EXHIBIT 10.1

              AMENDMENT NO. 6 TO THE COMPANY'S FINANCING AGREEMENT


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                                 SIXTH AMENDMENT

                           TO THE FINANCING AGREEMENT



            SIXTH AMENDMENT,  dated as of March 31, 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 and the Fifth Amendment dated as of March 25, 1998
(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,  the Borrowers,  the Guarantors,  the Lenders and the Agent
wish to amend the  Financing  Agreement  to among other  things (i) increase the
Credit  Exposure (as defined in the  Financing  Agreement)  and the Total Credit
Exposure (as defined in the Financing  Agreement),  (ii) extend the  Termination
Anniversary  Date (as  defined in the  Financing  Agreement),  (iii)  change the
interest rate and provide for a Eurodollar  interest rate option, and (iv) amend
certain other terms and conditions in the Financing Agreement.  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.

            2. RECITALS. The first sentence in the Recitals is hereby amended in
its entirety to read as follows:  "The Borrowers and the  Guarantors  have asked
the Lenders to extend credit to the Borrowers,  from the date hereof through the
Final  Maturity  Date (as  hereinafter  defined),  in the form of  discretionary
revolving  credit loans to the Borrowers at any time and from time to time prior
to the Final  Maturity  Date in an aggregate  principal  amount not in excess of
$50,000,000."

            3. EXISTING  DEFINITIONS.  (a) The  definition of the term "Business
Day" in  Section  1.01 of the  Financing  Agreement  is  hereby  amended  in its
entirety to read as follows:

                        "'Business  Day'  means any day other  than a  Saturday,
            Sunday or other day on which  commercial  banks in New York City are
            required or  authorized  to close,  provided,  that with  respect to
            borrowing,   payment,   conversion   to  or   continuation   of,  or
            determination of interest rate on,  Eurodollar  Loans,


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            Business Day shall mean any Business Day on which dealings in United
            States dollars may be carried on in the interbank eurodollar markets
            in New York City and London."

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

                        "'Credit  Exposure' means,  with respect to each Lender,
            the total credit  exposure of such Lender as set forth on Schedule A
            hereto,  as the same may be adjusted  from time to time  pursuant to
            Sections 10.01 or 11.01 hereof."

                  (c) The definition of the term "L/C Issuer" in Section 1.01 of
the Financing Agreement is hereby amended in its entirety to read as follows:

                        "'L/C  Issuer'  means  The Chase  Manhattan  Bank or its
            successors."

                  (d) The definition of the term "Post-Default  Rate" in Section
1.01 of the  Financing  Agreement  is hereby  amended in its entirety to read as
follows:

                        "'Post-Default  Rate' means a rate of interest per annum
            equal to the rate of interest otherwise in effect plus 1-1/2% or, if
            no other rate of interest is in effect, the Prime Rate plus 1%."

                  (e) The definition of the term "Termination  Anniversary Date"
in Section 1.01 of the Financing  Agreement is hereby amended in its entirety to
read as follows:

                        "'Termination Anniversary Date' means March 31, 2000 and
            thereafter March 31 of each succeeding calendar year."

                  (f) The  definition  of the term "Total  Credit  Exposure"  in
Section 1.01 of the  Financing  Agreement  is hereby  amended in its entirety to
read as follows:

                        "'Total Credit  Exposure'  means the sum of the Lenders'
            Credit  Exposures in Schedule A hereto,  as the same may be adjusted
            from time to time pursuant to Sections 10.01 or 11.01 hereof."

