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                                                                     EXHIBIT 4.1

                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
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ARTICLE 1. PURPOSE

         SECTION 1.1. In recognition of the services provided by certain key
         employees and to make additional retirement benefits available to such
         employees, on a tax-favored basis, USA Education, Inc. hereby adopts a
         deferred compensation plan (the "Plan"), effective December 8. 1998.

ARTICLE 2. DEFINITIONS

         SECTION 2.1 The following words and phrases shall have the following
         meanings unless a different meaning is plainly required by the context:

         AFFILIATE. "Affiliate" means any firm, partnership, or corporation that
         directly or indirectly, through one or more intermediaries, controls,
         is controlled by, or is under common control with the Company, provided
         such Affiliate is designated as such by the Committee. "Affiliate" also
         includes any other organization similarly related to the Company that
         is designated as such by the Committee.

         BENEFICIARY. "Beneficiary" means the person or persons designated as
         such in accordance with Section 12.3.

         BOARD. "Board" means the Board of Directors of USA Education, Inc.

         BONUS. "Bonus" means any bonus earned pursuant to the Management
         Incentive Plan and any other bonus designated by the Committee as
         eligible to be deferred pursuant hereto.

         BONUS DEFERRAL. "Bonus Deferral" means that portion of Bonus as to
         which a Participant has made an election to defer receipt of pursuant
         to the terms of this Plan.

         CODE. "Code" means the Internal Revenue Code of 1986, as amended from
         time to time.

         COMMITTEE. "Committee" means the Sallie Mae Deferred Compensation Plan
         Committee, as appointed by the Board to administer the Plan.

         COMPANY. "Company" means USA Education, Inc. and any Affiliate, unless
         the Affiliate has made an affirmative election not to adopt the Plan. A
         Company may revoke its participation in the Plan at any time, but until
         such revocation, all the provisions of the Plan and amendments thereto
         shall apply to the Eligible Employees of the Company. In the event a
         Company revokes its participation in the Plan, the Plan shall be deemed
         terminated only with respect to such Company.

         DISABLED. "Disabled" means a mental or physical condition which
         qualifies a Participant for a disability retirement benefit under the
         Retirement Plan.

         DISTRIBUTION OPTION. "Distribution Option" means one of the two
         distribution options which are available under the Plan, consisting of
         the Retirement Distribution Option and the In-Service Distribution
         Option, both described in Section 7.

         DISTRIBUTION OPTION ACCOUNT. "Distribution Option Account" or "Account"
         means the account established on behalf of a Participant, on the books
         of the Company, pursuant to Section 5.1, which shall be comprised of a
         Retirement Distribution Account and/or one or more In-Service
         Distribution Accounts.

         DISTRIBUTION OPTION PERIOD. "Distribution Option Period" means, with
         respect to the In-Service Distribution Account only, a period of five
         Plan Years for which an Eligible Employee elects, in the Enrollment
         Agreement for the first such Plan Year, the time and manner of payment
         of amounts

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                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
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         credited to the Eligible Employee's In-Service Distribution Option
         Account for all Plan Years in the Distribution Option Period.

         EARNINGS CREDITING OPTIONS. "Earnings Crediting Options" means the
         deemed investment options selected by the Participant from time to time
         pursuant to which deemed earnings are credited to the Participant's
         Distribution Option Account.

         EFFECTIVE DATE. "Effective Date" means the effective date of the Plan
         which is December 8, 1998.

         ELIGIBLE EMPLOYEE. "Eligible Employee" means an Employee who is a
         member of the group of selected management and/or highly compensated
         Employees of the Company and who is designated by the Committee as
         eligible to participate in the Plan.

         EMPLOYEE. "Employee" means any individual employed by the Company, in
         accordance with the personnel policies and practices of the Company,
         including citizens of the United States employed outside of their home
         country and resident aliens employed in the United States; provided,
         however, that to qualify as an "Employee" for purposes of the Plan, the
         individual must be a member of a group of "key management or other
         highly compensated employees" within the meaning of Sections 201, 301,
         and 401 of the Employee Retirement Income Security Act of 1974, as
         amended.

         END TERMINATION DATE. "End Termination Date" means the date of
         termination of a Participant's Service with the Company and its
         Affiliates and shall be determined without reference to any
         compensation continuation arrangement or severance benefit arrangement
         that may be applicable.

         ENROLLMENT AGREEMENT. "Enrollment Agreement" means the authorization
         form, in form and substance, satisfactory to the Committee, which an
         Eligible Employee files with the Committee in order to participate in
         the Plan.

         IN-SERVICE DISTRIBUTION ACCOUNT. "In-Service Distribution Account"
         means the account maintained on behalf of a Participant for each
         Distribution Option Period to which Salary and/or Bonus Deferrals are
         credited, pursuant to the In-Service Distribution Option.

         IN-SERVICE DISTRIBUTION OPTION. "In-Service Distribution Option" means
         the Distribution Option, pursuant to which benefits are payable in
         accordance with Section 7.2.

         MANAGEMENT INCENTIVE PLAN. "Management Incentive Plan" means the plan
         adopted by the Company, including any amendments thereto and any plan
         adopted in substitution or replacement thereof, pursuant to which
         bonuses will be determined for certain management employees.

         PARTICIPANT. "Participant" means an Eligible Employee who has filed a
         complete Enrollment Agreement with the Committee or its designee, in
         accordance with the provisions of Section 4, and who is making Salary
         and/or Bonus Deferrals into the Plan. In the event that the Participant
         becomes incompetent, the term shall mean his personal representative or
         guardian, who shall have the rights of a Participant, except the right
         to change the form and timing of the commencement of benefits elected
         by the Participant on the Enrollment Agreement. In the event of the
         death of a Participant, the term shall mean his Beneficiary, who shall
         have the rights of a Participant, except the right to change the form
         and timing of the commencement of benefits elected by the Participant
         on the Enrollment Agreement. An individual shall remain a Participant
         until that individual has received full distribution of any amount
         credited to the Participant's Account.

         PLAN. "Plan" means this plan, called the Sallie Mae Deferred
         Compensation Plan for Key Employees, as amended from time to time.

         PLAN YEAR. "Plan Year" means the 12-month period beginning on each
         January 1 and ending on the following December 31.

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                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
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         RETIREMENT. "Retirement" means the termination of the Participant's
         Service with the Company (for reasons other than death) at or after
         attaining Normal Retirement Age, as that term is defined in the
         Retirement Plan.

         RETIREMENT DISTRIBUTION ACCOUNT. "Retirement Distribution Account"
         means the account maintained on behalf of a Participant to which Salary
         and/or Bonus Deferrals and Supplemental Company Contributions are
         credited, pursuant to the Retirement Distribution Option.

         RETIREMENT DISTRIBUTION OPTION. "Retirement Distribution Option" means
         the Distribution Option, pursuant to which benefits are payable in
         accordance with Section 7.1.

         RETIREMENT PLAN. "Retirement Plan" means the Sallie Mae pension plan,
         as it may be amended from time to time.

         SALARY. "Salary" means the total amount of cash remuneration paid by
         the Company to an Eligible Employee for any calendar year of employment
         as base salary and/or severance payments, including the Participant's
         contributions of Salary under this Plan, any elective deferrals, as
         defined in section 402(g) of the Code, and any compensation contributed
         on behalf of an Eligible Employee to any cafeteria plan, as defined in
         section 125 of the Code, maintained by the Company or an Affiliate, but
         not taking into account any Company contributions to a defined benefit
         plan or supplemental defined benefit plan, any fringe benefits, moving
         and relocation expenses and other forms of welfare benefits.

         SALARY DEFERRAL. "Salary Deferral" means that portion of Salary as to
         which a Participant has made an annual election to defer receipt of,
         pursuant to the terms of this Plan.

         SALLIE MAE. "Sallie Mae" means USA Education, Inc.

         SERVICE. "Service" means the period of time during which an employment
         relationship exists between an Employee and the Company, including any
         period during which the Employee is on an approved leave of absence,
         whether paid or unpaid. "Service" also includes employment with an
         Affiliate if an Employee transfers directly between the Company and the
         Affiliate.

         SUPPLEMENTAL COMPANY CONTRIBUTIONS. "Supplemental Company
         Contributions" means those contributions made by the Company and
         credited to the Retirement Distribution Account of certain
         Participants, pursuant to Section 4.4.

         VALUATION DATE. "Valuation Date" means the last day of any Plan Year
         and any other date selected by the Committee.

ARTICLE 3. ADMINISTRATION OF THE PLAN AND DISCRETION
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         SECTION 3.1. The Committee shall have full power and authority to
         interpret the Plan, to prescribe, amend and rescind any rules, forms
         and procedures as it deems necessary or appropriate for the proper
         administration of the Plan, and to make any other determinations and to
         take any other actions as it deems necessary or advisable in carrying
         out its duties under the Plan. All action taken by the Committee
         arising out of, or in connection with, the administration of the Plan
         or any rules adopted thereunder, shall, in each case lie within its
         sole discretion, and shall be final, conclusive and binding upon any
         Company, the Board, all Employees, all Beneficiaries of Employees and
         all persons and entities having an interest therein. Notwithstanding
         any provision in this Plan to the contrary, the Committee shall have no
         authority to take any action or make any decision which impacts solely
         on the Plan benefits of the members of the Committee. In addition, no
         member of the Committee shall have authority to take action or make any
         decision which impacts solely on the Plan benefits of the member of the
         Committee.

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                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
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         SECTION 3.2. Members of the Committee shall serve without compensation
         for their services unless otherwise determined by the Board. All
         expenses of administering the Plan shall be paid by the Company.

         SECTION 3.3. Sallie Mae shall indemnify and hold harmless each member
         of the Committee from any and all claims, losses, damages, expenses
         (including counsel fees) and liability (including any amounts paid in
         settlement of any claim or any other matter with the consent of the
         Board) arising from any act or omission of such member, except when the
         same is due to gross negligence or willful misconduct.

         SECTION 3.4. Any decisions, actions or interpretations to be made under
         the Plan by the Committee shall be made in its respective sole
         discretion, not as a fiduciary, and need not be uniformly applied to
         similarly situated individuals and shall be final, binding and
         conclusive on all persons interested in the Plan.

ARTICLE 4. PARTICIPATION
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         SECTION 4.1. ELECTION TO PARTICIPATE: SALARY DEFERRALS. Annually, all
         Eligible Employees will be offered the opportunity to defer Salary to
         be earned in the following Plan Year. Any Eligible Employee may enroll
         in the Plan, effective as of the first day of a Plan Year, by filing a
         complete and fully executed Enrollment Agreement with the Committee by
         a date established by the Committee, but in no event later than the
         last day of the preceding Plan Year. Pursuant to said Enrollment
         Agreement, the Eligible Employee shall elect (a) the percentage of
         Salary to be deferred (pursuant to payroll reduction, and after
         required payroll taxes have been deducted), such percentage to be
         stated as a whole number, and (b) the Distribution Option applicable to
         such Salary Deferrals. A Participant shall allocate his or her Salary
         Deferrals between the Distribution Options in increments of ten
         percent, provided, however, that 100 percent of such deferrals may be
         allocated to one or the other of the Distribution Options.

                  The Committee may establish minimum or maximum amounts that
         may be deferred under this Section and may change such standards from
         time to time. Any such limits shall be communicated by the Committee to
         the Eligible Employees prior to the commencement of a Plan Year.

                  Once a Participant files an Enrollment Agreement with respect
         to Salary to be earned in the subsequent Plan Year, he may not change
         the percentage of Salary to be deferred or the allocation of such
         deferrals between the Distribution Options, except that he may file an
         election to suspend Salary Deferrals. Any such election to suspend
         Salary Deferrals shall be effective with respect to the first pay
         period that begins at least 30 days following the date on which such
         request to suspend Salary Deferrals is received by the Committee. Any
         suspension shall be effective for the remainder of the Plan Year.

         SECTION 4.2. ELECTION TO PARTICIPATE: BONUS DEFERRALS. Annually, all
         Eligible Employees will be offered the opportunity to defer Bonus
         earned in such Plan Year and payable in the following Plan Year. An
         Enrollment Agreement to make such Bonus Deferrals must be filed by such
         date established by the Committee, but in no event later than the last
         day of the second quarter of the Plan Year in which such Bonus is
         earned, except for the bonus earned for 1998, which may be deferred by
         special election on or before December 31, 1998. Pursuant to said
         Enrollment Agreement, the Eligible Employee shall elect (a) the
         percentage of Bonus to be deferred (pursuant to payroll reduction, and
         after required payroll taxes have been deducted), such percentage to be
         stated as a whole number, and (b) the Distribution Option applicable to
         such Bonus Deferrals. A Participant shall allocate his or her Bonus
         Deferrals between the Distribution Options in increments of ten
         percent, provided, however, that 100 percent of such deferrals may be
         allocated to one or the other of the Distribution Options.

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                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
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                  The Committee may establish minimum or maximum amounts that
         may be deferred under this Section and may change such standards from
         time to time. Any such limits shall be communicated by the Committee to
         the Eligible Employees prior to the commencement of a Plan Year.

                  Once a Participant files an Enrollment Agreement with respect
         to Bonus earned in the Plan Year, he may not change the percentage of
         Bonus to be deferred or the allocation of such deferrals between the
         Distribution Options.

         SECTION 4.3. NEWLY ELIGIBLE EMPLOYEES. The Committee may, in its
         discretion, permit Employees who first become Eligible Employees after
         the beginning of a Plan Year to enroll in the Plan for that Plan Year
         by filing a complete and fully executed Enrollment Agreement, in
         accordance with Sections 4.1 and 4.2, as soon as practicable following
         the date the Employee becomes an Eligible Employee but, in no event
         later than 30 days after such date. Any election by an Eligible
         Employee, pursuant to this Section, to defer Salary shall apply only to
         such amounts as are earned by the Eligible Employee after the date on
         which such Enrollment Agreement is filed. Notwithstanding anything in
         this Section to the contrary, a newly Eligible Employee shall not be
         eligible to elect to defer any Bonus earned in the Plan Year in which
         he first becomes an Eligible Employee, if he becomes an Eligible
         Employee after June 30 of the Plan Year.

         SECTION 4.4. SUPPLEMENTAL COMPANY CONTRIBUTIONS. The Company may make a
         Supplemental Company Contribution, if necessary, to make up for any
         contributions under the Sallie Mae 401(k) Savings Plan and the
         Retirement Plan that a Participant would have received in such plans if
         he had not elected to make Salary Deferrals or Bonus Deferrals pursuant
         to the terms of this Plan. Any Supplemental Company Contribution shall
         be credited to the Retirement Distribution Account.

         SECTION 4.5. TRANSFERS FROM OTHER PLANS OF DEFERRED COMPENSATION. The
         Company may credit an Eligible Employee with an amount under this Plan
         equal to the amount credited under a prior plan of deferred
         compensation maintained by the Company or its predecessor on behalf of
         a selected group of management and highly compensated employees. Any
         such amount shall be credited to the Retirement Distribution Account.

ARTICLE 5. DISTRIBUTION OPTION ACCOUNTS
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         SECTION 5.1. DISTRIBUTION OPTION ACCOUNTS. The Committee shall
         establish on its books a hypothetical account for a Participant. This
         account shall be referred to as the Distribution Option Account. Each
         Distribution Option Account shall be comprised of one or more
         sub-accounts. One sub-account shall be referred to as the Retirement
         Distribution Account. Generally, the distribution of amounts credited
         to the Retirement Distribution Account shall be subject to Section 7.1.
         The other sub-accounts shall be referred to as In-Service Distribution
         Accounts. One In-Service Distribution Account shall be established for
         each five-year Distribution Option Period. Supplemental Company
         Contributions, when credited, are credited only to the Retirement
         Distribution Account.

         SECTION 5.2. EARNINGS ON DISTRIBUTION OPTION ACCOUNTS. A Participant's
         Distribution Option Account shall be credited with earnings in
         accordance with the Earnings Crediting Options, elected by the
         Participant from time to time, until such Account is fully distributed.
         Participants may allocate their Retirement Distribution Account and/or
         each of their In-Service Distribution Accounts among the Earnings
         Crediting Options available under the Plan only in accordance with
         rules and procedures adopted by the Committee. The deemed rate of
         return, positive or negative, credited under each Earnings Crediting
         Option is based upon the actual investment performance of such Earnings
         Crediting Option, and shall equal the total return of such Earnings
         Crediting Option, net of asset based charges, including, without
         limitation, money management fees, fund expenses and mortality and
         expense risk insurance contract charges. The Company reserves the
         right, on a prospective basis, to add or delete Earnings Crediting
         Options.

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                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
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         SECTION 5.3. EARNINGS CREDITING OPTIONS. Notwithstanding that the rates
         of return credited to Participants' Distribution Option Accounts under
         the Earnings Crediting Options are based upon the actual performance of
         the Earnings Crediting Options, the Company shall not be obligated to
         invest any Salary or Bonus Deferrals, Supplemental Company
         Contributions, or any other amounts, in such Earnings Crediting
         Options.

         SECTION 5.4. CHANGES IN EARNINGS CREDITING OPTIONS. A Participant may
         change the Earnings Crediting Options to which his Distribution Option
         Account is deemed to be allocated with whatever frequency is determined
         by the Committee, which shall not be less than four times per Plan
         Year; provided however, that changes in Earnings Crediting Options
         based on the investment performance of Sallie Mae common stock that
         would affect the time and manner of payment of a Retirement
         Distribution Account will be effective only if it is filed at least six
         months prior to Retirement and in the Plan Year preceding the Plan Year
         in which the Participant's Retirement occurs. Each such change may
         include (a) reallocation of the Participant's existing Retirement
         Distribution Account and In-Service Distribution Accounts among the
         Earnings Crediting Options, and/or (b) reallocation of Earnings
         Crediting Options with respect to amounts to be credited to the
         Participant's Account in the future, as the Participant may elect. Any
         such change must be in accordance with the rules and procedures adopted
         by the Committee.

         SECTION 5.5. VALUATION OF ACCOUNTS. The value of a Participant's
         Distribution Option Account as of any Valuation Date shall equal the
         amounts theretofore credited to such Account, including any earnings
         (positive or negative) deemed to be earned on such Account in
         accordance with Section 5.2 through the Valuation Date preceding such
         date, less the amounts therefore deducted from such Account.

         SECTION 5.6. STATEMENT OF ACCOUNTS. The Committee shall provide to each
         Participant, not less frequently than annually, a statement in such
         form as the Committee deems desirable setting forth the balance
         standing to the credit of each Participant in each of his Distribution
         Option Account.

         SECTION 5.7. DISTRIBUTION FROM ACCOUNTS. The Participant's Distribution
         Option Account shall be reduced by the amount of payments made by the
         Company to the Participant or the Participant's Beneficiary pursuant to
         this Plan. Any distribution made to or on behalf of a Participant from
         his Distribution Option Account in an amount which is less than the
         entire balance of any such Account shall be made pro rata from each of
         the Earnings Crediting Options to which such Account is then allocated.

ARTICLE 6. DISTRIBUTION OPTIONS
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         SECTION 6.1. ELECTION OF DISTRIBUTION OPTION. In the first Enrollment
         Agreement filed with the Committee, an Eligible Employee shall elect
         the time and manner of payment pursuant to which the Eligible
         Employee's Distribution Option Account will be paid. The Eligible
         Employee may elect that deferrals be paid either in accordance with the
         Retirement Distribution Option, or the In-Service Distribution Option.
         Any deferrals to be paid in accordance with the Retirement Distribution
         Option shall be maintained in the Retirement Distribution Account. Any
         deferrals to be paid in accordance with the In-Service Distribution
         Option shall be maintained in an In-Service Distribution Account, one
         such In-Service Distribution Option being established for each
         Distribution Option Period.

         SECTION 6.2. RETIREMENT DISTRIBUTION OPTION. An election as to the time
         and manner of payment of a Retirement Distribution Account shall be
         applicable to all amounts in the Retirement Distribution Account;
         except that an election as to the time and manner of payment of amounts
         deemed to be allocated to SALLIE MAE stock as an Earnings Crediting
         Option may be different from an election as to the remainder of the
         Retirement Distribution Account. Elections may be changed at any time
         prior to Retirement by filing a new election with the Committee; except
         that any such election change will only be effective if it is filed at
         least six months prior to Retirement and in the Plan Year

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                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
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         preceding the Plan Year in which the Participant's Retirement occurs.
         Once a Participant terminates Services on account of Retirement, he may
         not change his election with respect to the timing and manner of
         payment of his Retirement Distribution Account.

         SECTION 6.3. IN-SERVICE DISTRIBUTION OPTION. The time and manner of
         payment elected with respect to an In-Service Distribution Account must
         be elected on the Enrollment Agreement at the time Salary or Bonus
         Deferrals are first directed into the In-Service Distribution Account.
         The election of the time and manner of payment will be applicable to
         all amounts in the In-Service Distribution Account and cannot be
         changed until the Distribution Option Period has terminated and a new
         Distribution Option Period has begun, at which time, a new In-Service
         Distribution Account shall he established for future deferrals.

