Document:

DESIGNS, INC.

                      1992 STOCK INCENTIVE PLAN, AS AMENDED

SECTION 1.  GENERAL PURPOSE OF THE PLAN; DEFINITIONS.

         The name of the plan is the Designs, Inc. 1992 Stock Incentive Plan
(the "Plan"). The purpose of the Plan is to encourage and enable the officers,
employees and directors of Designs, Inc. (the "Company") and its Subsidiaries
upon whose judgment, initiative and efforts the Company largely depends for the
successful conduct of its business to acquire a proprietary interest in the
Company. It is anticipated that providing such persons with a direct stake in
the Company's welfare will assure a closer identification of their interests
with those of the Company, thereby stimulating their efforts on the Company's
behalf and strengthening their desire to remain with the Company.

         The following terms shall be defined as set forth below:

                  "Act" means the Securities Exchange Act of 1934, as amended.

                  "Award" or "Awards", except where referring to a particular
         category of grant under the Plan, shall include Incentive Stock
         Options, Non-Qualified Stock Options, Conditioned Stock Awards,
         Unrestricted Stock Awards and Performance Share Awards.

                  "Board" means the Board of Directors of the Company.

                  "Cause" means and shall be limited to a vote of the Board of
         Directors at a meeting of the Board of Directors resolving that the
         participant should be dismissed as a result of (i) any material breach
         by the participant of any agreement to which the participant and the
         Company or any Subsidiary are both parties, (ii) any act (other then
         retirement) or omission to act by the participant which may have a
         material and adverse effect on the business of the Company or any
         Subsidiary or on the participant's ability to perform services for the
         Company or any Subsidiary, including, without limitation, the
         commission of any crime (other than ordinary traffic violations), or
         (iii) any material misconduct or neglect of duties by the participant
         in connection with the business or affairs of the Company or any
         Subsidiary of the Company.

                  "Change of Control" shall have the meaning set forth in
         Section 13.

                  "Code" means the Internal Revenue Code of 1986, as amended,
         and any successor Code, and related rules, regulations and
         interpretations.

                  "Committee" shall have the meaning set forth in Section 2.

                  "Conditioned Stock Award" means Awards granted pursuant to
         Section 6.

                  "Disability" means disability as set forth in Section 22(e)(3)
         of the Code.

                  "Effective Date" means the date on which the Plan is approved
         by stockholders as set forth in Section 15.

                  "Fair Market Value" on any given date means the last reported
         sale price at which Stock is traded on such date or, if no Stock is
         traded on such date, the most recent date on which Stock was traded, as
         reflected in the NASDAQ National Market System or, if applicable, any
         national stock exchange on which the Stock is traded.

                  "Incentive Stock Option" means any Stock Option designated and
         qualified as an "incentive stock option" as defined in Section 422 of
         the Code.

                  "Non-Employee  Director"  means a member of the Board who is
         not also an  employee of the Company or any Subsidiary.

                  "Non-Qualified Stock Option" means any Stock Option that is
         not an Incentive Stock Option.

                  "Normal Retirement" means retirement from active employment
         with the Company and its Subsidiaries in accordance with the retirement
         policies of the Company and its Subsidiaries then in effect.

                  "Option" or "Stock Option" means any option to purchase shares
         of Stock granted pursuant to Section 5.

                  "Performance Share Award" means Awards granted pursuant to
         Section 8.

                  "Stock" means the Common Stock, $.01 par value per share, of
         the Company, subject to adjustments pursuant to Section 3.

                  "Subsidiary" means any corporation or other entity (other than
         the Company) in any unbroken chain of corporations or other entities,
         beginning with the Company if each of the corporations or entities
         (other than the last corporation or entity in the unbroken chain) owns
         stock or other interests possessing 50% or more of the total combined
         voting power of all classes of stock or other interests in one of the
         other corporations or entities in the chain.

                  "Unrestricted Stock Award" means Awards granted pursuant to
         Section 7.

SECTION 2.        ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT
                  PARTICIPANTS AND DETERMINE AWARDS.

         (a) Committee. The Plan shall be administered by all of the
Non-Employee Director members of the Stock Option Committee of the Board, or any
other committee of not less than two Non-Employee Directors performing similar
functions, as appointed by the Board from time to time (the "Committee"). Each
member of the Committee shall be an "outside director" within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder and a
"non-employee director" within the meaning of Rule 16-3b(3)(i) promulgated under
the Act, or any successor definition under said Rule.

         (b) Powers of Committee. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

                  (i) to select the officers and other employees of the Company
         and its Subsidiaries to whom Awards may from time to time be granted;

                  (ii) to determine the time or times of grant, and the extent,
         if any, of Incentive Stock Options, Non-Qualified Stock Options,
         Conditioned Stock, Unrestricted Stock and Performance Shares, or any
         combination of the foregoing, granted to any one or more participants.

                  (iii) to determine the number of shares to be covered by any
         Award;

                  (iv) to determine and modify the terms and conditions,
         including restrictions, not inconsistent with the terms of the Plan, of
         any Award, which terms and conditions may differ among individual
         Awards and participants, and to approve the form of written instruments
         evidencing the Awards;

                  (v) to accelerate the exercisability or vesting of all or any
         portion of any Award;

                  (vi) subject to the provisions of Section 5(a)(ii), to extend
         the period in which Stock Options may be exercised;

                  (vii) to determine whether, to what extent, and under what
         circumstances Stock and other amounts payable with respect to an Award
         shall be deferred either automatically or at the election of the
         participant and whether and to what extent the Company shall pay or
         credit amounts equal to interest (at rates determined by the Committee)
         or dividends or deemed dividends on such deferrals; and

                  (viii) to adopt, alter and repeal such rules, guidelines and
         practices for administration of the Plan and for its own acts and
         proceedings as it shall deem advisable; to interpret the terms and
         provisions of the Plan and any Award (including related written
         instruments); to make all determinations it deems advisable for the
         administration of the Plan; to decide all disputes arising in
         connection with the Plan; and to otherwise supervise the administration
         of the Plan; to decide all disputes arising in connection with the
         Plan; and to otherwise supervise the administration of the Plan
         (including the power and authority to waive the requirement set forth
         in Section 7(c) of the Plan that an irrevocable written election to
         receive Unrestricted Stock, in lieu of directors' fees otherwise due,
         be delivered prior to the commencement of the calendar year in which
         the Non-Employee Director serves on the Board.

         All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.

SECTION 3.  SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION.

         (a) Shares Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 4,430,000. For purposes of this
limitation, the shares of Stock underlying any Awards which are forfeited,
canceled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) shall be added back to the shares
of Stock available for issuance under the Plan. Subject to such overall
limitation, shares may be issued up to such maximum number pursuant to any type
or types of Award, including Incentive Stock Options. Shares issued under the
Plan may be authorized but unissued shares or shares reacquired by the Company.
No individual participant in the Plan may, during any fiscal year of the
Company, be granted one or more Stock Options the sum of which cover more than
75,000 shares of Stock (such amount being subject to adjustment in accordance
with Section 3(b) hereof), provided, however, that an individual participant may
be granted one or more Stock Options the sum of which cover up to 270,000 shares
of Stock (such amount being subject to adjustment in accordance with Section
3(b) hereof) during any fiscal year if all such Stock Options have an exercise
price equal to not less than 200% of Fair Market Value on the date of grant.

         (b) Stock Dividends, Mergers, Etc. In the event that after approval of
the Plan by the stockholders of the Company in accordance with Section 15, the
Company effects a stock dividend, stock split or similar change in
capitalization affecting the Stock, the Committee shall make appropriate
adjustments in (i) the number and kind of shares of stock or securities on which
Awards may thereafter be granted, (ii) the number and kind of shares remaining
subject to outstanding Awards, and (iii) the option or purchase price in respect
of such shares. In the event of any merger, consolidation, dissolution or
liquidation of the Company, the Committee in its sole discretion may, as to any
outstanding Awards, make such substitution or adjustment in the aggregate number
of shares reserved for issuance under the Plan and in the number and purchase
price (if any) of shares subject to such Awards as it may determine and as may
be permitted by the terms of such transaction, or accelerate, amend or terminate
such Awards upon such terms and conditions as it shall provide (which, in the
case of the termination of the vested portion of any Award, shall require
payment or other consideration which the Committee deems equitable in the
circumstances), subject, however, to the provisions of Section 13.

         (c) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances. The shares which may be delivered
under such substitute awards shall be in addition to the maximum number of
shares provided for in Section 3(a) only to the extent that the substitute
Awards are granted in substitution for awards issued under a plan approved by
the stockholders of the entity which issued such predecessor awards.

SECTION 4.  ELIGIBILITY.

         Participants in the Plan will be such full or part-time officers and
other employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion. Non-Employee Directors are also eligible to participate in the
Plan but only to the extent provided in Section 5(c) and Section 7 below.

         An employee who is employed primarily to render services within the
jurisdiction of a labor union and whose compensation, hours of work, or
condition of employment are determined by collective bargaining with such union
shall not be an Eligible Employee for purposes of this Plan unless the
applicable collective bargaining agreement expressly provides that such employee
shall be eligible to participate in this Plan, in which event, however, such
employee shall be entitled to participate in the Plan only to the extent and on
the terms and conditions specified in such collective bargaining agreement.

SECTION 5.  STOCK OPTIONS.

         Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

         Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. To the extent that any option does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.

         No Incentive Stock Option shall be granted under the Plan after April
2, 2007.

         (a) Stock Options Granted to Employees. The Committee in its discretion
may grant Stock Options to employees of the Company or any Subsidiary. Stock
Options granted to employees pursuant to this Section 5(a) shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem desirable:

                  (i) Exercise Price. The exercise price per share for the Stock
         covered by a Stock Option granted pursuant to this Section 5(a) shall
         be determined by the Committee at the time of grant but shall be not
         less than 100% of Fair Market Value on the date of grant whether such
         Stock Option be an Incentive Stock Option or a Non-Qualified Stock
         Option. If an employee owns or is deemed to own (by reason of the
         attribution rules applicable under Section 424(d) of the Code) more
         than 10% of the combined voting power of all classes of stock of the
         Company or any Subsidiary or parent corporation and an Incentive Stock
         Option is granted to such employee, the option price shall be not less
         than 110% of Fair Market Value on the grant date.

                  (ii) Option Term. The term of each Stock Option shall be fixed
         by the Committee, but no Incentive Stock Option shall be exercisable
         more than ten years after the date the option is granted. If an
         employee owns or is deemed to own (by reason of the attribution rules
         of Section 424(d) of the Code) more than 10% of the combined voting
         power of all classes of stock of the Company or any Subsidiary or
         parent corporation and an Incentive Stock Option is granted to such
         employee, the term of such option shall be no more than five years from
         the date of grant.

                  (iii) Exercisability; Rights of a Shareholder. Stock Options
         shall become vested and exercisable at such time or times, whether or
         not in installments, as shall be determined by the Committee at or
         after the grant date. The Committee may at any time accelerate the
         exercisability of all or any portion of any Stock Option. An optionee
         shall have the rights of a shareholder only as to shares acquired upon
         the exercise of a Stock Option and not as to unexercised Stock Options.

                  (iv) Method of Exercise. Stock Options may be exercised in
         whole or in part, by giving written notice of exercise to the Company,
         specifying the number of shares to be purchased. Payment of the
         purchase price may be made by one or more of the following methods:

                       (A) In cash, by certified or bank check or other
               instrument acceptable to the Committee;

                       (B) In the form of shares of Stock that are not then
               subject to restrictions under any Company plan, if permitted by
               the Committee, in its discretion. Such surrendered shares shall
               be valued at Fair Market Value on the exercise date; or

                       (C) By the optionee delivering to the Company a properly
               executed exercise notice together with irrevocable instructions
               to a broker to promptly deliver to the Company cash or a check
               payable and acceptable to the Company to pay the purchase price;
               provided that in the event the optionee chooses to pay the
               purchase price as so provided, the optionee and the broker shall
               comply with such procedures and enter into such agreements of
               indemnity and other agreements as the Committee shall prescribe
               as a condition of such payment procedure. Payment instruments
               will be received subject to collection.

The delivery of certificates representing shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt from
the Optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price for
such shares and the fulfillment of any other requirements contained in the Stock
Option or applicable provisions of laws.

                  (v) Termination by Death. If any optionee's employment by the
         Company and its Subsidiaries terminates by reason of death, the Stock
         Option may thereafter be exercised, to the extent exercisable at the
         date of death, by the legal representative or legatee of the optionee,
         for a period of 180 days (or such longer period as the Committee shall
         specify at any time) from the date of death, or until the expiration of
         the stated term of the Option, if earlier.

                  (vi) Termination by Reason of Disability or Normal Retirement.

                       (A) Any Stock Option held by an optionee whose employment
               by the Company and its Subsidiaries has terminated by reason of
               Disability may thereafter be exercised, to the extent it was
               exercisable at the time of such termination, for a period of 180
               days (or such longer period as the Committee shall specify at any
               time) from the date of such termination of employment, or until
               the expiration of the stated term of the Option, if earlier.

                       (B) Any Stock Option held by an optionee whose employment
               by the Company and its Subsidiaries has terminated by reason of
               Normal Retirement may thereafter be exercised, to the extent it
               was exercisable at the time of such termination, for a period of
               90 days (or such longer period as the Committee shall specify at
               any time) from the date of such termination of employment, or
               until the expiration of the stated term of the Option, if
               earlier.

                       (C) The Committee shall have sole authority and
               discretion to determine whether a participant's employment has
               been terminated by reason of Disability or Normal Retirement.

                       (D) Except as otherwise provided by the Committee at the
               time of grant, the death of an optionee during a period provided
               in this Section 5(a)(vi) for the exercise of a Non-Qualified
               Stock Option, shall extend such period for 180 days from the date
               of death, subject to termination on the expiration of the stated
               term of the Option, if earlier.

                  (vii) Termination for Cause. If any optionee's employment by
         the Company and its Subsidiaries has been terminated for Cause, any
         Stock Option held by such optionee shall immediately terminate and be
         of no further force and effect; provided, however, that the Committee
         may, in its sole discretion, provide that such stock option can be
         exercised for a period of up to 30 days from the date of termination of
         employment or until the expiration of the stated term of the Option, if
         earlier.

                  (viii) Other Termination. Unless otherwise determined by the
         Committee, if an optionee's employment by the Company and its
         Subsidiaries terminates for any reason other than death, Disability,
         Normal Retirement or for Cause, any Stock Option held by such optionee
         may thereafter be exercised, to the extent it was exercisable on the
         date of termination of employment, for 30 days (or such longer period
         as the Committee shall specify at any time) from the date of
         termination of employment or until the expiration of the stated term of
         the Option, if earlier.

                  (ix) Annual Limit on Incentive Stock Options. To the extent
         required for "incentive stock option" treatment under Section 422 of
         the Code, the aggregate Fair Market Value (determined as of the time of
         grant) of the Stock with respect to which incentive stock options
         granted under this Plan and any other plan of the Company or its
         Subsidiaries become exercisable for the first time by an optionee
         during any calendar year shall not exceed $100,000.

                  (x) Form of Settlement. Shares of Stock issued upon exercise
         of a Stock Option shall be free of all restrictions under the Plan,
         except as otherwise provided in this Plan.

         (b) Reload Options. At the discretion of the Committee, Options granted
under this Section 5(a) may include a so-called "reload" feature pursuant to
which an optionee exercising an option by the delivery of a number of shares of
Stock in accordance with Section 5(a)(iv)(B) hereof would automatically be
granted an additional Option (with an exercise price equal to the Fair Market
Value of the Stock on the date the additional Option is granted and with the
same expiration date as the original Option being exercised, and with such other
terms as the Committee may provide) to purchase that number of shares of Stock
equal to the number delivered to exercise the original Option.

         (c) Stock Options Granted to Non-Employee Directors.

                  (i) Grant of Options Upon Election to Board. Each Non-employee
         Director who is elected by the stockholders of the Company to the Board
         on or subsequent to October 8, 1999 shall automatically be granted,
         upon such election, a Non-Qualified Stock Option to purchase 15,000
         shares of Stock. Each Non-Employee Director who is re-elected by the
         stockholders of the Company to the Board on or subsequent to October 8,
         1999 shall automatically be granted, upon each such re-election, a
         Non-qualified Stock Option to purchase 15,000 shares of Stock.

                  (ii) Exercise Price. The exercise price per share for the
         Stock covered by a Stock Option granted pursuant to this Section 6(c)
         shall be equal to the Fair Market Value of the Stock on the date the
         Stock Option is granted.

                  (iii) Exercise; Termination; Non-transferability.

                       (A) Options granted under this Section 5(c) shall be
               vested at the rate of 33 1/3% of such options shall be
               exercisable on the date of grant, an additional 33 1/3% of such
               options shall be exercisable on the first anniversary of the
               grant thereof, and an additional 33 1/3% of such options shall
               become exercisable on the second anniversary of grant thereof;
               subject to the provisions of Section 5(c)(iii)(B), any Option so
               granted shall be exercisable after the termination of service of
               the Non-Employee Director, whether because of death, disability
               or otherwise. No Option issued under this Section 5(c) shall be
               exercisable after the expiration of ten years from the date upon
               which such Option is granted.

                       (B) The rights of a Non-Employee Director in an Option
               granted under Section 5(c) shall terminate 90 days after such
               Director ceases to be a Director of the Company or the specified
               expiration date, if earlier; provided, however, that if the
               Non-Employee ceases to be a Director for Cause, the rights shall
               terminate immediately on the date on which he ceases to be a
               Director.

                       (C) Any Option granted to a Non-Employee Director and
               outstanding on the date of his or her death may be exercised by
               the legal representative or legatee of the optionee for a period
               of 180 days from the date of death or until the expiration of the
               stated term of the option, if earlier.

                       (D) Options granted under this Section 5(c) may be
               exercised only by written notice to the Company specifying the
               number of shares to be purchased. Payment of the full purchase
               price of the shares to be purchased may be made by one or more of
               the methods specified in Section 5(a)(iv). An optionee shall have
               the rights of a shareholder only as to shares acquired upon the
               exercise of a Stock Option and not as to unexercised Stock
               Options.

                  (iv) Limited to Non-Employee Directors. The provisions of this
         Section 5(c) shall apply only to Options granted or to be granted to
         Non-Employee Directors, and shall not be deemed to modify, limit or
         otherwise apply to any other provision of this Plan or to any Option
         issued under this Plan to a participant who is not a Non-Employee
         Director of the Company. To the extent inconsistent with the provisions
         of any other Section of this Plan, the provisions of this Section 5(c)
         shall govern the rights and obligations of the Company and Non-Employee
         Directors respecting Options granted or to be granted to Non-Employee
         Directors.

         (d) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee. Notwithstanding the foregoing, the
Committee may permit the optionee to transfer, without consideration for the
transfer, his Non-Qualified Stock Options to members of his immediate family, to
trusts for the benefit of such family members, or to partnerships in which such
family members are the only partners; provided that the transferee agrees in
writng with the Company to be bound by all terms and conditions of the Plan and
the applicable Stock Option.

SECTION 6.  CONDITIONED STOCK AWARDS.

         (a) Nature of Conditioned Stock Award. The Committee may grant
Conditioned Stock Awards to any employees of the Company or any Subsidiary. A
Conditioned Stock Award is an Award entitling the recipient to acquire, at no
cost or for a purchase price determined by the Committee, shares of Stock
subject to such restrictions and conditions as the Committee may determine at
the time of grant ("Conditioned Stock"). Conditions may be based on continuing
employment and/or achievement of pre-established performance goals and
objectives. In addition, a Conditioned Stock Award may be granted to an employee
by the Committee in lieu of a cash bonus due to such employee pursuant to any
other plan of the Company.

         (b) Acceptance of Award. A participant who is granted a Conditioned
Stock Award shall have no rights with respect to such Award unless the
participant shall have accepted the Award within 60 days (or such shorter date
as the Committee may specify) following the award date by making payment to the
Company, if required, by certified or bank check or other instrument or form of
payment acceptable to the Committee in an amount equal to the specified purchase
price, if any, of the shares covered by the Award and by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Conditioned Stock in such form as the Committee shall
determine.

         (c) Rights as a Shareholder. Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder with respect to the
Conditioned Stock, including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in
the written instrument evidencing the Conditioned Award. Unless the Committee
shall otherwise determine, certificates evidencing shares of Conditioned Stock
shall remain in the possession of the Company until such shares are vested as
provided in Section 6(e) below.

         (d) Restrictions. Shares of Conditioned Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment by the
Company and its Subsidiaries for any reason (including death, Disability, Normal
Retirement and for Cause), the Company shall have the right, at the discretion
of the Committee, to repurchase shares of Conditioned Stock with respect to
which conditions have not lapsed at their purchase price, or to require
forfeiture of such shares to the Company if acquired at no cost, from the
participant or the participant's legal representative. The Company must exercise
such right of repurchase or forfeiture not later than the 90th day following
such termination of employment (unless otherwise specified in the written
instrument evidencing the Conditioned Award).

         (e) Vesting of Conditioned Stock. The Committee at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the
nontransferability of the Conditioned Stock and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such pre-established performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer be
Conditioned Stock and shall be deemed "vested." The Committee at any time may
accelerate such date or dates and otherwise waive or, subject to Section 11,
amend any conditions of the Award.

         (f) Waiver, Deferral and Reinvestment of Dividends. The written
instrument evidencing the Conditioned Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Stock.

SECTION 7.  UNRESTRICTED STOCK AWARDS.

         (a) Grant or Sale of Unrestricted Stock. The Committee may, in its sole
discretion, grant (or sell at a purchase price determined by the Committee which
shall in no event be less than 85% of Fair Market Value) to any employees of the
Company or any Subsidiary shares of Stock free of any restrictions under the
Plan ("Unrestricted Stock"). Shares of Unrestricted Stock may be granted or sold
as described in the preceding sentence in respect of past services or other
valid consideration.

         (b) Elections to Receive Unrestricted Stock in Lieu of Compensation.
Upon the request of an employee and with the consent of the Committee, each
employee may, pursuant to an irrevocable written election delivered to the
Company no later than the date or dates specified by the Committee, receive a
portion of the cash compensation otherwise due to him in Unrestricted Stock
(valued at Fair Market Value on the date or dates the cash compensation would
otherwise be paid). Such Unrestricted Stock may be paid to the employee at the
same time as the cash compensation would otherwise be paid, or at a later time,
as specified by the employee in the written election.

         (c) Elections to Receive Unrestricted Stock in Lieu of Directors' Fees.
Each Non-Employee Director may, pursuant to an irrevocable written election
delivered to the Company no later than December 31 of any calendar year, receive
all or a portion of the directors' fees otherwise due to him in the subsequent
calendar year in Unrestricted Stock (valued at Fair Market Value on the date or
dates the directors' fees would otherwise be paid). Such Unrestricted Stock may
be paid to the Non-Employee Director at the same time the directors' fees would
otherwise have been paid, or at a later time, as specified by the Non-Employee
Director in the written election.

         (d) Restrictions on Transfers. The right to receive Unrestricted Stock
may not be sold, assigned, transferred, pledged or otherwise encumbered, other
than by will or the laws of descent and distribution.

SECTION 8.  PERFORMANCE SHARE AWARDS.

         (a) Nature of Performance Shares. A Performance Share Award is an award
entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. Performance Share Awards may be granted under the Plan to any employees of
the Company or any Subsidiary, including those who qualify for awards under
other performance plans of the Company. The Committee in its sole discretion
shall determine whether and to whom Performance Share Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Shares; provided, however, that the
Committee may rely on the performance goals and other standards applicable to
other performance-based plans of the Company in setting the standards for
Performance Share Awards under the Plan.

         (b) Restrictions of Transfer. Performance Share Awards and all rights
with respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.

