Document:

AMENDMENT

         This  Amendment  dated this 1st day of April,  2004 by and among Coates
International, Ltd., having a business address at Highway 34 and Ridgewood Road,
Wall Township,  New Jersey 07719-0738,  and George Coates,  having an address at
Highway 34 and Ridgewood Road, Wall Township,  New Jersey  07719-9738 (the above
identified  parties are collectively  referred to as the "Licensor") and McLean,
England and Associates, LLC, having its principal offices located at One Innwood
Circle, Suite 2004, Little Rock, Arkansas 72211 (the "Licensee").

         WHEREAS,  Licensor  and  Licensee  entered  into  a  License  Agreement
originally  on April 12,  2002 and have  operated  pursuant  to their  agreement
through the date of this Amendment ("License Agreement");

         WHEREAS,   Licensor  has   retrofitted   the  No.1  Diesel  855  engine
incorporating  the Coates CSRV  System,  which engine is  operational  on a test
stand. This engine is not ready for final testing and many costly  modifications
are to be carried out before it is ready for final testing.

         WHEREAS,  Licensee has requested Licensor to retrofit another 855 No. 2
engine  to  gasoline  incorporating  the CSRV by doing  so has  placed  an extra
expense and burden on Licensor.  Currently,  it is not financially  feasible for
Licensor to complete both engines concurrently  without considerable  additional
funding and staff.

         WHEREAS,  in the interest of time and efficiency  Licensor and Licensee
have  agreed  to  allow  Licensee  at  its  own  expense  to  undertake  various
modifications and refinements to the No. 1 855 Diesel powered CSRV truck engine;

         WHEREAS,  in order to  accomplish  the  aforesaid  mutual  objective of
Licensor  and  Licensee,  it is necessary to  supplement  the License  Agreement
solely as specified in, and limited by, this Amendment.  The permission  granted
by Licensor pursuant to this Amendment is not intend to, and does not constitute
a novation of the License Agreement.

         NOW,  THEREFORE,  in consideration  of the premises and covenants,  and
other  good  and  valuable  consideration,   and  the  mutual  promises  of  the
performance of the  undertaking  set forth in the License  Agreement and in this
Amendment, it is agreed, by and among Licensor and Licensee, as follows:

      1.    DEFINED  TERMS.   Except  as  specifically   defined   herein,   all
            definitions  of terms used herein  shall be in  accordance  with the
            License Agreement.

      2.    POSSESSION.  For the limited purpose set forth in paragraph 6 below,
            Licensor shall permit  Licensee to take possession of, but not title
            to, and to remove from Licensor's business premises, a single diesel
            powered  internal  combustion  engine that Licensor has retro-fitted
            with the CSRV Valve System ("No. 1 Test  Engine")  together with one
            of the two trucks containing an 855 Cummins Engine owned by Licensee
            ("Test Truck").  Unless or until otherwise  specified in the License
            Agreement,  Licensor  shall retain  title to the Test  Engine,  with
            exception  of the trucks  which are the  property of  Licensee.  The
            parties  agree  that  the Test  Engine  is  currently  in a state of
            development,  which Licensee will attempt to refine. The Test Engine
            is not ready for testing and certification,  and does not constitute
            a delivery  of such an engine as  contemplated  by the  Confidential
            Addendum to the License Agreement.

                                       18
<PAGE>

      3.    TEST MATERIAL.  Licensor shall provide  Licensee with, but not title
            to, the Test  Engine on test stand,  all  related  drawings or other
            intellectual property, that Licensor feels would aid Licensee in its
            refinement efforts  (collectively the "Test Material").  If Licensee
            requires any parts from  Licensor,  Licensee must pay for parts made
            by Licensor.

      4.    SHIPPING.  Licensee  shall  be  responsible  for  packing,  crating,
            shipping and transporting the Test Material and all costs associated
            therewith.  Licensee  shall  be  responsible  for  all  damage  from
            whatever cause or source caused to the Test Material, while the Test
            Material is off of  Licensor's  business  premises.  Within five (5)
            days of  taking  possession  of the  Test  Material  Licensee  shall
            deliver the Test Material to Ram Industries 7200 Industry Dr., North
            Little Rock, 72117 ("Ram Premises").

      5.    INSURANCE.  Licensee  shall  insure the Test  Material  against  all
            damage and loss for its full  replacement  value which is  currently
            estimated to be $250,000 with Licensor named as the sole loss payee;
            Licensor calculates it has expended  approximately  $2,500,000.00 on
            Licensee's  Diesel 855  engine.  Moreover,  Licensee  shall  provide
            Licensor with an insurance  policy providing  general  comprehensive
            liability  coverage  for  Licensor in relation to the Test  Material
            that  meets  the  specifications  of  the  License  Agreement.   The
            insurance  policy(ies)  shall be  delivered  by Licensee to Licensor
            before  the  Test  Material  is  removed  from  Licensor's  business
            premises.  Each  insurance  policy  shall be issued by an  insurance
            company  that is  reasonably  acceptable  to  Licensor  and which is
            authorized to do business both in the State of New Jersey and in the
            State of Arkansas.

      6.    PURPOSE.  Licensor  grants its  permission  for  Licensee at its own
            expense to use third party firms in its  refinement  efforts,  which
            will be  required  to  protect  the  confidentiality  of  Licensor's
            patents and trade secrets; each such consultant shall be required to
            sign  a  confidentiality  agreement.  The  required  confidentiality
            agreement  is  attached   hereto  as  Exhibit  A   ("Confidentiality
            Agreement").   Licensee   shall  be   responsible   to  enforce  the
            Confidentiality  Agreement and shall indemnify the Licensor  against
            any loss associated with a breach of the  Confidentiality  Agreement
            caused by, or related to, an act or omission of  Licensee.  Licensor
            will be the owner of all work and improvements  made by Licensee and
            its third party  contractors.  Licensee's  efforts  are  intended to
            supplement  those of Licensor  and to  accelerate  the time when the
            Test Engine can be tested at Southwest  Research  Institute  for EPA
            certification  purposes.   Licensor,  however,  without  having  any
            obligation  to do so,  may,  in its  sole and  absolute  discretion,
            continue to work on the No. 2 gasoline engine project to completion.

      7.    PAYMENT. All payments due Licensor by Licensee shall become due, and
            will be paid, in accordance with the License Agreement,  except that
            if Licensee  through its efforts  produces an engine that  satisfies
            the  criteria  specified  in the License  then the  precondition  to
            Licensee's  payment  obligation  shall have been satisfied as if the
            Licensor  had  produced  an  engine  that   satisfied  the  criteria
            specified in the License and payment  shall be due from the Licensee
            pursuant to the terms of the License Agreement.

      8.    REPORTS.  Licensee  shall provide  Licensor with a written  progress
            report every fifteen (15) days  detailing the progress that is being
            made on the Test Engine.

                                       19
<PAGE>

      9.    LOCATION.  Licensee  shall not remove the Test Material from the Ram
            Premises  without  the  prior  written  approval  of  the  Licensor.
            Licensor and its agents, employees,  contractors and consultants, on
            two (2) business days notice, shall have the absolute right, but not
            the  obligation,  to enter the Ram Premises,  during normal business
            hours,  to  inspect  the Test  Engine  and/or the Test Truck and all
            related data, plans, results,  reports and documents relating to the
            Test Engine and/or the Test Truck.

            Licensee  represents  to Licensor that the Ram Premises are safe and
            secure and that access to the Test  Material  will be limited to the
            Licensee  and its  consultant  which access shall be governed by the
            terms of the Confidentiality Agreement.

      10.   INDEMNIFICATION.  Indemnification  between  the  parties  will be in
            accordance  with the License  Agreement  and  paragraphs  4, 6 and 9
            hereof.

      11.   CONFIDENTIALITY. The confidentiality of Licensor's patents and trade
            secretes  shall  be  maintained  in  accordance   with  the  License
            Agreement and paragraphs 6 and 9 hereof.

      12.   BREACH;  REMEDIES.  In the event of a breach by either party of this
            Amendment   the  remedies  of  the  parties  shall  be  governed  in
            accordance with the License Agreement.

      13.   NOTICES. All notices between the parties shall be made in accordance
            with License Agreement.

      14.   APPLICABLE LAW. The law applicable to this Amendment Agreement shall
            be in accordance with License Agreement.

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

      16.   INTERPRETATION.  Wherever  herein the singular  number is used,  the
            same shall  include  the  plural,  and the  masculine  gender  shall
            include the  feminine  and neuter  genders,  and vice versa,  as the
            context shall require.

      17.   COUNTERPARTS.   This   Amendment   may  be   executed   in   several
            counterparts,  each of which shall be an original,  but all of which
            shall constitute one and the same instrument.

      18.   SECTION  HEADINGS.  The  section  headings  in  this  Amendment  are
            inserted only as a matter of convenience in reference and are not to
            be given any effect  whatsoever in construing  any provision of this
            Amendment.

                                       20
<PAGE>

      19.   ASSIGNMENT.  Neither this Amendment nor the License Agreement may be
            assigned by Licensee except as permitted by the License Agreement.

ATTEST:                                     COATES INTERNATIONAL, LTD.

   /s/ Shirley Naidel                       BY: /s/ George J. Coates
---------------------------------              --------------------------------
       Shirley Naidel                               George J. Coates, President
       Notary Public - New Jersey
My Commission Expires Dec. 27, 2005
       as to Both Signatures of
       George J. Coates

   /s/ Shirley Naidel                           /s/ George J. Coates
---------------------------------              --------------------------------
       Shirley Naidel                            George J. Coates, Individually

ATTEST:                                     McLEAN, ENGLAND & ASSOCIATES, LLC

         (Illegible)                        By: /s/ Jeff England
---------------------------------               -------------------------------
                                                 Jeff England

                                       21EXHIBIT 10.13

                              AMENDED AND RESTATED
                                REVOLVING CREDIT
                                       AND
                               SECURITY AGREEMENT

                          GMAC COMMERCIAL FINANCE LLC,
                                   (AS AGENT)

                                       AND

                    CONGRESS FINANCIAL CORPORATION (FLORIDA),
                            (AS DOCUMENTATION AGENT)

                                       AND

                          THE LENDERS SIGNATORY HERETO
                                FROM TIME TO TIME
                                  (AS LENDERS),

                                      WITH

                                PERFUMANIA, INC.,
                          PERFUMANIA PUERTO RICO, INC.,
                     MAGNIFIQUE PARFUMES AND COSMETICS, INC.
                                       AND
                               TEN KESEF II, INC.,
                                   (BORROWERS)

                            DATED AS OF MAY __, 2004

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>                                                                                             <C>
1.       DEFINITIONS..............................................................................1

         1.1      Accounting Terms................................................................1
         1.2      General Terms...................................................................2
         1.3      Uniform Commercial Code Terms..................................................18
         1.4      Certain Matters of Construction................................................18

2.       ADVANCES, PAYMENTS......................................................................18

         2.1(a)    TOTAL REVOLVING ADVANCES......................................................18
                  (b)      Discretionary Rights..................................................18
                  (c)      Inventory Sublimits...................................................19
         2.2      Procedure for Borrowing Revolving Advances.....................................19
         2.3      Disbursement of Advance Proceeds...............................................20
         2.4      Repayment of Advances..........................................................21
         2.5      Repayment of Excess Advances...................................................21
         2.6      Statement of Account...........................................................21
         2.7      Letters of Credit..............................................................22
         2.8      Issuance of Letters of Credit..................................................22
         2.9      Requirements For Issuance of Letters of Credit.................................22
         2.10     Additional Payments............................................................23
         2.11     Manner of Borrowing and Payment................................................23
         2.12     Use of Proceeds................................................................25
         2.13     Joint and Several Liability....................................................25
         2.14     Defaulting Lender..............................................................26

3.       INTEREST AND FEES.......................................................................27

         3.1      Interest.......................................................................27
         3.2      Letter of Credit Fees..........................................................27
         3.3      Facility Fee...................................................................28
         3.4      Computation of Interest and Fees...............................................28
         3.5      Maximum Charges................................................................28
         3.6      Increased Costs................................................................28
         3.7      Basis For Determining Interest Rate Inadequate or Unfair.......................29
         3.8      Capital Adequacy...............................................................30

4.       COLLATERAL: GENERAL TERMS...............................................................30

         4.1      Security Interest in the Collateral............................................30
         4.2      Perfection of Security Interest................................................30
         4.3      Disposition of Collateral......................................................34
         4.4      Preservation of Collateral.....................................................34
         4.5      Ownership of Collateral........................................................34
</TABLE>

                                      (i)

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                             <C>
         4.6      Defense of Agent's and Lender's Interests......................................35
         4.7      Books and Records..............................................................35
         4.8      Financial Disclosure...........................................................35
         4.9      Compliance with Laws...........................................................36
         4.10     Inspection of Premises.........................................................36
         4.11     Insurance......................................................................36
         4.12     Failure to Pay Insurance.......................................................37
         4.13     Payment of Taxes...............................................................37
         4.14     Payment of Leasehold Obligations...............................................37
         4.15     Accounts.......................................................................38
                  (a)      Nature of Accounts....................................................38
                  (b)      Solvency of Customers................................................ 38
                  (c)      Locations of Borrower.................................................38
                  (d)      Collection of Accounts................................................38
                  (e)      Notification of Assignment of Accounts................................38
                  (f)      Power of Agent to Act on Borrowers' Behalf............................38
                  (g)      No Liability..........................................................39
                  (h)      Establishment of a Lockbox Account, Dominion Account..................39
                  (i)      Adjustments...........................................................41
         4.16     Inventory......................................................................41
         4.17     Maintenance of Equipment.......................................................41
         4.18     Exculpation of Liability.......................................................41
         4.19     Environmental Matters..........................................................42
         4.20     Financing Statements...........................................................44

5.       REPRESENTATIONS AND WARRANTIES..........................................................44

         5.1      Authority......................................................................44
         5.2      Formation and Qualification....................................................44
         5.3      Survival of Representations and Warranties.....................................45
         5.4      Tax Returns....................................................................45
         5.5      Financial Statements...........................................................45
         5.6      Corporate Name.................................................................46
         5.7      O.S.H.A. and Environmental Compliance..........................................46
         5.8      Solvency; No Litigation, Violation, Indebtedness or Default....................46
         5.9      Patents, Trademarks, Copyrights and Licenses...................................47
         5.10     Licenses and Permits...........................................................48
         5.11     Default of Indebtedness........................................................48
         5.12     No Default.....................................................................48
         5.13     No Burdensome Restrictions.....................................................48
         5.14     No Labor Disputes..............................................................48
         5.15     Margin Regulations.............................................................48
         5.16     Investment Company Act.........................................................49
         5.17     Disclosure.....................................................................49
         5.18     Subordinated Debt Documentation................................................49
         5.19     Swaps..........................................................................49
         5.20     Conflicting Agreements.........................................................49
         5.21     Application of Certain Laws and Regulations....................................49
         5.22     Business and Property of Borrowers.............................................49
         5.23     Credit Card Agreements.........................................................49
</TABLE>

                                      (ii)
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                             <C>
6.       AFFIRMATIVE COVENANTS...................................................................50

         6.1      Payment of Fees................................................................50
         6.2      Conduct of Business and Maintenance of Existence and Assets....................50
         6.3      Violations.....................................................................51
         6.4      Government Receivables.........................................................51
         6.5      Fixed Charge Coverage Ratio....................................................51
         6.6      Minimum EBITDA.................................................................51
         6.7      Minimum Undrawn Availability...................................................52
         6.8      Execution of Supplemental Instruments..........................................52
         6.9      Payment of Indebtedness........................................................52
         6.10     Standards of Financial Statements..............................................52
         6.11     Credit Card Agreements.........................................................52

7.       NEGATIVE COVENANTS......................................................................53

         7.1      Merger, Consolidation, Acquisition and Sale of Assets..........................53
         7.2      Creation of Liens..............................................................53
         7.3      Guarantees.....................................................................53
         7.4      Investments....................................................................53
         7.5      Loans..........................................................................53
         7.6      Capital Expenditures...........................................................54
         7.7      Dividends......................................................................54
         7.8      Indebtedness...................................................................54
         7.9      Nature of Business.............................................................54
         7.10     Transactions with Affiliates...................................................54
         7.11     Leases.........................................................................54
         7.12     Subsidiaries...................................................................54
         7.13     Fiscal Year and Accounting Changes.............................................55
         7.14     Pledge of Credit...............................................................55
         7.15     Amendment of Articles of Incorporation, By-Laws................................55
         7.16     Compliance with ERISA..........................................................55
         7.17     Subordinated Note..............................................................55
         7.18     Prepayment of Indebtedness.....................................................55
         7.19     Additional Loans and Investments by Original Owner.............................55

8.       CONDITIONS PRECEDENT....................................................................56

         8.1      Conditions to Initial Advances.................................................56
                  (a)      Filings, Registrations and Recordings.................................56
                  (b)      Corporate Proceedings of Borrowers and Guarantor......................56
                  (c)      Incumbency Certificates of Borrowers and Guarantor....................56
                  (d)      Certificates..........................................................56
</TABLE>

                                      (iii)
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                             <C>
                  (e)      Good Standing Certificates............................................57
                  (f)      No Litigation.........................................................57
                  (g)      Financial Condition Certificates......................................57
                  (h)      Collateral Examination................................................58
                  (i)      Fees..................................................................58
                  (j)      Pro Forma Financial Statements and Other Financial Information........58
                  (k)      Other Documents.......................................................58
                  (l)      Subordination Agreement...............................................58
                  (m)      Insurance.............................................................58
                  (n)      Payment Instructions..................................................58
                  (o)      Blocked Accounts......................................................58
                  (p)      Consents..............................................................58
                  (q)      Financial Statements..................................................59
                  (r)      No Adverse Material Change............................................59
                  (s)      Leasehold Agreements..................................................59
                  (t)      Subordinated Debt Documentation.......................................59
                  (u)      Guarantees and Other Documents........................................59
                  (v)      Contract Review.......................................................59
                  (w)      Closing Certificate...................................................59
                  (x)      Borrowing Base........................................................59
                  (y)      Business Plan and Projections.........................................59
                  (z)      Undrawn Availability..................................................60
                  (aa)     Other.................................................................60
         8.2      Conditions to Each Advance.....................................................60
                  (a)      Representations and Warranties........................................60
                  (b)      No Default............................................................60
                  (c)      Maximum Advances......................................................60

9.       INFORMATION AS TO BORROWERS.............................................................60

         9.1      Disclosure of Material Matters.................................................60
         9.2      Schedules......................................................................61
         9.3      Environmental Reports..........................................................61
         9.4      Litigation.....................................................................61
         9.5      Material Occurrences...........................................................61
         9.6      Government Receivables.........................................................62
         9.7      Annual Financial Statements....................................................62
         9.8      Monthly Financial Statements...................................................62
         9.9      Borrowing Base Certificate.....................................................63
         9.10     Other Reports..................................................................63
         9.11     Additional Information.........................................................63
         9.12     Projected Operating Budget.....................................................63
         9.13     Variances From Operating Budget................................................63
         9.14     Notice of Suits, Adverse Events................................................63
         9.15     ERISA Notices and Requests.....................................................64
         9.16     Additional Documents...........................................................64
</TABLE>

                                      (iv)
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                             <C>
10.      EVENTS OF DEFAULT.......................................................................64

11.      LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT..............................................67

         11.1     Rights and Remedies............................................................67
         11.2     Agent's Discretion.............................................................68
         11.3     Setoff.........................................................................68
         11.4     Rights and Remedies not Exclusive..............................................68

12.      WAIVERS AND JUDICIAL PROCEEDINGS........................................................68

         12.1     Waiver of Notice...............................................................68
         12.2     Delay..........................................................................69
         12.3     JURY TRIAL WAIVER..............................................................69

13.      EFFECTIVE DATE AND TERMINATION..........................................................69

         13.1     Term...........................................................................69
         13.2     Termination....................................................................69

14.      REGARDING AGENT.........................................................................70

         14.1     Appointment....................................................................70
         14.2     Nature of Duties...............................................................70
         14.3     Lack of Reliance on Agent and Resignation......................................71
         14.4     Certain Rights of Agent........................................................71
         14.5     Reliance.......................................................................72
         14.6     Notice of Default..............................................................72
         14.7     Indemnification................................................................72
         14.8     Agent in its Individual Capacity...............................................72
         14.9     Delivery of Documents..........................................................72
         14.10    Borrowers' Undertaking to Agent................................................72
         14.11    Documentation Agent............................................................73

15.      INTERRELATED BUSINESSES; BORROWING AGENCY...............................................73

         15.1     Interrelated Businesses........................................................73
         15.2     Borrowing Agency Provisions....................................................73
         15.3     Waiver of Subrogation..........................................................74

16.      MISCELLANEOUS...........................................................................74

         16.1     Governing Law..................................................................74
         16.2     Amended and Restated Agreement; Amendments to Other Documents..................75
         16.3     Entire Understanding...........................................................75
         16.4     Successors and Assigns; Participations; New Lenders............................76
         16.5     Application of Payments........................................................77
         16.6     Indemnity......................................................................77
</TABLE>

                                       (v)

<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                             <C>
         16.7     Notice.........................................................................78
         16.8     Survival.......................................................................79
         16.9     Severability...................................................................79
         16.10    Expenses.......................................................................79
         16.11    Injunctive Relief..............................................................79
         16.12    Consequential Damages..........................................................79
         16.13    Captions.......................................................................79
         16.14    Counterparts; Telecopied Signatures............................................79
         16.15    Construction...................................................................80
         16.16    Confidentiality................................................................80
</TABLE>

                                      (vi)

<PAGE>

346115.9

                             EXHIBITS AND SCHEDULES

     Exhibit A             Borrowing Base Certificate
     Exhibit 5.5(b)        Projections
     Exhibit 16.4          Commitment Transfer Supplement

     Schedule 1.2          Permitted Liens
     Schedule 4.2(b)       Chattel Paper
     Schedule 4.2(d)       Deposit Accounts
     Schedule 4.2(e)       Investment Property
     Schedule 4.2(h)       Letter of Credit; Bankers Acceptances; or
                             similar instruments
     Schedule 4.2(i)       Commercial Tort Claims
     Schedule 4.2(j)       Collateral in the Custody or Control of Third Parties
     Schedule 4.5          Equipment and Inventory Locations
     Schedule 4.15(c)      Chief Executive Offices
     Schedule 5.2(a)       Organizational Information and Qualifications
     Schedule 5.2(b)       Subsidiaries
     Schedule 5.4          Federal Tax Identification Number
     Schedule 5.6          Trade Names
     Schedule 5.8(b)       Pending Litigation
     Schedule 5.8(d)       Employee Benefit Plans
     Schedule 5.9          Intellectual Property
     Schedule 5.10         Licenses or Permits
     Schedule 5.14         Labor Disputes
     Schedule 5.23         Credit Card Agreements
     Schedule 7.3          Guarantees
     Schedule 7.5          Loans
     Schedule 7.8          Permitted Indebtedness

<PAGE>

                              AMENDED AND RESTATED
                                REVOLVING CREDIT
                                       AND
                               SECURITY AGREEMENT

      Amended and Restated  Revolving Credit and Security  Agreement dated as of
May __, 2004 (this  "Agreement")  by and among  PERFUMANIA,  INC., a corporation
organized under the laws of the State of Florida  ("Perfumania"),  TEN KESEF II,
INC.,  a  corporation  organized  under the laws of the State of  Florida  ("Ten
Kesef"), PERFUMANIA PUERTO RICO, INC., a corporation organized under the laws of
the  Commonwealth  of Puerto Rico  ("Perfumania-Puerto  Rico"),  and  MAGNIFIQUE
PARFUMES AND  COSMETICS,  INC., a  corporation  organized  under the laws of the
State of Florida  ("Magnifique";  and together  with  Perfumania,  Ten Kesef and
Perfumania-Puerto  Rico, each individually,  a "Borrower" and collectively,  the
"Borrowers"),   the  undersigned  financial  institutions   (collectively,   the
"Lenders"  and  individually  a  "Lender"),  GMAC  COMMERCIAL  FINANCE  LLC,  as
successor  by merger  with GMAC  Commercial  Credit LLC ("GMAC  CF"),  a limited
liability  company formed under the laws of the State of Delaware,  as agent for
Lenders  (GMAC  CF, in such  capacity,  the  "Agent"),  and  CONGRESS  FINANCIAL
CORPORATION  (FLORIDA),  a corporation  organized under the laws of the State of
Florida, as documentation agent (in such capacity, the "Documentation Agent").

      WHEREAS,  GMAC CF has  previously  entered  into a  Revolving  Credit  and
Security  Agreement  dated as of May 12,  2000  with  Borrowers  (as  thereafter
amended,  restated,  renewed, extended,  substituted,  supplemented or otherwise
modified,  collectively,  prior to the  date of this  Agreement,  the  "Existing
Agreement"); and

      WHEREAS,  Borrowers have requested that the Existing Agreement be amended,
and Agent,  Documentation Agent and Lenders have agreed to do so, subject to the
terms and conditions set forth herein.

      NOW, THEREFORE,  IN CONSIDERATION of the mutual covenants and undertakings
herein contained, each of the Borrowers,  Agent, Documentation Agent and Lenders
hereby agree as follows:

1.    DEFINITIONS

      1.1 ACCOUNTING TERMS. As used in this Agreement or any certificate, report
or other document made or delivered pursuant to this Agreement, accounting terms
not defined in Section 1.2 or elsewhere in this Agreement and  accounting  terms
partly  defined  in  Section  1.2 to the  extent  not  defined,  shall  have the
respective meanings given to them under GAAP, provided,  however,  whenever such
accounting  terms  are used for the  purposes  of  determining  compliance  with
financial  covenants in this Agreement,  except as limited in these definitions,
such  accounting  terms  shall be defined  in  accordance  with GAAP  applied in
preparation of the audited financial statements of Borrowers.

<PAGE>

      1.2 GENERAL  TERMS.  For purposes of this  Agreement the  following  terms
shall have the following meanings:

      "Accountants" shall have the meaning set forth in Section 9.7 hereof.

      "Accounts"  shall mean all  present  and  future  rights of  Borrowers  to
payment of a monetary obligation, whether or not earned by performance, which is
not evidenced by chattel paper or an instrument,  (a) for property that has been
or is to be sold, leased, licensed,  assigned, or otherwise disposed of, (b) for
services rendered or to be rendered,  (c) for a secondary obligation incurred or
to be  incurred,  or (d)  arising  out of the use of a credit or charge  card or
information contained on or for use with the card.

      "Advances"  shall mean and include the  Revolving  Advances and Letters of
Credit.

      "Affiliate"  of any  Person  shall  mean  (a)  any  Person  (other  than a
Subsidiary) which,  directly or indirectly,  is in control of, is controlled by,
or is under common control with such Person, or (b) any Person who is a director
or executive  officer of such Person, of any Subsidiary of such Person or of any
Person described in CLAUSE (A) above.  For purposes of this definition,  control
of a Person shall mean the power,  direct or  indirect,  (x) to vote ten percent
(10%) or more of the securities having ordinary voting power for the election of
directors  of such  Person,  or (y) to  direct  or cause  the  direction  of the
management and policies of such Person whether by contract or otherwise.

      "Agent" shall have the meaning set forth in the preamble to this Agreement
and shall include its successors and assigns.

      "Agent's  security  interest"  or words of similar  import  shall have the
meaning set forth in Section 4.1 hereof.

      "Alternate  Base Rate" shall mean,  for any day, a rate per annum equal to
the higher of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Rate in effect on such day plus one half of one percent (1/2 %).

      "Applicable  Margin for Domestic Rate Loans" for any given month,  (a) for
the  period  commencing  on the  Closing  Date and ending on the last day of the
calendar  month  during which Agent has received  Borrowers'  audited  financial
statements for fiscal year ending  January 31, 2004,  the Applicable  Margin for
Domestic  Rate Loans  shall be 0.5%;  and (b) for the period  commencing  on the
first day of the month following Agent's receipt of Borrowers' audited financial
statements for fiscal year ending  January 31, 2004 and at all times  thereafter
for the balance of the Term, if the Borrowers' Leverage Ratio as at the last day
of Borrowers'  immediately  preceding  fiscal  quarter (as  determined  from the
Borrowers'  financial  statements  most recently  delivered in  accordance  with
Section 9.8 hereof),  is (i) greater than or equal to 6.0:1, then the Applicable
Margin for Domestic Rate Loans for such month shall be 1.25%;  (ii) greater than
or equal to 5.0:1 but less than 6.0:1,  then the Applicable  Margin for Domestic
Rate Loans for such month shall be 1.00%;  (iii)  greater than or equal to 4.0:1
but less than 5.0:1, then the Applicable Margin for Domestic Rate Loans for such
month shall be 0.5%;  or (iv) less than 4.0:1,  then the  Applicable  Margin for
Domestic Rate Loans for such month shall be 0.0%.

                                       2
<PAGE>

      "Applicable  Margin for LIBOR Rate Loans" shall mean, for any given month,
(a) for the period  commencing on the Closing Date and ending on the last day of
the calendar month during which Agent has received  Borrowers' audited financial
statements for fiscal year ending  January 31, 2004,  the Applicable  Margin for
LIBOR Rate Loans shall be 3.0%;  and (b) for the period  commencing on the first
day of the month  following  Agent's  receipt of  Borrowers'  audited  financial
statements for fiscal year ending  January 31, 2004 and at all times  thereafter
for the balance of the Term, if the Borrowers' Leverage Ratio as at the last day
of Borrowers'  immediately  preceding  fiscal  quarter (as  determined  from the
Borrowers'  financial  statements  most recently  delivered in  accordance  with
Section 9.8 hereof),  is (i) greater than or equal to 6.0:1, then the Applicable
Margin for LIBOR Rate Loans for such month shall be 3.75%;  (ii) greater than or
equal to 5.0:1 but less than 6.0:1,  then the  Applicable  Margin for LIBOR Rate
Loans for such month shall be 3.50%;  (iii)  greater  than or equal to 4.0:1 but
less than 5.0:1,  then the Applicable Margin for LIBOR Rate Loans for such month
shall be 3.00%;  (iv) greater  than or equal to 3.0:1 but less than 4.0:1,  then
the Applicable Margin for LIBOR Rate Loans for such month shall be 2.75%; or (v)
less than 3.0:1,  then the Applicable Margin for LIBOR Rate Loans for such month
shall be 2.50%.  The Applicable  Margin for LIBOR Rate Loans shall be determined
based  upon the  Applicable  Margin  for  LIBOR  Rate  Loans in effect as of the
commencement  of  any  Interest  Period  and,  notwithstanding  anything  to the
contrary  contained herein, the Applicable Margin for LIBOR Rate Loans in effect
as of the  commencement  of each  Interest  Period shall  remain the  Applicable
Margin for LIBOR Rate Loans for the entire Interest Period.

      "Armored  Car  Companies"  shall  mean  collectively,  Safe & Sound  Armed
Courier,  Inc. and Dunbar  Armored,  Inc., and their  respective  successors and
assigns or any other armored car service  selected by a Borrower  after the date
hereof after prior written notice to Agent and reasonably acceptable to Agent.

      "Authority" shall have the meaning set forth in Section 4.19(c).

      "Bank" shall mean The Bank of New York, and its successors and assigns.

      "Blocked Accounts" shall have the meaning set forth in Section 4.15(h).

      "Borrower"  or  "Borrowers"  shall  have  the  meanings  set  forth in the
preamble to this  Agreement  and shall extend to all  permitted  successors  and
assigns of such Persons.

      "Borrowers on a  Consolidated  Basis" except to the extent limited in this
definition, shall mean the consolidation in accordance with GAAP of the accounts
or other items of  Borrowers.  Presentations  of financial  information  for the
Borrowers on a  Consolidated  Basis shall be  consolidated  from the  applicable
audited or unaudited  consolidating financial statements of E Com Ventures, Inc.
Financial  information  shall not include footnote  disclosure  required by GAAP
with respect to the Borrowers on a  Consolidated  Basis,  but shall be deemed to
include the footnote  disclosure  contained in E Com  Ventures,  Inc.'s  related
audited or  unaudited  financial  statements  as it  relates to such  disclosure
related to Borrowers on a Consolidated Basis.

      "Borrowing Agent" shall mean Perfumania, Inc. and its permitted successors
and assigns.

                                       3
<PAGE>

      "Borrowing Base  Certificate"  shall mean the borrowing base  certificate,
substantially  in the form of  EXHIBIT A  hereto,  as such form may from time to
time be reasonably modified by Agent.

      "Business  Day" shall mean with  respect to LIBOR Rate  Loans,  any day on
which  commercial  banks  are  open for  domestic  and  international  business,
including dealings in Dollar deposits in London,  England and New York, New York
and  with  respect  to all  other  loans,  any  day  other  than a day on  which
commercial banks in New York are authorized or required by law to close.

      "CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. ss.ss.9601 et seq.

      "Change of Control" shall mean (a) the occurrence of any event (whether in
one or more transactions) which results in a transfer of control of any Borrower
to a Person who is not an Original Owner or (b) any merger or  consolidation  of
or with any  Borrower  or sale of all or  substantially  all of the  property or
assets of any  Borrower,  except that the merger of any Borrower  with any other
Borrower or an Original Owner shall not be deemed to be a Change of Control. For
purposes of this definition,  "control of Borrower" shall mean the power, direct
or indirect (x) to vote 50% or more of the  securities  having  ordinary  voting
power for the  election of  directors  of any Borrower or (y) to direct or cause
the  direction  of the  management  and  policies of any Borrower by contract or
otherwise;  PROVIDED, however, a change of control of the Guarantor shall not be
a Change of Control under this Agreement.

      "Change of  Ownership"  shall mean (a) fifty  percent (50%) or more of the
common stock of any Borrower is no longer owned or controlled by (including  for
the purposes of the  calculation of percentage  ownership,  any shares of common
stock into which any capital  stock of any Borrower  held by any of the Original
Owners is  convertible  or for which any such shares of the capital stock of any
Borrower or of any other Person may be exchanged  and any shares of common stock
issuable to such  Original  Owners upon  exercise  of any  warrants,  options or
similar  rights which may at the time of  calculation  be held by such  Original
Owners) a Person who is either an Original  Owner or an Affiliate of an Original
Owner  or (b) any  merger,  consolidation  or sale of  substantially  all of the
property or assets of any Borrower,  except that the merger of any Borrower with
any other Borrower shall not be deemed to be a Change of Ownership.

      "Charges" shall mean all taxes,  charges,  fees, imposts,  levies or other
assessments,  including, without limitation, all net income, gross income, gross
receipts,  sales, use, ad valorem,  value added, transfer,  franchise,  profits,
inventory,  capital stock, license,  withholding,  payroll,  employment,  social
security, unemployment, excise, severance, stamp, occupation and property taxes,
custom  duties,  fees,  assessments,  liens,  claims  and  charges  of any  kind
whatsoever,  together with any interest and any  penalties,  additions to tax or
additional  amounts,  imposed  by any  taxing or other  authority,  domestic  or
foreign (including,  without limitation, the PBGC or any environmental agency or
superfund),  upon the  Collateral,  any  Borrower  or any of its  Affiliates  or
Subsidiaries.

                                       4
<PAGE>

      "Closing  Date"  shall  mean the date  hereof or such other date as may be
agreed to in writing by the parties hereto.

      "Code" shall mean the Internal  Revenue Code of 1986, as amended from time
to time and the regulations promulgated thereunder.

      "Collateral" shall mean and include, with respect to each Borrower:

      (a) all Accounts and other Receivables;

      (b) all Equipment;

      (c) all General Intangibles;

      (d) all Inventory;

      (e) all Subsidiary Stock;

      (f) the Leasehold Interests;

      (g) all of such  Borrower's  right,  title and  interest in and to (i) its
respective  goods  and  other  property  including,  but  not  limited  to,  all
merchandise  returned or rejected by  Customers,  relating to or securing any of
the Receivables; (ii) all of such Borrower's rights as a consignor, a consignee,
an unpaid vendor,  mechanic,  artisan,  or other lienor,  including  stoppage in
transit,  setoff,  detinue,  replevin,  reclamation  and  repurchase;  (iii) all
additional  amounts  due to any  Borrower  from  any  Customer  relating  to the
Receivables;  (iv) other property,  including  warranty claims,  relating to any
goods  securing this  Agreement;  (v) all of such  Borrower's  contract  rights,
rights of payment  which have been earned  under a contract  right,  instruments
(including  all  promissory  notes),  documents,  chattel paper  (including  all
tangible and electronic chattel paper),  warehouse  receipts,  deposit accounts,
money,  securities  and  investment  property  (including  securities,   whether
certificated or  uncertificated,  securities  accounts,  security  entitlements,
commodity contracts or commodity  accounts),  credit balances and other property
of such Borrower now or hereafter  held or received by or in transit to Agent or
any Lender or any of Agent or any Lender's Affiliates or at any other depository
or  other  institution  from or for the  account  of any  Borrower  whether  for
safekeeping, pledge, custody, transmission, collection or otherwise; (vi) if and
when obtained by such Borrower,  all real and personal property of third parties
in which such Borrower has been granted a lien or security  interest as security
for the payment or  enforcement  of  Receivables  and including  deposits by and
property of account debtors or other persons securing the obligations of account
debtors;  (vii) any other goods, personal property or real property now owned or
hereafter  acquired  in which such  Borrower  has  expressly  granted a security
interest or may in the future grant a security  interest to Agent hereunder,  or
in any amendment or supplement  hereto or thereto,  or under any other agreement
between  Agent  and such  Borrower;  (viii)  all  letters  of  credit,  banker's
acceptances and similar instruments and including all  letter-of-credit  rights;
and (ix) all  commercial  tort  claims,  including,  without  limitation,  those
identified on SCHEDULE 4.2(I) hereto;

      (h) all Records; and

                                       5
<PAGE>

      (i) all proceeds and products of (a),  (b), (c), (d), (e), (f), (g) or (h)
in whatever  form,  including,  insurance  proceeds and all claims against third
parties for loss or damage to or destruction of or other involuntary  conversion
of any kind or nature of any or all of the other Collateral.

