Document:

<PAGE>
                                                                    Exhibit 10.2

                      AMENDED AND RESTATED CREDIT AGREEMENT

                           Dated as of August 28, 2002

                                      among

                             CRESCENT JEWELERS INC.,
                               CRESCENT JEWELERS,
                                       and
                   CERTAIN OF THEIR SUBSIDIARIES PARTY HERETO,
                             as the Credit Parties,

                     THE LENDING INSTITUTIONS NAMED HEREIN,
                                 as the Lenders,

                      THE CIT GROUP/BUSINESS CREDIT, INC.,
                             as Documentation Agent

                                       and

                             BANK OF AMERICA, N.A.,
                             as Administrative Agent
<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                             <C>
ARTICLE 1  DEFINITIONS............................................................................................1
         Section 1.1  Definitions.................................................................................1
         Section 1.2  Accounting Terms...........................................................................31
         Section 1.3  Interpretive Provisions....................................................................31

ARTICLE 2  CREDIT FACILITIES.....................................................................................32
         Section 2.1  Commitments................................................................................32
         Section 2.2  Method of Borrowing........................................................................33
         Section 2.3  Interest...................................................................................34
         Section 2.4  Repayment..................................................................................34
         Section 2.5  Notes......................................................................................35
         Section 2.6  Additional Provisions Relating to Letters of Credit........................................35
         Section 2.7  Additional Provisions Relating to Revolving Loans..........................................40
         Section 2.8  Maximum Interest Rate......................................................................41

ARTICLE 3  OTHER PROVISIONS RELATING TO CREDIT FACILITIES........................................................42
         Section 3.1  Default Rate...............................................................................42
         Section 3.2  Continuation and Conversion................................................................43
         Section 3.3  Prepayments................................................................................43
         Section 3.4  Termination of Credit Facility.............................................................44
         Section 3.5  Fees.......................................................................................45
         Section 3.6  Taxes, Yield Protection, and Illegality....................................................46
         Section 3.7  Pro Rata Treatment.........................................................................50
         Section 3.8  Sharing of Payments........................................................................50
         Section 3.9  Certain Limitations........................................................................51
         Section 3.10  Payments, Computations, Etc...............................................................52
         Section 3.11  Evidence of Debt..........................................................................54
         Section 3.12  Bank Products.............................................................................54

ARTICLE 4  CONDITIONS............................................................................................55
         Section 4.1  Closing Conditions.........................................................................55
         Section 4.2  Conditions to all Extensions of Credit.....................................................58

ARTICLE 5  REPRESENTATIONS AND WARRANTIES........................................................................59
         Section 5.1  Financial Condition........................................................................59
         Section 5.2  No Changes or Restricted Payments..........................................................59
         Section 5.3  Organization; Existence; Compliance with Law...............................................60
         Section 5.4  Power; Authorization; Enforceable Obligations..............................................60
         Section 5.5  No Legal Bar...............................................................................61
         Section 5.6  No Material Litigation and Disputes........................................................61
         Section 5.7  No Defaults................................................................................61
         Section 5.8  Ownership and Operation of Property........................................................61
         Section 5.9  Intellectual Property......................................................................61
</TABLE>

                                       i
<PAGE>
<TABLE>
<S>                                                                                                             <C>
         Section 5.10  No Burdensome Restrictions................................................................62
         Section 5.11  Taxes.....................................................................................62
         Section 5.12  ERISA.....................................................................................62
         Section 5.13  Use of Proceeds; Governmental Regulations, Etc............................................63
         Section 5.14  Subsidiaries..............................................................................64
         Section 5.15  Purpose of Extensions of Credit...........................................................64
         Section 5.16  Environmental Matters.....................................................................64
         Section 5.17  No Material Misstatements.................................................................65
         Section 5.18  Labor Matters.............................................................................65
         Section 5.19  Security Documents........................................................................66
         Section 5.20  Location of Real Property and Leased Premises.............................................67
         Section 5.21  Solvency..................................................................................67
         Section 5.22  Friedman's Subordinated Debt Documents....................................................67
         Section 5.23  Bank Accounts; Merchant Accounts..........................................................67

ARTICLE 6  AFFIRMATIVE COVENANTS.................................................................................67
         Section 6.1  Information Covenants......................................................................68
         Section 6.2  Preservation of Existence and Franchises...................................................72
         Section 6.3  Books and Records..........................................................................72
         Section 6.4  Compliance with Law........................................................................72
         Section 6.5  Payment of Taxes and Other Indebtedness....................................................72
         Section 6.6  Insurance..................................................................................72
         Section 6.7  Maintenance of Property....................................................................73
         Section 6.8  Performance of Obligations.................................................................73
         Section 6.9  Use of Proceeds............................................................................73
         Section 6.10  Audits/Inspections........................................................................73
         Section 6.11  Financial Covenants.......................................................................74
         Section 6.12  New Subsidiaries; Addition of Subsidiaries as Borrowers and Guarantors....................75
         Section 6.13  Guaranties of the Obligations.............................................................75
         Section 6.14  Additional Collateral; Further Assurances.................................................75
         Section 6.15  Landlord and Mortgagee Agreements.........................................................76
         Section 6.16  Bank as Depository........................................................................76
         Section 6.17  Interest Rate Protection..................................................................77

ARTICLE 7  NEGATIVE COVENANTS....................................................................................77
         Section 7.1  Indebtedness...............................................................................77
         Section 7.2  Liens......................................................................................78
         Section 7.3  Nature of Business.........................................................................78
         Section 7.4  Merger and Consolidation, Dissolution, and Acquisitions....................................78
         Section 7.5  Asset Dispositions.........................................................................79
         Section 7.6  Investments................................................................................80
         Section 7.7  Restricted Payments........................................................................80
         Section 7.8  Modifications and Payments in Respect of Other Funded Debt.................................80
         Section 7.9  Transactions with Affiliates...............................................................80
         Section 7.10  Fiscal Year; Organizational Documents.....................................................81
</TABLE>

                                       ii
<PAGE>
<TABLE>
<S>                                                                                                             <C>
         Section 7.11  Ownership of Subsidiaries; Limitations on Parent..........................................81
         Section 7.12  No Further Negative Pledges...............................................................81
         Section 7.13  Limitation on Management Fees.............................................................81
         Section 7.14  Limitation on Foreign Subsidiaries........................................................82
         Section 7.15  Inventory Classification..................................................................82

ARTICLE 8  EVENTS OF DEFAULT.....................................................................................82
         Section 8.1  Events of Default..........................................................................82
         Section 8.2  Acceleration; Remedies.....................................................................84

ARTICLE 9  AGENCY PROVISIONS.....................................................................................85
         Section 9.1  Appointment and Authorization..............................................................85
         Section 9.2  Delegation of Duties.......................................................................86
         Section 9.3  Liability of the Agent.....................................................................86
         Section 9.4  Reliance by the Agent......................................................................86
         Section 9.5  Notice of Default..........................................................................87
         Section 9.6  Credit Decision............................................................................87
         Section 9.7  Indemnification............................................................................87
         Section 9.8  The Agent in Individual Capacity...........................................................88
         Section 9.9  Successor Agent............................................................................88
         Section 9.10  Withholding Tax...........................................................................89
         Section 9.11  Collateral Matters........................................................................90
         Section 9.12  Restrictions on Actions by the Lenders; Sharing of Payments...............................91
         Section 9.13  Agency for Perfection; Appointment of Collateral Agent....................................92
         Section 9.14  Payments by the Agent to the Lenders......................................................92
         Section 9.15  Field Audit and Examination Reports; Disclaimer by the Lenders............................93
         Section 9.16  Relation Among the Lenders................................................................93
         Section 9.17  Settlement................................................................................93
         Section 9.18  Documentation Agent.......................................................................97

ARTICLE 10  MISCELLANEOUS........................................................................................97
         Section 10.1  Notices...................................................................................97
         Section 10.2  Right of Setoff...........................................................................97
         Section 10.3  Benefit of Agreement; Assignments.........................................................98
         Section 10.4  No Waiver; Remedies Cumulative...........................................................101
         Section 10.5  Expenses; Indemnification................................................................101
         Section 10.6  Amendments, Waivers, and Consents........................................................103
         Section 10.7  Counterparts.............................................................................105
         Section 10.8  Headings.................................................................................105
         Section 10.9  Survival.................................................................................105
         Section 10.10  Governing Law; Choice of Forum; Service of Process......................................105
         Section 10.11  Waiver of Jury Trial....................................................................107
         Section 10.12  Severability............................................................................107
         Section 10.13  Entirety................................................................................108
         Section 10.14  Binding Effect; Termination.............................................................108
</TABLE>

                                       iii
<PAGE>
<TABLE>
<S>                                                                                                             <C>
         Section 10.15  Confidentiality.........................................................................108
         Section 10.16  Other Security and Guaranties...........................................................109
         Section 10.17  Agency of Crescent for Each Other Credit Party..........................................109
         Section 10.18  Joint and Several Liability.............................................................109
         Section 10.19  Contribution and Indemnification Among the Borrowers....................................110
         Section 10.20  Additional Borrowers and Guarantors.....................................................111
         Section 10.21  Express Waivers By the Credit Parties in Respect of Cross Guaranties
                           and Cross Collateralization..........................................................111
         Section 10.22  Conflict................................................................................114
         Section 10.23  Amendment and Restatement...............................................................115
</TABLE>

                                       iv
<PAGE>
<TABLE>
<CAPTION>
                                    SCHEDULES
<S>                        <C>
Schedule 1.1A              Existing Letters of Credit
Schedule 1.1B              Investments
Schedule 1.1C              Liens
Schedule 1.1D              Lenders and Commitments
Schedule 5.2               Changes and Restricted Payments
Schedule 5.6               Litigation
Schedule 5.9               Intellectual Property
Schedule 5.14              Subsidiaries
Schedule 5.18              Labor Matters
Schedule 5.20              Real Properties; Locations of Collateral; Chief Executive Offices/Principal    Places of Business
Schedule 5.23              Bank Accounts; Merchant Accounts
Schedule 6.6               Insurance
Schedule 7.1               Indebtedness
Schedule 7.9               Transactions with Affiliates
Schedule 10.1              Lenders' Addresses

                                    EXHIBITS

Exhibit A                  Form of Revolving Note
Exhibit B                  Form of Notice of Borrowing
Exhibit C                  Form of Notice of Continuation/Conversion
Exhibit D                  Form of Officer's Compliance Certificate
Exhibit E                  Form of Assignment and Acceptance
</TABLE>

                                       v
<PAGE>
                     AMENDED AND RESTATED CREDIT AGREEMENT

      THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 28, 2002
("Agreement"), is by and among the lending institutions from time to time
parties hereto (such lending institutions, together with their respective
successors and assigns, are referred to hereinafter each individually as a
"Lender" and collectively as the "Lenders"), The CIT Group/Business Credit,
Inc., as documentation agent, Bank of America, N.A., as administrative agent for
the Lenders (in its capacity as the administrative agent, the "Agent"), Crescent
Jewelers Inc., a Delaware corporation, and Crescent Jewelers, a California
corporation, and each of its Subsidiaries party hereto.

                                    RECITALS:

      A. Capitalized terms used in this Agreement shall have the meanings
specified in Article 1.

      B. Crescent, the Parent, Bank of America, N.A., and certain other lending
institutions are party to that certain Credit Agreement dated as of September
15, 1999 (as amended, the "Original Credit Agreement") whereby certain credit
facilities were made available to Crescent on the terms and conditions set forth
therein.

      C. The Borrowers have requested that the Original Credit Agreement be
amended and restated to make available to the Borrowers a revolving credit
facility for loans and letters of credit in the aggregate principal amount of
$50,000,000, which extensions of credit the Borrowers will use for the purposes
permitted pursuant to Section 6.9, and to amend certain other provisions as set
forth herein.

      D. The Lenders have agreed to amend and restate the Original Credit
Agreement and make available to the Borrowers a revolving credit facility upon
the terms and conditions set forth in this Agreement.

      NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                                   ARTICLE 1

                                   DEFINITIONS

      Section 1.1 Definitions.

      As used in this Agreement, the following terms shall have the meanings
specified below:

      "ACH Transactions" means any cash management or related services
including, without limitation, the automated clearinghouse transfer of funds by
Bank of America for the account of any Borrower pursuant to agreement or
overdrafts.

                                     Page 1
<PAGE>
      "Acquisition" means the purchase or acquisition by any Person of any
Capital Stock of another Person or all or any substantial portion of the
Property (other than Capital Stock) of another Person, whether or not involving
a merger or consolidation with such other Person.

      "Adjusted Base Rate" means the Base Rate plus the Applicable Percentage.

      "Adjusted Eurodollar Rate" means the Eurodollar Rate plus the Applicable
Percentage.

      "Adjusted Net Earnings from Operations" means, for the Consolidated Group
for any period, the net income after provision for income taxes for such period,
as determined in accordance with GAAP and reported on the financial statements
of the Consolidated Group, excluding any and all of the following included in
such net income: (a) gain or loss arising from the sale of any capital assets;
(b) gain arising from any write-up in the book value of any asset; (c) earnings
of any Person, substantially all the assets of which have been acquired by a
member of Consolidated Group in any manner, to the extent realized by such other
Person prior to the date of acquisition; (d) earnings of any Person (excluding a
member of the Consolidated Group) in which a member of the Consolidated Group
has an ownership interest unless (and only to the extent) such earnings shall
actually have been received by a member of the Consolidated Group in the form of
cash distributions; (e) earnings of any Person to which assets of a member of
the Consolidated Group shall have been sold, transferred, or disposed of, or
into which a member of the Consolidated Group shall have been merged, or which
has been a party with a member of the Consolidated Group to any consolidation or
other form of reorganization, prior to the date of such transaction; (f) gain
arising from the acquisition of debt or equity securities of a member of the
Consolidated Group or from cancellation or forgiveness of Indebtedness; (g) gain
arising from extraordinary items, as determined in accordance with GAAP, or from
any other non-recurring transaction; and (h) non-cash expenses resulting from
the Parent reacquiring or otherwise taking back its Capital Stock in connection
with the forgiveness of Indebtedness of the Parent existing on the Closing Date
of up to $1,000,000 in the aggregate during the term of this Agreement owing by
employees of the Borrowers in connection with purchases of Capital Stock by such
employees under the Crescent Jewelers Inc. 1992 Restricted Stock Purchase Plan.

      "Adjusted Tangible Net Worth" means, as of any date and determined in
accordance with GAAP, (a) total assets, minus (b) total liabilities, plus (c)
Subordinated Debt, minus, (d) intangible assets, minus (e) notes receivable from
Affiliates and Investments in Affiliates, minus (f) the aggregate amount of
Installment Contracts for which any portion of a payment is more than ninety
(90) days past due on a "contractual" basis.

      "Adjusted Tangible Net Worth Requirement" means as of the end of each
Fiscal Period of the Parent ending after the Closing Date, an amount equal to
the amount specified corresponding to the applicable Fiscal Period end in the
following table, respectively:

                                     Page 2
<PAGE>
<TABLE>
<CAPTION>
                                               Adjusted Tangible Net Worth
      Fiscal Period End                               Requirement

<S>                                          <C>
Each Fiscal Period ending after
the Closing Date through and                          $47,000,000
including June 28, 2003

Fiscal Period ending August 2,               $47,000,000, plus the cumulative
2003 and each Fiscal Period                  amount of all Adjusted Tangible
ending thereafter                            Net Worth Requirement Increases
</TABLE>

      "Adjusted Tangible Net Worth Requirement Increase" means an amount
determined for the Parent and its Subsidiaries on a consolidated basis as of the
end of any Fiscal Year, commencing with the Fiscal Year ending August 2, 2003,
equal to the sum of (a) fifty percent (50.0%) of the amount (not less than zero)
of Net Income for each Fiscal Year ending after the Closing Date, plus (b)
seventy-five percent (75.0%) of the net amount of all equity proceeds received
by any Credit Party after the Closing Date (other than equity proceeds received
from another Credit Party).

      "Administrative Agent's Fee Letter" means that certain letter agreement,
dated concurrently herewith, between the Agent and the Borrowers, as such letter
agreement may be amended, restated, or otherwise modified from time to time.

      "Affiliate" means, with respect to any Person (the "subject Person"), any
other Person (a) directly or indirectly controlling or controlled by or under
direct or indirect common control with the subject Person or (b) directly or
indirectly owning or holding ten percent (10.0%) or more of the Capital Stock of
the subject Person. For purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

      "Agent" has the meaning specified in the introductory paragraph of this
Agreement.

      "Agent-Related Persons" means the Agent, together with its Affiliates, and
the officers, directors, employees, counsel, representatives, agents, and
attorneys-in-fact of the Agent and its Affiliates.

      "Agents' Fee Letter" means that certain letter agreement, dated
concurrently herewith, among the Agent, CIT (in its capacity as the
documentation agent hereunder), and the Borrowers, as such letter agreement may
be amended, restated, or otherwise modified from time to time.

      "Aggregate Revolving Commitment Amount" means the aggregate amount of
Revolving Commitments in effect from time to time, such amount being fifty
million Dollars ($50,000,000) on the Closing Date.

                                     Page 3
<PAGE>
      "Agreement" has the meaning specified in the introductory paragraph and
includes, without limitation, all amendments, restatements, or other
modifications hereto from time to time.

      "Anniversary Date" means an anniversary of the Closing Date.

      "Applicable Lending Office" means, for each Lender, the office of such
Lender (or of an Affiliate of such Lender) as such Lender may from time to time
specify to the Agent and the Borrowers by written notice as the office by which
such Lender's Eurodollar Loans are made and maintained.

      "Applicable Percentage" means, as of the Closing Date,

            (a) with respect to Base Rate Loans and all other Obligations other
      than Eurodollar Loans, 0.25%,

            (b) with respect to Eurodollar Loans, 2.75%,

            (c) with respect to the Unused Line Fee, 0.375%, and

            (d) with respect to the Letter of Credit Fee, 2.75%,

in each case subject to adjustment from time to time thereafter to the
applicable percentage specified corresponding to the Fixed Charge Coverage Ratio
of the Consolidated Group as set forth below, respectively:

<TABLE>
<CAPTION>
              FIXED CHARGE COVERAGE RATIO           BASE RATE     EURODOLLAR     UNUSED LINE     LETTER OF
                                                      LOANS          LOANS           FEE         CREDIT FEE
<S>                                                 <C>           <C>            <C>             <C>
       Less than 1.10 to 1.00                         0.50%          3.00%          0.50%          3.00%

       Greater than or equal to 1.10 to 1.00          0.25%          2.75%          0.375%         2.75%
       but less than 1.25 to 1.00

       Greater than or equal to 1.25 to 1.00          0.00%          2.50%          0.375%         2.50%
       but less than 1.50 to 1.00

       Greater than or equal to 1.50 to 1.00          0.00%          2.25%          0.375%         2.25%
</TABLE>

For the purpose of determining any such adjustments to the Applicable
Percentage, the Fixed Charge Coverage Ratio shall be determined for the
immediately preceding four (4) Fiscal Quarters based upon the financial
statements of the Consolidated Group for each of the Consolidated Group's
respective Fiscal Quarters, beginning with the Fiscal Quarter ending August 2,
2003, delivered to the Agent and the Lenders as required by Section 6.1(a) (with
respect to the financial statements for the last Fiscal Quarters of each Fiscal
Year) or Section 6.1(b) (with respect to the financial statements for each of
the other Fiscal Quarters of each Fiscal Year), and any such adjustment, if any,
shall become effective prospectively on and

                                     Page 4
<PAGE>
after the first day of the calendar month which begins at least five (5) days
after the date of delivery of such financial statements to the Agent and the
Lenders. Concurrently with the delivery of such financial statements, the
Borrowers shall deliver to the Agent and the Lenders a certificate, signed by an
Executive Officer of Crescent or the treasurer or corporate controller, of
Crescent, setting forth in reasonable detail the basis for the continuance of,
or any change in, the Applicable Percentage. In the event the Borrowers fail to
timely deliver any such financial statements, in addition to any other remedy
provided for in this Agreement, the Applicable Percentage shall be deemed to be
equal to the highest level set forth in the preceding table, until the first day
of the first calendar month following the delivery of such financial statements
at which time the Applicable Percentage shall be determined, prospectively, in
accordance with the terms hereof. If a Default or Event of Default exists at the
time any reduction in the Applicable Percentage is to be implemented, such
reduction shall not occur until the first day of the first calendar month
following the date on which such Default or Event of Default is waived by the
requisite Lenders.

      "Asset Disposition" means (a) the sale, lease, or other disposition of any
Property by any member of the Consolidated Group (including the Capital Stock of
a Subsidiary but excluding Capital Stock of the Parent), and (b) receipt by any
member of the Consolidated Group of any cash insurance proceeds or condemnation
award payable by reason of theft, loss, physical destruction or damage, taking,
or similar event with respect to any of its Property. For purposes hereof "Asset
Disposition" shall not include, in any event, (v) the sale of inventory in the
ordinary course of business, (w) the sale, lease, or other disposition of
machinery and equipment which is obsolete or no longer used or useful in the
conduct of the Borrowers' business, (x) the sale or disposition of Investments
included in clause (a) of the definition of Permitted Investments, and (y) the
issuance of Capital Stock of a Subsidiary to any member of the Consolidated
Group or the issuance of Capital Stock of a Subsidiary pro rata to all of its
holders in a manner that does not dilute the ownership interest of the members
of the Consolidated Group therein.

      "Assignment and Acceptance" has the meaning specified in Section 10.3(b).

      "Bank of America" means Bank of America, N.A., and its successors.

      "Bank Product Reserves" means all reserves which the Agent from time to
time establishes in its sole discretion for the Bank Products then provided or
outstanding.

      "Bank Products" means any one or more of the following types of services
or facilities extended to any Credit Party by Bank of America or any Affiliate
of Bank of America in reliance on Bank of America's agreement to indemnify such
Affiliate: (a) credit cards; (b) ACH Transactions; (c) cash management,
including, without limitation, controlled disbursement services; and (d) Hedging
Agreements.

      "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
States Code, as amended, modified, succeeded, or replaced from time to time.

                                     Page 5
<PAGE>
      "Bankruptcy Event" means, with respect to any Person, the occurrence of
any of the following with respect to such Person: (a) a court or governmental
agency having jurisdiction shall enter a decree or order for relief in respect
of such Person in an involuntary case under any applicable bankruptcy,
insolvency, or other similar law now or hereafter in effect, or appoint a
receiver, liquidator, assignee, custodian, trustee, or sequestrator (or similar
official) of such Person or for any substantial part of its Property or order
the winding up or liquidation of its affairs; (b) there shall be commenced
against such Person an involuntary case under any applicable bankruptcy,
insolvency, or other similar law now or hereafter in effect, or any case,
proceeding or other action for the appointment of a receiver, liquidator,
assignee, custodian, trustee, or sequestrator (or similar official) of such
Person or for any substantial part of such Person's Property or for the winding
up or liquidation of its affairs, and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged, or unbonded
for a period of sixty (60) consecutive days; (c) such Person shall commence a
voluntary case under any applicable bankruptcy, insolvency, or other similar law
now or hereafter in effect, or consent to the entry of an order for relief in an
involuntary case under any such law, or consent to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee, or
sequestrator (or similar official) of such Person or for any substantial part of
its Property or make any general assignment for the benefit of creditors; or (d)
such Person shall be unable to, or shall admit in writing its inability to, pay
its debts generally as they become due.

      "Base Rate" means, for any day, the rate of interest in effect for such
day as publicly announced from time to time by Bank of America in Charlotte,
North Carolina as its "prime rate" (the "prime rate" being a rate set by the
Bank of America based upon various factors including Bank of America's costs and
desired return, general economic conditions, and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate). Any change in the prime rate announced by Bank of America
shall take effect at the opening of business on the day specified in the public
announcement of such change. Each interest rate based upon the Base Rate shall
be adjusted simultaneously with any change in the Base Rate

      "Base Rate Loan" means any Loan bearing interest at a rate determined by
reference to the Base Rate.

      "Borrower" means, separately and individually, any of Crescent and any
other Person who becomes a party to this Agreement as a "Borrower" pursuant to
the terms hereof, jointly, severally, and collectively, and "Borrowers" means
more than one or all of the foregoing Persons, jointly, severally, and
collectively, as the context requires.

      "Borrowing Base" means, as of any day, an amount equal to the sum of (a)
the Receivables Advance Rate multiplied by the Net Balance of the Borrowers'
Eligible Installment Contracts, plus (b) the lesser of (i) fifty percent (50.0%)
of the Borrowers' Eligible Inventory, (ii) eighty-five percent (85.0%) of the
Net Recovery Value of the Borrowers' inventory, or (iii) $25,000,000, minus (c)
Reserves.

      "Borrowing Base Certificate" has the meaning specified in Section 6.1(d).

                                     Page 6
<PAGE>
      "Business Day" means a day other than a Saturday, Sunday, or other day on
which commercial banks in Pasadena, California or Charlotte, North Carolina are
authorized or required by law to close, except that, when used in connection
with a Eurodollar Loan, such day shall also be a day on which dealings between
banks are carried on in Dollar deposits in London, England.

      "Businesses" has the meaning specified in Section 5.16(a).

      "Capital Adequacy Regulation" means any guideline, request, or directive
of any central bank or other Governmental Authority, or any other law, rule, or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.

      "Capital Expenditures" means all payments due (whether or not paid during
any period) in respect of the cost of any fixed asset or improvement, or
replacement, substitution, or addition thereto, which has a useful life of more
than one year, including, without limitation, those costs arising in connection
with the direct or indirect acquisition of such asset by way of increased
product or service charges or in connection with a Capital Lease or Synthetic
Lease.

      "Capital Lease" means, as applied to any Person, any lease of any Property
by that Person as lessee which, in accordance with GAAP, is or should be
accounted for as a capital lease on the balance sheet of that Person.

      "Capital Stock" means (a) in the case of a corporation, capital stock, (b)
in the case of an association or business entity, any and all shares, interests,
participations, rights, or other equivalents (however designated) of capital
stock, (c) in the case of a partnership, partnership interests (whether general
or limited), (d) in the case of a limited liability company, membership
interests, and (e) any other units, rights, securities, equity interests,
participations, or equivalent evidences of ownership that confer on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.

      "Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than twelve (12) months from
the date of acquisition, (b) Dollar denominated time deposits and certificates
of deposit of (i) any Lender, (ii) any domestic commercial bank of recognized
standing having capital and surplus in excess of $500,000,000, or (iii) any bank
whose short-term commercial paper rating from Standard & Poor's Corporation
("S&P") is at least A-1 or the equivalent thereof or from Moody's Investor
Service, Inc. ("Moody's") is at least P-1 or the equivalent thereof (any such
bank being an "Approved Bank"), in each case with maturities of not more than
270 days from the date of acquisition, (c) commercial paper and variable or
fixed rate notes issued by a Lender or any Approved Bank (or by the parent
company thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or
P-1 (or the equivalent thereof) or better by Moody's and maturing within six (6)
months of the date of acquisition, (d) repurchase agreements entered into

                                     Page 7
<PAGE>
by any Person with a bank or trust company (including any of the Lenders) or
recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by the United
States in which such Person shall have a perfected first priority security
interest (subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the repurchase
obligations, and (e) Investments, classified in accordance with GAAP as current
assets, in money market investment programs registered under the Investment
Company Act of 1940, as amended, which are administered by reputable financial
institutions having capital of at least $500,000,000 and the portfolios of which
are limited to Investments of the character described in the foregoing clauses
(a) through (d).

      "Change of Control" means the occurrence of any of the following events:
(a) Phillip Ean Cohen shall fail to own and control, directly or indirectly,
Voting Stock of the Parent in an amount sufficient to elect a majority of the
Parent's board of directors, or (b) during any period of up to twelve (12)
consecutive months, commencing after the Closing Date, individuals who at the
beginning of such twelve (12) month period were directors of the Parent
(together with any new director whose election by the Parent's board of
directors or whose nomination for election by the Parent's stockholders was
approved by a vote of at least two-thirds of the directors then still in office
who either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors of the Parent then in office, or (c)
Crescent (except for the preferred stock issued to Friedman's pursuant to the
Friedman's Stock Sale), or any of its Subsidiaries, ceases to be a wholly-owned
Subsidiary of the Parent, excluding any such Subsidiary of Crescent which is the
subject of a transaction permitted by Section 7.4 or Section 7.5.

      "CIT" means The CIT Group/Business Credit, Inc., and its successors.

      "Closing Date" means the date of this Agreement.

      "Collateral" means a collective reference to the collateral which is
identified in, and at any time will be covered by, the Collateral Documents.

      "Collateral Adjustment Percent" means, calculated as of the last day of
each Fiscal Period, the sum of (a) the Past Due Percent, plus (b) the Net
Charge-off Percent.

      "Collateral Documents" means a collective reference to the Security
Agreements, the Mortgages (if any), and such other documents executed and
delivered in connection with the attachment and perfection of the Agent's Liens
arising thereunder, including, without limitation, UCC financing statements and
patent and trademark filings.

      "Commitment Period" means the period from and including the Closing Date
to but not including the earlier of (a) the Termination Date or (b) the date on
which the Commitments terminate in accordance with the provisions of this
Agreement.

                                     Page 8
<PAGE>
      "Commitments" means any of the Revolving Commitments and/or the LOC
Commitments.

      "Consolidated Group" means the Parent and its Subsidiaries (including,
without limitation, Crescent).

      "Consumer Protection Laws" means the Truth in Lending Act (and Regulation
Z promulgated thereunder), Equal Credit Opportunity Act, Fair Credit Reporting
Act, Fair Debt Collection Practices Act, Gramm-Leach-Bliley Financial Privacy
Act, anti-discrimination and fair lending laws and all other federal and state
laws, regulations, orders, directives, or similar requirements of any
Governmental Authority intended for the protection of consumers in connection
with the extension of consumer credit.

      "Continue", "Continuation", and "Continued" refer to the continuation
pursuant to Section 3.2 of a Eurodollar Loan from one Interest Period to the
next Interest Period.

      "Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any material agreement (including, without
limitation, the Friedman's Subordinated Debt Documents), instrument, or
undertaking to which such Person is a party or by which it or any of its
property is bound.

      "Convert", "Conversion", and "Converted" refer to a conversion pursuant to
Section 3.2 or Section 3.6 of a Base Rate Loan into a Eurodollar Loan or of a
Eurodollar Loan into a Base Rate Loan.

      "Credit Documents" means two or more of this Agreement, the Notes, the LOC
Documents (excluding any Letter of Credit), the Guaranty Agreements, the
Administrative Agent's Fee Letter, the Agents' Fee Letter, the Collateral
Documents, any agreement entered into in connection with any Bank Products, and
all other related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto (in each case as the same may be
amended, restated, or otherwise modified from time to time), and "Credit
Document" means any one of them.

      "Credit Parties" means, collectively, the Borrowers and the Guarantors,
and "Credit Party" means any one of such Persons.

      "Crescent" means Crescent Jewelers, a California corporation, and its
successors and assigns.

      "Default" means any event, act, or condition which with notice or lapse of
time, or both, would constitute an Event of Default.

      "Defaulting Lender" means, at any time, any Lender that (a) has failed to
make a Loan or purchase a Participation Interest required pursuant to the terms
of this Agreement within one Business Day of when due, (b) other than as set
forth in clause (a) preceding, has failed to pay to

                                     Page 9
<PAGE>
the Agent or any other Lender an amount owed by such Lender pursuant to the
terms of this Agreement within one Business Day of when due, unless such amount
is subject to a good faith dispute or discount, or (c) has been deemed insolvent
or has become subject to a bankruptcy or insolvency proceeding or with respect
to which (or with respect to any of the assets of which) a receiver, trustee, or
similar official has been appointed.

      "Designated Account" has the meaning set forth in Section 2.7(a).

      "Discretionary Over-Advances" has the meaning set forth in Section 2.1(a).

      "Dollars" and "$" means dollars in lawful currency of the United States.
Unless otherwise specified, all payments under this Agreement shall be made in
Dollars.

      "Domestic Credit Party" means any Credit Party which is incorporated or
organized under the laws of any state of the United States or the District of
Columbia.

      "Domestic Subsidiary" means any Subsidiary which is incorporated or
organized under the laws of any state of the United States or the District of
Columbia.

      "EBITDA" means, for any period, the sum of (a) Adjusted Net Earnings from
Operations, plus (b) to the extent deducted in determining Adjusted Net Earnings
from Operations, (i) Interest Expense, plus (ii) taxes, plus (iii) depreciation
and amortization, in each case on a consolidated basis determined in accordance
with GAAP.

      "Eligible Assignee" means (a) a Lender, (b) an Affiliate of a Lender, (c)
a commercial bank, commercial finance company, or other asset based lender
having total assets in excess of $1,000,000,000, and (d) any other Person
reasonably acceptable to the Agent and, if no Default or Event of Default
exists, the Borrowers; provided, however, that no Borrower nor an Affiliate of
any Borrower shall qualify as an Eligible Assignee.

      "Eligible Installment Contracts" means, for each Borrower as of any date
of determination and without duplication, those Installment Contracts which the
Agent, in its reasonable discretion, determines are eligible, but excluding,
without limiting the Agent's discretionary rights (a) any Installment Contract
which is (i) not subject to a perfected, first priority (subject to incohate
Liens for government charges or assessments not yet due) Lien in favor of the
Agent to secure the Total Obligations, (ii) subject to any other Lien that is
not a Permitted Lien, or (iii) evidences a transaction not in compliance with
any Requirement of Law, (b) any Installment Contract for which payment
thereunder is doubtful or is determined to be uncollectible (including, without
limitation, any Installment Contract under which any payment is more than sixty
(60) days past due on a "contractual" basis), (c) any Installment Contract which
is modified or rewritten, (d) any Installment Contract with a term of more than
twenty-four (24) months, (e) any Installment Contract for which the obligations
of the debtor thereunder are evidenced by a note, chattel paper, or other
instrument, unless the covenants set forth in the Security Agreement applicable
to such note, chattel paper, or instrument have been complied with, (f) any
Installment Contract for which the debtor thereunder is not solvent or is
subject to

                                    Page 10
<PAGE>
any bankruptcy or insolvency proceeding of any kind or which has died or been
declared judicially incompetent, (g) any Installment Contract for which the
debtor thereunder is located outside of the United States (unless payment for
the goods shipped is secured by an irrevocable letter of credit in form and
substance and from an institution acceptable to the Agent and with respect to
which the letter-of-credit rights (as defined in the UCC) have been assigned to
the Agent pursuant to documents in form and substance acceptable to the Agent),
(h) any Installment Contract which is contingent or which is subject to offset,
discount, or deduction (in each case to the extent of such offset, discount, or
deduction) or which is subject to any counterclaim, dispute, or other defense to
payment, (i) any Installment Contract under which any Subsidiary, employee, or
Affiliate of a Borrower is the debtor, (j) any Installment Contract representing
a sale to the government of the United States or any subdivision thereof unless
the Federal Assignment of Claims Act (or other similar Requirement of Law) has
been complied with to the satisfaction of the Agent with respect to such
Installment Contract, (k) any Installment Contract with respect to which any of
the representations, warranties, covenants, and agreements contained in the
Credit Documents are not or have ceased to be complete and correct or have been
breached, (l) any Installment Contract which represents a sale on a
bill-and-hold, guaranteed sale, sale and return, sale on approval, consignment,
or other repurchase or return basis, (m) any Installment Contract arising from a
transaction which does not conform to the credit criteria of a Borrower in
effect at the time such Installment Contract is entered into, (n) any
Installment Contract owing from a debtor the Agent reasonably determines is not
creditworthy, (o) any Installment Contract under which the initial payment is
more than forty-five (45) days from the original date of sale, (p) any
Installment Contract under which the merchandise purchased by the debtor has
been repossessed or a Borrower has demanded return of such merchandise, (q) any
Installment Contract arising in a transaction in which the goods covered thereby
have not been delivered, (r) the portion of any sales tax included in any
Installment Contract, (s) any Installment Contract which has payment terms which
are not fully amortizing within twenty-four (24) months after the date of sale
with respect thereto, and (t) any Installment Contract which fails to meet such
other specifications and requirements as may from time to time be established by
the Agent in its reasonable discretion.

      "Eligible Inventory" means, for each Borrower as of any date of
determination and without duplication, the lower of the aggregate book value
(based on a FIFO or a moving average cost valuation, consistently applied) or
fair market value of finished goods inventory owned by such Borrower, less
reserves against inventory shrinkage as are reasonably satisfactory to the Agent
and other appropriate reserves determined in accordance with GAAP. Without
limiting the foregoing, Eligible Inventory excludes any event (a) inventory
which is (i) not subject to a perfected, first priority (subject to inchoate
Liens for government charges or assessments not yet due) Lien in favor of the
Agent to secure the Total Obligations or (ii) subject to any other Lien that is
not a Permitted Lien, (b) inventory which is defective, obsolete, or not in good
or merchantable condition or fails to meet standards for sale or use imposed by
governmental agencies, departments, or divisions having regulatory authority
over such goods, (c) inventory which is not useable or salable at prices
approximating its cost in the ordinary course of the business (including,
without duplication, the amount of any reserves for obsolescence, unsalability,
or decline in value), (d) inventory located outside of the United States or in
transit (other than between locations operated by the Borrowers), (e) inventory
which is leased or on consignment, (f) inventory that has been returned to a
Borrower, unless such inventory meets all

                                    Page 11
<PAGE>
of the other requirements of eligibility contained herein, or repossessed by a
Borrower, (g) inventory that is located in a public warehouse or in possession
of a bailee or in a facility (other than a retail store operated by a Borrower)
leased by a Borrower if the applicable warehouseman, bailee, or lessor has not
delivered to the Agent, if requested by the Agent, a subordination or waiver
agreement, in form and substance satisfactory to the Agent, (h) inventory that
is not finished goods or is raw materials, work-in-process, chemicals, samples,
prototypes, supplies, or packing and shipping materials, (i) inventory that is
subject to a third party's trademark or other proprietary right, unless the
Agent is satisfied that it could sell such inventory on satisfactory terms
during the existence of an Event of Default, (j) inventory which is to be
returned to any vendor, (k) any capitalized costs included in inventory, and (l)
inventory which fails to meet such other specifications and requirements as may
from time to time be established by the Agent in its reasonable discretion.

      "Environmental Laws" means any and all lawful and applicable federal,
state, local, and foreign, statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises, licenses,
agreements, and other governmental restrictions relating to the environment or
to emissions, discharges, releases, or threatened releases of Materials of
Environmental Concern into the environment including, without limitation,
ambient air, surface water, ground water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of Materials of Environmental Concern.

      "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute thereto, as interpreted by the rules and
regulations thereunder, all as the same may be in effect from time to time.
References to sections of ERISA shall be construed also to refer to any
successor sections.

      "ERISA Affiliate" means an entity which is under common control with any
member of the Consolidated Group within the meaning of Section 4001(a)(14) of
ERISA, or is a member of a group which includes any member of the Consolidated
Group and which is treated as a single employer under Sections 414(b) or (c) of
the Internal Revenue Code.

      "ERISA Affiliate Plan" means any employee benefit plan (as defined in
Section 3(3) of ERISA) which is covered by ERISA and with respect to which any
ERISA Affiliate that is not a member of the Consolidated Group is (or, if such
plan were terminated at such time, would under Section 4069 of ERISA be deemed
to be) an "employer" within the meaning of Section 3(5) of ERISA.

      "ERISA Event" means (a) with respect to any Plan, the occurrence of a
Reportable Event or the substantial cessation of operations (within the meaning
of Section 4062(e) of ERISA), (b) the withdrawal by any member of the
Consolidated Group from a Multiple Employer Plan during a plan year in which it
was a substantial employer (as such term is defined in Section 4001(a)(2) of
ERISA), or the termination of a Multiple Employer Plan, (c) the distribution of
a notice of intent to terminate or the actual termination of a Plan pursuant to
Section 4041(a)(2) or 4041A of ERISA, (d) the institution of proceedings to
terminate or the actual termination of a Plan by the PBGC under Section 4042 of
ERISA, (e) any event or condition which might

                                    Page 12
<PAGE>
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, (f) the complete or partial
withdrawal of any member of the Consolidated Group from a Multiemployer Plan,
(g) the conditions for imposition of a lien under Section 302(f) of ERISA exist
with respect to any Plan, or (h) the adoption of an amendment to any Plan
requiring the provision of security to such Plan pursuant to Section 307 of
ERISA.

      "Eurodollar Loan" means any Loan that bears interest at a rate based upon
the Eurodollar Rate.

      "Eurodollar Rate" means, for any Interest Period, with respect to
Eurodollar Loans, the rate of interest per annum determined pursuant to the
following formula:
                                              Offshore Base Rate
            Eurodollar Rate    =    --------------------------------------
                                     1.00 - Eurodollar Reserve Percentage

            Where,

            "Eurodollar Reserve Percentage" means, for any day during any
            Interest Period, the reserve percentage (expressed as a decimal,
            rounded upward to the next 1/100th of 1.00%) in effect on such day
            applicable to member banks under regulations issued from time to
            time by the Federal Reserve Board for determining the maximum
            reserve requirement (including any emergency, supplemental, or other
            marginal reserve requirement) with respect to Eurocurrency funding
            (currently referred to as "Eurocurrency liabilities"). The
            Eurodollar Rate for each outstanding Eurodollar Loan shall be
            adjusted automatically as of the effective date of any change in the
            Eurodollar Reserve Percentage.

            "Offshore Base Rate" means the rate per annum appearing on Telerate
            Page 3750 (or any successor page) as the London interbank offered
            rate for deposits in Dollars at approximately 11:00 a.m. (London
            time) two Business Days prior to the first day of such Interest
            Period for a term comparable to such Interest Period. If for any
            reason such rate is not available, the Offshore Base Rate shall be,
            for any Interest Period, the rate per annum appearing on Reuters
            Screen LIBO Page as the London interbank offered rate for deposits
            in Dollars at approximately 11:00 a.m. (London time) two Business
            Days prior to the first day of such Interest Period for a term
            comparable to such Interest Period; provided, however, if more than
            one rate is specified on Reuters Screen LIBO Page, the applicable
            rate shall be the arithmetic mean of all such rates. If for any
            reason none of the foregoing rates is available, the Offshore Base
            Rate shall be, for any Interest Period, the rate per annum
            determined by the Agent as the rate of interest at which Dollar
            deposits in the approximate amount of the Eurodollar Loan comprising
            part of such borrowing would be offered by Bank of America's London
            Branch to major banks in the offshore Dollar market at their request
            at or about 11:00 a.m. (London time) two Business Days prior to the
            first day of such Interest Period for a term comparable to such
            Interest Period.

                                    Page 13
<PAGE>
      "Event of Default" has the meaning specified in Section 8.1.

      "Excluded Property" means, with respect to any member of the Consolidated
Group, including any Person that becomes a member of the Consolidated Group
after the Closing Date, any Property of such member of the Consolidated Group
which, subject to the terms of Section 7.12, is subject to a Lien of the type
described in clause (h) of the definition of "Permitted Liens" pursuant to
documents which prohibit such member of the Consolidated Group from granting any
other Liens in such Property.

      "Executive Officer" of any Person means any of the chief executive
officer, chief operating officer, president, chief accounting officer, and chief
financial officer of such Person.

      "Existing Letters of Credit" means the letters of credit identified on
Schedule 1.1A.

      "Extension of Credit" means, as to any Lender, the making of, or
participation in, a Loan by such Lender (including Continuations and Conversions
thereof) or the issuance or extension of, or participation in, a Letter of
Credit by such Lender.

      "Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1.00%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate charged to Bank of
America on such day on such transactions as determined by the Agent.

      "Federal Reserve Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.

      "Fees" means all fees payable by the Borrowers pursuant to Section 3.5.

      "Fiscal Period" means one of the three fiscal periods in a Fiscal Quarter,
each of which is approximately one calendar month in duration. There are twelve
(12) Fiscal Periods in each Fiscal Year.

      "Fiscal Quarter" means one of the four thirteen week, or if applicable
fourteen week, quarters in a Fiscal Year, with the first of such quarters
beginning on the first day of a Fiscal Year and ending on Saturday of the
thirteenth (or fourteenth, if applicable) week in such quarter.

                                    Page 14
<PAGE>
      "Fiscal Year" means, with respect to each member of the Consolidated
Group, the Fiscal Year for financial accounting purposes consisting of 52 or 53
weeks ending on the Saturday closest to July 31 of each year.

      "Fixed Charge Coverage Ratio" means, for any period, the ratio of EBITDA
divided by Fixed Charges.

      "Fixed Charges" means, for any period, the sum of (a) the cash portion of
Interest Expense for such period (including interest paid on the Friedman's
Subordinated Debt), plus (b) payments of Funded Debt (including the Friedman's
Subordinated Debt, mandatory commitment reductions, sinking fund payments,
payments in respect of the principal component of Capital Leases, Synthetic
Leases, and the like relating thereto) and the Indebtedness referred to in
paragraph 2 of Schedule 7.1 for such period other than payments of (i) principal
of the Loans and (ii) reimbursement obligations in respect of Letters of Credit,
plus (c) Capital Expenditures, minus any cash received (including the proceeds
of any insurance or condemnation award to the extent such proceeds are used to
purchase or acquire any fixed asset or improvement) upon the disposal of any
capital asset which is not applied to, (i) the repayment of any Indebtedness
other than the Loans or reimbursement obligations in respect of Letters of
Credit or (ii) payment of any fees, costs, and expenses of such disposal, plus
(d) Restricted Payments, plus (e) federal, state, local, and foreign income
taxes paid in cash, in each case determined in accordance with GAAP.

      "Foreign Subsidiary" means a Subsidiary which is not a Domestic
Subsidiary.

      "Friedman's" means Friedman's Inc., a Delaware corporation, and its
successors and assigns.

      "Friedman's Intercreditor Agreement" means that certain Subordination
Agreement, dated as of the Closing Date, among the Agent, Crescent, the Parent,
and Friedman's Inc., a Delaware corporation, as such agreement may be amended,
restated, or otherwise modified from time to time.

      "Friedman's Stock Sale" means the issuance or sale of Capital Stock of
Crescent to Friedman's, pursuant to the Stock Purchase Agreement, dated
concurrently herewith, among Friedman's and Crescent, as such agreement may be
amended, restated, or otherwise modified from time to time consistent with the
Friedman's Intercreditor Agreement.

      "Friedman's Subordinated Debt" means the Subordinated Debt owing by
Crescent to Friedman's, pursuant to the Friedman's Subordinated Debt Documents.

      "Friedman's Subordinated Debt Documents" means the Note Purchase Agreement
dated concurrently herewith, among Friedman's and Crescent and such other
agreements, certificates, documents, and instruments executed or delivered in
connection therewith, as such agreements, certificates, documents, and
instruments may be amended, restated, or otherwise modified from time to time
consistent with the Friedman's Intercreditor Agreement.

                                    Page 15
<PAGE>
      "Funded Debt" means, with respect to any Person (the "subject Person"),
without duplication, (a) all obligations of the subject Person for borrowed
money (other than, to the extent it may be included herein, trade debt incurred
in the ordinary course of business), (b) all obligations of the subject Person
evidenced by bonds, debentures, notes, or similar instruments, or upon which
interest payments are customarily made (other than, to the extent it may be
included herein, trade debt incurred in the ordinary course of business), (c)
all purchase money Indebtedness (including for purposes hereof, indebtedness and
obligations in respect of conditional sale or title retention arrangements
relating to Property purchased (other than customary reservations of title under
agreements with suppliers entered into in the ordinary course of business,
including, without limitation, the consignment of inventory and all obligations
issued or assumed as the deferred purchase price of Property or services
purchased) excluding trade debt incurred in the ordinary course of business,
which would appear as liabilities on a balance sheet) of the subject Person,
including, without limitation, the principal portion of all obligations of the
subject Person outstanding under Capital Leases, (d) all Support Obligations of
the subject Person with respect to Funded Debt of another Person, (e) the
maximum available amount of all standby letters of credit issued or bankers'
acceptances facilities for the account of the subject Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed), (f) all
Funded Debt of another Person secured by a Lien on any Property of the subject
Person, whether or not such Funded Debt has been assumed by the subject Person,
provided that for purposes hereof the amount of such Funded Debt shall be
limited to the amount of such Funded Debt as to which there is recourse to the
subject Person or the fair market value of the property which is subject to the
Lien, if less, (g) the outstanding attributed principal amount under any
Securitization Transaction to which the subject Person is a party, (h) the
principal portion of obligations outstanding under Synthetic Leases under which
the subject Person is the lessee, and (i) the maximum amount of all contingent
obligations (including earn-out payments incurred in connection with
Acquisitions consummated prior to the Closing Date. The Funded Debt of the
subject Person shall include the Funded Debt of any partnership or joint venture
in which the subject Person is a general partner or joint venturer, but only to
the extent to which there is recourse to the subject Person for the payment of
such Funded Debt.