         (c) Rights as a Shareholder. A participant receiving a Performance
Share Award shall have the rights of a shareholder only as to shares actually
received by the participant under the Plan and not with respect to shares
subject to the Award but not actually received by the participant. A participant
shall be entitled to receive a stock certificate evidencing the acquisition of
shares of Stock under a Performance Share Award only upon satisfaction of all
conditions specified in the written instrument evidencing the Performance Share
Award (or in a performance plan adopted by the Committee).

         (d) Termination. Except as may otherwise be provided by the Committee
at any time prior to termination of employment, a participant's rights in all
Performance Share Awards shall automatically terminate upon the participant's
termination of employment by the Company and its Subsidiaries for any reason
(including death, Disability, Normal Retirement and for Cause).

         (e) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment by the Company and its Subsidiaries, the Committee may
in its sole discretion accelerate, waive or, subject to Section 11, amend any or
all of the goals, restrictions or conditions imposed under any Performance Share
Award.

SECTION 9.  TAX WITHHOLDING.

         (a) Payment by Participant. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.

         (b) Payment in Shares. With the approval of the Committee, a
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due with respect to such Award, or (ii)
transferring to the Company shares of Stock owned by the participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due.

SECTION 10.  TRANSFER, LEAVE OF ABSENCE, ETC.

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another;

         (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.

SECTION 11.  AMENDMENTS AND TERMINATION.

         The Board may at any time amend or discontinue the Plan and the
Committee may at any time amend or cancel any outstanding Award (or provide
substitute Awards at the same or reduced exercise or purchase price or with no
exercise or purchase price, but such price, if any, must satisfy the
requirements which would apply to the substitute or amended Award if it were
then initially granted under this Plan) for the purpose of satisfying changes in
law or for any other lawful purpose, but no such action shall adversely affect
rights under any outstanding Award without the holder's consent. However, no
such amendment, unless approved by the stockholders of the Company, shall be
effective if it would cause the Plan to fail to satisfy the incentive stock
option requirements of the Code or if it would increase the limitation set forth
in Section 3(a) on the number of shares of Stock covered by Options that may be
granted to any individual participant during any fiscal year.

SECTION 12.  STATUS OF PLAN.

         With respect to the portion of any Award which has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provision of the foregoing sentence.

SECTION 13.  CHANGE OF CONTROL PROVISIONS.

         (a) Upon the occurrence of a Change of Control as defined in this
Section 13:

                  (i) Each Stock Option shall automatically become fully
         exercisable notwithstanding any provision to the contrary hereof.

                  (ii) Restrictions and conditions on Awards of Conditioned
         Stock shall automatically be deemed waived, and the recipients of such
         Awards shall become entitled to receipt of the stock subject to such
         Awards.

         (b) The Committee may at any time prior to a Change of Control
accelerate the exercisability of any Stock Options, Conditioned Stock, and
Performance Share Awards to the extent it shall in its sole discretion
determine.

         (c) "Change of Control" shall mean the occurrence of any one of the
following events:

                           (i) any "person" (as such term is used in Sections
         13(d) and 14(d)(2) of the Act) becomes a "beneficial owner" (as such
         term is defined in Rule 13d-3 promulgated under the Act) (other than
         the Company, any trustee or other fiduciary holding securities under an
         employee benefit plan of the Company, or any corporation owned,
         directly or indirectly, by the stockholders of the Company in
         substantially the same proportions as their ownership of stock of the
         Company), directly or indirectly, of securities of the Company
         representing thirty-five percent (35%) or more of the combined voting
         power of the Company's then outstanding securities; or, in the case of
         any person which as of October 20, 2000, is the beneficial owner,
         directly or indirectly, of securities of the Company representing more
         than [10%] of the combined voting power of the Company's then
         outstanding securities, such person shall become the beneficial owner,
         directly or indirectly, of securities of the Company representing
         [thirty-five percent (35%)] or more of the combined voting power of the
         Company's then outstanding securities in addition to the securities
         beneficially owned, directly or indirectly, by such person as of
         October 20, 2000 (excluding, for the avoidance of doubt, becoming the
         beneficial owner of such percentage of securities by reason of any
         acquisition, retirement or cancellation of securities by the Company).

                  (ii) at any time after October 20, 2000, persons who, as of
         October 20, 2000, constituted the Company's Board (the "Incumbent
         Board") cease for any reason, including without limitation as a result
         of a tender offer, proxy contest, merger or similar transaction, to
         constitute at least a majority of the Board, provided that any person
         becoming a director of the Company subsequent to October 20, 2000 whose
         election was approved by, or who was nominated with the approval of, at
         least a majority of the directors then comprising the Incumbent Board
         shall, for purposes of this Plan, be considered a member of the
         Incumbent Board; or

                  (iii) the stockholders of the Company approve a merger or
         consolidation of the Company with any other corporation or other
         entity, other than (a) a merger or consolidation which would result in
         the voting securities of the Company outstanding immediately prior
         thereto continuing to represent (either by remaining outstanding or by
         being converted into voting securities of the surviving entity) more
         than 65% of the combined voting power of the voting securities of the
         Company or such surviving entity outstanding immediately after such
         merger or consolidation or (b) a merger or consolidation effected to
         implement a recapitalization of the Company (or similar transaction) in
         which no "person" (as hereinabove defined) acquires more than 50% of
         the combined voting power of the Company's then outstanding securities;
         or

                  (iv) the stockholders of the Company approve a plan of
         complete liquidation of the Company or an agreement for the sale or
         disposition by the Company of all or substantially all of the Company's
         assets.

SECTION 14.  GENERAL PROVISIONS.

         (a) No Distribution; Compliance with Legal Requirements. The Committee
may require each person acquiring shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

         No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange requirements have
been satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.

         (b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.

         (c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan or any
Award under the Plan does not confer upon any employee any right to continued
employment with the Company or any Subsidiary.

SECTION 15.  EFFECTIVE DATE OF PLAN.

         The Plan shall become effective upon approval by the holders of a
majority of the shares of capital stock of the Company present or represented
and entitled to vote at a meeting of stockholders.

SECTION 16.  GOVERNING LAW.

         This Plan shall be governed by, and construed and enforced in
accordance with, the substantive laws of The Commonwealth of Massachusetts
without regard to its principles of conflicts of laws.================================================================================
                           SECOND AMENDED AND RESTATED
                           LOAN AND SECURITY AGREEMENT
================================================================================

================================================================================
                            FLEET RETAIL FINANCE INC.
                                    Agent for
                          The Lenders Referenced Herein

                                  DESIGNS, INC.
                                  The Borrower
================================================================================

                                December 7, 2000

<PAGE>

                                TABLE OF CONTENTS

ARTICLE 1-DEFINITIONS.........................................................1

ARTICLE 2-THE REVOLVING CREDIT...............................................19

         2-1.      -Establishment of Revolving Credit........................19

         2-2.      -Advances in Excess of Borrowing Base.....................20

         2-3.      -Risks of Value of Collateral.............................20

         2-4.      -Loan Requests............................................21

         2-5.      -Making of Loans Under Revolving Credit...................22

         2-6.      -The Loan Account.........................................22

         2-7.      -The Revolving Credit Notes...............................23

         2-8.      -Payment of The Loan Account..............................23

         2-9.      -Interest.................................................23

         2-10.     -Commitment Fee; Agent's Fee..............................24

         2-11.     -Line Fee.................................................24

         2-12.     -Early Termination Fee....................................25

         2-13.     -Regarding Fees...........................................25

         2-14.     -Agent's and Lenders' Discretion..........................25

         2-15.     -Procedures For Issuance of L/C's.........................26

         2-16.     -Fees For L/C's...........................................26

         2-17.     -Concerning L/C's.........................................27

         2-18.     -Changed Circumstances....................................28

         2-19.     -Increased Costs..........................................29

         2-20.     -Lenders' Commitments.....................................30

ARTICLE 3-CONDITIONS PRECEDENT...............................................31

         3-1.      -Corporate Due Diligence..................................31

         3-2.      -Opinion..................................................31

         3-3.      -[Intentionally Omitted]..................................31

         3-4.      -Guarantors...............................................31

         3-5.      -Additional Documents.....................................31

         3-6.      -Officers' Certificates...................................31

         3-7.      -Representations and Warranties...........................32

         3-8.      -Intentionally Omitted....................................32

         3-9.      -All Fees and Expenses Paid...............................32

         3-10.     -No Suspension Event......................................32

         3-11.     -No Adverse Change........................................32

ARTICLE 4 - GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS................32

         4-1.      -Payment and Performance of Liabilities...................32

         4-2.      -Due Organization -Corporate Authorization -No Conflicts..32

         4-3.      -Trade Names..............................................34

         4-4.      -Infrastructure...........................................34

         4-5.      -Locations................................................34

         4-6.      -Title to Assets..........................................35

         4-7.      -Indebtedness.............................................36

         4-8.      -Insurance Policies.......................................36

         4-9.      -Licenses.................................................37

         4-10.     -Leases...................................................37

         4-11.     -Requirements of Law......................................37

         4-12.     -Maintain Properties......................................37

         4-13.     -Pay Taxes................................................38

         4-14.     -No Margin Stock..........................................39

         4-15.     -ERISA....................................................39

         4-16.     -Hazardous Materials......................................39

         4-17.     -Litigation...............................................40

         4-18.     -Dividends or Investments.................................40

         4-19.     -Permitted Acquisitions...................................41

         4-20.     -Loans....................................................41

         4-21.     -Intentionally Omitted....................................42

         4-22.     -Restrictions on Sale of Collateral; License Agreements...42

         4-23.     -Protection of Assets.....................................42

         4-24.     -Line of Business.........................................42

         4-25.     -Affiliate Transactions...................................42

         4-26.     -Additional Assurances....................................43

         4-27.     -Adequacy of Disclosure...................................43

         4-28.     -Other Covenants..........................................43

ARTICLE 5-REPORTING REQUIREMENTS / FINANCIAL COVENANTS.......................43

         5-1.      -Maintain Records.........................................43

         5-2.      -Access to Records........................................44

         5-3.      -Notice to Agent..........................................44

         5-4.      -Borrowing Base Certificate...............................45

         5-5.      -Weekly Reports...........................................46

         5-6.      -Monthly Reports..........................................46

         5-7.      -Quarterly Reports........................................47

         5-8.      -Annual Reports...........................................47

         5-9.      -Applicable to Monthly, Quarterly and Annual Reports......48

         5-10.     -Officers' Certificates...................................48

         5-11.     -  Inventories, Appraisals, and Audits....................48

         5-12.     -Additional Financial Information.........................49

         5-13.     -Financial Performance Covenants..........................50

ARTICLE 6-USE AND COLLECTION OF COLLATERAL...................................50

         6-1.      -Use of Inventory Collateral..............................50

         6-2.      -Inventory Quality........................................50

         6-3.      -Adjustments and Allowances...............................50

         6-4.      -Validity of Accounts.....................................50

         6-5.      -Notification to Account Debtors..........................51

ARTICLE 7-CASH MANAGEMENT. PAYMENT OF LIABILITIES............................51

         7-1.      -Depository Accounts......................................51

         7-2.      -Credit Card Receipts.....................................51

         7-3.      -The Concentration and the Funding Accounts...............51

         7-4.      -Proceeds and Collection of Accounts......................52

         7-5.      -Payment of Liabilities...................................52

         7-6.      -The Funding Account......................................53

ARTICLE 8 - GRANT OF SECURITY INTEREST.......................................53

         8-1.      -  Grant of Security Interest.............................53

         8-2.      -  Extent and Duration of Security Interest...............54

ARTICLE 9-AGENT AS BORROWER'S ATTORNEY-IN-FACT...............................54

         9-1.      -Appointment as Attorney-In-Fact..........................54

         9-2.      -No Obligation to Act.....................................55

ARTICLE 10-EVENTS OF DEFAULT.................................................55

         10-1.     -Failure to Pay Revolving Credit..........................55

         10-2.     -Failure To Make Other Payments...........................56

         10-3.     -Failure to Perform Covenant or Liability(No Grace Period)56

         10-4.     -Financial Reporting Requirements.........................56

         10-5.     -Failure to Perform Covenant or Liability (Grace Period)..56

         10-6.     -Misrepresentation........................................56

         10-7.     -Acceleration of Other Debt. Breach of Lease..............56

         10-8.     -Default Under Other Agreements...........................57

         10-9.     -Uninsured Casualty Loss..................................57

         10-10.    -Judgment.  Restraint of Business.........................57

         10-11.    -Business Failure.........................................57

         10-12.    -Bankruptcy...............................................57

         10-13.    -Indictment -Forfeiture...................................58

         10-14.    -Default by Guarantor or Related Entity...................58

         10-15.    -Termination of Guaranty..................................58

         10-16.    -Challenge to Loan Documents..............................58

         10-17.    -Lease Default............................................58

         10-18.    .-Change in Control.......................................58

ARTICLE 11-RIGHTS AND REMEDIES UPON DEFAULT..................................59

         11-1.      -Rights of Enforcement...................................59

         11-2.      -Sale of Collateral......................................59

         11-3.      -Occupation of Business Location.........................60

         11-4.      -Grant of Nonexclusive License...........................60

         11-5.      -Assembly of Collateral..................................60

         11-6.      -Rights and Remedies.....................................60

ARTICLE 12-NOTICES...........................................................61

         12-1.      -Notice Addresses........................................61

         12-2.      -Notice Given............................................62

ARTICLE 13-TERM..............................................................62

         13-1.      -Termination of Revolving Credit.........................62

         13-2.      -Effect of Termination...................................62

ARTICLE 14-GENERAL...........................................................63

         14-1.      -Protection of Collateral................................63

         14-2.      -Successors and Assigns..................................63

         14-3.      -Severability............................................63

         14-4.      -Amendments.  Course of Dealing..........................63

         14-5.      -Power of Attorney.......................................64

         14-6.      -Application of Proceeds.................................64

         14-7.      -Costs and Expenses of Agent and Of Lenders..............64

         14-8.      -Copies and Facsimiles...................................64

         14-9.      -Massachusetts Law.......................................65

         14-10.     - Consent to Jurisdiction................................65

         14-11.     -Indemnification.........................................65

         14-12.     -Rules of Construction...................................66

         14-13.     -Intent..................................................67

         14-14.     -Right of Set-Off........................................67

         14-15.     -Maximum Interest Rate...................................67

         14-16.     -Waivers.................................................67

         14-17.     -Confidentiality.........................................68

         14-18.     -Amendment and Restatement...............................69

<PAGE>

                                    EXHIBITS

         2-4               :        Loan Request
         2-7               :        Revolving Credit Note
         2-20              :        Voting Rights
         4-2               :        Related Entities
         4-3               :        Trade Names
         4-4(b)            :        Exceptions to Property Rights
         4-5               :        Locations, Leases, and Landlords
         4-5(c)            :        Form of Landlord's Waiver
         4-6               :        Encumbrances
         4-7               :        Indebtedness
         4-8               :        Insurance Policies
         4-10              :        Capital Leases
         4-13              :        Taxes
         4-17              :        Litigation
         5-4               :        Borrowing Base Certificate
         5-13(a)           :        Financial Performance Covenants
         7-1               :        DDA's.
         7-2               :        Credit Card Arrangements

<PAGE>

SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT                            Fleet Retail Finance Inc.
                                                                           Agent

                                                                December 7, 2000

         THIS AGREEMENT is made between

          Fleet Retail Finance Inc (f/k/a BankBoston Retail Finance Inc.) (in
     such capacity, herein the "Agent"), a Delaware corporation with offices at
     40 Broad Street, Boston, Massachusetts 02109, as agent for the ratable
     benefit of the "Lenders", who are, at present, those financial institutions
     identified on the signature pages of this Agreement and who in the future
     are those Persons (if any) who become "Lenders" in accordance with the
     provisions of Section 2-20, below,

                  and

          Designs, Inc.  (hereinafter,  the "Borrower"),  a Delaware corporation
     with its principal executive offices at 66 B Street, Needham, Massachusetts
     02194

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

                                   WITNESSETH:
ARTICLE 1 - DEFINITIONS.

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

         "Acceptable Inventory": Eligible L/C Inventory and all other Inventory
                  of the Borrower (excluding any supplies, goods returned or
                  rejected by customers, goods to be returned to suppliers, and
                  goods in transit to third persons (other than the Borrower's
                  agents or warehouses)), consisting of casual apparel,
                  footwear, and related accessories, less any Reserves, as to
                  which inventory the Lender has a perfected security interest
                  which is prior and superior to all security interests, claims,
                  and encumbrances other than Permitted Encumbrances.

         "Accounts" and "Accounts Receivable" "Accounts" as defined in the UCC,
                  and also all: accounts, accounts receivable, credit card
                  receivables, notes, drafts, acceptances, and other forms of
                  obligations and receivables and rights to payment for credit
                  extended and for goods sold or leased, or services rendered,
                  whether or not yet earned by performance; all "contract
                  rights" as formerly defined in the UCC; all Inventory which
                  gave rise thereto, and all rights associated with such
                  Inventory, including the right of stoppage in transit; all
                  reclaimed, returned, rejected or repossessed Inventory (if
                  any) the sale of which gave rise to any Account.

         "Account Debtor": Has the meaning given that term in the UCC.

         "ACH":   Automated clearing house.

         "Acquisition": The purchase or other acquisition, by the Borrower or by
                  any Subsidiary (no matter how structured in one transaction or
                  in a series of transactions) , of: (a) equity interests in any
                  other Person which would constitute or which results in a
                  Change in Control of such other Person, or (b) such of the
                  assets of any Person as would permit the Borrower or such
                  Subsidiary to operate one or more retail locations of such
                  Person or to conduct other business operations with such
                  assets (provided, however, none of the following shall
                  constitute an "Acquisition": purchases of inventory in the
                  ordinary course of the Borrower's business; purchases, leases
                  or other acquisitions of Equipment in the ordinary course of
                  the Borrower's business; and capital expenditures permitted
                  hereunder).

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

         "Affiliate": With respect to any two Persons, a relationship in which
                  (a) one holds, directly or indirectly, not less than Fifty-One
                  Percent (51%) of the capital stock, beneficial interests,
                  partnership interests, or other equity interests of the other;
                  or (b) one has, directly or indirectly, the right, under
                  ordinary circumstances, to vote for the election of a majority
                  of the directors (or other body or Person who has those powers
                  customarily vested in a board of directors of a corporation);
                  or (c) not less than Fifty-One Percent (51%) of their
                  respective ownership is directly or indirectly held by the
                  same third Person.

         "Agent": Is defined in the Preamble.

         "Agent's Fee":    Is defined in Section 2-10.

         "Agent's Rights and Remedies":     Is defined in Section 11-6.

         "Amendment Fee":  Is defined in Section 2-10(a).

         "Amendment Fee Letter": That letter, styled the "Amendment Fee Letter"
                  between the Borrower and the Agent dated December 7, 2000, as
                  such letter may from time to time be amended.

         "Applicable Margin": The rates for Base Margin Loans and LIBOR Loans
                  determined as of the date of this Agreement based upon the
                  following criteria:

------------ ---------------------------- ---------------- ----------------
   Level        Availability                 Base Margin      LIBOR
                                             Applicable       Applicable
                                             Margin           Margin
------------ ---------------------------- ---------------- ----------------
   1            Less than 15% of the         0%               2.50%
                Borrowing Base
------------ ---------------------------- ---------------- ----------------
   2            Greater than or equal 15%    0%               2.25%
                of the Borrowing Base but
                less than or equal to 30%
                of the Borrowing Base
------------ ---------------------------- ---------------- ----------------
   3            Greater than 30% of the      0%               2.00%
                Borrowing Base but less
                than or equal to 70% of
                the Borrowing Base
------------ ---------------------------- ---------------- ----------------
   4            Greater than 70% of the      0%               1.75%
                Borrowing Base
------------ ---------------------------- ---------------- ----------------

          The Applicable Margin shall be adjusted monthly as of the first
                  day of each calendar month based upon the average Availability
                  for the immediately preceding calendar month. Upon the
                  occurrence of an Event of Default, interest shall accrue at
                  the rate set forth in Section 2-9(f).

         "Appraised Inventory Liquidation Value": The product of (a) the Cost of
                  Eligible Inventory (net of Inventory Reserves) multiplied by
                  (b) that percentage, determined from the then most recent
                  appraisal of the Borrowers' Inventory undertaken at the
                  request of the Agent, to reflect the appraiser's estimate of
                  the net recovery on the Borrowers' Inventory in the event of
                  an in-store liquidation of that Inventory.

         "Appraised Inventory Percentage":  90%.

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

         "Availability Reserves": Such reserves as the Agent from time to time
                  reasonably determines in the Agent's discretion as being
                  appropriate to reflect the impediments to the Agent's ability
                  to realize upon the Collateral. Without limiting the
                  generality of the foregoing, Availability Reserves may include
                  (but are not limited to) reserves based on the following
                  (notwithstanding that certain of the following may constitute
                  Permitted Encumbrances):
                                    (i)     Rent (based upon past due rent
                                            and/or whether or not Landlord's
                                            Waiver, acceptable to the Agent ,
                                            has been received by the Agent for
                                            those states in which the Agent
                                            reasonably believes the landlord(s)
                                            may have a statutory lien). Without
                                            limiting the Agent's rights, at the
                                            execution of this Agreement, the
                                            Availability Reserve for rent shall
                                            be in the sum of $400,000.00.
                                    (ii)    In store customer credits and Gift
                                            Certificates: Without limiting the
                                            Agent's rights, at the execution of
                                            this Agreement, the Availability
                                            Reserve for such items shall be in
                                            the sum of $250,000.00.
                                    (iii)   Frequent Shopper Programs.
                                    (iv)    Layaways and Customer Deposits
                                    (v)     Taxes and other governmental
                                            charges, including, ad valorem,
                                            personal property, and other taxes
                                            which might have priority over the
                                            security interests of the Agent in
                                            the Collateral.

         "Bankruptcy Code":      Title 11, U.S.C., as amended from time to time.

         "Base": The Base Rate  announced  from time to time by Fleet  National
               Bank (or any successor in interest to Fleet  National  Bank).  In
               the  event  that  said  bank (or any such  successor)  ceases  to
               announce  such a rate,  "Base"  shall refer to that rate or index
               announced  or published  from time to time as the Agent,  in good
               faith, designates as the functional equivalent to said Base Rate.
               Any change in "Base"  shall be  effective,  for  purposes  of the
               calculation of interest due  hereunder,  when such change is made
               effective  generally by the bank on whose rate or index "Base" is
               being  set.  In all  events,  interest  which  is  determined  by
               reference to Base (or any  successor to Base) shall be calculated
               on a 360 day year and actual days elapsed.

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

         "Base Margin Rate":  Base plus the Applicable Margin for Base Margin
               Loans.

         "Borrower":       Is defined in the Preamble.
         "Borrowing Base": The lesser, on any day, of
                           (a)      the amount determined in accordance with
                                    Section 2-1(b)(i); or
                           (b)      the amount determined in accordance with
                                    Section 2-1(b)(ii) hereof,
                  in each instance ((a) or (b)) determined without deduction
                  from said amount of the unpaid principal balance of the Loan
                  Account on that day.

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

         "BusinessPlan": The Borrower's annual business plan dated
                  November 2, 2000, which has been furnished to the Agent, and
                  any annual business plan hereafter furnished the Agent in
                  accordance with the provisions of Section 5-12(c) hereof.

         "Capital Expenditures":    The expenditure of funds or the incurrence
                  of liabilities which are capitalized in accordance with GAAP,
                  consistent with the Borrower's prior practices.

         "Capital Lease":  Any lease which is capitalized in accordance with
                  GAAP, consistent with the Borrower's prior practices.

