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                                                                    EXHIBIT 10.1



                                LICENSE AGREEMENT

                                 BY AND BETWEEN

                              L. C. LICENSING, INC.

                                       AND

                           SIRENA APPAREL GROUP, INC.


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<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                -----------------

SECTION                                                                                           PAGE
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<S>      <C>                                                                                        <C>
1.       Definitions    .........................................................................    2
2.       Grant of License    ....................................................................    4
3.       Samples; Merchandise    ................................................................    9
4.       Quality of Merchandise; Marketing    ...................................................   18
5.       Use of Licensed Mark: Advertising and Promotion; Packaging    ..........................   22
6.       Trademarks and Related Rights      .....................................................   28
7.       Royalty Payments and Statements    .....................................................   31
8.       Term    ................................................................................   36
9.       Infringement    ........................................................................   37
10.      Events of Default; Termination       ...................................................   38
11.      Certain Covenants of Licensee        ...................................................   42
12.      Effect of Expiration or Termination  ...................................................   46
13.      Sales Representatives; Trade Shows   ...................................................   50
14.      Certain Restrictions on Operations   ...................................................   50
15.      Confidentiality   ......................................................................   51
16.      Equitable Relief  ......................................................................   53
17.      Indemnity; Insurance    ................................................................   53
18.      Representations and Warranties     .....................................................   56
19.      Brokers    .............................................................................   58
20.      Notices    .............................................................................   58
21.      Integration    .........................................................................   59
22.      Amendments     .........................................................................   59
23.      Relationship of Parties   ..............................................................   59
24.      Interpretation   .......................................................................   60
25.      Jurisdiction    ........................................................................   60
26.      Severability    ........................................................................   60
27.      Waiver    ..............................................................................   60
28.      Further Assurances   ...................................................................   61
29.      Arbitration    .........................................................................   61
30.      Delegation by Licensor     .............................................................   63
31.      Counterparts   .........................................................................   63
32.      Third-Party Beneficiaries  .............................................................   63
33.      Power of Attorney    ...................................................................   63
34.      Force Majeure   ........................................................................   64
</TABLE>

<TABLE>
<S>         <C>
Exhibit A - Licensed Mark 
Exhibit B - Form of Distributorship Agreement 
Exhibit C - AICPA Professional Standards 
Exhibit D - Liz Claiborne, Inc.'s Standards of Engagement 
Exhibit E - Ann Klein Trademarks
</TABLE>




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                               LICENSE AGREEMENT

         LICENSE AGREEMENT ("Agreement") dated as of the first day of March
1997, by and between L.C. LICENSING, INC., a Delaware corporation having an
office c/o Liz Claiborne, Inc., 1441 Broadway, New York, New York 10019
("Licensor") and THE SIRENA APPAREL GROUP, INC., organized and existing under
the laws of the State of Delaware having an office at 10333 Vacco Street, South
El Monte, California ("Licensee").

         WHEREAS, Licensor holds exclusive rights to the use and exploitation of
the Licensed Marks in connection with the manufacture and sale of Merchandise
within the Territory (as such terms are defined below).

         WHEREAS, Licensee has experience and expertise in developing,
manufacturing, promoting, selling and distributing Merchandise, and is desirous
of associating its products with the Licensed Marks so as to obtain the benefit
of the goodwill associated therewith.

         WHEREAS, Licensee desires to have the exclusive right and license, and
Licensor desires to grant such right and license to use the Licensed Marks as
applied to the manufacture, promotion, sale and distribution of Merchandise
within the Territory, all on the terms and subject to the conditions hereinafter
set forth.

         NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and promises set forth below, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Licensor and Licensee agree as follows:

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         1.  DEFINITIONS.  The following definitions shall be applicable 
throughout this Agreement:

         1.1  The term "Territory" shall mean the United States of America, 
including Puerto Rico and Canada. The term "Domestic Territory" shall mean the
United States of America (including Puerto Rico); and the term "Foreign
Territory" shall mean the Territory other than the Domestic Territory.

         1.2  The term "Licensed Marks" shall mean the trademark "LIZ CLAIBORNE"
and the trademark "ELISABETH", each in the type style and type face set forth on
Exhibit A hereto; and, except with the express prior written approval of
Licensor in each case, no Licensed Mark shall be accompanied by any additional
word, mark or symbol, or shall include said trademark in any type style or type
face other than those set forth in Exhibit A, or any component or abbreviation
thereof, such as "LIZ" or "CLAIBORNE" per se. Licensor shall have the right to
change the required type face and type style of either Licensed Mark in its
discretion from time to time upon not less than thirty (30) days advance notice
to the Licensee.

         1.3  The term "Merchandise" shall mean and be limited to women's
swimwear and swimwear cover-ups, which cover-ups relate specifically to women's
swimwear and are approved by Licensor in advance, and shall not include any
other products whatsoever, it being understood and agreed that Licensor retains
all rights of creation and exploitation with respect to all other products other
than Merchandise.

         1.4  The term "Liz Merchandise" shall mean Merchandise sold or 
promoted, or intended to be sold or promoted, in connection with the Licensed
Marks; the term "Approved Liz

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Merchandise" shall mean Liz Merchandise approved by Licensor in accordance with
the provisions hereof.

         1.5  The term "Line Opening Date" when used with respect to Liz
Merchandise shall be the date of the initial trade introduction for each line of
such Merchandise. There is currently one seasonal Line Opening Date for
Merchandise each year, generally occurring in June.

         1.6  The term "Sample" shall mean any and all models, or actual 
samples, or prototypes, of Liz Merchandise, except that the terms "Initial
Sample", "Final Sample" and "Production Sample" shall have the meanings set
forth in Article 3 hereof.

         1.7  An "affiliate" of any person or entity shall mean and include any
person, corporation or other entity controlling, controlled by or under common
control with, such person or entity.

         1.8  The term "First Year" shall mean the period commencing on the date
of this Agreement as set forth above, and terminating on June 30, 1998.

         1.9  The term "Contract Year" shall mean the First Year, the period of
twelve (12) months commencing on July 1, 1998, the period of twelve (12) months
commencing on each July 1 thereafter.

         1.10 The term "Business Plan" shall mean such business plan(s) relating
to Licensee's use of the Licensed Marks in connection with the manufacture,
distribution and sale of Liz Merchandise hereunder, prepared by Licensee in such
format, and containing such detailed data, information, sales and marketing
plans, budgets and projections, as Licensor may from time to time request.

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         1.11 The term "Packaging" shall mean all packaging and packaging
materials for Liz Merchandise, including, without limitation, boxes, containers,
wrappings, labels, tags and any and all other receptacles and materials,
including any artwork and/or graphics embodied therein, but excluding any
shipping containers or other packaging materials which does not bear any
Licensed Mark and which is used exclusively for shipping Approved Liz
Merchandise to store accounts or distributors, as opposed to the ultimate
consumer.

         2.  GRANT OF LICENSE.

         2.1 Licensor hereby grants to Licensee, and Licensee hereby accepts,
for so long as this Agreement shall be in effect, and subject in all events to
the terms and provisions hereof, an exclusive license solely to use each
Licensed Mark in connection with the manufacture, advertising, merchandising,
promotion, sale and distribution to the trade throughout the Territory of
Approved Liz Merchandise. Licensee shall use each Licensed Mark only in the form
approved in writing by Licensor for use by Licensee and only in connection with
the manufacture, advertising, merchandising, promotion, sale and distribution to
the trade of Approved Liz Merchandise, subject to the limitations herein set
forth. No license is granted hereunder for the use of any Licensed Mark for any
purpose other than as specifically set forth in this Section 2.1. Licensor
reserves the right to use, and to grant to any other licensee the right to use,
any Licensed Mark, the name Liz Claiborne, and any designs, names or other items
supplied by Licensor hereunder in connection with any and all products and
services, other than Merchandise.

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         2.2 The license granted herein is strictly personal to Licensee.
Neither this Agreement nor any of the rights granted to or obligations
undertaken by Licensee hereunder may be transferred, assigned, pledged, sold,
mortgaged, sublicensed or otherwise hypothecated or disposed of, either directly
or indirectly, in whole or in part, by operation of law or otherwise
(collectively, "transfer"), to any person, firm, corporation, or entity without
the express prior written consent of Licensor; any attempted transfer without
such consent shall be null, void, and of no force or effect. As used herein, the
term "Licensee" shall include any assignee or sublicensee of Licensee so
approved by Licensor as hereinabove provided. Notwithstanding the foregoing,
Licensee may with the express prior written consent of Licensor employ
subcontractors to produce Approved Liz Merchandise hereunder; provided, however,
that (i) prior to any subcontractor undertaking any work under this Agreement,
Licensee shall have advised such subcontractor of the production, quality and
trademark protection requirements set forth herein as well as the Liz Standards
(as hereinafter defined), and shall have obtained such subcontractor's agreement
to comply with the same, and (ii) notwithstanding any express or implied
approval by Licensor of any contractor, all provisions hereof pertaining to Liz
Merchandise shall remain the sole and exclusive responsibility of Licensee in
accordance with the terms of this Agreement such that the supervision of
production of Approved Liz Merchandise shall remain under the control of
Licensor, and shall remain the responsibility of Licensee, in accordance with
the terms of this Agreement, and all such subcontractors shall comply with the
quality requirements of this Agreement. If Licensor shall at any time reasonably
conclude in good faith that any subcontractor is not in compliance with the Liz
Standards (as defined), Licensee

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shall, as soon as reasonably practicable upon notice from Licensor, specifying
the alleged deficiency in reasonable detail, remedy such deficiency or cease
further production of Liz Merchandise through such subcontractor. Licensee shall
supply Licensor, promptly upon Licensor's written request, with a list of
subcontractors and suppliers employed by Licensee in connection with its
operations hereunder. Licensee shall promptly cease its relationship with any
such subcontractor or supplier in connection with operations hereunder upon
Licensor's written request, provided that such request is based on acts of such
supplier or subcontractor involving an alleged infringement or violation of any
of Licensor's intellectual or proprietary rights or any of the Liz Standards.
Licensee shall within thirty (30) days after Licensor's written request require
subcontractors and suppliers to execute an agreement in a form reasonably
acceptable to Licensor and consistent with the terms of this Agreement,
including with respect to quality control.

         2.3 (A) Licensee understands and agrees that Licensor's program for the
use of any Licensed Mark in countries in the Foreign Territory or outside of the
Territory may involve special considerations, including, without limitation, the
proper securing of Licensor's rights in and to the Licensed Marks and marketing
strategies (including, without limitation, the marketing of other products
bearing any Licensed Mark), all of which are to be in Licensor's sole
discretion. Licensee acknowledges that in connection with entering the Foreign
Territory, Licensor may require minimum advertising obligations and minimum
royalties in addition to those set forth in Articles 5 and 7, respectively.
Accordingly, notwithstanding anything to the contrary contained herein, Licensee
shall not export any Liz Merchandise in the Foreign Territory unless and until
Licensee shall have submitted a Business Plan with respect to its plans therein
and Licensor has

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approved such Business Plan in writing. No such export sales shall be counted
for purposes of determining any Guaranteed Minimum Royalty or Sales Minimum
hereunder (as such terms are hereinafter defined). Licensor may from time to
time request, in writing to Licensee, that Licensee sell Approved Liz
Merchandise to certain accounts located in the Foreign Territory or outside the
Territory (including any of Licensor's foreign retail licensees), and Licensee
shall use its reasonable efforts promptly to comply with Licensor's request.

         2.3  (B)(1) Provided that no default (as defined above) on Licensee's
part hereunder has occurred, and no default hereunder then exists, and this
Agreement is then in full force and effect, Licensee shall have a right of first
refusal to act as Licensee under a license agreement, if any, which Licensor may
desire to enter with an unaffiliated licensee with respect to the manufacturing,
advertising, merchandising, promoting, selling and distribution of Merchandise
outside of the Territory.

              (B)(2) In the implementation of said first refusal rights,
Licensor shall give Licensee written notice (the "Option Notice") of the
principal terms of any third party bona fide offer which Licensor desires to
accept or proposed agreement for the rights to use the Licensed Marks as
aforesaid, made to Licensor by or proposed to be entered into by Licensor with
an unaffiliated proposed licensee, as the case may be (a "Third Party Offer").
Licensee shall have a period of twenty (20) business days after the date of
Licensor's notice to preempt such Third Party Offer by making its own bona fide
good faith offer, which offer shall (i) be in writing, (ii) state that it is
irrevocable for a period of no less than fifteen (15) business days after
receipt thereof by Licensor, and (iii) be signed by a duly authorized officer of
Licensee (such written offer being hereinafter

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referred to as the "Option Notice"), to enter into an agreement covering the
substantially identical subject matter contained in the Third Party Offer, on
terms and conditions substantially identical to those set forth in this
Agreement; provided that, with respect to financial terms, including rates for
Percentage Royalties and Guaranteed Minimum Royalties, such terms and conditions
shall be at least as favorable to Licensor as those provided in the Third Party
Offer. If Licensee shall not preempt the Third Party Offer in accordance with
the provisions set forth in the preceding sentence, then Licensee's first right
of refusal shall thereupon lapse with respect to the subject matter covered by
the Third Party Offer and Licensor shall have the unrestricted right to enter
into any agreement respecting use of the Licensed Marks as contemplated by the
Third Party Offer as Licensor may, in its sole discretion, determine; provided,
however, that if any Third Party Offer not preempted by Licensee as aforesaid
shall fail to materialize into a binding agreement within one hundred twenty
(120) days after the date of the Option Notice, Licensee's right of first
refusal shall be reinstated and be applicable to any subsequent Third Party
Offer provided that the conditions set forth in Section 2.3(b)(1) are satisfied.

         2.4 Licensee shall devote sufficient financial resources to its
business and operations hereunder and shall use its best efforts in
manufacturing, advertising, merchandising, promoting, selling and distributing
Approved Liz Merchandise so as to develop and maintain a substantial, ongoing
and expanding business under this Agreement, and, subject to the provisions of
this Agreement, including Sections 4.4 and 4.6, to sell a maximum quantity of
Approved Liz Merchandise.

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         2.5 Licensee's marketing program for Liz Merchandise shall at all times
adhere to the philosophy of Licensor, as from time to time expressed by Licensor
to Licensee. Licensee shall at all times maintain the prestige and goodwill of
the Licensed Mark and the name "Liz Claiborne". Without limiting the foregoing,
Licensee shall not, without the express prior written consent of Licensor, sell
or distribute any Liz Merchandise in combination sales, as premiums or
"give-aways," or pursuant to other similar methods of merchandising (including,
without limitation, "gift-with-purchase" and "purchase-with-purchase" programs),
and may not sell or distribute any other item or product in connection with Liz
Merchandise (any such other items or products being herein referred to as
"Promotion Products). In the event that Licensor shall consent to the sale or
distribution of Promotion Products, such consent may provide that for purposes
of determining Gross Sales (as defined below) hereunder, Promotion Products
shall be deemed Liz Merchandise hereunder if and to the extent that Licensee has
invoiced any accounts for such Promotion Products.

         3.  STANDARDS; SAMPLES AND SAMPLE APPROVALS; MERCHANDISE.

         3.1 (A) Licensee acknowledges that each Licensed Mark has established
prestige and goodwill and is well recognized in the mind of the trade and the
public and has a reputation for the highest standards and quality. Licensee
shall maintain in all of its operations under this Agreement, including the
Merchandise bearing a Licensed Mark, the highest standards and reputation, and
established prestige and goodwill, connected with the name and mark "Liz
Claiborne," including the design content, spirit, quality, style, fit, price
point and value which products bearing the "Liz Claiborne" name have come to
represent in the minds of the trade and

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the public, and reflect throughout its operations the standards embodied in the
businesses owned and operated by Liz Claiborne, Inc. and its Standards of
Engagement referred to in Section 11.5 (collectively, the "Liz Standards").

         (B) All items of Liz Merchandise shall reflect the Liz Standards and
the general Liz Claiborne apparel lifestyle themes and concepts as expressed by
Licensor to Licensee from time to time. Included within each collection shall be
(i) a number of items of Liz Merchandise which shall specifically coordinate and
be capable of being cross-merchandised with specific Liz Claiborne products, as
Licensor and Licensee shall agree, which shall have been specified in reasonable
detail to Licensee at an early enough time to permit achievement of such
coordination without any unreasonable cost and expense to Licensee, and (ii)
certain items which are not designed to coordinate with specific items of Liz
Claiborne products.