      "Funding Date" means any date on which any of the following occur: (a) a
borrowing hereunder consisting of Revolving Loans made on the same day by the
Lenders to the Borrowers, or any of them, or (b) by Bank of America in the case
of a borrowing funded by Non-Ratable Loans, or (c) by the Agent in the case of a
borrowing consisting of a Discretionary Over-Advance, or (d) the issuance of a
Letter of Credit hereunder.

      "GAAP" means generally accepted accounting principles in the United States
applied on a consistent basis and subject to the terms of Section 1.2.

      "Governmental Authority" means any nation or government, any state,
province, municipality, or other political subdivision thereof, any central bank
(or similar monetary or regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory, or administrative functions of or
pertaining to the government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by and of the
foregoing,

                                    Page 16
<PAGE>
and any department, agency, board, commission tribunal, committee, or
instrumentality of any of the foregoing.

      "Gross Installment Contract Payments" means, as of any date of
determination with respect to each Installment Contract, the outstanding balance
thereof including all unearned interest, premiums for insurance and product
warranties, and other fees and charges, whether earned or unearned, owing by the
debtor thereunder.

      "Guarantors" means the Parent and each other Person which may hereafter
become a Guarantor by execution of a guaranty agreement reasonably acceptable to
the Agent, together with their successors and assigns, and "Guarantor" means any
one of such Persons.

      "Guaranty Agreement" means any agreement executed and delivered by a
Credit Party which guarantees the payment or performance of the Total
Obligations, and "Guaranty Agreements" means two or more of such agreements,
collectively, as any such agreement may be amended, restated, or otherwise
modified from time to time.

      "Hedging Agreement" means an interest rate protection agreement or foreign
currency exchange agreement, as such agreement may be amended, restated, or
otherwise modified from time to time.

      "Indebtedness" means, with respect to any Person (the "subject Person"),
without duplication, (a) all Funded Debt of the subject Person, (b) all
obligations of such Person under take-or-pay or similar arrangements or under
commodities agreements, (c) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on, or payable out of the proceeds of production
from, Property owned or acquired, whether or not the obligations secured thereby
have been assumed, (d) all Support Obligations with respect to Indebtedness of
another Person, (e) all obligations under Hedging Agreements, (f) all preferred
Capital Stock which by the terms thereof could be (at the request of the holders
thereof or otherwise) subject to mandatory sinking fund payments, redemption, or
other acceleration (other than as a result of a Change of Control or an Asset
Disposition that does not in fact result in a redemption of such preferred
Capital Stock) at any time during the term of this Agreement, and (g) the
Indebtedness of any partnership or unincorporated joint venture in which such
Person is a general partner or a joint venturer.

      "Indemnified Liabilities" has the meaning specified in Section 10.5.

      "Installment Contract" means any loan agreement, installment sale
contract, or other form of instrument or document evidencing obligations owing
by a retail purchaser to a Borrower with respect to financial accommodations
provided by such Borrower to such purchaser in connection with a sale of
merchandise to such purchaser.

      "Intellectual Property" has the meaning specified in Section 5.9.

                                    Page 17
<PAGE>
      "Interest Expense" means, for any period, interest expense determined in
accordance with GAAP on a consolidated basis and including the amortization of
debt discount and premium, the interest component of Capital Leases and
Synthetic Leases and the implied interest component under Securitization
Transactions.

      "Interest Payment Date" means (a) as to any Base Rate Loan, the last day
of each calendar month and the Termination Date and (b) as to any Eurodollar
Loan, (i) the last day of each Interest Period for such Loan or, with respect to
any Interest Period of greater than three (3) months in duration, the last day
of the third month, (ii) the date of repayment of principal of such Loan, and
(iii) the Termination Date. If an Interest Payment Date falls on a date which is
not a Business Day, such Interest Payment Date shall be deemed to be the next
succeeding Business Day.

      "Interest Period" means, with respect to any Eurodollar Loan, a period of
one, two, three, or six months duration, as a Borrower may elect, commencing in
each case on the date of the borrowing (including Conversions, Continuations,
and renewals); provided, however, (a) if any Interest Period would end on a day
which is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day (except that if the next succeeding Business Day falls
in the next succeeding calendar month, then on the next preceding Business Day),
(b) no Interest Period shall extend beyond the Termination Date, and (c) if an
Interest Period begins on a day for which there is no numerically corresponding
day in the calendar month in which the Interest Period is to end, such Interest
Period shall end on the last day of such calendar month.

      "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute thereto, as interpreted by
the rules and regulations issued thereunder, in each case as in effect from time
to time. References to sections of the Internal Revenue Code shall be construed
also to refer to any successor sections.

      "Investment" in any Person means (a) the acquisition (whether for cash,
property, services, assumption of Indebtedness, securities, or otherwise) of
Capital Stock, bonds, notes, debentures, partnership, joint ventures, or other
ownership interests or other securities of such Person, (b) any deposit with, or
advance, loan, or other extension of credit to, such Person (other than deposits
made in connection with the purchase of equipment or other assets in the
ordinary course of business), or (c) any other capital contribution to or
investment in such Person, including, without limitation, any Support
Obligations (including any support for a letter of credit issued on behalf of
such Person) incurred for the benefit of such Person, but excluding any
Restricted Payment to such Person.

      "Issuing Lender" means Bank of America.

      "Lender" and "Lenders" have the meanings specified in the introductory
paragraph of this Agreement.

      "Letter of Credit" means any Existing Letter of Credit and any letter of
credit issued by the Issuing Lender for the account of a Borrower in accordance
with the terms of Section 2.1(b).

                                    Page 18
<PAGE>
      "Letter of Credit Fee" has the meaning specified in Section 3.5(b).

      "Leverage Ratio" means, as of any date and determined in accordance with
GAAP, the ratio of (a) total liabilities divided by (b) Adjusted Tangible Net
Worth.

      "Licenses" means all licenses, permits, and other grants of authority
obtained or required to be obtained from any Governmental Authority in
connection with the management or operation of the business of the members of
the Consolidated Group or the ownership, lease, license, or use of any Property
of the members of the Consolidated Group.

      "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, security interest, encumbrance, lien (statutory or otherwise),
preference, priority, or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed by a Person authorized to do so
under the UCC as adopted and in effect in the relevant jurisdiction or other
similar recording or notice statute, and any lease in the nature thereof).

      "Loan" or "Loans" means the Revolving Loans (including the Non-Ratable
Loans and the Discretionary Over-Advances) and the Base Rate Loans and
Eurodollar Loans comprising such Loans.

      "LOC Commitment" means the commitment of the Issuing Lender to issue, and
of the Lenders to participate in, Letters of Credit and LOC Obligations
hereunder.

      "LOC Committed Amount" means the maximum amount of LOC Obligations
hereunder, as specified in Section 2.1(b).

      "LOC Documents" means, with respect to any Letter of Credit, such Letter
of Credit, any amendments thereto, any documents delivered in connection
therewith, any application therefor, and any agreements, instruments,
guarantees, or other documents (whether general in application or applicable
only to such Letter of Credit) governing or providing for (a) the rights and
obligations of the parties concerned or at risk or (b) any collateral security
for such obligations.

      "LOC Obligations" means, at any time, the sum of (a) the maximum amount
which is, or at any time thereafter may become, available to be drawn under
Letters of Credit then outstanding, assuming compliance with all requirements
for drawings referred to in such Letters of Credit plus (b) the aggregate amount
of all drawings under Letters of Credit honored by the Issuing Lender but not
reimbursed by the Borrowers.

      "Margin Stock" means "margin stock" or any "margin security" as defined in
Regulation T, Regulation U, and Regulation X.

      "Material Adverse Effect" means a material adverse effect on (a) the
condition (financial or otherwise), operations, business, assets, or liabilities
of the Consolidated Group taken as a

                                    Page 19
<PAGE>
whole, (b) the ability of any Credit Party or other party thereto to perform any
material obligation under the Credit Documents to which it is a party, or (c)
the material rights and remedies of the Agent and the Lenders under the Credit
Documents.

      "Materials of Environmental Concern" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Laws, including, without limitation, asbestos,
polychlorinated biphenyls, and urea-formaldehyde insulation.

      "Maximum Rate" means, at any time, the maximum rate of interest the
Lenders may lawfully contract for, charge, or receive in respect of the Total
Obligations as allowed by any Requirement of Law.

      "Merchant Account" means, in respect of a Credit Party, any account,
agreement or arrangement between such Credit Party and another Person pursuant
to which such other Person gives or makes available credit to such Credit Party
in respect of credit card transactions generated by such Person.

      "Merchant Account Agreement" means an agreement evidencing a Merchant
Account, and any renewal, extension, modification, amendment or restatement
thereof.

      "Mortgaged Property" means the Property which is the subject of a Mortgage
as referenced therein.

      "Mortgages" means those mortgages, deeds of trust, security deeds, or like
instruments given to the Agent, for the benefit of the Agent and the Lenders, to
secure the Total Obligations, as such agreements may be amended, restated, or
otherwise and modified from time to time.

      "Multiemployer Plan" means a Plan which is a "multiemployer plan" as
defined in Sections 3(37) or 4001(a)(3) of ERISA.

      "Multiple Employer Plan" means a Plan (other than a Multiemployer Plan)
which any member of the Consolidated Group or any ERISA Affiliate and at least
one employer other than the members of the Consolidated Group or any ERISA
Affiliate are contributing sponsors.

      "Net Balance" means, as of any date of determination, the Gross
Installment Contract Payments of an Installment Contract, less all unearned
interest, fees, and charges (including premiums for insurance and product
warranties) owing by the debtor thereunder.

      "Net Charge-off Percent" means the percent, calculated as of the last day
of each Fiscal Period, equal to (a) the aggregate amount of all Net Charge-offs
of the Borrowers during each of the six (6) Fiscal Periods immediately preceding
the date of calculation, multiplied by two (2), divided by (b) the sum of the
Net Balance owing under all Installment Contracts of the Borrowers outstanding
as of the last day of each such Fiscal Period, divided by six (6).

                                    Page 20
<PAGE>
      "Net Charge-offs" means, for any period, the aggregate amount of all
unpaid payments under Installment Contracts which have been charged-off by the
Borrowers during such period, as reduced by the amount of all cash recoveries
with respect to Installment Contracts which have been charged-off during
previous periods or such period.

      "Net Income" means, for any period, the net income of the Consolidated
Group determined on a consolidated basis in accordance with GAAP.

      "Net Recovery Value" means, with respect to any inventory, the net
recovery value thereof in an orderly liquidation net of all costs of liquidation
thereof, as reasonably determined by the Agent based upon a written appraisal
prepared by an experienced and reputable independent appraiser acceptable to the
Agent on a valuation basis, and in form and substance, satisfactory to the
Agent.

      "Non-Ratable Loan" and "Non-Ratable Loans" have the meanings specified in
Section 2.7(e).

      "Note" or "Notes" means any of the Revolving Notes.

      "Notice of Borrowing" means a written notice of borrowing, in
substantially the form of Exhibit B, as required by Section 2.2(a)(i).

      "Notice of Continuation/Conversion" means a written notice of Continuation
or Conversion, in substantially the form of Exhibit C, as required by Section
3.2.

      "Obligations" means, collectively, the Revolving Loans and the LOC
Obligations.

      "Operating Lease" means, as applied to any Person, any lease by such
Person as lessee (including, without limitation, leases which may be terminated
by the lessee at any time) of any Property which is not a Capital Lease.

      "Original Credit Agreement has the meaning specified in Recital B.

      "Other Taxes" means any present or future stamp or documentary taxes or
any other excise or property taxes, charges, or similar levies (excluding, in
the case of each Lender and the Agent, such taxes (including income taxes or
franchise taxes) as are imposed on or measured by each Lender's or the Agent's
net income) which arise from any payment made hereunder or from the execution,
delivery, or registration of, or otherwise with respect to, this Agreement or
any other Credit Documents.

      "Participant" means any commercial bank, financial institution, or other
Person not an Affiliate of the Credit Parties who shall have been granted the
right by any Lender to participate in the financing provided by such Lender
under this Agreement, and who shall have entered into a participation agreement
in form and substance satisfactory to such Lender.

                                    Page 21
<PAGE>
      "Parent" means Crescent Jewelers Inc., a Delaware corporation, and its
successors and assigns.

      "Participation Interest" means the purchase by a Lender of a participation
in LOC Obligations as provided in Section 2.6(b) and in Loans as provided in
Section 3.8.

      "Past Due Percent" means the percent, calculated as of the last day of
each Fiscal Period, equal to (a) the Gross Installment Contract Payments owing
under all Installment Contracts owing to the Borrowers (excluding Installment
Contracts which have been charged-off or for which the subject merchandise has
been repossessed or demanded to be returned) as to which any portion of an
installment due thereunder is thirty (30) days or more past due as determined on
a "contractual" basis as of the last day of each of the six (6) Fiscal Periods
immediately preceding the date of calculation, divided by (b) the Gross
Installment Contract Payments owing under all Installment Contracts (excluding
Installment Contracts which have been charged-off or for which the subject
merchandise has been repossessed or demanded to be returned) as of the last day
of each of the six (6) Fiscal Periods immediately preceding the date of
calculation.

      "PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA and any successor thereof.

      "Permitted Distributions" means (a) any Restricted Payment by a Credit
Party to a Borrower or by a Credit Party that is not a Borrower to another
Credit Party that is not a Borrower and (b) any payment with respect to
Crescent's Capital Stock issued pursuant to the Friedman's Stock Sale which is
permitted under the Friedman's Intercreditor Agreement.

      "Permitted Investments" means Investments which are (a) cash and Cash
Equivalents, (b) accounts receivable created, acquired, or made in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms, (c) Investments consisting of Capital Stock, obligations,
securities, or other Property received in settlement of accounts receivable
(created in the ordinary course of business) from bankrupt obligors, (d)
Investments existing as of the Closing Date and set forth in Schedule 1.1B, (e)
advances or loans to directors, officers, and employees in the ordinary course
of business for reasonable business expenses that do not exceed $500,000 in the
aggregate at any one time outstanding, (f) Investments by members of the
Consolidated Group in their Subsidiaries and Affiliates existing on the Closing
Date, (g) Investments by members of the Consolidated Group in and to Domestic
Credit Parties, and (h) other Investments of a nature not contemplated in
clauses (a) through (g) preceding in an amount not to exceed $500,000 in the
aggregate at any time outstanding.

      "Permitted Liens" means:

            (a) Liens in favor of the Agent to secure the Total Obligations;

            (b) Liens in favor of Bank of America or an Affiliate of Bank of
      America pursuant to a Hedging Agreement permitted hereunder, but only (i)
      to the extent such Liens secure obligations under such Hedging Agreement
      permitted under Section 7.1,

                                    Page 22
<PAGE>
      (ii) to the extent such Liens are on the same collateral as to which the
      Agent, for the benefit of the Agent and the Lenders, also has a Lien, and
      (iii) so long as the obligations under such Hedging Agreement and the
      indebtedness, liabilities, and obligations of the Credit Parties hereunder
      and under the other Credit Documents shall share pari passu in the
      collateral subject to such Liens;

            (c) Liens (other than Liens created or imposed under ERISA) for
      taxes, assessments, or governmental charges or levies not yet due or Liens
      for taxes being contested in good faith by appropriate proceedings for
      which adequate reserves determined in accordance with GAAP have been
      established (and as to which the Property subject to any such Lien is not
      yet subject to foreclosure, sale, or loss on account thereof);

            (d) statutory Liens of landlords and Liens of carriers,
      warehousemen, mechanics, and materialmen and other Liens imposed by law or
      pursuant to customary reservations or retentions of title arising in the
      ordinary course of business, provided that such Liens secure only amounts
      not yet due and payable or, if due and payable, are unfiled and no other
      action has been taken to enforce the same or are being contested in good
      faith by appropriate proceedings for which adequate reserves determined in
      accordance with GAAP have been established (and as to which the Property
      subject to any such Lien is not yet subject to foreclosure, sale, or loss
      on account thereof);

            (e) Liens (other than Liens created or imposed under ERISA) incurred
      or deposits made by any member of the Consolidated Group in the ordinary
      course of business in connection with workers' compensation, unemployment
      insurance, and other types of social security, or to secure the
      performance of tenders, statutory obligations, bids, leases, government
      contracts, performance and return-of-money bonds, and other similar
      obligations (exclusive of obligations for the payment of borrowed money);

            (f) Liens in connection with attachments or judgments (including
      judgment or appeal bonds) provided that the attachments or the judgments
      secured shall, within thirty (30) days after the entry thereof, have been
      discharged or execution thereof stayed pending appeal, or shall have been
      discharged within thirty (30) days after the expiration of any such stay;

            (g) easements, rights-of-way, restrictions (including zoning
      restrictions), minor defects or irregularities in title, and other similar
      charges or encumbrances not, in any material respect, impairing the use of
      the encumbered Property for its intended purposes;

            (h) Liens on Property of any Person securing purchase money
      Indebtedness (including Capital Leases and Synthetic Leases) of such
      Person to the extent permitted under Section 7.1(c), provided that any
      such Lien attaches only to the Property financed or leased and such Lien
      attaches concurrently with or within ninety (90) days after the
      acquisition thereof;

                                    Page 23
<PAGE>
            (i) leases or subleases granted to others not interfering in any
      material respect with the business of any member of the Consolidated
      Group;

            (j) any interest or title of a lessor under, and Liens arising from
      UCC financing statements (or equivalent filings, registrations, or
      agreements in foreign jurisdictions) relating to, leases not prohibited by
      this Agreement;

            (k) Liens in favor of customs and revenue authorities arising as a
      matter of law to secure payment of customs duties in connection with the
      importation of goods;

            (l) Liens deemed to exist in connection with Investments in
      repurchase agreements which constitute Permitted Investments;

            (m) normal and customary rights of setoff upon deposits of cash in
      favor of banks or other depository institutions;

            (n) Liens of a collection bank arising under Section 4-210 of the
      UCC on items in the course of collection;

            (o) Liens existing as of the Closing Date and set forth on Schedule
      1.1C; provided that no such Lien shall at any time be extended to or cover
      any Property other than the Property subject thereto on the Closing Date,
      and provided further, notwithstanding the foregoing, any such Lien which
      purports to cover proceeds of consigned goods described in clause (p)
      following shall not be a Permitted Lien after the expiration of forty-five
      (45) days after the Closing Date;

            (p) Liens on goods consigned to a Borrower in connection with
      consignment arrangements, provided, that such consignment arrangement is
      evidenced by a written agreement in form and substance satisfactory to the
      Agent and such Lien does not attach to proceeds of such goods.

            (q) extension, renewal, or replacement (or successive extensions,
      renewals, or replacements), in whole or in part, of Liens referred to in
      the foregoing clauses; provided that the Lien given in connection any such
      extension, renewal, or replacement shall be limited to the property
      securing the Lien prior to extension, renewal, or replacement and where
      such Lien secures Funded Debt, the Lien given in connection with such
      extension, renewal, or replacement shall not secure indebtedness in an
      amount exceeding the principal amount secured immediately prior to the
      extension, renewal, or replacement; and

            (r) Liens comprised of any exclusion or exception under any title
      insurance policy provided to the Agent in accordance with the Credit
      Documents (which policy shall be in form and content reasonably
      satisfactory to the Agent).

                                    Page 24
<PAGE>
      "Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other enterprise
(whether or not incorporated) or any Governmental Authority.

      "Plan" means any employee benefit plan (as defined in Section 3(3) of
ERISA) which is covered by ERISA and with respect to which any member of the
Consolidated Group or any ERISA Affiliate is (or, if such plan were terminated
at such time, would under Section 4069 of ERISA be deemed to be) an "employer"
within the meaning of Section 3(5) of ERISA.

      "Pro Forma Basis" means that, for purposes of determining compliance with
any provision of this Agreement, including the financial covenants set forth in
Section 6.11, on a "Pro Forma Basis", that any transaction shall be deemed to
have occurred as of the first day of the applicable measurement period ending as
of the most recent Fiscal Period end immediately preceding the date of such
transaction with respect to which the Agent has received the Required Financial
Information. As used herein, "transaction" means (a) any payment of investment
banking fees pursuant to Section 6.1(h), (b) any Asset Disposition allowed by
Section 7.5, and (c) any Restricted Payment allowed by Section 7.7. In
connection with any calculation of the financial covenants set forth in Section
6.11, upon giving effect to a transaction on a Pro Forma Basis (y) income
statement items (whether positive or negative) attributable to the Property
disposed of in such Asset Disposition shall be excluded and (z) any Indebtedness
which is retired in connection with such Asset Disposition shall be excluded and
deemed to have been retired as of the first day of the applicable period.

      "Pro Forma Compliance Certificate" means a certificate of an Executive
Officer of Crescent delivered to the Agent in connection with (a) any merger or
consolidation allowed by Section 7.4 and (b) any Asset Disposition allowed by
Section 7.5, as applicable, and containing reasonably detailed calculations,
upon giving effect to the applicable transaction on a Pro Forma Basis, of the
EBITDA as of the most recent Fiscal Period end preceding the date of the
applicable transaction with respect to which the Agent shall have received the
Required Financial Information.

      "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

      "Real Property" means, with respect to any member of the Consolidated
Group, any real property (wherever located) which (a) is owned or leased by such
member of the Consolidated Group and (b) is not Excluded Property.

      "Receivables Advance Rate" means fifty percent (50.0%); provided that the
Receivables Advance Rate shall be reduced by one percent (1.0%) for each whole
percentage that the Collateral Adjustment Percent for the Fiscal Period ending
immediately preceding the date of determination exceeds the percentage specified
in the table below corresponding to the applicable Fiscal Period ending
immediately prior to the date of determination:

                                    Page 25
<PAGE>
<TABLE>
<CAPTION>
                       Fiscal Period End                                    Percentage
<S>             <C>                                                         <C>
                Fiscal Period ending July 27,
                2002                                                          54.0%

                Fiscal Period ending August 24,
                2002                                                          58.0%

                Fiscal Period ending September
                28, 2002                                                      60.0%

                Fiscal Periods ending October 26,
                2002 and November 23, 2002                                    61.0%

                Fiscal Period ending December 28,
                2002                                                          58.0%

                Fiscal Period ending January 25,
                2003 and each Fiscal Period                                   47.0%
                ending thereafter
</TABLE>

      "Register" has the meaning specified in Section 10.3(g).

      "Regulation T" means Regulation T of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof.

      "Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof.

      "Regulation X" means Regulation X of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof.

      "Regulation Z" means Regulation Z of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor to all or a
portion thereof.

      "Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA, other than those events as to which the advance or thirty (30) day notice
requirement has been waived by regulation.

      "Required Financial Information" means the annual and periodic compliance
certificates and related financial statements and information required by the
provisions of Section 6.1(a), Section 6.1(b), and Section 6.1(c).

      "Required Lenders" means, at any time, Lenders having more than sixty-five
percent (65.0%) of the aggregate Commitments, or if the Commitments have been
terminated, Lenders having more than sixty-five percent (65.0%) of the aggregate
principal amount of the Obligations outstanding (taking into account in each
case Participation Interests or obligations to participate therein); provided
that the Commitments of, and outstanding principal amount of Obligations (taking
into account Participation Interests therein) owing to, a Defaulting Lender
shall be excluded for purposes hereof in making a determination of Required
Lenders.

                                    Page 26
<PAGE>
      "Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule, regulation, or ordinance (including, without
limitation, Consumer Protection Laws and Environmental Laws) or determination of
an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or to which any of its material
Property is subject.

      "Reserves" means reserves that limit the availability of credit hereunder,
consisting of reserves against borrowing availability established by the Agent
from time to time in the Agent's reasonable discretion as a result of negative
forecasts and/or trends in the Borrowers' business, industry, prospects,
profits, operations, or financial condition or other issues, circumstances or
facts that could reasonably be expected to negatively and materially impact the
Collateral or the Borrowers' business, prospects, profits, operations, industry,
financial condition, or assets. Without limiting the generality of the
foregoing, the following reserves shall be deemed to be a reasonable exercise of
the Agent's discretion: (a) Bank Product Reserves; (b) reserves for accrued,
unpaid interest on the Loans; (c) reserves for rent at leased locations; (d)
reserves for customs charges; (e) reserves for dilution of accounts; (f)
reserves for warehousemen's or bailees' charges; (g) reserves for taxes, fees,
assessments, and other governmental charges which are due and unpaid; (h)
reserves for accounts payable in excess of sixty (60) days past due, not in
excess of $5,000,000; and (i) reserves for accounts payable to any Person who
has any interest in the proceeds of the sale of any consigned goods sold by a
Borrower, notwithstanding that such interest may be a Permitted Lien hereunder.

      "Restricted Payment" means (a) any dividend or other payment or
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of any member of the Consolidated Group, now or hereafter
outstanding (including, without limitation, any payment in connection with any
dissolution, merger, consolidation, or disposition involving any member of the
Consolidated Group), or to the holders, in their capacity as such, of any shares
of any class of Capital Stock of any member of the Consolidated Group, now or
hereafter outstanding (other than dividends or distributions payable in the same
class of Capital Stock of the applicable Person or dividends or distributions
payable to any Borrower (directly or indirectly through Subsidiaries)), (b) any
redemption, retirement, sinking fund or similar payment, purchase, or other
acquisition for value, direct or indirect, of any shares of any class of Capital
Stock of any member of the Consolidated Group, including, without limitation,
any payment with respect to any Capital Stock issued pursuant to the Friedman's
Stock Sale, now or hereafter outstanding, and (c) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options, or other rights
to acquire shares of any class of Capital Stock of any member of the
Consolidated Group, now or hereafter outstanding.

      "Revolving Commitment" means the commitment of each Lender to make its
ratable share of Revolving Loans hereunder.

      "Revolving Commitment Percentage" means, for each Lender, a fraction
(expressed as a percentage) the numerator of which is the Revolving Committed
Amount of such Lender at such

                                    Page 27
<PAGE>
time and the denominator of which is the Aggregate Revolving Commitment Amount
at such time. The Revolving Commitment Percentages are specified in Schedule
1.1D, which may be amended by the Agent from time to time to reflect assignments
by one Lender to another Lender.

      "Revolving Committed Amount" means, individually, the maximum Revolving
Commitment of each Lender, and collectively, the aggregate maximum amount of all
the Revolving Commitments of the Lenders hereunder. The Revolving Committed
Amounts are specified in Schedule 1.1D, which may be amended by the Agent from
time to time to reflect assignments by one Lender to another Lender.

      "Revolving Loans" has the meaning specified in Section 2.1(a).

      "Revolving Note" or "Revolving Notes" means the promissory notes of the
Borrowers, in substantially the form attached as Exhibit A, in favor of each of
the Lenders evidencing the Revolving Loans, individually or collectively, as
appropriate, as each such promissory note may be amended, restated, or otherwise
modified from time to time.

      "Sale and Leaseback Transaction" means any arrangement pursuant to which
any member of the Consolidated Group, directly or indirectly, becomes liable as
lessee, guarantor, or other surety with respect to any lease, whether an
Operating Lease or a Capital Lease, of any Property (a) which such member of the
Consolidated Group has sold or transferred (or is to sell or transfer) to a
Person which is not a member of the Consolidated Group or (b) which such member
of the Consolidated Group intends to use for substantially the same purpose as
any other Property which has been sold or transferred (or is to be sold or
transferred) by such member of the Consolidated Group to another Person which is
not a member of the Consolidated Group in connection with such lease.

      "Securities Exchange Act" means the Securities Exchange Act of 1934 and
the regulations promulgated thereunder.

      "Securitization Transaction" means, with respect to any Person (the
"subject Person"), any financing transaction or series of financing transactions
that have been or may be entered into by the subject Person pursuant to which
the subject Person may sell, convey, grant a security interest in, or otherwise
transfer to a Subsidiary, Affiliate, or any other Person, any accounts
receivable, notes receivable, rights to future lease payments or residuals, or
other similar rights to payment (herein, the "Securitization Receivables")
(whether such Securitization Receivables are then existing or arising in the
future) of the subject Person, and any assets related thereto, including,
without limitation, all security interests in merchandise or services financed
thereby, the proceeds of such Securitization Receivables, and other assets which
are customarily sold or in respect of which security interests are customarily
granted in connection with securitization transactions involving such assets.

      "Security Agreement" means each Security Agreement, executed and delivered
by any Credit Party to secure the Total Obligations, as such agreement may be
amended, restated, or

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<PAGE>
otherwise modified from time to time, and "Security Agreements" means two or
more of such agreements, collectively.

      "Single Employer Plan" means any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.

      "Solvent" means, when used with respect to any Person, that at the time of
determination:

            (a) the assets of such Person, at a fair valuation, are in excess of
      the total amount of its debts (including contingent liabilities);

            (b) the present fair saleable value of its assets is greater than
      its probable liability on its existing debts as such debts become absolute
      and matured;

            (c) it is then able and expects to be able to pay its debts
      (including contingent debts and other commitments) as they mature; and

            (d) it has capital sufficient to carry on its business as conducted
      and as proposed to be conducted.

For purposes of determining whether a Person is Solvent, the amount of any
contingent liability shall be computed as the amount that, in light of all the
facts and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.

      "Subject Properties" has the meaning specified in Section 5.16(a).

      "Subordinated Debt" means any Indebtedness (including, without limitation,
the Friedman's Subordinated Debt) of a member of the Consolidated Group which by
its terms is expressly subordinated in right of payment to the prior payment of
the Total Obligations on the terms and conditions and evidenced by documentation
satisfactory to the Agent and the Required Lenders.

      "Subsidiary" means, with respect to any Person (the "subject Person") any
corporation, partnership, association, limited liability company, joint venture,
or other business entity of which more than fifty percent (50.0%) of the voting
Capital Stock or other Capital Stock, is owned or controlled directly or
indirectly by the subject Person, or one or more of the Subsidiaries of the
subject Person, or a combination thereof. Unless the context otherwise clearly
requires, "Subsidiary" or "Subsidiaries" shall refer to Subsidiaries of the
Parent.

      "Support Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in the
ordinary course of business of negotiable instruments for deposit or collection)
guaranteeing or intended to guarantee any Indebtedness of any other Person in
any manner, whether direct or indirect, and including, without limitation, any
obligation, whether or not contingent, (a) to purchase any such

                                    Page 29
<PAGE>
Indebtedness or any Property constituting security therefor, (b) to advance or
provide funds or other support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency, or other balance sheet
condition of such other Person (including, without limitation, keep well
agreements, maintenance agreements, comfort letters, or similar agreements or
arrangements) for the benefit of any holder of Indebtedness of such other
Person, (c) to lease or purchase Property, securities, or services primarily for
the purpose of assuring the holder of such Indebtedness, or (d) to otherwise
assure or hold harmless the holder of such Indebtedness against loss in respect
thereof. The amount of any Support Obligation hereunder shall be deemed to be an
amount equal to the outstanding principal amount (or maximum principal amount,
if larger) of the Indebtedness in respect of which such Support Obligation is
made.

      "Supporting Letter of Credit" has the meaning specified in Section 2.6(i).

      "Synthetic Lease" means any synthetic lease, tax retention operating
lease, off-balance sheet loan, or similar off-balance sheet financing product
where such transaction is considered borrowed money indebtedness for tax
purposes but is classified as an Operating Lease under GAAP.

      "Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges, or withholdings, and all liabilities with respect thereto,
excluding, in the case of the Agent and each Lender, such taxes (including
income taxes or franchise taxes) as are imposed on or measured by the Agent's or
such Lender's income in the jurisdiction (whether federal, state, or local and
including any political subdivision thereof) under the laws of which the Agent
or such Lender, as the case may be, is organized or maintains a lending office.

      "Termination Date" means August 28, 2005, or such later date as to which
the Agent, the Lenders, and the Borrowers may in their sole discretion by
written consent agree.

      "Total Obligations" means all present and future loans, advances,
liabilities, obligations, covenants, duties, and debts owing by the Borrowers
and the other Credit Parties, to the Agent and/or any Lender, arising under or
pursuant to this Agreement or any of the other Credit Documents, whether or not
evidenced by any note, or other instrument or document, whether arising from an
extension of credit, opening of a letter of credit, acceptance, loan, guaranty,
indemnification, or otherwise, whether direct or indirect, absolute or
contingent, due or to become due, primary or secondary, as principal or
guarantor, and including all principal, interest, charges, expenses, fees,
attorneys' fees, filing fees, and any other sums chargeable to any Credit Party
hereunder or under any of the other Credit Documents. "Total Obligations"
includes, without limitation, (a) all Obligations now or hereafter arising and
(b) all debts, liabilities, and obligations now or hereafter arising from or in
connection with Bank Products.

      "UCC" means the Uniform Commercial Code (or any successor statute), as in
effect from time to time, of the State of New York or of any other state the
laws of which are required as a result thereof to be applied in connection with
the issue of perfection of security interests; provided that to the extent that
the UCC is used to define any term herein or in any other Credit

                                    Page 30
<PAGE>
Document and such term is defined differently in different Articles or Divisions
of the UCC, the definition of such term contained in Article or Division 9 shall
govern.

      "United States" means the United States of America.

      "Unused Line Fee" has the meaning specified in Section 3.5(a).

      "Voting Stock" means, with respect to any Person, Capital Stock issued by
such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.

      "Wholly Owned Subsidiary" of any Person means any Subsidiary 100% of whose
Voting Stock is at the time owned by such Person directly or indirectly through
other Wholly Owned Subsidiaries.

      Section 1.2  Accounting Terms. Except as otherwise expressly provided
herein, all accounting terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Lenders hereunder shall be prepared, in accordance with GAAP
applied on a consistent basis. All calculations made for the purposes of
determining compliance with this Agreement shall (except as otherwise expressly
provided herein) be made by application of GAAP applied on a basis consistent
with the most recent annual or periodic financial statements of the Consolidated
Group delivered pursuant to Section 6.1 (or, prior to the delivery of the first
financial statements of the Consolidated Group pursuant to Section 6.1,
consistent with the annual audited financial statements referenced in Section
5.1(a)); provided, however, if (a) the Borrowers shall object to determining
such compliance on such basis at the time of delivery of such financial
statements due to any change in GAAP or the rules promulgated with respect
thereto or (b) the Agent or the Required Lenders shall so object in writing
within sixty (60) days after delivery of such financial statements, then such
calculations shall be made on a basis consistent with the most recent financial
statements delivered by the Borrowers to the Lenders as to which no such
objection shall have been made.

      Section 1.3  Interpretive Provisions. Wherever used in this Agreement:

            (a) The meanings of defined terms are equally applicable to the
      singular and plural forms of the defined terms. Terms used herein that are
      defined in the UCC and are not otherwise defined herein shall have the
      meanings specified therefor in the UCC.

            (b) The words "hereof," "herein," "hereunder," and similar words
      refer to this Agreement as a whole and not to any particular provision of
      this Agreement. Section, Subsection, Schedule, and Exhibit references are
      to this Agreement unless otherwise specified. The term "documents"
      includes any and all instruments, documents, agreements, certificates,
      indentures, notices, and other writings, however evidenced. The term
      "including" is not limiting and means "including, without limitation." In
      the computation of periods of time from a specified date to a later
      specified date, the word "from" means "from and including," the words "to"
      and "until" each mean "to but

                                    Page 31
<PAGE>
      excluding" and the word "through" means "to and including." The word "or"
      is not exclusive.

            (c) Unless otherwise expressly provided herein, (i) references to
      agreements (including this Agreement) and other contractual instruments
      shall be deemed to include all subsequent amendments, restatements, and
      other modifications thereto, but only to the extent such amendments,
      restatements, and other modifications are not prohibited by the terms of
      any Credit Document, and (ii) references to any statute or regulation are
      to be construed as including all statutory and regulatory provisions
      consolidating, amending, replacing, supplementing, or interpreting the
      statute or regulation.

            (d) This Agreement and the other Credit Documents may use several
      different limitations, tests, or measurements to regulate the same or
      similar matters. All such limitations, tests, and measurements are
      cumulative and shall each be performed in accordance with their terms.

            (e) For purposes of Section 8.1, a breach of a financial covenant
      contained in Section 6.11 shall be deemed to have occurred as of any date
      of determination thereof by the Agent or as of the last day of any
      specified measuring period, regardless of when the Financial Statements
      reflecting such breach are delivered to the Agent and the Lenders.

            (f) This Agreement and the other Credit Documents are the result of
      negotiations among and have been reviewed by counsel to the Agent, each
      Lender, and the Credit Parties and are the products of all parties.
      Accordingly, this Agreement and the other Credit Documents shall not be
      construed against the Agent, the Lender, or the Credit Parties merely
      because of their respective involvement in their preparation.

                                   ARTICLE 2

                                CREDIT FACILITIES

      Section 2.1  Commitments.

      (a) Revolving Commitment. During the Commitment Period, subject to the
terms and conditions hereof, each Lender severally agrees to make revolving
loans (the "Revolving Loans"; such Revolving Loans to include Non-Ratable Loans
made by Bank of America pursuant to Section 2.7(e)) to the Borrowers in the
amount of such Lender's Revolving Commitment Percentage of such Revolving Loans
for the purposes hereinafter set forth; provided that (i) with regard to the
Lenders collectively, the aggregate principal amount of Obligations (excluding
Discretionary Over-Advances) at any time shall not exceed the lesser of (A) the
Aggregate Revolving Commitment Amount or (B) the Borrowing Base, and (ii) with
regard to each Lender individually, such Lender's Revolving Commitment
Percentage of Obligations (excluding Discretionary Over-Advances) at any time
shall not exceed the lesser of (A) such Lender's Revolving Committed Amount or
(B) such Lender's Revolving Commitment Percentage of the Borrowing Base.
Notwithstanding the foregoing, the Agent may make Revolving Loans

                                    Page 32
<PAGE>
in its discretion ("Discretionary Over-Advances") for and on behalf of the
Lenders in an aggregate principal amount outstanding at any time not to exceed
$5,000,000, even though (1) a Default or Event of Default then exists and has
not been waived or cured, (2) the other conditions to Extensions of Credit under
Section 4.2 have not or cannot be satisfied, or (3) after giving effect thereto,
the Obligations then outstanding will be in excess of the Borrowing Base (but
not in excess of the Aggregate Revolving Commitment Amount), if in the
reasonable business judgment of the Agent, such advances are necessary or
advisable for the protection or preservation of the Collateral or in order to
improve the likelihood of repayment of the Total Obligations (including
financing working capital needs). The Agent will give prompt notice to the
Lenders of any Discretionary Over-Advances and the circumstances giving rise
thereto, and each Lender will promptly reimburse the Agent for its ratable share
of such advance. The right and ability of the Agent to make Discretionary
Over-Advances hereunder are subject to revocation by written notice to the Agent
from the Required Lenders. Revolving Loans may consist of Base Rate Loans or
Eurodollar Loans, or a combination thereof, as the Borrowers may request, and
may be repaid and reborrowed in accordance with the provisions hereof.

      (b) Letter of Credit Commitment. During the Commitment Period, subject to
the terms and conditions hereof and of the LOC Documents, if any, and such other
terms and conditions which the Issuing Lender may reasonably require, the Agent
shall cause the Issuing Lender to issue, and the Lenders shall participate
severally in (to the extent of their respective Revolving Commitment
Percentages), such standby and documentary Letters of Credit as any of the
Borrowers may request, in form acceptable to the Issuing Lender, for the
purposes hereinafter set forth; provided that (i) the aggregate amount of LOC
Obligations shall not exceed $5,000,000 at any time (the "LOC Committed
Amount"), (ii) with regard to the Lenders collectively, the aggregate principal
amount of Obligations (excluding Discretionary Over-Advances) at any time shall
not exceed the lesser of (A) the Aggregate Revolving Commitment Amount or (B)
the Borrowing Base, and (iii) with regard to each Lender individually, such
Lender's Revolving Commitment Percentage of Obligations (excluding Discretionary
Over-Advances) at any time shall not exceed the lesser of (A) such Lender's
Revolving Committed Amount or (B) such Lender's Revolving Commitment Percentage
of the Borrowing Base.

Section 2.2  Method of Borrowing.

      (a) Notice of Request for Extensions of Credit. Any Borrower may request
an Extension of Credit hereunder by written notice (or telephonic notice
promptly confirmed in writing) as follows:

      (i) Revolving Loans. In the case of Revolving Loans, to the Agent not
later than 10:00 a.m. (Pasadena, California time) on the Business Day of the
requested borrowing in the case of Base Rate Loans, and on the third Business
Day prior to the date of the requested borrowing in the case of Eurodollar
Loans. Each such request for borrowing shall be irrevocable and shall specify
(A) that a Revolving Loan is requested, (B) the date of the requested borrowing
(which shall

                                    Page 33
<PAGE>
            be a Business Day), (C) the aggregate principal amount to be
            borrowed, and (D) whether the borrowing shall be comprised of Base
            Rate Loans, Eurodollar Loans, or a combination thereof, and if
            Eurodollar Loans are requested, the duration of the Interest
            Period(s) therefor.

                  (ii) Letters of Credit. The Borrowers must notify the Agent of
            any request for issuance of a Letter of Credit by 10:00 a.m.
            (Pasadena, California time) at least three (3) Business Days prior
            to the proposed issuance date. Such notice shall be irrevocable and
            must specify the original face amount of the Letter of Credit
            requested, the Business Day of issuance of such requested Letter of
            Credit, whether such Letter of Credit may be drawn in a single or in
            partial draws, the Business Day on which the requested Letter of
            Credit is to expire, the purpose for which such Letter of Credit is
            to be issued, and the beneficiary of the requested Letter of Credit.
            The Borrowers shall attach to such notice the proposed form of the
            Letter of Credit.

            (b) Minimum Amounts. Each request for a Revolving Loan which is a
      Eurodollar Loan (including Continuations and Conversions) shall be in a
      minimum principal amount of $5,000,000 and integral multiples of
      $1,000,000 in excess thereof.

            (c) Information Not Provided. If in connection with any such request
      for a Loan, the requesting Borrower shall fail to specify (i) an
      applicable Interest Period in the case of a Eurodollar Loan, such Borrower
      shall be deemed to have requested an Interest Period of one month, or (ii)
      the type of Loan requested, such Borrower shall be deemed to have
      requested a Base Rate Loan.

            (d) Maximum Number of Eurodollar Loans. No more than five (5)
      borrowings of Eurodollar Loans shall be outstanding at any time. For
      purposes hereof, Eurodollar Loans with separate or different Interest
      Periods will be considered as separate Eurodollar Loans even if their
      Interest Periods expire on the same date.

      Section 2.3  Interest. Subject to Section 2.8 and Section 3.1, the Loans
and other Total Obligations shall bear interest at a per annum rate, payable in
arrears on each applicable Interest Payment Date (or at such other times as may
be specified herein), as follows:

            (a) Base Rate Loans. During such periods as the Loans shall be
      comprised of Base Rate Loans, the Adjusted Base Rate;

            (b) Eurodollar Loans. During such periods as the Loans shall be
      comprised of Eurodollar Loans, the Adjusted Eurodollar Rate; and

            (c) Other Total Obligations. At all times for any other Total
      Obligations which remain unpaid, the Adjusted Base Rate.

      Section 2.4 Repayment. The Borrowers shall repay the outstanding principal
balance of the Loans, together with all other Total Obligations, including all
accrued and unpaid interest thereon, on the Termination Date. In addition, and
without limiting the generality of the

                                    Page 34
<PAGE>
foregoing, upon demand the Borrowers shall pay to the Agent, for the account of
the Lenders, the amount, if any and without duplication, by which the
Obligations exceed the lesser of the Borrowing Base or the aggregate Revolving
Commitments.

      Section 2.5  Notes. The Borrowers shall execute and deliver to each Lender
a Revolving Note. Each Revolving Note shall be in the principal amount of the
applicable Lender's Revolving Committed Amount, dated as of the Closing Date or
the date of any assignment of a portion of any Lender's Revolving Commitment.
Each Revolving Note shall represent the obligation of the Borrowers to pay the
amount of the applicable Lender's Revolving Committed Amount, or, if less, such
Lender's Revolving Commitment Percentage of the aggregate unpaid principal
amount of all Revolving Loans made to the Borrowers together with interest
thereon as prescribed in this Agreement.

      Section 2.6  Additional Provisions Relating to Letters of Credit.

            (a) Amounts Outside Expiration Date. The Agent shall not have any
      obligation to cause the Issuing Lender to issue any Letter of Credit at
      any time if: (i) the maximum face amount of the requested Letter of Credit
      is greater than the unused portion of the aggregate LOC Committed Amount
      at such time; (ii) the maximum undrawn amount of the requested Letter of
      Credit and all commissions, fees, and charges due from the Borrowers in
      connection with the opening thereof exceeds the lesser of (A) the
      Borrowing Base or the Aggregate Revolving Commitment Amount, minus (B) the
      Obligations at such time; or (iii) such Letter of Credit has an expiration
      date later than (A) the Termination Date or (B) more than twelve (12)
      calendar months from the date of issuance (except as any Letter of Credit
      may be extended pursuant to an "evergreen" or automatic renewal provision,
      provided that any such extension shall not be for an expiration date
      beyond the Termination Date).

            (b) Other Conditions. In addition to being subject to the
      satisfaction of the applicable conditions precedent contained in Article
      4, the obligation of the Agent to cause the Issuing Lender to issue any
      Letter of Credit is subject to the following conditions precedent having
      been satisfied in a manner reasonably satisfactory to the Agent:

                  (i) the Borrowers shall have delivered to the Issuing Lender,
            at such times and in such manner as the Issuing Lender may
            prescribe, an application in form and substance satisfactory to the
            Issuing Lender and reasonably satisfactory to the Agent for the
            issuance of the Letter of Credit and such other documents as may be
            required pursuant to the terms thereof, and the form, terms, and
            purpose of the proposed Letter of Credit shall be satisfactory to
            the Agent and the Issuing Lender (provided that in the event any
            term of such application or any other document is inconsistent with
            the terms of this Agreement the terms of this Agreement shall be
            controlling); and

                  (ii) as of the date of issuance, no order of any court,
            arbitrator, or Governmental Authority shall purport by its terms to
            enjoin or restrain money

                                    Page 35
<PAGE>

            center banks generally from issuing letters of credit of the type
            and in the amount of the proposed Letter of Credit, and no law,
            rule, or regulation applicable to money center banks generally and
            no request or directive (whether or not having the force of law)
            from any Governmental Authority with jurisdiction over money center
            banks generally shall prohibit, or request that the Issuing Lender
            refrain from, the issuance of letters of credit generally or the
            issuance of such proposed Letters of Credit.

            (c)   Issuance of Letters of Credit.

                  (i) Responsibilities of the Agent; Issuance. The Agent shall
            determine, as of the Business Day immediately preceding the
            requested issuance date of the Letter of Credit set forth in the
            notice from the Borrower pursuant to Section 2.2(a)(ii), whether the
            conditions set forth in Section 2.6(a) have been met as of such
            date. If the Agent determines that such conditions are met, the
            Agent shall cause the Issuing Lender to issue the requested Letter
            of Credit on the requested issuance date so long as the other
            conditions hereof are met.

                  (ii) Extensions and Amendments. The Agent shall not be
            obligated to cause the Issuing Lender to extend or amend any Letter
            of Credit issued pursuant hereto unless the requirements of this
            Section 2.6 are met as though a new Letter of Credit were being
            requested and issued. With respect to any Letter of Credit which
            contains any "evergreen" or automatic renewal provision, each Lender
            shall be deemed to have consented to any such extension or renewal
            unless such Lender shall have provided to the Agent, written notice
            that it declines to consent to any such extension or renewal at
            least thirty (30) days prior to the date on which the Issuing Lender
            is entitled to decline to extend or renew the Letter of Credit;
            provided that, notwithstanding the foregoing, if all of the
            requirements of this Section 2.6 are met and no Default or Event of
            Default has occurred and is continuing, no Lender may decline to
            consent to any such extension or renewal.