            4.  NEW  DEFINITIONS.   The  following   definitions  of  the  terms
"Eurodollar Base Rate", "Eurodollar Loan", "Eurodollar Rate", "Interest Period",
"Prime Rate Loan", and "Reserve  Requirements"  are hereby added to Section 1.01
of the Financing Agreement:

                        "'Eurodollar  Base Rate' means, with respect to each day
            during each Interest  Period  pertaining to a Eurodollar  Loan,  the
            rate of  interest  published  in The Wall  Street  Journal,  Eastern
            Edition,  two  Business  Days prior to such  Interest  Period as the
            "London Interbank Offered Rate" applicable to one, two, three or six
            months,  as selected by the  Administrative  Borrower.  In the event
            that The Wall Street  Journal,  Eastern  Edition is not published or
            such  rate  does not  appear  in The Wall  Street  Journal,  Eastern
            Edition,  the Eurodollar  Base Rate shall


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            be the rate determined by the Agent to be the rate at which deposits
            in United States dollars are offered by The Chase  Manhattan Bank to
            first  class  banks in the  interbank  eurodollar  market  where the
            eurodollar and foreign  currency and exchange  operations in respect
            of its eurodollar  loans are then being  conducted at  approximately
            11:00  A.M.,  New York City  time,  two  Business  Days prior to the
            beginning of such Interest Period, in an amount  approximately equal
            to the  principal  amount  of the  Eurodollar  Loan  to  which  such
            Interest  Period is to apply and for a period of time  comparable to
            such Interest Period."

                        "'Eurodollar  Loan' means a Loan bearing  interest based
            on the Eurodollar Rate."

                        "'Eurodollar Rate' means with respect to each day during
            each Interest  Period  pertaining  to a Eurodollar  Loan, a rate per
            annum  determined  for such  day in  accordance  with the  following
            formula (rounded upward to the nearest 1/16 of 1%):

                              Eurodollar Base Rate
                          ----------------------------
                          1.00 - Reserve Requirements"

                        "'Interest  Period' means with respect to any Eurodollar
            Loan, the period commencing on the borrowing date or the date of any
            continuation of or conversion into such Eurodollar Loan, as the case
            may be, and ending one, two, three or six months thereafter, in each
            case as selected by the  Administrative  Borrower in the  applicable
            notice given to the Agent  pursuant to Sections 2.03 or 2.10 hereof;
            provided  that (i) each  Interest  Period  shall  begin on the first
            Business  Day of a  month,  (ii)  any  Interest  Period  that  would
            otherwise  end on a day that is not a Business Day shall be extended
            to the next succeeding  Business Day, unless such Business Day falls
            in another  calendar month, in which case such Interest Period shall
            end on the next preceding Business Day, (iii) no Interest Period for
            any  Eurodollar  Loan shall end after the Final  Maturity  Date, and
            (iv) no more than three (3) Interest  Periods in the  aggregate  for
            the Borrowers may exist at any one time."

                        "'Prime Rate Loan' means a Loan bearing  interest at the
            Prime Rate."

                        "'Reserve Requirements' means, for any day as applied to
            a Eurodollar Loan, the aggregate (without  duplication) of the rates
            (expressed as a decimal fraction) of reserve  requirements in effect
            on such day (including,  without  limitation,  basic,  supplemental,
            marginal and emergency  reserves under any  regulations of the Board
            of Governors  of the Federal  Reserve  System or other  Governmental
            Authority  having  jurisdiction  with respect  thereto) dealing with
            reserve requirements  prescribed for eurocurrency funding (currently
            referred to as  "Eurocurrency  Liabilities"  in  Regulation D of the
            Board of Governors of the Federal  Reserve  System)  maintained by a
            member bank of the Federal Reserve


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            System.  Eurodollar Loans shall be deemed to constitute Eurocurrency
            Liabilities and to be subject to such reserve  requirements  without
            benefit of or credit for proration,  exceptions or offsets which may
            be available from time to time to any Lender or the Affiliate of any
            Lender  under  Regulation D of the Board of Governors of the Federal
            Reserve System."

