Document:

Employment Agreement

Employment  Agreement,  dated as of February 1, 2002,  by and between  Candie's,
Inc., a Delaware  corporation  (the "Company" or "Employer")  and Deborah Sorell
Stehr (the "Executive").

                               W I T N E S S E T H

                  WHEREAS, the Executive is currently the Company's Senior Vice
President and General Counsel; and

                  WHEREAS, the Company and Executive entered into an Employment
Agreement dated October 13, 1998, as amended on January 27, 2000 (the "Original
Agreement"); and

                  WHEREAS, the term of the Original Agreement expires on
January 31, 2002; and

                  WHEREAS, the Company wishes, among other things, to continue
the Executive's employment with the Company beyond the term currently provided
by the Original Agreement pursuant to the terms as provided herein;

                  NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the Employer and
Executive hereby agree as follows:

1.       Term.  The Company  hereby agrees to employ the Executive for a period
 commencing on February 1, 2002 and ending on January 31, 2004 (the "Term").

2.       Title;  Duties.  The  Executive  shall render  services to the Company
as chief  counsel to the Company in the  position  of Senior  Vice  President  -
General  Counsel.  Executive's  duties and  responsibilities  shall be
consistent  with the duties  undertaken  by the senior  legal  officer of a
corporation.  Executive  shall  report directly to Neil Cole.

3.       Compensation.

(a) Base Salary. Executive's base salary for the First Year (as defined below)
will be at a rate of not less than $225,000 per annum paid in accordance with
the Company's payroll practices and policies. Executive's base salary for the
Second Year (as defined below) will be at a rate of not less that $235,000 per
annum paid in accordance with the Company's payroll practices and policies. For
the purposes of this Agreement, the "First Year" shall mean the period February
1, 2002 through January 31, 2003 and the "Second Year" shall mean the period
February 1, 2003 through January 31, 2004.

(b) Bonus. Executive will be eligible for a bonus pursuant to the Company's
executive bonus program, which shall be established during the First Year. If,
for any reason, the Company does not establish such a bonus pool or plan during
the First Year, the Company will meet with Executive prior to the end of the
First Year to discuss a mutually acceptable alternative therefor, including, but
not limited to, a guaranteed bonus for the Second Year.

(c) The Company shall lease a car for Executive with monthly lease payments not
to exceed $700. The Company shall, in addition, reimburse Executive for all
parking, maintenance, repairs, insurance, gas, tolls and other related expenses
promptly upon Executive's submission of appropriate documentation.

4.       Other Benefits and Expenses.

(a) Executive shall be permitted during the Term to participate (without any
waiting periods) in any and all benefit plans, hospitalization, medical, health,
disability, officer/director or employee liability insurance plans, pension and
401K plans or other benefit plans (including any to-be-established bonus plans)
on the same terms and conditions as extended to other executive officers of the
Company.

(b) The Company shall promptly reimburse Executive for all reasonable and
necessary travel and entertainment expenses and other disbursements or costs
Executive may incur in connection with promoting the business of the Company.

(c) Executive shall be entitled to four weeks of paid vacation per year. If, in
any year, Executive does not take some or all of her vacation, such unused days
will be banked and carried over into the next year, as may be applicable.

5.       Establishment and Operation of Legal Department.

(a)      Executive shall be entitled to a full-time dedicated secretary or
assistant.

(b) Executive shall be permitted to attend such professional conferences,
receive such professional publications, acquire such professional books and
materials to build a library, and receive such other facilities and support as
are reasonable and necessary to establish a legal department and perform her
duties hereunder.

(c) Executive shall be provided with all reasonable and necessary facilities and
equipment to carry out her duties, including but not limited to a laptop
computer, cellular phone and home fax machine.

6.       Termination.

(a) Executive's employment may be terminated by the Company prior to the
expiration of the Term of this Agreement only for "Cause" by giving Executive
prior written notice of the basis for the proposed termination and a reasonable
chance to cure. As used in this agreement, the term "Cause" shall mean: (a)
Executive's willful and continuing malfeasance and failure to perform having a
material adverse effect on the Company; (b) Executive's willful engagement in
fraud or dishonesty against the Company having a material adverse effect on the
Company; or (c) Executive's conviction of a felony involving moral turpitude.

(b) Executive may terminate this Agreement at any time for "Good Reason" by
giving the Company prior written notice of the basis for the proposed
termination and a reasonable chance to cure. "Good Reason" shall mean any of the
following: (i) a breach by the Company of any of its payment obligations to
Executive hereunder; (ii) relocation of the Company outside a 50-mile radius of
New York City unless the Company shall provide Executive with a suitable
location from which to work within such radius; (iii) a proposed material
modification or reduction of Executive's duties or position as chief counsel;
(iv) the bankruptcy, reorganization or liquidation of the Company; or (v) a
failure of any successor corporation to the Company to assume the obligations
under this Agreement.

