CHARLOTTE RUSSE HOLDING INC, S-1, 1999-08-02

CHARLOTTE RUSSE HOLDING INC
S-1, 1999-08-02

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

CHARLOTTE RUSSE HOLDING, INC.
(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 5621 33-0724325
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification
Organization) No.)
</TABLE>

4645 MORENA BOULEVARD, SAN DIEGO, CA 92117, (858) 587-1500
(Address, including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
------------------------

BERNARD ZEICHNER
CHIEF EXECUTIVE OFFICER AND PRESIDENT
4645 MORENA BOULEVARD, SAN DIEGO, CA 92117, (858) 587-1500
(Name, Address, including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------

COPIES TO:

DANIEL S. EVANS, ESQ. FAYE H. RUSSELL, ESQ.
ROPES & GRAY BROBECK, PHLEGER & HARRISON, LLP
ONE INTERNATIONAL PLACE 550 WEST C STREET, SUITE 1200
BOSTON, MASSACHUSETTS 02110-2624 SAN DIEGO, CA 92101
(617) 951-7000 (619) 234-1966

------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C>
common stock, par value $.01, per share................... $46,000,000 $12,788.00
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 2, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE AND
THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE AND THE SELLING
STOCKHOLDERS ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[LOGO]

[LOGO]

COMMON STOCK

Charlotte Russe Holding, Inc. is offering shares of its common stock
and the selling stockholders are selling an additional shares. This is our
initial public offering and no public market currently exists for our shares.
Our common stock has been approved for quotation on the Nasdaq National Market
under the symbol "CHIC." We anticipate that the initial public offering price
will be between $ and $ per share.

------------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.

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<TABLE>
<CAPTION>
PER SHARE TOTAL
---------- ----------
<S> <C> <C>
Public Offering Price..................................................................... $ $
Underwriting Discounts and Commissions.................................................... $ $
Proceeds to Charlotte Russe............................................................... $ $
Proceeds to the Selling Stockholders...................................................... $ $
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Certain of the selling stockholders have granted the underwriters a 30-day
option to purchase up to an additional shares of common stock to cover
over-allotments. BancBoston Robertson Stephens Inc. expects to deliver the
shares of common stock to purchasers on , 1999.

------------------------

BANCBOSTON ROBERTSON STEPHENS

BANC OF AMERICA SECURITIES LLC

PAINEWEBBER INCORPORATED

FIRST UNION CAPITAL MARKETS CORP.

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THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
THE FRONT COVER FEATURES A BRIEF DESCRIPTION OF THE CHARLOTTE RUSSE AND RAMPAGE
CONCEPTS, ILLUSTRATED WITH BOTH INTERIOR AND EXTERIOR PERSPECTIVES OF THE STORES
AND IMAGES OF THE CHARLOTTE RUSSE CUSTOMER.

THE BACK COVER DISPLAYS A COLLAGE OF YOUNG WOMEN DRESSED IN CHARLOTTE RUSSE AND
RAMPAGE FASHION APPAREL AND ACCESSORIES. ADDITIONALLY, A MAP IS PROVIDED TO SHOW
STORE LOCATIONS AND PAST AND FUTURE EXPANSION SITES. THERE WILL ALSO BE A GRAPH
SHOWING STORE PENETRATION THROUGHOUT MULTIPLE REGIONS OF THE UNITED STATES.

2
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT, AND THE UNDERWRITERS HAVE NOT, AUTHORIZED ANY OTHER PERSON TO PROVIDE
YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT, AND THE
UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE SECURITIES IN ANY
JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. YOU SHOULD ASSUME THAT
THE INFORMATION APPEARING IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE ON
THE FRONT COVER OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL CONDITION, RESULTS
OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT DATE.

UNTIL , 1999, WHICH IS THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS, ALL DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

------------------------

TABLE OF CONTENTS

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<CAPTION>
PAGE
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<S> <C>
Summary.................................................................................................... 4
Risk Factors............................................................................................... 8
Forward-Looking Statements................................................................................. 13
Use of Proceeds............................................................................................ 14
Dividend Policy............................................................................................ 14
Capitalization............................................................................................. 15
Dilution................................................................................................... 16
Selected Consolidated Financial and Operating Data......................................................... 17
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 19
Business................................................................................................... 27
Management................................................................................................. 38
Principal and Selling Stockholders......................................................................... 44
Certain Transactions....................................................................................... 46
Description of Capital Stock............................................................................... 48
Shares Eligible for Future Sale............................................................................ 49
Underwriting............................................................................................... 51
Validity of Common Stock................................................................................... 53
Experts.................................................................................................... 53
Available Information...................................................................................... 54
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>

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The Charlotte Russe-Registered Trademark- trademark referred to in this
prospectus is federally registered in the United States and the [Russe
label]-TM- and Charlotte's Room-TM- trademarks referred to in this prospectus
are subject to pending applications for registration. These trademarks are the
property of Charlotte Russe Holding, Inc. or it subsidiaries. The
Rampage-Registered Trademark- trademark referred to in this prospectus is
federally registered in the United States and is used by Charlotte Russe under a
license agreement with Rampage Clothing Company. See "Business--Intellectual
Property." All other trademarks or trade names referred to in this prospectus
are the property of their respective owners.

3
<PAGE>
SUMMARY

THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION ABOUT OUR BUSINESS AND THIS
OFFERING. IT MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU.
YOU SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING "RISK FACTORS" AND THE
FINANCIAL STATEMENTS AND RELATED NOTES, BEFORE MAKING AN INVESTMENT DECISION.
OUR FISCAL YEAR CONSISTS OF THE 52 OR 53 WEEK PERIOD ENDING ON THE LAST SATURDAY
IN SEPTEMBER. ALL REFERENCES TO FISCAL YEARS IN THIS PROSPECTUS REFER TO THE
FISCAL YEAR ENDING IN THE CALENDAR YEAR INDICATED. FOR EXAMPLE, FISCAL 1998
REFERS TO THE FISCAL YEAR ENDED SEPTEMBER 26, 1998 AND OUR CURRENT FISCAL YEAR
REFERS TO THE FISCAL YEAR ENDED SEPTEMBER 25, 1999.

CHARLOTTE RUSSE HOLDING, INC.

Our Charlotte Russe stores offer fashionable, affordable apparel and
accessories that have been tested and accepted by the marketplace, thus
appealing to women who prefer established fashion trends. Our Rampage stores
feature emerging fashion trends and thus appeal to women with a flair for making
fashion statements who are willing to pay somewhat higher prices to create a
cutting-edge look. Our stores are located predominately in high visibility,
center court mall locations in spaces that average approximately 7,500 square
feet. These stores, which are generally twice as large as those of most of our
mall-based competitors, are designed to create an environment that is exciting
to shop and accentuates the fashion, breadth and value of our merchandise
selection.

In September 1996, we were acquired by two funds managed by Saunders Karp &
Megrue, L.P., a private equity investment firm, and Bernard Zeichner, our
Chairman, Chief Executive Officer and President. Following the acquisition, we
recruited a number of experienced retail executives to complement our existing
management team. This management team implemented a series of strategic
initiatives to position us to support an accelerated national store roll-out.
These initiatives, together with superior new store economics that generate on
average a cash return on investment of approximately 90% in the first year of
operations, have allowed us to grow significantly since our acquisition. As of
September 25, 1999, we expect to operate 96 stores in 15 states and Puerto Rico,
an increase of 61 stores since our acquisition at the beginning of fiscal 1997.
Our net sales increased to $134.1 million in fiscal 1998 from $70.7 million in
fiscal 1996, representing a compound annual growth rate of 37.7%. Additionally,
for the nine months ended June 26, 1999, our net sales increased to $126.4
million from $94.4 million, representing a 33.9% increase over the same period
last year.

OUR BUSINESS STRATEGY

The elements of our business strategy combine to create a merchandise
assortment and overall shopping experience that has broad consumer appeal and
differentiates us from our competitors. The principal elements of our business
strategy include the following:

- OFFER CONSISTENT VALUE PRICING. We offer a broad assortment of
fashionable, quality merchandise at prices generally 20% to 30% below most
of our direct mall-based competitors. Because our prices are affordable
and our merchandise quality is comparable to higher priced specialty
retailers and department stores, we create a strong perception of value
that has enabled us to build a broad and loyal customer base.

4
<PAGE>

- MAINTAIN DISTINCT BRAND IMAGES. We have created focused and differentiated
brand images based on fashion attitude, value pricing and quality. These
images are consistently communicated through all aspects of our business,
especially through our proprietary Charlotte Russe and [Russe label]
private label merchandise.

- TARGET A HIGHLY DESIRABLE MARKET. Our customer base of 15 to 35 year old
women represents a large and growing segment of the United States
population. In addition, the spending power of the teenage population,
which is a core component of our target segment, is expected to grow from
$96.3 billion in 1998 to approximately $147.6 billion in 2003,
representing a projected compound annual growth rate of 8.9%.

- OFFER BROAD, EXCITING MERCHANDISE ASSORTMENT. Our merchandise strategy is
founded on offering a broad assortment of apparel and accessories that
convey a consistent fashion attitude. We constantly introduce new
merchandise into our stores to maintain a fashion-forward product offering
that satisfies our customers' lifestyle needs and creates an exciting
shopping environment that is exclusive to our stores.

- CAPITALIZE ON STRONG STORE ECONOMICS. Our new stores generate a cash
return on investment of approximately 90% in their first year of
operations. We have consistently achieved these superior returns across a
variety of mall types throughout the United States.

- LEVERAGE HIGHLY EXPERIENCED MANAGEMENT TEAM. Our management team has built
an infrastructure to support national expansion, has increased brand
awareness and has improved our financial performance. We believe our
management's extensive experience with the company and demonstrated track
record of managing and executing retail growth concepts position us to
successfully execute our national expansion program.

- ACTIVELY MANAGE INVENTORY. We actively manage most of our inventory
through a test-and-reorder strategy designed to minimize our exposure to
fashion cycles. As a result of our strategy, we have one of the highest
inventory turn rates in the industry, and we believe our approach to
managing our merchandise mix has contributed to strong gross margins and
lower-than-average markdown rates.

OUR EXPANSION STRATEGY

Our long-term objective is to become a leading national specialty retailer
of fashion-forward, affordable apparel and accessories to youthful-minded women.
We intend to achieve this objective by pursuing the following initiatives:

- OPEN NEW STORES. Based on our successful track record of penetrating new
markets and solid infrastructure to support national expansion, we believe
we are well positioned for accelerated growth over the next several years.
Our plan is to open approximately 30 stores during fiscal 2000, of which
we have already completed our site selection and evaluation process for 24
potential sites.

- EXPAND PRODUCT OFFERINGS. We also plan to grow by increasing the breadth
and depth of our product categories, which may be sold in either existing
stores or through new store concepts. We have historically been able to
leverage our strong brand images to expand single item offerings into
entire collections of related merchandise.

------------------------

We are incorporated in Delaware, and our principal executive offices are
located at 4645 Morena Boulevard, San Diego, CA 92117. Our telephone number is
(858) 587-1500.

5
<PAGE>
EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES:

- NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION;

- A 100-FOR-ONE SPLIT OF OUR COMMON STOCK, EFFECTIVE UPON THE CLOSING OF
THIS OFFERING;

- AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION, EFFECTIVE UPON THE
CLOSING OF THIS OFFERING, TO INCREASE OUR AUTHORIZED COMMON STOCK TO
100,000,000 SHARES; AND

- THE EXERCISE OF OUTSTANDING WARRANTS TO PURCHASE 413,780 SHARES OF OUR
COMMON STOCK.

THE OFFERING

<TABLE>
<S> <C>
Common stock offered by Charlotte Russe...... shares

Common stock offered by selling
stockholders............................... shares
--------

Total.................................. shares

Common stock outstanding after the
offering................................... shares

Use of proceeds.............................. We intend to use these net proceeds to repay
secured indebtedness outstanding under our
revolving credit facility and for general
corporate purposes.

Proposed Nasdaq National Market symbol....... CHIC
</TABLE>

This information is based on shares of common stock outstanding as of June
26, 1999. This information excludes:

- 1,824,600 shares of our common stock subject to options outstanding as of
June 26, 1999 at a weighted average exercise price of $1.80 per share;

- 1,965,440 shares of our common stock subject to warrants outstanding as of
June 26, 1999 at an exercise price of $1.00 per share, subject to
adjustment; and

- 750,000 additional shares of our common stock that have been reserved for
issuance upon future grants of options under our stock option plans.

6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PREDECESSOR CHARLOTTE RUSSE
--------------------------------- -------------------------------------------
FISCAL YEAR ENDED FISCAL YEAR ENDED NINE MONTHS ENDED
--------------------------------- --------------------- -------------------
SEPT. 24, SEPT. 30, SEPT. 27, SEPT. 27, SEPT. 26, JUNE 27, JUNE 26,
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.......................... $59,307 $61,568 $70,663 $ 81,543 $ 134,091 $94,410 $126,378
Cost of goods sold................. 37,123 38,014 43,774 50,723 93,142 65,507 85,996
--------- --------- --------- --------- --------- -------- --------
Gross profit....................... 22,184 23,554 26,889 30,820 40,949 28,903 40,382
Selling, general and administrative
expenses......................... 12,223 12,652 15,266 17,168 26,989 19,052 24,743
Amortization of goodwill and other
intangibles...................... -- -- -- 815 895 712 672
Predecessor shareholders'
salaries......................... 9,000 10,200 8,000 1,200 -- -- --
--------- --------- --------- --------- --------- -------- --------
Operating income................... 961 702 3,623 11,637 13,065 9,139 14,967
Interest income (expense), net..... (159) (28) 42 (2,279) (3,026) (2,198) (2,938)
Other charges, net................. (94) (115) (143) (315) (280) (263) (204)
--------- --------- --------- --------- --------- -------- --------
Income before income taxes......... 708 559 3,522 9,043 9,759 6,678 11,825
Income taxes(1).................... -- -- -- 3,987 4,245 2,905 4,966
--------- --------- --------- --------- --------- -------- --------
Net income......................... $ 708 $ 559 $ 3,522 $ 5,056 $ 5,514 $ 3,773 $ 6,859
--------- --------- --------- --------- --------- -------- --------
--------- --------- --------- --------- --------- -------- --------
Net income per share(2):
Basic............................ $ 0.28 $ 0.30 $ 0.21 $ 0.37
Diluted.......................... $ 0.25 $ 0.27 $ 0.18 $ 0.32
Weighted average shares
outstanding(2):
Basic............................ 18,300 18,300 18,300 18,300
Diluted.......................... 19,992 20,668 20,688 21,207

SELECTED OPERATING DATA:
Number of stores open at end of
period........................... 30 33 35 41 74 69 85
Average square footage per
store(3)......................... 8,994 8,363 8,290 8,206 7,603 7,618 7,558
Comparable store sales increase
(decrease)(4).................... (6.0)% 0.0% 5.0% 5.1% (5.8)% (9.2)% 6.9%
Average store sales(5)............. $ 2,068 $ 2,031 $ 2,048 $ 2,219 $ 2,097 $ 1,542 $ 1,564
Sales per square foot(6)........... $ 228 $ 231 $ 247 $ 268 $ 272 $ 199 $ 206
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 26, 1999
-----------------------
ACTUAL AS ADJUSTED
--------- ------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............................................................................. $ (7,420) $
Total assets............................................................................................. 76,239
Total debt............................................................................................... 18,860
Total stockholders' equity............................................................................... 36,314
</TABLE>

- ------------

(1) The Predecessor had elected S corporation status for federal and state
income tax reporting purposes. Accordingly, the income of the Predecessor
was included in the tax returns of the shareholders and no provision for
income taxes was made. We have elected to operate as a C corporation since
our inception.

(2) See Notes 1, 8 and 12 of Notes to the consolidated financial statements for
the method used to calculate the net income per share and weighted average
shares outstanding.

(3) Our average square footage per store is based on open stores at the end of
the period.

(4) Our comparable store percentages are based on net sales, and stores are
considered comparable beginning on the first day of the month following the
fourteenth full month of sales.

(5) Our average store sales are based on the time weighted average of open
stores in the period.

(6) Our sales per square foot consists of net sales divided by the time weighted
average of gross square footage of open stores.

7
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RISK FACTORS

INVESTING IN OUR COMMON STOCK WILL PROVIDE YOU WITH AN EQUITY OWNERSHIP
INTEREST IN CHARLOTTE RUSSE. AS A CHARLOTTE RUSSE STOCKHOLDER, YOU WILL BE
SUBJECT TO RISKS INHERENT IN OUR BUSINESS. THE VALUE OF YOUR INVESTMENT MAY
INCREASE OR DECLINE AND YOU MAY LOSE ALL OR PART OF THE MONEY YOU PAID TO BUY
OUR COMMON STOCK. YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AS WELL AS
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN
SHARES OF OUR COMMON STOCK.

RISKS RELATING TO OUR BUSINESS

WE WILL BE OPENING NEW STORES MORE RAPIDLY THAN WE HAVE IN THE PAST, WHICH COULD
STRAIN OUR RESOURCES AND CAUSE US TO EXECUTE OUR BUSINESS LESS EFFECTIVELY.

Our growth will largely be dependent on successfully opening and operating
new stores. In the first three quarters of fiscal 1999, we opened 11 new stores,
and we plan to open an additional 11 stores in the fourth quarter. The addition
of 22 stores in fiscal 1999 will represent an increase of approximately 30% from
the number of stores open at the end of fiscal 1998. We plan to open
approximately 30 new stores during fiscal 2000, an increase of 31% from the end
of fiscal 1999. We intend to continue to increase our number of stores at
approximately this rate for at least the next few years. Our proposed expansion
is more rapid than what we have experienced in the past and will place increased
demands on our managerial, operational and administrative resources. These
increased demands could cause us to execute our business less effectively, which
in turn could cause deterioration in the financial performance of our individual
stores and slow our new store growth.

OUR PLANNED EXPANSION INVOLVES A NUMBER OF RISKS THAT COULD PREVENT OR DELAY THE
SUCCESSFUL OPENING OF NEW STORES AS WELL AS IMPACT THE PERFORMANCE OF OUR
EXISTING STORES.

Our ability to open and operate new stores successfully depends on many
factors, including, among others, our ability to:

- identify suitable store locations;

- negotiate acceptable lease terms, including desired tenant improvement
allowances;

- source sufficient levels of inventory to meet the needs of new stores;

- hire and train store personnel;

- successfully integrate new stores into our existing operations; and

- satisfy the fashion preferences of new geographic areas.

In addition, many of our new stores will be opened in regions of the United
States and its territories in which we currently have few or no stores. The
expansion into new markets may present competitive, merchandising and
distribution challenges that are different from those currently encountered in
our existing markets. Any of these challenges could adversely affect our
business and results of operations. In addition, to the extent our new store
openings are in existing markets, we may experience reduced net sales volumes in
existing stores in those markets.

OUR STORES ARE HEAVILY DEPENDENT ON THE CUSTOMER TRAFFIC GENERATED BY SHOPPING
MALLS.

Most of our store locations are not sufficiently concentrated to make
significant marketing expenditures cost effective. As a result, we depend
heavily on locating our stores in prominent locations within successful shopping
malls in order to generate customer traffic. We cannot control the development
of new shopping malls, the availability or cost of appropriate locations within
existing or new shopping malls, or the success of individual shopping malls.

8
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IF AT ANY TIME OUR COMPARABLE STORE SALES AND QUARTERLY RESULTS OF OPERATIONS
DECLINE OR DO NOT MEET THE EXPECTATIONS OF RESEARCH ANALYSTS, THE PRICE OF OUR
COMMON STOCK COULD DECLINE SUBSTANTIALLY.

Our quarterly results of operations for our individual stores have
fluctuated in the past and can be expected to continue to fluctuate in the
future. For instance, while quarterly comparable store sales increased at least
4.1% in each of the fourth quarter of fiscal 1998 and the first three quarters
of fiscal 1999, we experienced quarterly comparable store sales decreases
ranging from 1.7% to 10.5% in each of the five quarters preceding the fourth
quarter of fiscal 1998. Our net sales and operating results are typically lower
in the second quarter of our fiscal year due to the traditional retail slowdown
immediately following the winter holiday season. Our comparable store sales and
quarterly results of operations are affected by a variety of factors, including:

- the timing of new store openings and the relative proportion of new stores
to mature stores;

- fashion trends;

- calendar shifts of holiday or seasonal periods;

- the effectiveness of our test-and-reorder strategy in maintaining
appropriate inventory levels;

- changes in our merchandise mix;

- timing of promotional events;

- general economic conditions and, in particular, the retail sales
environment;

- actions by competitors or mall anchor tenants;

- weather conditions; and

- the level of pre-opening expenses associated with new stores.

You should refer to the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations" for more information.

OUR BUSINESS AND REPUTATION MAY BE ADVERSELY AFFECTED IF OUR RAMPAGE STORES ARE
ASSOCIATED WITH NEGATIVE PUBLICITY RELATED TO OTHER RETAILERS LICENSED TO USE
THE RAMPAGE TRADEMARK IN CONNECTION WITH THE SALE OF APPAREL OR OTHER
MERCHANDISE.

In connection with the acquisition of our Rampage stores, we acquired the
exclusive right within the United States to use the Rampage trademark for use on
exterior or interior signages at our stores as well as for promotional
materials. We do not, however, have the right to use the Rampage trademark on
our merchandise. The right to market merchandise under the Rampage trademark was
retained by Rampage Clothing Company. Further, nothing in our license agreement
with Rampage Clothing Company prohibits the sale of merchandise bearing the
Rampage trademark by other retailers or the licensing of the Rampage trademark
to other vendors. In fact, Rampage Clothing Company has licensed the trademark
to other retailers and vendors. We believe a positive Rampage brand image is
important to our success. Accordingly, if the merchandise sold by these
retailers under the Rampage trademark is of low quality or these third parties
otherwise engage in activities that may negatively affect the Rampage trademark
or are otherwise inconsistent with our Rampage store concept, consumers could
lose confidence in our merchandise and our reputation and business could be
materially adversely affected. You should refer to the section entitled
"Business--Intellectual Property" for more information.

OUR SUCCESS DEPENDS ON OUR ABILITY TO IDENTIFY AND RAPIDLY RESPOND TO CONSUMERS'
FASHION TASTES.

The apparel industry is subject to rapidly evolving fashion trends and
shifting consumer demands. Accordingly, our success is heavily dependent both on
the priority our target customers place on fashion and on our ability to
anticipate, identify and capitalize upon emerging fashion trends. Current

9
<PAGE>
fashion tastes place significant emphasis on a fashionable look. In the past
this emphasis has increased and decreased through fashion cycles, and decreased
emphasis has adversely affected our results. Although we rely on a
test-and-reorder merchandise strategy to minimize our exposure to misjudging
fashion tastes and to reduce inventory risks, we can not assure you that this
strategy will continue to be successful. Our failure to anticipate, identify or
react appropriately to changes in styles, trends, desired images or brand
preferences could lead to, among other things, excess inventories and higher
markdowns, as well as decreased appeal of our brands.

OUR MARKET SHARE MAY BE ADVERSELY IMPACTED AT ANY TIME BY A SIGNIFICANT NUMBER
OF COMPETITORS.

We operate in a highly competitive environment characterized by low barriers
to entry. We compete against a diverse group of retailers, including national
and local specialty retail stores, regional retail chains, traditional
department stores and, to a lesser extent, mall merchandisers. Our market share
and results of operations may be adversely impacted by this significant number
of competitors. Many of our competitors also are larger and have substantially
greater resources than we do.

WE RELY ON OUR GOOD RELATIONSHIPS WITH VENDORS TO IMPLEMENT OUR BUSINESS
STRATEGY SUCCESSFULLY.

Our business is dependent on continued good relations with our vendors. In
particular, we believe that we generally are able to obtain attractive pricing
and other terms from vendors because we are perceived as a desirable customer.
Our test-and-reorder merchandise strategy also relies in large part on our
ability to obtain merchandise from our vendors within three to six weeks from
the date of order. Our failure to maintain good relations with our vendors could
increase our exposure to changing fashion cycles, which may in turn lead to
increased inventory markdown rates.

OUR SOUTHWESTERN UNITED STATES CONCENTRATION MAKES US SUSCEPTIBLE TO ADVERSE
CONDITIONS IN THIS REGION.

A majority of our stores are located in southern California, Arizona and
Nevada. As a result, our operations are more subject to regional factors than
the operations of more geographically diversified competitors. These factors
include, among others, economic and weather conditions, demographic and
population changes and fashion tastes.

In addition, our corporate offices and distribution center are located in
San Diego, and we transact business with vendors at our offices in the
California Merchandise Mart in Los Angeles. A natural disaster or other
catastrophic event, such as an earthquake, affecting southern California could
significantly disrupt our operations.

OUR FAILURE TO RETAIN OUR EXISTING SENIOR MANAGEMENT TEAM COULD ADVERSELY AFFECT
OUR BUSINESS.

Our business requires disciplined execution at all levels of our
organization in order to timely deliver and display fashionable merchandise in
appropriate quantities in our stores. This execution requires experienced and
talented management. We currently have a management team with a great deal of
experience with us and in apparel retailing. If we were to lose the benefit of
this experience, and in particular if we were to lose the services of Bernard
Zeichner, our President and Chief Executive Officer, or Harriet Sustarsic, our
Executive Vice President and General Merchandise Manager, our business could be
adversely affected. We do not maintain key man insurance on any of our
management team. You should refer to the section entitled "Management" for more
information.

WE RELY ON THIRD PARTIES FOR UPGRADING AND MAINTAINING OUR MANAGEMENT
INFORMATION SYSTEMS. IF THESE THIRD PARTIES DO NOT ADEQUATELY PERFORM THESE
FUNCTIONS APPROPRIATELY, OUR BUSINESS COULD BE DISRUPTED.

The efficient operation of our business is heavily dependent on our
information systems. In particular, we rely heavily on the automated sortation
system used in our distribution center and the merchandise management system
used to track sales and inventory. We depend on our vendors to

10
<PAGE>
maintain and periodically upgrade these systems for the continued ability of
these systems to support our business as we expand. The software programs
supporting our automated sorting equipment and processing our inventory
management information were licensed to us by independent software developers.
The inability of these developers to continue to maintain and upgrade these
software programs would disrupt our operations if we are unable to convert to
alternate systems in an efficient and timely manner. You should refer to the
section entitled "Business--Management Information Systems" for more
information.

OUR BUSINESS MAY BE ADVERSELY AFFECTED IF OUR CRITICAL COMPUTER SYSTEMS DO NOT
PROPERLY HANDLE DATE INFORMATION AFTER DECEMBER 31, 1999.

Our operations may face risks associated with the fact that many computer
systems and software programs do not properly recognize dates after December 31,
1999. This could result in system failures or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to receive shipments, process financial information or credit card transactions,
deliver our merchandise to our stores or engage in other normal business
activities.

We have been advised by the vendors of the hardware and software used in our
accounting, point of sale and inventory control, and distribution information
systems that the versions of their products now used by us are Year 2000
compliant. We have begun testing these systems ourselves on a separate computer
using simulated dates after December 31, 1999 to verify compliance, and plan to
complete this testing by September 1, 1999.

We have been advised by our major credit card processors and
telecommunications providers that they believe their operations will not be
significantly disrupted by Year 2000 issues. We have begun testing the systems
of our major credit card processors on a separate computer using simulated dates
after December 31, 1999 to verify compliance, and plan to complete this testing
by September 1, 1999. Beyond this minimal testing, however, we have no assurance
that our credit card processors and telecommunications providers are correct in
their Year 2000 assessments, and significant disruptions in the services
provided to us would adversely affect our operations.

We currently purchase merchandise from a significant number of vendors, and
do not make purchases or otherwise exchange data with our vendors
electronically. Because we purchase from such a diverse group of vendors, we do
not believe that we are dependent on the operations of any single vendor or
group of vendors. As a result, we do not intend to inquire systematically about
the Year 2000 readiness of our vendors. You should refer to the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Year 2000 Readiness Disclosure Statement" for more information.

RISKS RELATING TO THIS OFFERING

WE ARE CONTROLLED BY A SMALL GROUP OF EXISTING STOCKHOLDERS WHOSE INTERESTS MAY
DIFFER FROM OTHER STOCKHOLDERS.

Two investment funds managed by Saunders Karp & Megrue, L.P. (collectively,
the "SKM Funds") will beneficially own approximately % of the outstanding
shares of our common stock after the offering. Accordingly, they will have
significant influence in determining the outcome of all matters submitted to
stockholders for approval, including the election of directors and significant
corporate transactions. The interests of these stockholders may differ from the
interests of other stockholders and their concentration of ownership may have
the effect of delaying or preventing a change in our control that may be favored
by other stockholders. As long as the SKM Funds own a majority of our common
stock, they will have the power to elect our entire board of directors. In
addition, under a stockholders agreement, the SKM Funds have the power to
nominate (1) three of our directors while they hold more than 25% of our
outstanding common stock and (2) two of our directors so long as they hold at
least 10% of the shares of common stock held by them immediately after the
completion of the

11
<PAGE>
offering. You should refer to the sections entitled "Principal and Selling
Stockholders" and "Certain Transactions" for more information.

THE LIQUIDITY OF OUR STOCK IS UNCERTAIN BECAUSE IT HAS NEVER BEEN PUBLICLY
TRADED, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE THE PRICE YOU
PAID.

There has not been a public market for our common stock. As a result, the
initial public offering price will be determined by negotiations among the
underwriters, the selling stockholders and us, and may not be indicative of
prices that will prevail in the public trading markets. Further, we cannot
predict the extent to which a trading market for our common stock will develop
or how liquid that market will be. You may not be able to resell your shares at
or above the initial public offering price.

THE MARKET PRICE OF OUR COMMON STOCK MAY BE MATERIALLY ADVERSELY AFFECTED BY
MARKET VOLATILITY.

The market price of our common stock is likely to fluctuate, both because of
actual and perceived changes in our financial results and prospects and because
of general volatility in the stock market. The factors that could cause
fluctuations in our stock price may include, among other factors discussed in
this section:

- actual or anticipated variations in comparable store sales or quarterly
operating results;

- changes in financial estimates by research analysts;

- actual or anticipated changes in the United States economy or the
retailing environment;

- changes in the market valuations of other specialty apparel or retail
companies;

- announcements by us or our competitors of significant acquisitions,
strategic partnerships, divestitures, joint ventures or other strategic
initiatives; and

- actual or anticipated sales of common stock by existing stockholders,
whether in the market or in a public offering.

THE PUBLIC SALE OF OUR STOCK BY EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT THE
PRICE OF OUR COMMON STOCK.

The market price of our common stock could decline as a result of market
sales by our existing stockholders after the offering, or the perception that
such sales will occur. These sales also might make it difficult for us to sell
equity securities in the future at a time and at a price that we deem
appropriate. You should refer to the section entitled "Shares Eligible for
Future Sale" for more information.

YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
INVESTMENT IN OUR COMMON STOCK.

The initial public offering price per share will significantly exceed our
net tangible book value per share. Accordingly, you will suffer immediate and
substantial dilution of $ per share, assuming an initial public
offering price of $ per share. This dilution is due in large part
to the fact that earlier investors paid substantially less than the public
offering price when they purchased their shares of our common stock. The
exercise of outstanding options and warrants to purchase our common stock will
result in additional dilution per share. You should refer to the section
entitled "Dilution" for more information.

12
<PAGE>
FORWARD-LOOKING STATEMENTS

We have made statements under the captions "Summary," "Risk Factors," "Use
of Proceeds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and in other sections of this prospectus that
are forward-looking statements. You can identify these statements by
forward-looking words such as "may," "will," "expect," "intend," "anticipate,"
"believe," "estimate" and "continue" or similar words. These forward-looking
statements may also use different phrases. We have based these forward-looking
statements on our current expectations and projections about future events.
These forward-looking statements, which are subject to risks, uncertainties, and
assumptions about us, may include, among other things, projections of our future
results of operations or of our financial condition, our anticipated growth
strategies, and anticipated trends in our business.

We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to accurately
predict or which we do not fully control that could cause actual results to
differ materially from those expressed or implied in our forward-looking
statements. Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual results to
differ materially from those expressed or implied by these forward-looking
statements, including those factors discussed under the caption entitled "Risk
Factors."

We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.

13
<PAGE>
USE OF PROCEEDS

We estimate that the net proceeds from our sale of the shares of
common stock we are offering will be approximately $ million,
assuming an initial public offering price of $ and after deducting
the estimated underwriting discounts and offering expenses payable. We will not
receive any proceeds from the sale of common stock by the selling stockholders.

We intend to use approximately $18.0 million of the net proceeds from this
offering to repay secured indebtedness outstanding under our revolving credit
facility with BankBoston, N.A, as agent. This debt has a maturity date of
September 30, 2002 and bears interest at a rate per annum equal to either (1)
the base rate established by BankBoston, N.A. plus 1.00% or (2) the Eurodollar
rate of BankBoston, N.A. plus 2.50%, at our option and subject to certain
adjustments. As of July 29, 1999, the interest rate on borrowings under our
revolving credit facility was 7.65%. We will use the remainder of the net
proceeds from this offering for general corporate purposes and, accordingly, we
will have significant flexibility in applying such proceeds. Pending any use, we
will invest the net proceeds of this offering in short-term, investment-grade
interest-bearing securities.

DIVIDEND POLICY

We do not intend to declare or pay a cash dividend on our common stock in
the foreseeable future. We currently intend to retain earnings to finance future
operations and expansions. We are prohibited by the terms of our revolving
credit facility from paying cash dividends without the prior written consent of
the lender.

14
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of June 26, 1999 on an
actual basis and as adjusted to reflect (1) a 100-for-one split of our common
stock, (2) an increase in our authorized common stock to 100,000,000 shares, (3)
the sale of the shares of common stock offered by us at an assumed initial
public offering price of $ per share, after deducting the underwriting
discount and estimated offering expenses payable by us, (4) the application of
the estimated net proceeds as described in "Use of Proceeds" and (5) the
exercise of warrants to purchase 413,780 shares of common stock by FSC Corp., an
affiliate of BankBoston Corporation. This table contains unaudited information
and should be read in conjunction with the consolidated financial statements
appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 26, 1999
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Capital leases, current portion.......................................................... $ 428 $
---------- -----------
---------- -----------
Capital leases, net of current portion................................................... 182
Notes payable to bank.................................................................... 18,250
---------- -----------
Total long-term debt................................................................. 18,432
Stockholder's equity:
Preferred stock, par value $0.01 per share; 3,000,000 shares authorized, none issued or
outstanding.......................................................................... --
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 18,310,800
shares issued and outstanding; shares issued and outstanding, as adjusted... 183
Additional paid-in capital............................................................. 19,662
Deferred compensation.................................................................. (960)
Retained earnings...................................................................... 17,429
---------- -----------
Total stockholders' equity........................................................... 36,314
---------- -----------
Total capitalization............................................................... $ 54,746 $
---------- -----------
---------- -----------
</TABLE>

The share information in the table is based on our shares of common stock
outstanding as of June 26, 1999. This table does not include:

- 1,824,600 shares of our common stock subject to options outstanding as of
June 26, 1999 at a weighted average exercise price of $1.80 per share;

- 1,965,440 shares of our common stock subject to warrants outstanding as of
June 26, 1999 at an exercise price of $1.00 per share, subject to
adjustment; and

- 750,000 additional shares of our common stock that have been reserved for
issuance under our stock plans.

15
<PAGE>
DILUTION

Our pro forma net tangible book value as of June 26, 1999 was approximately
$4.9 million or $0.26 per share of common stock. Our pro forma net tangible book
value per share represents our total tangible assets less total liabilities
divided by the pro forma total number of shares of common stock outstanding at
such date, assuming the exercise of warrants to purchase 413,780 shares of
common stock at an exercise price of $1.00 per share.

Without taking into account any changes in net tangible book value after
June 26, 1999, other than to give effect to the sale of the shares of common
stock offered by us at an assumed initial public offering price of $ per
share, after deducting the underwriting discount and estimated offering expenses
payable by us, our pro forma net tangible book value as of June 26, 1999 would
have been approximately $ million or $ per share of common stock. This
amount represents an immediate increase in pro forma net tangible book value of
$ per share to the existing stockholders and an immediate dilution
in pro forma net tangible book value of $ per share to new investors
purchasing shares in this offering. If the initial public offering price is
higher or lower, the dilution to new investors will be greater or less. The
following table illustrates the dilution in pro forma net tangible book value
per share to new investors.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $
Pro forma net tangible book value per share as of June 26, 1999............ $ 0.26
Increase in net tangible book value per share attributable to new
investors................................................................
---------
Pro forma net tangible book value per share after the offering...............
---------
Dilution per share to new investors.......................................... $
---------
---------
</TABLE>

The following table summarizes on a pro forma basis, as of June 26, 1999,
the number of shares of common stock purchased from us, the aggregate cash
consideration paid to us and the average price per share paid by existing
stockholders and to be paid by new investors purchasing the shares of common
stock in this offering at an assumed initial public offering price of $ per
share, before deducting underwriting discounts and commissions and estimated
offering expenses payable by us.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- -------- ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing Stockholders.............. % $ % $
New Investors......................
------- -------- ------- --------
Total............................ % $ %
------- -------- ------- --------
------- -------- ------- --------
</TABLE>

The above information assumes no exercise of (1) the underwriters'
over-allotment option and (2) stock options or warrants after June 26, 1999. As
of June 26, 1999, we had reserved 1,824,600 shares of our common stock for
issuance upon exercise of outstanding options at a weighted average exercise
price of $1.80 per share and 1,965,440 shares of our common stock for issuance
upon exercise of outstanding warrants at an exercise price of $1.00 per share.
To the extent any of these options or warrants are exercised, there will be
further dilution to new investors.

16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The selected consolidated financial data set forth below is qualified in its
entirety by, and should be read in conjunction with, "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements and notes thereto included elsewhere in this
prospectus. The selected consolidated balance sheet data as of September 27,
1997 and September 26, 1998 and the selected consolidated statement of income
data for the three years in the period ended September 26, 1998 have been
derived from our consolidated financial statements, which have been audited by
Ernst & Young LLP, independent auditors, and are included elsewhere in this
prospectus. The selected consolidated balance sheet data as of September 24,
1994, September 30, 1995 and September 27, 1996 and the selected consolidated
statement of income data for each of the two years in the period ended September
30, 1995 were derived from audited financial statements which are not included
in this prospectus. The selected consolidated balance sheet data as of June 27,
1998 and June 26, 1999 and the consolidated statement of income data for the
nine months ended June 27, 1998 and June 26, 1999 have been derived from
unaudited consolidated financial statements included elsewhere in this
prospectus. The unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of our management are necessary for the fair presentation of our
consolidated financial position and results of operations for those periods. Our
results for the nine months ended June 26, 1999 are not necessarily indicative
of the results that may be expected for the entire year or for any future
period.

<TABLE>
<CAPTION>
PREDECESSOR CHARLOTTE RUSSE
------------------------------- ------------------------------------------
FISCAL YEAR ENDED FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------- -------------------- --------------------
SEPT. 24, SEPT. 30, SEPT. 27, SEPT. 27, SEPT. 26, JUNE 27, JUNE 26,
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales.................................. $ 59,307 $ 61,568 $ 70,663 $ 81,543 $ 134,091 $ 94,410 $ 126,378
Cost of goods sold......................... 37,123 38,014 43,774 50,723 93,142 65,507 85,996
--------- --------- --------- --------- --------- --------- ---------
Gross profit............................... 22,184 23,554 26,889 30,820 40,949 28,903 40,382
Selling, general and administrative
expenses................................. 12,223 12,652 15,266 17,168 26,989 19,052 24,743
Amortization of goodwill and other
intangibles.............................. -- -- -- 815 895 712 672
Predecessor shareholders' salaries......... 9,000 10,200 8,000 1,200 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Operating income........................... 961 702 3,623 11,637 13,065 9,139 14,967
Interest income (expense), net............. (159) (28) 42 (2,279) (3,026) (2,198) (2,938)
Other charges, net......................... (94) (115) (143) (315) (280) (263) (204)
--------- --------- --------- --------- --------- --------- ---------
Income before income taxes................. 708 559 3,522 9,043 9,759 6,678 11,825
Income taxes(1)............................ -- -- -- 3,987 4,245 2,905 4,966
--------- --------- --------- --------- --------- --------- ---------
Net income................................. $ 708 $ 559 $ 3,522 $ 5,056 $ 5,514 $ 3,773 $ 6,859
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income per share(2):
Basic.................................... $ 0.28 $ 0.30 $ 0.21 $ 0.37
Diluted.................................. $ 0.25 $ 0.27 $ 0.18 $ 0.32
Weighted average shares outstanding(2):
Basic.................................... 18,300 18,300 18,300 18,300
Diluted.................................. 19,992 20,668 20,688 21,207

SELECTED OPERATING DATA:
Number of stores open at end of period..... 30 33 35 41 74 69 85
Average square footage per store(3)........ 8,994 8,363 8,290 8,206 7,603 7,618 7,558
Comparable store sales increase
(decrease)(4)............................ (6.0)% 0.0% 5.0% 5.1% (5.8)% (9.2)% 6.9%
Average stores sales(5).................... $ 2,068 $ 2,031 $ 2,048 $ 2,219 $ 2,097 $ 1,542 $ 1,564
Sales per square foot(6)................... $ 228 $ 231 $ 247 $ 268 $ 272 $ 199 $ 206
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
PREDECESSOR CHARLOTTE RUSSE
------------------------------- ------------------------------------------
AS OF AS OF
------------------------------- ------------------------------------------
SEPT. 24, SEPT. 30, SEPT. 27, SEPT. 27, SEPT. 26, JUNE 27, JUNE 26,
1994 1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)

<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)............... $ 952 $ 1,285 $ (3,589) $ (2,676) $ (1,239) $ (1,210) $ (7,420)
Total assets............................... 15,613 17,705 49,641 57,128 74,427 71,577 76,239
Total debt................................. 4,903 5,459 21,900 22,325 28,525 29,900 18,860
Total stockholders' equity................. 4,583 5,142 18,923 23,980 29,445 27,672 36,314
</TABLE>

- ---------

(2) See Notes 1, 8 and 12 of Notes to the consolidated financial statements for
the method used to calculate the net income per share and weighted average
shares outstanding.

(3) Our average square footage per store is based on open stores at the end of
the period.

(4) Our comparable store percentages are based on net sales, and stores are
considered comparable beginning on the first day of the month following the
fourteenth full month of sales.

(5) Our average store sales are based on the time weighted average of open
stores in the period.

(6) Our sales per square foot consists of net sales divided by the time weighted
average of gross square footage of open stores.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES TO THOSE STATEMENTS AND OTHER FINANCIAL
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

We are a national mall-based specialty retailer of fashionable, value-priced
apparel and accessories operating under two distinct store concepts, "Charlotte
Russe" and "Rampage." We were founded in 1975 and opened our first store in
Carlsbad, California. As a result of the success achieved with this store, we
gradually expanded our business by adding 15 stores throughout southern
California over the next 14 years. In 1990, we opened our first store in
Arizona, and in 1994 we expanded into the Nevada market. As of the end of fiscal
1996, we were operating a chain of 35 stores in three states, generating over
$70.0 million of net sales.

On September 26, 1996, two funds managed by Saunders Karp & Megrue, L.P., a
private equity investment firm, acquired Charlotte Russe from its founders with
the intention of pursuing an accelerated national new store expansion program.
Concurrent with the acquisition, Bernard Zeichner, who had joined us as
President in May 1996, acquired an ownership interest in the business from the
SKM Funds. The new owners believed a significant opportunity existed to leverage
the strength of our new store economics by further penetrating existing markets
and expanding the chain into other regions of the country. Mr. Zeichner
recognized the importance of developing the necessary infrastructure to execute
this strategic business plan and began hiring a number of key senior executives
with national retail experience to complement the existing management team.

In fiscal 1997, the first fiscal year under our new ownership, we opened
seven new stores compared to two new stores opened in the prior fiscal year, and
entered the northern California, Florida, Texas and Hawaii markets. As a result
of this new store growth and a 5.0% increase in our comparable store sales, our
net sales grew to $81.5 million in fiscal 1997 from $70.7 million in fiscal
1996, an increase of 15.4%.

In fiscal 1998, we undertook several strategic initiatives to enhance our
long-term national expansion plans. At the beginning of fiscal 1998, we acquired
16 stores in a bankruptcy proceeding from Rampage Retailing, Inc. These stores
provided us with a second distinct retail concept as well as an additional
vehicle for growth. In addition, we opened 17 new Charlotte Russe stores,
primarily in markets we entered in the prior fiscal year and in new markets such
as Georgia and South Carolina. Accordingly, our total store base increased by
80.5% during fiscal 1998. Finally, we moved into new corporate offices and a
larger, more automated distribution center capable of supporting our expansion
plans over the next several years. These initiatives, particularly the Rampage
acquisition, significantly strained our managerial and other resources. Due to
the expedited timing of the Rampage acquisition, we initially diverted Charlotte
Russe merchandise to support the opening of these stores and devoted significant
managerial resources to integrating this new concept. As a result, our buying
department was distracted by having to purchase for two distinctly different
chains throughout much of the first half of fiscal 1998 until we were able to
establish separate and dedicated buying operations for each concept. While we
achieved significant growth in net sales during fiscal 1998, we were only able
to achieve a modest increase in our operating income.

Our strong operating performance in fiscal 1999 reflects the benefits of the
infrastructure building process that we undertook during fiscal 1998. Net sales
for the nine months ended June 26, 1999 increased to $126.4 million from $94.4
million, an increase of 33.9% over the same period last year. This increase
resulted from a rise in comparable store sales of 6.9% and our continued growth
of new stores. During the same period, our operating income grew to $15.0
million from $9.1 million, an increase of 63.8%. We opened 11 new stores during
the first nine months of fiscal 1999, and we

19
<PAGE>
anticipate opening 11 more stores before the end of the fiscal year. These
stores include our first locations in Michigan, Illinois, Pennsylvania,
Connecticut, North Carolina and Puerto Rico.

RESULTS OF OPERATIONS

The following table sets forth our operating results, expressed as a
percentage of sales, and certain store information for the periods indicated. We
acquired our Rampage stores in the beginning of fiscal 1998 and, accordingly,
our results for fiscal 1996 and 1997 consist only of the results for our
Charlotte Russe stores.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ------------------------
------------------------------- JUNE 27, JUNE 26,
1996 1997 1998 1998 1999
--------- --------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales..................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................................ 61.9 62.2 69.5 69.4 68.0
--------- --------- --------- ----- -----
Gross profit.................................................. 38.1 37.8 30.5 30.6 32.0
Selling, general and administrative expenses.................. 21.6 21.1 20.1 20.2 19.6
Amortization of goodwill and other intangibles................ 0.0 1.0 0.7 0.7 0.6
Predecessor shareholders' salaries............................ 11.4 1.4 0.0 0.0 0.0
--------- --------- --------- ----- -----
Operating income.............................................. 5.1 14.3 9.7 9.7 11.8
Interest income (expense), net................................ 0.1 (2.8) (2.2) (2.3) (2.2)
Other charges, net............................................ (0.2) (0.4) (0.2) (0.3) (0.2)
--------- --------- --------- ----- -----
Income before income taxes.................................... 5.0 11.1 7.3 7.1 9.4
Income taxes.................................................. 0.0 4.9 3.2 3.1 4.0
--------- --------- --------- ----- -----
Net income.................................................... 5.0% 6.2% 4.1% 4.0% 5.4%
--------- --------- --------- ----- -----
--------- --------- --------- ----- -----
Number of stores open at end of period........................ 35 41 74 69 85
--------- --------- --------- ----- -----
--------- --------- --------- ----- -----
</TABLE>

NINE MONTHS ENDED JUNE 26, 1999 COMPARED TO NINE MONTHS ENDED JUNE 27, 1998

NET SALES. Net sales increased to $126.4 million from $94.4 million, an
increase of $32.0 million or 33.9% over the same period last year. This increase
is attributable primarily to $26.2 million of net sales for the 11 new stores
opened during fiscal 1999, as well as other stores opened in prior fiscal years
that did not qualify as comparable stores. Our comparable store sales increased
6.9% and contributed $5.8 million to the net sales increase during this period.

GROSS PROFIT. Gross profit represents net sales less cost of goods sold,
which includes buying, distribution and occupancy costs. Gross profit increased
to $40.4 million from $28.9 million, an increase of $11.5 million or 39.7% over
the same period last year. This increase is the result of higher net sales and
improved gross profit margins. As a percentage of net sales, gross profit rose
to 32.0% from 30.6%. The increase in gross profit as a percentage of net sales
was principally due to higher initial markups and the impact of leveraging
distribution center expenses over a higher sales base.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $24.7 million from $19.1 million, an
increase of $5.6 million or 29.9% over the same period last year. This increase
is attributable to new store expansion and increased corporate expenses. As a
percentage of sales, these expenses dropped to 19.6% from 20.2%, primarily due
to the impact of leveraging store operating expenses and corporate payroll
expenses over a higher sales base. The decline in expenses as a percentage of
net sales was partially offset by management bonus plan accruals, for which no
comparable charge was incurred during the same period of the prior year.

INCOME TAXES. The effective tax rate of 42.0% for the nine months ended
June 26, 1999 compares to an effective tax rate of 43.5% for the same period
last year. Our effective tax rate exceeds statutory

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tax rates due to non-deductible amortization of goodwill associated with the
acquisition of the business in September 1996. Since amortization is a fixed
amount, increases in pre-tax earnings reduce the effect of this tax difference
as a percentage of pre-tax earnings.

NET INCOME. Net income increased to $6.9 million from $3.8 million, an
increase of $3.1 million or 81.8% over the same period last year. This increase
was primarily due to an increase in gross profit, and was partially offset by an
increase in selling, general and administrative expenses, an increase in income
taxes, and an increase of $0.7 million in net interest expense. The increase in
net interest expense reflects a $0.8 million charge relating to the early
repayment of the 12.5% subordinated debt in June 1999.

YEAR ENDED SEPTEMBER 26, 1998 COMPARED TO YEAR ENDED SEPTEMBER 27, 1997

NET SALES. Net sales increased to $134.1 million from $81.5 million, an
increase of $52.6 million or 64.4% over the prior fiscal year. The increase
reflects $35.5 million of net sales from the 17 Rampage stores that were
acquired or opened during fiscal 1998. An additional $21.6 million of net sales
increases are related to the 16 new Charlotte Russe stores opened in fiscal
1998, as well as other stores opened in prior fiscal years that did not qualify
as comparable stores. This increase was partially offset by a 5.8% decrease in
our comparable store sales, which resulted in decreased sales of $4.5 million
compared to the prior fiscal year.

GROSS PROFIT. Gross profit increased to $40.9 million from $30.8 million,
an increase of $10.1 million or 32.9% over the same period last year. This
increase is a result of increased net sales, offset in part by decreased gross
profit margins. As a percentage of net sales, gross profit decreased to 30.5%
from 37.8%. The decrease in gross profit as a percentage of sales resulted in
part from the inclusion of the Rampage stores acquired at the beginning of
fiscal 1998, which stores have higher occupancy costs. In addition, lower
comparable stores sales at our Charlotte Russe stores resulted in higher
markdowns and higher occupancy expenses as a percentage of net sales.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $27.0 million from $17.2 million, an
increase of $9.8 million or 57.2% over the same period last year. This increase
is attributable to new store expansion and increased corporate expenses. These
expenses as a percentage of net sales declined to 20.1% from 21.1% as corporate
expenses were leveraged by the significant increase in our sales base. This
decline was partially offset by an increase in store operating expenses
resulting from the inclusion of the Rampage stores, which have slightly higher
expense levels than our Charlotte Russe stores, and higher expenses for our
Charlotte Russe stores resulting from a drop in average store volumes.

INCOME TAXES. The effective tax rate of 43.5% for the year ended September
26, 1998 compares to an effective tax rate of 44.1% for the prior fiscal year.

NET INCOME. Net income increased to $5.5 million from $5.1 million, an
increase of $0.4 million or 9.0% over the prior fiscal year. This increase was
primarily due to an increase in gross profit and a $1.2 million reduction in
salaries paid to predecessor shareholders pursuant to terms of the September
1996 acquisition. This increase in net income was largely offset by higher
selling, corporate and interest expenses associated with the Rampage
acquisition.

YEAR ENDED SEPTEMBER 27, 1997 COMPARED TO YEAR ENDED SEPTEMBER 27, 1996

NET SALES. Net sales increased to $81.5 million from $70.7 million, an
increase of $10.8 million or 15.4% over the prior fiscal year. The increase
reflects $7.4 million attributable to net sales for the seven new stores opened
during fiscal 1997, as well as other stores opened in prior fiscal years that
did not qualify as comparable stores. Our comparable store sales increased 5.1%
and contributed $3.4 million to the net sales increase.

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<PAGE>
GROSS PROFIT. Gross profit increased to $30.8 million from $26.9 million,
an increase of $3.9 million or 14.6% over the same period last year. This
increase is a result of increased net sales, offset in part by decreased gross
profit margin. As a percent of sales, gross profit decreased to 37.8% from
38.1%, primarily due to increased distribution center and related expenses.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $17.2 million from $15.3 million, an
increase of $1.9 million or 12.5% over the same period last year. This increase
is attributable to new store expansion and increased corporate expenses. As a
percentage of net sales, these expenses decreased to 21.1% from 21.6%, as a
result of the impact of leveraging store operating expenses over higher average
store sales volumes.

INCOME TAXES. The effective tax rate of 44.1% for the year ended September
27, 1997 compares to no income tax expense the prior year. We operated as an S
Corporation prior to fiscal 1997 and, as a result, had not been subject to
federal or certain state income taxes.

NET INCOME. Net income increased to $5.1 million from $3.5 million, an
increase of $1.6 million or 43.6% over the prior fiscal year. This increase was
primarily due to an increase in gross profit and a $6.8 million reduction in
salaries paid to predecessor shareholders pursuant to terms of the September
1996 acquisition. This increase in net income was partially offset by an
increase in selling, general and administrative expenses, a $0.8 million
increase in amortization of goodwill and other intangibles relating to our
acquisition, a $2.3 million increase in net interest expense primarily
attributable to higher levels of borrowing in connection with our acquisition,
and a $0.2 million increase in other charges relating to the payment of a
monitoring fee to Saunders Karp & Megrue, L.P.

QUARTERLY RESULTS AND SEASONALITY

We have historically experienced and expect to continue to experience
seasonal and quarterly fluctuations in our net sales and operating income. As is
the case with many retailers of apparel and related merchandise, our business is
subject to seasonal influences, characterized by strong sales during the
back-to-school, Easter and winter holiday seasons. The strength of each of these
three seasons generally provides relatively balanced sales during our first,
third and fourth fiscal quarters. We typically experience lower net sales and
net income during the second fiscal quarter ending in March of each year. Our
quarterly results of operations may fluctuate significantly as a result of a
variety of factors, including the timing of new store openings, fashion trends,
and shifts in timing of certain holidays, as well as other factors discussed in
the section entitled "Risk Factors."

The following table includes our unaudited quarterly results of operations
data for each of the three quarters in the nine months ended June 26, 1999 and
for each of the four quarters in the year ended September 26, 1998. We believe
that this information has been prepared on the same basis as our audited
consolidated financial statements and that all necessary adjustments, consisting
only of normal recurring adjustments, have been included to present fairly the
selected quarterly information when read in conjunction with our audited
consolidated financial statements and the notes to those statements included
elsewhere in the prospectus.

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<TABLE>
<CAPTION>
FISCAL YEAR 1998 FISCAL YEAR 1999
--------------------------------------------- ---------------------------------
THREE MONTHS ENDED THREE MONTHS ENDED
--------------------------------------------- ---------------------------------
DEC. 27, MAR. 28, JUNE 27, SEPT. 26, DEC. 28, MAR. 27, JUNE 26,
1997 1998 1998 1998 1998 1999 1999
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................... $ 35,251 $ 27,202 $ 31,957 $ 39,681 $ 46,007 $ 35,689 $ 44,682
Gross profit................ 12,158 7,482 9,263 12,046 15,150 10,625 14,607
Operating income............ 5,324 1,532 2,283 3,926 6,385 2,784 5,798
Net income.................. 2,605 333 835 1,741 3,223 1,204 2,432

AS A PERCENTAGE OF NET SALES:
Net sales................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit................ 34.5 27.5 29.0 30.4 32.9 29.8 32.7
Operating income............ 15.1 5.6 7.1 9.9 13.9 7.8 13.0
Net income.................. 7.4 1.2 2.6 4.4 7.0 3.4 5.4

OPERATING DATA:
Comparable store sales
increase (decrease)....... (10.5)% (10.4)% (6.7)% 4.1% 4.4% 4.5% 11.3%
Stores open at end of
period.................... 61 62 69 74 80 82 85
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Our capital requirements result primarily from capital expenditures related
to new store openings. We have historically satisfied our cash requirements
principally through cash flow from operations. We have used borrowings under our
revolving credit facility in the past for acquisitions, including our
acquisition by the SKM Funds and the acquisition of 16 stores from Rampage
Retailing, Inc. Due to the rapid turnover of our inventory, we generate trade
payables and other accrued liabilities sufficient to offset our working capital
requirements. As of June 26, 1999, we had negative working capital of $7.4
million.

During fiscal years 1997, 1998 and the first nine months of fiscal 1999, net
cash provided by operations was $8.3 million, $9.4 million and $17.4 million. In
the first nine months of fiscal 1999, cash flows from operating activities
increased as a result of increased operating earnings and increased current
liabilities. In fiscal 1997 and 1998 cash used in investing activities included
$2.0 million and $7.3 million related to the acquisition of 16 stores from
Rampage Retailing, Inc. Cash flows used for new store openings and the
construction of our distribution center and corporate facility were $5.2
million, $8.5 million and $7.6 million in fiscal 1997, 1998 and the nine months
ended June 26, 1999.

Excluding the impact of financing activities related to the Rampage
acquisition, the net repayment of borrowings under our revolving credit facility
and capital lease obligations were $1.6 million and $2.6 million in fiscal 1997
and 1998. During the nine months ended June 26, 1999, we repaid $11.0 million of
our 12.5% subordinated debt to the SKM Funds, although net borrowings under our
revolving credit facility rose only $1.7 million during the same period.

We expect to open approximately 30 stores in fiscal 2000. We estimate that
the average net investment to open a new store is approximately $450,000, which
includes capital expenditures, exclusive of landlord contributions, and initial
inventory, net of payables. During the first year of operations, our new stores
generate store-level operating cash flow of approximately $405,000, representing
a 90% cash return on investment. After taking into account store remodelings,
corporate capital projects and distribution center enhancements, total capital
expenditures for fiscal 2000 are projected to be approximately $18.0 million.

Our revolving credit facility provides us with a $32.0 million revolving
line of credit under which borrowed funds bear interest at either the Eurodollar
rate plus 2.50% or the base rate plus 1.00%. The

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<PAGE>
revolving credit facility requires us to maintain certain specified financial
ratios and restricts levels of capital expenditures and our level of debt. The
revolving credit facility is secured by substantially all of our assets and is
required to be repaid by September 30, 2002. At June 26, 1999, our outstanding
balance under the revolving credit facility was $18.3 million. We intend to
repay this balance with proceeds from this offering. We will seek to amend
various terms of the agreement including, but not limited to, reducing the
amount of available credit.

We believe that the proceeds from this offering, together with anticipated
cash flow from operations and funds anticipated to be available under our
revolving credit facility, will be sufficient to fund our store expansion
program and working capital requirements through fiscal 2000. If our cash flow
from operations should decline significantly, or if we accelerate our store
expansion program, it may be necessary for us to seek additional sources of
capital.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks relate primarily to changes in interest rates. We bear this
risk in two specific ways. First, we have debt outstanding under our $32.0
million revolving credit facility. This debt has a maturity date of September
30, 2002 and bears interest at a rate per annum equal to either (1) the base
rate established by BankBoston, N.A. plus 1.00% or (2) the Eurodollar rate of
BankBoston, N.A. plus 2.50%, at our option and subject to adjustments. As of
July 28, 1999, the interest rate on outstanding borrowings was 7.65%. We intend
to use approximately $18.0 million of the net proceeds from this offering to
repay all of the secured indebtedness outstanding at the time of such payment,
but may borrow additional funds under our facility as needed.

We have entered into an interest rate swap agreement to manage a portion of
our interest rate exposure. The notional amount associated with this agreement
was established at $11.0 million with annual reductions of $2.0 million during
the contract life until expiration in May 2001. As a result, a portion of our
variable rate bank debt is effectively converted to fixed rate debt and has a
current pay rate of 8.56%, subject to certain adjustments. The interest rate
differential to be received or paid is recognized as a component of interest
expense over the life of the agreement. You should refer to Note 5 of our
consolidated financial statements for further information regarding our
revolving debt and this swap instrument. We intend to terminate this swap
agreement prior to repayment of the outstanding amounts. Our revolving credit
facility carries a variable interest rate pegged to market indices and,
therefore, our statement of income and our cash flows will be exposed to changes
in interest rates.

The second component of interest rate risk involves the short-term
investment of excess cash in short-term, investment-grade interest-bearing
securities. These are considered to be cash equivalents and are shown that way
on our balance sheet. Changes in interest rates affect the investment income we
earn on our investments and, therefore, impact our cash flows and results of
operations.

YEAR 2000 READINESS DISCLOSURE STATEMENT

The Year 2000 issue refers to the potential for system and processing
failures of date-related calculations after December 31, 1999, and is the result
of computer-controlled systems using two digits rather than four to define the
applicable year. For example, computer programs that have date sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000.

STATE OF READINESS. We have made a preliminary assessment of the Year 2000
readiness of our core management information systems, including the hardware
supporting those systems. We have either replaced or upgraded substantially all
of these systems within the past two years and we have been advised by the
vendors of the hardware and software used in our financial accounting,
point-of-sale and inventory management, and distribution center sortation
systems that the versions of their products now used by us are Year 2000
compliant. Each of these replacements and upgrades were part of our budgeted
expenses for upgrading our computer infrastructure and were not primarily part

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<PAGE>
of an attempt to address the Year 2000 issue. We have begun testing these
systems ourselves on a separate computer with simulated dates after December 31,
1999 to verify compliance, and plan to complete this testing by September 1,
1999. We believe that any issues identified will be corrected prior to December
31, 1999, although we cannot assure you that we will be able to complete any
necessary corrective actions in a timely manner.

We are also planning to investigate other less critical equipment and
machinery that may contain embedded technology with Year 2000 compliance
problems. We also have material relationships with entities such as financial
institutions and public utilities that may not have adequately addressed the
Year 2000 issue. We have been advised by our major credit card processors and
telecommunications providers that they believe their operations will not be
significantly disrupted by Year 2000 issues. We have begun testing the systems
of our major credit card processors on a separate computer. Other than this
minimal testing, however, we have no assurance that our credit card processors
and telecommunications providers are correct in their Year 2000 assessments.
Significant disruptions in the services provided to us would adversely affect
our operations. We currently purchase merchandise from a significant number of
vendors, but do not make purchases or otherwise exchange data with our vendors
electronically. In addition, because we purchase merchandise from a diverse
group of vendors we do not believe that we are dependent on the operations of
any single vendor or group of vendors. As a result, we do not intend to inquire
systematically about the Year 2000 readiness of our vendors and their ability to
address Year 2000 issues.

OUR YEAR 2000 RISKS. We currently believe that our systems will be Year
2000 compliant and capable of functioning beyond December 31, 1999. In the most
reasonably likely worst case scenario, we could experience total system failure
for our management information systems. This would cause significant disruptions
in our operations, including a temporary inability to process financial
information or credit card transactions, receive shipments and timely deliver
our merchandise to our stores, execute our critical test-and-reorder strategy
effectively or otherwise engage in other normal business activities. We may also
suffer damage to our brand names if we are unable to execute our
test-and-reorder strategy to track changes in fashion trends, and we may
experience increased expenses associated with stabilization of operations after
critical systems failure and execution of contingency plans. In another
reasonably likely worst case scenario, a significant number of our vendors would
be unable to continue to supply adequate amounts of merchandise. Although the
adverse effects of any or all of these events are not quantifiable at this time,
any of these events would likely result in a loss of income and otherwise have a
material adverse effect on our business and operating results.

OUR CONTINGENCY PLANS. We have not yet developed contingency plans to
handle the most likely worst case Year 2000 scenarios. We expect, however, that
the worst case scenario involving the failure of our management information
systems over a sustained period would necessitate reverting to a number of
manual systems for recording sales, ordering merchandise and replenishing our
store level inventory. Further, we expect that the worst case scenario for the
loss of a significant number of vendors would require us to seek alternative
sources of supply, although there can be no assurance that such alternative
sources would be available on reasonable terms or at all. We intend to take
appropriate actions to mitigate the effects of third party failures to remediate
Year 2000 issues and for unexpected failures in our systems. If it becomes
necessary for us to take corrective actions, it is uncertain whether these
actions would result in significant interruptions in service or delays in
business operations or whether it would have a material adverse effect on our
results of operations, financial position or cash flow.

OUR YEAR 2000 REMEDIATION COSTS. As of June 26, 1999, we have spent less
than $50,000 addressing the Year 2000 issue and expect to spend a comparable
amount during the remainder of this calendar year. These amounts do not reflect
the cost of our employees that are responsible for testing our systems for Year
2000 compliance. Until we have completed our compliance testing, however, we

25
<PAGE>
cannot be sure that the costs associated with remediating Year 2000 issues will
not be materially more than our current estimate.

INFLATION

We do not believe that inflation has had a material adverse impact on our
business or operating results during the periods presented.

26
<PAGE>
BUSINESS

GENERAL

We are a national mall-based specialty retailer of fashionable, value-priced
apparel and accessories targeting young women between the ages of 15 and 35. We
have two distinct store concepts, "Charlotte Russe" and "Rampage," and operated
a total of 85 stores in 12 states as of June 26, 1999. Through our fashion
content, merchandise mix, exciting store layout and design, and striking
merchandise presentation, we project fashion attitudes that appeal to customers
across age and socioeconomic boundaries. Our Charlotte Russe stores offer
fashionable, affordable apparel and accessories that have been tested and
accepted by the marketplace, thus appealing to women who prefer established
fashion trends. Our Rampage stores feature emerging fashion trends and thus
appeal to women with a flair for making fashion statements who are willing to
pay somewhat higher prices to create a cutting-edge look. Our stores are located
predominantly in high-visibility, center court mall locations in spaces that
average approximately 7,500 square feet. These stores, which are generally twice
as large as those of most of our competitors, are designed to create an
environment that is exciting to shop and accentuates the fashion, breadth and
value of our merchandise selection.

Our broad assortment of merchandise is centered around styles that are
affordable, feminine and reflect the latest fashion trends. Our breadth of
merchandise enables our customers to assemble coordinated and complete outfits
that satisfy many of their lifestyle needs. Both our Charlotte Russe and Rampage
store concepts offer merchandise at value-oriented prices, often 20% to 30% less
than prices for comparable items offered by most of our direct mall-based
competitors. Over 80% of our Charlotte Russe merchandise is sold under the
Charlotte Russe label and over 90% of our Rampage merchandise is sold under our
proprietary [Russe label] label. The remainder of our merchandise consists of
nationally-recognized brands popular with our customers.

We opened our first store in 1975 in Carlsbad, California and slowly
expanded to 35 stores in southern California, Arizona and Nevada by the end of
fiscal 1996. In September 1996, we were acquired by two funds managed by
Saunders Karp & Megrue, L.P., a private equity investment firm, and Bernard
Zeichner, our Chairman, Chief Executive Officer and President. Following the
acquisition, we implemented a series of strategic initiatives to position us to
support an accelerated national store roll-out, including:

- hiring a number of senior executives with national retail experience to
complement our senior management team;

- substantially upgrading our management information systems;

- adding a second store concept by acquiring 16 Rampage stores in five
states; and

- consolidating our corporate and distribution center operations into a
modern 125,000 square foot facility in San Diego.

These initiatives, together with superior store economics that on average
generate a cash return on investment of approximately 90% in the first year of
operation, have allowed us to grow significantly since our acquisition. As of
September 25, 1999, we expect to operate 96 stores throughout 15 states and
Puerto Rico, an increase of 61 stores since our acquisition at the beginning of
fiscal 1997. Our net sales increased to $134.1 million in fiscal 1998 from $70.7
million in fiscal 1996, representing a compound annual growth rate of 37.7%.
Additionally, for the nine months ended June 26, 1999, our net sales increased
to $126.4 million from $94.4 million, representing a 33.9% increase over the
same period last year.

27
<PAGE>
OUR BUSINESS STRATEGY

The elements of our business strategy combine to create a merchandise
assortment that appeals to consumers from a broad range of socioeconomic,
demographic and cultural profiles and that differentiates us from our
competitors. We believe this broad consumer appeal, coupled with our superior
new store cash returns on investment, creates a highly portable store concept
and a significant opportunity for growth. The principal elements of our business
strategy include the following:

OFFER CONSISTENT VALUE PRICING. We offer a broad assortment of fashionable,
quality merchandise at prices generally 20% to 30% below most of our direct
mall-based competitors. We employ this value-pricing strategy across both of our
store concepts, with an average sales price for apparel items at our Charlotte
Russe and Rampage stores of approximately $18.75 and $29.00. Because our prices
are affordable and our merchandise quality is comparable to higher priced
specialty retailers and department stores, we create a strong perception of
value that has enabled us to build a broad and loyal base of customers.

MAINTAIN DISTINCT BRAND IMAGES. We have created focused and differentiated
brand images based on fashion attitude, value pricing and quality. These images
are consistently communicated through all aspects of our business, including
merchandise assortments and in-store visual merchandising. We also enhance brand
recognition by offering over 80% of our Charlotte Russe merchandise under the
Charlotte Russe label and over 90% of our Rampage merchandise under our
proprietary [Russe label] label. We believe that the strength of our private
label merchandise, along with other nationally branded merchandise, provides
opportunities for expansion of our current merchandise categories and entry into
new product categories.

TARGET A HIGHLY DESIRABLE MARKET. Our target customer base of 15 to 35 year
old women represents a large and growing consumer segment. According to the
United States Census Bureau, the teenage and early twenties population, a core
group of our target market, is expected to grow at a rate faster than that of
the overall United States population. We believe this growth will fuel
significant increases in consumer spending. In particular, the spending power
for teenagers has reached $96.3 billion in 1998, up from $68.8 billion in 1995,
and is expected to grow to approximately $147.6 billion in 2003, representing a
projected compound annual growth rate of 8.9% after 1998. An increase in minimum
wage, higher employment and easier access to credit cards have all contributed
to this growth in buying power.

OFFER BROAD, EXCITING MERCHANDISE ASSORTMENT. Our merchandising strategy is
founded on offering a broad assortment of apparel and accessories that conveys a
consistent fashion attitude. Our merchandise includes ready-to-wear apparel such
as knit and woven tops, dresses, shorts, pants and skirts, as well as
accessories such as shoes, handbags and jewelry that enable our customers to
create distinct ensembles complemented by color coordinated and fashion-forward
items. Our merchandise assortment is voguish enough to attract teenage customers
and yet stylish enough to retain those women as they mature into young adults.
We maintain a fresh and exciting shopping environment by frequently introducing
new merchandise into our stores and by regularly updating our merchandise
displays. In addition, our stores on average exceed 7,500 square feet and thus
provide a comfortable and spacious environment that accentuates the breadth of
our merchandise offerings.

CAPITALIZE ON STRONG STORE ECONOMICS. We estimate that the average net
investment to open a new store is approximately $450,000, which includes capital
expenditures, net of landlord contributions, and initial inventory, net of
payables. During their first year of operations, our new stores generate average
net sales of approximately $1.8 million and store-level operating cash flow of
approximately $405,000, or 22.5% of net sales. Accordingly, these stores
generate an average cash return on investment of 90% in their first year of
operations.

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<PAGE>
LEVERAGE HIGHLY EXPERIENCED MANAGEMENT TEAM. We believe our senior
management team combines a unique blend of experience with the company and other
national growth retailers. Following our acquisition in September 1996, Mr.
Zeichner recruited eight members of our highly experienced management team, who
have participated in the successful national expansion of retailers such as
Contempo Casuals, Guess? and Price Club. As a group, these officers currently
have an average of over 19 years of retail experience. These new managers
complemented our core group of buying and operations managers who had
participated in the evolution and growth of the Charlotte Russe concept and who
currently have an average of over 16 years of retail experience with us. The
successful integration of these distinct skill sets has produced a unique
corporate culture that leverages the talents of each group. Our management is
positioned to capitalize on the strong economics of the Charlotte Russe and
Rampage concepts and to successfully execute our national expansion program.

ACTIVELY MANAGE INVENTORY. The cornerstone of our merchandising strategy is
our test-and-reorder philosophy. This strategy allows us to minimize our
inventory risk by ordering small quantities of fashion merchandise to test
customer acceptance before placing larger purchase commitments. Our
test-and-reorder strategy is successful in large part because we deal primarily
with domestic vendors, which generally results in short lead times of three to
six weeks. These short lead times, together with our ability to monitor store
sales on a daily basis, permit us to quickly react to sell-through trends and
fashion preferences. We have one of the highest inventory turn rates in the
industry and we believe that our approach to managing our merchandise mix has
contributed to strong gross margins and lower-than-average markdown rates.

OUR EXPANSION STRATEGY

Our long-term objective is to become a leading national specialty retailer
of affordable fashion-forward apparel and accessories to youthful-minded women.
We intend to achieve this objective by pursuing an aggressive store opening
campaign and by expanding the breadth of our product categories.

OPEN NEW STORES. In connection with our acquisition in 1996, we initiated a
program to accelerate the rate of our new store openings and to expand our
operations to areas outside our core markets of southern California, Arizona and
Nevada. Since that time, we have more than doubled our store base from 35 stores
to 85 stores as of June 26, 1999. We anticipate operating 96 stores throughout
15 states and Puerto Rico as of the end of fiscal 1999. Based on this successful
track record, favorable demographic trends and a solid infrastructure, we
believe we are well positioned for accelerated growth over the next several
years. Our plan is to open approximately 30 stores during fiscal 2000 and we
have already completed our site selection and evaluation process for 24
potential sites. We expect to open new stores in existing markets as well as in
markets in which we currently do not have a presence. We believe that our
Charlotte Russe and Rampage stores are highly portable store concepts that
achieve superior new store cash returns on investment and can operate
successfully in a wide variety of geographic and demographic markets. Our
Charlotte Russe stores, for instance, have generated similar store-level
operating cash flow margins across a variety of mall types throughout different
geographic regions.

EXPAND PRODUCT OFFERINGS. We also plan to grow by increasing the breadth
and depth of our product categories, which may be sold in either existing stores
or through new store concepts. We have historically been able to leverage our
strong brand images to expand single item offerings into an entire collection of
related merchandise. For example, over the past two fiscal years we have
expanded our initial offering of bras into an entire lingerie department
consisting of bras, panties, intimate nighttime apparel, robes and slippers. Our
sales of lingerie, as a percentage of net sales, increased from 1.0% to 5.0%
during this period. We experienced similar success in expanding our shoe product
category. We believe that a substantial market opportunity exists for adding
fashionable new products, particularly in

29
<PAGE>
the high-margin areas of accessories and gift and decor items. To capitalize on
this market opportunity, we intend to test a new store concept called
"Charlotte's Room," through which we will sell themed products aimed at the
teenage consumer. We initially plan to test this concept in two stores later
this calendar year.

CUSTOMERS

Our two retail store concepts target young, fashion-conscious women. Our
Charlotte Russe customer is a woman who desires understandable trends at
substantial value. She is a hip teenager seeking the current fashion trends, as
well as the fashionable working woman looking for career dressing. Regardless of
her age, the Charlotte Russe customer is feminine and body conscious. Our
Rampage stores cater to women with definitive fashion sense who set rather than
follow trends. Our Rampage customer is hip, eclectic, body conscious and tapped
into pop culture. She wants her look to be cutting edge, while recognizing the
value of competitive pricing.

MERCHANDISE PLANNING AND ALLOCATION

Our merchandise planning and allocation team works closely with our General
Merchandise Manager, merchants and store personnel to meet the requirements of
individual stores for appropriate merchandise in sufficient quantities. This
team is also responsible for managing inventory levels, allocating merchandise
to stores and replenishing inventory based upon information generated by our
management information systems. Our planning department allocates merchandise
for new store openings based on estimated units per square foot, and all new
stores are fully stocked prior to opening. Our inventory control systems monitor
current inventory levels at each store and for our operations as a whole. If
necessary, we shift slow moving inventory to other stores for sell-through prior
to instituting corporate-wide markdowns. We also monitor recent selling history
within each store by merchandise classification, style, color and size.

MERCHANDISE

CHARLOTTE RUSSE. Our Charlotte Russe stores provide an exciting,
fashionable assortment of merchandise that complements virtually every facet of
our customers' lifestyle. Our merchandise reflects established fashion trends
and includes a broad offering of ready-to-wear apparel, including knit and woven
tops, dresses, shorts, pants and skirts, as well as seasonal items such as prom
dresses and outerwear. This product assortment allows us to be fashionable
enough to attract teenage customers and yet stylish enough to retain customers
as they become young working women. Our Charlotte Russe stores offer a higher
percentage of dresses as compared to other specialty retailers to better meet
our customers' broad lifestyle needs for casual, social, career and special
occasion wear. Our typical dresses range in price from $19.99 to $60.00,
although prices can be as high as $80.00 to $120.00 for special occasion
dresses. By offering a product mix that reflects a more mature stage of the
fashion cycle, our Charlotte Russe stores are able to learn from the experience
of our Rampage stores with emerging trends in order to more quickly identify
fashion that has a broad market appeal. Charlotte Russe stores also offer a
broad assortment of accessories, such as shoes, handbags, jewelry, cosmetics and
lingerie. Our expansive accessories category enables us to offer the convenience
of one-stop shopping to our customers, enabling them to complement their
ready-to-wear clothing with color coordinated items and fashion-forward
accessories. Over 80% of the merchandise sold in these stores carries the
Charlotte Russe label. Our average sales price for apparel items is $18.75, and
the average sales price for all of our merchandise, including accessories, is
$14.00.

RAMPAGE. Our Rampage stores offer essentially the same breadth of
ready-to-wear apparel as our Charlotte Russe stores, but the merchandise
reflects emerging trends and therefore a more cutting-edge look. There is also
less emphasis on the career customer in our Rampage stores. The retail prices
for our dresses range from $38.00 to $68.00, although prices can be higher for
special occasion dresses.

30
<PAGE>
Over 90% of the Rampage merchandise is offered under our proprietary [Russe
label] label. We work with our vendors to design approximately 65% of the
merchandise that is carried in our Rampage stores. We also have established a
standard fit for all of our apparel to ensure consistent sizing among our
merchandise. Our Rampage stores also offer specialty accessories that complement
our higher-end merchandise. As a leader of emerging fashions, our Rampage stores
are able to command higher price

points than Charlotte Russe, but still below our competitors. The average sales
price for apparel items in our Rampage stores is $29.00, and the average sales
price for all of our merchandise, including accessories, is $23.00.

VISUAL MERCHANDISING

We believe that a dynamic in-store merchandising strategy is critical to
strengthening our brand images and creating a fresh and exciting shopping
environment for our customers. We rely on a combination of merchandise
presentation and complementary in-store signage to communicate a consistent
fashion point-of-view to our customers and to encourage the purchase of
coordinated outfits. Our visual merchandising team also makes use of mannequins
in store windows as well as on the selling floor to enhance our merchandise
presentation.

Within our Charlotte Russe stores, we seek to create an inviting environment
by grouping our fashionable merchandise into multiple in-store boutiques
centered around lifestyle themes. While shopping in our store, a customer will
observe separate and distinct areas devoted to her various lifestyle needs,
including casual, club and career wear, lingerie, shoes and accessories, each
offering a vast array of selections. Each lifestyle collection is complemented
by an extensive in-store image advertising campaign that reinforces the
lifestyles and aspirations of our target customers, while also strengthening our
brand image. We believe that this multi-boutique feel creates an attractive
atmosphere for our customers and that the breadth and depth of our lifestyle
categories makes us a destination location for their shopping needs.

At our Rampage stores, we employ a different, but equally effective visual
merchandising strategy in order to capture our customers' interest. Our Rampage
merchandise is grouped by color and fashion trends to keep the stores looking
vibrant, hip and visually stimulating. We have implemented a comprehensive
marketing program that builds on our in-store sign graphics to accentuate the
fashion, quality and cutting-edge style of our merchandise.

MERCHANDISE SOURCING

All of our inventory is purchased from third party vendors. The cornerstone
of our merchandising strategy is our test-and-reorder philosophy. This strategy
allows us to manage our inventory risk by testing small quantities of fashion
merchandise in our stores before placing larger purchase commitments. Our
experienced buying staff then uses sophisticated information systems to track
the weekly sell-through of each merchandise item by classification, style, color
and size, and places appropriate reorders for popular merchandise. Accordingly,
our test-and-reorder strategy enables us to quickly react to sell-through trends
and fashion preferences.

Our test-and-reorder strategy is successful in large part because we deal
with domestic vendors, which generally results in short lead times of three to
six weeks. Accordingly, we have established relationships with over 600 vendors
to meet our ongoing fashion and inventory needs. We believe that we generally
are able to obtain attractive pricing and other terms from vendors because of
their desire to be associated with the Charlotte Russe and Rampage images and
the rapid consumer feedback provided by our test-and-reorder philosophy. Our
buyers also work closely with our vendors to secure affordable merchandise
suited to the fashion tastes of our target customers. We maintain a buying
office in the California Merchandise Mart in Los Angeles, the primary apparel
center in southern California, to facilitate constant dialogue and feedback
between our buying staff and our vendors.

31
<PAGE>
During the nine months ended June 26, 1999, our top five vendors accounted for
less than 12.2% of our total purchases and no single vendor accounted for more
than 3.9% of our total purchases.

DISTRIBUTION

The timely and efficient distribution of merchandise to our stores is
critical to the success of our test-and-reorder strategy. We process all of our
merchandise through our modern 125,000 square foot distribution center in San
Diego, California, which we built and took possession in April 1998. Our
distribution facility employs an automated system for sorting apparel by store
and facilitating packaging for display in our stores. We estimate that
approximately 20% of our apparel merchandise is currently pre-ticketed by our
vendors, and we expect that this percentage will increase substantially over the
next twelve months. This pre-ticketing by vendors saves time, reduces labor
costs and enhances inventory management. Our merchandise is generally shipped to
stores within 24 hours of receipt at the distribution center for delivery on
common carrier within one to three business days. Our merchandise is available
for sale in our stores the same day it is received and, accordingly, the time
period from receipt of goods at our distribution center to display in our stores
is typically less than five days. Each store generally receives three to five
merchandise shipments per week. We believe our current distribution
infrastructure is sufficient to accommodate our expected store growth and
expanded product offerings over the next several years.

STORE LOCATIONS

As of September 25, 1999, we expect to operate 74 Charlotte Russe stores and
22 Rampage stores throughout 15 states and Puerto Rico. Each of these stores is
shown in the following map and store list according to the state or territory in
which such store is located.

[MAP OF UNITED STATES SHOWING STORE LOCATIONS]

32
<PAGE>

ARIZONA (8)
- ----------------------------------------
Arizona Mills (Tempe)+
Arrowhead Center (Glendale)
Fashion Square (Scottsdale)
Fiesta Mall (Mesa)
Metro Center (Phoenix)
Paradise Valley Mall (Phoenix)
Tucson Mall
CALIFORNIA (40)
- ----------------------------------------
Fresno Fashion Fair
Los Angeles
Beverly Center (R)
Brea Mall
Del Amo Fashion Center (Torrance)+
Fox Hills Mall (Culver City)
Glendale Galleria +
Laguna Hills Mall
Lakewood Fashion Center
Los Cerritos Center
Main Place (Santa Ana)
*Mission Viejo (R)
Montclair Plaza
Montebello Town Center
Moreno Valley Mall
Northridge Fashion Center
Ontario Mills
Plaza at West Covina
Santa Anita Fashion Park
Sherman Oaks (R)
South Coast Plaza (Costa Mesa) (R)
Thousand Oaks Center
Topanga Plaza (Canoga Park)+
Westminster Mall
Westside Pavillion (R)
San Diego
Chula Vista Center
Fashion Valley Center
Grossmont Center (La Mesa)
Mission Valley
Plaza Camino Real (Carlsbad)
North County Fair (Escondido)
Parkway Plaza (El Cajon)
Plaza Bonita (National City)
University Towne Center
Santa Rosa Plaza
Serramonte Center (Daly City)
Sun Valley (Concord) (R)
Valley Plaza (Bakersfield)

CONNECTICUT (1)
- ----------------------------------------
*Meriden Square

FLORIDA (15)
- ----------------------------------------
Aventura Mall (R)
Broward Mall (Plantation)
Citrus Park Center (Tampa)
Coral Square
Dadeland Mall (Miami) (R)
Edison Mall (Fort Meyers)
Melbourne Square
*Orange Park Mall
Orlando Fashion Square
Oviedo Marketplace
Regency Square (Jacksonville)
Shops at Sunset (South Miami)
The Falls (Miami) (R)
Tyrone Square (St. Petersburg)
West Oaks Mall (Ococe)

GEORGIA (6)
- ----------------------------------------
Augusta Mall
*Mall of Georgia at Mill Creek+
Northlake Mall (Atlanta)
Perimeter Mall (Atlanta)
Town Center at Cobb (Kennesaw)

HAWAII (1)
- ----------------------------------------
Pearlridge (Aiea)

ILLINOIS (2)
- ----------------------------------------
Stratford Square
*Water Tower Place (Chicago)(R)

MICHIGAN (1)
- ----------------------------------------
Great Lakes Crossing (Auburn Hill)

NEW JERSEY (1)
- ----------------------------------------
Garden State Plaza (Paramus) (R)

NEW YORK (6)
- ----------------------------------------
Palisades Center (West Nyack)+
Roosevelt Field (Garden City)+
Soho (R)
Walden Galleria (Buffalo)

NEVADA (4)
- ----------------------------------------
Boulevard Mall (Las Vegas)
*Boulevard Mall (Las Vegas)(R)
Galleria (Henderson)
Meadows Mall (Las Vegas)

NORTH CAROLINA (1)
- ----------------------------------------
*Concord Mills

PENNSYLVANIA (1)
- ----------------------------------------
*Franklin Mills (Philadelphia)

PUERTO RICO (1)
- ----------------------------------------
*Plaza Del Sol

SOUTH CAROLINA (1)
- ----------------------------------------
Haywood Mall (Greenville)

TEXAS (7)
- ----------------------------------------
Collin Creek Mall (Plano)
Grapevine Mills
*Highland Mall (Austin)
Houston Galleria (R)
Lakeline Mall (Cedar Park)
Northpark Mall (Dallas) (R)
Valley View (Dallas)

- ---------

(R) Rampage store only

+ Both a Charlotte Russe and Rampage store

* Store to be opened during fourth quarter of fiscal 1999

33
<PAGE>
The following table highlights the number of stores, by geographic region,
opened in each of the last four fiscal years and expected to be opened during
the current fiscal year:

<TABLE>
<CAPTION>
NORTHEAST
CALIFORNIA SOUTHWEST SOUTHEAST & OTHER TOTAL
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Actual store count as of October 1, 1994................. 24 6 -- -- 30

FISCAL 1995
Stores opened.......................................... 3 1 -- -- 4
Stores closed (lease expired).......................... (1) 0 -- -- (1)
--------- --------- --------- --------- ---
26 7 -- -- 33

FISCAL 1996
Stores opened.......................................... 0 2 -- -- 2
--------- --------- --------- --------- ---
26 9 -- -- 35

FISCAL 1997
Stores opened.......................................... 3 1 2 1 7
Stores closed (lease expired).......................... (1) 0 0 0 (1)
--------- --------- --------- --------- ---
28 10 2 1 41

FISCAL 1998
Stores acquired (Rampage).............................. 7 2 3 4 16
Stores opened.......................................... 4 4 9 0 17
--------- --------- --------- --------- ---
39 16 14 5 74

FISCAL 1999
Stores opened through third quarter.................... 0 1 5 5 11
Stores to be opened in fourth Quarter.................. 1 2 4 4 11
--------- --------- --------- --------- ---
Expected store count at end of fiscal 1999............... 40 19 23 14 96
--------- --------- --------- --------- ---
--------- --------- --------- --------- ---
</TABLE>

SITE SELECTION

We seek to locate our stores in large, commanding spaces in high traffic
areas of strong regional malls. Our stores, which average approximately 7,500
square feet, are generally twice the size of most of our mall-based competitors'
stores and provide a comfortable and spacious shopping environment that
accentuates the breadth of our merchandise offering. To distinguish our stores,
we also seek prominent center court locations with distinctive architectural
features, such as high angled ceilings, which our store designers and visual
merchandisers can use to create striking displays, facades and entrances. We
believe that specialized store design features, including finished ceilings,
classic lighting and detailed features, help create a differentiated store
environment unique to young women's apparel retailers in the mall. We have
historically been able to locate and profitably operate our stores in a variety
of malls catering to different socioeconomic, demographic and cultural profiles.
We remodel our stores as appropriate and economically feasible, generally in
connection with our lease renewals.

We engage an independent real estate consultant to initially identify
favorable store locations in existing or new markets. This consultant currently
does not advise any other operators within the women's apparel industry. Our
site selection criteria includes:

- a careful assessment of mall traffic;

- the performance of other retailers within the mall and in particular those
serving our target customers;

- the proposed location within the mall;

34
<PAGE>
- population and demographic characteristics of the area; and

- projected profitability and cash return on investment.

Immediately after site approval, we simultaneously negotiate lease terms and
begin planning the store layout and design. We typically open a new store within
three months after lease execution and delivery of space.

STORE OPERATIONS

Our store operations are organized into a Western region with six districts
and an Eastern region with five districts. Each region is managed by a regional
manager and each district is managed by a district manager. Each district
manager is responsible for an average of eight stores. We expect to add two
additional district managers before the end of this fiscal year. Individual
store personnel generally consists of a store manager, one or two assistant
managers and seven to ten sales associates, the number of which generally
increases during our peak selling seasons. Our store managers are responsible
primarily for customer service training and hiring store level staff.
Merchandise selections, inventory management and visual merchandising strategies
for each store are determined at the corporate level. Our regional, district,
and store managers receive a base compensation plus incentive compensation based
on sales goals.

Our commitment to customer satisfaction and service is an integral part of
building customer loyalty. We strive to hire enthusiastic sales personnel and
provide them with extensive training to create a sales staff with a strong
fashion sense, a focus on customer service and a willingness to assist customers
with assembling, accessorizing and coordinating outfits.

Our standard training program for store managers includes an initial three
week session at a store managed by one of our approved training managers, as
well as frequent regional and district meetings. In addition, our training
manual provides practical information and skill development for all store level
positions. We develop new store managers by promoting from within and
selectively hiring from other retail organizations. In anticipation of our
accelerated store expansion, we have increased the number of people in our store
manager training program.

MARKETING AND PROMOTION

Our marketing and promotional activities contribute greatly to the
development of our brands, and as our operations continue to grow nationally,
these activities will expand in scope and become increasingly important to us.
Historically, our marketing and promotional activities have been primarily
focused on in-store initiatives. For example, we maintain store signage and
in-store graphics, packaging, and displays that convey our fashion-forward
orientation and brand. We have also conducted direct mail campaigns in
association with new store openings and utilized limited outdoor advertising.
Additionally, our periodic promotional activities are designed to drive traffic
into our stores and to further our brand image of fashion and value. In the
future, we expect our marketing and promotional program will include national
and regional print advertising, radio and television advertising and billboard
and bus stop advertising. We also plan to develop an Internet site that we
believe will further enhance our brand image and that we may eventually use as a
new channel for selling our merchandise.

MANAGEMENT INFORMATION SYSTEMS

We are committed to investing in and continually upgrading our management
information systems, as we believe those systems are critical to implementing
our expansion strategy in an efficient manner and to maintaining a competitive
industry position. Our management information systems address, among others
things, our stock keeping unit and classification inventory tracking, purchase
order

35
<PAGE>
management, merchandise distribution, automated ticket making, general ledger,
sales audit, accounts payable, fixed asset management, payroll, integrated
financials and point-of-sale information. Our buying, allocation and
distribution functions are supported by an ICM merchandising system that is
tailored for Charlotte Russe and we utilize a Lawson Software package for our
financial reporting and human resource functions. We believe our current systems
are adequate to meet future expansion plans over the next several years.

Our sales are updated daily in the merchandise reporting system by polling
sales information from each store's point-of-sale terminal. Our point-of-sale
system consists of registers providing price look-up, time and attendance,
supply ordering, bill of lading tracking and automated charge card processing.
We believe these features improve transaction accuracy, increase speed of
checkout time and overall store efficiency, and enable us to track the
productivity of individual sales associates. Through automated nightly two-way
electronic communication with each store, we upload sales information, payroll
hours and messages to our host system, and download new merchandise pricing,
price changes for existing merchandise, carton receipts and system maintenance
tasks to the point-of-sale devices. Based upon the evaluation of information
obtained through daily polling, our planning department implements merchandising
decisions regarding inventory levels, reorders, price changes and allocation of
merchandise to stores.

PROPERTIES

We expect to operate 96 stores throughout 15 states and Puerto Rico by the
end of our current fiscal year. We currently lease all of our store locations.
Most leases have an initial term of ten years and do not contain options to
extend the lease. Our leases, however, typically allow for termination after
three years if sales at that site do not exceed specified levels, although in
some instances we are required to pay back any landlord allowances received. We
lease space containing approximately 125,000 square feet for our executive
offices and distribution center in San Diego, California. This lease is for a
term of twelve years and is scheduled to expire on August 31, 2009. We believe
our distribution facility is adequate for our operations over the next several
years. We also lease approximately 4,100 square feet at the California
Merchandise Mart in Los Angeles. This lease expires May 31, 2002.

COMPETITION

We currently compete against a diverse group of retailers, including
national and local specialty retail stores, regional retail chains, traditional
retail department stores and, to a lesser extent, mass merchandisers. Our
competitors sell a broad assortment of apparel and accessories that are similar
and often identical to those we sell. Furthermore, our competitors may at times
sell their merchandise at prices lower than what we charge for comparable
merchandise. We believe that the principal bases upon which we compete in our
industry are timeliness of fashions, breadth of merchandise, brand recognition,
pricing and quality. We believe that we have a significant competitive advantage
over our competitors because of our exciting shopping environment. Our stores
are generally twice as large as most of our mall-based competitors and provide a
feminine look that is exciting to shop and accentuates the value and breadth of
our merchandise selection. We also believe that we have a competitive advantage
because of high consumer recognition and acceptance of our brands, our strong
presence in major shopping malls throughout the United States, our relationship
with our vendors and the experience of our management. The retail and apparel
industries, however, are highly competitive and characterized by relatively low
barriers to entry.

INTELLECTUAL PROPERTY

We believe that our trademarks are important to our success. Our Charlotte
Russe trademark is registered with the United States Patent and Trademark
Office. In addition, we have applications pending with the United States Patent
and Trademark Office for a number of additional marks,

36
<PAGE>
including [Russe label] and Charlotte's Room. We have also submitted
applications for additional uses related to the Charlotte Russe trademark. In
connection with the acquisition of our Rampage stores, we acquired the exclusive
right within the United States to use the Rampage trademark for use on exterior
or interior signages at our stores as well as for promotional materials. The
right to market merchandise under the Rampage trademark was retained by Rampage
Clothing Company and, accordingly, we do not have the right to use the Rampage
trademark on our merchandise. Further, nothing in our license agreement
prohibits the sale of merchandise bearing the Rampage trademark by other
retailers or the licensing of the Rampage trademark to other vendors. In fact,
Rampage Clothing Company has licensed the trademark to other retailers and
vendors. If the product quality or activities of these retailers or vendors
negatively impacts our business reputation, we have the right to rename our
Rampage stores and terminate the license agreement at the end of the applicable
period.

Furthermore, over 90% of the merchandise in our Rampage stores is sold under our
proprietary [Russe label] label, and only a nominal amount is sold under the
Rampage brand name. We pay an annual royalty under the license agreement equal
to the greater of a stated dollar amount or a percentage of net sales during the
fiscal year. The license agreement has an initial term of four years with an
unconditional option to renew for another four years. We may also extend the
license for ten additional four-year periods. We may exercise each of these
extension periods, however, only if our net sales for the last fiscal year of
the current four-year extension period exceed by 10% our net sales for the
fiscal year ending immediately prior to the beginning of such extension period.

EMPLOYEES

As of June 26, 1999, we employed 651 full-time and 1,006 part-time
employees. Of our full-time employees, 127 were employed at our corporate
offices, 87 were employed at our distribution center and 437 were employed at
our store locations. The number of part-time employees fluctuates depending on
our seasonal needs. None of our employees are represented by a labor union, and
we consider the relationship with our employees to be good.

LEGAL PROCEEDINGS

We are party to various legal proceedings in the ordinary course of
business. There are currently no material legal proceedings pending against us.

37
<PAGE>
MANAGEMENT

The following table sets forth information concerning our executive
officers, directors and other key employees. We expect to add two independent
directors shortly after the completion of this offering.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Bernard Zeichner............................ 55 Chairman of the Board, Chief Executive Officer, President
and Director

Harriet A. Bailiss-Sustarsic................ 41 Executive Vice President, General Merchandise Manager

Daniel T. Carter............................ 43 Executive Vice President, Chief Financial Officer

Robin T. Kernohan........................... 46 Executive Vice President, Store Operations

Allan W. Karp............................... 44 Director

David J. Oddi............................... 29 Director

OTHER KEY EMPLOYEES
Renee L. Bell............................... 37 Vice President, Rampage Apparel

Jennifer L. Bolinger........................ 42 Vice President, Human Resources

Sheri E. Coury.............................. 40 Vice President, Charlotte Russe Apparel

Graham P. Luck.............................. 46 Vice President, Real Estate and Store Planning

Rachel E. Luna.............................. 34 Vice President, Charlotte Russe and Rampage Accessories

Kalpana Makani.............................. 55 Vice President, Chief Information Officer

Nancy E. Mamann............................. 39 Vice President, Marketing

Jennifer D. Mitchell........................ 33 Vice President, Merchandise Planning and Allocation

Christopher M. Monier....................... 41 Vice President, Administration
</TABLE>

BERNARD ZEICHNER has been our President since May 1996. Mr. Zeichner also
serves as Chief Executive Officer and Chairman of the Board of Directors. Prior
to joining us, he was President of the retail division of Guess? from 1993 to
1995. Prior to that, Mr. Zeichner was employed by Contempo Casuals, serving as
President from 1982 to 1993 and as Chief Executive Officer from 1988 to 1993.
From 1977 to 1982, Mr. Zeichner was Executive Vice President of Joske's of
Texas, a department store chain.

HARRIET A. BAILISS-SUSTARSIC has been Executive Vice President and General
Merchandise Manager since October 1996. From 1993 to 1996, Ms. Sustarsic was
Director of Merchandising for the knits division of Rampage Clothing Company, a
junior apparel manufacturer. Previously, Ms. Sustarsic worked for Contempo
Casuals from 1987 to 1993, starting as a buyer and rising to a Divisional
Merchandise Manager. Ms. Sustarsic began her retail career in 1980 at The
Broadway department store chain and served in various merchandising positions.

DANIEL T. CARTER joined us in June 1998 as our Executive Vice President and
Chief Financial Officer after spending nine months as Chief Financial Officer
for Advanced Marketing Services, a public company that wholesales books to
Costco and Sam's Club. From 1986 to September 1997, Mr. Carter was employed by
The Price Company, the operator of Price Clubs, and follow-up entities, serving
as Senior Vice President for PriceCostco and Chief Financial Officer for Price
Enterprises. Mr. Carter is a Certified Public Accountant.

38
<PAGE>
ROBIN T. KERNOHAN began her employment with us in June 1996 as Regional
Manager and was promoted to Executive Vice President, Store Operations in
October 1997. From 1991 to 1996, Ms. Kernohan held the title of District Manager
at Miller's Outpost, where she supervised the operation of 20 stores. Ms.
Kernohan was employed by Contempo Casuals from 1974 to 1990, where she advanced
from sales to regional management, supervising 40 stores across five states.

ALLAN W. KARP has been a Director since September 1996. Since 1990, Mr. Karp
has been a Partner of Saunders Karp & Megrue Partners, L.L.C., or its
predecessor, which serves as the general partner of SKM Partners, L.P., which
serves as the general partner of the SKM Funds and Saunders Karp & Megrue, L.P.
Before founding Saunders Karp & Megrue, L.P., Mr. Karp was a Principal in the
Merchant Banking Department at Morgan Stanley & Co., Inc.

DAVID J. ODDI has been a Director since September 1996. Mr. Oddi joined
Saunders Karp & Megrue, L.P. as an Associate in 1994 and is currently a Partner
of Saunders Karp & Megrue Partners, L.L.C., which serves as the general partner
of SKM Partners, L.P., which serves as the general partner of the SKM Funds and
Saunders Karp & Megrue, L.P. Prior to joining Saunders Karp & Megrue, L.P., Mr.
Oddi was a financial analyst in the Leveraged Finance Group at Salomon Brothers
Inc. Mr. Oddi also serves on the board of directors of The Children's Place
Retail Stores, Inc., a specialty retailer of apparel and accessories for
children.

RENEE L. BELL joined us in October 1997 and has served as Vice President of
the Rampage Buying division since May 1999. Ms. Bell has 12 years of buying
experience and was previously a buyer at Contempo Casuals, bebe, and Rampage
Clothing Company. At bebe, Ms. Bell was also responsible for developing private
label merchandise in the sportswear, leather, coats, accessory and jewelry
categories.

JENNIFER L. BOLINGER began her employment with us in 1977 as a store sales
associate, and has served as Vice President of Human Resources since September
1997. Ms. Bolinger also held various positions in store operations, including
District Manager, leading up to her promotion to Director of Human Resources in
1993.

SHERI E. COURY began her employment with us in 1985 as a District
Merchandiser, and has served as Vice President of Charlotte Russe Apparel since
September, 1997, overseeing all apparel merchandising for these stores. Ms.
Coury came to us with over five years of previous retailing experience and has
served in a variety of merchandising capacities for us over the past 14 years as
the business has become a national retailer. Ms. Coury's background encompasses
a variety of merchandising functions, including visual operations,
merchandising, and seven years as a buyer.

GRAHAM P. LUCK joined us in 1997 as Vice President of Design and
Construction. Mr. Luck served as a Vice President at Guess? from 1994 to 1997.
From November 1986 to July of 1994, Mr. Luck served as Director of Store
Planning and Operations at Contempo Casuals. During the course of his retail and
construction career, Mr. Luck has been involved in all phases of store
negotiation, design and construction in high-growth retail companies.

RACHEL E. LUNA began her employment with us in 1981 as a store sales
associate, and has served as Vice President of Accessories for our Charlotte
Russe and Rampage stores since September 1997. Ms. Luna currently oversees
accessories merchandising for our Charlotte Russe and Rampage stores. During the
past 15 years as we have developed our national presence, Ms. Luna has worked
exclusively within the accessory, gift and intimate apparel product categories.
Ms. Luna has held numerous positions such as visual merchandiser, buyer, and
Divisional Manager.

KALPANA MAKANI joined us as Director of Management Information Systems in
September 1996 and was named Vice President, Chief Information Officer in
September, 1997. Prior to joining us, Ms. Makani spent two years as the Director
of Management Information Systems at Guess? and 18 years at Contempo Casuals
where she served as Vice President of M.I.S. Ms. Makani received a

39
<PAGE>
Master's Degree in Statistics and a Master's Degree in Computer Science from the
University of California at Berkeley.

NANCY E. MAMANN has served as Vice President of Marketing since joining us
in May, 1999. Ms. Mamann served as Vice President of Marketing for Jonathan
Martin from 1997 to 1999. For the previous six years, Ms. Mamann was the
President of Brand Communications at Rampage Clothing Company. Ms. Mamann's
other experience includes Advertising Coordinator for Guess?, Advertising and
Marketing Director for Jimmy'z, and Leon Max. Ms. Mamann has 17 years of
marketing experience in both retail and wholesale environments and founded an
advertising agency in 1989 that focused on the fashion and entertainment
industries.

JENNIFER D. MITCHELL began her employment with us in 1983 and was named Vice
President of Merchandise Planning and Allocations in September 1997. Ms.
Mitchell was directly responsible for creating our Merchandise Planning and
Allocation department in 1993. During her tenure at Charlotte Russe, Ms.
Mitchell has served in several other capacities, including District Accessory
Merchandiser, Assistant Apparel Buyer, and Office Manager.

CHRISTOPHER M. MONIER joined us in March 1997 and has served as Vice
President of Administration since September, 1997 and currently oversees all
aspects of distribution, traffic, purchasing and loss prevention. Prior to
joining us, Mr. Monier served in the distribution division of Skechers from 1995
to 1997. Prior to that time, Mr. Monier was a distribution center manager with
Contempo Casuals. Mr. Monier, who holds a Bachelor of Science Degree in
Industrial Engineering and Operation Research, has 19 years of experience in the
design and management of distribution centers, including such other companies as
LA. Gear and The Gap Stores.

BOARD OF DIRECTORS

Our by-laws provide for a board of directors of one or more directors, but
may consist of no more than seven or less than three persons. The number of
directors is currently fixed at three. Messrs. Karp, Oddi and Zeichner were
elected to serve as directors pursuant to the Stockholders Agreement. See
"Certain Transactions--Stockholders Agreement" We expect to add two directors
shortly after the completion of this offering. Our executive officers are
elected by the board of directors and serve at the discretion of the board of
directors. In addition, our directors and officers have contractual rights under
indemnification agreements that obligate us to indemnify them against certain
claims in their capacities as agents of Charlotte Russe.

COMMITTEES

We have a compensation committee comprised of Messrs. Karp and Oddi and the
board of directors intends to establish an audit committee shortly after the
completion of this offering. The compensation committee has the authority to
approve salaries and bonuses and other compensation matters for our officers, to
approve employee health and benefit plans and to administer our stock option
plans. The audit committee, which will be comprised of a majority of independent
directors, will have the authority to recommend the appointment of our
independent auditors and to review the results and scope of audits, internal
accounting controls and other accounting related matters.

DIRECTOR COMPENSATION

Upon the completion of this offering, our by-laws require that each
non-employee director will be entitled to an annual fee of $10,000 plus $500 for
each meeting attended, which fee may be waived by any such director. Our
directors currently in office have indicated that they intend to waive these
fees. Our directors will also be eligible to participate in the 1999 Equity
Incentive Plan.

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<PAGE>
EXECUTIVE COMPENSATION

The following table shows the cash compensation paid or accrued for the
fiscal year ended September 26, 1998, to our Chief Executive Officer and the
only other executive officer other than the Chief Executive Officer who received
more than $100,000 in salary and bonus during the fiscal year ended September
26, 1998. We did not make any restricted stock awards or long-term incentive
plan payments in the fiscal year ended September 26, 1998.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
ANNUAL SHARES OF
COMPENSATION(1) COMMON STOCK ALL OTHER
---------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS (#) ($)(2)
- ---------------------------------------------------------- ---------- ---------- -------------- -------------
<S> <C> <C> <C> <C>
Bernard Zeichner
Chief Executive Officer and President................... $ 275,001 $ -- -- $ 13,436

Harriet A. Bailiss-Sustarsic
Executive Vice President, General Merchandise Manager... 161,231 -- -- 2,031
</TABLE>

- ---------

(1) The amount of cash compensation does not include the aggregate value of
personal benefits or securities, property or other non-cash compensation
paid or distributed other than pursuant to a plan which was less than the
lesser of $50,000 and ten percent (10)% of the cash compensation received by
such officer.

(2) These amounts include contributions made under our 401(k) plan, payouts
relating to unused sick pay benefits and, with respect to Mr. Zeichner only,
relocation expenses.

FISCAL YEAR-END OPTION VALUES

The table below sets forth information for the officers indicated below with
respect to options held as of September 26, 1998. There was no public trading
market for our common stock as of September 26, 1998. Accordingly, the values in
the table have been calculated on the basis of an initial public offering price
of $ per share less the applicable exercise price.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END (#) FISCAL-YEAR-END ($)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bernard Zeichner.......................................... 183,000 732,000 $ $
Harriet A. Bailiss-Sustarsic.............................. 21,600 86,400 $ $
</TABLE>

EMPLOYMENT CONTRACT

We have entered into an employment agreement with Bernard Zeichner that will
remain effective through September 30, 2001. Under the terms of the employment
agreement, Mr. Zeichner has agreed to serve as our President and Chief Executive
Officer and as a member of our board of directors. Mr. Zeichner will receive an
annual base salary of $350,000 and an annual incentive bonus. Such bonus will be
based on a percentage, up to 0.75%, of our earnings before interest, taxes,
depreciation and amortization, depending on the growth in such earnings. Upon
completion of the offering, the vesting for 75% of Mr. Zeichner's outstanding
unvested options will accelerate. This will result in accelerated vesting for
options to purchase 411,750 shares of our common stock. If Mr. Zeichner's
employment is terminated without cause or Mr. Zeichner resigns his position as a
consequence of a material alteration of his responsibilities, movement of our
headquarters outside San Diego or a material breach of the

41
<PAGE>
employment agreement or the Stockholders Agreement, he will be entitled to one
year of his base salary at the time of termination, payable in 12 equal monthly
installments.

STOCK OPTION PLANS

We have historically granted options for the purchase of our common stock
pursuant to our 1996 Long-Term Incentive Plan and our 1999 Long-Term Incentive
Plan. The board of directors has resolved, however, that no further grants may
be made under either the 1996 Long-Term Incentive Plan or the 1999 Long-Term
Incentive Plan. Each of these plans provides that, so long as the SKM Funds own
more than 25% of our outstanding common stock, the option holders have certain
tag along rights in the event of a private sale by the SKM Funds of their shares
of common stock. There are currently options to purchase 1,824,600 shares of our
common stock outstanding under these plans.

