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                                                                EXHIBIT 10.1

The Sirena Apparel Group, Inc.
10333 Vacco Street
South El Monte, California 91733-0307

Gentlemen:

When signed below in the places provided, the following shall constitute the
agreement between The Sirena Apparel Group, Inc. (hereinafter referred to as
"LICENSEE") and Anne Klein Company LLC ("LICENSOR") with respect to the subject
matter hereof.


1.       DEFINITIONS.  Each of the following terms shall have the meanings given
it in this section when used in this Agreement:

         1.01.  (a) "COMPANY'S MARKS" shall mean the trademarks "ANNE KLEIN", 
[ * ].

                (b) "LICENSED MARKS" shall mean the trademark "ANNE KLEIN", as
shown on EXHIBIT A attached hereto and made a part hereof, and such logos as may
be approved from time to time.

                (c) "COMPANY'S TRADENAME" shall mean the tradename "ANNE KLEIN".

         1.02.  (a) "ARTICLES" shall mean women's intimate apparel, specifically
bras, shapewear and daywear (i.e., panties, camisoles, slips and other similar
items), excluding those underpants and undershirts generally of a unisex styling
and packaged for sale through various channels of distribution in addition to
women's lingerie departments of traditional department stores and lingerie
specialty stores (the "EXCLUDED ARTICLES").

                (b) "LICENSED ARTICLES" shall mean all Articles which are
manufactured by or for Licensee from designs delivered or approved by Licensor
hereunder including any such Licensed Articles distributed by Licensee without
the Licensed Marks.

                (c) "PRODUCT CATEGORY" shall mean any specific category of
Articles (i.e., "Bras", "Shapewear" or "Daywear", but not the individual items
within a category) or if the context suggests, each such category treated
separately.

---------

* Material omitted in sections 1.01(a), 2.01(c) and (d), 2.02(c), 2.03(c)(iii), 
  7.01(b)(ii) and (v), 7.02(a)(i), 8.01, 8.02, 9.01, 18, 18.02(a), 18.03 and 
  18.05(f), and Schedules 1.05(A), 1.05(B), 2.03, 10.02 and 18.06 pursuant to a 
  request for confidential treatment and filed separately with the Securities
  and Exchange Commission.


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         1.03.  (a) "NET SALES" shall mean the aggregate invoiced amount at the
prevailing wholesale price for all Licensed Articles shipped by Licensee or any
of its affiliates ("GROSS SALES"), less included taxes, returns actually
received and trade discounts customary in Licensee's industry for prompt
payment, but only to the extent such discounts are actually granted by Licensee
and taken by Licensee's customers. No deduction shall be made for any accruals
or reserves for returns, or for discounts, markdowns, allowances or
uncollectible accounts and no deduction shall be taken for bad debts or
collection costs incurred by Licensee. No other costs incurred in the
manufacturing, advertising, promoting, distributing and selling of Licensed
Articles shall be deducted. If a sale, transfer or other disposition is made
otherwise than at arm's length, the "NET SALES" of such Licensed Articles shall
be deemed to be the "Net Sales" of a corresponding sale at arm's length at the
prevailing wholesale price to accounts in Normal Retail Channels (as hereinafter
defined) in the United States.

                (b) Without limiting the generality of the foregoing, with
respect to Discontinued Goods (as hereinafter defined), "Net Sales" shall mean
the aggregate invoiced amount for Discontinued Goods shipped by Licensee or any
of its affiliates, less included taxes and returns actually received, but
without deduction for allowances of any kind or for any purpose; provided,
however, that for Discontinued Goods in excess of the quantity permitted in
Paragraph 2.03(b) below, the "Net Sales" of such Discontinued Goods shall be
deemed to be the "Net Sales" of a corresponding sale at arm's length at the
prevailing wholesale price to accounts in Normal Retail Channels in the United
States except as Licensor may from time to time expressly agree otherwise.

                (c) Notwithstanding the foregoing, if Licensee (or any parent,
subsidiary or affiliated company of Licensee) operates outlet stores
(hereinafter, "LICENSEE'S OUTLETS") or sells Licensed Articles through
Alternative Distribution Channels (as defined below), then with respect to sales
of Licensed Articles by Licensee's Outlets or through said Alternative
Distribution Channels, "NET SALES" shall mean the actual aggregate amount
received by Licensee's Outlets on account of said sales or by Licensee for sales
made directly through Alternative Distribution Channels, as applicable.



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         1.04.  "TERRITORY" shall mean the United States of America but not
including its territories and possessions. Upon Licensee's written request,
Licensor may elect in its discretion to grant Licensee permission to distribute
Licensed Articles in a particular country (or countries) of the world outside of
the Territory, including for this purposes territories and possessions of the
United States, (hereinafter referred to as the "FOREIGN TERRITORY"), subject to
the terms and conditions set forth in section 18 below. For the avoidance of
doubt, distribution of Licensed Articles to "duty-free" shops for sale to
international travelers and to airlines and cruise ship lines for on-board sales
shall be deemed distribution in a Foreign Territory, also subject to the terms
and conditions set forth in Section 18 below.

         1.05.  (a) "NORMAL RETAIL CHANNELS" shall mean (a) those retail outlets
in the Territory to which Licensor sells products bearing the Company's Marks
and (b) subject to Licensor's reasonable approval, such other retail outlets in
the Territory whose location, merchandising and overall operations are
consistent with the high quality of Licensed Articles and the reputation, image
and prestige of the Company's Marks. Attached hereto as Schedule 1.05(A) is a
list of those retail outlets in the Territory approved by Licensor for sale of
products bearing the Company's Marks and attached hereto as Schedule 1.05(B) is
a list of additional approved retail outlets for Licensed Articles. Each
Schedule is current as of the date of execution of this Agreement and may be
modified and supplemented by Licensor and/or by Licensee from time to time.

                (b) "Alternative Distribution Channels" shall mean direct mail
or television shopping networks or "on-line" or such other means of reaching the
ultimate consumer (other than through traditional retail outlets) as may
hereafter be devised. Licensor's prior written approval to use an Alternative
Distribution Channel shall be obtained in each instance. Sales by Licensee to
direct mail catalog divisions of traditional retailers shall not be deemed sales
through Alternative Distribution Channels. References in this Agreement to
Normal Retail Channels shall, unless the context indicates otherwise, also mean
approved Alternative Distribution Channels.



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         1.06.  (a) "CONTRACT YEAR" shall mean the twelve-month period 
commencing January 1 and ending the next following December 31, provided,
however, that the "INITIAL CONTRACT YEAR" shall commence on the Effective Date
and shall terminate on December 31, 1999.

                (b) "ACCOUNTING PERIOD" shall mean each three-month calendar
period ending March 31, June 30, September 30 and December 31, respectively, or
such shorter period in which Licensee has rights to distribute Licensed Articles
hereunder. Notwithstanding the foregoing, the "INITIAL ACCOUNTING PERIOD" shall
mean the period beginning on the Effective Date and ending September 30, 1999.

                (c) "EFFECTIVE DATE" shall mean the later of the date this 
Agreement is executed by Licensor and the date it is executed by Licensee.

         1.07.  "DISCONTINUED GOODS" shall mean only those Licensed Articles
which are sold by Licensee at a wholesale price which is at least thirty-three
percent (33%) less than the prevailing wholesale price at which Licensee has
customarily sold such Licensed Articles and which are shipped (a) at the
end-of-season as closeouts or (b) as damaged goods such as seconds or irregulars
labeled as seconds or irregulars.


2.       GRANT.

         2.01.  (a) Subject to the terms and conditions of this Agreement,
Licensor grants to Licensee during the Term (as hereinafter defined) the
exclusive right only in the Territory to use each Licensed Mark as a trademark
only on and in connection with the manufacture, advertising, promotion,
distribution and sale in Normal Retail Channels, except as otherwise agreed in
paragraph 2.03(b) below, of the Licensed Articles. It is expressly understood
and agreed that the manufacturing rights herein granted to Licensee do not
include the right to manufacture Licensed Articles for the sole purpose of
selling such Licensed Articles as Discontinued Goods.

                (b) Licensee acknowledges that, at the date hereof, Licensor
sells products bearing the Company's Marks in those categories known in the
women's retail apparel industry in the Territory as "bridge" and that such
products address the career and casual needs of Licensor's



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target customer including without limitation so-called "special sizes". Licensee
agrees that the Licensed Articles offered hereunder shall correspond to
Licensor's products; that is, the Licensed Articles shall be manufactured,
advertised, promoted, distributed and sold in a manner and at price-points
appropriate to those categories known in the women's retail apparel industry in
the Territory as "bridge" and the Licensed Articles shall address the career and
casual needs of Licensor's target customer including without limitation
so-called "special sizes". Without limiting the generality of the foregoing,
Licensee acknowledges and agrees that Licensed Articles offered hereunder shall
include so-called "full figure" and "mastectomy" Articles.

                (c) Licensee acknowledges that, at the date hereof, Licensor has
not approved the use by Licensee of Company's Mark, [ * ], hereunder. In the
event Licensor determines, in its sole discretion, to permit use of [ * ] as
a trademark on and in connection with Articles, Licensor shall promptly notify
Licensee and thereafter [ * ] shall be deemed a Licensed Mark for all
purposes hereunder.

                (d) Licensor reserves all rights to Company's Marks, including
the Licensed Marks, except those rights specifically granted herein to Licensee,
and Licensor may exercise such rights at any time. Without limiting the
generality of the immediately preceding sentence, Licensor's reserved rights
include the right to use and to license any of said Marks as part of a new
trademark (the "NEW TRADEMARK") to be used by Licensor or its designee (which
may or may not be a related company) on or in connection with new product lines
introduced by Licensor or its designee as part of a new apparel business (which
may include Articles) to be conducted by Licensor or said designee. If, during
the Term (as hereinafter defined), Licensor desires to market a line of Articles
bearing a New Trademark (the "NEW LINE"), Licensor shall notify Licensee, in
writing, thereof. Licensee shall have the first right and option to manufacture,
advertise, promote, distribute and sell said New Line pursuant to this
agreement, as amended to include such additional or different terms and
conditions as may be set forth in Licensor's notice. For purposes of this
paragraph, Company's Marks [ * ] and [ * ] shall be deemed New Trademarks.

                (e) Nothing in this Agreement shall be construed to limit
Licensor's rights to use the Licensed Marks on or in connection with Articles to
be presented and sold by Licensor as



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part of its collections or by Licensor's designee separately as part of a
"designer collection" line of products intended to be sold at a price structure
relative to Articles in general which is comparable to the price structure of a
"designer" sportswear collection relative to women's better sportswear in
general, as those terms are used in the women's retail apparel industry at the
date of execution of this Agreement.

                (f) If, during the Term (as hereinafter defined), Licensor
desires to market a line comprised substantially of Excluded Articles bearing
any of Company's Marks (the "EXCLUDED ARTICLES LINE"), Licensor shall notify
Licensee, in writing, thereof. Licensee shall have the first right and option to
manufacture, advertise, promote, distribute and sell said Excluded Articles Line
pursuant to this agreement, as amended to include such additional or different
terms and conditions as may be set forth in Licensor's notice. If Licensee
desires to exercise such right and option, Licensee shall notify Licensor in
writing within thirty (30) days after its receipt of said written notice from
Licensor. If Licensee fails to exercise its said right and option, Licensor may
grant a license covering the Excluded Articles Line to any third party which
license shall contain material terms and conditions not more favorable to such
third party than the material terms and conditions set forth herein and in
Licensor's notice.

                (g) In addition to the rights granted herein for Licensed
Articles, subject to the terms and conditions of this Agreement, Licensor grants
to Licensee during the Term (as hereinafter defined) the right only in the
Territory to use the Licensed Mark only as a trademark on and in connection with
the manufacture, advertising, promotion, distribution and sale in Normal Retail
Channels and in approved Alternative Distribution Channels of lingerie bags,
slippers, boudoir sachets, sleep/eye masks and such other similar items as
Licensor and Licensee may identify from time to time (collectively, "RELATED
ITEMS") from designs delivered or approved by Licensor hereunder. Licensee's
rights with respect to the product categories comprising Related Items shall be
non-exclusive. Related Items shall be distributed by Licensee in conjunction
with its Licensed Articles and shall not be offered as stand-alone products but
only to buyers of Licensed Articles to be merchandised with Licensed Articles.
Except as set forth in this paragraph, Related Items shall be subject to all
conditions applicable to Licensed Articles hereunder.



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         2.02.  (a) Except as hereinafter provided or otherwise approved by
Licensor, all Licensed Articles shall bear the Licensed Marks, and no Licensed
Articles shall be sold or otherwise distributed by Licensee under any trademark
other than the Licensed Marks including, without limitation, under a private
label of Licensee or any customer of Licensee.

                (b) Licensee shall not use the Licensed Marks on or in
connection with any product or activity which is not the subject of this
Agreement, including without limitation on Articles or any other product
manufactured from designs neither provided nor approved by Licensor or on
Articles or any other product distributed by any person or entity, including
Licensee, as premiums, promotions, give-aways or fund-raisers except with
Licensor's express prior approval.