            5.  CREDIT  EXPOSURE.  The second  sentence  of Section  2.01 of the
Financing Agreement is hereby amended in its entirety to read as follows:

                        "Notwithstanding the foregoing,  the aggregate principal
            amount of Loans  outstanding at any time to the Borrowers  shall not
            exceed the lowest of (i) the difference between (A) the Total Credit
            Exposure,  and (B) the aggregate Letter of Credit Obligations,  (ii)
            the difference  between (A) the then current  Borrowing Base and (B)
            the aggregate Letter of Credit Obligations, and (iii) $40,000,000."

            6. MAKING THE LOANS.  Section  2.03 of the  Financing  Agreement  is
hereby amended in its entirety to read as follows:

                        "SECTION  2.03.  Making  the Loans.  The  Administrative
            Borrower, on behalf of itself or any other Borrower,  shall give the
            Agent prior written or telephone notice (which notice,  if requested
            by the Agent, must be promptly confirmed in writing in substantially
            the form of  Exhibit I hereto (a  "Notice  of  Borrowing"))  (i) not
            later  than  12:00  noon  (New  York  City  time) on the date of the
            proposed borrowing,  in the case of a borrowing  consisting of Prime
            Rate  Loans,  or (ii) not later than 12:00 noon (New York City time)
            three Business Days prior to such proposed  borrowing in the case of
            a borrowing consisting of Eurodollar Loans, provided that Eurodollar
            Loans will only be made on the first  Business Day of a month.  Such
            Notice of  Borrowing  shall be  irrevocable  and shall  specify  the
            principal amount of the proposed  borrowing (which, in the case of a
            Eurodollar  Loan,  must be in a minimum  amount of $1,500,000 and in
            multiples  of  $500,000  in excess  thereof),  whether  such Loan is
            requested to be a Prime Rate Loan or a  Eurodollar  Loan and, in the
            case of a  Eurodollar  Loan,  the initial  Interest  Period for such
            Eurodollar  Loan and the proposed  borrowing  date,  which must be a
            Business  Day  and,  in the case of a  Eurodollar  Loan,  the  first
            Business  Day of a month,  and, if the Agent  agrees in its sole and
            absolute  discretion to make such Loan to a Borrower,  such Borrower
            shall be bound to make a  borrowing  in  accordance  therewith.  The
            Agent may act without liability upon the basis of written,  telecopy
            or telephone  notice  believed by the Agent in good faith to be from
            the Administrative  Borrower (or from any officer thereof designated
            in writing to the Agent),  and the Borrowers  hereby waive the right
            to dispute  the Agent's  record of the terms of any such  telephonic
            Notice of Borrowing."


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            7.  FUNDING  AND  SETTLEMENT.  (a) The  second  sentence  of Section
2.05(a)(i) of the Financing  Agreement is hereby amended in its entirety to read
as follows:

                        "If  either  (1)  the  Administrative  Borrower  gives a
            Notice of Borrowing  requesting a Eurodollar  Loan and the Agent has
            agreed to make such Loan or (2) the Administrative  Borrower gives a
            Notice  of  Borrowing  requesting  a Prime  Rate  Loan and the Agent
            agrees to make such Loan and  elects not to fund such Loan on behalf
            of the  Lenders,  then  promptly  after  receipt  of the  Notice  of
            Borrowing  requesting  such Loan, the Agent shall notify each Lender
            of the specifics of the requested Loan and that it will not fund the
            requested  Loan on behalf of the Lenders.  If the Agent notifies the
            Lenders  that it will not fund a  requested  Loan on  behalf  of the
            Lenders,  each  Lender  shall  make its Pro  Rata  Share of the Loan
            available  to the Agent,  in  immediately  available  funds,  at the
            Payment  Office  no later  than  3:00  p.m.  (New  York  City  time)
            (provided that the Agent requests payment from such Lender not later
            than 12:00 noon) on the date of the proposed Loan."