            (d) Payments Pursuant to Letters of Credit. The Borrowers agree to
      reimburse the Issuing Lender promptly upon demand for any draw under any
      Letter of Credit and to pay the Issuing Lender promptly upon demand the
      amount of all other charges and fees payable to the Issuing Lender under
      or in connection with any Letter of Credit when due, irrespective of any
      claim, setoff, defense, or other right which the Borrowers may have at any
      time against the Issuing Lender or any other Person. Each drawing under
      any Letter of Credit shall constitute a request by the Borrower for an
      borrowing of a Base Rate Loan in the amount of such drawing. The Funding
      Date with respect to such borrowing shall be the date of such drawing.

            (e) Indemnification; Exoneration; Power of Attorney.

                  (i) Indemnification. The Borrowers agree to protect,
            indemnify, pay, and save the Lenders, the Agent, and the Issuing
            Lender harmless from and against any and all claims, demands,
            liabilities, damages, losses, costs, charges,

                                    Page 36
<PAGE>
            and expenses (including attorneys' fees and expenses) which any
            Lender, the Agent, or the Issuing Lender may incur or be subject to
            as a consequence, direct or indirect, of the issuance of any Letter
            of Credit except to the extent that it shall be determined in a
            final, nonappealable judgment by a court of competent jurisdiction
            that any such claims, demands, liabilities, damages, losses, costs,
            charges, and expenses resulted from the gross negligence or willful
            misconduct of the Lenders, the Agent, or the Issuing Lender,
            respectively. The Borrowers' obligations under this Section 2.6(e)
            shall survive payment of all of the other Total Obligations.

                  (ii) Assumption of Risk by the Borrowers. As among the
            Borrowers, the Lenders, the Agent, and the Issuing Lender, the
            Borrowers assume all risks of the acts and omissions of, or misuse
            of any of the Letters of Credit by, the respective beneficiaries of
            such Letters of Credit. In furtherance and not in limitation of the
            foregoing, the Lenders, the Agent, and the Issuing Lender shall not
            be responsible for: (A) the form, validity, sufficiency, accuracy,
            genuineness, or legal effect of any document submitted by any Person
            in connection with the application for and issuance of and
            presentation of drafts with respect to any of the Letters of Credit,
            even if it should prove to be in any or all respects invalid,
            insufficient, inaccurate, fraudulent, or forged; (B) the validity or
            sufficiency of any instrument transferring or assigning or
            purporting to transfer or assign any Letter of Credit or the rights
            or benefits thereunder or proceeds thereof, in whole or in part,
            which may prove to be invalid or ineffective for any reason; (C) the
            failure of the beneficiary of any Letter of Credit to comply duly
            with conditions required in order to draw upon such Letter of
            Credit; (D) errors, omissions, interruptions, or delays in
            transmission or delivery of any messages, by mail, cable, telegraph,
            telex, or otherwise, whether or not they be in cipher unless such
            errors, omissions, interruptions, or delays are the result of the
            gross negligence or willful misconduct of the Issuing Lender; (E)
            errors in interpretation of technical terms; (F) any loss or delay
            in the transmission or otherwise of any document required in order
            to make a drawing under any Letter of Credit or of the proceeds
            thereof unless such loss or delay is the result of the gross
            negligence or willful misconduct of the Lender; (G) the
            misapplication by the beneficiary of any Letter of Credit of the
            proceeds of any drawing under such Letter of Credit; (H) any
            consequences arising from causes beyond the control of the Lenders
            or the Agent, including any act or omission, whether rightful or
            wrongful, of any present or future de jure or de facto Governmental
            Authority; or (I) the Issuing Lender's honor of a draw for which the
            draw or any certificate fails to comply with the terms of the Letter
            of Credit unless such failure to comply is the result of the gross
            negligence or willful misconduct of the Issuing Lender. None of the
            foregoing shall affect, impair, or prevent the vesting of any rights
            or powers of the Agent, any Lender, or the Issuing Lender under this
            Section 2.6(e).

                  (iii) Exoneration. Without limiting the foregoing, no action
            or omission whatsoever by the Agent or any Lender (excluding the
            Issuing Lender acting in such capacity) under or in connection with
            any of the Letters of Credit or

                                    Page 37
<PAGE>
            any related matters shall result in any liability of the Agent or
            any Lender to the Borrowers, or relieve the Borrowers of any of
            their obligations hereunder to any such Person.

                  (iv) Rights Against Issuing Lender. Nothing contained in this
            Agreement is intended to limit the Borrowers' rights, if any, with
            respect to the Issuing Lender which arise as a result of the letter
            of credit application and related documents executed by and between
            the Borrowers and the Issuing Lender.

                  (v) Account Party. The Borrowers hereby authorize and direct
            the Issuing Lender to name any Borrower as the "Account Party" in
            any Letter of Credit and to deliver to the Agent all instruments,
            documents, and other writings and property received by the Issuing
            Lender pursuant to each such Letter of Credit, and to accept and
            rely upon the Agent's instructions and agreements with respect to
            all matters arising in connection with each such Letter of Credit or
            the application therefor.

                  (vi) Power of Attorney. In connection with all inventory
            financed by any Letter of Credit, the Borrowers hereby appoint the
            Agent, or the Agent's designee, as its attorney, with full power and
            authority: (A) to sign and/or endorse any Borrower's name upon any
            warehouse or other receipts; (B) to sign any Borrower's name on
            bills of lading and other negotiable and non-negotiable documents;
            (C) to clear inventory through customs in the Agent's or any
            Borrower's name, and to sign and deliver to customs officials powers
            of attorney in any Borrower's name for such purpose; (D) to complete
            in any Borrower's or the Agent's name, any order, sale, or
            transaction, obtain the necessary documents in connection therewith,
            and collect the proceeds thereof; and (E) to do such other acts and
            things as are necessary in order to enable the Agent to obtain
            possession or control of such inventory and to obtain payment of the
            Total Obligations. Neither the Agent nor its designee, as any
            Borrower's attorney, will be liable for any acts or omissions, nor
            for any error of judgment or mistakes of fact or law other than for
            gross negligence or willful misconduct. This power, being coupled
            with an interest, is irrevocable until all Total Obligations have
            been paid and satisfied.

                  (vii) Control of Inventory. In connection with all inventory
            financed by Letters of Credit, the Borrowers will, at the Agent's
            request, instruct all suppliers, carriers, forwarders, customs
            brokers, warehouses, or others receiving or holding cash, checks,
            inventory, documents, or instruments in which the Agent holds a
            security interest to deliver them to the Agent and/or subject to the
            Agent's order, and if they shall come into any Borrower's
            possession, to deliver them, upon request, to the Agent in their
            original form. The Borrowers shall also, at the Agent's written
            request, designate the Agent as the consignee on all bills of lading
            and other negotiable and non-negotiable documents.

                                     Page 38
<PAGE>
            (f) Participation. Each Lender, with respect to the Existing Letters
      of Credit, hereby purchases a participation interest in such Existing
      Letters of Credit, and with respect to Letters of Credit issued on or
      after the Closing Date, upon issuance of a Letter of Credit, shall be
      deemed to have purchased without recourse a risk participation from the
      Issuing Lender in such Letter of Credit and the obligations arising
      thereunder, in each case in an amount equal to such Lender's pro rata
      share of the obligations under such Letter of Credit (based on the
      Revolving Commitment Percentages of such Lender) and shall absolutely,
      unconditionally, and irrevocably assume, as primary obligor and not as
      surety, and be obligated to pay to the Issuing Lender therefor and
      discharge when due, such Lender's pro rata share of the obligations
      arising under such Letter of Credit. Without limiting the scope and nature
      of each Lender's participation in any Letter of Credit, to the extent that
      the Issuing Lender has not been reimbursed as required hereunder or under
      any such Letter of Credit, each Lender shall pay to the Issuing Lender its
      pro rata share of such unreimbursed drawing in same day funds pursuant to
      the provisions of clause (c) following. The obligation of each Lender to
      reimburse the Issuing Lender shall be absolute and unconditional and shall
      not be affected by the occurrence of a Default, an Event of Default or any
      other occurrence or event. Any such reimbursement shall not relieve or
      otherwise impair the obligation of the Borrowers to reimburse the Issuing
      Lender under any Letter of Credit, together with interest as hereinafter
      provided.

            (g) Uniform Customs and Practices. The Issuing Lender may have the
      Letters of Credit be subject to The Uniform Customs and Practice for
      Documentary Credits (the "UCP") or the International Standby Practices
      1998 (the "ISP98"), in either case as published as of the date of issue by
      the International Chamber of Commerce, in which case the UCP or the ISP98,
      as applicable, may be incorporated therein and deemed in all respects to
      be a part thereof.

            (h) Responsibility of Issuing Lender. It is expressly understood and
      agreed that the obligations of the Issuing Lender hereunder to the Lenders
      are only those expressly set forth in this Agreement and that the Issuing
      Lender shall be entitled to assume that the conditions precedent set forth
      in Section 4.2 have been satisfied unless it shall have been notified by
      the Borrowers or a Lender (other than the Issuing Lender in its capacity
      as the Agent or a Lender) that any such condition precedent has not been
      satisfied; provided, however, that nothing set forth in this Section 2.6
      shall be deemed to prejudice the right of any Lender to recover from the
      Issuing Lender any amounts made available by such Lender to the Issuing
      Lender pursuant to this Section 2.6 in the event that it is determined by
      a court of competent jurisdiction that the payment with respect to a
      Letter of Credit constituted gross negligence or willful misconduct on the
      part of the Issuing Lender.

            (i) Supporting Letter of Credit; Cash Collateral. If,
      notwithstanding the provisions of Section 2.1(b), any Letter of Credit is
      outstanding upon the termination of this Agreement, then upon such
      termination the Borrowers shall deposit with the Agent with respect to
      each such Letter of Credit then outstanding, as the Agent in its
      discretion shall specify, either (i) a standby letter of credit (a
      "Supporting Letter of Credit") in form

                                     Page 39
<PAGE>
      and substance satisfactory to the Agent, issued by an issuer satisfactory
      to the Agent in an amount equal to the greatest amount for which such
      Letter of Credit may be drawn plus any fees and expenses associated with
      such Letter of Credit, under which Supporting Letter of Credit the Agent
      is entitled to draw amounts necessary to reimburse the Agent and the
      Lenders for payments to be made by the Agent and the Lenders under such
      Letter of Credit and any fees and expenses associated with such Letter of
      Credit or (ii) cash in an amount necessary to reimburse the Agent and the
      Lenders for payments to be made by the Agent and the Lenders under such
      Letter of Credit and any fees and expenses associated with such Letter of
      Credit. Such Supporting Letter of Credit or deposit of cash shall be held
      by the Agent, for the benefit of the Agent and the Lenders, as security
      for, and to provide for the payment of, the aggregate undrawn amount of
      such Letters of Credit remaining outstanding.

      Section 2.7 Additional Provisions Relating to Revolving Loans.

            (a) Disbursement. The Agent is authorized and directed by the
      Borrowers to transfer the proceeds of the Loans requested hereunder to an
      account maintained with Bank of America as specified by the Borrowers (the
      "Designated Account"). The Borrowers may designate a replacement
      Designated Account from time to time by written notice to the Agent. Any
      designation by the Borrowers of the Designated Account must be reasonably
      acceptable to the Agent.

            (b) Reliance Upon Authority; No Liability. The Agent is entitled to
      rely conclusively on any individual's request for Extensions of Credit on
      behalf of any Borrower, so long as the proceeds thereof are to be
      transferred to the Designated Account. The Agent shall have no duty to
      verify the identity of any individual representing himself or herself as a
      person authorized by the Borrowers to make such requests on their behalf.
      The Agent shall not incur any liability to the Borrowers as a result of
      acting upon any notice referred to in Section 2.2, which the Agent
      reasonably believes to have been given by an officer or other person duly
      authorized by the Borrowers to request Extensions of Credit on behalf of
      the Borrowers or for otherwise acting under this Section 2.7. The
      crediting of Loans to the Designated Account shall conclusively establish
      the obligation of the Borrowers to repay such Loans as provided herein.

            (c) The Agent's Election. Subject to the requirements of Section
      2.7(e), promptly after receipt of a request for an Extension of Credit
      (other than a request for a Eurodollar Loan) in compliance with Section
      2.2(a), the Agent shall elect in its discretion to have the terms of
      Section 2.7(d) or Section 2.7(e) apply to such requested borrowing. If
      Bank of America declines in its sole discretion to make a Non-Ratable Loan
      pursuant to Section 2.7(e), the terms of Section 2.7(d) shall apply to the
      requested borrowing.

            (d) Making of Revolving Loans. If the Agent elects to have the terms
      of this Section 2.7(d) apply to a requested borrowing or if the requested
      borrowing is for a Eurodollar Loan, then promptly after receipt of a
      Notice of Borrowing or telephonic notice in lieu thereof, the Agent shall
      notify the Lenders by telecopy, telephone, or e-mail of the requested
      borrowing. Subject to satisfaction of the applicable conditions precedent

                                     Page 40
<PAGE>
      set forth in Article 4, each Lender shall transfer its Revolving
      Commitment Percentage of the requested borrowing to the Agent in
      immediately available funds, to the account from time to time designated
      by the Agent, not later than 12:00 noon (Pasadena, California time) on the
      applicable Funding Date. After the Agent's receipt of the proceeds of such
      requested borrowing, the Agent shall make the proceeds of such requested
      borrowing available to the applicable Borrower on the applicable Funding
      Date by transferring same day funds to the Designated Account.

            (e) Making of Non-Ratable Loans. Subject to Section 2.7(c), if the
      Agent elects, with the consent of Bank of America, to have the terms of
      this Section 2.7(e) apply to a requested borrowing, Bank of America shall
      make a Loan in the amount of such requested borrowing available to the
      applicable Borrower on the applicable Funding Date by transferring same
      day funds to the Designated Account. Each Revolving Loan made solely by
      Bank of America pursuant to this Section 2.7(e) is referred to hereinafter
      as a "Non-Ratable Loan," and such Loans are collectively referred to as
      the "Non-Ratable Loans." Each Non-Ratable Loan shall be subject to all the
      terms and conditions applicable to other Loans except that all payments
      thereon shall be payable to Bank of America solely for its own account.
      The aggregate amount of Non-Ratable Loans outstanding at any time shall
      not exceed $5,000,000. The Agent shall not request Bank of America to make
      any Non-Ratable Loan if the Agent has received written notice from any
      Lender that one or more of the applicable conditions precedent set forth
      in Article 4 will not be satisfied on the requested Funding Date for the
      applicable borrowing. The Non-Ratable Loans shall be secured by the
      Agent's Liens in and to the Collateral and shall constitute Base Rate
      Loans and Obligations hereunder.

      Section 2.8 Maximum Interest Rate. If any of the interest rates set forth
in Section 2.3 and Section 3.1 (collectively herein, the "Interest Rate"),
absent the limitation set forth in this Section 2.8, would have exceeded the
Maximum Rate, then the Interest Rate shall be the Maximum Rate, and, if in the
future, the Interest Rate would otherwise be less than the Maximum Rate, then
the Interest Rate shall remain at the Maximum Rate until such time as the amount
of interest paid hereunder equals the amount of interest which would have been
paid if the same had not been limited by the Maximum Rate. In the event that,
upon payment in full of the Total Obligations, the total amount of interest paid
or accrued under the terms of this Agreement and the other Credit Documents is
less than the total amount of interest which would, but for this Section 2.8,
have been paid or accrued if the Interest Rate otherwise set forth in this
Agreement had at all times been in effect, then the Borrowers shall, to the
extent permitted by Requirements of Law, pay the Agent, for the account of the
Lenders, an amount equal to the excess of (a) the lesser of (i) the amount of
interest which would have been paid or accrued if the Maximum Rate had, at all
times, been in effect or (ii) the amount of interest which would have been paid
or accrued had the interest rate otherwise set forth in this Agreement, at all
times, been in effect over (b) the amount of interest actually paid or accrued
under this Agreement. Each of the Agent, each Lender, the Issuing Lender, and
each of the Borrowers acknowledges, agrees, and declares that it is its
intention to expressly comply with all Requirements of Law in respect of
limitations on the amount or rate of interest that can legally be contracted
for, charged, or received under or in connection with the Credit Documents.
Notwithstanding anything to the contrary contained in any Credit Document (even
if any such provision expressly declares that it

                                     Page 41
<PAGE>
controls all other provisions of the Credit Documents), in no contingency or
event whatsoever shall the amount of interest (including the aggregate of all
charges, fees, benefits, or other compensation which constitutes interest under
any applicable law) under the Credit Documents paid by the Borrowers, received
by the Agent, any Lender, or the Issuing Lender or agreed to be paid by the
Borrowers, or requested or demanded to be paid by the Agent, any Lender, or the
Issuing Lender exceed the Maximum Rate, and all provisions of the Credit
Documents in respect of the contracting for, charging, or receiving compensation
for the use, forbearance, or detention of money shall be limited as provided by
this Section 2.8. In the event any such interest is paid to the Agent, any
Lender, or the Issuing Lender by the Borrowers in an amount or at a rate which
would exceed the Maximum Rate, the Agent, such Lender, or the Issuing Lender, as
the case may be, shall automatically apply such excess to any unpaid amount of
the Total Obligations, other than interest, in the inverse order of maturity, or
if the amount of such excess exceeds said unpaid amount, such excess shall be
paid to the Borrowers, as applicable. All interest paid, or agreed to be paid,
by the Borrowers, or taken, reserved, or received by the Agent, any Lender, or
the Issuing Lender, shall be amortized, prorated, spread, and allocated in
respect of the Total Obligations throughout the full term of this Agreement.
Notwithstanding any provision contained in any of the Credit Documents, or in
any other related documents executed pursuant hereto, neither the Agent, any
Lender, or the Issuing Lender shall ever be entitled to charge, receive, take,
reserve, collect, or apply as interest any amount which, together with all other
interest under the Credit Documents would result in a rate of interest under the
Credit Documents in excess of the Maximum Rate and, in the event the Agent, any
Lender, or the Issuing Lender ever charges, receives, takes, reserves, collects,
or applies any amount in respect of the Borrowers that otherwise would, together
with all other interest under the Credit Documents, be in excess of the Maximum
Rate, such amount shall automatically be deemed to be applied in reduction of
the unpaid principal balance of the Total Obligations (other than interest), if
such principal balance is paid in full, any remaining excess shall forthwith be
paid to the Borrowers, as applicable. The Borrowers, the Agent, the Lenders, and
the Issuing Lender shall, to the maximum extent permitted under any Requirement
of Law, (A) characterize any non-principal payment as a standby fee, commitment
fee, prepayment charge, delinquency charge, expense, or reimbursement for a
third-party expense rather than as interest and (B) exclude prepayments,
acceleration, and the effects thereof. Nothing in any Credit Document shall be
construed or so operate as to require or obligate the Borrowers to pay any
interest, fees, costs, or charges greater than is permitted by any Requirement
of Law. Subject to the foregoing, the Borrowers hereby agree that the actual
effective rate of interest from time to time existing under the Credit
Documents, including all amounts agreed to by the Borrowers or charged or
received by the Agent, the Lenders, or the Issuing Lender pursuant to and in
accordance with the Credit Documents, which may be deemed to be interest under
any Requirement of Law, shall be deemed to be a rate which is agreed to and
stipulated by the Borrowers and the Lenders in accordance with Requirements of
Law.

                                    ARTICLE 3

                 OTHER PROVISIONS RELATING TO CREDIT FACILITIES

      Section 3.1 Default Rate. Subject to Section 2.8, during the existence of
an Event of Default, upon the election of the Agent or the Required Lenders (a)
the principal of and, to the

                                     Page 42
<PAGE>
extent permitted by law, interest on the Loans and any other amounts owing
hereunder or under the other Credit Documents shall bear interest, payable on
demand, at a per annum rate two percent (2.00%) greater than the rate which
would otherwise be applicable (or if no rate is applicable, whether in respect
of interest, fees, or other amounts, then the Adjusted Base Rate plus two
percent (2.00%)) and (b) the Letter of Credit Fee shall accrue at a per annum
rate two percent (2.00%) greater than the rate which would otherwise be
applicable.

      Section 3.2 Continuation and Conversion. The Borrowers shall have the
option, on any Business Day, to continue existing Loans into a subsequent
permissible Interest Period (a "Continuation") or to convert Loans into Loans of
another interest rate type (a "Conversion"); provided, however, that (a)
Eurodollar Loans may be Continued as Eurodollar Loans for new Interest Periods
only on the last day of the Interest Period applicable thereto, (b) Eurodollar
Loans may be paid prior to the last day of the relevant Interest Period or
Converted into Base Rate Loans only upon payment of the amounts determined in
accordance with Section 3.6(d), (c) without the consent of the Required Lenders,
Eurodollar Loans may be Continued, and Base Rate Loans may be Converted into
Eurodollar Loans, only if the conditions precedent set forth in Section 4.2 are
satisfied on the date of Continuation or Conversion, (d) Loans Continued as, or
Converted into, Eurodollar Loans shall be subject to the terms of the definition
of "Interest Period" and shall be in such minimum amounts as provided in Section
2.2(b), and (e) any request for Continuation of a Eurodollar Loan or Conversion
of a Base Rate Loan into a Eurodollar Loan which shall fail to specify an
Interest Period shall be deemed to be a request for an Interest Period of one
month. Each such Continuation or Conversion shall be effected by a Borrower by
giving a Notice of Continuation/Conversion (or telephonic notice promptly
confirmed in writing) to the office of the Agent specified in Section 10.1, or
at such other office as the Agent may designate in writing, prior to 10:00 a.m.
(Pasadena, California time) on the Business Day of, in the case of the
Conversion of a Eurodollar Loan into a Base Rate Loan, and on the third Business
Day prior to, in the case of the Continuation of a Eurodollar Loan as, or
Conversion of a Base Rate Loan into, a Eurodollar Loan, the date of the proposed
Continuation or Conversion, specifying the date of the proposed Continuation or
Conversion, the Loans to be so Continued or Converted, the types of Loans into
which such Loans are to be Converted and, if appropriate, the applicable
Interest Periods with respect thereto. Each request for Continuation or
Conversion shall be irrevocable and shall constitute a representation and
warranty by the Borrowers of the matters specified in Section 4.2(a), Section
4.2(b), and Section 4.2(c). In the event the Borrowers fail to request
Continuation or Conversion of any Eurodollar Loan in accordance with this
Section or any such Conversion or Continuation is not permitted or required by
this Section then such Eurodollar Loan shall, at the end of the Interest Period
applicable thereto, be automatically Converted to a Base Rate Loan. The Agent
shall give each Lender notice as promptly as practicable of any such proposed
Continuation or Conversion affecting any Loan.

      Section 3.3 Prepayments.

            (a) Voluntary Prepayments. The Loans may be repaid in whole or in
      part without premium or penalty; provided that (i) Eurodollar Loans may be
      prepaid only upon three (3) Business Days prior written notice to the
      Agent and must be accompanied by payment of any amounts owing under
      Section 3.6, (ii) such notice shall be provided by 10:00 a.m. (Pasadena,
      California time) on the date of such prepayment, in the case of

                                     Page 43
<PAGE>
      Base Rate Loans, or on the date three Business Days prior to such
      prepayment, in the case of Eurodollar Loans, and (iii) partial prepayments
      of the Eurodollar Loans shall be minimum principal amounts of $5,000,000
      and integral multiples of $1,000,000 in excess thereof.

            (b) Mandatory Prepayments.

                  (i) Revolving Commitments. If at any time (A) the aggregate
            principal amount of Obligations shall exceed the lesser of (1) the
            Aggregate Revolving Commitment Amount or (2) the Borrowing Base or
            (B) the aggregate amount of LOC Obligations shall exceed the LOC
            Committed Amount, the Borrowers shall make payment promptly on
            demand on the Revolving Loans and/or to a cash collateral account in
            respect of the LOC Obligations in an amount sufficient to eliminate
            the difference.

                  (ii) Asset Dispositions. The Borrowers shall prepay the
            Obligations hereunder in an amount equal to the net proceeds of any
            Asset Disposition upon receipt thereof. Prepayments under this
            clause (ii) shall not result in a commitment reduction and amounts
            paid on account thereof may be reborrowed subject to the
            availability and the other conditions to Extensions of Credit
            hereunder.

            (c) Application. Unless otherwise specified, prepayments on the
      Obligations shall be applied first to Base Rate Loans and then to
      Eurodollar Loans in direct order of Interest Period maturities.

      Section 3.4 Termination of Credit Facility.

            (a) The Borrowers may terminate this Agreement upon at least twenty
      (20) days prior written notice thereof to the Agent and the Lenders, upon
      (i) the payment in full of all outstanding Loans, together with accrued
      and unpaid interest thereon, and the cancellation and return of all
      outstanding Letters of Credit (or alternatively, with respect to each such
      Letter of Credit, the furnishing to the Agent, in the Agent's discretion,
      of a Supporting Letter of Credit or cash deposit, in each case in amounts
      and in the manner required by Section 2.6(i)), (ii) the payment in full of
      the early termination fee set forth in the following sentence, (iii) the
      payment in full of all reimbursable expenses and other Total Obligations
      together with accrued and unpaid interest thereon, and (iv) the payment in
      full of any amount due under Section 3.6. The aggregate amount of the
      Revolving Commitment Amount shall not be reduced except in connection with
      termination of the credit facility provided pursuant to this Agreement.
      Subject to Section 2.8, if this Agreement is terminated at any time prior
      to the second Anniversary Date, whether pursuant to this Section or
      pursuant to Section 8.2, the Borrowers shall pay to the Agent, for the
      account of the Lenders, an early termination fee determined in accordance
      with the following table:

                                     Page 44
<PAGE>
<TABLE>
<CAPTION>
          Period during which early
             termination occurs             Early Termination Fee
<S>                                         <C>
          On or prior to the first          2.00% of the aggregate Revolving
          Anniversary Date                  Committed Amount

          After the first Anniversary       1.00% of the aggregate Revolving
          Date but on or prior to the       Committed Amount
          second Anniversary Date
</TABLE>

      Notwithstanding the foregoing, no such early termination fee shall be
      payable in the event this Agreement is terminated (A) after the first
      Anniversary Date in connection with refinancing of the Total Obligations
      in a transaction in which another lending group of Bank of America or
      another lending group of CIT or any of their respective Affiliates
      provides or arranges replacement financing or (B) more than eighteen
      months after the Closing Date, in connection with a public offering of
      debt or equity securities of any Credit Party either arranged or
      underwritten by Bank of America, an Affiliate of Bank of America, or
      another investment banking firm (provided that Bank of America was offered
      the opportunity to lead such offering and has declined to lead such
      offering).

            (b) The term of this Agreement shall end on the Termination Date
      unless sooner terminated in accordance with the terms hereof. The Agent
      upon direction from the Required Lenders may terminate this Agreement,
      without notice to the Credit Parties, during the existence of an Event of
      Default. Upon the effective date of termination of this Agreement for any
      reason whatsoever, the Total Obligations (including all unpaid principal,
      accrued and unpaid interest, and any early termination or prepayment fees
      but excluding indemnification obligations to the extent no claim with
      respect thereto has been asserted and remains unsatisfied) shall become
      immediately due and payable and the Borrowers shall immediately arrange
      for the cancellation and return of all Letters of Credit then outstanding
      or, if permitted by the Agent in its discretion, presentation to the Agent
      of a Supporting Letter of Credit or cash collateral as specified in
      Section 2.6(k). Notwithstanding the termination of this Agreement, until
      the Total Obligations are indefeasibly paid and performed in full in cash,
      the Credit Parties shall remain bound by the terms of this Agreement and
      the other Credit Documents, as applicable, and shall not be relieved of
      any of their obligations hereunder or under any other Credit Document, and
      the Agent and the Lenders shall retain all their rights and remedies
      hereunder and under the other Credit Documents (including, without
      limitation, the Agent's Liens in and all rights and remedies with respect
      to all then existing and after-arising Collateral).

      Section 3.5 Fees.

            (a) Unused Line Fee. Subject to Section 2.8, until the Loans have
      been paid in full and this Agreement terminated, the Borrowers agree to
      pay to the Agent for the ratable benefit of the Lenders, in accordance
      with their respective Revolving Commitment Percentages, on the first day
      of each calendar month and on the Termination Date, a fee (the "Unused
      Line Fee") at a per annum rate equal to the Applicable Percentage for the
      Unused Line Fee multiplied by the amount by which the Revolving

                                     Page 45
<PAGE>
      Committed Amount exceeded the sum of the average daily amount of the
      Revolving Loans and the average daily undrawn face amount of all
      outstanding Letters of Credit during the immediately preceding month or
      shorter period if calculated for the first month after the Closing Date or
      on the Termination Date. For purposes of computing the Unused Line Fee,
      (i) any payment received by the Agent (if received prior to 11:00 a.m.
      (Pasadena, California time)) shall be deemed to be credited to the
      Borrowers' loan account on the Business Day following the date such
      payment is received by the Agent and (ii) Non-Ratable Loans shall not be
      counted toward or considered usage under the Revolving Committed Amount.

            (b) Letter of Credit Fees. Subject to Section 2.8 and Section 3.1,
      the Borrowers agree to pay to the Agent, for the account of the Lenders,
      in accordance with their respective Revolving Commitment Percentages, on
      the first day of each calendar month and on the Termination Date, a fee
      (the "Letter of Credit Fee") at a per annum rate equal to the Applicable
      Percentage for Letters of Credit, multiplied by the average daily undrawn
      face amount of all Letters of Credit outstanding during the immediately
      preceding month or shorter period if calculated for the first month after
      the Closing Date or on the Termination Date. The Borrowers also agree to
      pay all reasonable out-of-pocket costs, fees, and expenses incurred by the
      Issuing Lender in connection with the application for, processing of,
      issuance of, or amendment to any Letter of Credit, which costs, fees, and
      expenses shall include a "fronting fee" in an amount equal to one-quarter
      percent (0.25%) of the face amount of such Letter of Credit, payable to
      the Issuing Lender on the date of issuance of each Letter of Credit.

            (c) Administrative Fees. The Borrowers agree to pay to the Agent,
      for its own account, the fees referred to in the Administrative Agent's
      Fee Letter.

      Section 3.6 Taxes, Yield Protection, and Illegality.

            (a) Taxes.

                  (i) Any and all payments by the Borrowers, or any of them, to
            the Agent or any Lender under this Agreement and any other Credit
            Document shall be made free and clear of, and without deduction or
            withholding for, any Taxes. In addition, subject to Section 9.10(e),
            the Borrowers shall pay all Other Taxes

                  (ii) The Borrowers agree to indemnify and hold harmless the
            Agent and each Lender for the full amount of Taxes or Other Taxes
            (including any Taxes or Other Taxes imposed by any jurisdiction on
            amounts payable under this Section 3.6(a)) paid by the Agent or any
            Lender and any liability (including penalties, interest, additions
            to tax, and expenses) arising therefrom or with respect thereto,
            whether or not such Taxes or Other Taxes were correctly or legally
            asserted. Payment under this indemnification shall be made within
            thirty (30) days after the date the Agent or any Lender makes
            written demand therefor.

                                     Page 46
<PAGE>
                  (iii) If the Borrowers shall be required by law to deduct or
            withhold any Taxes or Other Taxes from or in respect of any sum
            payable hereunder to the Agent or any Lender, then:

                        (A) the sum payable shall be increased as necessary so
                  that after making all required deductions and withholdings
                  (including, without limitation, deductions and withholdings
                  applicable to additional sums payable under this Section
                  3.6(a)) the Agent or such Lender, as the case may be, receives
                  an amount equal to the sum it would have received had no such
                  deductions or withholdings been made;

                        (B) the Borrowers shall make such deductions and
                  withholdings;

                        (C) the Borrowers shall pay the full amount deducted or
                  withheld to the relevant taxing authority or other authority
                  in accordance with any applicable law; and

                        (D) the Borrowers shall also pay to the Agent, for the
                  account of each Lender, or each Lender at the time interest is
                  paid, all additional amounts which the respective Lender
                  specifies as necessary to preserve the after-tax yield such
                  Lender would have received if such Taxes or Other Taxes had
                  not been imposed.

                  (iv) Within thirty (30) days after the date of any payment by
            the Borrowers of Taxes or Other Taxes, the Borrowers shall furnish
            the Agent the original or a certified copy of a receipt evidencing
            payment thereof, or other evidence of payment satisfactory to the
            Agent.

                  (v) If the Borrowers are required to pay additional amounts to
            the Agent or any Lender pursuant to Section 3.6(a)(iii), then the
            applicable Lender shall use reasonable efforts (consistent with
            legal and regulatory restrictions) to change the jurisdiction of its
            Applicable Lending Office so as to eliminate any such additional
            payment by the Borrowers which may thereafter accrue, if such change
            in the judgment of such Lender is not otherwise disadvantageous to
            such Lender.

                  (vi) For any period with respect to which a Lender has failed
            to provide the Borrowers and the Agent with the appropriate forms
            pursuant to Section 9.10(a) (unless such failure is due to a change
            in treaty, law, or regulation occurring subsequent to the date on
            which a form originally was required to be provided), such Lender
            shall not be entitled to indemnification under this Section with
            respect to Taxes imposed by the United States.

                                     Page 47
<PAGE>
            (b) Illegality.

                  (i) If any Lender determines that the introduction of any
            Requirement of Law, or any change in any Requirement of Law, or in
            the interpretation or administration of any Requirement of Law, has
            made it unlawful, or that any central bank or other Governmental
            Authority has asserted that it is unlawful, for such Lender or its
            Applicable Lending Office to make Eurodollar Loans, then, on notice
            thereof by such Lender to the Borrowers through the Agent, any
            obligation of such Lender to make Eurodollar Loans shall be
            suspended until the circumstances giving rise to such determination
            no longer exist.

                  (ii) If a Lender determines that it is unlawful to maintain
            any Eurodollar Loans, the Borrowers shall, upon receipt of notice of
            such fact and demand from such Lender (with a copy to the Agent),
            prepay in full such Eurodollar Loans of such Lender then
            outstanding, together with accrued and unpaid interest thereon and
            amounts required under Section 3.6(d), either on the last day of the
            Interest Period thereof, if such Lender may lawfully continue to
            maintain such Eurodollar Loans to such day, or immediately, if such
            Lender may not lawfully continue to maintain such Eurodollar Loans.
            If the Borrowers are required to so prepay any Eurodollar Loans,
            then concurrently with such prepayment, the Borrowers shall borrow
            from the affected Lender, in the amount of such repayment, a Base
            Rate Loan.

            (c) Increased Costs and Reduction of Return.

                  (i) If any Lender determines that due to either (A) the
            introduction of or any change in the interpretation of any
            Requirement of Law or (B) the compliance by such Lender with any
            guideline or request from any central bank or other Governmental
            Authority (whether or not having the force of law), there shall be
            any increase in the cost to such Lender of agreeing to make or
            making, funding, or maintaining any Eurodollar Loans, then the
            Borrowers shall be liable for, and shall from time to time, upon
            demand (with a copy of such demand to be sent to the Agent), pay to
            the Agent for the account of such Lender, additional amounts as are
            sufficient to compensate such Lender for such increased costs.

                  (ii) If any Lender shall have determined that (A) the
            introduction of any Capital Adequacy Regulation, (B) any change in
            any Capital Adequacy Regulation, (C) any change in the
            interpretation or administration of any Capital Adequacy Regulation
            by any central bank or other Governmental Authority charged with the
            interpretation or administration thereof, or (D) compliance by such
            Lender or any corporation or other entity controlling such Lender
            with any Capital Adequacy Regulation, affects or would affect the
            amount of capital required or expected to be maintained by such
            Lender or any corporation or other entity controlling such Lender
            and (taking into consideration such Lender's or such corporation's
            or other entity's policies with respect to capital adequacy and such
            Lender's desired return on capital) determines that the amount of
            such

                                     Page 48
<PAGE>
            capital is increased as a consequence of its Revolving Commitment,
            Loans, credits, or obligations under this Agreement, then, upon
            demand of such Lender to the Borrowers through the Agent, the
            Borrowers shall pay to such Lender, from time to time as specified
            by such Lender, additional amounts sufficient to compensate such
            Lender for such increase.

            (d) Funding Losses. The Borrowers shall reimburse each Lender and
      hold each Lender harmless from any loss or expense which such Lender may
      sustain or incur as a consequence of:

                  (i) the failure of the Borrowers to make on a timely basis any
            payment of principal of any Eurodollar Loan;

                  (ii) the failure of the Borrowers to (i) borrow any requested
            Eurodollar Loan, (ii) Continue any Eurodollar Loan, or (iii) Convert
            a Base Rate Loan to a Eurodollar Loan after any Borrower has given
            (or is deemed to have given) a Notice of Borrowing or a Notice of
            Continuation/Conversion with respect thereto (except as permitted by
            Section 3.6(e)); or

                  (iii) the prepayment or other payment (including after
            acceleration thereof) of any Eurodollar Loans on a day that is not
            the last day of the relevant Interest Period;

      including any such loss of anticipated profit and any loss or expense
      arising from the liquidation or reemployment of funds obtained by such
      Lender to maintain its Eurodollar Loans or from fees payable to terminate
      the deposits from which such funds were obtained. The Borrowers shall also
      pay any customary administrative fees charged by any Lender in connection
      with the foregoing.

            (e) Inability to Determine Rates. If the Agent determines that for
      any reason adequate and reasonable means do not exist for determining the
      Eurodollar Rate for any requested Interest Period with respect to a
      proposed Eurodollar Loan, or that the Eurodollar Rate for any requested
      Interest Period with respect to a proposed Eurodollar Loan does not
      adequately and fairly reflect the cost to the Lenders of funding such
      Loan, the Agent will promptly so notify the Borrowers and each Lender.
      Thereafter, the obligation of the Lenders to make or maintain Eurodollar
      Loans hereunder shall be suspended until the Agent revokes such notice in
      writing. Upon receipt of a notice pursuant to the first sentence of this
      Section, the Borrowers may revoke any Notice of Borrowing or Notice of
      Continuation/Conversion then submitted by any of them. If the Borrowers do
      not revoke any such Notice of Borrowing or Notice of
      Continuation/Conversion, the Lenders shall make, Convert, or Continue the
      Loans, as proposed by the Borrowers, in the amount specified in the
      applicable notice submitted by the Borrowers, but such Loans shall be
      made, Converted, or Continued as Base Rate Loans instead of Eurodollar
      Loans.

                                     Page 49
<PAGE>
            (f) Certificates of the Agent. If any Lender claims reimbursement or
      compensation under this Section 3.6, the Agent shall determine the amount
      thereof and shall deliver to the Borrowers (with a copy to the affected
      Lender) a certificate setting forth in reasonable detail the amount
      payable to the affected Lender, and such certificate shall be conclusive
      and binding on the Borrowers in the absence of manifest error.

            (g) Survival. The agreements and obligations of the Borrowers in
      this Section 3.6 shall survive the payment of the Total Obligations.

      Section 3.7 Pro Rata Treatment. Except to the extent otherwise provided
herein:

            (a) Loans. Each Revolving Loan advance, each payment or prepayment
      of principal of any Revolving Loan (other than Non-Ratable Loans and
      Discretionary Over-Advances) or reimbursement obligations arising from
      drawings under Letters of Credit, each payment of interest on the
      Revolving Loans or reimbursement obligations arising from drawings under
      Letters of Credit, each payment of Unused Line Fees, each payment of the
      Letter of Credit Fee, each payment of early termination fee, each
      reduction of the Revolving Committed Amount (if any), and each
      Continuation or Conversion of any Revolving Loan shall be allocated pro
      rata among the Lenders in accordance with their respective Revolving
      Commitment Percentages.

            (b) Advances. No Lender shall be responsible for the failure or
      delay by any other Lender in its obligation to make its ratable share of a
      borrowing hereunder; provided, however, that the failure of any Lender to
      fulfill its obligations hereunder shall not relieve any other Lender of
      its obligations hereunder.

      Section 3.8 Sharing of Payments. The Lenders agree among themselves that,
in the event that any Lender shall obtain payment in respect of any Loan, LOC
Obligations, or any other obligation owing to such Lender under this Agreement
through the exercise of a right of setoff, banker's lien, or counterclaim, or
pursuant to a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim, received by such Lender under any applicable bankruptcy, insolvency, or
other similar law or otherwise, or by any other means, in excess of its pro rata
share of such payment as provided for in this Agreement, such Lender shall
promptly purchase from the other Lenders a Participation Interest in such Loans,
LOC Obligations, and other obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that all Lenders
share such payment in accordance with their respective ratable shares as
provided for in this Agreement. The Lenders further agree among themselves that
if payment to a Lender obtained by such Lender through the exercise of a right
of setoff, banker's lien, counterclaim, or other event as aforesaid shall be
rescinded or must otherwise be restored, each Lender which shall have shared the
benefit of such payment shall, by repurchase of a Participation Interest
theretofore sold, return its share of that benefit (together with its share of
any accrued interest payable with respect thereto) to each Lender whose payment
shall have been rescinded or otherwise restored. The Borrowers agree that any
Lender so purchasing such a Participation Interest may, to the fullest extent
permitted by law, exercise all rights of payment, including setoff, banker's
lien, or counterclaim, with respect to such Participation Interest as fully as
if such Lender were a holder

                                     Page 50
<PAGE>
of such Loan, LOC Obligations, or other obligation in the amount of such
Participation Interest. Except as otherwise expressly provided in this
Agreement, if any Lender or the Agent shall fail to remit to the Agent or any
other Lender an amount payable by such Lender or the Agent to the Agent or such
other Lender pursuant to this Agreement on the date when such amount is due,
such payments shall be made together with interest thereon for each date from
the date such amount is due until the date such amount is paid to the Agent or
such other Lender at a rate per annum equal to the Federal Funds Rate. If under
any applicable bankruptcy, insolvency, or other similar law, any Lender receives
a secured claim in lieu of a setoff to which this Section 3.8 applies, such
Lender shall, to the extent practicable, exercise its rights in respect of such
secured claim in a manner consistent with the rights of the Lenders under this
Section 3.8 to share in the benefits of any recovery on such secured claim.

      Section 3.9 Certain Limitations. The provisions of Section 3.6(a), Section
3.6(b), Section 3.6(c), and Section 3.6(d) shall be subject to the following:

            (a) Each Lender that desires compensation or indemnification under
      Section 3.6(a), Section 3.6(b), Section 3.6(c), or Section 3.6(d) shall
      notify the Borrowers through the Agent of any event occurring after the
      Closing Date entitling such Lender to compensation or indemnification
      under any of such Sections as promptly as practicable, but in any event
      within ninety (90) days after the occurrence of the event giving rise
      thereto; provided that (i) if any such Lender fails to give such notice
      within ninety (90) days after the occurrence of such an event, such Lender
      shall only be entitled to compensation or indemnification in respect of
      such event accruing under Section 3.6(a), Section 3.6(b), Section 3.6(c),
      or Section 3.6(d) with respect to the period from and after the date
      ninety (90) days prior to the date that such Lender does give notice.

            (b) Any notice given by a Lender pursuant to clause (a) preceding
      shall certify (i) that one of the events described in Section 3.6(a),
      Section 3.6(b), Section 3.6(c), or Section 3.6(d) has occurred, describing
      in reasonable detail the nature of such event, (ii) as to the increased
      cost, reduced amount receivable, or loss or expense resulting from such
      event, and (iii) as to the additional amount demanded by such Lender,
      attaching a reasonably detailed explanation of the calculation thereof.
      Such a certificate as to any compensation or indemnification payable
      pursuant to Section 3.6(a), Section 3.6(b), Section 3.6(c), or Section
      3.6(d), submitted by such Lender through the Agent to the Borrowers, shall
      be conclusive and binding on the parties hereto in the absence of manifest
      error.

            (c) If any Lender requests compensation or indemnification from the
      Borrowers under Section 3.6(a), Section 3.6(b), Section 3.6(c), or Section
      3.6(d), the Borrowers may, at their option, within fifteen (15) days after
      receipt by the Borrowers of written demand from the affected Lender for
      payment of such compensation or indemnification, notify the Agent and such
      affected Lender of their intention to replace the affected Lender. So long
      as no Event of Default shall have occurred and be continuing, the
      Borrowers may obtain, at the Borrowers' expense, a replacement Lender
      (which must be an Eligible Assignee reasonably acceptable to the Agent)
      for the affected Lender. If the Borrowers obtain a replacement Lender
      within ninety (90) days following

                                     Page 51
<PAGE>
      notice of their intention to do so, the affected Lender must sell and
      assign its loans and obligations and any Commitments to such replacement
      Lender pursuant to Section 10.3, for an amount equal to the principal
      balance of all Revolving Loans held by the affected Lender and all accrued
      interest and Fees with respect thereto through the date of such sale,
      provided that the Borrowers shall have paid to such affected Lender the
      compensation or indemnification that it is entitled to receive under
      Section 3.6(a), Section 3.6(b), Section 3.6(c), or Section 3.6(d), through
      the date of such sale and assignment. Notwithstanding the foregoing, the
      Borrowers shall not have the right to obtain a replacement Lender if the
      affected Lender rescinds its demand for such compensation or
      indemnification within fifteen (15) days following its receipt of the
      Borrowers' notice of intention to replace such affected Lender.
      Additionally, if the Borrowers give a notice to the Agent and an affected
      Lender of the Borrowers' intention to replace such affected Lender and the
      Borrowers do not so replace such affected Lender within ninety (90) days
      thereafter, the Borrowers' rights under this Section 3.9(c) shall
      terminate and the Borrowers shall promptly pay all compensation or
      indemnification demanded by such affected Lender pursuant to Section
      3.6(a), Section 3.6(b), Section 3.6(c), and Section 3.6(d).

      Section 3.10 Payments, Computations, Etc.

            (a) Generally. Except as otherwise specifically provided herein, all
      payments hereunder shall be made to the Agent in Dollars in immediately
      available funds, without setoff, deduction, counterclaim, or withholding
      of any kind, at the Agent's office specified in Section 10.1 not later
      than 10:00 a.m. (Pasadena, California time) on the date when due; provided
      that no Default or Event of Default shall be deemed to have occurred in
      connection with payments made on the due date but received after such
      cut-off time, even though credited for receipt on the following Business
      Day. Payments received after such time shall be deemed to have been
      received on the next succeeding Business Day. The Agent may (but shall not
      be obligated to) debit the amount of any such payment which is not made by
      such time to any ordinary deposit account of the Borrowers or any
      Guarantor maintained with the Agent (with notice to the Borrowers or such
      Guarantor). Each Borrower shall, at the time it makes any payment under
      this Agreement, specify to the Agent the Loans, LOC Obligations, Fees,
      interest, or other amounts payable by such Borrower hereunder to which
      such payment is to be applied (and in the event that such Borrower fails
      so to specify, or if such application would be inconsistent with the terms
      hereof, the Agent shall distribute such payment to the Lenders in such
      manner as the Agent may determine to be appropriate in respect of
      obligations owing by the Borrowers hereunder, subject to the terms of
      Section 3.7). The Agent will distribute such payments to such Lenders, if
      any such payment is received prior to 10:00 a.m. (Pasadena, California
      time) on a Business Day in like funds as received prior to the end of such
      Business Day and otherwise the Agent will distribute any such payment to
      such Lenders on the next succeeding Business Day. Whenever any payment
      hereunder shall be stated to be due on a day which is not a Business Day,
      the due date thereof shall be extended to the next succeeding Business Day
      (subject to accrual of interest and Fees for the period of such
      extension), except that in the case of Eurodollar Loans, if the extension
      would cause the payment to be made in the next following calendar month,
      then such payment shall

                                     Page 52
<PAGE>
      instead be made on the next preceding Business Day. Subject to Section
      2.8, unless expressly provided otherwise herein, all computations of
      interest and fees shall be made on the basis of actual number of days
      elapsed over a year of 360 days. Interest shall accrue from and include
      the date of borrowing, but exclude the date of payment.

