FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

For the Quarterly period ended                     July 31, 1995

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 name of registrant as specified in its charter)

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

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

(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 September 1, 1995.

Common Stock, $.01 par value per share:      6,459,381      shares.

Part I      FINANCIAL INFORMATION                                Page No.

Item 1.   Financial Statements *

Consolidated Balance Sheets -
January 31, 1995 and July 31, 1995 ................3

Consolidated Income Statements -
For the Three Months Ended
July 31, 1994 and 1995 ............................4

Consolidated Income Statements -
For the Six Months Ended
July 31, 1994 and 1995 ............................5

Consolidated Statements of Cash Flows -
For the Six Months Ended
July 31, 1994 and 1995 ............................6

Notes to Financial Statements ..........................7

Item 2.   Management's Discussion and Analysis of
Financial Condition and Results of
Operations ...........................................8-9

Part II     OTHER INFORMATION

Item 4.   Submission of Matters To A Vote of Stockholders .......10

Item 6.   Exhibits and Reports on Form 8-K
(a) Second Amended and Restated Loan Agreement, dated June 12, 1995

*   The  Balance  Sheet at January  31,  1995 has been  taken  from the  audited
financial  statements  at that  date.  All other  financial  statements  are
unaudited.

- 2 -

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

JANUARY 31,    JULY 31,
ASSETS                                                   1995         1995

(unaudited)

Current Assets:
Cash and Cash Equivalents                           $ 1,421      $ 2,720
Accounts Receivable - Net                            13,414       27,099
Inventories - Net                                    25,532       32,481
Prepaid and Refundable Income Taxes                   4,204        4,885
Prepaid Expense and Other Current Assets                466        1,267
-------      -------
Total Current Assets                           45,037       68,452
-------      -------

Property, Plant and Equipment at Cost - Net                7,015        6,877
Deferred Income Taxes                                      1,717        1,717
Other Assets                                                 803          809
-------      -------
$54,572      $77,855
=======      =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Notes Payable                                       $12,907      $34,250
Current Maturities of Capital Leases                    573          573
Accounts Payable                                      3,947        7,053
Accrued Expenses                                      2,152        2,740
Accrued Nonrecurring Charges                          2,856        2,693
-------      -------
Total Current Liabilities                      22,435       47,309

Obligations Under Capital Leases                           1,479        1,204
Nonrecurring Charges - Long-Term                             557          557

Stockholders' Equity:
Preferred stock, 1,000,000 shares authorized;
no shares issued and outstanding
Common Stock, $.01 par value: authorized,
20,000,000 shares; issued and outstanding,
6,459,381 shares on January 31, 1995 and on
July 31, 1995                                          65           65
Additional Paid-in capital                           23,603       23,603
Retained Earnings                                     6,433        5,117
-------      -------
30,101       28,785
-------      -------
$54,572      $77,855
=======      =======

See Accompanying Notes to Financial Statement.

-3-

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

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

THREE MONTHS ENDED
-------------------------
JULY 31,
1994    (000'S)       1995
----                  ----
(unaudited)

Net Sales                                         $    44,848        $    30,621

Commission Income                                       3,312              5,411
-----------        -----------

Net Sales and Revenues                          48,160             36,032

Cost of Goods Sold                                     39,622             26,417
-----------        -----------

Gross Profit                                     8,538              9,615

Selling, General and
Administrative Expenses                              6,332              5,502
-----------        -----------

Operating Profit                                 2,206              4,113

Interest and Financing Charges, Net                     1,062                991
-----------        -----------

Income Before Taxes                              1,144              3,122

Income Taxes                                              509              1,403
-----------        -----------

Net Income                                 $       635        $     1,719
===========        ===========

Income per common share:

Primary;
Net Income per common share                     $       .10        $       .27
===========        ===========
Weighted average number of
shares outstanding                               6,471,462          6,459,381
===========        ===========

Fully Diluted;
Net Income per common share                     $       .10        $       .27
===========        ===========

Weighted average number of shares
outstanding                                      6,471,462          6,459,381
===========        ===========

See Accompanying Notes to Financial Statements.

-4-

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

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

SIX MONTHS ENDED
--------------------
JULY 31,
1994    (000'S)    1995
----               ----
(unaudited)

Net Sales                                            $    65,005    $    39,462

Commission Income                                          3,312          5,845
-----------    -----------

Net Sales and Revenues                             68,317         45,307

Cost of Goods Sold                                        58,221         35,001
-----------    -----------

Gross Profit                                       10,096         10,306

Selling, General and
Administrative Expenses                                12,688         10,845
-----------    -----------

Operating Loss                                     (2,592)          (539)

Interest and Financing Charges, Net                        1,551          1,397
-----------    -----------

Loss Before Taxes                                  (4,143)        (1,936)

Income Taxes (Benefit)                                    (1,848)          (620)
-----------    -----------

Net Loss                                      $    (2,295)   $    (1,316)
===========    ===========

Loss per common share:

Primary;
Net Loss per common share                          $      (.35)   $      (.20)
===========    ===========

Weighted average number of
shares outstanding                                  6,457,298      6,459,381
===========    ===========

Fully Diluted;
Net Loss per common share                          $      (.35)   $      (.20)
===========    ===========

Weighted average number of shares
outstanding                                         6,457,298      6,459,381
===========    ===========

See Accompanying Notes to Financial Statements.

-5-

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED
----------------
JULY 31,
--------
1994              1995
----              ----
(000's)
(unaudited)

Cash Flows from Operating Activities:
Net Loss                                           $   (2,296)   $   (1,316)
Adjustments to Reconcile Net Income:
Depreciation and Amortization                          703           636
Changes in Operating Assets and Liabilities:
Accounts Receivable                                   (21,108)      (13,685)
Inventory                                             (19,465)       (6,949)
Prepaid and Refundable Income Taxes                    (2,107)         (681)
Prepaid Expenses                                          (57)         (801)
Other Assets                                              (22)           (6)
Accounts Payable and Accrued Expenses                  12,199         3,694
Accrued Nonrecurring Charge                                            (163)
----------    ----------
(29,857)      (17,955)
----------    ----------

Net Cash (Used in) Operating Activities                   (32,153)      (19,271)
----------    ----------

Cash Flows for Investing Activities:
Capital Expenditures                                     (354)         (498)
Investment in Joint Venture                              (452)
----------    ----------
Net Cash (Used in) Investing Activities:                     (806)         (498)
----------    ----------

Cash Flows from Financing Activities:
Borrowings under bankers' acceptances and notes        85,069        32,153
Repayments of bankers' acceptances and notes          (52,350)      (10,810)
Proceeds from capital lease obligations                 1,150
Payment of capital lease obligations                     (192)         (275)
----------    ----------
Net Cash Provided by Financing Activities                  33,677        21,068
----------    ----------

Net Increase (Decrease) in Cash                               718         1,299

Cash at Beginning Period                                      833         1,421
----------    ----------

Cash at End of Period                                  $    1,551    $    2,720
==========    ==========
Supplemental Disclosures of Cash Flow Information
Cash Paid During the Period for:
Interest                                      $    1,526    $    1,222
Income Taxes                                  $       36    $        2

See Accompanying Notes to Financial Statements.

-6 -

G-III APPAREL GROUP, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENT

Note 1 - General Discussion

The  results  for the three and six month  periods  ended July 31,  1995 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, 1995.

Note 2 - Inventories

January 31,          July 31,
Inventories consist of:                    1995                 1995
----                 ----

Finished products......................  $ 23,107             $ 27,324
Work-in-process........................        52                  884
Raw materials..........................     2,373                4,273
--------                -----
$ 25,532             $ 32,481
========               ======

Note 3 - Net Income (Loss) Per Common Share

Net Income  (Loss) per common share is based on the weighted  average  number of
common shares and common share equivalents  during each of the periods.  Primary
and fully diluted  earnings per share include the dilutive effect of unexercised
stock options.

Note 4 - Notes Payable

The  Company  has a loan  agreement  with three  banks for  $48,000,000  through
January 30, 1996 and  $40,000,000  through May 31,  1996,  of which  $40,000,000
through January 30, 1996 and  $32,000,000  through May 31, 1996 is available for
direct  borrowings  and the unused  balance for  letters of credit.  All amounts
available for borrowings are subject to borrowing base formulas.

Note 5 - Nonrecurring Charges

As of the year ended  January 31, 1995,  the Company had a remaining  reserve of
approximately  $3.4 million related to a cost reduction  program.  The status of
the components of the provision at July 31, 1995 was:

Balance            1995        Balance
January 31, 1995   Activity    July 31, 1995
----------------   --------    -------------

Disposal of Asian Facility        $  2,500            $           $   2,500
Shut down of Domestic Facilities       579               (69)           510
Severance and related costs            334               (94)           240
------               ----           ---
$  3,413            $ (163)     $   3,250
=====              =====         =====

-7-

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

Results of Operations

Net sales and  revenues  for the three  months  ended  July 31,  1995 were $36.0
million  compared to $48.2  million  for the same period last year.  For the six
months ended July 31, 1995,  net sales and revenues were $45.3 million  compared
to $68.3  million  for the same period in the prior  year.  The  decrease in net
sales  during  the  three  and  six  month  periods  was  primarily  due  to the
recognition by the Company of only  commission  income on certain types of sales
where the Company's customers provide letters of credit which are transferred by
the Company directly to overseas  manufacturers or where the Company's  customer
provided  letters of credit  directly  to overseas  manufacturers.  Prior to the
quarter  ended July 31, 1994,  the  customer  provided a letter of credit to the
Company  and  the  Company  opened  a  letter  of  credit  to the  manufacturer.
Accounting  rules require the Company to recognize only  commission  income with
respect to transactions  where the Company does not open a letter of credit. The
Company expects that it will increasingly utilize this type of transaction which
results in the Company reporting lower net sales and revenues.

The Company recognized $5.4 million and $5.8 million of commission income in the
three and six months ended July 31, 1995, respectively, compared to $3.3 million
in  each of the  comparable  periods  in the  prior  year.  If the  Company  had
recognized the full amount of sales from this type of transaction, net sales and
revenues would have been $63.5 million and $75.3 million, respectively, for such
three and six month  periods and, on a comparable  basis,  would have been $64.9
million and $85.2 million, respectively, for the same periods in the prior year.
The decrease in net sales and revenues in the six month period was primarily due
to lower net sales and revenues in the three  months  ended April 30, 1995.  The
unusually  warm fall season of 1994 left  retailers in an  overstocked  position
adversely effecting sales during such period.

Gross profit was $9.6 million for the three months ended July 31, 1995, compared
to $8.5 million in the same period last year.  Gross  profit as a percentage  of
net sales and  revenues  was 26.7% for the three  months  ended  July 31,  1995,
compared to 17.6% for the same period last year.  For the six month period ended
July 31,  1995,  gross  profit  was  $10.3  million,  or 22.7% of net  sales and
revenues, compared to $10.1 million, or 14.8% of net sales and revenues, for the
same period last year.  While the change in the use of certain letters of credit
to transact  sales did not impact  gross  profit  dollars,  it did affect  gross
profit as a percentage  of net sales and  revenues  since net sales and revenues
recognized from such  transactions  were lower.  Had the Company  recognized the
full amount of such sales,  gross profit for the three and six months ended July
31,  1995  would  have been  15.1%  and  13.7%,  respectively,  of net sales and
revenues,  compared to 13.1% and 11.9%, respectively,  for the same periods last
year.  The  increase  in the gross  profit  percentage  was a result of improved
margins in a majority of product lines as well as cost reductions resulting from
closure of the Company's domestic manufacturing facilities.

Selling,  general  and  administrative  expenses  of $5.5  million for the three
months  ended July 31, 1995 were  approximately  $800,000  less than in the same
period last year. As a percentage of net sales and  revenues,  selling,  general
and  administrative  expenses  were 15.3% in this period  compared to 13.1% last
year. For the six month period, selling general and administrative expenses were
$10.8 million, or 23.8% of net sales and revenues, compared to $12.7 million, or
18.6% of net sales and revenues,  for the same period last year. The increase as
a  percentage  of net sales and  revenues  was the result of lower  reported net
sales  and  revenues  as  described  above.  The  lower  selling,   general  and
administrative  expenses  were  the  result  of  the  implementation  of a  cost
reduction  program which began in the second half of the prior fiscal year.  The
Company is continuing to monitor and reduce expense levels and expects  selling,
general and administrative  expenses to continue to decrease for the reminder of
the year, compared to last year, as a result of this program.