                  (b) The first sentence of Section  2.05(b)(i) of the Financing
Agreement is hereby amended in its entirety to read as follows:

                        "With respect to each Eurodollar  Loan, on the first and
            the last  date of each  Interest  Period,  and with  respect  to all
            periods for which the Agent,  on behalf of the  Lenders,  has funded
            Prime  Rate  Loans  pursuant  to  subsection  2.05(a),  on the first
            Business Day after the last day of each week, or such shorter period
            as the Agent may from time to time  select (any such week or shorter
            period being herein called a "Settlement  Period"),  the Agent shall
            notify each Lender of the average daily unpaid  principal  amount of
            the Loans outstanding during such Settlement Period."

            8. INTEREST. Paragraphs (a) and (c) of Section 2.06 of the Financing
Agreement are hereby amended in their entirety to read as follows:

                        "(a)  Revolving  Credit  Loans.  Each  Loan  which  is a
            Eurodollar Loan shall bear interest on the principal  amount thereof
            from time to time  outstanding from the date of such Loan until such
            principal  amount  becomes  due,  at a rate per  annum  equal to the
            Eurodollar Rate for the Interest Period in effect for such Loan plus
            2.00%.  Each Loan which is a Prime Rate Loan shall bear  interest on
            the principal  amount thereof from time to time outstanding from the
            date of such Loan,  until such  principal  amount  becomes due, at a
            rate per annum equal to the Prime Rate minus .50%."

                        "(c) Interest Payment.  Interest on each Eurodollar Loan
            shall be payable in arrears on the last day of each Interest  Period
            of such  Eurodollar  Loan and, in the case of any Eurodollar Loan of
            six month  duration,  the day that interest  would have been paid if
            such  Eurodollar  Loan  had an  interest  period  of  three  months.
            Interest  on each  Prime  Rate Loan  shall be  payable  monthly,  in
            arrears,


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            on the first day of each month,  commencing  on the first day of the
            month  following  the  month in  which  such  Loan is  made,  and at
            maturity  (whether  upon  demand,  by  acceleration  or  otherwise).
            Interest at the  Post-Default  Rate shall be payable on demand.  The
            Borrowers  hereby  authorize  the Agent to, and the Agent may,  from
            time to time,  charge the Loan  Account  pursuant  to  Section  4.02
            hereof with the amount of any interest payment due hereunder."

            9.  PREPAYMENTS.  Paragraph  (g) of  Section  2.07 of the  Financing
Agreement is hereby amended by adding the following at the end thereof:

                        "Notwithstanding  the  foregoing in this  Section  2.07,
            prepayments  of  Eurodollar  Loans shall be subject to the following
            additional  requirements:  (i) all  prepayments of Eurodollar  Loans
            shall be  subject to the terms of  Section  2.09 of this  Agreement,
            (ii)  prepayments  of  Eurodollar  Loans shall be made upon at least
            three (3) Business Days  irrevocable  notice to the Agent, and (iii)
            no partial prepayment of a Eurodollar Loan shall be permitted."

            10. EURODOLLAR PROVISIONS. The following new Sections 2.08, 2.09 and
2.10 are hereby added to the Financing Agreement:

                        "SECTION  2.08.  Eurodollar   Rate  Not   Determinable;
            Illegality or Impropriety.