            (b) Allocation of Payments After Event of Default. Notwithstanding
      any other provisions of this Agreement to the contrary, during the
      existence of an Event of Default, all amounts collected or received on or
      in respect of the Total Obligations shall be paid over or delivered as
      follows:

                  FIRST, to the payment of all reasonable out-of-pocket costs
            and expenses (including, without limitation, reasonable attorneys'
            fees) of the Agent actually incurred in connection with enforcing
            the rights and remedies of the Agent and the Lenders under the
            Credit Documents (including, without limitation, exercising rights
            and remedies in respect of the Collateral) and any protective
            advances (including any Discretionary Over-Advances) made with
            respect thereto, excluding any of the foregoing solely relating to
            Bank Products;

                  SECOND, to payment of any fees and expenses (including,
            without limitation, fees and expenses owing pursuant to Section
            10.5(a)) owed to the Agent under the Credit Documents and not paid
            pursuant to clause "FIRST" preceding, excluding any of the foregoing
            solely relating to Bank Products;

                  THIRD, to the payment of all accrued interest and fees on or
            in respect of the Obligations;

                  FOURTH, to the payment of the outstanding principal amount of
            the Obligations hereunder (including the payment or cash
            collateralization of the outstanding LOC Obligations);

                  FIFTH, to the payment of all amounts due with respect to Bank
            Products;

                  SIXTH, to all other obligations hereunder and other
            obligations which shall have become due and payable under the Credit
            Documents otherwise and not repaid pursuant to clauses "FIRST"
            through "FIFTH" preceding; and

                  SEVENTH, to the payment of the surplus, if any, to whoever may
            be lawfully entitled to receive such surplus.

      In carrying out the foregoing, (i) amounts received shall be applied in
      the numerical order provided until exhausted prior to application to the
      next succeeding category, (ii) except as otherwise provided, the Lenders
      shall receive amounts ratably in accordance with their respective pro rata
      share (based on the proportion that the then outstanding Obligations held
      by such Lenders bears to the aggregate amount of Obligations then
      outstanding) of amounts available to be applied pursuant to clauses
      "THIRD", "FOURTH", and "SIXTH" preceding, and (iii) to the extent that any
      amounts available for distribution

                                     Page 53
<PAGE>
      pursuant to clause "FOURTH" preceding are attributable to the issued but
      undrawn amount of outstanding Letters of Credit, such amounts shall be
      held by the Agent in a cash collateral account and applied (A) first, to
      reimburse the Issuing Lender for any drawings under such Letters of Credit
      and (B) then, following the expiration of all Letters of Credit, to all
      other obligations of the types described in clauses "THIRD" and "FOURTH"
      preceding in the manner provided in this Section 3.10(b).

      Section 3.11 Evidence of Debt.

            (a) Each Lender shall maintain an account or accounts evidencing
      each Loan made by such Lender to the Borrowers from time to time,
      including the amounts of principal and interest payable and paid to such
      Lender from time to time under this Agreement. Each Lender will make
      reasonable efforts to maintain the accuracy of its account or accounts and
      to promptly update its account or accounts from time to time, as
      necessary.

            (b) The Agent shall maintain the Register pursuant to Section
      10.3(g), and a subaccount for each Lender, in which Register and
      subaccounts (taken together) shall be recorded (i) the amount, type, and
      Interest Period of each such Loan hereunder, (ii) the amount of any
      principal or interest due and payable or to become due and payable to each
      Lender hereunder, and (iii) the amount of any sum received by the Agent
      hereunder from or for the account of the Borrowers or any Guarantor and
      each Lender's share thereof. The Agent will make reasonable efforts to
      maintain the accuracy of the subaccounts referred to in the preceding
      sentence and to promptly update such subaccounts from time to time, as
      necessary.

            (c) The entries made in the accounts, Register, and subaccounts
      maintained pursuant to clause (b) preceding (and, if consistent with the
      entries of the Agent, clause (a)) shall be prima facie evidence of the
      existence and amounts of the obligations of the Borrowers and the
      Guarantors therein recorded absent manifest error; provided, however, that
      the failure of any Lender or the Agent to maintain any such account, such
      Register, or such subaccount, as applicable, or any error therein, shall
      not in any manner affect the obligation of the Borrowers or the Guarantors
      to repay the Loans and obligations owing hereunder and under the other
      Credit Documents to such Lender.

      Section 3.12 Bank Products. The Borrowers may request and the Agent may,
in its sole and absolute discretion, arrange for the Credit Parties to obtain
Bank Products from Bank of America or any Affiliate of Bank of America although
no Credit Party is required to do so. To the extent Bank Products are provided
by an Affiliate of Bank of America, the Borrowers agree to indemnify and hold
the Agent, Bank of America, and the Lenders harmless from any and all costs and
obligations now or hereafter incurred by the Agent, Bank of America, or any of
the Lenders which arise from any indemnity given by the Agent to its Affiliates
related to such Bank Products; provided, however, nothing contained herein is
intended to limit any Credit Party's rights, with respect to Bank of America or
its Affiliates, if any, which arise as a result of the execution of documents by
and between such Credit Party and Bank of America or its Affiliates which relate
to Bank Products. The agreement contained in this Section shall survive

                                     Page 54
<PAGE>
termination of this Agreement. The Borrowers acknowledge and agree that the
obtaining of Bank Products by the Credit Parties from Bank of America or Bank of
America's Affiliates (a) is in the sole and absolute discretion of Bank of
America or Bank of America's Affiliates, and (b) is subject to all rules and
regulations of Bank of America or Bank of America's Affiliates.

                                   ARTICLE 4

                                   CONDITIONS

      Section 4.1 Closing Conditions. The obligation of the Lenders to enter
into this Agreement and to make the initial Extensions of Credit shall be
subject to satisfaction of the following conditions (in form and substance
acceptable to the Lenders).

            (a) Executed Credit Documents. The Agent shall have received: (i)
      multiple counterparts of this Agreement, (ii) a Revolving Note for each
      Lender, (iii) multiple counterparts of the Collateral Documents and
      Guaranty Agreements (if any), and (iv) multiple counterparts of the
      Friedman's Intercreditor Agreement, in each case executed by a duly
      authorized officer of each party thereto and in each case conforming to
      the requirements of this Agreement.

            (b) Legal Opinions. The Agent shall have received multiple
      counterparts of opinions of counsel for the Credit Parties relating to the
      Credit Documents and the transactions contemplated therein, in form and
      substance satisfactory to the Agent and the Lenders, and including, among
      other things, opinions regarding enforceability of the Credit Documents
      and the perfection of the security interests created thereby.

            (c) Financial Information. The Lenders shall have received of such
      financial information regarding the members of the Consolidated Group as
      may be requested by, and in each case in form and substance satisfactory
      to, the Agent and the Lenders.

            (d) Personal Property Collateral. The Agent shall have received each
      of the following:

                  (i) UCC financing statements for each jurisdiction as is
            necessary or appropriate, in the Agent's discretion, to perfect the
            Agent's Liens in the Collateral;

                  (ii) original certificates evidencing the Capital Stock which
            is pledged as Collateral pursuant to any Credit Document (including
            100% of the Capital Stock of Crescent), together with undated stock
            transfer powers executed in blank;

                  (iii) such patent, trademark, and copyright notices and
            filings as necessary or appropriate, in the Agent's discretion, to
            perfect the security interests of the Agent in the Credit Parties'
            Intellectual Property;

                  (iv) a landlord's or mortgagee's waiver and consent agreement,
            in form and substance satisfactory to the Agent, duly executed on
            behalf of each landlord

                                     Page 55
<PAGE>
            or mortgagee, as the case may be, of Real Property, excluding retail
            store locations, on which any Collateral is located (provided that
            the Agent may, in its discretion, waive or defer such requirement or
            establish a Reserve with respect to any Collateral located on any
            Real Property for which the Agent has not received an acceptable
            waiver and consent agreement); and

                  (v) bailee agreements with each Person as the Agent determines
            are necessary, in form and substance satisfactory to the Agent, with
            respect to any Installment Contracts held by any such bailee
            (provided that the Agent may, in its discretion, establish a Reserve
            with respect to any such Installment Contracts held by any bailee
            for which the Agent has not received an acceptable bailee
            agreement).

            (e) Evidence of Insurance. The Agent shall have received evidence,
      in form, scope, and substance, reasonably satisfactory to the Agent, of
      all insurance coverage as required by this Agreement together with loss
      payable endorsements in form acceptable to the Agent.

            (f) Absence of Legal Proceedings. There shall not exist any action,
      suit, investigation, or proceeding pending in any court or before any
      arbitrator or Governmental Authority which could reasonably be expected to
      have a Material Adverse Effect.

            (g) Corporate Documents. The Agent shall have received the following
      (or their equivalent) for each of the Credit Parties:

                  (i) copies of the organization documents of such Credit Party
            certified to be true and complete as of a recent date by the
            appropriate Governmental Authority of the state or other
            jurisdiction of its organization and certified by a secretary,
            assistant secretary, general partner, or similar Person of such
            Credit Party to be true and correct as of the Closing Date;

                  (ii) a copy of the bylaws, partnership agreement, operating
            agreement, or other equivalent agreement or document of such Credit
            Party certified by a secretary, assistant secretary, general
            partner, or similar Person of such Credit Party to be true and
            correct and in force and effect as of the Closing Date;

                  (iii) copies of resolutions of the board of directors of such
            Credit Party or of the general partner, members, or similar Persons
            approving and adopting the Credit Documents to which such Credit
            Party is a party and the transactions contemplated therein and
            authorizing execution and delivery thereof, certified by a
            secretary, assistant secretary, general partner, or such Person of
            such Credit Party to be true and correct and in force and effect as
            of the Closing Date;

                  (iv) certificates of good standing and existence (or its
            equivalent) with respect to each Credit Party certified as of a
            recent date by the appropriate

                                     Page 56
<PAGE>
            Governmental Authorities of the state of organization and each other
            state in which the failure to so qualify and be in good standing
            would be reasonably likely to have a Material Adverse Effect on the
            business or operations of such Credit Party in such state; and

                  (v) an officer's certificate of the Credit Parties, dated as
            of the Closing Date, certifying to such factual matters as may be
            reasonably requested by the Agent.

            (h) Priority of Liens. The Agent shall have received satisfactory
      evidence that (i) the Agent holds a perfected, first priority Lien on all
      Collateral (subject only to Permitted Liens which are specifically
      permitted to have priority over the Liens of the Agent) and (ii) none of
      the Collateral is subject to any Liens other than Permitted Liens.

            (i) Officer's Certificates. The Agent shall have received a
      certificate executed by an Executive Officer of Crescent as of the Closing
      Date, in form and substance satisfactory to the Agent, stating that (i)
      each Borrower and each Guarantor is in compliance with all existing
      financial obligations, (ii) all governmental, shareholder, and third party
      consents and approvals, if any, necessary with respect to the Credit
      Documents and the transactions contemplated thereby have been obtained,
      (iii) there is no pending or, to such Executive Officer's knowledge,
      threatened action, suit, investigation, or proceeding in any court or
      before any arbitrator or governmental instrumentality that purports to
      affect any Borrower or any Guarantor or any transaction contemplated by
      the Credit Documents, which could reasonably be expected to have a
      Material Adverse Effect, (iv) immediately after giving effect to the
      initial Extensions of Credit on the Closing Date, (A) no Default or Event
      of Default exists, (B) all representations and warranties contained herein
      and in the other Credit Documents are true and correct in all material
      respects, and (C) the Credit Parties are in compliance on a Pro Forma
      Basis as of the Closing Date with each of the financial covenants set
      forth in Section 6.11 (assuming for purposes hereof that such financial
      covenants were measured as of, and for the twelve (12) Fiscal Periods
      ending on, the most recent Fiscal Period end and attaching detailed
      calculations demonstrating such compliance), (v) all conditions to funding
      of the Friedman's Subordinated Debt have been met, Crescent has received
      the proceeds of the Friedman's Subordinated Debt, and attaching true,
      correct, and complete copies of the Friedman's Subordinated Debt
      Documents, and (vi) all conditions to completion of the Friedman's Stock
      Sale have been met, Crescent has received the proceeds of the Friedman's
      Stock Sale, and attaching true, correct, and complete copies of the
      agreements, documents, and instruments executed and delivered in
      connection therewith.

            (j) Merchant Account Agreements. The Agent shall have received true,
      correct, and complete copies of all Merchant Account Agreements for which
      any Credit Party is party thereto.

            (k) Borrowing Base Certificate. The Agent shall have received a
      Borrowing Base Certificate dated as of the most recent week-end preceding
      the Closing Date, in

                                     Page 57
<PAGE>
      form and substance satisfactory to the Agent and certified by the chief
      financial officer of Crescent to be true and correct as of the date
      thereof.

            (l) Field Audit. Representatives of the Agent shall have completed a
      field audit of the accounts receivable, inventory, accounts payable, and
      accounting controls and systems of the members of the Consolidated Group
      with results and findings acceptable to the Agent and the Lenders.

            (m) Fees and Expenses. The Borrowers and the Guarantors shall have
      paid to the Lenders and the Agent of all fees and expenses owed by them in
      connection with this Agreement and the other Credit Documents, including,
      without limitation, payment to the Agent and CIT of the fees set forth in
      the Agents' Fee Letter.

            (n) Availability. After giving effect to the making of all
      Extensions of Credit (including any Loans made to finance the fees and
      expenses set forth in the Agents' Fee Letter or otherwise as reimbursement
      for fees, costs, and expenses then payable in connection with this
      Agreement and the other Credit Documents), and with all of the Borrowers'
      obligations current, on the Closing Date, the Borrowing Base shall exceed
      the outstanding Obligations by an amount not less than (a) $5,000,000,
      plus (b) the amount by which accounts payable of the Borrowers which are
      over sixty (60) days past due exceed $10,000,000.

            (o) Friedman's Subordinated Debt and Friedman's Stock Sale Funding.
      Crescent shall have received the proceeds of the Friedman's Subordinated
      Debt and the Friedman's Stock Sale in an aggregate amount not less than
      $85,000,000.

      Section 4.2 Conditions to all Extensions of Credit. The obligation of each
Lender to make any Loan or of the Issuing Lender to issue any Letter of Credit
hereunder (including the initial Extension of Credit to be made hereunder) is
subject to the satisfaction of the following conditions precedent on the date of
making such Extension of Credit:

            (a) Representations and Warranties. The representations and
      warranties made by the Borrowers and the Guarantors herein and in the
      other Credit Documents or which are contained in any certificate furnished
      at any time under or in connection herewith or therewith shall be true and
      correct in all material respects on and as of the date of such Extension
      of Credit as if made on and as of such date (except for those which
      expressly relate to an earlier date and except for changes expressly
      permitted therein or as expressly contemplated herein).

            (b) No Default or Event of Default. No Default or Event of Default
      shall have occurred and be continuing on such date or after giving effect
      to the Extension of Credit to be made on such date unless such Default or
      Event of Default shall have been waived in accordance with this Agreement.

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<PAGE>
            (c) Material Adverse Effect. No event has occurred and is
      continuing, or would result from such Extension of Credit, which has had
      or would have a Material Adverse Effect.

            (d) Additional Conditions to Revolving Loans and Letters of Credit.
      If making of a Revolving Loan, or issuance of a Letter of Credit, is
      requested pursuant to Section 2.1 and Section 2.2, all conditions set
      forth in Article 2 shall have been satisfied.

Each request for an Extension of Credit (including Continuations and
Conversions) and each acceptance by any Borrower of an Extension of Credit
(including Continuations and Conversions) shall be deemed to constitute a
representation and warranty by the Borrowers as of the date of such Extension of
Credit that the applicable conditions in clauses (a), (b), and (c) preceding (as
applicable) have been satisfied.

                                   ARTICLE 5

                         REPRESENTATIONS AND WARRANTIES

      To induce the Lenders to enter into this Agreement and to make the
Extensions of Credit hereunder, each of the Borrowers and the Guarantors hereby
represents and warrants to the Agent and to each Lender that:

      Section 5.1 Financial Condition. Each of the financial statements
described below (copies of which have heretofore been provided to the Agent for
distribution to the Lenders) have been prepared in accordance with GAAP
consistently applied throughout the periods covered thereby, are complete and
correct in all material respects and present fairly in all material respects the
financial condition (including disclosure of all material liabilities,
contingent or otherwise) and results from operations of the entities and for the
periods specified, subject in the case of interim company-prepared statements to
normal year-end adjustments and the absence of footnotes:

            (a) audited consolidated balance sheets for the Parent and its
      Subsidiaries dated as of July 31, 1999, July 31, 2000, and July 28, 2001,
      together with related audited consolidated statements of income and cash
      flows for the Fiscal Years then ending, certified by Ernst & Young LLP,
      certified public accountants;

            (b) company prepared consolidated balance sheets for the Parent and
      its Subsidiaries as of June 28, 2002, together with related consolidated
      statements of income and cash flows for the Fiscal Period then ending; and

            (c) after the Closing Date, the annual and periodic financial
      statements provided in accordance with Section 6.1(a) and Section 6.1(b).

      Section 5.2 No Changes or Restricted Payments. Except as set forth on
Schedule 5.2, since the date of the most recent annual audited financial
statements referenced in Section 5.1(a),

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<PAGE>
            (a) for the period from the date of such financial statements to the
      Closing Date, except as previously disclosed in writing to the Agent and
      the Lenders, (i) there have been no material sales, transfers, or other
      dispositions of any material part of the business or property of the
      members of the Consolidated Group, nor have there been any material
      purchases or other acquisitions of any business or property (including the
      Capital Stock of any other Person) by the members of the Consolidated
      Group, which are not reflected in the annual audited or company prepared
      periodic financial statements referenced in Section 5.1(a) and Section
      5.1(b), and (ii) no Restricted Payments have been declared or paid by
      members of the Consolidated Group to any Person which is not a Credit
      Party; and

            (b) there has been no circumstance, development, or event relating
      to or affecting the members of the Consolidated Group which has had or
      could reasonably be expected to have a Material Adverse Effect.

      Section 5.3 Organization; Existence; Compliance with Law. Each of the
members of the Consolidated Group (a) is duly incorporated, organized, or formed
and validly existing in good standing under the laws of the jurisdiction of its
incorporation, organization, or formation (b) has the corporate or other
necessary power and authority, and the legal right to own and operate its
Property, to lease the Property it operates as lessee, and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
entity and in good standing under the laws of each jurisdiction where its
ownership, lease, or operation of Property or the conduct of its business
requires such qualification, other than in such jurisdictions where the failure
to be so qualified and in good standing would not, in the aggregate, have a
Material Adverse Effect, and (d) is in compliance with all Requirements of Law
(including, without limitation, Consumer Protection Laws), except to the extent
that the failure to comply therewith would not, in the aggregate, be reasonably
expected to have a Material Adverse Effect.

      Section 5.4 Power; Authorization; Enforceable Obligations. Each of the
Credit Parties has the corporate or other necessary power and authority, and the
legal right, to make, deliver, and perform the Credit Documents to which it is a
party and has taken all necessary corporate or other action to authorize the
execution, delivery, and performance by it of the Credit Documents to which it
is a party. No consent or authorization of, filing with, notice to, or other act
by or in respect of, any Governmental Authority or any other Person is required
in connection with acceptance of Extensions of Credit or the making of the
guaranties hereunder or with the execution, delivery, or performance of any
Credit Documents by the Credit Parties (other than those which have been
obtained, such filings as are required by the Securities and Exchange Commission
and to fulfill other reporting requirements with Governmental Authorities) or
with the validity or enforceability of any Credit Document against the Credit
Parties (except such filings as are necessary in connection with the perfection
of the Liens created by such Credit Documents). Each Credit Document to which it
is a party constitutes a legal, valid, and binding obligation of such Credit
Party enforceable against such Credit Party in accordance with its respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law).

                                     Page 60
<PAGE>
      Section 5.5 No Legal Bar. The execution, delivery, and performance of the
Credit Documents, the borrowings hereunder, and the use of the Extensions of
Credit will not violate any Requirement of Law or any Contractual Obligation of
any member of the Consolidated Group (except those as to which waivers or
consents have been obtained), and will not result in, or require, the creation
or imposition of any Lien on any Property or revenue of any member of the
Consolidated Group pursuant to any Requirement of Law or Contractual Obligation
other than the Liens arising under or contemplated in connection with the Credit
Documents. No member of the Consolidated Group is in default under or with
respect to any of its Contractual Obligations in any respect which would
reasonably be expected to have a Material Adverse Effect. The Credit Parties'
entering into the Credit Documents and incurrence of the Total Obligations is
not prohibited under the terms of any Subordinated Debt.

      Section 5.6 No Material Litigation and Disputes.

            (a) Except as set forth on Schedule 5.6, no claim, litigation,
      investigation, or proceeding of or before any arbitrator or Governmental
      Authority is pending or, to the best knowledge of the Borrowers and the
      Guarantors, threatened by or against, any members of the Consolidated
      Group or against any of their respective Properties or revenues which (i)
      relate to the Credit Documents or any of the transactions contemplated
      hereby or thereby or (ii) would reasonably be expected to have a Material
      Adverse Effect.

            (b) No default exists and, to the best knowledge of the Borrowers
      and the Guarantors, no default has been asserted, under any Contractual
      Obligations to which any members of the Consolidated Group are party which
      individually or in the aggregate could reasonably be expected to have a
      Material Adverse Effect.

      Section 5.7 No Defaults. No Default or Event of Default has occurred and
is continuing.

      Section 5.8 Ownership and Operation of Property. Each of the members of
the Consolidated Group (a) has good record and marketable title to, or a valid
leasehold interest in, all its material Real Property, and good title to, or a
valid leasehold interest in, all its other material Property, and none of such
Property is subject to any Lien, except for Permitted Liens, and (b) holds all
licenses, permits, franchises, or other certifications, consents, approvals, and
authorizations, governmental or private, necessary to the ownership of its
Property and to the conduct of its business, except for any such licenses,
permits, franchises, or other certifications, consents, approvals, and
authorizations which the failure to hold could not reasonably be expected to
have a Material Adverse Effect.

      Section 5.9 Intellectual Property. Each of the members of the Consolidated
Group owns, or has the legal right to use, all United States trademarks,
tradenames, copyrights, patents, technology, know-how, and processes, if any,
necessary for each of them to conduct its business as currently conducted (the
"Intellectual Property") except for those the failure to own or have such legal
right to use would not be reasonably expected to have a Material Adverse Effect.
Schedule 5.9 sets forth a list of the Intellectual Property owned and used by
members of the Consolidated Group, as of the Closing Date. No claim has been
asserted in writing to any

                                     Page 61
<PAGE>
Borrower or any Guarantor and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the validity or
effectiveness of any such Intellectual Property, and the use of such
Intellectual Property by the members of the Consolidated Group does not infringe
on the rights of any Person, except for such claims and infringements that, in
the aggregate, could not be reasonably expected to have a Material Adverse
Effect.

      Section 5.10 No Burdensome Restrictions. No Requirement of Law or
Contractual Obligation of the members of the Consolidated Group would be
reasonably expected to have a Material Adverse Effect.

      Section 5.11 Taxes. Each member of the Consolidated Group has filed or
caused to be filed all income tax returns (federal, state, local, and foreign)
and all other tax returns which are required to be filed and has paid, except
where any failure to file or pay could not reasonably be expected to have a
Material Adverse Effect, (a) all amounts shown therein to be due (including
interest and penalties) and (b) all other taxes, fees, assessments, and other
governmental charges (including mortgage recording taxes, documentary stamp
taxes, and intangibles taxes) owing, except for such taxes which are not yet
delinquent or as are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have been
established unless the failure to make any such payment could give rise to an
immediate right to foreclose on a Lien securing such amounts. No tax claim or
assessment has been asserted against any member of the Consolidated Group which
if adversely determined could reasonably be expected to have a Material Adverse
Effect.

      Section 5.12 ERISA. Except as would not reasonably be expected to have a
Material Adverse Effect:

            (a) During the five (5) year period prior to the date on which this
      representation is made or deemed made: (i) no ERISA Event has occurred,
      and, to the best knowledge of the Borrowers and the Guarantors, no event
      or condition has occurred or exists as a result of which any ERISA Event
      could reasonably be expected to occur, with respect to any Plan; (ii) no
      "accumulated funding deficiency," as such term is defined in Section 302
      of ERISA and Section 412 of the Internal Revenue Code, whether or not
      waived, has occurred with respect to any Plan; (iii) each Plan has been
      maintained, operated, and funded in compliance with its own terms and in
      material compliance with the provisions of ERISA, the Internal Revenue
      Code, and any other applicable federal or state laws; and (iv) no lien in
      favor of the PBGC or a Plan has arisen or is reasonably likely to arise on
      account of any Plan.

            (b) The actuarial present value of all "benefit liabilities" (as
      defined in Section 4001(a)(16) of ERISA), whether or not vested, under
      each Single Employer Plan, as of the last annual valuation date prior to
      the date on which this representation is made or deemed made (determined,
      in each case, in accordance with Financial Accounting Standards Board
      Statement 87, utilizing the actuarial assumptions used in such Plan's most
      recent actuarial valuation report), did not exceed as of such valuation
      date the fair market value of the assets of such Plan.

                                     Page 62
<PAGE>
            (c) No member of the Consolidated Group has incurred, or, to the
      best knowledge of the Borrowers and the Guarantors, could be reasonably
      expected to incur, any withdrawal liability under ERISA to any
      Multiemployer Plan or Multiple Employer Plan. No member of the
      Consolidated Group would become subject to withdrawal liability under
      ERISA if any member of the Consolidated Group were to withdraw completely
      from all Multiemployer Plans and Multiple Employer Plans as of the
      valuation date most closely preceding the date on which this
      representation is made or deemed made. No member of the Consolidated Group
      has received any notification that any Multiemployer Plan is in
      reorganization (within the meaning of Section 4241 of ERISA), is insolvent
      (within the meaning of Section 4245 of ERISA), or has been terminated
      (within the meaning of Title IV of ERISA), and no Multiemployer Plan is,
      to the best knowledge of the Borrowers and the Guarantors, reasonably
      expected to be in reorganization, insolvent, or terminated.

            (d) No prohibited transaction (within the meaning of Section 406 of
      ERISA or Section 4975 of the Internal Revenue Code) or breach of fiduciary
      responsibility has occurred with respect to a Plan which has subjected or
      may subject any member of the Consolidated Group to liability under
      Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the
      Internal Revenue Code, or under any agreement or other instrument pursuant
      to which any member of the Consolidated Group has agreed or is required to
      indemnify any Person against any such liability.

            (e) No member of the Consolidated Group has liability with respect
      to "expected post-retirement benefit obligations" within the meaning of
      the Financial Accounting Standards Board Statement 106. Each Plan which is
      a welfare plan (as defined in Section 3(1) of ERISA) to which Sections
      601-609 of ERISA and Section 4980B of the Internal Revenue Code apply has
      been administered in compliance in all material respects of such sections.

            (f) Neither the execution and delivery of this Credit Agreement nor
      the consummation of the financing transactions contemplated thereunder
      will involve any transaction which is subject to the prohibitions of
      Sections 404, 406, or 407 of ERISA by reason of the identity of any member
      of the Consolidated Group or in connection with which a tax could be
      imposed on any member of the Consolidated Group pursuant to Section 4975
      of the Internal Revenue Code.

            (g) No ERISA Affiliate that is not a member of the Consolidated
      Group has incurred, or to the best knowledge of the Borrowers and the
      Guarantors, could reasonably be expected to incur, any liability under
      ERISA, the Internal Revenue Code or otherwise in relation to any ERISA
      Affiliate Plan that would have a Material Adverse Effect.

      Section 5.13 Use of Proceeds; Governmental Regulations, Etc.

            (a) The proceeds of the Loans are to be used solely for the purposes
      specified in Section 5.15. No Credit Party is in the business of buying or
      selling Margin Stock or extending credit for the purpose of buying or
      carrying Margin Stock.

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<PAGE>
            (b) None of the members of the Consolidated Group is subject to
      regulation under the Public Utility Holding Company Act of 1935, the
      Federal Power Act, or the Investment Company Act of 1940, each as amended.
      In addition, none of the members of the Consolidated Group is (i) an
      "investment company" registered or required to be registered under the
      Investment Company Act of 1940, as amended, and is not controlled by such
      a company, or (ii) a "holding company", or a "subsidiary company" of a
      "holding company", or an "affiliate" of a "holding company" or of a
      "subsidiary" of a "holding company", within the meaning of the Public
      Utility Holding Company Act of 1935, as amended.

      Section 5.14 Subsidiaries. Schedule 5.14 sets forth all of the
Subsidiaries of the Parent as of the Closing Date, including the jurisdiction of
organization, classes of Capital Stock (including options, warrants, rights of
subscription, conversion and exchangeability and other similar rights),
ownership, and ownership percentages thereof. The outstanding shares of Capital
Stock shown have been duly authorized and validly issued and, in the case of any
corporation, are fully paid and non-assessable and are owned free of Liens other
than Liens of the type described in clauses (a), (b), (c), (f), and (q) of the
definition of Permitted Liens. Except as identified on Schedule 5.14, the
outstanding shares of Capital Stock shown are not the subject of any buy-sell,
voting trust, or other shareholder agreement and are not subject to the
preemptive rights of any Person.

      Section 5.15 Purpose of Extensions of Credit. The Loans will be used by
the Borrowers solely to (a) refinance the indebtedness, liabilities, and
obligations of Crescent under the Original Credit Agreement and (b) provide
working capital and for other general corporate purposes of the Credit Parties.
No portion of the Loan proceeds will be used directly or indirectly (w) to buy
or carry any Margin Stock, (x) to repay or otherwise refinance indebtedness of
any Person incurred to buy or carry any Margin Stock, (y) to extend credit for
the purpose of buying or carrying any Margin Stock, or (z) to acquire any
security in any transaction that is subject to Section 13 or 14 of the
Securities Exchange Act of 1934 and the regulations promulgated thereunder, and
notwithstanding any other provision to the contrary, no portion of the Loans
will be used for any purpose which violates any provision of Regulation T,
Regulation U, or Regulation X.

      Section 5.16 Environmental Matters. Except as would not reasonably be
expected to have a Material Adverse Effect:

            (a) Each of the facilities and properties owned, leased, or operated
      by the members of the Consolidated Group (the "Subject Properties") and
      all operations at the Subject Properties are in compliance with all
      applicable Environmental Laws, and there is no violation of any
      Environmental Law with respect to the Subject Properties or the businesses
      operated by the members of the Consolidated Group (the "Businesses"), and
      there are no conditions relating to the Businesses or Subject Properties
      that could give rise to liability under any applicable Environmental Laws.

            (b) None of the Subject Properties contains, or to the knowledge of
      the Borrowers or the Guarantors has previously contained, any Materials of
      Environmental Concern at, on or under the Subject Properties in amounts or
      concentrations that

                                     Page 64
<PAGE>
      constitute or constituted a violation of, or could give rise to liability
      under, Environmental Laws.

            (c) None of the members of the Consolidated Group has received any
      written notice of, or written inquiry from any Governmental Authority
      regarding, any violation, alleged violation, non-compliance, liability, or
      potential liability regarding environmental matters or compliance with
      Environmental Laws with regard to any of the Subject Properties or the
      Businesses, nor does any member of the Consolidated Group have knowledge
      or reason to believe that any such notice will be received or is being
      threatened.

            (d) Materials of Environmental Concern have not been transported or
      disposed of from the Subject Properties, or generated, treated, stored, or
      disposed of at, on or under any of the Subject Properties or any other
      location, in each case by or on behalf of any members of the Consolidated
      Group in violation of, or in a manner that would be reasonably likely to
      give rise to liability under, any applicable Environmental Law.

            (e) No judicial proceeding or governmental or administrative action
      is pending or, to the best knowledge of the Borrowers or the Guarantors,
      threatened, under any Environmental Law to which any member of the
      Consolidated Group is or will be named as a party, nor are there any
      consent decrees or other decrees, consent orders, administrative orders,
      or other orders, or other administrative or judicial requirements
      outstanding under any Environmental Law with respect to any member of the
      Consolidated Group, the Subject Properties, or the Businesses.

            (f) There has been no release or, threat of release of Materials of
      Environmental Concern at or from the Subject Properties, or arising from
      or related to the operations (including, without limitation, disposal) of
      any member of the Consolidated Group in connection with the Subject
      Properties or otherwise in connection with the Businesses, in violation of
      or in amounts or in a manner that could give rise to liability under
      Environmental Laws.

      Section 5.17 No Material Misstatements. None of the information, reports,
financial statements, exhibits, or schedules, taken as a whole, furnished by or
on behalf of any member of the Consolidated Group to the Agent or any Lender in
connection with the negotiation of the Credit Documents or included therein or
delivered pursuant thereto contained, contains, or will contain any misstatement
of a material fact or omitted, omits, or will omit to state any material fact
necessary to make the statements therein not materially misleading, provided
that to the extent any such information, report, financial statement, exhibit,
or schedule was based upon or constitutes a forecast or projection, each of the
Borrowers and the Guarantors represents only that it acted in good faith and
utilized reasonable assumptions and due care in the preparation of such
information, report, financial statement, exhibit, or schedule.

      Section 5.18 Labor Matters. Except as set forth in Schedule 5.18, as of
the Closing Date,

                                     Page 65
<PAGE>
            (a) there are no strikes or lockouts against any members of the
      Consolidated Group pending or, to the best knowledge of the Borrowers and
      the Guarantors, threatened;

            (b) the hours worked by and payments made to employees of the
      Consolidated Group have not been in violation of the Fair Labor Standards
      Act or any other applicable federal, state, local, or foreign law dealing
      with such matters in any case where a Material Adverse Effect would
      reasonably be expected to occur as a result of the violation thereof;

            (c) all payments due from members of the Consolidated Group, or for
      which any claim may be made against a member of the Consolidated Group, on
      account of wages and employee health and welfare insurance and other
      benefits, have been paid or accrued as a liability on the books of the
      respective members of the Consolidated Group; and

            (d) none of the members of the Consolidated Group is party to a
      collective bargaining agreement.

      Section 5.19 Security Documents.

            (a) Security Agreements. Each Security Agreement is effective to
      create in favor of the Agent, for the benefit of the Agent and the
      Lenders, a legal valid and enforceable security interest in the
      "Collateral" identified therein and, when financing statements in
      appropriate form are filed in the appropriate offices for the locations
      specified as the jurisdiction of incorporation or organization (as
      applicable) of each Credit Party in Schedule 2.4(d) to each such Security
      Agreement, such Security Agreement shall create a fully perfected Lien on,
      pledge of, and security interest in, all right, title, and interest of the
      grantors thereunder in such "Collateral" that may be perfected by filing,
      recording, or registering a financing statement under the UCC, in each
      case prior and superior in right to any other Lien on any Collateral other
      than Permitted Liens which are specifically permitted to have priority
      over the Liens of the Agent.

            (b) Intellectual Property. Each Security Agreement together with the
      applicable Notice of Grant of Security Interest in Trademarks and the
      applicable Notice of Grant of Security Interest in Patents filed with the
      United States Patent and Trademark Office, and the applicable Notice of
      Grant of Security Interest in Copyrights filed with the United States
      Copyright Office will create a fully perfected Lien on, and security
      interest in, all right, title, and interest of the grantors thereunder in
      all Patents and Patent Licenses, Trademarks and Trademark Licenses, and
      Copyrights and Copyright Licenses (each as defined in such Security
      Agreement) and in which a security interest may be perfected by filing,
      recording, or registration of a Notice in the United States Patent and
      Trademark Office and the United States Copyright Office, in each case
      prior and superior in right to any other Lien other than Permitted Liens
      which are specifically permitted hereunder to have priority over the Liens
      of the Agent.

                                     Page 66
<PAGE>
            (c) Mortgages. The Mortgages (if any) are effective to create in
      favor of the Agent, for the benefit of the Agent and the Lenders, a legal,
      valid and enforceable Lien on all of the respective grantors' right,
      title, and interest in and to the Mortgaged Property thereunder and the
      proceeds thereof, and constitute fully perfected Liens on, and security
      interests in, all right, title, and interest of the grantors in such
      Mortgaged Property and the proceeds thereof, in each case prior and
      superior in right to any other Lien other than Permitted Liens which are
      specifically permitted hereunder to have priority over the Liens of the
      Agent.

      Section 5.20 Location of Real Property and Leased Premises. As of the
Closing Date:

            (a) Schedule 5.20 sets forth a complete and correct list of all Real
      Property located in the United States and owned or leased by any member of
      the Consolidated Group with street address and state where located;

            (b) Schedule 5.20 sets forth a list of all locations where any
      tangible personal property of any member of the Consolidated Group is
      located, including street address and state where located; and

            (c) Schedule 5.20 sets forth the chief executive office and
      principal place of business of each member of the Consolidated Group.

      Section 5.21 Solvency. Each of the Borrowers is, and the Credit Parties
(taken as a whole) are, Solvent prior to and after giving effect to each
Extension of Credit to be made on the Closing Date (including the inclusion of
each Existing Letter of Credit as a Letter of Credit hereunder).

      Section 5.22 Friedman's Subordinated Debt Documents. The Credit Parties
have delivered to the Agent true and correct copies of the Friedman's
Subordinated Debt Documents. Crescent has the corporate power and authority to
enter into the Friedman's Subordinated Debt Documents and incur the Subordinated
Debt evidenced thereby. The issuance of any subordinated notes in connection
with the Friedman's Subordinated Debt is exempt from registration under
applicable federal and state securities laws.

      Section 5.23 Bank Accounts; Merchant Accounts. As of the Closing Date,
Schedule 5.23 contains a complete and accurate list of all bank accounts
maintained by each Credit Party with any bank or other financial institution and
Merchant Accounts.

                                    ARTICLE 6

                              AFFIRMATIVE COVENANTS

      The Borrowers and the Guarantors hereby covenant and agree that so long as
this Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding or any Letter of Credit is outstanding,
and until all of the Commitments hereunder shall have terminated:

                                     Page 67
<PAGE>
      Section 6.1 Information Covenants.

            (a) Annual Financial Statements. The Borrowers and the Guarantors
      will furnish, or cause to be furnished, to the Agent and each of the
      Lenders, as soon as available, and in any event within ninety (90) days
      after the close of each Fiscal Year of the Parent, a consolidated balance
      sheet and income statement of the members of the Consolidated Group as of
      the end of such Fiscal Year, together with related consolidated statements
      of operations and retained earnings and of cash flows for such Fiscal
      Year, in each case setting forth in comparative form consolidated figures
      for the preceding Fiscal Year, all such financial information described
      above to be in reasonable form and detail and audited by independent
      certified public accountants of recognized national standing reasonably
      acceptable to the Agent and whose opinion shall be to the effect that such
      financial statements have been prepared in accordance with GAAP (except
      for changes with which such accountants concur) and shall not be limited
      as to the scope of the audit or qualified as to the status of the members
      of the Consolidated Group as a going concern or any other material
      qualifications or exceptions.

            (b) Periodic Financial Statements. The Borrowers and the Guarantors
      will furnish, or cause to be furnished, to the Agent and each of the
      Lenders, as soon as available, and in any event within thirty (30) days
      after the end of each Fiscal Period or forty-five (45) days for any Fiscal
      Period which ends on the last day of a Fiscal Year, a consolidated balance
      sheet, income statement, and statements of cash flows of the members of
      the Consolidated Group for such Fiscal Period, in each case setting forth
      in comparative form consolidated figures for the corresponding Fiscal
      Period of the preceding Fiscal Year, all such financial information
      described above to be in reasonable form and detail and reasonably
      acceptable to the Agent, and accompanied by a certificate of an Executive
      Officer of Crescent to the effect that such financial statements fairly
      present in all material respects the financial condition of the members of
      the Consolidated Group and have been prepared in accordance with GAAP,
      subject to changes resulting from audit and normal year-end audit
      adjustments and the absence of footnotes.

            (c) Officer's Certificate. The Borrowers and the Guarantors will
      furnish, or cause to be furnished, to the Agent and each of the Lenders,
      at the time of delivery of the financial statements provided for in
      Section 6.1(a) and Section 6.1(b) preceding, a certificate of an Executive
      Officer of Crescent, substantially in the form of Exhibit D, (i)
      demonstrating compliance with the financial covenants contained in Section
      6.11 by calculation thereof as of the end of each such Fiscal Period (as
      applicable) and (ii) stating that no Default or Event of Default exists,
      or if any Default or Event of Default does exist, specifying the nature
      and extent thereof and what action the Credit Parties propose to take with
      respect thereto.

            (d) Borrowing Base Certificate. The Borrowers and the Guarantors
      will furnish, or cause to be furnished, to the Agent and each of the
      Lenders, no later than the first Business Day following the end of the
      preceding calendar week, or on a more frequent basis as requested by the
      Agent, a statement of the Borrowing Base and its components as of the end
      of the immediately preceding week (or such other more

                                     Page 68
<PAGE>
      frequent period), in form and content satisfactory to the Agent and
      certified by an Executive Officer of Crescent or the treasurer or
      corporate controller of Crescent to be true and correct as of the date
      thereof (a "Borrowing Base Certificate") together with a schedule of the
      Borrowers' receivables created since the immediately preceding such
      schedule and Borrowing Base Certificate.

            (e) Annual Business Plan and Budgets. The Borrowers and the
      Guarantors will furnish, or cause to be furnished, to the Agent and each
      of the Lenders, within thirty (30) days after the end of each Fiscal Year
      of the Parent, beginning with the Fiscal Year ending August 2, 2003, an
      annual business plan and budget of the members of the Consolidated Group
      containing, among other things, pro forma financial statements for the
      following Fiscal Year.

            (f) Collateral Reports. The Borrowers and the Guarantors will
      furnish, or cause to be furnished, to the Agent and each of the Lenders,
      within fifteen (15) days after the end of each Fiscal Period, in form and
      detail reasonably satisfactory to the Agent, (i) an aging of the accounts
      receivable of the Borrowers, together with a computation of Eligible
      Installment Contracts in detail satisfactory to the Agent and a
      reconciliation to the previous Fiscal Period's aging of the accounts
      receivable of the Borrowers and to their respective general ledgers and
      financial statements, (ii) an aging of the accounts payable of the
      Borrowers, (iii) reports by category of inventory of the Borrowers, with
      additional detail showing additions to and deletions from the Borrowers'
      inventory, together with a computation of Eligible Inventory in detail
      satisfactory to the Agent and a reconciliation to the general ledger and
      financial statements, (iv) a list of all new locations where the Credit
      Parties have any Collateral and, any other locations where Collateral is
      no longer kept by the Credit Parties (including a listing of retail store
      locations opened or closed during such Fiscal Period), including the
      address and, if requested by the Agent, contact information for any
      landlord, (v) a computation of the Receivables Advance Rate and the
      Collateral Adjustment Percent, in form satisfactory to the Agent, and (vi)
      with the delivery of each of the foregoing, a certificate executed by the
      chief financial officer or treasurer of Crescent certifying as to the
      accuracy and completeness of the foregoing. If any of the records of the
      Borrowers or reports of the Collateral are prepared by an accounting
      service or other agent, each of the Borrowers hereby authorizes such
      service or agent to deliver such records, reports, and related documents
      to the Agent, for distribution to the Lenders.

            (g) Consumer Credit Policies. The Borrowers and the Guarantors will
      furnish, or cause to be furnished, to the Agent and each of the Lenders,
      concurrently with delivery of the financial statements for the last day of
      each Fiscal Quarter delivered pursuant to clause (a) or clause (b)
      preceding, written notice to the Agent of material changes or
      modifications in their respective consumer credit policies and practices,
      together with a written explanation, in substance and detail reasonably
      satisfactory to the Agent, of such changes or modifications to such
      consumer credit policies or practices.

            (h) Investment Banking Fees. The Borrowers and the Guarantors will
      furnish, or cause to be furnished, to the Agent and each of the Lenders,
      advance notice of all

                                     Page 69
<PAGE>
      investment banking fees in excess of $250,000 in the aggregate payable by
      members of the Consolidated Group in connection with any single
      transaction, together with a certification from the Borrowers that after
      giving effect thereto no Default or Event of Default shall exist on a Pro
      Forma Basis.

            (i) Auditor's Reports. The Borrowers and the Guarantors will
      furnish, or cause to be furnished, to the Agent and each of the Lenders,
      promptly upon receipt thereof, a copy of any other report or "management
      letter" submitted by independent accountants to any member of the
      Consolidated Group in connection with any annual, interim, or special
      audit of the books of such Person.

            (j) Reports. The Borrowers and the Guarantors will furnish, or cause
      to be furnished, to the Agent and each of the Lenders, promptly upon
      transmission or receipt thereof, (i) copies of any filings and
      registrations with, and reports to or from, the Securities and Exchange
      Commission, or any successor agency (excluding any exhibits thereto and
      any registration statements filed on Form S-8), and copies of all
      financial statements, proxy statements, notices, and reports as any member
      of the Consolidated Group shall send to its stockholders or to a holder of
      any Indebtedness owed by any member of the Consolidated Group in its
      capacity as such a holder and (ii) upon the request of the Agent, all
      reports and written information to and from the United States
      Environmental Protection Agency, or any state or local agency responsible
      for environmental matters, the United States Occupational Health and
      Safety Administration, or any state or local agency responsible for health
      and safety matters, or any successor agencies or authorities concerning
      environmental, health, or safety matters.

            (k) Notices. Upon any Executive Officer of the Borrower or any
      Guarantor obtaining actual knowledge thereof, the Borrowers and the
      Guarantors will immediately furnish, or cause to be furnished, to the
      Agent and each of the Lenders, written notice of (i) the occurrence of an
      event or condition consisting of a Default or Event of Default, specifying
      the nature and existence thereof and what action the Credit Parties
      propose to take with respect thereto, (ii) the occurrence of any of the
      following with respect to any member of the Consolidated Group (A) the
      pendency or commencement of any litigation, arbitration, or governmental
      proceeding against such Person which could reasonably be expected to have
      a Material Adverse Effect or (B) the institution of any proceedings
      against such Person with respect to, or the receipt of notice by such
      Person of potential liability or responsibility for violation, or alleged
      violation of any federal, state, or local law, rule, or regulation,
      including but not limited to, Environmental Laws, the violation of which
      could reasonably be expected to have a Material Adverse Effect, and (iii)
      the occurrence of any default or other breach or failure to perform under
      any agreement with respect to any Subordinated Debt.

            (l) ERISA. Upon any Executive Officer of the Borrower or any
      Guarantor obtaining knowledge thereof, the Borrowers and the Guarantors
      will give written notice to the Agent and the Lenders promptly (and in any
      event within five (5) Business Days) of: (i) any event or condition,
      including, but not limited to, any Reportable Event, that constitutes, or
      might reasonably lead to, an ERISA Event; (ii) with respect to any

                                     Page 70
<PAGE>
      Multiemployer Plan, the receipt of notice as prescribed in ERISA or
      otherwise of any withdrawal liability assessed against the Credit Parties
      or any ERISA Affiliates, or of a determination that any Multiemployer Plan
      is in reorganization or insolvent (both within the meaning of Title IV of
      ERISA); (iii) the failure to make full payment on or before the due date
      (including extensions) thereof of all amounts which any member of the
      Consolidated Group or any ERISA Affiliate is required to contribute to
      each Plan pursuant to its terms and as required to meet the minimum
      funding standard set forth in ERISA and the Internal Revenue Code with
      respect thereto; or (iv) any change in the funding status of any Plan that
      could have a Material Adverse Effect, together with a description of any
      such event or condition or a copy of any such notice and a statement by an
      Executive Officer of Crescent briefly setting forth the details regarding
      such event, condition, or notice, and the action, if any, which has been
      or is being taken or is proposed to be taken by the Credit Parties with
      respect thereto. Promptly upon request, the Borrowers and the Guarantors
      shall furnish to the Agent and the Lenders such additional information
      concerning any Plan as may be reasonably requested, including, but not
      limited to, copies of each annual report/return (Form 5500 series), as
      well as all schedules and attachments thereto required to be filed with
      the Department of Labor and/or the Internal Revenue Service pursuant to
      ERISA and the Internal Revenue Code, respectively, for each "plan year"
      (within the meaning of Section 3(39) of ERISA).

            (m) Additional Patents and Trademarks. At the time of delivery of
      the financial statements and reports pursuant to Section 6.1(a), the
      Borrowers and the Guarantors will furnish, or cause to be furnished, to
      the Agent and each of the Lenders, a report signed by an Executive Officer
      of Crescent setting forth (i) a list of registration numbers for all
      patents, trademarks, service marks, tradenames, and copyrights awarded to
      any member of the Consolidated Group since the last day of the immediately
      preceding Fiscal Year and (ii) a list of all patent applications,
      trademark applications, service mark applications, trade name
      applications, and copyright applications submitted by any member of the
      Consolidated Group since the last day of the immediately preceding Fiscal
      Year and the status of each such application, all in such form as shall be
      reasonably satisfactory to the Agent.

            (n) Notices to Subordinated Creditors. The Borrowers and the
      Guarantors will furnish, or cause to be furnished to the Agent and each of
      the Lenders copies of all statements, reports, notices, documents, and
      certificates, furnished pursuant to the Friedman's Subordinated Debt
      Documents and not otherwise furnished to the Agent and the Lenders
      pursuant to this Agreement.