      "Collateral Access Agreement" shall mean an agreement in writing,  in form
and substance  satisfactory to Agent, from any lessor of premises to a Borrower,
or any other  person to whom any  Collateral  (including  Inventory,  Equipment,
bills of lading or other  documents  of title) is  consigned or who has custody,
control  or  possession  of any such  Collateral  or is  otherwise  the owner or
operator of any premises on which any of such Collateral is located, pursuant to
which such lessor, consignee or other person, inter alia, acknowledges the first
priority security interest of Agent in such Collateral,  agrees to waive any and
all claims such lessor, consignee or other person may, at any time, have against
such  Collateral,  whether for processing,  storage or otherwise,  and agrees to
permit Agent access to, and the right to remain on, the premises of such lessor,
consignee  or other  person so as to exercise  Agent's  rights and  remedies and
otherwise deal with such  Collateral  and, in the case of any consignee or other
person who at any time has custody,  control or  possession  of any  Collateral,
acknowledges  that it holds and will hold  possession of the  Collateral for the
benefit  of Agent and agrees to follow all  instructions  of Agent with  respect
thereto.

      "Collection  Period"  shall have the meaning  set forth in Section  2.4(b)
hereof.

      "Commitment  Percentage" of any Lender shall mean the percentage set forth
below such Lender's  name on the  signature  page hereof as same may be adjusted
upon any assignment by a Lender pursuant to Section 16.4(b) hereof.

      "Commitment  Transfer  Supplement"  shall mean a  document  in the form of
EXHIBIT 16.4 hereto,  properly  completed  and  otherwise in form and  substance
satisfactory  to Agent by which the  Purchasing  Lender  purchases and assumes a
portion of the obligation of Lenders to make Advances under this Agreement.

      "Consents" shall mean, with respect to each Borrower,  all filings and all
licenses,  permits,  consents,  approvals,  authorizations,  qualifications  and
orders of governmental authorities and other third parties, domestic or foreign,
necessary to carry on any Borrower's  business,  including,  without limitation,
any consents  required under all applicable  federal,  state or other applicable
law.

      "Contract Rate" shall mean the Revolving Interest Rate.

      "Controlled  Group"  shall  mean  all  members  of a  controlled  group of
corporations and all trades or businesses  (whether or not  incorporated)  under
common  control  which,  together  with any  Borrower,  are  treated as a single
employer under Section 414 of the Code.

      "Cost" shall mean,  as to the  Inventory as of any date,  the cost of such
Inventory  as  of  such  date,  determined  on  a  first-in-first-out  basis  in
accordance with GAAP.

                                       6
<PAGE>

      "Credit Card Acknowledgments"  shall mean,  individually and collectively,
the agreements by Credit Card Issuers or Credit Card  Processors who are parties
to Credit Card Agreements in favor of Agent acknowledging Agent's first priority
security  interest  in the  monies  due  and  to  become  due  to  any  Borrower
(including,  without  limitation,  credits and  reserves)  under the Credit Card
Agreements,  and agreeing to transfer all such amounts to the Blocked  Accounts,
as the same now  exist or may  hereafter  be  amended,  modified,  supplemented,
extended, renewed, restated or replaced.

      "Credit  Card  Agreements"  shall  mean all  agreements  now or  hereafter
entered  into by any  Borrower  with any Credit  Card  Issuer or any Credit Card
Processor,  as the  same  now  exist  or may  hereafter  be  amended,  modified,
supplemented,  extended,  renewed,  restated  or  replaced,  including,  but not
limited to, the agreements set forth on SCHEDULE 5.23 hereto.

      "Credit Card  Issuer"  shall mean any person  (other than a Borrower)  who
issues or whose  members  issue credit  cards,  including,  without  limitation,
MasterCard  or VISA bank  credit or debit  cards or other  bank  credit or debit
cards issued through MasterCard International,  Inc., Visa, U.S.A., Inc. or Visa
International  and American  Express,  Discover,  Diners Club, Carte Blanche and
other non-bank credit or debit cards, including,  without limitation,  credit or
debit  cards  issued by or through  American  Express  Travel  Related  Services
Company, Inc. and Novus Services, Inc.

      "Credit Card  Processor"  shall mean any servicing or processing  agent or
any factor or financial  intermediary  who facilitates,  services,  processes or
manages the credit  authorization,  billing  transfer and/or payment  procedures
with respect to any of any Borrower's sales  transactions  involving credit card
or debit card purchases by customers using credit cards or debit cards issued by
any Credit Card Issuer (including,  but not limited to Citicorp Credit Services,
Inc.)

      "Credit Card  Receivables"  shall mean  collectively,  (a) all present and
future  rights of each  Borrower to payment from any Credit Card Issuer,  Credit
Card  Processor or other third party arising from sales of goods or rendition of
services to customers who have  purchased  such goods or services using a credit
or debit card and (b) all present and future  rights of each Borrower to payment
from any Credit  Card  Issuer,  Credit  Card  Processor  or other third party in
connection with the sale or transfer of Accounts arising pursuant to the sale of
goods or  rendition of services to customers  who have  purchased  such goods or
services using a credit card or a debit card, including, but not limited to, all
amounts at any time due or to become due from any Credit  Card  Issuer or Credit
Card Processor under the Credit Card Agreements or otherwise.

      "Customer"  shall mean and include the account  debtor with respect to any
Receivable  and/or the  prospective  purchaser  of goods,  services or both with
respect to any contract or contract  right,  and/or any party who enters into or
proposes to enter into any  contract  or other  arrangement  with any  Borrower,
pursuant to which such  Borrower is to deliver any personal  property or perform
any services.

      "Default" shall mean an event which,  with the giving of notice or passage
of time or both, would constitute an Event of Default.

      "Default  Rate" shall mean a rate equal to two  percent  (2%) per annum in
excess of the Contract Rate or the Overadvance Rate, as the case may be.

                                       7
<PAGE>

      "Defaulting  Lender"  shall have the meaning set forth in Section  2.14(a)
hereof.

      "Deposit Account Control Agreement" shall mean an agreement in writing, in
form and substance  satisfactory to Agent, by and among Agent, each Borrower and
any bank at which any deposit account of such Borrower is at any time maintained
which provides that such bank will comply with instructions  originated by Agent
directing  disposition  of the  funds in the  deposit  account  without  further
consent  by such  Borrower  and such  other  terms and  conditions  as Agent may
require, including as to any such agreement with respect to any Blocked Account,
providing that all items  received or deposited in the Blocked  Accounts are the
property of Agent,  that the bank has no lien upon,  or right to setoff  (except
with  regard to the usual and  customary  charges  of the bank for such  Blocked
Account Services) against, the Blocked Accounts,  the items received for deposit
therein,  or the funds  from time to time on deposit  therein  and that the bank
will wire, or otherwise  transfer,  in immediately  available  funds, on a daily
basis to the Payment  Account all funds  received or deposited  into the Blocked
Accounts.

      "Documents" shall have the meaning set forth in Section 8.1(b) hereof.

      "Dollars" and the sign "$" shall mean lawful money of the United States of
America.

      "Domestic Rate Loan" shall mean any Advance that bears interest based upon
the Alternate Base Rate.

      "EBITDA"  shall mean for any given period for Borrowers on a  Consolidated
Basis (a) net  income  (or loss)  determined  in  accordance  with GAAP less all
extraordinary  gains plus (b) cash payments of taxes,  plus (c) cash payments of
interest  expense plus (d)  depreciation  and  amortization  and other  non-cash
expenses  during such period (to the extent  deducted in the  computation of net
income (or loss) for such period).

      "Eligible  Inventory" shall mean Inventory located in the United States of
America or the Commonwealth of Puerto Rico consisting of finished goods held for
resale in the ordinary  course of the business of Borrowers  that are acceptable
to Agent based on the criteria set forth below. In general,  Eligible  Inventory
shall not include (a)  packaging  and shipping  materials;  (b) supplies used or
consumed in  Borrowers'  business;  (c)  Inventory at premises  other than those
owned,  leased  and/or  controlled  by a Borrower,  (d)  Inventory  subject to a
security  interest or lien in favor of any person  other than Agent except those
permitted in this Agreement including Permitted Encumbrances;  (e) bill and hold
goods; (f) unserviceable, obsolete or slow moving Inventory; (g) Inventory which
is not subject to the first priority,  valid and perfected  security interest of
Agent; (h) damaged and/or defective Inventory (i) returned Inventory that is not
held for resale; (j) Inventory to be returned to vendors;  (k) Inventory subject
to  deposits  made by  customers  for  sales  of  Inventory  that  has not  been
delivered;  (l) Inventory held after the applicable expiration date thereof; (m)
samples;  and (n) Inventory  purchased or sold on consignment.  General criteria
for Eligible Inventory may be established and revised from time to time by Agent
in its sole and absolute discretion.

      "Environmental  Complaint"  shall  have the  meaning  set forth in Section
4.19(c) hereof.

                                       8
<PAGE>

      "Environmental   Laws"   shall   mean  all   federal,   state   and  local
environmental,  land use,  zoning,  health,  chemical use, safety and sanitation
laws,  statutes,  ordinances  and  codes  relating  to  the  protection  of  the
environment   and/or  governing  the  use,   storage,   treatment,   generation,
transportation,  processing,  handling,  production  or  disposal  of  Hazardous
Substances and the rules, regulations,  policies,  guidelines,  interpretations,
decisions,  orders  and  directives  of  federal,  state and local  governmental
agencies and authorities with respect thereto.

      "Equipment"  shall mean and include with respect to each Borrower,  all of
such Borrower's now owned and hereafter  acquired  equipment,  wherever located,
including  machinery,  data  processing  and  computer  equipment  and  computer
hardware  and  software,  whether  owned or  licensed,  and  including  embedded
software, vehicles, tools, furniture, fixtures, all attachments,  accessions and
property now or hereafter affixed thereto or used in connection  therewith,  and
substitutions and replacements thereof, wherever located.

      "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and the rules and regulations promulgated thereunder.

      "Event of  Default"  shall  mean the  occurrence  of any of the events set
forth in Article 10 hereof.

      "Existing  Agreement"  shall have the meaning set forth in the preamble to
this Agreement.

      "Federal Funds Rate" shall mean, for any day, the weighted  average of the
rates on  overnight  Federal  funds  transactions  with  members of the  Federal
Reserve System arranged by Federal funds brokers,  as published for such day (or
if such day is not a Business Day, for the next immediately  preceding  Business
Day)  by the  Federal  Reserve  Bank  of New  York,  or if  such  rate is not so
published  for any day which is a Business  Day, the average of  quotations  for
such day on such  transactions  received  by the Bank from three  Federal  funds
brokers of recognized standing selected by the Bank.

      "Fee  Letter"  shall mean the fee letter dated as of the date hereof among
Borrowers and Agent.

      "Fixed  Charge  Coverage  Ratio"  shall mean as at the end of each  fiscal
quarter,  determined with respect to the Borrowers on a Consolidated  Basis, the
ratio for any given  computation  period of (a) EBITDA minus unfinanced  capital
expenditures to (b) the sum of (i) the interest  expense  (including all imputed
interest on capital  lease  obligations  of  Borrowers)  plus (ii) the aggregate
amount  of all  scheduled  debt  repayments  (including  all  imputed  principal
payments on capital lease  obligations  of Borrowers but excluding all Revolving
Advances)  plus (iii) cash  taxes paid by the  Borrowers,  in all cases for such
quarter.

      "Formula Amount" shall have the meaning set forth in Section 2.1(a).

      "Funded  Debt"  shall  mean  for  Borrowers  on  a   Consolidated   Basis,
liabilities  for  borrowed  money,  including,  without  limitation,  undrawn or
unreimbursed  Letters of Credit (to the  extent  such  Letters of Credit are not
specifically secured one hundred percent (100%) by cash or cash equivalents) and
capitalized lease obligations,  but excluding all liabilities for borrowed money
subordinated to the Obligations of Borrowers to Agent and Lenders hereunder.

                                       9
<PAGE>

      "GAAP" shall mean generally accepted  accounting  principles in the United
States of America in effect from time to time.

      "General  Intangibles"  shall mean and include as to each  Borrower all of
such Borrower's  general  intangibles,  whether now owned or hereafter  acquired
including, without limitation, all choses in action, causes of action, corporate
or  other  business  records,   patents,  patent  rights,  patent  applications,
equipment formulations,  manufacturing  procedures,  quality control procedures,
trademarks,  service marks,  service mark applications,  goodwill (including any
goodwill  associated  with  any  trademark  or the  license  of any  trademark),
copyrights, works which are the subject matter of copyrights, rights in works of
authorship,  copyright  registrations,   inventions,  trade  secrets,  formulae,
processes,  compounds, drawings, designs, blueprints,  surveys, reports, manuals
and operating standards,  design rights,  registrations,  licenses,  franchises,
customer  lists,  tax refunds,  tax refund claims,  computer  programs,  domaine
names,  domaine name  registrations,  software and contract  rights  relating to
software, all claims under guaranties, security interests or other security held
by or granted to such  Borrower  to secure  payment of any of the  Accounts by a
Customer,  all rights of  indemnification  and all other intangible  property of
every kind and nature (other than Receivables).

      "GMAC  CF"  shall  have the  meaning  set  forth in the  preamble  to this
Agreement and shall include its successors and assigns.

      "Governmental  Body"  shall  mean any nation or  government,  any state or
other political  subdivision  thereof or any entity  exercising the legislative,
judicial,   regulatory  or  administrative  functions  of  or  pertaining  to  a
government.

      "Guarantor"  shall mean E Com Ventures,  Inc. and any other Person that at
any time executes a Guaranty.

      "Guaranty" shall mean individually and collectively,  each guaranty of the
obligations of Borrowers executed by a Guarantor in favor of Agent and Lenders.

      "Hazardous  Discharge" shall have the meaning set forth in Section 4.19(c)
hereof.

      "Hazardous  Substance"  shall  mean,  without  limitation,  any  flammable
explosives,  radon,  radioactive  materials,  asbestos,  urea  formaldehyde foam
insulation,   polychlorinated  biphenyls,   petroleum  and  petroleum  products,
methane, hazardous materials, Hazardous Wastes, hazardous or toxic substances or
related materials as defined in CERCLA, the Hazardous  Materials  Transportation
Act, as amended (49 U.S.C.  Sections 1801, et seq.), RCRA, Articles 15 and 27 of
the New  York  State  Environmental  Conservation  Law or any  other  applicable
Environmental Law and in the regulations adopted pursuant thereto.

      "Hazardous  Wastes" shall mean all waste  materials  subject to regulation
under CERCLA, RCRA or applicable state law, and any other applicable Federal and
state  laws  now in force or  hereafter  enacted  relating  to  hazardous  waste
disposal.

                                       10
<PAGE>

      "Indebtedness" of a Person at a particular date shall mean all obligations
of such Person which in accordance  with GAAP would be classified upon a balance
sheet as liabilities  (except capital stock and surplus earned or otherwise) and
in any event,  without  limitation by reason of  enumeration,  shall include all
indebtedness, debt and other similar monetary obligations of such Person whether
direct or guaranteed,  and all premiums,  if any, due at the required prepayment
dates of such  indebtedness,  and all  indebtedness  secured by a Lien on assets
owned by such Person,  whether or not such indebtedness actually shall have been
created,  assumed or incurred by such Person.  Any  indebtedness  of such Person
resulting from the  acquisition by such Person of any assets subject to any Lien
shall be deemed,  for the purposes hereof, to be the equivalent of the creation,
assumption and incurring of the  indebtedness  secured  thereby,  whether or not
actually so created, assumed or incurred.

      "Interest  Period" shall mean the period  provided for any LIBOR Rate Loan
pursuant to Section 2.2(c).

      "Inventory" shall mean and include, with respect to each Borrower,  all of
such  Borrower's now owned and hereafter  existing or acquired  goods,  wherever
located,  which (a) are leased by such Borrower as lessor;  (b) are held by such
Borrower for sale or lease or to be furnished  under a contract of service;  (c)
are  furnished by such Borrower  under a contract of service;  or (d) consist of
raw materials,  work in process, finished goods or materials used or consumed in
its business.

      "Inventory  Advance  Rate"  shall  have the  meaning  set forth in Section
2.1(a)(i) hereof.

      "Investment  Property  Control  Agreement"  shall  mean  an  agreement  in
writing,  in form and substance  satisfactory to Agent, by and among Agent, each
Borrower and any securities intermediary, commodity intermediary or other person
who has  custody,  control or  possession  of any  investment  property  of such
Borrower acknowledging that such securities intermediary, commodity intermediary
or other person has custody,  control or possession of such investment  property
on behalf of Agent,  that it will comply with entitlement  orders  originated by
Agent with respect to such investment property,  or other instructions of Agent,
or (as the case may be) apply any value  distributed on account of any commodity
contract as directed by Agent, in each case, without the further consent of such
Borrower and including such other terms and conditions as Agent may require.

      "Leasehold  Interests"  shall mean all of  Borrowers'  present  and future
right, title and interest in and to any leased premises.

      "Lender" and "Lenders" shall have the meaning ascribed to such term in the
preamble to this  Agreement and shall include each Person which is a transferee,
successor or assign of any Lender.

      "Letters of Credit" shall have the meaning set forth in Section 2.7.

      "Letter of Credit  Fees"  shall have the  meaning set forth in Section 3.2
hereof.

      "Leverage  Ratio"  shall mean as at the end of each  fiscal  quarter,  the
ratio, for any given computation period of (a) Funded Debt to (b) EBITDA.

      "LIBOR  Rate"  shall  mean for any LIBOR  Rate  Loan for the then  current
Interest Period relating thereto,  the rate per annum quoted by the Bank two (2)
Business Days prior to the first day of such Interest Period for the offering by
the Bank to prime commercial banks in the London interbank  Eurodollar market of
Dollar  deposits  in  immediately  available  funds  for a period  equal to such
Interest Period and in an amount equal to the amount of such LIBOR Rate Loan.

                                       11
<PAGE>

      "LIBOR  Rate Loan"  shall mean an Advance at any time that bears  interest
based upon the LIBOR Rate.

      "Lien"  shall mean any  mortgage,  deed of trust,  pledge,  hypothecation,
assignment,  security interest, lien (whether statutory or otherwise),  Charges,
claim or  encumbrance,  or preference,  priority or other security  agreement or
preferential arrangement held or asserted in respect of any asset of any kind or
nature whatsoever including,  without limitation,  any conditional sale or other
title  retention  agreement,  any lease having  substantially  the same economic
effect as any of the  foregoing,  and the filing of, or agreement  to give,  any
financing  statement under the Uniform  Commercial Code or comparable law of any
jurisdiction.

      "Material  Adverse Effect" shall mean a material adverse effect on (a) the
condition,  operations,  assets or  business  prospects  of the  Borrowers  on a
Consolidated Basis, (b) the Borrowers' collective ability to pay the Obligations
in accordance with the terms thereof, (c) the value of the Collateral, the Liens
on the  Collateral  or the  priority  of any  such  Lien  or (d)  the  practical
realization  of the benefits of Agent's and Lenders'  rights and remedies  under
this Agreement and the Other Documents.

      "Maximum Loan Amount" shall mean $60,000,000.

      "Maximum Revolving Advance Amount" shall mean $60,000,000.

      "Monthly Advances" shall have the meaning set forth in Section 3.1 hereof.

      "Multiemployer  Plan"  shall  mean a  "multiemployer  plan" as  defined in
Sections 3(37) and 4001(a)(3) of ERISA.

      "Net  Orderly  Liquidation  Value"  shall  mean  the  amount  equal to the
recovery on the aggregate  amount of Inventory at such time on a "store  closing
sale"  basis or a "going out of  business  sale"  basis as set forth in the most
recent  appraisal of Inventory  reasonably  acceptable to and received by Agent,
net of  operating  expenses  incurred  during  the  period of  liquidation,  and
liquidation expenses and commissions.

      "Obligations"  shall  mean  and  include  any and  all of each  Borrower's
Indebtedness and/or liabilities to Agent or Lenders or any Affiliate of Agent or
any Lender of every kind, nature and description, direct or indirect, secured or
unsecured,  joint, several, joint and several, absolute or contingent, due or to
become  due,  now  existing  or  hereafter  arising,  contractual  or  tortious,
liquidated or unliquidated,  arising under or in connection with this Agreement,
the Other Documents or any transactions hereunder or thereunder,  including, but
not limited to, any and all of any Borrower's  Indebtedness  and/or  liabilities
under this Agreement,  the Other Documents or under any other agreement  between
Agent or Lenders and any Borrower and all  obligations  of any Borrower to Agent
or Lenders to perform acts or refrain from taking any action.

                                       12
<PAGE>

      "Original  Owners" shall mean E Com Ventures,  Inc.,  Stephen Nussdorf and
Glenn Nussdorf.

      "Other  Documents"  shall  mean the  Questionnaire  and any and all  other
agreements,  instruments and documents,  including,  without limitation,  notes,
guaranties,   pledges,  additional  security  agreements,  powers  of  attorney,
consents,  and all other writings  heretofore,  now or hereafter executed by any
Borrower  and/or  delivered by or on behalf of a Borrower to Agent or any Lender
in respect of the transactions contemplated by this Agreement.

      "Overadvance" shall have the meaning set forth in Section 3.1 hereof.

      "Overadvance  Rate" shall mean a per annum rate equal to one percent  (1%)
in excess of the  applicable  Revolving  Interest  Rate and the Letter of Credit
Fees, as the case may be.

      "Parent" of any Person shall mean a  corporation  or other entity  owning,
directly or  indirectly,  at least fifty percent (50%) of the shares of stock or
other  ownership  interests  having ordinary voting power to elect a majority of
the directors of the Person, or other Persons  performing  similar functions for
any such Person.

      "Payment Account" shall have the meaning set forth in Section  4.15(h)(ii)
hereof.

      "Payment  Office" shall mean  initially  1290 Avenue of the Americas,  New
York,  New York;  thereafter,  such other office of Agent,  if any, which it may
designate by notice to Borrowing Agent to be the Payment Office.

      "PBGC" shall mean the Pension Benefit Guaranty Corporation.

      "Permitted  Encumbrances"  shall mean with  respect to each  Borrower  (a)
Liens in favor of Agent for itself and the ratable benefit of Lenders; (b) Liens
for taxes,  assessments or other  governmental  charges either not delinquent or
being contested in good faith by appropriate proceedings and, in each case, with
respect to which proper reserves have been taken by Borrowers;  provided,  that,
the Lien shall have no effect on the  priority of the Liens in favor of Agent or
the value of the assets in which Agent has such a Lien and a stay of enforcement
of any such Lien  shall be in  effect;  (c)  Liens  disclosed  in the  financial
statements  referred  to in  Section  5.5,  the  existence  of which  Agent  has
consented to in writing;  (d) deposits or pledges of cash to secure  obligations
under  worker's  compensation,   social  security  or  similar  laws,  or  under
unemployment insurance; (e) deposits or pledges of cash to secure bids, tenders,
contracts  (other than  contracts for the payment of money),  leases,  statutory
obligations,  surety  and  appeal  bonds and other  obligations  of like  nature
arising in the ordinary  course of any Borrower's  business;  (f) judgment Liens
that  have  been  stayed  or  bonded  and   mechanics',   workers',   landlord's
materialmen's  or  other  like  Liens  arising  in the  ordinary  course  of any
Borrower's  business with respect to obligations  which are not due or which are
being contested in good faith by the applicable Borrower;  (g) Liens placed upon
fixed  assets  hereafter  acquired  to secure a portion  of the  purchase  price
thereof,  provided that (i) any such lien shall not encumber any other  property
of the Borrowers and (ii) the aggregate  amount of Indebtedness  secured by such
Liens  incurred as a result of such  purchases  during any fiscal year shall not
exceed the amount  provided  for in Section 7.6  hereof;  (h) Liens or rights of
setoff or credit  balances of any  Borrower  with Credit Card  Issuers,  but not
Liens on or  rights  of  setoff  against  any  other  property  or assets of any
Borrower  pursuant  to the  Credit  Card  Agreements  (as in  effect on the date
hereof) to secure the  obligations of any Borrower to the Credit Card Issuers as
a result  of fees and  chargebacks;  and (i) Liens  disclosed  on  SCHEDULE  1.2
hereto.

                                       13
<PAGE>

      "Person"  shall mean any  individual,  sole  proprietorship,  partnership,
corporation,   business  trust,  joint  stock  company,  trust,   unincorporated
organization association, limited liability company, institution, public benefit
corporation,  joint  venture,  entity or  government  (whether  Federal,  state,
county, city, municipal or otherwise,  including any instrumentality,  division,
agency, body or department thereof).

      "Plan" shall mean any employee  benefit plan within the meaning of Section
3(3) of ERISA,  maintained  for  employees  of any Borrower or any member of the
Controlled  Group or any such Plan to which any  Borrower  or any  member of the
Controlled Group is required to contribute on behalf of any of its employees.

      "Prepayment Date" shall have the meaning set forth in Section 13.1 hereof.

      "Prime Rate" shall mean the prime  commercial  lending rate of the Bank as
publicly  announced to be in effect from time to time,  such rate to be adjusted
automatically, without notice, on the effective date of any change in such rate.
This rate of interest is determined  from time to time by the Bank as a means of
pricing some loans to its  customers and is neither tied to any external rate of
interest  or index nor does it  necessarily  reflect the lowest rate of interest
actually charged by the Bank to any particular class or category of customers of
the Bank.

      "Pro Forma  Balance  Sheet"  shall have the  meaning  set forth in Section
5.5(a) hereof.

      "Pro  Forma  Financial  Statements"  shall have the  meaning  set forth in
Section 5.5(b) hereof.

      "Projections" shall have the meaning set forth in Section 5.5(b) hereof.

      "Purchasing  Lender"  shall have the meaning set forth in Section  16.4(c)
hereof.

      "Questionnaire" shall mean the Documentation Information Questionnaire and
the responses thereto provided by Borrowers and delivered to Agent.

      "RCRA" shall mean the Resource  Conservation  and Recovery  Act, 42 U.S.C.
ss.ss. 6901 et seq., as same may be amended from time to

      time.

      "Real  Property"  shall mean,  with respect to each Borrower,  all of such
Borrower's right, title and interest in and to its owned and leased premises.

      "Receivables" shall mean and include,  with respect to each Borrower,  all
of the  following  now owned or hereafter  arising or acquired  property of such
Borrower: (a) all Accounts; (b) all amounts at any time payable to such Borrower
in respect of the sale or other  disposition  by such Borrower or any Account or
other obligation for the payment of money; (c) all interest, fees, late charges,
penalties,  collection  fees and other amounts due or to become due or otherwise
payable in connection with any Account; (d) all Credit Card Receivables, and (e)
all payment  intangibles  of such Borrower and other  contract  rights,  chattel
paper,  instruments,  notes,  and  other  forms  of  obligations  owing  to such
Borrower, whether from the sale and lease of goods or other property,  licensing
of any property (including  Intellectual Property or other general intangibles),
rendition  of services  or from loans or advances by such  Borrower or to or for
the benefit of any third person  (including  loans or advances to any Affiliates
or  Subsidiaries  of such Borrower) or otherwise  associated  with any Accounts,
Inventory  or  General   Intangibles  of  such  Borrower   (including,   without
limitation,  choses in action, causes of action, tax refunds, tax refund claims,
any funds  which may become  payable to such  Borrower  in  connection  with the
termination  of any Plan or other  employee  benefit plan and any other  amounts
payable to such Borrower from any Plan or other  employee  benefit plan,  rights
and claims against carriers and shippers,  rights to  indemnification,  business
interruption  insurance and proceeds  thereof,  casualty or any similar types of
insurance and any proceeds thereof and proceeds of insurance  covering the lives
of employees on which Borrower is beneficiary).

                                       14
<PAGE>

      "Records"  shall  mean,  with  respect  to  each  Borrower,  all  of  such
Borrower's present and future books of account of every kind or nature, purchase
and sale agreements,  invoices, ledger cards, bills of lading and other shipping
evidence,  statements,  correspondence,  memoranda,  credit files and other data
relating to the  Collateral  or any  account  debtor,  together  with the tapes,
disks,  diskettes and other data and software  storage  media and devices,  file
cabinets or containers in or on which the  foregoing are stored  (including  any
rights of such Borrower with respect to the foregoing  maintained with or by any
other person).

      "Release" shall have the meaning set forth in Section 5.7(c)(i) hereof.

      "Rent  Reserve"  shall  mean (a)  prior to the  occurrence  of a  Default,
$350,000,  and (b)after the occurrence of a Default and during its  continuance,
$350,000 plus all past due rental  payments,  services charges and other amounts
due to the owners and lessors of any real property leased by Borrowers.

      "Reportable  Event"  shall mean a  reportable  event  described in Section
4043(b) of ERISA or the regulations promulgated thereunder.

      "Required  Lenders"  shall mean  Lenders  holding at least  sixty-six  and
two-thirds  percent (66 2/3%) of the  Advances,  EXCEPT,  THAT,  at any time the
number  of  Lenders  signatory  to this  Agreement  is equal to two (2) or less,
"Required Lenders" shall mean all Lenders.

      "Reserves"  shall mean all  Obligations  then chargeable to any account of
Borrowers,  as well as  Obligations  which may, in Agent's sole  discretion,  be
chargeable to Borrowers' account thereafter,  in each case, without duplication,
by reason of or in connection with any of the following:  steamship  guarantees;
airway releases;  to adjust for  audit/examination of Borrowers'  accounts(s) or
for any documentation  correction;  and such additional reserves as Agent in its
sole discretion,  exercised in good faith, deems appropriate. In addition to and
not in limitation of the  foregoing,  Reserves  shall  include,  in Agent's sole
discretion,  with  respect to Borrowers  (a) to reflect  events,  conditions  or
contingencies  that,  as determined  by Agent in it sole  discretion,  adversely
affect or would  adversely  affect the  security  interests  and other rights of
Agent in the Collateral  (including the enforceability,  perfection and priority
thereof), or (b) to reflect Agent's good faith belief that any collateral report
or financial  information  furnished by or on behalf of Borrowers to Agent is or
may have been incomplete,  inaccurate or misleading in any material respect,  or
(c) in  respect  of any state of facts  which  Agent  determines  in good  faith
constitutes  an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default, or (d) to reflect inventory shrinkage, or (e) to
reflect amounts due or to become due in respect of sales, use and/or withholding
taxes,  provided,  that,  a Reserve  pursuant  to this  CLAUSE  (E) will only be
established if (i) Undrawn  Availability (after giving effect to any reserve for
such amounts) shall be less than $500,000 or (ii) Default or an Event of Default
shall exist or have occurred and be  continuing,  or (f) the Rent Reserve or (g)
to reflect  amounts  owing by  Borrowers  to Credit Card  Issuers or Credit Card
Processors in connection with the Credit Card Agreements.

                                       15
<PAGE>

      "Retail  Inventory"  shall mean all finished goods Inventory to be sold by
Borrowers at a retail store location owned or leased by Borrowers.

      "Revolving  Advances"  shall mean  Advances  made  other  than  Letters of
Credit.

      "Revolving  Interest  Rate"  shall mean a per annum  interest  rate on all
Revolving  Advances  equal to as  applicable:  (a) with respect to Domestic Rate
Loans,  the sum of the  Alternate  Base  Rate  plus the  Applicable  Margin  for
Domestic  Rate Loans,  or (b) with  respect to LIBOR Rate Loans,  the sum of the
LIBOR Rate plus the Applicable Margin for LIBOR Rate Loans.

      "Settlement  Date" shall mean the Closing  Date and  thereafter  Friday of
each week  (unless  such day is not a Business Day in which case it shall be the
next succeeding Business Day) or such other date as Agent may elect.

      "Subordinated  Debt  Payments"  shall mean and include  all cash  actually
expended  to  make  payments  of  principal  and  interest  on the  Subordinated
Indebtedness.

      "Subordinated Debt  Documentation"  shall mean collectively,  the Security
Agreement  dated as of March 9, 2004 by and among  Perfumania  and  Subordinated
Lender,  the  Subordinated  Note,  and  all  agreements,  documents,  notes  and
instruments at any time executed  and/or  delivered by any Borrower or any other
person to, with or in favor of  Subordinated  Lender in connection  therewith or
related thereto,  as all of the foregoing now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

      "Subordinated  Indebtedness"  shall mean all Indebtedness now or hereafter
due and owing  Subordinated  Lender by any Borrowers under the Subordinated Debt
Documentation or otherwise.

      "Subordinated Lender" shall mean, collectively, Stephen Nussdorf and Glenn
Nussdorf.

      "Subordinated  Note" shall mean that certain  Subordinated  Secured Demand
Note,  dated March 9, 2004 by Perfumania in favor of Subordinated  Lender in the
original principal amount of $5,000,000, as in effect on the date hereof.

      "Subordination  Agreement" shall mean the Subordination Agreement dated as
of the date hereof among Agent, Lenders, Borrowers and Subordinated Lender.

                                       16
<PAGE>

      "Subsidiary"  shall mean a corporation  or other entity of whose shares of
stock or other  ownership  interests  having  ordinary  voting power (other than
stock or other  ownership  interests  having  such  power  only by reason of the
happening  of a  contingency)  to  elect a  majority  of the  directors  of such
corporation,  or other Persons performing similar functions for such entity, are
owned, directly or indirectly, by such Person.

      "Subsidiary  Stock" shall mean all of the issued and outstanding shares of
stock  owned  by  Perfumania  of (a)  Ten  Kesef,  a  Florida  corporation,  (b)
Perfumania-Puerto Rico, a Puerto Rico corporation, and (c) Magnifique, a Florida
corporation.

      "Term" shall mean the Closing Date through May __, 2007.

      "Termination  Event"  shall  mean  with  respect  to each  Borrower  (a) a
Reportable  Event  with  respect  to any  Plan or  Multiemployer  Plan;  (b) the
withdrawal of any Borrower or any member of the Controlled  Group from a Plan or
Multiemployer  Plan during a plan year in which such  entity was a  "substantial
employer" as defined in Section 4001(a)(2) of ERISA; (c) the providing of notice
of intent to  terminate a Plan in a distress  termination  described  in Section
4041(c) of ERISA;  (d) the institution by the PBGC of proceedings to terminate a
Plan  or  Multiemployer  Plan;  (e) any  event  or  condition  (i)  which  might
constitute  grounds under Section 4042 of ERISA for the  termination  of, or the
appointment of a trustee to administer,  any Plan or Multiemployer Plan, or (ii)
that may result in termination of a Multiemployer Plan pursuant to Section 4041A
of ERISA;  or (f) the  partial or  complete  withdrawal  within  the  meaning of
Sections 4203 and 4205 of ERISA, of any Borrower or any member of the Controlled
Group from a Multiemployer Plan.

      "Toxic  Substance" shall mean and include any material present on the Real
Property or the  Leasehold  Interests  which has been shown to have  significant
adverse effect on human health or which is subject to regulation under the Toxic
Substances Control Act (TSCA), 15 U.S.C.  ss.ss. 2601 et seq.,  applicable state
law,  or any other  applicable  Federal or state laws now in force or  hereafter
enacted  relating to toxic  substances.  "Toxic  Substance"  includes but is not
limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.

      "Transactions" shall have the meaning set forth in Section 5.5(a) hereof.

      "Transferee" shall have the meaning set forth in Section 16.4(b) hereof.

      "UCC" shall mean the Uniform  Commercial Code as in effect in the State of
New York, and any successor statute, as in effect from time to time (except that
terms used herein which are defined in the Uniform  Commercial Code as in effect
in the  State of New York on the date  hereof  shall  continue  to have the same
meaning  notwithstanding  any replacement or amendment of such statute except as
Agent may otherwise determine).

      "Undrawn  Availability" at a particular date shall mean an amount equal to
(a) the lesser of (i) the Formula Amount or (ii) the Maximum Loan Amount,  minus
(b) the outstanding amount of Advances.

