<PAGE>
 

<PAGE>


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

[ X ]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended            April 30, 1997
                              --------------------------------------

                                       OR

[  ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from                              to 
                               ----------------------------    -----------------

Commission File Number                     0-18183
                      ----------------------------------------------------------


                            G-III APPAREL GROUP, LTD.
           (Exact of name of registrant as specified in its character)



<TABLE>
<S>                                         <C>
            Delaware                                     41-1590959
- ---------------------------------           -----------------------------------
 (State or other jurisdiction of            (I.R.S. Employer Identification No.)
  incorporation or organization)

  345 West 37th Street, New York, New York                  10018
- --------------------------------------------------------------------------------
   (Address of Principal Executive Office)               (Zip Code)

</TABLE>


                                 (212) 629-8830
              ----------------------------------------------------
              (Registrant's telephone number, including area code)



- --------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15(d)  of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

Yes     XX            No
    ----------           ----------

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of June 1, 1997.

Common Stock, $.01 par value per share:      6,479,021      shares.
                                       ---------------------







<PAGE>
 

<PAGE>






Part I                FINANCIAL INFORMATION                      Page No.


   Item 1.            Financial Statements *

             Consolidated Balance Sheets -
                   January 31, 1997 and April 30, 1997...............3

             Consolidated Statements of Operations -
                   For the Three Months Ended
                   April 30, 1996 and 1997...........................4

             Consolidated Statements of Cash Flows -
                   For the Three Months Ended
                   April 30, 1996 and 1997...........................5

             Notes to Financial Statements...........................6


   Item 2.   Management's Discussion and Analysis of
             Financial Condition and Results of
             Operations............................................7-8



Part II    OTHER INFORMATION



   Item 6.   Exhibits and Reports on Form 8-K

           1.   Fourth Amended and Restated Loan Agreement,  dated May 31, 1997,
                by and among G-III Leather  Fashions,  Inc., the Banks signatory
                thereto and Fleet Bank,  N.A.  as Agent,  Collateral  Monitoring
                Agent and Issuing Bank for such Banks.

           2.   By laws as amended on April 17, 1997.

*  The  Balance  Sheet at  January  31,  1997 has been  taken  from the  audited
   financial  statements  at that  date.  All  other  financial  statements  are
   unaudited.




                                      - 2 -






<PAGE>
 

<PAGE>




                   G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

               (in thousands, except share and per share amounts)



<TABLE>
<CAPTION>

                                                          JANUARY 31,                APRIL 30,
                                                             1997                      1997
                                                             ----                      ----
ASSETS                                                                              (unaudited)
- ------
<S>                                                     <C>                        <C>        
Current Assets:
    Cash and Cash Equivalents                             $  13,067                $   5,703
    Accounts Receivable - Net                                 7,176                    3,028
    Inventories                                              13,986                   19,026
    Prepaid and Refundable Income Taxes                                                2,238
    Prepaid Expenses and Other Current Assets                   969                    1,718
                                                           --------                 --------
         Total Current Assets                                35,198                   31,713

Property and Equipment at Cost - Net                          5,030                    4,850
Deferred Income Taxes                                         3,351                    3,351
Other Assets                                                    976                    1,022
                                                           --------                 --------
                                                          $  44,555                $  40,936
                                                           ========                 ========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

    Notes Payable                                         $   3,459                $   3,477

    Current Maturities of Obligations Under
      Capital Leases                                            376                      369
    Federal and Foreign Income Taxes Payable                    447                       99
    Accounts Payable                                          2,169                    1,915
    Accrued Expenses                                          2,101                    2,483
    Accrued Nonrecurring Charges                              2,149                    2,133
                                                            -------                  -------
         Total Current Liabilities                           10,701                   10,476

Obligations Under Capital Leases                                554                      407
Nonrecurring Charges -  Long Term                               557                      475


Stockholders' Equity:

    Preferred stock, 1,000,000 shares authorized;
      no shares issued and outstanding in all periods
    Common Stock, $.01 par value: authorized
      20,000,000 shares; issued and outstanding,
      6,477,156 and 6,477,656 shares on January 31, 1997
      and April 30, 1997, respectively                           65                        65
    Additional Paid-in Capital                               23,638                    23,639
    Retained Earnings                                         9,122                     5,874
                                                            -------                  --------
                                                             32,825                    29,578
                                                            -------                  --------
                                                          $  44,555                $   40,936
                                                            =======                  ========

</TABLE>


See Accompanying Notes to Financial Statements.




                                       -3-






<PAGE>
 

<PAGE>




                   G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except share and per share amounts)



<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                                 APRIL 30,
                                              ----------------------------------------
                                                     1996                     1997
                                                     ----                     ----
                                                                (Unaudited)

<S>                                               <C>                      <C>   
Net Sales                                         $  5,063                 $  6,531

Cost of Goods Sold                                   4,911                    6,069
                                                   -------                  -------

      Gross Profit                                     152                      462


Selling, General and
  Administrative Expenses                            5,660                    5,814
                                                   -------                  -------

      Operating Loss                                (5,508)                  (5,352)

Interest and Financing Charges, Net                    212                       60
                                                   -------                  -------

      Loss Before Taxes                             (5,720)                  (5,412)

Income Taxes (Benefit)                              (2,280)                  (2,164)
                                                   -------                  -------

      Net Loss                                    $ (3,440)                $ (3,248)
                                                   =======                  =======


LOSS PER COMMON SHARE:

  Primary and Fully Diluted;
      Net Loss per common share                   $   (.53)                $  (.50)
                                                  ========                 ========

  Weighted average number of
     shares outstanding                          6,465,836                6,477,443
                                                 =========                =========

</TABLE>







See Accompanying Notes to Financial Statements.

                                       -4-








<PAGE>
 

<PAGE>



                   G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)



<TABLE>
<CAPTION>

                                                                  THREE MONTHS ENDED
                                                                        APRIL 30,
                                                          --------------------------------
                                                            1996               1997
                                                            ----               ----
                                                                 (Unaudited)

<S>                                                    <C>                  <C>  
Cash Flows from Operating Activities:
   Net Loss                                             $ (3,440)           $ (3,248)
   Adjustment to Reconcile Net Loss:
      Depreciation and Amortization                          364                 296

Changes in Operating Assets and Liabilities:

   Accounts Receivable                                    (3,838)              4,148
   Inventory                                              (3,989)             (5,040)
   Federal and Foreign Income Taxes                       (2,405)             (2,586)
   Prepaid Expenses                                         (197)               (749)
   Other Assets                                              (95)                (46)
   Accounts Payable and Accrued Expenses                   1,269                 128
   Accrued Nonrecurring Charge                               (56)                (16)

Net Cash (Used in) Operating Activities                   (7,299)             (7,113)
                                                         --------            --------

Cash Flows for Investing Activities:
   Capital Expenditures                                      (93)               (118)
   Capital Dispositions                                       53                   2
                                                        --------            --------
Net Cash (Used in) Investing Activities                      (40)               (116)
                                                        --------            --------

Cash Flows from Financing Activities:

   Increase in Notes Payable, Net                            404                  18
   Proceeds from Exercise of Stock Options                                         1
   Payment of Capital Lease Obligations                     (148)               (154)
                                                        --------            --------

Net Cash Provided by (used for) Financing Activities         256                (135)
                                                        --------            --------

Net (Decrease) in Cash                                    (4,495)             (7,364)

Cash at Beginning of Period                                7,617              13,067
                                                        --------            --------

Cash at End of Period                                   $  3,122            $  5,703
                                                        ========            ========

Supplemental Disclosures of Cash Flow Information
   Cash Paid During the Period for:
        Interest                                        $    109            $     94
        Income Taxes                                    $      1            $    440

</TABLE>



See Accompanying Notes to Financial Statements.



                                       -5-







<PAGE>
 

<PAGE>



                   G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - General Discussion

The results of the three month period  ended April 30, 1997 are not  necessarily
indicative of the results  expected for the entire fiscal year. The accompanying
financial   statements  included  herein  are  unaudited.   In  the  opinion  of
management,  all adjustments  (consisting of only normal recurring  adjustments)
necessary  for a  fair  presentation  of  the  financial  position,  results  of
operations and cash flows for the interim periods presented have been reflected.

The  accompanying  financial  statements  should be read in conjunction with the
financial statements and notes included in the Company's Form 10K filed with the
Securities and Exchange Commission for the year ended January 31, 1997.

Note 2 - Inventories


<TABLE>
<CAPTION>
                                                      (in thousands)
                                            January 31,            April 30,
   Inventories consist of:                     1997                  1997
                                               ----                  ----

<S>                                          <C>                    <C>     
         Finished products...............    $ 10,382               $ 11,440
         Work-in-process.................          27                    452
         Raw materials...................       3,577                  7,134
                                             ---------              --------
                                             $ 13,986               $ 19,026
                                             =========              ========

</TABLE>



Note 3 - Net Loss Per Common Share

Net loss per  common  share is based on the  weighted  average  number of common
shares outstanding during each of the periods,  adjusted for the dilutive effect
of common share equivalents, when applicable.

Note 4 - Notes Payable

The Company's loan agreement has been extended for two years,  with the extended
term expiring on May 31, 1999.  The  agreement  provides for a line of credit in
the amount of  $52,000,000  from May 31 to  October  30,  and  $40,000,000  from
October 31 to May 30 during each year of the  agreement.  The amounts  available
include  direct  borrowings of  $40,000,000  from  May 31 to  November  14,  and
$30,000,000  from November 15 to May 30, during each year of the agreement.  The
balance  of the credit  line may be used for  letters  of  credit.  All  amounts
available for borrowing are subject to borrowing base formulas.

Note 5 - Nonrecurring Charges

As of the year ended  January 31, 1997,  the Company had a remaining  reserve of
approximately  $2.6 million related to a cost reduction  program.  The status of
the components of the provision at the end of the period was:


<TABLE>
<CAPTION>
                                                      (in thousands)
                                        Balance            1997           Balance
                                    January 31, 1997     Activity      April 30, 1997
                                    ----------------     --------      --------------

<S>                                      <C>              <C>             <C>
   Closure of domestic
     and foreign facilities              $2,624            $(16)           $2,608
                                         ======            =====           ======

</TABLE>



Note 6 -  Future Effects of Recently Issued Accounting Pronouncements

The  Financial  Accounting  Standards  Board has issued  Statement  of Financial
Accounting  Standards  No. 128,  "Earnings  Per Share,"  which is effective  for
financial  statements  both interim and annual periods ending after December 15,
1997.  Early  adoption of the new  standard is not  permitted.  The new standard
eliminates   primary  and  fully   diluted   earnings  per  share  and  requires
presentation of basic and diluted earnings per share together with disclosure of
how the per  share  amounts  were  computed.  The  effect of  adopting  this new
standard is not expected to have a material impact on the disclosure of earnings
per share in the financial statements.



                                       -6-






<PAGE>
 

<PAGE>




I
tem 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

Statements  in this  Quarterly  Report on Form  10-Q  concerning  the  Company's
business outlook or future economic performance;  anticipated revenues, expenses
or other financial items; product introductions and plans and objectives related
thereto;  and statements  concerning  assumptions made or expectations as to any
future events,  conditions,  performance or other matter,  are  "forward-looking
statements"  as  that  term  is  defined  under  the  Federal  securities  laws.
Forward-looking statements are subject to risks, uncertainties and other factors
which could cause actual results to differ  materially from those stated in such
statements.  Such risks,  uncertainties and factors include, but are not limited
to,  reliance  on foreign  manufacturers,  the nature of the  apparel  industry,
including changing consumer demand and tastes, seasonality,  customer acceptance
of new products,  the impact of competitive products and pricing,  dependence on
existing  management,  general  economic  conditions,  as  well as  other  risks
detailed in the Company's  filings with the Securities and Exchange  Commission,
including this Quarterly Report on form 10-Q.

Results of Operations

The three month period ending on April 30 is traditionally  the quarter with the
lowest net sales by the Company  during its fiscal year. Net sales for the three
months ended April 30, 1997 were $6.5  million  compared to $5.1 million for the
same  period  last  year.  The  increase  in net sales  during the  quarter  was
primarily due to higher sales in the Mens and Kenneth Cole divisions.

Gross profit was $462,000 for the three months ended April 30, 1997, compared to
$152,000 in the same period last year. Gross profit as a percentage of net sales
was 7.1% for the three  months  ended April 30,  1997,  compared to 3.0% for the
same period last year. The increase in the gross profit  percentage was achieved
primarily in the mens and licensed product lines.

Selling,  general and  administrative  expenses  were $5.8 million for the three
months ended April 30, 1997 compared to $5.7 million in the prior year.

For the three months ended April 30, 1997,  interest and financing charges,  net
were  $60,000,  a decrease of  $152,000  from the same period of the prior year.
This  decrease is primarily  attributable  to interest  income  earned on higher
levels of cash equivalents as compared to last year.

Income tax benefit of $2.2 million reflects an effective tax rate of 40% for the
three  months  ended April 30,  1997,  compared to an income tax benefit of $2.3
million which reflected the same effective tax rate in the comparable  period of
the prior year.

As a result of the  foregoing,  for the three month period ended April 30, 1997,
the Company had a net loss of $3.2 million, or $.50 per share, compared to a net
loss of $3.4 million,  or $.53 per share, for the comparable period in the prior
year.




                                       -7-






<PAGE>
 

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

The Company's loan agreement has been extended for two years,  with the extended
term expiring on May 31, 1999.  The  agreement  provides for a line of credit in
the amount of  $52,000,000  from May 31 to  October  30,  and  $40,000,000  from
October 31 to May 30 during each year of the  agreement.  The amounts  available
include  direct  borrowings of  $40,000,000  from  May 31 to  November  14,  and
$30,000,000  from November 15 to May 30, during each year of the agreement.  The
balance  of the credit  line may be used for  letters  of  credit.  All  amounts
available for borrowing are subject to borrowing base formulas and  overadvances
specified in the agreement.

Direct  borrowings  bear  interest at the agent's prime rate (8.5% as of June 1,
1997) or LIBOR  plus 250  basis  points  at the  election  of the  Company.  All
borrowing are  collateralized  by the assets of the Company.  The loan agreement
requires the Company,  among other  covenants,  to maintain certain earnings and
tangible net worth levels,  and prohibits the payment of cash  dividends.  As of
April 30, 1997,  there were no direct  borrowing  outstanding and  approximately
$17.2 million of contingent  liability under open letters of credit.  The amount
borrowed  under the line of credit  varies  based  upon the  Company's  seasonal
requirements.

The Company's  wholly-owned  Indonesian  subsidiary  has a line of credit with a
bank for  approximately  $3.5  million  which  is  supported  by a $2.0  million
stand-by letter of credit issued under the Company's loan agreement. As of April
30, 1997,  the borrowing by the Indonesian  subsidiary  under its line of credit
approximated $3.5 million.






                                       -8-








<PAGE>
 

<PAGE>




 
                                  SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                       G-III APPAREL GROUP, LTD.
                                              (Registrant)




Date:   June 16, 1997                  By: /s/ Morris Goldfarb
                                           __________________________________
                                           Morris Goldfarb
                                           Chief Executive Officer




Date:   June 16, 1997                  By: /s/ Alan Feller
                                           __________________________________
                                           Alan Feller
                                           Chief Financial Officer,
                                           Treasurer, and Secretary



                           STATEMENT OF DIFFERENCES

The section symbol shall be expressed as................................'SS'




<PAGE>
 








<PAGE>

                                                                  EXECUTION COPY

                   FOURTH AMENDED AND RESTATED LOAN AGREEMENT

                                  BY AND AMONG

                          G-III LEATHER FASHIONS, INC.,

                          THE LENDERS SIGNATORY HERETO

                                       AND

                                FLEET BANK, N.A.
                      AS AGENT, COLLATERAL MONITORING AGENT
                        AND ISSUING BANK FOR SUCH LENDERS

                               AS OF MAY 31, 1997



<PAGE>
 

<PAGE>


                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                                       PAGE
                                                                                                       ----
<S>              <C>                <C>                                                                 <C>
Article 1.      Definitions...............................................................................3

Article 2.      Revolving Credit Facility................................................................25
         Section 2.1                Letters of Credit; Acceptances;
                                    Loans; Steamship Guaranties;
                                    Airway Releases......................................................25
         Section 2.2                Applications for Letters of
                                    Credit, Steamship Guaranties
                                    and Airway Releases..................................................27
         Section 2.3                Borrowing Notice and
                                    Disbursement of Loans................................................29
         Section 2.4                Notes................................................................30
         Section 2.5                Interest.............................................................31
         Section 2.6                Fees.................................................................32
         Section 2.7                Payment of Loans and Acceptances;
                                    Voluntary Changes in Commitments.....................................33
         Section 2.8                Use of Proceeds of Loans.............................................34
         Section 2.9                Computations.........................................................34
         Section 2.10               Time and Method of Payments;
                                    Statement of Account.................................................35
         Section 2.11               Several Obligations..................................................36
         Section 2.12               Guaranties...........................................................36
         Section 2.13               Security.............................................................37
         Section 2.14               Lending Offices......................................................40
         Section 2.15               Obligations Absolute.................................................41
         Section 2.16               Sharing of Payments
                                    and Set-Off Among Lenders............................................41
         Section 2.17               Additional Costs; Capital Requirements...............................42
         Section 2.18               Additional L/C Provisions............................................44
         Section 2.19               Pro Rata Treatment
 Among Lenders.....................................46
         Section 2.20               Non-Receipt of Funds by the Agent....................................47
         Section 2.21               Collections; Agent's Right to
                                    Notify Account Debtors and
                                    Endorse the Borrower's Name..........................................47
         Section 2.22               Application of Payments and Collections..............................49
         Section 2.23               Conversions of Loans.................................................50
         Section 2.24               Limitation on Types of Loans.........................................50
         Section 2.25               Illegality...........................................................51
</TABLE>






<PAGE>
 

<PAGE>




<TABLE>
<CAPTION>
                                                                                                       PAGE
                                                                                                       ----
<S>              <C>                <C>                                                                 <C>
         Section 2.26               Indemnification......................................................51
Article 3.      Representations and Warranties...........................................................52
         Section 3.1                Organization.........................................................52
         Section 3.2                Power, Authority, Consents...........................................53
         Section 3.3                No Violation of Law or Agreements....................................53
         Section 3.4                Due Execution, Validity, Enforceability..............................54
         Section 3.5                Properties, Priority of Liens........................................54
         Section 3.6                Judgments, Actions, Proceedings......................................54
         Section 3.7                No Default; Compliance With Laws.....................................55
         Section 3.8                Burdensome Documents.................................................55
         Section 3.9                Financial Statements;
                                    Projections..........................................................55
         Section 3.10               Tax Returns..........................................................56
         Section 3.11               Intangible Assets....................................................56
         Section 3.12               Regulation U and Regulation G........................................57
         Section 3.13               Name Changes, Mergers,
                                    Acquisitions; Location of Collateral.................................57
         Section 3.14               Full Disclosure......................................................57
         Section 3.15               Licenses and Approvals...............................................58
         Section 3.16               Labor Disputes; Collective Bargaining
                                    Agreements; Employee Grievances......................................58
         Section 3.17               Condition of Assets..................................................58
         Section 3.18               ERISA................................................................59
         Section 3.19               Account Representations
                                    and Warranties.......................................................60
         Section 3.20               Borrowing Base Certificates..........................................60
         Section 3.21               Accounts Receivable Aging Reports;
                                    Key Item Reports.....................................................60
         Section 3.22               Inventory Representations
                                    and Warranties.......................................................60
         Section 3.23               Forfeiture Proceeding................................................61
         Section 3.24               Americans with Disabilities Act......................................61

Article 4.      Conditions...............................................................................61
         Section 4.1                Conditions to Closing................................................61
         Section 4.2                Conditions to Subsequent
                                    Loans and Issuance of L/Cs...........................................64
</TABLE>



<PAGE>
 

<PAGE>




<TABLE>
                                                                                                       PAGE
                                                                                                       ----
<S>              <C>                <C>                                                                 <C>
Article 5.      Delivery of Financial Reports,
                Documents and Other Information..........................................................65
         Section 5.1                Annual Financial Statements..........................................65
         Section 5.2                Semi-Annual Financial Statements;
                                    Quarterly Financial Statements.......................................66
         Section 5.3                Compliance Information...............................................66
         Section 5.4                No Default Certificate...............................................66
         Section 5.5                Rental Obligations;
                                    Capitalized Lease Obligations........................................67
         Section 5.6                Accountants' Reports.................................................67
         Section 5.7                Copies of Documents..................................................67
         Section 5.8                Notices of Defaults..................................................68
         Section 5.9                ERISA Notices........................................................68
         Section 5.10               Additional Information and Reports...................................68
         Section 5.11               Confidentiality of Information.......................................70

Article 6.      Affirmative Covenants....................................................................71
         Section 6.1                Books and Records....................................................71
         Section 6.2                Inspections and Field Examinations;
                Annual Accounts Receivable...............................................................71
         Section 6.3                Maintenance and Repairs..............................................71
         Section 6.4                Continuance of Business..............................................71
         Section 6.5                Copies of Corporate Documents........................................72
         Section 6.6                Perform Obligations..................................................72
         Section 6.7                Notice of Litigation.................................................72
         Section 6.8                Insurance............................................................73
         Section 6.9                Financial Covenants..................................................73
         Section 6.10               Notice of Certain Events.............................................75
         Section 6.11               Comply with ERISA....................................................76
         Section 6.12               Environmental Compliance.............................................76
         Section 6.13               Management Letter....................................................76
         Section 6.14               Preparation of Strategic Plan Report.................................76
         Section 6.15               Tax Refunds..........................................................76

Article 7.      Negative Covenants.......................................................................77
         Section 7.1                Indebtedness.........................................................77
         Section 7.2                Liens................................................................77
         Section 7.3                Guaranties...........................................................78
         Section 7.4                Mergers; Acquisitions................................................79
</TABLE>






<PAGE>
 

<PAGE>




<TABLE>
<CAPTION>
                                                                                                       PAGE
                                                                                                       ----
<S>              <C>                <C>                                                                 <C>
         Section 7.5                Redemptions; Distributions...........................................79
         Section 7.6                Stock Issuance.......................................................79
         Section 7.7                Changes in Business..................................................79
         Section 7.8                Prepayments..........................................................80
         Section 7.9                Investments..........................................................80
         Section 7.10               Fiscal Year..........................................................81
         Section 7.11               ERISA Obligations....................................................81
         Section 7.12               Amendments of Documents..............................................82
         Section 7.13               Capital Expenditures.................................................82
         Section 7.14               Capitalized Lease Obligations........................................82
         Section 7.15               Management Fees......................................................83
         Section 7.16               Transactions with Affiliates.........................................83
         Section 7.17               Activities Leading to
                                    Forfeiture Proceeding................................................84
         Section 7.18               Rental Obligations...................................................84
         Section 7.19               Retail Store.........................................................85
         Section 7.20               License Agreements...................................................85

Article 8.      Events of Default........................................................................85
         Section 8.1                Payments.............................................................85
         Section 8.2                Certain Covenants....................................................86
         Section 8.3                Other Covenants......................................................86
         Section 8.4                Other Defaults.......................................................86
         Section 8.5                Representations and Warranties.......................................87
         Section 8.6                Bankruptcy...........................................................87
         Section 8.7                Judgments............................................................88
         Section 8.8                ERISA................................................................88
         Section 8.9                Ownership of Stock...................................................88
         Section 8.10               Management...........................................................89
         Section 8.11               Liens................................................................89
         Section 8.12               Amount of Obligations................................................89
         Section 8.13               Forfeiture Proceedings...............................................89
         Section 8.14               Material Adverse Change..............................................89

Article 9.      Agency Provisions........................................................................90
         Section 9.1                Appointment, Powers and Immunities...................................90
         Section 9.2                Reliance.............................................................90
         Section 9.3                Events of Default....................................................91
         Section 9.4                Rights as a Lender...................................................91
</TABLE>






<PAGE>
 

<PAGE>




<TABLE>
<CAPTION>
                                                                                                       PAGE
                                                                                                       ----
<S>              <C>                <C>                                                                 <C>
         Section 9.5                Indemnification......................................................91
         Section 9.6                Non-Reliance.........................................................92
         Section 9.7                Failure to Act.......................................................93
         Section 9.8                Resignation or Removal...............................................93
         Section 9.9                Sharing of Collateral and Payments...................................93
         Section 9.10               Additional Provisions as to
                                    the Collateral Monitoring Agent......................................94
         Section 9.11               Execution of Fifth Amended
                                    and Restated Loan Agreement..........................................96
         Section 9.12               Termination of Goldfarb Guaranty,
                                    Goldfarb Stock Pledge and Assignment
                                    of Taxes.............................................................96

Article 10.     Miscellaneous Provisions.................................................................96
         Section 10.1               Fees and Expenses; Indemnity.........................................96
         Section 10.2               Taxes................................................................97
         Section 10.3               Payments.............................................................98
         Section 10.4               Survival of Agreements and
                                    Representations; Construction........................................99
         Section 10.5               Lien on and Set-off of Deposits......................................99
         Section 10.6               Modifications, Consents and
                                    Waivers; Entire Agreement............................................99
         Section 10.7               Remedies Cumulative.................................................100
         Section 10.8               Further Assurances..................................................100
         Section 10.9               Notices.............................................................101
         Section 10.10              Counterparts........................................................103
         Section 10.11              Severability........................................................103
         Section 10.12              Binding Effect; No Assignment
                                    or Delegation by Borrower...........................................103
         Section 10.13              Assignments and Participation
                                    by Lenders; Issuance of L/Cs
                                    by Lender Affiliates................................................104
         Section 10.14              GOVERNING LAW; CONSENT TO JURISDICTION;
                                    WAIVER OF TRIAL BY JURY.............................................106
         Section 10.15.             Additional Agreements
                                    by Borrower and Loan Parties........................................107
         Section 10.16.             Release by Borrower and Loan Parties................................107
</TABLE>




<PAGE>
 

<PAGE>




<TABLE>
<CAPTION>
EXHIBITS
- --------
<S>               <C>
     A.           Form of Note
     B.           States of Incorporation and Qualification, and Capitalization and
                  Ownership of Stock, of Borrower and Subsidiaries
     C.           Consents, Waivers, Approvals; Violation of Agreements
     D-1.         Form of Available to Sell Report ($)
     D-2.         Form of Available to Sell Report (Units)
     D-3.         Form of Inventory Analysis Report
     D-4.         Form of Key Item Report
     E.           Permitted Security Interests, Liens and Encumbrances
     F.           Judgments, Actions, Proceedings
     G.           Defaults; Compliance with Laws, Regulations, Agreements
     H.           Burdensome Documents
     I.           Patents, Trademarks, Trade Names, Service Marks, Copyrights, and
                  Trade-Style Names
     J.           Name Changes, Mergers, Acquisitions; Location of Collateral
     K.           Labor Disputes; Collective Bargaining Agreements; Employee Grievances
     L.           Pension Plans
     M.           Permitted Indebtedness and Guaranties
     N.           Form of Assignment and Acceptance
     O.           Accounts and Inventory
     P.           Borrowing Base Certificate
     Q.           Form of Continuing Agreement for Issuance of Steamship Guaranties and Airway
                  Releases
     R.           Form of Fifth Amended and Restated Loan Agreement

SCHEDULE

         7.9      Investments

</TABLE>





<PAGE>
 

<PAGE>



                   FOURTH AMENDED AND RESTATED LOAN AGREEMENT

         THIS AGREEMENT, made as of the 31st day of May, 1997, by and among:

         G-III LEATHER FASHIONS, INC., a New York corporation (the "BORROWER");

         The  lenders   that  have   executed   the   signature   pages   hereto
(individually, a "LENDER" and collectively, the "LENDERS"); and

         FLEET  BANK,  N.A.,  a  national  banking   association,   individually
("FLEET")  and as Agent for the Lenders  (in such  capacity,  together  with its
successors in such capacity,  the "AGENT"),  as Collateral  Monitoring Agent for
the Lenders (in such  capacity,  together with its  successors in such capacity,
the  "COLLATERAL  MONITORING  AGENT"),  and as Issuing  Bank (in such  capacity,
together with its successors in such capacity, the "ISSUING BANK");

                              W I T N E S S E T H:

         WHEREAS,

         (A) The Borrower,  The Chase Manhattan Bank, N.A.  ("Chase"),  Chemical
Bank ("Chemical"),  Fleet (Chase, Chemical and Fleet, collectively, the "BANKS")
and the Agent entered into a Loan  Agreement  dated October 29, 1992 (as amended
from time to time through July 29, 1994, the "ORIGINAL LOAN AGREEMENT");

         (B) The Original  Loan  Agreement  was amended and restated on July 29,
1994 (as amended from time to time through  June 12, 1995,  the "FIRST  RESTATED
LOAN AGREEMENT");

         (C) The First Restated Loan Agreement was further  amended and restated
on June 12, 1995 (as amended  from time to time  through  the date  hereof,  the
"SECOND RESTATED LOAN AGREEMENT");

         (D) The Second Restated Loan Agreement was further amended and restated
on May 31,  1996 (as amended  from time to time  through  the date  hereof,  the
"THIRD RESTATED LOAN AGREEMENT");

         (E) Prior to the  execution  and  delivery of the Third  Restated  Loan
Agreement,  each of the Banks sold and  transferred to The CIT  Group/Commercial
Services,  Inc.  ("CIT"),  pursuant  to the terms  and  conditions  of  separate
Assignment and Acceptances,  an undivided interest in an amount equal to 2.5% in
the case of Fleet, 100% in the case of Chase and 13.333% in the case of Chemical
of the rights and  obligations  of Fleet,  Chase and  Chemical  under the Second
Restated  Loan






<PAGE>
 

<PAGE>


Agreement,  including,  without  limitation,  its  Commitments  thereunder,  the
Obligations owing to it and the Notes held by it;


         (E)  Pursuant to the Third  Restated  Loan  Agreement,  the Borrower is
indebted to the Banks in the  aggregate  principal  amount of  $3,114,784.16  in
respect of revolving loans made by the Banks and the Borrower and certain of its
affiliates  are the  account  parties  in  respect  of  letters  of  credit  and
acceptances   issued  by  the  Banks  in  the   outstanding   stated  amount  of
$20,609,422.39 (collectively, the "EXISTING LOAN AND L/C OBLIGATIONS");

         (F) The Existing Loan and L/C Obligations  and all other  indebtedness,
liabilities and obligations of the Borrower to the Banks whether now existing or
hereafter arising, including,  without limitation, those arising under the Third
Restated Loan Agreement (all such  indebtedness,  liabilities  and  obligations,
collectively,  the "EXISTING OBLIGATIONS") are secured by certain guaranties and
liens on collateral, including, without limitation: (a) the personal property of
the Borrower pursuant to a security agreement between the Borrower and the Agent
for the ratable benefit of the Banks, (b) the guaranties of certain subsidiaries
and  affiliates  of the  Borrower of the Existing  Obligations,  and (c) certain
personal  property  of such  subsidiaries  and  affiliates  pursuant to security
agreements by and between such  subsidiaries  and affiliates and the Agent,  for
the benefit of the Banks,  in each case,  as provided for in the Third  Restated
Loan Agreement;

         (G) Morris  Goldfarb and Aron Goldfarb (the  "INDIVIDUAL  GUARANTORS"),
stockholders  in G-III  Apparel  Group,  Ltd. (as further  defined  herein,  the
"PARENT"),  the owner of all of the issued and outstanding  capital stock of the
Borrower,  have  personally  guaranteed  a portion of the  Existing  Obligations
pursuant to a Guaranty,  dated May 18, 1994,  as confirmed and amended by (i) an
Individual  Guaranty  Confirmation,  dated  as of July  29,  1994,  between  the
Individual  Guarantors and the Agent, (ii) an Individual Guaranty  Confirmation,
dated as of July 12, 1995,  between the Individual  Guarantors and the Agent and
(iii) an Individual  Guaranty  Confirmation  and Amendment,  dated as of May 31,
1996, between the Individual Guarantors and the Agent (as amended, the "GOLDFARB
GUARANTY");

         (H) Morris Goldfarb has pledged his 250,000 shares of the capital stock
of the  Parent  (the  "GOLDFARB  PLEDGED  SHARES")  to secure a  portion  of the
Existing  Obligations  pursuant to a Guarantor Pledge Agreement,  dated June 12,
1995, as confirmed and amended by the Goldfarb Pledge Confirmation and Amendment
dated as of May 31, 1996,  between Morris  Goldfarb and the Agent (the "GOLDFARB
STOCK PLEDGE");


                                        2



<PAGE>
 

<PAGE>



         (I) The Parent has  executed  and  delivered an IRS Form 2848 dated May
31, 1996 granting to the Agent for the benefit of the Lenders,  inter alia,  the
authority  to receive  and endorse tax refund  checks  (the  "ASSIGNMENT  OF TAX
REFUNDS");

         (J) The Lenders have agreed to terminate each of the Goldfarb Guaranty,
the Goldfarb  Stock Pledge and the  Assignment  of Tax Refunds and to return the
Goldfarb Pledged Shares to Morris Goldfarb;

         (K) The Borrower  desires that the Lenders  extend the credit  facility
provided for under the Third  Restated Loan  Agreement as amended  hereby on the
terms and conditions contained herein;

         (L) The Lenders have agreed to extend the credit  facility,  subject to
the agreements of the parties, all as hereinafter set forth; and

         (M) In order  to  effect  the  amendment  of the  Third  Restated  Loan
Agreement,  the Lenders, the Agent, the Collateral Monitoring Agent, the Issuing
Bank and the  Borrower  desire to amend and  restate  the  Third  Restated  Loan
Agreement in its entirety as set forth herein;

         NOW, THEREFORE, the parties hereto agree to amend and restate the Third
Restated Loan Agreement in its entirety as follows:

         ARTICLE 1.  DEFINITIONS.

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

                  "ACCEPTANCE(S)"  - time  drafts  which  (a) are  drawn  by the
Borrower's  vendors or suppliers  under L/Cs which permit such  drawings and are
presented to the Agent in  accordance  with the terms of the relevant Time Trade
L/Cs on or before the respective  expiration  dates of such Time Trade L/Cs, (b)
are accepted by a Lender in accordance  with the terms of this Agreement and (c)
mature no later  than the  earlier  of (i) 60 days  after  the date of  issuance
thereof and (ii) the Commitment Termination Date.

                  "ACCOUNT"  - accounts  (including  but not limited to accounts
receivable),  revenues,  income,  fees and  receipts  whether  now or  hereafter
existing or now owned or hereafter acquired and wherever located,  of every kind
and  description,  tangible or  intangible,  and all rights to receive the same,
whether in the form of contract rights or other rights, and the proceeds of such
rights,  whether now owned or hereafter  coming into existence,  and all chattel
paper, instruments, general intangibles,  credits, claims, demands and any other
obligations for the payment of money.

                                        3



<PAGE>
 

<PAGE>




                  "ACCOUNT DEBTOR" or "ACCOUNT DEBTOR" - at any time, any Person
who is obligated to the Borrower under or on account of an Account.

                  "ACCOUNTS   RECEIVABLE  AGING  REPORT"  -  a  summary  account
receivable trial balance showing  accounts  receivable of the Borrower as of the
last day of the preceding week (in the case of a weekly report) or month (in the
case of a monthly report) outstanding from the due date set forth in the invoice
in the following categories: future; current; 1-30 days; 31-60 days; 61-90 days;
and 90 days and over.

                  "ADDITIONAL COSTS" - as defined in subsection 2.17(b) hereof.

                  "ADMINISTRATIVE FEE" - as defined in subsection 2.6(i) hereof.

                  "ADVISORY FEE" - as defined in subsection 2.6(a) hereof.

                  "AFFILIATE" - as to any Person, any other Person that directly
or indirectly  controls,  or is under common  control with, or is controlled by,
such  Person.  As  used in  this  definition,  "control"  (including,  with  its
correlative  meanings,  "controlled  by" and "under common  control with") shall
mean  possession,  directly  or  indirectly,  of power to  direct  or cause  the
direction of management or policies  (whether through ownership of securities or
partnership or other ownership  interests,  by contract or otherwise),  provided
that,  in any event:  (i) any Person that owns  directly or  indirectly 5% (with
respect to any  corporation  other than the Parent) or 15% (with  respect to the
Parent) or more of the securities  having ordinary voting power for the election
of  directors  or other  governing  body of a  corporation  or 5% or more of the
partnership  or other  ownership  interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such corporation
or other Person; and (ii) each shareholder, director and officer of the Borrower
shall be deemed to be an Affiliate of the Borrower.

                  "AGENT" - as defined in the heading of this Agreement.

                  "AIRWAY RELEASE(S)" - as defined in subsection 2.1(e) hereof.

                  "APPLICATION(S)" - as defined in subsection 2.2(a) hereof.

                  "ASSIGNMENT  AND  ACCEPTANCE"  - an  agreement  in the form of
Exhibit N hereto.

                  "ASSIGNMENT  OF  LIFE  INSURANCE"  -  as  defined  in  Section
2.13(c)(i)(A) hereof.


                                        4



<PAGE>
 

<PAGE>



                  "AVAILABILITY" - as of the date of any determination  thereof,
the Borrowing Base less Outstanding Obligations;  provided,  however, that at no
time  shall the sum of  Availability  and  Outstanding  Obligations  exceed  the
Commitment;  and,  provided,  further,  that in determining  Availability in the
issuance or advance,  as the case may be, of any of Standby  L/Cs,  Acceptances,
Loans,  Steamship  Guaranties or Airway  Releases,  the sum of Availability  and
Direct Debt shall not exceed the Direct Debt Sublimit.

                  "BALIHIDES" - P.T. Balihides,  an Indonesian limited liability
company.

                  "BET  STUDIO  LLC"  -  BET  Studio  LLC,  a  Delaware  limited
liability  company  formed as a joint  venture  between the  Borrower  and Black
Entertainment Television, Inc.

                  "BORROWER  ASSIGNMENT" - as defined in subsection  2.13(a)(ii)
hereof.

                  "BORROWER ASSIGNMENT  CONFIRMATION" - as defined in subsection
2.13(a)(ii)(B) hereof.

                  "BORROWER   SECURITY   AGREEMENT"  -  as  defined  in  Section
2.13(a)(i) hereof.

                  "BORROWER  SECURITY  INTEREST  CONFIRMATION"  - as  defined in
subsection 2.13(a)(ii)(A) hereof.

                  "BORROWING  BASE"  - as  of  the  date  of  any  determination
thereof, an amount up to, but not in excess of, the sum of:

                   (i)   Seventy-five (75%) percent of all Eligible Accounts;
                         plus

                  (ii)   Fifty (50%) percent of all Eligible Inventory; plus

                  (iii)   the applicable Overadvance.

The  Borrowing  Base shall be subject to  reduction at any time and from time to
time  because  of the  reduction  by the  Collateral  Monitoring  Agent,  in the
exercise of its  discretion,  of (x) the advance rates expressed as a percentage
in clauses (i) and (ii) of this  definition  and (y) the  percentage of Eligible
Accounts  and/or  Eligible  Inventory  included  therein by the application of a
chargeback  reserve,  a reserve for credit balances in the ineligible  column, a
"contra"  reserve  and  such  other  appropriate   reserves  as  the  Collateral
Monitoring Agent shall establish in accordance with Section 9.10 hereof.

                                        5



<PAGE>
 

<PAGE>



                  "BORROWING BASE  CERTIFICATE" - a certificate  executed by the
chief executive officer,  president,  chief operating officer or chief financial
officer of the Borrower  substantially  in the form annexed  hereto as Exhibit P
containing the information set forth therein.

                  "BORROWING NOTICE" - as defined in Section 2.3 hereof.

                  "BUSINESS  DAY" - any day other than  Saturday,  Sunday or any
other day on which  commercial banks in New York City are authorized or required
to close under the laws of the State of New York.

                  "CAPITAL  EXPENDITURES" - for any period, the aggregate amount
of all payments made during such period by any Person directly or indirectly for
the  purpose of  acquiring,  constructing  or  maintaining  fixed  assets,  real
property or equipment  that, in accordance  with generally  accepted  accounting
principles, would be added as a debit to the fixed asset account of such Person,
including,  without  limitation,  all amounts paid or payable during such period
with respect to interest that are required to be capitalized in accordance  with
generally accepted accounting principles.

                  "CAPITALIZED  LEASE" - any lease,  the obligations to pay rent
or other amounts under which constitute Capitalized Lease Obligations.

                  "CAPITALIZED  LEASE  OBLIGATIONS"  - as  to  any  Person,  the
obligations  of such  Person to pay rent or other  amounts  under a lease of (or
other agreement  conveying the right to use) real and/or personal property which
obligations  are required to be classified  and accounted for as a capital lease
on a balance sheet of such Person under generally accepted accounting principles
and, for purposes of this Agreement, the amount of such obligations shall be the
capitalized  amount thereof,  determined in accordance  with generally  accepted
accounting principles.

                  "CASH"  - as to  any  Person,  such  Person's  cash  and  cash
equivalents,  as  defined  in  accordance  with  generally  accepted  accounting
principles consistently applied.

                  "CLOSING  DATE"  -  the  date  of  the   consummation  of  the
transactions contemplated hereby.

                  "CODE"  - the  Internal  Revenue  Code of  1986,  as it may be
amended from time to time, and the regulations thereunder.

                  "COLLATERAL"   -  as  defined  in   the   respective  Security
Documents.

                                        6



<PAGE>
 

<PAGE>


                  "COLLATERAL FEES" - as defined in Section 2.6(g) hereof.

                  "COLLECTION  ACCOUNT" - an account owned and maintained by the
Collateral Monitoring Agent for the ratable benefit of the Lenders.

                  "COMMITMENT"  - (i) Fifty-two  Million  ($52,000,000)  Dollars
during the period from the date hereof to and including  October 30, 1997,  (ii)
Forty Million  ($40,000,000)  Dollars during the period from October 31, 1997 to
and  including  May 30,  1998,  (iii) Fifty-two  Million  ($52,000,000)  Dollars
during the period from May 31, 1998 to and including  October 30, 1998, and (iv)
Forty Million  ($40,000,000)  Dollars during the period from October 31, 1998 to
and including the  Commitment  Termination  Date, in each case in the aggregate,
allocated  among  each of the  Lenders,  respectively,  in the  amount set forth
opposite  such  Lender's  name on the  signature  pages hereof under the caption
"Commitment", as such amount is reduced in accordance with the terms hereof.

