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                                                                    Exhibit 10.3


                                    GUARANTY

            GUARANTY, dated December 24, 1997, made by each of the undersigned
entities (jointly and severally, the "Guarantors"), in favor of Hong J. Han and
Vasiliki Della Pasvantidou Rounick as Executrix of the Estate of Herbert Rounick
(the "Guaranteed Parties").

            PRELIMINARY STATEMENT. (a) The Guarantors are affiliates of The HeRo
Group, Inc., a New York corporation (the "Obligor"), and, other than Nah Nah
Collection Inc., NNCS-NJ LLC and N.N.C.S. LLC, previously guaranteed all of the
obligations of the Obligor to Vasiliki Della Pasvantidou Rounick as Executrix of
the Estate of Herbert Rounick pursuant to a three notes dated May 31, 1995, in
the aggregate original principal amount of $5,296,000 which notes represented
the consolidated indebtedness of the Obligor to Vasiliki Della Pasvantidou
Rounick as Executrix of the Estate of Herbert Rounick and indebtedness of
various affiliates of the Obligor to Vasiliki Della Pasvantidou Rounick as
Executrix of the Estate of Herbert Rounick which the Obligor assumed (the
"Original Notes");

                  (b) Vasiliki Della Pasvantidou Rounick as Executrix of the
Estate of Herbert Rounick sold part of the Original Notes to Hong J. Han and
accordingly two notes in similar form were issued in substitution for the
Original Notes representing the outstanding principal balance due pursuant to
the Original Notes and a pro-rata portion of the accrued and outstanding
interest with respect thereto as of November 30, 1997, the Note to Hong J. Han
being in the original principal amount of $5,403,125 and the Note to Della
Rounick as Executrix of the Estate of Herbert Rounick being in the original
principal amount of $1,257,676 (said Notes, as now or hereafter amended,
restated or replaced are hereinafter referred to as the "Notes");

                  (c) It is a condition precedent to the Guaranteed Parties
accepting the Notes that the original Guarantors confirm the continuation of
their existing guaranty by executing and delivering this Guaranty and that Nah
Nah Collection Inc., NNCS-NJ LLC and N.N.C.S. LLC as new subsidiaries of The
He-Ro Group, Ltd. (parent to Obligor) and affiliates of Obligor as of the date
hereof, also guaranty the obligations of the Obligor pursuant to said Notes.

            NOW, THEREFORE, in consideration of the premises and in order to
induce the Guaranteed Parties to accept the Notes, the Guarantors hereby agree
as follows:

            SECTION 1. Guaranty. The Guarantors hereby unconditionally guarantee
the punctual payment and performance when due, of all amounts due and to become
due from the Obligor under the Notes, whether at stated maturity, by
acceleration, or otherwise including principal, interest, late charges, fees and
expenses (such obligations being the "Obligations"), and agree to pay any and
all expenses incurred by the Guaranteed Parties in enforcing any rights under
this Guaranty.

            SECTION 2. Guaranty Absolute. The Obligations will be paid and
performed strictly in accordance with their terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Guaranteed
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Parties with respect thereto. The liability of the Guarantors under this
Guaranty shall be absolute and unconditional irrespective of:

            (i) any lack of validity or enforceability of the Obligations;

            (ii) any change in the time, manner or place of payment of, or in
      any other term of, all or any of the Obligations, or any other amendment
      or waiver of or any consent to departure thereof;

            (iii) any exchange, release or non-perfection of any collateral, or
      any release or amendment or waiver of or consent to departure from any
      other guaranty, for all or any of the Obligations; or

            (iv) any other circumstance which might otherwise constitute a
      defense available to, or a discharge of, the Obligor in respect of the
      Obligations or the Guarantors in respect of this Guaranty.

            This Guaranty shall continue to be effective or be reinstated, as
the case may be,

            This Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Obligations is
rescinded or must otherwise be returned by the Guaranteed Parties upon the
insolvency, bankruptcy or reorganization of the Obligor or otherwise, all as
though such payment had not been made.

            SECTION 3. Waiver. The Guarantors hereby waive promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Guaranty and any requirement that the Guaranteed Parties
exhaust any right or take any action against the Obligor or any other person or
entity or any collateral.

            SECTION 4. Subrogation. The Guarantors will not exercise any rights
which they may acquire by way of subrogation under this Guaranty, by any payment
made hereunder or otherwise until all the Obligations shall have been paid in
full. If any amount shall be paid to the Guarantors on account of such
subrogation rights at any time when all the Obligations shall not have been paid
in full, such amount shall be held in trust for the benefit of the Guaranteed
Parties and shall forthwith be paid to the Guaranteed Parties to be credited and
applied upon the Obligations, whether matured or unmatured, in accordance with
the terms of the Note in any order which the Guaranteed Parties may, in their
discretion, elect. If (i) the Guarantors shall make payment to the Guaranteed
Parties of all or any part of the Obligations and (ii) all the Obligations shall
be paid in full, the Guaranteed Parties will, at the Guarantors' request,
execute and deliver to the Guarantors appropriate documents, without recourse
and without representation or warranty, necessary to evidence the transfer by
subrogation to the Guarantors of an interest in the Obligations resulting from
such payment by the Guarantors.

