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                             EMPLOYMENT AGREEMENT


                  THIS AGREEMENT is made as of the 14th day of April, 1997, by
and between Donnkenny Apparel, Inc., a Delaware corporation (the "Company"),
and Harvey A. Appelle (the "Executive").


                          W I T N E S S E T H  T H A T

                  WHEREAS, the Company wishes to provide for the employment by
the Company of the Executive, and the Executive wishes to serve the Company,
in the capacities and on the terms and conditions set forth in this Agreement;

                  NOW, THEREFORE, it is hereby agreed as follows:

                  1. EMPLOYMENT PERIOD. The Company shall employ the
Executive, and the Executive shall serve the Company, on the terms and
conditions set forth in this Agreement. The term of this Agreement shall
commence on the date of this Agreement and, unless earlier terminated in
accordance with Section 5 hereof, shall continue through the third anniversary
of such date (such three-year term shall be referred to herein as the
"Employment Period").

                  2. POSITION AND DUTIES. (a) During the Employment Period,
the Executive shall serve as Chairman of the Board of Directors and as Chief
Executive Officer of each of the Company and each of its subsidiaries and the
Company's parent corporation, Donnkenny, Inc., a Delaware corporation
("Donnkenny") with such duties and responsibilities as are customarily
assigned to such positions, and such other duties and responsibilities not
inconsistent therewith as may from time to time be assigned to him by the
Board of Directors of the Company (the "Board"). The Executive shall be a
member of the Board on the first day of the Employment Period, and the Board
shall propose the Executive for re-election and shall use all reasonable
efforts to have the Executive re-elected to the Board and for positions
specified above throughout the Employment Period.

                  (b) During the Employment Period, the Executive shall report
directly to the Board. All other executive officers of the Company shall
report to the Executive.





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                  (c) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Executive is entitled, the Executive
shall devote his full business time and attention consistent with his
reasonable business judgment to the business and affairs of the Company and
shall perform, faithfully and diligently his duties and responsibilities
hereunder. It shall not be considered a violation of the foregoing for the
Executive to serve on corporate, industry, civic, social or charitable boards
or committees, or to manage his personal investments, so long as such
activities do not interfere in a significant manner with the performance of
the Executive's responsibilities as an employee of the Company in accordance
with this Agreement.

                  3. COMPENSATION. (a) BASE SALARY. The Executive's
compensation during the Employment Period shall be determined by the Board
upon the recommendation of the committee of the Board having responsibility
for approving the compensation of senior executives (the "Compensation
Committee"), subject to the next sentence and the other provisions of this
Section 3. During the Employment Period, the Executive shall receive an annual
base salary ("Annual Base Salary") of $400,000 for each of the first two years
of the Employment Period (i.e., the years beginning on the date of this
Agreement and on the first anniversary of such date), and $500,000 for the
third year of the Employment Period (i.e., the year beginning on the second
anniversary of the date of this Agreement). The Annual Base Salary shall be
payable in accordance with the Company's regular payroll practice for its
senior executives, as in effect from time to time.

                  (b) PERFORMANCE BONUS. During the Employment Period, the
Executive shall be eligible to receive an annual bonus ("Performance Bonus")
in an amount, if any, to be determined on an annual basis by the Board upon
the recommendation of the Compensation Committee, taking into account the
performance of Executive and the Company during the year in respect of which
the Performance Bonus is payable. The Performance Bonus shall be payable at or
as soon as practicable after the end of each calendar year (generally after
completion of the annual audit), in cash. If the Executive's employment with
the Company is terminated for any reason during the Employment Period, in
addition to any amounts to which the Executive may be entitled pursuant to
Section 6, the Executive shall be entitled to receive any Performance Bonus
that the Board has awarded to the Executive prior to the Date of Termination
(as defined below).

                  (c)  RESTRICTED STOCK AND STOCK OPTIONS.  In addition
to the payments provided above, on April 14, 1997, the



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Compensation Committee granted to the Executive, subject to the execution of
this Agreement, (i) an award of 150,000 restricted shares of the Common Stock
of Donnkenny pursuant to Donnkenny's Restricted Stock Plan at a purchase price
equal to the aggregate par value of such shares (i.e., $.01 per share); and
(ii) options to purchase 150,000 shares of Donnkenny Common Stock pursuant to
Donnkenny's Incentive Stock Option Plan (the "Stock Option Plan"), with the
purchase price upon exercise of such options equal to $2.9375 (i.e., $2-15/16)
per share (i.e., the closing price of the Common Stock on the date of such
grant). The shares of restricted stock and options shall vest as follows: (A)
115,000 options will become exercisable on March 31, 1998; (B) 30,000 shares
of restricted stock shall vest on, and 35,000 options will become exercisable
on, March 31, 1999, and (C) 120,000 shares of restricted stock shall vest on
March 31, 2000 and, with respect to the options, such options shall remain
exercisable during the remainder of their respective terms notwithstanding any
termination of the Executive's employment except as otherwise provided in the
grant agreements referred to below; provided, however, that the vesting of
such shares of restricted stock and options shall be accelerated in the event
of a Change in Control (as defined herein) and, in the case of certain of the
options, in certain other circumstances set forth in the grant agreement
referred to below. With respect to the options, such options shall be
incentive stock options to fullest extent permitted by applicable law and the
Stock Option Plan. The grant of the shares of restricted stock and options has
been made by the Compensation Committee pursuant to the grant agreements
attached hereto as Annexes A, B-1 (with respect to incentive stock options)
and B-2 (with respect to non-qualified stock options), respectively.

                  (d) SARs. Also on April 14, 1997, the Compensation Committee
granted to the Executive, subject to the execution of this Agreement, cash-pay
stock appreciation rights with respect to 50,000 shares of Donnkenny Common
Stock (the "SARs"). The SARs shall vest in its entirety on March 31, 1999;
provided, however, that such "vesting" shall be accelerated in the event of
(i) the termination of Executive's employment by the Company other than for
Cause or by the Executive for Good Reason (as such terms are defined below) in
either case prior to March 31, 1999, or (ii) a Change in Control. The grant of
the SARs has been made by the Compensation Committee pursuant to the grant
agreement attached hereto as Annex C.

                  (e)  AUTOMOBILE ALLOWANCE.  Upon not less than ten
days' written notice from the Executive, the Company shall lease
for the benefit of the Executive an automobile selected by the



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Executive and will pay directly or reimburse the Executive for up to an
aggregate of $1,000 per month during the Employment Period for the lease
payments with respect thereto and gasoline, insurance, parking, maintenance
and similar expenses.

                  (f) REIMBURSEMENT OF EXPENSES AND ADMINISTRATIVE SUPPORT.
The Company shall pay or reimburse the Executive, upon the presentation of
appropriate documentation of such expenses, for all reasonable travel and
other expenses incurred by the Executive in performing his obligations under
this Agreement. The Company further agrees to furnish the Executive with
office space and administrative support, and any other assistance and
accommodations as shall be reasonably required by the Executive in the
performance of his duties under this Agreement.

