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                                                                   EXHIBIT 10.3

[FINANCO, INC. LETTERHEAD]



                                                        November 11, 1996


The Clothestime, Inc.
5325 East Hunter Avenue
Anaheim, California 92807

        Attention: David Sejpal
                   Vice President and Chief Financial Officer

Creditors' Committee for The Clothestime, Inc.
% Siegel, Sommers & Schwartz, LLP
470 Park Avenue South
New York, New York 10016

        Attention: Gene Schwartz, Co-Chairman
                   Howard Camhi, Co-Chairman

Dear Sirs:

This will set forth the understanding and agreement between Financo, Inc., a
Delaware corporation ("Financo") and The Clothestime, Inc. (the "Company") and
the Creditors' Committee for the Company (the "Creditors' Committee") as 
follows:

1.      The Company and the Creditors' Committee hereby jointly engage Financo
        as their financial advisor for the purpose of (a) identifying
        opportunities for the "Sale/Merger" of or "Investment" in (as defined in
        paragraph 3 below) the Company; (b) advising the Company and the
        Creditors' Committee concerning opportunities for such a Sale/Merger or
        Investment, whether or not identified by Financo; (c) as requested by
        the Company and the Creditors' Committee, participating on their behalf
        in negotiations concerning such a Sale/Merger or Investment, and (d)
        assisting the Company and the Creditors' Committee with implementing any
        such Sale/Merger or Investment in the context of the Company's "Chapter
        11" (as hereinafter defined) context. References herein to the
        "Company" shall be deemed to include any entity that the Company may
        form to effect any of the transactions contemplated hereby.

2.      Financo hereby accepts the engagement described in Paragraph 1 and, in
        that connection, agrees to:

        (a)     assist with the preparation of financial and descriptive
                materials concerning the Company, and the distribution of such
                materials to prospective acquirors/merger partners of or
                investors in the Company;

        (b)     develop, update and review with the Company and the Creditors'
                Committee on an ongoing basis a list of parties which might be
                interested in acquiring, merging with or investing in the
                Company (the "List") and contact only parties on the List that
                the Company and the Creditors' Committee consent to in advance;
                and

        (c)     consult with and advise the Company and the Creditors' Committee
                concerning any prospective Sale/Merger or Investment and, if so
                requested by the Company and the Creditors' Committee,
                participate on the Company's and the Creditors' Committee's
                behalf in negotiations for such Sale/Merger or Investment.

        The Company and the Creditors' Committee may refuse to discuss or
        negotiate a Sale/Merger or Investment with any party for any reason
        whatsoever and may terminate negotiations with any party at any time.





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The Clothestime, Inc.
Creditors' Committee for The Clothestime, Inc.
November 11, 1996
Page 2

3.      For the purposes of this agreement:

        (a)     A "Sale/Merger" of the Company shall mean any transaction or
                series or combination of transactions, other than in the
                ordinary course of trade or business, whereby, directly or
                indirectly, control of or a material interest in the Company or
                its businesses or assets is transferred. A "Sale/Merger" may
                take the form of any of the following transactions (without
                limitation): a sale or exchange of capital stock; a sale or
                exchange of assets (including, without limitation, one or more
                sales of leases, and one or more bulk sales of inventory, but
                excluding in-store sales of inventory and sales of leases
                conducted in connection with the Company's closing of store
                locations, other than in connection with a transaction as
                described in the second subparagraph of paragraph 3(c) below), a
                lease of assets (with or without a purchase option), a merger or
                consolidation (whether or not the Company is the surviving
                entity), a tender or exchange offer, a leveraged buy-out, the
                formation of a joint venture, minority investment or
                partnership, or any similar transaction.

        (b)     An "Investment" in the Company shall mean any transaction, other
                than a Sale/Merger, constituting (a) the purchase by a third
                party of any security issued by the Company (including without
                limitation equity, debt or convertible securities, and any
                warrants or options to purchase the same), (b) any material loan
                (other than a working capital loan made by a financial
                institution) made by a third party to the Company, (c) the
                payment or assumption or defeasement by a third party of a
                material amount of the Company's obligations to third parties,
                or (d) any similar transaction.