         (C) Licensee, shall ensure that the most advanced technology and
techniques commonly used in the manufacture of Merchandise and consistent with
the pricing of Merchandise be available for embodiment within Liz Merchandise.
Licensee shall provide Licensor with a description of Licensee's research and
development capacities, processes, new product constructions, designs and
materials and the most up-to-date information (whether or not proprietary)
relating solely to the manufacture, distribution and sale of Liz Merchandise
("Licensee's R&D Materials"). Licensor shall maintain all of Licensee's R&D
Materials in confidence and shall not disclose the same, or any of it, to any
third party and to disclose the same only to Licensor's employees who need to
know such information, provided that Licensor may

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use such Licensee's R&D Materials for the purposes of manufacturing and selling
Liz Merchandise, whether under this Agreement, any other license agreement or
otherwise. The description of Licensee's R&D Materials shall be of sufficient
detail to allow Licensor to make an informed decision about viability for use in
connection with Liz Merchandise and shall be provided to Licensor as soon as
reasonably practical in the course of development, but in any event, Licensee's
R&D Materials will be provided in sufficient time for Licensor and Licensee to
be able to incorporate at least simultaneously with any commercial use in the
Territory by Licensee or any affiliate for itself or any third party, such
research and development into Approved Liz Merchandise in a manner consistent
with high quality products, so that Licensor is assured of having the option of
having any new or improved product, technology or technique available to
Licensee embodied in Liz Merchandise. Such information shall be deemed to be
confidential information under Section 15 of this Agreement. Upon termination of
this Agreement, Licensee shall provide Licensor access to, and the right to use,
any technical information necessary for Licensor to continue the manufacture of
any item of Liz Merchandise.

         3.2 (A) Licensee shall, submit to Licensor in a writing (accompanied by
graphics as appropriate), a proposed "make" or "makes" to form the basis for all
Liz Merchandise hereunder. Licensee shall submit appropriate Samples of same for
Licensor's approval. Appropriate representatives of Licensor and Licensee shall
meet promptly to confer on the proposed make or makes. The parties shall alter,
modify and change the samples to meet Licensor's approval. Once a make is
approved hereunder, it shall be the basis for each item of Liz Merchandise;
Licensee shall not change such make without first obtaining Licensor's prior
written approval. If either

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party believes a make or makes should be changed, the parties shall meet
promptly and effect such changes as are mutually agreeable.

         (B) By written notice to Licensor (a "Product Proposal Notice"),
Licensee shall propose to Licensor a line of Merchandise for each Selling Season
to be manufactured and sold as Liz Merchandise hereunder. Each Product Proposal
Notice shall set forth a proposed Line Opening Date which shall not be less than
120 days after the date of the applicable Product Proposal Notice. Licensee
shall provide Licensor with such additional information with respect to the
matters referred to in any Product Proposal Notice (including marketing studies
and the like) promptly upon Licensor's written request. Not less than 10 days
prior to the Line Opening Date proposed in a Product Proposal Notice, Licensee
shall provide Licensor with the following: (i) a program of suggested, broad
design themes and concepts ("Merchandise Concepts"), which shall include such
items as coloration, materials, sketches, hardware, trim and other
Specifications (as defined below), for items of Merchandise proposed for
inclusion within the relevant seasonal collection which Licensee believes may be
appropriate for manufacture and sale as Liz Merchandise hereunder; (ii) a
program of suggested design themes and concepts with respect to Packaging (as
defined below) for items of Merchandise for which Merchandise Concepts are being
supplied ("Design Concepts"); and (iii) a production calendar setting forth the
timing for approval of Merchandise Concepts, Design Concepts, Initial Samples
and Final Samples, assuming completed production by the Line Opening Date, and
providing Licensor sufficient time to provide comments thereon. Each such
presentation of Merchandise Concepts shall include concepts and related
materials for a complete lifestyle range of Merchandise reflecting the "Liz

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Claiborne" apparel brand lifestyles and shall include concepts and related
materials covering a full range of fashion swimwear and related accessories,
sufficient in number to enable Licensee to produce sufficient styles and SKUs of
Approved Liz Merchandise to meet the sales volume projections contained in its
then current Business Plan, and the applicable Sales Minimum (as hereinafter
defined). The Merchandise Concepts and Design Concepts shall be embodied in
verbal, written and pictorial descriptions and presentation materials, including
storyboards, together with any other sketches and materials as Licensee deems
appropriate.

         (C) At any time or from time to time, Licensor may, in its sole
discretion, by notice to Licensee, advise Licensee that Licensor desires a
particular item or items of Merchandise to be manufactured and sold as Liz
Merchandise hereunder, and Licensee shall use its best efforts to incorporate
any such item into the line of Liz Merchandise to the extent commercially
reasonable.

         (D) Promptly after Licensor's receipt of Merchandise Concepts and
Design Concepts, appropriate representatives of Licensor and Licensee shall meet
at such place in the New York City metropolitan area as Licensor shall
designate, to confer thereon and on any of Licensor's proposed designs. The
parties shall make such modifications thereon as may be required to meet
Licensor's initial approval with respect thereto. Unless otherwise notified by
Licensor, all meetings required pursuant to this Agreement shall occur in
Licensor's offices at 1441 Broadway, New York, New York.

         (E) Licensee shall, as soon as is practicable, but in no event less
than thirty (30) days prior to the appropriate Line Opening Date, prepare and
deliver to Licensor, or its designee, at such

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place as Licensor may reasonably designate within the United States, at
Licensee's sole cost and expense, an initial sample ("Initial Sample") in
respect of each item of Liz Merchandise as to which Licensor's initial approval
under Section 3.2(b) hereof shall have been given. Licensor and Licensee shall
make their appropriate representatives available to meet, at such place in the
New York City metropolitan area as Licensor shall designate, promptly after
Licensor's receipt of Initial Samples, to confer with respect to Licensee's
presentation of Initial Samples. Licensee shall make such commercially
reasonable modifications therein as may be required to meet Licensor's initial
approval.

         (F) Licensee shall, as soon as is practicable, but in no event less
than ten (10) days prior to the appropriate Line Opening Date, prepare and
deliver to Licensor, or its designee, at such place as Licensor may reasonably
designate within the United States, at Licensee's sole cost and expense, an
Initial Prototype (as defined below) in respect of each item of Liz Merchandise
for which Licensee had prepared an Initial Sample and as to which appropriate
commercially reasonable modifications shall have been effected so as to obtain
Licensor's initial approval with respect thereto. As used herein "Initial
Prototype" shall mean and include a Sample provided by Licensor to Licensee, and
an Initial Sample has been provided by Licensee to Licensor (or a Sample
provided by Licensor to Licensee under the provisions of Section 3.5 hereof),
which shall embody all of the specifications (the "Specifications"), including,
without limitation, the workmanship, quality, design, dimensions, styling,
detail, material, colors and the like, as are to be used in the actual
production of each item of Approved Liz Merchandise to be based on said Initial
Prototype. In the event that Licensor rejects a particular Initial Prototype or
Sample,

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Licensor shall notify Licensee of its reasons for rejection within twenty (20)
days of receipt of such Initial Prototype or Sample, and shall provide Licensee
with suggestions for modifying the particular Initial Prototype or Samples which
Licensor is rejecting. Licensee shall, as promptly as practicable, correct said
Initial Prototype or Samples, resubmit said Initial Prototype or Samples to
Licensor and seek Licensor's approval under the same terms and conditions as set
forth with respect to the first submission of Initial Prototypes.

         (G) The approval of Licensor of the Initial Prototype for all items of
Liz Merchandise shall be evidenced by a written list, duly signed by a
representative of Licensor, setting forth those Initial Prototypes which have
been approved for production by Licensee. Initial Prototypes so approved shall
be deemed "Final Samples" in respect of such collection. Approval of any and all
Samples as Final Samples shall be in the sole discretion of Licensor. Licensor
shall respond as promptly as reasonably practicable to any written request to
Licensor for approval of an Initial Prototype; any such request shall be
addressed to the attention of such person and at such address as Licensor may,
from time to time, designate (any change thereon to be effective only in
accordance with Section 20 hereof). Any approval of an Initial Prototype as a
Final Sample shall continue in effect indefinitely thereafter, unless withdrawn
by Licensor upon not less than four (4) months prior written notice to Licensee
given not earlier than twelve (12) months after the date on which initial
approval was given. Any such withdrawal of approval by Licensor shall be
prospective only and shall only relate to the subsequent manufacture and sale of
Liz Merchandise. Within sixty (60) days after approval by Licensor of Initial
Prototypes, or as soon thereafter as

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mutually agreed upon by Licensor and Prototypes. Licensee shall deliver to
Licensor a full set of Production Samples of Liz Merchandise as directed by
Licensor.

         (H) In the event that Licensor rejects a particular Final Sample or
Samples, Licensor shall notify Licensee of its reasons for rejection within
twenty (20) days of receipt of the Final Sample or Samples and shall provide
Licensee with commercially reasonable suggestions for modifying the particular
Final Sample or Samples which Licensor is rejecting. Licensee shall, as promptly
as practicable, correct said Final Sample or Samples in accordance with
Licensor's commercially reasonable suggestions, resubmit said Final Sample or
Samples to Licensor and seek Licensor's approval under the same terms and
conditions as set forth with respect to the first submission of such Samples.
Such revised Sample shall, for all purposes, be deemed a Final Sample hereunder
unless Licensee and Licensor mutually agree to the contrary within twenty (20)
days after the date of Licensee's receipt thereof.

         3.3 Licensor may, in its sole discretion (but shall not in any way be
obligated to), provide Licensee with a Sample in respect of any item or items of
Liz Merchandise. Such Sample shall, for all purposes, be deemed a Final Sample
hereunder unless Licensee and Licensor mutually agree to the contrary within
twenty (20) days after the date of Licensee's receipt thereof.

         3.4 Licensee shall use its reasonable efforts, through the submission
of a sufficient number of Liz Merchandise Concepts, Design Concepts and Initial
Samples, and otherwise, so as to enable Licensor to select and approve Initial
Prototypes for not less than eighteen (18) groupings of Liz Merchandise, each
with five (5) styles of swimwear, and two (2) styles of approved

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swimwear cover-ups for production for each Line Opening Date during the term
hereof. Subject to approval by Licensor, not less than eighteen (18) groupings
of Liz Merchandise, each with five (5) styles of swimwear, and two (2) styles of
approved swimwear cover-ups shall be approved for production hereunder at all
times.

         3.5 Licensee shall present for sale, through showings of each
collection to the trade and otherwise, all items of Approved Liz Merchandise in
respect of which Final Samples have been approved by Licensor, in accordance
with the terms hereof. Licensee shall use its best efforts to promote the sale
and distribution of, all items of Approved Liz Merchandise in respect of which
Final Samples have been approved by Licensor, in accordance with the terms
hereof.

         3.6 The Approved Liz Merchandise manufactured and sold by Licensee
shall strictly adhere, in all respects, including, without limitation, with
respect to the Specifications therefor, to the Final Samples therefor approved
by Licensor.

         3.7 Licensee hereby represents, warrants and covenants that Licensee
shall own or obtain, for the sole benefit of Licensor, prior to any use thereof,
any and all rights in or to any product designs, sketches or components thereof,
Packaging, advertising and artwork prepared or created by Licensee for Liz
Merchandise (such concepts and materials are collectively referred to as the
"Merchandise IP") necessary or appropriate to enable Licensee to (a) manufacture
and sell Approved Liz Merchandise based on or embodying such Merchandise IP, and
(b) prevent others from manufacturing and selling Merchandise based on or
embodying such Merchandise IP or any element confusingly similar thereto. All
right, title and interest in and to all Samples (including

                                                                              17


<PAGE>   20





Final Samples), and all Merchandise IP used in connection with all Samples and
Merchandise derived therefrom, including, without limitation, any modifications
to or improvements of any of the foregoing, to the extent the same may for any
reason be deemed to be other than the sole and exclusive property of, Licensor,
are hereby assigned to, and shall be the sole and exclusive property of,
Licensor, and shall not be used by Licensee other than in strict accordance with
this Agreement. Notwithstanding this paragraph, Licensee shall be entitled to
use and shall be the sole and exclusive owner of all Samples rejected by
Licensor for which Licensor does not reserve any right to use in the future by
notifying Licensee in writing at the time of rejection. All Liz Merchandise
manufactured by Licensee, Samples (including Final Samples), Initial Prototypes,
Merchandise Concepts, Design Concepts, sketches, product designs and colorways
provided hereunder shall be used by Licensee only in accordance with this
Agreement and none of the foregoing shall be used or adapted by or through
Licensee, through any affiliate of Licensee or otherwise, to produce any items
or products other than Approved Liz Merchandise hereunder.

         3.8 All Liz Merchandise manufactured by or on behalf of Licensee shall
be suitable for its intended use and shall not be designed or produced so as to
be inherently dangerous. Without limiting the foregoing, (i) no Liz Merchandise
shall contain or be packaged in any injurious, poisonous, deleterious or toxic
substance or material, (ii) no Liz Merchandise shall be adulterated or
mislabeled, and (iii) all Liz Merchandise and all manufacturing methods used to
produce the same shall meet or exceed all applicable industry and governmental
standards established in respect of safety. Licensee shall assure that all laws,
statutes, rules, regulations, and industrial or governmental standards and
requirements, now in force or hereafter adopted, which may be

                                                                              18


<PAGE>   21





applicable to the manufacture, advertising, merchandising, promotion, sale and
distribution of Liz Merchandise, shall be strictly observed and complied with,
notwithstanding the fact that Licensor may have expressly or implicitly approved
any item or conduct with respect thereto. Licensee shall supply Licensor,
promptly after Licensor's written request from time to time, with (i) copies of
all certifications provided by all manufacturers and importers of Liz
Merchandise, and (ii) a certification, in form and substance reasonably
satisfactory to Licensor, from a recognized independent testing laboratory to
the effect that Samples for such items of Liz Merchandise intended for sale and
distribution as Liz Merchandise as Licensor shall designate comply with the
foregoing provisions of this paragraph (collectively the "Safety Standards").
Costs and expenses relating to any such testing shall be shared equally by
Licensor and Licensee, provided, however, that if any such test results shall
indicate that any tested Liz Merchandise does not comply with the Safety
Standards, Licensee shall (A) forthwith pay all costs and expenses incurred in
connection with such testing and (B) pay all expenses of any additional testing
which Licensor shall reasonably request during the two (2) year period following
the date on which Licensor received the results of the test indicating said
sub-standard performance. Without limiting the foregoing, all Liz Merchandise
produced hereunder shall comply with all Liz Claiborne Standard of Quality
Guidelines formulated by Licensor after consultation with Licensee from time to
time (the initial guidelines to be formulated and provided to Licensee within a
reasonable time after the execution of this Agreement), and with all applicable
statutes, rules and regulations.

         3.9 Licensee shall, from time to time upon request of Licensor, furnish
Licensor, free of charge, with a reasonable quantity of Samples of each current
item of Liz Merchandise then

                                                                              19


<PAGE>   22





being or intended to be sold and distributed hereunder, provided that Licensor
acknowledges that such Samples are not being obtained for the purposes of
resale.

         4.  QUALITY OF MERCHANDISE; MARKETING.

         4.1 Licensor shall have the continuing right of approval of all items
of Liz Merchandise, including, without limitation, the Specifications therefor,
to ensure that all Liz Merchandise manufactured, sold or distributed (i) is in
compliance with the Final Samples therefor, (ii) is of the highest quality at
its price points, and (iii) is consistent with the Liz Standards, and are
otherwise in accordance with the terms of this Agreement. In connection with the
production of Liz Merchandise, Licensee shall use only such materials as
Licensor shall have previously approved.

         4.2 In the event that any Liz Merchandise is, in the judgment of
Licensor, not being manufactured or sold in accordance with the provisions
hereof, Licensor may notify Licensee thereof in writing. Licensee and Licensor
shall promptly meet in good faith to discuss such matters, and Licensee shall,
as promptly as practicable, take such reasonable action with respect thereto as
Licensor shall deem appropriate, including, if reasonably requested, the
immediate recall of such items of Merchandise from Licensee's customers and
ultimate consumers for inspection and/or destruction.