                  (g)  VACATION.  Executive shall be entitled to four (4)
weeks paid vacation in each calendar year.

                  (h) DEDUCTIONS. All payments made under this Agreement shall
be subject to such deductions at the source as from time to time may be
required to be made pursuant to any law, rule, regulation or order.

                  (i)  CHANGE IN CONTROL.  For purposes of this
Agreement, a "Change in Control" of the Company shall be deemed
to have occurred upon any of the following events:

                           (A) A person or entity or group of persons or
                  entities, acting in concert, shall become the direct or
                  indirect beneficial owner (within the meaning of Rule 13d-3
                  of the Securities Exchange Act of 1934, as amended), of
                  securities of the Company representing more than fifty
                  percent (50%) of the combined voting power of the issued and
                  outstanding common stock of Donnkenny or the Company; or

                           (B) The majority of the Board, or of the board of
                  directors of Donnkenny, is no longer comprised of the
                  incumbent directors who constitute such board on the date of
                  this Agreement and any other individual(s) who becomes a
                  director subsequent to the date of this Agreement whose
                  initial election or nomination for election as a director,
                  as the case may be, was approved by at least a majority of
                  the directors who comprised the incumbent directors as of
                  the date of such election or nomination; or




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                           (C) The Board shall approve a sale of all or
                  substantially all of the assets of the Company, or the board
                  of directors of Donnkenny shall approve a sale of all or
                  substantially all of the assets of Donnkenny; or

                           (D) The Board, or the board of directors of
                  Donnkenny, shall approve any merger, consolidation, or like
                  business combination or reorganization of the Company, or of
                  Donnkenny, the consummation of which would result in the
                  occurrence of any event described in clause (A) or (B)
                  above, and such transaction shall have been consummated.

                  4. PARTICIPATION IN BENEFIT PLANS. The Executive shall be
entitled to participate, during the term of this Agreement, in the Company's
benefit programs, including but not limited to qualified or non-qualified
pension plans, supplemental pension plans, group hospitalization, health,
dental care, death benefit, post-retirement welfare plans, or other present or
future group employee benefit plans or programs of the Company for which key
executives are or shall become eligible (collectively, the "Benefit Plans"),
on the same terms as other key executives of the Company. If participation in
any of such Benefit Plans is subject to or based on length of service, the
Executive shall be credited with ten years service upon execution of this
Agreement. In addition to and without limiting the generality of the
foregoing, (i) the Company shall obtain and maintain (x) a "key man" life
insurance policy under which the Company is the named beneficiary in the
amount of $2,500,000, and (y) a term life insurance policy in the amount of
$2,500,000, which policy shall be owned by the Executive, in each case from a
nationally-recognized insurance carrier reasonably acceptable to the
Executive, and (ii) the Company shall provide, in addition to any such
insurance regularly provided to the Company's executives and/or employees,
long-term disability insurance which will pay at least sixty percent (60%) of
Executive's Annual Base Salary until the Executive reaches age 65. Upon
termination of the employment of the Executive with the Company for any
reason, the Company shall have no further obligation to pay the premiums on
any of such policies, and the Executive shall be entitled to purchase from the
Company any life insurance policy then owned by the Company on the life of the
Executive and the aforementioned disability insurance policy (if permitted
under the terms of such policy) for a purchase price equal to the cash
surrender value of each policy, if any.

                  5.       TERMINATION OF EMPLOYMENT.  (a)  DEATH OR
DISABILITY.  The Executive's employment shall terminate



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automatically upon the Executive's death during the Employment Period. The
Company shall be entitled to terminate the Executive's employment because of
the Executive's Disability during the Employment Period. "Disability" means
that the Executive has been unable, for a period of not less than (x) 120
consecutive business days, or (y) 180 days within any 12 month period, to
perform the Executive's duties under this Agreement, as a result of physical
or mental illness or injury. A termination of the Executive's employment by
the Company for Disability shall be communicated to the Executive by written
notice, and shall be effective on the 30th day after receipt of such notice by
the Executive (the "Disability Effective Date"), unless the Executive returns
to full-time performance of the Executive's duties before the Disability
Effective Date.

                  (b) BY THE COMPANY. (i) The Company may terminate the
         Executive's employment during the Employment Period for Cause or
         without Cause. "Cause" means (x) the conviction of the Executive for
         the commission of (A) any felony, or (B) a misdemeanor involving
         moral turpitude, or (y) willful misconduct by the Executive that
         results in material and demonstrable damage to the business or
         reputation of the Company. No act or failure to act on the part of
         the Executive shall be considered "willful" unless it is done, or
         omitted to be done, by the Executive in bad faith or without
         reasonable belief that the Executive's action or omission was in the
         best interests of the Company. Any act or failure to act that is
         based upon authority given pursuant to a resolution duly adopted by
         the Board, or the advice of counsel for the Company, shall be
         conclusively presumed to be done, or omitted to be done, by the
         Executive in good faith and in the best interests of the Company.

                  (ii) A termination of the Executive's employment for Cause
         shall be effected in accordance with the following procedures. The
         Company shall give the Executive written notice ("Notice of
         Termination for Cause") of its intention to terminate the Executive's
         employment for Cause, setting forth in reasonable detail the specific
         conduct of the Executive that it considers to constitute Cause and
         the specific provision(s) of this Agreement on which it relies, and
         stating the date, time and place of the Special Board Meeting for
         Cause. The "Special Board Meeting for Cause" means a meeting of the
         Board called and held specifically for the purpose of considering the
         Executive's termination for Cause, that takes place not less than ten
         and not more than twenty business days after the Executive receives
         the Notice of Termination for Cause. The Executive shall be



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         given an opportunity, together with counsel, to be heard at the
         Special Board Meeting for Cause. The Executive's termination for
         Cause shall be effective when and if a resolution is duly adopted at
         the Special Board Meeting for Cause.

                  (iii) A termination of the Executive's employment without
         Cause shall be effected by giving the Executive written notice of the
         termination.

                  (c)  GOOD REASON.  (i)  The Executive may terminate
         employment for Good Reason or without Good Reason.  "Good
         Reason" means:

                           A. failure by the Company or Donnkenny to re-elect
                  the Executive as a director, Chairman of the Board and Chief
                  Executive Officer, or the assignment to the Executive of any
                  duties or responsibilities inconsistent in any respect with
                  those customarily associated with the positions to be held
                  by the Executive pursuant to this Agreement, or any other
                  action by the Company that results in a diminution in the
                  Executive's position, authority, duties or responsibilities,
                  other than an isolated, insubstantial and inadvertent action
                  that is not taken in bad faith and is remedied by the
                  Company promptly after receipt of notice thereof from the
                  Executive;

                           B. any failure by the Company to comply with any
                  provision of Section 3 of this Agreement, other than an
                  isolated, insubstantial and inadvertent failure that is not
                  taken in bad faith and is remedied by the Company promptly
                  after receipt of notice thereof from the Executive;

                           C. any requirement by the Company that the
                  Executive's services be rendered primarily at a location or
                  locations other than that provided for in New York City;

                           D. any purported termination of the Executive's
                  employment by the Company for a reason or in a manner not
                  expressly permitted by this Agreement;

                           E. any failure by the Company to comply with
                  paragraph (c) of Section 14 of this Agreement; or




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                           F.  any other material breach of this Agreement by
                  the Company that either is not taken in good faith or
                  is not remedied by the Company promptly after receipt
                  of notice thereof from the Executive.