            (o) Certificate of December Sales. The Borrowers and the Guarantors
      will furnish, or cause to be furnished, to the Agent and the Lenders, as
      soon as available, and in any event within five (5) Business Days after
      the end of each Fiscal Period ending closest to December 31 of each year,
      a certificate of an Executive Officer of Friedman's demonstrating
      compliance with the financial covenant contained in Section 6.11(d) by
      calculation thereof as of the end of each such Fiscal Period.

                                     Page 71
<PAGE>
            (p) Bank Accounts. With each of the certificates delivered pursuant
      to clause (c) preceding, the Borrowers and the Guarantors will furnish, or
      cause to be furnished, to the Agent a listing of each bank account opened
      or closed by any Credit Party, during the preceding Fiscal Period and any
      Merchant Account Agreement entered into by any Credit Party during the
      preceding Fiscal Period.

            (q) Other Information. With reasonable promptness upon any such
      request, the Borrowers and the Guarantors will furnish, or cause to be
      furnished, to the Agent and each of the Lenders, such other information
      regarding the business, properties, or financial condition of any member
      of the Consolidated Group as the Agent or any Lender through the Agent may
      reasonably request.

      Section 6.2 Preservation of Existence and Franchises. Except as a result
of or in connection with a dissolution, merger, or disposition of a Subsidiary
permitted under Section 7.4 or Section 7.5, the Borrowers and the Guarantors
will, and will cause each of their respective Subsidiaries to, do all things
necessary to preserve and keep in full force and effect its existence and all
material rights, franchises, and authority.

      Section 6.3 Books and Records. The Borrowers and the Guarantors will, and
will cause each of their respective Subsidiaries to, keep complete and accurate
books and records of its transactions in accordance with good accounting
practices on the basis of GAAP (including the establishment and maintenance of
appropriate reserves) and keep such books and records in a location with fire,
casualty and theft protection satisfactory to the Agent.

      Section 6.4 Compliance with Law. The Borrowers and the Guarantors will,
and will cause each of their respective Subsidiaries to, comply with all laws,
rules, regulations, and orders, and all applicable restrictions imposed by all
Governmental Authorities, applicable to it and its Property if noncompliance
with any such law, rule, regulation, order, or restriction could reasonably be
expected to have a Material Adverse Effect.

      Section 6.5 Payment of Taxes and Other Indebtedness. The Borrowers and the
Guarantors will, and will cause each of their respective Subsidiaries to, pay
and discharge (a) all taxes, assessments, and governmental charges or levies
imposed upon it, or upon its income or profits, or upon any of its Properties,
before they shall become delinquent and (b) all lawful claims (including claims
for labor, materials, and supplies) which, if unpaid, might give rise to a Lien
upon any of its Properties, provided, however, that no member of the
Consolidated Group shall be required to pay any such tax, assessment, charge,
levy, claim, or Indebtedness which is being contested in good faith by
appropriate proceedings for which adequate reserves determined in accordance
with GAAP have been established, unless the failure to make any such payment (i)
could give rise to an immediate right to foreclose on a Lien securing such
amounts or (ii) could have a Material Adverse Effect.

      Section 6.6 Insurance.

            (a) The Borrowers and the Guarantors will, and will cause each of
      their respective Subsidiaries to, at all times maintain in full force and
      effect insurance

                                     Page 72
<PAGE>
      (including worker's compensation insurance, liability insurance, casualty
      insurance, flood insurance, and business interruption insurance) in such
      amounts, covering such risks and liabilities, and with such deductibles or
      self-insurance retentions as are in accordance with normal industry
      practice (or as otherwise required by the Collateral Documents). The Agent
      shall be named as loss payee or mortgagee, as its interest may appear,
      and/or additional insured with respect to any such insurance providing
      coverage in respect of any Collateral, and each provider of any such
      insurance shall agree, by endorsement upon the policy or policies issued
      by it or by independent instruments furnished to the Agent, that it will
      give the Agent thirty (30) days prior written notice before any such
      policy or policies shall be altered or canceled, and that no act or
      default of any member of the Consolidated Group or any other Person shall
      affect the rights of the Agent or the Lenders under such policy or
      policies. The present insurance coverage of the members of the
      Consolidated Group is outlined as to carrier, policy number, expiration
      date, type, and amount on Schedule 6.6.

            (b) The proceeds from insurance received from the theft, loss,
      physical destruction or damage, taking, or similar event shall be used
      either to repair, replace, or reinvest in the same or similar assets or to
      prepay the Obligations.

      Section 6.7 Maintenance of Property. The Borrowers and the Guarantors
will, and will cause each of their respective Subsidiaries to, maintain and
preserve its properties and equipment material to the conduct of its business in
good repair, working order, and condition, normal wear and tear and casualty and
condemnation excepted, and will make, or cause to be made, in such properties
and equipment from time to time all repairs, renewals, replacements, extensions,
additions, betterments, and improvements thereto as may be needed or proper, to
the extent and in the manner customary for companies in similar businesses,
except, as to any of the foregoing activities, where the activities are not
otherwise prohibited hereunder.

      Section 6.8 Performance of Obligations. The Borrowers and the Guarantors
will, and will cause each of their respective Subsidiaries to, perform in all
material respects all of its obligations under the terms of all material
agreements, indentures, mortgages, security agreements, and other debt
instruments to which it is a party or by which it is bound except to the extent
that the failure to do so will not result in a Material Adverse Effect.

      Section 6.9 Use of Proceeds. The Borrowers will use the proceeds of
Extensions of Credit solely for the purposes set forth in Section 5.15 and not
for prepayment of interest or payment or prepayment of principal of any
Subordinated Debt or for any other payment of Subordinated Debt which would
violate the terms of any subordination agreement applicable thereto, including,
without limitation, the Friedman's Intercreditor Agreement.

      Section 6.10 Audits/Inspections. Upon reasonable notice and during normal
business hours, the Borrowers and the Guarantors will, and will cause each of
their respective Subsidiaries to, permit representatives appointed by the Agent,
including, without limitation, independent accountants, agents, attorneys, and
appraisers to visit and inspect its property, including its books and records,
its accounts receivable and inventory, its facilities and its other business
assets, and to make photocopies or photographs thereof and to write down and
record any information such

                                     Page 73
<PAGE>
representative obtains and shall permit the Agent or its representatives to
investigate and verify the accuracy of information provided to the Lenders and
to discuss all such matters with the officers, employees, and representatives of
such Person. The cost of such inspections and audits shall be at the expense of
the Borrowers as provided in the Security Agreement. The Lenders, and their
representatives may accompany the Agent and its representatives on any such
inspection or audit at their own expense.

      Section 6.11 Financial Covenants.

            (a) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio,
      determined for the Consolidated Group on a consolidated basis as of the
      last day of each Fiscal Period after the Closing Date for the preceding
      twelve (12) Fiscal Periods ending as of such date shall not be less than
      the ratio specified in the table below for the applicable dates as
      follows:

<TABLE>
<CAPTION>
            Fiscal Period End                      Fixed Charge Coverage Ratio
<S>                                                <C>
      Fiscal Period ending August 24, 2002                 0.65 to 1.00

      Fiscal Period ending September 28, 2002              0.70 to 1.00

      Fiscal Period ending October
      26, 2002 and November 23, 2002                       0.75 to 1.00

      Fiscal Period ending December 28,
      2002 and January 25, 2003                            1.00 to 1.00

      Fiscal Period ending February 22, 2003               1.05 to 1.00

      Fiscal Period ending March 29, 2003                  1.10 to 1.00

      Fiscal Period ending April 26, 2003
      and each Fiscal Period ending thereafter             1.15 to 1.00
</TABLE>

            (b) Adjusted Tangible Net Worth. The Adjusted Tangible Net Worth of
      the Consolidated Group, determined on a consolidated basis as of the last
      day of each Fiscal Period ending after the Closing Date, shall not be less
      than the Adjusted Tangible Net Worth Requirement.

            (c) Leverage Ratio. The Leverage Ratio, determined for the
      Consolidated Group on a consolidated basis as of the last day of each
      Fiscal Period ending after the Closing Date shall not be greater than 4.00
      to 1.00.

            (d) December Sales. The Borrowers and the Guarantors shall cause the
      actual retail sales of the Borrowers in the Fiscal Period ending closest
      to December 31 of each year to not be less than (i) $26,740,000 for such
      Fiscal Period ending December 28, 2002

                                     Page 74
<PAGE>
      and (ii) for each Fiscal Period ending closest to December 31 of each year
      thereafter, seventy percent (70.0%) of the projected retail sales for such
      Fiscal Period as set forth in the projections delivered to the Agent and
      the Lenders in the annual business plan and budget of the Borrowers
      delivered to the Agent and the Lenders as required pursuant to Section
      6.1(e).

      Section 6.12 New Subsidiaries; Addition of Subsidiaries as Borrowers and
Guarantors. Promptly upon creation or acquisition of any Subsidiary by a Credit
Party, other than any Subsidiary which is organized under Requirements of Law of
a jurisdiction other than the United States or a state of the United States, the
Credit Parties shall propose to the Agent that such new Subsidiary become, and
with the Agent's and the Required Lenders' consent pursuant to Section 10.20
cause such Subsidiary to become either a Borrower and a Guarantor or a Guarantor
(but not a Borrower) under the Credit Documents. Any Subsidiary which must be
added as either a Borrower or a Guarantor (but not a Borrower) as provided in
this Section 6.12, shall promptly execute and deliver a joinder agreement, all
items of the type required by Section 4.1 (as applicable) as if such Subsidiary
was a Credit Party on the Closing Date, and such other Credit Documents as the
Agent may reasonably require.

      Section 6.13 Guaranties of the Obligations. Each Credit Party, including
any Person which becomes a Borrower or a Guarantor after the Closing Date
pursuant to the terms of this Agreement, shall guarantee payment and performance
of the Total Obligations (other than such Total Obligations owing by itself)
pursuant to a Guaranty Agreement in form and substance satisfactory to the
Agent, duly executed or joined in (as applicable) by each such Credit Party.
Each Borrower acknowledges and expressly agrees with the Agent and each Lender
that the guaranty by such Borrower is required solely as a condition to, and is
given solely as inducement for and in consideration of, credit or accommodations
extended or to be extended under the Credit Documents to any or all of the other
Borrowers and is not required or given as a condition of extensions of credit to
such Borrower.

      Section 6.14 Additional Collateral; Further Assurances.

            (a) Subject to Requirements of Law, each Credit Party shall cause
      any Subsidiary of the Parent which is required to become a Credit Party
      pursuant to the terms of this Agreement to, upon the request of the Agent,
      (i) grant Liens to the Agent, for the benefit of the Agent and the
      Lenders, pursuant to such documents as the Agent may reasonably deem
      necessary and deliver such property, documents, and instruments as the
      Agent may request to perfect the Liens of the Agent in the Collateral of
      such Subsidiary (ii) execute a Guaranty Agreement with respect to the
      Total Obligations (excluding the Total Obligations of such Credit Party)
      pursuant to Section 6.13, in form and substance satisfactory to the Agent,
      and (iii) in connection with the foregoing requirements, or either of
      them, deliver to the Agent all items of the type required by Section
      4.1(a) (as applicable). Upon execution and delivery of such Credit
      Documents and other instruments, certificates, and agreements, such
      Subsidiary shall automatically become a Borrower and a Guarantor, or a
      Guarantor (but not a Borrower), as applicable, hereunder and thereupon
      shall have all of the rights, benefits, duties, and obligations in such
      capacity under the Credit Documents.

                                     Page 75
<PAGE>
            (b) Without limiting the foregoing, each Credit Party shall, and
      shall cause each of the Parent's Subsidiaries which is required to become
      a Credit Party pursuant to the terms of this Agreement to, execute and
      deliver, or cause to be executed and delivered, to the Agent such
      documents and agreements, and shall take or cause to be taken such actions
      as the Agent may, from time to time, reasonably request to carry out the
      terms and conditions of this Agreement and the other Credit Documents.

            (c) Upon the Agent's request, each Credit Party will deliver to the
      Agent the following with respect to each parcel of Real Property owned by
      any Credit Party:

                  (i) a Mortgage in proper form for recording in the
            jurisdiction in which such Real Property covered thereby is located;

                  (ii) ALTA or other mortgagee's policies, in form and substance
            satisfactory to the Agent, with respect to the Real Property subject
            to the Mortgages;

                  (iii) an environmental site assessment, in compliance with
            applicable Requirements of Law prepared by a credentialed
            environmental consultant acceptable to the Agent;

                  (iv) a boundary survey prepared and certified to the Agent by
            a credentialed surveyor acceptable to the Agent; and

                  (v) such other information, documentation, and certifications,
            in form and substance satisfactory to the Agent, as may be
            reasonably requested by the Agent.

      Section 6.15 Landlord and Mortgagee Agreements. The Credit Parties will
provide to the Agent upon the Agent's request, a landlord's or mortgagee's
waiver and consent agreement or subordination and consent agreement, in form and
substance reasonably acceptable to the Agent, duly executed on behalf of each
landlord or mortgagee, as the case may be, of Real Property on which any
Collateral is located; provided that the Agent may, in its discretion, defer
delivery of any such waiver and consent agreement or subordination and consent
agreement and establish a Reserve with respect to any Collateral located on any
Real Property for which the Agent has not received such acceptable waiver and
consent agreement or subordination and consent agreement; provided further that
in the event the Credit Parties, after use of commercially reasonable efforts,
are unable to obtain any such landlord waivers requested for a retail location,
the Agent's and the Lenders' sole remedy in connection therewith shall be to
establish a Reserve with respect to such location.

      Section 6.16 Bank as Depository. Each of the Credit Parties shall maintain
Bank of America as its principal depository bank, including for the maintenance
of operating, administrative, cash management, collection activity, and other
deposit accounts for the conduct of its business.

                                     Page 76
<PAGE>
      Section 6.17 Interest Rate Protection. Within sixty (60) days of the
Closing Date, and continuing thereafter during the term of this Agreement, the
Borrowers shall maintain in full force and effect one or more Hedging Agreements
(including interest rate cap agreements), in form and substance reasonably
satisfactory to the Agent, with a financial institution reasonably acceptable to
the Agent, that will have placed a limit upon the rate of interest payable by
the Borrowers under this Agreement or the Friedman's Subordinated Debt Documents
with respect to a principal amount of not less than $35,000,000.

                                    ARTICLE 7

                               NEGATIVE COVENANTS

            The Borrowers and the Guarantors hereby covenant and agree that so
long as this Agreement is in effect or any amounts payable hereunder or under
any other Credit Document shall remain outstanding or any Letter of Credit is
outstanding, and until all of the Commitments hereunder shall have terminated:

      Section 7.1 Indebtedness. The Borrowers and the Guarantors will not permit
any member of the Consolidated Group to contract, create, incur, assume, or
permit to exist any Indebtedness, except:

            (a) Indebtedness existing or arising under this Agreement or the
      other Credit Documents;

            (b) Indebtedness of the Borrowers and their Subsidiaries set forth
      on Schedule 7.1, and renewals, refinancings, and extensions thereof on
      terms and conditions which, taken as a whole, are no less favorable to
      such Person than such existing Indebtedness;

            (c) purchase money Indebtedness (including for purposes hereof
      obligations in respect of Capital Leases or Synthetic Leases) hereafter
      incurred by the Borrowers or any of their Subsidiaries to finance the
      purchase of fixed assets and any refinancing thereof; provided that (i)
      the total of all such Indebtedness for the Borrowers and their
      Subsidiaries taken together shall not exceed an aggregate principal amount
      of $2,500,000 at any one time outstanding; (ii) such Indebtedness when
      incurred shall not exceed the purchase price of the asset(s) financed; and
      (iii) no such Indebtedness shall be refinanced for a principal amount in
      excess of the principal balance outstanding thereon at the time of such
      refinancing;

            (d) obligations of the Borrowers or their Subsidiaries owing under
      interest rate, commodities, and foreign currency exchange protection
      agreements entered into in the ordinary course of business to manage
      existing or anticipated risks and not for speculative purposes;

            (e) unsecured intercompany Indebtedness owing by a member of the
      Consolidated Group to another member of the Consolidated Group (subject,
      however, to

                                     Page 77
<PAGE>
      the limitations of Section 7.6 in the case of the member of the
      Consolidated Group extending the loan, advance, or credit);

            (f) Support Obligations given by members of the Consolidated Group
      with respect to any Indebtedness permitted under this Section 7.1; and

            (g) other unsecured Indebtedness of the Borrowers and their
      Subsidiaries in an aggregate outstanding principal amount of up to
      $2,500,000 at any time.

      Section 7.2 Liens. The Borrowers and the Guarantors will not permit any
member of the Consolidated Group to contract, create, incur, assume, or permit
to exist any Lien with respect to any of its Property, whether now owned or
hereafter acquired, except for Permitted Liens.

      Section 7.3 Nature of Business. The Borrowers and the Guarantors will not
permit any member of the Consolidated Group to substantively alter the character
or conduct of the business conducted by such Person as of the Closing Date and
any business ancillary or complimentary thereto.

      Section 7.4 Merger and Consolidation, Dissolution, and Acquisitions.

            (a) No member of the Consolidated Group will enter into any
      transaction of merger or consolidation, except that:

                  (i) any member of the Consolidated Group (other than the
            Parent) may be a party to a transaction of merger or consolidation
            with another member of the Consolidated Group (other than the
            Parent); provided that (A) if Crescent is a party to such
            transaction, it shall be the surviving entity, and (B) in any event,
            and without limiting clause (A) preceding, the surviving entity
            shall be a Domestic Subsidiary and, if the survivor is not already a
            Credit Party, it shall execute and deliver such Credit Documents as
            may be necessary for compliance with the provisions of Section 6.12
            and Section 6.13; provided, that notwithstanding the foregoing, any
            Foreign Subsidiary may merge with and into another Foreign
            Subsidiary; and

                  (ii) any member of the Consolidated Group which is not a
            Borrower may enter into a transaction of merger or consolidation in
            connection with an Asset Disposition permitted under Section 7.5.

            (b) No member of the Consolidated Group may dissolve, liquidate, or
      wind up its affairs, other than any such member that is not a Borrower and
      whose assets are transferred to a Credit Party in an Asset Disposition
      allowed by Section 7.5.

            (c) No member of the Consolidated Group shall make any Acquisition
      (except for Permitted Investments or as otherwise expressly permitted by
      the provisions of clause (a) preceding), without the prior written consent
      of the Required Lenders.

                                     Page 78
<PAGE>
      Section 7.5 Asset Dispositions. The Borrowers and the Guarantors will not
permit any member of the Consolidated Group to make any Asset Disposition
(including, without limitation, any Sale and Leaseback Transaction), unless:

            (a) the sale, lease, or other disposition is to a Borrower;

            (b) the sale, lease or other disposition is by a Credit Party other
      than a Borrower, to a Credit Party.

            (c) such Asset Disposition is in connection with the closing of
      retail store locations of a Borrower in the ordinary course of business;
      provided that the Borrowers will not close more than ten (10) retail store
      locations in any twelve (12) consecutive Fiscal Periods;

            (d) such Asset Disposition is the result of theft, loss, physical
      destruction, or damage, taking or similar event with respect to the assets
      subject to such Asset Disposition and the proceeds from insurance
      resulting from such Asset Disposition are used to repair, replace, or
      reinvest in the same or similar assets;

            (e) in all other cases, (i) no accounts or Installment Contracts
      will be the subject of any such sale, (ii) any Eligible Inventory sold in
      connection with any such sale shall be sold for cash at least equal to an
      amount equal to such Eligible Inventory multiplied by the applicable
      advance rate for Eligible Inventory as specified in clause (b) of the
      definition of Borrowing Base, (iii) at least seventy-five percent (75.0%)
      of the consideration paid therefor shall consist of cash and Cash
      Equivalents, (iv) if the subject transaction involves Capital Stock of a
      Subsidiary of a Borrower, the subject transaction is of a controlling
      interest in such Subsidiary, (v) the aggregate net book value of all
      assets sold, leased, or otherwise disposed of shall not exceed $2,500,000
      in any Fiscal Year of the Parent, (vi) no Default or Event of Default
      shall exist immediately after giving effect thereto, and (vii) the
      Borrowers shall have demonstrated compliance with the financial covenants
      in Section 6.11 on a Pro Forma Basis after giving effect to the
      disposition and shall have delivered to the Agent a Pro Forma Compliance
      Certificate (including reaffirmation of the representations and warranties
      hereunder as of such date before and after giving effect to such
      transaction) in connection therewith; or

            (f) the assets sold consist of Installment Contracts which have been
      written-off in accordance with the applicable Borrower's credit policies
      and which are sold in a transaction consistent with such Borrower's
      customary business practices.

With respect to any assets subject to a disposition permitted by this Section
7.5, at the Borrowers' expense, the Agent will promptly deliver to the Borrowers
upon request such release documentation (including delivery of applicable stock
certificates) as may be reasonably requested to give effect to the release of
such assets from the security interests securing the Borrowers' obligations
hereunder.

                                     Page 79
<PAGE>
      Section 7.6 Investments. The Borrowers and the Guarantors will not permit
any member of the Consolidated Group to make or permit to exist any Investment
in or to any Person, except for Permitted Investments; provided that no member
of the Consolidated Group will make any Investment (including any Investment
which is of a type included in the definition of Permitted Investments) in the
Parent or any Person which owns or controls the Parent.

      Section 7.7 Restricted Payments. Neither any Borrower, any Guarantor, nor
the Parent will make any Restricted Payment except for Permitted Distributions.
Notwithstanding any other provision of this Agreement, the other Credit
Documents, or the Friedman's Intercreditor Agreement, neither any Borrower, any
Guarantor, nor the Parent will make any payment with respect to the Friedman's
Subordinated Debt or any Restricted Payment with respect to any Capital Stock
issued pursuant to the Friedman's Stock Sale if any Default or Event of Default
exists or will exist after giving effect to such payment.

      Section 7.8 Modifications and Payments in Respect of Other Funded Debt.
None of the members of the Consolidated Group will

            (a) after the issuance thereof, amend or modify (or permit the
      amendment or modification of) the terms of any Subordinated Debt in a
      manner adverse to the interests of the Lenders (including specifically any
      amendment of the terms of subordination, shortening any maturity or
      average life to maturity or requiring any payment sooner than previously
      scheduled or increasing the interest rate or fees applicable thereto) or
      in a manner prohibited by the subordination provisions thereof; or

            (b) make any prepayment, redemption, defeasance, or acquisition for
      value of (including, without limitation, by way of depositing money or
      securities with the trustee with respect thereto before due for the
      purpose of paying when due), or refund, refinance, or exchange of any
      Funded Debt (other than the Indebtedness under this Agreement and the
      other Credit Documents and intercompany Indebtedness permitted hereunder)
      other than regularly scheduled payments of principal and interest on such
      Funded Debt, except in connection with a refinancing or refunding
      permitted hereunder.

      Section 7.9 Transactions with Affiliates. The Borrowers and the Guarantors
will not permit any member of the Consolidated Group to enter into or permit to
exist any transaction or series of transactions with any officer, director,
shareholder, Subsidiary, or Affiliate of such Person other than (a) advances of
working capital to any Borrower, (b) transfers of other assets to any Borrower
or from any Credit Party which is not a Borrower to any other Credit Party, (c)
transactions permitted by Section 7.1, Section 7.4, Section 7.5, Section 7.6,
Section 7.7 or Section 7.13, (d) normal compensation and reimbursement of
expenses of officers and directors, (e) the transactions entered into prior to
the Closing Date and set forth on Schedule 7.9, and (f) except as otherwise
specifically limited in this Agreement, other transactions which are entered
into on terms and conditions substantially as favorable to such Person as would
be obtainable by it in a comparable arms-length transaction with a Person other
than an officer, director, shareholder, Subsidiary, or Affiliate.

                                     Page 80
<PAGE>
      Section 7.10 Fiscal Year; Organizational Documents. Without the prior
written consent of the Required Lenders (which consent shall not be unreasonably
withheld), the Borrowers and the Guarantors will not permit any member of the
Consolidated Group to amend, modify, or change (a) the last day of its Fiscal
Year or (b) its articles of incorporation (or corporate charter or other similar
organizational document) or bylaws (or other similar document) other than in a
manner which does not adversely affect the rights of the Agent or the Lenders.

      Section 7.11 Ownership of Subsidiaries; Limitations on Parent.
Notwithstanding any other provision of this Agreement to the contrary:

            (a) The Borrowers and the Guarantors will not permit any member of
      the Consolidated Group to (i) permit any Person other than a Borrower or
      any Wholly Owned Subsidiary of a Borrower to own any Capital Stock of any
      Subsidiary of a Borrower, except (A) to qualify directors where required
      by applicable law or to satisfy other requirements of applicable law with
      respect to the ownership of Capital Stock of Foreign Subsidiaries or (B)
      as a result of or in connection with a dissolution, merger, consolidation,
      or disposition of a Subsidiary permitted under Section 7.4 or Section 7.5,
      (ii) permit any Subsidiary of a Borrower to issue any shares of preferred
      Capital Stock, or (iii) permit, create, incur, assume, or suffer to exist
      any Lien on any Capital Stock of any Subsidiary of a Borrower, except for
      Permitted Liens.

            (b) The Parent shall not (i) hold any assets other than the Capital
      Stock of Crescent, (ii) have any liabilities other than (A) its
      liabilities under the Credit Documents, (B) tax liabilities in the
      ordinary course of business, (C) loans and advances permitted under
      Section 7.1 and Section 7.6, and (D) corporate, administrative, and
      operating expenses in the ordinary course of business, or (iii) engage in
      any business other than (A) owning the Capital Stock of Crescent and
      activities incidental or related thereto and (B) acting as a Guarantor
      hereunder and pledging its assets to the Agent, for the benefit of the
      Agent and the Lenders, pursuant to the Collateral Documents to which it is
      a party.

      Section 7.12 No Further Negative Pledges. The Borrowers and the Guarantors
will not permit any member of the Consolidated Group to enter into, assume, or
become subject to any agreement prohibiting or otherwise restricting the
creation or assumption of any Lien upon its properties or assets, whether now
owned or hereafter acquired, or requiring the grant of any security for any
obligation if security is given for any other obligation, except (a) pursuant to
or as otherwise expressly permitted by this Agreement and the other Credit
Documents and (b) pursuant to the terms of any purchase money Indebtedness
permitted by Section 7.1(c) to the extent such limitations relate only to the
property which is the subject of such financing.

      Section 7.13 Limitation on Management Fees. The Borrowers and the
Guarantors will not permit members of the Consolidated Group to pay management
or consulting fees (exclusive of investment banking fees payable in connection
with capital raising, debt placement, or other financial transactions permitted
under Section 6.1(h)) to any Affiliates (including, without limitation, Morgan
Schiff and its Affiliates) in an aggregate amount in excess of $500,000 during
any Fiscal Year of the Parent.

                                     Page 81
<PAGE>
      Section 7.14 Limitation on Foreign Subsidiaries. After the Closing Date,
the Borrowers and the Guarantors will not permit any member of the Consolidated
Group to create, acquire, or permit to exist any Subsidiary which is not a
Domestic Subsidiary (other than Sparkle Insurance Company, a Turks and Caicos
company) without the prior written consent of the Required Lenders.

      Section 7.15 Inventory Classification. During any calendar month, the
Borrowers and the Guarantors shall not transfer, convert, or otherwise
reclassify Eligible Inventory into inventory which is leased or consigned unless
(a) no Default or Event of Default exists, (b) the aggregate fair market value
thereof does not exceed $500,000, and (c) the Borrowers and the Guarantors
provide at least ten (10) Business Days prior written notice thereof to the
Agent, which notification contains satisfactory calculations that, after giving
effect to such transaction, the aggregate principal amount of the Obligations
will not exceed the Borrowing Base.

                                    ARTICLE 8

                                EVENTS OF DEFAULT

      Section 8.1 Events of Default. An Event of Default shall exist upon the
occurrence of any of the following specified events (each an "Event of
Default"):

            (a) the Borrowers or any Guarantor shall default in the payment when
      due of (i) any principal of any of the Loans, (ii) any reimbursement
      obligations arising from drawings under Letters of Credit, (iii) any
      interest on the Loans or on any reimbursement obligations arising from
      drawings under Letters of Credit, (iv) any Fees owing hereunder, or (v)
      any other amount owing under any of the other Credit Documents or in
      connection herewith or therewith;

            (b) any representation, warranty, or statement made or deemed to be
      made by any Borrower or any Guarantor herein, in any of the other Credit
      Documents, or in any statement or certificate delivered or required to be
      delivered pursuant hereto or thereto shall prove untrue in any material
      respect on the date as of which it was deemed to have been made;

            (c) any Borrower or any Guarantor shall

                  (i) default in the due performance or observance of any term,
            covenant, or agreement contained in Sections 6.2, 6.9, 6.10, 6.11,
            6.14, or 7.1 through 7.15,

                  (ii) default in the due performance of the requirements of
            Section 6.1(d) in the Agent's discretion or if such default shall
            continue for more than two Business Days,

                  (iii) default in the due performance or observance of any
            term, covenant, or agreement contained in Section 6.1 (other than
            Section 6.1(d)) or Section 6.16 and such default shall continue
            unremedied for a period of at least

                                     Page 82
<PAGE>
            five (5) Business Days after the earlier of an Executive Officer of
            a Credit Party becoming aware of such default or notice thereof by
            the Agent,

                  (iv) default in the due performance or observance by it of any
            term, covenant, or agreement (other than those referred to in
            clauses (a), (b), (c)(i), (c)(ii), (c)(iii), and (d) through (j) of
            this Section 8.1) contained in this Credit Agreement or in any other
            Credit Document and such default shall continue unremedied for a
            period of at least thirty (30) days after the earlier of an
            Executive Officer of a Credit Party becoming aware of such default
            or notice thereof by the Agent; or

            (d) except as otherwise expressly permitted herein, any Credit
      Document shall fail to be in full force and effect in all material
      respects or to give the Agent and/or the Lenders the Liens, rights,
      powers, and privileges purported to be created thereby in all material
      respects, or any Credit Party shall so state in writing;

            (e) except as the result of or in connection with a dissolution,
      merger, or disposition of a Subsidiary permitted under Section 7.4 or
      Section 7.5, the guaranty given by any Guarantor (including any Person
      which becomes a Guarantor after the Closing Date in accordance with
      Section 6.12) or any provision thereof shall cease to be in full force and
      effect in all material respects, or any Guarantor (including any Person
      which becomes a Guarantor after the Closing Date in accordance with
      Section 6.12) or any Person acting by or on behalf of such Guarantor shall
      deny or disaffirm such Guarantor's obligations under such guaranty;

            (f) any Bankruptcy Event shall occur with respect to any Credit
      Party;

            (g) any breach, noncompliance, default, or event of default (however
      defined), or other violation occurs under the Friedman's Subordinated Debt
      Documents or, with respect to any other Indebtedness (other than
      Indebtedness outstanding under this Agreement) in excess of $1,000,000 in
      the aggregate for the members of the Consolidated Group taken as a whole,
      (i) any member of the Consolidated Group shall (A) default in any payment
      (beyond the applicable grace period with respect thereto, if any) with
      respect to any such Indebtedness, or (B) the occurrence and continuance of
      a default in the observance or performance relating to such Indebtedness
      or contained in any instrument or agreement evidencing, securing, or
      relating thereto, or any other event or condition shall occur or condition
      exist, the effect of which default or other event or condition is to
      cause, or to permit, the holder or holders of such Indebtedness (or
      trustee or agent on behalf of such holders) to cause (determined without
      regard to whether any notice or lapse of time is required), any such
      Indebtedness to become due prior to its stated maturity or (ii) any such
      Indebtedness shall be declared due and payable, or required to be prepaid
      other than by a regularly scheduled required prepayment, prior to the
      stated maturity thereof;

            (h) one or more judgments or decrees shall be entered against one or
      more of the members of the Consolidated Group involving a liability of
      $1,000,000 or more in the

                                     Page 83
<PAGE>
      aggregate (to the extent not paid or fully covered by insurance provided
      by a carrier who has acknowledged coverage and has the ability to perform)
      or otherwise having a Material Adverse Effect and any such judgments or
      decrees shall not have been vacated, discharged, or stayed or bonded
      pending appeal within thirty (30) days from the entry thereof;

            (i) any of the following events or conditions, if such event or
      condition is reasonably likely to involve the imposition of taxes,
      penalties, and other liabilities against members of the Consolidated Group
      in an aggregate amount in excess of $500,000: (i) any "accumulated funding
      deficiency," as such term is defined in Section 302 of ERISA and Section
      412 of the Internal Revenue Code, whether or not waived, shall exist with
      respect to any Plan, or any Lien shall arise on the assets of any member
      of the Consolidated Group in favor of the PBGC or a Plan; (ii) an ERISA
      Event shall occur with respect to a Single Employer Plan, which is, in the
      reasonable opinion of the Agent, likely to result in the termination of
      such Plan for purposes of Title IV of ERISA; (iii) an ERISA Event shall
      occur with respect to a Multiemployer Plan or Multiple Employer Plan,
      which is, in the reasonable opinion of the Agent, likely to result in (A)
      the termination of such Plan for purposes of Title IV of ERISA, or (B) any
      member of the Consolidated Group incurring any liability in connection
      with a withdrawal from, reorganization of (within the meaning of Section
      4241 of ERISA), or insolvency (within the meaning of Section 4245 of
      ERISA) of such Plan; (iv) any prohibited transaction (within the meaning
      of Section 406 of ERISA or Section 4975 of the Internal Revenue Code) or
      breach of fiduciary responsibility shall occur which may subject any
      member of the Consolidated Group or any ERISA Affiliate to any liability
      under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the
      Internal Revenue Code, or under any agreement or other instrument pursuant
      to which any member of the Consolidated Group or any ERISA Affiliate has
      agreed or is required to indemnify any Person against any such liability;
      or (v) the occurrence of any event described in clause (i) through clause
      (iv) preceding in relation to an ERISA Affiliate Plan, if such event
      actually results in any member of the Consolidated Group incurring
      liability for taxes, penalties, or other liabilities in an aggregate
      amount in excess of $500,000; or

            (j) there shall occur a Change of Control.

      Section 8.2 Acceleration; Remedies. Upon the occurrence of an Event of
Default, and at any time thereafter unless and until such Event of Default has
been waived by the requisite Lenders (pursuant to the voting requirements
specified in Section 10.6) or cured to the satisfaction of the requisite Lenders
(pursuant to the voting procedures specified in Section 10.6), the Agent shall,
upon the request and direction of the Required Lenders, by written notice to the
Borrower take any of the following actions:

            (a) declare the Commitments terminated whereupon the Commitments
      shall be immediately terminated;

            (b) declare the unpaid principal of and any accrued interest in
      respect of all Loans, any reimbursement obligations arising from drawings
      under Letters of Credit, and

                                     Page 84
<PAGE>
      any and all other indebtedness or obligations of any and every kind owing
      by the Credit Parties to the Agent and/or any of the Lenders hereunder to
      be due whereupon the same shall be immediately due and payable without
      presentment, demand, protest, or other notice of any kind, all of which
      are hereby waived by the Credit Parties;

            (c) direct the Borrowers and the Guarantors to pay (and the
      Borrowers and the Guarantors agree that upon receipt of such notice, or
      upon the occurrence of an Event of Default under Section 8.1(f), they will
      immediately pay) to the Agent additional cash, to be held by the Agent,
      for the benefit of the Agent and the Lenders, in a cash collateral account
      as additional security for the LOC Obligations in respect of subsequent
      drawings under all then outstanding Letters of Credit in an amount equal
      to the maximum aggregate amount which may be drawn under all Letters of
      Credits then outstanding; and

            (d) enforce any and all rights and interests created and existing
      under the Credit Documents including, without limitation, all rights and
      remedies existing under the Collateral Documents, all rights and remedies
      against a Guarantor and all rights of set-off.

      Notwithstanding the foregoing, if an Event of Default specified in Section
8.1(f) shall occur with respect to any Borrower, then the Commitments shall
automatically terminate and all Loans, all reimbursement obligations arising
from drawings under Letters of Credit, all accrued interest in respect thereof,
all accrued and unpaid Fees, and all other indebtedness or obligations owing to
the Agent and/or any of the Lenders hereunder automatically shall immediately
become due and payable without the giving of any notice or other action by the
Agent or the Lenders.

                                    ARTICLE 9

                                AGENCY PROVISIONS

      Section 9.1 Appointment and Authorization. Each Lender hereby designates
and appoints Bank of America (acting in its capacity as the Agent) as its agent
under this Agreement and the other Credit Documents and each Lender hereby
irrevocably authorizes the Agent to take such action on its behalf under the
provisions of this Agreement and each other Credit Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Credit Document, together with such powers as are
reasonably incidental thereto. The Agent agrees to act as such on the express
conditions contained in this Article 9. The provisions of this Article 9 are
solely for the benefit of the Agent and the Lenders and the Credit Parties shall
have no rights as a third party beneficiary of any of the provisions contained
herein other than as expressly provided in Section 9.10 and Section 9.11.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Credit Document, the Agent shall not have any duties
or responsibilities, except those expressly set forth herein, nor shall the
Agent have or be deemed to have any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Agreement or any other Credit Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any

                                     Page 85
<PAGE>
Requirement of Law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative relationship
between independent contracting parties. Except as expressly otherwise provided
in this Agreement, the Agent shall have and may use its sole discretion with
respect to exercising or refraining from exercising any discretionary rights or
taking or refraining from taking any actions which the Agent is expressly
entitled to take or assert under this Agreement and the other Credit Documents,
including (a) the determination of the applicability of ineligibility criteria
with respect to the calculation of the Borrowing Base, (b) the making of
Discretionary Over-Advances, and (c) the exercise of remedies pursuant to
Section 8.2, and any action so taken or not taken shall be deemed consented to
by the Lenders.

      Section 9.2 Delegation of Duties. The Agent may execute any of its duties
under this Agreement or any other Credit Document by or through agents,
employees, or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects as long as such selection was made without gross negligence or
willful misconduct.

      Section 9.3 Liability of the Agent. None of the Agent-Related Persons
shall (a) be liable for any action taken or omitted to be taken by any of them
under or in connection with this Agreement or any other Credit Document or the
transactions contemplated hereby (except for its own gross negligence or willful
misconduct), or (b) be responsible in any manner to any of the Lenders for any
recital, statement, representation, or warranty made by any Credit Party, the
Parent, or any Affiliate of any Credit Party, or any officer thereof, contained
in this Agreement or in any other Credit Document, or in any certificate,
report, statement, or other document referred to or provided for in, or received
by the Agent under or in connection with, this Agreement or any other Credit
Document, or the validity, effectiveness, genuineness, enforceability, or
sufficiency of this Agreement or any other Credit Document, or for any failure
of any Credit Party, the Parent, or any other party to any Credit Document to
perform its obligations hereunder or thereunder. No Agent-Related Person shall
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Credit Document, or to inspect the properties,
books or records of any Credit Party, the Parent, or any Credit Party's
Affiliates.

      Section 9.4 Reliance by the Agent. The Agent shall be entitled to rely,
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex, or
telephone message, statement, or other document or conversation believed by it
to be genuine and correct and to have been signed, sent, or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including,
without limitation, counsel to any Credit Party and the Parent), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Credit Document unless it shall first receive such advice or concurrence
of the Required Lenders as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Credit Document in accordance with a request or consent of the Required
Lenders (or such other percentage of Lenders if so required by Section 10.6) and
such

                                     Page 86
<PAGE>
request and any action taken or failure to act pursuant thereto shall be binding
upon all of the Lenders.

      Section 9.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, unless
the Agent shall have received written notice from a Credit Party or a Lender
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." The Agent will notify the
Lenders of its receipt of any such notice. The Agent shall take such action with
respect to such Default or Event of Default as may be requested by the Required
Lenders in accordance with Article 8; provided, however, that unless and until
the Agent has received any such request, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable.

      Section 9.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Credit Parties and their Affiliates, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition, and
creditworthiness of the Credit Parties and their Affiliates, and all applicable
bank regulatory laws relating to the transactions contemplated hereby, and made
its own decision to enter into this Agreement and to extend credit to the
Borrowers. Each Lender also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals, and decisions in taking or not taking action under
this Agreement and the other Credit Documents, and to make such investigations
as it deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition, and creditworthiness of the
Credit Parties and their Affiliates. Except for notices, reports, and other
documents expressly herein required to be furnished to the Lenders by the Agent,
the Agent shall not have any duty or responsibility to provide any Lender with
any credit or other information concerning the business, prospects, operations,
property, financial and other condition, or creditworthiness of the Credit
Parties and their Affiliates which may come into the possession of any of the
Agent-Related Persons.

      Section 9.7 Indemnification. WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED
HEREBY ARE CONSUMMATED, THE LENDERS SHALL UPON DEMAND INDEMNIFY THE
AGENT-RELATED PERSONS (TO THE EXTENT NOT REIMBURSED BY OR ON BEHALF OF THE
CREDIT PARTIES AND WITHOUT LIMITING THE OBLIGATION OF THE CREDIT PARTIES TO DO
SO), IN ACCORDANCE WITH THEIR PRO RATA SHARES, FROM AND AGAINST ANY AND ALL
INDEMNIFIED LIABILITIES OTHER THAN LIABILITIES RELATING TO BANK PRODUCTS;
PROVIDED, HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT TO THE
AGENT-RELATED PERSONS OF ANY PORTION OF SUCH INDEMNIFIED LIABILITIES (AS DEFINED
HEREIN) RESULTING SOLELY FROM SUCH PERSON'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. Without limitation of the

                                     Page 87
<PAGE>
foregoing, each Lender shall reimburse the Agent upon demand for its pro rata
share of any costs or out-of-pocket expenses (including fees and expenses for
legal counsel) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment, or enforcement
(whether through negotiations, legal proceedings, or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, any other
Credit Document, or any document contemplated by or referred to herein, to the
extent that the Agent is not reimbursed for such expenses by or on behalf of the
Credit Parties. The undertaking in this Section shall survive the payment of the
Total Obligations and the resignation or replacement of the Agent.

      Section 9.8 The Agent in Individual Capacity. Bank of America and its
Affiliates may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in, and generally engage in any kind of
banking, trust, financial advisory, underwriting, or other business with any
Credit Party and its Affiliates as though Bank of America were not the Agent
hereunder and without notice to or consent of the Lenders. Bank of America or
its Affiliates may receive information regarding any Credit Party or its
Affiliates and account debtors (including information that may be subject to
confidentiality obligations in favor of any such Credit Party or Affiliate), and
the Lenders acknowledge that the Agent and Bank of America shall be under no
obligation to provide such information to the Lenders. With respect to its
Loans, Bank of America as a Lender shall have the same rights and powers under
this Agreement as any other Lender and may exercise the same as though it were
not the Agent, and the terms "Lender" and "Lenders" include Bank of America in
its individual capacity.

      Section 9.9 Successor Agent. The Agent may resign as Agent upon at least
thirty (30) days prior notice to the Lenders and the Credit Parties, such
resignation to be effective upon the acceptance of a successor agent to its
appointment as the Agent. In the event Bank of America sells all of its
Commitments and Loans as part of a sale, transfer, or other disposition by Bank
of America of substantially all of its loan portfolio, Bank of America shall
resign as the Agent and such purchaser or transferee shall become the successor
Agent hereunder. Subject to the foregoing, if the Agent resigns (the "resigning
Agent") under this Agreement, the Required Lenders shall appoint from among the
Lenders a successor agent for the Lenders (the "successor Agent"). If no
successor Agent is appointed prior to the effective date of the resignation of
the resigning Agent, the resigning Agent may appoint, after consulting with the
Lenders and the Borrowers, a successor Agent from among the Lenders. The
appointment of any successor Agent shall, so long as no Default or Event of
Default shall exist, be subject to the prior consent of the Borrowers (such
consent not to be unreasonably withheld). Upon the acceptance of its appointment
as the successor Agent, the successor Agent shall succeed to all the rights,
powers, and duties of the resigning Agent and the term "Agent" shall mean the
successor Agent and the resigning Agent's appointment, powers, and duties as the
Agent shall be terminated. After any resigning Agent's resignation hereunder as
the Agent, the provisions of this Article 9 shall continue to inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Agent under this Agreement.

                                     Page 88
<PAGE>
      Section 9.10 Withholding Tax.

            (a) If any Lender is a "foreign corporation, partnership, or trust"
      within the meaning of the Internal Revenue Code and such Lender claims
      exemption from, or a reduction of, United States withholding tax under
      Sections 1441 or 1442 of the Internal Revenue Code, such Lender agrees
      with and in favor of the Agent, to deliver to the Agent and the Borrowers:

                  (i) if such Lender claims an exemption from, or a reduction
            of, withholding tax under a U.S. tax treaty, two (2) properly
            completed and executed IRS Forms W-8BEN and W-8ECI before the
            payment of any interest in the first calendar year and before the
            payment of any interest in each third succeeding calendar year
            during which interest may be paid under this Agreement;

                  (ii) if such Lender claims that interest paid under this
            Agreement is exempt from United States withholding tax because it is
            effectively connected with a United States trade or business of such
            Lender, two (2) properly completed and executed copies of IRS Form
            W-8ECI before the payment of any interest is due in the first
            taxable year of such Lender and in each succeeding taxable year of
            such Lender during which interest may be paid under this Agreement,
            and IRS Form W-9; and

                  (iii) such other form or forms as may be required under the
            Internal Revenue Code or other laws of the United States as a
            condition to exemption from, or reduction of, United States
            withholding tax.

            Such Lender agrees to promptly notify the Agent and the Borrowers of
      any change in circumstances which would modify or render invalid any
      claimed exemption or reduction.

            (b) If any Lender claims exemption from, or reduction of,
      withholding tax under a United States tax treaty by providing IRS Form
      W-8BEN and such Lender sells, assigns, grants a participation in, or
      otherwise transfers all or part of the Total Obligations owing to such
      Lender under this Agreement, such Lender agrees to notify the Agent and
      the Borrowers of the percentage amount in which it is no longer the
      beneficial owner of such Total Obligations owing to such Lender. To the
      extent of such percentage amount, the Agent and the Borrowers will treat
      such Lender's IRS Form W-8BEN as no longer valid.

            (c) If any Lender claiming exemption from United States withholding
      tax by filing IRS Form W-8ECI with the Agent sells, assigns, grants a
      participation in, or otherwise transfers all or part of the Total
      Obligations owing to such Lender under this Agreement, such Lender agrees
      to undertake sole responsibility for complying with the withholding tax
      requirements imposed by Sections 1441 and 1442 of the Internal Revenue
      Code.

                                     Page 89
<PAGE>
            (d) If any Lender is entitled to a reduction in the applicable
      withholding tax, the Agent or the Borrowers may withhold from any interest
      payment to such Lender an amount equivalent to the applicable withholding
      tax after taking into account such reduction. If the forms or other
      documentation required by clause (a) preceding are not delivered to the
      Agent and the Borrowers, then the Agent or the Borrowers may withhold from
      any interest payment to such Lender not providing such forms or other
      documentation an amount equivalent to the applicable withholding tax.

            (e) If the IRS or any other Governmental Authority of the United
      States or other jurisdiction asserts a claim that the Agent or the
      Borrowers did not properly withhold tax from amounts paid to or for the
      account of any Lender (because the appropriate form was not delivered, was
      not properly executed, or because such Lender failed to notify the Agent
      or the Borrowers of a change in circumstances which rendered the exemption
      from, or reduction of, withholding tax ineffective, or for any other
      reason) such Lender shall indemnify the Agent and the Borrowers fully for
      all amounts paid, directly or indirectly, by the Agent or the Borrowers as
      tax or otherwise, including penalties and interest, and including any
      taxes imposed by any jurisdiction on the amounts payable to the Agent
      under this Section 9.10, together with all costs and expenses (including
      fees and expenses for legal counsel). The obligation of the Lenders under
      this clause (e) shall survive the payment of the Total Obligations and the
      resignation or replacement of the Agent.

      Section 9.11 Collateral Matters.