Our board of directors and stockholders adopted the 1999 Equity Incentive
Plan, effective as of the completion of this offering. Our 1999 Equity Incentive
Plan was adopted by the board of directors and our stockholders on July 29,
1999. The 1999 Equity Incentive Plan will be administered by the compensation
committee of our board of directors. The 1999 Equity Incentive Plan provides for
the grant of a variety of stock and stock-based awards and related benefits,
including stock options, restricted and unrestricted shares, deferred stock,
performance awards, rights to receive cash or shares with respect to an increase
in the value of the common stock. The 1999 Equity Incentive Plan's eligibility
criteria are intended to encompass those employees, officers, directors and
consultants who are in a position to make a significant contribution to the
success of Charlotte Russe.

The 1999 Equity Incentive Plan permits the grant of options that qualify as
incentive stock options and nonqualified options. The option exercise price of
each option shall be determined by the compensation committee of our board of
directors. In the case of incentive stock options, however, the exercise price
shall not be less than 100% of the fair market value of the shares on the date
of grant, or 110% in the case of incentive stock options granted to an
individual with ownership in excess of certain limits.

In general, and except as otherwise determined by the compensation committee
of our board of directors, all rights under awards granted pursuant to the 1999
Equity Incentive Plan to which the participant has not become irrevocably
entitled will terminate upon termination of the participant's employment,
consulting or service relationship with us. No award granted under the 1999
Equity Incentive Plan, other than an award in the form of an outright transfer
of cash or unrestricted stock, may be transferred other than by will or by the
laws of descent and distribution. During a participant's lifetime an award
requiring exercise may be exercised only by the participant, or in the event of
the participant's incapacity, the person legally appointed to act on the
participant's behalf.

Subject to adjustment for stock splits and similar events, the total number
of shares of common stock that can be issued under the 1999 Equity Incentive
Plan is 750,000 shares. Upon the completion of the offering, we expect to issue
options to purchase 250,000 shares of our common stock at an exercise price
equal to the initial public offering price of our common stock.

STOCK PURCHASE PLAN

We have adopted an employee stock purchase plan that is anticipated to be
implemented following the completion of this offering. The employee stock
purchase plan is designed to enable eligible employees to purchase shares of our
common stock at a discount on a periodic basis through payroll deductions. We
have reserved an aggregate of 350,000 shares of our common stock for issuance
pursuant to this plan. The purchases under the stock purchase plan will occur at
the beginning of each option period. The first option period will commence on
the date of this prospectus and will end on December 31, 1999. Thereafter, each
option period will be six months in duration. Our employees are eligible to
participate if they have been employed by us or our subsidiaries for at least
one year, as of

42
<PAGE>
the first day of any option period, and work for at least 32 hours per week.
Under the stock purchase plan, eligible employees, including executive officers,
are permitted to purchase on an after-tax basis our common stock through payroll
deductions that may not exceed 15% of their base compensation, including
commissions, bonuses, and overtime. Notwithstanding the foregoing, no employee
who is a 5% or greater holder of our voting stock is eligible to participate in
the plan. The amount contributed by each participant over the course of an
option period will be used to purchase shares of our common stock at a purchase
price equal to 85% of the fair market value of the common stock at the beginning
or the end of a purchase period, whichever is lower. Unless terminated sooner,
the stock purchase plan will terminate ten years from its effective date. The
employee stock purchase plan is intended to qualify for favorable tax treatment
under Section 423 of the Internal Revenue Code. The board of directors has
authority to amend or terminate the stock purchase plan, provided no such action
may adversely affect the rights of any participant.

43
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of our common stock as of June 26, 1999 and as adjusted to reflect the
sale of the shares in this offering for (1) each person who is known by us to
own beneficially more than 5% of our outstanding shares of common stock, (2)
each director and executive officer, (3) all directors and executive officers as
a group, and (4) each selling stockholder. As of June 26, 1999, there were
18,310,800 shares of outstanding common stock prior to giving effect to the
shares to be sold in this offering. Unless otherwise indicated below, to our
knowledge, all persons listed below have sole voting and investment power with
respect to their shares of common stock, except to the extent authority is
shared by spouses under applicable law. Unless otherwise indicated, each entity
or person listed below maintains a mailing address of c/o Charlotte Russe
Holding, Inc., 4645 Morena Boulevard, San Diego, CA 92117.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
NUMBER OF TO OFFERING OFFERING
SHARES ------------------------- ------------------------
NAME OF BENEFICIAL OWNER OFFERED NUMBER PERCENT NUMBER PERCENT
- --------------------------------------------------------- ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Bernard Zeichner(1)...................................... 1,527,750 8.00%
Harriet A. Bailiss-Sustarsic(2).......................... -- 43,200 * 43,200 *
Daniel T. Carter(3)...................................... -- 20,000 * 20,000 *
Robin T. Kernohan(4)..................................... -- 21,600 * 21,600 *
Allan W. Karp(5)......................................... -- 19,515,440 96.25
David J. Oddi(5)......................................... -- 19,515,440 96.25
All Directors and Executive Officers
as a Group............................................. 20,716,240 99.95

SELLING STOCKHOLDERS
SKM Funds(5)............................................. 19,515,440 96.25
FSC Corp.
100 Federal Street
Boston, Massachusetts 02110............................ 413,780 413,780 2.21 -- --

FIVE PERCENT (5%) STOCKHOLDERS
John F. Megrue(5)........................................ -- 19,515,440 96.25
Thomas A. Saunders, III(5)............................... -- 19,515,440 96.25
</TABLE>

- ---------

* Less than one percent

(1) Includes 366,000 shares of common stock subject to options exercisable
within sixty days after June 26, 1999 and options to purchase 411,750 shares
of common stock which vest immediately upon the closing of the offering.

(2) Includes 43,200 shares of common stock subject to options exercisable within
sixty days after June 26, 1999.

(3) Includes 20,000 shares of common stock subject to options exercisable within
sixty days after June 26, 1999.

(4) Includes 21,600 shares of common stock subject to options exercisable within
sixty days after June 26, 1999.

(5) Includes (a) 17,369,250 shares of common stock owned by The SK Equity Fund,
L.P., (b) 180,750 shares of common stock owned by SK Investment Fund, L.P.
(collectively with The SK Equity Fund, L.P., the "SKM Funds") and (3)
1,965,440 shares of common stock which may be acquired by the SKM Funds
pursuant to the exercise of certain warrants. SKM Partners, L.P. is the
general partner of each of The SK Equity Fund, L.P. and SK Investment Fund,
L.P. Messrs. Karp, Megrue, Oddi and Saunders are general partners of
Saunders Karp & Megrue Partners, L.L.C., which

44
<PAGE>
serves as the general partner of SKM Partners, L.P. and, therefore, may be
deemed to have beneficial ownership of the shares of common stock shown as
being owned by the SKM Funds above. Messrs. Karp, Megrue, Oddi and Saunders
disclaim beneficial ownership of such shares, except to the extent that any
of them has a limited partnership interest in such funds. The address for
each of these entities or persons is 262 Harbor Drive, Stamford, CT 06902.

The number of shares beneficially owned by each stockholder is determined in
accordance with the rules of the Securities and Exchange Commission and are not
necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes those share of common stock that the
stockholder has sole or shared voting of investment power and any shares of
common stock that the stockholder has right to acquire within sixty (60) days
after June 26, 1999 through the exercise of any option, warrant or other right.
The percentage ownership of the outstanding common stock, however, is based on
the assumption, expressly required by the rules of the Securities and Exchange
Commission, that only the person or entity whose ownership is being reported has
converted options or warrants into shares of common stock.

45
<PAGE>
CERTAIN TRANSACTIONS

TRANSACTIONS WITH AFFILIATES

In September 1996, in connection with our formation and the acquisition of
our business by the SKM Funds, Charlotte Russe issued shares of its common stock
to the following stockholders:

<TABLE>
<CAPTION>
NAME OF INVESTOR NUMBER OF SHARES PRICE PER SHARE
- ----------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
The SK Equity Fund, L.P.................................... 18,119,250 $ 1.00
SK Investment Fund, L.P.................................... 180,750 $ 1.00
</TABLE>

To partially fund our acquisition by the SKM Funds, we issued subordinated
notes to the SKM Funds in the aggregate principal amount of $11.0 million and
bearing interest, payable semi-annually, at the rate of 12.5% per annum. The
subordinated notes had a maturity date of September 27, 2003. On June 11, 1999,
we repaid the aggregate principal amount outstanding on the subordinated notes,
together with accrued interest and a prepayment premium of $440,000. In
connection with the issuance of the subordinated notes, we issued to (1) The SK
Equity Fund, L.P., warrants to purchase 1,945,010 shares of our common stock, at
an exercise price of $1.00 per share, and (2) SK Investment Fund, L.P., warrants
to purchase 19,400 shares of our common stock, at an exercise price of $1.00 per
share. Each of these warrants expires on September 27, 2006, and are subject to
adjustment for stock dividends, stock splits and combinations and certain other
dividends and distributions. The number of shares of common stock issuable under
these warrants increased by an aggregate of 1,030 shares pursuant to certain
anti-dilution provisions.

Mr. Bernard Zeichner, our Chief Executive Officer and President, purchased
750,000 shares of our common stock from the SKM Funds for $1.00 per share, or an
aggregate consideration of $750,000, shortly after their acquisition described
above.

In April, 1999, we agreed to loan Mr. Zeichner $1.5 million to fund the
purchase of a home. To date, Mr. Zeichner has borrowed an aggregate of $1.0
million. The loan is evidenced by a promissory note due April 26, 2004 and the
loan bears interest at a rate of 7.47% per annum. Mr. Zeichner intends to use
the net proceeds from the sale of shares of common stock in this offering to
repay the promissory note in full.

In March, 1999, we loaned Ms. Bailiss-Sustarsic $120,000 to fund the
purchase of a home. The loan was evidenced by a promissory note due March 12,
2004 bearing interest at a rate of 8.5% per annum. This loan was repaid in full
on July 1, 1999.

During fiscal 1998 and the nine months ended June 26, 1999, we purchased an
aggregate of approximately $110,000 of merchandise from Slant, Inc., a
manufacturer of women's apparel. Mr. Zeichner's daughter is the President and
Chief Executive Officer of Slant and his wife is also a principal officer. Mr.
Zeichner's wife and daughter also own a majority of the outstanding equity
interests in Slant, Inc. We believe that our transactions with Slant have been
no more favorable to Slant than could have been obtained from a disinterested
third party.

STOCKHOLDERS AGREEMENT

The SKM Funds and Mr. Bernard Zeichner have entered into a stockholders
agreement. This agreement provides that (1) so long as the SKM Funds own more
than 25% but less than 50% of our total outstanding shares, they will have the
right to nominate three directors and (2) so long as the SKM Funds own at least
10% of the shares of common stock held by them immediately after the completion
of this offering, they will have the right to nominate two directors. The
stockholders agreement grants Mr. Zeichner certain tag along rights in the event
of a private sale by the SKM Funds of their shares of common stock. The
stockholders agreement also grants, subject to limitations

46
<PAGE>
and exceptions, demand and piggyback registration rights to the SKM Funds and
Mr. Zeichner. See "Shares Eligible for Future Sale--Registration Rights."

The stockholders agreement provides for Saunders Karp & Megrue, L.P., an
affiliate of the SKM Funds, to render certain financial advisory services to us
in exchange for an annual fee of $250,000, payable in advance, plus
reimbursement for out-of-pocket expenses. This fee terminates when the SKM Funds
own less than 10% of the shares of common stock held by them immediately after
the completion of this offering.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

Our certificate of incorporation, which will become effective upon the
closing of this offering, authorizes the issuance of up to 100,000,000 shares of
common stock, par value $0.01 per share, and 3,000,000 shares of preferred
stock, par value $0.01 per share, the rights and preferences of which may be
established from time to time by our board of directors. As of June 26, 1999,
18,310,800 shares of common stock were outstanding, held of record by four
stockholders.

COMMON STOCK

Under our certificate of incorporation, holders of our common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders, including the election of directors. They do not have
cumulative voting rights. Subject to preferences that may be applicable to any
outstanding series of preferred stock, holders of our common stock are entitled
to share ratably in any dividends that may be declared by the board of directors
out of legally available funds. In case of a liquidation, dissolution or winding
up of Charlotte Russe, the holders of common stock will be entitled to share
ratably in the net assets legally available for distribution to shareholders, in
each case after payment of all of our liabilities and subject to preferences
that may be applicable to any series of preferred stock then outstanding. The
holders of common stock have no preemptive or conversion rights or other
subscription rights. See "Certain Transactions--Stockholders Agreement." There
are no redemption or sinking fund provisions applicable to the common stock. The
rights, preferences and privileges of holders of common stock are subject to the
rights of the holders of shares of any series of preferred stock that we may
designate and issue in the future.

PREFERRED STOCK

Under our certificate of incorporation, our board of directors has the
authority, without further action by the stockholders, to issue from time to
time, shares of preferred stock in one or more series. The board of directors
may fix the number of shares, designations, preferences, powers and other
special rights of the preferred stock. The preferences, powers, rights and
restrictions of different series of preferred stock may differ. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to holders of common stock or adversely affect the rights and
powers, including voting rights, of the holders of common stock. The issuance
may also have the effect of discouraging, delaying or preventing a change in
control of Charlotte Russe, regardless of whether the transaction may be
beneficial to stockholders. There are no shares of preferred stock outstanding
and we have no current plans to issue any shares of preferred stock.

LIABILITY OF DIRECTORS

Our certificate of incorporation provides that our directors shall not be
liable to Charlotte Russe or its stockholders for monetary damages for any
breach of fiduciary duty, except to the extent otherwise required by the
Delaware General Corporation Law. This provision will not prevent our
stockholders from obtaining injunctive or other relief against our directors.
This provision also does not shield our directors from liability under federal
or state securities laws.

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, this statue prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, asset sales and other

48
<PAGE>
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years prior to
the determination of such status did own, 15% or more of the voting stock of the
corporation, other than interested stockholders prior to the time our common
stock was listed in the Nasdaq National Market. This provision may be deemed to
have an anti-takeover effect and may discourage, delay or prevent a tender offer
or takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price
for the shares held by stockholders. In accordance with Section 203, the SKM
Funds and their affiliates are not considered interested stockholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, LLC.

SHARES ELIGIBLE FOR FUTURE SALE

The sale of a substantial amount of our common stock in the public market
after this offering could adversely affect the prevailing market price of our
common stock. Furthermore, because only a limited number of shares will be
available for sale shortly after this offering due to the contractual
restrictions on resale described in the section entitled "Underwriting" and the
legal restrictions on resale described below, the sale of a substantial amount
of common stock in the public market after these restrictions lapse could
adversely affect the prevailing market price of our common stock and our ability
to raise equity capital in the future.

Upon completion of this offering, we will have outstanding an aggregate of
shares of our common stock, assuming no exercise of outstanding options or
warrants. Of these shares, all of the shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, unless the shares are purchased by "affiliates" as that term is defined in
Rule 144 under the Securities Act. Any shares purchased by an affiliate may not
be resold except pursuant to an effective registration statement or an
applicable exemption from registration, including an exemption under Rule 144 of
the Securities Act. The remaining shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. These restricted securities may be sold in the public
market only if they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act. These rules
are summarized below.

Upon the expiration of the lock-up agreements described in the section
entitled "Underwriting" and subject to the provisions of Rule 144 and Rule 701,
restricted shares will be available for sale in the public market 180 days
after the date of this prospectus. The sale of these restricted securities is
subject, in the case of shares held by affiliates, to the volume restrictions
contained in Rule 144.

RULE 144

In general, under Rule 144 as currently in effect, beginning ninety (90)
days after the date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year from the later of the date
those shares of common stock were acquired from us or from an affiliate of ours
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of:

(1) one percent of the number of shares of common stock then outstanding,
which will equal approximately shares immediately after this
offering; or

49
<PAGE>
(2) the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale of any shares of common
stock.

The sales of any shares of common stock under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the availability of
current public information about us. Affiliates may sell shares not constituting
restricted securities in accordance with the foregoing volume limitations and
other restrictions, but without regard to the one-year holding period.

In addition, under Rule 144(k), a person who is not one of our affiliates at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years from the later of
the date such shares of common stock were acquired from us or from an affiliate
of ours, including the holding period of any prior owner other than an
affiliate, is entitled to sell those shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted pursuant to the lock-up agreements or
otherwise, those shares may be sold immediately upon the completion of this
offering.

RULE 701

In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell those shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with some of the restrictions,
including the holding period, contained in Rule 144.

REGISTRATION RIGHTS

Under the terms of a stockholders agreement, the SKM Funds are entitled to
unlimited demand registration rights that require us to register under the
Securities Act up to a total of 19,515,440 shares of their common stock,
including shares issuable pursuant to warrants currently held by the SKM Funds.
Of this amount, shares of common stock are being registered in this
offering. This right exists so long as the SKM Funds own at least 10% of the
shares of common stock held by them immediately after the completion of this
offering. Mr. Zeichner has the right to participate in any demand registrations
initiated by the SKM Funds. Mr. Zeichner currently owns 750,000 shares of common
stock and options to purchase 915,000 shares of common stock. We are obligated
to pay all fees, cash and expenses in connection with any such registration. By
exercising their registration rights and causing a large number of shares to be
registered and sold in the public market, these holders may cause the price of
the common stock to fall. Notwithstanding these demand registration rights, we
are not obligated to effect more than one demand registration in any six-month
period.

The stockholders agreement also grants, subject to certain limitations and
exceptions, piggyback registration rights to the SKM Funds and Mr. Zeichner in
the event we register any shares of common stock under the Securities Act. We
are obligated to pay all fees, costs and expenses in connection with any such
registration, other than underwriting discounts and commissions and transfer
taxes. The managing underwriters, however, of any such offering may exclude for
marketing reasons some or all of these shares of common stock from registration.

STOCK OPTIONS

At June 26, 1999, there were options to purchase 1,824,600 shares
outstanding under our stock option plans and otherwise. Shortly after the
effective date of this offering, we expect to file a registration statement
under the Securities Act covering 2,574,600 shares of common stock reserved for
issuance under our stock option plans. Upon the filing of this registration
statement and upon expiration of 180-day lock-up agreements, approximately
1,233,400 shares of common stock issuable upon exercise of stock options will be
immediately eligible for sale in the public market, subject to, Rule 144 volume
limitations applicable to our affiliates.

50
<PAGE>
UNDERWRITING

The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Banc of America Securities LLC, PaineWebber
Incorporated, and First Union Capital Markets Corp. have severally agreed with
us and the selling stockholders, subject to the terms and conditions of the
underwriting agreement, to purchase from us and the selling stockholders the
number of shares of common stock set forth opposite their respective names
below. The underwriters are committed to purchase and pay for all of these
shares if any are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- ---------------------------------------------------------------------------------- -----------
<S> <C>
BancBoston Robertson Stephens Inc.................................................
Banc of America Securities LLC....................................................
PaineWebber Incorporated..........................................................
First Union Capital Markets Corp..................................................
-----------
Total.......................................................................
-----------
-----------
</TABLE>

The underwriters' representatives have advised us and the selling
stockholders that the underwriters propose to offer the shares of common stock
to the public at the public offering price located on the cover page of this
prospectus and to some dealers at such price less a concession of not more than
$ per share, of which $ may be reallowed to other
dealers. After the completion of this offering, the public offering price,
concession, and reallowance to dealers may be reduced by the representatives.
This reduction will not change the amount of proceeds to be received by us or
the selling stockholders as indicated on the cover page of this prospectus. The
common stock is offered by the underwriters as stated in this prospectus,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part.

OVER-ALLOTMENT OPTION. Certain selling stockholders have granted to the
underwriters an option, exercisable during the 30-day period after the date of
this prospectus, to purchase up to additional shares of common stock at
the price per share indicated on the cover of this prospectus. To the extent
that the underwriters exercise this option, each of the underwriters will have a
firm commitment to purchase approximately the same percentage of the additional
shares that the number of shares of common stock to be purchased by it shown in
the above table represents as a percentage of the shares offered
hereby. If purchased, those additional shares will be sold by the underwriters
on the same terms as those on which the shares are being sold. The
relevant selling stockholders will be obligated, pursuant to the option, to sell
shares to the extent the option is exercised. The underwriters may exercise this
option only to cover over-allotments made in connection with the sale of the
shares of common stock offered in this prospectus.

The following table shows the per share and total underwriting discounts and
commissions to be paid by us and the selling stockholders to the underwriters.
This information is presented assuming either no exercise or full exercise by
the underwriters of their over-allotment option.

<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
----------- ------------ ------------

<S> <C> <C> <C>
Public offering price......................................................... $ $ $
Underwriting discounts and commissions paid by Charlotte Russe................ $ $ $
Proceeds, before expenses, to Charlotte Russe................................. $ $ $
Underwriting discounts and commissions paid by the selling stockholders....... $ $ $
Proceeds, before expenses, to the selling stockholders........................ $ $ $
</TABLE>

51
<PAGE>
The expenses of the offering are estimated at $ and are payable entirely by
us. BancBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 1999.

DIRECTED SHARE PROGRAM. At our request, the underwriters have reserved up
to shares of common stock to be issued by us and offered for sale in
this prospectus, at the initial public offering price, to our directors,
officers, employees, business associates and persons otherwise related to
Charlotte Russe and Saunders Karp & Megrue, L.P. The number of shares of common
stock available for sale to the general public will be reduced to the extent
these individuals purchase these reserved shares. The underwriters will offer
any reserved shares that are not so purchased to the general public on the same
basis as the other shares offered in this prospectus.

The underwriters have advised us that they do not intend to confirm sales of
more than 5% of the common stock offered in this offering to any accounts over
which they exercise discretionary authority.

INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters, Charlotte Russe and the selling stockholders against various
civil liabilities, including liabilities under the Securities Act and
liabilities arising from breaches of representations and warranties contained in
the underwriting agreement.

LOCK-UP AGREEMENTS. All of our directors and executive officers,
substantially all existing stockholders, and all holders of outstanding options
and warrants have agreed, during the period ending 180 days after the date of
this prospectus, subject to various exceptions, not to offer to sell, contract
to sell, or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of common stock or any options or warrants to purchase any
shares of common stock, or any securities convertible into or exchange for
shares of common stock owned as of the date of this prospectus or thereafter
acquired directly by these holders or with respect to which they have the power
of disposition, without the prior written consent of BancBoston Robertson
Stephens Inc. However, BancBoston Robertson Stephens Inc. may, in its sole
discretion and at any time or from time to time, without notice, release all or
any portion of the securities subject to the lock-up agreements. There are no
existing agreements between the representatives and any of our stockholders who
have executed a lock-up agreement providing consent to the sale of shares of
common stock before the expiration of the lock-up period.

In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of BancBoston Robertson Stephens Inc., subject
to various exceptions:

- consent to the disposition of any shares held by stockholders subject to
lock-up agreements before the expiration of the lock-up period; or

- issue, sell, contract to sell, or otherwise dispose of, any shares of
common stock, any options to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than our sale of shares in this offering, the issuance
of common stock upon the exercise of outstanding options and warrants, the
issuance of options under existing stock option and incentive plans
provided the options do not vest before the expiration of the lock-up
period.

See "Shares Eligible for Future Sale."

STABILIZATION. The representatives have advised us that, pursuant to
Regulation M under the Securities Act, some persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of shares of

52
<PAGE>
common stock on behalf of the underwriters for the purpose of fixing or
maintaining the price of the common stock. A "syndicate covering transaction" is
the bid for or the purchase of common stock on behalf of the underwriters to
reduce a short position incurred by the underwriters in connection with this
offering. A "penalty bid" is an arrangement permitting the representatives to
reclaim the selling concession otherwise accruing to an underwriter or syndicate
member in connection with this offering if the common stock originally sold by
such underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives have advised us that
these transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.

NO PRIOR PUBLIC MARKET. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus has been determined through
negotiations between us, the selling stockholders, and the representatives of
the underwriters. Among the factors considered in these negotiations were
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives of the
underwriters believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.

CERTAIN RELATIONSHIPS. FSC Corp., an affiliate of BancBoston Robertson
Stephens Inc., owns a warrant to purchase 413,780 shares of our common stock,
which represents less than 2.5% of our outstanding common stock. In connection
with the offering, FSC Corp. plans to exercise its warrant and to sell all of
its shares of our common stock as a selling stockholder in the offering. See
"Principal and Selling Stockholders."

QUALIFIED INDEPENDENT UNDERWRITER. We intend to use more than 10% of the
net proceeds of the sale of our common stock to repay indebtedness under our
existing credit facilities owed by us to BankBoston, N.A., an affiliate of
BancBoston Robertson Stephens Inc., one of the underwriters' representatives.
You should refer to "Use of Proceeds" for more information. Accordingly, the
offering must comply with the requirements of Rule 2710(c)(8) of the National
Association of Securities Dealers, Inc. Conduct Rules. This rule provides
generally that if more than 10% of our net proceeds from the sale of our common
stock is paid to the underwriters or their affiliates, the initial public
offering price of the common stock may not be higher than recommended by a
"qualified independent underwriter" meeting certain standards. Accordingly, Banc
of America Securities LLC is assuming the responsibilities of acting as the
qualified independent underwriter in pricing the offering and conducting due
diligence. The initial public offering price of the shares of our common stock
will be no higher than the price recommended by Banc of America Securities LLC.

VALIDITY OF COMMON STOCK

The validity of the common stock offered by this prospectus will be passed
upon for Charlotte Russe Holding, Inc. by Ropes & Gray, Boston, Massachusetts.
Brobeck, Phleger & Harrison, LLP, San Diego, California, has acted as counsel
for the underwriters in connection with certain legal matters related to this
offering.

EXPERTS

The consolidated financial statements of Charlotte Russe Holding, Inc. at
September 27, 1997 and September 26, 1998, for each of the two years in the
period ended September 26, 1998 and for our Predecessor for the year ended
September 27, 1996, appearing in this prospectus and the registration statement,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report

53
<PAGE>
thereon appearing elsewhere herein, and are included in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.

AVAILABLE INFORMATION

We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the common stock to be sold in this offering. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement or the
exhibits and schedules which are part of the Registration Statement. The rules
and regulations of the Securities and Exchange Commission allow us to omit
certain information included in the Registration Statement from this prospectus.
Accordingly, any statements made in this prospectus as to the contents of any
contract, agreement or other document are not necessarily complete. With respect
to each such contract, agreement or other document filed as an exhibit to the
Registration Statement, we refer you to the exhibit for a more complete
description of the matter involved, and each statement in this prospectus shall
be deemed qualified in its entirety by this reference. You may read and copy all
or any portion of the Registration Statement or any reports, statements or other
information in the files at the following public reference facilities of the
Securities and Exchange Commission:

<TABLE>
<S> <C> <C>
WASHINGTON, D.C. NEW YORK, NEW YORK CHICAGO, ILLINOIS
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
</TABLE>

You can request copies of these documents upon payment of a duplicating fee
by writing to the Securities and Exchange Commission. You may call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of its public reference rooms. Our filings, including the
Registration Statement, will also be available to you on the Internet web site
maintained by the Securities and Exchange Commission at http://www.sec.gov.

We intend to furnish our stockholders with annual reports containing audited
financial statements, and make available to our stockholders quarterly reports
for the first three quarters of each year containing unaudited interim financial
information.

54
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

Report of Ernst & Young LLP, Independent Auditors.......................................................... F-2

Consolidated Balance Sheets as of September 27, 1997, September 26, 1998 and June 26, 1999 (unaudited)..... F-3

Consolidated Statements of Income of the Predecessor for the year ended September 27, 1996 and of the
Company for the years ended September 27, 1997 and September 26, 1998 and the nine months ended June 27,
1998 (unaudited) and June 26, 1999 (unaudited)........................................................... F-4

Consolidated Statement of the Predecessor's Retained Earnings for the year ended September 27, 1996........ F-5

Consolidated Statement of Stockholders' Equity for September 27, 1996 (date of initial capitalization) and
for the years ended September 27, 1997 and September 26, 1998, and the nine months ended June 26, 1999
(unaudited).............................................................................................. F-5

Consolidated Statements of Cash Flows of the Predecessor for the year ended September 27, 1996 and of the
Company for the one day period ended September 27, 1996 and the years ended September 27, 1997 and
September 26, 1998, and the nine months ended June 27, 1998 (unaudited) and June 26, 1999 (unaudited).... F-6

Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>

F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors

Charlotte Russe Holding, Inc.

We have audited the accompanying consolidated balance sheets of Charlotte
Russe Holding, Inc. as of September 27, 1997 and September 26, 1998, and the
related consolidated statements of stockholders' equity for September 27, 1996
(date of initial capitalization) and for each of the two years in the period
ended September 26, 1998, the consolidated statements of income for the years
ended September 27, 1997 and September 26, 1998, the consolidated statements of
cash flows for the one day period ended September 27, 1996 and years ended
September 27, 1997 and September 26, 1998; and the statements of income,
retained earnings and cash flows of the Company's predecessor for the year ended
September 27, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Charlotte Russe
Holding, Inc., at September 27, 1997 and September 26, 1998, the consolidated
results of its operations for the years ended September 27, 1997 and September
26, 1998 and its cash flows for the one day period ended September 27, 1996 and
years ended September 27, 1997 and September 26, 1998 and the results of
operations and cash flows of the Company's predecessor for the year ended
September 27, 1996 in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

San Diego, California

November 12, 1998, except for Note 5,
as to which the date is December 30, 1998
and for the last two paragraphs of Note 8,
as to which the date is , 1999

- --------------------------------------------------------------------------------

The foregoing report is in the form that it will be signed upon the completion
of the restatement of the capital accounts described in Note 8 to the financial
statements.

/s/ ERNST & YOUNG LLP

San Diego, California

August 2, 1999

F-2
<PAGE>
CHARLOTTE RUSSE HOLDING, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
PRO FORMA
SEPTEMBER 27, SEPTEMBER 26, JUNE 26, STOCKHOLDERS'
1997 1998 1999 EQUITY
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 2,816,658 $ 1,003,906 $ 112,323
Inventories....................................... 3,800,035 8,864,789 7,544,295
Other current assets.............................. 856,768 2,013,474 1,369,058
Deferred tax assets............................... 972,249 1,190,000 1,382,000
------------- ------------- -------------
Total current assets.............................. 8,445,710 13,072,169 10,407,676
Fixed assets, net................................... 15,439,623 27,625,046 32,136,530
Goodwill and other intangibles, net................. 32,103,091 32,547,253 31,875,727
Deferred financing costs, net....................... 1,111,961 1,100,159 600,430
Notes receivable from officers...................... -- -- 1,020,000
Other assets........................................ 27,410 82,340 198,723
------------- ------------- -------------
Total assets...................................... $ 57,127,795 $ 74,426,967 $ 76,239,086
------------- ------------- -------------
------------- ------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade........................... $ 3,519,030 $ 7,398,038 $ 9,021,613
Accounts payable--other........................... 2,101,135 2,914,331 2,247,882
Accrued payroll and related expense............... 819,370 1,153,010 896,419
Income taxes payable.............................. 320,782 615,163 145,141
Other accrued expenses............................ 2,899,049 1,803,064 5,088,456
Notes payable to bank, current portion............ 1,462,500 -- --
Capital leases, current portion................... -- 428,000 428,000
------------- ------------- -------------
Total current liabilities......................... 11,121,866 14,311,606 17,827,511
Notes payable to bank, net of current portion....... 9,862,500 16,600,000 18,250,000
Subordinated notes payable to related parties....... 11,000,000 11,000,000 --
Capital leases, net of current portion.............. -- 496,874 182,087
Deferred rent....................................... 218,024 955,633 1,681,206
Other liabilities................................... 166,699 452,834 478,801
Deferred tax liabilities............................ 779,195 1,165,000 1,505,000
------------- ------------- -------------
Total liabilities................................. 33,148,284 44,981,947 39,924,605
Commitments
Stockholders' equity:
Preferred Stock $0.01 par value, 3,000,000 shares
authorized, none issued and outstanding......... -- -- --
Common Stock $0.01 par value, 100,000,000 shares
authorized, issued and outstanding 18,300,000
shares at September 27, 1997 and September 26,
1998, 18,310,800 at June 26, 1999, and xxx,xxx
on a pro forma basis............................ 183,000 183,000 183,108
Additional paid-in capital........................ 18,739,981 18,691,381 19,662,073
Deferred compensation............................. -- -- (960,000)
Retained earnings................................. 5,056,530 10,570,639 17,429,300
------------- ------------- ------------- -------------
Total stockholders' equity........................ 23,979,511 29,445,020 36,314,481
------------- ------------- ------------- -------------
Total liabilities and stockholders' equity........ $ 57,127,795 $ 74,426,967 $ 76,239,086
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

See accompanying notes.

F-3
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
COMPANY
PREDECESSOR -------------------------------------------------------------
(NOTE 1)
------------- YEARS ENDED NINE MONTHS ENDED
YEAR ENDED ----------------------------- -----------------------------
SEPTEMBER 27, SEPTEMBER 27, SEPTEMBER 26, JUNE 27, JUNE 26,
1996 1997 1998 1998 1999
------------- ------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
Net sales.......................... $ 70,663,065 $ 81,543,232 $ 134,091,459 $ 94,409,890 $ 126,378,315
Cost of goods sold, including
buying, distribution and
occupancy costs.................. 43,774,147 50,722,934 93,142,372 65,506,640 85,996,435
------------- ------------- ------------- ------------- -------------
Gross profit....................... 26,888,918 30,820,298 40,949,087 28,903,250 40,381,880
Selling, general and administrative
expenses......................... 15,265,607 17,168,370 26,988,510 19,052,243 24,743,176
Amortization of goodwill and other
intangibles...................... -- 814,411 895,360 711,538 671,526
Predecessor shareholders'
salaries......................... 8,000,000 1,200,000 -- -- --
------------- ------------- ------------- ------------- -------------
Operating income................... 3,623,311 11,637,517 13,065,217 9,139,469 14,967,178
Other income (expense):
Interest income (expense), net... 42,001 (2,278,730) (3,025,378) (2,198,298) (2,937,507)
Other charges, net............... (143,594) (315,363) (280,354) (262,791) (204,393)
------------- ------------- ------------- ------------- -------------
Total other income (expense)... (101,593) (2,594,093) (3,305,732) (2,461,089) (3,141,900)
------------- ------------- ------------- ------------- -------------
Income before income taxes......... 3,521,718 9,043,424 9,759,485 6,678,380 11,825,278
Income taxes....................... -- 3,986,894 4,245,376 2,905,096 4,966,617
------------- ------------- ------------- ------------- -------------
Net income......................... $ 3,521,718 $ 5,056,530 $ 5,514,109 $ 3,773,284 $ 6,858,661
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Net income per share:
Basic............................ $ 0.28 $ 0.30 $ 0.21 $ 0.37
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted.......................... $ 0.25 $ 0.27 $ 0.18 $ 0.32
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average shares
outstanding:
Basic............................ 18,300,000 18,300,000 18,300,000 18,300,100
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Diluted.......................... 19,992,300 20,668,000 20,688,000 21,207,100
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

See accompanying notes.

F-4
<PAGE>
PREDECESSOR (NOTE 1)

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

<TABLE>
<CAPTION>
RETAINED EARNINGS
-----------------
<S> <C>
Balance at September 30, 1995.......................................... $ 5,079,691
Net income........................................................... 3,521,718
Distributions to Predecessor Shareholders............................ (6,300,000)
Retained earnings on September 27, 1996, date of sale................ (2,301,409)
-----------------
Balance at September 27, 1996.......................................... $ --
-----------------
-----------------
</TABLE>

CHARLOTTE RUSSE HOLDING, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN DEFERRED RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION EARNINGS EQUITY
------------ ---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Initial capitalization of Charlotte
Russe Holding, Inc. on September 27,
1996:
Issuance of Common Stock............ 18,300,000 $ 183,000 $ 17,866,465 $ -- $ -- $ 18,049,465
Issuance of warrants to purchase
Common Stock...................... -- -- 873,516 -- -- 873,516
------------ ---------- ------------- ------------- ------------- -------------
Balance at September 27, 1996......... 18,300,000 183,000 18,739,981 -- -- 18,922,981

Net income.......................... -- -- -- -- 5,056,530 5,056,530
------------ ---------- ------------- ------------- ------------- -------------
Balance at September 27, 1997......... 18,300,000 183,000 18,739,981 -- 5,056,530 23,979,511

Stock option transactions, net of
tax benefit....................... -- -- (48,600) -- -- (48,600)
Net income.......................... -- -- -- -- 5,514,109 5,514,109
------------ ---------- ------------- ------------- ------------- -------------
Balance at September 26, 1998......... 18,300,000 183,000 18,691,381 -- 10,570,639 29,445,020

Stock option transactions
(unaudited)....................... 10,800 108 10,692 -- -- 10,800
Deferred compensation related to
stock options (unaudited)......... -- -- 960,000 (960,000) -- --
Net income (unaudited).............. -- -- -- -- 6,858,661 6,858,661
------------ ---------- ------------- ------------- ------------- -------------
Balance at June 26, 1999
(unaudited)......................... 18,310,800 $ 183,108 $ 19,662,073 $ (960,000) $ 17,429,300 $ 36,314,481
------------ ---------- ------------- ------------- ------------- -------------
------------ ---------- ------------- ------------- ------------- -------------
</TABLE>

See accompanying notes.

F-5
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY
(NOTE 1) --------------------------------------------------------------------------
------------- YEARS ENDED NINE MONTHS ENDED
YEAR ENDED ONE DAY ENDED ----------------------------- --------------------------
SEPTEMBER 27, SEPTEMBER 27, SEPTEMBER 27, SEPTEMBER 26, JUNE 27, JUNE 26,
1996 1996* 1997 1998 1998 1999
------------- ------------- ------------- ------------- ------------ ------------
(UNAUDITED) (UNAUDITED)
OPERATING ACTIVITIES
Reconciliation of net income to net
cash provided by (used in)
operating activities:
Net income....................... $ 3,521,718 $ -- $ 5,056,530 $ 5,514,109 $ 3,773,284 $ 6,858,661
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and
amortization................. 1,726,281 -- 2,838,168 4,959,105 3,561,550 4,425,276
Deferred rent.................. (67,831) (848,338) 218,024 737,609 784,206 725,573
Loss on disposal of asset...... -- -- -- -- -- 49,720
Changes in operating assets and
liabilities:
Inventories.................. (186,589) -- (1,016,955) (5,064,754) (3,494,767) 1,320,494
Other current assets......... (718,349) -- 369,464 (1,156,706) (1,214,538) 644,416
Deferred financing costs..... -- (449,718) (4,319) (254,748) (254,748) (166,591)
Other assets................. 13,262 -- (6,542) (54,930) (55,764) (116,383)
Accounts payable............. 1,471,934 -- 356,192 4,692,204 2,700,238 957,126
Accrued payroll and related
expense.................... (265,897) -- 159,545 333,640 (561,606) (256,591)
Income taxes payable......... -- -- 320,782 294,381 343,096 (470,022)
Other accrued expenses....... 397,632 1,018,302 141,314 (1,095,985) (2,716,823) 3,285,392
Other liabilities............ 9,029 -- 30,000 286,136 427,522 25,967
Deferred taxes............... -- -- (193,054) 168,054 1,066,534 148,000
------------- ------------- ------------- ------------- ------------ ------------
Net cash provided by (used in)
operating activities............. 5,901,190 (279,754) 8,269,149 9,358,115 4,358,184 17,431,038
INVESTING ACTIVITIES
Net cash invested in acquisition of
Rampage assets................... -- -- (2,046,000) (7,276,463) (7,276,463) --
Purchases of fixed assets.......... (1,357,369) -- (5,245,194) (8,537,486) (6,996,405) (7,648,634)
Funding of notes receivable from
officers......................... -- -- -- -- -- (1,120,000)
Repayments of notes receivable from
officers......................... -- -- -- -- -- 100,000
Net cash invested in acquisition of
predecessor...................... -- (32,836,417) (419,591) -- -- --
Sale of marketable securities...... 100,000 -- -- -- -- --
------------- ------------- ------------- ------------- ------------ ------------
Net cash used in investing
activities....................... (1,257,369) (32,836,417) (7,710,785) (15,813,949) (14,272,868) (8,668,634)
FINANCING ACTIVITIES
Payments on capital leases......... -- -- -- (631,918) (361,461) (314,787)
Payments on notes payable to bank
and revolving credit facility.... -- (5,000,000) (2,575,000) (18,925,000) (11,100,000) (21,150,000)
Proceeds from notes payable to bank
and revolving credit facility.... 1,250,000 10,900,000 3,000,000 24,200,000 18,675,000 22,800,000
Proceeds from notes payable to
related parties.................. -- 11,000,000 -- -- -- --
Payments on notes payable to
related parties.................. (1,709,434) -- -- -- -- (11,000,000)
Proceeds from issuance of Common
Stock............................ -- 18,049,465 -- -- -- 10,800
Cash distributions to Predecessor
shareholders..................... (6,300,000) -- -- -- -- --
------------- ------------- ------------- ------------- ------------ ------------
Net cash provided by (used in)
financing activities............. (6,759,434) 34,949,465 425,000 4,643,082 7,213,539 (9,653,987)
------------- ------------- ------------- ------------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents................. (2,115,613) 1,833,294 983,364 (1,812,752) (2,701,145) (891,583)
Cash and cash equivalents at
beginning of period.............. 4,140,516 -- 1,833,294 2,816,658 2,816,658 1,003,906
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
Cash and cash equivalents at end of
period........................... $ 2,024,903 $ 1,833,294 $ 2,816,658 $ 1,003,906 $ 115,513 $ 112,323
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
SUPPLEMENTAL SCHEDULE OF NONCASH
ACTIVITIES
Issuance of warrants to purchase
Common Stock..................... $ -- $ 873,516 $ -- $ -- $ -- $ --
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
Stock option transactions, net of
tax benefit $ -- $ -- $ -- $ 48,600 $ 48,600 $ --
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
Fixed assets acquired through
assumption of capital leases..... $ -- $ -- $ -- $ 1,567,313 $ -- $ --
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest........................... $ 159,603 $ -- $ 2,211,966 $ 2,947,606 $ 2,450,496 $ 3,341,653
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
Income taxes, net.................. $ 86,061 $ -- $ 4,088,756 $ 3,751,000 $ 2,561,999 $ 5,436,638
------------- ------------- ------------- ------------- ------------ ------------
------------- ------------- ------------- ------------- ------------ ------------
</TABLE>

- ------------
* The Company's cash flow activity for September 27, 1996 (date of initial
capitalization) relates to the acquisition (see Note 1). Cash flow activity
relating to store operations on the date of acquisition have been included
in the Predecessor's cash flow statement for the year ended September 27,
1996.

See accompanying notes.

F-6
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Charlotte Russe Holding, Inc. (the "Company") was incorporated in Delaware
in July 1996. On September 27, 1996, the Company was capitalized through the
issuance of Common Stock and long-term debt. Effective September 27, 1996, the
Company acquired all of the stock of Lawrence Merchandising Corporation, a
California corporation, and its affiliates, Lawrence Merchandising Corporation
of Nevada and Lawrence Merchandising Corporation of Nevada II, both Nevada
corporations, (collectively, the "Predecessor" companies) for approximately $35
million in cash. In addition, the Company repaid $5 million of the Predecessor's
short-term borrowings concurrent with the consummation of the purchase
transaction.

The acquisition was accounted for using the purchase method of accounting.
The excess of the aggregate purchase price over the fair value of net assets
acquired of approximately $32.9 million was recognized as goodwill.

As the acquisition occurred on the last day of fiscal 1996, the accompanying
consolidated statements of retained earnings, income and cash flows of the
Predecessor for the year ended September 27, 1996 reflect the activity of the
Company. In addition, due to the capitalization of the Company on September 27,
1996, the Statement of Cash Flows of the Company for the one day period ended
September 27, 1996 relates to the initial capitalization and the acquisition of
the Predecessor.

DESCRIPTION OF BUSINESS

The Company operates in one segment selling clothing and accessories for
women through its retail stores that operate under the names Charlotte Russe and
Rampage (Note 2). As of June 26, 1999, the Company operated 85 mall-based retail
stores in Arizona, California, Florida, Georgia, Hawaii, Illinois, Michigan,
Nevada, New Jersey, New York, South Carolina, and Texas.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

FISCAL YEAR

The Company's fiscal year is (and its Predecessor's fiscal year was) the
52/53 week period ending on the last Saturday in September. Fiscal years ended
September 27, 1996 and 1997 and September 26, 1998 each contained 52 weeks.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

F-7
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTERIM FINANCIAL DATA

The consolidated financial statements as of June 26, 1999 and for the nine
months ended June 27, 1998 and June 26, 1999 are unaudited. The unaudited
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements and, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary to state fairly the financial information set forth therein, in
accordance with generally accepted accounting principles. The results of
operations for the interim period ended June 26, 1999 are not necessarily
indicative of the results which may be reported for any other interim period or
for the year ending September 25, 1999.

CASH EQUIVALENTS

The Company considers all liquid investments with maturities of three months
or less when purchased to be cash equivalents.

INVENTORIES

Inventories are accounted for by the retail method. The cost of inventory is
determined at the lower of the first-in, first-out (FIFO) method or market.
During fiscal 1997, the Company changed from the last-in, first-out (LIFO)
method to the FIFO method. The change did not have a material effect on fiscal
1997 results of operations.

FIXED ASSETS

Fixed assets are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally
five to seven years. Leasehold improvements are amortized on a straight-line
basis over the estimated useful lives of the respective assets or the term of
the lease, whichever is less. Depreciation expense for the years ended September
27, 1996, September 27, 1997 and September 26, 1998 was $1,726,281 and
$1,808,165 and $3,797,195, respectively, and $2,702,428 and $3,542,107 for the
nine months ended June 27, 1998 and June 26, 1999, respectively.

GOODWILL AND OTHER INTANGIBLES

Goodwill represents the excess of the cost over the fair market value of net
assets acquired by the Company. Goodwill is amortized on a straight-line basis
over 40 years. Other intangibles are the result of the Company's acquisition of
the Rampage assets and are stated at cost and amortized using the straight-line
method over the estimated useful life of 20 years. Accumulated amortization for
goodwill and other intangibles at September 27, 1997, September 26, 1998 and
June 26, 1999 was $814,411, $1,709,771 and $2,381,297, respectively.

DEFERRED FINANCING COSTS

Debt issuance costs are amortized to interest expense using the straight
line method over the life of the related debt, ranging from September 30, 2002
to September 27, 2003. Unamortized issuance

F-8
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
costs remaining upon early retirement of debt are expensed. Accumulated
amortization at September 27, 1997, September 26, 1998 and June 26, 1999 was
$216,000, $482,142 and $427,481, respectively.

DEFERRED RENT

Rent expense on noncancellable leases containing known future scheduled rent
increases are recorded on a straight-line basis over the term of the respective
leases. The excess rent expense over rent paid is accounted for as deferred
rent.

INCOME TAXES

The Predecessor had elected S corporation status for federal income tax
reporting purposes and for those states which recognize S corporation status.
Accordingly, the income of the Predecessor was included in the tax returns of
the shareholders and no provision for federal income taxes was made in the
accompanying Predecessor's statement of income. The Company has elected to
operate as a C corporation from the date of its inception.

Upon completion of the purchase price allocation, deferred tax liabilities
were recognized for the tax effect of certain book to tax differences existing
at the acquisition date, with the offset recorded as an adjustment to goodwill.

The Company accounts for income taxes under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis.

Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in operations in
the period that includes the enactment date.

The provision for income taxes for the nine month periods presented is based
on the effective tax rate estimated to be in effect for the respective year.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company periodically assesses the recoverability of assets based on its
expectations of future profitability and undiscounted cash flow of the related
operations, and when circumstances dictate, adjusts the carrying value of the
asset. These factors, along with management's plans with respect to the
operations, are considered in assessing the recoverability of goodwill, other
purchased intangibles and fixed assets. As of September 26, 1998, the Company
did not have any impairment of assets, however, as of June 26, 1999, the Company
recorded impairment losses of approximately $722,000 relating to stores which
the Company plans to close during the year.

F-9
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION

Statement of Financial Accounting Standards (SFAS) No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, establishes the use of the fair value based method of
accounting for stock-based compensation arrangements, under which compensation
cost is determined using the fair value of stock-based compensation determined
as of the grant date, and is recognized over the periods in which the related
services are rendered. SFAS No. 123 also permits companies to elect to continue
using the current intrinsic value accounting method specified in Accounting
Principles Board Opinion (APB) No. 25 to account for stock-based compensation.
The Company has decided to retain the current intrinsic value based method, and
has disclosed the pro forma effect of using the fair value based method to
account for its stock-based compensation.

REVENUE RECOGNITION

Retail merchandise sales are recognized at the point of sale, less estimated
sales returns. A reserve is provided for on projected returns based on prior
experience.

STORE PRE-OPENING COSTS

Costs incurred in connection with the opening of a new store are expensed as
incurred.

NET INCOME PER SHARE

Basic net income per share is computed based on the weighted average
outstanding common shares. Dilutive net income per share is computed based on
the weighted average outstanding shares and potentially dilutive stock options
and warrants.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments, including cash and cash equivalents, accounts
payable, accrued expenses, income tax payable and capital lease obligations are
carried at cost, which management believes approximates fair value because of
the short-term maturity of these instruments. Interest on long-term debt is
primarily based on variable rates; therefore, management believes the carrying
amounts for the outstanding borrowings at September 27, 1997, September 26, 1998
and June 26, 1999 approximate fair value.

COMPREHENSIVE INCOME

In fiscal 1999, the Company adopted SFAS No. 130, REPORTING COMPREHENSIVE
INCOME. SFAS No. 123 establishes standards for reporting and display of
comprehensive income and its components. The Company did not have any component
of other comprehensive income for any periods presented.

F-10
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS

Advertising costs are expensed as incurred and were $50,704, $15,758 and
$241,603 for the years ended September 27, 1996, September 27, 1997 and
September 26, 1998, and $169,251 and $313,401 for the nine months ended June 27,
1998 and June 26, 1999, respectively.

RECLASSIFICATIONS

Certain amounts in the prior years financial statements have been
reclassified to conform with the 1999 presentation.

2. ACQUISITIONS OF RAMPAGE ASSETS

On September 30, 1997, the Company completed the acquisition of certain
assets of Rampage Retailing, Inc. (Rampage), a retailer of women's apparel, for
a purchase price of $10,500,000, consisting of cash of which $2,000,000 was
prepaid in fiscal year 1997 as a deposit, and the assumption of certain capital
lease obligations. The transaction was accounted for under the purchase method
and the purchase price was primarily allocated to fixed assets. The cash portion
of the purchase price was funded from the Company's credit facilities.

The Company's accompanying statements of income reflect the operating
results of Rampage since the date of acquisition. Prior to the acquisition,
Rampage operated in various business activities which consisted of manufacturing
operations and the sale of clothing through retail locations. The Company
acquired certain assets related to 16 retail store locations. The operating
results of the retail locations were computed through the retail location
operating profit level and combined into the operating results of a consolidated
entity. Therefore, the operating results of the retail locations did not include
any corporate expenses or other costs, such as interest, general and
administration, distribution or buying costs. The pro forma unaudited net sales
and gross profit for the year ended September 27, 1997, assuming the purchase of
Rampage had occurred on September 28, 1996 were $109,006,043 and $34,400,758,
respectively.

3. FIXED ASSETS

Fixed assets consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 27, SEPTEMBER 26, JUNE 26,
1997 1998 1999
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Leasehold improvements.............................................. $ 11,444,071 $ 23,690,119 $ 28,253,154
Furniture and fixtures.............................................. 1,740,892 6,764,970 8,851,340
Equipment and vehicles.............................................. 2,354,904 3,113,396 3,450,789
Prepaid Rampage acquisition costs................................... 2,046,000 -- --
------------- ------------- -------------
17,585,867 33,568,485 40,555,283
Less accumulated depreciation and amortization...................... (2,146,244) (5,943,439) (8,418,753)
------------- ------------- -------------
$ 15,439,623 $ 27,625,046 $ 32,136,530
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

F-11
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

4. NOTES RECEIVABLE FROM OFFICERS

In April 1999, the Company loaned $1,000,000 under a note agreement to its
President and Chief Executive Officer. The full amount of the note is secured by
a pledge of 750,000 shares of Common Stock of the Company, plus any shares
obtained by the officer in the future. All principal and accrued interest (7.47%
per annum) is due and payable on April 26, 2004, except in the event that all or
any part of the pledged Common Stock is sold, the net proceeds of the sale of
such shares of Common Stock must be used to repay any outstanding principal and
interest.

In March 1999, the Company loaned $120,000 under a note agreement to an
Executive Vice President of the Company. The full amount of the note is secured
by a pledge of all shares of Common Stock of the Company obtained by the officer
in the future. All principal and accrued interest (8.5% per annum) is due and
payable on March 12, 2004. As of June 26, 1999, $20,000 was outstanding.

5. CREDIT ARRANGEMENTS

At September 26, 1998, the Company had a bank credit agreement which
provided a $17.0 million term loan and a $10.0 million revolving credit
facility. In December 1998, the bank credit agreement was amended. The amended
agreement eliminated the $17.0 million term loan and increased the revolving
credit facility. The amended revolving credit facility provides for aggregate
commitments of $26.0 million through September 1999; $24.5 million from October
1999 through September 2000; $20.0 million from October 2000 through September
2001; and $14.5 million from October 2001 through maturity. All outstanding
borrowings under the amended revolving credit facility are due on September 30,
2002. Substantially all of the Company's assets secure the amended bank credit
agreement. At June 26, 1999, there was $18.3 million outstanding under the
revolving credit facility.

Interest on the amended revolving credit facility is payable quarterly at
either (i) the bank's Base Rate, as defined, plus 1.00% or (ii) the bank's
Eurodollar rate plus 2.50%, at the Company's option, subject to certain
adjustments.

Pursuant to the terms of the amended bank credit agreement, the Company can
issue up to $5.0 million of commercial or standby letters of credit. The annual
fee incurred is 2.00% for commercial and standby letters of credit plus
customary issuance and amendment charges. Fees are paid quarterly in arrears and
charges are paid as incurred. At September 26, 1998 and June 26, 1999, there
were outstanding letters of credit in the amount of $1.3 million and $0.5
million, respectively.

In June 1999, the bank credit agreement was amended to provide for aggregate
commitments of $32.0 million through September 1999; $30.5 million from October
1999 through September 2000; $25.0 million from October 2000 through September
2001; and $18.0 million from October 2001 through maturity, which remained
unchanged. In addition, the credit agreement was amended to permit the
redemption of the senior subordinated note agreements with affiliated investors.
(See Note 6)

The bank credit agreement requires that the Company maintain certain
financial ratios and restricts future liens and indebtedness, sales of assets,
and dividend payments. As of June 26, 1999, the Company is in compliance with
the terms of the bank credit agreement.

In connection with the original bank credit agreement, the Company issued
warrants to purchase approximately 413,780 shares of the Company's Common Stock
at $1.00 per share, subject to certain

F-12
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998 AND THE NINE MONTHS ENDED JUNE 27,
1998
AND JUNE 26, 1999 IS UNAUDITED.)

5. CREDIT ARRANGEMENTS (CONTINUED)
anti-dilution provisions. The warrants are exercisable immediately and expire on
September 27, 2006. The warrants were valued at approximately $152,000, which is
included in deferred financing costs and the warrants are being amortized on a
straight-line basis over the life of the agreement, as amended.

The Company has entered into an interest rate swap agreement to manage
certain of its interest rate exposure. The notional amount associated with this
agreement was established at $11.0 million with annual reductions of $2.0
million during the contract life until expiration in May 2001. As a result, a
portion of the Company's variable rate bank debt is effectively converted to
fixed rate debt and has a pay rate of 8.56%, subject to certain adjustments. The
interest rate differential to be received or paid is recognized as a component
of interest expense over the life of the agreement.

6. SUBORDINATED NOTES PAYABLE TO RELATED PARTIES

The Company had two senior subordinated note agreements with affiliated
investors which were paid off in 1999. Interest accrued at 12.5% and was due
semi-annually. Principal was due upon maturity of the notes, September 27, 2003.
The Company recognized interest expense of $1,375,000 and $1,371,000 for the
years ended September 27, 1997 and September 26, 1998, and $1,042,707 and
$973,754 for the nine months ended June 27, 1998 and June 26, 1999,
respectively.

In conjunction with the issuance of the two senior subordinated notes, the
Company issued warrants to purchase approximately 1,965,440 shares of Common
Stock at $1 per share. The warrants are exercisable immediately and expire on
September 27, 2006. The warrants are valued at approximately $722,000, which is
included in deferred financing costs and were being amortized on a straight-line
basis over the term of the notes.

In connection with the payment of all outstanding principal under the two
agreements in June 1999, the Company incurred a prepayment fee of $440,000,
which is included in interest expense in the accompanying statement of income
for the nine months ended June 26, 1999. In addition, the unamortized warrant
issue costs of approximately $455,000, related to the two senior subordinated
notes, was written off in June 1999.

7. COMMITMENTS

LEASES

The Company leases its retail stores, warehouse, and office facilities under
various operating leases which expire between 1999 and 2010. Under certain
retail store leases, the Company is required to pay the greater of a minimum
lease payment or 5% to 11% of annual sales volume. Rent expense, including
reimbursement of our proportional share of common area maintenance expenses, for
the years ended September 27, 1996, September 27, 1997 and September 26, 1998
and the nine months ended June 27, 1998 and June 26, 1999 was $7,992,576,
$8,766,335, $17,049,570, $12,229,746 and $16,601,497, respectively, including
$1,428,780, $452,564, $610,267, $130,340 and $745,441, respectively, of
contingent rentals.

F-13
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

7. COMMITMENTS (CONTINUED)

The following is a summary of the annual future minimum capital and
operating lease commitments as of September 26, 1998:

<TABLE>
<CAPTION>
CAPITAL
LEASES OPERATING LEASES
------------ ----------------
<S> <C> <C>
Year ending September:
1999.......................................................... $ 478,430 $ 14,714,057
2000.......................................................... 402,253 14,883,845
2001.......................................................... 92,922 15,021,579
2002.......................................................... 28,484 14,643,125
2003.......................................................... -- 13,980,522
Thereafter.................................................... -- 51,183,932
------------ ----------------
Total minimum lease payments.................................. 1,002,089 $ 124,427,060
----------------
----------------
Less amount representing interest............................. (77,215)
------------
Present value of net minimum lease payments, including
$428,000 which is current................................... $ 924,874
------------
------------
</TABLE>

LICENSE AGREEMENT

In conjunction with the acquisition of Rampage assets on September 30, 1997,
the Company entered into a license agreement enabling the Company to operate
stores under the Rampage name. The license fee is calculated as the greater of
an annual fee (ranging between $300,000 to $450,000) or a percent of sales at
stores operating under the Rampage name (ranging between 1.0% and 1.5%). The
license agreement is for an initial term of four years, however, the agreement
may be renewed for additional four year terms, provided certain conditions are
met. License fees incurred during the years ended September 27, 1997 and
September 26, 1998 and during the nine months ended June 27, 1998 and June 26,
1999 totaled $0, $354,526, $272,703 and $325,187, respectively.

8. EQUITY

STOCK OPTIONS

In 1996, the Company established a Long-Term Incentive Plan (the 1996 Plan).
The 1996 Plan provides for the issuance of shares of Common Stock under
incentive and non qualified stock options. Options vest ratably at 20% per year
over five years from the date of the grant, subject to certain acceleration
provisions and are exercisable for a period of up to ten years from the date of
grant. Incentive stock options are granted at prices which approximate the fair
value of the common shares at the date of grant as determined by the Board of
Directors.

In May 1999, the Company established a 1999 Long-Term Incentive Plan (the
1999 Plan). The 1999 Plan provides for the issuance of shares of common stock
under non qualified stock options and stock appreciation rights. The exercise
price of options shall not be less than 85% of the fair market value at the date
of grant, or 110% in the case of any person possessing 10% combined voting power
of all

F-14
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

8. EQUITY (CONTINUED)
classes of stock of the Company. The Company's Board of Directors determines the
vesting and other provisions of option and stock appreciation rights granted
under the 1999 Plan.

In July 1999, the Company's Board of Directors resolved that no further
stock option grants will be made from the 1996 Plan or 1999 Plan.

A summary of the Company's stock option activity and related information for
the plans is as follows:

<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
---------- -----------------
<S> <C> <C>
Outstanding at September 27, 1996.............................. -- $ --
Granted...................................................... 1,758,000 1.16
---------- -----
Outstanding at September 27, 1997.............................. 1,758,000 1.16
Granted...................................................... 216,000 3.65
Cancelled.................................................... (201,000) 1.58
---------- -----
Outstanding at September 26, 1998.............................. 1,773,000 1.41
Granted (unaudited).......................................... 120,000 7.00
Cancelled (unaudited)........................................ (57,600) 1.00
Exercised (unaudited)........................................ (10,800) 1.00
---------- -----
Outstanding at June 26, 1999 (unaudited)....................... 1,824,600 $ 1.80
---------- -----
---------- -----
Exercisable, September 27, 1997................................ -- --
Exercisable, September 26, 1998................................ 319,200 $ 1.17
</TABLE>

The following table summarizes information about stock options outstanding
as of June 26, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED AVERAGE ------------------------------
NUMBER REMAINING CONTRACTUAL WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING LIFE EXERCISE PRICE OUTSTANDING EXERCISE PRICE
- -------------------------------- ----------- --------------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$1.00-$2.00..................... 1,527,600 7.3 $ 1.18 611,000 $ 1.18
$3.50........................... 150,000 8.9 3.50 30,000 3.50
$4.00........................... 27,000 8.3 4.00 5,400 4.00
$7.00........................... 120,000 9.9 7.00 -- 7.00
</TABLE>

The Company recorded $960,000 of deferred compensation resulting from the
difference between the respective grant price per share and the estimated fair
market value of the Common Stock at the date of grant on certain employee stock
options. The deferred compensation will be amortized ratably over the vesting
period of the respective options.

Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value of these
options was estimated at the date of grant using the minimum value option
pricing model with the following weighted-average assumptions for 1997 and

F-15
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

8. EQUITY (CONTINUED)
1998: risk-free interest rate of 6%; dividend yields of 0%; and a
weighted-average life of the option of 7.6 years.

The minimum value option pricing model is similar to the Black-Scholes
option valuation model which was developed for use in estimating the fair value
of traded options which have no vesting restrictions and are fully transferable,
except that it excludes the factor of volatility. In addition, option valuation
models require the input of highly subjective assumptions. Because the Company's
employee stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the related options.
The Company's pro forma information follows:

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
<S> <C> <C>
SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
------------------ ------------------
Pro forma net income.................................. $ 4,950,679 $ 5,396,784
Net income as reported................................ $ 5,056,530 $ 5,514,109
</TABLE>

1999 EQUITY INCENTIVE PLAN

The Company's Board of Directors and stockholders adopted the 1999 Equity
Incentive Plan, effective as of the completion of its initial public offering.
The 1999 Equity Incentive Plan permits the grant of options that qualify as
incentive stock options and nonqualified options. The option exercise price of
each option shall be determined by the compensation committee of the Board of
Directors. In the case of incentive stock options, however, the exercise price
shall not be less than 100% of the fair market value of the shares on the date
of grant, or 110% in the case of incentive stock options granted to an
individual with ownership in excess of certain limits. Subject to adjustment for
stock splits and similar events, the total number of shares of Common Stock that
can be issued under the 1999 Equity Incentive Plan is 750,000 shares.

STOCK SPLIT

In connection with the filing of an initial public offering, the Company
approved a 100-for-1 stock split. In addition, the Company's certificate of
incorporation will be amended upon completion of its initial public offering, to
authorize the issuance of up to 100,000,000 shares of Common Stock and 3,000,000
shares of Preferred Stock. Consequently, the stock option data and per share
data, throughout the consolidated financial statements and the notes to the
consolidated financial statements, have been restated to reflect the stock
split.

F-16
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

9. INCOME TAXES

Income taxes consist of the following:

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
------------------ ------------------
<S> <C> <C>
Current:
Federal............................................. $ 3,505,000 $ 3,232,670
State............................................... 870,000 844,652
------------------ ------------------
4,375,000 4,077,322

Deferred:
Federal............................................. (369,984) 143,054
State............................................... (18,122) 25,000
------------------ ------------------
(388,106) 168,054
------------------ ------------------
Income taxes.......................................... $ 3,986,894 $ 4,245,376
------------------ ------------------
------------------ ------------------
</TABLE>

A reconciliation of income taxes at the federal statutory rate of 34% with
the provision for income taxes follows:

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
------------------ ------------------
<S> <C> <C>
Tax at U.S. statutory rates........................... $ 3,074,795 $ 3,318,225
State income taxes, net of federal tax benefit........ 574,200 573,970
Non deductible expenses............................... 187,222 161,256
Other, net............................................ 150,677 191,925
------------------ ------------------
$ 3,986,894 $ 4,245,376
------------------ ------------------
------------------ ------------------
</TABLE>

F-17
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

9. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 27, 1997 SEPTEMBER 26, 1998
------------------ ------------------
<S> <C> <C>
Deferred tax assets:
Inventory........................................... $ 184,726 $ 525,547
Deferred rent....................................... 223,035 378,274
State income taxes.................................. 273,456 208,293
Employee benefit programs........................... 124,978 176,520
Other accrued expenses.............................. 389,089 279,640
------------------ ------------------
Total deferred tax assets............................. 1,195,284 1,568,274

Deferred tax liabilities:
Tax over book depreciation.......................... (743,193) (1,102,251)
Intangibles......................................... (259,037) (441,023)
------------------ ------------------
Total deferred tax liabilities........................ (1,002,230) (1,543,274)
------------------ ------------------
Net deferred tax assets............................... $ 193,054 $ 25,000
------------------ ------------------
------------------ ------------------
</TABLE>

10. RELATED PARTY TRANSACTIONS

The Company expensed a management fee of $250,000 to an affiliated investor
during each of the years ended September 27, 1997 and September 26, 1998 and
$187,500 during each of the nine month periods ended June 27, 1998 and June 26,
1999. For the year ended September 26, 1998 and the nine months ended June 26,
1999, the Company purchased approximately $24,000 and $86,000, respectively, of
merchandise from a company primarily owned by family members of one of our
officers.

11. EMPLOYEE SAVINGS PLAN

The Company has an Internal Revenue Code Section 401(k) profit-sharing plan
(the Plan) for eligible employees. The Plan is funded by employee contributions
and provides for the Company to make discretionary contributions. The Company
matches 25% of participants contributions up to 4% of eligible compensation.
Amounts contributed and expensed under this plan were $0 and $30,648 for the
years ended September 27, 1997 and September 26, 1998, respectively and $7,458
and $7,964 for the nine-month periods ended June 27, 1998 and June 26, 1999,
respectively.

F-18
<PAGE>
CHARLOTTE RUSSE HOLDING, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION SUBSEQUENT TO SEPTEMBER 26, 1998
AND THE NINE MONTHS ENDED JUNE 27, 1998 AND JUNE 26, 1999 IS UNAUDITED.)

12. NET INCOME PER SHARE

A reconciliation of the numerators and denominators used in basic and
diluted net income per share is as follows:

<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS ENDED
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
SEPTEMBER 27, SEPTEMBER 26, JUNE 27, JUNE 26,
1997 1998 1998 1999
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)

Net income.......................................... $ 5,056,530 $ 5,514,109 $ 3,773,284 $ 6,858,661
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Net income per share:
Basic............................................. $ 0.28 $ 0.30 $ 0.21 $ 0.37
Effect of dilutive securities--stock options...... (0.02) (0.02) (0.02) (0.04)
Effect of dilutive securities--warrants........... (0.01) (0.01) (0.01) (0.01)
------------- ------------- ------------- -------------
Diluted........................................... $ 0.25 $ 0.27 $ 0.18 $ 0.32
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average number of shares:
Basic............................................. 18,300,000 18,300,000 18,300,000 18,300,100
Effect of dilutive securities--stock options...... 444,000 627,000 633,000 839,000
Effect of dilutive securities--warrants........... 1,248,300 1,741,000 1,755,000 2,068,000
------------- ------------- ------------- -------------
Diluted........................................... 19,992,300 20,668,000 20,688,000 21,207,100
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>

F-19
<PAGE>
[LOGO]

[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission Registration Fee and the National
Association of Securities Dealers, Inc. Filing Fee.

<TABLE>
<CAPTION>
ITEM AMOUNT
- --------------------------------------------------------------------------- -------------
<S> <C>
Securities and Exchange Commission Registration Fee........................ $ 12,788
National Association of Securities Dealer, Inc. Filing Fee................. 5,100
Nasdaq National Market Listing Fee......................................... 17,500
Blue Sky Fees and Expenses................................................. 5,000
Transfer Agent and Registrar Fees.......................................... 3,000
Accounting Fees and Expenses............................................... 200,000
Legal Fees and Expenses.................................................... 250,000
Printing Expenses.......................................................... 175,000
Miscellaneous.............................................................. 31,612
-------------
Total.................................................................. $ 700,000
-------------
-------------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation authorizes a court to award,
or the board of directors of a corporation to grant, indemnity to directors and
officers in terms sufficiently broad to permit indemnification under certain
circumstances for liabilities, including reimbursement for expenses incurred,
arising under the Securities Act of 1933.

As permitted by the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation provides that its directors shall not be liable to
the Registrant or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that the exculpation from liabilities
is not permitted under the Delaware General Corporation Law as in effect at the
time such liability is determined. As permitted by the Delaware General
Corporation Law, the By-Laws provide that the Registrant shall indemnify its
directors to the full extent permitted by the laws of the State of Delaware.

The Registrant currently has an insurance policy in place covering its
directors and officers from losses arising from the performance of their duties
with or on behalf of the Registrant. The maximum aggregate coverage amount under
such policy on an annual basis is $5.0 million and such policy is in effect
until March 1, 2000. The Registrant is in the process of obtaining additional
policies of insurance under which coverage will be provided (a) to its directors
and officers against loss arising from claims made by reason of breach of
fiduciary duty or other wrongful act and (b) to the Registrant with respect to
payments which may be made by the Registrant to such officers and directors
pursuant to the above indemnification provision or otherwise as a matter of law.

The Registrant has also entered into indemnification agreements with its
directors and officers obligating the Registrant to indemnify such directors and
officers against losses incurred in connection with certain claims in their
capacities as agents of the Registrant. The Underwriting Agreement provides for
the indemnification of officers and directors of the Registrant by the
Underwriters against certain liabilities.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Since July 13, 1996, the Registrant has issued the following securities
without registration under the Securities Act of 1933, as amended (the
"Securities Act"):

(1) On September 27, 1996, The SK Equity Fund, L.P. purchased 18,119,250
shares of common stock for $18,119,250 in cash and SK Investment Fund, L.P.
purchased 180,750 shares of common stock for $180,750 in cash.

(2) On September 27, 1996, the Registrant issued (A) to The SK Equity
Fund, L.P., a 12.5% Senior Subordinated Note due 2003 in the aggregate
principal amount of $10,891,354 and (B) to SK Investment Fund, L.P., a 12.5%
Senior Subordinated Note due 2003 in the aggregate principal amount of
$108,646. In connection with the issuance of the Senior Subordinated Notes
due 2003, the Registrant issued warrants (A) to FSC Corp., an affiliate of
BankBoston, N.A., for the purchase of 413,560 shares of its common stock at
an initial exercise price of $1.00 per share, (B) to The SK Equity Fund,
L.P. for the purchase of 1,945,010 shares of its common stock at an initial
exercise price of $1.00 per share, and (C) to SK Investment Fund, L.P. for
the purchase of 19,400 shares of its common stock at an initial exercise
price of $1.00 per share.

(3) During the three year period ended September 26, 1998 and the nine
months ended June 26, 1999, the Registrant granted options to purchase a
total of 2,151,000 shares of its common stock at a weighted average exercise
price of $1.79. Of this amount, options to purchase 10,800 shares of common
stock have been exercised for an aggregate consideration of $10,800 and
options to purchase 315,600 shares of common stock have been forfeited or
repurchased by the Registrant.

The sale and issuance of securities listed above in (1) and (2) were deemed
to be exempt from registration under Section 4(2) of the Securities Act or
Regulation D thereunder as transactions not involving a public offering. The
sale and issuance of securities listed above in (3) were deemed to be exempt
from registration under the Securities Act by virtue of Rule 701 promulgated
thereunder. All of the foregoing securities are deemed restricted securities for
purposes of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following exhibits are filed as part of this Registration Statement:

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement*

2.1 Stock Purchase Agreement dated as of August 26, 1996 by and among Charlotte Russe Holding, Inc., Daniel
Lawrence, Frank Lawrence and Larry Lawrence

3.1 Certificate of Incorporation of Charlotte Russe Holding, Inc., as amended

3.2 Certificate of Amendment to the Certificate of Incorporation of Charlotte Russe Holding, Inc. to be in
effect upon the closing of this offering*

3.3 By-laws of Charlotte Russe Holding, Inc.

4.1 Form of Common Stock Certificate*

5.1 Opinion of Ropes & Gray*

10.1 The Second Amended and Restated Revolving Credit Agreement dated as of December 23, 1998, as amended, by
and among Charlotte Russe, Inc., as Borrower, Charlotte Russe Holding, Inc., as Guarantor, and
BankBoston, N.A.
</TABLE>

II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
10.2 The Second Amended and Restated Security Agreement dated as of December 23, 1998 by and among the
Charlotte Russe, Inc., Charlotte Russe Holding, Inc., Charlotte Russe Merchandising, Inc. of Charlotte
Russe Inc. and BankBoston, N.A.

10.3 The Second Amended and Restated Trademark Collateral Security and Pledge Agreement dated as of December
23, 1998 by and between Charlotte Russe, Inc. and BankBoston, N.A.

10.4 The Second Amended and Restated Stock Pledge Agreement dated as of December 23, 1998 by and between
Charlotte Russe Holding, Inc. and Bank Boston, N.A.

10.5 The Stock Pledge Agreement, dated as of December 23, 1998 by and between Charlotte Russe, Inc. and
BankBoston, N.A.

10.6 The Second Amended and Restated Guaranty dated as of December 23, 1998 by Charlotte Russe Holding, Inc.
in favor of BankBoston, N.A.

10.7 Stockholders Agreement by and among Charlotte Russe Holding, Inc., The SK Equity Fund, L.P., SK
Investment Fund, L.P., and Bernard Zeichner*

10.8 Charlotte Russe, Inc. Agency Account Agreement dated December 5, 1997 by and between Charlotte Russe,
Inc. and BankBoston, N.A.

10.9 Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner dated October 1, 1996

10.10 Amendment No. 1 to Employment Agreement by and between Charlotte Russe, Inc. and Bernard Zeichner*

10.11 Trade Secret and Confidentiality Agreement dated as of October 1, 1996 by and between Charlotte Russe
Holding, Inc. and Bernard Zeichner

10.12 Charlotte Russe Holding, Inc. 1999 Long-Term Incentive Plan

10.13 Charlotte Russe Holding, Inc. 1996 Long-Term Incentive Plan

10.14 Lease Agreement for San Diego Distribution Center dated July 24, 1997 by and between Price Enterprises,
Inc. and Charlotte Russe, Inc.

10.15 Charlotte Russe Holding, Inc. 1999 Equity Incentive Plan*

10.16 License Agreement dated September 30, 1997 by and between Rampage Clothing Company and Charlotte Russe,
Inc.

11 Statement of Earnings Per Share*

21 Subsidiaries

23.1 Consent of Ernst & Young LLP

23.2 Consent of Ropes & Gray (See Exhibit 5.1)*

24 Power of Attorney (See Signature Page)

27 Financial Data Schedule
</TABLE>

- ---------

* To Be Filed With Amendment

(b) Financial Statement Schedules

All financial statement schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission have
been omitted because they are not required under the related instructions or are
inapplicable as the information has been provided in the consolidated financial
statements or related notes thereto.

II-3
<PAGE>
ITEM 17. UNDERTAKINGS

(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions described under "Item
14--Indemnification of Directors and Officers" above, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

(b) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.

(c) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the purchase agreements, certificates in
such denominations and registered in such names as required by the underwriters
to permit prompt delivery to each purchaser.

II-4
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California on this 30th day of July, 1999.

<TABLE>
<S> <C> <C>
CHARLOTTE RUSSE HOLDING, INC.

By: /s/ BERNARD ZEICHNER
-----------------------------------------
Bernard Zeichner
CHIEF EXECUTIVE OFFICER AND PRESIDENT
</TABLE>

POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated. Each person whose signature appears below
hereby authorizes Bernard Zeichner and Daniel T. Carter, and each of them, with
full power to them, to execute in the name and on behalf of such person any
amendment, including any post-effective amendment, to this Registration
Statement or any other registration statement for the same offering that is to
be effective upon filing pursuant to Rule 462(b) under the Securities Act, and
to file the same, with exhibits thereto, and other documents in connection
therewith, making such changes in this Registration Statement as the person(s)
so acting deems appropriate, and appoints each of such persons, each with full
power of substitution, attorney-in-fact to sign any amendment, including any
post-effective amendment, to this Registration Statement or any other
registration statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act, and to file the same, with
exhibits thereto, and other documents in connection therein.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
Chief Executive Officer,
/s/ BERNARD ZEICHNER President and Director
- ------------------------------ (Principal Executive July 30, 1999
Bernard Zeichner Officer)

Chief Financial Officer
/s/ DANIEL T. CARTER and Treasurer (Principal
- ------------------------------ Financial Officer and July 30, 1999
Daniel T. Carter Principal Accounting
Officer)

/s/ ALLAN W. KARP
- ------------------------------ Director July 30, 1999
Allan W. Karp

/s/ DAVID J. ODDI
- ------------------------------ Director July 30, 1999
David J. Oddi
</TABLE>

II-5

<PAGE>

STOCK PURCHASE AGREEMENT

AGREEMENT dated as of August 26, 1996 among Charlotte Russe Holding, Inc.,
a Delaware corporation ("Buyer"), and the selling shareholders listed on the
signature pages hereof (each, a "Seller" and collectively, the "Sellers").

WITNESSETH:

WHEREAS, Sellers are the record and beneficial owners of all of the
outstanding shares of common stock of Lawrence Merchandising Corporation, a
California corporation ("LMC"), Lawrence Merchandising Corporation of Nevada, a
Nevada corporation ("LMCN") and Lawrence Merchandising Corporation of Nevada II,
a Nevada corporation ("LMCN II"); and

WHEREAS, Sellers desire to sell such shares to Buyer, and Buyer desires to
purchase such shares from Sellers, upon the terms and subject to the conditions
hereinafter set forth;

The parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

1.1. DEFINITIONS. (a) The following terms, as used herein, have the
following meanings:

"Adjusted Working Capital" means (i) the sum of the following current
assets of the Companies: receivables, tenant allowances receivable, inventory,
prepaid expenses and refundable income taxes (which refundable income taxes are
in the amount of $27,084) including any required payments previously made under
Section 7519 of the Code regardless of their expected date of return to the
Companies, minus (ii) the sum of the following current liabilities of the
Companies: accounts payable and accrued expenses. None of the deferred rent
liability or insurance reserve will be treated as current liabilities for
purposes of this definition regardless of their expected date of payment or
amortization. No markdown reserves or sales returns allowances will be
considered for the purposes of this definition (other than such reserves or
allowances that would have been accrued by the Company prior to the date hereof
in the ordinary course of business consistent with past practices). No accrued
percentage rent liability will be considered for purposes of this definition
other than to the extent that a store has exceeded the threshold for percentage
rent as of the Closing Date. Inventory will be valued in a manner consistent
with the audited financial statements previously provided. Liabilities for gift
certificates and store credits will be calculated in accordance with the methods
used in the preparation of the Balance Sheet.

"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such Person;
PROVIDED that any Company shall not be considered an Affiliate of any Seller.

<PAGE>

"Balance Sheet" means the audited combined balance sheets of the Companies
as of September 30, 1995.

"Balance Sheet Date" means September 30, 1995.

"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, and any rules or regulations promulgated
thereunder.

"Closing Date" means the date of the Closing.

"Common Stock" means the LMC Common Stock, the LMCN Stock and the LMCN II
Common Stock.

"Company " means each of LMC, LMCN and LMCN II, and "Companies" means all
of the foregoing corporations.

"Debt" means all debt obligations of the Companies consistent with
generally accepted accounting principles.

"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, treaty, judicial decisions, regulations, rules, judgments,
orders, decrees, injunctions, permits, agreements and governmental restrictions,
whether now or hereafter in effect, relating to human health and safety, the
environment or to pollutants, contaminants, wastes or chemicals or any toxic,
radioactive, ignitable, corrosive, reactive or otherwise hazardous substances,
wastes or materials.

"Hazardous Substances" means any pollutant, contaminant, waste or chemical
or any toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substance, waste or material, or any substance, waste or material having any
constituent elements displaying any of the foregoing characteristics, including,
without limitation, petroleum, its derivatives, by-products and other
hydrocarbons, and any substance, waste or material regulated under Environmental
Laws.

"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.

"Intellectual Property Right" means any trademark, service mark, trade
name, invention, patent, trade secret, copyright, know-how (including any
registrations or applications for registration of any of the foregoing) or any
other similar type of proprietary intellectual property right.

"LMC Common Stock" means the Common Stock, par value $10 per share, of LMC.

-2-

<PAGE>

"LMC Purchase Price" means an amount equal to 50% of the Purchase

"LMCN Common Stock" means the Common Stock, par value $10 per share, of
LMCN.

"LMCN Purchase Price" means an amount equal to 25 % of the Purchase

"LMCN II Common Stock" means the Common Stock, par value $10 per share, of
LMCN II.

"LMCN II Purchase Price" means an amount equal to 25% of the Purchase
Price.

"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.

"Material Adverse Effect" means a material adverse effect on the condition
(financial or otherwise), business, assets, results of operations or prospects
of any Company, individually, or the Companies collectively.

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

"Person" means an individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or an agency or instrumentality thereof.

"Purchase Price" means (i) $37,800,000, plus (ii) the Working Capital
Adjustment (which may be a negative number), plus (iii) without duplication, the
amount of all capital expenditures either paid by the Companies prior to Closing
or accrued for and included as a payable in the calculation of Adjusted working
Capital on the Closing Balance Sheet, net of any landlord allowances either
received prior to Closing or included as a receivable in the calculation of
Adjusted Working Capital on the Closing Balance Sheet, incurred in connection
with the relocation of the Company's Mission Valley location, the remodel of the
Company's Fashion Valley location or the proposed Ontario Mills and Serramonte
locations, plus (iv) without duplication, such additional capital expenditures
relating to the construction of new stores (other than the Ontario Mills and
Serramonte locations referred to in (iii)) or the major remodel of existing
stores (other than the Mission Valley and Fashion Valley locations referred to
in (iii)) and other miscellaneous expenses with post-Closing benefits incurred
by the Companies after the

-3-

<PAGE>

date hereof and prior to Closing, in the case of each of the foregoing for
which Sellers shall have received the prior approval of Buyer, minus (v) the
Debt Repayment Amount.

"Sally Lawrence Non-Competition Agreement" means the Non-Competition
Agreement between Buyer and Sally Lawrence dated as of the Closing Date
substantially in the form attached hereto as Exhibit A.

"Seller's Amount" means (i) in respect of Frank Lawrence, an amount
equal to. the sum of (x) 47 1/2% of the LMC Purchase Price, (y) 33 1/3% of
the LMCN Purchase Price and (z) 33 1/3% of the LMCN H Purchase Price, (ii) in
respect of Larry Lawrence, an amount equal to the sum of (x) 5% of the LMC
Purchase Price, (y) 33 1/3% of the LMCN Purchase Price and (z) 33 1/3% of the
LMCN H Purchase Price and (iii) in respect of Daniel Lawrence, an amount
equal to the sum of (x) 47 1/2% of the LMC Purchase Price, (y) 33 1/3% of the
LMCN Purchase Price and (z) 33 1/3% of the LMCN II Purchase Price.

"Seller Shares" means, with respect to each Seller, the number of shares of
Common Stock set forth opposite its name on the signature pages hereof.

"Seller's Percentage" means with respect to each Seller the quotient of (i)
such Seller's Amount divided by (ii) the Purchase Price.

"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by one or more of the Companies.

"Working Capital Adjustment" means the sum of the following amounts: (i)
all cash and equivalents and marketable securities of the Company on the Closing
Date, minus $900,000 and (ii) the Adjusted Working Capital of the Company on the
Closing Date, plus $2,790,000. The parties acknowledge that the Working Capital
Adjustment may be a negative number.

(b) Each of the following terms is defined in the Section set forth
opposite such term:

<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Benefit Arrangements 3.25(c)
Business 5.5
Closing 2.2
Closing Balance Sheet 2.3(b)
Company Intellectual Property Rights 3.16
Company Indebtedness 7.7
Company Securities 3.5
Debt Repayment Amount 2.3
Damages 10.2
Estimated Purchase Price 2.3
</TABLE>

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<TABLE>
<S> <C>
Employee Plans 3.25(a)
Financing 4.5
Head Office Lease 7.5
Indemnified Party 10.2
Indemnifying Party 10.2
Pension Plans 3.25(a)
Securities Act 4.6
Sellers' Representative 12.9
</TABLE>

ARTICLE 2

PURCHASE AND SALE

2.1. PURCHASE AND SALE. Upon the terms and subject to the conditions of
this Agreement, each Seller agrees to sell to Buyer and Buyer agrees to purchase
from such Seller, its Seller Shares at the Closing. The aggregate purchase price
for all of the Seller Shares is the Purchase Price. Each Seller will be entitled
to receive such Seller's Percentage of the Purchase Price in exchange for the
Seller Shares owned by such Seller. The Purchase Price shall be paid as provided
in Section 2.2, subject to adjustment as provided in Section 2.4.

2.2. CLOSING. The closing (the "Closing") of the purchase and sale of the
Seller Shares hereunder shall take place at the offices of Latham & Watkins, San
Diego, California as soon as possible, but in no event later than 10 business
days, after satisfaction of the conditions set forth in Article 9, or at such
other time or place as Buyer and Sellers may agree. At the Closing:

(a) Buyer shall deliver to each Seller an amount in cash equal to such
Seller's Percentage of the Estimated Purchase Price in immediately
available funds by wire transfer to an account with a bank designated by
such Seller, by notice to Buyer, not later than two business days prior to
the Closing Date.

(b) Each Seller shall deliver to Buyer certificates for its Seller
Shares duly registered in the name of Buyer (or such other Person as Buyer
may designate to Sellers not less than five business days prior to the
Closing).

(c) Buyer shall transfer the Debt Repayment Amount to the banks and
accounts specified by Sellers five business days prior to Closing by wire
transfer of immediately available funds.

2.3. PURCHASE PRICE CALCULATIONS. (a) No later than five business days
prior to the Closing Date, Buyer and Sellers will agree in good faith on the
estimated Purchase Price (the "Estimated Purchase Price") to be paid by Buyer at
the Closing, which amount will (i) be based on Sellers' reasonable estimate of
the Working Capital Adjustment on the Closing Date and (ii) include any

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amounts (collectively, the "Debt Repayment Amount") that are required to
repay the Company Indebtedness as contemplated by Section 7.7.

(b) As promptly as practicable, but no later than 60 days, after the
Closing Date, Sellers will cause to be prepared and delivered to Buyer the
Closing Balance Sheet, and a certificate based on such Closing Balance Sheet
setting forth the Sellers' calculation of the Purchase Price and the related
Working Capital Adjustment. In connection with the preparation of the Closing
Balance Sheet, promptly following the Closing the parties agree to conduct a
physical inventory of the Company, at Buyer's expense. The Closing Balance Sheet
("Closing Balance Sheet") shall present the combined financial position of
Companies as of the close of business on the Closing Date in accordance with
generally accepted accounting principles applied on a basis consistent with
those used in the preparation of the Balance Sheet.

(c) If Buyer disagrees with Sellers' calculation of the Purchase Price and
the related Working Capital Adjustment delivered pursuant to Section 2.3(b),
Buyer may, within 60 days after delivery of the documents referred to in Section
2.3(b), deliver a notice to the Seller's Representative disagreeing with such
calculation and setting forth Buyer's calculation of such amount. Any such
notice of disagreement shall specify those items or amounts as to which Buyer
disagrees, and Buyer shall be deemed to have agreed with all other items and
amounts contained in the Closing Balance Sheet and the calculation of the
Purchase Price and the related Working Capital Adjustment delivered pursuant to
Section 2.3(b).

(d) If a notice of disagreement shall be delivered pursuant to Section
2.3(c), the Sellers' Representative and Buyer shall, during the 30 days
following such delivery, use their best efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of the Purchase Price and the related Working Capital Adjustment, which amounts
shall not be less than the amounts thereof shown in the Buyer's calculations
delivered pursuant to Section 2.3(c) nor more than the amount thereof shown in
Sellers' calculation delivered pursuant to Section 2.3(b). if, during such
period, the Sellers' Representative and Buyer are unable to reach such
agreement, they shall promptly thereafter cause independent accountants of
nationally recognized standing reasonably satisfactory to Buyer and the Sellers'
Representative (who shall not have any material relationship with Buyer or the
Sellers), promptly to review this Agreement and the disputed items or amounts
for the purpose of calculating the Purchase Price and the related Working
Capital Adjustment. In making such calculation, such independent accountants
shall consider only those items or amounts in the Closing Balance Sheet or the
Sellers' calculation of the Purchase Price and the related Working Capital
Adjustment as to which Buyer has disagreed and in no event shall the Purchase
Price be less than Buyers' calculation of the Purchase Price delivered pursuant
to Section 2.3(c) or more than Seller's calculation of the Purchase Price
delivered pursuant to Section 2.3(b). Such independent accountants shall deliver
to the Sellers and Buyer, as promptly as practicable, a report setting forth
such calculation. Such report shall be final and binding upon the Sellers and
Buyer. The cost of such review and report shall be borne (i) by the Buyer if the
absolute value of the difference between (A)(1) the Purchase Price and (2) the
Buyer's calculation of the Purchase Price delivered pursuant to Section 2.3(c)
is

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greater than the absolute value of the difference between (B)(1) the Purchase
Price and (2) Seller's calculation of the Purchase Price delivered pursuant
to Section 2.3(b), (ii) by the Sellers if the first such difference is less
than the second such difference and (iii) otherwise equally by the Sellers
and Buyer.

(e) The Sellers and Buyer agree that they will, and agree to cause their
respective independent accountants and the Companies to, cooperate and assist in
the preparation of the Closing Balance Sheet and the calculation of the Purchase
Price and the related Working Capital Adjustment and in the conduct of the
audits and reviews referred to in this Section, including without limitation,
the making available to the extent necessary of books, records, work papers and
personnel.

2.4. ADJUSTMENT OF PURCHASE PRICE. (a) If the Estimated Purchase Price
exceeds the Purchase Price, each Seller shall pay to Buyer, as an adjustment to
the Purchase Price, in the manner and with interest as provided in Section
2.4(b), such Seller's Percentage of the amount of such excess. If the Purchase
Price exceeds the Estimated Purchase Price, Buyer shall pay to each Seller, in
the manner and with interest as provided in Section 2.4(b), such Seller's
Percentage of the amount of such excess.

(b) Any payment pursuant to Section 2.4(a) shall be made at a mutually
convenient time and place within 10 days after the Purchase Price has been
finally determined by delivery by Buyer or Sellers, as the case may be, of a
certified or official bank check payable in immediately available funds to the
other party or by causing such payments to be credited to such account of such
other party as may be designated by such other party. The amount of any payment
to be made pursuant to this Section shall bear interest from and including the
Closing Date to but excluding the date of payment at a rate per annum equal to
the rate of interest announced by Morgan Guaranty Trust Company of New York as
its Base Rate in New York City in effect from time to time during the period
from the Closing Date to the date of payment. Such interest shall be payable at
the same time as the payment to which it relates and shall be calculated daily
on the basis of a year of 365 days and the actual number of days elapsed.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF SELLERS

Sellers jointly and severally represent and warrant to Buyer as of the date
hereof and as of the Closing Date that:

3.1. CORPORATE EXISTENCE AND POWER. Each Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted. Each Company is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction set forth on

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Schedule 3. 1. Sellers have heretofore delivered to Buyer true and complete
copies of the certificate of incorporation and bylaws of each Company as
currently in effect.

3.2. AUTHORIZATION. The execution, delivery and performance by Sellers of
this Agreement are within Sellers' and the Companies' respective individual and
corporate powers and have been duly authorized by all necessary corporate and
Stockholder action on the part of Sellers and the Companies. This Agreement
constitutes a valid and binding agreement of Sellers.

3.3. GOVERNMENTAL AUTHORIZATION; CONSENTS. (a) The execution, delivery and
performance by Sellers and the Companies of this Agreement require no action by
or in respect of, or filing with, any governmental body, agency, or official
other than compliance with any applicable requirements of the HSR Act such that
would have a Material Adverse Effect.

(b) Except as set forth in Schedule 3.3(b), no consent, approval, waiver or
other action by any Person (other than any governmental body, agency, official
or authority referred to in (a) above) under any contract, agreement, indenture,
lease, instrument or other document to which any Company is a party or by which
it is bound, is required or necessary for the execution, delivery and
performance of this Agreement by the Sellers or for the consummation of the
transactions contemplated hereby or thereby.

3.4. NON-CONTRAVENTION. The execution, delivery and performance by Sellers
and the Companies of this Agreement do not and will not (i) violate the
certificate of incorporation or bylaws of any Company, (ii) assuming compliance
with the matters referred to in Section 3.3, violate any applicable law, rule,
regulation, judgment, injunction, order or decree such that would have a
Material Adverse Effect, (iii) except as set forth in Schedule 3.15, require any
consent or other action by any Person under, constitute a default under, or give
rise to any right of termination, cancellation or acceleration of any right or
obligation of Sellers or any Company or a loss of any benefit to which any
Seller or any Company is entitled under, any agreement or other instrument
binding upon any Seller or any Company or any license, franchise, permit or
other similar authorization held by any Seller or any Company such that would
have a Material Adverse Effect or (iv) result in the creation or imposition of
any Lien on any asset of any Company such that would have a Material Adverse
Effect.

3.5. CAPITALIZATION. (a) The authorized capital stock of LMC consists of
4,000 shares of LMC Common Stock. As of the date hereof, there were, and as of
the Closing Date there will be, outstanding 2,000 shares of LMC Common Stock.

(b) The authorized capital stock of LMCN consists of 4,000 shares of LMCN
Common Stock. As of the date hereof, there were, and as of the Closing Date
there will be, outstanding 2,100 shares of LMCN Common Stock.

(c) The authorized capital stock of LMCN II consists of 4,000 shares of
LMCN II Common Stock. As of the date hereof, there were, and as of the Closing
Date there will be, outstanding 2,100 shares of LMCN II Common Stock.

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<PAGE>

(d) All outstanding shares of capital stork of each Company have been duly
authorized and validly issued and are fully paid and non-assessable. Except as
set forth in this Section 3.5, there are no outstanding (i) shares of capital
stock or voting securities of any Company, (ii) securities of any Company
convertible into or exchangeable for shares of capital stock or voting
securities of any Company, (iii) options or other rights to acquire from any
Company, or other obligation of any Company to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of any Company or (iv) any synthetic securities of any Company
such as stock appreciation rights (the items in clauses (i), (ii), (iii) and
(iv) being referred to collectively as the "Company Securities"). There are no
outstanding obligations of any Company to repurchase, redeem or otherwise
acquire any Company Securities.

3.6. OWNERSHIP OF SHARES. Each Seller is the record and beneficial owner
of its Seller Shares, free and clear of any Lien and any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of the Seller Shares), and will transfer and deliver to Buyer at the
Closing valid title to its Seller Shares free and clear of any Lien and any such
limitation or restriction.

3.7. SUBSIDIARIES. None of the Companies has any Subsidiaries.

3.8. FINANCIAL STATEMENTS. The audited combined balance sheets of the
Companies as of September 25, 1993, September 24, 1994 and September 30, 1995
and the related combined statements of income and retained earnings and cash
flows for the years ended September 25, 1993, September 24, 1994 and September
30, 1995, and the unaudited combined balance sheets of the Companies as of June
3, 1995 and June 1, 1996 and the related combined statements of income for the
period ended June 3, 1995 and June 1, 1996, present fairly, in all material
respects, the combined financial position of the Companies as of the dates
thereof, and their results of operations and cash flows for the periods then
ended, in conformity with generally accepted accounting principles applied on a
consistent basis (subject to normal year-end adjustments in the case of any
unaudited interim financial statements).

3.9. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date, the
business of each Company has been conducted in the ordinary course consistent
with past practices and except as set forth in Schedule 3.9 or as expressly
permitted by this Agreement, there has not been:

(i) any event, occurrence, development or state of circumstances or
facts which has had or could reasonably be expected to have a Material
Adverse Effect;

(ii) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of any
Company, or any repurchase, redemption or other acquisition by any Company
of any outstanding shares of capital stock or other securities of, or other
ownership interests in, any Company;

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(iii) any amendment of any material term of any outstanding security
of any Company;

(iv) any incurrence, assumption or guarantee by any Company of any
indebtedness for borrowed money;

(v) any creation or assumption by any Company of any Lien on any
material asset other than in the ordinary course of business consistent
with past practices;

(vi) any making by any Company of any loan, advance or capital
contributions to or investment in any Person other than in the ordinary
course of business consistent with past practices;

(vii) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of any Company
which, individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect;

(viii) any transaction or commitment made, or any contract or
agreement entered into, by any Company relating to its assets or business
(including the acquisition or disposition of any assets) or any
relinquishment by any Company of any contract or other right, in either
case, material to the Companies, other than transactions, commitments,
contracts and agreements in the ordinary course of business consistent with
past practices and those contemplated by this Agreement;

(ix) any change in any method of accounting or accounting practice by
any Company, except for any such change after the date hereof required by
reason of a concurrent change in generally accepted accounting principles;

(x) any (A) employment, deferred compensation, severance, retirement
or other similar agreement entered into with any director, officer or
employee of any Company (or any amendment to any such existing agreement),
(B) grant of any severance or termination pay to any director, officer or
executive employee of any Company, or (C) change in compensation or other
benefits payable to any director, officer or employee of any Company
pursuant to any severance or retirement plans or policies thereof or, in
respect of employees paid $50,000 or more annually, pursuant to terms of
employment;

(xi) any labor dispute, other than routine individual grievances, or,
to the Sellers' knowledge, any activity or proceeding by a labor union or
representative thereof to organize any employees of any Company, which
employees were not subject to a collective bargaining agreement at the
Balance Sheet Date, or any lockouts, strikes, slowdowns, work stoppages or
threats thereof by or with respect to any employees of any Company; or

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(xii) any write-up or write-down of assets.

3.10. NO UNDISCLOSED MATERIAL LIABILITIES. There are no liabilities of any
Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and, to the Sellers' knowledge, there is
no existing condition, situation or set of circumstances which could reasonably
be expected to result in such a liability, other than:

(a) as of the date of this Agreement, liabilities provided for in the
Balance Sheet or disclosed in the notes thereto or incurred in the ordinary
course of business consistent with past practices;

(b) as of the Closing Date, liabilities provided for in the Closing
Balance Sheet or the notes to the Balance Sheet;

(d) other undisclosed liabilities which, individually or in the
aggregate, are not material to any Company.

3.11. RELATED PARTY TRANSACTIONS. Schedule 3.11 contains a complete list
of all related party transactions between Sellers and their Affiliates, on the
one hand, and the Companies, on the other hand. At the time of the Closing, the
Companies will have no liabilities to Sellers and their Affiliates. Since the
Balance Sheet Date there has not been any accrual of liability by any Company to
any Seller or any of its Affiliates or other transaction between any Company and
any Seller and any of its Affiliates, except in the ordinary course of business
of the Companies consistent with past practice.

3.12. MATERIAL CONTRACTS. (a) Except as disclosed in Schedule 3.12, no
Company is a party to or bound by:

(i) any lease of real property providing for annual rentals of $10,000
or more;

(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets that provides for either (A) annual
payments by the Companies of $50,000 or more or (B) aggregate payments by
the Companies of $50,000 or more;

(iii) any sales, distribution or other similar agreement providing for
the sale by any Company of materials, supplies, goods, services, equipment
or other assets that provides for either (A) annual payments to the
Companies of $50,000 or more or (B) aggregate payments to the Companies of
$50,000 or more;

(iv) any partnership, joint venture or other similar agreement or

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(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or otherwise);

(vi) any agreement relating to indebtedness for borrowed money or the
deferred purchase price of property (in either case, whether incurred,
assumed, guaranteed or secured by any asset), except any such agreement
with an aggregate outstanding principal amount not exceeding $25,000 and
which may be prepaid on not more than 30 days notice without the payment of
any penalty;

(vii) any license, franchise or similar agreement;

(viii) any agency, dealer, sales representative, marketing or other
similar agreement;

(ix) any agreement that limits the freedom of any Company to compete
in any line of business or with any Person or in any area or which would so
limit the freedom of any Company after the Closing Date;

(x) any agreement with (A) Sellers or any of their Affiliates, (B) any
Person directly or indirectly owning, controlling or holding with power to
vote, 5 % or more of the outstanding voting securities of Sellers or any of
their Affiliates, (C) any Person 5 % or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held with power
to vote by Sellers or any of their Affiliates or (D) any director or
officer of Sellers' Affiliates or any associates" or members of the
"immediate family" (as such terms are respectively defined in Rule 12b-2
and Rule 16a-1 of the 1934 Act) of any such director or officer;

(xi) any agreement with any director or officer of the Companies or
with any "associate" or any member of the "immediate family" (as such terms
are respectively defined in Rules 12b-2 and 16a-I of the 1934 Act) of any
such director or officer; or

(xii) any other agreement, commitment, arrangement or plan not made in
the ordinary course of business that is material to the Companies.

(b) Each agreement, commitment, arrangement or plan disclosed in any
Schedule to this Agreement or required to be disclosed pursuant to this Section
to which any Company is a party is a valid and binding agreement of the
Companies party thereto and is in full force and effect, and no Company is, nor
to the knowledge of Sellers is any other party thereto in default or breach in
any material respect under the terms of any such agreement, contract, plan,
lease, arrangement or commitment.

3.13. LITIGATION. Except as set forth on Schedule 3.13, there is no
action, suit, investigation or proceeding (or to the knowledge of the Sellers
any basis therefor) pending

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against, or to the knowledge of Sellers threatened against or affecting,
Sellers or any Company or any of their respective properties before any court
or arbitrator or any governmental body, agency or official in which there is
a reasonable possibility of an adverse decision which would reasonably be
expected to have a Material Adverse Effect or which in any manner challenges
or seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement.

3.14. COMPLIANCE WITH LAWS AND COURT ORDERS; NO DEFAULTS. (a) Except as
set forth in Schedule 3.14, none of the Companies is in violation of, and has
not since September 25, 1992 violated, any applicable law, rule, regulation,
judgement, injunction, order or decree which violation could reasonably be
expected to have a Material Adverse Effect.

(b) None of the Companies is in default under, and no condition exists that
with notice or lapse of time or both would constitute a default under, any
agreement or other instrument binding upon the Companies or any license,
franchise, permit or similar authorization held by the Companies which default
could reasonably be expected to have a Material Adverse Effect.

3.15. PROPERTIES. (a) The Companies have good title to, or in the case of
leased Property have valid leasehold interests in, all personal property and
assets (whether tangible or intangible) reflected on the Balance Sheet or
acquired after the Balance Sheet Date. The Companies have good and marketable,
indefeasible, fee simple title to, or in the case of leased real property have
valid leasehold interests in, all real property reflected on the Balance Sheet
or acquired after the Balance Sheet Date. None of such property or assets
(whether real or personal) is subject to any Liens, except:

(i) Liens disclosed on the Balance Sheet;

(ii) Liens for taxes not yet due or being contested in good faith (and
for which adequate accruals or reserves have been established on the
Balance Sheet); or

(iii) Liens which do not materially detract from the value or
materially interfere with any present or intended use of such property or
assets.

(b) There are no developments affecting any such property or assets
(whether real or personal) pending or, to the knowledge of Sellers threatened,
which might materially detract from the value of such property or assets, or
materially interfere with any present or intended use of any such property or
assets.

(c) Schedule 3.15(c) contains a list of (x) all real property leases to
which any Company is a party (the "Leases") and (y) all Leases which require
third party consents, authorizations, notices, assignments or other action in
connection with the transactions contemplated herein. Except as set forth on
Schedule 3.15(c), (i) each I-ease is in full force and effect; (ii) all rents
and additional rents due on each such Lease have been paid through the date
hereof; (iii) in each case,

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no Company has received notice that it is in default thereunder; (iv) no
additional "percentage rent" or similar additional rent has been due on any
Lease that would require a rent adjustment to such Lease as a result of the
transactions contemplated hereby; and (v) neither the Companies nor, to the
knowledge of the Sellers, any other party thereto, is in default or breach
under any such Lease, and to the knowledge of the Sellers after due inquiry
there exists no event, occurrence, condition or act which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a default or breach by any Company under any such Lease. As of
the date hereof, no lessor under any of the Leases has sought to terminate or
modify in any respect any Lease in connection with or as a result of the
transactions contemplated hereby.

(d) The stores and improvements owned by the Companies are in good
operating condition and repair and have been reasonably maintained consistent
with standards generally followed in the industry (giving due account to the age
and length of use of same, ordinary wear and tear excepted), are adequate and
suitable for their present and intended uses and are structurally sound.

(e) The property and assets owned or leased by any Company, or which they
otherwise have the right to use, constitute all of the property and assets held
for use or used in connection with the businesses of any Company and are
generally adequate to conduct such businesses as currently conducted.

3.16. INTELLECTUAL PROPERTY. (a) Schedule 3.16 contains a list of all
Intellectual property Rights owned or licensed and used or held for use by any
Company ("Company Intellectual Property Rights"), specifying as to each, as
applicable: (i) the nature of such Intellectual Property Right; (ii) the owner
of such Intellectual Property Right; (iii) the jurisdictions by or in which such
Intellectual Property Right is recognized without regard to registration or has
been issued or registered or in which an application for such issuance or
registration has been filed, including the respective registration or
application numbers; and (iv) licenses, sublicenses and other agreements as to
which any Company is a party and pursuant to which any Person is authorized to
use such Intellectual Property Right, including the identity of all parties
thereto, a description of the nature and subject matter thereof, the applicable
royalty and the term thereof.

(b) (i) Since September 25, 1992, no Company has been defendant in any
action, suit, investigation or proceeding relating to, or otherwise has been
notified of, any alleged claim or infringement of any Intellectual Property
Rights, and Sellers and their Affiliates have no knowledge of any other such
infringement by any Company, and (ii) Sellers have no knowledge of any
continuing infringement by any other Person of any of any Company Intellectual
Property Rights. No Company Intellectual Property Right is subject to any
outstanding judgment, injunction, order, decree or agreement restricting the use
thereof by any Company or restricting the licensing thereof by any Company to
any Person. No Company has entered into any agreement to indemnify any other
Person against any charge of infringement of any Intellectual Property Right.

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(c) None of the processes and formulae, research and development results
and other know-how of any Company, the value of which to such Company is
contingent upon maintenance of the confidentiality thereof, has been disclosed
by any Company to any Person other than employees, representatives and agents of
any Company.

3.17. INSURANCE COVERAGE. Sellers have furnished to Buyer a list of, and
true and complete copies of, all insurance policies and fidelity bonds relating
to the assets, business, operations, employees, officers or directors of any
Company. There is no claim by any Company pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds or in respect of which such underwriters
have reserved their rights. All premiums payable under all such policies and
bonds have been paid timely and the Companies have otherwise complied fully with
the terms and conditions of all such policies and bonds. Such policies of
insurance and bonds (or other policies and bonds providing substantially similar
insurance coverage) have been in effect since September 25, 1992 and remain in
full force and effect. Such policies and bonds are of the type and in amounts
customarily carried by Persons conducting businesses similar to those of any
Company. Sellers do not know of any threatened termination of, premium increase
with respect to, or material alteration of coverage under, any of such policies
or bonds. Except as disclosed in Schedule 3.17, the Companies shall after the
Closing continue to have coverage under such policies and bonds with respect to
events occurring prior to the Closing.

3.18. LICENSES AND PERMITS. Schedule 3.18 correctly describes each
license, franchise, permit or other similar authorization affecting, or relating
in any way to, the assets or business of the Companies (the "Permits") together
with the name of the government agency or entity issuing such Permit. Except as
set forth on the Schedule 3.18, such Permits are valid and in full force and
effect and none of the Permits will be terminated or impaired or become
terminable, in whole or in part, as a result of the transactions contemplated
hereby.

3.19. INVENTORIES. The inventories set forth in the Balance Sheet were
properly stated therein at the lesser of cost (last-in, first-out method) or
fair market value determined in accordance with generally accepted accounting
principles consistently maintained and applied by the Companies. Cost was
determined using the retail method. A reserve for shrinkage is provided for
estimated inventory shrinkage since the date of the most recent physical count
of inventories. Since the Balance Sheet Date, the inventories of the Companies
have been maintained in the ordinary course of business. All such inventory is
owned free and clear of all Liens. All of the inventory recorded on the Balance
Sheet consists of, and all inventory of the Companies on the Closing Date will
consist of, items of a quality usable or saleable in the normal course of
business consistent with past practices (subject to reserves consistent with
past practices) and are and will be in quantities sufficient for the normal
operation of the business of the Companies in accordance with past practice.

