SEVENTH AMENDMENT

                           TO THE FINANCING AGREEMENT


          SEVENTH AMENDMENT,  dated as of April 13, 1999 (this "Amendment"),  to
the Financing Agreement,  dated as of February 13, 1996, as amended by the First
Amendment  dated as of February 13, 1997, the Second  Amendment dated as of June
1, 1997, the Third Amendment  dated as of October 1, 1997, the Fourth  Amendment
dated as of November 28, 1997,  the Fifth  Amendment  dated as of March 25, 1998
and the  Sixth  Amendment  dated  as of  March  31,  1999  (as so  amended,  the
"Financing  Agreement"),  by and among Happy Kids Children's Apparel Ltd., a New
York corporation  formerly known as Happy Kids, Ltd. ("Happy Kids"), Happy Kids,
Inc., a New York corporation  formerly known as O'Boy Inc. (the "Parent"),  Talk
of the Town Apparel Corp., a New York corporation  ("TOT  Apparel"),  O.P. Kids,
Inc., a New Jersey corporation and successor by merger to O.P. Kids, L.L.C. ("OP
Inc.",  and  together  with  Happy  Kids,  the Parent  and TOT  Apparel,  each a
"Borrower" and collectively, the "Borrowers"), the guarantors listed on Schedule
B  to  the  Financing  Agreement  (each  a  "Guarantor"  and  collectively,  the
"Guarantors"), the lenders listed on Schedule A to the Financing Agreement (each
a  "Lender"  and  collectively  the  "Lenders")  and  The  CIT  Group/Commercial
Services, Inc., as agent for the Lenders (in such capacity, the "Agent").

          WHEREAS,   concurrently  with  the  execution  and  delivery  of  this
Amendment,  the Parent is entering  into an Asset  Purchase  Agreement  (the "D.
Glasgow  Asset  Purchase  Agreement")  with D. Glasgow & Sons,  Inc., a New York
corporation ("D. Glasgow & Sons"),  and Andrew Glasgow,  the sole shareholder of
all of the issued and outstanding capital stock of D. Glasgow & Sons.

          WHEREAS,  D. Glasgow & Sons is engaged  principally in the business of
designing,   manufacturing   and  selling   children's   apparel  products  (the
"Business").

          WHEREAS,  pursuant  to the  terms  of the D.  Glasgow  Asset  Purchase
Agreement,  the Parent will purchase  certain of the assets and the Business for
the consideration  set forth in the D. Glasgow Asset Purchase  Agreement and the
assumption by the Parent of certain of D. Glasgow & Sons' liabilities.

          WHEREAS,  in connection  with the D. Glasgow Asset Purchase  Agreement
and the transactions  contemplated thereby (the "Asset Purchase  Transactions"),
the  Borrowers,  the  Guarantors,  the  Lenders  and the Agent wish to amend the
Financing   Agreement  to,  among  other  things,   permit  the  Asset  Purchase
Transactions.

          Accordingly,  the Borrowers, the Guarantors, the Lenders and the Agent
hereby agree as follows:

          1.     Definitions.    All  terms which are  defined in the  Financing
                 -----------
Agreement and not otherwise defined herein are used herein as defined therein.
<PAGE>

          2.     Existing Definitions.
                 --------------------
                 (a)  The definition of the term "License Agreements" in Section
1.01 of the  Financing  Agreement  is hereby  amended in its entirety to read as
follows:

                      "'License Agreements' means the BUM License Agreement, the
          Jordache License  Agreements,  the LA Gear License  Agreement,  the OP
          License Agreement,  the D. Glasgow License Agreements and each license
          agreement  entered into by any Borrower or Corporate  Guarantor  after
          the Effective Date."

                 (b)  The  definition of the term  "Licensor" in Section 1.01 of
the Financing Agreement is hereby amended in its entirety to read as follows:

                      "'Licensor'  means  BUM, Ocean Pacific,  LA Gear, Jeanjer,
          Jordache,  the D. Glasgow  Licensors  and any Person  entering  into a
          license  agreement with any Borrower or Corporate  Guarantor after the
          Effective Date".

          3.     New Definitions.   The  following  definitions of the terms "D.
                 ---------------
Glasgow Asset Purchase Agreement",  "D. Glasgow License Agreement",  "D. Glasgow
Licensor"  and  "Seventh  Amendment"  are hereby  added to  Section  1.01 of the
Financing Agreement:

                      "'D. Glasgow  Asset Purchase Agreement'  means  the  Asset
          Purchase  Agreement among the Parent,  D. Glasgow & Sons,  Inc., a New
          York corporation  ('D.  Glasgow & Sons') and Andrew Glasgow,  the sole
          shareholder of all of the issued and  outstanding  capital stock of D.
          Glasgow & Sons."