-8-

Interest  expense of $991,000  was $71,000  lower in the quarter  ended July 31,
1995,  compared to interest  expense of $1,062,000 in the same period last year.
For the six months  ended July 31,  1995,  interest  expense was  $1,397,000,  a
decrease of $154,000 from the prior year. The decrease is  attributable to lower
borrowing  levels  as a  result  of the  Company  maintaining  lower  levels  of
inventory,  which more than offset  higher  interest  rates and other  financing
costs.

Income taxes of $1.4 million  reflect an  effective  tax rate of 44.9%.  for the
three  months ended July 31,  1995,  compared to income taxes of $509,000  which
reflect an effective tax rate of 44.5%,  in the  comparable  period in the prior
year.  For the six months  ended July 31,  1995,  income tax benefit of $620,000
reflects an  effective  tax rate of 32.0%,  compared to an income tax benefit of
$1.8 million, or 44.6% in the same period last year. The decreased effective tax
rate for the six months  results from a lower  provision for current year income
taxes (40%),  resulting from the state and local tax loss carry forward from the
prior year,  offset in part by additional  federal taxes of $157,000,  due to an
income tax audit for certain prior periods through January 31, 1993.

As a result of the  foregoing,  for the three month  period ended July 31, 1995,
the Company had net income of $1.7 million, or $.27 per share, compared to a net
income of $635,000,  or $.10 per share,  for the comparable  period in the prior
year.  For the six month period ended July 31, 1995,  the Company had a net loss
of $1.3 million,  or $.20 per share,  compared to a net loss of $2.3 million, or
$.35 per share, for the same period in the prior year.

Liquidity and Capital Resources

The Company has a loan  agreement,  which expires May 31, 1996,  providing for a
collateralized  working  capital  line of  credit  for a  maximum  amount of $48
million through January 30, 1996 (reduced to $40 million  commencing January 31,
1996),  of which a maximum of $40 million  (reduced  to $32  million  commencing
January 31, 1996) is available for direct  borrowings and the unused balance for
letters of credit. All amounts available for borrowings are subject to borrowing
base formulas and overadvances specified in the agreement.

Direct borrowings bear interest at the agent's prime rate (8.75% as of September
1,  1995)  plus 2%.  All  borrowings  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
payments of cash  dividends.  As of July 31,  1995,  there was $31.6  million of
borrowings  outstanding and approximately $10.7 million of contingent  liability
under  open  letters of credit.  The  amount  borrowed  under the line of credit
varies based on the Company's seasonal requirements.  The current loan agreement
reduced the maximum credit line  available to the Company  compared to the prior
year.  The Company is planning to carry lower levels of inventory in the current
fiscal  year  compared to the prior year and,  as a result,  believes  that this
facility will be sufficient to meet its working capital needs. Inventories as of
July 31, 1995 were $32.5 million compared to $57.8 million as of July 31, 1994.

The Company's  majority-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 July
31, 1995,  the borrowing by the Indonesian  subsidiary  under its line of credit
approximated $2.7 million.

-9-

Item 4. Submission of Matters to a Vote of Stockholders

(a) The Company's  Annual Meeting of Stockholders  was held on June 22,
1995 (the 'Annual Meeting').

(b) The following matters were voted upon and approved by the Company's
stockholders at the Annual Meeting:

(i) The election of nine directors to serve for the ensuring year.
The  following  nominees  were  elected as  directors  of the Company  (with the
Company's stockholders having voted as set forth below):

================================================================================
Withheld
Nominee                     Votes For                          Authority to Vote
--------------------------------------------------------------------------------

Morris Goldfarb            5,958,656                             99,084
--------------------------------------------------------------------------------
Aron Goldfarb              5,957,656                            100,084
--------------------------------------------------------------------------------
Lyle Berman                5,958,156                             99,584
--------------------------------------------------------------------------------
Thomas J. Brosig           5,958,556                             99,184
--------------------------------------------------------------------------------
Alan Feller                5,959,256                             98,484
--------------------------------------------------------------------------------
Carl Katz                  5,958,156                             99,584
--------------------------------------------------------------------------------
Willem van Bokhorst        5,959,156                             98,584
--------------------------------------------------------------------------------
Sigmund Weiss              5,959,156                             98,584
--------------------------------------------------------------------------------
George J. Winchell         5,959,156                             98,584
================================================================================

(ii) The ratification of the appointment of Grant Thornton LLP as
the  Company's  independent  certified  public  accountants  for the fiscal year
ending  January 31, 1996.  The  Company's  stockholders  voted as follows:  FOR:
6,007,465
AGAINST: 45,740      ABSTENTIONS: 4,535    BROKER NON-VOTES: 0

-10-

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:    September 13, 1995                By: /s/ MORRIS GOLDFARB
---------------------------------
Morris Goldfarb
President and Chief
Executive Officer

Date:    September 13, 1995                By: /s/  ALAN FELLER
---------------------------------
Alan Feller
Chief Financial Officer,
Treasurer, and Secretary

STATEMENT OF DIFFERENCES
The section symbol shall be expressed as ....................  'ss'

EXHIBIT INDEX
-------------

Sequential
Page
Number
----------

Exhibit 10          Second Amended and Restated Loan Agreement                  

Exhibit 27          Financial Data Schedule                                     

SECOND AMENDED AND RESTATED LOAN AGREEMENT

BY AND AMONG

G-III LEATHER FASHIONS, INC.

THE BANKS SIGNATORY HERETO

AND

NATWEST BANK N.A.
AS AGENT, COLLATERAL MONITORING AGENT
AND ISSUING BANK FOR SUCH BANKS

JUNE 12, 1995

TABLE OF CONTENTS

PAGE
----

Article 1.       Definitions.................................................  2

Article 2.       Revolving Credit Facility................................... 21
Section 2.1    Letters of Credit; Acceptances;
Loans; Steamship Guaranties;
Airway Releases........................................... 21
Section 2.2    Applications for Letters of
Credit, Steamship Guaranties
and Airway Releases.. .................................... 23
Section 2.3    Borrowing Notice and
Disbursement of Loans..................................... 25
Section 2.4    Notes....................................................... 26
Section 2.5    Interest.................................................... 26
Section 2.6    Fees........................................................ 27
Section 2.7    Payment of Loans and Acceptances;
Voluntary Changes in Commitment;
Mandatory Prepayments.................................... 28
Section 2.8    Use of Proceeds of Loans.................................... 29
Section 2.9    Computations................................................ 29
Section 2.10   Time and Method of Payments;
Statement of Account..................................... 30
Section 2.11   Several Obligations......................................... 31
Section 2.12   Guaranties.................................................. 31
Section 2.13   Security.................................................... 32
Section 2.14   Lending Offices............................................. 36
Section 2.15   Obligations Absolute........................................ 36
Section 2.16   Sharing of Payments
and Set-Off Among Banks................................... 37
Section 2.17   Capital Requirements........................................ 37
Section 2.18   Additional L/C Provisions................................... 38
Section 2.19   Pro Rata Treatment Among Banks.............................. 40
Section

2.20   Non-Receipt of Funds by the Agent........................... 40
Section 2.21   Collections; Agent's Right to
Notify Account Debtors and
Endorse the Borrower's Name.............................. 41
Section 2.22   Application of Payments and Collections..................... 42

Article 3.       Representations and Warranties.............................. 43
Section 3.1    Organization................................................ 43
Section 3.2    Power, Authority, Consents.................................. 44
Section 3.3    No Violation of Law or Agreements........................... 45
Section 3.4    Due Execution, Validity, Enforceability..................... 45
Section 3.5    Properties, Priority of Liens............................... 46
Section 3.6    Judgments, Actions, Proceedings............................. 46
Section 3.7    No Default; Compliance With Laws............................ 46

-i-

PAGE
----

Section 3.8    Burdensome Documents........................................ 47
Section 3.9    Financial Statements;
Projections............................................... 47
Section 3.10   Tax Returns................................................. 48
Section 3.11   Intangible Assets........................................... 48
Section 3.12   Regulation U................................................ 48
Section 3.13   Name Changes, Mergers,
Acquisitions; Location of Collateral...................... 49
Section 3.14   Full Disclosure............................................. 49
Section 3.15   Licenses and Approvals...................................... 49
Section 3.16   Labor Disputes; Collective Bargaining
Agreements; Employee Grievances........................... 50
Section 3.17   Condition of Assets......................................... 50
Section 3.18   ERISA....................................................... 50
Section 3.19   Account Representations
and Warranties............................................ 52
Section 3.20   Borrowing Base Certificates................................. 52
Section 3.21   Accounts Receivable Aging Reports;
Key Item Reports.......................................... 52
Section 3.22   Inventory Representations
and Warranties............................................ 52
Section 3.23   Forfeiture Proceeding....................................... 53
Section 3.24   Americans with Disabilities Act............................. 53

Article 4.       Conditions.................................................. 53
Section 4.1    Conditions to Closing....................................... 53
Section 4.2    Conditions to Subsequent
Loans and Issuance of L/Cs................................ 56
Section 4.3    Post-Closing Obligations.................................... 56

Article 5.       Delivery of Financial Reports,
Documents and Other Information........................... 57
Section 5.1    Annual Financial Statements................................. 57
Section 5.2    Semi-Annual Financial Statements;
Quarterly Financial Statements............................ 58
Section 5.3    Compliance Information...................................... 59
Section 5.4    No Default Certificate...................................... 59
Section 5.5    Rental Obligations; Capitalized
Lease Obligations......................................... 59
Section 5.6    Accountants' Reports........................................ 59
Section 5.7    Copies of Documents......................................... 60
Section 5.8    Notices of Defaults......................................... 60
Section 5.9    ERISA Notices............................................... 60
Section 5.10   Additional Information and Reports ......................... 61
Section 5.11   Confidentiality of Information.............................. 62

-ii-

PAGE
----

Article 6.       Affirmative Covenants....................................... 63
Section 6.1    Books and Records........................................... 63
Section 6.2    Inspections and Field Examinations;
Annual Accounts Receivable............................... 63
Section 6.3    Maintenance and Repairs..................................... 64
Section 6.4    Continuance of Business..................................... 64
Section 6.5    Copies of Corporate Documents............................... 64
Section 6.6    Perform Obligations......................................... 64
Section 6.7    Notice of Litigation........................................ 65
Section 6.8    Insurance................................................... 65
Section 6.9    Financial Covenants......................................... 65
Section 6.10   Notice of Certain Events.................................... 66
Section 6.11   Comply with ERISA........................................... 67
Section 6.12   Environmental Compliance.................................... 67
Section 6.13   Management Letter........................................... 67
Section 6.14   Engagement of Consultant.................................... 67
Section 6.15   Tax Refunds................................................. 68

Article 7.       Negative Covenants.......................................... 68
Section 7.1    Indebtedness................................................ 68
Section 7.2    Liens....................................................... 69
Section 7.3    Guaranties.................................................. 69
Section 7.4    Mergers, Acquisitions; Liquidations......................... 70
Section 7.5    Redemptions; Distributions.................................. 70
Section 7.6    Stock Issuance.............................................. 71
Section 7.7    Changes in Business......................................... 71
Section 7.8    Prepayments................................................. 71
Section 7.9    Investments................................................. 71
Section 7.10   Fiscal Year................................................. 72
Section 7.11   ERISA Obligations........................................... 72
Section 7.12   Amendments of Documents..................................... 73
Section 7.13   Capital Expenditures........................................ 73
Section 7.14   Capitalized Lease Obligations............................... 73
Section 7.15   Management Fees............................................. 73
Section 7.16   Transactions with Affiliates................................ 73
Section 7.17   Activities Leading to Forfeiture
Proceeding............................................... 74
Section 7.18   Rental Obligations.......................................... 74
Section 7.19   Retail Store................................................ 74
Section 7.20   License Agreements.......................................... 75

Article 8.       Events of Default........................................... 75
Section 8.1    Payments.................................................... 75
Section 8.2    Certain Covenants........................................... 75
Section 8.3    Other Covenants............................................. 75