                (c) Licensee shall not manufacture, or cause the manufacture of,
any products bearing designs or of a styling or construction the same as or
substantially similar to the designs, styling or construction of any Licensed
Articles regardless of whether from the current season; provided, however, that
(i) the foregoing prohibition shall not apply to those Articles which the
parties designate as "generic" and (ii) with respect to Unique Styles (as
defined in paragraph 4.04(b) below), with Licensor's express prior written
approval (which shall not be unreasonably withheld or delayed) Licensee may
offer for sale and sell Articles of a styling or construction the same as or
substantially similar to the styling of said Unique Styles for delivery not
sooner than the corresponding season following the introductory seasonal
collection incorporating said style or construction as a Licensed Article
hereunder, it being understood and agreed by Licensee that Licensor shall not be
deemed to act unreasonably in denying approval with respect to any element which
constitutes Protectible Material hereunder. Without limiting the generality of
the foregoing, Licensor acknowledges that Licensee produces Articles on a
private label basis for specialty retailers such as [ * ], and Licensee
acknowledges and agrees that the approval requirement stated in subparagraph
(ii) of this paragraph 2.02(c) applies to these or other private label Articles.
With respect to [ * ], Licensor may in its sole discretion condition its
approval under this paragraph on Licensee's agreement to identify particular
such private label Articles derived from Unique Styles



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as [ * ] and all such Articles shall be deemed Licensed Articles for purposes of
computing royalties and Image Fund Payments (as defined below) hereunder.

                (d) Except for its licensed use of the Licensed Marks hereunder,
Licensee shall not adopt or use any mark, logo, insignia or design that is
likely to be confusingly similar to or cause deception or mistake with respect
to any of the Licensed Marks. Licensee shall not join any name or logo with the
Licensed Marks so as to form a new mark, except with the prior written approval
of Licensor, nor shall Licensee use any Licensed Marks as part of its corporate
name. However, subject to the terms and conditions of this Agreement, Licensor
hereby grants Licensee the limited, non-exclusive right to use Company's
Tradename in connection with the marketing, distributing, advertising, promotion
and sale of Licensed Articles hereunder. Licensee's employees may represent
themselves as being representatives of or being from "ANNE KLEIN INTIMATES".

         2.03.  (a) Licensee shall use its best efforts to exploit the rights
herein granted throughout the Territory and to sell the maximum quantity of
Licensed Articles therein consistent with the high standards and prestige
represented by the Licensed Marks. Notwithstanding the foregoing, Licensee shall
not sell Licensed Articles for resale except for resale to a consumer for
personal use and, except for sales made to or for resale in a Foreign Territory
in accordance with Section 18 below, Licensee shall not sell Licensed Articles
to any entity which it knows or has reason to believe intends to export Licensed
Articles from the Territory. Licensor and Licensee acknowledge that the Licensed
Articles are intended to be of the highest quality in the applicable market
segment and marketed in a manner commensurate with Licensor's standing and
reputation in the apparel industry. Accordingly, and in order to maintain the
reputation, image and prestige of Licensor and the Licensed Marks, Licensee's
primary distribution patterns shall consist of Normal Retail Channels. For
clarification: Licensor acknowledges that Licensee has retained representatives
who show the Licensed Articles to customers through regional markets throughout
the United States. Licensee hereby expressly agrees to inform its
representatives of the foregoing and acknowledges that the acts of said
representatives shall be deemed Licensee's acts for all purposes hereunder.



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                (b) Notwithstanding the foregoing, Licensee may sell
Discontinued Goods to Licensee's Outlets or to those end-destination outlet
stores operated by Fashions of Seventh Avenue, Inc. under the name "ANNE KLEIN
OUTLET" (collectively, the "OUTLETS") and to other appropriate retail outlets
for Discontinued Goods, subject to Licensor's reasonable approval; provided,
however, that, calculated separately with respect to each Product Category, the
number of units of Licensed Articles sold as Discontinued Goods shall not exceed
twenty percent (20%) of the aggregate manufactured units of such Product
Category (except as Licensor may expressly agree). Seconds, irregulars and
damaged goods shall always be marked as such. Licensee shall advise its buyers
of Discontinued Goods (including the Outlets) that Licensee does not have the
right to use or to authorize others to use the Licensed Marks in advertising or
selling the Discontinued Goods. Attached hereto as Schedule 2.03 is a list of
those currently-approved retail outlets to which Licensee may sell Discontinued
Goods hereunder. Said Schedule is current as of the Effective Date and may be
modified or supplemented from time to time.

                (c) Notwithstanding any contrary provision of this Agreement, in
addition to Discontinued Goods, Licensee shall be permitted to offer for sale
and sell certain specially-produced Licensed Articles to the Outlets ("Special
Products"), subject to the following terms and conditions:

                    (i)   Licensor and Licensee shall from time to time review 
the quantity and styles of Licensed Articles which may be manufactured, offered
for sale and sold as Special Products to the Outlets.

                    (ii)  All Licensed Articles sold as Special Products shall
bear royalties as provided in paragraph 9.01 below. Such royalties shall be
computed, accounted for and paid in accordance with this Agreement; provided,
however, that (A) the Sales Royalty on Net Sales of Special Products shall not
be reduced by any unrecouped Guaranteed Minimum Royalty payments, returns,
allowances or discounts nor shall such Sales Royalty paid in any particular
Contract Year be included in determining whether any increase is to be made in
the amount of the Guaranteed Minimum Royalty to be paid in the next following
Contract Year and (B) on Licensee's statements, Net Sales of Special Products
shall be shown separately from other sales.



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                    (iii) All Licensed Articles manufactured for sale as Special
Products shall bear the Licensed Mark [ * ] in a form approved by Licensor.

                    (iv)  For clarification: Special Products shall not be
considered "Discontinued Goods" for any purpose hereunder.

         2.04.  (a) During the Term (as hereinafter defined), Licensee shall not
negotiate with respect to, enter into agreements relating to, or participate in
business transactions which are inconsistent with the purpose of this Agreement
or which would tend to have a material adverse effect on Licensee's ability to
meet its obligations under this Agreement. Without limiting the generality of
the foregoing, during the Term, Licensee shall not manufacture and/or market any
line of Articles bearing the name or trademark of a designer of women's clothing
items or fashion accessories other than the Licensed Articles.

                (b) In the event that Licensee contemplates entering into a
license with a designer of women's clothing items or fashion accessories to
manufacture, advertise, promote, distribute and sell Articles in the Territory,
Licensee shall promptly inform Licensor and shall provide Licensor with
sufficient information concerning the proposed transactions to enable Licensor
to make an informed decision whether in its discretion, the nature of the
proposed license or the parties participating therein would materially adversely
impact upon or affect the Licensed Marks or their use in connection with the
Licensed Articles or Licensee's ability to meet all of its obligations under
this Agreement. Licensor shall notify Licensee of its decision within twenty
(20) business days after it receives all of the information referred to in the
preceding sentence or such other additional information as Licensor may
reasonably request. If Licensor approves the proposed license, which approval
must be in writing, and the advertising/exploitation commitments under such
license are greater than that provided for hereunder, this Agreement shall
automatically be deemed to increase the aggregate of the Image Fund Payment and
the Minimum Advertising Obligation (as those are defined below) to the amounts
provided in such license for comparable periods of time. Licensee shall notify
Licensor promptly upon making any such other designer license agreement,
including in such notice the identity of the designer and the
advertising/exploitation commitment contained in said agreement.



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         2.05. In the event of any dispute between Licensee and any other
licensee of Licensor in the Territory with respect to the products covered by
their respective licenses, such dispute shall be resolved in good faith by
Licensor in its sole discretion.

                (a) Without limiting the generality of the foregoing, Licensee
acknowledges that Licensor has or may enter into licenses with third parties for
hosiery and/or "activewear" and that such licensees may distribute and sell
products (such as, but not limited to, banded body-wear, control-top panty hose
or tights, in the case of hosiery, and banded body-wear, sports-bras or bike
shorts, in the case of activewear) and that the sale of such products by such
licensees other than to intimate apparel buyers of department stores or large
specialty stores (such as Saks Fifth Avenue) who are not also the hosiery or
activewear (as applicable) buyers shall not be deemed a breach of this Agreement
or a violation of or infringement upon Licensee's rights hereunder.

                (b) In addition, Licensee acknowledges that Licensor may from
time-to-time grant another licensee a limited non-exclusive right to produce and
distribute Articles bearing the Licensed Marks as so-called "related items"
(e.g., sleep masks distributed to said other licensee's customers of sleepwear)
or as "gifts-with-purchase" (e.g., a lingerie bag). In resolving a dispute with
respect to the products covered by particular licenses or in conjunction with a
grant of rights for related items, if appropriate, Licensor shall notify
Licensee and Licensee shall have the first right and option to manufacture such
product pursuant to an agreement of the parties as to price, quality and timing
of delivery. The parties shall establish an appropriate procedure to effectuate
the option herein given, it being understood that notice and agreement, if oral,
shall be promptly confirmed in writing.

                (c) Without limiting the generality of the foregoing, with
respect to those products to be sold by Licensee as Related Items hereunder,
Licensee acknowledges that Licensor may have granted to another licensee the
first right and option to manufacture similar products (an "OPTION") pursuant to
an agreement of the parties as to price, quality and timing of delivery. In the
event Licensee intends to market Related Items to which an option applies,
Licensee shall notify Licensor who will assist Licensee and the licensee holding
such option to establish an appropriate procedure to effectuate the option, it
is being understood that notice and agreement, if oral, shall be promptly
confirmed in writing.



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3.       TERM.

         3.01.  The term of this Agreement (the "TERM") shall commence on the
Effective Date and shall continue in full force and effect until December 31,
2002 unless earlier terminated pursuant to the terms and conditions of this
Agreement or upon the mutual agreement of Licensor and Licensee in a writing
signed by both.

         3.02.  (a) Time is of the essence with respect to all payments
hereunder. If Licensee fails to make any payment in full due hereunder, (i)
Licensee shall pay interest on such unpaid sum from and including the date such
payment becomes due until the date of payment in full at a rate equal to the
prime rate prevailing in New York, New York at Citibank, N. A., from time to
time during the period of such delinquency, plus two percent (2%) and (ii) if
such default continues uncured for a period of ten business (10) days (the
"PAYMENT GRACE PERIOD") after the date such payment becomes due, Licensor shall
have the right to terminate this Agreement immediately upon written notice to
Licensee. If any payment to be made hereunder shall be due on a day which is not
a business day, the due date of such payment shall be extended to the next
business day.

                (b) If Licensee otherwise fails to perform any of the other
material terms, conditions, agreements or covenants it is obligated to perform
hereunder and (i) such breach is curable but continues uncured for a period of
thirty (30) days after Licensor gives Licensee written notice thereof; or (ii)
if said breach is curable but not within thirty (30) days and all reasonable
steps necessary to cure have not been taken within thirty (30) days after
Licensor gives Licensee written notice of breach, Licensor may terminate the
Term immediately upon giving notice at any time after said thirtieth (30th) day,
without prejudice to any other rights of Licensor.

                (c) If Licensee otherwise fails to perform any of the other
material terms, conditions, agreements or covenants it is obligated to perform
hereunder and such breach is not curable, Licensor may terminate this Agreement
immediately upon giving notice at any time, without prejudice to any other
rights of Licensor.

                (d) Without limiting the generality of the foregoing, if
Licensee conducts its business hereunder in a manner which requires Licensor to
give two (2) or more notices in any



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consecutive twelve 12 month period pursuant to this paragraph 3.02 to obtain
Licensee's compliance with this Agreement, Licensor may elect to terminate this
Agreement forthwith and such termination shall be effective immediately upon
Licensor's giving notice.

         3.03.  Licensor shall have the right, without prejudice to any other
rights which it may have, to terminate the Term, effective immediately upon
Licensor's giving notice:

                (a) If by the time indicated in the introductory marketing plan
described in paragraph 7.01 (a) below (but not later than August, 1999),
Licensee has not begun the bona fide sale of the Licensed Articles and within a
reasonable time thereafter has not achieved commercial distribution through
Normal Retail Channels in the Territory reasonably consistent with the
agreed-upon business plan; or

                (b) If with respect to each Product Category bearing a Licensed
Mark, Licensee shall have failed to continue the manufacture and sale of any
Licensed Articles in commercial quantities for a period longer than one selling
season (except as Licensor otherwise expressly agrees) or if with respect to a
particular Licensed Mark, Licensee fails to use said Licensed Mark for a period
longer than one selling season after Licensor expressly requests such use;
provided, however, that Licensor shall terminate this Agreement only as to the
Product Category or Licensed Mark not being manufactured and sold. Thereafter,
notwithstanding any contrary provision hereof or implication contained herein,
Licensor may grant a license for the said Product Category or Licensed Mark to
any third party and such grant shall not be deemed a violation of or
infringement upon any of the rights of Licensee pursuant to the terms of this
Agreement; or

                (c) If Licensee shall fail, during any two (2) consecutive
Contract Years (a "TARGET PERIOD") hereunder, to achieve Net Sales from
distribution through Normal Retail Channels in an amount sufficient to allow
Licensee to recoup the aggregate Guaranteed Minimum Royalty payable by Licensee
during said Target Period.