         4.3 The duly authorized representatives of Licensor shall have the
right, upon five (5) business days advance notice to Licensee and during normal
business hours, to inspect all facilities utilized by Licensee, its
distributors, subcontractors, suppliers, agents and representatives, in
connection with the manufacture, sale, storage or distribution of Liz

                                                                              20


<PAGE>   23





Merchandise pursuant hereto and to examine Liz Merchandise in process of
manufacture or storage and when offered for sale within Licensee's operations.
Licensee consents to Licensor's examination of Liz Merchandise held by its
customers for resale. By executing this Agreement, Licensee does not represent
or imply that its customers consent to such examination. To the extent such
manufacturing and selling facilities are not owned or controlled by Licensee,
Licensee shall use all reasonable efforts to permit the representatives of
Licensor to make such inspections. Licensee shall use its best efforts and shall
take all steps reasonably requested by Licensor to prevent or avoid any misuse
of either licensed Mark by any of its distributors, subcontractors, suppliers or
customers.

         4.4 Licensee shall sell Approved Liz Merchandise only (i) through those
specialty shops, department stores and other retail outlets which deal in
Merchandise similar in quality and prestige to Merchandise bearing the "Liz
Claiborne" name, and whose operations are consistent with the quality and
prestige of the "Liz Claiborne" name and each Licensed Mark and the Liz
Standards and (ii) through any mail order catalogs through which Liz Claiborne,
Inc. offers apparel products. Licensee may sell distress or end-of-season
Approved Liz Merchandise through off-price channels approved in advance by
Licensor, provided that Licensor shall have a right of first refusal to purchase
any or all of such distress or end-of-season Approved Liz Merchandise at the
price and terms offered by Licensee to any third party for sale at Liz Claiborne
outlets. Licensee shall provide Licensor with prompt written notice of the
proposed terms of any offer to sell to third parties such Approved Liz
Merchandise, and Licensor shall have seven (7) business days from its receipt of
such notice to exercise its right of first refusal by providing written notice

                                                                              21


<PAGE>   24





to Licensee. Except as explicitly set forth above in this Section 4.4, no other
channels of distribution (including without limitation catalogue sales,
telemarketing or on-line services) shall be employed without Licensor's prior
express written consent, and Licensee shall consistently monitor the channels of
distribution to assure compliance with the terms of this Agreement. Licensee
shall not make sales of Liz Merchandise to any account (i) which it knows, or
reasonably should have known, intends to sell such Merchandise outside of the
retail outlets specified above within the Territory, or (ii) which Licensor
shall disapprove in writing to Licensee. Licensee shall cease selling Liz
Merchandise to any store, distributor or other customer, and shall use its best
efforts to remove any Liz Merchandise held by such store, distributor or other
customer, upon the reasonable request of Licensor or in the event that any such
distributor is not selling Liz Merchandise in accordance with the terms of this
Agreement.

         4.5 Licensee shall not sell any Liz Merchandise to any person or entity
who or which Licensee knows, or has or should have reasonable grounds to
believe, intends to resell, directly or indirectly, any Liz Merchandise outside
of the Territory or to any person or entity other than the ultimate consumer.
Licensee shall use its best efforts to sell and distribute Liz Merchandise
directly to accounts as opposed to selling and distributing through
distributors. Licensee must obtain the Licensor's prior approval of any
distributor engaged or used by Licensee in connection with Liz Merchandise.
Licensee shall enter into a distributorship agreement in the form attached
hereto as Exhibit B (as such form may, from time to time, be revised by
Licensor) with any distributor approved by Licensor, and an executed copy of
each such agreement shall be delivered to Licensor no later than ninety (90)
days after such distribution arrangement commences.

                                                                              22


<PAGE>   25





Licensee shall terminate any agreement or arrangement with any distributor with
respect to Liz Merchandise upon Licensor's reasonable written request, subject
to the terms of the written distributorship agreement.

         4.6 Licensee shall, during the term of this Agreement, sell to Licensor
or any affiliate of Licensor, or to any licensee of Licensor or any of its
affiliates operating a retail store or outlet dedicated to the sale of Liz
Claiborne products, such quantity and items of Liz Merchandise as Licensor, or
such affiliate or licensee, may from time to time require, as evidenced by
purchase orders placed with Licensee. Licensee shall use its reasonable efforts
to fill such orders to the same extent as it does for its most favored
customers, provided that Licensee need not sell to any licensee of Licensor if
any such sale would expose Licensee to any unreasonable credit risks. All sales
of Liz Merchandise to Licensor, or any of its affiliates or licensees, at all
times shall be made at prices not greater than the lowest actual wholesale
selling prices then being paid by Licensee's most favored customer for such Liz
Merchandise, and the terms of payment shall be not less advantageous to Licensor
or such affiliates or licensees than those then available to Licensee's most
favored customer for such Liz Merchandise. Nothing contained herein shall be
deemed to grant any right or license to Licensee in any country or territory in
which Licensor or its affiliates or any of their respective licensees may be
located.

         4.7 Licensee acknowledges that in order to preserve the goodwill
attached to the Licensed Marks, Liz Merchandise should be sold at prices and
terms reflecting the prestigious nature of the Licensed Marks; it being
understood, however, that Licensor is not empowered to fix or regulate the
prices at which the Liz Merchandise is to be sold, either at the wholesale or

                                                                              23


<PAGE>   26





retail level, and that the inclusion of this provision in the Agreement is not,
and shall not be, construed as a consent by Licensee to sell any Liz Merchandise
at any price.

         4.8 Licensee shall at all times maintain the high quality and standards
of the Liz Merchandise and undertakes to exercise all reasonable efforts to
safeguard the prestige and goodwill of each Licensed Mark and the name "Liz
Claiborne".

         5.  USE OF LICENSED MARK: ADVERTISING AND PROMOTION; PACKAGING.

         5.1 Licensee shall adhere to the Liz Standards in all of its
advertising, promotional and business materials (including, without limitation,
signs, phone listings, order forms, labels, boxes, receptacles, tags and
letterhead), all collateral and promotional products and material, all visual
merchandising materials of any kind, including, without limitation, in-store
fixtures, and all Packaging relating to or for all items of Liz Merchandise, and
shall not employ or otherwise release any of same, including, without limiting
the foregoing, any advertisement or collateral support materials relating to any
Liz Merchandise (such as, by way of example but not by way of limitation,
standard types of advertisements in the form of "slicks" or otherwise), unless
and until Licensee shall have made a request, in writing, for approval, and
Licensor shall have consented to same in writing. Licensee will cause to appear
on all Liz Merchandise, and on all advertising and business materials and
Packaging used in connection therewith, such legends, markings and notices as
Licensor may from time to time require and shall notify Licensee of such
requirement. Approval or disapproval of any proposed use of a Licensed Mark
shall be given by Licensor as promptly as reasonably practicable after receipt
of Licensee's written request in connection therewith, but in all cases within
twenty (20) business days after actual receipt by Licensor of

                                                                              24


<PAGE>   27





Licensee's request; if neither approval nor disapproval has been given within
such time, approval shall be deemed to have been given. Any such approval shall
continue in effect indefinitely thereafter, provided that any such approval may
be withdrawn by Licensor upon not less than three (3) months' prior written
notice to Licensee, given not earlier than twelve (12) months after the date on
which initial approval was, or was deemed, given. Provided approval to a use of
any Licensed Mark as part of a specific piece of business or advertising
material or Packaging remains effective, it shall not be necessary to obtain
prior approval for each separate, substantially similar use of such Licensed
Mark containing immaterial changes from the use of such Licensed Mark so
approved. Notwithstanding the foregoing, Licensee shall, as soon as is
reasonably possible, either prior to publication, release, use or other public
showing, or immediately thereafter, deliver to Licensor a tear sheet, proof or
"mock up" of any such changed use of a Licensed Mark, which shall be subject to
disapproval by Licensor; if such disapproval shall be expressed, the same shall
not be used at any later time unless approval thereof shall be later obtained.
If Licensee has already published, released, used or shown such disapproved
material, any such publication, release, use or showing prior to the receipt by
Licensee of a notice of disapproval relating thereto shall not constitute a
breach of this Agreement. Licensee shall, at the request of Licensor, include in
its advertising and on its business materials and all Packaging an indication of
the relationship of the parties hereto in a form approved by Licensor. All
right, title and interest in and to all advertising and promotional material
with respect to Liz Merchandise shall be the sole and exclusive property of
Licensor.

                                                                              25


<PAGE>   28


         5.2  Licensee shall prepare and present to Licensor a proposed 
marketing program with respect to the "launch," of Liz Merchandise in Summer
1997 and on an annual basis thereafter. Appropriate representatives of Licensor
and Licensee shall meet, at such place in the New York City metropolitan area as
Licensor shall designate, to confer on such marketing program, and Licensee
shall make such changes therein as shall be necessary to obtain Licensor's
approval thereof. Licensee shall present its proposal with respect to the launch
to Licensor by April 30, 1997. The introductory launch shall be presented to the
trade in or about June 1997, unless otherwise mutually agreed to by both
parties. The launch will be funded at not less than   *   , which launch shall
include the presentation to the trade of a fashion show dedicated to Liz
Merchandise. None of the launch expenditures incurred or paid by Licensee shall
be credited toward the minimum expenditure requirements of Section 5.6. 

         5.3  All cooperative advertising whereby Licensee provides a retailer 
a contribution toward the cost of an advertisement for Liz Merchandise, whether
Licensee's contribution be in the form of an actual monetary contribution,
credit or otherwise, shall be subject to the prior approval of Licensor under
the same terms and conditions as apply to advertising and promotional materials
prepared by or to be used by Licensee pursuant to Section 5.1 hereof; provided,
however, that in the event that Licensee is not as a matter of practice given an
opportunity to review the cooperative advertising copy or format prior to
publication due to time constraints, then Licensee shall notify Licensor, in
advance, of those retailers with whom it does cooperative

* Material omitted and filed separately with the Securities and Exchange
  Commission pursuant to request for confidential treatment.

                                                                              26


<PAGE>   29





Liz Merchandise advertising and/or promotion, and Licensee or Licensor, at
Licensor's sole election, shall notify the named retailer of the terms of this
Agreement which pertain to the said advertising or promotional materials and
advise that any cooperative Liz Merchandise advertising or promotion must comply
herewith. Licensee shall suspend its cooperative advertising of Liz Merchandise
with any retailer to whom Licensor shall reasonably object or with any retailer
who fails to comply with the provisions of Section 5.1 hereof; provided however,
that Licensee shall not be required to take any action that would constitute a
material breach of any agreement with any retailer.

         5.4 Licensee shall not use any Licensed Mark as part of a corporate
name or as a trademark, in whole or in part, or in such a way so as to give the
impression that the name "Liz Claiborne," any Licensed Mark, or any modification
or variation of any of the foregoing, is the property of Licensee. No name(s) or
word(s) shall be conjoined or used by Licensee in connection with any Licensed
Mark without the prior written consent of Licensor, including, without
limitation, in any Packaging, advertising, promotional or business materials, or
the like utilized by Licensee in connection with Liz Merchandise.

         5.5 Licensor may from time to time promulgate written uniform rules and
regulations relating to the manner of use of each Licensed Mark, which Licensee
shall, forthwith after receipt thereof, adhere to in its operations hereunder.
Upon receipt thereof by Licensee, Licensee shall have a reasonable time to
incorporate any changes in Licensor's rules and regulations.



                                                                              27


<PAGE>   30





         5.6 (A) During each Contract Year, Licensee shall expend on national
advertising (as defined) of Liz Merchandise an amount equal to the greater of
(x) * or (y) * of Net Sales for the prior Contract Year; provided that a minimum
of * must be expended by Licensee on national advertising in the First Contract
Year. For purposes of this Agreement, "national advertising" shall mean a
national advertising campaign pursuant to which Licensee shall appoint and
utilize an advertising agency (including in-house) designated by Licensor, and
Licensee shall pay such agency commissions and fees customarily charged in the
industry (which shall be included in the dollar requirements with respect to
national advertising set forth in this Article 5).

         (B) During each Contract Year, Licensee shall expend on cooperative
advertising of Liz Merchandise an amount not less than * of the Net Sales for
such Contract Year. In no event shall the expenses incurred in connection with
cooperative advertising under this Section 5.6(b) be applied against the
expenditures required under Sections 5.6(a) or 5.6(c).

         (C)  During each Contract Year, Licensee shall expend on in-store 
promotional activities, including in-store fixturing and visual merchandising,
with respect to Liz Merchandise not less than the following amounts: First
Contract Year: * ; Second Contract Year: * ; and

Third Contract Year:     *     .

         (D) Licensee shall prepare and present to Licensor for its approval,
from time to time, but no less frequently than semi-annually, and no more than
quarterly, a program of proposed marketing support activities, including
national and cooperative advertising, advertising and

* Material omitted and filed separately with the Securities and Exchange
  Commission pursuant to request for confidential treatment.

                                                                              28


<PAGE>   31





in-store advertising, and related budgets with respect to Approved Liz
Merchandise which shall be developed through consultation with Licensor and
shall be subject to Licensor's approval. Such marketing activities, including
collateral support recommendations, shall comply with the Liz Standards and
shall include such promotions, including without limitation "gift-with-purchase"
and "purchase-with-purchase" promotions, events, activities and strategies, as
the parties agree may be appropriate.

         (E) Licensee shall furnish Licensor with an accounting on a semi-annual
basis for each of the periods ending June 30 and December 31 of each Contract
Year reconciling the amount actually spent by Licensee on national advertising,
cooperative advertising, and in-store and marketing collateral support compared
with the budgeted amounts pursuant to this Section 5.6; such accountings shall
be furnished no later than thirty (30) days after the end of the period covered
thereby.

         5.7 Licensee agrees to engage, at its sole expense, a fixture
contractor (acceptable to Licensor), or to utilize the services of Licensor's
visual merchandising and design department, to design unique and appropriate
displays for Approved Liz Merchandise and to instruct store accounts of the type
authorized, or off-price channels approved by Licensor under Section 4.4
regarding such displays. Licensee shall use its best efforts to promote the use
of such fixtures, and such fixtures shall be supplied at Licensee's sole
expense. Licensor and Licensee shall mutually agree upon the Merchandise
fixtures which Licensee may supply to retail customers in connection with the
display of Liz Merchandise at retail. No other fixture may be used by Licensee
in connection with Liz Merchandise without Licensor's prior written consent,
except that



                                                                              29


<PAGE>   32





generic clothes racks and hangers not bearing a Licensed Mark may be used to
display Liz Merchandise without Licensor's prior consent. Licensee's
expenditures in connection with in-shop fixtures and displays shall not be
credited against Licensee's obligations with respect to the advertising
expenditure requirements set forth in this Article 5, other than Section 5.6(c).

         6.  TRADEMARKS AND RELATED RIGHTS.

         6.1 Licensee acknowledges that each Licensed Mark has acquired a
valuable secondary meaning and goodwill in the minds of the trade and the public
and that Merchandise bearing the Licensed Marks and the "Liz Claiborne" name
have acquired a reputation of high quality and style. Licensee acknowledges that
Licensor is the owner of all right, title and interest in and to each Licensed
Mark in any and all forms or embodiments thereof, and is the owner of the
goodwill attached to each Licensed Mark in connection with the business and
goods in relation to which the same has been and may in the future be used. For
the purposes of trademark registration, sales by Licensee of Liz Merchandise
shall be deemed to have been made by and for the benefit of Licensor. Licensee
shall exercise its best efforts throughout its operations under this Agreement
to safeguard the prestige and goodwill of each Licensed Mark and the name "Liz
Claiborne". Licensee will not, at any time, either directly or indirectly, or
permit any of its affiliates to, do any act or thing which may, in any way,
impair the rights of Licensor in and to either Licensed Mark or which may affect
the validity of either Licensed Mark or which may depreciate the prestige,
goodwill or value of the "Liz Claiborne" name or either Licensed Mark.



                                                                              30


<PAGE>   33





         6.2 Licensee acknowledges that only Licensor may file and prosecute a
trademark application or applications to register either Licensed Mark for any
items or services, including Liz Merchandise.