                  "COMMITMENT TERMINATION DATE" - May 31, 1999.

                  "COMPLIANCE CERTIFICATE" - a certificate executed by the chief
executive officer, president, chief operating officer or chief financial officer
of the  Borrower  to the  effect  that:  (i) as of  the  effective  date  of the
certificate, no Default or Event of Default under this Agreement exists or would
exist after giving effect to the action  intended to be taken by the Borrower as
described in such certificate, including, without limitation, that the covenants
set forth in Section 6.9 hereof  would not be breached  after  giving  effect to
such action,  together with a calculation in reasonable  detail, and in form and
substance  satisfactory to the Agent and the Lenders,  of such  compliance,  and
(ii) the representations  and warranties  contained in Article 3 hereof are true
and correct with the same effect as though such  representations  and warranties
were made on the date of such  certificate,  except for changes in the  ordinary
course of business none of which, either singly or in the aggregate,  have had a
material adverse effect on the business,  operations or financial  conditions of
the Borrower.

                  "CONSULTANT" - as defined in Section 6.14 hereof.

                  "CONTINUING AGREEMENT FOR ISSUANCE OF STEAMSHIP GUARANTIES AND
AIRWAY RELEASES" - agreement  pursuant to which Steamship  Guaranties and Airway
Releases are issued in the form attached hereto as Exhibit Q.

                  "CORPORATE  GUARANTOR(S)"  - as defined in subsection  2.13(b)
hereof.

                  "CREDIT PERIOD" - the period commencing on the date hereof and
ending on the Commitment Termination Date.


                                        7



<PAGE>
 

<PAGE>



                  "DEBT INSTRUMENT" - as defined in subsection 8.4(a) hereof.

                  "DEFAULT" - an event  which with  notice or lapse of time,  or
both, would constitute an Event of Default.

                  "DEFINED  CONTRIBUTION  PLAN" - a plan which is not covered by
Title IV of ERISA or subject to the minimum funding  standards of Section 412 of
the Code and which provides for an individual  account for each  participant and
for  benefits  based  solely  on the  amount  contributed  to the  participant's
account,  and any income,  expenses,  gains and losses,  and any  forfeitures of
accounts of other  participants  which may be  allocated  to such  participant's
account.

                  "DIRECT  DEBT"  - the  aggregate  principal  and/or  face  (or
stated) amount,  as applicable,  of all outstanding  Standby L/Cs,  Acceptances,
Loans, Steamship Guaranties and Airway Releases.

                  "DIRECT  DEBT  SUBLIMIT"  - (i)  Forty  Million  ($40,000,000)
Dollars  during the period from June 1, 1997 through and including  November 14,
1997, (ii) Thirty Million  ($30,000,000) Dollars during the period from November
15, 1997, through May 31, 1998, (iii) Forty Million ($40,000,000) Dollars during
the period from June 1, 1998  through and  including  November 14, 1998 and (iv)
Thirty Million  ($30,000,000)  Dollars during the period from November 15, 1998,
through  the  Commitment  Termination  Date;  provided  that,  at  the  Lenders'
discretion,  upon the  request of  the  Borrower,  the  applicable  Direct  Debt
Sublimit may be increased by an amount of Two Million ($2,000,000) Dollars.

                  "DOLLAR(S)" and "$" - lawful  money  of  the  United States of
                  America.

                  "DRAWING FEE" - as defined in Section 2.6(c) hereof.

                  "EBITDA" - for any  period,  net income  before  interest  and
provision  for taxes and without  giving  effect to any  extraordinary  gains or
losses  or gains or  losses  from  sales of assets  (other  than  from  sales of
Inventory in the ordinary  course of business),  adjusted by adding  thereto the
amount of all amortization and intangibles and depreciation  that were otherwise
deducted in determining net income.

                  "ELIGIBLE  ACCOUNT"  - an  Account  which  is  created  by the
Borrower in the ordinary course of business, is genuine and in all respects what
it purports to be, and which meets the following requirements:

                           (a)  as  of  the  date  of  computation  of  Eligible
Accounts,  no such Account shall have been  outstanding for more than the lesser
of 60 days from the


                                        8



<PAGE>
 

<PAGE>




due  date set  forth in the  invoice  or 180 days  from the date of the  invoice
relating thereto;

                           (b) the Account  shall have arisen from the bona fide
sale of goods or  provision  of  services,  which  goods or  services  have been
provided  to an Account  Debtor on an absolute  sale  basis,  are not shipped or
delivered  or  provided  on  a   consignment,   approval,   bill  and  hold,  or
sale-or-return  basis,  are not subject to any repurchase or return agreement or
arrangement  (other  than  customary  business  agreements  for  the  return  of
defective or  incorrectly  shipped  merchandise)  and have not been  returned or
rejected nor has the Account Debtor  refused to accept or revoked  acceptance of
such goods or services; and such sale of goods or provision of services has been
completed in accordance with the terms and provisions contained in any documents
related thereto;

                           (c) the Account is evidenced by one, if any, executed
original  agreement,  contract,  sales  confirmation  or  document  and  is  not
evidenced by chattel paper or an  instrument of any kind,  or, if the Account is
evidenced by chattel  paper or an  instrument,  the Borrower has  delivered  and
properly endorsed such chattel paper or instrument to the Agent;

                           (d) to the best of the Borrower's knowledge, no event
described in Section 8.6 hereof with respect to the Account Debtor has occurred,
the Agent and the Lenders,  in the exercise of their reasonable  judgment,  deem
the Account  Debtor to be  creditworthy,  and not more than 25% of the aggregate
unpaid amount of the Accounts due from the Account Debtor and Affiliates of such
Account  Debtor shall have been  outstanding  for more than 60 days from the due
date set forth in the invoice relating thereto;

                           (e) the Account  Debtor is located  within the United
States, Canada or Mexico;

                           (f) if the Account Debtor is located in Mexico, it is
WalMart or Price Club and the Account in Mexico of such Account  Debtor is in an
amount, in the aggregate, not in excess of $1,000,000;

                           (g) if the  Account  Debtor is Wilsons  Leather,  the
Account is in an amount, in the aggregate, not in excess of $2,500,000;

                           (h) if the  Account  Debtor is BET  Studio  LLC,  the
Account is in an amount, in the aggregate, not in excess of $250,000;

                           (i)  the  Account  is a  valid,  legally  enforceable
obligation of the Account Debtor;


                                        9



<PAGE>
 

<PAGE>




                           (j) the  Account  does not arise out of  transactions
with an Affiliate other than Wilsons Leather  (subject to subsection (g) of this
definition) or BET Studio LLC (subject to subsection (h) of this definition);

                           (k) the Account  does not arise out of the  provision
of trial  services or delivery of samples or trial  merchandise  to customers or
Account Debtors;

                           (l) the  Account  does not  arise  out of the sale of
goods or provision of services to a customer or Account Debtor for or on account
of credits  arising out of prior  sales or services to such  customer or Account
Debtor;

                           (m) the Borrower  does not have any  knowledge of any
disputes in excess of $10,000 with respect to the Account nor has anything  come
to the  attention of the Borrower  which would lead the Borrower to believe that
more than $10,000 of any such  Account is in dispute and the disputed  amount is
excluded from the computation of Eligible Accounts;

                           (n) the  amount of the face  value of the  Account is
not subject to any set-offs, counterclaims,  retainages or holdbacks of any type
other  than  those  set  forth  on the  Borrowing  Base  Certificate  which  are
acceptable to the Agent and the Lenders and are excluded from the computation of
Eligible  Accounts,  is actually and absolutely owing to the Borrower and is not
contingent  for any reason,  and,  except for  discounts,  credits or allowances
allowed  by the  Borrower  in the  ordinary  course of its  business  for prompt
payment,  all of which  discounts,  credits or  allowances  are reflected in the
calculation of and have been deducted from the face value of the invoice related
thereto and in the calculation of the Borrowing Base;

                           (o) the Account is not now, and the goods or services
giving  rise  to the  Account  were  not at the  time of the  sale or  provision
thereof,  subject to any Lien,  claim,  encumbrance or security  interest except
those of the Agent for the benefit of the Lenders and those expressly  permitted
under this Agreement; and

                           (p)  neither the United  States of  America,  nor any
state, any subdivision,  department,  or agency of either thereof is the Account
Debtor,  but only with  respect to more than an  aggregate  of  $200,000 in face
amount of Accounts.

Notwithstanding the foregoing,  the Collateral  Monitoring Agent and the Lenders
shall have the right, in the exercise of their reasonable  discretion,  to limit
the amount of  Accounts  from any  Account  Debtor or  Affiliate  of any Account
Debtor which shall be deemed to be "Eligible Accounts" hereunder.


                                       10

<PAGE>
 

<PAGE>



                  "ELIGIBLE  ASSIGNEE" - a  commercial  bank or other  financial
institution  organized  under the laws of the  United  States of  America or any
state and having a combined capital and surplus of at least $100,000,000.

                  "ELIGIBLE   INVENTORY"  -  Inventory  which:  (i)  constitutes
finished goods of the Borrower or Retail;  (ii) is not slow moving,  obsolete or
unsaleable; (iii) is currently useable or saleable in the ordinary course of the
Borrower's or Retail's  business;  (iv) is valued in accordance  with  generally
accepted accounting  principles applied  consistently with past practices of the
Borrower  and  Retail;  (v) is located on the  premises  listed on the  exhibits
attached to this  Agreement  or other  locations  permitted  under the  Borrower
Security  Agreement or any security  agreement  set forth in Section 2.13, or is
Inventory  in transit for sale in the ordinary  course of business;  (vi) is not
subject to any Lien or security  interest  whatsoever,  except for the Liens and
security interests  expressly permitted under the Borrower Security Agreement or
any security  agreement  set forth in Section 2.13,  and is not on  consignment;
(vii) does not  include raw  materials  or work-in  progress;  (viii) is not now
stored or shall not at any time hereafter be stored with a bailee, warehouseman,
or similar party unless pursuant to a bailment or storage agreement to which the
Agent is a party;  (ix)  does not  include  Inventory  styles  (A) on which  the
Borrower  has  taken a lower of cost or  market  markdown;  or (B) of which  the
Borrower has more than a one year supply on hand; (x) does not include Inventory
subject  to a license  agreement;  (xi)  does not  include  Inventory  in retail
stores; and (xii) shall include finished goods Inventory  consigned to the Agent
under the terms of the L/C used to acquire such  Inventory;  provided,  however,
that the  value of any  such  consigned  Inventory  shall  be  subject  to a 13%
reduction as a reserve for duty and freight.

                  "EMPLOYEE BENEFIT PLAN" - any employee benefit plan within the
meaning  of Section  3(3) of ERISA  which (a) is  maintained  for  employees  of
Borrower  or any of its  ERISA  Affiliates  or (b) has at any  time  within  the
preceding six (6) years been  maintained  for employees of any Loan Party or any
current or former ERISA Affiliate.

                  "ENVIRONMENTAL  LAWS  AND  REGULATIONS"  - all  environmental,
health and safety laws, regulations,  resolutions,  and ordinances applicable to
the  Borrower or  any other  Loan Party, or any  of their  respective  assets or
properties,  including,  without  limitation: (i) all regulations,  resolutions,
ordinances, decrees, and other similar documents and instruments  of  all courts
and  governmental  authorities,  bureaus  and  agencies,  domestic  and foreign,
whether  issued by environmental  regulatory agencies or otherwise, and (ii) all
laws, regulations, resolutions, ordinances and decrees relating to Environmental
Matters.

                  "ENVIRONMENTAL LIABILITY" - any liability under any applicable
law for any release of a hazardous  substance  caused by the seeping,  spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or



                                       11

<PAGE>
 

<PAGE>




disposing  of  hazardous  wastes or other  chemical  substances,  pollutants  or
contaminants  into  the  environment,  and any  liability  for the  costs of any
clean-up or other remedial action including,  without limitation,  costs arising
out of security fencing,  alternative water supplies,  temporary  evacuation and
housing  and  other  emergency   assistance   undertaken  by  any  environmental
regulatory body having jurisdiction over the Borrower or any other Loan Party to
prevent or  minimize  any actual or  threatened  release by the  Borrower or any
other  Loan  Party  of  any  hazardous  wastes  or  other  chemical  substances,
pollutants and contaminants  into the environment that would endanger the public
health or the environment.

                  "ENVIRONMENTAL   MATTER(S)"  -  a  release  of  any  toxic  or
hazardous waste or other chemical  substance,  pollutant or contaminant into the
environment or the  generation,  treatment,  storage or disposal of any toxic or
hazardous wastes or other chemical substances.

                  "ENVIRONMENTAL  PROCEEDING" - any judgment, action, proceeding
or investigation pending before any court or governmental  authority,  bureau or
agency, including,  without limitation,  any environmental regulatory body, with
respect to or  threatened  against or  affecting  the Borrower or any other Loan
Party or  relating  to the  assets  or  liabilities  of any of them,  including,
without  limitation,  in respect of any "facility" owned,  leased or operated by
any of them under the  Comprehensive  Environmental  Response,  Compensation and
Liability  Act of 1980,  as  amended,  or under any  state,  local or  municipal
statute,  ordinance or regulation  in respect  thereof,  in connection  with any
release of any toxic or hazardous waste or other chemical  substance,  pollutant
or contaminant into the environment, or with the generation, storage or disposal
of any toxic or hazardous wastes or other chemical substances.

                  "ERISA" - the Employee Retirement Income Security Act of 1974,
as it may be  amended  from  time  to  time,  and  the  regulations  promulgated
thereunder.

                  "ERISA  AFFILIATE"  -  as  applied  to  any  Loan  Party,  any
corporation,  person or trade or business  which is a member of a group which is
under common control with any Loan Party,  who together with any Loan Party,  is
treated as a single  employer  within the meaning of Section 414(b) - (o) of the
Code and, if applicable, Section 4001(a)(14) and (b) of ERISA.

                  "EURODOLLAR  BUSINESS DAY" - a day on which  commercial  banks
are open for business in London.

                  "EURODOLLAR  LOANS" - Loans that bear interest at a rate based
upon the LIBOR Base Rate.

                  "EVENT(S) OF DEFAULT" - as defined in Article 8 hereof.


                                       12

<PAGE>
 

<PAGE>




                  "EXAMINATION FEES" - as defined in Section 2.6(h) hereof.

                  "EXISTING  ACCEPTANCES" - the aggregate  amount of Acceptances
outstanding on the date hereof.

                  "EXISTING OBLIGATIONS" - as defined in the recitals hereof.

                  "EXISTING  LOANS" - the aggregate  amount of Loans made by the
Banks and outstanding on the date hereof.

                  "EXISTING  LOAN  AND  L/C  OBLIGATIONS"  - as  defined  in the
recitals hereof.

                  "EXISTING STANDBY L/CS" - the aggregate face or stated maximum
drawable amount (and to the maximum amount when a range of amounts is specified)
of Standby L/Cs issued by the Agent outstanding on the date hereof.

                  "EXISTING  STEAMSHIP  GUARANTIES  AND AIRWAY  RELEASES"  - the
aggregate  face or stated  amount of Steamship  Guaranties  and Airway  Releases
issued by the Agent and outstanding on the date hereof.

                  "EXISTING  TRADE L/CS" - the aggregate  face or stated maximum
drawable amount (and to the maximum amount when a range of amounts is specified)
of Trade L/Cs issued by the Agent outstanding on the date hereof.

                  "FEDERAL  FUNDS RATE" - for any day, the  weighted  average of
the rates on  overnight  federal  funds  transactions  with member  banks of the
Federal  Reserve  System  arranged by federal  funds brokers as published by the
Federal  Reserve Bank of New York for such day, or if such day is not a Business
Day, for the next  preceding  Business Day (or, if such rate is not so published
for any such day,  the  average  rate  charged  to the Agent on such day on such
transactions as reasonably determined by the Agent).

                  "FEE(S)" - as defined in subsection 2.6(j) hereof.

                  "FINANCIAL  STATEMENTS"  - the  audited  consolidated  balance
sheet of the Parent and the Subsidiaries  (including the Borrower) as at January
31,  1997,  together  with the  related  consolidated  statement  of income  and
retained earnings and statement of cash flow for the fiscal year then ended.

                  "FIRST  RESTATED LOAN  AGREEMENT" - as defined in the recitals
hereof.

                  "FLEET" - as defined in the heading of this Agreement.



                                       13

<PAGE>
 

<PAGE>



                  "FORFEITURE   PROCEEDING"   -  any   action,   proceeding   or
investigation  affecting the Borrower,  the Parent or any of its Subsidiaries or
Affiliates before any court, governmental department, commission, board, bureau,
agency or instrumentality,  domestic or foreign, or the receipt of notice by any
such  party  that any of them is a suspect  in or a target  of any  governmental
inquiry or  investigation,  which may result in an  indictment of any of them or
the seizure or forfeiture of any of their property.

                  "GLOBAL"  - Global  International  Trading  Company,  a Korean
corporation.

                  "GOVERNMENTAL ACTS" - as defined in subsection 2.18(d) hereof.

                  "GUARANTOR  SECURITY  AGREEMENT"  - as defined  in  subsection
2.13(b)(i) hereof.

                  "GUARANTOR  SECURITY  INTEREST  CONFIRMATION"  - as defined in
subsection 2.13(b)(ii)(A) hereof.

                  "GUARANTY  CONFIRMATION"  - as defined in  subsection  2.12(b)
hereof.

                  "GUARANTOR(S)" - as defined in Section 2.12(a) hereof.

                  "GUARANTY(IES)" - as defined in Section 2.12(a) hereof.

                  "HANIL BANK" - P.T. Hanil Tamara Bank.

                  "HANIL LETTER OF CREDIT" - the provision,  as a portion of the
purchase price payable in connection with the acquisition of P.T. Hwagang Indawa
(now known as Balihides) by the Borrower,  on behalf of P.T. Hwagang Indawa (now
known as  Balihides),  to Hanil Bank of a standby  letter of credit  expiring no
later than May 31,  1998 (or in the event that such letter of credit is extended
to May 31,  1999,  expiring  no  later  than  May 31,  1999)  in the  amount  of
$2,000,000  as security for the line of credit in the amount of $3,500,000 to be
provided by Hanil Bank to P.T. Hwagang Indawa (now known as Balihides).

                  "HOLDINGS" - Indawa Holding Corp., a Delaware  corporation and
a wholly-owned Subsidiary of the Parent.

                  "HONG KONG" - G-III Hong Kong Ltd., a Hong Kong corporation.

                  "INDEBTEDNESS"  -  with  respect  to  any  Person,   all:  (i)
liabilities or  obligations,  direct and  contingent,  which in accordance  with
generally accepted accounting  principles would be included in determining total
liabilities  as shown on



                                       14

<PAGE>
 

<PAGE>




the  liability  side of a balance  sheet of such  Person at the date as of which
Indebtedness  is to be determined,  including,  without  limitation,  contingent
liabilities  that in accordance  with such  principles,  would be set forth in a
specific  Dollar  amount  on the  liability  side of  such  balance  sheet,  and
Capitalized Lease Obligations of such Person; (ii) liabilities or obligations of
others  for which  such  Person is  directly  or  indirectly  liable,  by way of
guaranty  (whether  by  direct  guaranty,  suretyship,   discount,  endorsement,
take-or-pay  agreement,  agreement  to  purchase  or advance or keep in funds or
other agreement having the effect of a guaranty) or otherwise; (iii) liabilities
or  obligations  secured by Liens on any assets of such  Person,  whether or not
such  liabilities  or  obligations  shall  have  been  assumed  by it;  and (iv)
liabilities or obligations of such Person, direct or contingent, with respect to
letters of credit issued for the account of such Person and bankers  acceptances
created for such Person.

                  "INTEREST  PERIOD" - with respect to any Eurodollar Loan, each
period  commencing on the date such Loan is made or converted  from a Prime Rate
Loan or Loans,  or with respect to  Eurodollar  Loans,  the last day of the next
preceding  Interest Period with respect to such  Eurodollar  Loan, and ending on
the same day in the first,  second or third  calendar month  thereafter,  as the
Borrower  may select as provided  in Section  2.3 hereof,  except that each such
Interest Period that commences on the last Eurodollar Business Day of a calendar
month (or on any day for which there is no numerically  corresponding day in the
appropriate subsequent calendar month) shall end on the last Eurodollar Business
Day of the  appropriate  subsequent  calendar  month;  provided,  however,  that
notwithstanding the foregoing: (i) each Interest Period that would otherwise end
on a day that is not a Business  Day shall end on the next  succeeding  Business
Day (or, in the case of an Interest  Period for Eurodollar  Loans,  if such next
succeeding  Eurodollar Business Day falls in the next succeeding calendar month,
on  the  next  preceding  Eurodollar  Business  Day);  (ii)  each  borrowing  of
Eurodollar  Loans from the Lenders and each  conversion of Prime Rate Loans into
Eurodollar  Loans  shall  be in an  amount  not  less  than  $1,550,000  in  the
aggregate;  (iii) any  Interest  Period  for any type of Loan shall end no later
than the  Commitment  Termination  Date; and (iv)  notwithstanding  clause (iii)
above,  no  Interest  Period  shall  have a  duration  of less than one month or
greater than three  months.  In the event that the Borrower  fails to select the
duration  of any  Interest  Period  for any  Loan  within  the time  period  and
otherwise  as provided in Section 2.3 hereof,  such Loans will be  automatically
converted  into a Prime  Rate  Loan on the  last day of the  preceding  Interest
Period for such Loan.

                  "INVENTORY" - inventory of any of the Loan Parties,  including
finished products, goods in transit,  returns and supplies,  packaging materials
and all other items which  contribute to the promotion or sale thereof and spare
parts (until affixed to the machinery or equipment to which they relate).



                                       15

<PAGE>
 

<PAGE>


                  "INVESTMENT" - by any Person:

                  (a) the amount paid or committed  to be paid,  or the value of
property or services contributed or committed to be contributed,  by such Person
for or in connection  with the  acquisition by such Person of any stock,  bonds,
notes, debentures,  partnership or other ownership interests or other securities
of any other Person; and

                  (b) the amount of any advance,  loan or extension of credit by
such Person,  to any other Person,  or guaranty or other  similar  obligation of
such Person with respect to any Indebtedness of such other Person,  and (without
duplication)  any amount committed to be advanced,  loaned,  or extended by such
Person to any other  Person,  or any amount the payment of which is committed to
be assured by a guaranty  or similar  obligation  by such Person for the benefit
of, such other Person.

                  "IRS" -  Internal  Revenue  Service  or any  successor  agency
performing the same functions.

                  "ISSUING BANK" - as defined in the heading of this Agreement.

                  "KEY  ITEM  REPORT" - is  defined  in  subsection  5.10(c)(ii)
hereof.

                  "KOREAN  L/C" - a  stand-by  letter  of  credit  having a face
amount equal to not more than Five Hundred  Thousand Dollars  ($500,000)  issued
pursuant to Section  2.1(b)(ii)  hereof in favor of the Korean  Exchange Bank to
support a Two Million Dollar  ($2,000,000)  trade letter of credit  facility for
Global.

                  "KOSTROMA" - Kostroma Ltd., a Hong Kong corporation.

                  "LATEST BALANCE SHEET" - as defined in Section 3.9(a) hereof.

                  "L/C(S)" - Trade L/Cs and/or Standby L/Cs.

                  "LEASES"  -  leases  and  subleases  (other  than  Capitalized
Leases),  licenses for the use of real property,  easements,  grants,  and other
attachment rights and similar instruments under which the Borrower has the right
to use real or personal property or rights of way.

                  "LENDER(S)" - as defined in the heading of this Agreement.

                  "LENDER'S  COMMITMENT"  - the  amount  set forth  next to each
Lender's name on the signature pages hereto.





                                       16

<PAGE>
 

<PAGE>


                  "LENDER'S  SHARE" - with respect to any Lender,  such Lender's
pro rata share determined at any time as its Lender's Commitment as a percentage
of the Commitment.

                  "LIBOR BASE RATE" - means with respect to any Eurodollar  Loan
for any  Interest  Period  therefor,  the rate per  annum  (rounded  upward,  if
necessary to the nearest 1/32 of one percent) as  determined on the basis of the
offered rates for deposits in Dollars,  for a period of time  comparable to such
Interest  Period which appear on the Telerate page 3750 as of 11:00 a.m.  London
time on the day that is two  Eurodollar  Business Days prior to the first day of
such Interest Period;  provided,  however,  if the rate described above does not
appear on the Telerate System on any applicable interest determination date, the
LIBOR Base Rate for such Eurodollar  Loan shall be the rate (rounded  upwards as
described   above,   if  necessary)   for  deposits  in  Dollars  for  a  period
substantially  equal to such Interest Period on the Reuters Page "LIBO" (or such
other  page as may  replace  the LIBO Page on that  service  for the  purpose of
displaying  rates),  as of  11:00  a.m.  (London  time),  on the day that is two
Eurodollar Business Days prior to the first day of such Interest Period. If both
Telerate and Reuters system are  unavailable,  then the LIBOR Base Rate for such
Eurodollar Loan for such Interest Period shall be determined on the basis of the
offered  rates for deposits in Dollars for a period of time  comparable  to such
Interest  Period  which are offered by four major banks in the London  interbank
market at  approximately  11:00 a.m.  (London time),  on the day that is two (2)
Eurodollar  Business  Days  prior to the  first day of such  Interest  Period as
selected by the Collateral Monitoring Agent. The principal London office of each
of the four major  London  banks will be requested to provide a quotation of its
Dollar  deposit offer rate. If at least two such  quotations  are provided,  the
LIBOR Base Rate for such  Eurodollar  Loan for such Interest Period shall be the
arithmetic mean of the quotations.  If fewer than two quotations are provided as
requested, the LIBOR Base Rate for such Eurodollar Loan for such Interest Period
shall be  determined on the basis of the rates quoted by major banks in New York
City at  approximately  11:00  a.m.  (New York City time) on the day that is two
Business Days prior to the first day of such Interest Period.  In the event that
the Agent is unable to obtain any such quotation as provided  above,  it will be
deemed  that the  LIBOR  Base  Rate  pursuant  to a  Eurodollar  Loan  cannot be
determined.

                  "LIBOR RATE" - for any Eurodollar Loan for any Interest Period
therefor,  the rate per annum  (rounded  upwards,  if necessary,  to the nearest
1/100 of 1%) determined by the Agent to be equal to the quotient of: (a) (x) the
LIBOR Base Rate for such Loan for such Interest  Period;  divided by (y) 1 minus
the Reserve Requirement for such Loan for such Interest Period.

                  "LIEN"  -  any  mortgage,  deed  of  trust,  pledge,  security
interest,  encumbrance,  lien or charge of any kind  (including any agreement to
give any of the


                                       17

<PAGE>
 

<PAGE>



foregoing),  any conditional sale or other title retention agreement,  any lease
in the nature of any of the  foregoing,  and the filing of or  agreement to give
any financing statement under the Uniform Commercial Code of any jurisdiction.

                  "LOAN(S)" - as defined in subsection 2.1(d) hereof.

                  "LOAN DOCUMENTS" - this Agreement,  the Notes, the Guaranties,
the Guaranty Confirmations,  the Security Documents, the L/Cs, the Applications,
the  Acceptances,  and the  Continuing  Agreements  for  Issuance  of  Steamship
Guaranties and Airway  Releases to which any Loan Party is a party and all other
agreements executed and delivered in connection herewith or therewith, including
all amendments, modifications and supplements of or to all such agreements.

                  "LOAN  PARTY(IES)" - individually (or collectively in the case
of Loan Parties), the Borrower, the Parent, any Subsidiary,  any Guarantor,  and
any other  Person  (other than the Lenders and the Agent) which now or hereafter
executes and delivers to any Lender or the Agent any Loan Document.

                  "LOCKBOX" - as defined in Section 2.21(b) hereof.

                  "LOCKBOX AGREEMENT" - as defined in Section 2.21(b) hereof.

                  "MAJORITY  LENDERS" - so long as the Lenders  consist of three
Lenders or fewer,  Lenders  having 100% of the aggregate  amounts of Commitments
and,  at any time that the  Lenders  consist of four  Lenders  or more,  Lenders
having at least 80% of the aggregate amount of Commitments;  provided,  however,
that the vote of 100% of the  Lenders  shall at all  times be  required  for all
matters  not  specifically  to be  determined  by  Majority  Lenders  hereunder,
including,  but not limited to, extension of the term,  increase in Commitments,
change in interest rates, release of Collateral, any change to the definition of
Majority  Lenders and the  determination  pursuant  to Section  9.11 hereof that
certain asset based lending provisions set forth herein are no longer required.

                  "MANAGEMENT  FEES" - for any period,  all fees,  emoluments or
similar  compensation  paid or incurred by any Person (other than any such fees,
emoluments or similar  compensation,  including,  without limitation,  usual and
customary  director's  fees payable by the Parent to its  directors,  paid to or
incurred and payable to the Borrower,  the Parent or any of the Subsidiaries) in
respect of services rendered in connection with the management or supervision of
the  management  of  such  Person,  other  than  salaries,   bonuses  and  other
compensation  paid to any full time  executive  employee in respect of such full
time employment.

                 "MONTHLY DATES" - the last Business Day of each calendar month.




                                       18

<PAGE>
 

<PAGE>


                  "MULTIEMPLOYER  PLAN" - a  "multiemployer  plan" as defined in
Section  4001(a)(3)  or ERISA to which any Loan Party or any ERISA  Affiliate is
making, or is accruing an obligation to make, contributions or has made, or been
obligated to make, contributions within the preceding six (6) years.

                  "NOTE(S)" - as defined in Section 2.4 hereof.

                  "OBLIGATIONS"  -  collectively,   all  of  the   Indebtedness,
liabilities  and  obligations  of the  Borrower to the Lenders,  the Agent,  the
Collateral  Monitoring  Agent and the  Issuing  Bank,  whether  now  existing or
hereafter arising,  whether or not currently  contemplated,  including,  without
limitation,  liabilities  and obligations to repay Loans and Acceptances and pay
Fees, liabilities and obligations with respect to L/Cs, Steamship Guaranties and
Airway Releases, and all other Indebtedness, liabilities and obligations arising
under the Loan Documents.

                  "ORIGINAL LOAN AGREEMENT" - as defined in the recitals hereof.

                  "OUTSTANDING  OBLIGATIONS"  - the aggregate  principal  and/or
face (or stated) amount, as applicable, of all outstanding Obligations.

                  "OUTSTANDING  L/CS" - the  aggregate  face or  stated  maximum
drawing  amount (and to the maximum amount when a range of amounts is specified)
of all outstanding L/Cs.

                  "OVERADVANCE"  - the  amount  set forth  below for the  period
indicated:

                  Period                                              Amount
                  ------                                              -------
                  May 1, 1997-May 31, 1997                         $12,000,000
                  June 1, 1997-June 30, 1997                       $20,250,000
                  July 1, 1997-July 31, 1997                       $20,250,000
                  August 1, 1997-August 31, 1997                   $21,500,000
                  September 1, 1997-September 30, 1997             $17,300,000
                  October 1, 1997-October 26, 1997                 $17,300,000
                  October 27, 1997-October 31, 1997                $ 5,500,000
                  November 1, 1997-February 28, 1998                   -0-
                  March 1, 1998-March 31, 1998                     $ 1,000,000
                  April 1, 1998-April 30, 1998                     $ 6,000,000
                  May 1, 1998-May 31, 1998                         $15,300,000

and the  periods  and  amounts  from  June 1, 1998  through  and  including  the
Commitment Termination Date shall be as preliminarily  determined by the Lenders
and the Borrower based on the  Projections  and the business plan for the fiscal
year ending



                                       19

<PAGE>
 

<PAGE>



January  31, 1999 and the  unaudited  financial  statements  for the fiscal year
ending  January 31,  1998,  but in no event  shall the  periods be of  different
durations or the amounts be less than the amounts for the periods  corresponding
to the periods set forth above unless the Lenders determine (in their reasonable
discretion)  that such periods and amounts  warrant  adjustment  based upon such
Projections,  business plan or unaudited financial statements, which preliminary
determination  shall be made  within 30 days of receipt  by the  Lenders of such
Projections,   business  plan  and  unaudited  financial   statements  and  such
preliminary  determination shall become effective after receipt and satisfactory
review by the  Lenders of the  Financial  Statements  for the fiscal year ending
January 31, 1998; provided, however, that with respect to the Overadvance at all
times (x) the then applicable  Overadvance amount and all subsequent Overadvance
amounts  shall be reduced by (i) 50% of all tax refunds  paid to the Borrower or
the Parent (or paid to the  Collection  Account,  in  accordance  with the terms
hereof),  (ii) the proceeds of the sale of any assets other than in the ordinary
course of business, and (iii) 50% of the proceeds of any sale-leaseback,  all of
such reductions to be effective  immediately upon the Borrower's receipt (or, if
applicable,  the Collateral  Monitoring  Agent's  receipt for the account of the
Borrower) of such  refunds or  proceeds;  but there shall be no reduction to the
then applicable  Overadvance  amount in the case of any  sale-leaseback of newly
acquired  assets,  provided that (A) the  sale-leaseback  transaction  is closed
within 90 days of the acquisition of the assets and (B) both the acquisition and
the closing of the sale-leaseback are completed during the same fiscal year; and
(y) at any time when Outstanding Obligations have exceeded the Borrowing Base as
a result of (A)  Accounts  or  Inventory  believed  to be  Eligible  Accounts or
Eligible Inventory,  as the case may be, in fact being or becoming ineligible or
(B) the return of uncollected checks or other items applied to reduce Loans, the
Collateral  Monitoring  Agent shall have the  discretion  to continue to advance
Loans and to instruct  the Issuing  Bank to issue L/Cs,  Acceptances,  Steamship
Guaranties and Airway Releases,  as the case may be, up to an amount which would
result in the relevant  Overadvance  amount  specified above being exceeded by a
factor of 10% (it being  understood that the Collateral  Monitoring  Agent shall
advise the Lenders of all such issuances and advances within 24 hours);  and (z)
the  applicable  Overadvance  amount shall be increased by the amount of (a) any
cash collateral held by the Collateral  Monitoring Agent for the sole purpose of
securing  such  increases  to the  applicable  Overadvance  amount,  and (b) any
amounts  invested in U.S.  government  securities  or money market  mutual funds
backed by U.S. government  securities  maintained in an account with Fleet Bank,
N.A. by the  Borrower or the Parent and pledged or assigned to the Agent for the
benefit of the Lenders by the  Borrower  or the  Parent,  as the case may be, as
collateral security for the Obligations  pursuant to documentation  satisfactory
to the Lenders.

                  "PARENT" - G-III Apparel Group,  Ltd., a Delaware  corporation
and the  holder  of 100% of the  issued  and  outstanding  capital  stock of the
Borrower.




                                       20

<PAGE>
 

<PAGE>



                  "PARENT  SECURITY   AGREEMENT"  -  as  defined  in  subsection
2.13(c)(i)(B) hereof.

                  "PARENT  SECURITY  INTEREST  CONFIRMATION"  -  as  defined  in
subsection 2.13(c)(ii)(A) hereof.

                  "PARENT STOCK PLEDGE CONFIRMATION" - as defined in subsection
2.13(c)(ii)(B) hereof.

                  "PAYMENT  OFFICE" - the office of each Lender set forth on the
signature page hereof as the lending office of such Lender.

                  "PAYOR" - as defined in Section 2.20 hereof.

                  "PBGC" - Pension Benefit Guaranty Corporation or any successor
entity performing the same functions.

                  "PENSION PLAN" - at any time an employee  pension benefit plan
that is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Code and is either:  (i)  maintained by the Borrower or
any ERISA  Affiliate for  employees of the Borrower,  or by the Borrower for any
ERISA  Affiliate,  or  (ii)  maintained  pursuant  to  a  collective  bargaining
agreement  or any other  arrangement  under which more than one  employer  makes
contributions and to which the Borrower or any ERISA Affiliate is then making or
accruing an obligation to make  contributions  or has within the preceding  five
plan years made contributions.

                  "PERMITTED LIENS" - as to any Person:  (i) pledges or deposits
by such Person under workers'  compensation laws,  unemployment  insurance laws,
social  security  laws,  or  similar  legislation,  or good  faith  deposits  in
connection  with  bids,  tenders,  contracts  (other  than  for the  payment  of
Indebtedness  of such  Person),  or leases to which such  Person is a party,  or
deposits to secure public or statutory obligations of such Person or deposits or
pledges of Cash or United  States  Government  Bonds to secure  surety,  appeal,
performance or other similar bonds to which such Person is a party,  or deposits
as security  for  contested  taxes or import  duties or for the payment of rent;
(ii)  Liens  imposed  by law,  in the  aggregate,  in an amount not in excess of
$50,000, such as carriers', warehousemen's,  materialmen's and mechanics' liens,
or Liens arising out of judgments or awards  against such Person with respect to
which  such  Person at the time  shall  currently  be  prosecuting  an appeal or
proceedings for review and for which  appropriate  reserves have been allocated;
(iii) Liens for taxes not yet subject to penalties for non-payment and Liens for
taxes the payment of which is being contested as permitted by Section 6.6 hereof
and for which  appropriate  reserves have been allocated;  and (iv) minor survey
exceptions,  minor  encumbrances,  easements or  reservations  of, or rights of,
others



                                       21

<PAGE>
 

<PAGE>




for rights of way,  highways and railroad  crossings,  sewers,  electric  lines,
telegraph and telephone  lines and other  similar  purposes,  or zoning or other
restrictions  as to the use of  real  properties,  or  Liens  incidental  to the
conduct of the  business of such  Person or to the  ownership  of such  Person's
property that were not incurred in connection with  Indebtedness of such Person,
all of  which  Liens  referred  to in the  preceding  clause  (iv) do not in the
aggregate  materially  detract  from the value of the  properties  to which they
relate or materially  impair their use in the operation of the business taken as
a whole of such Person,  and as to all the foregoing  only to the extent arising
and continuing in the ordinary course of business.

                  "PERSON" - an  individual,  a corporation,  a  partnership,  a
limited  liability   company,   a  joint  venture,  a  trust  or  unincorporated
organization,  a joint stock company or other similar organization, a government
or any  political  subdivision  thereof,  a court,  or any other  legal  entity,
whether acting in an individual, fiduciary or other capacity.

                  "POST-DEFAULT  RATE" - in  respect  of any  amount  under this
Agreement  not paid when due (whether at stated  maturity,  by  acceleration  or
otherwise),  a rate per annum during the period commencing on the due date until
(but not  including  the date  upon  which)  such  Loans  or other  amounts,  as
applicable,  are paid in full equal to 2% above the interest  rate  provided for
herein.

                  "PRIME RATE" - the interest rate established from time to time
by  Fleet  as its  prime  rate.  Notwithstanding  the  foregoing,  the  Borrower
acknowledges that Fleet may regularly make domestic commercial loans at rates of
interest less than the rate of interest  referred to in the preceding  sentence.
Each change in any interest  rate  provided for herein based upon the Prime Rate
resulting  from a change in the Prime Rate shall take effect at the time of such
change in the Prime Rate.

                  "PRIME RATE LOANS" - Loans that bear  interest at a rate based
upon the Prime Rate.

                  "PROJECTIONS"  - the balance  sheets,  income  statements  and
statements  of cash flow of the Borrower,  prepared by the Borrower,  as at, and
for the fiscal  year  ending  January  31,  1998 and for the fiscal  year ending
January 31, 1999.

                  "PURCHASE MONEY SECURITY  INTEREST" - as defined in subsection
7.2(c) hereof.

                  "REFERENCE  LENDER" - for  purposes of  determining  the LIBOR
Base Rate,  the  non-United  States office or offices or  international  banking
facility or facilities of Fleet as Fleet may from time to time select.



                                       22

<PAGE>
 

<PAGE>


                  "REGULATION D" - Regulation D of the Board of Governors of the
Federal Reserve System,  as the same may be amended or supplemented from time to
time.

                  "REGULATORY  CHANGE" - as to any Lender,  any change after the
date of this  Agreement  in United  States  federal,  state or  foreign  laws or
regulations  (including  Regulation D and the laws or regulations that designate
any  assessment  rate relating to  certificates  of deposit or otherwise) or the
adoption  or  making  after  such  date of any  interpretations,  directives  or
requests  applying to a class of banks,  including such Lender,  of or under any
United  States  federal,  state or foreign laws or  regulations  (whether or not
having  the force of law) by any court or  governmental  or  monetary  authority
charged with the interpretation or administration thereof.

                  "REQUIRED PAYMENT" - as defined in Section 2.20 hereof.

                  "RESERVE  REQUIREMENT"  - for  any  Eurodollar  Loans  for the
Interest  Period for which interest is payable  hereunder,  the average  maximum
rate at which  reserves  (including  any  marginal,  supplemental  or  emergency
reserves) are required to be maintained during such period under Regulation D by
depository  institutions in respect of "Eurocurrency  Liabilities" (as such term
is used in Regulation  D).  Without  limiting the effect of the  foregoing,  the
Reserve  Requirement  shall reflect any other reserves required to be maintained
by such depository  institutions by reason of any Regulatory Change against: (i)
any category of  liabilities  that includes  deposits by references to which the
LIBOR  Rate  for  Eurodollar  Loans  is to be  determined  as  provided  in  the
definition  of "LIBOR  Base  Rate" in this  Article 1, or (ii) any  category  of
extensions of credit or other assets that include Eurodollar Loans.

                  "RETAIL" - G-III Retail Outlets Inc., a Delaware corporation.

                  "SECOND  RESTATED LOAN AGREEMENT" - as defined in the recitals
hereof.

                  "SECURITY  DOCUMENTS"  -  as  defined  in  subsection  2.13(e)
hereof.

                  "SETTLEMENT PERIOD" - as defined in Section 2.3(b) hereof.

                  "SIENA" - Siena Leather Ltd., a New York corporation.

                  "SOURCES"  -  Global  Apparel   Sourcing,   Ltd.,  a  Delaware
corporation.

