Document:

<PAGE>   1
                                                                    Exhibit 4.3
                            FORM OF SERIES B WARRANT

THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.

                     EXERCISABLE AT OR PRIOR TO 5:00 P.M.,
                    NEW YORK CITY TIME, ON JANUARY 15, 2001

                          SERIES B WARRANT CERTIFICATE

        HomePlace of America, Inc., a Delaware corporation (hereinafter called
the "Company"), for value received, hereby certifies that [Name Of Waccamaw
Shareholder] or registered assigns is the registered holder of __________ Series
B Warrants, and is entitled, upon surrender of this Series B Warrant Certificate
at the office of First Union National Bank (the "Warrant Agent"), in the City of
Charlotte, State of North Carolina (the "Warrant Agent Office") at any time at
or prior to 5:00 p.m., New York City time, on January 15, 2001, to purchase one
share of Common Stock of the Company (the "Shares") at the price of $12.00 per
share for each Series B Warrant held.

        The per share purchase price shown above and the number of shares
issuable upon exercise of the Series B Warrants represented by this Series B
Warrant Certificate are subject to adjustment for the occurrence of certain
events, including stock dividends and splits, combinations, reorganizations,
reclassifications, consolidations, mergers or sales of properties and assets
and upon the issuance of certain rights or warrants to holders of Common Stock
or the distribution to such holders of assets or indebtedness, as set forth in
the Warrant Agreement hereinafter referred to. A complete statement with
respect to such adjustments and to other terms and conditions pertaining to the
Series B Warrants is contained in the Warrant Agreement, effective as of June
15, 1999,

<PAGE>   2

between the Company and the Warrant Agent (the "Warrant Agreement"), which
terms and conditions are hereby incorporated by reference herein and made a
part hereof. Every holder of this Series B Warrant Certificate consents to all
of the terms contained in the Warrant Agreement by acceptance hereof. All terms
used in this Series B Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement, a
copy of which may be examined by the registered holder hereof at the Warrant
Agent Office.

         Upon the exercise of the Series B Warrants represented by this
New Waccamaw Warrant Certificate, the form of election to purchase on the
reverse hereof must be duly executed, and the accompanying instructions for the
registration and delivery of the stock must be filled in.

         The Series B Warrants represented by this Series B Warrant Certificate
are transferable (subject to the conditions set forth in the preceding
paragraphs or the Warrant Agreement) at the Warrant Agent Office by the
registered holder hereof in person or by attorney duly authorized in writing,
upon surrender of this Series B Warrant Certificate. Upon any such transfer, a
new Series B Warrant Certificate, representing the right to purchase a like
number of shares of the Company's Common Stock, will be issued to the
transferee in exchange for this Series B Warrant Certificate.

         This Series B Warrant Certificate and similar Series B Warrant
certificates when surrendered at the Warrant Agent Office by the registered
holder hereof in person or by attorney duly authorized in writing may be
exchanged for another Series B Warrant Certificate or Series B Warrant
Certificates, representing in the aggregate the right to purchase a like number
of shares of the Company's Common Stock.

        No fractional shares of Common Stock will be issued upon the exercise
of any Series B Warrant or Warrants evidenced hereby, but in lieu thereof a
cash payment will be made, as provided in the Warrant Agreement.

<PAGE>   3

        No holder of this Series B Warrant Certificate shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Common
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issue of
stock, reclassification of stock, change of par value, consolidation, merger,
conveyance or otherwise) or, except as provided in the Warrant Agreement, to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise, until the Series B Warrant or Warrants evidenced by this Series B
Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.

        No Series B Warrant evidenced hereby may be exercised after 5:00 p.m.,
New York City time on January 15, 2001, and to the extent not exercised by the
time of its expiration, any such Series B Warrant shall become void.

        This Series B Warrant and any certificate representing the Shares shall
be imprinted with a legend in substantially the following form:

          "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
          1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED
          OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
          THEREFROM UNDER SAID ACT."

        This Series B Warrant and the Shares may not be transferred or assigned
in whole or in part without compliance with applicable federal and state
securities laws by the transferor and the transferee (including the delivery of
investment representation letters and legal opinions reasonably

<PAGE>   4

satisfactory to the Company or the Warrant Agent, if reasonably requested by
the Company or the Warrant Agent).

         The Company is authorized by the Warrant Agreement to suspend the
exercise of all Warrants for any period during which any shares of Common Stock
reserved for exercise of Warrants require, under any Federal or state law or
rule or regulation of any national securities exchange, registration with or
approval of any governmental authority or listing on any national securities
exchange and such registration, approval or listing is not in effect.

                     (Signatures appear on following page.)

                                    HOMEPLACE OF AMERICA, INC.

<PAGE>   5

                                    By:
                                       -------------------------------
                                       Name:
                                       Title:

   Attest:

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

This Series B Warrant Certificate is not valid until countersigned by the
Warrant Agent.

   Countersigned:

                                       FIRST UNION NATIONAL BANK,
                                            as Warrant Agent,

                                By:
                                   ----------------------------------
                                           Authorized Officer

                                FORM OF EXERCISE
<PAGE>   6

                (FORM OF EXERCISE TO BE EXECUTED BY THE WARRANT
                        HOLDER AT THE TIME OF EXERCISE)

          To:     First Union National Bank
                  1525 West W.T. Harris Blvd. 3C3
                  Charlotte, North Carolina 28262
                  Attention: Mr. Mike Klotz

                  or its successor as Warrant Agent:

                  The undersigned, holder of the within Series B Warrant
  certificate, hereby (1) irrevocably exercises his right to purchase
  __________ shares of Common Stock, $0.001 par value, of HomePlace of America,
  Inc. (the "Company") which the undersigned is entitled to purchase under the
  terms of the within Series B Warrant Certificate, or such other securities as
  the undersigned shall be entitled to purchase under the terms of the Warrant
  Agreement referred to in such Series B Warrant Certificate by reason of the
  occurrence of certain events specified therein, and (2) elects to make
  payment in full for the number of shares of Common Stock so purchased by
  payment of $________ in cash or certified or official bank check.

            Please issue the certificate for shares of Common Stock in the name
  of, and pay any cash for any fractional share to:

  -----------------------------------------------------------------------
                               Print or type name

  -----------------------------------------------------------------------
                  Social Security or other Identifying Number

  -----------------------------------------------------------------------
                                 Street Address

  -----------------------------------------------------------------------
  City                             State                         Zip Code

  If such number of shares shall not be all the shares purchasable upon the
  exercise of the Series B Warrants evidenced by this Series B Warrant
  Certificate, a new Series B Warrant Certificate for the balance of such
  Series B Warrants remaining unexercised shall be registered in the name of
  and delivered to:

  Please insert social security or other identifying number

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

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

<PAGE>   7

  ---------------------------------------------------------------------------
                        (Please print name and address)

  Dated:
          ------------------                  ---------------------------
                                                      Signature
                                     (Signature must conform in all respects to
                                     name of holder as specified on the face of
                                     the Series B Warrant Certificate)

  (Signature Guaranteed):                                Date:
                         ---------------------                -----------------

  (If the Common Stock, cash in lieu of fractional shares or Series B Warrants
  for any unexercised balance are to be issued or paid to a person other than
  the person in whose name the within Series B Warrant is registered, or if
  otherwise requested by the Company or the Warrant Agent, a signature
  guarantee is required.)

<PAGE>   8

                                   ASSIGNMENT
                 (FORM OF ASSIGNMENT TO BE EXECUTED IF WARRANT
                      HOLDER DESIRES TO TRANSFER WARRANT)

         FOR VALUE RECEIVED, ______________________________________ hereby
  sells, assigns and transfers unto

     ____________________________________________________________________

     ____________________________________________________________________

     ____________________________________________________________________
                        (Please print name and address)

  this Series B Warrant certificate together with all right, title or interest
  therein, and does hereby irrevocably appoint _____________ attorney to
  transfer the within Series B Warrant Certificate on the books of the Warrant
  Agent with full power of substitution in the premises.

  Dated:
          ------------------               ---------------------------
                                                Signature

                                    (Signature must conform in all respects to
                                     name of holder as specified on the face of
                                     the Series B Warrant Certificate)

  (Signature Guaranteed):                                Date:
                         ---------------------                -----------------<PAGE>   1
                                                                    EXHIBIT 10.1

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

                           LOAN AND SECURITY AGREEMENT

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

                         BANKBOSTON RETAIL FINANCE INC.
                              ADMINISTRATIVE AGENT
                                COLLATERAL AGENT

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

                                  AmSouth Bank
                         BankBoston Retail Finance Inc.
                       The CIT Group Business Credit, Inc.
                           FINOVA Capital Corporation
                          Foothill Capital Corporation
                             Heller Financial, Inc.
                    IBJ Whitehall Business Credit Corporation
                     Jackson National Life Insurance Company
                          LaSalle Business Credit, Inc.
                               The Provident Bank
                              WORKINGCAPITALLENDERS

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

                          BACK BAY CAPITAL FUNDING LLC
                                   TERM LENDER
             -------------------------------------------------------

                           HOMEPLACE OF AMERICA, INC.
                                Lead Borrower for

                           HOMEPLACE OF AMERICA, INC.
                             HOMEPLACE STORES, INC.
                           HOMEPLACE STORES TWO, INC.
                           HOMEPLACE MANAGEMENT, INC.
                                  THE BORROWERS

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

                                  June 15, 1999

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<S>         <C>                                                                        <C>

ARTICLE 1 - DEFINITIONS.

ARTICLE 2 - THE REVOLVING CREDIT
         2-1.    Establishment of Revolving Credit.................................... 22
         2-2.    Advances in Excess of Availability................................... 23
         2-3.    Initial Reserves. Changes to Reserves................................ 23
         2-4.    Risks of Value of Inventory.......................................... 24
         2-5.    Loan Requests........................................................ 24
         2-6.    Making of Loans Under Revolving Credit............................... 26
         2-7.    SwingLine Loans...................................................... 27
         2-8.    The Loan Account..................................................... 27
         2-9.    The Revolving Credit Notes........................................... 28
         2-10.   Payment of The Loan Account.......................................... 28
         2-11.   Interest Rates. ..................................................... 29
         2-12.   Revolving Credit UpFront Fee......................................... 30
         2-13.   Administrative Agent's Fee........................................... 30
         2-14.   Line (Unused) Fee.................................................... 30
         2-15.   Early Termination Fee................................................ 30
         2-16.   Administrative Agent's and Working Capital Lenders' Discretion....... 31
         2-17.   Procedures For Issuance of L/C's..................................... 32
         2-18.   Fees For L/C's....................................................... 33
         2-19.   Concerning L/C's..................................................... 33
         2-20.   Changed Circumstances................................................ 35
         2-21    Working Capital Lenders' Commitments................................. 36
         2-22.   Designation of Lead Borrower as Borrowers' Administrative Agent...... 37

ARTICLE 3 - THE TERM LOAN:
         3-1.    Commitment To Make Term Loan......................................... 38
         3-2.    The Term Note........................................................ 38
         3-3.    Payment of Principal of the Term Loan.  ............................. 38
         3-4.    Interest. ........................................................... 39
         3-5.    Term Loan UpFront Fee................................................ 40
         3-6.    Term Loan Monitoring Fee............................................. 40
         3-7.    Payments............................................................. 40

ARTICLE 4 - CONDITIONS PRECEDENT:
         4-1.    Corporate Due Diligence.............................................. 40
         4-2.    Emergence. Merger.................................................... 40
         4-3.    Opinion.............................................................. 41
         4-4.    Additional Documents................................................. 41
         4-5.    Officers' Certificates............................................... 41
         4-6.    Representations and Warranties....................................... 41
         4-7.    Minimum Excess Availability.......................................... 41
         4-8.    All Fees and Expenses Paid........................................... 41
         4-9.    No Suspension Event.................................................. 42
         4-10.   No Adverse Change.................................................... 42
</TABLE>

<PAGE>   3

<TABLE>
<S>         <C>                                                                        <C>

ARTICLE 5 - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
         5-1.    Payment and Performance of Liabilities............................... 42
         5-2.    Due Organization - Corporate Authorization - No Conflicts............ 42
         5-3.    Trade Names.......................................................... 43
         5-4.    Locations............................................................ 44
         5-5.    Infrastructure....................................................... 45
         5-6.    Year 2000 Compliance................................................. 45
         5-7.    Title to Assets...................................................... 45
         5-8.    Indebtedness......................................................... 46
         5-9.    Insurance Policies................................................... 46
         5-10.   Licenses............................................................. 47
         5-11.   Leases............................................................... 47
         5-12.   Requirements of Law.................................................. 47
         5-13.   Maintain Properties.................................................. 48
         5-14.   Pay Taxes............................................................ 48
         5-15.   No Margin Stock...................................................... 49
         5-16.   ERISA................................................................ 49
         5-17.   Hazardous Materials.................................................. 49
         5-18.   Litigation........................................................... 50
         5-19.   Dividends or Investments............................................. 50
         5-20.   Loans................................................................ 50
         5-21.   Line of Business..................................................... 51
         5-22.   Protection of Assets................................................. 51
         5-23.   Affiliate Transactions............................................... 51
         5-24.   Executive Pay........................................................ 51
         5-25.   Additional Assurances................................................ 52
         5-26.   Adequacy of Disclosure............................................... 52
         5-27.   No Restrictions on Liabilities....................................... 53
         5-28.   Other Covenants...................................................... 53

ARTICLE 6 - REPORTING REQUIREMENTS / FINANCIAL COVENANTS:
         6-1.    Maintain Records..................................................... 53
         6-2.    Access to Records.................................................... 54
         6-3.    Immediate Notice .................................................... 54
         6-4.    Borrowing Base Certificate........................................... 55
         6-5.    Weekly Reports....................................................... 55
         6-6.    Monthly Reports...................................................... 56
         6-7.    Quarterly Reports.................................................... 57
         6-8.    Annual Reports....................................................... 57
         6-9.    Officers' Certificates............................................... 58
         6-10.   Inventories, Appraisals, and Audits.................................. 58
         6-11.   Additional Financial Information..................................... 59
         6-12.   Financial Performance Covenants...................................... 60

ARTICLE 7 - USE AND COLLECTION OF COLLATERAL:
         7-1.    Use of Inventory Collateral.......................................... 60
         7-2.    Inventory Quality.................................................... 60
         7-3.    Adjustments and Allowances........................................... 60
         7-4.    Validity of Accounts................................................. 61
         7-5.    Notification to Account Debtors...................................... 61
</TABLE>

<PAGE>   4

<TABLE>
<S>         <C>                                                                        <C>
ARTICLE 8 - CASH MANAGEMENT. PAYMENT OF LIABILITIES:
         8-1     Depository Accounts.................................................. 61
         8-2.    Credit Card Receipts................................................. 62
         8-3.    The Concentration and the Disbursement Accounts...................... 62
         8-4.    Proceeds and Collection of Accounts.................................. 62
         8-5.    Payment of Liabilities............................................... 63
         8-6.    The Disbursement Account............................................. 64

ARTICLE 9 - GRANT OF SECURITY INTEREST:
         9-1.   Grant of Security Interest............................................ 64
         9-2.   Extent and Duration of Security Interest.............................. 65
         10-1.   Appointment as Attorney-In-Fact...................................... 65
         10-2.   No Obligation to Act................................................. 66

ARTICLE 11 - EVENTS OF DEFAULT:
         11-1.   Failure to Pay Revolving Credit or Term Loan ........................ 66
         11-2.   Failure To Make Other Payments....................................... 66
         11-3.   Failure to Perform Covenant or Liability (No Grace Period)........... 66
         11-4.   Failure to Meet Financial Reporting Requirements..................... 67
         11-5.   Failure to Perform Covenant or Liability (Grace Period).............. 67
         11-6.   Misrepresentation.................................................... 67
         11-7.   Acceleration of Other Debt........................................... 67
         11-8.   Breach of Lease...................................................... 67
         11-9.   Default Under Other Agreements....................................... 68
         11-10.  Casualty Loss. Non-Ordinary Course Sales............................. 68
         11-11.  Judgment.  Restraint of Business..................................... 68
         11-12.  Business Failure..................................................... 68
         11-13.  Bankruptcy........................................................... 69
         11-14.  Indictment - Forfeiture.............................................. 69
         11-15.  Challenge to Loan Documents.......................................... 69
         11-16.  Executive Management................................................. 69
         11-17.  Change in Control.................................................... 70

ARTICLE 12 - RIGHTS AND REMEDIES UPON DEFAULT:
         12-1.   Rights of Enforcement................................................ 70
         12-2.   Sale of Collateral................................................... 70
         12-3.   Occupation of Business Location...................................... 71
         12-4.   Grant of Nonexclusive License........................................ 72
         12-5.   Assembly of Collateral............................................... 72
         12-6.   Rights and Remedies.................................................. 72

ARTICLE 13 - NOTICES:
         13-1.   Notice Addresses..................................................... 72
         13-2.   Notice Given......................................................... 73
         14-1.   Termination of Revolving Credit...................................... 74
         14-2.   Effect of Termination................................................ 74
</TABLE>

<PAGE>   5

<TABLE>
<S>         <C>                                                                        <C>

ARTICLE 15  -  GENERAL:
         15-1.   Protection of Collateral............................................. 74
         15-2.   Successors and Assigns............................................... 74
         15-3.   Severability......................................................... 75
         15-4.   Amendments.  Course of Dealing....................................... 75
         15-5.   Power of Attorney.................................................... 75
         15-6.   Application of Proceeds.............................................. 75
         15-7.   Increased Costs...................................................... 75
         15-8.   Costs and Expenses of Agents and Lender.............................. 76
         15-9.   Copies and Facsimiles................................................ 77
         15-10.  Massachusetts Law.................................................... 77
         15-12.  Indemnification...................................................... 78
         15-13.  Rules of Construction................................................ 78
         15-14.  Intent............................................................... 79
         15-15.  Maximum Interest Rate................................................ 80
         15-16.  Waivers.............................................................. 80
</TABLE>

                                    EXHIBITS

         2-7(c)          :       SwingLine Note
         2-9             :       Revolving Credit Note
         2-21(e)         :       Voting Rights
         3-2             :       Term Note
         5-2             :       Related Entities
         5-3             :       Trade Names.
         5-4             :       Locations.
         5-6             :       Year 2000
         5-7(a)          :       Encumbrances
         5-7(c)          :       Rights in Equipment
         5-8             :       Indebtedness.
         5-9             :       Insurance Policies.
         5-11            :       Leases
         5-14            :       Taxes
         5-18            :       Litigation
         6-4             :       Borrowing Base Certificate
         6-7(b)          :       Pricing Certificate
         6-12(a)         :       Financial Performance Covenants
         6-12(b)         :       Business Plan
         8-1             :       DDA's.
         8-2             :       Credit Card Arrangements

<PAGE>   6

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

           LOAN AND SECURITY AGREEMENT BANKBOSTON RETAIL FINANCE INC.
                                      AGENT

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

                                                                   June 14, 1999

         THIS AGREEMENT is made between

                  BankBoston Retail Finance Inc. (in such capacity, the
                  "ADMINISTRATIVE AGENT") a Delaware corporation with its
                  principal executive offices at 40 Broad Street, Boston,
                  Massachusetts, as Administrative Agent for the ratable benefit
                  of (i) the "WORKING CAPITAL LENDERS" (individually, a "WORKING
                  CAPITAL LENDER") who are, at present identified on the
                  signature pages (commencing on Page 82) of this Agreement) and
                  any person who becomes a "Working Capital Lender" in
                  accordance with the provisions of Section 2-21 of this
                  Agreement, and (ii) the Term Lender;

         and

                  BankBoston Retail Finance Inc. (in such capacity, the
                  "COLLATERAL AGENT"), as agent for the ratable benefit of the
                  Administrative Agent, the Working Capital Lenders, and the
                  Term Lender;

         and

                  Back Bay Capital Funding LLC (in such capacity, the "TERM
         LENDER"), a limited liability company with offices at 40 Broad Street,
         Boston, Massachusetts 02109,

         and

                 HomePlace of America, Inc., a Delaware corporation with its
         principal executive offices at 3200 Pottery Drive, Myrtle Beach, South
         Carolina 29577 (in such capacity, the "LEAD BORROWER") as agent for the
         following borrowers (individually, a "BORROWER" and collectively, the
         "BORROWERS"):

                           HomePlace of America, Inc. (a Delaware corporation
                  with its principal executive offices at 3200 Pottery Drive,
                  Myrtle Beach, South Carolina 29577 );

                           HomePlace Stores, Inc. (a Delaware corporation with
                  its principal executive offices at 3200 Pottery Drive, Myrtle
                  Beach, South Carolina 29577 );

<PAGE>   7

                           HomePlace Stores Two, Inc. (a Delaware corporation
                  with its principal executive offices at 3200 Pottery Drive,
                  Myrtle Beach, South Carolina 29577); and

                           HomePlace Management, Inc. (an Ohio corporation with
                  its principal executive offices at 3200 Pottery Drive, Myrtle
                  Beach, South Carolina 29577);

in consideration of the mutual covenants contained herein and benefits to be
derived herefrom.

                                   WITNESSETH:

ARTICLE 1 - DEFINITIONS.

         As herein used, the following terms have the following meanings or are
defined in the section of this Agreement so indicated:

         "ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
                 "accounts" as defined in the UCC, and also all: accounts,
                 accounts receivable, credit card receivables, notes, drafts,
                 acceptances, and other forms of obligations and receivables and
                 rights to payment for credit extended and for goods sold or
                 leased, or services rendered, whether or not yet earned by
                 performance; all "contract rights" as formerly defined in the
                 UCC; all Inventory which gave rise thereto, and all rights
                 associated with such Inventory, including the right of stoppage
                 in transit; all reclaimed, returned, rejected or repossessed
                 Inventory (if any) the sale of which gave rise to any Account.

         "ACH": Automated clearing house.

         "ACCOUNT DEBTOR": Has the meaning given that term in the UCC.

         "ADMINISTRATIVE AGENT": Is defined in the Preamble.

         "AGENTS' RIGHTS AND REMEDIES":  Is defined in Section 12-6.

         "ADMINISTRATIVE AGENT'S FEE": Is defined in Section 2-13.

                                       2
<PAGE>   8

         "AGENTS' RIGHTS AND REMEDIES":  Is defined in Section 12-6.

         "AFFILIATE": (a) Subject to (b) of this Definition, with respect to any
                 two Persons, a relationship in which (i) one holds, directly or
                 indirectly, not less than Twenty Five Percent (25%) of the
                 capital stock, beneficial interests, partnership interests, or
                 other equity interests of the other; or (ii) one has, directly
                 or indirectly, control of the other; or (c) not less than
                 Twenty Five Percent (25%) of their respective ownership is
                 directly or indirectly held by the same third Person.