         "Change in Control":       The occurrence of any of the following:
                           (a) The acquisition, by any group of persons (within
                  the meaning of the Securities Exchange Act of 1934, as
                  amended) or by any Person, of beneficial ownership (within the
                  meaning of Rule 13d-3 of the Securities and Exchange
                  Commission) of 50% or more of the issued and outstanding
                  capital stock of the Borrower having the right, under ordinary
                  circumstances, to vote for the election of directors of the
                  Borrower.
                           (b) More than one-third of the persons who were
                  directors of the Borrower on the first day of any period
                  consisting of Twelve (12) consecutive calendar months (the
                  first of which Twelve (12) month periods commences on the
                  first day of November, 1999), cease, for any reason other than
                  death or disability, to be directors of the Borrower.
                           (c) The persons who are directors of the Borrower as
                  of October 28, 1999 cease, for any reason, to constitute a
                  majority of the board of directors of the Borrower.

         "Chattel Paper":  Has the meaning given that term in the UCC.

         "Collateral":     Is defined in Section 8-1.

         "Commitment Fee": Is defined in Section 2-10.

         "Commitment":     Subject to Section 2-20, as follows:

------------------------ ----------------------------- -------------------------
 Lender                     Dollar Commitment             Commitment Percentage
------------------------ ----------------------------- -------------------------
 Fleet Retail Finance Inc.  $31,500,000.00                70%
------------------------ ----------------------------- -------------------------
 Wells Fargo Business       $13,500,000.00                30%
 Credit, Inc.
------------------------ ----------------------------- -------------------------

         "Commitment Percentage":  Subject to Section 2-20, as set forth in the
                            definition of "Commitment".

         "Concentration Account":   Is defined in Section 7-3.

         "Cost":  The lower of
                                    (a) the calculated cost of purchases, as
                           determined from invoices received by the Borrower,
                           the Borrower's purchase journal or stock ledger,
                           based upon the Borrower's accounting practices, known
                           to the Lender, which practices are in effect on the
                           date on which this Agreement was executed; or
                                    (b) the lowest ticketed or promoted price at
                           which the subject inventory is offered to the public,
                           after all mark-downs (whether or not such price is
                           then reflected on the Borrower's accounting system).
                           "Cost" does not include inventory capitalization
                           costs or other non-purchase price charges used in the
                           Borrower's calculation of cost of goods sold (other
                           than freight, which may be capitalized consistent
                           with GAAP and the Borrower's prior practices).

         "DDA":   Any checking or other demand daily depository account
                           maintained by any Obligor.

         "Deposit Account":   Has the meaning given that term in the UCC.

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

         "Documents of Title":      Has the meaning given that term in the UCC.

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

         "Early Termination Fee":   Is defined in Section 2-12.

         "Eligible Investments": Any or all of the following:

                  (a) marketable direct full faith and credit obligations of, or
         marketable obligations guaranteed by, the United States of America;
         provided that such securities, as a group, may not, on the date of
         determination, have a remaining weighted average maturity of more than
         five years;

                  (b) marketable direct full faith and credit obligations of
         States of the United States or of political subdivisions or agencies;
         provided that such securities, as a group, may not, on the date of
         determination, have a remaining weighted average maturity of more than
         five years; and provided, further, that such obligations carry a rating
         of "A" or better by a Rating Service;

                  (c) publicly issued bonds or debentures which have a remaining
         maturity at the time of purchase of no more than five years issued by a
         corporation (other than the Company or an Affiliate thereof), organized
         under the laws of a State of the United States or the District of
         Columbia; provided, that such obligations carry a rating of "A" or
         better by a Rating Service;

                  (d) open market commercial paper of any corporation (other
         than the Company or an Affiliate thereof) incorporated under the laws
         of the United States of America or any State thereof or the District of
         Columbia rated not less than "P-2" or "A-2" or its equivalent by a
         Rating Service and maturing within 270 days after the date on which
         such commercial paper is purchased;

                  (e) certificates of deposit and bankers acceptances maturing
         within one year after the acquisition thereof issued by (i) Fleet
         National Bank, or (ii) any commercial bank organized under the laws of
         the United States of America or of any political subdivision thereof
         the long term obligations of which are rated "A" or better by a Rating
         Service;

                  (f) Eurodollar certificates of deposit maturing within one
         year after the acquisition thereof issued by any commercial bank having
         combined capital, surplus and undivided profits of at least $1 billion;

                  (g) repurchase agreements, having terms of less than one year,
         for government obligations of the type described in (a) or (b) above,
         with a commercial bank or trust company meeting the requirements of
         clause (e) above;

                  (h) publicly issued collateralized mortgage obligations which
         have a remaining maturity at the time of purchase of no more than five
         years; provided, that such obligations carry a rating of "A" or better
         by a Rating Service;

                  (i) tax-exempt bonds or notes which have a remaining maturity
         at the time of purchase of no more than five years issued by any State
         of the United States or the District of Columbia, or any political
         subdivision thereof; provided, that such obligations carry a rating of
         "A" or better by a Rating Service;

                  (j) publicly issued shares of common or preferred stock issued
         by a corporation (other than the Borrower or an Affiliate thereof,
         unless otherwise permitted pursuant to Section 4-18 hereof), organized
         under the laws of any State of the United States or the District of
         Columbia, and bonds or debentures convertible into shares of such
         common or preferred stock, so long as (A) such securities have been
         registered under the Securities Exchange Act of 1934, as amended, and
         are traded on the New York Stock Exchange, the American Stock Exchange
         or NASDAQ, and (B) the senior debt securities of the issuer thereof (if
         any) are rated "A" or better by a Rating Service; provided, however,
         that the securities under this clause (j) may not at any time comprise
         more than 10% of the total assets of the Borrower; and

                  (k) interests in any fund or other pooled "open-end"
         investment vehicle which (i) is a registered investment company under
         the Investment Company Act of 1940, as amended and (ii) invests
         principally in obligations of any of the types described in clauses (a)
         through (j) above.

         "Eligible L/C Inventory":  Inventory, the purchase of which is
                  supported by a documentary L/C then having an initial expiry
                  of forty-five or less days, provided that
                                    (a) Such Inventory is of such types,
                           character, qualities and quantities (net of Inventory
                           Reserves) as the Agent in its reasonable discretion
                           from time to time reasonably determines to be
                           eligible for borrowing; and
                                    (b) The documentary L/C supporting such
                           purchase names the Agent or any Issuer as consignee
                           of the subject Inventory and the Agent has control
                           over the documents which evidence ownership of the
                           subject Inventory (such as by the providing to the
                           Agent of a customs brokers agreement in form
                           reasonably satisfactory to the Agent).

         "Employee Benefit Plan":   As defined in ERISA.

         "Encumbrance":    Each of the following:
                           (a) Any security interest, mortgage, pledge,
                  hypothecation, lien, attachment, or charge of any kind
                  (including any agreement to give any of the foregoing); the
                  interest of a lessor under a Capital Lease; conditional sale
                  or other title retention agreement; sale of accounts
                  receivable or chattel paper; or other arrangement pursuant to
                  which any Person is entitled to any preference or priority
                  with respect to the property or assets of another Person or
                  the income or profits of such other Person or which
                  constitutes an interest in property to secure an obligation;
                  each of the foregoing whether consensual or non-consensual and
                  whether arising by way of agreement, operation of law, legal
                  process or otherwise.
                           (b)      The filing of any financing statement under
                  the UCC or comparable law of any jurisdiction.

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

         "Environmental Laws":      All of the following:
                           (a)      Any and all federal, state, local or
                  municipal laws, rules, orders, regulations, statutes,
                  ordinances, codes, decrees or requirements which regulate or
                  relate to, or impose any standard of conduct or liability on
                  account of or in respect to environmental protection matters,
                  including, without limitation, Hazardous Materials, as are now
                  or hereafter in effect.
                           (b)      The common law relating to damage to Persons
                  or property from Hazardous Materials.

         "Equipment": Means "equipment" as defined in the UCC, and also all
                  motor vehicles, rolling stock, machinery, office equipment,
                  plant equipment, tools, dies, molds, store fixtures,
                  furniture, and other goods, property, and assets which are
                  used and/or were purchased for use in the operation or
                  furtherance of the Borrower's business, and any and all
                  accessions or additions thereto, and substitutions therefor.

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

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

         "Events of Default":       Is defined in Article 10.

         "Fee Letter":     That letter, styled the "Fee Letter" between the
                  Borrower and the Agent dated June 4, 1998, as such letter may
                  from time to time be amended.

         "Fixtures":       Has the meaning given that term in the UCC.
         "Funding Account":         Is defined in Section 7-3.

         "GAAP":  Principles  which are  consistent  with those  promulgated or
                  adopted  by the  Financial  Accounting  Standards  Board  and
                  its predecessors  (or  successors)  in effect and  applicable
                  to that accounting  period in respect of which reference to
                  GAAP is being made,  provided,  however,  in the event of a
                  Material Accounting Change,  then  unless  otherwise
                  specifically  agreed  to by the Agent,   (a)  the  Borrower's
                  compliance   with  the  financial performance  covenants
                  imposed pursuant to Section 5-13 shall be determined  as if
                  such Material  Accounting  Change had not taken place (except
                  for changes  resulting from the conversion from the LIFO
                  method  of  accounting  to a  method  in which  assets  are
                  reported  at the  lower  of cost or  market  value),  and (b)
                  the Borrower shall include, with its monthly,  quarterly,  and
                  annual financial  statements  a schedule,  certified  by the
                  Borrower's chief  financial  officer,  on which the effect of
                  such  Material Accounting  Change to the statement  with which
                  provided shall be described.

         "General Intangibles": Means "general intangibles" as defined in the
                  UCC; and also all: rights to payment for credit extended;
                  deposits; amounts due to the Borrower; credit memoranda in
                  favor of the Borrower; warranty claims; tax refunds and
                  abatements; insurance refunds and premium rebates; all means
                  and vehicles of investment or hedging, including, without
                  limitation, options, warrants, and futures contracts; records;
                  customer lists; telephone numbers; goodwill; causes of action;
                  judgments; payments under any settlement or other agreement;
                  literary rights; rights to performance; royalties; license
                  and/or franchise fees; rights of admission; licenses;
                  franchises; license agreements, including all rights of the
                  Borrower to enforce same; permits, certificates of convenience
                  and necessity, and similar rights granted by any governmental
                  authority; patents, patent applications, patents pending, and
                  other intellectual property; internet addresses and domain
                  names; developmental ideas and concepts; proprietary
                  processes; blueprints, drawings, designs, diagrams, plans,
                  reports, and charts; catalogs; manuals; technical data;
                  computer software programs (including the source and object
                  codes therefor), computer records, computer software, rights
                  of access to computer record service bureaus, service bureau
                  computer contracts, and computer data; tapes, disks,
                  semi-conductors chips and printouts; trade secrets rights,
                  copyrights, mask work rights and interests, and derivative
                  works and interests; user, technical reference, and other
                  manuals and materials; trade names, trademarks, service marks,
                  and all goodwill relating thereto; applications for
                  registration of the foregoing; and all other general
                  intangible property of the Borrower in the nature of
                  intellectual property; proposals; cost estimates, and
                  reproductions on paper, or otherwise, of any and all concepts
                  or ideas, and any matter related to, or connected with, the
                  design, development, manufacture, sale, marketing, leasing, or
                  use of any or all property produced, sold, or leased, by the
                  Borrower or credit extended or services performed, by the
                  Borrower, whether intended for an individual customer or the
                  general business of the Borrower, or used or useful in
                  connection with research by the Borrower.

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

         "Guarantors":     All Subsidiaries of the Borrower, which now or
                  hereafter own any assets, rights and interests in property,
                  whether tangible or intangible.

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

         "Indebtedness":   All indebtedness and obligations of or assumed by any
                  Person on account of or in respect to any of the following:
                           (a) In respect of money borrowed (including any
                  indebtedness which is non-recourse to the credit of such
                  Person but which is secured by an Encumbrance on any asset of
                  such Person) whether or not evidenced by a promissory note,
                  bond, debenture or other written obligation to pay money.
                           (b) In connection with any letter of credit or
                  acceptance transaction (including, without limitation, the
                  face amount of all letters of credit and acceptances issued
                  for the account of such Person or reimbursement on account of
                  which such Person would be obligated).
                           (c) In connection with the sale or discount of
                  accounts receivable or chattel paper of such Person.
                           (d) On account of deposits or advances.
                           (e) As lessee under Capital Leases.
                           (f) Indebtedness of others secured by an Encumbrance
                  on any asset of such Person, whether or not such Indebtedness
                  is assumed by such Person.
                           (g) Any guaranty, endorsement, suretyship or other
                  undertaking pursuant to which that Person may be liable on
                  account of any obligation of any third party (other than (i)
                  contingent and unliquidated indemnities delivered in the
                  ordinary course of business and (ii) guarantees and
                  endorsements resulting from the endorsement of negotiable
                  instruments for collection in the ordinary course of
                  business).
                           (h) The Indebtedness of a partnership or joint
                  venture in which such Person is a general partner or joint
                  venturer.

         "Indemnified Person":      Is defined in Section 14-11.

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

         "Interest Payment Date":  With reference to:
                           (a) Each LIBOR Loan: (i) Having an Interest Period of
                  one, two or three months, the last day of the Interest Period
                  relating thereto; the Termination Date, and the End Date; (ii)
                  Having an Interest Period of six months, the last day of the
                  third month of such Interest Period, the last day of the
                  Interest Period, the Termination Date and the End Date.
                           (b)      Each Base Margin Loan: the first day of each
                  month; the Termination Date; and the End Date.

         "Interest Period": (a) With respect to each LIBOR Loan: Subject to
                  Subsection (c), below, the period commencing on the date of
                  the making or continuation of, or conversion to, such LIBOR
                  Loan and ending on (but excluding) the day which corresponds
                  numerically to such date, one, two, three or six months
                  thereafter, as the Borrower may elect by notice to the Agent.
                            (b) With respect to each Base Margin Loan:
                  Subject to Subsection (c), below, the period commencing on the
                  date of the making or continuation of or conversion to such
                  Base Margin Loan and ending on that date (i) as of which the
                  subject Base Margin Loan is converted to a LIBOR Loan, as the
                  Borrower may elect by notice to the Agent, or (ii) on which
                  the subject Base Margin Loan is paid by the Borrower.
                            (c) The setting of Interest Periods is in all
                  instances subject to the following:
                                    (i)     Any Interest Period for a Base
                           Margin  Loan which would otherwise end on a day which
                           is not a Business Day shall be extended to the next
                           succeeding Business Day.
                                    (ii) Any Interest Period for a LIBOR Loan
                           which would otherwise end on a day that is not a
                           Business Day shall be extended to the next succeeding
                           Business Day, unless that succeeding Business Day is
                           in the next calendar month, in which event such
                           Interest Period shall end on the last Business Day of
                           the month during which the Interest Period ends.
                                    (iii) Any Interest Period applicable to a
                           LIBOR Loan, which Interest Period begins on a day for
                           which there is no numerically corresponding day in
                           the calendar month during which such Interest Period
                           ends, shall end on the last Business Day of the month
                           during which that Interest Period ends.
                                    (iv) Any Interest Period which would
                           otherwise end after the Termination Date shall end on
                           the Termination Date.
                                    (v) Subject to Section (iii), above, no
                           Interest Period applicable to a LIBOR Loan may be
                           less than one (1) month.
                                    (vi) The number of Interest Periods
                           applicable to LIBOR Loans in effect at any one time
                           is subject to Section 2-9 hereof.

         "Investment Property":     Has the meaning given that term in the UCC.

         "Inventory":      Means "inventory" as defined in the UCC and also all:
                  packaging and shipping materials related to any of the
                  foregoing; Goods held for sale or lease or furnished or to be
                  furnished under a contract or contracts of sale or service by
                  the Borrower, or used or consumed or to be used or consumed in
                  the Borrower's business; Goods of said description in transit:
                  returned, repossessed and rejected Goods of said description;
                  and all documents (whether or not negotiable) which represent
                  any of the foregoing.

         "Inventory Advance Rate": Such percentage as the Agent in its
                  reasonable discretion may establish from time to time, but in
                  no event in excess of seventy percent(70%) or less than
                  sixty-eight percent (68%). The initial Inventory Advance Rate
                  shall be sixty-eight percent (68%).

         "Inventory Reserves": Such Reserves as may be reasonably
                  established from time to time by the Agent in the Agent's
                  discretion with respect to the determination of the
                  saleability, at retail, of the Acceptable Inventory or which
                  reflect such other factors as affect the market value of the
                  Acceptable Inventory. Without limiting the generality of the
                  foregoing, Inventory Reserves may include (but are not limited
                  to) reserves based on the following:
                                    (i)     Seasonality.
                                    (ii)    Shrinkage.
                                    (iii)   Imbalance.
                                    (iv)    Change in Inventory character that
                                            could have an adverse impact on the
                                            appraised value of the Inventory as
                                            determined by the Agent in its
                                            reasonable discretion.
                                    (v)     Change in Inventory composition that
                                            could have an adverse impact on the
                                            appraised value of the Inventory as
                                            determined by the Agent in its
                                            reasonable discretion.
                                    (vi)    Change in Inventory mix that could
                                            have an adverse impact on the
                                            appraised value of the Inventory as
                                            determined by the Agent in its
                                            reasonable discretion.
                                    (vii)   Markdowns (both permanent and point
                                            of sale) not in the ordinary course
                                            of business and inconsistent with
                                            the Borrower's prior practices.
                                    (viii)  Retail markons and markups
                                            inconsistent with the Borrower's
                                            prior practices.

         "Issuer":         The issuer of any L/C.

         "June    2000 Resolution": Means the June 26, 2000 resolution of the
                  Board of Directors of the Borrower pursuant to which, among
                  other things, the Board of Directors authorized the Borrower
                  to pay an amount not to exceed $2,500,000.00 in the aggregate
                  to repurchase certain shares of the Borrower's capital stock.

         "L/C":   Any letter of credit, the issuance of which is procured by the
                  Agent for the account of the Borrower and any acceptance made
                  on account of such letter of credit.
         "Lease": Any lease or other agreement, no matter how styled or
                  structured, pursuant to which the Borrower is entitled to the
                  use or occupancy of any space.

         "Leasehold Interest":  Any interest of the Borrower as lessee under
                  any Lease.

         "Lenders":        Defined in the Preamble to this Agreement.

         "Letter-of-Credit Right":  Has the meaning given that term in UCC 9'99
                  and also refers to any right to payment or performance under
                  an L/C, whether or not the beneficiary has demanded or is at
                  the time entitled to demand payment or performance.

         "Liabilities" (in the singular, "Liability"):  Means all and each of
                  the following, whether now existing or hereafter arising under
                  this Agreement or any other Loan Document:
                           (a) Any and all direct and indirect liabilities,
                  debts, and obligations of the Borrower to the Agent or any
                  Lender, each of every kind, nature, and description.
                           (b) Each obligation to repay any loan, advance,
                  indebtedness, note, obligation, overdraft, or amount now or
                  hereafter owing by the Borrower to the Agent or any Lender
                  (including all future advances whether or not made pursuant to
                  a commitment by the Agent or any Lender), whether or not any
                  of such are liquidated, unliquidated, primary, secondary,
                  secured, unsecured, direct, indirect, absolute, contingent, or
                  of any other type, nature, or description, or by reason of any
                  cause of action which the Agent or any Lender may hold against
                  the Borrower.
                           (c) All notes and other obligations of the Borrower
                  now or hereafter assigned to or held by the Agent or any
                  Lender, each of every kind, nature, and description.
                           (d) All interest, reasonable fees, and charges and
                  other amounts which may be charged by the Agent or any Lender
                  to the Borrower and/or which may be due from the Borrower to
                  the Agent or any Lender from time to time.
                           (e) All reasonable costs and expenses incurred or
                  paid by the Agent or any Lender in respect of any agreement
                  between the Borrower and Agent or any Lender or instrument
                  furnished by the Borrower to the Agent or any Lender
                  (including, without limitation, Administrative Costs,
                  attorneys' reasonable fees, and all court and litigation costs
                  and expenses).
                           (f) Each of the foregoing as if each reference to the
                  "Agent and each Lender" therein were to each Affiliate of the
                  Agent or any Lender.

         "LIBOR   Business Day": Any day which is both a Business Day and a day
                  on which the principal interbank market for LIBOR deposits in
                  London in which Fleet National Bank participates is open for
                  dealings in United States Dollar deposits.

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

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

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

                                LIBOR Offer Rate
                               _________________
                           1 minus Reserve Percentage

                   (b) the Applicable Margin for LIBOR Loans.

         "Line (Unused) Fee":       Is defined in Section 2-11.

         "Loan Account":   Is defined in Section 2-6.

         "Loan Ceiling":    $45,000,000.00.

         "Loan    Documents": This Agreement, each instrument and document
                  executed and/or delivered as contemplated by Article 3, below,
                  and each other instrument or document from time to time
                  executed and/or delivered in connection with the arrangements
                  contemplated hereby, the Master Lease Agreement between the
                  Borrower and Winthrop Resources Corporation (which has been
                  assigned to an Affiliate of the Agent), and any other
                  instruments, documents, agreements and facilities heretofore
                  or hereafter entered into in connection with or relating to
                  any transaction which arises out of any cash management,
                  depository, investment, letter of credit, or interest rate
                  protection services provided by the Agent or any Lender or any
                  Affiliate of the Agent or any Lender, as each may be amended
                  from time to time.

         "Material Accounting Change": Any change in GAAP applicable to
                  accounting periods subsequent to the Borrower's fiscal year
                  most recently completed prior to the execution of this
                  Agreement, which change has a material effect on the
                  Borrower's financial condition or operating results, as
                  reflected on financial statements and reports prepared by or
                  for the Borrower, when compared with such condition or results
                  as if such change had not taken place or where preparation of
                  the Borrower's statements and reports in compliance with such
                  change results in the breach of a financial performance
                  covenant imposed pursuant to Section 5-13 where such a breach
                  would not have occurred if such change had not taken place or
                  vice versa.

         "Maturity Date":   November 30, 2003.

         "Obligors":       Collectively, the Borrower and the Guarantors.

         "Participant":    Is defined in Section 14-14, hereof.

         "Payment Intangible":      Has the meaning given that term in UCC 9'99
                  and also refers to any general intangible under which the
                  Account Debtor's primary obligation is a monetary obligation.

         "Permitted Acquisition":  An Acquisition complying with the following:
                                    (A) Such acquisition shall be of assets
                           ancillary, incidental or necessary to the retail sale
                           of apparel and related activities, or of 100% of the
                           stock of a corporation whose assets consist
                           substantially of such assets, or through the merger
                           of such a corporation with the Borrower (with the
                           Borrower as the surviving corporation), or with a
                           Subsidiary of the Borrower where, giving effect to
                           such merger, such corporation becomes a wholly-owned
                           Subsidiary of the Borrower; and
                                    (B) If such acquisition includes the
                           acquisition of assets by, or the merger of, the
                           Borrower, there shall have been no change in the
                           identity of the president, chief financial officer or
                           any executive vice president of the Borrower as a
                           consequence of such acquisition, or if there has been
                           such a change, the Lender shall have consented in
                           writing to such change in identity within thirty (30)
                           days thereafter (which consent shall not be
                           unreasonably withheld or delayed); and
                                    (C) If a new Subsidiary is formed or
                           acquired as a result of such Acquisition, such
                           Subsidiary shall execute documentation, reasonably
                           satisfactory in form and substance to the Agent,
                           guarantying payment and performance of the
                           Liabilities and granting a first lien, subject only
                           to Permitted Encumbrances, in its assets in favor of
                           the Agent, for the ratable benefit of the Lenders,

         "Permitted Encumbrances":  Those Encumbrances permitted as provided in
                  Section 4-6(a) hereof.

         "Person":   Any natural person, and any corporation, limited liability
                  company, trust, partnership, joint venture, or other
                  enterprise or entity.

         "Proceeds": Means "Proceeds" as defined in the UCC (defined below), and
                  each type of property described in Section 8-1 hereof.

         "Rating Service":  Either or both of Moody's Investors Services, Inc.
                  or Standard & Poor's Corporation.

         "Receipts":   All cash, cash equivalents, checks, and credit card slips
                  and receipts as arise out of the sale of the Collateral or any
                  collateral granted by the Borrower to the Agent.