                  (ii) A termination of employment by the Executive for Good
         Reason shall be effectuated by giving the Company written notice
         ("Notice of Termination for Good Reason") of the termination, setting
         forth in reasonable detail the specific conduct of the Company that
         constitutes Good Reason and the specific provision(s) of this
         Agreement on which the Executive relies. A termination of employment
         by the Executive for Good Reason shall be effective on the fifth
         business day following the date when the Notice of Termination for
         Good Reason is given, unless the notice sets forth a later date
         (which date shall in no event be later than 30 days after the notice
         is given).

                  (iii) A termination of the Executive's employment by the 
         Executive without Good Reason shall be effected by giving the Company 
        written notice of the termination.

                  (d) NO WAIVER. The failure to set forth any fact or
circumstance in a Notice of Termination for Cause or a Notice of Termination
for Good Reason shall not constitute a waiver of the right to assert, and
shall not preclude the party giving notice from asserting, such fact or
circumstance in an attempt to enforce any right under or provision of this
Agreement.

                  (e) DATE OF TERMINATION. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date on
which the termination of the Executive's employment by the Company for Cause
or without Cause or by the Executive for Good Reason is effective, or the date
on which the Executive gives the Company notice of a termination of employment
without Good Reason, as the case may be.

                  6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.

                  (a) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, the Company
shall continue to pay to the Executive's designated beneficiaries (or, if
there is no such beneficiary, to the Executive's estate or legal
representative), the Annual Base Salary provided for in Section 3(a) as in
effect on the Date of Termination through the end of the month in which the
Executive's death occurs. The Company also shall pay to the Executive's
designated beneficiaries (or, if there is no such



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beneficiary, to the Executive's estate or legal representative), in a lump sum
in cash within 30 days of the Date of Termination (or, in the case of the
amount referred to in clause (i) below, as soon as practicable after the end
of the calendar year in which the Date of Termination occurs), the sum of the
following amounts (the "Accrued Obligations"): (i) any accrued but unpaid
Performance Bonus, vacation pay or other monetary payments to which Executive
was entitled on the Date of Termination, and (ii) a pro rata portion of the
Performance Bonus for the year in which the Date of Termination occurs, based
on (x) the number of days of such year prior to the Date of Termination, and
(y) the performance bonuses for such year, if any, paid to the other senior
executives of the Company and the percentage of such executives' annual base
salary represented by such performance bonuses. (So, by way of illustration,
if the Executive's employment is terminated after six months in a year in
which the other senior executives of the Company receive performance bonuses
representing 50% of their annual base salary, the Executive (or his
beneficiaries) would be entitled to receive an amount equal to the Executive's
Annual Base Salary then in effect, multiplied by .25 (i.e., Annual Base Salary
x .50 x .50)). With respect to medical insurance coverage, the Company shall
continue to provide the spouse and dependents of the Executive, at the expense
of the Company, with the medical insurance then provided generally to
dependents of employees of the Company, for a period of five (5) years
following the termination of the employment of the Executive, which medical
insurance coverage shall be included as part of any required continuation of
coverage under Part 6, Subtitle B of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or any similar state or local law
("COBRA Coverage"); provided, however, that the COBRA Coverage shall terminate
with respect to such spouse and/or dependents as of the date that the spouse
and/or dependents receive equivalent coverage and benefits under any plans,
programs and/or arrangements of a subsequent employer. The rights and benefits
of the estate or other legal representative of the Executive under the benefit
plans and programs of the Company shall be determined in accordance with the
provisions of such plans and programs. The rights and benefits of the estate
or other legal representative of the Executive with respect to the shares of
restricted stock, options and SARs referred to in Section 3(c) shall be
determined in accordance with the provisions of the plans and grant agreements
governing such shares and options. Except as otherwise specified in this
Agreement, neither the estate or other legal representative of the Executive
nor the Company shall have any further rights or obligations under this
Agreement.




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                  (b) DISABILITY. If the Executive's employment is terminated
by reason of the Executive's Disability during the Employment Period, the
Company shall continue to pay to the Executive the Annual Base Salary provided
for in Section 3(a) until the date on which the Executive begins receiving
payments pursuant to the long-term disability insurance policy referred to in
Section 4. The Company also shall pay to the Executive, in a lump sum in cash
within 30 days of the Date of Termination (or, in the case of any Performance
Bonus, as soon as practicable after the end of the calendar year on which the
Date of Termination occurs), the Accrued Obligations. The Company shall
continue to provide the Executive and the spouse and dependents of the
Executive, at the expense of the Company, with the medical insurance then
provided generally to dependents of employees of the Company, for a period of
five (5) years following the termination of the employment of the Executive,
which medical insurance coverage shall be included as part of any required
COBRA Coverage; provided, however, that the COBRA Coverage shall terminate
with respect to the Executive, the spouse and/or dependents of the Executive
as of the date that any such individual receives equivalent coverage and
benefits under any plans, programs and/or arrangements of a subsequent
employer. The rights and benefits of the Executive under the benefit plans and
programs of the Company shall be determined in accordance with the provisions
of such plans and programs. The rights and benefits of the Executive with
respect to the shares of restricted stock, options and the SARs referred to in
Section 3(c) shall be determined in accordance with the provisions of the
plans and grant agreements governing such shares and options. Except as
otherwise specified in this Agreement, neither the Executive nor the Company
shall have any further rights or obligations under this Agreement.

                  (c) PRIOR TO A CHANGE IN CONTROL, AND BY THE COMPANY OTHER
THAN FOR CAUSE, DEATH OR DISABILITY, OR BY THE EXECUTIVE FOR GOOD REASON. If,
during the Employment Period and prior to the occurrence of a Change in
Control, the Company terminates the Executive's employment, other than for
Cause, death or Disability, or the Executive terminates employment for Good
Reason, the Company shall, at the option of the Company, (i) continue to pay
to the Executive, until the expiration of the Employment Period then in
effect, the Annual Base Salary provided for in Section 3(a) (but in no event
less than one year) or (ii) pay the Executive a lump sum amount equal to the
present value of the sum of (x) Annual Base Salary provided for in Section
3(a) which would have been payable from the Date of Termination to the
scheduled expiration date of such Employment Period (but in no event less than
one year), and (y) the Accrued Obligations,



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discounted at a rate equal to the then applicable interest rate on 30-day U.S.
Treasury bills determined as of the Date of Termination by the Board. The
Company shall continue to provide the Executive and the spouse and dependents
of the Executive, at the expense of the Company with the medical insurance
then provided generally to dependents of employees of the Company, for a
period of five (5) years following the termination of the employment of the
Executive, which medical insurance coverage shall be included as part of any
required COBRA Coverage; provided, however, that the COBRA Coverage shall
terminate with respect to the Executive, the spouse and/or dependents of the
Executive as of the date that any such individual receives equivalent coverage
and benefits under any plans, programs and/or arrangements of a subsequent
employer. The rights and benefits of the Executive under the benefit plans and
programs of the Company shall be determined in accordance with the provisions
of such plans and programs. The rights and benefits of the Executive with
respect to the shares of restricted stock, options and SARs referred to in
Section 3(c) shall be determined in accordance with the provisions of the
plans and grant agreements governing such shares and options. Except as
otherwise specified in this Agreement, neither the Executive nor the Company
shall have any further rights or obligations under this Agreement. The
payments and benefits provided pursuant to this paragraph (c) of Section 6 are
intended as liquidated damages for a termination of the Executive's employment
by the Company other than for Cause or Disability or for the actions of the
Company leading to a termination of the Executive's employment by the
Executive for Good Reason, in each case prior to the occurrence of a Change in
Control, and shall be the sole and exclusive remedy therefor.