                  Amounts credited to the In-Service Distribution Account must
         be deferred for at least two years. Therefore, if a Participant selects
         a commencement date that is not at least two years beyond the last day
         of the Distribution Option Period, then any deferrals that would be
         made within two years of the elected commencement date shall
         automatically be credited to the Retirement Distribution Account.

                  Amounts credited to the In-Service Distribution Account must
         remain in the In-Service Distribution Account for at least two years.
         In the event a Participant's In-Service Distribution Account includes
         amounts deferred within two years of the date on which the Participant
         has elected a distribution of his In-Service Distribution Account,
         deferrals in an amount equal to the deferrals made within the prior
         two-year period, measured from the date of distribution, and earnings
         attributable to such amounts, shall remain credited to the In-Service
         Distribution Account until all such deferrals have been credited to the
         Plan for two years, at which time, they shall be distributable as soon
         as administratively feasible in accordance with the Participant's
         election.

ARTICLE 7. DISTRIBUTION OF BENEFITS TO PARTICIPATNTS
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         SECTION 7.1. BENEFITS UNDER THE RETIREMENT DISTRIBUTION OPTION.
         Benefits under the Retirement Distribution Option shall be paid to a
         Participant as follows:

                           (a) BENEFITS UPON RETIREMENT. In the case of a
                  Participant whose Service with the Company terminates on
                  account of his Retirement, the Participant's Retirement
                  Distribution Account shall be distributed in one of the
                  following methods, as elected by the Participant in accordance
                  with Section 6.2: (i) in a lump sum, (ii) in annual
                  installments, or (iii) in accordance with any formula elected
                  by the Participant that is mathematically derived and is
                  acceptable to the Committee; except that, if elected by a
                  Participant, amounts deemed to be allocated to SALLIE MAE
                  stock as an Earnings Crediting Option shall be made in a lump
                  sum in SALLIE MAE stock. A Participant's Retirement
                  Distribution Account must be distributed in full before the
                  end of the fortieth year following the year in which occurs
                  the Participant's Retirement.

                           The Participant's Retirement Distribution Account
                  shall be distributed, as elected by the Participant, no later
                  than January 31 of the Plan Year immediately following (1) the
                  Plan Year in which the Participant's Retirement occurs, or (2)
                  the Plan Year in which the Participant attains an age
                  specified in the Enrollment Agreement provide the
                  Participant's Retirement has occurred; except that, if elected
                  by a Participant, amounts deemed to be allocated to SALLIE MAE
                  stock as an Earnings Crediting Option shall be made within 60
                  days of Retirement.

                           A lump sum benefit shall equal the value of the
                  Retirement Distribution Account as of the Valuation Date
                  immediately preceding the date of payment. The first annual
                  installment payment shall equal (i) the value of such
                  Retirement Distribution Account as of the Valuation Date
                  immediately preceding the date of payment, divided by (ii) the
                  number of annual installment payments elected by the
                  Participant in the Enrollment Agreement,

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                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
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                  pursuant to which such Retirement Distribution Account was
                  established. The remaining annual installments shall equal (i)
                  the value of such Retirement Distribution Account as of the
                  Valuation Date immediately preceding Plan Year divided by (ii)
                  the number of installments remaining."

                           (b) BENEFITS UPON TERMINATION OF EMPLOYMENT. A
                  Participant may also elect on the Enrollment Agreement to have
                  his Retirement Distribution Account paid in the form of a lump
                  sum if he should terminate Service prior to his Retirement.
                  Such lump sum will be distributed as soon as administratively
                  feasible following the date that is 12 months from the End
                  Termination Date; except that, if elected by a Participant,
                  amounts deemed to be allocated to SALLIE MAE stock as an
                  Earnings Crediting Option shall be made within 60 days of his
                  End Termination Date.

         SECTION 7.2. BENEFITS UNDER THE LN-SERVICE DISTRIBUTION OPTION.
         Benefits under the In-Service Distribution Option shall be paid to a
         Participant as follows:

                           (a) In-Service Distributions. In the case of a
                  Participant who continues in Service with the Company, the
                  Participant's In-Service Distribution Account for any
                  Distribution Option Period shall be paid to the Participant
                  commencing no later than January 31 of the Plan Year
                  irrevocably elected by the Participant in the Enrollment
                  Agreement pursuant to which such In-Service Distribution
                  Account was established, in one lump sum or in annual
                  installments payable over 2, 3, 4, or 5 years. Any lump sum
                  benefit payable in accordance with this paragraph shall be
                  paid not later than January 31 of the Plan Year elected by the
                  Participant in accordance with Section 6.3, in an amount equal
                  to the value of such In-Service Distribution Account as of the
                  Valuation Date immediately preceding the date of payment.
                  Annual installment payments, if any, shall commence not later
                  than January 31 of the Plan Year as elected by the Participant
                  in accordance with Section 6.3, in an amount equal to (i) the
                  value of such In-Service Distribution Account as of the
                  Valuation Date immediately preceding the date of payment,
                  divided by (ii) the number of annual installment payments
                  elected by the Participant in the Enrollment Agreement
                  pursuant to which such In-Service Distribution Account was
                  established. The remaining annual installments shall be paid
                  not later than January 31 of each succeeding year in an amount
                  equal to (i) the value of such In-Service Distribution Account
                  as of the Valuation Date immediately preceding Plan Year
                  divided by (ii) the number of installments remaining.

                           (b) A Participant may also elect on the Enrollment
                  Agreement to have his In-Service Distribution Account paid in
                  the form of a lump sum if he should terminate Service prior to
                  his Retirement. For Participants who are Executive Officers
                  for purposes of proxy disclosure, such lump sum will be
                  distributed in SALLIE MAE stock no later than 60 days
                  following termination of Service. For other Participants, such
                  lump sum will be distributed as soon as administratively
                  feasible following the date that is 12 months from the End
                  Termination Date and such an election shall be subject to the
                  provisions of Section 6.3.

ARTICLE 8. DISABILITY
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         SECTION 8.1. In the event a Participant becomes Disabled, the
         Participant's right to make any further deferrals under this Plan shall
         terminate as of the date for which the Participant is first eligible to
         receive a disability retirement benefit from the Retirement Plan. The
         Participant's Retirement Distribution Account, if any, shall be
         distributed to the Participant in accordance with Section 7.1 (a),
         treating the day on which he first becomes eligible for a disability
         benefit from the Retirement Plan as his retirement date. The
         Participant's In-Service Distribution Accounts, if any, will be
         distributed to the Participant in accordance with Section 7.2(a),
         without regard to the fact that the Participant became Disabled.

ARTICLE 9. SURVIVOR BENEFITS
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                    Page 8

<Page>

                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
--------------------------------------------------------------------------------

         SECTION 9.1. DEATH OF PARTICIPANT PRIOR TO THE COMMENCEMENT OF
         BENEFITS. In the event of a Participant's death prior to the
         commencement of benefits in accordance with Section 7, benefits shall
         be paid to the Participant's Beneficiary, as determined under Section
         12.3, pursuant to Section 9.2 or 9.3, whichever is applicable, in lieu
         of any benefits otherwise payable under the Plan to or on behalf of
         such Participant. The Participant's Beneficiary shall be treated as the
         Participant for purposes of the Plan and shall have the authority to
         elect the Earnings Crediting Options in the same manner as the
         Participant. In addition, the Beneficiary may elect to receive an
         accelerated distribution, pursuant to Section 11, or an Emergency
         Benefit, pursuant to Section 10. However, the Beneficiary shall not be
         entitled to change the form and timing of distribution as elected on
         the Enrollment Agreement.

                  Notwithstanding any provisions in this Section 9 to the
         contrary, in the event there is no designated Beneficiary, or the
         Beneficiary has predeceased the Participant, the Participant's
         Distribution Option Account shall be distributed to the Participant's
         estate in the form of a lump sum as soon as administratively feasible
         following the Participant's death.

         SECTION 9.2. SURVIVOR BENEFITS UNDER THE RETIREMENT DISTRIBUTION
         OPTION. A Participant may elect on the Enrollment Agreement the time
         and manner of payment of his Retirement Distribution Account in the
         event he dies prior to the commencement of distributions from such
         Retirement Distribution Account pursuant to Section 7.1. The
         Participant may elect that his Retirement Distribution Account be paid
         to his Beneficiary (a) in a lump sum as soon as practicable following
         the Participant's death, or (b) in the form, and at the time, that the
         Retirement Distribution Account would have been payable to the
         Participant, assuming the Participant retired at age 65. The amount of
         any lump sum benefit payable in accordance with this Section shall
         equal the value of such Retirement Distribution Account as of the
         Valuation Date immediately preceding the date on which such benefit is
         paid. The amount of any annual installment benefit payable in
         accordance with this Section shall equal (a) the value of such
         Retirement Distribution Account as of the Valuation Date immediately
         preceding the date on which such installment is paid, divided by (b)
         the number of annual installments remaining to be paid pursuant to the
         election of the Participant.

         SECTION 9.3. SURVIVOR BENEFITS UNDER THE IN-SERVICE DISTRIBUTION
         OPTION. A Participant may elect on the Enrollment Agreement the time
         and manner of payment of his In-Service Distribution Account in the
         event he dies prior to the commencement of distributions from such
         In-Service Distribution Account pursuant to Section 7.2. The
         Participant may elect that his In-Service Distribution Account be paid
         to his Beneficiary (a) in a lump sum as soon as practicable following
         the Participant's death, or (b) in the form, and at the time, that the
         In-Service Distribution Account would have been payable to the
         Participant. The amount of any lump sum benefit payable in accordance
         with this Section shall equal the value of such Retirement Distribution
         Account as of the Valuation Date immediately preceding the date on
         which such benefit is paid. The amount of any annual installment
         benefit payable in accordance with this Section shall equal (a) the
         value of such Retirement Distribution Account as of the Valuation Date
         immediately preceding the date on which such installment is paid,
         divided by (b) the number of annual installments remaining to be paid
         pursuant to the election of the Participant.

         SECTION 9.4. DEATH OF PARTICIPANT AFTER BENEFITS HAVE COMMENCED. In the
         event a Participant dies after annual installments from his
         Distribution Option Account have commenced, but before the entire
         balance of such Account has been paid, any remaining installments shall
         continue to be paid to the Participant's Beneficiary, as determined
         under Section 12.3, at such times and in such amounts as they would
         have been paid to the Participant had he survived.

--------------------------------------------------------------------------------
                                    Page 9

<Page>

                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
--------------------------------------------------------------------------------

ARTICLE 10. EMERGENCY BENEFIT
--------------------------------------------------------------------------------

         SECTION 10.1. In the event that the Committee, upon written request of
         a Participant, determines, in its sole discretion, that the Participant
         has suffered an unforeseeable financial emergency, the Company shall
         pay to the Participant from the vested portion of his Distribution
         Option Account, as soon as practicable following such determination, an
         amount necessary to meet the emergency, after deduction of any and all
         taxes as may be required pursuant to Section 12.9 (the "Emergency
         Benefit"). For purposes of this Plan, an unforeseeable financial
         emergency is an unexpected need for cash arising from an illness,
         casualty, loss, sudden financial reversal, or other such unforeseeable
         occurrence. Cash needs arising from foreseeable events, such as the
         purchase of a house or education expenses for children, shall not be
         considered to be the result of an unforeseeable financial emergency.
         Emergency Benefits shall be paid first from the Participant's
         In-Service Distribution Accounts, if any, in the order in which such
         Accounts would otherwise be distributed to the Participant. If the
         distribution exhausts the In-Service Accounts, the Retirement
         Distribution Account may be accessed. However, no Emergency Benefit may
         be distributed from deferrals, and earnings attributable to such
         deferrals, that have been credited to the Plan less than two years.
         With respect to that portion of any Distribution Option Account which
         is distributed to a Participant as an Emergency Benefit in accordance
         with this Section, no further benefit shall be payable to the
         Participant under this Plan. Notwithstanding anything in this Plan to
         the contrary, a Participant who receives an Emergency Benefit in any
         Plan Year shall not be entitled to make any further Salary or Bonus
         Deferrals for the remainder of such Plan Year. It is intended that the
         Committee's determination as to whether a Participant has suffered an
         "unforeseeable financial emergency" shall be made consistent with
         section 457(d)(1)(A)(iii) of the Code.

ARTICLE 11. ACCELERATED DISTRIBUTION
--------------------------------------------------------------------------------

         SECTION 11.1. AVAILABILITY OF WITHDRAWAL PRIOR TO THE COMMENCEMENT OF
         DISTRIBUTIONS. Upon the Participant's written election, the Participant
         may elect to withdraw all or a portion of the Participant's
         Distribution Option Account at any time prior to the time such
         Distribution Option Account is otherwise payable under the Plan,
         provided the conditions specified in Sections 11.3, 11.4, and 11.5 are
         satisfied. However, no amount may be distributed from deferrals, and
         earnings attributable to such deferrals, that have been credited to the
         Plan less than two years.

         SECTION 11.2. ACCELERATION OF PERIODIC DISTRIBUTIONS. Upon the
         Participant's written election, the Participant or Participant's
         Beneficiary who is receiving installment payments under the Plan may
         elect to have all or a percentage of the remaining installments
         distributed in the form of an immediately payable lump sum, provided
         the condition specified in Sections 11.3, 11.4 and 11.5 are satisfied.

         SECTION 11.3. FORFEITURE PENALTY. In the event of a withdrawal pursuant
         to Section 11.1, or an accelerated distribution pursuant to Section
         11.2, the Participant shall forfeit from the sub-account of his
         Distribution Option Account from which the withdrawal is made an amount
         equal to 10% of the amount of the withdrawal or accelerated
         distribution, as the case may be. The forfeited amount shall be
         deducted from the applicable sub-account prior to giving effect to the
         requested withdrawal or acceleration. The Participant and the
         Participant's Beneficiary shall not have any right or claim to the
         forfeited amount, and the Company shall have no obligation whatsoever
         to the Participant, the Participant's Beneficiary or any other person
         with regard to the forfeited amount

         SECTION 11.4. MINIMUM WITHDRAWAL. In no event shall the amount
         withdrawn in accordance with Section 1 1.1 or 11.2 be less than 25% of
         the amount credited to the Participant's Distribution Option Account
         immediately prior to the withdrawal.

         SECTION 11.5. SUSPENSION FROM DEFERRALS. In the event of a withdrawal
         pursuant to Section 11.1 or 11.2, a Participant who is otherwise
         eligible to make deferrals under Section 4 shall be prohibited from
         making any deferrals with respect to the Plan Year immediately
         following the Plan Year during

--------------------------------------------------------------------------------
                                    Page 10

<Page>
                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
--------------------------------------------------------------------------------

         which the withdrawal is made, and any election previously made by the
         Participant with respect to deferrals for the Plan Year of the
         withdrawal shall be void and of no effect with respect to subsequent
         Salary and Bonus Deferrals for such Plan Year.

ARTICLE 12. EARNINGS CREDITING OPTION BASED ON COMPANY STOCK
--------------------------------------------------------------------------------

         SECTION 12.1. INSIDERS. Effective February 1, 2001, notwithstanding any
         other provision of the Plan, elections by "Insiders" (Participants who,
         as of February 1, 2001, and at any time subsequent to February 1, 2001,
         are considered by the Company to be subject to Section 16b of the
         Securities Exchange Act of 1934) to have their Distribution Option
         Account deemed to be invested in Company stock may not be changed.
         Further, any portion of an Insider's Distribution Option Account deemed
         to be invested in Company stock shall be distributed in a lump sum, in
         the form of Company stock within 60 days of separation from service.

ARTICLE 13. MISCELLANEOUS
--------------------------------------------------------------------------------

         SECTION 13.1. AMENDMENT AND TERMINATION. The Plan may be amended,
         suspended, discontinued or terminated at any time by the Committee;
         provided, however, that no such amendment, suspension, discontinuance
         or termination shall reduce or in any manner adversely affect the
         rights of any Participant with respect to benefits that are payable or
         may become payable under the Plan based upon the balance of the
         Participant's Accounts as of the effective date of such amendment,
         suspension, discontinuance or termination.

         SECTION 13.2. CLAIMS PROCEDURE.
                       -----------------

                  (a) Claim

                  A person who believes that he is being denied a benefit to
         which he is entitled under the Plan (hereinafter referred to as a
         "Claimant") may file a written request for such benefit with the Plan
         Administrator, setting forth the claim.

                  (b) Claim Decision

                  Upon receipt of a claim, the Plan Administrator shall advise
         the Claimant that a reply will be forthcoming within ninety (90) days
         and shall, in fact, deliver such reply within such period. The Plan
         Administrator may, however, extend the reply period for an additional
         ninety (90) days for reasonable cause.

                  If the claim is denied in whole or in part, the Claimant shall
         be provided a written opinion, using language calculated to be
         understood by the Claimant, setting forth:

                           (1) The specific reason or reasons for such denial:

                           (2) The specific reference to pertinent provisions of
                           this Agreement on which such denial is based;

                           (3) A description of any additional material or
                           information necessary for the Claimant to perfect his
                           claim and an explanation why such material or such
                           information is necessary; and

                           (4) Appropriate information as to the steps to be
                           taken if the Claimant wishes to submit the claim for
                           review.

                  (c) Request for Review

--------------------------------------------------------------------------------
                                    Page 11

<Page>

                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
--------------------------------------------------------------------------------

                  Within sixty (60) days after the receipt by the Claimant of
         the written opinion described above, the Claimant may request in
         writing that the Committee review the determination of the Plan
         Administrator. The Claimant or his duly authorized representative may,
         but need not, review the pertinent documents and submit issues and
         comment in writing for consideration by the Committee. If the Claimant
         does not request a review of the initial determination within such
         sixty (60) day period, the Claimant shall be barred and estopped from
         challenging the determination.

                  (d) Review of Decision

                  Within sixty (60) days after the Committee's receipt of a
         request for review, it will review the initial determination. After
         considering all materials presented by the Claimant, the Committee will
         render a written opinion, written in a manner calculated to be
         understood by the Claimant, setting forth the specific reasons for the
         decision and containing specific references to the pertinent provisions
         of this Agreement on which the decision is based. If special
         circumstances require that the sixty (60) day time period be extended,
         the Committee will so notify the Claimant and will render the decision
         as soon as possible, but no later than one hundred twenty (120) days
         after receipt of the request for review.

         SECTION 13.3. DESIGNATION OF BENEFICIARY. Each Participant may
         designate a Beneficiary or Beneficiaries (which Beneficiary may be an
         entity other than a natural person) to receive any payments which may
         be made following the Participant's death. Such designation may be
         changed or canceled at any time without the consent of any such
         Beneficiary. Any such designation, change or cancellation must be made
         in a form approved by the Committee and shall not be effective until
         received by the Committee, or its designee. If no Beneficiary has been
         named, or the designated Beneficiary or Beneficiaries shall have
         predeceased the Participant, the Beneficiary shall be the Participant's
         estate. If a Participant designates more than one Beneficiary, the
         interests of such Beneficiaries shall be paid in equal shares, unless
         the Participant has specifically designated otherwise.

         SECTION 13.4. LIMITATION OF PARTICIPANT'S RIGHT. Nothing in this Plan
         shall be construed as conferring upon any Participant any right to
         continue in the employment of the Company, nor shall it interfere with
         the rights of the Company to terminate the employment of any
         Participant and/or to take any personnel action affecting any
         Participant without regard to the effect which such action may have
         upon such Participant as a recipient or prospective recipient of
         benefits under the Plan. Any amounts payable hereunder shall not be
         deemed salary or other Salary to a Participant for the purposes of
         computing benefits to which the Participant may be entitled under any
         other arrangement established by the Company for the benefit of its
         employees.

         SECTION 13.5. NO LIMITATION ON COMPANY ACTIONS. Nothing contained in
         the Plan shall be construed to prevent the Company from taking any
         action which is deemed by it to be appropriate or in its best interest.
         No Participant, Beneficiary, or other person shall have any claim
         against the Company as a result of such action.

         SECTION 13.6. OBLIGATIONS TO COMPANY. If a Participant becomes entitled
         to a distribution of benefits under the Plan, and if at such time the
         Participant has outstanding any debt, obligation, or other liability
         representing an amount owing to the Company, then the Company may
         offset such amount owed to it against the amount of benefits otherwise
         distributable, to the extent permissible under State law. Such
         determination shall be made by the Committee.

