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                                                                   EXHIBIT 10.64

                               SECURITY AGREEMENT


      This security agreement ("Agreement") is made and entered into as of
January 15, 1998, by SUNGOLD EYEWEAR, INC., formerly known as Gargoyles
Acquisition Corporation, a Washington corporation ("Sungold"), for the benefit
of U. S. BANK NATIONAL ASSOCIATION ("U. S. Bank").

                                R E C I T A L S :

      A.    Concurrently with the execution hereof, U. S. Bank and Gargoyles,
Inc. ("Borrower") entered into a credit agreement (together with all
supplements, exhibits, and amendments thereto, referred to as the "Credit
Agreement"), pursuant to which U. S. Bank agreed to extend to Borrower credit
facilities as more fully described therein (the "Loans").

      B.    Sungold will benefit from the credit facilities to be extended to
Borrower under the Credit Agreement, and accordingly wishes to grant to U. S.
Bank a security interest in all its assets as security for all the Secured
Obligations.

      C.    This Agreement is a restatement of that certain Security Agreement
dated as of April 7, 1997, which is being restated merely to reflect the name
change of Sungold and to update Schedule I attached thereto.

      NOW, THEREFORE, in order for U. S. Bank to make the Loans, Sungold agrees
as follows:

ARTICLE I. DEFINITIONS

      Unless otherwise defined herein, terms defined in the Credit Agreement
shall have the same meanings when used herein. For the purposes of this
Agreement, the following terms shall have the following meanings:

      "Account" means any right to payment for goods sold or leased or for
services rendered that is not evidenced by an Instrument or Chattel Paper,
whether or not it has been earned by performance.

      "Account Debtor" means the party who is obligated on or under any Account,
Chattel Paper, or General Intangible.

      "Assignee Deposit Account" shall have the meaning set forth in Section 5.7
hereof.


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      "Chattel Paper" means all interest of Sungold in writings that evidence
both a monetary obligation and a security interest in or a lease of specific
goods, including any group of writings consisting of both a security agreement
or a lease and an Instrument or series of Instruments.

      "Collateral" means all property, real, personal, and mixed, tangible and
intangible, wherever located, now owned or hereafter acquired by Sungold, or in
which Sungold has or later obtains an interest, and all products, profits,
rents, and proceeds of such property, including, but not limited to, Accounts,
Chattel Paper, Deposit Accounts, Documents, Equipment, Financial Assets, General
Intangibles, Goods, Instruments, Inventory, Investment Property, Patents,
Trademarks, and Vehicles.

      "Deposit Account" means a demand, time, savings, passbook, or like account
maintained with a bank, savings and loan association, credit union, or like
organization, other than an account evidenced by a certificate of deposit.

      "Document" means all of Sungold's right, title, and interest in or to any
document of title as defined in RCW 62A.1-201 and any receipt of the kind
described in RCW 62A.7-201(2).

      "Equipment" means all of Sungold's right, title, and interest in and to
Goods that are used or bought for use primarily in business and that are not
included within the definition of Inventory, including, but not limited to, all
machinery, equipment, furnishings, fixtures, vehicles, tools, supplies, and
other equipment of any kind and nature and all additions, substitutions, and
replacements of any of the foregoing, together with all attachments, components,
parts, accessories, improvements, upgrades, and accessories installed thereon or
affixed thereto.

      "Event of Default" means an occurrence of an Event of Default as defined
in the Credit Agreement.

      "Financial Assets" means all of Sungold's right, title, and interest in
and to any financial asset as defined in RCW 62A.8-102.

      "General Intangibles" means all personal property (including things in
action) other than Goods, Accounts, Chattel Paper, Documents, Financial Assets,
Instruments, Investment Property, and money, and shall include, but not be
limited to, all Patents, Trademarks, insurance proceeds, patents, copyrights,
trade names, trade secrets, goodwill, registrations, license rights, licenses,
royalty rights, royalties, permits, corporate and other business records, rights
to refunds or indemnification, computer 


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software (including all source codes and mask works), and all other intangible
personal property of Sungold of every kind and nature.

      "Goods" means all things that are movable or that are fixtures, not
including money, Documents, Financial Assets, Instruments, Investment Property,
Accounts, Chattel Paper, or General Intangibles.

      "Instrument" means any negotiable instrument or security or other writing
that evidences a right to the payment of money and is not itself a security
agreement or lease and is of a type that is in the ordinary course of business
transferred by delivery with any necessary endorsement or assignment.

