Document:

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                                                                   EXHIBIT 10.12

                        THIRD AMENDMENT TO LOAN DOCUMENTS

      BUILD-A-BEAR WORKSHOP, INC. ("BABWI"), successor by merger to BUILD-A-BEAR
WORKSHOP, LLC, SHIRTS ILLUSTRATED, LLC ("SHIRTS"), BUILD-A-BEAR WORKSHOP
FRANCHISE HOLDINGS, INC. ("BABWF"), BUILD-A-BEAR ENTERTAINMENT, LLC ("BABE"),
and BUILD-A-BEAR RETAIL MANAGEMENT, INC. ("BABRM"), jointly and severally
(individually and collectively, the "Borrower"), BUILD-A-BEAR WORKSHOP CANADA,
INC. ("Guarantor" or "BABWC") and U.S. BANK NATIONAL ASSOCIATION, formerly known
as FIRSTAR BANK, NATIONAL ASSOCIATION ("Lender"), hereby agree as follows
effective as of May 31, 2004 (the "Effective Date"):

1.    RECITALS.

      1.1   Lender and Build-A-Bear Workshop, LLC entered into a Loan Agreement
            and related loan and security documents dated as of March 1, 2000
            pursuant to which the Lender extended a revolving credit facility to
            the Borrower (the "Loan");

      1.2   Lender, Build-A-Bear Workshop, LLC and Build-A-Bear Workshop, Inc.
            entered into an assumption and amendment agreement dated as of April
            3, 2000, whereby Build-A-Bear Workshop, Inc. assumed all of the
            obligations of its predecessor in interest, Build-A-Bear Workshop,
            LLC;

      1.3   Lender and Borrower amended the terms of the Loan by the First
            Amended and Restated Loan Agreement and related loan and security
            documents dated as of June 1, 2001 (the "Prior Loan Agreement");

      1.4   Lender and Borrower amended and restated the Prior Loan Agreement by
            the Second Amended and Restated Loan Agreement dated as of February
            13, 2002 (the "Loan Agreement") and Borrower delivered to Lender in
            connection therewith the First Amended and Restated Revolving Credit
            Note (the "Note") and the First Amended and Restated Security
            Agreement (the "Security Agreement") (the Note, Security Agreement
            and Loan Agreement, the Guarantee of BABWC, and all other loan and
            security documents executed in connection with the Loan from time to
            time are referred to herein as the "Loan Documents");

      1.5   Lender and Borrower amended the Loan Documents pursuant to the First
            Amendment to Loan Documents effective as of May 30, 2003 to add
            additional borrowers to the Loan Documents, to revise certain
            financial covenants in the Loan Documents, and to add BABWC as a
            guarantor of the obligations under the Loan Documents.

      1.6   Lender and Borrower amended the Loan Documents pursuant to the
            Second Amendment to Loan Documents effective as of December 31, 2003
            to add an additional borrower to the Loan Documents.

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      1.7   Capitalized terms used herein and not otherwise defined will have
            the meanings given such terms in the Loan Agreement.

      1.8   Borrower and Lender desire to further amend the Loan Documents
            pursuant to this Third Amendment to Loan Documents ("Amendment").

2.    AMENDMENTS.

      2.1   Section 2.1.2 of the Loan Agreement is hereby deleted and replaced
            with the following:

            2.1.2 MAXIMUM AMOUNT. The maximum amount that may be outstanding
            under the Revolving Credit Note at any particular time may not
            exceed the lesser of the following (the "Maximum Amount"): (A) the
            Total Facility; or (B) in the event that Lender determines in its
            sole discretion to limit the amount to be advanced under the
            Revolving Credit Note (after 30 days prior written notice to
            Borrower of such determination by Lender), an amount equal to the
            sum of (a) up to 75% of Borrower's Eligible Receivables, plus (b) up
            to the lesser of: (i) $12,000,000; or (ii) 50% of Borrower's
            Eligible Inventory, plus (c) up to 10% of the book value of
            Borrower's net fixed assets. Notwithstanding anything to the
            contrary contained herein, Lender in its sole discretion may, but
            will never be obligated to, increase the amount of the Total
            Facility or change or suspend the limits on the Maximum Amount.

      2.2   Section 2.1 of the Loan Agreement is hereby amended to add the
            following as Section 2.1.5:

            2.1.5 COMMITMENT FEE. Borrower will pay to Lender a commitment fee
            beginning effective June 1, 2004, computed at the rate of 0.125% per
            annum, on the average daily difference between: (i) the outstanding
            amount of the Note and (ii) the Maximum Amount, such Commitment Fee
            to be payable quarterly in arrears on the last day of each June,
            September, December and March and upon the Maturity Date of the Note
            and/or the date this Agreement is terminated.

      2.3   Section 6.1 of the Loan Agreement is hereby deleted and replaced
            with the following:

            6.1   DEBT. Incur any Indebtedness other than: (a) the Loans and any
            subsequent Indebtedness to Lender; (b) open account obligations
            incurred in the ordinary course of business having maturities of
            less than 150 days; (c) lease payments for real property; (d) lease
            and rental payments for personal property whose aggregate annual
            rental payments do not exceed $100,000 during any calendar year; and
            (e) Indebtedness secured by Permitted Liens.

      2.4   Section 6.4 of the Loan Agreement is hereby deleted and replaced
            with the following:

            6.4   MINIMUM TANGIBLE NET WORTH. Permit the Tangible Net Worth of

                                     - 2 -

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            Borrower and Guarantor on a consolidated basis to be less than
            $54,000,000 at any time. Such amount shall be increased by the
            amount of all equity contributions made to the Borrower from time to
            time and shall be reduced by the amount of dividends, share
            repurchases, or any other return of capital contributions permitted
            under this Agreement; provided however, that such reductions shall
            not cause the Tangible Net Worth of Borrower and Guarantor on a
            consolidated basis to be less than $44,000,000 at any time.

      2.5   Section 6.6 of the Loan Agreement is hereby deleted and replaced
            with the following:

            6.6   DIVIDENDS. Declare or pay any dividends of any kind other than
            dividends payable solely in shares of its capital stock (including
            without limitation debt repayment, payment for goods and services);
            provided however, that Borrower may do so if such payment would not
            violate any of the other terms of this Agreement or the Security
            Documents and none of the following conditions exist or will exist
            as a result of any such payment: (i) an Event of Default or Default;
            and (ii) the difference between the Maximum Amount and the
            outstanding amount of the Revolving Credit Note is less than
            $5,000,000.

      2.6   Section 6.8 of the Loan Agreement is hereby deleted and replaced
            with the following:

            6.8   REDEMPTIONS. Purchase, retire, redeem or otherwise acquire for
            value, directly or indirectly, any shares of its capital stock now
            or hereafter outstanding; provided however, that Borrower may do so
            if such purchase, redemption or acquisition would not violate any of
            the other terms of this Agreement or the Security Documents and none
            of the following conditions exist or will exist as a result of any
            such purchase, redemption or acquisition: (i) an Event of Default or
            Default; and (ii) the difference between the Maximum Amount and the
            outstanding amount of the Revolving Credit Note is less than
            $5,000,000.

      2.7   Section 6.11 of the Loan Agreement is hereby deleted and replaced
            with the following:

            6.11  ADVANCES AND LOANS. Except as set forth in the Disclosure
            Schedule, lend money, give credit or make advances (other than
            ordinary, reasonable advances not to exceed $50,000 in the aggregate
            at any time) to any person, firm, joint venture or corporation,
            including, without limitation, Affiliates; provided however, that
            Borrower may make advances to BABWC so long as such advances shall
            not exceed $7,000,000 outstanding in the aggregate at any time.

      2.8   Notwithstanding the terms of the Loan Agreement requiring the
            regular submission of Borrowing Base Certificates to Lender,
            Borrower shall no longer be required to submit such Borrowing Base
            Certificates to Lender unless and until such time as Lender requires
            that Borrower do so by written notice to Borrower.

                                     - 3 -

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      2.9   The Maturity Date set forth in Section 3 of the Note is hereby
            extended from May 31, 2004 to May 31, 2005.

3.    REPRESENTATIONS, WARRANTIES, AND COVENANTS. To induce Lender to enter into
      this Amendment, Borrower represents, warrants, and covenants as follows:

      3.1   The representations and warranties of Borrower contained in the Loan
            Documents are deemed to have been made again on and as of the date
            of execution of this Amendment.

      3.2   No Event of Default (as such term is defined in the Loan Documents)
            or Default exists on the date hereof.

      3.3   Each Borrower and Guarantor represents and warrants that it has no
            claims, counterclaims, setoffs, actions or causes of actions,
            damages or liabilities of any kind or nature whatsoever whether at
            law or in equity, in contract or in tort, whether now accrued or
            hereafter maturing (collectively, "Claims") against Lender, their
            direct or indirect parent corporations or any direct or indirect
            Affiliates of such parent corporations, or any of the foregoing's
            respective directors, officers, employees, agents, attorneys and
            legal representatives, or the heirs, administrators, successors or
            assigns of any of them (collectively, "Lender Parties") that
            directly or indirectly arise out of, are based upon or are in any
            manner connected with any Prior Related Event. As an inducement to
            Lender to enter into this Agreement, each Borrower and Guarantor on
            behalf of itself, and all of its successors and assigns hereby
            knowingly and voluntarily releases and discharges all Lender Parties
            from any and all Claims, whether known or unknown, that directly or
            indirectly arise out of, are based upon or are in any manner
            connected with any Prior Related Event. As used herein, the term
            "Prior Related Event" means any transaction, event, circumstance,
            action, failure to act, occurrence of any sort or type, whether
            known or unknown, which occurred, existed, was taken, permitted or
            begun at any time prior to the Effective Date or occurred, existed,
            was taken, was permitted or begun in accordance with, pursuant to or
            by virtue of any of the terms of the Loan Documents or any documents
            executed in connection with the Loan Documents or which was related
            to or connected in any manner, directly or indirectly to the
            extension of credit represented by the Loan Documents.

      3.4   Each Borrower and Guarantor has the full right, power and authority
            to enter into this Amendment and perform its obligations hereunder,
            and no information or material submitted to Lender in connection
            with this Amendment contains any material misstatement or
            misrepresentation nor omits to state any material fact or
            circumstance.

4.    CONDITIONS PRECEDENT. The consent of Lender to this Amendment is subject
      to the satisfaction of the following conditions precedent:

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      4.1   Lender will have been furnished copies, certified by the Secretary
            of Borrower and Guarantor, of resolutions of the Board of Directors
            of Borrower and Guarantor authorizing the execution of this
            Amendment and any related documentation.

      4.2   The representations and warranties of Borrower in Section 3 herein
            will be true.

      4.3   Lender will have received an updated schedule of all locations of
            Borrower and of each Borrower's intellectual property, along with an
            executed pledge agreement of such intellectual property in form
            acceptable to Lender.

5.    GENERAL.

      5.1   Except as expressly modified herein, the Loan Documents, as amended,
            are and remain in full force and effect. Nothing contained herein
            will be construed as waiving any Default or Event of Default under
            the Loan Documents or will affect or impair any right, power or
            remedy of Lender under or with respect to the Loan Documents, as
            amended, or any agreement or instrument guaranteeing, securing or
            otherwise relating to any of the Advances.