         SECTION 13.7. NONALIENATION OF BENEFITS. Except as expressly provided
         herein, no Participant or Beneficiary shall have the power or right to
         transfer (otherwise than by will or the laws of descent and
         distribution), alienate, or otherwise encumber the Participant's
         interest under the Plan, except pursuant to a domestic relations order
         that would qualify as a Qualified Domestic Relations Order under
         section 414(p) of the Code. The Company's obligations under this Plan
         may not be assigned or transferred except to (a) any corporation or
         partnership which acquires all or substantially all of the Company's
         assets or (b) any corporation or partnership into which the Company may
         be merged

--------------------------------------------------------------------------------
                                    Page 12

<Page>

                               USA EDUCATION, INC.
                  DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES
--------------------------------------------------------------------------------

         or consolidated. The provisions of the Plan shall inure to the benefit
         of each Participant and the Participant's Beneficiaries, heirs,
         executors, administrators or successors in interest.

         SECTION 13.8. PROTECTIVE PROVISIONS. Each Participant shall cooperate
         with the Company by furnishing any and all information requested by the
         Company in order to facilitate the payment of benefits hereunder,
         taking such physical examinations (for insurance purposes) as the
         Company may deem necessary and taking such other relevant action as may
         be requested by the Company. If a Participant refuses to cooperate, the
         Company shall have no further obligation to the Participant under the
         Plan, other than payment to such Participant of the then current
         balance of the Participant's Distribution Option Accounts in accordance
         with his prior elections.

         SECTION 13.9. WITHHOLDING TAXES. The Company may make such provisions
         and take such action as it may deem necessary or appropriate for the
         withholding of any taxes which the Company is required by any law or
         regulation of any governmental authority, whether Federal, state or
         local, to withhold in connection with any benefits under the Plan,
         including, but not limited to, the withholding of appropriate sums from
         any amount otherwise payable to the Participant (or his Beneficiary).
         Each Participant, however, shall be responsible for the payment of all
         individual tax liabilities relating to any such benefits.

         SECTION 13.10. UNFUNDED STATUS OF PLAN. The Plan is intended to
         constitute an "unfunded" plan of deferred Salary for Participants.
         Benefits payable hereunder shall be payable out of the general assets
         of the Company, and no segregation of any assets whatsoever for such
         benefits shall be made. Notwithstanding any segregation of assets or
         transfer to a grantor trust, with respect to any payments not yet made
         to a Participant, nothing contained herein shall give any such
         Participant any rights to assets that are greater than those of a
         general creditor of the Company.

         SECTION 13.11. SEVERABILITY. If any provision of this Plan is held
         unenforceable, the remainder of the Plan shall continue in full force
         and effect without regard to such unenforceable provision and shall be
         applied as though the unenforceable provision were not contained in the
         Plan.

         SECTION 13.12. GOVERNMENT LAW. The Plan shall be construed in
         accordance with the laws of the Commonwealth of Virginia, without
         reference to the principles of conflict of laws.

         SECTION 13.13. HEADINGS. Headings are inserted in this Plan for
         convenience of reference only and are to be ignored in the construction
         of the provisions of the Plan.

         SECTION 13.14. GENDER, SINGULAR OR PLURAL. All pronouns and any
         variations thereof shall be deemed to refer to the masculine, feminine,
         or neuter, as the identity of the person or persons may require. As the
         context may require, the singular may read as the plural and the plural
         as the singular.

         SECTION 13.15. NOTICE. Any notice or filing required or permitted to be
         given to the Plan Administrator or the Committee under the Plan shall
         be sufficient if in writing and hand delivered, or sent by registered
         or certified mail, to the Human Resources Department, or to such other
         entity as the Plan Administrator or the Committee may designate from
         time to time. Such notice shall be deemed given as to the date of
         delivery, or, if delivery is made by mail, as of the date shown on the
         postmark on the receipt for registration or certification.

                  This Plan restatement includes amendments made on June 30,
         1999, October 1, 2000 and February 1, 2001.

--------------------------------------------------------------------------------
                                    Page 13<Page>

                                                                    EXHIBIT 10.1

                            STOCK PURCHASE AGREEMENT

      This STOCK PURCHASE AGREEMENT is entered into as of the 23rd day of
August, 2001 by and among STAGE II APPAREL CORP., a New York corporation (the
"COMPANY"), ALPHA OMEGA GROUP, INC., a Connecticut corporation ("AOG" and,
collectively with any permitted assigns, the "INVESTORS").

      WHEREAS, the parties desire to provide for the Company's issuance and sale
of its common stock to the Investors on the terms and subject to the conditions
contained herein;

      NOW, THEREFORE, the parties hereto agree as follows:

      1.    DEFINITIONS AND CONSTRUCTION.

            1.1 DEFINITIONS. As used in this Agreement, the following terms have
the respective meanings set forth below:

      "ADJUDICATION" has the meaning set forth in Section 9.5.

      "AFFILIATE" has the meaning set forth in Rule 405 under the Securities
Act.

      "AGREEMENT" means this Stock Purchase Agreement, including the Annex,
Schedules and Exhibits, as amended from time to time.

      "AOG" means Alpha Omega Group, Inc., a Connecticut corporation, and its
successors and permitted assigns.

      "APPLICABLE LAW" means, with respect to a Party, any legislation,
regulation, rule or procedure passed, adopted, implemented or amended by any
federal, state, local or foreign governmental or legislative body, or any notice
of a decision, finding or action by any federal, state, local or foreign
governmental agency, court or other administrative body, in each case to the
extent it has become effective, binding on the Party, its assets or operations
or applicable to the subject matter or its performance of this Agreement, from
and after the date compliance therewith is mandated by the terms thereof.

      "BCL" mean the New York Business Corporation Law, as amended.

      "BOARD" means the board of directors of the Company.

      "BOARD RECONSTITUTION" has the meaning set forth in Section 8.6.

      "BOOK ENTRY PROCEDURES" has the meaning set forth in Section 2.5.

      "BROKER'S LETTER" means a letter from an NASD member to the effect that
the sale of Registered Shares specified therein complied or shall comply with
relevant prospectus delivery requirements under Section 5(b)(2) of the Exchange
Act.

<Page>

      "CAPITAL SHARES" means the Common Stock and the Preferred Stock,
collectively, and any other class of the Company's capital stock hereafter
authorized, having the right to participate in the distribution of earnings and
assets of the Company.

      "CHARTER" and "BYLAWS" have the respective meanings set forth in Section
4.8.

      "CIT" means CIT Group/Commercial Services, Inc. and its successors and
assigns.

      "CLOSING," "CLOSING DATE" and "CLOSING NOTICE" have the respective
meanings set forth in Section 2.2.

      "CLOSING FEE" has the meaning set forth in Section 2.7(a).

      "COMMON STOCK" means the Company's common stock, par value $.01 per share,
now or hereafter Outstanding, or any Capital Shares or other securities of the
Company issued in exchange, conversion or substitution therefor by the Company,
it successors and assigns, including any Person resulting from any merger or
consolidation involving the Company.

      "COMPANY" means Stage II Apparel Corp., a New York corporation, and its
successors and permitted assigns.

      "COMPANY ACCOUNT" means an account maintained by the Company with a
commercial bank to be designated in writing by the Company.

      "CONTROL PERSON" means any Person who controls or is controlled (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) by a Party.

      "CREDIT FACILITY" means the factoring, letter of credit and loan facility
provided to the Company by CIT under agreements dated as of May 11, 1998, as
amended.

      "DERIVATIVE SECURITIES" means any securities that are convertible into or
exchangeable for Common Stock or any warrants, options or other rights to
subscribe for or purchase Common Stock or any such convertible or exchangeable
securities.

      "DTAD" means the Direct Transfer Agent Deposit services maintained by DTC.

      "DTC" means The Depository Trust Company.

      "DWAC" means the Deposit and Withdrawal at Custodian services maintained
by DTC.

      "EDGAR" means the SEC's electronic data gathering and retrieval system.

      "ESCROW AGENT" and "ESCROW DEPOSIT" have the meanings set forth in Section
2.1.

      "ESCROW AGREEMENT" means the Escrow Agreement in the form of EXHIBIT A
among the Company, AOG and the escrow agent named therein.

      "EXCHANGE ACT" means the United States Securities Exchange Act of 1934, as
amended, and the regulations promulgated thereunder.

                                       2
<Page>

      "FACTOR DEBT" means the indebtedness of the Company to CIT under the
Credit Facility with the CIT Group/Commercial Services, Inc.

      "FEE SHARES" has the meaning set forth in Section 2.7(a).

      "FINANCIAL STATEMENTS" has the meaning set forth in Section 4.5.

      "INDEMNIFIED PARTY" means a Person claiming indemnification under Section
11.

      "INDEMNIFYING PARTY" means a Party against which a claim for
indemnification is asserted under Section 11.

      "INVESTMENT AMOUNT" means the amount set forth in the Closing Notice to be
invested by the Investors for the purchase of Investor Shares on the terms and
subject to the conditions of this Agreement, aggregating (a) for all the
Investor Shares, an aggregate of $1,500,000 and (b) for the Investor Shares
issuable to each Investor, the product of (i) the aggregate Investment Amount
and (ii) the Investor Percentage listed opposite the name of that Investor in
the Investor List.

      "INVESTOR DESIGNEES" means the four individuals designated in ANNEX A for
appointment as directors of the Company pursuant to the Board Reconstitution.

      "INVESTOR LIST" means the listing in ANNEX A.

      "INVESTOR PERCENTAGE" means, for each Investor, the percentage listed
opposite its name on the Investor List.

      "INVESTOR REPRESENTATIVE" means (a) AOG, (b) in the event OAG assigns its
entire interest herein to one or more Affiliates in accordance with Section
13.2, the assignee with the greatest Investment Percentage, and (c) in either
case its successors and permitted assigns.

      "INVESTOR SHARES" means shares of Common Stock issued and sold by the
Company to the Investors on the terms and subject to the conditions of this
Agreement, including any shares of Common Stock issued in pursuant to Section
9.3.

      "INVESTORS" means the Persons listed on Investor List, and their
respective successors and permitted assigns.

      "LIABILITIES" means judgments, penalties (including excise and similar
taxes), fines and amounts paid in settlement, including in each case any
interest assessments or other charges payable in connection therewith.

      "LITIGATION EXPENSES" means reasonable expenses incurred in connection
with a Proceeding, including attorneys' fees, retainers and disbursements, court
costs, experts' fees, travel expenses and printing costs.

       "LOI" means the letter dated May 9, 2001 from Lancer Management Group to
the Board, including Schedule A thereto, relating to the transactions
contemplated by this Agreement.

      "MANAGEMENT AGREEMENT" means the Management Agreement dated as of the
Closing Date among the Company, RSC and Richard Siskind in the form of EXHIBIT
B.

                                       3
<Page>

      "MATERIAL ADVERSE EFFECT" means any material and adverse effect on the
business, operations, properties, prospects or financial condition of the
Company.

      "MATERIAL ACTIONS" has the meaning set forth in Section 4.12.

      "NASD" means the National Association of Securities Dealers, Inc.

      "OPTION PLANS" means the Company's (a) 1994 Incentive Stock Option Plan,
(b) 1998 Incentive Stock Option Plan, (c) 1998 Nonqualified Stock Option Plan
(Plan A) and (d) 1998 Mirror Option Plan (Plan B).

      "OUTSIDE CLOSING DATE" means November 30, 2001.

      "OUTSTANDING" means, at any date as of which the number of outstanding
Capital Shares of any class is to be determined, all issued and outstanding
Capital Shares of that class then directly or indirectly owned or held by or for
the account of any Person other than the Company. References in this Agreement
to Outstanding shares of Common Stock shall not include treasury shares.

      "OUTSTANDING OPTION" means any stock option issued under an Option Plan
that remains Outstanding on the Closing Date.

      "PARTY" means the Company, the Investors and their respective successors
or permitted assigns.

      "PERSON" means an individual, corporation, partnership, association,
limited liability company, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

      "PREFERRED STOCK" means the Company's preferred stock, par value $.01 per
share, now or hereafter Outstanding, or any Capital Shares or other securities
of the Company issued in exchange, conversion or substitution therefor by the
Company, it successors and assigns, including any Person resulting from any
merger or consolidation involving the Company.

      "PRINCIPAL MARKET" means the American Stock Exchange (the "AMEX"), OTC
Bulletin Board, Nasdaq SmallCap Market, Nasdaq National Market or New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.

      "PROCEEDING" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative or any appeal therein.

      "PROSPECTUS" means the prospectus in the form included in the Registration
Statement, as supplemented by any prospectus supplement filed with the SEC
pursuant to Rule 424(b).

      "PROXY STATEMENT" has the meaning set forth in Section 4.10.

      "PURCHASE PRICE" means $.05 per share.

      "REGISTERED SHARES" has the meaning set forth in Section 10.1.

                                       4
<Page>

      "REGISTRATION EFFECTIVE DATE" means the date on which the Registration
Statement is declared effective by the SEC.

      "REGISTRATION STATEMENT" means the registration statement on Form S-2 or
Form S-3 to be filed with the SEC and amended in accordance with the terms of
Section 10, for the registration of the Investor Shares and Fee Shares for
resale from time to time by the Selling Shareholders pursuant to Rule 415 under
the Securities Act.

      "RELATED AGREEMENTS" means the Management Agreement, Termination and
Release Agreements and the option agreements evidencing the Replacement Options.

      "REPLACEMENT OPTION PLAN" means the 2001 Stock Option Plan in the form of
EXHIBIT C, providing for the Company's issuance at the Closing of a Replacement
Option to the holder of each Outstanding Option.

      "REPLACEMENT OPTION" means, with respect to each Outstanding Option, a
stock option issuable to the holder on the Closing Date under the Replacement
Option Plan in exchange for the holder's Outstanding Option, exercisable during
the succeeding three years for the same number of Capital Shares covered by the
Outstanding Option at an exercise price of $.50 per share or the exercise of the
Outstanding Option, if less than $.50 per share.

      "REPRESENTATIVES" has the meaning set forth in Section 5.1.

      "RSC" means R. Siskind and Company, Inc., a New York corporation, and its
successors and assigns.

      "RSC DEBT" means the indebtedness of the Company to RSC, as evidenced by a
promissory note of the Company dated May 1, 2001, bearing interest at the rate
of 8% per annum.

      "SEC" means the United States Securities and Exchange Commission.

      "SEC DOCUMENTS" means the Company's latest annual report on Form 10-K as
of the time in question and its quarterly and current reports on Forms 10-Q and
8-K filed thereafter, including any amendments thereto, together with its latest
Proxy Statement as of the time in question, until the Company no longer has an
obligation to maintain the effectiveness of the Registration Statement.

      "SECURITIES ACT" means the United States Securities Act of 1933, as
amended, and the regulations promulgated thereunder.

      "SELLING SHAREHOLDERS" has the meaning set forth in Section 10.1.

      "SETTLEMENT NET PROCEEDS" means payments received by the Company pursuant
to any settlement of the Wear Me Apparel Case, net of all Litigation expenses
payable by the Company in connection therewith.

      "SHAREHOLDER APPROVAL" has the meaning set forth in Section 4.2.

      "TERMINATION AND RELEASE AGREEMENTS" means the Termination and Release
Agreements in substantially the form of EXHIBIT D.

                                       5
<Page>

      "TERMINATION NOTICE" has the meaning set forth in Section 12.4.

      "THIRD PARTY PROCEEDING" means any Proceeding first threatened or
initiated by a Person other than a Party or derivatively on behalf of a Party
after the Closing Date.

      "TRANSFER AGENT" means American Stock Transfer & Trust Company, or any
successor transfer agent for the Common Stock.

      "TRANSITION PERIOD" has the meaning set forth in Section 2.8.

      "WEAR ME APPAREL CASE" means the Company's pending Proceeding against Wear
Me Apparel Corp., described in SCHEDULE 4.13, for collection of unpaid
royalties.

            1.2 CONSTRUCTION. Unless otherwise expressly provided herein, all
references to Sections, Schedules, Annex or Exhibits refer to the corresponding
sections, schedules, annex or exhibits to this Agreement. The Investor List,
Schedules and Exhibits are hereby incorporated in and made a part of this
Agreement as if set forth in full herein. All capitalized terms used in the
Schedules and not otherwise defined shall have the respective meanings ascribed
to them in this Agreement.

      2.    PURCHASE AND SALE OF INVESTOR SHARES.

            2.1 ESCROW DEPOSIT. Upon execution of this Agreement, the Parties
shall enter into the Escrow Agreement, and the Investors shall deposit $200,000
with the Escrow Agent in accordance with the terms thereof (the "ESCROW
DEPOSIT").

            2.2 CLOSING NOTICE. On the date within two (2) business days after
delivery to the Investor Representative and the Escrow Agent of notice from the
Company certifying its satisfaction of the conditions set forth in Section 8,
the Investor Representative shall deliver a notice to the Company and the Escrow
Agent (the "CLOSING NOTICE") setting forth (a) the Investment Amount, (b) any
changes to the Investor Percentages set forth in the Investor List and (c) a
date within two (2) business days after the date of the Closing Notice (the
"CLOSING Date") on which the closing of the purchase and sale of the Investor
Shares hereunder (the "CLOSING") shall be held.

            2.3 PURCHASE AND SALE OF INVESTOR SHARES. On the terms and subject
to the conditions of this Agreement, at the Closing, the Company shall issue,
sell and deliver to the Investors, in proportion to their respective Investment
Percentages, a number of Investor Shares determined by dividing (a) the
Investment Amount by (b) the Purchase Price.

            2.4 CLOSING MECHANICS. At the Closing, (a) the Investors shall
deliver to Company, by wire transfer to the Company Account, immediately
available funds in an aggregate amount equal to the difference between (i)
Investment Amount specified in the Closing Notice and (ii) the Escrow Deposit,
and (b) the Company shall deliver to the Investor Representative a certificate
registered in the name of each Investor or its nominee, representing the
Investor Shares issuable hereunder to that Investor. The certificates
representing Investor Shares delivered at the Closing shall bear a legend
reflecting their restricted status under the Securities Act.

            2.5 POST-CLOSING MECHANICS. Following the Registration Effective
Date, as long as the Investors hold Registered Shares, the Company shall
maintain arrangements with the Transfer Agent authorizing the deposit of
Registered Shares through DWAC or DTAD procedures for the account of an Investor
with a DTC participant designated by the Investor ("BOOK ENTRY PROCEDURES"). The
availability

                                       6
<Page>

of Book Entry Procedures shall be subject to the Transfer Agent's receipt of (a)
written instructions from the Investor to deposit its Registered Shares for the
account of the Investor or its specified transferee with one or more DTC
participants identified therein, (b) certificates evidencing the Registered
Shares, bearing a restrictive legend, returned for cancellation and (c) a
Broker's Letter with respect to Registered Shares to be reissued for the account
of any transferee of the Investor. Following the Registration Effective Date,
Investors shall also be entitled to receive physical certificates evidencing
their Registered Shares free of any restrictive legend upon compliance with the
foregoing procedures.

            2.6 SALES PURSUANT TO PROSPECTUS. To induce the Company to maintain
arrangements with the Transfer Agent for reissuance of Investor Shares through
Book Entry Procedures or, at the direction of an Investor, delivery of
certificates evidencing its Investor Shares free of any restrictive legend, each
Investor agrees that it will not sell any Registered Shares other than pursuant
to the prospectus delivery requirements under Section 5(b)(2) of the Securities
Act. If the effectiveness of the Registration Statement is suspended or
terminated for any reason while Investors continue to own Registered Shares, the
Company will so notify the Investors. Upon receipt of that notice, each Investor
shall either (a) submit any physical certificates evidencing its Registered
Shares to the Transfer Agent (or make corresponding arrangements through Book
Entry Procedures for its Registered Shares held through DTC) for reissuance with
a restrictive legend under the Securities Act or (b) deliver to the Company an
opinion of counsel for the Investors, in form and substance acceptable to the
Company's counsel, to the effect that such reissuance is not required pursuant
to Rule 144(k) or other Applicable Law.

            2.7 FEES AND EXPENSES.

            (a) CLOSING FEE. The Company shall be responsible for a fee to
Capital Research Ltd. equal to seven (7%) percent of the Investment Amount
received by the Company for the sale of Investor Shares (the "CLOSING FEE"),
payable on the Closing Date solely in shares of Common Stock (the "FEE SHARES").
The number of Fee Shares shall be determined by dividing (i) the dollar value of
the Closing Fee by (ii) the Purchase Price.

            (b) TRANSACTION EXPENSES. On the Closing Date, the Company shall
reimburse the Investor Representative for its reasonable outside attorneys' and
other professional fees and disbursements, up to an aggregate of $7,500,
incurred in connection with the transactions contemplated by this Agreement.
Except as provided in this Section 2.7 and Section 12.5, each Party shall be
responsible for its own expenses incurred in connection with the transactions
contemplated by this Agreement.

            2.8 OTHER CLOSING TRANSACTIONS. At the Closing, the following
transactions shall be consummated and deemed to occur simultaneously with the
issuance and sale of the Investor Shares:

            (a) BOARD RECONSTITUTION. The Board Reconstitution shall be
implemented.

            (b) CHARTER AMENDMENT. A certificate of amendment to the Charter
increasing its authorized Common Stock from 9 million shares to 100 million
shares shall be filed with the Secretary of State of the State of New York.