                        (a) In the  event,  and on  each  occasion,  that  on or
            before the day on which the Eurodollar  Rate is to be determined for
            a  borrowing  that is to  include  Eurodollar  Loans,  the Agent has
            determined  in good faith that,  or has been advised by the Required
            Lenders that, (i) the  Eurodollar  Rate cannot be determined for any
            reason,  (ii) the  Eurodollar  Rate will not  adequately  and fairly
            reflect the cost of  maintaining  Eurodollar  Loans or (iii)  United
            States  dollar  deposits in the principal  amount of the  applicable
            Eurodollar  Loans  are not  available  in the  interbank  eurodollar
            market  where the  eurodollar  and  foreign  currency  and  exchange
            operations  in respect  of the  Lenders'  Eurodollar  Loans are then
            being conducted, the Agent shall, as soon as practicable thereafter,
            give  written  notice of such  determination  to the  Administrative
            Borrower  and  the  other   Lenders.   In  the  event  of  any  such
            determination,  any  request by the  Administrative  Borrower  for a
            Eurodollar  Loan pursuant to Section 2.03 shall,  until, in the case
            of such a determination by the Required Lenders,  the Agent has been
            advised by the  Required  Lenders  and the Agent has so advised  the
            Administrative  Borrower that, or in the case of a determination  by
            the Agent, the Agent has advised the Administrative Borrower and the
            other Lenders that, the circumstances  giving rise to such notice no
            longer exist,  be deemed to be a request for a Prime Rate Loan. Each
            determination  by the Agent  and/or the Required  Lenders  hereunder
            shall be conclusive and binding absent manifest error.


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                        (b) In the event that it shall be  unlawful  or improper
            for any  Lender to make,  maintain  or fund any  Eurodollar  Loan as
            contemplated  by this  Agreement,  then such Lender shall  forthwith
            give  notice  thereof to the Agent and the  Administrative  Borrower
            describing  such  illegality or  impropriety  in reasonable  detail.
            Effective immediately upon the giving of such notice, the obligation
            of such Lender to make  Eurodollar  Loans shall be suspended for the
            duration of such  illegality  or  impropriety  and, if and when such
            illegality or impropriety  ceases to exist,  such  suspension  shall
            cease, and such Lender shall notify the Agent and the Administrative
            Borrower.  If any such change shall make it unlawful or improper for
            any  Lender  to  maintain  any  outstanding  Eurodollar  Loan  as  a
            Eurodollar  Loan,  such Lender  shall,  upon the  happening  of such
            event,  notify the Agent and the  Administrative  Borrower,  and the
            Administrative  Borrower  shall  immediately,  or  if  permitted  by
            applicable law, rule,  regulation,  order,  decree,  interpretation,
            request or directive, at the end of the then current Interest Period
            for such Eurodollar  Loan,  convert each such Eurodollar Loan into a
            Prime Rate Loan.

                        SECTION 2.09.  Indemnity.

                        (a) The Borrowers hereby jointly and severally indemnify
            each Lender  against any loss or expense  that such Lender  actually
            sustains  or  incurs  (including,  without  limitation,  any loss or
            expense  incurred by reason of the  liquidation or  reemployment  of
            deposits or other funds  acquired by such Lender to fund or maintain
            any Eurodollar Loan, and including loss of anticipated profits) as a
            consequence  of (i) any failure by the  Borrowers  to fulfill on the
            date of any borrowing hereunder the applicable  conditions set forth
            in  Article  V, (ii) any  failure  by the  Borrowers  to borrow  any
            Eurodollar  Loan  hereunder,  to convert  any Prime Rate Loan into a
            Eurodollar  Loan or to  continue  a  Eurodollar  Loan as such  after
            notice of such borrowing,  conversion or continuation has been given
            pursuant to Section 2.03 or Section 2.10 hereof,  (iii) any payment,
            prepayment  (mandatory  or optional) or  conversion  of a Eurodollar
            Loan required by any provision of this  Agreement or otherwise  made
            on a date other than the last day of the Interest Period  applicable
            thereto,  (iv) any default in payment or prepayment of the principal
            amount  of any  Eurodollar  Loan or any  part  thereof  or  interest
            accrued  thereon,  as and  when  due and  payable  (at the due  date
            thereof,  by  notice  of  prepayment  or  otherwise),   or  (v)  the
            occurrence  of any Event of Default,  including,  in each such case,
            any  loss  (including,   without  limitation,  loss  of  anticipated
            profits) or reasonable  expense sustained or incurred in liquidating
            or  employing  deposits  from third  parties  acquired  to effect or
            maintain  such Loan or any part thereof as a Eurodollar  Loan.  Such
            loss or  reasonable  expense  shall include but not be limited to an
            amount equal to the excess, if any, as reasonably determined by such
            Lender,  of (i) its cost of  obtaining  the funds for the Loan being
            paid or  prepaid  or  converted  or  continued  or not  borrowed  or
            converted  or continued  (based on the  Eurodollar  Rate  applicable
            thereto) for the period from the date of such  payment,  prepayment,
            conversion,  continuation or failure to