-iii-

PAGE
----

Section 8.4    Other Defaults.............................................. 76
Section 8.5    Representations and Warranties.............................. 76
Section 8.6    Bankruptcy.................................................. 77
Section 8.7    Judgments................................................... 77
Section 8.8    ERISA....................................................... 78
Section 8.9    Ownership of Stock.......................................... 78
Section 8.10   Management.................................................. 78
Section 8.11   Liens....................................................... 79
Section 8.12   Amount of Obligations....................................... 79
Section 8.13   Forfeiture Proceedings...................................... 79
Section 8.14   Material Adverse Change..................................... 79

Article 9.       Agency Provisions........................................... 79
Section 9.1    Appointment, Powers and Immunities.......................... 79
Section 9.2    Reliance.................................................... 80
Section 9.3    Events of Default........................................... 80
Section 9.4    Rights as a Bank............................................ 81
Section 9.5    Indemnification............................................. 81
Section 9.6    Non-Reliance................................................ 82
Section 9.7    Failure to Act.............................................. 82
Section 9.8    Resignation or Removal...................................... 82
Section 9.9    Sharing of Collateral and Payments.......................... 83
Section 9.10   Additional Provisions as to the
Collateral Monitoring Agent............................... 84

Article 10.      Miscellaneous Provisions.................................... 85
Section 10.1   Fees and Expenses; Indemnity................................ 85
Section 10.2   Taxes....................................................... 87
Section 10.3   Payments.................................................... 87
Section 10.4   Survival of Agreements and
Representations; Construction............................. 88
Section 10.5   Lien on and Set-off of Deposits............................. 88
Section 10.6   Modifications, Consents and
Waivers; Entire Agreement................................. 89
Section 10.7   Remedies Cumulative......................................... 89
Section 10.8   Further Assurances.......................................... 90
Section 10.9   Notices..................................................... 90
Section 10.10  Counterparts................................................ 92
Section 10.11  Severability................................................ 92
Section 10.12  Binding Effect; No Assignment
or Delegation by Borrower................................. 93
Section 10.13  Assignments and Participation by
Banks; Issuance of L/Cs by
Bank Affiliates........................................... 93

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PAGE
----

Section 10.14  GOVERNING LAW; CONSENT TO JURISDICTION; 
WAIVER OF TRIAL BY JURY................................... 96
Section 10.15. Waiver of Existing Events of Defaults....................... 96
Section 10.16. Additional Agreements by Borrower
and Loan Parties. ................... .................... 97
Section 10.17. Release by Borrower and Loan Parties........................ 97

-v-

EXHIBITS

A.           Form of Fourth Substituted 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

SCHEDULE

1            Existing Events of Default
7.9          Investments

-vi-

SECOND AMENDED AND RESTATED LOAN AGREEMENT
------------------------------------------

THIS AGREEMENT, made as of the 12th day of June, 1995, by and among:

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

The Banks that have executed the signature pages hereto  (individually,
a 'Bank' and collectively, the 'Banks'); and

NATWEST BANK N.A. (formerly known as National  Westminster Bank USA), a
national banking association, as Agent for the Banks (in such capacity, together
with its successors in such  capacity,  the 'Agent'),  as Collateral  Monitoring
Agent for the Banks (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:
--------------------

(A) The  Borrower is indebted to the Banks in the  aggregate  principal
amount of NINETEEN  MILLION  NINE HUNDRED  THOUSAND AND 00/100  ($19,900,000.00)
DOLLARS 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
$15,385,300.00 (collectively,  the 'Existing Loan and L/C Obligations') pursuant
to the Amended and Restated  Loan  Agreement,  dated July 29, 1994, by and among
the Borrower,  the Banks and the Agent, as amended by Letter  Amendment dated as
of December  15, 1994,  Letter  Amendment  dated as of February 2, 1995,  Letter
Amendment  dated March 24, 1995,  Agreement as to Open Trade  Letters of Credit,
dated March 30, 1995,  Letter  Agreement  dated May 30, 1995,  Letter  Agreement
dated June 5, 1995 and Letter  Agreement dated June 9, 1995 (as so amended,  the
'Existing Loan Agreement');

(B) 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
Existing Loan Agreement (all such  indebtedness,  liabilities  and  obligations,
collectively, the 'Existing Bank 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

-1-

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  Bank   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 Existing Loan Agreement;

(C) Morris  Goldfarb and Aron Goldfarb,  stockholders  in G-III Apparel
Group, Ltd., the owner of all of the issued and outstanding capital stock of the
Borrower, have personally guaranteed a portion of the Existing Bank Obligations;

(D) As of the date  hereof,  the  Borrower  is not in  compliance  with
certain of the terms,  conditions  and covenants of the Existing Loan  Agreement
and certain Events of Default exist thereunder;

(E) The Borrower  desires that the Banks (i) waive the existing  Events
of Default  under the Existing Loan  Agreement,  which Events of Default are set
forth on Schedule 1 attached hereto (the 'Existing Events of Default'); and (ii)
extend the credit  facility  provided for under the Existing  Loan  Agreement as
amended hereby on the terms and conditions contained herein;

(F) The Banks have agreed to waive the  existing  Events of Default and
extend the credit facility, subject to the amendment of the terms and conditions
relating to the aforementioned collateral and subject to the other agreements of
the parties, all as hereinafter set forth; and

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

NOW,  THEREFORE,  the  parties  hereto  agree to amend and  restate the
Existing 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 Bank 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.

-2-

'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.

'Account Debtor' or 'account debtor' - at any time, any Person
who is obligated to the Borrower, Retail or Manufacturing under or on account of
an Account.

'Accounts   Receivable  Aging  Report'  -  a  summary  account
receivable  trial balance showing  accounts  receivable of the Borrower and each
Guarantor  (other than  Tatabuana) 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.

'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.

'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.

-3-

'Assignment  of  Life  Insurance'  -  as  defined  in  Section
2.13(c)(i)(A) hereof.

'Assignment   of  Tax   Refunds'   -  as  defined  in  Section
2.13(d)(ii)(C) hereof.

'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.

'Bank's Commitment' - the amount set forth next to each Bank's
name on the signature pages hereto.

'Bank's  Share' - with  respect to any Bank,  such  Bank's pro
rata share  determined  at any time as its Bank's  Commitment as a percentage of
the Commitment.

'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)      Eighty percent of all Eligible Accounts; plus

(ii)      Fifty 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 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.

'Borrowing Base  Certificate' - a certificate  executed by the
president or chief financial  officer of the Borrower  substantially in the form
annexed hereto as Exhibit P containing the information set forth therein.

-4-

'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.

'Collateral Fees' - as defined in Section 2.6(f) hereof.

'Collection  Account' - an account owned and maintained by the
Collateral Monitoring Agent for the ratable benefit of the Banks.

'Commitment' - (i) Forty-Eight Million  ($48,000,000)  Dollars
during the period from the date hereof to and including

-5-

January 30, 1996, and (ii)  $40,000,000  during the period from January 31, 1996
to and including May 31, 1996, in each case in the  aggregate,  allocated  among
each of the Banks,  respectively,  in the amount set forth  opposite such Bank'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, 1996.

'Compliance  Certificate'  - a  certificate  executed  by  the
president 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
Banks, 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 Guarantors' - as defined in Section 2.12 hereof.

'Credit Period' - the period commencing on the date hereof and
ending on the Commitment Termination Date.

'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

-6-

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 or Airway Releases.

'Direct  Debt  Sublimit' - (i)  $40,000,000  during the period
from  the  date  hereof  through  and  including  January  30,  1996,  and  (ii)
$32,000,000  during the period from  January 31,  1996,  through the  Commitment
Termination Date.

'Dollars'  and '$' - lawful  money  of the  United  States  of
America.

'Drawing Fee' - as defined in Section 2.6(b) 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, Manufacturing or Retail 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 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

-7-

any kind, or, if the Account is evidenced by chattel paper or an instrument, the
Borrower, Siena,  Manufacturing or Retail, as the case may be, has delivered and
properly endorsed such chattel paper or instrument to the Agent;

(d) to the best of the Borrower's, Manufacturing's or
Retail's knowledge, as the case may be, no event described in Section 8.6 hereof
with respect to the Account Debtor has occurred, the Agent and the Banks, 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)  the  Account  is a  valid,  legally  enforceable
obligation of the Account Debtor;

(h) the  Account  does not arise out of  transactions
with an Affiliate;

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

(j) 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;

(k) 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;

(l) 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 Banks 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

-8-

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;

(m) 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 Banks and those  expressly  permitted
under this Agreement; and

(n)  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 Banks
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.

'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,  Manufacturing  or  Retail;  (ii) is not slow
moving,  obsolete or unsaleable;  (iii) is currently  useable or saleable in the
ordinary course of the Borrower's, Manufacturing's or Retail's business; (iv) is
valued in accordance  with  generally  accepted  accounting  principles  applied
consistently  with past  practices of the  Borrower,  Siena,  Manufacturing  and
Retail;  (v) is located on the premises listed on the schedules attached to this
Agreement or other locations  permitted under the Borrower Security Agreement or
any security agreement set forth in Section 2.14, 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 2.14, 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 the  disposition
of which is restricted under an applicable license agreement; (xi) does not

-9-

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 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

-10-

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.

'Event(s) of Default' - as defined in Article 8 hereof.

'Examination Fees' - as defined in Section 2.6(g) hereof.

'Existing  Acceptances' - the aggregate  amount of Acceptances
outstanding on the date hereof.

'Existing Bank Obligations' - as defined in the second recital
paragraph hereof.

'Existing Events of Default' - as defined in the fifth recital
paragraph hereof.

'Existing  Loan  Agreement' - as defined in the first  recital
paragraph hereof.

'Existing  Loans' - the aggregate  amount of Loans made by the
Banks and outstanding on the date 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 Banks 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 Banks 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

-11-

amounts is specified) of Trade L/Cs issued by the Banks  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(h) hereof.

'Financial  Statements'  - the  audited  consolidated  balance
sheet of the Parent and the Subsidiaries  (including the Borrower) as at January
31,  1995,  together  with the  related  consolidated  statement  of income  and
retained earnings and statement of cash flow for the fiscal year then ended.

'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.

'Fourth  Substituted  Note(s)' - as  defined  in  Section  2.4
hereof.

'Global'  - Global  International  Trading  Company,  a Korean
corporation.

'Goldfarb   Pledge   Agreement'   -  as   defined  in  Section
2.13(e)(i).

'Governmental Acts' - as defined in subsection 2.18(d) 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.

-12-

'Hanil Letter of Credit' - the provision,  as a portion of the
purchase  price  payable  in  connection  with the  Indawa  Acquisition,  by the
Borrower,  on  behalf of  Indawa,  to Hanil  Bank of a standby  letter of credit
expiring no later than May 31, 1996 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
Indawa.

'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 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.

'Individual Guarantor(s)' - as defined in Section 2.12.

'Inventory' - inventory of any of the Loan Parties (other than
the  Individual  Guarantors),  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).

'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

-13-

(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' - NatWest  Bank  N.A.,  Chemical  Bank and The
Chase Manhattan Bank, N.A., as the case may be; provided, however, subsequent to
the Letter Agreement,  dated March 24, 1995, only NatWest Bank N.A. has acted as
Issuing  Bank;  and  provided,  further,  that  from and  after the date of this
Agreement only NatWest Bank N.A. shall act as Issuing Bank.

'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)(iii)  hereof in favor of the Korean Exchange Bank to
support a Two Million Dollar  ($2,000,000)  trade letter of credit  facility for
Global.

'Latest Balance Sheet' - as defined in Section 3.9(a) hereof.

'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.

'L/C(s)' - Trade L/Cs and/or Standby L/Cs.

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

-14-

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' - the Borrower,  the Parent, any Subsidiary,  any
Guarantor,  and any other Person  (other than the Banks and the Agent) which now
or hereafter executes and delivers to any Bank 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 Banks' - so long as the Banks consist of three Banks
or fewer,  Banks having 100% of the aggregate amounts of Commitments and, at any
time that the Banks consist of four Banks or more,  Banks having at least 80% of
the aggregate amount of Commitments; provided, however, that the vote of 100% of
the Banks shall at all times be required for all matters not  specifically to be
determined by Majority Banks hereunder, including, but not limited to, extension
of the term,  increase  in  Commitments,  change in interest  rates,  release of
Collateral and any change to the definition of Majority Banks.

'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.

'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.