      5.2   All representations and warranties made by Borrower herein will
            survive the execution and delivery of this Amendment.

      5.3   This Amendment will be binding upon and inure to the benefit of
            Borrower and Lender and their respective successors and assigns.

      5.4   Borrower will pay attorneys' fees and expenses of Lender incurred in
            connection with this Amendment and related documentation. Such fees,
            expenses may be charged to Borrower by Lender as a Revolving
            Advance.

      5.5   This Amendment will in all respects be governed and construed in
            accordance with the laws of the State of Ohio.

      5.6   A copy of this Amendment may be attached to the Note as an allonge.

      5.7   This Amendment and the documents and instruments to be executed
            hereunder constitute the entire agreement among the parties with
            respect to the subject matter hereof and shall not be amended,
            modified or terminated except by a writing signed by the party to be
            charged therewith.

      5.8   Borrower agrees to execute such other instruments and documents and
            provide Lender with such further assurances as Lender may reasonably
            request to more fully carry out the intent of this Amendment.

      5.9   This Amendment may be executed in a number of identical
            counterparts. If so, each such counterpart shall collectively
            constitute one agreement. Any signature delivered by a party by
            facsimile transmission shall be deemed to be an original signature
            hereto.

                                     - 5 -

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      5.10  No provision of this Amendment is intended or shall be construed to
            be for the benefit of any third party.

Executed as of the Effective Date.

BUILD-A-BEAR WORKSHOP, INC.                    U.S. BANK NATIONAL
                                               ASSOCIATION
BORROWER                                       LENDER

By: /s/ Maxine Clark                           By: /s/ Charles L. Thomas
    --------------------------                     --------------------------
Print Name: Maxine Clark                       Print Name: Charles L. Thomas
Title: Chief Executive Bear                    Title: Vice President

BUILD-A-BEAR                                   BUILD-A-BEAR WORKSHOP
ENTERTAINMENT, LLC                             FRANCHISE HOLDINGS, INC.
BORROWER                                       BORROWER

By: /s/ Maxine Clark                           By: /s/ Maxine Clark
    --------------------------                     --------------------------
Print Name: Maxine Clark                       Print Name: Maxine Clark
Title: Manager                                 Title: Chief Executive Bear

BUILD-A-BEAR RETAIL                            SHIRTS ILLUSTRATED, LLC
MANAGEMENT, INC.
BORROWER                                       BORROWER
                                                 By: Build-A-Bear Workshop, LLC,
                                                 its Managing Member

By: /s/ Maxine Clark                           By: /s/ Maxine Clark
    --------------------------                     --------------------------
Print Name: Maxine Clark                       Print Name: Maxine Clark
Title: Chief Executive Bear                    Title: Manager

BUILD-A-BEAR WORKSHOP
CANADA, INC.
GUARANTOR

By: /s/ Maxine Clark
    --------------------------
Print Name: Maxine Clark
Title: Chief Executive Bear

                                     - 6 -<PAGE>

                                                                   EXHIBIT 10.13

                   SECOND AMENDED AND RESTATED LOAN AGREEMENT

      BUILD-A-BEAR WORKSHOP, INC., successor by merger to BUILD-A-BEAR WORKSHOP,
LLC, AND SHIRTS ILLUSTRATED, LLC, jointly and severally (individually and
collectively, the "Borrower"), and U.S. BANK NATIONAL ASSOCIATION, formerly
known as FIRSTAR BANK, NATIONAL ASSOCIATION ("Lender"), hereby agree as follows:

      WHEREAS, Lender and Build-A-Bear Workshop, LLC entered into a Loan
Agreement and related loan and security documents dated as of March 1, 2000;

      WHEREAS, Lender, Build-A-Bear Workshop, LLC and Build-A-Bear Workshop,
Inc. entered into an assumption and amendment agreement dated as of April 3,
2000, whereby Build-A-Bear Workshop, Inc. assumed all of the obligations of its
predecessor in interest, Build-A-Bear Workshop, LLC;

      WHEREAS, Lender and Borrower entered into a First Amended and Restated
Loan Agreement and related loan and security documents dated as of June 1, 2001
(the "Prior Loan Agreement");

      WHEREAS, Lender and Borrower now desire to amend and restate the Prior
Loan Agreement by this Second Amended and Restated Loan Agreement;

      NOW THEREFORE, in consideration of the mutual promises, conditions, and
covenants set forth herein, the receipt and/or sufficiency of which is hereby
acknowledged, Borrower and Lender agree that the Prior Loan Agreement is hereby
amended and restated in its entirety as follows (the Prior Loan Agreement, as
amended and restated hereby, being referred to as the "Loan Agreement"):

1.    DEFINITIONS. Capitalized terms used herein and not otherwise defined
      herein will have the meanings given those terms in the second to last
      section of this Agreement.

2.    CREDIT FACILITIES.

      2.1   REVOLVING CREDIT LOAN.

            2.1.1 TOTAL FACILITY. Lender will make available to Borrower a line
                  of credit of up to $15,000,000 ("Total Facility"), subject to
                  the terms and conditions and made upon the representations and
                  warranties of Borrower set forth in this Agreement. Amounts
                  outstanding under the line of credit from time to time will be
                  referred to as the "Revolving Credit Loan". The Revolving
                  Credit Loan will be represented by the First Amended and
                  Restated Revolving Credit Note of Borrower of even date
                  herewith and all amendments, extensions and renewals thereto
                  and restatements and replacements thereof ("Revolving Credit
                  Note"). The Revolving Credit Loan will bear interest and will
                  be payable in the manner set forth in the Revolving Credit
                  Note, the terms of which are incorporated herein by reference.

                                       -1-
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            2.1.2 MAXIMUM AMOUNT. The maximum amount that may be outstanding
                  under the Revolving Credit Note at any particular time may not
                  exceed the lesser of the following (the "Maximum Amount"): (A)
                  the Total Facility; or (B) an amount equal to the sum of (a)
                  up to 75% of Borrower's Eligible Receivables, plus (b) up to
                  the lesser of: (i) $12,000,000; or (ii) 50% of Borrower's
                  Eligible Inventory, plus (c) up to 10% of the book value of
                  Borrower's net fixed assets. Notwithstanding anything to the
                  contrary contained herein, Lender in its sole discretion may,
                  but will never be obligated to, increase the amount of the
                  Total Facility or change or suspend the limits on the Maximum
                  Amount.

            2.1.3 ADVANCES. Advances will be made as specified in the Revolving
                  Credit Note.

            2.1.4 EXTENSIONS. After the initial term of the Revolving Credit
                  Note, Lender in its sole discretion may extend or renew the
                  Total Facility and the Revolving Credit Note by accepting from
                  Borrower one or more new notes, each of which will be deemed
                  to be the Revolving Credit Note under this Agreement. In no
                  event will Lender be under any obligation to extend or renew
                  the Total Facility or the Revolving Credit Note beyond the
                  initial term thereof.

      2.2   ADDITIONAL COSTS.

            2.2.1 TAXES, RESERVE REQUIREMENTS, ETC. In the event that any
                  applicable law, treaty, rule or regulation (whether domestic
                  or foreign) now or hereafter in effect and whether or not
                  presently applicable to Lender, or any interpretation or
                  administration thereof by any governmental authority charged
                  with the interpretation or administration thereof, or
                  compliance by Lender with any guideline, request or directive
                  of any such authority (whether or not having the force of
                  law), will (a) affect the basis of taxation of payments to
                  Lender of any amounts payable by Borrower under this Agreement
                  (other than taxes imposed on the overall net income of Lender,
                  by the jurisdiction, or by any political subdivision or taxing
                  authority of any such jurisdiction, in which Lender has its
                  principal office), (b) impose, modify or deem applicable any
                  reserve, special deposit or similar requirement against assets
                  of, deposits with or for the account of, or credit extended by
                  Lender, or (c) impose any other condition with respect to this
                  Agreement, any Note executed in connection with this Agreement
                  or any of the Security Documents, and the result of any of the
                  foregoing is to increase the cost of making, funding or
                  maintaining any such Note or to reduce the amount of any sum
                  receivable by Lender thereon, then Borrower will pay to Lender
                  from time to time, upon request by Lender, additional

                                       -2-
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                  amounts sufficient to compensate Lender for such increased
                  cost or reduced sum receivable.

            2.2.2 CAPITAL ADEQUACY. If either: (a) the introduction of, or any
                  change in, or in the interpretation of, any United States or
                  foreign law, rule or regulation or (b) compliance with any
                  directive, guidelines or request from any central bank or
                  other United States or foreign governmental authority (whether
                  or not having the force of law) promulgated, made, or that
                  becomes effective (in whole or in part) after the date hereof
                  affects or would affect the amount of capital required or
                  expected to be maintained by Lender or any corporation
                  directly or indirectly owning or controlling Lender and Lender
                  determines that such introduction, change or compliance has or
                  would have the effect of reducing the rate of return on Lender
                  capital or on the capital of such owning or controlling
                  corporation as a consequence of its obligations hereunder or
                  under any Note or any commitment to lend thereunder to a level
                  below that which Lender or such owning or controlling
                  corporation could have achieved but for such introduction,
                  change or compliance (after taking into account Lender's
                  policies or the policies of such owning or controlling
                  corporation, as the case may be, regarding capital adequacy)
                  by an amount deemed by Lender (in its sole discretion) to be
                  material, then, from time to time, Borrower will pay to Lender
                  such additional amount or amounts as will compensate Lender
                  for such reduction.

            2.2.3 CERTIFICATE OF LENDER. A certificate of Lender setting forth
                  such amount or amounts as will be necessary to compensate
                  Lender as specified above will be delivered to Borrower and
                  will be conclusive absent manifest error. Borrower will pay
                  Lender the amount shown as due on any such certificate within
                  10 days after its receipt of the same. Failure on the part of
                  Lender to deliver any such certificate will not constitute a
                  waiver of Lender's rights to demand compensation for any
                  particular period or any future period. The protection of this
                  Section will be available to Lender regardless of any possible
                  contention of invalidity or inapplicability of the law,
                  regulation, etc., that results in the claim for compensation
                  under this Section.

3.    COLLATERAL. The Collateral for the repayment of the Obligations will be
      that granted pursuant to the Security Documents.

4.    REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this
      Agreement and to make the advances herein contemplated, Borrower hereby
      represents and warrants as follows:

      4.1   ORGANIZATION. Borrower is a Delaware corporation or Missouri limited
            liability company duly organized and in good standing under the laws
            of the state of its organization, is duly qualified in all
            jurisdictions where required by the conduct of

                                       -3-
<PAGE>

            its business or ownership of its assets except where the failure to
            so qualify would not have a material adverse effect on its
            condition, financial or otherwise, and has the power and authority
            to own and operate its assets and to conduct its business as is now
            done.

      4.2   LATEST FINANCIALS. Its Current Financial Statements as delivered to
            Lender are true, complete and accurate in all material respects and
            fairly present its financial condition, assets and liabilities,
            whether accrued, absolute, contingent or otherwise and the results
            of its operations for the periods specified therein. The annual
            financial statements of all business entities included in the
            Current Financial Statements have been prepared in accordance with
            generally accepted accounting principles applied consistently with
            preceding periods subject to any comments and notes contained
            therein.