                         (b) No Person shall be deemed an Affiliate of any
                 Borrower if the sole relationship of such Person to all of the
                 Borrowers is the holding of an equity interest in such Person
                 by the Kuwait Investment Authority.

         "AGENT": Collectively and each individually, the Administrative Agent
                  and the Collateral Agent.

         "APPRAISED LIQUIDATION VALUE": The product of (a) the Cost of Eligible
                 Inventory (net of Inventory Reserves) multiplied by (b) that
                 percentage determined by the then most recent appraisal of the
                 Borrowers' Inventory undertaken at the request of the
                 Administrative Agent as reflecting that appraiser's estimate of
                 the realization on Cost of the Borrowers' Inventory in a
                 liquidation thereof.

         "AVAILABILITY": Is defined in Section 2-1(b)(i).

         "AVAILABILITY RESERVES": Such reserves as the Administrative Agent from
                 time to time determines in the Administrative Agent's
                 discretion as being appropriate to reflect the impediments to
                 any Agent's ability to realize upon the Collateral. Without
                 limiting the generality of the foregoing, Availability Reserves
                 may include (but are not limited to) reserves based on the
                 following:

                           (i)      Rent (based upon past due rent and/or
                                    whether or not Landlord's Waiver, acceptable
                                    to the Administrative Agent, has been
                                    received by the Administrative Agent ).

                           (ii)     In store customer credits.

                                       3
<PAGE>   9

                           (iii)    Gift Certificates.

                           (iv)     Frequent Shopper Programs.

                           (v)      Layaways and Customer Deposits

                           (vi)     Taxes and other governmental charges,
                                    including, ad valorem, personal property,
                                    and other taxes which might have priority
                                    over the security interests of the
                                    Collateral Agent in the Collateral.

                           (viii)   L/C Landing Costs.

                           (ix)     Year 2000 compliance.

                           (x)      Unfunded Plan Disbursements.

         "BANKRUPTCY CODE":  Title 11, U.S.C., as amended from time to time.

         "BANKRUPTCY COURT": The United States Bankruptcy Court for the District
                  of Delaware, which has subject matter jurisdiction over the
                  HomePlace Cases, and to the extent of any withdrawal of the
                  reference made pursuant to 28 U. S. C. ss.157 or direct
                  assignment to the district court, the United States District
                  Court for the District of Delaware.

         "BASE": The Base Rate announced from time to time by BankBoston, N.A.
                  (or any successor in interest to BankBoston, N.A.). In the
                  event that said bank (or any such successor) ceases to
                  announce such a rate, "Base" shall refer to that rate or index
                  announced or published from time to time as the Working
                  Capital Lenders, in good faith, designate as the functional
                  equivalent to said Base Rate. Any change in "Base" shall be
                  effective, for purposes of the calculation of interest due
                  hereunder, when such change is made effective generally by the
                  bank on whose rate or index "Base" is being set.

         "BASE MARGIN": (a) Until Section (b) of this Definition is in effect:
                  0.0

                           (b) Commencing with the first day of the Borrower's
                           third fiscal quarter in calendar year 2000, the Base
                           Margin shall be reset quarterly (commencing with the
                           Business Day after the Administrative Agent's receipt
                           of the Pricing Certificate (Section 6-7(b)) based on
                           the Pricing Grid. The Base Margin for Tiers I or III
                           of the Pricing grid shall apply in the event that
                           both criteria applicable to that Tier are satisfied.
                           In all other circumstances, the Base Margin

                                       4
<PAGE>   10

                           for Tier II of the Pricing Grid shall apply.

         "BASE MARGIN LOAN": Each Revolving Credit Loan while bearing interest
                  at the Base Margin Rate.

         "BASE MARGIN RATE": That per annum rate which is the aggregate of Base
                  plus the Base Margin.

         "BBRF": BankBoston Retail Finance Inc.

         "BORROWERS": Is defined in the Preamble.

         "BORROWING BASE": Is defined in Section 2-1.

         "BUSINESS DAY": Any day other than (a) a Saturday or Sunday; (b) any
                  day on which banks in Boston, Massachusetts or Myrtle Beach,
                  South Carolina, generally are not open to the general public
                  for the purpose of conducting commercial banking business; or
                  (c) a day on which the Administrative Agent is not open to the
                  general public to conduct business.

         "BUSINESS PLAN": The Borrowers' business plan annexed hereto as EXHIBIT
                  6-12(b)., and any revision, amendment, or update of such
                  business plan to which the Administrative Agent has provided
                  its written sign-off.

         "CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
                  liabilities which may be capitalized in accordance with GAAP.

         "CAPITAL LEASE": Any lease which may be capitalized in accordance with
                  GAAP.

         "CHANGE IN CONTROL": (a) The failure of the Lead Borrower to own,
                  beneficially and of record, 100% of the capital stock of all
                  of the other Borrowers having the right, under ordinary
                  circumstances, to vote for the election of directors of all
                  other Borrowers.

                           (b) The occurrence of any event or circumstance such
                  that the Lead Borrower does not have the power to elect all
                  directors of all other Borrowers.

                                       5
<PAGE>   11

                           (c) The acquisition, by any group of persons (within
                  the meaning of the Securities Exchange Act of 1934, as
                  amended) or by any Person, of beneficial ownership (within the
                  meaning of Rule 13d-3 of the Securities and Exchange
                  Commission) of 25% or more of the issued and outstanding
                  capital stock of the Lead Borrower having the right, under
                  ordinary circumstances, to vote for the election of directors
                  of the Borrower, except (a) that, if such acquisition is by
                  BankAmerica, N.A. or affiliates of BankAmerica, N.A., the
                  relevant percentage shall be 40% and (b) if such acquisition
                  is as a consequence of an offering under the Securities Act of
                  1933 by the Lead Borrower.

                           (d) More than fifty percent of the persons who were
                  Key Directors on the first day of any period consisting of
                  Twelve (12) consecutive calendar months (the first of which
                  Twelve (12) month periods commencing with the first day of the
                  month during which this Agreement was executed) cease, for any
                  reason to be Directors of the Lead Borrower other than by
                  reason of death or disability or the amendment of the Lead
                  Borrower's corporate by-laws or other corporate governance
                  documents so as to decrease the number of Directors of the
                  Lead Borrower.

         "CHAPTER 11 CASES": The jointly administered Chapter 11 case of the
                  HomePlace Group in the United States District Court for the
                  District of Delaware (Docket 98-8 (PJW).

         "CHATTEL PAPER": Has the meaning given that term in the UCC.

         "COLLATERAL": Is defined in Section 9-1.

         "COMMITMENT" and "COMMITMENT PERCENTAGE": Subject to Section 2-21,
                  below:

WORKING CAPITAL LENDER                  DOLLAR COMMITMENT            COMMITMENT
                                                                     PERCENTAGE
----------------------                  -----------------            ----------
AmSouth Bank                              $15,000,000.00                  7.5%
BankBoston Retail Finance Inc.            $30,000,000.00                   15%
The CIT Group Business Credit, Inc.       $25,000,000.00                 12.5%
FINOVA Capital Corporation                $15,000,000.00                  7.5%
Foothill Capital Corporation              $25,000,000.00                 12.5%

                                       6
<PAGE>   12

Heller Financial, Inc.                    $20,000,000.00                 10.0%
IBJ Whitehall Business Credit             $15,000,000.00                  7.5%
Corporation
Jackson National Life Insurance Co.       $25,000,000.00                 12.5%
LaSalle Business Credit, Inc.             $20,000,000.00                 10.0%
The Provident Bank                        $10,000,000.00                  5.0%

         "CONCENTRATION ACCOUNT":  Is defined in Section 8-3.

         "CONSOLIDATED": When used to modify a financial term, test, statement,
                  or report, refers to the application or preparation of such
                  term, test, statement, or report (as appropriate) based upon
                  the consolidation, in accordance with GAAP, of the financial
                  condition or operating results of the Borrowers.

         "CONSOLIDATED ADJUSTED EBITDA": The Borrowers' Consolidated earnings
                  before reorganization items, interest, taxes, depreciation,
                  and amortization, but after transition costs, each as
                  determined in accordance with GAAP.

         "COST": The lower of

                           (a) the calculated cost of purchases, as determined
                  from invoices received by the Borrowers, the Borrowers'
                  purchase journal or stock ledger, based upon the Borrowers'
                  accounting practices, known to the Working Capital Lenders,
                  which practices are in effect on the date on which this
                  Agreement was executed; or

                           (b) the lowest ticketed or promoted price at which
                  the subject inventory is offered to the public, after all
                  mark-downs (whether or not such price is then reflected on the
                  Borrowers' accounting system).

                 "Cost" does not include inventory capitalization costs or other
                 non-purchase price charges (exclusive of freight on the initial
                 purchase orders) used in the Borrowers' calculation of cost of
                 goods sold.

         "COSTS  OF COLLECTION": Includes, without limitation, all attorneys'
                  reasonable fees and reasonable out-of-pocket expenses incurred
                  by any Agent's attorneys or any

                                       7
<PAGE>   13

                  Lender's and all reasonable costs incurred by any Agent or any
                  Lender in the administration of the Liabilities and/or the
                  Loan Documents, including, without limitation, reasonable
                  costs and expenses associated with travel on behalf of any
                  Agent or any Lender, which costs and expenses are directly or
                  indirectly related to or in respect of any Agent's and any
                  Lender's: administration and management of the Liabilities;
                  negotiation, documentation, and amendment of any Loan
                  Document; or efforts to preserve, protect, collect, or enforce
                  the Collateral, the Liabilities, and/or the Agents' Rights and
                  Remedies and/or any of the rights and remedies of any Agent
                  against or in respect of any guarantor or other person liable
                  in respect of the Liabilities (whether or not suit is
                  instituted in connection with such efforts). The Costs of
                  Collection are Liabilities, and at the Administrative Agent's
                  option may bear interest at the highest post-default rate
                  which the Administrative Agent may charge the Borrower
                  hereunder as if such had been lent, advanced, and credited by
                  the Administrative Agent to, or for the benefit of, the
                  Borrowers.

         "CUSTOMER CREDIT LIABILITY": Gift certificates, merchandise credits,
                  and similar liabilities of any Borrower to its retail
                  customers and prospective customers.

         "CURRENT PAY INTEREST": Is defined in Section 3-4(a)(i)

         "DDA": Any checking or other demand daily depository account maintained
                  by the Borrowers.

         "DEPOSIT ACCOUNT": Has the meaning given that term in the UCC.

         "DISBURSEMENT ACCOUNT": Is defined in Section 8-3.

         "DOCUMENTS": Has the meaning given that term in the UCC.

         "DOCUMENTS OF TITLE": Has the meaning given that term in the UCC.

         "DOLLAR COMMITMENT": As provided in the Definition of "Commitment",
                  above.

         "EARLY TERMINATION FEE":  Is defined in Section 2-15.

                                       8
<PAGE>   14

         "ELIGIBLE INVENTORY": (a) Such of the Borrowers' Inventory (without
                  duplication as to Inventory described in (b) of this
                  Definition), at such locations, and of such types, character,
                  qualities and quantities, (net of Inventory Reserves) as the
                  Administrative Agent in its reasonable discretion from time to
                  time determines to be acceptable for borrowing, as to which
                  Inventory, the Collateral Agent has a perfected security
                  interest which is prior and superior to all security
                  interests, claims, and Encumbrances.

                           (b) Such of the Borrower's Inventory (without
                  duplication as to described in (a) of this Definition), the
                  purchase of which is supported by a documentary L/C then
                  having an initial expiry of sixty (60) or less days, provided
                  that (a) such Inventory is of such types, character, qualities
                  and quantities (net of Inventory Reserves) as the
                  Administrative Agent in its discretion from time to time
                  determines to be eligible for borrowing; and (b) The
                  documentary L/C supporting such purchase names either Agent as
                  consignee of the subject Inventory and either Agent has
                  control over the documents which evidence ownership of the
                  subject Inventory.

         "ELIGIBLE RECEIVABLES": (a) Under 4 business day accounts due from
                  major credit card processors on a non-recourse basis.

                           (b) Current amounts due from nationally recognized
                  inventory liquidators on account of store closures commenced
                  no later than 3 months following confirmation of the Plan,
                  which amounts are backed by letters of credit satisfactory to
                  the Administrative Agent.

         "EMPLOYEE BENEFIT PLAN": As defined in ERISA.

         "ENCUMBRANCE": Each of the following:

                           (a) Any security interest, mortgage, pledge,
                  hypothecation, lien, attachment, or charge of any kind
                  (including any agreement to give any of the foregoing); the
                  interest of a lessor under a Capital Lease; conditional sale
                  or other title retention agreement; sale of accounts
                  receivable or chattel paper; or other arrangement pursuant to
                  which any Person is entitled to any preference or priority
                  with respect to the property or assets of another Person or
                  the income or profits of such other Person or which
                  constitutes an interest in property to secure an obligation;
                  each of the foregoing whether

                                       9
<PAGE>   15

                  consensual or non-consensual and whether arising by way of
                  agreement, operation of law, legal process or otherwise.

                           (b) The filing of any financing statement under the
                  UCC or comparable law of any jurisdiction.

         "END DATE": The date upon which both (a) all Liabilities have been paid
                  in full and (b) all obligations of any Lender to make loans
                  and advances and to provide other financial accommodations to
                  the Borrowers hereunder shall have been irrevocably
                  terminated.

         "ENVIRONMENTAL LAWS": All of the following:

                           (a) Any and all federal, state, local or municipal
                  laws, rules, orders, regulations, statutes, ordinances, codes,
                  decrees or requirements which regulate or relate to, or impose
                  any standard of conduct or liability on account of or in
                  respect to environmental protection matters, including,
                  without limitation, Hazardous Materials, as are now or
                  hereafter in effect; and

                           (b) the common law relating to damage to Persons or
                  property from Hazardous Materials.

         "EQUIPMENT": Includes, without limitation, "equipment" as defined in
                  the UCC, and also all motor vehicles, rolling stock,
                  machinery, office equipment, plant equipment, tools, dies,
                  molds, store fixtures, furniture, and other goods, property,
                  and assets which are used and/or were purchased for use in the
                  operation or furtherance of the Borrowers' business, and any
                  and all accessions or additions thereto, and substitutions
                  therefor.

         "ERISA": The Employee Retirement Security Act of 1974, as amended.

         "ERISA  AFFILIATE": Any Person which is under common control with the
                  Borrowers within the meaning of Section 4001 of ERISA or is
                  part of a group which includes the Borrowers and which would
                  be treated as a single employer under Section 414 of the
                  Internal Revenue Code of 1986, as amended.

         "EVENTS OF DEFAULT": Is defined in Article 11. Each reference herein to
                  an "Event of Default" is to an Event of Default not then duly
                  waived by the Lender (as to which due waiver, see Section
                  15-4(b)). In the event of such due waiver, the

                                       10
<PAGE>   16

                  so-waived Event of Default shall be deemed never to have
                  occurred (other than with respect to any Costs of Collection
                  incurred by any Lender prior to such waiver).

         "FEE LETTER": The letter of even date, so styled, amongst the Agents,
                  BBRF, and the Borrower.

         "FIXTURES": Has the meaning given that term in the UCC.

         "GAAP": Principles which are consistent with those promulgated or
                  adopted by the Financial Accounting Standards Board and its
                  predecessors (or successors) in effect and applicable to that
                  accounting period in respect of which reference to GAAP is
                  being made, provided, however, in the event of a Material
                  Accounting Change, then unless otherwise specifically agreed
                  to by the Administrative Agent, (a) the Borrowers' compliance
                  with the financial performance covenants imposed pursuant to
                  Section 6-12 shall be determined as if such Material
                  Accounting Change had not taken place and (b) the Borrowers
                  shall include, with its monthly, quarterly, and annual
                  financial statements a schedule, certified by the Borrowers'
                  chief financial officer, on which the effect of such Material
                  Accounting Change to the statement with which provided shall
                  be described.

         "GENERAL INTANGIBLES" includes, without limitation, "general
                  intangibles" as defined in the UCC; and also all: rights to
                  payment for credit extended; deposits; amounts due to the
                  Borrowers; credit memoranda in favor of the Borrowers;
                  warranty claims; tax refunds and abatements; insurance refunds
                  and premium rebates; all means and vehicles of investment or
                  hedging, including, without limitation, options, warrants, and
                  futures contracts; records; customer lists; telephone numbers;
                  goodwill; causes of action; judgments; payments under any
                  settlement or other agreement; literary rights; rights to
                  performance; royalties; license and/or franchise fees; rights
                  of admission; licenses; franchises; license agreements,
                  including all rights of the Borrowers to enforce same;
                  permits, certificates of convenience and necessity, and
                  similar rights granted by any governmental authority; patents,
                  patent applications, patents pending, and other intellectual
                  property; internet addresses and domain names; developmental
                  ideas and concepts;

                                       11
<PAGE>   17

                  proprietary processes; blueprints, drawings, designs,
                  diagrams, plans, reports, and charts; catalogs; manuals;
                  technical data; computer software programs (including the
                  source and object codes therefor), computer records, computer
                  software, rights of access to computer record service bureaus,
                  service bureau computer contracts, and computer data; tapes,
                  disks, semi-conductors chips and printouts; trade secrets
                  rights, copyrights, mask work rights and interests, and
                  derivative works and interests; user, technical reference, and
                  other manuals and materials; trade names, trademarks, service
                  marks, and all goodwill relating thereto; applications for
                  registration of the foregoing; and all other general
                  intangible property of the Borrowers in the nature of
                  intellectual property; proposals; cost estimates, and
                  reproductions on paper, or otherwise, of any and all concepts
                  or ideas, and any matter related to, or connected with, the
                  design, development, manufacture, sale, marketing, leasing, or
                  use of any or all property produced, sold, or leased, by the
                  Borrowers or credit extended or services performed, by the
                  Borrowers, whether intended for an individual customer or the
                  general business of the Borrowers, or used or useful in
                  connection with research by the Borrowers.

         "GOODS": Has the meaning given that term in the UCC.

         "HAZARDOUS MATERIALS:" Any (a) hazardous materials, hazardous waste,
                  hazardous or toxic substances, petroleum products, which (as
                  to any of the foregoing) are defined or regulated as a
                  hazardous material in or under any Environmental Law and (b)
                  oil in any physical state.

         "HOMEPLACE CASES": The jointly administered Chapter 11 case of the
                  HomePlace Group in the United States District Court for the
                  District of Delaware (Docket 98-8 (PJW), as amended by order
                  entered in said Chapter 11 Case on or before May 1, 1999.

         "HOMEPLACE GROUP": HomePlace Stores, Inc.; HomePlace Stores Two, Inc.;
                  HomePlace Management, Inc. ;and HomePlace Holdings, Inc.

         "INDEBTEDNESS": All indebtedness and obligations of or assumed by any
                  Person on account of or in respect to any of the following:

                           (a) In respect of money borrowed (including any
                  indebtedness

                                       12
<PAGE>   18

                  which is non-recourse to the credit of such Person but which
                  is secured by an Encumbrance on any asset of such Person)
                  whether or not evidenced by a promissory note, bond, debenture
                  or other written obligation to pay money.

                           (b) For the payment of the purchase price of goods or
                  services deferred for more than Thirty (30) days beyond then
                  current trade terms provided to such person by the supplier of
                  such goods or services.

                           (c) In connection with any letter of credit or
                  acceptance transaction (including, without limitation, the
                  face amount of all letters of credit and acceptances issued
                  for the account of such Person or reimbursement on account of
                  which such Person would be obligated).

                           (d) In connection with the sale or discount of
                  accounts receivable or chattel paper of such Person.

                           (e) On account of deposits or advances.

                           (f) As lessee under Capital Leases.

                 "INDEBTEDNESS" of any Person shall also include:

                                    (x) Indebtedness of others secured by an
                           Encumbrance on any asset of such Person, whether or
                           not such Indebtedness is assumed by such Person.

                                    (y) Any guaranty, endorsement, suretyship or
                           other undertaking pursuant to which that Person may
                           be liable on account of any obligation of any third
                           party.

                                    (z) The Indebtedness of a partnership or
                           joint venture in which such Person is a general
                           partner or joint venturer.

         "INDEMNIFIED PERSON": Is defined in Section 15-12.

         "INSTRUMENTS": Has the meaning given that term in the UCC.

         "INTEREST PAYMENT DATE": With reference to:

                           Each Libor Loan: The last day of the Interest Period
                  relating thereto; the Termination Date; the End Date; and with
                  respect to any Libor Loan which has a six month Interest
                  Period, the last day of the third month of such Interest
                  Period.

                           Each Base Margin Loan: the first day of each month;
                  the Termination Date; and the End Date.

                                       13
<PAGE>   19

         "INTEREST PERIOD": (a) With respect to each Libor Loan: Subject to
                  Subsection (c), below, the period commencing on the date of
                  the making or continuation of, or conversion to, the subject
                  Libor Loan and ending one, two, three or six months
                  thereafter, as the Lead Borrower may elect by notice (pursuant
                  to Section 2-5(a)) to the Agent.

                           (b) With respect to each Base Margin Loan: Subject to
                  Subsection (c), below, the period commencing on the date of
                  the making or continuation of or conversion to such Base
                  Margin Loan and ending on that date (i) as of which the
                  subject Base Margin Loan is converted to a Libor Loan, as the
                  Lead Borrower may elect by notice (pursuant to Section 2-5(a))
                  to the Agent, or (ii) on which the subject Base Margin Loan is
                  paid by the Borrower.

                           (c) The setting of Interest Periods is in all
                  instances subject to the following: (i) Any Interest Period
                  for a Base Margin Loan which would otherwise end on a day
                  which is not a Business Day shall be extended to the next
                  succeeding Business Day.

                                    (ii) Any Interest Period for a Libor Loan
                           which would otherwise end on a day that is not a
                           Business Day shall be extended to the next succeeding
                           Business Day, unless that succeeding Business Day is
                           in the next calendar month, in which event such
                           Interest Period shall end on the last Business Day of
                           the month during which the Interest Period ends.

                                    (iii) Subject to Subsection (iv), below, any
                           Interest Period applicable to a Libor Loan, which
                           Interest Period begins on a day for which there is no
                           numerically corresponding day in the calendar month
                           during which such Interest Period ends, shall end on
                           the last Business Day of the month during which that
                           Interest Period ends.

                                    (iv) Any Interest Period which would
                           otherwise end after the Termination Date shall end on
                           the Termination Date.

                                    (v) The number of Interest Periods in effect
                           at any one time is subject to Section 2-11(d) hereof.

         "INVESTMENT PROPERTY":  Has the meaning given that term in the UCC.

                                       14
<PAGE>   20

         "INVENTORY": includes, without limitation, "inventory" as defined in
                  the UCC and also all: packaging, advertising, and shipping
                  materials related to any of the foregoing, and all names or
                  marks affixed or to be affixed thereto for identifying or
                  selling the same; Goods held for sale or lease or furnished or
                  to be furnished under a contract or contracts of sale or
                  service by the Borrowers, or used or consumed or to be used or
                  consumed in the Borrowers' business; Goods of said description
                  in transit: returned, repossessed and rejected Goods of said
                  description; and all documents (whether or not negotiable)
                  which represent any of the foregoing.