         "Receivables Collateral": That portion of the Collateral which consists
                  of the Borrower's Accounts, Accounts Receivable, contract
                  rights, General Intangibles, Payment Intangibles, Letter of
                  Credit Rights, Chattel Paper, Instruments, Documents of Title,
                  Documents, Investment Property, letters of credit for the
                  benefit of the Borrower, and bankers' acceptances held by the
                  Borrower, and any rights to payment.

         "Related Entity": (a) Any corporation, limited liability company,
                  trust, partnership, joint venture, or other enterprise which:
                  is a parent, brother-sister, or Subsidiary, of the Borrower;
                  could have such enterprise's tax returns or financial
                  statements consolidated with the Borrower's; could be a member
                  of the same controlled group of corporations (within the
                  meaning of Section 1563(a)(1), (2) and (3) of the Internal
                  Revenue Code of 1986, as amended from time to time) of which
                  the Borrower is a member; controls or is controlled by the
                  Borrower or by any Affiliate of the Borrower.
                           (b)      Any Affiliate.

         "Requirement of Law":      As to any Person:
                           (a)(i) All statutes, rules, regulations, orders, or
                  other requirements having the force of law and (ii) all court
                  orders and injunctions, arbitrator's decisions, and/or similar
                  rulings, in each instance ((i) and (ii)) of or by any federal,
                  state, municipal, and other governmental authority, or court,
                  tribunal, panel, or other body which has or claims
                  jurisdiction over such Person, or any property of such Person,
                  or of any other Person for whose conduct such Person would be
                  responsible.
                           (b) That Person's charter, certificate of
                  incorporation, articles of organization, and/or other
                  organizational documents, as applicable; and (c) that Person's
                  by-laws and/or other instruments which deal with corporate or
                  similar governance, as applicable.

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

         "Reserve Percentage": The decimal equivalent of that rate applicable to
                  a Lender under regulations issued from time to time by the
                  Board of Governors of the Federal Reserve System for
                  determining the maximum reserve requirement of that Lender
                  with respect to "Eurocurrency liabilities" as defined in such
                  regulations. The Reserve Percentage applicable to a particular
                  LIBOR Loan shall be based upon that in effect during the
                  subject Interest Period, with changes in the Reserve
                  Percentage which take effect during such Interest Period to
                  take effect (and to consequently change any interest rate
                  determined with reference to the Reserve Percentage) if and
                  when such change is applicable to such loans. As of the date
                  hereof, the Agent acknowledges that the Reserve Percentage is
                  zero.

         "Revolving Credit":        Is defined in Section 2-1.

         "Revolving Credit Note":   Is defined in Section 2-7.

         "SEC":   The Securities and Exchange Commission.

         "Stated Amount":  The maximum amount for which an L/C may be honored.

         "Subsidiary": With respect to any Person, any corporation, partnership
                  or other entity of which securities or other ownership
                  interests having ordinary voting power to elect a majority of
                  the board of directors or other Persons performing similar
                  functions are at the time directly or indirectly owned by such
                  Person.

         "Supporting Obligation": Has the meaning given that term in UCC 9'99
                  and also refers to a Letter-of-Credit Right or secondary
                  obligation which supports the payment or performance of an
                  Account, Chattel Paper, a Document, a General Intangible, an
                  Instrument, or Investment Property.

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

         "Termination Date": The earliest of (a) the Maturity Date; or (b) the
                  occurrence of any event described in Section 10-12 hereof; or
                  (c) date set by notice by the Agent to the Borrower, which
                  notice sets the Termination Date on account of the occurrence
                  of any Event of Default other than as described in Section
                  10-12 hereof.

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

         "UCC9'99": The Uniform Commercial Code, Article 9, 1999 Official Text,
                  except that following the effectiveness, in Massachusetts, of
                  the revision of Article 9 of the Uniform Commercial Code
                  contemplated by UCC9'99 (with such nonuniform variations as
                  may be adopted as part of the enactment of that revision),
                  each reference to "UCC9'99" shall be to the UCC.

ARTICLE 2- THE REVOLVING CREDIT

     2-1. ESTABLISHMENT OF REVOLVING CREDIT.
          (a) The  Lenders  hereby  establish  a  revolving  line of credit (the
     "Revolving  Credit") in the Borrower's favor pursuant to which each Lender,
     subject to, and in accordance  with,  this  Agreement,  acting  through the
     Agent,  shall make  loans and  advances  and  otherwise  provide  financial
     accommodations  to and for the account of the Borrower as provided  herein,
     in  each  instance  equal  to  that  Lender's   Commitment   Percentage  of
     Availability,  up to the maximum amount of that Lender's Dollar Commitment.
     The amount of the Revolving  Credit shall be  reasonably  determined by the
     Agent by reference to Availability, as determined by the Agent from time to
     time  hereafter.  All  loans  made  under  this  Agreement,  and all of the
     Borrower's other  Liabilities,  are payable as provided herein.

          (b) As used herein, the term "Availability"  refers at any time to the
     lesser of (i) or (ii), below, where:

               (i)   Is the result of:
                      (A) The Loan Ceiling.
                      MINUS
                      (B) The then unpaid principal balance of the Loan Account.
                      MINUS
                      (C) The then aggregate of such Availability Reserves as
                      may have been established by the Agent as provided herein.
                      MINUS
                      (D) The then outstanding Stated Amount of all L/C's.

               (ii)    Is the result of:
                      (A) The lesser of (1) the Appraised Inventory Percentage
                      of the Appraised Inventory Liquidation Value, or (2) up
                      to the then applicable Inventory Advance Rate of the Cost
                      of Acceptable Inventory.
                      MINUS
                      (B) The then unpaid principal balance of the Loan Account.
                      MINUS
                      (C) The then aggregate of such Availability Reserves as
                      may have been established by the Agent as provided herein.
                      MINUS
                      (D) The then outstanding Stated Amount of all L/C's.

          (c)  Availability  shall be based  upon  Borrowing  Base  Certificates
     furnished as provided in Section 5-4 hereof.

          (d) The proceeds of  borrowings  under the  Revolving  Credit shall be
     used solely for working  capital  purposes of the  Borrower,  for Permitted
     Acquisitions, for redemption, retirement, purchase or acquisition of any of
     the Borrower's Capital Stock, and for Capital  Expenditures,  all solely to
     the extent permitted by this Agreement.

     2-2. ADVANCES IN EXCESS OF BORROWING BASE. No Lender has any obligation to
make any loan or advance, or otherwise to provide any credit for the benefit of
the Borrower such that the balance of the Loan Account exceeds the Borrowing
Base. The making of loans, advances, and credits and the providing of financial
accommodations in excess of the Borrowing Base is for the benefit of the
Borrower and does not affect the obligations of the Borrower hereunder; such
loans, advances, credits, and financial accommodations constitute Liabilities.
The making of any such loans, advances, and credits and the providing of
financial accommodations, on any one occasion such that the Borrowing Base is
exceeded shall not obligate any Lender to make any such loans, credits, or
advances or to provide any financial accommodation on any other occasion nor to
permit such loans, credits, or advances to remain outstanding.

     2-3. RISKS OF VALUE OF COLLATERAL. The Agent's reference to a given asset
in connection with the making of loans, credits, and advances and the providing
of financial accommodations under the Revolving Credit and/or the monitoring of
compliance with the provisions hereof shall not be deemed a determination by the
Agent or any Lender relative to the actual value of the asset in question. All
risks concerning the saleability of the Borrower's Inventory are and remain upon
the Borrower. All Collateral secures the prompt, punctual, and faithful
performance of the Liabilities whether or not relied upon by the Agent or by any
Lender in connection with the making of loans, credits, and advances and the
providing of financial accommodations under the Revolving Credit.

     2-4. LOAN REQUESTS.
          (a) Subject to the  provisions  of this  Agreement,  a loan or advance
     under the Revolving  Credit duly and timely requested by the Borrower shall
     be made by the Lenders pursuant hereto, provided that:
               (i) Borrowing Base will not be exceeded; and
               (ii)The  Revolving  Credit has not been  suspended  as
                    provided in Section 2-4(i).
          (b) Subject to the  provisions  of this  Agreement,  the  Borrower may
     request a Revolving  Credit Loan and elect an  interest  rate and  Interest
     Period to be applicable to that  Revolving  Credit Loan by giving the Agent
     written  notice or telephonic  notice  confirmed in writing (in the form of
     EXHIBIT 2-4 hereof) no later than the following:
               (i) If such Loan is or is to be converted to a Base Margin Loan:
                    By 11:30 AM on the Business Day on which the subject
                    Revolving Credit Loan is to be made or is to be so
                    converted.
`              (ii)  If such Loan is or is to be continued as a LIBOR Loan:
                    By 1:00 PM Three (3)  Business  Days  before the end of the
                    then applicable  Interest Period or before the day on which
                    such Loan is to be made.
               (iii) If such Loan is to be converted to a LIBOR Loan: By 1:00 PM
                    Three (3)Business Days before the day on which such
                    conversion is to take place.
          (c)  (i) Base Margin Loans and  conversions  to Base Margin Loans
      shall be in a minimum amount of $10,000.00 each.
               (ii) LIBOR Loans and conversions to LIBOR Loans shall each be not
                    less than $500,000.00 and in $500,000.00 increments in
                    excess of such minimum.
          (d) Any request for a Revolving Credit Loan or for the conversion of a
     Revolving Credit Loan which is made after the applicable deadline therefor,
     as set forth  above,  shall be deemed to have been made at the  opening  of
     business on the next  Business Day or LIBOR  Business  Day, as  applicable.
     Each  request  for a  Revolving  Credit  Loan  or for the  conversion  of a
     Revolving Credit Loan shall be made in such manner as may from time to time
     be acceptable to the Agent

          (e) If,  during the Sixty (60) days  immediately  preceding the day on
     which a loan request is made there has been no unpaid principal  balance in
     the Loan  Account  on  account of loans and  advances  under the  Revolving
     Credit,  the  loan  so  requested  shall  be  made  (subject  to all  other
     provisions of this  Agreement) no later than the Second  Business Day after
     (and not counting) the day on which the loan otherwise would have been made
     as provided above.

          (f) The  Borrower  may request  that the Agent  cause the  issuance of
     L/C's for the account of the Borrower as provided in Section 2-15.

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

          (h) A request by the Borrower for loan or advance,  or other financial
     accommodation  under the Revolving  Credit shall be  irrevocable  and shall
     constitute  certification  by the  Borrower  that  as of the  date  of such
     request, each of the following is true and correct:

               (i) There has been no material adverse change in the Borrower's
     financial condition from the most recent financial information furnished
     Agent or any Lender pursuant to this Agreement.

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

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

               (iv) No Suspension Event is then extant.

          (i) Upon the occurrence from time to time of any Suspension Event:

               (i) The Agent may suspend the Revolving Credit immediately.
               (ii) Neither the Agent nor any Lender shall be obligated, during
               such suspension,  to make any loans or  advance,  or to  provide
               any  financial accommodation hereunder or to seek the issuance
               of any L/C.

     2-5.  MAKING OF LOANS UNDER REVOLVING CREDIT.
          (a) A loan or advance under the Revolving  Credit shall be made by the
     transfer of the proceeds of such loan or advance to the Funding  Account or
     as otherwise instructed by the Borrower.

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

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

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

          (c) There shall not be any  recourse to or  liability  of the Agent or
     any Lender,  on account of any delay in the  receipt,  and/or any loss,  of
     funds which  constitute a loan or advance under the Revolving  Credit,  the
     wire  transfer of which was properly  initiated by the Agent in  accordance
     with wire instructions provided to the Agent by the Borrower.

     2-6.   THE LOAN ACCOUNT.
          (a) An account  ("Loan  Account")  shall be opened on the books of the
     Agent.  A record  shall be kept in the Loan Account of all loans made under
     or pursuant to this Agreement and of all payments thereon.

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

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

          (d) Except as otherwise  provided herein,  all fees,  service charges,
     costs,  and  expenses for which the  Borrower is  obligated  hereunder  are
     payable on demand. In the determination of Availability, the Agent may deem
     fees, service charges,  accrued interest, and other payments as having been
     advanced  under the Revolving  Credit  whether or not such amounts are then
     due and payable.

          (e) The Agent, without the request of the Borrower,  may advance under
     the Revolving Credit any interest, fee, service charge, or other payment to
     which the Agent or any Lender is entitled from the Borrower pursuant hereto
     and may  charge  the same to the Loan  Account  notwithstanding  that  such
     amount so advanced may result in  Borrowing  Base's  being  exceeded.  Such
     action  on the part of the  Agent  shall  not  constitute  a waiver  of the
     Agent's rights and Borrower's  obligations under Section 2-8(b). Any amount
     which is added to the principal  balance of the Loan Account as provided in
     this Section 2-6(e) shall bear interest.

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

     2-7. THE REVOLVING CREDIT NOTES. The obligation to repay loans and advances
under the Revolving Credit, with interest as provided herein, shall be evidenced
by Notes (each, a "Revolving Credit Note") in the form of EXHIBIT 2-7, annexed
hereto, executed by the Borrower, one payable to each Lender. Neither the
original nor a copy of any Revolving Credit Note shall be required, however, to
establish or prove any Liability. In the event that any Revolving Credit Note is
ever lost, mutilated, or destroyed, the Borrower shall execute a replacement
thereof and deliver such replacement to the Agent.

     2-8. PAYMENT OF THE LOAN ACCOUNT.
          (a) The Borrower may repay all or any portion of the principal balance
     of the Loan Account from time to time until the Termination Date.

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

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

     2-9. INTEREST.
          (a) Each Revolving Credit Loan shall bear interest  (determined  based
     on a 360 day year and actual  days  elapsed) at the Base Margin Rate unless
     timely  notice is given (as  provided in Section  2-4(a))  that the subject
     Revolving  Credit Loan (or a portion thereof) is, or is to be converted to,
     a LIBOR Loan.

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

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

          (d) The Borrower shall not select, renew, or convert any interest rate
     for a  Revolving  Credit  Loan  such that  there  are more  than  seven (7)
     Interest Periods applicable to the LIBOR Loans at any one time.

          (e) The  Borrower  shall  pay  accrued and unpaid interest on each
     Revolving Credit Loan in arrears
          (i)  On the applicable Interest Payment Date for that Revolving Credit
               Loan.
          (ii) On the Termination Date and on the End Date.
          (iii)Following  the  occurrence, and during the continuance, of any
               Event of Default, with such frequency as may be determined by the
               Agent.

          (f) Following the occurrence, and during the continuance, of any Event
     of  Default  (whether  or not the Agent  exercises  the  Agent's  rights on
     account  thereof),  all Revolving Credit Loans shall bear interest,  at the
     option of the Agent,  at the  aggregate  of the Base  Margin  Rate plus Two
     Percent (2%) per annum.  The Agent shall  furnish the Borrower  with prompt
     written  notice of the Agent's  election to  institute  the default rate of
     interest hereunder.

          (g)  In  addition,  in  the  event  of  the  occurrence  of any of the
     circumstances  described in Section 2-18 hereof, and during the continuance
     thereof,  each Revolving Credit Loan shall bear interest  (determined based
     on a 360 day year and actual days elapsed) at the Base Margin Rate.

     2-10.  COMMITMENT FEE; AGENT'S FEE.
          (a) As compensation for the commitment of Fleet Retail Finance Inc. to
     make  loans  and  advances  to the  Borrower  and as  compensation  for its
     maintenance of sufficient  funds  available for such purpose,  Fleet Retail
     Finance  Inc.  has earned a  Commitment  Fee (so referred to herein) at the
     times and in the  amounts as set forth in the Fee  Letter and an  Amendment
     Fee (so referred to herein) at the times and in the amounts as set forth in
     the Amendment Fee Letter.

          (b) As  compensation  for Fleet Retail Finance Inc.'s serving as Agent
     hereunder,  Fleet Retail Finance Inc. will earn an Agent's Fee (so referred
     to herein)  payable by the  Borrower at the times and in the amounts as set
     forth in the Fee Letter.

     2-11.  LINE FEE.
     In addition to any other fee by the Borrower on account of the Revolving
     Credit, the Borrower shall pay the Agent a Line (Unused) Fee (so referred
     to herein) in arrears, on the first day of each month (and on the
     Termination Date). The Line Fee shall be equal to 0.375% per annum of the
     average daily difference, during the month just ended (or relevant period
     with respect to the payment being made on the Termination Date), between
     the Loan Ceiling and the unpaid principal balance of the Loan Account.

     2-12.  EARLY TERMINATION FEE.
     In the event that the  Termination  Date occurs, for any reason, prior to
     November 30, 2002, the Borrower shall pay the Agent, for the benefit of the
     Lenders,  the Early  Termination  Fee (so  referred to herein) in an amount
     equal to (a) one percent (1%) of the Loan Ceiling if the  Termination  Date
     occurs prior to November 30, 2001,  or (b) one-half of one percent  (0.50%)
     of the Loan Ceiling if the Termination Date occurs on or after November 30,
     2001 and prior to November 30, 2002,  provided that, the Early  Termination
     Fee  shall be  waived  if the  Liabilities  are  refinanced  by a  facility
     furnished by Fleet Retail  Finance Inc. or any of its  Affiliates  (nothing
     herein being  deemed the  commitment  or agreement of Fleet Retail  Finance
     Inc. or any of its Affiliates to so refinance the Liabilities).

     2-13.  REGARDING FEES.
     The Borrower shall not be entitled to any credit, rebate or repayment of
     the Commitment Fee, Line (Unused) Fee, Early Termination Fee, Agent's Fee
     or other fee previously earned by the Agent or any Lender pursuant to this
     Agreement notwithstanding any termination of this Agreement or suspension
     or termination of the Agent's and any Lender's respective obligation to
     make loans and advances hereunder.

     2-14.  AGENT'S AND LENDERS' DISCRETION.
          (a) Each reference in the Loan Documents to the exercise of discretion
     or the like by the Agent or any Lender shall be to that  Person's  exercise
     of its  reasonable  judgement,  in good  faith,  based  upon that  Person's
     consideration  of any such factor as the Agent or that Lender,  taking into
     account  information  of  which  that  Person  then has  actual  knowledge,
     believes:

               (i)  Will or  reasonably  could be expected to affect the value
                    of the Collateral,  the  enforceability  of  the  Agent's
                    security and collateral interests therein, or the amount
                    which the Agent would likely realize therefrom (taking into
                    account delays which may possibly be encountered in the
                    Lender's realizing upon the Collateral and likely
                    Administrative Costs).
               (ii) Indicates that any report or financial information
                    delivered to the Agent or any Lender by or on behalf of the
                    Borrower is incomplete, inaccurate, or misleading in any
                    material manner or was not prepared in accordance with the
                    requirements of this Agreement.
               (iii)Would likely result in the Borrower's becoming the subject
                    of a bankruptcy or insolvency proceeding.
               (iv) Constitutes a Suspension Event.

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

               (i)  Those  included in, or tested by, the  definitions of
                    "Acceptable Inventory," "Retail," and "Cost".
               (ii) Material changes in or to the mix of the Borrower's
                    Inventory.
               (iii)Seasonality  with  respect to the Borrower's Inventory and
                    patterns of retail sales.
               (iv) Such other factors as the Agent and each Lender determines
                    as having a material bearing on credit risks associated with
                    the providing of loans and financial accommodations to the
                    Borrower.

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

     2-15.    PROCEDURES FOR ISSUANCE OF L/C'S.
          (a) The  Borrower  may request  that the Agent  cause the  issuance of
     L/C's for the account of the  Borrower.  Each such request shall be in such
     manner as may from time to time be acceptable to the Agent.

          (b) The Agent will cause the  issuance of any L/C so  requested by the
     Borrower,  provided  that , at the time  that  the  request  is  made,  the
     Revolving  Credit has not been  suspended as provided in Section 2-4(i) and
     if so issued:

          (i) The aggregate Stated Amount of all L/C's then  outstanding,  does
               not exceed Ten Million Dollars ($10,000,000.00).
          (ii)The  expiry of the L/C is not later  than the  earlier  of Thirty
               (30)  days  prior  to the  Maturity  Date  (unless  the  Borrower
               provides cash collateral reasonably acceptable to the Agent in an
               amount  equal to 103% of the  Stated  Amount of any L/C having an
               expiry after that date) or the following:
                    (A) Standby's: One (1) year from initial issuance.
                    (B) Documentary's: One Hundred (100) days from issuance.
          (iii)  Borrowing Base would not be exceeded.

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

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

          (i)  Any delay or refusal by an Issuer to issue an L/C;
          (ii) Any action or  inaction  of an Issuer on account of or in respect
               to, any L/C.

          (e) The Agent, without the request of the Borrower,  may advance under
     the  Revolving  Credit (and charge to the Loan  Account)  the amount of any
     honoring of any L/C and other amount for which the Borrower, the Issuer, or
     the Lenders become obligated on account of, or in respect to, any L/C. Such
     advance  shall be made whether or not a Suspension  Event is then extant or
     such advance would result in Borrowing  Base's being exceeded.  Such action
     shall not  constitute a waiver of the Agent's  rights under Section  2-8(b)
     hereof.

     2-16.  FEES FOR L/C'S.
          (a) The  Borrower  shall pay to the Agent a fee,  on account of L/C's,
     the issuance of which had been  procured by the Agent,  monthly in arrears,
     and on the Termination  Date and on the End Date, equal to 2 % per annum of
     the weighted  average  Stated  Amount of all L/C's  outstanding  during the
     period in respect of which such fee is being paid.

          (b) In  addition  to the  fee to be  paid as  provided  in  Subsection
     2-16(a),  above, the Borrower shall pay to the Agent (or to the Issuer,  if
     so requested by Agent), on demand, all issuance,  processing,  negotiation,
     amendment,  and administrative fees and other amounts charged by the Issuer
     on account of, or in respect to, any L/C.

     2-17.  CONCERNING L/C'S.
          (a) None of the Issuer, the Issuer's correspondents,  or any advising,
     negotiating, or paying bank with respect to any L/C shall be responsible in
     any way for:
               (i)  The  performance  by  any  beneficiary  under  any  L/C  of
                    that beneficiary's obligations to the Borrower.
               (ii) The form, sufficiency, correctness, genuineness, authority
                    of any person signing; falsification; or the legal effect
                    of; any documents called for under any L/C if (with respect
                    to the foregoing) such documents on their face appear to be
                    in order.

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

          (c)  Unless  otherwise  agreed  to, in the  particular  instance,  the
     Borrower hereby authorizes any Issuer to:
               (i)   Select an advising bank, if any.
               (ii)  Select a paying bank, if any.
               (iii) Select a negotiating bank.

          (d) All directions,  correspondence,  and funds transfers  relating to
     any L/C are at the risk of the Borrower.  The Issuer shall have  discharged
     the Issuer's  obligations  under any L/C which, or the drawing under which,
     includes payment  instructions,  by the initiation of the method of payment
     called for in, and in accordance  with, such  instructions (or by any other
     commercially  reasonable and  comparable  method).  None of the Agent,  any
     Lender,  nor the Issuer shall have any  responsibility  for any inaccuracy,
     interruption,  error,  or  delay  in  transmission  or  delivery  by  post,
     telegraph or cable, or for any inaccuracy of translation.