      4.3   RECENT ADVERSE CHANGES. Except as specifically disclosed in the
            Disclosure Schedule, since the dates of its Current Financial
            Statements, Borrower has not suffered any damage, destruction or
            loss which has materially and adversely affected its business or
            assets and no event or condition of any character has occurred which
            has materially and adversely affected its assets, liabilities,
            business or financial condition, and Borrower has no knowledge of
            any event or condition which may materially and adversely affect its
            assets, liabilities, business or financial condition.

      4.4   RECENT ACTIONS. Except as disclosed in the Disclosure Schedule,
            since the dates of its Current Financial Statements, its business
            has been conducted in the ordinary course and Borrower has not: (a)
            incurred any obligations or liabilities, whether accrued, absolute,
            contingent or otherwise, other than liabilities incurred and
            obligations under contracts entered into in the ordinary course of
            business and other than liabilities to Lender; (b) discharged or
            satisfied any lien or encumbrance or paid any obligations, absolute
            or contingent, other than current liabilities, in the ordinary
            course of business; (c) mortgaged, pledged or subjected to lien or
            any other encumbrance any of its assets, tangible or intangible, or
            cancelled any debts or claims except in the ordinary course of
            business; or (d) made any loans or otherwise conducted its business
            other than in the ordinary course.

      4.5   TITLE. Borrower has good and marketable title to the assets
            reflected on its Current Financial Statements, free and clear from
            all liens and encumbrances except for: (a) current taxes and
            assessments not yet due and payable, (b) liens and encumbrances, if
            any, reflected or noted on said balance sheet or notes, (c) any
            security interests, pledges or mortgages to Lender in connection
            with the closing of this Agreement, (d) assets disposed of in the
            ordinary course of business, and (e) Permitted Liens.

      4.6   LITIGATION, ETC. Except as disclosed on the Disclosure Schedule, as
            of the date hereof, there are no actions, suits, proceedings or
            governmental investigations

                                       -4-
<PAGE>

            pending or, to its knowledge, threatened against Borrower which, if
            adversely determined, could result in a material and adverse change
            in its financial condition, business or assets; and there is no
            basis known to Borrower for any such actions, suits, proceedings or
            investigations.

      4.7   TAXES. Except as to taxes not yet due and payable, Borrower has
            filed all returns and reports that are now required to be filed by
            Borrower in connection with any federal, state or local tax, duty or
            charge levied, assessed or imposed upon Borrower or its property,
            including unemployment, social security and similar taxes; and all
            of such taxes have been either paid or adequate reserve or other
            provision has been made therefor. Borrower has timely filed the
            payments of every tax and tax return with the appropriate
            governmental authorities, and Borrower has never incurred a penalty
            for failure to file or to file in a timely manner. If Borrower has
            currently filed an extension for the payment of taxes, Borrower has
            accrued sufficient funds for the payment of such tax in accordance
            with generally accepted accounting principles.

      4.8   AUTHORITY. Borrower has full power and authority to enter into the
            transactions provided for in this Agreement. The documents to be
            executed by Borrower in connection with this Agreement, when
            executed and delivered by Borrower will constitute the legal, valid
            and binding obligations of Borrower enforceable in accordance with
            their respective terms except as such enforceability may be limited
            by applicable bankruptcy, reorganization, insolvency, moratorium or
            similar laws in effect from time to time affecting the rights of
            creditors generally and except as such enforceability may be subject
            to general principles of equity (regardless of whether such
            enforceability is considered in a proceeding in law or in equity).

      4.9   OTHER DEFAULTS. There does not now exist any default or violation by
            Borrower of or under any of the terms, conditions or obligations of:
            (a) as to corporate entities only, its Articles or Certificate of
            Incorporation and Regulations or Bylaws, as applicable, or as to
            limited liability companies only, its Articles of Organization and
            Operating Agreement; (b) any material indenture, mortgage, deed of
            trust, franchise, permit, contract, agreement, or other material
            instrument to which Borrower is a party or by which Borrower is
            bound; or (c) any law, regulation, ruling, order, injunction,
            decree, condition or other requirement applicable to or imposed upon
            Borrower by any law or by any governmental authority, court or
            agency; and the transactions contemplated by this Agreement and the
            Security Documents will not result in any such default or violation.

      4.10  STOCK OF BORROWER. If Borrower is not a publicly traded entity, all
            of the issued and outstanding securities of Borrower are owned by
            the parties listed on the Disclosure Schedule in the amounts
            specified by the name of each such shareholder and except as listed
            on the Disclosure Schedule, Borrower has no outstanding options,
            warrants or contracts to issue additional securities of any kind.

                                       -5-
<PAGE>

      4.11  STOCK. Except as listed on the Disclosure Schedule, Borrower does
            not own more than one percent (1%) of the issued and outstanding
            capital stock or other ownership interests of any corporation, firm
            or entity.

      4.12  SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES. Except as listed on
            the Disclosure Schedule, Borrower has no Subsidiaries and is not a
            party to any partnership agreement or joint venture agreement.

      4.13  LICENSES, ETC. Borrower has obtained any and all licenses, permits,
            franchises or other governmental authorizations necessary for the
            ownership of its properties and the conduct of its business.
            Borrower possesses adequate licenses, patents, patent applications,
            copyrights, trademarks, trademark applications, and trade names to
            continue to conduct its business as heretofore conducted by it,
            without any conflict with the rights of any other person or entity.

      4.14  SUFFICIENT CAPITAL. Borrower now has capital sufficient to carry on
            its business, all business and transactions in which Borrower is
            about to engage, and is now solvent and able to pay its debts as
            they mature.

      4.15  NAME, PLACES OF BUSINESS AND LOCATION OF COLLATERAL. Except as
            otherwise disclosed by written notice to Lender, the address of its
            principal place of business and every other place from which
            Borrower conducts business is as specified in the Disclosure
            Schedule. Except as otherwise disclosed by written notice to Lender,
            the Collateral and all books and records pertaining to the
            Collateral are and will be located at the addresses indicated on the
            Disclosure Schedule. In the five years preceding the date hereof,
            Borrower has not conducted business under any name other than its
            current name nor maintained any place of business or any assets in
            any jurisdiction other than those disclosed on the Disclosure
            Schedule.

      4.16  ERISA. Borrower and each of its ERISA Affiliates are in compliance
            in all material respects with the applicable provisions of ERISA and
            the regulations and published interpretations thereunder. Neither
            Borrower nor any ERISA Affiliate maintains, sponsors or contributes
            to, or has ever maintained, sponsored or contributed to any Plan or
            Multiemployer Plan.

      4.17  REGULATION U. No part of the proceeds of any Loans will be used to
            purchase or carry any margin stock (as such term is defined in
            Regulation U of the Board of Governors of the Federal Reserve
            System).

      4.18  CLOSING MEMO. The information contained in each of the documents
            prepared by Borrower, executed by Borrower or provided by a third
            party at the request of Borrower listed on the Closing Memo to be
            executed or delivered by Borrower or relating to Borrower is
            complete and correct in all material respects.

      4.19  ENVIRONMENTAL MATTERS.

                                       -6-
<PAGE>

          4.19.1  Borrower and the activities or operations on any of the real
                  estate that Borrower owns or occupies (the "Property") are in
                  compliance in all material respects with all applicable
                  federal, state and local, statutes, laws, regulations,
                  ordinances, policies and orders relating to regulation of the
                  environment, health or safety, or contamination or cleanup of
                  the environment (collectively "Environmental Laws").

          4.19.2  Borrower has obtained all approvals, permits, licenses,
                  certificates, or satisfactory clearances from all governmental
                  authorities required under Environmental Laws with respect to
                  the Property and any activities or operations at the Property.

          4.19.3  To the best of Borrower's knowledge, there have not been and
                  are not now any solid waste, hazardous waste, hazardous or
                  toxic substances, pollutants, contaminants, or petroleum in,
                  on, under or about the Property. The use which Borrower makes
                  and intends to make of the Property will not result in the
                  deposit or other release of any hazardous or toxic substances,
                  solid waste, pollutants, contaminants or petroleum on, to or
                  from the Property.

          4.19.4  To the best of Borrower's knowledge, there have been no
                  complaints, citations, claims, notices, information requests,
                  orders or directives on environmental grounds or under
                  Environmental Laws (collectively "Environmental Claims") made
                  or delivered to, pending or served on, or anticipated by
                  Borrower or its agents, or of which Borrower or its agents,
                  are aware or should be aware (i) issued by any governmental
                  department or agency having jurisdiction over the Property or
                  the activities or operations at the Property, or (ii) issued
                  or claimed by any third party relating to the Property or the
                  activities or operations at the Property.

          4.19.5  To the best of Borrower's knowledge, no asbestos-containing
                  materials are installed, used or incorporated into the
                  Property, and no asbestos-containing materials have been
                  disposed of on the Property.

          4.19.6  To the best of Borrower's knowledge, no polychlorinated
                  biphenyls ("PCBs") are located at, on or in the Property in
                  the form of electrical equipment or devices, including, but
                  not limited to, transformers, capacitors, fluorescent light
                  fixtures with ballasts, cooling oils or any other device or
                  form.

          4.19.7  To the best of Borrower's knowledge, there have not been and
                  are not now any underground storage tanks located within or
                  about the Property.

                                       -7-
<PAGE>

           4.19.8 The Property does not contain any wetlands as that term is
                  defined by relevant governmental agencies under Environmental
                  Laws and, to the best of Borrower's knowledge, there has been
                  no filling of wetlands on the Property in violation of
                  Environmental Laws.

           4.19.9 Borrower has provided Lender with copies of all environmental
                  reports, audits and studies known to Borrower and accessible
                  to Borrower, whether in Borrower's possession or otherwise,
                  regarding the Property.

     4.20  LABOR MATTERS. There are no material strikes or other material labor
           disputes against Borrower pending or, to its knowledge, threatened.
           The hours worked and payment made to its employees in all material
           respects have not been in violation of the Fair Labor Standards Act
           or any other applicable law dealing with such matters. All payments
           due from it, or for which any claim may be made against it, on
           account of wages and employee health and welfare insurance and other
           benefits, have been paid or accrued as a liability on its books. The
           consummation of the transactions contemplated herein will not give
           rise to a right of termination or right of renegotiation on the part
           of any union under any collective bargaining agreement to which
           Borrower is a party or by which Borrower is bound.

5.    AFFIRMATIVE COVENANTS. From the date of execution of this Agreement until
      all Obligations to Lender have been fully paid and this Agreement
      terminated, Borrower will:

      5.1   BOOKS, RECORDS AND ACCESS TO THE COLLATERAL. Maintain proper books
            of account and other records and enter therein complete and accurate
            entries and records of all of its transactions and, upon reasonable
            advance notice, give representatives of Lender access thereto at
            all reasonable times, including permission to examine, copy and make
            abstracts from any of such books and records and such other
            information as Lender may from time to time reasonably request.
            Borrower, upon reasonable advance notice, will give Lender
            reasonable access to the Collateral for the purposes of examining
            the Collateral and verifying its existence. Borrower will make
            available to Lender for examination copies of any reports,
            statements or returns which Borrower may make to or file with any
            governmental department, bureau or agency, federal or state. In
            addition, Borrower will be available to Lender, or cause its
            officers or general partners, as applicable, to be available from
            time to time upon reasonable notice to discuss the status of the
            Loans, its business and any statements, records or documents
            furnished or made available to Lender in connection with this
            Agreement.