      "Value" shall mean, as determined by Agent, with respect to Inventory, the
lower of (a) Cost or (b) market value.

                                       17
<PAGE>

      "Week" shall mean the time period  commencing  with a Wednesday and ending
on the following Tuesday.

      "Wholesale   Inventory"   shall  mean  all  finished  goods  Inventory  of
Borrowers, other than Retail Inventory.

      "Working  Capital" at a particular  date,  shall mean the excess,  if any,
with respect to the Borrowers on a  Consolidated  Basis,  of Current Assets over
Current Liabilities at such date.

      1.3 UNIFORM  COMMERCIAL  CODE TERMS.  All terms used herein and defined in
the UCC shall have the meaning given therein unless otherwise defined herein.

      1.4 CERTAIN  MATTERS OF  CONSTRUCTION.  The terms  "herein",  "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular  section,  paragraph or subdivision.  Any pronoun used
shall be deemed to cover all genders. Wherever appropriate in the context, terms
used  herein in the  singular  also  include  the  plural  and vice  versa.  All
references to statutes and related  regulations  shall include any amendments of
same  and  any  successor  statutes  and  regulations.  All  references  to  any
instruments or agreements,  including, without limitation,  references to any of
the Other  Documents  shall  include  any and all  modifications  or  amendments
thereto and any and all extensions or renewals thereof.

2.    ADVANCES, PAYMENTS.

      2.1 (A) TOTAL REVOLVING ADVANCES.  Subject to the terms and conditions set
forth in this Agreement,  including,  without  limitation,  Section 2.1(b), each
Lender,  severally and not jointly, will make Revolving Advances to Borrowers in
aggregate  amounts  outstanding  at any  time not  greater  than  such  Lender's
Commitment  Percentage of the lesser of (x) the Maximum Revolving Advance Amount
less the aggregate  undrawn  amount of  outstanding  Letters of Credit or (y) an
amount equal to the sum of:

            (i) up to the  lesser  of (A)  65%,  subject  to the  provisions  of
Section 2.1(b),  of Eligible  Inventory at such time, or (B) 90%, subject to the
provisions  of Section  2.1(b),  of the Net  Orderly  Liquidation  Value of such
Eligible  Inventory  at  such  time  (CLAUSES  (A)  AND  (B)  collectively,  the
"Inventory Advance Rate"), minus

            (ii) such Reserves as Agent may reasonably deem proper and necessary
from time to time.

The amount derived from (x) Section  2.1(a)(i)  minus (y) Section  2.1(a)(ii) at
any time and from time to time shall be referred to as the "Formula Amount".

      (b) DISCRETIONARY  RIGHTS.  The Inventory Advance Rate may be increased or
decreased  by Agent at any time  and from  time to time in the  exercise  of its
reasonable discretion. Each Borrower consents to any such increases or decreases
and  acknowledges  that decreasing the Inventory  Advance Rate or increasing the
reserves may limit or restrict Advances requested by a Borrower.

                                       18
<PAGE>

      (c)  INVENTORY  SUBLIMITS.  Notwithstanding  anything to the  contrary set
forth herein,  Borrowers hereby acknowledge,  confirm and agree that the maximum
amount of Wholesale  Inventory  which may be considered  Eligible  Inventory for
advance  purposes  hereunder shall not exceed,  at any given time, the aggregate
amount of $11,000,000.

      2.2 PROCEDURE FOR BORROWING REVOLVING ADVANCES.

            (a) Borrowing Agent, on behalf of Borrowers,  may notify Agent prior
to 11:00 a.m. on a Business Day of Borrowers'  request to incur,  on that day, a
Revolving  Advance  hereunder.  Such  request  shall  indicate the amount of the
requested  Revolving Advance.  Should any amount required to be paid as interest
hereunder,  or as fees or  other  charges  under  this  Agreement  or any  other
agreement  with Agent or any Lender,  or with  respect to any other  Obligation,
become due, same shall to the extent not otherwise  paid be deemed a request for
a Revolving  Advance  bearing  interest at the rate  applicable to Domestic Rate
Loans as of the date such payment is due, in the amount  required to pay in full
such  interest,  fee,  charge or  Obligation  under this  Agreement or any other
agreement with Agent or any Lender, and such request shall be irrevocable.

            (b) In the event  that  Borrowing  Agent,  on  behalf  of  Borrowers
desires to obtain a LIBOR Rate Loan,  Borrowing  Agent shall give Agent at least
three (3) Business  Days' prior written  notice,  specifying (i) the date of the
proposed  borrowing (which shall be a Business Day), (ii) the amount on the date
of such  LIBOR  Rate Loan to be  borrowed,  which  amount  shall be in a minimum
amount of $100,000 and in integral multiples of $100,000 in excess thereof,  and
(iii) the duration of the first Interest Period  therefor.  Interest Periods for
LIBOR Rate Loans  shall be for one,  two,  three or six  months.  The  aggregate
amount  of LIBOR  Rate  Loans  shall  not  exceed  eighty  percent  (80%) of the
aggregate amount of outstanding  Advances at any time, and there shall not be at
any time outstanding,  more than six (6) LIBOR Rate Loans, in the aggregate.  No
LIBOR Rate Loan shall be made available to any Borrower  during the  continuance
of a Default or an Event of Default.

            (c) Each Interest  Period of a LIBOR Rate Loan shall commence on the
date such LIBOR Rate Loan is made and shall end on such date as Borrowing  Agent
may elect as set forth in (b)(iii)  above provided that the exact length of each
Interest  Period  shall be  determined  in  accordance  with the practice of the
interbank  market for offshore  Dollar deposits and no Interest Period shall end
after the last day of the Term hereof.

            (d)  Borrowing  Agent  shall  elect  the  initial   Interest  Period
applicable  to a LIBOR  Rate  Loan by its  notice  of  borrowing  given to Agent
pursuant  to  Section  2.2(b)  or by its  notice  of  conversion  given to Agent
pursuant to Section 2.2(e),  as the case may be. Borrowing Agent shall elect the
duration of each succeeding Interest Period by giving irrevocable written notice
to Agent of such  duration  not less than three (3)  Business  Days prior to the
last day of the then current Interest Period applicable to such LIBOR Rate Loan.
If Agent  does not  receive  timely  notice of the  Interest  Period  elected by
Borrowing  Agent,  any Borrower  shall be deemed to have elected to convert to a
Domestic Rate Loan subject to Section 2.2(f) herein below.

                                       19
<PAGE>

            (e)  Provided  that no Event of Default  shall have  occurred and be
continuing,  any  Borrower  may, on the last  Business  Day of the then  current
Interest  Period  applicable  to any  outstanding  LIBOR  Rate  Loan,  or on any
Business Day with respect to Domestic  Rate Loans,  convert any such loan into a
loan of another type in the same aggregate  principal  amount  provided that any
conversion  of a LIBOR Rate Loan shall be made only on the last  Business Day of
the then current  Interest  Period  applicable  to such LIBOR Rate Loan.  If any
Borrower  desires to convert a loan,  Borrowing  Agent shall give Agent not less
than three (3) Business  Days' prior  written  notice to convert from a Domestic
Rate Loan to a LIBOR Rate Loan or one (1) Business Day's prior written notice to
convert from a LIBOR Rate Loan to a Domestic Rate Loan,  specifying  the date of
such  conversion,  the loans to be  converted  and if the  conversion  is from a
Domestic Rate Loan to any other type of loan, the duration of the first Interest
Period therefor. After giving effect to each such conversion, there shall not be
outstanding more than six (6) LIBOR Rate Loans, in the aggregate.

            (f) Each Borrower and Guarantor  shall  indemnify  Agent and Lenders
and hold  Agent and  Lenders  harmless  from and  against  any and all losses or
expenses  that Agent and Lenders may  sustain or incur as a  consequence  of any
prepayment,  conversion  of or any default by any Borrower in the payment of the
principal  of or interest  on any LIBOR Rate Loan or failure by any  Borrower to
complete a borrowing  of, a prepayment  of or  conversion  of or to a LIBOR Rate
Loan after  notice  thereof has been given,  including,  but not limited to, any
interest payable by Agent or Lenders to lenders of funds obtained by it in order
to make or maintain  its LIBOR Rate Loans  hereunder.  A  certificate  as to any
additional amounts payable pursuant to the foregoing sentence submitted by Agent
or any Lender to Borrowing Agent shall be conclusive absent manifest error.

            (g)  Notwithstanding  any other provision  hereof, if any applicable
law,  treaty,  regulation  or  directive,  or  any  change  therein  or  in  the
interpretation  or  application  thereof,  shall make it unlawful for any Lender
(for purposes of this subsection (g), the term "Lender" shall include any Lender
and the office or branch where any Lender or any corporation or bank controlling
such Lender  makes or  maintains  any LIBOR Rate Loans) to make or maintain  its
LIBOR Rate Loans,  the obligation of Lenders to make LIBOR Rate Loans hereunder,
as the case may be, shall forthwith be cancelled and Borrowing  Agent, on behalf
of  Borrowers,  shall,  if any affected  LIBOR Rate Loans are then  outstanding,
promptly upon request from Agent,  either pay all such affected LIBOR Rate Loans
or convert such  affected  LIBOR Rate Loans into loans of another  type.  If any
such payment or  conversion  of any LIBOR Rate Loan is made on a day that is not
the  last  day of the  Interest  Period  applicable  to such  LIBOR  Rate  Loan,
Borrowers shall pay Agent,  upon Agent's request,  such amount or amounts as may
be necessary to compensate Lenders for any loss or expense sustained or incurred
by Lenders  in  respect  of such LIBOR Rate Loan as a result of such  payment or
conversion, including (but not limited to) any interest or other amounts payable
by Lenders to lenders of funds  obtained by Lenders in order to make or maintain
such  LIBOR  Rate Loan.  A  certificate  as to any  additional  amounts  payable
pursuant to the foregoing sentence submitted by Lenders to Borrowing Agent shall
be conclusive absent manifest error.

      2.3 DISBURSEMENT OF ADVANCE PROCEEDS. All Advances shall be disbursed from
whichever  office  or other  place  Agent may  designate  from time to time and,
together  with any and all other  Obligations  of Borrowers to Agent or Lenders,
shall be  charged to  Borrowers'  account  on  Agent's  books.  During the Term,
Borrowers   may  use  the  Revolving   Advances  by  borrowing,   prepaying  and
reborrowing,  all in accordance with the terms and conditions of this Agreement.
The proceeds of each Revolving  Advance requested by Borrowers or deemed to have
been requested by Borrowers  under Section 2.2(a) hereof shall,  with respect to
requested Revolving Advances to the extent Lenders make such Revolving Advances,
be made available to the  applicable  Borrower on the day so requested by way of
credit to such  Borrower's  operating  account at The Bank of New York,  or such
other bank as Borrowing Agent may designate following  notification to Agent, in
federal funds or other immediately available funds or, with respect to Revolving
Advances deemed to have been requested by any Borrower, be disbursed to Agent to
be applied to the outstanding Obligations giving rise to such deemed request.

                                       20
<PAGE>

      2.4 REPAYMENT OF ADVANCES.

            (a) The Advances shall be due and payable in full on the last day of
the Term subject to earlier prepayment as herein provided.

            (b) Each Borrower  recognizes that the amounts  evidenced by checks,
notes,  drafts or any other  items of payment  relating  to and/or  proceeds  of
Collateral  may  not  be   collectible  by  Agent  on  the  date  received.   In
consideration of Agent's agreement to conditionally credit Borrowers' account as
of the  Business  Day on which  Agent  receives  those  items of  payment,  each
Borrower agrees that, in computing the charges under this  Agreement,  all items
of payment shall be deemed  applied by Agent on account of the  Obligations  one
(1) Business Day after  confirmation  to Agent by the Blocked  Account  bank, as
provided for in Section  4.15(h)  hereof (the  "Collection  Period"),  that such
items of payment  have been  collected  in good funds and  finally  credited  to
Agent's account.  Agent is not, however,  required to credit Borrowers'  account
for the amount of any item of payment which is unsatisfactory to Agent and Agent
may charge  Borrowers'  account  for the amount of any item of payment  which is
returned to Agent unpaid.

            (c) All payments of principal,  interest and other  amounts  payable
hereunder,  or under any of the related agreements shall be made to Agent at the
Payment Office not later than 1:00 P.M. (New York Time) on the due date therefor
in lawful money of the United  States of America in federal funds or other funds
immediately available to Agent. Agent shall have the right to effectuate payment
on any and all  Obligations  due and  owing  hereunder  by  charging  Borrowers'
account or by making Advances as provided in Section 2.2 hereof.

            (d) Borrowers shall pay principal,  interest,  and all other amounts
payable  hereunder,  or  under  any  Other  Documents,   without  any  deduction
whatsoever,  including,  but not  limited  to, any  deduction  for any setoff or
counterclaim.

      2.5  REPAYMENT  OF EXCESS  ADVANCES.  The  aggregate  balance of  Advances
outstanding  at any time in excess of the maximum  amount of Advances  permitted
hereunder  shall be  immediately  due and payable  without the  necessity of any
demand, at the Payment Office,  whether or not a Default or Event of Default has
occurred.

      2.6 STATEMENT OF ACCOUNT.  Agent shall  maintain,  in accordance  with its
customary procedures,  a loan account in the name of Borrowers in which shall be
recorded  the date and amount of each  Advance  made by Lenders and the date and
amount of each payment in respect  thereof;  provided,  however,  the failure by
Agent to record the date and amount of any Advance  shall not  adversely  affect
Agent or any Lender. Each month, Agent shall send to Borrowing Agent a statement
showing the  accounting  for the  Advances  made,  payments  made or credited in
respect thereof,  and other transactions  between Lenders and Borrowers,  during
such month.  The monthly  statements  shall be deemed  correct and binding  upon
Borrowers  in the  absence of  manifest  error and shall  constitute  an account
stated among Lenders and Borrowers unless Agent receives a written  statement of
Borrowers'  specific  exceptions  thereto within forty-five (45) days after such
statement is received by Borrowing  Agent.  The records of Agent with respect to
the loan  account  shall be prima facie  evidence of the amounts of Advances and
other charges thereto and of payments applicable thereto.

                                       21
<PAGE>

      2.7 LETTERS OF CREDIT.  Subject to the terms and conditions hereof,  Agent
shall issue, or cause Bank to issue,  Letters of Credit ("Letters of Credit") on
behalf of any Borrower;  provided,  however,  that Agent will not be required to
issue any Letters of Credit to the extent  that the face amount of such  Letters
of Credit  would then cause the sum of (a) the  outstanding  Revolving  Advances
plus (b) the outstanding  Letters of Credit (with the requested Letter of Credit
being deemed to be outstanding  for purposes of this  calculation) to exceed the
lesser of (i) the Maximum  Revolving  Advance Amount or (ii) the Formula Amount.
Each  Letter  of Credit  shall be issued  for the  ratable  risk of each  Lender
according to its pro rata share of the Advances. Notwithstanding anything to the
contrary contained herein,  the maximum amount of outstanding  Letters of Credit
shall not exceed  $1,000,000 in the aggregate at any time. All  disbursements or
payments  related to Letters of Credit shall be deemed to be Revolving  Advances
and shall bear interest at the Revolving  Interest Rate with respect to Domestic
Rate  Loans;  and Letters of Credit that have not been drawn upon shall not bear
interest.

      2.8 ISSUANCE OF LETTERS OF CREDIT.

            (a)  Borrowing  Agent on behalf of  Borrowers  may request  Agent to
issue,  or cause Bank to issue, a Letter of Credit by delivering to Agent at the
Payment Office, Agent's standard form of Letter of Credit and Security Agreement
together   with   Bank's   standard   form  of  Letter  of  Credit   Application
(collectively, the "Letter of Credit Application") completed to the satisfaction
of Agent and Bank; and, such other certificates,  documents and other papers and
information as Agent and Bank may reasonably request.

            (b) Each Letter of Credit shall, among other things, (i) provide for
the payment of sight drafts when  presented  for honor  thereunder in accordance
with the terms thereof and when accompanied by the documents  described  therein
and (ii) have an expiry date not later than twelve (12) months after such Letter
of  Credit's  date of  issuance  and in no event  later than the last day of the
Term.  Each  Letter of Credit  Application  and each  Letter of Credit  shall be
subject to the Uniform  Customs  and  Practice  for  Documentary  Credits  (1993
Revision),  International  Chamber of  Commerce  Publication  No.  500,  and any
amendments or revision  thereof and, to the extent not  inconsistent  therewith,
the laws of the State of New York.

      2.9 REQUIREMENTS FOR ISSUANCE OF LETTERS OF CREDIT.

            (a) In  connection  with  the  issuance  of any  Letter  of  Credit,
Borrowers  shall  indemnify,  save and hold Agent and Lenders  harmless from any
loss, cost, expense or liability,  including, without limitation,  payments made
by Agent or Lenders,  and expenses and  reasonable  attorneys'  fees incurred by
Agent and Lenders arising out of, or in connection with, any Letter of Credit to
be issued or created for any Borrower.  Borrowers  shall be bound by Agent's and
each Lender's regulations and good faith interpretations of any Letter of Credit
issued or created for its account, although this interpretation may be different
from its own, and, neither Agent, Lenders, nor any of their correspondents shall
be liable  for any error,  negligence,  or  mistakes,  whether  of  omission  or
commission,  in following  Borrowing  Agent's or any Borrower's  instructions or
those contained in any Letter of Credit or of any  modifications,  amendments or
supplements  thereto or in  issuing  or paying any Letter of Credit,  except for
Agent's, any Lender's or such correspondents' own willful misconduct.

                                       22
<PAGE>

            (b) In  connection  with all Letters of Credit issued by Agent under
this Agreement,  each Borrower  hereby  appoints Agent, or its designee,  as its
attorney,  with  full  power  and  authority  (i) to sign  and/or  endorse  such
Borrower's  name  upon  any  warehouse  or  other  receipts,  letter  of  credit
applications  and  acceptances;  (ii) to sign such  Borrower's  name on bills of
lading;  (iii) to clear  Inventory  through the United States of America Customs
Department  ("Customs")  in the  name of  such  Borrower  or  Agent  or  Agent's
designee, and to sign and deliver to Customs officials powers of attorney in the
name of such Borrower for such purpose;  and (iv) to complete in such Borrower's
name or Agent's name,  or in the name of Agent's  designee,  any order,  sale or
transaction, obtain the necessary documents in connection therewith, and collect
the proceeds  thereof.  Neither Agent nor its  attorneys  will be liable for any
acts or  omissions  nor for any error of  judgment  or  mistakes of fact or law,
except for Agent's or its attorney's own willful  misconduct.  This power, being
coupled with an interest,  is irrevocable during the Term and as long thereafter
as any Letters of Credit remain outstanding.

      2.10 ADDITIONAL PAYMENTS.  Any sums expended by Agent or any Lender due to
any  Borrower's  failure to perform or comply  with its  obligations  under this
Agreement or any Other Document including,  without  limitation,  any Borrower's
obligations  under Sections 4.2, 4.4, 4.12,  4.13,  4.14 and 6.1 hereof,  may be
charged to Borrowers' account as a Revolving Advance, shall bear interest at the
Default  Rate  applicable  to  Domestic  Rate  Loans  and  shall be added to the
Obligations.

      2.11 MANNER OF BORROWING AND PAYMENT.

            (a) Each borrowing of Revolving Advances shall be advanced according
to the applicable Commitment Percentages of Lenders.

            (b) Each payment (including each prepayment) by Borrowers on account
of the principal of and interest on the Revolving Advances,  shall be applied to
the  Revolving  Advances  pro  rata  according  to  the  applicable   Commitment
Percentages  of Lenders.  Except as  expressly  provided  herein,  all  payments
(including  prepayments)  to be made by any  Borrower  on account of  principal,
interest  and fees shall be made  without set off or  counterclaim  and shall be
made to Agent on behalf of the Lenders to the Payment Office, in each case on or
prior to 1:00 P.M.,  New York  time,  in Dollars  and in  immediately  available
funds.

                                       23
<PAGE>

            (c)  (i)  Notwithstanding  anything  to the  contrary  contained  in
Sections  2.11(a)  and (b)  hereof,  commencing  with  the  first  Business  Day
following  the Closing  Date,  each  borrowing  of Revolving  Advances  shall be
advanced by Agent and each payment any Borrower on account of Revolving Advances
shall be applied first to those  Revolving  Advances made by Agent. On or before
1:00 P.M.,  New York time, on each  Settlement  Date  commencing  with the first
Settlement Date following the Closing Date, Agent and Lenders shall make certain
payments as follows:  (A) if the aggregate amount of new Revolving Advances made
by Agent  during the  preceding  Week (if any) exceeds the  aggregate  amount of
repayments applied to outstanding Revolving Advances during such preceding Week,
then each  Lender  shall  provide  Agent  with  funds in an amount  equal to its
applicable  Commitment  Percentage of the difference  between (1) such Revolving
Advances and (2) such  repayments and (B) if the aggregate  amount of repayments
applied to outstanding Revolving Advances during such Week exceeds the aggregate
amount of new Revolving Advances made during such Week, then Agent shall provide
each  Lender  with  funds  in an  amount  equal  to  its  applicable  Commitment
Percentage of the difference  between (1) such repayments and (2) such Revolving
Advances.

                  (ii) Each Lender  shall be  entitled  to earn  interest at the
applicable  Contract Rate on outstanding  Advances which it has funded.  Because
the Agent on behalf of Lenders may be  advancing  and/or may be repaid  Advances
prior to the time when  Lenders  will  actually  advance  and/or be repaid  such
Advances,  interest  with  respect to Advances  shall be  allocated  by Agent in
accordance with the amount of Advances  actually  advanced by and repaid to each
Lender and the Agent and shall accrue from and  including the date such Advances
are so advanced to but  excluding  the date such  Advances are either  repaid by
Borrowers or actually  settled with the  applicable  Lender as described in this
Section.  To the extent that Agent has made any such amounts  available  and the
settlement  described  above shall not yet have occurred,  upon repayment of any
Advances  by  Borrowers,  Agent may apply such  amounts  repaid  directly to any
amounts made available by Agent pursuant to this Section.

                  (iii) Promptly  following each  Settlement  Date,  Agent shall
submit to each Lender a settlement statement for the Week immediately  preceding
such  Settlement  Date.  Such  certificate  of Agent shall be  conclusive in the
absence of manifest error.

            (d) If any Lender or any Transferee (a "benefited  Lender") shall at
any  time  receive  any  payment  of all or part of its  Advances,  or  interest
thereon,  or receive any Collateral in respect thereof  (whether  voluntarily or
involuntarily  or by set-off) in a greater  proportion  than any such payment to
and  Collateral  received by any other Lender,  if any, in respect of such other
Lender's Advances,  or interest thereon, and such greater  proportionate payment
or receipt of Collateral is not expressly  permitted  hereunder,  such benefited
Lender shall  purchase for cash from the other Lenders such portion of each such
other Lender's Advances, or shall provide such other Lender with the benefits of
any such  Collateral,  or the proceeds  thereof,  as shall be necessary to cause
such benefited Lender to share the excess payment or benefits of such Collateral
or proceeds ratably with each of Lenders; provided,  however, that if all or any
portion of such excess  payment or benefits is  thereafter  recovered  from such
benefited Lender,  such purchase shall be rescinded,  and the purchase price and
benefits returned,  to the extent of such recovery,  but without interest.  Each
Lender so  purchasing  a portion of another  Lender's  Advances may exercise all
rights  of  payment  (including,  without  limitation,  rights  of set off) with
respect to such  portion as fully as if such  Lender  were the direct  holder of
such portion.

                                       24
<PAGE>

            (e) Unless Agent shall have been notified by telephone, confirmed in
writing,  by any Lender that such  Lender  will not make the amount  which would
constitute its  applicable  Commitment  Percentage of the Advances  available to
Agent,  Agent may (but shall not be obligated  to) assume that such Lender shall
make such amount available to Agent and, in reliance upon such assumption,  make
available  to  Borrowers a  corresponding  amount.  Agent will  promptly  notify
Borrowers  of its receipt of any such  notice  from a Lender.  If such amount is
made available to Agent on a date after a Settlement Date, such Lender shall pay
to Agent on demand  an  amount  equal to the  product  of (i) the daily  average
Federal  Funds Rate  (computed  on the basis of a year of 360 days)  during such
period as quoted by Agent,  times (ii) such  amount,  times  (iii) the number of
days from and including  such  Settlement  Date to the date on which such amount
becomes immediately  available to Agent. A certificate of Agent submitted to any
Lender with  respect to any  amounts  owing  under this  paragraph  (e) shall be
conclusive, in the absence of manifest error. If such amount is not in fact made
available  to Agent by such Lender  within  three (3)  Business  Days after such
Settlement  Date,  Agent  shall be  entitled  to recover  such an  amount,  with
interest  thereon  at the rate  per  annum  then  applicable  to such  Revolving
Advances hereunder,  on demand from Borrowers;  provided,  however, that Agent's
right to such  recovery  shall  not  prejudice  or  otherwise  adversely  affect
Borrowers' rights (if any) against such Lender.

      2.12 USE OF  PROCEEDS.  Borrowers  shall apply the proceeds of Advances to
pay fees and  expenses  relating  to this  transaction,  and to provide  for its
working capital needs.

      2.13 JOINT AND SEVERAL  LIABILITY.  All Borrowers  shall be liable for all
amounts  due to Agent and  Lenders  under this  Agreement,  regardless  of which
Borrower  actually  receives the Advances or Letters of Credit  hereunder or the
amount  of such  Advances  received  or the  manner in which  Agent and  Lenders
account for such  Advances,  Letters of Credit or other  extensions of credit on
its books and  records.  The  Obligations  with  respect to  Advances  made to a
Borrower,  and the  Obligations  arising  as a result of the  joint and  several
liability of a Borrower  hereunder,  with respect to Advances  made to the other
Borrowers hereunder,  shall be separate and distinct  obligations,  but all such
Obligations  shall be primary  obligations  of all  Borrowers.  The  Obligations
arising as a result of the joint and several  liability of a Borrower  hereunder
with respect to Advances,  Letters of Credit or other  extensions of credit made
to the other Borrowers  hereunder shall, to the fullest extent permitted by law,
be unconditional  irrespective of (a) the validity or enforceability,  avoidance
or  subordination of the Obligations of the other Borrowers or of any promissory
note or other  document  evidencing  all or any part of the  Obligations  of the
other Borrowers,  (b) the absence of any attempt to collect the Obligations from
the other Borrowers or any other security therefor,  or the absence of any other
action to enforce the same, (c) the waiver, consent,  extension,  forbearance or
granting of any indulgence by Agent or Lenders with respect to any provisions of
any instrument  evidencing the Obligations of the other  Borrowers,  or any part
thereof, or any other agreement now or hereafter executed by the other Borrowers
and  delivered to Agent or Lenders,  (d) the failure by Agent or Lenders to take
any steps to perfect and maintain  its security  interest in, or to preserve its
rights and maintain its security or collateral for the  Obligations of the other
Borrowers,  (e) the  election of Agent or Lenders in any  proceeding  instituted
under Title 11 of the United States Code, as amended ("Bankruptcy Code"), of the
application of Section  1111(b)(2) of the Bankruptcy  Code, (f) the disallowance
of all or any portion of the  claim(s) of Agent or Lenders for the  repayment of
the Obligations of the other Borrowers under Section 502 of the Bankruptcy Code,
or (g) any other  circumstances  which  might  constitute  a legal or  equitable
discharge or defense of the other  Borrowers.  With  respect to the  Obligations
arising as a result of the joint and several  liability of a Borrower  hereunder
with respect to Advances,  Letters of Credit or other  extensions of credit made
to the other Borrowers  hereunder,  each Borrower waives,  until the Obligations
shall have been paid in full and this Agreement shall have been terminated,  any
right to enforce any right of  subrogation  or any remedy which Agent or Lenders
now has or may hereafter have against  Borrowers,  any endorser or any guarantor
of all or any part of the  Obligations,  and any  benefit  of,  and any right to
participate in, any security or collateral given to Agent and Lenders.  Upon any
Event of Default  and for so long as the same is  continuing,  Agent and Lenders
may proceed  directly  and at once,  without  notice,  against  any  Borrower to
collect and recover the full amount, or any portion of the Obligations,  without
first proceeding against the other Borrowers or any other Person, or against any
security or collateral for the  Obligations.  Each Borrower  consents and agrees
that Agent and  Lenders  shall be under no  obligation  to marshal any assets in
favor of Borrower(s) or against or in payment of any or all of the Obligations.

                                       25
<PAGE>

      2.14 DEFAULTING LENDER.

            (a)  Notwithstanding  anything to the contrary  contained herein, in
the event any Lender (i) has refused (which refusal constitutes a breach by such
Lender of its obligations under this Agreement) to make available its portion of
any Advance or (ii)  notifies  either Agent or Borrowing  Agent that it does not
intend to make available its portion of any Advance (if the actual refusal would
constitute  a breach by such  Lender of its  obligations  under this  Agreement)
(each, a "Lender Default"),  all rights and obligations hereunder of such Lender
(a  "Defaulting  Lender")  as to which a Lender  Default is in effect and of the
other parties  hereto shall be modified to the extent of the express  provisions
of this Section 2.14 while such Lender Default remains in effect.

            (b)   Advances   shall  be  incurred  pro  rata  from  Lenders  (the
"Non-Defaulting  Lenders")  which  are not  Defaulting  Lenders  based  on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any  Advances  required to be advanced by any Lender shall
be increased as a result of such Lender Default.  Amounts received in respect of
principal  of any type of  Advances  shall be applied  to reduce the  applicable
Advances  of each  Lender pro rata  based on the  aggregate  of the  outstanding
Advances of that type of all Lenders at the time of such application;  provided,
that,  Agent  shall not be  obligated  to transfer  to a  Defaulting  Lender any
payments  received by Agent for the  Defaulting  Lender's  benefit,  nor shall a
Defaulting  Lender  be  entitled  to  the  sharing  of  any  payments  hereunder
(including any  principal,  interest or fees).  Amounts  payable to a Defaulting
Lender shall instead be paid to or retained by Agent. Agent may hold and, in its
discretion,  relend to a Borrower  the amount of all such  payments  received or
retained by it for the account of such Defaulting Lender.

            (c) A Defaulting  Lender shall not be entitled to give  instructions
to Agent or to approve,  disapprove,  consent to or vote on any matters relating
to this Agreement and the Other  Documents.  All  amendments,  waivers and other
modifications  of this  Agreement  and the Other  Documents  may be made without
regard to a Defaulting  Lender and, for purposes of the  definition of "Required
Lenders", a Defaulting Lender shall be deemed not to be a Lender and not to have
Advances outstanding.

                                       26
<PAGE>

            (d) Other than as  expressly  set forth in this  Section  2.14,  the
rights and  obligations  of a Defaulting  Lender  (including  the  obligation to
indemnify Agent) and the other parties hereto shall remain unchanged. Nothing in
this  Section  2.14 shall be deemed to release  any  Defaulting  Lender from its
obligations  under this  Agreement  and the Other  Documents,  shall  alter such
obligations,  shall operate as a waiver of any default by such Defaulting Lender
hereunder, or shall prejudice any rights which any Borrower, Agent or any Lender
may have  against  any  Defaulting  Lender  as a result of any  default  by such
Defaulting  Lender  hereunder.  The  operation  of  this  Section  shall  not be
construed  to increase or  otherwise  affect the  Commitment  of any Lender,  or
relieve  or  excuse  the  performance  by  any  Borrower  of  their  duties  and
obligations hereunder.

            (e) In the  event a  Defaulting  Lender  retroactively  cures to the
satisfaction  of Agent the breach  which  caused a Lender to become a Defaulting
Lender,  such Defaulting Lender shall no longer be a Defaulting Lender and shall
be treated as a Lender under this Agreement.

      3. INTEREST AND FEES.

      3.1 INTEREST. Interest on Advances shall be payable in arrears on the last
day of each month with respect to Domestic Rate Loans and, with respect to LIBOR
Rate Loans,  at the end of each Interest Period or, for LIBOR Rate Loans with an
Interest  Period in excess of three  months,  at the  earlier  of (a) each three
months on the  anniversary  date of the  commencement of such LIBOR Rate Loan or
(b) the end of the Interest  Period.  Interest  charges shall be computed on the
actual  principal  of  Advances  outstanding  during  the  month  (the  "Monthly
Advances") at a rate per annum equal to the applicable  Revolving Interest Rate.
Whenever,  subsequent to the date of this Agreement,  the Alternate Base Rate is
increased or  decreased,  the  Revolving  Interest Rate with respect to Domestic
Rate Loans and/or LIBOR Rate Loans shall be similarly  changed without notice or
demand  of any kind by an  amount  equal to the  amount  of such  change  in the
Alternate Base Rate during the time such change or changes remain in effect.  In
the event that the  aggregate  outstanding  amount of all  Advances  exceeds the
lesser of the Maximum  Loan Amount and the Formula  Amount for three (3) or more
Business Days in any month during the Term (such excess, an "Overadvance"),  the
average daily balance of all Advances and other amounts charged or chargeable to
Borrowers'  account for such month shall bear interest at the Overadvance  Rate.
Upon  and  after  the  occurrence  of  an  Event  of  Default,  and  during  the
continuation thereof, the Obligations shall bear interest at the Default Rate.

      3.2 LETTER OF CREDIT FEES

            (a) Borrowers  shall pay Agent (i) for the benefit of Lenders,  fees
for each Letter of Credit for the period from and excluding the date of issuance
of same to and including the date of  expiration  or  termination,  equal to the
average daily face amount of each outstanding Letter of Credit multiplied by the
then current  Applicable  Margin for LIBOR Rate Loans on the outstanding  amount
thereof from time to time ("Letter of Credit Fees"),  such fees to be calculated
on the basis of a 360-day  year for the actual  number of days elapsed and to be
payable monthly in arrears on the first day of each month and on the last day of
the Term and (ii) Bank's other  customary  charges  payable in  connection  with
Letters of Credit,  as in effect from time to time. Any such charge in effect at
the time of a particular  transaction  shall be the charge for that transaction,
notwithstanding any subsequent change in Bank's prevailing charges for that type
of  transaction.  All Letter of Credit Fees  payable  hereunder  shall be deemed
earned in full on the date when the same are due and payable hereunder and shall
not be subject to rebate or proration upon the termination of this Agreement for
any reason.

                                       27
<PAGE>

            (b) On  demand,  Borrowers  will  cause  cash  to be  deposited  and
maintained in an account with Agent, as cash  collateral,  in an amount equal to
outstanding  Letters of Credit, and each Borrower hereby irrevocably  authorizes
Agent, in its discretion, on such Borrower's behalf and in such Borrower's name,
to open such an account  and to make and  maintain  deposits  therein,  or in an
account  opened by such  Borrower,  in the  amounts  required to be made by such
Borrower,  out of the proceeds of Receivables or other  Collateral or out of any
other funds of such Borrower coming into Agent's  possession at any time.  Agent
will invest such cash collateral (less  applicable  reserves) in such short-term
money-market  items as to which Agent and such Borrower  mutually  agree and the
net return on such investments  shall be credited to such account and constitute
additional cash  collateral.  No Borrower may withdraw  amounts  credited to any
such account except upon payment and  performance in full of all Obligations and
termination of this Agreement.

      3.3 FACILITY  FEE. If, for any month  during the Term,  the average  daily
unpaid  balance  of the  Advances  for each day of such month does not equal the
Maximum Loan Amount,  then Borrowers shall pay to Agent, for the ratable benefit
of Lenders, a fee at a rate equal to one-quarter of one percent (.25%) per annum
on the amount by which the Maximum Loan Amount exceeds such average daily unpaid
balance.  Such fee shall be  payable to Agent in arrears on the last day of each
month and shall not be subject to rebate or proration for any reason.

      3.4 COMPUTATION OF INTEREST AND FEES. Interest and fees hereunder shall be
computed  on the basis of a year of 360 days and for the  actual  number of days
elapsed.  If any payment to be made  hereunder  becomes due and payable on a day
other than a Business  Day, the due date  thereof  shall be extended to the next
succeeding  Business Day and interest thereon shall be payable at the applicable
Contract Rate during such extension.

      3.5 MAXIMUM  CHARGES.  In no event  whatsoever  shall  interest  and other
charges charged  hereunder exceed the highest rate permissible under law which a
court of competent jurisdiction shall, in a final determination, deem applicable
hereto.  In the event  that a court  determines  that  Agent or any  Lender  has
received  interest  and other  charges  hereunder  in excess of the highest rate
permissible  hereto,  such excess  amount  shall be first  applied to any unpaid
principal balance owed by Borrowers,  and if the then remaining excess amount is
greater than the previously  unpaid  principal  balance,  Lenders shall promptly
refund such excess amount to Borrowers and the provisions hereof shall be deemed
amended to provide for such permissible rate.