7.       Effect of Termination.

(a) Upon termination of Executive's employment for Cause (or upon Executive's
death or disability rendering her unable to perform), Executive (or Executive's
heirs and representatives) shall receive any accrued salary, pro-rated bonus and
vacation due through the date of termination and be reimbursed for any
outstanding business expenses (including those relating to Executive's car)
incurred prior to the date of termination. Executive (or Executive's heirs or
representatives, if applicable) shall also be entitled to continuation of health
and medical benefits for 3 months from the date of termination.

(b) If the Company terminates Executive's employment without Cause or Executive
terminates Executive's employment for Good Reason within 12 months after a
Change in Control (as defined in Subsection 7(d)), then the Company shall pay to
Executive in complete satisfaction of its obligations under this Agreement, as
severance pay and as liquidated damages (because actual damages are difficult to
ascertain), in a lump sum, in cash, within 15 days after the date of Executive's
termination, an amount equal to $100 less than three times Executive's
"annualized includable compensation for the base period" (as defined in Section
280G of the Internal Revenue Code of 1986); provided, however, that if such lump
sum severance payment, either alone or together with other payments or benefits,
either cash or non-cash, that Executive has the right to receive from the
Company, including, but not limited to, accelerated vesting or payment of any
deferred compensation, options, stock appreciation rights or any benefits
payable to Executive under any plan for the benefit of employees, which would
constitute an "excess parachute payment" (as defined in Section 280G of the
Internal Revenue Code of 1986), then such lump sum severance payment or other
benefit shall be reduced to the largest amount that will not result in receipt
by Executive of a parachute payment. The determination of the amount of the
payment described in this subsection shall be made by the Company's independent
auditors at the sole expense of the Company. For purposes of clarification the
value of any options described above will be determined by the Company's
independent auditors using a Black-Scholes valuation methodology.

(c) If within 12 months after the occurrence of a Change of Control, the Company
shall terminate Executive's employment without Cause or Executive terminates
Executive's employment for Good Reason, then notwithstanding the vesting and
exercisability schedule in any stock option agreement between the Company and
Executive, all unvested stock options granted by the Company to Executive
pursuant to such agreement shall immediately vest and become exercisable and
shall remain exercisable for not less than 180 days thereafter.

(d)      A "Change in Control" shall mean any of the following:

(1) any consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company's
common stock would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of the Company common stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger;

(2)      any sale,  lease,  exchange or other transfer (in one transaction or a
series of related  transactions) of all or substantially all of the assets of
the Company;

(3)      any  approval  by the  stockholders  of the  Company  of any  plan  or
proposal  for the  liquidation  or dissolution of the Company;

(4) the cessation of control (by virtue of their not constituting a majority of
directors) of the Company's Board of Directors by the individuals (the
"Continuing Directors") who (x) at the date of this Agreement were directors or
(y) become directors after the date of this Agreement and whose election or
nomination for election by the Company's stockholders, was approved by a vote of
at least two-thirds of the directors then in office who were directors at the
date of this Agreement or whose election or nomination for election was
previously so approved); or

(5) (A) the acquisition of beneficial ownership ("Beneficial Ownership"), within
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), of an aggregate of 15% or more of the voting power of the
Company's outstanding voting securities by any person or group (as such term is
used in Rule 13d-5 under the Exchange Act) who beneficially owned less than 10%
of the voting power of the Company's outstanding voting securities on the
effective date of this Agreement, (B) the acquisition of Beneficial Ownership of
an additional 5% of the voting power of the Company's outstanding voting
securities by any person or group who beneficially owned at least 10% of the
voting power of the Company's outstanding voting securities on the effective
date of this agreement, or (C) the execution by the Company and a stockholder of
a contract that by its terms grants such stockholder (in its, hers or his
capacity as a stockholder) or such stockholder's Affiliate (as defined in Rule
405 promulgated under the Securities Act of 1933 (an "Affiliate")) including,
without limitation, such stockholder's nominee to the Company's Board of
Directors (in its, hers or his capacity as an Affiliate of such stockholders),
the right to veto or block decisions or actions of the Company's Board of
Directors' provided however, that notwithstanding the foregoing, the events
described in items (A), (B) or (C) above shall not constitute a Change in
Control hereunder if the acquiror is (aa) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or one of its
affiliated entities and acting in such capacity, (bb) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of voting securities of the Company or (cc)
a person or group meeting the requirements of clauses (ii) and (ii) of Rule
13d-1(b)(1) under the Exchange Act;

(6) subject to applicable law, in a Chapter 11 bankruptcy proceeding, the
appointment of a trustee or the conversion of a case involving the Company to a
case under Chapter 7.

(e) Executive shall not be required to mitigate the amount of any payment
provided for in this Section 7 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 7 be reduced by any
compensation earned by Executive as the result of Executive's employment by
another employer or business or by profits earned by Executive from any other
source at any time before and after Executive date of termination.