'NatWest' - NatWest Bank N.A., in its individual capacity as a
Bank hereunder.

'New  Assignment  of Life  Insurance'  - as defined in Section
2.13(c)(ii)(B) hereof.

-15-

'Note(s)' - the Fourth Substituted Note(s).

'Obligations'  -  collectively,   all  of  the   Indebtedness,
liabilities and obligations of the Borrower (and with respect to Trade L/Cs, and
Hong Kong) to the Banks,  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.

'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
------                        ------

April 1, 1995-April 30, 1995            $17,400,000
May 1, 1995-May 31, 1995                 23,000,000
June 1, 1995-July  23, 1995              24,600,000
July 24, 1995-July  30, 1995             20,600,000
July 31, 1995-Aug.  23, 1995             16,600,000
August 24, 1995-August 30, 1995          13,700,000
August 31, 1995-September 29, 1995       10,900,000
September 30-October 30, 1995             9,000,000
October 31, 1995-November 30, 1995        2,900,000
December 1, 1995-January 31, 1996             -0-
February 1, 1996-February 29, 1996        1,650,000
March 1, 1996-March 31, 1996              8,100,000
April 1, 1996-April 30, 1996              7,100,000
May 1, 1996-May 31, 1996                 16,200,000

provided,   however,  that  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;  and  provided,
further,  that,  at any time when  Outstanding  Obligations  have  exceeded  the
Borrowing Base as a

-16-

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 Banks of all such issuances and advances within 24 hours).

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

'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.

'Payment  Office'  - the  office of each Bank set forth on the
signature page hereof as the lending office of such Bank.

'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

-17-

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 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
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  NatWest as its prime  rate.  Notwithstanding  the  foregoing,  the  Borrower
acknowledges that NatWest 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.

'Projections'  - the balance  sheets,  income  statements  and
statements  of cash flow of the  Borrower  as at, and for the fiscal year ending
January 31, 1996 and for the four month period ending May 31, 1996.

'Purchase Money Security  Interest' - as defined in subsection
7.2(c) hereof.

-18-

'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 Bank,  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 Bank,  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.

'Retail' - G-III Retail Outlets Inc., a Delaware corporation.

'Security  Documents'  -  as  defined  in  subsection  2.13(f)
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, 1996.

'Standby L/C Fee' - as defined in Section 2.6(c) hereof.

'Steamship Guaranties' - as defined in Section 2.1(e) hereof.

'Stock   Pledge   Agreement'   -   as   defined   in   Section
2.13(c)(ii)(D).

'Subsidiary'  - with respect to any Person,  any  corporation,
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

-19-

Person,  or (ii) in the case of a  partnership  or joint  venture  in which such
Person is a general  partner or joint  venturer  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.  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.

'Tax Powers' - as defined in Section 2.13(c)(ii)(C) hereof.

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

'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 or Hong Kong, respectively,  in
order to facilitate the transportation or purchase of goods from foreign vendors
by the  Borrower  or Hong Kong,  as the case may be, in the  ordinary  course of
their  respective  businesses,  which goods are  consigned  to the Issuing  Bank
pursuant to the terms of the  Application  or otherwise,  all of which (i) shall
have an

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expiration date of no later than August 31, 1996,  (ii) shall be  collateralized
on and after June 1, 1996 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(d) hereof.

'Unpaid Drawings' - as defined in Section 2.2 hereof.

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 Banks 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 and, in
the case of Trade L/Cs  only,  also for the  account  of Hong  Kong.  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  Banks  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
Banks of one or more  Trade  L/Cs for the  account  of the  Borrower  or for the
account of Hong Kong; 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

-21-

and Acceptances  outstanding at any one time shall not exceed $3,000,000,  (iii)
the amount of all Trade L/Cs for the account of Hong Kong outstanding at any one
time shall not exceed $2,000,000,  and (iv) no Trade L/Cs shall expire on a date
later than August 31, 1996 and shall be collateralized on and after June 1, 1996
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 Banks
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 amount of Standby L/Cs outstanding at any one time 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, 1996.

(c) During the Credit Period,  the Borrower may apply
to the Issuing  Bank for the issuance by the Issuing Bank on behalf of the Banks
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 Banks of a loan or loans, and may repay and reborrow such
loans (each a 'Loan' and, collectively,  the 'Loans');  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 Banks
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 $19,900,000.00 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  $13,009,758.00  and  shall
constitute 'Trade

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L/Cs'  hereunder in such  amount,  subject to the terms and  conditions  of this
Agreement; (iii) Existing Acceptances are in the amount of $295,152.00 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
$2,080,390.00  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- 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.

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 or Hong Kong,  as the case may be,  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 or Hong Kong,
as the case may be, 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 or Hong Kong,  as the
case may be. 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 proceeds,  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  or Hong Kong,  as the case may be,
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').

-23-

(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  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
Banks 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 Banks,  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 Commitment Termination Date and ending on the date

-24-

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 or Hong Kong,  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,  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 Banks 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  of a 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.

(b) The Collateral  Monitoring  Agent shall render to
each Bank  promptly  after the end of each week,  or such shorter  period as the
Agent may determine (such week or shorter period being  hereinafter  referred to
as a 'Settlement  Period'),  a summary statement of the Outstanding  Obligations
and  each  Bank's  Share  thereof  for  such  period.  If,  as of the end of any
Settlement  Period, any Bank's Share of Loans is more than such Bank's Share for
the previous  Settlement Period, then such Bank 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 Bank
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 Bank after 12:00 p.m.;  and,  on the other hand,  if any Bank's  Share of
Loans as of the end of any  Settlement  Period is less than such Bank's Share of
Loans for the previous Settlement Period,  then the Collateral  Monitoring Agent
shall transfer to such Bank 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 Bank hereunder, and all
funds remitted by

-25-

any Bank 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 Bank's Share of the Outstanding Obligations.
The failure of any Bank to make a timely payment  hereunder shall have no effect
on such Bank's  liability for such payment,  it being  understood that each Bank
shall  assume the risk to the  extent of its  Bank'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.

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

Section 2.5  Interest.

(a)  The  Borrower   shall  pay  to  the   Collateral
Monitoring  Agent,  for the ratable benefit of the Banks,  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 a rate equal to two (2%) percent per annum in excess of the Prime 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  not later than  monthly on the  Monthly
Dates.  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 Bank

-26-

to the extent that such Bank's receipt  thereof would not be  permissible  under
the law or laws  applicable to such Bank limiting  rates of interest that may be
charged or collected by such Bank.  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 Bank on the earliest  interest  payment date or
dates  on  which  the  receipt  thereof  would  be  permissible  under  the laws
applicable  to such Bank  limiting  rates of  interest  that may be  charged  or
collected by such Bank. Such deferred interest shall not bear interest.

Section 2.6  Fees.

(a) The  Borrower  shall  pay to the  Agent,  for the
ratable benefit of the Banks, a non-refundable advisory fee (the 'Advisory Fee')
in the amount of $500,000 payable as follows:

(i)  $125,000  paid  upon  execution  of the
Letter Agreement, dated April 27, 1995, among the Borrower and the Banks; and

(ii)   $125,000   payable   not  later  than
December 31, 1995; and

(iii)   $250,000   payable  not  later  than
February 29, 1996; provided, however, that this portion of the Advisory Fee will
be waived if (x) at all times during the period commencing with the date of this
Agreement  and  ending  on  February  29,  1996  (A) the  Borrower  has  been in
compliance  with the financial  covenants  described in  subsections  6.9(c) and
6.9(d) below and (B)  Outstanding  Obligations  have not exceeded the  Borrowing
Base, and (y) all Loans and Acceptances  (but not Standby Letters of Credit) are
paid in full on at least  five  consecutive  Business  Days  during  the  period
commencing  on  January  1, 1996 and  ending on  February  29,  1996;  provided,
however,  that if Acceptances are  outstanding  during the months of January and
February  1996, the Borrower will  nevertheless  be deemed to have satisfied the
requirement  in clause (y) above if the Collateral  Monitoring  Agent is holding
for the account of the Borrower during such consecutive five Business Day period
excess Cash in an amount which would be  sufficient  to prepay such  outstanding
Acceptances.

(b) Upon each  drawing  under an L/C, the Borrower or
Hong Kong,  as the case may be, shall pay to the Issuing  Bank,  for the ratable
benefit of the Banks,  a drawing fee (the 'Drawing Fee') computed at the rate of
five-sixteenths  of one  (5/16%)  percent  per annum of the face  amount of such
drawing, but in no event shall the Drawing Fee be less than $70.00.

(c) 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 Banks, an issuance fee

-27-

(the 'Standby L/C Fee')  computed at the rate of three (3%) percent per annum on
the face amount of the requested Standby L/C payable quarterly in advance on the
applicable Monthly Dates.

(d) Upon the  execution  and delivery by the Borrower
of an  Application  for any L/C,  Steamship  Guarantee  or Airway  Release,  the
Borrower  shall  pay  directly  to the  Issuing  Bank for its own  account,  all
issuance and associated transactional charges (the 'Transactional Fees') imposed
by the Issuing Bank in connection  with any L/C,  Steamship  Guarantee or Airway
Release.

(e) Upon the execution and delivery of an Acceptance,
the  Borrower  shall pay to the Issuing  Bank,  for the  ratable  benefit of the
Banks, a fee (the  'Acceptance  Fee') for such Acceptance  equal to the discount
rate of the Agent plus four (4%)  percent per annum of the  principal  amount of
such  Acceptance  for  the  term  thereof  payable  monthly  in  advance  on the
applicable Monthly Dates.

(f)  The  Borrower   shall  pay  to  the   Collateral
Monitoring  Agent for its own account the  following  fees monthly in advance on
the first Business Day of each calendar month (with the first such payment to be
made on June 1, 1995):

(i) monitoring fee - $5,000.00;

(ii) collateral  management fee - $1,500.00;
and

(iii) inventory  examination fee - $1,300.00
(collectively, the 'Collateral Fees').

(g) The  Borrower  shall pay to the Banks  within ten
days following demand therefor,  reimbursement  for the fees and expenses of any
Bank's field  examiners  which  accompany  the  Collateral  Monitoring  Agent on
inspections and field examinations (pursuant to Section 6.2 of this Agreement or
otherwise),  such fees and expenses to be calculated at such Bank's standard per
diem rates (the 'Examination Fees').

(h) The  Advisory  Fee,  the Drawing Fee, the Standby
L/C Fee, the Transactional Fees, the Acceptance Fee, the Collateral Fees and the
Examination Fees 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.

-28-

(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 day's prior written notice of such  termination
or reduction to the Banks 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.  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  Bank'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 Existing Loan Agreement,  in an aggregate principal amount of
$37,090,212.00;

(b) second to pay all fees and  expenses of the Agent
and the Banks associated with providing the Revolving Credit Facility; 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.

-29-

(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  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  three  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

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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 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 thirty 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 Bank shall be responsible for the failure of the
other Banks to make Loans to be made by such other Banks.

Section 2.12  Guaranties.

(a) The Parent,  Siena, Hong Kong,  Global,  Sources,
Holdings,  Retail and Tatabuana (the 'Corporate Guarantors') and Morris Goldfarb
and Aron  Goldfarb  (the  'Individual  Guarantors'  and,  collectively  with the
Corporate Guarantors,  hereinafter referred to individually as a 'Guarantor' and
collectively as the 'Guarantors')  have heretofore  executed (or, in the case of
Tatabuana only,  simultaneously  herewith is executing)  guaranties (each of the
foregoing  hereinafter referred to individually as a 'Guaranty' and collectively
as the  'Guaranties')  pursuant to the Existing Loan Agreement (and, in the case
of Tatabuana only, pursuant to this Agreement) guaranteeing, without limitation,
the due payment and performance of the Obligations to the Banks,  the Collateral
Monitoring Agent, the Issuing Bank and the Agent; provided, however, in the case
of the  Individual  Guarantors  only,  the amount to be paid by such  Individual
Guarantors,  in the  aggregate,  shall not  exceed the sum of Two  Million  Five
Hundred Thousand  Dollars  ($2,500,000) (it being understood that the pledge and
obligations

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of Morris Goldfarb under the Goldfarb  Pledge  Agreement are not subject to such
limitation, but are limited to the assets pledged thereunder).

