Document:

<PAGE>
                                                                  EXHIBIT 10.17

                     =======================================
                              AMENDED AND RESTATED
                          LOAN AND SECURITY AGREEMENT

                     =======================================

                           FLEET RETAIL FINANCE INC.
                                   THE LENDER

                     =======================================

                          BAKERS FOOTWEAR GROUP, INC.
                        F/K/A WEISS AND NEUMAN SHOE CO.
                                  THE BORROWER

                     =======================================

<PAGE>
                                TABLE OF CONTENTS

<Table>
<S>                                                                             <C>
ARTICLE 1: - DEFINITIONS:

ARTICLE 2: - THE REVOLVING CREDIT:
2.1.  Establishment of Revolving Credit .........................................25
2.2.  Advances in Excess of Borrowing Base (Overloans) ..........................25
2.3.  Risks of Value of Collateral ..............................................25
2.4.  Commitment to Make Revolving Credit Loans and Support Letters of Credit ...26
2.5.  Revolving Credit Loan Requests ............................................26
2.6.  Making of Revolving Credit Loans ..........................................28
2.7.  The Loan Account ..........................................................28
2.8.  The Revolving Credit Note .................................................29
2.9.  Payment of The Loan Account ...............................................29
2.10. Interest on Revolving Credit Loans ........................................30
2.11. Revolving Credit Commitment Fee; Amendment Fee ............................31
2.12. Facility Fee ..............................................................31
2.13. Unused Line Fee ...........................................................32
2.14. Early Termination Fee .....................................................32
2.15  Concerning Fees ...........................................................33
2.16. Lender's Discretion .......................................................34
2.17. Procedures For Issuance of L/C's ..........................................34
2.18. Fees For L/C's ............................................................35
2.19. Concerning L/C's ..........................................................36
2.20. References to Original Agreement ..........................................37
2.21. Changed Circumstances .....................................................38
2.22. Sublimit Facility .........................................................38

ARTICLE 3: - CONDITIONS PRECEDENT:
3.1   Corporate Due Diligence ...................................................40
3.2.  Opinion ...................................................................40
3.3.  Officers' Certificates ....................................................41
3.4.  Additional Documents ......................................................41
3.5.  Representations and Warranties ............................................41
3.6.  All Fees and Expenses Paid ................................................41
3.7.  No Suspension Event .......................................................41
3.8.  No Adverse Change .........................................................41

ARTICLE 4: - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:
4.1.  Payment and Performance of Liabilities ....................................42
4.2.  Due Organization. Corporate Authorization. No Conflicts ...................42
4.3.  Trade Names ...............................................................43
4.4.  Infrastructure ............................................................43
4.5.  Year 2000 Compliance ......................................................43
4.6.  Locations .................................................................43
      (c) .......................................................................44
4.7.  Title to Assets ...........................................................44
4.8.  Indebtedness ..............................................................45
4.9.  Insurance .................................................................45
4.10. Licenses ..................................................................46
4.11. Leases ....................................................................46
4.12. Requirements of Law .......................................................47
4.13. Labor Relations ...........................................................47
</Table>

                                       ii
<PAGE>
<Table>
<S>                                                                             <C>
4.14.  Maintain Properties ......................................................47
4.15.  Taxes ....................................................................48
4.16.  No Margin Stock ..........................................................50
4.17.  ERISA ....................................................................50
4.18.  Hazardous Materials ......................................................50
4.19.  Litigation ...............................................................51
4.20.  Dividends. Investments. Corporate Action .................................51
4.21.  Loans ....................................................................52
4.22.  Protection of Assets .....................................................52
4.23.  Line of Business .........................................................52
4.24.  Affiliate Transactions ...................................................52
4.25.  Executive Pay ............................................................53
4.26.  Further Assurances .......................................................53
4.27.  Adequacy of Disclosure ...................................................53
4.28.  No Restrictions on Liabilities ...........................................54
4.29.  Other Covenants ..........................................................54

ARTICLE 5: - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

5.1. Maintain Records ...........................................................54
5.2. Access to Records ..........................................................55
5.3. Immediate Notice to Lender .................................................55
5.4. Borrowing Base Certificate .................................................56
5.5. Monthly Reports ............................................................57
5.6. Quarterly Reports ..........................................................58
5.7. Annual Reports .............................................................58
5.8. Officers' Certificates .....................................................59
5.9. Inventories, Appraisals, and Audits ........................................59
5.10. Additional Financial Information ..........................................61
5.11. Financial Performance Covenants ...........................................62

ARTICLE 6: - USE AND COLLECTION OF COLLATERAL:
6.1. Use of Inventory Collateral ................................................62
6.2. Inventory Quality ..........................................................62
6.3. Adjustments and Allowances .................................................62
6.4. Validity of Accounts .......................................................63
6.5. Notification to Account Debtors ............................................63

ARTICLE 7: - CASH MANAGEMENT. PAYMENT OF LIABILITIES:
7.1  Depository Accounts ........................................................63
7.2. Credit Card Receipts .......................................................64
7.3. The Concentration, Blocked, and Operating Accounts .........................64
7.4. Proceeds and Collection of Accounts ........................................65
7.5. Payment of Liabilities .....................................................65
7.6. The Operating Account ......................................................66

ARTICLE 8: - GRANT OF SECURITY INTEREST:
8.1. Grant of Security Interest .................................................67
8.2. Extent and Duration of Security Interest ...................................67

ARTICLE 9: - LENDER AS BORROWER'S ATTORNEY-IN-FACT:
9.1. Appointment as Attorney-In-Fact ............................................68
9.2. No Obligation to Act .......................................................68

ARTICLE 10: - EVENTS OF DEFAULT:
</Table>

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<PAGE>
<Table>
<S>                                                                         <C>
10.1. Failure to Pay Revolving Credit .......................................69
10.2. Failure To Make Other Payments ........................................69
10.3. Failure to Perform Covenant or Liability (No Grace Period) ............69
10.4. Failure to Perform Covenant or Liability (Grace Period) ...............70
10.5. Misrepresentation .....................................................70
10.6. Acceleration of Other Debt. Breach of Lease ...........................70
10.7. Default Under Other Agreements ........................................70
10.8. Uninsured Casualty Loss ...............................................70
10.9. Attachment. Judgment. Restraint of Business ...........................70
10.10. Business Failure .....................................................71
10.11. Bankruptcy ...........................................................71
10.12. Default by Guarantor .................................................72
10.13. Indictment - Forfeiture ..............................................72
10.14. Termination of Guaranty ..............................................72
10.15. Challenge to Loan Documents ..........................................72
10.16. Key Management. Death or Disability ..................................72
10.17. Change in Control ....................................................73

ARTICLE 11: - RIGHTS AND REMEDIES UPON DEFAULT:
11.1. Rights of Enforcement .................................................73
11.2. Sale of Collateral ....................................................74
11.3. Occupation of Business Location .......................................74
11.4. Grant of Nonexclusive License .........................................75
11.5. Assembly of Collateral ................................................75
11.6. Rights and Remedies ...................................................75

ARTICLE 12: - NOTICES:
12.1. Notice Addresses ......................................................75
12.2. Notice Given ..........................................................76

ARTICLE 13: - TERM:
13.1. Termination of Revolving Credit .......................................77
13.2. Actions On Termination ................................................77

ARTICLE 14: - GENERAL:
14.1. Protection of Collateral ..............................................77
14.2. Publicity .............................................................77
14.3. Successors and Assigns ................................................78
14.4. Severability ..........................................................78
14.5. Amendments. Course of Dealing .........................................78
14.6. Power of Attorney .....................................................79
14.7. Application of Proceeds ...............................................79
14.8. Increased Costs .......................................................79
14.9. Costs and Expenses of the Lender ......................................80
14.10. Copies and Facsimiles ................................................80
14.11. Massachusetts Law ....................................................80
14.12. Consent to Jurisdiction ..............................................80
14.13. Indemnification ......................................................81
14.14. Rules of Construction ................................................81
14.15. Intent ...............................................................83
14.16. Participations: ......................................................83
14.17. Right of Set-Off .....................................................84
14.18. Pledges To Federal Reserve Banks: ....................................84
</Table>

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<Table>
<S>                                                                   <C>
14.19. Maximum Interest Rate ..........................................84
14.20. Waivers  .......................................................84
</Table>

                                        v

<PAGE>

                                    EXHIBITS

<Table>
<S>             <C>     <C>
2.8             :        Revolving Credit Note
4.2             :        Affiliates
4.3             :        Trade Names
4.6             :        Locations, Leases, and Landlords
4.7             :        Encumbrances
4:4.7(c)(ii)    :        Equipment Usage Agreement
4.8             :        Indebtedness
4.9             :        Insurance Policies
4.11            :        Capital Leases
4.15            :        Taxes
4.19            :        Litigation
5.4             :        Borrowing Base Certificate
5.11(a)         :        Financial Performance Covenants
5.11(b)         :        Business Plan
7.1             :        DDA's.
7.2             :        Credit Card Arrangements
</Table>

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<PAGE>

================================================================================
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT                           FLEET RETAIL FINANCE INC.
                                                                     THE LENDER

================================================================================

                                                             As of June 11, 2002

     THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "AGREEMENT") is
made between

          Fleet Retail Finance Inc. (the "LENDER") a Delaware corporation with
     offices at 40 Broad Street, Boston, Massachusetts 02109,

          and

          Bakers Footwear Group, Inc., f/k/a Weiss and Neuman Shoe Co. (the
     "BORROWER"), a Missouri corporation with its principal executive offices at
     2815 Scott Avenue, Suite C, St. Louis, Missouri 63103

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

                                  WITNESSETH:

     WHEREAS, on January 18, 2000, the Borrower and the Lender entered into a
certain Loan and Security Agreement (as amended and in effect, the "ORIGINAL
AGREEMENT"), pursuant to which, among other things, the Lender agreed to make
Revolving Credit Loans to the Borrower;

     WHEREAS, the Borrower has requested that the Lender amend the Original
Agreement in certain respects in order to, among other thing, extend the
Maturity Date of the Original Agreement;

     WHEREAS, the Lender is willing to amend the Original Agreement on the terms
set forth herein; and

     WHEREAS, the parties hereto desire to amend and restate the Original
Agreement in its entirety.

     NOW THEREFORE, the Borrower and the Lender hereby agree that the Original
Agreement shall be amended and restated in its entirety as follows:

                                        1
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                                   WITNESSETH:

ARTICLE 1: - DEFINITIONS:

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

     "ACCOUNTS" and "ACCOUNTS RECEIVABLE" include, without limitation,
     "accounts" as defined in the UCC, and also all: accounts, accounts
     receivable, receivables, and rights to payment (whether or not earned by
     performance) for: property that has been or is to be sold, leased,
     licensed, assigned, or otherwise disposed of; services rendered or to be
     rendered; a policy of insurance issued or to be issued; a secondary
     obligation incurred or to be incurred; energy provided or to be provided;
     for the use or hire of a vessel; arising out of the use of a credit or
     charge card or information contained on or used with that card; winnings in
     a lottery or other game of chance; and Health-Care-Insurance Receivables
     (as defined in the UCC); and also all Inventory which gave rise thereto,
     and all rights associated with such Inventory, including the right of
     stoppage in transit; all reclaimed, returned, rejected or repossessed
     Inventory (if any) the sale of which gave rise to any Account.

     "ACH": Automated clearing house.

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

     "ACQUISITION ": The (i) purchase or acquisition of (x) all or substantially
     all of the assets of another Person or (y) Control of a Person, or (ii)
     merger or consolidation of any Person with or into any other Person, in
     each case in one transaction or a group of transactions which are part of a
     common plan.

     "AFFILIATE": As applied to any Person, any other Person directly or
     indirectly Controlling, Controlled by or under common Control with, that
     Person.

     "AMENDMENT CLOSING DATE": June 11, 2002.

     "AMENDMENT FEE": Is defined in Section 2: 2-11.

     "APPLICABLE MARGIN": The following percentages for Base Margin Loans and
     Libor Loans based upon the following criteria:

                                       2
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<Table>
<Caption>
LEVEL           LIBOR MARGIN    BASE MARGIN
-----           ------------    -----------
<S>             <C>             <C>
I                      3.00%       0.75%
II                     2.75%       0.50%
</Table>

     As of the Amendment Closing Date, the Applicable Margin shall be
     established at Level I. Thereafter, the Applicable Margin shall be adjusted
     quarterly as of the first day of each calendar quarter, commencing July 8,
     2002, such that if during the quarter just ended, based upon financial
     statements delivered to the Lender in accordance with Section 5:5-6, (i)
     EBITDA exceeded 80% of EBITDA as projected in the Business Plan, the
     Applicable Margin shall be set (or reset or maintained) at Level II and
     (ii) if EBITDA did not exceed 80% of EBITDA as projected in the Business
     Plan, the Applicable Margin shall be set (or reset or maintained) at Level
     I. Upon the occurrence of an Event of Default (including, without
     limitation, failure to deliver quarterly financial statements in accordance
     with Section 5:5-6), the Applicable Margin may, at the option of the
     Lender, be immediately set at Level I (even if the EBITDA percentages for
     Level II have been met) and interest shall be determined in the manner set
     forth in Section 2.2-10(g).

     "APPRAISED INVENTORY LIQUIDATION VALUE": As determined by Lender, the net
     recovery, as reflected on an Inventory Appraisal, as recoverable on the
     Borrower's Inventory in the event of the conduct of a liquidation of the
     Borrower's Inventory pursuant to an in-store liquidation.

     "AVAILABILITY": The lesser of (a) or (b), where

          (a) is the result of

               (i)  The Revolving Credit Ceiling
               Minus

               (ii)  The aggregate unpaid balance of the Loan Account
               Minus

               (iii) The aggregate undrawn Stated Amount of all then outstanding
                     L/C's.
               Minus

               (iv)  The aggregate of the Availability Reserves.

          (b) is the result of

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               (i)   The Borrowing Base
               Minus

               (ii)  The aggregate unpaid balance of the Loan Account
               Minus

               (iv)  The aggregate undrawn Stated Amount of all then outstanding
                     L/C's.
               Minus

               (v)   The aggregate of the Availability Reserves.

     "AVAILABILITY RESERVES": Such reserves as the Lender from time to time
     determines in the Lender's reasonable judgment as being appropriate to
     reflect the impediments to the Lender's ability to realize upon the
     Collateral.

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

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

     "BASE MARGIN": As determined from the definition of Applicable Margin.

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

     "BASE MARGIN RATE": The aggregate of Base plus the then applicable Base
     Margin.

     "BLOCKED ACCOUNT": Any DDA into which the contents of any other DDA is
     transferred.

     "BLOCKED ACCOUNT AGREEMENT": An Agreement, in form satisfactory to the
     Lender, which Agreement recognizes the Lender's Collateral Interest in the
     contents of the DDA which is the subject of such Agreement and agrees that
     such contents shall be transferred only to the Concentration Account or as
     otherwise instructed by the Lender.

                                        4
<PAGE>

     "BORROWER": Is defined in the Preamble.

     "BORROWING BASE": The product of the Cost of Eligible Inventory (net of
     Inventory Reserves and the Loan to Collateral Reserve) multiplied by the
     Inventory Advance Rate.

     "BORROWING BASE CERTIFICATE": Is defined in Section 5.4.

     "BUSINESS DAY": Any day other than (a) a Saturday or Sunday; (b) any day on
     which banks in Boston, Massachusetts or in St. Louis, Missouri, generally
     are not open to the general public for the purpose of conducting commercial
     banking business; or (c) a day on which the principal office of the Lender
     is not open to the general public to conduct business.

     "BUSINESS PLAN": The Borrower's business plan annexed hereto as EXHIBIT
     5.11(b) and any revision, amendment, or update of such business plan which
     has been approved as provided in Section 5.10(d).

     "CAPITAL EXPENDITURES": The expenditure of funds or the incurrence of
     liabilities which may be capitalized in accordance with GAAP; provided,
     however, that no expenditure of insurance or condemnation proceeds made in
     connection with the repair, restoration or replacement of assets shall be
     treated as Capital Expenditures.

     "CAPITAL LEASE": Any lease which may be capitalized in accordance with GAAP
     other than any such lease of a retail location, the only basis for such
     capitalization being any required increase in future rents pursuant to the
     terms of such lease.

     "CHANGE IN CONTROL": The occurrence of any of the following:

     A. Prior to the occurrence of the IPO:

     (i) Any event such that Peter Edison and direct family members of Peter
     Edison, including, trust entities created, for estate planning purposes,
     for the benefit of the foregoing individuals, cease to own and otherwise
     control fifty-one percent (51%) or more of the issued and outstanding
     capital stock of the Borrower having the right, under ordinary
     circumstances, to vote for the election of directors of the Borrower and/or
     such

                                       5

<PAGE>

     that Peter Edison shall be unable to control at all times the appointment
     of the sole director of the Borrower.

     (ii) Any event such that Peter Edison shall cease, for any reason, to be
     the sole director of the Borrower, except that it shall not be deemed a
     Change in Control hereunder if, in order to facilitate changes required for
     the IPO, Bernard Edison and Julian Edison are made directors of the
     Borrower and Peter Edison is named chairman of the board of directors of
     the Borrower.

     B. On and after the occurrence of the IPO:

     (i) The purchase or other acquisition by any Person or group of Persons
     (within the meaning of Rule 13d-3 or Rule 14d of the Securities Exchange
     Act of 1934, as amended) (excluding, for this purpose, the Borrower or its
     subsidiaries or any employee benefit plan of the Borrower or its
     subsidiaries) of beneficial ownership (within the meaning of Rule 13d-3 of
     the Securities Exchange Act of 1934, as amended) of either the
     thenoutstanding shares of the Borrower's common stock or the combined
     voting power of the Borrower's then-outstanding voting securities entitled
     to vote generally in the election of directors, exceeding (x) that of Peter
     Edison (provided that this does not occur because Peter Edison has reduced
     the number of shares or voting power owned by him by more than 20% from the
     date of the occurrence of the IPO), or (y) 50% of either the
     thenoutstanding shares of common stock of the Borrower or the combined
     voting power of the Borrower's then-outstanding voting securities entitled
     to vote generally in the election of directors; or

     (ii) A reorganization, merger, consolidation, sale of all or substantially
     all of the assets of the Borrower, or similar transaction, in each case
     with respect to which Persons who were the stockholders of the Borrower
     immediately prior to such reorganization, merger or consolidation would not
     immediately thereafter own more than 50% of, respectively, the Borrower's
     common stock and the combined voting power entitled to vote generally in
     the election of directors of the reorganized, merged, consolidated or
     successor corporation's then-outstanding voting securities; or

     (iii) Peter Edison shall cease, for any reason, to be the chairman of the
     board of directors of the Borrower; or

     (iv) During any period of two (2) consecutive years, individuals who at the
     beginning of such period constituted the board of directors of the Borrower
     (together with any directors whose election or appointment by the board of
     directors of the Borrower or whose nomination for election by the
     shareholders of the Borrower was approved by vote

                                        6

<PAGE>

     of a majority of the directors then still in office who are either
     directors at the beginning of such period or whose election or nomination
     for election was previously so approved) cease for any reason to constitute
     a majority of the board of directors of the Borrower then in office.

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

     "COLLATERAL": Is defined in Section 8.1.

     "COLLATERAL INTEREST": Any interest in property to secure an obligation,
     including, without limitation, a security interest, mortgage, and deed of
     trust.

     "CONCENTRATION ACCOUNT": Is defined in Section 7.3.

     "CONTROL": The possession, direct or indirect, of the power to cause the
     direction of the management and policies of a Person whether through the
     ownership of voting securities, by contract or otherwise. A Person shall be
     deemed to have control of another Person if it is a "beneficial owner" (as
     such term is defined in Rule 13d-3 and Rule 13d-5 of the Securities
     Exchange Act of 1934, as amended) or a member of a "group" that is the
     beneficial owner, directly or indirectly, of 25% or more of the voting
     stock or equity interest in such Person. A Person shall be deemed to direct
     the management and policies of a Person if it, without limitation, obtains
     the power (whether or not exercised) to elect a majority of the board of
     directors of such Person (or other body or Person who has those powers
     customarily vested in a board of directors of a corporation). The terms
     "Controlled" and "Controlling" as used herein are intended to have the same
     meaning as "Control."

     "COST": The calculated cost of purchases, as determined from invoices
     received by the Borrower, the Borrower's purchase journal or stock ledger,
     based upon the Borrower's accounting practices to be placed in effect from
     and after December 31, 1999 (the retail method of accounting), which
     practices shall be in effect from and after December 31, 1999. "Cost" does
     not include inventory capitalization costs or other non-purchase price
     charges (such as freight) used in the Borrower's calculation of cost of
     goods sold.

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

                                       7

<PAGE>

     reasonable costs incurred by the Lender in the administration of the
     Liabilities and/or the Loan Documents, including, without limitation,
     reasonable costs and expenses associated with travel on behalf of the
     Lender, where such costs and expenses are directly or indirectly related to
     or in respect of the Lender's: administration and management of the
     Liabilities; negotiation, documentation, and amendment of any Loan
     Document; or efforts to preserve, protect, collect, or enforce the
     Collateral, the Liabilities, and/or the Lender' Rights and Remedies and/or
     any of the rights and remedies of the Lender against or in respect of any
     guarantor or other person liable in respect of the Liabilities (whether or
     not suit is instituted in connection with such efforts). The Costs of
     Collection are Liabilities, and at the Lender's option may bear interest at
     the then effective rate of interest applicable to loans and advances under
     the Revolving Credit.

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

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

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

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

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

     "EBITDA": The Borrower's earnings before interest, taxes, depreciation, and
     amortization, each as determined in accordance with GAAP.

     "ELIGIBLE IN-TRANSIT INVENTORY": Inventory (without duplication as to
     Eligible Inventory and Eligible L/C Inventory), title to which has passed
     to the Borrower and which is then being shipped from a foreign location for
     receipt, within 30 days, at a warehouse of the Borrower, provided that

          (a) Such Inventory is of such types, character, qualities and
          quantities (net of Inventory Reserves) as the Lender in its discretion
          from time to time determines to be eligible for borrowing; and

          (b) The documents which relate to such shipment name the Lender as
          consignee of the subject Inventory and the Lender has control over the
          documents which

                                       8

<PAGE>

          evidence ownership of the subject Inventory (currently, as Lender
          determines to be accomplished by the providing to the Lender of a
          Customs Brokers Agreement in form reasonably satisfactory to the
          Lender).

     "ELIGIBLE INVENTORY": All of the following:

               (a) Such of the Borrower's Inventory (without duplication as to
          Eligible L/C Inventory and Eligible In-Transit Inventory) at such
          locations, and of such types, character, qualities and quantities, as
          the Lender in its discretion from time to time determines to be
          acceptable for borrowing (including such limitations, if any, as
          determined by the Lender in its discretion in connection with store
          closings), as to which Inventory, the Lender has a perfected security
          interest which is prior and superior to all security interests,
          claims, and all Encumbrances other than Permitted Encumbrances.

               (b) Eligible L/C Inventory.

               (c) Eligible In-Transit Inventory.

               In no event, however, does "Eligible Inventory" include: any
          non-merchandise inventory (such as labels, bags, and packaging
          materials); damaged goods; return to vendor merchandise; packaways;
          consigned inventory; and other similar categories of Goods.

     "ELIGIBLE L/C INVENTORY": Inventory (without duplication as to Eligible
     Inventory and Eligible In-Transit Inventory), the purchase of which is
     supported by a documentary L/C then having an initial expiry of thirty (30)
     or less days, provided that

               (a) Such Inventory is of such types, character, qualities and
          quantities (net of Inventory Reserves) as the Lender in its discretion
          from time to time determines to be eligible for borrowing; and

               (b) The documentary L/C supporting such purchase names the Lender
          as consignee of the subject Inventory and the Lender has control over
          the documents which evidence ownership of the subject Inventory
          (currently, as Lender determines to be accomplished by the providing
          to the Lender of a Customs Brokers Agreement in form reasonably
          satisfactory to the Lender).

     "EMPLOYEE BENEFIT PLAN": As defined in ERISA.

     "ENCUMBRANCE": Any security interest, mortgage, pledge, hypothecation,
     lien, attachment, or charge of any kind (including any agreement to give
     any of the foregoing); the interest of a lessor under a Capital Lease;
     conditional sale or other title retention agreement; sale

                                       9
<PAGE>

     of accounts receivable or chattel paper; or other arrangement pursuant to
     which any Person is entitled to any preference or priority with respect to
     the property or assets of another Person or the income or profits of such
     other Person or which constitutes an interest in property to secure an
     obligation; each of the foregoing whether consensual or non-consensual and
     whether arising by way of agreement, operation of law, legal process or
     otherwise.

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

     "ENVIRONMENTAL LAWS":All of the following:

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

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

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

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

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

     "EVENTS OF DEFAULT": Is defined in Article 10. Each reference to an "Event
     of Default" is to an Event of Default not then duly waived by the Lender.
     In the event of such due waiver, the

                                       10

<PAGE>
     so-waived Event of Default shall be deemed never to have occurred, other
     than with respect to any post-default interest which accrued prior to such
     waiver.

     "EXECUTIVE AGREEMENT": Any agreement or understanding (whether or not
     written) to which the Borrower is a party or by which the Borrower may be
     bound, which agreement or understanding relates to Executive Pay.

     "EXECUTIVE OFFICER": Each of Peter Edison (CEO), Michele Bergerac
     (President) and Lawrence Spanley (CFO), and any other Person who (without
     regard to title) is the successor to any of the foregoing or who exercises
     a substantial portion of the authority being exercised, at the execution of
     the Original Agreement, by any of the foregoing or a combination of such
     authority of more than one of the foregoing or who otherwise has Control of
     the Borrower.

     "EXECUTIVE PAY": All salary, bonuses, and other value directly or
     indirectly provided by or on behalf of the Borrower to or for the benefit
     of any Executive Officer or any Affiliate, spouse, parent, or child of any
     Executive Officer.

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

     "FACILITY FEE": Is defined in Section 2.12.

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

     "GAAP": Principles which are consistent with those promulgated or adopted
     by the Financial Accounting Standards Board and its predecessors (or
     successors) in effect and applicable to that accounting period in respect
     of which reference to GAAP is being made, provided, however, in the event
     of a Material Accounting Change, then unless otherwise specifically agreed
     to by the Lender, (a) the Borrower's compliance with the financial
     performance covenants imposed pursuant to Section 5.11 shall be determined
     as if such Material Accounting Change had not taken place and (b) the
     Borrower shall include, with its monthly, quarterly, and annual financial
     statements a schedule, certified by the Borrower's chief financial officer,
     on which the effect of such Material Accounting Change to the statement
     with which provided shall be described.

                                       11

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

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

     "GROSS MARGIN": With respect to the subject accounting period for which
     being calculated, the decimal equivalent of the following (determined in
     accordance with the retail method of accounting):

                        Sales (Minus) Cost of Goods Sold
                        --------------------------------
                                     Sales

                                       12
<PAGE>
     "HAZARDOUS MATERIALS": Any (a) hazardous materials, hazardous waste,
     hazardous or toxic substances or petroleum products, which (as to any of
     the foregoing) are defined or regulated as a hazardous material in or under
     any Environmental Law and (b) oil in any physical state.

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

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

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

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

               (d) On account of deposits or advances.

               (e) As lessee under Capital Leases.

               (f) In connection with any sale and leaseback transaction.
          "Indebtedness" also includes:

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

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

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

     "INDEMNIFIED PERSON": Is defined in Section 14.13.

     "INITIAL FUNDING DATE": January 18, 2000.

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

                                       13
<PAGE>
     "INTEREST PAYMENT DATE": With reference to:

          Each Libor Loan: The last day of the Interest Period relating thereto;
     the Termination Date; and the End Date.

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

     "INTEREST PERIOD": The following:

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

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

          (c) The setting of Interest Periods is in all instances subject to the
     following:

               (i) Any Interest Period for a Base Margin Loan which would
          otherwise end on a day which is not a Business Day shall be extended
          to the next succeeding Business Day.

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

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

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

               (v) The number of Interest Periods in effect at any one time is
          subject to Section 2:2-10(e) hereof.

                                       14
<PAGE>

     "INVENTORY": Includes, without limitation, "inventory" as defined in the
     UCC and also all: (a) Goods which are leased by a Person as lessor; are
     held by a Person for sale or lease or to be furnished under a contract of
     service; are furnished by a Person under a contract of service; or consist
     of raw materials, work in process, or materials used or consumed in a
     business; (b) Goods of said description in transit; (c) Goods of said
     description which are returned, repossessed and rejected; (d) packaging,
     advertising, and shipping materials related to any of the foregoing; (e)
     all names, marks, and General Intangibles affixed or to be affixed or
     associated thereto; and (f) Documents and Documents of Title which
     represent any of the foregoing.

     "INVENTORY ADVANCE RATE": 70%

     " INVENTORY APPRAISAL": An appraisal of the Borrower 's Inventory
     undertaken at the request of the Lender, by a nationally recognized
     inventory appraiser acceptable to the Lender, using a methodology
     consistent with that employed by Hilco Great American in the preparation of
     its appraisal of the Borrower's Inventory dated November 1, 1999.

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

               (i)    Obsolescence (based upon Inventory on hand beyond a given
                      number of days).

               (ii)   Seasonality.

               (iii)  Shrinkage (to the extent not already reflected in the
                      calculation of Eligible Inventory).

               (iv)   Imbalance.

               (v)    Change in Inventory character.

               (vi)   Change in Inventory composition

               (vii)  Change in Inventory mix.

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

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

                                       15
<PAGE>

               (x)    Return to vendor (to the extent not removed from the
                      Borrowing

               Base on account of the Definition of "Eligible Inventory").

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

     "IPO": The receipt by the Borrower of aggregate net cash proceeds of no
     less than $10,000,000 as a result of the issuance and sale of common stock
     of the Borrower as set forth in a Registration Statement on Form S-1 as
     filed with the Securities & Exchange Commission (Registration No.
     333-86332), as such Registration Statement may be amended from time to
     time.

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

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

     "L/C LANDING COSTS": To the extent not included in the Stated Amount of an
     L/C, customs, duty, freight, and other out-of-pocket costs and expenses
     which will be expended to "land" the Inventory, the purchase of which is
     supported by such L/C.

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

     "LEASEHOLD INTEREST": Any interest of the Borrower as lessee under any
     Lease.

     "LENDER": Is defined in the Preamble to this Agreement.

     "LENDER'S RIGHTS AND REMEDIES": Is defined in Section 11.6.