8. Indemnification. The Employer shall indemnify and hold harmless the Executive
against any and all expenses reasonably incurred by her in connection with or
arising out of (a) the defense of any action, suit or proceeding in which she is
a party, or (b) any claim asserted or threatened against her, in either case by
reason of or relating to her being or having been an employee, officer or
director of the Company, whether or not she continues to be such an employee,
officer or director at the time of incurring such expenses, except insofar as
such indemnification is prohibited by law. Such expenses shall include, without
limitation, the fees and disbursements of attorneys, amounts of judgments and
amounts of any settlements, provided that such expenses are agreed to in advance
by the Employer. The foregoing indemnification obligation is independent of any
similar obligation provided in the Employer's Certificate of Incorporation or
Bylaws, and shall apply with respect to any matters attributable to periods
prior to the Effective Date, and to matters attributable to Executive's
employment hereunder, without regard to when asserted.

9.       Miscellaneous.

(a) This Agreement shall be governed by the laws of the State of New York and
each Party agrees that in the event of a dispute relating to the terms hereof
the other will submit to the exclusive jurisdiction of the state or federal
courts sitting within the City of New York.

(b) If not terminated in accordance with its terms, this Agreement shall be
binding upon, and inure to the benefit of, the Parties, their heirs, legal
representatives, successors and permitted assigns.

(c) The invalidity or unenforceability of any provision hereof shall not in any
way affect the validity or enforceability of any other provision. This Agreement
reflects the entire understanding between the Parties.

(d) This Agreement supersedes any and all other agreements, either oral or in
writing, between the parties hereto with respect to the employment of the
Executive by the Employer and contains all of the covenants and agreements
between the parties with respect to such employment in any manner whatsoever.
Any modification or termination of this Agreement will be effective only if it
is in writing signed by the party to be charged.

(e) This Agreement may be executed by the parties in one or more counterparts,
each of which shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.

10. Notices. All notices relating to this Agreement shall be in writing and
shall be either personally delivered, sent by telecopy (receipt confirmed) or
mailed by certified mail, return receipt requested, to be delivered at such
address as is indicated below, or at such other address or to the attention of
such other person as the recipient has specified by prior written notice to the
sending party. Notice shall be effective when so personally delivered, one
business day after being sent by telecopy or five days after being mailed.

                           To the Employer:

                                    Candie's, Inc.
                                    400 Columbus Avenue
                                    Valhalla, NY 10595
                  Attention: Neil Cole, Chief Executive Officer

                           With a copy in the same manner to:

                                    Blank Rome Tenzer Greenblatt LLP
                                    405 Lexington Avenue
                                    New York, New York 10174
                                    Attention: Robert J. Mittman, Esq.

                           To the Executive:

                                    Deborah Sorell Stehr
                                    320 East 46th Street, Apt 11A
                                    New York, New York  10017

                  IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the 1st day of February, 2002.

                                                     CANDIE'S, INC.

                                                     By: /s/ Neil Cole
                                                         -----------------------
                                                         Neil Cole,
                                                         Chief Executive Officer

                                                         /s/Deborah Sorell Stehr
                                                         -----------------------
                                                         Deborah Sorell StehrJanuary 23, 2002

CANDlE'S INC.
400 Columbus Avenue
Valhalla, NY 10595-1335

                        NOTIFICATION FACTORING AGREEMENT

Ladies and Gentlemen:

     We are pleased to confirm the terms and  conditions  that shall  govern our
full recourse funds in use accounting  factoring  arrangement with advances (the
"Agreement").

     1. SALE OF ACCOUNTS

     1. You hereby sell,  assign and  transfer to us, and we hereby  purchase as
absolute  owner,  all of your  accounts  created by or arising  from the sale of
goods or rendition of services by you  (referred to herein  collectively  as the
"Accounts",  individually as an `Account").  This includes,  without limitation,
all sales made and services  rendered under any of your trade names or styles or
through  any of  your  divisions.  Anything  contained  herein  to the  contrary
notwithstanding,  for  purposes  of  paragraphs  4,  5 and 6  hereof,  the  term
"Accounts"  shall not include  accounts  arising  from sales to any  subsidiary,
parent or affiliated company of yours.

     2. RISK OF NON-PAYMENT

     2. Under no  circumstances  are we to be deemed to have assumed any risk of
non-payment with respect to any Accounts,  it being understood that all Accounts
shall be at your  exclusive risk and with recourse back to you if payment is not
made on any Account for any reason whatsoever.

     3. INVOICING

     3. Each of your invoices shall bear a notice (in form and content  approved
by us)  that  the  Account  represented  thereby  has been  sold,  assigned  and
transferred to us, and is owned by and payable only to us. All invoices shall be
mailed by you to your  customers  at your  expense.  You shall  provide  us with
copies of all invoices,  and with such  confirmation of the transfer of Accounts
to us and such proof of order,  shipment  or delivery  as we may  require.  Your
printed name or rubber stamp signature on invoices and  confirmatory  assignment
schedules shall have the same legal effect as a manual  signature by one of your
authorized officers or agents. Should you for any reason defer shipment of goods
which you have sold and  invoiced  to a customer  (such  sales are also known as
bill and hold  sales)  you shall:  so advise us  promptly,  submit all  relevant
details  to us,  and  comply  with such  conditions  as we deem  necessary  as a
prerequisite to our handling the Accounts arising therefrom on our books.