            SECTION 5. Consent to Jurisdiction. (a) The Guarantors hereby
irrevocably submit to the jurisdiction of any New York State or Federal court
sitting in New York City in any action or proceeding arising out of or relating
to this Guaranty, and the


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Guarantors hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in such New York State or Federal court.
The Guarantors irrevocably consent to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to the
Guarantors at their address specified in Section 7. The Guarantors agree that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.

            (b) Nothing in this Section shall affect the right of the Guaranteed
Parties to serve legal process in any other manner permitted by law or affect
the right of the Guaranteed Parties to bring any action or proceeding against
the Guarantors or their property in the courts of any other jurisdictions.

            SECTION 6. Amendments, Etc. No amendment or waiver of any provision
of this Guaranty nor consent to any departure by the Guarantors therefrom shall
in any event be effective unless the same shall be in writing and signed by the
Guaranteed Parties and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

            SECTION 7. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telegraphic
communication) and, if to any of the Guarantors mailed or delivered to them,
addressed to 550 Seventh Avenue, New York, New York, 10018, Attention President,
if to the Guaranteed Parties, mailed or delivered to Hong J. Han at 12
Timberline Drive, Alpine, New Jersey 07620 and to Vasiliki Della Pasvantidou
Rounick at 15 West 53rd Street, New York, New York, 10019 or as to each party at
such other address as shall be designated by such party in a written notice to
the other party sent in accordance with the terms hereof. All such notices and
other communications shall be sent by a nationally recognized overnight delivery
service, by hand or by certified mail return receipt requested and shall be
deemed delivered upon receipt or refusal. Any notice sent by any party pursuant
to this Guaranty can be sent by a representative of such party including
counsel.

            SECTION 8. No Waiver; Remedies. No failure on the part of the
Guaranteed Parties to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.

            SECTION 9. Continuing Guaranty; Transfer of Note. This Guaranty is a
continuing guaranty and shall (i) remain in full force and effect until payment
in full of the Obligations and all other amounts payable under this Guaranty,
(ii) be binding upon the Guarantors, their successors and assigns, and (iii)
inure to the benefit of and be enforceable by the Guaranteed Parties and their
respective successors, transferees and assigns. Without limiting the generality
of the foregoing clause (iii), the Guaranteed Parties may assign or otherwise
transfer all or any party of their respective Notes to any other person, and
such subsequent holder thereof shall thereupon become vested with all the powers
and rights in respect thereof granted to the Guaranteed Parties herein or
otherwise.


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            SECTION 10. Joint and Several Liability. The Guarantors shall be
jointly and severally liable hereunder, and the word "Guarantors" wherever used
herein shall be construed to refer to the undersigned or any one or more of
them. This Guaranty shall not be revoked or impaired as to any one or more of
such parties by the dissolution, bankruptcy or insolvency (however defined) of
any of the others or by the release of any liabilities hereunder of any one or
more of such parties.

            SECTION 11. Subordination. The indebtedness evidenced by the Notes
and the obligations of the Guarantors pursuant to this Guaranty have been
subordinated to indebtedness owed by the Obligor and certain affiliates to (a)
Heller Financial Inc. pursuant to a Factoring and Revolving Inventory Loan and
Security Agreement of even date herewith and all present and future related
agreements as now or hereafter amended or supplemented and (b) Hong J. Han as
the assignee and successor of Marine Midland Bank, N.A., as agent for itself and
certain other banks as more fully set forth in agreements with such lenders as
in effect from time to time.

            SECTION 12. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of New York without regard
to the principles of conflict of laws.

            SECTION 13. Rights of Guaranteed Parties. The Guarantors acknowledge
that the rights of the Guarantied Parties pursuant to this Guaranty are subject
to the terms and provisions of the Debt Purchase and Intercreditor Agreement
among the Guaranteed Parties and the Obligor of even date herewith as now or
hereafter amended.

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            IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be
duly executed and delivered by an authorized officer as of the date first above
written.

                                The He-Ro Group, Ltd.
                                Nah Nah Collections, Inc.
                                HRNL, Inc.
                                European Collections of Silverthorne, Inc.
                                European Collections of Queenstown, Inc.
                                European Collections of Williamsburg Inc.
                                European Collections Outlet, Inc.
                                European Collections of Chattanooga, Inc.
                                European Collections of Gilroy Inc.
                                European Collections of Harriman Inc.
                                European Collections of Reading Station, Inc.
                                NNCS-NJ LLC
                                N.N.C.S. LLC
                                Colorado Textile, Inc.
                                H.R.I., Inc.
                                H.R.M.E. Inc.
                                HRI Palmer Corporation
                                HRSB, Inc.
                                N.R.T. Company, Inc.
                                Nouvelle Sportive, Inc.
                                Silhoutte, Inc.
                                Designer Collections of Pocono, Inc.
                                European Collections of Birch Run, Inc.
                                European Collections of Kenosha, Inc.
                                L'Estelle Fashion Corporation
                                Group Apparel He Ro Far East Limited (Hong Kong)
                                HE RO (Europe) Limited
                                Gruppo Italiano Limited
                                Klaxon Bay Limited
                                Dunard Limited


                                By: /s/ Sam Kaplan
                                   -----------------------------------------
                                    Sam Kaplan, Vice President of each


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