            (a) The Lenders hereby irrevocably authorize the Agent, at its
      option and in its sole discretion, to release any Liens upon any
      Collateral (i) upon the termination of the Commitments and payment and
      satisfaction in full of all Loans and reimbursement obligations in respect
      of Letters of Credit, and the termination of all outstanding Letters of
      Credit (whether or not any of such obligations are due) and all other
      Total Obligations; (ii) constituting property being sold or disposed of if
      the Credit Party disposing of such property certifies to the Agent that
      the sale or disposition is made in compliance with the terms of this
      Agreement (and the Agent may rely conclusively on any such certificate,
      without further inquiry); (iii) constituting property in which no Credit
      Party owned any interest at the time the Lien was granted or at any time
      thereafter; or (iv) constituting property leased to a Credit Party under a
      lease which has expired or been terminated in a transaction permitted
      under this Agreement. Except as provided above, the Agent will not release
      any of the Agent's Liens without the prior written authorization of the
      Lenders; provided that the Agent may, in its discretion, release the
      Agent's Liens on Collateral valued in the aggregate not in excess of
      $1,000,000 during each calendar year without the prior written
      authorization of the Lenders and the Agent may release the Agent's Liens
      on Collateral valued in the aggregate not in excess of $2,500,000 during
      each calendar year with the prior written authorization of the Required
      Lenders. Upon request by the Agent or the Credit Parties at any time, the
      Lenders will confirm in writing the Agent's authority to release any
      Agent's Liens upon particular types or items of Collateral pursuant to
      this Section 9.11.

                                     Page 90
<PAGE>
            (b) Upon receipt by the Agent of any authorization required pursuant
      to Section 9.11(a) from the Lenders or the Required Lenders, as
      applicable, of the Agent's authority to release any Liens upon particular
      types or items of Collateral, and upon at least five (5) Business Days
      prior written request by the Credit Parties, the Agent shall (and is
      hereby irrevocably authorized by the Lenders to) execute such documents as
      may be necessary to evidence the release of the Agent's Liens upon such
      Collateral; provided, however, that (i) the Agent shall not be required to
      execute any such document on terms which, in the Agent's opinion, would
      expose the Agent to liability or create any obligation or entail any
      consequence other than the release of such Liens without recourse or
      warranty, and (ii) such release shall not in any manner discharge, affect,
      or impair the Total Obligations or any Liens (other than those expressly
      being released) upon (or obligations of the Credit Parties in respect of)
      all interests retained by the Credit Parties, including the proceeds of
      any sale, all of which shall continue to constitute part of the
      Collateral.

            (c) The Agent shall have no obligation whatsoever to any of the
      Lenders to assure that the Collateral exists or is owned by the Credit
      Parties or is cared for, protected, or insured or has been encumbered, or
      that the Agent's Liens have been properly or sufficiently or lawfully
      created, perfected, protected, or enforced or are entitled to any
      particular priority, or to exercise at all or in any particular manner or
      under any duty of care, disclosure, or fidelity, or to continue
      exercising, any of the rights, authorities, and powers granted or
      available to the Agent pursuant to any of the Credit Documents, it being
      understood and agreed that in respect of the Collateral, or any act,
      omission, or event related thereto, the Agent may act in any manner it may
      deem appropriate, in its sole discretion given the Agent's own interest in
      the Collateral in its capacity as one of the Lenders and that the Agent
      shall have no other duty or liability whatsoever to any Lender as to any
      of the foregoing.

      Section 9.12 Restrictions on Actions by the Lenders; Sharing of Payments.

            (a) Each of the Lenders agrees that it shall not, without the
      express consent of all Lenders, and that it shall, to the extent it is
      lawfully entitled to do so, upon the request of all Lenders, setoff
      against the Total Obligations, any amounts owing by such Lender to any
      Credit Party or any accounts of any Credit Party now or hereafter
      maintained with such Lender. Each of the Lenders further agrees that it
      shall not, unless specifically requested to do so by the Agent, take or
      cause to be taken any action to enforce its rights under this Agreement or
      any other Credit Document or against any Credit Party, including the
      commencement of any legal or equitable proceedings, to foreclose any Lien
      on, or otherwise enforce any security interest in, any of the Collateral.

            (b) If at any time or times any Lender shall receive (i) by payment,
      foreclosure, setoff, or otherwise, any proceeds of Collateral or any
      payments with respect to the Total Obligations owing to such Lender
      arising under, or relating to, this Agreement or the other Credit
      Documents, except for any such proceeds or payments received by such
      Lender from the Agent pursuant to the terms of this Agreement, or (ii)
      payments from the Agent in excess of such Lender's ratable portion of all
      such

                                     Page 91
<PAGE>
      distributions by the Agent, such Lender shall promptly (1) turn the same
      over to the Agent, in kind, and with such endorsements as may be required
      to negotiate the same to the Agent, or in same day funds, as applicable,
      for the account of all of the Lenders and for application to the Total
      Obligations in accordance with the applicable provisions of this
      Agreement, or (2) purchase, without recourse or warranty, an undivided
      interest and participation in the Total Obligations owed to the other
      Lenders so that such excess payment received shall be applied ratably as
      among the Lenders in accordance with their Revolving Commitment
      Percentage; provided, however, that if all or part of such excess payment
      received by the purchasing party is thereafter recovered from it, those
      purchases of participations shall be rescinded in whole or in part, as
      applicable, and the applicable portion of the purchase price paid therefor
      shall be returned to such purchasing party, but without interest except to
      the extent that such purchasing party is required to pay interest in
      connection with the recovery of the excess payment.

      Section 9.13 Agency for Perfection; Appointment of Collateral Agent.

            (a) Each Lender hereby appoints each other Lender as agent for the
      purpose of perfecting Liens, for the benefit of the Agent and the Lenders,
      in assets which, in accordance with Article 9 of the UCC or any other
      Requirements of Law can be perfected only by possession. Should any Lender
      (other than the Agent) obtain possession of any such Collateral, such
      Lender shall notify the Agent thereof, and, promptly upon the Agent's
      request therefor shall deliver such Collateral to the Agent or otherwise
      deal with such Collateral in accordance with the Agent's instructions.

            (b) The Lenders hereby appoint, authorize, and direct Bank of
      America, N.A., its successors and assigns in such capacity, to act as
      collateral agent under the Collateral Documents (in such capacity, the
      "Collateral Agent") with such powers and discretion as are specifically
      delegated to the Collateral Agent by the terms thereof, together with such
      other powers as are reasonably incidental thereto. The Lenders further
      agree that the Collateral Agent shall be entitled to the same rights,
      privileges, powers, immunities, and indemnification provided to the Agent
      under this Article 9 to the same extent as provided to the Agent.

      Section 9.14 Payments by the Agent to the Lenders. All payments to be made
by the Agent to the Lenders shall be made by bank wire transfer or internal
transfer of immediately available funds to each Lender pursuant to wire transfer
instructions delivered in writing to the Agent on or prior to the Closing Date
(or if such Lender is an assignee, delivered with or in the applicable
Assignment and Acceptance), or pursuant to such other wire transfer instructions
as each party may designate for itself by written notice to the Agent.
Concurrently with each such payment, the Agent shall identify whether such
payment (or any portion thereof) represents principal, premium, or interest on
the Loans or otherwise. Unless the Agent receives notice from the Borrowers
prior to the date on which any payment is due to the Lenders that the Borrowers
will not make such payment in full as and when required, the Agent may assume
that the Borrowers have made such payment in full to the Agent on such date in
immediately available funds and the Agent may (but shall not be so required), in
reliance upon such assumption, distribute to each Lender on such due date an
amount equal to the amount then due such Lender.

                                     Page 92
<PAGE>
                                                                    EXHIBIT 10.2

If and to the extent the Borrowers have not made such payment in full to the
Agent, each Lender shall repay to the Agent on demand such amount distributed to
such Lender, together with interest thereon at the Federal Funds Rate for each
day from the date such amount is distributed to such Lender until the date
repaid.

      Section 9.15 Field Audit and Examination Reports; Disclaimer by the
Lenders. By signing this Agreement, each Lender:

            (a) is deemed to have requested that the Agent furnish such Lender,
      promptly after it becomes available, a copy of each field audit or
      examination report (each a "Report" and collectively, the "Reports")
      prepared by or on behalf of the Agent;

            (b) expressly agrees and acknowledges that neither Bank of America
      nor the Agent (i) makes any representation or warranty as to the accuracy
      of any Report, or (ii) shall be liable for any information contained in
      any Report;

            (c) expressly agrees and acknowledges that the Reports are not
      comprehensive audits or examinations, that the Agent, Bank of America, or
      any other party performing any audit or examination will inspect only
      specific information regarding the Credit Parties and will rely
      significantly upon the Credit Parties' books and records, as well as on
      representations of the Credit Parties' personnel;

            (d) agrees to keep all Reports confidential and strictly for its
      internal use, and not to distribute except to its Participants, or use any
      Report in any other manner; and

            (e) without limiting the generality of any other indemnification
      provision contained in this Agreement, agrees: (i) to hold the Agent and
      any such other Lender preparing a Report harmless from any action the
      indemnifying Lender may take or conclusion the indemnifying Lender may
      reach or draw from any Report in connection with any loans or other credit
      accommodations that the indemnifying Lender has made or may make to the
      Credit Parties, or the indemnifying Lender's participation in, or the
      indemnifying Lender's purchase of, a loan or loans of the Credit Parties;
      and (ii) to pay and protect, and indemnify, defend, and hold the Agent and
      any such other Lender preparing a Report harmless from and against, the
      claims, actions, proceedings, damages, costs, expenses, and other amounts
      (including fees and expenses of legal counsel) incurred by the Agent and
      any such other Lender preparing a Report as the direct or indirect result
      of any third parties who might obtain all or part of any Report through
      the indemnifying Lender.

      Section 9.16 Relation Among the Lenders. The Lenders are not partners or
co-venturers, and no Lender shall be liable for the acts or omissions of, or
(except as otherwise set forth herein in case of the Agent) authorized to act
for, any other Lender.

      Section 9.17 Settlement.

            (a) Each Lender's funded portion of the Loans is intended by the
      Lenders to be equal at all times to such Lender's Revolving Commitment
      Percentage of the

                                     Page 93
<PAGE>
      outstanding Loans. Notwithstanding such agreement, the Agent, Bank of
      America, and the Lenders agree (which agreement shall not be for the
      benefit of or enforceable by the Credit Parties) that in order to
      facilitate the administration of this Agreement and the other Credit
      Documents, settlement among them as to the Revolving Loans, including the
      Non-Ratable Loans, shall take place on a periodic basis in accordance with
      the following provisions:

                  (i) The Agent shall request settlement (a "Settlement") with
            the Lenders on at least a weekly basis, or on a more frequent basis
            at the Agent's election, (A) on behalf of Bank of America, with
            respect to each outstanding Non-Ratable Loan, (B) for itself, with
            respect to each Discretionary Over-Advance, and (C) with respect to
            collections received, in each case, by notifying the Lenders of such
            requested Settlement by telecopy, telephone, e-mail, or other
            similar form of transmission, of such requested Settlement, no later
            than 12:00 noon (Pasadena, California time) on the date of such
            requested Settlement (the "Settlement Date"). Each Lender (other
            than Bank of America, in the case of Non-Ratable Loans, and the
            Agent in the case of Discretionary Over-Advances) shall transfer the
            amount of such Lender's Revolving Commitment Percentage of the
            outstanding principal amount of the Non-Ratable Loans and
            Discretionary Over-Advances with respect to which Settlement is
            requested to the Agent, to such account of the Agent as the Agent
            may designate, not later than 2:00 p.m. (Pasadena, California time),
            on the Settlement Date applicable thereto. Settlements may occur
            during the continuation of a Default or an Event of Default and
            whether or not the applicable conditions precedent set forth in
            Article 4 have then been satisfied. Such amounts transferred to the
            Agent shall be applied against the amounts of the applicable
            Non-Ratable Loan or Discretionary Over-Advance and, together with
            the portion of such Non-Ratable Loan or Discretionary Over-Advance
            representing Bank of America's Revolving Commitment Percentage
            thereof, shall constitute Revolving Loans of such Lenders,
            respectively. If any such amount is not transferred to the Agent by
            any Lender on the Settlement Date applicable thereto, the Agent
            shall be entitled to recover such amount on demand from such Lender
            together with interest thereon at the Federal Funds Rate for the
            first three (3) days from and after the Settlement Date and
            thereafter at the Adjusted Base Rate (Y) on behalf of Bank of
            America, with respect to each outstanding Non-Ratable Loan, and (Z)
            for itself, with respect to each Discretionary Over-Advance.

                  (ii) Notwithstanding the foregoing, not more than one (1)
            Business Day after demand is made by the Agent (whether before or
            after the occurrence of a Default or an Event of Default and
            regardless of whether the Agent has requested a Settlement with
            respect to a Non-Ratable Loan or Discretionary Over-Advance), each
            other Lender (A) shall irrevocably and unconditionally purchase and
            receive from Bank of America or the Agent, as applicable, without
            recourse or warranty, an undivided interest and participation in
            such Non-Ratable Loan or Discretionary Over-Advance equal to such
            Lender's Revolving Commitment Percentage of such Non-Ratable Loan or
            Discretionary Over-Advance and (B) if Settlement has not previously
            occurred with respect to such Non-Ratable Loans or

                                    Page 94
<PAGE>
            Discretionary Over-Advance, upon demand by Bank of America or the
            Agent, as applicable, shall pay to Bank of America or the Agent, as
            applicable, as the purchase price of such participation an amount
            equal to one-hundred percent (100%) of such Lender's Revolving
            Commitment Percentage of such Non-Ratable Loans or Discretionary
            Over-Advance. If such amount is not in fact transferred to the Agent
            by any Lender, the Agent shall be entitled to recover such amount on
            demand from such Lender together with interest thereon at the
            Federal Funds Rate for the first two (2) days from and after such
            demand and thereafter at the Adjusted Base Rate.

                  (iii) From and after the date, if any, on which any Lender
            purchases an undivided interest and participation in any Non-Ratable
            Loan or Discretionary Over-Advance pursuant to clause (ii)
            preceding, the Agent shall promptly distribute to such Lender, such
            Lender's Revolving Commitment Percentage of all payments of
            principal and interest and all proceeds of Collateral received by
            the Agent in respect of such Non-Ratable Loan or Discretionary
            Over-Advance.

                  (iv) Between Settlement Dates, to the extent no Discretionary
            Over-Advances are outstanding, the Agent may pay over to Bank of
            America any payments received by the Agent, which in accordance with
            the terms of this Agreement would be applied to the reduction of the
            Loans, for application to the Non-Ratable Loans. If, as of any
            Settlement Date, collections received since the then immediately
            preceding Settlement Date have been applied to Bank of America's
            Revolving Loans (other than to Non-Ratable Loans or Discretionary
            Over-Advance in which a Lender has not yet funded its purchase of a
            participation pursuant to clause (ii) preceding), as provided for in
            the previous sentence, Bank of America shall pay to the Agent for
            the accounts of the Lenders, to be applied to the outstanding
            Revolving Loans of such Lenders, an amount such that each Lender
            shall, upon receipt of such amount, have, as of such Settlement
            Date, its Revolving Commitment Percentage of the Revolving Loans.
            During the period between Settlement Dates, Bank of America (with
            respect to Non-Ratable Loans), the Agent (with respect to
            Discretionary Over-Advances), and each Lender (with respect to the
            Revolving Loans other than Non-Ratable Loans and Discretionary
            Over-Advances), shall be entitled to interest at the applicable rate
            or rates payable under this Agreement on the actual average daily
            amount of funds employed by Bank of America, the Agent, and the
            other Lenders.

            (b) The Lenders' Failure to Perform. All Loans (other than
      Non-Ratable Loans and Discretionary Over-Advances) shall be made by the
      Lenders simultaneously and in accordance with their Revolving Commitment
      Percentages. It is understood that (i) no Lender shall be responsible for
      any failure by any other Lender to perform its obligation to make any
      Loans hereunder, nor shall the Revolving Committed Amount of any Lender be
      increased or decreased as a result of any failure by any other Lender to
      perform its obligation to make any Loans hereunder, (ii) no failure by any
      Lender to perform its obligation to make any Loans hereunder shall excuse
      any other Lender from

                                    Page 95
<PAGE>
      its obligation to make any Loans hereunder, and (iii) the obligations of
      each Lender hereunder shall be several, not joint and several.

            (c) Defaulting Lenders. Unless the Agent receives notice from a
      Lender on or prior to the Closing Date or, with respect to any borrowing
      after the Closing Date, at least one (1) Business Day prior to the date of
      such borrowing, that such Lender will not make available as and when
      required hereunder to the Agent such Lender's Revolving Commitment
      Percentage of such borrowing, the Agent may assume that each Lender has
      made such amount available to the Agent in immediately available funds on
      the Funding Date. Furthermore, the Agent may, in reliance upon such
      assumption, make available to the Borrowers on such date a corresponding
      amount. If any Lender has not transferred its full Revolving Commitment
      Percentage of any borrowing to the Agent in immediately available funds
      and if the Agent has transferred a corresponding amount to the Borrowers
      on the Business Day following such Funding Date the applicable Lender
      shall make such amount available to the Agent, together with interest at
      the Federal Funds Rate for that day. A notice by the Agent submitted to
      any Lender with respect to amounts owing shall be conclusive, absent
      manifest error. If each Lender's full Revolving Commitment Percentage of
      any requested borrowing is transferred to the Agent as required, the
      amount transferred to the Agent shall constitute such Lender's Loan for
      all purposes of this Agreement. If any such amount is not transferred to
      the Agent on the Business Day following the Funding Date, the Agent will
      notify the Borrowers of such failure to fund and, upon demand by the
      Agent, the Borrowers shall pay such amount to the Agent for the Agent's
      account, together with interest thereon for each day elapsed since the
      date of such borrowing, at a rate per annum equal to the Adjusted
      Eurodollar Rate or the Adjusted Base Rate, as applicable at the time to
      the Loans comprising that particular borrowing. The failure of any Lender
      to make any Loan on any Funding Date (any such Lender, prior to the cure
      of such failure, being hereinafter referred to as a "Defaulting Lender")
      shall not relieve any other Lender of its obligation hereunder to make a
      Loan on such Funding Date. No Lender shall be responsible for any other
      Lender's failure to advance such other Lenders' Revolving Commitment
      Percentage of any borrowing.

            (d) Retention of Defaulting Lender's Payments. The Agent shall not
      be obligated to transfer to a Defaulting Lender any payments made by the
      Borrowers to the Agent for the Defaulting Lender's benefit, nor shall a
      Defaulting Lender be entitled to the sharing of any payments hereunder.
      Amounts payable to a Defaulting Lender shall instead be paid to or
      retained by the Agent. In its discretion, the Agent may loan the Borrowers
      the amount of all such payments received or retained by it for the account
      of such Defaulting Lender. Any amounts so loaned to the Borrowers shall
      bear interest at the rate applicable to Base Rate Loans and for all other
      purposes of this Agreement shall be treated as if they were Loans,
      provided, however, that for purposes of voting or consenting to matters
      with respect to the Credit Documents and determining the Revolving
      Commitment Percentages, such Defaulting Lender shall be deemed not to be a
      "Lender." Until a Defaulting Lender cures its failure to fund its
      Revolving Commitment Percentage of any borrowing (i) such Defaulting
      Lender shall not be entitled to any portion of the Unused Line Fee and
      (ii) the Unused Line Fee shall accrue in favor of the Lenders which have
      funded their respective Revolving Commitment Percentage of such

                                    Page 96
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      requested borrowing and shall be allocated among such performing Lenders
      ratably based upon their relative Revolving Committed Amount. This Section
      shall remain effective with respect to such Lender until such time as the
      Defaulting Lender shall no longer be in default of any of its obligations
      under this Agreement. The terms of this Section shall not be construed to
      increase or otherwise affect the Revolving Commitment of any Lender, or
      relieve or excuse the performance by the Borrowers of their duties and
      obligations hereunder.

      Section 9.18 Documentation Agent. CIT, in its capacity as the
documentation agent, shall have no rights, powers, duties, liabilities,
fiduciary relationships, or obligations under this Agreement or any of the other
Credit Documents.

                                   ARTICLE 10

                                  MISCELLANEOUS

      Section 10.1 Notices. Except as otherwise expressly provided herein, all
notices and other communications shall have been duly given and shall be
effective (a) when delivered, (b) when transmitted via telecopy (or other
facsimile device) to the number specified below, (c) the Business Day following
the day on which the same has been delivered prepaid to a reputable national
overnight air courier service, or (d) the third Business Day following the day
on which the same is sent by certified or registered mail, postage prepaid, in
each case to the respective parties at the address, in the case of the
Borrowers, the Guarantors, and the Agent, set forth below, and, in the case of
the Lenders, set forth on Schedule 10.1, or at such other address as such party
may specify by written notice to the other parties hereto:

      if to the Borrowers or the Guarantors:

            Crescent Jewelers
            315 11th Street
            Oakland, California  94607
            Attn:  Victor Suglia
            Telecopy:  (510) 763-1213

      if to the Agent:

            Bank of America, N.A.
            55 South Lake Avenue , Suite 900
            Pasadena, California 91101
            Attn: Portfolio Manager
            Telecopy:    (626) 397-1275

      Section 10.2 Right of Setoff. In addition to any rights and remedies of
the Lenders provided by law, if an Event of Default exists or the Loans have
been accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Credit Parties, any such notice being waived by the
Credit Parties to the fullest extent permitted by law, to setoff and

                                    Page 97
<PAGE>
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by, and other indebtedness at any time owing by, such
Lender or any Affiliate of such Lender to or for the credit or the account of
the Credit Parties against the Total Obligations to such Lender, now or
hereafter existing, irrespective of whether or not the Agent or such Lender
shall have made demand under this Agreement or any other Credit Document and
although such Total Obligations owing by the Credit Parties may be contingent or
unmatured. Each Lender agrees promptly to notify the Credit Parties and the
Agent after any such setoff and application made by such Lender; provided,
however, the failure to give such notice shall not affect the validity of such
setoff and application. NOTWITHSTANDING THE FOREGOING, NO LENDER SHALL EXERCISE
ANY RIGHT OF SETOFF, BANKER'S LIEN, OR THE LIKE AGAINST ANY DEPOSIT ACCOUNT OR
PROPERTY OF ANY CREDIT PARTY HELD OR MAINTAINED BY SUCH LENDER WITHOUT THE PRIOR
WRITTEN UNANIMOUS CONSENT OF THE LENDERS.

      Section 10.3 Benefit of Agreement; Assignments.

            (a) This Agreement shall be binding upon and inure to the benefit of
      and be enforceable by the respective successors and assigns of the parties
      hereto; provided that neither any Borrower nor any Guarantor may assign or
      transfer any of its interests and obligations without prior written
      consent of each of the Lenders; provided further that the rights of each
      Lender to transfer, assign, or grant participations in its rights and/or
      obligations hereunder shall be limited as provided by this Section 10.3.

            (b) Any Lender may, with the written consent of the Agent (which
      consent shall not be unreasonably withheld) and if no Default or Event of
      Default exists with the written consent of Crescent (which consent shall
      not be unreasonably withheld), assign and delegate to one or more Eligible
      Assignees (provided that no consent of the Agent or Crescent shall be
      required in connection with any assignment and delegation by a Lender to
      an Affiliate of such Lender or to another Lender) (each an "Assignee")
      all, or any ratable part of all, of the Loans, the Commitments, and the
      other rights and obligations of such Lender hereunder, in a minimum amount
      of $10,000,000 and integral amounts of $1,000,000 in excess thereof or all
      of such assigning Lender's Loans and Commitments (provided that, unless an
      assignor Lender has assigned and delegated all of its Loans and
      Commitments, no such assignment and/or delegation shall be permitted
      unless, after giving effect thereto, such assignor Lender retains a
      Commitment in a minimum amount of $10,000,000); provided, however, that
      the Credit Parties and the Agent may continue to deal solely and directly
      with such Lender in connection with the interest so assigned to an
      Assignee until (i) written notice of such assignment, together with
      payment instructions, addresses, and related information with respect to
      the Assignee, shall have been given to the Borrowers and the Agent by such
      Lender and the Assignee; (ii) such Lender and its Assignee shall have
      delivered to the Borrowers and the Agent an Assignment and Acceptance in
      the form of Exhibit E (an "Assignment and Acceptance") together with any
      Notes subject to such assignment, and (iii) the assignor Lender or
      Assignee has paid to the Agent a processing fee in the amount of $5,000
      (provided that the Agent may, in its discretion, waive such fee in
      connection with the initial syndication of the Commitments). The Borrowers
      agree to promptly execute and deliver new or

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      replacement Notes as reasonably requested by the Agent to evidence
      assignments of the Loans and Commitments in accordance herewith.

            (c) From and after the date that the Agent notifies the assignor
      Lender that it has received an executed Assignment and Acceptance and
      payment of the above-referenced processing fee, (i) the Assignee
      thereunder shall be a party hereto and, to the extent that rights and
      obligations, including, but not limited to, the obligation to participate
      in Letters of Credit have been assigned to it pursuant to such Assignment
      and Acceptance, shall have the rights and obligations of a Lender under
      the Credit Documents, and (ii) the assignor Lender shall, to the extent
      that rights and obligations hereunder and under the other Credit Documents
      have been assigned by it pursuant to such Assignment and Acceptance,
      relinquish its rights and be released from its obligations under this
      Agreement (and in the case of an Assignment and Acceptance covering all or
      the remaining portion of an assigning Lender's rights and obligations
      under this Agreement, such Lender shall cease to be a party hereto).

            (d) By executing and delivering an Assignment and Acceptance, the
      assigning Lender thereunder and the Assignee thereunder confirm to and
      agree with each other and the other parties hereto as follows: (i) other
      than as provided in such Assignment and Acceptance, such assigning Lender
      makes no representation or warranty and assumes no responsibility with
      respect to any statements, warranties, or representations made in or in
      connection with this Agreement or the execution, legality, validity,
      enforceability, genuineness, sufficiency, or value of this Agreement or
      any other Credit Document furnished pursuant hereto or the attachment,
      perfection, or priority of any Lien granted by the Credit Parties to the
      Agent or any Lender in the Collateral; (ii) such assigning Lender makes no
      representation or warranty and assumes no responsibility with respect to
      the financial condition of the Credit Parties or the performance or
      observance by the Credit Parties of any of their respective obligations
      under this Agreement or any other Credit Document furnished pursuant
      hereto; (iii) such Assignee confirms that it has received a copy of this
      Agreement, together with such other documents and information as it has
      deemed appropriate to make its own credit analysis and decision to enter
      into such Assignment and Acceptance; (iv) such Assignee will,
      independently and without reliance upon the Agent, such assigning Lender,
      or any other Lender, and based on such documents and information as it
      shall deem appropriate at the time, continue to make its own credit
      decisions in taking or not taking action under this Agreement; (v) such
      Assignee appoints and authorizes the Agent to take such action as agent on
      its behalf and to exercise such powers under this Agreement and the other
      Credit Documents as are delegated to the Agent by the terms hereof,
      together with such powers, including the discretionary rights and
      incidental power, as are reasonably incidental thereto; and (vi) such
      Assignee agrees that it will perform in accordance with their terms all of
      the obligations which by the terms of this Agreement are required to be
      performed by it as a Lender.

            (e) Immediately upon satisfaction of the requirements of Section
      10.3(b), this Agreement shall be deemed to be amended to the extent, but
      only to the extent, necessary to reflect the addition of the Assignee and
      the resulting adjustment of the Commitments

                                    Page 99
<PAGE>
      arising therefrom. The Commitment allocated to each Assignee shall reduce
      such Commitments of the assigning Lender pro tanto.

            (f) Any Lender may at any time sell to one or more participants
      participating interests in any Loans, the Commitments of that Lender, and
      the other interests of that Lender (the "originating Lender") hereunder
      and under the other Credit Documents; provided, however, that (i) the
      originating Lender's obligations under this Agreement shall remain
      unchanged, (ii) the originating Lender shall remain solely responsible for
      the performance of such obligations, (iii) the Credit Parties and the
      Agent shall continue to deal solely and directly with the originating
      Lender in connection with the originating Lender's rights and obligations
      under this Agreement and the other Credit Documents, and (iv) no Lender
      shall transfer or grant any participating interest under which the
      participant has rights to approve any amendment to, or any consent or
      waiver with respect to, this Agreement or any other Credit Document except
      the matters set forth in Section 10.6(a)(i), Section 10.6(a)(ii), and
      Section 10.6(a)(iii), and (v) all amounts payable by the Borrowers
      hereunder shall be determined as if such Lender had not sold such
      participation, except that, if amounts outstanding under this Agreement
      are due and unpaid, or shall have been declared or shall have become due
      and payable upon the occurrence of an Event of Default, each participant
      shall be deemed to have the right of setoff in respect of its
      participating interest in amounts owing under this Agreement to the same
      extent and subject to the same limitation as if the amount of its
      participating interest were owing directly to it as a Lender under this
      Agreement.

            (g) The Agent shall maintain at its address referred to in Section
      10.1 a copy of each Assignment and Acceptance delivered to and accepted by
      it and a register for the recordation of the names and addresses of the
      Lenders and the Commitment of, and principal amount of the Loans owing to,
      each Lender from time to time (the "Register"). The entries in the
      Register shall be conclusive and binding for all purposes, absent manifest
      error, and the Credit Parties, the Agent, and the Lenders may treat each
      Person whose name is recorded in the Register as a Lender hereunder for
      all purposes of this Agreement. The Register shall be available for
      inspection by the Credit Parties or any Lender at any reasonable time and
      from time to time upon reasonable prior notice. Any assignment of any
      loan, commitment, interest, or obligation hereunder or under the other
      Credit Documents shall be effective only upon an entry with respect
      thereto being made in the Register.

            (h) Upon its receipt of an Assignment and Acceptance executed by the
      parties thereto, together with any Note subject to such assignment and
      payment of the processing fee, the Agent shall (i) accept such Assignment
      and Acceptance, (ii) record the information contained therein in the
      Register, and (iii) give prompt notice thereof to the parties thereto.

            (i) Any Lender may furnish any information concerning the members of
      the Consolidated Group in the possession of such Lender from time to time
      to assignees and participants (including prospective assignees and
      participants), subject, however, to the provisions of Section 10.15.

                                    Page 100
<PAGE>
            (j) Notwithstanding any other provision in this Agreement, any
      Lender may at any time create a security interest in, or pledge, all or
      any portion of its rights under and interest in this Agreement in favor of
      any Federal Reserve Bank in accordance with Regulation A of the Federal
      Reserve Board or U.S. Treasury Regulation 31 CFR Section 203.14, and such
      Federal Reserve Bank may enforce such pledge or security interest in any
      manner permitted under Requirements of Law.

      Section 10.4 No Waiver; Remedies Cumulative. No failure or delay on the
part of the Agent or any Lender in exercising any right, power, or privilege
hereunder or under any other Credit Document and no course of dealing between
the Agent or any Lender and any of the Credit Parties shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power, or
privilege hereunder or under any other Credit Document preclude any other or
further exercise thereof or the exercise of any other right, power, or privilege
hereunder or thereunder. The rights and remedies provided herein are cumulative
and not exclusive of any rights or remedies which the Agent or any Lender would
otherwise have. No notice to or demand on any Credit Party in any case shall
entitle the Credit Parties to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the Agent or the
Lenders to any other or further action in any circumstances without notice or
demand.

      Section 10.5 Expenses; Indemnification.

            (a) The Borrowers agree to pay to the Agent, for its benefit, on
      demand, all costs and expenses that the Agent pays or incurs in connection
      with the negotiation, preparation, syndication, consummation,
      administration (including reasonable costs of travel, lodging, and meals
      incurred in connection with administration of this Agreement),
      enforcement, and termination of this Agreement or any of the other Credit
      Documents, including: (i) all reasonable fees, expenses, and disbursements
      of any law firm or other counsel engaged by the Agent; (ii) costs and
      expenses (including all fees, expenses, and disbursements of any law firm
      or other counsel engaged by the Agent) in connection with administration
      of this Agreement and for any amendment, supplement, waiver, consent, or
      subsequent closing in connection with the Credit Documents and the
      transactions contemplated thereby; (iii) reasonable costs and expenses of
      lien and title searches, title insurance, and environmental audits; (iv)
      taxes, fees, and other charges for recording the Mortgages, filing
      financing statements and continuations, and other actions to perfect,
      protect, and continue the Agent's Liens (including reasonable costs and
      expenses paid or incurred by the Agent in connection with the consummation
      of this Agreement); (v) sums paid or incurred to pay any amount or take
      any action required of any Credit Party under the Credit Documents that
      such Credit Party fails to pay or take; (vi) costs of appraisals,
      inspections, and verifications of the Collateral, including travel,
      lodging, and meals for field examinations and inspections of the
      Collateral and the Credit Parties' operations by the Agent, plus the
      Agent's then customary charge for field examinations and audits and the
      preparation of reports thereof (such charge is currently $800 per day (or
      portion thereof) for each Person retained or employed by the Agent with
      respect to each field examination or audit); and (vii) costs and expenses
      of forwarding loan proceeds, collecting checks and other items of payment,
      and establishing and maintaining payment

                                    Page 101
<PAGE>
      accounts and lockboxes, and costs and expenses of preserving and
      protecting the Collateral. In addition, upon demand, the Borrowers agree
      to pay costs and expenses incurred by the Agent and the Lenders (including
      all reasonable fees, expenses, and disbursements of any law firm or other
      counsel engaged by the Agent and all reasonable fees, expenses, and
      disbursements incurred by the Lenders for one law firm retained by the
      Lenders), in each case, paid or incurred to obtain payment of the Total
      Obligations, enforce the Agent's Liens, sell or otherwise realize upon the
      Collateral, and otherwise enforce the provisions of the Credit Documents,
      or to defend any claims made or threatened against the Agent or any Lender
      arising out of the transactions contemplated hereby (including
      preparations for and consultations concerning any such matters).
      Additionally, the Borrowers agree to pay or reimburse Bank of America for
      all costs, fees, and expenses for which any Credit Party is obligated
      under the Original Credit Agreement, and Bank of America is authorized to
      charge such amounts to the loan account of the Borrowers as a Revolving
      Loan. The foregoing shall not be construed to limit any other provisions
      of the Credit Documents regarding costs and expenses to be paid by the
      Borrowers. All of the foregoing costs and expenses shall be charged to the
      loan account of the Borrowers as Revolving Loans.

            (b) EACH CREDIT PARTY AGREES TO DEFEND, INDEMNIFY, AND HOLD THE
      AGENT-RELATED PERSONS, AND EACH LENDER AND EACH OF THEIR RESPECTIVE
      OFFICERS, DIRECTORS, EMPLOYEES, COUNSEL, REPRESENTATIVES, AGENTS, AND
      ATTORNEYS-IN-FACT (EACH, AN "INDEMNIFIED PERSON") HARMLESS FROM AND
      AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES,
      ACTIONS, JUDGMENTS, SUITS, COSTS, CHARGES, EXPENSES, AND DISBURSEMENTS
      (INCLUDING ATTORNEY FEES AND EXPENSES) OF ANY KIND OR NATURE WHATSOEVER
      WHICH MAY AT ANY TIME (INCLUDING AT ANY TIME FOLLOWING REPAYMENT OF THE
      LOANS AND THE TERMINATION, RESIGNATION, OR REPLACEMENT OF THE AGENT OR
      REPLACEMENT OF ANY LENDER) BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST
      ANY SUCH PERSON IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT,
      ANY OTHER CREDIT DOCUMENT, OR ANY OTHER AGREEMENT, DOCUMENT, OR INSTRUMENT
      CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN, OR THE TRANSACTIONS
      CONTEMPLATED HEREBY OR THEREBY, OR ANY ACTION TAKEN OR OMITTED BY ANY SUCH
      PERSON UNDER OR IN CONNECTION WITH ANY OF THE FOREGOING, INCLUDING WITH
      RESPECT TO ANY INVESTIGATION, LITIGATION, OR PROCEEDING (INCLUDING ANY
      INSOLVENCY PROCEEDING OR APPELLATE PROCEEDING) RELATED TO OR ARISING OUT
      OF THIS AGREEMENT, ANY OTHER CREDIT DOCUMENT, OR THE LOANS OR THE USE OF
      THE PROCEEDS THEREOF, WHETHER OR NOT ANY INDEMNIFIED PERSON IS A PARTY
      THERETO (ALL THE FOREGOING, COLLECTIVELY, THE "INDEMNIFIED LIABILITIES");
      PROVIDED THAT THE CREDIT PARTIES SHALL HAVE NO OBLIGATION HEREUNDER TO ANY
      INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES TO THE EXTENT
      DETERMINED IN A

                                    Page 102
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      FINAL, NONAPPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO HAVE
      RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
      INDEMNIFIED PERSON. THE AGREEMENTS IN THIS SECTION 10.5(b) SHALL SURVIVE
      PAYMENT OF ALL OTHER TOTAL OBLIGATIONS.

            (c) EACH CREDIT PARTY AGREES TO INDEMNIFY, DEFEND, AND HOLD HARMLESS
      THE AGENT AND THE LENDERS FROM ANY LOSS OR LIABILITY DIRECTLY OR
      INDIRECTLY ARISING OUT OF THE USE, GENERATION, MANUFACTURE, PRODUCTION,
      STORAGE, RELEASE, THREATENED RELEASE, DISCHARGE, DISPOSAL, OR PRESENCE OF
      A HAZARDOUS SUBSTANCE RELATING TO ANY CREDIT PARTY'S OPERATIONS, BUSINESS,
      OR PROPERTY. THIS INDEMNITY WILL APPLY WHETHER THE HAZARDOUS SUBSTANCE IS
      ON, UNDER, OR ABOUT ANY CREDIT PARTY'S PROPERTY OR OPERATIONS OR PROPERTY
      LEASED TO ANY CREDIT PARTY. THE INDEMNITY INCLUDES BUT IT NOT LIMITED TO
      REASONABLE ATTORNEY FEES AND EXPENSES. THE INDEMNITY EXTENDS TO THE AGENT
      AND THE LENDERS, THEIR AFFILIATES, SUBSIDIARIES, AND ALL OF THEIR
      DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS, ATTORNEYS, AND
      ASSIGNS. AS USED IN THIS CLAUSE (c), "HAZARDOUS SUBSTANCES" MEANS ANY
      SUBSTANCE, MATERIAL, OR WASTE THAT IS OR BECOMES DESIGNATED OR REGULATED
      AS "TOXIC," "HAZARDOUS," "POLLUTANT," OR "CONTAMINANT" OR A SIMILAR
      DESIGNATION OR REGULATION UNDER ANY FEDERAL, STATE, OR LOCAL LAW (WHETHER
      UNDER COMMON LAW, STATUTE, REGULATION, OR OTHERWISE) OR JUDICIAL OR
      ADMINISTRATIVE INTERPRETATION OF SUCH, INCLUDING PETROLEUM OR NATURAL GAS.
      THIS INDEMNITY WILL SURVIVE REPAYMENT OF ALL OTHER OBLIGATIONS.

      Section 10.6 Amendments, Waivers, and Consents. Neither this Agreement nor
any other Credit Document nor any of the terms hereof or thereof may be amended,
changed, waived, discharged, or terminated unless such amendment, change,
waiver, discharge, or termination is in writing entered into by, or approved in
writing by, the Required Lenders and the Borrowers, provided, however, that:

            (a) except as specifically provided in clause (iv) following,
      without the consent of each Lender, neither this Agreement nor any other
      Credit Document may be amended to

                  (i) extend the final maturity of any Loan or of any
            reimbursement obligation, or any portion thereof, arising from
            drawings under Letters of Credit,

                  (ii) reduce the rate or extend the time of payment of interest
            (other than as a result of waiving the applicability of any
            post-default increase in interest rates) thereon or Fees hereunder,

                                    Page 103
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                  (iii) reduce or waive the principal amount of any Loan or of
            any reimbursement obligation, or any portion thereof, arising from
            drawings under Letters of Credit,

                  (iv) increase the aggregate amount of the Commitments
            (including the Revolving Loan Commitments and the LOC Committed
            Amount) or, with the consent of only the Lender affected thereby,
            increase the Commitment of a Lender over the amount thereof in
            effect (it being understood and agreed that a waiver of any Default
            or Event of Default or mandatory reduction in the Commitments shall
            not constitute a change in the terms of any Commitment of any
            Lender),

                  (v) except as the result of or in connection with an Asset
            Disposition permitted by Section 7.5 or as otherwise expressly
            permitted under Section 9.11 or the Collateral Documents, release or
            subordinate any Collateral,

                  (vi) except as the result of or in connection with a
            dissolution, merger, or disposition of a member of the Consolidated
            Group permitted under Section 7.4, release any Credit Party from its
            obligations under the Credit Documents,

                  (vii) amend, modify, or waive any provision of this Section
            10.6 or Section 3.6 through Section 3.9, Section 3.10(b), Section
            8.1(a), Section 10.2, Section 10.3, Section 10.5, or Section 10.9,

                  (viii) reduce any percentage specified in, or otherwise change
            any percentages of the Commitments which is required for the Lenders
            to take any action under this Agreement, or otherwise modify, the
            definition of Required Lenders,

                  (ix) amend the definition of (A) Eligible Installment
            Contracts, Eligible Inventory, or Reserves if the effect of any or
            all of such amendments would collectively increase the determination
            of the Borrowing Base by more than five percent (5.0%) or (B)
            Borrowing Base or Receivables Advance Rate, or

                  (x) consent to the assignment or transfer by any Borrower or
            any other Credit Party of any of its rights and obligations under
            (or in respect of) the Credit Documents except as permitted thereby;

            (b) without the consent of the Agent, no provision of Article 9 may
      be amended; and

            (c) without the consent of the Issuing Lender, no provision of
      Section 2.2(a)(ii) or Section 2.6 may be amended.

Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as provided in clause (a) preceding, (y) each Lender is
entitled to vote as such Lender sees fit on any bankruptcy reorganization plan
that affects the Loans, and each Lender acknowledges that

                                    Page 104
<PAGE>
the provisions of Section 1126(c) of the Bankruptcy Code supersedes the
unanimous consent provisions set forth herein and (z) the Required Lenders may
consent to allow a Credit Party to use cash collateral in the context of a
bankruptcy or insolvency proceeding.

      Section 10.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. It shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart for each of the parties hereto. Delivery by facsimile by
any of the parties hereto of an executed counterpart of this Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.

      Section 10.8 Headings. The headings of the sections and subsections hereof
are provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Agreement.

      Section 10.9 Survival. All indemnities set forth herein, including,
without limitation, in Section 2.6(e), Section 3.6, Section 9.7, and Section
10.5, shall survive the execution and delivery of this Agreement, the making of
the Loans, the issuance of the Letters of Credit, the repayment of the Loans,
LOC Obligations and other obligations under the Credit Documents, and the
termination of the Commitments hereunder, and all representations and warranties
made by the Borrowers and the Guarantors herein shall survive delivery of the
Notes and the making of the Loans hereunder.

      Section 10.10 Governing Law; Choice of Forum; Service of Process.

            (a) THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS AND
      LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE
      INTERNAL LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS, PROVIDED
      THAT PERFECTION ISSUES WITH RESPECT TO ARTICLE 9 OF THE UCC MAY GIVE
      EFFECT TO APPLICABLE CHOICE OR CONFLICT OF LAW RULES SET FORTH IN ARTICLE
      9 OF THE UCC) OF THE STATE OF NEW YORK; PROVIDED THAT THE AGENT AND THE
      LENDERS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.

            (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
      ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATES OF
      CALIFORNIA OR OF THE UNITED STATES LOCATED IN LOS ANGELES COUNTY,
      CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
      CREDIT PARTIES, THE AGENT, AND THE LENDERS CONSENTS, FOR ITSELF AND IN
      RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE
      COURTS. EACH OF THE CREDIT PARTIES, THE AGENT, AND THE LENDERS IRREVOCABLY
      WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR
      BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
      HEREAFTER HAVE TO THE

                                    Page 105
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      BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF
      THIS AGREEMENT, ANY OTHER CREDIT DOCUMENT, OR ANY OTHER AGREEMENT,
      DOCUMENT, OR INSTRUMENT RELATED HERETO OR THERETO. NOTWITHSTANDING THE
      FOREGOING (i) THE AGENT AND THE LENDERS SHALL HAVE THE RIGHT TO BRING ANY
      ACTION OR PROCEEDING AGAINST ANY CREDIT PARTY OR ITS PROPERTY IN THE
      COURTS OF ANY OTHER JURISDICTION THE AGENT OR THE LENDERS DEEM NECESSARY
      OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR OTHER SECURITY FOR
      THE TOTAL OBLIGATIONS AND (ii) EACH OF THE PARTIES HERETO ACKNOWLEDGES
      THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE IMMEDIATELY PRECEDING
      SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE THOSE
      JURISDICTIONS.

            (c) EACH CREDIT PARTY HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
      PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
      BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO SUCH CREDIT
      PARTY AT ITS ADDRESS SET FORTH IN SECTION 10.1 AND SERVICE SO MADE SHALL
      BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO
      DEPOSITED IN THE UNITED STATES MAILS POSTAGE PREPAID. NOTHING CONTAINED
      HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR THE LENDERS TO SERVE LEGAL
      PROCESS BY ANY OTHER MANNER PERMITTED BY LAW.

            (d) NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT TO THE
      CONTRARY, ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES, ARISING
      OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
      INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL AT THE
      REQUEST OF ANY PARTY HERETO BE DETERMINED BY BINDING ARBITRATION. The
      arbitration shall be conducted in accordance with the United States
      Arbitration Act (Title 9, U.S. Code), notwithstanding any choice of law
      provision in this Agreement, and under the Commercial Rules of the
      American Arbitration Association ("AAA"). The arbitrator(s) shall give
      effect to statutes of limitation in determining any claim. Any controversy
      concerning whether an issue is arbitrable shall be determined by the
      arbitrator(s). Judgment upon the arbitration award may be entered in any
      court having jurisdiction. The institution and maintenance of an action
      for judicial relief or pursuant to a provisional or ancillary remedy shall
      not constitute a waiver of the right of either party, including the
      plaintiff, to submit the controversy or claim to arbitration if any other
      party contests such action for judicial relief.

            (e) Notwithstanding the provisions of clause (d) preceding, no
      controversy or claim shall be submitted to arbitration without the consent
      of all parties if, at the time of the proposed submission, such
      controversy or claim arises from or related to an obligation to the
      Lenders which is secured by real estate property collateral (exclusive of
      real estate space lease assignments). If all the parties do not consent to
      submission of such a

                                    Page 106
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      controversy or claim to arbitration, the controversy or claim shall be
      determined as provided in Section 10.10(f).

            (f) At the request of any party a controversy or claim which is not
      submitted to arbitration as provided and limited in Section 10.10(d) and
      Section 10.10(e) shall be determined by judicial reference. If such an
      election is made, the parties shall designate to the court a referee or
      referees selected under the auspices of the AAA in the same manner as
      arbitrators are selected in AAA sponsored proceedings. The presiding
      referee of the panel, or the referee if there is a single referee, shall
      be an active attorney or retired judge. Judgment upon the award rendered
      by such referee or referees shall be entered in the court in which such
      proceeding was commenced.

            (g) No provision of clause (d) through clause (g) preceding shall
      limit the right of the Agent or the Lenders to exercise self-help remedies
      such as setoff, foreclosure against or sale of any real or personal
      property collateral or security, or obtaining provisional or ancillary
      remedies from a court of competent jurisdiction before, after, or during
      the pendency of any arbitration or other proceeding. The exercise of a
      remedy does not waive the right of either party to resort to arbitration
      or reference. At the Agent's option, foreclosure under a deed of trust or
      mortgage may be accomplished either by exercise of power of sale under the
      deed of trust or mortgage or by judicial foreclosure.

      Section 10.11 Waiver of Jury Trial. EACH OF THE CREDIT PARTIES, THE
LENDERS, AND THE AGENT IRREVOCABLY WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING, OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED
PERSON, PARTICIPANT, OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. EACH OF THE CREDIT PARTIES, THE LENDERS, AND THE AGENT
AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES FURTHER
AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF
THIS SECTION AS TO ANY ACTION, COUNTERCLAIM, OR OTHER PROCEEDING WHICH SEEKS, IN
WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT,
THE OTHER CREDIT DOCUMENTS, OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR
MODIFICATIONS TO THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS.

      Section 10.12 Severability. If any provision of any of the Credit
Documents is determined to be illegal, invalid, or unenforceable, such provision
shall be fully severable and the remaining provisions shall remain in full force
and effect and shall be construed without giving effect to the illegal, invalid,
or unenforceable provisions.

                                    Page 107
<PAGE>
      Section 10.13 Entirety. This Agreement together with the other Credit
Documents represent the entire agreement of the parties hereto and thereto, and
supersede all prior agreements and understandings, oral or written, if any,
including any commitment letters or correspondence relating to the Credit
Documents or the transactions contemplated herein and therein.