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3.20. RECEIVABLES. All accounts, notes receivable and other receivables
(other than receivables collected since the Balance Sheet Date) reflected on the
Balance Sheet are, and all accounts and notes receivable arising from or
otherwise relating to the business of the Companies at the Closing Date will be,
valid, genuine and fully collectible in the aggregate amount thereof, subject to
normal and customary trade discounts, less any reserves for doubtful accounts
recorded on the Balance Sheet. All accounts, notes receivable and other
receivables arising out of or relating to such business of the Companies at the
Balance Sheet Date have been included in the Balance Sheet, and all accounts,
notes receivable and other receivables arising out of or relating to the
business of the Companies at the Closing Date will be included in such Closing
Balance Sheet, in accordance with generally accepted accounting principles
applied on a consistent basis.

3.21. FINDERS' FEES. There is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Sellers or any Company who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.

3.22. EMPLOYEES. Schedule 3.22 sets forth a true and complete fist of the
names, titles, annual salaries and other compensation of all officers of the
Companies and all other employees of the Companies whose annual base salary
exceeds $50,000. None of the employees listed in Schedule 3.22 has indicated to
the Sellers or to the Companies that he intends to resign or retire as a result
of the transactions contemplated by this Agreement or otherwise within three
months after the Closing Date.

3.23. LABOR MATTERS. The Companies are in compliance with all currently
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and are not engaged in any unfair
labor practice, failure to comply with which or engagement in which, as the case
may be, would reasonably be expected to have a Material Adverse Effect. There is
no unfair labor practice complaint pending or, to the knowledge of Sellers,
threatened against any Company before the National Labor Relations Board. There
are no strikes, slowdowns, union organizational campaigns or other protected
concerted activity under the National Labor Relations Act or, to the knowledge
of Sellers, threats thereof, by or with respect to any employees of any Company.

3.24. ENVIRONMENTAL MATTERS. (a) Except as disclosed on Schedule 3.24,

(i) no notice, notification, demand, request for information,
citation, summons, complaint or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation, action,
claim, suit, proceeding or review is pending, or to the Sellers' knowledge,
threatened by any entity or other Person with respect to any matter
relating to any Company and relating to or arising out of any Environmental
Law;

(ii) to the Sellers' knowledge, no polychlorinated biphenyls,
radioactive material, lead, lead paint, asbestos-containing material,
incinerator, sump, surface impoundment,

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lagoon, landfill, septic, wastewater treatment or disposal system or
underground storage tank (active or inactive) is or has been present
at any property now or previously owned, leased or operated by any
Company;

(iii) to the Sellers' knowledge, no Hazardous Substance has been
discharged, disposed of, dumped, injected, pumped, deposited, spilled,
leaked, emitted or released at, on or under any property now or previously
owned, leased or operated by the Company;

(iv) no property now or previously owned, leased or operated by the
Company or any property to which the Company has, directly or indirectly,
transported or arranged for the transportation of any Hazardous Substances
is listed or, to the Company's knowledge, proposed for listing, on the
National Priorities List promulgated pursuant to CERCLA, on CERCLIS (as
defined in CERCLA) or on any similar federal, state or foreign list of
sites requiring investigation or clean-up; and

(v) each Company is in compliance with all Environmental Laws and has
obtained and is in compliance with any permit, authorization, license,
certificate or approval of any governmental authority relating to or
required under any Environmental Law and necessary or appropriate for the
business or operation of such Company.

(b) Except as set forth on Schedule 3.24, there has been no environmental
investigation, study, audit, test, review or other analysis conducted of which
any Company has knowledge in relation to the current or prior business of any
Company or any property or facility now or previously owned or leased by any
Company.

(c) For purposes of this Section, the term "Company" shall include any
entity which is, in whole or in part, a predecessor of any Company.

3.25. EMPLOYEE BENEFIT AND COMPENSATION PLANS. (a) Schedule 3.25 contains
a complete list of each "employee benefit plan", as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974 ("ERISA"), which (i) is
subject to any provision of ERISA and (ii) is maintained, administered or
contributed to by any Company or any affiliate (as defined below) thereof and
covers any employee or former employee of any Company or under which any Company
has any liability. Copies of such plans (and, if applicable, related trust
agreements) and all amendments thereto and written interpretations thereof have
been furnished to Buyer together with the most recent annual report (Form 5500)
prepared in connection therewith. Such plans are referred to collectively herein
as the "Employee Plans". For purposes of this Section, "affiliate" of any Person
means any other Person which, together with such Person, would be treated as a
single employer under Section 414 of the Code. The only Employee Plans which
individually or collectively would constitute an "employee pension benefit plan"
as defined in Section 3(2) or ERISA (the "Pension Plans") are identified as such
in the list referred to above.

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(b) No Employee Plan is subject to Title IV of ERISA, no Company has
incurred any liability under Title IV of ERISA, and no event has occurred that
could give rise to such liability. Each Employee Plan which is intended to be
qualified under Section 401 (a) of the Code is so qualified and has been so
qualified during the period from its adoption to date. Sellers have furnished to
Buyer copies of the most recent Internal Revenue Service determination letters
with respect to each such Plan. Each Employee Plan has been maintained in
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations which are applicable to such Plan.

(c) Schedule 3.25 contains a list of each employment, severance or other
similar contract, arrangement or policy, each union contract, and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
compensation or benefits which (i) is not an Employee Plan, (ii) is entered
into, maintained or contributed to, as the case may be, by any Company or any
affiliate thereof and (iii) covers any employee or former employee of any
Company. Such contracts, plans and arrangements as are described above, copies
or descriptions of all of which have been furnished previously to Buyer are
referred to collectively herein as the "Benefit Arrangements". Each Benefit
Arrangement has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such Benefit Arrangement. No Benefit
Arrangement provides for post-employment medical coverage or insurance, except
to the extent required under Part 6 of Title I of ERISA.

(d) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due under any Employee Plan or Benefit
Arrangement; (ii) materially increase any benefits otherwise payable under any
Employee Plan or Benefit Arrangement; or (iii) result in the acceleration of the
time of payment or vesting of any such benefits to any material extent.

3.26. OTHER INFORMATION. The Sellers have heretofore delivered to Buyer
complete copies of all materials requested by Buyer for the purpose of Buyer's
legal due diligence in respect of the Companies. None of the documents or
information delivered to Buyer in connection with the transactions contemplated
by this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading.

3.27. REPRESENTATIONS. The representations and warranties of Sellers
contained in this Agreement, disregarding all qualifications and exceptions
contained therein relating to materiality or Material Adverse Effect, are true
and correct with only such exceptions as would not in the aggregate reasonably
be expected to have a Material Adverse Effect.

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ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to each Seller as of the date hereof and as
of the Closing Date that:

4.1. CORPORATE EXISTENCE AND POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and has all corporate powers and all governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted.

4.2. CORPORATE AUTHORIZATION. The execution, delivery and performance by
Buyer Of this Agreement are within the corporate powers of Buyer and have been
duly authorized by all necessary corporate action on the part of Buyer. This
Agreement constitutes a valid and binding agreement of Buyer.

4.3. GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance
by Buyer of this Agreement require no action by or in respect of, or filing
with, any governmental body, agency or official other than compliance with any
applicable requirements of the HSR Act.

4.4. NON-CONTRAVENTION. The execution, delivery and performance by Buyer
of this Agreement do not and will not (i) violate the certificate of
incorporation or bylaws of Buyer or (ii) assuming compliance with the matters
referred to in Section 4.3, violate any applicable law, rule, regulation,
judgment, injunction, order or decree.

4.5. FINANCING. Buyer has sufficient funds, or unconditional commitments
to provide sufficient funds, to consummate the Closing and pay the Purchase
Price as provided herein.

4.6. PURCHASE FOR INVESTMENT. Buyer is purchasing the Seller Shares for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof. Buyer (either alone or together with its
advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its
investments in the Shares and is capable of bearing the economic risks of such
investment. Buyer acknowledges that the Seller Shares will not be registered
under the Securities Act of 1933, as amended (the "Securities Act"), or under
any state securities law and, therefore, may not be sold by Buyer except
pursuant to an effective registration statement under the Securities Act or an
exemption from registration thereunder and pursuant to registration under or an
exemption from all applicable state securities laws.

4.7. LITIGATION. There is no action, suit, investigation or proceeding (or
any basis therefor) pending against, or to the knowledge of Buyer threatened
against or affecting, Buyer

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before any court or arbitrator or any governmental body, agency or official
which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.

4.8. NET WORTH. After consummation of the Closing, Buyer shall have a net
worth equal to at least $2,650,000.

ARTICLE 5

COVENANTS OF SELLERS

Sellers jointly and severally agree that:

5.1. CONDUCT OF THE COMPANIES. From the date hereof until the Closing
Date, Sellers shall cause each Company to conduct its businesses in the ordinary
course consistent with past practice and to use its best efforts to preserve
intact its business organizations and relationships with third parties and to
keep available the services of its present officers and employees. Without
limiting the generality of the foregoing, from the date hereof until the Closing
Date, Sellers will not permit any Company to:

(i) adopt or propose any change in its certificate of incorporation or
bylaws;

(ii) merge or consolidate with any other Person or acquire a material
amount of assets of any other Person;

(iii) sell, lease, license or other-wise dispose of any material
assets or property except (A) pursuant to existing contracts or commitments
and (B) in the ordinary course consistent with past practice; or

(iv) agree or commit to do any of the foregoing.

Sellers will not, and will not permit any Company to (A) take or agree or commit
to take any action that would make any representation and warranty of Sellers
hereunder inaccurate in any respect at, or as of any time prior to, the Closing
Date or (B) omit or agree or commit to omit to take any action necessary to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.

5.2. ACCESS TO INFORMATION. From the date hereof until the Closing Date,
upon receipt of reasonable notice Sellers will (i) give, and will cause each
Company to give, Buyer its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties, books and
records of each Company and to the books and records of Sellers relating to each
Company, (ii) furnish, and will cause each Company to furnish, to Buyer, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data

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and other information relating to any Company as such Persons may reasonably
request and (iii) instruct the employees, counsel and financial advisors of
Sellers or any Company to cooperate with Buyer in its investigation of any
Company. No investigation by Buyer or other information received by Buyer
shall operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by Sellers hereunder.

5.3. NOTICES OF CERTAIN EVENTS. Sellers shall promptly notify Buyer of:

(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;

(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and

(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving
or otherwise affecting any Seller or any Company that, if pending on the
date of this Agreement, would have been required to have been disclosed
pursuant to Section 3.13 or that relate to the consummation of the
transactions contemplated by this Agreement.

5.4. RESIGNATIONS. At Buyer's request, Sellers will deliver to Buyer the
resignations of any officers and directors of each Company from their positions
with such Company after the Closing Date.

5.5. NONCOMPETITION. (a) Sellers agree that for a period of five full
years from the Closing Date, neither they nor any of their Affiliates shall:

(i) engage, either directly or indirectly, as a principal, agent
advisor or consultant either solely or jointly with others, or as
stockholders in any corporation or joint stock association, or as partners
in a partnership, in any business that operates a women's retail clothing
and/or women's retail clothing accessories business or any other business
that competes with the Company's business as conducted as of the Closing
Date (the "Business") in any of California, Nevada, Arizona, Oregon, Idaho,
Utah, Colorado, New Mexico, Texas and Florida; provided that nothing herein
shall prohibit the acquisition by any Seller or any of its Affiliates of
(x) a diversified company having not more than 5% of its sales (based on
its latest published annual audited financial statements) attributable to
the Business or (y) up to I % of the outstanding common stock of a publicly
traded company engaged in the Business; or

(ii) employ or solicit, or receive or accept the performance of
services by any current employee of any Company.

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(b) If any provision contained in this Section shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Section, but this Section shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. It is the intention
of the parties that if any of the restrictions or covenants contained herein
is held to cover a geographic area or to be for a length of time which is not
permitted by applicable law, or in any way construed to be too broad or to
any extent invalid, such provision shall not be construed to be null, void
and of no effect, but to the extent such provision would be valid or
enforceable under applicable law, a court of competent jurisdiction shall
construe and interpret or reform this Section to provide for a covenant
having the maximum enforceable geographic area, time period and other
provisions (not greater than those contained herein) as shall be valid and
enforceable under such applicable law. Sellers acknowledge that Buyer would
be irreparably harmed by any breach of this Section and that there would be
no adequate remedy at law or in damages to compensate Buyer for any such
breach. Sellers agree that Buyer shall be entitled to injunctive relief
requiring specific performance by Sellers of this Section, and Sellers
consent to the entry thereof.

5.6. CASH DISTRIBUTIONS AND CLOSING CASH BALANCE. Sellers agree that the
combined cash balances of the Companies shall be at least $900,000 at Closing,
and substantially all such cash balances shall reside at LMC. From the date
hereof until the Closing Date, Sellers will not permit any Company to make any
cash distributions with respect to any shares of capital stock of such Company
that would have the effect of reducing the combined cash of the Companies to an
amount less than $900,000 at the Closing.

5.7. LEASES. (a) Promptly following the execution of this Agreement,
Sellers shall cause the Companies to take any action that is required under the
terms of the Leases in connection with the transactions contemplated by this
Agreement (including preparing forms of assignments, delivering notices and
obtaining any required consents) without (i) any change in the terms of the
Leases (whether pursuant to their current terms or by amendment) or (ii) the
payment after the Closing of any consideration or expense by any Company or
Buyer.

(b) The parties agree that Schedule 5.7 describes the actions to be taken
under the Leases in connection with the transactions contemplated hereby.
Sellers will keep Buyer informed as to all material communications between
Sellers or the Companies (or their respective agents), on the one hand and the
landlords under the Leases (or their agents), on the other hand. Prior to
sending a form of assignment, notice or similar document to a landlord, Sellers
will deliver to Buyer's counsel a draft of such document for review and comment
by such counsel.

(c) Sellers acknowledge that (i) the occurrence of the Closing win not
relieve Sellers of their obligations under this Section 5.7 and (ii) the costs
of taking the actions described in this Section 5.7 will be borne by Sellers.

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(d) In the event that a Lease is terminated as a result of the transactions
contemplated hereby, Buyer and Sellers agree that the liquidated damages payable
to Buyer in such event will be the amount set forth on Exhibit C.

ARTICLE 6

COVENANTS OF BUYER

Buyer agrees that:

6.1 CONFIDENTIALITY. Prior to the Closing Date and after any termination of
this Agreement, Buyer and its Affiliates will hold, and will use their best
efforts to cause their respective officers, directors, employees, accountants,
counsel, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning any
Company furnished to Buyer or its Affiliates in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by Buyer,
(ii) in the public domain through no fault of Buyer or (iii) later lawfully
acquired by Buyer from sources other than any Seller or any Company; provided
that Buyer may disclose such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement and to its lenders in connection
with obtaining the financing for the transactions contemplated by this Agreement
so long as such Persons are informed by Buyer of the confidential nature of such
information and are directed by Buyer to treat such information confidentially.
The obligation of Buyer and its Affiliates to hold any such information in
confidence shall be satisfied if they exercise the same care with respect to
such information as they would take to preserve the confidentiality of their own
similar information. If this Agreement is terminated, Buyer and its Affiliates
will, and will use their best efforts to cause their respective officers,
directors, employees, accountants, counsel, consultants, advisors and agents to,
destroy or deliver to Sellers, upon request, all documents and other materials,
and all copies thereof, obtained by Buyer or its Affiliates or on their behalf
from Sellers or any Company in connection with this Agreement that are subject
to such confidence.

6.2. ACCESS. Buyer will cause each Company, on and after the Closing Date,
to afford promptly to each Seller and their agents reasonable access to their
properties, books, records, employees and auditors to the extent necessary to
permit such Seller to determine any matter relating to its rights and
obligations hereunder or to any period ending on or before the Closing Date.
Such Seller will hold, and will use its best efforts to cause its employees,
accountants, counsel, consultants, advisors and agents to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning any
Company provided to it pursuant to this Section.

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6.3. ASSUMPTION OF LEASES. Buyer will cooperate with Seller in taking the
actions described in Section 5.7 and will execute such documents as are
reasonably necessary to assume any Leases requiring such assumption as a result
of the transactions contemplated hereby.

6.4. NAME CHANGE. In the event this agreement is terminated, Buyer will
change its name so as not to include the words "Charlotte Russe".

ARTICLE 7

COVENANTS OF BUYER AND THE SELLERS

Buyer and the Sellers agree that:

7.1. BEST EFFORTS. Subject to the terms and conditions of this Agreement,
Buyer and the Sellers will use their best efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. Each Seller and Buyer agree, and each Seller,
prior to the Closing, and Buyer, after the Closing, agree to cause each Company,
to execute and deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement.

7.2. CERTAIN FILINGS. Sellers and Buyer shall cooperate with one another
(i) in determining whether any action by or in respect of, or filing with, any
governmental body, agency, official or authority is required, or any actions,
consents, approvals or waivers are required to be obtained from parties to any
material contracts, in connection with the consummation of the transactions
contemplated by this Agreement and (ii) in taking such actions or making any
such filings, furnishing information required in connection therewith and
seeking timely to obtain any such actions, consents, approvals or waivers.

7.3. PUBLIC ANNOUNCEMENTS. The parties agree not to issue any press
release or make any public statement with respect to this Agreement or the
transactions contemplated hereby or thereby without the consent of the other
parties hereto.

7.4. RELATED PARTY TRANSACTIONS. All related party transactions between
the Sellers or their Affiliates, on the one hand, and the Companies, on the
other hand, shall be settled prior to Closing.

7.5. HEAD OFFICE LEASE . Buyer and Sellers shall execute and deliver a
lease extension for a period of two years following the Closing Date, on terms
identical to those in effect on the Balance Sheet Date and as set forth in the
term sheet attached hereto as Exhibit B, in respect of the corporate
headquarters of the Companies located at 5015 Shoreharn Place, San Diego,
California (the "Head Office Lease").

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7.6. POST-CLOSING SERVICES BY SELLERS. (a) The parties agree that each of
the Sellers shall remain employed on a full-time basis by the Buyer in their
respective management positions with the Companies for a period of 90 days after
the Closing. Each Seller shall receive $125,000 in aggregate compensation for
providing such services during such period. During such period, each Seller
shall use his best efforts (i) to carry out the same duties and responsibilities
with the Company as such Seller had prior to the Closing and (ii) to facilitate
the management transition after Closing.

(b) The parties agree that each of the Sellers shall remain employed by the
Buyer for a period of nine months following the end of the 90 day full-time
employment period referred to in paragraph (a) above. Each Seller shall receive
$275,000 in aggregate compensation for providing such services during such
period. During such 9 month period each Seller shall use his best efforts to
carry out such duties and responsibilities as are mutually agreed upon by
Sellers and Buyer.

(c) The compensation payable under paragraphs (a) and (b) above will be
prorated and paid monthly, and such payments will be net of any applicable
withholding taxes that the Company would normally be required to withhold from
payments to salaried employees.

(d) Until the first anniversary of the Closing Date, Buyer shall pay the
medical insurance premiums for each Seller consistent with past practices of the
Company.

(e) The parties agree that the employment arrangements of Sellers pursuant
to this Section 7.6 may be terminated at any time by Buyer for "Cause" and that
in such event such terminated Seller shall be entitled only to pro rata payment
of compensation. For purposes of this Section 7.6, "Cause" shall mean (i)
willful misconduct that is materially detrimental to the Company or (ii)
conviction of a Seller of, or the entering of a plea of nolo contendere by a
Seller with respect to, having committed a felony.

7.7. REPAYMENT OF COMPANY INDEBTEDNESS. (a) Sellers shall not less than
five days prior to Closing calculate and deliver to Buyer a schedule of the Debt
Repayment Amount required to repay in full all indebtedness for borrowed money
of the Companies to banks and other parties, including unpaid interest,
penalties and other costs in respect thereof (the "Company Indebtedness"),
including a schedule of such banks and other parties and their bank wire
transfer information, and Buyer shall pay the Debt Repayment Amount to such
banks and other parties at the Closing.

(b) Buyer and Seller will cooperate in delivering to Bank of America such
documents as are reasonably necessary to facilitate the prepayment of any
amounts outstanding under, and the termination at Closing of (at no additional
cost to any Company), the Company's revolving credit facility with Bank of
America.

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ARTICLE 8

TAX MATTERS

8.1. TAX DEFINITIONS. The following terms, as used herein, have the
following meanings:

"Buyer Indemnitee" means Buyer, any of its Affiliates and, effective upon
the Closing, any of the Companies.

"Code" means the Internal Revenue Code of 1986, as amended.

"Federal Tax" means any Tax imposed under Subtitle A of the Code.

"Pre-Closing Tax Period" means any Tax period (or portion thereof) ending
on or before the close of business on the Closing Date.

"Section 338(h)(10) Election" is defined in Section 8.3(a).

"Tax" means (i) any tax imposed under Subtitle A of the Code and any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license, withholding
on amounts paid to or by any Company, payroll, employment, excise, severance,
stamp, Capital stock, occupation, property, environmental or windfall profit
tax, premium, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest,
penalty, addition to tax or additional amount imposed by any governmental
authority (a "Taxing Authority") responsible for the imposition of any such tax
(domestic or foreign), (ii) liability of any Company for the payment of any
amounts of the type described in (i) as a result of being a party to any
agreement or arrangement whereby liability of any Company for payments of such
amounts was determined or taken into account with reference to the liability of
any other person for any period during the Tax Indemnification Period, and (iii)
liability of any Company for the payment of any amounts as a result of being
party to any Tax Sharing Agreement or with respect to the payment of any amounts
of the type described in (i) or (ii) as a result of any express or implied
obligation to indemnify any other Person.

"Tax Asset" means any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute which could reduce Taxes (including without limitation deductions and
credits related to alternative minimum Taxes).

"Tax Indemnification Period", means (i) with respect to any Tax described
clause (i) of the definition of "Tax", any Pre-Closing Tax Period of any
Company, (ii) with respect to any Tax described in clause (H) of the definition
of "Tax", any Pre-Closing Tax Period of any Company and the Tax year of any
party to an arrangement described in such clause (ii) which includes (but does
not end on) the Closing Date, and (iii) with respect to any Tax described in
clause (iii) of

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the definition of "Tax", the survival period of the obligation under the
applicable contract or arrangement.

"Tax Sharing Agreements" means all existing Tax sharing agreements or
arrangements (whether or not written) binding any Company and any agreements or
arrangements which afford any other person the benefit of any Tax Asset of any
Company, afford any Company the benefit of any Tax Asset of any other person or
require or permit the transfer or assignment of income, revenues, receipts, or
gains.

8.2. TAX REPRESENTATIONS. Sellers represent and warrant to Buyer as of the
date hereof and as of the Closing Date that: (a) except as set forth in the
Balance Sheet (including the notes thereto) or on Schedule 8.2(a), (i) all Tax
returns, statements, reports and forms (including estimated tax or information
returns and reports) required to be filed with any Taxing Authority with respect
to any Pre-Closing Tax Period by or on behalf of any Company (collectively, the
"Returns"), have, to the extent required to be filed on or before the date
hereof, been filed when due in accordance with all applicable laws; (ii) as of
the time of filing, the Returns correctly reflected the facts in all material
respects regarding the income, business, assets, operations, activities and
status of the Companies and any other information required to be shown therein;
(iii) all Taxes shown as due and payable on the Returns that have been filed
have been timely paid, or withheld and remitted to the appropriate Taxing
Authority; (iv) the charges, accruals and reserves for Taxes with respect to the
Companies for any Pre-Closing Tax Period (including any Pre-Closing Tax Period
for which no Return has yet been filed) reflected on the books of the Companies
(excluding any provision for deferred income taxes) are adequate to cover such
Taxes; (v) all Returns filed with respect to Tax years of the Companies through
the Tax year ended September 30, 1993 have been examined and closed or are
Returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired; (vi)
none of the Companies is delinquent in the payment of any Tax or has requested
any extension of time within which to file any Return and has not yet filed such
Return; (vii) none of the Companies has granted any extension or waiver of the
statute of limitations period applicable to any Return, which period (after
giving effect to such extension or waiver) has not yet expired; (viii) there is
no claim, audit, action, suit, proceeding, or investigation now pending or
threatened against or with respect to any Company in respect of any Tax or Tax
Asset; (ix) there are no requests for rulings or determinations in respect of
any Tax or Tax Asset pending between any Company and any Taxing Authority; (x)
none of the Companies owns any interest in real property in the State of New
York or in any other jurisdiction in which a Tax is imposed on the transfer of a
controlling interest in an entity that owns any interest in real property;
however, LMC owns real, property in California where such a transfer triggers a
reassessment for property tax purposes; (xi) none of the property owned or used
by any Company is subject to a tax benefit transfer lease executed in accordance
with Section 168(f)(8) of the Internal Revenue Code of 1954, as amended; (xii)
none of the property owned or used by any Company is subject to a lease, other
than a "true" lease for federal income tax purposes; (xiii) none of the property
owned by any Company is "tax-exempt use property" within the meaning of Section
168(h) of the Code; (xiv) neither the Sellers nor any Company, nor any other
person on

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behalf of any Company, has entered into nor will it enter into any agreement
or consent pursuant to Section 341 (f) of the Code; (xv) there are no liens
for Taxes upon the assets of any Company except liens for current Taxes not
yet due; (xvi) Sellers are not subject to withholding under Section 1445 of
the Code with respect to any transaction contemplated hereby; (xvii) none of
the Companies has participated in any arrangement whereby any income,
revenues, receipts, gain, loss or Tax Asset of any Company was determined or
taken into account for Tax purposes with reference to or in conjunction with
any income, revenues, receipts, gain, loss, asset, liability or Tax Asset of
any other person (other than another Company); (xviii) none of the Companies
is currently under any contractual obligation to pay any amounts of the type
described in clause (ii) or (iii) of the definition of "Tax"; (xix) for all
taxable years from the date of incorporation through the time of closing on
the Closing Date, each of LMCN and LMCN 11 has been a valid "S" Corporation,
as defined in section 1361 of the Code, and such "S" corporation status has
never been terminated or revoked; (xx) LMC is presently an "S" corporation
and has been so continuously since April 1, 1988; and (xxi) all information
set forth in the notes to the Balance Sheet relating to Tax matters is true
and complete in all material respects.

(b) Schedule 8.2(b) contains a list of all jurisdictions (whether domestic
or foreign) to which any Tax is properly payable by the Company.

8.3. COVENANTS. (a) Sellers and Buyer agree to make a timely, effective
and irrevocable election under Section 338(h)(10) of the Code and under any
comparable statutes in any other jurisdiction with respect to LMCN and LMCN II
(the "Section 338(h)(10) Election"), and to file such election in accordance
with applicable regulations. The Section 338(h)(10) Election shall properly
reflect the Price Allocation (as hereinafter defined). It is understood that the
Price Allocation shall be consistent with the allocations reflected in the
definitions of LMCN Purchase Price and LMCN II Purchase Price. Any payment by
Buyer of the Debt Repayment Amount shall be allocable to the Company primarily
liable with respect to such debt. Sellers and Buyer (or, if the parties cannot
agree, the Accounting Referee) shall appraise the value of the assets of the
Companies that are deemed to have been acquired pursuant to the Section
338(h)(10) Election and shall allocate the modified ADSP (as such term is
defined in Treasury Regulations Section 1.338(h)(10)-I) (the "Modified Aggregate
Deemed Sales Price") of the assets of the Companies in accordance with the
Treasury regulations promulgated under Section 338(h)(10). Such allocation shall
be the "Price Allocation" and shall be binding on the parties hereto. Sellers
and Buyer agree to act in accordance with the Price Allocation in the
preparation, filing and audit of any Tax return and further agree to report the
Purchase Price allocable to the LMC Common Stock as paid and received for the
LMC Common Stock in the preparation, filing and audit of any such return.

(b) Without the prior written consent of Buyer, which shall not be
unreasonably withheld, neither Sellers nor any Company shall, to the extent it
may affect or relate to any Company, make or change any tax election (other than
making the Section 338(h)(10) Election), change an annual tax accounting period,
adopt or change any method of tax accounting, file any amended Return, enter
into any closing agreement, settle any Tax claim or assessment, surrender any
right to claim

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a Tax refund, consent to any extension or waiver of the limitations period
applicable to any Tax claim or assessment or take or omit to take any other
action, if any such action or omission could have the effect of materially
increasing the Tax liability or reducing any Tax Asset of any Company, Buyer
or any Affiliate of Buyer.

(c) All Returns not required to be filed on or before the date hereof (i)
will be filed when due in accordance with all applicable laws and (ii) as of the
time of filing, will correctly reflect in all material respects the facts
regarding the income, business, assets, operations, activities and status of the
Companies, and any other information required to be shown therein.

(d) Sellers shall cause the Companies to include in their respective Form
1120S Federal Tax returns and in any corresponding State or local Tax returns
all items of income, gain, loss, deduction and credit attributable to such
Companies through the time of closing on the Closing Date including, without
limitation, the consequences of the deemed sale pursuant to the Section
338(h)(10) Election with respect to LMCN and LMCN II.

(e) None of the Companies shall reserve any amount for or make any payment
Of Taxes to any person or any Taxing Authority, except for such Taxes as are due
or payable or have been properly estimated in accordance with applicable law as
applied in a manner consistent with past practice of Sellers.

(f) All transfer, documentary, sales, use, stamp, registration, value added
and other such Taxes and fees (including any penalties and interest) incurred in
connection with this Agreement (including any real property transfer tax and any
similar Tax) shall be paid by Sellers when due, and Sellers will, at their own
expense, file all necessary Tax returns and other documentation with respect to
all such Taxes and fees, and, if required by applicable law, Buyer will, and
will cause its Affiliates to, join in the execution of any such Tax returns and
other documentation.

8.4. TERMINATION OF EXISTING TAX SHARING AGREEMENTS. Any and all existing
Tax Sharing Agreements shall be terminated as of the date hereof After the date
hereof, none of the Companies shall have any further rights or liabilities
thereunder. This Agreement shall be the sole Tax sharing agreement relating to
any Company for all Pre-Closing Tax Periods. Sellers shall compensate Buyer for
and hold the Companies harmless against any Tax imposed by a Taxing Authority as
a result of such termination and, if any such termination is not binding on any
Taxing Authority, any adverse effect which would have been avoided if such
termination had been given effect by such Taxing Authority.

8.5. COOPERATION ON TAX MATTERS. (a) Buyer and Sellers shall cooperate
fully, as and to the extent reasonably requested by the other party, in
connection with the preparation and filing of any Tax return, statement, report
or form (including any report required pursuant to Section 6043 of the Code and
all Treasury Regulations promulgated thereunder), any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other party's request) the provision of records and information
which are reasonably relevant

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to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information
and explanation of any material provided hereunder. Sellers shall retain all
books and records pertinent to any Company relating to any Pre-Closing Tax
Period for a period of six years following the Closing (after which such
books and records shall become the property of the Buyer, if the Buyer so
requests), and to abide by all record retention agreements entered into with
any Taxing Authority, and (ii) to give the other party reasonable written
notice prior to destroying or discarding any such books and records.

(b) Buyer and Sellers further agree, upon request, to use all reasonable
efforts to obtain any certificate or other document from any governmental
authority or customer of any Company or any other person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including but not
limited to with respect to the transactions contemplated hereby); provided that
such efforts shall not delay the Closing unless the parties so agree.

8.6. CERTAIN DISPUTES. To the extent provided in Sections 8.3 and 8.7,
disputes arising under such Section and not resolved by mutual agreement as
stated therein shall be resolved by a nationally recognized accounting firm with
no material relationship with Buyer or Sellers (the "Accounting Referee"),
chosen and mutually acceptable to both Buyer and Sellers within five days of the
date on which the need to choose the Accounting Referee arises. The Accounting
Referee shall resolve any disputed items within 30 days of having the item
referred to it pursuant to such procedures as it may require. The costs, fees
and expenses of the Accounting Referee relating to the Price Allocation shall be
borne equally by Buyer and Sellers; otherwise, the Accounting Referee's costs,
fees and expenses shall be borne as reasonably determined by the Accounting
Referee in light of his or her determination(s) regarding the disputes
submitted.

8.7. TAX INDEMNIFICATION. (a) Sellers jointly and severally hereby
indemnify each Buyer Indemnitee against and agree to hold each Buyer Indemnitee
harmless from any (w) Tax of any Company related to the Tax Indemnification
Period, (x) Tax of any Company resulting from a breach of the provisions of this
Article 8, and (y) liabilities, costs, expenses (including, without limitation,
reasonable expenses of investigation and attorneys' fees and expenses), losses,
damages, assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any Tax described in (w) or (x),
including those incurred in the contest in good faith in appropriate proceedings
relating to the imposition, assessment or assertion of any such Tax, and any
liability as transferee. The sum of (w), (x) and (y), net of the present value
of any Tax benefits that will be realized post-Closing by any Company or
successor thereto as a result of the assessments giving rise to the Taxes
described in (w) and (x) is referred to herein as a "Loss." It is understood
that the present value of such benefits shall be agreed upon by Sellers and
Buyer or, if they cannot agree, by the Accounting Referee, and that, in any
event, the value of such benefits shall be discounted from the date that such
benefits are reasonably expected to be realized.

(b) For purposes of this Section, in the case of any Taxes that are imposed
on a periodic basis and are payable for a Tax period that includes (but does not
end on) the Closing Date, the portion of such Tax related to the portion of such
Tax period ending on and including the Closing

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Date shall (x) in the case of any Taxes other than gross receipts, sales or
use Taxes and Taxes based upon or related to income, be deemed to be the
amount of such Tax for the entire Tax period multiplied by a fraction the
numerator of which is the number of days in the Tax period ending on and
including the Closing Date and the denominator of which is the number of days
in the entire Tax period, and (y) in the case of any Tax based upon or
related to income and gross receipts, sales or use Tax be deemed equal to the
amount which would be payable if the relevant Tax period ended on and
included the Closing Date. The portion of any credits relating to a Tax
period that begins before and ends after the Closing Date shall be determined
as though the relevant Tax period ended on and included the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of the Companies.

(c) Upon payment by any Buyer Indemnitee of any Loss, Sellers shall
discharge their obligation to indemnify the Buyer Indemnitee against such Loss
by paying to Buyer an amount equal to the amount of such Loss.

(d) Subject to Section 8.7(g), any payment pursuant to this Section 8.7
shall be made not later than 45 days after receipt by Sellers of written notice
from Buyer (i) stating that a Loss has been paid by a Buyer Indemnitee and (ii)
providing evidence of payment and stating the amount thereof and of the
indemnity payment requested.

(e) Buyer agrees to give prompt notice to Sellers of any Loss or the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect Of which indemnity may be sought hereunder which Buyer reasonably deems
to be within the ambit of this Section 8.7 (specifying with reasonable
particularity the basis therefor) and will give Sellers such information with
respect thereto as Sellers may reasonably request. Sellers may, at their own
expense, (i) participate in and, (ii) except as provided in Section 8.7(f), upon
notice to Buyer, assume the defense of any such suit, action or proceeding
(including any Tax audit); provided that (i) Sellers' counsel is reasonably
satisfactory to Buyer, (ii) Sellers shall thereafter consult with Buyer upon
Buyer's reasonable request for such consultation from time to time with respect
to such suit, action or proceeding (including any Tax audit) and (iii) Sellers
shall not, without Buyer's consent (which shall not be unreasonably withheld),
agree to any settlement with respect to any Tax if such settlement could
adversely and materially affect the Tax liability of Buyer or any of its
Affiliates or, upon the Closing, any Company. If Sellers assume such defense,
(i) Buyer shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by Sellers and (ii) Sellers shall not assert that the Loss, or any
portion thereof, with respect to which Buyer seeks indemnification is not within
the ambit of this Section 8.7. If Sellers elect not to assume such defense,
Buyer may pay, compromise or contest the Tax at issue. Sellers shall be liable
for the reasonable fees and expenses of counsel employed by Buyer for any period
during which Sellers have not assumed the defense thereof. Whether or not
Sellers choose to defend or prosecute any claim, all of the parties hereto shall
cooperate in the defense or prosecution thereof.

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(f) Buyer shall control the defense of any claim that relates to Taxes
described in Section 8.7(b).

(g) Sellers shall not be liable under this Section 8.7 with respect to any
Tax resulting from a claim or demand the defense of which Sellers were not
offered the opportunity to assume as provided under Section 8.7(e) to the extent
Sellers' liability under this Section is adversely affected as a result thereof.
No investigation by Buyer or any of its Affiliates at or prior to the Closing
Date shall relieve Sellers of any liability hereunder.

(h) Any claim of any Buyer Indemnitee (other than Buyer) under this Section
may be made and enforced by Buyer on behalf of such Buyer Indemnitee.

8.8. PURCHASE PRICE ADJUSTMENT AND INTEREST. Any amount paid by Sellers or
Buyer under Section 8.7 will be treated as an adjustment to the Modified
Aggregate Deemed Sales Price (as required by regulations promulgated under
Section 338(h)(10) of the Code), in the case of LMCN and LMCN H, or to the
Purchase Price, in the case of LMC, unless a Final Determination (as defined
below) causes any such amount (i) to constitute gross income to Buyer (for which
no deduction or credit had been or may be taken by Buyer) and (ii) not to
constitute an adjustment to the Modified Aggregate Deemed Sales Price or the
Purchase Price for Federal Tax purposes. In the event of such a Final
Determination, Buyer or Sellers, as the case may be, shall pay an amount that
reflects the hypothetical Tax consequences of the receipt or accrual of such
payment, using the maximum statutory rate (or rates, in the case of an item that
affects more than one Tax) applicable to the recipient of such payment for the
relevant year, reflecting for example, the effect of deductions available for
interest paid or accrued and for Taxes such as state and local income Taxes. Any
payment required to be made by Buyer or Sellers under Section 8.7 that is not
made when due shall bear interest at the rate per annum determined, from time to
time, under the provision of Section 6621(a)(2) of the Code for each day until
paid. "Final Determination" shall mean (i) any final determination of liability
in respect of a Tax that, under applicable law, is not subject to further
appeal, review or modification through proceedings or otherwise (including the
expiration of a statute of limitations or a period for the filing of claims for
refunds, amended returns or appeals from adverse determinations) or (ii) the
payment of Tax by such Buyer Indemnitee with respect to any item disallowed or
adjusted by a Taxing Authority.

8.9. TAX REFUNDS. Any refund of a Tax paid by Sellers shall belong solely
to Sellers and shall, if such refund is paid to any Buyer Indemnitee, be paid to
Sellers provided that any Tax refund that is reflected on the Closing Balance
Sheet shall belong to Buyer.

8.10. SURVIVAL. Notwithstanding anything in this Agreement to the
contrary, the provisions of this Article 8 shall survive for the full period of
all applicable statutes of limitations (giving effect to any waiver, mitigation
or extension thereof).

ARTICLE 9

CONDITIONS TO CLOSING

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9.1. CONDITIONS TO OBLIGATIONS OF BUYER AND THE SELLERS. The obligations
of Buyer and Sellers to consummate the Closing are subject to the satisfaction
of the following conditions:

(a) Any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.

(b) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.

(c) All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of
the Closing shall have been taken, made or obtained.

(d) The Head Office Lease shall have been executed and delivered by
the parties thereto.

(e) The Company will have completed the actions required to be taken
under at least seven of the twelve Leases described in Sections D, E and F
of Schedule 5.7.

9.2. CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the Closing is subject to the satisfaction of the following further
conditions:

(a) (i) Each Seller shall have performed in all material respects all
of its obligations hereunder required to be performed by it on or prior to
the Closing Date, (ii) the representations and warranties of Sellers
contained in this Agreement and in any certificate or other writing
delivered by any Seller pursuant hereto shall be true at and as of the
Closing Date, as if made at and as of such date, and (iii) Buyer shall have
received a certificate signed by the Chief Executive Officer of each Seller
to the foregoing effect.

(b) There shall not be threatened, instituted or pending any action or
proceeding by any Person before any court or governmental authority or
agency, domestic or foreign, (i) seeking to restrain or prohibit the
ownership or operation by Buyer or any of its Affiliates of all or any
material portion of the business or assets of any Company or of Buyer or
any of their Affiliates or to compel Buyer or any of its Affiliates to
dispose of all or any material portion of the business or assets of the
Companies or of Buyer or any of their or Affiliates, (ii) seeking to impose
or confirm limitations on the ability of Buyer or any of its Affiliates
effectively to exercise full rights of ownership of the Seller Shares,
including without limitation, the right to vote any Seller Shares acquired
or owned by Seller or any of its Affiliates on all matters properly
presented to the Companies' Stockholders or (iii) seeking to require
divestiture by Buyer or any of its Affiliates of any Seller Shares.

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(c) There shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the purchase of the Seller
Shares, by any court, government or governmental authority or agency,
domestic or foreign, other than the application of the waiting period
provisions of the HSR Act to the purchase of the Seller Shares, that, in
the reasonable judgment of Buyer could, directly or indirectly, result in
any of the consequences referred to in clauses (i) through (iii) above.

(d) Buyer shall have received an opinion of Latham & Watkins, counsel
to Sellers, dated the Closing Date to the effect specified in Sections 3.1
through 3.4; PROVIDED that with respect to matters relating to the Leases
Buyer shall have received an opinion dated the Closing Date from either of
Wordes, Wilshin, Goren & Conner, real estate counsel to Sellers, or Latham
& Watkins; and provided further that with respect to matters governed by
Nevada law such counsel may rely upon the opinion of Nevada counsel
reasonably satisfactory to Buyer. In rendering such opinions, such counsel
may rely upon certificates of public officers and, as to matters of fact,
upon certificates of officers of Sellers or any Company, copies of which
certificates shall be contemporaneously delivered to Buyer.

(e) Buyer shall have received a duly executed copy of the Sally
Lawrence Non-Competition Agreement.

(f) Each Seller shall have delivered a certification for each Company
and signed by such Company to the effect that such Company is not nor has
it been within 5 years of the date hereof a "United States real property
holding corporation" as defined in Section 897 of the Code.

(g) Buyer shall have received all documents it may reasonably request
relating to the existence of each Company and the authority of each Seller
for this Agreement, all in form and substance reasonably satisfactory to
Buyer.

(h) Sellers shall have executed an effective, irrevocable election
under Section 338(h)(10) of the Code in respect of each of LMCN and LMCN II
in form and substance satisfactory to Buyer, and Sellers shall have
delivered all documents in connection therewith as Buyer may reasonably
request.

(i) Buyer shall have received certification signed by the Sellers to
the effect that none of the Sellers is a "foreign person" as defined in
Section 1445 of the Code.

(j) All intercompany account balances due from LMC to each of LMCN and
LMCN II shall have been settled at or prior to Closing (provided that any
intercompany account balances due from either of LMCN or LMCN II to LMC
need not be settled at or prior to Closing), and substantially all cash and
cash equivalents of the Companies shall be the property of LMC.

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(k) Each spouse of the Sellers shall have executed and delivered to
Buyer a Spouse Consent in the form attached hereto as Exhibit D.

9.3. CONDITIONS TO OBLIGATION OF SELLERS. The obligation of Sellers to
consummate the Closing is subject to the satisfaction of the following further
conditions:

(a) (i) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Closing Date, (ii) the representations and warranties of Buyer contained in
this Agreement and in any certificate or other writing delivered by Buyer
pursuant hereto shall be true at and as of the Closing Date, as if made at
and as of such date, and (iii) each Seller shall have received a
certificate signed by an executive officer of Buyer to the foregoing
effect.

(b) Each Seller shall have received an opinion of Davis Polk &
Wardwell, counsel to Buyer, dated the Closing Date to the effect specified
in Sections 4.1 through 4.4. In rendering such opinion, such counsel may
rely upon certificates of public officers and, as to matters of fact, upon
certificates of officers of Buyer, copies of which certificates shall be
contemporaneously delivered to such Seller.

(c) Each Seller shall have received all documents it may reasonably
request relating to the existence of Buyer and the authority of Buyer for
this Agreement, all in form and substance reasonably satisfactory to such
Seller.

ARTICLE 10

SURVIVAL; INDEMNIFICATION

10.1. SURVIVAL. The covenants, agreements, representations and warranties
of the parties hereto contained in this Agreement or in any certificate or other
writing delivered pursuant hereto or in connection herewith shall survive the
Closing until three years after the Closing Date; provided that the covenants,
agreements, representations and warranties contained in Section 3.11 and
Sections 3.16 through and including 3.27 shall survive the Closing until two
years after the Closing Date; and provided further that the covenants,
agreements, representations and warranties contained in Sections 3.5 and 3.6 and
in Article 8 shall survive until expiration of the statute of limitations
applicable to the matters covered thereby (giving effect to any waiver,
mitigation or extension thereof), if later. Notwithstanding the preceding
sentence, any covenant, agreement, representation or warranty in respect of
which indemnity may be sought under this Agreement shall survive the time at
which it would otherwise terminate pursuant to the preceding sentence, if notice
of the inaccuracy or breach thereof giving rise to such right of indemnity shall
have been given to the party against whom such indemnity may be sought prior to
such time.

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10.2. INDEMNIFICATION. (a) Sellers hereby jointly and severally indemnify
Buyer and, effective at the Closing, without duplication, any Company against
and agree to hold them harmless from any and all damage, loss, liability and
expense (including without limitation reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit or
proceeding) ("Damages") incurred or suffered by Buyer or any Company arising out
of any misrepresentation or breach of warranty, covenant or agreement made or to
be performed by Sellers pursuant to this Agreement (other than pursuant to
Article 8), including but not limited to, in the event the Lawrence
Merchandising Corporation Profit Sharing Plan (the "Profit Sharing Plan") is
determined by the Internal Revenue Service not to be qualified under Section
401(a) of the Code as a result of actions or inactions by the Companies or
Sellers prior to the Closing Date, the amount necessary to place Buyer, any
Company, any current or former employee of any Company, and any trust maintained
in connection with the Profit Sharing Plan, in the same economic position as if
such determination had not been made and the Profit Sharing Plan were qualified
under Section 401(a); PROVIDED that (i) Sellers shall not be liable under this
Section 10.2(a) unless the aggregate amount of Damages with respect to all
matters (excepting those in respect of the Profit Sharing Plan, which shall not
be subject to this proviso) referred to in this Section 10.2(a) (determined
without regard to any materiality qualification contained in any
representations, warranty or covenant giving rise to the claim for indemnity
hereunder) exceeds $250,000, which $250,000 amount shall not constitute a
deductible, and (ii) Sellers' maximum liability under this Section 10.2(a) shall
not exceed $5,000,000 (excluding (i) liabilities for taxes, (ii) liabilities
arising from knowing misrepresentations or fraud and (iii) claims for breach of
Sections 3.5 and 3.6).

(b) Buyer hereby indemnifies each Seller against and agrees to hold it
harmless from any and all Damages incurred or suffered by such Seller arising
out of any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by Buyer pursuant to this Agreement (other than pursuant to
Article 8); provided that (i) Buyer shall not be liable to any Seller under this
Section 10.2(b) unless the aggregate amount of Damages with respect to all
matters referred to in this Section 10.2(b) (determined without regard to any
materiality qualification contained in any representations, warranty or covenant
giving rise to the claim for indemnity hereunder) exceeds such Seller's
Percentage of $250,000, which $250,000 amount shall not constitute a deductible,
and (ii) Buyer's maximum liability to any Seller under this Section 10.2(b)
shall not exceed such Seller's Percentage of $5,000,000.

10.3. PROCEDURES. The party seeking indemnification under Section 10.2
(the "Indemnified Party") agrees to give prompt notice to the party against whom
indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or
the commencement of any suit, action or proceeding in respect of which indemnity
may be sought under such Section. The Indemnifying Party may, and at the request
of the Indemnified Party shall, participate in and control the defense of any
such suit, action or proceeding at its own expense. The Indemnifying Party shall
not be liable under Section 10.2 for any settlement effected without its consent
of any claim, litigation or proceeding in respect of which indemnity may be
sought hereunder.

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ARTICLE 11

TERMINATION

11.1. GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Closing:

(a) by mutual written agreement of each Seller and Buyer;

(b) by either Sellers owning a majority of the Seller Shares or Buyer
if the Closing shall not have been consummated on or before the date which
is 60 days after the date hereof;

(c) by either Sellers owning a majority of the Seller Shares or Buyer
if there shall be any law or regulation that makes consummation of the
transactions contemplated hereby illegal or otherwise prohibited or if
consummation of the transactions contemplated hereby would violate any
nonappealable final order, decree or judgment of any court or governmental
body having competent jurisdiction; or

(d) by Sellers owning a majority of the Seller Shares or by Buyer, if
there has been a material misrepresentation or breach of warranty on the
part of Buyer (in the case of termination by such Sellers) or by Sellers
(in the case of termination by Buyer) in the representations and warranties
contained herein; or any condition to such party's obligations hereunder
becomes incapable of fulfillment through no fault of such party and is not
waived by such party.

The party desiring to terminate this Agreement shall give written notice of
such termination to each other party.

11.2. EFFECT OF TERMINATION. If this Agreement is terminated as permitted
by Section 11.1, termination shall be without liability of any party (or any
stockholder, director, officer, employee, agent, consultant or representative of
such party) to the other parties to this Agreement; provided that if such
termination shall result from the willful failure of any party to fulfill a
condition to the performance of the obligations of the other party parties,
failure to perform a covenant of this Agreement or breach by any party hereto of
any representation or warranty or agreement contained herein, such party shall
be fully liable for any and all Damages incurred or suffered by the other party
parties as a result of such failure or breach. The provisions of Sections 6.1
and 12.3 shall survive any termination hereof pursuant to Section 11.1.

ARTICLE 12

MISCELLANEOUS

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<PAGE>

12.1. NOTICES. All notices, requests and other Communications to any party
hereunder shall be in writing (including facsimile transmission) and shall be
given,

if to Buyer, to:

Charlotte Russe Holding, Inc.
c/o Saunders Karp & Megrue
667 Madison Avenue
New York, NY 10021
Attention: Allan Karp
Fax: (212) 755-1624

with a copy to:

Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: John Buttrick, Esq.
Fax: (212) 450-4800

if to any Seller, to such Seller at its address set forth on the signature
pages hereof with a copy to:

Latham & Watkins
701 "B" Street
Suite 2100
San Diego, California 92101
Attention: Scott N. Wolfe, Esq.
Fax: (619) 696-7419

All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.

12.2. AMENDMENTS AND WAIVERS. (a) Any provision of this Agreement may be
amended or waived prior to the Closing Date if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each party
to this Agreement, or in the case of a waiver, by the party against whom the
waiver is to be effective.

(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other

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<PAGE>

or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.

12.3. EXPENSES . All costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense.

12.4. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto except that Buyer may transfer or assign, in
whole or from time to time in part, to one or more of its wholly owned
Subsidiaries, the right to purchase all or a portion of the Seller Shares, but
no such transfer or assignment will relieve Buyer of its obligations hereunder.

12.5. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of New York, without regard to the
conflicts of law rules of such state. The parties agree that this Section 12.5
shall not confer the right for any party to bring any suit, action or proceeding
in any New York Court absent first resort to the provisions of Section 12.8.

12.6. COUNTERPARTS: THIRD PARTY BENEFICIARIES. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. No provision of this Agreement is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.

12.7. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and understandings, both oral and written, among
the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by any party hereto. Neither this
Agreement nor any provision hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.

12.8. ARBITRATION. (a) Any dispute arising out of or in connection with
this Agreement shall be submitted to arbitration. The arbitration shall be
conducted according to the Commercial Arbitration Rules of the American
Arbitration Association. The place of arbitration shall be Houston, Texas or
such other place as may be agreed upon by the parties. Both parties shall
attempt to agree upon one arbitrator, but if they are unable to agree, each
shall appoint an arbitrator and these two shall appoint a third arbitrator.
Expenses of the arbitrator(s) shall be divided equally between the parties.

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<PAGE>

(b) Judgment upon the award rendered by the arbitrator(s) may be entered in
any court having jurisdiction thereof.

12.9. SELLERS' REPRESENTATIVE. Each of the Sellers hereby makes,
constitutes and appoints irrevocably Daniel Lawrence as his true and lawful
attorney-in-fact and agent (the "Sellers' Representative") for the purpose of
receiving and providing notices, consents, approvals, disagreements and waivers
hereunder from and to each party hereto and agreeing to any amendments to this
Agreement and any calculations and agreements in respect of the Purchase Price
and adjustments thereto. On the resignation or disqualification of Daniel
Lawrence, the Sellers will, by a majority vote of the Seller's Percentage,
appoint a replacement Sellers' Representative.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

CHARLOTTE RUSSE HOLDING, INC.

By: /s/ Allan W. Karp
-----------------
Title: President

THE SELLERS

Number of
Seller Shares
- -------------

LMC 950 Frank Lawrence
LMCN 700
LMCN II 700
/s/ Frank Lawrence
------------------
7706 Hillside Drive
La Jolla, California 92037

LMC 100 Larry Lawrence
LMCN 700
LMCN II 700
/s/ Larry Lawrence
------------------
7706 Hillside Drive
La Jolla, California 92037

LMC 950 Daniel Lawrence
LMCN 700
LMCN II 700

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<PAGE>

/s/ Daniel Lawrence
-------------------
7706 Hillside Drive
La Jolla, California 92037

-41-

<PAGE>

CERTIFICATE OF INCORPORATION

CHARLOTTE RUSSE HOLDING, INC.

* * * * *

FIRST: The name of the Corporation is
Charlotte Russe Holding, Inc.

SECOND: The address of its registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange
Street, City of Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent at such address is The
Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended
("Delaware Law").

FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 100, and the par
value of each such share is $1.00, amounting in the aggregate to
$100.

FIFTH: The name and mailing address of the
incorporator are:

NAME MAILING ADDRESS

Donald A. Smith 450 Lexington Avenue
New York, New York 10017

The power of the incorporator as such shall terminate upon the
filing of this Certificate of Incorporation.

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<PAGE>

SIXTH: The names and mailing addresses of the persons who are to
serve as directors until the first annual meeting of stockholders or until
their successors are elected and qualified are:

Name Mailing Address
---- ---------------

David Oddi Saunders Karp & Co., L.P.
667 Madison Avenue
New York, N.Y. 10021

Allan Karp Saunders Karp & Co., L.P.
667 Madison Avenue
New York, N.Y. 10021

SEVENTH: The Board of Directors shall have the power to adopt, amend
or repeal the bylaws of the Corporation.

EIGHTH: Election of directors need not be by written ballot unless
the bylaws of the Corporation so provide.

NINTH: (1) A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director to the fullest extent permitted by Delaware Law.

(2)(a) Each person, (and the heirs, executors or administrators of
such person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by the Corporation to the fullest extent permitted
by Delaware Law. The right to indemnification conferred in this ARTICLE NINTH
shall also include the right to be paid by the Corporation the expenses incurred
in connection with any such proceeding in advance of its final disposition to
the fullest extent authorized by Delaware Law. The right to indemnification
conferred in this ARTICLE NINTH shall be a contract right.

(b) The Corporation may, by action of its Board of Directors, provide
indemnification to such of the officers, employees and agents of the Corporation
to such extent and to such effect as the Board of

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<PAGE>

Directors shall determine to be appropriate and authorized by Delaware Law.

(3) The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any expense, liability or loss
incurred by such person in any such capacity or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under Delaware Law.

(4) The rights and authority conferred in this ARTICLE NINTH shall
not be exclusive of any other right which any person may otherwise have or
hereafter acquire.

(5) Neither the amendment nor repeal of this ARTICLE NINTH, nor the
adoption of any provision of this Certificate of Incorporation or the bylaws of
the Corporation, nor, to the fullest extent permitted by Delaware Law, any
modification of law, shall eliminate or reduce the effect of this ARTICLE NINTH
in respect of any acts or omissions occurring prior to such amendment, repeal,
adoption or modification.

TENTH: The Corporation reserves the right to amend this Certificate
of Incorporation in any manner permitted by Delaware Law and, with the sole
exception of those rights and powers conferred under the above ARTICLE NINTH,
all rights and powers conferred herein on stockholders, directors and officers,
if any, are subject to this reserved power.

IN WITNESS WHEREOF, I have hereunto signed my name this
30th day of July, 1996.

/s/ DONALD A. SMITH
-------------------
Donald A. Smith

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<PAGE>

CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
CHARLOTTE RUSSE HOLDING, INC.

It is hereby certified that:

1. The name of the corporation (hereinafter called the
"corporation") is Charlotte Russe Holding, Inc.

2. The certificate of incorporation of the corporation is hereby
amended by striking out Article Fourth thereof and by substituting in lieu of
said Article the following new Article:

"The total number of shares of which the Corporation shall have the
authority to issue is 250,000, and the par value of each share is
$1.00, amounting in the aggregate to $250,000."

3. The amendment of the certificate of incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware

Signed on September 23, 1996.

/s/ DAVID ODDI
-------------------------
David Oddi
Vice President

<PAGE>

Exhibit 3.3

BYLAWS

CHARLOTTE RUSSE HOLDING, INC.

* * * * *

ARTICLE I.

OFFICES

Section 1. REGISTERED OFFICE. The registered office shall be in
the City of Wilmington, County of New Castle, State of Delaware.

Section 2. OTHER OFFICES. The Corporation may also have offices
at such other places both within and without the State of Delaware as the Board
of Directors may from time to time determine or the business of the Corporation
may require.

Section 3. BOOKS. The books of the Corporation may be kept within
or without of the State of Delaware as the Board of Directors may from time to
time determine or the business of the Corporation may require.

ARTICLE II.

MEETINGS OF STOCKHOLDERS

Section 1. TIME AND PLACE OF MEETINGS. All meetings of
stockholders shall be held at such place, either within or without the State of
Delaware, on such date and at such time as may be determined from time to time
by the Board of Directors (or the Chairman in the absence of a designation by
the Board of Directors).

Section 2. ANNUAL MEETINGS. Annual meetings of stockholders,
commencing with the year 1996, shall be held to elect the Board of Directors and
transact such other business as may properly be brought before the meeting.

Section 3. SPECIAL MEETINGS. Special meetings of stockholders may
be called by the Board of Directors or the chairman of the Board and shall be
called by the Secretary at the request in writing of holders of record of a
majority of the outstanding capital stock of the Corporation entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.

<PAGE>

Section 4. NOTICE OF MEETING AND ADJOURNED MEETINGS; WAIVERS
OF NOTICE.

(a) Whenever stockholders are required or permitted to take any
action at a meeting, a written notice of the meeting shall be given which shall
state the place, date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called. Unless
otherwise provided by the General Corporation Law of the State of Delaware as
the same exists or may hereafter be amended ("Delaware Law"), such notice shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder of record entitled to vote at such meeting. Unless these
bylaws otherwise require, when a meeting is adjourned to another time or place
(whether or not a quorum is present), notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may transact
any business which might have been transacted at the original meeting. If the
adjournment is for more than 30 days, or after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.

(b) A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.

Section 5. QUORUM. Unless otherwise provided under the
certificate of incorporation or these bylaws and subject to Delaware Law, the
presence, in person or by proxy, of the holders of a majority of the outstanding
capital stock of the Corporation entitled to vote at a meeting of stockholders
shall constitute a quorum for the transaction of business.

Section 6. VOTING.

(a) Unless otherwise provided in the certificate of incorporation and
subject to Delaware Law, each stockholder shall be entitled to one vote for each
outstanding share of capital stock of the Corporation held by such stockholder.
Unless otherwise provided in Delaware Law, the certificate of incorporation or
these bylaws, the affirmative vote of a majority of the shares of capital stock
of the Corporation present, in person or by proxy, at a meeting of stockholders
and entitled to vote on the subject matter shall be the act of the stockholders.

(b) Each stockholder entitled to vote at a meeting of stockholders or
to express consent or dissent to a corporate action in writing without a meeting
may authorize another person or persons to act for him by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period.

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<PAGE>

Section 7. ACTION BY CONSENT.

(a) Unless otherwise provided in the certificate of incorporation,
any action required to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent or consents in writing, setting forth the action so
taken, shall be signed by the holders of outstanding capital stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.

(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered in the manner required by this Section and
Delaware Law to the Corporation, written consents signed by a sufficient number
of holders to take action are delivered to the Corporation by delivery to its
registered office in Delaware, its principal place of business, or an officer or
agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery made to the Corporation's
registered office shall be by hand or by certified or registered mail, return
receipt requested.

Section 8. ORGANIZATION. At each meeting of stockholders, the
Chairman of the Board, if one shall have been elected, (or in his absence or if
one shall not have been elected, the President) shall act as chairman of the
meeting. The Secretary (or in his absence or inability to act, the person whom
the chairman of the meeting shall appoint secretary of the meeting) shall act as
secretary of the meeting and keep the minutes thereof.

Section 9. ORDER OF BUSINESS. The order of business at all
meetings of stockholders shall be as determined by the chairman of the meeting.

ARTICLE III.

DIRECTORS

Section 1. GENERAL POWERS. Except as otherwise provided in
Delaware Law or the certificate of incorporation, the business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors.

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<PAGE>

Section 2. NUMBER, ELECTION AND TERM OF OFFICE. The number of
directors which shall constitute the whole Board shall be fixed from time to
time by resolution of the Board of Directors but shall not be less than three
nor more than seven. The directors shall be elected at the annual meeting of
the stockholders, except as provided in Section 12 of this Article III, and each
director so elected shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal. Directors need
not be stockholders.

Section 3. QUORUM AND MANNER OF ACTING. Unless the certificate of
incorporation or these bylaws require a greater number, a majority of the total
number of directors shall constitute a quorum for the transaction of business,
and the affirmative vote of a majority of the directors present at meeting at
which a quorum is present shall be the act of the Board of Directors. When a
meeting is adjourned to another time or place (whether or not a quorum is
present), notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting, the Board of Directors may transact any business which
might have been transacted at the original meeting. If a quorum shall not be
present at any meeting of the Board of directors the directors present thereat
may adjourn the meeting, from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.

Section 4. TIME AND PLACE OF MEETINGS. The Board of Directors
shall hold its meetings at such place, either within or without the State of
Delaware, and at such time as may be determined from time to time by the Board
of Directors (or the Chairman in the absence of a determination by the Board of
Directors).

Section 5. ANNUAL MEETING. The Board of Directors shall meet for
the purpose of organization, the election of officers and the transaction of
other business, as soon as practicable after each annual meeting of
stockholders, on the same day and at the same place where such annual meeting
shall be held. Notice of such meeting need not be given. In the event such
annual meeting is not so held, the annual meeting of the Board of Directors may
be held at such place either within or without the State of Delaware, on such
date and at such time as shall be specified in a notice thereof given as
hereinafter provided in Section 7 of this Article III or in a waiver of notice
thereof signed by any director who chooses to waive the requirement of notice.

Section 6. REGULAR MEETINGS. After the place and time of regular
meetings of the Board of Directors shall have been determined and notice thereof
shall have been once given to each member of the Board of Directors, regular
meetings may be held without further notice being given.

Section 7. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or the President and shall
be called by the Chairman of the Board, President or Secretary on the written
request of three directors. Notice of special

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<PAGE>

meetings of the Board of Directors shall be given to each director at least
three days before the date of the meeting in such manner as is determined by
the Board of Directors.

Section 8. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the Corporation's property and
assets, recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the bylaws of the Corporation; and
unless the resolution of the Board of Directors or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Each
committee shall keep regular minutes of its meetings and report the same to the
Board of Directors when required.

Section 9. ACTION BY CONSENT. Unless otherwise restricted by the
certificate of incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.

Section 10. TELEPHONIC MEETINGS. Unless otherwise restricted by
the certificate of incorporation or these bylaws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or such committee, as the
case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.

Section 11. RESIGNATION. Any director may resign at any time by
giving written notice to the Board of Directors or to the Secretary of the
Corporation. The resignation of any director shall take effect upon receipt of
notice thereof or at such later time as shall be specified in such notice; and
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.

Section 12. VACANCIES. Unless otherwise provided in the
certificate of incorporation, vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
the stockholders having the right to vote as a single

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<PAGE>

class may be filled by a majority of the directors then in office, although
less than a quorum, or by a sole remaining director. Whenever the holders of
any class or classes of stock or series thereof are entitled to elect one or
more directors by the certificate of incorporation, vacancies and newly
created directorships of such class or classes or series may be filled by a
majority of directors elected by such class or classes or series thereof then
in office, or by a sole remaining director so elected. Each director so
chosen shall hold office until his successor is elected and qualified, or
until his earlier death, resignation or removal. If there are no directors
in office, then an election of directors may be held in accordance with
Delaware Law. Unless otherwise provided in the certificate of incorporation,
when one or more directors shall resign from the Board, effective at a future
date, a majority of the directors then in office, including those who have so
resigned, shall have the power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in the
filling of other vacancies.

Section 13. REMOVAL. Any director or the entire Board of Directors
may be removed, with or without cause, at any time by the affirmative vote of
the holders of a majority of the outstanding capital stock of the Corporation
entitled to vote and the vacancies thus created may be filled in accordance with
Section 12 of this Article III.

Section 14. COMPENSATION. Unless otherwise restricted by the
certificate of incorporation or these bylaws, the Board of Directors shall have
authority to fix the compensation of directors, including fees and reimbursement
of expenses.

ARTICLE IV.

OFFICERS

Section 1. PRINCIPAL OFFICERS. The principal officers of the
Corporation shall be a President, one or more Vice Presidents, a Treasurer and a
Secretary who shall have the duty, among other things, to record the proceedings
of the meetings of stockholders and directors in a book kept for that purpose.
The Corporation may also have such other principal officers, including one or
more Controllers, as the Board may in its discretion appoint. One person may
hold the offices and perform the duties of any two or more of said offices,
except that no one person shall hold the offices and perform the duties of
President and Secretary.

Section 2. ELECTION, TERM OF OFFICE AND REMUNERATION. The
principal officers of the Corporation shall be elected annually by the Board of
Directors at the annual meeting thereof. Each such officer shall hold office
until his successor is elected and qualified, or until his earlier death,
resignation or removal. The remuneration of all officers of the Corporation
shall be fixed by the Board of Directors. Any vacancy in any office shall be
filled in such manner as the Board of Directors shall determine.

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<PAGE>

Section 3. SUBORDINATE OFFICERS. In addition to the principal
officers enumerated in Section 1 of this Article IV, the Corporation may have
one or more Assistant Treasurers, Assistant Secretaries and Assistant
Controllers and such other subordinate officers, agents and employees as the
Board of Directors may deem necessary, each of whom shall hold office for such
period as the Board of Directors may from time to time determine. The Board of
Directors may delegate to any principal officer the power to appoint and to
remove any such subordinate officers, agents or employees.

Section 4. REMOVAL. Except as otherwise permitted with respect to
subordinate officers, any officer may be removed, with or without cause, at any
time, by resolution adopted by the Board of Directors.

Section 5. RESIGNATIONS. Any officer may resign at any time by
giving written notice to the Board of Directors (or to a principal officer if
the Board of Directors has delegated to such principal officer the power to
appoint and to remove such officer). The resignation of any officer shall take
effect upon receipt of notice thereof or at such later time as shall be
specified in such notice; and unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make it effective.

Section 6. POWERS AND DUTIES. The officers of the Corporation
shall have such powers and perform such duties incident to each of their
respective offices and such other duties as may from time to time be conferred
upon or assigned to them by the Board of Directors.

ARTICLE V.

GENERAL PROVISIONS

Section 1. FIXING THE RECORD DATE.

(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than 60 nor less than 10 days before the date of such meeting. If no record
date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; PROVIDED that the Board of Directors
may fix a new record date for the adjourned meeting.

-7-

<PAGE>

(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required by Delaware Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the Corporation having custody of
the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the Corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the Board of Directors and prior action by the Board of Directors
is required by Delaware Law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.

(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than 60 days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.

Section 2. DIVIDENDS. Subject to limitations contained in
Delaware Law and the certificate of incorporation, the Board of Directors may
declare and pay dividends upon the shares of capital stock of the Corporation,
which dividends may be paid either in cash, in property or in shares of the
capital stock of the Corporation.

Section 3. FISCAL YEAR. The fiscal year of the Corporation shall
commence on the day after the last Saturday in September of each year.

Section 4. CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed, affixed or otherwise reproduced.

Section 5. VOTING OF STOCK OWNED BY THE CORPORATION. The Board of
Directors may authorize any person, on behalf of the Corporation, to attend,
vote at and grant

-8-

<PAGE>

proxies to be used at any meeting of stockholders of any corporation (except
this Corporation) in which the Corporation may hold stock.

Section 6. AMENDMENTS. These bylaws or any of them, may be
altered, amended or repealed, or new bylaws may be made, by the stockholders
entitled to vote thereon at any annual or special meeting thereof or by the
Board of Directors.

-9-

<PAGE>

CHARLOTTE RUSSE, INC.

SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT

DATED as of December 23, 1998

among

CHARLOTTE RUSSE, INC., as Borrower,
CHARLOTTE RUSSE HOLDING, INC., as Guarantor
BANKBOSTON, N.A., as Agent,

and

THE BANKS
listed on SCHEDULE 1 hereto

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION.. . . . . . . . . . . . . . . . . 1
1.1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. RULES OF INTERPRETATION. . . . . . . . . . . . . . . . . . . . .17
2. THE REVOLVING CREDIT FACILITY.. . . . . . . . . . . . . . . . . . . . . .18
2.1. COMMITMENT TO LEND.. . . . . . . . . . . . . . . . . . . . . . .18
2.2. COMMITMENT FEE.. . . . . . . . . . . . . . . . . . . . . . . . .18
2.3. REDUCTION OF TOTAL COMMITMENT. . . . . . . . . . . . . . . . . .19
2.3.1. MANDATORY REDUCTION OF TOTAL COMMITMENT. . . . . . . .19
2.3.2. OPTION OF REDUCTION OF TOTAL COMMITMENT. . . . . . . .19
2.4. THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.5. INTEREST ON LOANS. . . . . . . . . . . . . . . . . . . . . . . .20
2.6. REQUESTS FOR LOANS.. . . . . . . . . . . . . . . . . . . . . . .20
2.6.1. GENERAL. . . . . . . . . . . . . . . . . . . . . . . .20
2.6.2. LOANS TO REPAY UNPAID REIMBURSEMENT OBLIGATIONS. . . .21
2.7. CONVERSION OPTIONS.. . . . . . . . . . . . . . . . . . . . . . .21
2.7.1. CONVERSION TO DIFFERENT TYPE OF LOAN.. . . . . . . . .21
2.7.2. CONTINUATION OF TYPE OF LOAN.. . . . . . . . . . . . .22
2.7.3. EURODOLLAR RATE LOANS. . . . . . . . . . . . . . . . .22
2.8. FUNDS FOR LOANS. . . . . . . . . . . . . . . . . . . . . . . . .22
2.8.1. FUNDING PROCEDURES.. . . . . . . . . . . . . . . . . .22
2.8.2. ADVANCES BY AGENT. . . . . . . . . . . . . . . . . . .22
3. REPAYMENT OF THE LOANS. . . . . . . . . . . . . . . . . . . . . . . . . .23
3.1. MATURITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
3.2. MANDATORY REPAYMENTS OF LOANS. . . . . . . . . . . . . . . . . .23
3.3. OPTIONAL REPAYMENTS OF LOANS.. . . . . . . . . . . . . . . . . .24
4. LETTERS OF CREDIT.. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
4.1. LETTER OF CREDIT COMMITMENTS.. . . . . . . . . . . . . . . . . .24
4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. . . . . . . . .24
4.1.2. LETTER OF CREDIT APPLICATIONS. . . . . . . . . . . . .24
4.1.3. TERMS OF LETTERS OF CREDIT.. . . . . . . . . . . . . .25
4.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS.. . . . . . . . . .25
4.1.5. PARTICIPATIONS OF BANKS. . . . . . . . . . . . . . . .25
4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER.. . . . . . . . . . . .25
4.3. LETTER OF CREDIT PAYMENTS. . . . . . . . . . . . . . . . . . . .26
4.4. OBLIGATIONS ABSOLUTE.. . . . . . . . . . . . . . . . . . . . . .27
4.5. RELIANCE BY ISSUER.. . . . . . . . . . . . . . . . . . . . . . .27
4.6. LETTER OF CREDIT FEE.. . . . . . . . . . . . . . . . . . . . . .27
5. CERTAIN GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .28
5.1. FEES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.1.1. AGENT'S FEE. . . . . . . . . . . . . . . . . . . . . .28
5.1.2. CLOSING FEE. . . . . . . . . . . . . . . . . . . . . .28
</TABLE>

<PAGE>

-ii-

<TABLE>
<S> <C>
5.2. FUNDS FOR PAYMENTS.. . . . . . . . . . . . . . . . . . . . . . .28
5.2.1. PAYMENTS TO AGENT. . . . . . . . . . . . . . . . . . .28
5.2.2. NO OFFSET, ETC.. . . . . . . . . . . . . . . . . . . .29
5.3. COMPUTATIONS.. . . . . . . . . . . . . . . . . . . . . . . . . .29
5.4. INABILITY TO DETERMINE EURODOLLAR RATE.. . . . . . . . . . . . .29
5.5. ILLEGALITY.. . . . . . . . . . . . . . . . . . . . . . . . . . .30
5.6. CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . . .30
5.7. CAPITAL ADEQUACY.. . . . . . . . . . . . . . . . . . . . . . . .31
5.8. CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . . . .31
5.9. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
5.10. INTEREST AFTER EVENT OF DEFAULT.. . . . . . . . . . . . . . . .32
6. COLLATERAL SECURITY AND GUARANTIES. . . . . . . . . . . . . . . . . . . .32
7. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . .32
7.1. INCORPORATION; GOOD STANDING; AUTHORIZATION. . . . . . . . . . .32
7.2. ENFORCEABILITY.. . . . . . . . . . . . . . . . . . . . . . . . .33
7.3. TITLE TO PROPERTIES; FRANCHISES, INTELLECTUAL PROPERTY;
CONSENT; NO CONFLICT; INSURANCE.. . . . . . . . . . . . . . . . . . . .33
7.4. FISCAL YEAR; FINANCIAL STATEMENTS AND FORECAST.. . . . . . . . .33
7.5. NO MATERIAL CHANGES, ETC.. . . . . . . . . . . . . . . . . . . .33
7.6. LITIGATION.. . . . . . . . . . . . . . . . . . . . . . . . . . .33
7.7. CONSENTS; NO CONFLICT. . . . . . . . . . . . . . . . . . . . . .34
7.8. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.. . . . . . . . . .34
7.9. PERFECTION OF SECURITY INTEREST; ABSENCE OF FINANCING
STATEMENTS, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
7.10. SUBSIDIARIES, ETC.. . . . . . . . . . . . . . . . . . . . . . .34
7.11. BANK ACCOUNTS.. . . . . . . . . . . . . . . . . . . . . . . . .34
7.12. SENIOR INDEBTEDNESS.. . . . . . . . . . . . . . . . . . . . . .34
7.13. STATUS OF GUARANTOR.. . . . . . . . . . . . . . . . . . . . . .35
7.14. NO DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . .35
7.15. CAPITAL STRUCTURE.. . . . . . . . . . . . . . . . . . . . . . .35
7.16. USE OF PROCEEDS.. . . . . . . . . . . . . . . . . . . . . . . .35
7.16.1. GENERAL.. . . . . . . . . . . . . . . . . . . . . . .35
7.16.2. REGULATIONS U AND X.. . . . . . . . . . . . . . . . .35
8. AFFIRMATIVE COVENANTS OF THE BORROWER AND THE GUARANTOR.. . . . . . . . .35
8.1. PUNCTUAL PAYMENT.. . . . . . . . . . . . . . . . . . . . . . . .35
8.2. FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATE; BUDGET.. . . . . .36
8.3. BOOKS AND RECORDS; FISCAL YEAR; INSPECTIONS; COMMERCIAL
FINANCE EXAMINATIONS. . . . . . . . . . . . . . . . . . . . . . . . . .36
8.4. MAINTENANCE OF EXISTENCE, RIGHTS, FRANCHISES, ETC.;
MAINTENANCE OF PROPERTIES, ETC .. . . . . . . . . . . . . . . . . . . .36
8.5. INSURANCE; CHIEF EXECUTIVE OFFICE; COMPLIANCE WITH LAW;
PAYMENT OF TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . .37
8.6. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
</TABLE>

<PAGE>

-iii-

<TABLE>
<S> <C>
8.7. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . .38
8.8. AGENCY ACCOUNT AGREEMENTS. . . . . . . . . . . . . . . . . . . .38
8.9. FURTHER ASSURANCES.. . . . . . . . . . . . . . . . . . . . . . .38
8.10. POST-CLOSING MATTERS.. . . . . . . . . . . . . . . . . . . . . .39
8.11. AGREEMENTS REGARDING LOAN TO MR. ZEICHNER. . . . . . . . . . . .39
9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER AND THE GUARANTOR. . . . . . .39
9.1. RESTRICTIONS ON INDEBTEDNESS.. . . . . . . . . . . . . . . . . .39
9.2. RESTRICTIONS ON LIENS. . . . . . . . . . . . . . . . . . . . . .41
9.3. RESTRICTIONS ON SUBSIDIARIES AND INVESTMENTS.. . . . . . . . . .42
9.4. DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . .43
9.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS. . . . . . . . .43
9.5.1. MERGERS AND ACQUISITIONS.. . . . . . . . . . . . . . .43
9.5.2. DISPOSITION OF ASSETS. . . . . . . . . . . . . . . . .44
9.6. SALE AND LEASEBACK.. . . . . . . . . . . . . . . . . . . . . . .44
9.7. GUARANTIES.. . . . . . . . . . . . . . . . . . . . . . . . . . .45
9.8. SUBORDINATED DEBT. . . . . . . . . . . . . . . . . . . . . . . .45
9.9. BUSINESS ACTIVITIES. . . . . . . . . . . . . . . . . . . . . . .45
9.10. FISCAL YEAR.. . . . . . . . . . . . . . . . . . . . . . . . . .45
9.11. TRANSACTIONS WITH AFFILIATES. . . . . . . . . . . . . . . . . .45
9.12. BANK ACCOUNTS.. . . . . . . . . . . . . . . . . . . . . . . . .46
9.13. RESTRUCTURING AGREEMENTS. . . . . . . . . . . . . . . . . . . .46
10. FINANCIAL COVENANTS OF THE BORROWER. . . . . . . . . . . . . . . . . . .46
10.1. CAPITAL EXPENDITURES. . . . . . . . . . . . . . . . . . . . . .46
10.2. FUNDED DEBT TO EBITDA.. . . . . . . . . . . . . . . . . . . . .46
10.3. FIXED CHARGE RATIO. . . . . . . . . . . . . . . . . . . . . . .47
10.4. INTEREST COVERAGE RATIO.. . . . . . . . . . . . . . . . . . . .47
10.5. INVENTORY TURN RATIO. . . . . . . . . . . . . . . . . . . . . .47
11. CLOSING CONDITIONS.. . . . . . . . . . . . . . . . . . . . . . . . . . .48
11.1. LOAN DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . .48
11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS.. . . . . . . . . . . . .48
11.3. CORPORATE ACTION. . . . . . . . . . . . . . . . . . . . . . . .48
11.4. INCUMBENCY CERTIFICATE. . . . . . . . . . . . . . . . . . . . .48
11.5. VALIDITY OF LIENS.. . . . . . . . . . . . . . . . . . . . . . .49
11.6. PERFECTION CERTIFICATES.. . . . . . . . . . . . . . . . . . . .49
11.7. CERTIFICATES OF INSURANCE.. . . . . . . . . . . . . . . . . . .49
11.8. AGENCY ACCOUNT AGREEMENTS.. . . . . . . . . . . . . . . . . . .49
11.9. SOLVENCY CERTIFICATE. . . . . . . . . . . . . . . . . . . . . .49
11.10. OPINIONS OF COUNSEL. . . . . . . . . . . . . . . . . . . . . .49
11.11. PAYMENT OF FEES. . . . . . . . . . . . . . . . . . . . . . . .50
11.12. POST-CLOSING MATTERS . . . . . . . . . . . . . . . . . . . . .50
12. CONDITIONS TO ALL BORROWINGS.. . . . . . . . . . . . . . . . . . . . . .50
12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT.. . . . . . . . . . .50
12.2. NO LEGAL IMPEDIMENT.. . . . . . . . . . . . . . . . . . . . . .50
</TABLE>

<PAGE>

-iv-

<TABLE>
<S> <C>
13. EVENTS OF DEFAULT; ACCELERATION; ETC.. . . . . . . . . . . . . . . . . .50
13.1. EVENTS OF DEFAULT AND ACCELERATION. . . . . . . . . . . . . . .50
13.2. TERMINATION OF COMMITMENTS. . . . . . . . . . . . . . . . . . .53
13.3. REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . .53
13.4. DISTRIBUTION OF COLLATERAL PROCEEDS.. . . . . . . . . . . . . .53
14. SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
15. THE AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55
15.1. AUTHORIZATION.. . . . . . . . . . . . . . . . . . . . . . . . .55
15.2. EMPLOYEES AND AGENTS. . . . . . . . . . . . . . . . . . . . . .56
15.3. NO LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . . .56
15.4. NO REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . .56
15.4.1. GENERAL.. . . . . . . . . . . . . . . . . . . . . . .56
15.4.2. CLOSING DOCUMENTATION, ETC. . . . . . . . . . . . . .57
15.5. PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .57
15.5.1. PAYMENTS TO AGENT.. . . . . . . . . . . . . . . . . .57
15.5.2. DISTRIBUTION BY AGENT.. . . . . . . . . . . . . . . .57
15.5.3. DELINQUENT BANKS. . . . . . . . . . . . . . . . . . .57
15.6. HOLDERS OF NOTES. . . . . . . . . . . . . . . . . . . . . . . .58
15.7. INDEMNITY.. . . . . . . . . . . . . . . . . . . . . . . . . . .58
15.8. AGENT AS BANK.. . . . . . . . . . . . . . . . . . . . . . . . .58
15.9. RESIGNATION.. . . . . . . . . . . . . . . . . . . . . . . . . .58
15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT.. . . . . . . .59
15.11. DUTIES IN THE CASE OF ENFORCEMENT. . . . . . . . . . . . . . .59
16. EXPENSES AND INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . .59
16.1. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . .59
16.2. INDEMNIFICATION.. . . . . . . . . . . . . . . . . . . . . . . .60
16.3. SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . . .61
17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. . . . . . . . . . . . . .61
17.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY.. . . . . . .61
17.2. CONFIDENTIALITY.. . . . . . . . . . . . . . . . . . . . . . . .61
17.3. PRIOR NOTIFICATION. . . . . . . . . . . . . . . . . . . . . . .62
17.4. OTHER.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
18. SURVIVAL OF COVENANTS, ETC.. . . . . . . . . . . . . . . . . . . . . . .62
19. ASSIGNMENT AND PARTICIPATION.. . . . . . . . . . . . . . . . . . . . . .63
19.1. CONDITIONS TO ASSIGNMENT BY BANKS.. . . . . . . . . . . . . . .63
19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS;
COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63
19.3. REGISTER. . . . . . . . . . . . . . . . . . . . . . . . . . . .64
19.4. NEW NOTES.. . . . . . . . . . . . . . . . . . . . . . . . . . .65
19.5. PARTICIPATIONS. . . . . . . . . . . . . . . . . . . . . . . . .65
19.6. DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . .65
19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER OR
THE GUARANTOR.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .66
19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS.. . . . . . . . . . . . . .66
</TABLE>

<PAGE>

-v-

<TABLE>
<S> <C>
19.9. ASSIGNMENT BY BORROWER OR GUARANTOR.. . . . . . . . . . . . . .66
20. NOTICES, ETC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
21. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67
22. HEADINGS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
23. COUNTERPARTS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
24. ENTIRE AGREEMENT, ETC. . . . . . . . . . . . . . . . . . . . . . . . . .68
25. WAIVER OF JURY TRIAL.. . . . . . . . . . . . . . . . . . . . . . . . . .68
26. CONSENTS, AMENDMENTS, WAIVERS, ETC.. . . . . . . . . . . . . . . . . . .69
27. SEVERABILITY.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
28. TRANSITIONAL ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . .69
28.1. FIRST RESTATED CREDIT AGREEMENT SUPERSEDED. . . . . . . . . . .69
28.2. RETURN AND CANCELLATION OF NOTES. . . . . . . . . . . . . . . .70
28.3. FEES UNDER SUPERSEDED AGREEMENT.. . . . . . . . . . . . . . . .70
</TABLE>

<PAGE>

-vi-

LIST OF SCHEDULES

SCHEDULE 1 - Banks

SCHEDULE 1.1(a) - Restructuring Transactions

SCHEDULE 7.4 - Fiscal Periods

SCHEDULE 7.7 - Consents

SCHEDULE 7.11 - Bank Accounts

SCHEDULE 7.15 - Capital Structure

SCHEDULE 9.1 - Existing Indebtedness

SCHEDULE 9.2 - Existing Liens

<PAGE>

-vii-

LIST OF EXHIBITS

EXHIBIT A - Form of Agency Account Agreement

EXHIBIT B - Form of Amended and Restated Revolving Credit Note

EXHIBIT C - Form of Loan Request

EXHIBIT D - Form of Compliance Certificate

EXHIBIT E - Form of Assignment and Acceptance

<PAGE>

SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT

This SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made as of
December 23, 1998, by and among CHARLOTTE RUSSE, INC. (the "Borrower"), a
California corporation having its principal place of business at 4645 Morena
Boulevard, San Diego, California 92117, CHARLOTTE RUSSE HOLDING, INC., (the
"Guarantor"), a Delaware corporation, BANKBOSTON, N.A., a national banking
association, and the other lending institutions listed on SCHEDULE 1, and
BANKBOSTON, N.A., as agent for itself and such other lending institutions.

1. DEFINITIONS AND RULES OF INTERPRETATION.

1.1. DEFINITIONS. The following terms shall have the meanings set forth
in this Section 1 or elsewhere in the provisions of this Credit Agreement
referred to below:

ADMINISTRATION CONTRIBUTION AGREEMENT. The Capital
Contribution/Incorporation Agreement dated as of September 25, 1998 between the
Borrower and Charlotte Russe Administration, as in effect on the Closing Date.

AFFILIATE. Any Person that would be considered to be an affiliate of the
Borrower or the Guarantor under Rule 144(a) of the Rules and Regulations of the
Securities and Exchange Commission, as in effect on the date hereof, if the
Borrower or the Guarantor were issuing securities.

AGENCY ACCOUNT AGREEMENT. The several Agency Account Agreements, in
substantially the form of EXHIBIT A, entered into by any of the Transaction
Parties, the Agent and any depository institutions at which such Transaction
Party maintains depository accounts, subject to the requirements of Section 8.8.

AGENT'S FEE LETTER. The side letter dated as of the date hereof between
the Borrower and the Agent regarding the Borrower's payment of an annual Agent's
fee.

AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent or
its successor in such capacity may designate from time to time as its head
office.

AGENT. BankBoston, N.A. (or its successor, in such capacity), acting as
agent for the Banks.

AGENT'S SPECIAL COUNSEL. Bingham Dana LLP or such other counsel as may be
approved by the Agent.

<PAGE>

-2-

APPLICABLE BASE RATE MARGIN. For any fiscal quarter or period thereof
within any Interest Period with respect to any Base Rate Loan, three quarters of
one percent (.75%) per annum; PROVIDED, HOWEVER, that from and after the Agent's
receipt of the financial statements required by Section 8.2 for the fiscal
quarter of the Borrower and the Guarantor ending March 27, 1999 and in the event
that the Interest Coverage Ratio as of the last day of any fiscal quarter
referred to above meets the requirements set forth in the chart below, the
Applicable Base Rate Margin shall be adjusted, on the dates and for the periods
set forth in the paragraph below, to the percentage set forth opposite the
applicable Interest Coverage Ratio in the table below:

<TABLE>
<CAPTION>
Interest
Coverage Ratio Applicable Base Rate Margin
-------------- ---------------------------
<S> <C>
Less than or equal to 2.00:1.00 1.00%
Greater than 2.00:1.00 and less
than or equal to 3.00:1.00 0.75%
Greater than 3.00:1.00 and less
than or equal to 3.50:1.00 0.50%
Greater than 3.50:1.00 0.25%
</TABLE>

Changes in the Applicable Base Rate Margin resulting from changes in the
Interest Coverage Ratio shall become effective on the date on the 10th day after
which financial statements are received by the Agent pursuant to Section 8.2
(but with such receipt in no event to be later than the 45th day after the end
of each of the first three quarterly periods of each fiscal year or the 100th
day after the end of each fiscal year, as the case may be) and shall remain in
effect until the next change to be effected pursuant to this paragraph. If any
financial statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, the
Applicable Base Rate Margin as at the end of the fiscal period that would have
been covered thereby shall, for the purposes of this definition, be deemed to be
1.00%. In addition, at all times while an Event of Default shall have occurred
and be continuing, the Applicable Base Rate Margin shall for the purposes of
this definition be deemed to be 1.00%. Each determination of the Interest
Coverage Ratio pursuant to this definition shall be made with respect to the
period of four consecutive fiscal quarters of the Borrower ending at the end of
the period covered by the relevant financial statements.

APPLICABLE EURODOLLAR RATE MARGIN. For any fiscal quarter or period
thereof within any Interest Period with respect to a Eurodollar Rate Loan, two
and one half percent (2.50%) per annum; PROVIDED, HOWEVER, that from and after
the Agent's receipt of the financial statements required by Section 8.2 for the
fiscal quarter of the Borrower and the Guarantor ending March 27, 1999 and in
the event that the Interest Coverage Ratio as of the last day of any fiscal
quarter referred to above meets the requirements set forth in the chart below,
the Applicable Eurodollar Rate Margin shall be adjusted, on the dates and for
the

<PAGE>

-3-

periods set forth in the paragraph below, to the percentage set forth opposite
the applicable Interest Coverage Ratio in the table below:

<TABLE>
<CAPTION>
Interest
Coverage Ratio Applicable Eurodollar Rate Margin
-------------- ---------------------------------
<S> <C>
Less than or equal to 2.00:1.00 2.75%
Greater than 2.00:1.00 and less than
or equal to 3.00:1.00 2.50%
Greater than 3.00:1.00 and less than
or equal to 3.50:1.00 2.25%
Greater than 3.50:1.00 2.00%
</TABLE>

Changes in the Applicable Eurodollar Rate Margin resulting from changes in the
Interest Coverage Ratio shall become effective on the 10th day after the date on
which financial statements are received by the Agent pursuant to Section 8.2
(but with such receipt in no event to be later than the 45th day after the end
of each of the first three quarterly periods of each fiscal year or the 100th
day after the end of each fiscal year, as the case may be) and shall remain in
effect until the next change to be effected pursuant to this paragraph. If any
financial statements referred to above are not delivered within the time periods
specified above, then, until such financial statements are delivered, the
Applicable Eurodollar Rate Margin as at the end of the fiscal period that would
have been covered thereby shall, for the purposes of this definition, be deemed
to be 2.75%. In addition, at all times while an Event of Default shall have
occurred and be continuing, the Applicable Eurodollar Rate Margin shall for the
purposes of this definition be deemed to be 2.75%. Each determination of the
Interest Coverage Ratio pursuant to this definition shall be made with respect
to the period of four consecutive fiscal quarters of the Borrower ending at the
end of the period covered by the relevant financial statements.

ASSIGNMENT AND ACCEPTANCE. See Section 19.1.

BALANCE SHEET DATE. September 27, 1997.

BANKRUPTCY COURT ORDER. (i) The Revised Amended Order Granting Debtor's
Motion For Order Authorizing (1) Sale of Business Assets Free and Clear of
Liens, Claims and Encumbrances Outside The Ordinary Course of Business; and (2)
Assumption and Assignment of Real and Personal Property Leases In Connection
Therewith; Except With Respect to the Taubman Company Re: Store 2064 (Beverly
Center) and (ii) the Revised Order Granting Debtors' Motion for Order
Authorizing (1) Sale of Leasehold Interest In, and (2) Assumption and Assignment
of Real Property Lease With the Taubman Company of Store 2064 (Beverly Center),
each entered by the United States Bankruptcy Court for the Central District of
California in Case No. LA 97-34276-SB on September 29, 1997.

<PAGE>

-4-

BANKS. BKB and the other lending institutions listed on SCHEDULE 1 hereto
and any other Person who or which becomes an assignee of any rights and
obligations of a Bank pursuant to Section 19.

BASE RATE. The higher of (i) the annual rate of interest announced from
time to time by BKB at its head office in Boston, Massachusetts, as its "base
rate" and (ii) one-half of one percent (1/2%) above the Federal Funds Effective
Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall
mean for any day, the rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three funds brokers of recognized
standing selected by the Agent.

BASE RATE LOANS. Loans bearing interest calculated by reference to the Base
Rate.

BKB. BankBoston, N.A. (f/k/a The First National Bank of Boston), a
national banking association, in its individual capacity.

BORROWER. As defined in the preamble hereto.

BORROWER STOCK PLEDGE AGREEMENT. The Stock Pledge Agreement, dated or to
be dated on or prior to the Closing Date, between the Borrower and the Agent, in
form and substance satisfactory to the Banks and the Agent and in form
substantially the same as the Parent Stock Pledge Agreement.

BORROWER TRADEMARK AGREEMENT. The Second Amended and Restated Trademark
Collateral Security and Pledge Agreement, dated or to be dated on or prior to
the Closing Date, made by the Borrower in favor of the Agent and the several
Assignments of Trademarks delivered in connection therewith, in each case in
form and substance satisfactory to the Agent.

BUSINESS DAY. Any day on which banking institutions in Boston,
Massachusetts, are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, also a day which is a Eurodollar Business Day.

CAPITAL EXPENDITURES. Amounts paid or Indebtedness incurred by the
Guarantor or any of its Subsidiaries in connection with the purchase or lease by
the Guarantor or any of its Subsidiaries of fixed assets that would be required
to be capitalized and shown on the balance sheet of such Person in accordance
with generally accepted accounting principles (excluding amounts paid or
Indebtedness incurred in respect of Capitalized Leases); PROVIDED that Capital
Expenditures shall be calculated (i) net of any landlord allowances for the
purchase, lease or other acquisition or construction of fixed assets, (ii) in

<PAGE>

-5-

connection with the replacement or repair of any fixed asset, net of any cash
sale or insurance proceeds received by the Guarantor or its Subsidiaries in
respect of a sale of or casualty involving the fixed asset which is replaced or
repaired, and (iii) excluding amounts paid in connection with the Rampage
Acquisition pursuant to the Rampage Acquisition Documents.

CAPITALIZED LEASES. Leases under which the Guarantor or any of its
Subsidiaries is the lessee or obligor, the discounted future rental payment
obligations under which are required to be capitalized on the balance sheet of
the lessee or obligor in accordance with generally accepted accounting
principles.

CHARLOTTE RUSSE ADMINISTRATION. Charlotte Russe Administration, Inc., a
California corporation and wholly owned Subsidiary of the Borrower.

CHARLOTTE RUSSE MERCHANDISING. Charlotte Russe Merchandising, Inc., a
California corporation and wholly owned Subsidiary of the Borrower.

CHARLOTTE RUSSE MERCHANDISING TRADEMARK AGREEMENT. The Trademark
Collateral Security and Pledge Agreement, dated or to be dated on or prior to
the Closing Date, made by Charlotte Russe Merchandising in favor of the Agent,
and the several Assignments of Trademarks delivered in connection therewith, in
each case in form and substance satisfactory to the Agent.

CHARTER. The Certificate of Incorporation of the Guarantor, as in effect
on the Closing Date.

CHARTER DOCUMENTS. In respect of any entity, the certificate or articles
of incorporation or organization and the by-laws of such entity, or other
constitutive documents of such entity.

CLOSING DATE. The first date on which the conditions set forth in Section
11 have been satisfied and any Loans are to be made or any Letter of Credit is
to be issued hereunder.

CODE. The Internal Revenue Code of 1986.

COLLATERAL. All of the property, rights and interests of the Borrower, the
Guarantor and their Subsidiaries that are or are intended to be subject to the
security interests and mortgages created by the Security Documents.

COMMITMENT. With respect to each Bank, the amount set forth on SCHEDULE 1
hereto as the amount of such Bank's commitment to make Loans to, and to
participate in the issuance, extension and renewal of Letters of Credit for the
account of, the Borrower, as the same may be reduced from time to time pursuant
to Section 2.3 or otherwise; or if such commitment is terminated pursuant to the
provisions hereof, zero.

<PAGE>

-6-

COMMITMENT PERCENTAGE. With respect to each Bank, the percentage set forth
on SCHEDULE 1 hereto as such Bank's percentage of the aggregate Commitments of
all of the Banks.

CONSENT. In respect of any Person, any permit, license or exemption from,
approval, consent of, registration or filing with any local, state or federal
governmental or regulatory agency or authority, required under applicable law.

CONSOLIDATED OR CONSOLIDATED. With reference to any term defined herein,
shall mean that term as applied to the accounts of the Guarantor and its
Subsidiaries, consolidated in accordance with generally accepted accounting
principles.

CONSOLIDATED EBITDA. For any fiscal period, an amount equal to
Consolidated Net Income of the Guarantor and its Subsidiaries for such period,
PLUS, to the extent deducted in the calculation of Consolidated Net Income for
such period and without duplication, the sum of (a) depreciation and
amortization for such period, PLUS (b) income tax expense for such period, PLUS
(c) Consolidated Total Interest Expense paid or accrued during such period, PLUS
(d) fees and expenses paid by the Guarantor and its Subsidiaries during such
period in connection, and associated, with the closing of (i) the Loans (as
defined in the First Restated Credit Agreement) and the Rampage Acquisition, not
to exceed in aggregate amount $500,000 for all fiscal periods, and (ii) the
Loans, not to exceed in aggregate amount $100,000 for all fiscal periods, all as
determined in accordance with GAAP.

CONSOLIDATED FUNDED DEBT. At any time of determination, the sum of (i) the
amount of the Loans Outstanding (after giving account to any amounts requested)
PLUS (ii) the Maximum Drawing Amount and all Unpaid Reimbursement Obligations
PLUS (iii) the outstanding amount of any other Indebtedness For Borrowed Money.

CONSOLIDATED NET INCOME. For any period, the consolidated net income (or
net deficit) of the Guarantor and its Subsidiaries, after deduction of all
expenses, taxes and other proper charges, determined in accordance with GAAP,
after eliminating therefrom all extraordinary non-recurring non-cash items of
income and expense.

CONSOLIDATED TOTAL DEBT SERVICE. For any period, the sum of (a)
Consolidated Total Interest Expense for such period PLUS (b) the aggregate
liability of the Guarantor and its Subsidiaries for principal payments in
respect of Indebtedness relating to the borrowing of money or the obtaining of
credit (other than Indebtedness consisting of current liabilities permitted
under Section 9.1(d) hereof, other Indebtedness consisting of non-interest
bearing ordinary course obligations, principal payments on the Loans resulting
from prepayments required by Section 2.3.1 or Section 3.2, and Indebtedness
consisting of the Term Loan (as defined in the First Restated Credit Agreement)
repaid with the proceeds of the Loans on the Closing Date) due and payable
during such period.

<PAGE>

-7-

CONSOLIDATED TOTAL INTEREST EXPENSE. For any period, the aggregate
liability of the Guarantor and its Subsidiaries for interest on Indebtedness
relating to the borrowing of money or the obtaining of credit (other than
Indebtedness permitted under Section 9.1(d) hereof and other Indebtedness
consisting of non-interest bearing ordinary course obligations), whether
expensed or capitalized, including payments consisting of interest in respect of
Capitalized Leases and including commitment fees, agency fees, facility fees,
balance deficiency fees and similar fees and expenses in connection with the
borrowing of money or obtaining of credit.

CONSOLIDATED TOTAL LIABILITIES. All liabilities of the Guarantor and its
Subsidiaries that in accordance with GAAP are properly classified as
liabilities.

CONVERSION REQUEST. A notice given by the Borrower to the Agent of the
Borrower's election to convert or continue a Loan in accordance with
Section 2.7.

CREDIT AGREEMENT. This Second Amended and Restated Revolving Credit
Agreement, including the Schedules and Exhibits hereto.

DEFAULT. An event or act which with the giving of notice and/or the lapse
of time would become an Event of Default.

DELINQUENT BANK. See Section 15.5.3.

DOCUMENTARY LETTER OF CREDIT. Any Letter of Credit that is issued for the
benefit of a supplier of inventory to the Borrower to effect payment for such
inventory, the conditions of drawing under which include the presentation to the
Agent of bills of lading, invoices or similar documents.

DOLLARS or $. Dollars in lawful currency of the United States of America.

DOMESTIC LENDING OFFICE. Initially, the office of each Bank designated as
such in SCHEDULE 1 hereto; thereafter, such other office of such Bank, if any,
located within the United States that will be making or maintaining Base Rate
Loans.

DRAWDOWN DATE. The date on which any Loan is made or is to be made, and
the date on which any Loan is converted or continued in accordance with Section
2.7.

ELIGIBLE ASSIGNEE. Any of (i) a commercial bank or finance company
organized under the laws of the United States, or any State thereof or the
District of Columbia, and having total assets in excess of $1,000,000,000; (ii)
a savings and loan association or savings bank organized under the laws of the
United States, or any State thereof or the District of Columbia, and having a
net worth of at least $100,000,000, calculated in accordance with generally
accepted accounting principles; (iii) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation

<PAGE>

-8-

and Development (the "OECD"), or a political subdivision of any such country,
and having total assets in excess of $1,000,000,000, PROVIDED that such bank is
acting through a branch or agency located in the country in which it is
organized or another country which is also a member of the OECD; (iv) the
central bank of any country which is a member of the OECD; and (v) if, but only
if, any Event of Default has occurred and is continuing, any other bank,
insurance company, commercial finance company or other financial institution or
other Person approved by the Agent, such approval not to be unreasonably
withheld.

ENVIRONMENTAL LAWS. All laws pertaining to environmental matters,
including without limitation, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, in each case
as amended, and all rules, regulations, judgments, decrees, orders and licenses
arising under all such laws.

EQUITY DOCUMENTS. The Warrant, the Securityholders Agreement and the
Charter.

ERISA. The Employee Retirement Income Security Act of 1974, as amended,
and all rules, regulations, judgments, decrees and orders arising thereunder.

EUROCURRENCY RESERVE RATE. For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D), if such liabilities were
Outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.

EURODOLLAR BUSINESS DAY. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or such
other eurodollar interbank market as may be selected by the Agent in its sole
discretion acting in good faith.

EURODOLLAR LENDING OFFICE. Initially, the office of each Bank designated
as such in SCHEDULE 1 hereto; thereafter, such other office of such Bank, if
any, that shall be making or maintaining Eurodollar Rate Loans.

EURODOLLAR RATE. For any Interest Period with respect to a Eurodollar Rate
Loan, the rate of interest equal to (i) the rate at which BKB's Eurodollar
Lending Office is offered Dollar deposits two Eurodollar Business Days prior to
the beginning of such Interest Period in the interbank eurodollar market where
the eurodollar and foreign currency and exchange operations of such Eurodollar

<PAGE>

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Lending Office are customarily conducted, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Rate Loan of BKB to which such
Interest Period applies, divided by (ii) a number equal to 1.00 minus the
Eurocurrency Reserve Rate, if applicable.

EURODOLLAR RATE LOANS. Loans bearing interest calculated by reference to
the Eurodollar Rate.

EVENT OF DEFAULT. Any of the events listed in Section 13.1 hereof.

FINANCIAL STATEMENTS. In respect of any period, the balance sheet of any
Person as at the end of such period, and the related statement of income and
statement of cash flow for such period, each setting forth in comparative form
the figures for the previous comparable fiscal period, all in reasonable detail
as prepared in accordance with generally accepted accounting principles except,
with respect to monthly and quarterly financial statements, the absence of
footnotes.

FIRST RESTATED CREDIT AGREEMENT. The Amended and Restated Revolving Credit
and Term Loan Agreement dated as of December 5, 1997 among the Borrower, the
Guarantor, the Agent and the Banks.

FUNDS. Collectively, The SK Equity Fund, L.P. and the SK Investment
Fund, L.P.

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES or GAAP. Generally accepted
accounting principles consistent with those adopted by the Financial Accounting
Standards Board and its predecessor, (i) generally, as in effect from time to
time, and (ii) for purposes of determining compliance by the Guarantor and its
Subsidiaries with its financial covenants set forth herein, as in effect for the
fiscal year therein reported in the most recent Financial Statements submitted
to the Agent and the Banks prior to execution of this Credit Agreement.

GUARANTIES. The Parent Guaranty and each Subsidiary Guaranty.

GUARANTOR. See the preamble.

INDEBTEDNESS. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including in any event and whether or not so
classified: (i) all debt and similar monetary obligations, whether direct or
indirect; (ii) all liabilities secured by any mortgage, pledge, security
interest, lien, charge, or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; and (iii) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,

<PAGE>

-10-

including any obligation to supply funds to or in any manner to invest in,
directly or indirectly, the debtor, to purchase indebtedness, or to assure the
owner of indebtedness against loss, through an agreement to purchase goods,
supplies, or services for the purpose of enabling the debtor to make payment of
the indebtedness held by such owner or otherwise, and the obligations to
reimburse the issuer in respect of any letters of credit; PROVIDED that solely
for purposes of the definitions of Capital Expenditures, Consolidated Funded
Debt, Consolidated Total Debt Service and Consolidated Total Interest Expense,
letters of credit issued to secure trade obligations for goods or services in
the ordinary course of business, consistent with past practices, workmen's
compensation or similar liabilities and other obligations (not otherwise
constituting Indebtedness) arising in the ordinary course of business shall be
considered Indebtedness only to the extent that the aggregate face amount of
such letters of credit exceeds $500,000.

INDEBTEDNESS FOR BORROWED MONEY. (a) All obligations for borrowed money,
whether secured or unsecured, absolute or contingent, including, without
limitation, unmatured reimbursement obligations with respect to letters of
credit (PROVIDED that solely for purposes of the definitions of Capital
Expenditures, Consolidated Funded Debt, Consolidated Total Debt Service and
Consolidated Total Interest Expense, letters of credit issued to secure trade
obligations for goods or services in the ordinary course of business, consistent
with past practices, workmen's compensation or similar liabilities and other
obligations (not otherwise constituting Indebtedness For Borrowed Money) arising
in the ordinary course of business shall be considered Indebtedness For Borrowed
Money only to the extent that the aggregate face amount of such letters of
credit exceeds $500,000), or guarantees issued for the account of or on behalf
of any of the Transaction Parties, and all obligations representing the deferred
purchase price of property or services, other than accounts payable or accrued
expenses arising in the ordinary course of business, (b) all obligations
evidenced by bonds, notes, debentures or other similar instruments, (c) all
obligations secured by any mortgage, pledge, security interest or other lien on
property owned or acquired by any of the Transaction Parties, whether or not the
obligations secured thereby shall have been assumed, (d) that portion of all
obligations arising under Capitalized Leases that is required to be capitalized
on the Guarantor's consolidated financial statements, and (e) all guaranties,
endorsements and other contingent obligations of any of the Transaction Parties,
whether direct or indirect, in respect of indebtedness of others, including any
obligation to supply funds to or in any manner to invest in, directly or
indirectly, the debtor, to purchase indebtedness, or to assure the owner of
indebtedness against loss, through an agreement to purchase goods, supplies or
services for the purpose of enabling the debtor to make payment of the
indebtedness held by such owner or otherwise.

INELIGIBLE SECURITIES. Securities which may not be underwritten or dealt
in by member banks of the Federal Reserve System under Section 16 of the Banking
Act of 1993 (12 U.S.C. Section 24, Seventh), as amended.

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INTEREST COVERAGE RATIO. With respect to the last day of any fiscal
quarter, the ratio of (i) the sum of Consolidated EBITDA for the period of four
consecutive fiscal quarters ending on such day PLUS Rental Obligations for such
fiscal period to (ii) the sum of Consolidated Total Interest Expense for such
fiscal period PLUS Rental Obligations for such fiscal period.

INTEREST PAYMENT DATE. (i) As to any Base Rate Loan, the last day of any
fiscal quarter of the Borrower; and (ii) as to any Eurodollar Rate Loan, the
last day of the Interest Period relating to such Eurodollar Rate Loan.

INTEREST PERIOD: With respect to each Loan, (i) initially, the period
commencing on the initial Drawdown Date of such Loan and ending on the last day
of one of the periods set forth below, as selected by the Borrower in a Loan
Request (A) for any Base Rate Loan, the last day of the fiscal quarter of the
Borrower; and (B) for any Eurodollar Rate Loan, 1, 2 or 3 months; and (ii)
thereafter, each period commencing on the last day of the immediately preceding
Interest Period applicable to such Loan and ending on the last day of one of the
periods set forth above, as selected by the Borrower in a Conversion Request;
PROVIDED that all of the foregoing provisions relating to Interest Periods are
subject to the following:

(a) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall be extended to the next succeeding Eurodollar
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month, in which event such Interest
Period shall end on the immediately preceding Eurodollar Business Day;

(b) if any Interest Period with respect to a Base Rate Loan would end
on a day that is not a Business Day, that Interest Period shall end on the
next succeeding Business Day and interest shall accrue until such next
succeeding Business Day;

(c) if the Borrower shall fail to give notice as provided in Section
2.7, the Borrower shall be deemed to have requested a conversion of the
affected Eurodollar Rate Loan to a Base Rate Loan and the continuance of
all Base Rate Loans as Base Rate Loans on the last day of the then current
Interest Period with respect thereto;

(d) any Interest Period that begins on the last Eurodollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Eurodollar Business Day of a calendar month; and

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(e) any Interest Period relating to any Eurodollar Rate Loan that
would otherwise extend beyond the Maturity Date shall end on the Maturity
Date.