     4. REPRESENTATIONS AND WARRANTIES

     4.1 You hereby  represent and warrant  that:  each Account is based upon an
actual and bona fide sale and  delivery  of goods or  rendition  of  services to
customers,  made by you in the ordinary  course of your business;  the goods and
inventory  being sold and the Accounts  created are your exclusive  property and
are  not  and  shall  not be  subject  to  any  lien,  consignment  arrangement,
encumbrance,  security interest or financing statement whatsoever, other than in
our favor;  at the time of purchase by us of the Account,  your  customers  have
accepted  the goods or services,  owe and are  obligated to pay the full amounts
stated in the invoices according to their terms, without dispute, claim, offset,
defense,  deduction,  recoupment,  counterclaim  or contra  account  (any of the
foregoing  being  referred  to herein as a  "Customer  Claim")  unless  you have
notified  us  pursuant to  paragraph  8; all  amounts  are due in United  States
Dollars; all original invoices bear notice of the assignment and transfer to us;
any  taxes  or  fees  relating  to  your  Accounts  or  goods  are  solely  your
responsibility;  and none of the Accounts  factored with us hereunder  represent
sales to any subsidiary, parent or affiliated company of yours.

     4.2 You further  represent and warrant that:  your legal name is exactly as
set forth on the signature page of this Agreement,  you are a duly organized and
validly existing business  organization  incorporated or registered in the state
of New York, and are qualified to do business in all states where required;  the
most recent financial  statements  provided by you to us accurately reflect your
financial  condition  as of that  date and there  has been no  material  adverse
change in your financial condition since the date of those financial statements.
You agree to furnish us with such  information  concerning your business affairs
and financial condition as we may reasonably request from time to time. You will
furnish to us as soon as possible,  but not later than one hundred  twenty (120)
days after the close of each of your fiscal  years,  your and your  consolidated
subsidiaries  financial statements as of the end of such year, on a consolidated
basis, audited by a firm of independent,  certified public accountants, which as
of the date of this Agreement is BDO Seidman,  LLP and which is acceptable to us
of such  date,  or such  other  firm as may be  mutually  acceptable  to us, and
consolidating  statements  certified  by  one of  your  financial  officers.  In
addition, you shall deliver to us promptly upon their becoming available, a copy
of (A) all  consultants'  reports,  investment  bankers'  reports,  accountants'
management  letters,  business  plans and similar  documents,  (b) all  reports,
financial statements or other information  delivered to your shareholders and/or
filed with the SEC or any other governmental  authority,  (C) all reports, proxy
statements,  financial statements and other information generally distributed by
you to your creditors or the financial  community in general;  and (D) any audit
or other reports submitted to you by independent  accountants in connection with
any annual, interim or special audit.

     4.3 You agree that you will promptly notify us of any change in your: name,
state of incorporation or registration, location of your chief executive office,
place(s) of business,  and legal or business structure.  Further, you agree that
you will  promptly  notify us of any change in control of the  ownership of your
business organization, and of significant law suits or proceedings against you.

     4.4 You  further  represent  and  warrant  that  (a) the  trademark  and/or
tradename "Candies" together with all related intellectual  property is owned by
you and (b) the trademark  and/or  tradename  "Bongo"  together with all related
intellectual property is owned by your wholly owned subsidiary, Michael Caruso &
Co., Inc, in each case free and clear of all liens and/or security interest. You
agree that said trademarks  and/or  tradenames  shall not be sold or transferred
without our prior written consent.

     5. PURCHASE OF ACCOUNTS

     5. We shall  purchase the  Accounts for the gross amount of the  respective
invoices,  less factoring fees or commissions  relating thereto,  trade and cash
discounts  allowable to your customers and credits and allowances (the "Purchase
Price of  Accounts").  Our  purchase of the  Accounts  shall be reflected on the
Statements  of Account which we shall render to you, and such  statements  shall
also reflect all credits and discounts made available to your customers (whether
or not  taken)  and  anticipation  earned  by your  customers.  A more  detailed
description  of these and all other  accounting  procedures  used  hereunder  is
contained in the Guide.