      "Inventory" means all Goods held by Sungold for sale or lease, furnished
or to be furnished by Sungold under any contract of service, or held by Sungold
as raw materials, work in progress, or materials used or consumed in Sungold's
business.

      "Investment Property" means all of Sungold's right, title, and interest in
and to any investment property as defined in RCW 62A.9-115.

      "Patents" means (a) any patents and the goodwill associated therewith and
all rights arising out of or related thereto, now existing or hereafter adopted
or acquired, any registration or recording thereof, and any application in
connection with any of the foregoing, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States or of
any state thereof, or any other country or any political subdivision thereof, or
otherwise, including, but not limited to, any thereof referred to in Schedule I
hereto, and (b) all renewals thereof.

      "Secured Obligations" means any past, present, or future Indebtedness of
Borrower to U. S. Bank, and includes, but is not limited to, (a) any
indebtedness, obligation, or liability of any kind arising in any way of
Borrower to U. S. Bank, now existing or hereafter created, under the Credit
Agreement, the Notes, or the other Loan Documents, including any refinancing,
renewal, replacement, extension, amendment, or substitution of such
indebtedness, (b) any liability or obligation of Sungold hereunder, (c) the
obligations of Sungold under any guaranty executed by Sungold and delivered to
U. S. Bank, whereby Sungold guarantees the indebtedness of any Person other than
Sungold to U. S. Bank, and (d) any cost, expense, or liability, including, but
not limited to, reasonable attorneys' fees, that may be incurred and advances
that may be made by U. S. Bank in any way in connection with any of the
foregoing or any security therefor.

      "Trademark" means (a) any trademark, trade name, corporate name, company
name, business name, fictitious business name, trade style, service mark, logo,
or 


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other source or business identifier, and the goodwill associated therewith
and all rights arising out of or related thereto, now existing or hereafter
adopted or acquired, any registration or recording thereof, and any application
in connection with any of the foregoing, whether in the United States Patent and
Trademark Office or in any similar office or agency of the United States or of
any state thereof, or any other country or any political subdivision thereof, or
otherwise, including, but not limited to, any thereof referred to in Schedule I
hereto, and (b) all renewals thereof.

      "Vehicle" means any car, truck, trailer, construction or earth-moving
equipment, or other vehicle covered by a certificate of title of any state,
including, but not limited to, any tires or other appurtenances to any of the
foregoing.

ARTICLE II. GRANT OF SECURITY INTEREST

      As security for the payment and satisfaction of the Secured Obligations,
Sungold hereby grants to U. S. Bank a continuing security interest in and
assigns to U. S. Bank all of Sungold's right, title, and interest in the
Collateral and all products, profits, rents, and proceeds thereof.

ARTICLE III. COVENANTS OF SUNGOLD

      Sungold shall fully perform each of the covenants set forth below.

      3.1   OBLIGATIONS TO PAY

            (a)   Sungold shall pay to U. S. Bank, in timely fashion and in
full, all amounts payable by Sungold to U. S. Bank pursuant to Sungold's
Guaranty and the other Loan Documents; and

            (b)   Borrower shall pay and reimburse U. S. Bank for all
expenditures including reasonable attorneys' fees and legal expenses in
connection with the exercise by U. S. Bank of any of its rights or remedies
under Sungold's Guaranty or the other Loan Documents.

      3.2   PERFORMANCE

        Sungold shall fully perform in a timely fashion every covenant,
agreement, and obligation of Sungold set forth in its Guaranty and the other
Loan Documents.

      3.3   FURTHER DOCUMENTATION

      At its own expense, Sungold shall execute and deliver any financing
statement, any renewal, substitution, or correction thereof, or any other
document; shall 
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procure any document; and shall take such further action as U.
S. Bank may require in obtaining the full benefits of this Agreement.

      3.4   FILING FEES

      Sungold shall pay all costs of filing any financing, continuation, or
termination statement with respect to the security interests granted herein,
including the filing of this Agreement with the United States Patent and
Trademark Office.

      3.5   PLEDGES

      Sungold shall deliver and pledge to U. S. Bank, endorsed or accompanied by
instruments of assignment or transfer satisfactory to U. S. Bank, any
Instruments, Investment Property, Documents, General Intangibles, or Chattel
Paper that U. S. Bank may specify from time to time.

      3.6   MAINTENANCE OF RECORDS

      Sungold shall keep and maintain at its own cost and expense satisfactory
and complete records of the Collateral, including, but not limited to, a record
of all payments received and all credits granted with respect to the Collateral
and all other dealings with the Collateral. Sungold shall mark its books and
records pertaining to the Collateral to evidence this Agreement and the security
interests granted herein. Sungold shall deliver and turn over to U. S. Bank all
books and records pertaining to the Collateral at any time after the occurrence
and during the continuation of an Event of Default, if so demanded by U. S.
Bank.