INTEREST RATE AGREEMENT. Any interest rate swap agreement, interest rate
cap agreement, interest rate collar agreement, interest rate futures contract,
interest rate option agreement or other similar agreement or arrangement to
which the Borrower is a party, designed to protect the Borrower against
fluctuations in interest rates.

LETTER OF CREDIT. See Section 4.1.1.

LETTER OF CREDIT APPLICATION. See Section 4.1.2.

LETTER OF CREDIT FEE. See Section 4.6.

LETTER OF CREDIT PARTICIPATION. See Section 4.1.4.

LICENSE AGREEMENT. The License Agreement dated as of September 30, 1997 by
and between Rampage Clothing Company, a California corporation, and the
Borrower, as in effect on September 30, 1997.

LIENS. Any encumbrance mortgage, pledge, hypothecation, charge,
restriction or other security interest of any kind securing any obligation of
any entity or person.

LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of Credit
Applications, the Letters of Credit, the Agent's Fee Letter, the Subordination
Documents, the Equity Documents and the Security Documents.

LOAN REQUEST. See Section 2.6.

LOANS. Revolving credit loans made or to be made by the Banks to the
Borrower pursuant to Section 2.

MAJORITY BANKS. As of any date, the Banks holding at least sixty-six and
two thirds percent (66-2/3%) of the Outstanding principal amount of the Notes on
such date; and if no such principal is Outstanding, the Banks whose aggregate
Commitments constitutes at least sixty-six and two thirds percent (66-2/3%) of
the Total Commitment; PROVIDED, HOWEVER, that at any time when there are two
Banks party to this Credit Agreement, the term "Majority Banks" shall mean each
such Bank; and PROVIDED FURTHER that at any time when there are more than two
Banks party to this Credit Agreement and BKB holds sixty-six and two thirds
percent (66-2/3%) or more of the Outstanding principal amount of the Notes on
such date (or, if no such principal is Outstanding, if BKB's Commitment
constitutes sixty-six and two thirds percent (66-2/3%) or more of the Total
Commitment), the term "Majority Bank" shall mean BKB and at least one other
Bank.

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MATERIALLY ADVERSE EFFECT. Any materially adverse effect on the financial
condition, business operations or assets of the Guarantor or any of its
Subsidiaries, as the case may be, or material impairment of the ability of the
Guarantor or any of its Subsidiaries, as the case may be, to perform its
obligations hereunder or under any of the other Loan Documents.

MAXIMUM DRAWING AMOUNT. The maximum aggregate amount that the
beneficiaries may at any time draw under outstanding Letters of Credit, as such
aggregate amount may be reduced from time to time pursuant to the terms of the
Letters of Credit.

MERCHANDISING CONTRIBUTION AGREEMENT. The Capital
Contribution/Incorporation Agreement dated as of September 25, 1998 between the
Borrower and Charlotte Russe Merchandising, as in effect on the Closing Date.

NET CASH PROCEEDS. With respect to any sale of any assets of any of the
Transaction Parties, the gross consideration received by such Transaction Party
(in cash) from such sale, net of commissions, direct sales costs, normal closing
adjustments, income taxes attributable to such sale, amounts paid in connection
with the discharge of any liens on such assets and professional fees and
expenses incurred directly in connection therewith, to the extent that the
foregoing are actually paid in connection with such sale.

NOTES. See Section 2.4.

OBLIGATIONS. All indebtedness, obligations and liabilities of any of the
Guarantor and its Subsidiaries to any of the Banks and the Agent, individually
or collectively, existing on the date of this Credit Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, arising or incurred under this
Credit Agreement, any of the other Loan Documents or any Interest Rate Agreement
or in respect of any of the Loans made or Reimbursement Obligations incurred or
any of the Notes, Letter of Credit Applications, Letters of Credit or other
instruments at any time evidencing any thereof.

OUTSTANDING or outstanding. With respect to the Loans, the aggregate
unpaid principal thereof as of any date of determination.

ORIGINAL ACQUISITION. The acquisition by the Guarantor in September, 1996
of all of the outstanding shares of the capital stock of the predecessors of the
Borrower.

PARENT GUARANTY. The Amended and Restated Guaranty, dated or to be dated
on or prior to the Closing Date, made by the Guarantor in favor of the Banks and
the Agent pursuant to which the Guarantor guaranties to the Banks and the Agent
the payment and performance of the Obligations, in form and

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substance satisfactory to the Banks and the Agent and in substantially the same
form as the Amended and Restated Guaranty executed and delivered pursuant to the
First Restated Credit Agreement.

PARENT STOCK PLEDGE AGREEMENT. The Second Amended and Restated Stock
Pledge Agreement, dated or to be dated on or prior to the Closing Date, between
the Guarantor and the Agent, in form and substance satisfactory to the Banks and
the Agent and in form substantially the same as the Amended and Restated Stock
Pledge Agreement executed and delivered pursuant to the First Restated Credit
Agreement.

PERFECTION CERTIFICATE. The Perfection Certificate as defined in the
Security Agreement.

PERMITTED LIENS. Liens, security interests and other encumbrances
permitted by Section 9.2.

PERSON. Any individual, corporation, partnership, trust, unincorporated
association, business, or other legal entity, and any government or any
governmental agency or political subdivision thereof.

PRIOR CREDIT AGREEMENT. The Revolving Credit and Term Loan Agreement dated
as of September 27, 1996 among the Borrower (f/k/a Lawrence Merchandising
Corporation and successor by merger of Lawrence Merchandising Corporation of
Nevada and Lawrence Merchandising Corporation of Nevada II), the Guarantor and
BKB, as heretofore amended and in effect.

RAMPAGE ACQUISITION. The acquisition by the Borrower of the Rampage Assets
pursuant to the Rampage Acquisition Documents.

RAMPAGE ACQUISITION DOCUMENTS. Collectively, the Asset Purchase Agreement
dated as of September 30, 1997 by and between Rampage Retailing, Inc., a
Delaware corporation, and the Borrower, as in effect on September 30, 1997; the
License Agreement; and all other agreements and documents required to be entered
into or delivered pursuant thereto or in connection with the Rampage
Acquisition.

RAMPAGE ASSETS. Assets of Rampage acquired by the Borrower pursuant to the
terms of the Rampage Acquisition Documents.

RECORD. The grid attached to a Note, or the continuation of such grid, or
any other similar record, including computer records, maintained by any Bank
with respect to any Loan referred to in such Note.

REDUCTION DATE. See Section 2.8.1.

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REIMBURSEMENT OBLIGATION. The Borrower's obligation to reimburse the Agent
and the Banks on account of any drawing under any Letter of Credit as provided
in Section 4.2.

RENTAL OBLIGATIONS. For any period, all obligations in respect of base and
contingent rent and common area maintenance paid or due by the Guarantor or any
of its Subsidiaries during such period under any rental agreements or leases of
real or personal property (other than Capitalized Leases).

REQUIREMENT OF LAW. In respect of any Person, any law, treaty, rule,
regulation or determination of an arbitrator, court, or other governmental
authority, in each case applicable to or binding upon such Person or affecting
any of its property.

RESTRUCTURING AGREEMENTS. Those agreements listed on SCHEDULE 1.1(a), as
in effect on the Closing Date.

REVOLVING CREDIT LOAN MATURITY DATE. September 30, 2002.

SECTION 20 SUBSIDIARY. A Subsidiary of the bank holding company
controlling any Bank, which Subsidiary has been granted authority by the Federal
Reserve Board to underwrite and deal in certain Ineligible Securities.

SECURITY AGREEMENT. The Second Amended and Restated Security Agreement,
dated or to be dated on or prior to the Closing Date, among the Borrower, the
Guarantor, certain Subsidiaries of the Borrower and the Agent, in form and
substance satisfactory to the Banks and the Agent and in form substantially the
same as the Amended and Restated Security Agreement executed and delivered
pursuant to the First Restated Credit Agreement.

SECURITY DOCUMENTS. The Guaranties, the Security Agreement, the Trademark
Agreements, the Stock Pledge Agreements, the Agency Account Agreements and all
other instruments and documents, including without limitation Uniform Commercial
Code financing statements, required to be executed or delivered pursuant to any
Security Document.

SECURITYHOLDERS AGREEMENT: The Securityholders Rights Agreement dated as
of September 27, 1996 among the Guarantor, The SK Equity Fund, L.P., FSC Corp.,
as assignee of BKB, and such other stockholders of the Guarantor as may, from
time to time, become parties thereto in accordance with the provisions thereof.

STANDBY LETTER OF CREDIT: Any Letter of Credit other than a Documentary
Letter of Credit.

STOCK PLEDGE AGREEMENTS. The Borrower Stock Pledge Agreement and the
Parent Stock Pledge Agreement.

<PAGE>

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SUBORDINATED DEBT. Unsecured Indebtedness of any of the Transaction
Parties other than Charlotte Russe Administration that is expressly subordinated
and made junior to the payment and performance in full of the Obligations, and
evidenced as such by the Subordination Agreement or by another written
instrument containing subordination provisions in form and substance approved by
the Majority Banks in writing.

SUBORDINATED NOTES. The Second Amended and Restated 12.5% Senior
Subordinated Notes due 2003 dated as of December 23, 1998, issued by the
Guarantor in favor of the Funds in the original aggregate principal amount of
$11,000,000.

SUBORDINATION AGREEMENT. The Second Amended and Restated Subordination and
Intercreditor Agreement, dated or to be dated as of the Closing Date, among the
Agent, the Funds, the Guarantor and the Borrower, in form and substance
satisfactory to the Banks and the Agent and in form substantially the same as
the Amended and Restated Subordination and Intercreditor Agreement executed and
delivered pursuant to the First Restated Credit Agreement.

SUBORDINATION DOCUMENTS. The Subordination Agreement and the Subordinated
Notes.

SUBSIDIARY. Any corporation, association, trust, or other business entity
of which the designated parent shall at any time own directly or indirectly
through a Subsidiary or Subsidiaries at least a majority (by number of votes) of
the outstanding Voting Stock.

TOTAL COMMITMENT. The sum of the Commitments of the Banks, as in effect
from time to time.

TRADEMARK AGREEMENTS. The Borrower Trademark Agreement and the Charlotte
Russe Merchandising Trademark Agreement.

TRANSACTION PARTIES. Collectively, the Borrower, the Guarantor and each of
their Subsidiaries.

TYPE. As to any Loan, its nature as a Base Rate Loan or a Eurodollar Rate
Loan.

UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform Customs
and Practice for Documentary Credits (1993 Revision), International Chamber of
Commerce Publication No. 500 or any successor version thereto adopted by the
Agent in the ordinary course of its business as a letter of credit issuer and in
effect at the time of issuance of such Letter of Credit.

<PAGE>

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UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which
the Borrower does not reimburse the Agent and the Banks on the date specified
in, and in accordance with, Section 4.2.

VOTING STOCK. Stock or similar interests, of any class or classes (however
designated), the holders of which are at the time entitled, as such holders, to
vote for the election of a majority of the directors (or persons performing
similar functions) of the corporation, association, trust or other business
entity involved, whether or not the right so to vote exists by reason of the
happening of a contingency.

WARRANT. The Warrant issued by the Guarantor on September 27, 1996 to FSC
Corp., assignee of BKB.

1.2. RULES OF INTERPRETATION.

(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to
time in accordance with its terms and the terms of this Credit Agreement.

(b) The singular includes the plural and the plural includes the
singular.

(d) A reference to any Person includes its permitted successors and
permitted assigns.

(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.

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

(g) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts, have the
meanings assigned to them therein, with the term "instrument" being that
defined under Article 9 of the Uniform Commercial Code.

(h) Reference to a particular "Section " refers to that section of
this Credit Agreement unless otherwise indicated.

(i) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Credit Agreement as a whole and not to any
particular section or subdivision of this Credit Agreement.

<PAGE>

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(j) Unless otherwise expressly indicated, in the computation of
periods of time from a specified date to a later specified date, the word
"from" means "from and including," the words "to" and "until" each mean "to
but excluding," and the word "through" means "to and including."

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

(l) This Credit Agreement and the other Loan Documents are the result
of negotiation among, and have been reviewed by counsel to, among others,
the Agent and the Borrower and the other Transaction Parties and are the
product of discussions and negotiations among all parties. Accordingly,
this Credit Agreement and the other Loan Documents are not intended to be
construed against the Agent or any of the Banks merely on account of the
Agent's or any Bank's involvement in the preparation of such documents.

2. THE REVOLVING CREDIT FACILITY.

2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in
this Credit Agreement, each of the Banks severally agrees to lend to the
Borrower and the Borrower may borrow, repay, and reborrow from time to time from
the Closing Date up to but not including the Revolving Credit Loan Maturity Date
upon notice by the Borrower to the Agent given in accordance with Section 2.6,
such sums as are requested by the Borrower up to a maximum aggregate amount
Outstanding (after giving effect to all amounts requested) at any one time equal
to such Bank's Commitment MINUS such Bank's Commitment Percentage of the sum of
the Maximum Drawing Amount and all Unpaid Reimbursement Obligations, PROVIDED
that the sum of the Outstanding amount of the Loans (after giving effect to all
amounts requested) PLUS the Maximum Drawing Amount and all Unpaid Reimbursement
Obligations shall not at any time exceed the Total Commitment. The Loans shall
be made PRO RATA in accordance with each Bank's Commitment Percentage. Each
request for a Loan hereunder shall constitute a representation and warranty by
the Borrower that the conditions set forth in Section 11 and Section 12, in the
case of the initial Loans to be made on the Closing Date, and Section 12, in the
case of all other Loans, have been satisfied on the date of such request.

2.2. COMMITMENT FEE. The Borrower agrees to pay to the Agent for the
accounts of the Banks in accordance with their respective Commitment Percentages
a commitment fee calculated at the rate of one-quarter of one percent (0.25%)
per annum on the average daily amount during each fiscal quarter or portion
thereof, from the date hereof to the Revolving Credit Loan Maturity Date, by
which the Total Commitment MINUS the sum of the Maximum Drawing Amount and all
Unpaid Reimbursement Obligations exceeds the

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Outstanding amount of Loans during such fiscal quarter. The commitment fee
shall be payable quarterly in arrears on the first day of each fiscal quarter of
the Borrower for the immediately preceding fiscal quarter commencing on the
first such date following the date hereof, with a final payment on the Revolving
Credit Loan Maturity Date or any earlier date on which the Commitments shall
terminate.

2.3. REDUCTION OF TOTAL COMMITMENT.

2.3.1. MANDATORY REDUCTION OF TOTAL COMMITMENT. The Total Commitment
shall automatically and irrevocably be reduced, on the date set forth in
the table below under the column headed "Reduction Date," or, if such date
is not a Business Day, on the Business Day immediately following (each such
Business Day, a "Reduction Date") to the amount set forth in the table set
forth below under the column headed "Total Commitment" opposite such date
in the table below:

<TABLE>
<CAPTION>
Reduction Date Total Commitment Amount of Reduction
-------------- ---------------- -------------------
<S> <C> <C>
October 1, 1999 $24,500,000 $1,500,000

October 1, 2000 $20,000,000 $4,500,000

October 1, 2001 $14,500,000 $5,500,000
</TABLE>

Upon the occurrence of a Reduction Date, the Commitment of each Bank shall
be reduced PRO RATA in accordance with its Commitment Percentage of the
amount by which the Total Commitment is reduced. If, on any Reduction
Date, the sum of the outstanding amount of the Loans PLUS the Maximum
Drawing Amount PLUS all Unpaid Reimbursement Obligations exceeds the Total
Commitment in effect after giving effect to the reduction of the Total
Commitment that occurred on such date pursuant to this Section 2.3.1, then
the Borrower shall immediately pay the amount of such excess to the Agent
for the respective accounts of the Banks for application FIRST, to any
Unpaid Reimbursement Obligation; SECOND, to the Loans; and THIRD, to
provide to the Agent cash collateral for Reimbursement Obligations if
required pursuant to Section 4.2(b) or (c).

2.3.2. OPTION OF REDUCTION OF TOTAL COMMITMENT. The Borrower shall
have the right at any time and from time to time upon two (2) Business Days
prior written notice to the Agent to reduce by $100,000 or an integral
multiple thereof or terminate entirely the Total Commitment, whereupon the
Commitments of the Banks shall be reduced PRO RATA in accordance with their
respective Commitment Percentages of the amount specified in such notice
or, as the case may be, terminated. Promptly after receiving any notice of
the Borrower delivered pursuant to this Section 2.3, the Agent will notify
the Banks of the substance thereof. Upon the effective date of any such
reduction or termination, the Borrower shall pay to the Agent for the
respective accounts of the Banks the full

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amount of any commitment fee then accrued on the amount of the reduction.
No reduction or termination of the Commitments may be reinstated.

2.4. THE NOTES. The Loans shall be evidenced by separate promissory notes
of the Borrower in substantially the form of EXHIBIT B hereto (each a "Note"),
dated as of the Closing Date and completed with appropriate insertions. One
Note shall be payable to the order of each Bank in a principal amount equal to
such Bank's Commitment or, if less, the Outstanding amount of all Loans made by
such Bank, plus interest accrued thereon, as set forth below. The Borrower
irrevocably authorizes each Bank to make or cause to be made, at or about the
time of the Drawdown Date of any Loan or at the time of receipt of any payment
of principal on such Bank's Note, an appropriate notation on such Bank's Note
Record reflecting the making of such Loan or (as the case may be) the receipt of
such payment. The Outstanding amount of the Loans set forth on such Bank's Note
Record shall be PRIMA FACIE evidence of the principal amount thereof owing and
unpaid to such Bank, but the failure to record, or any error in so recording,
any such amount on such Bank's Note Record shall not limit or otherwise affect
the obligations of the Borrower hereunder or under any Note to make payments of
principal of or interest on any Note when due.

2.5. INTEREST ON LOANS. Except as otherwise provided in Section 5.10,

(a) Each Loan which is also a Base Rate Loan shall bear interest for
the period commencing with the Drawdown Date thereof and ending on the last
day of the Interest Period with respect thereto at a rate per annum equal
to the Base Rate PLUS the Applicable Base Rate Margin.

(b) Each Loan which is also a Eurodollar Rate Loan shall bear
interest for the period commencing with the Drawdown Date thereof and
ending on the last day of the Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such Interest
Period PLUS the Applicable Eurodollar Rate Margin.

(d) There shall be no more than five (5) Outstanding Loans which are
Eurodollar Rate Loans at any time.

2.6. REQUESTS FOR LOANS.

2.6.1. GENERAL. The Borrower shall give to the Agent written notice
in the form of EXHIBIT C hereto (or telephonic notice confirmed in a
writing in the form of EXHIBIT C hereto) of each Loan requested hereunder
(a "Loan Request") no later than (i) 1:00 p.m., Boston time (10:00 a.m.,
San Diego, California time), on the proposed Drawdown Date of any Base Rate
Loan and (ii) 1:00 p.m., Boston time (10:00 a.m., San Diego,

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California time), three (3) Eurodollar Business Days prior to the proposed
Drawdown Date of any Eurodollar Rate Loan. Each such notice shall specify
(A) the principal amount of the Loan requested, (B) the proposed Drawdown
Date of such Loan, (C) the Interest Period for such Loan and (D) the Type
of such Loan. Promptly upon receipt of any such notice, the Agent shall
notify each of the Banks thereof. Each Loan Request shall be irrevocable
and binding on the Borrower and shall obligate the Borrower to accept the
Loan requested from the Banks on the proposed Drawdown Date. Each Loan
Request for Base Rate Loans shall be in a minimum aggregate amount of
$50,000 or an integral multiple thereof, and each Loan Request for
Eurodollar Rate Loan shall be in a minimum aggregate amount of $100,000 or
an integral multiple thereof.

2.6.2. LOANS TO REPAY UNPAID REIMBURSEMENT OBLIGATIONS.
Notwithstanding the notice and minimum borrowing requirements set forth
above in this Section 2.6, the Banks agree to make Loans (which Loans shall
be Base Rate Loans) to the Borrower sufficient to pay to the Banks any
Unpaid Reimbursement Obligations on the date on which such Reimbursement
Obligations become Unpaid Reimbursement Obligations. The Borrower hereby
requests and authorizes the Agent and the Banks to make from time to time
such Loans by means of paying Unpaid Reimbursement Obligations. The
Borrower acknowledges and agrees that, except as otherwise provided in this
Section 2.6.2, the making of such Loans shall, in each case, be subject in
all respects to the provisions of this Agreement, including, without
limitation, the limitations set forth in Section 2.1 and the requirements
of the applicable conditions in Sections 11 and 12. All actions taken by
the Agent and the Banks pursuant to the provisions of this Section 2.6.2
shall be conclusive and binding on the Borrower.

2.7. CONVERSION OPTIONS.

2.7.1. CONVERSION TO DIFFERENT TYPE OF LOAN. The Borrower may elect
from time to time to convert any Outstanding Loan to a Loan of another
Type, PROVIDED that (i) with respect to any such conversion of a Loan from
a Eurodollar Loan to a Base Rate Loan, the Borrower shall give the Agent at
least three (3) Business Days prior written notice of such election; (ii)
with respect to any such conversion of a Base Rate Loan to a Eurodollar
Rate Loan, the Borrower shall give the Agent at least three (3) Eurodollar
Business Days prior written notice of such election; (iii) with respect to
any such conversion of a Eurodollar Rate Loan into a Base Rate Loan, such
conversion shall only be made on the last day of the Interest Period with
respect thereto and (iv) no Loan may be converted into a Eurodollar Rate
Loan when any Event of Default has occurred and is continuing. On the date
on which such conversion is being made, each Bank shall take such action as
is necessary to transfer its Commitment Percentage of such Loans to its
Domestic Lending Office or its Eurodollar Lending Office, as the case may
be. All or any part of Outstanding Loans of any Type may be converted into
a Loan of another Type as provided

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herein, PROVIDED that any partial conversion shall be in an aggregate
principal amount of $100,000 or a whole multiple thereof. Each Conversion
Request relating to the conversion of a Loan to a Eurodollar Rate Loan
shall be irrevocable by the Borrower.

2.7.2. CONTINUATION OF TYPE OF LOAN. Any Loan of any Type may be
continued as a Loan of the same Type upon the expiration of an Interest
Period with respect thereto by compliance by the Borrower with the notice
provisions contained in Section 2.7.1; PROVIDED that no Eurodollar Rate
Loan may be continued as such when any Event of Default has occurred and is
continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the first Interest Period relating thereto ending during the
continuance of any Event of Default of which officers of the Agent active
upon the Borrower's account have actual knowledge. In the event that the
Borrower fails to provide any such notice with respect to the continuation
of any Eurodollar Rate Loan as such, then such Eurodollar Rate Loan shall
be automatically converted to a Base Rate Loan on the last day of the first
Interest Period relating thereto. The Agent shall notify the Banks
promptly when any such automatic conversion contemplated by this Section
2.7 is scheduled to occur.

2.7.3. EURODOLLAR RATE LOANS. Any conversion to or from Eurodollar
Rate Loans shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Rate Loans having the same Interest Period shall not be less
than $100,000 or an integral multiple thereof.

2.8. FUNDS FOR LOANS.

2.8.1. FUNDING PROCEDURES. Not later than 3:00 p.m. (Boston time) on
the proposed Drawdown Date of any Loan, each of the Banks will make
available to the Agent, at the Agent's Head Office, in immediately
available funds, the amount of such Bank's Commitment Percentage of the
amount of the requested Loan. Upon receipt from each Bank of such amount,
and upon receipt of the documents required by Sections 11 and 12 and the
satisfaction of the other conditions set forth therein, to the extent
applicable, the Agent will make available to the Borrower the aggregate
amount of such Loans made available to the Agent by the Banks. The failure
or refusal of any Bank to make available to the Agent at the aforesaid time
and place on any Drawdown Date the amount of its Commitment Percentage of
the requested Loans shall not relieve any other Bank from its several
obligation hereunder to make available to the Agent the amount of such
other Bank's Commitment Percentage of any requested Loan.

2.8.2. ADVANCES BY AGENT. The Agent may, unless notified to the
contrary by any Bank prior to a Drawdown Date, assume that such Bank has
made available to the Agent on such Drawdown Date the

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amount of such Bank's Commitment Percentage of the Loans to be made on such
Drawdown Date, and the Agent may (but it shall not be required to), in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If any Bank makes available to the Agent such amount
on a date after such Drawdown Date, such Bank shall pay to the Agent on
demand an amount equal to the product of (i) the average computed for the
period referred to in clause (iii) below, of the weighted average interest
rate paid by the Agent for federal funds acquired by the Agent during each
day included in such period, TIMES (ii) the amount of such Bank's
Commitment Percentage of such Loans, TIMES (iii) a fraction, the numerator
of which is the number of days that elapse from and including such Drawdown
Date to the date on which the amount of such Bank's Commitment Percentage
of such Loans shall become immediately available to the Agent, and the
denominator of which is 360. A statement of the Agent submitted to such
Bank with respect to any amounts owing under this paragraph shall be PRIMA
FACIE evidence of the amount due and owing to the Agent by such Bank. If
the amount of such Bank's Commitment Percentage of such Loans is not made
available to the Agent by such Bank within three (3) Business Days
following such Drawdown Date, the Agent shall be entitled to recover such
amount from the Borrower on demand, with interest thereon at the rate per
annum applicable to the Loans made on such Drawdown Date.

3. REPAYMENT OF THE LOANS.

3.1. MATURITY. The Borrower promises to pay on the Revolving Credit Loan
Maturity Date, and there shall become absolutely due and payable on the
Revolving Credit Loan Maturity Date, all of the Loans Outstanding on such date,
together with any and all accrued and unpaid interest thereon.

3.2. MANDATORY REPAYMENTS OF LOANS. If at any time the sum of the
Outstanding amount of the Loans, the Maximum Drawing Amount and all Unpaid
Reimbursement Obligations exceeds the Total Commitment (as the same may be
reduced from time to time pursuant to Section 2.3.1 or Section 2.3.2), then the
Borrower shall immediately pay the amount of such excess to the Agent for the
respective accounts of the Banks for application: first, to any Unpaid
Reimbursement Obligations; second, to the Loans; and third, to provide to the
Agent cash collateral for Reimbursement Obligations as contemplated by Section
4.2(b) and (c). In the event that any of the Transaction Parties shall, after
the Closing Date, effect any sale of assets (other than those permitted by
Section 9.5.2(i) and (ii)), such Transaction Party shall, within fifteen (15)
days following receipt thereof (or if later, the first date on which the
aggregate amount of Net Cash Proceeds so received exceeds $250,000), prepay the
Loans in the amount by which the aggregate Net Cash Proceeds from all such sales
exceed $250,000. Each payment of any Unpaid Reimbursement Obligations or
prepayment of Loans shall be allocated among the Banks, in proportion, as nearly
as practicable, to each Reimbursement Obligation or (as the case may be) the
respective unpaid principal amount of each Bank's Note, with adjustments to the
extent

<PAGE>

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practicable to equalize any prior payments or repayments not exactly in
proportion.

3.3. OPTIONAL REPAYMENTS OF LOANS. The Borrower shall have the right, at
its election, to repay the Outstanding amount of the Loans, as a whole or in
part, at any time without penalty or premium, PROVIDED that any full or partial
prepayment of the Outstanding amount of any Eurodollar Rate Loans pursuant to
this Section 3.3 may be made only on the last day of the Interest Period
relating thereto. The Borrower shall give the Agent, no later than 1:00 p.m.,
Boston time (10:00 a.m. San Diego time), (i) on the date of any proposed
prepayment pursuant to this Section 3.3 of Base Rate Loans, and (ii) at least
three (3) Eurodollar Business Days notice of any proposed prepayment pursuant to
this Section 3.3 of Eurodollar Rate Loans, in each case specifying the proposed
date of prepayment of Loans and the principal amount to be prepaid. Each such
partial prepayment of the Loans shall be in an integral multiple of $100,000,
shall be accompanied by the payment of accrued interest (except with respect to
Base Rate Loans, accrued interest with respect to which shall be payable on the
next Interest Payment Date applicable to Base Rate Loans) on the principal
prepaid to the date of prepayment and shall be applied, in the absence of
instruction by the Borrower, first to the principal of Base Rate Loans and then
to the principal of Eurodollar Rate Loans. Each partial prepayment shall be
allocated among the Banks, in proportion, as nearly as practicable, to the
respective unpaid principal amount of each Bank's Note, with adjustments to the
extent practicable to equalize any prior repayments not exactly in proportion.

4. LETTERS OF CREDIT.

4.1. LETTER OF CREDIT COMMITMENTS.

4.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms
and conditions hereof and the execution and delivery by the Borrower of a
letter of credit application on the Agent's customary form (a "Letter of
Credit Application"), the Agent on behalf of the Banks and in reliance upon
the agreement of the Banks set forth in Section 4.1.4 and upon the
representations and warranties of the Borrower contained herein, agrees, in
its individual capacity, to issue, extend and renew for the account of the
Borrower one or more standby or documentary letters of credit
(individually, a "Letter of Credit"), in such form as may be requested from
time to time by the Borrower and agreed to by the Agent; PROVIDED, HOWEVER,
that, after giving effect to such request, (a) the sum of the aggregate
Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not
exceed $5,000,000 at any one time and (b) the sum of (i) the Maximum
Drawing Amount on all Letters of Credit, (ii) all Unpaid Reimbursement
Obligations, and (iii) the amount of all Loans Outstanding shall not exceed
the Total Commitment.

4.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit
Application shall be completed to the reasonable satisfaction of the

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Agent. In the event that any provision of any Letter of Credit Application
shall be inconsistent with any provision of this Credit Agreement, then the
provisions of this Credit Agreement shall, to the extent of any such
inconsistency, govern.

4.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued,
extended or renewed hereunder shall, among other things, (i) provide for
the payment of sight drafts for honor thereunder when presented in
accordance with the terms thereof and when accompanied by the documents
described therein, and (ii) have an expiry date no later than the date
which is thirty (30) days prior to the Revolving Credit Loan Maturity Date.
Each Letter of Credit so issued, extended or renewed shall be subject to
the Uniform Customs.

4.1.4. REIMBURSEMENT OBLIGATIONS OF BANKS. Each Bank severally
agrees that it shall be absolutely liable, without regard to the occurrence
of any Default or Event of Default or any other condition precedent
whatsoever, to the extent of such Bank's Commitment Percentage, to
reimburse the Agent on demand for the amount of each draft paid by the
Agent under each Letter of Credit to the extent that such amount is not
reimbursed by the Borrower pursuant to Section 4.2 (such agreement for a
Bank being called herein the "Letter of Credit Participation" of such
Bank).

4.1.5. PARTICIPATIONS OF BANKS. Each such payment made by a Bank
shall be treated as the purchase by such Bank of a participating interest
in the Borrower's Reimbursement Obligation under Section 4.2 in an amount
equal to such payment. Each Bank shall share in accordance with its
participating interest in any interest which accrues pursuant to Section
4.2.

4.2. REIMBURSEMENT OBLIGATION OF THE BORROWER. In order to induce the
Agent to issue, extend and renew each Letter of Credit and the Banks to
participate therein, the Borrower hereby agrees to reimburse or pay to the
Agent, for the account of the Agent or (as the case may be) the Banks, with
respect to each Letter of Credit issued, extended or renewed by the Agent
hereunder,

(a) except as otherwise expressly provided in Section 4.2(b) and (c),
on each date that any draft presented under such Letter of Credit is
honored by the Agent, or the Agent otherwise makes a payment with respect
thereto, (i) the amount paid by the Agent under or with respect to such
Letter of Credit, and (ii) the amount of any taxes, fees, charges or other
costs and expenses whatsoever incurred by the Agent or any Bank in
connection with any payment made by the Agent or any Bank under, or with
respect to, such Letter of Credit,

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(b) upon the reduction (but not termination) of the Total Commitment
to an amount less than the Maximum Drawing Amount, an amount equal to such
difference, which amount shall be held by the Agent for the benefit of the
Banks and the Agent as cash collateral for all Reimbursement Obligations,
and

(c) upon the termination of the Total Commitment, or the acceleration
of the Reimbursement Obligations with respect to all Letters of Credit in
accordance with Section 13, an amount equal to the then Maximum Drawing
Amount on all Letters of Credit, which amount shall be held by the Agent
for the benefit of the Banks and the Agent as cash collateral for all
Reimbursement Obligations.

Unless funded by a Loan pursuant to Section 2.6.2, each such payment shall be
made to the Agent at the Agent's Head Office in immediately available funds.
Interest on any and all amounts remaining unpaid by the Borrower under this
Section 4.2 and not required to be funded by a Loan pursuant to Section 2.6.2 at
any time from the date such amounts become due and payable (whether as stated in
this Section 4.2, by acceleration or otherwise) until payment in full (whether
before or after judgment) shall be payable to the Agent on demand at the rate
specified in Section 5.10 for overdue principal on the Loans.

4.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other
demand for payment shall be made under any Letter of Credit, the Agent shall
notify the Borrower of the date and amount of the draft presented or demand for
payment and of the date and time when it expects to pay such draft or honor such
demand for payment. If the Borrower fails to reimburse the Agent as provided in
Section 4.2 on or before the date that such draft is paid or other payment is
made by the Agent, the Agent may at any time thereafter notify the Banks of the
amount of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m.,
Boston time (12:00 p.m. San Diego, California time) on the Business Day next
following the receipt of such notice, each Bank shall make available to the
Agent, at the Agent's Head Office, in immediately available funds, such Bank's
Commitment Percentage of such Unpaid Reimbursement Obligation, together with an
amount equal to the product of (i) the average, computed for the period referred
to in clause (iii) below, of the weighted average interest rate paid by the
Agent for federal funds acquired by the Agent during each day included in such
period, TIMES (ii) the amount equal to such Bank's Commitment Percentage of such
Unpaid Reimbursement Obligation, TIMES (iii) a fraction, the numerator of which
is the number of days that elapse from and including the date the Agent paid the
draft presented for honor or otherwise made payment to the date on which such
Bank's Commitment Percentage of such Unpaid Reimbursement obligation shall
become immediately available to the Agent, and the denominator of which is 360.
The responsibility of the Agent to the Borrower and the Banks shall be only to
determine that the documents (including each draft) delivered under each Letter
of Credit in connection with such presentment shall be in conformity in all
material respects with such Letter of Credit.

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4.4. OBLIGATIONS ABSOLUTE. The Borrower's obligations under this Section
4 shall be absolute and unconditional under any and all circumstances and
irrespective of the occurrence of any Default or Event of Default or any
condition precedent whatsoever or any setoff, counterclaim or defense to payment
which the Borrower may have or have had against the Agent, any Bank or any
beneficiary of a Letter of Credit. The Borrower further agrees with the Agent
and the Banks that the Agent and the Banks shall not be responsible for, and
the Borrower's Reimbursement Obligations under Section 4.2 shall not be affected
by, among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Borrower, the beneficiary of any Letter of Credit or any financing
institution or other party to which any Letter of Credit may be transferred or
any claims or defenses whatsoever of the Borrower against the beneficiary of any
Letter of Credit or any such transferee. The Agent and the Banks shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Letter of Credit. The Borrower agrees that any action taken or omitted by
the Agent or any Bank under or in connection with each Letter of Credit and the
related drafts and documents, if done in good faith, shall be binding upon the
Borrower and shall not result in any liability on the part of the Agent or any
Bank to the Borrower.

4.5. RELIANCE BY ISSUER. To the extent not inconsistent with Section 4.4,
the Agent shall be entitled to rely, and shall be fully protected in relying
upon, any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons
and upon advice and statements of legal counsel, independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Credit Agreement with respect
to Letters of Credit issued hereunder unless it shall first have received,
following a request therefor, such advice or concurrence of the Majority Banks
as it reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. The Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Credit Agreement in accordance with a request
of the Majority Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Banks and all future holders of the
Notes or of a Letter of Credit Participation.

4.6. LETTER OF CREDIT FEE. The Borrower shall, as set forth below
(including with respect to any extensions or renewals of any Letter of Credit)
pay a fee (in each case, a "Letter of Credit Fee") to the Agent (i) quarterly in
arrears on the first day of each fiscal quarter of the Borrower for the
immediately preceding fiscal quarter of the Borrower, in respect of each Standby

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Letter of Credit an amount equal to two percent (2.00%) of the result of (A) the
average daily face amount of such Standby Letter of Credit during such period,
MULTIPLIED BY the number of days such Standby Letter of Credit is outstanding
and DIVIDED BY (B) three hundred and sixty (360), of which an amount equal to
one-eighth of one percent (0.125%) of the result of (x) the average daily face
amount of such Standby Letter of Credit during such period, MULTIPLIED by the
number of days such Standby Letter of Credit is outstanding and DIVIDED BY (y)
three hundred and sixty (360) shall be for the account of the Agent, as a
fronting fee, and the balance of which Letter of Credit Fee shall be for the
accounts of the Banks in accordance with their respective Commitment Percentages
and (ii) quarterly in arrears on the first day of each fiscal quarter of the
Borrower for the immediately preceding fiscal quarter of the Borrower, in
respect of each Documentary Letter of Credit an amount equal to one and
three-quarters percent (1.75%) of the result of (A) the average daily face
amount of such Documentary Letter of Credit during such period, MULTIPLIED BY
the number of days such Documentary Letter of Credit is outstanding, DIVIDED BY
(B) three hundred and sixty (360), of which an amount equal to one-eighth of one
percent (0.125%) of the result of (x) the average daily face amount of such
Documentary Letter of Credit during such period MULTIPLIED BY the number of days
such Documentary Letter of Credit is outstanding and DIVIDED BY (y) three
hundred sixty (360) shall be for the account of the Agent, as a fronting fee,
and the balance of which Letter of Credit Fee shall be for the accounts of the
Banks in accordance with their respective Commitment Percentages. In respect of
each Letter of Credit, the Borrower shall also pay to the Agent for the Agent's
own account, at such other time or times as such charges are customarily made by
the Agent, the Agent's customary issuance, amendment, negotiation or document
examination and other administrative fees as in effect from time to time.

5. CERTAIN GENERAL PROVISIONS.

5.1. FEES.

5.1.1. AGENT'S FEE The Borrower shall pay to the Agent annually in
advance, for the Agent's own account, an Agent's fee on the dates and in the
amounts set forth in the Agent's Fee Letter.

5.1.2. CLOSING FEE On the Closing Date, the Borrower shall pay to
the Agent, for the PRO RATA accounts of the Banks, a closing fee in the amount
of $32,500.

5.2. FUNDS FOR PAYMENTS.

5.2.1. PAYMENTS TO AGENT. All payments of principal, interest,
Reimbursement Obligations, commitment fees, Letter of Credit Fees and any
other amounts due hereunder or under any of the other Loan Documents shall
be made to the Agent, for the respective accounts of the Banks and the
Agent, at the Agent's Head Office or at such other location

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in the Boston, Massachusetts, area that the Agent may from time to time
designate, in each case in immediately available funds.

5.2.2. NO OFFSET, ETC. All payments by the Borrower hereunder and
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes,
levies, imposts, duties, charges, fees, deductions, withholdings,
compulsory loans, restrictions or conditions of any nature now or hereafter
imposed or levied by any jurisdiction or any political subdivision thereof
or taxing or other authority therein unless the Borrower is compelled by
law to make such deduction or withholding. If any such obligation is
imposed upon the Borrower with respect to any amount payable by it
hereunder or under any of the other Loan Documents, the Borrower will pay
to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or
under such other Loan Document, such additional amount in Dollars as shall
be necessary to enable the Banks or the Agent to receive the same net
amount which the Banks or the Agent would have received on such due date
had no such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made
by the Borrower hereunder or under such other Loan Document.

5.3. COMPUTATIONS. All computations of interest on the Loans and of
commitment fees, Letter of Credit Fees or other fees shall be based on a 360-day
year and paid for the actual number of days elapsed. Except as otherwise
provided in the definition of the term "Interest Period" with respect to
Eurodollar Rate Loans, whenever a payment hereunder or under any of the other
Loan Documents becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business Day, and interest
shall accrue during such extension.

5.4. INABILITY TO DETERMINE EURODOLLAR RATE. In the event that, prior to
the commencement of any Interest Period relating to any Eurodollar Rate Loan,
the Agent shall determine that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate that would otherwise determine the rate of
interest to be applicable to any Eurodollar Rate Loan during any Interest
Period, the Agent shall forthwith give notice of such determination (which shall
be conclusive and binding on the Borrower and the Banks) to the Borrower and the
Banks. In such event (i) any Loan Request or Conversion Request with respect to
Eurodollar Rate Loans shall be automatically withdrawn and shall be deemed a
request for Base Rate Loans, (ii) each Eurodollar Rate Loan will automatically,
on the last day of the then current Interest Period relating thereto, become a
Base Rate Loan, and (iii) the obligations of the Banks to make Eurodollar Rate
Loans shall be suspended until the Agent determines that the circumstances
giving rise to such suspension no longer exist, whereupon the Agent shall so
notify the Borrower and the Banks.

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5.5. ILLEGALITY. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or in the interpretation
or application thereof shall make it unlawful for any Bank to make or maintain
Eurodollar Rate Loans, such Bank shall forthwith give notice of such
circumstances to the Borrower and the other Banks and thereupon (i) the
commitment of such Bank to make Eurodollar Rate Loans or convert Loans of
another Type to Eurodollar Rate Loans shall forthwith be suspended and (ii) such
Bank's Loans then Outstanding as Eurodollar Rate Loans, if any, shall be
converted automatically to Base Rate Loans on the last day of each Interest
Period applicable to such Eurodollar Rate Loans or within such earlier period as
may be required by law; PROVIDED, HOWEVER, that nothing herein contained shall
be deemed to affect or limit the commitment of any other Bank not affected by
the circumstances set forth in this Section 5.5 to make Eurodollar Rate Loans or
to convert Loans of another type to Eurodollar Rate Loans in accordance with the
other terms and conditions of this Credit Agreement. The Borrower hereby agrees
promptly to pay the Agent for the account of such Bank, upon demand by such Bank
by delivery of a certificate in accordance with Section 5.8, any additional
amounts necessary to compensate such Bank for any costs incurred by such Bank in
making any conversion in accordance with this Section 5.5 other than on the last
day of any applicable Interest Period, including any interest or fees payable by
such Bank to lenders of funds obtained by it in order to make or maintain its
Eurodollar Rate Loans hereunder.

5.6. CHANGE IN CIRCUMSTANCES. If, on or after the date hereof the Agent
or any Bank determines that (i) the adoption of, or any change in, any
applicable law, rule, regulation or guideline or the interpretation or
administration thereof (whether or not having the force of law), or (ii)
compliance by the Agent or such Bank or its parent holding company with any
newly adopted or change in any applicable guideline, request or directive
(whether or not having the force of law), (A) shall subject the Agent or such
Bank to any tax, duty or other charge with respect to any Loan, any Letters of
Credit or any Note, or shall change the basis of taxation of payments to the
Agent or such Bank of the principal of or interest on, any Loans or in respect
of any other amounts due under this Credit Agreement (other than with respect to
taxes based upon the Agent or such Bank's net income), or (B) shall impose,
modify or deem applicable any reserve, special deposit or similar requirement
(including, without limitation, any imposed by the Board of Governors of the
Federal Reserve System, but excluding with respect to any Eurodollar Rate Loan
any such requirement included in an applicable Eurocurrency Reserve Rate)
against assets of, deposits with or for the account of, or credit extended by,
the Agent or such Bank, or shall impose on the Agent or such Bank or the London
interbank market any other condition affecting the Loans, any Letters of Credit
or the Notes, and the result of any of the foregoing is to increase the cost to
the Agent or such Bank of making or maintaining any Loan or any Letter of
Credit, to reduce the amount of any sum received or receivable by the Agent or
such Bank under this Agreement, on account of any Letter of Credit or under the
Notes with respect to any Loan, or to require the Agent or such Bank to

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make any payment or to forego any interest or Reimbursement Obligation or other
sum payable hereunder, by an amount reasonably deemed by the Agent or such Bank
to be material, then, upon demand by the Agent or such Bank by delivery of a
cetificate in accordance with Section 5.8, the Borrower agrees to pay to the
Agent or such Bank such additional amount or amounts as will compensate the
Agent or such Bank for such increased cost or reduction.

5.7. CAPITAL ADEQUACY. If on or after the date hereof any Bank or the
Agent determines that (i) the adoption of or change in any law, governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law) regarding capital requirements for banks or bank holding companies
or any change in the interpretation or application thereof by a court or
governmental authority with appropriate jurisdiction, or (ii) compliance by such
Bank or the Agent or any corporation controlling such Bank or the Agent with any
law, governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law) of any such entity regarding capital adequacy, has
the effect of reducing the return on such Bank's or the Agent's commitment with
respect to any Loans to a level below that which such Bank or the Agent could
have achieved but for such adoption, change or compliance by any amount deemed
by such Bank or (as the case may be) the Agent to be material, then such Bank or
the Agent may notify the Borrower of such fact. To the extent that the amount
of such reduction in the return on capital is not reflected in the Base Rate,
the Borrower agrees to pay such Bank or (as the case may be) the Agent for the
amount of such reduction in the return on capital as and when such reduction is
determined upon presentation by such Bank or (as the case may be) the Agent of a
certificate in accordance with Section 5.8 hereof. Each Bank or (as the case
may be) the Agent shall allocate such cost increases among the Borrower and its
other customers similarly situated on a fair and non-discriminatory basis.

5.8. CERTIFICATE. A certificate setting forth any additional amounts
payable pursuant to Sections 5.5, 5.7 or 5.8 and a brief explanation of such
amounts which are due, submitted by any Bank or the Agent to the Borrower, shall
be conclusive, absent manifest error, that such amounts are due and owing. All
additional amounts payable pursuant to Section 5.6 or Section 5.5 shall be due
and payable fifteen (15) days after receipt by the Borrower of such certificate.

5.9. INDEMNITY. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from and against any loss, cost or expense (excluding loss of
anticipated profits) that such Bank may sustain or incur as a consequence of (i)
default by the Borrower in payment of the principal amount of or any interest on
any Eurodollar Rate Loans, as and when due and payable, including any such loss
or expense arising from interest or fees payable by such Bank to lenders of
funds obtained by it in order to maintain its Eurodollar Rate Loans, (ii)
default by the Borrower in making a borrowing or conversion after the Borrower
has given (or is deemed to have given) a Loan Request or a Conversion Request
relating thereto in accordance with Section 2.6 or Section 2.7 or (iii) the
making of any payment of a Eurodollar Rate Loan or the making of any

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conversion of any such Loan to a Base Rate Loan on a day that is not the last
day of the applicable Interest Period with respect thereto, including interest
or fees payable by such Bank to lenders of funds obtained by it in order to
maintain any such Loans.

5.10. INTEREST AFTER EVENT OF DEFAULT. While an Event of Default is
continuing, amounts payable under any of the Loan Documents shall bear interest
(compounded monthly and payable on demand in respect of overdue amounts) at a
rate per annum which is equal to (a) prior to the end of the Interest Period
applicable to such amounts, two percent (2%) above the rate of interest
otherwise applicable to such Loans pursuant to Section 2.4 and (b) after the end
of the Interest Period(s) applicable to such amounts, the sum of (i) the Base
Rate, and (ii) three and one-half percent (3.50%) until such amount is paid in
full or (as the case may be) such Event of Default has been cured or waived in
writing by the Majority Banks pursuant to Section 2.6 (after as well as before
judgment).

6. COLLATERAL SECURITY AND GUARANTIES.

The Obligations shall be secured pursuant to the terms of the Security
Documents to which the Borrower is a party, including a pledge of the stock of
all Subsidiaries of the Borrower. The Obligations shall be guaranteed by the
Guarantor and certain Subsidiaries of the Borrower pursuant to the terms of the
Guaranties, and such Guaranties shall be secured by a pledge of all of the stock
of the Borrower and otherwise on other assets of the Guarantor and such
Subsidiaries in accordance with the terms of the Security Documents to which the
Guarantor or, as the case may be, any of such Subsidiaries is a party.

7. REPRESENTATIONS AND WARRANTIES.

Each of the Borrower and the Guarantor represents and warrants to the Banks
and the Agent on the date hereof, on the date of any Loan Request, on the date
of each request for a Letter of Credit, on the initial Drawdown Date of each
Loan and on the date on which each Letter of Credit is issued, extended or
renewed that:

7.1. INCORPORATION; GOOD STANDING; AUTHORIZATION. Each of the Transaction
Parties is duly organized, validly existing, and in good standing under the laws
of its jurisdiction of incorporation and is duly qualified and in good standing
in every other jurisdiction where it is doing business except those
jurisdictions in which the failure to be so qualified would not have a
Materially Adverse Effect, and the execution, delivery and performance by each
of the Transaction Parties of the Loan Documents and the Rampage Acquisition
Documents to which such Transaction Party is a party (i) are within its
corporate authority, (ii) have been duly authorized, and (iii) do not conflict
with or contravene its Charter Documents.

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7.2. ENFORCEABILITY. Upon execution and delivery thereof, each Loan
Document to which any of the Transaction Parties is a party shall constitute the
legal, valid and binding obligation of such Transaction Party, as applicable,
enforceable in accordance with its terms.

7.3. TITLE TO PROPERTIES; FRANCHISES, INTELLECTUAL PROPERTY; CONSENT; NO
CONFLICT; INSURANCE. Each of the Transaction Parties has good and marketable
title to all of its material properties, subject only to Liens permitted
hereunder, and possesses all assets, including intellectual properties,
franchises and Consents, adequate for the conduct of its business as now
conducted, without known conflict with any rights of others, other than those
the failure of which to possess would not have a Materially Adverse Effect.
Each of the Transaction Parties maintains insurance with financially responsible
insurers, copies of the policies for which have been previously delivered to the
Agent, covering such risks and in such amounts and with such deductibles as are
customary in such Transaction Party's business and are adequate and are in
accordance with the terms of the Security Agreement, and have named the Agent as
loss payee under all property and casualty insurance and as additional insured
under all liability insurance.

7.4. FISCAL YEAR; FINANCIAL STATEMENTS AND FORECAST. Each of the
Transaction Parties has a fiscal year which is the twelve (12) months ending on
the last Saturday in September of each year; the fiscal quarters of the
Guarantor and its Subsidiaries for the 1998-2002 fiscal years are as set forth
on SCHEDULE 7.4 hereto; the Guarantor and the Borrower have provided to the
Agent and the Banks the Guarantor's audited consolidated Financial Statements as
at the Balance Sheet Date and for the fiscal period then ended, and such
Financial Statements are complete and correct and fairly present the position of
the Guarantor and its Subsidiaries as at such date and for such period in
accordance with generally accepted accounting principles consistently applied;
none of the Transaction Parties has any Indebtedness, or any financial
obligations under any contracts, or agreements, except for Indebtedness
permitted under Section 9.1 hereof. The Guarantor has also provided to the
Agent and the Banks, as of September 30, 1998, its forecast of the operations of
the Guarantor and its Subsidiaries for the period from September 30, 1998
through September 30, 2002, and such forecast was prepared in good faith based
upon reasonable assumptions at the time of preparation thereof; such forecast
shall not be construed as a representation or warranty of future performance.

7.5. NO MATERIAL CHANGES, ETC. Since the Balance Sheet Date, there has
been no materially adverse change of any kind in the Borrower or the Guarantor
which would have a Materially Adverse Effect.

7.6. LITIGATION. There are no legal or other proceedings or
investigations pending or, to the best of the knowledge of each of the Borrower
and the Guarantor, threatened against any of the Transaction Parties before any
court, tribunal or regulatory authority in which there is a reasonable
possibility of an outcome that could have a Materially Adverse Effect.

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7.7. CONSENTS; NO CONFLICT. The execution, delivery and performance of
its obligations, and exercise of its rights under the Loan Documents and the
Rampage Acquisition Documents to which it is a party by each of the Borrower and
any of the Transaction Parties, including borrowing under this Credit Agreement
and the obtaining of Letters of Credit (i) except as set forth on SCHEDULE 7.7
hereto, do not require any Consents other than those Consents that have been
obtained or that will be obtained prior to the Closing Date, including, without
limitation, all appropriate filings made pursuant to the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder, and other than those that the failure of
which to obtain would not have a Materially Adverse Effect; and (ii) are not and
will not be in conflict with or prohibited or prevented by (A) any Requirement
of Law, (B) any Charter Document, corporate minute or resolution, in each case
binding on it, or (C) any instrument, agreement or provision thereof, in each
case binding on it or affecting its property except for such conflicts which
would not have a Materially Adverse Effect.

7.8. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. None of the
Transaction Parties is in violation of (i) any Charter Document, corporate
minute or resolution, (ii) any instrument or agreement, in each case binding on
it or affecting its property, except for such violations which would not have a
Materially Adverse Effect or (iii) any Requirement of Law, in a manner which
could have a Materially Adverse Effect, including, without limitation, all
applicable federal and state tax laws, ERISA and Environmental Laws.

7.9. PERFECTION OF SECURITY INTEREST; ABSENCE OF FINANCING STATEMENTS,
ETC. Upon execution and delivery of the Security Documents and the filing of
documents thereby required, the Agent shall have first-priority perfected Liens
in substantially all of the Collateral (with such exceptions as are acceptable
to the Agent), subject only to Liens permitted hereunder and entitled to
priority under applicable law, with no financing statements, chattel mortgages,
real estate mortgages or similar filings on record anywhere which conflict with
such first-priority Liens of the Agent.

7.10. SUBSIDIARIES, ETC. The Borrower is the Guarantor's only Subsidiary.
The Borrower has no Subsidiaries other than Charlotte Russe Administration and
Charlotte Russe Merchandising. Neither Charlotte Russe Administration nor
Charlotte Russe Merchandising has any Subsidiaries. None of the Transaction
Parties is a party to any partnership or joint venture.

7.11. BANK ACCOUNTS. SCHEDULE 7.11 hereto (as such may be amended from
time to time in accordance with Section 9.12) sets forth the account numbers and
locations of all bank accounts of each of the Transaction Parties.

7.12. SENIOR INDEBTEDNESS. All Indebtedness of the Guarantor to the Banks
in respect of the Obligations constitutes "Senior Indebtedness" or "Senior Debt"
(or the analogous term used therein) under the terms of any instrument

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evidencing or pursuant to which there is issued indebtedness which purports to
be Subordinated Debt of any of the Transaction Parties.

7.13. STATUS OF GUARANTOR. As of the Closing Date, the Guarantor has not
carried on any business (other than holding the capital stock of the Borrower)
and has no liabilities (other than pursuant to the Loan Documents) except for
matters relating to and liabilities incurred in connection with its
incorporation and the original acquisition by the Guarantor of the capital stock
of the Borrower.

7.14. NO DEFAULT. No Default or Event of Default has occurred and is
continuing.

7.15. CAPITAL STRUCTURE. As of the Closing Date, the capital structure of
the Guarantor is as set forth on SCHEDULE 7.15 hereto.

7.16. USE OF PROCEEDS.

7.16.1. GENERAL. The proceeds of the Loans shall be used to
refinance the Term Loan (as defined in the First Restated Credit Agreement)
and for working capital and general corporate purposes. The Borrower will
obtain Letters of Credit solely for working capital and general corporate
purposes.

7.16.2. REGULATIONS U AND X. No portion of any Loan is to be used,
and no portion of any Letter of Credit is to be obtained, for the purpose
of purchasing or carrying any "margin security" or "margin stock" as such
terms are used in Regulations U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Parts 221 and 224.

8. AFFIRMATIVE COVENANTS OF THE BORROWER AND THE
GUARANTOR.

Each of the Borrower and the Guarantor covenants and agrees that, so long
as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is
outstanding or any Bank has any obligation to make any Loans or the Agent has
any obligation to issue, extend or renew any Letters of Credit, each of the
Borrower and the Guarantor will comply with its obligations set forth throughout
this Agreement and:

8.1. PUNCTUAL PAYMENT. The Borrower will duly and punctually pay or cause
to be paid the principal and interest on the Loans, all Reimbursement
Obligations, the Letter of Credit Fees, the commitment fees, the Agent's fee and
all other amounts provided for in this Credit Agreement and the other Loan
Documents to which any of the Transaction Parties is a party, all in accordance
with the terms of this Credit Agreement and such other Loan Documents.

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8.2. FINANCIAL STATEMENTS; COMPLIANCE CERTIFICATE; BUDGET. Each of the
Borrower and the Guarantor will furnish the Agent, with sufficient copies for
each of the Banks: (i) as soon as available but in any event within one hundred
(100) days after the close of each fiscal year, the audited consolidated and
consolidating Financial Statements of the Guarantor and its Subsidiaries for
such fiscal year, certified by the Guarantor's accountants; (ii) as soon as
available but in any event within forty-five (45) days after the end of each
fiscal quarter the unaudited consolidated and, if requested by the Agent,
consolidating Financial Statements of the Guarantor and its Subsidiaries for
such quarter, certified by the Guarantor's chief financial officer; (iii) as
soon as available, but in any event within forty-five (45) days after the end of
each fiscal month, the unaudited consolidated and, if requested by the Agent,
consolidating Financial Statements of the Guarantor and its Subsidiaries for
such month (excluding a statement of cash flow for such period), monthly income
statements for each of the Borrower's and its Subsidiaries' stores and a report
of sales at each store of the Borrower or such Subsidiary for such month,
compared to sales at such store for the same month of the previous fiscal year;
(iv) together with the quarterly and annual audited Financial Statements, a
certificate of the Borrower and the Guarantor setting forth computations
demonstrating compliance with the Guarantor's and its Subsidiaries' financial
covenants set forth herein, and certifying that no Default or Event of Default
has occurred, or if it has, the actions taken by the Guarantor and its
Subsidiaries with respect thereto; and (v) as soon as practicable, but in any
event not later than sixty (60) days after the beginning of each fiscal year,
commencing with the 1999 fiscal year, a management-prepared budget for such
fiscal year, together with income and cash flow statements and capital
expenditure projections for such fiscal year.

8.3. BOOKS AND RECORDS; FISCAL YEAR; INSPECTIONS; COMMERCIAL FINANCE
EXAMINATIONS. Each of the Borrower and the Guarantor will, and will cause each
of the other Transaction Parties to, keep true and accurate books of account in
accordance with generally accepted accounting principles, maintain its current
fiscal year and permit the Agent, any Bank or its designated representatives to
inspect the Guarantor's and its Subsidiaries' premises during normal business
hours, to examine and be advised as to such or other business records upon the
request of the Agent or any Bank, and to permit the Agent's commercial finance
examiners to conduct periodic commercial finance examinations, all at the
Borrower's expense, PROVIDED that the number of commercial finance examinations
at the Borrower's expense shall not exceed two (2) per fiscal year so long as no
Default or Event of Default has occurred and is continuing.

8.4. MAINTENANCE OF EXISTENCE, RIGHTS, FRANCHISES, ETC.; MAINTENANCE OF
PROPERTIES, ETC . Each of the Borrower and the Guarantor shall, and shall cause
each of the other Transaction Parties to: (i) do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights and franchises and those of its Subsidiaries (except as otherwise
permitted in Section 9.5 hereof) and will not, and will not cause or permit any
of its Subsidiaries to, convert to a limited liability company, (ii) cause all
of

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its properties and those of its Subsidiaries to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment,
(iii) cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of such Transaction
Party, may be necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times, (iv) continue to
engage primarily in the businesses now conducted by it and in related
businesses; PROVIDED that nothing in these clauses (i)-(iv) shall prevent the
Guarantor or the Borrower from discontinuing the operation and maintenance of
any of its properties or those of its Subsidiaries if such discontinuance is, in
the judgment of the Guarantor or the Borrower, as the case may be, desirable in
the conduct of its or their business and that do not in the aggregate have a
Materially Adverse Effect.

8.5. INSURANCE; CHIEF EXECUTIVE OFFICE; COMPLIANCE WITH LAW; PAYMENT OF
TAXES. Each of the Borrower and the Guarantor shall, and shall cause each of
the other Transaction Parties to: (i) keep its business and assets insured with
financially responsible insurers, covering such risks and in such amounts and
with such deductibles as are customary in such Transaction Party's business and
are adequate and in accordance with the terms of the Security Agreement; (ii)
maintain its chief executive office in the United States, (iii) comply with all
Requirements of Law, including ERISA and Environmental Laws, except for any
noncompliance which would not have a Materially Adverse Effect; and (iv) duly
pay and discharge, or cause to be paid and discharged, before the same shall
become overdue, all taxes, assessments and other governmental charges (other
than taxes, assessments and other governmental charges imposed by foreign
jurisdictions that in the aggregate would not have a Materially Adverse Effect)
imposed upon it and its real properties, sales and activities, or any part
thereof, or upon the income or profits therefrom, as well as all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property; PROVIDED that any such tax, assessment, charge,
levy or claim need not be paid if the validity or amount thereof shall currently
be contested in good faith by appropriate proceedings and if such Transaction
Party shall have set aside on its books adequate reserves with respect thereto;
and PROVIDED FURTHER that the Guarantor and the Borrower will, and will cause
the other Transaction Parties to, pay all such taxes, assessments, charges,
levies or claims forthwith upon the commencement of proceedings to foreclose any
lien that may have attached as security therefor.

8.6. NOTICES. Each of the Borrower and the Guarantor shall notify the
Agent promptly in writing promptly upon any Transaction Party's chief executive
officer, president, chief financial officer, vice president, treasurer or other
responsible officer becoming aware thereof of (i) the occurrence of any Default
or Event of Default, (ii) any noncompliance with ERISA or any Environmental Law
or proceeding in respect thereof which could have a Materially Adverse Effect,
(iii) in accordance with the Security Agreement, any change of address or
additional location, (iv) any threatened or pending litigation or similar
proceeding affecting any of the Transaction Parties

<PAGE>

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involving an uninsured claim against such Transaction Party in which there is a
reasonable possibility of an outcome that could have a Materially Adverse Effect
or any material change in any such litigation or proceeding previously reported
and (v) claims against any assets or properties of any of the Transaction
Parties encumbered in favor of the Bank.

8.7. USE OF PROCEEDS. The Borrower will use the proceeds of the Loans
solely to refinance the Term Loan (as defined in the First Restated Credit
Agreement) and for working capital and general corporate purposes. The Borrower
will obtain Letters of Credit solely for working capital and general corporate
purposes.

8.8. AGENCY ACCOUNT AGREEMENTS. Each of the Borrower and the Guarantor
shall, and shall cause each of the other Transaction Parties to, enter into and
maintain Agency Account Agreements with each of the depository institutions at
which it maintains depository accounts, which accounts are listed on SCHEDULE
7.11 hereof (as such may be amended from time to time in accordance with Section
9.12); PROVIDED THAT the Borrower, Charlotte Russe Merchandising and Charlotte
Russe Administration need not enter into Agency Account Agreements with respect
to Account No. 3660044698 with NationsBank, Account No. 002-670399 with Bank of
Hawaii, Account No. 323-838065 with Chase Manhattan Bank, Account No. 4603793944
with Wells Fargo Bank, Account No. 1939799456 with Michigan National Bank and
Account Nos. 14501-08339 and 14508-08340 with Bank of America (collectively, the
"Excluded Accounts") (a) for so long as the aggregate amount held at any time in
any or all of such Excluded Accounts does not exceed $1,000,000; PROVIDED,
HOWEVER, that in connection with its obligations under this Section 8.8, the
Borrower shall deliver to the Agent, within thirty days following the end of
each fiscal quarter, a report of the activity in each such Excluded Account
during such fiscal quarter to enable it to monitor amounts held in such Excluded
Accounts; (b) unless a Default or Event of Default has occurred and is
continuing and the Agent has requested that the Borrower execute and deliver and
cause each of the applicable institutions to execute and deliver an Agency
Account Agreement; and (c) the Borrower causes all amounts contained in such
Excluded Accounts to be transferred to Account No. 14508-02607 with Bank of
America on a daily basis (unless the amount held in any such Excluded Account an
any day is less than $10,000, in which case such amounts need only be so
transferred when the amount in such account exceeds $10,000); PROVIDED, FURTHER,
that for purposes of this Section 8.8, the term "Excluded Accounts" shall
include any other depository account which the Borrower may from time to time
open so long as the aggregate amount held at any time in any or all of the
Excluded Accounts does not exceed $1,000,000, and the Borrower causes all
amounts contained in any such additional Excluded Account to be transferred to
Account No. 14508-02607 with Bank of America in accordance with the requirement
of clause (c) hereof.

8.9. FURTHER ASSURANCES. Each of the Borrower and the Guarantor will, and
will cause each of the Transaction Parties to, cooperate with the Banks

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and the Agent and execute such further instruments and documents as the Banks or
the Agent shall reasonably request to carry out to their satisfaction the
transactions contemplated by and the purposes of this Credit Agreement and the
other Loan Documents.

8.10. POST-CLOSING MATTERS. Each of the Borrower and the Guarantor agrees
to use its best efforts (which shall not include any payment to Rampage) to
obtain, on or before January 15, 1998, the consent of Rampage Clothing Company
to the grant and enforcement of a security interest in favor of the Agent, for
the benefit of the Agent and the Banks and pursuant to the Security Agreement,
in and to the Borrower's or, as the case may be, Charlotte Russe Merchandising's
rights and interests in, to and under the License Agreement, in order to secure
the Obligations.

8.11. AGREEMENTS REGARDING LOAN TO MR. ZEICHNER. Each of the Borrower
and the Guarantor agrees that, in the event that a Default or Event of Default
has occurred and is continuing, the Borrower or, as the case may be, the
Guarantor shall pay to the Agent any amounts received by it or them in payment
of the loan to Bernard Zeichner described in Section 9.3(h)(ii), with any such
amounts to be applied by the Agent in accordance with Section 13.4.

9. CERTAIN NEGATIVE COVENANTS OF THE BORROWER AND THE
GUARANTOR.

9.1. RESTRICTIONS ON INDEBTEDNESS. Neither the Borrower nor the Guarantor
will, or will permit any of the other Transaction Parties to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:

(a) Indebtedness to the Agent or any of the Banks under the Loan
Documents or any Interest Rate Agreement;

(b) Indebtedness assumed by the Borrower pursuant to the Rampage
Acquisition Documents in an aggregate amount not to exceed $3,825,000;

(c) Indebtedness in respect of obligations of the Borrower or
Charlotte Russe Merchandising under Capitalized Leases (except as otherwise
permitted under clause (e) hereof) which does not exceed $2,500,000 in the
aggregate outstanding at any time;

(d) liabilities of the Borrower or any of its Subsidiaries incurred in
the ordinary course of business not incurred through the borrowing of

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money, Capitalized Leases or the obtaining of credit except credit on an
open account customarily extended and in fact extended in connection with
normal purchases of goods and services but including all liabilities under
leases other than Capitalized Leases;

(e) obligations under the Capitalized Lease of the Borrower's new
headquarters and distribution center (including equipment installed
therein) not exceeding $12,500,000 in aggregate amount at any time
outstanding;

(f) Indebtedness owed by the Borrower or Charlotte Russe Merchandising
to trade vendors, in the amount of the cost to the Borrowers of inventory
on consignment from such trade vendors not to exceed $1,500,000 at any time
outstanding;

(g) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the applicable
Transaction Party shall at the time in good faith be prosecuting an appeal
or proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;

(h) endorsements for collection, deposit or negotiation and warranties
of products or services, in each case incurred in the ordinary course of
business;

(i) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the
extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of Section 8.8;

(j) Subordinated Debt;

(k) Indebtedness of the Borrower to the Guarantor;

(l) (i) obligations in respect of the fees and related expenses
payable to Saunders Karp & Megrue, L.P. to the extent such fees and
expenses are permitted by Section 9.11, and (ii) other obligations in
respect of fees and expenses payable in connection with the Rampage
Acquisition and the Loan Documents, not to exceed $500,000 in aggregate
amount;

(m) Indebtedness in respect of the Guarantor's obligations under the
Stock Purchase Agreement;

(n) Indebtedness of the Guarantor in respect of obligations owing to
the Borrower evidencing advances made by the Borrower from time to time
equal to (i) interest payments on the Subordinated Debt made within five
(5) Business Days of when such payment is due at any time

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when payment of the Subordinated Debt is not restricted under the terms of
the Subordination Agreement and (ii) expenses incurred in the ordinary
course of business by the Guarantor and payable by the Guarantor within
thirty (30) days of receipt of such advance from the Borrower;

(o) Indebtedness consisting of liabilities resulting from the marking
up of the Borrower's existing leases to reflect market rents;

(p) existing Indebtedness not included above and listed on
SCHEDULE 9.1 hereto;

(q) other Indebtedness not included in the foregoing provisions of
this Section 9.1 not to exceed $750,000 in the aggregate at any time
outstanding;

9.2. RESTRICTIONS ON LIENS. Neither the Borrower nor the Guarantor will,
nor will they permit any of the other Transaction Parties to, create, incur,
permit to exist or assume any Liens on any of the property or assets of the
Guarantor or the Borrower except:

(a) Liens in favor of the Agent and the Banks securing the
Obligations;

(b) Liens securing taxes, assessments and other governmental charges
or liens on properties to secure claims for labor, material or supplies, in
each case to the extent the Indebtedness in respect to which is permitted
under Section 9.1(i);

(c) deposits or pledges made in connection with worker's compensation,
unemployment insurance, old age pensions or other social security
obligations;

(d) Liens of carriers, warehousemen, mechanics and materialmen (i)
less than 120 days old in respect of obligations not overdue or (ii) with
respect to which the obligations related thereto are contested by the
applicable Transaction Party in good faith by appropriate proceedings and
such Transaction Party shall have set aside on its book adequate reserves
with respect thereto, PROVIDED that the Guarantor or the Borrower will pay,
or will cause such other Transaction Party to pay, all such carriers,
warehousemen, mechanics and materialmen forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security
therefor;

(e) Liens on properties in respect of judgments or awards, the
Indebtedness with respect to which is permitted by Section 9.1(g);

(f) easements, rights-of-way, zoning restrictions, restrictions on the
use of real property and defects and irregularities in the title thereto,

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landlord's or lessor's liens under leases to which any of the Transaction
Parties other than Charlotte Russe Administration is a party and similar
minor liens which individually and in the aggregate do not have a
Materially Adverse Effect;

(g) purchase money security interests in or purchase money mortgages
on, or Capitalized Leases in respect of, real or personal property securing
Indebtedness permitted by Section 9.1(c) or (e), covering only the property
so acquired or leased;

(h) Liens of consignors securing Indebtedness permitted under Section
9.1(f);

(i) in connection with the Rampage Acquisition, rights of equipment
lessors identified by the Bankruptcy Court Order with respect to leased
equipment, to the extent permitted by the Rampage Acquisition Documents;
and

(j) other Liens existing on the date hereof and listed on SCHEDULE 9.2
hereto.

9.3. RESTRICTIONS ON SUBSIDIARIES AND INVESTMENTS. Neither the Borrower
nor the Guarantor will, or will permit any of the other Transaction parties to,
create, form or permit to exist any Subsidiary (other than the Borrower and
those Subsidiaries set forth in Section 7.10), or make or permit to exist or to
remain outstanding any Investment except Investments in:

(a) Investments in marketable direct or guaranteed obligations of the
United States maturing within one (1) year;

(b) Investments in certificates of deposit, bankers' acceptances and
time and demand deposits of United States banks having total assets in
excess of $1,000,000,000;

(c) Investments in securities commonly known as "commercial paper"
issued by a corporation that at the time of purchase have been rated and
the ratings for which are not less than "P1" if rated by Moody's Investors
Services, Inc., and not less than "A1" if rated by Standard and Poor's;

(d) Investments in money market mutual funds utilized in the ordinary
course of business, the investment objectives and policies of which require
it to invest substantially all of its assets in investments of the type
permitted under clauses (a), (b) and (c) hereof;

(e) Investments consisting of the Guaranties or other investments by
the Guarantor in the Borrower;

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(f) Investments by the Borrower (i) in the Guarantor; (ii) in
Charlotte Russe Administration consisting of $1,000 in cash and the other
assets described in Section 9.5.2(iv); and (iii) in Charlotte Russe
Merchandising consisting of (A) $1,000 in cash and the other assets
described in Section 9.5.2(v) and (B) other Investments made in accordance
with the Restructuring Agreements or in the ordinary course of business;

(g) Investments as contemplated by Section 9.5.2(ii) and (iii);

(h) Investments consisting of (i) loans and advances to employees for
moving, entertainment, travel and other similar expenses in the ordinary
course of business not to exceed $50,000 in the aggregate at any time
outstanding and (ii) a loan from the Borrower or the Guarantor to Bernard
Zeichner in an aggregate amount not to exceed $1,500,000;

(i) such other investments as the Agent and the Majority Banks may
from time to time approve in writing;

PROVIDED, HOWEVER, that with respect to Investments in excess of $1,000,000 in
aggregate amount, such Investments will be considered Investments permitted by
this Section 9.3 only if all actions have been taken to the satisfaction of the
Agent to provide to the Agent, for the benefit of the Banks and the Agent, a
first priority perfected security interest in all of such Investments free of
all encumbrances other than Permitted Liens.

9.4. DISTRIBUTIONS. Neither the Borrower nor the Guarantor will make any
dividends or distributions on or in respect of any class of its capital stock of
any nature whatsoever, other than (i) dividends payable solely in shares of its
common stock and (ii) dividends and distributions by the Borrower to the
Guarantor.

9.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS.

9.5.1. MERGERS AND ACQUISITIONS. Neither the Borrower nor the
Guarantor will, or will permit any of the other Transaction Parties to,
become a party to any merger or consolidation, or purchase, lease or
otherwise acquire assets other than (a) the acquisition of assets in the
ordinary course of business (which includes the opening of new stores)
consistent with past practices, (b) subject to Section 9.1(e), the purchase
or lease of the Borrower's new headquarters and distribution center, (c) so
long as no Event of Default has occurred and is continuing or would result
therefrom and the Borrower has taken all steps necessary to grant the
Agent, for the benefit of the Banks, a first priority security interest in
substantially all of such assets, the acquisition by the Borrower of the
stock or assets of Persons engaged primarily in the same line of business
as the Borrower for an aggregate amount not to exceed $750,000 per fiscal
year of the Borrower, PROVIDED that with respect to any stock acquisitions,
the acquired entity is, concurrently with such acquisition,

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merged with and into the Borrower, with the Borrower being the surviving
entity, and (d) the merger of one or more Subsidiaries of the Borrower with
and into the Borrower, with the Borrower as the surviving entity.

9.5.2. DISPOSITION OF ASSETS. Neither the Borrower nor the Guarantor
will, or will permit any of the other Transaction Parties to, become a
party to or agree to or effect any disposition of assets, other than (i)
assets sales or dispositions in the ordinary course, consistent with past
practices (not including the termination of store leases); (ii) so long as
no Event of Default has occurred and is continuing, other asset sales
(including the termination of store leases of the Borrower not to exceed
eight (8) in any fiscal year) for cash, PROVIDED that the aggregate amount
of Net Cash Proceeds from all such sales in each fiscal year of the
Borrower in excess of $250,000 are applied by the Borrower, concurrently
with receipt of such proceeds by the Guarantor or the Borrower to make
prepayments on the Loans in accordance with Section 3.2; (iii) the
acquisition of the Rampage Assets on the terms and conditions set forth in
the Rampage Acquisition Documents; (iv) transfer of cash not in excess of
$1,000 in the aggregate and of rights to services of certain employees, in
each case to Charlotte Russe Administration pursuant to the Administration
Contribution Agreement; or (v) transfer of leasehold improvements with an
aggregate net book value not in excess of $3,000,000, trademark and related
intellectual property rights and associated goodwill, an operating lease in
respect of the lease of equipment at the Borrower's distribution center in
San Diego, California, rights to services of certain employees, one Ford
truck and cash not in excess of $1,000 in the aggregate, in each case to
Charlotte Russe Merchandising pursuant to the Merchandising Contribution
Agreement; PROVIDED, HOWEVER, that Charlotte Russe Merchandising shall have
executed and delivered to the Agent a trademark agreement in substantially
the form of the Trademark Agreement with respect to such trademark and
related intellectual property rights and associated goodwill, and the Agent
shall have made such Uniform Commercial Code and Patent and Trademark
Office filings as it shall deem necessary or appropriate.

9.6. SALE AND LEASEBACK. Neither the Borrower nor the Guarantor will, or
will permit any of the other Transaction Parties to, enter into any arrangement,
directly or indirectly, whereby any such Transaction Party shall sell or
transfer any property owned by it in order then or thereafter to lease such
property or lease other property that such Transaction Party intends to use for
substantially the same purpose as the property being sold or transferred, other
than the sale leaseback of the Borrower's new headquarters and distribution
center.

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9.7. GUARANTIES. Neither the Borrower nor the Guarantor will, or will
permit any of the other Transaction Parties to, guarantee payment on any loan
(other than pursuant to the Guaranties).

9.8. SUBORDINATED DEBT. Neither the Guarantor nor the Borrower will, or
will permit any of the other Transaction Parties to, amend, supplement or
otherwise modify the terms of any of the Subordinated Debt or prepay, redeem or
repurchase any of the Subordinated Debt.

9.9. BUSINESS ACTIVITIES. The Borrower will not engage directly or
indirectly in any type of business other than the businesses conducted by it on
the Closing Date and in related businesses. The Guarantor will not conduct any
business or other activities other than the ownership of the stock of the
Borrower and the business and activities incidental thereto. Neither the
Borrower nor the Guarantor will permit Charlotte Russe Administration to hold
assets with a fair market value in excess of $1,000 (excluding rights to
services of certain employees) or to engage in any business or activity other
than conducting administrative and management duties for the Borrower and the
other Transaction Parties.

9.10. FISCAL YEAR. Neither the Borrower nor the Guarantor will change
the date of the end of its fiscal year from that set forth in Section 7.4.1.

9.11. TRANSACTIONS WITH AFFILIATES. Neither the Borrower nor the
Guarantor will, or will permit any of the other Transaction Parties to, engage
in any transaction with any Affiliate (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
such Affiliate or, to the knowledge of the Borrower, the Guarantor or any other
Transaction Party, any corporation, partnership, trust or other entity in which
any such Affiliate has a substantial interest or is an officer, director,
trustee or partner, on terms more favorable to such Person than would have been
obtainable on an arm's-length basis in the ordinary course of business, except:

(a) the agreement with Saunders Karp & Megrue requiring the payment of
(i) an annual monitoring fee in an amount up to $250,000 per year and (ii)
other amounts in reimbursement of Saunders, Karp & Megrue's reasonable
out-of-pocket expense;

(b) (i) transactions or agreements among and between the Guarantor and
the Borrower and (ii) the loan to Bernard Zeichner permitted by
Section 9.3(h)(ii);

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(d) transactions or agreements among and between Charlotte Russe
Merchandising and the Borrower.

9.12. BANK ACCOUNTS. Neither the Borrower nor the Guarantor will, or
will permit any of the other Transaction Parties to, establish any bank accounts
other than those listed on SCHEDULE 7.12 (as the same shall be deemed amended
from time to time to include these depository institutions which have executed
and delivered an Agency Account Agreement) without entering into an Agency
Account Agreement with such depository institution.

9.13. RESTRUCTURING AGREEMENTS. Neither the Borrower nor the Guarantor
will, or will permit any of the other Transaction Parties to, amend, supplement
or otherwise modify the terms of any of the Restructuring Agreements.

10. FINANCIAL COVENANTS OF THE BORROWER.

10.1. CAPITAL EXPENDITURES. The Borrower and the Guarantor will not make,
and will not permit any of the other Transaction Parties to make, Capital
Expenditures during any fiscal year described in the table below (excluding
Capital Expenditures in respect of the purchase or lease of the Borrower's new
headquarters and distribution center (including any equipment installed
therein)) which in the aggregate exceed the greater of (i) the dollar amount set
forth opposite such fiscal year in such table and (ii) the amount equal to the
percentage of Consolidated EBITDA as measured for the prior fiscal year set
forth opposite such fiscal year in such table:

<TABLE>
<CAPTION>
Maximum Capital Expenditures

Dollar
Fiscal Period Amount Maximum Percentage
------------- ------ ------------------
<S> <C> <C>
September 27, 1998 - September 25, 1999 $13,000,000 54% of Consolidated EBITDA
September 26, 1999 - September 30, 2000 $15,250,000 58% of Consolidated EBITDA
October 1, 2000 - September 29, 2001 $17,750,000 56% of Consolidated EBITDA
September 30, 2001 - Maturity Date $19,700,000 52% of Consolidated EBITDA
</TABLE>

PROVIDED, HOWEVER, that if during any fiscal year the amount of Capital
Expenditures permitted by the foregoing for that fiscal year is not so utilized,
such unutilized amount, not in excess of $500,000, may be utilized in the next
succeeding fiscal year, after the maximum Capital Expenditures permitted in such
fiscal year have been utilized but not in any subsequent fiscal year.

10.2. FUNDED DEBT TO EBITDA. The Borrower and the Guarantor will not
permit the ratio of Consolidated Funded Debt measured on the last day of

<PAGE>

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each fiscal quarter ending during any period described in the table below to
Consolidated EBITDA as measured for the period of four consecutive fiscal
quarters ending on such last day to exceed the ratio set forth opposite such
period in such table:

<TABLE>
<CAPTION>
Fiscal Period Maximum Ratio
------------- -------------
<S> <C>
September 27, 1998 - June 26, 1999 1.70:1.00
June 27, 1999 - September 25, 1999 1.60:1.00
September 26, 1999 - September 30, 2000 1.50:1.00
October 1, 2000 - September 29, 2001 1.25.1.00
September 30, 2001 - Maturity Date 1.25:1.00
</TABLE>

10.3. FIXED CHARGE RATIO. The Borrower and the Guarantor will not permit
the ratio of the result of Consolidated EBITDA for any period of four
consecutive fiscal quarters ending during any period described in the table
below MINUS Capital Expenditures (excluding Capital Expenditures in respect of
the purchase or lease of the Borrower's new headquarters and distribution center
(including any equipment installed therein)) made during such fiscal period to
Consolidated Total Debt Service for such period of four consecutive fiscal
quarters to be less than the ratio set forth opposite such period in such table:

<TABLE>
<CAPTION>
Fiscal Period Minimum Ratio
------------- -------------
<S> <C>
September 27, 1998 - September 25, 1999 1.90:1.00
September 26, 1999 - September 30, 2000 1.90:1.00
October 1, 2000 - September 29, 2001 2.10:1.00
September 30, 2001 - Maturity Date 2.10:1.00
</TABLE>

10.4. INTEREST COVERAGE RATIO. The Borrower and the Guarantor will not
permit the Interest Coverage Ratio for any period of four consecutive fiscal
quarters ending during the period described in the table below to be less than
the ratio set forth opposite such period in such table:

<TABLE>
<CAPTION>
Fiscal Period Minimum Ratio
------------- -------------
<S> <C>
September 27, 1998 - June 26, 1999 1.50:1.00
June 27, 1999 - September 25, 1999 1.60:1.00
September 26, 1999 - September 30, 2000 1.60:1.00
October 1, 2000 - September 29, 2001 1.65:1.00
September 30, 2001 - Maturity Date 1.70:1.00
</TABLE>

10.5. INVENTORY TURN RATIO. The Borrower and the Guarantor will not, at
the end of each fiscal quarter of the Borrower, permit the ratio of (i) "cost of
merchandise sold" of the Borrower for the period consisting of the four

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consecutive fiscal quarters of the Borrower ending during any fiscal period
described in the table below to (ii) the average book value of inventory of the
Borrower as of the end of each fiscal quarter ending during such period, to be
less than the ratio set forth opposite such period in such table:

<TABLE>
<CAPTION>
Fiscal Period Minimum Ratio
------------- -------------
<S> <C>
September 27, 1998 - September 25, 1999 5.80:1.00
September 26, 1999 - September 30, 2000 5.50:1.00
October 1, 2000 - September 29, 2001 5.30:1.00
September 30, 2001 - Maturity Date 5.20:1.00
</TABLE>

11. CLOSING CONDITIONS.

The obligations of the Banks to make the initial Loans and of the Agent to
issue any initial Letters of Credit shall be subject to the satisfaction of the
following conditions precedent:

11.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly
executed and delivered by the respective parties thereto, shall be in full force
and effect and shall be in form and substance satisfactory to each of the Banks
and in each case in form substantially similar to those Loan Documents (as
defined in the First Restated Credit Agreement) executed and delivered pursuant
to the First Restated Credit Agreement. The Agent shall have received fully
executed copies of each such document in sufficient quantities for each Bank.

11.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. The Agent shall have
received from each of the Transaction Parties copies, in sufficient quantities
for each Bank, certified by a duly authorized officer of such Person to be true
and complete on the Closing Date, of each of (i) its charter or other
incorporation documents as in effect on such date of certification, and (ii) its
by-laws as in effect on such date.

11.3. CORPORATE ACTION. All corporate action necessary for the valid
execution, delivery and performance by each of the Transaction Parties of this
Credit Agreement and the other Loan Documents to which it is or is to become a
party shall have been duly and effectively taken, and evidence thereof
satisfactory to the Agent shall have been provided to the Agent, in sufficient
quantities for each of the Banks.

11.4. INCUMBENCY CERTIFICATE. The Agent shall have received, in
sufficient quantities for each of the Banks, from each of the Transaction
Parties, an incumbency certificate, dated as of the Closing Date, signed by a
duly authorized officer of such Transaction Party, and giving the name and
bearing a specimen signature of each individual who shall be authorized: (i) to
sign, in the name and on behalf of each of such Transaction Party, each of the
Loan Documents and Subordination Documents to which such Transaction Party is or
is to become a party; (ii) in the case of the Borrower, to make Loan Requests
and

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Conversion Requests and to apply for Letters of Credit; and (iii) to give
notices and to take other action on its behalf under the Loan Documents.

11.5. VALIDITY OF LIENS. The Security Documents shall be effective to
create in favor of the Agent a legal, valid and enforceable first priority
(except for Permitted Liens entitled to priority under applicable law) security
interest in and lien upon the Collateral (with such exceptions to a lien on all
assets of the Transaction Parties as are consistent with those accepted by the
Agent under the First Restated Credit Agreement). All filings, recordings,
deliveries of instruments and other actions necessary or desirable in the
opinion of the Agent to protect and preserve such security interests shall have
been duly effected. The Agent shall have received evidence thereof in form and
substance satisfactory to the Agent.

11.6. PERFECTION CERTIFICATES. The Agent shall have received from each of
the Transaction Parties a completed and fully executed Perfection Certificate.

11.7. CERTIFICATES OF INSURANCE. The Agent shall have received (i) a
certificate of insurance from an independent insurance broker dated as of the
Closing Date, identifying insurers, types of insurance, insurance limits, and
policy terms, naming the Agent as loss payee under all property and casualty
insurance and additional insured under all liability insurance, requiring the
issuer to give the Agent at least thirty (30) days prior written notice of
cancellation of any insurance and otherwise describing the insurance obtained in
accordance with the provisions of the Security Agreement and (ii) certified
copies of all policies evidencing such insurance (or certificates therefore
signed by the insurer or an agent authorized to bind the insurer).

11.8. AGENCY ACCOUNT AGREEMENTS. The Agent shall have received an Agency
Account Agreement executed by each depository institution listed on
SCHEDULE 8.20.

11.9. SOLVENCY CERTIFICATE. Each of the Banks shall have received an
officer's certificate of the Borrower and the Guarantor dated as of the Closing
Date as to the solvency of the Borrower individually and of the Transaction
Parties considered as a whole following the consummation of the transactions
contemplated herein and in form and substance satisfactory to the Banks.

11.10. OPINIONS OF COUNSEL. Each of the Banks and the Agent shall have
received a favorable legal opinion addressed to the Banks and the Agent, dated
as of the Closing Date, in form and substance satisfactory to the Banks and the
Agent, from Cooley, Godward LLP, counsel to the Borrower and the other
Transaction Parties.

11.11. PAYMENT OF FEES. The Borrower shall have paid to the Banks or the
Agent, as appropriate, the Agent's fee pursuant to Section 5.1 and the closing
fee pursuant to Section 5.1.2, together with all reasonable out-of-pocket
expenses of the

<PAGE>

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Agent, including but not limited to reasonable attorneys' fees and
disbursements.

11.12 POST-CLOSING MATTERS. The conditions, actions and items set forth
in Section 8.10 shall not be deemed waived by virtue of the fact that they are
not completed on the Closing Date.

12. CONDITIONS TO ALL BORROWINGS.

The obligations of the Banks to make any Loan and of the Agent to issue,
extend or renew any Letter of Credit, in each case whether on or after the
Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:

12.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the
representations and warranties of the Borrower, the Guarantor and the other
Transaction Parties contained in this Credit Agreement, the other Loan Documents
or in any document or instrument delivered pursuant to or in connection with
this Credit Agreement shall be true as of the date as of which they were made
and shall also be true at and as of the time of the making of such Loan or the
issuance, extension or renewal of such Letter of Credit, with the same effect as
if made at and as of that time (except to the extent of changes resulting from
transactions contemplated or permitted by this Credit Agreement and the other
Loan Documents and changes occurring in the ordinary course of business that
singly or in the aggregate are not materially adverse, and to the extent that
such representations and warranties relate expressly to an earlier date) and no
Default or Event of Default shall have occurred and be continuing.

12.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or
regulations thereunder or interpretations thereof that in the reasonable opinion
of any Bank would make it illegal for such Bank to make such Loan or to
participate in the issuance, extension or renewal of such Letter of Credit or in
the reasonable opinion of the Agent would make it illegal for the Agent to
issue, extend or renew such Letter of Credit.

13. EVENTS OF DEFAULT; ACCELERATION; ETC.

13.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events
("Events of Default") shall occur:

(a) the Borrower shall fail to pay any principal of the Loans or any
Reimbursement Obligation when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment;

(b) the Borrower or any of the other Transaction Parties shall fail
to pay any interest on the Loans, the commitment fee, any Letter of Credit
Fee, or the Agent's fee or other sums due hereunder or under any

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of the other Loan Documents, when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity
or at any other date fixed for payment;

(c) the Borrower or the Guarantor shall fail to comply with any of
its covenants contained in Section 8 (other than Sections 8.3, 8.4, 8.5 and
8.9), 9 (other than Section 9.11) or 10;

(d) the Borrower, the Guarantor or any of the other Transaction
Parties shall fail to perform any term, covenant or agreement contained
herein or in any of the other Loan Documents (other than those specified
elsewhere in this Section 13.1) for fifteen (15) days after written notice
of such failure has been given to the Borrower by the Agent or shall fail
to pay any sum due under any of the Loan Documents (other than the sums
referred to in paragraphs (a) and (b) of this Section 13.1) within fifteen
(15) days after written notice of such failure has been given to the
Borrower by the Agent;

(e) any representation or warranty of the Borrower or any of the
other Transaction Parties in this Credit Agreement or any of the other Loan
Documents, in any certificate or notice given in connection therewith shall
prove to have been false in any material respect upon the date when made or
deemed to have been made or repeated;

(f) the Borrower or any of the other Transaction Parties shall fail
to pay at maturity, or within any applicable period of grace, any
obligation in respect of any Indebtedness For Borrowed Money (the aggregate
amount of which Indebtedness For Borrowed Money exceeds $500,000) or fail
to observe or perform any material term, covenant or agreement contained in
any agreement by which it is bound, evidencing or securing any Indebtedness
For Borrowed Money (the aggregate amount of which Indebtedness For Borrowed
Money exceeds $500,000) for such period of time as would permit (assuming
the giving of appropriate notice if required) the holder or holders thereof
or of any obligations issued thereunder to accelerate the maturity thereof;

(g) the Borrower or any of the other Transaction Parties (i) shall
make an assignment for the benefit of creditors, (ii) shall be adjudicated
bankrupt or insolvent, (iii) shall seek the appointment of, or be the
subject of an order appointing, a trustee, liquidator or receiver as to all
or part of its assets, (iv) shall commence, approve or consent to, any case
or proceeding under any bankruptcy, reorganization or similar law and, in
the case of an involuntary case or proceeding, such case or proceeding is
not dismissed within forty-five (45) days following the commencement
thereof, or (v) shall be the subject of an order for relief in an
involuntary case under federal bankruptcy law;

<PAGE>

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(h) the Borrower or any of the other Transaction Parties shall be
unable to pay its debts as they mature;

(i) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than thirty days, whether or not consecutive, any final
judgment against the Borrower or any of the other Transaction Parties that,
with other outstanding final judgments, undischarged, unsatisfied and
unstayed against the Borrower or any of the other Transaction Parties
exceeds in the aggregate $500,000;

(j) the holders of all or any part of the Subordinated Debt shall
accelerate the maturity of all or any part of the Subordinated Debt or the
Subordinated Debt shall be prepaid, redeemed or repurchased in whole or in
part;

(k) if any of the Loan Documents shall be cancelled, terminated,
revoked or rescinded or the Agent's security interests, mortgages or liens
in a substantial portion of the Collateral shall cease to be perfected, or
shall cease to have the priority contemplated by the Security Documents, in
each case otherwise than with the express prior written agreement, consent
or approval of the Banks, or any action at law, suit or in equity or other
legal proceeding to cancel, revoke or rescind any of the Loan Documents
shall be commenced by or on behalf of the Borrower or any of the other
Transaction Parties party thereto or any of their respective stockholders,
or any court or any other governmental or regulatory authority or agency of
competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of
the Loan Documents is, in its or their entirety or in any material respect,
illegal, invalid or unenforceable in accordance with the terms thereof;

(l) (i) the Guarantor shall at any time, legally or beneficially cease
to own 100% of the Voting Stock of the Borrower, except as permitted by
Section 9.5.1, (ii) the Funds or their affiliates, collectively shall cease
to own legally or beneficially fifty-one percent (51%) or more of the
Voting Stock of the Guarantor on a fully-diluted basis or (iii) Saunders
Karp & Megrue, L.P. shall cease to manage the Funds;

then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Banks shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Credit Agreement,
the Notes and the other Loan Documents and all Reimbursement Obligations to be,
and they shall thereupon forthwith become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the Borrower; PROVIDED that in the event of any Event
of Default specified in Sections 13.1(g) or 13.1(h), all such amounts shall
become immediately due and payable automatically and without any requirement of
notice from the Agent or any Bank.

<PAGE>

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13.2. TERMINATION OF COMMITMENTS. If any one or more of the Events of
Default specified in Section 13.1(g) or Section 13.1(h) shall occur, any unused
portion of the Commitments hereunder shall forthwith terminate and each of the
Banks shall be relieved of all further obligations to make Loans to the Borrower
and the Agent shall be relieved of all further obligations to issue, extend or
renew Letters of Credit. If any other Event of Default shall have occurred and
be continuing, the Agent may and, upon the request of the Majority Banks, shall,
by notice to the Borrower, terminate the unused portion of the Commitments
hereunder, and upon such notice being given such unused portion of the
Commitments hereunder shall terminate immediately and each of the Banks shall be
relieved of all further obligations to make Loans and the Agent shall be
relieved of all further obligations to issue, extend or renew Letters of Credit.
No termination of the Commitments hereunder shall relieve the Borrower or any of
the other Transaction Parties of any of the Obligations.

13.3. REMEDIES. In case any one or more of the Events of Default shall
have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to Section 13.1, each Bank, if
owed any amount with respect to the Loans or the Reimbursement Obligations, may,
with the consent of the Majority Banks but not otherwise, proceed to protect and
enforce its rights by suit in equity, action at law or other appropriate
proceeding, whether for the specific performance of any covenant or agreement
contained in this Credit Agreement and the other Loan Documents or any
instrument pursuant to which the Obligations to such Bank are evidenced,
including as permitted by applicable law the obtaining of the EX PARTE
appointment of a receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of such Bank. No remedy herein conferred upon any Bank
or the Agent or the holder of any Note or purchaser of any Letter of Credit
Participation is intended to be exclusive of any other remedy and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or any
other provision of law.

13.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following
the occurrence or during the continuance of any Default or Event of Default, the
Agent or any Bank, as the case may be, receives any monies in connection with
the enforcement of any the Security Documents, or otherwise with respect to the
realization upon any of the Collateral, such monies shall be distributed for
application as follows:

(a) First, to the payment of, or (as the case may be) the
reimbursement of the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or
sustained by the Agent in connection with the collection of such monies by
the Agent, for the exercise, protection or enforcement by the Agent of all
or any of the rights, remedies, powers and privileges of the Agent under
this Credit Agreement or any of the other Loan Documents or in

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respect of the Collateral or in support of any provision of adequate
indemnity to the Agent against any taxes or liens which by law shall have,
or may have, priority over the rights of the Agent to such monies;

(b) Second, to all other Obligations consisting of fees; PROVIDED,
HOWEVER, that (i) distributions shall be made (A) PARI PASSU among
Obligations with respect to the Agent's fee payable pursuant to Section 5.1
and all other Obligations and (B) with respect to Obligations consisting of
fees owing to the Banks, among the Banks PRO RATA, and (ii) the Agent may
in its discretion make proper allowance to take into account any
Obligations not then due and payable;

(c) Third, to all Obligations in respect of the Loans (first to
interest and then to principal in respect of the Loans); PROVIDED, HOWEVER,
that (i) distributions shall be made among the Banks PRO RATA and (ii) the
Agent may in its discretion make proper allowance to take into account any
Obligations in respect of the Loans not then due and payable;

(d) Fourth, upon payment and satisfaction in full or other provisions
for payment in full satisfactory to the Banks and the Agent of all of the
Obligations, to the payment of any obligations required to be paid pursuant
to Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth
of Massachusetts; and

(e) Fifth, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.

14. SETOFF.

Regardless of the adequacy of any collateral for the Obligations, during
the continuance of any Event of Default, any deposits or other sums credited by
or due from any of the Banks to the Borrower or any of the other Transaction
Parties and any securities or other property of the Borrower and any of the
other Transaction Parties in the possession of such Bank may be applied to or
set off by such Bank against the payment of Obligations and any and all other
liabilities, direct, or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, of the Borrower or such other Transaction
Party to such Bank. Each of the Banks agrees with each other Bank that (i) if
an amount to be set off is to be applied to Indebtedness of the Borrower or such
other Transaction Party to such Bank, other than Indebtedness evidenced by the
Notes held by such Bank or constituting Reimbursement Obligations owed to such
Bank, such amount shall be applied ratably to such other Indebtedness and to the
Indebtedness evidenced by all such Notes held by such Bank or constituting
Reimbursement Obligations owed to such Bank, and (ii) if such Bank shall receive
from the Borrower or such other Transaction Party, whether by voluntary payment,
exercise of the right of setoff, counterclaim, cross action, enforcement of the
claim evidenced by the Notes held by, or constituting Reimbursement Obligations
owed to, such Bank by proceedings against the

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Borrower or such other Transaction Party at law or in equity or by proof thereof
in bankruptcy, reorganization, liquidation, receivership or similar proceedings,
or otherwise, and shall retain and apply to the payment of the Note or Notes
held by, or Reimbursement Obligations owed to, such Bank any amount in excess of
its ratable portion of the payments received by all of the Banks with respect to
the Notes held by, and Reimbursement Obligations owed to, all of the Banks, such
Bank will make such disposition and arrangements with the other Banks with
respect to such excess, eitherby way of distribution, PRO TANTO assignment of
claims, subrogation or otherwise as shall result in each Bank receiving in
respect of the Notes held by it or Reimbursement obligations owed it, its
proportionate payment as contemplated by this Credit Agreement; PROVIDED that if
all or any part of such excess payment is thereafter recovered from such Bank,
such disposition and arrangements shall be rescinded and the amount restored to
the extent of such recovery, but without interest.

15. THE AGENT.

15.1. AUTHORIZATION.

(a) The Agent is authorized to take such action on behalf of each of
the Banks and to exercise all such powers as are hereunder and under any of
the other Loan Documents and any related documents delegated to the Agent,
together with such powers as are reasonably incident thereto, PROVIDED that
no duties or responsibilities not expressly assumed herein or therein shall
be implied to have been assumed by the Agent.

(b) The relationship between the Agent and each of the Banks is that
of an independent contractor. The use of the term "Agent" is for
convenience only and is used to describe, as a form of convention, the
independent contractual relationship between the Agent and each of the
Banks. Nothing contained in this Credit Agreement nor the other Loan
Documents shall be construed to create an agency, trust or other fiduciary
relationship between the Agent and any of the Banks.

(c) As an independent contractor empowered by the Banks to exercise
certain rights and perform certain duties and responsibilities hereunder
and under the other Loan Documents, the Agent is nevertheless a
"representative" of the Banks, as that term is defined in Article 1 of the
Uniform Commercial Code, for purposes of actions for the benefit of the
Banks and the Agent with respect to all collateral security and guaranties
contemplated by the Loan Documents. Such actions include the designation
of the Agent as "secured party", "mortgagee" or the like on all financing
statements and other documents and instruments, whether recorded or
otherwise, relating to the attachment, perfection, priority or enforcement
of any security interests, mortgages or deeds of trust in collateral
security intended to secure the payment or performance of any of the
Obligations, all for the benefit of the Banks and the Agent.

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15.2. EMPLOYEES AND AGENTS. The Agent may exercise its powers and execute
its duties by or through employees or agents and shall be entitled to take, and
to rely on, advice of counsel concerning all matters pertaining to its rights
and duties under this Credit Agreement and the other Loan Documents. The Agent
may utilize the services of such Persons as the Agent in its sole discretion may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.

15.3. NO LIABILITY. Neither the Agent nor any of its shareholders,
directors, officers or employees nor any other Person assisting them in their
duties nor any agent or employee thereof, shall be liable for any waiver,
consent or approval given or any action taken, or omitted to be taken, in good
faith by it or them hereunder or under any of the other Loan Documents, or in
connection herewith or therewith, or be responsible for the consequences of any
oversight or error of judgment whatsoever, except that the Agent or such other
Person, as the case may be, may be liable for losses due to its willful
misconduct or gross negligence.

15.4. NO REPRESENTATIONS.

15.4.1. GENERAL. The Agent shall not be responsible for the
execution or validity or enforceability of this Credit Agreement, the
Notes, the Letters of Credit, any of the other Loan Documents or any
instrument at any time constituting, or intended to constitute, collateral
security for the Notes, or for the value of any such collateral security or
for the validity, enforceability or collectability of any such amounts
owing with respect to the Notes, or for any recitals or statements,
warranties or representations made herein or in any of the other Loan
Documents or in any certificate or instrument hereafter furnished to it by
or on behalf of the Borrower or any of the other Transaction Parties, or be
bound to ascertain or inquire as to the performance or observance of any of
the terms, conditions, covenants or agreements herein or in any instrument
at any time constituting, or intended to constitute, collateral security
for the Notes or to inspect any of the properties, books or records of the
Borrower or any of the other Transaction Parties. The Agent shall not be
bound to ascertain whether any notice, consent, waiver or request delivered
to it by the Borrower or any holder of any of the Notes shall have been
duly authorized or is true, accurate and complete. The Agent has not made
nor does it now make any representations or warranties, express or implied,
nor does it assume any liability to the Banks, with respect to the credit
worthiness or financial conditions of the Borrower or any of the other
Transaction Subsidiaries. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and
based upon such information and documents as it has deemed appropriate,
made its own credit analysis and decision to enter into this Credit
Agreement.

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15.4.2. CLOSING DOCUMENTATION, ETC. For purposes of determining
compliance with the conditions set forth in Section 11, each Bank that has
executed this Credit Agreement shall be deemed to have consented to,
approved or accepted, or to be satisfied with, each document and matter
either sent, or made available, by the Agent or BancBoston Robertson
Stephens Inc. or its predecessor, BankBoston Securities Inc., as arranger
(the "Arranger"), to such Bank for consent, approval, acceptance or
satisfaction, or required thereunder to be to be consent to or approved by
or acceptable or satisfactory to such Bank, unless an officer of the Agent
or the Arranger active upon the Borrower's account shall have received
notice from such Bank prior to the Closing Date specifying such Bank's
objection thereto and such objection shall not have been withdrawn by
notice to the Agent or the Arranger to such effect on or prior to the
Closing Date.

15.5. PAYMENTS.

15.5.1. PAYMENTS TO AGENT. A payment by the Borrower to the Agent
hereunder or any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees promptly to
distribute to each Bank such Bank's PRO RATA share of payments received by
the Agent for the account of the Banks except as otherwise expressly
provided herein or in any of the other Loan Documents.

15.5.2. DISTRIBUTION BY AGENT. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder, under
the Notes or under any of the other Loan Documents might involve it in
liability, it may refrain from making distributions until its right to make
distributions shall have been adjudicated by a court of competent
jurisdiction. If a court of competent jurisdiction shall adjudge that any
amount received and distributed by the Agent is to be repaid, each Person
to whom any such distribution shall have been made shall either repay to
the Agent its proportionate share of the amount so adjudged to be repaid or
shall pay over the same in such manner and to such Persons as shall be
determined by such court.

15.5.3. DELINQUENT BANKS. Notwithstanding anything to the contrary
contained in this Credit Agreement or any of the other Loan Documents, any
Bank that fails (i) to make available to the Agent its PRO RATA share of
any Loan or to purchase any Letter of Credit Participation or (ii) to
comply with the provisions of Section 14 with respect to making
dispositions and arrangements with the other Banks, where such Bank's share
of any payment received, whether by setoff or otherwise, is in excess of
its PRO RATA share of such payments due and payable to all of the Banks, in
each case as, when and to the full extent required by the provisions of
this Credit Agreement, shall be deemed delinquent (a "Delinquent Bank") and
shall be deemed a Delinquent Bank until such

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time as such delinquency is satisfied. A Delinquent Bank shall be deemed
to have assigned any and all payments due to it from the Borrower, whether
on account of Outstanding Loans, Unpaid Reimbursement Obligations,
interest, fees or otherwise, to the remaining nondelinquent Banks for
application to, and reduction of, their respective PRO RATA shares of all
Outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent
Bank hereby authorizes the Agent to distribute such payments to the
nondelinquent Banks in proportion to their respective PRO RATA shares of
all Outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent
Bank shall be deemed to have satisfied in full a delinquency when and if,
as a result of application of the assigned payments to all Outstanding
Loans and Unpaid Reimbursement Obligations of the nondelinquent Banks, the
Banks' respective PRO RATA shares of all Outstanding Loans and Unpaid
Reimbursement Obligations have returned to those in effect immediately
prior to such delinquency and without giving effect to the nonpayment
causing such delinquency.

15.6. HOLDERS OF NOTES. The Agent may deem and treat the payee of any
Note or the purchaser of any Letter of Credit Participation as the absolute
owner or purchaser thereof for all purposes hereof until it shall have been
furnished in writing with a different name by such payee or by a subsequent
holder, assignee or transferee.

15.7. INDEMNITY. The Banks ratably agree hereby to indemnify and hold
harmless the Agent and its affiliates from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent or such affiliate has not
been reimbursed by the Borrower or the Guarantor as required by Section 16), and
liabilities of every nature and character arising out of or related to this
Credit Agreement, the Notes, or any of the other Loan Documents or the
transactions contemplated or evidenced hereby or thereby, or the Agent's actions
taken hereunder or thereunder, except to the extent that any of the same shall
be directly caused by the Agent's willful misconduct or gross negligence.

15.8. AGENT AS BANK. In its individual capacity, BKB shall have the same
obligations and the same rights, powers and privileges in respect to its
Commitment and the Loans made by it, and as the holder of any of the Notes and
as the purchaser of any Letter of Credit Participations, as it would have were
it not also the Agent.

15.9. RESIGNATION. The Agent may resign at any time by giving sixty (60)
days prior written notice thereof to the Banks and the Borrower. Upon any such
resignation, the Majority Banks shall have the right to appoint a successor
Agent. Unless an Event of Default shall have occurred and be continuing, such
successor Agent shall be reasonably acceptable to the Borrower. If no successor
Agent shall have been so appointed by the Majority Banks and shall have accepted
such appointment within thirty (30) days after the retiring Agent's

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giving of notice of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a financial institution having
a rating of not less than A or its equivalent by Standard & Poor's Corporation.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation, the provisions of this Credit Agreement and the
other Loan Documents shall continue in effect for its benefit in respect of any
actions taken or omitted to be taken by it while it was acting as Agent.

15.10. NOTIFICATION OF DEFAULTS AND EVENTS OF DEFAULT. Each Bank hereby
agrees that, upon learning of the existence of a Default or an Event of Default,
it shall promptly notify the Agent thereof. The Agent hereby agrees that upon
receipt of any notice under this Section 15.10 it shall promptly notify the
other Banks of the existence of such Default or Event of Default.

15.11. DUTIES IN THE CASE OF ENFORCEMENT. In case one of more Events of
Default have occurred and shall be continuing, and whether or not acceleration
of the Obligations shall have occurred, the Agent shall, if (i) so requested by
the Majority Banks and (ii) the Banks have provided to the Agent such additional
indemnities and assurances against expenses and liabilities as the Agent may
reasonably request, proceed to enforce the provisions of the Security Documents
authorizing the sale or other disposition of all or any part of the Collateral
and exercise all or any such other legal and equitable and other rights or
remedies as it may have in respect of such Collateral. The Majority Banks may
direct the Agent in writing as to the method and the extent of any such sale or
other disposition, the Banks hereby agreeing to indemnify and hold the Agent,
harmless from all liabilities incurred in respect of all actions taken or
omitted in accordance with such directions, PROVIDED that the Agent need not
comply with any such direction to the extent that the Agent reasonably believes
the Agent's compliance with such direction to be unlawful or commercially
unreasonable in any applicable jurisdiction.