      3.6  INCREASED  COSTS.  In the event that any  applicable  law,  treaty or
governmental  regulation,  or any  change  therein or in the  interpretation  or
application  thereof,  or compliance by any Lender (for purposes of this Section
3.6, the term "Lender" shall include Agent or any Lender and any  corporation or
bank  controlling  Agent or any Lender) and the office or branch  where Agent or
any  Lender (as so  defined)  makes or  maintains  any LIBOR Rate Loans with any
request or  directive  (whether or not having the force of law) from any central
bank or other financial, monetary or other authority, shall:

                                       28
<PAGE>

            (a)  subject  Agent or any Lender to any tax of any kind  whatsoever
with  respect to this  Agreement  or change the basis of taxation of payments to
Agent or any Lender of  principal,  fees,  interest or any other amount  payable
hereunder or under any Other Documents (except for changes in the rate of tax on
the  overall net income of Agent or any Lender by the  jurisdiction  in which it
maintains its principal office);

            (b) impose, modify or hold applicable any reserve,  special deposit,
assessment or similar  requirement against assets held by, or deposits in or for
the account of, advances or loans by, or other credit extended by, any office of
Agent or any Lender,  including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or

            (c) impose on Agent or any Lender or the London interbank Eurodollar
market any other condition with respect to this Agreement, any Other Documents;

and the  result  of any of the  foregoing  is to  increase  the cost to Agent or
Lender of making,  renewing or maintaining  its Advances  hereunder by an amount
that Agent or such  Lender  deems to be  material or to reduce the amount of any
payment  (whether of principal,  interest or otherwise) in respect of any of the
Advances by an amount that Agent or such Lender deems to be material,  then,  in
any case  Borrowers  shall  promptly pay Agent or such Lender,  upon its demand,
such  additional  amount  as will  compensate  Agent  or such  Lender  for  such
additional  cost or such  reduction,  as the case may be.  Agent or such  Lender
shall certify the amount of such additional cost or reduced amount to Borrowers,
and such certification shall be conclusive absent manifest error.

      3.7 BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. In the event
that Agent or any Lender shall have determined that:

            (a) Dollar  deposits  in the  relevant  amount and for the  relevant
maturity  are not  available in the London  interbank  Eurodollar  market,  with
respect to an  outstanding  LIBOR Rate Loan,  a proposed  LIBOR Rate Loan,  or a
proposed conversion of a Domestic Rate Loan;

            (b) reasonable  means do not exist for  ascertaining  the LIBOR Rate
for any Interest Period;

then Agent shall give Borrowing Agent prompt written,  telephonic or telegraphic
notice of such  determination.  If such notice is given,  (i) any such requested
LIBOR Rate Loan shall be made as a Domestic Rate Loan,  unless  Borrowing  Agent
shall  notify  Agent no later  than  10:00  a.m.  (New York  City  time) two (2)
Business Days prior to the date of such proposed borrowing, that its request for
such  borrowing  shall be cancelled or made as an unaffected  type of LIBOR Rate
Loan,  (ii) any  Domestic  Rate Loan or LIBOR  Rate Loan  which was to have been
converted  to an  affected  type of LIBOR  Rate Loan  shall be  continued  as or
converted into a Domestic Rate Loan, or, if Borrowing  Agent shall notify Agent,
no later than 10:00 a.m. (New York City time) two (2) Business Days prior to the
proposed  conversion,  shall be maintained  as an unaffected  type of LIBOR Rate
Loan,  and (iii) any  outstanding  affected  LIBOR Rate Loans shall be converted
into a Domestic  Rate Loan,  or, if the Borrowing  Agent shall notify Agent,  no
later than 10:00 a.m.  (New York City time) two (2)  Business  Days prior to the
last  Business  Day of the  then  current  Interest  Period  applicable  to such
affected LIBOR Rate Loan,  shall be converted  into an unaffected  type of LIBOR
Rate Loan, on the last Business Day of the then current Interest Period for such
affected LIBOR Rate Loans.  Until such notice has been withdrawn,  Lenders shall
have no  obligation  to make an  affected  type of LIBOR  Rate Loan or  maintain
outstanding  affected  LIBOR Rate Loans and no Borrower  shall have the right to
convert a Domestic  Rate Loan or an  unaffected  type of LIBOR Rate Loan into an
affected type of LIBOR Rate Loan.

                                       29
<PAGE>

      3.8 CAPITAL ADEQUACY.

            (a) In the event that Agent or any Lender shall have determined that
any applicable law, rule, regulation or guideline regarding capital adequacy, or
any  change  therein,  or any  change in the  interpretation  or  administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by Agent or any
Lender (for purposes of this Section 3.8, the term "Lender"  shall include Agent
or any Lender and any  corporation or bank  controlling  Agent or any Lender and
the  office  or  branch  where  Agent or any  Lender  (as so  defined)  makes or
maintains any LIBOR Rate Loans) with any request or directive  regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable  agency, has or would have the effect of reducing the rate of
return on Agent's or any Lender's  capital as a consequence  of its  obligations
hereunder (but not as a general  regulatory  condition  generally  applicable to
lending  institutions)  to a level below that which  Agent or such Lender  could
have  achieved  but  for  such  adoption,  change  or  compliance  (taking  into
consideration  Agent's  and each  Lender's  policies  with  respect  to  capital
adequacy) by an amount deemed by Agent or any Lender to be material,  then, from
time to time,  Borrowers  shall  pay upon  demand to Agent or such  Lender  such
additional  amount or amounts as will  compensate  Agent or such Lender for such
reduction.  In determining such amount or amounts,  Agent or such Lender may use
any reasonable  averaging or attribution methods. The protection of this Section
3.8 shall be  available  to Agent and each  Lender  regardless  of any  possible
contention of invalidity or inapplicability  with respect to the applicable law,
regulation or condition.

            (b) A certificate  of Agent or such Lender setting forth such amount
or amounts as shall be necessary to compensate Agent or such Lender with respect
to Section 3.8(a) hereof when  delivered to Borrowing  Agent shall be conclusive
absent manifest error.

4.    COLLATERAL: GENERAL TERMS

      4.1 SECURITY INTEREST IN THE COLLATERAL.  To secure the prompt payment and
performance to Agent and each Lender of the  Obligations,  each Borrower  hereby
assigns,  pledges and grants to Agent for itself and the ratable benefit of each
Lender a continuing  security interest in and to all of its Collateral,  whether
now owned or existing or hereafter acquired or arising and wheresoever  located.
Each  Borrower  shall  mark  its  books  and  records  as  may be  necessary  or
appropriate to evidence, protect and perfect Agent's security interest ("Agent's
security  interest")  and shall cause its  financial  statements to reflect such
security interest.

                                       30
<PAGE>

      4.2 PERFECTION OF SECURITY INTEREST.

            (a) Each Borrower  irrevocably and unconditionally  authorizes Agent
(or  its  agent)  to file at any  time  and  from  time to time  such  financing
statements  with respect to the  Collateral  naming Agent or its designee as the
secured party and Such Borrower as debtor,  as Agent may require,  and including
any other  information  with respect to Such  Borrower or otherwise  required by
part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent
may  determine,  together  with any  amendment  and  continuations  with respect
thereto,  which authorization shall apply to all financing  statements filed on,
prior to or after the date hereof.  Each Borrower  hereby  ratifies and approves
all financing  statements naming Agent or its designee as secured party and Such
Borrower as debtor  with  respect to the  Collateral  (and any  amendments  with
respect to such  financing  statements)  filed by or on behalf of Agent prior to
the date hereof and ratifies and  confirms  the  authorization  of Agent to file
such  financing  statements  (and  amendments,  if any).  Each  Borrower  hereby
authorizes  Agent to adopt on behalf of such  Borrower  any symbol  required for
authenticating any electronic filing. In no event shall any Borrower at any time
file, or permit or cause to be filed,  any  correction  statement or termination
statement with respect to any financing  statement (or amendment or continuation
with respect thereto) naming Agent or its designee as secured party and any such
Borrower as debtor.

            (b) Each Borrower does not have any chattel paper (whether  tangible
or  electronic)  or  instruments  as of the date hereof,  except as set forth on
SCHEDULE  4.2(B) hereto.  In the event that any Borrower shall be entitled to or
shall  receive any  chattel  paper or  instrument  after the date  hereof,  such
Borrower  shall  promptly  notify Agent  thereof in writing.  Promptly  upon the
receipt  thereof by or on behalf of a Such  Borrower  (including by any agent or
representative), such Borrower shall deliver, or cause to be delivered to Agent,
all tangible chattel paper and instruments that such Borrower or may at any time
acquire, accompanied by such instruments of transfer or assignment duly executed
in blank as Agent may from time to time  specify,  in each case  except as Agent
may otherwise agree. At Agent's option, such Borrower shall, or Agent may at any
time on behalf of Such  Borrower,  cause the original of any such  instrument or
chattel  paper to be  conspicuously  marked in a form and manner  acceptable  to
Agent with the following  legend  referring to chattel paper or  instruments  as
applicable:  "This  [chattel  paper][instrument]  is  subject  to  the  security
interest  of GMAC  COMMERCIAL  FINANCE  LLC, as Agent,  and any sale,  transfer,
assignment  or  encumbrance  of this  [chattel  paper][instrument]  violates the
rights of such secured party."

            (c) In the event that any Borrower shall at any time hold or acquire
an interest in any  electronic  chattel paper or any  "transferable  record" (as
such term is defined in Section  201 of the  Federal  Electronic  Signatures  in
Global and  National  Commerce  Act or in Section 16 of the  Uniform  Electronic
Transactions Act as in effect in any relevant jurisdiction), such Borrower shall
promptly notify Agent thereof in writing.  Promptly upon Agent's  request,  such
Borrower shall take, or cause to be taken,  such actions as Agent may reasonably
request to give Agent  control of such  electronic  chattel  paper under Section
9-105 of the UCC and control of such  transferable  record under  Section 201 of
the Federal Electronic Signatures in Global and National Commerce Act or, as the
case may be, Section 16 of the Uniform Electronic Transactions Act, as in effect
in such jurisdiction.

                                       31
<PAGE>

            (d) No  Borrower  has any deposit  accounts  as of the date  hereof,
except as set forth on SCHEDULE 4.2(D) hereto.  No Borrower  shall,  directly or
indirectly,  after the date  hereof  open,  establish  or  maintain  any deposit
account  unless each of the following  conditions is satisfied:  (i) Agent shall
have received not less than five (5) Business  Days prior written  notice of the
intention of such Borrower to open or establish  such account which notice shall
specify in reasonable detail and specificity acceptable to Agent the name of the
account,  the owner of the  account,  the name and  address of the bank at which
such account is to be opened or  established,  the  individual at such bank with
whom such  Borrower  is dealing and the  purpose of the  account,  (ii) the bank
where such account is opened or maintained  shall be  acceptable  to Agent,  and
((iii) on or before the opening of such deposit account,  such Borrower shall as
Agent  may  specify  either  (A)  deliver  to Agent a  Deposit  Account  Control
Agreement  with respect to such deposit  account duly  authorized,  executed and
delivered by Such Borrower and the bank at which such deposit  account is opened
and  maintained or (B) arrange for Agent to become the customer of the bank with
respect to the deposit account on terms and conditions  acceptable to Agent. The
terms of this  subsection (d) shall not apply to deposit  accounts  specifically
and  exclusively  used for payroll,  payroll  taxes and other  employee wage and
benefit payments to or for the benefit of such Borrower's salaried employees.

            (e) No Borrower owns or holds, directly or indirectly,  beneficially
or as record owner or both, any investment  property,  as of the date hereof, or
have any investment  account,  securities  account,  commodity  account or other
similar account with any bank or other financial institution or other securities
intermediary  or  commodity  intermediary  as of the date  hereof,  in each case
except as set forth on SCHEDULE 4.2(E) hereto.

            (f) In the event that any Borrower  shall be entitled to or shall at
any time after the date hereof hold or acquire any certificated securities, such
Borrower  shall  promptly  endorse,  assign  and  deliver  the  same  to  Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as Agent may from time to time  specify.  If any  securities,  now or  hereafter
acquired by such Borrower are  uncertificated and are issued to such Borrower or
its nominee  directly by the issuer  thereof,  such Borrower  shall  immediately
notify Agent thereof and shall as Agent may specify, either (i) cause the issuer
to agree to comply with instructions  from Agent as to such securities,  without
further  consent of such Borrower or such nominee,  or (ii) arrange for Agent to
become the registered owner of the securities.

            (g) No Borrower shall, directly or indirectly, after the date hereof
open,  establish  or  maintain  any  investment  account,   securities  account,
commodity  account or any other similar  account (other than a deposit  account)
with any securities  intermediary or commodity  intermediary  unless each of the
following  conditions is satisfied:  (i) Agent shall have received not less than
five (5) Business Days prior written notice of the intention of such Borrower to
open or establish  such account which notice shall specify in reasonable  detail
and  specificity  acceptable to Agent the name of the account,  the owner of the
account,  the name and  address  of the  securities  intermediary  or  commodity
intermediary  at  which  such  account  is  to be  opened  or  established,  the
individual  at such  intermediary  with whom such  Borrower  is dealing  and the
purpose  of  the  account,   (ii)  the  securities   intermediary  or  commodity
intermediary  (as the case may be) where such  account  is opened or  maintained
shall be  acceptable  to Agent,  and  (iii)on  or  before  the  opening  of such
investment  account,   securities  account  or  other  similar  account  with  a
securities intermediary or commodity intermediary,  such Borrower shall as Agent
may  specify  either (A)  execute  and  deliver,  and cause to be  executed  and
delivered  to Agent,  an  Investment  Property  Control  Agreement  with respect
thereto  duly  authorized,  executed  and  delivered  by such  Borrower and such
securities  intermediary  or commodity  intermediary  or (B)arrange for Agent to
become the entitlement holder with respect to such investment  property on terms
and conditions acceptable to Agent.

                                       32
<PAGE>

            (h) No  Borrower is the  beneficiary  or  otherwise  entitled to any
right to  payment  under any letter of credit,  banker's  acceptance  or similar
instrument as of the date hereof, except as set forth on SCHEDULE 4.2(H) hereto.
In the event that any Borrower  shall be entitled to or shall  receive any right
to payment  under any  letter of  credit,  banker's  acceptance  or any  similar
instrument,  whether as beneficiary  thereof or otherwise after the date hereof,
such Borrower  shall  promptly  notify Agent  thereof in writing.  Such Borrower
shall  immediately,  as Agent may specify,  either (i)  deliver,  or cause to be
delivered  to  Agent,  with  respect  to any such  letter  of  credit,  banker's
acceptance or similar  instrument,  the written  agreement of the issuer and any
other  nominated  person  obligated  to make  any  payment  in  respect  thereof
(including  any  confirming  or  negotiating   bank),   in  form  and  substance
satisfactory  to Agent,  consenting  to the  assignment  of the  proceeds of the
letter of credit to Agent by such  Borrower  and  agreeing to make all  payments
thereon  directly to Agent or as Agent may otherwise  direct or (ii) cause Agent
to become, at such Borrower's expense, the transferee  beneficiary of the letter
of credit, banker's acceptance or similar instrument (as the case may be).

            (i) No Borrower  has  commercial  tort claims as of the date hereof,
except as set forth on SCHEDULE  4.2(I)  hereto.  In the event that any Borrower
shall at any time after the date hereof have any  commercial  tort claims,  such
Borrower shall promptly notify Agent thereof in writing,  which notice shall (i)
set forth in reasonable  detail the basis for and nature of such commercial tort
claim and (ii) include the express grant by such Borrower to Agent of a security
interest in such commercial tort claim (and the proceeds thereof).  In the event
that such notice does not include such grant of a security interest, the sending
thereof by such  Borrower to Agent shall be deemed to  constitute  such grant to
Agent.  Upon the sending of such notice,  any  commercial  tort claim  described
therein shall  constitute  part of the Collateral  and shall be deemed  included
therein.  Without limiting the authorization of Agent provided in Section 4.2(a)
hereof or otherwise  arising by the execution by such Borrower of this Agreement
or any of the Other Documents,  Agent is hereby irrevocably authorized from time
to time and at any time to file such  financing  statements  naming Agent or its
designee as secured party and such Borrower as debtor,  or any amendments to any
financing statements,  covering any such commercial tort claim as Collateral. In
addition,  such  Borrower  shall  promptly  upon  Agent's  request,  execute and
deliver, or cause to be executed and delivered,  to Agent such other agreements,
documents  and  instruments  as  Agent  may  require  in  connection  with  such
commercial tort claim.

            (j)  No  Borrower  has  any  goods,  documents  of  title  or  other
Collateral in the custody, control or possession of a third party as of the date
hereof,  except as set forth on  SCHEDULE  4.2(J)  hereto,  and except for goods
located in the United States in transit to a location of such Borrower permitted
herein in the ordinary  course of business of such Borrower in the possession of
the carrier  transporting such goods. In the event that any goods,  documents of
the  title or other  Collateral  are at any time  after  the date  hereof in the
custody,  control or  possession of any other person not referred to on SCHEDULE
4.2(J)  hereto or such  carriers,  such  Borrower  shall  promptly  notify Agent
thereof in writing.  Promptly upon Agent's request,  such Borrower shall deliver
to Agent a Collateral  Access Agreement duly authorized,  executed and delivered
by such person and such Borrower.

                                       33
<PAGE>

            (k) Each Borrower shall take any other actions reasonably  requested
by Agent  from  time to time to  cause  the  attachment,  perfection  and  first
priority of, and the ability of Agent to enforce, the security interest of Agent
in any and all of the Collateral,  including, without limitation, (i) executing,
delivering and, where  appropriate,  filing financing  statements and amendments
relating thereto under the UCC or other  applicable law, to the extent,  if any,
that such  Borrower's  signature  thereon is  required  therefor,  (ii)  causing
Agent's  name to be noted as  secured  party on any  certificate  of title for a
titled  good if such  notation  is a  condition  to  attachment,  perfection  or
priority of, or ability of Agent to enforce,  the security  interest of Agent in
such Collateral,  (iii) complying with any provision of any statute,  regulation
or treaty of the United  States as to any  Collateral  if  compliance  with such
provision is a condition to attachment, perfection or priority of, or ability of
Agent to enforce,  the security  interest of Agent in such Collateral,  and (iv)
obtaining  the consents and  approvals  of any  Governmental  Authority or third
party,  including,  without limitation,  any consent of any licensor,  lessor or
other person  obligated on  Collateral,  and taking all actions  required by any
earlier  versions  of the UCC or by other law,  as  applicable  in any  relevant
jurisdiction.

      4.3  DISPOSITION OF  COLLATERAL.  Each Borrower will safeguard and protect
all  Collateral  for Agent's  general  account and make no  disposition  thereof
whether by sale,  lease or  otherwise  except (a) the sale of  Inventory  in the
ordinary  course of business and (b) the disposition or transfer of obsolete and
worn-out  Equipment  in the ordinary  course of business  during any fiscal year
having an aggregate  fair market value of not more than $250,000 and only to the
extent  that (i) the  proceeds  of any  such  disposition  are  used to  acquire
replacement  Equipment  which is  subject  to Agent's  first  priority  security
interest  or (ii) the  proceeds  of which are  remitted to Agent as a payment in
respect of the Advances.

      4.4 PRESERVATION OF COLLATERAL. In addition to the rights and remedies set
forth in  Section  11.1  hereof,  Agent:  (a) may at any time take such steps as
Agent deems  necessary to protect Agent's  security  interest in and to preserve
the  Collateral,  including the hiring of such security guards or the placing of
other security protection measures as Agent may deem appropriate; (b) may employ
and  maintain  at any  Borrower's  premises  a  custodian  who  shall  have full
authority to do all acts necessary to protect Agent's security  interests in the
Collateral;  (c) may lease  warehouse  facilities to which Agent may move all or
part of the  Collateral;  (d) may use any  Borrower's  owned  or  leased  lifts,
hoists,  trucks and other  facilities  or equipment for handling or removing the
Collateral;  and (e) shall have, and is hereby  granted,  a right of ingress and
egress to the places where the  Collateral is located,  and may proceed over and
through any Borrower's owned or leased  property.  Each Borrower shall cooperate
fully with all of Agent's  efforts to preserve the Collateral and will take such
actions to preserve the Collateral as Agent may direct.  All of Agent's expenses
of preserving the Collateral,  including any expenses relating to the bonding of
a custodian,  shall be charged to Borrowers'  account as a Revolving Advance and
added to the Obligations.

      4.5 OWNERSHIP OF COLLATERAL.  With respect to the Collateral,  at the time
the Collateral becomes subject to Agent's security  interest:  (a) each Borrower
shall be the sole  owner of and  fully  authorized  and able to sell,  transfer,
pledge and/or grant a first priority security interest in each and every item of
its respective  Collateral to Agent; and, except for Permitted  Encumbrances the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and  agreement  executed by each Borrower or delivered to Agent or
any Lender in connection  with this  Agreement  shall be true and correct in all
material  respects;  (c) all signatures and  endorsements  of each Borrower that
appear on such documents and agreements shall be genuine and each Borrower shall
have full  capacity  to execute  same;  and (d) each  Borrower's  Equipment  and
Inventory shall be located as set forth on SCHEDULE 4.5 and shall not be removed
from such  location(s)  without the prior  written  consent of Agent except with
respect to the sale of Inventory in the ordinary course of business and the sale
or disposition of Equipment to the extent permitted in Section 4.3 hereof.

                                       34
<PAGE>

      4.6  DEFENSE OF AGENT'S  AND  LENDER'S  INTERESTS.  Until (a)  payment and
performance  in  full of all of the  Obligations  and  (b)  termination  of this
Agreement,  Agent's security  interests in the Collateral shall continue in full
force and effect.  During such period no Borrower  shall,  without Agent's prior
written  consent,  pledge,  sell (except  Inventory  in the  ordinary  course of
business and Equipment to the extent  permitted in Section 4.3 hereof),  assign,
transfer,  create or suffer to exist a Lien upon or  encumber or allow or suffer
to be encumbered in any way except for Permitted  Encumbrances,  any part of the
Collateral.  Each  Borrower  shall  defend  Agent's  security  interests  in the
Collateral against any and all Persons whatsoever.  At any time following demand
by Agent for  payment  of all  Obligations,  Agent  shall have the right to take
possession  of the  indicia of the  Collateral  and the  Collateral  in whatever
physical form  contained,  including  without  limitation:  labels,  stationery,
documents,  instruments and advertising materials. If Agent exercises this right
to take possession of the Collateral,  Borrowers shall, upon demand, assemble it
in the best manner possible and make it available to Agent at a place reasonably
convenient  to Agent.  In addition,  with respect to all  Collateral,  Agent and
Lenders shall be entitled to all of the rights and remedies set forth herein and
further  provided by the Uniform  Commercial Code or other  applicable law. Each
Borrower shall, and Agent may, at its option, instruct all suppliers,  carriers,
forwarders,  warehouses or others receiving or holding cash, checks,  Inventory,
documents  or  instruments  in which Agent holds a security  interest to deliver
same to Agent  and/or  subject to Agent's  order and if they shall come into any
Borrower's possession, they, and each of them, shall be held by such Borrower in
trust as Agent's  trustee,  and such Borrower will  immediately  deliver them to
Agent in their original form together with any necessary endorsement.

      4.7 BOOKS AND RECORDS. Each Borrower shall (a) keep proper books of record
and account in which full, true and correct entries will be made of all dealings
or transactions of or in relation to its business and affairs; (b) set up on its
books  accruals  with  respect to all taxes,  assessments,  charges,  levies and
claims;  and (c) on a  reasonably  current  basis set up on its books,  from its
earnings, allowances against doubtful Receivables,  advances and investments and
all  other  proper  accruals  (including,   without  limitation,  by  reason  of
enumeration,  accruals  for  premiums,  if any,  due on  required  payments  and
accruals for depreciation,  obsolescence, or amortization of properties),  which
should be set aside from such  earnings in  connection  with its  business.  All
determinations  pursuant to this subsection shall be made in accordance with, or
as required by, GAAP consistently applied in the opinion of the Accountants,  as
shall then be regularly engaged by Borrowers.

      4.8 FINANCIAL DISCLOSURE.  Each Borrower hereby irrevocably authorizes and
directs all  accountants  and  auditors  employed  by such  Borrower at any time
during the Term to exhibit and deliver to Agent and each Lender copies of any of
the Borrower's financial statements,  trial balances or other accounting records
of any sort in the  accountant's  or  auditor's  possession,  and to disclose to
Agent and each Lender any information  such accountants may have concerning such
Borrower's  financial  status and  business  operations.  Each  Borrower  hereby
authorizes all federal,  state and municipal authorities to furnish to Agent and
each Lender copies of reports or examinations relating to such Borrower, whether
made by such Borrower or otherwise;  however, Agent and each Lender will attempt
to obtain such  information  or materials  directly from such Borrower  prior to
obtaining  such   information  or  materials  from  such   accountants  or  such
authorities.

                                       35
<PAGE>

      4.9  COMPLIANCE  WITH LAWS.  Each  Borrower  shall  comply in all material
respects  with all acts,  rules,  regulations  and  orders  of any  legislative,
administrative  or  judicial  body  or  official  applicable  to its  respective
Collateral or any part thereof or to the operation of such  Borrower's  business
the  non-compliance  with  which  could  have a Material  Adverse  Effect.  Each
Borrower may, however, contest or dispute any acts, rules,  regulations,  orders
and directions of those bodies or officials in any reasonable  manner,  provided
that any  related  Lien is  inchoate  or  stayed  and  sufficient  reserves  are
established to the reasonable  satisfaction  of Agent to protect Agent's Lien on
or security  interest in the  Collateral.  The  Collateral at all times shall be
maintained in accordance with the  requirements of all insurance  carriers which
provide  insurance with respect to the  Collateral so that such insurance  shall
remain in full force and effect.

      4.10 INSPECTION OF PREMISES. At all reasonable times Agent and each Lender
shall  have  full  access to and the right to  audit,  check,  inspect  and make
abstracts and copies from each Borrower's books, records, audits, correspondence
and all other  papers  relating  to the  Collateral  and the  operation  of each
Borrower's  business.  Agent,  any  Lender  and their  agents may enter upon any
Borrower's  premises  at any  time  during  business  hours  and  at  any  other
reasonable  time,  and from time to time,  for the  purpose  of  inspecting  the
Collateral and any and all records  pertaining thereto and the operation of such
Borrower's  business.  Without in any way limiting the foregoing,  so long as no
Default  exists,  Agent and Lenders  will  provide a Borrower  with two (2) days
prior notice before entering such Borrower's premises for the purposes set forth
in this Section 4.10.

      4.11 INSURANCE.  Each Borrower shall bear the full risk of any loss of any
nature  whatsoever with respect to the  Collateral.  At each Borrower's own cost
and expense in amounts and with  carriers  acceptable  to Agent,  each  Borrower
shall  (a)  keep all its  insurable  properties  and  properties  in which  such
Borrower has an interest insured against the hazards of fire,  flood,  sprinkler
leakage,  those hazards  covered by extended  coverage  insurance and such other
hazards,  and for such amounts, as is customary in the case of companies engaged
in businesses similar to such Borrower's including, without limitation, business
interruption  insurance;  (b) maintain a bond in such amounts as is customary in
the case of companies  engaged in businesses  similar to such Borrower  insuring
against larceny,  embezzlement or other criminal  misappropriation  of insured's
officers and  employees who may either singly or jointly with others at any time
have access to the assets or funds of such Borrower  either  directly or through
authority to draw upon such funds or to direct generally the disposition of such
assets;  (c) maintain public and product liability  insurance against claims for
personal injury,  death or property damage suffered by others;  (d) maintain all
such worker's  compensation  or similar  insurance as may be required  under the
laws of any state or jurisdiction in which Borrower is engaged in business;  and
(e)  furnish  Agent  with  (i)  copies  of  all  policies  and  evidence  of the
maintenance  of such  policies by the renewal  thereof at least thirty (30) days
before any expiration date, and (ii)  appropriate  loss payable  endorsements in
form and substance  satisfactory to Agent, naming Agent as a co-insured and loss
payee as its  interests  may  appear  with  respect  to all  insurance  coverage
referred  to in CLAUSES  (A),  (C) AND (E)  above,  and  providing  (A) that all
proceeds  thereunder  shall be payable to Agent,  (B) no such insurance shall be
affected by any act or neglect of the insured or owner of the property described
in such  policy,  and (C) that such policy and loss  payable  clauses may not be
cancelled, amended or terminated unless at least thirty (30) days' prior written
notice is given to  Agent.  In the event of any loss  thereunder,  the  carriers
named therein hereby are directed by Agent and the  applicable  Borrower to make
payment for such loss to Agent and not to such  Borrower and Agent  jointly.  If
any insurance losses are paid by check, draft or other instrument payable to any
Borrower and Agent jointly,  Agent may endorse such  Borrower's name thereon and
do such  other  things as Agent may deem  advisable  to reduce the same to cash.
Agent is hereby authorized to adjust and compromise claims in excess of $250,000
under insurance coverage referred to in CLAUSES (A), (B) AND (E) above. All loss
recoveries  received  by Agent  upon any such  insurance  may be  applied to the
Obligations,  in such order as Agent in its sole discretion shall determine. Any
surplus  shall be paid by Agent to  Borrowers  or  applied  as may be  otherwise
required by law. Any deficiency  thereon shall be paid by Borrowers to Agent, on
demand.

                                       36
<PAGE>

      4.12 FAILURE TO PAY INSURANCE.  If any Borrower fails to obtain  insurance
as  hereinabove  provided,  or to keep the  same in  force,  Agent,  if Agent so
elects,  may obtain such  insurance and pay the premium  therefor for Borrowers'
account,  and charge Borrowers' account therefor and such expenses so paid shall
be part of the Obligations.

      4.13  PAYMENT  OF TAXES.  Each  Borrower  will pay,  when due,  all taxes,
assessments and other Charges  lawfully levied or assessed upon such Borrower or
any of the Collateral including,  without limitation, real and personal property
taxes,  assessments and charges and all franchise,  income,  employment,  social
security  benefits,   withholding,  and  sales  taxes.  If  any  Charge  by  any
governmental authority is or may be imposed on or as a result of any transaction
between  any  Borrower,  Agent and  Lenders  which  Agent or any  Lender  may be
required to withhold or pay or if any Charges remain unpaid after the date fixed
for their payment,  or if any claim shall be made which,  in Agent's or Lenders'
opinion,  may possibly create a valid Lien on the Collateral,  Agent may without
notice to Borrowers pay the Charges and each  Borrower  hereby  indemnifies  and
holds Agent and each Lender harmless in respect thereof.  Agent will not pay any
Charges to the extent that any Borrower has contested or disputed  those Charges
in good faith,  by expeditious  protest,  administrative  or judicial  appeal or
similar  proceeding  provided  that any  related  Lien is stayed and  sufficient
reserves are  established  to the  reasonable  satisfaction  of Agent to protect
Agent's  security  interest  in or Lien on the  Collateral.  The  amount  of any
payment by Agent  under  this  Section  4.13 shall be charged to the  Borrowers'
account as a Revolving Advance and added to the Obligations and, until Borrowers
shall  furnish  Agent with an indemnity  therefor (or supply Agent with evidence
satisfactory to Agent that due provision for the payment thereof has been made),
Agent may hold without  interest any balance  standing to Borrowers'  credit and
Agent shall retain Agent's  security  interest in any and all Collateral held by
Agent.

      4.14 PAYMENT OF LEASEHOLD  OBLIGATIONS.  Each Borrower  shall at all times
pay, when and as due, its rental  obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material  respects,  with all other
terms of such  leases  and keep them in full force and  effect  and,  at Agent's
request, will provide evidence of having done so.

                                       37
<PAGE>

      4.15 ACCOUNTS.

            (a) NATURE OF ACCOUNTS.  Each of the  Accounts  shall be a bona fide
and valid account representing a bona fide indebtedness incurred by the Customer
therein  named,  for a fixed sum as set forth in the  invoice  relating  thereto
(provided immaterial or unintentional invoice errors shall not be deemed to be a
breach  hereof) with respect to an absolute  sale or lease and delivery of goods
upon stated terms of a Borrower, or work, labor or services theretofore rendered
by a Borrower as of the date each  Receivable is created.  Same shall be due and
owing  in  accordance  with the  applicable  Borrower's  standard  terms of sale
without dispute,  setoff or counterclaim except as may be stated on the accounts
receivable schedules delivered by Borrowers to Agent.

            (b)  SOLVENCY  OF  CUSTOMERS.  Each  Customer,  to the  best of each
Borrower's knowledge,  as of the date each Receivable is created, is and will be
solvent and able to pay all  Accounts on which the Customer is obligated in full
when due or with  respect to such  Customers of any Borrower who are not solvent
such  Borrower  has set up on its books and in its  financial  records  bad debt
reserves adequate to cover such Accounts.

            (c) LOCATIONS OF BORROWER. Each Borrower's chief executive office is
located at the addresses  set forth on SCHEDULE  4.15(C)  hereto.  Until written
notice is given to Agent by  Borrowing  Agent of any  other  office at which any
Borrower  keeps its records  pertaining  to Accounts,  all such records shall be
kept at such executive office.

            (d) COLLECTION OF ACCOUNTS.  Until any Borrower's authority to do so
is terminated  by Agent (which  notice Agent may give at any time  following the
occurrence  of an  Event  of  Default  or a  Default  or when  Agent in its sole
discretion  deems it to be in Lenders'  best  interest to do so),  each Borrower
will, at such  Borrower's  sole cost and expense,  but on Agent's behalf and for
Agent's account,  collect as Agent's property and in trust for Agent all amounts
received  on  Accounts,  and  shall  not  commingle  such  collections  with any
Borrower's funds or use the same except to pay Obligations. Each Borrower shall,
upon request,  deliver to Agent, the Blocked Account in original form and on the
date of receipt thereof, all checks,  drafts, notes, money orders,  acceptances,
cash and other evidences of Indebtedness.

            (e)  NOTIFICATION  OF ASSIGNMENT OF ACCOUNTS.  At any time following
the  occurrence of an Event of Default or a Default,  Agent shall have the right
to send notice of the  assignment  of, and  Agent's  security  interest  in, the
Accounts  to any and all  Customers  or any third  party  holding  or  otherwise
concerned  with any of the  Collateral.  Thereafter,  Agent  shall have the sole
right to collect the  Accounts,  take  possession  of the  Collateral,  or both.
Agent's actual collection  expenses,  including,  but not limited to, stationery
and postage, telephone and telegraph,  secretarial and clerical expenses and the
salaries of any  collection  personnel  used for  collection,  may be charged to
Borrowers' account and added to the Obligations.

                                       38
<PAGE>

            (f) POWER OF AGENT TO ACT ON BORROWERS' BEHALF. Agent shall have the
right to receive,  endorse,  assign  and/or  deliver in the name of Agent or any
Borrower  any and all checks,  drafts and other  instruments  for the payment of
money  relating to the  Accounts,  and each  Borrower  hereby  waives  notice of
presentment,  protest  and  non-payment  of any  instrument  so  endorsed.  Each
Borrower  hereby  constitutes  Agent  or  Agent's  designee  as such  Borrower's
attorney  with  power  (i) to  endorse  such  Borrower's  name  upon any  notes,
acceptances,  checks,  drafts,  money  orders or other  evidences  of payment or
Collateral;  (ii) to sign such  Borrower's name on any invoice or bill of lading
relating to any of the  Accounts,  drafts  against  Customers,  assignments  and
verifications  of  Accounts;  (iii) to send  verifications  of  Accounts  to any
Customer;  (iv) to sign such Borrower's name on all financing  statements or any
other  documents or  instruments  deemed  necessary or  appropriate  by Agent to
preserve, protect, or perfect Agent's security interest in the Collateral and to
file same; (v) to demand payment of the Accounts; (vi) to enforce payment of the
Accounts  by legal  proceedings  or  otherwise;  (vii) to  exercise  all of such
Borrower's  rights and remedies  with respect to the  collection of the Accounts
and any other Collateral;  (viii) to settle, adjust, compromise, extend or renew
the Accounts; (ix) to settle, adjust or compromise any legal proceedings brought
to collect  Accounts;  (x) to prepare,  file and sign such  Borrower's name on a
proof of claim in bankruptcy or similar document  against any Customer;  (xi) to
prepare, file and sign such Borrower's name on any notice of Lien, assignment or
satisfaction of Lien or similar  document in connection  with the Accounts;  and
(xii) to do all other acts and things necessary to carry out this Agreement. All
acts of said  attorney or designee are hereby  ratified and  approved,  and said
attorney or designee  shall not be liable for any acts of omission or commission
nor for any  error  of  judgment  or  mistake  of  fact or of law,  unless  done
maliciously or with gross (not mere)  negligence;  this power being coupled with
an  interest  is  irrevocable  during the Term and  thereafter  while any of the
Obligations remain unpaid.  Agent shall have the right at any time following the
occurrence of an Event of Default or Default, to change the address for delivery
of mail  addressed to any Borrower to such address as Agent may designate and to
receive, open and dispose of all mail addressed to any Borrower and Agent agrees
to use its best  efforts to deliver to  Borrowing  Agent any mail which does not
relate, either directly or indirectly, to the Obligations or the Collateral.