         3.04.  Licensor shall have the right to terminate the Term effective
immediately upon written notice to Licensee:



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                (a) If Licensee commences or becomes the subject of any case or
proceeding under any applicable federal, state or foreign bankruptcy laws or if
a court appoints a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official for Licensee and any such involuntary
proceeding or appointment is not discharged within sixty (60) days; or

                (b) if Licensee defaults on any material obligation which is
secured by a security interest in any Licensed Articles; or

                (c) if Licensee takes or is the subject of any other action
which may have a material adverse effect on its ability to perform its material
obligations hereunder.


4.       DESIGN SERVICES/TECHNICAL ASSISTANCE.

         4.01. During each Contract Year, Licensee shall manufacture or have
manufactured, distribute, and sell in each of the usual and customary innerwear
markets (which at the Effective Date of this Agreement are held in New York in
January, March, May, August and November with corresponding regional markets)
collections of Licensed Articles in accordance with the designs and
specifications provided or approved by Licensor from time to time. The first
collection shall be the Holiday 1999 collection.

         4.02.  (a) Licensee, at its expense, shall employ an appropriate staff
of designers and merchandisers (product development employees/"line builders"),
reasonably acceptable to Licensor, to assure that Licensed Articles are
consistent in design and quality with the highest quality Articles in the
applicable market segment and with Licensor's standing and reputation in the
apparel industry and with the public.

                (b) In advance of the design phase for each seasonal collection,
Licensee shall provide Licensor with its merchandising plan for said collection,
including a report (by style) of sales performance of Licensed Articles from
prior collections, Licensee's assessment of market needs and competitive
positioning. Licensee also shall provide Licensor with access to its design
library/ archives, if any, to assist Licensor in connection with development of
ideas for Licensed Articles.



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                (c) For each collection of Licensed Articles, at such times as
the parties shall mutually agree, Licensor shall prepare and deliver to Licensee
design direction for the styles of Licensed Articles proposed to be included in
such collection and, in consideration of the technical requirements of Articles,
Licensee shall prepare and deliver to Licensor for its approval specific
designs, which shall reflect Licensor's design direction as well as
Licensee-developed designs, for styles of Licensed Articles proposed to be
included in such collection. The various collections of Licensed Articles shall
aggregate such number of styles of Articles (which may include styles from prior
collections ("CARRYOVERS") as well as styles) as the parties mutually agree, it
being understood and agreed by Licensee that each collection shall have an
appropriate representation of each Product Category. Licensee further agrees
that so long as a particular style remains generally available as a Licensed
Article (including through EDI or "Quick Response" or other replenishment
mechanism) that style shall not be sold as Discontinued Goods (except for
seconds/irregulars or discontinued colors). For purposes of this paragraph, the
term "DESIGN DIRECTION" means general design direction, including pattern,
texture, coloration, materials and fabrications (as defined below). For
clarification: Designs submitted by Licensee, including proposed materials and
fabrications, must be approved by Licensor in accordance with paragraph 4.05
herein.

                (d) Licensee shall identify to Licensor (in writing) its
requirements for tags, labels and packaging ("PACKAGING MATERIALS") to be used
in connection with Licensed Articles. Licensor shall provide designs and
specifications for said Packaging Materials and Licensee shall produce the
Packaging Materials in accordance with said designs and specifications.

                (e) Licensee shall identify to Licensor (in writing) its
requirements for closures and trim, including without limitation ribbons, laces
and embroideries, embodying the Licensed Mark or logos derived from the Licensed
Mark ("TRIM MATERIALS") to be used in connection with Licensed Articles.
Licensor shall provide designs and specifications for said Trim Materials and
Licensee shall produce said Trim Materials in accordance with the designs and
specifications. Uses of the Licensed Mark or any of Company's Marks as a design
element may be proposed by either Licensor or Licensee, but all such uses must
have Licensor's express prior approval.



                                     Page 15
<PAGE>   16


                (f) If Licensor incurs any costs in connection with the
development of Packaging Materials and/or Trim Materials exclusively for
Licensee, Licensee shall reimburse Licensor promptly after receipt of Licensor's
invoice therefor. Without limiting the generality of the foregoing, if Licensee
so requests, Licensor agrees that in development of Packaging Materials and/or
Trim Materials exclusively for Licensee, Licensor will work with Licensee's
usual resources for such Materials, it being the parties' intent to obtain the
highest quality Materials at the most favorable cost.

                (g) Given the technical considerations in the design and
development of Articles, particularly Bras and Shapewear, Licensee shall use its
reasonable good faith efforts to seek out and/or to develop fabrications
("LICENSEE FABRICATIONS") for Articles and to submit all such Licensee
Fabrications to Licensor for possible use in connection with Licensed Articles.
If Licensor elects to use a Licensee Fabrication in connection with Licensed
Articles, such Licensee fabrications shall be deemed Unique Styles (as defined
in paragraph 4.04(b) below) hereunder. In addition, at Licensor's request,
Licensee shall attempt to develop new fabrications to respond to Licensor's
specifications ("LICENSOR FABRICATIONS") and all such Licensor fabrications
shall be deemed Unique Styles. As used herein, "FABRICATIONS" shall mean new
fabrics, materials and other potential components (collectively).

         4.03.  (a) Licensor shall not be responsible for making samples.
However, Licensee agrees that from time to time it may be appropriate for
Licensor's representative to visit Licensee's factories or to attend one or more
appropriate major trade show(s), as agreed by the parties in advance, ("LICENSOR
TRAVEL") and Licensee agrees to reimburse Licensor for Licensee's pro rata
portion of Licensor's expenses incurred with respect to Licensor's Travel.

                (b) Licensee expressly acknowledges that all sample Licensed
Articles, whether made by Licensor, Licensee or under their authority, will be
Licensor's property and Licensee shall surrender these samples to Licensor
immediately upon the expiration or termination of the Term or sooner if Licensor
so requests.



                                     Page 16

<PAGE>   17


         4.04.  (a) Licensor acknowledges that Licensee employs quality 
standards for Articles manufactured by it and Licensor agrees that, in
connection with the design and development of Articles, it shall take such
standards into account; provided, that where Licensor's design standards and
requirements are of a higher level than Licensee's normal quality standards,
Licensee shall manufacture Licensed Articles in complete compliance with
Licensor's design standards and requirements. Without limiting the generality of
the foregoing, Licensor hereby approves the quality standard reflected in
Articles manufactured for Licensee by those factories identified on Schedule
4.04 attached hereto and made a part hereof at the Effective Date, it being
understood and agreed that if Licensee elects to employ any additional
factory(ies), the employment of such factory(ies) shall be subject to Licensor's
approval in each instance.

                (b) Licensee expressly acknowledges that all Protectible
Materials (as defined below) (including but not limited to fabrications and Trim
Materials) designed or, in the case of Licensor fabrications conceptualized, by
Licensor without input from Licensee which are clearly unique or distinctive
("UNIQUE STYLES") and all rights therein or thereto are and shall be the
property of Licensor, it being understood and agreed that Protectible Materials
which embody Company's Marks or a Company logo shall be designated Unique Styles
whether designed by Licensor, Licensee or both. Except as otherwise expressly
approved by Licensor in accordance with paragraph 2.02(c) above, all Unique
Styles shall be used by Licensee solely in connection with the manufacture,
distribution and sale of Licensed Articles in the Territory and pursuant to this
Agreement. Licensor may use and permit others to use the Unique Styles in any
manner it desires, provided that such use does not conflict with any rights
granted to Licensee hereunder and provided further that Licensor does not sell
or otherwise give any Unique Styles to any other manufacturer of Articles unless
the Articles incorporating such Unique Styles are to be sold outside of the
Territory.

         4.05.  Without limiting the generality of the foregoing, so that
Licensor shall be satisfied that Licensee continuously will be able to meet and
maintain the standards and specifications established by Licensor for the
Licensed Articles:



                                     Page 17
<PAGE>   18


                (a) Licensor and Licensee shall establish appropriate timetables
and procedures under which periodically throughout the development process of
Licensed Articles Licensee shall make available to Licensor the styles, designs,
materials, fabrications, Trim Materials, Packaging Materials and contents of
each collection of all Licensed Articles for Licensor's approval as to design
interpretation, workmanship and quality and to assure that all Licensed Articles
are reasonable facsimiles of designs approved by Licensor. In advance of
Licensee's Market opening of each collection Licensee shall make available to
Licensor for approval samples of each complete collection of Licensed Articles
intended to be offered in that Market together with or including the Packaging
Materials intended to be used with them. Licensee expressly acknowledges and
agrees that if samples are not made available to Licensor in sufficient time
prior to Market opening for Licensee to make changes requested by Licensor in
unapproved Articles, Licensor and Licensee shall agree upon changes to be made
prior to commercial production and Licensee shall submit production samples for
Licensor's approval or Licensee shall remove said unapproved Articles from its
collection of Licensed Articles.

                (b) After Licensor's approval of a collection of Licensed
Articles is given, Licensee shall not make any change in the Licensed Articles
or the Packaging Materials for Licensed Articles without Licensor's express
prior approval, it being the intent of the parties that the Licensed Articles
offered for sale and sold in any collection shall be those approved for
inclusion in said collection. No Licensed Articles shall be manufactured in
commercial quantities, sold or distributed by Licensee without Licensor's
express prior approval.

                (c) Licensee expressly agrees and acknowledges that Licensor's
decision to give its approval pursuant to this Agreement may be based solely on
Licensor's subjective standards and may be withheld in Licensor's sole and
absolute discretion. For purposes of this Agreement, only the President of
Licensor, or a designated alternate, may give approval on behalf of Licensor.

                (d) An approval given by Licensor for Licensed Articles to be
included in or Packaging Materials to be used by Licensee with one collection
shall not be construed as approval to include or use said Licensed Articles or
Packaging Materials in or with any other collection except as Licensor may
expressly agree with respect to carryovers. Licensor expressly reserves



                                     Page 18

<PAGE>   19


the right to review Licensee's entire line of Licensed Articles from time to
time for the purpose of deleting any previously-approved style which Licensor
deems, in its sole discretion (which shall not be unreasonably applied), no
longer appropriate for distribution as a Licensed Article. Following such
deletion, Licensee may, for a reasonable period (which shall not exceed six
months) to be mutually agreed, fill its existing orders for deleted styles
and/or sell off its existing on-hand inventory of deleted styles.

                (e) With respect to any matter hereunder for which Licensor's
approval is required, if Licensee timely submits Licensed Articles and/or
Packaging Materials or other materials for which Licensor's approval is required
and Licensor fails to disapprove any of them within ten (10) business days after
Licensor's receipt thereof (or such longer period as Licensor may reasonably
request), Licensor's approval shall be deemed given solely for the use for which
approval was sought.


5.       CONFIDENTIALITY.
         5.01.  Licensee and Licensor acknowledge that all information relating
to the business and operations of the other which each acquires, learns or has
learned during or prior to the Term, all special design concepts which either
party provides and has provided to the other and all sketches and designs,
including without limitation coloration and fabrication, and sourcing
information and manufacturing contractors, (the "CONFIDENTIAL INFORMATION")
received by either party from the other which are not commonly or currently
known in the marketplace are valuable property of the applicable party. Each
Party acknowledges the need to preserve the confidentiality and secrecy of such
Confidential Information and agrees that, during the Term and after the
expiration or other termination thereof, it shall not use or disclose same,
except to the extent expressly provided herein, and it shall take all necessary
steps to ensure that use of Confidential Information by it or by its contractors
and suppliers (which use shall be solely as necessary for, and in connection
with, the manufacture, distribution, sale, advertising and promotion of Licensed
Articles) shall preserve such confidentiality and secrecy in all respects.
Without limiting or impairing any other indemnification provision contained
herein, each party hereby agrees to release, defend, hold harmless and indemnify
the other against any and all claims,



                                     Page 19

<PAGE>   20


damages, causes of action, judgements, settlements, fines and other costs of any
kind, (including reasonable attorneys' fees) which may be suffered by the
indemnified party as a result of any breach by the breaching party or any of its
contractors of the provisions of this paragraph. The provisions of this
paragraph and the parties' obligations hereunder shall survive the expiration or
termination of the Term.


6.       MANUFACTURE OF LICENSED ARTICLES; QUALITY CONTROL.

         6.01.  Licensee shall not use the Licensed marks in a manner that would
be offensive to good taste or would injure the reputation of Licensor and/or the
Licensed Marks. The contents and workmanship of Licensed Articles shall at all
times be of the highest quality in the applicable market segment and Licensed
Articles shall be distributed, offered for sale and sold with Packaging
Materials and Trade Materials (as defined below) appropriate for said highest
quality Articles and consistent with Licensor's standing and reputation in the
apparel industry and with the public as a first rate apparel firm.