            (c) MANAGEMENT AGREEMENT. The Company shall execute and deliver the
Management Agreement, providing the Company, among other things, with (a) use of
the showroom space currently allocated to the Company's operations within the
RSC offices for a transitional period specified therein (the "TRANSITION
PERIOD"), (b) during the Transition Period, (i) apparel inventory sales services
of RSC sales personnel currently assigned to the Company's operations, (ii)
apparel inventory and litigation

                                       7
<Page>

management services of RSC's principal, Richard Siskind, on the terms provided
therein, and (iii) a lock up on sales of Common Stock by Mr. Siskind for one
year after the Closing Date, and (c) restructuring of the RSC Debt for recourse
solely to Settlement Net Proceeds.

            (d) TERMINATION AND RELEASE AGREEMENTS. The Company shall execute
and deliver the Termination and Release Agreements, providing for termination of
its employment arrangements with Richard Siskind and each other officer and
employee of the Company, with severance benefits limited to three months' base
salary, COBRA benefits and issuance of the Replacement Options.

            (e) REPLACEMENT OPTIONS. The Company shall issue the Replacement
Options upon cancellation of the Outstanding Options in accordance with the
Replacement Option Plan.

      3.    REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each Investor
represents and warrants to the Company as set forth below, and agrees that the
Company shall be entitled to assume the representations and warranties in this
Section 3 continue to be true and correct on the Closing Date unless otherwise
notified by the Investor Representative.

            3.1 ORGANIZATION. Each Investor (other than a natural Person) is
duly organized and existing in good standing under the laws of the jurisdiction
set forth opposite its name in the Investor List and has all requisite authority
to own its properties and to carry on its business as now being conducted.

            3.2 INVESTMENT INTENT. Each Investor is entering into this Agreement
for its own account and not with a view to any distribution of the Investor
Shares acquired by it, and it has no present arrangement to sell any of its
Investor Shares to or through any Person, PROVIDED that this representation
shall not be construed as an undertaking to hold any Common Stock for any
minimum or other specific term, and the Investor reserves the right to dispose
of its Registered Shares at any time in accordance with Applicable Law.

            3.3 SOPHISTICATION. Each Investor is a sophisticated investor, as
described in Rule 506(b)(2)(ii) under the Securities Act, and an accredited
investor, as defined in Rule 501 of the Securities Act, and has such experience
in business and financial matters that it is capable of evaluating the merits
and risks of an investment in Common Stock. Each Investor acknowledges that an
investment in the Common Stock is speculative and involves a high degree of
risk.

            3.4 AUTHORITY. This Agreement has been duly authorized and validly
executed and delivered by each Investor and is a valid and binding agreement of
the Investor, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights and to other equitable principles of general application.

            3.5 AFFILIATION. No Investor is an Affiliate of the Company.

            3.6 ABSENCE OF CONFLICTS. Neither the execution and delivery of this
Agreement by any Investor nor the consummation of the transactions contemplated
hereby or performance by an Investor with its undertakings herein will violate
any Applicable Law or, to the Investor's knowledge (a) violate any provision of
any indenture, instrument or agreement to which Investor is a party or is
subject or by which Investor or any of its assets is bound, (b) conflict with or
constitute a material default thereunder, (c) result in the creation or
imposition of any lien pursuant to the terms of any such indenture, instrument
or agreement or constitute a breach of any fiduciary duty owed by Investor to
any Person or (d) require the approval of any Person not heretofore obtained
pursuant to any Applicable Law or any material

                                       8
<Page>

contract, agreement, instrument, relationship or legal obligation to which
Investor is subject or to which any of its assets, operations or management may
be subject.

            3.7 DISCLOSURE; ACCESS TO INFORMATION. Each Investor has received or
had access to, through the Investor Representative, all documents, records and
other information pertaining to its investment in the Company that its has
requested, including documents filed by the Company under the Exchange Act, and
has been given the opportunity, directly or through the Investor Representative,
to meet or have telephonic discussions with representatives of the Company, to
ask questions of them, to receive answers concerning the terms and conditions of
this investment and to obtain information that the Company possesses or can
acquire without unreasonable effort or expense that is necessary to verify the
accuracy of the information already provided to the Investor or the Investor
Representative.

            3.8 MANNER OF SALE. At no time was any Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising relating
to the Company or any investment in the Common Stock.

            3.9 FEES. No Person acting on behalf of any Investor or any of its
Affiliates is entitled to any fees of any nature directly or indirectly from the
Investor or its Affiliates in connection with any of the transactions
contemplated hereby, except as otherwise provided in Section 2.7.

      4.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Investors as set forth below, subject to the
exceptions set forth in the Schedules.

            4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized and existing in good standing under the laws of the State of New York
and has all requisite corporate authority to own its properties and to carry on
its business as now being conducted. The Company is duly qualified to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes
qualification necessary, except where failure so qualify would have no Material
Adverse Effect. Except for dormant subsidiaries, the Company does not own all or
any part of or control, directly or indirectly, any other business, corporation,
joint venture, partnership or proprietorship.

            4.2 AUTHORITY. The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and to
issue the Investor Shares. The execution, issuance and delivery of this
Agreement, the issuance of the Investor Shares and the consummation by the
Company of the transactions contemplated hereby have been duly authorized by all
necessary corporate action, and no further consent or authorization is required
by its Board or, except for the matters set forth in SCHEDULE 4.2 requiring
shareholders approval (collectively, "SHAREHOLDER APPROVAL") or notice to
shareholders pursuant to the Proxy Statement. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights and to other equitable principles
of general application.

            4.3 CAPITALIZATION. On the date hereof, the Company's authorized
capital stock consists solely of (a) 9,000,000 shares of Common Stock, of which
4,127,267 shares are Outstanding, and (b) 1,000,000 shares of Preferred Stock,
none of which are Outstanding. Except as set forth herein or in SCHEDULE 4.3,
(a) no Derivative Securities are Outstanding, (b) no Person has any agreement,
right or commitment entitling it to acquire Derivative Securities from the
Company and (c) there are no agreements or other instruments of any kind to
which the Company or, to its knowledge, any Person is a party relating to the
voting of the Capital Shares, other than the Charter and Bylaws, or to the
registration

                                       9
<Page>

of Capital Shares under the Securities Act, other than the rights provided in
Section 6. All of the Capital Shares that are Outstanding on the date of this
Agreement have been duly and validly authorized and issued and are fully paid
and nonassessable.

            4.4 PRINCIPAL MARKET FOR THE COMMON STOCK. As of the date hereof,
(a) the Common Stock is registered under Section 12(g) of the Exchange Act and
is traded on the American Stock Exchange, (b) the Company is in full compliance
with all reporting requirements of the Exchange Act and (c) except as set forth
in SCHEDULE 4.4, all requirements for the continued listing of the Common Stock
on its current Principal Market are satisfied. The Company meets the
requirements for the use of Form S-2 under the Securities Act for the
registration thereunder of Capital Shares for the account of the holders thereof
pursuant to Rule 415 under the Securities Act.

            4.5 FINANCIAL STATEMENTS. The Company has delivered or made
available to the Investor Representative true and complete copies of SEC
Documents including the audited financial statements of the Company (including
footnotes) as of and for the year ended December 31, 2000 and the unaudited
condensed financial statements of the Company as of and for the six months ended
June 30, 2001 (collectively, the "FINANCIAL STATEMENTS"). The Financial
Statements (a) comply as to form in all material respects with applicable
accounting requirements and published rules and regulations of the SEC with
respect thereto, (b) were prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
for use on Form 10-Q) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and (c) fairly present the
consolidated financial position of Company and its subsidiary as of the dates
thereof and their consolidated results of operations for the periods then ended
(subject, in the case of unaudited statements, to normal year-end adjustments).

            4.6 VALID ISSUANCES. Assuming the accuracy of the representations
and warranties of the Investors in Section 3, both at the date hereof and at the
time of issuance, the issuance and sale of the Investor Shares will be exempt
from registration under the Securities Act in reliance upon Section 4(2) thereof
or Regulation D thereunder and ,when paid for by the Investors and delivered in
accordance with the terms hereof, the Investor Shares shall be duly and validly
issued, fully paid and nonassessable. Neither the issuance and sale of the
Investor Shares pursuant to this Agreement nor the Company's performance of its
other obligations hereunder will (a) result in the creation or imposition of any
liens, charges, claims or other encumbrances upon the Investor Shares or any of
the assets of the Company or (b) entitle the holders of Outstanding Capital
Shares to preemptive or other rights to subscribe to or acquire additional
Capital Shares or other securities of the Company. The Investors will not be
subject to personal liability solely by reason of their ownership or possession
of the Investor Shares.

            4.7 NO GENERAL SOLICITATION OR ADVERTISING. Neither the Company nor
any of its Affiliates nor any distributor or any person acting on its or their
behalf (a) has conducted or will conduct any general solicitation, as that term
is used in Rule 502(c) under the Securities Act, or any general advertising with
respect to any of the Investor Shares or (b) made any offers or sales of any
security or solicited any offers to buy any security under any circumstances
that would require the Company to register the issuance of the Investor Shares
under the Securities Act.

            4.8 CORPORATE DOCUMENTS. The Company has furnished or made available
to the Investor Representative true and correct copies of the Company's
Certificate of Incorporation, as amended and in effect on the date hereof (the
"CHARTER"), and its bylaws, as amended and in effect on the date hereof (the
"BYLAWS").

                                       10
<Page>

            4.9 NO CONFLICTS. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including the issuance of the Investor Shares, do not and
will not (a) subject to implementation of the Charter Amendment, result in a
violation of the Charter or Bylaws, (b) conflict with or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture, instrument or "lock-up"
arrangement or similar provision of any underwriting or similar agreement to
which the Company is a party, or (c) result in a violation of any Applicable
Law, nor is the Company or the conduct of its business otherwise in violation
of, conflict with or default under any of the foregoing, except for any
violations, conflicts, defaults or rights of termination, amendment,
acceleration or cancellation (i) that would, individually or in the aggregate,
have no Material Adverse Effect, or (ii) that are or may be affected by the
status of the Investor under any Applicable Law.

            4.10 CONSENTS. Assuming the accuracy of the covenants contained in
Section 2.5 and the representations and warranties contained in Section 3 both
at the date hereof and at the time of issuance, the Company is not required by
Applicable Law to obtain any consent, authorization or order of any court or
governmental body or to make any filing or registration with any court or
governmental body in connection with its execution, delivery or performance of
its obligations under this Agreement, other than the filing of (a) any notices
that may be required under state securities laws subsequent to the Closing, (b)
a proxy statement with the SEC under Section 14(a) of the Exchange Act and Rule
14f-1 thereunder, together with related notices to the Principal Market, in
connection with the Board's solicitation of Shareholder Approval and notice of
the Board Reconstitution (the "PROXY STATEMENT"), (c) an additional listing
application for the Investor Shares and Fee Shares with the Principal Market and
(d) the Registration Statement with the SEC.

            4.11 TRADEMARKS, TRADE NAMES AND LICENSES. The Company owns the
trademarks, trade names and registrations therefor listed in SCHEDULE 4.11.
Except as set forth in SCHEDULE 4.11, (a) the Company has not granted licenses
or other rights to use its trademarks, trade names or registrations, (b) no
other trademarks, trade names or registrations are either owned or licensed by
the Company and (c) to the best knowledge of the Company, the operations of the
Company do not infringe on the trademarks and trade names of any Person, and no
pending or threatened claim has been made to the contrary.

            4.12 NO MATERIAL ADVERSE CHANGE. Since the date of the most recent
Financial Statements, no event or condition has occurred that could have a
Material Adverse Effect. Except as set forth in SCHEDULE 4.12, since the date of
the most recent Financial Statements, the Company has not (a) issued or
repurchased any Capital Shares, issued any Derivative Securities or declared,
set aside or paid any dividend or distribution on Outstanding Capital Shares,
(b) incurred any obligation (absolute or contingent) except current liabilities
incurred in the ordinary course of business and obligations under the contracts
in effect as of that date, (c) mortgaged, pledged or knowingly subjected to
lien, charge or any other encumbrance, any of its assets, tangible or
intangible, (d) sold or transferred any of its tangible or intangible assets,
except to fund accounts payable and otherwise in the ordinary course of
business, (e) canceled any material debts or claims or waived any material
right, (f) paid or discharged any liabilities of any other Person, (g) sold,
assigned or transferred any trademarks, trade names, copyrights, licenses,
royalty agreements, proprietary registrations, know-how, trade secrets or other
intangible assets, or granted any licenses with respect to any of the foregoing,
(h) suffered or incurred any extraordinary expenses or losses, (i) paid or
discharged any material obligation or liability, absolute or contingent, other
than (A) as reflected in the Financial Statements, (B) Factor Debt and (C)
current liabilities incurred since June 30, 2001 in the ordinary course of
business, (k) made any material change in the individual or aggregate
compensation in any form payable to any of its employees, directors or
consultants, (l) entered into any material transaction of any kind except in the
ordinary course of business, or entered into any

                                       11
<Page>

transaction or agreement whatsoever with a Control Person of the Company, (m)
made any material changes in its accounting principles or methods or (n) agreed
in writing or, to the best knowledge of the Company, orally to take any of the
actions covered by this Section 4.12 (collectively, "MATERIAL ACTIONS").

            4.13 NO UNDISCLOSED LIABILITIES. The Company has no material
liabilities or obligations not reflected in the Financial Statements, other than
those incurred in the ordinary course of the Company's business since the date
of the most recent Financial Statements and which, individually or in the
aggregate, do not or would not have a Material Adverse Effect.

            4.14 NO INTEGRATED OFFERING. Neither the Company or its Affiliates
nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security,
other than pursuant to this Agreement, under circumstances that would require
the issuance of the Put Shares to be registered under the Securities Act.

            4.15 LITIGATION AND OTHER PROCEEDINGS. Except as set forth in
SCHEDULE 4.15, there are no lawsuits or proceedings pending or, to its
knowledge, threatened against the Company that might have a Material Adverse
Effect, and there are no judgments, orders, writs, injunctions, decrees or
awards issued by or, to the Company's knowledge, requested by any court,
arbitrator or governmental body that might have a Material Adverse Effect.

            4.16 FEES. No Person acting on behalf of the Company or any of its
Affiliates is entitled to any fees of any nature directly or indirectly from the
Company or its Affiliates in connection with any of the transactions
contemplated hereby, except as otherwise provided in Sections 2.7 and 12.5.

            4.17 DISCLOSURE. No representation or warranty of the Company
contained in this Agreement, no statement contained in any document, certificate
or Schedule and no data provided to the Investor Representative in connection
herewith by the Company, its Affiliates or any Person acting on its or their
behalf contains any untrue statement of a material fact or omits to state any
material fact necessary, in light of the circumstances under which it was made,
in order to make those statements not misleading.

            4.18 NON-PUBLIC INFORMATION. Neither the Company or its Affiliates
nor any Person acting on its or their behalf has disclosed any material
non-public information about the Company to the Investors.

      5.    DILIGENCE AND DISCLOSURE MATTERS.

            5.1 DUE DILIGENCE REVIEW. The Company shall make available for
inspection and review by the Investor Representative and its advisors and
representatives (collectively, "REPRESENTATIVES") copies of all SEC Documents
and other records of the Company as may be reasonably necessary to conduct due
diligence with respect to the purchase of Investor Shares and, following the
Registration Effective Date, the accuracy of the Registration Statement. In the
event that any non-public information about the Company provided or obtained in
the course of due diligence procedures hereunder becomes material, the Company
shall make full and complete public disclosure if required by and in accordance
with Applicable Law. The Investors acknowledge that the Company does not
disseminate non-public material information to any investors, money managers or
securities analysts, and confirm that nothing herein shall require the Company
to disclose non-public material information except as otherwise required by
Applicable Law.

                                       12
<Page>

            5.2 SUPPLEMENTAL DISCLOSURE. The Company shall have the continuing
obligation until the Closing to promptly supplement or amend the Schedules to
reflect any matter hereafter arising or discovered that, if existing or known at
the date of this Agreement, would have been required to be set forth or
described in the Schedules, PROVIDED that no supplement or amendment to the
Schedules delivered to the Investor Representative more than five (5) business
days after the date of this Agreement shall have any effect for the purpose of
determining the satisfaction of the conditions set forth in Section 8.

            5.3 NON-DISCLOSURE. Neither the Company nor any of its Affiliates or
representatives shall disclose to the Representatives any non-public material
information about the Company unless the information is first so identified and
the prospective recipient is provided with the opportunity to accept or refuse
to accept the information for review. The Company may, as a condition to
disclosing any material non-public information hereunder, require the
Representatives to enter into a confidentiality agreement in form and substance
reasonably satisfactory to the Company and the Investor Representative.

            5.4 PROXY STATEMENT. The Company covenants that on the date filed
with the SEC and on the date first sent or given to shareholders, the Proxy
Statement shall not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading. The Investors shall provide for use in the Proxy Statement
all information about the Investors and their Affiliates reasonably necessary
for the Proxy Statement to comply as to form in all material respects with the
relevant provisions of the Exchange Act. The Investors covenant that on the date
the Proxy Statement is filed with the SEC and on the date it is first sent to
the Company's shareholders, the information provided in writing by the Investors
or the Affiliates for use therein shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements related thereto contained in the Proxy
Statement, in light of the circumstances in which they were made, not
misleading. The Investor Representative and its counsel shall be given a
reasonable opportunity to review and comment upon the Proxy Statement and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to the Company's shareholders. The Company shall provide the
Investor Representative and its counsel with any comments the Company or its
counsel may receive from the SEC or its staff with respect to the Proxy
Statement promptly after the receipt thereof.

            5.5 REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each Party shall use all reasonable efforts to cause the Closing to
occur by the Outside Closing Date.

            5.6 FURTHER ASSURANCES. From time to time, as and when requested by
a Party, the other Party shall execute and deliver, or cause to be executed and
delivered, all documents and instruments and shall take all actions (subject to
the other provisions of this Agreement) as the other Party may reasonably deem
necessary or desirable to consummate the transactions contemplated by this
Agreement and the Related Agreements.

      6.    CONDUCT OF BUSINESS PENDING CLOSING. From the date of this Agreement
to the Closing, unless otherwise approved in writing by the Investor
Representative, the Company shall conduct its business in accordance with the
provisions of this Section 6.

            6.1 CORPORATE EXISTENCE. The Company shall take all steps necessary
to preserve and continue its corporate existence and franchises.

                                       13
<Page>

            6.2 CONDUCT OF OPERATIONS. The Company shall conduct its operations
in the ordinary and usual courses of business, as described in its most recent
SEC Documents, and shall not take or agree to take any Material Actions except
as provided in this Agreement. Any Settlement Net Proceeds received by the
Company shall be applied to repayment of RSC Debt before application for any
other purpose.

            6.3 PRESERVATION OF REPRESENTATIONS. The Company shall not take any
action that (a) if taken on or before the date hereof, would make any of its
representations and warranties in Section 5 untrue or (b) would interfere with
its ability to perform its obligations under this Agreement.

            6.4 PROCURING APPROVALS. The Company shall use its best efforts to
obtain all licenses, consents or other approvals required to be obtained by it
from any Person in connection with the transactions contemplated by this
Agreement. As soon as practicable after the date hereof, the Company shall file
a preliminary Proxy Statement with the SEC and mail copies of the definitive
Proxy Statement to its shareholders.

            6.5 DELIVERY OF PERIODIC REPORTS. The Company shall promptly deliver
to the Investor Representative, upon release to wire services or filing under
EDGAR, copies of all its press releases and SEC Documents.

            6.6 MAINTENANCE OF EXCHANGE LISTING. The Company will use its best
efforts to maintain the listing of the Common Stock the AMEX and will file, on
time, all reports required to be filed with the AMEX, pursuant to Section 12 of
the Exchange Act. The Company will provide the Investor Representative with a
copy of any correspondence or notice from the AMEX and any written response
thereto promptly after receipt or transmittal.

            6.7 REGISTRATION OF REPLACEMENT OPTIONS. As soon as practicable
after the date hereof, the Company shall file a registration statement on Form
S-8 with the SEC to register the Common Stock issuable upon exercise of the
Replacement Options for resale by the holders from time to time in reliance upon
Rule 415 under the Securities Act.

            6.8 EXCLUSIVITY. Between the date of this Agreement and the earlier
to occur of the Closing or the termination of this Agreement in accordance with
Section 12, neither the Company nor any Person acting on its behalf shall
initiate, encourage, solicit or agree to any offer from any Person other than
the Investors regarding any merger, sale of securities, sale of assets or
similar transaction involving the Company or any transaction that could be
expected to impede, delay, interfere with, prevent or dilute the benefits to the
Investors of the transactions contemplated hereby, unless (a) the Board
determines in good faith based on written advice of its outside legal counsel
that the action is necessary for the Board to comply with its fiduciary duties
to shareholders under Applicable Law, (b) prior to entering into negotiations,
the Board receives from that Person an executed confidentiality agreement with
terms no less favorable to the Company than those contained in Section 9.5 and
(c) prior to entering into those negotiations, the Company provides written
notice to the Investor Representative that includes the terms of the proposal,
the identity of the Person making the proposal and the fact that clauses (a) and
(b) of this Section 6.8 have been satisfied.