     "LIABILITIES": Includes, without limitation, the following:

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

               (ii) Each obligation to repay any loan, advance, indebtedness,
          note, obligation, overdraft, or amount now or hereafter owing by the
          Borrower to the Lender, (including all future advances whether or not
          made pursuant to a commitment by the Lender), whether or not any of
          such are liquidated, unliquidated, primary, secondary,

                                       16
<PAGE>

          secured, unsecured, direct, indirect, absolute, contingent, or of any
          other type, nature, or description, or by reason of any cause of
          action which the Lender, may hold against the Borrower.

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

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

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

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

               (vii) Each of the foregoing as if each reference to the " the
          Lender," were to each Affiliate of the Lender.

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

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

     "LIBOR MARGIN": As determined from the definition of Applicable Margin.

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

                                       17
<PAGE>
     "LIBOR RATE": That per annum rate which is the aggregate of the Libor Offer
     Rate plus the Libor Margin except that, in the event that the Lender
     determines in good faith that any Revolving Credit Lender may be subject to
     the Reserve Percentage, the "Libor Rate" shall mean, with respect to any
     Libor Loans then outstanding (from the date on which that Reserve
     Percentage first became applicable to such loans), and with respect to all
     Libor Loans thereafter made, an interest rate per annum equal the sum of
     (a) plus (b), where:

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

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

                        (b) is the applicable Libor Margin.

     "LOAN ACCOUNT": Is defined in Section 2.7.

     "LOAN DOCUMENTS": This Agreement and each other instrument or document from
     time to time executed and/or delivered in connection with the arrangements
     contemplated hereby, in connection with the Original Agreement, or in
     connection with any transaction between the Borrower, the Lender or any
     Affiliate of the Lender, including, without limitation, any transaction
     which arises out of any cash management, depository, investment, letter of
     credit, interest rate protection, or equipment leasing services provided by
     the Lender or any Affiliate of the Lender, as each may be amended from time
     to time.

     "LOAN TO COLLATERAL PERCENTAGE": 85%.

     "LOAN TO COLLATERAL RESERVE": A Reserve set so that the amount made
     available under the Borrowing Base on account of Eligible Inventory does
     not exceed in the aggregate the product of the Appraised Inventory
     Liquidation Value multiplied by the Loan to Collateral Percentage.

     "MATERIAL ACCOUNTING CHANGE": Other than with respect to changes
     specifically relating to the Borrower's change from and after December 31,
     1999 to the retail method of accounting, any change in GAAP applicable to
     accounting periods subsequent to the Borrower's fiscal year most recently
     completed prior to the execution of this Agreement, which change has a
     material effect on the Borrower's financial condition or operating results,
     as reflected on financial statements and reports prepared by or for the
     Borrower,

                                       18
<PAGE>

     when compared with such condition or results as if such change had not
     taken place or where preparation of the Borrower's statements and reports
     in compliance with such change results in the breach of a financial
     performance covenant imposed pursuant to Section 5.11 where such a breach
     would not have occurred if such change had not taken place or visa versa.

     "MATURITY DATE": December 31, 2004.

     "OPERATING ACCOUNT": Is defined in Section 7.3. "ORIGINAL AGREEMENT:": Is
     defined in the Preamble.

     "OVERLOAN": A loan, advance, or providing of credit support (such as the
     issuance of any L/C) to the extent that, at the time it is made it is in
     excess of the Borrowing Base as of immediately prior to the making of such
     loan, advance, or providing of credit support.

     "PARTICIPANT": Is defined in Section 14.16, hereof.

     "PERMITTED ACQUISITION": An Acquisition in which each of the following
     conditions is satisfied:

         (i) no Suspension Event then exists or would arise from the
     consummation of such Acquisition;

         (ii) the Borrower shall have furnished the Lender with: (a) at least
     ten (10) days' prior written notice of such intended Acquisition; (b) a
     current draft of the acquisition agreement and other acquisition documents;
     (c) a summary of any due diligence undertaken by the Borrower in connection
     with such Acquisition; (d) financial statements of the Person which is the
     subject of such Acquisition, to the extent available; (e) with respect to
     Acquisitions in excess of $1,000,000, (i) pro forma projected financial
     statements of the Borrower for the twelve (12) month period following such
     Acquisition after giving effect to such Acquisition (including balance
     sheets, cash flows and income statements by month for the acquired Person,
     individually, and on a consolidated basis with the Borrower) and (ii) the
     results of appraisals of the assets of the Person to be acquired in such
     Acquisition; and (f) such other information as the Lender may reasonably
     require;

         (iii) If the Acquisition is of capital stock or other ownership
     interests, after consummation of such Acquisition the Borrower shall own,
     directly or indirectly, a

                                       19
<PAGE>
     majority of the ownership interests in the Person being acquired and shall
     Control the Person being acquired; and

         (iv) any assets acquired shall be utilized in, and if the Acquisition
     involves a merger, consolidation or stock acquisition, the Person which is
     the subject of such Acquisition shall be engaged in, only those businesses
     permitted under Section 4.23 below. If the Person which is the subject of
     such Acquisition will be maintained as a subsidiary of the Borrower, such
     subsidiary shall have executed such documents as may be necessary to be a
     borrower hereunder or a guarantor of the Liabilities, as determined by the
     Lender, and, in any event, in order to secure the Liabilities the Lender
     shall have been granted a first priority security interest (subject to
     Permitted Encumbrances) in and Encumbrance on the ownership interests in
     such subsidiary and on such subsidiary's assets of the same nature as
     constitutes Collateral.

     "PERMITTED ENCUMBRANCES": The following:

         (i)    Encumbrances in favor of the Lender.

         (ii)   Purchase money security interests in Equipment to secure
                indebtedness permitted under Section 4.8.

         (iii)  Those Encumbrances (if any) listed on EXHIBIT 4.7, annexed
                hereto.

         (iv)   Encumbrances for taxes not yet delinquent or which are being
                contested in good faith by appropriate proceedings, provided
                that adequate reserves with respect thereto are maintained on
                the books of the Borrower in accordance with GAAP.

         (v)    Encumbrances in respect of property or assets imposed by law in
                the ordinary course of business, such as carrier's,
                warehousemen's, mechanics', materialmen's, repairmen's,
                landlord's or similar Encumbrances arising in the ordinary
                course of business which are (x) not overdue in accordance with
                customary business practices and consistent with the Borrower's
                prior practices, and do not in the aggregate materially detract
                from the value of such property or assets or materially impair
                the use thereof in the operation of the business of the
                Borrower, or (y) being contested in good faith by the Borrower
                by appropriate proceedings diligently instituted and conducted
                and without danger of any material risk to the Collateral, and
                adequate reserves or other appropriate provision as shall be
                required in conformity with GAAP shall have been made therefor.

                                       20
<PAGE>

         (vi)   Deposits to secure the performance of tenders, bids, sales,
                trade and government contracts, leases, statutory obligations,
                surety, appeal, and supersedeas bonds, warranty, advance
                payment, customs, performance and return-of-money bonds and
                other obligations of a like nature in the ordinary course of
                business (exclusive of obligations in respect of the payment of
                borrowed money) whether pursuant to statutory requirements,
                common law or consensual arrangements.

         (vii)  Easements, rights of way, leases, zoning or deed restrictions,
                licenses, covenants, building, restrictions, minor defects or
                irregularities in title and other similar real estate
                encumbrances incurred in the ordinary course of business that in
                the aggregate do not materially interfere with the conduct of
                the business of the Borrower.

         (viii) Any interest or title of a lessor under any lease entered into
                by the Borrower in the ordinary course of business covering only
                the assets so leased and not otherwise in violation of the Loan
                Documents.

         (ix)   Judgment liens with respect to judgments not in excess of
                $1,000,000 in the aggregate during the term of this Agreement
                and with respect to which lien execution has been stayed within
                sixty (60) days by appropriate judicial proceedings or the
                posting of an appeal bond or other security.

         (x)    Statutory and common law landlord's liens under leases to which
                the Borrower is a party.

     "PERMITTED INVESTMENTS": Any or all of the following:

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

         (b) marketable direct full faith and credit obligations of States of
     the United States or of political subdivisions or agencies; provided that
     such securities, as a group, may not, on the date of determination, have a
     remaining weighted average maturity of more than five years; and provided,
     further, that such obligations carry a rating of "A" or better by Moody's
     Investor Services, Inc. or Standard & Poor's Corporation;

         (c) certificates of deposit and bankers acceptances maturing within one
     year after the acquisition thereof issued by (i) Fleet National Bank or
     (ii) any commercial bank

                                       21
<PAGE>
     organized under the laws of the United States of America or of any
     political subdivision thereof the long term obligations of which are rated
     "A" or better by Moody's Investor Services, Inc. or Standard & Poor's
     Corporation;

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

         (e) tax-exempt bonds or notes which have a remaining maturity at the
     time of purchase of no more than five years issued by any State of the
     United States or the District of Columbia, or any political subdivision
     thereof; provided, that such obligations carry a rating of "A" or better by
     Moody's Investor Services, Inc. or Standard & Poor's Corporation;

     provided, however, that notwithstanding the foregoing, no such investments
     shall be permitted unless (i) no Revolving Credit Loans are then
     outstanding and (ii) such investments are pledged to the Lender as
     additional Collateral for the Liabilities pursuant to such agreements as
     may be reasonably required by the Lender.

     "PERMITTED SUBORDINATED INDEBTEDNESS": That Indebtedness of the Borrower
     (a) which is listed on EXHIBIT 4.8 annexed hereto and identified thereon as
     "Permitted Subordinated Indebtedness" (which Indebtedness the Lender hereby
     confirms is subordinated on terms satisfactory to it) and (b) which at all
     times shall be subject to subordination provisions (whether in a
     subordination agreement or otherwise), including, without limitation,
     standstill provisions, satisfactory to the Lender, together with
     amendments, restatements, renewals and extensions of the foregoing (other
     than subordination provisions which shall not be amended or otherwise
     modified without the prior written consent of the Lender) so long as such
     amendments, restatements, renewals and extensions are on terms no less
     favorable to the Lender and the Borrower as those in existence upon
     execution of the agreement being so amended, restated, renewed or extended.

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

     "PROCEEDS": Includes, without limitation, "Proceeds" as defined in the UCC
     (defined below), and each type of property described in Section 8.1 hereof.

                                       22
<PAGE>

     "RECEIPTS": All cash, cash equivalents, checks, and credit card slips,
     receipts and other Proceeds from any sale of the Collateral.

     "RECEIVABLES COLLATERAL": That portion of the Collateral which consists of
     Accounts, Accounts Receivable, General Intangibles, Chattel Paper,
     Instruments, Documents of Title, Documents, Investment Property, Payment
     Intangibles (as defined in the UCC), Letter-of-Credit Rights (as defined in
     the UCC), bankers' acceptances, and all other rights to payment.

     "REQUIREMENT OF LAW": As to any Person:

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

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

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

     "RESERVES": The following: Loan to Collateral Reserve; Availability
     Reserves; and Inventory Reserves.

     "REVOLVING CREDIT": Is defined in Section 2.1.

                                       23
<PAGE>

     "REVOLVING CREDIT CEILING": $25,000,000.00.

     "REVOLVING CREDIT COMMITMENT FEE": Is defined in Section 2.11.

     "REVOLVING CREDIT EARLY TERMINATION FEE": Is defined in Section 2.14.

     "REVOLVING CREDIT LOANS": Loans made under the Revolving Credit.

     "REVOLVING CREDIT NOTE": Is defined in Section 2.8.

     "REVOLVING CREDIT OBLIGATIONS": The aggregate of the Borrower's
     liabilities, obligations, and indebtedness of any character on account of
     or in respect to the Revolving Credit.

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

     "SUBLIMIT FACILITY:" Is defined in Section 2:2-22.

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

     "TERMINATION DATE": The earliest of (a) the Maturity Date; (b) the
     occurrence of any event described in Section 10.11, below; (c) the Lender's
     notice to the Borrower setting the Termination Date on account of the
     occurrence of any Event of Default other than as described in Section
     10.11, below; and (d) the Borrower's exercise of its early termination
     right as described in Section 2:2.14(c).

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

     "UNFUNDED CAPITAL EXPENDITURES": Any Capital Expenditure other than any
     Capital Expenditure financed with a third party and otherwise permitted by
     this Agreement.

     "UNUSED LINE FEE": Is defined in Section 2.13.

                                       24
<PAGE>
ARTICLE 2: - THE REVOLVING CREDIT:

     2.1. ESTABLISHMENT OF REVOLVING CREDIT.

         (a) The Lender hereby establishes a revolving line of credit (the
"REVOLVING CREDIT") in the Borrower's favor pursuant to which the Lender,
subject to, and in accordance with, this Agreement, shall make loans and
advances and otherwise provide financial accommodations to and for the account
of the Borrower as provided herein.

         (b) Loans, advances, and financial accommodations under the Revolving
Credit shall be made with reference to the Borrowing Base and shall be subject
to Availability. The Borrowing Base and Availability shall be determined by the
Lender by reference to Borrowing Base Certificates furnished as provided in
Section 5.4, below, and shall be subject to the following:

                (i) Such determination shall take into account those Reserves as
     the Lender may determine as being applicable thereto.

                (ii) The Cost of Eligible Inventory.

                (iii) The Cost of Eligible In-Transit Inventory.

                (iv) The Cost of Eligible L/C Inventory.

         (c) The proceeds of borrowings under the Revolving Credit shall be used
solely in accordance with the Business Plan for working capital purposes of the
Borrower, for its Capital Expenditures, for the payment of those dividends
permitted under Section 4:4.20(a)(ii), and for payment of Permitted Subordinated
Indebtedness, all solely to the extent permitted by this Agreement. No proceeds
of a borrowing under the Revolving Credit may be used, nor shall any be
requested, with a view towards the accumulation of any general fund or funded
reserve of the Borrower other than in the ordinary course of the Borrower's
business and consistent with the provisions of this Agreement.

     2.2. ADVANCES IN EXCESS OF BORROWING BASE (OVERLOANS).

         (a) The Lender does not have any obligation to make any loan or
advance, or otherwise to provide any credit to or for the benefit of the
Borrower where the result of such loan, advance, or credit is an Overloan.

         (b) The Lender's providing of an Overloan on any one occasion does not
affect the obligations of the Borrower hereunder (such as the Borrower's
obligation to immediately repay any amount which otherwise constitutes an
Overloan) nor obligate the Lender to do so on any other occasion.

     2.3. RISKS OF VALUE OF COLLATERAL. The Lender's reference to a given asset
in connection with the making of loans, credits, and advances and the providing
of financial accommodations under the Revolving Credit and/or the monitoring of
compliance with the provisions hereof shall not be deemed a determination by the
Lender relative to the actual value of the asset in question. All risks
concerning the

                                       25
<PAGE>

value of the Collateral are and remain upon the Borrower. All Collateral secures
the prompt, punctual, and faithful performance of the Liabilities whether or not
relied upon by the Lender in connection with the making of loans, credits, and
advances and the providing of financial accommodations under the Revolving
Credit.

     2.4. COMMITMENT TO MAKE REVOLVING CREDIT LOANS AND SUPPORT LETTERS OF
CREDIT.

     Subject to the provisions of this Agreement, the Lender shall make a loan
or advance under the Revolving Credit and shall use its reasonable efforts to
have an L/C issued for the account of the Borrower, in each instance if duly and
timely requested by the Borrower as provided herein provided that:

         (a) The Borrowing Base will not be exceeded.

         (b) The amount of the loan or advance or L/C so requested does not
exceed Availability.

         (c) The Revolving Credit has not been suspended as provided in Section
2:2.5(h).

     2.5. REVOLVING CREDIT LOAN REQUESTS.

         (a) Requests for loans and advances under the Revolving Credit or for
the continuance or conversion of an interest rate applicable to a Revolving
Credit Loan, may be requested by the Borrower in such manner as may from time to
time be acceptable to the Lender.

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

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

                (ii) If such Revolving Credit Loan is to be, or is to be
     continued as, or converted to, a Libor Loan: By 1:00PM Three (3) Libor
     Business Days before the commencement of any new Interest Period or the end
     of the then applicable Interest Period. Libor Loans and conversions to
     Libor Loans shall each be not less than $1,000,000 and in increments of
     $500,000 in excess of such minimum.

                (iii) Any Libor Loan which matures while an Event of Default
     shall have occurred and be continuing, shall be converted, at the option of
     the Lender, to a Base Margin Loan notwithstanding any notice from the
     Borrower that such Loan is to be continued as a Libor Loan.

         (c) Any request for a Revolving Credit Loan or for the continuance or
conversion of an interest rate applicable to a Revolving Credit Loan which is
made after the applicable deadline

                                       26
<PAGE>
therefor, as set forth above, shall be deemed to have been made at the opening
of business on the then next Business Day or Libor Business Day, as applicable.

         (d) Notwithstanding the foregoing and the provisions of Section 2.6(a)
and 2.6(b) below, if, but only if, during each of the Fifteen (15) days
immediately preceding the day on which a request is made for a loan under the
Revolving Credit or for the continuance or conversion of an interest rate
applicable to a Revolving Credit Loan, there has been no unpaid principal
balance in the Loan Account on account of loans and advances under the Revolving
Credit, the loan or the continuance or conversion so requested shall be made
(subject to all other provisions of this Agreement) no later than the next
Business Day after (and not counting) the day on which the loan or continuance
or conversion otherwise would have been made as provided above.

         (e) The Borrower may request that the Lender cause the issuance of
L/C's for the account of the Borrower as provided in Section 2.17.

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

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

                (i) There has been no material adverse change in the Borrower's
     financial condition from the most recent financial information furnished
     Lender pursuant to this Agreement (specifically excluding a potential
     one-time loss in taxable income, as reflected in the Business Plan,
     attributable solely to the Borrower's conversion from and after December
     31, 1999 to the retail method of accounting for its Inventory).

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

                (iii) The Borrower has made sufficient provisions for the
     payment of its sales tax liabilities.

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

                (v) No Suspension Event is then extant.

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

                (i) The Lender may suspend the Revolving Credit immediately.

                                       27
<PAGE>
                (ii) The Lender shall not be obligated, during such suspension,
     to make any loans or advance, or to provide any financial accommodation
     hereunder or to seek the issuance of any L/C, and the Lender may suspend
     the right of the Borrower to request any Libor Loan or to convert any Base
     Margin Loan to a Libor Loan.

     2.6. MAKING OF REVOLVING CREDIT LOANS.

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

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

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

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

         (c) There shall not be any recourse to or liability of the Lender or
any Revolving Credit Lender, on account of:

                (i) Any delay in the making of any loan or advance requested
     under the Revolving Credit.

                (ii) Any delay by any bank or other depository institution in
     treating the proceeds of any such loan or advance as collected funds.

                (iii) Any delay in the receipt, and/or any loss, of funds which
     constitute a loan or advance under the Revolving Credit, the wire transfer
     of which was properly initiated by the Lender in accordance with wire
     instructions provided to the Lender by the Borrower.

     2.7. THE LOAN ACCOUNT.

         (a) An account ("LOAN ACCOUNT") shall be opened on the books of the
Lender in which a record shall be kept of all loans and advances made under the
Revolving Credit.

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

         (c) All credits against the Liabilities shall be conditional upon final
payment to the Lender of the items giving rise to such credits. The amount of
any item credited against the Liabilities

                                       28
<PAGE>
which is charged back against the Lender for any reason or is not so paid shall
be a Liability and shall be added to the Loan Account, whether or not the item
so charged back or not so paid is returned.

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

         (e) The Lender, without the request of the Borrower, may advance under
the Revolving Credit any interest, fee, service charge, or other payment to
which Lender is entitled from the Borrower pursuant hereto and may charge the
same to the Loan Account notwithstanding that such amount so advanced may result
in Borrowing Base's being exceeded. Such action on the part of the Lender shall
not constitute a waiver of the Lender's rights and Borrower's obligations under
Section 2:2.9(b). Any amount which is added to the principal balance of the Loan
Account as provided in this Section 2:2.7(e) shall bear interest at the interest
rate then and thereafter applicable to loans and advances under the Revolving
Credit.

         (f) Any statement rendered by the Lender to the Borrower concerning the
Liabilities shall be considered correct and accepted by the Borrower and shall
be conclusively binding upon the Borrower in the absence of manifest error
unless the Borrower provides the Lender with written objection thereto within
twenty (20) days from the mailing of such statement, which written objection
shall indicate, with particularity, the reason for such objection. The Loan
Account and the Lender's books and records concerning the loan arrangement
contemplated herein and the Liabilities shall be prima facie evidence and proof
of the items described therein.

     2.8. THE REVOLVING CREDIT NOTE. The Borrower's obligation to repay loans
and advances under the Revolving Credit, with interest as provided herein, shall
be evidenced by a note (the "REVOLVING CREDIT NOTE") in the form of EXHIBIT 2.8,
annexed hereto, executed by the Borrower. Neither the original nor a copy of the
Revolving Credit Note shall be required, however, to establish or prove any
Liability. In the event that the Revolving Credit Note is ever lost, mutilated,
or destroyed, the Borrower shall execute a replacement thereof and deliver such
replacement to the Lender upon delivery by the Lender of an affidavit of loss
and customary indemnity.

     2.9. PAYMENT OF THE LOAN ACCOUNT.

         (a) The Borrower may repay all or any portion of the principal balance
of the Loan Account from time to time until the Termination Date.

                                       29
<PAGE>

         (b) The Borrower, without notice or demand from the Lender, shall pay
the Lender that amount, from time to time, which is necessary so that there is
no Overloan outstanding.

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

         (d) The Lender shall endeavor to cause the application of payments (if
any), pursuant to Sections 2:2-9(a) and 2:2-9(b) against Libor Loans then
outstanding in such manner as results in the least cost to the Borrower, but
shall not have any affirmative obligation to do so nor liability on account of
the Lender's failure to have done so. In no event shall action or inaction taken
by the Lender excuse the Borrower from any indemnification obligation under
Section 2:2-9(e).

         (e) The Borrower shall indemnify the Lender and hold the Lender
harmless from and against any loss, cost or expense (including loss of
anticipated profits and amounts payable by the Lender on account of "breakage
fees" (so-called)) which the Lender may sustain or incur (including, without
limitation, by virtue of acceleration after the occurrence of any Event of
Default) as a consequence of the following:

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

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

                (iii) The making of any payment on a Libor Loan or the making of
     any conversion of any such Libor Loan to a Base Margin Loan on a day that
     is not the last day of the applicable Interest Period with respect thereto.

     2.10. INTEREST ON REVOLVING CREDIT LOANS.

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

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

         (c) Subject to, and in accordance with, the provisions of this
Agreement, the Borrower may cause all or a part of the unpaid principal balance
of the Loan Account to bear interest at the Base Margin Rate or the Libor Rate
as specified from time to time by the Borrower by notice to the Lender.

                                       30
<PAGE>

         (d) For ease of reference and administration, each part of the Loan
Account which bears interest at the same rate of interest and for the same
Interest Period is referred to herein as if it were a separate "Revolving Credit
Loan".

         (e) The Borrower shall not select, renew, or convert any interest rate
for a Revolving Credit Loan such that, in addition to interest at the Base
Margin Rate, there are more than three (3) Libor Rates applicable to the
Revolving Credit Loans at any one time.

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

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

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

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

         (g) Following the occurrence of any Event of Default (and whether or
not the Lender exercises the Lender's rights on account thereof), all Revolving
Credit Loans shall bear interest, at the option of the Lender at a rate which is
the aggregate of the rate applicable to Base Margin Loans plus Two Percent (2%)
per annum.

     2.11. REVOLVING CREDIT COMMITMENT FEE; AMENDMENT FEE.

         (a) As compensation for the Lender's commitment to make loans and
advances to the Borrower under the Revolving Credit and as compensation for the
Lender's maintenance of sufficient funds available for such purpose, the Lender
has earned, and the Borrower has paid in full, the "REVOLVING CREDIT COMMITMENT
FEE" (so referred to herein) of $250,000.00.

         (b) The Revolving Credit Commitment Fee (net of the NonRefundable
Deposit previously paid to the Lender) shall be paid on the Initial Funding
Date.

         (c) In consideration of the Lender agreeing to amend and restate the
Original Agreement and the Lender's commitment to make loans and advances to the
Borrower under the Revolving Credit, the Borrower shall pay to the Lender the
"AMENDMENT FEE" (so referred to herein) of $125,000.00 dollars. The Amendment
Fee shall be fully earned and payable on the Amendment Closing Date and shall
not be subject to refund or rebate under any circumstances.

     2.12. FACILITY FEE.

         (a) In addition to any other fee or expense to be paid by the Borrower
on account of the Revolving Credit, the Borrower shall pay the Lender the
"FACILITY FEE" (so referred to herein) of $180,000.00, which has been fully
earned by the Lender's execution of this Agreement (of which the Lender
acknowledges receipt of $90,000 prior to the Amendment Closing Date).

                                       31
<PAGE>
         (b) Subject to this Section 2.12, the Facility Fee shall be paid to the
Lender in monthly installments of $3,000.00 each, as follows:

                (i) A proration of such monthly installments shall be paid out
     of the first advance under the Revolving Credit on the Initial Funding Date
     for the period beginning with the date on which this Agreement is executed
     and ending on the last day of the month of such Initial Funding Date.

                (ii) A monthly installment shall be paid on the first day of the
     month next following the Initial Funding Date and on the first day of each
     month thereafter, until the entire Facility Fee has been paid.

         (c) Upon the termination of the Revolving Credit and upon the
occurrence of any Event of Default described in Section 10.11 and at the option
of the Lender upon the occurrence of any other Event of Default, any remaining
installments of the Facility Fee shall be immediately due and payable.

     2.13. UNUSED LINE FEE. In addition to any other fee to be paid by the
Borrower on account of the Revolving Credit, the Borrower shall pay the Lender
the "UNUSED LINE FEE" (so referred to herein) of 0.25% per annum of the average
difference, during the month just ended (or relevant period with respect to the
payment being made on the Termination Date) between the Revolving Credit Ceiling
and the unpaid principal balance of the Loan Account. The Unused Line Fee shall
be paid in arrears, on the first day of each month after the execution of this
Agreement and on the Termination Date.

     2.14. EARLY TERMINATION FEE.

         (a) In the event that the Termination Date occurs, for any reason prior
to the Maturity Date, the Borrower shall pay to the Lender the "REVOLVING CREDIT
EARLY TERMINATION FEE" (so referred to herein) equal to the following percentage
of the Revolving Credit Ceiling (based upon the highest amount of the Revolving
Credit Ceiling during the six (6) month period immediately preceding the
Termination Date as determined by Lender) and payable on the Termination Date:

                     REVOLVING CREDIT EARLY TERMINATION FEE

<Table>
<Caption>

     TERMINATION DATE                            PERCENTAGE
     ----------------                            ----------
<S>                                              <C>
     On or prior to December 31, 2003            0.50%
     After December 31, 2003                        0%
</Table>

                                       32
<PAGE>

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

         (c) At the Borrower's election, which may be exercised only prior to
the occurrence of any Event of Default, the Borrower may provide the Lender with
irrevocable written notice setting the Termination Date, which date shall be at
least fifteen (15) days but not more than sixty (60) days after the giving of
such notice.

    2.15 CONCERNING FEES.

         (a) In addition to any other right to which the Lender is then entitled
on account thereof, the Lender may assess an additional fee payable by the
Borrower on account of the accommodation, from time to time, by the Lender of
the Borrower's request that the Lender depart or dispense with one or more of
the administrative provisions of this Agreement and/or the Borrower's failure to
comply with any of such provisions.

                (i) By way of non-exclusive example, the Lender may assess a fee
     on account of any of the following:

                     (A) The Borrower's failure to pay that amount which is
         necessary so that the principal balance of the Loan Account does not
         exceed Borrowing Base (as required under Section 2:2.9(b) hereof).

                     (B) The providing of a loan or advance under the Revolving
         Credit or charging of the Loan Account such that an Overloan is made.

                     (C) The foreshortening of any of the time frames with
         respect to the making of Revolving Credit Loans as set forth in Section
         2.5.

                     (D) The Borrower's failure to provide a financial statement
         or report within the applicable time frame provided for such report
         under Article 5: hereof.

                (ii) The inclusion of the foregoing right on the part of the
     Lender to assess a fee does not constitute an obligation, on the part of
     the Lender, to waive any provision of this Agreement under any
     circumstances. The assessment of any such fee in any particular
     circumstance shall not constitute the Lender's waiver of any breach of this
     Agreement on account of which such fee was assessed nor a course of action
     on which the Borrower may rely.

         (b) The Borrower shall not be entitled to any credit, rebate or
repayment of any fee earned by the Lender pursuant to this Agreement or any Loan
Document notwithstanding any termination of this Agreement or suspension or
termination of the Lender's obligation to make loans and advances hereunder.

                                       33
<PAGE>
     2.16. LENDER'S DISCRETION.

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

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

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

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

                (iv) Constitutes a Suspension Event.

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

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

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

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

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

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

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

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

     2.17. PROCEDURES FOR ISSUANCE OF L/C'S.

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

                                       34
<PAGE>
         (b) The Lender will use reasonable efforts to cause the issuance of any
L/C so requested by the Borrower, provided that, at the time that the request is
made, the Revolving Credit has not been suspended as provided in Section
2:2.5(h) and if so issued:

                (i) The aggregate Stated Amount of all L/C's then outstanding,
     does not exceed Ten Million Dollars and No Cents ($10,000,000.00).

                (ii) The expiry of the L/C is not later than the earlier of
     Thirty (30) days prior to the Maturity Date or the following:

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

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

                (iii) Borrowing Base would not be exceeded.

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

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

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

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

         (e) The Borrower shall reimburse the Issuer for the amount of any
honoring of a drawing under an L/C on the same day on which such honoring takes
place. The Lender, without the request of the Borrower, may advance under the
Revolving Credit (and charge to the Loan Account) the amount of any honoring of
any L/C and other amount for which the Borrower, the Issuer, or the Lender
becomes obligated on account of, or in respect to, any L/C. Such advance shall
be made whether or not a Suspension Event is then extant or such advance would
result in Borrowing Base's being exceeded. Such action shall not constitute a
waiver of the Lender's rights under Section 2:2.9(b) hereof.

         2.18. FEES FOR L/C'S.

         (a) The Borrower shall pay to the Lender a fee, on account of L/C's,
the issuance of which had been procured by the Lender, monthly in arrears, and
on the Termination Date and on the End Date, equal to 1.75% per annum of the
weighted average Stated Amount of all L/C's outstanding during the period in
respect of which such fee is being paid except that, following the occurrence of
any Event of Default, such fee shall be increased by two percent (2%) per annum.

         (b) In addition to the fee to be paid as provided in Subsection
2:2.18(a), above, the Borrower shall pay to the Lender (or to the Issuer, if so
requested by Lender), on demand, all standard issuance, processing, negotiation,
amendment, and administrative fees and other amounts charged by the Issuer on
account of, or in respect to, any L/C.