      3.7   DISPOSITION OF COLLATERAL

      Except as allowed in the Credit Agreement, Sungold shall not sell or
transfer any of the Collateral or release, compromise, or settle any obligation
or receivable due to Sungold.

      3.8   INDEMNIFICATION

      Sungold agrees to pay, and to indemnify U. S. Bank and hold U. S. Bank
harmless from, all liabilities, costs, and expenses, including, but not limited
to, legal fees and expenses with respect to or resulting from (a) any delay in
paying any excise, sales, or other taxes that may be payable or determined to be
payable with respect to any of the Collateral, (b) any delay by Sungold in
complying with any requirement of law applicable to any of the Collateral, or
(c) any of the transactions contemplated by this Agreement. In any suit,
proceeding, or action brought by U. S. Bank under any Account to enforce payment
of any sum owing thereunder or to enforce any provisions of any Account,
Sungold will indemnify U. S. Bank and hold U. S. Bank harmless from all expense,
loss, or damage suffered by reason of any defense, setoff, counterclaim,
recoupment, reduction, or liability whatsoever of the Account Debtor thereunder
arising out of a breach by Sungold of any obligation thereunder or arising out
of any other agreement, indebtedness, or liability at any time owing to or in
favor of such Account Debtor or its successors from Sungold.

      3.9   LIMITATIONS ON AMENDMENTS, MODIFICATIONS, TERMINATIONS, WAIVERS, AND
EXTENSIONS OF CONTRACTS AND AGREEMENTS GIVING RISE TO ACCOUNTS

      Sungold will not (a) amend, modify, terminate, waive, or extend any
provision of any agreement giving rise to an Account in any manner that could
reasonably be expected to have a material adverse effect on the value of such
Account as Collateral unless deemed necessary by Sungold in the reasonable
exercise of its business judgment, or (b) fail to exercise promptly and
diligently every material right that it may have under each agreement giving
rise to an Account, other than any right of termination unless deemed necessary
by Sungold in the reasonable exercise of its business judgment.

      3.10  LIMITATIONS ON DISCOUNTS, COMPROMISES, AND EXTENSIONS OF ACCOUNTS

      Sungold will not grant any extension of the time of payment of any of the
Accounts; compromise, compound, or settle the same for less than the full amount
thereof; release, wholly or partially, any Person liable for the payment
thereof; or allow any credit or discount whatsoever thereon unless deemed
necessary by Sungold in the reasonable exercise of its business judgment.

      3.11  FURTHER IDENTIFICATION OF COLLATERAL

      Sungold will furnish to U. S. Bank from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as U. S. Bank may request, all in
reasonable detail.

      3.12  NOTICES

      Sungold will advise U. S. Bank promptly in reasonable detail at its
address set forth in Section 7.9(a) hereof of any lien (other than liens created
hereby or permitted under the Credit Agreement) on or claim asserted against any
of the Collateral and (b) of the occurrence of any other event that could
reasonably be expected to have a material adverse effect on the Collateral or on
the liens created hereunder.


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      3.13  CHANGES IN LOCATIONS, NAME, ETC.

      Sungold will not (a) change the location of its chief executive
office/chief place of business from that specified in Section 4.10 or remove its
books and records from the location specified in Section 4.7 hereof, (b) permit
any of the Inventory or Equipment (excluding Vehicles) to be kept at locations
other than those listed on Schedule II hereto, or (c) change its name, identity,
or structure to such an extent that any financing statement filed by U. S. Bank
in connection with this Agreement would become seriously misleading, unless it
shall have given U. S. Bank at least ten days' prior written notice thereof.

      3.14  PATENTS AND TRADEMARKS

            (a)   Sungold (either itself or through licensees) will (i) continue
to use all Trademarks on each and every trademark class of goods applicable to
its current line as reflected in its current catalogs, brochures, and price
lists in order to maintain such Trademarks in full force free from any claim of
abandonment for nonuse, (ii) maintain as in the past the quality of products and
services offered under all Patents and Trademarks, (iii) employ all Patents and
Trademarks with the appropriate notice of registration, (iv) not adopt or use
any mark that is confusingly similar to or a colorable imitation of any
Trademarks unless U. S. Bank shall obtain a perfected security interest in such
mark pursuant to this Agreement, and (v) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
Patent or Trademark may become invalidated.