                      "'D.  Glasgow   License  Agreement'  means   each  license
          agreement  acquired by the Parent from D.  Glasgow & Sons  pursuant to
          the D. Glasgow Asset Purchase  Agreement,  as more fully  described on
          Annex I to the Seventh Amendment."

                      "'D. Glasgow Licensor'  means each  licensor party to a D.
          Glasgow License Agreement,  as more fully described on Annex II to the
          Seventh Amendment."

                      "'Seventh Amendment' means the Seventh Amendment, dated as
          of April 13, 1999, to the Financing Agreement."

          4.     Liens.   Section  7.02(a) of the Financing  Agreement is hereby
                 -----
amended by (i) deleting the word "and" at the end of clause (viii) thereof, (ii)
redesignating  clause (ix) thereof as clause (x), and (iii) adding the following
new clause (ix):

                      "(ix) Liens on  assets  (other  than  Accounts  Receivable
          and Inventory) acquired by the Parent pursuant to the D. Glasgow Asset
          Purchase  Agreement,   as  described  on  Annex  III  to  the  Seventh
          Amendment, but not the extension of coverage thereof to other property
          or the extension of maturity, refinancing or other modification of the
          terms thereof or of the Indebtedness secured thereby; and"

                                     - 2 -
<PAGE>

          5.   Investment.  Section 7.02(f) of the Financing Agreement is hereby
               ----------
amended by (i) deleting the words "and" at the end of clause (ii) thereof,  (ii)
redesignating  clause  (iii)  thereof  as  clause  (iv),  and (iii)  adding  the
following new clause (iii):

                     "(iii)  investments  by  the  Parent in  the  assets of  D.
          Glasgow & Sons  pursuant to the D. Glasgow Asset  Purchase  Agreement;
          and"

          6.   Capital Expenditures.  Section 7.02(h) of the Financing Agreement
               --------------------
is hereby amended in its entirety to read as follows:

                     "(h)   Capital Expenditures.  Make or be committed to make,
          or permit any of its Subsidiaries to make or be committed to make, any
          expenditure  (by purchase or  capitalized  lease) for fixed or capital
          assets other than (i) expenditures  made by the Parent pursuant to the
          D. Glasgow Asset Purchase  Agreement or (ii)  expenditures  (including
          obligations  under  Capitalized  Leases)  which  would  not  cause the
          aggregate amount of all such  expenditures to exceed $2,000,000 in any
          calendar year."

          7.   Schedules.    Schedule  6.01(e),  Schedule 6.01(s)  and  Schedule
               ---------

6.01(y)  to the  Financing  Agreement  are each  hereby  amended  by adding  the
information  contained on each of Annex IV, Annex V and Annex VI,  respectively,
to the Schedule to which such Annex relates.

          8.   Conditions.  This  Amendment shall  become  effective  only  upon
               ----------
satisfaction in full of the following  conditions precedent (the first date upon
which all such conditions have been satisfied being herein called the "Amendment
Effective Date"):

               (a)   Representations and  Warranties;  No Event of Default.  The
representations  and  warranties  contained  herein,  in  Section  6.01  of  the
Financing  Agreement  and in each other Loan Document and  certificate  or other
writing  delivered to the Agent and the Lenders  pursuant  hereto on or prior to
the  Amendment  Effective  Date  shall  be  correct  on and as of the  Amendment
Effective  Date as though made on and as of such date (except to the extent that
such  representations and warranties  expressly relate solely to an earlier date
in which case such  representations  and warranties shall be true and correct on
and as of such date);  and no Potential  Default or Event of Default  shall have
occurred and be continuing on the Amendment  Effective Date or would result from
this Amendment becoming effective in accordance with its terms.

               (b)   Delivery of Documents.  The Agent shall have received on or
before the Amendment  Effective Date the  following,  each in form and substance
satisfactory to the Agent and, unless indicated  otherwise,  dated the Amendment
Effective Date:

                     (i)  counterparts of this  Amendment, duly executed by the
          Borrowers, the Guarantors and the Lenders;

                     (ii) an Assignment for Security (Trademarks), duly executed
          executed by the Parent,  granting to the Agent, for the benefit of the
          Lenders, a security interest

                                     - 3 -
<PAGE>

          in all right,  title and  interest  of the Parent in, to and under the
          Trademarks listed on Annex VI hereto;

                      (iii)   certified   copies  of   requests  for  copies  of
          information on Form UCC-11, listing all effective financing statements
          which name as debtor D. Glasgow & Sons,  together  with copies of such
          financing  statements,  none of which,  except as otherwise  agreed in
          writing by the Agent,  shall cover any of the Collateral,  and results
          of searches for any tax and judgment  Liens filed against D. Glasgow &
          Sons or its property,  which results, except as otherwise agreed to in
          writing by the Agent, shall not show any such Liens;