         "INVENTORY ADVANCE RATE": The following percentage during the dates
                  indicated:

                 From December 16 to September 15:    70%
                 From September 16 to December 15:    72%

         "INVENTORY APPRAISAL CAP":  85%.

         "INVENTORY RESERVES": Such Reserves as may be established from time to
                  time by the Administrative Agent in the Administrative Agent's
                  discretion with respect to the determination of the
                  saleability, at retail, of the Eligible Inventory or which
                  reflect such other factors as affect the market value of the
                  Eligible Inventory. Without limiting the generality of the
                  foregoing, Inventory Reserves may include (but are not limited
                  to) reserves based on the following:

                           (i)      Obsolescence.

                           (ii)     Seasonality.

                           (iii)    Shrinkage.

                           (iv)     Imbalance.

                           (v)      Change in Inventory character.

                           (vi)     Change in Inventory composition

                           (vii)    Change in Inventory mix.

                           (viii)   Markdowns (both permanent and point of sale)

                           (ix)     Retail markons and markups inconsistent with
                                    prior period practice and performance;
                                    industry standards; current business plans;
                                    or

                                       15
<PAGE>   21

                                    advertising calendar and planned advertising
                                    events.

                           (x)      Consigned goods

         "ISSUER": BankBoston, N.A., and any successor to BankBoston, N.A.

         "KEY DIRECTORS": Class II Directors, as referenced in the Merger
                  Agreement until such time as membership on the Lead Borrower's
                  Board of Directors is not divided amongst classes of
                  directors. After that date on which membership on the Lead
                  Borrower's Board of Directors is no longer divided amongst
                  classes of directors, "Key Directors" refers to all directors.

         "L/C": Any letter of credit, the issuance of which is procured by the
                  Administrative Agent for the account of the Borrowers and any
                  acceptance made on account of such letter of credit.

         "L/C MARGIN": (a) Until Section (b) of this Definition is in effect:
                  1.5%

                  (b) Commencing with the first day of the Borrower's third
                  fiscal quarter in calendar year 2000, the L/CMargin shall be
                  reset quarterly (commencing with the Business Day after the
                  Administrative Agent's receipt of the Pricing Certificate
                  (Section 6-7(b)) based on the Pricing Grid for L/C's issued on
                  or after the date when so set, that is to say the L/C Margin
                  applicable to L/C's in effect at the time of
                  increases/decreases in margin will remain at the margin
                  originally in effect when such L/C had been issued. Tiers I or
                  III of the Pricing grid shall apply in the event that both
                  criteria applicable to that Tier are satisfied. In all other
                  circumstances, Tier II of the Pricing Grid shall apply.

         "LEAD BORROWER": Is defined in the Preamble.

         "LEASE": Any lease or other agreement, no matter how styled or
                  structured, pursuant to which the Borrowers is entitled to the
                  use or occupancy of any real property.

         "LENDER": Collectively and each individually, each Working Capital
                  Lender and

                                       16
<PAGE>   22

                  the Term Lender.

         "LIABILITIES" (in the singular, "LIABILITY") includes, without
                  limitation, the following:

                           (a) All and each of the following, whether now
                  existing or hereafter arising under this Agreement or under
                  any of the other Loan Documents:

                           (i) Any and all direct and indirect liabilities,
                  debts, and obligations of each Borrower to any Lender and/or
                  any Agent, each of every kind, nature, and description.

                           (ii) Each obligation to repay any loan, advance,
                  indebtedness, note, obligation, overdraft, or amount now or
                  hereafter owing by each Borrower to any Lender and/or any
                  Agent (including all future advances whether or not made
                  pursuant to a commitment by the Working Capital Lenders),
                  whether or not any of such are liquidated, unliquidated,
                  primary, secondary, secured, unsecured, direct, indirect,
                  absolute, contingent, or of any other type, nature, or
                  description, or by reason of any cause of action which any
                  Borrower to any Lender and/or any Agent may hold against any
                  of the Borrowers.

                           (iii) All notes and other obligations of each
                  Borrower now or hereafter assigned to or held by any Borrower
                  to any Lender and/or any Agent, each of every kind, nature,
                  and description.

                           (iv) All interest, fees, and charges and other
                  amounts which may be charged by any Borrower to any Lender
                  and/or any Agent to any of the Borrowers and/or which may be
                  due from any of the Borrowers to the any Borrower to any
                  Lender and/or any Agent from time to time.

                           (v) All costs and expenses incurred or paid by any
                  Agent in respect of any agreement between any of the
                  Borrowers, any Agent, or any Lender and/or any instrument
                  furnished by any of the Borrowers to any Agent (including,
                  without limitation, Costs of Collection, attorneys' reasonable
                  fees, and all court and litigation costs and expenses).

                           (vi) Any and all covenants of each of the Borrowers
                  to or with any Borrower to any Lender and/or any Agent and any
                  and all obligations of each of the Borrowers to act or to
                  refrain from acting in accordance with any agreement between
                  any of the Borrowers and the any Borrower to any Lender and/or
                  any Agent or instrument furnished by any of the Borrowers to
                  any Borrower to any Lender and/or any Agent.

                                       17
<PAGE>   23

                           (vii) Each of the foregoing as if each reference to
                  "any Lender and/or any Agent " therein were to each Affiliate
                  of any Agent or any Lender.

                           (b) Any and all direct and indirect liabilities,
                  debts, and obligations of Borrower to any Agent, each of every
                  kind, nature, and description.

         "LIBOR BUSINESS DAY": Any day which is both a Business Day and a day on
                  which the principal interbank market for Libor deposits in
                  London in which BankBoston, N.A. participates is open for
                  dealings in United States Dollar deposits.

         "LIBOR LOAN": Any Revolving Credit Loan which bears interest at a Libor
                  Rate.

         "LIBOR MARGIN": (a) Until Section (b) of this Definition is in effect:
                  2.25 % per annum

                           (b) Commencing with the first day of the Borrower's
                  third fiscal quarter in calendar year 2000, the Libor Margin
                  shall be reset quarterly (commencing with the Business Day
                  after the Administrative Agent's receipt of the Pricing
                  Certificate (Section 6-7(b)), based on the Pricing Grid, for
                  loans initiated on or after the date when so set, that is to
                  say Libor contracts in effect at the time of
                  increases/decreases in margin will remain at the margin
                  originally utilized when the contract was opened. The margin
                  in effect at a given time will apply to contracts opened at
                  that time, and shall be based upon the Pricing Grid. Tiers I
                  or III shall apply in the event that all criteria applicable
                  to that Tier are satisfied. In all other circumstances, Tier
                  II shall apply.

         "LIBOR OFFER RATE": That rate of interest (rounded upwards, if
                  necessary, to the next 1/100 of 1%) determined by the Agent to
                  be the highest prevailing rate per annum at which deposits on
                  U.S. Dollars are offered to BankBoston, N.A., by first-class
                  banks in the London interbank market in which BankBoston, N.A.
                  participates at or about 10:00AM (Boston Time) Two (2) Libor
                  Business Days before the first day of the Interest Period for
                  the subject Libor Loan, for a deposit approximately in the
                  amount of the subject loan for a period of time approximately
                  equal to such Interest Period.

                                       18
<PAGE>   24

         "LIBOR RATE": That per annum rate which is the aggregate of the Libor
                  Offer Rate plus the Libor Margin except that, in the event
                  that it is determined by the Agent that any Lender may be
                  subject to the Reserve Percentage, the "Libor Rate" shall
                  mean, with respect to any Libor Loans then outstanding (from
                  the date on which that Reserve Percentage first became
                  applicable to such loans), and with respect to all Libor Loans
                  thereafter made, an interest rate per annum equal the sum of
                  (a) plus (b), where:

                           (a) is the decimal equivalent of the following
                  fraction:

                                Libor Offer Rate
                           --------------------------
                           1 minus Reserve Percentage

                           (b) the applicable Libor Margin.

         "LINE (UNUSED) FEE": Is defined in Section 2-14.

         "LOAN ACCOUNT": Is defined in Section 2-8.

         "LOAN DOCUMENTS": This Agreement, each instrument and document executed
                  and/or delivered as contemplated by Section 3-2 or Article 4,
                  below, and each other instrument or document from time to time
                  executed and/or delivered in connection with the arrangements
                  contemplated hereby, as each may be amended from time to time.

         "LOCAL DDA": A depository account maintained by the Borrowers, the only
                  contents of which may be transfers from the Disbursement
                  Account and actually used solely (i) for petty cash purposes;
                  or (ii) for payroll.

         "MATERIAL ACCOUNTING CHANGE": Any change in GAAP applicable to
                  accounting periods subsequent to the Borrowers' fiscal year
                  most recently completed prior to the execution of this
                  Agreement, which change has a material effect on the
                  Borrowers' financial condition or operating results, as
                  reflected on financial statements and reports prepared by or
                  for the Borrowers, when compared with such condition or
                  results as if such change had not taken place or where
                  preparation of the Borrowers' statements and reports in
                  compliance with such change results in the breach of a
                  financial performance covenant imposed pursuant to Section
                  6-12 where such a

                                       19
<PAGE>   25

                  breach would not have occurred if such change had not taken
                  place or visa versa.

         "MATURITY DATE": June 30, 2002.

         "MERGER AGREEMENT" The Agreement and Plan of Merger dated as of March
                  16, 1999 by and among the HomePlace Holdings, Inc., Waccamaw
                  Corporation, and the Lead Borrower.

         "OPERATING ACCOUNT": Is defined in Section 8-3.

         "OVERALL INVENTORY ADVANCE RATE": The following percentage during the
                  dates indicated:

                 From December 16 to September 15:                75%
                 From September 16 to December 15:                79%

         "OVERALL INVENTORY APPRAISAL CAP": 92%

         "PARTICIPANT": Is defined in Section 14-13, hereof.

         "PERCENTAGE COMMITMENT": As included in the Definition of "Commitment".

         "PERMITTED ASSET SALES: A sale, not in the ordinary course, of the
                  Borrowers' assets which, when aggregate with all prior sales
                  since the date of this Agreement, does not exceed 20% of the
                  assets of the Borrowers, as reflected on a Consolidated
                  Balance Sheet of the Borrowers at the date of this Agreement.

         "PERMITTED ENCUMBRANCES": Those Encumbrances permitted as provided in
                  Section 5-7(a) hereof.

         "PERMITTED SUBDEBT": Indebtedness of the Borrowers which is
                  subordinated to the Liabilities pursuant to a written
                  agreement which is reasonably satisfactory to the
                  Administrative Agent.

         "PERSON": Any natural person, and any corporation, limited liability
                  company, trust,

                                       20
<PAGE>   26

                  partnership, joint venture, or other enterprise or entity.

         "PIK INTEREST": Defined in Section 3-4(a)(ii).

         "PLAN": The Joint Plan of Reorganization of the HomePlace Group under
                  Chapter 11 of the Bankruptcy Code filed on or about April 1,
                  1999, in the Chapter 11 Cases as amended by order entered in
                  the Chapter 11 Cases on or before May 1, 1999.

         "PRICING CERTIFICATE": Defined in Section 6-7(b).

         "PRICING GRID": The following:

                                  PRICING GRID

<TABLE>
<CAPTION>

Tier      Minimum 12 month           Consolidated 12 month           Libor          Base          L/C Margin
          trailing average           trailing Consolidated           Margin         Margin
          Availability               Adjusted EBITDA
                                      / Total Interest
------------------------------------------------------------------------------------------------------------
<S>       <C>                        <C>                             <C>            <C>           <C>
I         $25 Million                Greater than or Equal to        2.00 %         0.0           1.25%
                                     1.75 to 1.0
------------------------------------------------------------------------------------------------------------
II        Not Applicable             Greater than or Equal to        2.25 %         0.0           1.5%
                                     1.25 to 1.0, but less than
                                     1.75 to 1.0
------------------------------------------------------------------------------------------------------------
III       Not Applicable             Less than 1.25 to 1.0           2.50 %         0.25%         1.75%
------------------------------------------------------------------------------------------------------------
</TABLE>

         "PROCEEDS": include, without limitation, "Proceeds" as defined in the
                  UCC (defined below), and each type of property described in
                  Section 9-1 hereof.

         "RECEIPTS": All cash, cash equivalents, checks, and credit card slips
                  and receipts as arise out of the sale of the Collateral.

         "RECEIVABLES ADVANCE RATE": 85%.

         "RECEIVABLES COLLATERAL": That portion of the Collateral which consists
                  of the Borrowers' Accounts, Accounts Receivable, contract
                  rights, General Intangibles, Chattel Paper, Instruments,
                  Documents of Title, Documents, Securities, letters of credit
                  for the benefit of the Borrowers, and bankers' acceptances
                  held by the Borrowers, and any rights to payment.

                                       21
<PAGE>   27

         "RELATED ENTITY": (a) Except as described in (c) of this Definition,
                  any corporation, limited liability company, trust,
                  partnership, joint venture, or other enterprise which: is a
                  parent, brother-sister, subsidiary, or affiliate, of the
                  Borrowers; could have such enterprise's tax returns or
                  financial statements consolidated with the Borrowers'; could
                  be a member of the same controlled group of corporations
                  (within the meaning of Section 1563(a)(1), (2) and (3) of the
                  Internal Revenue Code of 1986, as amended from time to time)
                  of which the Borrowers is a member; Controls or is Controlled
                  by the Borrowers or by any Affiliate of the Borrowers.

                           (b) Except as described in (c) of this Definition,
                  any Affiliate.

                           (c) No Person shall be deemed a Related Entity of the
                  Borrowers if the sole relationship of such Person to all of
                  the Borrowers is the ownership of an equity interest in such
                  person by the Kuwait Investment Authority.

         "REQUIREMENT OF LAW": As to any Person:

                           (a)(i) All statutes, rules, regulations, orders, or
                  other requirements having the force of law and (ii) all court
                  orders and injunctions, arbitrator's decisions, and/or similar
                  rulings, in each instance ((i) and (ii)) of or by any federal,
                  state, municipal, and other governmental authority, or court,
                  tribunal, panel, or other body which has or claims
                  jurisdiction over such Person, or any property of such Person,
                  or of any other Person for whose conduct such Person would be
                  responsible.

                           (b) That Person's charter, certificate of
                  incorporation, articles of organization, and/or other
                  organizational documents, as applicable; and (c) that Person's
                  by-laws and/or other instruments which deal with corporate or
                  similar governance, as applicable.

         "RESERVE PERCENTAGE": The decimal equivalent of that rate applicable to
                  a Lender under regulations issued from time to time by the
                  Board of Governors of the Federal Reserve System for
                  determining the maximum reserve requirement of that Lender
                  with respect to "Eurocurrency liabilities" as defined in such
                  regulations. The Reserve Percentage applicable to a particular
                  Libor Loan shall be based upon that in effect during the
                  subject

                                       22
<PAGE>   28

                  Interest Period, with changes in the Reserve Percentage which
                  take effect during such Interest Period to take effect (and to
                  consequently change any interest rate determined with
                  reference to the Reserve Percentage) if and when such change
                  is applicable to such loans.

         "RESERVES": All (if any) Availability Reserves and Inventory Reserves.

         "REVOLVING CREDIT": Is defined in Section 2-1.

         "REVOLVING CREDIT LOAN": A term of convenience which refers to so much
                  of the unpaid principal balance of the Loan Account as bears
                  the same rate of interest for the same Interest Period. (See
                  Section 2-11(c)).

         "REVOLVING CREDIT NOTE": Is defined in Section 2-9.

         "REVOLVING CREDIT UPFRONT FEE": Is defined in Section 2-12.

         "REVOLVING CREDIT LOAN CEILING":$200 Million (subject to irrevocable
                  reduction of up to $50 Million (in increments of $10 Million)
                  on 30 days irrevocable prior written notice by the Lead
                  Borrower to the Administrative Agent at any time after July 1,
                  2000.

         "STATED AMOUNT": The maximum amount for which an L/C may be honored.

         "SWINGLINE LENDER": BBRF.

         "SWINGLINE LOANS": Defined in Section 2-7(a).

         "SWINGLINE LOAN CEILING": $20,000,000.00.

         "SUSPENSION EVENT": Any occurrence, circumstance, or state of facts
                  which (a) is an Event of Default; or (b) would become an Event
                  of Default if any requisite notice were given and/or any
                  requisite period of time were to run and such occurrence,
                  circumstance, or state of facts were not absolutely cured
                  within any applicable grace period.

                                       23
<PAGE>   29

         "TERM LENDER": Defined in the Preamble to this Agreement.

         "TERM LOAN": Defined in Section 3-1.

         "TERM LOAN UPFRONT FEE": Is defined in Section 3-5.

         "TERM LOAN MONITORING FEE": Is defined in Section .

         "TERM NOTE": Defined in Section 3-2.

         "TERMINATION DATE": The earliest of (a) the Maturity Date; or (b) the
                  occurrence of any event described in Section 11-13 hereof; or
                  (c) date set by notice by the Agent to the Borrower, which
                  notice sets the Termination Date on account of the occurrence
                  of any Event of Default other than as described in Section
                  11-13 hereof.

         "UCC": The Uniform Commercial Code as presently in effect in
                  Massachusetts (Mass. Gen. Laws, Ch. 106).

         "UNFUNDED PLAN DISBURSEMENTS" Those disbursements and payments required
                  to be made by the HomePlace Group incidental to, and as part
                  of, the consummation of the Plan, including (as finally
                  determined by the Bankruptcy Court or established in
                  accordance with the Plan) any so-called lease cure payments
                  and reclamation claims, for so long as, but only for so long
                  as, such disbursements and payments remain either unfunded or
                  unpaid by the HomePlace Group. Any Availability Reserve
                  established by the Administrative Agent as a consequence of
                  the existence of any Unfunded Plan Disbursements shall be
                  concomitantly reduced, or eliminated, upon receipt by the
                  Administrative Agent of confirmation, satisfactory to the
                  Administrative Agent in the Administrative Agent's sole and
                  exclusive discretion, that any Unfunded Plan Disbursements
                  have in fact been funded or paid.

         "WORKING CAPITAL LENDERS": Is defined in the Preamble to this
                  Agreement.

         "YEAR 2000 COMPLIANT": Computer applications, imbedded microchips, and

                                       24
<PAGE>   30

                  other systems and subsystems which properly recognize and
                  perform their intended function without any adverse effect on
                  account of their respective inability to recognize certain
                  dates prior to, on, and after December 31, 1999 or on account
                  of their treating any date prior to, on, or after December 31,
                  1999 other than as the specific date in question.

ARTICLE 2 - THE REVOLVING CREDIT:

         2-1. Establishment of Revolving Credit.

                  (a) The Working Capital Lenders hereby establish a revolving
line of credit (the "REVOLVING CREDIT") in the Borrowers' favor pursuant to
which each Working Capital Lender, subject to, and in accordance with, this
Agreement, acting through the Administrative Agent, shall make loans and
advances and otherwise provide financial accommodations to and for the account
of the Borrower as provided herein, in each instance equal to that Working
Capital Lender's Commitment Percentage of Availability, up to the maximum amount
of that Working Capital Lender's Dollar Commitment. The amount available for
borrowing under the Revolving Credit shall be determined by the Administrative
Agent by reference to Availability, as determined by the Administrative Agent
from time to time.

                  (b) As used herein, the following terms have the following
meanings:

                           (i)      "AVAILABILITY" refers at any time to the
                                    result of the following:

                                    (A)      Borrowing Base.

                           Minus

                                    (B)      The then unpaid principal balance
                                             of the Loan Account (including,
                                             without duplication, the unpaid
                                             principal balance of Revolving
                                             Loans and any SwingLine Loans).

                           Minus

                                    (C)      The then Stated Amount of all
                                             L/C's.

                           (ii)     "BORROWING BASE" refers at any time to the
                                    least of 2-1(b)(ii)(A), 2- 1(b)(ii)(B), or
                                    2-1(b)(ii)(C), where:

                                    (A)      is the Revolving Credit Loan
                                             Ceiling.

                                    (B)      is the result of the following:

                                             (I)      The lesser of the
                                                      following:

                                                      (1)     The product of the
                                                              Cost of Eligible
                                                              Inventory (net of
                                                              Inventory
                                                              Reserves)
                                                              multiplied by the
                                                              Inventory Advance
                                                              Rate.

                                       25
<PAGE>   31

                                                      (2)     The product of the
                                                              Appraised
                                                              Liquidation Value
                                                              multiplied by the
                                                              Inventory
                                                              Appraisal Cap.

                           Plus

                                             (II)     The Receivables Advance
                                                      Rate of the face amount of
                                                      Eligible Receivables

                           Minus

                                             (III)    The then aggregate of the
                                                      Availability Reserves.

                                    (C)      is the result of the following:

                                             (I)      The lesser of the
                                                      following:

                                                      (1)     The product of the
                                                              Cost of Eligible
                                                              Inventory (net of
                                                              Inventory
                                                              Reserves)
                                                              multiplied by the
                                                              OverAll Inventory
                                                              Advance Rate.

                                                      (2)     The product of the
                                                              Appraised
                                                              Liquidation Value
                                                              multiplied by the
                                                              OverAll Inventory
                                                              Appraisal Cap.

                           Plus

                                             (II)     The Receivables Advance
                                                      Rate of the face amount of
                                                      Eligible Receivables

                           Minus

                                             (III)    The then aggregate of the
                                                      Availability Reserves.

                           Minus

                                             (IV)     The unpaid principal
                                                      balance of the Term Loan
                                                      and all accrued and unpaid
                                                      PIK Interest.

                  (c) Availability shall be based upon Borrowing Base
Certificates furnished as provided in Section 6-4, below.

                  (d) The proceeds of borrowings under the Revolving Credit
shall be used solely for the following:

                           (i) To retire the revolving and term credit
                  facilities in the Chapter 11 Cases which are provided or
                  agented by BBRF

                           (ii) To provide funds for payments required to be
                  made under the Plan.

                                       26
<PAGE>   32

                           (iii) For on-going working capital requirements of
                  the Borrowers, transition expenses, and capital expenditures,
                  all in accordance with the Borrower's business plan.

         2-2. Advances in Excess of Availability. No Working Capital Lender has
any obligation to provide credit to the Borrower such that the balance of the
Loan Account exceeds the Borrowing Base provided however, the Working Capital
Lenders' doing so does not affect the obligations of the Borrowers hereunder nor
obligate the Working Capital Lenders to do so on any other occasion.

         2-3. Initial Reserves. Changes to Reserves.

                  (a) At the execution of this Agreement, the only Reserves are
as follows:

                           (i) Availability Reserves:

                                    (A) 50% of Customer Credit Liability.