         6.3 Licensee shall use each Licensed Mark strictly in compliance with
and observance of any and all applicable laws, rules, regulations, and
ordinances and shall use such markings in connection therewith as may be
requested by Licensor in writing. To the extent any rights in and to either
Licensed Mark are deemed to accrue to Licensee pursuant to this Agreement or
otherwise, Licensee hereby assigns any and all such rights, at such time as they
may be deemed to accrue, to Licensor. Licensee shall execute any and all
documents and instruments requested by Licensor which Licensor may deem
necessary, proper or appropriate to accomplish or confirm such assignment. Any
such assignment, transfer or conveyance shall be without consideration other
than the mutual agreements contained herein. Upon expiration or termination of
this Agreement for any reason whatsoever, Licensee will forthwith execute and
file any and all documents requested by Licensor terminating any and all
trademark registrations, registered user agreements and other documents
regarding the Licensed Marks. Licensor shall bear all expenses reasonably
incurred in preparing and recording any and all such documents.

         6.4 Licensee agrees never (i) to challenge the validity or ownership of
either Licensed Mark or any application for registration thereof, or any
trademark registrations thereof in any jurisdiction, nor (ii) to contest the
fact that Licensee's rights under this Agreement (a) are solely those of a
manufacturer and distributor, and (b) subject only to the applicable provisions
of



                                                                              31


<PAGE>   34





Sections 12.2 and 12.3 hereof, terminate upon termination of this Agreement. The
provisions of this Section 6.4 shall survive any termination or expiration of
this Agreement.

         6.5 In the event that any of Licensee's designs for Liz Merchandise, or
any advertising, Packaging or promotional material, may be made the subject of
patent, trademark or copyright protection, Licensor shall have the right, at its
own expense, to file applications therefor and shall be the exclusive owner of
such rights. Licensee shall promptly after its receipt of written notice from
Licensor fully cooperate with Licensor in connection with any such activities.

         6.6 Licensor agrees to indemnify and hold harmless Licensee against any
and all liabilities, claims, causes of action, suits, damages and expenses
(including reasonable attorneys' fees and expenses) which Licensee may incur (a)
solely by reason of its use, in accordance with the terms and conditions of this
Agreement, of (i) any Licensed Mark, or (ii) the designs provided to Licensee by
Licensor (if any) in connection with Liz Merchandise within the Territory, or
(iii) the name, likeness, sound or image of any model supplied by Licensor to
Licensee or required by Licensor to be used by Licensee, to the extent that such
liability arises solely through the infringement of another's trademark, design,
patent, copyright, right of publicity or other proprietary rights or (b) solely
by reason of the inclusion of Section 3.1 or Section 4.7 in this Agreement, and
for no other reason whatsoever, including any act by the Licensee or any of its
customers, if it is finally determined by a court of competent jurisdiction in a
final order or judgment which is not appealed, that the inclusion of either
Section 3.1 or 4.7 in this Agreement in and of itself constituted a violation of
the antitrust laws of the United States or any state thereof; provided in each
case that Licensee shall (i) promptly have notified Licensor thereof in



                                                                              32


<PAGE>   35





writing, and (ii) give full cooperation in the defense against such claim(s). If
any action or proceeding shall be brought or asserted against Licensee in
respect of which indemnity may be sought from Licensor under this paragraph,
Licensor shall, after receiving notice of any claim, have the opportunity if it
desires to assume and direct the defense thereof, including the employment of
counsel and the payment of expenses. In no event shall Licensor be liable under
any settlement of any such claim effected without its prior written consent.

         7.  ROYALTY PAYMENTS AND STATEMENTS.

         7.1 Licensee shall pay to Licensor, on the dates provided below, the
Guaranteed Minimum Royalty hereinafter set forth, as a non-refundable advance
against Percentage Royalties (defined below) payable to Licensor hereunder in
respect of each Contract Year specified for sales made in the Domestic
Territory. No credit shall be permitted against the Guaranteed Minimum Royalties
paid in respect of any Contract Year based on Guaranteed Minimum Royalties or
Percentage Royalties paid or payable in respect of any other Contract Year. If
the aggregate of all Guaranteed Minimum Royalties and Percentage Royalties in
respect of sales of Liz Merchandise in the Domestic Territory ("Domestic
Percentage Royalties") paid by Licensee to Licensor hereunder in respect of a
Contract Year shall equal or exceed the Guaranteed Minimum Royalty for such
Contract Year, then Licensee shall not be obligated to make payment of any
further installment of Guaranteed Minimum Royalty otherwise payable hereunder in
respect of such Contract Year. Only Net Sales of Liz Merchandise in the Domestic
Territory shall apply toward the Guaranteed Minimum Royalty for any Contract
Year.



                                                                              33


<PAGE>   36





         7.2 (A) The Guaranteed Minimum Royalty for each Contract Year of the
Initial Term (as defined) shall be as follows:

<TABLE>
<CAPTION>
                  CONTRACT YEAR                            GUARANTEED MINIMUM
                  ENDING ON JUNE 30 OF                     ROYALTY
                  ---------------------                    -------
                           <S>                                  <C>
                           1998                                 *
                           1999                                 *
                           2000                                 *
</TABLE>


follows:     *      advance on the First Year Guaranteed Minimum Royalty shall 
be paid upon the execution of this Agreement, and the remainder of the First
Year Guaranteed Minimum royalty shall be paid in two (2) equal installments, one
on the first day of October 1997 and the other on the first day of January 1998.
Guaranteed Minimum Royalties for each Contract Year thereafter shall be paid in
four (4) equal installments on the first day of January, April, July and October
during each Contract Year.

         (B) The parties agree that at such time that Net Sales of Approved Liz
Merchandise bearing the ELISABETH trademark reach * for any consecutive 12 month
period, the parties shall in good faith provide for separate Guaranteed Minimum
Royalties for each Contract Year for Liz Merchandise bearing the ELISABETH
trademark.

         7.3 (A) Licensee shall pay to Licensor a percentage royalty on all of
Licensee's Net Sales (defined below) of Liz Merchandise (the "Percentage
Royalty") during each Contract Year hereof equal to * of Net Sales; provided
that with respect to Liz Merchandise sold at a "closeout" or distress price more
than          *          lower than Licensee's usual or customary price

* Material omitted and filed separately with the Securities and Exchange
  Commission pursuant to request for confidential treatment.

                                                                              34


<PAGE>   37





therefor, Percentage Royalties shall be paid at a rate of * of the Net Sales of
such Liz Merchandise; and further provided, that such lower rate of Percentage
Royalties shall not be applicable to in excess of * of the aggregate of
Licensor's Gross Sales of Liz Merchandise for any Contract Year hereunder, less
only the deductions enumerated in clauses (i) and (ii) of paragraph (b) below
for such Contract Year, and Percentage Royalties for Liz Merchandise sold at
such "closeout" or other distress prices in excess of such * of aggregate Gross
Sales, less the specified deductions as aforesaid, shall be paid at the then
applicable regular royalty rate of the Net Sales price therefor.

         (B) As used in this Agreement, the term "Gross Sales" for any period
shall mean the gross invoice price of all Liz Merchandise sold or shipped by or
on behalf of Licensee during such period. As used in this Agreement, the term
"Net Sales for any period shall mean Gross Sales for such period less (i)
freight charges and taxes separately billed on the face of the invoice, (ii)
ordinary and customary trade and prompt payment discounts separately shown on
the face of the invoice and actually taken by customers and allowed by Licensee,
if any, (iii) cash credits actually paid, if any, for the return of defective
Liz Merchandise, and (iv) credits, if any, granted as an accommodation to
customers in the nature of ordinary and customary "mark down charge backs" or
"stock adjustment returns" in accordance with standard industry practice;
provided, however, that the amount of aggregate credits under clause (ii), (iii)
and (iv) above shall not exceed * of Licensee's Gross Sales for any Contract
Year. No other deductions shall be

* Material omitted and filed separately with the Securities and Exchange
  Commission pursuant to request for confidential treatment.

                                                                              35


<PAGE>   38





taken. Gross Sales and Net Sales be computed without regard to whether payment
therefor has been received by Licensee. Merchandise returns, if any, shall be
credited in the quarterly period in which the returns were actually made, and
"mark down chargebacks" and "stock adjustment returns" permitted as credits with
the limits set forth in this Section 7.4(b) shall be credited in the quarterly
period in which the credit memorandum evidencing the same is actually issued by
Licensee.

         (C) The gross invoice price of any Liz Merchandise sold by Licensee to
any affiliate of Licensee shall, for the purposes of this Agreement, be deemed
to be the higher of (i) the actual gross invoice price therefor, or (ii)
Licensee's regular selling price for such Liz Merchandise sold to unaffiliated
parties for sale at retail or at discount (whatever the case may be), and shall
be deemed sold at the earlier of the invoice date and delivery date. In no case
shall royalties be due on resale by any such affiliate. Liz Merchandise shall
not be shipped on consignment.

         7.4 Licensee shall prepare, and at all times maintain at its principal
executive offices, true, correct and complete separate books of account and
records reflecting all transactions and operations within the scope of this
Agreement, in accordance with generally accepted accounting principles
consistently applied. Licensee shall prepare and furnish to Licensor a statement
of operations, in form and scope satisfactory to Licensor and certified as
accurate by a senior financial officer of Licensee, for each quarterly period
ended the last day of March, June, September and December in each Contract Year
hereunder, which shall be furnished to Licensor within thirty (30) days after
the end of each such period. Without limiting the foregoing, each such statement
shall include, by month, all aggregate Gross Sales, freight charges and taxes,
trade



                                                                              36


<PAGE>   39





and prompt payment discounts, accommodation credits, Merchandise returns, and
Net Sales for the previous quarterly period and computation of the Percentage
Royalty due to Licensor in respect thereof, together with a separate statement
of wholesale sales, off-price sales, export sales and sales by customer and
country and such other information as Licensor may reasonably request. Each such
statement shall be accompanied by payment in full to Licensor of all Percentage
Royalties due Licensor in respect of the period covered by such statement. Such
statements shall be deemed confidential information for purposes of Section 15
hereof.

         7.5 If the payment of any Guaranteed Minimum Royalties or Percentage
Royalties hereunder is delayed for any reason, interest shall accrue on the
unpaid principal amount of such payment at the prime rate (as defined) plus four
percent (4%) (the "Default Rate"). The "prime rate" shall be as published from
time to time by The Chase Manhattan Bank, N.A. in New York City, adjusted each
January 1 and July 1 to reflect the prime rate in effect at each such date, each
such adjusted rate to apply for the 6 months immediately following such
adjustment.

         7.6 Within one-hundred (100) days after the end of each Contract Year
during the term of this Agreement, Licensee shall submit to Licensor a statement
in the form of a certified opinion in the form set forth in the AICPA
Professional Standards relating to royalty reports attached as Exhibit C hereto,
as the same may be amended from time to time, compiled by Licensee's regular
independent certified public accountants (who shall be reasonably satisfactory
to Licensor) to the effect that they have reviewed each of the statements
covering such Contract Year which have been furnished to Licensor by Licensee
pursuant to Section 7.5 hereof, that they have checked such statements of
Licensee with Licensee's books of account and records, and that such



                                                                              37


<PAGE>   40





statements are true, correct and complete and accurately present the information
required to be contained therein pursuant to this Agreement in accordance with
generally accepted accounting principles applied on a consistent basis.

         7.7 Licensee's books and records of account, together with any relevant
supporting materials, shall be available for inspection and copying (at
Licensor's expense) by Licensor or its agents at all reasonable times during
Licensee's normal business hours, upon reasonable prior notice, for the duration
of this Agreement and for three (3) years thereafter. Such books, records and
materials shall be available for audit by Licensor or its agents at all
reasonable times during Licensee's normal business hours. Any audit by Licensor
shall be made by Licensor at its own expense, provided, however, that if any
examination by Licensor shall reveal an underpayment by Licensee in Percentage
Royalties payable to Licensor for any quarterly period, Licensee shall forthwith
pay any such deficiency, together with interest thereon from the original due
date at the Default Rate, and, if such underpayment is in an amount equal to or
greater than two percent (2%) of the amount originally paid by Licensee in
respect of such period, Licensee shall also pay all costs and expenses incurred
by Licensor in connection with such examination.

         7.8 All payments required hereunder shall be made in United States
dollars in immediately available funds by company check or by wire transfer to
the account of Licensor in accordance with such instructions as Licensor may,
from time to time, provide Licensee. In the event that any sale of Liz
Merchandise is paid in a foreign currency, the amount of such sale shall be
converted to United States dollars at the buying site rate for United States
dollars published by The Chase



                                                                              38


<PAGE>   41





Manhattan Bank, N.A. in New York City as in effect on the last business day of 
the period in respect of which the payment of Percentage Royalties in respect of
such sale is to be calculated.

         8.  TERM.

         8.1 The initial term of this Agreement shall commence as of the date
hereof and shall continue through June 30, 2000 (the "Initial Term"), unless
renewed or sooner terminated as provided herein.

         8.2 Subject to the provisions of this Agreement and provided that no
event of default (as defined below) under this Agreement has occurred and is
continuing and no default (as defined below) under this Agreement then exists,
if (a) Licensee has achieved Net Sales in the Domestic Territory for the twelve
month period ending June 30, 1999 of * and (b) Net Sales in the Domestic
Territory for the quarter ending September 30, 1999 shall exceed Net Sales in
the Domestic Territory for the quarter ending September 30, 1998 by at least * ,
Licensee shall have the right to renew this Agreement by giving Licensor written
notice of Licensee's intention to renew no later than September 30, 1999, which
renewal shall be subject to the (x) approval of Licensor, which shall not be
unreasonably withheld, and (y) the negotiation of the terms and conditions of
the renewal period, including the guaranteed minimum royalties.

         8.3 The parties agree that any announcement to the public or trade of
the termination of this Agreement shall be made only by a joint statement
mutually agreed upon by each party except as may be required by applicable law
or regulation in the reasonable opinion of counsel.

* Material omitted and filed separately with the Securities and Exchange
  Commission pursuant to request for confidential treatment.

                                                                              39


<PAGE>   42





         8.4 Upon termination of this Agreement, at the request of Licensor,
Licensee shall exercise its option under any then existing distributorship
agreements to purchase inventory of Liz Merchandise then held by such
distributors, provided that with respect to the inventory so purchased by
Licensee, Licensor shall be obligated to exercise its Inventory Purchase Option
set forth in Section 12.2 at a price equal to Licensee's cost to purchase such
inventory from the distributor.

         9. INFRINGEMENT. Licensee shall promptly notify Licensor of any
infringement of either Licensed Mark with respect to Liz Merchandise, or any act
of unfair competition by third parties relating to any Licensed Mark with
respect to Liz Merchandise, whenever such infringement or act shall come to
Licensee's attention. After receipt of such notice from Licensee, Licensor may,
in Licensor's discretion, take such action to stop such infringement or act as
Licensor may deem necessary to protect each Licensed Mark for use on or in
connection with Merchandise. Licensee shall cooperate fully with Licensor to
stop any such infringement or act in the Territory with respect to Liz
Merchandise and, if reasonably requested by Licensor, shall join with Licensor
as a party to any action brought by Licensor for such purpose. Licensor shall
have full control over any action taken, including without limitation, the right
to select counsel, to settle on any terms it deems advisable in its discretion,
to appeal any adverse decision rendered in any court, to discontinue any action
taken by it, and otherwise to make any decision in respect thereto as it in its
discretion deems advisable, except Licensee shall have control over any claim
asserted against Licensee by the alleged infringer by way of cross-complaint,
counter-claim or otherwise, provided that such claim does not in any way involve
any issues relating to either Licensed Mark or Liz



                                                                              40


<PAGE>   43





Merchandise. Licensor shall bear all reasonable costs and expenses (including
attorneys' fees) connected with any such action, except that if Licensee desires
to retain its own counsel, it shall do so at its own expense. Any recovery as a
result of such action shall belong solely to Licensor except to the extent that
such recovery represents damages specifically allocated to Licensee, in which
event such specified recovery, net of all expenses, including Licensor's
reasonable attorneys' fees and other reasonable litigation expenses, shall be
paid to Licensee. Licensee agrees that Licensor shall have the sole power to
take or omit to take legal or other action, before any court or governmental
authority or otherwise, with respect to the protection of each Licensed Mark
against infringement, or otherwise and that if Licensor shall determine, in its
discretion, that it would not be in the best interests of Licensor's business,
viewed as a whole, to take any such action, Licensor may determine to omit from
taking any such action, and Licensee hereby agrees to abide by any such
decision.