                      (iv)   a certificate of the chief executive officer or the
          chief  financial  officer  of the  Parent,  certifying  that  attached
          thereto  are  complete  and  correct  copies of the D.  Glasgow  Asset
          Purchase  Agreement and all other  agreements,  instruments  and other
          documents executed and delivered in connection  therewith as requested
          by the Agent;

                      (v)   a  certificate  of an  authorized  officer  of  each
          Borrower  and  Corporate  Guarantor,  certifying  the  names  and true
          signatures of the  representatives  of such Person  authorized to sign
          this Amendment and the other documents to be executed and delivered by
          such Person in  connection  herewith,  together  with  evidence of the
          incumbency of such authorized officers;

                      (vi)   a certificate of the chief executive officer or the
          chief  financial  officer of the Parent,  certifying as to the matters
          set forth in subsection (a) of this Section 8;

                      (vii)   a  copy  of  each  of  the   D.  Glasgow   License
          Agreements as in effect on the Amendment Effective Date,  certified as
          a true and correct copy thereof by the chief executive  officer or the
          chief financial officer of the Parent;

                      (viii)  evidence  of the  insurance  coverage  required by
          the terms of Section 7.01(h) of the Financing  Agreement and the other
          Loan  Documents  naming the Agent an additional  insured or loss payee
          thereunder as specified by the Agent on all assets  acquired  pursuant
          to the D. Glasgow Asset Purchase Agreement; and

                      (ix)   such  other  agreements,  instruments,   approvals,
          opinions and other documents as the Agent may reasonably request.

               (c)   Proceedings.   All   proceedings  in  connection  with  the
transactions  contemplated  by  this  Amendment,  and all  documents  incidental
hereto,  shall be  satisfactory  to the Agent and its special  counsel,  and the
Agent and such special counsel shall have received all such information and such
counterpart  originals  or  certified  copies  of  documents,   and  such  other
agreements,  instruments,  approvals, opinions and other documents, as the Agent
or such special counsel may reasonably request.

                                     - 4 -
<PAGE>

          9.   Representations  and  Warranties.   Each of the Borrowers and the
               --------------------------------
Corporate Guarantors represents and warrants as follows:

               (a) Each  Borrower and  Corporate  Guarantor (i) is a corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
state of its organization and (ii) has all requisite power,  authority and legal
right to  execute,  deliver  and  perform  this  Amendment,  and to perform  the
Financing Agreement, as amended hereby.

               (b)  The  execution,  delivery  and  performance  by it  of  this
Amendment  and the  performance  by it of the  Financing  Agreement,  as amended
hereby (i) have been duly  authorized by all necessary  action,  (ii) do not and
will not violate or create a default under its articles of organization, by-laws
or any  applicable  law or any  contractual  restriction  binding  or  otherwise
affecting it or any of its properties,  and (iii) except as provided in the Loan
Documents,  do not and will not result in or require  the  creation  of any Lien
upon or with respect to its property.

               (c) No  authorization  or  approval  or other  action  by, and no
notice to or filing with, any Governmental Authority or other regulatory body is
required in connection  with (i) the due execution,  delivery and performance by
it of this Amendment and (ii) the performance by it of the Financing  Agreement,
as amended hereby.

               (d)  Each  of this  Amendment  and the  Financing  Agreement,  as
amended hereby,  is a legal,  valid and binding  obligation of each Borrower and
Corporate Guarantor that is a party thereto enforceable against each such Person
in accordance with the terms thereof.

               (e) The representations and warranties contained in Article VI of
the Financing Agreement are correct on and as of the Amendment Effective Date as
though made on and as of the Amendment Effective Date (except to the extent such
representations and warranties expressly relate to an earlier date in which case
such representations and warranties shall be true and correct as of such earlier
date),  and no Event  of  Default  or  Potential  Default  has  occurred  and is
continuing  on and as of the Amendment  Effective  Date or will result from this
Amendment becoming effective in accordance with its terms.

          10.   Continued Effectiveness of the Financing Agreement.  Each of the
                --------------------------------------------------
Borrowers and the Corporate  Guarantors  hereby confirms and agrees that, except
as  otherwise  provided  in Section 9, (i) each Loan  Document  to which it is a
party is,  and shall  continue  to be, in full  force and  effect  and is hereby
ratified and  confirmed in all respects  except that on and after the  Amendment
Effective  Date all  references  in any such  Loan  Document  to "the  Financing
Agreement", "thereto", "thereof", "thereunder" or words of like import referring
to the Financing Agreement shall mean the Financing Agreement as amended by this
Amendment,  and (ii) to the extent any such Loan Document  purports to assign or
pledge  to the  Agent,  or to grant  to the  Agent a Lien on any  collateral  as
security for the  Obligations  of the Borrowers or the  Guarantors  from time to
time existing in respect of the Financing Agreement and the Loan Documents, such
pledge,  assignment and/or grant of the Lien is hereby ratified and confirmed in
all respects.