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            borrow,  convert or continue on the last day of the Interest  Period
            for such Loan (or,  in the case of a failure to  borrow,  convert or
            continue,  the last day of the  Interest  Period  for such Loan that
            would have commenced on the date of such failure to borrow,  convert
            or  continue)  over  (ii) the  amount  of  interest  (as  reasonably
            determined  by such Lender) that would be realized by such Lender in
            re-employing the funds so paid,  prepaid,  converted or continued or
            not borrowed,  converted or continued for such  Interest  Period.  A
            certificate  of any Lender  setting forth in  reasonable  detail any
            amount or amounts  that such Lender is entitled to receive  pursuant
            to this  Section  2.09 and the basis for the  determination  of such
            amount or amounts shall be delivered to the Administrative  Borrower
            and shall be conclusive and binding absent manifest error.

                        (b) Notwithstanding  paragraph (a) of this Section 2.09,
            the Agent will use reasonable efforts to minimize or reduce any such
            loss or expense resulting from the mandatory prepayments required by
            Section  2.07 of this  Agreement  by (i)  applying  all payments and
            prepayments to Loans bearing interest at the Prime Rate prior to any
            application of payments to Loans bearing  interest at the Eurodollar
            Rate and (ii)  after all Prime  Rate  Loans  have been paid in full,
            calculating  any such loss or expense based upon the net decrease in
            Eurodollar Loans on a day after giving effect to all prepayments and
            all Loans made on such day.

                        SECTION 2.10.  Continuation and Conversion of Loans.

                        (a) Subject to Section 2.08 hereof,  the Borrowers shall
            have the  right,  at any time,  on three (3)  Business  Days'  prior
            irrevocable written or telecopy notice to the Agent, to continue any
            Eurodollar Loan, or any portion thereof,  into a subsequent Interest
            Period or to convert any Prime Rate Loan or portion  thereof  into a
            Eurodollar  Loan,  or on one (1)  Business  Day's prior  irrevocable
            written or telecopy  notice to the Agent,  to convert any Eurodollar
            Loan or  portion  thereof  into a Prime  Rate  Loan,  subject to the
            following:

                              (i) no  Eurodollar  Loan may be  continued as such
            and no Prime Rate Loan may be converted into a Eurodollar Loan, when
            any  Event  of  Default  or  Default  shall  have  occurred  and  be
            continuing at such time;

                              (ii) in the case of a continuation of a Eurodollar
            Loan as such or a conversion  of a Prime Rate Loan into a Eurodollar
            Loan, the aggregate  principal  amount of such Eurodollar Loan shall
            not be less than  $1,500,000  and in  multiples  of  $500,000  if in
            excess thereof;

                              (iii)  in  the  case  of  a   conversion   from  a
            Eurodollar  Loan to a Prime Rate Loan  accrued  interest on the Loan
            (or portion  thereof) being converted shall be jointly and severally
            paid by the Borrowers at the time of conversion;


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                              (iv) a Prime  Rate  Loan may be  converted  into a
            Eurodollar Loan only on the first Business Day of a month;

                              (v) any portion of a Loan  maturing or required to
            be  repaid  in less  than one  month  may not be  converted  into or
            continued as a Eurodollar Loan; and

                              (vi) if any conversion of a Eurodollar  Loan shall
            be effected on a day other than the last day of an Interest  Period,
            the Borrowers  shall jointly and severally  reimburse each Lender on
            demand  for  any  loss  incurred  or to  be  incurred  by it in  the
            reemployment of the funds released by such conversion as provided in
            Section 2.09 hereof.