      5.2   MONTHLY STATEMENTS. Furnish Lender within 45 days after the end of
            each calendar month internally prepared financial statements of
            Borrower with respect to such calendar month, which financial
            statements will: (a) be in reasonable detail and in form reasonably
            satisfactory to Lender; (b) be accompanied by a compliance
            certificate and a Borrowing Base Certificate; (c) include a balance
            sheet as of the end of such period, profit and loss and surplus
            statements for such

                                       -8-
<PAGE>

            period and a statement of cash flows for such period; (d) include
            prior year comparisons; and (e) be on a consolidating and
            consolidated basis for Borrower and its Subsidiaries, if any, and
            for any entity in which Borrower's financial information is
            consolidated in accordance with generally accepted accounting
            principles.

      5.3   ANNUAL STATEMENTS. Furnish Lender within 120 days after the end of
            each fiscal year of Borrower annual audited financial statements
            which will: (a) include a balance sheet as of the end of such year,
            profit and loss and surplus statements and a statement of cash flows
            for such year; (b) be on a consolidated basis with Borrower, its
            Subsidiaries, if any, and any entity into which Borrower's financial
            information is consolidated in accordance with generally accepted
            accounting principles; (c) be accompanied by a compliance
            certificate and a Borrowing Base Certificate, and (d) contain the
            unqualified opinion of a national independent certified public
            accountant and its examination will have been made in accordance
            with generally accepted auditing standards and such opinion will
            identify any generally accepted accounting principles not
            consistently applied from year to year, to the extent such
            inconsistency is material to the financing statements.

      5.4   AUDITOR'S LETTERS, ETC. Furnish any letter, other than routine
            correspondence, directed to Borrower by its auditors or independent
            accountants, relating to its financial statements, accounting
            procedures, financial condition, tax returns or the like since the
            date of the Current Financial Statements to Lender.

      5.5   TAXES. Pay and discharge when due all indebtedness and all taxes,
            assessments, charges, levies and other liabilities imposed upon it,
            its income, profits, property or business, except those which
            currently are being contested in good faith by appropriate
            proceedings and for which Borrower has set aside adequate reserves
            or made other adequate provision with respect thereto, but any such
            disputed item will be paid forthwith upon the commencement of any
            proceeding for the foreclosure of any lien which may have attached
            with respect thereto, unless Lender has received an opinion in form
            and substance and from legal counsel acceptable to Borrower that
            such proceeding is without merit.

      5.6   OPERATIONS. Continue its business operations in substantially the
            same manner as at present, except where such operations are rendered
            impossible by a fire, strike or other events beyond its control;
            keep its real and personal properties in good operating condition
            and repair; make all necessary and proper repairs, renewals,
            replacements, additions and improvements thereto and comply with the
            provisions of all leases to which Borrower is party or under which
            Borrower occupies or holds real or personal property so as to
            prevent any loss or forfeiture thereof or thereunder.

      5.7   INSURANCE. Comply with the insurance requirements of the Security
            Documents. In addition to the foregoing, keep its insurable real and
            personal property insured

                                       -9-
<PAGE>

            with responsible insurance companies against loss or damage by fire,
            windstorm and other hazards which are commonly insured against in an
            extended coverage endorsement in an amount equal to not less than
            90% of the insurable value thereof on a replacement cost basis and
            also maintain public liability insurance in a reasonable amount. In
            addition, the parties delivering to Lender insurance certificates as
            listed on the Closing Memo will maintain extended liability
            insurance and property insurance of at least the amounts and
            coverages listed on such certificates delivered in connection with
            the Closing and in a form and with companies reasonably satisfactory
            to Lender. Notwithstanding the foregoing, such property insurance
            will at all times be in an amount so that such party will not be
            deemed a "co-insurer" under any co-insurance provisions of such
            policies. All such insurance policies will name Lender as an
            additional insured and, where applicable, as lender's loss payee
            under a loss payable endorsement satisfactory to Lender. All such
            policies will provide that ten (10) days prior written notice must
            be given to Lender before such policy is altered or cancelled.
            Schedules of all insurance will be submitted to Lender upon request.
            Such schedules will contain a description of the risks covered, the
            amounts of insurance carried on each risk, the name of the insurer
            and the cost of such insurance. Borrower will provide new schedules
            to Lender promptly to reflect any change in insurance coverage.

      5.8   COMPLIANCE WITH LAWS. Comply with all laws and regulations
            applicable to Borrower and to the operation of its business,
            including without limitation those relating to environmental and
            health matters, and do all things necessary to maintain, renew and
            keep in full force and effect all rights, permits, licenses,
            certificates, satisfactory clearances and franchises necessary to
            enable Borrower to continue its business.

      5.9   ENVIRONMENTAL VIOLATIONS.

            5.9.1 In the event that any hazardous or toxic substances,
                  pollutants, contaminants, solid waste or hazardous waste, or
                  petroleum are released (as that term is defined under
                  Environmental Laws) at or from the Property, or are otherwise
                  found to be in, on, under, about or migrating to or from the
                  Property in violation of Environmental Laws or in excess of
                  cleanup levels established under Environmental Laws, promptly
                  will notify Lender in writing and will promptly commence such
                  action as may be appropriate or required with respect to such
                  conditions, including, but not limited to, investigation,
                  removal and cleanup thereof, and deposit with Lender cash
                  collateral, letter of credit, bond or other assurance of
                  performance in form, substance and amount reasonably
                  acceptable to Lender to cover the cost of such action. Upon
                  request, Borrower will provide Lender with updates on the
                  status of Borrower's actions to resolve or otherwise address
                  such conditions, until such time as such conditions are fully
                  resolved to the satisfaction of Lender, as determined by
                  Lender in the exercise of its reasonable discretion.

                                      -10-
<PAGE>

            5.9.2 In the event Borrower receives notice of an Environmental
                  Claim from any governmental agency or other third party
                  alleging a violation of or liability under Environmental Laws
                  with respect to the Property or Borrower's activities or
                  operations at the Property, promptly notify Lender in writing
                  and will commence such action as may be appropriate or
                  required with respect to such Environmental Claim. Upon
                  request, Borrower will provide Lender with updates on the
                  status of Borrower's actions to resolve or otherwise address
                  such Environmental Claim, until such claim has been fully
                  resolved to the satisfaction of Lender, as determined by
                  Lender in the exercise of its reasonable discretion.

      5.10  ENVIRONMENTAL AUDIT AND OTHER ENVIRONMENTAL INFORMATION. Provide
            copies of all environmental reports, audits, and studies obtained by
            Borrower from work conducted by Borrower or any other person or
            entity on the Property or property adjacent thereto as soon as such
            reports, audits and studies become available to it. If the
            submissions are considered inadequate or insufficient in order for
            Lender to adequately consider the environmental condition of the
            Property or the status of Borrower's environmental compliance or if
            the submissions are in error, then Lender may require Borrower, at
            Borrower's sole expense, to engage an independent engineering or
            consulting firm acceptable to Lender to conduct a complete
            environmental report, study, or audit in as timely as fashion as is
            reasonably possible. In addition, Borrower will provide Lender with
            information related to remedial action at its Property or adjacent
            to its Property as soon as such information becomes available to it.

      5.11  BUSINESS NAMES AND LOCATIONS. Promptly notify Lender of: (a) any
            change in the name under which Borrower conducts its business; (b)
            any change in the location of the Collateral or Borrower's principal
            place of business; and (c) the opening or closing of any place from
            which Borrower conducts business.

      5.12  ACQUISITION OF ASSETS. Not acquire any assets, real or personal,
            unless such assets are automatically covered by the existing
            Security Documents or within 10 days of such acquisition, Borrower
            delivers to Lender a mortgage, pledge or security agreement to
            encumber such asset in favor of Lender.

      5.13  ACCOUNTS. So long as any of the Loans are in effect, maintain Lender
            as Borrower's primary bank of account and Borrower will maintain all
            operating accounts and all store accounts (in areas where a branch
            location of Lender or any of Lender's Affiliates is accessible to
            Borrower) with Lender or any of Lender's Affiliates.

      5.14  ERISA COMPLIANCE. Comply in all material respects with the
            applicable provisions of ERISA and furnish to Lender: (i) as soon as
            possible, and in any event within 30 days after any officer of
            Borrower or any ERISA Affiliate knows or has reason to know that any
            Reportable Event for which the thirty (30) day

                                      -11-
<PAGE>

            notice requirement has not been waived pursuant to Section 4043 of
            ERISA and the regulations promulgated thereunder has occurred that
            alone or together with any other Reportable Event could reasonably
            be expected to result in liability of Borrower to the PBGC in an
            aggregate amount exceeding $25,000, a statement of a financial
            officer setting forth details as to such Reportable Event and the
            action that Borrower proposes to take with respect thereto, together
            with a copy of the notice of such Reportable Event, if any, given to
            the PBGC, (ii) promptly after receipt thereof, a copy of any notice
            Borrower or any ERISA Affiliate may receive from the PBGC relating
            to the intention of the PBGC to terminate any Plan or Plans (other
            than a Plan maintained by an ERISA Affiliate which is considered an
            ERISA Affiliate only pursuant to subsection (m) or (o) of Code
            Section 414) or to appoint a trustee to administer any such Plan,
            (iii) within 10 days after the due date for filing with the PBGC
            pursuant to Section 412(n) of the Code of a notice of failure to
            make a required installment or other payment with respect to a Plan,
            a statement of its financial officer setting forth details as to
            such failure and the action that Borrower proposes to take with
            respect thereto together with a copy of any such notice given to the
            PBGC and (iv) promptly and in any event within 30 days after receipt
            thereof by Borrower or any ERISA Affiliate from the sponsor of a
            Multiemployer Plan, a copy of each notice received by Borrower or
            any ERISA Affiliate concerning (A) the imposition of Withdrawal
            Liability in an amount exceeding $25,000, or (B) a determination
            that a Multiemployer Plan is, or is expected to be, terminated or in
            reorganization, both within the meaning of Title IV of ERISA, and
            which, in each case, is expected to result in an increase in annual
            contributions of Borrower or an ERISA Affiliate to such
            Multiemployer Plan in an amount exceeding $25,000.

      5.15  NOTICE OF DEFAULT. Notify Lender in writing within five days after
            Borrower knows or has reason to know of the occurrence of an Event
            of Default.

      5.16  SALE AND LEASEBACK. Except to the extent related to Indebtedness
            permitted by Section 6.1, not directly or indirectly enter into any
            arrangement to sell or transfer all or any part of its assets then
            owned by Borrower and thereupon or within one year thereafter rent
            or lease any of the assets so sold or transferred.