         (c) If any change in any law, executive order or regulation, or any
directive of any administrative or governmental authority (whether or not having
the force of law), or in the interpretation

                                       35
<PAGE>

thereof by any court or administrative or governmental authority charged with
the administration thereof, shall either:

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

                (ii) impose on any Issuer any other condition or requirements
     relating to any such letters of credit;

and the result of any event referred to in Section 2:2.18(c)(i) or
2:2.18(c)(ii), above, shall be to increase the cost to the Lender or to any
Issuer of issuing or maintaining any L/C (which increase in cost shall be the
result of such Issuer's reasonable allocation among that Issuer's letter of
credit customers of the aggregate of such cost increases resulting from such
events), then, upon demand by the Lender and delivery by the Lender to the
Borrower of a certificate of an officer of the Lender or the subject Issuer
describing such change in law, executive order, regulation, directive, or
interpretation thereof, its effect on such Issuer, and the basis for determining
such increased costs and their allocation, the Borrower shall immediately pay to
the Lender, from time to time as specified by the Lender, such amounts as shall
be sufficient to compensate the Lender or the subject Issuer for such increased
cost. Any Issuer's determination of costs incurred under Section 2:2.18(c)(i) or
2:2.18(c)(ii), above, and the allocation, if any, of such costs among the
Borrower and other letter of credit customers of such Issuer, if done in good
faith and made on an equitable basis and in accordance with such officer's
certificate, shall be conclusive and binding on the Borrower.

     2.19. CONCERNING L/C'S.

         (a) None of the Issuer, the Issuer's correspondents, or any advising,
negotiating, or paying bank with respect to any L/C shall be responsible in any
way for:

                (i) The performance by any beneficiary under any L/C of that
     beneficiary's obligations to the Borrower.

                (ii) The form, sufficiency, correctness, genuineness, authority
     of any person signing; falsification; or the legal effect of; any documents
     called for under any L/C if (with respect to the foregoing) such documents
     on their face appear to be in order.

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

                                       36
<PAGE>

         (c) Unless otherwise agreed to, in the particular instance, the
Borrower hereby authorizes any Issuer to:

                (i)     Select an advising bank, if any.

                (ii)    Select a paying bank, if any.

                (iii)   Select a negotiating bank.

         (d) All directions, correspondence, and funds transfers relating to any
L/C are at the risk of the Borrower. The Issuer shall have discharged the
Issuer's obligations under any L/C which, or the drawing under which, includes
payment instructions, by the initiation of the method of payment called for in,
and in accordance with, such instructions (or by any other commercially
reasonable and comparable method). Neither the Lender nor the Issuer shall have
any responsibility for any inaccuracy, interruption, error, or delay in
transmission or delivery by post, telegraph or cable, or for any inaccuracy of
translation.

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

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

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

                (i) Any lack of validity or enforceability or restriction,
     restraint, or stay in the enforcement of this Agreement, any L/C, or any
     other agreement or instrument relating thereto.

                (ii) The Borrower's consent to any amendment or waiver of, or
     consent to the departure from, any L/C.

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

                (iv) Any good faith honoring of a drawing under any L/C, which
     drawing possibly could have been dishonored based upon a strict
     construction of the terms of the L/C.

     2.20. REFERENCES TO ORIGINAL AGREEMENT. The terms "Loan and Security
Agreement," "this Agreement," "Loan Agreement," and similar references as used
in the documents, instruments and agreements executed and/or delivered in
connection with the Original Agreement, shall mean the Original Agreement as
amended and restated hereby in its entirety, and each of such documents,
instruments and agreements is hereby so amended. Except as specifically agreed
herein, each of the Loan

                                       37
<PAGE>
Documents executed and delivered in connection with the Original Agreement are
hereby ratified and confirmed and shall remain in full force and effect in
accordance with their terms.

     2.21. CHANGED CIRCUMSTANCES.

         (a) The Lender may advise the Borrower that the Lender has made the
good faith determination (which determination shall be final and conclusive) of
any of the following:

                (i) Adequate and fair means do not exist for ascertaining the
     rate for Libor Loans.

                (ii) The continuation of or conversion of any Revolving Credit
     Loan to a Libor Loan has been made impracticable or unlawful by the
     occurrence of a contingency that materially and adversely affects the
     applicable market or the compliance by the Lender or any Revolving Credit
     Lender in good faith with any Applicable Law.

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

         (b) In the event that the Lender advises the Borrower of an occurrence
described in Section 2:2-21(a), then, until the Lender notifies the Borrower
that the circumstances giving rise to such notice no longer apply:

                (i) The obligation of the Lender to make Libor Loans or to
     permit the Borrower to select the Libor Rate as otherwise applicable to any
     Revolving Credit Loans shall be suspended.

                (ii) Any notice which the Borrower had given the Lender with
     respect to any Libor Loan, the time for action with respect to which has
     not occurred prior to the Lender's having given notice pursuant to Section
     2:2-21, shall be deemed at the option of the Lender to not having been
     given.

     2.22. SUBLIMIT FACILITY.

     In order to expedite the purchase by the Borrower of one or more Sam &
Libby Stores on or before April 1, 2002 (the "SUBLIMIT FACILITY CLOSING DATE"),
the Lender agrees to make available to the Borrower up to $2,500,000 in
Revolving Credit Loans (the "SUBLIMIT FACILITY") on the following terms and
conditions:

     (a) The Sublimit Facility shall terminate, and the aggregate of Revolving
Credit Loans outstanding under the Sublimit Facility and any remaining
installments of the Sublimit Facility Fee (hereinafter referred to) shall be due
and payable in full, on the date which is the earliest to occur of (i)

                                       38
<PAGE>
February 20, 2003, (ii) the date of the occurrence of the IPO and (iii) the
Termination Date. The Sublimit Facility is a part of the Revolving Credit and
does not, and shall not be deemed to, increase the Revolving Credit Ceiling.
Other than as specifically set forth in this Section 2.22, Revolving Credit
Loans under the Sublimit Facility shall be treated as are all other Revolving
Credit Loans under this Agreement including, without limitation, Section 2.10
hereof; provided, however, that Revolving Credit Loans under the Sublimit
Facility shall not be subject to the Borrowing Base limitations set forth in
this Agreement regarding Revolving Credit Loans (including, without limitation,
Sections 2.1(b) and 2.4(a) hereof). The Borrower has the right to terminate the
Sublimit Facility at any time upon written notice to the Lender accompanied by
payment in full of all Revolving Credit Loans outstanding under the Sublimit
Facility and the applicable amount of the Sublimit Facility Fee referred to in
Section 2.22(b).

         (b) In addition to any other fee or expense to be paid by the Borrower
on account of the Revolving Credit, a "SUBLIMIT FACILITY FEE" (so referred to
herein) of not more than $400,000.00 shall be payable by the Borrower to the
Lender as follows:

                (i) $200,000 shall be fully earned by the Lender on the Sublimit
                Facility Closing Date for making the Sublimit Facility available
                to the Borrower (and regardless of whether or not any Revolving
                Credit Loans are made at any time under the Sublimit Facility)
                and, subject to the rest of this Section 2.22, shall be paid to
                the Lender in monthly installments of (x) $16,667 each
                commencing with the first day of the month next following the
                Sublimit Facility Closing Date and on the first day of each of
                the next five (5) months thereafter (the Lender confirms that as
                of the Amendment Closing Date it has received Sublimit Facility
                Fee payments in the aggregate amount of $66,668), and (y)
                $50,000 each on September 1, 2002 and October 1, 2002, until the
                aggregate amount of $200,000 has been paid; and

                (ii) Commencing with November 1, 2002, if any Revolving Credit
                Loans shall be outstanding under the Sublimit Facility during
                the preceding month, the Sublimit Facility Fee payable on the
                first day of the next succeeding month shall be in the amount of
                $50,000; provided, however, that in any event, the aggregate
                Sublimit Facility Fee shall not exceed $400,000.

                (c) The Borrower shall repay Revolving Credit Loans, if any,
outstanding under the Sublimit Facility such that (i) Revolving Credit Loans
outstanding under the Sublimit Facility shall not exceed (x) $2,300,000 as of
December 31, 2002 and (y) $2,100,000 as of January 31, 2003 and (ii) no
Revolving Credit Loans shall be outstanding, and the Sublimit Facility shall be
terminated, as of February

                                       39
<PAGE>
20, 2003. The Lender agrees the first Revolving Credit Loans to which it shall
apply collected balances in accordance with Section 7.5 hereof shall be
Revolving Credit Loans under the Sublimit Facility, if any.

         (d) For the Fiscal year of the Borrower ending January 4, 2003, the
remainder of the calculation EBITDA of the Borrower minus Capital Expenditures
of the Borrower, in each case during such Fiscal year, shall be a positive
number; provided, however, that the foregoing covenant shall be deemed deleted
and of no further force and effect upon the termination of the Sublimit Facility
in accordance with Section 2.22(a) above including, without limitation, upon the
occurrence of the IPO.

         (e) Upon the termination of the Revolving Credit and upon the
occurrence of any Event of Default described in Section 10.11 and at the option
of the Lender upon the occurrence of any other Event of Default, any remaining
installments of the Sublimit Facility Fee shall be immediately due and payable,
it being understood that, in any event, an aggregate of not less than $200,000
shall be due and payable as a Sublimit Facility Fee hereunder.

ARTICLE 3: - CONDITIONS PRECEDENT:

     As a condition to the effectiveness of this Agreement, the establishment of
the Revolving Credit, and the making of the first loan under the Revolving
Credit, each of the documents respectively described in Sections 3.1 through and
including 3.3, (each in form and substance satisfactory to the Lender) shall
have been delivered to the Lender, and the conditions respectively described in
Sections 3.5 through and including 3.8, shall have been satisfied:

     3.1 CORPORATE DUE DILIGENCE.

         (a) A Certificate of corporate good standing issued by the Secretary of
State of Missouri.

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

         (c) A Certificate of the Borrower's Secretary of the due adoption,
continued effectiveness, and setting forth the texts of, each corporate
resolution adopted in connection with the establishment of the loan arrangement
contemplated by the Loan Documents and attesting to the true signatures of each
Person authorized as a signatory to any of the Loan Documents.

     3.2. OPINION. An opinion of counsel to the Borrower in form and substance
satisfactory to the Lender.

                                       40
<PAGE>
     3.3. OFFICERS' CERTIFICATES. Certificates executed by the Chief Executive
Officer and the Chief Financial Officer of the Borrower and stating that the
representations and warranties made by the Borrower to the Lender in the Loan
Documents are true and complete as of the date of such Certificate, and that no
event has occurred which is or which, solely with the giving of notice or
passage of time (or both) would be an Event of Default.

     3.4. ADDITIONAL DOCUMENTS. Such additional instruments and documents as the
Lender or its counsel reasonably may require or request including, without
limitation, the following:

         (a) Those notifications and agreements described in Section 7:7.1(b)
(which relates to cash management).

         (b) Confirmation from each Guarantor that they have had the opportunity
to review this Agreement and that the applicable Guaranty remains in full force
and effect and is applicable to the Liabilities.

         (c) Exhibits, updated if and as necessary to be accurate as of the
Amendment Closing Date.

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

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

     3.7. NO SUSPENSION EVENT. No Suspension Event shall then exist.

     3.8. NO ADVERSE CHANGE. No event shall have occurred or failed to occur,
which occurrence or failure is or could have a materially adverse effect upon
the Borrower's financial condition when compared with such financial condition
at January 5, 2002.

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

                                       41
<PAGE>

ARTICLE 4: - GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:

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

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

     4.2. DUE ORGANIZATION. CORPORATE AUTHORIZATION. NO CONFLICTS.

         (a) The Borrower presently is and shall hereafter remain in good
standing as a Missouri corporation and is and shall hereafter remain duly
qualified and in good standing in every other State in which, by reason of the
nature or location of the Borrower's assets or operation of the Borrower's
business, such qualification may be necessary, except where the failure to so
qualify would have no more than a de minimis adverse effect on the business or a
assets of the Borrower.

         (b) Each Affiliate is listed on EXHIBIT 4.2, annexed hereto. The
Borrower shall provide the Lender with prior written notice of any entity's
becoming or ceasing to be an Affiliate.

         (c) The Borrower shall not change its State of incorporation nor its
taxpayer identification number.

         (d) The Borrower has all requisite corporate power and authority to
execute and deliver all Loan Documents to which the Borrower is a party and has
and will hereafter retain all requisite corporate power to perform all
Liabilities.

         (e) The execution and delivery by the Borrower of each Loan Document to
which it is a party; the Borrower's consummation of the transactions
contemplated by such Loan Documents (including, without limitation, the creation
of Collateral Interests by the Borrower to secure the Liabilities); the
Borrower's performance under those of the Loan Documents to which it is a party;
the borrowings hereunder; and the use of the proceeds thereof:

               (i) Have been duly authorized by all necessary corporate action.

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

               (iii) Will not result in the creation or imposition of, or the
     obligation to create or impose, any Encumbrance upon any assets of the
     Borrower pursuant to any Requirement of Law or obligation, except pursuant
     to the Loan Documents.

                                       42
<PAGE>

         (f) The Loan Documents have been duly executed and delivered by
Borrower and are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their respective terms.

     4.3. TRADE NAMES.

         (a) EXHIBIT 4.3, annexed hereto, is a listing of:

               (i) All names under which the Borrower conducted its business
     during the prior five (5) years.

               (ii) All entities and/or persons with whom the Borrower
     consolidated or merged, or from whom the Borrower ever acquired in a single
     transaction or in a series of related transactions substantially all of
     such entity's or person's assets during the prior five (5) years.

         (b) The Borrower will provide the Lender with not less than twenty-one
(21) days prior written notice (with reasonable particularity) of any change to
the Borrower's name from that under which the Borrower is conducting its
business at the execution of this Agreement and will not effect such change
unless the Borrower is then in compliance with all provisions of this Agreement.

     4.4. INFRASTRUCTURE.

         (a) The Borrower has and will maintain a sufficient infrastructure to
conduct its business as presently conducted and as contemplated to be conducted
as described in the Business Plan.

         (b) The Borrower owns and possesses, or has the right to use (and will
hereafter own, possess, or have such right to use) all patents, industrial
designs, trademarks, trade names, trade styles, brand names, service marks,
logos, copyrights, trade secrets, know-how, confidential information, and other
intellectual or proprietary property of any third Person necessary for the
Borrower's conduct of the Borrower's business.

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

     4.5. INTENTIONALLY OMITTED.

     4.6. LOCATIONS.

         (a) The Collateral, and the books, records, and papers of Borrower
pertaining thereto, are kept and maintained solely at the following locations:

                                       43
<PAGE>

               (i) The Borrower's chief executive offices at 2815 Scott Avenue,
     Suite C, St. Louis, Missouri 63103.

               (ii) Those locations which are listed on EXHIBIT 4.6, annexed
     hereto, which EXHIBIT includes, with respect to each such location, the
     name and address of the landlord on the Lease which covers such location
     (or an indication that the Borrower owns the subject location) and of all
     service bureaus with which any such records are maintained and the names
     and addresses of each of the Borrower's landlords.

         (b) The Borrower shall not remove any of the Collateral from said chief
executive office or those locations listed on EXHIBIT 4.6 except for the
following purposes:

               (i) To accomplish sales of Inventory in the ordinary course of
     business.

               (ii) To move Inventory from one such location to another such
     location.

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

         (c) Except as contemplated by the Business Plan, the Borrower will not:

               (i) Execute any Lease or alter, modify, or amend any Lease in any
     material manner.

               (ii) Commit to, or open or close, any location at which the
     Borrower maintains, offers for sale, or stores any of the Collateral,
     subject to the condition that immediately prior to the earliest date on
     which the Borrower becomes legally obligated on account of its leasing of
     the subject new Store, no Suspension Event is extant, and no Suspension
     Event will occur by reason of the Borrower's so becoming obligated.

         (d) Except as otherwise disclosed pursuant to, or permitted by, this
Section 4.6, no tangible personal property of the Borrower is in the care or
custody of any third party or stored or entrusted with a bailee or other third
party and none shall hereafter be placed under such care, custody, storage, or
entrustment.

     4.7. TITLE TO ASSETS.

         (a) The Borrower is, and shall hereafter remain, the owner of the
Collateral free and clear of all Encumbrances except Permitted Encumbrances.

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

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

                                       44
<PAGE>
               (i) Equipment which is merely incidental to the conduct of the
     Borrower's business.

               (ii) Equipment subject to an agreement, substantially in the form
     of EXHIBIT 4:4.7(c)(ii) annexed hereto, with the third party which has an
     interest in such Equipment.

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

     4.8. INDEBTEDNESS. The Borrower does not and shall not hereafter have any
Indebtedness with the exceptions of:

         (a) Any Indebtedness on account of the Revolving Credit.

         (b) The Indebtedness (if any) listed on EXHIBIT 4.8, annexed hereto.

         (c) Permitted Subordinated Indebtedness.

         (d) Purchase money Indebtedness not otherwise described in this Section
4.8 and capital leases for the acquisition of Equipment as provided in the
Business Plan.

     4.9. INSURANCE.

         (a) EXHIBIT 4.9, annexed hereto, is a schedule of all insurance
policies owned by the Borrower or under which the Borrower is the named insured.
Each of such policies is in full force and effect. Neither the issuer of any
such policy nor the Borrower is in default or violation of any such policy.

         (b) The Borrower shall have and maintain at all times insurance
covering such risks, in such amounts, containing such terms, in such form, for
such periods, and written by such companies as may be satisfactory to the
Lender.

         (c) All insurance carried by the Borrower shall provide for a minimum
of Sixty (60) days' written notice of cancellation to the Lender and all such
insurance which covers the Collateral shall include an endorsement in favor of
the Lender, which endorsement shall provide that the insurance, to the extent of
the Lender's interest therein, shall not be impaired or invalidated, in whole or
in part, by reason of any act or neglect of the Borrower or by the failure of
the Borrower to comply with any warranty or condition of the policy.

         (d) The coverage reflected on EXHIBIT 4.9 presently satisfies the
foregoing requirements, it being recognized by the Borrower, however, that such
requirements may change hereafter to reflect changing circumstances.

                                       45
<PAGE>

         (e) The Borrower shall furnish the Lender from time to time with
certificates or other evidence satisfactory to the Lender regarding compliance
by the Borrower with the foregoing requirements.

         (f) In the event of the failure by the Borrower to maintain insurance
as required herein, the Lender, at its option, may obtain such insurance,
provided, however, the Lender's obtaining of such insurance shall not constitute
a cure or waiver of any Event of Default occasioned by the Borrower's failure to
have maintained such insurance.

         (g) The Borrower shall advise the Lender of each claim in excess of
$50,000.00 made by the Borrower under any policy of insurance which covers the
Collateral and will permit the Lender, at the Lender's option in each instance,
to the exclusion of the Borrower, to conduct the adjustment of each such claim
(and of all claims following the occurrence of any Suspension Event). The
Borrower hereby appoints the Lender as the Borrower's attorney in fact to
obtain, adjust, settle, and cancel any insurance described in this section and
to endorse in favor of the Lender any and all drafts and other instruments with
respect to such insurance. This appointment, being coupled with an interest, is
irrevocable until this Agreement is terminated by a written instrument executed
by a duly authorized officer of the Lender. The Lender shall not be liable on
account of any exercise pursuant to said power except where there has been a
final judicial determination (in a proceeding in which the Lender had an
opportunity to be heard) that such exercise was grossly negligent manner or in
willful misconduct. The Lender may apply any proceeds of such insurance against
the Liabilities, whether or not such have matured, in such order of application
as the Lender may determine.

     4.10. LICENSES. Each license, distributorship, franchise, and similar
agreement issued to, or to which the Borrower is a party is in full force and
effect. No party to any such license or agreement is in default or violation
thereof. The Borrower has not received any notice or threat of cancellation of
any such license or agreement.

     4.11. LEASES. EXHIBIT 4.11, annexed hereto, is a schedule of all presently
effective Capital Leases. (Exhibit 4.6 includes a list of all other presently
effective Leases). Each of such Leases and Capital Leases is in full force and
effect. No party to any such Lease or Capital Lease is in default or violation
of any such Lease (except for defaults caused solely by the IPO and as to which
Lease no rights or remedies are being exercised by the subject creditor or
lessor) or Capital Lease and the Borrower has not received any notice or threat
of cancellation of any such Lease or Capital Lease. The Borrower hereby
authorizes the Lender at any time and from time to time to contact any of the
Borrower's landlords in order to confirm the Borrower's continued compliance
with the terms and conditions of the Lease(s) between the Borrower and that
landlord and to discuss such issues, concerning the Borrower's occupancy under
such Lease(s), as the Lender may determine.

                                       46
<PAGE>

     4.12. REQUIREMENTS OF LAW. The Borrower is in compliance with, and shall
hereafter comply with and use its assets in compliance with, all Requirements of
Law except where the failure of such compliance will not have more than a de
minimis adverse effect on the Borrower's business or assets. The Borrower has
not received any notice of any violation of any Requirement of Law (other than
of a violation which has no more than a de minimis adverse effect on the
Borrower's business or assets), which violation has not been cured or otherwise
remedied.

     4.13. LABOR RELATIONS.

         (a) The Borrower has not been and is not presently a party to any
collective bargaining or other labor contract.

         (b) There is not presently pending and, to the Borrower's knowledge,
there is not threatened any of the following:

               (i) Any strike, slowdown, picketing, work stoppage, or employee
     grievance process.

               (ii) Any proceeding against or affecting the Borrower relating to
     the alleged violation of any Requirement of Law pertaining to labor
     relations or National Labor Relations Board, the Equal Employment
     Opportunity Commission, or any comparable governmental body, organizational
     activity, or other labor or employment dispute against or affecting the
     Borrower, which, if determined adversely to the Borrower could have more
     than a de minimis adverse effect on the Borrower.

               (iii) Any lockout of any employees by the Borrower, (and no such
     action is contemplated by the Borrower).

               (iv) Any application for the certification of a collective
     bargaining agent.

         (c) No event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute.

         (d) The Borrower:

               (i) Has complied in all material respects with all Requirements
     of Law relating to employment, equal employment opportunity,
     nondiscrimination, immigration, wages, hours, benefits, collective
     bargaining, the payment of social security and similar taxes, occupational
     safety and health, and plant closing.

               (ii) Is not liable for the payment of more than a de minimis
     amount of compensation, damages, taxes, fines, penalties, or other amounts,
     however designated, for the Borrower's failure to comply with any
     Requirement of Law referenced in Section 4:4.13(d)(i).

     4.14. MAINTAIN PROPERTIES. The Borrower shall:

                                       47
<PAGE>

         (a) Keep the Collateral in good order and repair (ordinary reasonable
wear and tear and insured casualty excepted).

         (b) Not suffer or cause the waste or destruction of any material part
of the Collateral.

         (c) Not use any of the Collateral in violation of any policy of
insurance thereon.

         (d) Not sell, lease, or otherwise dispose of any of the Collateral,
other than the following:

               (i) The sale of Inventory in compliance with this Agreement.

               (ii) The disposal of Equipment which is obsolete, worn out, or
     damaged beyond repair, which Equipment is replaced to the extent necessary
     to preserve or improve the operating efficiency of the Borrower.

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

     4.15. TAXES.

         (a) The Borrower, in accordance with all Requirements of Law, has
properly filed all of the Borrower's federal tax returns for all tax periods
through and including the Borrower's taxable year referenced in EXHIBIT 4.15,
annexed hereto. Except as specifically described in said EXHIBIT 4.15, at no
time has the Borrower received from the Internal Revenue Service: (i) any
request to perform any examination of or with respect to the Borrower, or (ii)
any other written or verbal notice in any way relating to any alleged failure by
Borrower to comply with all Requirements of Law concerning the payment of any
taxes, including, without limitation, respecting any issue which reasonably
could be expected to result in the assertion of a deficiency for any tax period
open for examination, assessment, or claim by the Internal Revenue Service. With
respect to each such request or notice from the Internal Revenue Service, as
referenced in said EXHIBIT 4.15, the Borrower has received written notice from
the Internal Revenue Service that the Internal Revenue Service has completed its
examination of the Borrower's federal tax returns for all tax periods through
and including the Borrower's taxable year referenced on said EXHIBIT 4.15 and
that all deficiencies, assessments, and other amounts asserted as a result of
such examinations have been fully paid or settled. No agreement is extant which
waives or extends any statute of limitations applicable to the right of the
Internal Revenue Service to assert a deficiency or make any other claim for or
in respect to any of the Borrower's federal tax liabilities. No issue has been
raised in any such examination which, by application of similar principles,
reasonably could be expected to result in the assertion of a deficiency for any
tax period open for examination, assessment, or claim by the Internal Revenue
Service.

         (b) The Borrower, in accordance with all Requirements of Law, has
properly filed all of the Borrower's applicable state and local returns for all
tax periods through and including the Borrower's taxable year referenced in said
EXHIBIT 4.15. Except as specifically described in said EXHIBIT 4.15, at no time
has the Borrower received from any state and local taxing authority: (i) any

                                       48
<PAGE>
request to perform any examination of or with respect to the Borrower, or (ii)
any other written or verbal notice in any way relating to any alleged failure by
Borrower to comply with all Requirements of Law concerning the payment of taxes,
including, without limitation, respecting any issue which reasonably could be
expected to result in the assertion of a deficiency for any tax period open for
examination, assessment, or claim by the respective state or local taxing
authority. With respect to each such request or notice from all state or local
taxing authorities, as referenced in said EXHIBIT 4.15, the Borrower has
received written notice from the respective state and local taxing authorities
to which the Borrower is subject that such authorities have completed their
respective examination of the Borrower's returns for all state and local income,
excise, sales, and other taxes for which the Borrower is liable for the
respective tax years referenced on said EXHIBIT 4.15 and that all deficiencies,
assessments, and other amounts asserted as a result of such examinations have
been fully paid or settled. No agreement is extant which waives or extends any
statute of limitations applicable to the right of any state or local taxing
authority to assert a deficiency or make any other claim for or in respect to
any such state or local taxes. No issue has been raised in any such examination
which, by application of similar principles, reasonably could be expected to
result in the assertion of a deficiency for any tax period open for examination,
assessment, or claim by any state or local taxing authority.

         (c) Except as disclosed on said EXHIBIT 4.15, there are no examinations
of or with respect to the Borrower presently being conducted by the Internal
Revenue Service or any other taxing authority.

         (d) The Borrower has, and hereafter shall: pay, as they become due and
payable, all taxes and unemployment contributions and other charges of any kind
or nature levied, assessed or claimed against the Borrower or the Collateral by
any person or entity whose claim could result in an Encumbrance upon any asset
of the Borrower or by any governmental authority; properly exercise any trust
responsibilities imposed upon the Borrower by reason of withholding from
employees' pay or by reason of the Borrower's receipt of sales tax or other
funds for the account of any third party; timely make all contributions and
other payments as may be required pursuant to any Employee Benefit Plan now or
hereafter established by the Borrower; and timely file all tax and other returns
and other reports with each governmental authority to whom the Borrower is
obligated to so file; provided, however, that the Borrower may contest taxes not
yet delinquent or which are being contested in good faith by appropriate
proceedings so long as adequate reserves with respect thereto are maintained on
the books of the Borrower in accordance with GAAP and no notice of tax lien has
been filed with respect thereto.

         (e) At its option, the Lender may, but shall not be obligated to, on
ten (10) days' prior written notice to the Borrower, pay any taxes, unemployment
contributions, and any and all other charges levied or assessed upon the
Borrower or the Collateral by any person or entity or governmental authority,
and make any contributions or other payments on account of the Borrower's
Employee Benefit Plan as the Lender, in the Lender's discretion, may deem
necessary or desirable, to protect, maintain, preserve,

                                       49
<PAGE>

collect, or realize upon any or all of the Collateral or the value thereof or
any right or remedy pertaining thereto, provided, however, that (i) the Lender
may make any of the foregoing payments without notice to the Borrower if in the
Lender's reasonable judgment any delay caused by such notice would materially
adversely affect its ability to protect, maintain, preserve, collect, or realize
upon any or all of the Collateral or the value thereof or any right or remedy
pertaining thereto and (ii) the Lender's making of any such payment shall not
constitute a cure or waiver of any Event of Default occasioned by the Borrower's
failure to have made such payment.

     4.16. NO MARGIN STOCK. The Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying any margin stock
(within the meaning of Regulations U, T, and X of the Board of Governors of the
Federal Reserve System of the United States). No part of the proceeds of any
borrowing hereunder will be used at any time to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.

     4.17. ERISA. Neither the Borrower nor any ERISA Affiliate ever has or
hereafter shall:

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

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

         (c) Engage in any "prohibited transactions" or "reportable events"
(respectively as described in ERISA).

         (d) Engage in, or commit, any act such that a tax or penalty could be
imposed upon the Borrower on account thereof pursuant to ERISA.

         (e) Accumulate any material funding deficiency within the meaning of
ERISA.

         (f) Terminate any Employee Benefit Plan such that a lien could be
asserted against any assets of the Borrower on account thereof pursuant to
ERISA.

         (g) Be a member of, contribute to, or have any obligation under any
Employee Benefit Plan which is a multiemployer plan within the meaning of
Section 4001(a) of ERISA.

     4.18. HAZARDOUS MATERIALS.

         (a) The Borrower has never:

               (i) Been legally responsible for any release or threat of release
     of any Hazardous Material.

               (ii) Received notification of any release or threat of release of
     any Hazardous Material from any site or vessel occupied or operated by the
     Borrower and/or of the incurrence of any expense or loss in connection with
     the assessment, containment, or removal of any release or threat of release
     of any Hazardous Material from any such site or vessel.

                                       50
<PAGE>
         (b) The Borrower shall:

               (i) Dispose of any Hazardous Material only in compliance with all
     Environmental Laws.

               (ii) Not store on any site or vessel occupied or operated by the
     Borrower and not transport or arrange for the transport of any Hazardous
     Material, except if such storage or transport is in the ordinary course of
     the Borrower's business and is in compliance with all Environmental Laws.

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

     4.19. LITIGATION. Except as described in EXHIBIT 4.19, annexed hereto,
there is not presently pending or threatened by or against the Borrower any
suit, action, proceeding, or investigation which, if determined adversely to the
Borrower, would have more than a de minimis adverse effect upon the Borrower's
financial condition or ability to conduct its business as such business is
presently conducted or is contemplated to be conducted in the foreseeable
future.