                  "STANDBY L/CS" - as defined in Section  2.1(b)(ii)  hereof and
including the Existing  Standby L/Cs which  continue to be  outstanding,  all of
which shall provide for an expiration date no later than May 31, 1999.

                  "STANDBY L/C FEE" - as defined in Section 2.6(d) hereof.



                                       23

<PAGE>
 

<PAGE>


                  "STEAMSHIP GUARANTIES" - as defined in Section 2.1(e) hereof.

                  "STOCK   PLEDGE    AGREEMENT"  -  as   defined   in    Section
2.13(c)(i)(C).

                  "SUBSIDIARY"  - with respect to any Person,  any  corporation,
limited liability company,  partnership or joint venture whether now existing or
hereafter  organized or acquired:  (i) in the case of a corporation,  of which a
majority of the  securities  having ordinary  voting  power for the  election of
directors  (other  than  securities  having  such  power  only by  reason of the
happening of a  contingency)  are at the time owned by such Person and/or one or
more Subsidiaries of such Person, or (ii) in the case of a partnership,  limited
liability  company or joint  venture in which such Person is a general  partner,
member  or joint  venturer,  as the case  may be or of which a  majority  of the
partnership  or other  ownership  interests are at the time owned by such Person
and/or one or more of its Subsidiaries;  provided, however that for all purposes
of this  Agreement,  the term  "Subsidiary"  shall not  include  BET Studio LLC.
Unless  the  context  otherwise  requires,   references  in  this  Agreement  to
"Subsidiary" or "Subsidiaries"  shall be deemed to be references to a Subsidiary
or Subsidiaries of the Parent.

                  "TANGIBLE  NET  WORTH" - the sum of  capital  surplus,  earned
surplus  and  capital  stock,  less  intangibles  and  treasury  stock,  all  as
determined  in  accordance  with  generally   accepted   accounting   principles
consistently applied.

                  "TATABUANA"  - P.T.  Tatabuana  Raya,  an  Indonesian  limited
liability company.

                  "TERMINATION  EVENT" - (a) a "Reportable  Event"  described in
Section  4043  of  ERISA  and  the  regulations  issued  thereunder;  or (b) the
withdrawal of any Loan Party or any ERISA Affiliate from a Pension Plan during a
plan  year in  which it was a  "substantial  employer"  as  defined  in  Section
4001(a)(2)  of ERISA or was deemed such under Section  4068(f) of ERISA;  or (c)
the termination of a Pension Plan, the filing of a notice of intent to terminate
a Pension Plan or the  treatment of a Pension  Plan  amendment as a  termination
under Section 4041 of ERISA;  or (d) the institution of proceedings to terminate
a Pension  Plan by the PBGC;  or (e) any other  event or  condition  which would
constitute grounds under Section 4042(a) of ERISA for the termination of, or the
appointment of a trustee to administer,  any Pension Plan; or (f) the partial or
complete   withdrawal  of  any  Loan  Party  or  any  ERISA   Affiliate  from  a
Multiemployer  Plan; or (g) the  imposition of a Lien pursuant to Section 412 of
the IRC or Section 302 of ERISA;  or (h) any event or condition which results in
the  reorganization or insolvency of a Multiemployer  Plan under Section 4241 or
Section 4245 of ERISA, respectively; or (i) any event or condition which results
in the termination of a  Multiemployer  Plan under Section 4041A of ERISA or the
institution


                                       24

<PAGE>
 

<PAGE>



by the PBGC of proceedings to terminate a Multiemployer  Plan under Section 4042
of ERISA.

                  "THIRD  RESTATED LOAN  AGREEMENT" - as defined in the recitals
hereof.

                  "TIME  TRADE  L/CS" - Trade L/Cs  issued on time terms  (which
shall be limited to 60 days past sight).

                  "TRADE  L/CS" - sight and time  letters  of  credit  issued in
favor of  beneficiaries  specified  by the Borrower in order to  facilitate  the
transportation  or purchase of goods from foreign vendors by the Borrower in the
ordinary  course of its business,  which goods are consigned to the Issuing Bank
pursuant to the terms of the  Application  or otherwise,  all of which (i) shall
have an  expiration  date of no later than August 31,  1999,  (ii) shall be cash
collateralized  on and after June 1, 1999 as provided in Section  2.2(f) hereof,
and (iii) shall include Existing Trade L/Cs.

                  "TRADEMARKS"  -  trademarks,   trade  names,   service  marks,
trademark  applications,  trademark registrations and rights with respect to the
foregoing.

                  "TRADEMARK   SECURITY  AGREEMENT"  -  as  defined  in  Section
2.13(d)(i) hereof.

                  "TRADEMARK  SECURITY  INTEREST  CONFIRMATION"  - as defined in
Section 2.13(d)(ii)(A).

                  "TRANSACTIONAL FEES" - as defined in Section 2.6(e) hereof.

                  "UNPAID DRAWINGS" - as defined in Section 2.2 hereof.

                  "UNUSED  COMMITMENT"  - as at any date,  for each Lender,  the
difference,  if any, between:  (a) the amount of such Lender's  Commitment as in
effect on such date, minus (b) the sum of the then outstanding  principal amount
of all  Loans  made by such  Lender  and such  Lender's  pro  rata  share of all
Outstanding  L/Cs and  outstanding  Acceptances,  Airway  Releases and Steamship
Guarantees at such time.

                  "UNUSED  COMMITMENT  FEE" - as  defined  in  subsection 2.6(b)
hereof.

                  "WEE  BEEZ" - Wee  Beez  International  Limited,  a Hong  Kong
corporation.

                  "WILSONS  LEATHER"  - Wilsons  The  Leather  Experts  Inc.,  a
Minnesota corporation.



                                       25

<PAGE>
 

<PAGE>



Any accounting  terms used in this Agreement that are not  specifically  defined
herein  shall have the meanings  customarily  given to them in  accordance  with
generally  accepted  accounting  principles  as in  effect  on the  date of this
Agreement,  except  that  references  in Article 5 to such  principles  shall be
deemed to refer to such  principles  as in  effect on the date of the  financial
statements delivered pursuant thereto.

         ARTICLE 2.     REVOLVING CREDIT FACILITY.

                  SECTION 2.1       LETTERS OF CREDIT; ACCEPTANCES;
                                    LOANS; STEAMSHIP GUARANTIES;
                                    AIRWAY RELEASES.

                           (a) During the Credit Period and upon the  Borrower's
application therefor as hereinafter provided, the Issuing Bank shall, subject to
the terms and conditions of this  Agreement,  for the Lenders pro rata according
to their respective  commitments,  issue Trade L/Cs, Standby L/Cs,  Acceptances,
Airway Releases and Steamship Guaranties for the account of the Borrower. During
the Credit Period and upon the  Borrower's  application  therefor as hereinafter
provided,  the  Collateral  Monitoring  Agent  shall,  subject  to the terms and
conditions  of this  Agreement,  for the  Lenders  pro rata  according  to their
respective shares of the Commitment,  advance Loans to or for the account of the
Borrower.

                           (b)(i)  During the Credit  Period,  the  Borrower may
apply to the Issuing  Bank for the issuance by the Issuing Bank on behalf of the
Lenders  of one or more Trade L/Cs for the  account of the  Borrower;  provided,
however,  that (i) the amount of any Trade L/C to be issued shall not exceed the
Availability,  (ii) the aggregate  amount of all Time Trade L/Cs and Acceptances
outstanding at any one time shall not exceed  $3,000,000 and (iii) no Trade L/Cs
shall expire on a date later than August 31, 1999 and shall be collateralized on
and after June 1, 1999 as provided in Section 2.2(f) hereof.

                           (ii) During the Credit Period, the Borrower may apply
to the  Issuing  Bank for the  issuance  by the  Issuing  Bank on  behalf of the
Lenders of one or more standby letters of credit for the account of the Borrower
(each a "STANDBY L/C" and, collectively, the "STANDBY L/CS"); provided, however,
that (i) the  amount of any  Standby  L/C to be  issued  shall  not  exceed  the
Availability,  (ii) the sum of the amount of Standby L/Cs outstanding at any one
time and the aggregate  amount of drawings  under Standby L/Cs during the Credit
Period shall not exceed $3,000,000,  (iii) in the case of Standby L/Cs issued in
order to  facilitate  the  transportation  or  purchase  of goods from a foreign
vendor, the goods are consigned to the Issuing Bank pursuant to the terms of the
applicable Application or otherwise,  and (iv) no Standby L/Cs shall expire on a
date later than May 31, 1999.



                                       26

<PAGE>
 

<PAGE>



                           (c) During the Credit Period,  the Borrower may apply
to the  Issuing  Bank for the  issuance  by the  Issuing  Bank on  behalf of the
Lenders of one or more Acceptances;  provided,  however,  that (i) the aggregate
amount of all Time Trade L/Cs and Acceptances  outstanding at any one time shall
not  exceed  $3,000,000,  and  (ii) all  Acceptances  shall  be  issued  only in
connection  with the  presentation of drafts under  outstanding  Time Trade L/Cs
issued in accordance with the terms of this Agreement.

                           (d) During the Credit Period,  the Borrower may apply
to the Collateral  Monitoring Agent for the advance by the Collateral Monitoring
Agent  on  behalf  of the  Lenders  of a loan  or  loans  (each  a  "LOAN"  and,
collectively,  the "LOANS"), and subject to the terms of this Agreement,  during
the Credit  Period,  the  Borrower  may borrow,  prepay,  repay  (provided  that
prepayment or repayment of Eurodollar  Loans shall be subject to the  provisions
of Section 2.26 hereof) and reborrow by means of Prime Rate Loans or  Eurodollar
Loans,  and during such period and thereafter  until the date of payment in full
of all of the Loans,  the Borrower  may convert  Loans of one type into Loans of
another  type as provided in Section 2.23 hereof;  provided,  however,  that the
amount of any Loan to be advanced shall not exceed the Availability.

                           (e) During the Credit Period,  the Borrower may apply
to the  Issuing  Bank for the  issuance  by the  Issuing  Bank on  behalf of the
Lenders of one or more steamship  guaranties  (each a "STEAMSHIP  GUARANTY" and,
collectively,  the "STEAMSHIP  GUARANTIES")  or airway releases (each an "AIRWAY
RELEASE" and,  collectively,  "AIRWAY RELEASES");  provided,  however,  that any
amount of any Steamship Guaranty or Airway Release to be issued shall not exceed
the Availability.

                           (f)  The  parties  acknowledge  that  as of the  date
hereof:  (i) the Existing Loans are in the amount of $3,114,784.16 and that such
Existing  Loans are hereby  extended  and renewed and shall  constitute  "Loans"
hereunder in such amount, subject to the terms and conditions of this Agreement;
(ii)  Existing  Trade  L/Cs  are in  the  amount  of  $18,529,032.89  and  shall
constitute  "Trade  L/Cs"  hereunder  in such  amount,  subject to the terms and
conditions of this  Agreement;  (iii) Existing  Acceptances are in the amount of
$0.00 and shall constitute  "Acceptances"  hereunder in such amount,  subject to
the terms and conditions of this  Agreement;  (iv) Existing  Standby L/Cs are in
the amount of  $2,080,389.50  and shall  constitute  "Standby L/Cs" hereunder in
such amount,  subject to the terms and  conditions  of this  Agreement;  and (v)
Existing Steamship Guaranties and Airway Releases are in the amount of $0.00 and
shall constitute "Steamship Guaranties" and "Airway Releases" hereunder,  as the
case  may be,  in such  amount  subject  to the  terms  and  conditions  of this
Agreement.




                                       27

<PAGE>
 

<PAGE>



                           (g) As of the date hereof,  the Lenders have adjusted
the outstanding principal amount of the Obligations owing to each Lender so that
each  Lender  holds no more than its  Lender's  Share of the  Obligations  after
giving effect to this Agreement.

                  SECTION 2.2       APPLICATIONS FOR LETTERS OF
                                    CREDIT, STEAMSHIP GUARANTIES
                                    AND AIRWAY RELEASES.

                           (a)  Subject  to the  provisions  of  Section  2.1(b)
hereof,  upon the  execution  and  delivery or  electronic  transmission  by the
Borrower  simultaneously to the Issuing Bank and the Collateral Monitoring Agent
of the  Issuing  Bank's  standard  form of  application  for  letter  of  credit
(individually, an "APPLICATION",  and collectively, the "APPLICATIONS") and upon
payment by the  Borrower  of the  applicable  fees  provided  for in Section 2.6
hereof and receipt of instructions  from the Collateral  Monitoring  Agent as to
Availability,  the Issuing Bank shall,  subject to the terms and  conditions  of
this  Agreement,  in a timely manner in accordance  with its standard  operating
procedures,  issue an L/C for the account of the  Borrower.  In the event of any
conflict, discrepancy or any omission of terms provided herein between the terms
established  by the Issuing Bank in its  Application  or otherwise and this Loan
Agreement, the terms provided herein shall prevail.

                           (b)  Subject  to the  provisions  of  Section  2.1(e)
hereof,  upon the  execution  and  delivery or  electronic  transmission  by the
Borrower  simultaneously to the Issuing Bank and the Collateral Monitoring Agent
of an  application  therefor,  the Issuing Bank shall,  subject to the terms and
conditions of this  Agreement and receipt of  instructions  from the  Collateral
Monitoring Agent as to  Availability,  in a timely manner in accordance with its
standard operating  procedures,  issue Steamship  Guaranties or Airway Releases.
Any such Steamship  Guaranties or Airway  Releases shall be subject to the terms
of the  Continuing  Agreement  for Issuance of Steamship  Guaranties  and Airway
Releases.

                           (c) The Borrower shall  reimburse the Issuing Bank in
immediately available funds at the Issuing Bank's Payment Office on the same day
as demand  therefor  is made by the  Issuing  Bank for any  payment  made by the
Issuing Bank under an L/C (all such amounts so paid until paid, are  hereinafter
referred to as "UNPAID DRAWINGS").

                           (d) The Borrower  hereby  irrevocably  instructs  the
Collateral  Monitoring  Agent to advance to the Issuing Bank from any account of
the Borrower with the Collateral  Monitoring Agent and, to the extent sufficient
Availability  exists to advance Loans, to pay any Unpaid Drawings.  In the event
that at any time there are not  sufficient  funds in any account of the Borrower
with the  Collateral  Monitoring




                                       28

<PAGE>
 

<PAGE>



Agent to pay any Unpaid Drawing or sufficient  Availability  for payment of such
Unpaid Drawing, the Collateral Monitoring Agent shall nevertheless advance funds
to pay such  Unpaid  Drawings  and any funds  advanced  by the Agent in  payment
thereof shall be treated as Loans, but shall be due and payable  immediately and
shall bear  interest  which shall accrue from the date such funds were  advanced
until paid in full at the Post-Default Rate.

                           (e) The Borrower's obligations under this Section 2.2
to  reimburse  the  Issuing  Bank with  respect  to Unpaid  Drawings  (including
interest  thereon)  shall  be  absolute  and  unconditional  under  any  and all
circumstances and irrespective of any setoff, counterclaim or defense to payment
which the  Borrower  may have or have had against the  Issuing  Bank,  including
(without  limitation,  but subject nonetheless to the provisions of Section 2.18
hereof) any defense based on the failure of any drawing under the L/C to conform
to the  terms  of  such  L/C or any  non-application  or  misapplication  by the
beneficiary of the L/C of the proceeds of such drawing.

                           (f) If,  notwithstanding the other provisions of this
Section 2.2, on the Commitment  Termination  Date there are any L/Cs,  Steamship
Guaranties  or  Airway  Releases  which  either  (x)  have not  expired  or been
terminated  with the consent of the  Borrower and the  respective  beneficiaries
thereof or (y) have expired by their terms within the 30-day period prior to the
Commitment Termination Date and the Collateral Monitoring Agent has not yet been
able to  determine  whether  conforming  drafts have been  presented on a timely
basis, then this Agreement (including,  without limitation, this Section 2.2 and
Section 2.18 hereof) and the respective rights, obligations and covenants of the
Borrower,  the Agent, the Collateral  Monitoring Agent, the Issuing Bank and the
Lenders under this Agreement and the other Loan  Documents  shall remain in full
force  and  effect  until  the date on which  the  last of the  L/Cs,  Steamship
Guaranties or Airway Releases  expires or is terminated (with the consent of the
Borrower and the  beneficiaries  thereof)  and all payments  made by the Issuing
Bank  under the L/Cs,  the  Acceptances,  the  Steamship  Guaranties  and Airway
Releases are  reimbursed  in full by the  Borrower,  except that the  Commitment
shall terminate on the Commitment  Termination Date and none of the Lenders, the
Issuing  Bank or the  Agent  shall  have any  obligation  after  the  Commitment
Termination  Date  to  make  Loans  or to  issue  L/Cs,  Acceptances,  Steamship
Guaranties or Airway Releases  hereunder.  In addition,  the Borrower shall, for
the period beginning on the day after the Commitment Termination Date and ending
on the date  which  is the  later of (x) the  last  outstanding  L/C,  Steamship
Guaranty  or  Airway  Release  expires  or is  terminated  and (y) the  30th day
following the expiration of any L/C,  Steamship Guaranty or Airway Release which
expired during the 30-day period prior to the Commitment  Termination Date, with
respect to any such Indebtedness of the Borrower,  provide the Issuing Bank with
(1) collateral in the form of Cash in an amount equal to 103% of the full amount
of any such L/C,



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<PAGE>




Steamship  Guaranty or Airway  Release or (2) a letter of  indemnification  with
respect  to, or a letter of credit  issued to secure  payment of, each such L/C,
Steamship Guaranty or Airway Release from a financial institution  acceptable to
the Lenders and the Agent.  Upon compliance with the provisions of the foregoing
sentence, the Borrower shall,  notwithstanding  anything herein to the contrary,
be relieved of all other obligations under this Agreement or the Loan Documents.

                  SECTION 2.3       BORROWING NOTICE AND
                                    DISBURSEMENT OF LOANS.

                           (a) The Borrower shall give the Collateral Monitoring
Agent written  notice of each  borrowing and  conversion of each Loan and of the
duration of each Interest  Period  applicable to each  Eurodollar  Loan (in each
case, a "BORROWING  NOTICE").  Each Borrowing  Notice shall be  irrevocable  and
shall be  effective  on the date of the  related  borrowing,  if received by the
Agent not later than 12 noon, New York City time, on the date that is:

                           (i) In the case of each  notice of  borrowing  of, or
conversion into, Prime Rate Loans, on the date of the Borrowing Notice,  subject
to subsection 2.9(c); and

                           (ii) In the case of each notice of  borrowing  of, or
conversion  into,  Eurodollar  Loans, and in the case of any Eurodollar Loan the
Interest  Period of which is  maturing  and is  intended  to be  continued  as a
Eurodollar  Loan,  three (3)  Eurodollar  Business Days prior to the date of the
related borrowing or conversion or the first day of such Interest Period.

Each such notice of borrowing or conversion shall specify the amount (subject to
Section 2.1 hereof) and type of Loans to be borrowed or converted  (and,  in the
case of a  conversion,  the type of Loans to result from such  conversion),  the
date of borrowing or conversion  (which shall be: (x) a Business Day in the case
of each borrowing of Prime Rate Loans, and (y) a Eurodollar  Business Day in the
case of each  borrowing of  Eurodollar  Loans and each  conversion  of or into a
Eurodollar  Loan).  Each such notice of the duration of an Interest Period shall
specify the Loans to which such  Interest  Period is to relate.  The  Collateral
Monitoring  Agent shall notify the Lenders of the content of each such Borrowing
Notice promptly after its receipt thereof.

                           (b) The Collateral  Monitoring  Agent shall render to
each Lender promptly after the end of each week in the case of Prime Rate Loans,
on the date of funding in the case of  Eurodollar  Loans,  or after such shorter
period as the Agent may determine  (such week, date of funding or shorter period
being hereinafter referred to




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<PAGE>


as a "SETTLEMENT  PERIOD"),  a summary statement of the Outstanding  Obligations
and each  Lender's  Share  thereof  for such  period.  If,  as of the end of any
Settlement  Period, any Lender's Share of Loans is more than such Lender's Share
for the  previous  Settlement  Period,  then such Lender  shall  transfer to the
Collateral Monitoring Agent good funds for the amount of the increase (A) on the
same Business Day that notice is given by the Collateral Monitoring Agent to the
Lender if such notice is given  prior to 12:00 p.m.  and (B) no later than 12:00
p.m.  on the  following  Business  Day if  notice  is  given  by the  Collateral
Monitoring  Agent to the Lender after 12:00 p.m.; and, on the other hand, if any
Lender's Share of Loans as of the end of any Settlement Period is less than such
Lender's Share of Loans for the previous  Settlement Period, then the Collateral
Monitoring  Agent shall transfer to such Lender good funds for the amount of the
decrease  (A) on the same  Business  Day if the  Collateral  Monitoring  Agent's
calculations  with respect to such Settlement  Period are completed before 12:00
p.m.  and (B) on the next  Business  Day if the  Collateral  Monitoring  Agent's
calculations  with respect to such  Settlement  Period are completed after 12:00
p.m.  Unless the receiving party gives at least five Business Days prior written
notice to the contrary, all funds remitted by the Collateral Monitoring Agent to
any Lender  hereunder,  and all funds  remitted by any Lender to the  Collateral
Monitoring  Agent  hereunder,  shall be sent by wire  transfer  to such  party's
respective  account as set forth on the signature  pages hereof.  The Collateral
Monitoring Agent agrees to mark its books and records each Settlement  Period to
show each  Lender's  Share of the  Outstanding  Obligations.  The failure of any
Lender to make a timely payment  hereunder shall have no effect on such Lender's
liability for such payment,  it being  understood  that each Lender shall assume
the  risk  to the  extent  of its  Lender's  Share  of  each  Loan  made or L/C,
Acceptance,  Steamship  Guaranty  or Airway  Release  issued as and when made or
issued, as the case may be.

                  SECTION 2.4       NOTES.

                           (a) The Loans made by each Lender  shall be evidenced
by a single promissory note of the Borrower in substantially the form of Exhibit
A hereto payable to such Lender (each, a "NOTE" and collectively,  the "NOTES").
Each Note  shall be dated the date of this  Agreement,  shall be  payable to the
order of each Lender on a date not later than the Commitment Termination Date in
a principal  amount equal to such  Lender's  Commitment as originally in effect,
and shall otherwise be duly completed. The Notes shall be payable as provided in
Section 2.7 hereof.

                           (b) Upon receipt of an affidavit of an officer of the
Collateral Monitoring Agent as to the loss, theft,  destruction or mutilation of
any Note or any other Security  Document which is not of public record,  and, in
the case of any such loss, theft, destruction or mutilation,  upon surrender and
cancellation  of such Note or other Security  Document,  Borrower will issue, in
lieu  thereof,  a  replacement  Note




                                       31

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<PAGE>



or other Security Document in the same principal amount thereof and otherwise of
like tenor.

                  SECTION 2.5       INTEREST.

                           (a)  The  Borrower   shall  pay  to  the   Collateral
Monitoring Agent, for the ratable benefit of the Lenders,  interest on the daily
balances  of the Loans  outstanding  during the  preceding  month for the period
commencing  on the date of each such Loan until such Loan shall be paid in full,
at the following rates per annum:

                                    (i)     For a Prime Rate Loan, a rate  equal
to the Prime Rate; and

                                    (ii)    For a Eurodollar Loan, a rate  equal
to two and one-half (2 1/2%) percent per annum in excess of the LIBOR Rate.

                           (b) Notwithstanding the foregoing, the Borrower shall
pay  interest on any Loan or any  installment  thereof,  and on any other amount
payable by the Borrower  hereunder  (to the extent  permitted by law) that shall
not be paid in full when due (whether at stated  maturity,  by  acceleration  or
otherwise)  for the period  commencing on the due date thereof until the same is
paid in full at the Post-Default Rate.

                           (c) Except as provided in the next sentence,  accrued
interest  on each Loan  shall be  payable:  (i) not later  than  monthly  on the
Monthly  Dates and (ii) in the case of any  Eurodollar  Loan,  upon the  payment
thereof  or the  conversion  thereof  into a Prime  Rate  Loan  (but only on the
principal so paid or  converted).  Interest that is payable at the  Post-Default
Rate shall be payable from time to time on demand of the  Collateral  Monitoring
Agent.

                           (d) Anything in this Agreement or any of the Notes to
the contrary notwithstanding, the obligation of the Borrower to make payments of
interest shall be subject to the limitation  that payments of interest shall not
be required to be made to any Lender to the extent  that such  Lender's  receipt
thereof would not be permissible under the law or laws applicable to such Lender
limiting rates of interest that may be charged or collected by such Lender.  Any
such  payments  of  interest  that are not made as a  result  of the  limitation
referred  to in the  preceding  sentence  shall be made by the  Borrower to such
Lender on the  earliest  interest  payment  date or dates on which  the  receipt
thereof would be permissible  under the laws  applicable to such Lender limiting
rates of interest that may be charged or collected by such Lender. Such deferred
interest shall not bear interest.



                                       32

<PAGE>
 

<PAGE>



                  SECTION 2.6   FEES.

                           (a) The  Borrower  shall  pay to the  Agent,  for the
ratable benefit of the Lenders, a non-refundable  advisory fee fully earned upon
the execution and delivery of this Agreement (the "ADVISORY  FEE") in the amount
of $200,000 payable as follows:

                            (i)  $100,000 payable on the Closing Date; and

                           (ii) $100,000  payable on the earlier to occur of (x)
May 31, 1998; and (y) the refinancing by the Borrower of the Obligations.

                           (b) The  Borrower  shall  pay to the  Agent,  for the
account of each Lender, an unused  commitment fee (the "UNUSED  COMMITMENT FEE")
on the daily average amount of such Lender's Unused  Commitment,  for the period
from the date hereof to and including  the  Commitment  Termination  Date at the
rate of one-quarter of one (1/4%) percent per annum on the portion of the Unused
Commitment  of such  Lender;  provided the amount of the Unused  Commitment  Fee
shall not exceed $50,000  during the term of this  Agreement;  provided  further
that no Unused  Commitment Fee shall be assessed for the periods from January 1,
1998  through  and  including  April 30,  1998 and  January 1, 1999  through and
including April 30, 1999. The accrued Unused  Commitment Fee shall be calculated
every third  Monthly Date  commencing  on July 31, 1997 and such amount shall be
payable  quarterly in arrears on every third  Monthly Date  commencing on August
31, 1997 and on the Commitment Termination Date.

                           (c) Upon  each  drawing  under an L/C,  the  Borrower
shall pay to the Issuing Bank, for the ratable benefit of the Lenders, a drawing
fee (the "DRAWING FEE") computed at the rate of one eighth of one (1/8%) percent
per annum of the face amount of such drawing,  but in no event shall the Drawing
Fee be less than $70.00.

                           (d) Upon the  execution  and delivery by the Borrower
of an Application for a Standby L/C, the Borrower shall pay to the Issuing Bank,
for the ratable benefit of the Lenders,  an issuance fee (the "STANDBY L/C FEE")
computed  at the rate of one and one half of one (1 1/2%)  percent  per annum on
the face amount of the requested Standby L/C payable quarterly in advance on the
applicable Monthly Dates.

                           (e) Upon the  execution  and delivery by the Borrower
of an Application  for any L/C,  Steamship  Guarantee or Airway Release (or upon
any modification,  amendment,  cancellation or extension thereof),  the Borrower
shall pay  directly  to the  Issuing  Bank for its own  account,  all  issuance,
processing  and



                                       33

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<PAGE>



associated  transactional  charges  (the  "TRANSACTIONAL  FEES")  imposed by the
Issuing Bank in connection with any L/C, Steamship Guarantee or Airway Release.

                           (f) Upon the execution and delivery of an Acceptance,
the  Borrower  shall pay to the Issuing  Bank,  for the  ratable  benefit of the
Lenders,  a fee (the "ACCEPTANCE FEE") for such Acceptance equal to the discount
rate of the Agent plus two and  three-quarters  (2.75%) percent per annum of the
principal  amount of such  Acceptance  for the term thereof  payable  monthly in
advance on the applicable Monthly Dates.

                           (g)  The  Borrower   shall  pay  to  the   Collateral
Monitoring  Agent for its own  account a fee of $35,000  per  annum,  a pro rata
portion of which shall be payable  monthly in advance on the first  Business Day
of each calendar  month (with the first such payment to be made on June 1, 1997)
(the "COLLATERAL FEES").

                           (h) The Borrower  shall pay to the Lenders within ten
days following demand therefor,  reimbursement  for the fees and expenses of the
Collateral  Monitoring  Agent's and any Lender's field examiners which accompany
the Collateral Monitoring Agent on inspections and field examinations  (pursuant
to  Section  6.2 or  9.10(b)  of this  Agreement  or  otherwise),  such fees and
expenses  to be  calculated  at such  Lender's  standard  per  diem  rates  (the
"EXAMINATION FEES").

                           (i) The Borrower  shall pay to the Agent for its sole
account an administrative fee (the "ADMINISTRATIVE  FEE") in accordance with the
terms of a separate agreement between the Agent and the Borrower.

                           (j) The Advisory Fee, the Unused  Commitment Fee, the
Drawing Fee, the Standby L/C Fee, the  Transactional  Fees, the Acceptance  Fee,
the  Collateral  Fees,  the  Examination  Fees  and the  Administrative  Fee are
hereinafter  sometimes  referred to individually as a "FEE" and  collectively as
the "FEES".

                  SECTION 2.7       PAYMENT OF LOANS AND ACCEPTANCES;
                                    VOLUNTARY CHANGES IN COMMITMENT;
                                    MANDATORY PREPAYMENTS.

                           (a) All outstanding  Loans and  Acceptances  shall be
paid in full not later than the Commitment Termination Date.

                           (b) The  Borrower  shall be entitled to  terminate or
reduce either or both of the  Commitment  and the Direct Debt Sublimit  provided
that the  Borrower  shall  give  one (1)  day's  prior  written  notice  of such
termination  or reduction  to the Lenders and that any partial  reduction of the
Commitment or the Direct Debt Sublimit shall be in an aggregate  amount equal to
$100,000 or an integral  multiple  thereof.



                                       34

<PAGE>
 

<PAGE>




Any such  termination  or reduction  shall be permanent  and  irrevocable.  Each
partial  reduction of either the Commitment or the Direct Debt Sublimit shall be
applied pro rata to reduce each Lender's  Share of the Commitment and the Direct
Debt Sublimit.

                           (c)  Notwithstanding  any  other  provisions  of this
Agreement,  in the  event  that on any  day the  Obligations  shall  exceed  the
Borrowing  Base  (including  but not limited to the  circumstances  in which the
Collateral  Monitoring  Agent has exercised  its  discretion to continue to make
Loans and to instruct the Issuing Bank that Availability exists for the issuance
of L/Cs,  Acceptances,  Steamship Guaranties and Airway Releases, as provided in
the definition of "Overadvance"  in Article 1 of this  Agreement),  the Borrower
shall immediately upon the Collateral Monitoring Agent's request repay the Loans
and/or  prepay  Acceptances  in an amount  sufficient  to reduce  the sum of the
aggregate  principal amount of the Obligations to an amount not greater than the
Borrowing Base on that date and shall not be permitted to request the Collateral
Monitoring  Agent to make any Loans or make  application  to the Issuing Bank to
issue Trade L/Cs,  Standby L/Cs,  Steamship  Guaranties or Airway Releases until
such payment or repayment is made.


                  SECTION 2.8    USE OF PROCEEDS OF LOANS.

                           The  proceeds of the Loans  hereunder  may be used by
the Borrower solely for the following:

                           (a) first to refinance  existing  indebtedness of the
Borrower  under the Third  Restated Loan  Agreement,  in an aggregate  principal
amount of $23,724,206.55;

                           (b) second to pay all fees and  expenses of the Agent
and the Lenders associated with the preparation,  execution and delivery of this
Agreement; and

                           (c)  third  to  provide   working   capital  for  the
Borrower.


                  SECTION 2.9   COMPUTATIONS.

                           (a)  Interest  on all  Loans  and each  Fee  shall be
computed on the basis of a year of 360 days and actual days  elapsed  (including
the first day but excluding the last) occurring in the period for which payable.

                           (b) (i) For the  purpose of  computing  interest  and
calculating  Availability  hereunder,  all payments  consisting  of cash or wire
transfers  in  immediately  available  funds  shall be  deemed  received  by the
Collateral Monitoring Agent: (A) on the same Business Day that such payments are
deposited  in the



                                       35

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<PAGE>



Collection  Account in the event such  deposit is made on or prior to 1:00 p.m.;
and (B) one Business Day following deposit thereof in the Collection  Account in
the event such  deposit is made after  1:00 p.m.;  provided,  however,  that the
foregoing  references to 1:00 p.m. shall be changed to 12:00 p.m. if the date of
such deposit is the last Business Day of the calendar  month or the Business Day
before a holiday;

                           (ii)  For the  purpose  of  calculating  Availability
hereunder,  all checks,  drafts,  or similar non-cash items of payment by or for
the  account  of the  Borrower  shall  be  deemed  received  by  the  Collateral
Monitoring  Agent (A) on the same  Business Day that the deposit of such payment
is made in the  Collection  Account in the event  such  deposit is made prior to
1:00 p.m.; and (B) one Business Day following  deposit thereof in the Collection
Account in the event such deposit is made after 1:00 p.m.; and

                           (iii) For the purpose of computing interest and Fees,
all checks,  drafts,  or similar non-cash items of payment by or for the account
of the Borrower shall be deemed received by the Collateral  Monitoring Agent two
(2)  Business  Days after  deposit of such  payment in the  Collection  Account;

provided, however, that, for purposes other than computing interest and Fees and
calculating Availability, no check, drafts, or other instruments received by the
Collateral   Monitoring  Agent  shall  constitute   payment  to  the  Collateral
Monitoring  Agent  unless  and until  such item of  payment  has  actually  been
collected  by the  Collateral  Monitoring  Agent  and such  collection  has been
credited to the Collection Account.

                           (c)  On  the  basis  of  the  daily   Borrowing  Base
Certificate  delivered  by the  Borrower  to  the  Collateral  Monitoring  Agent
pursuant to subsection  5.10(a)  hereof,  the Collateral  Monitoring  Agent will
determine on a daily basis the Availability  and the Borrower's  compliance with
the terms of this  Agreement,  including  but not limited to the  provisions  of
Section 2.7 hereof.

                  SECTION 2.10     TIME AND METHOD OF PAYMENTS;
                                   STATEMENT OF ACCOUNT.

                           (a) All  payments of  principal,  interest,  Fees and
other amounts (including indemnities) payable by the Borrower hereunder shall be
made in Dollars,  in immediately  available funds, to the Collateral  Monitoring
Agent at its Payment  Office not later than 12 noon,  New York City time, on the
date on which such payment shall become due. With respect to all such  payments,
the  Collateral  Monitoring  Agent shall (i) advance  funds in payment and treat
such  advance  of  funds  as a Loan or  (ii)  in the  event  that  there  is not
sufficient  Availability,  debit the amount of any such  payment to any ordinary
deposit  account of the Borrower with the



                                       36

<PAGE>
 

<PAGE>



Collateral  Monitoring  Agent.  In the event that  there is  neither  sufficient
Availability  or  amounts  in the  deposit  accounts  of the  Borrower  with the
Collateral Monitoring Agent, the Borrower shall make the payment directly at the
Collateral  Monitoring  Agent's  Payment  Office as provided  above.  Additional
provisions relating to payments are set forth in Section 10.3 hereof.

                           (b) The Collateral Monitoring Agent shall provide the
Borrower with a statement of account on a monthly  basis,  and each statement of
account  that is delivered by the  Collateral  Monitoring  Agent to the Borrower
that  relates  to the  Obligations  shall be deemed  correct  in the  absence of
manifest  error and shall  constitute an account stated between the Borrower and
the  Collateral  Monitoring  Agent  unless  thereafter  waived in writing by the
Collateral  Monitoring  Agent or  unless,  within 30 days  after the  Borrower's
receipt of such statement,  the Borrower  delivers to the Collateral  Monitoring
Agent, by registered or certified mail, written objection thereto specifying the
error or errors,  if any,  contained in any such statement;  provided,  however,
that any failure by the Collateral Monitoring Agent to provide the Borrower with
a  statement  of  account  shall not  affect  the  Obligations  of the  Borrower
hereunder or under any Note.

                  SECTION 2.11    SEVERAL OBLIGATIONS.

                           No Lender shall be responsible for the failure of the
other Lenders to make Loans to be made by such other Lenders.

                  SECTION 2.12    GUARANTIES.

                           (a) The Parent,  Siena, Hong Kong,  Global,  Sources,
Holdings,  Retail,  Tatabuana,  Balihides,  Wee Beez and  Kostroma  (hereinafter
referred to individually as a "GUARANTOR" and collectively as the  "GUARANTORS")
have  heretofore  executed  guaranties  (each  of  the  foregoing,  as  amended,
hereinafter  referred to  individually  as a "GUARANTY" and  collectively as the
"GUARANTIES")  pursuant to the Original Loan Agreement,  the First Restated Loan
Agreement, the Second Restated Loan Agreement and, in the case of Balihides, Wee
Beez and Kostroma,  the Third  Restated Loan  Agreement,  guaranteeing,  without
limitation,  the due payment and  performance of the Obligations to the Lenders,
the Collateral Monitoring Agent, the Issuing Bank and the Agent.

                           (b) Each of the Guarantors shall, simultaneously with
the  execution  and  delivery of this  Agreement,  acknowledge  and confirm that
"Guaranteed  Obligations"  as used and defined in the  Guaranties  (or any other
term used  therein to describe  or refer to the  Indebtedness,  liabilities  and
obligations  of the Borrower  and each  Guarantor to the Lenders and the Agent),
includes,  without  limitation,  all of the  Obligations,  by the  execution and
delivery to the Agent of a guaranty  confirmation



                                       37

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<PAGE>


and amendment satisfactory to the Agent (hereinafter referred to individually as
a "GUARANTY CONFIRMATION" and collectively as the "GUARANTY CONFIRMATIONS").

                  SECTION 2.13    SECURITY.

                       (a) (i)  The  Borrower  has  heretofore  granted  to  the
Agent,  for the ratable benefit of the Lenders,  a Lien on all of the Borrower's
personal  property,  including,  but not limited  to,  Accounts  and  Inventory,
whether  then owned or  thereafter  acquired,  tangible and  intangible,  by the
execution  and  delivery of a Security  Agreement  dated  October 29,  1992,  as
amended by an  Amendment  Letter  dated  February 1, 1994,  a Borrower  Security
Interest  Confirmation and Amendment dated June 12, 1995 and a Borrower Security
Interest  Confirmation  and Amendment dated as of May 31, 1996 (as amended,  the
"BORROWER SECURITY AGREEMENT");

                           (ii) The  Borrower  has  heretofore  assigned  to the
Agent,  for  the  ratable  benefit  of the  Lenders,  all of its  rights  to any
distributions from BET Studio LLC by the execution and delivery of an Assignment
dated as of April 23, 1997 (the "BORROWER ASSIGNMENT");

                           (iii)  In  order  to  secure  the  due   payment  and
performance  by the  Borrower of all of the  Obligations,  the  Borrower  shall,
simultaneously with the execution and delivery of this Agreement:

                                            (A)  Acknowledge  and confirm to the
Agent that the term  "Obligations" as used and defined in the Borrower  Security
Agreement  (or  any  other  term  used  therein  to  describe  or  refer  to the
Indebtedness,  liabilities and  obligations of the Borrower to the Lenders,  the
Collateral  Monitoring Agent, the Issuing Bank and the Agent) includes,  without
limitation,  the  Obligations as defined herein by the execution and delivery to
the Agent of a security interest confirmation in form and substance satisfactory
to the  Agent  (hereinafter  referred  to as  the  "BORROWER  SECURITY  INTEREST
CONFIRMATION");

                                            (B)  Acknowledge  and confirm to the
Agent that the term "Obligations" as used an defined in the Borrower  Assignment
(or any other  term  used  therein  to  describe  or refer to the  Indebtedness,
liabilities  and  obligations  of the  Borrower to the Lenders,  the  Collateral
Monitoring Agent, the Issuing Bank and the Agent) includes,  without limitation,
the  Obligations as defined herein by the execution and delivery to the Agent of
an  assignment  confirmation  in form and  substance  satisfactory  to the Agent
(hereinafter referred to as the "BORROWER ASSIGNMENT CONFIRMATION"); and

                                            (C) Execute and deliver, or cause to
be executed and  delivered,  to the Agent such other  agreements,  documents and
instruments as



                                       38

<PAGE>
 

<PAGE>


the Agent may reasonably require in order to effect the purposes of the Borrower
Security Agreement and the Borrower Assignment (as acknowledged and confirmed by
the  Borrower  Security  Interest   Confirmation  and  the  Borrower  Assignment
Confirmation, respectively), this Section 2.13 and this Agreement.

                          (b) (i) Each of the Parent,  Siena,  Holdings,  Retail
and Sources (hereinafter referred to individually as a "CORPORATE GUARANTOR" and
collectively as the "CORPORATE GUARANTORS") has heretofore granted to the Agent,
for  the  ratable  benefit  of the  Lenders,  a Lien  on all of  such  Corporate
Guarantor's  personal  property,  including,  but not limited to,  Accounts  and
Inventory,  whether then owned or thereafter acquired,  tangible and intangible,
by the  execution  and  delivery of a Security  Agreement,  each as amended by a
Security  Interest  Confirmation  and  Amendment  dated  June 12,  1995 and by a
Security Interest  Confirmation and Amendment dated as of May 31, 1996 (each, as
amended,  a "GUARANTOR  SECURITY  AGREEMENT"  and  collectively,  the "GUARANTOR
SECURITY AGREEMENTS"); and

                              (ii) In order to secure   the  due   payment   and
performance  by the Borrower of all of the  Obligations,  each of the  Corporate
Guarantors  shall,  simultaneously  with  the  execution  and  delivery  of this
Agreement:

                                            (A) Acknowledge and confirm that the
term  "Obligations" as used and defined in its Guarantor  Security Agreement (or
any  other  term  used  therein  to  describe  or  refer  to  the  Indebtedness,
liabilities  and  obligations of the Borrower and such Guarantor to the Lenders,
the  Collateral  Monitoring  Agent,  the Issuing  Bank and the Agent)  includes,
without  limitation,  in each case, the Obligations as defined  herein,  in each
case  by  the  execution  and  delivery  to the  Agent  of a  security  interest
confirmation  and  amendment  in form and  substance  satisfactory  to the Agent
(hereinafter  referred to as a "GUARANTOR  SECURITY  INTEREST  CONFIRMATION" and
collectively, the "GUARANTOR SECURITY INTEREST CONFIRMATIONS"); and

                                            (B) Execute and deliver, or cause to
be executed and delivered, to the Agent such  other  agreements,  documents  and
instruments as the Agent may  reasonably require in order to effect the purposes
of its  Guarantor  Security  Agreement  (as  acknowledged  and  confirmed by its
Guarantor Security Interest Confirmation), this Section 2.13 and this Agreement.