        (c)     Financo's compensation in connection with the consummation of a
                Sale/Merger or an Investment is based on the transaction's
                "Aggregate Value". "Aggregate Value" of a Sale/Merger or
                Investment shall mean the sum of (1) the value of all cash,
                securities and other property (including contingent
                consideration) paid or payable by an acquiring/investing party
                in connection with a Sale/Merger or Investment, (ii) any
                indebtedness of the Company that is "assumed" (as defined below)
                in connection with a Sale/Merger or Investment, and (iii) any
                dividends or other distributions paid by the Company out of the
                ordinary course from the date hereof through the closing of any
                Sale/Merger or Investment. 

                Further, if it is determined that the Company's value to its
                estate is maximized by effecting a Sale/Merger as a multi-step
                transaction whereby the Company sells or merges its principal
                operating components to one purchaser/merger partner, with
                certain remaining assets (i.e., cash, cash equivalents,
                investments, inventories or receivables) being liquidated, sold
                or distributed by the estate, then the proceeds of such
                liquidated, sold or distributed assets shall be deemed to be
                part of the Aggregate Value of such Sale/Merger.

                The value of any non-cash portion of Aggregate Value, such as
                securities (whether debt or equity) or other property, shall be
                determined as follows: (1) the value of securities that are
                freely tradable in an established public market will be
                determined as provided in the definitive agreement governing the
                Sale/Merger or Investment or, in the absence of such an
                agreement or provision, on the basis of the last closing price
                prior to the consummation of a Sale/Merger or Investment; and
                (2) the value of the securities that are not freely tradable or
                have no established public market, or of property other than
                securities, shall be the fair market value thereof. Indebtedness
                of the Company shall be

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The Clothestime, Inc.
Creditors' Committee for The Clothestime, Inc.
November 11, 1996
Page 3


                deemed to have been "assumed" if (A) such indebtedness is
                repaid, assumed or otherwise defeased by an acquiror, investor
                or a other third party, or (B) in connection with a Sale/Merger
                in the form of a "stock" transaction (e.g., sale of stock,
                merger, consolidation, etc.), such indebtedness remains an
                obligation of the Company (or its successor or assignee) upon
                consummation of Sale/Merger. The term "indebtedness" shall, in
                the case of short-term revolving working capital debt, include
                only the average outstanding amount of such debt for the twelve
                months preceding the Sale/Merger or Investment. 

4.      The Company and the Creditor's Committee shall (a) furnish to Financo
        the names of all parties, if any, with whom they have had, prior to the
        date hereof, or have, at any time during the term of Financo's
        engagement hereunder, discussion or contacts concerning a Sale/Merger or
        Investment (such parties' names shall be hereby deemed to have been
        added to the List); and (b) make available to Financo all information
        concerning the business, assets, operations and financial condition of
        the Company that Financo reasonably requests in connection with the
        performance of its obligations hereunder. The Company and the Creditors'
        Committee recognize and confirm that, in advising them and in completing
        its engagement hereunder, Financo is using and relying on information,
        data, and material furnished to it by the Company. It is understood that
        in performing under this Agreement, Financo may assume and rely upon the
        accuracy and completeness of, but has not assumed any responsibility for
        independent verification of, such information, data and material so
        furnished.

5.      Financo shall be engaged hereunder from the date hereof until this
        Agreement is terminated in accordance with the terms set forth below.
        Subject to the provisions of paragraphs 6 through 11, which shall
        survive any termination of this Agreement and/or the completion of
        Financo's engagement hereunder, the Company and the Creditors' Committee
        may terminate Financo's engagement hereunder at any time by giving
        Financo at least 10 business days prior written notice. Within 10
        business days after the effective date of any termination, Financo will
        deliver to the Company and the Creditors' Committee a copy of the List
        as then constituted.

6.      As compensation for the services rendered by Financo hereunder, the
        Company shall pay Financo as follows:

        (a)     A retainer of $125,000 shall be paid to Financo by the Company
                (the "Retainer Fee") upon the effectiveness of this Agreement
                under the rules and procedures of the "Bankruptcy Court" (as
                hereinafter defined). The Retainer Fee shall be credited against
                any fee paid pursuant to paragraph 6(b) below.

        (b)     Except as provided in paragraph 6(c) below, if a Sale/Merger of
                or Investment in the Company occurs either (i) with any party
                during the term of Financo's engagement hereunder, or (ii) at
                any time during a period of 12 months following the effective
                date of the Company's termination of Financo's engagement
                hereunder where the Sale/Merger or Investment involves a party
                either named on the List or with whom the Company or the
                Creditors' Committee had contact during the term of Financo's
                engagement hereunder, then the Company shall pay Financo a fee
                (a "Success Fee") equal to the greater of (A) $300,000 plus
                1-1/2% of the Aggregate Value, or (B) $400,000.
     