                                     - 5 -
<PAGE>

          11.  Miscellaneous.  (a) This Amendment may be  executed in any number
               -------------
of counterparts and by different parties hereto in separate  counterparts,  each
of which  shall be deemed to be an  original,  but all of which  taken  together
shall constitute one and the same agreement.

               (b)  Section  and  paragraph  headings  herein are  included  for
convenience  of reference only and shall not constitute a part of this Amendment
for any other purpose.

               (c)  This Amendment  shall  be  governed  by,  and  construed  in
accordance with, the laws of the State of New York.

               (d)  The Borrowers will pay on demand  all reasonable fees, costs
and expenses of the Agent in  connection  with the  preparation,  execution  and
delivery of this  Amendment  and all  documents  incidental  hereto,  including,
without  limitation,  the reasonable  fees,  disbursements  and other charges of
Schulte Roth & Zabel LLP, counsel to the Agent.


                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]


                                     - 6 -
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective  officers  thereunto duly authorized,  as of the
date first above written.

                                   BORROWERS:
                                   ---------

                                   HAPPY KIDS CHILDREN'S APPAREL LTD.,
                                   formerly known as Happy Kids, Ltd.


                                   By: /s/ Jack M. Benun
                                       ------------------------------------
                                       Title: President
                                             ------------------------------
                                       Name:  Jack M. Benun
                                             ------------------------------


                                   HAPPY KIDS INC., formerly known as
                                   O'Boy Inc.


                                   By: /s/ Jack M. Benun
                                       ------------------------------------
                                       Title: President
                                             ------------------------------
                                       Name:  Jack M. Benun
                                             ------------------------------


                                   TALK OF THE TOWN APPAREL CORP.


                                   By: /s/ Jack M. Benun
                                       ------------------------------------
                                       Title: President
                                             ------------------------------
                                       Name:  Jack M. Benun
                                             ------------------------------


                                   O.P. KIDS, INC.


                                   By: /s/ Jack M. Benun
                                       ------------------------------------
                                       Title: President
                                             ------------------------------
                                       Name:  Jack M. Benun
                                             ------------------------------

<PAGE>

                                   GUARANTORS:
                                   ----------

                                   H.O.T. KIDZ, INC.


                                   By: /s/ Jack M. Benun
                                       ------------------------------------
                                       Title: President
                                             ------------------------------
                                       Name:  Jack M. Benun
                                             ------------------------------

                                   HAWK INDUSTRIES, INC.


                                   By: /s/ Jack M. Benun
                                       ------------------------------------
                                       Title: President
                                             ------------------------------
                                       Name:  Jack M. Benun
                                             ------------------------------


                                   J&B 18 CORP.


                                   By: /s/ Jack M. Benun
                                       ------------------------------------
                                       Title: President
                                             ------------------------------
                                       Name:  Jack M. Benun
                                             ------------------------------


<PAGE>

                                   AGENT AND LENDER:
                                   ----------------

                                   THE CIT GROUP/COMMERCIAL
                                     SERVICES, INC.


                                   By: /s/ Deborah Rogut
                                       ------------------------------------
                                       Title: Vice President
                                             ------------------------------
                                       Name:  Deborah Rogut
                                             ------------------------------


                                   LENDERS:
                                   -------

                                   THE CHASE MANHATTAN BANK


                                   By: /s/ Barbara Saltzman
                                       ------------------------------------
                                       Title: Vice President
                                             ------------------------------
                                       Name:  Barbara Saltzman
                                             ------------------------------


                                   ISRAEL DISCOUNT BANK OF NEW YORK


                                   By: /s/ Gary Harkins
                                       ------------------------------------
                                       Title: Vice President
                                             ------------------------------
                                       Name:  Gary Harkins
                                             ------------------------------


                                   By: /s/ Ronald Bongiovanni
                                       ------------------------------------
                                       Title: Vice President
                                             ------------------------------
                                       Name:  Ronald Bongiovanni
                                             ------------------------------


                                   REPUBLIC NATIONAL BANK OF NEW YORK


                                   By: /s/ Thomas DeGeorge
                                       ------------------------------------
                                       Title: Vice President
                                             ------------------------------
                                       Name:  Thomas DeGeorge
                                             ------------------------------


<PAGE>


                                     ANNEX I
                                     -------

                         [D. Glasgow License Agreements]



                                    ANNEX II
                                    --------

                             [D. Glasgow Licensors]



                                    ANNEX III
                                    ---------

                               [D. Glasgow Liens]



                                    ANNEX IV
                                    --------

                               Inventory Locations



                                     ANNEX V
                                     -------

                           Operating Lease Obligations



                                    ANNEX VI
                                    --------

                                   Tradenames