            (b)   Sungold will notify U. S. Bank immediately if it knows, or has
reason to know, of (i) any application or registration relating to any Patent or
Trademark material to its business that may become abandoned or dedicated, or
(ii) any adverse determination or development (including, but not limited to,
the institution of, or any adverse determination or development in, any
proceeding in the United States Patent and Trademark Office or any court or
tribunal in any country) regarding Sungold's ownership of any Patent or
Trademark or its right to register, keep, or maintain the same.

            (c)   Whenever Sungold, either by itself or through any agent,
employee, licensee, or designee, shall file an application for the registration
of any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency in any state or other country or any political
subdivision thereof, Sungold shall report such filing to U. S. Bank within five
Business Days after the last day of the calendar month in which such filing
occurs. Sungold shall execute and deliver to U. S. Bank all agreements,
instruments, powers of attorney, documents, 


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and papers that U. S. Bank may request to evidence U. S. Bank's security
interest in any such Patent and Trademark and in the goodwill and general
intangibles of Sungold relating to or represented thereby; provided that Sungold
acknowledges that it is Sungold's intent that this Agreement grant to U. S. Bank
a valid, perfected, and enforceable security interest in all Patents and
Trademarks now owned or hereafter adopted or acquired, without the necessity of
further documentation. Sungold hereby constitutes U. S. Bank its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, with all acts of such attorney being hereby ratified and confirmed;
and such power, being coupled with an interest, is irrevocable until all Secured
Obligations are paid in full.

            (d)   Sungold will take all reasonable and necessary steps,
including, but not limited to, all reasonable and necessary steps in any
proceeding before the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof, to
maintain and pursue each application, to obtain the relevant registration, and
to maintain each registration of all Patents and Trademarks, including, but not
limited to, filing applications for renewal, affidavits of use, and affidavits
of incontestability.

            (e)   If any Patent or Trademark that is included in the Collateral
is infringed, misappropriated, or diluted by a third party, Sungold shall
promptly notify U. S. Bank after it learns thereof and shall take such action as
Sungold reasonably deems appropriate under the circumstances to protect such
Patent or Trademark.

      3.15  VEHICLES

      Upon the request of U. S. Bank, Sungold shall take all steps necessary for
U. S. Bank to obtain a valid, perfected, and first priority security interest in
any Vehicle constituting Collateral, including the delivery to U. S. Bank of the
original certificate of title for each Vehicle. Each certificate of title shall
thereafter indicate U. S. Bank's first priority lien on the Vehicle covered by
such certificate. Sungold shall execute and deliver to U. S. Bank any and all
agreements, instruments, documents, powers of attorney, and papers that U. S.
Bank may request to evidence and perfect U. S. Bank's security interest in any
Vehicle. Sungold hereby constitutes U. S. Bank its attorney-in-fact to execute
and file all such writings for the foregoing purposes, with all acts of such
attorney being hereby ratified and confirmed; and such power, being coupled with
an interest, is irrevocable until all Secured Obligations are paid in full.


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      3.16  INSURANCE

      Sungold agrees to insure the Collateral against all hazards in form and
amount satisfactory to U. S. Bank. If Sungold fails to obtain such insurance, U.
S. Bank shall have the right, but not the obligation, to obtain either insurance
covering both Sungold's and U. S. Bank's interest in the Collateral, or
insurance covering only U. S. Bank's interest in the Collateral. Sungold agrees
to pay any premium charged for such insurance. This amount may be added to the
outstanding balance of the Loans, and interest thereon shall be charged at the
rate specified in any applicable loan document, or U. S. Bank may demand
immediate payment. Any unpaid insurance premium advanced by U. S. Bank shall be
secured under the terms of this Agreement. U. S. Bank will have no liability
whatsoever for any loss that may occur by reason of the omission or lack of
coverage of any such insurance. Sungold hereby assigns to U. S. Bank the right
to receive proceeds of such insurance to the full amount of the Secured
Obligations and hereby directs any insurer to pay all proceeds directly to U. S.
Bank, and authorizes U. S. Bank to endorse any draft. In U. S. Bank's sole
discretion, U. S. Bank may apply any insurance proceeds either toward repair of
the property or reduction of the balance of the Secured Obligations.

      3.17  FINANCING STATEMENTS

      Sungold agrees that a carbon, photographic, or other reproduction of a
financing statement or this Agreement is sufficient as a financing statement.
Sungold also acknowledges and agrees that all security agreements and financing
statements previously executed by Sungold and delivered to U. S. Bank shall
remain in full force and effect, and shall secure all Indebtedness of Sungold to
U. S. Bank, including, without limitation, repayment of the Loans.