      7.    CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS. The obligations
of the Company hereunder to issue and sell the Investor Shares to the Investors
at the Closing and consummate the other transactions contemplated by Section 2
are subject to the satisfaction, on or before the Closing Date, of each of the
conditions set forth in this Section 7.

                                       14
<Page>

            7.1 ACCURACY OF THE INVESTORS' REPRESENTATION AND WARRANTIES. The
representations and warranties of the Investors herein shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date as though made as of the Closing Date.

            7.2 PERFORMANCE BY THE INVESTORS. The Investors shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required hereunder to be performed, satisfied or
complied with by the Investors at or prior to the Closing Date.

      8.    CONDITIONS PRECEDENT TO THE INVESTORS' OBLIGATIONS. The obligation
of the Investors hereunder to acquire and pay for the Investor Shares at the
Closing are subject to the satisfaction, on or before the Closing Date, of each
of the conditions set forth in this Section 8. The Investors may not rely on the
Company's failure to satisfy any condition set forth in this Section 8 if the
failure was caused by their own failure to act in good faith or to use all
reasonable efforts to satisfy the conditions set forth in Section 7.

            8.1 ACCURACY OF THE COMPANY'S REPRESENTATION AND WARRANTIES. The
representations and warranties of the Company herein shall be true and correct
in all material respects as of the date of this Agreement and as of the Closing
Date as though made as of the Closing Date (except for representations and
warranties specifically made as of a different specified date) with respect to
all periods, and as to all events and circumstances occurring or existing to and
including the Closing Date (except for any conditions that have temporarily
caused any representations or warranties herein to be incorrect and that have
been corrected with no Material Adverse Effect).

            8.2 PERFORMANCE BY THE COMPANY. The Company shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required hereunder to be performed, satisfied or complied with by
the Company at or prior to the Closing Date.

            8.3 NO INJUNCTION. No Applicable Law shall prohibit the transactions
contemplated by this Agreement, and no proceeding for that purpose shall have
been commenced.

            8.4 ADVERSE CHANGES. Since the filing date of the Company's most
recent SEC Document prior to the Closing Date, no event or condition shall have
occurred that had or would likely have a Material Adverse Effect. For purposes
of this Section 8, a Material Adverse Effect shall not include any excess of
less than $700,000 in (a) the Company's current liabilities as of the end of the
month immediately preceding the Closing Date over (b) its current assets as of
that date, adjusted by giving pro forma effect to the greater of (i) $500,000 or
(ii) any larger settlement or settlement offer received in the Wear Me Apparel
Case.

            8.5 NO TRADING SUSPENSION OR DELISTING OF COMMON STOCK. The trading
of the Common Stock shall not have been suspended by the SEC, and the Common
Stock shall not have been delisted from the Principal Market, nor shall the
Company have received any letter or notice of any suspension or delisting.

            8.6 BOARD RECONSTITUTION. The Investor Representative shall have
received (a) the written resignation of each incumbent director of the Company,
executed and effective as of the Closing Date, subject to Closing hereunder, and
(b) a unanimous written consent of all incumbent directors of the Company,
executed and effective as of the Closing Date, subject to Closing hereunder, (i)
appointing the Investor Designees as directors of the Company to fill the
vacancies created by their resignations (the "BOARD RECONSTITUTION") and (ii)
resolving, in full compliance with BCL Sections 713, 912 and 913 (including the
unanimous vote of the disinterested directors) and the related Charter
provisions, that the

                                       15
<Page>

Investors shall not be deemed to be "INTERESTED SHAREHOLDERS" as defined in
Article 8 of the of the Charter or BCL Section 912.

            8.7 CONSENTS OBTAINED. The Company shall have obtained (a) any
required written consents of CIT and any other Person whose consent is required
to the transactions contemplated by this Agreement, including Shareholder
Approval, and (b) approval from the AMEX for an additional listing of the
maximum number of Investor Shares and Fee Shares, subject to official notice of
issuance.

            8.8 CHARTER AMENDMENT. A certificate of amendment to the Charter
shall have been filed with the Secretary of State of the State of New York
implementing the Charter Amendment.

            8.9 MANAGEMENT AGREEMENT. RSC and Richard Siskind shall have
executed and delivered the Management Agreement, and RSC shall have terminated
the Company's license for office space at 1385 Broadway in New York City at no
cost to the Company and with no contingent liabilities thereunder.

            8.10 TERMINATION AND RELEASE AGREEMENTS. Richard Siskind and each
other officer and employee of the Company, whether or not currently receiving
any salary from the Company, shall have executed and delivered a Termination and
Release Agreement, providing for termination of all employment arrangements and
release of all related obligations other than severance benefits at existing
base salary rates for three months, COBRA benefits required by Applicable Law
and issuance of the Replacement Options.

            8.11 REPLACEMENT OPTIONS. Each holder of an Outstanding Option shall
have received a Replacement Option therefor, evidenced by an option agreement
executed by the Company substantially in the form annexed to the Replacement
Option Plan.

            8.12 OFFICER'S CERTIFICATE. The Investor Representative shall have
received a Compliance Certificate in substantially the form of EXHIBIT E,
executed by the chief executive officer of the Company as at the Closing Date.

      9.    POST-CLOSING COVENANTS.

            9.1 LITIGATION MATTERS. After the Closing, the Company shall
continue to utilize Goetz Fitzpatrick Most & Bruckman, LLP as its sole counsel
in the Wear Me Apparel Case, if not yet settled, and shall pay invoices of that
firm for ongoing professional services, including services rendered after the
Closing Date, within 30 days after the applicable invoice date. So long as any
Factor Debt or RSC Debt is outstanding, the Company shall accept and implement
any recommended proposal for settlement of the Wear Me Apparel Case in
accordance with Section 4.2 of the Management Agreement and shall not, without
the prior written consent of RSC, settle the Wear Me Apparel Case (except as
provided in Section 4.2 of the Management Agreement) or any Third Party
Proceeding against the Company, permit a default judgment to be entered therein
or consent to the entry of any adverse judgment therein. The Company shall apply
any Settlement Net Proceeds or proceeds (net of Litigation Expenses) from any
judgment in the Wear Me Apparel Case (a) first to repay in full any outstanding
RSC Debt, (b) second to repay in full any outstanding Factor Debt and (c)
thereafter for working capital purposes. The Investors shall not, directly or
indirectly through any of their Affiliates, vote their Investor Shares or any
other shares of Common Stock acquired by them or take any action as officers or
directors of the Company to approve, effect or facilitate any act or omission
that would result in a violation of the Company's covenants in this Section 9.1.

                                       16
<Page>

            9.2 CONDUCT OF BUSINESS. So long as any Factor Debt or RSC Debt is
outstanding, the Company shall conduct its operations in the ordinary and usual
course of business. For a period of at least three years after the Closing Date,
the Company shall maintain the directors and officers liability insurance policy
in place on the Closing Date or a replacement policy with equivalent coverage
for former officers and directors and shall pay all premiums thereon as they
become due. The Investors shall not, directly or indirectly through any of their
Affiliates, vote their Investor Shares or any other shares of Common Stock
acquired by them or take any action as officers or directors of the Company to
approve, effect or facilitate any act or omission that would result in a
violation of the Company's covenants in this Section 9.2.

            9.3 STANDSTILL OBLIGATIONS. The Investors shall not vote their
Investor Shares or any other shares of Common Stock acquired by them or take any
action as directors of the Company to approve a merger of consolidation of the
Company with, or a sale of all or substantially all the assets of the Company to
any Affiliate of any of the Investors (other than a merger, consolidation or
sale that does not increase the percentage ownership of Investors and their
Affiliates in the surviving entity) unless (a) the effective consideration per
share of Common Stock to be received by other holders of Common Stock in the
transaction complies in all material respects with any applicable requirements
of the BCL regarding the fairness of transactions between a corporation and any
controlling stockholder, and (b) if the transaction is proposed within three
years after the Closing, the consideration to be received in the transaction on
an equivalent per share basis has a value that is not less than the Purchase
Price. Notwithstanding the foregoing, this Section 9.3 shall not apply to any
transaction that is approved by holders (other than the Investors and their
Affiliates) of Common Stock representing a majority of the Common Stock (other
than shares held by the Investors and their Affiliates) voted with respect to
the transaction.

      10.   REGISTRATION RIGHTS.

            10.1 REGISTRATION STATEMENT FILING. As soon as practicable after the
Closing, the Company shall file the Registration Statement with the SEC to
register the Investor Shares and Fee Shares ("REGISTERED SHARES") for resale by
the holders ("SELLING SHAREHOLDERS") from time to time in reliance upon Rule 415
under the Securities Act. The Registration Statement shall not include and
Capital Shares other than the Registered Shares.

            10.2 REGISTRATION PROCEDURES AND EXPENSES. The Company shall (a) use
its best efforts to cause the Registration Statement to become effective as soon
as practicable after its filing, (b) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the Prospectus as
may be necessary to keep the Registration Statement effective until all of the
Registered Shares have been sold by the Selling Shareholders, (c) furnish to the
Selling Shareholders such number of copies of the Prospectus in conformity with
the requirements of the Securities Act and such other documents as they may
reasonably request in order to facilitate the public sale or other disposition
of the Registered Shares, (d) file documents required for state securities or
"blue sky" clearance in jurisdictions specified in writing by the Selling
Shareholders and use its best efforts to cause the Registered Shares so
registered to be and remain qualified thereunder where qualifications are
required to permit the public sale thereof and (e) bear all expenses in
connection with the procedures described in clauses (a) through (d) of this
Section 10.2, other than selling commissions and any fees and expenses of
counsel or other advisers, if any, to the Investors and any other Selling
Shareholders in connection with the resale of the Registered Shares. The Company
will advise the Investors promptly and, if requested by the Investor
Representative, will confirm the advice in writing, when it receives notice that
the Registration Statement or any post-effective amendment to the Registration
Statement has become effective.

                                       17
<Page>

            10.3 AMENDMENTS TO THE REGISTRATION STATEMENT. The Company shall
advise the Investor Representative within three business days prior to filing
any amendment to the Registration Statement or supplement to the Prospectus
relating to the Investors. So long as, in the reasonable opinion of counsel for
the Investor Representative, a Prospectus is required to be delivered in
connection with sales of Registered Shares by the Investors or any dealer on
their behalf, the Company shall provide the Investor Representative with a copy
of each SEC Document promptly after its filing with the SEC. If any event or
condition shall occur that in the judgment of the Company or in the opinion of
counsel for the Investor Representative is required to be set forth in the
Prospectus (as then amended or supplemented) in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or to otherwise comply with the Securities Act or any other
Applicable Law, the Company shall promptly prepare and file with the SEC an
appropriate supplement or amendment thereto, and will expeditiously furnish the
Investor Representative with a reasonable number of copies thereof.

            10.4 SECURITIES ACT COMPLIANCE. The Registration Statement in the
form in which it becomes effective and as it may be amended when any
post-effective amendment thereto become effective and the Prospectus and any
supplement or amendment thereto when filed with the SEC under Rule 424(b) under
the Securities Act shall complied in all material respects with the provisions
of the Securities Act and shall not at any such times contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the case of the
Prospectus, in the light of the circumstances under which they made) not
misleading, except that this covenant shall not apply to statements in or
omissions from the Registration Statement or the Prospectus made in reliance
upon and in conformity with information relating to the Investors and any other
Selling Shareholders furnished to the Company in writing by or on their behalf
expressly for use therein.

            10.5 SALES OF REGISTERED SHARES. The Investors shall not effect any
disposition of the Registered Shares that would constitute a sale within the
meaning of the Securities Act except as contemplated in the Registration
Statement.

      11.   INDEMNIFICATION.

            11.1 INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and
hold harmless the Investors, their Affiliates, duly authorized agents and
Control Persons from and against any Liabilities and Litigation Expenses
incurred by the Indemnified Party in connection with any Proceeding to which the
Indemnified Party is, was or at any time becomes a party, arising from the
Company's breach of its representations and warranties under this Agreement or
its failure to perform any of its covenants contained in this Agreement.

            11.2 INDEMNIFICATION BY THE INVESTOR. Each Investor shall, jointly
and severally, indemnify and hold harmless the Company, its Affiliates, duly
authorized agents and Control Persons from and against any Liabilities and
Litigation Expenses incurred by the Indemnified Party in connection with any
Proceeding to which the Indemnified Party is, was or at any time becomes a
party, arising from the Investor's breach of its representations and warranties
under this Agreement or its failure to perform any of its covenants contained in
this Agreement.

            11.3 NOTICE AND DEFENSE OF CLAIM. The Indemnified Party shall
promptly notify the Indemnifying Party in writing of the commencement of any
Third Party Proceeding for which indemnification may be claimed hereunder,
PROVIDED that any failure to so notify the Indemnifying Party shall not relieve
it from its obligations under this Section 11. If it receives notice of a Third
Party Proceeding from the Indemnified Party, the Indemnifying Party may
participate in the Proceeding at its own expense and will be entitled to assume
the defense thereof with counsel of its choice unless counsel

                                       18
<Page>

for the Indemnifying Party reasonably concludes that there would be a conflict
of interest between the Indemnifying Party and the Indemnified Party that
precludes their joint representation under Applicable Law or ethical canons. If
the Indemnifying Party assumes the defense of the Third Party Proceeding, it
shall not be liable to the Indemnified Party for any Litigation Expenses
subsequently incurred by it in connection with the defense thereof, except to
the extent that the Indemnifying Party authorizes the Indemnified Party to
engage separate counsel or the Indemnifying Party or its counsel fails to act
with reasonable diligence in assuming the defense of the Proceeding, in each of
which events all Litigation Expenses thereafter incurred by the Indemnified
Party for employing separate counsel shall be subject to indemnification
hereunder. In no event shall the Indemnifying Party be obligated for the
Litigation Expenses of more than one separate counsel to represent all
Indemnified Parties in a particular Third Party Proceeding.

            11.4 ADVANCEMENT OF EXPENSES. Upon written request by the
Indemnified Party in connection with a Third Party Proceeding, the Indemnifying
Party shall promptly advance all Litigation Expenses incurred by or on behalf of
the Indemnified Party to the extent authorized under Section 11.3. The request
shall contain a reasonably detailed description of the Litigation Expenses or,
if available to the Indemnified Party, documentation evidencing the amount of
the Litigation Expenses. The Indemnified Party's right to advancement of
Litigation Expenses shall be conditioned upon its agreement to repay amounts
advanced if it is ultimately determined that the Indemnified Party is not
entitled to be indemnified for those Litigation Expenses under this Section 11.

            11.5 REMEDIES OF THE INDEMNIFIED PARTY. In the event that (a)
advances of Litigation Expenses pursuant to Section 11.4 are not timely made,
(b) payment of Liabilities or Litigation Expenses are not timely made after a
determination of entitlement to indemnification hereunder or (c) the Indemnified
Party otherwise seeks to enforce its rights under this Section 11, the
Indemnified Party shall be entitled to a final adjudication of its rights
hereunder in any court of competent jurisdiction in the venue specified in
Section 10.2 (an "Adjudication"). All Litigation Expenses reasonably incurred by
the Indemnified Party in connection with an Adjudication shall be borne by the
Indemnifying Party if the Indemnified Party is successful in the Adjudication.

            11.6 SETTLEMENT, COMPROMISE AND CONSENT. Without the prior written
consent of the Indemnified Party, the Indemnifying Party shall not settle any
Third Party Proceeding, permit a default judgment to be entered therein or
consent to the entry of any adverse judgment therein unless the settlement,
compromise or consent includes an unconditional release in favor of the
Indemnified Party by all claimants from any liability therein. The Indemnifying
Party shall not be liable to indemnify the Indemnified Party under this Section
11 for any amounts paid in settlement of a Third Party Proceeding effected
without its written consent, which the Indemnifying Party shall not unreasonably
withhold or delay.

            11.7 NONEXCLUSIVITY. The rights of the Indemnified Party under this
Section 11 shall not be deemed exclusive or in limitation of any other rights to
which the Indemnified Party may be entitled under Applicable Law.

            11.8 OTHER PAYMENTS. The Indemnifying Party shall not be liable to
make any payment under this Section 11 to the extent that the Indemnified Party
has received payment from a third party of the amounts otherwise payable by the
Indemnifying Party hereunder.

            11.9 SUBROGATION. The Indemnifying Party shall be subrogated, to the
extent of any indemnification payment under this Agreement, to all related
rights of recovery of the Indemnified Party,

                                       19
<Page>

and the Indemnified Party shall take all actions necessary to secure the
Indemnifying Party's recovery rights and perfect its ability to enforce those
rights.

      12.   TERMINATION

            12.1 INVESTOR TERMINATION EVENT. Provided that the Investors have
not materially breached any of their representations, warranties, covenants or
agreements contained herein, the Investor Representative may terminate this
Agreement and abandon the transactions contemplated hereby at any time prior to
the Closing if the Company shall have failed to satisfy in any material respect
any of the conditions set forth in Section 8 or any of those conditions shall
have become incapable of fulfillment and shall not have been waived by the
Investor Representative and the failure or nonfulfillment materially reduces the
benefits of the transactions contemplated hereby to the Investors.

            12.2 COMPANY TERMINATION EVENT. Provided that the Company has not
materially breached any of its representations, warranties, covenants or
agreements contained herein, it may terminate this Agreement and abandon the
transactions contemplated hereby at any time prior to the Closing if the
Investors shall have failed to satisfy in any material respect any of the
conditions set forth in Section 7 or any of those conditions shall have become
incapable of fulfillment and shall not have been waived by the Company and the
failure or nonfulfillment materially reduces the benefits of the transactions
contemplated hereby to the Company.

            12.3 OTHER TERMINATION EVENTS. This Agreement may be terminated and
the transactions contemplated hereby abandoned by the Parties if the Closing
does not occur on or prior to the Outside Closing Date, PROVIDED that the Party
seeking termination pursuant to this Section 12.3 is not in breach of its or
their material representations, warranties, covenants or agreements contained in
this Agreement.

            12.4 NOTICE OF TERMINATION. In the event the Company or the Investor
Representative seeks to terminate this Agreement pursuant to this Section 12, it
shall provide written notice thereof to the other Parties and the Escrow Agent,
setting forth in reasonable detail the grounds for termination, whereupon the
transactions contemplated by this Agreement shall be terminated, without further
action by any Party, subject to the provisions of Section 12.5.

            12.5 EFFECTS OF TERMINATION. If this Agreement is terminated and the
transactions contemplated hereby are abandoned as provided in this Section 12,
this Agreement shall become void and of no further force or effect, except that
(a) the Escrow Deposit shall be disbursed in accordance with the Escrow
Agreements, and (b) each Party shall return all documents and other material
received from or on behalf of the counter Party in connection with the
transactions contemplated hereby, together with all copies thereof, whether so
obtained before or after the execution hereof. All confidential information
received by a Party with respect to the business of the counter Party shall be
treated in accordance with the restrictions set forth in the LOI, and those
restrictions shall remain in full force and effect notwithstanding any
termination of this Agreement.

      13.   MISCELLANEOUS.

            13.1 CHOICE OF LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by a Party against the
counter Party concerning the transactions contemplated by this Agreement shall
be brought only in the state courts of New York or in the federal courts located
in New York City, New York. All Parties agree to submit to the jurisdiction of
those courts and waive trial by jury. The prevailing Party in any Proceeding
between the Parties shall be entitled to recover from the

                                       20
<Page>

counter Party its reasonable attorneys' fees and disbursements incurred in
connection with the Proceeding.

            13.2 ASSIGNMENT. Neither this Agreement nor any rights or
obligations of a Party hereunder may be assigned by any Party without the prior
written consent of the counter Party, except for an assignment of an Investor's
interest in this Agreement, in whole or in part, to any Affiliate of the
Investor, subject to the Company's receipt of (a) prior written notice of the
assignment and (b) an amendment to this Agreement, in form and substance
reasonably acceptable to the Company, executed by each Investor and providing
for (i) the addition of the assignee as an Investor hereunder and (ii)
appropriate modifications to ANNEX A.

            13.3 BINDING EFFECT. The terms, conditions and provisions of this
Agreement and all rights and obligations of each Party hereunder shall inure to
the benefit of and be binding upon that Party and its successors and permitted
assigns.

            13.4 NO THIRD-PARTY BENEFICIARIES. This Agreement and the Related
Agreements are for the sole benefit of the Parties hereto and the signatories
thereto, and nothing herein expressed or implied shall give or be construed to
give to any other Person any legal or equitable rights hereunder or thereunder.