(b) Each of the  Guarantors  (other  than  Tatabuana)
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  described  or  refer to the
Indebtedness,  liabilities and  obligations of the Borrower,  Hong Kong and each
Guarantor to the Banks and the Agent), includes,  without limitation, all of the
Obligations,  by  the  execution  and  delivery  to  the  Agent  of  a  guaranty
confirmation  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
simultaneously  with the execution and delivery of the Existing Loan  Agreement,
granted to the Agent, for the ratable benefit of the Banks, 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 (as amended, the 'Borrower
Security Agreement');

(ii) 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 Banks,  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'); 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 the  Borrower  Security  Agreement  (as  acknowledged  and  confirmed  by the
Borrower Security Interest Confirmation), this Section 2.13 and this Agreement.

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(b)      (i) Each of the Corporate  Guarantors (other
than Global,  Hong Kong and Tatabuana) has heretofore  granted to the Agent, for
the ratable  benefit of the Banks, a Lien on all of such  Corporate  Guarantor's
Accounts  and  Inventory  (and,  in the  case  of  Retail,  all of its  personal
property) whether then owned or thereafter acquired, tangible and intangible, by
the execution and delivery of a Security Agreement (each, 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 Banks, the
Collateral  Monitoring Agent, the Issuing Bank and the Agent) includes,  without
limitation,  in each case, the Obligations as defined herein, and will amend the
terms of the Guarantor  Security  Agreement to provide for a Lien on all of such
Corporate  Guarantor's  personal  property,  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');

(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 Banks,  a lien on, and  assigned  to the Agent,  for the
ratable  benefit of the Banks,  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 Section 6.8 (c) hereof by the execution
and delivery to the Agent of a collateral  assignment  of life  insurance  dated
October 29, 1992 (the 'Assignment of Life Insurance'); and

(B)  Granted  to the  Agent for the
ratable  benefit of the Banks, a Lien on all of its personal  property,  whether
then owned or thereafter acquired, tangible and intangible,

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by the  execution and delivery of a Security  Agreement  dated as of January 31,
1994 (the 'Parent Security 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
Banks,  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)   Execute  and  deliver  a  new
Assignment of Life Insurance (the 'New Assignment of Life  Insurance')  granting
to the Agent for the  ratable  benefit  of the Bank's a Lien on all Key Man Life
Insurance  proceeds under the policy maintained  pursuant to the requirements of
Section 6.8(c) hereof;

(C)  Execute  and deliver IRS Forms
2848 and 234 (the 'Tax  Powers')  granting  to the Agent for the  benefit of the
Banks, inter alia, the authority to receive and endorse tax refund checks;

(D)  Execute  and  deliver  a stock
pledge agreement (the 'Stock Pledge Agreement') of all stock of all Subsidiaries
and Affiliates  (other than Tatabuana and Qingdao G-III Garments  Production Co.
Ltd., the Borrower's Chinese Affiliate,  and their Subsidiaries and Affiliates),
including  but not limited to the stock of the  Borrower,  granting to the Agent
for the ratable benefit of the Banks a Lien on all such stock; and

(E) 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
Parent Security  Agreement (as  acknowledged  and confirmed by the Second Parent
Security  Interest  Confirmation),  the New  Assignment of Life  Insurance,  the
Assignment  of Tax Refunds,  the Stock Pledge  Agreement,  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 Existing Loan
Agreement  granted to the Agent for the  ratable  benefit of the Banks a Lien on
all of their respective Trademarks whether then owned or thereafter acquired, by
the execution and

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delivery to the Agent of a Trademark  Security  Agreement dated October 29, 1992
and a New Trademark  Security Agreement dated July 29, 1994  (collectively,  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 Banks, 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)      (i)  Morris  Goldfarb,  either  prior  to or
simultaneously  with the execution and delivery of this Agreement,  has executed
and delivered to the Agent,  for the ratable  benefit of the Banks,  a pledge of
250,000 shares of the stock of the Parent (the 'Goldfarb  Pledge  Agreement') in
order to secure the due  payment  and  performance  by the  Borrower  of all the
Obligations;

(ii) Morris  Goldfarb shall also 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 the Goldfarb Pledge Agreement.

(f) The  Borrower  Security  Agreement,  the Borrower
Security Interest Confirmation, the Guarantor Security Agreements, the Guarantor
Security Interest Confirmation, the New Assignment of Life Insurance, the Parent
Security  Agreement,  the Parent Security Interest  Confirmation,  the Trademark
Security Agreement, the Trademark Security Interest Confirmation, the Assignment
of Tax Refunds, the Stock Pledge Agreement,  the Goldfarb Pledge Agreement,  and
the aforesaid  agreements,  instruments and documents are hereinafter  sometimes
referred to collectively as the 'Security Documents'.

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Section 2.14 Lending Offices.

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

Section 2.15 Obligations Absolute.

The  obligations  of the Borrower and Hong Kong 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  or Hong Kong 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
Bank 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 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,  Hong  Kong or  beneficiaries  in
connection therewith; and

(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 Bank.

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Section 2.16 Sharing of Payments and Set-Off Among Banks.

(a) The Borrower  hereby  agrees that, in addition to
(and without limitation of) any right of set-off,  banker's lien or counterclaim
a Bank may otherwise have, each Bank 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 Bank to exercise any such
right or shall  affect the right of any Bank to exercise and retain the benefits
of  exercising,  any such  right  with  respect  to any  other  indebtedness  or
obligation of the Borrower.

(b) Each Bank:

(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 Banks of the Obligations,  shall promptly  purchase from the other
Banks a  participation  in the  Obligations  held  by the  other  Banks  in such
amounts,  and  make  such  other  adjustments  from  time to time  as  shall  be
equitable, so that all the Banks shall share the benefit of such payment and the
Obligations pro rata in accordance with their  respective  Commitments.  To such
end all the Banks 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  Banks.  The Borrower
agrees that any Bank so purchasing a participation  in the  Obligations  held by
the other Banks may exercise all rights of set-off,  banker's lien, counterclaim
or similar  rights with respect to such  participation  as fully as if such Bank
were a direct holder of  Obligations  in the amount of such  participation.  The
failure of any Bank to purchase  participations as provided  hereunder shall not
affect the validity of the set-off as between such Bank and the Borrower.

Section 2.17 Capital Requirements.

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 Bank with any request

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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 Bank hereunder,  and the result of any event referred to
above is to impose upon any Bank or increase any capital requirement  applicable
as a result of the making or  maintenance  of,  such  Bank's  Commitment  or the
obligation  of the Borrower  hereunder  with respect to such  Commitment  (which
imposition of capital  requirements may be determined by each Bank's  reasonable
allocation of the  aggregate of such capital  increases or  impositions),  then,
upon  demand  made by such Bank 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  Bank  from  time to time  as  specified  by such  Bank
additional  commitment  fees  or  interest  or  other  amounts  which  shall  be
sufficient to compensate such Bank 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 Bank as a result of an  imposition  of or  increase  in capital
requirements submitted by such Bank 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 'Bank'  shall be deemed to include  any  participant  in such
Bank's Commitment.

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 Bank, (2) impose on any Bank any other condition
regarding  this  Agreement  or the  L/Cs,  or (3)  subject  any Bank 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 Bank; and

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

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then, upon demand of any Bank, the Borrower shall pay to the Banks, from time to
time as specified by each of the Banks,  respectively,  all  additional  amounts
which are necessary to compensate such Bank for such increased cost or reduction
incurred by that Bank. 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 Bank 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 Bank showing the manner of  calculation
thereof  shall be submitted by such Bank 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  Bank  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, 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 Bank.  None of the above  shall  affect,
impair, or prevent the vesting of any Bank'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 Bank,  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 Bank  under  any  resulting  liability  to the
Borrower.

(d)  The  Borrower   shall  at  all  times   protect,
indemnify  and save  harmless  each Bank 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 Bank 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 Bank 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

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Acts'); provided,  however, that the Borrower shall not be required to indemnify
any Bank 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 Bank 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  Bank.
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 Banks.

(a) Except as  otherwise  provided  herein:  (i) each
Loan advanced by the  Collateral  Monitoring  Agent  hereunder,  (ii) 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),  (iii)  each  payment of any Fee (other  than  Transactional  Fees,
Collateral Fees and Examination Fees) by the Borrower,  and (iv) 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 Banks according to the respective Bank's Share.

(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 Bank shall  have made all  payments  to the
Collateral  Monitoring  Agent  required  to be made  hereunder,  the  Collateral
Monitoring  Agent  shall pay to such Bank an amount  equivalent  to such  Bank'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 Bank or the Borrower (the 'Payor') prior to the date notified
on which such Bank 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
Banks,  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,

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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 Bank) or equal to the rate of interest  applicable  to such
Loan (when the recipient is the Borrower).

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,

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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  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  pro  rata  among  the  Banks to
reduce the amount of any outstanding Loans; then

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

(iii) 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

(iv) 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.

Article 3.   Representations and Warranties.

Each of the  Borrower  and  the  other  Loan  Parties
(other than the  Individual  Guarantors)  hereby  represents and warrants to the
Banks, 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

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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,  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

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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  thereunder,  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 Banks.

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  affect  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.

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

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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.

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

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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  affects 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 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  have been 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 Banks 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.

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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.  The Parent's  consolidated
federal  income tax return for the year ended July 31, 1990, is presently  being
audited by the IRS.

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 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.

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.

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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-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 Banks 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 Bank 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  Statements,  the
Projections,  or any certificate or other written statement so made or furnished
to the Agent or the Banks  other  than any  statement  with  respect  to matters
affecting the economy as a whole.

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  affect  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.

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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 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

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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.

(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.

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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 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;

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(b) No  Inventory  is subject to any Lien or
security interest whatsoever, except for the Liens and security interests of the
Agent and the Banks 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 Banks,  shall be subject to the  fulfillment
(to the satisfaction of the Agent, the Collateral  Monitoring Agent, the Issuing
Bank and the Banks) of the following conditions precedent:

(a) The Borrower shall have executed and delivered to
each Bank its Fourth Substituted Note;

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

(e) Each Corporate  Guarantor  (except for Hong Kong,
Global  and  Tatabuana)  shall  have  executed  and  delivered  to the Agent its
Guarantor Security Interest Confirmation;

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(f) Each  Corporate  Guarantor  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.

(g) Tatabuana shall have delivered its Guaranty;

(h) The Parent shall have  executed and  delivered to
the  Agent:  (i)  the  Parent  Security  Interest  Confirmation,  (ii)  the  New
Assignment of Life Insurance,  (iii) the Assignment of Tax Refunds, and (iv) the
Stock  Pledge  Agreement  and the stock  certificates,  stock powers and proxies
required by the terms thereof;

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

(j) Morris Goldfarb shall have executed and delivered
the Goldfarb Pledge Agreement;

(k) The Borrower  shall have  delivered  the Lock Box
Agreement;

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

(m) The Borrower or the Parent  shall have  delivered
the original  Policy of Key Man Life Insurance  required by the terms of Section
6.8(c) hereof;

(n) 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 Banks, 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;

(o) Each of:

(i) Fulbright & Jaworski L.L.P., counsel to the
Borrower, the Parent, Siena,  Manufacturing,  Retail, Holdings,  Sources and the
Individual Guarantors; and

(ii) Robertson Double, counsel to Hong Kong; and

(iii) Daesung Accounting Firm, counsel to Global;

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shall have  delivered  their opinion to, and in form and substance  satisfactory
to, the Agent and the Banks;

(p) The Agent shall have  received  true and complete
copies of the Financial  Statements and the Projections,  each certified as such
in a certificate executed by the president,  vice president,  or chief financial
officer of the Borrower;

(q) 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 the Subsidiaries  certifying that since October 29,
1992 or the date of delivery of the respective  certificates of incorporation to
the Agent there have been no  amendments,  modifications  or  supplements to the
certificates  of  incorporation  of each of the  Borrower,  the  Parent  and the
Subsidiaries;

(iii) A certificate  of the Secretary of each of
the Borrower, the Parent and the Subsidiaries  certifying that since October 29,
1992 or the date of delivery of the  respective  by-laws to the Agent there have
been no amendments,  modifications  or supplements to the by-laws of each of the
Borrower, the Parent and the Subsidiaries;

(iv)  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;

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

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

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(r) (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(r)
are satisfied on such date; and

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

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 Banks,  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 Banks) of the following  conditions
precedent:

(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 Banks;

provided,  however,  that the Borrower  hereby  acknowledges  to the  Collateral
Monitoring  Agent,  the Issuing  Bank,  the Agent and each of the Banks 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.