ARTICLE IV. REPRESENTATIONS AND WARRANTIES

      Sungold hereby makes the following representations and warranties:

      4.1   TITLE TO COLLATERAL

      Sungold has good and marketable title to all the Collateral, free and
clear of all liens excepting only the security interests created pursuant to
this Agreement or permitted pursuant to the Credit Agreement.

      4.2   NO IMPAIRMENT OF COLLATERAL

      None of the Collateral shall be impaired or jeopardized because of the
security interest herein granted.


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      4.3   OTHER AGREEMENTS

      The execution and delivery of this Agreement, the consummation of the
transactions provided for herein, and the fulfillment of the terms hereof will
not result in the breach of any of the terms, conditions, or provisions of, or
constitute a default under, or conflict with, or cause any acceleration of any
obligation under any (a) agreement or other instrument to which Sungold is a
party or by which Sungold is bound or (b) Applicable Law.

      4.4   NO APPROVALS

      No Governmental Approvals of any nature are required in connection with
the security interests herein granted.

      4.5   AUTHORITY

      Sungold has full power and authority to assign to U. S. Bank and to grant
to U. S. Bank a security interest in the Collateral.

      4.6   LOCATION OF RECORDS

      The address of the office where the books and records of Sungold are kept
concerning the Collateral is set forth on Schedule II.

      4.7   LOCATION OF COLLATERAL

      The locations of all Inventory and Equipment of Sungold are described on
Schedule II.

      4.8   NAME

      Sungold conducts its business only under the names "Sungold Enterprises,
Inc.," "Sungold Eyewear," and "Sungold I-Wear."

      4.9   ACCOUNTS

      The amount represented by Sungold to U. S. Bank from time to time as owing
by each Account Debtor or by all Account Debtors in respect of the Accounts will
at such time be the correct amount actually owing by such Account Debtor or
Debtors thereunder. No material amount payable to Sungold under or in connection
with any Account is evidenced by any Instrument or Chattel Paper that has not
been delivered to U. S. Bank.


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      4.10  CHIEF EXECUTIVE OFFICE

      Sungold's chief executive office and chief place of business is located at
the address set forth on Schedule II.

      4.11  PATENTS AND TRADEMARKS

      Schedule I hereto includes all Patents and Trademarks owned by Sungold in
its own name as of the date hereof. To the best of Sungold's knowledge, each
such Patent and Trademark is valid, subsisting, unexpired, and enforceable and
has not been abandoned. Except as set forth in Schedule I, none of such Patents
or Trademarks is the subject of any licensing or franchise agreement except as
otherwise disclosed to U. S. Bank in writing prior to the execution of this
Agreement. No holding, decision, or judgment that would limit, cancel, or
question the validity of any such Patent or Trademark has been rendered by any
Governmental Body. No action or proceeding is pending that (a) seeks to limit,
cancel, or question the validity of any such Patent or Trademark or (b) would,
if adversely determined, have a material adverse effect on the value of any
Patent or Trademark.

      4.12  VEHICLES

      Schedule III hereto is a complete and correct list of all Vehicles owned
by Sungold on the date hereof that constitute Collateral hereunder.

ARTICLE V. U. S. BANK'S RIGHTS WITH RESPECT TO THE COLLATERAL

      5.1   NO DUTY ON U. S. BANK'S PART

      U. S. Bank shall not be required (except at its option upon the occurrence
and during the continuation of any Event of Default) to realize upon any
Accounts, Financial Assets, Instruments, Investment Property, Chattel Paper, or
General Intangibles; collect the principal, interest, or payment due thereon,
exercise any rights or options of Sungold pertaining thereto; make presentment,
demand, or protest; give notice of protest, nonacceptance, or nonpayment; or do
any other thing for the protection, enforcement, or collection of such
Collateral. The powers conferred on U. S. Bank hereunder are solely to protect
U. S. Bank's interests in the Collateral and shall not impose any duty upon U.
S. Bank to exercise any such powers. U. S. Bank shall be accountable only for
amounts that U. S. Bank actually receives as a result of the exercise of such
powers; and neither U. S. Bank nor any of its officers, directors, employees, or
agents shall be responsible to Sungold for any act or failure to act hereunder.


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      5.2   NEGOTIATIONS WITH ACCOUNT DEBTORS

      Upon the occurrence and during the continuation of any Event of Default,
U. S. Bank may, in its sole discretion, extend or consent to the extension of
the time of payment or maturity of any Instruments, Accounts, Chattel Paper, or
General Intangibles.