            In the event that the Administrative  Borrower shall not give notice
            to continue any Eurodollar Loan into a subsequent  Interest  Period,
            such  Loan  shall  automatically  become  a Prime  Rate  Loan at the
            expiration of the then current Interest Period."

            11. FEES. Section 4.01 of the Financing  Agreement is hereby amended
by deleting  paragraph  (c) thereof in its  entirety  and  substituting  in lieu
thereof the following new paragraph (c):

                        "(c) L/C ISSUER FEE. The  Borrowers  agree to pay to the
            Agent  for  the  account  of the L/C  Issuer  a  non-refundable  L/C
            Issuer's fee in the amount of $25,000 per annum,  which L/C Issuer's
            fee is earned in full by the L/C Issuer on March 31, 1999 and on the
            31st  day  of  each  March  thereafter  and  is  payable  in  twelve
            consecutive  monthly  installments of $2,083.33 on April 1, 1999 and
            on the first day of each month thereafter."

            12. FINANCIAL COVENANTS.  Section 7.01(l) of the Financing Agreement
is hereby amended in its entirety to read as follows:

                        "(l)  FINANCIAL COVENANTS.

                              (i)  TANGIBLE NET WORTH.  Maintained  Consolidated
            Tangible Net Worth (before any LIFO  adjustments  made for the prior
            fiscal year in accordance with GAAP) of not less than $28,000,000 at
            all times.

                              (ii) NET  LOSS.  Not incur a  Cumulative  Net Loss
            (before  any LIFO  adjustments  made for the  prior  fiscal  year in
            accordance with GAAP) for the Parent and its Subsidiaries at the end
            of any fiscal quarter of the Parent."


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            13.  ROYALTY  PAYMENTS.  Clause  (viii) of  Section  7.02(b)  of the
Financing Agreement is hereby amended in its entirety to read as follows:

                             "(viii) Indebtedness represented by minimum royalty
            payments under any License Agreement entered into by any Borrower in
            the ordinary course of business;"

            14.  OPERATING  LEASES.  Subclause  B  of  Section  7.02(g)  of  the
Financing Agreement is hereby amended in its entirety to read as follows:

                        "(B)  Operating  Lease   Obligations   incurred  in  the
            ordinary  course of  business  of the  Borrowers  and the  Corporate
            Guarantors and their Subsidiaries."

            15. CAPITAL EXPENDITURES. Section 7.02(h) of the Financing Agreement
is hereby  amended by deleting the amount  "$200,000" and  substituting  in lieu
thereof "$2,000,000 in any calendar year."

            16. DELIVERY OF NOTES.  Each Lender shall deliver to the Agent,  for
delivery to and cancellation by the Borrowers, all Notes issued by the Borrowers
and held by the Lenders under the Financing  Agreement  (collectively,  the "Old
Notes"). The Borrowers shall execute and deliver to the Agent for the account of
each  Lender the Notes  which such  Lender is  entitled  to receive  pursuant to
Section 2.04 of the Financing Agreement, in the form of Exhibit A thereto and in
the  principal  amount for each Lender  equal to its Pro Rata Share of the Total
Credit Exposure,  as set forth in Annex I to this Amendment (the "New Notes" and
together  with this  Amendment,  the  "Amendment  Documents").  The Agent  shall
release and deliver the Old Notes to the Borrowers for  cancellation and deliver
the New Notes to the Lenders.

            17.  SCHEDULE A.  Schedule A to the  Financing  Agreement  is hereby
amended by deleting  such  Schedule in its  entirety  and  substituting  in lieu
thereof new Schedule A, which is attached hereto as Annex I.

            18.  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.