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

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

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

               (i)  impose, modify or deem applicable any reserve, special
                    deposit or similar requirements against letters of credit
                    heretofore or hereafter issued by any Issuer or with respect
                    to which the Agent, any Lender or any Issuer has an
                    obligation to lend to fund drawings under any L/C; or
               (ii) impose on any Issuer any other condition or requirements
                    relating to any such letters of credit;

and the result of any event referred to in Section 2-17(g)(i) or 2-17(g)(ii),
above, shall be to increase the cost to any Issuer of issuing or maintaining
any L/C (which increase in cost shall be the result of such Issuer's reasonable
allocation among that Issuer's letter of credit customers of the aggregate of
such cost increases resulting from such events), then, upon demand by the Agent
and delivery by the Agent to the Borrower of a certificate of an officer of the
subject Issuer describing such change in law, executive order, regulation,
directive, or interpretation thereof, its effect on such Issuer, and the basis
for determining such increased costs and their allocation, the Borrower shall
immediately pay to the Agent, from time to time as reasonably specified by the
Agent, such amounts as shall be sufficient to compensate such Issuer for
such increased cost. Any Issuer's determination of costs incurred under
Section 2-17(g)(i) or 2-17(g)(ii), above, and theallocation, if any, of
such costs among the Borrower and other letter of credit customers of such
Issuer, if done in good faith and made on an equitable basis and in
accordance with such officer's certificate, shall be conclusive and binding on
the Borrower.

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

            (i)     Any lack of validity or enforceability or restriction,
                    restraint, or stay in the enforcement of this Agreement, any
                    L/C, or any other agreement or instrument relating thereto.
            (ii)    Any amendment or waiver of, or consent to the departure
                    from, any L/C.
            (iii)   The existence of any claim, set-off, defense, or other right
                    which the Borrower may have at any time against the
                    beneficiary of any L/C.
            (iv)    Any good faith honoring of a drawing under any L/C, which
                    drawing possibly could have been dishonored based upon a
                    strict construction of the terms of the L/C.

     2-18.  CHANGED CIRCUMSTANCES.
          (a) The Agent may give the Borrower  notice of the  occurrence  of the
     following:
               (i) The Agent shall have determined in good faith on any day on
                   which the rate for a LIBOR Loan would otherwise be set, that,
                   by reason of changes affecting the London interbank market,
                   adequate and fair means do not exist for ascertaining such
                   rate on the basis provided for in the definition of LIBOR
                   Offer Rate.
               (ii)The Agent shall have determined in good faith that:

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

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

          (b) In the  event  that the  Agent  gives  the  Borrower  notice of an
     occurrence described in Section 2-18(a), then, until the Agent notifies the
     Borrower that the circumstances giving rise to such notice no longer apply:

               (i) The  obligation of the Agent and of each Lender to make
                   LIBOR Loans of the type affected by such changed
                   circumstances or to permit the Borrower to select the
                   affected interest rate as otherwise applicable to any
                   Revolving Credit Loans shall be suspended.
               (ii)Any notice which the Borrower had given the Agent with
                   respect to any LIBOR Loan, the time for action with respect
                   to which has not occurred prior to the Agent's having given
                   notice pursuant to Section  2-18(a), shall be deemed at the
                   option of the Agent to not having been given and such loan
                   shall be made or continued as, or converted into, as
                   appropriate, a Base Margin Loan.
               (iii)Subject to the  provisions of Section 2-11, the Borrower may
                   (and shall, with respect to the occurrence of any event
                   described in Section 2-18(a)(ii)), cancel the relevant
                   borrowing or conversion notice on the same date the Borrower
                   was notified of such event, or if the LIBOR Loan is then
                   outstanding, prepay the affected LIBOR Loan.

     2-19.   INCREASED COSTS.
     If, as a result of any requirement of law, or of the interpretation or
application thereof by any court or by any governmental or other authority or
entity charged with the administration thereof, whether or not having the force
of law, which:

          (a) subjects any Lender to any taxes or changes the basis of taxation,
     or increases  any existing  taxes,  on payments of  principal,  interest or
     other amounts payable by the Borrower to the Agent or any Lender under this
     Agreement (except for taxes on the Agent or any Lender's overall net income
     or capital imposed by the  jurisdiction in which the Agent or that Lender's
     principal or lending offices are located);

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

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

          (d)  imposes on any  Lender a  requirement  to  maintain  or  allocate
     capital  in  relation  to the  Liabilities;  and the  result  of any of the
     foregoing,  in such Lender's reasonable opinion, is to increase the cost to
     that  Lender of making  or  maintaining  any  loan,  advance  or  financial
     accommodation or to reduce the income  receivable by such Lender in respect
     of any loan, advance or financial accommodation by an amount which the such
     Lender deems to be material, then the Agent shall furnish the Borrower with
     written notice of any event entitling any Lender to compensation  hereunder
     (a "Change Notice"). Thereafter, upon ten (10) days written notice from the
     Agent,  from  time to time,  to the  Borrower  (such  notice  to set out in
     reasonable  detail the facts  giving rise to and a summary  calculation  of
     such  increased  cost or reduced  income),  the  Borrower  shall pay to the
     Agent,  for the benefit of the  subject  Lender,  that  amount  which shall
     compensate  the subject  Lender for such  additional  cost or  reduction in
     income accruing after the date of the Change Notice.

     2-20.   LENDERS' COMMITMENTS.
          (a) The  obligations  of each  Lender are  several  and not joint.  No
     Lender  shall have any  obligation  to make any loan or  advance  under the
     Revolving Credit in excess of the lesser of
               (i) that Lender's Commitment Percentage of the subject loan or
                   advance or of Availability; or
               (ii)that Lender's Dollar Commitment,

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

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

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

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

               (iii) Unless an Event of Default has occurred and is continuing
               (in which event, no consent of the Borrower is required), any
               appointment  of an agent for the  Lenders  to  replace  the Agent
               shall be subject to the prior  consent of the Borrower (not to be
               unreasonably withheld), which consent will be deemed given unless
               the Borrower provides the Agent with written objection,  not more
               than five (5) Business  Days after the Agent shall have given the
               Borrower written notice of such proposed replacement.

          (d) Upon written  notice given the Borrower from time to time by the
     Agent, of any assignment or allocation referenced in Section 2-20(c):

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

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

          (e)  The  Borrower   recognizes  that  the  Agent's  exercise  of  any
     discretion  accorded  to the  Agent  herein  and of its  rights,  remedies,
     powers, privileges, and discretions with respect to the Borrower is subject
     to a certain  Agency  Agreement  amongst  the Agent  and the  Lenders.  The
     provisions of the Agency Agreement relating to voting rights of the Lenders
     shall be subject to the approval of the Borrower,  which approval shall not
     be unreasonably  delayed or withheld.  The Borrower  acknowledges  that the
     Borrower's  approval of the voting rights shall be deemed  furnished if the
     voting rights provisions  described in EXHIBIT 2-20 hereto are incorporated
     in the Agency Agreement.

ARTICLE 3- CONDITIONS PRECEDENT.

         As a condition to the effectiveness of this Agreement, the
establishment of the Revolving Credit, and the making of the first loan under
the Revolving Credit, each of the documents respectively described in Sections
3-1 through and including 3-6, (each in form and substance reasonably
satisfactory to the Agent) shall have been delivered to the Agent, and the
conditions respectively described in Sections 3-7 through and including 3-11,
shall have been satisfied:

     3-1.  CORPORATE DUE DILIGENCE.
     A Certificate of each Obligor's Secretary of the due adoption,
continued effectiveness, and setting forth the texts of, each corporate
resolution adopted in connection with the establishment of the loan arrangement
contemplated by the Loan Documents and attesting to the true signatures of each
Person authorized as a signatory to any of the Loan Documents.

     3-2. OPINION.
     An opinion of counsel to the Obligors in form and substance reasonably
satisfactory to the Agent .

     3-3. [Intentionally Omitted]

     3-4. GUARANTORS.
     Each Guarantor shall have (a) executed and delivered to the
Agent and the Lenders its guaranty of the Liabilities, and (b) granted the Agent
for the ratable benefit of the Lenders, a first lien on all of its assets, and
(c) shall have executed such other documents and undertaken such other action as
the Agent may have reasonably requested.

     3-5. ADDITIONAL DOCUMENTS.
     Such additional instruments and documents as the Agent or its counsel
reasonably may require or request, including, without limitation an
Intercreditor and Subordination Agreement with Winthrop Resources,Inc.

     3-6. OFFICERS' CERTIFICATES.
     Certificates executed on behalf of the Borrower by the President and the
Chief Financial Officer of the Borrower and stating that the representations
and warranties made by the Borrower to the Agent and the Lenders in the Loan
Documents are true and complete in all material respects as of the date of such
Certificate, and that no event has occurred which is or which, solely with the
giving of notice or passage of time (or both) would be an Event of Default.

     3-7. REPRESENTATIONS AND WARRANTIES.
Each of the representations made by or on behalf of the Obligors in this
Agreement or in any of the other Loan Documents or in any other report,
statement, document, or paper provided by or on behalf of the Obligors shall be
true and complete in all material respects as of the date as of which such
representation or warranty was made.

     3-8. Intentionally Omitted.

     3-9. ALL FEES AND EXPENSES PAID.
All fees due at or immediately after the first funding under the Revolving
Credit and all costs and expenses incurred by the Agent in connection with the
establishment of the credit facility contemplated hereby (including the fees
and expenses of counsel to the Agent) shall have been paid.

     3-10. NO SUSPENSION EVENT.
     No Suspension Event shall then exist.

     3-11. NO ADVERSE CHANGE.
     No event shall have occurred or failed to occur, which occurrence or
failure is or could have a materially adverse effect upon the Borrower's
financial condition when compared with such financial condition at the fiscal
month ended September 30, 2000.

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

ARTICLE 4- GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS

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

     4-1.  PAYMENT AND PERFORMANCE OF LIABILITIES.     The Borrower shall pay
each Liability when due (or when demanded if payable on demand) and shall
promptly, punctually, and faithfully perform each other Liability.

     4-2.  DUE ORGANIZATION - Corporate Authorization - No Conflicts.

          (a) The  Borrower  presently  is and  shall  hereafter  remain in good
     standing as a Delaware  corporation and is and shall hereafter  remain duly
     qualified and in good standing in every other State in which,  by reason of
     the  nature  or  location  of the  Borrower's  assets or  operation  of the
     Borrower's business, such qualification may be necessary,  except where the
     failure  to so  qualify  would not have a  material  adverse  effect on the
     Borrower's business, assets or financial condition.

          (b) Each Related Entity is listed on EXHIBIT 4-2, annexed hereto. Each
     Related Entity is and shall hereafter  remain in good standing in the State
     in which  incorporated  and is and shall hereafter remain duly qualified in
     which  other  State in  which,  by reason  of that  entity's  assets or the
     operation of such entity's  business,  such qualification may be necessary,
     except  where the failure to so qualify  would not have a material  adverse
     effect on the Related  Entity's  business,  assets or financial  condition,
     provided that, the Borrower may dissolve any Related Entity if

          (i)  upon such  dissolution,  all of such Related  Entity's assets are
               transferred to the Borrower and
          (ii) as a result of such dissolution, the Borrower does not, expressly
               or by operation of law,  assume any  liabilities  of such Related
               Entity that would,  in  accordance  with GAAP,  be  classified as
               liabilities,  whether absolute or contingent,  and whether or not
               they would be reflected on a balance  sheet and the notes thereto
               of the  Borrower,  unless the Agent shall have  consented  to the
               assumption of such  liabilities.  The Borrower  shall provide the
               Agent with  prior  written  notice of any  entity's  becoming  or
               ceasing to be a Related Entity.

          (c) Each Obligor has all  requisite  corporate  power and authority to
     execute and deliver all Loan Documents to which such Obligor is a party and
     has and will hereafter retain all requisite  corporate power to perform all
     Liabilities.

          (d) The  execution  and delivery by each Obligor of each Loan Document
     to which it is a party;  the  Obligor's  consummation  of the  transactions
     contemplated by such Loan Documents  (including,  without  limitation,  the
     creation of security  interests  by the Obligors as  contemplated  hereby);
     each Obligor's performance under those of the Loan Documents to which it is
     a party; the borrowings hereunder; and the use of the proceeds thereof:

               (i)  Have been duly authorized by all necessary corporate action.
               (ii) Do not, and will not, contravene in any material respect any
                    provision of any Requirement of Law or obligation of the
                    Obligors.
               (iii)Will not result in the creation or imposition of, or the
                    obligation to create or impose, any Encumbranc upon any
                    assets of the Obligors pursuant to any Requirement of Law
                    or obligation, except pursuant to the Loan Documents.

          (e) The Loan  Documents  have  been duly  executed  and  delivered  by
     Obligors and are the legal, valid and binding  obligations of the Obligors,
     enforceable against the Obligors in accordance with their respective terms,
     except as enforceability may be limited by bankruptcy, insolvency, or other
     laws  relating to or affecting  generally  the  enforcement  of  creditors'
     rights  and  except to the extent  that the  availability  of the remedy of
     specific  performance or injunctive  relief is subject to the discretion of
     the court before which any proceeding therefor may be brought.

          (f) The Borrower's  respective  organizational  identification  number
     assigned to it by the State of its incorporation and its respective federal
     employer  identification  number is stated on EXHIBIT 4-2,  annexed hereto.
     The Borrower shall not change its State of organization; any organizational
     identification  number  assigned to the  Borrower  by that  State;  or that
     Borrower's federal taxpayer identification number.

     4-3. TRADE NAMES.
          (a) EXHIBIT 4-3, annexed hereto, is a listing of:

               (i) All names under which the Borrower conducted its business
                   within the past five (5) years.
               (ii)All entities and/or persons with whom within the past five
                   (5)years the Borrower consolidated or merged, or from whom
                   within the past five (5) years the Borrower acquired in a
                   single transaction or in a series of related transactions
                   substantially all of such entity's or person's assets.

          (b) Except  (i) upon not less than  fifteen  (15) days  prior  written
     notice given the Agent , and (ii) in compliance  with all other  provisions
     of this  Agreement,  the Borrower will not undertake or commit to undertake
     any action such that the results of that action, if undertaken prior to the
     date of this Agreement, would have been reflected on EXHIBIT 4-3.

     4-4. INFRASTRUCTURE.
          (a) To the Obligors' knowledge, except as set forth in EXHIBIT 4-4(b),
     the Obligors own and possess,  or have the right to use (and will hereafter
     own, possess,  or have such right to use) all patents,  industrial designs,
     trademarks,  trade names, trade styles,  brand names, service marks, logos,
     copyrights,  trade secrets, know-how,  confidential information,  and other
     intellectual or proprietary property of any third Person necessary for each
     Obligor's conduct of its business.

          (b) To the  Obligors'  knowledge,  the conduct by the  Obligors of the
     Obligors'  business  does not  presently  infringe  (nor will the  Obligors
     conduct  their  business  in the  future so as to  infringe)  the  patents,
     industrial  designs,  trademarks,  trade names, trade styles,  brand names,
     service marks, logos,  copyrights,  trade secrets,  know-how,  confidential
     information,  or other  intellectual  or proprietary  property of any third
     Person.

     4-5. LOCATIONS.
          (a) The  Collateral,  and the books,  records,  and papers of Borrower
     pertaining thereto,  are kept and maintained solely at the Borrower's chief
     executive offices at

          (i) 66 B Street, Needham, Massachusetts 02194; and
          (ii)those locations which are listed on EXHIBIT 4-5,  annexed hereto,
               which EXHIBIT includes,  with respect to each such location,  the
               name and address of the  landlord on the Lease which  covers such
               location (or an  indication  that the  Borrower  owns the subject
               location) and of all service  bureaus with which any such records
               are maintained.

          (b) The  Borrower  shall not  remove any of the  Collateral  from said
     chief executive office or those locations listed on EXHIBIT 4-5 except to

          (i)  accomplish sales of Inventory in the ordinary course of business;
          (ii) move Inventory from one such location to another such location;
          (iii)utilize such of the Collateral as is removed from such locations
               in the ordinary course of business (such as motor vehicles).
          (iv) return Inventory to the Borrower's  suppliers  in the ordinary
               course of business, consistent with the Borrower's past
               practices;
          (v)  move  Inventory  to  third  parties  to  complete  alterations
               thereon; or
          (vi) move Inventory and other Collateral to a new store or warehouse,
               provided the Borrower  furnishes the Agent with at least ten (10)
               days prior notice thereof.

          (c) The Obligors will not execute,  alter,  modify, or amend any Lease
     other  than  in the  ordinary  course  of  business  and not  otherwise  in
     violation of this  Agreement;  provided that

          (i)  no such amendment shall result in any Obligor's granting a
               landlord an Encumbrance on any of the Obligors' assets; and
          (ii) the Borrower shall not execute, alter, modify or amend any Lease,
               whether or not in the ordinary course of business,  without first
               furnishing  the Agent  with ten (10) days  prior  notice  thereof
               (provided  that no such  notice  need be  furnished  if the  sole
               purpose of the  amendment is to extend the term of the Lease) and
               using its best efforts to obtain a landlord's  waiver in favor of
               the Agent, in form reasonably satisfactory to the Agent.

          (d) None of the Obligors  shall cease the conduct of business from any
     of their present or future  locations  without first  furnishing  the Agent
     with at least ten (10) days prior notice thereof.

          (e) Except as otherwise  disclosed  pursuant to, or permitted by, this
     Section 4-5, no tangible  personal  property of any Obligor of more than de
     minimis  value is in the care or  custody  of any third  party or stored or
     entrusted  with a bailee or other  third party and no property of more than
     de minimis  value  shall  hereafter  be placed  under  such care,  custody,
     storage, or entrustment.

     4-6.  TITLE TO ASSETS.
          (a) The  Borrower  is, and shall  hereafter  remain,  the owner of the
     Collateral  free and clear of all  Encumbrances  with the exceptions of the
     following (the "Permitted Encumbrances"):
          (i)   Encumbrances in favor of the Agent.
          (ii)  Those Encumbrances  (if any) listed on EXHIBIT 4-6, annexed
                hereto.
          (iii) Encumbrances for taxes, assessments or other governmental
                charges which are being contested in good faith by appropriate
                proceedings, and for which adequate reserves are being
                maintained, as to which no Encumbrance which may have priority
                over the Agent's Encumbrance shall have arisen.
          (iv)  Statutory liens of carriers, warehousemen, mechanics,
                materialmen, repairmen, landlords, and others arising in the
                ordinary course of business for sums not overdue, or which are
                being contested in good faith by appropriate proceedings.
          (v)   Liens incurred or deposits or pledges  made in  connection with
                worker's compensation, health or unemployment insurance, social
                security laws, or similar legislation or in connection with or
                to secure the payment or performance of  bids, tenders, sale
                agreements, leases, trade agreements,  statutory  obligations or
                surety bonds, or other liens  incidental to the ordinary conduct
                of its  business or the  ownership  of its  property and assets,
                which are not incurred  in  connection  with the borrowings of
                money; or judgment liens in proceedings which are being appealed
                and with  respect to which there has been a stay of  execution;
                provided  that  all of  the  foregoing  do  not in the aggregate
                materially  adversely affect the value of its property or assets
                or impair the use thereof in the  operation  of the Borrower's
                business.
          (vi)  Encumbrances on property hereafter acquired   (either  in
                connection with purchase money mortgages, rental  purchase
                agreements, including capital leases, or conditional  sale or
                other title retention  agreements), which are restricted to the
                property so acquired and do not secure Indebtedness exceeding
                the fair value (at the time of acquisition) thereof.
          (vii) Easements, rights of way, restrictions, minor defects,
                encroachments  or  irregularities in title and other similar
                charges or encumbrances  not interfering in any material respect
                with the ordinary conduct of the business of the Borrower or any
                of its Related Entities.
          (viii)License agreements pursuant to which the Borrower licenses any
                of its trademarks, trade names, service marks, trade dress, or
                other intellectual property.

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

          (c) The  Borrower  shall not  acquire  or obtain  the right to use any
     Equipment,  the acquisition or right to use of which Equipment is otherwise
     permitted  by this  Agreement,  in which  Equipment  any third party has an
     interest, except for:

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

     4-7.  INDEBTEDNESS. The Obligors do not and shall not hereafter have any
Indebtedness with the exceptions of:
          (a)      Any Indebtedness to the Lenders .
          (b)      The Indebtedness (if any) listed on EXHIBIT 4-7, annexed
                   hereto.
          (c)      Any Indebtedness secured by Permitted Encumbrances.

     4-8. INSURANCE POLICIES.
          (a)  EXHIBIT  4-8,  annexed  hereto,  is a schedule  of all  insurance
     policies  owned by the  Obligors or under which any of the  Obligors is the
     named insured. To the Obligors' knowledge, each of such policies is in full
     force and effect.  To the  Obligors'  knowledge,  neither the issuer of any
     such policy nor any Obligor is in default or violation of any such policy.

          (b) The  Obligors  shall  have and  maintain  at all  times  insurance
     covering such risks, in such amounts,  containing such terms, in such form,
     for such  periods,  and  written  by such  companies  as may be  reasonably
     satisfactory to the Agent . The coverage reflected on EXHIBIT 4-8 presently
     satisfies the foregoing requirements,  it being recognized by the Borrower,
     however,  that such  requirements  may change hereafter to reflect changing
     circumstances.  All insurance  carried by the Obligors  shall provide for a
     minimum of Ten (10) days' written notice of  cancellation  to the Agent due
     to  non-payment  of  premiums,  and  Thirty  (30) days'  written  notice of
     cancellation  to the  Agent  in  all  other  circumstances,  and  all  such
     insurance which covers the Collateral shall include an endorsement in favor
     of the Agent,  which endorsement  shall provide that the insurance,  to the
     extent  of  the  Agent's  interest  therein,   shall  not  be  impaired  or
     invalidated,  in whole or in part,  by reason of any act or  neglect of any
     Obligor or by the  failure of any  Obligor to comply  with any  warranty or
     condition  of the policy.  In the event of the  failure by the  Obligors to
     maintain  insurance  as required  herein,  the Agent , at its  option,  may
     obtain such insurance,  provided,  however,  the Agent's  obtaining of such
     insurance  shall not  constitute  a cure or waiver of any Event of  Default
     occasioned by the Obligors' failure to have maintained such insurance.  The
     Borrower  shall  furnish  to  the  Agent  certificates  or  other  evidence
     satisfactory  to the Agent  regarding  compliance  by the Obligors with the
     foregoing insurance provisions.

          (c) The  Borrower  shall  advise  the Agent of each claim in excess of
     $500,000.00 made by the Borrower under any policy of insurance which covers
     the Collateral.  Following the  acceleration of the time for payment of the
     Liabilities,  the Borrower will permit the Agent , at the Agent's option in
     each instance,  to the exclusion of the Borrower, to conduct the adjustment
     of all  claims  regardless  of the  amount  thereof.  The  Borrower  hereby
     appoints the Agent as the  Borrower's  attorney in fact to obtain,  adjust,
     settle,  and cancel any insurance  described in this section and to endorse
     in favor of the Agent any and all drafts and other instruments with respect
     to such insurance.  This  appointment,  being coupled with an interest,  is
     irrevocable  until this  Agreement is  terminated  by a written  instrument
     executed by a duly authorized officer of the Agent . The Agent shall not be
     liable on account of any  exercise  pursuant  to said power  except for any
     exercise with gross  negligence  or in actual  willful  misconduct  and bad
     faith.  The Agent may apply any  proceeds  of such  insurance  against  the
     Liabilities, whether or not such have matured, in such order of application
     as the Agent may determine.

     4-9. LICENSES. Each license, distributorship,franchise, and similar
     agreement issued to, or to which any Obligor is a party is in full force
     and effect. To the Obligors' knowledge, no party to any such license or
     agreement is in default or violation thereof. The Obligors have not
     received any notice of cancellation of any such license or agreement.

     4-10.LEASES. EXHIBIT 4-10, annexed hereto, is a schedule of all presently
effective Capital Leases. EXHIBIT 4-5 includes a list of the locations of
properties that are the subject of all other presently effective Leases. To the
Obligors' knowledge, each of such Leases and Capital Leases is in full force and
effect. To the Obligors' knowledge, no party to any such Lease or Capital Lease
is in default or violation of any such Lease or Capital Lease, and the Obligors
have not received any notice of cancellation of any such Lease or Capital Lease.
The Obligors hereby authorize the Agent at any time and from time to time after
the occurrence, and during the continuance, of an Event of Default to contact
any of the Obligor's landlords in order to confirm the Obligor's continued
compliance with the terms and conditions of the Lease(s) between such Obligor
and that landlord and to discuss such issues, concerning the Obligor's occupancy
under such Lease(s), as the Agent may determine.