16. EXPENSES AND INDEMNIFICATION.

16.1. EXPENSES. Each of the Borrower and the Guarantor agrees to pay (i)
the reasonable costs of producing and reproducing this Credit Agreement, the
other Loan Documents and the other agreements and instruments mentioned herein,
(ii) any taxes (including any interest and penalties in respect thereto) payable
by the Agent or any of the Banks (other than taxes based upon the Agent's or any
Bank's net income) on or with respect to the transactions contemplated by this
Credit Agreement (the Borrower and the Guarantor hereby agreeing to indemnify
the Agent and each Bank with respect thereto), (iii) the reasonable fees,
expenses and disbursements of the Agent's Special Counsel or any local counsel
to the Agent incurred in connection with the preparation, syndication,
administration or interpretation of the Loan Documents and other instruments
mentioned herein, each closing hereunder, any amendments,

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modifications, approvals, consents or waivers hereto or hereunder, or the
cancellation of any Loan Document upon payment in full in cash of all of the
Obligations or pursuant to any terms of such Loan Document for providing for
such cancellation, (iv) the fees, expenses and disbursements of the Agent or any
of its affiliates incurred by the Agent or such affiliate in connection with the
preparation, syndication, administration or interpretation of the Loan Documents
and other instruments mentioned herein, including all title insurance premiums
and surveyor, engineering and appraisal charges, (v) any fees, costs, expenses
and bank charges, including bank charges for returned checks, incurred by the
Agent in establishing, maintaining or handling agency accounts for the
collection of any of the Collateral; (vi) all reasonable out-of-pocket expenses
(including without limitation reasonable attorneys' fees and costs, which
attorneys may be employees of any Bank or the Agent, and reasonable consulting,
accounting, appraisal, investment banking and similar professional fees and
charges) incurred by any Bank or the Agent in connection with (A) the
enforcement of or preservation of rights under any of the Loan Documents against
the Borrower or any of the other Transaction Parties or the administration
thereof after the occurrence of a Default or Event of Default and (B) any
litigation, proceeding or dispute whether arising hereunder or otherwise, in any
way related to any Bank's or the Agent's relationship with the Borrower or any
of the other Transaction Parties and (vii) all reasonable fees, expenses and
disbursements of any Bank or the Agent incurred in connection with UCC searches,
UCC filings or mortgage recordings.

16.2. INDEMNIFICATION. Each of the Borrower and the Guarantor agrees to
indemnify and hold harmless the Agent, its affiliates and the Banks from and
against any and all claims, actions and suits whether groundless or otherwise,
and from and against any and all liabilities, losses, damages and expenses of
every nature and character arising out of this Credit Agreement or any of the
other Loan Documents or the transactions contemplated hereby including, without
limitation, (i) any actual or proposed use by the Borrower or any of the other
Transaction Parties of the proceeds of any of the Loans or Letters of Credit,
(ii) the reversal or withdrawal of any provisional credits granted by the Agent
upon the transfer of funds from agency accounts or in connection with the
provisional honoring of checks or other items, (iii) any actual or alleged
infringement of any patent, copyright, trademark, service mark or similar right
of the Borrower or any of the other Transaction Parties comprised in the
Collateral, (iv) the Borrower or any of the other Transaction Parties entering
into or performing this Credit Agreement or any of the other Loan Documents or
(v) with respect to the Borrower and any of the other Transaction Parties and
their respective properties and assets, the violation of any Environmental Law,
the presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any Hazardous Substances or any action, suit,
proceeding or investigation brought or threatened with respect to any Hazardous
Substances (including, but not limited to, claims with respect to wrongful
death, personal injury or damage to property), in each case including, without
limitation, the reasonable fees and disbursements of counsel and

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allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding; PROVIDED, HOWEVER, that such
indemnity shall not apply to the portion, if any, of such losses, claims,
damages, liabilities or related expenses of any Person seeking indemnification
that is determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the willful misconduct or gross
negligence of the Person seeking indemnification. In litigation, or the
preparation therefor, the Banks and the Agent and its affiliates shall be
entitled to select their own counsel and, in addition to the foregoing
indemnity, each of the Borrower and the Guarantor agrees to pay promptly the
reasonable fees and expenses of such counsel. If, and to the extent that the
obligations of the Borrower or the Guarantor under this Section 16.2 are
unenforceable for any reason, each of the Borrower and the Guarantor hereby
agrees to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law.

16.3. SURVIVAL. The covenants contained in this Section 16 shall survive
payment or satisfaction in full of all other Obligations.

17. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.

17.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. Each of the
Borrower and the Guarantor acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Borrower, the Guarantor or the other Transaction Parties in connection with
this Credit Agreement or otherwise, by a Section 20 Subsidiary. Each of the
Borrower and the Guarantor hereby authorizes (a) such Section 20 Subsidiary to
share with the Agent and each Bank any information delivered to such Section 20
Subsidiary by the Borrower or the Guarantor, and (b) the Agent and each Bank to
share with such Section 20 Subsidiary any information delivered to the Agent or
such Bank by the Borrower or any of the other Transaction Parties pursuant to
this Credit Agreement, or in connection with the decision of such Bank to enter
into this Credit Agreement; it being understood, in each case, that any such
Section 20 Subsidiary receiving such information shall be bound by the
confidentiality provisions of this Credit Agreement. Such authorization shall
survive the payment and satisfaction in full of all of the Obligations.

17.2. CONFIDENTIALITY. Each of the Banks and the Agent agrees, on behalf
of itself and each of its affiliates, directors, officers, employees and
representatives, to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Borrower or any of the other
Transaction Parties pursuant to this Credit Agreement that is identified by such
Person as being confidential at the time the same is delivered to the Banks or
the Agent, PROVIDED that nothing herein shall limit the disclosure of any such
information (a) after such information shall have become public other than
through a violation of this Section 17, (b) to the extent required by

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statute, rule, regulation or judicial process, (c) to counsel for any of the
Banks or the Agent, (d) to bank examiners or any other regulatory authority
having jurisdiction over any Bank or the Agent, or to auditors or accountants,
(e) to the Agent, any Bank or any Section 20 Subsidiary, (f) in connection with
any litigation to which any one or more of the Banks, the Agent or any Section
20 Subsidiary is a party, or in connection with the enforcement of rights or
remedies hereunder or under any other Loan Document, (g) to a Subsidiary or
affiliate of such Bank as provided in Section 17.1 or (h) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant agrees to be bound by the provisions of Section 19.6.

17.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable
law or court order, each of the Banks and the Agent shall, prior to disclosure
thereof, notify the Borrower of any request for disclosure of any such
non-public information by any governmental agency or representative thereof
(other than any such request in connection with an examination of the financial
condition of such Bank by such governmental agency) or pursuant to legal
process.

17.4. OTHER. In no event shall any Bank or the Agent be obligated or
required to return any materials furnished to it or any Section 20 Subsidiary by
the Borrower or any of the other Transaction Parties. The obligations of each
Bank under this Section 17 shall supersede and replace the obligations of such
Bank under any confidentiality letter in respect of this financing signed and
delivered by such Bank to the Borrower and/or the Guarantor prior to the date
hereof and shall be binding upon any assignee of, or purchaser of any
participation in, any interest in any of the Loans or Reimbursement Obligations
from any Bank.

18. SURVIVAL OF COVENANTS, ETC.

All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower or any of the other Transaction
Parties pursuant hereto shall be deemed to have been relied upon by the Banks
and the Agent, notwithstanding any investigation heretofore or hereafter made by
any of them, and shall survive the making by the Banks of any of the Loans and
the issuance, extension or renewal of any Letters of Credit, as herein
contemplated, and shall continue in full force and effect so long as any Letter
of Credit or any amount due under this Credit Agreement or the Notes or any of
the other Loan Documents remains Outstanding or any Bank has any obligation to
make any Loans or the Agent has any obligation to issue, extend or renew any
Letter of Credit, and for such further time as may be otherwise expressly
specified in this Credit Agreement. All statements contained in any certificate
or other paper delivered to any Bank or the Agent at any time by or on behalf of
the Borrower or any of the other Transaction Parties pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower or such Transaction Party
hereunder.

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19. ASSIGNMENT AND PARTICIPATION.

19.1. CONDITIONS TO ASSIGNMENT BY BANKS. Except as provided herein, each
Bank may assign to one or more Eligible Assignees all or a portion of its
interests, rights and obligations under this Credit Agreement (including all or
a portion of its Commitment Percentage and Commitment and the same portion of
the Loans at the time owing to it, the Notes held by it and its participating
interest in the risk relating to any Letters of Credit); PROVIDED that (i) each
of the Agent and, unless an Event of Default shall have occurred and be
continuing, the Borrower shall have given its prior written consent to such
assignment, which consent, in the case of the Borrower, will not be unreasonably
withheld, (ii) each such assignment shall be of a constant, and not a varying,
percentage of all the assigning Bank's rights and obligations under this Credit
Agreement, (iii) each assignment shall be in a minimum amount of $5,000,000 and
(iv) BKB shall retain, free of any such assignment (other than an assignment of
100% of its interests, rights and obligations under this Credit Agreement), an
amount of its Commitment of not less than the lesser of (A) $13,260,000 and (B)
fifty-one percent (51%) of the sum of the Total Commitment as of the date of
such assignment and (v) the parties to such assignment shall execute and deliver
to the Agent, for recording in the Register (as hereinafter defined), an
Assignment and Acceptance, substantially in the form of EXHIBIT F hereto (an
"Assignment and Acceptance"), together with any Notes subject to such
assignment. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five (5) Business Days after the execution
thereof, (i) the assignee thereunder shall be a party hereto and, to the extent
provided in such Assignment and Acceptance, have the rights and obligations of a
Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in
such assignment and upon payment to the Agent of the registration fee referred
to in Section 19.3, be released from its obligations under this Credit
Agreement.

19.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By
executing and delivering an Assignment and Acceptance, the parties to the
assignment thereunder confirm to and agree with each other and the other parties
hereto as follows:

(a) other than the representation and warranty that it is the legal
and beneficial owner of the interest being assigned thereby free and clear
of any adverse claim, the assigning Bank makes no representation or
warranty, express or implied, and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection with
this Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Credit Agreement, the other Loan
Documents or any other instrument or document furnished pursuant hereto or
the attachment, perfection or priority of any security interest or
mortgage,

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(b) the assigning Bank makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower, any of the other Transaction Parties or any other Person
primarily or secondarily liable in respect of any of the Obligations, or
the performance or observance by the Borrower, any of the other Transaction
Parties or any other Person primarily or secondarily liable in respect of
any of the Obligations of any of their obligations under this Credit
Agreement or any of the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto;

(c) such assignee confirms that it has received a copy of this Credit
Agreement, together with copies of the most recent financial statements
referred to in Section 7.4 and Section 8.4 and such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance;

(d) such assignee will, independently and without reliance upon the
assigning Bank, the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Credit
Agreement;

(e) such assignee represents and warrants that it is an Eligible
Assignee;

(f) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under this Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof or thereof, together with such powers as are reasonably
incidental thereto;

(g) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Credit
Agreement are required to be performed by it as a Bank;

(h) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; and

(i) such assignee acknowledges that it has made arrangements with the
assigning Bank satisfactory to such assignee with respect to its PRO RATA
share of Letter of Credit Fees in respect of Outstanding Letters of Credit.

19.3. REGISTER. The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentage of, and principal amount of the Loans owing to and Letter of Credit
Participations purchased by, the Banks from time to time. The entries in the

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Register shall be conclusive, in the absence of manifest error, and the
Borrower, the other Transaction Parties, the Agent and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Credit Agreement. The Register shall be available for
inspection by the Borrower and the Banks at any reasonable time and from time to
time upon reasonable prior notice. Upon each such recordation, the assigning
Bank agrees to pay to the Agent a registration fee in the sum of $3,500.

19.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance
executed by the parties to such assignment, together with each Note subject to
such assignment, the Agent shall (i) record the information contained therein in
the Register, and (ii) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five (5) Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
Eligible Assignee in an amount equal to the amount assumed by such Eligible
Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank
has retained some portion of its obligations hereunder, a new Note to the order
of the assigning Bank in an amount equal to the amount retained by it hereunder.
Such new Notes shall provide that they are replacements for the surrendered
Notes, shall be in an aggregate principal amount equal to the aggregate
principal amount of the surrendered Notes, shall be dated the effective date of
such an Assignment and Acceptance and shall otherwise be substantially the form
of the assigned Notes. The surrendered Notes shall be canceled and returned to
the Borrower.

19.5. PARTICIPATIONS. Each Bank may sell participations to one or more
banks or other entities in all or a portion of such Bank's rights and
obligations under this Credit Agreement and the other Loan Documents; PROVIDED
that (i) each such participation shall be in an amount of not less than
$5,000,000, (ii) any such sale or participation shall not affect the rights and
duties of the selling Bank hereunder to the Borrower and (iii) the only rights
granted to the participant pursuant to such participation arrangements with
respect to waivers, amendments or modifications of the Loan Documents shall be
the rights to approve waivers, amendments or modifications that would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the Commitment of such Bank as it relates to such participant, reduce
the amount of any commitment fees or Letter of Credit Fees to which such
participant is entitled or extend any regularly scheduled payment date for
principal or interest.

19.6. DISCLOSURE. Each of the Borrower and the Guarantor agrees that in
addition to disclosures made in accordance with standard and customary banking
practices any Bank may disclose information obtained by such Bank pursuant to
this Credit Agreement to assignees or participants and potential assignees or
participants hereunder; PROVIDED that such assignees or participants or
potential assignees or participants shall agree (i) to treat in confidence such
information unless such information otherwise becomes public

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knowledge, (ii) not to disclose such information to a third party, except as
required by law or legal process and (iii) not to make use of such information
for purposes of transactions unrelated to such contemplated assignment or
participation.

19.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE BORROWER OR THE
GUARANTOR. If any assignee Bank is an Affiliate of the Borrower or the
Guarantor, then any such assignee Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or other
modifications to any of the Loan Documents or for purposes of making requests to
the Agent pursuant to Section 13.1 or Section 13.2, and the determination of the
Majority Banks shall for all purposes of this Credit Agreement and the other
Loan Documents be made without regard to such assignee Bank's interest in any of
the Loans or Reimbursement Obligations. If any Bank sells a participating
interest in any of the Loans or Reimbursement Obligations to a participant, and
such participant is the Borrower or an Affiliate of the Borrower, then such
transferor Bank shall promptly notify the Agent of the sale of such
participation. A transferor Bank shall have no right to vote as a Bank
hereunder or under any of the other Loan Documents for purposes of granting
consents or waivers or for purposes of agreeing to amendments or modifications
to any of the Loan Documents or for purposes of making requests to the Agent
pursuant to Section 13.1 or Section 13.2 to the extent that such participation
is beneficially owned by the Borrower or any Affiliate of the Borrower, and the
determination of the Majority Banks shall for all purposes of this Credit
Agreement and the other Loan Documents be made without regard to the interest of
such transferor Bank in the Loans or Reimbursement Obligations to the extent of
such participation.

19.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Bank shall
retain its rights to be indemnified pursuant to Section 16 with respect to any
claims or actions arising prior to the date of such assignment. If any assignee
Bank is not incorporated under the laws of the United States of America or any
state thereof, it shall, prior to the date on which any interest or fees are
payable hereunder or under any of the other Loan Documents for its account,
deliver to the Borrower and the Agent certification as to its exemption from
deduction or withholding of any United States federal income taxes. Anything
contained in this Section 19 to the contrary notwithstanding, any Bank may at
any time pledge all or any portion of its interest and rights under this Credit
Agreement (including all or any portion of its Notes) to any of the twelve
Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12
U.S.C. Section 341. No such pledge or the enforcement thereof shall release the
pledgor Bank from its obligations hereunder or under any of the other Loan
Documents.

19.9. ASSIGNMENT BY BORROWER OR GUARANTOR. Neither the Borrower nor the
Guarantor shall assign or transfer any of its rights or obligations under any of
the Loan Documents without the prior written consent of each of the Banks.

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20. NOTICES, ETC.

Except as otherwise expressly provided in this Credit Agreement, all
notices and other communications made or required to be given pursuant to this
Credit Agreement or the Notes or any Letter of Credit Applications shall be in
writing and shall be delivered in hand, mailed by United States registered or
certified first class mail, postage prepaid, sent by overnight courier, or sent
by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier
or postal service, addressed as follows:

(a) if to the Borrower or the Guarantor, at 4645 Morena Boulevard,
San Diego, California 92117 Attention: Daniel T. Carter, Chief Financial
Officer, Fax: 619-587-0619 with a copy to Saunders Karp & Megrue, L.P., 667
Madison Avenue, New York, New York 10021, Attn. Allan Karp and David Oddi,
Fax: 212-755-1624, or at such other address for notice as the Borrower or
the Guarantor shall last have furnished in writing to the Person giving the
notice;

(b) if to the Agent, at 100 Federal Street, Boston, Massachusetts
02110, USA, Attention: Terese A. McLaughlin, or such other address for
notice as the Agent shall last have furnished in writing to the Person
giving the notice; and

(c) if to any Bank, at such Bank's address set forth on SCHEDULE 1
hereto, or such other address for notice as such Bank shall have last
furnished in writing to the Person giving the notice.

Any such notice or demand shall be deemed to have been duly given or made
and to have become effective (i) if delivered by hand, overnight courier or
facsimile to a responsible officer of the party to which it is directed, at the
time of the receipt thereof by such officer or the sending of such facsimile and
(ii) if sent by registered or certified first-class mail, postage prepaid, on
the third Business Day following the mailing thereof.

21. GOVERNING LAW.

THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED
THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). EACH OF THE
BORROWER AND THE GUARANTOR AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND

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CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS
IN ANY SUCH SUIT BEING MADE UPON THE BORROWER OR THE GUARANTOR BY MAIL AT THE
ADDRESS SPECIFIED IN Section 20. EACH OF THE BORROWER AND THE GUARANTOR HEREBY
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.

22. HEADINGS.

The captions in this Credit Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.

23. COUNTERPARTS.

This Credit Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Credit Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom enforcement is sought.

24. ENTIRE AGREEMENT, ETC.

The Loan Documents and any other documents executed in connection herewith
or therewith express the entire understanding of the parties with respect to the
transactions contemplated hereby. Neither this Credit Agreement nor any term
hereof may be changed, waived, discharged or terminated, except as provided in
Section 27.

25. WAIVER OF JURY TRIAL.

Each of the parties hereto hereby waives its right to a jury trial with
respect to any action or claim arising out of any dispute in connection with
this Credit Agreement, the Notes or any of the other Loan Documents, any rights
or obligations hereunder or thereunder or the performance of which rights and
obligations. Except as prohibited by law, each of the Borrower and the
Guarantor hereby waives any right it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. Each of the Borrower and the Guarantor (i) certifies that no
representative, agent or attorney of any Bank or the Agent has represented,
expressly or otherwise, that such Bank or the Agent would not, in the event of
litigation, seek to enforce the foregoing waivers and (ii) acknowledges that the
Agent and the Banks have been induced to enter into this Credit Agreement, the
other Loan Documents to which it is a party and the Subordination Documents

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to which it is a party by, among other things, the waivers and certifications
contained herein.

26. CONSENTS, AMENDMENTS, WAIVERS, ETC.

Any consent or approval required or permitted by this Credit Agreement to
be given by the Banks may be given, and any term of this Credit Agreement, the
other Loan Documents or any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower or any of the
other Transaction Parties of any terms of this Credit Agreement, the other Loan
Documents or such other instrument or the continuance of any Default or Event of
Default may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Borrower or, as applicable, such other Transaction Party, and the written
consent of the Majority Banks. Notwithstanding the foregoing, the rate of
interest on the Notes (other than interest accruing pursuant to Section 5.10.2
following the effective date of any waiver by the Majority Banks of the Default
or Event of Default relating thereto), the amount of the Commitments of the
Banks, and the amount of commitment fee or Letter of Credit Fees hereunder may
not be changed without the written consent of the Borrower and the written
consent of each Bank affected thereby; the Revolving Credit Loan Maturity Date
may not be postponed without the written consent of each Bank affected thereby;
this Section 26 and the definition of Majority Banks may not be amended, without
the written consent of all of the Banks; and the amount of the Agent's Fee or
any Letter of Credit Fees payable for the Agent's account and Section 15 may not
be amended without the written consent of the Agent. No waiver shall extend to
or affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent or
any Bank in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon any of the Transaction
Parties shall entitle any of the Transaction Parties to other or further notice
or demand in similar or other circumstances.

27. SEVERABILITY.

The provisions of this Credit Agreement are severable and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Credit Agreement in any jurisdiction.

28. TRANSITIONAL ARRANGEMENTS.

28.1. FIRST RESTATED CREDIT AGREEMENT SUPERSEDED. This Agreement shall
supersede the First Restated Credit Agreement in its entirety, except as
provided in this Section 28.1. On the Closing Date, the rights and obligations
of the parties under the First Restated Credit Agreement and the "Notes" (as

<PAGE>

-70-

defined in the First Restated Credit Agreement) issued in favor of BKB under the
First Restated Credit Agreement as defined therein shall be subsumed within and
be governed by this Agreement and the other Loan Documents, PROVIDED, HOWEVER,
that each of the "Loans" (as defined in the First Restated Credit Agreement)
outstanding under the First Restated Credit Agreement on the Closing Date shall,
for purposes of this Agreement, be Loans, and shall continue to bear interest or
be subject to fees at the respective rates in effect immediately prior to the
Closing Date to the Closing Date, in the case of Base Rate Loans, and to the end
of the applicable Interest Period in the case of Eurodollar Rate Loans.

28.2. RETURN AND CANCELLATION OF NOTES. Upon its receipt of its Notes
hereunder on the Closing Date, BKB will promptly return to the Borrower, marked
"Canceled", any notes of the Borrower held by such Bank pursuant to the First
Restated Credit Agreement.

28.3. FEES UNDER SUPERSEDED AGREEMENT. All commitment and other fees
expenses owing or accruing under or in respect of the First Restated Credit
Agreement through the Closing Date shall be calculated as of the Closing Date
(prorated in the case of any fractional periods), and shall be paid in
accordance with the method, and on the dates, specified in the First Restated
Credit Agreement, as if the First Restated Credit Agreement were still in
effect.

<PAGE>

-71-

IN WITNESS WHEREOF, the undersigned have duly executed this Credit
Agreement as a sealed instrument as of the date first set forth above.

CHARLOTTE RUSSE, INC.

By: /s/ DANIEL T. CARTER
------------------------------------
Name: Daniel T. Carter
Title: CFO

CHARLOTTE RUSSE HOLDING, INC.

By: /s/ DANIEL T. CARTER
------------------------------------
Name: Daniel T. Carter
Title: CFO

BANKBOSTON, N.A., individually and
as Agent

By: /s/ NANCY E. FULLER
------------------------------------
Name: Nancy E. Fuller
Title: Director

UNION BANK OF CALIFORNIA, N.A.

By: /s/ TERRY ROCHA
------------------------------------
Name: Terry Rocha
Title: Vice President

<PAGE>

SCHEDULE 1
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
REVOLVING
BANKS REVOLVING CREDIT CREDIT
COMMITMENT COMMITMENT
PERCENTAGE
- -----------------------------------------------------------------------------
<S> <C> <C>
BankBoston, N.A. $19,259,259.24 74.074074%
- -----------------------------------------------------------------------------
Union Bank of California, N.A. $ 6,740,740.76 25.925926%
- -----------------------------------------------------------------------------
TOTAL $ 26,000,000 100%
- -----------------------------------------------------------------------------
</TABLE>

<PAGE>

SCHEDULE 1-1(a)

Restructuring Transactions

1. Capital Contribution/Incorporation Agreement, dated as of September 25,
1998, by and between Charlotte Russe, Inc. and Charlotte Russe
Administration, Inc.;

2. Capital Contribution/Incorporation Agreement, dated as of September 25,
1998, by and between Charlotte Russe, Inc. and Charlotte Russe
Merchandising, Inc.;

3. Sales and Distribution Agreement, dated as of September 27, 1998, by and
between Charlotte Russe Merchandising, Inc. and Charlotte Russe, Inc.;

4. Management and Administrative Services Agreement, dated as of September 27,
1998, by and between Charlotte Russe Administration, Inc. and Charlotte
Russe, Inc.;

5. Management and Administrative Services Agreement, dated as of September 27,
1998, by and between Charlotte Russe Administration, Inc. and Charlotte
Russe Merchandising, Inc.;

6. Master Employment Services Agreement, dated as of September 27, 1998, by
and between Charlotte Russe, Inc. and Charlotte Russe Administration, Inc.;

7. Master Employment Services Agreement, dated as of September 27, 1998, by
and between Charlotte Russe, Inc. and Charlotte Russe Merchandising, Inc.;

8. Equipment Lease, dated as of September 27, 1998, by and between Charlotte
Russe, Inc. and Charlotte Russe Administration, Inc.;

9. Equipment Lease, dated as of September 27, 1998, by and between Charlotte
Russe, Inc. and Charlotte Russe Merchandising, Inc.;

10. Trademark Assignment, dated as of December 23, 1998, by Charlotte Russe,
Inc.; and

11. Trademark License Agreement, dated as of December 23, 1998, by and between
Charlotte Russe Merchandising, Inc. and Charlotte Russe, Inc.

-2-

<PAGE>

SCHEDULE 7.4

Fiscal Periods

<TABLE>
<CAPTION>
YEAR/QUARTER DATE ENDING
<S> <C>
1997/98 (FY98)
First Quarter 12/27/97
Second Quarter 3/28/98
Third Quarter 8/27/98
Fourth Quarter 9/26/98

1998/99 (FY99)
First Quarter 12/26/98
Second Quarter 3/27/99
Third Quarter 6/26/99
Fourth Quarter 9/25/99

1999/00 (FY00)
First Quarter 1/1/00
Second Quarter 4/1/00
Third Quarter 7/1/00
Fourth Quarter 9/30/00

2000/01 (FY01)
First Quarter 12/30/00
Second Quarter 3/31/01
Third Quarter 6/30/01
Fourth Quarter 9/29/01

2001/02 (FY02)
First Quarter 12/29/01
Second Quarter 3/30/02
Third Quarter 6/29/02
Fourth Quarter 9/29/02

2002/03 (FY03)
First Quarter 12/28/02
Second Quarter 3/29/03
Third Quarter 6/28/03
Fourth Quarter 9/27/03
</TABLE>

-3-

<PAGE>

SCHEDULE 7.7

Consents

NONE

-4-

<PAGE>

SCHEDULE 7.11

CHARLOTTE RUSSE, INC.
BANK ACCOUNTS

<TABLE>
<CAPTION>
Bank Account No. Type of Account
---- ----------- ---------------
<S> <C> <C>
Bank of America 14508-02607 Concentration
San Diego Corp. Bkg. Group
#1450 14504-02420 Payroll
450 "B" Street, Suite 100
San Diego, California 92101

14501-02672 Bankcards
14500-03318 Bankcards
14507-04178 Bankcards
14503-03529 Insurance/PR Tax

14506-04305 Disbursement

Bank of America 896-961 Horizon Gov't Svc
Mutual Fund Services #9011 Shares Fund
P.O. Box 37032
San Francisco, California 94137-9011

NationsBank 3660044698 Depository
P.O. Box 4899
Mail Code Gal-006-18-31
Atlanta, Georgia

Bank of Hawaii 0002-670399 Depository
P.O. Box 2900
Honolulu, Hawaii 96846-6000

Chase Manhattan Bank 323-838065 Depository
Church Street Station
P.O. Box 932
New York, NY 10008-0932

-5-

<PAGE>

BankBoston, N.A. 512-98005 Corporate Checking
100 Federal Street
Mail Stop: 01-09-05 4000209186 Money Market
Boston, MA 02110

Wells Fargo Bank 4603793944 Bankcards
P.O. Box 63020
San Francisco, CA 92117-3650

Michigan National Bank 1939799456 Depository
2690 Tittabawassee
Saginaw, MI 48604
</TABLE>

-6-

<PAGE>

CHARLOTTE RUSSE MERCHANDISING, INC.
BANK ACCOUNTS

<TABLE>
<CAPTION>
Bank Account No. Type of Account
---- ----------- ---------------
<S> <C> <C>
Bank of America 14501-08339 Disbursement
San Diego Corp. Bkg. Group
#1450 450 "B" Street, Suite 100
San Diego, California 92101
Contact: Ms. Karin Barnes-VP
(619) 515-7507
Fax (619) 515-7541
</TABLE>

-7-

<PAGE>

CHARLOTTE RUSSE ADMINISTRATION, INC.
BANK ACCOUNTS

<TABLE>
<CAPTION>
Bank Account No. Type of Account
---- ----------- ---------------
<S> <C> <C>
Bank of America 14508-08340 Disbursement
San Diego Corp. Bkg. Group
#1450 450 "B" Street, Suite 100
San Diego, California 92101
Contact: Ms. Karin Barnes-VP
(619) 515-7507
Fax (619) 515-7541
</TABLE>

-8-

<PAGE>

SCHEDULE 7.15

Charlotte Russe Holding, Inc.
Capital Structure

Authorized Shares = 250,000

<TABLE>
<CAPTION>
Primary Fully Diluted
------- -------------
Amount Shares Ownership Shares Ownership
------ ------- --------- -------------- --------
<S> <C> <C> <C> <C> <C>
Subordinated Debt:

SKEP. . . . . . . . $10,891,354 0.0 0.0% 19,450.0 8.6%

SKIF. . . . . . . . $ 108,646 0.0 0.0% 194.0 0.1%
------------- --- --- -------- ----
TOTAL . . . $11,000,000 0.0 0.0% 19,644.1 8.7%
============= === === ======== ====
Common Equity:

SKEP. . . . . . . . $17,369,252 173,692.5 94.9% 173,692.5 76.6%

SKIF. . . . . . . . $ 180,748 1,807.5 1.0% 1,807.5 0.8%

B. Zeichner . . . . $ 750,000 7,500.0 4.1% 7,500.0 3.3%

BankBoston,N.A. . . $0 0.0 0.0% 4,136.6 1.8%

Sub Debt Holders. . $0 0.0 0.0% 19,644.1 8.7%

Stock Option Plan . $0 0.0 0.0% 20,000.0 8.8%
------------- --- --- -------- ----
Total . . . $18,300,000 183,000.0 100.0% 226,779.7 100.0%
============= ========= ===== ========= =====
</TABLE>

-9-

<PAGE>

SCHEDULE 9.1

Existing Indebtedness

Institution Indebtedness
----------- ------------

None

-10-

<PAGE>

SCHEDULE 9.2

Existing Liens

Institution Lien
----------- ----
<S> <C>
COMDISCO Leased Equipment: HP K100
computer and related
equipment and software.

AMERICAN NATIONAL LEASING Leased Equipment: water
CORP. coolers in stores

BANCBOSTON LEASING, INC. Leased Equipment:
Materials Handling System in
distribution center

</TABLE>

-11-

<PAGE>

EXHIBIT A

FORM OF AGENCY ACCOUNT AGREEMENT

CHARLOTTE RUSSE, INC.
4645 Morena Boulevard
San Diego, CA 92117
Tel: (619) 587-9900
Fax: (619) 587-0619

______________, ___

[Agency Account Institution]
[Address]

Re: Account No. _______________

Ladies and Gentlemen:

This letter refers to Account No. and all other accounts (collectively,
the "Store Account") which [Name of Borrower] (the "Company") maintains with
you ("you" or the "Bank").

The Company hereby notifies you that it has entered into certain
financial arrangements with BankBoston, N.A., as agent (the "Agent") for
itself and other lending institutions and, in connection with those financial
arrangements, it has transferred exclusive ownership and control of the Store
Account to the Agent.

By its execution and delivery of this letter to the Agent, the Bank
irrevocably acknowledges and agrees as follows: (a) the Bank has been advised
that all funds which may from time to time be on deposit in the Store Account
are the property of the Agent; (b) the Bank shall disclose to the Agent such
information relating to the Store Account and the debits and credits thereto
as the Agent may from time to time reasonably request; (c) except as set
forth below, the Bank will not exercise any right of set-off, banker's lien
or any similar right in favor of itself or any other person in connection
with any monies, checks, drafts, instruments or other items of payment
deposited into the Store Account, or any funds on deposit thereon; (d) the
Bank will collect all monies, checks, drafts, instruments and other items of
payment deposited into the Store Account; and (e) upon the Bank's receipt of
written notice from the Agent, it will on a daily basis transfer the
collected available balance of funds standing to the credit of the Store
Account by wire transfer (or other means acceptable to the Agent) solely to:

BankBoston, N.A.
Account #________________
ABA 0 11000930

-12-

<PAGE>

Re: Charlotte Russe, Inc.
Attn: Terese A. McLaughlin, Large Corporate

(the "Agent Concentration Account") or such other destination as the Agent
shall designate. The Agent hereby notifies you that the Agent will from time
to time access the Store Account for the sole purpose of facilitating the
transfer of funds therein to the Agent Concentration Account pursuant to the
instructions set forth in the foregoing sentence.

For providing the services described in this letter agreement, the
Company shall pay to the Bank a nonrefundable monthly fee of $_, payable in
advance. This fee is in addition to the Bank's customary wire transfer of
funds. The Bank is authorized to debit the Store Account to pay this fee and
the wire transfer charges.

Notwithstanding anything in this letter to the contrary, the Bank Shall
have the right to deduct from or set off against amounts from time to time in
the Store Account (1) its usual and customary costs and expenses in respect
of interest on overdrafts and any return items, and its usual and customary
fees and expenses associated with any such return item, overdraft and/or the
maintenance of the Store Account and (ii) the face amount (or portion
thereof) of any check, instrument or other item which was deposited in the
Store Account and which has been returned unpaid for reasons of insufficient
funds or has otherwise not been collected. You hereby acknowledge and agree
that all such interest, costs, fees and expenses shall be for the account of
the Company and in the event the amounts in the Store Account are
insufficient to reimburse you for the same, the Company hereby agrees to
reimburse you for such interest, costs, fees and/or expenses immediately upon
your demand therefor in immediately available funds.

The Bank shall have no duty to inquire into the source or use of any
monies, checks, drafts, instruments or other items or amounts deposited into
the Store Account. The Company hereby agrees that any deposits of monies,
checks, drafts, instruments or other items into or withdrawals from the Store
Account now or hereafter directed by the Agent are authorized by the Company
and the Company acknowledges that it has no right to direct such transfers at
any time. The Bank shall be fully protected in acting on any instruction of
the Agent with respect to the Store Account without making any inquiry as to
the Agent's authority to give such instruction.

The Company consents and agrees to the foregoing, authorizes the Bank to
enter into this letter agreement, and agrees to indemnify and hold harmless
the Bank from and against any and all claims, actions and suits (whether
groundless or otherwise), losses, damages, costs, expenses and liabilities of
every nature and character arising out of the Bank's compliance with the
terms of this letter, except such as result from the Bank's gross negligence
or willful misconduct, and in no event shall the Bank be liable for any
consequential, indirect or special damages.

This letter agreement is binding upon each of the undersigned and you
and each of our respective successors and assigns and shall inure to the
benefit of each of us and other respective successors and assigns. It
supersedes all prior agreements, oral or written, with respect to the

-13-

<PAGE>

subject matter hereof, and may not be modified without the prior written
consent of each of the parties hereto.

This letter agreement may be terminated only as follows: (1) you may
terminate this letter agreement and the Store Account at any time which is
thirty (30) days or more after the date you shall have given written notice
of such termination to the Agent and (ii) the Agent may terminate this letter
agreement and the Store Account at any time which is thirty (30) days or more
after the date the Agent shall have given written notice of such termination
(sent to each of the Company and you).

Any notice hereunder shall be delivered to the relevant party hereto at
the address and to the attention of such party set forth below, or at such
other address or to the attention of such other party as the party to be
addressed may specify by written notice delivered to each other party hereto.
No termination shall affect or impair any of the agreements, rights or
obligations hereunder of any party with respect to any periods of time prior
to the date of such termination.

-14-

<PAGE>

This letter agreement shall be governed by and construed in accordance
with the internal laws of the Commonwealth of Massachusetts and applicable
federal law. This letter agreement shall become effective immediately upon
being executed by all of the parties hereto.

Very truly yours,

CHARLOTTE RUSSE, INC.

By:______________________________
Name:
Title:
Address:

Telephone:
Telecopier:
Attention:

BANKBOSTON, N.A., AS THE AGENT

By:______________________________
Name: Terese A. McLaughlin
Address: 100 Federal Street
Boston, MA 02110
Telephone: (617) 434-2683
Telecopier: (617) 434-6685
Attention: Terese A. McLaughlin

Acknowledged and agreed to this
_____ day of ____________, 19__

[NAME OF BANK]

By:________________________________
Name:
Title:
Address:

Telephone:
Telecopier:
Attention:

-15-

<PAGE>

EXHIBIT B

FORM OF AMENDED AND RESTATED
REVOLVING CREDIT NOTE

$____________ ____________, ___

FOR VALUE RECEIVED, the undersigned CHARLOTTE RUSSE, INC., a California
corporation, (the "Borrower"), hereby promises to pay to the order of I a
national banking association (the "Bank") at the Agent's head office at
100 Federal Street, Boston, Massachusetts 02110:

(a) prior to or on the Revolving Credit Loan Maturity Date the
principal amount of DOLLARS ($ ) or, if less, the aggregate unpaid
principal amount of Loans advanced by the Bank to the Borrower pursuant to
the Second Amended and Restated Revolving Credit Agreement dated as of
December 23, 1998 (as amended and in effect from time to time, the "Credit
Agreement"), among the Borrower, the Guarantor (as defined therein), the
Bank and other lending institutions which are or may become parties thereto
from time to time, (the Bank and such other lending institutions being
collectively referred to as the "Banks") and BankBoston, N.A., as agent for
the Banks (the "Agent");

(b) the principal outstanding hereunder from time to time at the times
provided in the Credit Agreement; and

(c) interest on the principal balance hereof from time to time
outstanding from the Closing Date under the Credit Agreement through and
including the maturity date hereof at the times and at the rate provided in
the Credit Agreement.

This Amended and Restated Revolving Credit Note (this "Note") is an amendment
and restatement of the [Amended and Restated] Revolving Credit Note of the
Borrower dated December 15, 1997 and issued by the Borrower to [, which was in
turn an amendment and restatement of the Revolving Credit Notes of the
Borrower dated as of December 5, 1997, September 30, 1997 and September 27,
1996].* This Note evidences borrowings under and has been issued by the
Borrower in accordance with the terms of the Credit Agreement. The Bank and
any holder hereof is entitled to the benefits of the Credit Agreement, the
Security Documents and the other Loan Documents, and may enforce the
agreements of the Borrower contained therein, and any holder hereof may
exercise the respective remedies provided for thereby or otherwise available
in respect thereof, all in accordance with the respective terms thereof. All
capitalized terms used in this Note and not otherwise defined herein shall
have the same meanings herein as in the Credit Agreement.

- -----------------
* Bracketed language to be inserted into note issued to BankBoston, N.A.

-16-

<PAGE>

The Borrower irrevocably authorizes the Bank to make or cause to be
made, at or about the time of the Drawdown Date of any Loan or at the time of
receipt of any payment of principal of this Note, an appropriate notation on
the grid attached to this Note, or the continuation of such grid, or any
other similar record, including computer records, reflecting the making of
such Loan or (as the case may be) the receipt of such payment. The
outstanding amount of the Loans set forth on the grid attached to this Note,
or the continuation of such grid, or any other similar record, including
computer records, maintained by the Bank with respect to any Loans shall be
prima facie evidence of the principal amount thereof owing and unpaid to the
Bank, but the failure to record, or any error in so recording, any such
amount on any such grid, continuation or other record shall not limit or
otherwise affect the obligation of the Borrower hereunder or under the Credit
Agreement to make payments of principal of and interest on this Note when due.

The Borrower has the right in certain circumstances and the obligation
under certain other circumstances to prepay the whole or part of the
principal of this Note on the terms and conditions specified in the Credit
Agreement.

If any one or more of the Events of Default shall occur, the entire
unpaid principal amount of this Note and all of the unpaid interest accrued
thereon may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.

No delay or omission on the part of the Bank or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or of
any other rights of the Bank or such holder, nor shall any delay, omission or
waiver on any one occasion be deemed a bar or waiver of the same or any other
right on any further occasion.

The Borrower and every endorser and guarantor of this Note or the
obligation represented hereby waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assents to any
extension or postponement of the time of payment or any other indulgence, to
any substitution, exchange or release of collateral and to the addition or
release of any other party or person primarily or secondarily liable.

THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL FOR ALL
PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR
CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS
NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY
FEDERAL COURT SITTING THEREIN AND THE CONSENT TO THE NONEXCLUSIVE
JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING
MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED BY REFERENCE IN
SECTION 20 OF THE CREDIT

-17-

<PAGE>

AGREEMENT. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH
SUIT IS BROUGHT IN AN INCONVENIENT COURT.

This Note shall be deemed to take effect as a sealed instrument under
laws of the Commonwealth of Massachusetts.

IN WITNESS WHEREOF, the undersigned have caused this Note to be signed
in its corporate name by its duly authorized officer as of the day and year
first above written.

CHARLOTTE RUSSE, INC.

By:__________________________
Title:

-18-

<PAGE>

- --------------------------------------------------------------------------------
AMOUNT AMOUNT OF BALANCE OF
OF REVOLVING PRINCIPAL PAID PRINCIPAL NOTATION
DATE CREDIT LOAN OR PREPAID UNPAID MADE BY:
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

-19-

<PAGE>

- --------------------------------------------------------------------------------

</TABLE>

-20-

<PAGE>

EXHIBIT C

CHARLOTTE RUSSE, INC.
4645 Morena Boulevard
San Diego, CA 92117

____________ __, ____

BankBoston, N.A., as Agent
100 Federal Street
Boston, MA 02110

Attention: Terese A. McLaughlin, Large Corporate Retail-Apparel

RE: REQUEST UNDER THE SECOND AMENDED AND
RESTATED REVOLVING CREDIT AGREEMENT

Ladies and Gentlemen:

Reference is hereby made to that certain Second Amended and Restated
Revolving Credit Agreement dated as of December 23, 1998 by and among
Charlotte Russe, Inc. (the "Borrower"), Charlotte Russe Holding, Inc.,
BankBoston, N.A. and the other lending institutions listed on Schedule I
thereto and BankBoston, N.A., as agent (the "Agent") for itself and such
other lending institutions (as amended and in effect from time to time, the
"Credit Agreement"). Capitalized terms which are used herein without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.

FOR BORROWINGS:

Pursuant to Section 2.6 of the Credit Agreement, we hereby request that
a Loan consisting of [**a Base Rate Loan in the principal amount of $_________,
or a Eurodollar Rate Loan in the principal amount of $___________** with an
Interest Period commencing on ____________ and maturing on _____________**]
be made on ___________ __, ____. We understand that this request is
irrevocable and binding on us and obligates us to accept the requested Loan
on such date.

- -----------------
** Note: Eurodollar Rate Loans shall not be less than $100,000 or a multiple
of $100,000 in excess thereof.

-21-

<PAGE>

BankBoston, N.A.
Page 2

We hereby certify (a) that the aggregate outstanding principal amount of
the Loans on today's date is $ , (b) that we will use the proceeds of the
requested Loan in accordance with the provisions of the Credit Agreement,
(c) that each of the representations and warranties contained in the Credit
Agreement, any of the other Loan Documents or any documents, certificate or
other paper or notice delivered pursuant to or in connection with the Credit
Agreement was true and correct in all material respects as of the date as of
which they were made and each of the representations and warranties contained
in the Credit Agreement are true at and as of the date hereof (except, in
each case, to the extent of changes resulting from transactions contemplated
or permitted by the Credit Agreement and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially
adverse, and to the extent that such representations and warranties relate
expressly to an earlier date) and (d) that no Default or Event of Default has
occurred and is continuing.

FOR REPAYMENTS:

Pursuant to the Credit Agreement, we hereby request that $ applied as
payment of principal on our outstanding [**Loans **].

Very truly yours,

CHARLOTTE RUSSE, INC.

By:____________________________
Title:

-22-

<PAGE>

EXHIBIT D

FORM OF
COMPLIANCE CERTIFICATE

[Date]

BankBoston, N.A., as Agent
and the Banks referred to below
100 Federal Street
Boston, Massachusetts 02110

Ladies and Gentlemen:

Reference is hereby made to that certain Second Amended and Restated
Revolving Credit Agreement dated as of December 23, 1998, (as amended, modified,
supplemented or restated and in effect from time to time, the "Credit
Agreement") among Charlotte Russe, Inc. (the "Borrower"), Charlotte Russe
Holding, Inc. (the "Guarantor), the lending institutions referred to therein as
Banks (collectively, the "Banks"), and BankBoston, N.A., as agent for itself and
the Banks (in such capacity, the "Agent"). Capitalized terms used herein without
definition shall have the same meanings herein as in the Credit Agreement.

This is a certificate delivered pursuant to Section 8.2 of the Credit
Agreement with respect to calculations of certain components of the criteria for
determining the Applicable Margin and for purposes of evidencing compliance with
the financial covenants provided for in Section 10 of the Credit Agreement. This
certificate has been duly executed by the principal financial or accounting
officer of the Borrower.

To the best of the knowledge and belief of the undersigned: (a) each of the
representations and warranties contained in the Credit Agreement and the other
Loan Documents are true in all material respects as of the date hereof, with the
same effect as if made at and as of the date hereof (except to the extent of any
changes resulting from transactions contemplated or permitted by the Credit
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially adverse
and to the extent that such representations and warranties relate expressly to
an earlier date); (b) attached hereto as Appendix I and set forth in reasonable
detail are computations evidencing compliance with the covenants contained in
Section 10 of the Credit Agreement as of the date and for the applicable period
to which the financial statements delivered herewith relate as well as
calculations relating to the Interest Coverage Ratio component of the Applicable
Base Rate Margin or Applicable Eurodollar Rate Margin criteria as of the date
and for the applicable period to which the financial statements delivered
herewith relate; (c) the calculations present the financial information
contained therein as of the last day of such period and for such applicable
period, as the case may be, subject to normal year end adjustments; (d) as of
the date hereof, no Default or Event of

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<PAGE>

Default has occurred or is continuing and (e) the [quarterly] [annual]
financial statements delivered to the Banks and the Agent herewith were
prepared in accordance with generally accepted accounting principles (except
for the absence of footnotes required by generally accepted accounting
principles) and presents fairly the financial position of the Borrower and
its Subsidiaries as of the date thereof [(subject, in the case of the
quarterly financial statements, to year-end adjustments)].

In addition, together with this certificate, the Borrower is delivering to
the Agent the financial statements [describe date and period of applicable
financial statements] required pursuant to Section 8.2 of the Credit Agreement.

IN WITNESS WHEREOF, the undersigned has executed this certificate as an
instrument under seal as of the date first written above.

CHARLOTTE RUSSE, INC.

By:______________________
Name:
Title:

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<PAGE>

APPENDIX I

COMPLIANCE CERTIFICATE WORKSHEET

CHARLOTTE RUSSE, INC.
CHARLOTTE RUSSE HOLDING, INC.

As of ______________

Section Calculation
- ------- -----------
<S> <C> <C>

10.1 CAPITAL EXPENDITURES

Capital Expenditures (in $____________
the aggregate) (not to exceed
the greater of (i) the dollar
amount set forth opposite the
relevant fiscal year
described in the table in
Section 10.1 and (ii) the
amount equal to the
percentage of Consolidated
EBITDA as measured for the
prior fiscal year set forth
opposite the relevant
fiscal year in such table)

10.2 FUNDED DEBT TO EBITDA. $____________

A. CONSOLIDATED FUNDED
DEBT:
(measured on the last
day of the fiscal
quarter ending during
the relevant period
described in the table
in Section 10.2)

(1) amount of Loans $__________
outstanding, PLUS

(2) Maximum Drawing $__________
Amount and all
unpaid Reimbursement
Obligations, PLUS

(3) outstanding $__________
amount of any other
Indebtedness For
Borrowed Money:

-25-
<PAGE>

B. CONSOLIDATED EBITDA: $___________
(measured for the period
of four consecutive
fiscal quarters ending
during the relevant
period described in the
table in Section 10.2)

(1) Consolidated net $__________
income (or net
deficit), PLUS
(after deduction of
all expenses, taxes,
and other proper
charges)

(2) depreciation and $__________
amortization, plus

(3) income tax $__________
expense, PLUS

(4) Consolidated
Total Interest
Expense, PLUS

(5) fees and $__________
expenses paid in
connection with the
closing of the Loans
and the Rampage
Acquisition (up to a
maximum of
$__________)

C. RATIO OF A TO B: _____:_____
(not to exceed the ratio
for the relevant period
as set forth in the table
in Section 10.2)

10.3 FIXED CHARGE RATIO. $__________
A. CONSOLIDATED EBITDA
MINUS CAPITAL
EXPENDITURES
(measured for the period
of four consecutive
fiscal quarters ending
during the relevant
period described in the
table in Section 10.3)

(1) Consolidated $__________
EBITDA, MINUS

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<PAGE>

(2) Capital $__________
Expenditures:
(excluding Capital
Expenditures in
respect of the
purchase or lease of
the Borrower's new
headquarters and
distribution center
(including any
equipment installed
therein))

B. CONSOLIDATED TOTAL $_________
DEBT SERVICE:
(measured for the period
of four consecutive
fiscal quarters ending
during the relevant
period described in the
table in Section 10. 3)

(1) Consolidated $__________
Total Interest
Expense, plus

(2) aggregate $__________
liability for
principal payments
in respect of
Indebtedness
relating to the
borrowing of money
or the obtaining of
credit (other than
Indebtedness
consisting of
current liabilities
permitted under
Section 9.1(d) and
other Indebtedness
consisting of non-
interest bearing
ordinary course
obligations due and
payable)

C. RATIO OF A TO B: ____:____
(not to be less than the
ratio set forth opposite
the relevant period
described in the table in
Section 10.3)

-27-
<PAGE>

10.4 INTEREST COVERAGE RATIO

A. CONSOLIDATED EBITDA $_________
PLUS RENTAL OBLIGATIONS:
(measured for the period
of four consecutive
fiscal quarters ending
during the relevant
period described in the
table in Section 10.4)

(1) Consolidated net $__________
income (or net
deficit), PLUS
(after deduction of
all expenses, taxes,
and other proper
charges)

(2) depreciation and $__________
amortization, PLUS

(3) income tax $__________
expense, PLUS

(4) Consolidated $__________
Total Interest
Expense, PLUS

(5) fees and $__________
expenses paid in
connection with the
closing of the
Loans, PLUS

(6) Rental $__________
Obligations:

B. CONSOLIDATED TOTAL
INTEREST EXPENSE PLUS $__________
RENTAL OBLIGATIONS:
(measured for the period
of four consecutive
fiscal quarters ending
during the relevant
period described in the
table in Section 10.4)

(1) Consolidated $__________
Total Interest
Expense, PLUS

(2) Rental $__________
Obligations:

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<PAGE>

C. RATIO OF A TO B: _____:____
(not to be less than the
ratio set forth opposite
the relevant period
described in the table in
Section 10.4)

10.5 INVENTORY TURN RATIO.

A. COST OF MERCHANDISE $_________
SOLD OF THE BORROWER:
(measured for the period
of four consecutive
fiscal quarters ending
during the relevant
period described in the
table in Section 10.5)

B. AVERAGE BOOK VALUE OF $_________
INVENTORY OF THE
BORROWER:

C. RATIO OF A TO B: ____:____
(not to be less than the
ratio set forth opposite
the relevant period
described in the table in
Section 10.5)

</TABLE>

-29-
<PAGE>

EXHIBIT E

FORM OF
ASSIGNMENT AND ACCEPTANCE

Dated as of ____________, ___

Reference is made to the Second Amended and Restated Revolving Credit
Agreement, dated as of December 23, 1998 (as from time to time amended and in
effect, the "Credit Agreement"), by and among CHARLOTTE RUSSE, INC., a
California corporation (the "Borrower"), CHARLOTTE RUSSE HOLDING, INC., a
Delaware corporation (the "Guarantor"), the banking institutions referred to
therein as Banks (collectively, the "Banks"), and BANKBOSTON, N.A., a national
banking association, as agent (in such capacity, the "Agent") for the Banks.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned to such terms in the Credit Agreement.

________________________________________ (the "Assignor") and
________________________________ (the "Assignee") hereby agree as follows:

1. ASSIGNMENT. Subject to the terms and conditions of this Assignment and
Acceptance, the Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes without recourse to the Assignor, a
$__________ interest in and to the rights, benefits, indemnities and obligations
of the Assignor under the Credit Agreement equal to % in respect of the Total
Commitment immediately prior to the Effective Date (as hereinafter defined).

2. ASSIGNOR'S REPRESENTATIONS. The Assignor (i) represents and warrants
that (A) it is legally authorized to enter into this Assignment and Acceptance,
(B) as of the date hereof, its Commitment is $______________ its Commitment
Percentage is the aggregate outstanding principal balance of its Loans equals $
the aggregate amount of its Letter of Credit Participations equals $ (in each
case after giving effect to the assignment contemplated hereby but without
giving effect to any contemplated assignments which have not yet become
effective), and (C) immediately after giving effect to all assignments which
have not yet become effective, the Assignor's Commitment Percentage will be
sufficient to give effect to this Assignment and Acceptance, (ii) makes no
representation or warranty, express or implied, and assumes no responsibility
with respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or any of the other Loan Documents or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit Agreement, the other Loan Documents or any other instrument or
document furnished pursuant thereto or the attachment, perfection or priority of
any security interest or mortgage, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder free and clear
of any

-30-
<PAGE>

claim or encumbrance; (111) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrower or
the Guarantor or any other Person primarily or secondarily liable in respect
of any of the Obligations, or the performance or observance by the Borrower
or the Guarantor or any other Person primarily or secondarily liable in
respect of any of the Obligations of any of its obligations under the Credit
Agreement or any of the other Loan Documents or any other instrument or
document delivered or executed pursuant thereto; and (iv) attaches hereto the
Note delivered to it under the Credit Agreement.

The Assignor requests that the Borrower exchange the Assignor's Note for
new Notes payable to the Assignor and the Assignee as follows:

Notes Payable to Amount of
the Order of: Note
- ---------------- ---------
<S> <C>
Assignor $___________
Assignee $___________

</TABLE>

3. ASSIGNEE'S REPRESENTATIONS. The Assignee (1) represents and warrants
that (A) it is duly and legally authorized to enter into this Assignment and
Acceptance, (B) the execution, delivery and performance of this Assignment and
Acceptance do not conflict with any provision of law or of the charter or bylaws
of the Assignee, or of any agreement binding on the Assignee, (C) all acts,
conditions and things required to be done and performed and to have occurred
prior to the execution, delivery and performance of this Assignment and
Acceptance, and to render the same the legal, valid and binding obligation of
the Assignee, enforceable against it in accordance with its terms, have been
done and performed and have occurred in due and strict compliance with all
applicable laws; (11) confirms that it has received a copy of the Credit
Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 8.2 thereof and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; (iii) agrees that it
will, independently and without reliance upon the Assignor, the Agent or any
other Bank and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement; (iv) represents and warrants that
it is an Eligible Assignee; (v) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Credit
Agreement and the other Loan Documents as are delegated to the Agent by the
terms thereof, together with such powers as are reasonably incidental thereto;
(vi) agrees that it will perform in accordance with their terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Bank; and (vii) acknowledges that it has made arrangements
with the Assignor satisfactory to the Assignee with respect to its pro rata
share of Letter of Credit Fees in respect of outstanding Letters of Credit.

4. EFFECTIVE DATE. The effective date for this Assignment and Acceptance
shall be (the "Effective Date"). Following the execution of this Assignment and
Acceptance and, prior to the

-31-
<PAGE>

occurrence of a Default or Event of Default, the consent of the Borrower
hereto having been obtained, each party hereto shall deliver its duly
executed counterpart hereof to the Agent for acceptance by the Agent and
recording in the Register by the Agent. Upon the recordation of this
Assignment and Acceptance, the Assignor shall pay to the Agent a registration
fee in the sum of $3,500. Schedule I to the Credit Agreement shall thereupon
be replaced as of the Effective Date by the Schedule I annexed hereto.

5. RIGHTS UNDER CREDIT AGREEMENT. Upon such acceptance and recording,
from and after the Effective Date, (i) the Assignee shall be a party to the
Credit Agreement and, to the extent provided in this Assignment and Acceptance,
have the rights and obligations of a Bank thereunder, and (ii) the Assignor
shall, with respect to that portion of its interest under the Credit Agreement
assigned hereunder, relinquish its rights and be released from its obligations
under the Credit Agreement; provided, however, that the Assignor shall retain
its rights to be indemnified pursuant to Section 16 of the Credit Agreement with
respect to any claims or actions arising prior to the Effective Date.

6. PAYMENTS. Upon such acceptance of this Assignment and Acceptance by the
Agent and such recording, from and after the Effective Date, the Agent shall
make all payments in respect of the rights and interests assigned hereby
(including payments of principal, interest, fees and other amounts) to the
Assignee. The Assignor and the Assignee shall make any appropriate adjustments
in payments for periods prior to the Effective Date by the Agent or with respect
to the making of this assignment directly between themselves.

7. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO TAKE
EFFECT AS A SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO
CONFLICT OF LAWS).

8. COUNTERPARTS. This Assignment and Acceptance may be executed in any
number of counterparts which shall together constitute but one and the same
agreement.

IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned
has caused this Assignment and Acceptance to be executed on its behalf by its
officer thereunto duly authorized, as of the date first above written.

ASSIGNOR:

By:_______________________
Title:

ASSIGNEE:

-32-
<PAGE>

By:________________________
Title:
CONSENTED TO:

CHARLOTTE RUSSE, INC.

By:
_________________________
Title:

BANKBOSTON, N.A., as
Agent

By:_______________________
Title:

-33-

<PAGE>

FIRST AMENDMENT AND MODIFICATION AGREEMENT

FIRST AMENDMENT AND MODIFICATION AGREEMENT dated as of June 10, 1999
(this "Amendment") by and among CHARLOTTE RUSSE, INC., a California
corporation (the "Borrower"); CHARLOTTE RUSSE HOLDING, INC., a Delaware
corporation (the "Guarantor"); CHARLOTTE RUSSE MERCHANDISING, INC., a
California corporation (the "Subsidiary Guarantor"); BANKBOSTON, N.A., as
Agent (the "Agent") and BANKBOSTON, N.A., individually, and the other lending
institutions (collectively, the "Banks") listed on SCHEDULE 1 to the Second
Amended and Restated Revolving Credit Agreement dated as of December 23, 1998
(as amended and in effect from time to time, the "Credit Agreement") among
the Borrower, the Guarantor, the Banks and the Agent. Terms not otherwise
defined herein which are defined in the Credit Agreement shall have the
respective meanings assigned to such terms in the Credit Agreement, as
amended hereby.

WHEREAS, the Borrower has requested that the Agent and the Banks amend
certain provisions of the Credit Agreement in order, among other things, to
increase the size of the Total Commitment to $32,000,000 and to permit the
redemption of the Subordinated Notes;

WHEREAS, upon the terms and subject to the conditions contained herein,
the Agent and the Banks are willing so to increase the total Commitment and
to consent to such redemption;

NOW, THEREFORE, in consideration of the mutual agreements contained in
the Credit Agreement, the other Loan Documents and this Amendment and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1. AMENDMENT OF SECTION 1.1 OF THE CREDIT AGREEMENT. Section
1.1 of the Credit Agreement is hereby amended by:

(a) deleting the table contained in the definition of "Applicable
Eurodollor Rate Margin" and substituting in lieu thereof the table set forth
below:

<PAGE>

APPLICABLE EURODOLLAR
" INTEREST COVERAGE RATIO RATE MARGIN
- ----------------------------- -----------------------
<S> <C>
Less than or equal to 2.00:1.00.......... 2.50%

Greater than 2.00:1.0 and less
than or equal to 3.00:1.00.............. 2.25%

Greater than 3.00:1.00 and less
than or equal to 3.50:1.00.............. 2.00%

Greater than 3.50:1.00................... 1.75%"

</TABLE>

(b) deleting from the definition of "Applicable Eurodollar Rate Margin"
the percentage "2.75%" in each place it appears and substituting in lieu
thereof in each such place the percentage "2.50%";

(c) amending the definition of "Consolidated EBITDA" by (i) deleting the
word "and" between clauses (i) and (ii) of clause (d) thereof, and (ii)
inserting, immediately before the period (".") at the end thereof the
following text:

", and (iii) the redemption of the Subordinated Notes in their entirety,
on or before June 30, 1999, in accordance with the terms of Section 5.1 of
each Subordinated Note".

(d) amending the definition of "Consolidated Total Debt Service" by
inserting in the parenthetical in clause (b) thereof, immediately after the
text "other than" and immediately before the text "Indebtedness consisting of
current liabilities...", the text "Indebtedness consisting of the
Subordinated Notes, to the extent each of such Subordinated Notes is redeemed
in its entirety on or before June 30, 1999 in accordance with the terms of
Section 5.1 of each Subordinated Note,".

(e) amending the definition of "Consolidated Total Interest Expense" by
inserting, immediately before the period (".") at the end thereof, the text:
"and excluding, to the extent applicable, premiums and other amounts payable
and non-cash amounts expensed, in each case in connection with the
redemption, on or before June 30, 1999, of the Subordinated Notes in
accordance with the terms of Section 5.1 of each Subordinated Note."

(f) deleting the definition of "Reduction Date" in its entirety and
substituting in lieu thereof the following new definition:

"REDUCTION DATE. See Section 2.3.1."

(g) inserting, in the order required by alphabetical order, the
following new definition:

-2-

<PAGE>

"SUBSIDIARY GUARANTY. The Guaranty, dated or to be dated on or prior
to the Closing Date, made by Charlotte Russe Merchandising in favor of the
Banks and the Agent pursuant to which Charlotte Russe Merchandising
guaranties to the Banks and the Agent the payment and performance of the
Obligations, in form and substance satisfactory to the Agent."

SECTION 2. AMENDMENT OF SECTION 2.3.1 OF THE CREDIT AGREEMENT.
Section 2.3.1 of the Credit Agreement is hereby amended by deleting the table
set forth therein and substituting in lieu thereof the following table:

TOTAL COMMITMENT
"REDUCTION DATE FOLLOWING REDUCTION AMOUNT OF REDUCTION
- -------------- ------------------- -------------------

<S> <C> <C>
October 1, 1999 $30,500,000 $1,500,000
October 1, 2000 $25,000,000 $5,500,000
October 1, 2001 $18,000,000 $7,000,000"

</TABLE>

SECTION 3. AMENDMENT OF 7.16.1 OF THE CREDIT AGREEMENT. Section 7.16.1
of the Credit Agreement is hereby amended by deleting the first sentence
thereof in its entirety and substituting in lieu thereof the following
sentence: "The proceeds of the Loans shall be used to refinanced the Term
Loan (as defined in the First Restated Credit Agreement), to enable the
Guarantor to redeem, on or before June 30, 1999, the Subordinated Notes in
their entirety in accordance with the terms of Section 5.1 of each
Subordinated Note and for working capital and general corporate purposes."

SECTION 4. AMENDMENT OF SECTION 8.7 OF THE CREDIT AGREEMENT. Section 8.7
of the Credit Agreement is hereby amended by deleting the first sentence
thereof in its entirety and substituting in lieu thereof the following
sentence: "The Borrower will use the proceeds of the Loans solely to
refinance the Term Loan (as defined in the First Restated Credit Agreement),
to redeem, on or before June 30, 1999, the Subordinated Notes in their
entirety in accordance with the terms of Section 5.1 of each Subordinated
Note and for working capital and general corporate purposes."

SECTION 5. AMENDMENT OF SECTION 9.1 OF THE CREDIT AGREEMENT. Section 9.1
of the Credit Agreement is hereby amended by:

(a) inserting in subsection (j) thereof immediately prior to the
semicolon (";") at the end thereof the text "(but excluding, after June 30,
1999, the Subordinated Notes)";

(b) deleting clause (i) from subsection (n) thereof and
substituting in lieu thereof the following text:

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<PAGE>

(i) in connection with the redemption of the Subordinated
Notes in accordance with the terms of Section 5.1 of each
Subordinated Note, the outstanding principal amount of the
Subordinated Notes, together with any accrued interest, premiums or
fees thereon, in an aggregate amount not to exceed $11,800,000 and
which aggregate amount is paid on or before June 30, 1999".

SECTION 6. AMENDMENT OF SECTION 9.8 OF THE CREDIT AGREEMENT. Section 9.8
of the Credit Agreement is hereby amended by deleting the period (".") at the
end thereof and substituting in lieu thereof the following text: ";PROVIDED,
HOWEVER, that, on or prior to June 30, 1999, the Guarantor may redeem the
Subordinated Notes in accordance with the terms of Section 5.1 of each
Subordinated Note."

SECTION 7. REPLACEMENT OF EXHIBIT B AND SCHEDULE 1 TO THE CREDIT
AGREEMENT. EXHIBIT B and SCHEDULE 1 to the Credit Agreement are hereby
deleted in their entirety, and EXHIBIT B and SCHEDULE 1 attached hereto are
hereby respectively substituted in lieu thereof.

SECTION 8. LIMITED CONSENT UNDER THE SUBORDINATION AGREEMENT. Pursuant
to Section 2.1 of the Subordination Agreement, payments of any kind on the
Subordinated Notes (other than regularly scheduled payments of interest on
the Subordinated Notes which are otherwise permitted to be paid by the terms
of the Subordination Agreement) are subordinated to the Obligations and
deferred until the full and final payment in cash of the Obligations.
Notwithstanding the foregoing, the Agent and the Banks hereby consent to the
redemption on or before June 30, 1999, by the Guarantor of the Subordinated
Notes in accordance with Section 5.1 of each of the Subordinated Notes so
long as the Subordinated Notes (a) are redeemed in their entirety on or
before June 30, 1999 and (b) the aggregate amount paid in respect of such
redemption (including principal, interest, premiums, fees and any other
amounts) does not exceed $11,800,000.

SECTION 9. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed
to be effective as of the date first written above (the "Effective Date")
upon the Agent's receipt of the following, each in form and substance
satisfactory to the Agent:

(a) facsimile copies of original counterparts (to be followed
promptly by original counterparts) or original counterparts of this
Amendment, duly executed by each of the Borrower, the Guarantor, the
Subsidiary Guarantor, the Agent and the Banks;

(b) a duly executed promissory note in the form of EXHIBIT B
hereto, issued in favor of each Bank in the respective original principal
amounts set forth on SCHEDULE 1 hereto;

(c) a duly executed Secretary's certificate of the Assistant
Secretary of each of the Borrower, the Guarantor and the Subsidiary

-4-
<PAGE>

Guarantor certifying (and where applicable, attaching copies of) the
Borrower's, the Guarantor's and the Subsidiary Guarantor's (i) charter
document; (ii) by-laws; (iii) resolutions of its Board of Directors
authorizing the transactions contemplated hereby; and (iv) the
incumbency of officers entitled to sign this Amendment on behalf of the
Borrower, the Guarantor and the Subsidiary Guarantor, as the case may be;

(d) the legal opinion of Latham & Watkins, counsel to the Borrower,
the Guarantor and the Subsidiary Guarantor;

(e) such corporate good standing certificates of each of the
Borrower, the Guarantor and the Subsidiary Guarantor as the Agent may
require;

(f) payment in cash to the Agent, for the PRO RATA accounts of the
Banks, of an amendment fee in the amount of $60,000; and

(g) such other documents, agreements and items as the Agent may
require.

SECTION 10. REPRESENTATIONS AND WARRANTIES; NO DEFAULT;
AUTHORIZATION. Each of the Borrower, the Guarantor and the Subsidiary
Guarantor hereby represents and warrants to each of the Agent and the Banks
as follows:

(a) Each of the representations and warranties of the Borrower, the
Guarantor and the Subsidiary Guarantor contained in the Credit
Agreement, the other Loan Documents or in any document or instrument
delivered pursuant to or in connection with the Credit Agreement, the
other Loan Documents or this Amendment was true as of the date as of
which it was made and is true as of the Effective Date (except to the
extent of changes resulting from transactions contemplated or permitted
by the Credit Agreement, as amended hereby, and the other Loan Documents
and changes occurring in the ordinary course of business that singly or
in the aggregate are not materially adverse and to the extent that such
representations and warranties relate expressly to an earlier date), and
no Default or Event of Default has occurred and is continuing as of the
date of this Amendment or would occur after giving effect to the
transactions contemplated by this Amendment; and

(b) This Amendment has been duly authorized, executed and delivered
by each of the Borrower, the Guarantor and the Subsidiary Guarantor, and
shall be in full force and effect upon the satisfaction of the condition
set forth in Section 9 hereof, and the agreements of each of the
Borrower, the Guarantor and the Subsidiary Guarantor contained herein,
in the Credit Agreement, as herein amended, or in the other Loan
Documents respectively constitute the legal, valid and binding
obligations of each of the Borrower, the Guarantor and the Subsidiary
Guarantor

-5-

<PAGE>

party hereto or thereto, enforceable against the Borrower, the Guarantor
and the Subsidiary Guarantor in accordance with their respective terms,
except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors' rights and except to the extent
that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any
proceeding therefor may be brought.

SECTION 11. RATIFICATION, ETC. Except as expressly amended hereby,
the Credit Agreement, the other Loan Documents and all documents, instruments
and agreements related thereto are hereby ratified and confirmed in all
respects and shall continue in full force and effect. All references in the
Credit Agreement or such other Loan Documents or in any related agreement or
instrument to the Credit Agreement or such other Loan Documents shall
hereafter refer to such agreements as amended hereby, pursuant to the
provisions of the Credit Agreement.

SECTION 12. NO PRESENT CLAIMS. In order to eliminate any possibility
that any past conditions, acts, omissions, events, circumstances or matters
would impair or otherwise adversely affect any of the rights, interests,
contracts, collateral security or remedies of the Agent or any of the Banks,
each of the Borrower, the Guarantor and the Subsidiary Guarantor hereby
acknowledges and agrees that: (i) neither it nor any of its Subsidiaries has
any claim or cause of action against the Agent, any of the Banks or any of
their directors, officers, employees or agents; (ii) neither it nor any of
its Subsidiaries has any offset right, counterclaim or defense of any kind
against any of its obligations, indebtedness or liabilities to the Agent
and/or the Banks, including, without limitation, the Obligations; and (iii)
each of the Agent and the Banks has heretofore properly performed and
satisfied in a timely manner all of its obligations to each of the Borrower,
the Guarantor and the Subsidiary Guarantor and their Subsidiaries.

SECTION 13. EXPENSES. Without limiting the expense reimbursement
requirements set forth in Section 16 of the Credit Agreement, the Borrower
agrees to pay on demand all costs and expenses, including reasonable
attorneys' fees, of the Agent incurred in connection with this Amendment.

SECTION 14. NO IMPLIED WAIVER, ETC. Except as expressly provided
herein, nothing contained herein shall constitute a waiver of, impair or
otherwise affect any of the Obligations, any other obligations of the
Borrower, the Guarantor and the Subsidiary Guarantor or any of their
Subsidiaries or any right of the Agent or the Banks consequent thereon. The
waivers and consents provided herein are limited strictly to their terms.
Neither the Agent nor any of the Banks shall have any obligation to issue any
further waiver or consent with respect to the subject matter hereof or any
other matter.

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<PAGE>

SECTION 15. COUNTERPARTS. This Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but which
together shall constitute one and the same instrument.

SECTION 16. GOVERNING LAW. THIS AMENDMENT SHALL FOR ALL PURPOSES
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS (WITHOUT REFERENCE TO CHOICE OR CONFLICTS OF LAWS).

-7-

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
document under seal as of the date first above written.

CHARLOTTE RUSSE, INC.

By: /s/ DANIEL T. CARTER
------------------------
Name: Daniel T. Carter
Title: CFO

CHARLOTTE RUSSE HOLDING, INC.

By: /s/ DANIEL T. CARTER
------------------------
Name: Daniel T. Carter
Title: CFO

BANKBOSTON, N.A., Individually and
as Agent

By: /s/ NANCY FULLER
------------------------
Name: Nancy Fuller
Title: Director

UNION BANK OF CALIFORNIA, N.A.

By: /s/ TERRY ROCHA
------------------------
Name: Terry Rocha
Title: Vice President

<PAGE>

SECOND AMENDED AND RESTATED SECURITY AGREEMENT

This SECOND AMENDED AND RESTATED SECURITY AGREEMENT, dated as of December
23, 1998 (this "Agreement"), is by and among CHARLOTTE RUSSE, INC., a California
corporation (the "Borrower"), CHARLOTTE RUSSE HOLDING, INC., a Delaware
corporation (the "Guarantor"), CHARLOTTE RUSSE MERCHANDISING, INC., a California
corporation ("Charlotte Russe Merchandising" and together with the Borrower and
the Guarantor, the "Companies") and BANKBOSTON, N.A., a national banking
association, as agent (the "Agent") for itself and such other lending
institutions (collectively, the "Banks") which are or may become parties to that
certain Second Amended and Restated Revolving Credit Agreement dated as of
December 23, 1998 (as amended and in effect from time to time, the "Credit
Agreement") among the Borrower, the Guarantor, the Banks and the Agent.

WHEREAS, pursuant to that certain Amended and Restated Revolving Credit and
Term Loan Agreement dated as of December 5, 1997 (as amended and in effect from
time to time, the "First Restated Credit Agreement", which amended and restated
in its entirety the Revolving Credit and Term Loan Agreement dated as of
September 27, 1996), the Banks made loans or otherwise extended credit to the
Borrower for the purposes described therein;

WHEREAS, pursuant to that certain Amended and Restated Security Agreement
dated as of December 5, 1997 (as amended and in effect from time to time, the
"First Restated Security Agreement", which amended and restated in its entirety
a Security Agreement dated as of September 27, 1996), the Borrower and the
Guarantor granted certain security interests to the Banks to secure payment and
performance of their obligations under and with respect to the First Restated
Credit Agreement and the related loan documents;

WHEREAS, the Borrower, the Guarantor, the Banks and the Agent have entered
into the Credit Agreement to amend and restate in its entirety the First
Restated Credit Agreement;

WHEREAS, the Guarantor has entered into the Parent Guaranty and Charlotte
Russe Merchandising has entered into the Subsidiary Guaranty (collectively, the
"Guaranties"), each dated as of the date hereof, each in favor of the Banks and
the Agent, and pursuant to which the Guarantor and Charlotte Russe Merchandising
have guaranteed the payment and performance of the Obligations (as defined in
the Credit Agreement) of the Borrower to the Banks and the Agent;

WHEREAS, it is a condition precedent to the Banks making any loans or
otherwise extending credit to the Borrower under the Credit Agreement that the
Companies execute and deliver to the Agent, for the benefit of the

<PAGE>

-2-

Banks and the Agent, a security agreement in substantially the form hereof; and

WHEREAS, each of the Companies wishes to grant security interests in the
Collateral (as hereinafter defined) in favor of the Agent in order to secure the
Obligations, and the Borrower and the Guarantor wish to ratify and confirm the
prior grant of a security interest in the Collateral under the First Restated
Security Agreement;

NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Borrower and the Guarantor hereto agree that the First
Restated Security Agreement is hereby amended and restated in its entirety, and
the parties agree as follows:

1. DEFINITIONS. All capitalized terms used herein without definitions
shall have the respective meanings provided therefor in the Credit Agreement.
All terms defined in the Uniform Commercial Code as in effect in the
Commonwealth of Massachusetts and used herein shall have the same definitions
herein as specified therein.

2. GRANT OF SECURITY INTEREST.

2.1. COLLATERAL GRANTED. Each of the Companies hereby grants to the
Agent, for the benefit of the Banks, to secure the payment and performance
in full of all of the Obligations, a security interest in and so pledges
and assigns to the Agent, for the benefit of the Banks, the following
properties, assets and rights of such Company, wherever located, whether
now owned or hereafter acquired or arising, and all proceeds and products
thereof (all of the same being hereinafter called the "Collateral"):

All personal and fixture property of every kind and nature
including without limitation all furniture, fixtures, equipment, raw
materials, inventory, goods, accounts, contract rights, rights to the
payment of money, insurance refund claims and all other insurance
claims and proceeds, tort claims, chattel paper, documents,
instruments, securities and other investment property, deposit
accounts and all general intangibles including, without limitation,
all tax refund claims, license fees, patents, patent applications,
trademarks, trademark applications, trade names, copyrights, copyright
applications, rights to sue and recover for past infringement of
patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature
pursuant to which such Company possesses, uses or has authority to
possess or use property (whether tangible or intangible) of others or
others possess, use

<PAGE>

-3-

or have authority to possess or use property (whether tangible or
intangible) of such Company, and all recorded data of any kind or
nature, regardless of the medium of recording including, without
limitation, all software, writings, plans, specifications and
schematics.

2.2. DELIVERY OF INSTRUMENTS, ETC. Pursuant to the terms hereof,
each of the Companies has endorsed, assigned and delivered to the Agent all
negotiable or non-negotiable instruments (including certificated
securities) and chattel paper pledged by it hereunder, together with
instruments of transfer or assignment duly executed in blank as the Agent
may have specified. In the event that any of the Companies shall, after
the date of this Agreement, acquire any other negotiable or non-negotiable
instruments (including certificated securities) or chattel paper to be
pledged by it hereunder, such Company shall forthwith endorse, assign and
deliver the same to the Agent, accompanied by such instrument's of transfer
or assignment duly executed in blank as the Agent may from time to time
specify. To the extent that any securities are uncertificated, appropriate
book-entry transfers reflecting the pledge of such securities created
hereby have been or, in the case of uncertificated securities hereafter
acquired by any of the Companies, will at the time of such acquisition be,
duly made for the account of the Agent or one or more nominees of the Agent
with the issuer of such securities or other appropriate book-entry facility
or financial intermediary, with the Bank having at all times the right to
obtain definitive certificates (in the Agent's name or in the name of one
or more nominees of the Agent) where the issuer customarily or otherwise
issues certificates, all to be held as Collateral hereunder. Each of the
Companies hereby acknowledges that the Agent may, in its discretion,
appoint one or more financial institutions to act as the Agent's agent in
holding in custodial account instruments or other financial assets in which
the Agent is granted a security interest hereunder, including, without
limitation, certificates of deposit and other instruments evidencing short
term obligations.

2.3. EXCLUDED COLLATERAL. Notwithstanding the foregoing provisions
of this Section 2, such grant of security interest shall not extend to, and
the term "Collateral" shall not include, any chattel paper and general
intangibles which are now or hereafter held by any of the Companies as
licensee, lessee or otherwise, to the extent that (i) such chattel paper
and general intangibles are not assignable or capable of being encumbered
as a matter of law or under the terms of the license, lease or other
agreement applicable thereto (but solely to the extent that any such
restriction shall be enforceable under applicable law), without the consent
of the licensor or lessor thereof or other applicable party thereto and
(ii) such consent has not been obtained; PROVIDED, HOWEVER, that the
foregoing grant of security interest shall extend to, and the term
"Collateral" shall include, (A) any and all

<PAGE>

-4-

proceeds of such chattel paper and general intangibles to the extent that
the assignment or encumbering of such proceeds is not so restricted and (B)
upon any such licensor, lessor or other applicable party consent with
respect to any such otherwise excluded chattel paper or general intangibles
being obtained, thereafter such chattel paper or general intangibles as
well as any and all proceeds thereof that might have theretofore have been
excluded from such grant of a security interest and the term "Collateral".

2.4. STOCK PLEDGE AGREEMENTS. Concurrently herewith, the Borrower
and the Guarantor are executing and delivering to the Agent, for the
benefit of the Banks and the Agent, Stock Pledge Agreements. Pursuant to
the Borrower Stock Pledge Agreement, the Borrower is pledging to the Agent,
for the benefit of the Banks and the Agent, all the shares of the capital
stock of the Borrower's Subsidiaries. Pursuant to the Parent Stock Pledge
Agreement, the Guarantor is pledging to the Agent, for the benefit of the
Banks and the Agent, all the shares of the capital stock of the Borrower.
Such pledges shall be governed by the terms of such Stock Pledge Agreements
and not by the terms of this Agreement.

2.5. TRADEMARK ASSIGNMENTS. Concurrently herewith the Borrower is
executing and delivering to the Agent, for the benefit of the Banks, the
Trademark Assignment pursuant to which the Borrower is assigning to the
Agent, for the benefit of the Banks, certain Collateral consisting of
trademarks, service marks and trademark and service mark rights, together
with the goodwill appurtenant thereto. The provisions of the Trademark
Assignment are supplemental to the provisions of this Agreement, and
nothing contained in the Trademark Assignment shall derogate from any of
the rights or remedies of the Banks or the Agent hereunder. Nor shall
anything contained the Trademark Assignment be deemed to prevent or extend
the time of attachment or perfection of any security interest in such
Collateral created hereby.

3. TITLE TO COLLATERAL, ETC. The Companies are the owners of the
Collateral free from any adverse lien, security interest or other encumbrance,
except for the security interest created by this Agreement and other liens
permitted by the Credit Agreement. None of the Collateral constitutes, or is
the proceeds of, "farm products" as defined in Section 9-109(3) of the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts. None of the
account debtors in respect of any accounts, chattel paper or general intangibles
and none of the obligors in respect of any instruments included in the
Collateral is a governmental authority subject to the Federal Assignment of
Claims Act.

4. CONTINUOUS PERFECTION. Each Company's chief executive office is
indicated on the Perfection Certificate of such Company delivered to the Bank
herewith (the "Perfection Certificate"). None of the Companies will

<PAGE>

-5-

change the same, or the name, identity or corporate structure of such Company in
any manner, without providing at least thirty (30) days prior written notice to
the Agent. Subject to Section 6 hereof, the Collateral, to the extent not
delivered to the Agent pursuant to Section 2.2, will be kept at those locations
listed on the Perfection Certificates except for inventory which is in transit
between such locations or is being returned to suppliers and none of the
Companies will remove the Collateral from such locations (except for inventory
which is in transit between such locations or is being returned to suppliers),
without providing at least thirty (30) days prior written notice to the Agent.

5. NO LIENS. Except for the security interest herein granted and liens
permitted by the Credit Agreement, the Companies shall be the owner of the
Collateral free from any lien, security interest or other encumbrance, and the
Companies shall defend the same against all claims and demands of all persons at
any time claiming the same or any interests therein adverse to the Agent or any
of the Banks. None of the Companies shall pledge, mortgage or create, or suffer
to exist a security interest in the Collateral in favor of any person other than
the Agent, for the benefit of the Banks, except for liens permitted by the
Credit Agreement.

6. NO TRANSFERS. None of the Companies will sell or offer to sell or
otherwise transfer the Collateral or any interest therein except for (i) sales
of inventory in the ordinary course of business and (ii) sales or other
dispositions of assets as contemplated or permitted by the Credit Agreement.

7. INSURANCE.

7.1. MAINTENANCE OF INSURANCE. Each of the Companies will maintain
with financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall
be in accordance with general practices of businesses engaged in similar
activities in similar geographic areas. Such insurance shall be in such
minimum amounts that such Company will not be deemed a co-insurer under
applicable insurance laws, regulations and policies and otherwise shall be
in such amounts, contain such terms, be in such forms and be for such
periods as may be reasonably satisfactory to the Agent. In addition, all
such insurance shall be payable to the Agent as loss payee under a
"standard" or "New York" loss payee clause. Without limiting the foregoing,
each of the Companies will (i) keep all of its physical property insured
with casualty or physical hazard insurance on an "all risks" basis, with a
full replacement cost endorsement and an "agreed amount" clause in an
amount equal to 100% of the full replacement cost of such property, (ii)
maintain all such workers' compensation or similar insurance as may be
required by law and (iii) maintain, in amounts and with deductibles equal
to those generally maintained by businesses engaged in similar activities
in similar

<PAGE>

-6-

geographic areas, general public liability insurance against claims of
bodily injury, death or property damage occurring, on, in or about the
properties of such Company; and business interruption insurance.

7.2. INSURANCE PROCEEDS. The proceeds of any casualty insurance in
respect of any casualty loss of any of the Collateral shall, subject to the
rights, if any, of other parties with a prior interest in the property
covered thereby, (i) so long as no Event of Default has occurred and is
continuing and to the extent that the amount of such proceeds is less than
$5,000,000, be disbursed to the Company which suffers such loss for direct
application by such Company solely to the repair or replacement of such
Company's property so damaged or destroyed and (ii) in all other
circumstances, be held by the Agent as cash collateral for the Obligations.
The Agent may, at its sole option, disburse from time to time all or any
part of such proceeds so held as cash collateral, upon such terms and
conditions as the Agent may reasonably prescribe, for direct application by
the applicable Company solely to the repair or replacement of such
Company's property so damaged or destroyed, or the Agent may apply all or
any part of such proceeds to the Obligations with the Commitment (if not
then terminated) being reduced by the amount so applied to the Obligations.

7.3. NOTICE OF CANCELLATION, ETC. All policies of insurance shall
provide for at least ten (10) days prior written cancellation notice to the
Agent if cancellation is due to failure to pay premiums and thirty (30)
days prior written cancellation notice to the Agent if cancellation is due
to any other reason. In the event of failure by any Company to provide and
maintain insurance as herein provided, the Agent may, at its option,
provide such insurance and charge the amount thereof to such Company. The
Companies shall furnish the Agent with certificates of insurance and
policies evidencing compliance with the foregoing insurance provision.

8. MAINTENANCE OF COLLATERAL; COMPLIANCE WITH LAW. Each of the Companies
will keep the Collateral in good order and repair and will not use the same in
violation of law or any policy of insurance thereon. The Agent, or its
designee, may inspect the Collateral at any reasonable time within normal
business hours, wherever located. In accordance with the manner required under
Section 9.5 of the Credit Agreement, each of the Companies will pay all taxes,
assessments, governmental charges and levies upon the Collateral or incurred in
connection with the use or operation of such Collateral or incurred in
connection with this Agreement. Each of the Companies has at all times
operated, and each of the Companies will continue to operate, its business in
compliance in all material respects with all applicable provisions of the
federal Fair Labor Standards Act, as amended, and with all applicable provisions
of federal, state and local statutes and ordinances dealing with the control,
shipment, storage or

<PAGE>

-7-

disposal of hazardous materials or substances, except for any noncompliance
which would not have a Materially Adverse Effect.

9. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.

9.1. EXPENSES INCURRED BY AGENT. In its discretion, the Agent may
discharge taxes and other encumbrances at any time levied or placed on any
of the Collateral, make repairs thereto and pay any necessary filing fees.
Each the Companies agrees jointly and severally to reimburse the Agent on
demand for any and all expenditures so made. The Agent shall have no
obligation to any of the Companies to make any such expenditures, nor shall
the making thereof relieve the Companies of any default.

9.2. AGENT'S OBLIGATIONS AND DUTIES. Anything herein to the contrary
notwithstanding, each of the Companies shall remain liable under each
contract or agreement comprised in the Collateral to be observed or
performed by such Company thereunder. Neither the Agent nor any Bank shall
have any obligation or liability under any such contract or agreement by
reason of or arising out of this Agreement or the receipt by the Agent or
any Bank of any payment relating to any of the Collateral, nor shall the
Agent or any Bank be obligated in any manner to perform any of the
obligations of any of the Companies under or pursuant to any such contract
or agreement, to make inquiry as to the nature or sufficiency of any
payment received by the Agent or any Bank in respect of the Collateral or
as to the sufficiency of any performance by any party under any such
contract or agreement, to present or file any claim, to take any action to
enforce any performance or to collect the payment of any amounts which may
have been assigned to the Agent or any Bank or to which the Agent or any
Bank may be entitled at any time or times. The Agent's sole duty with
respect to the custody, safe keeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts or otherwise, shall
be to deal with such Collateral in the same manner as the Agent deals with
similar property for its own account.

10. SECURITIES AND DEPOSITS. The Agent may at any time after an Event of
Default shall have occurred and be continuing, at its option, transfer to itself
or any nominee any securities constituting Collateral, receive any income
thereon and hold such income as additional Collateral or apply it to the
Obligations. Whether or not any Obligations are due, the Agent may, after an
Event of Default shall have occurred and be continuing, demand, sue for,
collect, or make any settlement or compromise which it deems desirable with
respect to the Collateral. Regardless of the adequacy of Collateral or any
other security for the Obligations, any deposits or other sums at any time
credited by or due from the Agent or any Bank to any of the Companies may at any
time after an Event of Default shall have

<PAGE>

-8-

occurred and be continuing be applied to or set off against any of the
Obligations.

11. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER OBLIGORS. If an Event of
Default shall have occurred and be continuing, each of the Companies shall, at
the request of the Agent, notify account debtors on accounts, chattel paper and
general intangibles of such Company and obligors on instruments for which such
Company is an obligee of the security interest of the Agent in any account,
chattel paper, general intangible or instrument and that payment thereof is to
be made directly to the Agent or to any financial institution designated by the
Agent as the Agent's agent therefor, and the Agent may itself, if an Event of
Default shall have occurred and be continuing, without notice to or demand upon
such Company, so notify account debtors and obligors. After the making of such
a request or the giving of any such notification, such Company shall hold any
proceeds of collection of accounts, chattel paper, general intangibles and
instruments received by such Company as trustee for the Agent without
commingling the same with other funds of such Company and shall turn the same
over to the Agent in the identical form received, together with any necessary
endorsements or assignments. The Agent shall apply the proceeds of collection
of accounts, chattel paper, general intangibles and instruments received by the
Agent to the Obligations, such proceeds to be immediately entered after final
payment in cash or solvent credits of the items giving rise to them.

12. FURTHER ASSURANCES. Each of the Companies, at its own expense, shall
do, make, execute and deliver all such additional and further acts, things,
deeds, assurances and instruments as the Agent may require more completely to
vest in and assure to the Agent and the Banks their respective rights hereunder
or in any of the Collateral, including, without limitation, (i) executing,
delivering and, where appropriate, filing financing statements and continuation
statements under the Uniform Commercial Code, (ii) using its reasonable efforts
to obtain governmental and other third party consents and approvals, including
without limitation any consent of any licensor, lessor or other applicable party
referred to in Section 2.3, PROVIDED that "reasonable efforts" shall not require
such Company to agree to any dimunition in its rights with respect to such third
parties or to make any additional payments to such third parties and (iii)
taking all actions required by Sections 8-313 and 8-321 of the Uniform
Commercial Code, as applicable in each relevant jurisdiction, with respect to
certificated and uncertificated securities; PROVIDED that, as to perfection, it
is understood and agreed that (a) no fixture filings or filings or recordations
as to any leasehold interests, or consent or other agreement from any landlord,
shall be required, except to the extent provided by Section 9.1(k) of the Third
Amendment and (b) unless there is a significant change from past practice as to
ownership of motor vehicles, no action beyond the filing of Uniform Commercial
Code financing statements shall be required with respect to motor vehicles.

<PAGE>

-9-

13. POWER OF ATTORNEY.

13.1. APPOINTMENT AND POWERS OF AGENT. Each of the Companies hereby
irrevocably constitutes and appoints the Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorneys-in-fact with full irrevocable power and authority in the place
and stead of such Company or in the Agent's own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate
action and to execute any and all documents and instruments that may be
necessary or desirable to accomplish the purposes of this Agreement and,
without limiting the generality of the foregoing, hereby gives said
attorneys the power and right, on behalf of such Company, without notice to
or assent by such Company, to do the following:

(a) upon the occurrence and during the continuance of an Event
of Default, generally to sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral in such
manner as is consistent with the Uniform Commercial Code as in effect
in the Commonwealth of Massachusetts and as fully and completely as
though the Agent were the absolute owner thereof for all purposes, and
to do at such Company's expense, at any time, or from time to time,
all acts and things which the Agent deems necessary to protect,
preserve or realize upon the Collateral and the Agent's security
interest therein, in order to effect the intent of this Agreement, all
as fully and effectively as such Company might do, including, without
limitation, (i) the filing and prosecuting of registration and
transfer applications with the appropriate federal or local agencies
or authorities with respect to trademarks, copyrights and patentable
inventions and processes, (ii) upon written notice to such Company,
the exercise of voting rights with respect to voting securities, which
rights may be exercised, if the Agent so elects, with a view to
causing the liquidation in a commercially reasonable manner of assets
of the issuer of any such securities and (iii) the execution, delivery
and recording, in connection with any sale or other disposition of any
Collateral, of the endorsements, assignments or other instruments of
conveyance or transfer with respect to such Collateral; and

(b) to file such financing statements with respect hereto, with
or without such Company's signature, or a photocopy of this Agreement
in substitution for a financing statement, as the Agent may deem
appropriate and to execute in such Company's name such financing
statements and amendments thereto and continuation statements which
may require such Company's signature.

<PAGE>

-10-

13.2. RATIFICATION BY COMPANIES. To the extent permitted by law,
each of the Companies hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. This power of attorney
is a power coupled with an interest and shall be irrevocable.

13.3. NO DUTY ON AGENT. The powers conferred on the Agent hereunder
are solely to protect the interests of the Agent and the Banks in the
Collateral and shall not impose any duty upon it to exercise any such
powers. The Agent shall be accountable only for the amounts that it
actually receives as a result of the exercise of such powers and neither it
nor any of its officers, directors, employees or agents shall be
responsible to any of the Companies for any act or failure to act, except
for the Agent's own gross negligence or willful misconduct.

14. REMEDIES. If an Event of Default shall have occurred and be
continuing, the Agent may, without notice to (except as required by applicable
law) or demand upon the Companies, declare this Agreement to be in default, and
the Agent shall thereafter have in any jurisdiction in which enforcement hereof
is sought, in addition to all other rights and remedies, the rights and remedies
of a secured party under the Uniform Commercial Code, including, without
limitation, the right to take possession of the Collateral, and for that purpose
the Agent may, so far as the Companies can give authority therefor, enter upon
any premises on which the Collateral may be situated and remove the same
therefrom. The Agent may in its discretion require the Companies to assemble
all or any part of the Collateral at such location or locations within the
state(s) of each Company's principal office(s) or at such other locations as the
Agent may designate. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, the Agent shall give to the Companies at least ten (10) Business Days
prior written notice of the time and place of any public sale of Collateral or
of the time after which any private sale or any other intended disposition is to
be made. Each of the Companies hereby acknowledges that ten (10) Business Days
prior written notice of such sale or sales shall be reasonable notice. In
addition, each of the Companies waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Agent's and the
Banks' rights hereunder, including, without limitation, their right following an
Event of Default to take immediate possession of the Collateral and to exercise
their rights with respect thereto. To the extent that any of the Obligations
are to be paid or performed by a person other than any of the Companies, each of
the Companies waives and agrees not to assert any rights or privileges which it
may have under Section 9-112 of the Uniform Commercial Code as in effect in the
Commonwealth of Massachusetts.

15. NO WAIVER, ETC. Each of the Companies waives demand, notice, protest,
notice of acceptance of this Agreement, notice of loans made, credit extended,
Collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description. With respect

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-11-

to both the Obligations and the Collateral, each of the Companies assents to any
extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of or failure to perfect any security interest
in any Collateral, to the addition or release of any party or person primarily
or secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Agent may deem advisable. The Agent shall have no
duty as to the collection or protection of the Collateral or any income thereon,
nor as to the preservation of rights against prior parties, nor as to the
preservation of any rights pertaining thereto beyond the safe custody thereof as
set forth in Section 9.2. The Agent shall not be deemed to have waived any of
its rights upon or under the Obligations or the Collateral unless such waiver
shall be in writing and signed by the Agent. No delay or omission on the part
of the Agent in exercising any right shall operate as a waiver of such right or
any other right. A waiver on any one occasion shall not be construed as a bar
to or waiver of any right on any future occasion. All rights and remedies of
the Agent with respect to the Obligations or the Collateral, whether evidenced
hereby or by any other instrument or papers, shall be cumulative and may be
exercised singularly, alternatively, successively or concurrently at such time
or at such times as the Agent deems expedient.

16. MARSHALLING. The Agent shall not be required to marshal any present
or future collateral security (including but not limited to this Agreement and
the Collateral) for, or other assurances of payment of, the Obligations or any
of them or to resort to such collateral security or other assurances of payment
in any particular order, and all of its rights hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that
it lawfully may, each of the Companies hereby agrees that it will not invoke any
law relating to the marshalling of collateral which might cause delay in or
impede the enforcement of the Agent's rights under this Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, each of the Companies hereby irrevocably waives the benefits of
all such laws.

17. PROCEEDS OF DISPOSITIONS; EXPENSES. The Companies shall pay to the
Agent on demand any and all expenses, including reasonable attorneys' fees and
disbursements, incurred or paid by the Agent in protecting, preserving or
enforcing the Agent's or any Bank's rights under or in respect of any of the
Obligations or any of the Collateral. After deducting all of said expenses, the
residue of any proceeds of collection or sale of the Obligations or Collateral
shall, to the extent actually received in cash, be applied to the payment of the
Obligations in such order or preference as the Agent may determine, proper
allowance and provision being made for any Obligations not then due. Upon the
final payment and satisfaction in full of

<PAGE>

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all of the Obligations and after making any payments required by Section
9-504(1)(c) of the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts, any excess shall be returned to the Companies, and the Companies
shall remain liable for any deficiency in the payment of the Obligations.

18. OVERDUE AMOUNTS. Until paid, all amounts due and payable by any of
the Companies hereunder shall be a debt secured by the Collateral and shall
bear, whether before or after judgment, interest at the rate of interest for
overdue principal set forth in the Credit Agreement.

19. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS INTENDED TO
TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. Each of the
Companies agrees that any suit for the enforcement of this Agreement may be
brought in the courts of the Commonwealth of Massachusetts or any federal court
sitting therein and consents to the non-exclusive jurisdiction of such court and
to service of process in any such suit being made upon the Companies by mail at
the address specified by reference in Section 20 of the Credit Agreement. Each
of the Companies hereby waives any objection that it may now or hereafter have
to the venue of any such suit or any such court or that such suit is brought in
an inconvenient court.

20. WAIVER OF JURY TRIAL. EACH OF THE COMPANIES WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
each of the Companies waives any right which it may have to claim or recover in
any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. Each of the Companies (i) certifies that neither the Agent or
any Bank nor any representative, agent or attorney of the Agent or any Bank has
represented, expressly or otherwise, that the Agent or such Bank would not, in
the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that, in entering into the Credit Agreement and the other Loan
Documents to which the Agent is a party, the Agent and the Banks are relying
upon, among other things, the waivers and certifications contained in this
Section 20.

21. MISCELLANEOUS. The headings of each section of this Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon each of
the Companies and its respective successors and assigns, and shall inure to the
benefit of the Agent and the Banks and its successors and assigns. If any term
of this Agreement shall be held to be invalid, illegal or unenforceable, the
validity of all other terms hereof shall in no way be affected thereby, and this
Agreement shall be construed and be enforceable

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as if such invalid, illegal or unenforceable term had not been included herein.
Each of the Companies acknowledges receipt of a copy of this Agreement.

22. TRANSITIONAL ARRANGEMENTS. This Agreement shall supersede the First
Restated Security Agreement in its entirety on and as of the Closing Date. On
the Closing Date, the rights and obligations of the parties under the First
Restated Security Agreement shall be subsumed within and governed by this
Agreement; PROVIDED, that the provisions of the First Restated Security
Agreement shall remain in full force and effect prior to the Closing Date. The
security interest granted by this Agreement is an extension of the security
interest granted in the First Restated Security Agreement.

<PAGE>

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IN WITNESS WHEREOF, intending to be legally bound, each of the Companies
has caused this Second Amended and Restated Security Agreement to be duly
executed as of the date first above written.

CHARLOTTE RUSSE, INC.

By: /s/ DANIEL T. CARTER
--------------------------------
Title: CFO

CHARLOTTE RUSSE HOLDING, INC.

By: /s/ DANIEL T. CARTER
--------------------------------
Title: CFO

CHARLOTTE RUSSE
MERCHANDISING, INC.

By: /s/ DANIEL T. CARTER
--------------------------------
Title: CFO

Accepted:

BANKBOSTON, N.A., AS AGENT

By: /s/ NANCY E. FULLER
--------------------
Title: Director

<PAGE>

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CERTIFICATE OF ACKNOWLEDGMENT

STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )

Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 23 day of December, 1998, personally appeared Daniel T.
Carter to me known personally, and who, being by me duly sworn, deposes and
says that he is the CFO of each of Charlotte Russe, Inc., Charlotte Russe
Holding, Inc. and Charlotte Russe Merchandising, Inc. and that said
instrument was signed and sealed on behalf of each of said corporations by
authority of its Board of Directors, and said Daniel T. Carter acknowledged
said instrument to be the free act and deed of each of said corporations.

/s/ HEATHER A. EAGAN
----------------------------
Notary Public
My commission expires:

<PAGE>

SECOND AMENDED AND RESTATED TRADEMARK
COLLATERAL SECURITY AND PLEDGE AGREEMENT

SECOND AMENDED AND RESTATED TRADEMARK COLLATERAL SECURITY AND PLEDGE
AGREEMENT, dated as of December 23, 1998 (this "Agreement"), by and between
CHARLOTTE RUSSE, INC., a California corporation having its principal place of
business at 4645 Morena Boulevard, San Diego, California 92117 (the "Assignor"),
and BANKBOSTON, N.A., a national banking association having an office at 100
Federal Street, Boston, Massachusetts 02110, as agent (in such capacity, the
"Agent") for itself and other lending institutions (collectively, the "Banks")
which are or may become parties to that certain Second Amended and Restated
Revolving Credit Agreement dated as of December 23, 1998 (as amended and in
effect from time to time, the "Credit Agreement") among the Assignor, Charlotte
Russe Holding, Inc. (the "Guarantor"), the Banks and the Agent.

WHEREAS, pursuant to that certain Amended and Restated Revolving
Credit and Term Loan Agreement dated as of December 5, 1997 (as amended and in
effect from time to time, the "First Restated Credit Agreement", which amended
and restated in its entirety the Revolving Credit and Term Loan Agreement dated
as of September 27, 1996), the Banks made loans or otherwise extended credit to
the Assignor for the purposes described therein;

WHEREAS, pursuant to that certain Amended and Restated Security
Agreement dated as of December 5, 1997 (as amended and in effect from time to
time, the "First Restated Security Agreement", which amended and restated in its
entirety the Security Agreement dated as of September 27, 1996), the Assignor
granted to the Agent, for the benefit of the Banks and the Agent, security
interests in substantially all of its assets, including but not limited to
certain of its intellectual property assets, to secure payment and performance
of its obligations under and with respect to the First Restated Credit
Agreement;

WHEREAS, pursuant to that certain Amended and Restated Trademark
Collateral Security and Pledge Agreement dated as of December 5, 1997 (as
amended and in effect from time to time, the "First Restated Trademark
Agreement", which amended and restated in its entirety the Trademark
Collateral Security and Pledge Agreement dated as of September 27, 1996), the
Assignor granted to the Agent, for the benefit of the Banks and the Agent,
security interests in certain of its intellectual property assets to secure
payment and performance of its obligations under and with respect to the
First Restated Credit Agreement;

WHEREAS, the Assignor, the Guarantor, the Banks and the Agent have
entered into the Credit Agreement to amend and restate in its entirety the First
Restated Credit Agreement;

WHEREAS, pursuant to that certain Second Amended and Restated Security
Agreement dated as December 23, 1998 (as amended and in effect from

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time to time, the "Security Agreement"), the Assignor has granted to the
Agent, for the benefit of the Banks and the Agent, a security interest in
substantially all of its assets, including but not limited to all of its
intellectual property assets, to secure payment and performance of its
Obligations under and with respect to the Credit Agreement;

WHEREAS, it is a condition precedent to the Agent and the Banks
amending and restating the First Restated Credit Agreement and converting any
loans under the First Restated Agreement into Loans under the Credit Agreement
or making any other Loans or otherwise extending credit under the Credit
Agreement that the Assignor execute and deliver to the Agent, for the benefit of
the Banks and the Agent, a trademark agreement in substantially the form hereof;

WHEREAS, the Assignor wishes to grant to the Agent, for the benefit of
the Banks and the Agent, security interests in all of its intellectual property
assets, including but not limited to trademarks, service marks, trademark and
service mark registrations, and trademark and service mark registration
applications, in order to secure its Obligations and to ratify and confirm the
prior grant of a security interest in its intellectual property assets under the
First Restated Trademark Agreement; and

WHEREAS, the Assignor is the direct legal and/or beneficial owner of
all trademarks, service marks, trademark and service mark registrations, and
trademark and service mark registration applications listed on SCHEDULE A;

NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Assignor and the Agent agree that the First
Restated Trademark Agreement is hereby amended and restated in its entirety as
follows:

1. DEFINITIONS.

Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings provided therefor in the Credit Agreement and the
Security Agreement. In addition, the following terms shall have the meanings set
forth in this Section 1 or elsewhere in this Agreement referred to below:

ASSIGNMENT OF MARKS. See Section 2.1.

ASSOCIATED GOODWILL. All goodwill of the Assignor and its business,
products and services appurtenant to, associated with or symbolized by the
Trademarks and the use thereof.

PLEDGED TRADEMARKS. All of the Assignor's right, title and interest in
and to all of the Trademarks, the Trademark Registrations, the Trademark License
Rights, the Trademark Rights, the Associated Goodwill, the Related Assets, and

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-3-

all accessions to, substitutions for, replacements of, and all products and
proceeds of any and all of the foregoing.

PTO. The United States Patent and Trademark Office.

RELATED ASSETS. All assets, rights and interests of the Assignor that
uniquely reflect or embody the Associated Goodwill, including the following:

(a) all patents, inventions, copyrights, trade secrets,
confidential information, formulae, methods or processes, compounds,
recipes, know-how, methods and operating systems, drawings,
descriptions, formulations, manufacturing and production and delivery
procedures, quality control procedures, product and service
specifications, catalogs, price lists, and advertising materials,
relating to the manufacture, production, delivery, provision and sale
of goods or services under or in association with any of the
Trademarks; and

(b) the following documents and things in the possession or
under the control of the Assignor, or subject to its demand for
possession or control, related to the production, delivery, provision
and sale by the Assignor, or any affiliate, franchisee, licensee or
contractor, of products or services sold by or under the authority of
the Assignor in connection with the Trademarks or Trademark Rights,
whether prior to, on or subsequent to the date hereof:

(i) all lists, contracts, ancillary documents and
other information that identify, describe or provide
information with respect to any customers, dealers or
distributors of the Assignor, its affiliates or franchisees
or licensees or contractors, for products or services sold
under or in connection with the Trademarks or Trademark
Rights, including all lists and documents containing
information regarding each customer's, dealer's or
distributor's name and address, credit, payment, discount,
delivery and other sale terms, and history, pattern and
total of purchases by brand, product, style, size and
quantity;

(ii) all agreements (including franchise
agreements), product and service specification documents and
operating, production and quality control manuals relating
to or used in the design, manufacture, production, delivery,
provision and sale of products or services under or in
connection with the Trademarks or Trademark Rights;

(iii) all documents and agreements relating to the
identity and locations of all sources of supply, all terms
of purchase and delivery, for all materials, components, raw
materials and other supplies and services used in the
manufacture, production,

<PAGE>

-4-

provision, delivery and sale of products or services under
or in connection with the Trademarks or Trademark Rights;
and

(iv) all agreements and documents constituting or
concerning the present or future, current or proposed
advertising and promotion by the Assignor (or any of its
affiliates, franchisees, licensees or contractors) of
products or services sold under or in connection with the
Trademarks or Trademark Rights.

TRADEMARK AGREEMENT. This Trademark Collateral Security and Pledge
Agreement, as amended and in effect from time to time.

TRADEMARK LICENSE RIGHTS. Any and all past, present or future rights
and interests of the Assignor pursuant to any and all past, present and future
franchising or licensing agreements in favor of the Assignor, or to which the
Assignor is a party, pertaining to any Trademarks, Trademark Registrations, or
Trademark Rights owned or used by third parties in the past, present or future,
including the right (but not the obligation) in the name of the Assignor or the
Bank to enforce, and sue and recover for, any breach or violation of any such
agreement to which the Assignor is a party.

TRADEMARK REGISTRATIONS. All past, present or future federal, state,
local and foreign registrations of the Trademarks, all past, present and future
applications for any such registrations (and any such registrations thereof upon
approval of such applications), together with the right (but not the obligation)
to apply for such registrations (and prosecute such applications) in the name of
the Assignor or the Agent, and to take any and all actions necessary or
appropriate to maintain such registrations in effect and renew and extend such
registrations.

TRADEMARK RIGHTS. Any and all past, present or future rights in, to
and associated with the Trademarks throughout the world, whether arising under
federal law, state law, common law, foreign law or otherwise, including the
following: all such rights arising out of or associated with the Trademark
Registrations; the right (but not the obligation) to register claims under any
state, federal or foreign trademark law or regulation; the right (but not the
obligation) to sue or bring opposition or cancellation proceedings in the name
of the Assignor or the Agent for any and all past, present and future
infringements or dilution of or any other damages or injury to the Trademarks,
the Trademark Rights, or the Associated Goodwill, and the rights to damages or
profits due or accrued arising out of or in connection with any such past,
present or future infringement, dilution, damage or injury; and the Trademark
License Rights.

TRADEMARKS. All of the trademarks, service marks, designs, logos,
indicia, trade names, corporate names, company names, business names, fictitious
business names, trade styles, elements of package or trade dress, and other
source and product or service identifiers, used or associated with or
appurtenant to the products, services and businesses of the Assignor, that (i)

<PAGE>

-5-

are set forth on SCHEDULE A hereto, or (ii) have been adopted, acquired, owned,
held or used by the Assignor or are now owned, held or used by the Assignor, in
the Assignor's business, or with the Assignor's products and services, or in
which the Assignor has any right, title or interest, or (iii) are in the future
adopted, acquired, owned, held and used by the Assignor in the Assignor's
business or with the Assignor's products and services, or in which the Assignor
in the future acquires any right, title or interest.

USE. With respect to any Trademark, all uses of such Trademark by, for
or in connection with the Assignor or its business or for the direct or indirect
benefit of the Assignor or its business, including all such uses by the Assignor
itself, by any of the affiliates of the Assignor, or by any franchisee, licensee
or contractor of the Assignor.