         10.  EVENTS OF DEFAULT; TERMINATION.

         10.1  Each of the following shall constitute an event of default under 
this Agreement:

                           (A)  If Licensee shall fail to pay any funds owing to
Licensor pursuant to this Agreement as due for a period of five (5) days after 
such funds were due; and when due; 

               (B)   If any representation or warranty of either party contained
herein shall be or become false or misleading in any material respect, or if
either party shall fail to perform or observe any term, condition, agreement or
covenant in this Agreement on its part to be performed or observed, other than
as provided in paragraph (a) of this Section 10.1, and such default is not


                                                                              41


<PAGE>   44





remedied within twenty (20) days after written notice thereof from the
non-defaulting party, unless such default is not capable of being cured through
the defaulting party's diligent and continuous effort within such twenty (20)
day period, and such party immediately commences to cure such default, and
thereafter applies its diligent and continuous best efforts to cure such
default, and does in fact cure such default within forty-five (45) days of the
initial notice of default; or

                   (C) If Licensee or Licensor shall institute proceedings to be
adjudicated a voluntary bankrupt or insolvent, or shall consent to the filing of
a bankruptcy proceeding against it, or shall file a petition or answer seeking
reorganization or arrangement under any bankruptcy act or any other similar
applicable law of any country, or shall consent to the appointment of a receiver
or liquidator or trustee or assignee in bankruptcy or insolvency for itself, or
any of its property, or shall make an assignment for the benefit of creditors,
or shall be unable to pay its debts generally as they become due, or shall cease
doing business as a going concern, or corporate action shall be taken by it in
furtherance of any of the foregoing purposes; or

                   (D) If an order, judgment or decree of a court having
jurisdiction shall have been entered adjudicating Licensee or Licensor a
bankrupt or insolvent, or approving, as properly filed, a petition seeking
reorganization of Licensee or Licensor or of all or a substantial part of its
properties or assets under any bankruptcy act or other similar applicable law,
as from time to time amended, or appointing a receiver, trustee or liquidator of
Licensee or Licensor, and such order, judgment or decree shall remain in force,
undischarged and unstayed for a period of thirty (30)



                                                                              42


<PAGE>   45





days, or a judgment or lien for the payment of money in excess of * shall be
rendered or entered against it and the same shall remain undischarged or
unbonded for a period of forty-five (45) days or any writ or warrant or
attachment shall be issued or levied against a substantial part of its property
and the same shall not be released, vacated or bonded within thirty (30) days
after issue or levy; or

                  (E) If Licensee shall for any reason discontinue the sale of
Approved Liz Merchandise or any substantial portion of its business operations,
or shall liquidate or dissolve; or

                  (F) If Licensee shall, without the prior written consent of
Licensor first had and obtained, sell (regardless of how designated) all or
substantially all of its assets, or shall merge or consolidate with or into
another corporation or entity, or if more than 25% of the issued and outstanding
shares of the voting stock of Licensee shall be sold or transferred, directly or
indirectly, in each case whether in a single transaction or as the aggregate
result of a series of related transactions, and whether the transaction or
transactions involve an affiliated or unaffiliated person or entity; or

                  (G) If Licensee's Net Sales of Liz Merchandise for any 
Contract Year hereunder in the Domestic Territory shall fail to equal or exceed
the applicable Sales Minimum (as defined below) in respect of such Contract Year
with respect to Liz Merchandise. As used herein, the term "Sales Minimum" for
each Contract Year shall mean the following levels of Net Sales in the Domestic
Territory: in the First Contract Year: * ; Second Contract Year: * ; and

* Material omitted and filed separately with the Securities and Exchange
  Commission pursuant to request for confidential treatment.

                                                                              43


<PAGE>   46





Third Contract Year: * ; provided that the parties agree and acknowledge that at
such time that Net Sales of Liz Merchandise bearing the ELISABETH trademark
reach * for any consecutive 12 month period, the parties shall in good faith
amend this paragraph (g) to provide for separate minimum Net Sales levels for
each Contract Year for Liz Merchandise bearing the ELISABETH trademark.

         10.2 As used in this Agreement, the term "default" shall mean any
condition, event or state of facts which, after notice or lapse of time, or
both, would be an event of default.

         10.3 If any event of default shall occur and be continuing, the
non-defaulting party may, by written notice to be defaulting party, terminate
this Agreement.

         10.4 Licensee represents and warrants that Mr. Douglas Arbetman is (i)
the Chief Executive Officer and President of Licensee, and (ii) empowered with
authority to bind unconditionally the Licensee in all of its dealings
contemplated by this Agreement (other than the execution of this Agreement which
requires approval of Licensee's Board of Directors), and that Mr. Douglas
Arbetman is principally responsible for substantially all of the operations of
Licensee contemplated hereunder. In the event that Mr. Douglas Arbetman's
position, authority or responsibility, as set forth in the preceding sentence,
terminates for any reason (including by reason of death or disability), Licensee
shall promptly inform Licensor thereof. In the event of such termination of Mr.
Douglas Arbetman's position, authority or responsibility at any time, Licensor
shall have the right to terminate this Agreement, by written notice to Licensee,
in its sole

* Material omitted and filed separately with the Securities and Exchange
  Commission pursuant to request for confidential treatment.

                                                                              44


<PAGE>   47





discretion, at any time Mr. Douglas Arbetman does not have the position,
authority or responsibility set forth in the first sentence of this Section
10.4.

         11.  CERTAIN COVENANTS OF LICENSEE.

         11.1 Licensee shall deliver to Licensor (i) within one hundred (100)
days after the end of each fiscal year of Licensee, an audited consolidated
balance sheet of Licensee as at the end of such fiscal year, together with an
audited consolidated statement of the results of operations of Licensee during
such fiscal year, all of which financial statements shall be certified by such
independent certified public accountants as may be reasonably satisfactory to
Licensor, and (ii) within forty-five (45) days after the end of each fiscal
quarter of Licensee, other than the fourth fiscal quarter, unaudited
consolidated balance sheets as at the last day of such quarter, together with an
unaudited consolidated statement of the results of operations of Licensee during
such period, all prepared in accordance with generally accepted accounting
principles and accompanied by a certificate of the senior financial officer of
the Licensee to the effect that, subject to year-end audit, they fairly present
the consolidated results of operations of Licensee during such fiscal quarter
and the consolidated financial position of Licensee at the end of such fiscal
quarter. Each such delivery of financial statements shall be accompanied by a
certificate of the senior financial officer of Licensee (a) certifying that no
default on the part of Licensee under the provisions of Section 11.2 hereof has
occurred, and (b) setting out, in reasonable detail, the manner in which the
computations required in respect of the financial tests set out in Section
11.2(b) were effected (including such appropriate back up as Licensor may
reasonably request) and (c) certifying that all such statements are true,
complete and correct and accurately set forth the financial position of



                                                                              45


<PAGE>   48





Licensee at the end of such period reported therein and the results of
operations for the stated period then ended. Licensor shall have the opportunity
to discuss the financial statements with Licensee, and Licensee shall provide
Licensor with any such information Licensor reasonably requests in connection
with such review.

         11.2 (A) Licensee shall pay punctually and discharge when due or renew
or extend prior to default, in the ordinary course of business, any indebtedness
heretofore or hereafter incurred by Licensee and discharge, perform and observe
any covenants, provisions and conditions required to be discharged, performed
and observed in connection therewith or in connection with any agreement
relating thereto except (i) when such indebtedness is subject to a bona fide
dispute or (ii) with respect to indebtedness constituting in aggregate, less
than * .

         (B) Licensee hereby covenants and agrees that (i) the consolidated
stockholders' equity of Licensee and its consolidated subsidiaries shall at all
times equal or exceed * ; (ii) the consolidated stockholders' equity of Licensee
shall not decline by * or more in any fiscal year of Licensee, as measured as of
the last day of each such fiscal year; and (iii) the ratio of total liabilities
of Licensee (which for this purpose shall be all liabilities less bank
overdrafts, accounts payable, accrued liabilities and current portions of
capital lease obligations) to consolidated stockholders' equity of Licensee
shall at all times be less than or equal to * . The determination of each of the
financial tests set out in this Section 11.2(b) shall be made in accordance with
generally accepted accounting principles, applied consistently with the methods

* Material omitted and filed separately with the Securities and Exchange
  Commission pursuant to request for confidential treatment.

                                                                              46


<PAGE>   49





used in the preparation of Licensee's audited financial statements, except as
otherwise specified in this Section 11.2(b).

         (C) Notwithstanding the foregoing, and without in any way limiting or
restricting Licensor's rights to terminate this Agreement upon default as
provided herein, which rights shall remain absolute, if any of Licensee's
financial covenants set out in this Section 11.2 shall fail to be maintained,
performed or observed, then and in such event the then current term of this
Agreement shall be deemed to terminate, without further notice or action on the
part of any person, on the date which is four (4) months after the first date on
which such failure shall have occurred, unless Licensor shall, in its sole
discretion, waive such termination in a writing specifically referring to this
paragraph.

         11.3 Licensee shall prepare and deliver to Licensor at Licensee's sole
cost and expense, such Business Plans and updates thereof, together with such
other information, as Licensor may reasonably request with respect to Licensee's
actual projected and proposed business in Liz Merchandise, on such time schedule
as Licensor may reasonably prescribe.

         11.4 (A) Licensee shall operate the business licensed hereunder in a
division separate from Licensee's other businesses and operations.

         (B) Licensee shall at all times employ such competent and qualified
personnel as shall be necessary to fulfill its obligations under this Agreement.
Without limiting the foregoing, Licensee shall employ an experienced Division
President, Design Director, and sales staff in each case dedicated solely to and
responsible for Liz Merchandise, and at all times reasonably acceptable to



                                                                              47


<PAGE>   50





Licensor. Licensee shall make all of its personnel, and shall use its best
efforts to make the personnel of its contractors, suppliers and other resources,
available by appointment during normal business hours for consultation with
representatives of Licensor.

         11.5 Licensee shall comply with Licensor's Standards of Engagement, as
promulgated from time to time; the current terms of such Standards are set forth
on Exhibit D.

         11.6 (A) Licensee in order to induce Licensor to enter into this
Agreement and to secure the full and complete payment and performance when due
of all of Licensee's liabilities and obligations to Licensor hereunder hereby
pledges and grants to Licensor hereunder a first priority security interest in
Licensee's rights and interests under the Agreement, whether such interests are
now owned or in existence or hereafter acquired or created, together with all
substitutions for, additions and accessions to, and proceeds of the foregoing
(the "Collateral").

         (B) Licensee at its sole cost and expense, shall execute and deliver
any and all further documents, including, without limitation, Uniform Commercial
Code financing statements and amendments and extensions thereof, and do any and
all such further acts and supply any and all further information deemed
necessary or desirable by Licensor to perfect, evidence, protect, maintain or
enforce Licensor's security interest in the Collateral, or otherwise to carry
out the purposes hereof, in any and all jurisdictions of the United States or
elsewhere in the world. Licensor is hereby appointed attorney-in-fact of
Licensee to execute and file, at any time and from time to time as Licensor may
deem necessary or appropriate, one or more financing statements,



                                                                              48


<PAGE>   51





and any amendments and extensions thereof, signed only by Licensor, with respect
to all or any part of the Collateral.

         (C) Following the occurrence of an event of default, Licensor shall
have with respect to the Collateral the rights, options and remedies of a
secured party under the Uniform Commercial Code or other applicable law.

         12.  EFFECT OF EXPIRATION OR TERMINATION.

         12.1 Upon the expiration or termination of this Agreement (whether by
reason of the expiration of the stated term of this Agreement, by earlier
termination of this Agreement pursuant to Article 10 hereof or otherwise), (a)
except to the extent specifically otherwise provided in Sections 12.2 and 12.3
hereof, all rights of Licensee hereunder shall terminate and revert
automatically to Licensor, and neither Licensee nor any of its receivers,
representatives, trustees, agents, successors or assigns (by operation of law or
otherwise) shall have any right to manufacture, exploit, advertise, merchandise,
promote, sell, distribute or deal in or with Liz Merchandise, and Licensee and
all of its assignees, successors or assigns (by operation of law or otherwise)
shall forthwith discontinue all use of each Licensed Mark and any variation or
simulation thereof, or any mark confusingly similar therewith, and all
references thereto or hereto, and all Merchandise Concepts, Design Concepts,
Packaging, Merchandise IP sketches, designs, colorways, Samples and labels
provided or employed hereunder and created or used by Licensee for Liz
Merchandise, including any modifications or improvements thereof and any
patents, trademarks, copyrights, trade names and other proprietary rights in
connection therewith, and Licensee hereby irrevocably releases and disclaims any
right or interest in or to any and all of the



                                                                              49


<PAGE>   52





foregoing other than Samples rejected by Licensor which Licensee did not reserve
the right to use in the future by notifying Licensee in writing of such
reservation at the time of rejection; and (b) Licensor shall forthwith have the
unrestricted right to manufacture, advertise, merchandise, promote, sell and
distribute Liz Merchandise, directly or through others, and to grant licenses
with respect to Merchandise and the Licensed Mark. The provisions of this
Section 12.1 shall take precedence over any conflicting provision of this
Agreement. In addition, Licensee will execute any instruments requested by
Licensor which Licensor, in its sole discretion, deems necessary, proper or
appropriate to accomplish or confirm the foregoing. Any such assignment,
transfer or conveyance shall be without consideration other than the mutual
agreements contained herein.

         12.2 If, upon the expiration or termination of this Agreement (whether
by reason of the expiration of the stated term of this Agreement, by earlier
termination of this Agreement pursuant to Article 10 hereof or otherwise),
Licensee (or any subcontractor or distributor of Licensee) shall have on hand
any finished inventory of Liz Merchandise or any trim or fabric exclusively
purchased for use with Liz Merchandise, Licensor shall have the option (herein
called the "Inventory Purchase Option") to purchase all or any part of
Licensee's (or any such subcontractor's or distributor's) inventory of Liz
Merchandise (which shall for this purpose include any trim or other material
purchased by Licensee specifically for use in Approved Liz Merchandise) which is
completed and which remains on hand at such expiration or termination date and
which is not subject to written orders received from customers on the date of
termination or expiration of this Agreement, for an aggregate purchase price
equal to Licensee's standard cost



                                                                              50


<PAGE>   53





of making such Liz Merchandise, including the cost of materials, direct labor
and manufacturing overhead. If such Liz Merchandise was purchased by Licensee,
the cost shall be the Licensee's purchase price or landed cost. Such purchase
will be f.o.b. point of shipment. Licensee shall furnish Licensor, within ten
(10) days after the expiration or termination date hereof, a written statement
describing the items of Liz Merchandise in Licensee's inventory and stating the
cost of each such item and documentation showing the inventory held by each of
Licensee's subcontractors and distributors, and outstanding orders and
commitments for Liz Merchandise. The Inventory Purchase Option may be exercised,
in whole or in part, by Licensor within thirty (30) days after receipt by
Licensor of Licensee's written statement referred to in the preceding sentence
("Purchase Option Period"), and the purchase price shall be payable and
inventory delivered within ten (10) days after such exercise. Licensor may
offset the purchase price against any payments due from Licensee. Licensee shall
use its best efforts to obtain any inventory of Liz Merchandise held by any of
its subcontractors or distributors upon the expiration or termination hereof.

         12.3 Subject to the provisions of Section 12.2 hereof, Licensee may
complete (but only in accordance with the terms and conditions of this
Agreement) production of Approved Liz Merchandise which is in process, or for
which written orders have been received from customers, all as of the date of
termination or expiration of this Agreement (whether by reason of the expiration
of the stated term of this Agreement, by earlier termination of this Agreement
pursuant to Article 10 hereof or otherwise). Notwithstanding anything to the
contrary contained herein, upon completion of the production of any Approved Liz
Merchandise in accordance with the



                                                                              51


<PAGE>   54





provisions of this Section 12.3, such Merchandise shall be deemed subject to an
Inventory Purchase Option, to the extent and as set forth in Section 12.2
hereof, except that (a) Licensee shall present Licensor with a written list on
the last day of each week during which it is completing such production, setting
forth the Liz Merchandise completed during such week, and (b) each applicable
Purchase Option Period shall commence upon Licensor's receipt of each such list.