     4-11. REQUIREMENTS OF LAW. The Obligors are in compliance with, and shall
hereafter comply with and use their assets in compliance with, all Requirements
of Law, except where such non-compliance would not have a material adverse
effect on the Borrower, its business or assets. The Obligors have not received
any notice of any violation of any Requirement of Law (whether or not such
violation is material), which violation has not been cured or otherwise
remedied.

     4-12. MAINTAIN PROPERTIES. The Borrower shall:
          (a) Keep the Collateral in good order and repair (ordinary  reasonable
     wear and tear and insured casualty excepted).
          (b) Not suffer or cause the waste or  destruction of any material part
     of the Collateral.
          (c)  Not use any of the  Collateral  in  violation  of any  policy  of
     insurance thereon.
          (d) Not sell,  lease,  or otherwise  dispose of any of the Collateral,
     other than the following:
          (i)   The sale of Inventory in compliance with this Agreement.
          (ii)  The  disposal of Equipment which is obsolete, worn out, or
                damaged beyond repair, which Equipment is replaced to the extent
                necessary to preserve or improve the operating  efficiency of
                the Borrower.
          (iii) The turning over to the Agent of all Receipts as provided
                herein.
          (iv)  The sale, liquidation or other disposition of Inventory at any
                locations from which the Borrower determines to cease the
                conduct of its business, provided that such sales, liquidations,
                or other dispositions shall be on terms reasonably satisfactory
                to the Agent (whose consent shall not be unreasonably delayed or
                withheld), and further provided that notwithstanding the Agent's
                furnishing of any such consent, the Agent may, in the exercise
                of its reasonable discretion, impose Inventory Reserves, as a
                result of the occurrence of any such sale, liquidation, or
                disposition.

     4-13. PAY TAXES.
          (a) Except as  described  EXHIBIT  4-13,  the  Borrower  has filed all
     material tax returns and reports (federal,  state and local) required to be
     filed  by  it,  and  paid  all  material   taxes,   assessments  and  other
     governmental  charges  imposed upon it and its  property and assets,  other
     than (i) such as are presently  payable without  interest or penalty,  (ii)
     such as are being contested in good faith by appropriate  proceedings,  and
     for which adequate  reserves are being  maintained in accordance with GAAP,
     or (iii) with  respect to local  taxes,  such  local  taxes  payable by the
     Borrower  which (A) the chief  financial  officer  of the  Borrower  has no
     knowledge of the  Borrower's  obligation  to pay and (B) the failure to pay
     does not have a material adverse effect on the business,  property,  assets
     or condition,  financial or otherwise, of the Borrower. Except as described
     on EXHIBIT  4-13,  the federal  income tax returns of the Borrower have not
     been audited by the Internal  Revenue  Service within the last three years,
     all prior  audits have been  closed,  and there are no unpaid  assessments,
     penalties  or other  charges  arising  from such  prior  audits.  Except as
     described on EXHIBIT  4-13,  no agreement is extant which waives or extends
     any statute of limitations  applicable to the right of the Internal Revenue
     Service or any state taxing  authority  to assert a deficiency  or make any
     other claim for or in respect to federal or state taxes.  No issue has been
     raised in any  examination  which,  by application  of similar  principles,
     reasonably could be expected to result in the assertion of a deficiency for
     any fiscal year open for examination,  assessment, or claim by the Internal
     Revenue Service or any state taxing authority.

          (b)Except  as set forth in Section  4-6(a)(iii)  hereof,  the Borrower
     hereafter  shall:  pay,  as they  become  due and  payable,  all  taxes and
     unemployment  contributions and other charges of any kind or nature levied,
     assessed or claimed against the Obligors or the Collateral by any person or
     entity  whose claim could  result in an  Encumbrance  upon any asset of any
     Obligor  or by any  governmental  authority;  properly  exercise  any trust
     responsibilities  imposed upon the Obligors by reason of  withholding  from
     employees' pay or by reason of any Obligor's  receipt of sales tax or other
     funds for the account of any third party; timely make all contributions and
     other payments as may be required pursuant to any Employee Benefit Plan now
     or hereafter  established by any Obligor; and timely file all tax and other
     returns and other  reports  with each  governmental  authority  to whom any
     Obligor is obligated to so file.

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

     4-14. NO MARGIN STOCK.
     The Obligors are not engaged in the business of extending  credit for the
     purpose of purchasing or carrying any margin stock (within the meaning of
     Regulations G,U,T, and X of the Board of Governors of the Federal Reserve
     System of the United  States). Except as permitted elsewhere in this
     Agreement, no part of the proceeds of any borrowing hereunder will be used
     at any time to purchase or carry any such margin  stock or to extend credit
     to others for the purpose of purchasing or carrying any such margin stock.

     4-15. ERISA.  Neither the Borrower nor any ERISA Affiliate:
          (a) Is in violation of or hereafter  shall  violate,  or has failed or
     hereafter  shall fail to be in material  compliance  with,  the  Borrower's
     Employee Benefit Plan.
          (b) Has failed or hereafter  shall fail timely to file all reports and
     filings required by ERISA to be filed by the Borrower.
          (c)  Has  engaged  or  hereafter   shall  engage  in  any  "prohibited
     transactions" or "reportable events" (respectively as described in ERISA).
          (d) Has engaged or hereafter shall engage in, or commit,  any act such
     that a tax or penalty could be imposed upon the Borrower on account thereof
     pursuant to ERISA.
          (e) Has accumulated or hereafter shall accumulate any material funding
     deficiency within the meaning of ERISA.
          (f) Has terminated or hereafter shall  terminate any Employee  Benefit
     Plan such that a lien could be asserted  against any assets of the Borrower
     on account thereof pursuant to ERISA.
          (g) Is or hereafter  shall be a member of,  contribute to, or have any
     obligation  under any Employee  Benefit Plan which is a multiemployer  plan
     within the meaning of Section 4001(a) of ERISA.

     4-16. HAZARDOUS MATERIALS.
     (a)      The Obligors have never:
          (i)  been legally  responsible for any release or threat of release of
               any Hazardous Material; or
          (ii) received  notification of any release or threat of release of any
               Hazardous  Material from any site or vessel  occupied or operated
               by any Obligor and/or of the incurrence of any expense or loss in
               connection  with the assessment,  containment,  or removal of any
               release or threat of release of any  Hazardous  Material from any
               such site or vessel.

     (b)      The Obligors shall:
          (i)  dispose of any Hazardous  Material  only in  compliance  with all
               Environmental Laws in all material respects; and
          (ii) not  store on any site or  vessel  occupied  or  operated  by any
               Obligor and not  transport  or arrange for the  transport  of any
               Hazardous Material, except if such storage or transport is in the
               ordinary  course of such Obligor's  business and is in compliance
               with all Environmental Laws in all material respects.

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

     4-17.  LITIGATION.  Except as described in EXHIBIT  4-17,  annexed  hereto,
there is not presently pending or threatened by or against any Obligor any suit,
action,  proceeding,  or  investigation  which, if determined  adversely to such
Obligor,  would have a material  adverse  effect  upon the  Obligors'  financial
condition  or ability to conduct  their  business as such  business is presently
conducted or is contemplated to be conducted in the foreseeable future.

     4-18.  DIVIDENDS OR INVESTMENTS. The Obligors shall not:

          (a) Pay any cash dividend or make any other distribution in respect of
     any class of the Borrower's capital stock.
          (b) Redeem, retire, purchase, or acquire any of the Borrower's capital
     stock involving the expenditure of cash after the date of this Agreement at
     any time that a Suspension Event has occurred and is continuing.
          (c)  Invest  in or  purchase  any  stock or  securities  or  rights to
     purchase any such stock or securities,  of any corporation or other entity,
     other than (i) Permitted Acquisitions,  and (ii) other Eligible Investments
     provided that no Revolving  Credit Loans are then outstanding and each such
     Eligible Investment is pledged to the Agent to secure the Liabilities).
          (d) Except as  permitted  pursuant to Section  4-19  hereof,  merge or
     consolidate or be merged or consolidated with or into any other corporation
     or other entity.
          (e) Except as permitted  pursuant to Section 4-19 hereof,  consolidate
     any of the  Borrower's  operations  with those of any other  corporation or
     other entity.
          (f) Organize or create any Related  Entity,  other than in  connection
     with a Permitted  Acquisition  and in  compliance  with the  provisions  of
     Section 4-19(e) hereof.
          (g) Subordinate  any debts or obligations  owed to the Borrower by any
     third party to any other debts owed by such third party to any other Person
     other  than  subordination,   attornment,  and  non-disturbance  agreements
     required pursuant to any Leases.
          (h) Except as permitted  pursuant to Section 4-19 hereof,  acquire any
     assets  other than in the  ordinary  course and  conduct of the  Borrower's
     business as conducted at the execution of this Agreement

     4-19.  PERMITTED ACQUISITIONS. The Borrower may make Permitted Acquisitions
without the consent of the Agent or the Lenders; provided that:
          (a) Not less  than  Fifteen  (15)  days  prior  written  notice  (with
     reasonable  particularity  as to the facts and  circumstances in respect of
     which such notice is being given) of such Permitted Acquisition is given to
     the Agent.
          (b) The  aggregate  purchase  price  (exclusive  of the portion of the
     purchase  price paid for with  capital  stock of the  Borrower) of all such
     Permitted  Acquisitions  undertaken  from and after October 31, 1998 is not
     greater than Nine Million Dollars ($9,000,000.00).
          (c) The aggregate  consideration  paid in cash for all such  Permitted
     Acquisitions  does not exceed the difference  between Five Million  Dollars
     ($5,000,000.00)  and the amount of cash expended by the Borrower  after the
     date of this Agreement  pursuant to Section  4-18(b) hereof  (provided that
     the aggregate  consideration paid in cash for Permitted Acquisitions in any
     twelve month period after the date of this  Agreement  shall not exceed the
     difference  between (i)  $2,500,000.00 and (ii) the amount of cash expended
     by the  Borrower  during  such  twelve  month  period  pursuant  to Section
     4-18(b)).
          (d) No Event of  Default  then  exists or would  result  from any such
     Acquisition.
          (e) With  respect,  to and in the event of any  Permitted  Acquisition
     which consists of, or results in the creation of, a Subsidiary, Agent shall
     be  provided  with  such  Subsidiary's  Unlimited  Guaranty  (in  form  and
     substance  satisfactory to the Agent),  which  Unlimited  Guaranty shall be
     secured by first perfected  security  interests and liens on  substantially
     all of the assets of such  Subsidiary,  subject to the same limitations set
     forth in Section 8-1 hereof and subject to Permitted Encumbrances.
          (f) The Agent and the Lenders  shall have no obligation to include any
     Inventory acquired in such Permitted Acquisition (or Inventory of a similar
     type and nature  acquired after the Permitted  Acquisition)  as "Acceptable
     Inventory".

     4-20.  LOANS.  The  Obligors  shall not make any loans or advances  to, nor
acquire the Indebtedness of, any Person,  provided,  however, the foregoing does
not prohibit any of the following:
          (a) Advance payments made to the Borrower's  suppliers in the ordinary
     course.
          (b) Advances to the Borrower's officers,  employees,  and salespersons
     with  respect to  reasonable  expenses  to be  incurred  by such  officers,
     employees, and salespersons for the benefit of the Borrower, which expenses
     are properly  substantiated by the person seeking such advance and properly
     reimbursable by the Borrower.
          (c) Loans to the  Borrower's  officers  and  employees  not  exceeding
     $400,000 in the aggregate at any one time  outstanding,  provided that each
     such  loan is for a term of not more than 90 days from the date on which it
     is made and is paid within such 90-day  period;  provided that, all amounts
     due on account of loans permitted under this clause
          (c) shall constitute  Collateral and shall be pledged to the Agent for
     the ratable benefit of the Lenders; and
          (d) Advances to  contractors  for the  construction  or  renovation of
     stores, buildings or improvements for use in the business of the Borrower.

     4-21. Intentionally Omitted.

     4-22.  RESTRICTIONS  ON  SALE OF  COLLATERAL;  LICENSE  AGREEMENTS.  To the
Obligors'  knowledge,  the Obligors are not, and shall not become,  party to any
agreement or understanding  which limits,  impairs,  or otherwise  restricts the
ability  of the  Agent to  freely  sell  and  dispose  of any of the  Collateral
(including,  without  limitation,  any  repurchase  agreements,  rights of first
refusal or other agreements which limit or condition the time, manner,  place or
price  for the  sale or  disposition  of the  Collateral),  other  than  certain
Trademark License  Agreements with Levi Strauss & Co. dated November 1, 1991 and
November 15, 1996. The Borrower  shall not effect or permit any material  change
or amendment to the terms of such License  Agreements which would impose further
restrictions  to the Agent's  disposition of the Collateral or would shorten the
term of such License Agreements, other than as contemplated in the Amendment and
Distribution  Agreement  dated as of October  31,  1988 by and among  Designs JV
Corp., LDJV, Inc. and The Designs/OLS Partnership.

     4-23. PROTECTION OF ASSETS. The Agent, in the Agent's discretion,  and from
time to time,  may discharge  any tax or  Encumbrance  on any of the  Collateral
(other than Permitted  Encumbrances  unless an Event of Default has occurred and
is  continuing),  or take any other action that the Lender may deem necessary or
desirable to repair, insure, maintain, preserve, collect, or realize upon any of
the Collateral.  The Agent shall not have any obligation to undertake any of the
foregoing  and shall have no  liability  on account of any action so  undertaken
except where there is a specific finding in a judicial  proceeding (in which the
Agent has had an opportunity to be heard),  from which finding no further appeal
is  available,  that the Agent  had  acted in  actual  bad faith or in a grossly
negligent manner.  The Borrower shall pay to the Agent, on demand, or the Agent,
in its discretion,  may add to the Loan Account, all amounts paid or incurred by
the Lender pursuant to this section.  The obligation of the Borrower to pay such
amounts is a Liability.

     4-24. LINE OF BUSINESS. The Obligors shall not engage in any business other
than the business in which they are currently  engaged or a business  reasonably
related thereto  provided that the foregoing shall not prohibit the expansion or
contraction of the Borrower's  business so long as the Borrower is still engaged
solely in the retail sale of apparel, footwear and related accessories and other
activities, ancillary, incidental or necessary thereto.

     4-25. AFFILIATE TRANSACTIONS.  The Obligors shall not make any payment, nor
give any value to any  Related  Entity  except for goods and  services  actually
purchased by the Obligors  from, or sold by the Obligors to, such Related Entity
for a price and on terms which shall
          (a) be competitive and fully  deductible as an "ordinary and necessary
     business  expense" and/or fully depreciable under the Internal Revenue Code
     of 1986 and the Treasury Regulations, each as amended; and
          (b) not be less  favorable than those which would have been charged in
     an arms length transaction.

     4-26.  ADDITIONAL ASSURANCES.
          (a)  The  Borrower  shall  execute  and  deliver  to  the  Agent  such
     instruments,  documents, and papers, and shall do all such things from time
     to time hereafter as the Agent may reasonably  request to carry into effect
     the  provisions  and intent of this  Agreement;  to protect and perfect the
     Agent's  security  interests  in the  Collateral;  and to  comply  with all
     applicable  statutes  and  laws,  and  facilitate  the  collection  of  the
     Receivables Collateral.  The Borrower shall execute all such instruments as
     may be  required  by the  Agent  with  respect  to the  recordation  and/or
     perfection of the security interests created herein.
          (b) The Borrower hereby designates the Agent as and for the Borrower's
     true and lawful attorney, with full power of substitution, to sign and file
     any  financing  statements  in order to  perfect  or  protect  the  Agent's
     security and other collateral interests in the Collateral.
          (c) A carbon, photographic, or other reproduction of this Agreement or
     of any financing  statement or other instrument  executed  pursuant to this
     Section  4-26  shall be  sufficient  for  filing to  perfect  the  security
     interests granted herein.

     4-27.  ADEQUACY OF DISCLOSURE.
          (a) All financial statements furnished to the Agent and each Lender by
     the  Borrower  have been  prepared  in  accordance  with GAAP  consistently
     applied and present  fairly the  condition  of the  Borrower at the date(s)
     thereof  and the  results of  operations  and cash flows for the  period(s)
     covered.  There has been no change in the financial  condition,  results of
     operations,  or cash  flows  of the  Borrower  since  the  date(s)  of such
     financial  statements,  other  than  changes  in  the  ordinary  course  of
     business, which changes have not been materially adverse, either singularly
     or in the aggregate.
          (b)  The  Borrower  does  not  have  any  contingent   obligations  or
     obligation  under  any  Lease or  Capital  Lease  which is not noted in the
     Borrower's  annual  certified  financial  statements  and  Form 10K and 10Q
     reports  furnished to the Agent and each Lender  prior to the  execution of
     this Agreement.
          (c) No  document,  instrument,  agreement,  or paper now or  hereafter
     given the Agent by or on behalf of the  Borrower  or any  guarantor  of the
     Liabilities  in  connection  with the  execution  of this  Agreement by the
     Agent, taken as a whole, contains or will contain any untrue statement of a
     material fact or omits or will omit to state a material  fact  necessary in
     order to make the statements therein not misleading.

     4-28. OTHER COVENANTS. The Borrower shall not indirectly do or cause to be
done any act which, if done directly by the Borrower, would breach any covenant
contained in this Agreement.

ARTICLE 5- REPORTING REQUIREMENTS / FINANCIAL COVENANTS.

     5-1.     MAINTAIN RECORDS. The Borrower shall:
          (a) At all times,  keep proper books of account,  in which full, true,
     and accurate  entries shall be made of all of the Borrower's  transactions,
     all in  accordance  with GAAP applied  consistently  with prior  periods to
     fairly reflect the financial condition of the Borrower at the close of, and
     its results of operations for, the periods in question.
          (b) Timely provide the Agent with those financial reports, statements,
     and  schedules  required  by this  Article  5 or  otherwise,  each of which
     reports,  statements  and  schedules  shall  be  prepared,  to  the  extent
     applicable, in accordance with GAAP applied consistently with prior periods
     to fairly reflect the financial  condition of the Borrower at the close of,
     and its results of operations for, the period(s) covered therein.
          (c) At all times,  keep  accurate  current  records of the  Collateral
     including,  without  limitation,  accurate  current stock,  cost, and sales
     records  of  its  Inventory,  accurately  and  sufficiently  itemizing  and
     describing the kinds,  types,  and quantities of Inventory and the cost and
     selling prices thereof.
          (d) At all times, retain independent  certified public accountants who
     are reasonably  satisfactory to the Agent and instruct such  accountants to
     fully  cooperate  with,  and be  available  to,  the Agent to  discuss  the
     Borrower's financial performance,  financial condition,  operating results,
     controls, and such other matters, within the scope of the retention of such
     accountants, as may be raised by the Agent.
          (e) Not change the Borrower's fiscal year.
          (f) Not change the Borrower's taxpayer identification number.

     5-2.  ACCESS TO RECORDS.
          (a) Upon reasonable  prior notice from the Agent to the Borrower,  the
     Borrower shall accord the Agent and the Agent's representatives with access
     from time to time as the Agent and such  representatives may require to all
     properties  owned by or over which the Borrower has control.  The Agent and
     the Agent's  representatives  shall have the right,  and the Borrower  will
     permit  the Agent and such  representatives  from time to time as the Agent
     and such representatives may request, to examine,  inspect,  copy, and make
     extracts from any and all of the Borrower's books, records,  electronically
     stored  data,  papers,  and  files.  The  Borrower  shall  make  all of the
     Borrower's copying facilities available to the Agent.
          (b)  The  Borrower  hereby   authorizes  the  Agent  and  the  Agent's
     representatives to:
          (i)  Except to the extent  prohibited  by the  Borrower's  contractual
               obligations,  inspect,  copy,  duplicate,  review,  cause  to  be
               reduced to hard copy,  run off,  draw off, and  otherwise use any
               and all computer or  electronically  stored  information  or data
               which relates to the Borrower, or any service bureau, contractor,
               accountant, or other person, and directs any such service bureau,
               contractor,  accountant,  or other person fully to cooperate with
               the Agent and the Agent's representatives with respect thereto.
          (ii) Verify  at  any  time  the  Collateral  or any  portion  thereof,
               including  verification  with  Account  Debtors,  and/or with the
               Borrower's computer billing companies,  collection agencies,  and
               accountants and to sign the name of the Borrower on any notice to
               the Borrower's Account Debtors or verification of the Collateral.

     5-3.  NOTICE TO AGENT.
          (a) The Borrower shall provide the Agent with written notice  promptly
     upon the  occurrence of any of the following  events,  which written notice
     shall be with reasonable particularity as to the facts and circumstances in
     respect of which such notice is being given:

          (i)   Any change in the Borrower's officers.

          (ii)  The completion of any physical count of the Borrower's
                Inventory (together with a copy of the results thereof
                certified by the Borrower's chief financial officer).
          (iii) Any ceasing of the Borrower's making of payment, in the ordinary
                course, to any of its creditors, on  account  of  obligations
                aggregating in excess of $180,000.00 (including the ceasing of
                the making of such payments on account of a dispute  with the
                subject creditor).
          (iv)  Any failure by the Borrower to pay rent at any of the Borrower's
                locations which rent in the aggregate exceeds $180,000.00, which
                failure  continues for more than Ten (10) days following the day
                on which such rent first came due.
          (v)   Any material change in the  business,  operations,  or financial
                affairs of the Borrower.
          (vi)  The Borrower's obtaining knowledge of any fact which has, or in
                the  foreseeable future, is likely to have, a material  adverse
                effect on the financial condition  of  the  Borrower or any
                Guarantor.
          (vii) The occurrence of any Suspension Event.
          (viii)Any intention on the  part of the  Borrower to discharge the
                Borrower's present independent accountants or any withdrawal or
                resignation by such independent accountants from their acting in
                such capacity (as to which, see Subsection 5-1(d)).
          (ix)  Any litigation which, if determined adversely to the Borrower,
                is likely to have a material adverse effect on the financial
                condition of the Borrower.

          (b) The Borrower shall:

          (i)  Provide the  Agent, when so distributed, with copies of any
               materials distributed to the shareholders of the Borrower (qua
               such shareholders).
          (ii) Provide the Agent:
                    (A)When filed, copies of all filings with the SEC.
                    (B)When received, copies of all correspondence from the SEC,
                       asserting that the Borrower is in violation of any
                       Requirement of Law.
          (iii)Add the Agent as an addressee on all mailing lists  maintained by
               or for the Borrower.
          (iv) At the request of the Agent, from time to time, provide the Agent
               with  copies of all  advertising  (including  copies of all print
               advertising   and   duplicate   tapes  of  all  video  and  radio
               advertising).
          (v)  Provide the Agent, when received by the Borrower, with a copy of
               any  management letter or similar  communications from  any
               accountant of the Borrower.

         5-4. BORROWING BASE CERTIFICATE.  The Borrower shall provide the Agent
     by 5:00 PM, daily,  (unless no Revolving Credit Loans are  outstanding,  in
     which event weekly, by the close of business on Monday of each week) with a
     Borrowing Base  Certificate (in the form of EXHIBIT 5-4 annexed hereto,  as
     such form may be revised from time to time by the Agent).  Such Certificate
     may be sent to the  Agent  by  facsimile  transmission,  provided  that the
     original   thereof  is   forwarded  to  the  Agent  on  the  date  of  such
     transmission.  It is  understood  that in  furnishing  the  Borrowing  Base
     Certificate to the Agent,  the Borrower will update  Inventory  values on a
     weekly basis (at a minimum).