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The Clothestime, Inc.
Creditors' Committee for The Clothestime, Inc.
November 11, 1996
Page 4

        (c)     It is understood by the parties hereto that the Company, prior
                to the date hereof, has received from Ray DeAngelo and/or any of
                his affiliates ("DeAngelo") a proposal for a Sale/Merger or
                Investment (the "DeAngelo Proposal"); and may receive, after the
                date hereof, from Fast Retailing Ltd. and/or any of its
                affiliates ("Fast Retailing" and, together with "DeAngelo",
                each, alternatively, a "Designated Pre-Existing Candidate") a
                proposal for a Sale/Merger or Investment (a "Fast Retailing
                Proposal"). In order for a Fast Retailing Proposal to be
                considered  a valid proposal for the purposes of this Agreement,
                on or before November 25, 1996, Fast Retailing must present a
                bona fide proposal in writing to the Company and the Creditors'
                Committee that is not subject to material additional due
                diligence and which contains the key material terms of a
                potential Sale/Merger or Investment, including (without
                limitation) credible details on the realizable value of such a
                transaction to the Company and its estate, the general structure
                and manner of implementation of such a transaction, how such a
                transaction would be financed, and a definitive timetable for
                consummation. In the event that the Company effects a
                Sale/Merger or Investment with DeAngelo or with Fast Retailing
                (but only if Fast Retailing submits a valid proposal as provided
                above), then the provisions of this paragraph 6(c) shall govern
                the payment of fees to Financo.

                (i)  If potential acquirors/investors other than the
                     Designated Pre-Existing Candidates conduct on- or off-site
                     financial due diligence on the Company prior to the
                     acceptance by the Court of a Sale/Merger or Investment
                     transaction from one of the Designated Pre-Existing
                     Candidates, but such potential acquirors/investors either
                     submit no proposals to effect a Sale/Merger or Investment,
                     or submit proposals for a Sale/Merger or Investment none of
                     which, in the reasonable opinion of the Company and the
                     Creditors' Committee, present value to the estate
                     materially superior to the DeAngelo Proposal or a valid
                     Fast Retailing Proposal, then, in the event that the
                     Company thereafter enters into an agreement to effect a
                     Sale/Merger or Investment with one of the Designated
                     Pre-Existing Candidates, Financo shall thereupon be paid a
                     fee of $50,000 (the "Termination Fee"). A termination Fee
                     shall not be payable if the only parties that conduct any
                     on- or off-site financial due diligence on the Company are
                     the Designated Pre-Existing Candidates. 

                (ii) If one or more of the potential acquirors/investors other
                     than the  Designated Pre-Existing Candidates submit
                     proposals for a Sale/Merger or Investment at least one of
                     which, in the reasonable opinion of the Company or the
                     Creditors' Committee, presents value to the estate
                     materially superior to the DeAngelo Proposal or a valid
                     Fast Retailing Proposal, then, in the event that the
                     Company thereafter effects a Sale/Merger or Investment with
                     a Designated Pre-Existing Candidate within the time
                     parameters outlined in paragraph 6(b) above, the Company
                     shall pay Financo a Success Fee as provided in such
                     paragraph 6(b).

        (d)     Payment of a Success Fee to Financo pursuant to this paragraph 6
                shall be paid by the Company to Financo at the closing of a
                Sale/Merger or Investment by wire transfer or check payable in
                immediately available funds. Payment of a Termination Fee to
                Financo pursuant to this paragraph 6 shall be paid by the
                Company to Financo immediately following the approval by the
                Court of a Sale/Merger or Investment meeting the conditions of
                paragraph 6(c)(i) by wire transfer or check payable in
                immediately available funds.
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The Clothestime, Inc.
Creditors' Committee for The Clothestime, Inc.
November 11, 1996
Page 5

        The Company and the Creditors' Committee represent that neither has
        made any agreement with any brokers, representatives or other persons 
        pursuant to which such persons would have an interest in compensation 
        due from the Company to Financo in connection with any transaction
        contemplated herein.