      Section 10.14 Binding Effect; Termination.

            (a) This Agreement shall become effective at such time on or after
      the Closing Date when it shall have been executed by the Borrowers, the
      Guarantors, and the Agent, and the Agent shall have received copies hereof
      which, when taken together, bear the signatures of each Lender, and
      thereafter this Agreement shall be binding upon and inure to the benefit
      of the Borrowers, the Guarantors, the Agent, each Lender, and their
      respective successors and assigns.

            (b) The term of this Agreement shall be until no Loans, LOC
      Obligations, or any other amounts payable hereunder or under any of the
      other Credit Documents shall remain outstanding, no Letters of Credit
      shall be outstanding, all of the Loans and obligations owing hereunder and
      under the other Credit Documents have been irrevocably satisfied in full
      and all of the Commitments hereunder shall have expired or been
      terminated.

      Section 10.15 Confidentiality. The Agent and each Lender (each, a "Lending
Party") agrees to keep confidential any information furnished or made available
to it by the Credit Parties pursuant to this Agreement that is marked
confidential; provided that nothing herein shall prevent any Lending Party from
disclosing such information (a) to any other Lending Party or any Affiliate of
any Lending Party, or any officer, director, employee, agent, or advisor of any
Lending Party or Affiliate of any Lending Party, (b) to any other Person if
reasonably incidental to the administration of the credit facility provided
herein, (c) as required by any law, rule, or regulation, (d) upon the order of
any court or administrative agency, (e) upon the request or demand of any
regulatory agency or authority, (f) that is or becomes available to the public
or that is or becomes available to any Lending Party other than as a result of a
disclosure by any Lending Party prohibited by this Agreement, (g) in connection
with any litigation to which such Lending Party or any of its Affiliates may be
a party, (h) to the extent necessary in connection with the exercise of any
remedy under this Agreement or any other Credit Document, (i) to the National
Association of Insurance Commissioners or any similar organization or any
nationally recognized rating agency that requires access to information about a
Lender's investment portfolio in connection with ratings issued with respect to
such Lender, (j) to any direct or indirect contractual counterparty in swap
agreements or such contractual counterparty's professional advisor (so long as
such contractual counterparty or professional advisor to such contractual
counterparty (i) has been approved in writing by the Borrowers and (ii) agrees
in a writing enforceable by the Borrowers to be bound by the provisions of this
Section 10.15) and (k) subject to provisions substantially similar to those
contained in this Section 10.15, to any actual or proposed participant or
assignee.

                                    Page 108
<PAGE>
      Section 10.16 Other Security and Guaranties. The Agent may, without notice
or demand and without affecting the Credit Parties' obligations hereunder, from
time to time: (a) take from any Person and hold collateral (other than the
Collateral) for the payment of all or any part of the Total Obligations and
exchange, enforce, or release such collateral or any part thereof; and (b)
accept and hold any endorsement or guaranty of payment of all or any part of the
Total Obligations and release or substitute any such endorser or guarantor, or
any Person who has given any Lien in any other collateral as security for the
payment of all or any part of the Total Obligations, or any other Person in any
way obligated to pay all or any part of the Total Obligations.

      Section 10.17 Agency of Crescent for Each Other Credit Party. Each of the
other Credit Parties irrevocably appoints Crescent as its agent for all purposes
relevant to this Agreement, including the giving and receipt of notices and
execution and delivery of all documents, instruments, and certificates
contemplated herein and all modifications hereto. Any acknowledgment, consent,
direction, certification, or other action which might otherwise be valid or
effective only if given or taken by all or any of the Credit Parties or acting
singly, shall be valid and effective if given or taken only by Crescent, whether
or not any of the other Credit Parties joins therein, and the Agent and the
Lenders shall have no duty or obligation to make further inquiry with respect to
the authority of Crescent under this Section 10.16, provided that nothing in
this Section 10.16 shall limit the effectiveness of, or the right of the Agent
and the Lenders to rely upon, any notice (including without limitation a Notice
of Borrowing or a Notice of Continuation/Conversion), document, instrument,
certificate, acknowledgment, consent, direction, certification, or other action
delivered by any Credit Party pursuant to this Agreement.

      Section 10.18 Joint and Several Liability. All Loans, upon funding, shall
be deemed to be jointly funded to and received by the Borrowers. Each Borrower
jointly and severally agrees to pay, and shall be jointly and severally liable
under this Agreement for, all of the Total Obligations, regardless of the manner
or amount in which proceeds of Loans are used, allocated, shared, or disbursed
by or among the Borrowers themselves, or the manner in which the Agent and/or
any Lender accounts for such Loans or other extensions of credit on its books
and records. Each Borrower shall be liable for all amounts due to the Agent
and/or any Lender under this Agreement, regardless of which Borrower actually
receives Loans or other extensions of credit hereunder or the amount of such
Loans and extensions of credit received or the manner in which the Agent and/or
such Lender accounts for such Loans or other extensions of credit on its books
and records. Each Borrower's indebtedness, liabilities, and obligations with
respect to Loans and other extensions of credit made to it, and such Borrower's
indebtedness, liabilities, and obligations arising as a result of the joint and
several liability of such Borrower hereunder, with respect to Loans made to the
other Borrowers hereunder, shall be separate and distinct obligations, but all
such indebtedness, liabilities, and obligations shall be primary obligations of
such Borrower. The Borrowers acknowledge and expressly agree with the Agent and
each Lender that the joint and several liability of each Borrower is required
solely as a condition to, and is given solely as inducement for and in
consideration of, credit or accommodations extended or to be extended under the
Credit Documents to any or all of the other Borrowers and is not required or
given as a condition of extensions of credit to such Borrower. Each Borrower's
indebtedness, liabilities, and obligations under this Agreement and as an
obligor under a Guaranty Agreement shall be separate and distinct obligations.
Each Borrower's indebtedness,

                                    Page 109
<PAGE>
liabilities, and obligations under this Agreement shall, to the fullest extent
permitted by law, be unconditional irrespective of (i) the validity or
enforceability, avoidance, or subordination of the indebtedness, liabilities,
and obligations of any other Borrower or of any promissory note or other
document evidencing all or any part of the indebtedness, liabilities, and
obligations of any other Borrower, (ii) the absence of any attempt to collect
the indebtedness, liabilities, and obligations from any other Borrower, any
Guarantor, or any other security therefor, or the absence of any other action to
enforce the same, (iii) the waiver, consent, extension, forbearance, or granting
of any indulgence by the Agent and/or any Lender with respect to any provision
of any instrument evidencing the indebtedness, liabilities, and obligations of
any other Borrower or Guarantor, or any part thereof, or any other agreement now
or hereafter executed by any other Borrower or Guarantor and delivered to the
Agent and/or any Lender, (iv) the failure by the Agent and/or any Lender to take
any steps to perfect and maintain its security interest in, or to preserve its
rights to, any security or collateral for the indebtedness, liabilities, and
obligations of any other Borrower or Guarantor, (v) the Agent's and/or any
Lender's election, in any proceeding instituted under the Bankruptcy Code, of
the application of Section 1111(b)(2) of the Bankruptcy Code, (vi) any borrowing
or grant of a security interest by any other Borrower, as debtor-in-possession
under Section 364 of the Bankruptcy Code, (vii) the disallowance of all or any
portion of the Agent's and/or any Lender's claim(s) for the repayment of the
indebtedness, liabilities, and obligations of any other Borrower under Section
502 of the Bankruptcy Code, or (viii) any other circumstances which might
constitute a legal or equitable discharge or defense of a guarantor or of any
other Borrower. With respect to any Borrower's indebtedness, liabilities, and
obligations arising as a result of the joint and several liability of the
Borrowers hereunder with respect to Loans or other extensions of credit made to
any of the other Borrowers hereunder, such Borrower waives, until the Total
Obligations shall have been paid in full and this Agreement shall have been
terminated, any right to enforce any right of subrogation or any remedy which
the Agent and/or any Lender now has or may hereafter have against any other
Borrower, any endorser or any Guarantor of all or any part of the Total
Obligations, and any benefit of, and any right to participate in, any security
or collateral given to the Agent and/or any Lender to secure payment of the
Total Obligations or any other liability of any Borrower to the Agent and/or any
Lender. Upon any Event of Default, the Agent may proceed directly and at once,
without notice, against any Borrower to collect and recover the full amount, or
any portion of the Total Obligations, without first proceeding against any other
Borrower or any other Person, or against any security or collateral for the
Total Obligations. Each Borrower consents and agrees that the Agent shall be
under no obligation to marshal any assets in favor of any Borrower or against or
in payment of any or all of the Total Obligations.

      Section 10.19 Contribution and Indemnification Among the Borrowers. Each
Borrower is obligated to repay the Total Obligations as joint and several
obligors under this Agreement. To the extent that any Borrower shall, under this
Agreement as a joint and several obligor, repay any of the Total Obligations
constituting Loans made to another Borrower hereunder or other Total Obligations
incurred directly and primarily by any other Borrower (an "Accommodation
Payment"), then the Borrower making such Accommodation Payment shall be entitled
to contribution and indemnification from, and be reimbursed by, each of the
other Borrowers in an amount, for each of such other Borrowers, equal to a
fraction of such Accommodation Payment, the numerator of which fraction is such
other Borrower's Allocable Amount and the denominator

                                    Page 110
<PAGE>
of which is the sum of the Allocable Amounts of all of the Borrowers. As of any
date of determination, the "Allocable Amount" of each Borrower shall be equal to
the maximum amount of liability for Accommodation Payments which could be
asserted against such Borrower hereunder without (a) rendering such Borrower
"insolvent" within the meaning of Section 101 (31) of the Bankruptcy Code,
Section 2 of the Uniform Fraudulent Transfer Act ("UFTA") or Section 2 of the
Uniform Fraudulent Conveyance Act ("UFCA"), (b) leaving such Borrower with
unreasonably small capital or assets, within the meaning of Section 548 of the
Bankruptcy Code, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving
such Borrower unable to pay its debts as they become due within the meaning of
Section 548 of the Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the
UFCA. All rights and claims of contribution, indemnification, and reimbursement
under this Section shall be subordinate in right of payment to the prior payment
in full of the Total Obligations. The provisions of this Section shall, to the
extent expressly inconsistent with any provision in any Credit Document,
supersede such inconsistent provision.

      Section 10.20 Additional Borrowers and Guarantors. Addition of any Person
as a Borrower or a Guarantor is subject to approval of the Agent and the
Required Lenders, and may be conditioned upon such requirements as they may
reasonably determine in their discretion, including, without limitation, (a) the
furnishing of such financial and other information as the Agent or any such
Lender may request; (b) approval by all appropriate approval authorities of the
Agent and each such Lender; (c) execution and delivery by the Credit Parties,
such Person, the Agent, and the Required Lenders of such agreements and other
documentation (including, without limitation, an amendment to this Agreement or
any other Credit Document), and the furnishing by such Person or any of the
Credit Parties of such certificates, opinions, and other documentation, as the
Agent and any such Lender may reasonably request. Neither the Agent nor any
Lender shall have any obligation to approve any such Person for addition as a
party to this Agreement.

      Section 10.21 Express Waivers By the Credit Parties in Respect of Cross
Guaranties and Cross Collateralization. Each Credit Party agrees as follows:

            (a) Each Credit Party hereby waives: (i) notice of acceptance of
      this Agreement; (ii) notice of the making of any Loans, the issuance of
      any Letter of Credit, or any other financial accommodations made or
      extended under the Credit Documents or the creation or existence of any
      indebtedness, liabilities, or obligations under the Credit Documents;
      (iii) notice of the amount of the indebtedness, liabilities, and
      obligations under the Credit Documents, subject, however, to such Credit
      Party's right to make inquiry of the Agent to ascertain the amount of the
      indebtedness, liabilities, and obligations under the Credit Documents at
      any reasonable time; (iv) notice of any adverse change in the financial
      condition of any other Credit Party or of any other fact that might
      increase such Credit Party's risk with respect to such other Credit Party
      under the Credit Documents; (v) notice of presentment for payment, demand,
      protest, and notice thereof as to any promissory notes or other
      instruments among the Credit Documents; and (vii) all other notices
      (except if such notice is specifically required to be given to such Credit
      Party hereunder or under any of the other Credit Documents to which such
      Credit Party is a party) and demands to which such Credit Party might
      otherwise be entitled.

                                    Page 111
<PAGE>
            (b) Each Credit Party hereby waives the right by statute or
      otherwise to require the Agent or any Lender to institute suit against any
      other Credit Party or to exhaust any rights and remedies which the Agent
      or any Lender has or may have against any other Credit Party. Each Credit
      Party further waives any defense arising by reason of any disability or
      other defense of any other Credit Party (other than the defense that the
      Total Obligations shall have been fully and finally performed and
      indefeasibly paid) or by reason of the cessation from any cause whatsoever
      of the liability of any such Credit Party in respect thereof.

            (c) Each Credit Party hereby waives and agrees not to assert against
      the Agent, any Lender, or the Issuing Lender: (i) any defense (legal or
      equitable), setoff, counterclaim, or claim which such Credit Party may now
      or at any time hereafter have against any other Credit Party or any other
      party liable under the Credit Documents; (ii) any defense, setoff,
      counterclaim, or claim of any kind or nature available to any other Credit
      Party against the Agent, any Lender, or the Issuing Lender, arising
      directly or indirectly from the present or future lack of perfection,
      sufficiency, validity, or enforceability of the Total Obligations or any
      security therefor; (iii) any right or defense arising by reason of any
      claim or defense based upon an election of remedies by the Agent, any
      Lender, or the Issuing Lender under any applicable law; (iv) the benefit
      of any statute of limitations affecting any other Credit Party's liability
      hereunder.

            (d) Each Credit Party consents and agrees that, without notice to or
      by such Credit Party and without affecting or impairing the obligations of
      such Credit Party hereunder, the Agent may (subject to any requirement for
      consent of any of the Lenders to the extent required by this Agreement),
      by action or inaction: (i) compromise, settle, extend the duration or the
      time for the payment of, or discharge the performance of, or may refuse to
      or otherwise not enforce the Credit Documents; (ii) release all or any one
      or more parties to any one or more of the Credit Documents or grant other
      indulgences to any other Credit Party in respect thereof; (iii) amend or
      modify in any manner and at any time (or from time to time) any of the
      Credit Documents; or (iv) release or substitute any Person liable for
      payment of the Total Obligations, or enforce, exchange, release, or waive
      any security for the Total Obligations or any guaranty therefor.

            (e) Each Guarantor hereby waives:

                  (i) any and all rights, benefits, and defenses under
            California Civil Code Sections 2845 and 2850, which would
            otherwise require the Agent and the Lenders to proceed against any
            Borrower or any other Person, or to proceed against or exhaust any
            security held by the Agent or any Lender at any time, or to first
            apply any security of any Borrower to the discharge of the Total
            Obligations, or to pursue any other remedy in the Agent's or any
            Lender's power before proceeding against any Guarantor hereunder;

                  (ii) any and all rights, benefits, and defenses under
            California Civil Code Sections 2847 and 2848, and each
            Guarantor agrees that such Guarantor shall have no right of
            subrogation, reimbursement, exoneration, contribution, indemnity, or

                                    Page 112
<PAGE>
            similar right as against any Borrower which would result in such
            Guarantor being deemed a creditor of any Borrower under the
            Bankruptcy Code or any other law or for any other purpose, and each
            Guarantor further WAIVES any and all rights, benefits, and defenses
            under California Civil Code Section 2849, which provides that a
            surety is entitled to the benefit of every security for the
            performance of the principal obligation held by the creditor;

                  (iii) any and all rights, benefits, and defenses under
            California Code of Civil Procedure Section 580d, which would
            otherwise limit the Agent's and the Lenders' right to recover a
            deficiency after a non-judicial foreclosure sale, and any and all
            rights and defenses arising out of an election of remedies by the
            Agent and the Lenders, even though that election of remedies, such
            as a non-judicial foreclosure with respect to security for a
            guaranteed obligation, has destroyed such Guarantor's rights of
            subrogation and reimbursement against any Borrower by the operation
            of California Code of Civil Procedure Section 580d, or otherwise;

                  (iv) any and all rights, benefits, and defenses under
            California Code of Civil Procedure Section 580(a) which would
            otherwise limit any Guarantor's liability after a non-judicial
            foreclosure sale to the difference between the obligations
            guaranteed herein and the fair market value of the property or
            interests sold at such non-judicial foreclosure sale;

                  (v) any and all rights, benefits, and defenses under
            California Code of Civil Procedure Section 580(b) which would
            otherwise limit the Agent's or any Lender's right to record a
            deficiency judgment with respect to purchase money obligations;

                  (vi) any and all rights, benefits, and defenses under
            California Code of Civil Procedure Section 726 which, among other
            things, would otherwise require the Agent or any Lender to exhaust
            all of its security before a personal judgment may be obtained for a
            deficiency;

                  (vii) any and all rights, benefits, and defenses under any
            other present or future so-called "antideficiency" laws or statutes
            of the state of California limiting or discharging the principal's
            indebtedness.

      Notwithstanding the waivers set forth in clauses (i) through (vii)
      preceding, to the extent that the Total Obligations are secured by Real
      Property owned by any Guarantor, it is agreed the foregoing waivers are
      intended to apply to any security provided by any Borrower or any other
      Person and not to Real Property of such Guarantor securing the Total
      Obligations. With respect to Real Property of any Guarantor which secures
      the Total Obligations, such Guarantor shall be entitled to all of the
      benefits of California Code of Civil Procedure Sections 580a, 580b,
      580d, 726 and all other antideficiency laws, to the extent that they are
      applicable.

            (f) Each Guarantor WAIVES all rights described in California Civil
      Code Section 2856 (a)(1)-(3), inclusive, which includes, without
      limitation, any rights and

                                    Page 113
<PAGE>
      defenses which are or may become available to such Guarantor by reason of
      California Civil Code Sections 2787 to 2855, inclusive. Accordingly,
      without limiting the scope or effect of any of the other waivers of any
      Guarantor contained in any Credit Document:

                  (i) such Guarantor WAIVES all rights and defenses that such
            Guarantor may have because any debtor's debt is secured by Real
            Property. This means, among other things:

                        (A) the Agent and the Lenders may collect from such
                  Guarantor without first foreclosing on any real or personal
                  property pledged by any Borrower; and

                        (B) if the Agent or any Lender forecloses on any Real
                  Property pledged by such Guarantor, the amount of the debt may
                  be reduced only by the price for which that collateral is sold
                  at the foreclosure sale, even if the collateral is worth more
                  than the sale price and the Agent and the Lenders may collect
                  from such Guarantor even if the Agent and the Lenders, by
                  foreclosing on such Real Property, have destroyed any right
                  such Guarantor may have to collect from any Borrower;

                  (ii) the waiver contained in this clause (f) is an
            unconditional and irrevocable waiver of any rights and defenses such
            Guarantor may have because any Borrower's debt is secured by Real
            Property; these rights and defenses include, but are not limited to,
            any rights or defenses based upon Sections 580a, 580b, 580d, or 726
            of the California Code of Civil Procedure;

                  (iii) such Guarantor WAIVES all rights and defenses arising
            out of an election of remedies by the Agent or the Lenders, even
            though that election of remedies, such as a nonjudicial foreclosure
            with respect to security for a guaranteed obligation, has destroyed
            such Guarantor's rights of subrogation and reimbursement against the
            principal by the operation of Section 580d of the California Code of
            Civil Procedure or otherwise.

Each Credit Party represents and warrants to the Agent and the Lenders that such
Credit Party is currently informed of the financial condition of all other
Credit Parties and all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Total Obligations. Each Credit
Party further represents and warrants that such Credit Party has read and
understands the terms and conditions of the Credit Documents. Each Credit Party
agrees that neither the Agent, any Lender, nor the Issuing Lender has any
responsibility to inform any Credit Party of the financial condition of any
other Credit Party or of any other circumstances which bear upon the risk of
nonpayment or nonperformance of the Total Obligations.

      Section 10.22 Conflict. To the extent that there is a conflict or
inconsistency between any provision hereof, on the one hand, and any provision
of any Credit Document, on the other hand, this Agreement shall control.

                                    Page 114
<PAGE>
      Section 10.23 Amendment and Restatement.

            (a) This Agreement and the other Credit Documents amends and
      restates in its entirety the Original Credit Agreement. All rights,
      benefits, indebtedness, interest, liabilities, and obligations of the
      parties to the agreements, documents, and instruments executed and
      delivered in connection with the Original Credit Agreement (the "Original
      Credit Documents") are hereby renewed, amended, restated, and superseded
      in their entirety according to the terms and provisions set forth herein
      and in the other Credit Documents. All indebtedness, liabilities, and
      obligations of the Credit Parties under the Original Credit Agreement are
      renewed and continued and hereafter shall be payable in accordance with
      this Agreement.

            (b) All obligations of any Credit Party under any guaranty agreement
      executed pursuant to the Original Credit Documents are renewed and
      continued and hereafter shall be payable in accordance with the Guaranty
      Agreements executed by such Credit Parties, and each such Credit Party
      acknowledges and agrees that the "Guaranteed Obligations" as defined by
      the Guaranty Agreements include, without limitation, the "Obligations"
      under the Original Credit Agreement existing on the Closing Date as
      renewed by this Agreement.

            (c) All security interests, liens, and assignments previously
      granted by any Credit Party pursuant to the Original Credit Documents are
      hereby renewed and continued, and all such security interests, liens, and
      assignments shall remain in full force and effect as security for the
      Total Obligations.

            (d) This Agreement shall not result in or constitute a waiver of or
      a release, discharge, or forgiveness of any amount payable pursuant to the
      Original Credit Documents, which such amounts are payable pursuant to the
      terms of this Agreement. Each Credit Party represents and warrants that as
      of the date hereof there are no claims or offsets against, or defenses or
      counterclaims to, its obligations under this Agreement or any of the
      Original Credit Documents. To induce the Agent and the Lenders to enter
      into this Agreement, each Credit Party waives any and all such claims,
      offsets, defenses, or counterclaims, whether known or unknown, arising
      prior to the date hereof and relating to the Original Credit Documents or
      this Agreement and the other Credit Documents.

                  [Remainder of page intentionally left blank]

                                    Page 115
<PAGE>
      IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Agreement to be duly executed and delivered as of the date first above
written.

                                                CREDIT PARTIES:

                                                CRESCENT JEWELERS

                                                By: /s/ Victor M. Suglia
                                                    ----------------------------
                                                    Victor M. Suglia
                                                    Senior Vice President, Chief
                                                    Financial Officer

                                                CRESCENT JEWELERS INC.

                                                By: /s/ Victor M. Suglia
                                                    ----------------------------
                                                    Victor M. Suglia
                                                    Senior Vice President, Chief
                                                    Financial Officer

                                                AGENT:

                                                BANK OF AMERICA, N.A.

                                                By: /s/ David T. Knoblauch
                                                    ----------------------------
                                                    David T. Knoblauch
                                                    Senior Vice President

                                                LENDERS:

                                                BANK OF AMERICA, N.A.

                                                By: /s/ David T. Knoblauch
                                                    ----------------------------
                                                    David T. Knoblauch
                                                    Senior Vice President

                                    Page 116
<PAGE>
                                                THE CIT GROUP/BUSINESS
                                                CREDIT, INC.

                                                By:    /s/ Thomas H. Hopkins
                                                    ----------------------------
                                                Name:  Thomas H. Hopkins
                                                      --------------------------
                                                Title: Vice President
                                                       -------------------------

                                    Page 117
<PAGE>
                                 Schedule 1.1(A)

                           EXISTING LETTERS OF CREDIT

                                    Page Solo
<PAGE>
                                 Schedule 1.1(B)

                                   INVESTMENTS

                                   Page Solo
<PAGE>
                                 Schedule 1.1(C)

                                      LIENS

                                   Page Solo
<PAGE>
                                 Schedule 1.1(D)

                             LENDER AND COMMITMENTS

<TABLE>
<CAPTION>
                                              Revolving      Revolving         LOC
                                              Commitment     Committed       Committed
             Lender                           Percentage      Amount           Amount
-------------------------------------         ----------    -----------     -----------
<S>                                           <C>           <C>             <C>
Bank of America, N.A.                            50.00%     $25,000,000     $ 2,500,000
The CIT  Group/Business  Credit, Inc.            50.00%     $25,000,000     $ 2,500,000
Total                                           100.00%     $50,000,000     $ 5,000,000
</TABLE>

                                   Page Solo
<PAGE>
                                  Schedule 5.2

                         CHANGES AND RESTRICTED PAYMENTS

                                   Page Solo
<PAGE>
                                  Schedule 5.6

                                   LITIGATION

                                   Page Solo
<PAGE>
                                  Schedule 5.9

                              INTELLECTUAL PROPERTY

      A.    Trademarks

      B.    Tradenames

      C.    Copyrights

      D.    Patents

      E. Other Intellectual Property (technology, know-how and processes
necessary for the conduct of business

                                   Page Solo
<PAGE>
                                  Schedule 5.14

                                  SUBSIDIARIES

                                   Page Solo
<PAGE>
                                  Schedule 5.18

                                  LABOR MATTERS

                                   Page Solo
<PAGE>
                                  Schedule 5.20

                      REAL PROPERTY LOCATIONS; LOCATIONS OF
                       COLLATERAL; CHIEF EXECUTIVE OFFICE/
                          PRINCIPAL PLACES OF BUSINESS

                                   Page Solo
<PAGE>
                                  Schedule 5.23

                        BANK ACCOUNTS; MERCHANT ACCOUNTS

                                   Page Solo
<PAGE>
                                  Schedule 6.6

                                    INSURANCE

                                   Page Solo
<PAGE>
                                  Schedule 7.1

                                  INDEBTEDNESS

                                   Page Solo
<PAGE>
                                  Schedule 10.1

                               LENDERS' ADDRESSES

<TABLE>
<CAPTION>
================================================================================
          Credit Contact                          Operations Contact
--------------------------------------------------------------------------------
<S>                                       <C>
Bank of America, N.A.                     Bank of America, N.A.
55 South Lake Avenue, Suite 900           55 South Lake Avenue, Suite 900
Pasadena, CA  91101                       Pasadena, CA  91101
Attn:  Portfolio Manager                  Attn:  Kathy Thompson
Telephone:  (626) 397-1200                Telephone:  (626) 397-1256
Telecopy:    (626) 397-1275               Telecopy:    (626) 397-1275

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THE  CIT  GROUP/BUSINESS   CREDIT, INC.   THE  CIT  GROUP/BUSINESS  CREDIT, INC.
300 South Grand Avenue, 3rd Floor         300 South Grand Avenue, 3rd Floor
Los Angeles, CA 90071                     Los Angeles, CA 90071
Attn: Tom Hopkins                         Attn: Margaret Mak
Telephone:  (213) 613-2576                Telephone:  (213) 613-2585
Telecopy:    (213) 613-2501               Telecopy:    (213) 613-2537

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                                   Page Solo<PAGE>
                                                                    Exhibit 10.3

                   SERIES A PREFERRED STOCK PURCHASE AGREEMENT

         THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of this 28th day of August, 2002 (the "Effective Date"), by and among
CRESCENT JEWELERS, a California corporation (the "Company"), CRESCENT JEWELERS,
INC., a Delaware corporation (the "Parent"), and FRIEDMAN'S INC., a Delaware
corporation (the "Purchaser").

         WHEREAS, the Company has offered to sell to the Purchaser $50,000,000
of the Company's Series A Preferred Stock (the "Preferred Stock"), and the
Purchaser is willing to purchase the Preferred Stock, subject to the terms and
conditions hereof;

         WHEREAS, the parties wish to evidence the sale of the Preferred Stock
by entering into this Agreement pursuant to which the Purchaser shall purchase,
and the Company shall issue and sell 1,000,000 shares of the Preferred Stock;
and

         WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company to enter into this Agreement, and the
Purchaser has approved this Agreement;

         NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1. ISSUANCE AND SALE OF PREFERRED STOCK.

         1.1 AUTHORIZATION OF PREFERRED STOCK. The Company has authorized the
issuance and sale of the Preferred Stock as set forth in and pursuant to the
Company's Amended and Restated Articles of Incorporation (the "Articles"), which
are attached hereto as Exhibit A, and which have been filed with the Secretary
of State of the State of California. The Preferred Stock shall have the rights,
privileges and preferences set forth in the Articles.

         1.2 PURCHASE AND SALE OF PREFERRED STOCK. The Company agrees to issue
and sell to the Purchaser, and the Purchaser agrees to purchase from the
Company, the Preferred Stock for an aggregate purchase price of $50,000,000 (the
"Purchase Price") or $50 per share.

         1.3 CLOSING. The sale and purchase of the Preferred Stock shall occur
at the offices of Jenkens & Gilchrist, 55 South Lake Avenue, Suite 650,
Pasadena, California 91101 or such other location as the Company and the
Purchaser shall agree in writing, on August 28, 2002 at 11:00 a.m. EST (the
"Closing Date"). The delivery of the Preferred Stock shall be made to the
Purchaser against payment by wire transfer of immediately available funds to an
account designated in writing by the Company. If on the Closing Date the Company
shall fail to tender the Preferred Stock to the Purchaser as provided in this
Section 1.3, or any of the conditions specified in Section 4 hereof shall not
have been fulfilled to the Purchaser's satisfaction, at the Purchaser's
election, the Purchaser shall be relieved of all obligations under this
Agreement,

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without thereby waiving any other rights the Purchaser may have by reason of
such failure or such non-fulfillment.

         1.4 USE OF PROCEEDS. The proceeds of the sale of the Preferred Stock
shall be used by the Company to pay down the Senior Indebtedness.

         1.5 DEFINITIONS. Certain capitalized terms used in this Agreement are
defined in Section 12.1 hereof; references to a "Schedule" or "Exhibit" are,
unless otherwise specified, to the Schedules and Exhibits attached to this
Agreement.

SECTION 2. GENERAL REPRESENTATIONS AND WARRANTIES.

         The Parent and the Company hereby jointly and severally represent and
warrant to the Purchaser as follows:

         2.1 CAPITAL STOCK; SUBSIDIARIES.

                  (a) The authorized Capital Stock of the Company consists of
(i) 2,000,000 shares of common stock, no par value, 1,000 of which are issued
and outstanding and held by the Parent and (ii) 2,000,000 shares of preferred
stock, no par value, none of which are issued or outstanding immediately prior
to the execution of this Agreement. All such outstanding shares have been
validly issued and are fully paid, non-assessable shares, and free of preemptive
rights. No shares of the Capital Stock of the Company are held on the date
hereof in the treasury of the Company. The issuance and sale of all such shares
have been in full compliance with all applicable federal and state securities
laws. There are no subscriptions, options, warrants or calls relating to the
issuance by the Company of any shares of its Capital Stock, including any right
of conversion or exchange under any outstanding security or other instrument. To
the Company's knowledge, there are no voting trusts or other agreements or
understandings with respect to the voting of the Capital Stock of the Company.
The shares of the Company's common stock are vested with all of the voting
rights in the Company. The Company is not subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of its
Capital Stock or any security convertible into or exchangeable for any of its
Capital Stock.

                  (b) The Company's sole Subsidiary is Sparkle Insurance
Company, a corporation organized under the laws of the Turks and Caicos, British
West Indies. All of the outstanding shares of Capital Stock of the Subsidiary
have been validly issued and are fully paid and nonassessable and are owned
beneficially and of record by the Company, free and clear of any Liens other
than Liens in favor of, or for the benefit of, the Senior Lenders.

         2.2 ORGANIZATION AND AUTHORITY. The Company is (i) a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, (ii) has all requisite power and authority (corporate and other) to
own and operate its properties, to conduct its business as currently conducted
and as currently proposed to be conducted, to offer, issue, sell and deliver the
Preferred Stock, to enter into this Agreement and the Other Agreements and to
perform its obligations under this Agreement, the Articles and the Other
Agreements and (iii) has duly qualified to do business as a foreign corporation
and is in good standing in every

                                       2
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jurisdiction in which the failure to so qualify would materially and adversely
effect the business, earnings, prospects, properties or condition (financial or
other) of the Company and its Subsidiary, taken as a whole (an "MAE").

         2.3 FINANCIAL STATEMENTS AND OTHER INFORMATION; FINANCIAL CONDITION.
The Company has delivered to the Purchaser (i) consolidated financial statements
of the Parent, the Company and the Subsidiary for the Fiscal Years ended July
31, 2000 and 2001, including consolidated audited balance sheets, consolidated
statements of income, consolidated statements of shareholders equity, and
consolidated statements of cash flows, together with the opinions thereon of
Ernst & Young LLP, independent certified public accountants, and (ii) unaudited
balance sheets, consolidated statements of income, consolidated statements of
shareholders equity, and consolidated statements of cash flows financial
statements of the Parent, the Company and the Subsidiary as of and for each
Fiscal Quarter since July 31, 2001 (such financial statements, collectively, are
hereinafter referred to as the "Financial Statements"). The Financial Statements
have been prepared in accordance with GAAP applied on a consistent basis during
the respective periods, are correct and complete copies thereof, and fairly
present in all material respects the financial position of the Parent, the
Company and the Subsidiary as of the respective dates of the balance sheets
included therein and the results of operations of the Parent, the Company and
the Subsidiary for the respective periods covered by the statements of income
and cash flows, provided, however, that the unaudited financial statements
referred to in the foregoing clause (ii) lack footnotes and other presentation
items and are subject to normal year-end adjustments in accordance with the
ordinary course of business consistent with past practice, none of which would,
either individually or in the aggregate, be material to the Parent, the Company
and the Subsidiary, taken as a whole. Except as set forth in the Financial
Statements, neither the Parent, the Company nor the Subsidiary has any material
obligation or liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or not due) which, either individually
or in the aggregate, would be material to the Parent, the Company or the
Subsidiary that is not disclosed by the Financial Statements other than
liabilities incurred since July 31, 2002 in the ordinary course of business
which, either individually or in the aggregate, are not material to the
financial condition of the Parent, the Company or the Subsidiary or the conduct
of their business. Neither the Parent nor the Company knows of any reasonable
basis for the assertion against the Parent, the Company or the Subsidiary of any
liability or obligation of any nature whatsoever that would be required by GAAP
to be disclosed in the Financial Statements that is not disclosed.

         2.4 CHANGES. Since July 31, 2002, there has not been any change in the
assets, liabilities, business, earnings, properties or condition (financial or
other) of the Parent, the Company and the Subsidiary, taken as a whole, from
that reflected in the Financial Statements, except changes in the ordinary
course of business consistent with past practice that have not had and are not
reasonably likely to have an MAE.

         2.5 LICENSES, REGISTRATIONS, ETC. The Company and its Subsidiary own or
possess, and hold free from burdensome restrictions or known conflicts with the
rights of others, all licenses, registrations, franchises, permits, copyrights,
trademarks, service marks, trade names and patents and all rights with respect
to the foregoing, necessary for the conduct of their respective businesses as
now conducted, and are in compliance with the terms and conditions, if

                                       3
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any, of all such franchises, licenses, registrations, permits, rights of way,
easements, consents, copyrights, trademarks, service marks, trade names and
patents and the terms and conditions of any agreements relating thereto, except
for such conflicts or noncompliance which, either individually or in the
aggregate, are not reasonably expected to have an MAE.

         2.6 TITLE TO PROPERTIES; LEASES. The Company and its Subsidiary each
has good and valid title to the properties reflected as being owned by it on the
Financial Statements, as well as to the properties acquired since the date of
the most recent Financial Statement (except property disposed of since said date
in the ordinary course of business) and none of such properties is subject to
any Lien other than Permitted Liens. The Company and its Subsidiary each has the
right to, and does, enjoy peaceful and undisturbed possession under all leases
under which it is leasing property. All such leases are valid, subsisting and in
full force and effect, and none of such leases is in default.

         2.7 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the Company nor its
Subsidiary is (a) in violation of any term of its charter or by-laws, or (b) in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in, and is not otherwise in default under, (i)
any evidence of Indebtedness or any instrument or agreement under or pursuant to
which any evidence of Indebtedness has been issued the consequences of which
default would be to permit the holder or holders of such Indebtedness, or any
trustee or agent acting on behalf of such holder or holders, to accelerate the
maturity of any such Indebtedness or to require that any such Indebtedness be
prepaid prior to its stated maturity or (ii) any other instrument or agreement
to which it is a party or by which it is bound or any of its properties is
affected, the consequences of which default would reasonably be expected to have
an MAE. As of the date hereof, neither the Company nor its Subsidiary is in
default with respect to, or has failed (which failure has not been remedied) to
make at the time contemplated, payment of any dividends or any mandatory
redemption payments of any preferred stock or any principal of, or premium or
interest on, any Indebtedness for Money Borrowed. Neither the execution,
delivery or performance of this Agreement and the Other Agreements nor the
offer, issuance, sale, delivery or performance of the Preferred Stock does or
will (A) conflict with or violate the charter or by-laws of the Company or its
Subsidiary, (B) conflict with or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation of any Lien on any of the properties or assets of the Company or its
Subsidiary pursuant to the terms of, any evidence of Indebtedness, or any
instrument or agreement under or pursuant to which any evidence of Indebtedness
has been issued, or any other instrument or agreement referred to in this
Section 2.7 to which the Company or its Subsidiary is a party or by which they
are bound or by which any of their properties are affected (the consequences of
which could reasonably be expected to have an MAE), or (C) require the consent
of, or other action by, any trustee, shareholder or creditor of, any lessor to
or any investor in, the Company or its Subsidiary, other than for the consents
and actions described on Schedule 2.7, all of which have been obtained or taken
or none of which would have an MAE.

         2.8 NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor its
Subsidiary is a party to or bound by (nor are any of their respective properties
affected by) any contract or agreement, or subject to any order, writ,
injunction or decree or other action of any court or any

                                       4
<PAGE>
governmental department, commission, bureau, board or other administrative
agency or official, or any charter or other corporate or contractual
restriction, which has an MAE. Neither the Company nor its Subsidiary is a party
to any material contract or agreement with any Affiliate, which contract or
agreement is on terms that are less favorable to it than would obtain in a
comparable arm's-length transaction with a Person other than an Affiliate.

         2.9 COMPLIANCE WITH LAW, ETC. Each of the Company and its Subsidiary is
in compliance with all statutes, laws and ordinances and all governmental rules
and regulations to which it is subject, the violation of which, either
individually or in the aggregate, would reasonably be expected to have an MAE.
Neither the execution, delivery or performance of this Agreement and the Other
Agreements nor the offer, issuance, sale, delivery or performance of the
Preferred Stock does or will cause the Company or its Subsidiary to be in
violation of any law or ordinance, writ, injunction or decree or other action of
any court or governmental authority or arbitrator or any order, rule or
regulation, of any federal or state agency, or to the Company's and its
Subsidiary's knowledge, of any county, municipal or other governmental or public
authority or agency.

         2.10 COMPLIANCE WITH ERISA.

                  (a) The term "Plan" shall mean each "employee benefit plan" as
defined in Section 3(3) of ERISA sponsored by the Company or its Subsidiary.
Neither the Company, its Subsidiary or any ERISA Affiliates maintain any
employee benefit plan subject to Title IV of ERISA (a "Title IV Plan").

                  (b) The term "party in interest" shall have the meaning
assigned thereto in Section 3(14) of ERISA; the term "prohibited transaction"
shall have the meaning assigned thereto in Section 4975 of the Code and Section
406 of ERISA; the term "accumulated funding deficiency" shall have the meaning
assigned thereto in Section 412 of the Code and Section 302 of ERISA.

                  (c) Except as set forth in Schedule 2.10, no Plan holds any
assets invested in "employer securities" within the meaning of Section 407(d) of
ERISA.

                  (d) The Company and its Subsidiary have not engaged in a
prohibited transaction that would subject the Company or its Subsidiary to a
material tax or penalty which would be reasonably expected to have an MAE.

                  (e) Provided that the representations and warranties of the
Purchaser set forth in Section 3.5 are true and accurate in all respects,
neither the execution and delivery of this Agreement and the Other Agreements
nor the offer, issuance, sale and delivery of the Preferred Stock by the Company
or the consummation of the transactions contemplated hereby and thereby will
involve or constitute a prohibited transaction.

                  (f) Except as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, or any similar state statutes, no Plan
provides medical, life insurance or

                                       5
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other welfare benefits to or with respect to former employees or independent
contractors of the Company or any ERISA Affiliate.

                  (g) Except as would not reasonably be expected to have an MAE:
each Plan is in substantial compliance with ERISA, the Code and applicable law;
no Title IV Plan has an accumulated funding deficiency, whether or not waived;
no proceedings have been instituted by the PBGC nor has any other Person taken
action to terminate any Title IV; neither the Company, its Subsidiary nor any
ERISA Affiliate has incurred any material unfunded liability to or on account of
a Title IV Plan; and no condition exists which could reasonably be expected to
present a material risk to the Company or any ERISA Affiliate of incurring such
a liability. None of the Plans is, nor has the Company, its Subsidiary or any
ERISA Affiliate within the last six years been obligated to make any
contributions to, a "multi-employer plan" within the meaning of Section 4001 of
ERISA.

         2.11 PENDING LITIGATION, ETC. There is no action at law, suit in equity
or other proceeding or investigation (whether or not purportedly on behalf of
the Company or its Subsidiary) in any court or by or before any other
governmental or public authority or agency, or any arbitrator or arbitration
panel pending or, to the best knowledge of the Company, threatened in writing
against the Company, its Subsidiary or any of their respective properties that,
either individually or in the aggregate, (a) would have an MAE, or (b) questions
the validity or enforceability of this Agreement, the Articles or the Other
Agreements other than, in each case, as set forth on Schedule 2.11. Neither the
Company nor its Subsidiary is in default with respect to any order, writ,
injunction, judgment or decree of any court or other governmental or public
authority or agency or arbitrator or arbitration panel, which would have an MAE.

         2.12 TAXES. All federal, state and other tax returns of the Company and
its Subsidiary required by law to be filed have been duly filed or a valid
extension for such filing has been obtained, and all federal, state and other
taxes, assessments, fees and other governmental charges upon the Company and its
Subsidiary or upon any of their respective properties, incomes or assets that
are due and payable have been paid, except where such failure to file or pay
would have an MAE. No extensions of the time for the assessment of deficiencies
have been granted by the Company or its Subsidiary. The Company does not know of
any proposed, asserted, or assessed tax deficiency against it or its Subsidiary
that would be material to the condition (financial or other) of the Company and
its Subsidiary, taken as a whole. Neither the Company nor its Subsidiary is a
party to, bound by or obligated under any tax sharing or similar agreement.
There are no Liens on any properties or assets of the Company or its Subsidiary
imposed or arising as a result of the delinquent payment or the non-payment of
any tax, assessment, fee or other governmental charge which is due and owing,
except Liens for taxes, assessments or other governmental charges either not
delinquent, or the validity of which is being contested in good faith by
appropriate proceedings and which are adequately reserved for in accordance with
GAAP. The charges, accruals and reserves, if any, on the books of the Company
and its Subsidiary in respect of federal, state and local corporate franchise
and income taxes for all fiscal periods to date are adequate in accordance with
generally accepted accounting principles, and the Company knows of no additional
unpaid assessments for such periods or of any basis therefor. There are no
applicable taxes or other governmental charges or governmental fees payable by
the

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Company or its Subsidiary in connection with the execution and delivery of this
Agreement and the Other Agreements or the offer, issuance, sale and delivery of
the Preferred Stock.

         2.13 INVESTMENT COMPANY ACT. The Company is not an "investment company"
or an "affiliated person" of an "investment company" or a company "controlled"
by an "investment company" as such terms are defined in the Investment Company
Act of 1940, as amended. Neither the Company nor its Subsidiary is an
"investment adviser" or an "affiliated person" of an "investment adviser" as
such terms are defined in the Investment Advisers Act of 1940, as amended.

         2.14 OUTSTANDING SECURITIES. All securities of the Company and its
Subsidiary have been offered, issued, sold and delivered in compliance with, or
pursuant to exemptions from, all federal and state laws, and the rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.

         2.15 CORPORATE PROCEEDINGS. The Company has taken all corporate action
necessary to be taken by it to authorize the execution and delivery of this
Agreement and the Other Agreements and the offer, issuance, sale and delivery of
the Preferred Stock and the performance of all obligations to be performed by it
hereunder and thereunder.

         2.16 CONSENT, ETC. No prior consent, approval or authorization of,
registration, qualification, designation, declaration or filing with, or notice
to (in each case that has not been obtained or made, as appropriate) (a) any
federal, state or local governmental or public authority or agency, or (b) any
shareholder, creditor, lessor or other non-governmental Person, is or was
required for the valid execution, delivery and performance of this Agreement,
the Other Agreements or the valid offer, issuance, sale, delivery and
performance of the Preferred Stock. The Company has obtained all consents,
approvals or authorizations of, made all declarations or filings with, or given
all notices to, all federal, state or local governmental or public authorities
or agencies which are necessary for the continued conduct by the Company of its
business as now conducted or as proposed to be conducted and which the failure
to so obtain, make or give would have an MAE.

         2.17 COMPLIANCE WITH ENVIRONMENTAL LAWS.

                  (a) The Company and its Subsidiary each is, and will continue
to be, in compliance with all applicable federal, state and local environmental
laws, regulations and ordinances governing its business, products, properties or
assets with respect to all discharges into the ground and surface water,
emissions into the ambient air and generation, accumulation, storage, treatment,
transportation, labeling or disposal of waste materials or processed by-products
for which failure to comply could have an MAE, and neither the Company nor its
Subsidiary is liable for any penalties, fines or forfeitures for failure to
comply with any of the foregoing, the failure to comply with which would
reasonably be expected to have an MAE. All licenses, permits or registrations
required for the business of the Company and its Subsidiary, as presently
conducted and proposed to be conducted, under any federal, state or local
environmental laws, regulations or ordinances have been secured (or application
for, or

                                       7
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application for transfer thereof, have been made) and each of the Company and
its Subsidiary is in substantial compliance therewith.

                  (b) No release, emission, or discharge into the environment of
hazardous substances, as defined under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, or hazardous waste as defined under
the Resource Conservation and Recovery Act, or air pollutants as defined under
the Clean Air Act, or pollutants as defined under the Clean Water Act, is
presently occurring or has in the past occurred on or from any property owned or
leased by the Company or its Subsidiary in excess of federal, state or local
permitted releases or reportable quantities, or other concentrations, standards
or limitations under the foregoing laws or any state law governing the
protection of health and the environment or under any other federal, state, or
local laws or regulations.

                  (c) Neither the Company nor its Subsidiary has ever, except in
accordance with applicable laws or regulations, (i) owned, occupied or operated
a site or structure on or in which (to the Company's knowledge) any hazardous
substance was or is stored, transported or disposed of, (ii) transported or
arranged for the transportation of any hazardous substance or (iii) caused or
been held legally responsible for any release or threatened release of any
hazardous substance, or received notification from any federal, state or other
governmental authority of any release or threatened release, or that it may be
required to pay the costs or expenses incurred in connection with any efforts to
mitigate the environmental impact of any release or threatened release of any
hazardous substance from any site or structure owned, occupied or operated by
the Company or its Subsidiary.

         2.18 FULL DISCLOSURE. Neither this Agreement nor any Financial
Statement referred to in Section 2.3 hereof contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein not misleading.

         2.19 VALIDITY OF AGREEMENTS AND PREFERRED STOCK. This Agreement and the
Other Agreements have been duly executed and delivered by the Parent and the
Company and constitute the legal, valid and binding obligation of the Parent and
the Company, enforceable against them in accordance with their terms, subject in
each case to applicable principles of equity and bankruptcy and insolvency law.
Upon receipt by the Company of payment for the Preferred Stock as provided in
this Agreement, the Preferred Stock will have been duly issued by the Company
and will constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with its terms, subject in each
case to applicable principles of equity and bankruptcy and insolvency law.

         2.20 LABOR RELATIONS. Except as disclosed on Schedule 2.20, neither the
Company nor its Subsidiary is engaged in any unfair labor practice, unjust
dismissals or employment discrimination that would have an MAE. There is (a) no
charge or complaint pending or, to the Company's knowledge, threatened against
the Company or its Subsidiary before the National Labor Relations Board or
before the Equal Employment Opportunity Commission or any federal, state, local
or foreign agency or court responsible for the prevention of unlawful employment
practices or breaches of employment contracts that would have an MAE, (b) no
grievance or

                                       8
<PAGE>
arbitration proceedings pending, or to the Company's knowledge, threatened
against the Company or its Subsidiary, (c) no strike, labor dispute, slowdown or
stoppage pending or, to the Company's knowledge, threatened against the Company
or its Subsidiary, (d) no union representation question existing with respect to
the employees of the Company or its Subsidiary and no union organizing
activities are taking place with respect to any thereof, and (e) no collective
bargaining agreement currently in existence to which the Company or its
Subsidiary is a party.