                           (c) (i) The Parent has heretofore:

                                            (A) Granted  to  the  Agent, for the
ratable benefit of the Lenders,  a lien on, and assigned to the  Agent,  for the
ratable  benefit  of  the Lenders,  all of its  right,  title  and interest  in,
to  and  under  all  of  the  insurance  policies on the life of Morris Goldfarb
required to be maintained by the Parent  pursuant to



                                       39

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<PAGE>


Section 6.8(c) hereof by the execution and delivery to the Agent of a collateral
assignment  of life  insurance  dated  May 24,  1995  (the  "ASSIGNMENT  OF LIFE
INSURANCE");

                                            (B)  Granted  to the  Agent  for the
ratable  benefit  of the  Lenders,  a Lien  on  all  of its  personal  property,
including,  but not limited to Accounts  and  Inventory,  whether  then owned or
thereafter acquired, tangible and intangible, by the execution and delivery of a
Security Agreement dated as of January 31, 1994, as amended by a Parent Security
Interest Confirmation and Amendment dated June 12, 1995 and by a Parent Security
Interest  Confirmation  and Amendment dated as of May 31, 1996 (as amended,  the
"PARENT SECURITY AGREEMENT"); and

                                            (C)  Pledged to the  Agent,  for the
ratable  benefit  of the  Lenders,  all of the  stock  of all  Subsidiaries  and
Affiliates,  including,  but not limited to, the stock of the  Borrower,  by the
execution  and delivery of a Stock  Pledge  Agreement  dated June 12,  1995,  as
amended by a Stock Pledge  Confirmation  and Amendment dated as of May, 31, 1996
(as amended, the "STOCK PLEDGE AGREEMENT"); and

                              (ii)  In  order  to  secure  the due  payment  and
performance  by  the  Borrower  of all of the  Obligations,  the  Parent  shall,
simultaneously with the execution and delivery of this Agreement:

                                            (A)  Acknowledge  and confirm to the
Agent that the term  "Obligations"  as used and  defined in the Parent  Security
Agreement  (or  any  other  term  used  therein  to  describe  or  refer  to the
Indebtedness,  liability and  obligations  of the Borrower and the Parent to the
Lenders,  the  Collateral  Monitoring  Agent,  the Issuing  Bank and the Agent),
includes without limitation, in each case, the Obligations as defined herein, by
the execution and delivery to the Agent of a security interest  confirmation and
amendment in form and substance  satisfactory to the Agent (hereinafter referred
to as the "PARENT SECURITY INTEREST CONFIRMATION");

                                            (B)  Acknowledge  and confirm to the
Agent  that the term  "Obligations"  as used and  defined  in the  Stock  Pledge
Agreement  (or  any  other  term  used  therein  to  describe  or  refer  to the
Indebtedness,  liability and  obligations  of the Borrower and the Parent to the
Lenders,  the  Collateral  Monitoring  Agent,  the Issuing  Bank and the Agent),
includes without limitation, the Obligations as defined herein, by the execution
and delivery to the Agent of a stock pledge  confirmation  and amendment in form
and substance  satisfactory to the Agent (hereinafter referred to as the "PARENT
STOCK PLEDGE CONFIRMATION");

                                            (C) Execute and deliver, or cause to
be executed and delivered to the Agent such other  documents and  instruments as
the Agent may



                                       40

<PAGE>
 

<PAGE>



reasonably  require  in order to effect  the  purposes  of the  Parent  Security
Agreement  (as  acknowledged  and  confirmed  by the  Parent  Security  Interest
Confirmation),  the Assignment of Life Insurance, the Stock Pledge Agreement (as
acknowledged  and  confirmed  by the Parent  Stock  Pledge  Confirmation),  this
Section 2.13 and this Agreement.

                           (d) (i) The  Borrower,  the  Parent  and  Siena  have
heretofore  simultaneously  with the execution and delivery of the Original Loan
Agreement  and the First  Restated Loan  Agreement  granted to the Agent for the
ratable  benefit  of the  Lenders a Lien on all of their  respective  Trademarks
whether then owned or thereafter acquired,  by the execution and delivery to the
Agent of a Trademark  Security Agreement dated October 29, 1992, a New Trademark
Security  Agreement  dated July 29,  1994,  as amended by a  Trademark  Security
Interest  Confirmation  and  Amendment  dated June 12,  1995 and as amended by a
Trademark Security Interest  Confirmation and Amendment dated as of May 31, 1996
(collectively, as amended, the "TRADEMARK SECURITY AGREEMENT");

                               (ii) In order to secure  the  due   payment   and
performance by the Borrower of all of the Obligations,  the Borrower, the Parent
and  Siena  shall,  simultaneously  with  the  execution  and  delivery  of this
Agreement:

                                            (A)  Acknowledge  and confirm to the
Agent that the term  "Obligations" as used and defined in the Trademark Security
Agreement  (or any  other  terms  used  therein  to  describe  or  refer  to the
Indebtedness  of the  Borrower,  the  Parent,  and  Siena  to the  Lenders,  the
Collateral Monitoring Agent, the Issuing Bank and the Agent), includes,  without
limitation,  in each case, the Obligations as defined  herein,  by the execution
and  delivery to the Agent of a trademark  security  interest  confirmation  and
amendment in form and substance  satisfactory to the Agent (hereinafter referred
to as the "TRADEMARK SECURITY INTEREST CONFIRMATION"); and

                                            (B) Execute and deliver, or cause to
be executed and delivered to the Agent such other  documents and  instruments as
the  Agent  may  reasonably  require  in order to  effect  the  purposes  of the
Trademark  Security  Agreement (as  acknowledged  and confirmed by the Trademark
Security Interest Confirmation), this Section 2.13 and this Agreement.

                           (e) The  Borrower  Security  Agreement,  the Borrower
Security Interest Confirmation, the Borrower Assignment, the Borrower Assignment
Confirmation, the Guarantor Security Agreements, the Guarantor Security Interest
Confirmations,  the Assignment of Life Insurance, the Parent Security Agreement,
the Parent Security Interest Confirmation, the Trademark Security Agreement, the
Trademark Security Interest Confirmation, the Stock Pledge Agreement, the Parent




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<PAGE>




Stock  Pledge  Confirmation  and  the  aforesaid  agreements,   instruments  and
documents are  hereinafter  sometimes  referred to collectively as the "SECURITY
DOCUMENTS".

                  SECTION 2.14    LENDING OFFICES.

                           The Loans of each type made by each  Lender  shall be
made at such Lender's  lending office for Loans of such type as set forth on the
signature page hereto of such Lender.

                  SECTION 2.15     OBLIGATIONS ABSOLUTE.

                           The  obligations of the Borrower under this Agreement
and the Loan Documents shall be absolute,  unconditional  and  irrevocable,  and
shall be  performed  strictly in  accordance  with the terms of this  Agreement,
under all circumstances whatsoever, including, without limitation, the following
circumstances:

                              (i) the L/Cs, the Notes,  the Loan Agreement,  the
other Loan Documents or any other agreements,  instruments or documents relating
thereto proving to be forged, fraudulent, invalid, unenforceable or insufficient
in any respect;

                              (ii) any  amendment or waiver of or any consent to
the departure from all or any of the Security Documents;

                              (iii) the existence of any claim, setoff,  defense
or other rights which the Borrower may have at any time against any  beneficiary
or any  transferee of any  beneficiary  (or any Persons or entities for whom any
beneficiary  or any such  transferee  may be  acting),  any  Lender or any other
Person,  whether in  connection  with this  Agreement,  the L/Cs,  the  Security
Documents, the other Loan Documents or any unrelated transaction;

                              (iv) any demand  presented  under the L/Cs (or any
endorsement thereon) proving to be forged, fraudulent, invalid, unenforceable or
insufficient  in any respect or any statement  therein  being  inaccurate in any
respect whatsoever;

                              (v)  payment  by the  Issuing  Bank  under any L/C
against  preparation  of a demand  which does not comply  with the terms of such
L/C, including, without limitation, the circumstances referred to in clause (iv)
above or the failure of any document to bear adequate reference to such L/C;

                              (vi) the use to  which  the L/Cs may be put or any
acts or omissions of the Borrower or beneficiaries in connection therewith; and



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<PAGE>



                              (vii)  any  other   circumstances   or   happening
whatsoever,  whether or not similar to any of the foregoing,  provided that such
circumstances  or  happening  shall not have  constituted  gross  negligence  or
willful misconduct of the Agent or any Lender.

                  SECTION 2.16     SHARING OF PAYMENTS
                                   AND SET-OFF AMONG LENDERS.

                           (a) The Borrower  hereby  agrees that, in addition to
(and without limitation of) any right of set-off,  banker's lien or counterclaim
a Lender may otherwise  have, each Lender shall be entitled,  at its option,  to
offset  balances  held by it at any of its offices  against any  principal of or
interest on any of the  Obligations  hereunder,  or any Fee  payable  under this
Agreement,  that is not paid when due  (regardless  of whether such balances are
then due to the Borrower),  in which case it shall promptly  notify the Borrower
thereof,  provided  that its  failure to give such  notice  shall not affect the
validity thereof.  Nothing contained herein shall require any Lender to exercise
any such right or shall  affect the right of any Lender to  exercise  and retain
the  benefits  of  exercising,   any  such  right  with  respect  to  any  other
indebtedness or obligation of the Borrower.

                           (b) Each Lender:

                              (i) if it shall effect payment of any principal of
or  interest  on any  Obligations  held by it under this  Agreement  through the
exercise of any rights provided for in subsection (a) above, or

                              (ii) upon or  following  any  acceleration  by the
Agent and the Lenders of the Obligations, shall promptly purchase from the other
Lenders a  participation  in the  Obligations  held by the other Lenders in such
amounts,  and  make  such  other  adjustments  from  time to time  as  shall  be
equitable,  so that all the Lenders  shall share the benefit of such payment and
the  Obligations pro rata in accordance with their  respective  Commitments.  To
such end all the Lenders shall make appropriate adjustments among themselves (by
the resale of a participation sold or otherwise) if any payment received must be
restored or any acceleration is rescinded by the Majority Lenders.  The Borrower
agrees that any Lender so purchasing a participation  in the Obligations held by
the  other  Lenders  may  exercise  all  rights  of  set-off,   banker's   lien,
counterclaim or similar rights with respect to such participation as fully as if
such  Lender  were a  direct  holder  of  Obligations  in  the  amount  of  such
participation.  The failure of any Lender to purchase participations as provided
hereunder  shall not affect the  validity of the set-off as between  such Lender
and the Borrower.




                                       43

<PAGE>
 

<PAGE>


                  SECTION 2.17    ADDITIONAL COSTS; CAPITAL REQUIREMENTS.

                           (a) In the event that any  existing  or future law or
regulation,  guideline or interpretation thereof, by any court or administrative
or governmental authority charged with the administration thereof, or compliance
by any Lender with any request or directive  (whether or not having the force of
law) of any such authority shall impose,  modify or deem applicable or result in
the  application  of,  any  capital   maintenance,   capital  ratio  or  similar
requirement  against  loan  commitments  made by any Lender  hereunder,  and the
result of any event  referred  to above is to impose upon any Lender or increase
any capital requirement  applicable as a result of the making or maintenance of,
such  Lender's  Commitment  or the  obligation  of the Borrower  hereunder  with
respect to such  Commitment  (which  imposition of capital  requirements  may be
determined  by each  Lender's  reasonable  allocation  of the  aggregate of such
capital  increases  or  impositions),  then,  upon demand made by such Lender as
promptly as practicable  after it obtains  knowledge that such law,  regulation,
guideline,  interpretation,  request or directive  exists and determines to make
such demand, the Borrower shall immediately pay to such Lender from time to time
as  specified  by such Lender  additional  commitment  fees or interest or other
amounts which shall be sufficient to compensate  such Lender for such imposition
of or  increase  in capital  requirements  together  with  interest on each such
amount  from the fifth day after the date of demand  therefor  until  payment in
full thereof at the Post-Default Rate. A certificate setting forth in reasonable
detail  the  amount  necessary  to  compensate  such  Lender  as a result  of an
imposition  of or increase in capital  requirements  submitted by such Lender to
the  Borrower  shall be  conclusive,  absent  manifest  error,  as to the amount
thereof. For purposes of this Section 2.17, all references to any "Lender" shall
be deemed to include any participant in such Lender's Commitment.

                           (b) In the event that any  Regulatory  Change  shall:
(i) change the basis of taxation of any amounts payable to any Lender under this
Agreement or the Notes in respect of any Loans  including,  without  limitation,
Eurodollar  Loans or in respect of L/Cs (other than taxes imposed on the overall
net income of such Lender for any such Loans by the United  States of America or
the jurisdiction in which such Lender has its principal office);  or (ii) impose
or  modify  any  reserve,  Federal  Deposit  Insurance  Corporation  premium  or
assessment,  special deposit or similar requirements  relating to any extensions
of credit,  letters of credit or guarantees issued by or participations  thereof
of or other assets of, or any deposits with or other liabilities of, such Lender
(in respect of any of such Loans or any deposits  referred to in the  definition
of "LIBOR Base Rate" in Article 1 hereof or in respect of L/Cs); or (iii) impose
any other  conditions  affecting this Agreement in respect of Loans,  including,
without  limitation,  Eurodollar  Loans  or L/Cs (or any of such  extensions  of
credit, assets, deposits or liabilities relating thereto); and the result of any
event  referred to in clause (i),  (ii) or (iii) above shall be to increase such
Lender's  costs of making or




                                       44

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<PAGE>



maintaining,  participating  in  or  acquiring  any  Loans,  including,  without
limitation, Eurodollar Loans, or L/Cs or its Commitment, or to reduce any amount
receivable  by such Lender  hereunder in respect of any of the  foregoing  (such
increases in costs and reductions in amounts receivable are hereinafter referred
to as "ADDITIONAL COSTS"), in each case, only to the extent that such Additional
Costs are not  included  in the LIBOR Base Rate  applicable  to such  Eurodollar
Loans,  then, (i) such Lender shall  promptly  notify the Borrower in writing of
such  Regulatory  Change and (ii) upon demand made by such Lender as promptly as
practicable  after it obtains knowledge that such a Regulatory Change exists and
determines to make such demand (a copy of which demand shall be delivered to the
Agent),  the Borrower shall pay to such Lender from time to time as specified by
such Lender in a certificate setting forth in reasonable detail the basis of the
computation of such amount,  additional  commitment  fees or other amounts which
shall be  sufficient  to  compensate  such  Lender  for such  increased  cost or
reduction  in amounts  receivable  by such Lender from the date of such  change,
together with interest on each such amount from the date demanded  until payment
in full thereof at the  Post-Default  Rate. All references to any "Lender" shall
be deemed to include any participant in such Lender's Commitment.

                           (c)  Without  limiting  the  effect of the  foregoing
provisions of this Section 2.17, in the event that, by reason of any  Regulatory
Change,  any Lender either:  (i) incurs Additional Costs based on or measured by
the excess  above a  specified  level of the amount of a category of deposits or
other  liabilities of such Lender which includes  deposits by reference to which
the  interest  rate on  Eurodollar  Loans  is  determined  as  provided  in this
Agreement or a category of  extensions  of credit or other assets of such Lender
which includes  Eurodollar Loans, or (ii) becomes subject to restrictions on the
amount of such a category of  liabilities  or assets that it may hold,  then, if
such Lender so elects by notice to the Borrower (with a copy to the Agent),  the
obligation of such Lender to make,  and to convert Loans of any other type into,
Loans of such type hereunder  shall be suspended  until the date such Regulatory
Change ceases to be in effect (and all Loans of such type then outstanding shall
be converted into Prime Rate Loans or into Eurodollar Loans of another duration,
as the case may be, in  accordance  with  Section 2.23  hereof).  If at any time
after such Lender gives notice under this Section 2.17(c) such Lender determines
that such Regulatory  Change is no longer in effect,  such Lender shall promptly
give notice of that  determination,  in writing,  to the Borrower and the Agent,
and the Agent shall promptly  transmit the notice to each other Lender.  At such
time as such  Regulatory  Change is no longer  in  effect  (whether  or not such
notice has been  given),  the  Borrower's  right to request,  and such  Lender's
obligation, if any, to make and convert such Loans shall be restored.

                           (d) Determinations by any Lender for purposes of this
Section  2.17 of the effect of any  Regulatory  Change on its costs of making or
maintaining



                                       45

<PAGE>
 

<PAGE>



Loans or L/Cs or on amounts receivable by it in respect of Loans or L/Cs, and of
the  additional  amounts  required to  compensate  such Lender in respect of any
Additional  Costs,  shall be set forth in writing in reasonable detail and shall
be conclusive, absent manifest error.

                  SECTION 2.18     ADDITIONAL L/C PROVISIONS.

                           (a) Without  limiting the  generality of Section 2.17
hereof, if:

                                          
                               (i) any change in any law or regulation or in the
interpretation  thereof by any court or administrative or governmental authority
charged  or  claiming  to  be  charged with the administration thereof shall (1)
impose,  modify  or  deem  applicable  any  reserve,  special  deposit,  capital
maintenance, deposit insurance premium or  assessment,  or  similar  requirement
against letters of credit issued by or assets held  by,  or deposits with or for
the  account  of,  any  Lender,  (2)  impose  on  any Lender any other condition
regarding  this  Agreement  or  the  L/Cs, or (3) subject any Lender to any tax,
charge,  fee, deduction or withholding of any kind whatsoever other than changes
in the rate of tax on the over-all net income of such Lender; and

                                (ii) the result of  any  such  event shall be to
increase  the  cost to any Lender of the issuance or maintenance of the L/Cs, or
reduce  the amount of principal, interest, or any fee or compensation receivable
by any Lender in respect of the L/Cs or this Agreement;

then,  upon demand of any Lender,  the Borrower  shall pay to the Lenders,  from
time to time as specified by each of the Lenders,  respectively,  all additional
amounts which are necessary to compensate such Lender for such increased cost or
reduction  incurred  by that  Lender.  All  payments  of  compensation  for such
increased cost or reduction  shall be  accompanied by interest  thereon from the
date such increased cost or reduction is incurred by any Lender until payment in
full thereof at the rate provided in Section  2.5(a) hereof and, in the event of
non-payment  by the Borrower  following  demand,  thereafter at the Post-Default
Rate. A certificate as to such increased cost incurred by any Lender showing the
manner of calculation  thereof shall be submitted by such Lender to the Borrower
and shall be conclusive (absent manifest error) as to the amount thereof. In the
event of any  inconsistency  between the terms of this  Section 2.18 and Section
2.17, the provisions of Section 2.17 shall govern.

                           (b) No  Lender  shall  be  responsible:  (i)  for the
validity  or  insufficiency  of any  instrument  transferring  or  assigning  or
purporting  to transfer or assign the L/Cs or the rights or benefits  thereunder
or  proceeds  thereof  in whole or in part,  which  may prove to be  invalid  or
ineffective for any reason; (ii) for errors,



                                       46

<PAGE>
 

<PAGE>




omissions,  interruptions or delays in transmission or delivery of any messages,
by mail, cable telegraph, telex or otherwise,  whether or not they be in cipher;
(iii) for any loss or delay in the  transmission or otherwise of any document or
draft required in order to make a draw under the L/Cs or of proceeds thereof; or
(iv) for any  consequence  arising from causes beyond the control of any Lender.
None of the above shall affect,  impair,  or prevent the vesting of any Lender's
rights or powers hereunder.

                           (c)  In   furtherance   and   extension  and  not  in
limitation of the specific provisions hereinabove set forth, any action taken or
omitted  by any  Lender,  under or in  connection  with the L/Cs or the  related
drafts or document(s),  if taken or omitted in good faith, shall be binding upon
the Borrower and shall not put any Lender under any  resulting  liability to the
Borrower.

                           (d)  The  Borrower   shall  at  all  times   protect,
indemnify  and save  harmless  each  Lender from and against any and all claims,
actions,  suits and other  legal  proceedings,  and from and against any and all
loss, claims, demands,  liabilities,  damages, costs, charges,  counsel fees and
other expenses which any Lender may, at any time,  sustain or incur by reason of
or in  consequence  of or arising out of the issuance of the L/Cs;  it being the
intention of the parties that this  Agreement  shall be construed and applied to
protect  and  indemnify  any Lender  against  any and all risk  involved  in the
issuance  of the L/Cs,  all of which risks are hereby  assumed by the  Borrower,
including,  without  limitation,  any and all  risks of the  acts or  omissions,
whether  rightful  or  wrongful,  of any  present  or future de jure or de facto
government or governmental authority (all such acts and omissions, herein called
the  "GOVERNMENTAL  ACTS");  provided,  however,  that the Borrower shall not be
required to indemnify any Lender for any claims, damages,  losses,  liabilities,
costs or expenses to the extent,  but only to the extent,  caused by the willful
misconduct  or gross  negligence  of any Lender in not  honoring  any demand for
payment  under any L/C  (after  the  presentation  to it by the  beneficiary  of
drawing documents  strictly complying with the terms and conditions of such L/C)
except if as a result of any  Governmental  Act or any other  cause  beyond  the
control of any Lender.  Notwithstanding  any other  provision  contained in this
Agreement, the obligations of the Borrower under this Section 2.18 shall survive
the termination of this Agreement.

                  SECTION 2.19     PRO RATA TREATMENT AMONG LENDERS.
 
                           (a) Except as  otherwise  provided  herein:  (i) each
Loan advanced by the Collateral  Monitoring Agent hereunder,  each other advance
made by the Collateral Monitoring Agent, the Issuing Bank or the Agent hereunder
(including but not limited to advances to protect or preserve  Collateral),  and
each payment of any Fee (other than  Transactional  Fees,  Collateral  Fees, the
Administrative Fee and


                                       47

<PAGE>
 

<PAGE>



Examination  Fees)  by the  Borrower  shall  be  made  by or to  the  Collateral
Monitoring  Agent,  the Issuing  Bank or the Agent,  as the case may be, for the
account of the Lenders  according to the respective  Lender's  Share,  (ii) each
conversion  of Loans of a particular  type under Section 2.23 hereof (other than
conversions provided for by Section 2.25 hereof) will be made pro rata among the
Lenders holding Loans of such type according to the respective principal amounts
of such Loans held by such  Lenders,  and (iii) each  payment of principal of or
interest on Loans in each case will be made by or to the  Collateral  Monitoring
Agent, the Issuing Bank or the Agent, as the case may be, for the account of the
Lenders.

                           (b)  On  a  monthly   basis,   after  the  Collateral
Monitoring  Agent's receipt of monthly interest charges pursuant to Section 2.10
of this  Agreement,  and  provided a Lender  shall have made all payments to the
Collateral  Monitoring  Agent  required  to be made  hereunder,  the  Collateral
Monitoring Agent shall pay to such Lender an amount  equivalent to such Lender's
Share of such interest and any Fees received during the prior month.

                  SECTION 2.20     NON-RECEIPT OF FUNDS BY THE AGENT.

                  Unless  the  Collateral   Monitoring  Agent  shall  have  been
notified by a Lender or the Borrower (the "PAYOR") prior to the date notified on
which such Lender is to make payment to the Collateral  Monitoring  Agent of the
proceeds  of a Loan to be  made by it  hereunder  or the  Borrower  is to make a
payment to the Collateral Monitoring Agent for the account of one or more of the
Lenders,  as the case may be (such  payment  being herein  called the  "REQUIRED
PAYMENT"), which notice shall be effective upon receipt, that the Payor does not
intend to make the Required  Payment to the  Collateral  Monitoring  Agent,  the
Collateral  Monitoring  Agent may assume that the Required Payment has been made
and may, in reliance upon such  assumption  (but shall not be required to), make
the amount thereof available to the intended  recipient on such date and, if the
Payor has not in fact made the  Required  Payment to the  Collateral  Monitoring
Agent,  the recipient of such payment shall, on demand,  repay to the Collateral
Monitoring  Agent the amount made available to it together with interest thereon
in respect of each day during the period  commencing on the date such amount was
so made  available  by the  Collateral  Monitoring  Agent  until  the  date  the
Collateral  Monitoring  Agent  recovers such amount at a rate per annum equal to
the Federal Funds Rate for such day (when the recipient is a Lender) or equal to
the  rate of  interest  applicable  to such  Loan  (when  the  recipient  is the
Borrower).



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<PAGE>



                  SECTION 2.21       COLLECTIONS; AGENT'S RIGHT TO
                                     NOTIFY ACCOUNT DEBTORS AND
                                     ENDORSE THE BORROWER'S NAME.

                           (a) The  Borrower  and all other  Loan  Parties  will
immediately upon receipt of all checks, drafts, cash or other remittances (i) in
payment  of  any  of  its  accounts,  contract  rights  or  general  intangibles
constituting part of the Collateral,  or (ii) in payment of any Collateral sold,
transferred,  leased or otherwise  disposed of, as permitted  under  Section 7.7
hereof,  or (iii) in  payment  of, or on  account  of its  Accounts,  contracts,
contract rights,  notes, drafts,  acceptances,  general  intangibles,  choses in
action and all other forms of  obligations  relating to any of the Collateral so
sold, transferred, or leased or otherwise disposed of, deliver any such items to
the  Collateral  Monitoring  Agent at the  Payment  Office or to the  Collection
Account  accompanied by a remittance  report in form supplied or approved by the
Collateral  Monitoring  Agent,  such  items to be  delivered  to the  Collateral
Monitoring  Agent in the same form received,  endorsed or otherwise  assigned by
the Borrower where necessary to permit collection of such items and,  regardless
of the form of such endorsement, the Borrower hereby waives presentment, demand,
notice of  dishonor,  protest,  notice of  protest  and all other  notices  with
respect thereto.

                           (b) The  Borrower  and all other Loan  Parties  shall
direct all Account  Debtors to make all  payments  due from them to the Borrower
upon the Accounts  directly to the Collateral  Monitoring  Agent, the Collection
Account  or to a  Lockbox  (each,  a  "LOCKBOX")  designated  by the  Collateral
Monitoring  Agent and maintained by the Collateral  Monitoring Agent pursuant to
one or more lockbox  agreements in form and substance  satisfactory to the Agent
(each, a "LOCKBOX AGREEMENT"),  which agreements shall be executed and delivered
by the Borrower at the request of the Collateral Monitoring Agent.

                           (c) In the event that, notwithstanding the provisions
of subsections (a) and (b) of this Section 2.21, as applicable, the Borrower (or
any of its affiliates,  officers,  employees, agent, or those Persons acting for
or in concert  with the  Borrower)  shall  receive  any monies,  checks,  notes,
drafts,  or any other payment  relating to any  Collateral or as proceeds of any
Collateral,  the Borrower shall receive such monies,  checks,  notes, drafts and
other payments as agent for the Collateral  Monitoring  Agent and shall hold, or
shall cause such Affiliate or Person to hold, all such items of payment in trust
as  trustee  of an  express  trust for the  Collateral  Monitoring  Agent and as
property of the Collateral  Monitoring Agent,  separate and apart from the funds
of the Borrower and such Affiliate and the Borrower (and all of its  Affiliates,
officers,  employees, agents and other Persons acting for or in concert with the
Borrower)  shall:  (i) on the first  Business  Day  following  receipt  thereof,
deposit such items of payment,  or cause such items of payment to be  deposited,
in kind, in the Collection Account; and (ii) in addition to all reports required
in Article 5



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<PAGE>




hereof, if, as, and when requested by the Collateral  Monitoring Agent,  forward
to the Collateral  Monitoring  Agent,  on a daily basis,  copies of all items of
payment and of all deposit  slips  related  thereto,  together with a collection
report in form and substance satisfactory to the Collateral Monitoring Agent.

                           (d) The Borrower  hereby  authorizes  the  Collateral
Monitoring  Agent at all times:  (i) to open the Borrower's mail directed to the
Lockbox and, following an Event of Default, all other mail; (ii) to collect, and
to verify by mail, telephone, telegraph or otherwise, any and all amounts due to
the  Borrower  from  Account  Debtors;  and (iii) to notify  any or all  Account
Debtors  that  the  Accounts  have  been  assigned  to the  Agent  and  that the
Collateral Monitoring Agent has a security interest therein. The Borrower hereby
agrees  that  any  such  notice,  in  the  Collateral  Monitoring  Agent's  sole
discretion,  may be  sent on the  Borrower's  stationery,  in  which  event,  if
required by the Collateral  Monitoring Agent (and all Persons  designated by the
Collateral  Monitoring Agent for that purpose) as the Borrower's true and lawful
attorney  (and  agent-in-fact)  to endorse  the  Borrower's  name on any checks,
notes,  drafts,  or any other form of payment relating to Collateral or proceeds
of Collateral that come in to the Collateral  Monitoring  Agent's  possession or
under the Collateral Monitoring Agent's control.

                           (e) Notwithstanding Subsection (d) above or any other
provision  of this  Agreement,  nothing  contained in this  Section  2.21,  this
Agreement  or any other  Loan  Document  shall be  deemed to limit or  otherwise
restrict the Collateral Monitoring Agent's normal verification procedures.

                  SECTION 2.22      APPLICATION OF PAYMENTS AND COLLECTIONS.

                           (a) All amounts received by the Collateral Monitoring
Agent for the  account of the  Borrower  pursuant to Section  2.21 or  otherwise
shall, on each Business Day, be

                                (i)  applied  to Fees which are at such time due
and unpaid; then

                                (ii)  applied to  amounts  payable  pursuant  to
Section 2.26; then

                                (iii)  applied  pro rata  among the  Lenders  to
reduce the amount of any outstanding Loans; then

                                (iv)   applied  to   prepay,   in  the  case  of
liquidation  only,  with  any  applicable  prepayment  or  "breakage"  fee,  all
Acceptances;



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<PAGE>



                                (v) held by the Collateral  Monitoring  Agent as
collateral to secure any outstanding L/Cs,  Acceptances  (other than in the case
of a liquidation), Steamship Guaranties and Airway Releases; then

                                (vi) only if all Loans  have  been  repaid,  all
Acceptances  prepaid (in the case of a  liquidation)  and all L/Cs,  Acceptances
(other  than in the case of a  liquidation),  Steamship  Guaranties  and  Airway
Releases are fully secured by amounts held by the  Collateral  Monitoring  Agent
pursuant to clause  (iii)  above,  credited  to the  Borrower's  demand  deposit
account maintained with the Agent.

                           (b)  Notwithstanding  anything  else in this  Section
2.22 or in this Agreement to the contrary,  the Borrower  irrevocably waives the
right to direct the  application of any and all payments and  collections at any
time or times hereafter  received by the Collateral  Monitoring Agent from or on
behalf of the  Borrower.  The Borrower  irrevocably  agrees that the  Collateral
Monitoring Agent shall have the continuing  exclusive right to apply and reapply
any  and all  such  payments  and  collections  received  at any  time or  times
hereafter  by  the  Collateral  Monitoring  Agent  or  its  agents  against  the
Obligations  in  such  manner  as  the  Collateral  Monitoring  Agent  may  deem
advisable, notwithstanding any entry by the Collateral Monitoring Agent upon any
of its books and records.

                           (c)  Except  as set forth in  Sections  2.17 and 2.24
hereof,  all payments and  repayments  made shall be applied  first to the Prime
Rate Loans, and shall be applied to Eurodollar Loans only to the extent any such
payment exceeds the principal amount of Prime Rate Loans outstanding at the time
of such payment.

                  SECTION 2.23     CONVERSIONS OF LOANS.

                           The Borrower shall have the right to convert Loans of
one type into Loans of another type from time to time,  provided  that:  (i) the
Borrower  shall  give  the  Collateral  Monitoring  Agent  notice  of each  such
conversion  as  provided in Section 2.3  hereof;  (ii)  Eurodollar  Loans may be
converted only on the last day of an Interest  Period for such Loans;  and (iii)
except as required by Section 2.17  hereof,  no Prime Rate Loan may be converted
into a  Eurodollar  Loan if on the proposed  date of  conversion a Default or an
Event of Default  exists.  The  Collateral  Monitoring  Agent shall use its best
efforts to notify the Borrower of the effectiveness of such conversion,  and the
new  interest  rate  to  which  the  converted  Loans  are  subject,  as soon as
practicable after the conversion;  provided,  however,  that any failure to give
such  notice  shall not affect the  Borrower's  obligations,  or the  Collateral
Monitoring  Agent's or the Lenders'  rights and  remedies,  hereunder in any way
whatsoever.




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<PAGE>


                  SECTION 2.24     LIMITATION ON TYPES OF LOANS.
 
                           Anything herein to the contrary notwithstanding,  if,
on or prior to the  determination  of an interest rate for any Eurodollar  Loans
for  any  Interest  Period  therefor,  the  Majority  Lenders  determine  (which
determination shall be conclusive):

                           (a)  by  reason  of any  event  affecting  the  money
markets in the United  States of America  or the  Eurodollar  interbank  market,
quotations of interest rates for the relevant deposits are not being provided in
the relevant amounts or for the relevant  maturities for purposes of determining
the rate of interest for such Loans under this Agreement; or

                           (b)  the  rates  of  interest   referred  to  in  the
definition  of "LIBOR Base Rate" in Article 1 hereof upon the basis of which the
rate of interest on any Eurodollar  Loans for such period is determined,  do not
accurately  reflect the cost to the Lenders of making or maintaining  such Loans
for such period,  then the Collateral  Monitoring  Agent shall give the Borrower
and each Lender prompt notice  thereof (and shall  thereafter  give the Borrower
and each Lender prompt notice of the cessation, if any, of such condition),  and
so long as such  condition  remains in  effect,  the  Lenders  shall be under no
obligation  to make  Loans of such type or to  convert  Prime  Rate  Loans  into
Eurodollar  Loans and the Borrower shall, on the last day(s) of the then current
Interest Period(s) for the outstanding Eurodollar Loans either prepay such Loans
in  accordance  with  Section 2.7 hereof or convert such  Eurodollar  Loans into
Prime Rate Loans in  accordance  with Section 2.21 hereof.  If at any time after
the  Collateral  Monitoring  Agent  gives  notice  under this  Section  2.24 the
Majority  Lenders  determines  that such condition no longer exists,  they shall
give prompt notice of that determination,  in writing, to the Borrower.  At such
time as such  condition  no longer  exists  (whether or not such notice has been
given), the Borrower's right to request, and the Lender's  obligations,  if any,
to make Eurodollar Loans (and to convert Prime Rate Loans into Eurodollar Loans)
shall be restored.

                  SECTION 2.25     ILLEGALITY.

                           Notwithstanding   any   other   provision   in   this
Agreement,  in the event that it becomes  unlawful  for any Lender to: (i) honor
its obligation to make Eurodollar Loans hereunder,  or (ii) maintain  Eurodollar
Loans  hereunder,  then such Lender shall promptly  notify the Borrower  thereof
(with a copy to the Collateral Monitoring Agent),  describing such illegality in
reasonable  detail (and shall  thereafter  promptly  notify the Borrower and the
Collateral Monitoring Agent of the cessation,  if any, of such illegality),  and
thereupon the Lenders  obligation to make Eurodollar  Loans and to convert other
types of Loans into  Eurodollar  Loans  hereunder  shall be




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<PAGE>


suspended until such time as the Lenders may again make and maintain  Eurodollar
Loans and the Lenders outstanding Eurodollar Loans shall be converted into Prime
Rate Loans in  accordance  with Section  2.23 hereof.  If at any time after such
Lender gives notice under this Section 2.25 such Lender  determines  that it may
again make and maintain Eurodollar Loans, such Lender shall promptly give notice
of that determination,  in writing, to the Borrower and the Agent, and the Agent
shall  promptly  transmit the notice to each other Lender.  At such time as such
Lender may again make and maintain  Eurodollar Loans (whether or not such notice
has been given), the Borrower's right to request, and the Lender's  obligations,
if any, to make and to convert such Loans shall be restored.

                  SECTION 2.26    INDEMNIFICATION.

                           The  Borrower  shall pay to the Collateral Monitoring
Agent  for  the  account of each Lender, upon the request of such Lender through
the Collateral Monitoring Agent, such amount or amounts as shall compensate such
Lender for any  loss  (including  loss of profit),  cost or expense  incurred by
such Lender (as reasonably determined by such Lender) as a result of:

                           (a) any  payment or  prepayment  or  conversion  of a
Eurodollar  Loan  held by such  Lender on a date  other  than the last day of an
Interest Period for such Eurodollar Loan; or

                           (b)  any   failure  by  the   Borrower  to  borrow  a
Eurodollar Loan held by such Lender on the date for such borrowing  specified in
the relevant  Borrowing  Notice under Section 2.3 hereof,  such  compensation to
include,  without  limitation,  an  amount  equal  to:  (i) any loss or  expense
suffered by such Lender during the period from the date of receipt of such early
payment or  prepayment  or the date of such  conversion  to the last day of such
Interest  Period if the rate of  interest  obtainable  by such  Lender  upon the
redeployment of an amount of funds equal to such Lender's pro rata share of such
payment,  prepayment  or conversion or failure to borrow or convert is less than
the rate of  interest  applicable  to such  Eurodollar  Loan  for such  Interest
Period,  or (ii) any loss or  expense  suffered  by such  Lender in  liquidating
Eurodollar  deposits prior to maturity that correspond to such Lender's pro rata
share of such payment, prepayment,  conversion,  failure to borrow or failure to
convert. The determination by each such Lender of the amount of any such loss or
expense,  when set forth in a written  notice to the Borrower,  containing  such
Lender's calculation thereof in reasonable detail, shall be presumed correct, in
the absence of manifest error.

         ARTICLE 3.   REPRESENTATIONS AND WARRANTIES.



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<PAGE>




                  Each  of the  Borrower  and  the  other  Loan  Parties  hereby
represents and warrants to the Lenders,  the Collateral  Monitoring  Agent,  the
Issuing Bank and the Agent that:

                  SECTION 3.1     ORGANIZATION.

                           (a) Each of the Borrower, the Parent, each Subsidiary
and each other Loan Party is duly organized and validly  existing under the laws
of its state or country of organization  and has the power to own its assets and
to  transact  the  business  in which it is  presently  engaged  and in which it
proposes to be engaged.  Exhibit B hereto accurately and completely lists, as to
each of the Borrower, the Parent, each Subsidiary and each other Loan Party: (i)
the state of incorporation or organization of each such entity,  and the type of
legal  entity  that  each  of  them  is,  (ii)  as to  each  of  them  that is a
corporation,  the classes and number of  authorized  and  outstanding  shares of
capital stock of each such corporation,  and, except with respect to the Parent,
the owners of such outstanding shares of capital stock, (iii) as to each of them
that is a legal entity other than a corporation (but not a natural person),  the
type and amount of equity  interests  authorized  and  outstanding  of each such
entity,  and,  except  with  respect to the  Parent,  the owners of such  equity
interests,  and (iv) the business in which each of such entities is engaged. All
of  the  foregoing  shares  or  other  equity  interests  that  are  issued  and
outstanding   have  been  duly  and  validly  issued  and  are  fully  paid  and
non-assessable,  and are owned by the Persons referred to on Exhibit B, free and
clear of any Lien except as otherwise  provided for herein.  Except as set forth
on  Exhibit  B,  there  are  no  outstanding  warrants,  options,  contracts  or
commitments  of any kind  entitling any Person to purchase or otherwise  acquire
any shares of capital  stock or other  equity  interests  of the Borrower or any
Subsidiary  or any  other  Loan  Party  other  than  the  Parent  nor are  there
outstanding any securities  that  are convertible into or  exchangeable  for any
shares  of  capital  stock  or  other  equity  interests  of the  Borrower,  any
Subsidiary or any other Loan Party other than the Parent. Except as set forth on
Exhibit B, neither the Borrower,  the Parent,  any Subsidiary nor any other Loan
Party has any Subsidiary.

                           (b) Each of the Borrower, the Parent, each Subsidiary
and each other Loan Party is in good standing in its state of  organization  and
in  each  state  in  which  it  is  qualified  to  do  business.  There  are  no
jurisdictions other than as set forth on Exhibit B hereto in which the character
of the properties owned or proposed to be owned by the Borrower, the Parent, any
Subsidiary or any other Loan Party or in which the  transaction  of the business
of the  Borrower,  the  Parent,  any  Subsidiary  or any other Loan Party as now
conducted  requires the Borrower,  the Parent,  any Subsidiary or any other Loan
Party to qualify to do business and as to which failure so to qualify could have
a material adverse effect on the business,  operations,



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<PAGE>
 

<PAGE>



financial  condition or properties of the Borrower,  the Parent,  any Subsidiary
and any other Loan Party taken as a whole.

                  SECTION 3.2     POWER, AUTHORITY, CONSENTS.

                           The  Borrower and each other Loan Party has the power
to execute,  deliver and  perform the Loan  Documents  to be executed by it. The
Borrower has the power to borrow hereunder and has taken all necessary corporate
action to authorize the borrowing  hereunder on the terms and conditions of this
Agreement.  The  Borrower  and each  other  Loan  Party has taken all  necessary
action,  corporate  or  otherwise,  to  authorize  the  execution,  delivery and
performance  of the Loan  Documents to be executed by it. No consent or approval
of any Person (including,  without limitation,  any stockholder of any corporate
Loan Party or any partner in any partnership Loan Party), no consent or approval
of any  landlord or  mortgagee,  no waiver of any Lien or right of  distraint or
other  similar right and no consent,  license,  certificate  of need,  approval,
authorization or declaration of any governmental authority, bureau or agency, is
or will be required in connection with the execution, delivery or performance by
the Borrower or any other Loan Party, or the validity,  enforcement or priority,
of the Loan Documents or any Lien created and granted there under, except as set
forth on  Exhibit  C hereto,  each of which  either  has been  duly and  validly
obtained on or prior to the date hereof and is now in full force and effect,  or
is designated on Exhibit C as waived by the Majority Lenders.