         12.4 If and to the extent that the Inventory Purchase Option is not
exercised in full with respect to all Liz Merchandise subject thereto, if
Licensee is not in default under this Agreement, Licensee may use the Licensed
Marks ("Royalty Option") in connection with the sale of Approved Liz
Merchandise, as to which an Inventory Purchase Option was not exercised, for six
(6) months immediately following the expiration of the applicable Purchase
Option Period, provided Licensee fully complies with the provisions hereof,
including, without limitation, the provisions of Articles 4 and 5 hereof, in
connection with such disposal, except the provisions regarding minimum royalties
and sales. Licensee shall be obligated to continue to pay Licensor the
Percentage Royalty provided for herein in respect of all of its sales of Liz
Merchandise made pursuant to the Royalty Option. The existence of the Royalty
Option shall not affect any of the rights of Licensor hereunder, including
without limitation those referred to in clause (b) of Section 12.1 hereof. Upon
the expiration of all Purchase Option Periods, or, if Licensee shall then have
the Royalty Option, upon the expiration of the Royalty Option, Licensee shall
deliver to Licensor all material and other products in its possession or under
its control incorporating any Licensed Mark,



                                                                              52


<PAGE>   55





including, without limitation, all labels, tags, Packaging, containers, 
advertising and promotional material.

         12.5  Notwithstanding any termination or expiration of this Agreement 
(whether by reason of the expiration of the stated term of this Agreement, by 
earlier termination of this Agreement pursuant to Article 10 hereof or
otherwise), Licensor hereby reserves, all the rights and remedies which it may
have, at law or in equity, with respect to (a) the collection of royalties or
other funds payable by Licensee pursuant to this Agreement, (b) the enforcement
of all rights relating to the establishment, maintenance and protection of the
Licensed Mark, and (c) damages for breach of this Agreement on the part of
Licensee.

         13.  SHOWROOMS; SALES REPRESENTATIVES; TRADE SHOWS.

         13.1  Licensee shall, at its sole cost and expense, maintain, operate
and staff exclusively signed showrooms at such location as shall be acceptable
to Licensor within the Borough of Manhattan, and at such other locations as
Licensor and Licensor shall agree, which shall be devoted solely to the
presentation and sale of Approved Liz Merchandise, (each, a "Liz Showroom").
Licensee shall display and offer for sale to the trade at each Liz Showroom all
(and not less than all) current items of Approved Liz Merchandise for which
Final Samples have been approved by Licensor. Each Liz Showroom shall be
maintained, operated, staffed and decorated at all times in all respects in a
first class manner so as to reflect creditably on the prestige and goodwill of
Licensor and each Licensed Mark; without limiting the foregoing Licensee shall
at all times maintain each Liz Showroom in a safe, clean and attractive
condition. If commercially reasonable, Licensee will do such lighting, painting,
decorating, embellishing, repairing and



                                                                              53


<PAGE>   56





restoration as Licensor may from time to time reasonably suggest. Licensee shall
at all times employ a sufficient number of qualified Liz Merchandise sales
personnel at each Liz Showroom.

         13.2 Licensee shall arrange for booths at such national and regional
trade shows as Licensee and Licensor from time to time shall deem appropriate,
at which booths solely Approved Liz Merchandise (and no other Merchandise) shall
be displayed, such booths to be staffed by sales personnel who shall have
responsibility solely for the promotion and sale of Approved Liz Merchandise
(and no other Merchandise).

                  14.  CERTAIN RESTRICTIONS ON OPERATIONS

         14.1 Licensee acknowledges that, in order to induce Licensor to enter
into this Agreement and to grant Licensee the exclusive right, license and
privilege to use each Licensed Mark in connection with Approved Liz Merchandise
(all in accordance with the terms and subject to the conditions set forth in
this Agreement), Licensee, among other things, has represented and warranted to
Licensor that Licensee will devote a substantial portion of its time and energy
and use all best efforts, through the adequate financing of Licensee's
operations and business, in order that Licensee shall develop and maintain a
substantial, ongoing and expanding business in Liz Merchandise. Licensee further
acknowledges that Licensor is expressly relying on the representations and
warranties of Licensee herein in entering into this Agreement and thereby
granting to Licensee the exclusive license herein granted. In order to confirm
the scope and application of such representations and warranties, Licensee
hereby covenants to and agrees with Licensor that, during the term of this
Agreement, neither Licensee nor any of its affiliates shall



                                                                              54


<PAGE>   57





plan for, engage in or have any ownership interest in, directly or indirectly,
any business or entity involved in the manufacture, advertising, merchandising,
promotion, sale or distribution of any Merchandise produced bearing or sold
under or in association with any trademark owned by or associated with any
nationally known fashion designer (individual or entity) or apparel brand which
competes with Licensor's apparel products and in substantially similar channels
of distribution; provided, however, that nothing contained in this Agreement
shall prohibit Licensee from the marketing and sale of Merchandise under the
"Anne Klein" trademarks listed on Exhibit E attached hereto.

         15.  CONFIDENTIALITY.

         15.1 Each party Licensee acknowledges that all information of a
business or technical nature disclosed to the other party during the course of
this Agreement with respect to the business of the disclosing party and its
affiliates, including without limitation business plans, marketing plans,
non-pubic financial data, designs, sketches, materials, colors, costs, pricing,
customers, production techniques, sources of supply and other documents,
non-public information and trade secrets of the disclosing party and its
affiliates, were acquired, designed and/or developed by them at great expense,
are secret, confidential and unique, and constitute the trade secrets and
exclusive property of the disclosing party and its affiliates, and that any use
by the non-disclosing party of any such trade secrets and property other than
for the sole purpose of manufacturing, advertising, merchandising, promoting,
selling and distributing Approved Liz Merchandise in accordance with the terms
of this Agreement would be wrongful and would cause irreparable injury to the
disclosing party and its affiliates.



                                                                              55


<PAGE>   58





         15.2 Neither Licensor or Licensee will at any time disclose or divulge
to any person, firm or corporation or use, or permit any of its affiliates,
employees or representatives to use, disclose or divulge, for any purpose other
than solely as required for the manufacturing, advertising, merchandising,
promoting, selling and distributing of Approved Liz Merchandise in accordance
with the terms of this Agreement, directly or indirectly, for its own or the
benefit of any person, firm or corporation, any property, any trade secrets or
confidential information of the other party or any of its affiliates, obtained
from or through them, except to the extent required by law or court order.

         15.3 In the event that either party is directed to disclose any portion
of any Confidential Information of the other party or any other materials
proprietary to the other party in conjunction with a judicial proceeding or
arbitration, the disclosing party shall immediately notify the nondisclosing
party both orally and in writing. The disclosing party agrees to provide the
nondisclosing party with reasonable cooperation and assistance in obtaining a
suitable protective order and in taking any other steps to preserve
confidentiality of the nondisclosing party's confidential information and
proprietary materials.

         16.  EQUITABLE RELIEF. The parties hereby acknowledge that each will
suffer great and irreparable harm as a result of the breach by the other
Licensee of any covenant or agreement to be performed or observed under this
Agreement other than the covenants to make monetary payments, and, whether such
breach occurs before or after the termination of this Agreement, each party
hereby acknowledges that the nonbreaching party shall be entitled to apply for
and



                                                                              56


<PAGE>   59





receive from any court of competent jurisdiction a temporary restraining order,
preliminary injunction and permanent injunction, without any necessity of
proving damages, enjoining the breaching party from further breach of this
Agreement or with respect to the Licensee, further infringement or impairment of
Licensor's rights in and to either of the Licensed Marks. Such relief shall be
in addition to and not to substitution of any other remedies available to the
nonbreaching party pursuant to this Agreement or otherwise.

         17.  INDEMNITY; INSURANCE.

         17.1 (A) It is understood and agreed that as between Licensor, on the
one hand, and Licensee, on the other hand, Licensor assumes no liability to
Licensee or any third party with respect to the performance characteristics of
Liz Merchandise, all of which liabilities shall be borne by Licensee.

         (B) Licensee does hereby indemnify and agrees to save and hold
Licensor, Liz Claiborne, Inc. and their respective officers, directors, agents,
representatives and controlling persons (collectively, for purposes of this
Article 17, "Licensor"), individually, harmless of and from any and all
liability, claims, causes of action, suits, damages and expenses (including
reasonable attorneys' fees and expenses) (collectively, "Indemnified Losses"),
which any such entity or person may become liable for, or may incur, or be
compelled to pay to any third party, by reason of any acts, whether of omission
or commission, that may arise under or in connection with this Agreement, in
connection with Liz Merchandise manufactured by or on behalf of Licensee or
otherwise in connection with Licensee's business or by virtue of any
misrepresentation or breach



                                                                              57


<PAGE>   60





of warranty or failure to perform or observe any covenant on its part to be 
performed or observed hereunder.

         17.2 Licensor shall immediately give notice to Licensee of any claim,
action or suit that may give rise to liability under this Article 17, provided
that the failure of any indemnified party to provide the notice required by this
Article 17 or Article 6.6 shall not relieve the indemnifying party of its
obligations hereunder. Licensee shall have the option to defend any such claim,
action or suit, including, but not limited to, the right to select counsel,
control the defense, assert counterclaims and crossclaims, bond any lien or
judgment, take any appeal and to settle on such terms as it, in its discretion,
reasonably deems advisable, provided prior notice of any settlement is given to
the Licensor and such party provides its express prior consent thereto, which
shall not be unreasonably withheld or delayed.

         17.3 Licensee shall maintain at its own expense in full force and
effect at all times during which the Liz Merchandise is being sold and used,
with a recognized and responsible insurance carrier licensed to do business in
the State of California and acceptable to Licensor, a liability insurance policy
with limits of liability of at least * per person and * per accident or
occurrence with respect to Liz Merchandise. Liability coverage under such
insurance policy shall include, but shall not be limited to, claims resulting
from accidents or occurrences arising out of any alleged defect in Liz
Merchandise, whether such defect be patent or latent in nature and whether such
defect is alleged to be a manufacturing or design defect. Such insurance shall
be in

* Material omitted and filed separately with the Securities and Exchange
  Commission pursuant to request for confidential treatment.

                                                                              58


<PAGE>   61





such form and of such duration as shall insure against all accidents or
occurrences occurring at all times during which Liz Merchandise is being sold
and used, regardless of when the claim shall be made. Such insurance shall be
for the benefit of and shall name as co-insured Licensor, Liz Claiborne, Inc.
and their respective officers, directors, agents, representatives and
controlling persons, and shall provide for at least thirty (30) days' prior
written notice by the carrier thereof (each an "Insurance Notice") to Licensor
and Licensee of the cancellation or modification thereof. Licensee shall, as
promptly as practicable, but in any event within thirty (30) days after the
signing of this Agreement, and from time to time thereafter upon Licensor's
written request, deliver to Licensor (i) a true, correct and complete copy of
its liability insurance policy (including all endorsements), as then in effect,
and (ii) a certificate of such insurance from the insurance carrier which sets
forth the scope of coverage and the limits of liability. Licensee shall, on an
annual basis, promptly furnish to Licensor evidence in form and substance
satisfactory to Licensor of the maintenance of its liability insurance policy.
Licensee shall provide Licensor, as promptly as practicable, but in no event
more than three (3) business days after its receipt thereof, with a true,
correct and complete copy of any Insurance Notice received by Licensee
hereunder. In the event that the insurance coverage to be provided under the
policy as proposed to be modified by any Insurance Notice shall be unacceptable
to Licensor, Licensee shall thereupon use its best efforts either to retain the
coverage then provided for in the said policy or to obtain other insurance
coverage which is acceptable to Licensor. In the event that, within fifteen (15)
days prior to the effective date of any change set out in any Insurance Notice,
Licensee shall not have provided or arranged for insurance coverage (substitute
or otherwise) reasonably acceptable to Licensor,



                                                                              59


<PAGE>   62





Licensor may itself arrange to obtain insurance coverage complying with the
terms hereof. Licensee shall reimburse Licensor, immediately upon Licensor's
request, for all expenses and premium payments associated with Licensor's
seeking and obtaining such coverage. Licensee's maintenance of the insurance
coverage as provided herein shall not limit, excuse or replace any of Licensee's
obligations under the provisions of Section 17.1 hereof, which shall remain
absolute.

         17.4 The provision of this Article 17 shall survive any termination or
expiration of this Agreement.

         18.  REPRESENTATIONS AND WARRANTIES.

         18.1 Licensee hereby represents and warrants to Licensor as  follows:

         (A)  Licensee is a corporation duly organized, validly existing and in 
good standing under the laws of Delaware, and is duly qualified and authorized
to do business and in good standing in all jurisdictions in which the nature of
its business requires such qualifications.

         (B)  Neither the execution, delivery nor performance of this Agreement
by Licensee will, with or without the giving of notice or passage of time, or
both, conflict with, or result in a default or loss of rights under, any
provision of any other agreement or understanding to which Licensee is a party
or by which it or any of its properties may be bound.

         (C)  Licensee has full power and authority to enter into this Agreement
and to carry out the transactions contemplated thereby in accordance with its
terms; the execution, delivery, and performance of this Agreement by Licensee
have been duly and properly authorized by all



                                                                              60


<PAGE>   63





necessary actions; and this Agreement constitutes the valid and binding
obligation of Licensee enforceable in accordance with its terms.

         18.2  Licensor hereby represents and warrants to Licensee as  follows:

                  (A) Licensor is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, and is duly qualified and
authorized to do business as a foreign corporation in good standing in all
jurisdictions in which the nature of its business requires such qualification.

                  (B) Neither the execution, delivery nor performance of this
Agreement by Licensor will, with or without the giving of notice or passage of
time, or both, conflict with, or result in a default or loss of rights under,
any provision of the Certificate of Incorporation or By-Laws of Licensor or any
other agreement or understanding to which Licensor is a party or by which it or
any of its properties may be bound.

                  (C) Licensor has full power and authority to enter into this
Agreement and to carry out the transactions contemplated thereby in accordance
with its terms; the execution, delivery, and performance of this Agreement by
Licensor have been duly and properly authorized by all necessary corporate
actions; and this Agreement constitutes the valid and binding obligation of
Licensor enforceable in accordance with its terms.

                  (D) Licensor is the sole owner of each Licensed Mark in the 
United States and Liz Claiborne, Inc. is the sole owner of each Licensed Mark in
Canada, and Liz Claiborne, Inc. has granted Licensor the exclusive right to
sublicense each Licensed Mark in Canada. Each

                                                                              61


<PAGE>   64





Licensed Mark has been registered on the Principal Register of the U.S. Patent
and Trademark Office in International classes 2, 6, 11, 24, 25 and 27.

         19. BROKERS. Each of Licensor and Licensee hereby represents and
warrants to the other that neither it nor any of its affiliates (including its
officers, directors or employees) has employed or dealt with any broker or
finder in connection with this Agreement or the transactions contemplated
hereby, and agrees to indemnify and hold the other harmless from any and all
liabilities (including, without limitation, reasonable attorneys' fees and
disbursements paid or incurred in connection with any such liabilities) for any
brokerage commissions or finders' fees in connection with this Agreement or the
transactions contemplated hereby insofar as such liabilities shall be based on
the arrangements or agreements made by it or on its behalf.


         20. NOTICES. All reports, requests, demands or notices required by this
Agreement shall be in writing and shall be deemed to be duly given on the date
same is sent and acknowledged via hand delivery, facsimile or overnight delivery
service (with a copy simultaneously sent by registered mail), or, if mailed,
five (5) days after mailing by certified or registered mail, return receipt
requested, to the party concerned at the following address:

                  IF TO LICENSOR:

                  L. C. Licensing, Inc.
                  c/o Liz Claiborne, Inc.
                  1441 Broadway
                  New York, New York  10018
                  ATTENTION:  PRESIDENT, LICENSING
                  Fax No.: (212) 626-1807
                  WITH COPY TO:

                  Liz Claiborne, Inc.





                                                                              62


<PAGE>   65

                  1 Claiborne Avenue

                  North Bergen, New Jersey  07047

                  ATTENTION: LEGAL DEPARTMENT
                  Fax No.: (201) 295-7851






                                                                              63
<PAGE>   66




                  IF TO LICENSEE:
                  The Sirena Apparel Group, Inc.
                  10333 Vacco Street
                  South El Monte, California  91733
                  ATTENTION: PRESIDENT
                  Fax No.: (818) 442-2280

                  WITH COPY TO:
                  Manatt, Phelps & Philips
                  11355 West Olympic
                  Los Angeles, California  90064
                  ATTENTION: PAUL IRVING, ESQ.
                  Fax No.: (310) 312-4224

Any party may change the address to which such notices and communications shall
be sent by written notice to the other parties, provided that any notice of
change of address shall be effective only upon receipt.