     6. ADVANCES

     6. At your request, and in our sole discretion, we may advance funds to you
and Bright Star Footwear,  Inc.  ("Bright Star"),  under its separate  Factoring
Agreement with us, in an aggregate amount of up to the lesser of (A) $20,000,000
or (B) the sum of: (i) up to  eighty-five  percent (85%) prior to the collection
of the  Accounts,  (ii) subject to your  execution  and delivery of an inventory
security  agreement  supplement  in form and  substance  satisfactory  to us, in
amounts of up to sixty percent (60%) of the value of your Eligible Inventory (as
defined in the  Inventory  Security  Agreement)  calculated  on the basis of the
lower of cost or market,  with cost  calculated  on a first  in-first out basis,
(iii)  subject to your  execution  and  delivery of a letter of credit  security
agreement  supplement in form and substance  satisfactory to us, we will, in our
sole  discretion,  assist you in  establishing  or opening letters of credit for
your account or guarantee the payment or  performance  of such letters of credit
up to an  aggregate  face  amount  not  exceeding  $3,000,000  at any  one  time
outstanding  for you and Bright Star and (iv) we may make  available  to you and
Bright Star,  in our sole  discretion,  an  overadvance  accommodation  of up to
$5,000,000.00 in the aggregate outstanding at any onetime. (For purposes hereof,
"overadvances"  shall mean advances in excess of the percentage  limitations set
forth above.).  In addition,  we will establish a discretionary line for you and
Bright Star of up to  $250,000.00  in the aggregate  outstanding at any one time
for Ledger Debt (as defined in section  11).  This line will be available to you
provided  that (a) this  Agreement is in full force and effect,  (b) no Event of
Default hereunder is then outstanding and (c) there is no material deterioration
in your credit worthiness in our reasonable  opinion. At your request, we may in
our sole  discretion,  make advances to you prior to the collection of Accounts,
subject to our right to hold any reserves we deem  necessary as security for the
payment and performance of any and all of your  Obligations,  as defined herein.
All amounts  owing to us by you,  including,  without  limitation,  any advances
which may be made to you prior to shipment and any debit  balance in your Client
Position  Account (as defined below),  shall be payable to us on demand.  We may
send to you at any time any credit  balance  in your  Funds-In-Use  Account  (as
defined below), without prior notice to you.

     7. PAYMENT OF ACCOUNTS

     7. Checks and other proceeds  received by us in payment of Accounts will be
promptly  applied  to your  account  with us  after  crediting  your  customer's
account;  however,  we shall debit your account monthly with the cost of two (2)
additional business days on all such amounts. The foregoing shall be computed at
the rate charged by us on debit balances, as set forth in paragraph 13.1 hereof.
No checks,  drafts or other  instruments  received by us shall  constitute final
payment of an  Account  unless and until such  instruments  have  actually  been
collected.

     8. CUSTOMER CLAIMS AND CHARGEBACKS

     8. You  shall  notify  us  promptly  of any  matter  affecting  the  value,
enforceability  or  collectability  of any Account and of all  Customer  Claims,
returns and rejections. You shall issue credit memoranda promptly upon accepting
returns or granting  allowances,  (and upon our request,  send duplicates and/or
confirm the assignment of such credit memoranda to us). We may at any time debit
or charge back to your  account the amount of: any Account  which is not paid in
full when due for any reason and any Account  with respect to which we determine
that there has been a breach of any  representation or warranty  hereunder.  Any
deduction taken by a customer shall be charged back to your account immediately,
and we may at any time debit or charge  back to your  account the amount of: (i)
payments we receive on Accounts which we are required  thereafter to turnover or
return;  (ii)  any  and all  expenses  and  attorneys'  fees  incurred  by us in
collecting  or  attempting  to collect  any Account  charged  back to you or any
Obligation  hereunder;  and (iii)  any  expenses  incurred  by us as a result of
remittances  made by  customers  on  Accounts  that are not  finally  paid,  for
whatever  reason.  Further,  we shall be entitled to charge you a reasonable fee
for each  Account  which we may place with a  collection  agency or attorney for
collection,  which fee shall be charged to your  account in addition to any fees
or  expenses  of such  collection  agency  or  attorney.  We may  bring  suit or
otherwise enforce collection, in your name or ours, and generally shall have all
other rights respecting said Accounts,  including, without limitation, the right
to:  accelerate  or extend the time of  payment,  modify  the terms of  payment,
settle,  compromise,  release in whole or in part any amounts  owing,  and issue
credits in your name or ours. To the extent applicable, you hereby waive any and
all claims and defenses based on suretyship. We may endorse or sign your name or
ours on any checks or other instruments or documents with respect to Accounts or
the goods covered thereby.

     9. STATEMENTS OF ACCOUNT

     9. After the end of each month, within ten (10) business days on the end of
each month,  we shall send to you one or more reports showing the accounting for
sales,  charges,  advances and other  transactions  between us during that month
(herein the "Reports").  The Reports sent to you each month will include,  among
other things,  a Statement of Account which will reflect  transactions  in three
accounts: an accounts receivable account (the "Accounts Receivable Account"),  a
client  position  account (the "Client  Position  Account')  and a  funds-in-use
account (the "Funds-In-Use Account"). All financial transactions between us will
be reflected  on these  monthly  Reports.  The monthly  Reports  shall be deemed
correct and binding upon you and shall  constitute an account stated between us,
unless we receive a written statement of your exceptions within thirty (30) days
after the date the same are received by you.