                  SECTION 3.3     NO VIOLATION OF LAW OR AGREEMENTS.

                           The  execution  and delivery by the Borrower and each
other Loan Party of each Loan Document to which it is a party and performance by
it hereunder and thereunder, will not violate any provision of law and will not,
except as set forth on Exhibit C hereto,  conflict with or result in a breach of
any order, writ,  injunction,  ordinance,  resolution,  decree, or other similar
document or instrument of any court or governmental authority, bureau or agency,
domestic or  foreign,  or any  certificate  of  incorporation  or by-laws of the
Borrower or any other  corporate  Loan Party or  partnership  agreement or other
organizational  document  or  instrument  of  any  Loan  Party  that  is  not  a
corporation,  or create  (with or without the giving of notice or lapse of time,
or both) a default under or breach of any agreement,  bond, note or indenture to
which the  Borrower or any other Loan Party is a party,  or by which any of them
is bound or any of their  respective  properties  or assets is  affected  (which
default  or  breach  would  have a  material  adverse  effect  on the  business,
financial  conditions  or  operations  of  the  Borrower,  the  Parent  and  the
Subsidiaries  taken as a whole),  or result in the imposition of any Lien of any
nature  whatsoever  upon any of the  properties  or  assets  owned by or used in
connection with the business of the Borrower or any other Loan Party, except for
the Liens created and granted pursuant to the Security Documents.



                                       55

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<PAGE>



                  SECTION 3.4     DUE EXECUTION, VALIDITY, ENFORCEABILITY.

                           This  Agreement and each other Loan Document to which
any Loan Party is a party has been duly executed and delivered by the Loan Party
that is a party  thereto  and each  constitutes  the valid and  legally  binding
obligation  of the  Borrower  or such other Loan Party that is a party  thereto,
enforceable  in accordance  with its terms,  except as such  enforcement  may be
limited by applicable bankruptcy,  insolvency,  reorganization,  moratorium,  or
other  similar  laws,  now or hereafter in effect,  relating to or affecting the
enforcement  of  creditors'  rights  generally  and  except  that the  remedy of
specific  performance  and other  equitable  remedies  are  subject to  judicial
discretion;  provided,  however,  that such laws shall not materially  interfere
with the practical  realization of the benefits of the Security Documents or the
Liens created thereby,  except for: (i) possible delay, (ii) situations that may
arise  under  Chapters  11 and 7 of the  Bankruptcy  Code and  applicable  state
bankruptcy laws, and (iii) equitable orders of the Bankruptcy Court.

                  SECTION 3.5      PROPERTIES, PRIORITY OF LIENS.

                           All  of  the  properties  and  assets  owned  by  the
Borrower  and each other Loan Party that is  executing a Security  Document  are
owned by each of them,  respectively,  free and clear of any Lien of any  nature
whatsoever,  except as provided for in the Security Documents,  and as permitted
by Section 7.2 hereof.  The Liens that,  simultaneously  with the  execution and
delivery  of  this  Agreement  and  the  consummation  of  the  initial  closing
hereunder,  have been created and granted by the Security  Documents  constitute
valid perfected first Liens on the properties and assets covered by the Security
Documents,  subject to no prior or equal Lien except as permitted by Section 7.2
hereof.

                  SECTION 3.6      JUDGMENTS, ACTIONS, PROCEEDINGS.

                           Except as set forth on Exhibit F hereto, there are no
outstanding judgments,  actions or proceedings,  including,  without limitation,
any  Environmental   Proceeding,   pending  before  any  court  or  governmental
authority,  bureau or agency,  with respect to or, to the best of the Borrower's
knowledge, threatened against or affecting the Borrower or any other Loan Party,
involving, in the case of any court proceeding or threatened court proceeding, a
claim in excess of $100,000,  nor, to the best of the Borrower's  knowledge,  is
there any reasonable  basis for the institution of any such action or proceeding
that is probable of assertion,  nor are there any such actions or proceedings in
which the Borrower or any other Loan Party is a plaintiff or complainant.



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<PAGE>




                  SECTION 3.7       NO DEFAULT; COMPLIANCE WITH LAWS.
 
                           Except as set forth on Exhibit G hereto,  neither the
Borrower,  the  Parent,  any  Subsidiary  nor any other Loan Party is in default
under any agreement, ordinance, resolution, decree, bond, note, indenture, order
or  judgment  to  which it is a party or by  which  it is  bound,  or any  other
agreement or other  instrument by which any of the properties or assets owned by
it or used in the conduct of its business is affected,  which default could have
a material adverse effect on the business,  operations,  financial  condition or
properties of the Borrower, the Parent, any Subsidiary and any other Loan Party,
taken as a whole,  or on the ability of the  Borrower or any other Loan Party to
perform its  obligations  under the Loan  Documents to which it is a party.  The
Borrower,  the Parent,  and each Subsidiary has complied and is in compliance in
all respects with all applicable laws, ordinances and regulations,  resolutions,
ordinances,  decrees and other similar  documents and  instruments of all courts
and  governmental  authorities,  bureaus and  agencies,  domestic  and  foreign,
including,   without   limitation,   all  applicable   Environmental   Laws  and
Regulations,  non-compliance  with which could have a material adverse effect on
the business, operations, financial condition or properties of the Borrower, the
Parent, and any Subsidiary, taken as a whole, or on the ability of the Borrower,
the Parent or any Subsidiary to perform its obligations under the Loan Documents
to which it is a party.

                  SECTION 3.8      BURDENSOME DOCUMENTS.

                           Except as set forth on Exhibit H hereto,  neither the
Borrower  nor any of the other  Loan  Parties is a party to or bound by, nor are
any of the  properties  or assets  owned by the Borrower or any other Loan Party
used in the conduct of their respective  businesses  affected by, any agreement,
ordinance,  resolution,  decree,  bond,  note,  indenture,  order  or  judgment,
including,   without   limitation,   any  of  the  foregoing   relating  to  any
Environmental  Matter,  that materially and adversely  effects their  respective
businesses, assets or conditions, financial or otherwise.

                  SECTION 3.9      FINANCIAL STATEMENTS;
                                   PROJECTIONS.

                           (a) Each of the  Financial  Statements  is materially
accurate and complete and presents fairly the financial position of the Borrower
and the consolidated and consolidating  financial position of the Parent and the
Subsidiaries,  as applicable,  and each other entity to which it relates,  as at
its date, and has been prepared in accordance with generally accepted accounting
principles.  Neither the Borrower, the Parent, any of the Subsidiaries,  nor any
other entity to which any of the Financial  Statements relates, has any material
obligation,  liability or commitment,  direct or contingent (including,  without
limitation, any Environmental Liability), that



                                       57

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<PAGE>



is not reflected in the Financial Statements. There has been no material adverse
change in the financial  position or  operations of the Borrower,  the Parent or
any of its  Subsidiaries  or any  other  entity  to which  any of the  Financial
Statements relates, taken as a whole, since the date of the latest balance sheet
included  in  the  Financial   Statements  (the  "LATEST  BALANCE  SHEET").  The
Borrower's  fiscal year is the twelve-month  period ending on January 31 in each
year.

                           (b)  The  Projections  for  the  fiscal  year  ending
January 31, 1998 have been  prepared,  and the  Projections  for the fiscal year
ending  January  31,  1999 will be  prepared,  on the  basis of the  assumptions
accompanying  them and reflect as of the date thereof the Borrower's  good faith
projections,  after reasonable analysis, of the matters set forth therein, based
on  such  assumptions;  provided,  however,  that  the  Lenders  and  the  Agent
acknowledge  that projections as to future events are not statements of fact and
that actual results during the period or periods covered by such Projections may
differ from the projected results.

                  SECTION 3.10     TAX RETURNS.

                           Each of the Borrower, the Parent and the Subsidiaries
has filed all  federal,  state and local tax returns  required to be filed by it
and has not failed to pay any taxes, or interest and penalties relating thereto,
on or before the due dates thereof including any extensions  thereof.  Except to
the extent that reserves therefor are reflected in the Financial Statements: (i)
there are no material  federal,  state or local tax liabilities of the Borrower,
the Parent or any  Subsidiary  due or to become due for any tax year ended on or
prior to the date of the Latest Balance Sheet  relating to such entity,  whether
incurred in respect of or measured  by the income of such  entity,  that are not
properly reflected in the Latest Balance Sheet relating to such entity, and (ii)
there are no material  claims  pending  or, to the  knowledge  of the  Borrower,
proposed or threatened against any of the Borrower, the Parent or any Subsidiary
for past federal, state or local taxes, except those, if any, as to which proper
reserves are reflected in the Financial Statements.

                  SECTION 3.11     INTANGIBLE ASSETS.

                           Each   of  the   Borrower,   the   Parent,   and  the
Subsidiaries  possesses all patents,  trademarks,  service  marks,  trade names,
copyrights  and  trade-style  names,  and rights with respect to the  foregoing,
necessary to conduct its business as now  conducted  without any known  conflict
with  the  patents,   trademarks,   service  marks,  trade  names,   copyrights,
trade-style names and rights with respect to the foregoing, of any other Person,
and each of such patents,  trademarks,  service marks, trade names,  copyrights,
trade-style  names and rights with respect  thereto,  together  with any pending
applications  therefor, are listed on Exhibit I hereto. Exhibit I sets



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<PAGE>



forth all  patents,  trademarks,  service  marks,  trade names,  copyrights  and
trade-style  names  owned  and  used  by  the  Borrower,   the  Parent  and  the
Subsidiaries.

                  SECTION 3.12     REGULATION U AND REGULATION G.
 
                           No part of the proceeds received by the Borrower from
the Loans will be used directly or indirectly for: (a) any purpose other than as
set forth in Section 2.8 hereof,  or (b) the purpose of  purchasing or carrying,
or for  payment in full or in part of  Indebtedness  that was  incurred  for the
purposes of purchasing or carrying,  any "margin stock", as such term is defined
in 'SS' 221.3 of Regulation U of the Board of  Governors  of the Federal Reserve
System, 12 C.F.R.,  Chapter II, Part 221 and in Section 207.2(i) of Regulation G
of the Board of Governors of the Federal Reserve System, 12 C.F.R.,  Chapter II,
Part 207.

                  SECTION 3.13    NAME CHANGES, MERGERS,
                                  ACQUISITIONS; LOCATION OF COLLATERAL.

                           (a) Except as set forth on Exhibit J hereto,  neither
the  Borrower  nor any other  Loan Party  that is  granting  Liens on its assets
pursuant to any Security Document has within the six (6) year period immediately
preceding  the date of this  Agreement  changed  its name,  been  the  surviving
entity of a merger or consolidation, or acquired all or substantially all of the
assets of any Person.

                           (b)  Neither  the  Borrower  nor any other Loan Party
that is granting  liens on its assets  pursuant  to any  Security  Document  has
granted liens (other than statutory  liens) to any person other than the Lenders
on Collateral  constituting  personal property which Collateral has, at any time
during the four-month period immediately preceding the date hereof, been located
anywhere other than at its location on the date hereof.

                  SECTION 3.14     FULL DISCLOSURE.

                           None of the Financial  Statements,  the  Projections,
nor any  certificate,  opinion,  or any other  statement  made or  furnished  in
writing to the Agent or any Lender by or on behalf of the Borrower,  the Parent,
any of the  Subsidiaries  or any  other  Loan  Party  in  connection  with  this
Agreement or the transactions contemplated herein, contains any untrue statement
of a material fact, or omits to state a material fact necessary in order to make
the statements  contained therein or herein not misleading,  as of the date such
statement  was made.  There is no fact known to the  Borrower or the Parent that
has, or would in the now foreseeable  future have, a material  adverse effect on
the business,  prospects or condition,  financial or otherwise, of the Borrower,
the Parent,  any of the Subsidiaries and any other Loan Party, taken as a whole,
which  fact has not been set forth  herein,  in the  Financial




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Statements,  the Projections,  or any certificate or other written  statement so
made or  furnished  to the Agent or the Lenders  other than any  statement  with
respect to matters affecting the economy as a whole or set forth in the Parent's
filings with the Securities and Exchange Commission.

                  SECTION 3.15     LICENSES AND APPROVALS.

                           The Borrower, the Parent and each of the Subsidiaries
has all necessary licenses, permits and governmental authorizations, the absence
of which  would  have a  material  adverse  effect  on the  business,  financial
condition or operations of the Borrower, the Parent and the Subsidiaries,  taken
as a whole, including, without limitation,  licenses, permits and authorizations
relating to  Environmental  Matters,  to own and operate its  properties  and to
carry on its business as now conducted.

                  SECTION 3.16     LABOR DISPUTES; COLLECTIVE BARGAINING
                                   AGREEMENTS; EMPLOYEE GRIEVANCES.

                           (a) All  collective  bargaining  agreements  or other
labor  contracts  covering the Borrower,  the Parent or any  Subsidiary  are set
forth on  Exhibit  K hereto;  (b)  except  as set  forth on  Exhibit  K, no such
collective  bargaining  agreement or other labor contract will expire during the
term of this Agreement;  (c) to the best of the Borrower's  knowledge,  also set
forth on Exhibit K are those locations where a union or other labor organization
is seeking to organize, or to be recognized as bargaining  representative for, a
bargaining unit of employees of the Borrower, the Parent or any Subsidiary;  (d)
to the best of the  Borrower's  knowledge,  there is no  pending  or  threatened
strike,  work  stoppage,   material  unfair  labor  practice  claim  or  charge,
arbitration or other  material labor dispute  against or affecting the Borrower,
the Parent or any Subsidiary or their  representative  employees;  (e) there has
not been,  during the five (5) year period prior to the date  hereof,  a strike,
work stoppage,  material  unfair labor practice claim or charge,  arbitration or
other  material labor dispute  against or affecting the Borrower,  the Parent or
any Subsidiary or any of their  representative  employees,  and (f) there are no
actions, suits, charges,  demands, claims,  counterclaims or proceedings pending
or, to the best of the Borrower's  knowledge,  threatened  against the Borrower,
the  Parent  or any of the  Subsidiaries,  by or on  behalf  of,  or  with,  its
employees,  other than  employee  grievances  arising in the ordinary  course of
business that are not, in the aggregate, material.

                  SECTION 3.17  CONDITION OF ASSETS.

                           All of the assets and properties of the Borrower, the
Parent and the Subsidiaries,  that are reasonably necessary for the operation of
its business,  are


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in good working  condition,  ordinary  wear and tear  excepted,  and are able to
serve the function for which they are currently being used.

                  SECTION 3.18  ERISA.

                           (a) Except as described in Exhibit L annexed  hereto,
neither the  Borrower  nor the Parent has, and neither of them has ever had, any
Pension Plan in  connection  with which there could arise a direct or contingent
liability  of the  Borrower  to the PBGC,  the  Department  of Labor or the IRS.
Except as  described  in Exhibit L annexed  hereto,  neither  the Parent nor the
Borrower is a  participating  employer in: (i) any Pension Plan under which more
than one employer makes  contributions as described in Sections 4063 and 4064 of
ERISA, or (ii) a multiemployer  plan as defined in Section  4001(a)(3) of ERISA.
With respect to any  Multiemployer  Plan,  both the Borrower and the Parent have
paid or  accrued  all  contributions  pursuant  to the  terms of the  applicable
collective  bargaining  agreement  required to be paid or accrued by it; neither
the Borrower nor the Parent has had a complete  withdrawal under Section 4203 of
ERISA or  partial  withdrawal  under  Section  4205 of ERISA;  and  neither  the
Borrower nor the Parent had any mass withdrawal liability.

                           (b)  Neither  the  Borrower  nor the  Parent  has any
contingent  liability  with  respect to any  post-retirement  benefit  under any
Employee  Benefit  Plan,  other  than  liability  for health  plan  continuation
coverage under Code Section 4980 B.

                           (c) Each Employee Benefit Plan complies, in both form
and  operation,  in all material  respects,  with its terms,  ERISA and the Code
including,  without  limitation,  Code  Section  4980 B and to the  best  of the
Borrower's knowledge,  no condition exists or event has occurred with respect to
any plan which would  result in the  incurrence  by  Borrower  and Parent of any
material  liability,  fine, or penalty.  Each Employee  Benefit Plan and related
trust agreement is legally valid and binding and in full force and effect to the
extent not heretofore  terminated.  To the best of the Borrower's knowledge,  no
Employee Benefit Plan is being audited or investigated by any government  agency
or subject to any pending or threatened claim or suit.  Neither the Borrower nor
the Parent has engaged in any  transaction  which would  subject it to liability
under Section 4212(c) of ERISA.

                           (d)  Neither  the  Parent  nor the  Borrower  nor any
fiduciary of any Employee Benefit Plan has engaged in any prohibited transaction
under  Section 406 of ERISA which  would have a material  adverse  effect on the
business,  operations or condition,  financial or otherwise,  of the Borrower or
the  Parent.  The  execution,  delivery  and  carrying  out of the  terms of any
agreement that is related to this  transaction  will not constitute a prohibited
transaction under such Section.





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                           (e)  There  are  no  agreements  which  will  provide
payments to any officer, employer,  shareholder or highly compensated individual
which  will be  "parachute  payments"  under  Section  280G of the Code that are
nondeductible  to any Loan  Party and  which  will be  subject  to the tax under
Section  4999 of the Code  for  which  any  Loan  Party  would  have a  material
withholding liability.

                           (f) All  references to the Borrower and the Parent in
this Section 3.18 or in any other Section of this  Agreement  relating to ERISA,
shall be deemed to refer to the  Borrower,  the  Parent  and all other  entities
which are considered ERISA Affiliates.

                  SECTION 3.19     ACCOUNT REPRESENTATIONS
                                   AND WARRANTIES.

                           Except as specifically disclosed on Exhibit O annexed
hereto, with respect to all present and future Eligible Accounts included in the
determination of the Borrowing Base:

                           (a) Each Account included in each such Borrowing Base
satisfies the definition of Eligible Accounts.

                           (b) No such  Account has been  assigned or pledged to
any other Person.

                           (c) To the best of the  Borrower's  knowledge,  there
are no facts,  events,  or  occurrences  that in any way impair the  validity or
enforcement  of any such  Account of the  Borrower  or tend to reduce the amount
payable thereunder from the amount of the invoice value shown on any schedule of
accounts or on any contracts,  invoices,  and statements  delivered to the Agent
with respect thereto.

                  SECTION 3.20     BORROWING BASE CERTIFICATES.

                           The  information  set  forth in each  Borrowing  Base
Certificate is or will be on the date delivered true, complete and correct,  and
each Account  included in each such  Borrowing Base satisfies or will satisfy on
the date of the  applicable  Borrowing Base  Certificate  the  requirements  for
Eligible Accounts set forth in this Agreement,  including without limitation the
definitions applicable thereto.

                  SECTION 3.21     ACCOUNTS RECEIVABLE AGING REPORTS;
                                   KEY ITEM REPORTS.

                           The information set forth in each Accounts Receivable
Aging  Report  and Key  Item  Report  is or will be on the  date  thereof  true,
complete and



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correct with respect to the subject matter thereof.

                  SECTION 3.22     INVENTORY REPRESENTATIONS
                                   AND WARRANTIES.

                           Except as specifically disclosed on Exhibit O annexed
hereto,  with respect to all present and future Eligible  Inventory  included in
the determination of the Borrowing Base:

                                    (a) All Inventory is located on the premises
listed on the  schedules  attached  to the  Borrower  Security  Agreement  or is
Eligible Inventory in transit for sale in the ordinary course of business;

                                    (b) No  Inventory  is subject to any Lien or
security interest whatsoever, except for the Liens and security interests of the
Agent and the Lenders and those Liens or security interests set forth in Section
7.2 hereof; and

                                    (c)  Except  as  specified  in the  Borrower
Security  Agreement  or  otherwise  permitted  by this  Agreement,  no  Eligible
Inventory is now stored or shall at any time  hereafter be stored with a bailee,
warehouseman, or similar party.

                  SECTION 3.23     FORFEITURE PROCEEDING.

                           Neither the Borrower nor any of its  Subsidiaries  or
Affiliates  is  engaged  in or  proposes  to be  engaged  in the  conduct of any
business  or activity  which  could  result in a  Forfeiture  Proceeding  and no
Forfeiture Proceeding against any of them is pending or threatened.

                  SECTION 3.24     AMERICANS WITH DISABILITIES ACT.

                           The Borrower,  the Parent and its Subsidiaries are in
compliance with all applicable provisions of the Americans with Disabilities Act
(42 U.S.C. 'SS' 12101-12213) and the regulations issued thereunder.

         ARTICLE 4.   CONDITIONS.

                  SECTION 4.1      CONDITIONS TO CLOSING.

                           The obligation of the Collateral  Monitoring Agent to
make Loans, and the obligation of the Issuing Bank to issue or amend Trade L/Cs,
Standby L/Cs,  Acceptances,  Steamship Guaranties and Airway Releases hereunder,
in each case for the account of the Lenders, shall be subject to the fulfillment
(to the satisfaction of



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the Agent, the Collateral Monitoring Agent, the Issuing Bank and the Lenders) of
the following condi tions precedent:

                           (a) The Borrower shall have executed and delivered to
each Lender its Note;

                           (b) The Borrower shall have executed and delivered to
the Agent an Application with respect to each L/C, if any, requested by it;

                           (c) The Borrower shall have executed and delivered to
the Agent the Borrower Security Interest Confirmation;

                           (d) The Borrower shall have executed and delivered to
the Agent the Borrower Assignment Confirmation;

                           (e) Each of the  Guarantors  shall have  executed and
delivered to the Agent its Guaranty Confirmation;

                           (f) Each Corporate  Guarantor shall have executed and
delivered to the Agent its Guarantor Security Interest Confirmation;

                           (g) Each Corporate Guarantor and each of the Borrower
and the Parent shall have delivered such UCC Financing  Statements or Amendments
as the Agent may  require to effect the  granting of the Liens  provided  for in
this Agreement.

                           (h) The Parent shall have  executed and  delivered to
the Agent:  (i) the Parent Security  Interest  Confirmation  and (ii) the Parent
Stock Pledge Confirmation;

                           (i) The  Borrower,  the Parent  and Siena  shall have
executed  and  delivered  to  the  Agent  their  Trademark   Security   Interest
Confirmation;

                           (j) The  Borrower  shall have  delivered to the Agent
the Lock Box Agreement;

                           (k) The  Borrower  shall have  delivered to the Agent
the Continuing Agreement for Issuance of Steamship Guaranty and Airway Releases;

                           (l) The  Borrower  shall have  delivered  evidence of
insurance  coverage  on the  Inventory  and as  otherwise  required by the terms
hereof,  with  endorsements  showing the Agent as co-insured and loss payee, for
the ratable benefit of the Lenders,  and an undertaking by the insurance company
or  companies  to give the Agent not less  than 30 days  notice of any  proposed
cancellation or non-renewal;


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                           (m) The  Borrower  shall have  delivered to the Agent
evidence of (i) insurance policies on the life of Morris Goldfarb required to be
maintained by the Parent  pursuant to Section  6.8(c) hereof and (ii) payment of
the premium in  connection  with such  insurance  policies  covering  the period
through May 31, 1998.

                           (n)  Fulbright  &  Jaworski  L.L.P.,  counsel  to the
Borrower,  the Parent, Siena, Retail,  Holdings and Sources shall have delivered
their opinion to, and in form and substance  satisfactory  to, the Agent and the
Lenders;

                           (o) The Agent shall have  received  true and complete
copies of the  Financial  Statements  and the  Projections  for the fiscal  year
ending January 31, 1998, each certified as such in a certificate executed by the
president, chief operating officer or chief financial officer of the Borrower;

                           (p) The  Agent  shall  have  received  copies  of the
following:

                                    (i)  All  of  the  consents,  approvals  and
waivers  referred to on Exhibit C hereto (except only those which,  as stated on
Exhibit C, shall not be delivered) including,  without limitation,  all landlord
waivers of  distraint or similar  instruments  of waiver or  subordination  with
respect to all leased locations where Collateral is located;

                                    (ii) A certificate  of the Secretary of each
of the  Borrower,  the Parent and Siena  certifying  that since October 29, 1992
there have been no amendments,  modifications or supplements to the certificates
of incorporation of each of the Borrower, the Parent and Siena;

                                    (iii) A certificate of the Secretary of each
of the  Borrower,  the Parent and Siena  certifying  that since October 29, 1992
there have been no  amendments,  modifications  or supplements to the by-laws of
each of the  Borrower,  the Parent  and Siena  other  than an  amendment  to the
Parent's by-laws in April of 1997;

                                    (iv)  The  certificates  of   incorporation,
certified by the Secretary of State of their respective states of incorporation,
of each of Retail,  Sources and Holdings and comparable documents for Hong Kong,
Global,  Tatabuana,  Balihides,  Wee  Beez  and  Kostroma  from  each  of  their
respective jurisdictions of organization and all amendments thereto;

                                    (v) The  by-laws of each of Retail,  Sources
and  Holdings  and  comparable  documents  for  Hong  Kong,  Global,  Tatabuana,
Balihides, Wee Beez and Kostroma, certified by their respective secretaries;


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                                    (vi)  All  corporate  action  taken  by  the
Borrower, the Parent, and the Subsidiaries to authorize the execution,  delivery
and  performance  of each of the Loan  Documents  to which it is a party and the
transactions contemplated thereby, certified by their respective secretaries;

                                    (vii) Good standing certificates as of dates
not more than 20 days prior to the date of the closing,  with respect to each of
the  Borrower,  the  Parent,  Siena,  Holdings,  Sources  and  Retail,  from the
Secretary of State of their respective states of incorporation and each state in
which each of them is qualified to do business;

                                    (viii) A  certificate  of the  Secretary  of
each  of  Hong  Kong,  Wee  Beez,  Global,  Tatabuana,  Balihides  and  Kostroma
certifying  that each is in good  standing  in its  respective  jurisdiction  of
organization; and

                                    (ix)   An   incumbency   certificate   (with
specimen  signatures)  with  respect  to  the  Borrower,   the  Parent  and  the
Subsidiaries.

                                    (q) (i) The Borrower shall have complied and
shall then be in compliance  with all of the terms,  covenants and conditions of
this Agreement;

                                    (ii) After  giving  effect to the  execution
and delivery of this Agreement, there shall exist no Default or Event of Default
hereunder; and

                                    (iii)  The  representations  and  warranties
contained in Article 3 hereof shall be true and correct on the date hereof;

and the Agent shall have received a Compliance Certificate dated the date hereof
certifying,  inter alia, that the conditions set forth in this subsection 4.1(q)
are satisfied on such date; and

                                    (r)  All  legal  matters   incident  to  the
initial closing shall be satisfactory to counsel to the Agent and the Lenders.

                  SECTION 4.2       CONDITIONS TO SUBSEQUENT
                                    LOANS AND ISSUANCE OF L/Cs.

                           The obligation of the Collateral  Monitoring Agent to
make any Loan and the  obligation  of the Issuing Bank to issue or amend a Trade
L/C, Standby L/C, Acceptance, Steamship Guaranty or Airway Release, in each case
for the account of the Lenders,  subsequent  to the date hereof shall be subject
to the fulfillment (to the reasonable  satisfaction of the Collateral Monitoring
Agent, the Issuing Bank, the Agent and the Lenders) of the following  conditions
precedent:



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                           (a)  The  Collateral   Monitoring  Agent  shall  have
received a Borrowing Base Certificate of current date; and

                           (b) All legal  matters  incident to such  transaction
shall be  reasonably  satisfactory  to counsel  for, the  Collateral  Monitoring
Agent, the Issuing Bank, the Agent and the Lenders;

provided,  however,  that the Borrower  hereby  acknowledges  to the  Collateral
Monitoring  Agent,  the Issuing Bank, the Agent and each of the Lenders that the
delivery by it of each Borrowing Notice and/or Application shall be deemed to be
a  certification,  representation  and  warranty by the  Borrower as of the date
thereof of the truth of those statements which would be included in a Compliance
Certificate dated such date.

         ARTICLE 5.        DELIVERY OF FINANCIAL REPORTS,
                           DOCUMENTS AND OTHER INFORMATION.

                  While  the  Commitments  are  outstanding,  and so long as the
Borrower is indebted to any Lender,  the Agent, the Collateral  Monitoring Agent
or the Issuing Bank and until payment in full of the Loans and  Acceptances  and
the termination or expiration of all the L/Cs,  Steamship  Guaranties and Airway
Releases,  and full and  complete  performance  of all of its other  obligations
arising hereunder, the Borrower shall deliver to the Collateral Monitoring Agent
and each Lender the following, subject to the provisions of Section 5.11 hereof:

                  SECTION 5.1      ANNUAL FINANCIAL STATEMENTS.

                           (a) Annually, as soon as available,  but in any event
within 90 days after the last day of each of its fiscal  years,  a  consolidated
and  consolidating  balance sheet of the Parent and the Subsidiaries  (including
the  Borrower)  as at such last day of the fiscal  year,  and  consolidated  and
consolidating  statements  of income  and  retained  earnings  and  consolidated
statements  of cash  flow of the  Parent  and the  Subsidiaries  (including  the
Borrower),  for such fiscal year,  each  prepared in accordance  with  generally
accepted accounting principles  consistently applied, in reasonable detail, and,
as to the consolidated statements of the Parent, certified without qualification
by Grant  Thornton  L.L.P.  or  another  firm of  independent  certified  public
accountants reasonably satisfactory to the Agent and the Lenders, and certified,
as to the consolidating statements,  by the chief executive officer,  president,
chief operating  officer or the chief financial officer of the Parent, as fairly
presenting  the  financial  position and the results of operations of the Parent
and the  Subsidiaries  (including the Borrower) as at and for the year ending on
its date and as having  been  prepared in  accordance  with  generally  accepted
accounting principles.


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                           (b)  Annually,  within 120 days after the last day of
each of its fiscal years,  management  prepared  divisional income statements in
reasonable detail for the preceding fiscal year.

                  SECTION 5.2       SEMI-ANNUAL FINANCIAL STATEMENTS;
                                    QUARTERLY FINANCIAL STATEMENTS.

                           (a) As soon as available,  but in any event within 45
days after the end of the Parent's first three (3) fiscal quarterly  periods,  a
consolidating and consolidated  balance sheet of the Parent and the Subsidiaries
(including  the  Borrower)  as of the last day of such  quarter,  a statement of
income and retained earnings and  consolidating  and consolidated  statements of
income and retained  earnings of the Parent and the Subsidiaries  (including the
Borrower)  as of the last day of such  quarter  and for the fiscal year to date,
and consolidated statements of cash flow, and on a comparative basis figures for
the  corresponding  period of the  immediately  preceding  fiscal  year,  all in
reasonable detail,  each such statement (i) to provide a specific  certification
with respect to compliance with the financial covenants set forth in Section 6.9
of this  Agreement and (ii) to be certified in a certificate  of the  president,
chief operating  officer or chief financial  officer of the Parent as accurately
presenting  the  financial  position and the results of operations of the Parent
and the  Subsidiaries  (including  the  Borrower),  as at its  date and for such
quarter  and for  the  fiscal  year  to date  and as  having  been  prepared  in
accordance with generally accepted accounting  principles  consistently  applied
(subject to year-end audit adjustments).

                           (b) As soon as available,  but in any event within 60
days after the end of the Parent's first three (3) fiscal quarterly  periods,  a
management  prepared  divisional  income  statement for such quarter and for the
fiscal year to date and on a  comparative  basis  figures for the  corresponding
period of the immediately preceding fiscal year, all in reasonable detail.

                  SECTION 5.3      COMPLIANCE INFORMATION.

                           Promptly after a written request therefor, such other
financial data or information  evidencing  compliance  with the  requirements of
this  Agreement,  the Notes and the other  Loan  Documents,  as any  Lender  may
reasonably request from time to time.

                  SECTION 5.4      NO DEFAULT CERTIFICATE.

                           At  the  same  time  as  it  delivers  the  financial
statements  required  under the  provisions  of Section  5.1 and 5.2  hereof,  a
certificate of the chief executive officer,  president,  chief operating officer
or chief financial officer of the Borrower and the Parent, respectively,  to the
effect that no Default  hereunder and that no default




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under any other material  agreement to which the Borrower,  the Parent or any of
the  Subsidiaries  is a party or by which it is bound,  or by which, to the best
knowledge of the Borrower,  the Parent or any Subsidiary,  any of its properties
or assets,  taken as a whole,  may be materially  affected,  and no event which,
with the giving of notice or the lapse of time, or both,  would  constitute such
an Event of Default or  default,  exists,  or, if such  cannot be so  certified,
specifying in reasonable detail the exceptions,  if any, to such statement. Such
certificate shall be accompanied by a detailed calculation indicating compliance
with the covenants contained in Sections 6.9, 7.13 and 7.14 hereof.

                  SECTION 5.5       RENTAL OBLIGATIONS;
                                    CAPITALIZED LEASE OBLIGATIONS.

                           Within 15 days after the end of each of the  Parent's
fiscal quarters, a certificate of the chief executive officer,  president, chief
operating  officer or chief  financial  officer of the Parent  setting forth the
dollar  amount  of  expenditures  made  by the  Borrower,  the  Parent  and  its
Subsidiaries in respect of rental  obligations and Capitalized Lease Obligations
for the fiscal period ending on such date and a calculation  indicating that the
Borrower,  the Parent and its Subsidiaries are in compliance with the provisions
of Sections 7.14 and 7.18 hereof.

                  SECTION 5.6      ACCOUNTANTS' REPORTS.

                           Promptly  upon receipt  thereof,  copies of all other
reports  or  correspondence  submitted  to the  Borrower  or the  Parent  by its
independent accountants in connection with any annual or interim audit or review
of the books of the Borrower or the Parent made by such accountants,  including,
without limitation, accountant's management letters.

                  SECTION 5.7      COPIES OF DOCUMENTS.

                           Promptly  upon their  becoming  available,  copies of
any: (i) financial statements, projections,  non-routine reports, notices (other
than routine correspondence), requests for waivers and proxy statements, in each
case,  delivered by the Borrower,  the Parent or any of the  Subsidiaries to any
lending  institution  other than the  Lenders;  (ii)  correspondence  or notices
received  by the  Borrower  or the  Parent  from  any  federal,  state  or local
governmental authority that regulates the operations of the Borrower, the Parent
or any of its  Subsidiaries,  relating  to an  actual  or  threatened  change or
development that would be materially adverse to the Borrower,  the Parent or any
Subsidiary,  taken as a whole; (iii) registration  statements and any amendments
and supplements  thereto, and any regular and periodic reports, if any, filed by
the  Borrower  or the  Parent  or any of its  Subsidiaries  with any  securities
exchange or with the  Securities  and Exchange  Commission  or any




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governmental  authority  succeeding  to any or all of the  functions of the said
Commission;  (iv) letters of comment or  correspondence  sent to the Borrower or
the Parent or any of the  Subsidiaries by any such  securities  exchange or such
Commission in relation to the Borrower or the Parent or any of the  Subsidiaries
and its affairs;  (v) written reports submitted by the Borrower or the Parent or
any of the  Subsidiaries by its  independent  accountants in connection with any
annual  or  interim  audit of the  books of the  Borrower  or the  Parent or the
Subsidiaries made by such accountants; (vi) proxy statements,  notices and other
correspondence delivered by the Parent to its shareholders; (vii) any appraisals
received by the Borrower or the Parent or any of the  Subsidiaries  with respect
to the  properties or assets of the Borrower or the Parent or the  Subsidiaries;
and  (viii)  any  other  information  reasonably  requested  by the Agent or any
Lender.

                  SECTION 5.8       NOTICES OF DEFAULTS.

                           Promptly,  notice of the occurrence of any Default or
Event of Default,  any event that after any necessary  notice and/or cure period
may become a Default or Event of Default under Section  8.4(b) or any event that
would constitute or cause a material adverse change in the condition,  financial
or  otherwise,  or the  operations  of the  Borrower or the Parent or any of the
Subsidiaries,  including,  without limitation, a default or a cancellation under
any lease of property where inventory is stored.

                  SECTION 5.9       ERISA NOTICES.

                           (a)  Concurrently  with such  filing,  a copy of each
Form 5500 that is filed with respect to each Pension Plan with the IRS; and

                           (b) Promptly,  upon their becoming available,  copies
of:  (i) all  correspondence  with  the  PBGC,  the  Secretary  of  Labor or any
representative  of the IRS with  respect to any  Pension  Plan,  relating  to an
actual or threatened  change or development that would be materially  adverse to
the  Borrower or the Parent or  any  Subsidiary;  (ii)  copies of all  actuarial
valuations  received by the  Borrower or the Parent with  respect to any Pension
Plan; and (iii) copies of any notices of Plan  termination  filed by any Pension
Plan  Administrator  (as those terms are used in ERISA) with the PBGC and of any
notices  from the PBGC to the  Borrower or the Parent with respect to the intent
of the PBGC to institute involuntary termination proceedings; and

                           (c)  Promptly  upon  receipt by the  Borrower  or the
Parent  of  any  correspondence  from  a  Multiemployer  Plan  with  respect  to
withdrawal liability.

                  SECTION 5.10     ADDITIONAL INFORMATION AND REPORTS.




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                           To  the  Collateral  Monitoring  Agent  only,  unless
requested by any Lender with respect to a specific  delivery or  deliveries  and
then only for such specific  delivery or deliveries so requested  (except in the
case of the reports identified in clauses (c)(ii),  (iii) and (v) and (e) below,
which Borrower shall at all times deliver to each Lender),

                           (a) Daily, a Borrowing  Base  Certificate in the form
attached hereto as Exhibit P, with ineligible Accounts and ineligible  Inventory
in Item 6 of such  Borrowing Base  Certificate  being  recalculated  on a weekly
basis  only at the time the  reports  identified  in  paragraph  (b)  below  are
delivered.

                           (b) Weekly,  with respect to each week ending  Friday
delivered by Wednesday of the following week:

                                    (i) an Accounts Receivable Aging Report;

                                    (ii) an Available to Sell Report  designated
in Dollars in the form attached hereto as Exhibit D-1;

                                    (iii) an Available to Sell Report designated
in units of Inventory in the form attached hereto as Exhibit D-2;

                                    (iv) an  Inventory  Analysis  Report  on LDP
Cost vs LCM Cost in the form attached hereto as Exhibit D-3; and

                                    (v) a divisional  status report detailing by
division:  (A) open customer orders detailed by "this year versus last year" and
"TLC/FLC versus  warehouse";  and (B) inventory detailed as to inventory on hand
and in transit.

                           (c) Monthly,  delivered not more than 25 days (except
as otherwise provided below) after the end of each calendar month:

                                    (i) all the  reports  identified  in clauses
(b)(i) through  (b)(iv)  above,  prepared on a monthly basis as to the preceding
calendar month;

                                    (ii) a key item report ("KEY ITEM  REPORT"),
as of the  last day of the  immediately  preceding  month  with  respect  to the
Borrower  and each  Guarantor  in the  form  attached  hereto  as  Exhibit  D-4;
provided,  however,  that such  statement may be delivered not more than 30 days
after the end of each calendar month; provided further that such statement shall
not be required during the months of February and March;



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                                    (iii) a statement with respect to compliance
with the financial  covenants set forth in Section 6.9 of this Agreement  (other
than the covenant in subsection 6.9(a)); provided,  however, that such statement
may be delivered not more than 30 days after the end of each calendar month;

                                    (iv) a  reconciliation  between  the general
ledger and the Accounts Receivable Aging Report and the month-end Borrowing Base
Certificate; and

                                    (v) the  report on the  accounts  receivable
delivered  to CIT  pursuant  to the  Amended and  Restated  Accounts  Receivable
Purchase Agreement dated November 8, 1995 between the Borrower and CIT;

                                    (vi)  a   Gross   Margin   Report   in  form
satisfactory to the Collateral Monitoring Agent and the Lenders; and

                                    (vii) an accounts  payable  aging  report in
form satisfactory to the Collateral Monitoring Agent;

each of which  shall be  certified  as true and  correct by the chief  executive
officer,  president,  chief operating  officer or the chief financial officer of
the Borrower or the Parent, as the case may be.

                           (d) Promptly after a request by the Agent, such other
information regarding the business,  affairs and condition of the Borrower,  the
Parent  and the  Subsidiaries  as the  Agent  may from  time to time  reasonably
request.

                           (e)  By  no  later  than   January  31,   1998,   (i)
Projections for the fiscal year ending January 31, 1999 and (ii) a business plan
for the fiscal year ending January 31, 1999.

                  SECTION 5.11      CONFIDENTIALITY OF INFORMATION.

                           The  Agent,  the  Collateral  Monitoring  Agent,  the
Issuing Bank and the Lenders acknowledge that any information provided to any of
them  pursuant  to this  Article  5 which  is  marked  "confidential"  shall  be
delivered  to  the  recipient  with  the  understanding  that,  subject  to  the
provisions  of  Section  10.13(e)  hereof,  the  recipient  will  hold  all such
information with respect to the Parent  confidential  and that the Parent,  as a
company whose shares are publicly  traded,  is relying on such  understanding in
delivering  that  information;  provided,  however,  that,  notwithstanding  the
foregoing,  each of the Agent, the Collateral Monitoring Agent, the Issuing Bank
and the  Lenders  may  disclose  or  disseminate  such  information  to: (a) its
directors,  officers,  employees,  agents,  attorneys,   accountants  and  other
professional  advisors who would  ordinarily have access to such  information in
the  normal  course of the



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performance of their duties or services with the understanding that each of such
individuals will use its best efforts to hold all such information confidential;
and (b)  such  third  parties  as it may,  in its  discretion,  deem  reasonably
necessary or desirable in connection  with or in response to (i) compliance with
any law, ordinance or governmental order,  regulation,  rule, policy,  subpoena,
investigation or request, or (ii) any order, decree, judgment,  subpoena, notice
of discovery or similar ruling or pleading issued, filed, served or purported on
its face to be issued,  filed or served (x) by or under  authority of any court,
tribunal,  arbitration board of any governmental agency, commission,  authority,
board or similar  entity,  or (y) in  connection  with any  proceeding,  case or
matter  pending  (or on its face  purported  to be  pending)  before  any court,
tribunal,  arbitration board or any governmental agency, commission,  authority,
board or similar entity. The Agent, the Collateral Monitoring Agent, the Issuing
Bank and the  Lenders  shall  have no  continuing  obligations  with  respect to
confidentiality of information following an Event of Default.