            13.5 AMENDMENT. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by all the Parties.

            13.6 NOTICES. Any notice given under this Agreement shall be made in
writing and shall be deemed to have been duly given or made if delivered
personally, mailed with postage prepaid by registered or certified mail or sent
by courier or facsimile to a Party at its address set forth or provided below.
Any notice so sent shall be deemed to have been given or delivered (a) at the
time that it is personally delivered, (b) within two business days after the
date deposited in the United States mail or one business day after deposit with
an overnight courier if sent by mail or courier or (c) when receipt is
acknowledged, if sent by facsimile. A Party may change its address by giving
notice in writing, stating its new address, to the other Party.

      IF TO THE INVESTOR REPRESENTATIVE:

          Alpha Omega Group, Inc.
          350 Bedford Street - Suite 307
          Stamford, CT 06901

          Attention: ___________________

      IF TO THE COMPANY:

         Stage II Apparel Corp.
         1385 Broadway - 24th Floor
         New York, NY 10018

         Attention: Richard Siskind,
                    President and Chief Executive Officer

                                       21
<Page>

            13.7 FEES AND EXPENSES. Except as provided in Sections 2.7 and 12.5,
each Party shall pay its own expenses in connection with the transactions
contemplated by this Agreement.

            13.8 BROKERAGE. Each Party represents to the other Party that it has
had no dealings in connection with this transaction with any finder or broker
entitled to payment of any fee or commission from the other Party except as set
forth in Section 2.7.

            13.9 PUBLICITY. Except as required by Applicable Law, neither the
Company nor any Investor shall issue any press release or otherwise make any
public statement or announcement with respect to this Agreement or the
transactions contemplated hereby without the prior consent of the Investor
Representative, in the case of a statement or announcement by the Company, or
the Company, in the case of a statement or announcement by any Investor, which
shall not be unreasonably withheld, conditioned or delayed in either case.

            13.10 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits, together with the confidentiality provisions of the LOI, sets forth
the entire agreement and understanding of the Parties relating to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
negotiations and understandings between or among the Parties, both oral and
written, relating to the subject matter hereof.

            13.11 SEVERABILITY. In the event any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without that provision, severance of which shall not affect the validity or
enforceability of any other provision of this Agreement.

            13.12 WAIVER OF PROVISIONS. The waiver of compliance at any time
with any of the provisions, terms or conditions contained in this Agreement
shall not be considered a waiver of the provision, term or condition itself or
of any other provision, term or condition hereof.

            13.13 CAPTIONS. The headings and captions in this Agreement and in
the Schedules and Exhibits are for convenience and identification only and are
in no way intended to define, limit or expand the scope and intent of this
Agreement or any provision hereof.

            13.14 COUNTERPARTS. This Agreement may be executed in separate
counterparts that together will constitute one and the same instrument.

                                       22
<Page>

      IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by the undersigned as of the date first set forth above.

                                      STAGE II APPAREL CORP.

                                      By:___________________________________
                                         Richard Siskind,
                                         President and Chief Executive Officer

                                      ALPHA OMEGA GROUP, INC.

                                      By:___________________________________
                                         Name:
                                         Title:

                                       23
<Page>

                                                                         ANNEX A

                                  INVESTOR LIST

<Table>
<Caption>

                                JURISDICTION OF ORGANIZATION INVESTOR
NAME AND ADDRESS OF INVESTOR            PRIMARY RESIDENCE               PERCENTAGE
----------------------------    -------------------------------------   ----------

<S>                                   <C>                                  <C>
Alpha Omega Group, Inc.               Connecticut                          100%
350 Bedford Street - Suite 307
Stamford, CT 06901
</Table>

                               INVESTOR DESIGNEES

<Table>
<Caption>

NAME AND ADDRESS OF                 BIOGRAPHICAL INFORMATION FOR USE BY THE COMPANY IN
INVESTOR DESIGNEE                   THE PROXY STATEMENT
-------------------                 --------------------------------------------------

<S>                                 <C>
[To be added]
</Table>

<Page>

                      SCHEDULES TO STOCK PURCHASE AGREEMENT

      Capitalized terms used and not otherwise defined in these Schedules have
the respective meanings ascribed to them in the attached Stock Purchase
Agreement dated as of August 23, 2001 between Stage II Apparel Corp. and the
Investors listed therein.

SCHEDULE 4.2.

PROXY STATEMENT MATTERS FOR SHAREHOLDER APPROVAL

      1.    Issuance of the Investor Shares in accordance with AMEX Rule 341;

      2.    Charter Amendment increasing its authorized Common Stock from 9
            million shares to 100 million shares;

      3.    Issuance of Replacement Options pursuant to Replacement Option Plan;
            and

      4.    Effective as of the Closing Date and subject to the Closing,
            amendment to the Charter changing the Company's name as determined
            by the Investor Representative.

PROXY STATEMENT MATTER FOR NOTICE TO SHAREHOLDERS

      Board Reconstitution pursuant to Rule 14f-1 under the Exchange Act

SCHEDULE 4.3.

DERIVATIVE SECURITIES

<Table>
<Caption>

                                                                  COMMON STOCK
                                            EXERCISE              ISSUABLE UPON
DERIVATIVE INSTRUMENTS                        PRICE                 EXERCISE
----------------------                      --------              --------------
<S>                                          <C>                     <C>
Stock Options issued under the Option Plans:
  1994 and 1998 ISO Plans.................   $.30 - $1.00            1,106,000
  1998 NSO Plan...........................       $.75                  900,000
  1998 Mirror Option Plan(1)..............   $.50 - $1.50            1,476,000
Other Derivative Securities...............        N/A                      ---
                                                                     ---------

  TOTAL DERIVATIVE SECURITIES                                        3,392,000
                                                                     =========
</Table>

----------

   (1) Subject to exercise of Founder Options (as defined in the Plan)

REGISTRATION OF CAPITAL SHARES

      The Company has filed a registration statement on Form S-8 (Reg. No.
333-31684) covering the resale of Common Stock issuable under the Option Plans.

                                       24
<Page>

SCHEDULE 4.11.

TRADEMARKS

      1. Trademark for MAIN EVENT, Registration No. 1,233,642

      2. Trademark for PRO TOUR, Registration No. 1,133,121

      3. Trademark for TIMBER RUN, Registration No. 1,207,349

      4. Trademark for CROSS COLOURS, Registration No. __________.

LICENSES

      The Company has an exclusive license acquired in August 1999 to use the
STANLEY BLACKER trademark for men's activewear, swimwear, jeans, sleepwear and
loungewear, as well as various categories of accessories. The Company is
currently in negotiations for termination of the license at an estimated cost
not to exceed $30,000.

SCHEDULE 4.12.

MATERIAL ADVERSE CHANGE

None

SCHEDULE 4.15.

LITIGATION

      In February 2001, the Company brought an action in New York County Supreme
Court against Wear Me Apparel Corp. for unpaid royalties aggregating in excess
of $1.5 million under a license agreement entered with Stage II in October 1999.
The agreement provided an exclusive license to the Kid's Headquarters division
of Wear Me Apparel for manufacturing and distribution of boys' sportswear lines
under the CROSS COLOURS trademark, with a scheduled launch for the Fall 2000
season. The licensee filed counterclaims seeking the return of an initial
$100,000 payment under the agreement, and the Company filed an answer denying
any liability and interposing various affirmative defenses.

      The Company was joined as a party in JAY KOSLOW V. STAGE II APPAREL CORP.
AND TOWNSLEY LTD., which was originally filed in June 1995 in the Supreme Court
of the State of New York, County of New York, under Index No. 118726/95, seeking
collection of sales commissions allegedly due from Townsley, Ltd., which was
subsequently acquired by the Company. Pursuant to an order dated January 30,
1998, the complaint was amended to substitute Jay Koslow, an individual, as
plaintiff, and on July 10, 1998, the Company answered the amended complaint,
denying liability and asserting several affirmative of defenses. Some discovery
has taken place in this case, but no trial date has been set.

      The Company is a party to an action entitled HELLER HOROWITZ AND FEIT,
P.C. V. STAGE II APPAREL CORP., filed in New York County Supreme Court under
Index No. 605792/97 in 1997. This is an action

                                       2
<Page>

for legal fees by the plaintiff, a law firm, for approximately $11,000.00. The
Company has filed an answer denying any liability to the plaintiff.

      The Company is a party to an action entitled LINMARK V. STAGE II APPAREL
CORP., filed in New York County Supreme Court under Index No. 600970/00 in 2000,
seeking sales commissions allegedly due a former sales representative located in
Hong Kong in the amount of $141,000.00. The Company has filed an answer and
counterclaim denying any liability to the plaintiff and seeking damages under
its counterclaim in excess of the amount claimed by the plaintiff.

                                       3
<Page>

                                                                       EXHIBIT A

                            FORM OF ESCROW AGREEMENT

      This ESCROW AGREEMENT is entered into as of the 23rd day of August, 2001
by and among STAGE II APPAREL CORP., a New York corporation (the "COMPANY"),
ALPHA OMEGA GROUP, INC., a Connecticut corporation (the "INVESTOR
REPRESENTATIVE"), and GOETZ, FITZPATRICK, MOST & BRUCKMAN, LLP, a New York
limited liability partnership, as escrow agent (the "ESCROW AGENT").

                                    RECITALS

      A. The Company and the Investor Representative are parties to Stock
Purchase Agreement of even dated herewith (the "SPA") providing, among other
things, for the Company's issuance to the investors named therein (the
"INVESTORS") of common stock representing a controlling interest in the Company
(the "INVESTOR SHARES").

      B. To induce the Company to enter into the SPA, the Investors have agreed
to deposit $200,000 with the Escrow Agent (the "ESCROW Deposit") to be held and
disbursed in accordance with the terms set forth in this Agreement.

      Accordingly, the parties hereby agree as follows:

                                    AGREEMENT

      1.    DEFINITIONS AND CONSTRUCTION.

            1.1 DEFINITIONS. As used in this Agreement, the following terms have
the respective meanings set forth below:

      "AGREEMENT" means this Escrow Agreement, as amended from time to time.

      "APPLICABLE LAW" means, with respect to a Party, any legislation,
regulation, rule or procedure passed, adopted, implemented or amended by any
federal, state, local or foreign governmental or legislative body, or any notice
of a decision, finding or action by any federal, state, local or foreign
governmental agency, court or other administrative body, in each case to the
extent it has become effective, binding on the Party, its assets or operations
or applicable to the subject matter or its performance of this Agreement, from
and after the date compliance therewith is mandated by the terms thereof.

      "CLOSING" means the closing of the offering and sale of the Investor
Shares pursuant to Section 2 of the SPA.

       "CLOSING DATE," "CLOSING NOTICE" and "OUTSIDE CLOSING DATE" have the
respective meanings set forth in Section 4.

      "COMPANY" means Stage II Apparel Corp., a New York corporation, and its
successors and permitted assigns.

      "ESCROW AGENT" means Goetz, Fitzpatrick, Most & Bruckman, LLP, a New York
limited liability partnership, and its successors and permitted assigns.

<Page>

      "INVESTOR REPRESENTATIVE" means Alpha Omega Group, Inc., a Connecticut
corporation, and its successors and permitted assigns.

       "INVESTORS" and "INVESTOR SHARES" have the respective meanings set forth
in Recital A.

      "PARTY" means the Company, the Investor Representative, the Escrow Agent
and their respective successors or permitted assigns.

      "PERSON" means an individual, corporation, partnership, association,
limited liability company, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

      "PRINCIPAL PARTY" means each of the Company and the Investor
Representative.

      "PROCEEDING" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative or any appeal therein.

      "SPA" has the meaning set forth in Recital A.

            1.2 CONSTRUCTION. Unless otherwise expressly provided herein, all
references to Recitals or Sections refer to the corresponding recitals or
sections of this Agreement.

      2. APPOINTMENT OF ESCROW AGENT. The Principal Parties hereby appoint the
Escrow Agent to serve as escrow agent in accordance with the terms of this
Agreement, and the Escrow Agent hereby accepts the appointment.

      3. DELIVERY OF ESCROW DEPOSIT. On the date hereof, the Investor
Representative will deliver to the Escrow Agent a certified or bank check in the
amount of the Escrow Deposit. The Escrow Agent will hold the proceeds therefrom
in a segregated escrow account at a money center bank in New York City and will
not provide any Person with access thereto unless specifically authorized
hereunder.

      4. DISTRIBUTION OF ESCROW DEPOSIT AT CLOSING. If the Escrow Agent receives
from the Investor Representative, on or before November 30, 2001 (the "OUTSIDE
CLOSING DATE"), a written notice addressed to the Company and the Escrow Agent
(the "CLOSING NOTICE") setting forth, among other things, the date of the
Closing (the "CLOSING DATE"), the Escrow Agent will disburse the Escrow Deposit
to the Company at the Closing in immediately available funds.

      5.    DISTRIBUTION OF ESCROW DEPOSIT UPON TERMINATION.

            5.1 TERMINATION UNDER SECTION 12.1 OF THE SPA. If the Escrow Agent
receives from the Investor Representative, on or before the Outside Closing
Date, a written notice addressed to the Company and the Escrow Agent, certifying
that the Investors have not materially breached any of their representations,
warranties, covenants or agreements contained in the SPA and stating its
election to terminate the SPA in accordance with Section 12.1 thereof, then the
Escrow Agent will disburse the Escrow Deposit to the Investor Representative
five (5) business days thereafter, PROVIDED no notice is theretofore received
from the Company objecting to Investor Representative's right to termination the
SPA pursuant to Section 12.1 thereof.

                                       2
<Page>

            5.2 TERMINATION UNDER SECTION 12.2 OF THE SPA. If the Escrow Agent
receives from the Company, on or before the Outside Closing Date, a written
notice addressed to the Investor Representative and the Escrow Agent, certifying
that the Company has not materially breached any of its representations,
warranties, covenants or agreements contained in the SPA and stating its
election to terminate the SPA in accordance with Section 12.2 thereof, then the
Escrow Agent will disburse the Escrow Deposit to the Company five (5) business
days thereafter, PROVIDED no notice is theretofore received from the Investor
Representative objecting to Company's right to termination the SPA pursuant to
Section 12.2 thereof.

            5.3 TERMINATION UNDER SECTION 12.3 OF THE SPA. If the Escrow Agent
receives from a Principal Party, after the Outside Closing Date, a written
notice addressed to the other Principal Party and the Escrow Agent, certifying
that it (and the other Investors if the notice is from the Investor
Representative) has not materially breached any of its (or their)
representations, warranties, covenants or agreements contained in the SPA and
stating its election to terminate the SPA in accordance with Section 12.3
thereof, then the Escrow Agent will disburse the Escrow Deposit to the notifying
Party five (5) business days thereafter, PROVIDED no notice is theretofore
received from the other Principal Party objecting to notifying Party's right to
termination the SPA pursuant to Section 12.3 thereof.

      6.    FEES. As consideration for its services as Escrow Agent hereunder,
each of the Company and the Investor Representative will pay the Escrow Agent an
administration fee of $______, payable in advance upon the execution hereof.

      7.    RIGHTS AND OBLIGATIONS OF THE ESCROW AGENT. The Escrow Agent shall
have the following rights, privileges, obligations and immunities hereunder:

            7.1 EXCULPATION. The Escrow Agent shall have no responsibility
except for the deposit and distribution of the Escrow Deposit in accordance with
the terms of this Agreement. The Escrow Agent shall not be liable for any act
done or omitted to be done under this Agreement, except as a result of its gross
negligence or willful misconduct.

            7.2 DISPUTE RESOLUTION. If any question, dispute or disagreement
arises among the Principal Parties with respect to the disbursement of the
Escrow Deposit or the interpretation of this Agreement, the Escrow Agent shall
not be required to act and shall not be held liable for refusal to act until the
question or dispute is settled, and the Escrow Agent shall have the right at its
discretion to do either or both of the following:

                  (i) withhold or stop all further performance under this
Agreement until the Escrow Agent is satisfied, by receipt of a written document
in form and substance satisfactory to the Escrow Agent, that the question,
dispute or disagreement had been resolved; or

                  (ii) file a suit in interpleader and obtain by final judgment,
rendered by a court of competent jurisdiction, an order binding all parties
interested in the matter. In any such suit, or should the Escrow Agent become
involved in litigation in any manner whatsoever on account of this Agreement,
the Escrow Agent shall be entitled to recover its attorneys' fees and costs in
accordance with Section 8.

            7.3 RELIANCE ON COUNSEL. The Escrow Agent may consult with counsel
of its own choice and shall not be liable for any action taken or suffered by it
hereunder in good faith and believed by it to be authorized hereby, nor for
action taken or omitted by it in accordance with the advice of its counsel,
which shall not be counsel for any of the Principal Parties.

                                       3
<Page>

            7.4 RELIANCE ON INSTRUMENTS. The Escrow Agent shall be obligated
only for the performance of the duties specifically set forth in this Agreement
and may rely and shall be protected in acting or refraining from acting upon any
written notice, instruction or request furnished to it hereunder and believed by
it to be genuine and to have been signed or presented by the proper party or
parties and to take statements made therein as authorized and correct without
any affirmative duty of investigation.

      8.    INDEMNIFICATION. To the fullest extent permitted by Applicable Law,
each Principal Party will indemnify and hold harmless the Escrow Agent and its
shareholders, directors, officers, employees and agents from and against any and
all judgments, penalties, fines and amounts paid in settlement (including any
interest assessments or other charges payable in connection therewith), and all
reasonable expenses, including attorneys' fees, incurred in the absence of gross
negligence or willful misconduct on the part of the Escrow Agent, arising out of
or in connection with the performance of its duties hereunder. This covenant
shall survive the termination of this Agreement.

      9.    RESIGNATION. The Escrow Agent reserves the right to resign
hereunder, upon ten (10) days prior written notice to the Principal Parties. In
the event of the Escrow Agent's resignation, and prior to the effective date
thereof, the Principal Parties will designate, by written notice to Escrow
Agent, a successor agent to assume the responsibilities of Escrow Agent under
this Agreement, and Escrow Agent shall immediately deliver to the successor
escrow agent all copies of the source code held hereunder. If the Principal
Parties fail to designate a successor escrow agent within the foregoing time
period, the Escrow Agent may deliver the Escrow Deposit held by it into the
registry of any court having jurisdiction.

      10.   TERM; TERMINATION. The term of this Agreement shall commence on the
date hereof and terminate upon disbursement of the Escrow Deposit in accordance
with the terms hereof.

      11.   MISCELLANEOUS.

            11.1 CHOICE OF LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws.

            11.2 ASSIGNMENT. Neither this Agreement nor any rights or
obligations of a Party hereunder may be assigned by any Party without the prior
written consent of the other Parties.

            11.3 BINDING EFFECT. The terms, conditions and provisions of this
Agreement and all rights and obligations of each Party hereunder shall inure to
the benefit of and be binding upon that Party and its successors and permitted
assigns.

            11.4 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the Parties, and nothing herein expressed or implied shall give or be
construed to give to any other Person any legal or equitable rights hereunder or
thereunder.

            11.5 AMENDMENT. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by all the Parties.

            11.6 NOTICES. Any notice given under this Agreement shall be made in
writing and shall be deemed to have been duly given or made if delivered
personally, mailed with postage prepaid by registered or certified mail or sent
by courier or facsimile to a Party at its address set forth or provided below.
Any notice so sent shall be deemed to have been given or delivered (a) at the
time that it is personally delivered, (b) within two business days after the
date deposited in the United States mail or one business day after deposit with
an overnight courier if sent by mail or courier or (c) when receipt is

                                       4
<Page>

acknowledged, if sent by facsimile. A Party may change its address by giving
notice in writing, stating its new address, to the other Party.

      IF TO THE INVESTOR REPRESENTATIVE:

          Alpha Omega Group, Inc.
          350 Bedford Street - Suite 307
          Stamford, CT 06901

          Attention: ___________________

      IF TO THE COMPANY:

         Stage II Apparel Corp.
         1385 Broadway - 24th Floor
         New York, NY 10018

         Attention:  Richard Siskind,
                     President and Chief Executive Officer

      IF TO THE ESCROW AGENT:

          Goetz, Fitzpatrick, Most & Bruckman, LLP
          One Penn Plaza
          New York, NY 10019
          Attention:  Barry Fertel, Esq.

            11.7 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of the Parties relating to the subject matter hereof
and supersedes all prior and contemporaneous agreements, negotiations and
understandings among the Parties, both oral and written, relating to the subject
matter hereof.

            11.8 SEVERABILITY. In the event any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without that provision, severance of which shall not affect the validity or
enforceability of any other provision of this Agreement.

            11.9 WAIVER OF PROVISIONS. The waiver of compliance at any time with
any of the provisions, terms or conditions contained in this Agreement shall not
be considered a waiver of the provision, term or condition itself or of any
other provision, term or condition hereof.

            11.10 CAPTIONS. The headings and captions in this Agreement are for
convenience and identification only and are in no way intended to define, limit
or expand the scope and intent of this Agreement or any provision hereof.