2. GRANT OF SECURITY INTEREST.

2.1. SECURITY INTEREST; ASSIGNMENT OF MARKS. As collateral security
for the payment and performance in full of all of the Obligations, the Assignor
hereby unconditionally grants to the Agent, for the benefit of the Banks, a
continuing security interest in and first priority lien on the Pledged
Trademarks, and pledges and mortgages (but does not transfer title to) the
Pledged Trademarks to the Agent, for the benefit of the Banks. In addition, the
Assignor has executed in blank and delivered to the Agent an assignment of
federally registered trademarks in substantially the form of EXHIBIT 1 hereto
(the "Assignment of Marks"). The Assignor hereby authorizes the Agent to
complete as assignee and record with the PTO the Assignment of Marks upon the
occurrence and during the continuance of an Event of Default and the proper
exercise of the Agent's remedies under this Trademark Agreement and the Security
Agreement.

2.2. CONDITIONAL ASSIGNMENT. In addition to, and not by way of
limitation of, the grant, pledge and mortgage of the Pledged Trademarks
provided in Section 2.1, the Assignor grants, assigns, transfers, conveys and
sets over to the Agent, for the benefit of the Banks, the Assignor's entire
right, title and interest in and to the Pledged Trademarks; PROVIDED that
such grant, assignment, transfer and conveyance shall be and become of force
and effect only (i) upon or after the occurrence and during the continuance
of an Event of Default and (ii) either (A) upon the written demand of the
Agent at any time during such continuance or (B) immediately and
automatically (without notice or action of any kind by the Agent) upon an
Event of Default for which acceleration of the Loans is automatic under the
Credit Agreement or upon the sale or other disposition of or foreclosure upon
the Collateral pursuant to the Security Agreement and applicable law
(including the transfer or other disposition of the Collateral by the
Assignor to the Agent or its nominee in lieu of foreclosure).

2.3. SUPPLEMENTAL TO SECURITY AGREEMENT. Pursuant to the Security
Agreement the Assignor has granted to the Agent, for the benefit of the Banks, a

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-6-

continuing security interest in and lien on the Collateral (including the
Pledged Trademarks). The Security Agreement, and all rights and interests of the
Agent in and to the Collateral (including the Pledged Trademarks) thereunder,
are hereby ratified and confirmed in all respects. In no event shall this
Trademark Agreement, the grant, assignment, transfer and conveyance of the
Pledged Trademarks hereunder, or the recordation of this Trademark Agreement (or
any document hereunder) with the PTO, adversely affect or impair, in any way or
to any extent, the Security Agreement, the security interest of the Banks and
the Agent in the Collateral (including the Pledged Trademarks) pursuant to the
Security Agreement and this Agreement, the attachment and perfection of such
security interest under the Uniform Commercial Code (including the security
interest in the Pledged Marks), or any present or future rights and interests of
the Bank in and to the Collateral under or in connection with the Security
Agreement, this Agreement or the Uniform Commercial Code. Any and all rights and
interests of the Agent, for the benefit of the Banks, in and to the Pledged
Trademarks (and any and all obligations of the Assignor with respect to the
Pledged Trademarks) provided herein, or arising hereunder or in connection
herewith, shall only supplement and be cumulative and in addition to the rights
and interests of the Banks and the Agent (and the obligations of the Assignor)
in, to or with respect to the Collateral (including the Pledged Trademarks)
provided in or arising under or in connection with the Security Agreement and
shall not be in derogation thereof.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS.

The Assignor represents, warrants and covenants that: (i) SCHEDULE A
sets forth a true and complete list of all Trademarks and Trademark
Registrations now owned, licensed, controlled or used by the Assignor; (ii) the
Trademarks and Trademark Registrations are subsisting and have not been adjudged
invalid or unenforceable, in whole or in part, and there is no litigation or
proceeding pending concerning the validity or enforceability of the Trademarks
or Trademark Registrations; (iii) to the best of the Assignor's knowledge, each
of the Trademarks and Trademark Registrations is valid and enforceable; (iv) to
the best of the Assignor's knowledge, there is no infringement by others of the
Trademarks, Trademark Registrations or Trademark Rights; (v) no claim has been
made that the use of any of the Trademarks does or may violate the rights of any
third person, and to the best of the Assignor's knowledge, there is no
infringement by the Assignor of the trademark rights of others; (vi) the
Assignor is the sole and exclusive owner of the entire and unencumbered right,
title and interest in and to each of the Trademarks (other than ownership and
other rights reserved by third party owners with respect to Trademarks that the
Assignor is licensed to use), free and clear of any liens, charges, encumbrances
and adverse claims, including pledges, assignments, licenses, registered user
agreements and covenants by the Assignor not to sue third persons, other than
the security interest and assignment created by the Security Agreement and this
Trademark Agreement; (vii) the Assignor has the unqualified right to enter into
this Trademark Agreement and to perform its terms; (viii) the Assignor has used,
and will

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-7-

continue to use, proper statutory and other appropriate proprietary notices
in connection with its use of the Trademarks; (ix) the Assignor has used, and
will continue to use for the duration of this Trademark Agreement, consistent
standards of quality in its manufacture and provision of products and
services sold or provided under the Trademarks; (x) this Trademark Agreement,
together with the Security Agreement, will create in favor of the Agent, for
the benefit of the Banks, a valid and perfected first priority security
interest in the Pledged Trademarks upon making the filings referred to in
clause (xi) of this Section 3; and (xi) except for the filing of financing
statements with the Secretary of State of the State of California under the
Uniform Commercial Code and the recording of this Trademark Agreement with
the PTO, no authorization, approval or other action by, and no notice to or
filing with, any governmental or regulatory authority, agency or office is
required either (A) for the grant by the Assignor or the effectiveness of the
security interest and assignment granted hereby or for the execution,
delivery and performance of this Trademark Agreement by the Assignor, or (B)
for the perfection of or the exercise by the Agent or any Bank of any of its
rights and remedies hereunder.

4. INSPECTION RIGHTS.

The Assignor hereby grants to the Agent and the Banks and their
designated representatives the right to inspect the Assignor's premises at
reasonable times during normal business hours.

5. NO TRANSFER OR INCONSISTENT AGREEMENTS.

Without the Agent's prior written consent and except for licenses of
the Pledged Trademarks in the ordinary course of the Assignor's business
consistent with its past practices, the Assignor will not (i) mortgage, pledge,
assign, encumber, grant a security interest in, transfer, license or alienate
any of the Pledged Trademarks, or (ii) enter into any agreement (for example, a
license agreement) that is inconsistent with the Assignor's obligations under
this Trademark Agreement or the Security Agreement.

6 AFTER-ACQUIRED TRADEMARKS, ETC.

6.1. AFTER-ACQUIRED TRADEMARKS. If, before the Obligations shall have
been finally paid and satisfied in full, the Assignor shall obtain any right,
title or interest in or to any other or new Trademarks, Trademark Registrations
or Trademark Rights, the provisions of this Trademark Agreement shall
automatically apply thereto and the Assignor shall promptly provide to the Agent
notice thereof in writing and execute and deliver to the Agent such documents or
instruments as the Agent may reasonably request further to implement, preserve
or evidence the Agent's interest therein of the Banks and the Agent.

6.2. AMENDMENT TO SCHEDULE. The Assignor authorizes the Agent to
modify this Trademark Agreement and the Assignment of Marks, without the

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necessity of the Assignor's further approval or signature, by amending SCHEDULE
A hereto and the ANNEX to the Assignment of Marks to include any future or other
Trademarks, Trademark Registrations or Trademark Rights under Section 2 or
Section 6.

7. TRADEMARK PROSECUTION.

7.1. ASSIGNOR RESPONSIBLE. The Assignor shall assume full and complete
responsibility for the prosecution, defense, enforcement or any other necessary
or desirable actions in connection with the Pledged Trademarks, and shall hold
the Agent harmless from any and all costs, damages, liabilities and expenses
that may be incurred by the Agent in connection with the Agent's interest of the
Banks and the Agent in the Pledged Trademarks or any other action or failure to
act in connection with this Trademark Agreement or the transactions contemplated
hereby. In respect of such responsibility, the Assignor shall retain trademark
counsel acceptable to the Agent.

7.2. ASSIGNOR'S DUTIES, ETC. The Assignor shall have the right and the
duty, through trademark counsel reasonably acceptable to the Agent, to prosecute
diligently any trademark registration applications of the Trademarks pending as
of the date of this Trademark Agreement or thereafter, to preserve and maintain
all rights in the Trademarks and Trademark Registrations, including the filing
of appropriate renewal applications and other instruments to maintain in effect
the Trademark Registrations and the payment when due of all registration renewal
fees and other fees, taxes and other expenses that shall be incurred or that
shall accrue with respect to any of the Trademarks or Trademark Registrations.
Any expenses incurred in connection with such applications and actions shall be
borne by the Assignor. The Assignor shall not abandon any filed trademark
registration application, or any Trademark Registration or Trademark, without
the consent of the Agent, which consent shall not be unreasonably withheld.

7.3. ASSIGNOR'S ENFORCEMENT RIGHTS. The Assignor shall have the right
and the duty to bring suit or other action in the Assignor's own name to
maintain and enforce the Trademarks, the Trademark Registrations and the
Trademark Rights. The Assignor may require the Agent to join in such suit or
action as necessary to assure the Assignor's ability to bring and maintain any
such suit or action in any proper forum if (but only if) the Agent is completely
satisfied that such joinder will not subject the Bank to any risk of liability.
The Assignor shall promptly, upon demand, reimburse and indemnify the Agent for
all damages, costs and expenses, including legal fees, incurred by the Agent
pursuant to this Section 7.3.

7.4. PROTECTION OF TRADEMARKS, ETC. In general, the Assignor shall
take any and all such actions (including institution and maintenance of suits,
proceedings or actions) as may be necessary or appropriate to properly maintain,
protect, preserve, care for and enforce the Pledged Trademarks. The Assignor
shall not take or fail to take any action, nor permit any action to be

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taken or not taken by others under its control, that would adversely affect the
validity, grant or enforcement of the Pledged Trademarks.

7.5. NOTIFICATION BY ASSIGNOR. Promptly upon obtaining knowledge
thereof, the Assignor will notify the Agent in writing of the institution of, or
any final adverse determination in, any proceeding in the PTO or any similar
office or agency of the United States or any foreign country, or any court,
regarding the validity of any of the Trademarks or Trademark Registrations or
the Assignor's rights, title or interests in and to the Pledged Trademarks, and
of any event that does or reasonably could materially adversely affect the value
of any of the Pledged Trademarks, the ability of the Assignor or the Agent to
dispose of any of the Pledged Trademarks or the rights and remedies of the Banks
and the Agent in relation thereto (including but not limited to the levy of any
legal process against any of the Pledged Trademarks).

8. REMEDIES.

Upon the occurrence and during the continuance of an Event of Default,
the Agent shall have, in addition to all other rights and remedies given it by
this Trademark Agreement (including, without limitation, those set forth in
ss.2.2), the Credit Agreement, the Security Agreement and the other Loan
Documents, those allowed by law and the rights and remedies of a secured party
under the Uniform Commercial Code as enacted in the Commonwealth of
Massachusetts, and, without limiting the generality of the foregoing, the Agent
may immediately, without demand of performance and without other notice (except
as set forth next below) or demand whatsoever to the Assignor, all of which are
hereby expressly waived, sell or license at public or private sale or otherwise
realize upon the whole or from time to time any part of the Pledged Trademarks,
or any interest that the Assignor may have therein, and after deducting from the
proceeds of sale or other disposition of the Pledged Trademarks all expenses
incurred by the Agent in attempting to enforce this Trademark Agreement
(including all reasonable expenses for broker's fees and legal services), shall
apply the residue of such proceeds toward the payment of the Obligations as set
forth in or by reference in the Security Agreement. Notice of any sale, license
or other disposition of the Pledged Trademarks shall be given to the Assignor at
least ten (10) days before the time that any intended public sale or other
public disposition of the Pledged Trademarks is to be made or after which any
private sale or other private disposition of the Pledged Trademarks may be made,
which the Assignor hereby agrees shall be reasonable notice of such public or
private sale or other disposition. At any such sale or other disposition, the
Agent may, to the extent permitted under applicable law, purchase or license the
whole or any part of the Pledged Trademarks or interests therein sold, licensed
or otherwise disposed of.

9. COLLATERAL PROTECTION.

If the Assignor shall fail to do any act that it has covenanted to do
hereunder, or if any representation or warranty of the Assignor shall be

<PAGE>

-10-

breached, the Agent, in its own name or that of the Assignor (in the sole
discretion of the Agent), may (but shall not be obligated to) do such act or
remedy such breach (or cause such act to be done or such breach to be remedied),
and the Assignor agrees promptly to reimburse the Bank for any cost or expense
incurred by the Agent in so doing.

10. POWER OF ATTORNEY.

If any Event of Default shall have occurred and be continuing, the
Assignor does hereby make, constitute and appoint the Agent (and any officer or
agent of the Agent as the Agent may select in its exclusive discretion) as the
Assignor's true and lawful attorney-in-fact, with full power of substitution and
with the power to endorse the Assignor's name on all applications, documents,
papers and instruments necessary for the Agent to use the Pledged Trademarks, or
to grant or issue any exclusive or nonexclusive license of any of the Pledged
Trademarks to any third person, or to take any and all actions necessary for the
Agent to assign, pledge, convey or otherwise transfer title in or dispose of any
of the Pledged Trademarks or any interest of the Assignor therein to any third
person, and, in general, to execute and deliver any instruments or documents and
do all other acts that the Assignor is obligated to execute and do hereunder.
The Assignor hereby ratifies all that such attorney shall lawfully do or cause
to be done by virtue hereof and releases the Agent from any claims, liabilities,
causes of action or demands arising out of or in connection with any action
taken or omitted to be taken by the Agent under this power of attorney (except
for the Agent's gross negligence or willful misconduct). This power of attorney
is coupled with an interest and shall be irrevocable for the duration of this
Trademark Agreement.

11. FURTHER ASSURANCES.

The Assignor shall, at any time and from time to time, and at its
expense, make, execute, acknowledge and deliver, and file and record as
necessary or appropriate with governmental or regulatory authorities, agencies
or offices, such agreements, assignments, documents and instruments, and do such
other and further acts and things (including, without limitation, obtaining
consents of third parties), as the Agent may reasonably request or as may be
necessary or appropriate in order to implement and effect fully the intentions,
purposes and provisions of this Agreement, or to assure and confirm to the Agent
the grant, perfection and priority of the Agent's security interest of the Banks
and the Agent in the Pledged Trademarks.

12. TERMINATION.

At such time as all of the Obligations have been finally paid and
satisfied in full, this Trademark Agreement shall terminate and the Agent shall,
upon the written request and at the expense of the Assignor, execute and deliver
to the Assignor all deeds, assignments and other instruments as may be necessary
or proper to reassign and reconvey to and re-vest in the Assignor the entire

<PAGE>

-11-

right, title and interest to the Pledged Trademarks previously granted,
assigned, transferred and conveyed to the Agent by the Assignor pursuant to this
Agreement, as fully as if this Agreement had not been made, subject to any
disposition of all or any part thereof that may have been made by the Agent
pursuant hereto or the Security Agreement.

13. COURSE OF DEALING.

No course of dealing between the Assignor and the Agent, nor any
failure to exercise, nor any delay in exercising, on the part of the Agent, any
right, power or privilege hereunder or under the Security Agreement or any other
agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.

14. EXPENSES.

Any and all fees, costs and expenses, of whatever kind or nature,
including the reasonable attorneys' fees and expenses incurred by the Agent in
connection with the preparation of this Agreement and all other documents
relating hereto, the consummation of the transactions contemplated hereby or the
enforcement hereof, the filing or recording of any documents (including all
taxes in connection therewith) in public offices, the payment or discharge of
any taxes, counsel fees, maintenance or renewal fees, encumbrances, or otherwise
protecting, maintaining or preserving the Pledged Trademarks, or in defending or
prosecuting any actions or proceedings arising out of or related to the Pledged
Trademarks, shall be borne and paid by the Assignor.

15. OVERDUE AMOUNTS.

Until paid, all amounts due and payable by the Assignor hereunder
shall be a debt secured by the Pledged Trademarks and other Collateral and shall
bear, whether before or after judgment, interest at the rate of interest for
overdue principal set forth in the Credit Agreement.

16. NO ASSUMPTION OF LIABILITY; INDEMNIFICATION.

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE BANK
ASSUMES NO LIABILITIES OF THE ASSIGNOR WITH RESPECT TO ANY CLAIM OR CLAIMS
REGARDING THE ASSIGNOR'S OWNERSHIP OR PURPORTED OWNERSHIP OF, OR RIGHTS OR
PURPORTED RIGHTS ARISING FROM, ANY OF THE PLEDGED TRADEMARKS OR ANY USE, LICENSE
OR SUBLICENSE THEREOF, WHETHER ARISING OUT OF ANY PAST, CURRENT OR FUTURE EVENT,
CIRCUMSTANCE, ACT OR OMISSION OR OTHERWISE. ALL OF SUCH LIABILITIES SHALL BE
EXCLUSIVELY THE RESPONSIBILITY OF THE ASSIGNOR, AND THE ASSIGNOR

<PAGE>

-12-

SHALL INDEMNIFY THE BANK FOR ANY AND ALL COSTS, EXPENSES, DAMAGES AND CLAIMS,
INCLUDING LEGAL FEES, INCURRED BY THE AGENT WITH RESPECT TO SUCH LIABILITIES.

17. NOTICES.

All notices and other communications made or required to be given
pursuant to this Trademark Agreement shall be in writing and shall be delivered
in hand, mailed by United States registered or certified first-class mail,
postage prepaid, or sent by telecopy and confirmed by delivery via courier or
postal service, addressed as follows:

(a) if to the Assignor, at 4645 Morena Boulevard, San Diego,
California 92117, Attention: Chief Fiancnial Officer, or at such other
address for notice as the Assignor shall last have furnished in
writing to the person giving the notice, with copies to Saunders Karp
& Megrue, L.P., 667 Madison Avenue, New York, New York 10017,
Attention: Allan Karp and David Oddi; and

(b) if to the Agent, at 100 Federal Street, Mailstop
01-09-05, Boston, Massachusetts 02110, Large Corporate Retail-Apparel
Division, Attention: Terese A. McLaughlin or at such other address for
notice as the Bank shall last have furnished in writing to the person
giving the notice.

Any such notice or demand shall be deemed to have been duly given or
made and to have become effective (i) if delivered by hand to a responsible
officer of the party to which it is directed, at the time of the receipt thereof
by such officer, (ii) if sent by registered or certified first-class mail,
postage prepaid, five (5) days after the posting thereof, and (iii) if sent by
telecopy, when such telecopy is transmitted to the appropriate telecopy number
and telephonic confirmation of receipt thereof is obtained.

18. AMENDMENT AND WAIVER.

This Trademark Agreement is subject to modification only by a
writing signed by the Agent and the Assignor, except as provided in Section
6.2. The Agent shall not be deemed to have waived any right hereunder unless
such waiver shall be in writing and signed by the Agent. A waiver on any one
occasion shall not be construed as a bar to or waiver of any right on any
future occasion.

19. GOVERNING LAW; CONSENT TO JURISDICTION.

THIS TRADEMARK AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED
INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE COMMONWEALTH OF MASSACHUSETTS. The Assignor agrees that any suit for the
enforcement of this Trademark Agreement may be brought in the

<PAGE>

-13-

courts of the Commonwealth of Massachusetts or any federal court sitting
therein and consents to the non-exclusive jurisdiction of such court and to
service of process in any such suit being made upon the Assignor by mail at
the address specified pursuant to Section 17. The Assignor hereby waives any
objection that it may now or hereafter have to the venue of any such suit or
any such court or that such suit is brought in an inconvenient court.

20. WAIVER OF JURY TRIAL.

THE ASSIGNOR WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS TRADEMARK
AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH
RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Assignor waives any
right which it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. The Assignor (i)
certifies that neither the Agent or any Bank nor any representative, agent or
attorney of the Agent or such Bank has represented, expressly or otherwise, that
the Agent or such Bank would not, in the event of litigation, seek to enforce
the foregoing waivers, and (ii) acknowledges that, in entering into the Credit
Agreement and the other Loan Documents to which the Bank and the Agents are
parties, the Agent is relying upon, among other things, the waivers and
certifications contained in this Section 20.

21. MISCELLANEOUS.

The headings of each section of this Trademark Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Trademark Agreement and all rights and obligations hereunder shall be binding
upon the Assignor and its respective successors and assigns, and shall inure to
the benefit of the Banks and the Agent and their successors and assigns. In the
event of any irreconcilable conflict between the provisions of this Trademark
Agreement and the Credit Agreement, or between this Trademark Agreement and the
Security Agreement, the provisions of the Credit Agreement or the Security
Agreement, as the case may be, shall control. If any term of this Trademark
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall in no way be affected thereby, and this Trademark
Agreement shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The Assignor acknowledges
receipt of a copy of this Trademark Agreement.

22. TRANSITIONAL ARRANGEMENTS.

This Trademark Agreement shall supersede the First Restated Trademark
Agreement in its entirety on and as of the Closing Date. On the Closing Date,
the rights and obligations of the parties under the First Restated Trademark
Agreement shall be subsumed within and governed by this

<PAGE>

-14-

Trademark Agreement; PROVIDED, that the provisions of the First Restated
Trademark Agreement shall remain in full force and effect prior to the Closing
Date. The security interest granted by this Agreement is an extension of the
security interest granted in the First Restated Trademark Agreement.

[REMAINING PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

-15-

IN WITNESS WHEREOF, this Trademark Agreement has been executed as of
the day and year first above written.

CHARLOTTE RUSSE, INC.

By: /s/ DANIEL T. CARTER
---------------------------------------
Title: CFO

BANKBOSTON, N.A., AS AGENT

By: /s/ NANCY E. FULLER
---------------------------------------
Title: Director

CERTIFICATE OF ACKNOWLEDGMENT

STATE OF CALIFORNIA )
) ss.
COUNTY OF SAN DIEGO )

Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this 23 day of December, 1998, personally appeared Daniel T.
Carter to me known personally, and who, being by me duly sworn, deposes and
says that he is the CFO of Charlotte Russe, Inc., and that said instrument
was signed and sealed on behalf of said corporation by authority of its Board
of Directors, and said Daniel T. Carter acknowledged said instrument to be
the free act and deed of said corporation.

/s/ HEATHER A. EAGAN
------------------------------
Notary Public
My commission expires:

<PAGE>

SCHEDULE A

TRADEMARKS AND TRADEMARK REGISTRATIONS

Trademark Registrations --
or United States Patent and Trademark Office
Service Mark Registration No. Registration Date
------------ --------------- -----------------
<S> <C> <C>
Charlotte Russe* 1,485,692
</TABLE>

Trademark Pending Applications --
or United States Patent and Trademark Office
Service Mark Serial No. Filing Date
------------ ---------- -----------
<S> <C> <C>
CHARLOTTE RUSSE* 75-539,417

REMLI* 75-539,157

CHARLOTTE RUSSE* 75-539,156

CHARLOTTE RUSSE* 75-539,155

REMLI* 75-539,154

REMLI* 75-539,047

CHARLOTTE RUSSE* 75-539,045

REMLI* 75-539,044

CHARLOTTE RUSSE* 75-539,043

CHARLOTTE RUSSE* 75-539,040

REMLI* 75-539,039

REMLI* 75-539,038
</TABLE>

* The Registered or Pending Trademark has been licensed from Charlotte Russe
Merchandising, Inc. pursuant to a Trademark License Agreement dated as December
23, 1998.

<PAGE>

EXHIBIT 1

ASSIGNMENT OF TRADEMARKS AND SERVICE MARKS (U.S.)

WHEREAS, Charlotte Russe, Inc., a corporation organized and existing
under the laws of the State of California, having a place of business at 4645
Morena Boulevard, San Diego, California 92117 (the "Assignor"), has adopted and
used and is using the trademarks and service marks (the "Marks") identified on
the ANNEX hereto, and is the owner of the registrations of and pending
registration applications for such Marks in the United States Patent and
Trademark Office identified on such ANNEX; and

WHEREAS, ____________________, a ____________________ organized and
existing under the laws of the State of ___________________, having a place of
business at __________________________ (the "Assignee"), is desirous of
acquiring the Marks and the registrations thereof and registration applications
therefor;

NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Assignor does hereby assign, sell and transfer unto
the Assignee all right, title and interest in and to the Marks, together with
(i) the registrations of and registration applications for the Marks, (ii) the
goodwill of the business symbolized by and associated with the Marks and the
registrations thereof, and (iii) the right to sue and recover for, and the right
to profits or damages due or accrued arising out of or in connection with, any
and all past, present or future infringements or dilution of or damage or injury
to the Marks or the registrations thereof or such associated goodwill.

This Assignment of Trademarks and Service Marks (U.S.) is intended to
and shall take effect as a sealed instrument at such time as the Assignee shall
complete this instrument by inserting its name in the second paragraph above and
signing its acceptance of this Assignment of Trademarks and Service Marks (U.S.)
below.

<PAGE>

-2-

IN WITNESS WHEREOF, the Assignor, by its duly authorized officer, has
executed this assignment, as an instrument under seal, on this ________ day of
____________________, _________.

CHARLOTTE RUSSE, INC.

By:
--------------------------------------
Title:

The foregoing assignment of the Marks and the registrations thereof
and registration applications therefor by the Assignor to the Assignee is hereby
accepted as of the ______ day of _________________, _______.

By:
--------------------------------
Title:

STATE OF ________ )
)ss.
COUNTY OF ________ )

On this the _______ day of December, 1998, before me appeared
_____________________, the person who signed this instrument, who acknowledged
that he is the ___________________________ of Charlotte Russe, Inc. and that
being duly authorized he signed such instrument as a free act on behalf of
Charlotte Russe, Inc.

------------------------------
Notary Public
[Seal]
My commission expires:

<PAGE>

ANNEX

Trademark Registrations --
or United States Patent and Trademark Office
Service Mark Registration No. Registration Date
------------ --------------- -----------------
<S> <C> <C>
</TABLE>

Trademark Pending Applications --
or United States Patent and Trademark Office
Service Mark Serial No. Filing Date
------------ --------- -----------
<S> <C> <C>
</TABLE>

<PAGE>

SECOND AMENDED AND RESTATED STOCK PLEDGE AGREEMENT

This SECOND AMENDED AND RESTATED STOCK PLEDGE AGREEMENT is made as of
December 23, 1998 (this "Agreement"), by and between CHARLOTTE RUSSE HOLDING,
INC., a Delaware corporation (the "Company"), and BANKBOSTON, N.A., a national
banking association, as agent (in such capacity, the "Agent") for itself and
other lending institutions (collectively, the "Banks") which are or may become
parties to that certain Second Amended and Restated Revolving Credit Agreement
dated as of December 23, 1998 (as amended and in effect from time to time, the
"Credit Agreement") among the Company, Charlotte Russe, Inc. (the "Borrower"),
the Banks and the Agent.

WHEREAS, pursuant to that certain Amended and Restated Revolving
Credit and Term Loan Agreement dated as of December 5, 1997 (as amended and in
effect from time to time, the "First Restated Credit Agreement", which amended
and restated in its entirety the Revolving Credit and Term Loan Agreement dated
as of September 27, 1996), the Banks made loans or otherwise extended credit to
the Borrower for the purposes described therein;

WHEREAS, the Company and the Agent entered into that certain Amended
and Restated Stock Pledge Agreement dated as of December 5, 1997 (as amended and
in effect from time to time, the "First Restated Stock Pledge Agreement", which
amended and restated in its entirety the Stock Pledge Agreement dated as of
September 27, 1996) by and between the Company and the Agent, for the benefit of
the Banks and the Agent;

WHEREAS, the Company, the Borrower, the Banks and the Agent have
entered into the Credit Agreement to amend and restate in its entirety the First
Restated Credit Agreement;

WHEREAS, it is a condition precedent to the Banks amending and
restating the First Restated Credit Agreement and converting any loans under the
First Restated Credit Agreement into Loans under the Credit Agreement or making
any other Loans under the Credit Agreement that the Company execute and deliver
to the Agent, for the benefit of the Banks and the Agent, a pledge agreement in
substantially the form hereof;

WHEREAS, the Company wishes to grant pledges and security interests in
favor of the Agent in order to secure the Obligations and to ratify and confirm
the prior grant of pledges and security interests under the First Restated Stock
Pledge Agreement; and

WHEREAS, the Company is the direct legal and/or beneficial owner of
all (except as otherwise noted in ANNEX A) of the issued and outstanding shares
of each class of the capital stock of each of the corporations described on
ANNEX A;

<PAGE>

-2-

NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Agent agree that the First Restated
Stock Pledge Agreement is hereby amended and restated in its entirety as
follows:

1. PLEDGE OF STOCK, ETC.

1.1. PLEDGE OF STOCK. The Company hereby pledges, assigns,
grants a security interest in, and delivers to the Agent, for the
benefit of the Banks, all of the shares of capital stock of the
Borrower of every class, as more fully described on ANNEX A hereto, to
be held by the Agent, for the benefit of the Banks, subject to the
terms and conditions hereinafter set forth. The certificates for such
shares, accompanied by stock powers or other appropriate instruments
of assignment thereof duly executed in blank by the Company, have been
delivered to the Agent.

1.2. ADDITIONAL STOCK. In case the Company shall acquire any
additional shares of the capital stock of the Borrower or any other
Subsidiary of the Company or any corporation which is the successor of
the Borrower or such Subsidiary, or any securities exchangeable for or
convertible into shares of such capital stock of any class of the
Borrower or such Subsidiary, by purchase, stock dividend, stock split
or otherwise, then the Company shall forthwith deliver to and pledge
such shares or other securities to the Agent, for the benefit of the
Banks, under this Agreement and shall deliver to the Agent forthwith
any certificates therefor, accompanied by stock powers or other
appropriate instruments of assignment duly executed in blank by the
Company. The Company agrees that the Agent may from time to time
attach as ANNEX A hereto an updated list of the shares of capital
stock or securities at the time pledged with the Agent hereunder.

1.3. PLEDGE OF CASH COLLATERAL ACCOUNT. The Company also
hereby pledges, assigns, grants a security interest in, and delivers
to the Agent, the Cash Collateral Account and all of the Cash
Collateral as such terms are hereinafter defined.

2. DEFINITIONS. The term "Obligations" and all other capitalized terms
used herein without definition shall have the respective meanings provided
therefor in the Credit Agreement. Terms used herein and not defined in the
Credit Agreement or otherwise defined herein that are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts have such
defined meanings herein, unless the context otherwise indicated or requires, and
the following terms shall have the following meanings:

CASH COLLATERAL. See Section 4.

<PAGE>

-3-

CASH COLLATERAL ACCOUNT. See Section 4.

STOCK. Includes the shares of stock described in ANNEX A attached
hereto and any additional shares of stock at the time pledged with the Agent
hereunder.

STOCK COLLATERAL. The property at any time pledged to the Agent
hereunder (whether described herein or not) and all income therefrom, increases
therein and proceeds thereof, including without limitation that included in Cash
Collateral but excluding from the definition of "Stock Collateral" any income,
increases or proceeds received by the Company to the extent expressly permitted
by Section 6.

TIME DEPOSITS. See Section 4.

3. SECURITY FOR OBLIGATIONS. This Agreement and the security interest
in and pledge of the Stock Collateral hereunder are made with and granted to the
Agent, for the benefit of the Banks, as security for the payment and performance
in full of all the Obligations.

4. LIQUIDATION, RECAPITALIZATION, ETC.

4.1. DISTRIBUTIONS PAID TO AGENT. Any sums or other property
paid or distributed upon or with respect to any of the Stock, whether
by dividend or redemption or upon the liquidation or dissolution of
the issuer thereof or otherwise, shall, except to the limited extent
provided in Section 6, be paid over and delivered to the Agent to be
held by the Agent as security for the payment and performance in full
of all of the Obligations. In case, pursuant to the recapitalization
or reclassification of the capital of the issuer thereof or pursuant
to the reorganization thereof, any distribution of capital shall be
made on or in respect of any of the Stock or any property shall be
distributed upon or with respect to any of the Stock, the property so
distributed shall be delivered to the Agent to be held by it as
security for the Obligations. Except to the limited extent provided in
Section 6, all sums of money and property paid or distributed in
respect of the Stock, whether as a dividend or upon such a
liquidation, dissolution, recapitalization or reclassification or
otherwise, that are received by the Company shall, until paid or
delivered to the Agent, be held in trust for the Agent as security for
the payment and performance in full of all of the Obligations.

<PAGE>

-4-

after consultation with the Company, PROVIDED, that, in each such
case, arrangements satisfactory to the Agent are made and are in place
to perfect and to ensure the first priority of the Agent's security
interest therein. Interest earned on the Cash Collateral Account and
on the Time Deposits, and the principal of the Time Deposits at
maturity that is not invested in new Time Deposits, shall be deposited
in the Cash Collateral Account. The Cash Collateral Account, all sums
from time to time standing to the credit of the Cash Collateral
Account, any and all Time Deposits, any and all instruments or other
writings evidencing Time Deposits and any and all proceeds or any
thereof are hereinafter referred to as the "Cash Collateral."

4.3. COMPANY'S RIGHTS TO CASH COLLATERAL, ETC. Except as
otherwise expressly provided in Section 15, the Company shall have no
right to withdraw sums from the Cash Collateral Account, to receive
any of the Cash Collateral or to require the Agent to part with the
Agent's possession of any instruments or other writings evidencing any
Time Deposits.

5. WARRANTY OF TITLE; AUTHORITY. The Company hereby represents and
warrants that: (i) the Company has good and marketable title to, and is the sole
record and beneficial owner of, the Stock described in Section 1, subject to no
pledges, liens, security interests, charges, options, restrictions or other
encumbrances except the pledge and security interest created by this Agreement,
(ii) all of the Stock described in Section 1 is validly issued, fully paid and
non-assessable, (iii) the Company has full power, authority and legal right to
execute, deliver and perform its obligations under this Agreement and to pledge
and grant a security interest in all of the Stock Collateral pursuant to this
Agreement, and the execution, delivery and performance hereof and the pledge of
and granting of a security interest in the Stock Collateral hereunder have been
duly authorized by all necessary corporate or other action and do not contravene
any law, rule or regulation or any provision of the Company's charter documents
or by-laws or of any judgment, decree or order of any tribunal or of any
agreement or instrument to which the Company is a party or by which it or any of
its property is bound or affected or constitute a default thereunder, and (iv)
the information set forth in ANNEX A hereto relating to the Stock is true,
correct and complete in all respects. The Company covenants that it will defend
the rights and security interest of the Banks and the Agent in such Stock
against the claims and demands of all persons whomsoever. The Company further
covenants that it will have the like title to and right to pledge and grant a
security interest in the Stock Collateral hereafter pledged or in which a
security interest is granted to the Agent hereunder and will likewise defend the
rights, pledge and security interest thereof and therein of the Banks and the
Agent.

6. DIVIDENDS, VOTING, ETC., PRIOR TO MATURITY. Unless the
circumstances described in the penultimate sentence of this section exist, the
Company shall be entitled to receive all cash dividends paid in respect

<PAGE>

-5-

of the Stock, to vote the Stock and to give consents, waivers and ratifications
in respect of the Stock; PROVIDED, HOWEVER, that no vote shall be cast or
consent waiver or ratification given by the Company if the effect thereof would
in the reasonable judgment of the Agent impair any of the Stock Collateral or be
inconsistent with or result in any violation of any of the provisions of the
Credit Agreement, the Notes or any of the other Loan Documents. If an Event of
Default shall have occurred and be continuing and such Event of Default shall
have resulted in a restriction, pursuant to the Subordination Agreement, on the
ability of the Company to make payments on the Subordinated Debt, then for so
long as such restriction is in effect all such rights of the Company to receive
cash dividends shall cease. All such rights of the Company to vote and give
consents, waivers and ratifications with respect to the Stock shall, at the
Agent's option, as evidenced by the Agent's notifying the Company of such
election, cease in case an Event of Default shall have occurred and be
continuing.

7. REMEDIES.

7.1. IN GENERAL. If an Event of Default shall have occurred
and be continuing, the Agent shall thereafter have the following
rights and remedies (to the extent permitted by applicable law) in
addition to the rights and remedies of a secured party under the
Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts, all such rights and remedies being cumulative, not
exclusive, and enforceable alternatively, successively or
concurrently, at such time or times as the Agent deems expedient:

(a) if the Agent so elects and gives notice of
such election to the Company, the Agent may vote any or all
shares of the Stock (whether or not the same shall have been
transferred into its name or the name of its nominee or
nominees) for any lawful purpose, including, without
limitation, if the Agent so elects, for the liquidation of
the assets of the issuer thereof, and give all consents,
waivers and ratifications in respect of the Stock and
otherwise act with respect thereto as though it were the
outright owner thereof (the Company hereby irrevocably
constituting and appointing the Agent the proxy and
attorney-in-fact of the Company, with full power of
substitution, to do so);

(b) the Agent may demand, sue for, collect or make
any compromise or settlement the Agent deems suitable in
respect of any Stock Collateral;

<PAGE>

-6-

performance by the Company or any notice or advertisement
whatsoever except as expressly provided herein or as may
otherwise be required by law;

(d) the Agent may cause all or any part of the
Stock held by it to be transferred into its name or the name
of its nominee or nominees; and

(e) the Agent may set off against the Obligations
any and all sums deposited with it or held by it, including
without limitation, any sums standing to the credit of the
Cash Collateral Account and any Time Deposits issued by the
Agent.

7.2. SALE OF STOCK COLLATERAL. In the event of any
disposition of the Stock Collateral as provided in clause (c) of
Section 7.1, the Agent shall give to the Company at least ten (10)
Business Days prior written notice of the time and place of any public
sale of the Stock Collateral or of the time after which any private
sale or any other intended disposition is to be made. The Company
hereby acknowledges that ten (10) Business Days prior written notice
of such sale or sales shall be reasonable notice. The Agent may
enforce its rights hereunder without any other notice and without
compliance with any other condition precedent now or hereunder imposed
by statute, rule of law or otherwise (all of which are hereby
expressly waived by the Company, to the fullest extent permitted by
law). The Agent may buy any part or all of the Stock Collateral at any
public sale and if any part or all of the Stock Collateral is of a
type customarily sold in a recognized market or is of the type which
is the subject of widely-distributed standard price quotations, the
Agent may buy at private sale and may make payments thereof by any
means. The Agent may apply the cash proceeds actually received from
any sale or other disposition to the reasonable expenses of retaking,
holding, preparing for sale, selling and the like, to reasonable
attorneys' fees, travel and all other expenses which may be incurred
by the Agent in attempting to collect the Obligations or to enforce
this Agreement or in the prosecution or defense of any action or
proceeding related to the subject matter of this Agreement, and then
to the Obligations in the order set forth in such order or preference
as the Agent may determine after proper allowance for Obligations not
then due. Only after such applications, and after payment by the Agent
of any amount required by Section 9-504(1)(c) of the Uniform
Commercial Code as in effect in the Commonwealth of Massachusetts,
need the Agent account to the Company for any surplus.

7.3. REGISTRATION OF STOCK. If the Agent shall determine to
exercise its right to sell any or all of the Stock pursuant to this
Section 7, and if in the opinion of counsel for the Agent it is
necessary, or if in the reasonable opinion of the Agent it is
advisable, to have the Stock,

<PAGE>

-7-

or that portion thereof to be sold, registered under the provisions of
the Securities Act of 1933, as amended (the "Securities Act"), the
Company agrees to use its best efforts to cause the issuer or issuers
of the Stock contemplated to be sold, to execute and deliver, and
cause the directors and officers of such issuer to execute and
deliver, all at the Company's expense, all such instruments and
documents, and to do or cause to be done all such other acts and
things as may be necessary or, in the reasonable opinion of the Agent,
advisable to register such Stock under the provisions of the
Securities Act and to cause the registration statement relating
thereto to become effective and to remain effective for a period of 9
months from the date such registration statement became effective, and
to make all amendments thereto or to the related prospectus or both
that, in the reasonable opinion of the Agent, are necessary or
advisable, all in conformity with the requirements of the Securities
Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. The Company agrees to use its best
efforts to cause such issuer or issuers to comply with the provisions
of the securities or "Blue Sky" laws of any jurisdiction which the
Agent shall designate and to cause such issuer or issuers to make
available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the
provisions of Section 11(a) of the Securities Act.

7.4. PRIVATE SALES. The Company recognizes that the Agent
may be unable to effect a public sale of the Stock by reason of
certain prohibitions contained in the Securities Act, federal banking
laws, and other applicable laws, but may be compelled to resort to one
or more private sales thereof to a restricted group of purchasers. The
Company agrees that any such private sales may be at prices and other
terms less favorable to the seller than if sold at public sales and
that such private sales shall not by reason thereof be deemed not to
have been made in a commercially reasonable manner. The Agent shall be
under no obligation to delay a sale of any of the Stock for the period
of time necessary to permit the issuer of such securities to register
such securities for public sale under the Securities Act, or such
other federal banking or other applicable laws, even if the issuer
would agree to do so. Subject to the foregoing, the Agent agrees that
any sale of the Stock shall be made in a commercially reasonable
manner, and the Company agrees to use its best efforts to cause the
issuer or issuers of the Stock contemplated to be sold, to execute and
deliver, and cause the directors and officers of such issuer to
execute and deliver, all at the Company's expense, all such
instruments and documents, and to do or cause to be done all such
other acts and things as may be necessary or, in the reasonable
opinion of the Agent, advisable to exempt such Stock from registration
under the provisions of the Securities Act, and to make all amendments
to such instruments and documents which, in the opinion of the Agent,
are necessary or advisable, all in conformity with the requirements of
the

<PAGE>

-8-

Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto. The Company further agrees to
use its best efforts to cause such issuer or issuers to comply with
the provisions of the securities or "Blue Sky" laws of any
jurisdiction which the Agent shall designate and, if required, to
cause such issuer or issuers to make available to its security
holders, as soon as practicable, an earnings statement (which need not
be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act.

7.5. COMPANY'S AGREEMENTS, ETC. The Company further agrees
to do or cause to be done all such other acts and things as may be
reasonably necessary to make any sales of any portion or all of the
Stock pursuant to this Section 7 valid and binding and in compliance
with any and all applicable laws (including, without limitation, the
Securities Act, the Securities Exchange Act of 1934, as amended, the
rules and regulations of the Securities and Exchange Commission
applicable thereto and all applicable state securities or "Blue Sky"
laws), regulations, orders, writs, injunctions, decrees or awards of
any and all courts, arbitrators or governmental instrumentalities,
domestic or foreign, having jurisdiction over any such sale or sales,
all at the Company's expense. The Company further agrees that a breach
of any of the covenants contained in this Section 7 will cause
irreparable injury to the Agent, that the Agent has no adequate remedy
at law in respect of such breach and, as a consequence, agrees that
each and every covenant contained in this Section 7 shall be
specifically enforceable against the Company and the Company hereby
waives and agrees not to assert any defenses against an action for
specific performance of such covenants.

8. MARSHALLING. The Agent shall not be required to marshal any present
or future security for (including but not limited to this Agreement and the
Stock Collateral), or other assurances of payment of, the Obligations or any of
them, or to resort to such security or other assurances of payment in any
particular order. All of the Agent's rights hereunder and in respect of such
security and other assurances of payment shall be cumulative and in addition to
all other rights, however existing or arising. To the extent that it lawfully
may, the Company hereby agrees that it will not invoke any law relating to the
marshalling of collateral that might cause delay in or impede the enforcement of
the Agent's rights under this Agreement or under any other instrument evidencing
any of the Obligations or under which any of the Obligations is outstanding or
by which any of the Obligations is secured or payment thereof is otherwise
assured, and to the extent that it lawfully may the Company hereby irrevocably
waives the benefits of all such laws.

9. COMPANY'S OBLIGATIONS NOT AFFECTED. The obligations of the Company
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by (i) any exercise or nonexercise, or any waiver,

<PAGE>

-9-

by the Agent of any right, remedy, power or privilege under or in respect of any
of the Obligations or any security thereof (including this Agreement); (ii) any
amendment to or modification of the Credit Agreement, the Notes, the other Loan
Documents or any of the Obligations; (iii) any amendment to or modification of
any instrument (other than this Agreement) securing any of the Obligations,
including, without limitation, any of the Security Documents; or (iv) the taking
of additional security for, or any other assurances of payment of, any of the
Obligations or the release or discharge or termination of any security or other
assurances of payment or performance for any of the Obligations; whether or not
the Company shall have notice or knowledge of any of the foregoing.

10. TRANSFER, ETC., BY COMPANY. Without the prior written consent of
the Agent, the Company will not sell, assign, transfer or otherwise dispose of,
grant any option with respect to, or pledge or grant any security interest in or
otherwise encumber or restrict any of the Stock Collateral or any interest
therein, except for the pledge thereof and security interest therein provided
for in this Agreement.

11. FURTHER ASSURANCES. The Company will do all such acts, and will
furnish to the Agent all such financing statements, certificates, legal opinions
and other documents and will obtain all such governmental consents and corporate
approvals and will do or cause to be done all such other things as the Agent may
reasonably request from time to time in order to give full effect to this
Agreement and to secure the rights of the Agent hereunder, all without any cost
or expense to the Agent. If the Agent so elects, a photocopy of this Agreement
may at any time and from time to time be filed by the Agent as a financing
statement in any recording office in any jurisdiction.

12. AGENT'S EXONERATION. Under no circumstances shall the Agent be
deemed to assume any responsibility for or obligation or duty with respect to
any part or all of the Stock Collateral of any nature or kind or any matter or
proceedings arising out of or relating thereto, other than (i) to exercise
reasonable care in the physical custody of the Stock Collateral and (ii) after
an Event of Default shall have occurred and be continuing, to act in a
commercially reasonable manner. The Agent shall not be required to take any
action of any kind to collect, preserve or protect its or the Company's rights
in the Stock Collateral or against other parties thereto. The Agent's prior
recourse to any part or all of the Stock Collateral shall not constitute a
condition of any demand, suit or proceeding for payment or collection of any of
the Obligations.

13. NO WAIVER, ETC. No act, failure or delay by the Agent shall
constitute a waiver of its rights and remedies hereunder or otherwise. No single
or partial waiver by the Agent of any default or right or remedy that it may
have shall operate as a waiver of any other default, right or remedy or of the
same default, right or remedy on a future occasion. The Company hereby waives
presentment, notice of dishonor and protect of all

<PAGE>

-10-

instruments, included in or evidencing any of the Obligations or the Stock
Collateral, and any and all other notices and demands whatsoever (except as
expressly provided herein or in the Credit Agreement).

14. NOTICE, ETC. All notices, requests and other communications
hereunder shall be made in the manner set forth in, and at the address specified
by reference in Section 20 of the Credit Agreement.

15. TERMINATION. Upon final payment and performance in full of the
Obligations, this Agreement shall terminate and the Agent shall, at the
Company's request and expense, return such Stock Collateral in the possession or
control of the Agent as has not theretofore been disposed of pursuant to the
provisions hereof, together with any moneys and other property at the time held
by the Agent hereunder.

16. NO WAIVER. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated except by a written instrument
expressly referring to this Agreement and to the provisions so modified or
limited, and executed by the party to be charged.

17. SUCCESSORS AND ASSIGNS. This Agreement and all obligations of the
Company shall be binding upon the successors and assigns of the Company, and
shall, together with the rights and remedies of the Agent hereunder, inure to
the benefit of the Agent, its successors in title and assigns.

18. GOVERNING LAW. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS AN
INSTRUMENT UNDER SEAL AND THIS AGREEMENT AND THE OBLIGATIONS OF THE COMPANY
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS.

19. WAIVER OF JURY TRIAL. THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF
ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Company waives
any right which it may have to claim or recover in any litigation referred to in
the preceding sentence any special, exemplary, punitive or consequential damages
or any damages other than, or in addition to, actual damages. The Company (i)
certifies that neither the Agent or any Bank nor any representative, agent or
attorney of the Agent or such Bank has represented, expressly or otherwise, that
the Agent or such Bank would not, in the event of litigation, seek to enforce
the foregoing waivers and (ii) acknowledges that, in entering into the Credit
Agreement and the other Loan Documents to which the Agent and the Banks are
parties, the Agent is relying upon, among other things, the waivers and
certifications contained in this Section 19.

<PAGE>

-11-

20. HEADINGS. The descriptive section headings have been inserted for
convenience of reference only and do not define or limit the provisions hereof.

21. SEVERABILITY, ETC. If any term of this Agreement shall be held to
be invalid, illegal or unenforceable, the validity of all other terms hereof
shall be in no way affected thereby, and this Agreement shall be construed and
be enforceable as if such invalid, illegal or unenforceable term had not been
included herein. The Company acknowledges receipt of a copy of this Agreement.

22. TRANSITIONAL ARRANGEMENTS. This Agreement shall supersede the
First Restated Stock Pledge Agreement in its entirety on and as of the Closing
Date. On the Closing Date, the rights and obligations of the parties under the
First Restated Stock Pledge Agreement shall be subsumed within and governed by
this Agreement; PROVIDED, that the provisions of the First Restated Stock Pledge
Agreement shall remain in full force and effect prior to the Closing Date. The
security interest granted by this Agreement is an extension of the security
interest granted in the First Restated Stock Pledge Agreement

[REMAINING PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

-12-

IN WITNESS WHEREOF, intending to be legally bound, the Company and the
Agent have caused this Second Amended and Restated Stock Pledge Agreement to be
executed as of the date first above written.

CHARLOTTE RUSSE HOLDING, INC.

By: /s/ DANIEL T. CARTER
------------------------------------------
Title: CFO

BANKBOSTON, N.A., AS AGENT

By: /s/ NANCY E. FULLER
------------------------------------------
Title: Director

The undersigned Subsidiaries hereby join in the above Agreement for
the sole purpose of consenting to and being bound by the provisions of Sections
4.1, 6 and 7 thereof, the undersigned hereby agreeing to cooperate fully and in
good faith with the Bank and the Company in carrying out such provisions.

CHARLOTTE RUSSE, INC.

By: /s/ DANIEL T. CARTER
------------------------------------------
Title: CFO

<PAGE>

ANNEX A TO PLEDGE AGREEMENT

None of the issuers has any authorized, issued or outstanding shares
of its capital stock of any class or any commitments to issue any shares of its
capital stock of any class or any securities convertible into or exchangeable
for any shares of its capital stock of any class except as otherwise stated in
this ANNEX A.

Number of Number of Number of Par or
Record Class of Authorized Issued Outstanding Liquidation
Issuer Owner Shares Shares Shares Shares Value
------ ------ -------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charlotte Charlotte common 4,000 4,000 4,000 $10.00
Russe, Inc. Russe
Holding, Inc.
</TABLE>

<PAGE>

STOCK PLEDGE AGREEMENT

This STOCK PLEDGE AGREEMENT is made as of December 23, 1998 (this
"Agreement"), by and between CHARLOTTE RUSSE, INC., a California corporation
(the "Borrower"), and BANKBOSTON, N.A., a national banking association, as agent
(in such capacity, the "Agent") for itself and other lending institutions
(collectively, the "Banks") which are or may become parties to that certain
Second Amended and Restated Revolving Credit Agreement dated as of December 23,
1998 (as amended and in effect from time to time, the "Credit Agreement") among
the Borrower, Charlotte Russe Holding, Inc. (the "Guarantor"), the Banks and the
Agent.

WHEREAS, the Borrower, the Guarantor, the Banks and the Agent have entered
into the Credit Agreement to amend and restate in its entirety the First
Restated Credit Agreement;

WHEREAS, it is a condition precedent to the Banks amending and restating
the First Restated Credit Agreement and converting any loans under the First
Restated Credit Agreement into Loans under the Credit Agreement or making any
other Loans under the Credit Agreement that the Borrower execute and deliver to
the Agent, for the benefit of the Banks and the Agent, a pledge agreement in
substantially the form hereof;

WHEREAS, the Borrower wishes to grant pledges and security interests in
favor of the Agent, for the benefit of the Banks and the Agent, in order to
secure the Obligations; and

WHEREAS, the Borrower is the direct legal and/or beneficial owner of all
(except as otherwise noted in ANNEX A) of the issued and outstanding shares of
each class of the capital stock of each of the corporations described on ANNEX
A;

1. PLEDGE OF STOCK, ETC.

1.1. PLEDGE OF STOCK. The Borrower hereby pledges, assigns, grants a
security interest in, and delivers to the Agent, for the benefit of the
Banks, all of the shares of capital stock of Charlotte Russe

<PAGE>
-2-

Merchandising, Inc. ("Charlotte Russe Merchandising") and Charlotte Russe
Administration, Inc. ("Charlotte Russe Administration"), as more fully
described on ANNEX A hereto, to be held by the Agent, for the benefit of
the Banks, subject to the terms and conditions hereinafter set forth. The
certificates for such shares, accompanied by stock powers or other
appropriate instruments of assignment thereof duly executed in blank by the
Borrower, have been delivered to the Agent.

1.2. ADDITIONAL STOCK. In case the Borrower shall acquire any
additional shares of the capital stock of Charlotte Russe Merchandising or
Charlotte Russe Administration or any other Subsidiary of the Borrower or
any corporation which is the successor of the Borrower or such Subsidiary,
or any securities exchangeable for or convertible into shares of such
capital stock of any class of the Borrower or such Subsidiary, by purchase,
stock dividend, stock split or otherwise, then the Borrower shall forthwith
deliver to and pledge such shares or other securities to the Agent, for the
benefit of the Banks, under this Agreement and shall deliver to the Agent
forthwith any certificates therefor, accompanied by stock powers or other
appropriate instruments of assignment duly executed in blank by the
Borrower. The Borrower agrees that the Agent may from time to time attach
as ANNEX A hereto an updated list of the shares of capital stock or
securities at the time pledged with the Agent hereunder.

1.3. PLEDGE OF CASH COLLATERAL ACCOUNT. The Borrower also hereby
pledges, assigns, grants a security interest in, and delivers to the Agent,
the Cash Collateral Account and all of the Cash Collateral as such terms
are hereinafter defined.

2. DEFINITIONS. The term "Obligations" and all other capitalized terms used
herein without definition shall have the respective meanings provided therefor
in the Credit Agreement. Terms used herein and not defined in the Credit
Agreement or otherwise defined herein that are defined in the Uniform Commercial
Code as in effect in the Commonwealth of Massachusetts have such defined
meanings herein, unless the context otherwise indicated or requires, and the
following terms shall have the following meanings:

CASH COLLATERAL. See Section 4.

CASH COLLATERAL ACCOUNT. See Section 4.

STOCK. Includes the shares of stock described in ANNEX A attached hereto
and any additional shares of stock at the time pledged with the Agent hereunder.

<PAGE>
-3-

included in Cash Collateral but excluding from the definition of "Stock
Collateral" any income, increases or proceeds received by the Borrower to the
extent expressly permitted by Section 6.

TIME DEPOSITS. See Section 4.

3. SECURITY FOR OBLIGATIONS. This Agreement and the security interest in
and pledge of the Stock Collateral hereunder are made with and granted to the
Agent, for the benefit of the Banks, as security for the payment and performance
in full of all the Obligations.

4. LIQUIDATION, RECAPITALIZATION, ETC.

4.1. DISTRIBUTIONS PAID TO AGENT. Any sums or other property paid or
distributed upon or with respect to any of the Stock, whether by dividend
or redemption or upon the liquidation or dissolution of the issuer thereof
or otherwise, shall, except to the limited extent provided in Section 6, be
paid over and delivered to the Agent to be held by the Agent as security
for the payment and performance in full of all of the Obligations. In case,
pursuant to the recapitalization or reclassification of the capital of the
issuer thereof or pursuant to the reorganization thereof, any distribution
of capital shall be made on or in respect of any of the Stock or any
property shall be distributed upon or with respect to any of the Stock, the
property so distributed shall be delivered to the Agent to be held by it as
security for the Obligations. Except to the limited extent provided in
Section 6, all sums of money and property paid or distributed in respect of
the Stock, whether as a dividend or upon such a liquidation, dissolution,
recapitalization or reclassification or otherwise, that are received by the
Borrower shall, until paid or delivered to the Agent, be held in trust for
the Agent as security for the payment and performance in full of all of the
Obligations.

4.2. CASH COLLATERAL ACCOUNT. All sums of money that are delivered to
the Agent pursuant to this Section 4 shall be deposited into an interest
bearing account with the Agent (the "Cash Collateral Account"). Some or all
of the funds from time to time in the Cash Collateral Account may be
invested in time deposits, including, without limitation, certificates of
deposit issued by the Agent (such certificates of deposit or other time
deposits being hereinafter referred to, collectively, as "Time Deposits"),
that are satisfactory to the Agent after consultation with the Borrower,
PROVIDED, that, in each such case, arrangements satisfactory to the Agent
are made and are in place to perfect and to ensure the first priority of
the Agent's security interest therein. Interest earned on the Cash
Collateral Account and on the Time Deposits, and the principal of the Time
Deposits at maturity that is not invested in new Time Deposits, shall be
deposited in the Cash Collateral Account. The Cash Collateral Account, all
sums from time to time standing to the credit of the Cash Collateral

<PAGE>
-4-

Account, any and all Time Deposits, any and all instruments or other
writings evidencing Time Deposits and any and all proceeds or any thereof
are hereinafter referred to as the "Cash Collateral."

4.3. BORROWER'S RIGHTS TO CASH COLLATERAL, ETC. Except as otherwise
expressly provided in Section 14, the Borrower shall have no right to
withdraw sums from the Cash Collateral Account, to receive any of the Cash
Collateral or to require the Agent to part with the Agent's possession of
any instruments or other writings evidencing any Time Deposits.

5. WARRANTY OF TITLE; AUTHORITY. The Borrower hereby represents and
warrants that: (i) the Borrower has good and marketable title to, and is the
sole record and beneficial owner of, the Stock described in Section 1, subject
to no pledges, liens, security interests, charges, options, restrictions or
other encumbrances except the pledge and security interest created by this
Agreement, (ii) all of the Stock described in Section 1 is validly issued, fully
paid and non-assessable, (iii) the Borrower has full power, authority and legal
right to execute, deliver and perform its obligations under this Agreement and
to pledge and grant a security interest in all of the Stock Collateral pursuant
to this Agreement, and the execution, delivery and performance hereof and the
pledge of and granting of a security interest in the Stock Collateral hereunder
have been duly authorized by all necessary corporate or other action and do not
contravene any law, rule or regulation or any provision of the Borrower's
charter documents or by-laws or of any judgment, decree or order of any tribunal
or of any agreement or instrument to which the Borrower is a party or by which
it or any of its property is bound or affected or constitute a default
thereunder, and (iv) the information set forth in Annex A hereto relating to the
Stock is true, correct and complete in all respects. The Borrower covenants that
it will defend the rights and security interest of the Banks and the Agent in
such Stock against the claims and demands of all persons whomsoever. The
Borrower further covenants that it will have the like title to and right to
pledge and grant a security interest in the Stock Collateral hereafter pledged
or in which a security interest is granted to the Agent hereunder and will
likewise defend the rights, pledge and security interest thereof and therein of
the Banks and the Agent.

5.1. DIVIDENDS, VOTING, ETC., PRIOR TO MATURITY. So long as no Event of
Default shall have occurred and be continuing, the Borrower shall be entitled to
receive all cash dividends paid in respect of the Stock, to vote the Stock and
to give consents, waivers and ratifications in respect of the Stock; PROVIDED,
HOWEVER, that no vote shall be cast or consent waiver or ratification given by
the Borrower if the effect thereof would in the reasonable judgment of the Agent
impair any of the Stock Collateral or be inconsistent with or result in any
violation of any of the provisions of the Credit Agreement, the Notes or any of
the other Loan Documents. All such rights of the Borrower to receive cash
dividends shall cease in case a Default or an Event of Default shall have
occurred and be continuing. All

<PAGE>
-5-

such rights of the Borrower to vote and give consents, waivers and ratifications
with respect to the Stock shall, at the Agent's option, as evidenced by the
Agent's notifying the Borrower of such election, cease in case a Default or an
Event of Default shall have occurred and be continuing.

6. REMEDIES.

6.1. IN GENERAL. If an Event of Default shall have occurred and be
continuing, the Agent shall thereafter have the following rights and
remedies (to the extent permitted by applicable law) in addition to the
rights and remedies of a secured party under the Uniform Commercial Code as
in effect in the Commonwealth of Massachusetts, all such rights and
remedies being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently, at such time or times as the Agent deems
expedient:

(a) if the Agent so elects and gives notice of such election to
the Borrower, the Agent may vote any or all shares of the Stock
(whether or not the same shall have been transferred into its name or
the name of its nominee or nominees) for any lawful purpose,
including, without limitation, if the Agent so elects, for the
liquidation of the assets of the issuer thereof, and give all
consents, waivers and ratifications in respect of the Stock and
otherwise act with respect thereto as though it were the outright
owner thereof (the Borrower hereby irrevocably constituting and
appointing the Agent the proxy and attorney-in-fact of the Borrower,
with full power of substitution, to do so);

(b) the Agent may demand, sue for, collect or make any compromise
or settlement the Agent deems suitable in respect of any Stock
Collateral;

(c) the Agent may sell, resell, assign and deliver, or otherwise
dispose of any or all of the Stock Collateral, for cash or credit or
both and upon such terms at such place or places, at such time or
times and to such entities or other persons as the Agent thinks
expedient, all without demand for performance by the BORROWER or any
notice or advertisement whatsoever except as expressly provided herein
or as may otherwise be required by law;

(d) the Agent may cause all or any part of the Stock held by it
to be transferred into its name or the name of its nominee or
nominees; and

(e) the Agent may set off against the Obligations any and all
sums deposited with it or held by it, including without

<PAGE>
-6-

limitation, any sums standing to the credit of the Cash Collateral
Account and any Time Deposits issued by the Agent.

6.2. SALE OF STOCK COLLATERAL. In the event of any disposition of the
Stock Collateral as provided in clause (c) of Section 7.1, the Agent shall
give to the Borrower at least ten (10) Business Days prior written notice
of the time and place of any public sale of the Stock Collateral or of the
time after which any private sale or any other intended disposition is to
be made. The Borrower hereby acknowledges that ten (10) Business Days prior
written notice of such sale or sales shall be reasonable notice. The Agent
may enforce its rights hereunder without any other notice and without
compliance with any other condition precedent now or hereunder imposed by
statute, rule of law or otherwise (all of which are hereby expressly waived
by the Borrower, to the fullest extent permitted by law). The Agent may buy
any part or all of the Stock Collateral at any public sale and if any part
or all of the Stock Collateral is of a type customarily sold in a
recognized market or is of the type which is the subject of
widely-distributed standard price quotations, the Agent may buy at private
sale and may make payments thereof by any means. The Agent may apply the
cash proceeds actually received from any sale or other disposition to the
reasonable expenses of retaking, holding, preparing for sale, selling and
the like, to reasonable attorneys' fees, travel and all other expenses
which may be incurred by the Agent in attempting to collect the Obligations
or to enforce this Agreement or in the prosecution or defense of any action
or proceeding related to the subject matter of this Agreement, and then to
the Obligations in the order set forth in such order or preference as the
Agent may determine after proper allowance for Obligations not then due.
Only after such applications, and after payment by the Agent of any amount
required by Section 9-504(1)(c) of the Uniform Commercial Code as in effect
in the Commonwealth of Massachusetts, need the Agent account to the
Borrower for any surplus.

6.3. REGISTRATION OF STOCK. If the Agent shall determine to exercise
its right to sell any or all of the Stock pursuant to this Section 7, and
if in the opinion of counsel for the Agent it is necessary, or if in the
reasonable opinion of the Agent it is advisable, to have the Stock, or that
portion thereof to be sold, registered under the provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Borrower
agrees to use its best efforts to cause the issuer or issuers of the Stock
contemplated to be sold, to execute and deliver, and cause the directors
and officers of such issuer to execute and deliver, all at the Borrower's
expense, all such instruments and documents, and to do or cause to be done
all such other acts and things as may be necessary or, in the reasonable
opinion of the Agent, advisable to register such Stock under the provisions
of the Securities Act and to cause the registration statement relating
thereto to become effective

<PAGE>
-7-

and to remain effective for a period of 9 months from the date such
registration statement became effective, and to make all amendments thereto
or to the related prospectus or both that, in the reasonable opinion of the
Agent, are necessary or advisable, all in conformity with the requirements
of the Securities Act and the rules and regulations of the Securities and
Exchange Commission applicable thereto. The Borrower agrees to use its best
efforts to cause such issuer or issuers to comply with the provisions of
the securities or "Blue Sky" laws of any jurisdiction which the Agent shall
designate and to cause such issuer or issuers to make available to its
security holders, as soon as practicable, an earnings statement (which need
not be audited) which will satisfy the provisions of Section 11(a) of the
Securities Act.

6.4. PRIVATE SALES. The Borrower recognizes that the Agent may be
unable to effect a public sale of the Stock by reason of certain
prohibitions contained in the Securities Act, federal banking laws, and
other applicable laws, but may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers. The Borrower
agrees that any such private sales may be at prices and other terms less
favorable to the seller than if sold at public sales and that such private
sales shall not by reason thereof be deemed not to have been made in a
commercially reasonable manner. The Agent shall be under no obligation to
delay a sale of any of the Stock for the period of time necessary to permit
the issuer of such securities to register such securities for public sale
under the Securities Act, or such other federal banking or other applicable
laws, even if the issuer would agree to do so. Subject to the foregoing,
the Agent agrees that any sale of the Stock shall be made in a commercially
reasonable manner, and the Borrower agrees to use its best efforts to cause
the issuer or issuers of the Stock contemplated to be sold, to execute and
deliver, and cause the directors and officers of such issuer to execute and
deliver, all at the Borrower's expense, all such instruments and documents,
and to do or cause to be done all such other acts and things as may be
necessary or, in the reasonable opinion of the Agent, advisable to exempt
such Stock from registration under the provisions of the Securities Act,
and to make all amendments to such instruments and documents which, in the
opinion of the Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission applicable thereto. The Borrower further
agrees to use its best efforts to cause such issuer or issuers to comply
with the provisions of the securities or "Blue Sky" laws of any
jurisdiction which the Agent shall designate and, if required, to cause
such issuer or issuers to make available to its security holders, as soon
as practicable, an earnings statement (which need not be audited) which
will satisfy the provisions of Section 11(a) of the Securities Act.

<PAGE>
-8-

6.5. BORROWER'S AGREEMENTS, ETC. The Borrower further agrees to do or
cause to be done all such other acts and things as may be reasonably
necessary to make any sales of any portion or all of the Stock pursuant to
this Section 7 valid and binding and in compliance with any and all
applicable laws (including, without limitation, the Securities Act, the
Securities Exchange Act of 1934, as amended, the rules and regulations of
the Securities and Exchange Commission applicable thereto and all
applicable state securities or "Blue Sky" laws), regulations, orders,
writs, injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction
over any such sale or sales, all at the Borrower's expense. The Borrower
further agrees that a breach of any of the covenants contained in this
Section 7 will cause irreparable injury to the Agent, that the Agent has no
adequate remedy at law in respect of such breach and, as a consequence,
agrees that each and every covenant contained in this Section 7 shall be
specifically enforceable against the Borrower and the Borrower hereby
waives and agrees not to assert any defenses against an action for specific
performance of such covenants.

7. MARSHALLING. The Agent shall not be required to marshal any present or
future security for (including but not limited to this Agreement and the Stock
Collateral), or other assurances of payment of, the Obligations or any of them,
or to resort to such security or other assurances of payment in any particular
order. All of the Agent's rights hereunder and in respect of such security and
other assurances of payment shall be cumulative and in addition to all other
rights, however existing or arising. To the extent that it lawfully may, the
Borrower hereby agrees that it will not invoke any law relating to the
marshalling of collateral that might cause delay in or impede the enforcement of
the Agent's rights under this Agreement or under any other instrument evidencing
any of the Obligations or under which any of the Obligations is outstanding or
by which any of the Obligations is secured or payment thereof is otherwise
assured, and to the extent that it lawfully may the Borrower hereby irrevocably
waives the benefits of all such laws.

8. BORROWER'S OBLIGATIONS NOT AFFECTED. The obligations of the Borrower
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by (i) any exercise or nonexercise, or any waiver, by the Agent of
any right, remedy, power or privilege under or in respect of any of the
Obligations or any security thereof (including this Agreement); (ii) any
amendment to or modification of the Credit Agreement, the Notes, the other Loan
Documents or any of the Obligations; (iii) any amendment to or modification of
any instrument (other than this Agreement) securing any of the Obligations,
including, without limitation, any of the Security Documents; or (iv) the taking
of additional security for, or any other assurances of payment of, any of the
Obligations or the release or discharge or termination of any security or other
assurances of payment or

<PAGE>
-9-

performance for any of the Obligations; whether or not the Borrower shall have
notice or knowledge of any of the foregoing.

9. TRANSFER, ETC., BY BORROWER. Without the prior written consent of the
Agent, the Borrower will not sell, assign, transfer or otherwise dispose of,
grant any option with respect to, or pledge or grant any security interest in or
otherwise encumber or restrict any of the Stock Collateral or any interest
therein, except for the pledge thereof and security interest therein provided
for in this Agreement.

10. FURTHER ASSURANCES. The Borrower will do all such acts, and will
furnish to the Agent all such financing statements, certificates, legal opinions
and other documents and will obtain all such governmental consents and corporate
approvals and will do or cause to be done all such other things as the Agent may
reasonably request from time to time in order to give full effect to this
Agreement and to secure the rights of the Agent hereunder, all without any cost
or expense to the Agent. If the Agent so elects, a photocopy of this Agreement
may at any time and from time to time be filed by the Agent as a financing
statement in any recording office in any jurisdiction.

11. AGENT'S EXONERATION. Under no circumstances shall the Agent be deemed
to assume any responsibility for or obligation or duty with respect to any part
or all of the Stock Collateral of any nature or kind or any matter or
proceedings arising out of or relating thereto, other than (i) to exercise
reasonable care in the physical custody of the Stock Collateral and (ii) after
an Event of Default shall have occurred and be continuing, to act in a
commercially reasonable manner. The Agent shall not be required to take any
action of any kind to collect, preserve or protect its or the Borrower's rights
in the Stock Collateral or against other parties thereto. The Agent's prior
recourse to any part or all of the Stock Collateral shall not constitute a
condition of any demand, suit or proceeding for payment or collection of any of
the Obligations.

12. NO WAIVER, ETC. No act, failure or delay by the Agent shall constitute
a waiver of its rights and remedies hereunder or otherwise. No single or partial
waiver by the Agent of any default or right or remedy that it may have shall
operate as a waiver of any other default, right or remedy or of the same
default, right or remedy on a future occasion. The Borrower hereby waives
presentment, notice of dishonor and protect of all instruments, included in or
evidencing any of the Obligations or the Stock Collateral, and any and all other
notices and demands whatsoever (except as expressly provided herein or in the
Credit Agreement).

13. NOTICE, ETC. All notices, requests and other communications hereunder
shall be made in the manner set forth in, and at the address specified by
reference in Section 20 of the Credit Agreement.

14. TERMINATION. Upon final payment and performance in full of the
Obligations, this Agreement shall terminate and the Agent shall, at the

<PAGE>
-10-

Borrower's request and expense, return such Stock Collateral in the possession
or control of the Agent as has not theretofore been disposed of pursuant to the
provisions hereof, together with any moneys and other property at the time held
by the Agent hereunder.

15. NO WAIVER, OVERDUE AMOUNTS. Neither this Agreement nor any term hereof
may be changed, waived, discharged or terminated except by a written instrument
expressly referring to this Agreement and to the provisions so modified or
limited, and executed by the party to be charged. Until paid, all amounts due
and payable by the Borrower hereunder shall be a debt secured by the Stock
Collateral and shall bear, whether before or after judgment, interest at the
rate of interest for overdue principal set forth in the Credit Agreement.

16. SUCCESSORS AND ASSIGNS. This Agreement and all obligations of the
Borrower shall be binding upon the successors and assigns of the Borrower, and
shall, together with the rights and remedies of the Agent hereunder, inure to
the benefit of the Agent, its successors in title and assigns.

17. GOVERNING LAW. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS AN
INSTRUMENT UNDER SEAL AND THIS AGREEMENT AND THE OBLIGATIONS OF THE BORROWER
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS. The Borrower agrees that any suit for the
enforcement of this Agreement may be brought in the courts of the Commonwealth
of Massachusetts or any federal court sitting therein and consents to the
non-exclusive jurisdiction of such court and to service of process in any such
suit being made upon the Borrower by mail at the address specified in Section 20
of the Credit Agreement. The Borrower hereby waives any objection that it may
now or hereafter have to the venue of any such suit or any such court or that
such suit is brought in an inconvenient court.

18. WAIVER OF JURY TRIAL. THE BORROWER WAIVES ITS RIGHT TO A JURY TRIAL
WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION
WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF
ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Borrower waives
any right which it may have to claim or recover in any litigation referred to in
the preceding sentence any special, exemplary, punitive or consequential damages
or any damages other than, or in addition to, actual damages. The Borrower (i)
certifies that neither the Agent or any Bank nor any representative, agent or
attorney of the Agent or such Bank has represented, expressly or otherwise, that
the Agent or such Bank would not, in the event of litigation, seek to enforce
the foregoing waivers and (ii) acknowledges that, in entering into the Credit
Agreement and the other Loan Documents to which the Agent and the Banks are

<PAGE>
-11-

parties, the Agent is relying upon, among other things, the waivers and
certifications contained in this Section 19.

19. HEADINGS. The descriptive section headings have been inserted for
convenience of reference only and do not define or limit the provisions hereof.

20. SEVERABILITY, ETC. If any term of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
be in no way affected thereby, and this Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein. The Borrower acknowledges receipt of a copy of this Agreement.

[REMAINING PAGE INTENTIONALLY LEFT BLANK]

<PAGE>
-12-

IN WITNESS WHEREOF, intending to be legally bound, the Borrower and the
Agent have caused this Stock Pledge Agreement to be executed as of the date
first above written.

CHARLOTTE RUSSE, INC.

By: /s/ DANIEL T. CARTER
--------------------------------
Title: CFO

BANKBOSTON, N.A., AS AGENT

By: /s/ NANCY E. FULLER
--------------------------------
Title: Director

The undersigned Subsidiaries hereby join in the above Agreement for the
sole purpose of consenting to and being bound by the provisions of Section
Sections 4.1, 6 and 7 thereof, the undersigned hereby agreeing to cooperate
fully and in good faith with the Bank and the Borrower in carrying out such
provisions.

CHARLOTTE RUSSE
MERCHANDISING, INC.

By: /s/ DANIEL T. CARTER
--------------------------------
Title: CFO

CHARLOTTE RUSSE
ADMINISTRATION, INC.

By: /s/ DANIEL T. CARTER
--------------------------------
Title: CFO

<PAGE>

ANNEX A TO PLEDGE AGREEMENT

None of the issuers has any authorized, issued or outstanding shares of its
capital stock of any class or any commitments to issue any shares of its capital
stock of any class or any securities convertible into or exchangeable for any
shares of its capital stock of any class except as otherwise stated in this
ANNEX A.

Number of Number of Number of Par or
Record Class of Authorized Issued Outstanding Liquidation
Issuer Owner Shares Shares Shares Shares Value
------ ------ -------- ---------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Charlotte Russe Charlotte common 1,000 1,000 1,000 $1.00
Merchandising Inc. Russe Inc.

Charlotte Russe Charlotte common 1,000 1,000 1,000 $1.00
Administration, Russe, Inc.
Inc.
</TABLE>

<PAGE>

SECOND AMENDED AND RESTATED GUARANTY

SECOND AMENDED AND RESTATED GUARANTY, dated as of December 23, 1998 (this
"Guaranty"), by CHARLOTTE RUSSE HOLDING, INC., a Delaware corporation (the
"Guarantor") in favor of (a) BANKBOSTON, N.A., a national banking association as
agent (hereinafter, in such capacity, the "Agent") for itself and other lending
institutions (hereinafter, collectively, the "Banks") which are or may become
parties to a Second Amended and Restated Revolving Credit Agreement dated as of
December 23, 1998 (as amended and in effect from time to time, the "Credit
Agreement") among Charlotte Russe, Inc. (the "Borrower"), the Guarantor, the
Banks and the Agent and (b) each of the Banks.

WHEREAS, pursuant to that certain Amended and Restated Guaranty dated as of
December 5, 1997 (as amended and in effect from time to time, the "First
Restated Guaranty", which amended and restated in its entirety the Guaranty
dated as of September 27, 1996), the Guarantor guaranteed the Borrower's
obligations to the Banks under and with respect to the First Restated Credit
Agreement;

WHEREAS, the Guarantor, the Borrower, the Banks and the Agent have entered
into the Credit Agreement to amend and restate in its entirety the First
Restated Credit Agreement;

WHEREAS, it is a condition precedent to the Banks making any loans or
otherwise extending credit to the Borrower under the Credit Agreement that the
Guarantor execute and deliver to the Agent, for the benefit of the Bank and the
Agent, a guaranty substantially in the form hereof; and

WHEREAS, the Guarantor wishes to amend and restate in its entirety the
First Restated Guaranty in order to ratify, confirm and continue its guaranty of
the payment and performance of all of the Obligations (as defined in the Credit
Agreement) pursuant to the terms and conditions set forth herein;

NOW, THEREFORE, the Guarantor hereby agrees with the Banks and the Agent
that the First Restated Guaranty is hereby amended and restated in its entirety
as follows.

<PAGE>

-2-

1. DEFINITIONS. The term "Obligations" and all other capitalized terms used
herein without definition shall have the respective meanings provided therefor
in the Credit Agreement.

2. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantor hereby guarantees to
the Banks and the Agent the full and punctual payment when due (whether at
stated maturity, by required pre-payment, by acceleration or otherwise), as well
as the performance, of all of the Obligations including all such which would
become due but for the operation of the automatic stay pursuant to Section
362(a) of the Federal Bankruptcy Code and the operation of Sections 502(b)
and 506(b) of the Federal Bankruptcy Code. This Guaranty is an absolute,
unconditional and continuing guaranty of the full and punctual payment and
performance of all of the Obligations and not of their collectibility only and
is in no way conditioned upon any requirement that the Agent or any Bank first
attempt to collect any of the Obligations from the Borrower or resort to any
collateral security or other means of obtaining payment. Should the Borrower
default in the payment or performance of any of the Obligations, the obligations
of the Guarantor hereunder with respect to such Obligations in default shall
become immediately due and payable to the Agent, for the benefit of the Banks,
without demand or notice of any nature, all of which are expressly waived by the
Guarantor. Payments by the Guarantor hereunder may be required by the Agent on
any number of occasions.

3. GUARANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC. The Guarantor
further agrees, as the principal obligor and not as a guarantor only, to pay to
the Agent, on demand, all costs and expenses (including court costs and
reasonable legal expenses) incurred or expended by the Agent in connection with
the Obligations, this Guaranty and the enforcement thereof, together with
interest on amounts recoverable under this Section 3 from the time when such
amounts become due until payment, whether before or after judgment, at the rate
of interest for overdue principal set forth in the Credit Agreement, PROVIDED
that if such interest exceeds the maximum amount permitted to be paid under
applicable law, then such interest shall be reduced to such maximum permitted
amount.

4. WAIVERS BY GUARANTOR; AGENT'S FREEDOM TO ACT. The Guarantor agrees that
the Obligations will be paid and performed strictly in accordance with their
respective terms, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent or any Bank with respect thereto. To the fullest extent permitted by law,
the Guarantor waives promptness, diligences, presentment, demand, protest,
notice of acceptance, notice of any Obligations incurred and all other notices
of any kind, all defenses which may be available by virtue of any valuation,
stay, moratorium law or other similar law now or hereafter in effect, any right
to require the marshalling of assets of the Borrower or any other entity or
other person

<PAGE>

-3-

primarily or secondarily liable with respect to any of the Obligations, and all
suretyship defenses generally. Without limiting the generality of the foregoing,
the Guarantor agrees to the provisions of any instrument evidencing, securing or
otherwise executed in connection with any Obligation and agrees that the
obligations of the Guarantor hereunder shall not be released or discharged, in
whole or in part, or otherwise affected by (i) the failure of the Agent or any
Bank to assert any claim or demand or to enforce any right or remedy against the
Borrower or any other entity or other person primarily or secondarily liable
with respect to any of the Obligations; (ii) any extensions, compromise,
refinancing, consolidation or renewals of any Obligation; (iii) any change in
the time, place or manner of payment of any of the Obligations or any
rescissions, waivers, compromise, refinancing, consolidation, amendments or
modifications of any of the terms or provisions of the Credit Agreement, the
Notes, the other Loan Documents or any other agreement evidencing, securing or
otherwise executed in connection with any of the Obligations; (iv) the addition,
substitution or release of any entity or other person primarily or secondarily
liable for any Obligation, (v) the adequacy of any rights which the Agent or any
Bank may have against any collateral security or other means of obtaining
repayment of any of the Obligations; (vi) the impairment of any collateral
securing any of the Obligations, including without limitation the failure to
perfect or preserve any rights which the Agent or any Bank might have in such
collateral security or the substitution, exchange, surrender, release, loss or
destruction of any such collateral security; or (vii) to the fullest extent
permitted by law, any other act or omission which might in any manner or to any
extent vary the risk of the Guarantor or otherwise operate as a release or
discharge of the Guarantor, all of which may be done without notice to the
Guarantor. To the fullest extent permitted by law, the Guarantor hereby
expressly waives any and all rights or defenses arising by reason of (A) any
"one action" or "anti-deficiency" law which would otherwise prevent the Agent or
any Bank from bringing any action, including any claim for a deficiency, or
exercising any other right or remedy (including any right of set-off), against
the Guarantor before or after the Agent's or such Bank's commencement or
completion of any foreclosure action, whether judicially, by exercise of power
of sale or otherwise, or (B) any other law which in any other way would
otherwise require any election of remedies by the Agent or any Bank.

5. UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWER. If for any reason the
Borrower has no legal existence or is under no legal obligation to discharge any
of the Obligations, or if any of the Obligations have become irrecoverable from
the Borrower by reason of such Borrower's insolvency, bankruptcy or
reorganization or by other operation of law or for any other reason, this
Guaranty shall nevertheless be binding on the Guarantor to the same extent as if
the Guarantor at all times had been the principal obligor on all such
Obligations. In the event that acceleration of the time for payment of any of
the Obligations is stayed upon the insolvency, bankruptcy or reorganization of
the Borrower, or for any other reason, all such amounts otherwise subject to
acceleration under the terms of the

<PAGE>

-4-

Credit Agreement, the Notes, the other Loan Documents or any other agreement
evidencing, securing or otherwise executed in connection with any Obligation
shall be immediately due and payable by the Guarantor.

6. SUBROGATION; SUBORDINATION.

6.1. WAIVER OF RIGHTS AGAINST BORROWER. Until the final payment and
performance in full of all of the Obligations and any and all other
obligations of the Borrower to the Agent or any Bank or any affiliate of
the Agent or such Bank, the Guarantor shall not exercise any rights against
the Borrower arising as a result of payment by the Guarantor hereunder, by
way of subrogation, reimbursement, restitution, contribution or otherwise,
and will not prove any claim in competition with the Agent or any Bank or
such affiliate in respect of any payment hereunder in any bankruptcy,
insolvency or reorganization case or proceedings of any nature; the
Guarantor will not claim any setoff, recoupment or counterclaim against the
Borrower in respect of any liability of the Guarantor to the Borrower; and
the Guarantor waives any benefit of and any right to participate in any
collateral security which may be held by the Agent or any Bank or any such
affiliate.

6.2. SUBORDINATION. The payment of any amounts due with respect to any
indebtedness of the Borrower now or hereafter owed to the Guarantor is
hereby subordinated to the prior payment in full of all of the Obligations
and any and all other obligations of the Borrower to the Agent or any Bank
or any affiliate of the Agent or any Bank. The Guarantor agrees that, after
the occurrence of any default in the payment or performance of any of the
Obligations, the Guarantor will not demand, sue for or otherwise attempt to
collect any such indebtedness of the Borrower to the Guarantor until all of
the Obligations shall have been paid in full. If, notwithstanding the
foregoing sentence, the Guarantor shall collect, enforce or receive any
amounts in respect of such indebtedness, such amounts shall be collected,
enforced and received by the Guarantor as trustee for the Banks and the
Agent and be paid over to the Agent, for the benefit of the Banks, on
account of the Obligations without affecting in any manner the liability of
the Guarantor under the other provisions of this Guaranty.

6.3. PROVISIONS SUPPLEMENTAL. The provisions of this Section 6 shall
be supplemental to and not in derogation of any rights and remedies of the
Agent or any Bank or any affiliate of the Agent or any Bank under any
separate subordination agreement which the Agent or any Bank or such
affiliate may at any time and from time to time enter into with the
Guarantor.

7. SECURITY; SETOFF. The Guarantor grants to the Agent, for the benefit of
the Banks, as security for the full and punctual payment and

<PAGE>

-5-

performance of all of the Guarantor's obligations hereunder, a continuing lien
on and security interest in all securities or other property belonging to the
Guarantor now or hereafter held by the Banks and the Agent and in all deposits
(general or special, time or demand, provisional or final) and other sums
credited by or due from the Banks and the Agent to the Guarantor or subject to
withdrawal by the Guarantor. Regardless of the adequacy of any collateral
security or other means of obtaining payment of any of the Obligations, the
Agent is hereby authorized at any time and from time to time, when an Event of
Default has occurred and is continuing, without notice to the Guarantor (any
such notice being expressly waived by the Guarantor) and to the fullest extent
permitted by law, to set off and apply such deposits and other sums against the
obligations of the Guarantor under this Guaranty, whether or not the Agent shall
have made any demand under this Guaranty and although such obligations may be
contingent or unmatured.

8. FURTHER ASSURANCES. The Guarantor agrees to do all such things and
execute all such documents as the Agent may consider necessary or desirable to
give full effect to this Guaranty and to perfect and preserve the rights and
powers of the Banks and the Agent hereunder. The Guarantor acknowledges and
confirms that the Guarantor itself has established its own adequate means of
obtaining from the Borrower on a continuing basis all information desired by the
Guarantor concerning the financial condition of the Borrower and that the
Guarantor will look to the Borrower and not to the Agent or any Bank in order
for the Guarantor to keep adequately informed of changes in the Borrower'
financial condition.

9. REINSTATEMENT. After the termination of this Guaranty, this Guaranty
shall continue to be effective or be reinstated if at any time any payment made
or value received with respect to any Obligation is rescinded or must otherwise
be returned by the Agent or any Bank upon the insolvency, bankruptcy or
reorganization of any of the Borrower, or otherwise, all as though such payment
had not been made or value received.

10. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantor, its successors and assigns, and shall inure to the benefit of and be
enforceable by the Agent and the Banks and their successors, transferees and
assigns. Without limiting the generality of the foregoing sentence and except as
limited by the Credit Agreement, the Agent or any Bank may assign or otherwise
transfer the Credit Agreement, the Notes, the other Loan Documents or any other
agreement or note held by it evidencing, securing or otherwise executed in
connection with the Obligations, or sell participations in any interest therein,
to any other entity or other person, and such other entity or other person shall
thereupon become vested, to the extent set forth in the agreement evidencing
such assignment, transfer or participation, with all the rights in respect
thereof granted to the Agent or such Bank herein.

<PAGE>

-6-

11. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this
Guaranty nor consent to any departure by the Guarantor therefrom shall be
effective unless the same shall be in writing and signed by the Agent. No
failure on the part of the Agent or any Bank to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.

12. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
by United States registered or certified first class, postage prepaid, or sent
by overnight courier, or if sent by telecopy or telefax, when such telecopy or
telefax is transmitted to the appropriate telecopy or telefax number and
telephonic confirmation of receipt thereof is obtained, addressed as follows: if
to the Guarantor, at the address set forth beneath its signature hereto, and if
to the Banks, at the address for notices to the Agent specified by reference in
Section 20 of the Credit Agreement, or at such address as either party may
designate in writing to the other.

13. GOVERNING LAW; CONSENT TO JURISDICTION. THIS GUARANTY IS INTENDED TO
TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. The Guarantor
agrees that any suit for the enforcement of this Guaranty may be brought in the
courts of the Commonwealth of Massachusetts or any federal court sitting therein
and consents to the nonexclusive jurisdiction of such court and to service of
process in any such suit being made upon the Guarantor by mail at the address
specified by reference in Section 12. The Guarantor hereby waives any objection
that it may now or hereafter have to the venue of any such suit or any such
court or that such suit was brought in an inconvenient court.

14. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY
TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
the Guarantor hereby waives any right which it may have to claim or recover in
any litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in addition to,
actual damages. The Guarantor (i) certifies that neither the Agent or any Bank
nor any representative, agent or attorney of the Agent or such Bank has
represented, expressly or otherwise, that the Agent or such Bank would not, in
the event of litigation, seek to enforce the foregoing waivers and (ii)
acknowledges that, in entering into the Credit Agreement and the other Loan
Documents to which the Banks and

<PAGE>

-7-

the Agent are parties, the Banks and the Agent is relying upon, among other
things, the waivers and certifications contained in this Section 14.

15. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the
Guarantor with respect to the matters set forth herein. The rights and remedies
herein provided are cumulative and not exclusive of any remedies provided by law
or any other agreement, and this Guaranty shall be in addition to any other
guaranty of or collateral security for any of the Obligations. The invalidity or
unenforceability of any one or more sections of this Guaranty shall not affect
the validity or enforceability of its remaining provisions. Captions are for the
ease of reference only and shall not affect the meaning of the relevant
provisions. The meanings of all defined terms used in this Guaranty shall be
equally applicable to the singular and plural forms of the terms defined.

16. TRANSITIONAL ARRANGEMENTS. This Guaranty shall supersede the First
Restated Guaranty in its entirety on and as of the Closing Date. On the Closing
Date, the rights and obligations of the parties under the First Restated
Guaranty shall be subsumed within and governed by this Guaranty; PROVIDED, that
the provisions of the First Restated Guaranty shall remain in full force and
effect prior to the Closing Date.

<PAGE>

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IN WITNESS WHEREOF, the Guarantor has caused this Second Amended and
Restated Guaranty to be executed and delivered as of the date first above
written.

CHARLOTTE RUSSE HOLDING, INC.

By: /s/ DANIEL T. CARTER
-------------------------------
Title: CFO

Address:

4645 Morena Boulevard
San Diego, California 92117
Telecopy: 619-587-0619

<PAGE>

AGENCY ACCOUNT AGREEMENT

CHARLOTTE RUSSE, INC.
1515 Shoreham Place
San Diego, CA 92122
Tel: (619) 587-9900
Fax: (619) 587-0619

December 5, 1997

[Agency Account Institution]
[Address]

Re: Account No. 14508-02607

Ladies and Gentlemen:

This letter refers to Account No. and all other accounts (collectively,
the "Store Account") which [Name of Borrower] (the "Company") maintains with
you ("you" or the "Bank").

BankBoston, N.A.
Account #________________
ABA 0 11000930

1
<PAGE>

Re: Charlotte Russe, Inc.
Attn: Terese A. McLaughlin, Large Corporate

2
<PAGE>

subject matter hereof, and may not be modified without the prior written
consent of each of the parties hereto.

3
<PAGE>

Very truly yours,

CHARLOTTE RUSSE, INC.

By: /s/ LON GILBERT
------------------------------
Name: Lon R. Gilbert
Title: Chief Financial Officer
Address: 5015 Shoreham Place
San Diego, CA 92122

Telephone:
Telecopier:
Attention:

BANKBOSTON, N.A., AS THE AGENT

By: /s/ DEBRA ZURKA
------------------------------
Name: Debra Zurka
Address: 100 Federal Street
Boston, MA 02110
Telephone: (617) 434-2683
Telecopier: (617) 434-6685
Attention: Terese A. McLaughlin

Acknowledged and agreed to this
3rd day of December, 1997

[NAME OF BANK]

By: /s/ KARIN BARNES
---------------------------
Name: Karin S. Barnes
Title: Vice President
Address: 450 B Street
Mezzaine Level
San Diego, CA 92101

Telephone: (619) 515-7507
Telecopier: (619) 515-7524
Attention: Karin S. Barnes

<PAGE>

EMPLOYMENT AGREEMENT

ARTICLE 1
GENERAL PROVISIONS

Section 1.01 EMPLOYMENT AGREEMENT. This Employment Agreement
("Agreement") is entered into as of the first day of October, 1996 by and
between Lawrence Merchandising Corporation dba Charlotte Russe, a California
Corporation ("Company"), and Mr. Bernard Zeichner ("Mr. Zeichner").

ARTICLE 2
POSITION AND DUTIES

Section 2.01 POSITION. Company shall employ Mr. Zeichner as its
President and Chief Executive Officer. During the term of his employment by
the Company, Mr. Zeichner shall also serve as a member of the Company's Board
of Directors (the "Board") and as a member of the Board of Directors (the
"Parent Board") of Charlotte Russe Holding, Inc. ("Parent").

Section 2.02 DUTIES. Mr. Zeichner shall have such authority and duties
which are customary for the position of a President and Chief Executive
Officer and shall perform such executive-level duties as may be assigned to
him by Company or its Board of Directors which reasonably serve the purpose
of this Agreement and/or meet the needs of Company and its affiliates. Mr.
Zeichner shall be based in San Diego at Company's headquarters and shall
report only to the Board and Directors of the Company. All other officers
and employees of the Company shall report directly or indirectly to Mr.
Zeichner.

Section 2.03 FULL ATTENTION TO BUSINESS. During said employment,
except for sick leave, reasonable vacations and excused leaves of absence,
Mr. Zeichner shall devote his full business time energies, interest,
abilities and productive efforts to the business of the Company and its
affiliates and shall not, without the Company's written consent, render any
kind of services to others for compensation and, in addition, shall not
engage in any activity which conflicts or interferes with the performance of
Mr. Zeichner's duties hereunder.

Section 2.04 COVENANTS NOT TO COMPETE DURING TERM. During the term of
this Agreement, Mr. Zeichner shall not participate in any capacity in any
business competing with the Company or any of its affiliates.

ARTICLE 3
TERM OF EMPLOYMENT

Section 3.01 TERM. Subject to earlier termination as provided in this
Agreement, Mr. Zeichner shall be employed commencing on the date first
mentioned above and ending on the third anniversary of such date (the
"Term"). Neither party is under any obligation to renew or

<PAGE>

extend this Agreement. Any new employment agreement shall only be effective
after having been reduced to writing and executed by both parties hereto. In
the absence of earlier termination as provided herein, this Agreement shall
terminate atomically on the third anniversary of such date. In the event Mr.
Zeichner continues to perform services after this Agreement has terminated,
and pending execution of a new employment agreement, if any, such services
shall constitute employment for an unspecified term, terminable at will, with
or without cause or reason, with or without advance notice, and with or
without pay in lieu of advance notice.

ARTICLE 4
COMPENSATION

Section 4.01 SALARY. Company shall pay Mr. Zeichner an annualized base
salary of $275,000, to be paid in accordance with Company's pay policy.

Section 4.02 STOCK OPTIONS. Mr. Zeichner shall be granted options under
the Charlotte Russe Holding, Inc. 1996 Long-Term Incentive Plan(the "Parent
Plan"), to purchase 3.5% of the Company's common stock, on a primary basis, at
an exercise price of $100 per share. Mr. Zeichner shall also be granted
additional options under the Parent Plan to purchase 1.5% of the Company's
common stock, on a primary basis, at an exercise price of $200 per share. Such
options shall have a term of 10 years. Such options shall vest in five equal
annual installments commencing on the first anniversary on the date hereof,
provided, however that 75% of any invested options shall become vested if at the
time of a registered underwritten initial public offering of the Parent's common
stock or for any 25 consecutive trading day period thereafter the fair market
value of the Parent's common stock held by the Parent's controlling shareholder
exceeds $250 per shares, as adjusted to take into account any event referred to
in Section4(b) of the Parent Plan. For purposes of this Section 4.02, the fair
market value of a share of the Parent's common stock shall be: (i) the closing
price of a share of the Parent's common stock on the principal exchange on which
shares of the Parent's common stock are then trading, if any, or (ii) if such
common stock is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, (1) the sales price (if the Parent's common stock is then
listed as a National Market Issue under the NASD National Market System) or(2)
the mean between the closing representative bid and asked prices (in all other
cases) for the Parent's common stock as reported by NASDAQ or such successor
quotation system.

Section 4.03 PERFORMANCE BONUS. For work performed during each of fiscal
year 1997, 1998 and 1999 (ending September 30, 1997, 1998 and 1999,
respectively), Mr. Zeichner shall be eligible for a bonus based upon achievement
of budgeted annual performance goals established by the Board, in which
deliberations Mr. Zeichner shall be entitled to participate as a member thereof.
Mr. Zeichner's bonus opportunity shall range from 0% to 100% of his base salary,
with 35% of base salary payable upon attainment of 100% of the budgeted
performance goals.

Section 4.04 PERFORMANCE BONUS CONDITIONS. The Performance Bonus shall be
paid by check no later than 75 days following fiscal year end. Mr. Zeichner
must be actively employed

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<PAGE>

as of fiscal year end to be eligible for this bonus. If Mr. Zeichner quits or
is fired "for cause" as herein defined in Section 6.04, there shall be no
bonus to Mr. Zeichner in respect of the year of such termination. If Mr.
Zeichner is terminated prior to fiscal year end without cause or by reason of
Mr. Zeichner's disability or death or if Mr. Zeichner terminates his
employment for "good reason", Mr. Zeichner shall receive a pro-rata bonus
based on actual performance, to be figured by pro-rating any bonus that would
have been paid for the full fiscal year on a daily basis, to the date of
termination.

Section 4.05 HEALTH INSURANCE. Mr. Zeichner and his family shall be
entitled to participate in any Company-provided group medical, vision or
dental insurance plans. Company shall pay the entire cost of premiums for
the group medical insurance. Mr. Zeichner may elect to purchase coverage for
himself and his family for vision care and dental insurance.

Section 4.06 AUTO PRIVILEGES. Mr. Zeichner shall be entitled to the
use of an automobile leased by the Company.

Section 4.07 VACATION. Mr. Zeichner shall be entitled to the use of an
automobile leased by the Company.

Section 4.08 VACATION. Mr. Zeichner shall be entitled to two weeks of
paid vacation per year.

Section 4.09 REIMBURSEMENT OF LEGAL FEES. Mr. Zeichner shall receive
reimbursement for reasonable attorney fees incurred in connection with this
employment agreement and the Securityholders Rights Agreement. Mr. Zeichner
shall submit to Company the legal bills for reimbursement.

Section 4.10 BUSINESS EXPENSE REIMBURSEMENT. The Company shall reimburse
Mr. Zeichner for all reasonable business expenses incurred and documented
pursuant to the Company's expense reimbursement policies and practices.

Section 4.11 LIABILITY INSURANCE AND INDEMNIFICATION. Mr. Zeichner
shall be added as an additional named insured under all liability insurance
policies now in force or hereafter obtained covering any officer or director
of the Company or Parent in his or her capacity as an officer or director.
The Company and Parent shall also indemnify Mr. Zeichner in his capacity as
an officer or director and hold him harmless from any cost, expense or
liability arising out of or relating to any act or decisions made by him on
behalf of or in the course of performing services for the Company and Parent
to the fullest extent permitted by California law to the same extent as
provided to other officers or directors of the Company and Parent.

ARTICLE 5
UNFAIR COMPETITION

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<PAGE>

Section 5.01 CONFLICT OF INTEREST. The Company relies on the integrity
and good judgment of all employees to observe ethical, professional and legal
standards, and good business practices, in the conduct of the Company's
business. In keeping with ethical business practice, it is critical that Mr.
Zeichner refrain from activities which conflict with the best interest of the
Company.

Section 5.02 COVENANT NOT TO MISUSE INFORMATION. Mr. Zeichner agrees to
execute and abide by the Trade Secret and Confidentiality Agreement set forth in
Exhibit "A", which is incorporated herein by reference and made a part hereof.
Mr. Zeichner's compliance with the terms of Exhibit "A" is a material
requirement of this Agreement.

ARTICLE 6
TERMINATION OR RESIGNATION

Section 6.01 TERMINATION WITHOUT CAUSE. The Company may terminate this
Agreement at any time, without notice, without cause. In such an event, Company
shall comply with the severance compensation provisions set forth in Sections
6.02 and 6.03.

Section 6.02 TERMINATION WITHOUT CAUSE SEVERANCE COMPENSATION. In the
event Mr. Zeichner's employment is terminated by the Company without cause, he
shall be entitled to severance equal to 100% of his annual base salary payable
as set forth in Section 6.03. If Mr. Zeichner breaches any of his obligations
hereunder including, without limitation, Exhibit A hereto, the company shall be
relieved of any obligation hereunder to make severance payments to Mr. Zeichner.

No Severance shall be payable hereunder in the event Mr. Zeichner
resigns his employment other than for "good reason" as provided in Section 6.08
or is terminated for "cause", as herein defined under Section 6.04.

From date of notification by the Company that it has elected to
terminate his employment, Mr. Zeichner will be free to discuss a position
with other prospective employers. Mr. Zeichner may continue with current
title and responsibilities after the termination notice date, upon mutual
consent of Company and Mr. Zeichner. During the period after notification,
but prior to leaving Company, Mr. Zeichner will be entitled to all
compensation and employee benefits under Section 4 of this Agreement until
the actual termination. Mr. Zeichner's severance benefits hereunder shall
not be offset by any income or earnings from any other employment he may
obtain and Mr. Zeichner shall be under no duty to mitigate the Company's
damages under this Agreement by obtaining or attempting to obtain successor
employment

Section 6.03 SEVERANCE DISTRIBUTION. The severance compensation
payable to Mr. Zeichner under Section 6.02 of this Agreement will be paid to
Mr. Zeichner on a monthly basis, less required payroll taxes. Company shall
be entitled to cease making any severance

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<PAGE>

compensation payments required under this Agreement in the event Mr. Zeichner
breaches any provision of this Agreement or Exhibit "A".

Section 6.04 TERMINATION FOR CAUSE. The Company may terminate this
Agreement at any time, without notice, for cause. In such an event, no
severance compensation whatsoever shall be paid to Mr. Zeichner. For the
purposes of this Agreement, termination for cause shall mean that Mr. Zeichner
was terminated because of: (i) Mr. Zeichner's wilful breach of duty, gross
neglect of duty, gross carelessness or gross misconduct in the performance of
Mr. Zeichner's duties; (ii) Mr. Zeichner's conviction of a crime involving moral
turpitude; (iii) Mr. Zeichner's commission of any act of dishonesty involving
the Company; (iv) Mr. Zeichner's unauthorized disclosure of material privileged
or confidential information related to the Company or its employees except as
may be compelled by legal process or court order or the violation of any
provision of Exhibit "A"; (v) Mr. Zeichner's commission of some wilful act or
omission which violates material Company policy, procedures, or otherwise
constitutes unethical or detrimental business conduct; or (vi) any other willful
act or omission by Mr. Zeichner which, in the reasonable good faith opinion of
the Company has, or is reasonably likely to have, a material adverse impact upon
the Company or its reputation, PROVIDED, HOWEVER, that with regard to clauses
(i), (v) and (vi) above, Mr. Zeichner's employment may not be terminated for
cause unless and until the Board has given him reasonable written notice of its
intended actions and specifically describing the alleged events, activities or
omissions giving rise thereto and with respect to those events, activities or
omissions for which a cure is possible, a reasonable opportunity to cure such
breach. In the event that this Agreement is terminated for cause pursuant to
this Section, neither the Company nor Mr. Zeichner shall have any remaining
duties or obligations hereunder except as set forth in Section 6.07 or Exhibit A
hereto, and the Company shall pay to Mr. Zeichner, or his estate, Mr. Zeichner's
base salary pursuant to Section 4.01, prorated through the date of termination
of this Agreement, and any performance bonus earned for prior pursuant to
Section 4.03 and unpaid as of the date of such termination.

Section 6.05 AUTOMATIC TERMINATION. (a) This Agreement shall
automatically terminate on the expiration of the Term of the Agreement,
unless the parties expressly agree in writing to renew the Agreement as set
forth in Section 3.01. No severance compensation whatsoever shall be paid to
Mr. Zeichner under Section 6.02 in the event of a termination pursuant to
this Section 6.05(a).

(b) In the event that Mr. Zeichner's employment with the Company is
terminated by reason of his death or disability, the Company shall continue to
pay his base salary to him (or to his beneficiary, in the event of his death)
for 12 months.

Section 6.06 RESIGNATION. Mr. Zeichner may terminate this Agreement by
giving the Company written notice of resignation thirty (30) days in advance of
the date of resignation, Company may, at its sole discretion, upon receiving
such notice of resignation, waive any or all of Mr. Zeichner's 30 days' notice
period. No severance compensation whatsoever shall be paid to

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<PAGE>

Mr. Zeichner under Section 6.02 or otherwise in the event of a termination
pursuant to this Section.

Section 6.07 TERMINATION FOR GOOD REASON. Mr. Zeichner may, at any time,
terminate his employment with the Company for "good reason" (as defined below).
In such event the Company shall pay Mr. Zeichner severance compensation as if
the Company had terminated Mr. Zeichner's employment without "cause" under
Section 6.02. For purposes of this Agreement, "good reason" shall mean, without
the express written consent of Mr. Zeichner, the occurrence of any of the
following events unless such events are fully corrected within 30 days following
notification by Mr. Zeichner to the Company that he intends to terminate his
employment hereunder: (i) a material alteration, reduction or diminution in the
duties, responsibilities and status of Mr. Zeichner's position as described in
Article 2 of this Agreement, (ii) the Company's requiring Mr. Zeichner to be
based anywhere other than at the Company's headquarters, or anywhere outside of
the San Diego metropolitan area, or (iii) a material breach by the Company of
Article 4 of this Agreement or of any material provision of the Shareholders
Agreement (as defined in the Parent Plan).

Section 6.08 TERMINATION OBLIGATIONS: RETURN OF COMPANY PROPERTY. Mr.
Zeichner hereby acknowledges and agrees that all property of the Company or any
affiliate thereof in possession of Mr. Zeichner, including without limitation,
all books, manuals, files, financial statements, computer disks, contracts,
lists (including without limitation, customer lists, price lists and/or pricing
schedules, lists or summaries of the Company's or any affiliate's costs, lists
of Company's or any affiliate's vendors or suppliers), and other documents of
any kind, proprietary information, and equipment furnished to or prepared by Mr.
Zeichner in the course of, or incident to, his employment belong exclusively to
the Company or its affiliates, as the case may be, and shall be promptly
returned to the Company or its affiliates, as the case may be, upon termination
of Mr. Zeichner's employment for any reason. The obligations contained in this
paragraph shall survive the termination of Mr. Zeichner's employment for any
reason whatsoever.

ARTICLE 7

MISCELLANEOUS PROVISIONS

Section 7.01 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties and supersedes all prior oral and written
Agreements, understandings, commitments, and practices between the parties.
Other than as expressly set forth herein, Mr. Zeichner and Company acknowledge
and represent that there are no other promises, terms, conditions or
representations (verbal or written) regarding any matter relevant hereto. No
supplement, modification, or amendment of any term, provision or condition of
this Agreement shall be binding or enforceable unless evidenced in writing and
executed by the parties hereto.

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<PAGE>

Section 7.02 CALIFORNIA LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, and the venue
of any litigation commenced hereunder shall be San Diego, California.

Section 7.03 PARTIAL INVALIDITY. If the application of any provision of
this Agreement and Exhibit A hereto, or any section, subsection, subdivision,
sentence, clause, phrase, word or portion of this Agreement and Exhibit A hereto
should be held invalid or unenforceable, the remaining provisions thereof shall
not be affected thereby, but shall continue to be given full force and effect as
if the part so held invalid or unenforceable had not been included herein.

Section 7.04 NOTICES. Notices given under this Agreement may be given by
registered or certified mail, return receipt requested, or by personal delivery.
A mailed notice shall be deemed given two (2) business days after mailing.

Section 7.05 MR. ZEICHNER ACKNOWLEDGMENT. Mr. Zeichner acknowledges that
he has read and understands this Agreement, is fully aware of its legal effect,
has not acted in reliance upon any representations or promised made by Company
other than those contained in writing herein, and has entered into an Agreement
freely based on his own judgment.

Section 7.06 OTHER REMEDIES. Nothing in this Agreement shall limit any
remedy of Company under the California Uniform Trade Secrets Act (California
Civil Code Section 3426 et seq.) or otherwise available under law.

Section 7.07 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.

Section 7.08 NO ASSIGNMENT. This Assignment may not be assigned or
encumbered in any way by Mr. Zeichner. The Company may assign this Agreement to
any successor (whether by merger, consolidation, or purchase of the Company's
stock) to all or a controlling interest in the Company's business, in which case
this Agreement shall be binding upon and inure to the benefit of such successors
and assigns.

Section 7.09 NO SOLICITATION OF EMPLOYEES. Mr. Zeichner specifically
agrees that during the term of this Agreement and for a period of two 92) years
thereafter, Mr. Zeichner shall not, directly or indirectly, either for himself
or for any other person, firm, corporation or legal entity, solicit any then
employee of Company or any affiliate thereof to leave the employment of Company
or any such affiliate.

Section 7.10 LIMITATION ON WAIVER. A waiver of any term, provision or
condition of this Agreement shall not be deemed to be, or constitute a waiver of
any other term, provision or condition herein, whether or not similar. No
waiver shall be binding unless in writing and signed by the waiving party.

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<PAGE>

Section 7.11 ATTORNEYS' FEES. In the event that any proceeding is
commenced involving the interpretation or enforcement of the provisions of this
Agreement, the Party prevailing in such proceeding shall be entitled to recover
its costs and reasonable attorneys' fees from the non-prevailing party.

IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement on the dates set forth below:

Bernard Zeichner LAWRENCE MERCHANDISING
CORPORATION dba
CHARLOTTE RUSSE

By: /s/ BERNARD ZEICHNER /s/ ALAN KARP
-------------------------- --------------------------------
Its Authorized Agent

Dated: October 7, 1996 Dated: October 7, 1996
----------------------- -------------------------

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<PAGE>

TRADE SECRET AND CONFIDENTIALITY AGREEMENT

1. Bernard Zeichner (hereinafter "Mr. Zeichner") hereby enters into this Trade
Secret and Confidentiality Agreement ("Agreement") with Lawrence
Merchandising Corporation dba Charlotte Russe (hereinafter "Company").
This Agreement sets forth the obligations of Mr. Zeichner concerning
Mr. Zeichner's use of trade secrets and confidential information acquired
in the course of Mr. Zeichner's employment with the Company. This
Agreement shall constitute Exhibit "A" to the Employment Agreement dated as
of October 1, 1996 between Mr. Zeichner and Company.

2. CONFIDENTIAL INFORMATION

a. The parties agree that, during the term of employment, Mr. Zeichner
will have access to and become acquainted with various trade secrets
and confidential information of Company and its affiliates, consisting
of documents, files, computer programs and databases, processes,
techniques, patterns, procedures, and related documentation,
compilations of information, records and specifications including but
not limited to:

i. BUSINESS INFORMATION, such as (but not limited to) the Company's
and its affiliates' present and future business practices, or
techniques, patent information and applications, leases,
contracts, and business plans; and

ii. FINANCIAL INFORMATION, such as (but not limited to) the Company's
and its affiliates' earnings, sales, assets, debts, prices,
pricing structure, margins, volume/quantities of purchases or
sales, or other financial data; and

iii. SUPPLY INFORMATION, such as (but not limited to) confidential
information relating to reliable or key supplier's and/or
vendor's names or addresses including contact persons, terms of
supply and/or vendor contracts or particular transactions,
potential suppliers and/or vendors, or other related data that is
not publicly available to other persons who may be engaged in the
same business as the Company; and MARKETING INFORMATION, such as
(but not limited to) prior, ongoing or proposed marketing
programs, presentations or agreements by or on behalf of the
Company and its affiliates, pricing information, customer bonus
programs, prior or existing contracts terms, marketing tests
and/or results of marketing efforts; and

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<PAGE>

iv. PERSONNEL INFORMATION, such as (but not limited to) employees'
personal or medical histories, compensation, employee incentive
programs or other terms of employment, actual or proposed
promotions, hirings, resignations, terminations or reasons
therefor, training methods, or other personnel information; and

v. CUSTOMER INFORMATION, such as (but not limited to) past, existing
or prospective customers' names, addresses or backgrounds,
customer specifications and requirements, volumes of purchase,
prices that particular or various customers are charged or pay
for services, proposals or agreements between customers and the
Company or its affiliates, status of customers' accounts, or
other information about actual or prospective customers; and

vi. CUSTOMER TRADE SECRETS, such as (but not limited to) proprietary
information of the Company's or its affiliates' customers
provided to the Company or its affiliates for the sole and
exclusive purpose of permitting the Company or its affiliates to
market or provide products or services to such customers or
prospective customers.

For purposes of this Agreement, the trade secrets and confidential
information referred to in this Paragraph 2 hereafter shall be collectively
referred to as "Confidential Information."

b. PRIOR EMPLOYMENT. Mr. Zeichner acknowledges and understands that if
Mr. Zeichner obtained any proprietary knowledge, inventions, or other
trade secret information from a former employer, Mr. Zeichner is
prohibited from using such trade secret information during the course
and scope of Mr. Zeichner's employment unless: (i) Mr. Zeichner has
obtained written consent from the former employer to do so; and
(ii) Mr. Zeichner has fully disclosed such written consent to Company.
Mr. Zeichner further agrees that Mr. Zeichner shall indemnify the
Company against all claims for Mr. Zeichner's use of any trade secret
information obtained from a former employer.

3. USE OF COMMON PROPERTY

a. Mr. Zeichner acknowledges that all files, records, information,
documents, computerized records (including customer profiles and
databases), drawings, specifications, formulae, equipment and similar
items relating to the business of Company, its affiliates and/or its
customers, whether or not prepared by Mr. Zeichner and whether or not
they constitute Confidential Information: (i) are and shall remain
the exclusive property of the Company or its affiliates; and (ii)
shall not be removed from the premises of the Company or any affiliate
thereof except to the extent such removal is temporary and for the
sole and exclusive purpose of

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<PAGE>

permitting Mr. Zeichner to perform his duties under the Employment
Agreement, unless approved in writing by the Company.

b. All such books, information, records or documents mentioned in
Paragraph 3(a) above shall be immediately returned to Company by
Mr. Zeichner upon the Company's request or upon termination of
Mr. Zeichner's employment relationship with Company.

4. MISAPPROPRIATION OF CONFIDENTIAL INFORMATION; UNFAIR COMPETITION

a. Mr. Zeichner acknowledges that any unauthorized possession,
communication, or use of Confidential Information would enable
Mr. Zeichner (or any third party to whom Mr. Zeichner might
disseminate the Confidential Information) to unfairly compete with the
Company or any affiliate thereof, by using the Confidential
Information to its/their advantage.

b. Mr. Zeichner covenants and agrees that Mr. Zeichner will keep all
Confidential Information absolutely confidential and divulge said
Confidential Information only to those other executives of the Company
or any affiliate thereof who absolutely require the information in
order to perform duties on behalf of the Company or any affiliate
thereof. Mr. Zeichner further promises and agrees that Mr. Zeichner
shall not misuse, misappropriate or disclose Confidential Information,
directly or indirectly, or use it in any way, either during the term
of employment or thereafter, except as required in connection with
Mr. Zeichner's duties on behalf of the Company or any affiliate
thereof.

5. NON-COMPETITION

a. During the employment term, Mr. Zeichner shall not, directly or
indirectly, either as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director, or in
any other individual or representative capacity, engage or participate
in any business that is in competition or related in any manner
whatsoever with the business of the Company or any affiliate thereof,
PROVIDED, HOWEVER, that the "beneficial ownership" by Mr. Zeichner,
either individually or as a member of a "group," as such terms are
used in Rule 13d of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), of
not more than two percent (2%) of the voting stock of any
publicly-held corporation shall not be a violation of this Agreement.
This restriction includes engaging in any preparatory activities
respecting the commencement of any business competitive with or
related to the business of the Company or any affiliate thereof.
Mr. Zeichner must obtain the advance written approval of the Company
prior to engaging in such employment.

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<PAGE>

b. During the employment term or upon termination of employment,
Mr. Zeichner agrees not to reveal or use Confidential Information.
Prior to accepting any employment after leaving the Employment of
Company, Mr. Zeichner shall, during the two (2) year period following
such termination of employment, inform any prospective or actual
subsequent employer of the requirements imposed upon him under this
Agreement.

6. NON-SOLICITATION

During employment, and for a period of two (2) years following
termination of employment with Company, Mr. Zeichner covenants and agrees
that Mr. Zeichner shall not induce, solicit or attempt to induce or solicit
any Company employee to discontinue working for Company or any affiliate
thereof, whether for the purpose of working for any competitor of Company or
any affiliate thereof or otherwise.

7. MISCELLANEOUS

a. Mr. Zeichner hereby acknowledges and agrees that any actual or
threatened violation of this Agreement will cause Company immediate
and irreparable harm which cannot be adequately remedied with monetary
damages alone. Accordingly, upon any actual or threatened violation
of this Agreement, Mr. Zeichner agrees that the Company or any
affiliate thereof shall be entitled to, and Mr. Zeichner hereby
consents to the immediate issuance of a temporary restraining order,
preliminary and/or permanent injunction, without bond, to prevent
Mr. Zeichner or any entity or person acting in concert with
Mr. Zeichner, from revealing or otherwise utilizing Confidential
Information. Such restraining order and/or injunction shall be in
addition to any other rights and/or remedies the Company or any
affiliate thereof may have.

b. This Agreement has been entered into in the State of California, and
it is expressly contemplated by the parties and agreed upon by them
that the interpretation and enforcement hereof shall be governed by
the substantive and procedural laws of the State of California.

c. In the event that any proceeding is commenced involving the
interpretation or enforcement of the provisions of this Agreement, the
party prevailing in such proceeding shall be entitled to recover its
reasonable costs and attorneys' fees.

d. The failure of the Company or any affiliate thereof to exercise any
right or remedy upon any breach or default with respect to any of the
terms of this Agreement, or delay by the Company or any affiliate
thereof in exercising any such right or remedy, shall not operate as a
waiver, and no waiver of any type or amendment of

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<PAGE>

this agreement shall be binding upon the Company or any affiliate
thereof unless evidenced by a writing signed on behalf of the Company
or any affiliate thereof.

e. If the application of any provision of this Agreement, or any action,
subsection, subdivision, sentence, clause, phrase, word or portion of
this Agreement should be held invalid or unenforceable, the remaining
provisions thereof shall not be effected thereby, but shall continue
to be given full force and effect as if the part so held invalid or
unenforceable had not been included herein.

f. This instrument constitutes the entire Agreement of the parties hereto
with respect to its subject matter, and supersedes any other express
or implied oral and written agreements between the parties. Other
than as expressly set forth herein, the parties expressly acknowledge
that there are no other promises, terms, conditions, or
representations (verbal or written) regarding any matter covered by
this Agreement. This Agreement shall not be modified, extended or
supplemented in any manner, except by subsequent written contract
signed by both Mr. Zeichner and the Company.

8. The parties acknowledge that they have read and understood the terms and
conditions of this Agreement, and that they agree and intend to abide by
them.

Dated: October 7, 1996 LAWRENCE MERCHANDISING CORPORATION
dba CHARLOTTE RUSSE

By /s/ ALAN KARP
-------------------------------------

Dated: October 7, 1996 /s/ BERNARD ZEICHNER
-------------------------------------
Mr. Zeichner's Signature

Bernard Zeichner
-------------------------------------
Mr. Zeichner's Name (Please Print)

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EXHIBIT 10.12

CHARLOTTE RUSSE HOLDINGS, INC.

1999 LONG-TERM INCENTIVE PLAN

SECTION 1. PURPOSE. The purposes of the Charlotte Russe Holding, Inc.
1999 Long-Term Incentive Plan are to promote the interests of Charlotte Russe
Holding, Inc., a Delaware Corporation (the "COMPANY"), and its stockholders
by (i) attracting and retaining exceptional executive personnel and other key
employees and consultants and directors of the Company and its Affiliates;
(ii) motivating such employees and consultants and directors by means of
performance-related incentives to achieve longer-range performance goals; and
(iii) enabling such employees and consultants and directors to participate in
the long-term growth and financial success of the Company.

SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:

"AFFILIATE" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.

"AWARD" shall mean any Option or Stock Appreciation Right.

"AWARD AGREEMENT" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.

"BOARD" shall mean the Board of Directors of the Company.

"CAUSE", with respect to any Participant, shall mean "cause" as defined
in such Participant's employment agreement or, in the absence of any
employment agreement, (A) such Participant's continued failure substantially
to perform such Participant's duties with the Company or its Affiliates
(other than as a result of total or partial incapacity due to physical or
mental illness or by reason of an accident while performing his duties),
(B) a significant act of dishonesty, deceit or breach of fiduciary duty on
such Participant's part in the performance of his duties, (C) an act or acts
on such Participant's part constituting a crime involving moral turpitude or
a felony under the laws of the United States or any state thereof,
(D) unauthorized disclosure of information, (E) any other negligent or
willful act or omission of such Participant which is significantly injurious
to the Company monetarily or otherwise, (F) breach of any covenants set forth
in any agreement between the Participant and the Company or (G) such
Participant's use of illegal drugs, abuse of other controlled substances or
habitual intoxication.

"CHANGE IN CONTROL" shall be deemed to have occurred if: (i) other then
by reason of a Public Offering or series of Public Offerings, the SK Entities
collectively cease to be the

<PAGE>

"BENEFICIAL OWNERS" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing more than
50% of the combined voting power of the Company's then outstanding securities
or (ii) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets. If any of the
events enumerated in clauses (i) and (ii) occur, the Board shall determine
the effective date of the Change in Control resulting therefrom, for purposes
of the Plan. A Public Offering or series of Public Offerings of more than
50% of the combined voting power of the Company's then outstanding securities
shall not constitute a Change in Control.

"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.

"COMMITTEE" shall mean (a) a committee of the Board of Directors
designated by the Board to administer the Plan (which, to the extent
necessary to comply with or qualify under Rule 16b-3 and Section 162(m)),
shall be composed of not less than the number of persons required by such
Rule or such Section, each of whom is a "NONEMPLOYEE DIRECTOR within the
meaning of Rule 16b-3 and an "OUTSIDE DIRECTOR" for purposes of section 162(m))
or (b) if the Board has not so designated a committee, the Board.

"DISABILITY" shall mean if a Participant becomes physically or mentally
incapacitated and is therefore unable for a period of 6 consecutive months or
for an aggregate of 6 months in any 24 consecutive month period, to perform
his duties to the Company or its Affiliates.

"ELIGIBLE INDIVIDUAL" shall mean an employee or consultant and prior to
a Public Offering, a director of the Company or any of its Affiliates.

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

"FAIR MARKET VALUE" shall mean the fair market value of the property or
other item being valued, as determined by the Committee in good faith.

"INITIAL PUBLIC OFFERING" means the first Public Offering of the Company.

"NON-QUALIFIED STOCK OPTION" shall mean a right to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is not
intended to meet the requirements of Section 422 of the Code or any successor
provision thereto.

"OPTION" shall mean a Non-Qualified Stock Option.

"PARTICIPANT" shall mean any Eligible Individual selected by the
Committee to receive an Award under the Plan.

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<PAGE>

"PERSON" shall mean any individual, corporation, partnership,
association, joint stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.

"PLAN" shall mean this Charlotte Russe Holding, Inc. 1999 Long-Term
Incentive Plan.

"PUBLIC OFFERING" shall mean any primary or secondary public offering of
equity securities of the Company pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), other than pursuant to a registration statement on Form S-4 or Form S-8
or any successor or similar form.

"REGISTRABLE STOCK" means any Shares until (i) a registration statement
covering such Shares has been declared effective by the SEC and such shares
have been disposed of pursuant to such effective registration statement,
(ii) such Shares are sold under circumstances in which all of the applicable
conditions of Rule 144 (or any similar provisions then in force) under the
Securities Act are met or (iii) such Shares are otherwise transferred, the
Company has delivered a new certificate or other evidence of ownership for
such Shares not bearing the legend required pursuant to this Plan and such
Shares may be resold without subsequent registration under the Securities Act.

"RULE 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.

"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the Staff thereof.

"SECTION 162(m)" shall mean Section 162(m) of the Code or any successor
provision thereto as in effect from time to time and the rules and other
authorities promulgated thereunder by the Internal Revenue Service or the
Department of the Treasury.

"SHAREHOLDERS AGREEMENT" shall mean the Securityholders Rights Agreement
dated as of September 27,1996 among The SK Equity Fund, L.P., SK Investment
Fund, L.P., Bernard Zeichner and FSC Corporation, as such agreement may be
amended from time to time.

"SHARES" shall mean shares of the Common Stock, $1.00 par value, of the
Company, or such other securities of the Company as may be designated by the
Committee from time to time.

"SK ENTITIES" means The SK Equity Fund, L.P., the SK Investment Fund, L.P.,
any partner of The SK Equity Fund, L.P. or the SK Investment Fund, L.P., any
Affiliate of The SK Equity Fund, L.P. and any Affiliate or any partner of The
SK Equity Fund, L.P. or the SK Investment Fund, L.P. and "SK ENTITY" means
any one of such Persons.

"STOCK APPRECIATION RIGHT" shall mean any right granted under Section 7
of the Plan.

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<PAGE>

"SUBSTITUTE AWARDS" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired
by the Company or with which the Company combines.

"SUCCESSOR" shall mean the legal representative of a deceased
Participant or the person or persons who acquire the right to exercise an
Award pursuant to Section 13 hereof.

"THIRD PARTY" means a prospective purchaser of Shares in an arm's length
transaction from a Shareholder (as defined in the Shareholders Agreement)
where such purchaser is not a Permitted Transferee (as defined in the
Shareholders Agreement) of such Shareholder.

SECTION 3. ADMINISTRATION.

(a) AUTHORITY OF COMMITTEE. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and authority to:
(i) designate Participants; (ii) determine the type or types of Awards to be
granted; (iii) determine the number of Shares to be covered by, or with
respect to which payments, rights, or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any
Award; (v) determine whether, to what extent, and under what circumstances
Awards may be settled or exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited, or suspended and the method
or methods by which Awards may be settled, exercised, canceled, forfeited, or
suspended; (vi) interpret and administer the Plan and any instrument or
agreement relating to, or Award made under, the Plan; (vii) establish, amend,
suspend, or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (viii)
make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan.

(b) COMMITTEE DISCRETION BINDING. Unless otherwise expressly provided
in the Plan, all designations, determinations, interpretations, and other
decisions under or with respect to the Plan or any Award shall be within the
sole discretion of the Committee, may be made at any time and shall be final,
conclusive, and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award, any
stockholder and any Eligible Individual.

SECTION 4. SHARES AVAILABLE FOR AWARDS.

(a) SHARES AVAILABLE. Subject to adjustment as provided in Section 4(b),
the number of Shares with respect to which Awards may be granted under the
Plan shall be 3,000. If, after the effective date of the Plan, any Shares
covered by an Award granted under the Plan, or to which such an Award
relates, are forfeited, or if such an Award is settled for cash or otherwise
terminates or is canceled without the delivery of Shares, then the Shares
covered by such Award, or to which such Award relates, or the number of
Shares otherwise *counted against the

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<PAGE>

aggregate number of Shares with respect to which Awards may be granted, to
the extent of any such settlement, forfeiture, termination or cancellation,
shall, in the calendar year in which such settlement, forfeiture, termination
or cancellation occurs, again become Shares with respect to which Awards may
be granted. In the event that any Option or other Award granted hereunder is
exercised through the delivery of Shares or in the event that withholding tax
liabilities arising from such Award are satisfied by the withholding of
Shares by the Company, the number of Shares available for Awards under the
Plan shall be increased by the number of Shares so surrendered or withheld.
Notwithstanding the foregoing and subject to adjustment as provided in
Section 4(b), no Person may receive Awards under the Plan in any calendar
year that relate to more than 2,000 Shares at any time during which the
Company's stock is "publicly held" within the meaning of Section 162(m).

(b) ADJUSTMENTS. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to
be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all
of (i) the number of Shares or other securities of the Company (or number and
kind of other securities or property) with respect to which Awards may be
granted, (ii) the number of Shares or other securities of the Company (or
number and kind of other securities or property) subject to outstanding
Awards, and (ii) the grant or exercise price with respect to any Award, or,
if deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award; provided, in each case, that with respect to any Award, no
such adjustment shall be authorized to the extent that such authority would
be inconsistent with the Plan's meeting the requirements of Section 162(m) at
any time during which the Company's stock is "publicly held" within the
meaning of Section 162(m).

(c) SUBSTITUTE AWARDS. Any Shares underlying Substitute Awards shall
not, except in the case of Shares with respect to which Substitute Awards are
granted to Eligible Individuals who are officers or directors of the Company
for purposes of Section 16 of the Exchange Act or any successor section
thereto, be counted against the Shares available for Awards under the Plan.

(d) SOURCES OF SHARES DELIVERABLE UNDER AWARDS. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.

SECTION 5. ELIGIBILITY. Any person who is at the time of grant an
Eligible Individual who is not a member of the Committee shall be eligible to
be designated a Participant.

SECTION 6. STOCK OPTIONS.

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<PAGE>

(b) EXERCISE PRICE. The exercise price of each Option granted under
the Plan shall be not less than eighty-five percent (85%) of the Fair Market
Value of the stock at the time the option is granted, except that the price
shall be one hundred and ten percent (110%) of the Fair Market Value of the
stock in the case of any person possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company.

(c) EXERCISE. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may specify in the
applicable Award Agreement; PROVIDED that (i) each Option granted to a Person
other than an officer or director of the Company shall vest at the rate of at
least 20% per year over five years from the date of grant and (ii) no Option
shall be exercisable more than 120 months from the date of grant. The
Committee may impose such conditions with respect to the exercise of Options,
including without limitation, any relating to the application of federal or
state securities laws, as it may deem necessary or advisable.

(d) PAYMENT. No Shares shall be delivered pursuant to any exercise of
an Option until payment in full of the exercise price therefor is received by
the Company. Such payment may be made in cash, or its equivalent, or, if and
to the extent permitted by the Committee, by exchanging Shares owned by the
optionee (which are not the subject of any pledge or other security
interest), or by a combination of the foregoing, provided that the combined
value of all cash and cash equivalents and the Fair Market Value of any such
Shares so tendered to the Company as of the date of such tender is at least
equal to such exercise price.

SECTION 7. STOCK APPRECIATION RIGHTS.

(a) GRANT. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Eligible Individuals to
whom Stock Appreciation Rights shall be granted, the number of Shares to be
covered by each Stock Appreciation Right Award, the grant price thereof and
the conditions and limitations applicable to the exercise thereof. Stock
Appreciation Rights may be granted in tandem with another Award, in addition
to another Award, or freestanding and unrelated to another Award. Stock
Appreciation Rights granted in tandem with or in addition to an Award may be
granted either at the same time as the Award or at a later time. Unless
otherwise determined by the Committee, Stock Appreciation Rights shall not be
exercisable earlier than six months after grant.

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<PAGE>

(c) OTHER TERMS AND CONDITIONS. Subject to the terms of the Plan and
any applicable Award Agreement, the Committee shall determine, at the grant
of a Stock Appreciation Right, the term, methods of exercise, methods and
form of settlement, and any other terms and conditions of any Stock
Appreciation Right. The Committee may impose such conditions or restrictions
on the exercise of any Stock Appreciation Right as it shall deem appropriate.

SECTION 8. TERMINATION OR SUSPENSION OF SERVICE. The following
provisions shall apply in the event of the Participant's termination of
service as an employee or consultant or director unless the Committee shall
have provided otherwise, either at the time of the grant of the Award or
thereafter.

(a) TERMINATION OF SERVICE. If the Participant's service with the
Company or its Affiliates is terminated for any reason other than for Cause
or by reason of death or Disability, the Participants right to exercise any
Stock Option or Stock Appreciation Right shall terminate, and such Option or
Stock Appreciation Right shall expire, on the earlier of (A) the ninetieth
day following such termination of service or (B) the date such Option or
Stock Appreciation Right would have expired had it not been for the
termination of service. If the Participant's service with the Company or its
Affiliates is terminated by reason of death or Disability, the Participant's
right to exercise any Stock Option or Stock Appreciation Right shall
terminate, and such Option or Stock Appreciation Right shall expire, on the
earlier of (A) one year following such termination of service or (B) the date
such Option or Stock Appreciation Right would have expired had it not been
for the termination of service. In each case, the Participant (or his
estate) shall have the right to exercise such Option or Stock Appreciation
Right prior to such expiration to the extent it was exercisable at the date
of such termination of service and shall not have been exercised. If the
Participant's service with the Company or its Affiliates is terminated for
Cause, the Participant's right to exercise any Stock Option or Stock
Appreciation Right shall terminate, and such Option or Stock Appreciation
Right shall expire, immediately.

(b) ACCELERATION AND EXTENSION OF EXERCISABILITY. Notwithstanding the
foregoing but subject to Section 12(b) hereof, the Committee may, in its
discretion, provide (A) that an Option granted to a Participant may terminate
at a date earlier than that set forth above, (B) that an Option granted to a
Participant may terminate at a date earlier than that set forth above, (B)
that an Option granted to a Participant may terminate at a date later than
that set forth above, provided such date shall not be beyond the date the
Option would have expired had it not been for the termination of the
Participant's service and (C) that an Option or Stock Appreciation Right may

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become immediately exercisable when it finds that such acceleration would be
in the best interests of the Company.

(i) Notwithstanding any other provision of this plan but subject
to the provisions of the applicable award Agreement, upon the termination
of a Participant's service prior to an Initial Public Offering, the Company
may elect, at any time within the later of (i) 90 days after such
termination or (ii) 90 days after a Participant exercises an Award, to
require such Participant or his Successor shall sell, all vested Shares
acquired as a result of the exercise of an Award and owned by such
Participant or Successor in accordance with this Section 8(c). The price
at which such Surrendered Shares may be repurchased shall be an amount
equal to the product of Fair Market Value of a Share as of the date of such
termination of service multiplied by the number of shares repurchased.

(ii) If the Company elects to exercise its right to require any
Participant or Successor to sell Shares pursuant to this Section 8(c), the
Company shall deliver written notice (a "REPURCHASE NOTICE") to such
Participant or Successor to such effect.

(iii) The Shares specified in the Repurchase Notice as being subject
to repurchase (the "SURRENDERED SHARES") shall be surrendered for
repurchase within ten business days of the date of such receipt of such
notice (the "REPURCHASE DATE"). On the Repurchase Date, the Participant or
Successor selling such Surrendered Shares (the "SELLER") shall deliver to
the Company the certificate or certificates representing the Surrendered
Shares owned by such Seller on such date against delivery by the Company of
the repurchase amount to such Seller, which may be paid at the election of
the Company, in cash or by certified check.

(iv) The Company shall have the right to resell any Surrendered
Shares received from a Seller pursuant to this Section 8(c), whether or not
the applicable Repurchase Price has been paid to such Seller; provided that
any such sale or other disposition by the Company of Surrendered Shares
shall not relieve the Company of its obligation to pay the applicable
repurchase price for such Surrendered Shares.

SECTION 9. CHANGE IN CONTROL. Notwithstanding any other provision of
the Plan to the contrary, upon a Change in Control, all outstanding Awards
shall vest, become immediately exercisable or payable and that no outstanding
Stock Appreciation Right may be terminated, amended, or suspended upon or
after a Change in Control.

SECTION 10. RIGHT TO PARTICIPATE IN A SALE.

(a) If at any time the collective shareholdings of the SK Entities is 25%
or more of the outstanding common stock of the Company, an SK Entity proposes to
transfer any of its

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Shares to a Third Party other than in a Public Offering or an open market
sale pursuant to Rule 144 (a "TAG SALE"), such SK Entity shall provide
written notice of such proposed Tag Sale to Participants ("TAG NOTICE"). The
Tag Notice shall identify the number of Shares subject to the Tag Sale (the
"NUMBER OF SHARES"), the per Share consideration for which a sale is proposed
to be made (the "TAG SALE PRICE") and all other material terms and conditions
of the proposed Tag Sale. Each Participant shall, as to Shares and vested
Options held by it, have the right and option, exercisable as set forth
below, to participate in the Tag Sale for up to the number of Shares and
vested Options as constitute its Tag Pro Rata Portion of the Number of
Shares, and the amount of Shares to be sold by the SK Entities in the Tag
Sale shall be reduced, if necessary, to the extent Participants (as well as
such other parties permitted by the Shareholders Agreement to participate)
elect to participate. "Tag Pro Rate Portion" means, with respect to each
Participant that desires to participate in a Tag Sale at the time of the Tag
Sale, the proportion (expressed as a percentage) that its ownership of
Shares, outstanding warrants relating to Shares, and vested Options bears to
all outstanding Shares, outstanding warrants relating to Shares, and vested
Options owned by all shareholders who desire to participate in such Tag Sale
at such time. Each eligible Participant that desires to exercise such option
shall provide the SK Entities with written irrevocable notice within ten (10)
days after the date the Tag Notice is given (the "TAG NOTICE PERIOD"), and
shall simultaneously provide a copy of such notice to the Company and the
other shareholders. Each accepting Participant shall deliver to the SK
Entities the certificate or certificates representing the Shares to be sold
or otherwise disposed of pursuant to such Tag Sale by such Participant,
together with a limited power-of-attorney authorizing the SK Entities to sell
or otherwise dispose of such Shares and Options pursuant to the terms of the
Tag Sale. Delivery of such certificate or certificates representing the
Shares to be sold and the limited power of-attorney authorizing the SK
Entities to sell or otherwise dispose of such Shares and Options shall
constitute an irrevocable acceptance of the Tag Sale by such Participant.

(b) The per Share and per Option consideration to be paid to each
accepting Participant and SK Entity participating in the Tag Sale shall be
the Tag Sale Price and the Tag Sale Price minus the exercise price,
respectively.

(c) Promptly after the consummation of the sale or other disposition of
Shares and Options pursuant to the Tag Sale, the SK Entities shall notify the
accepting Participants thereof, shall remit to each of the accepting
Participants the total consideration for the Shares and Options of such
Participant sold or otherwise disposed of pursuant thereto as computed
pursuant to (b) above less, to the extent that the Participants selling
Shares and Options pursuant to such Tag Sale pay the expenses related to the
Tag Sale of such Shares and Options, the pro rata portion of expenses related
to the sale of such Shares and Options, and shall furnish such other evidence
of the completion and time of completion of such sale or other disposition
and the terms thereof as may be reasonably requested by such Participant.

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<PAGE>

and Options pursuant to such Tag Sale. The SK Entities shall have 90 days in
which to sell the applicable Shares and Options on substantially the same
terms and conditions that were contained in the Tag Notice. If, at the end
of such 90-day period, the SK Entities have not completed the sale of all the
Shares and Options, the SK Entities shall return to the Participants all
certificates representing the Shares which such Participants delivered for
sale or other disposition pursuant to this Section 10, and all the
restrictions on sale or other disposition contained in this Plan with respect
to Shares and Options owned by such Participants shall again be in effect.

(e) Notwithstanding anything contained in this Section 10, there shall
be no liability on the part of the SK Entities to any Participant if the sale
of Shares and Options pursuant to this Section 10 is not consummated for
whatever reason. Any decision as to whether to sell Shares and Options shall
be at the SK Entities' sole and absolute discretion.

(f) Notwithstanding anything contained in this Section 10 to the
contrary, all rights and obligations under this Section 10 shall expire upon
the second anniversary of the Initial Public Offering.

SECTION 11. RIGHT TO COMPEL PARTICIPATION IN CERTAIN SALES.

(a) At any time prior to the Initial Public Offering, if any SK Entity
should sell any of its Shares to any Third Party, which sale by such Entities
comprises at least 50% of the outstanding Common Stock of the Company (a
"DRAG SALE"), such SK Entity may, at its option, require any Participant
holding Shares or vested Options to participate in such sale. Such SK Entity
shall provide written notice of such Drag Sale to the Participants not later
than ten (10) days prior to the proposed sale ("DRAG NOTICE"). The Drag
Notice shall identify the purchaser, the number of Shares subject to the Drag
Sale (the "NUMBER OF SHARES"), the per Share consideration for which a safe
is proposed to be made (the "DRAG SALE PRICE") and all other material terms
and conditions of the Drag Sale. Each of the Participants shall be required,
as set forth below, to tender the percentage of Shares and vested Options
owned by such Participant as constitutes its Drag Pro Rata Portion. "DRAG PRO
RATA PORTION" means, at the time of the Drag Sale, the proportion (expressed
as a percentage) that the Shares to be sold by the SK Entities bears to all
the Shares owned by the SK Entities immediately prior to such Drag Sale.
Within five (5) days following the date of the Drag Notice, each of the
Participants shall deliver to a representative of such SK Entity designated
in the Drag Notice, the certificate or certificates representing the Shares
to be sold or otherwise disposed of pursuant to such sale by such
Participant, together with a limited power-of-attorney authorizing the SK
Entities to sell or otherwise dispose of such Shares and Options pursuant to
the terms of the Drag Sale. In the event that a Participant should fail to
deliver such certificate or certificates representing the Shares to be sold
and the limited power-of-attorney authorizing the SK Entities to sell or
otherwise dispose of such Shares and Options to such Third Party, the Company
shall cause the books and records of the Company to show that such Shares and
Options are bound by the provisions of this Section 11 and that such Shares
and Options shall be transferred to the Third Party immediately upon

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surrender for transfer by such Participant against payment of the per Share
and per Options consideration therefor.

(b) The per Share and per Option consideration to be paid to such SK
Entity and to each Participant required to participate in the Drag Sale shall
be the Drag Sale Price and the Drag Sale Price minus the exercise price,
respectively.

(c) Such SK Entities shall have 90 days from the date of the Drag
Notice in which to sell the applicable Shares and Options in accordance with
the terms and conditions set forth in such notice. If, within 90 after such
SK Entity gives the Drag Notice, it has not completed the sale of all the
Shares and Options subject to the Drag Sale, such SK Entity shall return to
each Participant all certificates representing Shares that such Participant
delivered for sale pursuant to this Section 11, and all the restrictions or
requirements relating to sale or other disposition contained in the Plan with
respect to Shares and Options owned by such Participants shall again be in
effect including, without limitation this Section 11.

(d) Promptly after the consummation of the sale of Shares pursuant to
this Section 11, the SK Entities shall give notice thereof to the
Participants, shall remit to each Participant which has surrendered its
certificates the total consideration for the Shares and Options of such
Participant sold pursuant thereto as computed pursuant to Section 11 (b), and
shall furnish such other evidence of the completion and time of completion of
such sale or other disposition and the terms thereof as may be reasonably
requested by such Participant.

SECTION 12. AMENDMENT AND TERMINATION.

(a) AMENDMENTS TO THE PLAN. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation or
termination shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including for
these purposes any approval requirement which is a prerequisite for exemptive
relief from Section 16(b) of the Exchange Act, for which or with which the
Board deems it necessary or desirable to qualify or comply. Notwithstanding
anything to the contrary herein, the Committee may amend the Plan in such
manner as may be necessary so as to have the Plan conform with local rules
and regulations in any jurisdiction outside the United States.

(b) AMENDMENTS TO AWARDS. The Committee may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would adversely affect the
rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the consent
of the affected Participant, holder or beneficiary.

-11-

<PAGE>

(c) ADJUSTMENT OF AWARDS Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that, if applicable,
no such adjustment shall be authorized to the extent such authority would be
inconsistent with the Plan's meeting the requirements of Section 162(m).

(d) CANCELLATION. Any provision of this Plan or any Award Agreement to
the contrary notwithstanding, the Committee may cause any Award granted
hereunder to be canceled in consideration of a cash payment or alternative
Award made to the holder of such canceled Award equal in value to the Fair
Market Value of such canceled Award.

SECTION 13. GENERAL PROVISIONS.

(a) NONTRANSFERABILITY. No Award shall be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by a
Participant, except by will or the laws of descent and distribution. Any
Successor shall take rights herein granted subject to the terms and
conditions hereof. No transfer shall be effective to bind the Company unless
such Successor shall have executed and delivered to the Company an instrument
pursuant to which the Successor shall have agreed to be bound by the terms of
the Plan and any applicable Award Agreement.

(b) NO RIGHTS TO AWARDS. No Eligible Individual, Participant or other
Person shall have any claim to be granted any Award, and there is no
obligation for uniformity of treatment of Eligible Individuals, Participants,
or holders or beneficiaries of Awards. The terms and conditions of Awards
need not be the same with respect to each recipient.

(c) SHARE CERTIFICATES. All certificates for Shares or other securities
of the Company or any Affiliate delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities are
then listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.

In addition to any other legend that may be required, each certificate
for Shares that is issued to any Participant upon exercise or settlement of
an Award shall bear a legend in substantially the following form:

-12-

<PAGE>

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE
THEREWITH. THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE 1999 LONG-TERM
INCENTIVE PLAN, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST
FROM CHARLOTTE RUSSE HOLDING, INC. OR ANY SUCCESSOR
THERETO."

If any Shares shall cease to be Registrable Stock, the Company shall,
upon the written request of the Participant, issue to such Participant a new
certificate evidencing such Shares without the first sentence of the above
legend endorsed thereon. If any Shares cease to be subject to any restrictions
on transfer set forth in this Plan, the Company shall, upon the written
request of a Participant, issue to such Participant a new certificate
evidencing such Shares without the second sentence of the legend required
above endorsed thereon.

(d) DELEGATION. Subject to the terms of the Plan and applicable law,
the Committee may delegate to one or more officers or managers of the Company
or any Affiliate, or to a committee of such officers or managers, the
authority, subject to such terms and limitations as the Committee shall
determine, to grant Awards to, or to cancel, modify or waive rights with
respect to, or to alter, discontinue, suspend, or terminate Awards held by,
Eligible individuals who are not officers or directors of the Company for
purposes of Section 16 of the Exchange Act, or any successor section thereto,
or who are otherwise not subject to such Section.

(e) WITHHOLDING. A participant may be required to pay to the Company
or any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Award, from any payment due or
transfer made under any Award or under the Plan or from any compensation or
other amount owing to a Participant the amount (in cash, Shares, other
securities, other Awards or other property) of any applicable withholding
taxes in respect of an Award, its exercise, or any payment or transfer under
an Award or under the Plan and to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for the payment of
such taxes. The Committee may provide for additional cash payments to
holders of Awards to defray or offset any tax arising from the grant,
vesting, exercise or payments of any Award.

(f) AWARD AGREEMENTS. Each Award hereunder shall be evidenced by an
Award Agreement which shall be delivered to the Participant and shall specify
the terms and conditions of the Award and any rules applicable thereto.

(g) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained in
the Plan shall prevent the Company or any Affiliate from adopting or continuing
in effect other

-13-

<PAGE>

compensation arrangements, which may, but need not, provide for the grant of
options, restricted stock, Shares and other types of Awards provided for
hereunder (subject to stockholder approval if such approval is required), and
such arrangements may be either generally applicable or applicable only in
specific cases.

(h) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ or
as a consultant or director of the Company or any Affiliate. Further, the
Company or an Affiliate may at any time dismiss a Participant from service,
with or without cause, free from any liability or any claim under the Plan,
unless otherwise expressly provided in the Plan, in any Award Agreement or in
any other agreement between the Company or any Affiliate and the Participant.

(i) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or holder or beneficiary of any Award shall
have any rights as a stockholder with respect to any Shares to be distributed
under the Plan until he or she has become the holder of such Shares.

(j) RESTRICTIONS ON TRANSFER; FORM S-8.

(i) Prior to an initial Public Offering, no Participant or holder
or beneficiary of any Award may directly or indirectly, offer, sell,
assign, transfer, grant a participation in, pledgeor otherwise dispose of
any Shares acquired upon exercise of an Award (a "TRANSFER"), except for
transfers pursuant to Sections 10 and 11 of the Plan. After an Initial
Public Offering, a Participant may transfer Shares acquired upon exercise
of an Award pursuant to Rule 144 (or any successor provision) of the
Securities Act.

(ii) Following the Initial Public Offering, the Company covenants
to use its best efforts to register Shares to be, acquired upon exercise of
Options on Form S-8.

(k) GOVERNING LAW. The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan and any Award Agreement
shall be determined in accordance with the laws of the State of Delaware.

(l) SEVERABILITY. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform the applicable laws, or if it
cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, Person or Award and the
remainder of the Plan and any such Award shall remain in full force and
effect.

-14-

<PAGE>

(m) OTHER LAWS. The Committee may refuse to issue or transfer any
Shares or other consideration under an Award if, acting in its sole
discretion, it determines that the issuance or transfer of such Shares or
such other consideration might violate any applicable law or regulation or
entitle the Company to recover the same under Section 16(b) of the Exchange
Act, and any payment tendered to the Company by a Participant, other holder
or beneficiary in connection with the exercise of such Award shall be
promptly refunded to the relevant Participant, holder or beneficiary. Without
limiting the generality of the foregoing, no Award granted hereunder shall be
construed as an offer to sell securities of the Company, and no such offer
shall be outstanding, unless and until the Committee in its sole discretion
has determined that any such offer, if made, would be in compliance with all
applicable requirements of the U.S. federal securities laws and any other
laws to which such offer, if made, would be subject.

(n) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant
or any other Person. To the extent that any Person acquires a right to
receive payments from the Company or any Affiliate pursuant to an Award, such
right shall be no greater than the right of any unsecured general creditor of
the Company or any Affiliate.

(o) HEADINGS. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.

(p) FINANCIAL STATEMENTS. The Company will provide Participants with
financial statements of the Company at least annually.

SECTION 14. TERM OF THE PLAN.

(a) EFFECTIVE DATE. The Plan shall be effective as of May 1, 1999,
subject to approval by the stockholders of the Company within one year
thereafter.

(b) EXPIRATION DATE. No Award shall be granted under the Plan after
the 10th anniversary of the Effective Date. Unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award granted
hereunder may, and the authority of the Board or the Committee to amend,
alter, adjust, suspend, discontinue, or terminate any such Award to waive any
conditions or rights under any such Award shall, continue after the authority
for grant of new Awards hereunder has been exhausted.

-15-

<PAGE>

CHARLOTTE RUSSE HOLDING, INC.

1996 Long-Term Incentive Plan

SECTION 1. PURPOSE. The purposes of the Charlotte Russe Holding, Inc.
1996 Long-Term Incentive Plan are to promote the interests of Charlotte
Russe Holding, Inc., a Delaware Corporation (the "COMPANY"), and its
stockholders by (i) attracting and retaining exceptional executive personnel
and other key employees and consultants and directors of the Company and its
Affiliates; (ii) motivating such employees and consultants and directors by
means of performance goals; and (iii) enabling such employees and
consultants and directors to participate in the long-term growth and
financial success of the Company.

SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:

"AWARD" shall mean any Option and Stock Appreciation Right.

"AWARD AGREEMENT" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.

"BOARD" shall mean the Board of Directors of the Company.

<PAGE>

"CAUSE", with respect to any Participant, shall mean "CAUSE" as defined in
such Participant's employment agreement or, in the absence of any employment
agreement, (A) such Participant's continued failure substantially to perform
such Participant's duties with the Company or its Affiliates (other than as a
result of total or partial incapacity due to physical or mental illness or
by reason of an accident while performing his duties), (B) a significant act
of dishonesty, deceit or breach of fiduciary duty on such Participant's part
in the performance of his duties, (C) an act or acts on such Participant's
part constituting a crime involving moral turpitude or a felony under the
laws of the United States or any state thereof, (D) unauthorized disclosure
of information, (E) any other negligent or willful act or omission of such
Participant which is significantly injurious to the Company monetarily or
otherwise, (F) breach of any covenants set forth in any agreement between
the Participant and the Company or (G) such participant's use of illegal
drugs, abuse of other controlled substances or habitual intoxication.

"CHANGE IN CONTROL" shall be deemed to have occurred if: (i) other than
by reason of a Public Offering or series of Public Offerings, the SK Entities
collectively cease to be the "BENEFICIAL OWNERS" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the Company's then
outstanding securities or (ii) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets. If any of the events enumerated in clauses (i) and (ii) occur, the
Board shall determine the effective date of the Change in Control resulting
therefrom, for purposes of the Plan. A Public Offering or series of Public
Offerings of more than 50% of the combined voting power of the Company's then
outstanding securities shall not constitute a Change in Control.

"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.

2
<PAGE>

"NON-EMPLOYEE DIRECTOR" within the meaning of Rule 16b-3 and an "OUTSIDE
DIRECTOR" for purposes of section 162(m)) or (b) if the Board has not so
designated a committee, the Board.

"DISABILITY" shall mean if a Participant becomes physically or mentally
incapacitated and is therefore unable for a period of 6 consecutive months or
for an aggregate of 6 months in any 24 consecutive month period to perform
his duties to the Company or its Affiliates.

"ELIGIBLE INDIVIDUAL" shall mean an employee or consultant and prior to
a Public Offering, a director of the Company or any of its Affiliates.

"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

"FAIR MARKET VALUE" shall mean the fair market value of the property or
other item being valued, as determined by the Committee in good faith.

"INCENTIVE STOCK OPTION" shall mean a right to purchase Shares from the
Company that is granted under Section 6 of the Plan and that is intended to
meet the requirements of Section 422 of the Code or any successor provision
thereto.

"INITIAL PUBLIC OFFERING" means the first Public Offering of the Company.

"NON-QUALIFIED STOCK OPTION" shall mean a right to purchase Shares from
the Company that is granted under Section 6 of the Plan and that is not
intended to be an Incentive Stock Option.

"OPTION" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.

"PARTICIPANT" shall mean any Eligible Individual selected by the
Committee to receive an Award under the Plan.

"PERSON" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization,
government or political subdivision thereof or other entity.

<PAGE>

"PLAN" shall mean this Charlotte Russe Holding, Inc. 1996 Long-Term
Incentive Plan.

"RULE 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.

"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the Staff thereof.

"SECTION 162 (m)" shall mean Section 162(m) of the Code or any successor
provision thereto as in effect from time to time and the rules and other
authorities promulgated thereunder by the Internal Revenue Service or the
Department of the Treasury.

"SHAREHOLDERS AGREEMENT" shall mean the Securityholders Rights
Agreement dated as of September 27, 1996 among the SK Equity Fund, L.P., SK
Investment Fund, L.P., Bernard Zeichner and FSC Corporation, as such
agreement may be amended from time to time.

"SHARES" shall mean shares of the Common Stock, $1.00 par value, of the
Company, or such other securities of the Company as may be designated by the
Committee from time to time.

4
<PAGE>

"SK ENTITIES" means the SK Equity Fund, L.P., the SK Investment Fund,
L.P., any partner of the SK Equity Fund, L.P. or the SK Investment Fund,
L.P., any Affiliate of The SK Equity Fund, L.P. and any Affiliate or any
partner of The SK Equity Fund, L.P. or the SK Investment Fund, L.P. and "SK
Entity" means any one of such Persons.

"STOCK APPRECIATION RIGHT" shall mean any right granted under Section 7
of the Plan.

"SUBSTITUTE AWARDS" shall mean Awards granted in assumption of, or in
substitution for, outstanding awards previously granted by a company acquired
by the Company or with which the Company combines.

"SUCCESSOR" shall mean the legal representative of a deceased
Participant or the person or persons who acquire the right to exercise an
Award pursuant to Section 13 hereof.

SECTION 3. ADMINISTRATION.

(a) AUTHORITY OF COMMITTEE. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and authority to:
(i) designate Participants; (ii) determine the type or types of Awards to be
granted; (iii) determine the number of Shares to be covered by, or with
respect to which payments, rights, or other matters are to be calculated in
connection with, Awards; (iv) determine the terms and conditions of any
Award; (v) determine whether, to what extent, and under what circumstances
Awards may be settled or exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited, or suspended and the method
or methods by which Awards may be settled, exercised, canceled, forfeited,
or suspended; (vi) interpret and administer the Plan and any instrument or
agreement relating to, or

<PAGE>

Award made under, the Plan; (vii) establish, amend, suspend, or waive such
rules and regulations and appoint such agents as it shall deem appropriate
for the proper administration of the Plan; and (viii) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan.

SECTION 4. SHARES AVAILABLE FOR AWARDS.

(a) SHARES AVAILABLE. Subject to adjustment as provided in Section
4(b), the number of Shares with respect to which Awards may be granted under
the Plan shall be 20,000. If, after the effective date of the Plan, any
Shares covered by an Award granted under the Plan, or to which such an Award
relates, are forfeited, or if such an Award is settled for cash or otherwise
terminates or is canceled without the delivery of Shares, then the Shares
covered by such Award, or to which such Award relates, or the number of
Shares otherwise counted against the aggregate number of Shares with respect
to which Awards may be granted, to the extent of any such settlement,
forfeiture, termination or cancellation, shall, in the calendar year in which
such settlement, forfeiture, termination or cancellation occurs, again become
Shares with respect to which Awards may be granted. In the event that any
Option or other Award granted hereunder is exercised through the delivery of
Shares or in the event that withholding tax liabilities arising from such
Award are satisfied by the withholding of Shares by the Company, the number
of Shares available for Awards under the Plan shall be increased by the
number of Shares so surrendered or withheld. Notwithstanding the foregoing and
subject to adjustment as provided in Section 4(b), no "covered employee" (as
defined in Section 162(m)) may receive Awards under the Plan in any calendar
year that relate to more than 2,000 Shares.

6
<PAGE>

(b) ADJUSTMENTS. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other
securities, or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities of the
Company, issuance of warrants or other rights to purchase Shares or other
securities of the Company, or other similar corporate transaction or event
affects the Shares such that an adjustment is determined by the Committee to
be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number of Shares or other securities of the Company (or number and
kind of other securities or property) with respect to which Awards may be
granted, (ii) the number of Shares or other securities of the Company (or
number and kind of other securities or property) subject to outstanding
Awards, and (iii) the grant or exercise price with respect to any Award, or,
if deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award; provided, in each case, that (A) with respect to Awards of
Incentive Stock Options no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422(b)(1) of the
Code, as from time to time amended and (B) with respect to any Award, no such
adjustment shall be authorized to the extent that such authority would be
inconsistent with the Plan's meeting the requirements of Section 162(m).

(d) SOURCES OF SHARES DELIVERABLE UNDER AWARDS. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.

SECTION 5. ELIGIBILITY. Any person who is at the time of grant an
Eligible Individual who is not a member of the Committee shall be eligible to
be designated a Participant.

<PAGE>

SECTION 6. STOCK OPTIONS.

(a) GRANT. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Eligible Individuals to
whom Options shall be granted, the number of Shares to be covered by each
Option, the exercise price therefor and the conditions and limitations
applicable to the exercise of the Option. The Committee shall have the
authority to grant Incentive Stock Options, or to grant Non-Qualified Stock
Options, or to grant both types of options. In the case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and
comply with such rules as may be prescribed by Section 422 of the Code, as
from time to time amended, and any regulations implementing such statute.

(b) EXERCISE PRICE. The Committee in its sole discretion shall
establish the exercise price at the time each Option is granted.

(c) EXERCISE. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award Agreement. The Committee may
impose such conditions with respect to the exercise of Options, including
without limitation, any relating to the application of federal or state
securities laws, as it may deem necessary or advisable.

SECTION 7. STOCK APPRECIATION RIGHTS.

(a) GRANT. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Eligible Individuals to
whom Stock Appreciation Rights shall be

8
<PAGE>

granted, the number of Shares to be covered by each Stock Appreciation Right
Award, the grant price thereof and the conditions and limitations applicable
to the exercise thereof. Stock Appreciation Rights may be granted in tandem
with another Award, in addition to another Award, or freestanding and
unrelated to another Award. Stock Appreciation Rights granted in tandem with
or in addition to an Award may be granted either at the same time as the
Award or at a later time. Unless otherwise determined by the Committee, Stock
Appreciation Rights shall not be exercisable earlier than six months after
grant.

(b) EXERCISE AND PAYMENT. A Stock Appreciation Right shall entitle
the Participant to receive an amount equal to the excess of the Fair Market
Value of a Share on the date of exercise of the Stock Appreciation Right over
the grant price thereof, provided that the Committee may for administrative
convenience determine that, with respect to any Stock Appreciation Right
which is not related to an Incentive Stock Option and which can only be
exercised for cash during limited periods of time in order to satisfy the
conditions of Rule 16b-3, the exercise of such Stock Appreciation Right for
cash during such limited period shall be deemed to occur for all purposes
hereunder on the day during such limited period on which the Fair Market
Value of the Shares is the highest. Any such determination by the Committee
may be changed by the Committee from time to time and may govern the exercise
of Stock Appreciation Rights granted prior to such determination as well as
Stock Appreciation Rights thereafter granted. The Committee shall
determine whether a Stock Appreciation Right shall be settled in cash,
Shares or a combination of cash and Shares.

SECTION 8. TERMINATION OR SUSPENSION OF SERVICE. The following
provisions shall apply in the event of the Participant's termination of
service as an employee or consultant or director unless

<PAGE>

the Committee shall have provided otherwise, either at the time of the grant
of the Award or thereafter.

(a) TERMINATION OF SERVICE. If the Participant's service with the
Company or its Affiliates is terminated for any reason other than for Cause
or by reason of death or Disability, the Participant's right to exercise any
Stock Option or Stock Appreciation Right shall terminate, and such Option or
Stock Appreciation Right shall expire, on the earlier of (A) the ninetieth
day following such termination of service or (B) the date such Option or
Stock Appreciation Right would have expired had it not been for the
termination of service. If the Participant's service with the Company or its
Affiliates is terminated by reason of death or Disability, the Participant's
right to exercise any Stock Option or Stock Appreciation Right shall
terminate, and such Option or Stock Appreciation Right shall expire, on the
earlier of (A) one year following such termination of service or (B) the date
such Option or Stock Appreciation Right would have expired had it not been
for the termination of service. In each case, the Participant (or his estate)
shall have the right to exercise such Option or Stock Appreciation Right
prior to such expiration to the extent it was exercisable at the date of such
termination of service and shall not have been exercised. If the
Participant's service with the Company or its Affiliates is terminated for
Cause, the Participant's right to exercise any Stock Option or Stock
Appreciation Right shall terminate, and such Option or Stock Appreciation
Right shall expire, immediately.

(b) ACCELERATION AND EXTENSION OF EXERCISABILITY. Notwithstanding the
foregoing but subject to Section 12(b) hereof, the Committee may, in its
discretion, provide (A) that an Option granted to a Participant may
terminate at a date earlier than that set forth above, (B) that an Option
granted to a Participant not subject to Section 16 of the Exchange Act may
terminate at a date later than that set forth above, provided such date shall
not be beyond the date the Option would have expired had it not been for the
termination of the Participant's service and (C) that an Option or Stock
Appreciation Right may become immediately exercisable when it finds that such
acceleration would be in the best interests of the Company.

(i) Notwithstanding any other provision of this Plan but
subject to the provisions of the applicable Award

10
<PAGE>

Agreement, upon the termination of a Participant's service, the
Company may elect, at any time within one year of such termination, to
require such Participant or his Successor to sell to the Company, and
such Participant or such Successor shall sell, all vested Shares
acquired as a result of the exercise of an Award and owned by such
Participant or Successor in accordance with this Section 8(c). The
price at which such Surrendered Shares (as defined in Section
8(c)(iii)) may be repurchased shall be determined as follows: (1) in
the case of a repurchase arising from a termination for Cause, an
amount equal to the product of (x) the lower of (A) the exercise price
for the Award pursuant to which the Shares were purchased and (B) the
Fair Market Value of a Share as of the date of such termination of
service multiplied by (y) the number of Shares so repurchased, and (2)
in the case of a repurchase arising from a termination for any reason
other than Cause, an amount equal to the product of Fair Market Value
of a Share as of the date of such termination of service multiplied by
the number of shares repurchased.

(ii) If the Company elects to exercise its right to require any
Participant or Successor to sell Shares pursuant to this Section 8(c),
the Company shall deliver written notice (a "REPURCHASE NOTICE") to
such Participant or Successor to such effect.

(iii) The Shares specified in the Repurchase Notice as being
subject to repurchase (the "SURRENDERED SHARES") shall be surrendered
for repurchase within ten business days of the date of such receipt of
such notice (the "REPURCHASE DATE"). On the Repurchase Date, the
Participant or Successor selling such Surrendered Shares (the
"SELLER") shall deliver to the Company the certificate or certificates
representing the Surrendered Shares owned by such Seller on such date
against delivery by the Company of the repurchase amount to such
Seller, which may be paid at the election of the Company, in cash or
by certified check, or, in the event the Company

11
<PAGE>

is prohibited from making payment with cash as a result of a credit
agreement or debt obligation binding upon the Company or cannot
make a cash payment for any other reason, by a promissory
note issued by the Company (a "PAYMENT NOTE") payable to the order of
the Seller. The Company shall use its best efforts to pay the
repurchase amount in cash or by certified check. All certificates for
Surrendered Shares shall be duly endorsed in favor of the Company by
the Seller in whose name such certificate or certificates is
registered or accompanied by a duly executed stock or security
assignment in favor of the Company with the signature(s) thereon
guaranteed by a commercial bank or trust company or a member of a
national securities exchange or the National Association of Securities
Dealers, Inc. If any Seller shall fail to deliver such certificate or
certificates (or evidence) to the Company within the time required,
the Company shall cause its books and records to show that the
Surrendered Shares are bound by the provisions of this Section 8(c) of
the Plan and that the Surrendered Shares, until transferred to the
Company, shall not be entitled to any proxy, dividend or other rights
from the date by which such certificate or certificates should have
been delivered to the Company.

(iv) Each Payment Note shall (A) by payable to the order of the
Seller, (B) be issued and dated the Repurchase Date, (C) be in a
principal amount equal to the repurchase price of such Surrendered
Shares and (D) mature at a stated maturity date, which maturity date
shall be the later of five years after the Repurchase Date and the
earliest date permitted by the Company's credit agreements and other
debt obligations. Each Payment Note shall bear interest in respect of
the unpaid principal amount of such Payment Note from the Repurchase
Date to the maturity date thereof at a rate per annum equal to the
then-current yield to maturity on United States treasury securities of
comparable maturity, as determined in good faith by the Company, plus
100 basis points.

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<PAGE>

(v) The Company shall have the right to resell any Surrendered
Shares received from a Seller pursuant to this Section 8(c),
whether or not the applicable Repurchase Price has been paid to such
Seller; PROVIDED that any such sale or other disposition by the
Company of Surrendered Shares shall not relieve the Company of its
obligation to pay the applicable repurchase price for such
Surrendered Shares.

SECTION 9. CHANGE IN CONTROL. Notwithstanding any other provision of
the Plan to the contrary, the Committee may provide in the applicable Award
Agreement that, upon a Change in Control, all outstanding Awards shall vest,
become immediately exercisable or payable and that no outstanding Stock
Appreciation Right may be terminated, amended, or suspended upon or after a
Change in Control.

SECTION 10. RIGHT TO PARTICIPATE IN A SALE.

(a) If at any time the collective shareholdings of the SK Entities is
25% or more of the outstanding common stock of the Company, an SK Entity
proposes to transfer any of its Shares to a Third Party other than in a
Public Offering or an open market sale pursuant to Rule 144 (a "TAG SALE"),
such SK Entity shall provide written notice of such proposed Tag Sale to
Participants ("TAG NOTICE"). The Tag Notice shall identify the number of
Shares subject to the Tag Sale (the "NUMBER OF SHARES"), the per Share
consideration for which a sale is proposed to be made (the "TAG SALE PRICE")
and all other material terms and conditions of the proposed Tag Sale. Each
Participant shall, as to Shares and vested Options held by it, have the right
and option, exercisable as set forth below, to participate in the Tag Sale
for up to the number of Shares and vested Options as constitute its Tag Pro
Rata Portion of the Number of Shares, and the amount of Shares to be sold by
the SK Entities in the Tag Sale shall be reduced,if necessary, to the extent
Participants (as well as such other parties permitted by the Shareholders
Agreement to participate) elect to participate. "TAG PRO RATA PORTION" means,
with respect to each Participant that desires to participate in a Tag Sale
at the time of the Tag Sale, the proportion (expressed as a percentage) that
its ownership of Shares, outstanding warrants relating to Shares, and vested
Options bears to all outstanding Shares, outstanding warrants relating to
Shares, and vested Options owned by all shareholders who

13
<PAGE>

desire to participate in such Tag Sale at such time. Each eligible
Participant that desires to exercise such option shall provide that SK
Entities with written irrevocable notice within ten (10) days after the date
the Tag Notice is given (the "TAG NOTICE PERIOD"), and shall simultaneously
provide a copy of such notice to the Company and the other shareholders. Each
accepting Participant shall deliver to the SK Entities the certificate or
certificates representing the Shares to be sold or otherwise disposed of
pursuant to such Tag Sale by such Participant, together with a limited
power-of-attorney authorizing the SK Entities to sell or otherwise dispose of
such Shares and Options pursuant to the terms of the Tag Sale. Delivery of
such certificate or certificates representing the Shares to be sold and the
limited power-of-attorney authorizing the SK Entities to sell or otherwise
dispose of such Shares and Options shall constitute an irrevocable acceptance
of the Tag Sale by such Participant

(c) Promptly after the consummation of the sale or other disposition of
Shares and Options pursuant to the Tag Sale, the SK Entities shall notify the
accepting Participants thereof, shall remit to each of the accepting
Participants the total consideration for the Shares and Options of
such Participant sold or otherwise disposed of pursuant thereto as computed
pursuant to (b) above less, to the extent that the Participants selling
Shares and Options pursuant to such Tag Sale pay the expenses related to the
Tag Sale of such Shares and Options, the pro rata portion of expenses related
to the sale of such Shares and Options, and shall furnish such other evidence
of the completion and time of completion of such sale or other disposition
and the terms thereof as may be reasonably requested by such Participant.

(d) If at the termination of the Tag Notice Period any eligible
Participant shall not have elected to participate in the Tag Sale, such
Participant will be deemed to have waived any of and all of its rights under
this Section 10 with respect to the sale or other disposition of its Shares
and Options pursuant to such Tag Sale. The SK Entities shall have 90 days in
which to sell the applicable Shares and Options on substantially the same
terms and conditions that were contained in

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<PAGE>

the Tag Notice. If, at the end of such 90-day period, the SK Entities have
not completed the sale of all the Shares and Options, the Sk Entities shall
return to the Participants all certificates representing the Shares which
such Participants delivered for sale or other disposition pursuant to this
Section 10, and all the restrictions on sale or other disposition contained
in this Plan with respect to Shares and Options owned by such Participants
shall again be in effect.

(f) Notwithstanding anything contained in this Section 10 to the
contrary, all rights and obligations under this Section 10 shall expire upon
the second anniversary of the Initial Public Offering.

SECTION 11. Right to Compel Participation in Certain Sales.

(a) At any time prior to the Initial Public Offering, if any SK Entity
should sell any of its Shares to any Third Party, which sale by such
Entities comprises at lease 50% of the outstanding Common Stock of the
Company (a "DRAG SALE"), such SK Entity may, at its option, require any
Participant holding Shares or vested Options to participate in such sale.
Such SK Entity shall provide written notice of such Drag Sale to the
Participants not later than ten (10) days prior to the proposed sale ("DRAG
NOTICE"). The Drag Notice shall identify the purchaser, the number of Shares
subject to the Drag Sale (the "NUMBER OF SHARES"), the per Share
consideration for which a sale is proposed to be made ( the "DRAG SALE PRICE")
and all other material terms and conditions of the Drag Sale. Each of the
Participants shall be required, as set forth below, to tender the percentage
of Shares and vested Options owned by such Participant as constitutes its
Drag Pro Rata Portion. "DRAG PRO RATA PORTION" means, at the time of the
Drag Sale, the proportion (expressed as a percentage) that the Shares to be
sold by the SK Entities bears to all the Shares owned by the SK Entities
immediately prior to such Drag Sale. Within five (5) days following the date
of the Drag Notice, each of the Participants shall deliver to a representative
of such SK Entity designated in the Drag Notice, the certificate or
certificates representing the Shares to be

<PAGE>

sold or otherwise disposed of pursuant to such sale by such Participant,
together with a limited power-of-attorney authorizing the SK Entities to sell
or otherwise dispose of such Shares and Options pursuant to the terms of the
Drag Sale. In the event that a Participant should fail to deliver such
certificate or certificates representing the shares to be sold and the limited
power-of-attorney authorizing the SK Entities to sell or otherwise dispose of
such Shares and Options to such Third Party, the Company shall cause the
books and records of the Company to show that such Shares and Options are
bound by the provisions of this Section 11 and that such Shares and Options
shall be transferred to the Third Party immediately upon surrender for
transfer by such Participant against payment of the per Share and per Options
consideration therefor.

(d) Promptly after the consummation of the sale of Shares pursuant to
this Section 11, the SK Entities shall give notice thereof to the
Participants, shall remit to each Participant which has surrendered its
certificates the total consideration for the Shares and Options of such
Participant sold pursuant thereto as computed pursuant to Section 11(b), and
shall furnish such other evidence of the completion and time of completion of
such sale or other disposition and the terms thereof as may be reasonably
requested by such Participant.

SECTION 12. Amendment and Termination.

16
<PAGE>

(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation or
termination shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including for
these purposes any approval requirement which is a prerequisite for exemptive
relief from Section 16(b) of the Exchange Act, for which or with which the
Board deems it necessary or desirable to qualify or comply. Notwithstanding
anything to the contrary herein, the Committee may amend the Plan in such
manner as may be necessary so as to have the Plan conform with local rules
and regulations in any jurisdiction outside the United States.

(b) Amendments to Awards. The Committee may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would adversely affect the
rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the consent
of the affected Participant, holder or beneficiary

(c) Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make adjustments
in the terms and conditions of, and the criteria included in, Awards in
recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate, or of
changes in applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan; provided that, if applicable, no
such adjustment shall be authorized to the extent such authority would be
inconsistent with the Plan's meeting the requirements of Section 162(m).

(d) Cancellation. Any provision of this Plan or any Award Agreement to the
contrary notwithstanding, the Committee may cause any Award granted hereunder
to be canceled in consideration

17
<PAGE>

of a cash payment or alternative Award made to the holder of such canceled
Award equal in value to the Fair Market Value of such canceled Award.

SECTION 13. General Provisions.

(a) Nontransferability. No Award shall be assigned, alienated, pledged,
attached, sold or otherwise transferred or encumbered by a Participant,
except by will or the laws of descent and distribution. Any Successor shall
take rights herein granted subject to the terms and conditions hereof. No
transfer shall be effective to bind the Company unless such Successor shall
have executed and delivered to the Company an instrument pursuant to which
the Successor shall have agreed to be bound by the terms of the Plan and any
applicable Award Agreement.

(b) No Rights to Awards. No Eligible Individual, Participant or other
Person shall have any claim to be granted any Award, and there is no
obligation for uniformity of treatment of Eligible Individuals, Participants,
or holders or beneficiaries of Awards. The terms and conditions of Awards
need not be the same with respect to each recipient.

(c) Share Certificates. All certificates for Shares or other securities
of the Company or any Affiliate delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan or
the rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares or other securities are
then listed, and any applicable Federal or state laws, and the Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.

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<PAGE>

"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY
IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE 1996 LONG-TERM INCENTIVE PLAN, COPIES OF WHICH MAY BE
OBTAINED UPON REQUEST FROM CHARLOTTE RUSSE HOLDING, INC. OR ANY
SUCCESSOR THERETO."

If any Shares shall cease to be Registrable Stock, the Company shall,
upon the written request of the Participant, issue to such Participant a new
certificate evidencing such Shares without the first sentence of the above
legend endorsed thereon. If any Shares cease to be subject to any restrictions
on transfer set forth in this Plan, the Company shall, upon the written request
of a Participant, issue to such Participant a new certificate evidencing such
Shares without the second sentence of the legend required above endorsed
thereon.

(d) Delegation. Subject to the terms of the Plan and applicable law,
the Committee may delegate to one or more officers or managers of the Company or
any Affiliate, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to grant
Awards to, or to cancel, modify or waive rights with respect to, or to alter,
discontinue, suspend, or terminate Awards held by, Eligible Individuals who are
not officers or directors of the Company for purposes of Section 16 of the
Exchange Act, or any successor section thereto, or who are otherwise not subject
to such Section.

(e) Withholding. A participant may be required to pay to the Company
or any Affiliate and the Company or any Affiliate shall have the right and is
hereby authorized to withhold from any Award, from any payment due or transfer
made under any Award or under the Plan or from any compensation or other amount
owing to a Participant the amount (in cash, Shares, other securities, other
Awards or other property) of any applicable withholding taxes in respect of an
Award, its exercise, or any payment or transfer under an Award or under
the Plan and to take such other action as may be necessary in the opinion

<PAGE>

of the Company to satisfy all obligations for the payment of such taxes. The
Committee may provide for additional cash payments to holders of Awards to
defray or offset any tax arising from the grant, vesting, exercise or payments
of any Award.

(f) Award Agreements. Each Award hereunder shall be evidenced by an
Award Agreement which shall be delivered to the Participant and shall specify
the terms and conditions of the Award and any rules applicable thereto.

(g) No Limit on Other Compensation Arrangements. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other compensation arrangements, which may, but need
not, provide for the grant of options, restricted stock, Shares and other
types of Awards provided for hereunder (subject to stockholder approval if
such approval is required), and such arrangements may be either generally
applicable or applicable only in specific cases.

(h) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ or as a
consultant or director of the Company or any Affiliate. Further, the Company or
an Affiliate may at any time dismiss a Participant from service, free from any
liability or any claim under the Plan, unless otherwise expressly provided in
the Plan, in any Award Agreement or in any other agreement between the Company
or any Affiliate and the Participant.

(i) No Rights as Stockholder. Subject to the provisions of the
applicable Award, no Participant or holder or beneficiary of any Award shall
have any rights as a stockholder with respect to any Shares to be distributed
under the Plan until he or she has become the holder of such Shares.

(i) Restrictions on Transfer; Form S-8.

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<PAGE>

and 11 of the Plan. After an Initial Public Offering, a Participant
may transfer Shares acquired upon exercise of an Award pursuant to
Rule 144 (or any successor provision) of the Securities Act.

(ii) Following the Initial Public Offering, the Company
covenants to use its best efforts to register Shares to be acquired
upon exercise of Options on Form S-8.

<PAGE>

(o) HEADINGS. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.

SECTION 14. TERM OF THE PLAN.

(a) EFFECTIVE DATE. The Plan shall be effective as of October 1, 1996,
subject to approval by the stockholders of the Company within one year
thereafter.

(b) EXPIRATION DATE. No Incentive Stock Option shall be granted under
the Plan after the 10th anniversary of the Effective Date. Unless otherwise
expressly provided in the Plan or in an applicable Award Agreement, any Award
granted hereunder may, and the authority of the Board or the Committee to
amend, alter, adjust, suspend, discontinue, or terminate any such Award or to
waive any conditions or rights under any such Award shall, continue after the
authority for grant of new Awards hereunder has been exhausted.

<PAGE>

LEASE AGREEMENT

(San Diego - Morena Blvd. - Charlotte Russe)

AGREEMENT made this 24th day of July, 1997, by and between PRICE
ENTERPRISES, INC., a Delaware corporation (referred to herein as "Landlord")
and CHARLOTTE RUSSE, INC., a California corporation (referred to herein as
"Tenant").

RECITALS

A) Landlord is the fee owner of the real property legally
described on Exhibit A attached hereto which is comprised of approximately
twenty seven (27) acres of land, multiple adjoining buildings (the "Building
Complex") and other improvements thereon as shown on the Site Plan attached
hereto as Exhibit B (collectively referred to herein as the "Shopping
Center").

B) Landlord wishes to lease to Tenant and Tenant wishes to lease
from Landlord, a portion of a building located in the Shopping Center (the
"Building"), which portion contains approximately eighty seven thousand
(87,000) square feet of Floor Area (the "Building Premises"), shown on the
Site Plan attached hereto as Exhibit B together with the parking lot area
shown on Exhibit B (the "Parking Lot Premises"). The Building Premises and
the Parking Lot Premises are collectively referred to herein as the
"Premises".

NOW, THEREFORE, in consideration of the mutual covenants herein,
the Landlord and Tenant agree as follows:

ARTICLE I

DEFINITIONS, PREMISES, TERM

1.01 DEFINITIONS.

A) "Building" shall mean the building in which the Building
Premises is located which is depicted on Exhibit B attached hereto.

B) "Building Complex" is defined in Recital Paragraph (A).

C) "Commencement Date" shall mean the date the Term of this Lease
begins as provided in Section 1.04.

D) "Extension Term" is defined in Section 1.06.

E) "Floor Area" shall mean the aggregate number of.. square feet
of floor space, from time to time, of the ground floors only in any and all
buildings located in the Shopping Center available or held for the exclusive
use and occupancy of tenants or occupants or

<PAGE>

future tenants or occupants, whether or not actually occupied, measured from
the exterior faces or the exterior lines of the exterior walls and from the
center of interior walls separating separate premises. Excluded from Floor
Area are any fire corridors

F) "Governing Interest Rate" shall mean the prime rate charged by
Wells Fargo Bank of California, plus three (3) percentage points, determined
as of the date interest begins to accrue.

G) "Impositions" is defined in Section 4.01 (A).

H) "Initial Term" is defined in Section 1.05.

I) "Landlord" shall mean the Landlord named herein and its
successors and assigns.

J) "Landlord's Work" is defined in Exhibit D attached hereto.

K) "Law" shall mean any judicial decision, statute, constitution,
ordinance, regulation, rule, administrative order, or other requirements of
any municipal, county, state, federal, or other governmental agency or
authority having jurisdiction over the Landlord and Tenant or the Premises,
or both, in effect either at the time of execution of this Lease or at any
time during the Term, including, without limitation, any regulation or order
of a quasiofficial entity or body (e.g., Board of Fire Examiners or public
utilities).

L) "Lease" shall mean this lease agreement.

M) "Lease Date" is the date of this Lease.

N) "Lease Termination Date" shall mean the last day of the 'Term"
as provided herein or upon earlier termination of this Lease.

O) "Lease Year" shall mean every twelve (12) consecutive calendar
months during the Term commencing on the Rent Commencement Date, provided,
however, if the Rent Commencement Date is not the first day of a calendar
month, the first Lease Year shall consist of the twelve (12) full consecutive
calendar months following the Rent Commencement Date, plus the period from
the Rent Commencement Date to the first day of such twelve (12) calendar
month period.

P) "Minimum Rent" is defined in Section 3.02.

Q) "Mortgage" shall mean any mortgage, deed to secure debt,
trust indenture, or deed of trust which may now or hereafter affect, encumber,
or be a lien upon the Premises or

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<PAGE>

Landlord's interest therein; and any renewals, modifications, consolidations
replacements, and extensions thereof.

R) "Mortgagee" shall mean the holder of any Mortgage, at any time.

S) "North Driveway Area" is defined in Section 1.03(A).

T) "Option Notice" is defined in Section 1.06(C)(2)(a).

U) "Parking Lot Premises" is defined in Recital Paragraph (B).

V) "Person" shall mean and include an individual, corporation,
partnership, unincorporated organization or government, or any agency or
political subdivision thereof.

W) "Premises" is defined in Recital Paragraph (B).

X) "Pro Rata Share" shall mean a fraction the numerator of which
is the Floor Area of the Building Premises and the denominator of which is
the Floor Area of the entire Shopping Center, including the Building
Premises, as determined from time to time.

Y) "Rent" shall mean Minimum Rent and all other amounts required
to be paid by Tenant to Landlord as provided herein.

Z) "Repairs" shall mean repairs, replacements, alterations,
changes, and improvements.

AA) "Rent Commencement Date" is defined in Section 3.01.

BB) "Restoration" is defined in Section 7.01.

CC) "Tenant" shall mean the Tenant named herein and its
successors and as-signs as permitted herein.

DD) "Tenant's Work" is defined in Exhibit D.

EE) "Term" shall mean the Initial Term or the Initial Term as
then extended pursuant to Section 1.06 herein.

1.02 EXHIBITS.

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<PAGE>

The following exhibits are attached to and part of this Lease.

Exhibit A - Legal Description of Shopping Center.
Exhibit B - Site Plan of Shopping Center.
Exhibit C - Confirmation of Initial Term of Lease.
Exhibit D - Leasehold Improvements.
Exhibit E - Sign Requirements.

1.03 LEASE OF PREMISES.

A) Landlord leases to Tenant and Tenant leases from Landlord
the Premises, upon the terms and conditions of this Lease. Without limitation of
the foregoing, Landlord grants Tenant and its employees, agents, contractors,
invitees and suppliers the non-exclusive right to use the driveway entrance of
the Shopping Center to the north of the Premises (the "North Driveway Area"), as
shown on the Site Plan attached hereto as Exhibit B, for vehicular ingress only
from Morena Boulevard to the Premises. Vehicles may not exit the Premises
through the North Driveway Area.

B) The Premises are leased in their "AS IS" condition subject
to Landlord's Work and subject to Landlord's obligations under Section 2.04 and
6.02. Tenant acknowledges that it is relying on its own investigation of the
Premises, including, but not limited to, its physical condition of the Premises,
and further acknowledges that the Landlord makes no representation or warranty
with respect to the Premises or any other matter pertaining to this Lease,
except as specifically provided herein.

C) Landlord warrants that upon the Commencement Date the roof
of the Building Premises shall be reasonably watertight and Landlord has the
right to grant sole and exclusive possession of the Parking Lot Premises to the
Tenant.

D) This Lease of the Premises is subject to (i) all covenants,
conditions, restrictions, easements, liens and encumbrances, and other matters
of record affecting the Premises; (ii) all future covenants, conditions,
restrictions, easements, liens and encumbrances and other matters of record
affecting the Premises, provided they do not materially adversely affect
Tenant's rights or obligations herein; and (iii) all Laws. Except for the
matters shown in that certain title insurance policy as of December 16, 1994,
issued by Chicago Title Company, Policy No.: 970103 15, Reference: 984537 / #14,
Landlord represents and warrants that there are no covenants, conditions,
restrictions, easements, liens or encumbrances, or other matters of record,
which materially adversely (i) affect Tenant's use and enjoyment of the Premises
pursuant to this Lease, (ii) affect Tenant's exercise of its rights under this
Lease, and/or (iii) increase Tenant's obligations under this Lease.

E) Tenant has no right to park in or otherwise use any portion
of the Shopping Center other than the Premises and the North Driveway Area as
provided herein.

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<PAGE>

1.04 LANDLORD'S WORK.

A) Landlord shall cause the construction of Landlord's Work in
accordance with applicable codes and laws as provided in Exhibit D, attached
hereto captioned "Leasehold Improvements". The term of this Lease shall begin
(the "Commencement Date") on the date (i) Landlord has substantially completed
that portion of Landlord's Work required to be completed prior to the
Commencement Date, as provided herein in paragraph 1 A) 1) of Exhibit D, other
than such "punch list" items which can be completed within thirty (30) days and
without material interference with Tenants efforts to ready the Premises for
Tenant's occupancy; and (ii) Landlord has given Tenant written notice that the
Premises is ready for Tenant's possession.

B) Landlord covenants to diligently rectify the items contained
in the "punch list" while minimizing interference with the performance of
Tenant's Work.

C) Promptly after the Lease Date, Landlord shall prepare
building plans for the Landlord's Work and submit same to the applicable
governmental authorities to obtain all necessary permits to construct Landlord's
Work (the "Landlord's Permits"). If Landlord does not obtain the Landlord's
Permits within sixty (60) days after the Lease Date, then either Landlord
(provided Landlord has diligently attempted to obtain Landlord's Permits) or
Tenant may terminate this Lease by giving notice of such termination to the
other party within ten (10) days after such sixty (60) day period.

D) Landlord's Architect shall determine the Floor Area of the
Building Premises upon completion of the Landlord's Work and notify both
Landlord and Tenant, in writing, of such measurements prior to the Rent
Commencement Date. Such determination by Landlord's Architect shall be binding
on Tenant, unless Tenant gives Landlord written notification of such
disagreement within fifteen (15) days after receiving such determination, in
which case, Landlord and Tenant shall agree on an independent architect (to be
paid in equal shares by Landlord and Tenant) to determine Floor Area which
determination shall be binding on Landlord and Tenant.

1.05 INITIAL TERM.

A) The term of this Lease shall commence on the Commencement
Date and terminate August 31, 2009 ("Initial Term").

B) When the Commencement Date and the Rent Commencement Date
have been determined, the Landlord and Tenant shall immediately execute a
confirmation of such dates in the form and content as set forth in Exhibit C
attached hereto.

1.06 OPTION TO EXTEND LEASE TERM.

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<PAGE>

A) Subject to Paragraph E) below Tenant may, at Tenants option,
extend the Initial Term of this Lease for up to two (2) consecutive periods of
five (5) years each (each such period referred to as an "Extension Term"),
subject to all the provisions of this Lease, except for any further extensions
of the Term. The Extension Term shall commence at the expiration of the Initial
Term, or the previous Extension Term, as the case may be, and shall terminate on
the last day prior to the fifth anniversary of the date of commencement of the
Extension Term, unless sooner terminated as provided herein.

B) After the exercise of an option to extend, all references in
this Lease to the "Term" shall be considered to mean the Term as extended, and
all references to termination or to the end of the Term shall be considered to
mean the termination or end of the Extension Term.

C) Tenant's right to extend the Initial Term or such Initial
Term as previously extended, is subject to:

(1) the following conditions precedent:

a) This Lease shall be in full force and effect at
the time notice of exercise is given and on the last day of the Initial Term or
the then current Extension Term, as applicable.

b) Tenant shall not be in default with all periods of
time to cure such default having expired as provided in Section 13.01 herein:
(i) at the time notice of exercise is given; or (ii) on the last day of the
Initial Term, or the previous Extension Term as the case may be.

(2) compliance with the following procedure for exercising
the option:

a) At least one (1) year before the last day of the
Initial Term or the current Extension Term, as the case may be, Tenant shall
give Landlord written notice irrevocably exercising the option (the "Option
Notice").

b) Each party shall, at the request of the other,
execute a memorandum acknowledging the fact that the option in question has been
exercised.

D) Neither the foregoing option granted to Tenant to extend the
Term of this Lease, nor the exercise thereof by Tenant, shall prevent Landlord
from exercising any right granted or reserved to Landlord in this Lease or which
Landlord may have by virtue of any Law or otherwise, to terminate this Lease,
either during the Initial Term or during any Extension Term. Any lawful
termination of this Lease shall serve to terminate all Extension Terms, whether
or not Tenant shall have exercised same. Any right on the part of Landlord to
terminate this

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<PAGE>

Lease shall continue during the Extension Term, and the foregoing option
granted to Tenant to extend the Term shall not be deemed to give Tenant any
further option to extend the Term.

E) A portion of the shopping center is currently leased to The
Price Company pursuant to a written lease dated August 29, 1994 between Price
Enterprises, Inc. ("Landlord") and The Price Company ("Tenant") (referred to
herein as the "Costco Lease"). The initial term of the Costco Lease expires
August 31, 2009. The tenant under the Costco Lease has an option to extend the
initial term of such lease for up to seven (7) periods of five (5) years each.

(1) In the event the Tenant herein exercises its option to
extend the term of this Lease for the first Extension Term commencing September
1, 2009, and the tenant under the Costco Lease does not exercise its option to
extend the term of the Costco Lease (beginning September 1, 2009) then the
Landlord, at its option, may declare Tenant's option to extend the Term of this
Lease null and void by giving written notice of such fact to Tenant within
thirty (30) days after the right of the tenant under the Costco Lease to extend
its lease term expires.

(2) In the event that the initial terms of both this Lease
and the Costco Lease are extended for the five year period beginning September
1, 2009, and in the event the Tenant herein exercises its option to further
extend the Term of this Lease for the second Extension Term commencing September
1, 2014, and the tenant under the Costco Lease does not exercise its further
option to extend the term of the Costco Lease, beginning September 1, 2014, then
the Landlord, at its option, may declare Tenant' s option to extend the Term of
this Lease null and void by giving written notice of such fact to the Tenant
within thirty (30) days after the right of the tenant under the Costco Lease to
extend its lease term expires.

F) Landlord represents that the tenant under the Costco Lease
must exercise its options, if any to extend the term of such lease at least six
(6) months prior to the expiration of the then-existing lease term.

ARTICLE II

USE AND OPERATION OF PREMISES

2.01 USE OF PREMISES.

Tenant may use the Building Premises for offices, warehousing and a
merchandise distribution facility and for merchandise liquidation sales one (1)
day only during each calendar month and for no other purpose whatsoever; and may
use the Parking Lot Premises for parking vehicles and driveways and a trash
container and compact area and for no other purpose whatsoever.

2.02 OPERATION OF TENANT'S BUSINESS.

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A) In the event Tenant does not operate its business in the
Premises for more than six (6) months during any twelve (12) month period,
except if prevented by events of Force Majeure and except for days during which
Tenant is diligently making alterations or repairs to the Premises, then
Landlord, at its option, may terminate this Lease upon sixty (60) days prior
notice to the Tenant.

B) The following activities are prohibited on the Premises
except as otherwise provided in paragraph (A) above: auction, going out of
business, fire or bankruptcy sales; unreasonable noise or offensive odors; coin
operated vending machines or pay telephones, unless for the exclusive use of
employees of the Tenant. In addition, no radio or television antennas shall be
installed on the exterior of the Building Premises, and no aerial or any form of
satellite dish may be erected on the roof or otherwise on the exterior of the
Building, unless it is not visible to public view.

2.03 TENANT'S COMPLIANCE WITH LAWS.

Tenant shall comply with all Laws concerning the Premises and the use
thereof.

Notwithstanding anything to the contrary contained in this Lease, Tenant
shall not (and Landlord shall) be required to comply with the provision of any
Law pertaining to the Premises and/or the use thereof if and to the extent that
the then need for such compliance is caused by or is legally required due to:
(i) work which Landlord or another tenant proposes to do with respect to the
Shopping Center or any part thereof or (ii) a use proposed to be conducted in
the Shopping Center (other than the Premises) by parties other than the Tenant.

2.04 WASTE - NUISANCE.

Tenant shall not use the Premises in any manner that will constitute waste
or a public or private nuisance.

2.05 TENANT SIGNS.

A) Tenant, at its cost, shall have the right to place,
construct and maintain an exterior sign on the outside of the Premises, as set
forth in the "Sign Requirements" in Exhibit E attached hereto, advertising the
name of its business.

B) Tenant shall not have the right to place, construct, or
maintain on the exterior walls or roof of the Building Premises, any signs,
advertisements, names, insignia, trademarks, descriptive material, or any other
similar item without Landlord's consent, except as allowed in Exhibit E attached
hereto. Landlord, at Tenant's cost, may remove any item placed, constructed, or
maintained that does not comply with the provisions of this paragraph.

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<PAGE>

C) Tenant shall not, without Landlord's consent, place,
construct, or maintain outside of the Premises and within the Shopping Center
any advertisement media, including, without limitation, searchlights, flashing
lights, loudspeakers, phonographs, or other similar visual or audio media.

2.06 CANCELLATION OF INSURANCE; INCREASE IN INSURANCE RATES.

Tenant shall not do, bring, or keep anything in or about the
Premises that will cause a cancellation of any insurance covering the Building.
If the rate of any insurance carried by Landlord is increased solely as a result
of Tenant's use, Tenant shall pay to Landlord within thirty (30) days before the
date Landlord is obligated to pay a premium on the insurance, or within ten (10)
days after Landlord delivers to Tenant a certified statement from Landlord's
insurance carrier stating that the rate increase was caused solely by an
activity of Tenant of the Premises as permitted in this Lease, whichever date is
later, a sum equal to the difference between the original premium and the
increased premium.

2.07 LANDLORD'S ENTRY ON PREMISES.

A) Landlord and its authorized representatives shall have the
right to enter the Premises at all reasonable times during Tenant's normal
business hours, upon twelve (12) hours prior notice to Tenant, unless such entry
is required due to an emergency, for any of the following purposes:

(1) to determine the condition of the Premises and whether
Tenant is complying with its obligations under this Lease;

(2) to do, at its option, any Repairs to the Premises where
Tenant has failed to do so;

(3) to do any Repairs to the Premises which Landlord is
required to do as provided herein;

(4) to serve, post, or keep posted any notices required or
allowed under the provisions of this Lease; and

(5) to show the Premises to any prospective purchaser of
the Premises or any lender with respect to the Shopping Center.

B) Landlord shall conduct its activities on the Premises as
allowed in this section in a manner that will cause the least possible
inconvenience, annoyance, or disturbance to Tenant. Nothing in this Section
shall be deemed to impose any obligation on the part of Landlord to do anything
that is allowed by this Section.

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<PAGE>

Notwithstanding anything to the contrary contained in this Lease,
in the event that due to any entry by or on behalf of Landlord into the
Premises, the Premises are rendered wholly or partially untenantable, then
during the period of such untenantability all Rent shall abate in proportion to
the degree to which Tenant's use of the Premises is impaired.

ARTICLE III

RENT

3.01 RENT COMMENCEMENT DATE.

Tenant shall commence paying Minimum Rent, Rent, Impositions, and
all other Rent as provided herein on the earlier of (i) the date Tenant opens
for business on the Premises, or (ii) ninety (90) days after the Commencement
Date (the "Rent Commencement Date").

3.02 MINIMUM RENT.

A) Tenant shall pay to Landlord a monthly "Minimum Rent" during
each Lease Year, beginning on the Rent Commencement Date as follows:

(1) INITIAL TERM

<TABLE>
<CAPTION>
LEASE YEAR MONTHLY RATE
---------- ------------
<S> <C>
1- 3 $.47 per square foot of Floor Area.
4- 7 $-57 per square foot of Floor Area.
8-11 $-67 per square foot of Floor Area.
12 through end $.77 per square foot of Floor Area.
of Initial Term
</TABLE>

(2) EXTENSION TERM

September 1, 2009 - August 31, 2014
The greater of $18 per square foot of
Floor Area or ninety five percent (95%)
of the Minimum Monthly Fair Market Value
Rental Rate as determined in paragraph
(B) below.

September 1, 2014 - August 31, 2019
The greater of $.78 per square foot of
Floor Area or ninety five percent (95%)
of the Minimum Monthly Fair

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<PAGE>

Market Value Rental Rate as
determined in paragraph (B) below.

B) (1) The "Minimum Monthly Fair Market Rental Rate" shall be
determined as provided in this Section 3.02 (B).

(2) The parties shall have thirty (30) days after Landlord
receives an Option Notice in which to agree, in writing, on the Minimum
Monthly Fair Market Value Rental Rate during the Extension Term. If the
parties agree, in writing, on the Minimum Monthly Fair Market Value Rental
Rate for the Extension Term within the thirty (30) day period, they shall
immediately execute an amendment to this Lease, stating the Minimum Monthly
Fair Market Rental Rate for such Extension Term.

(3) If the parties are unable to agree on the Minimum Monthly
Fair Market Value Rental Rate for the Extension Term within the thirty (30)
day period, then within ten (10) days after expiration of that period each
party, at its cost and by giving notice to the other party, shall appoint a
real estate appraiser with at least five years' full-time commercial
appraisal experience in the area in which the Premises are located to
appraise and set the Minimum Monthly Fair Market Value Rental Rate for the
Extension Term. If a party does not appoint an appraiser within such ten (10)
day period, the single appraiser appointed shall be the sole appraiser and
shall set the Minimum Monthly Fair Market Value Rental Rate for the Extension
Term. If the two appraisers are appointed by the parties as stated in this
paragraph, they shall meet promptly and attempt to set the Minimum Monthly
Fair Market Value Rental Rate for the Extension Term. If the are unable to
agree within thirty (30) days after the second appraiser has been appointed,
they shall attempt to select a third appraiser meeting the qualifications
stated in this paragraph within seven (7) days after the last day the two
appraisers are given to set the Minimum Monthly Fair Market Value Rental
Rate. If they are unable to agree on the third appraiser, either of the
parties to this Lease by giving ten (10) days' notice to the other party may
file a petition with the American Arbitration Association solely for the
purpose of selecting a third appraiser who meets the qualifications stated in
this paragraph. Each party shall bear half the cost of the American
Arbitration Association's appointing the third appraiser and of paying the
third appraiser's fee. The third appraiser, however selected, shall be a
person who has not previously acted in any capacity for either party.

(4) Within thirty (30) days after the selection of the third
appraiser, a majority of the appraisers shall set the Minimum Monthly Fair
Market Value Rental Rate for the Extension Term. If a majority of the
appraisers are unable to set the Minimum Monthly Fair Market Value Rental
Rate within the stipulated period of time, the three appraisals shall be
added together and their total divided by three; the resulting quotient shall
be the Minimum Monthly Fair Market Value Rental Rate for the Premises during
the Extension Term. If, however, the low appraisal and/or the high appraisal
are more than five percent (5%) lower and/or higher than the middle
appraisal, the low appraisal and/or the high appraisal shall be disregarded.
If only one appraisal is disregarded, the remaining two appraisals shall be
added together and their total

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<PAGE>

divided by two; the resulting quotient shall be the Minimum Monthly Fair
Market Value Rental Rate for the Premises during the Extension Term. If both
the low appraisal and the high appraisal are disregarded as stated in this
paragraph, the middle appraisal shall be the Minimum Monthly Fair Market
Value Rental Rate for the Premises during the Extension Term.

(5) Minimum Monthly Fair Market Value Rental Rate shall be
the minimum rent a willing tenant would pay and a willing landlord would
accept for the Extension Term, subject to all of the other terms and
conditions of this Lease determined as of the date of which is one (1) year,
prior to the beginning of the Extension Term.

3.03 MONTHLY INSTALLMENTS.

The Minimum Rent for each Lease Year shall be paid in twelve (12)
equal monthly installments in advance on the Rent Commencement Date and on
the first day of each calendar month thereafter (referred to herein as
"Monthly Rent"). If the first Lease Year is longer than twelve (12) calendar
months, the annual Minimum Rent for the first Lease Year shall consist of the
annual Minimum Rent for twelve (12) calendar months, plus a pro-rated daily
amount for the period from the Rent Commencement Date until the last day of
the month in which the Rent Commencement Date occurs. If the last day of the
Term is other than the last day of a calendar month, then the Minimum Rent
for such short month shall be pro-rated on a daily basis based upon a thirty
(30) day month.

3.04 NO COUNTERCLAIM, ABATEMENT, ETC.

Except as otherwise specifically provided herein, Rent and all
other sums payable by Tenant hereunder shall be paid without notice, demand,
noncompulsory counterclaim, setoff, deduction or defense, and without
abatement, suspension, deferment, diminution or reduction, and the
obligations and liabilities of Tenant hereunder shall in no way be released,
discharged or otherwise affected by reason of (a) any damage to or
destruction of or any Taking (as hereinafter defined) of the Premises,
including improvements thereto or any part thereof; (b) any restriction or
prevention of or interference with any use of the Premises, including
improvements thereto or any part thereof other than by Landlord; (c) any
bankruptcy, insolvency, reorganization, composition, adjustment, dissolution,
liquidation or other like proceeding relating to Landlord; (d) any claim
which Tenant has or might have against Landlord; or (e) any failure on the
part of Landlord to perform or comply with any of the terms hereof or of any
other agreement with Tenant, whether or not Tenant shall have notice or
knowledge of any of the foregoing. Nothing contained in the preceding
sentence shall preclude Tenant from bringing an independent action against
Landlord. Except as expressly provided in this Lease, Tenant waives all
rights now or hereafter conferred by statute or otherwise to quit, terminate
or surrender this Lease or the Premises or any part thereof, or to any
abatement, suspension, deferment, diminution or reduction of rent or any
other sum payable by Tenant hereunder.

3.05 INTEREST ON RENT.

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Each late payment of Rent shall bear interest from its due date
until paid, at the Governing Interest Rate.

3.06 LATE CHARGE.

Notwithstanding anything to the contrary herein contained, in
order to cover the extra expenses involved in handling delinquent payments,
Tenant, at Landlord's option, shall pay a "late charge" of five percent (5%)
of the delinquent payment when such payment of Rent hereunder is paid more
than ten (10) days after the due date and more than three (3) days after
written demand for Rent by Landlord. It is understood and agreed that this
charge is for additional expense incurred by Landlord, and shall not be
considered interest.

3.07 PLACE FOR PAYMENT OF RENT.

All payments of Rent shall be made to the Landlord at 4649 Morena
Boulevard, San Diego, California 92117, or such other address designated, in
writing, by Landlord.

ARTICLE IV

TAXES, ASSESSMENTS AND UTILITIES

4.01 IMPOSITIONS.

A) The term "Impositions" shall mean all real estate taxes,
duties or assessments (special or otherwise), water and sewer rents, whether
ordinary or extraordinary, general or special, foreseen or unforeseen, of any
kind and nature whatsoever, which, at any time during the Term of this Lease,
shall be assessed, levied, confirmed, imposed upon or grow out of, or become
due and payable in respect of, or become a lien on or be attributable in any
manner to the Shopping Center, or the rents receivable therefrom, or any part
thereof or any use thereon or any facility located therein or used in
connection therewith, whether or not any of the foregoing shall be a
so-called "real estate ta)e'. From and after the Rent Commencement Date,
Tenant shall pay to Landlord Tenant's Pro-Rata Share of all Impositions
attributable to the land and Improvements of the Shopping Center. All
Impositions or installments thereof payable with respect to the tax year in
which the Rent Commencement Date shall occur, and all Impositions or
installments thereof with respect to the tax year in which this Lease shall
terminate, shall be apportioned.

B) With respect to Impositions which by law may be paid over a
period of time, Landlord shall be deemed to have elected (the "Installment
Election") to pay such Impositions over the longest period of time permitted
by law, regardless of whether Landlord has in fact so elected. With respect
to each year in which the Installment Election is effective and with respect
to the Impositions subject to the Installment Election, Tenant's share of
such

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<PAGE>

Imposition(s) for each year shall be the amount which would be required to be
paid to the collecting authority as if Landlord had in fact made the
Installment Election, plus interest and/or penalties resulting from the
Installment Election.

4.02 OTHER GOVERNMENTAL CHARGES.

Tenant shall pay, before any fine, penalty, interest, or cost may
be added thereto or become due or be imposed by operation of law for the
nonpayment thereof, all excises, levies, licenses, and permit fees, and other
governmental charges, general and special, ordinary and extraordinary,
unforeseen and foreseen, of any kind and nature whatsoever attributable
solely to (a) the Premises, or (b) Tenant, which, at any time prior to or
during the Term of this Lease, may be assessed, levied, confirmed, imposed
upon, or grow or become due and payable out of or in respect of or become a
lien on, the Premises or any part thereof or any appurtenance thereto as the
result of or in connection with the use to which the Premises are put by
Tenant (notwithstanding that such use may be for the purposes herein
permitted or may have been consented to by Landlord).

4.03 EXCEPTIONS FROM IMPOSITIONS; CHARGES IN LIEU OF IMPOSITIONS.

Tenant shall not be required to pay any municipal, county, state,
or federal income or franchise taxes of Landlord, business license fee of
Landlord, or any municipal, county, state, or federal estate, succession,
inheritance, or transfer taxes of Landlord. If, at any time during the term,
the State in which the Property is locate or any political subdivision of the
state, including any county, city and county, public corporation, district,
or any other political entity or public corporation of the state, levies or
assesses against Landlord a tax, fee, or excise on (1) rents, (2) the square
footage of the Premises, (3) the act of entering into this Lease, or (4) the
occupancy of Tenant, however described, including, without limitation, a
socalled value-added tax, as a direct substitution in whole or in part for,
or in addition to, any real property taxes, Tenant shall pay before
delinquency that tax, fee, or excise. Tenant's share of any such tax, fee, or
excise shall be substantially the same as Tenant's proportionate share of
real property taxes as provided in this Lease.

4.04 PAYMENT OF IMPOSITIONS.

Landlord shall submit to Tenant, with respect to each real estate
fiscal tax period for which Impositions are payable, a bill for Tenant's Pro
Rata Share of the Impositions, together with a true copy of the tax bill.
Tenant shall pay Impositions to Landlord within thirty (30) days after
receipt of such tax bill.

4.05 CONTEST OF TAXES.

Except as provided below, Tenant shall not institute any proceeding with
respect to the assessed valuation of the Premises or any part thereof or the
Impositions thereon. If Landlord has

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not instituted such proceeding for any year or fiscal period, and if at least
forty-five (45) days prior to the last day for the institution thereof, Ten '
ant requests Landlord to institute such proceeding, Landlord may, within
fifteen (15) days after such request, file with the appropriate authority
having jurisdiction thereover, an application for reduction and correction of
the tax assessment for such year or fiscal period, failing which, Tenant may
file such application on behalf of Landlord. In the event that there should
be an increase in Impositions as a result of a proceeding instituted at the
request of or by Tenant, then Tenant shall pay the full amount of (a) such
increase each year during the Term, and (b) the expenses incurred in
connection therewith; provided, however, that if any such Imposition which
was increased as a result of a proceeding instituted by or at the request of
Tenant for any tax year, shall, for such tax year, subsequently be reduced,
Tenant shall receive the benefit of such reduction. If Landlord shall receive
a refund of an Imposition for which Tenant has made payment, Tenant shall
receive such refund thereof after deducting the costs, fees and expenses
incurred by Landlord in connection with obtaining such refund. Landlord shall
provide Tenant with copies of notices received by Landlord from the taxing
authorities of any assessments or reassessments of the Premises in sufficient
time to enable Tenant to contest same in accordance with the provision of
this Section 4.05.

4.06 PERSONAL PROPERTY TAX.

Tenant shall pay before delinquency all taxes, assessments,
license fees, and other charges ("taxes") that are levied and assessed
against Tenant's personal property installed or located in or on the
Premises, and that become payable during the term. On demand by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of these payments.
If any taxes on Tenant's personal property are levied against Landlord or ,
Landlord's property, or if the assessed value of the Building or the Shopping
Center is increased by the inclusion of a value placed on Tenant's personal
property, and if Landlord pays the taxes on any of these items or the taxes
based on the increased assessment of these items, Tenant, on demand, shall
immediately reimburse Landlord for the sum of the taxes levied against
Landlord, or the proportion of the taxes resulting from the increase in
Landlord's assessment. Landlord shall have the right to pay these taxes
regardless of the validity of the levy.

4.07 UTILITIES.

Tenant agrees to make its own arrangements, at Tenant's sole cost
and expense, for any gas, electricity, and any other utility required in
connection with the use and operation of the Premises. Tenant shall pay
before delinquency, directly to the appropriate company or governmental
agency, all charges for all utilities consumed on the Premises.

ARTICLE V

SHOPPING CENTER - USE AND OPERATION

5.01 LANDLORD'S MANAGEMENT AND OPERATIONAL RIGHTS.

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A) Landlord shall have the right to:

(1) Change the size, location or nature of the buildings
and other improvements in the Shopping Center (other than the Premises),
including, but not limited to multi-deck, subterranean or elevated parking
facilities.

(2) Increase the size of the Shopping Center by additional
land, buildings and other structures.

B) Notwithstanding anything in paragraph A) above to the
contrary, Landlord shall not voluntarily: (i) close off or eliminate either
of the two curb cuts which presently permit direct access to the Premises off
of Morena Boulevard; or (ii) close off or eliminate the North Driveway Area;
except if due to an emergency or due to making repairs.

5.02 HILLSIDE MAINTENANCE.

Tenant shall reimburse Landlord monthly for Tenant's Pro-Rata
Share of all reasonable costs incurred by Landlord in the periodic repair,
maintenance and clean-up of the hillside along the northern and eastern
boundaries of the Shopping Center; provided, however, Tenant's Pro Rata Share
may never exceed Five Thousand Dollars ($5,000) in any Lease Year.

ARTICLE VI

REPAIR, MAINTENANCE AND ALTERATIONS OF PREMISES

6.01 TENANT'S REPAIRS AND MAINTENANCE.

Except as provided in Section 2.04 and 6.02, and Articles VII and
XII, throughout the Term, Tenant, at its sole cost and expense, shall
maintain the Premises and keep same in good order and condition, and make all
necessary Repairs thereto, interior and exterior, ordinary and extraordinary,
and unforeseen and foreseen, all in accordance with applicable Laws. All
Repairs made by Tenant shall be equal in quality and class to the original
work. Tenant shall have the benefit of all warranties in force with respect
to portions of the Premises Tenant is obligated to repair and maintain as
provided herein.

6.02 LANDLORD'S REPAIRS AND MAINTENANCE.

Landlord, at its sole cost and expense, shall maintain in its
current condition and in accordance with applicable Laws, the following:

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A) The structural parts of the Building which structural parts
include only the foundations, bearing walls (excluding glass and doors)
sub-flooring and roof (excluding skylights after the first Lease Year).

B) The unexposed electrical, plumbing and sewage systems located
within the Premises.

C) Gutters and downspouts which are part of the Building.

If Landlord refuses or neglects to repair the Premises properly as
required in this Section 6.02 and Section 2.04 within a reasonable time after
written notice by Tenant to Landlord, (except that no notice shall be
required in case of emergency, and except that such "reasonable time" shall
not be more than ten (10) days, unless such repairs cannot be reasonably
completed within such ten (10) day period and Landlord shall have commenced
the repair within a reasonable period of time after receipt of Tenant's
notice and thereafter diligently proceeded therewith to completion), Tenant
may make such repairs, at Landlord's expense, and upon completion thereof
Tenant may deduct its reasonably incurred costs occasioned by such repairs
from Rent next becoming due.

6.03 STRUCTURAL AND EXTERIOR REPAIRS.

Tenant shall not make any structural or exterior changes or
Repairs in or to the Premises, including any Restoration without (except in
an emergency situation), first obtaining Landlord's written consent, not to
be unreasonably withheld, delayed or conditioned, subject, however, in all
cases, to the following additional requirements:

A) Any structural work shall be completed under the supervision
of a licensed architect or engineer, and no such structural or exterior
changes or Repairs shall be made, except in accordance with detailed plans
and specifications, all of which shall be submitted to Landlord for prior
approval (which shall not be unreasonably withheld, delayed or conditioned).
Plans and specifications submitted to Landlord shall be deemed approved
unless, within twenty (20) days of Landlord's receipt thereof, Landlord
notifies Tenant of its disapproval and specifies the reason therefor. Tenant
shall perform all changes and Repairs in accordance with the approved plans
and specifications.

B) Any Repairs shall, when completed, be of such character as
not to reduce the value of the Premises below its value immediately before
such change or alteration.

C) Neither the height of the Building Premises, nor the Floor
Area of the Premises, nor the footprint of the Building Premises may be
changed.

D) The Building Premises may not be subdivided.

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E) No buildings or other structures may be built in the Parking
Lot Premises.

Subject to all other provisions of this Section 6.03, upon
obtaining Landlord's prior written consent, which shall not be unreasonably
withheld, delayed or conditioned, Tenant shall have the right to make changes
and alterations to the Parking Lot Premises, including without limitation the
installation of lighting, signage and security cameras, and the right to
enclose the Parking Lot Premises by the use of fencing or other reasonable
means; provided, however, the Parking Lot Premises may only be used for
parking of vehicles ingress and egress driveways, liquidation sales referred
to in Section 2.01, and a trash container and compactor area. In addition,
Tenant shall have the right without Landlord's consent to install a satellite
dish or antenna on or about the Premises (other than the roof) so long as
such dish or antenna is not readily visible to public view.

6.04 REPAIRS - GENERAL CONDITIONS.

All Repairs to the Premises which the Tenant desires or is required
to make are subject to the following:

A) The Repairs shall be made promptly and in a good and
workmanlike manner in compliance with all applicable permits and
authorizations and Laws. Upon Landlord's request, Tenant shall furnish
evidence that Tenant has obtained all required permits and authorizations.

B) The cost of Repairs which are Tenant's obligation shall be
promptly paid by Tenant so that the Premises shall at all times be free of
mechanics' liens for labor and materials supplied or claimed to have been
supplied to the Premises by or on behalf of Tenant.

C) In the event the Tenant's net worth at the time Repairs are
to be made is less than Fifteen Million Dollars ($15,000,000), then prior to
the commencement of Repairs the estimated aggregate cost of which exceeds One
Hundred Thousand Dollars ($100,000), Tenant shall deliver evidence to
Landlord that Tenant has obtained: (i) workmen's compensation insurance,
covering all persons employed in connection with Repairs and with respect to
whom death or bodily injury claims could be asserted against Landlord,
Landlord's designee(s), Tenant or the Premises and all policies or
certificates therefor issued by the respective insurers, bearing notations
that such insurance is in good standing; and (ii) "builder's risk" insurance.

D) In the event the Tenant's net worth at the time Repairs are
to be made is less than Fifteen Million Dollars ($15,000,000)and the
estimated aggregate cost of such Repairs exceeds One Hundred Thousand Dollars
($100,000), then before the commencement of the Repairs, Tenant, at its cost,
shall furnish to Landlord a performance and completion bond in a form
reasonably acceptable to Landlord, issued by an insurance company qualified
and licensed to do business in California, in a sum equal to the cost of the
Repairs guaranteeing the

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completion of the Repairs free and clear of all liens and other charges and in
accordance with plans and specifications.

6.05 FIXTURES.

Subject to governmental permits and approvals first having been
received, Tenant may, at its own cost and expense, place or install or cause
to be placed or installed in or upon the Premises such equipment, furniture,
and fixtures as Tenant, in its sole discretion, shall deem necessary or
appropriate to the conduct of Tenant's business. Tenant may, at its own
expense, thereafter, at any time, substitute, replace, or cause to be
substituted or replaced any or all of said signs, equipment, furniture, and
fixtures. All of said signs, equipment, furniture and fixtures shall, for
the purpose of this Lease, be treated as personal property, no matter how
affixed, and at no time shall Landlord have any rights therein unless and
until granted by a written instrument executed by both Tenant and Landlord.

6.06 NO CONSTRUCTION BEFORE NOTICE; NOTICE OF NONRESPONSIBILITY.

No Repairs of any kind, in excess of Thirty Thousand Dollars
($30,000.00), shall be commenced, and no building or other materials shall be
delivered for any Repairs until at least ten (10) days after written notice
has been given by Tenant to Landlord of the commencement of such work or the
delivery of such materials. Landlord shall, at any and all reasonable times
during the term of this Lease, have the right to post and maintain on the
Premises, and to record as required by Law, any notice or notices of
nonresponsibility provided for by the mechanics' lien laws of the State in
which the Premises are located. The work prohibited by this Section, until
ten (10) days written notice thereof has been given to Landlord, includes, as
well as actual construction work, any site preparation work, installation of
utilities, street construction or improvement work, or any grading or filling
of said Premises.

6.07 CLAIMS AGAINST LANDLORD.

Nothing contained in this Lease shall constitute any consent or
request by Landlord, express or implied, for the performance of any labor or
services or the furnishing of any materials or other property in respect of
the Premises or any part thereof, or as giving Tenant any right, power or
authority to contract for or permit the performance of any labor or services
or the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Landlord.