                                    (B) 65% of the landing costs for goods
                           covered by documentary L/C's, which landing costs
                           were not included in the subject documentary L/C.

                                    (C) 2 months rent for locations in States in
                           which the landlord may have a preferred position,
                           where the subject landlord has not provided a waiver
                           or subordination in form satisfactory to the
                           Administrative Agent.

                                    (D) Unfunded Plan Disbursements, in the
                           amount of $5,200,000.00.

                           (ii) Inventory Reserves: A reserve for shrinkage,
                  initially set as follows:

                                    (A) Inventory carried on the HomePlace
                           system: Initially $5.1 Million, and increased, on the
                           first day of each month, by 2.4% of the preceding
                           month's sales until the Borrowers' inventory is
                           relieved to reflect the results of a physical
                           inventory (at which time, this Reserve shall be
                           relieved and likewise begin to accrete).

                                    (B) Inventory carried on the Waccamaw
                           system: Initially, at $500 Thousand at retail (on the
                           assumption that the practice of accruing shrinkage at
                           retail at 1.6% of sales will continue).

                  (b) The Administrative Agent shall provide not less than seven
days prior notice to the Borrower of the establishment of any Reserve (other
than those established at the execution

                                       27
<PAGE>   33

of this Agreement) except that a change to a then existing Reserve, which change
reflects changed circumstances (e.g. the Reserve for Customer Credit Liability
will change based on the aggregate of Customer Credit Liability at any one
time), may be made without such notice.

         2-4. Risks of Value of Inventory. The Administrative Agent's reference
to a given asset concerning the providing of credit to the Borrowers is not a
determination by the Administrative Agent of the value of such asset. All risks
concerning the Collateral are the Borrower's. All Collateral secures all
Liabilities whether relied upon by the Administrative Agent or the Working
Capital Lenders.

         2-5. Loan Requests.

                  (a) Subject to the provisions of this Agreement, a loan or
advance under the Revolving Credit duly and timely requested by the Lead
Borrower shall be made pursuant hereto, provided that:

                           (i) Borrowing Base will not be exceeded; and

                           (ii) The Revolving Credit has not been suspended as
                  provided in Section 2-5(i).

                  (b) Requests for loans and advances under the Revolving Credit
may be requested by the Lead Borrower in such manner as may from time to time be
acceptable to the Administrative Agent.

                  (c) Subject to the provisions of this Agreement, the Lead
Borrower may request a Revolving Credit Loan and elect an interest rate and
Interest Period to be applicable to that Revolving Credit Loan by giving the
Administrative Agent notice no later than the following:

                           (i) If such Revolving Credit Loan is or is to be
                  converted to a Base Margin Loan: By 11:30AM on the Business
                  Day on which the subject Revolving Credit Loan is to be made
                  or is to be so converted. Base Margin Loans requested by the
                  Lead Borrower, other than those resulting from the conversion
                  of a Libor Loan, shall not be less than $10,000.00.

                           (ii) If such Revolving Credit Loan is, or is to be
                  continued as, or converted to, a Libor Loan: By 1:00PM Three
                  (3) Libor Business Days before the end of the then applicable
                  Interest Period. Libor Loans and conversions to Libor Loans
                  shall each be not less than $1,000,000.00 and in increments of
                  $250,000.00 in excess of such minimum.

                           (iii) Any Libor Loan which matures while a Suspension
                  Event is extant shall be converted, at the option of the
                  Administrative Agent to a Base Margin Loan notwithstanding any
                  notice from the Lead Borrower that such

                                       28
<PAGE>   34

                  Loan is to be continued as a Libor Loan.

                  (d) Any request for a Revolving Credit Loan or for the
conversion of a Revolving Credit Loan which is made after the applicable
deadline therefor, as set forth above, shall be deemed to have been made at the
opening of business on the then next Business Day or Libor Business Day, as
applicable. Each request for a Revolving Credit Loan or for the conversion of a
Revolving Credit Loan shall be made in such manner as may from time to time be
acceptable to the Administrative Agent

                  (e) If, during the Fifteen (15) days immediately preceding the
day on which a loan request is made there has been no unpaid principal balance
in the Loan Account on account of loans and advances under the Revolving Credit,
the loan so requested shall be made (subject to all other provisions of this
Agreement) no later than the Second Business Day after (and not counting) the
day on which the loan otherwise would have been made as provided above.

                  (f) The Lead Borrower may request that the Administrative
Agent cause the issuance of L/C's for the account of the Lead Borrower as
provided in Section 2-17.

                  (g) The Administrative Agent may rely on any request for a
loan or advance, or other financial accommodation under the Revolving Credit
which the Administrative Agent, in good faith, believes to have been made by a
Person duly authorized to act on behalf of the Lead Borrower and may decline to
make any such requested loan or advance, or issuance, or to provide any such
financial accommodation pending the Administrative Agent's being furnished with
such documentation concerning that Person's authority to act as may be
satisfactory to the Administrative Agent.

                  (h) A request by the Lead Borrower for loan or advance, or
other financial accommodation under the Revolving Credit shall be irrevocable
and shall constitute certification by each 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 in the
                  Lead Borrower's financial condition from the most recent
                  financial information furnished Administrative Agent or any
                  Working Capital Lender pursuant to this Agreement.

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

                           (iii) All or a portion of any loan or advance so
                  requested will be set aside by the Lead Borrower to cover all
                  of the Borrowers' obligations for sales tax on account of
                  sales since the then most recent borrowing pursuant to the
                  Revolving Credit.

                           (iv) Each representation which is made herein or in
                  any of the Loan Documents (defined below) is then true and
                  complete, in all material respects, as of and as if made on
                  the date of such request.

                                       29
<PAGE>   35

                           (v) No Suspension Event is then extant.

                  (i) At any time that any Suspension Event is extant:

                           (i) Neither the Administrative Agent nor any Working
                  Capital Lender shall be obligated, during such suspension, to
                  make any loans or advance, or to provide any financial
                  accommodation hereunder or to seek the issuance of any L/C.

                           (ii) The Administrative Agent may suspend the right
                  of the Lead Borrower to request any Libor Loan or to convert
                  any Base Margin Loan to a Libor Loan.

         2-6. Making of Loans Under Revolving Credit.

                  (a) A loan or advance under the Revolving Credit shall be made
by the transfer of the proceeds of such loan or advance to the Disbursement
Account or as otherwise instructed by the Lead Borrower.

                  (b) A loan or advance shall be deemed to have been made under
the Revolving Credit (and the Borrowers shall be indebted to the Administrative
Agent for the amount thereof immediately) at the following:

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

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

                  (c) There shall not be any recourse to or liability of any
Agent or any Working Capital Lender, on account of:

                           (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 properly initiated by
                  the Administrative Agent in accordance with wire instructions
                  provided to the Administrative Agent by the Lead Borrower.

         2-7. SwingLine Loans

                  (a) For ease of administration, loans under the Revolving
Credit may be made by the SwingLine Lender (in the aggregate, the "SWINGLINE
LOANS") in accordance with the procedures set forth in this Agreement for the
making of loans and advances under the Revolving

                                       30
<PAGE>   36

Credit. The unpaid principal balance of the SwingLine Loans shall not at any one
time be in excess of the SwingLine Loan Ceiling (which SwingLine Loan Ceiling is
subject to amendment, from time to time, by written notice by the Administrative
Agent to the Lead Borrower).

                  (b) The aggregate unpaid principal balance of SwingLine Loans
shall bear interest as if the same were loans and advances under the Revolving
Credit.

                  (c) The obligation to repay SwingLine Loans shall be evidenced
by a Note in the form of EXHIBIT 2-7(C), annexed hereto, executed by the
Borrower, and payable to the SwingLine Lender. Neither the original nor a copy
of that Note shall be required, however, to establish or prove any Liability. In
the event that said Note is ever lost, mutilated, or destroyed, the Borrowers
shall execute a replacement thereof and deliver such replacement to the
Administrative Agent.

                  (d) For all purposes of this Agreement,

                           (i) The SwingLine Lender is a "Lender".

                           (ii) The SwingLine Loans and the Borrowers'
                  obligations to the SwingLine Lender constitute and are secured
                  as "Liabilities".

                  (e) SwingLine Loans may be subject to periodic settlement with
the Working Capital Lenders in accordance with the terms of the Agency
Agreement.

         2-8. The Loan Account.

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

                  (b) The Administrative Agent may also keep a record (either in
the Loan Account or elsewhere, as the Administrative Agent may from time to time
elect) of all interest, fees, service charges, costs, expenses, and other debits
owed the Administrative Agent and each Working Capital 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 Administrative Agent for the Account of each Working
Capital Lender of the items giving rise to such credits. The amount of any item
credited against the Liabilities which is charged back against Administrative
Agent or any Working Capital 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 Borrowers are obligated hereunder are
payable on demand. In the determination of Availability, the Administrative
Agent may deem fees, service charges, accrued interest, and other payments which
will be due and payable between the date of such determination

                                       31
<PAGE>   37

and the first day of the then next succeeding month as having been advanced
under the Revolving Credit whether or not such amounts are then due and payable.

                  (e) The Administrative Agent, without the request of the Lead
Borrower, may advance under the Revolving Credit any interest, fee, service
charge, or other payment to which the Administrative Agent or any Working
Capital Lender is entitled from any Borrower pursuant hereto and may charge the
same to the Loan Account notwithstanding that such amount so advanced may result
in the Borrowing Base being exceeded. Such action on the part of the
Administrative Agent shall not constitute a waiver of the Administrative Agent's
rights and the Borrowers' obligations under Section 2-10(b). Any amount which is
added to the principal balance of the Loan Account as provided in this Section
2-8(e) shall bear interest , subject to Section 2-11(f), 2-18(a)(i)(B), at the
Base Margin Rate.

                  (f) Any statement rendered by the Administrative Agent or any
Working Capital Lender to the Lead Borrower concerning the Liabilities shall be
considered correct and accepted by all Borrowers and shall be conclusively
binding upon all Borrowers unless the Lead Borrower provides the Administrative
Agent 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 Administrative Agent'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.

         2-9. The Revolving Credit Notes. The obligation to repay loans and
advances under the Revolving Credit, with interest as provided herein, shall be
evidenced by Notes (each, a "REVOLVING CREDIT NOTE") in the form of EXHIBIT 2-9,
annexed hereto, executed by the Lead Borrower, one payable to each Working
Capital Lender. Neither the original nor a copy of any Revolving Credit Note
shall be required, however, to establish or prove any Liability. In the event
that any Revolving Credit Note is ever lost, mutilated, or destroyed, the Lead
Borrower shall execute a replacement thereof and deliver such replacement to the
Administrative Agent.

         2-10. Payment of The Loan Account.

                  (a) The Borrowers may repay all or any portion of the
principal balance of the Loan Account from time to time until the Termination
Date. Such payments shall be applied first to Base Margin Loans and only then to
Libor Loans.

                  (b) The Borrowers, without notice or demand from the
Administrative Agent or any Working Capital Lender, shall pay the Administrative
Agent the following (which payments shall be applied first to Base Margin Loans
and only then to Libor Loans):

                           (i) That amount, from time to time, which is
                  necessary so that

                                       32
<PAGE>   38

                  the unpaid balance of the Loan Account does not exceed the
                  Borrowing Base.

                           (ii) That amount which is equal to the Inventory
                  Advance Rate of the Cost of Inventory which is sold by the
                  Borrowers in bulk other than in the ordinary course.

                  (c) The Administrative Agent shall endeavor to cause those
application of payments (if any), pursuant to Sections 2-10(a) and 2-10(b)
against Libor Loans then outstanding in such manner as results in the least cost
to the Lead Borrower, but shall not have any affirmative obligation to do so nor
liability on account of the Administrative Agent's failure to have done so. In
no event shall action or inaction taken by the Administrative Agent excuse the
Lead Borrower from any indemnification obligation under Section 2-10(e).

                  (d) The Borrowers shall repay the then entire unpaid balance
of the Loan Account and all other Liabilities on the Termination Date.

                  (e) The Borrowers shall indemnify each Working Capital Lender
and hold each Working Capital Lender harmless from and against any loss, cost or
expense (including loss of anticipated profits) which such Working Capital
Lender may sustain or incur (including, without limitation, by virtue of
acceleration after the occurrence of any Event of Default) as a consequence of
the following:

                           (i) Default by any Borrower in payment of the
                  principal amount of or any interest on any Libor Loan as and
                  when due and payable, including any such loss or expense
                  arising from interest or fees payable by such Working Capital
                  Lender to Working Capital Lenders of funds obtained by it in
                  order to maintain its Libor Loans

                           (ii) Default by any Borrower in making a borrowing or
                  conversion after the Lead Borrower has given (or is deemed to
                  have given) a request for a Revolving Credit Loan or a request
                  to convert a Revolving Credit Loan from one applicable
                  interest rate to another.

                           (iii) The making of any payment on a Libor Loan or
                  the making of any conversion of any such Loan to a Base Margin
                  Loan on a day that is not the last day of the applicable
                  Interest Period with respect thereto, including interest or
                  fees payable by such Working Capital Lender to Working Capital
                  Lenders of funds obtained by it in order to maintain any such
                  Loans as "breakage fees" (so-called).

         2-11. Interest Rates.

                  (a) Each Revolving Credit Loan shall bear interest at the Base
Margin Rate unless timely notice is given (as provided in Section 2-5(a)) that
the subject Revolving Credit Loan (or a portion thereof) is, or is to be
converted to, a Libor Loan.

                                       33
<PAGE>   39

                  (b) Each Revolving Credit Loan which consists of a Libor Loan
shall bear interest at the applicable Libor Rate.

                  (c) Subject to the provisions hereof, the Lead Borrower, by
notice to the Administrative Agent, may cause all or a part of the unpaid
principal balance of the Loan Account to bear interest at the Base Margin Rate
or the Libor Rate as specified from time to time by the Lead Borrower. For ease
of reference and administration, each part of the Loan Account which bears
interest at the same interest and for the same Interest Period is referred to
herein as if it were a separate "Revolving Credit Loan".

                  (d) The Lead Borrower shall not select, renew, or convert any
interest rate for a Revolving Credit Loan such that, in addition to interest at
the Base Margin Rate, there are more than Eight (8) Libor Rates applicable to
the Revolving Credit Loans at any one time.

                  (e) The Borrowers shall pay accrued and unpaid interest on
each Revolving Credit Loan in arrears as follows:

                           (i) On the applicable Interest Payment Date for that
                  Revolving Credit Loan.

                           (ii) On the Termination Date and on the End Date.

                           (iii) Following the occurrence of any Event of
                  Default, with such frequency as may be determined by the
                  Administrative Agent.

                  (f) Following the occurrence of any Event of Default (and
whether or not the Administrative Agent exercises the Administrative Agent's
rights on account thereof), each Revolving Credit Loan shall bear interest, at
the option of the Administrative Agent at rate which is the aggregate of the
then applicable rate for that loan plus Two Percent (2%) per annum.

         2-12. Revolving Credit UpFront Fee. As compensation for the commitment
of BBRF included herein to make loans and advances to the Borrower and as
compensation for its maintenance of sufficient funds available for such purpose,
BBRF has earned a REVOLVING CREDIT UPFRONT FEE (so referred to herein) at the
times and in the amounts as set forth the Fee Letter.

         2-13. Administrative Agent's Fee. In addition to any other fee or
expense paid by the Borrowers on account of the Revolving Credit, the Borrowers
shall pay the Administrative Agent an ADMINISTRATIVE AGENT'S FEE (so referred to
herein) as provided in the Fee Letter.

         2-14. Line (Unused) Fee. In addition to any other fee by the Borrowers
on account of the Revolving Credit, the Lead Borrower shall pay the
Administrative Agent a LINE (UNUSED) FEE (so referred to herein) in arrears, on
the first day of each quarter (and on the Termination Date). The Line (Unused)
Fee shall be equal to 0.375% per annum of the average difference, during the

                                       34
<PAGE>   40

quarter just ended (or relevant period with respect to the payment being made on
the Termination Date) between the Loan Ceiling and the aggregate of the unpaid
principal balance of the Loan Account plus the undrawn amount of all L/C's
outstanding during the quarter just ended (or such relevant period).

         2-15. Early Termination Fee.

                  (a) In the event that the Termination Date occurs, for any
reason, prior to the Maturity Date, except as provided in Section 2-15(b), the
Borrowers shall pay the Administrative Agent, for the benefit of the Working
Capital Lenders, the EARLY TERMINATION FEE (so referred to herein) consisting of
the following percentage of the weighted average of the Loan Ceiling in effect
within the six months immediately prior to such early termination:

                              EARLY TERMINATION FEE

From                    To                              Percentage of Loan
                                                        Ceiling
--------------------------------------------------------------------------
Closing                 June 30, 2000                   1.0%
July 1, 2000            June 30, 2001                   0.5%

                  (b) No Early Termination Fee shall be due and payable in the
event of the early termination of the Revolving Credit in concert with a
refinancing of the Revolving Credit agented or provided by BBRF or any affiliate
of BBRF, it being understood that neither BBRF nor any affiliate of BBRF has
agreed to provide or to entertain a request to provide any such refinancing.

         2-16. Administrative Agent's and Working Capital Lenders' Discretion.

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

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

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

                                       35
<PAGE>   41

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

                           (iv) Constitutes a Suspension Event.

                  (b) In the exercise of such judgement, each Agent and each
Working Capital Lender also may take into account any of the following factors:

                           (i) Those included in, or tested by, the definitions
                  of "Eligible Inventory" and "Cost".

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

                           (iii) General macroeconomic conditions which have a
                  material effect on the Borrowers' cost structure.

                           (iv) Material changes in or to the mix of the
                  Borrowers' Inventory.

                           (v) Seasonality with respect to the Lead Borrowers'
                  Inventory and patterns of retail sales.

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

                  (c) The burden of establishing the failure of the
Administrative Agent or any Working Capital Lender to have acted in a reasonable
manner in such Person's exercise of discretion shall be the Lead Borrowers'.

         2-17. Procedures For Issuance of L/C's.

                  (a) The Lead Borrower may request that the Administrative
Agent cause the issuance of L/C's for the account of a Borrower. Each such
request shall be in such manner as may from time to time be acceptable to the
Administrative Agent.

                  (b) The Administrative Agent will endeavor to cause the
issuance of any L/C so requested by the Lead Borrower, provided that , at the
time that the request is made, the Revolving Credit has not been suspended as
provided in Section 2-5(i) and if so issued:

                           (i) The aggregate Stated Amount of all L/C's then
                  outstanding, does not exceed $25,000,000.00.

                           (ii) The expiry of the L/C is not later than the
                  earlier of Thirty (30) days prior to the Maturity Date (unless
                  the Borrower provides cash collateral reasonably acceptable to
                  the Administrative Agent in an amount equal to 105% of the
                  Stated Amount of any L/C having an expiry after that date) or
                  the following:

                                       36
<PAGE>   42

                           (A) Standby's: One (1) year from initial issuance.

                           (B) Documentary's: Sixty (60) days from issuance.

                           (iii) Borrowing Base would not be exceeded.

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

                  (d) There shall not be any recourse to, nor liability of, the
Administrative Agent or any Working Capital Lender on account of

                           (i) Any delay or refusal by an Issuer to issue an
                  L/C;

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

                  (e) The Borrowers shall reimburse the Issuer for the amount of
any honoring of a drawing under an L/C on the same day on which such honoring
takes place. The Administrative Agent, without the request of the Lead Borrower,
may advance under the Revolving Credit (and charge to the Loan Account) the
amount of any honoring of any L/C and other amount for which the Borrowers, the
Issuer, or the Working Capital Lenders become obligated on account of, or in
respect to, any L/C. Such advance shall be made whether or not a Suspension
Event is then extant or such advance would result in Borrowing Base's being
exceeded. Such action shall not constitute a waiver of the Administrative
Agent's rights under Section 2-10(b) hereof.

         2-18. Fees For L/C's.

                  (a) The Borrowers shall pay to the Administrative Agent the
following fees, quarterly in arrears, on the Termination Date, and on the End
Date, on account of L/C's, the issuance of which had been procured by the
Administrative Agent:

                           (i) For the account of the Working Capital Lenders:

                                    (A) Standby L/C's: The L/C Margin, per
                           annum, of the weighted average of the stated amount
                           of all standby L/C's outstanding at any time since
                           the most recent payment of such fee.

                                    (B) Documentary L/C's: The L/C Margin, per
                           annum, of the weighted average of the stated amount
                           of all documentary L/C's outstanding at any time
                           since the most recent payment of such fee.

Following the occurrence of any Event of Default (and whether or not the
Administrative Agent exercises the Administrative Agent's rights on account
thereof), the above fees shall increase, at the Administrative Agent's option,
to the aggregate of the applicable L/C Margin plus Two Percent (2%) per annum.

                           (ii) For the account of the Issuer, 0.125% per annum
                  of the weighted average of the stated amount of all L/C's
                  outstanding at any time since the most recent payment of such
                  fee.

                                       37
<PAGE>   43

                  (b) In addition to the fee to be paid as provided in
Subsection 2-18(a), above, the Borrowers shall pay to the Administrative Agent
(or to the Issuer, if so requested by Administrative Agent), on demand, all
issuance, processing, negotiation, amendment, and administrative fees and other
amounts charged by the Issuer on account of, or in respect to, any L/C.

         2-19. 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 any 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 (with
                  respect to the foregoing) 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,
each 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 Borrowers. 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). None of any Agent, any Working
Capital Lender, or 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 Administrative Agent's, each Working Capital 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

                                       38
<PAGE>   44

law or contract.

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

                  (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 Administrative Agent, any or any Issuer
                  has an obligation to lend to fund drawings under any L/C; or

                           (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 2-19(g)(i) or 2-19(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
Administrative Agent and delivery by the Administrative Agent to the Lead
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 Borrowers shall immediately pay to the
Administrative Agent, from time to time as specified by the Administrative
Agent, such amounts as shall be sufficient to compensate such Issuer for such
increased cost. Any Issuer's determination of costs incurred under Section
2-19(g)(i) or 2-19(g)(ii), above, and the allocation, if any, of such costs
among the Borrowers and other letter of credit customers of such Issuer, if done
in good faith and made on an equitable basis and in accordance with such
officer's certificate, shall be conclusive and binding on the Borrowers.

                  (h) The obligations of the Borrowers 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.

                                       39
<PAGE>   45

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

                           (iv) Any good faith 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.

         2-20. Changed Circumstances.

                  (a) The Administrative Agent may give the Lead Borrower notice
of the occurrence of the following:

                           (i). The Administrative Agent shall have determined
                  in good faith (which determination shall be final and
                  conclusive) on any day on which the rate for a Libor Loan
                  would otherwise be set, that adequate and fair means do not
                  exist for ascertaining such rate.