            (g) NO  LIABILITY.  Neither  Agent nor any Lender  shall,  under any
circumstances  or in any event  whatsoever,  have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Accounts or any instrument received in payment thereof, or for any
damage resulting  therefrom.  Following the occurrence of an Event of Default or
Default,  Agent may,  without  notice or consent from any Borrower,  sue upon or
otherwise collect, extend the time of payment of, compromise or settle for cash,
credit  or  upon  any  terms  any  of the  Accounts  or  any  other  securities,
instruments or insurance  applicable thereto and/or release any obligor thereof.
Agent is authorized and empowered to accept the return of the goods  represented
by any of the  Accounts,  without  notice to or  consent  by any  Borrower,  all
without discharging or in any way affecting any Borrower's liability hereunder.

                                       39
<PAGE>

            (h)  ESTABLISHMENT  OF A LOCKBOX  ACCOUNT,  DOMINION  ACCOUNT.  Each
Borrower  shall  establish and  maintain,  at its expense,  blocked  accounts or
lockboxes and related blocked accounts (in either case, "Blocked Accounts"),  as
Agent may specify,  with such banks as are  acceptable  to Agent into which such
Borrower shall promptly deposit and direct its account debtors to directly remit
all payments on Receivables and all payments  constituting proceeds of Inventory
or other  Collateral  in the  identical  form in which such  payments  are made,
whether by cash, check or other manner. Each Borrower shall deliver, or cause to
be delivered to Agent, a Deposit  Account  Control  Agreement  duly  authorized,
executed and  delivered by each bank where a Blocked  Account is  maintained  as
provided  in this  Section  4.15(h)  hereof or at any time and from time to time
Agent may become  bank's  customer  with  respect to the  Blocked  Accounts  and
promptly  upon Agent's  request,  such  Borrower  shall execute and deliver such
agreements  or  documents  as Agent may require in  connection  therewith.  Each
Borrower  agrees that all payments made to such Blocked  Accounts or other funds
received  and  collected  by Agent,  whether in respect of the  Receivables,  as
proceeds of  Inventory  or other  Collateral  or  otherwise  shall be treated as
payments to Agent in respect of the Obligations  and therefore shall  constitute
the property of Agent to the extent of the then outstanding Obligations.

                  (i) Each  Borrower  shall  deposit all proceeds  from sales of
Inventory in every form,  including,  without limitation,  cash, checks,  credit
card sales drafts, credit card sales or charge slips or receipts and other forms
of daily store  receipts,  from each retail store  location of such  Borrower on
each  business day into the deposit  accounts of such  Borrower  used solely for
such  purpose  and  identified  to each  retail  store  location as set forth on
SCHEDULE  4.2(D)  hereto.  All such funds  deposited  into the separate  deposit
accounts shall be sent by ACH or by wire transfer on a daily basis and all other
proceeds of Collateral shall be sent by ACH or by wire transfer,  to the Blocked
Accounts.  Each Borrower shall irrevocably  authorize and direct in writing,  in
form and substance  satisfactory to Agent, each of the banks into which proceeds
from sales of Inventory  from each retail store location of such Borrower are at
any time deposited as provided above to send all funds deposited in such account
by ACH or by wire  transfer on a daily basis to the  Blocked  Accounts  and such
banks shall agree in writing to do so. Such  authorization  and direction  shall
not be  rescinded,  revoked or  modified  without the prior  written  consent of
Agent.

                  (ii) Each Borrower shall promptly  either cause all amounts on
deposit in its deposit accounts used by each retail store location to be sent as
provided  in Section  4.15(h)(i)  above or shall  itself  deposit or cause to be
deposited  all proceeds  from sales of  Inventory,  all amounts  payable to such
Borrower  from Credit Card  Issuers  and Credit  Card  Processors  and all other
proceeds of Collateral. Without in any way limiting the foregoing, each Borrower
shall  establish and maintain a Blocked Account into which all proceeds from the
sale of Wholesale  Inventory will be deposited and a Blocked  Account into which
all proceeds from the sale of Retail  Inventory will be deposited.  The banks at
which the Blocked  Accounts are  established  shall enter into an agreement,  in
form and substance  satisfactory to Agent,  providing that all items received or
deposited in the Blocked Accounts are the property of Agent, that the depository
bank has no lien upon, or right of setoff  against,  the Blocked  Accounts,  the
items  received for deposit  therein,  or the funds from time to time on deposit
therein  and that the  depository  bank will wire,  or  otherwise  transfer,  in
immediately  available  funds, on a daily basis, all funds received or deposited
into the Blocked  Accounts to such bank  account of Agent as Agent may from time
to time designate for such purpose  ("Payment  Account").  Each Borrower  agrees
that all amounts  deposited in such Blocked Accounts or other funds received and
collected  by Agent,  whether as proceeds of inventory  or other  Collateral  or
otherwise  shall be the property of Agent. In the event that no Event of Default
exists and is continuing and no Obligations are outstanding,  Agent agrees, upon
the written request of Borrowing  Agent, to deliver to Borrowers,  to an account
specified  in writing by  Borrowing  Agent,  any credit  balance in the  Payment
Account or any other account maintained by Agent for the Borrowers' account.

                                       40
<PAGE>

                  (iii) To the extent any Borrower may elect, at such Borrower's
option,  to use the Armored Car  Companies  to pick up and collect cash or other
proceeds of sales of Inventory from a retail store location, such Borrower shall
deliver to the Armored Car  Companies  all proceeds  from sales of Inventory and
other Collateral from such retail store location of such Borrower. Each Borrower
electing to use an Armored Car Company  shall  irrevocably  authorize and direct
the Armored Car  Companies in writing,  in form and  substance  satisfactory  to
Agent,  to remit all such  proceeds  at any time  received  by the  Armored  Car
Companies only to the deposit  account  identified on SCHEDULE 4.2(D) hereto for
such purpose and  thereafter to the Blocked  Accounts.  Such  authorization  and
direction  to the  Armored  Car  Companies  shall not be  rescinded,  revoked or
modified without the prior written consent of Agent. As of the date hereof,  the
only Armored Car Companies used by the Borrowers are Safe & Sound Armed Courier,
Inc. and Dunbar  Armored,  Inc.  Borrowers  shall not use any other  Armored Car
Companies for any purpose, except if (A) Agent shall have received not less than
ten (10) days' prior written notice of the intention of any such Borrower to use
such other Armored Car Companies,  (B) Agent shall have received an agreement in
writing  from  such  other  Armored  Car   Companies,   in  form  and  substance
satisfactory  to Agent,  acknowledging  the  security  interests of Agent in the
Collateral, waiving any security interest, lien or other claim to cash and other
items delivered by such Borrower to the Armored Car Company and agreeing to send
all cash and other items  received by them only to the Blocked  Accounts  and to
otherwise  follow the  instructions  of Agent with respect  thereto upon Agent's
request,  duly  authorized,  executed  and  delivered  by and other  Armored Car
Companies, and (C) no Event of Default shall exist or have occurred.

            (i)  ADJUSTMENTS.   No  Borrower  will,   without  Agent's  consent,
compromise  or adjust any Accounts  (or extend the time for payment  thereof) or
accept any returns of merchandise or grant any additional discounts,  allowances
or  credits  thereon  except  for  those  compromises,   adjustments,   returns,
discounts,  credits and  allowances  as have been  heretofore  customary  in the
business of such Borrower.

      4.16 INVENTORY. If applicable, all Inventory manufactured by Borrowers has
been,  and will be,  produced by Borrowers in  accordance  with the Federal Fair
Labor Standards Act of 1938, as amended,  and all rules,  regulations and orders
thereunder.

      4.17  MAINTENANCE OF EQUIPMENT.  The Equipment shall be maintained in good
operating  condition  and repair  (reasonable  wear and tear  excepted)  and all
necessary  replacements  of and repairs  thereto shall be made so that the value
and operating efficiency of the Equipment shall be maintained and preserved.  No
Borrower  shall use or operate the  Equipment in violation of any law,  statute,
ordinance, code, rule or regulation.  Each Borrower shall have the right to sell
Equipment except to the extent set forth in Section 4.3 hereof.

      4.18 EXCULPATION OF LIABILITY. Nothing herein contained shall be construed
to  constitute  Agent or any  Lender as any  Borrower's  agent  for any  purpose
whatsoever,  nor shall  Agent or any  Lender be  responsible  or liable  for any
shortage, discrepancy, damage, loss or destruction of any part of the Collateral
wherever the same may be located and  regardless of the cause  thereof.  Neither
Agent  nor any  Lender,  whether  by  anything  herein or in any  assignment  or
otherwise,  assume any  Borrower's  obligations  under any contract or agreement
assigned  to Agent or such  Lender,  and neither  Agent nor any Lender  shall be
responsible  in any way for the  performance by any Borrower of any of the terms
and conditions thereof.

                                       41
<PAGE>

      4.19 ENVIRONMENTAL MATTERS.

            (a)  Borrowers  shall  ensure  that the  Real  Property  remains  in
compliance with all Environmental  Laws and they shall not place or permit to be
placed any Hazardous Substances on any Real Property except as not prohibited by
applicable law or appropriate governmental authorities.

            (b) Borrowers shall dispose of any and all Hazardous Waste generated
at the Real Property only at  facilities  and with carriers that maintain  valid
permits under RCRA and any other applicable  Environmental Laws. Borrowers shall
use their commercially  reasonable  efforts to obtain  certificates of disposal,
such as  hazardous  waste  manifest  receipts,  from all  treatment,  transport,
storage or disposal  facilities or operators employed by Borrowers in connection
with the  transport  or disposal of any  Hazardous  Waste  generated at the Real
Property.

            (c) In the event any Borrower  obtains,  gives or receives notice of
any  Release or threat of  Release of a  reportable  quantity  of any  Hazardous
Substances at the Real Property (any such event being hereinafter referred to as
a  "Hazardous  Discharge")  or  receives  any notice of  violation,  request for
information or notification that it is potentially responsible for investigation
or cleanup of  environmental  conditions at the Real Property,  demand letter or
complaint, order, citation, or other written notice with regard to any Hazardous
Discharge or violation of Environmental  Laws affecting the Real Property or any
Borrower's  interest  therein (any of the  foregoing is referred to herein as an
"Environmental   Complaint")  from  any  Person,   including  any  state  agency
responsible in whole or in part for environmental  matters in the state in which
the Real  Property  is  located or the United  States  Environmental  Protection
Agency (any such person or entity  hereinafter the "Authority"),  then Borrowing
Agent shall, within five (5) Business Days, give written notice of same to Agent
detailing facts and  circumstances of which any Borrower is aware giving rise to
the Hazardous  Discharge or Environmental  Complaint.  Such information is to be
provided to allow Agent to protect its  security  interest in the Real  Property
and is not intended to create nor shall it create any  obligation  upon Agent or
any Lender with respect thereto.

            (d) Borrowers shall promptly  forward to Agent copies of any request
for information,  notification of potential liability, demand letter relating to
potential  responsibility  with  respect  to the  investigation  or  cleanup  of
Hazardous  Substances at any other site owned,  operated or used by any Borrower
to dispose of  Hazardous  Substances  and shall  continue  to forward  copies of
correspondence  between any Borrower and the Authority  regarding such claims to
Agent  until the claim is settled.  Borrowers  shall  promptly  forward to Agent
copies of all documents and reports concerning a Hazardous Discharge at the Real
Property  that any  Borrower is required to file under any  Environmental  Laws.
Such  information  is to be provided  solely to allow  Agent to protect  Agent's
security interest in the Real Property and the Collateral.

                                       42
<PAGE>

            (e) Borrowers shall respond  promptly to any Hazardous  Discharge or
Environmental  Complaint and take all necessary action in order to safeguard the
health of any Person and to avoid  subjecting the Collateral or Real Property to
any Lien.  If any  Borrower  shall fail to  respond  promptly  to any  Hazardous
Discharge or  Environmental  Complaint or any Borrower shall fail to comply with
any of the  requirements of any  Environmental  Laws, Agent on behalf of Lenders
may, but without the  obligation  to do so, for the sole  purpose of  protecting
Agent's  security  interest in  Collateral:  (i) give such notices or (ii) enter
onto the Real  Property  (or  authorize  third  parties  to enter  onto the Real
Property)  and take such actions as Agent (or such third  parties as directed by
Agent) deem reasonably necessary or advisable,  to clean up, remove, mitigate or
otherwise deal with any such Hazardous Discharge or Environmental Complaint. All
reasonable  costs and  expenses  incurred  by Agent and  Lenders  (or such third
parties)  in the  exercise  of any  such  rights,  including  any  sums  paid in
connection  with any judicial or  administrative  investigation  or proceedings,
fines and  penalties,  together with interest  thereon from the date expended at
the Default Rate for Domestic Rate Loans  constituting  Revolving Advances shall
be paid upon demand by Borrowers,  and until paid shall be added to and become a
part of the  Obligations  secured  by the  Liens  created  by the  terms of this
Agreement or any other agreement between Agent, any Lender and any Borrower.

            (f) After the occurrence of a Hazardous Discharge, promptly upon the
written  request of Agent from time to time,  Borrowers  shall provide Agent, at
Borrowers' expense, with an environmental site assessment or environmental audit
report  prepared  by  an  environmental   engineering  firm  acceptable  in  the
reasonable opinion of Agent, to assess with a reasonable degree of certainty the
existence of a Hazardous  Discharge and the potential  costs in connection  with
abatement,  cleanup and removal of any Hazardous  Substances found on, under, at
or within the Real  Property.  Any  report or  investigation  of such  Hazardous
Discharge proposed and acceptable to an appropriate Authority that is charged to
oversee the clean-up of such Hazardous  Discharge  shall be acceptable to Agent.
If such estimates,  individually  or in the aggregate,  exceed  $100,000,  Agent
shall have the right to require  Borrowers  to post a bond,  letter of credit or
other security reasonably satisfactory to Agent to secure payment of these costs
and expenses.

            (g) Borrowers  shall defend and indemnify Agent and Lenders and hold
Agent, Lenders and their respective  employees,  agents,  directors and officers
harmless  from and  against all loss,  liability,  damage and  expense,  claims,
costs, fines and penalties,  including  attorney's fees, suffered or incurred by
Agent or  Lenders  under or on  account of any  Environmental  Laws,  including,
without  limitation,  the assertion of any Lien thereunder,  with respect to any
Hazardous Discharge, the presence of any Hazardous Substances affecting the Real
Property,  whether or not the same  originates or emerges from the Real Property
or any contiguous real estate,  including any loss of value of the Real Property
as a result of the foregoing except to the extent such loss,  liability,  damage
and expense is attributable to any Hazardous Discharge resulting from actions on
the part of Agent or any Lender.  Borrowers' obligations under this Section 4.19
shall arise upon the  discovery of the presence of any  Hazardous  Substances at
the Real Property,  whether or not any federal,  state,  or local  environmental
agency has taken or threatened any action in connection with the presence of any
Hazardous Substances.  Borrowers' obligation and the indemnifications  hereunder
shall survive the termination of this Agreement.

            (h) For  purposes of Section 4.19 and 5.7,  all  references  to Real
Property shall be deemed to include all of Borrowers' right,  title and interest
in and to its owned and leased premises.

                                       43
<PAGE>

      4.20  FINANCING  STATEMENTS.  Except as respects the financing  statements
filed by Agent and the  financing  statements  described  on  SCHEDULE  1.2,  no
financing statement covering any of the Collateral or any proceeds thereof is on
file in any public office.

      5. REPRESENTATIONS AND WARRANTIES.

      Each Borrower represents and warrants as follows:

      5.1 AUTHORITY.  Each Borrower has full power, authority and legal right to
enter  into  this  Agreement  and the Other  Documents  and to  perform  all its
respective  Obligations  hereunder and thereunder.  The execution,  delivery and
performance  of this  Agreement  and of the Other  Documents (a) are within such
Borrower's corporate powers, have been duly authorized, are not in contravention
of law or the terms of such Borrower's by-laws,  certificate of incorporation or
other  applicable  documents  relating to such  Borrower's  formation  or to the
conduct of such Borrower's  business or of any material agreement or undertaking
to which such  Borrower is a party or by which such  Borrower is bound,  and (b)
will not conflict  with nor result in any breach in any of the  provisions of or
constitute  a  default  under or  result  in the  creation  of any  Lien  except
Permitted  Encumbrances  upon any asset of such Borrower under the provisions of
any agreement,  charter  document,  instrument,  by-law,  or other instrument to
which such Borrower or its property is a party or by which it may be bound.

      5.2 FORMATION AND QUALIFICATION.

            (a) Each Borrower is duly  incorporated  and in good standing  under
the laws of the state listed on SCHEDULE  5.2(A) and is qualified to do business
and is in good standing in the states listed on SCHEDULE 5.2(A) which constitute
all states in which  qualification  and good  standing  are  necessary  for such
Borrower to conduct its  business  and own its property and where the failure to
so qualify could have a Material Adverse Effect.  Each Borrower has delivered to
Agent true and complete copies of its certificate of  incorporation  and by-laws
and will promptly notify Agent of any amendment or changes thereto.

            (b) The only  Subsidiaries  of each  Borrower are listed on SCHEDULE
5.2(B).

            (c) The exact  legal  name of each  Borrower  is as set forth on the
signature page of this Agreement and on SCHEDULE 5.2(A) hereto. No Borrower has,
during  the past  five  years,  been  known by or used any  other  corporate  or
fictitious name or been a party to any merger or consolidation,  or acquired all
or  substantially  all of the  assets  of any  Person,  or  acquired  any of its
property or assets out of the ordinary  course of business,  except as set forth
on SCHEDULE 5.6 hereto.

            (d) Each  Borrower is an  organization  of the type and organized in
the jurisdiction set forth on SCHEDULE 5.2(A) hereto. SCHEDULE 5.2(A) accurately
sets  forth  the  organizational  identification  number  of  such  Borrower  or
accurately  states that such  Borrower  has none and  accurately  sets forth the
federal employer identification number of such Borrower.

            (e) The chief executive  office and mailing address of each Borrower
and each Borrower's Records concerning  Accounts are located only at the address
identified  as such on  SCHEDULE  4.15(C)  hereto and its only  other  places of
business and the only other  locations of Collateral,  if any, are the addresses
set forth in  SCHEDULE  4.5  hereto,  subject to the right of such  Borrower  to
establish  new  locations in  accordance  with  Section 6.2 below.  SCHEDULE 4.5
hereto  correctly  identifies  any of such  locations  which  are not owned by a
Borrower and sets forth the owners and/or operators thereof.

                                       44
<PAGE>

      5.3 SURVIVAL OF REPRESENTATIONS  AND WARRANTIES.  All  representations and
warranties of each Borrower  contained in this Agreement and the Other Documents
shall be true at the time of such Borrower's execution of this Agreement and the
Other  Documents,  and shall  survive the  execution,  delivery  and  acceptance
thereof by the parties  thereto and the  closing of the  transactions  described
therein   or  related   thereto.   Any   misrepresentation   or  breach  of  any
representation or warranty  whatsoever  contained in this Agreement or the Other
Documents shall be deemed material.

      5.4 TAX RETURNS.  Each Borrower's federal tax identification number is set
forth on SCHEDULE 5.4 hereto.  Each  Borrower  has filed all federal,  state and
local tax returns and other reports each is required by law to file and has paid
all taxes,  assessments,  fees and other  governmental  charges that are due and
payable.  Except as set forth on SCHEDULE  5.4 hereto,  all  Federal,  state and
local income tax returns of each  Borrower  have been examined and reported upon
by the  appropriate  taxing  authority  or  closed  by  applicable  statute  and
satisfied  for all fiscal  years prior to and  including  the fiscal year ending
January 31, 2003.  The  provision  for taxes on the books of the  Borrowers on a
Consolidated  Basis are  adequate  in all  material  respects  for all years not
closed by applicable statutes,  and for its current fiscal year, and no Borrower
has knowledge of any deficiency or additional assessment in connection therewith
not provided for on its books.

      5.5 FINANCIAL STATEMENTS.

            (a) The pro forma balance sheet of Borrowers on a Consolidated Basis
(the "Pro Forma Balance Sheet")  furnished to Agent on the Closing Date reflects
the  consummation  of the  transactions  contemplated by the  Subordinated  Debt
Documentation  and under this  Agreement (the  "Transactions")  and is accurate,
complete and correct and fairly reflects the financial condition of Borrowers on
a  Consolidated  Basis,  after  giving  effect  to the  Transactions,  as of the
accounting  closing date for the month of February,  2004. The Pro Forma Balance
Sheet has been  certified  as  accurate,  complete  and correct in all  material
respects  by the  President  and Chief  Financial  Officer  of  Perfumania.  All
financial  statements referred to in this Section 5.5(a),  including the related
schedules and notes thereto, have been prepared, in accordance with GAAP, except
as may be disclosed in such financial statements or as limited in the definition
used in this Agreement.

            (b) The  twelve-month  cash flow  projections  of the  Borrowers and
their  projected  balance  sheets as of the  Closing  Date,  copies of which are
annexed hereto as EXHIBIT 5.5(B) (the  "Projections") were prepared by the Chief
Financial  Officer  of  Borrowers,  are based on  underlying  assumptions  which
provide a reasonable  basis for the  projections  contained  therein and reflect
Borrowers'  good faith  judgment based on present  circumstances.  The cash flow
Projections  together with the Pro Forma Balance  Sheet,  are referred to as the
"Pro Forma Financial Statements".

                                       45
<PAGE>

      5.6  CORPORATE  NAME.  Except  as set forth on  SCHEDULE  5.6  hereto,  no
Borrower has been known by any other  corporate  name in the past five years and
does not sell  Inventory or perform  services  under any other name, nor has any
Borrower been the surviving corporation of a merger or consolidation or acquired
all or  substantially  all of the assets of any Person during the preceding five
(5) years.

      5.7 O.S.H.A. AND ENVIRONMENTAL COMPLIANCE.

            (a)  Each  Borrower  has duly  complied  with,  and its  facilities,
business,  assets,  property,  leaseholds and Equipment are in compliance in all
material  respects with, the provisions of the Federal  Occupational  Safety and
Health Act, the Environmental  Protection Act, RCRA and all other  Environmental
Laws;  there  have  been  no  outstanding   citations,   notices  or  orders  of
non-compliance  issued to any  Borrower  or relating  to its  business,  assets,
property,  leaseholds  or Equipment  under any such laws,  rules or  regulations
which would result in a Material Adverse Effect.

            (b) Each  Borrower has been issued all required  federal,  state and
local licenses, certificates or permits relating to all applicable Environmental
Laws,  other  than  those that the  failure  to have  obtained  would not have a
Material Adverse Effect.

            (c) (i) There are no visible signs of releases,  spills, discharges,
leaks  or  disposal  (collectively  referred  to  as  "Releases")  of  Hazardous
Substances at, upon, under or within any Real Property or any premises leased by
any Borrower;  (ii) there are no  underground  storage tanks or  polychlorinated
biphenyls on the Real  Property or any premises  leased by any  Borrower;  (iii)
neither the Real Property nor any premises  leased by any Borrower has ever been
used as a treatment,  storage or disposal  facility of Hazardous Waste; and (iv)
no Hazardous  Substances are present on the Real Property or any premises leased
by a Borrower,  excepting such  quantities as are handled in accordance with all
applicable  manufacturer's  instructions  and  governmental  regulations  and in
proper  storage  containers  and as  are  necessary  for  the  operation  of the
commercial business of any Borrower or of its tenants.

      5.8 SOLVENCY; NO LITIGATION, VIOLATION, INDEBTEDNESS OR DEFAULT.

            (a) Borrowers,  individually and collectively,  are solvent, able to
pay  their  debts as they  mature,  have  capital  sufficient  to carry on their
business  and all  businesses  in which they is about to  engage,  and as of the
Closing Date, the fair present  saleable value of their assets,  calculated on a
going  concern  basis,  is in excess  of the  amount  of their  liabilities  and
subsequent  to  the  Closing  Date,  the  fair  saleable  value  of  its  assets
(calculated  on a going  concern  basis)  will be in excess of the amount of its
liabilities.

            (b)  Except  as  disclosed  in  Schedule  5.8(b)  hereto  or in  the
financial  statements of Borrowers on a Consolidated  Basis, no Borrower has (i)
any pending or threatened litigation,  arbitration, actions or proceedings which
involve the reasonable  likelihood of having a Material Adverse Effect, and (ii)
any  liabilities  or  indebtedness   other  than  the  Obligations   other  than
liabilities  incurred subsequent to the date of such financial statements in the
ordinary course of business.

                                       46
<PAGE>

            (c)  No  Borrower  is  in  violation  of  any  applicable   statute,
regulation  or  ordinance  in any respect  which  could have a Material  Adverse
Effect, nor is any Borrower in violation of any order of any court, governmental
authority or arbitration board or tribunal.

            (d) No Borrower nor any member of the Controlled  Group maintains or
contributes  to any Plan other  than those  listed on  SCHEDULE  5.8(D)  hereto.
Except as set forth in SCHEDULE  5.8(D)  hereto,  (i) no Plan has  incurred  any
"accumulated  funding  deficiency," as defined in Section 302(a)(2) of ERISA and
Section  412(a) of the Code,  whether or not waived,  and each Borrower and each
member  of  the  Controlled  Group  has  met  all  applicable   minimum  funding
requirements  under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is  intended to be a qualified  plan under  Section  401(a) of the Code as
currently in effect has been  determined by the Internal  Revenue  Service to be
qualified  under  Section  401(a) of the Code and the trust  related  thereto is
exempt  from  federal  income  tax under  Section  501(a) of the Code,  (iii) no
Borrower nor any member of the  Controlled  Group has incurred any  liability to
the PBGC  other  than for the  payment  of  premiums,  and there are no  premium
payments  which  have  become  due  which  are  unpaid,  (iv) no Plan  has  been
terminated by the plan  administrator  thereof nor by the PBGC,  and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan,  (v) at this time,  the current value of the assets
of each  Plan  exceeds  the  present  value of the  accrued  benefits  and other
liabilities of such Plan and no Borrower nor any member of the Controlled  Group
knows of any facts or circumstances  which would materially  change the value of
such assets and accrued benefits and other liabilities,  (vi) no Borrower or any
member  of the  Controlled  Group  has  breached  any  of the  responsibilities,
obligations or duties imposed on it by ERISA with respect to any Plan,  (vii) no
Borrower or any member of a Controlled  Group has incurred any liability for any
excise tax arising under  Section 4972 or 4980B of the Code,  and no fact exists
which could give rise to any such liability, (viii) no Borrower or any member of
the  Controlled  Group or any  fiduciary  of, or any trustee  to, any Plan,  has
engaged in a "prohibited  transaction"  described in Section 406 of the ERISA or
Section 4975 of the Code or taken any action which would constitute or result in
a  Termination  Event  with  respect to any such Plan which is subject to ERISA,
(ix)  each  Borrower  and  each  member  of the  Controlled  Group  has made all
contributions  due and payable  with  respect to each Plan,  (x) there exists no
event  described  in  Section  4043(b) of ERISA,  for which the thirty  (30) day
notice period  contained in 29 CFR  ss.2615.3  has not been waived,  and (xi) no
Borrower or any member of the Controlled Group has any fiduciary  responsibility
for  investments  with  respect to any plan  existing for the benefit of persons
other than  employees or former  employees of any Borrower and any member of the
Controlled  Group,  and no  Borrower or any member of the  Controlled  Group has
withdrawn,  completely or partially,  from any Multiemployer Plan so as to incur
liability under the Multiemployer Pension Plan Amendments Act of 1980.

      5.9 PATENTS,  TRADEMARKS,  COPYRIGHTS  AND LICENSES.  All patents,  patent
applications,  trademarks,  trademark applications,  service marks, service mark
applications,  copyrights,  copyright applications,  design rights,  tradenames,
assumed names,  trade secrets and licenses owned or utilized by any Borrower are
set forth on SCHEDULE 5.9 hereto,  are to the extent owned by  Borrowers,  valid
and have  been  duly  registered  or filed  with  all  appropriate  governmental
authorities  and constitute all of the  intellectual  property  rights which are
necessary for the operation of its business; there is no objection to or pending
challenge to the validity of any such  material  patent,  trademark,  copyright,
design right, tradename, trade secret or license and no Borrower is aware of any
grounds  for any  challenge,  except as set forth in SCHEDULE  5.9 hereto.  Each
patent, patent application,  patent license,  trademark,  trademark application,
trademark license, service mark, service mark application, service mark license,
copyright,  copyright  application  and  copyright  license owned or held by any
Borrower and all trade secrets used by any Borrower consist of original material
or property  developed by such  Borrower or to such  Borrower's  knowledge,  was
lawfully  acquired by such  Borrower  from the proper and lawful owner  thereof.
Each of such items has been  maintained so as to preserve the value thereof from
the date of creation or acquisition thereof.

                                       47
<PAGE>

      5.10  LICENSES AND PERMITS.  Except as set forth in SCHEDULE  5.10 hereto,
each  Borrower  (a) is in  compliance  with and (b) has  procured  and is now in
possession  of, all  material  licenses or permits  required  by any  applicable
federal,  state or local law or regulation  for the operation of its business in
each  jurisdiction  wherein it is now conducting or proposes to conduct business
and where the failure to procure such  licenses or permits could have a Material
Adverse Effect.

      5.11 DEFAULT OF INDEBTEDNESS.  No Borrower is in default in the payment of
the  principal of or interest on any  Indebtedness  or under any  instrument  or
agreement  under or subject  to which any  Indebtedness  has been  issued and no
event has occurred  under the  provisions  of any such  instrument  or agreement
which  with or  without  the  lapse of time or the  giving of  notice,  or both,
constitutes or would  constitute an event of default  thereunder,  which default
would have a Material Adverse Effect.

      5.12 NO DEFAULT.  No Borrower is in default in the payment or  performance
of any of its obligations  with respect to any material  contract and no Default
has occurred.

      5.13 NO BURDENSOME  RESTRICTIONS.  No Borrower is party to any contract or
agreement the  performance  of which could have a Material  Adverse  Effect.  No
Borrower  has agreed or  consented  to cause or permit in the  future  (upon the
happening of a contingency or otherwise) any of its property,  whether now owned
or  hereafter  acquired,  to be  subject  to a Lien  which  is  not a  Permitted
Encumbrance.

      5.14 NO LABOR  DISPUTES.  No Borrower  is  involved in any labor  dispute;
there  are no  strikes  or  walkouts  or union  organization  of any  Borrower's
employees  threatened  or in  existence  and no labor  contract is  scheduled to
expire during the Term other than as set forth on SCHEDULE 5.14 hereto.

      5.15 MARGIN  REGULATIONS.  No  Borrower  is  engaged,  nor will it engage,
principally or as one of its important activities,  in the business of extending
credit for the purpose of  "purchasing"  or "carrying" any "margin stock" within
the  respective  meanings  of each of the quoted  terms  under  Regulation  U or
Regulation G of the Board of Governors of the Federal  Reserve System as now and
from time to time  hereafter  in effect.  No part of the proceeds of any Advance
will be used for  "purchasing"  or  "carrying"  "margin  stock"  as  defined  in
Regulation U of such Board of Governors.

                                       48
<PAGE>

      5.16  INVESTMENT  COMPANY  ACT.  No Borrower  is an  "investment  company"
registered  or required to be  registered  under the  Investment  Company Act of
1940, as amended, nor is it controlled by such a company.

      5.17  DISCLOSURE.  No  representation  or warranty made by any Borrower in
this Agreement or in any financial statement,  report,  certificate or any other
document  furnished in connection  herewith  contains any untrue  statement of a
material  fact or  omits  to  state  any  material  fact  necessary  to make the
statements  herein or  therein  not  misleading.  There is no fact  known to any
Borrower or which  reasonably  should be known to any Borrower  which  Borrowers
have not  disclosed to Agent in writing with respect to the  Transactions  which
could have a Material Adverse Effect.

      5.18 SUBORDINATED DEBT  DOCUMENTATION.  Agent has received complete copies
of the Subordinated Debt  Documentation  (including all exhibits,  schedules and
disclosure  letters referred to therein or delivered  pursuant thereto,  if any)
and all amendments  thereto,  waivers relating thereto and other side letters or
agreements  affecting the terms  thereof.  None of such documents and agreements
has been amended or  supplemented,  nor have any of the provisions  thereof been
waived,  except  pursuant  to  a  written  agreement  or  instrument  which  has
heretofore been delivered to Agent.

      5.19 SWAPS. No Borrower is a party to, nor will it be a party to, any swap
agreement  whereby such Borrower has agreed or will agree to swap interest rates
or currencies  unless same provides that damages upon  termination  following an
event of default  thereunder are payable on an unlimited "two-way basis" without
regard to fault on the part of either party.

      5.20  CONFLICTING  AGREEMENTS.  No  provision  of any  material  mortgage,
indenture,  contract,  agreement,  judgment,  decree  or  order  binding  on any
Borrower or affecting  the  Collateral  conflicts  with, or requires any Consent
which  has not  already  been  obtained  to,  or  would in any way  prevent  the
execution,  delivery or performance of, the terms of this Agreement or the Other
Documents.

      5.21  APPLICATION  OF CERTAIN  LAWS AND  REGULATIONS.  No  Borrower or any
Affiliate of any Borrower is subject to any statute,  rule or  regulation  which
regulates the  incurrence of any  Indebtedness,  including  without  limitation,
statutes or regulations relative to common or interstate carriers or to the sale
of electricity, gas, steam, water, telephone,  telegraph or other public utility
services.

      5.22 BUSINESS AND PROPERTY OF BORROWERS.  Upon and after the Closing Date,
Borrowers  do not  propose to engage in any  business  other than the retail and
wholesale sale of perfumes and activities necessary to conduct the foregoing. On
the Closing Date, each Borrower will own all the property and possess all of the
rights and Consents necessary for the conduct of the business of such Borrower.

                                       49
<PAGE>

      5.23  CREDIT  CARD  AGREEMENTS.  Set forth in  SCHEDULE  5.23  hereto is a
correct and complete list of (a) all of the Credit Card Agreements and all other
agreements,  documents and instruments existing as of the date hereof between or
among each Borrower, any of its affiliates,  the Credit Card Issuers, the Credit
Card  Processors  and any of their  affiliates,  (b) the percentage of each sale
payable to the Credit Card Issuer or Credit  Card  Processor  under the terms of
the  Credit  Card  Agreements,  (c) all other fees and  charges  payable by each
Borrower under or in connection with the Credit Card Agreements and (d) the term
of such Credit Card  Agreements.  The Credit Card  Agreements  constitute all of
such agreements necessary for each Borrower to operate its business as presently
conducted with respect to credit cards and debit cards and no Receivables of any
Borrower  arise from  purchases by  customers of Inventory  with credit cards or
debit cards,  other than those which are issued by Credit Card Issuers with whom
a Borrower  has  entered  into one of the Credit  Card  Agreements  set forth on
SCHEDULE  5.23 hereto or with whom such  Borrower has entered into a Credit Card
Agreement  in  accordance  with  this  Section  5.23.  Each of the  Credit  Card
Agreements   constitutes  the  legal,  valid  and  binding  obligations  of  the
applicable  Borrower  and to the best of such  Borrower's  knowledge,  the other
parties  thereto,  enforceable in accordance with their respective terms and are
in full force and effect. No default or event of default,  or act,  condition or
event which after notice or passage of time or both,  would constitute a default
or an event of default  under any of the Credit  Card  Agreements  exists or has
occurred.  Each  Borrower,  as  applicable,  and the other parties  thereto have
complied with all of the terms and  conditions of the Credit Card  Agreements to
the extent  necessary  for such  Borrower to be entitled to receive all payments
thereunder.  Borrowers have delivered, or caused to be delivered to Agent, true,
correct and complete copies of all of the Credit Card Agreements.

      6. AFFIRMATIVE COVENANTS.

      Until  payment  in  full  of  the  Obligations  and  termination  of  this
Agreement:

      6.1 PAYMENT OF FEES.  Each Borrower shall pay to Agent on demand all usual
and customary  fees and expenses  which Agent incurs in connection  with (a) the
forwarding of Advance proceeds and (b) the  establishment and maintenance of any
Blocked Accounts as provided for in Section  4.15(h).  Agent may, without making
demand,  charge the account of  Borrowers  for all such fees and  expenses.  6.2
CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS. Each Borrower shall
(a) Conduct  continuously  and operate  actively its business  according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition  (reasonable wear and tear excepted
and  except  as  may be  disposed  of in  accordance  with  the  terms  of  this
Agreement),  including,  without limitation, all licenses, patents,  copyrights,
design  rights,  tradenames,  trade secrets and  trademarks and take all actions
necessary to enforce and protect the validity of any intellectual property right
or other right included in the Collateral; (b) keep in full force and effect its
existence  and comply in all  material  respects  with the laws and  regulations
governing  the conduct of its  business,  (c) no Borrower  shall change its name
unless  each of the  following  conditions  is  satisfied:  (i) Agent shall have
received not less than thirty (30) days prior written  notice from such Borrower
of such proposed change in its corporate name, which notice shall accurately set
forth the new name;  and (ii) Agent shall have  received a copy of the amendment
to the  Certificate  of  Incorporation  of such Borrower  providing for the name
change  certified by the Secretary of State of the jurisdiction of incorporation
or  organization  of such  Borrower  as soon as it is  available;  and (d)  such
Borrower shall not change its chief  executive  office or its mailing address or
organizational  identification  number  (or if it does not have  one,  shall not
acquire  one) unless  Agent shall have  received not less than thirty (30) days'
prior written notice from Borrower of such proposed  change,  which notice shall
set forth such  information  with respect thereto as Agent may require and Agent
shall  have  received  such  agreements  as  Agent  may  reasonably  require  in
connection  therewith.  No  Borrower  shall  change  its  type of  organization,
jurisdiction of organization or other legal structure.