         ARTICLE 6.   AFFIRMATIVE COVENANTS.

                           While the Commitments are outstanding and, so long as
the Borrower is indebted to the Lenders,  the Agent,  the Collateral  Monitoring
Agent or the Issuing Bank and until payment in full of the Loans and Acceptances
and the termination or expiration of all L/Cs,  Steamship  Guaranties and Airway
Releases,  and full and  complete  performance  of all of its other  obligations
arising hereunder,  the Borrower and the Parent shall and the Parent shall cause
each Subsidiary to:

                  SECTION 6.1       BOOKS AND RECORDS.

                           Keep  proper  books of record and account in a manner
reasonably  satisfactory  to the Agent and the Lenders in which  full,  true and
correct entries shall be made of all dealings or transactions in relation to its
business and activities.

                  SECTION 6.2        INSPECTIONS AND FIELD EXAMINATIONS;
                                     ANNUAL ACCOUNTS RECEIVABLE.

                           Permit  the  Collateral   Monitoring  Agent  and  the
Lenders  (in the case of the  Lenders,  only when  accompanying  the  Collateral
Monitoring  Agent)  to  make  or  cause  to  be  made,   inspections  and  field
examinations  of any books,  records and papers of the Borrower,  the Parent and
each of the Subsidiaries and to make extracts  therefrom and copies thereof,  or
to make  inspections  and  examinations  of any properties and facilities of the
Borrower,  the Parent and the  Subsidiaries,  on reasonable  notice, at all such
reasonable  times  and as often as the  Agent  and the  Lenders  may  reasonably
require, in order to assure that each the Borrower and the Parent is and will be
in compliance with its  obligations  under the Loan Documents or to evaluate the
Lenders' investment in the then Outstanding Obligations.



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                  SECTION 6.3       MAINTENANCE AND REPAIRS.

                           Maintain in good repair, working order and condition,
subject to normal wear and tear, all material properties and assets from time to
time owned by it and used in or necessary for the operation of its business, and
make all reasonable repairs, replacements, additions and improvements thereto.

                  SECTION 6.4       CONTINUANCE OF BUSINESS.

                           (a) Do,  or  cause  to be done  at its  expense,  all
things  reasonably  necessary  to preserve and keep in full force and effect its
corporate  existence and all permits,  rights and  privileges  necessary for the
proper  conduct of its  business,  except  where the  failure to keep any of the
foregoing in effect will not have a material  adverse  effect on the business of
the Borrower,  and continue generally to engage in the same line of business and
comply in all  material  respects  with all  applicable  laws,  regulations  and
orders.

                           (b) Do,  or  cause  to be done  at its  expense,  all
things  reasonably  necessary to preserve and maintain all patents,  trademarks,
service  marks,  trade  names,  copyrights  and  trade-style  names which are of
material value to the operation of its business.

                  SECTION 6.5       COPIES OF CORPORATE DOCUMENTS.

                           Subject to the prohibitions set forth in Section 7.12
hereof,  promptly  deliver to the Agent and each Lender copies of any amendments
or  modifications   to  the  Borrower's,   the  Parent's  and  any  Subsidiary's
certificate  of  incorporation  and  by-laws,  certified  with  respect  to  the
certificate  of  incorporation  by  the  Secretary  of  State  of its  state  of
incorporation  and,  with respect to the by-laws,  by the secretary or assistant
secretary of such corporation.

                  SECTION 6.6       PERFORM OBLIGATIONS.

                           Pay  and  discharge  all  of  its   obligations   and
liabilities,   including,   without  limitation,   all  taxes,  assessments  and
governmental  charges upon its income and properties when due, unless and to the
extent  only  that  such  obligations,   liabilities,   taxes,  assessments  and
governmental  charges  shall  be  contested  in good  faith  and by  appropriate
proceedings  and that, to the extent required by generally  accepted  accounting
principles then in effect,  proper and adequate book reserves  relating  thereto
are  established  by the Borrower,  or, as the case may be, by the Parent or the
appropriate  Subsidiary,  and then  only to the  extent  that a bond is filed in
cases where the filing of a bond is  necessary  to avoid the  creation of a Lien
against any of its properties.



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                  SECTION 6.7        NOTICE OF LITIGATION.

                           Promptly  notify the Agent and the Lenders in writing
of any  litigation,  legal  proceeding  or dispute,  other than  disputes in the
ordinary  course  of  business  or,  whether  or not in the  ordinary  course of
business,  involving  amounts  in  excess  of One  Hundred  Thousand  ($100,000)
Dollars,  affecting the Borrower,  the Parent or any  Subsidiary  whether or not
fully  covered by  insurance,  and  regardless  of the  subject  matter  thereof
(excluding,  however,  any actions relating to workers'  compensation  claims or
negligence  claims  relating  to use of  motor  vehicles,  if fully  covered  by
insurance, subject to deductibles).

                  SECTION 6.8       INSURANCE.

                           (a) (i) Maintain with responsible insurance companies
acceptable  to the  Agent  such  insurance  on such of its  properties,  in such
amounts  and  against  such  risks  as  is  customarily  maintained  by  similar
businesses  similarly  situated,  naming the Agent as loss payee for the ratable
benefit of the  Lenders;  (ii) file with the Agent  upon its  request a detailed
list of the  insurance  then in  effect,  stating  the  names  of the  insurance
companies,  the amounts and rates of the insurance,  the dates of the expiration
thereof and the properties and risks covered thereby; (iii) within 10 days after
notice in writing from the Agent, obtain such additional  insurance as the Agent
may reasonably request;  and (iv) provide for endorsements or certifications (1)
scheduling the coverage under such insurance, (2) identifying the Agent as "loss
payee" for the ratable  benefit of the  Lenders,  and (3)  specifying  that such
insurance shall be non-cancellable unless not less than 30 days' notice is given
to the Agent;

                           (b) Carry all insurance available through the PBGC or
any private insurance companies covering its obligations to the PBGC; and

                           (c)  (i)  Maintain   with  one  or  more  responsible
insurance companies acceptable to the Agent and the Lenders, term life insurance
on  the  life  of  Morris  Goldfarb,  in the amount of not less than $20,000,000
naming  the  Agent  for  the ratable  benefit of the Lenders as assignee of such
insurance and (ii) file with the Agent upon its request a  detailed  list of the
insurance  on the life of Morris Goldfarb,  then in effect, stating the names of
the insurance companies, the amounts and rates of  insurance and the  expiration
dates thereof.

                  SECTION 6.9       FINANCIAL COVENANTS.

                           (a) Have or maintain, with respect to the Parent on a
consolidated basis (excluding BET Studio LLC), EBITDA on a cumulative basis from
the first day of each fiscal  year  through the date set forth below at not less
than, or,


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in the case of a loss,  not more than,  the  respective  amounts set forth below
opposite each such last day of the fiscal quarter:

         Date                                        EBITDA
         ----                                        -------
         April 30, 1997                              ($5,500,000)
         July 31, 1997                               ($4,000,000)
         October 31, 1997                             $8,000,000
         January 31, 1998                             $6,300,000
         April 30, 1998                              ($7,000,000)

and the periods and  respective  amounts from May 1, 1998 through and  including
the Commitment Termination Date shall be preliminarily determined by the Lenders
and the Borrower based on the  Projections  and the business plan for the fiscal
year ending  January 31, 1999 and the  unaudited  financial  statements  for the
fiscal year ending  January  31,  1998,  but in no event shall the periods be of
different  durations or the amounts be less than (if such amount is negative) or
greater  than  (if  such  amount  is  positive)  the  amounts  for  the  periods
corresponding  to the periods set forth above unless the Lenders  determine  (in
their reasonable  discretion)  that such periods and amounts warrant  adjustment
based  on  the  financial  condition  of  the  Borrower  as set  forth  in  such
Projections,  business plan or unaudited financial statements, which preliminary
determination  shall be made  within 30 days of receipt  by the  Lenders of such
Projections,   business  plan  and  unaudited  financial  statements,  and  such
determination  shall become effective after receipt and  satisfactory  review by
the Lenders of the Financial  Statements  for the fiscal year ending January 31,
1998.



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                           (b) (1) Have or maintain,  with respect to the Parent
on a consolidated  basis  (excluding BET Studio LLC),  Tangible Net Worth at all
times during the periods set forth below at not less than the respective amounts
set forth opposite each such period:

                                                           Minimum Tangible
         Date                                                 Net Worth
         ----                                              -----------------

         February 28, 1997-May 31, 1997                      $27,500,000



                               (2) Have or maintain,  with respect to the Parent
on a consolidated basis (excluding BET Studio LLC), Tangible Net Worth as of the
dates set forth below at not less than the respective amounts set forth opposite
each such date:

                                                           Minimum Tangible
         Date                                                 Net Worth
         ----                                              -----------------
         July 31, 1997                                        $29,200,000
         October 31, 1997                                     $35,200,000
         January 31, 1998                                     $33,950,000
         April 30, 1998                                       $30,000,000

and the periods and  respective  amounts from May 1, 1998 through and  including
the Commitment  Termination  Date shall be determined in the sole  discretion of
the Lenders within 30 days of receipt by the Lenders of the  Projections and the
business  plan for the fiscal  year ending  January  31, 1999 and the  unaudited
financial  statements  for the fiscal year ending  January  31,  1998,  and such
determination  shall become effective after receipt and  satisfactory  review by
the Lenders of the Financial  Statements  for the fiscal year ending January 31,
1998.

                           (c) Have no Loans and Acceptances  Outstanding for 60
consecutive  days during the periods from  December 1, 1997,  through  April 30,
1998, and December 1, 1998 through April 30, 1999;  provided,  however,  that if
Acceptances  are  outstanding  during the months of December  1997 through April
1998 and/or December 1998 through April 1999, the Borrower will  nevertheless be
deemed to have satisfied such requirement if the Collateral  Monitoring Agent is
holding for the account of the Borrower during such  consecutive 60 Business Day
period  excess  cash in an  amount  which  would be  sufficient  to  repay  such
outstanding Acceptances.

                           (d)  Maintain  Loans,   Standby  L/Cs,   Acceptances,
Steamship  Guaranties and Airway Releases Outstanding at an amount not to exceed
75% of



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Eligible  Accounts  Receivable for 60 consecutive days  during the  periods from
November  1,  1997 through April 30, 1998 and November 1, 1998 through April 30,
1999.

                  SECTION 6.10              NOTICE OF CERTAIN EVENTS.

                           (a)  Promptly  notify  the  Agent in  writing  of the
occurrence of any Reportable  Event,  as defined in Section 4043 of ERISA,  with
respect to a Pension Plan maintained by the Borrower or an ERISA Affiliate, if a
notice of such  Reportable  Event is required under ERISA to be delivered to the
PBGC within 30 days after the occurrence thereof, together with a description of
such Reportable  Event and a statement of the action the Borrower or the Parent,
as the case may be, intends to take with respect  thereto,  together with a copy
of the notice thereof given to the PBGC.

                           (b)  Promptly  notify  the  Agent in  writing  of the
receipt by the Borrower or the Parent of an assessment  of withdrawal  liability
in  connection  with a  complete  or  partial  withdrawal  with  respect  to any
Multiemployer  Plan and the statement of the action that the Loan Party or ERISA
Affiliate intends to take with respect thereto.

                           (c)  Promptly  notify  the  Agent in  writing  if the
Borrower or the Parent or any other Loan Party  receives:  (i) any notice of any
violation or administrative or judicial  complaint or order having been filed or
about to be filed  against  the  Borrower or the Parent or such other Loan Party
alleging violations of any Environmental Law and Regulation,  or (ii) any notice
from any governmental body or any other Person alleging that the Borrower or the
Parent  or such  other  Loan  Party is or may be  subject  to any  Environmental
Liability;  and promptly upon receipt thereof,  provide the Agent with a copy of
such notice  together  with a statement of the action the Borrower or the Parent
or such other Loan Party intends to take with respect thereto.

                  SECTION 6.11              COMPLY WITH ERISA.

                           Comply with all applicable provisions of ERISA now or
hereafter  in effect  unless the  failure to so comply  will not have a material
effect on the business of the Borrower or any ERISA Affiliate.



                  SECTION 6.12              ENVIRONMENTAL COMPLIANCE.

                           Operate all property  owned or leased by it such that
no  obligation,   including  a  clean-up  obligation,   shall  arise  under  any
Environmental  Law and Regulation,  which  obligation would constitute a Lien on
any  property of the  Borrower


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or the Parent or any other Loan Party; provided, however, that in the event that
any such claim is made or any such obligation arises,  the Borrower,  the Parent
or such other Loan Party shall, at its own cost and expense, immediately satisfy
such claim or obligation.

                  SECTION 6.13             MANAGEMENT LETTER.

                           If  the  Borrower,   the  Parent  or  any  Subsidiary
receives a  management  letter with respect to the  Borrower,  the Parent or any
Subsidiary  prepared by Grant  Thornton  L.L.P.  or another firm of  independent
certified public  accountants,  provide a copy of such management  letter to the
Lenders within five (5) days following receipt.

                  SECTION 6.14             PREPARATION OF STRATEGIC PLAN REPORT.

                           The Borrower  shall prepare and submit to the Lenders
on or before each of September 1, 1997 and  September 1, 1998, a written  report
with respect to (a) the status of the implementation of the recommendations made
by the Carl Marks  Consulting  Group,  Co. (the  "CONSULTANT")  in the strategic
plan, dated September 1996 prepared by the Consultant for the Borrower,  and (b)
any modifications made to such strategic plan.

                  SECTION 6.15             TAX REFUNDS.

                           Instruct,  or otherwise  arrange with, the IRS, state
tax  authorities  and other relevant  authorities for all tax refunds payable to
the Parent, the Borrower or any Subsidiaries to be paid as a cash refund, rather
than as applied as a credit against their current or future tax liabilities. The
Parent,  the  Borrower and all  Subsidiaries  will apply for all  available  tax
refunds within 60 days following the date hereof and will thereafter  diligently
prosecute such applications to conclusion.

         ARTICLE 7.   NEGATIVE COVENANTS.

                  So long as the  Borrower  is  indebted  to the  Lenders or the
Agent,  and  until  payment  in  full  of the  Loans  and  Acceptances  and  the
termination or expiration of all the L/Cs,  and Steamship  Guaranties and Airway
Releases,  and full and  complete  performance  of all of its other  obligations
arising hereunder, the Borrower shall not and the Parent shall not and shall not
permit any of its  Subsidiaries to do, agree to do, or permit to be done, any of
the following:




                  SECTION 7.1               INDEBTEDNESS.



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                           Create,  incur,  permit to exist or have  outstanding
any Indebtedness, except:

                           (a) Indebtedness of the Borrower to the Lenders,  the
Agent,  the  Collateral   Monitoring  Agent  and  the  Issuing  Bank  and  other
Obligations under this Agreement;

                           (b)  Taxes,  assessments  and  governmental  charges,
non-interest bearing accounts payable and accrued  liabilities,  in any case not
more than 90 days past due from the original due date thereof,  and non-interest
bearing  deferred  liabilities  other than for borrowed  money  (e.g.,  deferred
compensation  and deferred  taxes),  in each case incurred and continuing in the
ordinary course of business;

                           (c)  Indebtedness  secured by the security  interests
referred to in subsection  7.2(c) hereof and Capitalized Lease  Obligations,  in
each case incurred only if, after giving  effect  thereto,  the limit on Capital
Expenditures set forth in Section 7.13 hereof would not be breached;

                           (d)  Indebtedness of the Borrower to the Lenders with
respect to the Korean L/C and the Hanil L/C; and

                           (e) As set  forth on  Exhibit  M hereto  which  shall
include, without limitation, with respect to each such item of Indebtedness, its
terms, maturity, conditions, the collateral security therefor and the use of the
proceeds thereof.

                  SECTION 7.2               LIENS.

                           Create, or assume or permit to exist, any Lien on any
of the  properties  or  assets  of the  Borrower  or  the  Parent  or any of its
Subsidiaries, whether now owned or hereafter acquired, except:

                           (a) Those   created  and  granted  by   the  Security
Documents;

                           (b) Permitted Liens;

                           (c) Purchase money  mortgages or security  interests,
conditional sale  arrangements and other similar  security  interests,  on motor
vehicles and equipment  acquired by the Borrower or the Parent or any Subsidiary
(hereinafter  referred to indi vidually as a "PURCHASE MONEY SECURITY INTEREST")
with the proceeds of the Indebtedness  referred to in subsection  7.1(c) hereof;
provided, however, that:



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                             (i) The  transaction  in which any  Purchase  Money
Security  Interest  is  proposed  to be created is not then  prohibited  by this
Agreement;

                             (ii) Any Purchase  Money  Security  Interest  shall
attach only to the property or asset acquired in such  transaction and shall not
extend to or cover any other assets or properties  of the Borrower,  the Parent,
or, as the case may be, any Subsidiary; and

                             (iii) The  Indebtedness  secured  or covered by any
Purchase Money Security Interest shall not exceed the lesser of the cost or fair
market  value of the  property  or asset  acquired  and  shall  not be  renewed,
extended or prepaid from the  proceeds of any  borrowing  by the  Borrower,  the
Parent or any Subsidiary;

                           (d) The interests of the lessor under any Capitalized
Lease permitted hereunder; and

                           (e) As set forth on Exhibit E hereto.

                  SECTION 7.3               GUARANTIES.

                           Except  as set forth on  Exhibit  M  hereto,  assume,
endorse,  be or become liable for, or guarantee,  the obligations of any Person,
except by the endorsement of negotiable instruments for deposit or collection in
the ordinary course of business; provided, however, that the Parent may guaranty
(i) the  obligations  of Siena and the  Borrower  in respect  of trade  accounts
payable,  rental  obligations and Capitalized Lease Obligations  permitted to be
incurred in accordance  with the provisions of Sections  7.1(b),  7.18 and 7.14,
respectively and (ii) up to $500,000 in the aggregate of the obligations of Hong
Kong and Global  permitted to be incurred in  accordance  with the terms of this
Agreement.  For the purposes  hereof,  the term  "guarantee"  shall  include any
agreement, whether such agreement is on a contingency or otherwise, to purchase,
repurchase  or  otherwise  acquire  Indebtedness  of  any  other  Person,  or to
purchase,  sell or lease, as lessee or lessor, property or services, in any such
case  primarily  for the purpose of enabling  another  person to make payment of
Indebtedness,   or  to  make  any  payment  (whether  as  an  advance,   capital
contribution,  purchase of an equity  interest or otherwise) to assure a minimum
equity,  asset  base,  working  capital  or other  balance  sheet  or  financial
condition,  in connection with the Indebtedness of another Person,  or to supply
funds to or in any  manner  invest in  another  Person in  connection  with such
Person's Indebtedness.


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                  SECTION 7.4               MERGERS; ACQUISITIONS.

                           (a) Merge or consolidate  with any Person (whether or
not the Borrower or the Parent or any  Subsidiary is the surviving  entity),  or
acquire all or  substantially  all of the assets or any of the capital  stock of
any Person; or

                           (b) Create any new Subsidiary or Affiliate.


                  SECTION 7.5               REDEMPTIONS; DISTRIBUTIONS.

                           (a) Except in connection  with existing  stock option
plans of the Parent, purchase,  redeem, retire or otherwise acquire, directly or
indirectly, or make any sinking fund payments with respect to, any shares of any
class of stock of the Borrower,  the Parent or any  Subsidiary  now or hereafter
outstanding or set apart any sum for any such purpose; or

                           (b)  Declare  or  pay  any   dividends  or  make  any
distribution of any kind on the Borrower's or the Parent's outstanding stock, or
set aside any sum for any such  purpose,  except that the Borrower or the Parent
may  declare  or pay any  dividend  payable  solely in shares of its  respective
common stock;  provided,  however, that if any such issuance would result in the
issuance of fractional  shares,  the Borrower or the Parent, as the case may be,
may pay dividends in cash in the amount of such fractional shares to the holders
thereof in lieu of issuing  fractional  shares to such holders provided that the
amount of such cash dividends in the aggregate shall not exceed $10,000.

                  SECTION 7.6               STOCK ISSUANCE.

                           Issue any additional shares or any right or option to
acquire any shares, or any security  convertible into any shares, of the capital
stock of the  Borrower  or any  Subsidiary,  except  in  connection  with  stock
dividends as permitted under subsection 7.5(b) hereof.

                  SECTION 7.7               CHANGES IN BUSINESS.

                           Make any material change in the business conducted by
the  Borrower,  the  Parent or its  Subsidiaries,  as the case may be, or in the
nature of its  operation,  or liquidate or dissolve the Borrower,  the Parent or
its Subsidiaries (or suffer any liquidation or  dissolution),  or convey,  sell,
lease, assign,  transfer or otherwise dispose of any of its property,  assets or
business except in the ordinary course of business and for a fair  consideration
or dispose of any shares of stock  (except by the Parent) or any Indebted  ness,
whether now owned or hereafter



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acquired,  or  discount,  sell,  pledge,  hypothecate  or  otherwise  dispose of
accounts receivable.

                  SECTION 7.8               PREPAYMENTS.

                           Make any  voluntary  or  optional  prepayment  of any
Indebtedness  (other than  Indebtedness  hereunder  to the Lenders) for borrowed
money incurred or permitted to exist under the terms of this Agreement.


                  SECTION 7.9               INVESTMENTS.

                           Except as otherwise  permitted  under this Agreement,
make,  or suffer to exist,  any  Investment  in any Person,  including,  without
limitation,  any  Subsidiary,  any joint venture or any  shareholder,  director,
officer or  employee  of the  Borrower,  the Parent or any of the  Subsidiaries,
except:

                           (a) Investments in:

                             (i) obligations  issued or guaranteed by the United
States of America;

                             (ii) certificates of deposit,  bankers  acceptances
and  other  "money  market  instruments"  issued  by any bank or  trust  company
organized  under the laws of the United  States of America or any State  thereof
and  having  capital  and  surplus  in an  aggregate  amount  of not  less  than
$100,000,000;

                             (iii) open  market  commercial  paper  bearing  the
highest  credit  rating  issued by Standard & Poor's  Corporation  or by another
nationally recognized credit rating agency;

                             (iv)  repurchase  agreements  entered into with any
bank or trust company  organized  under the laws of the United States of America
or any State  thereof and having  capital and surplus in an aggregate  amount of
not less than  $100,000,000  relating  to United  States of  America  government
obligations; and

                             (v) shares of "money market funds", each having net
assets of not less than $100,000,000;

in each case  maturing  or being due or  payable  in full not more than 180 days
after the Borrower's, the Parent's or any Subsidiary's acquisition thereof;

                           (b)  Investments in the form of loans to employees of
the  Borrower,  the  Parent or any  Subsidiary,  provided  that the  outstanding
principal


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amount of all such loans to any one  employee  shall at no time exceed  $100,000
and that the aggregate  outstanding  principal amount of all such loans shall at
no time exceed $200,000;

                           (c)  Investments by (i) the Borrower or the Parent in
any  Subsidiary and by the Parent or any Subsidiary in the Borrower as in effect
on the date  hereof  and as set forth on  Schedule  7.9 and (ii) an  advance  or
advances to Holdings which shall not exceed  $500,000 in the aggregate and which
shall in each case be evidenced by a note repayable no later than May 31, 1999;

                           (d) Investments in BET Studio LLC;  provided that the
amount of  Investments  pursuant to this  subsection (d) shall not exceed in the
aggregate $2,000,000;

                           (e)  Investments in no more than one (1) retail store
from the date hereof  through  May 31,  1998 and three (3) retail  stores in the
aggregate from the date hereof through the Commitment  Termination  Date,  which
Investments  shall  not  exceed  $175,000   individually  and  $500,000  in  the
aggregate; and

                           (f) Other  Investments in any factories,  ventures or
retail  stores  as in effect on the date  hereof  as set forth on  Schedule  7.9
hereof.

                  SECTION 7.10              FISCAL YEAR.

                           Change its fiscal year.

                  SECTION 7.11              ERISA OBLIGATIONS.

                           (a)  Be  or   become   obligated   (after   a   final
determination)  to the PBGC in excess of $50,000 other than in respect of annual
premium payments;

                           (b)  Be  or   become   obligated   (after   a   final
determination)  to the IRS in excess of $50,000  with respect to excise or other
penalty taxes provided for in Section 4975 of the Code;

                           (c) Incur a complete withdrawal or partial withdrawal
with  respect to any  Multiemployer  Plan if such  withdrawal  would result in a
material adverse change in the business,  operations or condition,  financial or
otherwise, of the Borrower, the Parent or its Subsidiaries; or

                           (d) Fail to make any  contribution  or payment to any
Multiemployer  Plan which the  Borrower  or the Parent is required to make under
any agreement relating to such Multiemployer Plan, or any law pertaining thereto
if such


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failure would result in a material adverse change in the business, operations or
condition,   financial  or  otherwise,  of  the  Borrower,  the  Parent  or  its
Subsidiaries.

                  SECTION 7.12              AMENDMENTS OF DOCUMENTS.

                           Modify, amend,  supplement or terminate,  or agree to
modify,  amend,  supplement or terminate,  its certificate of  incorporation  or
by-laws.

                  SECTION 7.13              CAPITAL EXPENDITURES.

                           Make  or be  or  become  obligated  to  make  Capital
Expenditures  for the Parent,  Borrower  and the  Subsidiaries,  in an amount in
excess of (a)  $1,200,000  in the  aggregate  during  the period  commencing  on
February 1, 1997 and ending on January 31, 1998; (b) an aggregate  amount during
the period  commencing  on  February  1, 1998 and ending on January  31, 1999 as
preliminarily   determined  by  the  Lenders  and  the  Borrower  based  on  the
Projections  and the business  plan for the fiscal year ending  January 31, 1999
and the unaudited  financial  statements  for the fiscal year ending January 31,
1998,  but in no event less than  $1,200,000  unless the Lenders  determine  (in
their reasonable  discretion) that such amount warrants  adjustment based on the
financial  condition of the Borrower as set forth in such Projections,  business
plan or unaudited financial statements, which determination shall be made within
30 days of  receipt  by the  Lenders  of such  Projections,  business  plan  and
unaudited  financial  statements,  and such determination shall become effective
after receipt and satisfactory review by the Lenders of the Financial Statements
for the fiscal year ending January 31, 1998; and (c) an aggregate  amount during
the  period  commencing  on  February  1,  1999 and  ending  on May 31,  1999 as
preliminarily   determined  by  the  Lenders  and  the  Borrower  based  on  the
Projections  and the business  plan for the fiscal year ending  January 31, 1999
and the unaudited  financial  statements  for the fiscal year ending January 31,
1998, but in no event less than $400,000 unless the Lenders  determine (in their
reasonable  discretion)  that  such  amount  warrants  adjustment  based  on the
financial  condition of the Borrower as set forth in such Projections,  business
plan or unaudited financial statements, which determination shall be made within
30 days of  receipt  by the  Lenders  of such  Projections,  business  plan  and
unaudited  financial  statements,  and such determination shall become effective
after receipt and satisfactory review by the Lenders of the Financial Statements
for the fiscal year ending January 31, 1998.

                  SECTION 7.14              CAPITALIZED LEASE OBLIGATIONS.

                           Become  obligated to make  expenditures in respect of
Capitalized Lease  Obligations  in excess of the amount  outstanding on the date
hereof with respect to Capitalized  Lease  Obligations plus (a) aggregate annual
payments   of   $400,000  for  expenditures  in  respect  of  Capitalized  Lease
Obligations  with respect 



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to   all   Leases  entered  into   during  the   period  from  February  1, 1997
through January 31, 1998, and (b) aggregate  annual payments for expenditures in
respect of Capitalized Lease Obligations with respect to all Leases entered into
during  the  period  from   February  1,  1998  through   January  31,  1999  as
preliminarily   determined  by  the  Lenders  and  the  Borrower  based  on  the
Projections  and the business  plan for the fiscal year ending  January 31, 1999
and the unaudited  financial  statements  for the fiscal year ending January 31,
1998, but in no event less than $400,000 unless the Lenders  determine (in their
reasonable  discretion)  that  such  amount  warrants  adjustment  based  on the
financial  condition of the Borrower as set forth in such Projections,  business
plan or unaudited financial statements, which determination shall be made within
30 days of  receipt  by the  Lenders  of such  Projections,  business  plan  and
unaudited  financial  statements,  and such determination shall become effective
after receipt and satisfactory review by the Lenders of the Financial Statements
for the fiscal year ending January 31, 1998; and (c) aggregate  annual  payments
for expenditures in respect of Capitalized Lease Obligations with respect to all
Leases entered into during the period from February 1, 1999 through May 31, 1999
as  preliminarily  determined  by the  Lenders  and the  Borrower  based  on the
Projections  and the business  plan for the fiscal year ending  January 31, 1999
and the unaudited  financial  statements  for the fiscal year ending January 31,
1998, but in no event less than $133,333 unless the Lenders  determine (in their
reasonable  discretion)  that  such  amount  warrants  adjustment  based  on the
financial  condition of the Borrower as set forth in such Projections,  business
plan or unaudited financial statements, which determination shall be made within
30 days of  receipt  by the  Lenders  of such  Projections,  business  plan  and
unaudited  financial  statements,  and such determination shall become effective
after receipt and satisfactory review by the Lenders of the Financial Statements
for the fiscal year ending January 31, 1998, provided, however, that the amounts
permitted  in (a),  (b) and (c) above  shall  apply only to Leases  relating  to
Capital Expenditures permitted under Section 7.13.

                  SECTION 7.15              MANAGEMENT FEES.

                           Pay, or be or become obligated to pay, any Management
Fees  to  any  Person,  or  any  interest  on  any deferred obligation therefor,
including,  without  limitation,  to  any  shareholder,  director,   officer  or
employee of the Borrower other than in usual and customary  amounts with respect
to the services rendered or management supervision provided.

                  SECTION 7.16              TRANSACTIONS WITH AFFILIATES.

                           Except  as  expressly  permitted  by this  Agreement,
directly or indirectly:  (a) make any Investment in an Affiliate;  (b) transfer,
sell,  lease,  assign or otherwise  dispose of any assets to an  Affiliate;  (c)
merge into or consolidate  with or purchase or acquire assets from an Affiliate;
(d) enter into any other transaction


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directly  or  indirectly  with or for the benefit of any  Affiliate  (including,
without limitation,  guarantees and assumptions of obligations of an Affiliate);
or (e) enter into any agreement  providing for above-market  prices for goods or
services to or from an  Affiliate;  provided,  however,  that:  (i)  payments on
Investments  expressly  permitted  by Section  7.9 hereof may be made,  (ii) any
Affiliate  who is a natural  person may serve as an  employee or director of the
Borrower or any Subsidiary and receive reasonable  compensation for his services
in such capacity, and (iii) the Borrower, the Parent or any Subsidiary may enter
into any  transaction  with an Affiliate  providing for the leasing of property,
the  rendering  or receipt  of  services  or the  purchase  or sale of  product,
inventory and other assets in the ordinary course of business if the monetary or
business consideration arising therefrom would be substantially as advan tageous
to the  Borrower,  the  Parent  or a  Subsidiary  as the  monetary  or  business
consideration that it would obtain in a comparable arm's length transaction with
a Person not an Affiliate.

                  SECTION 7.17              ACTIVITIES LEADING TO
                                            FORFEITURE PROCEEDING.

                           Neither the Borrower nor any of its  Subsidiaries  or
Affiliates  shall  engage in or  propose  to be  engaged  in the  conduct of any
business or activity which could result in a Forfeiture Proceeding.

                  SECTION 7.18              RENTAL OBLIGATIONS.

                           Enter into any Lease (other than  Capitalized  Leases
that are governed by Section 7.14  hereof),  other than Leases which require the
Borrower,  the Parent or any Subsidiary to pay in the aggregate not in excess of
(a) $400,000  during the period from February 1, 1997 through  January 31, 1998;
(b) an amount during the period from  February 1, 1998 through  January 31, 1999
as  preliminarily  determined  by the  Lenders  and the  Borrower  based  on the
Projections  and the business  plan for the fiscal year ending  January 31, 1999
and the unaudited  financial  statements  for the fiscal year ending January 31,
1998, but in no event less than $400,000 unless the Lenders  determine (in their
reasonable  discretion)  that  such  amount  warrants  adjustment  based  on the
financial  condition of the Borrower as set forth in such Projections,  business
plan or unaudited financial statements, which determination shall be made within
30 days of  receipt  by the  Lenders  of such  Projections,  business  plan  and
unaudited  financial  statements,  and such determination shall become effective
after receipt and satisfactory review by the Lenders of the Financial Statements
for the fiscal year ending January 31, 1998; and (c) an amount during the period
from  February 1, 1999 through May 31, 1999 as  preliminarily  determined by the
Lenders and the Borrower based on the  Projections and the business plan for the
fiscal year ending January 31, 1999 and the unaudited  financial  statements for
the fiscal year ending January 31, 1998, but in no event less than


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$133,333 unless the Lenders determine (in their reasonable discretion) that such
amount warrants  adjustment based on the financial  condition of the Borrower as
set forth in such Projections,  business plan or unaudited financial statements,
which  determination  shall be made  within 30 days of receipt by the Lenders of
such Projections,  business plan and unaudited  financial  statements,  and such
determination  shall become effective after receipt and  satisfactory  review by
the Lenders of the Financial  Statements  for the fiscal year ending January 31,
1998; provided, however, that such limitations shall not apply to the portion of
any lease payment due which is determined as a percentage of the revenues of the
applicable retail store of the Borrower, the Parent or any Subsidiary.

                  SECTION 7.19              RETAIL STORE.

                           Except as expressly permitted by Section 7.9(e), open
any additional  retail stores during the period from the date hereof through the
Commitment  Termination Date; provided,  however, that in addition to the retail
stores  expressly  permitted by Section 7.9(e),  the Borrower may open seasonal,
outlet-type stores so long as (i) not more than four (4) such stores are open at
any time,  (ii) the  occupancy  of each such  store  shall not  exceed  five (5)
months, (iii) the Borrower shall not make any capital expenditures in connection
with such  stores,  and (iv) rent payable to the lessors of such stores shall be
determined on a "percentage  of sales" basis only (i.e.,  no fixed minimum rent)
and the Borrower shall not guarantee to the lessor any minimum sales.

                  SECTION 7.20              LICENSE AGREEMENTS.

                           Enter  into  any  licensing   agreement  which  would
prohibit or limit the Agent's exercise of rights to liquidate Collateral.

         ARTICLE 8.  EVENTS OF DEFAULT.

                           If any one or more of the following  events  ("EVENTS
OF DEFAULT") shall occur and be continuing,  the Commitments shall terminate and
the  entire  unpaid  balance  of the  principal  of and  interest  on the  Notes
outstanding and all other  Obligations  and  Indebtedness of the Borrower to the
Lenders  and the Agent  arising  hereunder  and under the other Loan  Documents,
shall  immediately  become due and payable  upon  written  notice to that effect
given to the Borrower by the Agent (except that in the case of the occurrence of
any Event of Default described in Section 8.6 no such notice shall be required),
without  presentment or demand for payment,  notice of  non-payment,  protest or
further notice or demand of any kind,  all of which are expressly  waived by the
Borrower:


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                  SECTION 8.1               PAYMENTS.

                           Failure by the  Borrower  to (i) make any  payment or
mandatory prepay ment of principal or interest upon any Note when due, (ii) make
any  payment  of any Fee when due,  (iii)  make any  payment  arising  under any
Application,  L/C, Acceptance,  Steamship Guarantee or Airway Release, (iv) make
any  required  payment  under  Section  2.7 of this  Agreement,  or (v) make any
required  payment under Section 2.17,  2.18 and 10.1 of this Agreement and, with
respect to clause (v) only, such failure shall continue  unremedied for a period
of 10 days in the case of  Section  2.17 and 2.18 and three (3) days in the case
of Section 10.1, in each case after receipt by Borrower of a demand therefor; or

                  SECTION 8.2               CERTAIN COVENANTS.

                           Failure to perform or observe  any of the  agreements
of the  Borrower,  the Parent or any  Subsidiary  contained  in  Section  6.9 or
Article 7 hereof; or

                  SECTION 8.3               OTHER COVENANTS.

                           (a) Failure by the Borrower to perform or observe any
other term,  condition or covenant of this Agreement or of any of the other Loan
Documents to which it is a party,  which shall remain unremedied for a period of
15 days after the earlier of (i) when the Borrower becomes aware of such failure
and (ii) notice thereof shall have been given to the Borrower by the Agent; or

                           (b) Failure by any Loan Party other than the Borrower
to  perform  or  observe  any term,  condition  or  covenant  of any of the Loan
Documents to which it is a party,  which shall remain unremedied for a period of
15 days  after the  earlier of (i) when such Loan  Party  becomes  aware of such
failure and (ii)  notice  thereof  shall have been given to the  Borrower by the
Agent; or

                  SECTION 8.4               OTHER DEFAULTS.

                           (a) Other  than the  defaults  set forth on Exhibit G
hereto,  failure to perform or observe  any term,  condition  or covenant of any
bond, note, debenture,  loan agreement,  indenture,  guaranty,  trust agreement,
mortgage  or  similar  instrument  to which  the  Borrower,  the  Parent  or any
Subsidiary is a party or by which it is bound, or by which any of its properties
or assets may be affected  (a "DEBT  INSTRUMENT"),  so that,  as a result of any
such failure to perform, the Indebtedness included therein or secured or covered
thereby  may be  declared  due and  payable  prior  to the  date on  which  such
Indebtedness would otherwise become due and payable; or



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                           (b) Any event or  condition  referred  to in any Debt
Instrument  shall  occur or fail to occur,  so that,  as a result  thereof,  the
Indebtedness  included therein or secured or covered thereby may be declared due
and payable prior to the date on which such Indebtedness  would otherwise become
due and payable; or

                           (c)  Failure  to pay any  Indebtedness  for  borrowed
money due at final maturity or pursuant to demand under any Debt Instrument;

provided,  however,  that if any creditor or beneficiary  under any bond,  note,
debenture,  loan agreement,  indenture,  guaranty, trust agreement,  mortgage or
similar instrument shall assert a default (including,  without limitation, those
set forth on Exhibit G hereto) and shall  either (i) declare due and payable the
Indebtedness evidenced or secured thereby or (ii) shall commence the exercise of
remedies  on the basis of such  default,  such  declaration  or  exercise  shall
constitute  an Event of  Default  hereunder,  upon the  happening  of which  the
Lenders may take action  notwithstanding  Section  10.15  hereof;  and provided,
further,  that the provisions of this Section 8.4 shall not be applicable to any
Debt  Instrument that on the date this Section 8.4 would otherwise be applicable
thereto, relates to or evidences Indebtedness in a principal amount of less than
$50,000; or

                  SECTION 8.5               REPRESENTATIONS AND WARRANTIES.

                           Any representation or warranty made in writing to the
Lenders  or the Agent in any of the Loan  Documents  or in  connection  with the
making  of  the  Loans  or the  issuance  of any  L/Cs,  Acceptances,  Steamship
Guaranties or Airway Releases,  or any certificate,  statement or report made or
delivered in compliance with this Agreement, shall have been false or misleading
in any  material  respect  when  made or  delivered  or  deemed  made or  deemed
delivered; or

                  SECTION 8.6               BANKRUPTCY.


                           (a) The Borrower,  the Parent or any Subsidiary shall
make an assignment for the benefit of creditors,  file a petition in bankruptcy,
be adjudicated insolvent,  petition or apply to any tribunal for the appointment
of a receiver,  custodian, or any trustee for it or him or a substantial part of
its or his  assets,  or shall  commence  any  proceeding  under any  bankruptcy,
reorganization,  arrangement,  readjustment of debt,  dissolution or liquidation
law or statute of any  jurisdiction,  whether now or hereafter in effect, or the
Borrower,  the  Parent or any  Subsidiary  shall  take any  corporate  action to
authorize any of the foregoing actions;  or there shall have been filed any such
petition  or  application,  or any such  proceeding  shall  have been  commenced
against it or him, that remains  unstayed or undismissed for a period of 60 days
or more; or any order for relief shall be entered in any such proceeding; or the
Borrower, the Parent or any Subsidiary by any act or omission shall


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indicate  its or  his  consent  to,  approval  of or  acquiescence  in any  such
petition,  application or proceeding or the appointment of a custodian, receiver
or any  trustee  for it or him  or  any  substantial  part  of any of its or his
properties,  or shall suffer any  custodianship,  receivership or trusteeship to
continue unstayed or undischarged for a period of 60 days or more; or

                           (b) The Borrower,  the Parent or any Subsidiary shall
generally not pay its or his debts as such debts become due; or

                           (c) The Borrower,  the Parent or any Subsidiary shall
have concealed,  removed,  or permitted to be concealed or removed,  any part of
its or his  property,  with  intent  to  hinder,  delay  or  defraud  its or his
creditors  or any of them or made or  suffered a  transfer  of any of its or his
property that may be fraudulent under any bankruptcy,  fraudulent  conveyance or
similar  law; or shall have made any  transfer of its or his  property to or for
the benefit of a creditor at a time when other creditors similarly situated have
not been  paid;  or shall have  suffered  or  permitted,  while  insolvent,  any
creditor  to  obtain  a Lien  upon  any of its  or his  property  through  legal
proceedings  or distraint  that is not stayed or vacated within 60 days from the
date thereof; or

                  SECTION 8.7               JUDGMENTS.

                           Any judgment against the Borrower,  the Parent or any
Subsidiary or any  attachment,  levy or execution  against any of its properties
for any amount in excess of $200,000 in respect of any judgment after  deducting
from such judgment the amount of any insurance  proceeds payable to the judgment
debtor  with  respect  thereto,   shall  remain  unpaid,   unstayed  on  appeal,
undischarged, unbonded or undismissed for a period of 30 days or more; or

                  SECTION 8.8               ERISA.