Section 4.3 Post-Closing Obligations.

(a)  Within  45  days  following  the  date  of  this
Agreement the Borrower and the Parent shall  deliver the following  with respect
to Tatabuana:

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(i) Copies of all organizational documents;

(ii)  evidence  of  good   standing   reasonably
satisfactory to the Agent; and

(iii) an opinion of counsel to  Tatabuana in form
and  substance  satisfactory  to the Agent and the  Banks,  opining as to (among
other things) the Guaranty  delivered by Tatabuana  having been duly  authorized
and delivered and enforceable in accordance with its terms.

(b)  Within  10  days  following  the  date  of  this
Agreement  the  Borrower  and the  Parent  shall  deliver  to the Banks a letter
specifying  in  reasonable  detail the  existing  defaults  with  respect to the
Indebtedness owing to the IDA and JDA (as defined on Exhibit C).

(c)  Within  60  days  following  the  date  of  this
Agreement  the  Borrower  and the  Parent  shall  deliver  to the  Agent a stock
certificate for Global and the Agent is hereby authorized to enter the number of
shares,  certificate  number and other  appropriate  information with respect to
such stock  certificate  on the  schedule to the Stock Pledge  Agreement  and to
possess such  certificate on behalf of the Banks as collateral  security for the
timely payment of the Obligations.

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 Bank, 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 Bank 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  ninety  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
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 or another firm of

-57-

independent  certified public accountants  reasonably  satisfactory to the Agent
and the Banks, and certified, as to the consolidating  statements,  by 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.

(b)  Annually,  at the same time that the  statements
referred  to in  paragraph  (a) of  this  Section  5.1 are  delivered,  personal
financial statements of the Individual Guarantors as of the most recent calendar
year-end,  certified as true and correct by each Individual  Guarantor as to his
own statement.

Section 5.2 Semi-Annual Financial Statements; Quarterly
Financial Statements.

(a) As soon as  available,  but in any  event  within
forty-five  days after the end of the Parent's  semi-annual  fiscal  periods,  a
consolidating  balance sheet of the Parent and the  Subsidiaries  (including the
Borrower)  as of the  last  day of such  semi-annual  period  and  consolidating
statements of income and retained earnings and statements of cash flow, for such
semi-annual  period,  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 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 applicable,  as at its date and for such semi-annual period 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
forty-five  days after the end of the  Parent's  first  three  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 and a
statement of income and retained  earnings and  consolidating  and  consolidated
statements of income and retained earnings and statements of cash flow, for such
quarter,  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 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 as having

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been  prepared in  accordance  with  generally  accepted  accounting  principles
consistently applied (subject to year-end audit adjustments).

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  Bank 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 president or chief financial  officer of the Borrower and the
Parent,  respectively,  to the  effect  that no  default  hereunder  and that no
default 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 president 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  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.

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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  Banks;  (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  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 Bank.

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

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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

To  the  Collateral  Monitoring  Agent  only,  unless
requested by any Bank 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),  (c)(iii) and (e) below,  which
Borrower shall at all times deliver to each Bank),

(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;

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

(vi) an accounts  payable  aging  report in form
satisfactory to the Collateral Monitoring Agent and the Banks.

(c)  Monthly,  delivered  not more than  fifteen days
after the end of each calendar month;

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(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-3;

(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 only
may be delivered not more than 22 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)  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;

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

(d) By no later  than  January  31,  1996,  financial
projections for the Parent's ensuing fiscal year.

(e)  As  and  when  issued,  copies  of  all  reports
prepared by the Consultant within ten days after receipt.

Section 5.11 Confidentiality of Information.

The  Agent,  the  Collateral  Monitoring  Agent,  the
Issuing Bank and the Banks  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  Banks  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  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)

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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  Banks  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 Banks,  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  Banks 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 Banks
(in the case of the Banks,  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 Banks 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  Banks'
investment in the then Outstanding Obligations.

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Section 6.3 Maintenance and Repairs.

Maintain  in good  repair,  working  order and condi-
tion,  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 Bank 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 Banks 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 Banks;  (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 ten 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 Banks,  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 Banks, 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  Banks 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,  EBITDA on a  cumulative  basis  from the first day of each
fiscal year  through the date set forth below at not less than,  or, in the case
of a loss, not more than, the

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respective  amounts  set forth below  opposite  each such last day of the fiscal
quarter:

Date                                      EBITDA
----                                      ------

April 30, 1995                        ($4,800,000)
July 31, 1995                         ($1,100,000)
October 31, 1995                       $6,250,000
January 31, 1996                       $5,000,000
April 30, 1996                        ($4,200,000)

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

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

April 30, 1995-July 30, 1995              $26,000,000
July 31, 1995-October 30, 1995            $27,500,000
October 31, 1995-January 30, 1996         $31,000,000
January 31, 1996-April 29, 1996           $30,000,000
April 30, 1996-May 31, 1996               $27,000,000

(c) Reduce Loans and  Acceptances  Outstanding  to an
amount equal to or less than $5,000,000 for thirty  consecutive  days during the
period from December 1, 1995, through February 28, 1996.

(d)  Maintain  Loans,   Standby  L/Cs,   Acceptances,
Steamship  Guaranties and Airway Releases Outstanding at an amount not to exceed
80% of Eligible  Accounts  Receivable for 60 consecutive  days during the period
from November 1, 1995 through February 28, 1996.

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

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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 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 or another firm of independent  certified
public accountants, provide a copy of such management letter to the Banks within
five days following receipt.

Section 6.14 Engagement of Consultant.

Engage  the Carl Marks  Consulting  Group,  Co.  (the
'Consultant') to monitor the implementation of (i) the recommendations set forth
in the Consultant's report, dated January 1995, and (ii) the Borrower's proposed
implementation  schedule previously  submitted to the Banks (it being understood
and  agreed  that  the  Borrower  does  not  intend  to  implement  all  of  the
recommendations made in the Consultant's report). The Borrower

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will provide to the Banks copies of all retainer agreements between the Borrower
and the Consultant promptly following the execution thereof.

Section 6.15 Tax Refunds.

Instruct,  or otherwise  arrange  with,  the Internal
Revenue  Service,  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 Banks 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.

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

(a) Indebtedness of the Borrower and Hong Kong to the
Banks, 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 Banks with
respect to the Korean L/C and the Hanil L/C; and

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(e) As set  forth on  Exhibit  L 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 individually as a 'Purchase Money Security  Interest')
with the proceeds of the Indebtedness  referred to in subsection  7.1(c) hereof;
provided, however, that:

(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  Capi-
talized 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,

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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.

Section 7.4 Mergers, Acquisitions; Liquidations.

(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.

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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  Indebtedness,
whether now owned or hereafter 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 Banks) 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 accep-
tances 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;

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(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  amount of all such loans to any one employee  shall at no time exceed
$50,000 and that the aggregate  outstanding  principal  amount of all such loans
shall at no time exceed $100,000;

(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  Exhibit  D-1 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 January 31,
1996; and

(d) 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

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(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  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  in an  amount  in excess of  $800,000  (net of  reimbursements  by
landlords  up to  $250,000) in the  aggregate  for the Parent,  Borrower and the
Subsidiaries,  during the period commencing on the date hereof and ending on May
31, 1996.

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  $200,000  for   expenditures  in  respect  of  Capitalized   Lease
Obligations  with respect to all Leases  entered into during the period from the
date of this  Agreement  through  January 31,  1996,  and (b)  aggregate  annual
payments of $80,000 for expenditures in respect of Capitalized Lease Obligations
with respect to all Leases  entered into during the period from February 1, 1996
through May 31, 1996, provided,  however,  that the amounts permitted in (a) and
(b) 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 Manage-
ment 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

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assets to an  Affiliate;  (c) merge  into or  consolidate  with or  purchase  or
acquire assets from an Affiliate;  (d) enter into any other transaction 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 advantageous 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
$150,000; provided, however, that such limitation 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.

Open any  additional  retail stores during the period
from the date hereof through May 31, 1996; provided,  however, that the Borrower
may open  seasonal,  outlet-type  stores  so long as (i) not more  than six such
stores are open at any time,  (ii) the  occupancy  of each such store  shall not
exceed five 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.

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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
Banks 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:

Section 8.1 Payments.

Failure by the  Borrower  to (i) make any  payment or
mandatory  prepayment 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, or (iv)
make  any  required  payment  under  Section  2.7,  2.17,  2.18 and 10.1 of this
Agreement; 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 or he 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

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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

(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 Banks
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
Banks 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

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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 sixty
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
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 sixty 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 sixty 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 thirty days or more; or

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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 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
Banks) 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 Banks, in their sole
discretion,  shall have become and shall have commenced to perform the duties of
chief  executive  officer of the  Borrower  within  thirty  (30) 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

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Section 8.11 Liens.

Any of the Liens created and granted to the Agent for
the ratable  benefit of the Banks 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 Bank written notice of the  commencement of
any  Forfeiture  Proceeding  as provided in Section  5.11 or any Bank 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 Bank 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 Bank.  None of the Collateral  Monitoring  Agent,
the  Issuing  Bank or the  Agent  shall  be  responsible  to the  Banks  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

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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 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
Banks,  and such  instructions  of the  Majority  Banks and any action  taken or
failure to act pursuant thereto shall be binding on all of the Banks.

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 Bank 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 Banks. The Agent shall

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(subject to Section 9.7 hereof) take such action with respect to such Default as
shall be directed by the Majority Banks.

Section 9.4 Rights as a Bank.

Each of the Collateral  Monitoring Agent, the Issuing
Bank and the Agent in its  capacity  as a Bank  hereunder,  shall  have the same
rights  and powers  hereunder  as any other  Bank and may  exercise  the same as
though it were not acting as an agent hereunder,  and the term 'Bank' or 'Banks'
shall,  unless the context otherwise  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 Bank) 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 Banks hereunder,  and may accept fees and other  consideration from
the Borrower or its Affiliates,  for services in connection with this Agreement,
the Security  Documents or any of the other Loan Documents or otherwise  without
having to account for the same to the Banks.

Section 9.5 Indemnification.

The  Banks  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, unless a
default has occurred and is continuing, normal administrative costs and expenses
incident  to the  performance  of their  agency  duties  hereunder  or under the
Security  Documents)  or the  enforcement  of any of the terms  hereof or of the
Security Documents, or of any such other documents,  provided that no Bank 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.

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Section 9.6 Non-Reliance.

Each  Bank  agrees  that  it has,  independently  and
without  reliance on the Collateral  Monitoring  Agent,  the Issuing Bank or the
Agent or any other Bank, 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
Bank, 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 books of the  Borrower.  Except for
notices,  reports and other documents and information  expressly  required to be
furnished to the Banks 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 Bank 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 Banks 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 Banks and the Borrower and (ii) may be
removed at any time with or without cause by the Majority  Banks.  Upon any such
resignation  or removal,  the  Majority  Banks shall have the right to appoint a
successor. If no successor Collateral Monitoring Agent, Issuing

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Bank or Agent shall have been so appointed by the Majority  Banks and shall have
accepted such  appointment  within 30 days after the retiring  party's giving of
notice of resignation or the Majority Banks' 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 Banks,  after  consultation  with the  Borrower,
appoint a successor which shall be one of the Banks.  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.

Section 9.9 Sharing of Collateral and Payments.