         21.  INTEGRATION. This Agreement (including the Exhibits hereto) sets
forth the entire agreement and understanding between the parties relating in any
way to the use of any Licensed Mark, or to the subject matter hereof and
supersedes and merges all prior discussions, arrangements and agreements between
them.

         22.  AMENDMENTS.  This Agreement may not be amended or modified except 
by written instrument signed by each of the parties hereto.

         23.  RELATIONSHIP OF PARTIES.  Nothing herein contained shall be 
construed to constitute the parties hereto as partners or as joint ventures, or
as franchisor/franchisee, or either as agent of the other. Neither party hereto
by virtue hereof shall have the right or authority to act for or to



                                                                              64


<PAGE>   67





bind the other in any way or to sign the name of the other or to represent that
the other is in any way responsible for the acts or omissions of the other.

         24. INTERPRETATION. This Agreement has been entered into in the State
of New York and shall be construed by and interpreted in accordance with the
laws of that State without regard to principles of conflict of laws. The
headings given to the paragraphs of this Agreement are for the convenience of
the parties only and are not to be used in any interpretation of this Agreement.

         25. JURISDICTION. Licensor and Licensee hereby (i) agree that the State
and Federal courts sitting in the State and City of New York shall have
exclusive jurisdiction in any action arising out of or connected in any way with
this Agreement; (ii) each consent to personal jurisdiction of and venue in such
courts in any such matter; and (iii) further agree that the service of process
or of any other papers with respect to such proceedings upon them by mail in
accordance with the provisions set out in Article 20 hereof shall be deemed to
have been duly given to and received by them ten (10) days after the date of
certified mailing and shall constitute good, proper and effective service.

         26. SEVERABILITY.  In the event that any one or more provisions of this
Agreement shall be held invalid, illegal or unenforceable in any respect, the
validity, legality or enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.

         27. WAIVER.  No failure or delay on the part of either party in 
exercising any power or right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise



                                                                              65


<PAGE>   68





of any other power or right. No waiver by either party of any provision of this
Agreement, or of any breach or default, shall be effective unless in writing and
signed by the party against whom such waiver is to be enforced. All rights and
remedies provided for herein shall be cumulative and in addition to any other
rights or remedies such parties may have at law or in equity.

         28. FURTHER ASSURANCES. Each party hereto shall be cooperative and
shall take such further action and shall execute and deliver such further
documents as may be reasonable requested by the other party hereto in order to
effectuate or facilitate the purpose and intents of this Agreement.

         29. ARBITRATION. (A) Except as provided below, the parties have not
consented to arbitrate any disputes hereunder. Any controversy, claim or dispute
arising hereunder relating to the amount of Percentage Royalties or advertising
expenditures, and any dispute concerning the scope of this Article 29, shall be
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association (the "AAA") as supplemented herein, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. Any claim or counterclaim not relating to the
Percentage Royalties or advertising expenditures shall not be arbitrated.

                  (B) There shall be three arbitrators, including at least one
practicing attorney and one certified public accountant. Pending final award,
arbitrator compensation and expenses shall be advanced equally by both parties.
The arbitration shall take place in New York, New York.



                                                                              66


<PAGE>   69





                  (C) The AAA shall hold an administrative conference with
counsel for the parties within 20 days after the filing of the demand for
arbitration. The three (3) arbitrators shall be mutually selected by Licensor
and Licensee as promptly as practicable. If the parties are unable to agree on
any or all of the arbitrators, the parties agree to have the AAA complete the
appointment of three arbitrators as quickly as possible. Within thirty (30) days
after all three arbitrators have been appointed, an initial meeting among the
arbitrators and counsel for the parties shall be held for the purpose of
establishing a plan for administration of the arbitration, including: (i)
definition of issues; (ii) scope, timing, and types of discovery, which may at
the discretion of the arbitrators include production of documents in the
possession of the parties, but may not without consent of all parties include
depositions; (iii) exchange of documents and filing of detailed statement of
claim and prehearing memoranda; (iv) schedule and place(s) of hearings; and (v)
any other matters that may promote the efficient, expeditious, and
cost-effective conduct of the proceeding.

                  (D) The final award shall include pre-award interest at a rate
of interest determined by the arbitrators to approximate the cost to the
prevailing party of borrowing money during the relevant period. The final award
may grant such other, further, and different relief as authorized by the
Commercial Arbitration Rules of the AAA, except punitive damages.

                  (E) The parties consent to the jurisdiction of the Supreme
Court of the State of New York, and of the United States District Court for the
Southern District of New York, for all purposes in connection with arbitration,
including the entry of judgment on any award; and consent that any process,
notice of motion or other application to either of said courts, and any



                                                                              67


<PAGE>   70





papers in connection with arbitration, may be served by registered or certified
mail, return receipt requested, by personal service, or in such other manner as
may be permissible under the rules of the applicable court or arbitration
tribunal, provided a reasonable time for appearance is allowed given the
circumstances surrounding the process, motion, application or other processes.

                  (F) Each party agrees that the arbitrators shall take into
account in rendering any such determination the following factors: the
reputation for high quality and style for products bearing each Licensed Mark,
the potential worldwide market for products (including Liz Merchandise) bearing
each Licensed Mark, Licensor's need to protect and maintain the Licensed Mark
and Licensee's good faith efforts to comply with the terms of this Agreement.

         30.  DELEGATION BY LICENSOR. Notwithstanding any provision to the
contrary herein contained, Licensor's rights and obligations in connection with
the review and approval of Liz Merchandise hereunder (thereby rendering the same
Approved Liz Merchandise), may be delegated by Licensor to any affiliate of
Licensor, and Licensee shall accept the performance of such designee, for all
purposes hereunder, as the performance of Licensor hereunder.

         31.  COUNTERPARTS.  This Agreement may be executed in one or more 
counterparts, all of which taken together shall be deemed an original.

         32.  THIRD PARTY BENEFICIARIES.  Notwithstanding anything to the 
contrary in this Agreement, this Agreement does not and shall not be construed
to itself confer any rights whatsoever upon any person or entity whatsoever
except Licensor and Licensee and their



                                                                              68


<PAGE>   71





respective affiliates, whether upon a theory of third party beneficiary or
otherwise, and Licensee and Licensor agree on behalf of themselves and their
respective affiliates to neither cause nor permit any of their respective
affiliates, including their respective officers, directors and employees, to
take any action inconsistent with the provisions of this Section. Only the
parties to this Agreement shall have any rights under or be entitled to enforce
this Agreement.

         33. POWER OF ATTORNEY. Licensee hereby irrevocably appoints Licensor as
its attorney-in-fact to execute in Licensee's name and on its behalf and any all
instruments and documents which Licensor has requested Licensee to execute in
accordance with the terms hereof, but which for whatever reason, Licensee shall
have failed to execute and return to Licensor within ten (10) days of receipt.

         34. FORCE MAJEURE. If the performance of any part of this Agreement by
either party is prevented, hindered or delayed by reason of any cause beyond the
control of such party, which shall include without limitation, war,
mobilization, revolution, civil commotion, riot, strike, lockout, flood,
earthquake, hurricane, act of God or public enemy, restriction or restraint
imposed by law or by rule, regulation or order by government authority, or
interruption of transportation facilities, the party affected shall promptly
provide notice thereof to the other party and shall be excused from such
performance to the extent that it is necessarily prevented, hindered or delayed
thereby during the continuance of any such happening or event provided however
that the party affected shall use its best efforts to resume the performance of
its obligations under this Agreement.



                                                                              69


<PAGE>   72




         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date and year first above written.

                                       L. C. LICENSING, INC.

                                       By:/S/
                                          --------------------------------------
                                          Authorized Signature

                                       THE SIRENA APPAREL GROUP, INC.

                                       By:/S/
                                          --------------------------------------
                                          Authorized Signature



                                                                              70





<PAGE>   73
                                    EXHIBIT A

                                  LICENSED MARK




                                  LIZ CLAIBORNE
                                 S W I M W E A R




                                E L I S A B E T H
                                 S W I M W E A R
                           B Y L I Z C L A I B O R N E


<PAGE>   74
                                    EXHIBIT B

                        FORM OF DISTRIBUTORSHIP AGREEMENT


<PAGE>   75
                                    EXHIBIT B

                        AUTHORIZED DISTRIBUTOR AGREEMENT


                  Agreement made as of the _____ day of ___________________ 199_
between ________________, doing business as ______________________________, with
principal offices at ______________________________, (hereinafter referred to as
the "Company"), and ____________________________________________________________
maintaining its principal office at ____________________________________________
________________________________________________________________________________
(hereinafter referred to as the "Distributor").

                                  WITNESSETH:

                  WHEREAS, the Company pursuant to an Amended and Restated
License Agreement (the "License Agreement") dated ________________________ with
Liz Claiborne, Inc. ("LCI") distributes throughout the United States women's
swimwear, swimwear cover-ups, and related accessories; and

                  WHEREAS, Distributor desires to become a distributor of
certain of the Company's aforementioned products,

                  NOW, THEREFORE, by reason of the promises and in consideration
of the mutual covenants hereinafter set forth, the parties hereto agree as
follows:

                  FIRST: The Company hereby grants to Distributor the
nonexclusive right to purchase women's swimwear, swimwear cover-ups, and related
accessories sold by the Company which are described in Schedule A annexed
hereto, as said schedule may be amended from time to time by the Company upon
written notice to Distributor (the "Products"), under the trademarks set forth
in Schedule B annexed hereto, as amended from time to time by the Company (the
"Trademarks"), for resale only in specialty shops, department stores, and other
retail outlets which (i) have been approved in advance by LCI, (ii) which deal
in products similar in quality and prestige to products bearing the Trademarks,
and (iii) whose operations are consistent with the quality and prestige of the
Trademarks ("Retail Accounts") in the United States and Puerto Rico (the
"Territory") from the date of this Agreement for the period of one year or until
this Agreement is terminated in accordance with the provisions of Article
SEVENTH hereto, whichever is sooner, all upon the terms and conditions
hereinafter set forth.

                  SECOND: The Company agrees, during the term hereof, to sell
Products to Distributor upon the terms and conditions hereinafter set forth:


<PAGE>   76
                  (1)    In consideration of the duties it will perform
                         hereunder Distributor, until further notice from the
                         Company and subject to the terms of this Agreement,
                         shall be entitled to the Company's published
                         distributor prices. Such prices are subject to change
                         without notice by the Company.

                  (2)    All products shall be delivered to Distributor, in
                         accordance with the terms of sale set forth in the
                         Company's then current price list, as it may be amended
                         from time to time by the Company, which terms shall
                         govern in the case of conflict or inconsistency with
                         the terms and conditions set forth herein.

                  (3)    Distributor shall bear the cost of any taxes, levies,
                         duties or fees of any kind applicable to the sale of
                         any products by the Company to Distributor, and
                         Distributor shall forthwith pay to the Company all such
                         sums upon demand unless Distributor shall provide the
                         Company, at the time of submission of its purchase
                         order to the Company, with tax exemption certificates
                         or license acceptable to the appropriate taxing
                         authorities.

                  (4)    Delivery dates as set forth in any purchase order or
                         confirmation thereof shall be deemed to be estimated
                         only. The Company shall not be liable for any delay in
                         delivery of any Products.

                  (5)    Each shipment of Products to Distributor shall
                         constitute a separate sale obligating Distributor to
                         pay thereof, whether said shipment be in whole or in
                         partial fulfillment of any purchase order or
                         confirmation issued in connection therewith.

                  (6)    The Company reserves the right to allocate its
                         inventory of Products in such manner as it may, in its
                         sole and absolute discretion from time to time
                         determine.

                  (7)    The Company shall have the right, in the exercise of
                         its sole and absolute discretion, to reject any
                         purchase order, either in whole or in part, placed by
                         the Distributor, and no purchase order shall be binding
                         upon the Company unless accepted by the Company in
                         writing or by delivery of Products in whole or partial
                         fulfillment thereof, provided that such delivery shall
                         only constitute acceptance to the extent of Product
                         shipped.

                  (8)    The Company shall have the right, in the exercise of
                         its sole and absolute discretion, to cancel any
                         purchase order accepted by the Company in writing or to
                         delay the shipment thereof, if Distributor shall fail
                         to meet payment schedules or other credit or financial
                         requirements established by the Company.

                  (9)    The Company shall have the right at any time to effect
                         changes in, or to discontinue the sale of any Products
                         without incurring any liability to Distributor.

                  (10)   Prior to returning any product, Distributor shall
                         obtain authorization from the Company's National
                         manager of Sales in writing. Any return of Products
                         shall be in accordance with the returns policy set
                         forth in the terms section of the current price list,
                         as it may be amended from time to time.

                                       2

<PAGE>   77
                  (11)   Under no circumstances shall the Company be liable to
                         Distributor for any indirect, special or consequential
                         damages.

                  THIRD: In the event of any conflict or inconsistency between
the terms and conditions of Distributor's purchase order and this Agreement, the
terms of this Agreement shall govern.

                  FOURTH: Distributor shall:

                  (1)    Only sell and distribute Products to Retail Accounts.
                         Distributor shall use its best efforts to promote the
                         sale and distribution of Products to Retail Accounts
                         throughout the Territory. Distributor further agrees
                         that it will only sell Products to Retail Accounts
                         which deal in products similar in quality and prestige
                         to products bearing the Trademarks and whose operations
                         are consistent with the quality and prestige of the
                         Trademarks. The Company reserves the right to determine
                         which accounts satisfy these standards for quality and
                         prestige. Distributor agrees that upon request it shall
                         furnish a list of its current Retail Accounts for
                         Product to the Company. Without limiting the foregoing,
                         Distributor shall not, without the express prior
                         written consent of the Company, sell or distribute any
                         Product in combination sales, as premiums or
                         "giveaways", or pursuant to other similar methods of
                         merchandising.

                  (2)    Not directly sell products to consumers, and not
                         directly or indirectly, sell Products to customers
                         outside the Territory or to customers for resale
                         outside the Territory. Customer shall use best efforts
                         to assure that its customers in fact legitimately meet
                         the standards for Retail Accounts and do not, directly
                         or indirectly, sell or distribute Products outside the
                         Territory.

                  (3)    Except with the prior written consent of the Company,
                         refrain from seeking alternative supplies of Products
                         from parties other than the Company, including but not
                         limited to other distributors of Products, and from
                         outside the Territory.

                  (4)    Not, directly or indirectly, sell Products into the
                         following channels of trade: mass merchandisers,
                         catalog showrooms, membership warehouses, flea markets,
                         swap meets, pawn shops, grocery stores, convenience
                         stores, drug chains, gas stations, and car washes, or
                         any other channel of trade or account which is a
                         non-clothing retailer without prior written approval
                         from Company and LCI. Distributor shall not, without
                         the express prior written consent of the Company and
                         LCI sell or distribute any Products in combination
                         sales, as premiums or "give-aways" or pursuant to other
                         similar methods of merchandising, and may not sell or
                         distribute any other item or product or any service in
                         connection with the Products. Distributor shall obtain
                         the Company's and LCI's prior written approval for all
                         advertising and promotional activities and collateral
                         support materials.

                  (5)    Comply with all applicable federal, state, county and
                         local laws, ordinances and regulations.



                                       3
<PAGE>   78

                  (6)    Maintain its business establishment in attractive,
                         clean, orderly and sanitary condition and maintain all
                         fixtures and furnishings of the establishment in good
                         condition and repair.

                  (7)    Maintain adequate sales and warehouse facilities.

                  (8)    Maintain sufficient inventory of a wide range of
                         Products to reasonably fulfill the requirements of
                         Retail Accounts.

                  (9)    Accept deliveries of Products ordered from the Company
                         at Distributor's Central Warehouse facility.

                  (10)   Make prompt payment of all invoices, in accordance with
                         the terms thereof, rendered by the Company to
                         Distributor in connection with such Products as may
                         from time to time be sold by the Company to
                         Distributor.

                  (11)   Accept automatic shipment of mutually agreed upon
                         quantities of new Products issued by the Company and
                         use its best efforts to promote the sale and
                         distribution of such new Products to retail Accounts
                         throughout the Territory. If Distributor is unable
                         reasonably to sell a new Product in a one hundred
                         twenty (120) day period, the Product will be exchanged
                         for other Product of the same value without any
                         restocking fee.