         6.02.  (a) In connection with its manufacture of Licensed Articles,
Licensee shall assure that, in addition to abiding by the terms of this
Agreement, the following conditions are met:

                    (i)   Licensed Articles are produced under satisfactory
working conditions and in accordance with all applicable laws and regulations
(including those regarding wages and hours); and

                    (ii)  Convict or forced or child labor shall not be used.

                (b) In the event Licensee engages a contractor or supplier
(hereinafter, "CONTRACTOR"), including without limitation an affiliate of
Licensee, in connection with the manufacture of the Licensed Articles, of any
Protectible Materials (as defined below) and/or of a significant component of
the Licensed Articles themselves and/or of any component thereof bearing any of
the Licensed Marks, Licensee shall, immediately upon retention of such
Contractor furnish Licensor, in writing, with the name and address of the
Contractor and a description of the Licensed Articles or components involved.
Licensee shall specifically obtain and maintain in its files the Contractor's
written agreement (a) to abide by the provisions of this Agreement relating



                                     Page 20
<PAGE>   21


to confidentiality, quality standards and trademark protection (including,
without limitation, a prohibition against distribution by the Contractor of any
Licensed Articles or Protectible Materials (if any)--including overruns or
Articles which are unacceptable because damaged or defective--to any person
other than Licensee), (b) to produce Licensed Articles under satisfactory
working conditions and in accordance with all applicable laws and regulations
(including those regarding wages and hours), (c) to refrain from using convict
or forced or child labor and (d) to permit Licensor to exercise its rights to
obtain current production samples and of inspection set forth in paragraph 6.03
below (together, the "CONTRACT CONDITIONS"). Notwithstanding any contrary
provision of paragraph 2.01 above, Licensor acknowledges that, due to the
particular nature of manufacturing demands associated with Articles, Licensee
may find it necessary to manufacture Licensed Articles or Protectible Materials
(if applicable) outside of the Territory and Licensor agrees that Licensee may
do so, subject to prior notice to Licensor and to strict compliance with this
paragraph 6.02. Licensee shall take all steps necessary to ensure that any
subcontractor of any Contractor is subject to the Contract Conditions applicable
to Contractors hereunder to the same extent such Contract Conditions are
applicable to Contractors. The engagement of a Contractor by Licensee in
compliance with the terms of this paragraph 6.02 shall not be deemed a
sublicense hereunder and no such Contractor shall acquire any rights with
respect to the Licensed Mark or any of the Company's Marks.

         6.03. (a) During the Term, Licensee, periodically, but at least once
for each collection and at any other time as requested by Licensor, shall
submit, free of any charge to Licensor, randomly selected then-current
production samples of each Licensed Article and Packaging Materials so that
Licensor may assure itself of the maintenance of the standards and
specifications for each. Licensor may, at its election, retain any of such
samples for its archival purposes. Licensor also shall have the right, upon
reasonable advance notice to Licensee, to inspect the manufacturing process for
each Licensed Article produced under this Agreement, at whatever place or places
as such Licensed Articles are manufactured.

                (b) Notwithstanding any contrary provision herein, if, at any
time, any, production sample is disapproved by Licensor on the grounds that such
sample does not conform



                                     Page 21

<PAGE>   22


to the approved pre-production sample, Licensor shall so advise Licensee and,
upon Licensee's receipt of such advice by any means, approval with respect to
that Licensed Article shall be deemed revoked. If such advice is given orally,
Licensor shall promptly confirm the content of such communication in writing;
provided, that, notwithstanding any other provision of this Agreement to the
contrary, the advice shall be deemed effective when made orally by Licensor.
Upon Licensee's receipt of such advice, Licensee shall not manufacture or
release that Licensed Article for public distribution until a new approval has
been given for that Licensed Article.

                (c) Prior to the initial production of any stationery, invoices
and other similar business papers (collectively, "BUSINESS DOCUMENTS") bearing
the Licensed Marks or Company's Tradename and, thereafter, once during each
Contract Year and at any other time upon Licensor's reasonable request, Licensee
shall furnish Licensor with a reasonable number of samples of such business
documents for approval by Licensor and its legal counsel. Licensee shall not
modify approved business documents except upon prior express approval by
Licensor and its legal counsel of any such modification.

         6.04.  (a) Each licensed Article shall be manufactured, packaged,
labeled, sold and distributed in accordance with all applicable international,
national, state, provincial, local and other laws, rules and regulations (any of
these a "LAW") governing the design, quality or safety of such Articles.
Licensee expressly acknowledges that Licensor shall rely on Licensee to ensure
that the manufacture, packaging, labeling, advertising, sale and distribution of
Licensed Articles hereunder shall conform in all respects with all applicable
Laws. Licensor's approval of any sample shall not be construed to mean that
Licensor has determined that the sample conforms to the Laws.

                (b) Licensee shall display, including, without limitation, on
all Packaging Materials for each Licensed Article and on all business documents,
advertising, promotional, publicity and exploitation material relating to it,
any Licensed Mark or Company's Tradename only in such form and manner as is
consistent with standards promulgated by Licensor from time to time and
specifically approved by Licensor and its legal counsel. Licensee also shall
cause to appear on all such items, such legends, markings and notices as either
may be required by any Law in the Territory or as Licensor reasonably may
request. Licensee expressly acknowledges



                                     Page 22

<PAGE>   23


that it shall acquire no proprietary rights in the Licensed Marks by virtue of
such use. Without limiting the generality of the foregoing, Licensee shall not
use any tradename or other identifying marking owned by or associated with any
department store or other retail establishment, wholesale outlet or other
person, firm or corporation on Licensed Articles or containers therefore bearing
the License Marks.

         6.05.  With respect to any matter hereunder for which Licensor's
approval is required, if Licensee timely submits those materials for which
Licensor's approval is required and Licensor fails to disapprove any of them
within ten (10) business days after Licensor's receipt thereof (or such longer
period as Licensor may reasonably request), Licensor's approval shall be deemed
given solely for the use for which approval was sought.


7.       ADVERTISING; SHOWROOM; MARKETING.

         7.01.  (a) Prior to the "LAUNCH" of the initial collection of Licensed
Articles, Licensee shall provide for Licensor's approval, an introductory
marketing plan stating anticipated sales volume, accounts, product positioning
(viz. competition), advertising and promotional support and such other relevant
information as Licensor may reasonably request. Further, in addition to the
advertising described below, Licensor and Licensee shall endeavor to agree upon
the manner and media to be utilized in advertising and promoting and staging the
launch (including the amounts to be expended by Licensee in connection
therewith), provided, however, that Licensor's decision shall be final.

                (b) (i) Licensee acknowledges that, in recognition of the
importance of advertising in developing and projecting the image of the Licensed
Marks and in enhancing the sales of Licensed Articles, Licensor will conduct a
program for all products bearing the Licensed Marks (the "IMAGE PROGRAM").
Licensor will develop and control the creative components of all advertising and
related promotional material (including all publicity, whether through media
placement or "events") to be used in the Image Program. Licensor will determine
the media to be used for advertisements and the advertising agency(ies) to be
used and all national (including for purposes of this paragraph Licensor-placed
regional and local) advertisements will be placed by



                                     Page 23
<PAGE>   24


Licensor.  The Image Program shall include all of the activities undertaken by 
Licensor to develop and promote the Company's Marks.

                    (ii)  In connection with the Image Program, Licensee shall
pay to Licensor in each Contract Year an amount equal to [ * ] of Net Sales
hereunder for said Contract Year (the "IMAGE FUND PAYMENT"); provided, however,
that the Image Fund Payment for any Contract Year, after the Initial Contract
Year, shall be not less than [ * ] (the "MINIMUM IFP") which shall be payable
in accordance with paragraph 7.01(b)(v) below. Notwithstanding the generality of
the foregoing, in the Initial Contract Year the Image Fund Payment shall be
[ * ], of which a portion to be determined by Licensor shall be utilized in
advertising, promoting and staging the launch, as contemplated in paragraph
7.01(a) above.

                    (iii) The Image Fund Payment shall be used by Licensor for
purposes of advertising and promoting the Licensed Articles. However, if
Licensor elects to do brand advertising of the Licensed Mark on television,
Licensor may apply up to one-half (1/2) of the Image Fund Payment for such
purpose.

                    (iv)  The Image Fund Payment shall be computed and paid
quarterly at the time Licensee renders it statements in accordance with
Paragraph 10.01 hereunder. The Image Fund Payment shall be due and payable
whether or not a payment of Sales Royalty is due for any particular Accounting
Period. The Image Fund Payment shall be in addition to any other monies payable
hereunder and shall not be credited against and/or recoupable from Sales
Royalties otherwise payable to Licensor hereunder.

                    (v)   Without limiting the generality of the foregoing,
after the Initial Contract Year Licensee shall pay an amount equivalent to [ * ]
of the Minimum IFP at the beginning of each calendar quarter and, in addition,
during any Contract Year, if Licensor incurs Image Program expenses in
connection with Licensed Articles which exceed the Image Fund Payment made to
date in such Contract Year, Licensor shall render, and Licensee shall promptly
pay, Licensor's invoice in the amount of such excess. Each amount paid by
Licensee under this paragraph shall be treated as an advance against and
deductible from Licensee's next-following Image Fund Payment when it comes due
in the ordinary course. For clarification: The Image Program expenses for which
Licensor may request an advance pursuant to this paragraph shall be



                                     Page 24

<PAGE>   25


in an amount consistent with Licensor's Image Program budget (which shall be
known to Licensee). To the extent that Licensee's Image Fund Payments in any
Contract Year exceed the actual Image Program expenses in connection with
Licensed Articles for such Contract Year, the excess will be added to the Image
Program budget in connection with Licensed Articles for the next Contract Year;
provided, however, that at the normal expiration of this Agreement, if Licensee
has paid excess Image Fund Payments in the final Contract Year, the amount of
such excess shall be repaid to Licensee by Licensor within a reasonable period
after Licensor receives Licensee's final accounting statement hereunder.

         7.02.  (a) (i) In addition to its participation in the Image Program,
in each Contract Year, Licensee shall fund a budget in an amount not less than 
[ * ] ([ * ] in the Initial Contract Year) of its projected Net Sales of 
Licensed Articles to enable Licensee to conduct other advertising and promotion,
including in-store sales promotion, as it deems appropriate for the successful
implementation of its business plan for the sale of Licensed Articles (the
"MINIMUM ADVERTISING OBLIGATION"). At least fifty percent (50%) of Licensee's
Minimum Advertising Obligation shall be expended for purposes other than co-op
advertising.

                    (ii)  To satisfy the Minimum Advertising Obligation, under
and with the direction and supervision of Licensor, Licensee will develop
advertising and marketing plans and programs for each collection of Licensed
Articles (including but not limited to such items as the amounts to be spent by
the Licensee upon trade, consumer and co-op advertising for the Licensed
Articles) for each Contract Year. Licensor shall develop and control the
creative components of all advertising material. All advertising and all
marketing plans and programs, including without limitation advertising visuals
and copy, media selection and schedules and sales promotions (such as, but not
limited to, "gifts with purchase") whether developed by Licensor or Licensee
shall be subject to the prior express written approval of Licensor.

                    (iii) With respect to co-op ads, Licensee shall obtain
Licensor's prior approval of the creative components of any advertising
materials Licensee elects to provide to its customers for use in co-op ads,
store catalogs and the like. In addition, Licensor and Licensee



                                     Page 25

<PAGE>   26


shall jointly develop guidelines with respect to Licensed Articles which
Licensee shall furnish to its customers who wish to participate in Licensee's
co-op advertising program, but Licensee shall not be deemed to have breached
this Agreement if its customers fail to follow such guidelines.

                (b) (i) The following items shall be considered expenditures
which will be included in determining whether Licensee has satisfied the Minimum
Advertising Obligation: cooperative advertising; trade advertising; additional
related materials, such as printed materials, brochures, post cards and product
guides; visual merchandise, such as display materials and point-of-purchase
materials; and consumer media/print advertising.

                    (ii)  Licensee shall reimburse Licensor, promptly after
receipt of Licensor's invoice, for Licensor's reasonable costs incurred in
connection with the development of materials for Licensee's use in satisfying
its Minimum Advertising Obligation, it being acknowledged and agreed that costs
incurred in connection with the development of materials requested by Licensee
or in accordance with a budget developed by the parties shall be deemed
"reasonable".

                    (iii) For clarification: The cost of printing and producing
Packaging Materials and the like shall not be credited against the Minimum
Advertising Obligation nor shall any product design expenses incurred by
Licensee be credited against the Minimum Advertising Obligation.