Upon or following any  acceleration  by the Agent and
the Banks of the  Obligations,  and  following  the purchase by each Bank of its
proportional share of the Obligations  pursuant to subsection 2.16(b) hereof, in
the event that any Bank 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 Bank in respect of the
aggregate  amount of the  corresponding  Obligation  held by such Bank, then the
Bank  so  receiving   such  greater   proportionate   payment  or  such  greater
proportionate amount of Collateral,  shall purchase for cash from the other Bank
or Banks such portion of each such other Bank's or Banks' Loan, or shall provide
the other  Banks  with the  benefits  of any such  Collateral,  or the  proceeds
thereof,  as shall be necessary to cause such Bank  receiving the  proportionate
overpayment  to share the  excess  payment or  benefits  of such  Collateral  or
proceeds  ratably with each Bank. For the purposes of this Section,  payments on
Obligations  received by each Bank and receipt of  Collateral by each Bank shall
be in the same  proportion as the  proportion of: (A) the  Obligations  owing to
such Bank in respect of the Obligations held by such Bank to (B) the Obligations
owing  to all of the  Banks  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 Bank that received
the  proportionate  overpayment,  such  purchase  of  Obligations  or payment of
benefits, as the case may be, shall be

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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 Banks,  monthly on or before the 20th day of the following  month,
reports as to:

(i) a  summary  of  projected  Availability  vs
actual Availability;

(ii) an accounts receivable aging analysis;

(iii)  an   accounts   receivable   concentration
summary;

(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 Banks 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 such
field  examinations  at least once during each fiscal quarter during the term of
this  Agreement.  Upon reasonable  advance request of the Collateral  Monitoring
Agent,  the Banks shall have the right to examine at the  Collateral  Monitoring
Agent's offices,  or to request copies (prepared at the requesting  Bank'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 Banks 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 Banks 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

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objections by the Majority  Banks 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 Banks at least 24 hours  notice  that the Agent  intends to  establish  such
additional  reserves  and (y)  the  Collateral  Monitoring  Agent  has not  been
notified  of  objections  by the  Majority  Banks  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; or

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

Article 10. Miscellaneous Provisions.

Section 10.1 Fees and Expenses; Indemnity.

The  Borrower  will  promptly  pay all  costs  of the
Collateral  Monitoring  Agent, the Issuing Bank, the Agent and each of the Banks
in preparing  the Loan  Documents  and all costs and expenses of the  Collateral
Monitoring Agent and the Banks 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
assignments, 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
Banks   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

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documents,  the  preservation  of all  rights of the  Banks  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  Banks  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  Banks  with  respect  to the  amending  and
restating of the  Existing  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 Bank 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 Bank 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  Bank)
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 by any
Bank 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 Banks  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.

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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  Banks 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 Bank or any other holder of a Note,  or
issuer of an L/C, Acceptance,  Steamship Guarantee or Airway Release, such Bank,
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 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,

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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  Bank 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 Bank payable
by such Bank 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 Bank 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 Banks a Lien on any and all  deposits or other sums at any time  credited
by or due from the Agent or any Bank 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 Bank, the Collateral  Monitoring  Agent, the
Issuing  Bank or the 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  Bank  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.

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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 Bank
and the Borrower except that: (i) any modification or amendment of, or waiver or
consent  with  respect  to,  Article 4 may be  signed  only by the Agent and the
Majority Banks and the Borrower (provided,  however,  that the consummation of a
transaction  by a Bank shall be deemed,  with respect to such Loan only, to have
the  effect of the  execution  by such  Bank 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  Banks 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 Banks,  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 Banks 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  Bank  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 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  Bank,  the
Collateral Monitoring Agent, the Issuing Bank or the Agent and without regard to
any other  obligation of any nature  whatsoever  that any Bank,  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

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action,  suit or proceeding  instituted by any Bank, 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 Banks  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:

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

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(b)  If to any Bank:

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:

NatWest 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
175 Water Street
New York, New York 10038
Attention:  John C. Phelan
Telecopier No.: (212) 952-1474

(d)  If to the Issuing Bank:

NatWest 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
175 Water Street
New York, New York 10038
Attention:  John C. Phelan
Telecopier No.: (212) 952-1474

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(e)  If to the Agent:

NatWest 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
175 Water Street
New York, New York 10038
Attention:  John C. Phelan
Telecopier No.: (212) 952-1474

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.

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

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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 Banks,  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 Banks,
and any purported assignment or delegation without such consent shall be void.

Section 10.13 Assignments and Participation by Banks; Issuance
of L/Cs by Bank Affiliates.

(a) Each  Bank  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  Bank's  rights  and
obligations  under  this  Agreement,  (ii) the amount of the  Commitment  of the
assigning Bank 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 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 Bank hereunder, and (y) the Bank 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

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portion of an assigning Bank's rights and obligations under this Agreement, such
Bank shall cease to be a party hereto).

(b) By executing and  delivering  an  Assignment  and
Acceptance,  the Bank 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 Bank 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 Bank 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
Bank or any other Bank and based on such  documents and  information as it shall
deem  appropriate  at the time,  continue  to make its own credit  decisions  in
taking or not taking action under this  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 Bank.

(c) Upon its receipt of an Assignment  and Acceptance
executed  by an  assigning  Bank  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 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  Bank  has  retained  a  Bank's  Commitment
hereunder, a new such instrument to the order of the assigning Bank in an amount
equal to the Bank's  Commitment  retained by it hereunder.  Such new  instrument
shall be in an aggregate principal

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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 A hereto.

(d)  (i) Each Bank 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
Bank's  Commitment,  the Loans owing to it,  amounts  outstanding  in respect of
outstanding Obligations, and the Note held by it; and

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

provided,  however,  that:  (x) such  Bank's  obligations  under this  Agreement
(including,  without limitation,  its Bank's Commitment  hereunder) shall remain
unchanged,  (y) such Bank shall remain solely  responsible  to the other parties
hereto for the performance of such  obligations,  (z) such Bank 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 Banks shall  continue to deal solely and directly  with such
Bank in connection with such Bank's rights and obligations under this Agreement.

(e) Any Bank 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 Bank 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 Bank.

(f) In addition to the assignments and participations
permitted  under  subsections  (a) through  (d) hereof,  any Bank may assign and
pledge  all or any  portion of its Loans and Note to (i) any  Affiliate  of such
Bank 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 Federal  Reserve Bank.  Any such  assignment
shall not release the assigning Bank from its obligations hereunder.

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Section 10.14 GOVERNING LAW; CONSENT TO JURISDICTION; 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) EACH OF THE  BORROWER  AND HONG KONG  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. EACH OF THE
BORROWER,  AND HONG KONG,  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.  EACH OF THE BORROWER,  AND
HONG KONG 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.  EACH OF THE BORROWER,  AND HONG KONG 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. EACH OF THE BORROWER,  AND HONG KONG 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
BANK TO COMMENCE  LEGAL  PROCEEDINGS  OR  OTHERWISE  PROCEED  AGAINST ANY OF THE
BORROWER,  OR HONG KONG IN ANY  JURISDICTION  OR TO SERVE  PROCESS IN ANY MANNER
PERMITTED BY LAW.

(c) EACH OF THE BORROWER,  HONG KONG, THE BANKS,  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 THIS  AGREEMENT,  OR THE VALIDITY,  PROTECTION,
INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF.

Section 10.15. Waiver of Existing Events of Defaults.

The  Agent and the Banks  hereby  waive the  Existing
Events of Default as of the date hereof.

-96-

Section 10.16. 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 Banks 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 Banks to
lift such stay.

Section 10.17. 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
Banks, 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.

-97-

IN WITNESS  WHEREOF,  the parties  hereto have caused
this Agreement to be duly executed on 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

INDAWA HOLDING CORP.

By:_______________________________
Title

[SIGNATURES CONTINUED ON NEXT PAGE]

GLOBAL APPAREL SOURCING, LTD.

By:________________________________
Title

G-III RETAIL OUTLETS INC.

By:________________________________
Title

P.T. TATABUANA RAYA

By:_________________________________
Title

Agreed as to Section 2.13(e),  2.13(f),
4.1(d), 4.1(j), 10.16 and 10.17
(solely as such Sections relate to the
Individual Guarantors):

-----------------------------------
Morris Goldfarb, by Alan Feller,
his attorney-in-fact

-----------------------------------
Aron Goldfarb

[SIGNATURES CONTINUED FROM PREVIOUS PAGE]

NATWEST 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:

NatWest 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:

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

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

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

NATWEST BANK N.A.,
as Agent

By:_________________________________
Title

Lending Office:

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

Address for Notices:

NatWest 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:

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

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

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

NATWEST 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:

NatWest 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:

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

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

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

Commitment:
----------
$18,461,538.46                     NATWEST BANK N.A.,
as a Bank
(as a percentage:
38.461538462%)
By:_________________________________
Title

Lending Office:

1133 Avenue of the Americas
New York, New York 10036
Attention:  Thomas M. Fasano,
Vice President

Address for Notices:

1133 Avenue of the Americas
New York, New York 10036
Attention:  Thomas M. Fasano,
Vice President

Telex No.:  232369
Answer-Back Code:  NBNA UR
Telecopier:  (212) 290-1704

Wire Transfer Instructions:

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

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

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

Commitment:
----------
$18,461,538.46                     CHEMICAL BANK

(as a percentage:
38.461538462%)

By:_________________________________
Title

Lending Office:

111 West 40th Street
New York, New York 10018
Attention:  Kristina Kohl,
Vice President

Address for Notices:

111 West 40th Street
New York, New York 10018
Attention:  Kristina Kohl,
Vice President

Telex No.:  175666
Answer-Back Code:  CBC.UT
Telecopier:  (212) 403-5112

Wire Transfer Instructions:

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

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

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

Commitment:
----------
$11,076,923.08                     THE CHASE MANHATTAN BANK, N.A.

(as a percentage:
23.076923076%)
By:_________________________________
Title

Lending Office:

Textile & Apparel Division
1411 Broadway - 5th Floor
New York, New York 10018
Attention:  Roberta Weissenberg

Address for Notices:

Textile & Apparel Division
1411 Broadway - 5th Floor
New York, New York 10018
Attention:  Roberta Weissenberg

Telex No.: 62910CMBUW
Answer-Back Code:
Telecopier: (212) 768-9514

Wire Transfer Instructions:

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

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

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

EXHIBITS AND SCHEDULES

EXHIBITS

A.       Form of Fourth Substituted 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

SCHEDULE
1        Existing Events of Default

7.9      Investments

EXHIBIT A
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

FORM OF FOURTH SUBSTITUTED NOTE

$____________________                            New York, New York
June __, 1995

FOR VALUE  RECEIVED,  the  undersigned  G-III LEATHER
FASHIONS, INC., a New York corporation (the 'Borrower'),  hereby promises to pay
to the order of                  (the 'Bank') on May 31, 1996 or on such earlier
date as is provided for in the Second  Amended and Restated  Loan  Agreement (as
such  Loan  Agreement  may be  amended,  modified  or  supplemented,  the  'Loan
Agreement')  dated the date hereof  between the  Borrower,  the banks  signatory
thereto and NatWest Bank N.A., as Collateral  Monitoring Agent, Issuing Bank and
Agent  (in its  capacity  as  Collateral  Monitoring  Agent,  together  with its
successors and assigns,  the 'Collateral  Monitoring Agent'),  the lesser of (i)
the principal sum of ($         )  Dollars, or (ii) the portion of the aggregate
unpaid  principal amount of the Loans (as defined in the Loan Agreement) made by
the Bank to the Borrower pursuant to the Loan Agreement,  and to pay interest on
the unpaid  principal amount of each Loan from the date thereof at the rates per
annum and for the periods set forth in or  established by the Loan Agreement and
calculated as provided therein.

All  indebtedness  outstanding  under  this Note  shall  bear  interest
(computed in the same manner as interest on this Note prior to  maturity)  after
maturity,  whether at stated  maturity,  by  acceleration  or otherwise,  at the
Post-Default  Rate (as  defined in the Loan  Agreement),  and all such  interest
shall be payable on demand.

Anything herein 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 the Bank to the extent
that the Bank's receipt  thereof would not be permissible  under the law or laws
applicable  to the Bank  limiting  rates of  interest  which may be  charged  or
collected  by the Bank.  Any such  payments of interest  which are not made as a
result of the limitation  referred to in the preceding sentence shall be made by
the Borrower to the Bank on the earliest interest payment date or dates on which
the receipt

thereof  would be  permissible  under the laws  applicable  to the Bank limiting
rates of interest which may be charged or collected by the Bank.

Payment of both  principal  and interest on this Note are to be made at
the  office  of the  Collateral  Monitoring  Agent at 51  Cragwood  Road,  South
Plainfield,  New Jersey  07080 or such other  place as the holder  hereof  shall
designate  to the Borrower in writing,  in lawful money of the United  States of
America in immediately available funds.

This Note is one of the Fourth  Substituted  Notes  referred  to in the
Loan Agreement,  is secured in the manner provided therein,  may be prepaid upon
and subject to terms and  conditions  thereof  and is  entitled to the  benefits
thereof.