                                       50
<PAGE>

      6.3  VIOLATIONS.  Each Borrower shall promptly  notify Agent in writing of
any violation of any law,  statute,  regulation or ordinance of any Governmental
Body,  or of any agency  thereof,  applicable  to any Borrower  which may have a
Material Adverse Effect.

      6.4 GOVERNMENT  RECEIVABLES.  Each Borrower shall take all steps necessary
and legally  permissible to protect Agent's interest in the Collateral under the
Federal  Assignment of Claims Act or other applicable state or local statutes or
ordinances  and  deliver to Agent  appropriately  endorsed,  any  instrument  or
chattel paper connected with any Receivable arising out of contracts between any
Borrower  and  the  United  States,  any  state  or any  department,  agency  or
instrumentality of any of them.

      6.5  FIXED  CHARGE  COVERAGE  RATIO.   Borrowers  shall  maintain,   on  a
consolidated  basis,  as at the end of each fiscal quarter (July 31, October 31,
January 31 and April 30 in any given year),  a Fixed Charge  Coverage  Ratio not
less than the amounts set forth below for each  computation  period as set forth
below:

--------------------------------------------------------------------------------
                                                        FIXED CHARGE
     COMPUTATION PERIOD                                COVERAGE RATIO
--------------------------------------------------------------------------------
3 months ending April 30, 2004                          (2.5) : 1.0
--------------------------------------------------------------------------------
6 months ending July 31, 2004                           (0.9) : 1.0
--------------------------------------------------------------------------------
9 months ending October 31, 2004                        (1.7) : 1.0
--------------------------------------------------------------------------------
12 months ending January 31, 2005                        1.3 : 1.0
--------------------------------------------------------------------------------
the  12  consecutive  month  period          To be determined based on 85% of
ending  as of the  end  each  fiscal         the projections  as set forth in
quarter commencing with the fiscal           Borrower's  yearly  business  plan,
quarter ending April 30, 2005                delivered pursuant to Section 9.12
                                             hereof which shall be acceptable to
                                             Agent and Required Lenders, in
                                             their sole discretion
--------------------------------------------------------------------------------

      6.6 MINIMUM EBITDA.  Borrowers shall maintain, on a consolidated basis, as
at the end of each fiscal  quarter (July 31, October 31, January 31 and April 30
in any given  year),  EBITDA in an amount  not less than the  amounts  set forth
below for each computation period as set forth below:

--------------------------------------------------------------------------------
          COMPUTATION PERIOD                              EBITDA
--------------------------------------------------------------------------------
3 months ending April 30, 2004                          ($775,000)
--------------------------------------------------------------------------------
6 months ending July 31, 2004                            $805,000
--------------------------------------------------------------------------------
9 months ending October 31, 2004                        ($340,000)
--------------------------------------------------------------------------------
12 months ending January 31, 2005                       $7,730,000
--------------------------------------------------------------------------------
the  12  consecutive  month  period        To be determined based on 85% of the
ending  as of the  end  each  fiscal       projections  as set forth in
quarter commencing with the fiscal         Borrower's  yearly  business  plan,
quarter ending April 30, 2005              delivered pursuant to Section 9.12
                                           hereof which shall be acceptable to
                                           Agent and Required Lenders, in their
                                           sole discretion
--------------------------------------------------------------------------------

                                       51
<PAGE>

      6.7 MINIMUM UNDRAWN AVAILABILITY.  Borrowers shall maintain, at all times,
a minimum Undrawn  Availability of not less than $2,000,000,  EXCEPT,  THAT, for
the calendar  months of July,  August,  September and October,  Borrowers  shall
maintain,  at all  times,  a  minimum  Undrawn  Availability  of not  less  than
$1,000,000.

      6.8 EXECUTION OF SUPPLEMENTAL INSTRUMENTS. Each Borrower shall execute and
deliver to Agent from time to time, upon demand,  such supplemental  agreements,
statements,  assignments and transfers, or instructions or documents relating to
the Collateral,  and such other instruments as Agent may request,  in order that
the full intent of this Agreement may be carried into effect.

      6.9  PAYMENT  OF  INDEBTEDNESS.  Each  Borrower  shall pay,  discharge  or
otherwise satisfy at or before maturity (subject, where applicable, to specified
grace  periods  and,  in the  case of the  trade  payables,  to  normal  payment
practices) all its obligations and liabilities of whatever  nature,  except when
the amount or validity  thereof is  currently  being  contested in good faith by
appropriate  proceedings and each Borrower shall have provided for such reserves
as Agent may reasonably  deem proper and necessary,  subject at all times to any
applicable subordination arrangement in favor of Lenders.

      6.10  STANDARDS OF FINANCIAL  STATEMENTS.  Each  Borrower  shall cause all
financial statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12 and
9.13 as to which GAAP is  applicable  to be complete and correct in all material
respects  (subject,  in the case of  interim  financial  statements,  to  normal
year-end  audit  adjustments  and  absence  of  notes)  and  to be  prepared  in
reasonable  detail and in accordance with GAAP applied  consistently  throughout
the  periods  reflected  therein  (except  as  concurred  in by  such  reporting
accountants  or officer,  as the case may be, and disclosed  therein) and in all
cases except as modified by the definitions contained in this Agreement.

      6.11 CREDIT CARD  AGREEMENTS.  Each Borrower shall (a) observe and perform
all material  terms,  covenants,  conditions  and  provisions of the Credit Card
Agreements  to be observed and  performed by it at the times set forth  therein;
(b) not do, permit,  suffer or refrain from doing anything, as a result of which
there  could be a  default  under or  breach  of any of the  terms of any of the
Credit Card  Agreements,  (c) at all times maintain in full force and effect the
Credit Card  Agreements and not terminate,  cancel,  surrender,  modify,  amend,
waive or release any of the Credit Card  Agreements,  or consent to or permit to
occur any of the foregoing; except, that, a Borrower may terminate or cancel any
of the Credit Card  Agreements  in the  ordinary  course of the business of such
Borrower;  provided,  that, such Borrower shall give Agent not less than fifteen
(15) days prior written notice of its intention to so terminate or cancel any of
the Credit Card  Agreements;  (d) not enter into any new Credit Card  Agreements
with any new Credit Card Issuer  unless (i) Agent shall have  received  not less
than thirty (30) days prior written  notice of the intention of such Borrower to
enter into such  agreement  (together with such other  information  with respect
thereto as Agent may request) and (ii) such Borrower  delivers,  or causes to be
delivered to Agent,  a Credit Card  Acknowledgment  in favor of Agent;  (e) give
Agent immediate written notice of any Credit Card Agreement entered into by such
Borrower after the date hereof,  together with a true, correct and complete copy
thereof and such other  information  with respect  thereto as Agent may request;
and (f) furnish to Agent,  promptly upon the request of Agent,  such information
and evidence as Agent may require from time to time  concerning the  observance,
performance  and  compliance  by such  Borrower  or the other  party or  parties
thereto with the terms, covenants or provisions of the Credit Card Agreements.

                                       52
<PAGE>

      7. NEGATIVE COVENANTS.

      No Borrower  shall,  until  satisfaction  in full of the  Obligations  and
termination of this Agreement:

      7.1 MERGER, CONSOLIDATION,  ACQUISITION AND SALE OF ASSETS. Enter into any
merger,  consolidation or other  reorganization with or into any other Person or
acquire  all or a  substantial  portion  of the assets or stock of any Person or
permit any other  Person to  consolidate  with or merge with it ; except that, a
Borrower may merge with any other Borrower provided that Borrowers provide Agent
with thirty (30) days' prior written notice. Sell, lease,  transfer or otherwise
dispose of any of its  properties or assets,  except as permitted  under Section
4.3 hereof.

      7.2 CREATION OF LIENS. Create or suffer to exist any Lien or transfer upon
or against any of its property or assets now owned or hereafter acquired, except
Permitted Encumbrances.

      7.3  GUARANTEES.  Become  liable  upon the  obligations  of any  Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders)
except (a) as disclosed on SCHEDULE 7.3 hereto, (b) the endorsement of checks in
the ordinary course of business.

      7.4 INVESTMENTS. Purchase or acquire obligations or stock of, or any other
interest in, any Person,  except (a)  obligations  issued or  guaranteed  by the
United  States of America  or any  agency  thereof;  (b)  commercial  paper with
maturities of not more than 180 days and a published rating of not less than A-1
or P-1 (or the equivalent rating); (c) certificates of time deposit and bankers'
acceptances  having  maturities  of  not  more  than  180  days  and  repurchase
agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined  capital and surplus of at least  $500,000,000,  or
(ii)  its debt  obligations,  or those  of a  holding  company  of which it is a
Subsidiary, are rated not less than A (or the equivalent rating) by a nationally
recognized investment rating agency; and (d) U.S. money market funds that invest
solely in obligations issued or guaranteed by the United States of America or an
agency thereof.

      7.5 LOANS.  Make  advances,  loans or  extensions of credit to any Person,
including without  limitation,  any Parent,  Subsidiary or Affiliate except with
respect to (a) the extension of commercial  trade credit in connection  with the
sale of Inventory in the ordinary course of its business,  (b) loans outstanding
as of the date  hereof  as set  forth on  SCHEDULE  7.5  hereto  (so long as the
aggregate  principal amount of such loans does not exceed $200,000) and loans to
employees in the ordinary course of business not to exceed the aggregate  amount
of $100,000  outstanding at any one time; and (c) advances,  loans or extensions
of credit made from one Borrower to another  Borrower in the ordinary  course of
business consistent with historical practices.

                                       53
<PAGE>

      7.6 CAPITAL  EXPENDITURES.  Contract for, purchase or make any expenditure
or commitments for fixed or capital assets (including capitalized leases) in any
fiscal year in an amount in excess of $4,500,000.

      7.7 DIVIDENDS.  Declare,  pay or make any dividend or  distribution on any
shares of the  common  stock or  preferred  stock of any  Borrower  (other  than
dividends   or   distributions   payable  in  its   stock,   or   split-ups   or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase,  redemption or other  retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or  preferred
stock of any  Borrower,  provided,  however,  that  after  giving  effect to the
payment of such dividends there shall not exist any Event of Default or Default.

      7.8  INDEBTEDNESS.   Create,   incur,   assume  or  suffer  to  exist  any
Indebtedness  (exclusive of trade debt) except in respect of (a) Indebtedness to
Lenders;  (b)  Indebtedness  outstanding  as of the date  hereof as set forth on
SCHEDULE  7.8  hereto;   (c)  Indebtedness  due  under  the  Subordinated   Debt
Documentation;  and (d) Indebtedness incurred for capital expenditures permitted
under Section 7.6 hereof.

      7.9 NATURE OF BUSINESS. Substantially change the nature of the business in
which it is  presently  engaged,  nor except as  specifically  permitted  herein
purchase or invest, directly or indirectly, in any assets or property other than
in the ordinary  course of business for assets or property  which are useful in,
necessary for and are to be used in its business as presently conducted.

      7.10  TRANSACTIONS  WITH  AFFILIATES.  Directly or  indirectly,  purchase,
acquire or lease any property from, or sell,  transfer or lease any property to,
or otherwise  deal with,  any  Affiliate,  except  transactions  in the ordinary
course of business,  on an  arm's-length  basis on terms no less  favorable than
terms which would have been obtainable from a Person other than an Affiliate.

      7.11  LEASES.  Enter as  lessee  into any  lease  arrangement  for real or
personal property (unless capitalized and permitted under Section 7.6 hereof) if
after giving effect  thereto,  aggregate  annual rental  payments for all leased
property would exceed in any one fiscal year 105% of the amount of annual rental
payments  for all  leased  property  for such  fiscal  year as set  forth in the
Projected Operating Budget for such fiscal year.

      7.12 SUBSIDIARIES.

            (a) Form any Subsidiary.

            (b)  Enter   into  any   partnership,   joint   venture  or  similar
arrangement.

                                       54
<PAGE>

      7.13 FISCAL YEAR AND ACCOUNTING  CHANGES.  Change its fiscal year from the
Saturday  closest to January 31 or make any change (a) in  accounting  treatment
and  reporting  practices  except as  required  by GAAP or (b) in tax  reporting
treatment except as required by law.

      7.14 PLEDGE OF CREDIT.  Now or  hereafter  pledge  Agent's or any Lender's
credit on any purchases or for any purpose  whatsoever or use any portion of any
Advance in or for any business other than such Borrower's  business as conducted
on the date of this Agreement.

      7.15 AMENDMENT OF ARTICLES OF  INCORPORATION,  BY-LAWS.  Amend,  modify or
waive any term or material provision of its Articles of Incorporation or By-Laws
unless such amendment,  modification or waiver would not have a Material Adverse
Effect upon such Borrower.

      7.16 COMPLIANCE WITH ERISA.

            (a) (i) Maintain,  or permit any member of the  Controlled  Group to
maintain,  or (ii) become  obligated to contribute,  or permit any member of the
Controlled  Group to become  obligated to  contribute,  to any Plan,  other than
those Plans  disclosed  on SCHEDULE  5.8(D)  hereto;  (b) engage,  or permit any
member  of  the  Controlled  Group  to  engage,  in any  non-exempt  "prohibited
transaction",  as that term is defined in section 406 of ERISA and Section  4975
of the Code; (c) incur,  or permit any member of the Controlled  Group to incur,
any "accumulated funding deficiency",  as that term is defined in Section 302 of
ERISA or Section  412 of the Code;  (d)  terminate,  or permit any member of the
Controlled  Group to  terminate,  any Plan where such event could  result in any
liability  of  any  Borrower  or  any  member  of the  Controlled  Group  or the
imposition  of a lien on the  property  of any  Borrower  or any  member  of the
Controlled  Group pursuant to Section 4068 of ERISA;  (e) assume,  or permit any
member of the  Controlled  Group to assume,  any obligation to contribute to any
Multiemployer Plan not disclosed on SCHEDULE 5.8(D) hereto; (f) incur, or permit
any member of the Controlled  Group to incur,  any  withdrawal  liability to any
Multiemployer  Plan;  (g) fail promptly to notify Agent of the occurrence of any
Termination  Event;  (h) fail to  comply,  or permit a member of the  Controlled
Group to fail to  comply,  with the  requirements  of ERISA or the Code or other
applicable  laws in  respect  of any Plan;  or (i) fail to meet,  or permit  any
member of the Controlled Group to fail to meet, all minimum funding requirements
under  ERISA  or the Code or  postpone  or delay  or  allow  any  member  of the
Controlled  Group to postpone or delay any funding  requirement  with respect of
any Plan.

      7.17 SUBORDINATED NOTE. At any time, directly or indirectly,  pay, prepay,
repurchase,  redeem, retire or otherwise acquire, or make any payment on account
of any  principal  of,  interest on or premium  payable in  connection  with the
repayment or redemption of the Subordinated Note, except as expressly  permitted
in the Subordination Agreement.

      7.18  PREPAYMENT OF  INDEBTEDNESS.  At any time,  directly or  indirectly,
prepay any Indebtedness (other than to Agent), or repurchase,  redeem, retire or
otherwise acquire any Indebtedness of any Borrower.

                                       55
<PAGE>

      7.19 ADDITIONAL  LOANS AND INVESTMENTS BY ORIGINAL OWNER.  Notwithstanding
anything  to the  contrary  contained  herein,  from and after the date  hereof,
Original  Owners may make additional  cash equity capital  contributions  and/or
loans to the  Borrowers  (the  "Additional  Investments").  Original  Owners and
Borrowing Agent shall provide Agent and Lenders with written notice of each such
Additional  Investment  and, on a quarterly  basis, a summary of the outstanding
amount of all such Additional Investments. All Additional Investments consisting
of loans or advances to any Borrower shall constitute Subordinated  Indebtedness
and shall be subject to the terms and provisions of the  Subordinated  Agreement
unless Required Lenders, in their documents, agree otherwise.

      8. CONDITIONS PRECEDENT.

      8.1 CONDITIONS TO INITIAL  ADVANCES.  The agreement of Lenders to make the
initial  Advances  requested  to be made on the  Closing  Date is subject to the
satisfaction,  or waiver by Lenders,  immediately  prior to or concurrently with
the making of such Advances, of the following conditions precedent:

            (a) FILINGS, REGISTRATIONS AND RECORDINGS. Each document (including,
without limitation, any Uniform Commercial Code financing statement) required by
this Agreement,  any Other Document or under law or reasonably  requested by the
Agent to be filed, registered or recorded in order to create, in favor of Agent,
a perfected  security  interest in or lien upon the  Collateral  shall have been
properly filed, registered or recorded in each jurisdiction in which the filing,
registration or recordation thereof is so required or requested, and Agent shall
have received an acknowledgment  copy, or other evidence  satisfactory to it, of
each such filing,  registration or recordation and satisfactory  evidence of the
payment of any necessary fee, tax or expense relating thereto;

            (b) CORPORATE  PROCEEDINGS OF BORROWERS AND  GUARANTOR.  Agent shall
have  received,  in form and  substance  satisfactory  to  Agent,  a copy of the
resolutions in form and substance reasonably satisfactory to Agent, of the Board
of  Directors of each  Borrower and  Guarantor  authorizing  (i) the  execution,
delivery  and  performance  of  this  Agreement,   the  Other   Documents,   the
Subordinated Debt Documentation,  and any related agreements,  (collectively the
"Documents")  and (ii) the  granting  by each  Borrower  of the  Liens  upon the
Collateral and by each Guarantor upon all of such Guarantor's property, in favor
of Agent for itself and the ratable  benefit of Lenders,  in each case certified
by the Secretary or an Assistant  Secretary of each Borrower and Guarantor as of
the Closing Date; and, such certificate shall state that the resolutions thereby
certified have not been amended,  modified,  revoked or rescinded as of the date
of such certificate;

            (c) INCUMBENCY CERTIFICATES OF BORROWERS AND GUARANTOR.  Agent shall
have received, in form and substance satisfactory to Agent, a certificate of the
Secretary or an Assistant  Secretary of each Borrower and  Guarantor,  dated the
Closing  Date,  as to the  incumbency  and  signature  of the  officers  of each
Borrower executing this Agreement, and each Borrower and Guarantor executing any
of the other  Documents or any certificate or other documents to be delivered by
it pursuant  hereto,  together with evidence of the incumbency of such Secretary
or Assistant Secretary;

                                       56
<PAGE>

            (d) CERTIFICATES.  Agent shall have received,  in form and substance
satisfactory to Agent, a copy of the Articles or Certificate of Incorporation or
other  charter  documents of each  Borrower and  Guarantor,  and all  amendments
thereto,  certified by the Secretary of State or other  appropriate  official of
its  jurisdiction of  incorporation  together with copies of the By-Laws of each
Borrower and  Guarantor,  and all  agreements  of each  Borrower's  shareholders
certified  as  accurate  and  complete by the  Secretary  of each  Borrower  and
Guarantor;

            (e) GOOD STANDING  CERTIFICATES.  Agent shall have received, in form
and  substance  satisfactory  to  Agent,  good  standing  certificates  for each
Borrower and Guarantor dated not more than thirty (30) days prior to the Closing
Date,  issued by the  Secretary of State or other  appropriate  official of each
Borrower's and Guarantor's  jurisdiction of incorporation  and each jurisdiction
where the conduct of each Borrower's and each Guarantor's business activities or
the ownership of its properties necessitates qualification;

            (f) NO  LITIGATION.  (i)  Except  as set  forth on  SCHEDULE  5.8(B)
hereto,  no litigation,  investigation or proceeding before or by any arbitrator
or Governmental  Body shall be continuing or threatened  against any Borrower or
Guarantor  against the officers or directors of any Borrower or Guarantor (A) in
connection  with the  Documents  or any of the  Transactions  and which,  in the
reasonable  opinion  of Agent,  is  deemed  material  or (B) which if  adversely
determined,  could, in the reasonable  opinion of Agent, have a Material Adverse
Effect;  and (ii) no injunction,  writ,  restraining order or other order of any
nature  materially  adverse to any  Borrower or  Guarantor or the conduct of its
business or inconsistent  with the due  consummation of the  Transactions  shall
have been issued by any Governmental Body;

            (g)  FINANCIAL  CONDITION  CERTIFICATES.  Agent shall have  received
executed Officers Certificates  satisfactory in form and substance  satisfactory
to Agent, executed Officers Certificates certifying the solvency of Borrowers on
a Consolidated Basis after giving effect to the Indebtedness contemplated hereby
and by the  Subordinated  Debt  Documentation  and  as to  Borrowers'  financial
resources and their ability to meet their  obligations  and  liabilities as they
become due; to the effect that as of the Closing Date and after giving effect to
the Transactions:

                  (i) the assets of Borrowers on a Consolidated Basis, at a fair
valuation,  exceed the total liabilities  (including  contingent,  subordinated,
unmatured and  unliquidated  liabilities) of Borrowers on a Consolidated  Basis;
(ii) current projections which are based on underlying assumptions which provide
a reasonable  basis for the  projections  and which reflect each Borrower's good
faith  judgment  based on present  circumstances  that each  Borrower  will have
sufficient cash flow to enable it to pay its debts as they mature; and

                  (iii) no Borrower has an unreasonably  small capital base with
which to engage in its anticipated business.

For purposes of this subsection (h), the "fair  valuation" of the assets of each
Borrower  shall be  determined  on the basis of the amount which may be realized
within a reasonable  time,  either through  collection or sale of such assets at
market  value,  conceiving  the latter as the amount which could be obtained for
the  property  in  question  within  such  period  by  a  capable  and  diligent
businessman  from an interested  buyer who is willing to purchase under ordinary
selling conditions;

                                       57
<PAGE>

            (h) COLLATERAL  EXAMINATION.  Agent shall have completed  Collateral
examinations and received any required appraisals, the results of which shall be
satisfactory in form and substance to Agent, of the  Receivables,  Inventory and
General  Intangibles,  of each  Borrower and all books and records in connection
therewith;

            (i) FEES.  Agent shall have  received  all fees payable to Agent and
Lenders on or prior to the Closing Date pursuant to Article 3 hereof;

            (j) PRO FORMA FINANCIAL STATEMENTS AND OTHER FINANCIAL  INFORMATION.
Agent shall have received,  in form and substance  satisfactory to Agent, a copy
of the Pro  Forma  Financial  Statements,  a copy of a pro  forma  statement  of
sources and uses of cash as of the Closing Date, and a current summary inventory
report and aging of accounts receivable and accounts payable for Borrowers which
shall be satisfactory in all respects to Agent;

            (k) OTHER DOCUMENTS. Agent shall have received final executed copies
of the Subordinated Debt Documentation and of all Other Documents,  each in form
and substance  satisfactory to Agent, and all related agreements,  documents and
instruments as in effect on the Closing Date and the  transactions  contemplated
by such documentation  shall be consummated  concurrently with the making of the
initial Advances;

            (l)  SUBORDINATION  AGREEMENT.  Agent  shall  have  entered  into  a
Subordination  Agreement with Borrowers and Subordinated  Lender which shall set
forth the basis upon which the  Subordinated  Lender may receive,  and Borrowers
may  make,   payments  under  the  Subordinated   Note,  which  basis  shall  be
satisfactory in form and substance to Agent in its sole discretion;

            (m)  INSURANCE.  Agent  shall have  received  in form and  substance
satisfactory  to  Agent,  certified  copies  of  Borrowers'  casualty  insurance
policies,  together with loss payable  endorsements on Agent's  standard form of
loss payee  endorsement  naming  Agent as loss payee,  and  certified  copies of
Borrowers' liability insurance policies, together with endorsements naming Agent
as a co-insured;

            (n) PAYMENT  INSTRUCTIONS.  Agent shall have  received,  in form and
substance  satisfactory to Agent,  written instructions from Borrowers directing
the  application  of  proceeds  of the initial  Advances  made  pursuant to this
Agreement;

            (o)  BLOCKED  ACCOUNTS.  Agent  shall  have  received,  in form  and
substance  satisfactory  to Agent,  duly executed  agreements  establishing  the
Blocked  Accounts  with  financial  institutions  acceptable  to  Agent  for the
collection or servicing of the Receivables and proceeds of the Collateral;

            (p)  CONSENTS.  Agent  shall have  received,  in form and  substance
satisfactory to Agent, any and all Consents necessary to permit the effectuation
of the transactions contemplated by this Agreement and the Other Documents; and,
Agent shall have  received  such  Consents and waivers of such third  parties as
might  assert  claims with respect to the  Collateral,  as Agent and its counsel
shall deem reasonably necessary;

                                       58
<PAGE>

            (q) FINANCIAL  STATEMENTS.  Agent shall have  received,  in form and
substance satisfactory to Agent, unaudited consolidated financial statements for
Borrowers  for fiscal  year ending  January 31,  2004,  and  Borrowers'  monthly
financial statements through and including February, 2004.

            (r) NO ADVERSE  MATERIAL  CHANGE.  (i) Since April 30,  2004,  there
shall not have  occurred  (A) any  material  adverse  change  in the  condition,
financial or otherwise,  operations,  properties or prospects of the  Borrowers,
taken  as a  whole,  (B)  any  material  damage  or  destruction  to  any of the
Collateral nor any material  depreciation in the value thereof and (C)any event,
condition  or  state of facts  which  could  reasonably  be  expected  to have a
Material  Adverse  Effect,  and (D) any material  deviation  from the  forecasts
furnished to Agent with respect to the Borrowers,  taken as a whole, and (ii) no
representations  made or information supplied to Agent shall have been proven to
be inaccurate or misleading in any material respect;

            (s)  LEASEHOLD  AGREEMENTS.  Agent  shall  have  received  landlord,
mortgagee or warehouseman  agreements  satisfactory to Agent with respect to all
premises leased by Borrowers at which books and records  relating to Receivables
are located;

            (t) SUBORDINATED DEBT DOCUMENTATION.  Agent shall have received,  in
form  and  substance  satisfactory  to  Agent,  final  executed  copies  of  the
Subordinated  Debt  Documentation  which shall contain such terms and provisions
including, without limitation, subordination terms, satisfactory to Agent;

            (u) GUARANTEES AND OTHER DOCUMENTS. Agent shall have received (i) an
acknowledgment  by  Guarantor  that the  Guaranty  and Stock Pledge and Security
Agreement previously executed by Guarantor, each remain in full force and effect
in accordance with their respective terms and provisions,  and (ii) the executed
Fee Letter and Other  Documents  in addition to the  foregoing,  all in form and
substance satisfactory to Agent;

            (v)  CONTRACT  REVIEW.   Agent  shall  have  reviewed  all  material
contracts of Borrowers including,  without limitation,  leases, union contracts,
labor contracts, vendor supply contracts, license agreements and distributorship
agreements  and such  contracts  and  agreements  shall be  satisfactory  in all
respects to Agent;

            (w)  CLOSING  CERTIFICATE.  Agent shall have  received,  in form and
substance  satisfactory  to  Agent,  a closing  certificate  signed by the Chief
Financial Officer of each Borrower dated as of the date hereof, stating that (i)
all  representations  and  warranties  set forth in this Agreement and the Other
Documents  are true and correct on and as of such date,  (ii)  Borrowers  are on
such date in  compliance  with all the terms  and  provisions  set forth in this
Agreement and the Other  Documents and (iii) on such date no Default or Event of
Default has occurred or is continuing;

            (x) BORROWING BASE. Agent shall have received, in form and substance
satisfactory  to Agent, a Borrowing Base  Certificate  sufficient to support the
Advances in the amount requested by Borrowers on the Closing Date;

                                       59
<PAGE>

            (y) BUSINESS PLAN AND  PROJECTIONS.  Agent shall have  received,  in
form and substance  satisfactory to Agent,  Borrowers' business plan and monthly
financial  projections  for Borrowers'  fiscal year ending January 31, 2005, and
such further  information and  documentation as Agent shall  reasonably  require
with respect to each Borrower.

            (z)  UNDRAWN  AVAILABILITY.  After  giving  effect  to  the  initial
Advances  hereunder,  Borrowers  shall  have  Undrawn  Availability  of at least
$6,500,000; and

            (aa)  OTHER.  Agent  shall  have  received  in  form  and  substance
satisfactory to Agent, evidence of all corporate and other proceedings,  and all
documents,   instruments   and  other  legal  matters  in  connection  with  the
Transactions  shall be reasonably  satisfactory  in form and substance to Agent,
Lenders and their counsel.

      8.2  CONDITIONS  TO EACH  ADVANCE.  The  agreement  of Lenders to make any
Advance  requested to be made on any date (including,  without  limitation,  the
initial  Advance),  is subject to the  satisfaction of the following  conditions
precedent as of the date such Advance is made:

            (a) REPRESENTATIONS AND WARRANTIES.  Each of the representations and
warranties made by any Borrower in or pursuant to this Agreement and any related
agreements  to  which  it is a  party,  and  each  of  the  representations  and
warranties  contained  in  any  certificate,  document  or  financial  or  other
statement  furnished at any time under or in connection  with this  Agreement or
any related  agreement shall be true and correct in all material respects on and
as of such date as if made on and as of such date,  except to the extent made as
of a specific date;

            (b) NO DEFAULT.  No Event of Default or Default  shall have occurred
and be  continuing  on such date,  or would  exist  after  giving  effect to the
Advances requested to be made, on such date, provided,  however that Lenders, in
their  sole  discretion,  may  continue  to make  Advances  notwithstanding  the
existence  of an Event of Default or Default and that any Advances so made shall
not be deemed a waiver of any such Event of Default or Default; and

            (c) MAXIMUM  ADVANCES.  In the case of any Advances  requested to be
made,  after giving effect  thereto,  the Advances  shall not exceed the maximum
amount of Advances permitted under Section 2.1 hereof.

Each  request  for  an  Advance  by  Borrowers   hereunder  shall  constitute  a
representation and warranty by each Borrower as of the date of such Advance that
the conditions contained in this subsection shall have been satisfied.

9.    INFORMATION AS TO BORROWERS.

      Each Borrower shall, until satisfaction in full of the Obligations and the
termination of this Agreement:

      9.1 DISCLOSURE OF MATERIAL  MATTERS.  Immediately  upon learning  thereof,
report to Agent all matters  materially  affecting the value,  enforceability or
collectibility of any portion of the Collateral  including,  without limitation,
any Borrower's reclamation or repossession of, or the return to any Borrower of,
a material  amount of goods or claims or disputes  asserted  by any  Customer or
other obligor.

                                       60
<PAGE>

      9.2 SCHEDULES. Deliver to Agent Inventory reports not later than the third
(3rd) Business Day of each week for the immediately preceding week. In addition,
(a) deliver to Agent on or before the fifteenth  (15th) day of each month as and
for the prior month,  or more frequently as Agent may require from time to time,
accounts receivable agings,  accounts payable schedules and a certification duly
signed by an officer of Borrowing  Agent that all  obligations  of the Borrowers
under all real or  personal  property  leases  have been  paid,  (b)  deliver to
Hilco/Great  American  or such other  person as Agent may  direct,  from time to
time,  not later than the third  (3rd)  Business  Day of each  fiscal  quarter a
summary  report of the  Borrowers'  Inventory,  prepared  by  category,  and (c)
deliver to Agent,  at Borrowers'  expense,  on or before the thirtieth  (30) day
after the end of each fiscal quarter as and for the prior fiscal quarter,  or at
any time or times as Agent may request on or after an Event of Default,  written
Inventory  appraisals in form, scope and methodology  acceptable to Agent and by
an  appraiser  acceptable  to Agent,  addressed  to Agent or upon which Agent is
expressly  permitted  to  rely.  In  addition  to and not in  limitation  of the
foregoing,  Borrowers  shall  deliver  to Agent at such  intervals  as Agent may
reasonably require: (i) copies of Customer's invoices, (ii) evidence of shipment
or delivery,  and (iii) such further  schedules,  documents  and/or  information
regarding the  Collateral as Agent may require  including,  without  limitation,
trial balances and test verifications. Agent shall have the right to confirm and
verify  all  Receivables  by any  manner and  through  any  medium it  considers
advisable  and do  whatever  it may deem  reasonably  necessary  to protect  its
interests  hereunder.  The items to be provided  under this Section are to be in
form reasonably satisfactory to Agent and executed by Borrowers and delivered to
Agent from time to time solely for Agent's convenience in maintaining records of
the  Collateral,  and  Borrowers'  failure to deliver any of such items to Agent
shall not affect, terminate, modify or otherwise limit Agent's security interest
with respect to the Collateral.

      9.3 ENVIRONMENTAL REPORTS.  Furnish Agent,  concurrently with the delivery
of the  financial  statements  referred  to in  Sections  9.7  and  9.8,  with a
certificate  signed by the  President  and/or  Chief  Financial  Officer of each
Borrower  stating,  to the  best of his  knowledge,  that  each  Borrower  is in
compliance  in all  material  respects  with all  federal,  state and local laws
relating to  environmental  protection and control and  occupational  safety and
health. To the extent any Borrower is not in compliance with the foregoing laws,
the certificate shall set forth with specificity all areas of non-compliance and
the  proposed  action such  Borrower  will  implement  in order to achieve  full
compliance.

      9.4 LITIGATION.  Promptly notify Agent in writing of any litigation,  suit
or administrative proceeding affecting any Borrower, whether or not the claim is
covered by insurance,  and of any suit or administrative  proceeding,  which may
have a Material Adverse Effect.

      9.5  MATERIAL  OCCURRENCES.  Promptly  notify  Agent in  writing  upon the
occurrence  of (a) any Event of  Default  or  Default;  (b) any event of default
under  the  Subordinated  Debt  Documentation;  (c) any  event,  development  or
circumstance  whereby any financial  statements  or other  reports  furnished to
Agent fail in any material  respect to present  fairly,  in accordance with GAAP
consistently  applied  except as limited  in the  definitions  included  in this
Agreement,  the financial  condition or operating  results of any Borrower as of
the  date of  such  statements;  (d) any  accumulated  retirement  plan  funding
deficiency  which, if such  deficiency  continued for two plan years and was not
corrected as provided in Section 4971 of the Code, could subject any Borrower to
a tax  imposed by Section  4971 of the Code;  (e) each and every  default by any
Borrower  which  might  result  in  the  acceleration  of  the  maturity  of any
Indebtedness,  including  the  names  and  addresses  of  the  holders  of  such
Indebtedness  with respect to which there is a default  existing or with respect
to which the maturity has been or could be  accelerated,  and the amount of such
Indebtedness;  and (f) any other  development  in the business or affairs of any
Borrower which might have a Material Adverse Effect; in each case describing the
nature thereof and the action Borrowers propose to take with respect thereto.

                                       61
<PAGE>

      9.6  GOVERNMENT  RECEIVABLES.  Notify  Agent  immediately  if  any  of its
Receivables  arise out of contracts  between any Borrower and the United States,
any state, or any department, agency or instrumentality of any of them.

      9.7 ANNUAL FINANCIAL  STATEMENTS.  Furnish Agent within one hundred twenty
(120) days after the end of each fiscal  year of  Borrowers,  consolidating  and
consolidated  financial statements for Borrowers including,  but not limited to,
statements of income and  stockholders'  equity and cash flow from the beginning
of the current  fiscal year to the end of such fiscal year and the balance sheet
as at the end of such fiscal year, all prepared in accordance  with GAAP applied
on a basis consistent with prior practices, except as limited in the definitions
included in this  Agreement  and in  reasonable  detail  together  with  audited
consolidating and consolidated  financial  statements for E Com Ventures,  Inc.,
prepared  in  accordance  with GAAP  applied  on a basis  consistent  with prior
periods reported upon without  qualification by an independent  certified public
accounting  firm  reasonably  satisfactory  to Agent  (the  "Accountants").  The
reports  shall be  accompanied  by a certificate  of the President  and/or Chief
Financial  Officer  of  each  Borrower  which  shall  state  that,  based  on an
examination  sufficient to permit him to make an informed statement,  no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default, its nature, when it occurred,  whether it is continuing and
the steps being taken by such  Borrower  with respect to such default and,  such
certificate shall have appended thereto  calculations which set forth Borrowers'
compliance with the  requirements  or restrictions  imposed by Sections 6.5, 6.6
and 6.7 hereof.