                           (a) The  institution by the PBGC of  proceedings  for
the  involuntary  termination  of any  Pension  Plan by reason of, or that could
result in, an  "accumulated  funding  deficiency"  under Section 412 of the Code
which  would have a  material  adverse  effect on the  business,  operations  or
condition,   financial  or  otherwise,  of  the  Borrower,  the  Parent  or  its
Subsidiaries; or

                           (b)  Failure  by the  Borrower  or the Parent to make
required  contributions,  in accordance with the applicable provisions of ERISA,
to each of the Employee Benefit Plans or Plans hereafter  established or assumed
by it including  any Plan which is a  Multiemployer  Plan, if such failure would
result in the imposition of a Lien,  which would have a material  adverse effect
on the business,  financial condition or properties of the Borrower,  the Parent
and its Subsidiaries, on the assets


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of the Borrower or the Parent or an ERISA  Affiliate or would  otherwise  have a
material  adverse effect on the business,  financial  condition or properties of
the Borrower, the Parent and the Subsidiaries, taken as a whole; or

                  SECTION 8.9               OWNERSHIP OF STOCK.

                           Morris  and/or Aron Goldfarb (or, in the event of the
death of either of them, his estate, legal representative or heirs) shall at any
time own,  beneficially and of record, less than 33 1/3% in the aggregate of all
of the  issued and  outstanding  shares of  capital  stock of the Parent  having
ordinary voting rights for the election of directors; or

                  SECTION 8.10              MANAGEMENT.

                           Morris   Goldfarb   shall   cease   for  any   reason
whatsoever,   including,  without  limitation,  death  or  disability  (as  such
disability shall be determined in the sole and absolute judgment of the Majority
Lenders) to be and continuously perform the duties of chief executive officer of
the Borrower or, if such cessation  shall occur as a result of the death or such
disability,  no successor  satisfactory  to the Agent and the Lenders,  in their
sole  discretion,  shall have  become and shall have  commenced  to perform  the
duties of chief  executive  officer  of the  Borrower  within 90 days after such
cessation;  provided,  however,  that if any  satisfactory  successor or interim
management  shall have been so elected and shall have  commenced  performance of
such duties within such period,  the name of such successor or successors  shall
be deemed to have been  inserted  in place of Morris  Goldfarb  in this  Section
8.10; or

                  SECTION 8.11              LIENS.

                           Any of the Liens created and granted to the Agent for
the ratable benefit of the Lenders under the Security Documents shall fail to be
valid,  first,  perfected  Liens,  subject to no prior or equal Lien,  except as
permitted by Section 7.2 hereof; or



                  SECTION 8.12              AMOUNT OF OBLIGATIONS.

                           On the last day of any month, the Obligations  exceed
the Borrowing  Base whether or not such excess is repaid  pursuant to subsection
2.7(c) hereof at any time; or

                  SECTION 8.13              FORFEITURE PROCEEDINGS.

                           Any Forfeiture  Proceeding  shall have been commenced
or the Borrower shall have given any Lender  written notice of the  commencement
of any



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Forfeiture Proceeding as provided in Section 5.11 or any Lender has a good faith
basis to believe that a Forfeiture Proceeding has been threatened or commenced.

                  SECTION 8.14              MATERIAL ADVERSE CHANGE.

                           There shall have occurred a material  adverse  change
in the financial condition or business prospects of the Borrower, the Parent and
the Subsidiaries, taken as a whole, since the date of this Agreement.

         ARTICLE 9.  AGENCY PROVISIONS.

                  SECTION 9.1               APPOINTMENT, POWERS AND IMMUNITIES.

                           Each   Lender   hereby   irrevocably   appoints   and
authorizes  each of the Collateral  Monitoring  Agent,  the Issuing Bank and the
Agent to act as its agent hereunder,  under the Security Documents and the other
Loan Documents with such powers as are  specifically  delegated to such parties,
respectively,  by the terms of this  Agreement,  the Security  Documents and the
other  Loan  Documents  together  with  such  other  powers  as  are  reasonably
incidental  thereto.  Each of the Collateral  Monitoring Agent, the Issuing Bank
and the Agent shall have no duties or  responsibilities  except those  expressly
set forth in this Agreement, the Security Documents and the other Loan Documents
and shall be a trustee for any Lender. None of the Collateral  Monitoring Agent,
the  Issuing  Bank or the Agent  shall be  responsible  to the  Lenders  for any
recitals, statements, representations or warranties contained in this Agreement,
the  Security  Documents,  or the  other  Loan  Documents,  in any  Application,
certificate or other document referred to or provided for in, or received by any
of them  under,  this  Agreement,  the  Security  Documents  or the  other  Loan
Documents,   or   for   the   value,   validity,   effectiveness,   genuineness,
enforceability or sufficiency of this Agreement,  the Security  Documents or the
other Loan Documents or any other document referred to or provided for herein or
therein  or  for  the   collectibility   of  the  Loans  or  for  the  validity,
effectiveness  or value of any  interest  or  security  covered by the  Security
Documents  or  for  the  value  of  any   Collateral  or  for  the  validity  or
effectiveness of any assignment, mortgage, pledge, security agreement, financing
statement,  document or  instrument,  or for the filing,  recording,  re-filing,
continuing or  re-recording of any thereof or for any failure by the Borrower or
any of the other Loan  Parties to perform any of its  obligations  hereunder  or
under the other Loan Documents.  Each of the Collateral  Monitoring  Agent,  the
Issuing Bank and the Agent may employ agents and attorneys-in-fact and shall not
be answerable, except as to money or securities received by it or its authorized
agents, for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable  care. None of the Collateral  Monitoring  Agent,
the Issuing Bank or the Agent nor any of their directors, officers, employees or
agents  shall be liable or  responsible  for any  action  taken or omitted to be
taken by it or them hereunder, under


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the Security Documents or the other Loan Documents or in connection  herewith or
therewith, except for its or their own gross negligence or willful misconduct.

                  SECTION 9.2               RELIANCE.

                           Each of the Collateral  Monitoring Agent, the Issuing
Bank and the Agent shall be entitled to rely upon any  certification,  notice or
other  communication  (including  any thereof by telephone,  telex,  telegram or
cable)  believed by it to be genuine and correct and to have been signed or sent
by or on behalf of the proper person or persons,  and upon advice and statements
of legal counsel, independent accountants and other experts selected by them. As
to any  matters not  expressly  provided  for by this  Agreement,  the  Security
Documents or the other Loan Documents,  each of the Collateral Monitoring Agent,
the Issuing  Bank or the Agent shall in all cases be fully  protected in acting,
or in refraining  from acting,  hereunder,  under the Security  Documents or the
other Loan  Documents in  accordance  with  instructions  signed by the Majority
Lenders,  and such  instructions of the Majority Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.

                  SECTION 9.3               EVENTS OF DEFAULT.

                           Neither the Collateral  Monitoring Agent or the Agent
shall be deemed to have knowledge of the occurrence of a Default unless the such
party has received notice from a Lender or the Borrower  specifying such Default
and stating that such notice is a "Notice of Default".  In the event that either
the  Agent or the  Collateral  Monitoring  Agent  receives  such a notice of the
occurrence of a Default,  the Agent or the Collateral  Monitoring shall promptly
give notice  thereof to the  Lenders.  The Agent  shall  (subject to Section 9.7
hereof)  take such action with  respect to such  Default as shall be directed by
the Majority Lenders.

                  SECTION 9.4               RIGHTS AS A LENDER.

                           Each of the Collateral  Monitoring Agent, the Issuing
Bank and the Agent in its  capacity as a Lender  hereunder,  shall have the same
rights and powers  hereunder  as any other  Lender and may  exercise the same as
though  it were not  acting  as an agent  hereunder,  and the term  "Lender"  or
"Lenders"  shall,  unless the context other wise indicates,  include each of the
Collateral  Monitoring  Agent,  the Issuing Bank and the Agent in its individual
capacity.  Each of the Collateral  Monitoring  Agent, the Issuing Bank and Agent
and their  Affiliates  may  (without  having to account  therefor to any Lender)
accept deposits from, lend money to and generally engage in any kind of banking,
trust or other business with the Borrower or its  Affiliates,  as if it were not
acting  as an agent of the  Lenders  hereunder,  and may  accept  fees  from the
Borrower or its Affiliates, for services in connection with this


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Agreement,  the  Security  Documents  or any  of the  other  Loan  Documents  or
otherwise  without  having to  account  for the same to the  Lenders;  provided,
however,  that each of the  Collateral  Monitoring  Agent,  Issuing Bank and the
Agent  will  not  accept  more  than its  Lender's  Share of any fee paid by the
Borrower  to the  Lenders  or to the Agent for the  account  of the  Lenders  in
connection with this Agreement.

                  SECTION 9.5               INDEMNIFICATION.

                           The Lenders shall  indemnify  each of the  Collateral
Monitoring  Agent,  the Issuing Bank and the Agent (to the extent not reimbursed
by the Borrower under Sections 10.1 and 10.2 hereof), ratably in accordance with
their respective Commitments, for any and all liabilities,  obligations, losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any  kind and  nature  whatsoever  that may be  imposed  on,  incurred  by or
asserted against any of the Collateral Monitoring Agent, the Issuing Bank or the
Agent in any way  relating to or arising  out of this  Agreement,  the  Security
Documents or any of the other Loan Documents or any other documents contemplated
by or  referred  to herein or therein  or the  transactions  contemplated  by or
referred  to herein or  therein  or the  transactions  contemplated  hereby  and
thereby (including, without limitation, the costs and expenses that the Borrower
is obligated to pay under  Sections 10.1 and 10.2 hereof,  but excluding  normal
administrative  costs and expenses  incident to the  performance of their agency
duties  hereunder  or under  the  Security  Documents  unless a  default  by the
Borrower with respect to the payment  thereof has occurred and is continuing) or
the enforcement of any of the terms hereof or of the Security  Documents,  or of
any such other documents, provided that no Lender shall be liable for any of the
foregoing  to the  extent  they  arise  from the  gross  negligence  or  willful
misconduct of the party to be indemnified.

                  SECTION 9.6               NON-RELIANCE.

                           Each  Lender  agrees that it has,  independently  and
without  reliance on the Collateral  Monitoring  Agent,  the Issuing Bank or the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrower and decision to
enter into this Agreement and that it will,  independently  and without reliance
upon the Collateral Monitoring Agent, the Issuing Bank or the Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time,  continue to make its own analysis  and  decisions in taking or not
taking  action under this  Agreement,  the Security  Documents or the other Loan
Documents.  None of the  Collateral  Monitoring  Agent,  the Issuing Bank or the
Agent  shall be  required  to keep  itself  informed  as to the  performance  or
observance  by the Borrower of this  Agreement,  the  Security  Documents or the
other Loan Documents or any other document referred to or provided for herein or
therein or to inspect the properties or


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<PAGE>

books of the  Borrower.  Except for  notices,  reports and other  documents  and
information  expressly required to be furnished to the Lenders by the Collateral
Monitoring  Agent, the Issuing Bank or the Agent hereunder or under the Security
Documents, or the other Loan Documents, none of the Collateral Monitoring Agent,
the Issuing Bank or the Agent shall have any duty or  responsibility  to provide
any  Lender  with  any  credit  or other  information  concerning  the  affairs,
financial  condition  or  business  of the  Borrower,  that  may  come  into the
possession of the Collateral  Monitoring Agent, the Issuing Bank or the Agent or
any of its Affiliates.

                  SECTION 9.7               FAILURE TO ACT.

                           Except  for   action   expressly   required   of  the
Collateral  Monitoring Agent, the Issuing Bank or the Agent hereunder,  or under
the Security  Documents,  each of the Collateral  Monitoring  Agent, the Issuing
Bank or the Agent shall in all cases be fully  justified  in failing or refusing
to  act  hereunder  or  thereunder   unless  it  shall  be  indemnified  to  its
satisfaction  by the Lenders  against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any such action.

                  SECTION 9.8               RESIGNATION OR REMOVAL.

                           Subject  to  the  appointment  and  acceptance  of  a
successor  as provided  below,  each of the  Collateral  Monitoring  Agent,  the
Issuing  Bank or the Agent (i) may resign at any time by giving not less than 10
days' prior written  notice thereof to the Lenders and the Borrower and (ii) may
be removed at any time with or without cause by the Majority  Lenders.  Upon any
such  resignation  or  removal,  the  Majority  Lenders  shall have the right to
appoint a successor.  If no successor Collateral  Monitoring Agent, Issuing Bank
or Agent shall have been so  appointed  by the  Majority  Lenders and shall have
accepted such  appointment  within 30 days after the retiring  party's giving of
notice of resignation or the Majority  Lenders'  removal of the retiring  party,
then the retiring Collateral Monitoring Agent, the Issuing Bank or Agent, as the
case  may be,  may,  on  behalf  of the  Lenders,  after  consultation  with the
Borrower,  appoint  a  successor  which  shall be one of the  Lenders.  Upon the
acceptance  of any  appointment  as  successor  hereunder  or under the Security
Documents, such successor Collateral Monitoring Agent, Issuing Bank or Agent, as
the case may be,  shall  thereupon  succeed  to and become  vested  with all the
rights,  powers,  privileges and duties of the retiring party,  and the retiring
party shall be discharged  from its duties and  obligations  hereunder and under
the  Security  Documents.  After any  retiring  party's  resignation  or removal
hereunder as Collateral Monitoring Agent, Issuing Bank or Agent, as the case may
be, the provisions of this Article 9 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
the Collateral Monitoring Agent, the Issuing Bank or Agent hereunder.


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                  SECTION 9.9               SHARING OF COLLATERAL AND PAYMENTS.

                           Upon or following any  acceleration  by the Agent and
the Lenders of the Obligations, and following the purchase by each Lender of its
proportional share of the Obligations  pursuant to subsection 2.16(b) hereof, in
the  event  that  any  Lender  shall  obtain  payment  in  respect  of any  such
Obligation,  or interest thereon,  or receive any Collateral or proceeds thereof
with respect to any such Obligation,  whether voluntarily or involuntarily,  and
whether  through  the  exercise  of  a  right  of  banker's  lien,   set-off  or
counterclaim  against the  Borrower or any other Loan Party or  otherwise,  in a
greater proportion than any such payment obtained by any other Lender in respect
of the aggregate  amount of the  corresponding  Obligation  held by such Lender,
then the Lender so receiving such greater  proportionate payment or such greater
proportionate  amount  of  Collateral,  shall  purchase  for cash from the other
Lender or Lenders such portion of each such other  Lender's or Lenders' Loan, or
shall provide the other Lenders with the benefits of any such Collateral, or the
proceeds  thereof,  as shall be  necessary  to cause such Lender  receiving  the
proportionate  overpayment  to share the  excess  payment  or  benefits  of such
Collateral  or  proceeds  ratably  with each  Lender.  For the  purposes of this
Section,  payments  on  Obligations  received  by each  Lender  and  receipt  of
Collateral by each Lender shall be in the same  proportion as the proportion of:
(A) the Obligations  owing to such Lender in respect of the Obligations  held by
such Lender to (B) the Obligations owing to all of the Lenders in respect of all
of the Obligations;  provided,  however, that, with respect to the foregoing, if
all or any portion of such excess  payment or benefits is  thereafter  recovered
from the Lender that received the  proportionate  overpayment,  such purchase of
Obligations or payment of benefits, as the case may be, shall be rescinded,  and
the purchase price and benefits  returned,  to the extent of such recovery,  but
without interest.

                  SECTION 9.10              ADDITIONAL PROVISIONS AS TO
                                            THE COLLATERAL MONITORING AGENT.

                           (a) The Collateral Monitoring Agent shall prepare and
submit to the Lenders, monthly on or before the 20th day of the following month,
reports as to:

                             (i) a summary of projected  Availability  vs actual
Availability (including a calculation of the Borrowing Base amount);

                             (ii) an accounts receivable aging analysis;

                             (iii) an accounts receivable concentration summary;


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                             (iv) ineligible  calculations for both Accounts and
Inventory; and

                             (v)  accounts  receivable   statistics   (including
sales, turnover and dilution) on both a monthly and cumulative basis.

                           (b) Whenever the Collateral Monitoring Agent conducts
a field examination, the Collateral Monitoring Agent will deliver to the Lenders
a report prepared by the Collateral  Monitoring  Agent as to the results of such
field  examination  as promptly as  possible,  but in any event no later than 30
days  following  the  Collateral   Monitoring   Agent's  receipt  of  the  field
examination reports.  The Collateral  Monitoring Agent agrees to conduct, at the
Borrower's expense:  (i) at least three (3) field examinations of the Borrower's
Accounts per annum during the term of this Agreement, and (ii) at the Collateral
Monitoring Agent's discretion,  field examinations of the Borrower's  Inventory,
provided that the Collateral  Monitoring  Agent shall conduct at least three (3)
such examinations of Inventory per annum during the term of this Agreement. Upon
reasonable advance request of the Collateral Monitoring Agent, the Lenders shall
have the right to examine at the Collateral  Monitoring  Agent's offices,  or to
request copies (prepared at the requesting Lender's cost) of, all field reports,
resulting  correspondence  with the Borrower and other work product  relating to
such field  examination.  The Collateral  Monitoring Agent agrees to respond to,
and to refer to the Borrower when appropriate and then to respond to, reasonable
inquiries  made by the Lenders  arising  with respect to field  examinations  or
reports.

                           (c)  The  Collateral  Monitoring  Agent  may  include
Inventory  labeled  as  "Season  X"  in  Eligible   Inventory  if  the  Borrower
establishes to the satisfaction of the Collateral Monitoring Agent that existing
orders for such  Inventory  exceed such Inventory  currently on hand;  provided,
however,  that prior to including such  Inventory in Eligible  Inventory (x) the
Collateral  Monitoring Agent has given the Lenders at least 24 hours notice that
the Agent intends to include such Inventory in Eligible  Inventory,  and (y) the
Collateral  Monitoring Agent has not been notified of objections by the Majority
Lenders to the  inclusion  of such  Inventory in Eligible  Inventory  within the
24-hour period following the giving of such notice.

                           (d)  Without  limiting  the  generality  of any other
provision hereof,  the Collateral  Monitoring Agent shall  specifically not have
authority to:

                             (i)  increase  or  decrease  the   percentages   of
Eligible  Accounts or Eligible  Inventory to be included in the Borrowing  Base,
other than by  adjustment  of the  reserves  provided for in the  definition  of
"Borrowing Base";  provided,  however,  that the Collateral Monitoring Agent may
establish  additional reserves if (x) the Collateral  Monitoring Agent has given
the Lenders at least 24 hours notice that the Agent  intends to  establish  such
additional reserves and (y) the


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Collateral  Monitoring Agent has not been notified of objections by the Majority
Lenders to the  establishing  of such  additional  reserves  within the  24-hour
period following the giving of such notice; and provided,  further, that once an
additional  reserve has been  established  the Collateral  Monitoring  Agent may
adjust that reserve in its discretion.

                           (ii) release Collateral;

                           (iii)  waive any  violation  or  default  under  this
Agreement,  the Security Documents, the Loan Documents or otherwise on behalf of
the Lenders; or

                           (iv)  modify  the  amount  of any  Fees  or  interest
payable pursuant to this Loan Agreement.


                  SECTION 9.11              EXECUTION OF FIFTH AMENDED
                                            AND RESTATED LOAN AGREEMENT.

                           Upon  receipt  and  review  by  the  Lenders  of  the
Borrower's  audited financial  statements for the fiscal year ending January 31,
1998 and the  Projections  for the fiscal year ending  January 31, 1999,  if the
Lenders determine,  in their sole and absolute  discretion,  that certain of the
asset based  lending  provisions  set forth herein are no longer  required,  the
parties  hereto shall  execute and deliver the Fifth  Amended and Restated  Loan
Agreement in  substantially  the form of Exhibit R hereto and in accordance with
the terms thereof.

                  SECTION 9.12              TERMINATION OF GOLDFARB GUARANTY,
                                            GOLDFARB STOCK PLEDGE AND ASSIGNMENT
                                            OF TAXES.

                           Each of the  Lenders,  the Agent  and the  Collateral
Monitoring  Agent  agrees that on or prior to the Closing  Date it will  execute
such  terminations  and releases as the Borrower and the  Individual  Guarantors
reasonably  request to evidence the  termination of the Goldfarb  Guaranty,  the
Goldfarb  Stock Pledge and the  Assignment of Taxes and take such further action
that is reasonably  necessary to effect such  terminations,  including,  without
limitation, returning the Goldfarb Pledged Shares to Morris Goldfarb.

         ARTICLE 10.                MISCELLANEOUS PROVISIONS.

                  SECTION 10.1              FEES AND EXPENSES; INDEMNITY.


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                           The  Borrower  will  promptly  pay all  costs  of the
Collateral Monitoring Agent, the Issuing Bank, the Agent and each of the Lenders
in preparing  the Loan  Documents  and all costs and expenses of the  Collateral
Monitoring  Agent  and  the  Lenders  of  the  issuance  of  the  Notes,   L/Cs,
Applications,  Acceptances,  Steamship Guaranties and Airway Releases and of the
Borrower's and the other Loan Parties'  performance  of and compliance  with all
agreements  and  conditions  contained  herein  on its part to be  performed  or
complied with (including,  without limitation,  all costs of filing or recording
any assign ments, mortgages, financing statements and other documents except any
such costs incurred in connection with an assignment or  participation  pursuant
to Section 10.13 hereof), and the reasonable fees and expenses and disbursements
of counsel to the  Collateral  Monitoring  Agent the Issuing Bank, the Agent and
the  Lenders  in  connection  with  the  preparation,  execution  and  delivery,
administration, interpretation and enforcement of this Agreement, the other Loan
Documents, the L/Cs, Applications,  Acceptances, Steamship Guaranties and Airway
Releases and all other  agreements,  instruments and documents  relating to this
transaction,  the  consummation  of the  transactions  contemplated  by all such
documents,  the  preservation  of all rights of the Lenders  and the  Collateral
Monitoring Agent, the Issuing Bank, and the Agent the negotiation,  preparation,
execution and delivery of any amendment, modification or supplement of or to, or
any consent or waiver under,  any such document (or any such  instrument that is
proposed  but  not  executed  and  delivered)  and  with  any  claim  or  action
threatened,  made  or  brought  against  any of the  Lenders  or the  Collateral
Monitoring  Agent,  the Issuing Bank and the Agent arising out of or relating to
any extent to this  Agreement,  the other  Loan  Documents  or the  transactions
contemplated hereby or thereby and including,  without limitation, the allocated
costs of  internal  counsel to the  Lenders  with  respect to the  amending  and
restating of the Third Restated Loan Agreement.  In addition,  the Borrower will
promptly pay all costs and expenses (including,  without limitation,  reasonable
fees, costs and disbursements of counsel) suffered or incurred by each Lender in
connection with its  enforcement of this  Agreement,  the Loan Documents and the
Notes held by it, the L/Cs, Applications,  Acceptances, Steamship Guaranties and
Airway  Releases or any other sum due to it under this  Agreement  or any of the
other Loan  Documents or any of its other rights  hereunder  or  thereunder.  In
addition to the  foregoing,  the Borrower  shall  indemnify  each Lender and the
Collateral  Monitoring  Agent,  the Issuing Bank and the Agent and each of their
respective  directors,  officers,  employees,  attorneys,  agents and Affiliates
against,  and hold each of them harmless from, any loss,  liabilities,  damages,
claims,   costs  and  expenses   (including   reasonable   attorneys'  fees  and
disbursements,  including  cost  allocated  by  in-house  counsel to any Lender)
suffered  or incurred by any of them  arising out of,  resulting  from or in any
manner  connected  with, the execution,  delivery and performance of each of the
Loan Documents, the Loans and any and all transactions related to or consummated
in  connection  with  the  Loans,  L/Cs,  Applications,  Acceptances,  Steamship
Guaranties  and  Airway  Releases,   including,   without  limitation,   losses,
liabilities, damages, claims, costs and expenses suffered or incurred


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by any Lender or the Collateral Monitoring Agent, the Issuing Bank and the Agent
or any of their respective directors, officers, employees,  attorneys, agents or
Affiliates arising out of or related to any Environmental Matter,  Environmental
Liability or  Environmental  Proceeding,  or in  investigating,  preparing  for,
defending  against,  or providing  evidence,  producing  documents or taking any
other   action  in  respect  of  any   commenced   or   threatened   litigation,
administrative  proceeding or investigation  under any federal securities law or
any other statute of any  jurisdiction,  or any regulation,  or at common law or
otherwise.  The  indemnity  set forth  herein  shall be in addition to any other
obligations  or  liabilities  of the  Borrower  to the  Agent  and  the  Lenders
hereunder or at common law or  otherwise.  The  provisions  of this Section 10.1
shall survive the payment of the Notes, L/Cs, Acceptances,  Steamship Guaranties
and Airway Releases and the termination of this Agreement.

                  SECTION 10.2              TAXES.

                           If,  under  any  law in  effect  on the  date  of the
closing of any Loan  hereunder,  or under any  retroactive  provision of any law
subsequently  enacted,  it shall be determined that any Federal,  state or local
tax is  payable  in  respect  of the  issuance  of any  Note,  L/C,  Acceptance,
Steamship  Guarantee and Airway  Release,  or in  connection  with the filing or
recording  of  any  assignments,   mortgages,  financing  statements,  or  other
documents (whether measured by the amount of Indebtedness  secured or otherwise)
as contemplated  by this Agreement,  then the Borrower will pay any such tax and
all  interest and  penalties,  if any,  and will  indemnify  the Lenders and the
Collateral  Monitoring  Agent,  the Issuing Bank and the Agent  against and save
each of them harmless from any loss or damage  resulting  from or arising out of
the  nonpayment  or delay in payment  of any such tax.  If any such tax or taxes
shall be assessed or levied against any Lender or any other holder of a Note, or
issuer  of an L/C,  Acceptance,  Steamship  Guarantee  or Airway  Release,  such
Lender,  or such  other  holder or  issuer,  as the case may be,  may notify the
Borrower and make immediate payment thereof, together with interest or penalties
in connection  therewith,  and shall  thereupon be entitled to and shall receive
immediate  reimbursement  therefor from the Borrower.  Notwithstanding any other
provision  contained in this  Agreement,  the  covenants  and  agreements of the
Borrower  in this  Section  10.2  shall  survive  payment  of the  Notes,  L/Cs,
Acceptances,  Steamship  Guaranties and Airway  Releases and the  termination of
this Agreement.

                  SECTION 10.3              PAYMENTS.

                           As set forth in Article 2 hereof, all payments by the
Borrower on account of principal,  interest,  Fees and other charges  (including
any indemnities) shall be made to the Collateral Monitoring Agent at its Payment
Office, in lawful money of the United States of America in immediately available
funds,  by wire  transfer or  otherwise,  not later than 1:00 P.M. New York City
time on the date such payment


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is due.  Any such  payment  made on such date but after such time shall,  if the
amount paid bears  interest,  be deemed to have been made on, and interest shall
continue to accrue and be payable thereon until,  the next  succeeding  Business
Day. If any payment of principal  or interest  becomes due on a day other than a
Business Day, such payment may be made on the next  succeeding  Business Day and
such extension  shall be included in computing  interest in connection with such
payment.  All  payments  hereunder  and  under  the  Notes,  L/Cs,  Acceptances,
Steamship  Guaranties  and  Airway  Releases  shall be made  without  set-off or
counterclaim  and in such  amounts  as may be  necessary  in order that all such
payments shall not be less than the amounts otherwise specified to be paid under
this Agreement and the Notes, L/Cs, Acceptances, Steamship Guaranties and Airway
Releases  (after  withholding  for or on account  of: (i) any  present or future
taxes,  levies,  imposts,  duties or other  similar  charges of whatever  nature
imposed by any  government  or any  political  subdivision  or taxing  authority
thereof,  other than any tax (except those  referred to in clause (ii) below) on
or  measured  by the net income of the  Lender to which any such  payment is due
pursuant  to  applicable  federal,  state and local  income  tax laws,  and (ii)
deduction of amounts equal to the taxes on or measured by the net income of such
Lender  payable by such Lender with  respect to the amount by which the payments
required to be made under this sentence exceed the amounts  otherwise  specified
to be  paid in  this  Agreement  and the  Notes,  L/Cs,  Acceptances,  Steamship
Guaranties  and Airway  Releases).  Upon payment in full of any Note, the Lender
holding such Note shall mark the Note "Paid" and return it to the Borrower.

                  SECTION 10.4              SURVIVAL OF AGREEMENTS AND
                                            REPRESENTATIONS; CONSTRUCTION.

                           All agreements,  representations  and warranties made
herein  shall  survive the delivery of this  Agreement,  the Notes and any other
instruments evidencing Obligations.  The headings used in this Agreement and the
table of contents are for convenience only and shall not be deemed to constitute
a part hereof.  All uses herein of the masculine gender or of singular or plural
terms  shall be deemed to include  uses of the  feminine  or neuter  gender,  or
plural or singular terms, as the context may require.

                  SECTION 10.5              LIEN ON AND SET-OFF OF DEPOSITS.

                           As security  for the due payment and  performance  of
all the Obligations, the Borrower hereby grants to Agent for the ratable benefit
of the Lenders a Lien on any and all deposits or other sums at any time credited
by or due from the Agent or any  Lender to the  Borrower,  whether in regular or
special depository accounts or otherwise, and any and all monies, securities and
other property of the Borrower,  and the proceeds thereof, now or hereafter held
or received by or in transit to any Lender, the Collateral Monitoring Agent, the
Issuing Bank or the


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Agent  from or for the  Borrower,  whether  for  safekeeping,  custody,  pledge,
transmission,  collection or otherwise,  and any such  deposits,  sums,  monies,
securities and other  property,  may at any time after the occurrence and during
the continuance of any Event of Default be set-off,  appropriated and applied by
any Lender or the Agent  against any of the  Obligations,  whether or not any of
such  Obligations is then due or is secured by any  collateral,  or, if it is so
secured,  whether or not the  collateral  held by the Agent is  considered to be
adequate, all as set forth in and pursuant to Section 2.17 hereof.

                  SECTION 10.6              MODIFICATIONS, CONSENTS AND
                                            WAIVERS; ENTIRE AGREEMENT.

                           No  modification,  amendment  or  waiver  of or  with
respect to any provision of this Agreement,  any Notes, the Security  Documents,
or any of the other Loan  Documents and all other  agreements,  instruments  and
documents delivered pursuant hereto or thereto,  nor consent to any departure by
the Borrower from any of the terms or conditions thereof,  shall in any event be
effective  unless it shall be in writing and signed by the Agent and each Lender
and the Borrower  except that: (i) any  modification or amend ment of, or waiver
or consent  with  respect to,  Article 4 may be signed only by the Agent and the
Majority Lenders and the Borrower (provided, however, that the consummation of a
transaction by a Lender shall be deemed, with respect to such Loan only, to have
the  effect of the  execution  by such  Lender of a waiver  of, or  consent to a
departure  from,  any term or provision of Article 4 that has not been satisfied
as of  the  date  of  the  consummation  of  such  transaction);  and  (ii)  any
modification  or amendment of, or waiver or consent with respect to, Articles 1,
5, 6, 7, 8 and 10 (other than this Section 10.6) may be signed only by the Agent
and the Majority  Lenders and the Borrower.  Any such waiver or consent shall be
effective only in the specific  instance and for the purpose for which given. No
consent to or demand on the Borrower in any case shall, of itself, entitle it to
any other or further  notice or demand in similar or other  circumstances.  This
Agreement  and  the  other  Loan  Documents  embody  the  entire  agreement  and
understanding  among the Lenders,  the Collateral  Monitoring Agent, the Issuing
Bank,  the  Agent and the  Borrower  and  supersede  all  prior  agreements  and
understandings relating to the subject matter hereof.



                  SECTION 10.7              REMEDIES CUMULATIVE.

                           Each  and  every  right  granted  to  the  Collateral
Monitoring Agent, the Issuing Bank, the Agent and the Lenders hereunder or under
any other document delivered hereunder or in connection herewith,  or allowed it
by law or equity, shall be cumulative and may be exercised from time to time. No
failure on the part of the Collateral  Monitoring  Agent,  the Issuing Bank, the
Agent  or any  Lender  or the  holder  of any  Note or the  issuer  of any  L/C,
Acceptance,  Steamship Guarantee or Airway Release to exercise,  and no delay in
exercising, any right shall operate as a waiver


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<PAGE>

thereof,  nor shall any single or partial  exercise  of any right  preclude  any
other or future  exercise  thereof or the exercise of any other  right.  The due
payment  and  performance  of the  Obligations  shall be  without  regard to any
counterclaim,  right of offset or any other claim  whatsoever  that the Borrower
may have against any Lender,  the Collateral  Monitoring Agent, the Issuing Bank
or the Agent and without regard to any other obligation of any nature whatsoever
that any Lender, the Collateral  Monitoring Agent, the Issuing Bank or the Agent
may have to the Borrower,  and no such  counterclaim or offset shall be asserted
by the Borrower in any action, suit or proceeding  instituted by any Lender, the
Collateral  Monitoring  Agent,  the  Issuing  Bank or the Agent for  payment  or
performance of the Obligations.

                  SECTION 10.8              FURTHER ASSURANCES.

                           At any time and from time to time,  upon the  request
of the Agent, the Borrower shall execute, deliver and acknowledge or cause to be
executed, delivered and acknowledged, such further documents and instruments and
do such other acts and  things as the Agent may  reasonably  request in order to
fully effect the purposes of this  Agreement,  the other Loan  Documents and any
other  agreements,  instruments  and documents  delivered  pursuant hereto or in
connection  with the Loans,  including,  without  limitation,  the execution and
delivery to the Agent of mortgages in form and substance reasonably satisfactory
to the Agent and the Lenders  covering all real  property or  interests  therein
acquired by the Borrower,  and all leases of real  property  entered into by the
Borrower as tenant or lessee,  after the date of this Agreement,  promptly after
such acquisition or the entering into of any such lease.

                  SECTION 10.9              NOTICES.

                           All    notices,    requests,    reports   and   other
communications  pursuant to this Agreement shall be in writing, either by letter
(delivered by hand or commercial  messenger  service or sent by certified  mail,
return receipt  requested,  except for routine  reports  delivered in compliance
with  Article  5  hereof  which  may be sent by  ordinary  first-class  mail) or
telegram or telecopy, addressed as follows:

                           (a) If to the Borrower or any other Loan Party:

                               G-III Leather Fashions, Inc.
                               345 West 37th Street
                               New York, NY 10018
                               Attention: Chief Financial Officer
                               Telecopier No.: (212) 967-1487

                               with a copy to:


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<PAGE>


                               Fulbright & Jaworski L.L.P.
                               666 Fifth Avenue
                               New York, New York 10103
                               Attention: Neil Gold, Esq.
                               Telecopier No.: (212) 752-5958

                           (b) If to any Lender:

                               To its address set forth below its
                               name on the signature pages hereof,
                               with a copy to the Agent; and

                           (c) If to the Collateral Monitoring Agent:

                               Fleet Bank, N.A., as Agent
                               51 Cragwood Road
                               South Plainfield, New Jersey 07080
                               Attention: Mr. Murray Markowitz,
                                                 Vice President
                               Telecopier No.: (908) 226-6102

                               with a copy  (other  than  in  the  case  of
                               Borrowing  Notices  and  reports  and  other
                               documents   delivered  in  compliance   with
                               Article 5 hereof) to:

                               Winston & Strawn
                               200 Park Avenue
                               New York, New York 10166
                               Attention:  John C. Phelan
                               Telecopier No.: (212) 294-4700

                           (d) If to the Issuing Bank:

                               Fleet Bank, N.A., as Agent
                               51 Cragwood Road
                               South Plainfield, New Jersey 07080
                               Attention: Mr. Murray Markowitz,
                                                Vice President
                               Telecopier No.: (908) 226-6102

                               with a copy  (other  than  in  the  case  of
                               Borrowing  Notices  and  reports  and  other
                               documents   delivered  in  compliance   with
                               Article 5 hereof) to:


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<PAGE>



                               Winston & Strawn
                               200 Park Avenue
                               New York, New York 10166
                               Attention:  John C. Phelan
                               Telecopier No.: (212) 294-4700

                           (e) If to the Agent:

                               Fleet Bank, N.A., as Agent
                               1185 Avenue of the Americas
                               New York, New York 10036
                               Attention: Mr. Anthony Santoro,
                                              Vice President
                               Telecopier No.: (212) 819-4106

                               with a copy  (other  than  in  the  case  of
                               Borrowing  Notices  and  reports  and  other
                               documents   delivered  in  compliance   with
                               Article 5 hereof) to:

                               Winston & Strawn
                               200 Park Avenue
                               New York, New York 10166
                               Attention:  John C. Phelan
                               Telecopier No.: (212) 294-4700

Any  notice,  request or  communication  hereunder  shall be deemed to have been
given on the day on  which  it is  telecopied  to such  party at the  telecopier
number specified above or delivered by hand or such commercial messenger service
to such party at its address  specified above, or, if sent by mail, on the third
Business Day after the day  deposited in the mail,  postage  prepaid,  or in the
case of telegraphic notice,  when delivered to the telegraph company,  addressed
as aforesaid.  Any party may change the person,  address or telecopier number to
whom or which notices are to be given hereunder, by notice duly given hereunder;
provided,  however,  that any such  notice  shall be deemed  to have been  given
hereunder only when actually received by the party to which it is addressed.

                  SECTION 10.10             COUNTERPARTS.

                           This  Agreement  may  be  signed  in  any  number  of
counterparts  with the same effect as if the signatures  thereto and hereto were
upon the same instrument.

                  SECTION 10.11             SEVERABILITY.


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                           The provisions of this  Agreement are severable,  and
if any 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 in this  Agreement in any
jurisdiction. Each of the covenants, agreements and conditions contained in this
Agreement is  independent  and compliance by the Borrower with any of them shall
not  excuse  non-compliance  by the  Borrower  with  any  other.  All  covenants
hereunder shall be given  independent  effect so that if a particular  action or
condition is not permitted by any of such  covenants,  the fact that it would be
permitted by an exception to, or be otherwise within the limitations of, another
covenant  shall not avoid the  occurrence of a Default or an Event of Default if
such action is taken or condition exists.

                  SECTION 10.12             BINDING EFFECT; NO ASSIGNMENT
                                            OR DELEGATION BY BORROWER.

                           This Agreement shall be binding upon and inure to the
benefit of the  Borrower and its  successors  and to the benefit of the Lenders,
the  Collateral  Monitoring  Agent,  the  Issuing  Bank and the  Agent and their
respective  successors and assigns.  The rights and  obligations of the Borrower
under this  Agreement  shall not be  assigned  or  delegated  without  the prior
written consent of the Agent, the Collateral  Monitoring Agent, the Issuing Bank
and the Lenders, and any purported assignment or delegation without such consent
shall be void.

                  SECTION 10.13             ASSIGNMENTS AND PARTICIPATION
                                            BY LENDERS; ISSUANCE OF L/CS
                                            BY LENDER AFFILIATES.

                           (a) Each  Lender  may  assign to one or more banks or
other  entities  all or a portion  of its  rights  and  obligations  under  this
Agreement  (including,  without limitation,  all or a portion of its Commitment,
the Loans owing to it or the other  Obligations  or L/Cs  issued by it,  amounts
outstanding in respect of outstanding Obligations, and the Note or Notes held by
it); provided,  however,  that: (i) each such assignment shall be of a constant,
and not a  varying,  percentage  of all of the  assigning  Lender's  rights  and
obligations  under  this  Agreement,  (ii) the amount of the  Commitment  of the
assigning Lender being assigned pursuant to each such assignment  (determined as
of the date of the Assignment and  Acceptance  with respect to such  assignment)
shall in no event be less than $5,000,000 (unless such lesser amount is equal to
the  then  outstanding   Commitment)  and  shall  be  an  integral  multiple  of
$2,500,000,  and (iii) each such  assignment  shall be to an Eligible  Assignee.
Upon such  execution,  delivery,  acceptance and  recording,  from and after the
effective date specified in each Assignment and Acceptance, which effective date


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<PAGE>

shall be at least 5 Business Days after the execution thereof:  (x) the assignee
thereunder  shall  be a  party  hereto  and,  to  the  extent  that  rights  and
obligations  hereunder have been assigned to it pursuant to such  Assignment and
Acceptance,  have the rights and obligations of a Lender hereunder,  and (y) the
Lender  assignor  thereunder  shall,  to the extent that rights and  obligations
hereunder have been assigned by it pursuant to such  Assignment and  Acceptance,
relinquish its rights and be released from its obligations  under this Agreement
(and, in the case of an Assignment and Acceptance  covering all or the remaining
portion of an assigning  Lender's rights and  obligations  under this Agreement,
such Lender shall cease to be a party hereto).

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

                           (c) Upon its receipt of an Assignment  and Acceptance
executed  by an  assigning  Lender and an  assignee  representing  that it is an
Eligible  Assignee,  together  with any Note,  Application  or other  instrument
evidencing an Obligation subject to such assignment, the Agent shall: (i) accept
such  Assignment  and  Acceptance,  and (ii) give prompt  notice  thereof to the
Borrower.  Within  five  Business  Days after its  receipt of such  notice,  the
Borrower, at its own expense, shall execute


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<PAGE>


and deliver to the Agent in exchange for the  surrendered  Note,  Application or
other instrument  evidencing an Obligation a new such instrument to the order of
such  Eligible  Assignee  in an amount  equal to the  Commitment  assumed  by it
pursuant to such  Assignment  and  Acceptance  and, if the assigning  Lender has
retained a Lender's Commitment hereunder,  a new such instrument to the order of
the assigning Lender in an amount equal to the Lender's  Commitment  retained by
it hereunder.  Such new  instrument  shall be in an aggregate  principal  amount
equal to the aggregate principal amount of such surrendered instrument, shall be
dated the effective date of such  Assignment and Acceptance and shall  otherwise
be in substantially the form of Exhibit N hereto.