     4.20. DIVIDENDS. INVESTMENTS. CORPORATE ACTION. The Borrower shall not:

         (a) Pay any dividend or make any other distributions of cash and/or
property with respect to any class of the Borrower's capital stock, other than:

               (i) A common stock dividend of the Borrower's own capital stock.

               (ii) For any year as to which the Borrower is an S Corporation
     for federal tax purposes, dividend(s) to the Borrower's shareholder(s) in
     an amount sufficient to cover the tax liability of such shareholder(s) on
     account of the attribution of the Borrower's income to such shareholder(s),
     but only provided that such payment does not otherwise breach or result in
     the breach of any provision of the Loan Documents.

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

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

               (i) Securities issued to the Borrower pursuant to a plan of
     reorganization of a third party consummated under the United States
     Bankruptcy Code.

               (ii) The purchase of the Sam and Libby stores pursuant to that
     certain Purchase Agreement dated January 25, 2002 between the Borrower and
     SJC Retail LLC.

               (iii) After the occurrence of the IPO, (x) Permitted Acquisitions
     not to exceed $1,000,000 in any Fiscal year and (y) Permitted Investments.

                                       51
<PAGE>
         (d) Merge or consolidate or be merged or consolidated with or into any
other corporation or other entity.

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

         (f) Organize or create any Affiliate.

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

         (h) Acquire any assets other than in the ordinary course and conduct of
the Borrower's business as conducted at the execution of this Agreement

     4.21. LOANS. The Borrower shall not make any loans or advances to, nor
acquire the Indebtedness of, any Person, provided, however, the foregoing does
not prohibit any of the following:

         (a) Advance payments made to the Borrower's suppliers in the ordinary
course.

         (b) Advances to the Borrower's officers, employees, and salespersons
with respect to reasonable expenses to be incurred by such officers, employees,
and salespersons for the benefit of the Borrower, which expenses are properly
substantiated by the person seeking such advance and properly reimbursable by
the Borrower.

     4.22. PROTECTION OF ASSETS. The Lender, in the Lender's discretion, and
from time to time, may discharge any tax or Encumbrance on any of the
Collateral, or take any other action which the Lender may deem necessary or
desirable to repair, insure, maintain, preserve, collect, or realize upon any of
the Collateral. The Lender shall not have any obligation to undertake any of the
foregoing and shall have no liability on account of any action so undertaken
except where there is a specific finding in a judicial proceeding (in which the
Lender has had an opportunity to be heard), from which finding no further appeal
is available, that the Lender had acted in actual bad faith or in a grossly
negligent manner. The Borrower shall pay to the Lender, on demand, or the
Lender, in its discretion, may add to the Loan Account, all amounts paid or
incurred by the Lender pursuant to this section 4.22.

     4.23. LINE OF BUSINESS. The Borrower shall not engage in any business other
than the business in which it is currently engaged or a business reasonably
related thereto (the conduct of which reasonably related business is reflected
in the Business Plan).

     4.24. AFFILIATE TRANSACTIONS. The Borrower shall not make any payment, nor
give any value to any Affiliate except for goods and services actually purchased
by the Borrower from, or sold by the Borrower to, such Affiliate for a price and
on terms which shall

                                       52
<PAGE>

         (a) be competitive and fully deductible as an "ordinary and necessary
business expense" and/or fully depreciable under the Internal Revenue Code of
1986 and the Treasury Regulations, each as amended; and

         (b) be no less favorable to the Borrower than those which would have
been charged and imposed in an arms length transaction.

     4.25. INTENTIONALLY OMITTED.

     4.26. FURTHER ASSURANCES.

         (a) The Borrower is not the owner of, nor has it any interest in, any
property or asset which, immediately upon the satisfaction of the conditions
precedent to the effectiveness of the credit facility contemplated hereby
(Article 3:) will not be subject to perfected Collateral Interests in favor of
the Lender (subject only to Permitted Encumbrances) to secure the Liabilities.

         (b) The Borrower will not hereafter acquire any asset or any interest
in property which is not, immediately upon such acquisition, subject to such a
perfected Collateral Interest in favor of the Lender to secure the Liabilities
(subject only to Permitted Encumbrances).

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

         (d) The Borrower hereby designates the Lender as and for the Borrower's
true and lawful attorney, with full power of substitution, to sign and file any
financing statements in order to perfect or protect the Lender's Collateral
Interests in the Collateral.

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

     4.27. ADEQUACY OF DISCLOSURE.

         (a) All financial statements furnished to the Lender by the Borrower
have been prepared in accordance with GAAP consistently applied and present
fairly the condition of the Borrower at the date(s) thereof and the results of
operations and cash flows for the period(s) covered. There has been no change in
the financial condition, results of operations, or cash flows of the Borrower
since the date(s) of such financial statements, other than changes in the
ordinary course of business, which

                                       53
<PAGE>
changes have not been materially adverse, either singularly or in the aggregate
and changes resulting from the Borrower's conversion, from and after December
31, 1999 to the retail method of accounting for Inventory.

         (b) The Borrower does not have any material contingent obligations or
obligation under any Lease or Capital Lease which is not noted in the Borrower's
financial statements furnished to the Lender prior to the execution of this
Agreement.

         (c) No document, instrument, agreement, or paper now or hereafter given
the Lender by or on behalf of the Borrower or any guarantor of the Liabilities
in connection with the execution of this Agreement by the Lender contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements therein not
misleading. There is no fact known to the Borrower which has, or which, in the
foreseeable future could have, a material adverse effect on the financial
condition of the Borrower or any such guarantor which has not been disclosed in
writing to the Lender.

     4.28. NO RESTRICTIONS ON LIABILITIES. The Borrower shall not enter into or
directly or indirectly become subject to any agreement which prohibits or
restricts, in any manner, the Borrower's:

         (a) Creation of, and granting of Collateral Interests in favor of the
Lender.

         (b) Incurrence of Liabilities under this Agreement or the incurrence of
any material amount of Liabilities under any other Loan Document.

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

ARTICLE 5: - FINANCIAL REPORTING AND PERFORMANCE COVENANTS:

     5.1. MAINTAIN RECORDS. The Borrower shall:

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

         (b) Timely provide the Lender with those financial reports, statements,
and schedules required by this Article 5: or otherwise, each of which reports,
statements and schedules shall be prepared, to the extent applicable, in
accordance with GAAP applied consistently with prior periods to fairly reflect
the financial condition of the Borrower at the close of, and its results of
operations for, the period(s) covered therein.

                                       54
<PAGE>

         (c) At all times, keep accurate current records of the Collateral
including, without limitation, accurate current stock, cost, and sales records
of its Inventory, accurately and sufficiently itemizing and describing the
kinds, types, and quantities of Inventory and the cost and selling prices
thereof.

         (d) At all times, retain independent certified public accountants who
are reasonably satisfactory to the Lender and instruct such accountants to fully
cooperate with, and be available to, the Lender to discuss the Borrower's
financial performance, financial condition, operating results, controls, and
such other matters, within the scope of the retention of such accountants, as
may be raised by the Lender. The Borrower's present accountants (Stone Carlie
and Company, of St. Louis, Missouri) are presently satisfactory to the Lender.

         (e) Not change the Borrower's fiscal year.

     5.2. ACCESS TO RECORDS.

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

         (b) The Borrower hereby authorizes the Lender to:

               (i) Inspect, copy, duplicate, review, cause to be reduced to hard
         copy, run off, draw off, and otherwise use any and all computer or
         electronically stored information or data which relates to the
         Borrower, or any service bureau, contractor, accountant, or other
         person, and directs any such service bureau, contractor, accountant, or
         other person fully to cooperate with the Lender with respect thereto.

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

         (c) The Lender from time to time may designate one or more
representatives to exercise the Lender's rights under this Section 5.2 as fully
as if the Lender were doing so.

     5.3. PROMPT NOTICE TO LENDER.

         (a) The Borrower shall provide the Lender with written notice promptly
upon the occurrence of any of the following events, which written notice shall
be with reasonable particularity as to the facts and circumstances in respect of
which such notice is being given:

                                       55
<PAGE>

               (i) Any change in the Borrower's Executive Officers.

               (ii) Any ceasing of the Borrower's making of payment at any time
     to any of its creditors, in the ordinary course, in excess of $500,000.

               (iii) Any failure by the Borrower to pay rent in excess of
     $500,000 in the aggregate at any of the Borrower's locations, which failure
     continues for more than Three (3) days following the last day on which such
     rent was payable.

               (iv) Any material adverse change in the business, operations, or
     financial affairs of the Borrower.

               (v) The occurrence of any Suspension Event.

               (vi) Any intention on the part of the Borrower to discharge the
     Borrower's present independent accountants or any withdrawal or resignation
     by such independent accountants from their acting in such capacity (as to
     which, see Subsection 5:5.1(d)).

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

         (b) The Borrower shall:

               (i) Provide the Lender, when so distributed, with copies of any
     materials distributed to the shareholders of the Borrower (qua such
     shareholders).

               (ii) Add the Lender as an addressee on all mailing lists to
     retail customers maintained by or for the Borrower.

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

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

               (v) Provide the Lender with copies of all written Executive
     Agreements and outlines of the salient features of all unwritten Executive
     Agreements; the Lender hereby agreeing to keep such agreements confidential
     in accordance with the Lender's customary policies regarding confidential
     agreements.

     5.4. BORROWING BASE CERTIFICATE. From and after the Initial Funding Date
(and as otherwise may be requested from time to time by the Lender), the
Borrower shall provide the Lender by 11:30A.M. (Boston Time), daily, with a
Borrowing Base Certificate (in the form of EXHIBIT 5.4 annexed hereto, as such
form may be revised from time to time by the Lender), on which the Borrower's
Inventory shall be rolled forward no less frequently than once per week. Such
Certificate may be sent to the Lender

                                       56
<PAGE>

by facsimile transmission, provided that the original thereof is forwarded to
the Lender on the date of such transmission.

     5.5. MONTHLY REPORTS.

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

               (i) Within Twenty (20) days of the end of the previous month
     (except where the previous month is December, in which case only, within
     Thirty-Five (35) days of the end of the previous month):

                    (A) A "Stock Ledger Inventory Report" (including a
         "Department on hand" (Cost/Retail Inventory) and a JDA Stock Ledger and
         Inventory Store Master) and a Certificate (signed by the Borrower's
         Chief Executive Officer or Chief Financial Officer) concerning the
         Borrower's Inventory.

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

                    (C) An outstanding L/C (In-Transit) Report.

               (ii) Within Thirty (30) days of the end of the previous month
     (except where the previous month is December, in which case only, within
     Forty (40) days of the end of the previous month):

                    (A) Reconciliation of the above described Report and
         Inventory Certificate (Section 5:5.5(a)(i)(A)) to Availability and to
         the general ledger as of the end of the subject month.

                    (B) A Gross Margin Reconciliation.

                    (C) A Store Activity Report (which shall include, among
          other things, the certification of the Borrower's Chief Executive
          Officer and its Chief Financial Officer that, taking into account such
          Store openings, if any, as shall have occurred during the period
          covered by such Report, the Borrower's management information systems
          and its management infrastructure are sufficient to deal efficiently
          with any added burdens created by such opening(s) and that neither the
          incurrence of the expenses associated with preparation of the new
          location(s) for opening nor the operation of the new location(s)
          thereafter shall have more than a de minimis negative effect on the
          Borrower's EBITDA nor result in a Suspension Event.

                    (D) The officer's compliance certificate described in
          Section 5.8.

                    (E) An internally prepared financial statement of the
          Borrower's financial condition and the results of its operations for,
          the period ending with the end of the subject month, which financial
          statement shall include, at a minimum, a balance sheet, income
          statement (on a store specific and on a "consolidated" basis), cash
          flow

                                       57
<PAGE>

          and comparison of same store sales for the corresponding month of the
          then immediately previous year, as well as to the Business Plan.

         (b) For purposes of Section 5:5.5(a)(i), above, the first "previous
month" in respect of which the items required by that Section shall be provided
shall be November, 1999 and for purposes of Section 5:5.5(a)(ii), above, the
first "previous month" in respect of which the items required by that Section
shall be provided shall be November, 1999.

     5.6. QUARTERLY REPORTS. Quarterly, within Forty Five (45) days following
the end of each of the Borrower's fiscal quarters, the Borrower shall provide
the Lender with the following:

         (a) An original counterpart of a management prepared financial
statement of the Borrower for the period from the beginning of the Borrower's
then current fiscal year through the end of the subject quarter, with
comparative information for the same period of the previous fiscal year, which
statement shall include, at a minimum, a balance sheet, income statement (on a
store specific and on a "consolidated" basis), statement of changes in
shareholders' equity, and cash flows and comparisons for the corresponding
quarter of the then immediately previous year, as well as to the Business Plan.

         (b) The officer's compliance certificate described in Section 5.8

     5.7. ANNUAL REPORTS.

         (a) Annually, within one hundred twenty (120) days following the end of
the Borrower's fiscal year, the Borrower shall furnish the Lender with the
following:

               (i) An original signed counterpart of the Borrower's annual
     financial statement, which statement shall have been prepared by, and bear
     the unqualified opinion of, the Borrower's independent certified public
     accountants (i.e. said statement shall be "certified" by such accountants)
     and shall include, at a minimum (with comparative information for the then
     prior fiscal year) a balance sheet, income statement, statement of changes
     in shareholders' equity, and cash flows.

               (ii) The officer's compliance certificate described in Section
     5.8.

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

               (i) Such annual financial statement will be delivered by the
     Borrower to the Lender.

               (ii) It is the primary intention of the Borrower, in its
     engagement of such accountants, to satisfy the financial reporting
     requirements set forth in this Article 5:.

               (iii) The Borrower has been advised that the Lender

                                       58
<PAGE>

will rely thereon with respect to the administration of, and transactions under,
the credit facility contemplated by this Agreement.

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

         (d) The Borrower shall cause the delivery to the Lender, with the
annual statement to be furnished by the Borrower pursuant to this section, of an
updated financial statement (in form satisfactory to the Lender) of, and signed
by each guarantor of the Liabilities, which personal financial statement shall
be of a date not more than Fourteen (14) days prior to the date of such delivery
and each time when filed by the subject guarantor, a copy of that guarantor's
federal income tax return so filed.

     5.8. OFFICERS' CERTIFICATES. The Borrower shall cause the Borrower's
Chief Executive Officer or its Chief Financial Officer respectively to provide
such Person's Certificate with those monthly, quarterly, and annual statements
to be furnished pursuant to this Agreement, which Certificate shall:

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

               (i) Usual year end adjustments (this exception shall not be
     included in the Certificate which accompanies such annual statement).

               (ii) Material Accounting Changes (in which event, such
     Certificate shall include a schedule (in reasonable detail) of the effect
     of each such Material Accounting Change) not previously specifically taken
     into account in the determination of the financial performance covenant
     imposed pursuant to Section 5.11.

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

         (c) Include calculations concerning the Borrower's compliance (or
failure to comply) at the date of the subject statement with each of the
financial performance covenants included in Section 5.11 hereof.

     5.9. INVENTORIES, APPRAISALS, AND AUDITS.

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

                                       59
<PAGE>

         (b) The Borrower, at its own expense, shall cause not less than two (2)
physical inventories to be undertaken in each twelve (12) month period during
which this Agreement is in effect (the spacing of the scheduling of which
inventories shall be subject to the Lender's discretion) conducted by such
inventory takers as are satisfactory to the Lender and following such
methodology as may be satisfactory to the Lender.

               (i) The Borrower shall provide the Lender with a copy of the
     preliminary results of each such physical inventory (as well as of any
     other physical inventory undertaken by the Borrower) within ten (10) days
     following the completion of such inventory.

               (ii) The Borrower shall provide the Lender with a reconciliation
     of the results of each such inventory (as well as of any other physical
     inventory undertaken by the Borrower) to the Borrower's books and records
     within thirty (30) days following the completion of such inventory.

               (iii) The Lender, in its discretion, following the occurrence of
     a Suspension Event, may cause such additional inventories to be taken as
     the Lender determines (each, at the expense of the Borrower).

         (c) The Lender may obtain appraisals of the Collateral, from time to
time (in all events, at the Borrower's expense) conducted by such appraisers as
are satisfactory to the Lender. The Lender contemplates conducting no less than
Two (2) and not more than Three (3) such appraisals (in each event, at the
Borrower's expense) of the Collateral during any Twelve (12) month period during
which this Agreement is in effect, but in its discretion, may undertake
additional such appraisals during such period.

         (d) The Lender contemplates conducting no less than Two (2) and not
more than Three (3) commercial finance audits (in each event, at the Borrower's
expense) of the Borrower's books and records during any Twelve (12) month period
during which this Agreement is in effect, but in its discretion, may undertake
additional such audits during such period.

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

         (f) The Lender agrees that prior to the occurrence of any Event of
Default, the maximum amount of third party fees for which the Borrower shall be
obligated to reimburse the Lender, cumulatively in any Twelve (12) month period
during which this Agreement is in effect, is the aggregate of the following plus
out of pocket expenses:

              Audits:         $30,000.00.
              Appraisals:      35,000.00.

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<PAGE>

In the event of and following the occurrence of any Event of Default, there
shall not be any "cap" on such fees.

     5.10. ADDITIONAL FINANCIAL INFORMATION.

         (a) In addition to all other information required to be provided
pursuant to this Article 5:, the Borrower promptly shall provide the Lender (and
any guarantor of the Liabilities), with such other and additional information
concerning the Borrower, the Collateral, the operation of the Borrower's
business, and the Borrower's financial condition, including original
counterparts of financial reports and statements, as the Lender may from time to
time request from the Borrower.

         (b) The Borrower may provide the Lender, from time to time hereafter,
with updated forecasts of the Borrower's anticipated performance and operating
results.

         (c) In all events, the Borrower, no sooner than Ninety (90) nor later
than Sixty (60) days prior to the end of each of the Borrower's fiscal years,
shall provide the Lender with an updated and extended forecast which shall go
out at least through the end of the then next fiscal year and shall include an
income statement, balance sheet, and statement of cash flow, by month, each
prepared in conformity with GAAP and consistent with the Borrower's then current
practices; in addition, within sixty (60) days of the occurrence of the IPO, the
Borrower shall provide the Lender with an updated and extended forecast which
shall give effect to the IPO and shall go out at least through the end of the
then current fiscal year and shall include an income statement, balance sheet,
and statement of cash flow, by month, each prepared in conformity with GAAP and
consistent with the Borrower's then current practices.

         (d) The Lender, following the receipt of any of such forecast, may, but
shall not be under any obligation to, provide its written approval of such
forecast (in which event, such forecast shall become the Business Plan); such
forecast shall be deemed approved by the Lender and shall constitute the new
Business Plan in the event that the Lender shall not have identified in writing
its objections to such forecast within thirty (30) days of its receipt thereof.
If such Business Plan is approved or deemed approved by the Lender in accordance
with the foregoing, the Lender may, by extrapolation from the Business Plan and
in consultation with the Borrower, extend or revise the financial performance
covenants included on EXHIBIT 5.11, annexed hereto.

         (e) In the event that in accordance with Section 5.10 (d) the Lender
objects to a forecast provided by the Borrower, and the Borrower is unable to
promptly deliver a forecast to which the Lender does not object, then the
Lender, by written notice to the Borrower, may revise, roll-over, or extend, for
the then coming fiscal year, the financial performance covenants applicable to
the Borrower pursuant to Section 5.11 hereof by extrapolation from the then
current Business Plan, subject to revision in consultation with the Borrower
upon delivery of a forecast approved or deemed approved as set forth in Section
5.10 (d) above.

                                       61
<PAGE>

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

     5.11. FINANCIAL PERFORMANCE COVENANTS. The Borrower shall observe and
comply with those financial performance covenants set forth on EXHIBIT 5.11(a),
annexed hereto, certain of which covenants are based on the Business Plan set
forth on EXHIBIT 5.11(b), annexed hereto. Such financial performance covenants
are subject to change, revision, roll over, and extension as provided in Section
5:5.10(d) hereof. Compliance with such financial performance covenants shall be
made as if no Material Accounting Changes had been made (other than any Material
Accounting Changes specifically taken into account in the setting of such
covenants).

ARTICLE 6: - USE AND COLLECTION OF COLLATERAL:

     6.1. USE OF INVENTORY COLLATERAL.

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

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

     6.2. INVENTORY QUALITY. All Inventory now owned or hereafter acquired by
the Borrower is and will be of good and merchantable quality and free from
defects (other than defects within customary trade tolerances).

     6.3. ADJUSTMENTS AND ALLOWANCES. The Borrower may grant such allowances or
other adjustments to the Borrower's Account Debtors (exclusive of extending the
time for payment of any Account or Account Receivable, which shall not be done
without first obtaining the Lender's prior written consent in each instance) as
the Borrower may reasonably deem to accord with sound business practice,

                                       62
<PAGE>

provided, however, the authority granted the Borrower pursuant to this Section
6.3 may be limited or terminated by the Lender at any time in the Lender's
discretion.

     6.4. VALIDITY OF ACCOUNTS.

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

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

         (c) The Borrower shall not post any bond to secure the Borrower's
performance under any agreement to which the Borrower is a party nor cause any
surety, guarantor, or other third party obligee to become liable to perform any
obligation of the Borrower (other than to the Lender) in the event of the
Borrower's failure so to perform other than as may be required under workers'
compensation laws and the like.

     6.5. NOTIFICATION TO ACCOUNT DEBTORS. Upon the occurrence and during the
continuance of an Event of Default, the Lender shall have the right to notify
any of the Borrower's Account Debtors to make payment directly to the Lender and
to collect all amounts due on account of the Collateral.

ARTICLE 7: - CASH MANAGEMENT. PAYMENT OF LIABILITIES:

     7.1 DEPOSITORY ACCOUNTS.

         (a) Annexed hereto as EXHIBIT 7.1 is a Schedule of all present DDA's,
which Schedule includes, with respect to each depository (i) the name and
address of that depository; (ii) the account number(s) of the account(s)
maintained with such depository; and (iii) a contact person at such depository.

         (b) The Borrower shall deliver the following to the Lender, as a
condition to the effectiveness of this Agreement:

               (i) Notification, executed on behalf of the Borrower, to each
     depository institution with which any DDA is maintained (other than any
     Exempt DDA and the Blocked Account), in form satisfactory to the Lender of
     the Lender's interest in such DDA.

               (ii) A Blocked Account Agreement with any depository institution
     at which either of the following conditions applies:

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<PAGE>

                    (A) Both any DDA (other than the Operating Account) and the
         Operating Account is maintained.

                    (B) A Blocked Account is maintained.

         (c) The Borrower will not establish any DDA hereafter (other than an
Exempt DDA) unless, contemporaneous with such establishment, the Borrower
delivers the following to the Lender:

               (i) Notification to the depository at which such DDA is
     established if the same would have been required pursuant to Section
     7:7.1(b)(ii)(A) if the subject DDA were open at the execution of this
     Agreement.

               (ii) A Blocked Account Agreement executed on behalf of the
     depository at which such DDA is established if the same would have been
     required pursuant to Section 7:7.1(b)(ii)(B) if the subject DDA were open
     at the execution of this Agreement.

     7.2. CREDIT CARD RECEIPTS.

         (a) Annexed hereto as EXHIBIT 7.2, is a Schedule which describes all
arrangements to which the Borrower is a party with respect to the payment to the
Borrower of the proceeds of credit card charges for sales by the Borrower.

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

     7.3. THE CONCENTRATION, BLOCKED, AND OPERATING ACCOUNTS.

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

               (i) The "CONCENTRATION ACCOUNT" (so referred to herein):
     Established by the Lender with Fleet National Bank

               (ii) The "BLOCKED ACCOUNT" (so referred to herein): Established
     by the Borrower with Southwest Bank of St. Louis (as subsequently shall be
     replaced with an account to be established at Fleet National Bank as and
     when directed by the Lender).

               (iii) The "OPERATING ACCOUNT" (so referred to herein):
     Established by the Borrower with Southwest Bank of St. Louis (as
     subsequently shall be replaced with an account to be established at Fleet
     National Bank as and when directed by the Lender).

                                       64
<PAGE>
         (b) The contents of each DDA (other than the Operating Account) and of
the Blocked Account constitutes Collateral and Proceeds of Collateral. The
contents of the Concentration Account constitutes the Lender's property.

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

     7.4. PROCEEDS AND COLLECTION OF ACCOUNTS.

         (a) All Receipts:

               (i) Constitute Collateral and proceeds of Collateral.

               (ii) Shall be held in trust by the Borrower for the Lender.

               (iii) Shall not be commingled with any of the Borrower's other
     funds.

               (iv) Shall be deposited and/or transferred only to the Blocked
     Account or the Concentration Account.

         (b) The Borrower shall cause the ACH or wire transfer to the Blocked or
the Concentration Account, no less frequently than daily (and whether or not
there is then an outstanding balance in the Loan Account) of the following:

               (i) The then contents of each DDA (other than any Exempt DDA),
     each such transfer to be net of any minimum balance, not to exceed
     $1,000.00, as may be required to be maintained in the subject DDA by the
     bank at which such DDA is maintained).

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

Telephone advice (confirmed by written notice) shall be provided to the Lender
on each Business Day on which any such transfer is made.

         (c) Whether or not any Liabilities are then outstanding, the Borrower
shall cause the ACH or wire transfer to the Concentration Account, no less
frequently than daily, of then entire ledger balance of the Blocked Account, net
of such minimum balance, not to exceed $1,000.00, as may be required to be
maintained in the Blocked Account by the depository which the Blocked Account is
maintained.

         (d) In the event that, notwithstanding the provisions of this Section
7.4, the Borrower receives or otherwise has dominion and control of any
Receipts, or any proceeds or collections of any Collateral, such Receipts,
proceeds, and collections shall be held in trust by the Borrower for the Lender
and shall not be commingled with any of the Borrower's other funds or deposited
in any account of the Borrower other than as instructed by the Lender.

     7.5. PAYMENT OF LIABILITIES.

                                       65
<PAGE>

         (a) On each Business Day, the Lender shall apply the then collected
balance of the Concentration Account (net of fees charged, and of such impressed
balances as may be required by the bank at which the Concentration Account is
maintained) towards the unpaid balance of the Loan Account and all other
Liabilities, provided, however, for purposes of the calculation of interest on
the unpaid principal balance of the Loan Account, such payment shall be deemed
to have been made One (1) Business Day after such transfer.

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

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

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

               (iii) If notice of a deposit to the Concentration Account
     (Section 7:7.5(b)(i)) or payment (Section 7:7.5(b)(ii)) is not available to
     the Lender until after 2:00PM on a Business Day, such deposit or payment
     shall be deemed to have been made at 9:00AM on the then next Business Day.

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

         (c) The Lender shall transfer to the Operating Account any surplus in
the Concentration Account remaining after the application towards the
Liabilities referred to in Section 7:7.5(a), above (less those amount which are
to be netted out, as provided therein) provided, however, in the event that

               (i) a Suspension Event has occurred and is continuing; and

               (ii) one or more L/C's are then outstanding, then the Lender may
     establish a funded reserve of up to 105% of the aggregate Stated Amounts of
     such L/C's. Such funded reserve shall either be (i) returned to the
     Borrower in the event that no Suspension Event is then continuing or (ii)
     applied towards the Liabilities following the occurrence of any Event of
     Default described in Section 10.11 or acceleration following the occurrence
     of any other Event of Default.

     7.6. THE OPERATING ACCOUNT. Except as otherwise specifically provided in,
or permitted by, this Agreement, all checks shall be drawn by the Borrower upon,
and other disbursements shall be made by the Borrower solely from, the Operating
Account.

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<PAGE>

ARTICLE 8: - GRANT OF SECURITY INTEREST:

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

         (a) All Accounts and accounts receivable.

         (b) All Inventory.

         (c) All General Intangibles.

         (d) All Equipment.

         (e) All Goods.

         (f) All Fixtures.

         (g) All Chattel Paper.

         (h) All Farm Products.

         (i) All Letter-of-Credit Rights.

         (j) All Payment Intangibles.

         (k) All Supporting Obligations.

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

         (m) All Leasehold Interests.

         (n) All Investment Property, Instruments, Documents, Deposit Accounts,
policies and certificates of insurance, deposits, impressed accounts,
compensating balances, money, cash, or other property.

         (o) All insurance proceeds, refunds, and premium rebates, including,
without limitation, proceeds of fire and credit insurance, whether any of such
proceeds, refunds, and premium rebates arise out of any of the foregoing or
otherwise.

         (p) All liens, guaranties, rights, remedies, and privileges pertaining
to any of the foregoing, including the right of stoppage in transit.

     8.2. EXTENT AND DURATION OF SECURITY INTEREST. The security interest
created and granted herein is in addition to, and supplemental of, any security
interest previously granted by the Borrower to

                                       67
<PAGE>
the Lender and shall continue in full force and effect applicable to all
Liabilities until both (a) all Liabilities have been paid and/or satisfied in
full and (b) the security interest created herein is specifically terminated in
writing by a duly authorized officer of the Lender.

ARTICLE 9: - LENDER AS BORROWER'S ATTORNEY-IN-FACT:

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

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

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

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

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

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

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

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

     9.2. NO OBLIGATION TO ACT. The Lender shall not be obligated to do any of
the acts or to exercise any of the powers authorized by Section 9.1 herein, but
if the Lender elects to do any such act or to exercise any of such powers, it
shall not be accountable for more than it actually receives as a result

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<PAGE>
of such exercise of power, and shall not be responsible to the Borrower for any
act or omission to act except for any act or omission to act as to which there
is a final determination made in a judicial proceeding (in which proceeding the
Lender has had an opportunity to be heard) which determination includes a
specific finding that the subject act or omission to act had been grossly
negligent or in actual bad faith.

ARTICLE 10: - EVENTS OF DEFAULT:

         The occurrence of any event described in this Article 10: respectively
shall constitute an "EVENT OF DEFAULT" herein. Upon the occurrence of any Event
of Default described in Section 10.11, any and all Liabilities shall become due
and payable without any further act on the part of the Lender. Upon the
occurrence of any other Event of Default, the Lender may declare any and all
Liabilities shall become immediately due and payable. The occurrence of any
Event of Default shall also constitute, without notice or demand, a default
under all other agreements between the Lender and the Borrower and instruments
and papers heretofore, now or hereafter given the Lender by the Borrower.

     10.1. FAILURE TO PAY REVOLVING CREDIT. The failure by the Borrower to pay
any amount when due under the Revolving Credit.

     10.2. FAILURE TO MAKE OTHER PAYMENTS. The failure by the Borrower to pay
within five (5) days following the earlier of the Borrower's knowledge of such
failure or of its receipt of written notice from the Lender of such failure, any
payment Liability other than any payment liability on account of the principal
of, or interest on, or fees in respect of, the Revolving Credit.