                           (ii). The Administrative Agent shall have determined
                  in good faith (which determination shall be final and
                  conclusive) that:

                                    (A) The continuation of or conversion of any
                           Revolving Credit Loan to a Libor Loan has been made
                           impracticable or unlawful by the occurrence of a
                           contingency that materially and adversely affects the
                           applicable market or compliance by the Administrative
                           Agent or any Working Capital Lender in good faith
                           with any applicable law or governmental regulation,
                           guideline or order or interpretation or change
                           thereof by any governmental authority charged with
                           the interpretation or administration thereof or with
                           any request or directive of any such governmental
                           authority (whether or not having the force of law).

                                    (B) The indices on which the interest rates
                           for Libor Loans are based shall no longer represent
                           the effective cost to the Administrative Agent or any
                           Working Capital Lender for U.S. dollar deposits in
                           the interbank market for deposits in which it
                           regularly participates.

                  (b) In the event that the Administrative Agent gives the Lead
Borrower notice of an occurrence described in Section 2-20(a), then, until the
Administrative Agent notifies the Lead Borrower that the circumstances giving
rise to such notice no longer apply:

                           (i) The obligation of the Administrative Agent and of
                  each Working Capital Lender to make Libor Loans of the type
                  affected by such changed circumstances or to permit the Lead
                  Borrower to select the affected interest rate as otherwise
                  applicable to any Revolving Credit Loans shall be suspended.

                           (ii) Any notice which the Lead Borrower had given the

                                       40
<PAGE>   46

                  Administrative Agent with respect to any Libor Loan, the time
                  for action with respect to which has not occurred prior to the
                  Administrative Agent's having given notice pursuant to Section
                  2-20(a), shall be deemed at the option of the Administrative
                  Agent to not having been given.

         2-21 Working Capital Lenders' Commitments.

                  (a) The obligations of each Working Capital Lender are several
and not joint. No Working Capital Lender shall have any obligation to make any
loan or advance under the Revolving Credit in excess of the lesser of

                           (i) that Working Capital Lender's Commitment
                  Percentage of the subject loan or advance or of Availability;
                  or

                           (ii) that Working Capital Lender's Dollar Commitment,

                  (b) No Working Capital Lender shall have any liability to any
Borrower on account of the failure of any other Working Capital Lender to
provide any loan or advance under the Revolving Credit nor any obligation to
make up any shortfall which may be created by such failure.

                  (c) The Dollar Commitments, Commitment Percentages, and
identities of the Working Capital Lenders (but not the overall Commitment) may
be changed, from time to time by the reallocation or assignment of Dollar
Commitments and Commitment Percentages amongst the Working Capital Lenders or
with other Persons who determine to become "Working Capital Lenders", provided,
however,

                           (i) Unless an Event of Default has occurred (in which
                  event, no consent of the Lead Borrower is required) any
                  assignment to a Person not then a Working Capital Lender shall
                  be subject to the prior consent of the Lead Borrower (not to
                  be unreasonably withheld), which consent will be deemed given
                  unless the Lead Borrower provides the Administrative Agent
                  with written objection, not more than Five (5) Business Days
                  after the Administrative Agent shall have given the Lead
                  Borrower written notice of a proposed assignment).

                           (ii) Any such assignment or reallocation shall be on
                  a pro-rata basis such that each reallocated or assigned Dollar
                  Commitment to any Person remains the same percentage of the
                  overall Commitment (in terms of dollars) as the reallocated
                  Commitment Percentage is to such Person.

                  (d) Upon written notice given the Lead Borrower from time to
time by the Administrative Agent, of any assignment or allocation referenced in
Section 2-21(c):

                           (i) Each shall execute one or more replacement
                  Revolving Credit Notes to reflect such changed Dollar
                  Commitments, Commitment Percentages, and identities and shall
                  deliver such replacement Revolving Credit

                                       41
<PAGE>   47

                  Notes to the Administrative Agent (which promptly thereafter
                  shall deliver to the Lead Borrower the Revolving Credit Notes
                  so replaced) provided however, in the event that a Revolving
                  Credit Note is to be exchanged following its acceleration or
                  the entry of an order for relief under the Bankruptcy Code
                  with respect to any Borrower, the Administrative Agent, in
                  lieu of causing the Borrowers to execute one or more new
                  Revolving Credit Notes, may issue the Administrative Agent's
                  Certificate confirming the resulting Commitments and
                  Commitment Percentages.

                           (ii) Such change shall be effective from the
                  effective date specified in such written notice and any Person
                  added as a Working Capital Lender shall have all rights and
                  privileges of a Working Capital Lender hereunder thereafter as
                  if such Person had been a signatory to this Agreement and any
                  other Loan Document to which a Working Capital Lender is a
                  signatory and any person removed as a Working Capital Lender
                  shall be relieved of any obligations or responsibilities of a
                  Working Capital Lender hereunder thereafter.

                  (e) The Borrower recognizes that the Administrative Agent's
exercise of any discretion accorded to the Administrative Agent herein and of
its rights, remedies, powers, privileges, and discretions with respect to the
Borrower is subject to a certain Agency Agreement amongst the Administrative
Agent, the Working Capital Lenders, and the Term Lender. The "voting rights"
which are included in that Agency Agreement are set forth on EXHIBIT 2-21(E),
annexed hereto. The Administrative Agent, the Working Capital Lenders, and the
Term Lender each agree that, so long as there has occurred no Event of Default,
the designation of those actions which require "Unanimous Consent" and
"Unanimous Consent Plus", as set forth in Sections 33 and 34 of the Agency
Agreement, may not be amended without the prior written consent of the Borrower.

         2-22. Designation of Lead Borrower as Borrowers' Administrative Agent.

                  (a) Each Borrower hereby designates the Lead Borrower as that
Borrower's agent to obtain loans and advances under the Revolving Credit, the
proceeds of which shall be available to each Borrower for the same uses as those
set forth in Section 1-1(d), above. As the disclosed principal for its agent,
each Borrower shall be obligated to the Administrative Agent, the Collateral
Agent, and the Working Capital Lenders on account of loans and advances so made
under the Revolving Credit as if made directly by the Working Capital Lenders to
that Borrower, notwithstanding the manner by which such loans and advances are
recorded on the books and records of the Lead Borrower and of any Borrower.

                  (b) The proceeds of each of such loans and advances shall be
deposited into the Disbursement Account or as otherwise indicated by the Lead
Borrower. No Agent nor any

                                       42
<PAGE>   48

Lender shall have any obligation to see to the application of such proceeds.

ARTICLE 3 - THE TERM LOAN:

         3-1. Commitment To Make Term Loan. Subject to satisfaction of the
Conditions Precedent (Article 4) on or before June 15, 1999, the Borrower shall
borrow from the Term Lender and the Term Lender shall lend to the Borrower the
sum of $15,000,000.00 (the "TERM LOAN"), repayable with interest as provided
herein.

                  (a) To retire the revolving and term credit facilities in the
Chapter 11 Cases which are provided or agented by BBRF

                  (b) To provide funds for payments required to be made under
the Plan.

                  (c) For on-going working capital requirements of the
Borrowers, transition expenses, and capital expenditures, all in accordance with
the Borrower's business plan.

         3-2. The Term Note. The obligation to repay the Term Loan, with
interest as provided herein, shall be evidenced by a Note (the "TERM NOTE") in
the form of EXHIBIT 3-2, annexed hereto, executed by the Borrowers. Neither the
original nor a copy of the Term Note shall be required, however, to establish or
prove any Liability. In the event that the Term Note is ever lost, mutilated, or
destroyed, the Borrowers shall execute a replacement thereof and deliver such
replacement to the Lender.

         3-3. Payment of Principal of the Term Loan.

                  (a) Except as provided in Section 3-3(c), the Borrowers may
not repay all or any portion of the principal balance of the Term Loan prior to
the repayment in full of all Liabilities under the Revolving Credit and the
termination of any obligation, under the Revolving Credit, of the Administrative
Agent, or any Working Capital Lender to make any loans or to provide any
financial accommodations.

                  (b) The Term Loan shall be paid by an amount, from time to
time, equal to 10% of the net proceeds of the sale of inventory in bulk other
than in the ordinary course, to the extent permitted herein.

                  (c) The Term Loan may be prepaid as follows:

                           (i) With the net proceeds of Permitted Asset Sales.

                           (ii) With the net proceeds of the sale of equity
                  securities, the issuance of which is otherwise permitted in
                  this Agreement.

                           (iii) With the net proceeds of Permitted SubDebt.

                           (iv) After July 1, 2000, provided that each of the
                  following conditions is met:

                                       43
<PAGE>   49

                                    (A) Such prepayment is not less than $3
                           Million or an integer of $3 Million.

                                    (B) Not more than one other such prepayment
                           has then been made within the past 12 months prior to
                           the date of such prepayment.

                                    (C) Availability, immediately following the
                           making of such prepayment, is not less than $30
                           Million.

                                    (D) The Administrative Agent shall have been
                           provided with the following:

                                             (I) A Certificate of the Lead
                                    Borrower's President or Chief Financial
                                    Officer that, with the exception of those
                                    accounts which are the subject of a good
                                    faith dispute, all accounts payable by each
                                    Borrower are within 30 days of its
                                    respective invoice terms.

                                             (II) A forecast, prepared in a
                                    manner which is consistent with those
                                    previously provided to the Administrative
                                    Agent, which reflects that Availability, for
                                    the shorter of the then next 12 months or
                                    the period through the Maturity Date will
                                    not be less than $20 Million.

                                    (E) The ratio of Consolidated Adjusted
                           EBITDA to total interest expense, for the then most
                           recent 12 month period, shall be equal to or greater
                           than 2.75 to 1.0.

                                    (F) Consolidated Adjusted EBITDA for the
                           then most recent 12 month period, shall not be less
                           than $35 Million.

                                    (G) No Suspension Event is then extant and
                           no Event of Default shall have occurred or will occur
                           by reason of the making of such prepayment.

                  (d) On the Maturity Date, the Borrowers shall repay the then
entire unpaid balance of the Term Loan and all other Liabilities.

         3-4. Interest.

                  (a) The unpaid principal balance of the Term Loan shall bear
interest, until repaid, fixed at 15.0% per annum, payable as follows:

                           (i) Interest on the unpaid principal balance of the
                  Term Loan, equal to 12.0% per annum ("CURRENT PAY INTEREST")
                  shall be payable monthly in arrears, on the first day of each
                  month, and on the Maturity Date.

                           (ii) Accrued Interest on the unpaid principal balance
                  of the Term

                                       44
<PAGE>   50

                  Loan, equal to 3.0% per annum ("PIK INTEREST") , shall be
                  added to the then unpaid principal balance of the Term Note
                  monthly, on the first day of each month, commencing with July
                  1, 1999. The aggregate balance of PIK Interest so added to the
                  Term Note shall bear interest at 12% per annum.

                  (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), Current Pay Interest shall be 14% per annum and PIK
Interest shall be equal to 5% per annum.

         3-5. Term Loan UpFront Fee. As compensation for the Lender's having
committed to make the Term Loan, the Term Lender has earned the "TERM LOAN
UPFRONT FEE" (so referred to herein) in the amount and payable as provided in
the Fee Letter.

         3-6. Term Loan Monitoring Fee. As compensation for its monitoring the
Borrower's compliance with this Agreement, the Term Lender shall be paid a "TERM
LOAN MONITORING FEE" (so referred to herein) in the amount and payable as
provided in the Fee Letter.

         3-7. Payments. The Borrower authorizes the Term Loan Lender to request
that the Administrative Agent pay over directly to the Term Loan Lender any and
all amounts due from time to time under this Agreement as advances under the
Revolving Credit and hereby instructs the Administrative Agent to honor such
request, provided that no Suspension Event is then extant and none will result
from the honoring of such request. The Term Loan Lender shall provide the
Borrower with prompt written notice of any amount which the Lender receives from
the Administrative Agent pursuant to a request made under this Section 3-7.

ARTICLE 4 - CONDITIONS PRECEDENT:

         As a condition to the effectiveness of this Agreement, the
establishment of the Revolving Credit, the making of the first loan under the
Revolving Credit, and the making of the Term Loan, each of the documents
respectively described in Sections 4-1 through and including 4-5, (each in form
and substance satisfactory to the Administrative Agent) shall have been
delivered to the Administrative Agent, and the conditions respectively described
in Sections 4-6 through and including 4-10, shall have been satisfied:

         4-1. Corporate Due Diligence.

                  (a) Certificates of corporate good standing issued by the
respective Secretaries

                                       45
<PAGE>   51

of State for the States under whose law the respective Borrowers are organized.

                  (b) Certificates of due qualification, in good standing, by
the Secretaries of State of each State in which the nature of a Borrower's
business conducted or assets owned could require such qualification.

                  (c) Certificates of the Borrowers' respective Secretaries of
the due adoption, continued effectiveness, and setting forth the texts of, each
corporate resolution 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. Emergence. Merger.

                  (a) A certified copy of the Docket for the Chapter 11 Cases,
as of no earlier than Eleven (11) days following the entry of the Order
confirming the Plan with either (i) no order or process entered in the Chapter
11 Cases or otherwise, which process has the effect of staying, modifying,
reversing, vacating, or otherwise affecting the effectiveness of such Plan in
accordance with its terms and as so confirmed or (ii) if such an order or
process is so entered, the Administrative Agent's being furnished with an
unqualified opinion of the Borrowers' bankruptcy or general counsel which
concludes that such order does not adversely affect (A) the operation and
enforceability of the within Agreement and (B) the availability, in accordance
with their respective terms, of the Agents' Lender's Rights and Remedies.

                  (b) A Certificate of the Lead Borrower's Chair that: the
merger which is contemplated by Merger Agreement has been consummated in
accordance with the terms of the Merger Agreement and the requisite
documentation to effect such merger have been filed with the appropriate
authorities of the States of incorporation of Waccamaw Corporation and HomePlace
of America, Inc.

         4-3. Opinion. An opinion of counsel to the Borrowers in form and
substance satisfactory to the Administrative Agent.

         4-4. Additional Documents. Such additional instruments and documents as
the Administrative Agent or its counsel reasonably may require or request.

         4-5. Officers' Certificates. Certificates executed by the respective
Presidents and the Chief Financial Officers of each of the Borrowers and stating
that the representations and warranties made by the Borrowers in the Loan
Documents are true and complete in all material respects as of the date of such
Certificate, and that, to such Person's knowledge, no event has

                                       46
<PAGE>   52

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 Borrowers in this Agreement or in any of the other Loan
Documents or in any other report, statement, document, or paper provided by any
or on behalf of the Borrowers shall be true and complete in all material
respects as of the date as of which such representation or warranty was made.

         4-7. 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 credit facility, is not less than
$22,500,000.00.

         4-8. All Fees and Expenses Paid. All fees due at or immediately after
the first funding under the Revolving Credit and all costs and expenses incurred
by the Administrative Agent, the Collateral Agent, and the Term Lender in
connection with the establishment of the credit facility contemplated hereby
(including the reasonable fees and expenses of counsel to the Administrative
Agent, the Collateral Agent, and the Term Lender and fees then due as provided
in the Fee Letter) shall have been paid.

         4-9. No Suspension Event. No Suspension Event shall then be extant.

         4-10. No Adverse Change. No material adverse change shall have occurred
in the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrowers from the Borrowers' pro forma business
plan dated April 9, 1999 provided to BBRF or, as applicable, from the following
unaudited annual financial statements provided to BBRF:

         HomePlace Group                 :        February 28, 1999
         Waccamaw Corporation            :        January 31, 1999

No document shall be deemed delivered to any Agent or any Lender until received
and accepted by the Administrative Agent at its head offices in Boston,
Massachusetts. Under no circumstances will this Agreement take effect until
executed and accepted by the Agents at said head office.

                                       47
<PAGE>   53

ARTICLE 5 - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:

         To induce each 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) and the Term Loan, the Borrowers, in addition to all
other representations, warranties, and covenants made by any of the Borrowers in
any other Loan Document, makes those representations, warranties, and covenants
included in this Agreement.

         5-1. Payment and Performance of Liabilities. The Borrowers shall pay
each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.

         5-2. Due Organization - Corporate Authorization - No Conflicts.

                  (a) The Borrowers presently are in good standing as
corporations under the laws of the states of their respective incorporation, and
are duly qualified and in good standing in every other State in which, by reason
of the nature or location of the Borrowers' assets or operation of the
Borrowers' business, such qualification may be necessary.

                  (b) Each Related Entity is listed on EXHIBIT 5-2, annexed
hereto. Each Related Entity is in good standing in the State in which
incorporated and is duly qualified in which other State in which, by reason of
that entity's assets or the operation of such entity's business, such
qualification may be necessary. The Borrowers shall provide the Working Capital
Lenders with prior written notice of any entity's becoming or ceasing to be a
Related Entity.

                  (c) The Borrowers have all requisite corporate power and
authority to execute and deliver all Loan Documents to which the Borrowers are a
party and have and will hereafter retain all requisite corporate power to
perform all Liabilities.

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

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

                           (iii) Will not result in the creation or imposition
                  of, or the obligation to create or impose, any Encumbrance
                  upon any assets of the Borrowers

                                       48
<PAGE>   54

                  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 Borrowers and are the legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their respective terms.

         5-3. Trade Names.

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

                           (i) All names under which the Borrowers ever
                  conducted their business.

                           (ii) All entities and/or persons with whom the
                  Borrowers ever consolidated or merged, or from whom the
                  Borrowers ever acquired in a single transaction or in a series
                  of related transactions substantially all of such entity's or
                  person's assets.

                  (b) Except (i) upon not less than twenty-one (21) days prior
written notice given the Working Capital Lenders , and (ii) in compliance with
all other provisions of this Agreement, the Borrowers 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 Borrowers own and possess, or have 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 Borrowers' conduct of the Borrowers' business.

                  (d) The conduct by the Borrowers of the Borrowers' business
does not 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.

                  (a) The Collateral, and the books, records, and papers of the
Borrowers pertaining thereto, are kept and maintained solely at those locations
which are listed on EXHIBIT 5-4, annexed hereto, which EXHIBIT includes, with
respect to each such location, the name and address of the landlord on the Lease
which covers such location and of all service bureaus with which any such
records are maintained and the names and addresses of each of the Borrowers'
landlords.

                  (b) The Borrowers shall not remove any of the Collateral from
said locations listed on EXHIBIT 5-4 except to:

                           (i) accomplish sales of Inventory in the ordinary
                  course of business; or

                                       49
<PAGE>   55

                           (ii) move Inventory from one such location to another
                  such location; or

                           (iii) utilize such of the Collateral as is removed
                  from such locations in the ordinary course of business (such
                  as motor vehicles).

                  (c) No Borrower will execute any lease, commit to, or become
legally obligated to, open any additional Stores unless each of the following
conditions is satisfied with respect thereto:

                           (i) Such commitment or obligation is in the ordinary
                  course of business.

                           (ii) Such commitment or obligation is not, and does
                  not result in, a violation of this Agreement.

                           (iii) Not less than less than thirty (30) days prior
                  written notice of the opening of the subject Store is given to
                  the Administrative Agent.

                           (iv) The relevant Borrower has used its best efforts
                  to obtain a landlord's waiver from the Landlord of the subject
                  Store, which waiver is in form reasonably satisfactory to the
                  Administrative Agent.

                           (v) Such commitment or obligation will not result in
                  the opening of more than the following number of stores during
                  the Borrowers' fiscal year indicated:

Fiscal Year Ending in      2000            2001             2002           2003
February:
-------------------------------------------------------------------------------
Maximum New Stores            7              13               18             25

                  (d) Each Borrower may alter, modify, or amend any Lease;
provided that no such amendment shall result in a violation of this Agreement or
in the granting to the landlord an Encumbrance not otherwise imposed by
operation of law on any of the Borrower's assets.

                  (e) No Borrower shall cease the conduct of business from any
of its present or future Stores without first furnishing the Administrative
Agent with not less than thirty (30) days prior written notice thereof.

                  (f) No tangible personal property of any 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.

         5-5. Infrastructure.

                  (a) The Borrowers have and will maintain a sufficient
infrastructure to conduct

                                       50
<PAGE>   56

their business as presently conducted and as contemplated to be conducted as
described in the Business Plan.

                  (b) The Borrowers own and possess, or have the right to use
(and will hereafter own, possess, or have such 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
Borrowers' conduct of the Borrowers' business.

                  (c) The conduct by the Borrowers of the Borrowers' business
does not , in any material respect, presently infringe (nor will any Borrower
conduct its business in the future so as to infringe) 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.

         5-6. Year 2000 Compliance.

                  (a) Based upon a diligent inquiry undertaken by the Borrowers,
it appears that, except as set forth on EXHIBIT 5-6, annexed hereto, the
Borrower's operations are Year 2000 Compliant.

                  (b) The Borrowers have developed a detailed plan and timetable
with respect to the Borrowers' operations becoming fully Year 2000 Compliant as
set forth on EXHIBIT 5-6 and has committed adequate resources to execute that
plan and to meet such timetable.

                  (c) Following the Borrowers' operations becoming Year 2000
Compliant, no Borrower will suffer or permit its operations thereafter to cease
to be Year 2000 Compliant in any manner which might have more than a de minimus
effect on its operations.

         5-7. Title to Assets.

                  (a) The Borrowers are, and shall hereafter remain, the owners
of the Collateral free and clear of all Encumbrances with the exceptions of the
following (the "PERMITTED ENCUMBRANCES"):

                           (i) The security interest created herein.

                           (ii) Those Encumbrances (if any) listed on EXHIBIT
                  5-7(A), annexed hereto.

                  (b) Except as set forth on EXHIBIT 5-7(A), the Borrowers do
not and shall not have possession of any property on consignment to the
Borrowers. In no event shall the Cost of the goods on consignment ever exceed
the product of $7 Thousand times the number of retail stores then in operation
nor shall any Borrower have any goods on consignment to it which are not stated
as a separate item on the Borrowing Base Certificate. No Inventory which is
consigned to any Borrower shall constitute Eligible Inventory.

                                       51
<PAGE>   57

                  (c) Except as described on EXHIBIT 5-7(C), no Borrower shall
acquire or obtain the right to use any Equipment, the acquisition or right to
use of which Equipment is otherwise permitted by this Agreement, in which
Equipment any third party has an interest, except for:

                           (i) Equipment which is merely incidental to the
                  conduct of that Borrower's business.

                           (ii) Equipment, the acquisition or right to use of
                  which has been consented to by the Administrative Agent, which
                  consent may be conditioned upon the Administrative Agent's
                  receipt of such agreement with the third party which has an
                  interest in such Equipment as is satisfactory to the
                  Administrative Agent.

         5-8. Indebtedness. The Borrowers do not and shall not hereafter have
any Indebtedness with the exceptions of:

                  (a) Any Indebtedness to the Working Capital Lenders .

                  (b) Any Indebtedness on account of the Term Loan.