      5.17  LINE OF BUSINESS. Not enter into any lines or areas of business
            substantially different from the business or activities in which
            Borrower is presently engaged.

      5.18  BUSINESS OPPORTUNITIES. Not divert (or permit anyone to divert) any
            of its business or opportunities to any other corporate or business
            entity in which Borrower or its Affiliates may hold a direct or
            indirect interest.

      5.19  WAIVERS. Not waive any right or rights of substantial value which,
            singly or in the aggregate, is or are material to its condition
            (financial or other), properties or business.

                                      -12-
<PAGE>

      5.20  BORROWING BASE REPORTS. Upon the request from time to time of Lender
            but in no event less often than monthly furnish Lender a Borrowing
            Base Certificate.

      5.21  LANDLORD LIEN WAIVERS. Use its commercially reasonable efforts to
            promptly deliver to Lender, in form and substance satisfactory to
            Lender, landlord lien waivers from the existing and future landlords
            of Borrower.

6.    NEGATIVE COVENANTS. From the date of execution of this Agreement until all
      of the Obligations have been fully paid, Borrower will not without
      Lender's prior written consent:

      6.1   DEBT. Incur any Indebtedness other than: (a) the Loans and any
            subsequent Indebtedness to Lender; (b) open account obligations
            incurred in the ordinary course of business having maturities of
            less than 150 days; (c) lease payments for real property; (d) lease
            and rental payments for personal property whose aggregate annual
            rental payments do not exceed $1,000,000 during calendar year 2002
            and $1,300,000 through May, 2003; (e) Indebtedness secured by
            Permitted Liens; and (f) existing unsecured Indebtedness to
            Enterprise Bank in an amount not to exceed $525,000.

      6.2   LIENS. Incur, create, assume, become or be liable in any way, or
            suffer to exist any mortgage, pledge, lien, charge or other
            encumbrance of any nature whatsoever on any of its assets, now or
            hereafter owned, other than Permitted Liens.

      6.3   GUARANTEES. Guarantee, endorse or become contingently liable for the
            obligations of any person, firm or corporation, except in connection
            with the endorsement and deposit of checks in the ordinary course of
            business for collection.

      6.4   MINIMUM TANGIBLE NET WORTH. Permit the Tangible Net Worth of
            Borrower on a consolidated basis to be less than the following: (a)
            $37,000,000 as of December 29, 2001 through December 27, 2002; and
            (b) $39,000,000 as of December 28, 2002 and thereafter. All such
            amounts shall be increased by the amount of all equity contributions
            made to the Borrower from time to time.

      6.5   FUNDED DEBT RATIO. Permit the ratio of: (i) Funded Debt of Borrower
            to (ii) EBTIDA of Borrower calculated on a rolling historical
            12-month basis, all on a consolidated basis to be greater than 2.00
            to 1.00 at any time.

      6.6   DIVIDENDS. Declare or pay any dividends of any kind other than
            dividends payable solely in shares of its capital stock (including
            without limitation debt repayment, payment for goods and services).

      6.7   ADDITIONAL SECURITIES. Issue any additional securities of any
            description or issue warrants, options or rights to purchase its
            securities (collectively, "Additional Securities"), provided,
            however, that so long as no Default or Event of Default

                                      -13-
<PAGE>

            has occurred and is continuing, the Borrower shall be permitted to
            issue Additional Securities to the extent that any such issuance
            (individually or in the aggregate) does not result in a transfer of
            Control of the Borrower from its current shareholders as of the date
            hereof. For purposes of this Section, "Control of the Borrower"
            shall mean the power, direct or indirect: (a) to vote 50% or more of
            the securities having ordinary voting power for the election of
            directors of Borrower; or (b) to direct or cause the direction of
            the management and policies of Borrower by contract or otherwise.

      6.8   REDEMPTIONS. Purchase, retire, redeem or otherwise acquire for
            value, directly or indirectly, any shares of its capital stock now
            or hereafter outstanding.

      6.9   INVESTMENTS. Except as disclosed on the Disclosure Schedule,
            purchase or hold beneficially any stock, other securities or
            evidences of indebtedness of, or make any investment or acquire any
            interest whatsoever in, any other person, firm or corporation other
            than (i) obligations of the United States Treasury and agencies
            thereof, (ii) commercial paper maturing within one-year and rated
            "A-1/P-2" and better, or (iii) Certificates of Deposit of the
            Lender.

      6.10  MERGER, ACQUISITION OR SALE OF ASSETS. Except as disclosed on the
            Disclosure Schedule, merge or consolidate with or into any other
            entity or acquire all or substantially all the assets of any person,
            firm, partnership, joint venture, or corporation, or sell, lease or
            otherwise dispose of any of its assets except for dispositions in
            the ordinary course of business. Store closings from time to time
            (not in excess of ten during any 12-month period) are considered in
            the ordinary course of business

      6.11  ADVANCES AND LOANS. Except as set forth in the Disclosure Schedule,
            lend money, give credit or make advances (other than ordinary,
            reasonable advances not to exceed $550,000 in the aggregate at any
            time) to any person, firm, joint venture or corporation, including,
            without limitation, Affiliates.

      6.12  SUBSIDIARIES. Except as disclosed on the Disclosure Schedule,
            acquire any Subsidiaries, create any Subsidiaries or enter into any
            partnership or joint venture agreements.

      6.13  TRANSACTIONS WITH AFFILIATES. Enter into any transaction, including,
            without limitation, any purchase, sale, lease or exchange of
            property or the rendering of any service, with any Affiliate unless
            such transaction is otherwise permitted under this Agreement, is in
            the ordinary course of its business, and is on reasonable terms no
            less favorable to Borrower than Borrower would obtain in a
            comparable arm's length transaction with a non-Affiliate.

      6.14  POST CLOSING MATTERS. Fail to deliver to Lender in form and
            substance satisfactory to Lender the documents, if any, noted as
            post closing items on the Closing Memo on or before the date
            specified in the Closing Memo.

                                      -14-
<PAGE>

7.    EVENTS OF DEFAULT. Upon the occurrence of any of the following events with
      respect to Borrower:

      7.1   NON-PAYMENT. The non-payment of any principal amount of any Note
            when due, whether by acceleration or otherwise, or the nonpayment of
            any interest upon any Note or any other amount due Lender pursuant
            to this Agreement within 5 days of when the same is due;

      7.2   COVENANTS. The default in the due observance of any covenant or
            agreement to be kept or performed by it under the terms of this
            Agreement or any of the Security Documents and the failure or
            inability of it to cure such default within 30 days of the
            occurrence thereof; provided that such 30 day grace period will not
            apply to: (a) any default which in Lender's good faith determination
            is incapable of cure, (b) any default that has previously occurred
            more than 3 times, (c) any default in any negative covenants, or (d)
            any failure to maintain insurance or to permit inspection of the
            Collateral or of its books and records.

      7.3   REPRESENTATIONS AND WARRANTIES. Any representation or warranty made
            by it in this Agreement, in any of the Security Documents or in any
            report, certificate, opinion, financial statement or other document
            furnished in connection with the Obligations is false or erroneous
            in any material respect or any material breach thereof has been
            committed;

      7.4   OBLIGATIONS. Except as provided in Sections 7.1, 7.2 and 7.3 above,
            the default by it in the due observance of any covenant, negative
            covenant or agreement to be kept or performed by it under the terms
            of this Agreement, the Security Documents or any document now or
            in the future executed in connection with any of the Obligations and
            the lapse of any applicable cure period provided therein with
            respect to such default, or, if so defined therein, the occurrence
            of any Event of Default or Default (as such terms are defined
            therein);

      7.5   BANKRUPTCY, ETC. It: (a) dissolves or is the subject of any
            dissolution, a winding  up or liquidation; (b) makes
            a general assignment for the benefit of creditors; or (c) files or
            has filed against it a petition in bankruptcy, for a reorganization
            or an arrangement, or for a receiver, trustee or similar creditors'
            representative for its property or assets or any part thereof, or
            any other proceeding under any federal or state insolvency law, and
            if filed against it, the same has not been dismissed or discharged
            within 60 days thereof;

      7.6   EXECUTION, ATTACHMENT. ETC. The commencement of any foreclosure
            proceedings, proceedings in aid of execution, attachment actions,
            levies against, or the filing by any taxing authority of a lien
            against it or against any of the Collateral, except those liens
            being diligently contested in good faith which in the aggregate do
            not exceed $100,000;

                                      -15-
<PAGE>

      7.7   LOSS, THEFT OR SUBSTANTIAL DAMAGE TO THE COLLATERAL. In addition to
            the rights of Lender to deal with proceeds of insurance as provided
            in the Security Documents, the loss, theft or substantial damage to
            the Collateral if the result of such occurrence (singly or in the
            aggregate) is the failure or inability to resume substantially
            normal operation of its business within 30 days of the date of such
            occurrence;

      7.8   JUDGMENTS. Unless in the opinion of Lender it is adequately insured
            or bonded, the entry of a final judgment for the payment of money
            involving more than $100,000 against it and the failure by it to
            discharge the same, or cause it to be discharged, within 10 days
            from the date of the order, decree or process under which or
            pursuant to which such judgment was entered, or to secure a stay of
            execution pending appeal of such judgment; the entry of one or more
            final monetary or non-monetary judgments or order which, singly or
            in the aggregate, does or could reasonably be expected to: (a) cause
            a material adverse change in the value of the Collateral or its
            condition (financial or otherwise), operations, properties or
            prospects, (b) have a material adverse effect on its ability to
            perform its obligations under this Agreement or the Security
            Documents, or (c) have a material adverse effect on the rights and
            remedies of Lender under this Agreement, any Note or any Security
            Document;

      7.9   IMPAIRMENT OF SECURITY. (a) The validity or effectiveness of any
            Security Document or its transfer, grant, pledge, mortgage or
            assignment by the party executing it in favor of Lender is impaired;
            (b) any party, other than Lender, to a Security Document asserts
            that any Security Document is not a legal, valid and binding
            obligation of it enforceable in accordance with its terms; (c) the
            security interest or lien purporting to be created by any of the
            Security Documents ceases to be or is asserted by any party to any
            Security Document (other than Lender) not to be a valid, perfected
            lien subject to no liens other than liens not prohibited by this
            Agreement or any Security Document; or (d) any Security Document is
            amended, subordinated, terminated or discharged, or any person is
            released from any of its covenants or obligations except to the
            extent that Lender expressly consents in writing thereto;

      7.10  OTHER INDEBTEDNESS OF LENDER'S AFFILIATES. A default with respect to
            any evidence of Indebtedness by it (other than to Lender pursuant to
            this Agreement) to any of Lender's Affiliates, if the effect of such
            default is to accelerate the maturity of such Indebtedness or to
            permit the holder thereof to cause such Indebtedness to become due
            prior to the stated maturity thereof, or if any Indebtedness of it
            for borrowed money (other than to Lender pursuant to this Loan
            Agreement) is not paid when due and payable, whether at the due date
            thereof or a date fixed for prepayment or otherwise (after the
            expiration of any applicable grace period;

      7.11  OTHER INDEBTEDNESS. A default with respect to any evidence of
            Indebtedness in excess of $100,000 by it (other than to Lender or
            Lender's Affiliate pursuant to