          5-5. WEEKLY REPORTS. If any Revolving Credit Loans are outstanding, or
     if the Stated Amount of outstanding L/Cs exceed  $3,000,000.00,  weekly, on
     Wednesday of each week (as of the then immediately preceding Saturday), the
     Borrower shall provide the Agent with a sales audit report (in such form as
     may be reasonably  specified  from time to time by the Agent).  Such report
     may be sent to the  Agent  by  facsimile  transmission,  provided  that the
     original   thereof  is   forwarded  to  the  Agent  on  the  date  of  such
     transmission.

     5-6.  MONTHLY REPORTS.
          (a) Monthly, the Borrower shall provide the Agent with the following
     (each in such form as the Agent from time to time may specify):

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

               (A) A "Stock Ledger Inventory Report" by department for each
                   division and a Certificate by department for each division
                   (signed on behalf of the Borrower by the Borrower's President
                   or Chief Financial Officer) concerning the Borrower's
                   Inventory.

               (B) An aging of the Borrower's Inventory.

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

               (A)  Reconciliations  of the above described Report and inventory
                    Certificate  (Section  5-6(a)(i)(A))  to Availability and to
                    the general ledger as of the end of the subject month.

               (B)  A gross margin reconciliation.

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

               (D)  An aging of the Borrower's accounts payable.

               (E)  A store activity report.

               (F)  An  internally   prepared   consolidated  and  consolidating
                    financial statement of the Obligors' financial condition the
                    results of its  operations  for, the period  ending with the
                    end of the subject month,  which  financial  statement shall
                    include, at a minimum, a balance sheet, income statement (on
                    a store specific and on a "consolidated"  basis),  cash flow
                    and  comparison  of same store  sales for the  corresponding
                    month of the then  immediately  previous year, as well as to
                    the Business Plan.

               (G)  The following  portions of the Borrower's  monthly financial
                    closing package:

               (i)   Executive Summary/Press releases.
               (ii)  Monthly and year to date sales reporting package.
               (iii) A comparison of actual sales to the prior year's sales and
                     to the Borrower's projections for the subject month and for
                     the year to date.
               (iv)  A Gross Margin analysis by segment for the subject month
                     and fiscal quarter to date.
               (v)   An Inventory Reconciliation of the Borrower's retail stock
                     ledger to the Borrower's general ledger.
               (vi)  A Shrink analysis and accruals by division.

          (b) For  purposes of Section  5-6(a)(i),  above,  the first  "previous
     month" in  respect of which the items  required  by that  Section  shall be
     provided  shall be the fiscal month ended  April,  1998 and for purposes of
     Section  5-6(a)(ii),  above, the first "previous month" in respect of which
     the items  required by that Section  shall be provided  shall be the fiscal
     month ended April, 1998.

          5-7.  QUARTERLY REPORTS.  Quarterly,  within Fifty (50) days following
     the end of each of the  Borrower's  fiscal  quarters  (except  for the last
     fiscal  quarter of each fiscal year),  the Borrower shall provide the Agent
     with an original  counterpart  of a management  prepared  consolidated  and
     consolidating  financial statement of the Borrower and its Subsidiaries for
     the period from the beginning of the  Borrower's  then current  fiscal year
     through the end of the subject quarter,  with  comparative  information for
     the same period of the previous fiscal year, which statement shall include,
     at a minimum, a balance sheet, income statement (on a store specific and on
     a "consolidated" basis),  statement of changes in shareholders' equity, and
     cash  flows  and  comparisons  for the  corresponding  quarter  of the then
     immediately  previous  year,  as well as to the  Business  Plan,  (ii)  the
     Borrower's Form 10-Q report filed with the SEC.

     5-8. ANNUAL REPORTS.
          (a) Annually,  within  ninety-five  (95) days following the end of the
     Borrower's fiscal year, the Borrower shall furnish the Agent with

          (i)  an  original   signed   counterpart  of  the  Borrower's   annual
               consolidated financial statement,  which statement shall bear the
               unqualified  opinion  of, the  Borrower's  independent  certified
               public  accountants  (i.e. said statement shall be "certified" by
               such  accountants).  Such annual  statement  shall include,  at a
               minimum (with  comparative  information for the then prior fiscal
               year) a balance sheet, income statement,  statement of changes in
               shareholders' equity, and cash flows, and
          (ii) the Borrower's Form 10-K report filed with the SEC.

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

          (i)  Such annual financial statement will be delivered by the Borrower
               to the Agent (for subsequent distribution to each Lender).
          (ii) It is the  intention of the Borrower,  in its  engagement of such
               accountants,  to satisfy the financial reporting requirements set
               forth in this Article 5.
          (iii)The Agent (and each Lender) will rely thereon with respect to the
               administration  of, and  transactions  under, the credit facility
               contemplated by this Agreement.

          (c) Each annual  statement  shall be accompanied by such  accountant's
     certificate  indicating that, in the preparation of such annual  statement,
     such  accountants  did not conclude that any Suspension  Event had occurred
     during the subject fiscal year as a result of the Borrower's  breach of the
     financial  performance covenants set forth on EXHIBIT 5-13(a) hereto (or if
     one or more had occurred, the facts and circumstances thereof).

     5-9. APPLICABLE TO MONTHLY, QUARTERLY AND ANNUAL REPORTS.  All financial
reports furnished by the Borrower under Sections 5-6, 5-7, and 5-8 hereof shall
be prepared on the following basis:
     (a)      The Borrower and its Subsidiaries on a consolidated basis; and
     (b)      The Borrower and its Subsidiaries on a consolidated basis.

          5-10. OFFICERS' CERTIFICATES.  The Borrower shall cause the Borrower's
     President and Chief Financial Officer respectively to provide such Person's
     Certificate  on behalf of the Borrower with those monthly,  quarterly,  and
     annual  statements  to be  furnished  pursuant  to  this  Agreement,  which
     Certificate shall:

          (a) Indicate  that the subject  statement  was prepared in  accordance
     with GAAP consistently  applied and presents fairly the financial condition
     of the  Obligors  at the  close of,  and the  results  of their  respective
     operations and cash flows for, the period(s) covered,  subject,  however to
     the following:

          (i) usual year end  adjustments  and footnotes  (this exception shall
               not be included in the Certificate  which accompanies such annual
               statement).
          (ii)Material  Accounting  Changes (in which event,  such  Certificate
               shall include a schedule (in reasonable  detail) of the effect of
               each such Material Accounting Change) not previously specifically
               taken  into  account  in  the   determination  of  the  financial
               performance covenant imposed pursuant to Section 5-13.

          (b) Indicate either that during the relevant period

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

          (c) Include  calculations  concerning  the  Borrower's  compliance (or
     failure to comply) at the date of the  subject  statement  with each of the
     financial performance covenants included in Section 5-13 hereof.

     5-11. INVENTORIES, APPRAISALS, AND AUDITS.
          (a) The Agent and each  Lender,  at the expense of the  Borrower,  may
     participate in and/or  observe each physical  count and/or  inventory of so
     much of the  Collateral  as consists of Inventory  which is  undertaken  on
     behalf of the Borrower.

          (b) Upon the Agent's  request from time to time,  the  Borrower  shall
     obtain (in all events,  at the Borrower's  expense)  physical counts and/or
     inventories of the  Collateral,  conducted by such inventory  takers as are
     satisfactory to the Agent and following such methodology as may be required
     by the Agent,  each of which physical  counts and/or  inventories  shall be
     observed by the Borrower's  accountants.  The Agent contemplates  requiring
     the  Borrower to conduct one such count  and/or  inventory  for each of the
     Borrower's locations during each Twelve (12) month period during which this
     Agreement is in effect.  The Borrower shall promptly furnish the Agent with
     copies  of the  results  and  adjusting  entries  for  each  such  count or
     inventory.  In the Agent's discretion,  after the occurrence of an Event of
     Default,  the  Agent  may  undertake  or cause the  Borrower  to  undertake
     additional such counts or inventories during any such period.

          (c) Upon the Agent's  request from time to time,  the  Borrower  shall
     permit t he Agent to obtain  appraisals  (in all events,  at the Borrower's
     expense) conducted by such appraisers as are satisfactory to the Agent.

          (d)  The  Agent  contemplates  conducting  up to Four  (4)  commercial
     finance audits (in each event, at the Borrower's expense) of the Borrower's
     books and records  during any Twelve (12) month  period  during  which this
     Agreement is in effect,  but in its  discretion,  may undertake  additional
     such audits during such period.

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

          (f) The  maximum  aggregate  cost for the  following  which  the Agent
     conducts  or causes to be  conducted  in any Twelve  (12) month  period for
     which the Borrower shall reimburse the Agent shall not exceed the aggregate
     of following, it being understood, however, that (x) the maxima are subject
     to Borrower's having made available, as appropriate,  upon reasonable prior
     notice  and  during  normal  business  hours,  its  facilities,   financial
     information,  and personnel to facilitate completion in the ordinary course
     of the following and (y) no Event of Default having occurred and continuing
     (and that if either  (x) or (y) is not  fulfilled,  there  shall not be any
     such limitation on the aggregate of such costs):

          (i)   Appraisals pursuant to Section 5-11(c): $65,000.00 .
          (ii)  Commercial finance audits pursuant to Section 5-11(d):
                $20,000.00, plus travel expenses.
          (iii) Mystery Shopping pursuant to Section 5-11(e): $1,000.00

     5-12.  ADDITIONAL FINANCIAL INFORMATION.
          (a) In  addition  to all other  information  required  to be  provided
     pursuant to this Article 5, the Borrower  promptly shall provide the Agent,
     with such other and additional  information  concerning  the Obligors,  the
     Collateral,  the  operation of the  Obligors'  business,  and the Obligors'
     financial condition,  including original  counterparts of financial reports
     and statements,  as the Agent may from time to time reasonably request from
     the Borrower.

          (b) The Borrower may provide the Agent,  from time to time  hereafter,
     with updated  projections  of the  Obligors'  anticipated  performance  and
     operating results.

          (c) In all events, the Borrower,  no sooner than Ninety (90) nor later
     than  Sixty  (60) days  prior to the end of each of the  Borrower's  fiscal
     years, shall furnish the Agent with an updated and extended  projection for
     the Obligors which shall go out at least through the end of the next fiscal
     year.

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

          5-13. FINANCIAL PERFORMANCE COVENANTs.  The Borrower shall observe and
     comply  with those  financial  performance  covenants  set forth on EXHIBIT
     5-13(a),  annexed  hereto.   Compliance  with  such  financial  performance
     covenants shall be made as if no Material Accounting Changes had been made.
     The Agent may determine the Borrower's compliance with such covenants based
     upon financial reports and statements provided by the Borrower to the Agent
     (whether or not such  financial  reports and  statements are required to be
     furnished  pursuant to this  Agreement)  as well as by reference to interim
     financial information provided to, or developed by, the Agent. If the Agent
     determines, based upon information developed by the Agent, that an Event of
     Default  exists as a result of the  Borrower's  failure to comply with such
     covenants,  the Agent shall  furnish such  information  which the Agent has
     developed to the Borrower upon the Borrower's request therefor.

ARTICLE 6- USE AND COLLECTION OF COLLATERAL.

     6-1.   USE OF INVENTORY COLLATERAL.
          (a) The Borrower  shall not engage in any sale of the Inventory  other
     than for fair  consideration  in the conduct of the Borrower's  business in
     the ordinary course and shall not engage in sales or other  dispositions to
     creditors;  sales or other  dispositions in bulk; and any use of any of the
     Inventory in breach of any provision of this Agreement.

          (b) No sale of Inventory shall be on consignment,  approval,  or under
     any other  circumstances  such that,  with the exception of the  Borrower's
     customary return policy applicable to the return of inventory  purchased by
     the Borrower's retail customers in the ordinary course,  such Inventory may
     be returned to the Borrower without the consent of the Agent.

     6-2. INVENTORY QUALITY.  All Inventory now owned or hereafter acquired
     by the  Borrower is and will be of good and  merchantable  quality and free
     from defects (other than defects within customary trade tolerances),  other
     than Inventory  owned or acquired for the Levi's Outlet By Designs  Stores,
     which in the ordinary course sells  manufacturer's  overruns,  discontinued
     lines, and irregulars purchased directly from Levi Strauss & Company.

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

     6-4.      -VALIDITY OF ACCOUNTS.
          (a) The  amount  of each  Account  shown on the  books,  records,  and
     invoices of the Borrower represented as owing by each Account Debtor is and
     will be the correct amount  actually owing by such Account Debtor and shall
     have been fully earned by performance by the Borrower.

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

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

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

ARTICLE 7- CASH MANAGEMENT. PAYMENT OF LIABILITIES.

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

          (b) The  Borrower  shall  deliver to the Agent,  as a condition to the
     effectiveness  of this Agreement a notification,  executed on behalf of the
     Obligors,  to each depository  institution (other than Fleet National Bank)
     with which any DDA is maintained, in form satisfactory to the Agent, of the
     Agent's interest in such DDA.

          (c) The Obligors  will not  establish  any DDA  hereafter,  unless the
     Borrower  shall have  furnished at least ten (10) days prior written notice
     to the  Agent  and  unless  the  Borrower  shall  deliver  to the  Agent  a
     notification  to the  depository  institution  with which such DDA is to be
     maintained,  in form  satisfactory to the Agent, of the Agent's interest in
     such DDA.

     7-2.   CREDIT CARD RECEIPTS.
          (a) Annexed hereto as EXHIBIT 7-2, is a Schedule  which  describes all
     arrangements to which any Obligor is a party with respect to the payment to
     such  Obligor of the  proceeds of all credit card  charges for sales by the
     Obligors.

          (b) The  Borrower  shall  deliver to the Agent,  as a condition to the
     effectiveness  of the  Agreement,  notification,  executed on behalf of the
     Obligors,   to  each  of  the  Obligors'  credit  card  clearinghouses  and
     processors  of notice (in form  satisfactory  to the Agent ), which  notice
     provides that payment of all credit card charges  submitted by the Obligors
     to that  clearinghouse  or other  processor and any other amount payable to
     the Obligors by such  clearinghouse or other processor shall be directed to
     the Concentration Account or as may be otherwise directed by the Agent. The
     Obligors  shall not change such  direction or  designation  except upon and
     with the prior written consent of the Agent .

     7-3.  THE CONCENTRATION AND THE FUNDING ACCOUNTS.
          (a) The following  checking  accounts have been or will be established
     (and are so referred to herein):

          (i) The  Concentration  Account:  Established by the Agent with Fleet
               National Bank.
          (ii)The  Funding  Account:  Established  by the  Borrower  with Fleet
               National Bank (Account No. 4701682 and Account No. 80-048-046).

          (b)  The  contents  of each  DDA  (other  than  the  Funding  Account)
     constitutes  Collateral  and  Proceeds of  Collateral.  The contents of the
     Concentration Account constitutes the Agent's property.

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

     7-4.   PROCEEDS AND COLLECTION OF ACCOUNTS.
          (a) All Receipts constitute  Collateral and proceeds of Collateral and
     shall  be held in  trust  by the  Obligors  for the  Agent;  and  shall  be
     deposited and/or transferred only to the Concentration Account.

          (b)  The  Borrower  shall  cause  the  ACH  or  wire  transfer  to the
     Concentration  Account,  no less  frequently than daily (and whether or not
     there  is then an  outstanding  balance  in the Loan  Account)  of the then
     contents of each DDA (other than the Funding  Account),  each such transfer
     to be net of any minimum balance, not to exceed $750.00, as may be required
     to be  maintained  in the  subject  DDA by the  bank at  which  such DDA is
     maintained).

          (c) In the event that,  notwithstanding the provisions of this Section
     7-4,  any Obligor  receives or  otherwise  has  dominion and control of any
     Receipts, or any proceeds or collections of any Collateral,  such Receipts,
     proceeds,  and  collections  shall be held in trust by such Obligor for the
     Agent and shall not be commingled  with any of the Obligors' other funds or
     deposited in any account of the Obligors  other than as  instructed  by the
     Agent.

     7-5.   PAYMENT OF LIABILITIES.
          (a)  On  each  Business  Day,  the  Agent  shall  apply,  towards  the
     Liabilities,  the then collected balance of the Concentration  Account (net
     of fees charged,  and of such impressed  balances as may be required by the
     bank at which the Concentration Account is maintained),  provided, however,
     for purposes of the calculation of interest on the unpaid principal balance
     of the Loan Account, such payment shall be deemed to have been made One (1)
     Business  Day after such  transfer,  and  further  provided  that until the
     occurrence, and during the continuance,  of an Event of Default, unless the
     Borrower  otherwise  instructs the Agent, the balance of the  Concentration
     Account  shall  not be  applied  to any  LIBOR  Loans  until the end of the
     applicable Interest Period therefor.

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

          (i)  Funds shall be deemed to have been deposited to the Concentration
               Account on the Business  Day on which  deposited,  provided  that
               notice of such  deposit is  available  to the Agent by 2:00 PM on
               that Business Day.
          (ii) Funds  paid  to  the   Agent,   other  than  by  deposit  to  the
               Concentration  Account,  shall be deemed to have been received on
               the Business Day when they are good and collected funds, provided
               that notice of such  payment is available to the Agent by 2:00 PM
               on that Business Day.
          (iii)If notice  of a deposit  to the  Concentration  Account  (Section
               7-5(b)(i)) or payment  (Section  7-5(b)(ii))  is not available to
               the Agent until after 2:00 PM on a Business Day, unless caused by
               the Agent's bank's error, such deposit or payment shall be deemed
               to have been made at 9:00 AM on the next Business Day.
          (iv) All deposits to the  Concentration  Account and other payments to
               the Agent are subject to clearance and collection.

          (c) The Agent shall transfer to the Funding Account any surplus in the
     Concentration   Account   remaining  after  the  application   towards  the
     Liabilities  referred to in Section 7-5(a),  above (less those amount which
     are to be netted out, as provided therein) provided,  however, in the event
     that both (i) an Event of Default has occurred and is continuing,  and (ii)
     one or more L/C's are then  outstanding,  the Agent may  establish a funded
     reserve of up to 103% of the aggregate Stated Amounts of such L/C's.

     7-6.   THE FUNDING ACCOUNT. Except as otherwise specifically provided in,
or permitted by, this Agreement, all checks shall be drawn by the Borrower upon
and other disbursements made by the Borrower solely from, the Funding Account.

ARTICLE 8- GRANT OF SECURITY INTEREST

     8-1.  GRANT OF SECURITY  INTEREST.  To secure the  Borrower's  prompt,
     punctual, and faithful performance of all and each of the Liabilities,  the
     Borrower hereby grants to the Agent, for the ratable benefit of the Lenders
     and their respective Affiliates,  a continuing security interest in and to,
     and assigns to the Agent,  for the ratable benefit of the Lenders and their
     respective Affiliates,  the following,  and each item thereof,  whether now
     owned or now due, or in which the Borrower  has an  interest,  or hereafter
     acquired,  arising,  or to become due, or in which the Borrower  obtains an
     interest, and all products, Proceeds,  substitutions,  and accessions of or
     to any of the following (all of which,  together with any other property in
     which the  Agent may in the  future be  granted  a  security  interest,  is
     referred to herein as the "Collateral"):

     (a) All Accounts and accounts receivable.
     (b) All Inventory.
     (c) All General Intangibles.
     (d) All Equipment.
     (e) All Goods.
     (f) All Fixtures.
     (g) All Chattel Paper.
     (h) All Letter-of-Credit Rights.
     (i) All Payment Intangibles.
     (j) All Supporting Obligations.
     (k) All books,  records,  and  information  relating to the Collateral
      and/or to the  operation of the Borrower's  business,  and all  rights of
      access to such books, records, and information, and all property in which
      such books, records, and information are stored, recorded, and maintained.
     (l) All Investment Property (including,  without limitation,  stock in
      the Guarantors), Instruments, Documents, Deposit Accounts, policies and
      certificates of insurance, deposits, impressed  accounts,  compensating
      balances, money, cash, or other property.
     (m) All insurance proceeds,  refunds, and premium rebates, including,
      without limitation, proceeds of fire and credit insurance, whether any of
      such  proceeds,  refunds, and  premium rebates arise out of any of the
      foregoing (8-1(a) through 8-1(l)) or otherwise.
     (n) All liens, guaranties,  rights, remedies, and privileges pertaining to
      any of the foregoing (8-1(a)  through  8-1(m)), including  the  right of
      stoppage in transit.
     (o) All Leasehold Interests.

     Notwithstanding anything in this Agreement to the contrary, with
respect to each item of Collateral constituting equipment subject to a Capital
Lease, or constituting an agreement, license, permit or other instrument of the
Borrower, such item shall be subject to the security interest created hereby
only to the extent that the granting of such security interest, under the terms
of such Capital Lease, agreement, license, permit or other instrument, or as
provided by law, does not cause any default under or termination of such Capital
Lease, agreement, license, permit or other instrument or the loss of any
material right of the Borrower thereunder; provided, however, that in no event
shall the foregoing be construed to exclude from the security interest created
by this agreement, proceeds or products of any such Capital Lease, agreement,
license, permit or other instrument of the Borrower or any accounts receivable
or the right to payments due or to become due the Borrower under any such
agreement or other instrument.

     8-2.  EXTENT AND  DURATION  OF SECURITY  INTEREST.  The grant of a security
     interest  herein is in  addition  to, and  supplemental  of,  any  security
     interest previously granted by the Borrower to the Agent and shall continue
     in  full  force  and  effect   applicable  to  all  Liabilities  until  all
     Liabilities  have  been  paid  and/or  satisfied  in full and the  security
     interest  granted  herein is  specifically  terminated in writing by a duly
     authorized  officer of the Agent. It is further intended that, with respect
     to any term used  herein to describe  Collateral,  which term is defined in
     either (or both) the UCC as in effect on the date when this  Agreement  was
     executed by the Borrowers or in UCC9'99,  the meaning given that term shall
     be the more encompassing of the two definitions.

ARTICLE 9- AGENT AS BORROWER'S ATTORNEY-IN-FACT.

     9-1. -APPOINTMENT AS ATTORNEY-IN-FACT. The Borrower hereby irrevocably
constitutes and appoints the Agent as the Borrower's true and lawful attorney,
with full power of substitution, exercisable after the occurrence, and during
the continuance, of an Event of Default, to convert the Collateral into cash at
the sole risk, cost, and expense of the Borrower, but for the sole benefit of
the Agent. The rights and powers granted the Agent by such appointment include
but are not limited to the right and power to:

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

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

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

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

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

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

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

     9-2. NO  OBLIGATION  TO ACT.  The Agent shall not be obligated to do any of
     the acts or to exercise any of the powers authorized by Section 9-1 herein,
     but if the  Agent  elects  to do any  such act or to  exercise  any of such
     powers, it shall not be accountable for more than it actually receives as a
     result of such  exercise  of power,  and  shall not be  responsible  to the
     Borrower  for any act or  omission to act except for any act or omission to
     act  as  to  which  there  is a  final  determination  made  in a  judicial
     proceeding  (in which  proceeding  the Agent has had an  opportunity  to be
     heard) which determination includes a specific finding that the subject act
     or omission to act had been grossly negligent or in actual bad faith.

ARTICLE 10- EVENTS OF DEFAULT.

         The occurrence of any event described in this Article 10 respectively
shall constitute an "Event of Default" herein. Upon the occurrence of any Event
of Default described in Section 10-12, any and all Liabilities shall become due
and payable without any further act on the part of the Agent or any Lender. Upon
the occurrence of any other Event of Default, any and all Liabilities shall
become immediately due and payable, at the option of the Agent and without
notice or demand. The occurrence of any Event of Default shall also constitute,
without notice or demand, a default under all other agreements between the Agent
or any Lender and the Borrower and instruments and papers given the Agent or any
Lender by the Borrower, whether such agreements, instruments, or papers now
exist or hereafter arise.

     10-1. FAILURE TO PAY REVOLVING CREDIT.  The failure by the Borrower to pay
when due any principal or interest hereunder, or fees payable under Sections
2-10, 2-11, 2-12, or 2-16 of this Agreement.