     10.3. FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD). The
failure by the Borrower to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability not otherwise described in
Section 10.1 or Section 10.2 hereof, and included in any of the following
provisions hereof:

<Table>
<Caption>
Section               Relates to :
-------               ------------
<S>                   <C>
4.6                   Location of Collateral
4.7                   Title to Assets
4.8                   Indebtedness
4.9                   Insurance Policies
4.15                  Pay taxes
4.20                  Dividends. Investments. Other Corporate Actions
4.24                  Affiliate Transactions
6.1                   Use of Collateral
Article 7:            Cash Management (other than Section 7.1(c))
</Table>

                                       69
<PAGE>

     10.4. FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The failure
by the Borrower to promptly, punctually, faithfully and timely perform,
discharge, or comply with any covenant or Liability (i) in Article 5 within five
(5) days following the earlier of the Borrower's knowledge of such failure or of
its receipt of written notice from the Lender of such failure, (ii) in Section
7.1(c) within ten (10) days following the earlier of the Borrower's knowledge of
such failure or of its receipt of written notice from the Lender of such failure
or (iii) not described in any of Sections10.1, 10.2, 10.3 or 10.4(i) or
10.4(ii), within fifteen (15) days following the earlier of the Borrower's
knowledge of such failure or of its receipt of written notice from the Lender of
such failure.

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

     10.6. ACCELERATION OF OTHER DEBT. BREACH OF LEASE. The occurrence of any
event such that (i) any Indebtedness in excess of $1,000,000 in the aggregate of
the Borrower to any creditor(s) other than the Lender could be accelerated or
(ii) without the consent of the Borrower, ten percent (10%) or more of the
Borrowers's store Leases could be terminated (whether or not the subject
creditor or lessor takes any action on account of such occurrence); provided,
however, a Lease shall not be included in the calculation of Leases under clause
(ii) if the breach of such Lease is caused solely by the occurrence of the IPO
and no rights and remedies are being exercised under such Lease by the subject
creditor or lessor.

     10.7. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any material breach
or default under any material agreement (including any material Loan Document)
between the Lender and the Borrower other than this Agreement, or under any
material instrument given by the Borrower to the Lender and the expiry, without
cure, of any applicable grace period (notwithstanding that the Lender may not
have exercised all or any of its rights on account of such breach or default).

     10.8. UNINSURED CASUALTY LOSS. The occurrence of any uninsured loss, theft,
damage, or destruction of or to any portion of the Collateral having a value in
excess of $2,000,000, unless such loss, theft, damage or destruction (x) is not
likely to have a material adverse effect on the Borrower's business and
financial condition and (y) does not result in the occurrence of any other
Suspension Event hereunder.

     10.9. ATTACHMENT. JUDGMENT. RESTRAINT OF BUSINESS.

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

         (b) The entry of any judgment assessing damages in excess of $500,000
against the Borrower, which judgment is not covered by insurance and is not
satisfied, discharged, or vacated within thirty (30) days after entry or filing
of such judgment (if a money judgment) or appealed from (with execution or
similar process stayed) within fifteen (15) days of its entry.

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

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

     10.11. BANKRUPTCY. The failure by the Borrower to generally pay the debts
of the Borrower as they mature; adjudication of bankruptcy or insolvency
relative to the Borrower; the entry of an order for relief or similar order with
respect to the Borrower in any proceeding pursuant to the Bankruptcy Code or any
other federal bankruptcy law; the filing of any complaint, application, or
petition by the Borrower initiating any matter in which the Borrower is or may
be granted any relief from the debts of the Borrower pursuant to the Bankruptcy
Code or any other insolvency statute or procedure; the filing of any complaint,
application, or petition against the Borrower initiating any matter in which the
Borrower is or may be granted any relief from the debts of the Borrower pursuant
to the Bankruptcy Code or any other insolvency statute or procedure, which
complaint, application, or petition is not timely contested in good faith by the
Borrower by appropriate proceedings or, if so contested, is not dismissed within
thirty (30) days of when filed.

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     10.12. DEFAULT BY GUARANTOR. The occurrence of any of Events of Default
arising under Section 10.11 and/or under Section 10.13 with respect to any
guarantor or endorser of the Liabilities, or the occurrence of any of the Events
of Default with respect to any parent, subsidiary, or Affiliate of the Borrower,
as if such guarantor, endorser, parent, or Affiliate were the "Borrower"
described therein.

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

     10.14. TERMINATION OF GUARANTY. The termination or attempted termination of
any guaranty by any guarantor of the Liabilities, other than in accordance with
the terms of that certain Confirmation and Release of Guaranty Agreement date as
of the Amendment Closing Date.

     10.15. CHALLENGE TO LOAN DOCUMENTS.

         (a) Any challenge by or on behalf of the Borrower or any guarantor of
the Liabilities to the validity of any Loan Document or the applicability or
enforceability of any Loan Document strictly in accordance with the subject Loan
Document's terms or which seeks to void, avoid, limit, or otherwise adversely
affect any security interest created by or in any Loan Document or any payment
made pursuant thereto.

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

     10.16. KEY MANAGEMENT. DEATH OR DISABILITY. At any time prior to the
occurrence of the IPO, the (i) death or disability of Peter Edison (or of any
other Person who is then the successor Executive Officer to Peter Edison) or
(ii) failure of Peter Edison (or such successor) to exercise those duties
exercised by Peter Edison at the execution of this Agreement, provided, however,
(a) if and only if the Borrower furnishes the Lender with written notice of the
occurrence of such death, disability, or failure of said Persons within Five (5)
days of such occurrence, then such death, disability, or failure of said Persons
shall not constitute an "Event of Default" until thirty (30) days after such
occurrence and, unless the Lender sooner waives such Event of Default, or gives
written notice of the acceleration of the Liabilities, such death, disability,
or failure shall cease to be an "Event of Default" One Hundred Twenty

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(120) days after its having occurred (provided the Borrower has furnished Lender
with such written notice).

     10.17. CHANGE IN CONTROL. Any Change in Control; provided, however, that
prior to occurrence of the IPO, any Change in Control resulting solely on
account of the death or disability of Peter Edison, as the sole director of the
Borrower, shall be subject to the provisions of Section 10.16.

ARTICLE 11: - RIGHTS AND REMEDIES UPON DEFAULT:

     Upon the occurrence of any Event of Default described in Section 10.11 and
upon the occurrence of any other Event of Default, and at all times thereafter,
the Lender shall have the following rights and remedies in addition to all of
the rights, remedies, powers, privileges, and discretions available to Lender
prior to the occurrence of an Event of Default. No stay which otherwise might be
imposed pursuant to Section 362 of the Bankruptcy Code or otherwise shall stay,
limit, prevent, hinder, delay, restrict, or otherwise prevent the Lender's
exercise of any of such rights and remedies.

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

         (a) To give notice to any bank at which any DDA or Blocked Account is
maintained and in which Proceeds of Collateral are deposited, to turn over such
Proceeds directly to the Lender.

         (b) To give notice to any of the Borrower's customs brokers to follow
the instructions of the Lender as provided in any written agreement or
undertaking of such broker in favor of the Lender.

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

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

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

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

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

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

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<PAGE>
     11.2. SALE OF COLLATERAL.

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

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

         (c) Unless the Collateral is perishable or threatens to decline
speedily in value, or is of a type customarily sold on a recognized market (in
which event the Lender shall provide the Borrower such notice as may be
practicable under the circumstances), the Lender shall give the Borrower at
least ten (10) days prior notice, by authenticated record, of the date, time,
and place of any proposed public sale, and of the date after which any private
sale or other disposition of the Collateral may be made. The Borrower agrees
that such written notice shall satisfy all requirements for notice to the
Borrower which are imposed under the UCC or other applicable law with respect to
the exercise of the Lender's rights and remedies upon default.

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

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

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

     11.3. OCCUPATION OF BUSINESS LOCATION. In connection with the Lender's
exercise of the Lender's rights under this Article 11:, the Lender may enter
upon, occupy, and use any premises owned or occupied by the Borrower, and may
exclude the Borrower from such premises or portion thereof as may have been so
entered upon, occupied, or used by the Lender. The Lender shall not be required
to remove any of the Collateral from any such premises upon the Lender's taking
possession thereof, and

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may render any Collateral unusable to the Borrower. In no event shall the Lender
be liable to the Borrower for use or occupancy by the Lender of any premises
pursuant to this Article 11:, nor for any charge (such as wages for the
Borrower's employees and utilities) incurred in connection with the Lender's
exercise of the Lender's Rights and Remedies.

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

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

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

ARTICLE 12: - NOTICES:

     12.1. NOTICE ADDRESSES. All notices, demands, and other communications made
in respect of this Agreement (other than a request for a loan or advance or
other financial accommodation

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under the Revolving Credit) shall be made to the following addresses, each of
which may be changed upon seven (7) days written notice to all others given by
certified mail, return receipt requested:

If to the Lender:
                          Fleet Retail Finance Inc.
                          40 Broad Street
                          Boston, Massachusetts 02109
                          Attention : Mr. Evan Israelson
                                      Loan Officer
                          Fax       : 617 434-4312

With a copy to:
                          Riemer & Braunstein LLP
                          Three Center Plaza
                          Boston, Massachusetts 02108
                          Attention : Kevin M. Murtagh, Esquire
                          Fax       : 617-880-3456

If to the Borrower:
                          Bakers Footwear Group, Inc.
                          2815 Scott Avenue, Suite C
                          St. Louis, Missouri 63103
                          Attention : Mr. Peter Edison
                          Fax       :
With a copy to:

                          Bryan Cave LLP
                          One Metropolitan Square
                          211 N. Broadway - Suite 3600
                          St. Louis, Missouri 63102-2750
                          Attention : Harold R. Burroughs, Esq.
                          Fax       : 314-259-2020

     12.2. NOTICE GIVEN.

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

               (i) By mail: the sooner of when actually received or Three (3)
     days following deposit in the United States mail, postage prepaid.

               (ii) By recognized overnight express delivery: the Business Day
     following the day when sent.

               (iii) By Hand: If delivered on a Business Day after 9:00 AM and
     no later than Three (3) hours prior to the close of customary business
     hours of the recipient, when delivered. Otherwise, at the opening of the
     then next Business Day.

               (iv) By Facsimile transmission (which must include a header on
     which the party sending such transmission is indicated): If sent on a
     Business Day after 9:00 AM and no

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     later than Three (3) hours prior to the close of customary business hours
     of the recipient, one (1) hour after being sent. Otherwise, at the opening
     of the then next Business Day.

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

ARTICLE 13: - TERM:

     13.1. TERMINATION OF REVOLVING CREDIT. The Revolving Credit shall remain in
effect (subject to suspension as provided in Section 2:2.5(h) hereof) until the
Termination Date.

     13.2. ACTIONS ON TERMINATION. On the Termination Date, the Borrower shall
pay the Lender (whether or not then due), in immediately available funds, all
then Liabilities including, without limitation: the entire balance of the Loan
Account (including the unpaid principal balance of the Revolving Credit Loans);
any then remaining installments of the Revolving Credit Commitment Fee; any then
remaining installments of the Facility Fee; any accrued and unpaid Unused Line
Fee; and all unreimbursed costs and expenses of Lender; for which the Borrower
is responsible; and shall make such arrangements concerning any L/C's then
outstanding are reasonably satisfactory to the Lender. Until such payment, all
provisions of this Agreement, other than those contained in Article 2: which
place an obligation on the Lender to make any loans or advances or to provide
financial accommodations under the Revolving Credit or otherwise, shall remain
in full force and effect until all Liabilities shall have been paid in full. The
release by the Lender of the Collateral Interests granted the Lender by the
Borrower hereunder may be upon such conditions and indemnifications as the
Lender may require.

ARTICLE 14: - GENERAL:

     14.1. PROTECTION OF COLLATERAL. The Lender has no duty as to the collection
or protection of the Collateral beyond the safe custody of such of the
Collateral as may come into the possession of the Lender.

     14.2. PUBLICITY. The Lender may issue a "tombstone" notice of the
establishment of the credit facility contemplated by this Agreement and may make
reference to the Borrower (and may utilize

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any logo or other distinctive symbol associated with the Borrower) in connection
with any advertising, promotion, or marketing undertaken by the Lender.

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

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

     14.5. AMENDMENTS. COURSE OF DEALING.

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

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

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

     14.7. APPLICATION OF PROCEEDS. The proceeds of any collection, sale, or
disposition of the Collateral, or of any other payments received hereunder,
shall be applied towards the Liabilities in such order and manner as the Lender
determines in its sole discretion, consistent, however, with the provisions of
this Agreement. The Borrower shall remain liable for any deficiency remaining
following such application.

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

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

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

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

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

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

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<PAGE>

such notice, that amount which shall compensate the Lender for such additional
cost or reduction in income.

     14.9. COSTS AND EXPENSES OF THE LENDER

         (a) The Borrower shall pay from time to time on demand all Costs of
Collection and all reasonable costs, expenses, and disbursements (including
attorneys' reasonable fees and expenses) which are incurred by the Lender in
connection with the preparation, negotiation, execution, and delivery of this
Agreement and of any other Loan Documents, and all other reasonable costs,
expenses, and disbursements which may be incurred connection with or in respect
to the credit facility contemplated hereby or which otherwise are incurred with
respect to the Liabilities.

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

         (c) The undertaking on the part of the Borrower in this Section 14.9
shall survive payment of the Liabilities and/or any termination, release, or
discharge executed by the Lender in favor of the Borrower, other than a
termination, release, or discharge which makes specific reference to this
Section 14.9.

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

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

     14.12. CONSENT TO JURISDICTION.

         (a) The Borrower agrees that any legal action, proceeding, case, or
controversy against the Borrower with respect to any Loan Document may be
brought in the Superior Court of Suffolk County Massachusetts or in the United
States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Lender may elect in the Lender's sole discretion. By
execution and delivery of this

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<PAGE>
Agreement, the Borrower, for itself and in respect of its property, accepts,
submits, and consents generally and unconditionally, to the jurisdiction of the
aforesaid courts.

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

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

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

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

     14.13. INDEMNIFICATION. The Borrower shall indemnify, defend, and hold the
Lender and any Participant and any of their respective employees, officers, or
agents (each, an "INDEMNIFIED PERSON") harmless of and from any claim brought or
threatened against any Indemnified Person by the Borrower, any guarantor or
endorser of the Liabilities, or any other Person (as well as from attorneys'
reasonable fees, expenses, and disbursements in connection therewith) on account
of the relationship of the Borrower or of any other guarantor or endorser of the
Liabilities (each of claims which may be defended, compromised, settled, or
pursued by the Indemnified Person with counsel of the Lender's selection, but at
the expense of the Borrower) other than any claim as to which a final
determination is made in a judicial proceeding (in which the Lender and any
other Indemnified Person has had an opportunity to be heard), which
determination includes a specific finding that the Indemnified Person seeking
indemnification had acted in a grossly negligent manner or in actual bad faith.
This indemnification shall survive payment of the Liabilities and/or any
termination, release, or discharge executed by the Lender in favor of the
Borrower, other than a termination, release, or discharge duly executed on
behalf of the Lender which makes specific reference to this Section 14.13.

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

                                       81
<PAGE>

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

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

         (c) Unless otherwise specifically provided for herein or in a specific
Loan Document (and then only to the extent so provided), as between the parties
hereto or to any Loan Document, the definitions of the following terms, as
included in the UCC, are deemed to be as follows for purposes of the performance
of obligations arising under or in respect of any Loan Document:

                    (i) "Authenticate" means "signed".

                    (ii) "Record" means written information in a tangible form.

         (d) Cross references to Sections in this Agreement begin with the
Article in which that Section appears, followed by a colon, and then the Section
to which reference is made. (For example, a reference to "Section 5:5-6" is to
Section 5-6, which appears in Article 5 of this Agreement).

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

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

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

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

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

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

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

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

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

                                       82
<PAGE>
         (n) The symbol "$" refers to United States Dollars.

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

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

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

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

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

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

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

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

         (s) The Loan Documents shall be construed and interpreted in a
harmonious manner and in keeping with the intentions set forth in Section 14.15
hereof, provided, however, in the event of any inconsistency between the
provisions of this Agreement and any other Loan Document, the provisions of this
Agreement shall govern and control.

     14.15. INTENT. It is intended that:

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

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

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

         (d) All reasonable costs, expenses, and disbursements incurred by the
Lender in connection with the Lender's relationship(s) with the Borrower shall
be borne by the Borrower.

         (e) Unless otherwise explicitly provided herein, the Lender's consent
to any action of the Borrower which is prohibited unless such consent is given
may be given or refused by the Lender in its sole discretion and without
reference to Section 2.16 hereof.

     14.16. PARTICIPATIONS: The Lender may sell participations in the Lender's
interests herein to one or more financial institutions (each, a "PARTICIPANT").

                                       83
<PAGE>
     14.17. RIGHT OF SET-OFF. Any and all deposits or other sums at any time
credited by or due to the Borrower from the Lender or any Participant or from
any Affiliate of any of the foregoing, and any cash, securities, instruments or
other property of the Borrower in the possession of any of the foregoing,
whether for safekeeping or otherwise (regardless of the reason such Person had
received the same) shall at all times constitute security for all Liabilities
and for any and all obligations of the Borrower to the Lender or any Participant
or such Affiliate and may be applied or set off against the Liabilities and
against such obligations at any time, whether or not such are then due and
whether or not other collateral is then available to the Lender.

     14.18. PLEDGES TO FEDERAL RESERVE BANKS: Nothing included in this Agreement
shall prevent or limit any, to the extent that such is subject to any of the
twelve Federal Reserve Banks organized under ss.4 of the Federal Reserve Act (12
U.S.C. ss.341) from pledging all or any portion of that Lender's interest and
rights under this Agreement, provided, however, neither such pledge nor the
enforcement thereof shall release the pledging from its obligations hereunder or
under any of the Loan Documents.

     14.19. MAXIMUM INTEREST RATE. Regardless of any provision of any Loan
Document, the Lender shall never be entitled to contract for, charge, receive,
collect, or apply as interest on any Liability, any amount in excess of the
maximum rate imposed by applicable law. Any payment which is made which, if
treated as interest on a Liability would result in such interest's exceeding
such maximum rate shall be held, to the extent of such excess, as additional
collateral for the Liabilities as if such excess were "Collateral."

     14.20. WAIVERS.

         (a) The Borrower (and all guarantors, endorsers, and sureties of the
Liabilities) make each of the waivers included in Section 14:14.20(b), below,
knowingly, voluntarily, and intentionally, and understands that the Lender, in
establishing the facilities contemplated hereby and in providing loans and other
financial accommodations to or for the account of the Borrower as provided
herein, whether not or in the future, is relying on such waivers.

         (b) THE BORROWER, AND EACH SUCH GUARANTOR, ENDORSER, AND SURETY
RESPECTIVELY WAIVES THE FOLLOWING TO THE EXTENT PERMITTED UNDER APPLICABLE LAW:

               (i) Except as otherwise specifically required hereby, notice of
     non-payment, demand, presentment, protest and all forms of demand and
     notice, both with respect to the Liabilities and the Collateral.

               (ii) Except as otherwise specifically required hereby, the right
     to notice and/or hearing prior to the Lender's exercising of the Lender's
     rights upon default.

                                       84
<PAGE>
               (iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY
     IN WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY
     IS INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE LENDER IS JOINED AS A
     PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT
     OF, ANY RELATIONSHIP AMONGST OR BETWEEN THE BORROWER OR ANY OTHER PERSON
     AND THE LENDER LIKEWISE WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH
     CASE OR CONTROVERSY).

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

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

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

                        [SPACE INTENTIONALLY LEFT BLANK]

                                       85
<PAGE>

         IN WITNESS WHEREOF, the parties have hereunto caused this Loan and
Security Agreement to be executed and their seals to be hereto affixed as of the
date first above written.

                                                     BAKERS FOOTWEAR GROUP, INC.
                                                                    ("BORROWER")

                                              By  /s/ PETER EDISON
                                                  ------------------------------
                                      Print Name: PETER EDISON
                                                  ------------------------------
                                           Title: CHAIRMAN OF THE BOARD AND
                                                  CHIEF EXECUTIVE OFFICER
                                                  ------------------------------

                                                       FLEET RETAIL FINANCE INC.
                                                                      ("LENDER")

                                             By   /s/ EVAN ISRAELSON
                                                  ------------------------------
                                     Print Name:  EVAN ISRAELSON
                                                  ------------------------------
                                          Title:  ASSISTANT VICE PRESIDENT
                                                  ------------------------------

<PAGE>

                                                                     EXHIBIT 2.8

REVOLVING CREDIT NOTE                                  FLEET RETAIL FINANCE INC.

Boston, Massachusetts                                     As of January 18, 2000

     FOR VALUE RECEIVED, the undersigned, Weiss and Neuman Shoe Co., a
Missouri corporation with its principal executive offices at 2815 Scott
Avenue, Suite C, St. Louis, Missouri 63103 (the "BORROWER") promises to pay to
the order of Fleet Retail Finance Inc., a Delaware corporation with its offices
at 40 Broad Street Boston, Massachusetts 02109 (with any subsequent holder, the
"LENDER") the aggregate unpaid principal balance of loans and advances made to
or for the account of the Borrower pursuant to the Revolving Credit established
pursuant to the Loan and Security Agreement of even date (as such may be
amended hereafter, the "LOAN AGREEMENT") between the Lender and the Borrower,
with interest at the rate and payable in the manner stated therein.

     This is the "Revolving Credit Note" to which reference is made in the Loan
Agreement and is subject to all terms and provisions thereof. The principal of,
and interest on, this Note shall be payable as provided in the Loan Agreement
and shall be subject to acceleration as provided therein.

     The Lender's books and records concerning loans and advances pursuant to
the Revolving Credit, the accrual of interest thereon, and the repayment of
such loans and advances, shall be prima facie evidence of the indebtedness
hereunder.

     No delay or omission by the Lender in exercising or enforcing any of the
Lender's powers, rights, privileges, remedies, or discretions hereunder shall
operate as a waiver thereof on that occasion nor on any other occasion. No
waiver of any default hereunder shall operate as a waiver of any other default
hereunder, nor as a continuing waiver.

     The Borrower, and each endorser and guarantor of this Note, respectively
waives presentment, demand, notice, and protest, and also waives any delay on
the part of the holder hereof. Each assents to any extension or other
indulgence (including, without limitation, the release or substitution of
collateral) permitted by the Lender with respect to this Note and/or any
collateral given to secure this Note or any extension or other indulgence with
respect to any other liability or any collateral given to secure any other
liability of the Borrower or any other person obligated on account of this Note.

                                       1
<PAGE>

     This Note shall be binding upon the Borrower, and each endorser and
guarantor hereof, and upon their respective heirs, successors, assigns, and
representatives, and shall inure to the benefit of the Lender and its
successors, endorsees, and assigns.

     The liabilities of the Borrower, and of any endorser or guarantor of this
Note, are joint and several, provided, however, the release by the Lender of any
one or more such person, endorser or guarantor shall not release any other
person obligated on account of this Note. Each reference in this Note to the
Borrower, any endorser, and any quarantor, is to such person individually and
also to all such persons jointly. No person obligated on account of this Note
may seek contribution from any other person also obligated unless and until all
liabilities, obligations and indebtedness to the Lender of the person from whom
contribution is sought have been satisfied in full.

     This Note is delivered at the offices of the Lender in, shall be governed
by the laws of The Commonwealth of Massachusetts, and shall take effect as a
sealed instrument.

     The Borrower makes the following waiver knowingly, voluntarily, and
intentionally, and understands that the Lender in the establishment and
maintenance of the Lender's relationship with the Borrower contemplated by this
Note, is relying thereon. THE BORROWER, TO THE EXTENT ENTITLED THERETO, WAIVES
ANY PRESENT OR FUTURE RIGHT OF THE BORROWER, OR OF ANY GUARANTOR OR ENDORSER OF
THE BORROWER OR OF ANY OTHER PERSON LIABLE TO THE LENDER ON ACCOUNT OF OR IN
RESPECT TO THE LIABILITIES, TO A TRIAL BY JURY IN ANY CASE OR CONTROVERSY IN
WHICH THE LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS
INITIATED BY OR AGAINST THE LENDER OR IN WHICH THE LENDER IS JOINED AS A PARTY
LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT TO, ANY
RELATIONSHIP AMONGST OR BETWEEN THE BORROWER, ANY SUCH PERSON, AND THE LENDER.

                                                       WEISS AND NEUMAN SHOE CO.
                                                                The ("BORROWER")

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

                                     ..2..

[Exhibits 4.2 through 5.4 as listed on page vi of this Exhibit 10.17 have been
omitted. The registrant undertakes to furnish supplementally a copy of such
exhibits upon request.]
<PAGE>

                                                               EXHIBIT 5:5.11(a)

                        FINANCIAL PERFORMANCE COVENANTS

CAPITAL EXPENDITURES:

The Borrower shall not permit or suffer its Unfunded Capital Expenditures for
the fiscal year ending January 4, 2003 to be greater than $5,100,000, or
$8,500,000 if the IPO shall be consummated during the year 2003; Unfunded
Capital Expenditures for any fiscal year thereafter shall be set based on the
Business Plan of Borrower pursuant to Section 5.11 of the Loan Agreement.

MINIMUM AVAILABILITY:

The Borrower shall maintain at all times Availability of not less than $1.5
Million, except that, Availability may be less than $1.5 Million for not more
than three (3) consecutive Business Days in any month.

[Exhibits 5.11(b), 7.1 and 7.2 as listed on page vi of this Exhibit 10.17 have
been omitted. The registrant undertakes to furnish supplementally a copy of such
exhibits upon request.]
<PAGE>
              CONFIRMATION AND RELEASE OF GUARANTY AGREEMENT

                                                            June 11, 2002

Fleet Retail Finance Inc.
40 Broad Street
Boston, Massachusetts 02109

Gentlemen:

         On January 18, 2000, BAKERS FOOTWEAR GROUP, INC., f/k/a Weiss and
Neuman Shoe Co. (the "BORROWER"), a Missouri corporation with its principal
executive offices at 2815 Scott Avenue, Suite C, St. Louis, Missouri 63103,
entered into a loan arrangement with Fleet Retail Finance Inc. (the "LENDER"),
pursuant to which the Lender established a revolving line of credit in the
Borrower's favor in accordance with the terms of a Loan and Security Agreement
of that date (as amended to date, the "ORIGINAL LOAN AGREEMENT"). In connection
with said Original Loan Agreement, the undersigned (the "GUARANTOR") executed
and delivered a LIMITED GUARANTY OF COLLECTION (the "GUARANTY") of the
Liabilities (as therein defined) of the Borrower to the Lender.

         Further, on the date hereof, the Borrower and the Lender shall enter
into a certain Amended and Restated Loan and Security Agreement pursuant to
which the Borrower and Lender shall amend and restate the terms and conditions
of the Original Loan Agreement (hereinafter, the Original Loan Agreement as so
amended and restated by the Amended and Restated Loan and Security Agreement,
and as such hereinafter may be modified, amended, supplemented or restated,
shall be referred to as the "LOAN AGREEMENT"). The Lender will not enter into
such Loan Agreement unless, among other things, the Guarantor executes and
delivers this Letter Agreement (the "LETTER AGREEMENT") to the Lender. Terms
used and not otherwise defined herein shall have the meanings attributed thereto
in the Loan Agreement.

         Therefore, to induce the Lender to enter into the Loan Agreement, the
Guarantor hereby warrants, represents, covenants, and agrees as follows:

1.       The Guarantor hereby ratifies and confirms the warranties and
         representations set forth in the Guaranty, and acknowledges that
         pursuant to the terms of the Guaranty, the Guarantor previously
         guaranteed the payment of the Liabilities of the Borrower to the Lender
         to the extent set forth in such Guaranty, that this acknowledgment is
         being executed as a confirmation of the Guarantor's obligations to
         Lender under the Guaranty and that, subject to the limitations
         contained in the Guaranty, the Guarantor shall remain liable for all of
         the Liabilities, now existing or hereafter arising, whether or not any
         similar confirmation letter is executed in the future.

2.       The Guarantor hereby acknowledges and agrees that he has no offsets,
         defenses, or counterclaims against the Lender with respect to his
         obligations under the Guaranty or otherwise, and to the extent that the
         Guarantor has any such offsets, defenses, or counterclaims, the
         Guarantor hereby WAIVES and RELEASES the same.

3.       It is agreed by the Lender that, upon Lender's satisfaction that the
         following conditions have been met, the Guaranty shall be deemed
         terminated and the

<PAGE>
Guarantor shall be deemed released from all obligations thereunder, and the
Lender shall execute such releases as Guarantor shall reasonably request:

               a.   No Suspension Event shall have occurred and be continuing;

               b.   The Borrower shall have received not less than $10,000,000
                    in cash proceeds from the IPO; and

               c.   The Borrower shall have made the payments required under
                    Section 2.22 of the Loan Agreement in full in cash.

This Letter Agreement is intended to take effect as a sealed instrument.

                                                 Very truly yours,

                                                 /s/ PETER EDISON
                                                 -------------------------------
                                                 PETER EDISON

ACCEPTED, ACKNOWLEDGED AND AGREED TO:

FLEET RETAIL FINANCE INC.
("LENDER")

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

                                       2<PAGE>

                                                                 EXHIBIT 10.17.1

================================================================================
FIRST AMENDMENT TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT                   FLEET RETAIL FINANCE INC.
================================================================================

         This First Amendment to Amended and Restated Loan and Security
Agreement (the "FIRST AMENDMENT") is made as of this 20th day of February, 2003
by and among

                           Fleet Retail Finance Inc. (the "LENDER"), a Delaware
                  corporation with offices at 40 Broad Street, Boston,
                  Massachusetts 02109,

                           and

                           Bakers Footwear Group, Inc., f/k/a Weiss and Neuman
                  Shoe Co. (the "BORROWER"), a Missouri corporation with its
                  principal executive offices at 2815 Scott Avenue, Suite C,
                  St. Louis, Missouri 63103,

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

                                   WITNESSETH:

         A. Reference is made to that certain Amended and Restated Loan and
         Security Agreement (the "LOAN AGREEMENT") dated as of June 11, 2002 by
         and among the Borrower and the Lender.

         B. The Borrower arid the Lender desire to modify and amend the Loan
         Agreement, to, among other things, extend the maturity date of the
         Sublimit Facility from February 20, 2003 to February 20, 2004, subject
         to the terms and conditions of this First Amendment.

         Accordingly, the Borrower and the Lender agree as follows:

         1. DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Loan Agreement.

         2. AMENDMENT TO ARTICLE 2. Section 2.22 of the Loan Agreement is hereby
deleted in its entirety and replaced by the following:

                  "2.22. Sublimit Facility.