                                       5
<Page>

            11.12 COUNTERPARTS. This Agreement may be executed in separate
counterparts that together will constitute one and the same instrument.

      IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by the undersigned as of the date first set forth above.

                                        STAGE II APPAREL CORP.

                                        By:___________________________________
                                           Richard Siskind,
                                           President and Chief Executive Officer

                                        ALPHA OMEGA GROUP, INC.

                                        By:___________________________________
                                           Name:
                                           Title:

                                        GOETZ, FITZPATRICK, MOST &
                                          BRUCKMAN, LLP

                                        By:___________________________________
                                           Name:
                                           Title:

                                       6
<Page>

                                                                       EXHIBIT B

                          FORM OF MANAGEMENT AGREEMENT

      This MANAGEMENT AGREEMENT is entered into as of the __ day of ______, 2001
(the "EFFECTIVE DATE") by and among STAGE II APPAREL CORP., a New York
corporation (the "COMPANY"), R. SISKIND AND COMPANY, INC., a New York
corporation ("RSC"), and Richard Siskind ("RS").

                                    RECITALS

      A. RS is a controlling shareholder, director and the chief executive
officer of the Company and is the principal shareholder of RSC.

      B. At the direction of RS, RSC has provided various accommodations to the
Company, including advances aggregating $[403,000] (the "RSC DEBT"), apparel
inventory sale services from RSC personnel ("INVENTORY SERVICES") and use of the
showroom space within the RSC offices at 1385 Broadway, New York, New York
allocated to the Company's operations as of the Effective Date ("LICENSED
SPACE").

      C. The Company is a party to Stock Purchase Agreement dated as of August
23, 2001 with the investors named therein (the "SPA") providing, among other
things, for a change in control, management and location of the Company (the
"REDIRECTION").

      D. In connection with the closing of the transactions contemplated by the
SPA (the "CLOSING"), the parties desire to implement applicable provisions of
the SPA relating to the Redirection, restructure the RSC Debt and to provide for
transitional services from RS on the terms and conditions set forth in this
Agreement.

      Accordingly, the parties hereby agree as follows:

                                    AGREEMENT

      1.    DEFINITIONS AND CONSTRUCTION.

            1.1 DEFINITIONS. As used in this Agreement, the following terms have
the respective meanings set forth below:

      "ADJUDICATION" has the meaning set forth in Section 7.4.

      "AFFILIATE" has the meaning set forth in Rule 405 under the Securities
Act.

      "AGREEMENT" means this Management Agreement, as amended from time to time.

      "APPLICABLE LAW" means, with respect to a Party, any legislation,
regulation, rule or procedure passed, adopted, implemented or amended by any
federal, state, local or foreign governmental or legislative body, or any notice
of a decision, finding or action by any federal, state, local or foreign
governmental agency, court or other administrative body, in each case to the
extent it has become effective, binding on the Party, its assets or operations
or applicable to the subject matter or its performance of this Agreement, from
and after the date compliance therewith is mandated by the terms thereof.

<Page>

      "BOARD" means the board of directors of the Company.

      "CIT" means CIT Group/Commercial Services, Inc. and its successors and
assigns.

      "CLOSING" has the meaning set forth in Recital D.

      "COMPANY" means Stage II Apparel Corp., a New York corporation, and its
successors and permitted assigns.

      "CONTROL PERSON" means any Person who controls or is controlled (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) by a Party.

      "CREDIT FACILITY" means the factoring, letter of credit and loan facility
provided to the Company by CIT under agreements dated as of May 11, 1998, as
amended.

      "EFFECTIVE DATE" means the date first set forth above.

      "FACTOR DEBT" means the indebtedness of the Company to CIT under the
Credit Facility with the CIT Group/Commercial Services, Inc.

      "INDEMNIFIED PARTY" means a Person claiming indemnification under Section
7.

      "INDEMNIFYING PARTY" means a Party against which a claim for
indemnification is asserted under Section 7.

      "INFORMATION" has the meaning set forth in Section 6.1

      "INVENTORY SERVICES" has the meaning set forth in Recital B, as amplified
in Section 3.

      "LIABILITIES" means judgments, penalties (including excise and similar
taxes), fines and amounts paid in settlement, including in each case any
interest assessments or other charges payable in connection therewith.

      "LICENSED SPACE" has the meaning set forth in Recital B.

      "LICENSE TERM" has the meaning set forth in Section 2.1.

      "LITIGATION EXPENSES" means reasonable expenses incurred in connection
with a Proceeding, including attorneys' fees, retainers and disbursements, court
costs, experts' fees, travel expenses and printing costs.

      "PARTY" means the Company, RSC, RS and their respective successors,
personal representatives or permitted assigns.

      "PERSON" means an individual, corporation, partnership, association,
limited liability company, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

                                       2
<Page>

      "PROCEEDING" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative or any appeal therein.

      "REDIRECTION" has the meaning set forth in Recital C.

      "RS" means Richard Siskind.

      "RSC" means R. Siskind and Company, Inc., a New York corporation, and its
successors and permitted assigns.

      "RSC DEBT" has the meaning set forth in Recital B and is evidenced by a
promissory note of the Company dated May __, 2001, bearing interest at the rate
of 8% per annum.

      "RS GUARANTY" means the Guaranty dated as of May 11, 1998 issued by RS to
CIT with respect to a portion of the Company's indebtedness under the Credit
Facility.

      "SETTLEMENT NET PROCEEDS" means payments received by the Company pursuant
to any settlement of the Wear Me Apparel Case, net of all Litigation Expenses
payable by the Company in connection therewith.

      "THIRD PARTY PROCEEDING" means and Proceeding first threatened or
initiated after the Effective date by a Person other than a Party or
derivatively on behalf of a Party.

      "WEAR ME APPAREL CASE" means the Company's pending Proceeding against Wear
Me Apparel Corp. for collection of unpaid royalties, described in Schedule 4.13
to the SPA.

            1.2 CONSTRUCTION. Unless otherwise expressly provided herein, all
references to Recitals or Sections refer to the corresponding recitals or
sections of this Agreement.

      2.    LICENSED SPACE.

            2.1 TRANSITIONAL LICENSE. To facilitate the Redirection, RSC hereby
grants the Company a license to use the Licensed Space for transitional showroom
space, pending its relocation, for a term (the "LICENSE TERM") commencing on the
Effective Date and ending on the earlier of (a) five months thereafter or (b)
the sale and shipment of all or substantially all the Company's apparel
inventory in place as of the Effective Date. The Company shall have no fixed
license fee or rent obligation to RSC for the license granted hereunder, but
shall reimburse RSC upon invoicing for all allocable out-of pocket expenses
incurred by RSC for the Company's account in connection with the Licensed Space,
including telephone and electricity charges.

            2.2 ACCEPTANCE. The Company accepts the License Space "as is" in its
condition and state of repair as of the Effective Date, and RSC shall have no
obligation to perform or pay or any work on the Licensed Space for continued use
by the Company.

            2.3 COVENANTS OF THE COMPANY. The Company shall keep and maintain
the Licensed Space in good order and refrain from disturbing any other tenants,
licensees or occupants by its use of the Licensed Space. Upon the expiration of
the License Term or prior relocation by the Company, its shall vacate and
surrender the Licensed Space to RSC in the same condition and state of repair as
on the Effective Date. The Company shall comply with building regulations and
Applicable Law in its use of

                                       3
<Page>

the Licensed Space and shall indemnify RSC and hold it harmless from and against
any Liabilities and Litigation Expenses arising from any breach of its covenants
in this Section 2.3.

            2.4 RELEASE OF PRIOR OBLIGATIONS. RSC hereby releases, acquits and
forever discharges the Company from and against any and all claims, obligations
or other liabilities of any kind or character arising from or in any way
connected with or related to the Company's use of the Licensed Space prior to
the Effective Date.

      3.    INVENTORY SERVICES.

            3.1 SCOPE OF SERVICES. During the License Term, RSC shall provide
the Company with continuing Inventory Services from RSC personnel, at no cost to
the Company except as provided in Section 3.3, with a view to assisting the
Company sell its apparel inventory in place as of the Effective Date by the end
of the License Term and repay outstanding Factor Debt with proceeds of those
sales.

            3.2 INVENTORY CONTROLS AND RECORDKEEPING. RSC's administrative
personnel assigned to the Inventory Services hereunder shall (a) assist the
Company maintain its existing system of internal controls sufficient to provide
reasonable assurances that all transactions involving Inventory Services are
executed in accordance with prior practices and (b) record all transactions
involving Inventory Services on the Company's books of account as necessary to
permit preparation of its financial statements in conformity with generally
accepted accounting principles consistently applied.

            3.3 COVENANTS OF THE COMPANY. The Company shall reimburse RSC upon
invoicing for all allocable out-of pocket expenses incurred by RSC for the
Company's account in connection with the Inventory Services, including shipping
and warehousing charges and sales commissions.

      4.    SERVICES OF RS; RSC DEBT RESTRUCTURING.

            4.1 INVENTORY MANAGEMENT. During the License Term, RS shall
supervise RSC personnel assigned to perform Inventory Services and shall use his
best efforts to maximize the Company's net sales from the sale of its apparel
inventory in place as of the Effective Date.

            4.2 LITIGATION MANAGEMENT. During the License Term and thereafter so
long as the Wear Me Apparel Case is pending, the Company shall continue to
utilize Goetz Fitzpatrick Most & Bruckman, LLP as its sole counsel therein and
shall pay invoices of that firm for ongoing professional services within 30 days
after the applicable invoice date. Except as provided in the last sentence of
this Section 4.2, during the License Term and thereafter so long as the Wear Me
Apparel Case is pending, (a) RS shall have sole and complete control over the
management and conduct of the Wear Me Apparel Case, including any settlement
negotiations, and (b) the Company (i) shall accept and implement any proposal
recommended by RS for settlement of the Wear Me Apparel Case, (ii) shall not,
without the prior written consent of RSC, settle the Wear Me Apparel Case or any
Third Party Proceeding against the Company, permit a default judgment to be
entered therein or consent to the entry of any adverse judgment therein, and
(iii) shall permit RS to participate in any negotiations for settlement of the
Third Party Proceedings to which the Company is a party as of the Effective
Date. RCS shall consent to any proposal for settlement of the Wear Me Apparel
Case providing for Settlement Net Proceeds sufficient to repay in full all
Factor Debt and RSC Debt then outstanding, and RS shall relinquish control over
the management and conduct of the Wear Me Apparel Case upon implementation of
settlement agreement to the foregoing effect.

            4.3 OTHER TRANSITIONAL MATTERS. During the License Term, RS shall
confer and cooperate with the Company's management to assist it in resolving any
other transitional matters arising in

                                       4
<Page>

connection with the Redirection. During the first 12 months after the Effective
Date, provided the Company has not breached any of its covenants in this
Agreement and the SPA, RS shall not offer to sell or sell any of his shares of
Common Stock.

            4.4 NATURE AND SCOPE OF RS SERVICES. During the License Term, RS
shall have the right to retain the office and authority of President of the
Company pending the sale of all or substantially all the Company's apparel
inventory in place as of the Effective Date, whereupon the relationship of RS
with the Company shall automatically change from an employment to a consulting
relationship. The Company acknowledges that, in either capacity, RS shall devote
to the services contemplated by this Section 4 only the time he determines to be
reasonably necessary to fulfill his undertakings herein, and nothing in this
Agreement shall prohibit RS from devoting a substantial portion of his
professional time to the operations of RSC throughout the License Term.

            4.5 SALARY, FEES AND EXPENSES. In consideration for RS's services
hereunder, the Company shall (a) pay RS, for the same period as the License Term
or, if longer, a period of three months after the Effective Date installments of
base salary or consulting fees, as the case may be, at the rate of $16,667 per
month, payable weekly in arrears, and (b) reimburse RS, upon presentation of
documentation adequate to establish deductibility of expenses for federal income
tax purposes, for all travel and related expenses reasonably incurred in
connection with those services.

            4.6 RSC Debt Restructuring. To accommodate the Redirection, RSC
hereby agrees to limit its recourse for repayment of the RSC Debt to Settlement
Net Proceeds or, in the event the Wear Me Apparel Case proceeds to trial, to the
Company's proceeds (net of Litigation Expenses) from any judgment in the Wear Me
Apparel Case. The Company's promissory note evidencing the RSC Debt is hereby
amended accordingly.

      5.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. To induce
RS and RSC to enter into this Agreement and perform their respective
undertakings herein, the Company covenants and agrees or represents and warrants
as follows:

            5.1 PURCHASE ORDERS. So long as the RS Guaranty or any RSC Debt is
outstanding, the Company shall not sell any of its apparel inventory in place as
of the Effective Date without prior consultation with RS or prior consent of
RSC.

            5.2 LITIGATION MATTERS. After the Closing, the Company shall
continue to utilize Goetz Fitzpatrick Most & Bruckman, LLP as its sole trial
counsel in the Wear Me Apparel Case and shall pay invoices of that firm for
ongoing professional services in a timely manner. So long as the RS Guaranty or
any RSC Debt is outstanding, the Company shall accept and implement any
recommended proposal for settlement of the Wear Me Apparel Case in accordance
with Section 4.2 and shall not, without the prior written consent of RSC, settle
the Wear Me Apparel Case or any Third Party Proceeding against the Company,
permit a default judgment to be entered therein or consent to the entry of any
adverse judgment therein. The Company shall apply any Settlement Net Proceeds or
proceeds from any judgment in the Wear Me Apparel Case (a) first to repay in
full all outstanding RSC Debt and (b) second to repay in full any outstanding
Factor Debt.

            5.3 SPA PERFORMANCE ACTIONS. The Company shall timely and fully
perform all of its undertakings in the SPA required to be performed after the
Effective Date.

            5.4 REMEDIES. The Company acknowledges that damages at law will be
an insufficient remedy in the event that it violates the terms of this Section 5
and that the other Parties may apply for and

                                       5
<Page>

obtain immediate injunctive relief in any court of competent jurisdiction to
restrain the breach or threatened breach of the Company's undertakings and
covenants contained herein.

            5.5 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to RS and RSC that (a) its execution and delivery of this Agreement and
performance of its undertakings herein have been duly authorized by all
necessary corporate action, (b) this Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights and to other equitable principles of general application,
and (c) the execution, delivery and performance of this Agreement by the Company
do not and will not (i) result in a violation of the Certificate of
Incorporation or Bylaws, (ii) conflict with or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or cancellation of,
any material agreement to which the Company is a party, or (iii) result in a
violation of any Applicable Law.

      6.    CONFIDENTIAL INFORMATION.

            6.1 INFORMATION. RS and RSC acknowledge that their performance of
this Agreement will entail confidential affairs of the Company that may include
information about its costs, profits, markets, sales, products, key personnel,
pricing policies, operational methods, concepts, technical processes and
applications, as well as other business affairs and methods not generally
available to the public (collectively, "INFORMATION"). For purposes of this
Agreement, Information shall not include information that (a) is in the public
domain at the time of disclosure to the recipient, (b) become becomes part of
the public domain after disclosure to the recipient through no fault, act or
failure to act, error or breach of this Agreement by the recipient, (c) is known
to the recipient at the time of disclosure, or (d) is required by Applicable Law
to be disclosed to any court or other governmental body, PROVIDED that the
recipient shall notify the Company thereof to provide or afford it the
opportunity to obtain a protective order or other relief.

            6.2 PROTECTION OF INFORMATION. RS and RSC each agree that it (a)
shall keep all Information strictly confidential, (b) shall not disclose any
Information to any employees or agents of RSC, other than those who have a need
to know and are subject to confidentiality obligations substantially similar to
those provided herein, (c) shall not disclose any Information to anyone other
than the foregoing employees and agents, except with the Company's prior written
consent, and (d) shall not use any Information, directly or indirectly, for his
or its own benefit or the benefit of any Affiliate.

            6.3 REMEDIES. RS and RSC each acknowledge that damages at law will
be an insufficient remedy in the event that he or it violates the terms of this
Section 6 and that the Company may apply for and obtain immediate injunctive
relief in any court of competent jurisdiction to restrain the breach or
threatened breach of their undertakings and covenants contained herein.

      7.    INDEMNIFICATION.

            7.1 INDEMNIFICATION BY THE COMPANY. Except to the extent
attributable to the willful misconduct or gross negligence of RS or RSC, the
Company shall indemnify RS, RSC, their Affiliates, duly authorized agents and
Control Persons from and against any Liabilities and Litigation Expenses
incurred by the Indemnified Party in connection with any Proceeding to which the
Indemnified Party is, was or at any time becomes a party by reason of the
Inventory Services or other services contemplated hereby, provided the
Indemnified Party acted in good faith and in a manner reasonably believed to be
in or not opposed to the best interest of the Company in the performance of
those services.

                                       6
<Page>

            7.2 NOTICE AND DEFENSE OF CLAIM. The Indemnified Party shall
promptly notify the Indemnifying Party in writing of the commencement of any
Third Party Proceeding for which indemnification may be claimed hereunder,
PROVIDED that any failure to so notify the Indemnifying Party shall not relieve
it from its obligations under this Section 7. If it receives notice of a Third
Party Proceeding from the Indemnified Party, the Indemnifying Party may
participate in the Proceeding at its own expense and will be entitled to assume
the defense thereof with counsel of its choice unless counsel for the
Indemnifying Party reasonably concludes that there would be a conflict of
interest between the Indemnifying Party and the Indemnified Party that precludes
their joint representation under Applicable Law or ethical canons. If the
Indemnifying Party assumes the defense of the Third Party Proceeding, it shall
not be liable to the Indemnified Party for any Litigation Expenses subsequently
incurred by it in connection with the defense thereof, except to the extent that
the Indemnifying Party authorizes the Indemnified Party to engage separate
counsel or the Indemnifying Party or its counsel fails to act with reasonable
diligence in assuming the defense of the Proceeding, in each of which events all
Litigation Expenses thereafter incurred by the Indemnified Party for employing
separate counsel shall be subject to indemnification hereunder. In no event
shall the Indemnifying Party be obligated for the Litigation Expenses of more
than one separate counsel to represent all Indemnified Parties in a particular
Third Party Proceeding.

            7.3 ADVANCEMENT OF EXPENSES. Upon written request by the Indemnified
Party in connection with a Third Party Proceeding, the Indemnifying Party shall
promptly advance all Litigation Expenses incurred by or on behalf of the
Indemnified Party to the extent authorized under Section 7.3. The request shall
contain a reasonably detailed description of the Litigation Expenses or, if
available to the Indemnified Party, documentation evidencing the amount of the
Litigation Expenses. The Indemnified Party's right to advancement of Litigation
Expenses shall be conditioned upon its agreement to repay amounts advanced if it
is ultimately determined that the Indemnified Party is not entitled to be
indemnified for those Litigation Expenses under this Section 7.

            7.4 REMEDIES OF THE INDEMNIFIED PARTY. In the event that (a)
advances of Litigation Expenses pursuant to Section 7.4 are not timely made, (b)
payment of Liabilities or Litigation Expenses are not timely made after a
determination of entitlement to indemnification hereunder or (c) the Indemnified
Party otherwise seeks to enforce its rights under this Section 7, the
Indemnified Party shall be entitled to a final adjudication of its rights
hereunder in any court of competent jurisdiction in the venue specified in
Section 9.2 (an "ADJUDICATION"). All Litigation Expenses reasonably incurred by
the Indemnified Party in connection with an Adjudication shall be borne by the
Indemnifying Party if the Indemnified Party is successful in the Adjudication.

            7.5 SETTLEMENT, COMPROMISE AND CONSENT. Without the prior written
consent of the Indemnified Party, the Indemnifying Party shall not settle any
Third Party Proceeding, permit a default judgment to be entered therein or
consent to the entry of any adverse judgment therein unless the settlement,
compromise or consent includes an unconditional release in favor of the
Indemnified Party by all claimants from any liability therein. The Indemnifying
Party shall not be liable to indemnify the Indemnified Party under this Section
7 for any amounts paid in settlement of a Third Party Proceeding effected
without its written consent, which the Indemnifying Party shall not unreasonably
withhold or delay.

            7.6 NONEXCLUSIVITY. The rights of the Indemnified Party under this
Section 7 shall not be deemed exclusive or in limitation of any other rights to
which the Indemnified Party may be entitled under Applicable Law.

                                       7
<Page>

            7.7 OTHER PAYMENTS. The Indemnifying Party shall not be liable to
make any payment under this Section 7 to the extent that the Indemnified Party
has received payment from a third party of the amounts otherwise payable by the
Indemnifying Party hereunder.

            7.8 SUBROGATION. The Indemnifying Party shall be subrogated, to the
extent of any indemnification payment under this Agreement, to all related
rights of recovery of the Indemnified Party, and the Indemnified Party shall
take all actions necessary to secure the Indemnifying Party's recovery rights
and perfect its ability to enforce those rights.