     10-2. FAILURE TO MAKE OTHER PAYMENTS. The failure by the Borrower to pay
within Five (5) Business Days after the date when due (or upon demand, if
payable on demand) any payment Liability other than those set forth in Section
10-1 hereof.

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

                           SECTION:                  RELATES TO:
                           4-5                       Location of Collateral
                           4-6                       Title to Assets
                           4-7                       Indebtedness
                           4-8(b)                    Insurance Policies
                           4-13                      Pay taxes
                           4-25                      Affiliate Transactions
                           4-26                      Additional Assurances
                           5-13                      Financial Covenants
                           6-1                       Use of Collateral
                           Article 7                 Cash Management

     10-4.  FINANCIAL REPORTING REQUIREMENTS.
The failure by the Borrower to promptly, punctually, faithfully and timely
perform, discharge, or comply with the financial reporting requirements
included in Article 5, subject, however, to the following limited number of
grace periods applicable to certain of those requirements:
------------------------- ---------- ------------------- -----------------------
REPORT / STATEMENT         REQUIRED     GRACE PERIOD         NUMBER OF GRACE
                          BY SECTION                             PERIODS
------------------------- ---------- ------------------- -----------------------
Borrowing Base                                            Three per fiscal
Certificates              5-4        One Business Day     Quarter
------------------------- ---------- ------------------- -----------------------
Weekly Report             5-5        Two Business Days    Six in any 12 months
------------------------- ---------- ------------------- -----------------------
Monthly Report (15 Days)  5-6(a)(i)  Three Business Days  Three in any 12 months
------------------------- ---------- ------------------- -----------------------
Monthly Reports (30 Days) 5-6(a)(ii) Three Business Days  Three in any 12 months
------------------------- ---------- ------------------- -----------------------

     10-5.  FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD).
The failure by the  Borrower,  upon Thirty (30) days written  notice by the
Agent , to cure the Borrower's failure to promptly, punctually and faithfully
perform, discharge, or comply with any covenant or  Liability  not  described
in any of Sections  10-1, 10-2, 10-3 or 10-4 hereof.

     10-6.  MISREPRESENTATION.  The determination by the Agent that any
representation or warranty at any time made by the Borrower to the Agent or any
Lender, was not true or complete in all material respects when given.

     10-7.  ACCELERATION OF OTHER DEBT. BREACH OF LEASE. The occurrence of any
event such that any Indebtedness  of the  Borrower to any creditor in excess of
$500,000.00  other than the Agent or any Lender could be accelerated or, without
the consent of the  Borrower,  Leases with  aggregate  monthly rents of at least
$180,000.00  could be terminated  prior to the stated  termination  date thereof
(whether  or not the subject  creditor or lessor  takes any action on account of
such occurrence).

     10-8.  DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach or
default under any agreement between the Agent or any Lender and the Borrower or
instrument  or  paper  given  the  Agent  or  any  Lender  by the  Borrower  not
constituting a Loan Document,  whether such agreement,  instrument, or paper now
exists  or  hereafter  arises,   with  respect  to  Indebtedness  in  excess  of
$500,000.00  (notwithstanding  that the Agent or the subject Lender may not have
exercised its rights upon default under any such other agreement,  instrument or
paper).

     10-9.   UNINSURED CASUALTY LOSS. The occurrence of any uninsured loss,
theft, damage, or destruction of or to any substantial portion of the
Collateral.

     10-10.  JUDGMENT.  RESTRAINT OF BUSINESS.

          (a)  The  attachment  by  trustee  or  other  process,  of  any of the
     Borrower's  funds  on  deposit  with,  or  assets  of the  Borrower  in the
     possession of, the Agent or any Lender or such Participant.

          (b) The  entry of any  judgment  against  the  Borrower  in  excess of
     $500,000.00,  which  judgment is not  satisfied  (if a money  judgment)  or
     appealed from (with execution or similar process stayed) within thirty (30)
     days of its entry.

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

     10-11.  BUSINESS FAILURE. Any act by, against, or relating to the Borrower,
or its property or assets, which act constitutes the application for, consent
to, or sufferance of the appointment of a receiver, trustee, or other person,
pursuant to court action or otherwise, over all, or any part of the Borrower's
property; the granting of any trust mortgage or execution of an assignment for
the benefit of the creditors of the Borrower, or the occurrence of any other
voluntary or involuntary liquidation or extension of debt agreement for the
Borrower; the offering by or entering into by the Borrower of any composition,
extension, or any other arrangement seeking relief from or extension of the
debts of the Borrower; or the initiation of any judicial or non-judicial
proceeding or agreement by, against, or including the Borrower which seeks or
intends to accomplish a reorganization or arrangement with creditors; and/or the
initiation by or on behalf of the Borrower of the liquidation or winding up of
all or any part of the Borrower's business or operations.

     10-12.  BANKRUPTCY. The failure by the Borrower to generally pay the debts
of the Borrower as they mature; adjudication of bankruptcy or insolvency
relative to the Borrower; the entry of an order for relief or similar order with
respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by the Borrower initiating any matter in which the Borrower is or may
be granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the filing of any complaint,
application, or petition against the Borrower initiating any matter in which
the Borrower is or may be granted any relief from the debts of the Borrower
pursuant to the Bankruptcy Code or any other insolvency statute or procedure,
which complaint, application, or petition is not timely contested in good faith
by the Borrower by appropriate proceedings or, if so contested, is not dismissed
within ninety (90) days of when filed.

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

     10-14. DEFAULT BY GUARANTOR OR RELATED ENTITY. The occurrence of any of the
foregoing Events of Default with respect to any Guarantor of the Liabilities, or
the occurrence of any of the foregoing Events of Default with respect to any
parent (if the Borrower is a corporation), subsidiary, or Related Entity, as if
such Guarantor, parent, or Related Entity were the "Borrower" described therein.

     10-15. TERMINATION OF GUARANTY.  The termination or attempted termination
of any guaranty by any Guarantor of the Liabilities.

     10-16. CHALLENGE TO LOAN DOCUMENTS.
                  (a) Any challenge by or on behalf of the Borrower or any
Guarantor of the Liabilities to the validity of any Loan Document or the
applicability or enforceability of any Loan Document in accordance with the
subject Loan Document's material terms or which seeks to void, avoid, limit, or
otherwise materially adversely affect the security interest created by or in the
Loan Documents or any payment made pursuant thereto.

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

     10-17. LEASE DEFAULT. The occurrence of any default, after any applicable
grace or cure period,  pursuant to that certain Master Lease Agreement of the
Borrower with Winthrop Resources Corporation and all Schedules thereto,
as such may be amended and in effect from time to time.

     10-18. CHANGE IN CONTROL.       Any Change in Control.

     10-19  MATERIAL ADVERSE CHANGE. An event shall have occurred or failed to
occur, which occurrence or failure is or could have a materially adverse effect
upon the Borrower's financial condition when compared with such financial
condition as of September 30, 2000.

     10-20 LEVI STRAUSS CHANGES. There shall have occurred any material adverse
change in or to the Borrower's business relationship with Levi Strauss & Co.
when compared to such relationship as of October 8, 1999.

ARTICLE 11 - RIGHTS AND REMEDIES UPON DEFAULT.

         In addition to all of the rights, remedies, powers, privileges, and
discretions which the Agent is provided prior to the occurrence of an Event of
Default, the Agent shall have the following rights and remedies upon the
occurrence of any Event of Default and at any time thereafter. No stay which
otherwise might be imposed pursuant to Section 362 of the Bankruptcy Code or
otherwise shall stay, limit, prevent, hinder, delay, restrict, or otherwise
prevent the Agent's exercise of any of such rights and remedies.

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

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

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

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

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

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

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

     11-2.    SALE OF COLLATERAL.
          (a) Any sale or other  disposition  of the Collateral may be at public
     or  private  sale upon such  terms  and in such  manner as the Agent  deems
     advisable,  having due regard to compliance  with any statute or regulation
     which  might  affect,  limit,  or apply to the Agent's  disposition  of the
     Collateral.

          (b) The Agent, in the exercise of the Agent's rights and remedies upon
     default,  may  conduct  one or more  going out of  business  sales,  in the
     Agent's own right or by one or more agents and  contractors.  Such  sale(s)
     may be  conducted  upon any  premises  owned,  leased,  or  occupied by the
     Borrower.  The Agent and any such agent or contractor,  in conjunction with
     any such sale,  may  augment the  Inventory  with other goods (all of which
     other  goods shall  remain the sole  property of the Agent or such agent or
     contractor).  Any  amounts  realized  from  the  sale of such  goods  which
     constitute augmentations to the Inventory (net of an allocable share of the
     costs  and  expenses  incurred  in  their  disposition)  shall  be the sole
     property of the Agent or such agent or contractor  and neither the Borrower
     nor any Person  claiming  under or in right of the Borrower  shall have any
     interest therein.

          (c)  Unless the  Collateral  is  perishable  or  threatens  to decline
     speedily in value, or is of a type customarily sold on a recognized  market
     (in which event the Agent shall  provide the  Borrower  with such notice as
     may be  practicable  under the  circumstances),  the Agent  shall  give the
     Borrower at least seven (7) days prior  written  notice of the date,  time,
     and place of any  proposed  public  sale,  and of the date after  which any
     private  sale or other  disposition  of the  Collateral  may be  made.  The
     Borrower agrees that such written notice shall satisfy all requirements for
     notice to the Borrower which are imposed under the UCC or other  applicable
     law with  respect to the exercise of the Agent's  rights and remedies  upon
     default.

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

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

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

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

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

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

ARTICLE 12- NOTICES.

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

If to the Agent:
                                    Fleet Retail Finance Inc.
                                    40 Broad Street
                                    Boston, Massachusetts 02109
                                    Attention        :  Mr. James Dore
                                                        Director
                                    Fax              :  617 434-4339
         With a copy to:
                                    Riemer & Braunstein
                                    Three Center Plaza
                                    Boston, Massachusetts  02108
                                    Attention        :  David S. Berman, Esquire
                                    Fax              :  617 723-6831

If to the Borrower:
                                    Designs, Inc.
                                    66 B Street
                                    Needham, Massachusetts 02194
                                    Attention        : Dennis Hernreich, Senior
                                                       Vice President and  Chief
                                                       Financial Officer
                                    Fax              : (781) 444-8999

         With a copy to:
                                    Kramer, Levin, Naftalis & Frankel, LLP
                                    919 Third Avenue
                                    New York, New York 10022
                                    Attention        : Peter G. Smith, Esquire
                                    Fax              : (212) 715-8000

     12-2.    NOTICE GIVEN.
          (a) Except as otherwise specifically provided herein, notices shall be
     deemed made and correspondence  received, as follows (all times being local
     to the place of delivery or receipt):

          (i)   By mail: the sooner of when actually received or Three (3) days
                following deposit in the United States mail, postage prepaid.
          (ii)  By  recognized  overnight express  delivery: the Business Day
                following the day when sent.
          (iii) By Hand:  If  delivered  on a Business Day after 9:00 AM and no
                later  than  Three (3) hours prior to the  close of  customary
                business hours of the recipient, when delivered. Otherwise, at
                the opening of the next Business Day.
          (v)   By Facsimile transmission (which must include a header on which
                the party sending such transmission is indicated): If sent on a
                Business Day after  9:00 AM and no later  than  Three (3) hours
                prior to the close of customary business hours of the recipient,
                one(1) hour after being sent. Otherwise, at the opening of the
                next Business Day.

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

ARTICLE 13- TERM.

     13-1.  TERMINATION OF REVOLVING CREDIT.  The Revolving Credit shall remain
in effect (subject to suspension as provided in Section 2-4(i) hereof) until the
Termination Date.

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

ARTICLE 14-  GENERAL.

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

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

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

     14-4. AMENDMENTS. COURSE OF DEALING.

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

          (b) The Borrower may undertake any action otherwise prohibited hereby,
     and may omit to take any action otherwise  required  hereby,  upon and with
     the express prior written consent of the Agent.  No consent,  modification,
     amendment,  or  waiver  of any  provision  of any  Loan  Document  shall be
     effective  unless  executed  in  writing by or on behalf of the party to be
     charged with such modification,  amendment, or waiver (and if such party is
     the Agent, then by a duly authorized  officer  thereof).  Any modification,
     amendment,  or waiver  provided by the Agent shall be in reliance  upon all
     representations  and  warranties  theretofore  made to the  Agent  by or on
     behalf  of the  Borrower  (and any  guarantor,  endorser,  or surety of the
     Liabilities)  and  consequently  may be  rescinded in the event that any of
     such  representations  or  warranties  was not  true  and  complete  in all
     material respects when given.

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

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

     14-7. COSTS AND EXPENSES OF AGENT AND OF LENDERS.

(a) The Borrower shall pay on demand all Administrative Costs and all reasonable
expenses  of the  Agent in  connection  with  the  preparation,  execution,  and
delivery of this Agreement and of any other Loan Documents, whether now existing
or hereafter arising, and all other reasonable expenses which may be incurred by
the Agent in  preparing or amending  this  Agreement  and all other  agreements,
instruments,  and documents related thereto,  or otherwise incurred with respect
to the Liabilities,  and all costs and expenses of the Agent which relate to the
credit facility contemplated hereby.

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

(c) The Borrower  authorizes  the Agent to pay all such fees and expenses and in
the Agent's discretion, to add such fees and expenses to the Loan Account.

(d) The  undertaking  on the part of the  Borrower  in this  Section  14-7 shall
survive payment of the Liabilities and/or any termination, release, or discharge
executed  by the  Agent in  favor of the  Borrower,  other  than a  termination,
release, or discharge which makes specific reference to this Section 14-7.

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

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

     14-10. CONSENT TO JURISDICTION.
          (a) The Borrower  agrees that any legal action,  proceeding,  case, or
     controversy  against the Borrower  with respect to any Loan Document may be
     brought in the Superior  Court of Suffolk  County  Massachusetts  or in the
     United States District Court, District of Massachusetts, sitting in Boston,
     Massachusetts,  as the Agent may elect in the Agent's sole  discretion.  By
     execution and delivery of this Agreement,  the Borrower,  for itself and in
     respect of its  property,  accepts,  submits,  and consents  generally  and
     unconditionally, to the jurisdiction of the aforesaid courts.

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

          (c) The Borrower  WAIVES any objection  based on forum non  conveniens
     and any objection to venue of any action or proceeding instituted under any
     of the  Loan  Documents  and  consents  to the  granting  of such  legal or
     equitable remedy as is deemed appropriate by the Court.

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

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

     14-11.  INDEMNIFICATION. The Borrower shall indemnify, defend, and hold the
Agent and each Lender and any employee, officer, or agent of any of the
foregoing (each, an "Indemnified Person") harmless of and from any claim
brought or threatened against any Indemnified Person by the Borrower, any
guarantor or endorser of the Liabilities, or any other Person (as well as from
attorneys' reasonable fees and expenses in connection therewith) on account of
the relationship of the Borrower or of any other guarantor or endorser of the
Liabilities with the Agent, the Funding Agent, or any Lender (each of claims
which may be defended, compromised, settled, or pursued by the Indemnified
Person with counsel of the Lender's selection, but at the expense of the
Borrower) other than any claim as to which a final determination is made in a
judicial proceeding (in which the Agent and any other Indemnified Person has had
an opportunity to be heard), which determination includes a specific finding
that the Indemnified Person seeking indemnification had acted in a grossly
negligent manner or in actual bad faith. This indemnification shall survive
payment of the Liabilities and/or any termination, release, or discharge
executed by the Agent in favor of the Borrower, other than a termination,
release, or discharge which makes specific reference to this Section 14-11.

     14-12. RULES OF CONSTRUCTION. The following rules of construction shall be
applied in the interpretation, construction, and enforcement of this Agreement
and of the other Loan Documents:

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

          (b) Headings (indicated by being underlined) and the Table of Contents
     are solely for convenience of reference and do not constitute a part of the
     instrument in which included and do not affect such  instrument's  meaning,
     construction, or effect.

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

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

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

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

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

          (h) Terms which are defined in one section of an  instrument  are used
     with such definition throughout the instrument in which so defined.

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

          (j) References to "herein",  "hereof", and "within" are to this entire
     Loan  Agreement and not merely to the provision in which such  reference is
     included.

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

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

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

               (i) Unless otherwise  provided (I) the day of the act, event, or
          default from which the  designated  period of time begins to run shall
          not be included  and the last day of the period so  computed  shall be
          included  unless  such last day is not a Business  Day, in which event
          the last day of the relevant period shall be the next Business Day and
          (II) the  period  so  computed  shall  end at 5:00 PM on the  relevant
          Business Day.
               (ii) The word "from" means "from and including".
               (iii) The words "to" and "until" each mean "to, but excluding".
               (iv) The work "through" means "to and including".

          (n) The  Loan  Documents  shall  be  construed  and  interpreted  in a
     harmonious  manner and in keeping with the  intentions set forth in Section
     14-13 hereof, provided,  however, in the event of any inconsistency between
     the  provisions  of  this  Agreement  and  any  other  Loan  Document,  the
     provisions of this Agreement shall govern and control.

          (o) The words "during the  continuance  of an Event of Default"  shall
     mean the occurrence of an Event of Default which has not been waived by the
     Agent.

     14-13.   INTENT. It is intended that:
          (a) This Agreement take effect as a sealed instrument.

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

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

          (d) Unless otherwise  explicitly  provided herein, the Agent's consent
     to any action of the Borrower  which is  prohibited  unless such consent is
     given  may be given or  refused  by the  Agent in its sole  discretion  and
     without reference to Section 2-14 hereof.

          (e) Any term used herein to  describe  Collateral  or a Person,  which
     term is  defined  in either (or both) the UCC as in effect on the date when
     this Agreement was executed by the Borrowers or in UCC9'99,  shall be given
     the meaning which is the more encompassing of the two definitions.

          14-14.  RIGHT OF  SET-OFF.  Any and all  deposits or other sums at any
     time  credited  by or due to the  Borrower  from the Agent or any Lender or
     from any  Affiliate  of the Agent or any  Lender  and any cash,  secuities,
     instruments  or other  property of the  Borrower in the  possession  of the
     Agent or any  Lender or any such  Affiliate,  whether  for  safekeeping  or
     otherwise  (regardless  of the reason  such Person had  received  the same)
     shall at all times constitute  security for all Liabilities and for any and
     all  obligations  of the Borrower to the Agent and each Lender and any such
     Affiliate and may be applied or set off against the Liabilities and against
     such  obligations  at any  time,  after  the  occurrence,  and  during  the
     continuance,  of an Event of Default,  whether or not such are then due and
     whether or not other  collateral is then available to the Agent, any Lender
     or any such Affiliate.

          14-15. MAXIMUM INTEREST RATE.  Regardless of any provision of any Loan
     Document,  none of the Agent or any Lender  shall be  entitled  to contract
     for, charge, receive,  collect, or apply as interest on any Liability,  any
     amount in excess of the maximum rate imposed by applicable law. Any payment
     which is made which,  if treated as interest on a Liability would result in
     such interest's exceeding such maximum rate shall be held, to the extent of
     such excess, as additional collateral for the Liabilities as if such excess
     were "Collateral."

          14-16. WAIVERS.
          (a) The Borrower (and all guarantors,  endorsers,  and sureties of the
     Liabilities) make each of the waivers included in Section 14-16(b),  below,
     knowingly,  voluntarily, and intentionally,  and understands that the Agent
     and each Lender, in entering into the financial  arrangements  contemplated
     hereby and in providing loans and other financial  accommodations to or for
     the  account of the  Borrower  as  provided  herein,  whether not or in the
     future, is relying on such waivers.

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

              (i) Except as otherwise  specifically required hereby, notice of
          non-payment,  demand, presentment, protest and all forms of demand and
          notice, both with respect to the Liabilities and the Collateral.
              (ii) Except as otherwise specifically required hereby, the right
          to  notice  and/or  hearing  prior to the  Agent's  exercising  of the
          Agent's rights upon default.
              (iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR  CONTROVERSY
          IN WHICH THE AGENT OR ANY LENDER IS OR BECOMES A PARTY  (WHETHER  SUCH
          CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT OR ANY LENDER
          OR IN WHICH  THE AGENT OR ANY  LENDER IS JOINED AS A PARTY  LITIGANT),
          WHICH  CASE OR  CONTROVERSY  ARISES  OUT OF OR IS IN  RESPECT  OF, ANY
          RELATIONSHIP  AMONGST OR BETWEEN THE  BORROWER OR ANY OTHER PERSON AND
          THE AGENT OR ANY LENDER (AND THE AGENT AND EACH LENDER LIKEWISE WAIVES
          THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).

              (iv)  The  benefits  or  availability  of  any  stay,  limitation,
          hindrance,  delay, or restriction (including,  without limitation, any
          automatic stay which  otherwise  might be imposed  pursuant to Section
          362 of the Bankruptcy Code) with respect to any action which the Agent
          may or may become entitled to take hereunder.

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

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

          14-17. CONFIDENTIALITY.  The Agent and each of the Lenders agrees that
     it will not disclose  without the prior consent of the Borrower (other than
     to its employees,  Affiliates,  advisors or counsel,  each of whom shall be
     directed to observe this  confidentiality  obligation) any information with
     respect to the Borrower or any of its  Subsidiaries  which is now or in the
     future furnished  pursuant to this Agreement or any other Loan Document and
     which is designated by the Borrower in writing as  confidential,  provided,
     however, that the Agent may disclose any such information (i) as has become
     generally  available to the public,  (ii) as may be required in any report,
     statement  or  testimony  submitted  to any  municipal,  state,  or federal
     regulatory body having or claiming to have  jurisdiction  over the Agent or
     any Lender,  (iii) as may be required in respect to any summons or subpoena
     or in connection with any litigation, (iv) in order to comply with any law,
     order,  regulation or ruling applicable to the Agent or any Lender,  (v) to
     any prospective or actual  transferee or participant in connection with any
     contemplated transfer or participation of this Agreement,  the Liabilities,
     or any  interest  therein  by  the  Agent,  provided,  however,  that  such
     prospective transferee or participant executes a confidentiality  agreement
     with  the  Agent  for the  benefit  of the  Borrower  and its  Subsidiaries
     containing similar provisions to those set forth in this Section 14-17, and
     (vi)  as  may  be  reasonably  required  in  connection  with  the  Agent's
     enforcement  of this  Agreement  or the other Loan  Documents  against  the
     Borrower and/or its Subsidiaries.

          14-18.  AMENDMENT AND RESTATEMENT.  This Agreement amends and restates
     the June 4, 1998 Amended and Restated Credit Agreement between Fleet Retail
     Finance Inc.,  as agent,  the lenders party thereto and the Borrower in its
     entirety.  All of the  other  documents  executed  in  connection  with the
     existing Credit Agreement remain in full force and effect, provided that In
     the event of any  inconsistency  between the terms thereof and the terms of
     the Loan Documents,  the Loan Documents shall control. Without limiting the
     foregoing,  the Borrower ratifies and confirms that the collateral  granted
     to the Agent under the  Trademark  Security  Agreement and the Stock Pledge
     Agreement  dated  as of June 4,  1998 (as  well as  under  this  Agreement)
     continues to secure all Liabilities.

                                                                   DESIGNS, INC.
                                                                    ("Borrower")

                                           By: /s/ DENNIS R. HERNREICH

                                   Print Name:     DENNIS R. HERNREICH

                                        Title:     SR VP

                                                       FLEET RETAIL FINANCE INC.
                                                                       ("Agent")

                                             By:/s/ JAMES R. DORE

                                     Print Name:    JAMES R. DORE

                                          Title:    DIRECTOR

                                  The "Lenders"

                                           FLEET RETAIL FINANCE INC.

                                             By:/s/ JAMES R. DORE

                                     Print Name:    JAMES R. DORE

                                          Title:    DIRECTOR

                                           WELLS FARGO BUSINESS CREDIT INC.

                                             By:/s/ SCOTT FIORE

                                     Print Name:    SCOTT FIORE

                                          Title:    VICE PRESIDENT

605510.5

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