6.08 MECHANICS' LIENS.

At all times during the Term, Tenant shall keep said Premises
free and clear of all liens and claims of liens for labor, services,
materials, supplies or equipment performed on or furnished to said Premises
by or on behalf of Tenant or other occupant of the Premises. However, Tenant
may, in good faith and at Tenant's own expense, contest the validity of any

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such asserted lien, claim or demand, provided Tenant pursues such contest
diligently and, if Landlord so requests of Tenant in writing, Tenant shall
furnish a bond freeing the Premises from any such lien. If Tenant does not
cause to be recorded the bond described as aforementioned or otherwise
protect the property within twenty (20) days after service on Tenant of
written request from Landlord to do so, Landlord may, at its option, in
addition to any other right or remedy, pay, adjust, compromise and discharge
any such lien or claim of lien on such terms and manner as Landlord may deem
appropriate. In such event, Tenant shall, on or before the first day of the
next calendar month following any such payment by Landlord, reimburse
Landlord for the full amount paid by Landlord in paying, adjusting,
compromising, and discharging such lien or claim of lien, including any
attorneys' fees or other cost expended by Landlord, together with interest at
the Governing Interest Rate from the date of payment by Landlord to the date
of repayment by Tenant.

ARTICLE VII

CASUALTY DAMAGE - RESTORATION

7.01 DAMAGE DUE TO RISK COVERED BY INSURANCE.

If after the Lease Date, the Premises or the Building are totally
or partially destroyed from a risk covered or required to be covered by the
insurance described in Section 8.03 , then Landlord shall diligently restore
the Premises and the Building to substantially the same condition as they
were in immediately before the destruction (the "Restoration"). Except as
otherwise provided herein, such destruction shall not terminate the Lease. If
the existing laws do not permit the Restoration, either party may terminate
the Lease by giving notice to the other party.

7.02 DESTRUCTION DUE TO RISK NOT COVERED BY INSURANCE.

A) If during the Term, the Premises or the Building are totally
or partially destroyed from a risk not covered or required to be covered by
the insurance described in Section 8.03 or any other insurance policy
maintained by Landlord, Landlord shall restore the Premises and the Building
to substantially the same condition as they were in immediately before
destruction. Except as otherwise provided herein, such destruction shall not
terminate the Lease. If the existing Laws do not permit Restoration, either
party can terminate this Lease by giving notice to the other party.

B) Notwithstanding anything in paragraph (A) above to the
contrary, if the cost of Restoration pursuant to this Section 7.02 exceeds
thirty-five percent (35%) of the then replacement value of the Premises or
the Building. Landlord may elect to terminate this Lease by giving notice to
Tenant within fifteen (15) days after determining the Restoration cost and
replacement value.

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C) In the case of destruction to the Premises only, if Landlord
elects to terminate this Lease Tenant, within fifteen (15) days after
receiving Landlord's notice to terminate, can elect to pay to Landlord, at
the time Tenant notifies Landlord of its election, the difference between
thirty-five percent (35%) of the then replacement value of the Premises and
the actual cost of Restoration, in which case Landlord shall diligently
complete Restoration of the Premises and Building. Landlord shall give Tenant
satisfactory evidence that all sums contributed by Tenant as provided in this
paragraph have been expended by Landlord in paying the cost of Restoration.

D) If Landlord elects to terminate this Lease and Tenant does not
elect to perform the Restoration or contribute toward the cost of Restoration
as provided in this Section, this Lease shall terminate.

7.03 EXTENT OF LANDLORD'S OBLIGATION TO RESTORE.

If Landlord is required or elects to restore the Premises as
provided in Section 7.01 or 7.02, Landlord shall not be required to restore
alterations or improvements made by Tenant (except to the extent covered by
Landlord's insurance), tenants trade fixtures, and tenant's other personal
property.

7.04 SUBSTANTIAL DESTRUCTION.

A) For purposes of this Section 7.04 "Substantial Destruction"
shall mean damage or destruction of the Building Complex where the cost to
repair or replace same exceeds forty percent (40%) of the replacement value
of the Building Complex just prior to the damage or destruction.

B) Notwithstanding anything in the Lease to the contrary, but
subject to Section 7.08, in the event that at any time there is Substantial
Destruction of the Building Complex, the Landlord may, at its option,
relocate the Tenant within the Shopping Center to other premises within the
Shopping Center (the "New Premises"), provided the New Premises are at least
as large and have comparable utility to Tenant as the Premises described
herein, provided Tenant shall not be required to vacate the Premises, which
are tenantable, until the New Premises are ready for occupancy by Tenant.

7.05 DAMAGE NEAR END OF TERM.

If the Premises are totally or partially destroyed during the
last year of the Term which destruction makes more than thirty percent (30%)
of the Floor Area of the Building Premises untenantable, either Landlord or
Tenant may terminate this Lease by giving notice to the other party not more
than thirty (30) days after the date of such destruction. However, if the
destruction occurs during the last year of the Term and if within thirty (30)
days after the date of such destruction Tenant elects to extend the Term, as
permitted under Section 1.06 (if the time

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within which the option can be exercised has not expired), Landlord may not
terminate this Lease as aforementioned, subject, however to the Landlord's
rights under Section 1.06 (E)(2).

7.06 ABATEMENT OF RENT.

In the event of any damage or destruction of the Premises
rendering the same partially or completely untenantable, then thereafter the
Rent shall equitably abate, until Restoration of the damaged Premises, based
upon the Floor Area of the Premises and/or portion of the Parking Lot
Premises rendered untenantable or inadequate for Tenant's use.

7.07 WAIVER OF STATUTE.

Landlord and Tenant waive the provisions of California Civil Code
Section 1932(2) and Civil Code Section 1933(4) with respect to any
destruction of the Premises or the Building.

7.08 TENANT'S RIGHT OF TERMINATION.

Notwithstanding anything to the contrary contained in this Lease,
in the event the Premises is damaged by any casualty and based upon a
reasonable estimate the Premises is not likely to be restored within two
hundred and forty (240) days after the date of the casualty nor is New
Premises as defined in Section 7.04 (B) likely to be provided to Tenant
within two hundred forty (240) days after the date of the casualty, then
Tenant shall have the right to terminate this Lease by notice to Landlord
given within thirty (30) days after the date of the casualty.

ARTICLE VIII

INDEMNITY - EXCULPATION - INSURANCE

8.01 EXCULPATION OF LANDLORD.

Landlord shall not be liable to Tenant for any damage to Tenant
or Tenant's property from any cause, and Tenant waives all claims Tenant may
have in the future against Landlord for damage to person or property arising
for any reason, except that Landlord shall be liable to Tenant for damage to
Tenant resulting from the negligent acts or omissions of Landlord or its
employees or agents.

8.02 INDEMNITY OF LANDLORD.

From and after the Lease Date, Tenant hereby indemnifies and
agrees to hold Landlord and its Mortgagee harmless from and against any and
all claims, liability, demands, causes of action, proceedings, damages, costs
and expenses (including, but not limited to reasonable attorneys' fees which:
(1) arise from or are in connection with Tenant's use,

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occupation, control, management or repair of the Premises; (2) arise from or
are in connection with any act or omissions of Tenant or Tenant's employees
or agents; (3) result from any default by Tenant of any provision of this
Lease; or (4) arise from any injury to person or property sustained in the
Premises (except to the extent contributed to by the negligence of the
Landlord or its agents or employees); provided, however, that prior to the
Commencement Date, Tenant's indemnity with respect to injury to person or
property shall only apply if caused by Tenant, its agents, employees or
independent contractors. Tenant shall defend any action and proceeding which
may be brought against Landlord or Mortgagee with respect to the foregoing or
in which they are impleaded.

8.03 FIRE AND CASUALTY INSURANCE PREMISES.

A) Landlord shall maintain on the Building and other
improvements in which the Premises are located a policy of Special Form
property insurance and difference in conditions insurance to the extent of
full replacement value and rent interruption insurance for a period not to
exceed one (1) year. The insurance policy shall be issued in the name of the
Landlord, Tenant, and Landlord's lender as their interests appear. The
insurance policy shall provide that any proceeds shall be made payable to
Landlord. If this Lease is terminated, the insurance policy and all rights
under it or the insurance proceeds shall belong to Landlord. The insurance
shall not cover Tenants furniture, fixtures, equipment and other personal
property nor other improvements made by the Tenant to the Premises after the
Rent Commencement Date.

B) Tenant shall reimburse Landlord for Tenant's Share of the
reasonable premiums paid by Landlord for maintaining the insurance required
by Section 8.3 within thirty (30) days after Tenant receives a copy of the
premium notice with a computation of Tenant's Share of such premium cost.
Tenant's obligation to reimburse Landlord for insurance cost shall be
prorated for any partial Lease Year at the commencement and expiration of the
Term. Tenant's Share shall mean a fraction the numerator of which is the
Floor Area of the Premises and the denominator of which is the Floor Area of
all buildings covered by such insurance policy, including the Floor Area of
the Premises.

8.04 TENANT PUBLIC LIABILITY AND PROPERTY DAMAGE INSURANCE.

A) Tenant, at its sole cost, shall maintain public liability and
property damage insurance (and product liability insurance) with a single
combined limit of Two Million Dollars ($2,0 00,000) and property damage
limits of not less than Two Million Dollars ($2,000,000) insuring against all
liability of Tenant and its authorized representatives arising out of and in
connection with Tenant's use and occupancy of the Premises. All public
liability and product liability insurance and property damage insurance shall
insure performance by Tenant of the indemnity provisions of Section 8.02.
Both Landlord and Tenant shall be named insureds and the policy shall contain
cross liability endorsements. Notwithstanding anything to the contrary
contained in this Lease, Tenant may satisfy any of its insurance requirements
under the Lease by means of a blanket, excess liability and/or umbrella
policy(ies).\

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B) Not more frequently than once every five (5) years and not
prior to the fifth (5th) anniversary of the Rent Commencement Date, at the
request of Landlord, Tenant must increase the amount of public liability
insurance coverage as reasonably determined by Landlord; provided, however
the percentage of such increase every five (5) years may not exceed the
percentage increase in the Consumer Price Index (base year 1982-1984=100) San
Diego, published by the United States Department of Labor for such five (5)
year period.

8.05 WAIVER OF SUBROGATION.

The parties release each other and their respective authorized
representatives from any claims for damage to the Premises or the Building
Complex and for damage to Tenant's fixtures, equipment and other personal
property in or on the Premises and the Building that are caused by or result
from risks insured against under any insurance policies carried or required
to be carried by the parties. Each party shall cause each insurance policy
obtained by it to provide that the insurance company waives all right of
recovery by way of subrogation against either party in connection with any
damage covered by any policy. Neither party shall be liable to the other for
any damage caused by fire or any of the risks insured against under any
insurance policy required by this Lease. If any insurance policy cannot be
obtained with a waiver of subrogation, or is obtainable only by the payment
of an additional premium charge above that charged by insurance companies
issuing policies without waiver of subrogation, the party undertaking to
obtain the insurance shall notify the other party of this fact. The other
party shall have a period of ten (10) days after receiving the notice either
to place the insurance with a company that is reasonably satisfactory to the
other party and that will carry the insurance with a waiver of subrogation,
or to agree to pay the additional premium if such a policy is obtainable at
additional cost. If the insurance cannot be obtained or the party n whose
favor a waiver of subrogation is desired refuses to pay the additional
premium charged, the other party is relieved of the obligation to obtain a
waiver of subrogation rights with respect to the particular insurance
involved.

8.06 GENERAL INSURANCE MATTERS.

All the insurance required under this Lease shall:

A) Be issued by insurance companies authorized to do business in
the State of California, with a financial rating of at least an A + 3A status
as rated in the most recent edition of Best's Insurance Reports.

B) Be issued as a primary policy.

C) Contain an endorsement requiring at least ten (10) days
written notice from the insurance company to both parties and Landlord's
lender before cancellation or change in the coverage, scope, or amount of any
policy.

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Each policy, or a certificate of the policy, together with
evidence of payment of premiums, shall be deposited with the other party at
the commencement of the Term, and on renewal of the policy not less than
thirty (30) days before expiration of the Term of the policy.

ARTICLE IX

ENVIRONMENTAL MATTERS

9.01 DEFINITION.

[GRAPHIC]

A) For purposes of this Article IX, the term "Hazardous
Substance" means any (a) substance, product, waste or other material of any
nature whatsoever which is or becomes listed, regulated, or addressed
pursuant to the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601, et seq. ("CERCLA"); the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. ("RCRN'); the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Water
Act, 33 U.S.C. Section 1251, et seq.; the California Hazardous Waste Control
Act, Health and Safety Code Section 25100, et seq.; the California Hazardous
Substance Account Act, Health and Safety Code Section 25330, et seq.; the
California Safe Drinking Water and Toxic Enforcement Act, Health and Safety
Code Section 25249.5, et

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seq.; California Health and Safety Code Section 25280, et seq. (Underground
Storage of Hazardous Substances); the California Hazardous Waste Management
Act, Health and Safety Code Section 25170.1, et seq.; California Health and
Safety Code Section 25501, et seq. (Hazardous Materials Response Plans and
Inventory); or the California Porter-Cologne Water Quality Control Act, Water
Code Section 13000, et seq., all as amended (the above-cited California state
statutes are hereinafter collectively referred to as "the State Toxic
Substances Laws"), or any other federal, state or local statute, law,
ordinance, resolution, code, rule, regulation, order or decree regulating,
relating to, or imposing liability or standards of conduct concerning any
hazardous, toxic or dangerous waste, substance or material, as now or at any
time hereafter in effect; (b) any substance, product, waste or other material
of any nature whatsoever which may give rise to liability under any of the
above statutes or under any statutory or common law theory based on
negligence, trespass, intentional tort, nuisance or strict liability or under
any reported decisions of a state or federal court; (c) petroleum or crude
contamination of the Premises with Hazardous Substances, (vii) estimated
costs of removing any Hazardous Substances; and (viii) any other information
or recommendations Landlord may reasonably require.

B) If the presence, release, threat of release, placement on,
under or about the Premises, or the use, generation, manufacture, storage,
treatment, discharge, release, burial or disposal on, under or about the
Premises or transportation to or from the Premises of any Hazardous Substance
is caused by Tenant and: (i) gives rise to liability, costs or damages
(including, but not limited to, a response action, remedial action, or
removal action) under RCRA, CERCLA, the State Toxic Substance Laws, or any
statutory or common law theory based on negligence, trespass, intentional
tort, nuisance or strict liability or under any reported decision of a state
or federal court; (ii) causes or threatens to cause a significant public
health effect; or (iii) pollutes or threatens to pollute the environment,
Tenant shall, subject to subsection (F) of this Section 9.02, promptly take
any and all response, remedial and removal action necessary to clean up the
Premises and any other affected property and mitigate exposure to liability
arising from the Hazardous Substance, whether or not required by law or by
any governmental entity.

C) Tenant shall comply with all federal, state and local laws,
ordinances and regulations relating to any such response, remedial or removal
action.

D) Tenant shall indemnify, defend with counsel selected by
Landlord, protect and hold harmless Landlord, its directors, officers,
employees, agents, assigns and any successor or successors to Landlord's
interest in the Premises from and against all claims, actual damages
(including, but not limited to, special and consequential damages), punitive
damages, injuries, costs, response costs, losses, demands, debts, liens,
liabilities, causes of action, suits, legal or administrative proceedings,
interest, fines, charges, penalties and expenses [including, but not

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limited to: (1) attorneys', engineers', consultants' and expert witness fees
and costs incurred in connection with defending against any of the foregoing
or in enforcing this indemnity and (2) any diminution in the value of the
Premises] of any kind whatsoever paid, incurred or suffered by, or asserted
against, the Premises or any indemnified party directly or indirectly arising
from or attributable to (i) any breach by Tenant of any of its agreements,
warranties or representations set forth in this Article IX or (ii) any
repair, cleanup or detoxification, or preparation and implementation of any
removal, remedial, response, closure or other plan concerning any Hazardous
Substance introduced by Tenant on, under or about the Premises, regardless of
whether undertaken due to governmental action. To the fullest extent
permitted by law, the foregoing indemnification shall apply regardless of the
fault, active or passive negligence, breach of warranty or contract of
Landlord. The foregoing indemnity is intended to operate as an agreement
pursuant to Section 107(e) of CERCLA, 42 U.S.C. Section 9607(e) and
California Health and Safety Code Section 25364, to insure, protect, hold
harmless and indemnify Landlord from any liability pursuant to such section.

E) Tenant shall promptly give Landlord (i) a copy of any written
notice, correspondence or information it receives from any federal, state or
other government authority regarding Hazardous Substances on, under or about
the Premises or Hazardous Substances which affect or may affect the Premises,
or regarding any actions instituted, completed or threatened by any such
governmental authority concerning Hazardous Substances which affect or may
affect the Premises; (ii) written notice of any knowledge or information
Tenant obtains in writing regarding Hazardous Substances on, under or about
the Premises or expenses or losses incurred or expected to be incurred by
Tenant, third party or any government agency to study, assess, contain or
remove any Hazardous Substances on, under, about or near the Premises for
which expense or loss Tenant may be liable; (iii) written notice of any
knowledge or information Tenant obtains regarding the release or discovery of
Hazardous Substances on, under or about the Premises, and; (iv) written
notice of all written claims made or threatened by any third party against
Tenant or the Premises relating to damage, contribution, cost recovery
compensation, loss or injury resulting from any Hazardous Substance.

F) Without Landlord's prior written consent, which shall not be
unreasonably withheld or delayed, Tenant shall not take any remedial action
in response to the presence of any Hazardous Substance on, under or about the
Premises, nor enter into any settlement agreement, consent decree, or other
compromise in respect to any claims referred to in subsection (E) of this
Section 9.02, which remedial action, settlement, consent or compromise might,
in Landlord's reasonable judgment, impair the value of the Premises;
provided, however, that Landlord's prior consent shall not be necessary in
the event that the presence of any Hazardous Substance on, under or about the
Premises either poses an immediate threat to the health, safety or welfare of
any individual or is of such a nature that an immediate remedial response is
necessary and it is not possible to obtain Landlord's consent before taking
such action, provided that in such event Tenant shall notify Landlord as soon
as practicable of any action so taken. Landlord agrees not to withhold its
consent, where such consent is required hereunder, if either (i) a particular
remedial action is ordered by a court of competent jurisdiction, or (ii) Tenant
established to the reasonable

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satisfaction of Landlord that there is no reasonable alternative to such
remedial action which would result in less impairment of the value of the
Premises.

9.02 LANDLORD'S INDEMNITY.

Landlord shall indemnify, defend and hold Tenant harmless from: (i)
any claims by third parties for damages to property or injury to persons arising
out of Landlord's release of Hazardous Substances from the Premises and from
(ii) damages, penalties, and clean-up costs claimed or imposed by any
governmental authority arising out of Hazardous Substances existing on or under
the Shopping Center as of the Commencement Date or Hazardous Substances on the
Shopping Center caused by the Landlord after the Commencement Date.

ARTICLE X

ASSIGNMENT AND SUBLETTING

10.01 ASSIGNMENT AND SUBLETTING.

A) Except as otherwise provided in this Section, Tenant shall
not voluntarily assign or encumber its interest in this Lease, or in the
Premises, or sublease all or any part of the Premises, or allow any other Person
to occupy or use all or any part of the Premises, without first obtaining
Landlord's prior written consent, which consent shall not be unreasonably
withheld. Any assignment, encumbrance, or sublease without Landlord's consent
shall be void. No consent to any assignment, encumbrance, or sublease shall
constitute a further waiver of the provisions of this paragraph.

B) Anything contained in this Article X to the contrary, Tenant
shall have the right to assign this Lease or sublet the Premises, without
obtaining Landlord's prior written consent thereto: (1) to an entity which is a
parent, subsidiary, or affiliate (as defined in Securities Act of 1933 and the
regulations thereunder) of Tenant for so long as such relationship to Tenant
under this Lease exists; or (2) to a corporation which is a successor to Tenant
and its subsidiaries and affiliates, by way of merger, consolidation or
corporate reorganization, or to any entity which has succeeded to the interest
of Tenant by the purchase of substantially all of the assets or shares of stock
of Tenant and its subsidiaries and affiliates, provided: (a) Tenant is not then
in default under the terms of Section 13-01 of this Lease; (b) promptly after
the execution of any such assignment or subletting, a fully executed and
acknowledged original assignment or sublease agreement, is delivered to
Landlord, which assignment shall contain an assumption agreement by the assignee
in favor of Landlord of the terms and provisions of this Lease; and (c) Tenant
shall remain liable under this Lease.

C) In the event Tenant wishes Landlord's consent referred to in
paragraph (A) above, Tenant shall forward to Landlord:

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(1) The names and addresses of all principals of the
proposed assignee or sublessee.

(2) Financial statements of the proposed assignee or
sublessee.

(3) The proposed business activity to be conducted by the
assignee or sublessee.

(4) A copy of the proposed assignment, pursuant to which
assignment such assignee shall assume all obligations on Tenant's part to be
performed hereunder.

(5) A check payable to the Landlord in the amount of Seven
Hundred Fifty Dollars ($750.00) to compensate Landlord for its fees and costs in
reviewing the request for its consent and all documents related thereto.

D) No assignment by Tenant of its interest under this Lease,
which is permitted herein, shall be valid or effective unless in writing and
unless and until there is delivered to Landlord a copy of a written assignment
and assumption agreement executed by the Tenant and the assignee, pursuant to
which such assignee agrees to assume and be bound by all of the obligations of
this Lease to be performed by Tenant from and after the effective date of such
assignment. Any sublease of the Premises shall be subject to all of the terms,
covenants, and conditions of this Lease.

E) The Tenant shall continue to remain liable for all past and
future Rent and all other obligations and covenants of the Tenant hereunder
notwithstanding any assignment or sublease. Notwithstanding the aforementioned
in the event of an assignment of this Lease by the Tenant, the assignor-tenant
shall be relieved of tenant obligations thereafter accruing if: the "net worth"
of the assignee at the date of the assignment is at least equal to the greater
of (i) Twenty Million Dollars ($20,000,000) or (ii) the "net worth" of the
assignor at the date of the assignment. The "net worth" of both the assignor and
the assignee must be determined according to generally accepted to accounting
principles as set forth in certified financial statements of independent
certified public accountants licensed to do business in the State of California.

ARTICLE XI

SUBORDINATION AND ATTORNMENT

11.01 SUBORDINATION.

A) At Landlord's election, this Lease shall be subordinate or
superior to the lien of any present or future Mortgage irrespective of the time
of recording of such Mortgage. If, from time to time, Landlord shall elect that
this Lease be subordinate to the lien of any Mortgage,

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Landlord may exercise such election by giving notice thereof to Tenant. The
exercise of any of the elections provided in this paragraph shall not exhaust
Landlord's right to elect differently thereafter, from time to time. At the
election of Landlord, this clause shall be self-operative, and no further
instrument shall be required. Upon Landlord's request, from time to time,
Tenant shall (1) confirm in writing and in recordable form that this Lease is
so subordinate or so paramount (as Landlord may elect) to the lien of any
Mortgage; and/or (2) execute an instrument making this Lease so subordinate
or so paramount (as Landlord may elect) to the lien of any Mortgage, in such
form as may be reasonably required by an applicable Mortgagee.

B) This Lease shall not be subordinate to any present or future
Mortgage unless the holder of any such Mortgage executes and delivers to Tenant
a non-disturbance and attornment agreement, which agreement shall provide, inter
alia, that, notwithstanding any foreclosure of such Mortgage or deed in lieu of
foreclosure, such Mortgagee shall recognize this Lease, including all of
Tenant's rights hereunder.

11.02 ATTORNMENT.

If the Premises are encumbered by a Mortgage, and such Mortgage is
foreclosed, or if the Premises are sold pursuant to such foreclosure or by
reason of a default under said Mortgage, then notwithstanding such foreclosure,
such sale or such default (1) Tenant shall not disaffirm this Lease or any of
its obligations hereunder, and (2) at the request of the applicable Mortgagee or
purchaser at such foreclosure or sale, Tenant shall attorn to such Mortgagee or
purchaser and execute a new lease for the Premises setting forth all of the
provisions of this Lease, except that the term of such new lease shall be for
the balance of the Term.

ARTICLE XII

CONDEMNATION

12.01 ENTIRE PREMISES TAKEN.

If the whole of the Premises shall be acquired by eminent domain or
condemned by eminent domain, then the Term shall cease and terminate as; of the
date on which possession of the Premises is actually surrendered to the
condemning authority, and on such date all Rent shall be paid up to that date
and thereupon this Lease sh ' all terminate. Tenant shall in no event have any
claim against Landlord or the condemning authority for the value of any
unexpired Term.

12.02 PARKING LOT PREMISES.

A) If more than ten percent (10%) of the area of the Parking
Lot Premises shall be acquired by eminent domain then the Tenant may terminate
this Lease by giving Landlord at least sixty (60) days prior written notice of
termination no later than thirty (30) days

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after possession of the Parking Lot Premises is acquired by the condemning
governmental authority.

B) If either the most northern curb cut which provides direct
access to the Parking Lot Premises from Morena Boulevard or the North Driveway
Area is permanently taken by eminent domain and no reasonably substitute curb
cut is provided in its place so that Tenant has reasonable ingress and egress to
and from the Premises, then the Tenant may terminate this Lease by giving
Landlord at least sixty (60) days prior written notice of termination no later
than thirty (30) days after such curb cut or North Driveway Area is taken and
thus, rendered unavailable by the condemning governmental authority.

12.03 PORTION OF BUILDING PREMISES TAKEN.

If any part of the Building Premises shall be acquired by eminent
domain or condemned by eminent domain, then in any such event the Term shall, at
Tenant's option, be terminated by written notice to Landlord within sixty (60)
days after any such taking. The Lease shall cease and terminate sixty (60) days
after the Tenant gives Landlord the notice of termination as aforementioned, and
on such date all Rent shall be paid up to that date, and thereupon this Lease
shall terminate. Tenant shall in no event have any claim against Landlord or the
condemning authority for the value of the unexpired Term. In the event of a
partial taking or condemnation of the Building Premises, and Tenant does not so
elect to terminate this Lease, then Landlord shall use the net condemnation
proceeds allocable to the Building Premises for the Restoration of the Building
Premises in accordance with the provisions of Paragraph 7.01 hereof, to a
condition comparable to their condition at the time immediately prior to the
condemnation or taking; less, however, the portion lost in the taking, and this
Lease shall continue in full force and effect pursuant to the terms and
conditions hereof; provided, however, that the Minimum Rent shall abate in
proportion to the Floor Area of the Building Premises taken. If the condemnation
award is insufficient to pay the entire cost of the Restoration, then
notwithstanding any provision of this Lease to the contrary, Landlord shall have
no obligation to repair or pay for the repair of such damage, and Tenant, if it
fails to terminate this Lease in accordance with this paragraph, shall supply
the amount of any deficiency and repair the damage. For purposes of determining
the amount of the funds available for Restoration of the Building Premises from
the condemnation award, said amount will be deemed to be that part of the award
which remains after payment of Landlord's reasonable expenses incurred in
recovering same and which represents a portion of the total sum so available
(excluding any award or other compensation for land), which is equitably
allocable to the Building Premises.

12.04 LANDLORD'S AWARD.

Except to the extent hereinabove provided with respect to the
Restoration of the Premises, in the event of any condemnation or taking as
hereinbefore provided, whether whole or partial, the Tenant shall not be
entitled to any part of the award, as damages or otherwise, for such
condemnation, and the Landlord and any mortgagee of Landlord are to receive
the full

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amount of such award as their respective interests may appear, the Tenant
hereby expressly waiving any right or claim to any part thereof and assigning
to Landlord any such right or claim to which it might be entitled.

12.05 TENANT'S AWARD.

Tenant shall have the right to claim and recover from the
condemning authority, but not from Landlord or any Mortgagee, such compensation
as may be separately awarded or recovered by Tenant in Tenant's own right for or
on account of, and limited solely to any cost to which Tenant might be put in
removing Tenant's merchandise, furniture, fixtures, and equipment from the
Premises, loss of business and any other damages, excluding the value of -the
Shopping Center, the Premises, and the value, if any, of the Tenant's Leasehold
Estate, provided, in any event, no such claim by Tenant reduces the award
Landlord would otherwise be entitled to.

ARTICLE XIII

DEFAULT

13.01 TENANT'S DEFAULT.

The occurrence of any of the following shall constitute a default
by Tenant:

A) failure to pay Rent, when due, if the failure continues for
ten (10) days after written notice has been given to Tenant by Landlord;

B) failure by Tenant to pay any monetary obligation provided
herein, except as provided in paragraph (A) above or any breach of any other
provision of this Lease if the breach is not cured within thirty (30) days after
written notice; provided, however, with respect to a non-monetary breach, if
Tenant cannot reasonably cure the breach within such thirty (30) day period,
Tenant shall not be in default of this Lease if Tenant commences to cure the
breach within the thirty (30) day period and diligently and in good faith
continues to cure the breach.

13.02 LANDLORD'S REMEDIES CUMULATIVE.

Landlord shall have the following remedies set forth in subsections
(A) through (H) below if Tenant commits a default. These remedies are not
exclusive and may be exercised concurrently or successively; they are cumulative
in addition to any remedies now or later allowed by law.

A) BRING SUIT FOR PERFORMANCE. Landlord may bring suit for the
collection of the Rent or other amounts for which Tenant is then in default, or
for the performance of any other covenant or agreement devolving upon Tenant,
all without having to enter into possession or terminate this Lease;

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B) RE-ENTRY WITHOUT TERMINATION. Landlord may re- enter the
Premises, by summary proceedings or otherwise, and take possession thereof,
without thereby terminating this Lease, and thereupon Landlord may expel all
persons and remove all property therefrom, either peaceably or by force,
without becoming liable to prosecution therefor, and relet the Premises and
receive the rent therefrom, applying the same first to the payment of the
reasonable expenses of such re-entry and the reasonable cost of such
reletting, and then to the payment -of the Rent and other amounts for which
Tenant is then in default; the balance, if any, to be paid to Tenant, who,
whether or not the Premises are relet, shall remain liable for any
deficiency, it is agreed that the commencement and prosecution of any action
by Landlord in forcible entry and detainer, ejectment, or otherwise, or the
appointment of a receiver, or any execution of any decree obtained in any
action to recover possession of the Premises, or obtained in any action to
recover possession of the Premises, or any re-entry, shall not be construed
as an election to terminate this Lease unless Landlord shall, in writing,
expressly exercise its election to declare the Term hereunder ended and to
terminate this Lease, and unless this Lease be expressly terminated, such
re-entry or entry by Landlord, whether had or taken under summary proceedings
or otherwise, shall not be deemed to have absolved or discharged Tenant from
any of its obligations and liabilities for the remained of the Term of this
Lease. Notwithstanding anything to the contrary or other provisions of this
Lease, if the Landlord elects the remedy provided in this Section 13.02(B),
Tenant shall have the right to sublet the Premises, assign its interest in
the Lease, or both, with the written consent of the Landlord, which consent
shall not be unreasonably withheld.

C) TERMINATION OF LEASE AND TENANT'S RIGHT TO POSSESSION.
Landlord may terminate this Lease and Tenant's right to possession by giving
Tenant five (5) days' written notice of such termination. No act by Landlord,
other than giving Tenant written notice of termination of this Lease, shall
in fact terminate the Lease. Upon termination of the Lease, neither the
Landlord nor the Tenant shall have any future rights or obligations under the
Lease, except that Landlord shall have the right to recover from the Tenant
the following:

(1) the worth, at the time of the award, of the unpaid Rent
that had been earned at the time of termination of this Lease;

(2) the worth, at the time of the award, of the amount by
which the unpaid Rent that would have been earned after the date of termination
of this Lease until the time of award exceeds the amount of the loss of Rent
that Tenant proves could have been reasonably avoided;

(3) the worth, at the time of the award, of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of the loss of Rent that Tenant proves could have been
reasonably avoided; and

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(4) any other amount, and court costs, necessary to
compensate Landlord for all detriment proximately caused by Tenant's failure to
perform his obligations under the Lease or which, in the ordinary course of
things, would be likely to result therefrom.

D) DEFINITIONS. As used herein, the following phrases shall be
interpreted as follows:

(1) "The worth, at the time of the award," as used in
subsections 13.02(C)(1) and (2) above, is to be computed by allowing interest at
the maximum lawful rate. "The worth, at the time of the award," as referred to
in subsection 13.02(C)(3) above, is to be computed by discounting the amount at
the discount rate of the Federal Reserve Bank of San Francisco at the time of
the award, plus one percent (1 %).

(2) As used herein, the term "time of award" shall mean
either the date upon which Tenant pays to Landlord the amount recoverable by
Landlord as hereinabove set forth or the date of entry of any determination,
order, or judgment of any court or other legally constituted body determining
the amount recoverable, whichever first occurs.

E) Promptly after notice of termination, Tenant shall surrender
and vacate the Premises and all improvements in broom-clean condition, and
Landlord may re-enter and take possession of the Premises and all remaining
improvements and eject all parties in possession or eject some and not others,
or eject none. Termination under subsection 13.02(C) shall not relieve Tenant
from the payment of any sum due to Landlord or from any claim for damages
previously accrued or then accruing against Tenant.

F) ASSIGNMENT OF SUBRENTS. Tenant assigns to Landlord all
subrents and other sums falling due from subtenants, licensees, and
concessionaires (herein called subtenants) during any period in which Landlord
has the right under this Lease, whether exercised or not, to re-enter the
Premises for Tenant's default, and Tenant shall not have any right to such sums
during that period. Landlord may, at Landlord's election, re-enter the Premises
and improvements with or without process of law, without terminating this Lease,
and either or both collect these sums or bring action for the recovery of the
sums directly from such obligors. Landlord shall receive and collect all
subrents and avails from reletting, applying them: first, to the payment of
reasonable expenses (including attorneys' fees or brokers' commissions or both)
paid or incurred by or on behalf of Landlord in recovering possession and
placing the Premises and improvements in good condition; second, to the
reasonable expense of securing new lessees; third, to the fulfillment of
Tenant's covenants to the end of the Term; and fourth, to Tenant. Tenant shall
nevertheless pay to Landlord on the due dates specified in this Lease the
equivalent of all sums required of Tenant under this Lease, plus Landlord's
expenses, less the avails of the sums assigned and actually collected under this
provision. Landlord may proceed to collect either the assigned sums or Tenant's
balances, or both, or any installment or installments of the, either before or
after expiration of the Term, but the period of limitations shall not begin to
run on Tenant's payments until the due date of the final installment to which
Landlord is entitled, nor

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shall it begin to run on the payments of the assigned sums until the due date
of the final installment due from the respective obligors.

G) APPOINTMENT OF RECEIVER. If Tenant fails to perform any of
the obligations set forth in Section 13.01, and such failure or violation is not
cured within the time periods set forth in Section 13.01, then Landlord shall
have the right to have a receiver appointed to collect rent for any subtenants.
Neither the filing of a petition for the appointment of a receiver nor the
appointment itself shall constitute an election by Landlord to terminate this
Lease.

H) Landlord's Right to Cure Tenant's Default. Landlord, at any
time after Tenant commits a default, can cure the default at Tenant's cost if
Tenant fails to perform any of the obligations set forth in Section 13.01, and
such failure or violation is not cured within the time periods provided in
Section 13.01. If Landlord, at any time, by reason of Tenant's default, pays any
sum or does any act that requires the payment of any sum, the sum paid by Lessor
shall be immediately reimbursed from Tenant to Landlord, and if paid at a later
date shall bear interest at the Governing Interest Rate from the date the sum is
paid by Landlord until Landlord is reimbursed by Tenant.

13.03 TENANT'S WAIVER OF STATUTORY RIGHTS.

In the event of any termination of this Lease or re-entry by
Landlord without termination as provided under this Article XIII, Tenant, so far
as permitted by law, waives (a) any notice of re-entry or of the institution of
legal proceedings to that end; (b) any right of redemption, re-entry, or
repossession; and (c) any right to trial by jury.

13.04 LANDLORD'S DEFAULT.

A) Landlord shall be in default under this Lease if Landlord
fails to perform any covenant of Landlord and such failure is not cured within
thirty (30) days after receipt of written notice from Tenant of such failure;
provided, however, if Landlord can not reasonably cure such failure within such
thirty (30) day period Landlord shall not be in default if Landlord commences to
cure the failure within the thirty (30) day period and diligently and in good
faith continues to cure the failure.

B) In the event of Landlord's default, Tenant may seek
injunctive relief or damages against the Landlord.

ARTICLE XIV

END OF TERM

14.01 SURRENDER OF PREMISES.

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A) On the Lease Termination Date the Tenant shall quit and
surrender the Premises into the possession and use of Landlord without delay,
broom-clean and in good order, condition and repair (reasonable wear and tear
excepted), free and clear of all occupancies or subleases, and free and clear of
all liens and encumbrances other than those, if any, created by Landlord. At the
end of the Term or earlier termination of this Lease, despite any options or
privileges herein contained, the title to and/or ownership of tenant leasehold
improvements, if not therefor vested in Landlord, shall automatically; vest in
Landlord without the execution of any further instrument, free and clear of all
liens and encumbrances other than those, if any, created by Landlord. However,
Tenant shall, on demand, execute any further assurances of title to the tenant
leasehold improvements.

B) Any alterations made to the Premises shall remain on and be
surrendered with the Premises on the Lease Termination Date.

14.02 TENANT'S TRADE FIXTURES.

All trade fixtures and equipment (not including plumbing and
electrical fixtures that are a part of the Building and not including heating,
ventilating, and air conditioning equipment) installed by or for Tenant or its
subtenants or licensees in the Premises, regardless of the manner -of
attachment, shall be and remain the property of Tenant or its subtenants or
licensees. Landlord hereby waives any lien rights with respect to said trade
fixtures, equipment, and merchandise inventory granted by or under any present
or future law. Said trade fixtures, equipment, and merchandise inventory may be
removed by Tenant or its subtenants; or licensees at any time during the Lease
Term, and shall be removed on or before the Lease Termination Date, but Tenant
shall promptly repair all damage to the Premises caused thereby. Any of said
trade fixtures remaining on the Premises after the Lease Termination Date shall
be deemed abandoned and shall become the property of Landlord without payment
therefor.

14.03 ABANDONED PERSONAL PROPERTY.

Any personal property of Tenant or any subtenant or occupant which
shall remain in or on the Premises after the Lease Termination Date, may, at the
option of Landlord and without notice, be deemed to have been abandoned by
Tenant or such subtenant or occupant and may either be retained by Landlord as
its property or be disposed of, without accountability, in such manner as
Landlord may see fit, or, if Landlord may give written notice to Tenant to such
effect, such property shall be removed by Tenant, at Tenant's cost and expense.
Any property not removed after the Lease Termination Date may be stored by
Landlord, at Tenant's expense.

14.04 HOLDOVER.

If the Premises are not surrendered as provided in this Article
XIV, Tenant shall indemnify and hold Landlord harmless against loss and
liability (including attorneys' fees) resulting from the delay by Tenant or
Tenant's assignee of this Lease or any sub-tenants in so

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surrendering the Premises, including, without limitation, any claims made by
any succeeding occupant founded on such delay. If Tenant or Tenant's assignee
of this Lease or any subtenant's shall hold over after the end of the Lease
Termination Date, such holding over shall be construed as a tenancy at
sufferance and Tenant shall pay Landlord for the use and occupancy of the
Premises during such holdover period, an amount equal to shall be one hundred
and fifty percent (150%) of the Monthly Rent payable for the last month of
the Term of this Lease.

14.05 SURVIVAL OF OBLIGATIONS.

All obligations and liabilities which have accrued as of the Lease
Termination Date shall survive such date.

14.06 SURVIVAL.

The provisions of this Article XIV shall survive any termination of
this Lease.

ARTICLE XV

MISCELLANEOUS

15.01 ATTORNEYS' FEES.

Should any action or proceeding be commenced between the parties to
this Lease concerning the Premises, this Lease, or the rights and duties of
either in relation thereto, the party, Landlord or Tenant, prevailing in such
litigation shall be entitled, in addition to other relief as may be granted in
the action or proceeding, to a reasonable sum as and for its attorneys' fees and
costs in such litigation which shall be determined by the court in such
litigation or in a separate action brought for that purpose.

15.02 NOTICES.

All waivers, elections, options, notices, demands, and consents
which either party may be required or may desire to give under this Lease
("Notice") shall be in writing and shall be effective upon receipt or attempted
delivery by Federal Express or other 24-hour express courier service, personal
delivery or by certified or registered mail, posted prepaid, return receipt
requested, addressed as follows:

To Tenant: CHARLOTTE RUSSE, INC.
Attn: CEO
4645 Morena Boulevard
San Diego, California 92117

Prior to the Rent Commencement Date, notice to Tenant shall be sent to:

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CHARLOTTE RUSSE, INC.
Attn: CEO
5015 Shoreham Place
San Diego, California 92122

To Landlord: PRICE ENTERPRISES, INC.
4649 Morena Boulevard
San Diego, California 92117

or such other address as either party may hereafter indicate by written notice
to the other.

15.03 FORCE MAJEURE.

Each Party shall be excused from performing any obligation or
undertaking provided in this Agreement, except any obligation to pay any sum of
money under the applicable provisions hereof, in the event and so long as the
performance of any such obligation is prevented or delayed, retarded, or
hindered by the following "Force Majeure" events: act of God, fire, earthquake,
floods, explosion, actions of the elements, war, invasion, insurrection, riot,
mob violence, sabotage, inability to procure or general shortage of labor,
equipment, facilities, materials, or supplies in the ordinary course on the open
market; failure of normal transportation, strikes, lockouts, action of labor
unions, condemnation, requisition, laws, orders of governmental or civil or
military authorities; the inability to obtain governmental approvals or permits
despite the exercise of due diligence and best efforts by a Party; or any other
cause, whether similar or dissimilar to the foregoing, not within the reasonable
control of such Party, other than the lack of or inability to obtain funds.

15.04 GOVERNING LAW.

This Lease and all matters relating to this Lease shall be governed
by the laws of the State of California in force at the time any need for
interpretation of this Lease or any decision or holding concerning this Lease
arises.

15.05 BINDING ON HEIRS AND SUCCESSORS.

This Lease shall be binding on and shall inure to the benefit of
the heirs, executors, administrators, successors, and assigns of the parties
hereto, Landlord and Tenant, but nothing in this Section shall be construed as a
consent by Landlord to any assignment of this Lease or any interest therein by
Tenant, except as may be specifically provided herein.

15.06 PARTIAL INVALIDITY.

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Should any provision of this Lease be held by a court of competent
jurisdiction to be either invalid, void or unenforceable, the remaining
provisions of this Lease shall remain in full force and effect, unimpaired by
the holding.

15.07 ENTIRE AGREEMENT.

This Lease and the exhibits attached set forth the entire agreement
between the parties. Tenant covenants that it has examined the Premises and
knows the area and condition thereof. Tenant enters into this Lease on the basis
of its own independent investigation only and not any statement or
representation of anyone else. Except as specifically set forth herein, there
are no agreements, representations or warranties whatsoever as to any matter,
including, but not limited to, the physical condition, layout, leases, footage,
rents, income, expenses, operation, and zoning relating to the Premises. Any
prior conversations or writings are merged herein, superseded hereby and
extinguished. No subsequent amendment of this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and signed by Landlord and Tenant.

15.08 WAIVER.

No term, covenant, or condition of this Lease can be waived, except
in writing, signed by the party making the waiver, Landlord or Tenant, as the
case may be. No waiver of any default hereunder shall be implied from any
omission by either party to take any action on account of such default if such
default persists or is repeated, and no express waiver shall affect any default
other than the default specified in the express waiver, and that only for the
time and to the extent therein stated. The payment or acceptance of Rent or
partial Rent with knowledge of the breach of any of the covenants of this Lease
by Tenant or Landlord, as the case may be, shall not be deemed a waiver of any
such breach. One or more waivers of any breach of any covenant, term or
condition of this Lease shall not be construed as a waiver of any. subsequent
breach of the same covenant, term or condition. The consent or approval by
either party to or of any act requiring consent or approval of the other party
shall not be deemed to waive or render unnecessary that party's consent or
approval to or of any subsequent similar act.

15.09 SALE OR TRANSFER OF PREMISES.

If Landlord sells, transfers, or assigns all or any portion of this
Lease or the Premises, including improvements thereon, Landlord, on consummation
of the sale, transfer or assignment, shall be released from any liability
thereafter accruing under this Lease if Landlord's successor has assumed in
writing, for the benefit of Tenant, Landlord's obligations thereafter accruing
under this Lease, and Tenant has received a copy of such writing. Any prepaid
Rent may be transferred to Landlord's successor, and on such transfer Landlord
shall be discharged from any further liability in reference to the prepaid Rent.

15.10 TIME OF THE ESSENCE.

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Time is expressly declared to be the essence of this Lease.

15.11 ESTOPPEL CERTIFICATE.

Tenant shall, within ten (10) days notice from Landlord, execute
and deliver to Landlord in recordable form, a certificate stating that is Lease
is unmodified and in full force and effect, or in full force and effect as
modified, and stating the modifications. The certificate also shall state the
amount of current monthly Rent, the dates to which the Rent has been paid in
advance, the amount of prepaid Rent, and any other information with respect to
this Lease requested by Landlord. Failure to deliver the certificate within the
ten (10) days shall be conclusive upon the party failing to deliver the
certificate for the benefit of the party requesting the certificate and any
successor to the party requesting the certificate, that this Lease is in full
force and effect, and has not been modified, except as may be represented by the
party requesting the certificate, and that Rent and other charges have not been
paid for any period after date of Notice of Request.

15.12 BROKER.

The Landlord and the Tenant each represent that it has not had any
dealings with any broker, finder, or other person with respect to this Lease.
Each party shall hold harmless and indemnify and defend the other party from all
damages resulting from any claims that may be asserted against the other party
by any broker, finder, or other person with whom the other party has purportedly
dealt in connection with this Lease.

15.13 RIGHT OF FIRST REFUSAL.

A) Provided Tenant is not in default of any of its obligations
under this Lease, Tenant shall have the First Right of Refusal, during the
Initial Term, only to lease from the Landlord the entire "Adjacent Office Space"
as defined in paragraph (B) below, pursuant to the following terms and
conditions:

(1) In the event the Landlord wishes to accept a bona fide offer
from a third party (the "Third Party") to Lease the entire Adjacent Office Space
it shall send a written notice to the Tenant, together with a proposed lease, in
duplicate, which contains all of the terms and conditions of the bona fide
offer.

(2) If Tenant wishes to lease the Adjacent Office Space from the
Landlord it shall execute the proposed lease and return the duplicate
counterparts within seven (7) days after receipt of same from Landlord.

(3) If the Tenant does not execute and return the duplicate
counterparts of the Lease to Landlord within such seven (7) day period, then the
Landlord may enter into the

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Lease with the Third Party within thirty (30) days after the expiration of said
seven (7) day period, in which case this Section 15.13 shall forever be null
and void.

B) The "Adjacent Office Space" shall mean that approximately
50,000 square feet of Floor Area shown on Exhibit B.

C) Notwithstanding anything in this Section 15.13 to the
contrary, the Tenant shall have no rights under this Section 15.13 in the event:

(1) Landlord leases less than the entire Adjacent Office Space.

(2) Landlord leases the Adjacent Office Space: (i) to a
subsidiary corporation or entity in which the Landlord has a direct or indirect
equity interest; or (ii) to a corporation that was a former subsidiary of
Landlord.

(3) Landlord wishes to transfer rights in the Adjacent Office
Space other than by lease, including, but not limited to a sale of the Shopping
Center or any portion thereof, or if the Landlord is involved in a merger or
other form of reorganization.

15.14 HEADINGS.

The headings of the articles and sections of this Lease are for
convenience of reference only and are not a part of this Lease.

15.15 NUMBER AND GENDER.

Whenever the context requires the singular number, it shall include
the plural, the plural the singular, and the use of any gender shall include all
genders.

15.16 CORPORATE AUTHORITY.

Each individual executing this Lease on behalf of a corporation
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on behalf of said corporation in accordance with a duly adopted
resolution of the board of directors or in accordance with the by-laws of said
corporation; and that this Lease is binding upon said corporation in accordance
with its terms.

15.17 ACCORD AND SATISFACTION.

A) Payment by Tenant or receipt by Landlord of a lesser amount
than the Rent or other charges herein stipulated shall be deemed to be on
account of the earliest due -stipulated Rent or other charges, and no
endorsement or statement on any check or any letter accompanying any check or
payment as Rent or other charges shall be deemed an accord and satisfaction, and

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Landlord shall accept such check or payment without prejudice to Landlord's
right to recover the balance of such Rent or other charges or to pursue any
other remedy provided in this Lease or by Law.

B) No endorsement or statement on any check or any letter
accompanying any check from Landlord to Tenant shall be deemed an accord and
satisfaction, and Tenant shall accept such check or payment without prejudice to
Tenant's right to recover any amount due Tenant or to pursue any other remedy
provided in this Lease or by Law.

15.18 SUBMISSION OF LEASE TO TENANT.

The submission of this Lease to Tenant not signed by Landlord shall
be for examination purposes only, and does not and shall not constitute an offer
by Landlord to lease the Premises to Tenant or otherwise create any interest by
Tenant in the Premises. Execution of this Lease by Tenant and return to Landlord
shall not be binding upon Landlord, notwithstanding any time interval, unless
and until Landlord has in fact executed and delivered this Lease to Tenant.

Executed in San Diego, California, as of the date first written
above.

LANDLORD: TENANT:

PRICE ENTERPRISES, INC. CHARLOTTE RUSSE, INC.

by /s/ ROBERT PRICE by /s/ BERNARD ZEICHNER
----------------------- -----------------------

its President its CEO and President
----------------------- -----------------------

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EXHIBIT A

DESCRIPTION

Page 1 Policy No. 970103 15

LOT I OF ROSE CANYON WAREHOUSE SUBDIVISION, IN THE CITY OF SAN DIEGO, COUNTY OF
SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 3787, FILED IN THE
OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COMM, JANUARY 22, 1958.

PARCEL B:

THAT PORTION OF PUEBLO LOT 1787 OF THE PUEBLO LANDS OF SAN DIEGO, IN THE CITY OF
SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF
MADE BY JAMES PASCOE IN 1870, A COPY OF WHICH SAID MAP WAS FILED IN THE OFFICE
OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, AND IS KNOWN AS MISCELLANEOUS MAP
NO. 36, DESCRIBED AS FOLLOWS:

COMMENCING AT THE NORTHEAST CORNER OF PUEBLO LOT 1787; THENCE SOUTH
75 34' 10" WEST ALONG THE NORTHERLY LINE THEREOF 889-03 FEET TO THE SOUTHEAST
CORNER OF PUEBLO LOT 1778, AND THE TRUE POINT OF BEGINNING; THENCE SOUTHERLY
ALONG THE SOUTHERLY PROLONGATION OF THE FIRST LINE OF PUEBLO LOT 1778, A
DISTANCE OF 80.00 FEET; THENCE SOUTH 47 11' 30" WEST, 190.00 FEET, MORE OR
LESS, TO A POINT IN A LINE PARALLEL WITH AND DISTANT 225.00 FEET NORTHEASTERLY,
MEASURED AT RIGHT ANGLES FROM THE NORTHEASTERLY RIGHT OF WAY LINE OF THE
ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY (FORMERLY CALIFORNIA SOUTHERN
RAILROAD COMPANY) ; THENCE SOUTH 42 48' 30" EAST 87.40 FEET TO THE SOUTH-
EASTERLY LINE OF LAND DESCRIBED IN DEED TO JOHN W. RICE, JR. RECORDED MARCH 15,
1941 IN BOOK 1151, PAGE 168 OF OFFICIAL RECORDS; THENCE NORTH 47 19' 00" EAST TO
AN INTERSECTION WITH THE FOURTH LINE OF PUEBLO LOT 1787; THENCE SOUTH 75 34' 10"
WEST AL0NG SAID NORTHERLY LINE TO THE TRUE POINT OF BEGINNING.

-43-

<PAGE>

EXHIBIT B
[DIAGRAM]

"SHOPPING CENTER"

ADJACENT OFFICE SPACE

50.000 SF

220'

COSTCO 147,578 SF

PI11CE IRELF STORAGE 85,000 SF

'Ir r". IN

MORENA BOULEVARD 46

0 BUILDING

CONCEPTUAL SITE PLAN 4645 Morena Blvd., San Diego, CA

- -MAP

4405-4842 Utrome 8~4 Sm Ditoo. CA 02117

PRICE SELF STORAGE 29.2DO Sr

EXHIBIT B Page I of 2

[DIAGRAM]

<PAGE>

-45-

<PAGE>

9 18 817

1121

J21

RAMP

200 1

EXIT PASSAGEWAY 540'

120' PRICE

SELFSTORAGE

80 1

0 0 4 0 " 0 4p 0 0 9 0 0 0 9

. 0 - nv 0- & 0 -A 99 :-

CURB CUT BUILDING PREMISES NORTH DRIVEWAY AREA

0---- PARKING LOT PREMISES

CONCEPTUAL SITE PLAN

&--I . - - -

CURBCUT

NOT TO F""ALE

EXHIBIT B Pagle A' )f 2

-46-

<PAGE>

EXHIBIT C

CONFIRMATION OF INITIAL TERM OF LEASE

(San Diego/Morena Blvd. - Charlotte Russe)

This confirmation of term of lease is made on _______________ 19__, between
PRICE ENTERPRISES, INC., a Delaware corporation ("Landlord") and
____________________, a ("Tenant"), who agree as follows:

1. Landlord and Tenant entered into a Lease dated _______________, 19__, in
which Landlord leased to Tenant and Tenant leased from Landlord the Premises
described in Section ____ ("Premises").

2. Landlord and Tenant agree to confirm the commencement and expiration dates
of the term, and the Rent Commencement Date as follows:

a) _______________, 19__, is the Commencement Date of the
Initial Term of the Lease;

b) _______________, 19__, is the expiration date of the Initial
Term of the Lease; and

c) _______________, 19__, is the Rent Commencement Date.

TENANT

__________________________

LANDLORD

__________________________

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<PAGE>

EXHIBIT D

LEASEHOLD IMPROVEMENTS

(San Diego/Morena Blvd. - Charlotte Russe)

I. LANDLORD'S WORK

A) Landlord, at its sole cost and expense, shall cause the
following work to be performed on the Premises, in accordance with applicable
building codes (the "Landlord's Work"):

1) The following Landlord's Work shall be substantially
completed before the Commencement Date.

a) All areas of the parking lot that have failed will be
replaced. The parking lot will be overlayed or slurryed sealed (at Landlord's
option) to provide positive drainage.

b) Install a concrete receiving-well to accommodate seven (7) -
10 foot wide dock doors on +/- 12 foot centers. Dock height shall be 4' 0". The
receiving well shall have adequate drainage so that there will be no standing
water.

c) Install seven (7) - 10' wide x 10' high, 20 gauge steel,
manually operated dock doors with dock seals, including any required structural
modifications.

d) Install ten (10) 500 waft quartz exterior light fixtures or
equivalent for parking lot security lighting. Light fixtures, conduits and wires
to be run to new electric switch gear location. Final electrical connections to
be made by Tenant.

e) Build a 12 foot wide asphalt ramp from the parking lot into
the building. Provide a 14 foot high by 10 foot wide, 20 gauge steel, manually
operated roll-up door, including any required structural modifications. Ramp and
door to be located on the north side of the building next to the receiving well.

f) The north and west sides of the building will be painted to
match the existing Price Self Storage facility, located immediately adjacent to
the Premises.

g) The current existing maintenance shed to be removed.

h) The current existing gasoline pumps and tanks, if any, on
north side of Parking Lot Premises to be removed.

-48-

<PAGE>

i) Remove the existing switch gear currently located within the
Premises and install a clean, flat integral slab at the location of existing
switch gear. Install a new amp meter section on the exterior of the west wall,
200 feet south of the northwest corner of the building.

j) The existing fire corridor on the east wall will be
shortened to +/- 150 feet long starting at Price Self Storage and running in the
northerly direction.

k) Landlord to remove the existing loading dock on the north
and west sides. Existing dock doors in these areas to be removed and filled in
with metal siding as close as reasonably possible to existing siding. Existing
exit door awnings to be removed.

l) The perimeter fence along Morena Boulevard is to be removed.
The fence which currently runs in a northerly direction from the Building
Premises to the North Driveway Area will be relocated to the eastern boundary
line of the Parking Lot Premises.

m) Remove any and all asbestos, if any, in the Building
Premises, in accordance with applicable laws and regulations.

n) Install landscaping and irrigation along the existing public
sidewalk which is on the western boundary of the Premises, along Morena
Boulevard. Such landscaping to be similar to the existing landscaping.

2) The following Landlord's Work ("Phase 2 Work") shall be
substantially completed after the Commencement Date:

a) Stripe the parking lot per Tenant's plan.

b) Build a secondary exit from the Building Premises, if
required by the City of San Diego.

c) Build a handicap ramp to meet the current building codes at
the Tenant's main entrance to the Building Premises on the west side. Remove
existing ramp.

d) The fence along the northerly boundary of the Premises will
contain a break so that vehicles may make a right hand turn off the North
Driveway Area.

Tenant shall submit plans to Landlord ("Tenant's Plans") showing:
(i) the parking lot striping plan; (ii) the location of the secondary exit for
the Building if required; (iii) the location of Tenant's main entrance to the
Building Premises and the break in the fence along with northern boundary of the
Premises. Landlord shall commence Phase 2 Work within thirty (30) days after the
date: (i) Landlord has obtained Landlord's Permits; (ii) Tenant has delivered
complete Tenant's Plans to the Landlord; and (iii) the current tenant in the
Premises has vacated

-49-

<PAGE>

same, subject to extension of time for Force Majeure under Section 15.03 and
thereafter, diligently proceed to complete such Landlord's Work.

Landlord shall substantially complete Phase 2 Work (other than such
"punch list" items which can be completed within thirty (30) days and without
material interference with Tenant's efforts to ready the Premises for Tenant's
occupancy) within sixty (60) days after the date: (i) Landlord has obtained
Landlord's Permits; (ii) Tenant has delivered complete Tenant's Plans to the
Landlord; and (iii) the current tenant in the Premises has vacated same, subject
to extension of time for Force Majeure under Section 15.03 (referred to as the
Phase 2 Completion Date). If the Phase 2 Work is not completed by the Phase 2
Completion Date, then the ninety (90) day period referred to in Section 3.01,
captioned "Rent Commencement Date" shall be increased by the number of days from
the Phase 2 Completion Date until the date the Phase 2 Work has been
substantially completed.

B) LANDLORD'S PLANS.

Landlord shall prepare plans (the "Work Plans") for Landlord's
Work which is to be completed before the Commencement Date and submit same for
Tenant's reasonable approval. Tenant shall approve the Work Plans within five
(5) business days after receipt of same. If Tenant does not give Landlord
written approval or disapproval within such five (5) day period, the Work Plans
shall be deemed approved. Tenant may disapprove the Work Plans only if they are
contrary to the outline specifications of paragraph (A) above. In the event
there is a dispute with respect to Tenant's disapproval of the Work Plans, such
dispute shall be settled by binding arbitration pursuant to the rules and
procedures of the American Arbitration Association.

II. TENANT'S WORK

A) CONSTRUCTION

(1) Tenant, at its sole cost and expense, subject to
reimbursement by Landlord under paragraph E below, shall make all leasehold
alterations and improvements to the Premises, other than Landlord's Work, which
are necessary or required for Tenant's use and occupancy of the Premises (the
"Tenant's Work").

B) TENANT'S BUILDING PLANS

(1) Tenant shall prepare complete working drawings and
specifications, (the "Building Plans") which shall govern the performance of
"Tenant's Work", which shall mean and include the repairs, renovations and
alterations to the Premises, other than Landlord's Work. The Building Plans
shall in any case conform to applicable governmental requirements and to sound
and generally accepted engineering practices.

-50-

<PAGE>

(2) When completed, the Building Plans shall be submitted to
Landlord for its approval, which Landlord agrees shall not be unreasonably
withheld. Within twenty (20) days after the receipt of the Building Plans,
Landlord shall give Tenant written notice of such approval or of disapproval
based upon any reasonable objections. Landlord's failure to approve or to
disapprove within that period of time shall constitute approval. If Landlord
disapproves, Tenant shall revise the Building Plans and shall re-submit them
to Landlord, Landlord agrees to approve or disapprove in the case of any such
re-submission or resubmissions in the same manner and within twenty (20) days
of receipt of such revised Building Plans. Landlord's failure to approve or
to disapprove within that period shall constitute approval.

C) PERMITS AND APPROVALS

(1) Within thirty (30) days after the Building Plans are
approved by Landlord, Tenant shall apply for any necessary building permits and
approvals in connection with the construction of Tenant's Work (collectively,
the "Permits"). Tenant shall, in a timely manner, keep Landlord reasonably
informed of the status of all applications for Permits and of the time and place
of all meetings or hearings with governmental agencies and representatives with
respect thereto. Landlord shall have the right to attend and participate in such
meetings. In the event changes to the Building Plans are required by any
governmental authority, Tenant may make any changes which are minor in nature
without Landlord's consent. Any other changes in the Building Plans prior to the
issuance of the Permits shall require Landlord's consent which shall not be
unreasonably withheld. For the purpose of this paragraph C), Landlord's failure
to approve or disapprove such changes within twenty (20) days after receipt of
such request shall constitute approval. Upon issuance of the Permits, including,
without limitation, the building permit, Tenant shall submit to Landlord, a
final set of Building Plans reflecting all changes, if any, as approved by
Landlord (or not requiring the approval of Landlord) hereunder (the "Approved
Building Plans").

(2) In the event Tenant wishes to make changes to the Approved
Building Plans, it may do so pursuant to the same approval process and standard
as is set forth in paragraph C)(1), except that the deemed approval period for
Landlord's consent shall be twenty (20) days after receipt of such request. In
the event that any change to the Approved Building Plans requires any change to
any portion of Tenant's Work which has been completed, the total cost of
installation and removal of such completed work shall be the sole responsibility
of the Tenant and shall not be included within the term "Building Costs" (as
defined in paragraph E) for purposes of reimbursement by Landlord. If any
changes by Tenant under this paragraph (2) result, in the aggregate, in a net
increase or decrease in the cost of Tenant's Work, Tenant shall notify Landlord
of such fact as soon after such changes are required as is reasonably possible
together with a good faith estimate of the estimated net increase or decrease in
the cost of Tenant's Work. On written request therefor, Tenant shall deliver to
Landlord, reasonably satisfactory evidence substantiating in detail the changes
in the cost of Tenant's Work resulting from Tenant's changes under this
paragraph C).

-51-

<PAGE>

D) CONSTRUCTION CONTRACTS. Promptly after Tenant obtains the
Permits, Tenant shall retain a general contractor for Tenant's Work.

E) OWNERSHIP. All leasehold improvements shall be the property
of the Landlord. All such leasehold improvements shall be free of any and all
liens and encumbrances.

F) CONTRACTOR'S GUARANTIES AND WARRANTIES. Each contractor and
subcontractor participating in the construction of Tenant's Work shall be
duly licensed, and each contract and sub-contract shall contain the guaranty
of the contractor or sub-contractor that the portion of Tenant's Work covered
thereby will be free from all defects in workmanship and materials for the
period of time which customarily applies in good contracting practices, but
in no event less than one (1) year after the completion of Tenant's Work. The
aforesaid guaranties shall include the obligation to repair or replace, in a
thoroughly workmanlike manner and without any additional charge, all of
Tenant's Work done or furnished by said contractor or sub-contractor, or by
any of his sub-contractors, employees or agents, which shall be or become
defective because of faulty materials or workmanship within the period
covered by such guaranty (and of which notice is given to such contractor or
sub-contractor within such period); and the correction, as aforesaid, of any
such matter shall include, without any additional charge therefore, all
expense and damages in connection with the removal, replacement and/or repair
in a thoroughly workmanlike manner of any other part of Tenant's Work which
may be damaged or disturbed thereby. All warranties or guaranties as to
materials or workmanship on or with respect to Tenant's Work shall be written
so that they shall inure to the benefit of Landlord and Tenant as their
respective interests may appear and can be directly enforced by either, and
Tenant shall give to Landlord, any assignment or other assurance necessary to
effectuate the same.

G) WORK PROCEDURES. Each contractor and sub-contractor
participating in Tenant's Work shall:

(1) Store all building materials, tools and equipment within the
Premises or such other locations as may be specifically designated by Landlord,
in advance of the commencement of construction by Tenant;

(2) Make appropriate arrangements for temporary utility
connections as available within the Shopping Center, and shall pay the cost of
said connections and of proper maintenance and removal of the same, and shall
pay all utility charges incurred by such contract or sub-contractors;

(3) Remove all trash, debris and rubbish as reasonably necessary
and, upon completion of Tenant's Work, shall remove all temporary structures,
surplus materials, debris and rubbish of whatever kind remaining in the
Premises, the building or the Shopping Center;

(4) Properly protect Tenant's Work with lights, guard rails and
barricades, and secure all parts of Tenant's Work against accident, storm and
any other hazard.

-52-

<PAGE>

-53-

<PAGE>

EXHIBIT E

SIGN REQUIREMENTS

(San Diego/Morena Blvd. - Charlotte Russe)

1. Tenant shall pay for all signs, sign installation (including final
connection, transformers, and all other labor and materials) and maintenance.

2. Tenant shall obtain all necessary permits, prior to installing any signs.

3. There shall be no flashing or moving signs.

-54-

<PAGE>

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (the "Agreement") is made as of the 30th day of
September, 1997, by and between Rampage Clothing Company, a California
corporation the ("RCC") and Charlotte Russe, Inc., a California corporation
(the "New Licensee").

RECITALS

WHEREAS, RCC and Rampage Retailing Inc. ("RRI") have filed petitions
for relief under Chapter 11 of the United States Bankruptcy Code, are debtors
in possession thereunder in jointly administered, but not substantively
consolidated, bankruptcy cases pending in the United States Bankruptcy Court
for the Central District of California, bearing case numbers LA 97-34276 SB
and LA 97-34278 SB, respectively (the "Bankruptcy Court");

WHEREAS, RRI entered into an Asset Purchase Agreement with The Wet Seal,
Inc., a Delaware corporation ("Wet Seal") dated August 21, 1997 pursuant to
which RRI agreed, subject to Bankruptcy Court approval to sell to Wet Seal
certain of its Assets, as defined in such agreement (the "Old Agreement");

WHEREAS, pursuant to the terms of the Old Agreement RRI agreed to cause
Licensor to enter into a License Agreement with Wet Seal, which License
Agreement was entered into as of August 21, 1997 (the "Old License
Agreement");

WHEREAS, except as expressly modified by this Agreement or by the Order,
as hereinafter defined, RCC and the New Licensee have agreed to RCC's license
of RCC's Trademark, as such term is defined in the Old License Agreement, to
the New Licensee pursuant to the terms of the Old License Agreement and the
Bankruptcy Court has approved of such license (the "License"), and

NOW THEREFORE, in consideration of the premises and the mutual convenants
herein contained, the parties hereto agree as follows:

1. INCORPORATION OF THE TERMS OF THE OLD LICENSE. Except as expressly
modified by the terms of this Agreement or the Orders, the parties hereto
agree that the terms of the License shall be governed by the provisions of
the Old License Agreement, which is attached here to and made a part hereof as
Exhibit "A".

2. BANKRUPTCY COURT APPROVAL. The parties hereto acknowledge and agree
that the terms and conditions of the License are subject to the terms and
conditions of the following order of the Bankruptcy Court: Order Granting
Debtors' Motion for Order Authorizing: (1) Sale of Business Assets Free and
Clear of Liens, Claims and Encumbrances Outside the Ordinary Course of
Business; and (2) Assumption and Assignment of Real and Personal Property
Leases in Connection Therewith; Except With Respect To Lease With the Taubman
Company Re: Store 2064 (Beverley Center) entered September 29, 1997 (the

<PAGE>

"Order"). In the event of any inconsistency between the terms and conditions
of this Agreement and the Order, the terms of the Order shall be deemed to
prevail.

3. MODIFICATIONS TO THE OLD AGREEMENT. The Old Agreement is hereby
modified as follows:

(a) For all purposes "Licensee" shall be deemed to be Charlotte
Russe, Inc., a California corporation;

(b) Section 1. shall be amended to add the following definition:
"(i) The term "Effective Date" shall be deemed for all purposes in this
Agreement to be September 30, 1997 any other reference contained herein shall
be null and void and of no force or effect;

(c) Section 2(b) shall be amended to delete the amount "five
hundred thousand dollars ($500,000.00)" and insert in lieu thereof "five
million two hundred thousand dollars ($5,200,000.00)", subject to
reimbursement as provided in the Order,";

(d) Section 4(a) shall be amended to insert at the beginning
thereof the following: "Notwithstanding anything to the contrary contained
elsewhere herein to the contrary, Royalty Payments due hereunder shall be
paid for a minimum period of one (1) year," and to delete therefrom "a
percentage of Total Net Revenues from each Contract Year (the "Royalty
Payments") and insert "the Royalty Payments (the "Royalty Payments")";

(e) Subsection 10(a)(iii) shall be amended to delete "CIT/BCC,
Inc." and insert in lieu thereof "The CIT Group/Commercial Services, Inc., as
successor to The CIT Group/BCC, Inc.";

(f) Subsection 10(b)(i) shall be amended to delete "State of
Delaware" and insert in lieu thereof "State of California.";

(g) Section 11(d) shall be amended to complete the blank therein
with the insertion of "September 30";

(h) Section 19 shall be deleted in its entirety and replaced with
the following: "NOTICE. Any notice, request, demand, waiver, consent,
approval or other communication ("notice") that is required or permitted
hereunder by any party to another shall be in writing and be deemed given
only if delivered personally or by reputable overnight-courier service or
sent sent by certified mail, postage prepaid, as follows:

(a) If to Licensor to:

Rampage Clothing Company
2825 Santa Fe Avenue
Los Angeles, California 90058-1408

<PAGE>
ATTN: S. Gerald Birin

With Copies to:

Joseph A. Eisenberg, Esq.
Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, California 90067-5010

Jeffrey H. Kapor, Esq.
Katz, Hoyt, Seigel & Kapor LLP
11111 Santa Monica Blvd., Suite 820
Los Angeles, California 90025

(b) If to Licensee to:

Charlotte Russe, Inc.
5015 Shoreham Place
San Diego, California 92122

With copies to:

Randye B. Soref, Esq.
Julie A. Goren, Esq.
Buchalter, Nemer, Fields & Younger
601 South Figueroa Street, Suite 2400
Los Angeles, California 90017-5704

or to such other address as the addressee may have specified in a notice duly
given to the sender. Any such notice will be deemed to have been given as of
the date so delivered, or mailed.",

(i) Schedule A to the Agreement ("Royalty Schedule") shall be
changed to reflect the following:

CONTRACT YEARS ROYALTY PAYMENTS DUE
- -------------- --------------------

One through Four: The Greater of One Percent (1%) or
Three Hundred Thousand Dollars ($300,000.00)

Five through Eight The Greater of One and One Half Percent (1.5%) or
Four Hundred Fifty Thousand Dollars ($450,000.00)

<PAGE>

Nine through Twelve The Greater of One and One Quarter Percent (1.25%)
or Three Hundred Seventy-Five Thousand Dollars
($375,000.00)

Thirteen on The Greater of One Percent (1%) or
Three Hundred Thousand Dollars ($300,000.00)".

IN WITNESS WHEREOf, the parties hereto have executed this Amendment
as of the date first above written.

LICENSOR:

RAMPAGE CLOTHING COMPANY,
a California corporation

By: /s/ GERALD BIRIN, CFO
--------------------------
GERALD BIRIN

LICENSEE:

CHARLOTTE RUSSE, INC., a California
corporation

By: /s/ Lon R. Gilbert
---------------------------
Lon R. Gilbert

4
<PAGE>

EXHIBIT "A"

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (the "Agreement") is made and entered into as of
the 21st day of August, 1997 (the "Effective Date"), by and between Rampage
Clothing Company, Debtor in Possession, Inc., a California corporation, (the
"Licensor"), and The Wet Seal, Inc., a Delaware Corporation, (the "Licensee").

W I T N E S S E T H:

WHEREAS, Licensor has established valuable goodwill in the tradename
RAMPAGE (the "Mark") and Licensor is the owner of such Mark and the United
States trademark registrations and applications pertaining thereto; and

WHEREAS, Licensee wishes to operate certain retail stores (the
"Stores") (as such term is hereinafter defined), throughout the world, and
wishes to obtain certain limited rights to use the Mark in connection
therewith.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1. DEFINITIONS

For purposes of this Agreement, the following definitions shall apply:

(a) The term "Stores" shall mean retail stores utilizing the Mark as the
name of such store and through which wearing apparel, shoes, accessories
and such other merchandise as is typically offered at a RAMPAGE store is sold.
Such term shall include any retail store acquired by Licensee pursuant to
that certain Asset Purchase Agreement by and between Retailing and Licensee,
of even date herewith, as well as any retail store which Licensee may open and
operate pursuant to its rights hereunder. However, such term shall not apply
to a boutique or other segregated marketing area using the Mark and operated
within a retail store owned by a third party (by way of example, a RAMPAGE
boutique operated in a department store comparable to a Macy's, Riches,
Burdines or Nordstroms).

(b) The term "Mark" shall mean the trademark RAMPAGE.

(c) The term "Total Net Revenues" shall mean the total revenues less
returns, credits, refunds and all taxes (other than income taxes), received
by Licensee from sales of merchandise by Licensee at the Stores.

(d) The Term "Uses" shall mean those uses of the Mark upon the exterior
and interior signage identifying the name of a Store.

<PAGE>

(e) The term "Related Uses" shall mean those uses of the Mark upon
packing materials, hangers, billing documents, promotional materials,
advertising literature relating to the Stores and other articles (other than
the goods for sale at a store) associated with the operation of a retail
store.

(f) The term "Contract Year" shall mean each period of time between
anniversaries of the Commencement Date.

(g) The term "Quarter" shall mean every three (3) months of each
Contract Year.

(h) The term "Sublicense Revenue" shall mean the net revenue received by
Licensee from its sublicensees, if any.

2. GRANT OF LICENSE TO USE THE MARK

(a) GRANT. Licensor, to the extent that it may be able lawfully to do so,
hereby grants to Licensee, throughout the Territory, during the term of this
Agreement and subject to its terms and conditions, the exclusive right and
license to make Use of the Mark and the non-exclusive right and license to make
Related Uses of the Mark. It is expressly understood that the rights and
license granted herein do not extend to (i) any trademark or trade symbol of
Licensor except those specific symbols set forth as the Mark; (ii) any
merchandise offered for sale of any kind or nature whatsoever; (iii) any use
of the Mark except in the manner expressly provided herein. With respect to
such other trademarks, symbols and merchandise, all rights are expressly
reserved to Licensor. Within the Territory, Licensor is hereby prohibited and
restricted from making any Use, in any form or manner, of the Mark, or any of
them, either alone or as a component of another trademark. Notwithstanding
the foregoing, nothing herein contained shall prohibit, limit or restrict
Licensor from making, licensing or otherwise permitting uses other than the
Uses of the Mark, whether such use is made by or on behalf of Licensor or by
any other person, firm, corporation, partnership or other entity for any
purpose whatsoever. Additionally, and notwithstanding the foregoing, nothing
herein contained shall prohibit, limit or restrict Licensor within the
Territory from making, licensing or otherwise permitting the Related Uses of
the Mark, whether such Related Use is made by or on behalf of Licensor or by
any other person, firm, corporation, partnership or other entity.

(b) FEE TO RAMPAGE RETAILING, INC. Licensor acknowledges that it
previously licensed Rampage Retailing, Inc. (hereafter, "Retailing") to Use
the Mark and make the Related Uses of the Mark. Therefore, upon the execution
of this Agreement, Licensee shall pay Retailing a one-time fee in the amount
of five hundred thousand dollars ($500,000.00) to acquire Retailing's right
to Use the Mark and make the Related Uses of the Mark. This amount is not a
Royalty Payment and shall not be applied against any royalty payable or to be
paid by Licensee to Licensor for Licensee's activities hereunder. This fee is
non-refundable.

<PAGE>

3. TERRITORY

(a) GENERALLY. The territory of this Agreement shall be the United
States of America, its territories and possessions.

(b) EXPANSION OF TERRITORY. In the event that Licensor can provide
Licensee with the right to Use the Mark and make Related Uses of the Mark in
other independent jurisdictions throughout the world, the parties hereto
agree that the Territory may be expanded to such other independent
jurisdictions accordingly:

(i) CANADA AND MEXICO. Licensee shall have the first option to
obtain from Licensor the exclusive right to Use the Mark in Canada and
Mexico as well as the non-exclusive right to make the Related Uses in
Canada and Mexico. However, should Licensee not exercise this option
before the second anniversary of the Commencement Date of this
agreement, then Licensor shall be free to Use and make Related Uses of
the Mark within Canada or Mexico, or to license or otherwise authorize
such Uses and Related Uses by any other entity within Canada and Mexico
and Licensee shall have no further rights with respect to Canada and
Mexico. During such two-year period, Licensor may present to Licensee a
proposal for making a Use and Related Use of the Mark within Canada or
Mexico. Licensee shall then have thirty (30) days to consider such
proposal and notify Licensor in writing of its acceptance or rejection of
such proposal. Should Licensee fail to notify Licensor of its
decision with respect to such proposal within such time, or if Licensee
rejects such proposal, then Licensor shall be free to proceed to
consummate all transactions relating to such proposal. Additionally,
Licensee's exclusivity with respect to Canada and Mexico shall terminate
at such time, however, should Licensor not commence Use of the Marks based
upon such proposal within six (6) months of the end of such thirty (30)
day period, then Licensee's exclusivity shall be reinstated for the
remainder of the two year period, subject to the terms of this paragraph.

(ii) REMAINDER OF THE WORLD. Each party shall have the right of
first refusal with respect to the other concerning Use of the Mark the
Related Uses of the Mark in each other country of the world. Therefore,
should either party, either directly or through a sublicensee, desire
to make Use and make the Related Uses of the Mark in any country within
which no Use has previously been made, such party shall present the
proposed arrangement to the other for the other's consideration. The
party to whom the proposal was made shall have thirty (30) days to
advise the other, in writing, whether such party shall undertake the Use
and Related Uses of the Mark in accordance with the terms of such
proposal. Should such party notify the other of its refusal to accept
such proposal, or should such party fail to notify the other of its desire
to accept such proposal within such time, then the party making such
proposal shall be free to commence Use of the Mark as set forth in such
proposal and the other party shall have no further rights with respect to
the Mark for such country.

3
<PAGE>

(iii) EXCLUSION OF JAPAN. The parties hereto agree that Licensor
cannot provide Licensee with any rights to Japan and therefore Japan
shall be excluded from this Agreement.

(c) INABILITY OF LICENSOR TO PROVIDE RIGHTS. Should Licensor determine
that it cannot provide Licensee the right to make the Use or Related Uses of
the Mark within any independent jurisdiction throughout the world, such
independent jurisdiction shall be severed from this Agreement.

(d) SUBLICENSING OF RIGHTS. Licensee shall not have the right to
sublicense any of its rights pursuant to this Agreement except that Licensee
may sublicense to any entity the right to make the Use of the Mark and the
Related Uses of the Mark in any independent jurisdiction that has become a
part of the Territory pursuant to Paragraph 3(b)(ii), above. The scope of any
such sublicense can be no more broad than the scope of this Agreement. Such
sublicense must state that Licensee has derived its rights to the Mark
pursuant to this Agreement and that the sublicensee's rights pursuant to such
sublicense are subject to the terms and conditions of this Agreement. Such
sublicense must also contain other normal and customary restrictions as are
usually imposed upon a sublicensing relationship. No such sublicense shall be
entered into without the prior written consent of Licensor as to both the
sublicensee and the form of the sublicense, which consent may be withheld
upon the exercise of Licensor's reasonable discretion.

(e) REGISTRATION OF TRADEMARK. Licensee may, upon the express written
permission of Licensor, seek to register the Mark in any independent
jurisdiction within the Territory. Such registration shall be in the name of
Licensor and shall be for such services approximating the Use and Related
Uses. Licensee shall bear all costs of such registration and shall keep
Licensor duly apprised of the progress of such matter. Licensor shall provide
such assistance as may be necessary. Licensor confers upon Licensee a power
of attorney for the sole purpose of filing and prosecuting applications for
registration of the Mark, and maintaining as current pre-existing
registrations, however, such power is exercisable, if at all, only in the
event that neither Licensor nor a surviving entity of Licensor remain as
on-going concerns.

4. ROYALTY PAYMENTS AND SUBLICENSING REVENUES

(a) ROYALTY. As compensation for the license and other rights granted
hereunder, Licensee shall pay to Licensor a percentage of the annual Total
Net Revenues from each Contract Year (the "Royalty Payments") as more fully
set forth in Schedule A, attached hereto. Licensee shall: (i) compute the
Royalty Payment each Quarter and submit a complete report of the Total Net
Revenues received during such Quarter and an accounting of the Royalty
Payment derived therefrom to Licensor within thirty (30) after the end of
each Quarter during the term hereof, and (ii) pay to Licensor the Royalty
Payment reflected in such report simultaneously with the delivery of such
report. The report provided by Licensee shall be certified in writing by an
officer of Licensee as being true and accurate.

<PAGE>

(b) ACCEPTANCE OF REPORTS AND STATEMENTS. The receipt and/or acceptance
by Licensor of any statements furnished, or Royalties paid hereunder,
including, but not limited to the cashing of any royalty checks paid
hereunder (regardless of Licensee's endorsement on such checks), shall not
preclude Licensor from questioning the correctness thereof at any time.

(c) SUBLICENSEE REVENUES. In the event that Licensee shall enter into
any sublicenses (as provided for above), the Total Net Revenue from Stores
operated by such sublicensees shall be added to Licensee's Total Net Revenue
for purposes of calculating the Royalty Payment to be made to Licensor by
Licensee. Any royalty earned by Licensee from such sublicenses in excess of
the royalty payable to Licensor shall be the property of Licensee.

5. AUDIT RIGHTS; ADJUSTMENTS

(a) Licensee shall maintain at its principal place of business separate
invoices, records and books of account pertaining to Total Net Revenues of
Licensee as well as Total Net Revenues of any individual sublicensees. Such
records and books of account shall be complete and accurate, and maintained
in accordance with generally accepted accounting principles, so as to make
the amount due and payable to Licensor under this Agreement clearly
ascertainable. Licensor shall have the right throughout the Term of this
Agreement, and for a two-year period thereafter, to inspect the books,
records and accounts of Licensee during normal business hours for the purpose
of verifying the amount due and payable hereunder.

(b) If Licensor determines that the amount owing to Licensor by Licensee
hereunder has been understated or underpaid, Licensee shall immediately pay
to Licensor all payments found to be due, with interest thereon, at the rate
of 1 1/2% per month, or the maximum legal rate, whichever is less, computed
from the date said unpaid amounts would have been due had they been properly
calculated, until the date that they are actually paid. Additionally,
Licensee shall reimburse Licensor for the cost of such audit.

6. QUALITY CONTROL

(a) Licensee agrees that the Stores shall be of at least the standard of
the stores previously operated by Licensor as Rampage stores. Stores
operated by Licensee or any sublicensee shall meet the requirement of this
paragraph, and will thus be of such style, appearance, quality and location,
as well as being merchandised so as to be suited to their exploitation to the
advantage and to the protection and enhancement of the Mark and the goodwill
pertaining thereto. Licensee further agrees that the Stores will be operated
in accordance with all material federal, state and local laws and that the
same shall in no manner reflect adversely upon the good name of Licensor.

(b) Licensee shall permit duly authorized representatives of Licensor to
inspect, at reasonable times, and upon reasonable notice, the Stores for
compliance with the terms of this Agreement. Additionally, Licensee shall,
upon request of Licensor, submit to Licensor, for the purposes of determining
compliance with the standards required by this Agreement, representative
samples of all Uses and Related Uses of the Mark. Unless written objections is

<PAGE>

received by License within three (3) business days after Licensor's receipt
of such items, items furnished pursuant to this paragraph shall be deemed
acceptable to Licensor.

7. TITLE-TO-THE-MARK

(a) Licensee recognizes the great value of the publicity and goodwill
associated with the Mark, and agrees that such value and goodwill, including
any such value and goodwill arising from the activities of Licensee, belong
to and shall enure exclusively to Licensor. Licensee further acknowledges
that the Mark has acquired a secondary meaning in the minds of purchasing
public.

(b) Licensee recognizes Licensor's title to the Mark and shall not, at
any time, do or suffer to be done any act or thing which will in any way
impair the rights of Licensor in and to the Mark. It is understood that
Licensee shall not acquire and shall not claim title to the Mark adverse to
Licensor by virtue of the license herein granted to Licensee, or through
Licensee's use of the Mark, it being the intention of the parties that all of
the use of the Mark by Licensee or any party acting under authority of
Licensee shall at all times inure to the benefit of Licensor.

(c) Licensee hereby acknowledges that as between Licensor and Licensee,
Licensor owns the Mark and all rights, registrations, applications and
filings with respect to such Mark, and all renewals and extensions of any
such registrations, applications and filings. Licensee further acknowledges
that it is acquiring hereunder only the right to use the Mark in connection
with the Uses and Related Uses in the Territory in accordance with the terms
of this Agreement, and that all rights to the Mark, other than those
specifically granted to Licensee herein, are reserved to Licensor for its own
use and benefit.

(d) Licensee shall, at Licensor's request, execute, acknowledge and
deliver to Licensor any documents and/or instruments that Licensor may, from
time to time, reasonably deem necessary or desirable to evidence, protect,
enforce or defend its rights or title in and to the Mark. Licensee hereby
irrevocably appoints Licensor as Licensee's true and lawful attorney-in-fact,
to execute, acknowledge and deliver any such documents or instruments that
Licensee fails or refuses to so execute, acknowledge or deliver.

(e) Upon termination or expiration of this Agreement, Licensee shall,
within ninety (90) days thereafter, discontinue and shall thereafter refrain
from the use of the Mark, or any of them, in any way or for any purpose
whatsoever, and will not use, at any time, any trademarks, tradenames,
slogans, labels, copyrights, emblems, insignia, packages or other trade
identifying symbols bearing resemblance to or confusingly similar to the Mark
or any of them. Any Use of the Mark or Related Uses of the Mark by Licensee
during such ninety-day period shall be on a non-exclusive basis, however, all
Royalty Payments shall continue to be made to Licensor on Total Net Revenues
during such time.

8. ABATEMENT OF INFRINGEMENT. In the event that Licensor or Licensee becomes
aware or suspects that there exists an infringement, unfair competition,
violation of 15 U.S.C. 1125a.

6
<PAGE>

or dilution of any of the Mark as they pertain to Stores or Related Uses,
anywhere in North America, it shall promptly notify the other party giving
such details as are available. Licensor and Licensee shall consult together as
to the best course of action to pursue and shall diligently take such
appropriate action as is mutually agreed upon to protect the parties'
respective rights in the Mark. If the parties agree to bring suit, Licensor
shall control the prosecution of such suit, and Licensee agrees that in any
such suit it will render to Licensor such assistance as is reasonably
requested. All expenses relating to any such suit, including but not limited
to reasonable attorney's fees and expenses, shall be borne equally by
Licensee and Licensor. Likewise, Licensee and Licensor shall share equally in
any recovery obtained in such suit, whether by settlement, award or
judgment. If the parties do not mutually agree to file and prosecute a cause
of action to protect the Mark, then either party may file and prosecute such
action in its own name and at its sole expense, and the other party will
render such assistance, at the prosecuting party's expenses, as is reasonably
requested by the prosecuting party. The prosecuting party shall be entitled
to all recoveries from such suit instituted and prosecuted by it.

9. PROMOTIONAL ACTIVITIES. Licensee shall conscientiously use its best
efforts to fully and adequately promote the Stores and maintain the high
standards of Licensor as to advertising and all other promotions and
promotional material. However, notwithstanding the foregoing, Licensee shall
not distribute any promotional materials or engage in any external
advertising of the Stores without the prior written consent of Licensor,
acting in a commercially reasonable manner, as to the form, content and
placement of such promotion. Licensor shall have fifteen (15) business days
following its receipt of any submission from Licensee to approve such
submission. Should Licensor fail to notify Licensee of its rejection of such
submission within such time, then Licensor's approval shall be deemed granted.

10. REPRESENTATIONS AND WARRANTIES

(a) Licensor hereby represents and warrants to Licensee as follows:

(i) ORGANIZATION AND GOOD STANDING. Licensor is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California. Licensor has the full power and authority to own the Mark, to
carry on its business as presently conducted and to license the Mark to
Licensee pursuant to the terms hereof.

(ii) POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution,
delivery and performance of this Agreement by Licensor (1) are within
Licensor's Corporate powers; (2) have been duly authorized by all necessary
Bankruptcy Court action; (3) are not in contravention of any provision of
Licensor's other agreements, judgments or decrees; (4) will not violate any
law or regulation applicable to Licensor or any order or decree against
Licensor of any court or governmental instrumentality; and (5) except for the
Bankruptcy Court, do not require the consent or approval of any third party.
This Agreement has been duly executed and delivered by a duly authorized
representative of Licensor and constitutes the legal, valid and binding
obligation of Licensor, enforceable against Licensor in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
moratorium,

<PAGE>

reorganization or other laws or legal principles affecting the rights of
creditors generally or by general principles of equity (whether or not a
proceeding is brought in a court of law or equity).

(iii) VALIDITY OF THE MARK: NO INFRINGEMENT. (1) Licensor is the
owner of the Mark, and has not liened, pledged, hypothecated, or otherwise
encumbered such rights and knows of no lien, pledge, hypothecation or other
encumbrance of the Mark other than Licensor's grant of a security interest
in the Mark to CIT/BCC, Inc., whose consent to this transaction has been
received; (2) the Mark are valid and subsisting; (3) Licensor has granted no
other licenses that conflict with the rights and licenses granted to Licensee
under this Agreement; and (4) to the best of Licensor's knowledge, none of
the Mark licensed hereunder infringes on any trademarks or other rights owned
by any other person.

(b) Licensee hereby represents and warrants to Licensor as follows:

(i) ORGANIZATION AND GOOD STANDING. Licensee is a Corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Licensee has the full power and authority to own its properties,
to carry on its business as presently conducted.

(ii) POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The execution,
delivery and performance of this Agreement by Licensee (1) are within
Licensee's Corporate powers; (2) have been duly authorized by all necessary
Corporate action; (3) are not in contravention of any provision of Licensee's
other agreements, judgments or decrees; (4) will not violate any law or
regulation applicable to Licensee or any order or decree against Licensee of
any court or governmental instrumentality; and (5) do not require the consent
or approval of any third party. This Agreement has been duly executed and
delivered by a duly authorized representative of Licensee and constitutes the
legal, valid and binding obligation of Licensee, enforceable against Licensee
in accordance with its terms except as such enforcement may be limited by
applicable bankruptcy, moratorium, reorganization or other laws or legal
principles affecting the rights of creditors generally or by general
principles of equity (whether or not a proceeding is brought in a court of law
or equity).

11. TERM.

(a) INITIAL TERM. Subject to the provisions for prior termination set
forth herein, this Agreement shall commence as of the Effective Date and
shall (i) continue in full force and effect until the fourth (4th)
anniversary of such date (the "Expiration Date").

(b) FIRST RENEWAL PERIOD. The Term shall automatically renew for an
additional four (4) years, or until the eighth (8th) anniversary of the
Commencement Date unless either (i) Licensee shall deliver written notice to
Licensor of its intention to not renew the Term of this Agreement by the one
hundred twentieth (120th) day prior to the conclusion of the Initial Term; or
(ii) Licensee shall be in material breach of this Agreement upon the
Expiration Date.

<PAGE>

(i) GENERALLY. The Term of this Agreement may be extended for
additional periods of four (4) years (a "Renewal Period") up to the
forty-eighth (48th) anniversary of the Commencement Date. However, for
Licensee to have the right to extend the Term for any Renewal Period, during
the Renewal Period that is about to conclude; (i) The Total Net Sales at the
end of such Renewal Period must be ten percent (10%) greater than the Total
Net Sales at the beginning of such Renewal Period; (ii) Licensee shall not be
in material breach of this Agreement upon the conclusion of such Renewal
Period; and (iii) Licensee shall provide Licensor with written notice of its
intention to renew the Term for an additional Renewal Period at least one
hundred twenty (120) days prior to the scheduled expiration of such Renewal
Period.

(ii) SPECIAL CONSIDERATIONS IF THE TERRITORY HAS BEEN EXPANDED. In
the event that the Territory has been expanded pursuant to Paragraph 3(b),
above, the increase in Total Net Sales shall be calculated separately: (i)
For the United States; (ii) For Canada and Mexico; and (iii) For the
remainder of the world. If such expansion occurs during a Renewal Period,
then the percentage requirement shall be pro-rated accordingly. Should
Licensee fail to satisfy such requirements for any of the United States,
Mexico and Canada, or the remainder of the world, then this Agreement shall
expire with respect to such respective area for which Licensee failed to
satisfy such requirement. However, if Licensee is in material breach of this
Agreement upon the conclusion of any Renewal Period, this Agreement shall
expire as to the entire Territory.

(d) Notwithstanding the above, Licensee shall have the unrestricted
right to cancel this Agreement upon thirty (30) days advance written notice
given at any time after __________,1998.

12. TERMINATION. The remedies provided herein are cumulative and not
exclusive. In addition to these remedies, Licensor may exercise any and all
other rights and remedies it has under other provisions of this Agreement or
applicable law. Licensor may terminate the rights of Licensee under this
Agreement for reasons set forth below or for other reasons pursuant to other
provisions of this Agreement.

(a) DEFAULT UPON LICENSE PAYMENTS: At the option of Licensor, the rights
of Licensee under this Agreement shall terminate if Licensee fails to make
timely payments of any monies required hereunder, Licensee shall have ten
days following written notice from Licensor to cure a default by payment of
the entire balance due, plus interest thereon.

(b) INSOLVENCY OR BANKRUPTCY: Licensor shall have the right to terminate
the rights of Licensee under this Agreement (i) if Licensee files a petition
in bankruptcy, or if a petition in bankruptcy is filed against it; (ii) if
Licensee becomes insolvent, or makes an assignment for the benefit of its
creditors, or files petition or otherwise seeks relief under or pursuant to
any bankruptcy, insolvency or reorganization statute or proceeding, or if it
discontinues its

<PAGE>

business, or if a custodian, receiver or trustee is appointed for it, or a
substantial of its business or assets; or (iii) if Licensee becomes unable to
discharge its duties pursuant to this Agreement.

(c) ACTS DETRIMENTAL TO BRAND: Licensee acknowledges that it is one of
what could be many licensees of the Mark and that its actions and omissions
can have a substantial impact on the business and profits of Licensor,
business and profits of the other licensees of Licensor and the value of the
Mark. Therefore, if Licensee takes any action, or fails to take an action,
which action or omission is, in the reasonable opinion of Licensor,
materially harmful to the Mark or the business or Licensor, Licensor's other
licensees, or the brand, then, at Licensor's option, all rights of Licensee
under this Agreement shall terminate. Before Licensor terminates the rights
of Licensee under this Agreement for an act detrimental to brand, Licensor
shall give Licensee notice of the acts or omissions it believes to be
detrimental. Licensee shall have thirty (30) days after delivery of such
notice in which to cure or correct said acts or omissions or commence an
arbitration pursuant to the terms of this Agreement. If, in the reasonable
opinion of Licensor, Licensee fails to cure or correct such acts or omissions
or fails to commence an arbitration within thirty (30) days after such
notice, then Licensor may, at its sole option, thereupon immediately
terminate all of Licensee's rights under this Agreement. Licensor may give
notice at any time during the Term of this Agreement that it believes
Licensee has committed an act or omission detrimental to the Mark, the
business of Licensor or its other licensees, or the brand. The failure of
Licensor to give notice of any particular act or omission shall not be deemed
a waiver of Licensor's right to give notice for any other act or omission.

(d) CURE PERIOD: Before Licensor terminates the right of Licensee under
this Agreement for a default or breach of license, Licensor shall give
Licensee a chance to cure said breach or default, if it is curable. If a
provision of this Agreement specifies a certain cure or notice period, such
provision shall apply. If no such provision shall apply, Licensee shall have
30 days after notice from Licensor to cure the breach or default. If Licensee
fails to cure the breach or default with the applicable cure period, Licensor
may thereupon immediately terminate all of Licensee's rights hereunder. No
notice need be given for breaches or defaults which are not curable.

(e) RESULT OF TERMINATION. Licensee shall be obligated upon termination,
in addition to any other obligation upon Licensee hereunder, to immediately
pay Licensor all Royalty Payments that have accrued to the account of
Licensor up to such time as well as make a full accounting to Licensor of
Total Net Revenues during the current Contract Year. Additionally, Licensee
must continue to account to and pay Licensor for all Total Net Revenues
during the liquidation period, if applicable.

(f) INJUNCTIVE RELIEF: Licensee acknowledges that the Mark possess a
special, unique and extraordinary character which makes difficult the
assessment of monetary damages that would be sustained by Licensor from the
unauthorized use of the Mark, and that irreparable injury would be caused by
such use. Licensee further acknowledges that it would be difficult to fully
compensate Licensor for damages for any violation by Licensee of (i) the

<PAGE>

provisions of this Agreement relating to the protection of, or the use of the
Mark and/or other intellectual property of Licensor; and (ii) the provisions
of this Agreement relating to quality control and approval. Accordingly,
Licensee specifically agrees that Licensor shall be entitled to temporary and
permanent injunctive relief to enforce this Agreement, and Licensee shall
expressly waive the defense that a remedy and damages would be adequate as
well as the requirement for the posting of any bond in connection with any
such injunctive relief. This provision with respect to injunctive relief shall
not, however, diminish the right of Licensor to claim and recover damages in
addition to or in lieu of injunctive relief.

13. ARBITRATION. Except as otherwise set forth in this Agreement, any claim,
dispute or controversy arising out of, or relating to any section of this
Agreement or the making, performance or interpretation of the rights and
obligations set forth in this Agreement (including, without limitation,
Paragraph 12(c)) shall be settled on an expedited basis by binding
arbitration in California before a single arbitrator from the Judicial
Arbitration Mediation Service ("JAMS") mutually agreeable to the parties
hereto, and, if no agreement is reached, before the arbitrator from JAMS
selected in accordance with the rules of JAMS then in effect, which
arbitration shall be conducted in accordance with such rules, and judgment
upon any award rendered may be entered in any court having jurisdiction
thereof. The decision of the arbitrator shall be binding on all of the
parties, and any right to judicial action on any matter subject to
arbitration hereunder is hereby waived, unless otherwise provided by
applicable law or in this Agreement, except suit to enforce the arbitration
award or in the event arbitration is not available for any reason. The
arbitrator shall be bound by the terms and conditions of this Agreement and
shall not extend, modify or suspend any of the provisions of this Agreement.
The costs associated for the payments of arbitration services with JAMS
shall be shared equally between the parties.

14. INDEMNIFICATION

(a) Licensee shall indemnify and hold harmless Licensor and each of its
affiliates, and all of their respective partners, officers, directors,
employees, agents and other representatives or consultants from and against,
any and all damages, losses, deficiencies, liabilities, costs and expenses
(including reasonable legal fees and expenses) and any and all claims,
demands, suits, investigations, proceedings, settlements and compromises
incurred or suffered by any such person that result from, relate to, or
otherwise arise out of:

(i) any breach of any representation or warranty on the part of
Licensee contained in this Agreement, or any nonfulfillment of any
agreement, convenant or other obligation on the part of Licensee under
this Agreement:

(ii) the Use or Related Use of Mark by Licensee; and

(iii) the enforcement of the indemnification obligations under this
Section 14(a).

<PAGE>

(b) Licensor shall indemnify and hold harmless Licensee and its
affiliates, and all of their respective partners, officers, directors,
employees, agents, and other representatives or consultants, from and
against, any and all damages, losses, deficiencies, liabilities, costs, and
expenses (including reasonable legal fees and expenses) and any and all
claims, demands, suits, investigations, proceedings, settlements and
compromises incurred or suffered by any such person that result from, relate
to, or arise out of:

(i) any breach of any representation or warranty on the part of
Licensor contained in this Agreement, or any nonfulfillment of any
agreement, convenant or other obligation on the part of Licensor under
this Agreement;

(ii) Licensor's ownership or use of the Mark prior to the
Commencement Date or the ongoing use of the Mark by Licensor; and

(iii) the enforcement of the indemnification obligations under this
Section 14(b).

(c) Licensee shall pay promptly to any person entitled to
indemnification from Licensee pursuant hereto, and Licensor shall pay
promptly to any person entitled to indemnification from Licensor pursuant
hereto, the amount of all damages, losses, deficiencies, liabilities, costs,
expenses, claims, settlements, compromises and other obligations owing
pursuant to this Section 14.

15. INSURANCE. Licensee shall at all times during the Term of this Agreement
carry comprehensive general liability insurance for and including, without
limitation, coverage for product liability, bodily injury, property damage,
personal injury and advertising injury (in amounts of at least $5,000,000)
with an insurer acceptable to Licensor and cause Licensor to be named as an
additional insured under all policies for such insurance. Licensee shall
furnish to Licensor certificates of insurance providing for the
above-described coverages issued an insurance company on the commencement of
the Term of this Agreement and thereafter not less than 15 days prior to the
expiration date of each policy referenced in the certificates of insurance
furnished pursuant to this Agreement. Each certificate of insurance shall
state that the corresponding policy or policies will not be canceled or
altered unless Licensor is first given 30 days prior written notice by the
insurance company. The insurance afforded by the policy or policies shall not
be limited in any way by the reason of insurance maintained by Licensor.

16. EXPENSES. Each of the parties shall pay its own costs and expenses
(including legal fees) incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement, and the consummation of the
transactions contemplated by this Agreement.

17. CONTENTS OF AGREEMENT: ASSIGNMENT. This Agreement, including the
Schedules hereto, sets forth the entire understanding of the parties with
respect to the subject matter hereof and the transactions contemplated hereby
and it shall not be amended or modified except by written instrument duly
executed by each of the parties hereto. Without the prior written consent of
Licensor, Licensee may not assign its rights and obligations under this
Agreement except that

<PAGE>

Licensee may assign its rights and obligations hereunder without such consent
(i) in connection with a sale of all or substantially all of the business or
division of Licensee which uses the Mark, provided the purchaser thereof
assumes all of Licensee's obligations hereunder, (ii) in connection with a
sale of 80% or more of the capital stock or other equity interests in any
entity that directly or indirectly owns the business or division of Licensee
which uses the Mark, or (iii) to an affiliate or subsidiary of Licensee,
provided that the business and assets of Licensee related to the subject
matter of this Agreement are transferred to such affiliate or subsidiary and
such affiliate or subsidiary assumes all of Licensee's obligations hereunder.
Any assignment of the Mark and the goodwill associated therewith by Licensor
or any assignee or subject assignee of Licensor shall be made subject to the
terms of this Agreement.

18. WAIVER. Any term or other provision of this Agreement may be waived at
any time by the party or parties entitled to the benefit thereof by a written
instrument duly executed by such party or parties.

19. NOTICES. Any notices, request, demand, waiver, consent, approval or
other communication ("notice") that is required or permitted hereunder shall
be in writing and shall be deemed given only if delivered personally or by
reputable overnight-courier service or sent by fax or by registered or
certified mail, postage or delivery charge prepaid, as follows:

(a) If to Licensor to:

Rampage Clothing Company
2825 South Santa Fe Ave.
Vernon, CA 90058
Fax - (213) 581-9040
Attention: Mr. Gerald Birin

With a copy to:

Katz, Hoyt, Siegel & Kapor LLP
11111 Santa Monica Blvd.
Suite 820
Los Angeles, CA 90025
Fax - (310) 473-7138
Attention: Jeffrey H. Kapor, Esq.

(b) If to Licensee to:

The Wet Seal, Inc.
64 Fairbanks
Irvine, CA 92718
Facsimile No.: (714) 770-8609
Attention: Ed Thomas

<PAGE>

With a copy to:

Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Facsimile No.: (212) 872-1002
Attention: Alan Siegel, Esq.

or to such other address as the addressee may have specified in a notice duly
given to the sender. Any such notice will be deemed to have been given as of
the date so delivered, faxed, or mailed.

20. GOVERNING LAW: CONSENT TO JURISDICTION. This Agreement shall be
governed by and interpreted and enforced in accordance with the laws of the
State of California, without regard to the principles thereof relating to
conflicts of laws. This Agreement is deemed to be consummated in the State of
California and the forum for any dispute shall be the federal court located
in the State of California whose venue is Los Angeles County or the superior
court for the County of Los Angeles, whichever is appropriate.

21. ATTORNEY'S FEES. Should any suit be brought to enforce any of the terms
or provisions contained in this Agreement, the prevailing party shall be
entitled to reasonable attorney fees and costs.

22. NO HYPOTHECATION. Licensee shall not pledge, hypothecate, mortgage,
grant liens in or upon, grant security interest in, use as collateral or
otherwise borrow upon the license, or any of Licensee's rights under this
Agreement, without the express prior written consent of Licensor. Any such
action without Licensor's consent shall be void and of no effect and shall
entitle Licensor to immediately terminate Licensee's rights under this
Agreement.

23. HEADINGS; NUMBER AND GENDER. All section headings and other captions
contained in this Agreement are for convenience of reference only, do not
form a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. Words used in this Agreement, regardless of
the number and gender specifically used, shall be deemed and construed to
include any other number, singular or plural, and any other gender,
masculine, feminine, or neuter, as the context requires.

24. SCHEDULES. All Schedules referred to in this Agreement are intended to
be and hereby are specifically made a part of this Agreement.

25. SEVERABILITY. Any provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering
unenforceable the remaining provisions hereof, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

<PAGE>

26. COUNTERPARTS. This Agreement may be executed in two or more separate or
multiple counterparts, each of which shall be deemed an original, and which
shall be effective even if not all parties shall have executed the same
counterpart; but all such counterparts shall together evidence and constitute
a single agreement.

27. NO JOINT VENTURE. Nothing contained in this Agreement shall be
construed to place the parties in relationship of partners or joint
venturers, or as making the parties agents for one another or otherwise
having the power to bind one another to any contracts or other instruments or
to any undertakings, obligations, or other liabilities.

28. MUTUAL CONFIDENTIALITY. The parties agree that they will assure that
they and their affiliates, subsidiaries, successors and assigns and their
respective employees, agents, attorneys and representatives shall maintain as
confidential, and shall not use for their own account, disclose or cause to
be disclosed to any person or entity any proprietary information of the other
party to which such party may gain access as a result of its participation
hereunder. The foregoing shall not apply to any information that is publicly
disclosed by the original holder of such information, or which becomes
publicly known through no fault or action of the party prior to any
disclosure by such party.

29. DRAFTSMANSHIP OF AGREEMENT. This writing is the result of the mutual
effort of the parties and their respective counsel, therefore, the parties
agree that neither party shall be considered the draftsman of this Agreement.

IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the date first above written.

[LICENSOR]

RAMPAGE CLOTHING COMPANY

By: /s/ Gerald Birin
------------------------------
Name: Gerald Birin
Title: Chief Financial Officer

[LICENSEE]

THE WET SEAL, INC.

By: /s/ Edward Thomas
------------------------------
Name: Edward Thomas
Title: President and CEO

<PAGE>

SCHEDULE A

ROYALTY SCHEDULE

CONTRACT YEARS PERCENTAGE
- -------------- ----------
One through Four..............................................One Percent (1%)
Five through Eight.............................One and One Half Percent (1.5%)
Nine through Twelve........................One and One Quarter Percent (1.25%)
Thirteen on...................................................One Percent (1%)

<PAGE>

CHARLOTTE RUSSE HOLDING, INC.
SUBSIDIARIES

<TABLE>
<CAPTION>
Names under which
Subsidiary State of Incorporation does business
- ------------------------- -------------------------- -------------------------

<S> <C> <C>
Charlotte Russe, Inc. California Charlotte Russe
Rampage

Charlotte Russe California Charlotte Russe
Merchandising, Inc. Merchandising, Inc.

Charlotte Russe California Charlotte Russe
Administration, Inc. Administration, Inc.
</TABLE>

<PAGE>

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected
Consolidated Financial and Operating Data" and "Experts" and to the use of
our report dated November 12, 1998 (except for Note 5, as to which the date
is December 30, 1998 and for the last two paragraphs of Note 8, as to which
the date is _______, 1999) in the Registration Statement to be filed on or
about August 2, 1999 and related Prospectus of Charlotte Russe Holding, Inc.
for the registration of ________ shares of its common stock.

ERNST & YOUNG LLP

San Diego, California

________________________________________________________________________________

The foregoing consent is in the form that will be signed upon the completion
of the restatement of the capital accounts described in Note 8 to the
financial statements.

/s/ ERNST & YOUNG LLP

San Diego, California
August 2, 1999

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES F-3 AND F-4 OF THE COMPANY'S FORM S-1.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-25-1999
<PERIOD-START> SEP-27-1998
<PERIOD-END> JUN-26-1999
<CASH> 112,323
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 7,544,295
<CURRENT-ASSETS> 10,407,676
<PP&E> 40,555,283
<DEPRECIATION> 8,418,753
<TOTAL-ASSETS> 76,239,086
<CURRENT-LIABILITIES> 17,827,511
<BONDS> 0
0
0
<COMMON> 183,108
<OTHER-SE> 36,131,373
<TOTAL-LIABILITY-AND-EQUITY> 75,239,086
<SALES> 126,378,315
<TOTAL-REVENUES> 0
<CGS> 85,996,435
<TOTAL-COSTS> 25,414,702
<OTHER-EXPENSES> 204,393
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,937,507
<INCOME-PRETAX> 11,825,278
<INCOME-TAX> 4,966,617
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,858,661
<EPS-BASIC> .37
<EPS-DILUTED> .32

</TABLE>