                                      -16-
<PAGE>

            this Agreement), if the effect of such default is to accelerate the
            maturity of such Indebtedness or to permit the holder thereof to
            cause such Indebtedness to become due prior to the stated maturity
            thereof, or if any Indebtedness of it in excess of $100,000 for
            borrowed money (other than to Lender or Lender's Affiliate pursuant
            to this Loan Agreement) is not paid when due and payable, whether at
            the due date thereof or a date fixed for prepayment or otherwise
            (after the expiration of any applicable grace period);

      7.12  LEASES. Any declared material default, that is not cured within any
            applicable cure period, existing under more than two (2) of
            Borrower's real property leases at any one time;

then immediately upon the occurrence of any of the events described in Section
7.5 and at the option of the Lender upon the occurrence of any other Event of
Default, the Loans, all Notes and all other Obligations immediately will mature
and become due and payable without presentment, demand, protest or notice of any
kind which are hereby expressly waived. After the occurrence of any Event of
Default, Lender is authorized without notice to anyone to offset and apply to
all or any part of the Obligations all moneys, credits and other property of any
nature whatsoever of Borrower now or at any time hereafter in the possession of,
in transit to or from, under the control or custody of, or on deposit with
(whether held by Borrower individually or jointly with another party), Lender or
any of Lender's Affiliates. The rights and remedies of Lender upon the
occurrence of any Event of Default will include but not be limited to all rights
and remedies provided in the Security Documents and all rights and remedies
provided under applicable law. In furtherance but not in limitation of the
foregoing, upon the occurrence of an Event of Default, Lender may refuse to make
any further advances under any Note included in the Obligations. Borrower waives
any requirement of marshalling of the assets covered by the Security Documents
upon the occurrence of any Event of Default. Upon or during the occurrence of an
Event of Default, Lender may request the appointment of a receiver of the
Collateral. Such appointment may be made without notice, and without regard to
(i) the solvency or insolvency, at the time of application for such receiver, of
the person or persons, if any, liable for the payment of the Obligations; and
(ii) the value of the Collateral at such time. Such receiver will have the power
to take possession, control and care of the Collateral and to collect all
accounts resulting therefrom. Notwithstanding the appointment of any receiver,
trustee, or other custodian, Lender will be entitled to the possession and
control of any cash, or other instruments at the time held by, or payable or
deliverable under the terms of this Loan Agreement or any Security Documents to
Lender.

8. CONDITIONS PRECEDENT.

      8.1   AT CLOSING. Lender's obligation to make any of the Loans is
            conditioned upon the receipt by Lender of all documents in form and
            substance acceptable to Lender listed on the Closing Memo, except
            for those specifically listed thereon as post-closing items.

      8.2   ADDITIONAL ADVANCES. Lender's obligations to make any Loan and/or
            any advance under any Note on any date in the future (to the extent
            that there are

                                      -17-
<PAGE>

            funds remaining to be disbursed hereunder or under any Note) are
            subject to the conditions precedent that:

            8.2.1 NO DEFAULTS. There does not exist any Event of Default, nor
                  any event which upon notice or lapse of time or both would
                  constitute an Event of Default.

            8.2.2 ACCURACY. The representations and warranties contained in this
                  Agreement, the Security Documents, and in each document listed
                  on the Closing Memo prepared by Borrower, executed by Borrower
                  or provided by a third party at the request of Borrower, and
                  in any document delivered in connection therewith will be true
                  and accurate on and as of such date, except as such warranties
                  and representations may be affected by: (a) this Agreement or
                  transactions contemplated thereby, and (b) events occurring
                  after the Closing Date as to those representations and
                  warranties relating to the Current Financial Statements.

            8.2.3 OTHER DOCUMENTS. Lender will have received such other
                  documents, instruments, opinions, certificates, or items of
                  information which it may have reasonably required in
                  connection with the transactions provided for in this
                  Agreement.

      8.3   BORROWING REPRESENTATIONS. Each borrowing by Borrower hereunder will
            constitute a representation and warranty by Borrower as of the date
            of such borrowing that the conditions set forth in Section 8.2 have
            been satisfied.

9.    CLOSING EXPENSES. Borrower will pay Lender at closing a reasonable sum for
      expenses and Attorneys Fees incurred by Lender in connection with the
      preparation, execution and delivery of this Agreement and the attendant
      documents and the consummation of the transactions contemplated hereby
      together with all: (a) recording fees and taxes; (b) survey, appraisal and
      environmental report charges; and (c) title search and title insurance
      charges, including any stamp or documentary taxes, charges or similar
      levies which arise from the payment made hereunder or from the execution,
      delivery or registration of any Security Document or this Agreement. If
      Borrower fails to pay such fees, Lender is entitled to disburse such sums
      as an advance under any Note.

10.   POST-CLOSING EXPENSES. To the extent that Lender incurs any costs or
      expenses in protecting or enforcing its rights in the Collateral or
      observing or performing any of the conditions or obligations of Borrower
      or any Guarantor thereunder, including but not limited to reasonable
      Attorneys' Fees in connection with litigation, preparation of amendments
      or waivers, present or future stamp or documentary taxes, charges or
      similar levies which arise from any payment made hereunder or from the
      execution, delivery or registration of any Security Document or this
      Agreement, such costs and expenses will be due on demand, will be included
      in the Obligations and will bear interest at the Default Rate if not paid
      within fifteen (15) days of becoming due.

                                      -18-
<PAGE>

11.   REPRESENTATIONS AND WARRANTIES TO SURVIVE. All representations,
      warranties, covenants, indemnities and agreements made by Borrower herein
      and in the Security Documents will survive the execution and delivery of
      this Agreement, the Security Documents and the issuance of any Notes.

12.   ENVIRONMENTAL INDEMNIFICATION. Lender will not be deemed to assume any
      liability or obligation for loss, damage, fines, penalties, claims or
      duties to clean-up or dispose of wastes or materials on or relating to the
      Property merely by conducting any inspections of the Property or by
      obtaining title to the Property by foreclosure, deed in lieu of
      foreclosure or otherwise. Borrower, including its successors and assigns,
      agrees to remain fully liable and will indemnify, defend and hold harmless
      Lender, its directors, officers, employees, agents, contractors,
      subcontractors, licensees, invitees, successors and assigns, from and
      against any claims, demands, judgments, damages, actions, causes of
      action, injuries, administrative orders, liabilities, costs, expenses,
      clean-up costs, waste disposal costs, litigation costs, fines, penalties,
      damages and other related liabilities arising from (i) the failure of
      Borrower to perform any obligation herein required to be performed by
      Borrower, (ii) the removal or other remediation of hazardous or toxic
      substances, hazardous wastes, pollutants or contaminants, solid waste or
      petroleum at or from the Property, (iii) any act or omission, event or
      circumstance existing or occurring resulting from or in connection with
      the ownership, construction, occupancy, operation, use and/or maintenance
      of the Property, (iv) any and all claims or proceedings (whether brought
      by private party or governmental agency) for bodily injury, property
      damage, abatement or remediation, environmental damage or impairment and
      any other injury or damage resulting from or relating to any hazardous or
      toxic substances, hazardous waste, pollutants, contaminants, solid waste,
      or petroleum located upon or migrating into, from or through the Property
      (whether or not any or all of the foregoing was caused by the Borrower or
      its tenant or subtenant, or a prior owner of the Property or its tenant or
      subtenant, or any third party and whether or not the alleged liability is
      attributable to the handling, storage, generation, transportation or
      disposal of such material or the mere presence of such material on the
      Property), and (v) Borrower's breach of any representation or warranty
      contained in this Agreement. Without limitation, the foregoing indemnities
      will apply to Lender with respect to claims, demands, losses, damages
      (including consequential damages), liabilities, causes of action,
      judgements, penalties, costs and expenses (including reasonable attorneys'
      fees and court costs) which in whole or in part are caused by or arise out
      of the negligence of Lender. Such indemnity, however, will not apply to
      Lender to the extent the subject of the indemnification is caused by or
      arises out of the gross negligence or willful misconduct of Lender. All
      environmental representations, warranties, covenants, and indemnities will
      continue indefinitely and may not be cancelled or terminated except by a
      writing signed by Lender specifically referring to this Section.
      Notwithstanding anything contained to the contrary in any Note, the Loan
      Agreement, or other Security Documents evidencing or securing the
      Obligations, the provisions of this Section will survive the termination
      or expiration of the Obligations, the full repayment of the Obligations,
      or the acquiring of title by Lender or its successors and assigns by
      foreclosure, deed in lieu of foreclosure or otherwise, and will be fully
      enforceable against Borrower and its successors and assigns. The
      provisions of this Section will constitute a separate

                                      -19-
<PAGE>

      undertaking by Borrower and will be an inducement to Lender in extending
      the Loan evidencing the Obligations to Borrower. The provisions of this
      Section will not be subject to any anti-deficiency or similar laws.

13.   DEFINITIONS. For purposes hereof;

      13.1     Each accounting term not defined or modified herein will have the
               meaning given to it under generally accepted accounting
               principles in effect on the Closing Date.

      13.2     "Affiliate" will mean any person, partnership, joint venture,
               company or business entity under common control or having similar
               equity holders owning at least ten percent (10%) thereof, whether
               such common control is direct or indirect. All of Person's direct
               or indirect parent corporations, partners, Subsidiaries, and the
               officers, shareholders, members, directors and partners of any of
               the foregoing and persons related by blood or marriage to any of
               the foregoing will be deemed to be a Person's Affiliates for
               purposes of this Agreement.

      13.3     "Attorneys Fees" will mean the reasonable value of the services
               (and all costs and expenses related thereto) of the attorneys
               (and all paralegals and other staff employed by such attorneys)
               employed by Lender from time to time to: (i) take any action in
               or with respect to any suit or proceedings (bankruptcy or
               otherwise) relating to the Collateral or this Agreement; (ii)
               protect, collect, lease or sell, any of the Collateral; (iii)
               attempt to enforce any lien on any of the Collateral or to give
               any advice with respect to such enforcement; (iv) enforce any of
               Lender's rights to collect any of the Obligations; (v) give
               Lender advice with respect to this Agreement, including but not
               limited to advice in connection with any default, workout or
               bankruptcy; (vi) prepare any amendments, restatements, amendments
               or waivers to this Agreement or any of the documents executed in
               connection with any of the Obligations.

      13.4     "Borrowing Base Certificate" will mean the Borrowing Base
               Certificate in the form delivered by Lender to Borrower in
               connection with the Closing of this Agreement and all amendments
               thereto and revisions thereof required by Lender.

      13.5     "Business Day" will mean any day excluding Saturday, Sunday and
               any other day on which banks are required or authorized to close
               in Ohio.

      13.6     "Closing" will mean the execution and delivery of the documents
               listed on the Closing Memo.

      13.7     "Closing Date" will mean the date on which this Agreement is
               executed.

      13.8     "Closing Memo" will mean the Closing Memorandum between Borrower
               and Lender in connection with the transactions represented by
               this Agreement.

      13.9     "Code" will mean the Internal Revenue Code of 1986, as amended
               from time to time.