                           (d) (i) Each Lender may sell participations to one or
more banks or other  entities in all or a portion of its rights and  obligations
under this Agreement  (including,  without  limitation,  all or a portion of its
Lender's  Commitment,  the Loans owing to it, amounts  outstanding in respect of
outstanding Obligations, and the Note held by it; and

                               (ii) Fleet may arrange  for the  issuance of L/Cs
which it is obligated to issue hereunder by an Affiliate of such Lender;

provided,  however,  that:  (x) such Lender's  obligations  under this Agreement
(including,  without limitation, its Lender's Commitment hereunder) shall remain
unchanged,  (y) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (z) such Lender shall remain the
holder of any such Note and the  issuer  of the L/C or other  Direct  Obligation
(whenever  issued) for all purposes of this  Agreement,  and the  Borrower,  the
Agent and the other Lenders shall continue to deal solely and directly with such
Lender in  connection  with such  Lender's  rights  and  obligations  under this
Agreement.

                           (e) Any Lender may, in connection with any assignment
or  participation  or  proposed  assignment  or  participation  pursuant to this
Section 10.13,  disclose to the assignee or participant or proposed  assignee or
participant,  any information  relating to the Borrower furnished to such Lender
by or on behalf of the Borrower;  provided that,  prior to any such  disclosure,
the assignee or participant or proposed  assignee or participant  shall agree to
preserve the  confidentiality  of any confidential  information  relating to the
Borrower received by it from such Lender.

                           (f) In addition to the assignments and participations
permitted under  subsections  (a) through (d) hereof,  any Lender may assign and
pledge  all or any  portion of its Loans and Note to (i) any  Affiliate  of such
Lender or (ii) any  Federal  Reserve  Bank as  collateral  security  pursuant to
Regulation  A of the Board of Governors  of the Federal  Reserve  System and any
Operating Circular issued by such


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Federal Reserve Bank. Any such assignment shall not release the assigning Lender
from its obligations hereunder.

                  SECTION 10.14             GOVERNING LAW; CONSENT TO JURIS-
                                            DICTION; WAIVER OF TRIAL BY JURY.

                           (a) THIS AGREEMENT,  THE OTHER LOAN DOCUMENTS AND ALL
OTHER  DOCUMENTS AND INSTRUMENTS  EXECUTED AND DELIVERED IN CONNECTION  HEREWITH
AND THEREWITH, SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT  REGARD TO ITS RULES  PERTAINING
TO CONFLICTS OF LAWS.

                           (b) THE BORROWER  IRREVOCABLY CONSENTS THAT ANY LEGAL
ACTION OR PROCEEDING AGAINST IT UNDER,  ARISING OUT OF OR IN ANY MANNER RELATING
TO THIS  AGREEMENT,  AND EACH OTHER LOAN DOCUMENT MAY BE BROUGHT IN ANY COURT OF
THE STATE OF NEW YORK,  COUNTY OF NEW YORK,  OR IN THE  UNITED  STATES  DISTRICT
COURT FOR THE SOUTHERN  DISTRICT OF NEW YORK.  THE BORROWER BY THE EXECUTION AND
DELIVERY OF THIS AGREEMENT, EXPRESSLY AND IRREVOCABLY ASSENTS AND SUBMITS TO THE
PERSONAL  JURISDICTION  OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR  PROCEEDING.
THE  BORROWER  FURTHER  IRREVOCABLY  CONSENTS TO THE  SERVICE OF ANY  COMPLAINT,
SUMMONS,  NOTICE OR OTHER  PROCESS  RELATING TO ANY SUCH ACTION OR PROCEEDING BY
DELIVERY  THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER PROVIDED FOR IN SECTION
10.9 HEREOF.  THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY  WAIVES ANY CLAIM OR
DEFENSE IN ANY SUCH ACTION OR  PROCEEDING  BASED ON ANY ALLEGED LACK OF PERSONAL
JURISDICTION,  IMPROPER VENUE OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS.  THE
BORROWER  SHALL NOT BE ENTITLED IN ANY SUCH ACTION OR  PROCEEDING  TO ASSERT ANY
DEFENSE GIVEN OR ALLOWED UNDER THE LAWS OF ANY STATE OTHER THAN THE STATE OF NEW
YORK  UNLESS  SUCH  DEFENSE IS ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF
NEW YORK.  NOTHING IN THIS SECTION 10.14 SHALL AFFECT OR IMPAIR IN ANY MANNER OR
TO ANY EXTENT THE RIGHT OF ANY LENDER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED  AGAINST ANY OF THE BORROWER IN ANY  JURISDICTION OR TO SERVE PROCESS IN
ANY MANNER PERMITTED BY LAW.

                           (c)  THE  BORROWER,   THE  LENDERS,   THE  COLLATERAL
MONITORING  AGENT,  THE ISSUING  BANK AND THE AGENT  WAIVES TRIAL BY JURY IN ANY
LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION  WITH, OR ARISING OUT OF,
THIS AGREEMENT,  ANY OF THE OTHER LOAN DOCUMENTS,  OR ANY INSTRUMENT OR DOCUMENT
DELIVERED PURSUANT TO


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THIS  AGREEMENT,  OR THE  VALIDITY,  PROTECTION,  INTERPRETATION,  COLLECTION OR
ENFORCEMENT THEREOF.

                  SECTION 10.15.           ADDITIONAL AGREEMENTS
                                           BY BORROWER AND LOAN PARTIES.

                           Each of the Borrower and the Loan Parties agrees that
in the  event  that  the  Borrower  or any  Loan  Party  is the  subject  of any
insolvency,  bankruptcy,  receivership,  dissolution,  reorganization or similar
proceeding,  federal or state,  voluntary or  involuntary,  under any present or
future law or act, the Collateral  Monitoring Agent, the Issuing Bank, the Agent
and the Lenders shall be entitled to the  automatic and absolute  lifting of any
automatic  stay as to the  enforcement  of their rights and remedies  under this
Agreement and the Security Documents, including specifically, but not limited to
the stay  imposed  by Section  362 of the  United  States  Bankruptcy  Code,  as
amended,  and each of the Borrower and the Loan Parties  hereby  consents to the
immediate lifting of any such automatic stay, and will not contest any motion by
the Collateral  Monitoring  Agent, the Issuing Bank, the Agent or the Lenders to
lift such stay.

                  SECTION 10.16.           RELEASE BY BORROWER AND LOAN PARTIES.

                           Each of the Borrower and the Loan Parties agrees that
the Borrower and the Loan Parties on behalf of themselves  and their  respective
Subsidiaries,  Affiliates,  successors  and assigns  hereby  release and forever
discharge the Collateral  Monitoring  Agent, the Issuing Bank, the Agent and the
Lenders,  their  respective  parents,   subsidiaries  and  affiliates,  and  the
officers,  directors,  employees,  agents and attorneys of each of them from any
and all liability,  actions,  claims,  causes of action,  suits, debts, damages,
executions and demands whatsoever, in law or in equity which the Borrower or the
Loan Parties or any of their respective Subsidiaries,  Affiliates, successors or
assigns might have,  arising out of, based upon, in connection with or otherwise
relating  to  any  matter   whatsoever,   including  without   limitation,   the
Obligations, from the beginning of time to the date hereof.

                            [SIGNATURE PAGES FOLLOW]


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<PAGE>
 

<PAGE>

                           IN WITNESS  WHEREOF,  the parties  hereto have caused
this Agreement to be duly executed as of the date first above written.


                                              G-III LEATHER FASHIONS, INC.

                                              By:______________________________
                                                                           Title

Agreed:

G-III HONG KONG LTD.

By:______________________________
                             Title

Agreed as to Articles 2, 3, 4, 6, 7 and 10:

G-III APPAREL GROUP, LTD.

By:______________________________
                             Title

Agreed as to Article 2, 4 and 10:

SIENA LEATHER LTD.

By:_______________________________
                              Title

GLOBAL INTERNATIONAL TRADING
 COMPANY

By:_______________________________
                              Title


<PAGE>
 

<PAGE>



                       [SIGNATURES CONTINUED ON NEXT PAGE]
INDAWA HOLDING CORP.

By:_______________________________
                              Title

GLOBAL APPAREL SOURCING, LTD.

By:________________________________
                               Title

G-III RETAIL OUTLETS INC.

By:________________________________
                               Title

P.T. TATABUANA RAYA

By:________________________________
                               Title

P.T. BALIHIDES

By:________________________________
                              Title

WEE BEEZ INTERNATIONAL LIMITED

By:________________________________
                               Title

KOSTROMA LTD.

By:________________________________
                               Title



<PAGE>
 

<PAGE>

                       [SIGNATURES CONTINUED ON NEXT PAGE]
                                     FLEET BANK, N.A.,
                                     AS COLLATERAL MONITORING AGENT

                                     BY:__________________________
                                                              TITLE

                                     Lending Office:

                                     51 Cragwood Road
                                     South Plainfield, New Jersey 07080
                                     Attention:  Murray Markowitz,
                                                  Vice President

                                     Address for Notices:

                                     Fleet Bank, N.A.
                                     51 Cragwood Road
                                     South Plainfield, New Jersey 07080
                                     Attention:  Murray Markowitz,
                                                   Vice President

                                     Telex:
                                     Answer-Back Code:
                                     Telecopier: (908) 226-6102

                                     Wire Transfer Instructions:

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

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

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



<PAGE>
 

<PAGE>



                                     FLEET BANK, N.A.,
                                     AS AGENT


                                     BY:__________________________
                                          Vice President      TITLE

                                     Lending Office:

                                     1185 Avenue of the Americas
                                     New York, New York 10036
                                     Attention:  Anthony Santoro,
                                                   Vice President

                                     Address for Notices:

                                     Fleet Bank, N.A.
                                     1185 Avenue of the Americas
                                     New York, New York 10036
                                     Attention:  Anthony Santoro,
                                                   Vice President

                                     Telex:
                                     Answer-Back Code:
                                     Telecopier: (212) 819-4106

                                     Wire Transfer Instructions:

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

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

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





<PAGE>
 

<PAGE>



                                     FLEET BANK, N.A.,
                                     AS ISSUING BANK

                                     BY:__________________________
                                                              TITLE

                                     Lending Office:

                                     51 Cragwood Road
                                     South Plainfield, New Jersey 07080
                                     Attention:  Murray Markowitz,
                                                   Vice President

                                     Address for Notices:

                                     Fleet Bank, N.A.
                                     51 Cragwood Road
                                     South Plainfield, New Jersey 07080
                                     Attention:  Murray Markowitz,
                                                   Vice President

                                     Telex:
                                     Answer-Back Code:
                                     Telecopier: (908) 226-6102

                                     Wire Transfer Instructions:

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

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

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



<PAGE>
 

<PAGE>



         COMMITMENT:
         -----------

         $20,000,000.00              FLEET BANK, N.A.,
                                     AS A LENDER

         (as a percentage:
          38.46%)

                                     BY:____________________________
                                          Vice President        TITLE

                                     Lending Office for Prime Rate Loans
                                     and Eurodollar Loans:

                                     1185 Avenue of the Americas
                                     New York, New York 10036
                                     Attention:  Anthony Santoro,
                                                   Vice President

                                     Address for Notices:

                                     1185 Avenue of the Americas
                                     New York, New York 10036
                                     Attention:  Anthony Santoro,
                                                  Vice President

                                     Telex No.:  232369
                                     Answer-Back Code:  NBNA UR
                                     Telecopier:  (212) 819-4106

                                     Wire Transfer Instructions:

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

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

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



<PAGE>
 

<PAGE>



         COMMITMENT:
         -----------

         $17,000,000.00              THE CHASE MANHATTAN BANK

         (as a percentage:
          32.69%)

                                     BY:__________________________
                                                              TITLE


                                     Lending Office for Prime Rate Loans
                                     and Eurodollar Loans:

                                     111 West 40th Street
                                     New York, New York 10018
                                     Attention: James J. Ducey,
                                                  Vice President

                                     Address for Notices:

                                     111 West 40th Street
                                     New York, New York 10018
                                     Attention: James J. Ducey,
                                                 Vice President
                                     Telex No.: 175666
                                     Answer-Back Code: CBC.UT
                                     Telecopier: (212) 403-5112

                                     Wire Transfer Instructions:

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

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

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




<PAGE>
 

<PAGE>




         COMMITMENT:
         -----------

         $15,000,000.00              THE CIT GROUP/COMMERCIAL
                                     SERVICES, INC.

         (as a percentage:
          28.85%)

                                     BY:____________________________
                                                                TITLE

                                     Lending Office for Prime Rate Loans
                                     and Eurodollar Loans:

                                     1211 Avenue of the Americas
                                     New York, New York 10036
                                     Attention: Kelly Colleran,
                                                 Assistant Vice President

                                     Address for Notices:

                                     1211 Avenue of the Americas
                                     New York, New York 10036
                                     Attention: Kelly Colleran,
                                                  Assistant Vice President
                                     Telex No.:
                                     Answer-Back Code:
                                     Telecopier: (212) 382-6814

                                     Wire Transfer Instructions:

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

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

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



<PAGE>
 

<PAGE>


                             EXHIBITS AND SCHEDULES

EXHIBITS
- --------


<TABLE>
<S>      <C>
A.       Form of Note

B.       States of Incorporation and Qualification, and Capitalization and Ownership of
         Stock, of Borrower and Subsidiaries

C.       Consents, Waivers, Approvals; Violation of Agreements

D-1      Form of Available to Sell Report ($)

D-2      Form of Available to Sell Report (Units)

D-3      Form of Inventory Analysis Report

D-4      Form of Key Item Report

E.       Permitted Security Interests, Liens and Encumbrances

F.       Judgments, Actions, Proceedings

G.       Defaults; Compliance with Laws, Regulations, Agreements

H.       Burdensome Documents

I.       Patents, Trademarks, Trade Names, Service Marks, Copyrights

J.       Name Changes, Mergers, Acquisitions; Location of Collateral

K.       Labor Disputes; Collective Bargaining Agreements; Employee Grievances

L.       Pension Plans

M.       Permitted Indebtedness and Guaranties

N.       Form of Assignment and Acceptance

O.       Accounts and Inventory

P.       Borrowing Base Certificate

Q.       Form of Continuing Agreement for Issuance of Steamship Guaranties and Airway
         Releases
</TABLE>




<PAGE>
 

<PAGE>


<TABLE>
<S>       <C>

R.       Form of Fifth Amended and Restated Loan Agreement
</TABLE>


SCHEDULE

7.9  Investments



<PAGE>







<PAGE>

                                                             As Amended 4/17/97


                                     BY-LAWS

                                       OF

                            G-III APPAREL GROUP, LTD.

                                    ARTICLE I

                                     OFFICES

                  Section  1.  The  registered  office  shall  be in the City of
Dover, County of Kent, State of Delaware.

                  Section 2. 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.

                                   ARTICLE II

                            MEETINGS OF STOCKHOLDERS

                  Section 1. All meetings of the  stockholders  for the election
of  directors  shall be held at such  place as may be fixed from time to time by
the board of directors  either  within or without the State of Delaware as shall
be  designated  from time to time by the board of  directors  and  stated in the
notice of the meeting or in a duly executed waiver of notice  thereof.  Meetings
of stockholders for any other purpose may be held at such time and place, within
or  without  the State of  Delaware,  as shall be  stated  in the  notice of the
meeting or in a duly executed waiver of notice thereof.






<PAGE>

<PAGE>


Stockholders  need not be  physically  present  to  participate  in a meeting of
stockholders,  but may  participate  by means of  conference  telephone or other
similar communications  equipment by means of which all
 persons participating in
the meeting can hear each other.

                  Section 2. Annual  meetings of  stockholders,  commencing with
the year 1990,  shall be held on the second  Tuesday of  December if not a legal
holiday,  and if a legal  holiday,  then on the next secular day  following,  at
10:00 A.M.,  or at such other date as shall be  designated  from time to time by
the board of directors  and stated in the notice of the  meeting,  at which they
shall elect by a majority  vote a board of  directors,  and transact  such other
business as may properly be brought before the meeting.

                  Section 3. Written  notice of the annual  meeting  stating the
place, date and hour of the meeting shall be given to each stockholder  entitled
to vote at such  meeting  not less than ten nor more than sixty days  before the
date of the meeting.

                  Section 4. The officer  who has charge of the stock  ledger of
the  Corporation  shall prepare and make, at least ten days before every meeting
of  stockholders,  a complete list of the  stockholders  entitled to vote at the
meeting,  arranged  in  alphabetical  order,  and  showing  the  address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any  stockholder,  for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place  within





                                  -2-




<PAGE>

<PAGE>



the city where the meeting is to be held,  which place shall be specified in the
notice of the meeting,  or, if not so specified,  at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the  meeting  during  the  whole  time  thereof,  and  may be  inspected  by any
stockholder who is present.

                  Section  5.  Special  meetings  of the  stockholders,  for any
purpose  or  purposes,   unless  otherwise  prescribed  by  statute  or  by  the
certificate  of  incorporation,  may be called by the president or secretary and
shall be called by the  chairman of the board,  president  or  secretary  at the
request in writing of a majority of the board of directors, or at the request in
writing of stockholders  owning a majority in amount of the entire capital stock
of the  Corporation  issued and  outstanding  and entitled to vote. Such request
shall state the purpose or purposes of the proposed meeting.

                  Section 6.  Written  notice of a special  meeting  stating the
place,  date and hour of the meeting  and the purpose or purposes  for which the
meeting  is  called,  shall be given not less than ten nor more than  sixty days
before the date of the  meeting,  to each  stockholder  entitled to vote at such
meeting.

                  Section  7.  Business  transacted  at any  special  meeting of
stockholders shall be limited to the purposes stated in the notice.

                                       -3-






<PAGE>

<PAGE>




                  Section 8. The holders of a majority  of the stock  issued and
outstanding  and entitled to vote thereat,  present in person or  represented by
proxy,  shall  constitute a quorum at all meetings of the  stockholders  for the
transaction  of  business  except as  otherwise  provided  by  statute or by the
certificate of incorporation.  If, however,  such quorum shall not be present or
represented at any meeting of the  stockholders,  the  stockholders  entitled to
vote thereat,  present in person or  represented  by proxy,  shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting,  until a quorum shall be present or represented.  At such adjourned
meeting at which a quorum  shall be present or  represented  any business may be
transacted  which  might  have been  transacted  at the  meeting  as  originally
notified.  If the  adjournment  is for more than  thirty  days,  or if 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.

                  Section 9. When a quorum is present at any  meeting,  the vote
of the holders of a majority of the stock having  voting power present in person
or represented  by proxy shall decide any question  brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation or these by-laws,  a different vote is required
in which case such  express  provision  shall govern and control the decision of
such question.

                  Section 10. Unless  otherwise  provided in the  certificate of
incorporation  each  stockholder  shall at every meeting of the  stockholders be
entitled to one vote in person or by proxy 

                                       -4-






<PAGE>

<PAGE>




for  each  share  of  the  capital  stock  having  voting  power  held  by  such
stockholder,  but no proxy shall be voted on after three  years  from  its date,
unless the proxy provides for a longer period.

                  Section 11. Unless  otherwise  provided in the  certificate of
incorporation,  any action required to be taken at any annual or special meeting
of  stockholders  of the  Corporation,  or any action  which may be taken at any
annual or special meeting of such 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
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 the  State of  Delaware,  its  place of
business, or the secretary of the Corporation.  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 sixty days of the earliest dated consent delivered in the manner
required  by this  Section  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 the State of Delaware,  its principal place
of  business,  or  the  secretary  of  the  Corporation.  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.




                                     -5-









<PAGE>

<PAGE>


                                   ARTICLE III

                                    DIRECTORS

                  Section 1. The number of directors which shall  constitute the
whole  board  shall be fixed  from  time to time by the  board of  directors  or
stockholders  but shall not be less than two. The directors  shall be elected at
the annual meeting of the stockholders,  except as provided in Section 2 of this
Article,  and each  director  elected  shall hold  office  until his  respective
successor is elected and qualified. The directors need not be stockholders.

                  Section 2. Except as  otherwise  provided by statute or by the
certificate  of  incorporation,   vacancies  and  newly  created   directorships
resulting from any increase in the authorized  number of directors may be filled
by a majority of the directors then in office,  though less than a quorum, or by
a sole remaining  director,  and the directors so chosen shall hold office until
the next annual  election and until their  successors are duly elected and shall
qualify,  unless sooner displaced.  If there are no directors in office, then an
election of directors may be held in the manner provided by statute.  If, at the
time of filling any vacancy or any newly  created  directorship,  the  directors
then in office  shall  constitute  less than a majority  of the whole  board (as
constituted immediately prior to any such increase),  the Court of Chancery may,
upon application of any stockholder or stockholders holding at least ten percent
of the total  number of the shares at the time  outstanding  having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships,  or to replace the directors chosen by
the directors then in office.


                                      -6-






<PAGE>

<PAGE>



                  Section 3. The business of the Corporation shall be managed by
or under the  direction  of its board of  directors  which may exercise all such
powers of the  corporation  and do all such lawful acts and things as are not by
statute or by the certificate of  incorporation  or by these by-laws directed or
required to be exercised or done by the stockholders.

                            THE CHAIRMAN OF THE BOARD

                  Section 4. The board of directors at its first  meeting  after
each  annual  meeting of  stockholders  shall  choose  from among its  members a
chairman.  The chairman of the board of directors  shall preside at all meetings
of stockholders  and of the board of directors.  He shall have such other powers
and perform such other duties as are provided in these  by-laws and, in addition
thereto, as the board of directors may from time to time determine. The chairman
of the board of  directors  shall not be deemed an  officer  of the  Corporation
under any provision of the statutes or of the  certificate of  incorporation  or
these by-laws.

                        MEETINGS OF THE BOARD OF DIRECTORS

                  Section 5. The board of directors of the  Corporation may hold
meetings,  both  regular  and  special,  either  within or without  the State of
Delaware.


                                       -7-





<PAGE>

<PAGE>




                  Section 6. The first  meeting of each newly  elected  board of
directors  shall be held at such time and place as shall be fixed by the vote of
the  stockholders  at the annual  meeting and no notice of such meeting shall be
necessary to the newly  elected  directors in order  legally to  constitute  the
meeting,  provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of  directors,  or in the event  such  meeting is not held at the time and
place so fixed by the  stockholders,  the  meeting  may be held at such time and
place as shall  be  specified  in a notice  given as  hereinafter  provided  for
special  meetings  of the  board of  directors,  or as shall be  specified  in a
written waiver signed by all of the directors.

                  Section 7. Regular  meetings of the board of directors  may be
held without notice at such time and at such place as shall from time to time be
determined by the board.

                  Section 8. Special  meetings of the board may be called by the
chairman  of the board or  president  on three  days'  notice to each  director,
either personally or by mail or by telegram; special meetings shall be called by
the chairman of the board, the president or secretary in like manner and on like
notice on the written request of two directors.

                  Section  9. At all  meetings  of the board a  majority  of the
directors shall  constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall  be  the  act  of the  board  of  directors,  except  as may be  otherwise
specifically  provided by statute or by the certificate of  incorporation.  If a
quorum  shall not



                                   -8-





<PAGE>

<PAGE>




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 10. Unless otherwise  restricted by the certificate of
incorporation or these by-laws,  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 11. Unless otherwise  restricted by the certificate of
incorporation  or these  by-laws,  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 any committee,  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.

                             COMMITTEES OF DIRECTORS

                  Section 12. 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


                                       -9-




<PAGE>

<PAGE>



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.  In the absence or disqualification of a
member of a committee,  the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously  appoint  another  member  of the board of  directors  to act at the
meeting  in the  place of any  such  absent  or  disqualified  member.  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  by-laws  of the  Corporation;  and,  unless the
resolution or the certificate of  incorporation  expressly so provides,  no such
committee  shall  have the  power or  authority  to  declare  a  dividend  or to
authorize the issuance of stock.  Such  committee or committees  shall have such
name or names as may be determined  from time to time by  resolution  adopted by
the board of directors.

                  Section 13. Each committee  shall keep regular  minutes of its
meetings and report the same to the board of directors when required.




                                   -10-






<PAGE>

<PAGE>



                            COMPENSATION OF DIRECTORS

                  Section 14. Unless otherwise  restricted by the certificate of
incorporation or these by-laws,  the board of directors shall have the authority
to fix the compensation of directors.  The directors may be paid their expenses,
if any, of  attendance at each meeting of the board of directors and may be paid
a fixed sum for attendance at each meeting of the board of directors or a stated
salary as director.  Nothing herein shall preclude any director from serving the
Corporation in any other capacity and receiving compensation  therefor.  Members
of special or standing committees may be allowed like compensation for attending
committee meetings.

                                                     
                              REMOVAL OF DIRECTORS

                  Section 15. Unless otherwise  restricted by the certificate of
incorporation  or these  by-laws,  any director or the entire board of directors
may be removed,  with or without  cause,  by the holders of a majority of shares
entitled to vote at an election of directors.

                                   ARTICLE IV

                                     NOTICES

                  Section 1.  Whenever,  under the provisions of the statutes or
of the certificate of incorporation  or of these by-laws,  notice is required to
be given to any  director  or  stockholder,  it shall not be  construed  to



                                     -11-





<PAGE>

<PAGE>



mean  personal  notice,  but  such  notice  may be given  in  writing,  by mail,
addressed to such director or  stockholder,  at his address as it appears on the
records of the corporation,  with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States  mail.  Notice  to  directors  may also be given  by  telegram,  telex or
telecopy with receipt confirmed by telecopy.

                  Section 2.  Whenever  any notice is required to be given under
the  provisions of the statutes or of the  certificate  of  incorporation  or of
these  by-laws,  a waiver  thereof in  writing,  signed by the person or persons
entitled to said notice,  whether before or after the time stated therein, shall
be deemed  equivalent to notice.  A person  entitled to notice of any meeting of
the board of directors or  stockholders,  as the case may be, waives such notice
if he  appears  in  person  or, in the case of a  stockholder,  by proxy at such
meeting,  except when the person  attends a meeting for the express  purposes of
objecting,  at the beginning of the meeting,  to the transaction of any business
because the meeting is not lawfully called or convened.

                                    ARTICLE V

                                    OFFICERS

                  Section 1. The officers of the Corporation  shall be chosen by
the board of directors and shall be a chief executive  officer,  a president,  a
vice-president,  a secretary  and a treasurer.  The board of directors


                                       -12-





<PAGE>

<PAGE>



may  also  choose  additional   vice-presidents,   and  one  or  more  assistant
secretaries and assistant  treasurers.  Any number of offices may be held by the
same person,  unless the certificate of incorporation or these by-laws otherwise
provide.

                  Section 2. The board of directors at its first  meeting  after
each annual meeting of stockholders  shall choose a chief executive  officer,  a
president, one or more vice-presidents, a secretary and a treasurer.

                  Section  3. The board of  directors  may  appoint  such  other
officers and agents as it shall deem  necessary who shall hold their offices for
such terms and shall  exercise  such powers and perform  such duties as shall be
determined from time to time by the board.

                  Section  4. The  salaries  of all  officers  and agents of the
Corporation shall be fixed by the board of directors.

                  Section 5. The officers of the  Corporation  shall hold office
until their successors are chosen and qualify.  Any officer elected or appointed
by the board of directors may be removed at any time by the affirmative  vote of
a majority of the board of directors. Any vacancy occurring in any office of the
Corporation shall be filled by the board of directors.




                                       -13-





<PAGE>

<PAGE>



                           THE CHIEF EXECUTIVE OFFICER

                  Section 6. The chief executive  officer shall have general and
active management of the business of the Corporation,  and in the absence of the
chairman of the board, shall preside at all meetings of the stockholders and the
board of directors.  The chief executive officer shall make reports to the board
of directors and stockholders, and shall perform any and all other duties as are
incident to the office or are properly  required of the chief executive  officer
by the board of directors. The chief executive officer shall see that all orders
and resolutions of the board of directors are carried into effect.

                                  THE PRESIDENT

                  Section 7. The president shall have general supervision of the
affairs  of  the  Corporation,  shall  sign  or  countersign  all  certificates,
contracts, or other instruments of the corporation as authorized by the board of
directors  and shall have such other powers and perform such other duties as are
provided in these  by-laws and, in addition  thereto,  as the board of directors
may from time to time determine.

                  Section 8. The President  shall execute  bonds,  mortgages and
other  contracts  requiring a seal,  under the seal of the  Corporation,  except
where  required or  permitted  by law to be  otherwise  signed and  executed and
except where the signing and execution  thereof shall be expressly  delegated by
the board of directors to some other officer or agent of the Corporation.



                                     -14-





<PAGE>

<PAGE>




                               THE VICE-PRESIDENTS

                  Section 9. In the absence of the  president or in the event of
his  inability or refusal to act, the  vice-president  (or in the event there be
more than one vice-president, the vice-presidents in the order designated by the
directors,  or in the  absence  of any  designation,  then in the order of their
election)  shall perform the duties of the  president,  and when so acting shall
have  all  the  powers  of and be  subject  to all  the  restrictions  upon  the
president.  The  vice-presidents  shall  perform such other duties and have such
other powers as the board of directors may from time to time prescribe.

                      THE SECRETARY AND ASSISTANT SECRETARY

                  Section 10. The  secretary  shall  attend all  meetings of the
board of  directors  and all  meetings  of the  stockholders  and record all the
proceedings of the meetings of the  Corporation and of the board of directors in
a book to be kept for  that  purpose  and  shall  perform  like  duties  for the
standing  committees when required.  He shall give, or cause to be given, notice
of all  meetings  of the  stockholders  and  special  meetings  of the  board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president,  under whose  supervision  he shall be. He shall have
custody  of the  corporate  seal  of the  Corporation  and he,  or an  assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed,  it may be attested by his signature or by the signature of
such assistant  secretary.  The board of directors may give general authority to
any  other  officer  to affix  the seal of the  Corporation  and to  attest  the
affixing by his signature.



                                     -15-





<PAGE>

<PAGE>



                  Section 11. The assistant secretary,  or if there be more than
one, the assistant secretaries in the order determined by the board of directors
(or if  there be no such  determination,  then in the  order of their  election)
shall,  in the  absence of the  secretary  or in the event of his  inability  or
refusal to act,  perform the duties and exercise the powers of the secretary and
shall  perform  such other  duties  and have such  other  powers as the board of
directors may from time to time prescribe.

                     THE TREASURER AND ASSISTANT TREASURERS

                  Section  12.  The  treasurer  shall  have the  custody  of the
corporate  funds and  securities  and shall keep full and  accurate  accounts of
receipts  and  disbursements  in books  belonging to the  Corporation  and shall
deposit all moneys and other  valuable  effects in the name and to the credit of
the  Corporation  in such  depositories  as may be  designated  by the  board of
directors.

                  Section 13. He shall disburse the funds of the  Corporation as
may be  ordered  by the board of  directors,  taking  proper  vouchers  for such
disbursements,  and shall render to the president and the board of directors, at
its regular meetings,  or when the board of directors so requires, an account of
all  his  transactions  as  treasurer  and of  the  financial  condition  of the
Corporation.

                  Section 14. If required  by the board of  directors,  he shall
give the Corporation a bond (which shall be renewed every six years) in such sum
and with  such  surety  or  sureties  as shall be  satisfactory  to the board of
directors for the faithful  performance  of the duties of his office and for



                                     -16-






<PAGE>

<PAGE>



the  restoration  to  the  Corporation,  in  case  of  his  death,  resignation,
retirement or removal from office,  of all books,  papers,  vouchers,  money and
other property of whatever kind in his possession or under his control belonging
to the Corporation.

                  Section 15. The assistant treasurer, or if there shall be more
than one,  the  assistant  treasurers  in the order  determined  by the board of
directors  (or if there  be no such  determination,  then in the  order of their
election),  shall,  in the  absence  of the  treasurer  or in the  event  of his
inability  or refusal to act,  perform the duties and exercise the powers of the
treasurer  and shall perform such other duties and have such other powers as the
board of directors may from time to time prescribe.

                                

                                   ARTICLE VI

                                 INDEMNIFICATION

                  SECTION 1. The Corporation  shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened,  pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative  (other than an action by or in the right of the  Corporation)  by
reason of the fact that he is or was a  director,  officer  or  employee  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  expenses  (including  attorneys'
fees),  judgments,  fines and amounts paid in settlement actually and reasonably
incurred by him in connection  with such action,  suit or proceeding if he acted
in good faith and in a manner he reasonably  believed



                                   -17-




<PAGE>

<PAGE>



to be in or not  opposed  to the best  interests  of the  Corporation,  and with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.  The termination of any action,  suit or proceeding by
judgment,  order, settlement,  conviction,  or upon a plea of nolo contendere or
its equivalent,  shall not, of itself,  create a presumption that the person did
not act in good faith and in a manner which he  reasonably  believed to be in or
not opposed to the best  interest of the  Corporation,  and, with respect to any
criminal action or proceeding,  had reasonable cause to believe that his conduct
was unlawful.


                  Section 2. The Corporation  shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened,  pending or
completed  action or suit by or in the  right of the  Corporation  to  procure a
judgment  in its  favor  by  reason  of the fact  that he is or was a  director,
officer or employee 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
expenses (including  attorneys' fees) actually and reasonably incurred by him in
connection  with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the  Corporation and except that no  indemnification  shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of  Chancery  or the court in which  such  action or suit was  brought
shall determine upon application that, despite the adjudication of liability but
in view of all  the  circumstances  of the  case,


                                      -18-




<PAGE>

<PAGE>




such person is fairly and  reasonably  entitled to indemnity  for such  expenses
which the Court of Chancery or such other court shall deem proper.

                  Section 3. To the extent that a director,  officer or employee
of the  Corporation has been successful on the merits or otherwise in defense of
any action,  suit or  proceeding  referred to in Sections 1 or 2 of this Article
VI, or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.


                  Section 4. Any  indemnification  under Sections 1 or 2 of this
Article VI (unless ordered by a court) shall be made by the Corporation  only as
authorized in the specific case upon a determination that indemnification of the
director,  officer or employee is proper in the circumstances because he has met
the applicable  standard of conduct set forth in Sections 1 or 2 of this Article
VI. Such determination shall be made (a) by the board of directors by a majority
vote of a quorum  consisting  of directors  who were not parties to such action,
suit or  proceeding,  or (b) if such a quorum  is not  obtainable,  or,  even if
obtainable a quorum of disinterested  directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.

                  Section  5.  Expenses  incurred  by  a  director,  officer  or
employee of the  Corporation  in defending a civil or criminal  action,  suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action,  suit or proceeding  upon receipt of an undertaking by or on






                                        -19-




<PAGE>

<PAGE>



behalf of such  director,  officer or  employee to repay such amount if it shall
ultimately  be  determined  that he is not  entitled  to be  indemnified  by the
Corporation as authorized in this Article.

                  Section 6. The  indemnification  and  advancement  of expenses
provided by, or granted  pursuant to, the other  Sections of this Article  shall
not be  deemed  exclusive  of  any  other  rights  to  which  a  person  seeking
indemnification  or  advancement  of expenses may be entitled  under any by-law,
agreement, or vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office.

                  Section 7. 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 liability
asserted against him and incurred by him 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 the provisions of this Article.

                  Section 8. The  indemnification  and  advancement  of expenses
provided  by, or granted  pursuant  to, this  Article  shall,  unless  otherwise
provided when authorized or ratified,  continue as to a person who has ceased to
be a director,  officer or employee and shall inure to the benefit of the heirs,
executors and administrators of such a person.


                                      -20-





<PAGE>

<PAGE>




                                   ARTICLE VII

                              CERTIFICATE OF STOCK

                  Section 1. Every holder of stock in the  Corporation  shall be
entitled to have a certificate, signed by, or in the name of the Corporation by,
the president or a vice-president  and the treasurer or an assistant  treasurer,
or the secretary or an assistant  secretary of the  Corporation,  certifying the
number of shares owned by him in the Corporation.

                  Section 2. Any of or all the signatures on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile  signature has been placed upon a certificate  shall have ceased
to be such  officer,  transfer  agent or registrar  before such  certificate  is
issued,  it may be issued by the Corporation  with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.

                                LOST CERTIFICATES

                  Section 3. The board of directors may direct a new certificate
or  certificates  to be  issued  in place  of any  certificate  or  certificates
theretofore  issued by the  Corporation  alleged  to have been  lost,  stolen or
destroyed,  upon the making of an affidavit of that fact by the person  claiming
the certificate of stock to be lost, stolen or destroyed.  When authorizing such
issue of a new certificate or  certificates,  the board of directors may, in its
discretion  and as a condition  precedent to the issuance  thereof,  require the
owner of such lost,  stolen or destroyed  certificate  or  certificates,  or his


                                    -21-





<PAGE>

<PAGE>



legal  representative,  to advertise the same in such manner as it shall require
and/or  to give the  Corporation  a bond in such sum as shall be  sufficient  to
indemnify  the  Corporation  against  any  claim  that may be made  against  the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.

                               TRANSFERS OF STOCK

                  Section 4. Upon  surrender to the  Corporation or the transfer
agent  of  the  Corporation  of  a  certificate  for  shares  duly  endorsed  or
accompanied  by proper  evidence of  succession,  assignation  or  authority  to
transfer,  it shall be the duty of the Corporation to issue a new certificate to
the  person  entitled  thereto,  cancel  the  old  certificate  and  record  the
transaction upon its books.

                               FIXING RECORD DATE

                  Section 5. 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,  or to express consent to corporate  action in writing
without a meeting,  or  entitled  to receive  payment of any  dividend  or other
distribution  or allotment of any rights,  or 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, in advance, a record date,
which  shall not be more than  sixty nor less than ten days  before  the date of
such  meetings,  nor  more  than  sixty  days  prior  to  any  other  action.  A
determination  of




                                     -22-





<PAGE>

<PAGE>


stockholders  of  record  entitled  to  notice  of or to  vote at a  meeting  of
stockholders shall apply to any adjournment of the meeting;  provided,  however,
that the board of directors may fix a new record date for the adjourned meeting.

                  Section 6. In order that the  Corporation  may  determine  the
stockholders  entitled  to consent  to  corporate  action in  writing  without a
meeting, the board of directors shall fix a record date, which record date shall
not precede the date upon which the  resolution  fixing the record is adopted by
the board of directors, and which date shall not be more than ten days after the
date upon which the resolution fixing the record date is adopted by the board of
directors.

                  Section 7. 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 shall 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 more than sixty days prior
to such action.

                             REGISTERED STOCKHOLDERS

                  Section 8. The Corporation  shall be entitled to recognize the
exclusive  right of a person  registered  on its books as the owner of shares to
receive  dividends,  and to vote as such owner,



                                      -23-




<PAGE>

<PAGE>



and to hold liable for calls and assessments a person registered on its books as
the owner of shares,  and shall not be bound to recognize any equitable or other
claim to or  interest  in such share or shares on the part of any other  person,
whether  or not it  shall  have  express  or other  notice  thereof,  except  as
otherwise provided by the laws of Delaware.

                                  ARTICLE VIII

                               GENERAL PROVISIONS

                                    DIVIDENDS

                  Section  1.   Dividends   upon  the   capital   stock  of  the
Corporation,  subject to the provisions of the certificate of incorporation,  if
any,  may be  declared  by the board of  directors  at any  regular  or  special
meeting,  pursuant to law.  Dividends  may be paid in cash,  in property,  or in
shares of the capital  stock,  subject to the  provisions of the  certificate of
incorporation.

                  Section 2. Before  payment of any  dividend,  there may be set
aside out of any funds of the  Corporation  available for dividends  such sum or
sums as the directors  from time to time, in their  absolute  discretion,  think
proper  as a  reserve  or  reserves  to meet  contingencies,  or for  equalizing
dividends,  or for repairing or maintaining any property of the Corporation,  or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.

                                      -24-






<PAGE>

<PAGE>




                                     CHECKS

                  Section 3. All  checks or  demands  for money and notes of the
Corporation  shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.

                                   FISCAL YEAR

                  Section 4. The  fiscal  year of the  Corporation  shall end on
July 31 unless otherwise fixed by resolution of the board of directors.

                                      SEAL

                  Section 5. 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 or affixed or reproduced or otherwise.

                                BOOKS AND RECORDS



                                      -25-




<PAGE>

<PAGE>



                  Section  6.  Subject  to  any  provisions   contained  in  the
statutes,  the books and records of the Corporation may be kept at such place or
places  either  within or without the State of  Delaware as shall be  designated
from time to time by the board of directors.

                                   ARTICLE IX

                                   AMENDMENTS

                  Section 1. These  by-laws may be altered,  amended or repealed
or new by-laws may be adopted by the  stockholders or by the board of directors,
when such power is conferred  upon the board of directors by the  certificate of
incorporation,  at any regular  meeting of the  stockholders  or of the board of
directors  or at any  special  meeting  of the  stockholders  or of the board of
directors  if notice of such  alteration,  amendment,  repeal or adoption of new
by-laws be  contained  in the notice of such  special  meeting.  If the power to
adopt,  amend or repeal  by-laws is conferred upon the board of directors by the
certificate  of  incorporation  it shall  not  divest  or limit the power of the
stockholders to adopt, amend or repeal by-laws.

                                      -26-



<PAGE>





<TABLE> <S> <C>

<ARTICLE>                              5
<MULTIPLIER>                           1,000
       
<S>                                    <C>
<FISCAL-YEAR-END>                      JAN-31-1998
<PERIOD-TYPE>                          3-MOS
<PERIOD-END>                           APR-30-1997
<CASH>                                 5,703
<SECURITIES>                           0
<RECEIVABLES>                          5,607
<ALLOWANCES>                           (2,579)
<INVENTORY>                            19,026
<CURRENT-ASSETS>                       31,713
<PP&E>                                 12,757
<DEPRECIATION>                         (7,907)
<TOTAL-ASSETS>                         40,936
<CURRENT-LIABILITIES>                  10,476
<BONDS>                                0
<PREFERRED-MANDATORY>                  0
<PREFERRED>                            0
<COMMON>                               65
<OTHER-SE>                             29,513
<TOTAL-LIABILITY-AND-EQUITY>           40,936
<SALES>                                6,531
<TOTAL-REVENUES>                       6,531
<CGS>                                  6,069
<TOTAL-COSTS>                          6,069
<OTHER-EXPENSES>                       0
<LOSS-PROVISION>                       0
<INTEREST-EXPENSE>                     60
<INCOME-PRETAX>                        (5,412)
<INCOME-TAX>                           (2,164)
<INCOME-CONTINUING>                    (3,248)
<DISCONTINUED>                         0
<EXTRAORDINARY>                        0
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<NET-INCOME>                           (3,248)
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