                  (12)   Maintain adequate servicing of Retail Accounts for the
                         purpose of perpetuating sell-in and reorder.

                  (13)   Use the Trademarks in connection with the sale of
                         Products throughout the Territory only in the
                         registered style or style otherwise stipulated by the
                         Company, and not in connection with any other goods
                         except in strict accordance with the Company's Image
                         Protection and Enhancement Policy set forth in Schedule
                         C annexed hereto and with the Company's prior written
                         approval, (which approval shall be in Company's sole
                         discretion) as required by such Policy. Distributor
                         shall not use the Trademarks, any part thereof or any
                         word or sign similar thereto at any time during or
                         after the term of this Agreement as part of any
                         corporate, trade, business, or firm name.

                  (14)   Not alter, remove, obscure or otherwise interfere with
                         or add to any Trademarks or other marking or
                         indications, whether of the source of origin of
                         Products or otherwise, which may be affixed to Products
                         at such time as they are delivered to Distributor.

                  (15)   On an annual basis, provide Company with Distributor's
                         customer list for Product and a list of the
                         Distributor's sales representatives and their
                         territories. Distributor will also provide Company on a
                         quarterly basis with a list of Distributor's sales of
                         Product by zip code.

                  FIFTH: Distributor agrees to make available to the Company
such statements of Distributor's financial condition as the Company may, from
time to time, request. The Company reserves the right at all times, either
generally or with respect to any specific purchase order of Distributor to 



                                       4
<PAGE>   79
vary, change or limit the amount or duration of credit to be allowed to
Distributor. Distributor further agrees not to make any deduction of any kind
from any payment becoming due to the Company unless Distributor shall have
received an official credit memorandum from the Company authorizing such
deduction.

                  SIXTH: The relationship established between the Company and
Distributor by the Agreement is that of a vendor to its vendee and nothing
herein contained shall be deemed to establish or otherwise create a relationship
of principal and agent between the Company and Distributor; it is understood
that Distributor is an independent contractor who cannot and shall not be deemed
an agent of the Company for any purpose whatsoever, and neither Distributor nor
any of its agents or employees shall have the right or authority to assume or
create any obligation of any kind, whether expressed or implied, on behalf of
the Company.

                  Distributor shall make no warranties or representations on
behalf of the Company to customers or to the trade with respect to any Products,
except such as may be expressly approved in writing by the Company.

                  SEVENTH: This Agreement shall become effective upon the date
first above written and shall continue in force for the period of one (1) year,
but may be canceled by either party with or without cause upon the giving of not
less than thirty (30) days' prior written notice to the other party.

                  EIGHTH: During the period between the giving of notice of
termination to which reference is made in Article SEVENTH hereof and the
effective date of termination as set forth in such notice, any products which
the Company in its sole discretion, may decide to sell to Distributor shall be
delivered to Distributor solely upon a C.O.D. basis.

                  NINTH: Distributor hereby accords to the Company upon
termination of this agreement an option to repurchase from Distributor all or
any part of Distributor's inventory of Products at the then prevailing prices to
Distributor or at the prices paid therefor by Distributor, whichever may be the
lesser (the "Repurchase Price"), pursuant to the following procedures:

                  (1)    Within five (5) days after the effective date of
                         termination, Distributor shall submit to the Company a
                         written schedule reflecting all Products then owned by
                         or in possession of Distributor. Said schedule shall
                         identify each Products by E.O.S. number and shall
                         indicate the quantity thereof on hand.

                  (2)    Thereafter, the Company shall have the right to inspect
                         the inventory reflected on such schedule and shall give
                         written notice of its election to repurchase all or
                         none or any part of the inventory.

                  (3)    Upon receipt of said notice of repurchase, Distributor
                         shall forthwith deliver such Products as may be
                         specified therein to a carrier designated by the
                         Company. Payment of the Repurchase 



                                       5
<PAGE>   80

                         Price  as hereinabove provided shall be made by the 
                         Company to Distributor by either: (a) the issuance to 
                         Distributor of a credit corresponding to the repurchase
                         price to be applied in the reduction of any 
                         indebtedness of Distributor to the Company, or (b) if 
                         the Repurchase Price shall exceed the then current 
                         indebtedness of Distributor to the Company, by payment 
                         of such excess to Distributor within forty-five (45) 
                         days after delivery of said Products to the Company.

                  TENTH: Upon termination of this Agreement, Distributor shall
immediately cease to represent itself as an authorized distributor of the
Company with respect to the Products and shall otherwise desist from all conduct
or representations which might lead the public to believe that Distributor is
authorized by the Company to sell its Products; provided, however, that
Distributor shall have the right to sell in the Territory, in accordance with
the provisions of this Agreement, those Products which shall be in its inventory
on the date of such termination and which the Company shall not have repurchased
pursuant to the provisions of Article NINTH hereof.

                  ELEVENTH: The termination of this Agreement shall neither
release the Distributor from the obligation to pay any sum that may be owing to
the Company, whether then or thereafter, nor operate to discharge any liability
that had been incurred by Distributor. Except as qualified by the preceding
sentence neither party shall, by reason of termination of this Agreement be
liable to the other for any damages, direct, consequential or otherwise,
sustained by reason of any such termination.

                  TWELFTH: If Distributor shall default in the payment of any
indebtedness to the Company when and as the same shall become due and payable,
and if such default shall continue for a period of ten (10) days after written
notice of such default shall have been given to Distributor by registered or
certified mail, then all of the liabilities and obligations of Distributor to
the Company, whether then due or not, shall at the Company's option and without
further notice to Distributor become immediately due and payable.

                  THIRTEENTH: Distributor agrees to pay to the Company a monthly
service charge at the rate of eighteen percent (18%) per annum, or such lesser
rate as shall be the highest legal rate then in effect, on the unpaid balance of
any indebtedness of Distributor to the Company which shall then be due and
payable, computed from the date such indebtedness became past due to the date of
payment thereof.

                  FOURTEENTH: Distributor shall not assign or otherwise transfer
its rights and obligations under this Agreement without the prior written
consent of the Company.

                  FIFTEENTH: Distributor agrees to give to the Company immediate
notice in writing of: (a) any transaction affecting the ownership of ten percent
(10%) or more of Distributor's capital stock, if Distributor shall be a
corporation, or (b) any change in the respective interests of the partners, if
Distributor shall be a partnership, or (c) any transaction affecting the
ownership of any part of the business, if Distributor shall be a sole
proprietorship.



                                       6
<PAGE>   81

                  SIXTEENTH: Distributor acknowledges and agrees that any
failure on the part of the Company to enforce at any time, or for any period of
time, any of the provisions of this Agreement shall not be deemed or construed
to be a waiver of such provisions or the right of the Company thereafter to
enforce each and every provision.

                  SEVENTEENTH: This is the entire Agreement between the parties
hereto regarding the Products and supersedes any prior agreement made between
the parties regarding the Products, except for any security agreements or other
agreements giving the Company rights as a creditor against Distributor which
shall remain in full force and effect. No prior statement, representation,
promise or agreement, written or verbal, shall be of any force to vary, expand
or diminish the provisions hereof. The Agreement may be modified or amended only
by an instrument in writing, executed by both parties.

                  EIGHTEENTH: This Agreement shall be governed by, and construed
in accordance with the laws of the State of California, without regard to its
choice-of-laws or conflict-of-law rules, as though made and to be fully
performed in said state.

                  NINETEENTH: If and to the extent that any provision of this
Agreement shall be determined by any legislature or court to be in whole or in
part invalid or unenforceable, such provision or part thereof shall be deemed to
be surplusage and, to the extent not so determined to be invalid or
unenforceable, each provision hereof shall remain in full force and effect.

                  TWENTIETH: All notices required or permitted hereby shall be
sent to the respective addresses on the face hereof by registered or certified
mail. The address to which notice to either party shall be sent may be changed
by such party by written notice to the other party.

                  TWENTY-FIRST: Distributor acknowledges that the Trademarks
have acquired a valuable secondary meaning and goodwill in the minds of the
trade and the public and that Products bearing the Trademarks have acquired a
reputation of high quality and style. Distributor acknowledges that LCI is the
owner of all right, title and interest in and to the Trademarks in any and all
forms or embodiments thereof, and is the owner of the goodwill attached to the
Trademarks in connection with the business and goods in relation to which the
same has been and may in the future be used. Distributor shall comply with all
notice and marking requirements of any law or regulation applicable or necessary
for the protection of the Trademarks, or which the Company, in its discretion,
may deem appropriate. Sales by Distributor of Products shall be deemed for the
purpose of trademark registration to have been made by and for the benefit of
LCI. Distributor will not, at any time, do or cause to be done any act or thing
which may, in any way, impairs the rights of LCI in and to the Trademarks or
which may depreciate the value of the Trademarks or their prestige and goodwill.
Distributor agrees and acknowledges that all rights of the Company with respect
to Products are subject to the terms and conditions contained in the License
Agreement.



                                       7
<PAGE>   82
                  TWENTY-SECOND: Distributor acknowledges that with respect to
any rights of the Company under this Agreement in connection with the
Trademarks, LCI shall be deemed a third party beneficiary authorized to exercise
such rights provided that LCI will give the Company reasonable notice (which
shall in any event be at least five business days) of its intention to exercise
its rights hereunder against Distributor.

                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.


                                  DISTRIBUTOR*


BY:________________________            BY:________________________

___________________________               ________________________
          Title                                      Title

*If Distributor is a corporation, indicate the office of the person signing the
Agreement on behalf of the corporation. If Distributor is a partnership, the
same should be signed by a partner, who should so indicate by the use of the
word "Partner". If Distributor is a sole proprietorship, the same should be
indicated by use of the title "Sole Proprietor".


                                       8
<PAGE>   83
                                   SCHEDULE A

                                    Products


                                       9
<PAGE>   84
                                   SCHEDULE B

                                   Trademarks


                                       10
<PAGE>   85
                                   SCHEDULE C

                     Image Protection and Enhancement Policy


To insure that our customers continue to associate the _______________, and Liz
Claiborne names with only the finest products meeting the Company's high-quality
specifications, and to assure that any association of these products with the
goods or services of others results in the enhancement of the Liz Claiborne
Products and image:

o        all accounts must obtain the Company's prior, written approval (see
         attached form) before participating in any promotional activity that
         involves both Liz Claiborne Collection or other products and the goods
         or services of others, including but not limited to sweepstakes,
         dealer-loader, self-liquidation and premium promotions; and

o        no account may resell to the retail trade, directly to consumers or to
         any third party any apparel, accessories or other materials that are
         obtained through the Company's Co-op Program, which materials are to be
         used for promotional purposes only.


                                       11
<PAGE>   86
                                   SCHEDULE C

                     Promotional Activity Pre-Approval Form


______________________________, 199__


____________________________________________________


____________________________________________________


____________________________________________________


____________________________________________________


Dear Customer:

Your request to participate in the promotional activity described below is:

                  ____________            approved, as consistent with . . .

                  ____________            not approved, because it is 
                                          inconsistent with . . .

                           ,              's policy.

                  Description of promotional activity:

                  ______________________________________________________________

                  ______________________________________________________________

                  ______________________________________________________________

                  ______________________________________________________________

                  ______________________________________________________________

                  ______________________________________________________________

Thank you for your cooperation

Sincerely,



_____________________________________
The Sirena Apparel Group, Inc.


                                       12
<PAGE>   87
                                    EXHIBIT C

                          AICPA PROFESSIONAL STANDARDS


                                       13
<PAGE>   88
                                     Exhibit

                          Report Relating to Royalties

                               Board of Directors

                                XYZ Corporation

                  We have examined the schedule of royalties applicable to
engine production of the Q Division of XYZ Corporation for the year ended
December 31, 19XX, under the terms of a license agreement dated May 14, 19XX,
between ABC Company and XYZ Corporation. Our examination was made in accordance
with generally accepted auditing standards and, accordingly, included such tests
of the accounting records and such other auditing procedures as we considered
necessary in the circumstances.

                  We have been informed that, under XYZ Corporation's
interpretation of the agreement referred to above, royalties were based on the
number of engines produced after giving effect to a reduction for production
retirements that were scrapped, but without a reduction for field returns that
were scrapped, even though the field returns were replaced with new engines
without charge to customers. This treatment is consistent with what followed in
prior years.

                  In our opinion, the schedule of royalties referred to above
fairly presents the number of engines produced by the Q Division of XYZ
Corporation during the year ended December 31, 19XX, and the amount of royalties
applicable thereto under the license agreement referred to above, on the basis
indicated in the preceding paragraph.


                                       14
<PAGE>   89
                                    EXHIBIT D

                  LIZ CLAIBORNE, INC.'S STANDARDS OF ENGAGEMENT


                                       15
<PAGE>   90
                    LIZ CLAIBORNE, INC. AND ITS SUBSIDIARIES
                             STANDARDS OF ENGAGEMENT


1.       LEGAL REQUIREMENTS. Licensees must observe all applicable laws of their
         country, including laws relating to employment, discrimination, the
         environment, safety and the apparel and related fields. If local or
         industry practices exceed local legal requirements, this higher
         standard should be met.

2.       HEALTH AND SAFETY. Conditions must be safe, clean and acceptable
         throughout all work and residential facilities.

3.       EMPLOYMENT PRACTICES. We will only support businesses who are fair to
         their employees:

         _        LICENSEES MUST PAY WAGES AND BENEFITS AND PROVIDE COMPENSATION
                  FOR OVERTIME CONSISTENT WITH LOCAL LAWS.

         _        LICENSEES MUST ADOPT WORKING HOURS THAT DO NOT EXCEED
                  PREVAILING LOCAL LAW. ONE DAY IN SEVEN SHOULD BE REGULARLY
                  ENCOURAGED AS A DAY OFF.

         _        LICENSEES MUST NOT USE CHILD LABOR AS DEFINED BY LOCAL LAW
                  (HOWEVER, WORKERS MUST BE AT LEAST 15 YEARS OF AGE), FORCED
                  LABOR OR PRISON LABOR.

         _        LICENSEES MUST NOT USE CORPORAL PUNISHMENT OR OTHER MENTAL OR
                  PHYSICAL DISCIPLINARY ACTIONS OR ENGAGE IN SEXUAL HARASSMENT.

         _        WE FAVOR LICENSEES WHO DO NOT DISCRIMINATE BASED UPON RACE,
                  RELIGION, NATIONAL ORIGIN, POLITICAL AFFILIATION OR SEX, AND
                  WHO ENCOURAGE FREE ASSOCIATION AND FREEDOM OF EXPRESSION.

4.       ENVIRONMENTAL PRACTICE. We favor licensees who practice environmental
         protection.

5.       ETHICAL CONDUCT. We will encourage our licensees to embrace ethical
         standards in the conduct of their businesses. We will NOT SUPPORT OR
         PARTICIPATE IN ANY WAY IN ANY LOCAL, REGIONAL OR NATIONAL WAR OR ARMED
         CONFLICT IN ANY COUNTRY IN WHICH WE DO BUSINESS AND WILL SEEK TO
         MINIMIZE OUR BUSINESS RISK WHERE CONFLICT EXISTS, EMPHASIZING THE
         SAFETY OF OUR EMPLOYEES AND REPRESENTATIVES.

IF YOU BELIEVE THAT THESE STANDARDS OF ENGAGEMENT ARE NOT BEING UPHELD OR IF YOU
HAVE ANY QUESTIONS REGARDING THESE STANDARDS OF ENGAGEMENT, PLEASE CONTACT LIZ
CLAIBORNE. YOUR IDENTITY WILL BE KEPT IN CONFIDENCE.


                                       16
<PAGE>   91

                                    EXHIBIT E


Trademarks Currently Known To Be Owned By Anne Klein

                  i.                ANNE KLEIN
                  ii.               THE LION LOGO
                  iii.              A LINE
                  iv.               A LINE & DESIGN
                  v.                A LINE ANNE KLEIN
                  vi.               A LINE ANNE KLEIN & DESIGN
                  vii.              ANNE KLEIN II
                  viii.             A & DESIGN
                  ix.               ASENTIALS
                  x.                AKM
                  xi.               AKII
                  xii.              MARK OF THE LION
                  xiii.             LITTLE ANNE BY ANNE KLEIN CHILDREN


                                       17