                           As of February 20, 2003 (the "SUBLIMIT FACILITY
                  EXTENSION DATE"), the Lender agrees to make available to the
                  Borrower up to $2,000,000.00 in Revolving Credit Loans (the
                  "SUBLIMIT FACILITY") on the following terms and conditions:

                           (a) The Sublimit Facility shall terminate, and the
                           aggregate of Revolving Credit Loans outstanding under
                           the Sublimit Facility and any remaining installments
                           of the Sublimit Facility Fee (hereinafter referred
                           to) shall be due and payable in full, on the date
                           which is the earliest to occur of (i) February 20,
                           2004 and (ii) the Termination Date. The Sublimit
                           Facility is a part of the Revolving Credit and does
                           not, and shall not be deemed to, increase the
                           Revolving Credit

<PAGE>
                  Ceiling. Other than as specifically set forth in this Section
                  2.22, Revolving Credit Loans under the Sublimit Facility shall
                  be treated as are all other Revolving Credit Loans under this
                  Agreement including, without limitation, Section 2.10 hereof;
                  provided, however, that Revolving Credit Loans under the
                  Sublimit Facility shall not be subject to the Borrowing Base
                  limitations set forth in this Agreement regarding Revolving
                  Credit Loans (including, without limitation, Sections 2.1(b)
                  and 2.4(a) hereof). The Borrower has the right to terminate
                  the Sublimit Facility at any time upon written notice to the
                  Lender accompanied by payment in full of all Revolving Credit
                  Loans outstanding under the Sublimit Facility and the
                  applicable amount of the Sublimit Facility Fee referred to in
                  Section 2.22(b).

                  (b) In addition to any other fee or expense to be paid by the
                  Borrower on account of the Revolving Credit, a "SUBLIMIT
                  FACILITY FEE" (so referred to herein) of not more than
                  $400,000.00 shall be payable by the Borrower to the Lender as
                  a fee for making the Sublimit Facility available to the
                  Borrower (and regardless of whether or not any Revolving
                  Credit Loans are made at any time under the Sublimit Facility)
                  as follows:

                           (i) the Sublimit Facility Fee shall be paid to the
                           Lender in monthly installments of $33,333.00 each on
                           the first day of each month commencing with March 1,
                           2003; and

                           (ii) in any event, $200,000.00 of the Sublimit
                           Facility Fee shall be deemed fully earned by the
                           Lender on the Sublimit Facility Extension Date; if
                           the Sublimit Facility shall be terminated for any
                           reason prior to the payment of $200,000.00, the
                           Borrower shall pay to the Lender on such date of
                           termination the difference between $200,000.00 and
                           the amount of Sublimit Facility Fee previously paid
                           to Lender.

                  (c) The Borrower shall repay Revolving Credit Loans, if any,
                  outstanding under the Sublimit Facility such that (i)
                  Revolving Credit Loans outstanding under the Sublimit Facility
                  shall not exceed (x) $1,500,000.00 as of December 1, 2003, (y)
                  $1,000,000.00 as of January 1, 2004 and (z) $500,000.00 as of
                  February 1, 2004, and (ii) no Revolving Credit Loans shall be
                  outstanding, and the Sublimit Facility shall be terminated, on
                  February 20, 2004. The Lender agrees the first Revolving
                  Credit Loans to which it shall apply collected balances in
                  accordance with Section 7.5 hereof shall be Revolving Credit
                  Loans under the Sublimit Facility, if any.

                  (d) (i) Upon the termination of the Revolving Credit; (ii)
                  upon the occurrence of any Event of Default described in
                  Section 10.11; or (iii) at the option of the Lender upon the
                  occurrence of any other Event of Default, any unpaid
                  installments of the Sublimit Facility Fee for periods ending
                  on or prior to the date of such termination or Event of
                  Default, as the case may be, shall be immediately due and
                  payable, it being understood that, in any event, an aggregate
                  of not less than $200,000.00 shall be due and payable as a
                  Sublimit Facility Fee hereunder."

         3. AMENDMENTS TO ARTICLE 5. Sections 5.9(d) and 5.9(f) of the Loan
Agreement are hereby deleted in their entirety and replaced by the following,
respectively:

                                      -2-
<PAGE>
                          (d) The Lender contemplates conducting no less than
                  Two (2) and not more than Four (4) commercial finance audits
                  (in each event, at the Borrowers expense) of the Borrower's
                  books and records during any Twelve (12) month period during
                  which this Agreement is in effect, but in its discretion, may
                  undertake additional such audits during such period."

                          (f) The Lender agrees that prior to the occurrence of
                  any Event of Default, the maximum amount of third party fees
                  for which the Borrower shall, be obligated to reimburse the
                  Lender, cumulatively in any Twelve (12) month period during
                  which this Agreement is in effect, is the aggregate of the
                  following, plus out of pocket expenses:

                          Audits:     $25,000.00.
                          Appraisals:  45,000.00.

                  In the event of and following the occurrence of any Event of
                  Default, there shall not be any "cap" on such fees."

        4. AMENDMENTS TO EXHIBITS. Exhibits 4:4.6,4:4.9, 4:4.11,4:4.19,5:5.11(a)
and 7:7.1 are each hereby amended as set forth on respective Exhibits annexed
hereto.

        5. ADDITIONAL ACKNOWLEDGMENTS AND REPRESENTATIONS

                  (a) As an inducement for the Lender to execute this First
        Amendment, the Borrower hereby represents and warrants that as of the
        date hereof:

                          (i) no Suspension Event has occurred and is
                          continuing; and

                          (ii) other than with respect to the MVC Note (as such
                          term is defined below), none of the principal
                          outstanding under any Permitted Subordinated
                          Indebtedness has matured or otherwise become due and
                          payable and the maturity date of all of such
                          Permitted Subordinated Indebtedness is later than the
                          Maturity Date.

                  (b) In accordance with Section 5.10(c) of the Agreement,
        Lender hereby acknowledges receipt from Borrower of Borrower's forecast
        for the fiscal year ending January 4, 2004 and confirms that it has
        accepted such forecast which shall be deemed the current Business Plan
        under the Agreement.

        6. RATIFICATION OF LOAN DOCUMENTS; NO CLAIMS AGAINST LENDER. Except as
provided herein, all terms and conditions of the Loan Agreement and of the other
Loan Documents remain in full force and effect. Each of the Borrower and the
Guarantor hereby ratifies, confirms, and re-affirms all and singular the terms
and conditions, including execution and delivery, of the Loan Documents. There
is no basis nor set of facts on which any amount (or any portion thereof) owed
by the Borrower or the Guarantor to the Lender could be reduced, offset, waived,
or forgiven, by rescission or otherwise; nor is there any claim, counterclaim,
off set, or defense (or other right, remedy, or basis having a similar effect)
available to the Borrower or to the Guarantor with regard to the respective
Liabilities of the Borrower and the Guarantor to the Lender; nor is there any
basis on which the terms and conditions of any of the respective Liabilities of
the Borrower and of the Guarantor to the Lender could be claimed to be other
than as stated on the written instruments which evidence such Liabilities. To
the extent that the Borrower or the Guarantor has (or ever had any such claim
the Lender, each hereby affirmatively WAIVES and RELEASES same.

                                      -3-

<PAGE>
     7. CONDITIONS TO EFFECTIVENESS. This First Amendment shall not be effective
until each of the following conditions precedent have been fulfilled to the
satisfaction of the Lender:

        (a) This First Amendment shall have been duly executed and delivered by
     the respective parties hereto, shall be in full force and effect and shall
     be in form and substance satisfactory to the Lender;

        (b) All action on the part of the Borrower necessary for the valid
     execution, delivery and performance by the Borrower of this First Amendment
     shall have been duly and effectively taken and evidence thereof
     satisfactory to the Lender shall have been provided to the Lender. The
     Lender shall have received from the Borrower true copies of the resolutions
     adopted by the Directors of the Borrower authorizing the transactions
     described herein, certified by the secretary of the Borrower to be true
     and complete;

        (c) The Borrower shall have paid to the Lender all fees and expenses
     then due and owing pursuant to the Loan Agreement including, without
     limitation, any portion of the Sublimit Facility Fee due and owing under
     the Loan Agreement through the date hereof;

        (d) The Borrower shall have provided such additional instruments and
     documents to the Lender as the Lender and Lender's counsel may have
     reasonably requested, each in form and substance satisfactory to the
     Lender;

        (e) The promissory note (the "MVC NOTE") in the original principal
     amount of $500,000.00 dated June 22, 1999 made by Borrower to Mississippi
     Valley Capital, LLC ("MVC"), assignee of Mississippi Valley Capital
     Company, the Warrant (the "MVC WARRANT") to purchase shares of Class A
     Common Stock issued by the Borrower to MVC, and the Intercreditor and
     Subordination Agreement (the "MVC INTERCREDITOR AGREEMENT") dated as of
     June 22, 1999 by and among the Borrower, the Lender and MVC, shall each be
     amended or otherwise modified on terms and conditions satisfactory to
     Lender;

        (f) Peter Edison shall have executed and delivered a Confirmation of
     Guarantee in form and substance satisfactory to Lender and shall have
     delivered to Lender current personal financial statements including,
     without limitation, federal and state tax returns for the 2001 fiscal year;
     and

        (g) The Lender shall have received an opinion of counsel to the Borrower
     covering such matters and otherwise in form and substance satisfactory to
     the Lender.

     8. MISCELLANEOUS.

        (a) This First Amendment may be executed in several counterparts and by
     each party on a separate counterpart, each of which when so executed and
     delivered shall be an original, and all of which together shall constitute
     one instrument.

        (b) The First Amendment expresses the entire understanding of the
     parties with respect to the transactions contemplated hereby. No prior
     negotiations or discussions shall limit, modify, or otherwise affect the
     provisions hereof.

        (c) Any determination that any provision of this First Amendment or any
     application hereof is invalid, illegal, or unenforceable in any respect and
     in any instance shall not affect the validity, legality, or enforceability
     of such provision in any other instance, or the validity, legality, or
     enforceability of any other provisions of this First Amendment.

                                      -4-

<PAGE>

                  (d) The Borrower shall pay on demand all reasonable costs and
         expenses of the Lender, including, without limitation, reasonable
         attorneys' fees in connection with the preparation, negotiation,
         execution, and delivery of this First Amendment.

                  (e) This First Amendment shall be construed, governed, and
         enforced pursuant to the internal laws of The Commonwealth of
         Massachusetts and shall take effect as scaled instrument.

                        [SPACE INTENTIONALLY LEFT BLANK]

                                      -5-

<PAGE>
         IN WITNESS WHEREOF, the parties have hereunto caused this First
Amendment to be executed ad their seals to be hereto affixed as of the date
first above written.

                                                 BAKERS FOOTWEAR GROUP, INC.,
                                                 F/K/A WEISS AND NEUMAN SHOE CO.

                                                 By /s/ PETER EDISON
                                                    ----------------------------
                                                 Name Peter Edison
                                                      --------------------------
                                                 Title Chief Executive Officer
                                                       -------------------------

                                                 FLEET RETAIL FINANCE INC.

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

         The undersigned Guarantor hereby consents to the terms and conditions
of this First Amendment and hereby joins in the acknowledgments and agreements
set forth in this First Amendment, all as of the date first above written.

/s/ PETER EDISON
--------------------------------
PETER EDISON

                                      S-1
<PAGE>

         IN WITNESS WHEREOF, the parties have hereunto caused this First
Amendment to be executed and their seals to be hereto affixed as of the date
first above written.

                                            BAKERS FOOTWEAR GROUP, INC.,
                                            F/K/A WEISS AND NEUMAN SHOE CO.

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

                                            FLEET RETAIL FINANCE INC.

                                            By /s/ EVAN ISREALSON
                                              ----------------------------------
                                            Name EVAN ISREALSON
                                                --------------------------------
                                            Title ?VP
                                                 -------------------------------

         The undersigned Guarantor hereby consents to the terms and conditions
of this First Amendment and hereby joins in the acknowledgements and agreements
set forth in this First Amendment, all as of the date first above written.

--------------------------------
PETER EDISON

                                      /S-1/

[Exhibit 4.4.7(c)(ii) Equipment Usage Agreements; Exhibit 4.6 Locations, Leases,
and Landlords; Exhibit 4.\7 Encumbrances; Exhibit 4.9 Insurance Policies;
Exhibit 4.11 Capital Leases; and Exhibit 4.19 Litigation to this Exhibit 10.17.1
have been omitted. The registrant undertakes to furnish supplementally a copy of
such exhibits upon request.]
<PAGE>

                               EXHIBIT 5:5.11(a)

                        FINANCIAL PERFORMANCE COVENANTS

CAPITAL EXPENDITURES:

The Borrower shall not permit or suffer its Unfunded Capital Expenditures for
the fiscal year ending January 4, 2004 to be greater than $2,300,000; Unfunded
Capital Expenditures for any fiscal year thereafter shall be set based on the
Business Plan of Borrower pursuant to Section 5.11 of the Loan Agreement.

MINIMUM AVAILABILITY:

The Borrower shall maintain at all times Availability of not less than $1.5
Million, except that, Availability may be less than $1.5 Million for nor more
than three (3) consecutive Business Days in any month.

EBITDA:

The Borrower shall not permit its EBITDA to be less than the amounts set forth
below, in each case measured for the period from March 2, 2003 through the date
indicated:

<Table>
<Caption>

         DATE                           MINIMUM EBITDA
         ----                           --------------
<S>                                <C>
April 5, 2003                      ($564,563.00)

May 3, 2003                        ($68,842.00)

May 31, 2003                       $422,575.00

July 5, 2003                       $1,227,036.00

August 2, 2003                     $36,324.00

August 30, 2003                    $522,638.00

October 4, 2003                    $1,149,748.00

November 1, 2003                   $1,336,452.00

November 29, 2003                  $2,180,198.00

January 3, 2004                    $7,035,338.00
</Table>

[Exhibit 7.1 DDA's to this Exhibit 10.17.1 has been omitted. The registrant
undertakes to furnish supplementally a copy of such exhibit upon request.]

<PAGE>

         AMENDED AND RESTATED INTERCREDITOR AND SUBORDINATION AGREEMENT

                             Preliminary Statement

     This Amended and Restated Intercreditor and Subordination Agreement (this
"AGREEMENT") is made by and among BAKERS FOOTWEAR GROUP, INC., f/k/a Weiss
and Neuman Shoe Co. (the "COMPANY"), MISSISSIPPI VALLEY CAPITAL, LLC (the
"SUBORDINATED CREDITOR") and FLEET RETAIL FINANCE INC. ("FLEET" or "SENIOR
LENDER").

     WHEREAS, the Company, Mississippi Valley Capital Company ("MVCC") and
Senior Lender entered into that certain Intercreditor and Subordination
Agreement  dated as of January 18, 2000 (the "ORIGINAL SUBORDINATION
AGREEMENT") in accordance with which the parties agreed to the subordination of
the indebtedness owned by the Company to the Subordinated Creditor under the
"Subordinated Note" and "Warrant" (as each such term is defined in the Original
Subordination Agreement; such Subordinated Note is referred to herein as the
"ORIGINAL NOTE" and the Warrant as the "ORIGINAL WARRANT") to the Liabilities
under the Loan and Security Agreement dated as of January 18, 2000 between the
Company and the Senior Lender (as amended, the "ORIGINAL LOAN AGREEMENT");

     WHEREAS, the Company and the Senior Lender amended and restated the
Original Loan Agreement as of June 11, 2002 (the "LOAN AGREEMENT"); capitalized
terms used herein and not otherwise defined shall have the same meanings
ascribed to them in the Loan Agreement;

     WHEREAS, MVCC assigned its interest in the Original Note and the Original
Warrant to Subordinated Creditor pursuant to that certain Assignment of
Transaction and Transaction Documents dated as of January 30, 2003;

     WHEREAS, the Subordinated Creditor and the Company amended and restated
the Original Note and Original Warrant as of January 31, 2003 and the
Subordinated Creditor is now the holder of an Amended and Restated Promissory
Note issued by the Company in the principal amount of $500,000 (the
"SUBORDINATED NOTE"), and an Amended and Restated Warrant to Purchase Shares of
Class A Common Stock of Bakers Footwear Group, Inc., f/k/a Weiss and Neuman
Shoe Co. issued pursuant to the Subordinated Note (the "WARRANT") copies of each
which are attached hereto as Exhibit 1;

     WHEREAS, the Company has granted to the Subordinated Creditor a second
priority lien on the Collateral pursuant to a Security Agreement dated as of
January 31, 2003 between the Company and the Subordinated Creditor (the
"SECURITY AGREEMENT"); and

     WHEREAS, the obligation of the Senior Lender to continue to make the Loans
to the Company under the Loan Agreement is subject to the condition, among
others, that the Subordinated Creditor and the Company each agrees to the
subordination provisions contained herein.

     NOW THEREFORE, FOR VALUABLE CONSIDERATION, the receipt and sufficiency of

                                       1

<PAGE>

which are hereby acknowledged, and in consideration of the willingness of the
Senior Lender to continue to make the Loans to the Company pursuant to the Loan
Agreement, the Company and the Subordinated Creditor, jointly and severally,
agree with the Senior Lender that the Original Subordination Agreement shall be
amended and restated in its entirety as follows:

1.   Subordination of Indebtedness and Subordination of Lien.

     a.   The Subordinated Creditor hereby subordinates all present and future
          indebtedness of the Company to the Subordinated Creditor including but
          not limited to the Indebtedness evidenced by the Subordinated Note
          and the Warrant, together with any and all Indebtedness of or rights
          of the Subordinated Creditor against any guarantor of the Senior
          Indebtedness (collectively, the "SUBORDINATED INDEBTEDNESS"), to any
          and all Indebtedness now or hereafter owing by the Company to the
          Senior Lender (collectively, the "SENIOR INDEBTEDNESS") and agrees
          that the Subordinated Indebtedness shall be junior in right of payment
          and exercise of remedies to the Senior Indebtedness.

     b.   The security interests of the Senior Lender in the Collateral shall
          be deemed to have a priority senior to any security interest of the
          Subordinated Creditor in the Collateral. The Senior Lender's priority
          shall be irrespective of the time, order or method of attachment or
          perfection of security interests, or the time or order of filing of
          mortgages or financing statements or taking of possession, or the
          giving of or failure to give notice of purchase money security
          interests. The lien priorities provided in this Section 1(b) shall not
          be altered or otherwise affected by any amendment, modification,
          supplement, extension, renewal, restatement or refinancing of either
          the Senior Indebtedness or the Subordinated Indebtedness, or any
          portion thereof, nor by any action or inaction which either the Senior
          Lender or the Subordinated Creditor may take or fail to take in
          respect of the Collateral.

2.   Payments.

     a.   Subject to Section 2(c) below, for so long as any Senior Indebtedness
          remains outstanding, the Subordinated Creditor shall be entitled to
          receive and retain only those regularly scheduled payments (without
          acceleration) of interest on the Subordinated Note (the "SCHEDULED
          INTEREST PAYMENTS"), to the extent and in the manner set forth in the
          Subordinated Note. The Company shall not pay, and the Subordinated
          Creditor shall not accept payment of, the Warrant Redemption Price.

     b.   Subject to Section 2(c) below, for so long as any Senior Indebtedness
          remains outstanding, commencing with March 1, 2004 the Subordinated
          Creditor shall be entitled to receive and retain prepayments of the
          Subordinated Indebtedness (other than payments or prepayments of the
          Warrant Redemption Price) in an amount not to exceed $400,000 in any
          fiscal year, so long as prior to the Company making and the
          Subordinated Creditor receiving such permitted prepayment of
          Subordinated

                                       2

<PAGE>

          Indebtedness, the Senior Lender shall have received the Company's
          audited financial statements for the fiscal year just ended, which
          audited financial statements shall show that (i) the Company had
          positive net income for such fiscal year, (ii) the Company has minimum
          Availability under (and from time to time defined in) the Loan
          Agreement (after giving effect to any such prepayment of Subordinated
          Indebtedness) of $3,000,000, (iii) as of such date, there exists no
          Default (as defined below) under the Loan Agreement, and no Default
          will occur by reason of the making of any such prepayment of
          Subordinated Indebtedness and (iv) the aggregate amount of prepayments
          of all Permitted Subordinated Indebtedness (including any such
          prepayment of Subordinated Indebtedness) of the Company does not
          exceed $500,000 in any fiscal year of the Company.

     c.   Notwithstanding the provisions of Sections 2(a) and 2(b) above, the
          Company and the Subordinated Creditor covenant to and agree with the
          Senior Lender that upon the occurrence of a default or event of
          default under the Loan Agreement (collectively, a "DEFAULT"), the
          Subordinated Creditor's right to receive and retain the Scheduled
          Interest Payments under the Subordinated Note shall immediately cease.
          The Senior Lender covenants to give written notice to the Subordinated
          Creditor promptly upon the cure by the Company or waiver by the Senior
          Lender of any Default (any such notice being referred to herein as a
          "CURE OR WAIVER NOTICE"). The Subordinated Creditor agrees not to
          demand, accept or receive any payment in respect of the Subordinated
          Indebtedness or take any action of any kind whatsoever with respect to
          the Collateral after the occurrence of a Default, including, without
          limitation, any payment received through the exercise of any right of
          setoff, counterclaim, cross-claim or otherwise, or any collateral
          therefor, until the earlier to occur of (i) receipt by the
          Subordinated Creditor of a Cure or Waiver Notice signed by the Senior
          Lender, or (ii) receipt by the Subordinated Creditor of written
          confirmation from the Senior Lender that the Senior Indebtedness has
          been paid in full in cash. Without limiting the foregoing, the Company
          agrees that no amount shall be paid in respect of the Subordinated
          Indebtedness, whether in cash, property, securities or otherwise, by
          the Company to the Subordinated Creditor, or any additional Collateral
          or interests therein given to Subordinated Creditor, during the
          pendency of a Default under the Loan without the prior written consent
          of the Senior Lender or the issuance by the Senior Lender of a Cure or
          Waiver Notice, in which event the Scheduled Interest Payments may
          resume.

3.   Bankruptcy; Insolvency; Acceleration of Senior Indebtedness, etc.

     a.   In the event of an insolvency, bankruptcy, receivership, liquidation,
          acceleration and demand for repayment of the Senior Indebtedness,
          reorganization or other similar proceedings relative to the Company or
          to its assets, or in the event of any proceedings for voluntary
          liquidation, dissolution or other winding up of the Company, whether
          or not involving insolvency or bankruptcy (any such proceeding
          referenced above being referred to herein as an "INSOLVENCY
          PROCEEDING"), so long as any Senior Indebtedness is outstanding, the
          Senior Lender shall be entitled in any such proceedings to receive

                                       3

<PAGE>

          payment in full in cash of all Senior Indebtedness before the
          Subordinated Creditor is entitled in such proceeding to receive any
          payment on account of the Subordinated Indebtedness, and to that end
          in any such proceedings, so long as any Senior Indebtedness remains
          outstanding, any payment or distribution of any kind or character,
          whether in cash or in other property, to which the Subordinated
          Creditor would be entitled but for the provisions hereof, shall be
          delivered to the Senior Lender to the extent necessary to make payment
          in full in cash of all Senior Indebtedness remaining unpaid, after
          giving effect to any concurrent payment or distribution to the holders
          of Senior Indebtedness.

     b.   Upon the commencement of an Insolvency Proceeding, the Subordinated
          Creditor shall be deemed, in order to effectuate the subordination set
          forth above, to have assigned the Subordinated Indebtedness to the
          Senior Lender and granted to the Senior Lender as of the date of the
          commencement of such Insolvency proceeding the right to collect all
          payments and distributions of any kind and description, whether in
          cash or other property, thereafter paid or payable in respect of any
          claims or demands of the Subordinated Creditor against the Company
          arising from the Subordinated Indebtedness. Upon the commencement of
          an Insolvency Proceeding, the Subordinated Creditor shall also be
          deemed to have granted to the Senior Lender the full right (but no
          obligation), in its own name or in its name as attorney in fact for
          the Subordinated Creditor, to collect and enforce said claims and
          demands of the Subordinated Creditor by suit, proof of claim in
          bankruptcy or other liquidation, reorganization or insolvency
          proceedings or otherwise. The Subordinated Creditor by its execution
          of this Agreement also hereby grants to the Senior Lender: (i) the
          exclusive right to vote any and all claims of the Subordinated
          Creditor in any Insolvency Proceeding involving the Company with
          respect to the election of a trustee or similar official and with
          respect to any proposed plan of reorganization of the Company; and
          (ii) the exclusive right to object to any proposed plan of
          reorganization relating to the Company to which the Subordinated
          Creditor otherwise would have standing to object in an Insolvency
          Proceeding.

4.   Turn-Over of Payments and/or Collateral Received by Subordinated Creditor.
     In the event that notwithstanding the provisions of the Loan Agreement and
     this Agreement:

     a.   The Company shall make any payment to the Subordinated Creditor not
          expressly authorized hereby, such payment shall be held in trust by
          the Subordinated Creditor, for the benefit of the Senior Lender, and
          shall be paid over immediately (upon demand) to the Senior Lender for
          application in accordance with the Loan Agreement to the payment of
          all Senior Indebtedness remaining due and payable until the same shall
          have been paid in full, in cash, after giving effect to any concurrent
          payment or distribution to the holders of such Senior Indebtedness. In
          the event of the failure of the Subordinated Creditor to endorse any
          instrument for the payment of money so received by the Subordinated
          Creditor, the Senior Lender is irrevocably appointed attorney-in-fact
          for the Subordinated Creditor with full power to make such endorsement
          and with

                                       4

<PAGE>

          full power of substitution.

     b.   The Subordinated Creditor receives any Collateral, and/or any
          additional collateral to secure the Subordinated Indebtedness, the
          Subordinated Creditor shall deliver same to the Senior Lender,
          immediately upon receipt thereof.

     c.   The Subordinated Creditor receives any payment on account of the
          Collateral, including but not limited to payments made or Collateral
          granted as adequate protection in connection with a bankruptcy
          proceeding of the Company, the Subordinated Creditor shall hold such
          payment in trust for the Senior Lender and shall not commingle such
          payments with any other funds of the Subordinated Creditor. The
          Subordinated Creditor shall deliver all such payments to the Senior
          Lender immediately upon the receipt thereof by the Subordinated
          Creditor in the identical form received, duly endorsed to the Senior
          Lender.

5.   Obligations Absolute. The provisions of this Agreement are for the
     purpose of defining the relative rights of the Senior Lender on the one
     hand and the Subordinated Creditor on the other hand with respect to the
     enforcement of rights and remedies and priority of payment of the various
     obligations of the Company to each of them. Nothing herein shall impair, as
     between the Company and the Subordinated Creditor, the obligations of the
     Company, which are unconditional and absolute, to pay to the holder thereof
     the principal and interest thereon and any other liabilities encompassed in
     the Subordinated Indebtedness, all in accordance with the respective terms,
     subject to the prior payment in full in cash of the Senior Indebtedness.

6.   Subordination Not Affected. Without the necessity of any reservation of
     rights against or any notice to or further assent by the Subordinated
     Creditor, (i) any demand for payment of any Senior Indebtedness made by the
     Senior Lender may be rescinded in whole or in part by the Senior Lender,
     (ii) the Senior Lender may exercise or refrain from exercising any rights
     and/or remedies against the Company and others, if any, liable under the
     Senior Indebtedness, and (iii) the Senior Indebtedness and any agreement or
     instrument evidencing, securing, or otherwise relating to the Senior
     Indebtedness (including without limitation, the Loan Agreement and the
     other Loan Documents), or any collateral security therefor or guaranty
     thereof or other right of any nature with respect thereto, may be amended,
     extended, modified, continued, accelerated, compromised, waived,
     surrendered or released by the Senior Lender, in any manner the Senior the
     subordination of the Subordinated Indebtedness to the Senior
     Indebtedness provided for herein Lender deems in its best interests, all
     without impairing, abridging, releasing or affecting in any manner. Without
     limiting the foregoing, the Subordinated Creditor waives any and all notice
     of the creation, amendment, restatement, extension, acceleration,
     compromise, continuation, waiver, surrender, release or modification of any
     nature of Senior Indebtedness, the Loan Agreement or the other Loan
     Documents, and notice of or proof of reliance by the Senior Lender upon the
     subordination provided for herein. The Senior Indebtedness shall
     conclusively be deemed to have been created, contracted and incurred in
     reliance upon the provisions of this Agreement.

                                       5
<PAGE>

7.   Warranties, Representations, Covenants and Acknowledgements of the
     Subordinated Creditor.

     a.   The Subordinated Creditor represents to the Senior Lender that all
          existing Indebtedness of the Company to the Subordinated Creditor is
          evidenced by the Subordinated Note and the Warrant. The Subordinated
          Creditor further represents that said Indebtedness has not heretofore
          been assigned, pledged to, or subordinated in favor of, any other
          Person.

     b.   The Subordinated Creditor hereby covenants and agrees that it will
          not amend or permit amendment of the terms of any agreement, document
          or instrument hereafter evidencing any Subordinated Indebtedness,
          without the prior written consent of the Senior Lender, including,
          without limitation, any amendment that would: (i) increase the
          principal amount of the Subordinated Indebtedness; (ii) increase the
          rate of interest accruing on the Subordinated Indebtedness; (iii)
          change in any manner the dates upon which any principal or interest
          payment on the Subordinated Indebtedness is due; (iv) change in any
          manner, or add, affirmative or negative covenants, events of default,
          redemption provisions or subordination provisions of any Subordinated
          Indebtedness; or grant to the Subordinated Creditor the right to
          purchase, or to cause the Company to issue, equity interests in the
          Company. This Section 7(b) shall not operate to preclude the
          Subordinated Creditor from (i) causing the Company to issue the Common
          Stock under and as defined in the Warrant, (ii) extending the maturity
          date of the Subordinated Note, as provided therein, or (iii) causing
          the Company to execute a promissory note in the original principal
          amount of $800,000.00, payable to the order of Subordinated Creditor,
          in lieu of the payment of the Warrant Redemption Price (as provided in
          the Warrant), subject to the applicable provisions of the Loan
          Agreement.

     c.   The execution, delivery and performance of this Agreement has been
          duly authorized by all necessary corporate, partnership or other
          action on the part of the Subordinated Creditor, and this Agreement
          constitutes a valid and binding obligation of the Subordinated
          Creditor, enforceable against it in accordance with its terms.

     d.   The Subordinated Creditor covenants and agrees that it will not
          assign, pledge, sell, transfer or otherwise dispose of any of the
          Subordinated Indebtedness or interests herein, whether through
          assignment or participation or otherwise, except to a Person who first
          becomes a party hereto and accepts without qualification all
          obligations of the Subordinated Creditor hereunder.

     e.   The Subordinated Creditor covenants and agrees that it will (i) in
          order to effectuate its agreement in Section 4(b) above, endorse in
          favor of and deliver to the Senior Lender (immediately upon receipt
          thereof) any evidence of, or collateral for, the Subordinated
          Indebtedness, and (ii) execute all such documentation as the Senior
          Lender may reasonably request from time to time in order to facilitate
          the liquidation of the Collateral by the Company and/or the exercise
          of the Senior Lender's rights and remedies under the Loan Agreement
          and other Loan Documents, it being understood

                                       6
<PAGE>

          that, subject to the Senior Lender's prior rights therein, the
          Subordinated Creditor's security interest in the Collateral shall
          attach to the net proceeds (if any) of such liquidation or exercise to
          the extent that the Subordinated Creditor is entitled thereto. Such
          documentation may include, without limitation, terminations of
          financing statements which the Senior Lender may file in connection
          with the liquidation or exercise. In the event the Senior Lender, in
          connection with its exercise of its rights and remedies hereunder,
          requests the Subordinated Creditor to prepare and file amendments or
          terminations of any financing statement and the Subordinated Creditor
          fails to provide such amendments or terminations within ten (10) days
          of the Senior Lender's request, then the Senior Lender shall be
          authorized, and this Agreement shall constitute an authenticated
          record authorizing the Senior Lender to, file such amendments or
          terminations.

     f.   The Subordinated Creditor acknowledges and agrees that this Agreement
          is a "subordination agreement" within the meaning of Section 510(a) of
          the United States Bankruptcy Code (the "CODE"), 11 U.S.C. Section
          510(a).