                  (d) AFTER A CHANGE IN CONTROL, AND BY THE COMPANY OTHER THAN
FOR CAUSE, DEATH OR DISABILITY, OR BY THE EXECUTIVE FOR GOOD REASON OR
OTHERWISE. If, during the Employment Period and upon or after the occurrence
of a Change in Control other than a Change in Control proposed, sponsored or
supported by the Executive, the Executive's employment is terminated by the
Company or the Executive for any or no reason other than by the Company for
Cause, death or Disability, the Company shall pay to the Executive a lump sum
amount in cash equal to three times the sum of (x) the Executive's Annual Base
Salary in effect on the Date of Termination, and (y) the Performance Bonus, if
any, paid to the Executive with respect to the calendar year prior to the Date
of Termination. The Company also shall pay to the Executive, in a lump sum in
cash within 30 days of the Date of Termination (or, in the case of any
Performance Bonus, as soon as practicable after the end of the calendar year
in which the Date of Termination occurs), the Accrued Obligations; provided,



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however, that the Company shall be required to pay the Performance Bonus
component of the Accrued Obligations only if no Performance Bonus is included
in the calculation of the amount referred to in the preceding sentence. The
Company shall continue to provide the Executive and the spouse and dependents
of the Executive, at the expense of the Company with the medical insurance
then provided generally to dependents of employees of the Company, for a
period of five (5) years following the termination of the employment of the
Executive, which medical insurance coverage shall be included as part of any
required COBRA Coverage; provided, however, that the COBRA Coverage shall
terminate with respect to the Executive, the spouse and/or dependents of the
Executive as of the date that any such individual receives equivalent coverage
and benefits under any plans, programs and/or arrangements of a subsequent
employer. The rights and benefits of the Executive under the benefit plans and
programs of the Company shall be determined in accordance with the provisions
of such plans and programs. The rights and benefits of the Executive with
respect to the shares of restricted stock, options and SARs referred to in
Section 3(c) shall be determined in accordance with the provisions of the
plans and grant agreements governing such shares and options. Except as
otherwise specified in this Agreement, neither the Executive nor the Company
shall have any further rights or obligations under this Agreement. The
payments and benefits provided pursuant to this paragraph (d) of Section 6 are
intended as liquidated damages for a termination of the Executive's employment
by the Company other than for Cause or Disability or for the actions of the
Company leading to a termination of the Executive's employment by the
Executive for Good Reason, in each case on or after the occurrence of a Change
in Control, and shall be the sole and exclusive remedy therefor.

                  (e) BY THE COMPANY FOR CAUSE; BY THE EXECUTIVE OTHER THAN
FOR GOOD REASON. If the Executive's employment is terminated by the Company
for Cause during the Employment Period, or if the Executive voluntarily
terminates employment during the Employment Period, other than for Good
Reason, the Company shall pay to the Executive in a lump sum in cash within 30
days of the Date of Termination any portion of the Executive's Annual Base
Salary through the Date of Termination that has not yet been paid, and the
Company shall have no further obligations under this Agreement, except as
otherwise specified in this Agreement. The rights and benefits of the
Executive under the benefit plans and programs of the Company shall be
determined in accordance with the provisions of such plans and programs. The
rights and benefits of the Executive with respect to the shares of restricted
stock, options and the SARs referred to in



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Section 3(c) shall be determined in accordance with the provisions of the
plans and grant agreements governing such shares and options.

                  (f) The Company's obligation to deliver the liquidated
damages payments described in paragraphs (c) and (d) of this Section 6 shall
be contingent on the Executive delivering to the Company, on or about the Date
or Termination, a legal release in a form acceptable to counsel to the
Company, releasing the Company, its affiliates, and the current and former
directors, officers and employees of the Company from any obligations relating
to his employment hereunder, subject to the Company's continuing obligations
under this Agreement and subject to the Executive's continuing rights under
the terms and conditions of the compensation and benefit plans in which the
Executive is a participant, as such plans may be amended from time to time.

                  (g) The respective obligations of the Company and the
Executive under Sections 9, 10, 11, 12 and 13 shall survive any termination of
Executive's employment; provided, however, that the Executive's obligations
under Section 11 (Non-Competition) shall terminate and shall not survive in
the event (i) the Executive's employment is terminated by the Company other
than for Cause or by the Executive for Good Reason, or (ii) the Executive's
employment is terminated for any or no reason following a Change in Control.

                  (h) Notwithstanding any other provision of this Agreement,
to the extent the Company reasonably determines that the Executive would be
subject to the excise tax under Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), on any payments under Section 6 of this
Agreement and such other amounts or benefits the Executive receives from the
Company, any person whose actions result in a change of ownership covered by
Section 280G(b)(2) of the Code or any person affiliated with the Company or
such person, required to be included in the calculation of parachute payments
for purposes of Sections 280G and 4999 of the Code, the amounts provided under
this Agreement shall be automatically reduced to an amount one dollar less
than that which, when combined with such other amounts, would subject the
Executive to such excise tax.

                  7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in
any plan, program, policy or practice provided by the Company or any of its
affiliated companies for which the Executive may qualify, nor, subject to
paragraph (f) of Section 16, shall anything in this Agreement limit or
otherwise



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affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Vested benefits and other
amounts that the Executive is otherwise entitled to receive under the
Restricted Stock Plan, the Incentive Stock Option Plan, or any other plan,
policy, practice or program of, or any contract of agreement with, the Company
or any of its affiliated companies on or after the Date of Termination shall
be payable in accordance with the terms of each such plan, policy, practice,
program, contract or agreement, as the case may be.

                  8. NO OFFSET, ETC. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under, this
Agreement shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and
such amounts shall not be reduced, regardless of whether the Executive obtains
other employment.