     10. GRANT OF SECURITY INTEREST

     10.1 In  addition  to the  sale of  Accounts  hereunder,  and  without  the
necessity of any further formality, writing or evidence, you hereby transfer and
assign to us and grant us a security  interest in all of your  right,  title and
interest in and to all of your now existing and future (herein  collectively the
"Collateral"):  (a) accounts (including the Accounts),  instruments,  documents,
chattel  paper  (including   electronic  chattel  paper),   general  intangibles
(including  all payment  intangibles  and all other rights to payment),  and any
other   obligations   owing  to  you;  (b)  unpaid  seller's  rights  (including
rescission,  repossession,  replevin,  reclamation and stoppage in transit); (c)
rights to any inventory  represented  by the  foregoing,  including  returned or
repossessed  goods;  (d) reserves and credit  balances  arising  hereunder;  (e)
guarantees,  collateral, supporting obligations and letter of credit rights with
respect to the foregoing; (0 insurance policies,  proceeds or rights relating to
the  foregoing;  (g) federal,  state and local income tax refunds;  (h) cash and
non-cash proceeds of the foregoing; (i) Books and Records (defined in section 12
below)  evidencing or pertaining to the  foregoing;  and U) all now existing and
future patents and trademarks,  including those  registered in the United States
Patent  and  Trademark  Office,  the  goodwill  of the  business  in  connection
therewith,  and any and all proceeds,  royalties and other fees which are or may
become due  therefrom or for the use thereof..  (It is understood  that we shall
have no  obligation  to perform in any respect,  any  contracts  relating to any
Accounts).

     10.2 You agree to comply with all  applicable  laws to perfect our security
interest in collateral pledged to us hereunder, and to execute such documents as
we may require to effectuate the foregoing and to implement this Agreement.  You
irrevocably  authorize us to file  financing  statements  and all amendments and
continuations with respect thereto, all in order to create,  perfect or maintain
our security  interest in the Collateral,  and you hereby ratify and confirm any
and all financing  statement,  amendments and continuations with respect thereto
heretofore and hereafter filed by us pursuant to the foregoing authorization.

     11. OBLIGATIONS SECURED

     11.  The  security  interest  granted  hereunder  and any lien or  security
interest that we now or hereafter  have in any of your other assets,  collateral
or property,  secure the payment and performance of all of your now existing and
future  indebtedness  and  obligations  to us,  whether  absolute or contingent,
whether  arising  under this  Agreement or any other  agreement  or  arrangement
between us, by operation of law or otherwise  ("Obligations").  Obligations also
include ledger debt (which means  indebtedness for goods and services  purchased
by you from any party whose accounts  receivable are factored or financed by us)
("Ledger Debt"), and indebtedness arising under any guaranty, credit enhancement
or other credit support granted by you in our favor. Any reserves or balances to
your  credit  and any  other  assets,  collateral  or  property  of yours in our
possession constitutes security for any and all Obligations.

     12. BOOKS AND RECORDS AND EXAMINATIONS

     12. You agree: to make your records, files and books of account (including,
without  limitation,  paper  records,  computer-based  data,  records  or media,
electronic  records,  tapes, discs, etc., and all programs and procedure manuals
relating  thereto)  (all of the  foregoing  referred  to herein  as  "Books  and
Records") available to us on request; to permit us to visit your premises during
business hours to examine the same and to make copies or extracts  thereof;  and
to conduct such  examinations as we deem necessary.  In order to cover costs and
expenses  we may incur in  connection  with any such  examinations,  we shall be
entitled  to charge you a fee of $750.00  for each day or part  thereof for each
examiner during which such examination is conducted,  which fee shall be charged
to your account, in addition to any out-of-pocket costs and expenses we incur as
a result of conducting said examinations.

     13. INTEREST, FACTORING FEES OR COMMISSIONS AND OTHER CHARGES

     13.1  Interest  shall be  charged  as of the last day of each  month on the
debit  balance in your  Funds-In-Use  Account  each day during that  month.  The
amount that appears in your Funds-In-Use  Account is the difference  between the
balance in your  Accounts  Receivable  Account  and the  balance in your  Client
Position Account.  Interest is charged as of the last day of each month based on
the daily debit balances in your Funds In Use account for that month,  at a rate
equal to the sum of one percent (1%) plus the Chase Prime Rate (defined  below).
The Chase Rate is the per annum rate of interest publicly announced by The Chase
Manhattan Bank in New York,  New York from time to time as its prime rate.  (The
prime rate is not  intended  to be the lowest  rate of  interest  charged by The
Chase  Manhattan  Bank to its  borrowers.)  Any  change in the rate of  interest
hereunder due to a change in the Chase Rate shall take effect as of the first of
the month following such change in the Chase Rate.  Interest shall be calculated
based on a 360 day year.  Interest  shall be credited as of the last day of each
month on any credit  balance in your  Funds-In-Use  Account each day during that
month,  at a rate four percent (4%) per annum below the Chase Rate being used to
calculate interest hereunder for the period. In no event, shall the rate charged
hereunder  exceed the highest rate permitted under applicable law. In the event,
however,  that we do receive  interest  hereunder  in excess of the highest rate
permissible,  you agree that your sole remedy shall be to seek repayment of such
excess,  and you hereby waive any and all other rights and remedies which may be
available to you under law or in equity.

     13.2 If you, as a client of ours,  purchase  goods or services from another
client of ours and your payments on these  invoices are not timely  received,  a
late interest  payment,  at our then late interest rate, will be charged to your
account with us and shall be deemed an Obligation under this Agreement.