8.   Validity and Enforceability of Liens Securing Senior Indebtedness;
     Cooperation with Senior Lender; Application of Proceeds.

     a.   The Subordinated Creditor will not in any proceeding, whether in
          connection with a bankruptcy or insolvency or other event described in
          Section 2 or otherwise, challenge, oppose or contest (or join in any
          challenge, opposition or contest by any third party, or encourage any
          third party to challenge, oppose or contest) the Senior Indebtedness
          or the perfection, superiority, priority, validity or enforceability
          of any security interest or lien granted to the Senior Lender pursuant
          to the Loan Agreement, the Security Documents or other Loan Documents,
          nor will the Subordinated Creditor challenge the validity or
          enforceability of such Loan Agreement, Security Documents or other
          Loan Documents, or any provision thereof. The Subordinated Creditor
          hereby acknowledges that the provisions of this Agreement are intended
          to be enforceable at all times, whether before or after any proceeding
          or other event described in Section 2 of this Agreement. The
          Subordinated Creditor hereby waives any right to require the Senior
          Lender to marshal the collateral for such Senior Indebtedness.

     b.   Without limiting the foregoing, the Subordinated Creditor will not
          challenge or oppose (or join with any party challenging or opposing)
          or take any action whatsoever to impair the exercise by the Senior
          Lender of the rights and remedies granted to the Senior Lender in the
          Loan Document.

     c.   Upon the entry of an order for relief with respect to the Company
          pursuant to Title 11 of the Code, the Subordinated Creditor shall not
          (i) object to or oppose any motions filed by the Senior Lender
          including, without limitation, any motion for relief from the
          automatic stay pursuant to Section 362 of the Code, any motion to
          approve debtor in possession financing pursuant to Section 364 of the
          Code, or any motion filed by the

                                       7

<PAGE>

          Company to conduct a sale of any or all of the Collateral pursuant to
          Section 363 of the Code; or (ii) provide or cause an affiliate of the
          Subordinated Creditor to provide debtor in possession financing
          pursuant to Section 364 of the Code.

     d.   The Senior Lender shall have no duty as to the collection or
          protection of the Collateral or any income or distribution thereon,
          beyond the safe custody of such of the Collateral as may come into the
          possession of the Senior Lender, and shall have no duty as to the
          preservation of any rights pertaining thereto, including, without
          limitation, any rights against prior parties.

     e.   In the event of a sale, transfer or other disposition of any
          Collateral, the Subordinated Creditor agrees that any security
          interest or lien of the Subordinated Creditor in or on such Collateral
          shall terminate and be released automatically and without further
          action to the extent that the Senior Lender terminates and releases
          its security interest in or lien on such Collateral, and the
          Subordinated Creditor further agrees to execute all necessary
          instruments and documents to evidence such termination and release. In
          the event any Collateral, or any collections or other proceeds
          thereof, shall be received by the Subordinated Creditor at any time
          for any such reason, such Collateral and proceeds shall be held in
          trust for the benefit of, and promptly remitted to, the Senior Lender.

     f.   The proceeds (if any) received by the Senior Lender on account of
          the Collateral shall be applied towards the Senior Indebtedness in
          such order and manner as the Senior Lender determines in its sole and
          exclusive discretion. Any such proceeds received by the Senior Lender
          in excess of the amounts necessary to satisfy the Senior Indebtedness
          in full shall be paid to the Subordinated Creditor or in accordance
          with any applicable law or court order.

9.   Limitations on Remedies. Upon any event of default in respect of the
     Subordinated Indebtedness, the Subordinated Creditor shall not (1)
     accelerate all or any portion of the Subordinated Indebtedness, (2)
     commence or join (unless the Senior Lender shall also commence or join) in
     any involuntary proceeding against the Company or any of its Subsidiaries
     under any bankruptcy, reorganization, readjustment of debt, arrangement of
     debt, receivership, liquidation or insolvency law or statute of any federal
     or state government, (3) commence any action or against the Company or any
     of its Subsidiaries to enforce payment of all or any part of the
     Subordinated Indebtedness or (4) commence or continue any foreclosure or
     liquidation proceedings or remedies or take any action (other than to
     perfect or to continue the perfection of, the lien of the Subordinated
     Creditor in any Collateral) in respect of any of the Collateral, or
     exercise any other of the Subordinated Creditor' rights, remedies, powers,
     privileges, and discretions with respect to the Collateral, for a period of
     180 days after receipt by the Senior Lender from the Subordinated Creditor
     of written notice of such event of default (the "STANDSTILL PERIOD");
     provided, however, that if before the expiration of the Standstill Period
     (i) the Senior Lender accelerates all or any portion of the Senior
     Indebtedness, (ii) if the event of default under the Subordinated
     Indebtedness is caused solely by the occurrence of a Default under the
     Senior Indebtedness, Senior Lender delivers to the Subordinated Creditor a

                                       8
<PAGE>

     Cure or Waiver Notice in accordance with Section 2(c) hereof, or (iii) the
     Senior Lender in its sole discretion, shall cure the event of default under
     the Subordinated Indebtedness which gave rise to the Standstill Period (it
     being understood that Senior Lender shall have absolutely no obligation to
     the Company or the Subordinated Creditor to so cure any such event of
     default and, furthermore, that if Senior Lender shall cure any such event
     of default it shall not be obligated under any circumstances to cure any
     other event of default at any time occurring), then the Subordinated
     Creditor shall continue to forbear after the Standstill Period from the
     exercise of any rights or remedies against the Company or the Collateral
     unless the Senior Lender consents in writing to the exercise of such rights
     and remedies. If the forbearance of Subordinated Creditor after expiration
     of a Standstill Period has not occurred in accordance with the prior
     sentence, then the Subordinated Creditor shall be entitled to exercise (for
     the benefit of the Senior Lender until the Senior Lender is paid in full in
     cash) its rights and remedies against the Company or Collateral after five
     (5) days advance written notice to the Senior Lender. Nothing contained in
     this Section 9 shall limit or impair the obligations and agreements of the
     Subordinated Creditor set forth in Sections 1 and 2 of this Agreement.

10.  Assignments and Appointments. The Subordinated Creditor, for itself and
     its successors and assigns, hereby irrevocably authorizes and directs the
     Senior Lender, and any trustee or debtor in possession in bankruptcy,
     receiver, custodian or assignee for the benefit of creditors of the
     Company, whether in voluntary or involuntary liquidation, dissolution or
     reorganization, on his or its behalf, to take such action as may be
     necessary or appropriate to effectuate the subordination provided for in
     this Agreement and irrevocably appoints the Senior Lender any such trustee,
     receiver, custodian or assignee, their attorney-in-fact for such purpose
     with full powers of substitution and revocation.

11.  No Impairment. No right of the Senior Lender to enforce subordination as
     herein provided shall at any time or in any way be affected or impaired by
     any failure to act on the part of the Company, or by any non-compliance by
     the Company with any of the terms, provisions and covenants of the
     agreement, documents and instruments evidencing the Subordinated
     Indebtedness, regardless of any knowledge thereof that the Senior Lender
     may have or be otherwise charged with, or by any action which the Senior
     Lender may take or refrain from taking with respect to the Senior
     Indebtedness or the Subordinated Indebtedness.

12.  Further Assurances. In order to carry out the terms and intent of this
     Subordination Agreement more effectively, the Subordinated Creditor will
     take all actions and execute all further documents and instruments
     reasonably necessary or convenient to preserve for the Senior Lender the
     benefits of this Agreement.

13.  Waivers, etc. No action which the Senior Lender, or the Company with the
     consent of the Senior Lender, may take or refrain from taking with respect
     to any Subordinated Indebtedness, or any promissory note or notes
     representing the same, or any collateral therefor, including any waiver or
     release thereof (or any waiver of any provision thereof or default
     thereunder) or of any agreement or agreements (including guaranties) in
     connection therewith, shall affect this Agreement or the rights of the
     Senior Lender or the obligations of the Subordinated Creditor

                                       9

<PAGE>

     hereunder. No waiver shall be deemed to be made by the Senior Lender of any
     of its rights hereunder unless the same shall be in writing and then only
     with respect to the specific instance involved, and shall in no way impair
     or offset the rights of the Senior Lender or the obligations of the
     Subordinated Creditor in any other respect or at any other time.

14.  Notices.

     a.   By the Senior Lender to the Subordinated Creditor. The Senior Lender
          shall endeavor to provide the Subordinated Creditor with notice of any
          default or event of default by the Company under the Loan Agreement
          simultaneously with giving notice to the Company, provided that any
          failure by the Senior Lender to give such notice shall not affect or
          limit the senior Lender's rights hereunder.

     b.   By the Subordinated Creditor to the Senior Lender. The Subordinated
          Creditor shall provide the Senior Lender with notice of any default
          relating to any Subordinated Indebtedness simultaneously with giving
          notice to the Company.

     c.   By the Company to the Senior Lender. The Company shall provide the
          Senior Lender with copies of all notices of any default received by it
          from the Subordinated Creditor immediately upon its receipt thereof.

     d.   By the Company to the Subordinated Creditor. The Company shall
          provide the Subordinated Creditor with copies of all notices of any
          default given by it to the Lender or received by it from the Senior
          Lender immediately upon its delivery or receipt thereof.

     e.   Method. Except as otherwise provided herein, all demands or notices
          hereunder shall be in writing and shall be deemed to have been
          sufficiently given or served for all purposes hereof if personally
          delivered or mailed or transmitted by (a) telecopy if the sender on
          the same day sends a confirming copy of such communication by a
          recognized overnight delivery services (charges prepaid), (b)
          recognized overnight delivery services (charges prepaid) or (c) first
          class mail, postage prepaid, to them as their respective addresses as
          set forth on the signature pages hereto and incorporated herein by
          reference, or at such other address as the party to whom such notice
          is directed may have designated in writing to the other party hereto.
          A notice shall be deemed to have been given upon the earlier to occur
          of (i) three (3) days after the date on which it is deposited in the
          U.S. mails or (ii) receipt by the party to whom such notice is
          directed.

15.  Miscellaneous. This Agreement shall be binding upon the Subordinated
     Creditor and the Company and their respective heirs, legal representatives,
     successors and assigns and shall inure to the benefit of the Senior Lender
     and its legal representatives, successors and assigns (including without
     limitation any transferee of any Senior Indebtedness). The Senior Lender
     may assign this Agreement or its rights thereunder without the consent of
     the Subordinated Creditor or the Company. This Agreement may be executed in
     any number of counterparts and

                                       10
<PAGE>

     by the different parties hereto on separate counterparts, each of which
     when so executed and delivered shall be an original, but all of the
     counterparts shall together constitute one and the same instrument.

16.  Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement,
     including the validity hereof and the rights and obligations of the parties
     hereunder, shall be construed in accordance with and governed by the
     internal laws of the Commonwealth of Massachusetts (without regard to
     conflicts of law principals). The Subordinated Creditor, to the extent that
     the Subordinated Creditor may lawfully do so, hereby consents to service of
     Creditor may lawfully do so, hereby consents to service of process, and to
     be sued, in the Commonwealth of Massachusetts and consents to the
     jurisdiction of the courts of the Commonwealth of Massachusetts and the
     United States District Court for the District of Massachusetts, as well as
     to the jurisdiction of all courts to which an appeal may be taken from such
     courts, for the purpose of any suit, action or other proceeding arising out
     of any of such Subordinated Creditor's Obligations hereunder or with
     respect to the transactions contemplated hereby, and expressly waives any
     and all objections as to venue in any such courts. The Subordinated
     Creditor further agrees that a summons and complaint commencing an action
     or proceeding in any of such courts shall be properly served and confer
     personal jurisdiction if served personally or by certified mail at the
     address set forth below under the signature of the Subordinated Creditor or
     as otherwise provided under the laws of the Commonwealth of Massachusetts.
     EACH OF THE COMPANY AND THE SUBORDINATED CREDITOR IRREVOCABLY WAIVES ALL
     RIGHT TO A TRIAL BY JURY IN ANY SUIT, ACTION, OR OTHER PROCEEDING HEREAFTER
     INSTITUTED BY OR AGAINST IT IN RESPECT OF ITS OBLIGATIONS HEREUNDER OR THE
     TRANSACTIONS CONTEMPLATED HEREBY.

17.  Acknowledgment by Company. The Company covenants and agrees not to make any
     distribution or payment to the Subordinated Creditor in violation of the
     terms of this Agreement.

18.  Legends. The Subordinated Creditor covenants and agrees that until all
     Senior Indebtedness is paid in full in cash, the Subordinated Note, the
     Warrant and the Security Agreement, and each promissory note or other
     instrument at any time evidencing Subordinating Indebtedness, shall bear at
     all times, in a conspicuous manner, the following legend:

          This [Note/Warrant/Security Agreement] and the indebtedness evidenced
          hereby are subordinate, in the manner and to the extent set forth in
          that Amended and Restated Intercreditor and Subordination Agreement
          (as amended, supplemented or otherwise modified from time to time, the
          "SUBORDINATION AGREEMENT") dated as of April 8, 2003 between and
          among Bakers Footwear Group, Inc., f/k/a Weiss & Neuman Shoe Co. (as
          the "COMPANY"), Mississippi Valley Capital, LLC (as the
          "SUBORDINATED CREDITOR") and the Senior Lender named therein, to all
          indebtedness owed by the maker of this [Note/Warrant/Security
          Agreement] to the Senior Lender, and the holder of this
          [Note/Warrant/Security Agreement], by its acceptance hereof, shall be
          bound by the provisions of the Subordination Agreement.

                                       11

<PAGE>

This Agreement is executed as a sealed instrument as of the 8th day of
April, 2003.

                 COMPANY

                 BAKERS FOOTWEAR GROUP, INC., f/k/a Weiss and Neuman Shoe Co.

                 By: /s/ PETER EDISON
                    ------------------------------------
                 Name: Peter Edison
                 Title: Chief Executive Officer
                 Address: 2815 Scott Avenue, Suite C, St. Louis, MO 63103
                 Telecopier: 314-641-0390

                 SUB ORDINATED CREDITOR

                 MISSISSIPPI VALLEY CAPITAL, LLC

                 By:
                    ------------------------------------
                 Name: Scott D. Felser
                 Title: Manager
                 Address: 101 South Hanley Road, Suite 1250, St. Louis, MO 63105
                 Telecopier: 314-727-8872

                 SENIOR LENDER

                 FLEET RETAIL FINANCE INC.

                 By:
                    ------------------------------------
                 Name: Evan Israelson
                 Title: Assistant Vice President
                 Address: 40 Broad Street, Boston, MA 02109
                 Telecopier: 617-434-4312

                                       12
<PAGE>

This Agreement is executed as a sealed instrument as of the 8th day of
April, 2003.

          COMPANY

          BAKERS FOOTWEAR GROUP, INC., f/k/a Weiss and Neuman Shoe Co.

          By:
             ------------------------------------
          Name: Peter Edison
          Title: Chief Executive Officer
          Address: 2815 Scott Avenue, Suite C, St. Louis, MO 63103
          Telecopier: 314-641-0390

          SUB ORDINATED CREDITOR

          MISSISSIPPI VALLEY CAPITAL, LLC

          By: /s/ SCOTT D. FESLER
             ------------------------------------
          Name: Scott D. Fesler
          Title: Manager
          Address: 101 South Hanley Road, Suite 1250, St. Louis, MO 63105
          Telecopier: 314-727-8872

          SENIOR LENDER

          FLEET RETAIL FINANCE INC.

          By:
             ------------------------------------
          Name: Evan Israelson
          Title: Assistant Vice President
          Address: 40 Broad Street, Boston, MA 02109
          Telecopier: 617-434-4312

                                       12
<PAGE>

This Agreement is executed as a sealed instrument as of the 8th day of
April, 2003.

                 COMPANY

                 BAKERS FOOTWEAR GROUP, INC., f/k/a Weiss and Neuman Shoe Co.

                 By:
                    ------------------------------------
                 Name: Peter Edison
                 Title: Chief Executive Officer
                 Address: 2815 Scott Avenue, Suite C, St. Louis, MO 63103
                 Telecopier: 314-641-0390

                 SUB ORDINATED CREDITOR

                 MISSISSIPPI VALLEY CAPITAL, LLC

                 By:
                    ------------------------------------
                 Name: Scott D. Felser
                 Title: Manager
                 Address: 101 South Hanley Road, Suite 1250, St. Louis, MO 63105
                 Telecopier: 314-727-8872

                 SENIOR LENDER

                 FLEET RETAIL FINANCE INC.

                 By: /s/ EVAN ISRAELSON
                    ------------------------------------
                 Name: Evan Israelson
                 Title: Assistant Vice President
                 Address: 40 Broad Street, Boston, MA 02109
                 Telecopier: 617-434-4312

                                       12
<PAGE>

                  THIS SECURITY AGREEMENT AND THE INDEBTEDNESS
                  EVIDENCED HEREBY ARE SUBORDINATE, IN THE
                  MANNER AND TO THE EXTENT SET FORTH IN THAT
                  AMENDED AND RESTATED INTERCREDITOR AND
                  SUBORDINATION AGREEMENT (AS AMENDED,
                  SUPPLEMENTED OR OTHERWISE MODIFIED FROM
                  TIME TO TIME, THE "SUBORDINATION AGREEMENT")
                  DATED AS OF APRIL 8, 2003, BETWEEN AND AMONG
                  BAKERS FOOTWEAR GROUP, INC., F/K/A/ WEISS &
                  NEUMAN SHOE CO., AS THE COMPANY, MISSISSIPPI
                  VALLEY CAPITAL, LLC, AS THE SUBORDINATED
                  CREDITOR, AND THE SENIOR LENDER NAMED
                  THEREIN, TO ALL INDEBTEDNESS OWED BY THE
                  MAKER OF THIS SECURITY AGREEMENT TO THE
                  SENIOR LENDER, AND THE HOLDER OF THIS
                  SECURITY AGREEMENT, BY ITS ACCEPTANCE
                  HEREOF, SHALL BE BOUND BY THE PROVISIONS
                  OF THE SUBORDINATION AGREEMENT.

                               SECURITY AGREEMENT

     1. Grant of Security Interest. BAKERS FOOTWEAR GROUP, INC., F/K/A WEISS AND
NEUMAN SHOE CO., a Missouri corporation with its principal place of business
located at 2815 Scott Avenue, St. Louis, Missouri 63103 ("Debtor"), in order to
induce Mississippi Valley Capital, LLC, a Missouri limited liability company
("Secured Party") to extend certain financial accommodations and in
consideration thereof and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, hereby transfers, assigns, and
grants to Secured Party a continuing and irrevocable security interest and
general lien in and to all of the following property and rights of Debtor:

          (a)  All now owned or hereafter acquired Accounts, accounts
               receivable, other receivables, any right to payment of a monetary
               obligation, whether or not earned by performance, leases and
               lease payments, contract rights, any other obligations or
               indebtedness owed to Debtor from whatever source arising; all
               other rights of Debtor to receive performance or any payments in
               money or in kind, whether or not earned by performance, all
               guaranties, security interests and Supporting Obligations of any
               of the foregoing and insurance policies and proceeds relating
               thereto, and all rights of Debtor as an unpaid seller of Goods
               and services, including, but not limited to, the rights to
               stoppage in transit, replevin, reclamation, and resale, and
               rights to payment for money or funds advanced or sold. The rights
               and property described in this Section 1(a) are referred to
               herein collectively as the "Accounts Collateral."

          (b)  All now owned or hereafter acquired Inventory, merchandise, raw
               materials, goods in process, work in progress, materials used or
               consumed in a business, finished goods, findings or component
               materials, and all supplies, incidentals, office supplies,
               packaging materials, and any and all property or items used or

<PAGE>

               consumed in the operation of the business of Debtor or which
               contribute to the finished products or to the sale, promotion and
               shipment thereof, As-Extracted collateral, all property leased by
               Debtor, held by Debtor for sale or lease or to be furnished under
               a contract for service and all Documents evidencing any part of
               any of the foregoing. The rights and property described in this
               Section 1(b) are referred to herein collectively as the
               "Inventory Collateral."

          (c)  All now owned or hereafter acquired Equipment, goods other than
               Inventory Collateral, parts, computers, including data, hardware
               and software, machinery, fixtures, furniture, furnishings, tools,
               dies, aircraft, vessels and vehicles of every kind and
               description, whether or not titled, and all parts and accessories
               for or relating to any of the foregoing. The rights and property
               described in this Section 1(c) are referred to herein
               collectively as the "Equipment Collateral."

          (d)  All now owned or hereafter acquired General Intangibles, all
               claims and causes of action, and all other intangible personal
               property of Debtor of every kind and nature, whether registered
               or unregistered, Payment Intangibles, corporate or other business
               records, all books, mailing and customer lists, ledgers, books of
               account, records, writings, data bases, software, information and
               data however stored or embedded, inventions, designs, blueprints,
               plans specifications, patents, patent applications, service
               marks, trademarks, trade names, trade secrets, domain names,
               processes, formulas, goodwill, copyrights, registrations,
               licenses, permits, leases, contracts, governmental approvals,
               franchises, applications and renewals of any of the foregoing,
               privileges, rights, tax refunds and tax claims, any swap, hedging
               or derivatives agreements, insurance proceeds, pension and
               insurance surpluses. The rights and property described in this
               Section 1(d) are referred to herein as the "General Intangibles
               Collateral."

               In addition to, and not by way of limitation of, the grant of a
               security interest in service marks, trademarks and patents set
               forth above, Debtor hereby, effective upon the occurrence of a
               default under this Security Agreement and upon the written demand
               of Secured Party, assigns, grants, sells, conveys, transfers
               title to and sets over to Secured Party for the benefit of
               Secured Party all of Debtor's right, title and interest, whether
               now or hereafter existing or acquired, in and to such service
               marks, trademarks and patents.

          (e)  All now owned or hereafter acquired, Chattel Paper, Instruments,
               Notes, Promissory Notes, Deposit Accounts, Investment Property,
               Securities, letters of credit, Letter-of-Credit Rights,
               Documents, Payment Intangibles, Financial Assets, all Supporting
               Obligations for any of the foregoing ("Other Property
               Collateral").

          (f)  All proceeds including proceeds and products of all of the
               foregoing and all additions and accessions to, replacements and
               substitutions of, insurance policies and payments, condemnation
               proceeds of, and documents covering all of the foregoing, all
               property received wholly or partly in trade or exchange for all
               of the foregoing, and all income, rents, revenues, dividends,
               distributions, issues, profits, cash or non-cash proceeds and
               accessions arising from the sale, lease, license, encumbrance,
               collection, or any other temporary or permanent disposition of
               any of the foregoing or any interest therein (the "Proceeds").

                                      -2-
<PAGE>

     Capitalized terms used and not defined herein shall have the meanings
given to them in the Uniform Commercial Code as adopted and in force in the
State of Missouri, as from time to time amended.

     The Accounts Collateral, Inventory Collateral, Equipment Collateral,
General Intangibles Collateral, Other Property Collateral and Proceeds are
collectively referred to herein as the "Collateral."

     2. Proceeds. The security interests granted to Secured Party in any
proceeds or other property arising out of the disposition of the Collateral and
anything contained herein or in any financing statement shall not be deemed
permission or assent by Secured Party to any sale of disposition of the
Collateral except to the extent expressly provided herein.

     3. Indebtedness Secured. The security interest granted hereby is to secure
payment in full of (i) any and all sums from time to time due from Debtor to
Secured Party, any instruments evidencing the indebtedness of Debtor to Secured
Party in respect of that certain Amended and Restated Subordinated Note dated as
of January 31, 2003, executed by Debtor and payable to the order of Secured
Party (the "Note"), and the full and complete performance of all agreements and
documents executed or delivered pursuant thereto, all as the same may be
amended, modified, or extended from time to time, (ii) all advances made by
Secured Party to discharge taxes or levies on, or made for repairs to,
maintenance of, or insurance on, the Collateral, (iii) all money or other credit
heretofore and hereafter advanced by Secured Party to or for the account of
Debtor pursuant to the Note, and (v) all costs and expenses incurred in the
collection of the foregoing, including representation in any bankruptcy
proceedings, including attorney's fees (all of the above being referred to,
collectively, as the "Obligations").

     It is the true, clear, and express intention of Debtor that the continuing
grant of this security interest remain as security for payment and performance
of the Obligations, whether now existing, or which may hereinafter be incurred,
or whether or not contemplated by the parties at the time of the granting of
this security interest. The notice of the continuing grant of this security
interest, therefore, shall not be required to be stated on the face of any
document representing any Obligations, nor otherwise identify it as being
secured hereby; and if such Obligations shall remain, or become that of less
than all of Debtors herein, any Debtor not liable therefrom hereby expressly
hypothecates his, her, its or their ownership interest in the Collateral to the
extent required to satisfy the Obligations, without restriction, or limitation.
Any Obligations shall be deemed to have been made pursuant to Section 400.9-204
of the Uniform Commercial Code of Missouri.

     4. Debtor's Name, Place of Business and Location of Collateral. Debtor's
(i) chief executive office and all Collateral is located at 2815 Scott Avenue,
St. Louis, Missouri 63103; (ii) its State of organization or incorporation is
Missouri, and without prior written notice to Secured Party, Debtor shall not
change its State of incorporation or organization until such time as all
outstanding Obligations to Secured Party have been satisfied in full; and (iii)
its exact legal name is as first provided above.

     When any Collateral is in the possession of a third party, the Debtor will
join with the Secured Party in notifying the third party of the Secured Party's
security interest and obtaining an acknowledgement from the third party that it
is holding the Collateral for the benefit of the Secured Party. The Debtor will
use commercially reasonable efforts to obtain control agreements in form
satisfactory to the Secured Party as deemed necessary by the Secured Party for
purposes of further perfecting or enforcing the security interests of the
Secured Party hereunder. The Debtor shall not create any Chattel Paper of
certificated Collateral without delivering same to the Secured Party or placing
a legend on the Chattel Paper acceptable to the Secured Party indicating that
the Secured Party has a security interest in the Chattel Paper.

                                      -3-

<PAGE>

     5.  Collateral Use. The Collateral shall be kept in good order and repair
and Debtor will not permit waste or do anything to impair the value of the
Collateral or any part thereof or use or permit others to use the Collateral in
material violation of any insurance policy covering the Collateral or any
statute, ordinance or state or federal regulation. Debtor shall give Secured
Party immediate written notice of any damage, destruction, theft, loss or the
occurrence of any event which impairs the value of the Collateral.

     6.  Adverse Security Interests and Liens. Debtor is, or, to the extent that
the Collateral will be acquired after the date hereof, will be, the owner of the
Collateral free from any and all liens, security interests or encumbrances,
except for the security interest granted hereby and the following permitted
liens:

          (a)  The security interests granted to the Senior Lender, as defined
               in the Subordination Agreement (the "Senior Lender");

          (b)  Purchase money security interests in Collateral to secure
               indebtedness permitted by the Senior Lender;

          (c)  Those encumbrances (if any) listed on EXHIBIT 4.7, annexed to the
               Amended and Restated Loan and Security Agreement dated as of June
               11, 2002 (the "Credit Agreement") between Debtor and Senior
               Lender.

          (d)  Encumbrances for taxes not yet delinquent or which are being
               contested in good faith by appropriate proceedings, provided that
               adequate reserves with respect thereto are maintained on the
               books of the Debtor in accordance with generally accepted
               accounting principles.

          (e)  Encumbrances in respect of property or assets imposed by law in
               the ordinary course of business, such as carrier's,
               warehousemen's, mechanics', materialmen's, repairmen's,
               landlord's or similar encumbrances arising in the ordinary course
               of business which are (x) not overdue in accordance with
               customary business practices and consistent with the Debtor's
               prior practices, and do not in the aggregate materially detract
               from the value of such property or assets or materially impair
               the use thereof in the operation of the business of the Debtor,
               or (y) being contested in good faith by the Debtor by appropriate
               proceedings diligently instituted and conducted and without
               danger of any material risk to the Collateral, and adequate
               reserves or other appropriate provision as shall be required in
               conformity with generally accepted accounting principles shall
               have been made therefor.

          (f)  Deposits to secure the performance of tenders, bids, sales, trade
               and government contracts, leases, statutory obligations, surety,
               appeal, and supersedeas bonds, warranty, advance payment,
               customs, performance and return-of-money bonds and other
               obligations of a like nature in the ordinary course of business
               (exclusive of obligations in respect of the payment of borrowed
               money) whether pursuant to statutory requirements, common law or
               consensual arrangements.

          (g)  Easements, rights of way, leases, zoning or deed restrictions,
               licenses, covenants, building, restrictions, minor defects or
               irregularities in title and other similar real estate
               encumbrances incurred in the ordinary course of business that in
               the

                                      -4-

<PAGE>

          aggregate do not materially interfere with the conduct of the business
          of the Debtor.

     (h)  Any interest or title of a lessor under any lease entered into by the
          Debtor in the ordinary course of business covering only the assets so
          leased.