         7.03.  Licensee agrees to create a separate division (the "DIVISION") 
to conduct its business in Licensed Articles pursuant to this Agreement, which
Division may share general administration, operations, warehousing and
manufacturing facilities and functions with Licensee's other divisions. Licensee
shall employ an executive, reasonably acceptable to Licensor, to be in charge of
and work exclusively for the Division and a Marketing and Sales Manager, also
reasonably acceptable to Licensor, who shall devote his time exclusively to the
marketing and sale of the Licensed Articles. In addition, Licensee shall
maintain an adequate staff, including a sales force and in-store consultants,
solely for the sale of Licensed Articles and service to Licensee's customers for
Licensed Articles.



                                     Page 26
<PAGE>   27



         7.04.  (a) During the Term, Licensee shall maintain a separate showroom
exclusively for the display of Licensed Articles. Said showroom shall be
decorated in a manner approved by Licensor to be consistent in design and
appearance with Licensor's designated showroom concept. Licensee's showroom
shall be staffed and maintained in a manner commensurate with the reputation and
prestige of the Licensed Marks as a designation for highest quality products.
For clarification: Licensor acknowledges that Licensee has retained
representatives who show the Licensed Articles to customers through regional
markets throughout the United States. Licensee hereby expressly agrees to inform
its representatives of the requirement to maintain a separate area, visibly and
clearly, demarcated from other areas of its showroom and decorated in a suitable
manner, for the display of Licensed Articles. Licensee acknowledges that the
acts of said representatives shall be deemed Licensee's acts for all purposes
hereunder. As used in this paragraph 7.04, references to "SHOWROOM" shall be
deemed to include exhibit facilities maintained by Licensee or its
representatives at trade shows where Licensed Articles are shown and/or sold.

                (b) (i) It is the parties' intent and Licensee agrees that an
essential element of marketing Licensed Articles shall be the development and
installation of in-store shops to house only Licensed Articles ("SHOPS").
Licensor and Licensee shall mutually agree as to those accounts where a Shop
will be required (each, a "KEY ACCOUNT"), it being acknowledged by Licensee that
the establishment of Shops in Key Accounts is a material obligation of Licensee
hereunder. In those accounts which are not Key Accounts, Licensee will require a
so-called "soft shop" to house the Licensed Articles. As used herein, a "SOFT
SHOP" means a separate area for Licensed Articles within a larger department for
Articles generally, which shall be appropriate in size to carry a representative
assortment of each Product Category and which shall feature signage and other
fixtures or icons bearing the Licensed Marks.

                    (ii)  With respect to all material aspects of the design and
construction of Shops, including fixtures, furnishings and signage, Licensee
shall consult with Licensor. Licensee shall not modify Licensor's direction
except with Licensor's express prior approval which shall not be unreasonably
withheld or delayed. Through its store customer service program,



                                     Page 27
<PAGE>   28


Licensee shall, at all times, assure that each Key Account maintains its Shops
in a clean and attractive condition equal to the standard of competitors'
in-store shops.

                    (iii) Licensee shall be responsible for all expenses
incurred in carrying out its obligations under this paragraph 7.04(b). If
Licensor incurs any costs primarily in connection with the foregoing, Licensee
shall reimburse Licensor promptly after receipt of Licensor's invoice therefor.

         7.05.  (a) Licensee acknowledges the importance to the development of
the image and reputation of the Licensed Marks of displaying the full range of
products bearing the Licensed Marks. Accordingly, in each season Licensee shall
provide representative samples of Licensed Articles to Licensor, without charge,
for display in the New York showroom maintained by Licensor for its apparel
bearing the Licensed Marks or for its licensed products generally. Such samples
shall be made available to Licensor upon Licensor's reasonable request, so that
the Licensed Articles may be merchandised and shown with the applicable clothing
line and with other products bearing the Licensed Marks. Licensee shall also
provide to Licensor, without charge, additional samples as may be required for
advertising and publicity needs.

                (b) Upon Licensor's request, Licensee shall provide Licensor
with a reasonable number of Licensed Articles as requested by Licensor, for use
in connection with its fashion shows, which Licensed Articles shall be from the
current collection in process. Licensee acknowledges that some of such shows
shall take place prior to the commencement of production of such Licensed
Articles and that License shall be required to provide pre-production samples.

                (c) For control purposes, Licensee may elect to "memo bill"
Licensor, at Licensee's direct cost therefor, for the samples provided. Upon
return of the samples, the "memo bill" shall be promptly canceled.


8.       GUARANTEED MINIMUM ROYALTY.

         8.01.  In consideration of both the license granted and the services to
be performed by Licensor hereunder, during the Initial Contract Year of the
Term, Licensee shall pay the Licensor



                                     Page 28

<PAGE>   29


a Guaranteed Minimum Royalty in the amount of [ * ], and for each succeeding
Contract Year during the Term, a Guaranteed Minimum Royalty in an amount equal
to [ * ] of the Sales Royalty (as hereinafter defined) earned hereunder for the
preceding Contract Year, but not less than [ * ] in the second Contract Year
and, thereafter, [ * ] (the "BASE AMOUNT").

         8.02.  The Guaranteed Minimum Royalty payable for each Contract Year
shall be paid to Licensor in equal monthly installments on the first business
day of each month during each such Contract Year, except that, for the Initial
Contract Year, the Guaranteed Minimum Royalty shall be paid as follows: 
(a) [ * ], upon execution of this Agreement and (b) the balance in equal monthly
installments commencing July 1, 1999. If [ * ] of the Sales Royalty exceeds the
Base Amount, the increase in the amount of the Guaranteed Minimum Royalty to be
paid over the Base Amount will be determined at the time Licensee renders its
accounting for the just-concluded Contract Year and appropriate adjustments to
the amount of the monthly installments in the current Contract Year will be
made.

         8.03.  The Guaranteed Minimum Royalty paid for each Contract Year is
non-refundable but shall be credited against and recouped from the Sales Royalty
otherwise payable for that Contract Year, as provided in Section 9 below.


9.       SALES ROYALTY.

         9.01.  In consideration of both the license granted and the services to
be performed by Licensor hereunder, Licensee shall pay to Licensor a Sales
Royalty equal to [ * ] of all Net Sales.

         9.02.  The Sales Royalty hereunder shall be accounted for and paid
quarterly within thirty (30) days after the last business day of each Accounting
Period during the Term. The Sales Royalty earned for each Accounting Period
shall be computed in accordance with paragraph 10.01 below.



                                     Page 29
<PAGE>   30


         9.03.  No payment of Sales Royalty for any Accounting Period shall
reduce the Guaranteed Minimum Royalty due to Licensor for said Contract Year;
provided, however, that if the aggregate of the Guaranteed Minimum Royalty and
any additional Sales Royalty actually paid to Licensor for a particular Contract
Year (the "TOTAL PAID ROYALTY") exceeds the aggregate Sales Royalty earned by
Licensor hereunder for said Contract Year, then the amount by which the Total
Paid Royalty exceeds the greater of the Guaranteed Minimum Royalty or the Sales
Royalty earned shall be deemed "EXCESS ROYALTY" and Licensee may recoup the
amount of the Excess Royalty from the Sales Royalty otherwise payable to
Licensor in the next Contract Year, not withstanding any contrary provision of
this Agreement. Except as expressly provided in the immediately preceding
sentence, no payment of Sales Royalty for any Contract Year shall reduce the
Guaranteed Minimum Royalty or the Sales Royalty due to Licensor for any other
Contract Year. Without limiting the generality of the foregoing, if Licensee
pays an Excess Royalty in the final Contract Year, Licensor shall repay the
amount of such Excess Royalty to Licensee within thirty (30) days after
Licensor's receipt of Licensee's final accounting statement documenting such
Excess Royalty.


10.      ACCOUNTING STATEMENTS AND OPERATING REPORTS.

         10.01. Licensee shall deliver to Licensor at the time each Sales
Royalty payment is due, a statement in the form set forth in Schedule 10.01
attached hereto and made a part hereof, signed and certified as accurate by the
Chief Financial Officer of Licensee. With respect to each Licensed Mark and
Product Category, the statement shall provide the following information
concerning the calculation of the amount payable for the period covered by the
statement (the "REPORTING PERIOD"):

                (a) the gross sales of all Licensed Articles shipped during the
Reporting Period; 

                (b) the amount of any approved deductions from gross sales
including for allowable returns actually received during the Reporting Period,
or trade discounts actually taken;



                                     Page 30
<PAGE>   31


                (c) the Net Sales;

                (d) the amount of Sales Royalty earned hereunder on said Net
Sales for the Reporting Period; 

                (e) the total amount of Sales Royalty earned in the current
Contract Year (including Sales Royalty earned in the Reporting Period); and 

                (f) the amount of Sales Royalty payable this Reporting Period
after deduction from the amount shown in (e) of the amount of the Guaranteed
Minimum Royalty and Sales Royalty actually paid in the current Contract Year
through the end of the Reporting Period.

                  The amount payable for the Reporting Period shall be the
aggregate of the amount calculated in accordance with the preceding
sub-paragraphs (a) through (f) and the amount of the Image Fund Payment due
hereunder for the Reporting Period. The Image Fund Payment shall be in addition
to any other monies payable hereunder and shall not be credited against and/or
recoupable from Sales Royalties otherwise payable to Licensor hereunder. In a
supplemental statement for the Reporting Period, Licensee shall show the amount
of Net Sales through Normal Retail Channels, the amount of Special Promotion
Sales, the amount of Net Sales of Discontinued Goods, and, by country, the Net
Sales made pursuant to a distribution right granted under Section 18 below. Such
statement shall be furnished to Licensor irrespective of the quantity of
Licensed Articles that have been sold during the Reporting Period. Accounting
statements and payments shall be sent to Licensor to the attention of the Chief
Financial Officer, with a copy to the President of Licensor's Licensing
Division.

         10.02.  During each Contract Year, Licensee shall provide Licensor with
additional information concerning its business hereunder. Licensor intends that
this information shall be the basis for its periodic business-review meetings
with Licensee.

                (a) Within thirty (30) days after the last business day of the
second and fourth Accounting Periods of each Contract Year during the Term,
Licensee shall deliver to Licensor an Operating Report setting forth, separately
for each Product Category (if applicable), the following: (i) the total amount
spent by Licensee, in addition to the Image Fund Payments, for



                                     Page 31
<PAGE>   32


the advertising and promotion of Licensed Articles during the particular
Contract Year through the end of the most recently completed two (2) Accounting
Periods indicating the amounts paid for cooperative advertisements separately
from other advertising and promotion; (ii) stated separately, by account, those
amounts paid for promotions and/or cooperative advertisements (indicating the
medium in which said advertising appeared); (iii) by account, including accounts
in any Foreign Territory where sale of Licensed Articles is permitted in
accordance with Section 18 below, Net Sales (in dollars and units), and (iv) Net
Sales by style (in dollars, units and average price and accompanied by a photo
or line drawing), for the top 20 styles. The information requested in the
foregoing subsections (iii) and (iv) shall be provided separately for petites,
missy and large sizes, if applicable. The Operating Report shall be in the form
set forth in Schedule 10.02 attached hereto and made a part hereof, signed and
certified as accurate by a duly authorized officer of Licensee. Upon Licensor's
reasonable request, Licensee shall deliver to Licensor, together with the
Operating Report, copies (such as tear sheets) of all advertisements relating to
the Licensed Marks and Licensed Articles placed by Licensee or on its behalf
during the Accounting Periods covered by the report.

                (b) Not later than October 15th of each Contract Year, Licensee
shall furnish Licensor its quarterly sales projections for the Licensed Articles
(by Product Category) for the next Contract Year. Not later than June 15th of
each Contract Year, Licensee shall furnish Licensor with any revision of its
sales projections by quarter, for the current Contract Year. Sales projections
shall be accompanied by the assumptions on which such projection is based. 

                (c) Operating Reports and projections shall be sent to Licensor
to the attention of the President of Licensor's Licensing. Division, with a copy
to Licensor's Chief Financial Officer.

         10.03.  Receipt or acceptance by Licensor of any of the statements
furnished, or of any sums paid, pursuant to this Agreement shall not preclude
Licensor from questioning their correctness at any time.



                                     Page 32
<PAGE>   33


         10.04.  (a) Licensee shall maintain appropriate books of account in
which accurate entries shall be made concerning all transactions within the
scope of this Agreement. Licensee acknowledges that it is Licensor's policy to
conduct audits of its licensees periodically, whether or not Licensor has any
concern that an audit is necessary. Therefore, during the Term, and for a period
of twelve (12) calendar months thereafter, Licensor shall have the right,
through any of its employees or other authorized representative of its choice,
upon reasonable advance notice to Licensee, to examine and copy all or part of
these books of account and al I other records, documents and material in the
possession or under the control of Licensee with respect to the subject matter
of this Agreement. Without limiting the generality of the foregoing, Licensee
shall maintain supporting customer invoices and such other documents as may be
reasonably required to substantiate royalty statements rendered and operating
reports hereunder and to enable Licensor to confirm that all Licensed Articles
are accounted for, including without limitation for each style of Licensed
Article, the quantity of each such style manufactured and sales information
indicating by month, by customer and in the aggregate the style number, quantity
and invoice price of all Licensed Articles shipped.