      5.3   RIGHT TO ASSIGN

      Except as otherwise provided in the Credit Agreement, U. S. Bank may
assign or transfer the whole or any part of the Secured Obligations and may
transfer therewith as collateral security the whole or any part of the
Collateral; and all obligations, rights, powers, and privileges herein provided
shall inure to the benefit of the assignee and shall bind the successors and
assigns of the parties hereto.

      5.4   DUTIES REGARDING COLLATERAL

      Beyond the safe custody thereof, U. S. Bank shall not have any duty as to
any Collateral in its possession or control, or as to any preservation of any
rights of or against other parties.

      5.5   COLLECTION FROM ACCOUNT DEBTORS

      Upon the occurrence and during the continuation of any Event of Default,
Sungold shall, upon demand by U. S. Bank (and without any grace or cure period),
notify all Account Debtors to make payment to U. S. Bank of any amounts due or
to become due. Sungold authorizes U. S. Bank to contact the Account Debtors for
the purpose of having all or any of them pay their obligations directly to U. S.
Bank. Upon demand by U. S. Bank, Sungold shall enforce collection of any
indebtedness owed to it by Account Debtors.

      5.6   INSPECTION

      U. S. Bank and its designees, from time to time at reasonable times and
intervals, may inspect the Equipment and Inventory and inspect, audit, and make
copies of and extracts from all records and all other papers in the possession
of Sungold.

      5.7   ASSIGNEE DEPOSIT ACCOUNT

      Upon demand by U. S. Bank, Sungold will transmit and deliver to U. S.
Bank, in the form received, immediately after receipt, all cash, checks, drafts,
Chattel Paper, Instruments, or other writings for the payment of money,
including Investment 


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Property (properly endorsed, where required, so that the items may be collected
by U. S. Bank) that may be received by Sungold at any time. All items or amounts
that are delivered by Sungold to U. S. Bank, or collected by U. S. Bank from the
Account Debtors, shall be deposited to the credit of a Deposit Account
("Assignee Deposit Account") of Sungold with U. S. Bank, as security for the
payment of the Secured Obligations. Sungold shall have no right to withdraw any
funds deposited in the Assignee Deposit Account. U. S. Bank may, from time to
time in its discretion, and shall, upon the request of Sungold made not more
than twice in any week, apply all or any of the balance, representing collected
funds, in the Assignee Deposit Account, to payment of the Secured Obligations,
whether or not then due, in such order of application, not inconsistent with the
terms of the Credit Agreement and this Agreement, as U. S. Bank may determine;
and U. S. Bank may, from time to time in its discretion, release all or any of
such balance to Sungold.

ARTICLE VI. U. S. BANK'S RIGHTS AND REMEDIES

      6.1   GENERAL

      Upon the occurrence of any Event of Default, U. S. Bank may exercise its
rights and remedies in the Credit Agreement and in any other Loan Documents and
any other rights and remedies at law and in equity, simultaneously or
consecutively, all of which rights and remedies shall be cumulative. The choice
of one or more rights or remedies shall not be construed as a waiver or election
barring other rights and remedies. Sungold hereby acknowledges and agrees that
U. S. Bank is not required to exercise all rights and remedies available to it
equally with respect to all the Collateral and that U. S. Bank may select less
than all the Collateral with respect to which the rights and remedies as
determined by U. S. Bank may be exercised.

      6.2   NOTICE OF SALE: DUTY TO ASSEMBLE COLLATERAL

      In addition to or in conjunction with the rights and remedies referred to
in Section 6.1 hereof:

            (a)   Written notice mailed to Sungold at the address designated
herein ten days or more prior to the date of public or private sale of any of
the Collateral shall constitute reasonable notice.

            (b)   If U. S. Bank requests, Sungold will assemble the Collateral
and make it available to U. S. Bank at places that U. S. Bank shall reasonably
select, whether on Sungold's premises or elsewhere.


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ARTICLE VII. GENERAL PROVISIONS

      7.1   ENTIRE AGREEMENT

      This Agreement, together with the Credit Agreement and the other Loan
Documents, sets forth all the promises, covenants, agreements, conditions, and
understandings between the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements, or conditions, express or implied, oral or written,
with respect thereto, except as contained or referred to herein. This Agreement
may not be amended, waived, discharged, or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of such
amendment, waiver, discharge, or termination is sought.

      7.2   INVALIDITY

      If any provision of this Agreement shall for any reason be held to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provision hereunder, but this Agreement shall be construed as if such
invalid or unenforceable provision had never been contained herein.