     13.3 For our services hereunder,  you will pay us a factoring fee or charge
of  one-quarter  of one percent  (.25%) of the gross face amount of all Accounts
factored  with us, but in no event less than $1.00 per  invoice.  All  factoring
fees or charges are due and  charged to your  account  upon our  purchase of the
underlying  Account.  Commencing on even date herewith,  if the actual factoring
fees or  charges  paid to us by you  during  any  Contract  Year,  is less  than
$100,000.00  ("Minimum  Factoring Fees"), we shall charge your account as of the
end of such  Contract  Year with an amount equal to the  difference  between the
actual  factoring  fees or charges  paid  during  such  Period and said  Minimum
Factoring Fees.  "Contract Year" shall mean the period ending on the last day of
the month occurring one year from the date of this Agreement and each subsequent
Contract  Year shall be the twelve month  period  ending on the same day in each
year thereafter.

     13.4 In addition  to the  foregoing,  you shall pay all costs and  expenses
incurred by us in connection with the preparation, execution, administration and
enforcement of this Agreement,  including,  without  limitation,  all reasonable
fees  and  expenses  attributable  to the  services  of our  attorneys  (whether
in-house or outside), all search fees and the cost of all public record filings.
Furthermore,  you shall pay to us a  reasonable  fee for:  all  special  reports
prepared by us at your  request and all wire  transfers.  All such fees shall be
charged to your  account  and may be changed by us from time to time upon notice
to  you.  Notwithstanding  the  foregoing,  in  no  event  shall  the  fees  for
preparation  and execution of this  Agreement  exceed  $10,000 in the aggregate,
plus all search and fling fees.

     13.5 In addition to the fees and charges under this Agreement, you and your
affiliate, Bright Star Footwear, Inc., jointly and severally agree to pay us, as
of the date hereof, a Documentation  Fee, set forth in 13.4 above, in the amount
of $10,000 in the aggregate,  to compensate us for the use of our in-house legal
department and facilities in documenting this Agreement.

     13.6  If any tax by any  governmental  authority  (other  than  income  and
franchise taxes imposed on us which are not related to any  transaction  between
us) is or may be imposed on, or arises as a result of, any transactions  between
us, any sales made by you, or any inventory or goods relating to such sales, and
we are or may be  required  to  withhold  or pay  such tax and any  interest  or
penalties  related thereto,  you shall indemnify and hold us harmless in respect
thereof and pay to us the amount of any such tax, interest or penalties.

     14. TERMINATION

     14. Except as otherwise  provided herein,  you may terminate this Agreement
for any  reason  whatsoever,  but only as of an  Anniversary  Date,  as  defined
herein, and then only by giving us at least sixty (60) days prior written notice
of termination. We may terminate this Agreement for any reason whatsoever at any
time by giving you written notice stating a termination date not less than sixty
(60) days from the date such notice is given, or immediately at any time without
prior  notice to you upon and after the  occurrence  of an Event of Default  (as
defined below).  This Agreement  continues  uninterrupted  unless  terminated as
herein provided. As used herein, the term "Anniversary Date" shall mean the last
day of the month  occurring three years from the date hereof or the same date in
any year  thereafter.  In the event you  terminate  this  Agreement  prior to an
Anniversary  Date you shall pay to us and we shall be  entitled  to  receive  an
amount equal to the difference  between the actual  commissions paid to us under
paragraph  13.3 hereof and the aggregate of the Minimum  Factoring  Fees for the
Contract  Year during which this  Agreement is  terminated  and each  additional
Contract Year occurring  thereafter prior to the next Anniversary Date; provided
however,  no  termination  fees of any kind shall be imposed in the event of any
replacement  of this  factoring  agreement by us.  Unless sooner  demanded,  all
Obligations shall become due and payable upon termination of this Agreement and,
pending a final accounting,  we may withhold any balances in your account unless
supplied with an indemnity satisfactory to us to cover all Obligations.  All our
rights,  liens and security  interests  hereunder  shall  continue and remain in
effect after  termination of this  Agreement,  whether said  termination is upon
notice or as a result of the  occurrence  of an Event of Default,  and you shall
continue to assign accounts  receivable to us and to remit to us all collections
on accounts receivable,  until all Obligations have been paid in full or we have
been supplied with an indemnity satisfactory to us to cover all Obligations.

     15. EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT

     15.1 An "Event of  Default"  shall be deemed to have  occurred  under  this
Agreement  upon:  (a) the cessation of your business or the calling of a meeting
of your creditors;  (b) your failure to meet your debts as they mature;  (c) the
commencement  by or  against  you of any  bankruptcy,  insolvency,  arrangement,
reorganization,  receivership or similar  proceedings under any federal or state
law;  (d) breach by you of any  representation,  warranty or covenant  contained
herein  or in any  other  agreement  between  us;  (e) your  failure  to pay any
Obligation  within five (5) days of the due date thereof or (0 the occurrence of
an Event of Default under or termination of our Factoring  Agreement with Bright
Star.