                                      -20-
<PAGE>

         13.10    "Collateral" will mean any property, real or personal,
                  tangible or intangible, now or in the future securing the
                  Obligations, including but not limited to the property covered
                  by the Security Documents.

         13.11    Intentionally Deleted

         13.12    "Current Financial Statements" will mean the following
                  financial statements: (a) Borrower's audited balance sheet
                  dated December 31, 2000 and statement of profit, loss and
                  surplus for the fiscal year ended December 31, 2000; and (b)
                  Borrower's internally prepared balance sheet dated October 31,
                  2001 and statement of profit, loss and surplus for the period
                  January 1, 2001 through October 31, 2001. For the purposes of
                  any future date on which the representations and warranties
                  contained in Section 4 hereof are deemed to be remade, the
                  most current financial statements, tax returns or other
                  documents with respect to Borrower delivered to Lender
                  pursuant to Section 5 above will be deemed the "Current
                  Financial Statements".

         13.13    "Default Rate" will mean 4% per annum plus the highest rate of
                  interest that would otherwise be in effect under any Note but
                  not more than the highest rate permitted by applicable law.

         13.14    "Default" will mean any event or condition that with the
                  passage of time or giving of notice, or both, would constitute
                  an Event of Default.

         13.15    "Disclosure Schedule" will mean collectively, the Disclosure
                  Schedule of Borrower dated March 1, 2000 and the first and
                  second supplements thereto, now or previously delivered by the
                  Borrower to the Lender in connection with the Loan.

         13.16    "EBITDA" will mean the sum of: (i) net income (or loss), as
                  determined in accordance with generally accepted accounting
                  principles; (ii) depreciation and amortization; (iii)
                  interest; (iv) taxes. Other non-cash charges and extraordinary
                  items including, but not limited to, gain or loss from the
                  sale or disposition of capital assets, will be included or
                  excluded at the sole discretion of the Lender.

         13.17    "Eligible Receivables" will mean those amounts set forth on
                  Borrower's Current Financial Statements as "Tenant
                  Allowances", less any amounts of such "Tenant Allowances"
                  deemed by Lender, in its sole credit judgment, to be
                  ineligible.

         13.18    "Eligible Inventory" will mean Inventory which is not, in the
                  good faith opinion of Lender, in accordance with its customary
                  business practices, obsolete or unmerchantable and which
                  Lender, in its sole credit judgment, deems Eligible Inventory,
                  based on such credit and collateral considerations as Lender
                  may deem appropriate. Eligible Inventory will be valued at the
                  lower of cost or market value.

                                      -21-
<PAGE>

         13.19    "ERISA Affiliate" will mean any trade or business (whether or
                  not incorporated) that is a member of a group of which
                  Borrower is a member and which is treated as a single employer
                  under Section 414 of the Code.

         13.20    "ERISA" will mean the Employee Retirement Income Security Act
                  of 1974, or any successor statute, as amended from time to
                  time.

         13.21    "Event of Default" will mean any of the events listed in
                  Section 7.

         13.22    "Funded Debt" will mean all Indebtedness to financial
                  institutions or commercial lenders.

         13.23    "Hazardous Wastes", "hazardous substances" and "pollutants or
                  contaminants" will mean any substances, waste, pollutant or
                  contaminant now or hereafter included with any respective
                  terms under any now existing or hereinafter enacted or amended
                  federal, state or local statute, ordinance, code or
                  regulation, including but not limited to the Comprehensive
                  Environmental Response, Compensation, and Liability Act, 42
                  U.S.C. Section 9601 et seq. ("CERCLA").

         13.24    "Indebtedness" will mean, without duplication: (i) all
                  obligations (including capitalized lease obligations) which in
                  accordance with generally accepted accounting principles would
                  be shown on a balance sheet as a liability; (ii) all
                  obligations for borrowed money or for the deferred purchase
                  price of property or services; and (iii) all guarantees,
                  reimbursement, payment or similar obligations, absolute,
                  contingent or otherwise, under acceptance, letter of credit or
                  similar facilities.

         13.25    "Lender's Affiliate" will mean any person, partnership, joint
                  venture, company or business entity under common control or
                  having similar equity holders owning at least ten percent
                  (10%) thereof with Lender, whether such common control is
                  direct or indirect. All of Lender's direct or indirect parent
                  corporations, sister corporations, and subsidiaries will be
                  deemed to be a Lender's Affiliate for purposes of this
                  Agreement.

         13.26    "Loan(s)" will mean any and all advances of funds under this
                  Agreement or any of the Notes.

         13.27    "Multiemployer Plan" will mean a multiemployer plan as defined
                  in Section 4001(a)(3) of ERISA to which Borrower or any ERISA
                  Affiliate (other than one considered an ERISA Affiliate only
                  pursuant to subsection (m) or (o) of Code Section 414) is
                  making or accruing an obligation to make contributions, or has
                  within any of the preceding five plan years made or accrued an
                  obligation to make contributions.

         13.28    "Note(s)" will mean any note, now or in the future, between
                  Borrower and Lender, and will include any amendments made
                  thereto and restatements thereof, extensions and replacements.

                                      -22-
<PAGE>

         13.29    "Obligations" will mean and include all loans, advances,
                  debts, liabilities, obligations, covenants and duties owing to
                  Lender or any of Lender's Affiliates, from Borrower of any
                  kind or nature, present or future, whether or not evidenced by
                  any note, guaranty or other instrument, including but not
                  limited to those arising under: (i) this Agreement, (ii) the
                  Notes, (iii) under any other agreement, instrument or
                  document, whether or not for the payment of money, whether
                  arising by reason of an extension of credit, opening of a
                  letter of credit, loan, guaranty, indemnification or in any
                  other manner, whether direct or indirect (including those
                  acquired by assignment, participation, purchase, negotiation,
                  discount or otherwise), absolute or contingent, joint or
                  several, due or to become due, now existing or hereafter
                  arising and whether or not contemplated by Borrower or Lender
                  or any Lender's Affiliate on the Closing Date; and as to all
                  of the foregoing, including any amendments, modifications, or
                  superceding documents to each of the foregoing; and all
                  charges, expenses, fees, including but not limited to
                  reasonable Attorneys' Fees, and any other sums chargeable to
                  Borrower under any of the Obligations.

         13.30    "PBGC" will mean the Pension Benefit Guaranty Corporation
                  referred to and defined in ERISA.

         13.31    "Permitted Liens" will mean:

                  13.31.1  liens securing the payment of taxes, either not yet
                           due or the validity of which is being contested in
                           good faith by appropriate proceedings, and as to
                           which Borrower has set aside on its books adequate
                           reserves to the extent required by generally accepted
                           accounting principles;

                  13.31.2  deposits under workers' compensation, unemployment
                           insurance and social security laws, or to secure the
                           performance of bids, tenders, contracts (other than
                           for the repayment of borrowed money) or leases, or to
                           secure statutory obligations or surety or appeal
                           bonds, or to secure indemnity, performance or other
                           similar bonds in the ordinary course of business;

                  13.31.3  liens imposed by law, such as carrier's,
                           warehousemen's or mechanics' liens, incurred by
                           Borrower in good faith in the ordinary course of
                           business, and liens arising out of a judgment or
                           award against Borrower with respect to which Borrower
                           will currently be prosecuting an appeal, a stay of
                           execution pending such appeal having been secured;

                  13.31.4  liens in favor of Lender;

                  13.31.5  reservations, exceptions, encroachments and other
                           similar title exceptions or encumbrances affecting
                           real properties, provided such do not materially
                           detract from the use or value thereof as used by the
                           owner thereof;

                                      -23-
<PAGE>

                  13.31.6  attachment, judgment, and similar liens provided that
                           execution is effectively stayed pending a good faith
                           contest;

                  13.31.7  liens by a bank on deposit accounts of Borrower that
                           arise by operation of law, and that are otherwise in
                           compliance with the terms of this Agreement;

                  13.31.8  purchase money security interests limited to the
                           asset financed by Borrower and securing Indebtedness
                           not in excess of $100,000 in the aggregate at any
                           time; and

                  13.31.9  security interests arising as a result of lease
                           transactions permitted by Section 6.1(d) and limited
                           to the asset leased by Borrower.

         13.32    "Person" will include an individual, a corporation, a limited
                  liability company, an association, a partnership, a trust or
                  estate, a joint stock company, an unincorporated organization,
                  a joint venture, a government (foreign or domestic), any
                  agency or political subdivisions thereof, or any other entity.

         13.33    "Plan" will mean any pension plan subject to the provisions of
                  Title IV of ERISA or Section 412 of the Code and which is
                  maintained for employees of Borrower or any ERISA Affiliate.

         13.34    "Prime Rate" will mean the rate per annum established by
                  Lender from time to time based on its consideration of various
                  factors, including money market, business and competitive
                  factors, and it is not necessarily Lender's most favored
                  interest rate. Subject to any maximum or minimum interest rate
                  limitations specified herein or by applicable law, if and when
                  such Prime Rate changes, then in each such event, the rate of
                  interest payable under this Agreement, any Note, the Security
                  Documents or any other document evidencing the Obligations
                  that is tied to the Prime Rate will change automatically
                  without notice effective the date of such changes.

         13.35    "Reportable Event" will mean any reportable event as defined
                  in Section 4043(b) of ERISA or the regulations issued
                  thereunder with respect to a Plan (other than a Plan
                  maintained by an ERISA Affiliate which is considered an ERISA
                  Affiliate only pursuant to subsection (m) or (o) of Code
                  Section 414).

         13.36    "Security Documents" will mean this agreement and the
                  agreements, pledges, mortgages, guarantees, or other documents
                  delivered by Borrower, any Guarantor or any other person or
                  entity to Lender or Lender's Affiliate previously, now or in
                  the future to encumber the Collateral in favor of Lender or
                  Lender's Affiliate, including but not limited to those listed
                  on the Closing Memo, and all amendments thereto and
                  restatements thereof.

         13.37    "Subsidiaries" means a corporation of which shares of stock
                  having ordinary voting power (other than stock having such
                  power only by reason of the

                                      -24-
<PAGE>

                  happening of a contingency) to elect a majority of the Board
                  of Directors or other managers of such corporation are at the
                  time owned, or the management of which is otherwise
                  controlled, directly or indirectly through one or more
                  intermediaries, or both, by Borrower.

         13.38    "Tangible Net Worth" will mean the total of book net worth
                  (including the sum of common stock, preferred stock, paid-in
                  capital, subordinated debt and earned surplus) less
                  capitalized organizational or closing costs, treasury stock,
                  deferred leasing and financing costs, goodwill, and any other
                  assets generally considered as intangible.

         13.39    "Withdrawal Liability" will mean liability to a Multiemployer
                  Plan as a result of a complete or partial withdrawal from such
                  Multiemployer Plan, as such terms are defined in Part I of
                  Subtitle E of Title IV of ERISA.

         13.40    All other terms contained in this Agreement and not otherwise
                  defined herein will, unless the context indicates otherwise,
                  have the meanings provided for by the Uniform Commercial Code
                  of the State of Ohio to the extent the same are defined
                  therein.