      7.3   NONWAIVER AND NONEXCLUSIVE RIGHTS AND REMEDIES

            (a)   No right or remedy herein conferred upon or reserved to U. S.
Bank is intended to be to the exclusion of any other right or remedy, but each
and every such right or remedy shall be cumulative and shall be in addition to
every other right or remedy given hereunder and now or hereafter existing at law
or in equity.

            (b)   No delay or omission by U. S. Bank in exercising any right or
remedy accruing upon an Event of Default shall impair any such right or remedy,
or shall be construed to be a waiver of any such Event of Default, or an
acquiescence therein, nor shall it affect any subsequent Event of Default of the
same or of a different nature.

      7.4   TERMINATION OF SECURITY INTEREST

      When all the Secured Obligations have been paid in full, the security
interest provided herein shall terminate and U. S. Bank shall return to Sungold
all Collateral then held by U. S. Bank, if any, and upon written request of
Sungold, shall execute, in form for filing, termination statements of the
security interests herein granted. Thereafter, no party hereto shall have any
further rights or obligations hereunder.


<PAGE>   14
      7.5   SUCCESSORS AND ASSIGNS

      All rights of U. S. Bank hereunder shall inure to the benefit of its
successors and assigns, and all obligations of Sungold shall be binding upon its
successors and assigns.

      7.6   U. S. BANK'S APPOINTMENT AS ATTORNEY-IN-FACT

            (a)   Sungold hereby irrevocably constitutes and appoints U. S. Bank
and any officer or agent thereof, with full power of substitution, as its true
and lawful attorney-in-fact with full irrevocable power and authority in the
place and stead of Sungold and in the name of Sungold or in its own name, from
time to time in U. S. Bank's discretion, for the purpose of carrying out the
terms of this Agreement, to take any and all appropriate action, and to execute
any and all documents and instruments that may be necessary or desirable to
accomplish the purposes of this Agreement; and without limiting the generality
of the foregoing, Sungold hereby gives U. S. Bank the power and right, on behalf
of Sungold, without consent by or notice to Sungold, to do the following:

            (i)   to transfer to U. S. Bank or to any other person all or any of
      said Collateral, to endorse any Instruments pledged to U. S. Bank, and to
      fill in blanks in any transfers of Collateral, powers of attorney, or
      other documents delivered to U. S. Bank;

            (ii)  to pay or discharge taxes and liens levied or placed on or
      threatened against the Collateral, to effect any repairs or any insurance
      called for by the terms of this Agreement, and to pay all or any part of
      the premiums therefor and the costs thereof;

            (iii) upon the occurrence and during the continuation of any Event
      of Default (A) to take possession of, endorse, and collect any checks,
      drafts, notes, acceptances, or other instruments for the payment of moneys
      due under any Account, Instrument, or General Intangible or with respect
      to any other Collateral and (B) to file any claim or to take any other
      action or proceeding in any court of law or equity or otherwise deemed
      appropriate by U. S. Bank for the purpose of collecting all such moneys
      due under any Account, Financial Asset, Instrument, Investment Property,
      or General Intangible or with respect to any other Collateral whenever
      payable; and

            (iv)  upon the occurrence and during the continuation of any Event
      of Default (A) to direct any party liable for any payment under any of the
      Collateral to make payment of all moneys due or to become due thereunder


<PAGE>   15
      directly to U. S. Bank or as U. S. Bank shall direct; (B) to ask for,
      demand, collect, and receive payment of and receipt for, any and all
      moneys, claims and other amounts due or to become due at any time in
      respect of or arising out of any Collateral; (C) to sign and endorse any
      invoices, freight or express bills, bills of lading, storage or warehouse
      receipts, drafts against debtors, assignments, verifications, notices, and
      other documents in connection with any of the Collateral; (D) to commence
      and prosecute any suits, actions, or proceedings at law or in equity in
      any court of competent jurisdiction to collect the Collateral or any
      thereof and to enforce any other right in respect of any Collateral; (E)
      to defend any suit, action, or proceeding brought against Sungold with
      respect to any Collateral; (F) to settle, compromise, or adjust any suit,
      action, or proceeding described in clause (E) above and, in connection
      therewith, to give such discharge or releases as U. S. Bank may deem
      appropriate; (G) to assign any Patent and Trademark (along with the
      goodwill of the business to which any such Patent and Trademark pertains)
      throughout the world for such terms or terms, on such conditions, and in
      such manner as U. S. Bank shall in its sole discretion determine; and (H)
      generally, to sell, transfer, pledge, and make any agreement with respect
      to or otherwise deal with any of the Collateral as fully and completely as
      though U. S. Bank were the absolute owner thereof for all purposes; and to
      do, at U. S. Bank's option and Sungold's expense, at any time or from time
      to time, all acts and things that U. S. Bank deems necessary to protect,
      preserve or realize upon the Collateral and U. S. Bank's liens thereon and
      to effect the intent of this Agreement, all as fully and effectively as
      Sungold might do.