                  (c) The Indebtedness (if any) listed on EXHIBIT 5-8, annexed
hereto.

                  (d) Purchase money Indebtedness and capital leases for the
acquisition of Equipment, not exceeding $40,000,000.00 outstanding at any one
time.

         5-9. Insurance Policies.

                  (a) EXHIBIT 5-9, annexed hereto, is a schedule of all
insurance policies owned by the Borrowers or under which any of the Borrowers
are the named insured. Each of such policies is in full force and effect.
Neither the issuer of any such policy nor any of the Borrowers is in default or
violation of any such policy.

                  (b) The Borrowers 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 satisfactory to
the Administrative Agent . The coverage reflected on EXHIBIT 5-9 presently
satisfies the foregoing requirements, it being recognized by the Borrowers,
however, that such requirements may change hereafter to reflect changing
circumstances. All insurance carried by the Borrowers shall provide for a
minimum of Twenty (20) days' written notice of cancellation to the
Administrative Agent and all such insurance which covers the Collateral shall
include an endorsement in favor of the Administrative Agent, which endorsement
shall provide that the insurance, to the extent of the Administrative Agent's
interest therein, shall not be impaired or invalidated, in whole or in part, by
reason of any act or neglect of the Borrowers or by the failure of the Borrowers
to comply with any warranty or condition of the policy. In the event of the
failure by the Borrowers to maintain insurance as required herein, the
Administrative Agent, at its option, may

                                       52
<PAGE>   58

obtain such insurance, provided, however, the Administrative Agent's obtaining
of such insurance shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrowers' failure to have maintained such insurance. The
Borrowers shall furnish to the Administrative Agent certificates or other
evidence satisfactory to the Administrative Agent regarding compliance by the
Borrowers with the foregoing insurance provisions.

                  (c) The Borrowers shall advise the Administrative Agent of
each claim in excess of $100,000.00 made by the Borrowers under any policy of
insurance which covers the Collateral and will permit the Administrative Agent,
at the Administrative Agent's option in each instance, to the exclusion of the
Borrowers, to conduct the adjustment of each such claim (and of all claims
following the occurrence of any Suspension Event). The Borrowers hereby appoint
the Administrative Agent as the Borrowers' attorney in fact to obtain, adjust,
settle, and cancel any insurance described in this section and to endorse in
favor of the Administrative Agent 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 Administrative Agent . The Administrative
Agent shall not be liable on account of any exercise pursuant to said power
except for any exercise in a grossly negligent manner or for willful
misconduct.. The Administrative Agent may apply any proceeds of such insurance
against the Liabilities, whether or not such have matured, in such order of
application as the Administrative Agent may determine.

         5-10. Licenses. Each license, distributorship, franchise, and similar
agreement issued to, or to which any of the Borrowers is a party is in full
force and effect. No party to any such license or agreement is in default or
violation thereof. The Borrowers have not received any notice or threat of
cancellation of any such license or agreement.

         5-11. Leases. EXHIBIT 5-11, 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. No party to a Lease or a Capital Lease is in
default or violation of any such Lease or Capital Lease and the Borrowers have
not received any notice or threat of cancellation of any such Lease or Capital
Lease. The Borrowers hereby authorize the Administrative Agent at any time and
from time to time to contact any of the Borrowers' landlords in order to confirm
the Borrowers' continued compliance with the terms and conditions of the Leases
between the Borrowers and that landlord and to discuss such issues, concerning
the Borrowers' occupancy under such Leases, as the Administrative Agent may
determine.

         5-12. Requirements of Law. The Borrowers are in compliance with, and
shall hereafter

                                       53
<PAGE>   59

comply with and use its assets in compliance with, all Requirements of Law. None
of the Borrowers has received any notice of any violation of any Requirement of
Law (whether or not such violation is material), which violation has not been
cured or otherwise remedied.

         5-13. Maintain Properties. The Borrowers shall:

                  (a) Keep the Collateral in good order and repair (ordinary
reasonable wear and tear and insured 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) Not sell, lease, or otherwise dispose of any of the
Collateral, other than as follows:

                           (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 Borrowers.

                           (iii) The turning over to the Administrative Agent of
                  all Receipts as provided herein.

                           (iv) Permitted Asset Sales.

         5-14. Pay Taxes.

                  (a) All federal taxes for which the Borrowers are liable or
obligated are presently due and payable without penalty; or have been paid or
settled; or will be duly dealt with under the Plan.

                  (b) All state taxes for which the Borrowers are liable or
obligated are presently due and payable without penalty; or have been paid or
settled; or will be duly dealt with under the Plan.

                  (c) Except as disclosed on EXHIBIT 5-14, annexed hereto, there
are no examinations of or with respect to the Borrowers presently being
conducted by the Internal Revenue Service or any other taxing authority.

                  (d) The Borrowers 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 Borrowers or the Collateral by any
person or entity whose claim could result in an Encumbrance upon any asset of
the Borrowers or by any governmental authority; properly exercise any trust
responsibilities imposed upon the Borrowers by reason of withholding from
employees' pay or by reason of the Borrowers' receipt of sales tax or other
funds for the account of any third

                                       54
<PAGE>   60

party; timely make all contributions and other payments as may be required
pursuant to any Employee Benefit Plan now or hereafter established by the
Borrowers; and timely file all tax and other returns and other reports with each
governmental authority to whom the Borrowers is obligated to so file provided
however, nothing included in this Section 5-14(d) shall prevent the Borrowers
from contesting, in good faith and by appropriate proceedings, any tax liability
claimed against any Borrower, but only provided that and so long as no tax lien
is filed with respect thereto.

                  (e) At its option, the Administrative Agent may, but shall not
be obligated to, pay any taxes, unemployment contributions, and any and all
other charges levied or assessed upon the Borrowers or the Collateral by any
person or entity or governmental authority, and make any contributions or other
payments on account of the Borrowers' Employee Benefit Plan as the
Administrative Agent, in the Administrative Agent'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 Administrative Agent's making of any
such payment shall not constitute a cure or waiver of any Event of Default
occasioned by the Borrowers' failure to have made such payment.

         5-15. No Margin Stock. The Borrowers are 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 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.

         5-16. ERISA. None of the Borrowers nor any ERISA Affiliate ever has or
hereafter shall:

                  (a) Violate or fail to be in full compliance with the
Borrowers' Employee Benefit Plan.

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

                  (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 upon the Borrowers 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 against any assets of the Borrowers on account thereof pursuant to
ERISA.

                  (g) Be a member of, contribute to, or have any obligation
under any Employee

                                       55
<PAGE>   61

Benefit Plan which is a multiemployer plan within the meaning of Section 4001(a)
of ERISA.

         5-17. Hazardous Materials.

                  (a) No Borrower has ever:

                           (i) been legally responsible for any release or
                  threat of release of any Hazardous Material; or

                           (ii) received notification of any release or threat
                  of release of any Hazardous Material from any site or vessel
                  occupied or operated by the Borrowers 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 Borrowers shall:

                           (i) dispose of any Hazardous Material only in
                  compliance with all Environmental Laws; and

                           (ii) not store on any site or vessel occupied or
                  operated by the Borrowers 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 Borrowers' business
                  and is in compliance with all Environmental Laws.

                  (c) The Borrowers shall provide the Administrative Agent with
written notice upon the Borrowers' 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 Borrowers may be liable.

         5-18. Litigation. Except as described in EXHIBIT 5-18, annexed hereto,
there is not presently pending or threatened by or against the Borrowers any
suit, action, proceeding, or investigation which, if determined adversely to the
Borrowers, would have a material adverse effect upon the Borrowers' financial
condition or ability to conduct their business as such business is presently
conducted or is contemplated to be conducted in the foreseeable future.

         5-19. Dividends or Investments. The Borrowers shall not:

                  (a) Pay any cash dividend or make any other distribution in
respect of any class of the capital stock of HomePlace America, Inc.

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

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

                                       56
<PAGE>   62

                  (d) Merge or consolidate or be merged or consolidated with or
into any other corporation or other entity.

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

                  (f) Organize or create any Related Entity other than a wholly
owned subsidiary which takes all such steps as the Agents reasonably may require
to become "Borrowers" on like terms and conditions as are applicable to other
"Borrowers", and then only if the Agents are reasonably satisfied that the
creation of such subsidiary does not adversely affect the secured position of
the Collateral Agent and its rights and remedies upon default.

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

         5-20. Loans. The Borrowers 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 Borrowers' suppliers in the
ordinary course.

                  (b) Advances to the Borrowers' officers, employees, and
salespersons with respect to reasonable expenses to be incurred by such
officers, employees, and salespersons for the benefit of the Borrowers, which
expenses are properly substantiated by the person seeking such advance and
properly reimbursable by the Borrowers, but in any event, not greater than
$250,000.00 in the aggregate at any one time outstanding.

         5-21. Line of Business. The Borrowers shall not engage in any business
other than the business in which, at the execution of this Agreement, they are
engaged or a business reasonably related thereto (the conduct of which
reasonably related business is reflected in the Business Plan).

         5-22. Protection of Assets. The Administrative Agent, in the
Administrative Agent's discretion, and from time to time, may discharge any tax
or Encumbrance on any of the Collateral, or take any other action that the
Administrative Agent may deem necessary or desirable to repair, insure,
maintain, preserve, collect, or realize upon any of the Collateral. The
Administrative Agent 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
Administrative Agent has had an opportunity to be heard), from which finding no
further appeal is available, that the Administrative Agent had acted in actual
bad faith or in a grossly negligent manner. The Borrowers shall pay to the
Administrative Agent, on demand, or the

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Administrative Agent, in its discretion, may add to the Loan Account, all
amounts paid or incurred by the Administrative Agent pursuant to this section.
The obligation of the Borrowers to pay such amounts is a Liability.

         5-23. Affiliate Transactions. The Borrowers shall not make any payment,
nor give any value to any Related Entity except for goods and services actually
purchased by the Borrowers from, or sold by the Borrowers to, such Related
Entity 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.

         5-24. Executive Pay.

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

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

                  (c) The Borrowers will not:

                           (i) Enter into any Executive Agreement not extant 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 5-23 hereof.

         5-25. Additional Assurances.

                  (a) The Borrowers are not the owners 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 Collateral Agent (subject only to Permitted
Encumbrances) to secure the Liabilities.

                  (b) The Borrowers will not hereafter acquire any asset or any
interest in property

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<PAGE>   64

which is not, immediately upon such acquisition, subject to such a perfected
security interest in favor of the Collateral Agent to secure the Liabilities
(subject only to Encumbrances (if any) permitted pursuant to Section 5-7(a),
above).

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

                  (d) Each Borrower hereby designates the Collateral Agent as
and for that Borrower's true and lawful attorney, with full power of
substitution, to sign and file any financing statements in order to perfect or
protect the Collateral Agent's security and other collateral interests in the
Collateral.

                  (e) A carbon, photographic, or other reproduction of this
Agreement or of any financing statement or other instrument executed pursuant to
this Section 5-25 shall be sufficient for filing to perfect the security
interests granted herein.

         5-26. Adequacy of Disclosure.

                  (a) All financial statements furnished to the Agents and the
Lenders by the Borrowers have been prepared in accordance with GAAP consistently
applied and present fairly the condition of the Borrowers 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 Borrowers 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 Borrowers do not have any contingent obligations or
obligation under any Lease or Capital Lease which is not noted in the Borrowers'
financial statements furnished to the Agents and the Lenders prior to the
execution of this Agreement.

                  (c) No document, instrument, agreement, or paper now or
hereafter given to any Agent or any Lender by or on behalf of the Borrowers or
any guarantor of the Liabilities in connection with the execution of this
Agreement by the Lenders 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
Borrowers which has, or which, in the foreseeable future could have, a material
adverse effect on the financial condition of the Borrowers or any such guarantor
which has not been disclosed in writing to the Working Capital Lenders.

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<PAGE>   65

         5-27. No Restrictions on Liabilities. No Borrower shall enter into or
directly or indirectly become subject to any agreement which prohibits or
restricts, in any manner, that Borrower's:

                  (a) Creation of, and granting of security and other collateral
interests in favor of the Collateral Agent.

                  (b) Incurrence of Liabilities.

         5-28. Other Covenants. The Borrowers shall not indirectly do or cause
to be done any act which, if done directly by the Borrowers, would breach any
covenant contained in this Agreement.

ARTICLE 6 - REPORTING REQUIREMENTS / FINANCIAL COVENANTS:

         6-1. Maintain Records. The Borrowers shall:

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

                  (b) Timely provide the Administrative Agent with those
financial reports, statements, and schedules required by this Article 6 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 Borrowers 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 Administrative Agent and
instruct such accountants to fully cooperate with, and be available to, the
Administrative Agent to discuss the Borrowers' 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 Administrative
Agent.

                  (e) Not change the Borrowers' fiscal year.

                  (f) Not change the Borrowers' taxpayer identification number.

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         6-2. Access to Records.

                  (a) The Borrowers shall accord the Administrative Agent and
its representatives with reasonable access from time to time as the
Administrative Agent and such representatives reasonably may require to all
properties owned by or over which the Borrowers has control. The Administrative
Agent and its representatives shall have the right, and the Borrowers will
permit the Administrative Agent and its representatives from time to time as the
Administrative Agent and its representatives may request, to examine, inspect,
copy, and make extracts from any and all of the Borrowers' books, records,
electronically stored data, papers, and files. The Borrowers shall make all of
the Borrowers' copying facilities available to the Administrative Agent.

                  (b) The Borrowers hereby authorizes the Administrative Agent
and its 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 Borrowers, 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 Working Capital Lenders and the Working
                  Capital Lenders' representatives with respect thereto.

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

         6-3. Immediate Notice.

                  (a) The Borrowers shall provide the Administrative Agent 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) Any change in the Borrowers' Executive Officers,
                  officers, directors, or key employees.

                           (ii) The completion of any physical count of the
                  Borrowers' Inventory (together with a copy of the certified
                  results thereof).

                           (iii) Any ceasing of the Borrowers' making of
                  payment, in the ordinary course, to any of its creditors
                  (including the ceasing of the making of such payments on
                  account of a dispute with the subject creditor).

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<PAGE>   67

                           (iv) Any failure by the Borrowers to pay rent due,
                  which failure continues for more than Three (3) days following
                  the day on which such rent first came due.

                           (v) Any material change in the business, operations,
                  or financial affairs of the Borrowers.

                           (vi) The occurrence of any Suspension Event.

                           (vii) Any intention on the part of the Borrowers to
                  discharge the Borrowers' present independent accountants or
                  any withdrawal or resignation by such independent accountants
                  from their acting in such capacity (as to which, see
                  Subsection 6-1(d)).

                           (viii) Any litigation which, if determined adversely
                  to the Borrowers, might have a material adverse effect on the
                  financial condition of the Borrowers.

                  (b) The Borrowers shall:

                           (i) Provide the Administrative Agent, when so
                  distributed, with copies of any materials distributed to the
                  shareholders of the Borrowers (qua such shareholders).

                           (ii) Add the Administrative Agent as an addressee on
                  all mailing lists maintained by or for the Borrowers.

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

                           (iv) Provide the Administrative Agent, when received
                  by any of the Borrowers, with a copy of any management letter
                  or similar communications from any accountant of the
                  Borrowers.

         6-4. Borrowing Base Certificate. The Borrowers shall provide the
Administrative Agent, daily, with a Borrowing Base Certificate (in the form of
EXHIBIT 6-4 annexed hereto, as such form may be revised from time to time by the
Working Capital Lenders ). Such Certificate may be sent to the Administrative
Agent by facsimile transmission, provided that the original thereof is forwarded
to the Administrative Agent on the date of such transmission.

         6-5. Weekly Reports. Weekly, on Wednesday of each week (as of the then
immediately preceding Saturday) the Borrowers shall provide the Administrative
Agent with a sales audit report and a flash collateral report (each in such form
as may be specified from time to time by the Administrative Agent). Such report
may be sent to the Administrative Agent by facsimile

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<PAGE>   68

transmission, provided that the original thereof is forwarded to the
Administrative Agent on the date of such transmission.

         6-6. Monthly Reports.

                  (a) Monthly, the Borrowers shall provide the Administrative
Agent with original counterparts of the following (each in such form as the
Administrative Agent from time to time may specify):

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

                                    (A) A "Stock Ledger Inventory Report" and a
                           Certificate (signed by the Borrowers' respective
                           Presidents or Chief Financial Officers) concerning
                           the Borrowers' Inventory.

                                    (B) An Open to Buy Report on which is shown
                           whether inventory levels are adequate to meet sales
                           projections.

                           (ii) Within Thirty (30) days of the end of the
                  previous month:

                                    (A) Reconciliations of the above described
                           Report and inventory Certificate (Section
                           6-6(a)(i)(A)) to Availability and to the general
                           ledger as of the end of the subject month.

                                    (B) A Gross Margin Reconciliation.

                                    (C) A schedule of purchases from the
                           Borrowers' ten largest vendors (in terms of year to
                           date purchases), which schedule shall be in such form
                           as may be satisfactory to the Administrative Agent
                           and shall include year to date cumulative purchases
                           and an aging of payables to each such vendor.

                                    (D) An aging of the Borrowers' Inventory.

                                    (E) An aging of the Borrowers' credit card
                           receivables.

                                    (F) An aging of the Borrowers' accounts
                           payable.

                                    (G) An internally prepared financial
                           statement of the Borrowers' Consolidated financial
                           condition the results of its operations for, the
                           period ending with the end of the subject month,
                           which financial statement shall include, at a
                           minimum, a balance sheet, income statement (on a
                           store specific and on a "consolidated" basis), cash
                           flow and , and after the completion of one year's
                           operations, comparison of same store sales for the
                           corresponding month of the then immediately previous
                           year.

                  (b) For purposes of Section 6-6(a)(i), above, the first
"previous month" in respect of which the items required by that Section shall be
provided shall be May, 1999 and for purposes of Section 6-6(a)(ii), above, the
first "previous month" in respect of which the items required by that

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<PAGE>   69

Section shall be provided shall be May, 1999.

         6-7. Quarterly Reports.

                  (a) Quarterly, within Forty Five (45) days following the end
of each of the Borrowers' fiscal quarters, the Lead Borrower shall provide the
Administrative Agent with an original counterpart of a management prepared
financial statement of the Borrowers for the period from the beginning of the
Borrowers' then current fiscal year through the end of the subject quarter, and
after the completion of one year's operations, with comparative information for
the same period of the previous fiscal year, which statement shall include, at a
minimum, a balance sheet, income statement (on a store specific and on a
"consolidated" basis), statement of changes in shareholders' equity, and cash
flows, and after the completion of one year's operations, comparisons for the
corresponding quarter of the then immediately previous year, as well as to the
Business Plan.

                  (b) Commencing with the Borrowers' third fiscal quarter in
2000, the Lead Borrower shall provide the Administrative Agent with the
financial statements furnished in accordance with Section 6-7(a), an original
counterpart of a Certificate (signed by the Borrowers' President or Chief
Financial Officer) in the form of EXHIBIT 6-7(B), annexed hereto (the "PRICING
CERTIFICATE"), as such form reasonably may be revised from time to time
hereafter, on which shall be indicated (with supporting calculations) the
Borrowers' performance with respect to those criteria included in the definition
of the applicable margin as set forth in the Pricing Grid.

         6-8. Annual Reports.

                  (a) Annually, within ninety (90) days following the end of the
Borrowers' fiscal year, the Borrowers shall furnish the Administrative Agent
with an original signed counterpart of each of the Borrowers' annual financial
statement, which statement shall have been prepared by, and bear the unqualified
opinion of, the Borrowers' independent certified public accountants (i.e. said
statement shall be "certified" by such accountants). Such annual statement shall
include, at a minimum (each Consolidated, and, and after the completion of one
year's operations, with comparative information for the then prior fiscal year)
a balance sheet, income statement, statement of changes in shareholders' equity,
and cash flows.

                  (b) No later than the earlier of Fifteen (15) days prior to
the end of each of the Borrowers' fiscal years or the date on which such
accountants commence their work on the preparation of the Borrowers' annual
financial statement, the Borrowers shall give written notice to such accountants
(with a copy of such notice, when sent, to the Administrative Agent) that:

                           (i) Such annual financial statement will be delivered
                  by the Borrowers to the Administrative Agent (for subsequent
                  distribution to each Lender).

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<PAGE>   70

                           (ii) It is the primary intention of the Borrowers, in
                  its engagement of such accountants, to satisfy the financial
                  reporting requirements set forth in this Article 6.

                           (iii) The Borrowers have been advised that the
                  Administrative Agent (and each Lender)will rely thereon with
                  respect to the administration of, and transactions under, the
                  credit facility contemplated by this Agreement.

                  (c) Each annual statement shall be accompanied by such
accountant's Certificate indicating that, in conducting the audit for such
annual statement, such accountants nothing came to the attention of such
accountants to believe that any Suspension Event had occurred during the subject
fiscal year (or if one or more had occurred, the facts and circumstances
thereof).

         6-9. Officers' Certificates. The Borrowers shall cause the Borrowers'
respective Presidents and Chief Financial Officers, 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 Borrowers at the close of, and the results of the Borrowers'
operations and cash flows for, the period(s) covered, subject, however to the
following:

                           (i) Usual year end adjustments (with the exception of
                  the Certificate which accompanies such annual statement)

                           (ii) Material Accounting Changes (in which event,
                  such Certificate shall include a schedule (in reasonable
                  detail) of the effect of each such Material Accounting Change)
                  not previously specifically taken into account in the
                  determination of the financial performance covenant imposed
                  pursuant to Section 6-12.

                  (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 Borrowers to be taken on
account thereof.

                  (c) Include calculations concerning the Borrowers' compliance
(or failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 6-12 hereof.

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<PAGE>   71

         6-10. Inventories, Appraisals, and Audits.

                  (a) The Administrative Agent and the Lenders, at the expense
of the Borrowers, 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 Borrowers.

                  (b) Upon the Administrative Agent's request from time to time,
the Borrowers shall obtain, or shall permit the Administrative Agent to obtain
(in all events, at the Borrowers' expense) physical counts and/or inventories of
the Collateral, conducted by such inventory takers as are satisfactory to the
Administrative Agent and following such methodology as may be required by the
Administrative Agent, each of which physical counts and/or inventories shall be
observed by the Borrowers' accountants. The Administrative Agent contemplates
conducting (or having the Borrower conduct) Two (2) such counts and/or
inventories during any 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.

                  (c) Upon the Administrative Agent's request from time to time,
the Borrowers shall permit the Administrative Agent to obtain appraisals (in all
events, at the Borrowers' expense) conducted by such appraisers as are
satisfactory to the Administrative Agent. Unless an Event of Default has
occurred (in which event the Borrowers shall be responsible for all costs and
expenses of all appraisals so obtained), the Borrowers shall reimburse the
Administrative Agent for costs and expenses of up to 4 (3 if the Term Loan has
been retired) such appraisals in any 12 month period. Notwithstanding any input
which may be provided to the appraiser by or on behalf of the Administrative
Agent in connection with the preparation of the subject appraisal and the
conclusions and recommendations included therein, each such appraisal,
conclusions, and recommendations, shall be deemed to have been prepared and
provided by a Person which, as to the Agents and the Lenders, is an independent
contractor.