         2.21 BROKER'S OR FINDER'S COMMISSIONS. Except as disclosed on Schedule
2.22, no broker's or finder's placement fee or commission will be payable by the
Company with respect to the issuance and delivery of the Preferred Stock or any
of the transactions contemplated hereby. The Company will hold the Purchaser
harmless from any claim, demand or liability for broker's or finder's placement
fees or commissions (other than any such fees or commissions payable by or to
the Purchaser), whether or not payable by the Company, alleged to have been
incurred in connection with this transaction.

         2.22 INSURANCE. The Company and its Subsidiary have, with respect to
the properties and business of the Company and its Subsidiary, with financially
sound and reputable insurers, insurance against such casualties and
contingencies of such types and in such amounts as is customary in the case of
corporations engaged in the same or a similar business or having similar
properties similarly situated.

         2.23 OFFEREES. The Company represents that neither the Company nor any
Person acting as its agent, broker, dealer or otherwise in connection with the
offering or sale of the Preferred Stock has, either directly or through any
agent, offered any of the Preferred Stock or any similar securities for sale to,
or solicited any offers to buy any thereof from, or otherwise approached or
negotiated in respect thereof with, any Person or Persons other than the
Purchaser. The Company agrees that neither it nor any agent will on behalf of
it, sell or offer any of the Preferred Stock or any similar securities to, or
solicit offers to buy any thereof from, or otherwise approach or negotiate in
respect thereof with, any other Person or Persons whomsoever, or take any other
action, so as to bring the issuance and sale of the Preferred Stock within the
provisions of Section 5 of the Securities Act or the provisions of any state
securities law requiring registration of securities, notification of the
issuance and sale thereof or confirmation of the availability of any exemption
from registration thereof.

SECTION 3. REPRESENTATIONS OF THE PURCHASER.

         The Purchaser represents and warrants to the Company as follows:

         3.1 EXISTENCE. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.

         3.2 AUTHORITY. The Purchaser has the right and corporate power and
authority to enter into, execute, deliver and perform its obligations under this
Agreement and the Other Agreements, and its officers or agents executing and
delivering this Agreement and the Other Agreements are duly authorized to do so.
This Agreement and the Other Agreements have been

                                       9
<PAGE>
duly and validly executed and delivered and constitute the legal, valid and
binding obligation of the Purchaser, enforceable in accordance with their
respective terms.

         3.3 INVESTOR STATUS. The Purchaser is an "accredited investor" within
the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act
of 1933, as amended (the "Securities Act"). It understands and acknowledges that
the Preferred Stock has not been registered under the Securities Act or any
other applicable securities law, is being offered in transactions not requiring
registration under the Securities Act or any other securities laws, and may not
be offered, sold or otherwise transferred except in compliance with the
registration requirements of the Securities Act and any other applicable
securities law, pursuant to an exemption therefrom or in a transaction not
subject thereto and in each case in compliance with the conditions for transfer
set forth in Section 3.4.

         3.4 INVESTMENT FOR OWN ACCOUNT; RESTRICTION ON TRANSFER. The Purchaser
is purchasing the Preferred Stock for its own account for investment, and not
with a view to, or for offer or sale in connection with, any distribution
thereof in violation of the Securities Act or any other securities laws. The
Purchaser agrees, and each Person to whom the Preferred Stock is offered, sold,
assigned, transferred, pledged, encumbered or otherwise disposed of
(collectively, "transferred"), in whole or in part, will agree, to transfer such
Preferred Stock only to the Purchaser, or a Subsidiary of the Purchaser which is
an "accredited investor" within the meaning of Rule 501(a) of Regulation D
promulgated under the Securities Act, that is acquiring such Preferred Stock (or
any interest therein) for its own account and not with a view to, or for offer
or sale in connection with, any distribution in violation of the Securities Act
or any other securities law, or pursuant to any other available exemption from
the registration requirements of the Securities Act and the requirements of any
other securities laws.

         3.5 NO ERISA PLAN ASSETS. The Preferred Stock will not be purchased
with the assets of any pension plan, profit-sharing plan, retirement plan,
individual retirement account, individual retirement annuity, employee benefit
plan or other plan or arrangement subject to Title I of ERISA or Code Section
4975.

SECTION 4. CONDITIONS OF OBLIGATION TO PURCHASE PREFERRED STOCK.

         The Purchaser's obligation to purchase and pay for the Preferred Stock
hereunder on the Closing Date shall be subject to the satisfaction, prior to or
concurrently with such purchase and payment, of the following conditions unless
otherwise waived by the Purchaser in writing:

         4.1 PURCHASE AGREEMENT. The Company shall have executed and delivered
this Agreement to the Purchaser.

         4.2 PREFERRED STOCK CERTIFICATE. A certificate representing the
Preferred Stock, issued in the name of the Purchaser shall have been duly
executed and delivered by the Company.

                                       10
<PAGE>
         4.3 PERFORMANCE OF OBLIGATIONS. The Company shall have performed all of
its obligations to be performed hereunder prior to or on the Closing Date, and
the Purchaser shall have received an Officer's Certificate from the Company,
dated the Closing Date, to such effect.

         4.4 REPRESENTATIONS TRUE. The representations and warranties of the
Company contained in Section 2 hereof shall be true and correct on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the Closing Date.

         4.5 SENIOR LOAN AGREEMENT. The Purchaser shall have received an
Officer's Certificate of the Company attaching a fully executed copy of the
Senior Loan Agreement and certifying that such document is a true and complete
copy thereof, and that neither the offer, issuance, sale or delivery of the
Preferred Stock by the Company nor the execution, delivery or performance of
this Agreement or the Other Agreements does or will conflict with or result in a
breach of, or constitute a default under, such Senior Loan Agreement.

         4.6 SUBORDINATION AGREEMENT. The Purchaser shall have received an
Officer's Certificate of the Company attaching a fully executed copy of the
Subordination Agreement and certifying that such document is a true and complete
copy thereof, and that neither the offer, issuance, sale or delivery of the
Preferred Stock by the Company nor the execution, delivery or performance of
this Agreement or the Other Agreements does or will conflict with or result in a
breach of, or constitute a default under, such Subordination Agreement.

         4.7 LEGALITY. The Preferred Stock shall qualify as a legal investment
for the Purchaser under all applicable laws, and the Purchaser's purchase
thereof shall not cause the Purchaser to be subject to any onerous or materially
burdensome legal requirement or penalty.

         4.8 PROCEEDINGS, INSTRUMENTS, ETC. All proceedings and actions taken on
or prior to the Closing Date in connection with the transactions contemplated by
this Agreement, and all instruments incident thereto, shall be in form and
substance reasonably satisfactory to the Purchaser and its counsel, and the
Purchaser and its counsel shall have received copies of all documents that they
may reasonably request in connection with such proceedings, actions and
transactions (including, without limitation, copies of court documents,
certifications and evidence of the correctness of the representations and
warranties contained herein and certifications and evidence of the compliance
with the terms and the fulfillment of the conditions of this Agreement, in form
and substance reasonably satisfactory to the Purchaser and its counsel).

SECTION 5. EXPENSES.

         The Company agrees to indemnify the Purchaser from and hold it harmless
against any documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery by the Company or any other
Person of this Agreement, the Preferred Stock, the Other Agreements, and any
documents executed in connection therewith.

                                       11
<PAGE>
SECTION 6. CERTAIN SPECIAL RIGHTS.

         6.1 HOME OFFICE PAYMENT. Subject to the terms of the Articles, the
Company will punctually pay in immediately available funds by 12:00 noon, New
York, New York time on the date payment is due all amounts payable to the
Purchaser with respect to any Preferred Stock held by the Purchaser or its
nominee (without the necessity for any presentation or surrender thereof or any
notation of such payment thereon) in the manner and at the address for such
purpose specified below the Purchaser's name in Schedule 6.1 hereto, or at any
other address as the Purchaser may direct in writing; provided, however, that
the information set forth with respect to the Purchaser in Schedule 6.1 hereto
shall be deemed notice sufficient to permit payment in accordance with this
Section 6.1. The Purchaser agrees that if it sells, assigns or transfers any
Preferred Stock, the Purchaser shall, prior to any such sale, assignment or
transfer, make a proper notation thereon of the amounts paid with respect to
such Preferred Stock as of the date of such sale, assignment or transfer.

         6.2 DELIVERY EXPENSES. If the Purchaser surrenders any Preferred Stock
pursuant to this Agreement, or if the Company issues any new certificate
representing Preferred Stock pursuant to this Agreement, the Company shall pay
all reasonable costs and expenses of delivery of the surrendered Preferred Stock
and any certificate or certificates issued in exchange or replacement for, or on
registration of transfer of, the surrendered Preferred Stock or any such new
certificate, as the case may be, in each case insured to the Purchaser's
reasonable satisfaction.

         6.3 ISSUANCE TAXES. The Company will pay all taxes in connection with
the execution and delivery of this Agreement and the Other Agreements and the
issuance and sale of the Preferred Stock, and any modification of this Agreement
or the Preferred Stock, and will save the Purchaser and any subsequent holder of
the Preferred Stock harmless, without limitation as to time, against any and all
liabilities (including, without limitation, any interest or penalty for
nonpayment or delay in payment, or any income taxes paid by the Purchaser in
connection with any reimbursement by the Company) with respect to all such taxes
(other than income taxes due resulting from a transfer of the Preferred Stock).
The obligations of the Company under this Section 6.3 shall survive the
termination of this Agreement.

SECTION 7. REGISTRATION, EXCHANGE AND REPLACEMENT OF PREFERRED STOCK
CERTIFICATES.

         7.1 PREFERRED STOCK REGISTER. The Company shall cause to be kept at its
principal office a register for the registration and transfer of the Preferred
Stock. The name and address of the Purchaser, the transfer thereof and the name
and address of any transferee of the Preferred Stock shall be recorded in such
register.

         7.2 ISSUANCE OF NEW PREFERRED STOCK CERTIFICATES UPON EXCHANGE OR
TRANSFER. Upon surrender for exchange or registration of transfer of shares of
Preferred Stock to a transferee at the office of the Company designated for
notices in accordance with Section 13.1 hereof, the Company shall execute and
deliver, at its expense, one or more new certificates of any authorized
denomination requested by the Purchaser of the surrendered Preferred Stock,

                                       12
<PAGE>
each dated the date to which dividends have been paid on the Preferred Stock so
surrendered (or, if no dividends have been paid, the date of the surrendered
Preferred Stock), but in the same aggregate unpaid principal amount as the
surrendered Preferred Stock, and registered in the name of such Person or
Persons as shall be designated in writing by the Purchaser. Every share of
Preferred Stock surrendered for registration of transfer shall be duly endorsed,
or be accompanied by a written instrument of transfer duly executed, by the
Purchaser or by his attorney duly authorized in writing and the transferee.

         7.3 REPLACEMENT OF PREFERRED STOCK CERTIFICATE. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of a Preferred Stock certificate and, in the case of any such loss,
theft or destruction, upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company or, in the event of
such mutilation upon surrender and cancellation of a Preferred Stock
certificate, the Company, without charge to the Purchaser, will make and deliver
a new Preferred Stock certificate of like tenor in lieu of such lost, stolen,
destroyed or mutilated Preferred Stock certificate. If any such lost, stolen or
destroyed Preferred Stock certificate is owned by the Purchaser or any other
holder whose credit is satisfactory to the Company, then the affidavit of an
authorized officer of such owner setting forth the fact of loss, theft or
destruction and of its ownership of the Preferred Stock certificate at the time
of such loss, theft or destruction shall be accepted as satisfactory evidence
thereof, and no further indemnity shall be required as a condition to the
execution and delivery of a new Preferred Stock certificate, other than a
written agreement of such owner (in form reasonably satisfactory to the Company)
to indemnify the Company.

SECTION 8. CERTAIN COVENANTS OF THE COMPANY.

                  The Company covenants and agrees that so long as any Preferred
Stock shall remain outstanding:

         8.1 CORPORATE EXISTENCE. The Company will (a) take and fulfill, or
cause to be taken and fulfilled, all actions and conditions necessary to
preserve and keep in full force and effect its existence, rights and privileges
as a corporation, and will not liquidate or dissolve, and (b) take and fulfill,
or cause to be taken and fulfilled, all actions and conditions necessary to
qualify, and to preserve and keep in full force and effect its qualification, to
do business as a foreign corporation in the jurisdictions in which the conduct
of its business or the ownership or leasing of its properties requires such
qualification unless the Board of Directors of the Company determines in good
faith that failure to so qualify would not have a MAE; provided, however, that
this Section 8.1 shall not be deemed to prohibit any transaction permitted by
Section 8.6 hereof.

         8.2 GENERAL MAINTENANCE OF PROPERTIES AND BUSINESS, ETC.

                  (a) The Company will, and will cause its Subsidiary to,
maintain its properties and assets in normal working order and condition and
make all necessary repairs, renewals, replacements, additions, betterments and
improvements thereto, ordinary wear and tear excepted, all as in the judgment of
the Company may be necessary so that the business carried on

                                       13
<PAGE>
in connection therewith may be properly and advantageously conducted at all
times; provided, however, that nothing in this Section 8.2 shall prevent the
Company or its Subsidiary from discontinuing the operation and maintenance of
any of its properties if such discontinuance is, in the judgment of the Company
or such Subsidiary, desirable in the conduct of its business, and if in the good
faith determination of the Board of Directors of the Company the anticipated
effect of such discontinuance is not adverse in any material respect to the
Purchaser.

                  (b) The Company will, and will cause its Subsidiary to,
maintain with financially sound and reputable insurers, such insurance as may be
required by law and such other insurance, to such extent and against such
hazards and liabilities, as it in good faith determines is customarily
maintained by companies similarly situated with like properties.

                  (c) The Company will, and will cause its Subsidiary to, keep
true and accurate books of records and accounts in which full and correct
entries will be made with respect to all of its business transactions in
accordance with sound business practices, and reflect in its financial
statements adequate accruals and appropriations to reserves, all in accordance
with generally accepted accounting principles.

                  (d) The Company will, and will cause its Subsidiary to, do or
cause to be done all things necessary to preserve and keep in full force and
effect its existence, rights and franchises, except to the extent permitted by
this Agreement and except in such cases where the Board of Directors of the
Company determines in good faith that failure to do so would not have a MAE.

                  (e) The Company will, and will cause its Subsidiary to, pay
prior to delinquency all taxes, assessments and governmental levies which if not
paid would have a MAE, and except as contested in good faith and by appropriate
proceedings.

         8.3 COMPLIANCE WITH LAW, ETC. Neither the Company nor its Subsidiary
will (a) violate any law, ordinance, governmental rule or regulations to which
it is or may become subject, the violation of which would have a MAE; or (b)
fail to obtain or maintain any patents, trademarks, service marks, trade names,
copyrights, design patents, licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its property or to the conduct of
its business, except where the failure so to obtain or maintain the foregoing
would not, individually or in the aggregate, have a MAE.

         8.4 PAYMENT OF TAXES AND CLAIMS. The Company and its Subsidiary each
will pay and discharge promptly when due:

                  (a) all taxes, assessments and governmental charges and levies
imposed upon it, its income or profits or any of its properties, before the same
shall become delinquent; and

                  (b) all lawful claims of materialmen, mechanics, carriers,
warehousemen, landlords and other similar Persons for labor, materials, supplies
and rentals that, if unpaid, might by law become a Lien upon any of its
property;

                                       14
<PAGE>
provided, however, that none of the foregoing need be paid while the same is
being contested in good faith by appropriate proceedings diligently conducted so
long as adequate reserves shall have been established in accordance with
generally accepted accounting principles with respect thereto, title of the
Company or such Subsidiary, as the case may be, to the particular property shall
not be divested thereby and its right to use the particular property shall not
be materially and adversely affected thereby.

         8.5 ERISA.

                  (a) The Company and its Subsidiary will (and with respect to
any Title IV Plan, will use reasonable best efforts to cause any ERISA Affiliate
to) continue any and all Plans in compliance with all applicable requirements of
the Code, ERISA and the rules and regulations adopted thereunder, in each case
as in effect at the time, until such Plans are terminated, and the liabilities
thereof discharged, in accordance with applicable law.

                  (b) Neither the Company nor any of its ERISA Affiliates will
(i) have any accumulated funding deficiency with respect to any Title IV Plan,
(ii) incur any excise tax or civil penalty under Section 4975 of the Code or
Section 502(i) of ERISA (respectively) with respect to any prohibited
transaction involving any Plan in an amount which could reasonably be expected
to have an MAE, nor (iii) become obligated to make any contributions to any
multi-employer plan (as defined in Section 2.10(g) hereof).

                  (c) Neither the Company nor its Subsidiary (or, solely with
respect to a Title IV Plan, any ERISA Affiliate) will permit any event or
condition to occur or exist with respect to any Plan if, as a result of such
event or condition (together with all other such events or conditions), the
Company or any ERISA Affiliate would incur or be reasonably likely to incur a
liability to a Plan or the PBGC (or any combination of the foregoing) which is
or could be materially adverse in relation to the consolidated financial
position of the Company and its Subsidiary.

         8.6 MERGER; CONSOLIDATION. The Company will not merge into or
consolidate with any other Person or permit any other Person to merge into or
consolidate with it, transfer all or substantially all of its assets, or
liquidate, dissolve or otherwise transfer all if its assets unless (i) the
corporation which survives such merger or results from such consolidation (the
"surviving corporation") shall be organized under the laws of the United States
of America or a jurisdiction thereof, (ii) (A) the Company shall be the
surviving corporation or (B) the due and punctual payment of dividends, if any,
on the Preferred Stock, and the due and punctual performance and observance of
all the covenants in this Agreement, the Articles and the Other Agreements to be
performed or observed by the Company, shall be expressly assumed in writing by
the surviving corporation by an instrument reasonably satisfactory in form and
substance to the holders of at least a majority of the Preferred Stock then
outstanding, (iii) immediately after the consummation of the transaction, and
after giving effect thereto, Consolidated Tangible Net Worth of the surviving
corporation shall not be less than the Consolidated Tangible Net Worth of the
Company immediately before consummation of the transaction, and (iv) an opinion
of counsel (reasonably satisfactory in form and substance to the holders of at
least a majority of the

                                       15
<PAGE>
Preferred Stock then outstanding) is delivered to the Purchaser upon
consummation of the transaction to the effect that the conditions in this
Section 8.6 have been satisfied and to the effect that this Agreement, the
Preferred Stock and the instrument referred to in clause (ii) (B) of this
Section 8.6 are legal, valid and binding obligations of the surviving
corporation, enforceable against the surviving corporation in accordance with
their respective terms.

         8.7 RIGHT OF FIRST REFUSAL.

                  (a) If the Company or the Parent wishes to sell or otherwise
transfer any shares of the Company's Capital Stock or the Parent's Capital
Stock, it shall first give written notice (an "Option Notice") to the Purchaser
setting forth the terms and conditions of any such sale or transfer (the
"Offer"). The shares of Capital Stock subject to such Offer are referred to in
this Section 8.8 as the "Offered Shares."

                  (b) Upon the delivery of an Option Notice by the Company or
the Parent, the Purchaser shall have the right (the "First Refusal Right") to
purchase, at the price, on the terms and subject to the conditions specified in
the Offer, all, but not less than all, of the Offered Shares covered by the
Option Notice. Within ten (10) days after the delivery of the Option Notice (the
"Exercise Period"), the Purchaser shall notify the Company or the Parent, as
applicable (the "First Refusal Notice"), whether the Purchaser intends to
exercise the First Refusal Right. Failure to deliver the First Refusal Notice
within the Exercise Period shall constitute a waiver of the First Refusal Right.

                  (c) If the Purchaser exercises the First Refusal Right as to
all of the Offered Shares within the Exercise Period, the Company or the Parent,
as applicable, shall have the obligation to sell the Offered Shares to the
Purchaser at the price, on the terms and subject to the conditions specified in
the Offer.

                  (d) If the Purchaser does not exercise the First Refusal Right
as to all of the Offered Shares within the Exercise Period, for a period of
sixty (60) days commencing immediately upon the expiration of the Exercise
Period (the "Third Party Offer Period"), the Company or the Parent, as
applicable, may offer to sell the Offered Shares to a third party on terms not
more favorable to any such third party than those contained in the Offer (the
"Third Party Offer"). If any such Third Party Offer is not consummated within
the Third Party Offer Period, the Offered Shares shall again be subject to the
restrictions set forth in this Section 8.8.

                  (e) The closing for any purchase of Offered Shares by the
Purchaser shall occur at such time and place as the parties shall agree. At the
closing, the Purchaser shall pay for the Offered Shares in accordance with the
terms of the Offer. The Company or the Parent, as applicable, shall deliver
certificates representing the Offered Shares, free and clear of all liens,
charges and encumbrances, and properly endorsed for transfer.

SECTION 9. PREFERENCES.

         Except as otherwise provided in the Subordination Agreement, nothing
contained in this Section 9 or elsewhere in this Agreement or in the Other
Agreements is intended to or shall

                                       16
<PAGE>
impair, as among the Company, its creditors other than holders of the Senior
Indebtedness and the Purchaser, the obligation of the Company, which is absolute
and unconditional, to pay to the Purchaser the dividends due on the Preferred
Stock as and when the same shall become due and payable in accordance with the
Articles, or is intended to or shall affect the relative rights of the
Purchaser, the creditors of the Company other than the holders of Senior
Indebtedness and any other holder of Capital Stock, nor shall anything herein or
therein prevent the Purchaser from exercising all remedies otherwise permitted
by applicable law under this Agreement in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.

         Nothing contained in this Section 9 or elsewhere in this Agreement or
in the Other Agreements is intended to or shall affect the obligation of the
Company to make or prevent the Company from making dividend payments at any time
with respect to the Preferred Stock.

SECTION 10. INFORMATION TO BE FURNISHED TO THE PURCHASER.

         10.1 OTHER INFORMATION. The Company will deliver to the Purchaser the
following:

                  (a) promptly after submission thereof to the Company, copies
of any detailed reports submitted to the Company by its independent certified
public accountants in connection with each annual or interim audit of the
accounts of the Company made by such accountants;

                  (b) promptly upon distribution thereof, copies of all
financial, other statements (including proxy statements and annual environmental
audits) and reports or notices, excluding borrowing notices, as the Company
shall send to any class of its shareholders (in such capacity), any of the
Senior Lenders or any holder of any of its Indebtedness;

                  (c) promptly and, in any event, within 30 days thereafter,
notice of the institution of any suit, action or proceeding against the Company,
which could, in the reasonable judgment of the Company, have an MAE;

                  (d) promptly upon becoming aware of the occurrence of any (i)
"reportable event" (within the meaning of Section 4043 of ERISA) or (ii)
prohibited transaction, that could result in a material tax or penalty on the
Company or any ERISA Affiliate in connection with any Plan, a written notice
specifying the nature thereof, what action the Company or any ERISA Affiliate is
taking or proposes to take with respect thereto and, when known, any action
taken by the Internal Revenue Service, the United States Department of Labor or
the PBGC with respect thereto;

                  (e) promptly after receipt of notice of the exercise of any
remedy by a secured party with respect to any of the assets or property of the
Company or its Subsidiary;

                  (f) promptly upon request therefor, such other data, filings
and information as the Purchaser may from time to time reasonably request; and

                                       17
<PAGE>
                  (g) promptly upon the formation or the acquisition thereof,
notice of the formation or acquisition, as the case may be, of any new
subsidiary.

         10.2 CONFIDENTIALITY. The Purchaser agrees that it will keep any
information obtained by it pursuant to Section 10.1 confidential; provided,
however, that the Purchaser may disclose any such information (a) as has become
generally available to the public, (b) as may be required in any report,
statement or testimony required to be submitted to any municipal, state or
Federal regulatory body having or claiming to have jurisdiction over it or to
the National Association of Insurance Commissioners, The Nasdaq Stock Market or
similar organizations or their successors, (c) as may be required in response to
any summons or subpoena or in connection with any litigation, (d) to the extent
that the Purchaser believes it appropriate in order to comply with any law,
order, regulation or ruling applicable to it, (e) subject to Section 13.3
hereof, to the prospective transferee in connection with any contemplated
transfer of any of the Preferred Stock; and (f) to the Senior Lenders.

SECTION 11. INTERPRETATION OF AGREEMENT.

         11.1 DEFINITIONS. Except as the context shall otherwise require, the
following terms shall have the following meanings for all purposes of this
Agreement (the definitions to be applicable to both the singular and the plural
form of the terms defined, where either such form is used in this Agreement):

                  The term "Administrative Agent" shall mean the agent for the
Senior Lenders under the Designated Senior Indebtedness.

                  The term "Affiliate," with respect to any Person (hereinafter
"such Person"), shall mean any other Person (a) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with, such Person or another Affiliate of such Person, (b) which
beneficially owns or holds 10% or more of the shares of any class of the Voting
Stock of such Person, or (c) 10% or more of the shares of any class of Voting
Stock of which is beneficially owned or held by such Person or any Affiliate of
such Person. The term "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of Voting Stock, by contract or otherwise.
The term "Affiliate," when used herein without reference to any Person, shall
mean an Affiliate of the Company.

                  The term "Articles" shall have the meaning set forth in
Section 1.1 hereof.

                  The term "Board Of Directors" when used herein without
reference to any particular Person shall mean the Board of Directors of the
Company.

                  The term "Business Day" shall mean any day on which commercial
banks are not authorized or required to close in San Francisco, California and
Atlanta, Georgia.

                  The term "Capital Lease" shall mean any lease that is required
to be capitalized on a balance sheet of the lessee in accordance with generally
accepted accounting principles.

                                       18
<PAGE>
                  The term "Capital Stock" of any Person (and when used herein
and without reference to any particular Person shall mean the Capital Stock of
the Company) means any and all shares, interests, participations or other
equivalents (however designated) of corporate stock or any other equity interest
of such Person. Indebtedness that is convertible into equity securities shall
not be deemed to constitute Capital Stock.

                  The term "Closing Date" shall have the meaning set forth in
Section 1.4 hereof.

                  The term "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.

                  The term "Company" shall mean Crescent Jewelers, a California
corporation.

                  The term "Designated Senior Indebtedness" shall mean
Indebtedness consisting of (i) revolving credit or other bank loans incurred by
the Company for general working capital purposes and (ii) the Indebtedness and
other amounts owing under the Senior Loan Agreement including any amendments,
renewals, modifications, extensions, increases, substitutions or replacements of
or under the Senior Loan Agreement.

                  The term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.

                  The term "ERISA Affiliate" shall mean any Person that is under
"common control" with the Company within the meaning of Section 4001(b) of
ERISA.

                  The term "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended from time to time.

                  The term "Financial Statements" shall have the meaning set
forth in Section 2.3 hereof.

                  The term "Fiscal Quarter" shall mean each of the four
consecutive quarterly periods collectively forming a Fiscal Year.

                  The term "Fiscal Year" shall mean any period of four
consecutive quarters ending on the closest Saturday to July 31 of each year.

                  The term "generally accepted accounting principles" or "GAAP"
shall mean, as of the date of any determination with respect thereto, United
States generally accepted accounting principles consistently applied and
maintained throughout the periods indicated.

                  The term "Indebtedness," with respect to any Person, shall
mean all items (other than Capital Stock, capital surplus, retained earnings and
deferred credits) which, in accordance with GAAP, would be included in
determining total liabilities as shown on the liability side of a balance sheet
as at the date on which indebtedness is to be determined. The term
"Indebtedness"

                                       19
<PAGE>
shall also include, whether or not so reflected, (a) indebtedness, obligations
and liabilities secured by any Lien on property of such Person whether or not
the indebtedness secured thereby shall have been assumed by such Person, (b) all
obligations in respect of Capital Leases and (c) all guaranties.

                  The term "Indebtedness for Money Borrowed," with respect to
any Person, shall mean and include the aggregate amount of, without duplication:
(a) all obligations of such Person for borrowed money; (b) all obligations of
such Person evidenced by bonds, debentures, notes, or other similar instruments;
(c) all obligations of such Person under Capital Leases; (d) all obligations or
liabilities of others secured by a Lien on any asset owned by such Person,
irrespective of whether such obligation or liability is assumed, to the extent
of the lesser of such obligation or liability or the fair market value of such
asset; (e) all Indebtedness for property or services acquired by such Person,
except accounts payable and accrued liabilities arising in the ordinary course
of business that are not overdue by more than 90 days or that are being
contested in good faith; and (f) any guarantee of Indebtedness described in any
of clauses (a) through (f) above, including obligations in respect of letters of
credit.

                  The term "Lien" shall mean any interest in property securing
an obligation owed to, or a claim by, any Person other than the owner of the
property, whether such interest shall be based on the common law, statute or
contract, whether or not such interest shall be recorded or perfected and
whether or not such interest shall be contingent upon the occurrence of some
future event or events or the existence of some future circumstance or
circumstances, and including the lien or security interest arising from a
mortgage, encumbrance, pledge, adverse claim or charge, conditional sale or
trust receipt, or from a lease, consignment or bailment for security purposes.
The term "Lien" shall also include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting property. For the purposes of this
Agreement, a Person shall be deemed to be the owner of any property that such
Person shall have acquired or shall hold subject to a conditional sale agreement
or other arrangement (including a leasing arrangement) pursuant to which title
to the property shall have been retained by or vested in some other Person for
security purposes.

                  The term "MAE" shall have the meaning set forth in Section 2.2
hereof.

                  The term "Note" shall mean the Company's Senior Subordinated
Note due August 28, 2007, issued in an aggregate principal amount of $35,000,000
pursuant to the Note Purchase Agreement, dated of even date herewith, between
the Company, the Parent and the Purchaser.

                  The term "Officer's Certificate" shall mean a certificate
executed on behalf of a corporation by any of its Chief Executive Officer,
President, Vice President of Finance or Chief Financial Officer.

                  The term "Other Agreements" means any and all other
agreements, instruments and documents (including, without limitation, notes,
guarantees, powers of attorney, consents, assignments, contracts, notices,
subordination agreements and all other agreements or

                                       20
<PAGE>
instruments), and all renewals, modifications and extensions thereof, whether
heretofore, now or hereafter executed by or on behalf of the Company and
delivered to and for the benefit of the Purchaser with respect to this Agreement
or any of the transactions contemplated by this Agreement.

                  The term "Parent" shall mean Crescent Jewelers, Inc., a
Delaware corporation and the parent company of the Company.

                  The term "PBGC" shall mean the Pension Benefit Guaranty
Corporation or any successor thereof.

                  The term "Permitted Liens" shall mean (i) statutory liens of
landlords, carriers, warehousemen, processors, mechanics, materialmen or
suppliers incurred in the ordinary course of business and securing amounts not
yet due or declared to be due by the claimant thereunder, (ii) liens or security
interests in favor of the Purchaser (iii) liens or security interests in favor
of the Administrative Agent, for the benefit of Administrative Agent and Senior
Lenders, (iv) zoning restrictions and easements, licenses, covenants and other
restrictions affecting the use of real property that do not individually or in
the aggregate have a material adverse effect on the Company's ability to use
such real property for its intended purpose in connection with Company's
business, and (v) liens specifically permitted by the Purchaser in writing.

                  The term "Person" shall mean any individual, corporation,
partnership, joint venture, association, joint stock company, trust, estate,
unincorporated organization or government (or any agency or political
subdivision thereof).

                  The term "Preferred Stock" shall mean the Company's Series A
Preferred Stock as further described in the Articles issued and sold pursuant to
the terms of this Agreement.

                  The term "Purchase Price" shall have the meaning set forth in
Section 1.3 hereof.

                  The term "Securities Act" shall mean the Securities Act of
1933, as amended from time to time.

                  The term "Seller Take-Back Paper" shall mean any Indebtedness
of the Company incurred in connection with the acquisition of any property,
which Indebtedness is owed to the Person or any Affiliate thereof from which
such property was acquired.

                  The term "Senior Lenders" shall mean the lenders as defined in
the Senior Loan Agreement and/or the lenders under any Designated Senior
Indebtedness.

                  The term "Senior Loan Agreement" means the Credit Agreement,
dated August 28, 2002, by and between the Company, the Parent and certain of
their subsidiaries, the lenders named therein, Bank of America, N.A., as
administrative agent, and The CTI Group/Business Credit, Inc., as syndication
agent and all documents and instruments executed and delivered pursuant thereto
in connection with the loans and advances made thereunder or contemplated
thereby, and all amendments, renewals, modifications, extensions, increases,
substitutions or

                                       21
<PAGE>
replacements of or to such agreements, documents and instruments whether with
the same or different lenders or in different amounts or under different terms.

                  The term "Senior Indebtedness" shall mean, as of any date, the
principal of, and any accrued and unpaid interest on, Designated Senior
Indebtedness; provided, however, that "Senior Indebtedness" shall not include:
(a) any Indebtedness if the terms of the instrument creating or evidencing such
Indebtedness provides that such Indebtedness is not senior in right of payment
to the Note, including without limitation, all Indebtedness, accrued interest
and other amounts owing under or in respect of the Note; (b) any Indebtedness of
the Company to an Affiliate thereof (unless such Indebtedness is Designated
Senior Indebtedness); (c) any Indebtedness consisting of accounts payable or
accrued liabilities arising in the ordinary course of business; and (d) Seller
Take-Back Paper.

                  The term "Senior Subordinated Obligations" means and includes
any and all Indebtedness and/or liabilities of the Company to the Purchaser of
every kind, nature and description, direct or indirect, secured or unsecured,
joint, several, joint and several, absolute or contingent, due or to become due,
now existing or hereafter arising, under this Agreement or any Other Agreement
(regardless of how such Indebtedness or liabilities arise or by what agreement
or instrument they may be evidenced or whether evidenced by any agreement or
instrument) and all obligations of the Company to the Purchaser to perform acts
or refrain from taking any action under any of the aforementioned documents,
together with all renewals, modifications, extensions, increases, substitutions
or replacements of any of such Indebtedness.

                  The term "Subordination Agreement" shall mean that certain
Subordination Agreement dated August 28, 2002 by and among the Parent, the
Company, the Purchaser and its Subsidiaries and the Administrative Agent.

                  The term "Subsidiary," with respect to any Person, shall mean
any corporation or partnership (including any joint venture) at least 50% of the
outstanding shares of Voting Stock or similar interest of which are owned,
directly or indirectly, by such Person. The term "Subsidiary," when used herein
without reference to any particular Person, shall mean, the sole Subsidiary of
the Company, Sparkle Insurance Company, a corporation organized under the laws
of the Turks and Caicos, British West Indies.

                  The term "this Agreement" shall mean this Series A Preferred
Stock Purchase Agreement (including the annexed Exhibits and Schedules), as it
may from time to time be amended, supplemented or modified in accordance with
its terms.

                  The term "Voting Stock," with respect to a corporation, shall
mean the stock of such corporation the holders of which are ordinarily, in the
absence of contingencies, entitled to elect members of the Board of Directors
(or other governing body) of such corporation, and, with respect to any
partnership, any partnership interest entitling the holder thereof to share in
distributions of partnership income or capital or to make decisions binding such
partnership in accordance with the partnership agreement or other governing
instrument or applicable law.

                                       22
<PAGE>
         11.2 DIRECTLY OR INDIRECTLY. Any provision in this Agreement referring
to action to be taken by any Person, or that such Person is prohibited from
taking, shall be applicable whether such action is taken directly or indirectly
by such Person.

         11.3 ACCOUNTING TERMS All accounting terms used herein that are not
otherwise expressly defined shall have the respective meanings given to them in
accordance with generally accepted accounting principles at the particular time.

         11.4 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the law of the State of New York.

         11.5 HEADINGS. The headings of the Sections and other subdivisions of
this Agreement have been inserted for convenience of reference only, and shall
not be deemed to constitute a part hereof.

         11.6 INDEPENDENCE OF COVENANTS. Each covenant made by the Company
herein is independent of each other covenant so made. The fact that the
operation of any such covenant permits a particular action to be taken or
condition to exist does not mean that such action or condition is not
prohibited, restricted or conditioned by the operation of the provisions of any
other covenant herein.

SECTION 12. MISCELLANEOUS.

         12.1 NOTICES. All communications under this Agreement, the Other
Agreements or the Preferred Stock shall be in writing and shall be delivered or
mailed (i) if to the Purchaser, at the address set forth in Schedule 6.1 hereto,
marked for attention as there indicated, or at such other address as the
Purchaser may have furnished to the Company in writing, (ii) if to any other
holder Preferred Stock, to it at its address listed in the books for the
registration and registration of transfer of Preferred Stock required to be
maintained by the Company pursuant to Section 7.1 hereof, or at such other
address as such holder shall have furnished to the Company in writing, and (iii)
if the Company, at the address set forth in Schedule 6.1 hereto, marked for
attention as there indicated, or at such other address as the Company may have
furnished to the Purchaser and all other holders of the Preferred Stock then
outstanding in writing. Any written communication so addressed and mailed by
certified mail, return receipt requested, shall be deemed to have been given
when so mailed. All other written communications shall be deemed to have been
given upon receipt thereof.

         12.2 SURVIVAL. All representations, warranties and covenants made by
the Parent or the Company herein or by the Company or any Subsidiary in any
certificate or other instrument delivered under or in connection with this
Agreement shall be considered to have been relied upon by the Purchaser and
shall survive the delivery of the Preferred Stock to the Purchaser regardless of
any investigation made by the Purchaser or on its behalf. All statements in any
such certificate or other instrument shall constitute representations and
warranties of the Company hereunder.

                                       23
<PAGE>
         12.3 ASSIGNMENT; SALE OF INTEREST. The Company may not sell, assign or
transfer this Agreement or any portion thereof, including, without limitation,
the Company's rights, title, interests, remedies, powers and/or duties
hereunder. The Purchaser may only sell, assign, transfer or otherwise dispose of
(collectively, a "Transfer") this Agreement or the Preferred Stock, or any
portion hereof or thereof, including, without limitation, the Purchaser's
rights, title, interests, remedies, powers and/or duties hereunder or thereunder
to a Subsidiary of the Purchaser without the prior consent of the Company.

         12.4 SUCCESSORS AND ASSIGNS. This Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns.

         12.5 INDEMNIFICATION. IN ADDITION TO AND NOT IN LIMITATION OF THE OTHER
INDEMNITIES PROVIDED FOR HEREIN OR IN ANY OTHER AGREEMENTS, THE COMPANY HEREBY
INDEMNIFIES AND HOLDS HARMLESS THE PURCHASER AND ITS AFFILIATES, AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS, FROM ANY CLAIMS, ACTIONS,
DAMAGES, COSTS, ATTORNEYS' FEES AND EXPENSES (INCLUDING ANY OF THE SAME ARISING
OUT OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED (BUT
EXCLUDING THEIR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT)) TO WHICH ANY OF THEM
MAY BECOME SUBJECT, INSOFAR AS SUCH LOSSES, LIABILITIES, CLAIMS, ACTIONS,
DAMAGES, COSTS AND EXPENSES ARISE FROM OR RELATE TO THIS AGREEMENT OR THE OTHER
AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREBY, OR FROM ANY
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION,
ANY THREATENED INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY OF
THE FOREGOING, OR FROM ANY VIOLATION OR CLAIM OF VIOLATION OF ANY APPLICABLE
ENVIRONMENTAL LAWS WITH RESPECT TO ANY REAL OR PERSONAL PROPERTY, OR FROM ANY
GOVERNMENTAL OR JUDICIAL CLAIM, ORDER OR JUDGMENT WITH RESPECT TO ANY REAL OR
PERSONAL PROPERTY OF THE COMPANY, OR FROM ANY BREACH OF THE WARRANTIES,
REPRESENTATIONS OR COVENANTS CONTAINED IN THIS AGREEMENT OR THE OTHER
AGREEMENTS. THE FOREGOING INDEMNIFICATION INCLUDES ANY SUCH CLAIMS, ACTIONS,
DAMAGES, COSTS, AND EXPENSES INCURRED BY REASON OF THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED, BUT EXCLUDES ANY OF THE SAME
INCURRED BY REASON OF SUCH PERSON'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

         12.6 AMENDMENT AND WAIVER. This Agreement and the Preferred Stock may
be amended or supplemented, and the observance of any term hereof or thereof may
be waived, with the written consent of the Company and the Purchaser.

         12.7 COUNTERPARTS. This Agreement may be executed and delivered to the
Company and the Purchaser simultaneously in one or more counterparts, each of
which shall be deemed an original, but all such counterparts shall together
constitute but one and the same instrument.

                            [Signatures on next page]

                                       24
<PAGE>
         IN WITNESS WHEREOF, the Parent, the Company and the Purchaser have
caused this Agreement to be executed and delivered by their respective duly
authorized officers as of the date first written above.

<TABLE>
<S>                                   <C>
                                      FRIEDMAN'S INC.

                                      By: /s/ John Mauro
                                          -------------------------------------
                                          John Mauro
                                          Vice President

                                      CRESCENT JEWELERS

                                      By: /s/ Victor M. Suglia
                                          -------------------------------------
                                          Victor M. Suglia
                                          Senior Vice President, Chief Financial
                                          Officer Secretary and Treasurer

                                      CRESCENT JEWELERS INC.

                                      By: /s/ Victor M. Suglia
                                          -------------------------------------
                                          Victor M. Suglia
                                          Senior Vice President, Chief Financial
                                          Officer Secretary and Treasurer
</TABLE>

                                       25
<PAGE>
                                                                    SCHEDULE 2.3

                        FINANCIAL INFORMATION EXCEPTIONS

None.
<PAGE>
                                                                    SCHEDULE 2.7

                            LIST OF REQUIRED CONSENTS

None.
<PAGE>
                                                                   SCHEDULE 2.10

                   PLAN ASSETS INVESTED IN EMPLOYER SECURITIES

None.
<PAGE>
                                                                   SCHEDULE 2.11

                               LIST OF LITIGATION

None.
<PAGE>
                                                                   SCHEDULE 2.20

                                 LABOR RELATIONS

The Company is party to a collective bargaining agreement that covers 29 of the
Company's 1010 employees (numbers are an approximate but substantially
accurate).
<PAGE>
                                                                   SCHEDULE 2.22

                        BROKER'S OR FINDER'S COMMISSIONS

None.
<PAGE>
                                                                    SCHEDULE 6.1

<TABLE>
<CAPTION>
PURCHASER:                                 THE COMPANY:
<S>                                        <C>

Friedman's Inc.                            Crescent Jewelers
4 West State Street                        315 11th Street
Savannah, GA  31401                        Oakland, CA  94607
Attention: John Mauro                      Attention: Victor M. Suglia
</TABLE>
<PAGE>
                                                                       EXHIBIT A

                              AMENDED AND RESTATED
                          ARTICLES OF INCORPORATION OF
                                CRESCENT JEWELERS

<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                <C>
SECTION 1.  ISSUANCE OF NOTES. .................................................................      1

     Section 1.1     Authorization of Notes ....................................................      1
     Section 1.2     Purchase and Sale of Initial Note .........................................      1
     Section 1.3     Closing ...................................................................      1
     Section 1.4     Use of Proceeds ...........................................................      2
     Section 1.5     Definitions ...............................................................      2

SECTION 2.  GENERAL REPRESENTATIONS AND WARRANTIES .............................................      2

     Section 2.1     Capital Stock; Subsidiaries ...............................................      2
     Section 2.2     Organization and Authority ................................................      2
     Section 2.3     Financial Statements and Other Information; Financial Condition ...........      3
     Section 2.4     Changes ...................................................................      3
     Section 2.5     Licenses, Registrations, etc ..............................................      3
     Section 2.6     Title to Properties; Leases ...............................................      4
     Section 2.7     Compliance with Other Instruments, etc ....................................      4
     Section 2.8     No Materially Adverse Contracts, etc ......................................      4
     Section 2.9     Compliance with Law, etc ..................................................      5
     Section 2.10    Compliance with ERISA .....................................................      5
     Section 2.11    Pending Litigation, etc ...................................................      6
     Section 2.12    Taxes .....................................................................      6
     Section 2.13    Investment Company Act ....................................................      7
     Section 2.14    Outstanding Securities ....................................................      7
     Section 2.15    Corporate Proceedings .....................................................      7
     Section 2.16    Consent, etc ..............................................................      7
     Section 2.17    Compliance with Environmental Laws ........................................      7
     Section 2.18    Full Disclosure ...........................................................      8
     Section 2.19    Validity of Agreements and Notes ..........................................      8
     Section 2.20    Labor Relations ...........................................................      8
     Section 2.21    Broker's or Finder's Commissions ..........................................      9
     Section 2.22    Insurance .................................................................      9
     Section 2.23    Offerees ..................................................................      9

SECTION 3.  REPRESENTATIONS OF THE PURCHASER ...................................................      9

     Section 3.1     Existence .................................................................      9
     Section 3.2     Authority .................................................................      9
     Section 3.3     Investor Status ...........................................................     10
     Section 3.4     Investment For Own Account; Restriction on Transfer .......................     10
     Section 3.5     No ERISA Plan Assets ......................................................     10

SECTION 4.  CONDITIONS OF OBLIGATION TO PURCHASE NOTES .........................................     10

     Section 4.1     Purchase Agreement ........................................................     10
</TABLE>

                                       i
<PAGE>
<TABLE>
<S>                                                                                                <C>
     Section 4.2     Preferred Stock Certificate ...............................................     10
     Section 4.3     Performance of Obligations ................................................     11
     Section 4.4     Representations True; No Event of Default .................................     11
     Section 4.5     Senior Loan Agreement .....................................................     11
     Section 4.6     Subordination Agreement ...................................................     11
     Section 4.7     Legality ..................................................................     11
     Section 4.8     Proceedings, Instruments, etc .............................................     11

SECTION 5.  EXPENSES ...........................................................................     11

SECTION 6.  CERTAIN SPECIAL RIGHTS .............................................................     12

     Section 6.1     Home Office Payment .......................................................     12
     Section 6.2     Delivery Expenses .........................................................     12
     Section 6.3     Issuance Taxes ............................................................     12

SECTION 7.  REGISTRATION, EXCHANGE AND REPLACEMENT OF PREFERRED STOCK CERTIFICATES .............     12

     Section 7.1     Preferred Stock Register ..................................................     12
     Section 7.2     Issuance of New Preferred Stock Certificates Upon Exchange or Transfer ....     12
     Section 7.3     Replacement of Preferred Stock Certificate ................................     13

SECTION 8.  CERTAIN COVENANTS OF THE COMPANY ...................................................     13

     Section 8.1     Corporate Existence .......................................................     13
     Section 8.2     General Maintenance of Properties and Business, etc .......................     13
     Section 8.3     Compliance with Law, etc ..................................................     14
     Section 8.4     Payment of Taxes and Claims ...............................................     14
     Section 8.5     ERISA .....................................................................     15
     Section 8.6     Merger; Consolidation .....................................................     15
     Section 8.7     Right of First Refusal ....................................................     16

SECTION 9.  PREFERENCES ........................................................................     16

SECTION 10. INFORMATION TO BE FURNISHED TO THE PURCHASER .......................................     17

     Section 10.1    Other Information .........................................................     17
     Section 10.2    Confidentiality ...........................................................     18

SECTION 11. INTERPRETATION OF AGREEMENT ........................................................     18

     Section 11.1    Definitions ...............................................................     18
     Section 11.2   Directly or Indirectly .....................................................     23
     Section 11.3    Accounting Terms ..........................................................     23
     Section 11.4    Governing Law .............................................................     23
     Section 11.5    Headings ..................................................................     23
     Section 11.6   Independence of Covenants ..................................................     23

SECTION 12. MISCELLANEOUS ......................................................................     23

     Section 12.1    Notices ...................................................................     23
     Section 12.2    Survival ..................................................................     23
</TABLE>

                                       ii
<PAGE>
<TABLE>
<S>                                                                                                <C>
     Section 12.3    Assignment, Sale of Interest ..............................................    244
     Section 12.4    Successors and Assigns ....................................................    244
     Section 12.5    Indemnification ...........................................................    244
     Section 12.6    Amendment and Waiver ......................................................    244
     Section 12.7    Counterparts ..............................................................    244
</TABLE>

                                      iii

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