                                     - 10 -
<PAGE>


                  (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) a copy of the resolutions of each Borrower and each
      Corporate  Guarantor,  certified as of the Amendment  Effective Date by an
      authorized  officer  thereof,  authorizing the execution of this Amendment
      and the transactions contemplated hereby;

                        (iii) a  certificate  of an  authorized  officer of each
      Borrower  and each  Corporate  Guarantor,  certifying  the  names and true
      signatures of the  representatives  of such Person authorized to sign this
      Amendment,  together  with evidence of the  incumbency of such  authorized
      officers;

                        (iv) 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 18;

                        (v)  the  New  Notes,  duly  executed  by  each  of  the
Borrowers; and

                        (vi)  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  the  Amendment  Documents,  and  all  documents
incidental thereto,  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.

                  (d) Fee.  The  Borrowers  shall  have  paid the  Agent for the
account of the  Lenders in  accordance  with the  Lenders'  respective  Pro Rata
Shares (or the Agent may charge the Loan Account pursuant to Section 4.02) a fee
of $37,000, which fee shall be earned in full on the date of this Amendment.

            19.  REPRESENTATIONS  AND WARRANTIES.  Each of the Borrowers and the
Corporate Guarantors represents and warrants as follows:

                  (a) Each  Borrower and  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  the  Amendment  Documents  and to  perform  the
Financing Agreement, as amended hereby.


                                     - 11 -
<PAGE>


                  (b)  The  execution,  delivery  and  performance  by it of the
Amendment  Documents 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 the Amendment  Documents and (ii) the  performance  by it of the Amendment
Documents and the Financing Agreement, as amended hereby.

                  (d)  Each  of  the  Amendment   Documents  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.

            20. CONTINUED EFFECTIVENESS OF THE FINANCING AGREEMENT.  Each of the
Borrowers and the Corporate  Guarantors hereby confirms and agrees that (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.


                                     - 12 -
<PAGE>


            21. 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,  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]


                                     - 13 -
<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/ Stuart Bender
                                        -----------------------------------
                                        Title:
                                        Name: Stuart Bender


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


                                    By: /s/ Stuart Bender
                                        -----------------------------------
                                        Title:
                                        Name: Stuart Bender


                                    TALK OF THE TOWN APPAREL CORP.


                                    By: /s/ Stuart Bender
                                        -----------------------------------
                                        Title:
                                        Name: Stuart Bender


                                    O.P. KIDS, INC.


                                    By: /s/ Stuart Bender
                                        -----------------------------------
                                        Title:
                                        Name: Stuart Bender


<PAGE>


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

                                    H.O.T. KIDZ, INC.


                                    By: /s/ Stuart Bender
                                        -----------------------------------
                                        Title:
                                        Name: Stuart Bender


                                    HAWK INDUSTRIES, INC.


                                    By: /s/ Stuart Bender
                                        -----------------------------------
                                        Title:
                                        Name: Stuart Bender


                                    J&B 18 CORP.


                                    By: /s/ Stuart Bender
                                        -----------------------------------
                                        Title:
                                        Name: Stuart Bender


<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/ David F. Gibbs
                                        -----------------------------------
                                        Title: Vice President
                                        Name:  David F. Gibbs


                                    ISRAEL DISCOUNT BANK OF NEW YORK


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


                                    By: /s/ Lissa Baum
                                        -----------------------------------
                                        Title: Senior Vice President
                                        Name:  Lissa Baum


                                    REPUBLIC NATIONAL BANK OF NEW YORK


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


<PAGE>


                                     Annex I

                                   SCHEDULE A
                                   ----------


Lender                                       Exposure            Percentage
------                                       --------            ----------

The CIT Group/Commercial Services, Inc.     $14,815,000            29.63%

The Chase Manhattan Bank                    $20,565,000            41.13%

Israel Discount Bank of New York            $ 6,640,000            13.28%

Republic National Bank of New York          $ 7,980,000            15.96%
                                           ------------          --------

                                            $50,000,000           100.00%