                  (d) The Administrative Agent may cause commercial finance
audits to be conducted of the Borrowers' books and records from time to time.
Unless an Event of Default has occurred (in which event the Borrowers shall be
responsible for all costs and expenses of all such audits so conducted), the
Borrowers shall reimburse the Administrative Agent for costs and expenses of up
to 4 (3 if the Term Loan has been retired) such audits in any 12 month period.

                  (e) The Administrative Agent from time to time (in all events,
at the Borrowers' expense) may undertake "mystery shopping" (so-called) visits
to all or any of the Borrowers' business premises. The Administrative Agent
shall provide the Borrowers with a copy of any non-company confidential results
of such mystery shopping.

                  (f) Each reference in this Section 6-10 to the Agents' or any
Lender's expense is to the such Agents' and such Lender's reasonable
out-of-pocket expenses associated with the subject matter of such reference.

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         6-11. Additional Financial Information.

                  (a) In addition to all other information required to be
provided pursuant to this Article 6, the Borrowers promptly shall provide the
Administrative Agent (and any guarantor of the Liabilities), with such other and
additional information concerning the Borrowers, the Collateral, the operation
of the Borrowers' business, and the Borrowers' financial condition, including
original counterparts of financial reports and statements, as the Administrative
Agent may from time to time request from the Borrowers.

                  (b) The Borrowers shall provide the Administrative Agent, from
time to time hereafter, with updated projections of the Borrowers' anticipated
performance and operating results.

                  (c) In all events, the Borrowers, no sooner than Ninety (90)
nor later than Sixty (60) days prior to the end of each of the Borrowers' fiscal
years, shall furnish the Administrative Agent with an updated and extended
projections (inclusive of balance sheets, income statements, and cash flow
statements by month) which shall go out at least through the end of the then
next fiscal year.

                  (d) The Borrowers recognize that all appraisals, inventories,
analysis, financial information, and other materials which the Administrative
Agent may obtain, develop, or receive with respect to the Borrowers is
confidential to the Administrative Agent and the Lenders and that, except as
otherwise provided herein, the Borrowers are not entitled to receipt of any of
such appraisals, inventories, analysis, financial information, and other
materials, nor copies or extracts thereof or therefrom.

         6-12. Financial Performance Covenants.

                  (a) The Borrowers shall observe and comply with those
financial performance covenants set forth on EXHIBIT 6-12(A), annexed hereto.
Compliance with such financial performance covenants shall be made as if no
Material Accounting Changes had been made (other than any Material Accounting
Changes specifically taken into account in the setting of such covenants). The
Administrative Agent may determine the Borrowers' compliance with such covenants
based upon financial reports and statements provided by the Borrowers to the
Administrative Agent (whether or not such financial reports and statements are
required to be furnished pursuant to this Agreement) as well as by reference to
interim financial information provided to, or developed by, the Administrative
Agent.

                  (b) The Borrowers' Business Plan is annexed hereto as EXHIBIT
6-12(B).

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ARTICLE 7 - USE AND COLLECTION OF COLLATERAL:

         7-1. Use of Inventory Collateral.

                  (a) Except for Permitted Asset Sales, the Borrowers shall not,
engage in any sale of the Inventory other than for fair consideration in the
conduct of the Borrowers' business in the ordinary course and shall not engage
in sales or other dispositions to creditors; sales or other dispositions in
bulk; and use 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 Borrowers'
customary return policy applicable to the return of inventory purchased by the
Borrowers' retail customers in the ordinary course, such Inventory may be
returned to the Borrowers without the consent of the Administrative Agent

         7-2. Inventory Quality. All Inventory now owned or hereafter acquired
by the Borrowers is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances).

         7-3. Adjustments and Allowances. The Borrowers may grant such
allowances or other adjustments to the Borrowers' Account Debtors (exclusive of
extending the time for payment of any Account or Account Receivable, which shall
not be done without first obtaining the Administrative Agent's prior written
consent in each instance) as the Borrowers may reasonably deem to accord with
sound business practice, provided, however, the authority granted the Borrowers
pursuant to this Section 7-3 may be limited or terminated by the Administrative
Agent at any time in the Administrative Agent's discretion.

         7-4.    Validity of Accounts.

                  (a) The amount of each Account shown on the books, records,
and invoices of the Borrowers 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 Borrowers.

                  (b) The Borrowers have no knowledge of any impairment of the
validity or collectibility of any of the Accounts and shall notify the
Administrative Agent of any such fact immediately after the Borrowers become
aware of any such impairment.

                  (c) No Borrower shall post any bond to secure the Borrowers'
performance under any agreement to which that Borrower is a party nor cause any
surety, guarantor, or other third party obligee to become liable to perform any
obligation of a Borrower (other than to the Working Capital Lenders ) in the
event of the Borrowers' failure so to perform.

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         7-5. Notification to Account Debtors. The Administrative Agent shall
have the right at any time (whether or not an Event of Default has occurred) to
notify any of the Borrowers' Account Debtors to make payment directly to the
Administrative Agent and to collect all amounts due on account of the
Collateral.

ARTICLE 8 - CASH MANAGEMENT. PAYMENT OF LIABILITIES:

         8-1 Depository Accounts.

                  (a) Annexed hereto as EXHIBIT 8-1 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; and (iii) a contact person at such depository.

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

                           (i) Notification, executed on behalf of the relevant
                  Borrower, to each depository institution with which any DDA is
                  maintained (other than the Disbursement Account or any Local
                  DDA), in form satisfactory to the Administrative Agent, of the
                  Collateral Agent's interest in such DDA.

                           (ii) An agreement (generally referred to as a
                  "Blocked Account Agreement"), in form satisfactory to the
                  Administrative Agent with any depository institution at which
                  both any DDA (other than the Operating Account) and the
                  Disbursement Account is maintained.

                           (iii) An agreement (generally referred to as a
                  "Blocked Account Agreement"), in form satisfactory to the
                  Administrative Agent, with any depository institution at which
                  a Blocked Account is maintained

                  (c) No Borrower will establish any DDA hereafter (other than a
Local DDA) unless, contemporaneous with such establishment, the Lead Borrower
delivers to the Administrative Agent an agreement (in form satisfactory to the
Administrative Agent) executed on behalf of the depository with which such DDA
is being established.

         8-2. Credit Card Receipts.

                  (a) Annexed hereto as EXHIBIT 8-2, is a Schedule which
describes all 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 Lead Borrower shall deliver to the Administrative
Agent, as a condition to the effectiveness of this Agreement, notification,
executed on behalf of the relevant Borrower, to each of the Borrower"s credit
card clearinghouses and processors of notice (in form satisfactory to

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<PAGE>   75

the Administrative Agent), which notice provides that payment of all credit card
charges submitted by any Borrower to that clearinghouse or other processor and
any other amount payable to any Borrower by such clearinghouse or other
processor shall be directed to the Concentration Account or as otherwise
designated from time to time by the Administrative Agent. No Borrower shall
change such direction or designation except upon and with the prior written
consent of the Administrative Agent .

         8-3. The Concentration and the Disbursement Accounts.

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

                           (i) The CONCENTRATION ACCOUNT: Established by the
                  Administrative Agent with BankBoston, N. A.

                           (ii) The DISBURSEMENT ACCOUNT: Established by the
                  Lead Borrower with BankBoston, N. A.

                           (iii) The OPERATING ACCOUNT: Established by the Lead
                  Borrower with BankBoston, N. A.

                  (b) The contents of the Concentration Account constitutes
Collateral and Proceeds of Collateral.

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

         8-4. Proceeds and Collection of Accounts.

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

                  (b) The Lead Borrower shall cause the ACH or wire transfer to
the Concentration 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 Disbursement Account) which transfers
                  shall be net of such minimum balance, not to exceed an average
                  of 1.5 days deposits to that DDA, as may be required to be
                  maintained in the subject DDA by the bank at which such DDA is
                  maintained; and

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<PAGE>   76

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

         8-5. Payment of Liabilities.

                  (a) On each Business Day, the Administrative Agent shall
apply, towards the SwingLine Loans and the Working Capital Loans, 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), which application shall be in such order as the
Administrative Agent shall determine, 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 One (1) Business Day after such
transfer.

                  (b) The Administrative Agent shall transfer to the
Disbursement Account any surplus in the Concentration Account remaining after
the application towards the Liabilities referred to in Section 8- 5(a), above
(less those amount 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 Administrative Agent may establish a
funded reserve of up to 105% of the aggregate Stated Amounts of such L/C's.

                  (c) The following rules shall apply to deposits and payments
under and pursuant to this Agreement:

                           (i) Funds shall be deemed to have been deposited to
                  the Concentration Account on the Business Day on which
                  deposited, provided that notice of such deposit is available
                  to the Working Capital Lenders by 2:00PM on that Business Day.

                           (ii) Funds paid to any Lender, other than by deposit
                  to the Concentration Account, shall be deemed to have been
                  received on the Business Day when such funds are good and
                  collected funds, provided that notice of such payment is
                  available to the Working Capital Lenders by 2:00PM on that
                  Business Day.

                           (iii) If notice of a deposit to the Concentration
                  Account (Section 8-5(c)(i)) or payment (Section 8-5(c)(ii)) is
                  not available to the Administrative Agent until after 2:00PM
                  on a Business Day, such deposit or payment shall be deemed to
                  have been made at 9:00AM on the then next Business Day.

                           (iv) All deposits to the Concentration Account and
                  other payments to the Lenders are subject to clearance and
                  collection.

                  (d) The Administrative Agent shall transfer to the
Disbursement Account any surplus in the Concentration Account remaining after
the application towards the Liabilities referred

                                       71
<PAGE>   77

to in Section 8- 5(a), above (less those amount 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 Working
Capital Lenders may establish a funded reserve of up to 105% of the aggregate
Stated Amounts of such L/C's.

         8-6. The Disbursement Account. Except as otherwise specifically
provided in, or permitted by, this Agreement, all checks shall be drawn by the
Lead Borrower upon, and other disbursements made by the Lead Borrower solely
from, the Disbursement Account.

ARTICLE 9 - GRANT OF SECURITY INTEREST:

         9-1. Grant of Security Interest. To secure the prompt, punctual, and
faithful performance of all and each of the Borrowers' Liabilities, the
Borrowers, and each of them, hereby grant to the Collateral Agent for the
benefit of the Lenders, and to the Lenders, a continuing security interest, in
and to, and assigns to the Collateral Agent for the benefit of the Lenders, and
to the Lenders, the following, and each item thereof, whether now owned or now
due, or in which any of the Borrowers has an interest (and without regard to
whether acquired prior or subsequent to the initiation of the Chapter 11 Cases),
or hereafter acquired, arising, or to become due, or in which any of the
Borrowers obtains an interest, and all products, Proceeds, substitutions, and
accessions of or to any of the following (all of which, together with any other
property in which the Lenders may in the future be granted a security interest,
is referred to herein as the "COLLATERAL"):

                  (a)      All Accounts and Accounts Receivable.

                  (b)      All Inventory.

                  (c)      All General Intangibles.

                  (d)      All Equipment.

                  (e)      All Goods.

                  (f)      All Fixtures.

                  (g)      All Chattel Paper.

                  (h)      All books, records, and information relating to the
                           Collateral and/or to the operation of the Borrowers'
                           business, and all rights of access to such books,
                           records, and information, and all property in which
                           such books, records, and information are stored,
                           recorded, and maintained.

                  (i)      All Investment Property, Instruments, Documents,
                           Deposit Accounts, Financial Assets, policies and
                           certificates of insurance, deposits,

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<PAGE>   78

                           impressed accounts, compensating balances, money,
                           cash, or other property.

                  (j)      All insurance proceeds, refunds, and premium rebates,
                           including, without limitation, proceeds of fire and
                           credit insurance, whether any of such proceeds,
                           refunds, and premium rebates arise out of any of the
                           foregoing.(9-1(a) through 9-1(i)) or otherwise.

                  (k)      All liens, guaranties, rights, remedies, and
                           privileges pertaining to any of the foregoing (9-1(a)
                           through 9-1(i)), including the right of stoppage in
                           transit.

         9-2. 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 Borrowers to the Lenders and 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
Collateral Agent .

ARTICLE 10 - ADMINISTRATIVE AGENT AS BORROWERS' ATTORNEY-IN-FACT:

         10-1. Appointment as Attorney-In-Fact. Each Borrower hereby irrevocably
constitutes and appoints the Collateral Agent, effective upon the occurrence of
an Event of Default, as that 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 Borrowers, but for the sole benefit of the Collateral
Agent and the Lenders. The rights and powers granted to of the Collateral Agent
by this appointment 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 Borrowers' mail is to be sent to such address as the Collateral Agent
shall designate; receive and open the Borrowers' mail; remove any Receivables
Collateral and Proceeds of Collateral therefrom and turn over the balance of
such mail either to the Borrowers or to any trustee in bankruptcy, receiver,
assignee for the benefit of creditors of the Borrowers, or other legal
representative of the Borrowers whom the Collateral Agent determines to be the
appropriate person to whom to so turn over such mail.

                  (c) Endorse the name of the Borrowers in favor of the
Administrative Agent upon any and all checks, drafts, notes, acceptances, or
other items or instruments; sign and

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<PAGE>   79

endorse the name of the Borrowers 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 Borrowers on any notice to the
Borrowers' Account Debtors or verification of the Receivables Collateral; sign
the Borrowers' 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.

                  (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
Borrowers 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 Borrowers.

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

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

         10-2. No Obligation to Act. The Administrative Agent shall not be
obligated to do any of the acts or to exercise any of the powers authorized by
Section 10-1, but if the Collateral Agent elects to do any such act or to
exercise any of such powers, it shall not be accountable for more than it
actually receives and shall not be responsible to the Lead Borrower or any
Borrower 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
Administrative Agent 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 11 - 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 11-13, any and all Liabilities shall become due
and payable without further action the part of any Agent or any 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 Administrative Agent, without
notice or demand. The occurrence of any such Event of Default shall also
constitute, without notice or demand, a default under all other agreements any
Agent and any Lender and any of the Borrowers and instruments and papers given
any Agent or any Lender by any of the Borrowers, whether such agreements,
instruments, or papers now exist or hereafter arise.

                                       74
<PAGE>   80

         11-1. Failure to Pay Revolving Credit or Term Loan . The failure by the
Borrowers to pay any amount when due under the Revolving Credit or the Term
Loan.

         11-2. Failure To Make Other Payments. The failure by any Borrower to
pay when due (or upon demand, if payable on demand) any payment Liability other
than under the Revolving Credit or the Term Loan.

         11-3. Failure to Perform Covenant or Liability (No Grace Period). The
failure by any of the Borrowers to promptly, punctually, faithfully and timely
perform, discharge, or comply with any covenant or Liability not otherwise
described in section 11-1 or section 11-2, above, and included in any of the
following provisions hereof:

                      Section                     Relates to            :
                      --------------------------------------------------
                      5-4                      Location of Collateral
                      5-7(a)                   Title to Assets
                      5-8                      Indebtedness
                      5-9                      Insurance Policies
                      5-14                     Pay taxes
                      5-23                     Affiliate Transactions
                      6-12                     Financial Performance Covenants
                      Article 8                Cash Management(1)

         11-4. Failure to Meet Financial Reporting Requirements. The failure by
the Lead Borrower to provide the financial statements and reports required by
the following Sections of this Agreement within the applicable grace period, if
available as provided below, or when due if no such grace period is then
available:

SECTION       REQUIREMENT             GRACE PERIOD          NUMBER OF GRACE
                                                            PERIODS AVAILABLE
--------------------------------------------------------------------------------
6-5           Weekly Reports          2 Days                4 per fiscal quarter
6-6           Monthly Reports         5 Days                4 per fiscal year
6-7           Quarterly Reports       5 Days                1 per fiscal year
6-8           Annual Statement        No Grace Period       No Grace Period

         11-5. Failure to Perform Covenant or Liability (Grace Period). The
failure by the Borrowers, upon Fifteen (15) days written notice by the
Administrative Agent to the Lead Borrower, to cure the Borrowers' failure to
promptly, punctually and faithfully perform, discharge, or comply with any
covenant or Liability not described in any of Sections 11-1, 11-2, 11-3, or 11-4
above.

-----------------
(1)      A breach of a covenant or Liability imposed under Article 8, which
         breach is occasioned by a mechanical failure or force majeure, shall
         not constitute an "Event of Default", provided that the Borrowers are
         diligently attempting to cure such breach and in fact do cure such
         breach no later than 3 days after it first occurred.

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<PAGE>   81

         11-6. Misrepresentation. The determination by the Administrative Agent
that any representation or warranty at any time made by any Borrower to any
Agent or any Lender, was not true or complete in all material respects when
given.

         11-7. Acceleration of Other Debt. The occurrence of any event such
that any Indebtedness of any Borrower in excess of $500,000.00, to any creditor
other than any Agent or any Lender could be accelerated (whether or not the
subject creditor takes any action on account of such occurrence).

         11-8. Breach of Leases. The occurrence of any of the following with
respect to Leases on which any Borrower is the lessee or is obligated:

                  (a) An aggregate of more than $200,000 in rent is then
overdue.

                  (b) Default and the expiry of any applicable grace period with
respect not less than 4 Leases of retail locations.

                  (c) Default and the expiry of any applicable grace period of
any Lease of any warehouse or distribution center.

         11-9. Default Under Other Agreements. The occurrence of any material
breach or default under any agreement between any Agent and/or any Lender, on
the one hand, and any Borrower on the other or instrument or paper given any
Agent and/or any Lender by any Borrower, whether such agreement, instrument, or
paper now exists or hereafter arises (notwithstanding that the relevant Agent or
Lender may not have exercised its rights upon default under any such other
agreement, instrument or paper).

         11-10. 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) of any material portion of the Collateral.

         11-11. Judgment. Restraint of Business.

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

                  (b) The entry of any judgment in excess of $500,000.00 against
any Borrower, which judgment is not satisfied (if a money judgment) or appealed
from (with execution or similar process stayed) within 45 days of its entry.

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<PAGE>   82

                  (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 any Borrower of its business in the ordinary course.

         11-12. Business Failure. Any act by, against, or relating to any
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 that
Borrower's property; the granting of any trust mortgage or execution of an
assignment for the benefit of the creditors of any Borrower, or the occurrence
of any other voluntary or involuntary liquidation or extension of debt agreement
for any Borrower; the offering by or entering into by any Borrower of any
composition, extension, or any other arrangement seeking relief from or
extension of the debts of any Borrower; or the initiation of any judicial or
non-judicial proceeding or agreement by, against, or including any Borrower
which seeks or intends to accomplish a reorganization or arrangement with
creditors; and/or the initiation by or on behalf of a Borrower of the
liquidation or winding up of all or any part of any Borrower's business or
operations.

         11-13. Bankruptcy. The failure by any Borrower to generally pay the
debts of that Borrower as they mature; adjudication of bankruptcy or insolvency
relative to any Borrower; the entry of an order for relief or similar order with
respect to any Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by or against the Borrower initiating any matter in which any Borrower
is or may be granted any relief from the debts of that Borrower pursuant to the
Bankruptcy Code or any other insolvency statute or procedure.

         11-14. Indictment - Forfeiture. The indictment of, or institution of
any legal process or proceeding against, any Borrower, 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 any
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 any Borrower of its
business in the ordinary course.

         11-15. Challenge to Loan Documents. (a) Any challenge by or on behalf
of any 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.

                                       77
<PAGE>   83

                  (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.

         11-16. Executive Management. The death, disability, or failure of
either of Gregory K. Johnson or David A. Frost (hereinafter, the "EXECUTIVE
OFFICERS") at any time to exercise that authority and discharge those management
responsibilities with respect to the Borrower as are required to be exercised
and discharged by such Person at the execution of this Agreement provided,
however,

                  (a) such death, disability, or failure of said Person shall
not constitute an "Event of Default" until Ninety (90) days after such
occurrence and, unless the Administrative Agent sooner waives such Event of
Default, or gives written notice of the acceleration of the Liabilities (as to
which, see Proviso (b), below) such death, disability, or failure shall cease to
be an "Event of Default" One Hundred Twenty (120) days after its having
occurred; and

                  (b) the Administrative Agent shall not accelerate the
Liabilities on account of such death, disability, or failure except upon and
with Ninety (90) days written notice given at any time during the Thirty (30)
day "window" period described in Proviso (a), above. Nothing contained in this
Section 11-16 shall limit, modify, affect, or impair any of the Administrative
Agent's other rights and remedies, including any rights and remedies upon the
occurrence of any other Event of Default..

         11-17. Change in Control. Any Change in Control.

ARTICLE 12 - RIGHTS AND REMEDIES UPON DEFAULT:

         Upon the occurrence of any Event of Default and at any time thereafter,
the Collateral Agent shall have the following rights and remedies in addition to
all rights, remedies, powers, privileges, and discretions available to the
Collateral Agent prior to such occurrence.

          12-1. Rights of Enforcement. The Collateral Agent shall have all of
the rights and remedies of a secured party upon that Part of Article 9 of the
UCC entitled "Default" (at the execution of this Agreement, Part 5 of Article 9
of the UCC and in the event of the adoption and effectiveness of the 1998
Revisions to Article 9 of the UCC, Part 6 thereof), in addition to which the
Collateral Agent shall have all and each of the following rights and remedies:

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<PAGE>   84

                  (a) To give notice to any bank at which any DDA in which
proceeds of collateral are deposited to turn over such proceeds directly to the
Collateral Agent.

                  (b) To give notice to any customs broker to follow the
instructions of the Collateral Agent, as provided in any written agreement or
undertaking of such broker in favor of the Collateral Agent.

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

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

                  (e) 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 Collateral Agent deems advisable and with or without the taking of
possession of any of the Collateral.

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

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

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

         12-2. 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 Collateral
Agent deems advisable, having due regard to compliance with any statute or
regulation which might affect, limit, or apply to the Collateral Agent's
disposition of the Collateral.

                  (b) The Collateral Agent, in the exercise of the Agents'
Rights and Remedies upon default, may conduct one or more going out of business
sales, in the Collateral Agent's own right or by one or more Collateral Agents
and contractors. Such sale(s) may be conducted upon any premises owned, leased,
or occupied by any Borrower. The Collateral Agent and any such Collateral 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
Collateral Agent or such Collateral 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 reasonable expense incurred in their
disposition) shall be the sole property of the Collateral Agent and/or the
Working Capital Lenders or such Collateral Agent or contractor and neither any
Borrower nor any Person claiming under or in right of any 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 Collateral Agent shall

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<PAGE>   85

provide the Borrower with such notice as may be practicable under the
circumstances), the Collateral Agent shall give the Lead Borrower at least seven
(7) 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. Each Borrower agrees that such written notice
shall satisfy all requirements for notice to that Borrower which are imposed
under the UCC or other applicable law with respect to the exercise of the
Agents' Rights and Remedies upon default.