      9.8 MONTHLY  FINANCIAL  STATEMENTS.  Furnish Agent within thirty (30) days
after the end of each month,  consolidating  and consolidated  unaudited balance
sheet of Borrowers and unaudited  statements of income and stockholders'  equity
and cash flow of Borrowers  reflecting  results of operations from the beginning
of the fiscal  year to the end of such month and for such  month,  prepared on a
basis  consistent  with prior practices and complete and correct in all material
respects,  subject  to  normal  year  end  adjustments.  The  reports  shall  be
accompanied  by a  certificate  signed by the President  and/or Chief  Financial
Officer of each  Borrower,  which  shall  state  that,  based on an  examination
sufficient to permit him to make an informed statement,  (a) no Default or Event
of Default exists, or, if such is not the case, specifying such Default or Event
of Default, its nature, when it occurred, whether it is continuing and the steps
being taken by Borrowers  with respect to such event,  (b) Borrowers are current
with  respect to payment of all  amounts  due or to become due in respect of (i)
sales, use and/or  withholding  taxes, (ii) Real Property taxes, and (iii) lease
payments,  and (c) such  certificate  shall have appended  thereto  calculations
which set forth  Borrowers'  compliance  with the  requirements  or restrictions
imposed by Sections 6.5, 6.6 and 6.7 hereof.

                                       62
<PAGE>

      9.9 BORROWING BASE  CERTIFICATE.  Furnish Agent,  not later than the third
(3rd) Business Day of each week for the immediately preceding week, and together
with each request for a Revolving  Advance,  a Borrowing Base  Certificate  duly
completed  and  executed  by the chief  financial  officer or other  appropriate
financial  officer of Borrowing Agent and delivered to Agent.  Nothing contained
in any Borrowing Base Certificate shall be deemed to limit,  impair or otherwise
affect  the  rights  of  Agent  and  Lenders  in the  event of any  conflict  or
inconsistency  between any amounts or  calculations as set forth in any Borrower
Base  Certificate  and any amounts or  calculations  as  determined by Agent and
Lenders in good faith,  the  determination of Agent and Lenders shall govern and
be  conclusive  and binding  upon  Borrowing  Agent and each  Borrower.  Without
limiting the  foregoing,  each  Borrower  shall furnish to Agent and Lenders any
information  which  Agent and  Lenders  may  reasonably  request  regarding  the
determination  and  calculation of any of the amounts set forth in any Borrowing
Base Certificate.

      9.10 OTHER REPORTS.  Furnish Agent as soon as available,  but in any event
within  ten (10)  days  after  the  issuance  thereof,  (a) with  copies of such
financial  statements,  reports and returns as each  Borrower  shall send to its
stockholders,  and (b) copies of all notices sent  pursuant to the  Subordinated
Debt Documentation.

      9.11   ADDITIONAL   INFORMATION.   Furnish  Agent  with  such   additional
information  as Agent  shall  reasonably  request  in order to  enable  Agent to
determine  whether  the terms,  covenants,  provisions  and  conditions  of this
Agreement have been complied with by Borrowers including, without limitation and
without the  necessity  of any request by Agent,  (a) at least  thirty (30) days
prior thereto,  notice of any  Borrower's  opening of any new office or place of
business or any Borrower's  closing of any existing office or place of business,
and (b)  promptly  upon any  Borrower's  learning  thereof,  notice of any labor
dispute to which any  Borrower  may  become a party,  any  strikes  or  walkouts
relating to any of its plants or other  facilities,  and the  expiration  of any
labor  contract  to which any  Borrower  is a party or by which any  Borrower is
bound.

      9.12 PROJECTED OPERATING BUDGET.  Furnish Agent, no later than thirty (30)
days prior to the  beginning of each  Borrower's  fiscal years  commencing  with
fiscal year 2005, a month by month  projected  operating  budget  (with  written
assumptions)  and cash flow of Borrowers  on a  consolidated  and  consolidating
basis for such fiscal year  (including an income  statement,  statements of cash
disbursements,  cash  collections,  balance  sheet,  statements of cash flow and
borrowing base  projections for each month),  such projections to be accompanied
by a  certificate  signed by the  President or Chief  Financial  Officer of each
Borrower to the effect that such  projections have been prepared on the basis of
sound  financial  planning  practice  consistent with past budgets and financial
statements and that such officer has no reason to question the reasonableness of
any material assumptions on which such projections were prepared.

      9.13 VARIANCES FROM OPERATING BUDGET. Furnish Agent, concurrently with the
delivery of the financial statements referred to in Section 9.7 and each monthly
report,  a written  report  summarizing  all  material  variances  from  budgets
submitted by Borrowers pursuant to Section 9.12 and a discussion and analysis by
management with respect to such variances.

                                       63
<PAGE>

      9.14 NOTICE OF SUITS, ADVERSE EVENTS.  Furnish Agent with prompt notice of
(a) any lapse or other  termination of any Consent issued to any Borrower by any
Governmental  Body or any other Person that is material to the  operation of any
Borrower's  business,  (b) any  refusal  by any  Governmental  Body or any other
Person to renew or extend any such  Consent;  and (c) copies of any  periodic or
special reports filed by any Borrower with any Governmental  Body or Person,  if
such reports indicate any material change in the business,  operations,  affairs
or condition of any Borrower,  or if copies thereof are requested by Agent,  and
(d)  copies  of  any  material  notices  and  other   communications   from  any
Governmental Body or Person which specifically relate to any Borrower.

      9.15 ERISA NOTICES AND  REQUESTS.  Furnish  Agent with  immediate  written
notice in the event that (a) any Borrower or any member of the Controlled  Group
knows or has reason to know that a Termination Event has occurred, together with
a written  statement  describing such Termination  Event and the action, if any,
which such Borrower or member of the Controlled  Group has taken, is taking,  or
proposes to take with  respect  thereto  and,  when known,  any action  taken or
threatened  by the Internal  Revenue  Service,  Department of Labor or PBGC with
respect thereto, (b) any Borrower or any member of the Controlled Group knows or
has reason to know that a prohibited  transaction (as defined in Sections 406 of
ERISA and 4975 of the  Code)  has  occurred  together  with a written  statement
describing such  transaction and the action which such Borrower or any member of
the  Controlled  Group has taken,  is taking or  proposes  to take with  respect
thereto,  (c) a funding  waiver  request has been filed with respect to any Plan
together with all  communications  received by any Borrower or any member of the
Controlled Group with respect to such request,  (d) any increase in the benefits
of any existing Plan or the establishment of any new Plan or the commencement of
contributions  to any  Plan to  which  (e) any  Borrower  or any  member  of the
Controlled  Group was not previously  contributing  shall occur, any Borrower or
any  member of the  Controlled  Group  shall  receive  from the PBGC a notice of
intention  to terminate a Plan or to have a trustee  appointed  to  administer a
Plan,  together with copies of each such notice,  (f) any Borrower or any member
of the Controlled Group shall receive any favorable or unfavorable determination
letter from the Internal Revenue Service  regarding the  qualification of a Plan
under Section 401(a) of the Code,  together with copies of each such letter; (g)
any  Borrower  or any  member of the  Controlled  Group  shall  receive a notice
regarding the imposition of withdrawal  liability,  together with copies of each
such notice;  (h) any Borrower or any member of the Controlled  Group shall fail
to make a required  installment or any other required  payment under Section 412
of the Code on or before the due date for such  installment  or payment;  or (i)
any  Borrower  or  any  member  of  the  Controlled   Group  knows  that  (i)  a
Multiemployer  Plan has been terminated,  (ii) the administrator or plan sponsor
of a Multiemployer Plan intends to terminate a Multiemployer  Plan, or (iii) the
PBGC has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.

      9.16  ADDITIONAL  DOCUMENTS.  Execute and deliver to Agent,  upon request,
such  documents  and  agreements  as Agent  may,  from time to time,  reasonably
request to carry out the purposes, terms or conditions of this Agreement.

10.   EVENTS OF DEFAULT.

      The occurrence of any one or more of the following events shall constitute
an "Event of Default":

      10.1  failure by any  Borrower  to pay any  principal  or  interest on the
Obligations when due, whether at maturity or by reason of acceleration  pursuant
to the terms of this  Agreement  or by  notice of  intention  to  prepay,  or by
required  prepayment or failure to pay any other  liabilities  or make any other
payment, fee or charge provided for herein or in any Other Document when due;

                                       64
<PAGE>

      10.2 any representation or warranty made or deemed made by any Borrower in
this  Agreement  or any related  agreement  or in any  certificate,  document or
financial or other  statement  furnished at any time in  connection  herewith or
therewith  shall prove to have been  misleading  in any material  respect on the
date when made or deemed to have been made;

      10.3 failure by any Borrower to (a) furnish financial information when due
or when  requested  by  Agent  within  a  reasonable  time of such  request,  or
(b)permit the inspection of its books or records;

      10.4  issuance of a notice of Lien  (other than a Permitted  Encumbrance),
levy,  assessment,  injunction or attachment  against a material  portion of any
Borrower's property;

      10.5  failure or neglect of any  Borrower to perform,  keep or observe any
term, provision, condition, covenant herein contained, or contained in any other
agreement or arrangement, now or hereafter entered into between any Borrower and
any Lender;

      10.6 any judgment is rendered or judgment liens filed against any Borrower
for an amount  in  excess of  $250,000  which  within  thirty  (30) days of such
rendering or filing is not either satisfied,  stayed or discharged of record, or
which at any time is unstayed;

      10.7  any  Borrower  shall  (a)  apply  for,  consent  to  or  suffer  the
appointment of, or the taking of possession by, a receiver,  custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property,  (b) make a general  assignment  for the  benefit  of  creditors,  (c)
commence a voluntary case under any state or federal  bankruptcy laws (as now or
hereafter in effect),  (d) be  adjudicated a bankrupt or  insolvent,  (e) file a
petition  seeking to take advantage of any other law providing for the relief of
debtors,  (f) acquiesce to, or fail to have  dismissed,  within  forty-five (45)
days,  any  petition  filed  against  it in  any  involuntary  case  under  such
bankruptcy  laws, or (g) take any action for the purpose of effecting any of the
foregoing;  except  that with  respect to Section  10.7(f)  above,  so long as a
petition  is pending  against  any  Borrower,  Agent and  Lenders  shall have no
obligation  whatsoever  to make  any  loans or  advances  or  provide  financial
accommodations to any Borrower hereunder;

      10.8 any Borrower  shall admit in writing its  inability,  or be generally
unable,  to pay its debts as they become due or cease  operations of its present
business;

      10.9 any Affiliate of any Borrower, or any Guarantor, shall (a) apply for,
consent  to or suffer the  appointment  of, or the  taking of  possession  by, a
receiver,  custodian,  trustee,  liquidator or similar fiduciary of itself or of
all or a substantial  part of its property,  (b) admit in writing its inability,
or be generally  unable, to pay its debts as they become due or cease operations
of its  present  business,  (c) make a general  assignment  for the  benefit  of
creditors,  (d) commence a voluntary case under any state or federal  bankruptcy
laws  (as  now or  hereafter  in  effect),  (e) be  adjudicated  a  bankrupt  or
insolvent,  (f) file a  petition  seeking  to take  advantage  of any  other law
providing  for  the  relief  of  debtors,  (g)  acquiesce  to,  or  fail to have
dismissed,  within  forty-five  (45) days,  any petition filed against it in any
involuntary  case  under such  bankruptcy  laws,  or (h)take  any action for the
purpose of effecting any of the foregoing;

                                       65
<PAGE>

      10.10 any change in the  Borrowers'  condition  or affairs  (financial  or
otherwise) which,  taken as a whole, in Lenders'  reasonable  opinion materially
impairs the Collateral;

      10.11 any Lien  created  hereunder  or  provided  for  hereby or under any
related  agreement  for any reason  ceases to be or is not a valid and perfected
Lien having a first priority interest;

      10.12 an event of  default  has  occurred  and  been  declared  under  the
Subordinated  Debt  Documentation  which  default  shall not have been  cured or
waived within any applicable grace period and for which  Subordinated  Lender is
permitted to take action under the Subordination Agreement;

      10.13 a  default  of the  obligations  of any  Borrower  under  any  other
agreement to which it is a party shall occur which  causes,  with respect to the
Borrowers taken as a whole, a Material Adverse Effect which default is not cured
or waived by the non-defaulting party within thirty (30) days of its occurrence;

      10.14 termination or breach of any Guaranty or similar agreement  executed
and delivered to Agent in connection with the Obligations of any Borrower, or if
any  Guarantor  attempts  to  terminate,  challenges  the  validity  of,  or its
liability under, any such Guaranty or similar agreement;

      10.15 any Change of Ownership or Change of Control shall occur;

      10.16 any material  provision  of this  Agreement  shall,  for any reason,
cease to be valid and binding on any Borrower, or any Borrower shall so claim in
writing to Agent;

      10.17 (a) any Governmental  Body shall (i) revoke,  terminate,  suspend or
adversely  modify any  license,  permit,  patent,  trademark or tradename of any
Borrower,  or  (ii)  commence  proceedings  to  suspend,  revoke,  terminate  or
adversely modify any such license,  permit,  trademark,  tradename or patent and
such proceedings shall not be dismissed or discharged within sixty (60) days, or
(iii)  schedule  or conduct a hearing on the  renewal  of any  license,  permit,
trademark,  tradename or patent necessary for the continuation of any Borrower's
business and the staff of such  Governmental  Body issues a report  recommending
the termination,  revocation,  suspension or material,  adverse  modification of
such license, permit,  trademark,  tradename or patent, in any case, which could
have a Material  Adverse  Effect;  or (b) any  agreement  which is  necessary or
material  to the  operation  of any  Borrower's  business  shall be  revoked  or
terminated  and not  replaced by a  substitute  reasonably  acceptable  to Agent
within thirty (30) days after the date of such  revocation or  termination,  and
such revocation or termination and non-replacement could have a Material Adverse
Effect;

      10.18 any material portion of the Collateral shall be seized or taken by a
Governmental  Body,  or any  Borrower or the title and rights of any Borrower or
any other Person with respect to any material  portion of the  Collateral  shall
have become the subject  matter of  litigation  which  might,  in the opinion of
Lenders, exercised in good faith, upon final determination, result in impairment
or loss of the security provided by this Agreement or the Other Documents;

                                       66
<PAGE>

      10.19 an event or  condition  specified  in  Sections  7.16 or 9.15 hereof
shall occur or exist with  respect to any Plan and, as a result of such event or
condition,  together with all other such events or  conditions,  any Borrower or
any member of the Controlled  Group shall incur, or in the opinion of Lenders be
reasonably  likely to incur,  a liability to a Plan or the PBGC (or both) which,
in the reasonable judgment of Lenders, could have a Material Adverse Effect; or

      10.20 any bank at which any deposit  account of any Borrower is maintained
shall  fail to  comply  with any of the  terms of any  Deposit  Account  Control
Agreement  to  which  such  bank  is a  party  or any  securities  intermediary,
commodity  intermediary or other  financial  institution at any time in custody,
control or possession of any investment  property of such Borrower shall fail to
comply with any of the terms of any  Investment  Property  Control  Agreement to
which such person is a party.

11.   LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.

      11.1 RIGHTS AND REMEDIES.  Upon the  occurrence of (a) an Event of Default
pursuant to Section 10.7 all  Obligations  shall be immediately  due and payable
and this  Agreement  and the  obligation  of Lenders to make  Advances  shall be
deemed  terminated;  and (b) any of the other  Events of Default and at any time
thereafter  (such default not having  previously  been cured),  at the option of
Required  Lenders  all  Obligations  shall be  immediately  due and  payable and
Lenders  shall have the right to terminate  this  Agreement and to terminate the
obligation  of Lenders to make  Advances.  Upon the  occurrence  of any Event of
Default,  Agent in its discretion  shall have the right to exercise,  or, at the
written direction of Required Lenders,  shall exercise, any and all other rights
and remedies provided for herein,  under the UCC and at law or equity generally,
including,  without  limitation,  the right to foreclose the security  interests
granted  herein and to realize upon any  Collateral  by any  available  judicial
procedure  and/or to take  possession  of and sell any or all of the  Collateral
with or without  judicial  process.  Agent may enter any Borrower's  premises or
other  premises  without  legal process and without  incurring  liability to any
Borrower therefor,  and Agent may thereupon,  or at any time thereafter,  in its
discretion without notice or demand,  take the Collateral and remove the same to
such place as Agent may deem  advisable and Agent may require  Borrowers to make
the  Collateral  available  to Lenders at a  convenient  place.  With or without
having  the  Collateral  at the  time or  place  of  sale,  Agent  may  sell the
Collateral,  or any part  thereof,  at public or  private  sale,  at any time or
place,  in one or more  sales,  at such  price or prices,  and upon such  terms,
either for cash,  credit or future  delivery,  as Agent may elect.  Except as to
that part of the Collateral which is perishable or threatens to decline speedily
in value or is of a type  customarily sold on a recognized  market,  Agent shall
give Borrowers  reasonable  notification  of such sale or sales, it being agreed
that in all events  written  notice  mailed to  Borrowers at least five (5) days
prior to such sale or sales is reasonable notification. At any public sale Agent
or any Lender may bid for and become the purchaser, and Agent, any Lender or any
other  purchaser  at any such sale  thereafter  shall hold the  Collateral  sold
absolutely free from any claim or right of whatsoever kind, including any equity
of redemption and such right and equity are hereby expressly waived and released
by each  Borrower.  In connection  with the exercise of the foregoing  remedies,
Agent  is  granted  permission,   without  charge,  to  use  all  of  Borrowers'
trademarks,  trade styles, trade names, patents, patent applications,  licenses,
franchises and other  proprietary  rights which are used in connection  with (i)
Inventory for the purpose of disposing of such Inventory and (ii) Equipment. The
proceeds  realized from the sale of any Collateral  shall be applied as follows:
first,  to the  reasonable  costs,  expenses  and  attorneys'  fees and expenses
incurred by Agent and Lenders for  collection and for  acquisition,  completion,
protection,  removal,  storage, sale and delivery of the Collateral;  second, to
interest due upon any of the  Obligations;  and,  third, to the principal of the
Obligations.  If any deficiency  shall arise,  Borrowers  shall remain liable to
Agent and Lenders therefor.

                                       67
<PAGE>

      11.2 AGENT'S DISCRETION. Agent shall have the right in its sole discretion
to determine which rights,  Liens,  security  interests or remedies Agent may at
any time pursue, relinquish,  subordinate, or modify or to take any other action
with respect thereto and such determination will not in any way modify or affect
any of Agent's or Lenders' rights hereunder.

      11.3 SETOFF. In addition to any other rights which Agent or any Lender may
have under applicable law, upon the occurrence of an Event of Default hereunder,
Agent and each Lender shall have a right to apply any  Borrower's  property held
by Agent,  such Lender or by the Bank to reduce the  Obligations.  If any Lender
(including  Agent) shall obtain from any Borrower payment of any principal of or
interest on any Advance  owing to it or payment of any other  amount  under this
Agreement  or any of the Other  Documents  through the  exercise of any right of
setoff,  banker's lien or counterclaim or similar right or otherwise (other than
from Agent as provided  herein),  and, as a result of such payment,  such Lender
shall  have  received  more  than its pro rata  share  of the  principal  of the
Advances  or more than its share of such other  amounts  then due  hereunder  or
thereunder by any Borrower to such Lender than the percentage  thereof  received
by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders,
the amount of such excess and simultaneously  purchase from such other Lenders a
participation in the Advances or such other amounts, respectively, owing to such
other  Lenders  (or  such  interest  due  thereon,  as the  case may be) in such
amounts,  and  make  such  other  adjustments  from  time to time  as  shall  be
equitable,  to the end that all  Lenders  shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving  such excess  payment) in accordance  with their  respective pro rata
shares or as otherwise  agreed by Lenders.  To such end, all Lenders  shall make
appropriate adjustments among themselves (by the resale of participation sold or
otherwise) if such payment is rescinded or must otherwise be restored.

      11.4 RIGHTS AND REMEDIES NOT EXCLUSIVE.  The  enumeration of the foregoing
rights and  remedies is not  intended to be  exhaustive  and the exercise of any
right or remedy  shall not  preclude the exercise of any other right or remedies
provided  for  herein  or  otherwise  provided  by law,  all of  which  shall be
cumulative and not alternative.

12.   WAIVERS AND JUDICIAL PROCEEDINGS.

      12.1 WAIVER OF NOTICE.  Each Borrower  hereby waives notice of non-payment
of any of the Receivables,  demand, presentment, protest and notice thereof with
respect to any and all instruments, notice of acceptance hereof, notice of loans
or advances made,  credit  extended,  Collateral  received or delivered,  or any
other action taken in reliance hereon,  and all other demands and notices of any
description, except such as are expressly provided for herein.

                                       68
<PAGE>

      12.2  DELAY.  No delay or  omission  on  Agent's or any  Lender's  part in
exercising any right,  remedy or option shall operate as a waiver of such or any
other right, remedy or option or of any default.

      12.3 JURY TRIAL  WAIVER.  EACH PARTY TO THIS  AGREEMENT  HEREBY  EXPRESSLY
WAIVES  ANY  RIGHT TO TRIAL BY JURY OF ANY  CLAIM,  DEMAND,  ACTION  OR CAUSE OF
ACTION (a) ARISING  UNDER THIS  AGREEMENT OR ANY OTHER  INSTRUMENT,  DOCUMENT OR
AGREEMENT  EXECUTED  OR  DELIVERED  IN  CONNECTION  HEREWITH,  OR (b) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,  DOCUMENT OR
AGREEMENT  EXECUTED OR DELIVERED IN  CONNECTION  HEREWITH,  OR THE  TRANSACTIONS
RELATED  HERETO OR  THERETO  IN EACH CASE  WHETHER  NOW  EXISTING  OR  HEREAFTER
ARISING,  AND WHETHER  SOUNDING IN CONTRACT OR TORT OR OTHERWISE  AND EACH PARTY
HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND,  ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY,  AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE  CONSENTS OF THE PARTIES  HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.

13.   EFFECTIVE DATE AND TERMINATION.

      13.1 TERM. This  Agreement,  which shall inure to the benefit of and shall
be  binding  upon  the  respective  successors  and  permitted  assigns  of each
Borrower,  Agent and each Lender,  shall become effective on the date hereof and
shall  continue  in full force and effect  until the last day of the Term unless
sooner terminated as herein provided.  Borrowers may terminate this Agreement at
any time upon sixty (60) days' prior written  notice upon payment in full of the
Obligations.  The Term shall be automatically extended for successive periods of
one (1) year each unless  terminated  by either party at the end of such initial
Term or any  successive  Term by giving  the other  party  sixty (60) days prior
written  notice.  Borrowers may terminate  this Agreement at any time upon sixty
(60) days' prior written notice upon payment in full of the Obligations.  In the
event that the Obligations are prepaid in full prior to the last day of the Term
(the date of such prepayment  hereinafter  referred to as the "Prepayment Date")
Borrowers shall pay to Agent for the benefit of Lenders an early termination fee
(the "Early  Termination  Fee") in an amount equal to (a) three  percent (3%) of
the Maximum  Loan Amount if the  Prepayment  Date occurs on or after the Closing
Date to and including the date  immediately  preceding the first  anniversary of
the  Closing  Date,  (b) two  percent  (2%) of the  Maximum  Loan  Amount if the
Prepayment Date occurs on or after the first  anniversary of the Closing Date to
and  including the date  immediately  preceding  the second  anniversary  of the
Closing  Date,  and (c) one  percent  (1%) of the  Maximum  Loan  Amount  if the
Prepayment Date occurs on or after the second anniversary of the Closing Date to
and  including  the date  immediately  preceding  the third  anniversary  of the
Closing Date or prior to the end of any extended term.

                                       69
<PAGE>

      13.2  TERMINATION.  The  termination of the Agreement shall not affect any
Borrower's,  Agent's or any Lender's  rights,  or any of the Obligations  having
their  inception  prior  to the  effective  date  of such  termination,  and the
provisions  hereof shall continue to be fully operative  until all  transactions
entered  into,  rights or  interests  created  or  Obligations  have been  fully
disposed of, concluded or liquidated.  The Liens and rights granted to Agent and
Lenders hereunder and the financing statements filed hereunder shall continue in
full force and effect,  notwithstanding the termination of this Agreement or the
fact that any Borrower's respective account may from time to time be temporarily
in a zero or credit position, until all of the Obligations of each Borrower have
been paid or performed in full after the  termination  of this Agreement or each
Borrower has furnished Agent and Lenders with an indemnification satisfactory to
Agent and Lenders with respect  thereto.  Accordingly,  each Borrower waives any
rights which it may have under Section 9-513 of the Uniform  Commercial  Code to
demand the filing of termination statements with respect to the Collateral,  and
Agent  shall  not be  required  to  send  such  termination  statements  to each
Borrower,  or to file  them  with any  filing  office,  unless  and  until  this
Agreement  shall  have  been  terminated  in  accordance  with its terms and all
Obligations paid in full in immediately  available  funds. All  representations,
warranties,  covenants,  waivers and agreements  contained  herein shall survive
termination hereof until all Obligations are paid or performed in full.

14.   REGARDING AGENT.

      14.1  APPOINTMENT.  Each Lender hereby  designates GMAC CF to act as Agent
for such Lender under this Agreement and the Other Documents. Each Lender hereby
irrevocably  authorizes  Agent to take  such  action  on its  behalf  under  the
provisions of this Agreement and the Other Documents and to exercise such powers
and to  perform  such  duties  hereunder  and  thereunder  as  are  specifically
delegated to or required of Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto and Agent shall hold all Collateral,
payments of principal and  interest,  fees (except the fees set forth in Section
3.2 and in the Fee Letter),  charges and  collections  (without giving effect to
any  collection  days)  received  pursuant  to this  Agreement,  for the ratable
benefit of Lenders.  Agent may perform any of its duties hereunder by or through
its agents or employees.  As to any matters not  expressly  provided for by this
Agreement (including,  without limitation, the collection of any note evidencing
any of the Obligations,)  Agent shall not be required to exercise any discretion
or take any action,  but shall be required to act or to refrain from acting (and
shall be fully  protected  in so  acting or  refraining  from  acting)  upon the
instructions of the Required Lenders,  and such  instructions  shall be binding;
provided,  however,  that Agent shall not be  required to take any action  which
exposes  Agent to liability or which is contrary to this  Agreement or the Other
Documents or applicable  law unless Agent is furnished  with an  indemnification
reasonably satisfactory to Agent with respect thereto.

                                       70
<PAGE>

      14.2  NATURE OF DUTIES.  Agent  shall  have no duties or  responsibilities
except those  expressly  set forth in this  Agreement  and the Other  Documents.
Neither Agent nor any of its officers,  directors,  employees or agents shall be
(a)  liable for any action  taken or  omitted  by them as such  hereunder  or in
connection  herewith,  unless caused by their  willful  misconduct or gross (not
mere) negligence, or (b) responsible in any manner for any recitals, statements,
representations  or  warranties  made by any  Borrower  or any  officer  thereof
contained  in  this  Agreement,  or in  any  of the  Other  Documents  or in any
certificate, report, statement or other document referred to or provided for in,
or received by Agent under or in connection  with,  this Agreement or any of the
Other  Documents  or  for  the  value,  validity,  effectiveness,   genuineness,
enforceability  or sufficiency of this Agreement,  or any of the Other Documents
or for any failure of any Borrower to perform its obligations  hereunder.  Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the  observance  or  performance  of any  of the  agreements  contained  in,  or
conditions of, this Agreement or any of the Other  Documents,  or to inspect the
properties,  books or records of any  Borrower.  The duties of Agent as respects
the Advances to Borrowers  shall be  mechanical  and  administrative  in nature;
Agent shall not have by reason of this  Agreement a  fiduciary  relationship  in
respect of any Lender; and nothing in this Agreement,  expressed or implied,  is
intended to or shall be so construed as to impose upon Agent any  obligations in
respect of this Agreement except as expressly set forth herein.

      14.3 LACK OF RELIANCE ON AGENT AND RESIGNATION.

            (a)  Independently  and  without  reliance  upon  Agent or any other
Lender,  each Lender has made and shall continue to make (i) its own independent
investigation  of the  financial  condition  and  affairs  of each  Borrower  in
connection with the making and the continuance of the Advances hereunder and the
taking or not  taking of any  action in  connection  herewith,  and (ii) its own
appraisal of the creditworthiness of each Borrower.  Agent shall have no duty or
responsibility, either initially or on a continuing basis, to provide any Lender
with any credit or other  information with respect thereto,  whether coming into
its possession  before making of the Advances or at any time or times thereafter
except as shall be provided by any Borrower pursuant to the terms hereof.  Agent
shall  not  be  responsible   to  any  Lender  for  any  recitals,   statements,
information, representations or warranties herein or in any agreement, document,
certificate  or a statement  delivered in connection  with or for the execution,
effectiveness,   genuineness,   validity,   enforceability,   collectability  or
sufficiency  of  this  Agreement  or any  Other  Document,  or of the  financial
condition of any Borrower,  or be required to make any inquiry concerning either
the  performance or observance of any of the terms,  provisions or conditions of
this Agreement,  the Other Documents or the financial condition of any Borrower,
or the existence of any Event of Default or any Default.

            (b) Agent may resign on sixty (60) days'  written  notice to each of
Lenders and Borrowing Agent and upon such resignation, the Required Lenders will
promptly designate a successor Agent reasonably satisfactory to Borrowers.

            (c) Any such successor Agent shall succeed to the rights, powers and
duties of Agent,  and the term "Agent" shall mean such successor agent effective
upon its appointment,  and the former Agent's rights, powers and duties as Agent
shall be  terminated,  without  any other or further  act or deed on the part of
such former Agent.  After any Agent's  resignation  as Agent,  the provisions of
this Article 14 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.

      14.4 CERTAIN  RIGHTS OF AGENT.  If Agent shall request  instructions  from
Lenders  with  respect  to any  act or  action  (including  failure  to  act) in
connection with this Agreement or any Other Document, Agent shall be entitled to
refrain  from such act or taking such  action  unless and until Agent shall have
received  instructions  from the  Required  Lenders;  and Agent  shall not incur
liability  to any  Person by  reason  of so  refraining.  Without  limiting  the
foregoing,  Lenders shall not have any right of action whatsoever  against Agent
as a result of its acting or refraining from acting hereunder in accordance with
the instructions of the Required Lenders.

                                       71
<PAGE>

      14.5  RELIANCE.  Agent  shall  be  entitled  to rely,  and  shall be fully
protected in relying,  upon any note, writing,  resolution,  notice,  statement,
certificate,  telex, teletype or telecopier message,  cablegram,  order or other
document or  telephone  message  believed by it to be genuine and correct and to
have been signed, sent or made by the proper person or entity, and, with respect
to all legal matters  pertaining to this  Agreement and the Other  Documents and
its duties  hereunder,  upon advice of counsel  selected by it. Agent may employ
agents  and  attorneys-in-fact  and  shall  not be  liable  for the  default  or
misconduct  of any such  agents  or  attorneys-in-fact  selected  by Agent  with
reasonable care.

      14.6 NOTICE OF DEFAULT.  Agent  shall not be deemed to have  knowledge  or
notice of the  occurrence of any Default or Event of Default  hereunder or under
the  Other  Documents,  unless  Agent  has  received  notice  from a Lender or a
Borrower  referring to this Agreement or the Other  Documents,  describing  such
Default  or Event of  Default  and  stating  that such  notice  is a "notice  of
default".  In the event  that Agent  receives  such a notice,  Agent  shall give
notice  thereof to Lenders.  Agent  shall take such action with  respect to such
Default or Event of  Default as shall be  reasonably  directed  by the  Required
Lenders;  provided,  that,  unless  and until  Agent  shall have  received  such
directions,  Agent may (but  shall not be  obligated  to) take such  action,  or
refrain  from  taking  such  action,  with  respect to such  Default or Event of
Default as it shall deem advisable in the best interests of Lenders.

      14.7   INDEMNIFICATION.   To  the  extent  Agent  is  not  reimbursed  and
indemnified  by Borrowers,  each Lender will  reimburse  and indemnify  Agent in
proportion  to its  respective  portion of the Advances  (or, if no Advances are
outstanding,  according to its Commitment Percentage),  from and against any and
all liabilities,  obligations,  losses, damages, penalties,  actions, judgments,
suits,  costs,  expenses or disbursements of any kind or nature whatsoever which
may be imposed on,  incurred  by or asserted  against  Agent in  performing  its
duties hereunder,  or in any way relating to or arising out of this Agreement or
any Other Loan  Document;  provided  that,  Lenders  shall not be liable for any
portion of such liabilities,  obligations,  losses, damages, penalties, actions,
judgments,  suits, costs, expenses or disbursements resulting from Agent's gross
negligence (but not mere negligence) or willful misconduct.

      14.8 AGENT IN ITS INDIVIDUAL  CAPACITY.  With respect to the obligation of
Agent to lend under this Agreement,  the Advances made by it shall have the same
rights and powers hereunder as any other Lender and as if it were not performing
the duties as Agent specified herein;  and the term "Lender" or any similar term
shall,  unless the context  clearly  otherwise  indicates,  include Agent in its
individual capacity as a Lender.  Agent may engage in business with any Borrower
as if it were not performing the duties  specified  herein,  and may accept fees
and other  consideration  from any Borrower for services in connection with this
Agreement or otherwise without having to account for the same to Lenders.

      14.9 DELIVERY OF  DOCUMENTS.  To the extent Agent  receives  documents and
information  from any Borrower  pursuant to the terms of this  Agreement,  Agent
will promptly furnish such documents and information to Lenders.

      14.10  BORROWERS'   UNDERTAKING  TO  AGENT.  Without  prejudice  to  their
respective  obligations to Lenders under the other provisions of this Agreement,
each Borrower hereby  undertakes with Agent to pay to Agent from time to time on
demand all  amounts  from time to time due and  payable by it for the account of
Agent or Lenders or any of them  pursuant  to this  Agreement  to the extent not
already  paid.  Any payment  made  pursuant  to any such demand  shall pro tanto
satisfy the relevant Borrower's  obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.

                                       72
<PAGE>

      14.11 DOCUMENTATION AGENT. The Lender identified on the signature pages of
this  Agreement  as the  "Documentation  Agent"  shall  have  no  right,  power,
obligation, liability, responsibility or duty under this Agreement or any of the
Other  Documents  other than those  applicable  to all Lenders as such.  Without
limiting the foregoing,  the Lender so identified shall not have or be deemed to
have any fiduciary  relationship with any Lender.  Each Lender acknowledges that
it has not relied, and will not rely, on the Lender so identified in deciding to
enter into this Agreement or in taking or not taking action hereunder.

15.   INTERRELATED BUSINESSES; BORROWING AGENCY.

      15.1  INTERRELATED  BUSINESSES.  Borrowers hereby represent and warrant to
Agent and Lenders that (a) Borrowers make up a related  organization  of various
entities  constituting  a  single  economic  and  business  enterprise  so  that
Borrowers  share an identity of interests such that any benefit  received by any
one of them benefits the others;  (b) certain of Borrowers render services to or
for the  benefit of other  Borrowers,  as the case may be,  purchase or sell and
supply goods to or from or for the benefit of the others,  make loans,  advances
and provide other  financial  accommodations  to or for the benefit of the other
Borrowers  (including,  inter alia, the payment by Borrowers of creditors of the
other  Borrowers  and  guarantees  by  Borrowers  of  indebtedness  of the other
Borrowers and provide administrative, marketing, payroll and management services
to or  for  the  benefit  of  the  other  Borrowers),  and  (c)  Borrowers  have
centralized accounting and legal service,  common officers and directors and are
identified  to creditors as a single  economic  and  business  enterprise  doing
business as "Perfumania."

      15.2 BORROWING AGENCY PROVISIONS.

            (a) Each Borrower hereby irrevocably  designates  Borrowing Agent to
be its  attorney  and agent and in such  capacity  to borrow,  sign and  endorse
notes, and execute and deliver all instruments,  documents, writings and further
assurances now or hereafter  required  hereunder,  on behalf of such Borrower or
Borrowers,  and hereby  authorizes Agent to pay over or credit all loan proceeds
hereunder in accordance with the request of Borrowing Agent.

            (b) The handling of this credit facility as a co-borrowing  facility
with a borrowing agent in the manner set forth in this Agreement is solely as an
accommodation  to Borrowers and at their  request.  Neither Agent nor any Lender
shall incur  liability  to Borrowers  as a result  thereof.  To induce Agent and
Lenders to do so and in consideration  thereof, each Borrower hereby indemnifies
Agent and each Lender and holds Agent and each Lender  harmless from and against
any and all  liabilities,  expenses,  losses,  damages  and  claims of damage or
injury  asserted  against  Agent or any  Lender by any  Person  arising  from or
incurred by reason of the handling of the financing arrangements of Borrowers as
provided  herein,  reliance by Agent or any Lender on any request or instruction
from  Borrowing  Agent or any other  action  taken by Agent or any  Lender  with
respect to this  Section  15.2  except due to willful  misconduct  or gross (not
mere) negligence by the indemnified party.