                (b) Licensee shall make all payments required to be made to
eliminate any discrepancy revealed by an audit within fifteen (15) days after
Licensor's demand therefor, plus interest at the prime rate prevailing from time
to time in New York, New York at Citibank, N.A., plus two percent (2%), on such
unpaid royalties from the date(s) said royalties were originally due and
payable. In addition, if Licensee's payment or aggregate of payments for any
period covered by an audit of Licensee's books and records (the "AUDIT PERIOD")
was less than the amount which should have been paid by a sum equal to or
greater than two percent (2%) of the aggregate royalty reported to Licensor
during the Audit Period or $10,000 per 12-month period encompassed by the Audit
Period (whichever is less), Licensee shall reimburse Licensor for the cost of
such audit. 

                (c) All books of account and records shall be kept available by
Licensee for at least four (4) full calendar years after the end of each
calendar year of the Term.



                                     Page 33
<PAGE>   34


11.      INTELLECTUAL PROPERTY.

         11.01.  (a) (i) Licensee shall not question or otherwise challenge,
either directly or indirectly, during the Term or after the termination or
expiration of the Term, Licensor's ownership of the entire right, title and
interest (including any and all accompanying goodwill) in and to the Licensed
Marks or Company's Tradename, the validity of this Agreement or the validity of
any registration or application for registration by Licensor of the Licensed
Marks. Licensee acknowledges and agrees that, to the extent that any goodwill
and other rights attach to or arise in connection with the use of the Licensed
Marks by Licensee, Licensee hereby assigns any and all such goodwill and rights,
at such time as they may be deemed to accrue, to Licensor.

                    (ii)  Licensee agrees that it will not make application in
its own name for registration of the Licensed Marks but Licensee shall promptly
supply Licensor with all material it may request for such purposes and give
Licensor its full cooperation in connection therewith. Licensee shall at any
time, whether during or after the Term, execute any documents requested by
Licensor to confirm Licensor's ownership of the Licensed Marks or to record
Licensee as a licensee or registered user of the Licensed Marks; provided,
however, that in the event of any ambiguity or conflict between any provision of
any such document and any provision of this Agreement, this Agreement shall
prevail. Without limiting the generality of the foregoing, Licensee shall
provide Licensor with a duplicate original of each of the first three (3)
invoices for shipments for bona fide commercial sale of the Licensed Articles in
interstate commerce in the United States.

                (b) Licensee shall use Company's Tradename and the Licensed
Marks strictly in compliance with all applicable legal requirements. Licensee
shall not, at any time, do or suffer to be done any act or thing which may be
offensive to good taste or would in any way adversely affect any rights in and
to Company's Tradename and the Licensed Marks or any applications and/or
registrations therefor or which, directly or indirectly, may reduce the value of
Company's Tradename and the Licensed Marks or injure their reputation. Licensee
shall not, and shall cause its customers to not, sell, advertise, promote or
exploit Licensed Articles in a manner inconsistent in any way with Licensor's
rights with respect to or that may reduce the value of Company's Tradename and
Company's Marks, including the Licensed Marks.



                                     Page 34

<PAGE>   35


                (c) In the event Licensor and Licensee decide to use one or more
newly-created names to designate particular styles or attributes unique to
Licensed Articles or some of them (hereinafter referred to as "CREATED MARKS"),
Licensor shall be the owner of all rights in said Created Marks, trademark
registration (if any) shall be in Licensor's name and references in this
Agreement to Licensed Marks, including in this Section 11, shall be deemed to
include all or any Created Marks, except as expressly stated herein. 

                    (i)   The decision to adopt a Created Mark and the form of
each such Created Mark shall be determined by mutual agreement of Licensor and
Licensee, but if the parties are unable to agree, Licensor's decision shall
prevail. 

                    (ii)  During the Term, before a trademark previously
registered to Licensee but not otherwise identified with a Licensee product
which is not a Licensed Article is adopted and used as a Created Mark on or with
Licensed Articles, Licensor and Licensee shall enter into an appropriate
agreement confirming that Licensor may continue to use and grant others
(including a successor licensee) the right to use said proposed Created Mark as
a trademark on (or designation for) Licensed Articles following the termination
or other expiration of the Term. Such agreement shall contain such terms and
conditions as are usual and customary in other similar agreements and
appropriate to the circumstances as they then appear.

         11.02.  Licensee expressly acknowledges and agrees that nothing in this
Agreement will be deemed in any way to constitute an assignment by Licensor of
Company's Tradename and the Licensed Marks or of any rights with respect
thereto, or to give Licensee any right, title or interest in or to Company's
Tradename and the Licensed Marks (except the right to make use thereof as herein
provided).

         11.03.  Licensee shall promptly notify Licensor, in writing, of any
actual, suspected or apparent infringement or counterfeit of any of the Licensed
Marks or any unfair competition, "passing off" or other violation (collectively
"INFRINGEMENT") of the Licensed Marks that comes to the attention of Licensee.
Licensee will cooperate with Licensor, and, if requested by Licensor, shall join
with Licensor, in such action as Licensor in its discretion may deem advisable,
it being



                                     Page 35
<PAGE>   36


understood and agreed that Licensor may elect, in its sole discretion, to
refrain from taking any action. The proceeds of any settlement of or recovery
from any such action shall be shared by Licensor and Licensee pro-rata in
proportion to their respective contribution to the costs and expenses incurred
in connection with such action. Any non-monetary rights obtained as a result of
any such action shall belong entirely to Licensor. Licensee shall have no right
to take any action with respect to any Licensed Mark without Licensor's prior
written approval. Licensor shall not be liable to Licensee or any other person
or entity for any damages or otherwise by reason of any Infringement.

         11.04.  Any copyright, patent, industrial design right, or design 
patent which may be created in any Licensed Article, Licensor fabrication,
sketch, design, advertising, Packaging Materials or the like designed or
approved by Licensor in connection with Licensed Articles (hereinafter,
collectively, "PROTECTIBLE MATERIALS") and all Unique Styles shall be the
property of Licensor. To the extent that any Material is or contains any content
that is eligible for copyright protection pursuant to the Copyright Act of 1976,
such Material or content thereof shall be considered a "work made for hire" (as
such term is defined in the Copyright Act of 1976), and all rights with respect
thereto shall be automatically assigned to Licensor. Licensee shall not, at any
time, do or suffer to be done any act or thing which may adversely affect any
rights of Licensor in the Protectible Materials, including, without limitation,
filing any application in its name to record any claims to copyrights, patents
or design patents in Licensed Articles, and upon Licensor's request, shall do
all things reasonably required by Licensor to preserve and protect said rights,
including, without limitation, placing an appropriate copyright or industrial
design right notice on all Licensed Articles and the Protectible Materials
therefor. Licensee shall at any time, whether during or after the Term, execute
any documents requested by Licensor to confirm Licensor's ownership of the
Protectible Materials; provided, however, that in the event of any ambiguity or
conflict between any provision of any such document and any provision of this
Agreement, this Agreement shall prevail.


12.      INDEMNIFICATION; INSURANCE



                                     Page 36
<PAGE>   37


         12.01.  Licensee shall release, defend, hold harmless and indemnify
Licensor and its agents from and against any claims, demands, causes of action,
judgments, settlements, fines or other costs (including reasonable attorneys'
fees) which Licensor may incur or be obligated to pay or for which it may become
liable or be compelled to pay in any action, claim or proceeding against it
arising out of or in connection with Licensee's performance of this Agreement,
including without limitation on account of any alleged defect in any Licensed
Article produced by or for Licensee under this Agreement or the manufacture,
labeling, sale, distribution or advertisement of any Licensed Article by
Licensee in violation of any Law. Licensor shall give Licensee prompt notice of
any such claim or suit. Notwithstanding the foregoing, Licensor may elect to
take sole control of such proceedings and settlements thereof, at Licensee's
expense, if (a) the same would be reasonably likely to adversely affect the
Licensed Marks and (b) an adverse result would be reasonably likely to
irreparably damage Licensor's goodwill. The provisions of this paragraph and
Licensee's obligations hereunder shall survive the expiration or termination of
this Agreement.

         12.02.  Licensor shall release, defend, hold harmless and indemnify
Licensee from any claims, demands, causes of action, judgments, settlements,
fines or other costs (including reasonable attorneys' fees) arising solely out
of a third-party claim concerning the use by Licensee of the Licensed Marks as
authorized in this Agreement in any jurisdiction included within the purview of
trademark registration in the United States; provided, however that Licensor's
liability to Licensee shall be limited to the amount of royalties paid by
Licensee to Licensor during the pendency of said claim or suit. Licensee shall
give Licensor prompt notice of any such claim or suit. Licensor shall have the
right to undertake and conduct the defense of any suit so brought through
counsel of Licensor's choice.

         12.03.  At all times during which Licensed Articles are being sold,
Licensee shall, at its own expense, procure and maintain in full force and
effect with a responsible insurance carrier reasonably acceptable to Licensor a
public liability insurance policy including products liability coverage with
respect to Licensed Articles, as well as contractual liability coverage with
respect to this Agreement, with a limit of liability of not less than
$10,000,000. Said insurance policy



                                     Page 37
<PAGE>   38


shall include Licensor as an additional insured and shall provide for at least
sixty (60) days prior written notice to Licensor of the cancellation or
substantial modification thereof. Such insurance may be obtained by Licensee in
conjunction with a policy of liability insurance which covers products other
than Licensed Articles, including any such policies currently owned by Licensee.
Without limiting the generality of the foregoing, Licensee's policies of
casualty insurance shall provide that the insurance carrier may take no action
with respect to Licensed Articles or the Licensed Marks if such action would
constitute a breach by Licensee of any of the provisions of this Agreement.
Licensee shall deliver a certificate of such insurance to Licensor promptly
following complete execution of this Agreement and annually thereafter shall
furnish to Licensor evidence of the maintenance of said insurance policy.
Nothing contained in this paragraph 12.03 shall be deemed to limit, circumscribe
or affect in any way the indemnification provisions of paragraph 12.01 above.


13.      EFFECT OF EXPIRATION OR TERMINATION.

         13.01. The termination of this Agreement, for any reason, shall be
without prejudice to any other right or remedy Licensor may have -- including
without limitation, all rights and remedies which it has, or which are granted
to it by operation of law, to enjoin the unlawful or unauthorized use of
Company's Tradename and the Licensed Marks, to collect monies payable by
Licensee hereunder and to be compensated for damages for breach of this
Agreement -- and such rights and remedies are hereby expressly reserved.
Licensee acknowledges that Licensor has no adequate remedy hereunder or at law
for Licensee's use of the Licensed Marks and Company's Tradename in violation of
this Agreement and Licensor shall be entitled to injunctive relief or other
equitable remedies therefor. Without limiting the generality of the foregoing,
any amounts expended by Licensor or Licensee in connection with this Agreement
are expended with the knowledge that this Agreement may be terminated in
accordance with its terms.

         13.02.  (a) If either party serves upon the other pursuant to an 
express provision of this Agreement a notice (the "TERMINATION NOTICE") that it
desires to terminate this Agreement or that it desires that the Term shall not
be extended, Licensor's obligation to submit designs



                                     Page 38
<PAGE>   39


pursuant to paragraph 4.02 shall immediately terminate and, within twenty (20)
days after the date of the Termination Notice, Licensee shall deliver to
Licensor the following: (i) a complete list of Licensee's then-current accounts
for Licensed Articles and, for each account, Net Sales for the last-completed
Contract Year, indicating regular price and off-price sales; (ii) a list of each
style, indicating total Net Sales dollars and units for the last-completed
Contract Year, as well as Licensee's published list price and suggested retail
price, if any; (iii) a list of the "top 20" selling styles for the
last-completed Contract Year, and two (2) samples of each. All information shall
be stated separately with respect to each of the Licensed Marks and each Product
Category.

                (b) Contemporaneously with the delivery of the information
requested in paragraph 13.02(a), Licensee shall also deliver a complete and
accurate schedule of Licensee's inventory of Licensed Articles and, to the
extent available, related work in process and materials then on hand, in the
possession of Contractors and in transit including non-cancelable orders
identifiable to Licensed Articles and/or bearing the Licensed Marks (hereinafter
referred to as "INVENTORY"). The Inventory schedule shall be prepared as of the
close of business on the date of such Termination Notice. Except as Licensor may
otherwise agree, all cancelable orders for the production of Licensed Articles
and/or related materials used to produce Licensed Articles shall promptly be
canceled. 

                (c) (i)   If the date of termination stated in the Termination
Notice is not the expiration date contemplated in paragraph 3.01 above,
Licensee's rights to manufacture Licensed Articles hereunder shall terminate as
of the date of the Termination Notice and, except as Licensor may otherwise
expressly agree in writing, all cancelable orders for the production of Licensed
Articles and/or related materials used to produce Licensed Articles shall
promptly be canceled and no new production shall be started. 