This Note shall be deemed to be in substitution for and replacement of,
and not a repayment  of the Note dated  November  22, 1994 made by the  Borrower
payable to the Lender (the  'Prior  Note') and all  interest  accrued and unpaid
under  such  Prior  Note  shall be deemed  evidenced  by this  Note and  payable
hereunder from and after the date of accrual thereof. The execution and delivery
of this Note shall not be  construed  (i) to have  constituted  repayment of any
amount of principal or interest on the Prior Note,  or (ii) to release,  cancel,
terminate  or otherwise  impair all or an part of any lien or security  interest
granted to the Banks party to the Loan  Agreement or their agents as  collateral
security for the Prior Note.

Upon the  occurrence  of any Event of  Default,  as defined in the Loan
Agreement,  the  principal  amount of and  accrued  interest on this Note may be
declared due and payable in the manner and with the effect  provided in the Loan
Agreement.

The  Borrower  shall pay costs and expenses of  collection,  including,
without  limitation,  attorneys'  fees and  disbursements  in the event that any
action, suit or proceeding is brought by the holder hereof to collect this Note.

THIS  NOTE  SHALL  BE  GOVERNED  BY,  AND  CONSTRUED  AND  ENFORCED  IN
ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ITS RULES
PERTAINING TO CONFLICTS OF LAWS.

G-III LEATHER FASHIONS, INC.

By_____________________________
Title

EXHIBIT B
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

STATES OF INCORPORATION AND QUALIFICATION,
AND CAPITALIZATION AND OWNERSHIP
OF STOCK, OF BORROWER AND SUBSIDIARIES

EXHIBIT C
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

CONSENTS, WAIVERS, APPROVALS;
VIOLATION OF AGREEMENTS

EXHIBIT D-1
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

FORM OF AVAILABLE TO SELL REPORT ($)

[FORM FOLLOWS THIS PAGE.]

EXHIBIT D-2
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

FORM OF AVAILABLE TO SELL REPORT (UNITS)

[FORM FOLLOWS THIS PAGE.]

EXHIBIT D-3
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

FORM OF INVENTORY ANALYSIS REPORT

[FORM FOLLOWS THIS PAGE.]

EXHIBIT D-4
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

FORM OF KEY ITEM REPORT

[FORM FOLLOWS THIS PAGE.]

The key item report will contain the following information presented in
a form satisfactory to the Collateral Monitoring Agent:

1.       accounts  receivable by  subsidiary  compared to such accounts
receivable  for the  corresponding  period of the  immediately
preceding fiscal year;

2.       month-end Inventory balance by location;

3.       month-end accounts payable balance by subsidiary;

4.       month-end  unshipped orders by division,  aged by the shipping
month, compared to such unshipped orders for the corresponding
period of the immediately preceding fiscal year;

5.       shipped orders by division for such  preceding  month compared
to same month of the  immediately  preceding  fiscal  year and
projection;

6.       the balances,  if any, in intercompany accounts among the Loan
Parties (other than the Individual Guarantors);

7.       divisional  sales and gross profit for the preceding  calendar
month,  compared to such amounts for the corresponding  period
of the  immediately  preceding  fiscal  year and to the amount
that had been projected for such preceding  month,  including,
without  limitation,  a  reasonably  detailed  description  of
deviations  from  the  amounts  for  the  preceding  year  and
projected for such preceding  month,  together with cumulative
sales and gross  profit for the fiscal year  to-date  compared
with such amount for the immediately preceding fiscal year;

8.       sales by  warehouse,  foreign  letters of credit and  transfer
letters of credit for such month compared to same month of the
immediately preceding fiscal year and projection;

9.       in the  month  immediately  following  the last  month of each
fiscal quarter,  a restatement of such fiscal quarter's profit
and loss statement to reclassify commission income from sales;

10.      in the  month  immediately  following  the end of each  fiscal
year,  an aging report of  inventory  by season,  division and
style;

11.      in the  month  immediately  following  the last  month of each
fiscal quarter, a gross profit report by style;

12.      receivables from Mexico.

EXHIBIT E
TO AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

PERMITTED SECURITY INTERESTS
LIENS AND ENCUMBRANCES

EXHIBIT F
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

JUDGMENTS, ACTIONS, PROCEEDINGS

EXHIBIT G
TO AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

DEFAULTS; COMPLIANCE WITH LAWS,
REGULATIONS, AGREEMENTS

EXHIBIT H
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

BURDENSOME DOCUMENTS

EXHIBIT I
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

PATENTS, TRADEMARKS, TRADE
NAMES, SERVICE MARKS, COPYRIGHTS

EXHIBIT J
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

NAME CHANGES, MERGERS, ACQUISITIONS; LOCATION OF COLLATERAL

EXHIBIT K
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

LABOR DISPUTES, COLLECTIVE BARGAINING
AGREEMENTS; EMPLOYEE GRIEVANCES

EXHIBIT L
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

PENSION PLANS

EXHIBIT M
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

PERMITTED INDEBTEDNESS AND GUARANTIES

EXHIBIT N
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

FORM OF ASSIGNMENT AND ACCEPTANCE

Dated            

Reference  is hereby  made to the Amended  and  Restated  Loan
Agreement dated                       (the 'Loan  Agreement') by and among G-III
Leather  Fashions,  Inc., a New York  corporation  (the  'Borrower'),  the Banks
signatory thereto (collectively,  the 'Banks') and National Westminster Bank USA
in its  capacity  as agent  for the  Banks  (in  such  capacity,  the  'Agent').
Capitalized  terms used herein that are defined in the Loan  Agreement  that are
not otherwise defined herein shall have the respective meanings ascribed thereto
in the Loan Agreement.

,   a                      (the
'Assignor')  and                                         ,  a                  ,
(the 'Assignee') agree as follows:

1. The Assignor hereby sells and assigns to the Assignee,  and
the Assignee hereby purchases and assumes from the Assignor,  a    % interest in
and to all of the Assignor's  rights and obligations under the Loan Agreement as
of the Effective Date (as defined below) (including,  without  limitation,  such
percentage  interest in the Assignor's  Commitment as in effect on the Effective
Date,  and the Loans owing to the Assignor on the Effective  Date,  and the Note
held by the Assignor).

2. The Assignor:  (i)  represents  and warrants that as of the
date hereof its Commitment  (without  giving effect to assignments  thereof that
have not yet become  effective) is  $            and the  aggregate  outstanding
principal  amount of Loans owing to it  (without  giving  effect to  assignments
thereof that have not yet become effective) is $          ;  (ii) represents and
warrants  that it is the  legal  and  beneficial  owner  of the  interest  being
assigned  by it  hereunder,  and that  such  interest  is free and  clear of any
adverse  claim;  (iii)  makes no  representation  or  warranty  and  assumes  no
responsibility  with respect to any  statements,  warranties or  representations
made in or in  connection  with the Loan  Agreement or any other  instrument  or
document  furnished  pursuant  thereto;  and  (iv)  makes no  representation  or
warranty and assumes no responsibility with respect to the

financial  condition of the Borrower or any other Loan Party or the  performance
or observance by the Borrower or any other Loan Party of any of its  obligations
under the Loan Agreement or any other instrument or document  furnished pursuant
thereto; and (v) attaches the Note referred to in paragraph 1 above and requests
that the Agent  exchange  such Note for new Notes as  follows:  a Note dated the
Effective  Date (as such  term is  defined  below)  in the  principal  amount of
$           payable to the order of the Assignee, and a Note dated the Effective
Date in the principal amount of $         payable to the order of the Assignor.

3. The  Assignee:  (i) confirms that it has received a copy of
the Loan Agreement,  together with copies of such financial  statements and such
other  documents and  information  as it has deemed  appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance;  (ii)
agrees that it will,  independently  and without  reliance  upon the Agent,  the
Assignor or any other Bank and based on such  documents  and  information  as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Agreement;  (iii) confirms that it is
an Eligible Assignee; (iv) appoints and authorizes the Agent to take such action
as its agent on its behalf and to exercise such powers under the Loan  Agreement
as are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Agreement
are  required  to be  performed  by it as a  Bank;  and  (vi)  specifies  as its
addresses  for Loans (and address for notices) the office set forth  beneath its
name on the signature pages hereof.

4. The effective date for this Assignment and Acceptance shall
be                    (the  'Effective  Date').  Following the execution of this
Assignment and  Acceptance,  it will be delivered to the Agent for acceptance by
the Agent.

5. Upon such  acceptance,  as of the Effective  Date:  (i) the
Assignee shall be a party to the Loan  Agreement and, to the extent  provided in
this  Assignment  and  Acceptance,  have the  rights and  obligations  of a Bank
thereunder  and  (ii)  the  Assignor  shall,  to the  extent  provided  in  this
Assignment  and  Acceptance,  relinquish  its  rights and be  released  from its
obligations under the Loan Agreement.

6. Upon such  acceptance,  from and after the Effective  Date,
the Agent  shall  make all  payments  under the Loan  Agreement  and the Note in
respect of the interest  assigned hereby  (including,  without  limitation,  all
payments of principal, interest and commitment fees with respect thereto) to the
Assignee.  The Assignor and Assignee shall make all  appropriate  adjustments in
payments  under  the  Loan  Agreement  and the  Note  for  periods  prior to the
Effective Date directly between themselves.

7. This  Assignment and  Acceptance  shall be governed by, and
construed in accordance with, the laws of the State of New York.

[NAME OF ASSIGNOR]

By_______________________________________
Title

[NAME OF ASSIGNEE]

By_______________________________________
Title

Lending Office for Prime Rate Loans:

Attention:

Address for Notices:

Attention:

Telephone No.:

Telex No.:

Accepted this     day

of               , 199 

NATWEST BANK N.A.,
as Agent

By_____________________________________
Title

EXHIBIT O
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

ACCOUNTS AND INVENTORY

NONE

EXHIBIT P
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK

BORROWING BASE CERTIFICATE

As of                

[FORM OF BORROWING BASE CERTIFICATE FOLLOWS THIS PAGE]

EXHIBIT Q
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
------------------
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK
-------------------------------------------------------

FORM OF CONTINUING AGREEMENT FOR ISSUANCE
OF STEAMSHIP GUARANTIES AND AIRWAY RELEASES
-------------------------------------------

[FORM FOLLOWS THIS PAGE.]

SCHEDULE 1
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
------------------
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK
------------------------------------------------------

EXISTING EVENTS OF DEFAULT
--------------------------

SCHEDULE 7.9
TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
BY AND AMONG
G-III LEATHER FASHIONS, INC.,
THE BANKS SIGNATORY HERETO
AND
NATWEST BANK N.A.,
------------------
AS AGENT, COLLATERAL MONITORING AGENT AND ISSUING BANK
------------------------------------------------------

INVESTMENTS
-----------

<ARTICLE>                                            5
<MULTIPLIER>                                         1,000

<PERIOD-TYPE>                                        6-MOS
<FISCAL-YEAR-END>                                    JAN-31-1996
<PERIOD-END>                                         JUL-31-1995
<CASH>                                                2,720
<SECURITIES>                                              0
<RECEIVABLES>                                        27,099
<ALLOWANCES>                                              0
<INVENTORY>                                          32,481
<CURRENT-ASSETS>                                     68,452
<PP                                                6,877
<DEPRECIATION>                                            0
<TOTAL-ASSETS>                                       77,855
<CURRENT-LIABILITIES>                                47,309
<BONDS>                                                   0
<COMMON>                                                 65
<PREFERRED-MANDATORY>                                     0
<PREFERRED>                                               0
<OTHER-SE>                                           28,720
<TOTAL-LIABILITY-AND-EQUITY>                         77,855
<SALES>                                              39,462
<TOTAL-REVENUES>                                     45,307
<CGS>                                                35,001
<TOTAL-COSTS>                                             0
<OTHER-EXPENSES>                                     10,845
<LOSS-PROVISION>                                          0
<INTEREST-EXPENSE>                                    1,397
<INCOME-PRETAX>                                      (1,936)
<INCOME-TAX>                                           (620)
<INCOME-CONTINUING>                                       0
<DISCONTINUED>                                            0
<EXTRAORDINARY>                                           0
<CHANGES>                                                 0
<NET-INCOME>                                         (1,316)
<EPS-PRIMARY>                                          (.20)
<EPS-DILUTED>                                          (.20)