                                       73
<PAGE>

            (c) All  Obligations  shall be joint and several,  and each Borrower
shall make payment  upon the  maturity of the  Obligations  by  acceleration  or
otherwise,  and such obligation and liability on the part of each Borrower shall
in no way be affected by any  extensions,  renewals and  forbearance  granted to
Agent or any Lender to any Borrower,  failure of Agent or any Lender to give any
Borrower  notice of borrowing or any other  notice,  any failure of Agent or any
Lender to pursue or preserve  its rights  against any  Borrower,  the release by
Agent or any  Lender  of any  Collateral  now or  thereafter  acquired  from any
Borrower,  and such  agreement  by each  Borrower to pay upon any notice  issued
pursuant thereto is  unconditional  and unaffected by prior recourse by Agent or
any  Lender  to the  other  Borrowers  or any  Collateral  for  such  Borrower's
Obligations or the lack thereof.

      15.3 WAIVER OF  SUBROGATION.  Each Borrower  expressly  waives any and all
rights of subrogation,  reimbursement,  indemnity, exoneration,  contribution of
any other claim which such Borrower may now or hereafter  have against the other
Borrowers or other Person  directly or  contingently  liable for the Obligations
hereunder,  or  against  or  with  respect  to  the  other  Borrowers'  property
(including,  without  limitation,  any  property  which  is  Collateral  for the
Obligations), arising from the existence or performance of this Agreement.

16.   MISCELLANEOUS.

      16.1 GOVERNING  LAW. This Agreement  shall be governed by and construed in
accordance  with the laws of the State of New York  applied to  contracts  to be
performed wholly within the State of New York. Any judicial  proceeding  brought
by or  against  any  Borrower  with  respect  to any of  the  Obligations,  this
Agreement  or any  related  agreement  may be brought in any court of  competent
jurisdiction  in the  State of New  York,  United  States of  America,  and,  by
execution and delivery of this Agreement,  each Borrower  accepts for itself and
in  connection  with  its  properties,   generally  and   unconditionally,   the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment  rendered thereby in connection with this Agreement.  Each
Borrower  hereby  waives  personal  service of any and all  process  upon it and
consents that all such service of process may be made by registered mail (return
receipt  requested)  directed  to  Borrowing  Agent at its  address set forth in
Section 16.7 and service so made shall be deemed  completed seven (7) days after
the same  shall  have been so  deposited  in the mails of the  United  States of
America,  or, at the  Agent's  and/or  any  Lender's  option,  by  service  upon
Borrowing  Agent which each  Borrower  irrevocably  appoints as such  Borrower's
Agent for the purpose of accepting service within the State of New York. Nothing
herein shall affect the right to serve process in any manner permitted by law or
shall  limit the right of Agent or any Lender to bring  proceedings  against any
Borrower  in the  courts of any other  jurisdiction.  Each  Borrower  waives any
objection to jurisdiction and venue of any action instituted hereunder and shall
not  assert any  defense  based on lack of  jurisdiction  or venue or based upon
forum non conveniens.  Any judicial  proceeding by any Borrower against Agent or
any Lender  involving,  directly or  indirectly,  any matter or claim in any way
arising  out of,  related to or  connected  with this  Agreement  or any related
agreement, shall be brought only in a federal or state court located in the City
of New York, State of New York.

                                       74
<PAGE>

      16.2 AMENDED AND RESTATED AGREEMENT;  AMENDMENTS TO OTHER DOCUMENTS.  This
Agreement amends, restates,  replaces, and supercedes in its entirety, without a
breach in continuity, the Existing Agreement, as it has heretofore been amended,
restated, renewed, supplemented, substituted or otherwise modified. Neither this
Agreement  nor any  portion  or  provisions  hereof  may be  changed,  modified,
amended, waived, supplemented,  discharged, cancelled or terminated orally or by
any course of dealing,  or in any manner  other than by an agreement in writing,
signed by the party to be charged.  With  respect to any of the Other  Documents
heretofore  executed and  delivered  by any Borrower or Guarantor in  connection
with the  Existing  Agreement,  each such Other  Document  is hereby  amended as
follows: (a) all references to the Existing Agreement are hereby amended to mean
this Agreement,  and (b) all references to GMAC Commercial Credit LLC are hereby
amended to mean GMAC CF, in its capacity as Agent hereunder.

      16.3 ENTIRE UNDERSTANDING

            (a) This Agreement and the documents executed  concurrently herewith
contain the entire  understanding  between each Borrower,  Agent and each Lender
and supersedes all prior agreements and understandings,  if any, relating to the
subject matter hereof. Any promises,  representations,  warranties or guarantees
not herein  contained and hereinafter made shall have no force and effect unless
in writing,  signed by each  Borrower's,  Agent's and each  Lender's  respective
officers.  Neither this  Agreement nor any portion or  provisions  hereof may be
changed,  modified,  amended,  waived,  supplemented,  discharged,  cancelled or
terminated orally or by any course of dealing, or in any manner other than by an
agreement  in  writing,  signed  by  the  party  to be  charged.  Each  Borrower
acknowledges  that it has  been  advised  by  counsel  in  connection  with  the
execution of this  Agreement  and Other  Documents  and is not relying upon oral
representations or statements inconsistent with the terms and provisions of this
Agreement.

            (b) The Required  Lenders,  Agent with the consent in writing of the
Required  Lenders,  and Borrowers may, subject to the provisions of this Section
16.3(b),  from time to time enter into written  supplemental  agreements to this
Agreement  or the Other  Documents  executed  by  Borrowers,  for the purpose of
adding or deleting any provisions or otherwise  changing,  varying or waiving in
any  manner  the  rights  of  Lenders,  Agent  or  Borrowers  thereunder  or the
conditions,  provisions  or terms  thereof  of  waiving  any  Event  of  Default
thereunder,  but  only  to the  extent  specified  in such  written  agreements;
provided,  however,  that no such  supplemental  agreement  shall,  without  the
consent of all Lenders:

                  (i) increase the Commitment Percentage of any Lender;

                  (ii) increase the Maximum Revolving Advance Amount;

                  (iii) extend the maturity of any instrument  evidencing any of
the  Obligations or the due date for any amount payable  hereunder,  or decrease
the rate of interest or reduce any fee payable by Borrowers to Lenders  pursuant
to this Agreement;

                  (iv)  alter the  definition  of the term  Required  Lenders or
alter, amend or modify this Section 16.3(b);

                                       75
<PAGE>

                  (v) alter the  definition  of any of the  following  terms (A)
EBITDA,  (B) Fixed Charge Coverage Ratio, (C) Inventory  Advance Rates, (D) Rent
Reserve, (E) Formula Amount, or (F) Undrawn Availability;

                  (vi)  release  any  Borrower  or  Guarantor,  or  release  any
Collateral  during any  calendar  year  having an  aggregate  value in excess of
$2,000,000; or

                  (vii) change the rights and duties of Agent.

Any such supplemental  agreement shall apply equally to each Lender and shall be
binding  upon  Borrowers,  Lenders  and  Agent  and all  future  holders  of the
Obligations.  In the case of any waiver,  Borrowers,  Agent and Lenders shall be
restored to their former  positions and rights,  and any Event of Default waived
shall be  deemed  to be cured and not  continuing,  but no waiver of a  specific
Event of Default shall extend to any subsequent Event of Default (whether or not
the  subsequent  Event of Default is the same as the Event of Default  which was
waived), or impair any right consequent thereon.

      16.4 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS.

            (a) This Agreement shall be binding upon and inure to the benefit of
Borrowers,  Agent, each Lender,  all future holders of the Obligations and their
respective  successors  and  assigns,  except  that no  Borrower  may  assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Agent and each Lender.

            (b)  Each  Borrower  acknowledges  that  in the  regular  course  of
commercial banking business one or more Lenders may at any time and from time to
time  sell   participating   interests  in  the  Advances  to  other   financial
institutions (each such transferee or purchaser of a participating  interest,  a
"Transferee").  Each  Transferee  may exercise all rights of payment  (including
without  limitation  rights of  set-off)  with  respect  to the  portion of such
Advances held by it or other  Obligations  payable hereunder as fully as if such
Transferee  were the direct holder thereof  provided that Borrowers shall not be
required to pay to any Transferee  more than the amount which it would have been
required to pay to Lender  which  granted an  interest in its  Advances or other
Obligations  payable  hereunder to such Transferee had such Lender retained such
interest in the Advances hereunder or other Obligations payable hereunder and in
no event shall  Borrowers  be required to pay any such amount  arising  from the
same  circumstances  and with respect to the same Advances or other  Obligations
payable hereunder to both such Lender and such Transferee.  Each Borrower hereby
grants to any Transferee a continuing security interest in any deposits,  moneys
or other property actually or constructively held by such Transferee as security
for the Transferee's interest in the Advances.

                                       76
<PAGE>

            (c) Any Lender may sell,  assign or transfer  all or any part of its
rights under this  Agreement and the Other  Documents to one or more  additional
banks or financial  institutions  and one or more additional  banks or financial
institutions may commit to make Advances hereunder (each a "Purchasing Lender"),
in  minimum  amounts  of not less  than  $5,000,000,  pursuant  to a  Commitment
Transfer Supplement, executed by a Purchasing Lender, the transferor Lender, and
Agent and  delivered  to Agent for  recording.  Upon such  execution,  delivery,
acceptance and recording,  from and after the transfer effective date determined
pursuant  to  such  Commitment  Transfer   Supplement,   (i)  Purchasing  Lender
thereunder  shall  be a  party  hereto  and,  to the  extent  provided  in  such
Commitment  Transfer  Supplement,  have the rights and  obligations  of a Lender
thereunder  with a  Commitment  Percentage  as set forth  therein,  and (ii) the
transferor  Lender  thereunder  shall, to the extent provided in such Commitment
Transfer Supplement,  be released from its obligations under this Agreement, the
Commitment  Transfer  Supplement  creating a  novation  for that  purpose.  Such
Commitment  Transfer  Supplement  shall be deemed to amend this Agreement to the
extent,  and only to the  extent,  necessary  to reflect  the  addition  of such
Purchasing  Lender and the resulting  adjustment of the  Commitment  Percentages
arising from the purchase by such  Purchasing  Lender of all or a portion of the
rights and  obligations of such  transferor  Lender under this Agreement and the
Other  Documents.  Borrowers  hereby consent to the addition of such  Purchasing
Lender and the resulting  adjustment of the Commitment  Percentages arising from
the  purchase  by such  Purchasing  Lender of all or a portion of the rights and
obligations  of such  transferor  Lender  under  this  Agreement  and the  Other
Documents.  Borrowers  shall  execute and deliver such further  documents and do
such further acts and things in order to effectuate the foregoing.

            (d) Agent shall  maintain  at its address a copy of each  Commitment
Transfer  Supplement  delivered to it and a register  (the  "Register")  for the
recordation of the names and addresses of the Advances owing to each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest  error,  and  Borrowers,  Agent and Lenders may treat each Person whose
name is recorded in the  Register as the owner of the Advance  recorded  therein
for the  purposes  of this  Agreement.  The  Register  shall  be  available  for
inspection  by Borrowers or any Lender at any  reasonable  time and from time to
time upon  reasonable  prior notice.  Agent shall receive a fee in the amount of
$2,500  payable by the applicable  Purchasing  Lender upon the effective date of
each transfer or assignment to such Purchasing Lender.

            (e) Borrowers authorize each Lender to disclose to any Transferee or
Purchasing  Lender and any prospective  Transferee or Purchasing  Lender any and
all financial information in such Lender's possession concerning Borrowers which
has been delivered to such Lender by or on behalf of Borrowers  pursuant to this
Agreement or in connection with such Lender's credit evaluation of Borrowers.

      16.5  APPLICATION  OF  PAYMENTS.  Agent  shall  have  the  continuing  and
exclusive  right to apply or reverse  and  re-apply  any payment and any and all
proceeds of  Collateral  to any portion of the  Obligations.  To the extent that
Borrowers make a payment or Agent or any Lender receives any payment or proceeds
of  the  Collateral  for  any  Borrower's   benefit,   which  are   subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession,  receiver,  custodian or any other
party under any bankruptcy  law,  common law or equitable  cause,  then, to such
extent,  the  Obligations  or part  thereof  intended to be  satisfied  shall be
revived and  continue as if such  payment or proceeds  had not been  received by
Agent or such Lender.

                                       77
<PAGE>

      16.6 INDEMNITY.  Each Borrower shall indemnify Agent, each Lender and each
of their respective officers, directors,  Affiliates,  employees and agents from
and against any and all liabilities,  obligations,  losses, damages,  penalties,
actions,  judgments,  suits,  costs,  expenses and  disbursements of any kind or
nature  whatsoever  (including,  without  limitation,  fees and disbursements of
counsel) which may be imposed on, incurred by, or asserted  against Agent or any
Lender in any litigation, proceeding or investigation instituted or conducted by
any governmental  agency or  instrumentality or any other Person with respect to
any aspect of, or any  transaction  contemplated  by, or  referred to in, or any
matter related to, this Agreement or the Other  Documents,  whether or not Agent
or any Lender is a party thereto, except to the extent that any of the foregoing
arises out of the willful misconduct or gross (not mere) negligence of the party
being indemnified.

      16.7 NOTICE.  Any notice or request hereunder may be given to any Borrower
or to Agent or any Lender at their  respective  addresses  set forth below or at
such other  address as may  hereafter be specified in a notice  designated  as a
notice of change of address under this Section.  Any notice or request hereunder
shall be given by (a) hand delivery,  (b) overnight  courier,  (c) registered or
certified mail, return receipt requested,  or (d) telecopy to the number set out
below (or such other number as may hereafter be specified in a notice designated
as a notice  of  change  of  address)  with  telephone  communication  to a duly
authorized  officer of the  recipient  confirming  its  receipt as  subsequently
confirmed by registered  or certified  mail.  Any notice or other  communication
required or permitted  pursuant to this Agreement  shall be deemed given (i)when
personally delivered to any officer of the party to whom it is addressed, (ii)on
the  earlier  of actual  receipt  thereof  or three (3) days  following  posting
thereof by certified or registered mail,  postage prepaid,  OR (iii) upon actual
receipt  thereof when sent by a recognized  overnight  delivery  service or (iv)
upon actual  receipt  thereof  when sent by  telecopier  to the number set forth
below with telephone communication confirming receipt and subsequently confirmed
by registered,  certified or overnight  mail to the address set forth below,  in
each case  addressed  to each party at its  address  set forth  below or at such
other  address as has been  furnished in writing by a party to the other by like
notice:

      (A)  If to Agent at:                   GMAC COMMERCIAL FINANCE LLC
                                             2810 Interstate Tower
                                             121 West Trade Street
                                             Charlotte, North Carolina 28202
                                             Attention:   Corporate Loan
                                                          Administration
                                             Telephone:   704 342-5360
                                             Telecopier:  704 342-5353

      (B)  If to a Lender other
           than Agent, as specified
           on the signature pages hereof

      (C)  If to Borrowing Agent at:         PERFUMANIA, INC.
                                             251 International Parkway
                                             Sunrise, Florida 33325
                                             Attention:    Mr. Donovan Chin
                                             Telephone:    954 335-9030
                                             Telecopier:   954 335-9179

                                       78
<PAGE>

           With a copy to:
                                             Greenberg Traurig, P.A.
                                             777 South Flagler Drive
                                             Suite 300 East Tower
                                             West Palm Beach, Florida 33401
                                             Attention:    Morris C. Brown, Esq.
                                             Telephone:    (561) 650-7928
                                             Telecopier:   (561) 805-7841

      16.8 SURVIVAL. The obligations of Borrowers under Sections 2.10, 3.6, 3.7,
3.8 and 16.6 shall survive termination of this Agreement and the Other Documents
and payment in full of the Obligations.

      16.9  SEVERABILITY.  If  any  part  of  this  Agreement  is  contrary  to,
prohibited  by, or deemed invalid under  applicable  laws or  regulations,  such
provision  shall be  inapplicable  and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.

      16.10  EXPENSES.  All costs and expenses  including,  without  limitation,
reasonable attorneys' fees and disbursements  incurred by Agent, Agent on behalf
of  Lenders  and  Lenders  (a) in all  efforts  made to  enforce  payment of any
Obligation or effect collection of any Collateral, or (b) in connection with the
entering into, modification,  amendment,  administration and enforcement of this
Agreement  or any  consents or waivers  hereunder  and all  related  agreements,
documents  and  instruments,  or (c) in  instituting,  maintaining,  preserving,
enforcing and foreclosing on Agent's security  interest in or Lien on any of the
Collateral,  whether  through  judicial  proceedings  or  otherwise,  or  (d) in
defending or prosecuting  any actions or proceedings  arising out of or relating
to Agent's or any Lender's  transactions with any Borrower, or (e) in connection
with any  advice  given to Agent or any  Lender  with  respect to its rights and
obligations under this Agreement and all related  agreements,  may be charged to
Borrowers' account and shall be part of the Obligations.

      16.11 INJUNCTIVE RELIEF.  Each Borrower  recognizes that, in the event any
Borrower  fails to  perform,  observe or  discharge  any of its  obligations  or
liabilities  under this Agreement,  any remedy at law may prove to be inadequate
relief to Lenders;  therefore, each Lender, if such Lender so requests, shall be
entitled to temporary and permanent  injunctive  relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.

      16.12  CONSEQUENTIAL  DAMAGES.  Neither Agent, any Lender nor any agent or
attorney  for any of them  shall be liable  to any  Borrower  for  consequential
damages arising from any breach of contract, tort or other wrong relating to the
establishment, administration or collection of the Obligations.

      16.13  CAPTIONS.  The  captions at various  places in this  Agreement  are
intended for convenience only and do not constitute and shall not be interpreted
as part of this Agreement.

                                       79
<PAGE>

      16.14 COUNTERPARTS;  TELECOPIED SIGNATURES. This Agreement may be executed
in any number of and by different parties hereto, on separate counterparts,  all
of  which  when  so  executed,  shall  be  deemed  an  original,  but  all  such
counterparts  shall  constitute  one  and  the  same  agreement.  Any  signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.

      16.15  CONSTRUCTION.  The  parties  acknowledge  that  each  party and its
counsel have reviewed this Agreement and that the normal rule of construction to
the effect that any  ambiguities  are to be resolved  against the drafting party
shall not be employed in the interpretation of this Agreement or any amendments,
schedules or exhibits thereto.

      16.16 CONFIDENTIALITY.

            (a) Agent, each Lender and each Transferee shall hold all non-public
information  obtained by Agent,  such Lender or such Transferee  pursuant to the
requirements  of this  Agreement in accordance  with Agent's,  such Lender's and
such Transferee's customary procedures for handling confidential  information of
this nature;  provided,  however,  Agent,  each Lender and each  Transferee  may
disclose such confidential information (a) to its examiners, affiliates, outside
auditors,  counsel and other professional  advisors, (b) to Agent, any Lender or
to any prospective  Transferees and Purchasing  Lenders,  and (c) as required or
requested  by any  Governmental  Body or  representative  thereof or pursuant to
legal  process;  provided,  further that (i) unless  specifically  prohibited by
applicable law or court order,  Agent, each Lender and each Transferee shall use
reasonable efforts prior to disclosure thereof, to notify the Borrowing Agent of
the applicable  request for disclosure of such  non-public  information (A) by a
Governmental  Body or  representative  thereof  (other than any such  request in
connection  with an  examination  of the  financial  condition  of a Lender or a
Transferee by such Governmental  Body) or (B) pursuant to legal process and (ii)
in no event shall Agent, any Lender or any Transferee be obligated to return any
materials  furnished by any Borrower other than those  documents and instruments
in  possession  of Agent or any  Lender  in  order  to  perfect  its Lien on the
Collateral  once the  Obligations  have been paid in full and this Agreement has
been  terminated.  Each Borrower  acknowledges  that from time to time financial
advisory,  investment  banking and other  services may be offered or provided to
such  Borrower  or one or  more  of its  Affiliates  (in  connection  with  this
Agreement  or  otherwise)  by  any  Lender  or by one or  more  Subsidiaries  or
Affiliates of such Lender and each  Borrower  hereby  authorizes  each Lender to
share  any  information  delivered  to  such  Lender  by such  Borrower  and its
Subsidiaries  pursuant to this Agreement,  or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of
such Lender,  it being  understood  that any such Subsidiary or Affiliate of any
Lender  receiving  such  information  shall be bound  by the  provision  of this
Section 16.16 as if it were a Lender hereunder. Such authorization shall survive
the repayment of the Obligations and the termination of this Agreement.

                                       80
<PAGE>

            (b) Notwithstanding  anything to the contrary set forth herein or in
any of the  Other  Documents  or any  other  written  or oral  understanding  or
agreement,  (i) any obligations of  confidentiality  contained herein, in any of
the Other  Documents or any such other  understanding  or agreement do not apply
and have not applied from the commencement of discussions between the parties to
the tax treatment and tax structure of the transactions contemplated herein (and
any related transactions or arrangements),  and (ii) each party (and each of its
employees, representatives, or other agents) may disclose to any and all persons
the tax treatment and tax structuring of the  transactions  contemplated  herein
and all materials of any kind  (including  opinions or other tax analyses)  that
are provided to such party relating to such tax treatment and tax structure, all
within the meaning of Treasury Regulation Section 1.6011-4; provided, that, each
party  recognizes  that the privilege that it may, in its  discretion,  maintain
with  respect  to  the  confidentiality  of  a  communication  relating  to  the
transactions  contemplated herein,  including a confidential  communication with
its attorney or a  confidential  communication  with a federally  authorized tax
practitioner under Section 7525 of the Internal Revenue Code, is not intended to
be affected by the  foregoing.  Borrowers  do not intend to treat the  Advances,
loans and related  transactions as being a "reportable  transaction" (within the
meaning  of  Treasury  Regulation  Section  1.6011-4).  In the  event  Borrowers
determine to take any action inconsistent with such intention,  it will promptly
notify Agent thereof. Each Borrower acknowledges that one or more of Lenders may
treat  its  Advances  and  loans as part of a  transaction  that is  subject  to
Treasury  Regulation Section 1.6011-4 or Section  301.6112-1,  and the Agent and
such Lender or Lenders, as applicable,  may file such IRS forms or maintain such
lists and other  records as they may  determine  is  required  by such  Treasury
Regulations.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       81
<PAGE>

      Each of the parties has signed this Agreement as of the day and year first
above written.

                                   PERFUMANIA, INC.

                                   By:
                                      ------------------------------------------
                                   Its:
                                       -----------------------------------------

                                   PERFUMANIA PUERTO RICO, INC.

                                   By:
                                      ------------------------------------------
                                   Its:
                                       -----------------------------------------

                                   MAGNIFIQUE PARFUMES AND
                                      COSMETICS, INC.

                                   By:
                                      ------------------------------------------
                                   Its:
                                       -----------------------------------------

                                   TEN KESEF II, INC.

                                   By:
                                      ------------------------------------------
                                   Its:
                                       -----------------------------------------

                       [SIGNATURES CONTINUED ON NEXT PAGE]

                                       82
<PAGE>

                    [SIGNATURES CONTINUED FROM PREVIOUS PAGE]

                                   GMAC COMMERCIAL FINANCE LLC,
                                   as Lender and as Agent

                                   By:
                                      ------------------------------------------
                                   Its:
                                       -----------------------------------------

                                   Address: 2810 Interstate Tower
                                            121 West Trade Street
                                            Charlotte, North Carolina 28202
                                            Commitment Percentage:  58.3333334%

                                   CONGRESS FINANCIAL CORPORATION (FLORIDA),
                                   as Lender and as Documentation Agent

                                   By:
                                      ------------------------------------------
                                   Its:
                                       -----------------------------------------

                                   Address: 777 Brickell Avenue, Suite 808
                                            Miami, Florida 33131
                                            Commitment Percentage:  41.6666666%

                                       83

<PAGE>

                                  EXHIBIT 16.4

                         COMMITMENT TRANSFER SUPPLEMENT

      COMMITMENT  TRANSFER  SUPPLEMENT,   dated  as  of  _________,  200_  among
___________________________          (the         "Transferor          Lender"),
__________________________  ("Purchasing  Lender"),  and GMAC COMMERCIAL FINANCE
LLC, as agent for the Lenders  under the Amended and Restated  Revolving  Credit
and Security Agreement described below (in such capacity, the "Agent").

                              W I T N E S S E T H:

      WHEREAS,  this  Commitment  Transfer  Supplement  is  being  executed  and
delivered in accordance with Section 16.4 of the Amended and Restated  Revolving
Credit and Security Agreement dated as of May __, 2004 (this "Agreement") by and
among PERFUMANIA,  INC., a corporation  organized under the laws of the State of
Florida  ("Perfumania"),  TEN KESEF II, INC., a corporation  organized under the
laws of the State of Florida  ("Ten  Kesef"),  PERFUMANIA  PUERTO RICO,  INC., a
corporation  organized  under  the  laws  of the  Commonwealth  of  Puerto  Rico
("Perfumania-Puerto  Rico"),  and  MAGNIFIQUE  PARFUMES AND  COSMETICS,  INC., a
corporation organized under the laws of the State of Florida ("Magnifique";  and
together  with   Perfumania,   Ten  Kesef  and   Perfumania-Puerto   Rico,  each
individually,  a "Borrower" and collectively,  the  "Borrowers"),  the financial
institutions from time to time parties thereto (collectively,  the "Lenders" and
individually a "Lender"),  GMAC  COMMERCIAL  FINANCE LLC, as successor by merger
with GMAC Commercial  Credit LLC ("GMAC CF"), a limited liability company formed
under the laws of the State of Delaware,  as agent for Lenders (GMAC CF, in such
capacity,  the  "Agent"),  and  CONGRESS  FINANCIAL  CORPORATION  (FLORIDA),  as
documentation agent (in such capacity,  the "Documentation Agent") (as from time
to  time  amended,   restated,   renewed,   extended,   replaced,   substituted,
supplemented  or otherwise  modified in accordance  with the terms thereof,  the
"Credit Agreement");

      WHEREAS,  Purchasing  Lender wishes to become a Lender party to the Credit
Agreement; and

      WHEREAS,  the  Transferor  Lender is selling and  assigning to  Purchasing
Lender rights, obligations and commitments under the Credit Agreement;

      NOW, THEREFORE, the parties hereto hereby agree as follows:

      1. All capitalized  terms used herein which are not defined shall have the
meanings given to them in the Credit Agreement.

<PAGE>

      2. Upon  receipt  by the  Agent of four  counterparts  of this  Commitment
Transfer Supplement,  to each of which is attached a fully completed SCHEDULE I,
and each of which has been executed by the Transferor Lender and Agent, together
with payment to Agent of the transfer fee payable under  Section  16.4(d) of the
Credit Agreement and if the Purchasing Lender is not incorporated under the laws
of the United States of America or a State thereof,  four (4) duplicate executed
copies of the United States Internal  Revenue  Service Form 1001 or 4224,  Agent
will transmit to Transferor  Lender and Purchasing  Lender a Transfer  Effective
Notice,  substantially  in the form of SCHEDULE II to this  Commitment  Transfer
Supplement (a "Transfer Effective Notice"). Such Transfer Effective Notice shall
set  forth,  INTER  ALIA,  the  date on  which  the  transfer  affected  by this
Commitment  Transfer  Supplement shall become effective (the "Transfer Effective
Date")  which  date  shall not be  earlier  than the first  (1st)  Business  Day
following the date such Transfer  Effective  Notice is received.  From and after
the Transfer  Effective Date,  Purchasing  Lender shall be a Lender party to the
Credit Agreement for all purposes thereof.

      3. At or before 12:00 Noon (New York City time) on the Transfer  Effective
Date, Purchasing Lender shall pay to Transferor Lender, in immediately available
funds,  an amount  equal to the purchase  price,  as agreed  between  Transferor
Lender and such Purchasing Lender (the "Purchase  Price"),  of the portion being
purchased  by  such  Purchasing  Lender  (such  Purchasing  Lender's  "Purchased
Percentage")  of  the  outstanding  Advances  and  other  amounts  owing  to the
Transferor  Lender  under  the  Credit  Agreement.  Effective  upon  receipt  by
Transferor  Lender of the Purchase  Price from a Purchasing  Lender,  Transferor
Lender  hereby  irrevocably  sells,  assigns and  transfers  to such  Purchasing
Lender,  without  recourse,  representation  or warranty,  and Purchasing Lender
hereby irrevocably  purchases,  takes and assumes from Transferor  Lender,  such
Purchasing Lender's Purchased Percentage of the Advances and other amounts owing
to  the  Transferor  Lender  under  the  Credit  Agreement   together  with  all
instruments, documents and collateral security pertaining thereto.

      4. Transferor  Lender has made  arrangements  with Purchasing  Lender with
respect to the portion,  if any, to be paid,  and the date or dates for payment,
by Transferor Lender to such Purchasing  Lender of any fees heretofore  received
by  Transferor  Lender  pursuant to the Credit  Agreement  prior to the Transfer
Effective  Date and the portion,  if any, to be paid,  and the date or dates for
payment,  by such  Purchasing  Lender to  Transferor  Lender of fees or interest
received by such  Purchasing  Lender  pursuant to the Credit  Agreement from and
after the Transfer Effective Date.

      5. (a) All  principal  payments  that would  otherwise be payable from and
after the Transfer  Effective  Date to or for the account of  Transferor  Lender
pursuant  to the  Credit  Agreement  shall,  instead,  be  payable to or for the
account of  Transferor  Lender  and  Purchasing  Lender,  as the case may be, in
accordance  with their  respective  interests as  reflected  in this  Commitment
Transfer Supplement.

      (b) All interest,  fees and other amounts that would otherwise  accrue for
the account of  Transferor  Lender from and after the  Transfer  Effective  Date
pursuant to the Credit Agreement shall, instead,  accrue for the account of, and
be payable to, Transferor  Lender and Purchasing  Lender, as the case may be, in
accordance  with their  respective  interests as  reflected  in this  Commitment
Transfer  Supplement.  In the event that any amount of  interest,  fees or other
amounts  accruing  prior to the  Transfer  Effective  Date was  included  in the
Purchase Price paid by any Purchasing  Lender,  Transferor Lender and Purchasing
Lender will make appropriate  arrangements  for payment by Transferor  Lender to
such Purchasing Lender of such amount upon receipt thereof from Borrowers.

                                       2
<PAGE>

      6. Concurrently with the execution and delivery hereof,  Transferor Lender
will provide to Purchasing  Lender  conformed copies of the Credit Agreement and
all related documents delivered to Transferor Lender.

      7. Each of the parties to this Commitment  Transfer Supplement agrees that
at any time and from time to time upon the written  request of any other  party,
it will execute and deliver such further  documents and do such further acts and
things  as such  other  party may  reasonably  request  in order to  effect  the
purposes of this Commitment Transfer Supplement.

      8. By  executing  and  delivering  this  Commitment  Transfer  Supplement,
Transferor Lender and Purchasing Lender confirm to and agree with each other and
Agent and Lenders as follows: other than the representation and warranty that it
is the legal and beneficial owner of the interest being assigned hereby free and
clear  of any  adverse  claim,  Transferor  Lender  makes no  representation  or
warranty  and  assumes  no  responsibility   with  respect  to  any  statements,
warranties or representations made in or in connection with the Credit Agreement
or the execution, legality, validity, enforceability,  genuineness,  sufficiency
or value of the Credit Agreement or any other  instrument or document  furnished
pursuant  thereto;  Transferor  Lender makes no  representation  or warranty and
assumes no responsibility  with respect to the financial  condition of Borrowers
or the  performance or observance by Borrowers of any of its  obligations  under
the Credit  Agreement or any other  instrument  or document  furnished  pursuant
hereto;  Purchasing  Lender  confirms  that it has received a copy of the Credit
Agreement,  together  with copies of such  financial  statements  and such other
documents and  information  as it has deemed  appropriate to make its own credit
analysis  and  decision  to enter  into  this  Commitment  Transfer  Supplement;
Purchasing   Lender  will,   independently  and  without  reliance  upon  Agent,
Transferor  Lender  or any  other  Lenders  and  based  on  such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions  in taking or not taking  action  under the Credit  Agreement;
Purchasing  Lender appoints and authorizes Agent to take such action as agent on
its  behalf and to  exercise  such  powers  under the  Credit  Agreement  as are
delegated to the Agent by the terms  thereof;  Purchasing  Lender agrees that it
will  perform  all of its  respective  obligations  as set  forth in the  Credit
Agreement to be performed by it as a Lender;  and Purchasing  Lender  represents
and warrants to Transferor  Lender,  Lenders,  Agent,  and Borrowers  that it is
either (x)  entitled  to the  benefits  of an income tax treaty  with the United
States  of  America  that  provides  for an  exemption  from the  United  States
withholding  tax on interest  and other  payments  made by  Borrowers  under the
Credit  Agreement and the Other Documents or (y) is engaged in trade or business
within the United States of America.

      9.  SCHEDULE I hereto sets forth the  revised  Commitment  Percentages  of
Transferor Lender and the Commitment  Percentage of Purchasing Lender as well as
administrative information with respect to Purchasing Lender.

                                       3
<PAGE>

      10.  This  Commitment  Transfer  Supplement  shall  be  governed  by,  and
construed in accordance with, the laws of the State of New York.

      IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Commitment
Transfer  Supplement to be executed by their respective duly authorized officers
on the date set forth above.

                                  ----------------------------------------------
                                  as Transferor Lender

                                  By:
                                      ------------------------------------------

                                  Name:
                                       -----------------------------------------

                                  Title:
                                         ---------------------------------------

                                  ----------------------------------------------
                                  as a Purchasing Lender

                                  By:
                                      ------------------------------------------

                                  Name:
                                       -----------------------------------------

                                  Title:
                                         ---------------------------------------

                                  GMAC COMMERCIAL FINANCE LLC, as Agent

                                  By:
                                      ------------------------------------------

                                  Name:
                                       -----------------------------------------

                                  Title:
                                         ---------------------------------------

                                       4
<PAGE>

                  SCHEDULE I TO COMMITMENT TRANSFER SUPPLEMENT

          LIST OF OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS

[Transferor Lender]                        Revised Commitment Amount   $

                                           Revised Commitment
                                           Percentage:                       %

[Purchasing Lender]                        Commitment Amount           $

                                           Commitment Percentage:            %

ADDRESSES FOR NOTICES

Attention:
Telephone:
Telecopier:

                                       5
<PAGE>

                  SCHEDULE II TO COMMITMENT TRANSFER SUPPLEMENT

                       [Form of Transfer Effective Notice]

To:  ____________________,  as Transferor  Lender and  ____________________,  as
     Purchasing Lender:

      The undersigned,  as Agent under the Amended and Restated Revolving Credit
and Security  Agreement dated as of May __, 2004 (this "Agreement") by and among
PERFUMANIA,  INC. ("Perfumania"),  TEN KESEF II, INC. ("Ten Kesef"),  PERFUMANIA
PUERTO  RICO,  INC.  ("Perfumania-Puerto  Rico"),  and  MAGNIFIQUE  PARFUMES AND
COSMETICS,  INC.  ("Magnifique";  and together  with  Perfumania,  Ten Kesef and
Perfumania-Puerto  Rico, each individually,  a "Borrower" and collectively,  the
"Borrowers"),  the  financial  institutions  from time to time parties  thereto,
(collectively,  the  "Lenders" and  individually  a "Lender"),  GMAC  COMMERCIAL
FINANCE LLC, as successor by merger with GMAC Commercial Credit LLC ("GMAC CF"),
a limited liability  company formed under the laws of the State of Delaware,  as
agent for  Lenders  (GMAC CF,  in such  capacity,  the  "Agent"),  and  CONGRESS
FINANCIAL CORPORATION  (FLORIDA),  as documentation agent (in such capacity, the
"Documentation  Agent")  (as  from  time to  time  amended,  restated,  renewed,
extended,   replaced,   substituted,   supplemented  or  otherwise  modified  in
accordance with the terms thereof, the "Credit Agreement")  acknowledges receipt
of four (4) executed  counterparts of a completed Commitment Transfer Supplement
in the form attached hereto,  [and four (4) duplicate  executed copies of United
States Internal Revenue Service Form [specify]. [Note: Attach copy of Commitment
Transfer  Supplement.] Terms defined in such Commitment  Transfer Supplement are
used herein as therein defined.

      Pursuant to such Commitment Transfer Supplement,  you are advised that the
Transfer Effective Date will be [Insert date of Transfer Effective Notice.]

                                 GMAC COMMERCIAL FINANCE LLC,

                                 AS AGENT

                                 By:
                                     ------------------------------------------

                                 Title:
                                        ---------------------------------------

ACCEPTED FOR RECORDATION
IN REGISTER:

                                       6

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00066-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00066-of-00352.parquet"}]]