                    (ii)  If the date of termination stated in the Termination
Notice is the expiration date contemplated in paragraph 3.01 above, Licensee's
rights to manufacture Licensed Articles hereunder shall terminate as of the
expiration date. To facilitate the orderly disposition of Licensee's Inventory
of Licensed Articles, during the final three (3) months of the Term, Licensee's
Inventory of Licensed Articles shall not exceed its Inventory on-hand during the
immediately-preceding three (3) months and Licensee shall manufacture and take
delivery of only



                                     Page 39

<PAGE>   40



such additional quantity of Licensed Articles as are reasonably necessary to
enable Licensee to fill orders from its customers on-hand at the commencement of
said three-month period or reasonably expected, based upon Licensee's prior
experience.

                (d) Neither Licensor nor Licensee shall make any announcement
concerning the expiration or termination of this Agreement except as the parties
shall mutually agree and except as otherwise required by law.

         13.03.  Notwithstanding the expiration or other termination of the 
Term, Licensee shall not be released from any obligation that accrued prior to
the date of expiration or termination and Licensee shall remain bound by the
provisions of this Agreement which by their terms impose upon Licensee
obligations extending beyond the date of expiration or other termination.

         13.04. (a) Except as otherwise specifically provided in this section
13, on the expiration or termination of the Term, all of the rights of Licensee
under this Agreement to use the Licensed Marks and Company's Tradename as
provided herein shall immediately terminate and shall revert automatically to
Licensor; all Sales Royalties on sales theretofore made shall become immediately
due and payable; and Licensee shall discontinue forthwith all use of Company's
Tradename and the Licensed Marks, shall no longer have the right to use
Company's Tradename and the Licensed Marks or any variation or simulation
thereof and shall, promptly upon Licensor's written request, free of charge,
execute any and all documents Licensor may deem necessary or desirable to the
effect that Licensee no longer has the right to manufacture, advertise, promote
and sell Licensed Articles hereunder or to use the Licensed Marks (and if
Licensee fails to do so promptly, Licensor shall have the right to sign such
documents as it deems reasonably necessary on Licensee's behalf). In addition,
Licensee shall thereupon destroy, or, if requested by Licensor, shall deliver to
Licensor all samples in its possession and all Packaging Materials,
advertisements, advertising materials of all kinds and other material in its
possession with Company's Tradename and the Licensed Marks thereon. In addition,
an updated Inventory schedule, including the direct cost of each item as shown
on Licensee's books, shall be prepared as of the close of business on the date
of such expiration or termination.



                                     Page 40
<PAGE>   41


                (b) If Licensee does not have the right to continue to sell its
Inventory pursuant to paragraph 13.05 below or if Licensee advises Licensor that
it does not intend to attempt to sell off its Inventory, Licensor thereupon
shall have the option, exercisable by notice in writing delivered to Licensee
within thirty (30) days after its receipt of the complete updated Inventory
schedule in written form, to purchase any or all of the Inventory for an amount
equal to the cost of the Inventory being purchased or its fair market value,
whichever is lower. In the event such purchase option is exercised by Licensor,
Licensee shall deliver to Licensor or its designee all of the Inventory referred
to therein within fifteen (15) days after Licensor's said notice of exercise of
its option. Licensor shall pay Licensee for such Inventory as is in marketable,
first quality condition within thirty (30) days after its receipt thereof.
Licensee's rights with respect to disposal of the Inventory shall not be altered
in the event Licensor does not exercise its purchase option hereunder.

         13.05. (a) If the Term expires or is terminated by Licensor other than
for any breach arising from material misuse of Company's Tradename and the
Licensed Marks or any failure to make any payment when due hereunder (whether or
not subsequently paid) or pursuant to paragraph 3.04(a) and 3.04(b) above,
Licensee (but no other person, including for this purpose any person having a
security interest in the Inventory) shall be entitled, for an additional period
of four (4) months only on a non-exclusive basis to sell and dispose of its
remaining Inventory of Licensed Articles on hand at the expiration or other
termination of the Term from, but only from, the final seasonal collection sold
hereunder. All sales pursuant to this paragraph shall be made subject to all of
the provisions of this Agreement and to an accounting for and the payment of
Sales Royalty thereon. Such accounting and payment shall be due in accordance
with sections 9 and 10 above, except that accounting and payment shall be made
monthly within thirty (30) days after the last business day of each calendar
month in the sell-off period, and a final accounting and payment shall be due
within thirty (30) days after the close of the said four (4) month period.

                (b) If, during the sell-off period, Licensee wishes to sell any
of its Inventory other than in Normal Retail Channels, or if Licensee wishes to
sell all or substantially all of the Inventory to a single purchaser or group of
related purchasers, Licensor shall, in such event, have



                                     Page 41

<PAGE>   42


a right of first refusal with respect to any such sale at a price equal to the
price to be paid to Licensee by the proposed purchaser, which right shall be
exercisable only by notice in writing delivered to Licensee within ten (10)
business days after Licensor receives written notice from Licensee setting forth
the cost of the Inventory covered by the proposed sale and all of the pertinent
details thereof, including, without limitation, the name of the proposed
purchaser and the proposed purchase price. If Licensor does not exercise its
rights to purchase hereunder, Licensee may proceed with the proposed sale with
the purchaser and at the price offered to Licensor. All sales other than in
Normal Retail Channels shall be deemed sales of Discontinued Goods for all
purposes hereunder. However, if the proposed sale is to a single purchaser or
group of related purchasers, in lieu of any other royalty otherwise payable
hereunder, Licensee shall pay to Licensor, within fifteen (15) business days
after its receipt thereof, an amount equal to fifty percent (50%) of the amount
by which the purchase price for the Inventory exceeds Licensee's cost for such
Inventory as reflected on the Inventory schedule submitted by Licensee pursuant
to paragraph 13.04.

         13.06. (a) No receiver, liquidator, assignee, trustee or custodian
appointed to administer the affairs of Licensee, sheriff or any other officer of
the court or official charged with taking custody of Licensee's assets or
business shall have the right to continue the performance of this agreement on
behalf of Licensee or to exploit or use Company's Tradename and/or the Licensed
Marks in any way.

                (b) Notwithstanding the provisions of paragraph 13.06(a) above,
if the Bankruptcy Code or any amendment, supplement or successor thereto (the
"CODE") permits a trustee in bankruptcy of Licensee (or Licensee, as
Debtor-in-Possession) to assume this Agreement and either does so and,
thereafter, desires to assign this Agreement to a third person in compliance
with the requirements of the Code, the trustee or Licensee as the case may be,
shall notify Licensor of same in writing. Said notice shall set forth the name
and address of the proposed assignee, the proposed consideration for the
assignment and all other relevant details thereof. The giving of such notice
shall be deemed to constitute the grant to Licensor of an option to have this
Agreement assigned to it or to its designee for such consideration, or its



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<PAGE>   43


equivalent in money, and upon such terms as are specified in the notice. Said
option may be exercised only by written notice given to the trustee or Licensee,
as the case may be, by Licensor within fifteen (15) days after Licensor's
receipt of the aforesaid notice from such party, or within such shorter period
as may be deemed appropriate by the court in the bankruptcy proceeding. If
Licensor fails to exercise its said option within the aforestated exercise
period, the trustee or Licensee, as the case may be, may complete the assignment
referred to in its notice, but only if such assignment is to the entity named in
said notice and for consideration and upon the terms specified therein. Nothing
contained herein shall be deemed to preclude or impair any rights which Licensor
may have as a creditor in any such bankruptcy proceeding.

14.      REPRESENTATIONS AND WARRANTIES.

         14.01. Licensor represents and warrants that it is a limited liability
company in good standing under the laws of the State of New York and that it has
full right, power and authority to enter into this Agreement and to perform all
of its obligations hereunder. Licensor further represents and warrants that it
has granted no other existing license to use the Licensed Marks on Articles for
sale in the Territory and that it shall grant no such other license during the
Term except in accordance with the provisions hereof.

         14.02. Licensee represents and warrants that it is a corporation
incorporated in California and in good standing under the laws of said State,
that it has full right, power and authority to enter into this Agreement and to
perform all of its obligations hereunder and that the party signing on its
behalf is duly authorized to do so.

         14.03. Each of Licensee and Licensor represents and warrants that it
did not engage any broker in connection with this Agreement or the transactions
contemplated hereby.

15.      FORCE MAJEURE.

         15.01. Neither party hereto shall be under any liability hereunder to
the other on account of any loss, damage or delay occasioned or caused by
lockouts, strikes, riots, fires, explosions,



                                     Page 43
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blockade, civil commotion, epidemic, insurrection, war or warlike condition, the
elements, embargoes, failure or inability to obtain material or transportation
facilities, acts of God or the public enemy, compliance with any law, regulation
or other governmental order or other causes beyond the control of the party
affected, whether or not similar to the foregoing; provided, however, that if
such condition continues for three (3) months and is not industry-wide but
applies only to Licensee, Licensor may terminate the Term on thirty (30) days'
written notice which may be given at any time after said three (3) month period
and provided, further, that nothing herein shall at any time excuse any accrued
obligation for the payment of money.

16.      ASSIGNABILITY.

         16.01. (a) The rights granted herein are personal to Licensee and
Licensee may not assign or sublicense any or all of its right or delegate any of
its duties under this Agreement. Any deliberately attempted assignment,
sublicense, or delegation or any one of these purportedly occurring by virtue of
the operation of law shall be void and shall constitute grounds for termination
of this Agreement which termination shall be effective on the fifteenth (15th)
day following the date of Licensor's notice.

                (b) Without limiting the generality of the foregoing, if
Licensee contemplates the sale or other disposition of any portion of its
business or assets related to the subject matter of this Agreement, including
without limitation through a sale of stock, or if there is a change of control
or management of Licensee, Licensee shall promptly inform Licensor and shall
provide Licensor with sufficient information concerning the proposed transaction
and/or transferee to enable Licensor to make an informed decision whether in its
discretion, the nature of the proposed transaction, the parties participating
therein or the resulting ownership of Licensee would materially adversely impact
upon or affect the Licensed Marks or their use in connection with the Licensed
Articles or Licensee's ability to meet all of its obligations under this
Agreement. Licensor shall notify Licensee of its decision within twenty (20)
business days after it receives all of the information referred to in the
preceding sentence or such other additional information as Licensor may
reasonably request. If Licensor approves the proposed transaction, which
approval must be in writing, Licensor's right to terminate this Agreement
pursuant to this paragraph shall



                                     Page 44
<PAGE>   45


not arise. For avoidance of doubt: If Licensor fails to approve the proposed
transaction and Licensee elects to transfer ownership or control of its business
or assets related to the subject matter of this Agreement in the absence of such
approval, Licensor may elect to terminate this Agreement in accordance with
paragraph 16.01(a).

         16.02. This Agreement shall inure to the benefit of and shall be
binding upon the parties, Licensor's successors, transferees and assigns and
Licensee's permitted successors, transferees and assigns.


17.      NOTICES.

         17.01. Any notice or other communication under this Agreement will be
in writing and will be considered given when delivered personally, sent by
confirmed telefax or delivered by an overnight courier service (such as Federal
Express or DHL) which requires the addressee to acknowledge receipt thereof or
by certified mail, return receipt requested, to the parties at the following
addresses, or at such other address as a party may specify by notice to the
other:

          TO LICENSOR:      Anne Klein Company LLC
                            11 West 42nd Street
                            New York, New York 10036
                            Attention: President,
                            Anne Klein Licensing Division

with a copy to Licensor's Senior Vice President and General Counsel at the same
address (Fax number: (212) 626-6354).

          TO LICENSEE:      The Sirena Apparel Group, Inc.
                            10333 Vacco Street
                            South El Monte, California 91733-0307

                            Attention:        Maurice Newman, Chairman and CEO
                            Fax Number:       (626) 442-2280


18. INTERNATIONAL. Upon Licensee's written request, which must be accompanied by
a marketing plan stating, inter alia, anticipated sales volume and accounts
(initial and projected) (a "COUNTRY PLAN"), Licensor may elect in its discretion
to grant Licensee permission to distribute Licensed Articles in a particular
country (or countries) of the world outside of the Territory or to



                                     Page 45
<PAGE>   46


"duty-free" shops for sale to international travelers and to airlines and cruise
ship lines for on-board sales (hereinafter referred to as the "FOREIGN
TERRITORY"), subject to the terms and conditions set forth in this section 18.
Licensee acknowledges that under the applicable trademark laws of many countries
of the world the filing of statutorily-mandated documents is a prerequisite to
use of a trademark by any party other than the registered owner. Accordingly,
Licensee shall not offer for sale or sell Licensed Articles for resale in any
country which requires a document filing until an appropriate document has been
filed. With respect to each particular Foreign Territory, if Licensor approves
Licensee's request to distribute in a said Foreign Territory (an "APPROVED
FOREIGN TERRITORY"), Licensee shall pay to Licensor a fee (the "FOREIGN
TERRITORY FEE") to offset Licensor's costs associated with obtaining or
maintaining trademark protection for the Licensed Marks in said Approved Foreign
Territory or otherwise enabling Licensee to use the Licensed Marks in such
country; the Foreign Territory Fee shall initially be the sum of [ * ]. The
amount of the Foreign Territory Fee paid shall be deemed an advance against
royalties otherwise payable by Licensee only with respect to sales of Licensed
Articles in or to said Approved Foreign Territory.