7.      The Company shall, upon prior notice from Financo, pay, in advance, for
        all travel and lodging expenses, and for any material, publishing or 
        photocopying costs, to be incurred by Financo on the Company's and the
        Creditors' Committee's behalf in connection with Financo's engagement
        hereunder. Except as otherwise provided for in the foregoing sentence,
        the Company shall reimburse Financo, on a monthly basis in arrears for
        Financo's reasonable out-of-pocket expenses incurred in connection with 
        Financo's activities under or contemplated by this engagement during 
        such preceding month, which out-of-pocket expenses may include, but 
        not be limited to, outside database charges, overtime or outside word
        processing charges, communication charges, courier services and other
        necessary and reasonable expenses.

8.      Financo will act under this Agreement as an independent contractor with
        duties solely to the Company and the Creditors' Committee. The Company
        and the Creditors' Committee expressly acknowledge that their
        engagement of Financo is not intended to confer rights upon any person
        not a party hereto, including shareholders, employees or creditors of
        the Company, as against Financo, Financo's affiliates or their 
        respective directors, officers, agents and employees or each other 
        person, if any, controlling Financo or any of its affiliates. Except 
        as otherwise required by applicable law, any advice to be provided by
        Financo under this Agreement shall not be disclosed publicly or made
        available to third parties without prior written approval of Financo,
        which approval shall not be unreasonably withheld.

9.      The Company and the Creditors' Committee agree that, following the
        completion of any transaction contemplated hereby, Financo will have
        the right to place advertisements in financial and other newspapers and
        journals, at its own expense, describing its services to the Company
        and the Creditors' Committee hereunder, provided that, prior to placing
        any such advertisements, Financo will submit a copy of any such
        advertisements to the Company and the Creditors' Committee for their 
        approval.

10.     Financo understands that the Company has filed a voluntary
        bankruptcy petition under Chapter 11 ("Chapter 11") of the U.S.
        Bankruptcy Code in the U.S. Bankruptcy Court of the Central District of
        California, Santa Ana Division (the "Bankruptcy Court"). Financo, the
        Company and the Creditors' Committee acknowledge that this Agreement
        and its effectiveness are subject to the approval of the Bankruptcy
        Court. The Company and the Creditors' Committee agree to seek to make
        this agreement effective either through a joint stipulation or a motion
        pursuant to the rules and procedures of the Bankruptcy Court as soon as
        reasonably practicable and to take all reasonable actions necessary to
        procure such effectiveness.

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The Clothestime, Inc.
Creditors' Committee for The Clothestime, Inc.
November 11, 1996
Page 6

11.     This Agreement shall be deemed to have been made in the State of New
        York. This Agreement and all controversies arising from or relating to
        performance under this Agreement shall be governed by and construed in
        accordance with the laws of the State of New York, without giving effect
        to such State's rules concerning conflicts of laws. ANY RIGHT TO TRIAL
        BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF THIS
        AGREEMENT OR CONDUCT IN CONNECTION WITH THIS ENGAGEMENT IS HEREBY
        WAIVED. This letter shall constitute the entire agreement between the
        parties hereto. This Agreement shall remain in full force and effect
        following completion or termination of Financo's engagement hereunder
        and shall be binding upon and inure to the benefit of any successors,
        assigns, heirs and personal representatives of the Company, the
        Creditors' Committee, and Financo. This Agreement may be executed via
        facsimile transmission and may be executed in separate counterparts,
        each of which shall be deemed to be an original and all of which
        together shall constitute a single instrument.

        
        If the foregoing correctly sets forth the understanding and agreement
between Financo and the Company, please sign in the space indicated below.





                                        FINANCO, INC.

                                        By: /s/ Joshua R. Goldberg
                                           ---------------------------------
                                                Joshua R. Goldberg
                                                Managing Director



                                        THE CLOTHESTIME, INC.

                                        By: /s/ David A. Sejpal
                                           ----------------------------------
                                                David A. Sejpal
                                                Vice President and
                                                Chief Financial Officer


                                        CREDITORS' COMMITTEE FOR THE
                                        CLOTHESTIME, INC.

                                        By: /s/ Gene Schwartz
                                           -----------------------------------
                                                Gene Schwartz
                                                Co-Chairman


                                        By: /s/ Howard Camhi
                                           ------------------------------------
                                                Howard Camhi
                                                Co-Chairman