     (i)  Judgment liens with respect to judgments not in excess of $1,000,000
          in the aggregate during the term of this Agreement and with respect to
          which lien execution has been stayed within sixty (60) days by
          appropriate judicial proceedings or the posting of an appeal bond or
          other security.

     (j)  Statutory and common law landlord's liens under leases to which the
          Debtor is a party.

     Debtor shall not further transfer or assign any interest in this Security
Agreement or the Collateral; and Debtor, at Debtor's expense, will defend the
Collateral against all claims and demands of all other persons at any time
claiming the same or an interest therein. There are no financing statements now
on file in any public office covering the Collateral, or intended so to be, or
in which Debtor is named or signed as debtor, and Debtor will not execute and
there will not be on file in any public office any financing statement or
statements covering the Collateral except the financing statements to be filed
in respect of and for the security interest of (i) Secured Party hereby granted
or provided for, (ii) Senior Lender, and (iii) any other permitted lien.

     7.   Insurance. Debtor, at Debtor's sole cost, shall at all times keep the
Collateral insured against physical loss or damage with coverage to be in
special coverage form, plus earthquake, flood, mine subsidence and other hazards
in an amount not less than the greater of (1) the full replacement cost or (2)
such other amount as may from time to time be required by Secured Party, with no
co-insurance clauses or deductibles in excess of $1,000.00 in the policies of
insurance unless Secured Party shall consent thereto in writing, in such form,
for such periods and written by such companies as may be satisfactory to Secured
Party, payable to and protecting Secured Party for not less than the total
amount owing on all indebtedness and obligations secured hereby. Debtor shall
maintain combined form business interruption and extra expense coverage. In
addition, Debtor shall maintain commercial general liability insurance in
occurrence form with coverage limits of at least $2,000,000.00 annual aggregate,
$1,000,000.00 per occurrence or as otherwise acceptable to Secured Party.
Notwithstanding the foregoing, Secured Party acknowledges that Debtor's
insurance policies include $2,500,000 sublimits for flood and earthquake
coverage, and such earthquake sublimit excludes the Debtor's facilities in
California, Nevada, and Washington. All such insurance shall be carried by
companies authorized to insure in Missouri and which have an AM Best rating of
A-IX or better and are otherwise acceptable to Secured Party, and all such
policies shall be in form acceptable to Secured Party.

     All policies of insurance shall provide that Secured Party be the loss
payee and that the proceeds shall be paid first to Secured Party and that
Secured Party shall be protected against loss from any act or neglect of Debtor
or third parties, and such other endorsements as Secured Party may from time to
time request. Debtor will promptly provide Secured Party with evidence of such
insurance. Such insurance shall require a minimum of thirty (30) days prior
written notice to Secured Party or any cancellation thereof or any changes
affecting coverage, and no act or omission by Company shall invalidate the
obligation of the insurer to Secured Party. Debtor hereby assigns to Secured
Party, its successors and assigns, the proceeds of all such insurance to the
extent of the unpaid balance of the Obligations secured hereby. Debtor appoints
Secured Party as its attorney-in-fact (such appointment to be effective only
upon and after the occurrence of an Event of Default) to file claims under any
such insurance policies, to receive, receipt and give acquittance for any
payments that may be payable thereunder, and to execute any

                                     - 5 -

<PAGE>

and all endorsements, receipts, releases, assignments, reassignments or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies. Secured Party or its
successors or assigns may cancel such insurance at any time and shall receive
the return premium, if any, therefor, and may apply such return premium to the
purchase of similar insurance or to the balance due on the Obligations secured
hereby at its election. The insurance provisions herein contained are in
addition to and not in limitation of any other insurance requirements contained
in other agreements of Debtor to Secured Party.

     8. Records. The records concerning the Collateral will be kept at the
address indicated in Section 4 hereof. Secured Party may inspect such records or
the Collateral at any reasonable time at any address. Debtor will not remove any
part of such records from said location without the price written consent of
Secured Party.

     9. Financing Statement and Others Acts. Debtor irrevocably authorizes
Secured Party at any time and from time to time to file financing or
continuation statements and/or amendments thereto, without the signature of
Debtor, and Debtor shall execute and deliver such other instruments and
documents as may be requested by Secured Party to perfect, confirm and further
evidence the security interest and assignments hereby granted and shall pay the
fees incurred in filing all such financing statements or other instruments or
documents. If any applicable law requires the registration of the Collateral or
the issuance of a certificate of title therefor or both, Debtor agrees to
promptly comply with such law(s) and shall cause notice of the security interest
of Secured Party to be shown on any such certificate of title and will join in
executing such application for the title forms as Secured Party shall require.

     Upon request of Secured Party, Debtor will promptly do all other acts and
things, and will execute and file all other instruments deemed necessary by
Secured Party under applicable law to establish, maintain and continue Secured
Party's perfected security interest in the Collateral and to effectuate the
intent of this Security Agreement and will pay all costs and expenses of filing
and recording or promptly reimburse Secured Party therefor if such costs and
expenses are incurred by Secured Party, including the costs of any searches
deemed necessary by Secured Party to establish, determine or maintain the
validity and the priority of the security interest of Secured Party, and pay or
otherwise satisfy all other claims and charges which in the reasonable opinion
of Secured Party might prejudice, imperil or otherwise affect the Collateral or
Secured Party's security interest therein. A photocopy of this Agreement shall
be deemed an original for purposes of filing or recording.

     10. Taxes and Assessments. Debtors will pay promptly when due all taxes,
assessments and other charges levied or assessed upon the Collateral or for its
use or operation or upon this Security Agreement or upon any or other documents
evidencing the Obligations secured hereby.

     11. Collateral Certificates and Schedules. Debtor shall furnish to Secured
Party from time to time, upon reasonable request, written statements,
certificates and schedules identifying and describing the Collateral and any
additions thereto and substitutions therefor in such detail as Secured Party
may require and certified as to accuracy the President or Chief Executive
Officer of Debtor.

     12. Collateral Disposition. Until default hereunder or receipt of contrary
instructions from Secured Party:

     (a)  Debtor may have possession of the Collateral and use it in any lawful
          manner not inconsistent with this Agreement or with any policy of
          insurance thereon;

                                     - 6 -
<PAGE>

          (b)  Debtor may sell the Inventory Collateral in the ordinary course
               of Debtor's business (excluding, however, transfers or
               dispositions on satisfaction of debt), and Debtor may use and
               consume raw materials or supplies, the use and consumption of
               which is necessary in order to carry on Debtor's business in the
               ordinary course; and

          (c)  Debtor will, at its own expense, collect, as and when due, all
               amounts due under the Accounts Collateral, including the taking
               of such action with respect to such collection as Secured Party
               may reasonably request or, in the absence of such request, as
               Debtor may deem advisable, and may grant, in the ordinary course
               of Debtor's business, to any party obligated on any of the
               Accounts Collateral, any rebate, refund or adjustment to which
               such party may be lawfully entitled, and may accept, in
               connection therewith, the lawful return of goods, the sale or
               lease or which shall have given rise to such Accounts Collateral.

     13. Undertakings by Secured Party. Secured Party may from time to time, at
its sole option, and without notice to Debtor, perform any undertaking of
Debtor hereunder which, after reasonable notice, Debtor shall fail to perform
and take any other action which Secured Party deems necessary for the
maintenance or preservation of any of the Collateral or the interest of Secured
Party therein (including, without limitation, the discharge of taxes or liens
of any kind against the Collateral or the procurement of insurance) and Debtor
agrees to forthwith reimburse Secured Party, on demand, for all expenses of
Secured Party in connection with the foregoing, together with interest thereon
at a per annum rate equal to the highest rate of interest applicable to any of
the Obligations secured hereby, until reimbursed by Debtor and all amounts not
so reimbursed shall be added to and become a part of the Obligations secured
hereby. Secured Party may, for the foregoing purposes, act in its own name or
that of Debtor and may also act for the purpose of adjusting or settling any
policy of insurance on the Collateral, or endorsing any draft received in
connection therewith. For all of the foregoing purposes, Debtor hereby grants
to any officer of Secured Party its power of attorney, irrevocable so long as
any of the Obligations secured hereby shall be outstanding.

     14. Warranties Correct. Debtor hereby warrants and represents that all
financial statements, certificates and schedules heretofore and hereafter
delivered to Secured Party by or on behalf of Debtor, and any statement and
data submitted in writing to Secured Party in connection with this Security
Agreement or any Obligations of Debtor to Secured Party, are true and correct
in all material respects and fairly present in all material respects the
financial condition of Debtor for the periods involved.

     15. Identification of Collateral. Upon request of Secured Party, Debtor
will stamp on its records concerning the Collateral, a notation, in form
reasonably satisfactory to Secured Party, of the security interest of the
Secured Party hereunder, and when requested by Secured Party, Debtor shall
further affix to the Collateral such signs or labels as shall be reasonably
satisfactory to Secured Party to indicate the security interest of Secured
Party in the Collateral. Upon request of Secured Party at any time, Debtor will
promptly deliver to Secured Party lists or copies of all Collateral.

     16. Accounts Collateral Warranties. Debtor warrants and represents with
respect to the Accounts Collateral that:

          (a)  all accounts are due and payable in cash not more than thirty
               (30) days from the date of the invoice evidencing the account;

          (b)  The accounts are genuine in all respects and are as purported and
               the account debtor has the capacity to enter into the
               transaction;

                                      -7-
<PAGE>

          (c)  The accounts have not been previously assigned or encumbered
               except as otherwise set forth herein;

          (d)  Debtor has full right and authority to assign them;

          (e)  If arising from the sale or lease of goods, such goods have been
               shipped or delivered to the account debtor;

          (f)  The accounts are valid, legally enforceable obligation of the
               account debtor thereunder and are not subject to any offset,
               counterclaim or other defense on the part of such account debtor
               or to any claim on the part of such account debtor denying
               liability thereunder in whole or in part;

          (g)  No partial payment not shown upon the accounts has been made by
               anyone;

          (h)  The accounts are enforceable according to their respective terms;
               and

          (i)  The accounts are evidenced by invoices, dated not later than the
               date of shipment or performance rendered to such account debtor
               and are not evidenced by any instrument or chattel paper.

     17. Default. Debtor shall be in default under this Security Agreement upon
the occurrence of any one or more of the following events or conditions (each of
which is an "Event of Default"):

          (a)  Failure of Debtor to pay any sum due under any Obligations or
               liability secured hereby;

          (b)  Breach or failure to perform by Debtor of any covenant, promise,
               condition, obligation or liability contained or referred to
               herein, in the Obligations secured hereby or in any other
               agreement to which Debtor and Secured Party are parties;

          (c)  The making or furnishing in any manner of any representation,
               statement or warranty to Secured Party by or on behalf of Debtor
               in connection with this Security Agreement or all or any part of
               the Obligations secured hereby, which representation, statement
               or warranty was false in any material respect when made or
               furnished;

          (d)  Any loss, theft, damage, destruction, sale or encumbrance to or
               of any of the Collateral;

          (e)  Any tax levy, attachment, garnishment, levy or execution or other
               process issued against Debtor or the Collateral;

          (f)  With respect to any principal indebtedness exceeding $1,000,000
               owed by Debtor to any creditor, (i) any suspension of payment by
               Debtor, or (ii) any event or occurrence which constitutes an
               event of default or which results in the acceleration of the
               maturity of any obligations of Debtor under any indenture,
               agreement, undertaking or other instrument; or

          (g)  Merger, consolidation, dissolution, termination of existence,
               insolvency, business failure, bankruptcy, appointment of a
               custodian or receiver of any part of the

                                      -8-

<PAGE>

                  property of Debtor, the commencement of any bankruptcy or
                  insolvency proceedings or any assignment for the benefit of
                  any creditors by or against Debtor or any co-maker,
                  accommodation maker, surety or guarantor of Debtor, or entry
                  of any judgment against any of them, death of Debtor or any
                  guarantor, or failure of any guarantor or surety of Debtor to
                  provide Secured Party with financial information promptly when
                  requested by Secured Party.

         Notwithstanding the foregoing, until the payment in full of the Senior
Indebtedness (as defined in the Subordination Agreement), an Event of Default
shall only include (i) Debtor's failure to pay any sum due under any
Obligations or liability secured hereby, and (ii) any event or occurrence which
constitutes an event of default or which results in the acceleration of the
maturity of any obligations of Debtor owed to the Senior Lender.

         18. Remedies. Upon the occurrence of any default under this Security
Agreement, Secured Party may at its option, without notice or demand, declare
all Obligations secured hereby immediately due and payable and Secured Party,
upon the occurrence of any such default, may exercise any and all of the rights
and remedies of a secured party under the Uniform Commercial Code of Missouri,
then in effect. Secured Party may take immediate possession of the Collateral
or any part thereof wherever the same may be found, and for said purposes may,
and is hereby appointed Debtor's agent and authorized by Debtor to, enter
Debtor's premises for the purpose of removing, assembling or taking possession
of the Collateral without liability for trespass or any other right of action
by reason of taking possession of said Collateral. Whenever the Collateral is
in Secured Party's possession, Secured Party may use and operate same as
appropriate for the purpose of protecting Secured Party's interest with respect
thereto. In addition, if any Collateral shall require rebuilding, repairing,
maintenance, preparation, or is in process or other unfinished state, Secured
Party shall have the right at its option to do such rebuilding, repairing
preparation, processing or completion of manufacturing on or off Debtor's
premises, for the purpose of putting the Collateral in such saleable form as
Secured Party shall deem appropriate. Secured Party may require Debtor, at
Debtor's expense, to assemble the Collateral and make it available to Secured
Party at a place to be designated by Secured Party. Debtor agrees to pay all
costs of Secured Party in the collection of the Obligations and enforcement of
rights hereunder, including reasonable attorney's fees and legal expense, and
of any repairs to any realty or other property to which any of the Collateral
may be affixed or be a part. Any notice of any sale, lease, or other
disposition, or other intended action by Secured Party shall be deemed
reasonable if it is in writing and deposited in the United States mail at least
ten (10) days in advance of the intended disposition or other intended action
or, with respect to a private sale, at least ten (10) days in advance of the
date after which a private sale or sales shall occur, first class postage
prepaid, addressed to Debtor at the address set forth in Section 4 hereof or to
any other address of Debtor appearing on the records of Secured Party. At any
sale, the Secured Party may specifically disclaim any warranties including of
title or the like. The Secured Party may comply with any applicable state or
federal law requirements in connection with a disposition of the Collateral and
compliance will not be considered adversely to affect the commercial
reasonableness of any sale or disposition of the Collateral. Debtor waives all
rights to require any marshalling of assets.

         Secured Party shall also have the right to apply for and have a
receiver appointed by a court of competent jurisdiction to enforce its rights
and remedies hereunder in order to mange, protect and preserve the Collateral,
continue the operation of the business of Debtor, and to collect all revenues
and profits thereof and apply the same to the payment of (i) all expenses and
other charges of such receivership, including the compensation of the receiver,
and (ii) the Obligations secured hereby until a sale or other disposition of
such Collateral shall be finally made and consummated.

         Secured Party may notify, or at the request of Secured Party the
Debtor will so notify, any and all parties obligated on any of the Collateral
that the Collateral has been assigned to Secured Party and that

                                      -9-
<PAGE>

all payments thereon are to be made directly to Secured Party. Secured Party
may settle, compromise or release, on terms acceptable to Secured Party, in
whole or in part, any amounts owing on such Collateral; sue to enforce payments
and prosecute any action or proceeding with respect to the Collateral in its
own name or the name of Debtor; and extend the time of payment, make allowance
and adjustments, and issue credits in its own name or the name of Debtor. Upon
request of Secured Party, Debtor will indicate on all invoices to account
debtors that the accounts are payable directly to Secured Party.

         Debtor will deliver to Secured Party promptly upon receipt, all
proceeds of Collateral received by Debtor, including proceeds of the Accounts
Collateral in the exact form in which they are received. To protect Secured
Party's rights hereunder, Debtor will assign or endorse proceeds to Secured
Party as Secured Party may request, and hereby constitutes any officer or
employee of Secured Party its true and lawful attorney-in-fact (such
appointment to be effective only upon and after the occurrence of an Event of
Default), with full power to endorse the name of Debtor upon any invoice,
freight or express bill or bill of lading relating to any such accounts, upon
drafts against account debtors and assignments and verifications of accounts and
notices to account debtors, upon any and every remittance or instrument of
payment, including checks, drafts and money orders, and in whatever form
received, and to do and perform all other acts and things necessary, proper and
requisite to carry out the intent of this Security Agreement. The power herein
granted shall be deemed to be coupled with an interest and shall not be revoked
by Debtor until Secured Party has been paid all sums due it, including all
proper expenses, with interest. All such items received by Secured Party for the
Collateral shall be applied in the manner set forth below for the proceeds of
any sale of Collateral.

         The proceeds of any sale shall be applied in the following order:
first, to pay all costs and expenses of every kind for care, safekeeping,
collection, sale, delivery or otherwise (including expenses incurred in the
protection of Secured Party's title to or lien upon or right in any such
property, expenses for legal services of any kind in connection therewith or in
making any such sale or sales, insurance, commission for sale and guaranty),
then to interest on all Obligations of Debtor to Secured Party; then to the
principal thereof, whether or not such Obligations are due or accrued. Any
remaining surplus shall be paid to whomever shall be legally entitled thereto.
Application of proceeds as between particular Obligations to Secured Party
shall be in the absolute and sole discretion of Secured Party. If the proceeds
of any such sales are insufficient to pay all Obligations of Debtor to Secured
Party, Debtor shall remain liable for the deficiency.

         19. Inspection. Section Party or its nominee shall have the privilege
at any time, upon request, of inspecting during reasonable business hours any
of the business properties or premises of Debtor and the books and records of
Debtor relating not only to the Collateral, or the processing or collecting
thereof, but also those relating to its general business affairs and financial
condition of Debtor. Debtor further agrees from time to time to furnish such
other reports, data and financial statements, in respect of its business and
financial condition, as Secured Party may reasonably require.

         20. The Secured Party's Duties. The powers conferred on the Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. Unless otherwise
required by law, the Debtor has the risk of loss of the Collateral, and the
Secured Party shall have no duty as to any Collateral or as to the taking of
any necessary steps to preserve rights against other parties or any other
rights pertaining to any Collateral.

         21. Nature and Priority of Security Interest. Secured Party
acknowledges and agrees that the security interest granted by Debtor to Secured
Party under this Agreement, as well as the exercise of Secured Party's rights
and remedies with respect to the Collateral, are subordinate and junior to the
security interests of Senior Lender in the Collateral to the extent set forth
in the Subordination Agreement. All representations and warranties of Debtor to
Secured Party in this Agreement or in any

                                      -10-
<PAGE>

related document or instrument are hereby qualified in their entirety to reflect
the existence and priority of such security interest.

         22. Miscellaneous. Debtor and Secure Party further agree as follows:

               (a)  Governing Law. This Security Agreement shall be governed by
                    and construed in accordance with the laws of the State of
                    Missouri without regard to conflict of laws principles.

               (b)  Non-Waiver. Waiver of or acquiescence by Secured Party in
                    any default by Debtor, or failure of Secured Party to insist
                    upon strict performance by Debtor of any warranties,
                    agreements or other obligations contained in this Security
                    Agreement shall not constitute a waiver of any subsequent or
                    other default, failure or waiver of strict performance,
                    whether similar or dissimilar.

               (c)  Modifications. No Modification of any provision of this
                    Security Agreement, no approvals required from Secured Party
                    and no consent by Secured Party to any departure therefrom
                    by Debtor shall be effective unless such modification,
                    approval or consent shall be in writing and signed by a duly
                    authorized officer of Secured Party, and the same shall then
                    be effective only for the period and on the conditions and
                    for the specific instances and purposes specified in such
                    writing. No notice to or demand on Debtor in any case shall
                    entitle Debtor to any other or further notice or demand in
                    similar or other circumstances.

               (d)  Severability. Wherever possible, each provision of this
                    Security Agreement shall be interpreted in such manner as to
                    be effective and valid under applicable law, but if any
                    provision of this Security Agreement shall be prohibited
                    by or invalid under applicable law, such provision shall be
                    ineffective only to the extent of such prohibition or
                    invalidity, without invalidating the remainder of such
                    provision or the remaining provisions of this Security
                    Agreement.

               (e)  Notices. All notices and other communications provided for
                    herein shall, unless otherwise stated herein, be in writing
                    and shall be personally delivered or sent by certified mail,
                    postage prepaid, by prepaid overnight nationally recognized
                    courier, or by facsimile, to the intended party at the
                    address or facsimile number of such party set forth as
                    follows:

                           If to Secured Party:

                           Mississippi Valley Capital, LLC
                           c/o Bush O'Donnell and Company
                           101 South Hanley Road, Suite 1250
                           St. Louis, Missouri 63105
                           Attention: Scott D. Fesler
                           Facsimile No. (314) 727-8872

                           If to Debtor:

                           Bakers Footwear Group, Inc.
                           2815 Scott Avenue
                           St. Louis, Missouri 63103

                                      -11-
<PAGE>

                    Attention: Peter A. Edison, Chief Executive Officer
                    Facsimile No. (314) 641-0390

               or at such other address or facsimile number as shall be
               designated by such party in a written notice to the other parties
               hereto. All such notices and communications shall be effective
               (a) if personally delivered, when delivered, (b) if sent by
               certified mail, three (3) days after having been deposited in the
               mail, postage prepaid, (c) if sent by overnight courier, one
               business day after having been given to such courier, or (d) if
               transmitted by facsimile, when sent.

          (f)  RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies of
               Secured Party under this Security Agreement are cumulative and
               are not in lieu of, but are in addition to any other rights or
               remedies which Secured Party shall have under this Security
               Agreement or any other instrument, or at law or in equity. No
               course of dealing between Secured Party and Debtor or any failure
               or delay on the part of Secured Party in exercising any rights or
               remedies hereunder shall operate as a waiver of any rights or
               remedies of Secured Party and no single or partial exercise of
               any rights or remedies hereunder shall operate as a waiver or
               preclude the exercise of any other rights or remedies hereunder.

          (g)  SECURITY INTEREST AND PLEDGE ABSOLUTE. All rights, including the
               security interest of Secured Party granted hereunder, and all
               obligations of Debtor hereunder, shall be absolute and
               unconditional irrespective of:

               i.   any lack of validity or enforceability of the Obligations or
                    any other agreement or instrument relating thereto:

               ii.  any change in the time, manner or place of payment of, or in
                    any other term of, all or any of the Obligations, or any
                    other amendment or waiver of or any consent to any departure
                    from the Obligations or any agreement or instrument relating
                    thereto; or

               iii. any exchange, release or non-perfection of any other
                    collateral, or any release or amendment or waiver of or
                    consent to departure from any guaranty, for all or any of
                    the Obligations.

          (h)  COSTS OF ENFORCEMENT. In the event that Secured Party shall
               retain or engage an attorney or attorneys to collect or enforce
               or protect its interests with respect to this Security Agreement
               or any instrument or document delivered pursuant to this Security
               Agreement, including the representation of Secured Party in
               connection with any bankruptcy, reorganization, receivership or
               any other any action affecting creditor's rights, and regardless
               of whether a suit or action is commenced, Debtor shall pay all of
               the costs and expenses of such collection, enforcement or
               protection, including reasonable attorneys' fees, and Secured
               Party may take judgment for all such amounts.

          (i)  SUCCESSORS AND ASSIGNS. This Security Agreement shall be binding
               upon and inure to the benefit of Secured Party and its successors
               and assigns Debtor and its heirs, successors and permitted
               assigns.

                                      -12-

<PAGE>

          (j)  Assignment: Sale of Interest. The Secured Party shall notify the
               Company upon the assignment of Secured Party's rights, title,
               interests, remedies, powers and duties hereunder.

          (k)  Fees and Expenses. Debtor shall pay all out-of-pocket costs and
               expenses, including reasonable attorneys' fees and expenses,
               incurred by Secured Party in connection with the preparation of
               this Security Agreement and any document or instrument delivered
               pursuant to or in connection with this Security Agreement and all
               related documentation, recording or filing fees. Debtor shall
               also pay all like costs and expenses incurred by Secured Party
               in connection with any amendments, waivers, renewals or
               modifications of or made pursuant to this Security Agreement or
               any document or instrument delivered pursuant to or in connection
               with this Security Agreement and all other related documentation.

          (l)  Reinstatement of Obligations. Debtor expressly agrees that to the
               extent a payment or payments to Secured Party, or any part
               thereof, are subsequently invalidated, declared to be void or
               voidable, set aside and are required to be repaid to a trustee,
               custodian, receiver or any other party under any bankruptcy act,
               state or federal law, common law or equitable cause, then to the
               extent of such payment or repayment, the obligation or part
               thereof intended to be satisfied and any collateral given
               therefore including this Agreement shall be revived and continued
               in full force and effect as if said payment had not been made.

          (m)  Financing Statement. At the option of Secured Party, this
               Security Agreement, or a carbon, photographic or other
               reproduction of this Security Agreement or of any Uniform
               Commercial Code financing statement covering the Collateral or
               any portion thereof, shall be sufficient as a Uniform Commercial
               Code financing statement and may be filed as such.

          (n)  Capitalized Terms. Capitalized terms used and not defined herein
               shall have the meanings given to them in the Uniform Commercial
               Code as adopted and in force in the State of Missouri, as from
               time to time amended.

          (o)  Controlling Provisions. If any item of Collateral hereunder also
               constitutes collateral granted to Secured Party under any other
               mortgage, deed of trust, agreement or instrument, in the event of
               any conflict between the provisions under this Security Agreement
               and those under such other mortgage, agreement or instrument
               relating to such Collateral, the provision or provisions selected
               by Secured Party shall control with respect to such Collateral.

          (p)  Setoff. In addition to any rights now or hereafter granted under
               the provisions of any applicable law, rule or regulation and, not
               by way of limitation of any such rights, upon the occurrence of
               (a) any Event of Default, or (b) any event which with the lapse
               of time or the giving of notice, or both, would constitute an
               Event of Default, Secured Party is hereby authorized by Debtor,
               at any time or from time to time, without notice to Debtor or to
               any other person, any such notice being hereby expressly waived,

               i.   to setoff and to appropriate and to apply any and all
                    deposits (general or special, time or demand, including, but
                    not limited to, indebtedness evidenced by certificates of
                    deposit, in each case whether matured or

                                      -13-
<PAGE>

                    unmatured) and any other indebtedness at any time held or
                    owing by Secured Party to or for the credit or account of
                    Debtor against and on account of the obligations and
                    liabilities of Debtor to Secured Party, including, but not
                    limited to, all claims of any nature or description arising
                    out of or connected with this Security Agreement or any
                    instrument or document delivered in connection with or
                    pursuant to this Security Agreement, irrespective of whether
                    or not (a) Secured Party shall have made any demand under
                    this Security Agreement or any instrument or document
                    delivered in connection with or pursuant to this Security
                    Agreement, or (b) Secured Party shall have declared the
                    principal of and interest on amounts under this Security
                    Agreement or any instrument or document delivered in
                    connection with or pursuant to this Security Agreement to be
                    due and payable as permitted pursuant to this Security
                    Agreement or any instrument or document delivered in
                    connection with or pursuant to this Security Agreement, and
                    although said obligations and liabilities, or any of them,
                    shall be contingent or unmatured, and

               ii.  pending any such setoff or appropriation or application, to
                    hold the amounts of all deposits as collateral and to
                    return as unpaid any or all checks drawn against such
                    deposits that are presented for payment as Secured Party in
                    its sole discretion shall decide.

          (q)  Consent to Forum. DEBTOR HEREBY CONSENTS TO THE JURISDICTION OF
               ANY STATE COURT LOCATED WITHIN THE CITY OF ST. LOUIS OR ST. LOUIS
               COUNTY, MISSOURI OR FEDERAL COURT IN THE EASTERN DISTRICT OF
               MISSOURI, EASTERN DIVISION. DEBTOR WAIVES ANY OBJECTION TO
               JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST IT AS
               PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON
               LACK OF JURISDICTION OR VENUE. DEBTOR FURTHER AGREES NOT TO
               ASSERT AGAINST SECURED PARTY (EXCEPT BY WAY OF A DEFENSE OR
               COUNTERCLAIM IN A PROCEEDING INITIATED BY SECURED PARTY) ANY
               CLAIM OR OTHER ASSERTION OF LIABILITY WITH RESPECT TO THIS
               SECURITY AGREEMENT, SECURED PARTY'S CONDUCT OR OTHERWISE IN ANY
               JURISDICTION OTHER THAN THE FOREGOING JURISDICTIONS.

          (r)  Waiver of Jury Trial. DEBTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY
               JURY (WHICH SECURED PARTY ALSO WAIVES) IN ANY ACTION, SUIT,
               PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATING
               TO THIS SECURITY AGREEMENT, THE OBLIGATIONS OF DEBTOR HEREUNDER
               OR SECURED PARTY'S CONDUCT IN RESPECT OF ANY OF THE FOREGOING.

          (s)  Mo.Rev.Stat. Section 432.045 Statement. The following notice is
               given pursuant to Section 432.045 of the Missouri Revised
               Statues; nothing contained in such notice shall be deemed to
               limit or modify the terms of this Agreement: "ORAL AGREEMENTS OR
               COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM
               ENFORCING REPAYMENT OF A

                                      -14-

<PAGE>

                  DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT
                  ENFORCEABLE. TO PROTECT YOU (COMPANY) AND US (CREDITOR) FROM
                  MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH
                  COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS
                  THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN
                  US EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT."

                  [Remainder of page intentionally left blank]

                                      -15-

<PAGE>

         IN WITNESS WHEREOF, this Security Agreement has been executed and
delivered by Debtor this 31st day of January, 2003.

                                BAKERS FOOTWEAR GROUP, INC. F/K/A
                                WEISS AND NEUMAN SHOE CO.

                                By:  /s/ PETER A. EDISON
                                    --------------------------------------------
                                    Peter A. Edison, Chief Executive Officer

<PAGE>
                           ACKNOWLEDGMENT AND CONSENT

         The undersigned hereby acknowledges receipt of, and consents to, the
foregoing Security Agreement dated January 31, 2003, executed by Bakers
Footwear Group, Inc. f/k/a Weiss and Neuman Shoe Co., a Missouri corporation,
granting a security interest in the collateral further described therein to
Mississippi Valley Capital, LLC, a Missouri limited liability company.

         IN WITNESS WHEREOF, the undersigned has executed this Acknowledgement
and Consent of as of this 31st day of January, 2003.

                                              FLEET RETAIL FINANCE INC.

                                              By: /s/ EVAN ISRAELSON
                                                 -----------------------
                                              Name:  Evan Israelson
                                                   ---------------------
                                              Title:       AVP
                                                    --------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00059-of-00352.parquet"}]]