                  (d) If any of the Collateral is sold, leased, or otherwise
disposed of by the Collateral Agent on credit, the Liabilities shall not be
deemed to have been reduced as a result thereof unless and until payment is
finally received thereon by the Collateral Agent.

                  (e) The Collateral Agent shall turn over to the Administrative
Agent the proceeds of any exercise of the Collateral Agent's Rights and Remedies
under this Article 12. The Administrative Agent shall apply such proceeds
towards the Liabilities in such manner, and with such frequency, as the
Administrative Agent determines.

         12-3. Occupation of Business Location. In connection with the
Collateral Agent's exercise of the Collateral Agent's rights under this Article
12, the Collateral Agent may enter upon, occupy, and use any premises owned or
occupied by each Borrower, and may exclude each Borrower from such premises or
portion thereof as may have been so entered upon, occupied, or used by the
Collateral Agent. The Collateral Agent shall not be required to remove any of
the Collateral from any such premises upon the Collateral Agent's taking
possession thereof, and may render any Collateral unusable to all Borrowers. In
no event shall the Collateral Agent be liable to any Borrower for use or
occupancy by the Collateral Agent of any premises pursuant to this Article 12,
nor for any charge (such as wages for a Borrower's employees and utilities)
incurred in connection with the Collateral Agent's exercise of the Agents'
Rights and Remedies.

         12-4. Grant of Nonexclusive License. Each Borrower hereby grants to the
Collateral Agent a royalty free nonexclusive irrevocable license to use, apply,
and affix any trademark, tradename, logo, or the like in which that Borrower now
or hereafter has rights, such license being with respect to the Collateral
Agent'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.

         12-5. Assembly of Collateral. The Collateral Agent may require the
Borrowers to assemble the Collateral and make it available to the Collateral
Agent at the Borrowers' sole risk and expense at a place or places which are
reasonably convenient to both the Collateral Agent and Borrowers.

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<PAGE>   86

         12-6. Rights and Remedies. The rights, remedies, powers, privileges,
and discretions of each Agent hereunder (herein, the " AGENTS' RIGHTS AND
REMEDIES") shall be cumulative and not exclusive of any rights or remedies which
it would otherwise have. No delay or omission by that Agent in exercising or
enforcing any of the Agents' Rights and Remedies shall operate as, or
constitute, a waiver thereof. No waiver by that Agent 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 Agent's Rights or Remedies, and no express or implied agreement or
transaction of whatever nature entered into between any Agent and any person, at
any time, shall preclude the other or further exercise of the Agents' Rights and
Remedies. No waiver by any Agent of any of the Agent'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 Agents' Rights and Remedies and all
of the rights, remedies, powers, privileges, and discretions of each Agent under
any other agreement or transaction are cumulative, and not alternative or
exclusive, and may be exercised by the Agents at such time or times and in such
order of preference as the Agents may determine. The Agents' Rights and Remedies
may be exercised without resort or regard to any other source of satisfaction of
the Liabilities.

ARTICLE 13 - NOTICES:

         13-1. 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 Administrative Agent
Or the Collateral Agent:         BBRF
                                 40 Broad Street
                                 Boston, Massachusetts 02109
                                 Attention: Michael Pizette,
                                            Managing Director
                                 Fax: 617 434-4312

         With a copy to:         Riemer & Braunstein
                                 Three Center Plaza
                                 Boston, Massachusetts  02108
                                 Attention: Richard B. Jacobs, Esquire
                                 Fax: 617 880 3456

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<PAGE>   87

If to the Lead Borrower or any
Borrower                         HomePlace America, Inc.
                                 3200 Pottery Drive
                                 Myrtle Beach, South Carolina 29577
                                 Attention: Mr. David Frost
                                            Senior Vice President Finance and
                                            Controller
                                 Fax: 803 236-5750

         With a copy to:         Parker, Poe, Adams & Bernstein L.L.P.
                                 2500 Charlotte Plaza
                                 Charlotte, North Carolina 28244
                                 Attention: Fred C. Thompson, Jr., Esquire

         13-2. 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
                  Business Day following the day when sent.

                           (iii) By Hand: If delivered on a Business Day after
                  9:00 AM 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 Business Day.

                           (iv) By Facsimile transmission (which must include a
                  header on which the time sent and party sending such
                  transmission are indicated): If sent on a Business Day after
                  9:00 AM 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
                  Business 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 14 - TERM:

         14-1. Termination of Revolving Credit. The Revolving Credit shall
remain in effect (subject to suspension as provided in Section 2-5(i) hereof)
until the Termination Date.

                                       82
<PAGE>   88

         14-2. Effect of Termination. Upon the Termination Date, the Borrowers
shall pay the Administrative Agent (whether or not then due), in immediately
available funds, all then Liabilities including, without limitation: the entire
balance of the Loan Account (including the unpaid balance of the Revolving
Credit and of any SwingLine Loans); any remaining balance of the Administrative
Agent's Fee; any accrued and unpaid Line Fee; any then remaining installments of
the Revolving Credit UpFront Fee and/or the Term Loan UpFront Fee; any then
remaining installments of the Term Loan Monitoring Fee; and all unreimbursed
costs and expenses of each Agent and of each Lender for which the Borrowers are
responsible; and shall make such arrangements concerning any L/C's then
outstanding are reasonably satisfactory to the Administrative Agent . Until such
payment, all provisions of this Agreement, other than those contained in Article
2 which place an obligation on the Administrative Agent and any 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.

ARTICLE 15  -  GENERAL:

         15-1. Protection of Collateral. No Agent has any 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 that Agent and shall have no
duty as to the preservation of rights against prior parties or any other rights
pertaining thereto. The Agents may include reference to all or any of the
Borrowers (and may utilize any logo or other distinctive symbol associated with
any of the Borrowers) in connection with any advertising, promotion, or
marketing undertaken by the Agents.

         15-2. Successors and Assigns. This Agreement shall be binding upon the
Lead Borrower, each Borrower, and their respective representatives, successors,
and assigns and shall enure to the benefit of each Agent and each Lender and the
respective successors and assigns of each provided, however, no trustee or other
fiduciary appointed with respect to the any Borrower shall have any rights
hereunder. In the event that an Agent or any 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 such assignor
hereunder and such assignor shall thereupon be discharged and relieved from its
duties and obligations hereunder.

         15-3. 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.

                                       83
<PAGE>   89

         15-4. Amendments. Course of Dealing.

                  (a) The Loan Documents incorporate all discussions and
negotiations between the parties concerning the matters included therein. No
such discussions and negotiations, nor any custom, usage, or course of dealings
shall limit, modify, or otherwise affect the provisions thereof. No failure to
give notice to the Lead Borrower or any Borrower of that Person'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.

                  (b) The Lead Borrower and any Borrower may undertake any
action otherwise prohibited hereby, and may omit to take any action otherwise
required hereby, with the express prior written consent of the Administrative
Agent . No consent, modification, amendment, or waiver of any provision of any
Loan 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 an Agent, then by a duly authorized officer thereof). Any
modification, amendment, or waiver provided by any Agent shall be in reliance
upon all representations and warranties theretofore made to that Agent 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.

         15-5. Power of Attorney. In connection with all powers of attorney
included in this Agreement, each Borrower hereby grants unto each Agent full
power to do any and all things necessary or appropriate in connection with the
exercise of such powers as fully and effectually as that Borrower might or could
do, hereby ratifying all that said attorney shall do or cause to be done by
virtue of this Agreement. Such powers of attorney shall terminate on the End
Date.

         15-6. Application of Proceeds. The proceeds of any disposition of the
Collateral and of any other payments received on account of the Liabilities
shall be applied toward the Liabilities in such order and manner as the
Administrative Agent determines in its reasonable discretion. Each Borrower
shall remain liable for any deficiency remaining following such application.

         15-7. Increased Costs. If, as a result of any requirement of law, or of
the interpretation or application thereof by any court or by any governmental or
other authority or entity charged with the administration thereof, whether or
not having the force of law, which:

                  (a) subjects any Lender to any taxes or changes the basis of
taxation, or increases any existing taxes, on payments of principal, interest or
other amounts payable by any

                                       84
<PAGE>   90

Borrower to the Administrative Agent or any Lender under this Agreement (except
for taxes on the Administrative Agent or any Lender's overall net income or
capital imposed by the jurisdiction in which the Administrative Agent or that
Working Capital Lender's principal or lending offices are located);

                  (b) imposes, modifies or deems applicable any reserve, cash
margin, special deposit or similar requirements against assets held by, or
deposits in or for the account of or loans by or any other acquisition of funds
by the relevant funding office of any Lender;

                  (c) imposes on any Lender any other condition with respect to
any Loan Document; or

                  (d) imposes on any Lender a requirement to maintain or
allocate capital in relation to the Liabilities;

and the result of any of the foregoing, in the Lender's reasonable opinion, is
to increase the cost to that Lender of making or maintaining any loan, advance
or financial accommodation or to reduce the income receivable by such Lender in
respect of any loan, advance or financial accommodation by an amount which the
such Lender deems to be material, then upon the Administrative Agent's giving
written notice thereof, from time to time, to the Lead Borrower (such notice to
set out in reasonable detail the facts giving rise to and a summary calculation
of such increased cost or reduced income), the Borrowers shall forthwith pay to
the Administrative Agent, for the benefit of the subject Lender, upon receipt of
such notice, that amount which shall compensate the subject Lender for such
additional cost or reduction in income.

         15-8. Costs and Expenses of Agents and Lender. .

                  (a) The Borrowers shall pay on demand all Costs of Collection
and all reasonable expenses of each Agent 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 each Agent in preparing or amending this Agreement and
all other agreements, instruments, and documents related thereto, or otherwise
incurred with respect to the Liabilities, and all costs and expenses of each
Agent which relate to the credit facility contemplated hereby.

                  (b) The Borrowers shall pay on demand all costs and expenses
(including attorneys' reasonable fees and expenses) incurred, following the
occurrence of any Event of Default, by each Lender in connection with the
enforcement, attempted enforcement, or preservation of any rights and remedies
under this, or any other Loan Document, as well as any such costs and expenses
in connection with any "workout", forbearance, or restructuring of the credit
facility contemplated hereby.

                  (c) Each Borrower authorizes the Administrative Agent to pay
all such fees and

                                       85
<PAGE>   91

expenses and in the Administrative Agent's discretion, to add such fees and
expenses to the Loan Account.

                  (d) The undertakings on the part of the Borrowers in this
Section 15-8 shall survive payment of the Liabilities and/or any termination,
release, or discharge executed by any Agent in favor of the Borrower, other than
a termination, release, or discharge which makes specific reference to this
Section 15-8.

         15-9. Copies and Facsimiles. This Agreement and all documents which
relate thereto, which have been or may be hereinafter furnished any Agent, or
any Lender may be reproduced by that Person or by the Administrative Agent by
any photographic, microfilm, xerographic, digital imaging, or other process, and
that Person 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 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.

         15-10. Massachusetts Law. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the law of The Commonwealth of Massachusetts.

         15-11. Consent to Jurisdiction.

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

                  (b) Each Borrower WAIVES personal service of any and all
process upon it, and irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to the Lead Borrower at the
Lead Borrower's address for notices as specified herein, such service to become
effective five (5) Business Days after such mailing.

                  (c) Each Borrower WAIVES any objection based on forum non
         conveniens and

                                       86
<PAGE>   92

any objection to venue of any action or proceeding instituted under any of the
Loan Documents and consents to the granting of such legal or equitable remedy as
is deemed appropriate by the Court.

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

                  (e) Each Borrower agrees that any action commenced by any
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 Suffolk 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.

         15-12. Indemnification. The Lead Borrower and each Borrower
respectively, jointly and severally, shall indemnify, defend, and hold each
Agent and each Lender and any employee, officer, or agent of any of the
foregoing (each, an "INDEMNIFIED PERSON") harmless of and from any claim 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 Borrowers or of any other guarantor or endorser of the
Liabilities with any Agent or any Lender (each of claims which may be defended,
compromised, settled, or pursued by the Indemnified Person at the reasonable
expense of the Borrowers) other than any claim as to which a final determination
is made in a judicial proceeding (in which the Administrative Agent 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
or willful misconduct. This indemnification shall survive payment of the
Liabilities and/or any termination, release, or discharge executed by any Agent
in favor of any of the Borrowers, other than a termination, release, or
discharge which makes specific reference to this Section 15-12.

         15-13. Rules of Construction. The following rules of construction shall
be applied in the interpretation, construction, and enforcement of this
Agreement and of the other Loan Documents:

                  (a) Unless otherwise specifically provided herein, interest
and any other fee or charge which is stated as per annum percentage shall be
calculated on a 360 day year and actual days elapsed.

                  (b) Words in the singular include the plural and words in the
plural include the singular.

                  (c) Titles, headings (indicated by being underlined or shown
in Small Capitals) and any Table of Contents are solely for convenience of
reference; do not constitute a part of the instrument in which included; and do
not affect such instrument's meaning, construction, or effect.

                                       87
<PAGE>   93

                  (d) The words "includes" and "including" are not limiting.

                  (e) Text which follows the words "including, without
limitation" (or similar words) is illustrative and not limitational.

                  (f) Except where the context otherwise requires or where the
relevant subsections are joined by "or", compliance with any Section or
provision of any Loan Document which constitutes a warranty or covenant requires
compliance with all subsections (if any) of that Section or provision. Except
where the context otherwise requires, compliance with any warranty or covenant
of any Loan Document which includes subsections which are joined by "or" may be
accomplished by compliance with any of such subsections.

                  (g) Text which is shown in italics, shown in BOLD, shown IN
ALL CAPITAL LETTERS, or in any combination of the foregoing, shall be deemed to
be conspicuous.

                  (h) The words "may not" are prohibitive and not permissive.

                  (i) The word "or" is not exclusive.

                  (j) Any reference to a Person's "knowledge" (or words of
similar import) are to such Person's knowledge assuming that such Person has
undertaken reasonable and diligent investigation with respect to the subject of
such "knowledge" (whether or not such investigation has actually been
undertaken).

                  (k) Terms which are defined in one section of any Loan
Document are used with such definition throughout the instrument in which so
defined.

                  (l) The symbol "$" refers to United States Dollars.

                  (m) Unless limited by reference to a particular Section or
provision, any reference to "herein", "hereof", or "within" is to the entire
Loan Document in which such reference is made.

                  (n) References to "this Agreement" or to any other Loan
Document is to the subject instrument as amended to the date on which
application of such reference is being made.

                  (o) Except as otherwise specifically provided, all references
to time are to Boston time.

                  (p) In the determination of any notice, grace, or other period
of time prescribed or allowed hereunder:

                           (i) Unless otherwise provided (I) the day of the act,
                  event, or default from which the designated period of time
                  begins to run shall not be included and the last day of the
                  period so computed shall be included unless such last day is
                  not a Business Day, in which event the last day of the
                  relevant period shall be the then next Business Day and (II)
                  the period so computed shall end at 5:00 PM on the relevant
                  Business Day.

                           (ii) The word "from" means "from and including".

                                       88
<PAGE>   94

                           (iii) The words "to" and "until" each mean "to, but
                  excluding".

                           (iv) The word "through" means "to and including".

                  (q) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 15-14
hereof, provided, however, in the event of any inconsistency between the
provisions of this Agreement and any other Loan Document, the provisions of this
Agreement shall govern and control.

         15-14. Intent. It is intended that:

                  (a) This Agreement take effect as a sealed instrument.

                  (b) The scope of the security interests created by this
Agreement be broadly construed in favor of the Collateral Agent.

                  (c) The security interests created by this Agreement secure
all Liabilities, whether now existing or hereafter arising.

                  (d) All reasonable costs and expenses incurred by each Agent
and, to the extent provide in Section 15-8 each Lender in connection with such
Person's relationship(s) with the Borrowers shall be borne by the Borrowers.

                  (e) Unless otherwise explicitly provided herein, any Agent's
consent to any action of any Borrower which is prohibited unless such consent is
given may be given or refused by that Agent in its sole discretion and without
reference to Section 2-16 hereof.

         15-15. Maximum Interest Rate. Regardless of any provision of any Loan
Document, no Agent and no Lender shall be entitled to contract for, charge,
receive, collect, or apply as interest on any Liability, any amount in excess of
the maximum rate imposed by applicable law. Any payment which is made which, if
treated as interest on a Liability would result in such interest's exceeding
such maximum rate shall be held, to the extent of such excess, as additional
collateral for the Liabilities as if such excess were "Collateral."

         15-16. Waivers.

                  (a) The Lead Borrower and each Borrower (and all guarantors,
endorsers, and sureties of the Liabilities) make each of the waivers included in
Subsection 15-16(b), below, knowingly, voluntarily, and intentionally, and
understands that the each Agent and each Lender is entering into the financial
arrangements contemplated hereby and in providing loans and other financial
accommodations to or for the account of the Borrowers as provided herein,
whether not or in the future, is relying on such waivers.

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

                                       89
<PAGE>   95

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

                           (ii) 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 Administrative Agent or any
                  Lender, could be reduced or claimed to be paid otherwise than
                  in accordance with the tenor of and written terms of such
                  Liability.

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

                                                      HOMEPLACE OF AMERICA, INC.
                                                               THE LEAD BORROWER

                                               By  /s/ David A. Frost
                                                   -----------------------------
                                       Print Name: David A. Frost
                                                   -----------------------------
                                            Title: Senior Vice President,
                                                   Finance, Treasurer and
                                                   Controller
                                                   -----------------------------

                                  THE BORROWERS

HOMEPLACE OF AMERICA, INC.                          HOMEPLACE STORES, INC.

By /s/ David A. Frost                          By  /s/ David A. Frost
   --------------------------                      -----------------------------

Print Name: David A. Frost             Print Name: David A. Frost
            -----------------                      -----------------------------
Title: Senior Vice President,               Title: Senior Vice President,
       Finance, Treasurer and                      Finance, Treasurer and
       Controller                                  Controller
       ----------------------                      -----------------------------

HOMEPLACE HOLDINGS, INC.                              HOMEPLACE STORES TWO, INC.

By /s/ David A. Frost                          By  /s/ David A. Frost
   --------------------------                      -----------------------------

Print Name: David A. Frost             Print Name: David A. Frost
            -----------------                      -----------------------------
Title: Senior Vice President,               Title: Senior Vice President,
       Finance, Treasurer and                      Finance, Treasurer and
       Controller                                  Controller
       ----------------------                      -----------------------------

HOMEPLACE MANAGEMENT, INC.

By  /s/ David A. Frost
    -------------------------
Print Name: David A. Frost
            -----------------
Title: Senior Vice President,
       Finance, Treasurer and
       Controller
       ----------------------

                                       90
<PAGE>   96

                                                  BANKBOSTON RETAIL FINANCE INC.
                                                            ADMINISTRATIVE AGENT
                                                                COLLATERAL AGENT

                                                     By  /s/ Michael L. Pizette
                                                         ----------------------

                                             Print Name: Michael L. Pizette
                                                         ----------------------

                                                  Title: Managing Director
                                                         ----------------------

                           THE WORKING CAPITAL LENDERS

                                                                    AMSOUTH BANK

                                               By illegible
                                                  ------------------------------

                                               Notice Address:
                                                     350 Park Avenue, 19th Floor
                                                     New York, New York 10022
                                                     Attention:
                                                     Fax

                                                  BANKBOSTON RETAIL FINANCE INC.

                                         By  /s/ Michael L. Pizette
                                             ----------------------
                                             Michael Pizette, Managing Director

                                             Notice Address:
                                                     40 Broad Street
                                                     Boston, Massachusetts 02109
                                                     Attention:
                                                     Fax

                                       91
<PAGE>   97

                                             THE CIT GROUP BUSINESS CREDIT, INC.

                                             By /s/ Allison Fuedman
                                                --------------------------------

                                             Notice Address:
                                                 1211 Avenue of the Americas
                                                 New York, New York 10036
                                                 Attention: Regional Credit Mgr.
                                                 Fax (212) 536-1295

                                                      FINOVA CAPITAL CORPORATION

                                          By /s/ Brian Rujawitz
                                             -----------------------------------

                                          Notice Address:
                                              311 South Wacker Drive, Suite 4400
                                              Chicago, Illinois 60606
                                              Attention: Brian Rujawitz
                                              Fax (312) 322-7250

                                                    FOOTHILL CAPITAL CORPORATION

                                          By  illegible
                                              ----------------------------------

                                          Notice Address:
                                            11111 Santa Monica Blvd., Suite 1500
                                            Los Angeles, California 90025-3333
                                            Attention:
                                            Fax

                                                          HELLER FINANCIAL, INC.

                                          By /s/ John Buff
                                             -----------------------------------

                                          Notice Address:
                                                 150 East 42d Street, 7th Floor
                                                 New York, New York 10017
                                                 Attention: John Buff
                                                 Fax (212) 880-7002

                                       92
<PAGE>   98

                                       IBJ WHITEHALL BUSINESS CREDIT CORPORATION

                                          By /s/ Wing C. Lenor
                                             -----------------------------------

                                          Notice Address:
                                                  One State Street
                                                  New York, New York 10004
                                                  Attention: Wing C. Lenor
                                                  Fax (212) 858-2151

                                        JACKSON NATIONAL LIFE INSURANCE COMPANY
                                        By: PPM Finance, Inc. - Attorney-In-Fact

                                          By /s/ Jeffrey J. Podwika
                                             -----------------------------------

                                          Notice Address:
                                                 c/o PPM Finance, Inc.
                                                 225 West Wacker, Suite 1200
                                                 Chicago, Illinois 60606
                                                 Attention: Jeffrey C. Podwika
                                                 Fax (312) 634-0815

                                                   LASALLE BUSINESS CREDIT, INC.

                                          By /s/ Ellen T. Cook
                                             -----------------------------------

                                          Notice Address:
                                                  135 South LaSalle, Suite 400
                                                  Chicago, Illinois 60603
                                                  Attention: Ellen T. Cook
                                                  Fax (312) 904-0291

                                                              THE PROVIDENT BANK

                                          By /s/ Barry A. Peterson
                                             -----------------------------------

                                          Notice Address:
                                                  One East Fourth Street, 249A
                                                  Cincinnati, Ohio 45202
                                                  Attention: Joe Gorde
                                                  Fax (513) 579-2858

                                       93
<PAGE>   99

                                                                 THE TERM LENDER
                                                    BACK BAY CAPITAL FUNDING LLC

                                         By  /s/ Michael L. Pizette
                                             ----------------------
                                             Michael Pizette, Managing Director

                                       94

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