            (b)   Sungold hereby ratifies all that said attorneys shall lawfully
do or cause to be done by virtue hereof. This power of attorney is a power
coupled with an interest and shall be irrevocable.

            (c)   Sungold also authorizes U. S. Bank, at any time and from time
to time, to execute, in connection with the sale provided for in Article VI
hereof, any endorsements, assignments, or other instruments of conveyance or
transfer with respect to the Collateral.

            (d)   The powers conferred on U. S. Bank hereunder are solely to
protect U. S. Bank's interests in the Collateral and shall not impose any duty
upon U. S. Bank to exercise any such powers. U. S. Bank shall be accountable
only for amounts that it actually receives as a result of the exercise of such
powers, and neither it nor any of its officers, directors, employees, or agents
shall be responsible to Sungold for any act or failure to act hereunder.


<PAGE>   16
      7.7   PERFORMANCE BY U. S. BANK OF SUNGOLD'S OBLIGATIONS

      If Sungold fails to perform or comply with any of its agreements contained
herein and U. S. Bank, as provided for by the terms of this Agreement, shall
itself perform or comply, or otherwise cause performance or compliance, with
such agreement, the expense of U. S. Bank incurred in connection with such
performance or compliance, together with interest thereon at the rate provided
for in the Credit Agreement upon the occurrence of an Event of Default, shall be
payable by Sungold to U. S. Bank on demand and shall constitute Secured
Obligations.

      7.8   GOVERNING LAW

      This Agreement and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with and shall be governed by the
laws of the state of Washington, without regard to the choice of law rules
thereof.

      7.9   NOTICES

      All notices, requests, consents, demands, approvals, and other
communications hereunder shall be deemed to have been duly given, made, or
served if in writing and when delivered personally, or sent via facsimile, or
mailed by first-class mail, postage prepaid, to the respective parties to this
Agreement as follows:

            (a)   If to U. S. Bank:

                       U. S. Bank National Association
                       First Bank Place
                       601 Second Avenue South
                       Minneapolis, MN 55402-4302
                       Attention:  David C. Larsen
                       Facsimile No.:  (612) 973-2148

            (b)   If to Sungold:

                       Sungold Eyewear, Inc.
                       5866 S. 194th Street
                       Kent, Washington 98032
                       Attn:  Steven R. Kingma
                       Facsimile number (206) 872-3317

The designation of the person to be so notified or the address of such person
for the purposes of such notice may be changed from time to time by similar
notice in writing, except that any communication with respect to a change of
address shall be 


<PAGE>   17
deemed to be given or made when received by the party to whom such communication
was sent.

      7.10  COUNTERPARTS

      This Agreement may be executed in one or more counterparts, each of which
shall constitute an original Agreement, but all of which together shall
constitute one and the same instrument.



<PAGE>   18
      IN WITNESS WHEREOF, Sungold and U. S. Bank have caused these presents to
be duly executed by their respective duly authorized signatories as of the day
and year first above written.


                                      SUNGOLD EYEWEAR, INC., 
                                      a Washington corporation



                                      By: /s/ DOUGLAS B. HANFF
                                          ------------------------------------- 

                                      Title:  CEO
                                          ------------------------------------- 

ACCEPTED BY:                          U. S. BANK NATIONAL ASSOCIATION


                                      By:  /s/ DAVID C. LARSEN
                                          ------------------------------------- 

                                      Title: Vice President
                                          ------------------------------------- 
<PAGE>   19
                                   SCHEDULE I


                             PATENTS AND TRADEMARKS



<PAGE>   20
                                   SCHEDULE II



        Address of chief executive office:

        Sungold Eyewear, Inc.
        5866 S. 194th Street
        Kent, Washington  98032


        Address of Office where 
        books and records are kept:

        Sungold Eyewear, Inc.
        5866 S. 194th Street
        Kent, Washington  98032


        Addresses of locations of collateral:


        Sungold Eyewear, Inc.
        2095 New Highway
        Farmingdale, New York  11735


<PAGE>   21
                                  SCHEDULE III

                                    VEHICLES



                                      None.