      8.    TERMINATION. If a Party fails to perform any of his or its covenants
or obligations hereunder and the failure continues uncured for more than ten
days after written notice thereof from the counter Party, specifying its
objections in reasonable detail, the counterparty may terminate this Agreement
upon written notice to the other Parties, PROVIDED the expiration or termination
of this Agreement shall not affect the obligations of the Parties under Sections
2.3, 5, 6, or 7 and shall not subject any Party to liability for (a)
compensation, expense reimbursement or damages for any matter except as provided
therein or (b) special, indirect, incidental or consequential damages of any
nature.

      9.    MISCELLANEOUS.

            9.1 INDEPENDENT CONTRACTORS. Each Party shall act as an independent
contractor hereunder, with sole responsibility for its own operations, personnel
and operating expenses, except as otherwise provided in Section 4.4. Nothing
contained in this Agreement shall be construed to create a partnership or joint
venture between or among the Parties, and no Party shall take any action or make
any representation inconsistent with the foregoing.

            9.2 CHOICE OF LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by a Party against the
counter Party concerning the transactions contemplated by this Agreement shall
be brought only in the state courts of New York or in the federal courts located
in New York City, New York. All Parties agree to submit to the jurisdiction of
those courts and waive trial by jury. The prevailing Party in any Proceeding
between the Parties shall be entitled to recover from the counter Party its
reasonable attorneys' fees and disbursements incurred in connection with the
Proceeding.

            9.3 ASSIGNMENT. Neither this Agreement nor any rights or obligations
of a Party hereunder may be assigned by any Party without the prior written
consent of the counter Party.

            9.4 BINDING EFFECT. The terms, conditions and provisions of this
Agreement and all rights and obligations of each Party hereunder shall inure to
the benefit of and be binding upon that Party and its successors or personal
representatives and permitted assigns.

            9.5 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole
benefit of the Parties hereto, and nothing herein expressed or implied shall
give or be construed to give to any other Person any legal or equitable rights
hereunder or thereunder.

            9.6 AMENDMENT. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by all the Parties.

            9.7 NOTICES. Any notice given under this Agreement shall be made in
writing and shall be deemed to have been duly given or made if delivered
personally, mailed with postage prepaid by

                                       8
<Page>

registered or certified mail or sent by courier or facsimile to a Party at its
address set forth or provided below. Any notice so sent shall be deemed to have
been given or delivered (a) at the time that it is personally delivered, (b)
within two business days after the date deposited in the United States mail or
one business day after deposit with an overnight courier if sent by mail or
courier or (c) when receipt is acknowledged, if sent by facsimile. A Party may
change its address by giving notice in writing, stating its new address, to the
other Party.

      IF TO THE COMPANY:

         Stage II Apparel Corp.
         1385 Broadway - 24th Floor
         New York, NY 10018

         Attention: ________________

      IF TO RS OR RSC:

         R. Siskind and Company, Inc.
         1385 Broadway - 24th Floor
         New York, NY 10018

         Attention: Richard Siskind,
                    President and Chief Executive Officer

            9.8 ENTIRE AGREEMENT. This Agreement, together with provisions of
the SPA referred to herein, sets forth the entire agreement and understanding of
the Parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the Parties,
both oral and written, relating to the subject matter hereof.

            9.9 WAIVER OF PROVISIONS. The waiver of compliance at any time with
any of the provisions, terms or conditions contained in this Agreement shall not
be considered a waiver of the provision, term or condition itself or of any
other provision, term or condition hereof.

            9.10 CAPTIONS. The headings and captions in this Agreement are for
convenience and identification only and are in no way intended to define, limit
or expand the scope and intent of this Agreement or any provision hereof.

            9.11 COUNTERPARTS. This Agreement may be executed in separate
counterparts that together will constitute one and the same instrument.

                                       9
<Page>

      IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by the undersigned as of the date first set forth above.

                                          STAGE II APPAREL CORP.

                                          By:___________________________________
                                             Name:
                                             Title:

                                          R. SISKIND AND COMPANY, INC.

                                          By:___________________________________
                                             Richard Siskind,
                                             President

                                          --------------------------------------
                                          RICHARD SISKIND

                                       10
<Page>

                                                                       EXHIBIT C

                         FORM OF 2001 STOCK OPTION PLAN

                                  [To be added]

<Page>

                                                                       EXHIBIT D

                    FORM OF TERMINATION AND RELEASE AGREEMENT

      This TERMINATION AND RELEASE AGREEMENT is entered into as of the __ day of
______, 2001 (the "EFFECTIVE DATE") by and among STAGE II APPAREL CORP., a New
York corporation (the "COMPANY"), and the undersigned employee of the Company
(the "EMPLOYEE").

                                    RECITALS

      A. The Employee is an employee of R. Siskind and Company, Inc., a New York
corporation ("RSC"), which has arranged for the Employee's services to the
Company on a part-time basis (the "EMPLOYMENT").

      B. The Company is a party to Stock Purchase Agreement dated as of August
23, 2001 with the investors named therein (the "SPA") providing, among other
things, for a change in control, management and location of the Company.

      C. In connection with the closing of the transactions contemplated by the
SPA (the "CLOSING"), the parties desire to implement applicable provisions of
the SPA relating to the Redirection and to provide for termination of the
Employment and related matters on the terms and conditions set forth in this
Agreement.

      Accordingly, the parties hereby agree as follows:

                                    AGREEMENT

      1.    DEFINITIONS AND CONSTRUCTION.

            1.1 DEFINITIONS. As used in this Agreement, the following terms have
the respective meanings set forth below:

      "ADJUDICATION" has the meaning set forth in Section 10.5.

      "AFFILIATE" has the meaning set forth in Rule 405 under the Securities
Act.

      "AGREEMENT" means this Termination and Release Agreement, as amended from
time to time.

      "APPLICABLE LAW" means, with respect to a Party, any legislation,
regulation, rule or procedure passed, adopted, implemented or amended by any
federal, state, local or foreign governmental or legislative body, or any notice
of a decision, finding or action by any federal, state, local or foreign
governmental agency, court or other administrative body, in each case to the
extent it has become effective, binding on the Party, its assets or operations
or applicable to the subject matter or its performance of this Agreement, from
and after the date compliance therewith is mandated by the terms thereof.

      "BOARD" means the board of directors of the Company.

      "CLOSING" has the meaning set forth in Recital C.

                                       1
<Page>

      "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1986,
as amended.

      "COMPANY" means Stage II Apparel Corp., a New York corporation, and its
successors and permitted assigns.

      "EMPLOYEE" means the undersigned individual and his or her personal
representatives.

      "CONTROL PERSON" means any Person who controls or is controlled (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) by a Party.

      "EFFECTIVE DATE" means the date first set forth above.

      "EMPLOYMENT" has the meaning set forth in Recital A.

      "INDEMNIFIED PARTY" means a Person claiming indemnification under Section
10.

      "INDEMNIFYING PARTY" means a Party against which a claim for
indemnification is asserted under Section 10.

      "INFORMATION" has the meaning set forth in Section 8.1

      "LIABILITIES" means judgments, penalties (including excise and similar
taxes), fines and amounts paid in settlement, including in each case any
interest assessments or other charges payable in connection therewith.

      "LITIGATION EXPENSES" means reasonable expenses incurred in connection
with a Proceeding, including attorneys' fees, retainers and disbursements, court
costs, experts' fees, travel expenses and printing costs.

      "OPTION AGREEMENT" means the option agreement of even date herewith
between the Parties evidencing the Replacement Options issuable to the Employee
under the Replacement Option Plan.

      "OUTSTANDING OPTION" means each stock option issued by the Company to the
Employee that remains outstanding immediately prior to the Closing.

      "PARTY" means the Company, the Employee and their respective successors,
personal representatives or permitted assigns.

      "PERSON" means an individual, corporation, partnership, association,
limited liability company, trust or other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.

      "PROCEEDING" means any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative, arbitrative or
investigative or any appeal therein.

      "REPLACEMENT OPTION" means, with respect to each Outstanding Option, a new
stock option issuable to the Employee on the Effective Date under the
Replacement Option Plan in exchange for the Employee's outstanding option,
exercisable during the succeeding three years for the same number of

                                       2
<Page>

Capital Shares at an exercise price of $.50 per share or the exercise price of
the outstanding option, if less than $.50 per share.

      "REPLACEMENT OPTION PLAN" means the 2001 Stock Option Plan in the form of
EXHIBIT B to the SPA, providing for the Company's issuance at the Closing of a
Replacement Option to the holder of each Outstanding Option.

      "RSC" means R. Siskind and Company, Inc., a New York corporation, and its
successors and assigns.

      "SPA" has the meaning set forth in Recital B.

      "THIRD PARTY PROCEEDING" means and Proceeding threatened or initiated by a
Person other than a Party or derivatively on behalf of a Party.

            1.2 CONSTRUCTION. Unless otherwise expressly provided herein, all
references to Recitals or Sections refer to the corresponding recitals or
sections of this Agreement.

      2.    EMPLOYMENT TERMINATION. The Employment is hereby terminated as of
the Effective Date, and neither Party shall thereafter have any obligation of
any nature to the other Party except as provided in or contemplated by this
Agreement.

      3.    SALARY CONTINUATION. To the extent that the Employee received any
base salary from the Company immediately prior to the Closing in connection with
the Employment, the Company shall provide the Employee, for a period of three
(3) months after the Effective Date, salary continuation at the same base rate
and on the same weekly schedule in effect immediately prior to the Closing.

      4.    REPLACEMENT OPTION. The Company shall issue the Employee on the
Effective Date a Replacement Option in exchange for the Outstanding Options in
accordance with the Replacement Option Plan. The Parties shall execute and
deliver an option agreement of even date herewith, in the form provided for in
the Replacement Option Plan, evidencing the Replacement Options.

      5.    COBRA CONTINUATION BENEFITS. For a period of three (3) months after
the Effective Date, the Company shall pay all premiums required to obtain
continuation coverage for the Employee and any covered dependents under its
group health plan.

      6.    COOPERATION. At the request of the Company, the Employee shall fully
cooperate with the Company, as a witness or otherwise, in connection with any
litigation involving the Company, subject to reimbursement by the Company of all
reasonable travel related expenses incurred by the Employee in connection
therewith.

      7.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Employee that (a) its execution and delivery of
this Agreement and performance of its undertakings herein have been duly
authorized by all necessary corporate action, (b) this Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights and to other equitable principles
of general application, and (c) the execution, delivery and performance of this
Agreement by the Company do not and will not (i) result in a violation of the
Certificate of Incorporation or Bylaws, (ii) conflict with or constitute a
default (or an event that with notice or lapse of time or both would become a

                                       3
<Page>

default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement to which the Company is
a party, or (iii) result in a violation of any Applicable Law.

      8.    CONFIDENTIAL INFORMATION.

            8.1 INFORMATION. The Employee acknowledges that the Employment
entailed confidential affairs of the Company that may have included information
about its costs, profits, markets, sales, products, key personnel, pricing
policies, operational methods, concepts, technical processes and applications,
as well as other business affairs and methods not generally available to the
public (collectively, "INFORMATION"). For purposes of this Agreement,
Information shall not include information that (a) was in the public domain at
the time of disclosure to the Employee, (b) became or becomes part of the public
domain after disclosure to the Employee through no fault, act or failure to act,
error or breach of this Agreement by the Employee, (c) was known to the Employee
at the time of disclosure or (d) is required by Applicable Law to be disclosed
to any court or other governmental body, PROVIDED that the Employee shall notify
the Company thereof to provide or afford it the opportunity to obtain a
protective order or other relief.

            8.2 PROTECTION OF INFORMATION. The Employee shall keep all
Information strictly confidential and shall not use any Information, directly or
indirectly, for his or her own benefit or the benefit of any other Person.

            8.3 REMEDIES. The Employee acknowledges that damages at law will be
an insufficient remedy in the event that he or she violates the terms of this
Section 8 and that the Company may apply for and obtain immediate injunctive
relief in any court of competent jurisdiction to restrain the breach or
threatened breach of their undertakings and covenants contained herein.

      9.    MUTUAL RELEASE. Except for rights and obligations provided for or
contemplated by this Agreement, each Party hereby releases, acquits and forever
discharges the other Party from and against any and all claims, charges,
complaints, obligations, promises, agreements, contracts, damages, actions,
causes of action, suits, accrued benefits or other Liabilities of any kind or
character, to the extent they are currently known or, with the exercise of
reasonable diligence, should have been known as of the date hereof, arising from
or in any way connected with or related to the Employment. The Employee confirms
that he or she is not presently affected by any disability that would prevent
him or her from knowingly and voluntarily granting the foregoing release, which
has been made without any duress, coercion or undue influence.

      10.   INDEMNIFICATION.

            10.1 INDEMNIFICATION BY THE COMPANY. Except to the extent
attributable to the Employee's willful misconduct or gross negligence, the
Company shall indemnify the Employee and his or her duly authorized agents,
heirs and personal representatives from and against any Liabilities and
Litigation Expenses incurred by the Indemnified Party in connection with any
Proceeding to which the Indemnified Party is, was or at any time becomes a party
by reason of the Employment or any services in connection therewith, provided
the Indemnified Party acted in good faith and in a manner reasonably believed to
be in or not opposed to the best interest of the Company in the performance of
those services.

            10.2 NOTICE AND DEFENSE OF CLAIM. The Indemnified Party shall
promptly notify the Indemnifying Party in writing of the commencement of any
Third Party Proceeding for which indemnification may be claimed hereunder,
PROVIDED that any failure to so notify the Indemnifying Party shall not relieve
it from its obligations under this Section 10. If it receives notice of a Third
Party

                                       4
<Page>

Proceeding from the Indemnified Party, the Indemnifying Party may participate in
the Proceeding at its own expense and will be entitled to assume the defense
thereof with counsel of its choice unless counsel for the Indemnifying Party
reasonably concludes that there would be a conflict of interest between the
Indemnifying Party and the Indemnified Party that precludes their joint
representation under Applicable Law or ethical canons. If the Indemnifying Party
assumes the defense of the Third Party Proceeding, it shall not be liable to the
Indemnified Party for any Litigation Expenses subsequently incurred by it in
connection with the defense thereof, except to the extent that the Indemnifying
Party authorizes the Indemnified Party to engage separate counsel or the
Indemnifying Party or its counsel fails to act with reasonable diligence in
assuming the defense of the Proceeding, in each of which events all Litigation
Expenses thereafter incurred by the Indemnified Party for employing separate
counsel shall be subject to indemnification hereunder. In no event shall the
Indemnifying Party be obligated for the Litigation Expenses of more than one
separate counsel to represent all Indemnified Parties in a particular Third
Party Proceeding.

            10.3 ADVANCEMENT OF EXPENSES. Upon written request by the
Indemnified Party in connection with a Third Party Proceeding, the Indemnifying
Party shall promptly advance all Litigation Expenses incurred by or on behalf of
the Indemnified Party to the extent authorized under Section 10.3. The request
shall contain a reasonably detailed description of the Litigation Expenses or,
if available to the Indemnified Party, documentation evidencing the amount of
the Litigation Expenses. The Indemnified Party's right to advancement of
Litigation Expenses shall be conditioned upon its agreement to repay amounts
advanced if it is ultimately determined that the Indemnified Party is not
entitled to be indemnified for those Litigation Expenses under this Section 10.

            10.4 REMEDIES OF THE INDEMNIFIED PARTY. In the event that (a)
advances of Litigation Expenses pursuant to Section 10.4 are not timely made,
(b) payment of Liabilities or Litigation Expenses are not timely made after a
determination of entitlement to indemnification hereunder or (c) the Indemnified
Party otherwise seeks to enforce its rights under this Section 10, the
Indemnified Party shall be entitled to a final adjudication of its rights
hereunder in any court of competent jurisdiction in the venue specified in
Section 11.1 (an "ADJUDICATION"). All Litigation Expenses reasonably incurred by
the Indemnified Party in connection with an Adjudication shall be borne by the
Indemnifying Party if the Indemnified Party is successful in the Adjudication.

            10.5 SETTLEMENT, COMPROMISE AND CONSENT. Without the prior written
consent of the Indemnified Party, the Indemnifying Party shall not settle any
Third Party Proceeding, permit a default judgment to be entered therein or
consent to the entry of any adverse judgment therein unless the settlement,
compromise or consent includes an unconditional release in favor of the
Indemnified Party by all claimants from any liability therein. The Indemnifying
Party shall not be liable to indemnify the Indemnified Party under this Section
10 for any amounts paid in settlement of a Third Party Proceeding effected
without its written consent, which the Indemnifying Party shall not unreasonably
withhold or delay.

            10.6 NONEXCLUSIVITY. The rights of the Indemnified Party under this
Section 10 shall not be deemed exclusive or in limitation of any other rights to
which the Indemnified Party may be entitled under Applicable Law.

            10.7 OTHER PAYMENTS. The Indemnifying Party shall not be liable to
make any payment under this Section 10 to the extent that the Indemnified Party
has received payment from a third party of the amounts otherwise payable by the
Indemnifying Party hereunder.

                                       5
<Page>

            10.8 SUBROGATION. The Indemnifying Party shall be subrogated, to the
extent of any indemnification payment under this Agreement, to all related
rights of recovery of the Indemnified Party, and the Indemnified Party shall
take all actions necessary to secure the Indemnifying Party's recovery rights
and perfect its ability to enforce those rights.

      11.   MISCELLANEOUS.

            11.1 CHOICE OF LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws. Any action brought by a Party against the
counter Party concerning the transactions contemplated by this Agreement shall
be brought only in the state courts of New York or in the federal courts located
in New York City, New York. All Parties agree to submit to the jurisdiction of
those courts and waive trial by jury. The prevailing Party in any Proceeding
between the Parties shall be entitled to recover from the counter Party its
reasonable attorneys' fees and disbursements incurred in connection with the
Proceeding.

            11.2 ASSIGNMENT. Neither this Agreement nor any rights or
obligations of a Party hereunder may be assigned by any Party without the prior
written consent of the counter Party.

            11.3 BINDING EFFECT. The terms, conditions and provisions of this
Agreement and all rights and obligations of each Party hereunder shall inure to
the benefit of and be binding upon that Party and its successors or personal
representatives and permitted assigns.

            11.4 AMENDMENT. Except as expressly provided in this Agreement,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated other than by a written instrument signed by both Parties.

            11.5 NOTICES. Any notice given under this Agreement shall be made in
writing and shall be deemed to have been duly given or made if delivered
personally, mailed with postage prepaid by registered or certified mail or sent
by courier or facsimile to a Party at its address set forth or provided below.
Any notice so sent shall be deemed to have been given or delivered (a) at the
time that it is personally delivered, (b) within two business days after the
date deposited in the United States mail or one business day after deposit with
an overnight courier if sent by mail or courier or (c) when receipt is
acknowledged, if sent by facsimile. A Party may change its address by giving
notice in writing, stating its new address, to the other Party.

      IF TO THE COMPANY:

         Stage II Apparel Corp.
         1385 Broadway - 24th Floor
         New York, NY 10018

         Attention:     ________________

      IF TO THE EMPLOYEE:

         c/o R. Siskind and Company, Inc.
         1385 Broadway - 24th Floor
         New York, NY 10018

                                       6
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            11.6 ENTIRE AGREEMENT. This Agreement, together with provisions of
the Option Agreement, sets forth the entire agreement and understanding of the
Parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the Parties,
both oral and written, relating to the subject matter hereof.

            11.7 WAIVER OF PROVISIONS. The waiver of compliance at any time with
any of the provisions, terms or conditions contained in this Agreement shall not
be considered a waiver of the provision, term or condition itself or of any
other provision, term or condition hereof.

            11.8 CAPTIONS. The headings and captions in this Agreement are for
convenience and identification only and are in no way intended to define, limit
or expand the scope and intent of this Agreement or any provision hereof.

            11.9 COUNTERPARTS. This Agreement may be executed in separate
counterparts that together will constitute one and the same instrument.

      IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed by the undersigned as of the date first set forth above.

                                          STAGE II APPAREL CORP.

                                          By:___________________________________
                                             Name:
                                             Title:

                                          EMPLOYEE:

                                          -------------------------------------
                                          Print Name:

                                       7
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                                                                       EXHIBIT E

                         FORM OF COMPLIANCE CERTIFICATE

      The undersigned, ________________, hereby certifies as follows with
respect to shares of Common Stock of Stage II Apparel Corp. (the "COMPANY")
issuable in connection with the Closing pursuant to the Stock Purchase Agreement
dated as of August 23, 2001 between the Company and the Investors named therein
(the "AGREEMENT"), as follows:

      1. The undersigned is the duly elected President and Chief Executive
Officer of the Company.

      2. The representations and warranties of the Company set forth in Section
4 of the Agreement are true and correct in all material respects as though made
on and as of the date hereof.

      3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing Date.

      The undersigned has executed this Certificate this ____ day of ______,
2001.

                                          ---------------------------------
                                          Richard Siskind,
                                          President and Chief Executive Officer

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