                  9. INVENTIONS. Any and all inventions, innovations or
improvements ("inventions") made, developed or created by the Executive
(whether at the request or suggestion of the Company (which, as used in this
Section 9, shall be deemed to include the Company and each of its
subsidiaries) or otherwise, whether alone or in conjunction with others, and
whether during regular hours of work or otherwise) during the period of his
employment with the Company which may be directly or indirectly useful in, or
relate to, the business of the Company, shall be promptly and fully disclosed
by the Executive to the Board and shall be the Company's exclusive property as
against the Executive, and the Executive shall promptly deliver to an
appropriate representative of the Company as designated by the Board all
papers, drawings, models, data and other material relating to any inventions
made, developed or created by him as aforesaid. The Executive shall, at the
request of the Company and without any payment therefor, execute any documents
necessary or advisable in the opinion of the Company's counsel to direct
issuance of patents or copyrights to the Company with respect to such
inventions as are to be the Company's exclusive property as against the
Executive or to vest in the Company title to such inventions as against the
Executive. The expense of securing any such patent or copyright shall be borne
by the Company.

                  10. CONFIDENTIAL INFORMATION. The Executive shall hold all
secret or confidential information, knowledge or data



                                      14



<PAGE>









relating to the Company or any of its affiliated companies and their
respective businesses that the Executive obtains during the Executive's
employment by the Company or any of its affiliated companies and that is not
public knowledge (other than as a result of the Executive's violation of this
Section 10) ("Confidential Information") in strict confidence. The Executive
shall not communicate, divulge or disseminate Confidential Information at any
time during or after the Executive's employment with the Company, except with
the prior written consent of the Company or as otherwise required by law or
regulation or by legal process. If the Executive is requested pursuant to, or
required by, applicable law or regulation or by legal process to disclose any
Confidential Information, the Executive will provide the Company, as promptly
as the circumstances reasonably permit, with notice of such request or
requirement and, unless a protective order or other appropriate relief is
previously obtained, the Confidential Information, subject to such request,
may be disclosed pursuant to and in accordance with the terms of such request
or requirement, provided that the Executive shall use his best efforts to
limit any such disclosure to the precise terms of such request or requirement.

                  11. NON-COMPETITION. The Executive acknowledges that the
services to be rendered by him to the Company (which, as used in this Section
11 shall be deemed to include the Company and each of its subsidiaries) are of
a special and unique character. In consideration of his employment hereunder,
the Executive agrees, for the benefit of the Company, that he will not, during
the term of this Agreement and (except in a case where the Executive's
employment is terminated (x) by the Company other than for Cause, (y) by the
Executive for Good Reason, or (z) by the Executive or the Company for any or
no reason following the occurrence of a Change in Control) thereafter until
the expiration of a period of twelve (12) months commencing on the date of
termination of his employment with the Company (a) engage, directly or
indirectly, whether as principal, agent, distributor, representative,
consultant, employee, partner, stockholder, limited partner or other investor
(other than an investment of not more than (i) five percent (5%) of the stock
or equity of any corporation the capital stock of which is publicly traded or
(ii) five percent (5%) of the ownership interest of any limited partnership or
other entity) or otherwise, within the United States of America, in any
apparel business which is competitive with the business now, or at any time
during the term of this Agreement, conducted by the Company, (b) solicit or
entice to endeavor to solicit or entice away from the Company any person who
was an officer, employee or sales representative of



                                      15



<PAGE>









the Company, either for his own account or for any individual, firm or
corporation, whether or not such person would commit any breach of his
contract of employment by reason of leaving the service of the Company, and
the Executive agrees not to employ, directly or indirectly, any person who was
an officer, employee or sales representative of the Company or who by reason
of such position at any time is or may be likely to be in possession of any
confidential information or trade secrets relating to the businesses or
products of the Company, or (c) solicit or entice or endeavor to solicit or
entice away from the Company any customer or prospective customer of the
Company, either for his own account or for any individual, firm or
corporation. In addition, the Executive shall not, at any time during the term
of this Agreement or at any time thereafter, engage in the business which uses
as its name, in whole or in part, Donnkenny, Kenny Classics or any other
tradename or trademark or corporate name used by Donnkenny, the Company or any
of their subsidiaries.

                  12. INDEMNIFICATION. (a) The Company shall indemnify the
Executive to the fullest extent permitted by Delaware law in effect as of the
date hereof against all costs, expenses, liabilities and losses (including,
without limitation, attorneys' fees, judgments, fines, penalties, ERISA excise
taxes, penalties and amounts paid in settlement) reasonably incurred by the
Executive in connection with a Proceeding. For the purposes of this Section
12, a "Proceeding" shall mean any action, suit or proceeding, whether civil,
criminal, administrative or investigative, in which the Executive is made, or
is threatened to be made, a party to, or a witness in, such action, suit or
proceeding by reason of the fact that he is or was an officer, director or
employee of the Company or is or was serving as an officer, director, member,
employee, trustee or agent of any other entity at the request of the Company,
whether or not the basis of such Proceeding arises out of or in connection
with the Executive's alleged action or omission in an official capacity.

                  (b) The Company shall advance to the Executive all
reasonable costs and expenses incurred by him in connection with a Proceeding
within 20 days after receipt by the Company of a written request for such
advance. Such request shall include an itemized list of the costs and expenses
and an undertaking by the Executive to repay the amount of such advance if it
shall ultimately be determined that he is not entitled to be indemnified
against such costs and expenses. Upon a request under subsection (b), the
Executive shall be deemed to have met the standard of conduct required for
such indemnification unless the contrary shall be established by a court of
competent jurisdiction.



                                      16



<PAGE>










                  (c) The Executive shall not be entitled to indemnification
under this Section 12 unless he meets the standard of conduct specified in the
Delaware General Corporation Law. Any indemnification under subsection (a)
(unless ordered by a court) shall be made by the Company only as authorized in
the specific case upon a determination that indemnification of the Executive
is proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware Corporation Law. Such determination shall be
made (1) by the Board by a majority vote of a quorum consisting of directors
who were not parties to such Proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.

                  (d) The Company shall not settle any Proceeding or claim in
any manner which would impose on the Executive any penalty or limitation
without his prior written consent. Neither the Company nor the Executive will
unreasonably withhold its or his consent to any proposed settlement.

                  (e) The indemnification in this Section 12 shall inure to
the benefit of the Executive's heirs, executors and administrators.

                  (f) The Company agrees to use its best efforts to obtain,
continue and maintain an adequate directors and officers' liability insurance
policy and shall cause such policy to cover the Executive to the extent the
Company provides such coverage for its other executive officers.

                  13. ATTORNEYS' FEES. The Company agrees to pay, as incurred,
all legal fees and expenses incurred by the Company and the Executive in
connection with the preparation of this Agreement. The Company further agrees
to pay, as incurred, to the fullest extent permitted by law, all legal fees
and expenses that the Executive may reasonably incur as a result of any
contest (regardless of the outcome) by the Company, the Executive or others of
the validity or enforceability of or liability under, or otherwise involving,
any provision of this Agreement, together with interest on any delayed payment
at the applicable federal rate provided for in Section 7872(f)(2)(A) of the
Code.

                  14. SUCCESSORS; BENEFICIARIES. (a) This Agreement is
personal to the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution.



                                      17



<PAGE>









This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.