     15.2 Upon and after the  occurrence of an Event of Default,  this Agreement
may be terminated by us immediately  at anytime,  without notice to you, and all
Obligations  shall,  at our option and without notice or demand of any kind (all
of which you  hereby  expressly  waive),  become  due and  payable  immediately.
Further, we may remove, from any premises where the same may be located, any and
all documents,  instruments,  Books and Records (and any receptacles or cabinets
containing the same)  pertaining to the Accounts or other  collateral  hereunder
and/or we may use (at your expense) such of your  personnel,  supplies and space
at your  place  of  business  or  elsewhere,  as may be  necessary  to  properly
administer  and  enforce  our rights in the  Accounts  and any other  collateral
hereunder,  and to facilitate the collection thereof and realization thereon. We
may  sell,  assign  or  otherwise  dispose  of the  Accounts  and any  returned,
reclaimed or repossessed  inventory,  goods or other property  relating thereto,
whether held by you or by us, at public or private sale,  for cash, on credit or
otherwise,  at such  price  and on  such  terms  as we in our  sole  option  and
discretion may determine,  and we may bid or become purchasers at any such sale,
or acquire an interest in or dispose of said  property.  You hereby  acknowledge
that you have no right to notice,  or to an  accounting  or right of  redemption
with respect to any such sale or other disposition of the aforesaid  Accounts or
aforesaid  goods.  With respect to any other  property or collateral in which we
have a security  interest,  we shall have all of the  rights and  remedies  of a
secured  party under  Article 9 of the  Uniform  Commercial  Code.  If notice of
intended  disposition  of any of said property or collateral is required by law,
it is agreed that ten (10) days notice shall constitute  reasonable  notice. The
net cash proceeds  resulting  from the exercise of any of the foregoing  rights,
after deducting all charges, costs and expenses (including reasonable attorneys'
fees) shall be applied by us to the payment or satisfaction of the  Obligations,
whether  due or to become  due,  in such  order as we may  elect,  and you shall
remain liable to us for any  deficiencies.  Upon and after the  occurrence of an
Event of Default,  or in the event of a termination  of this Agreement by us, we
are hereby authorized by you to notify postal  authorities at any time to change
the address for delivery of mail to you to such address as we may designate, and
to receive and open mail  addressed  to you to enable us to carry out our rights
under this Agreement.

     15.3 Anything  contained herein to the contrary  notwithstanding  you shall
have the right to terminate this Agreement without the imposition of any Minimum
Factoring Fees or other  termination fees if we have not offered you a term loan
facility substantially on the terms set forth in our proposal letter of December
21, 2001 in the amount of not less $12,500,000  within ninety (90) days from the
date first written above on the terms and conditions set forth therein.

     16. MISCELLANEOUS PROVISIONS

     16.1 This Agreement,  and all attendant  documentation,  as the same may be
amended  from time to time,  constitutes  the entire  agreement  between us with
regard to the subject  matter hereof,  and  supersedes  any prior  agreements or
understandings. Furthermore, unless specifically provided otherwise herein, this
Agreement can be changed only by a writing  signed by both of us, and shall bind
and benefit each of us and our  respective  successors  and  assigns,  provided,
however, that you may not assign this Agreement or your rights hereunder without
our  prior  written  consent.  Our  failure  or delay in  exercising  any  right
hereunder shall not constitute a waiver thereof or bar us from exercising any of
our rights at anytime.  The validity,  interpretation  and  enforcement  of this
Agreement shall be governed by the laws of the State of New York Jurisdiction to
be in New York County.

     16.2 If any provision of this Agreement (including, without limitation, any
provision relating to charges constituting  interest payable by you) is contrary
to, prohibited by, or deemed invalid under applicable laws or regulations,  such
provision  shall be  inapplicable  and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.

     16.3 Paragraph headings are for convenience only and shall not be deemed to
be a controlling part of this Agreement.

                                [Remainder of page intentionally left blank]

<PAGE>

     17. JURY TRIAL WAIVER

     17. To the extent permitted by applicable law, you and we each hereby waive
any right to a trial by jury in any action or  proceeding  arising  directly  or
indirectly out of this Agreement,  or any other agreement or transaction between
us or to which we are both parties.

     If the foregoing is in  accordance  with,  and  accurately  reflects,  your
understanding,  please so indicate by signing and  returning  to us the original
and one copy of this Agreement.  This Agreement shall take effect as of the date
set forth above,  but only after being  accepted below by one of our officers in
New York,  New York,  after which,  we shall forward your fully executed copy to
you for your files.

                                         Very truly yours,

                                         THE CIT GROUP/COMMERCIAL SERVICES, INC.

                                         By:/s/ Richard Lyons
                                         -------------------------------------
                                         Name:  Richard Lyons
                                         Title: Vice President

Read and Agreed:

CANDIES, INC

By:/s/ Richard Danderline
-----------------------------------
Name:  Richard Danderline
Title: Executive Vice President

                                         Accepted at New York, New York
                                         THE CIT GROUP/COMMERCIAL SERVICES, INC.

                                         By:/s/ Jonathan A. Lucas
                                         -------------------------------------
                                         Name:  Jonathan A. Lucas
                                         Title: Senior Vice President

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