14.      GENERAL.

         14.1     INDEMNITY. Borrower will indemnify, defend and hold harmless
                  Lender, its directors, officers, counsel and employees, from
                  and against all claims, demands, liabilities, judgments,
                  losses, damages, costs and expenses, joint or several
                  (including all accounting fees and Attorneys' Fees reasonably
                  incurred), that Lender or any such indemnified party may incur
                  arising under or by reason of this Agreement or any act
                  hereunder or with respect hereto or thereto including but not
                  limited to any of the foregoing relating to any act, mistake
                  or failure to act in perfecting, maintaining, protecting or
                  realizing on any collateral or lien thereon except the willful
                  misconduct or gross negligence of such indemnified party.
                  Without limiting the generality of the foregoing, Borrower
                  agrees that if, after receipt by Lender of any payment of all
                  or any part of the Obligations, demand is made at any time
                  upon Lender for the repayment or recovery of any amount or
                  amounts received by Borrower in payment or on account of the
                  Obligations and Lender repays all or any part of such amount
                  or amounts by reason of any judgment, decree or order of any
                  court or administrative body, or by reason of any settlement
                  or compromise of any such demand, this Agreement will continue
                  in full force and effect and Borrower will be liable, and will
                  indemnify, defend and hold harmless Lender for the amount or
                  amounts so repaid. The provisions of this Section will be and
                  remain effective notwithstanding any contrary action which may
                  have been taken by Borrower in reliance upon such payment, and
                  any such contrary action so taken will be without prejudice to
                  Lender's rights under this Agreement and will be deemed to
                  have been conditioned upon such payment having become final
                  and irrevocable. The provisions of this Section will survive
                  the expiration or termination of this Agreement.

                                      -25-
<PAGE>

         14.2     CONTINUING AGREEMENT. This Agreement is and is intended to be
                  a continuing Agreement and will remain in full force and
                  effect until the Loan is finally and irrevocably paid in full.

         14.3     NO THIRD PARTY BENEFICIARIES. Nothing express or implied
                  herein is intended or will be construed to confer upon or give
                  any person, firm, or corporation, other than the parties
                  hereto, any right or remedy hereunder or by reasons hereof.

         14.4     NO PARTNERSHIP OR JOINT VENTURE. Nothing contained herein or
                  in any of the agreements or transactions contemplated hereby
                  is intended or will be construed to create any relationship
                  other than as expressly stated herein or therein and will not
                  create any joint venture, partnership or other relationship.

         14.5     WAIVER. No delay or omission on the part of Lender to exercise
                  any right or power arising from any Event of Default will
                  impair any such right or power or be considered a waiver of
                  any such right or power or a waiver of any such Event of
                  Default or any acquiescence therein nor will the action or
                  nonaction of Lender in case of such Event of Default impair
                  any right or power arising as a result thereof or affect any
                  subsequent default or any other default of the same or a
                  different nature. No disbursement of the Loans hereunder will
                  constitute a waiver of any of the conditions to Lender's
                  obligation to make further disbursements; nor, in the event
                  that Borrower is unable to satisfy any such condition, will
                  any such disbursement have the effect of precluding Lender
                  from thereafter declaring such inability to be an Event of
                  Default.

         14.6     NOTICES. All notices, demands, requests, consents, approvals
                  and other communications required or permitted hereunder will
                  be in writing and will be conclusively deemed to have been
                  received by a party hereto and to be effective if delivered
                  personally to such party, or sent by telecopy (followed by
                  written confirmation) or by overnight courier service, or by
                  certified or registered mail, return receipt requested,
                  postage prepaid, addressed to such party at the address set
                  forth below or to such other address as any party may give to
                  the other in writing for such purpose:

                        Lender:          U.S. BANK NATIONAL ASSOCIATION
                                         425 Walnut Street, ML CN-WN-08
                                         Cincinnati, Ohio 45202
                                         Attention: Charles L. Thomas

                        To Borrower:     BUILD-A-BEAR WORKSHOP, INC.
                                         SHIRTS ILLUSTRATED, LLC
                                         1954 Innerbelt Business Center Drive
                                         St. Louis, Missouri 63114
                                         Attention: Mr. Jack Burtelow

                  All such communications, if personally delivered, will be
                  conclusively deemed to have been received by a party hereto
                  and to be effective when so delivered, or if

                                      -26-
<PAGE>

                  sent by telecopy, on the day on which transmitted, or if sent
                  by overnight courier service, on the day after deposit thereof
                  with such service, or if sent by certified or registered mail,
                  on the third Business Day after the day on which deposited in
                  the mail.

         14.7     SUCCESSORS AND ASSIGNS. This Agreement will be binding upon
                  and inure to the benefit of Borrower and Lender and their
                  respective successors and assigns, provided, however, that
                  Borrower may not assign this Agreement in whole or in part
                  without the prior written consent of Lender and Lender at any
                  time may assign this Agreement in whole or in part.

         14.8     MODIFICATIONS. This Agreement, any Notes and the Security
                  Documents, and the documents listed on the Closing Memo,
                  constitute the entire agreement of the parties and supersede
                  all prior agreements and understandings regarding the subject
                  matter of this Agreement, including but not limited to any
                  proposal or commitment letters. No modification or waiver of
                  any provision of this Agreement, any Note, any of the Security
                  Documents or any of the documents listed on the Closing Memo,
                  nor consent to any departure by Borrower therefrom, will be
                  established by conduct, custom or course of dealing; and no
                  modification, waiver or consent will in any event be effective
                  unless the same is in writing and specifically refers to this
                  Agreement, and then such waiver or consent will be effective
                  only in the specific instance and for the purpose for which
                  given. No notice to or demand on Borrower in any case will
                  entitle Borrower to any other or further notice or demand in
                  the same, similar or other circumstance.

         14.9     REMEDIES CUMULATIVE. No single or partial exercise of any
                  right or remedy by Lender will preclude any other or further
                  exercise thereof or the exercise of any other right or remedy.
                  All remedies hereunder and in any instrument or document
                  evidencing, securing, guaranteeing or relating to any Loan or
                  now or hereafter existing at law or in equity or by statute
                  are cumulative and none of them will be exclusive of the
                  others or any other remedy. All such rights and remedies may
                  be exercised separately, successively, concurrently,
                  independently or cumulatively from time to time and as often
                  and in such order as Lender may deem appropriate.

         14.10    ILLEGALITY. If fulfillment of any provision hereof or any
                  transaction related hereto or of any provision of the Notes or
                  the Security Documents, at the time performance of such
                  provision is due, involves transcending the limit of validity
                  prescribed by law, then ipso facto, the obligation to be
                  fulfilled will be reduced to the limit of such validity; and
                  if any clause or provisions herein contained other than the
                  provisions hereof pertaining to repayment of the Obligations
                  operates or would prospectively operate to invalidate this
                  Agreement in whole or in part, then such clause or provision
                  only will be void, as though not herein contained, and the
                  remainder of this Agreement will remain operative and in full
                  force and effect; and if such provision pertains to repayment
                  of the Obligations, then, at the option of Lender, all of the
                  Obligations of Borrower to Lender will become immediately due
                  and payable.

                                      -27-
<PAGE>

         14.11    GENDER, ETC. Whenever used herein, the singular number will
                  include the plural, the plural the singular and the use of the
                  masculine, feminine or neuter gender will include all genders.

         14.12    HEADINGS. The headings in this Agreement are for convenience
                  only and will not limit or otherwise affect any of the terms
                  hereof.

         14.13    TIME. Time is of the essence in the performance of this Loan
                  Agreement.

         14.14    GOVERNING LAW AND JURISDICTION; No JURY TRIAL. THIS AGREEMENT
                  WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
                  PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE
                  STATE OF OHIO, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES,
                  AND BORROWER HEREBY AGREES TO THE JURISDICTION OF ANY STATE OR
                  FEDERAL COURT LOCATED WITHIN HAMILTON COUNTY, OHIO AND
                  CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY CERTIFIED MAIL
                  DIRECTED TO BORROWER AT BORROWER'S ADDRESS SET FORTH HEREIN
                  FOR NOTICES AND SERVICE SO MADE WILL BE DEEMED TO BE COMPLETED
                  FIVE (5) BUSINESS DAYS AFTER THE SAME HAS BEEN DEPOSITED IN
                  U.S. MAILS, POSTAGE PREPAID; PROVIDED THAT NOTHING CONTAINED
                  HEREIN WILL PREVENT LENDER FROM BRINGING ANY ACTION OR
                  EXERCISING ANY RIGHTS AGAINST ANY SECURITY OR AGAINST BORROWER
                  INDIVIDUALLY, OR AGAINST ANY PROPERTY OF BORROWER, WITHIN ANY
                  OTHER STATE OR NATION. BORROWER WAIVES ANY OBJECTION BASED ON
                  FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE OF ANY ACTION
                  INSTITUTED HEREUNDER. BORROWER AND LENDER EACH WAIVE ANY RIGHT
                  TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS
                  AGREEMENT, ANY DOCUMENTS EVIDENCING ANY OF THE OBLIGATIONS, OR
                  ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH AGREEMENTS.

     Executed as of February _, 2002             BUILD-A-BEAR WORKSHOP, INC.

                                                 BY: /s/ Maxine Clark
                                                    -----------------------
                                                 PRINT NAME:  MAXINE CLARK
                                                 TITLE: PRESIDENT

                                      -28-
<PAGE>

                                                 SHIRTS ILLUSTRATED, LLC

                                                 BY: Build-A-Bear Workshop, Inc.
                                                     Its Managing Member

                                                 BY: /s/ Maxine Clark
                                                    -----------------------
                                                 PRINT NAME: Maxine Clark
                                                 TITLE: President

                                                 U.S. BANK
                                                 NATIONAL ASSOCIATION

                                                 BY: /s/ Charles L. Thomas
                                                    -----------------------
                                                 PRINT NAME: Charles L. Thomas
                                                 TITLE: Vice President

STATE OF________________)
                        )  SS.
COUNTY OF_______________)

         The foregoing instrument was acknowledged before me this February __,
2002 by Maxine Clark, the duly authorized Officer of BUILD-A-BEAR WORKSHOP,
INC., a Delware corporation, on behalf of the corporation.

                                             /s/ Marie A. Powers
                                             --------------------------------
                                             Notary Public

STATE OF________________)                              MARIE A. POWERS
                        )  SS.                   NOTARY PUBLIC - NOTARY SEAL
COUNTY OF_______________)                             STATE OF MISSOURI
                                                     ST. CHARLES COUNTY
                                             MY COMMISSION EXPIRES: MAY 24, 2003

         The foregoing instrument was acknowledged before me this
February___________, 2002 by Maxine Clark, the duly authorized Officer of
BUILD-A-BEAR WORKSHOP, INC., a Delaware corporation, the managing member of
SHIRTS ILLUSTRATED, LLC, a Missouri limited liability company, on behalf of the
company.

                                             /s/ Marie A. Powers
                                             --------------------------------
                                             Notary Public

                                                       MARIE A. POWERS
                                                 NOTARY PUBLIC - NOTARY SEAL
                                                      STATE OF MISSOURI
                                                     ST. CHARLES COUNTY
                                             MY COMMISSION EXPIRES: MAY 24, 2003

                                      -29-

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