                  (b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

                  (c) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
both the Company as defined above and any such successor that assumes and
agrees to perform this Agreement, by operation of law or otherwise.

                  (d) The Executive shall be entitled, to the extent permitted
under any applicable law, to select and change the beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder
following the Executive's death by giving the Company written notice thereof.
In the event of the Executive's death or a judicial determination of his
incompetence, reference in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative.

                  15. MISCELLANEOUS. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

                  (b) All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

                           If to the Executive:

                           Mr. Harvey A. Appelle
                           25 Erie Street
                           Irvington, New York  10573




                                      18



<PAGE>









                           If to the Company:

                           Donnkenny Apparel, Inc.
                           1411 Broadway
                           New York, New York  10018
                           Attention:  General Counsel

or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 15. Notices and communications
shall be effective when actually received by the addressee.

                  (c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.

                  (d) Notwithstanding any other provision of this Agreement,
the Company may withhold from amounts payable under this Agreement all
federal, state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.

                  (e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert, any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraphs (c) or (d) of
Section 5 of this Agreement) shall not be deemed to be a waiver of such
provision or right or of any other provision of or right under this Agreement.

                  (f) The Executive and the Company acknowledge that this
Agreement supersedes any other agreement between them concerning the subject
matter hereof.

                  (g) The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated or subject to
attachment, garnishment, levy, execution or other legal or equitable process
except as required by law. Any attempt by the Executive to anticipate,
alienate, assign, sell, transfer, pledge, encumber or charge the same shall be
void. Payments hereunder shall not be considered assets of the Executive in
the event of insolvency or bankruptcy.




                                      19



<PAGE>









                  (h) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.

                  IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization of the Board of Directors,
the Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.



                                           ------------------------------------
                                           Harvey A. Appelle


                                           DONNKENNY APPAREL, INC.


                                           By
                                             ----------------------------------






                                      20



<PAGE>

                                                                       ANNEX A



                                DONNKENNY, INC.
                                 1411 BROADWAY
                           NEW YORK, NEW YORK 10018


                                              As of April 14, 1997


Mr. Harvey A. Appelle
25 Erie Street
Irvington, New York 10573

                  As referenced in your employment agreement with Donnkenny
Apparel, Inc., dated as of April 14, 1997, you have been awarded a restricted
stock award of 150,000 shares of common stock ("Common Stock") of Donnkenny,
Inc. (the "Company") under the Company's 1996 Restricted Stock Plan (the
"Plan").


                  The shares are vested according to the following schedule:

                           Date of Vesting                Number of shares
                           ---------------                ----------------

                           March 31, 1999                     30,000
                           March 31, 2000                    120,000

Notwithstanding the foregoing, the vesting of such shares shall be accelerated
in the event of a Change in Control, as that term is defined in your
employment agreement.


                  Accordingly, we request you to complete, sign and send to
the Company an Investment Representation Letter in the form attached hereto.
The terms of the Plan, including, without limitation, those relating to
withholding taxes and securities regulation, are incorporated in this
Agreement by reference.


                  All shares of Common Stock received by you hereunder shall
contain a legend in substantially the following form:

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE ACT, OR STATE SECURITIES LAWS, BUT HAVE BEEN
         ISSUED OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
         REQUIREMENTS OF THE SECURITIES ACT OF 1933 (THE "ACT"). NO
         DISTRIBUTION, SALE, OFFER FOR SALE, TRANSFER,



                                      A-1



<PAGE>









         DELIVERY, PLEDGE, OR OTHER DISPOSITION OF THESE SECURITIES MAY BE
         EFFECTED EXCEPT IN COMPLIANCE WITH THE ACT, ANY APPLICABLE STATE
         LAWS, AND THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
         COMMISSION AND STATE AGENCIES
         PROMULGATED THEREUNDER.

                  YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE
PLAN WHICH DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND
STATE SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THE COMPANY CAN ISSUE ANY
SHARES TO YOU. THE COMPANY HAS NO OBLIGATION TO REGISTER THE SHARES THAT YOU
RECEIVE HEREBY, AND IF IT NEVER REGISTERS THE SHARES, YOU WILL NOT BE ABLE TO
SELL THE SHARES UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE
PRESENT TIME, EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES
LAWS ARE VERY LIMITED AND MIGHT BE UNAVAILABLE TO YOU AT THE TIME YOU WISH TO
SELL YOUR SHARES. IN ADDITION, YOU SHOULD CONSULT WITH YOUR TAX ADVISOR
CONCERNING THE RAMIFICATIONS TO YOU OF HOLDING OR SELLING YOUR SHARES.

                  This agreement shall bind and inure to the benefit of the
parties hereto and the successors and assigns of the Company.

                  Please acknowledge this agreement by signing and returning
to the Company the Acceptance and Acknowledgment attached hereto.


                                                      Very truly yours,


                                                      DONNKENNY, INC.


                                                      By:
                                                         ----------------------





                                      A-2



<PAGE>









INSTRUCTION:  PLEASE COMPLETE THE INFORMATION REQUESTED BELOW,
DETACH THIS PAGE AFTER SIGNING WHERE INDICATED AND RETURN TO THE
COMPANY.



                         ACCEPTANCE AND ACKNOWLEDGMENT



                  I accept the restricted stock award described in the Letter
Agreement from Donnkenny, Inc., dated as of April 14, 1997, granted pursuant
to the Donnkenny, Inc. 1996 Restricted Stock Plan (the "Plan"). I further
acknowledge that I have read and understand all the provisions and limitations
of the Plan.


Dated: As of April 14, 1997



                                          --------------------------------
                                          Signature

                                          Name: Harvey A. Appelle
                                                -------------------------------

                                        Social Security No.
                                                           ------------------








                                      A-3



<PAGE>
                                                                    ANNEX B-1




                                DONNKENNY, INC.

                       INCENTIVE STOCK OPTION AGREEMENT

TO:  Harvey A. Appelle

                  As referenced in your employment agreement with Donnkenny
Apparel, Inc. ("Donnkenny") dated as of April 14, 1997, pursuant to the 1992
Stock Option Plan, as amended (the "Plan") of Donnkenny, Inc. (the "Company"),
you have been granted incentive stock options for the purchase of 68,084
shares (the "Option") of the Company's Common Stock at an exercise price of
$2.9375 (i.e., $2-15/16) per share, the closing price of the Company's Common
Stock on April 14, 1997. Please sign and return to the Company the Acceptance
and Acknowledgement attached to this Stock Option Agreement. The terms of the
Plan, including, without limitation, those relating to withholding taxes, are
incorporated into this Agreement by reference. This Option is intended to be
an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.

                  The terms of the Option are set forth in the Plan and in
this Agreement. Certain of the terms set forth in the Plan are summarized
below; however, reference should be made to the Plan for the complete terms.

                  Term: This option shall terminate ten years from date of
grant, unless sooner terminated in accordance with the terms of the Plan and
this Agreement.