         18.01. Licensee's right to distribute Licensed Articles in any
particular Approved Foreign Territory shall continue only during the Term of
this Agreement; provided, however, that Licensor reserves the right to and may
terminate the distribution permission granted herein with respect to any
particular Approved Foreign Territory on ninety (90) days prior written notice
which may be given at any time and for any reason, including without limitation,
if Licensee shall have failed to continue the sale and/or distribution of
Licensed Articles to said particular Approved Foreign Territory in reasonable
commercial quantities for a period longer than one selling season. Licensor's
election to grant permission to distribute in a Foreign Territory shall not be
construed to convey any rights in the Licensed Marks in said Approved Foreign
Territory, except as expressly set forth in this section 18.

         18.02. (a) Licensee shall account for and pay royalties on Net Sales of
Licensed Articles in or to the Approved Foreign Territory in accordance with
this Agreement; provided,



                                     Page 46

<PAGE>   47


however, that (i) for purposes of computing the Sales Royalty payable, such Net
Sales shall be deemed to be not less than the "Net Sales" of a corresponding
sale at the prevailing wholesale price as if such sales had been made in Normal
Retail Channels in the Territory; and (ii) on Licensee's statements, Net Sales
made pursuant to a distribution right granted hereunder shall be shown
separately for each Approved Foreign Territory. Notwithstanding the generality
of the foregoing, if Licensee's sales to a Foreign Territory are made on a
"first cost" price basis, then for purposes of royalty reporting said "first
cost" price shall be deemed "Net Sales" with respect to such Foreign Territory
and the Sales Royalty applicable to said sales shall be computed at the rate of
[ * ] in lieu of the rate provided in paragraph 9.01 above.

                (b) If Net Sales are stated in a currency other than U.S.
Dollars, they shall also be reported to Licensor, and the Sales Royalty payable
thereon shall be calculated, in the U.S. Dollar equivalent at the selling price
of such other currency as reported by The Wall Street Journal at the last
business day of the Accounting Period for which such Royalty is payable. In
addition, upon Licensor's reasonable request, Licensee shall furnish copies of
its invoices showing sales in or to any particular Approved Foreign Territory.
Without limiting the generality of the foregoing, Licensee shall provide
Licensor with a duplicate original of each of the first three (3) invoices for
bona fide commercial sale of Licensed Articles in or to each Approved Foreign
Territory.

         18.03. In any particular season, Licensee shall distribute for sale in
or to the Approved Foreign Territory, only those Licensed Articles approved by
Licensor in each case for sale in such season in accordance with this Agreement.
All marketing plans and programs, including sales promotions and any advertising
use of the Licensed Marks, in connection with Licensed Articles in any Approved
Foreign Territory shall comply with the applicable provisions of this Agreement;
Licensee will use its reasonable efforts to make copies (such as tear sheets) of
any such advertisements available to Licensor. Minimum advertising expenditure
requirements in a particular Approved Foreign Territory shall be not less than
[ * ] of wholesale sales based initially upon the Country Plan for each such
country.



                                     Page 47
<PAGE>   48


         18.04. Licensor and Licensee acknowledge that the Licensed Articles are
intended to be of the highest quality and marketed in a manner commensurate with
Licensor's standing and reputation in the apparel industry in the United States.
Accordingly, and in order to maintain the reputation, image and prestige of the
Licensed Marks, Licensee's primary distribution patterns shall consist of (a)
those retail outlets in the particular Approved Foreign Territory previously
approved by Licensor for the sale of products bearing the Licensed Marks and (b)
subject to Licensor's reasonable approval, such other retail outlets in the
particular Approved Foreign Territory whose location, merchandising and overall
operations are consistent with the high quality of Licensed Articles and the
reputation, image and prestige of the Licensed Marks. Except as expressly
provided in this section 18, Licensee shall not sell Licensed Articles to anyone
in the Approved Foreign Territory for resale except resale to a consumer for
personal use nor shall Licensee make such sales to any entity which it knows or
has reason to believe intends to export such Licensed Articles outside the
particular Approved Foreign Territory.

         18.05. If Licensee plans to effect its right to distribute in a
particular Approved Foreign Territory through the use of a third party
distributor or through an affiliated company (the "DISTRIBUTOR"), Licensor's
permission (if granted) will be subject to agreement by the Distributor (in
writing) to the foregoing and to the following additional terms and conditions:

                (a) The Distributor's rights will cease immediately upon the
expiration or other termination of this Agreement (if not sooner).

                (b) The Distributor will not manufacture Licensed Articles or
affix any markings on the Licensed Articles (including on the packaging
therefor, unless such markings are required by law in the particular Approved
Foreign Territory and Licensor's prior approval has been sought and given).

                (c) The Distributor acknowledges that Distributor will not
acquire any rights in the Licensed Marks as a result of such distribution and
that any and all good will and other rights which attach to or arise in
connection with the use of the Licensed Marks by the Distributor shall inure to
the sole benefit of Licensor and shall remain vested therein.



                                     Page 48
<PAGE>   49


                (d) The Distributor shall furnish Licensee with sales
information sufficient to enable Licensee to comply on a timely basis with its
reporting obligations hereunder, including without limitation those reporting
obligations described in paragraph 10.01 and 10.02 above.

                (e) Licensee shall retain the right to sell directly to an
Approved Foreign Account (as defined below).

                (f) Minimum advertising expenditure requirements shall be not
less than [ * ] of wholesale sales based initially upon the Country
Plan for each particular country of the Distributor's Approved Foreign
Territory.

         18.06. Without limiting the generality of the foregoing, Licensor
hereby gives permission to Licensee to distribute to those accounts in each
Foreign Territory to which Licensor has approved the sale of products bearing
the Licensed Marks (each, an "APPROVED FOREIGN ACCOUNT") as set forth on
Schedule 18.06 attached hereto, as it may be modified and supplemented from time
to time. Licensee hereby agrees to notify Licensor prior to selling any Licensed
Articles to an Approved Foreign Account or in or to an Approved Foreign
Territory so that proper trademark protection may be timely arranged and to pay
the applicable Foreign Territory Fee(s) in accordance with paragraph 18.01
above.


19.      MISCELLANEOUS.

         19.01. Nothing herein contained shall be construed to constitute
Licensee a partner, franchisee, joint venturer, or agent of Licensor, and
Licensee shall have no power to obligate or bind Licensor in any manner
whatsoever, it being intended by the parties hereto that Licensee's relationship
to Licensor hereunder shall be as an independent contractor responsible for its
own actions. No supervision given by or assistance from Licensor shall be deemed
to negate the foregoing.

         19.02. No waiver by either party, whether express or implied, of any
provision of this Agreement, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other provision of
this Agreement.



                                     Page 49
<PAGE>   50


         19.03. If any provision or any portion of any provision of this
Agreement shall be held to be void or unenforceable, the remaining provisions of
this Agreement and the remaining portion of any provision held void or
unenforceable in part shall continue in full force and effect; provided,
however, that no such determination shall excuse any accrued obligation for the
payment of money.

         19.04. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Agreement to be drafted. If any words or phrases in this Agreement shall have
been stricken out or otherwise eliminated, whether or not any other words or
phrases have been added, this Agreement shall be construed as if those words or
phrases were never included in this Agreement, and no implication or inference
shall be drawn from the fact that the words or phrases were so stricken out or
otherwise eliminated.

         19.05. Notwithstanding anything to the contrary contained in this
Agreement, Licensor shall have the right, exercisable at any time, to negotiate
and enter into agreements with third parties either within or outside of the
Territory pursuant to which it may grant a license to use the Licensed Marks in
connection with the manufacture, advertising, promotion, distribution and sale
of Articles outside the Territory at any time or in the Territory, but only if,
pursuant to such third party agreements in the Territory, either the Articles
are manufactured in the Territory solely for export outside the Territory or the
collections of such Articles are not shipped for sale in the Territory prior to
the expiration or termination date of the Term and the first collection of
Articles to be sold thereunder is the collection following the last seasonal
collection sold hereunder. Nothing herein contained shall be construed to
prevent any such third party licensee from showing such Articles and accepting
orders therefor prior to the termination hereof. Licensor shall notify Licensee
in writing of its intention to terminate the Term due to Licensee's default
and/or the execution of any agreement granting a license to use the Licensed
Marks in connection with the sale and manufacture of Articles in the Territory
as described in this paragraph 19.05.



                                     Page 50
<PAGE>   51


         19.06. (a) This agreement is entered into in the State of New York and
shall be construed in accordance with the internal substantive laws of New York
applicable to contracts to be wholly performed therein and, to the extent
applicable, the federal laws of the United States.

                (b) The parties agree that any action, suit or proceeding based
upon any matter, claim or controversy arising hereunder or relating hereto shall
be brought solely in the appropriate state or Federal Court in the State and
County of New York; except that in the event either party is sued by a third
party or joined in any other Court or in any forum by a third party in respect
of any matter which may give rise to a claim hereunder, the parties consent to
the jurisdiction of such court or forum over any claim which may be asserted
therein between the parties hereto.

                    (i)   Each party hereto hereby waives, to the fullest extent
permitted by applicable law, any right it may have to object to the venue of the
above-mentioned courts, including any claim that such action, suit or proceeding
has been brought in an inconvenient forum.

                    (ii)  Each party hereto hereby waives, to the fullest extent
permitted by applicable law, any right it may have to a trial by jury in respect
of any matter directly or indirectly arising out of, under or in connection with
this Agreement.

                    (iii) Each party hereto hereby waives, to the fullest extent
permitted by applicable law, any right it may have to seek punitive damages in
respect of any matter directly or indirectly arising out of, under or in
connection with this Agreement.

                (c) Any process in any action, suit or proceeding arising out of
or relating to this Agreement may, among other methods permitted by law, be
served upon Licensee by delivering or mailing the same in accordance with
paragraph 17.01 hereof.

         19.07. This writing sets forth the entire understanding between the
parties with respect to the subject matter hereof and supersedes all prior
understandings, negotiations, arrangements or agreements. No modification,
amendment, waiver, termination or discharge of this agreement shall be binding
upon the parties unless confirmed by a written instrument signed by the duly
authorized signatory of each.



                                     Page 51
<PAGE>   52


         19.08. The parties agree to implement this Agreement by executing or
causing to be executed such additional and subsidiary agreements and other
documents as may be necessary or desirable fully to protect the Licensed Marks
and effectively to carry out the terms of this Agreement in accordance with
applicable laws and regulations.

         19.09. This document will not be binding on either party or constitute
a note or memorandum of the material terms of an agreement until each party has
received delivery of a copy executed on behalf of both parties.

Kindly indicate your acceptance of this agreement by signing below in the place
provided.

                                                Very truly yours,

                                                ANNE KLEIN COMPANY LLC


                                                By: /s/ [Signature Illegible]
                                                   -----------------------------


                                                Date:  12/14/1998
                                                     ---------------------------


ACCEPTED AND AGREED:

THE SIRENA APPAREL GROUP, INC.


By: /s/ MAURICE B. NEWMAN
   ---------------------------


Date: 12/10/1998
     -------------------------



                                     Page 52
<PAGE>   53


                            S C H E D U L E   1.05(A)
                                   ANNE KLEIN

                          Current Approved Account List




                                     [ * ]





                                     Page 53

<PAGE>   54




                                     [ * ]






                                     Page 54

<PAGE>   55






                                     [ * ]







                                     Page 55
<PAGE>   56


                            S C H E D U L E   1.05(B)
               Additional Approved Accounts for Licensed Articles






                                     [ * ]







                                     Page 56

<PAGE>   57


                             S C H E D U L E   2.03
                                OFF-PRICE STORES






                                     [ * ]








                                     Page 57
<PAGE>   58


                              S C H E D U L E   4.04



Sirena Apparel Group, Inc.
10333 Vacco Street
South El Monte, CA 91733

SirenaMex S.A. de C.V.
Calz Constitucion entre
Yucatan y Michoacan S/N
San Luis, Sonora Mexico

Holly Bra of California
1112 North Seward Street
Hollywood, CA 90038-0369

IKA Textil S.A. de C.V.
Cerrada Benito Juarez No. 22
Col. San Pedro C.P. 72210
Puebla, Pue.  Mexico

Little Treasures
4666 San Fernando Road
Glendale, CA



                                     Page 58
<PAGE>   59


                              S C H E D U L E  10.01
                            Statement - Sales Royalty

                                [to be provided]



                                     Page 59
<PAGE>   60


                             S C H E D U L E   10.02
                          Semi-annual Operating Report








                                     [ * ]







                                   Page 1 of 3
<PAGE>   61


                              S C H E D U L E   18.06





                                     [ * ]








                                     Page 60
<PAGE>   62






                                     [ * ]







                                     Page 61