                  Exercise: During your lifetime only you can exercise the
Option. The Plan also provides for exercise of the Option by the personal
representative of your estate or the beneficiary thereof following your death.
You may use the Notice of Exercise in the form attached to this Agreement when
you exercise the Option.

                  Notices: All notices sent in connection with this Option
shall be in writing and, if to the Company, shall be delivered personally to
the Secretary of the Company or mailed to its principal office, addressed to
the attention of the Secretary and, if to the Optionee, shall be delivered
personally or mailed to the Optionee at the address noted on the attached
Acceptance and Acknowledgement. Such addresses may be changed at any time by
notice from one party to the other.




                                     B-1-1



<PAGE>









                  Payment for Shares:  The Option may be paid for by
delivery to the Company of the following together with the Notice
of Exercise:

                  (a) Bank certified or cashier's checks; or

                  (b) Unless the Plan Administrator in its sole discretion
determines otherwise, shares of the capital stock of the Company held by you
having a fair market value at the time of exercise, as determined in good
faith by the Plan Administrator, equal to the exercise price.

                  Upon receipt of written notice of exercise and payment and
delivery of any other required documentation, the Company shall deliver to the
person exercising the Option a certificate or certificates for such shares. It
shall be a condition to the performance of the Company's obligation to issue
or transfer Common Stock upon exercise of this option that the Optionee pay,
or make provision satisfactory to the Company for the payment of, any taxes
which the Company is obligated to collect with respect to the issue or
transfer of Common Stock upon exercise.

                  Termination: If your employment by the Company or Donnkenny
is terminated for Cause, as defined in the Plan, the Option will terminate as
of the first discovery by the Company or Donnkenny of any reason for
termination for Cause. If your employment stops because of your death or
disability, the Option shall terminate 12 months after your employment stops.
Otherwise the Option will terminate 3 months after your employment with the
Company or Donnkenny ends.

                  Nothing in the Plan or in this Agreement shall confer on you
any right to continue in the employ of the Company or any parent or subsidiary
of the Company or interfere in any way with the right of the Company or any
parent or subsidiary of the Company to terminate your employment at any time.

                  Transfer of Option:  The Option is not transferable
except by will or by the applicable laws of descent and
distribution.




                                     B-1-2



<PAGE>









                  Vesting:  The Option is vested according to the
following schedule:

         Date of Vesting                Number of shares exercisable
         ---------------                ----------------------------

         March 31, 1998                         34,042
         March 31, 1999                         34,042

Notwithstanding the foregoing, the vesting of such Options shall be
accelerated in the event of a Change in Control, as that term is defined in
your employment agreement.

                  Date of Grant:  The date of grant of the Option is
April 14, 1997.

                  YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE
PLAN WHICH DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND
STATE SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE
EXERCISED AND BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY HAS
NO OBLIGATION TO REGISTER THE SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF
YOUR OPTION, AND IF SUCH SHARES ARE NOT REGISTERED, YOU WILL NOT BE ABLE TO
EXERCISE THE OPTION UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE
PRESENT TIME, EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES
LAWS ARE VERY LIMITED AND MIGHT BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION
OF THE OPTION. CONSEQUENTLY, YOU MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE
OPTION AND TO RECEIVE SHARES UPON SUCH EXERCISE. IN ADDITION, YOU SHOULD
CONSULT WITH YOUR TAX ADVISOR CONCERNING THE RAMIFICATIONS TO YOU OF HOLDING
OR EXERCISING YOUR OPTIONS OR HOLDING OR SELLING THE SHARES UNDERLYING SUCH
OPTIONS.

                  You understand that, during any period in which the shares
which may be acquired pursuant to your Option are subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 (and you are also so
subject), in order for your transactions under the Plan to qualify for the
exemption from Section 16(b) provided by Rule 16b-3, a total of six months
must elapse between the grant of the Option and the sale of the Option (other
than upon exercise or conversion) or the shares underlying the Option.

                  All decisions or interpretations made by the Compensation
Committee with regard to any question arising hereunder or under the Plan
shall be binding and conclusive on the Company and you.




                                     B-1-3



<PAGE>









                  This Agreement shall bind and inure to the benefit of the
parties hereto and the successors and assigns of the Company and, to the
extent provided in the Plan, your executors, administrators, legatees, and
heirs.

                  Please execute the Acceptance and Acknowledgement set forth
below on the enclosed copy of this Agreement and return it to the undersigned.

                                               Very truly yours,


                                               DONNKENNY, INC.
Dated: As of April 14, 1997

                                               By:
                                                  ---------------------------



                                     B-1-4



<PAGE>









INSTRUCTION:  PLEASE COMPLETE THE INFORMATION REQUESTED BELOW,
DETACH THIS PAGE AFTER SIGNING WHERE INDICATED AND RETURN TO THE
COMPANY.



                        ACCEPTANCE AND ACKNOWLEDGEMENT

         I, a resident of the State of ____________________________, accept
the incentive stock option described in the Incentive Stock Option Agreement
dated as of April 14, 1997 and in the Donnkenny, Inc. 1992 Stock Option Plan,
as amended, and acknowledge receipt of a copy of this Agreement. I have read
and understand all the provisions and limitations of the Plan, particularly
those relating to incentive stock options and the provisions of Section 8 of
the Plan relating to securities regulations.



Dated: As of April 14, 1997
       -----------------------



------------------------------
  Signature


------------------------------
  Social Security Number


         Name:     Harvey A. Appelle
                   --------------------------
         Address:
                   --------------------------

         ------------------------------------






                                     B-1-5



<PAGE>









                                DONNKENNY, INC.
                 NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION

                        ------------------------------
                             (Name, please print)


                        ------------------------------
                                    (Date)

DONNKENNY, INC.
1411 Broadway
New York, New York 10018

Gentlemen:

I hereby exercise my right to purchase _______________ shares of Common Stock
of Donnkenny, Inc., a Delaware corporation ("Donnkenny"), pursuant to, and in
accordance with, the Donnkenny, Inc. 1992 Stock Option Plan and the Incentive
Stock Option Agreement ("Agreement") dated as of April 14, 1997. As provided
in that Agreement, I hereby: [check one]

                  [ ]      deliver herewith a certified or bank cashier's
                           check in the amount of the aggregate option
                           exercise price; or

                  [ ]      undertake to deliver shares of the capital stock
                           of Donnkenny held by me having a fair market value
                           at the time of exercise, as determined in good
                           faith by the Plan Administrator, equal to the
                           aggregate option exercise price.

                  Please deliver to me stock certificates representing the
subject shares registered as follows:

         Name:
              --------------------------------------------
         Address:
                 -----------------------------------------

         -------------------------------------------------

         Social Security Number 
                                --------------------------

         The aggregate exercise price is $ _________ (total number of shares
to be purchased x $________).




                                     B-1-6



<PAGE>









         (1) Tax Implications. I understand that there are certain tax
implications to my exercise of my right to purchase shares of Common Stock
under the Agreement. I further understand that it is my obligation to confer
with my own tax advisor with respect to such tax implications.

         (2) Securities Regulation. I understand that the Company may require
me to represent that the shares of Common Stock I propose to purchase are not
being acquired for resale of such securities.


                                                Very truly yours,


                                                --------------------------
                                                Name:



                                     B-1-7



<PAGE>
                                                                     ANNEX B-2



                                DONNKENNY, INC.

                     NON-QUALIFIED STOCK OPTION AGREEMENT

TO:  Harvey A. Appelle

                  As referenced in your employment agreement with Donnkenny
Apparel, Inc. ("Donnkenny") dated as of April 14, 1997, pursuant to the 1992
Stock Option Plan, as amended (the Plan") of Donnkenny, Inc. (the "Company"),
you have been granted non-qualified stock options for the purchase of 81,916
shares (the "Option") of the Company's Common Stock at an exercise price of
$2.9375 (i.e., $2-15/16) per share, the closing price of the Company's Common
Stock on April 14, 1997. Please sign and return to the Company the Acceptance
and Acknowledgement attached to this Stock Option Agreement. The terms of the
Plan, including, without limitation, those relating to withholding taxes, are
incorporated into this Agreement by reference. This Option is not intended to
qualify as an "incentive stock option" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended.

                  The terms of the Option are set forth in the Plan and in
this Agreement. Certain of the terms set forth in the Plan are summarized
below; however, reference should be made to the Plan for the complete terms.

                  Term:  This Option shall terminate ten years from date
of grant.

                  Exercise: During your lifetime only you can exercise the
Option. The Plan also provides for exercise of the Option by the personal
representative of your estate or the beneficiary thereof following your death.
You may use the Notice of Exercise in the form attached to this Agreement when
you exercise the Option.

                  Notices: All notices sent in connection with this Option
shall be in writing and, if to the Company, shall be delivered personally to
the Secretary of the Company or mailed to its principal office, addressed to
the attention of the Secretary and, if to the Optionee, shall be delivered
personally or mailed to the Optionee at the address noted on the attached
Acceptance and Acknowledgement. Such addresses may be changed at any time by
notice from one party to the other.




                                     B-2-1



<PAGE>








                  Payment for Shares:  The Option may be paid for by
delivery to the Company of the following together with the Notice
of Exercise:

                  (a) Bank certified or cashier's checks;

                  (b) Unless the Plan Administrator in its sole discretion
determines otherwise, shares of the capital stock of the Company held by you
having a fair market value at the time of exercise, as determined in good
faith by the Plan Administrator, equal to the exercise price; or

                  (c) A properly executed Notice of Exercise together with
instructions to the Company to withhold from the shares that would otherwise
be issued upon exercise that number of shares having a fair market value equal
to the option exercise price.

                  Upon receipt of written notice of exercise and payment and
delivery of any other required documentation, the Company shall deliver to the
person exercising the Option a certificate or certificates for such shares. It
shall be a condition to the performance of the Company's obligation to issue
or transfer Common Stock upon exercise of this option that the Optionee pay,
or make provision satisfactory to the Company for the payment of, any taxes
which the Company is obligated to collect with respect to the issue or
transfer of Common Stock upon exercise.

                  Termination: As stated above, this Option shall terminate on
April 14, 2007 (i.e., the tenth anniversary of the date of grant),
notwithstanding the fact that your employment by the Company or Donnkenny may
have terminated prior to such date.

                  Nothing in the Plan or in this Agreement shall confer on you
any right to continue in the employ of the Company or any parent or subsidiary
of the Company or interfere in any way with the right of the Company or any
parent or subsidiary of the Company to terminate your employment at any time.

                  Transfer of Option:  The Option is not transferable
except by will or by the applicable laws of descent and distribution.




                                     B-2-2



<PAGE>








                  Vesting:  The Option is vested according to the
following schedule:

         Date of Vesting                    Number of shares exercisable
         ---------------                    ----------------------------

         March 31, 1998                            80,958
         March 31, 1999                               958

Notwithstanding the foregoing, the vesting of such Options shall be
accelerated in the event of a Change in Control, as that term is defined in
your employment agreement.

                  Date of Grant: The date of grant of the Option is April 14,
1997.

                  YOUR PARTICULAR ATTENTION IS DIRECTED TO SECTION 8 OF THE
PLAN WHICH DESCRIBES CERTAIN IMPORTANT CONDITIONS RELATING TO FEDERAL AND
STATE SECURITIES LAWS THAT MUST BE SATISFIED BEFORE THE OPTION CAN BE
EXERCISED AND BEFORE THE COMPANY CAN ISSUE ANY SHARES TO YOU. THE COMPANY HAS
NO OBLIGATION TO REGISTER THE SHARES THAT WOULD BE ISSUED UPON THE EXERCISE OF
YOUR OPTION, AND IF SUCH SHARES ARE NOT REGISTERED, YOU WILL NOT BE ABLE TO
EXERCISE THE OPTION UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE. AT THE
PRESENT TIME, EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES
LAWS ARE VERY LIMITED AND MIGHT BE UNAVAILABLE TO YOU PRIOR TO THE EXPIRATION
OF THE OPTION. CONSEQUENTLY, YOU MIGHT HAVE NO OPPORTUNITY TO EXERCISE THE
OPTION AND TO RECEIVE SHARES UPON SUCH EXERCISE. IN ADDITION, YOU SHOULD
CONSULT WITH YOUR TAX ADVISOR CONCERNING THE RAMIFICATIONS TO YOU OF HOLDING
OR EXERCISING YOUR OPTIONS OR HOLDING OR SELLING THE SHARES UNDERLYING SUCH
OPTIONS.

                  You understand that, during any period in which the shares
which may be acquired pursuant to your Option are subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 (and you are also so
subject), in order for your transactions under the Plan to qualify for the
exemption from Section 16(b) provided by Rule 16b-3, a total of six months
must elapse between the grant of the Option and the sale of the Option (other
than upon exercise or conversion) or the shares underlying the Option.

                  All decisions or interpretations made by the Compensation
Committee with regard to any question arising hereunder or under the Plan
shall be binding and conclusive on the Company and you.

                  This Agreement shall bind and inure to the benefit of
the parties hereto and the successors and assigns of the Company



                                     B-2-3



<PAGE>








and, to the extent provided in the Plan, your executors,
administrators, legatees, and heirs.

                  Please execute the Acceptance and Acknowledgement set forth
below on the enclosed copy of this Agreement and return it to the undersigned.

                                                   Very truly yours,


                                                   DONNKENNY, INC.
Dated: As of April 14, 1997

                                                    By:
                                                       -----------------------




                                     B-2-4



<PAGE>








INSTRUCTION:  PLEASE COMPLETE THE INFORMATION REQUESTED BELOW,
DETACH THIS PAGE AFTER SIGNING WHERE INDICATED AND RETURN TO THE
COMPANY.



                        ACCEPTANCE AND ACKNOWLEDGEMENT

         I, a resident of the State of ____________________________, accept
the non-qualified stock option described in the Non-Qualified Stock Option
Agreement dated as of April 14, 1997 and in the Donnkenny, Inc. 1992 Stock
Option Plan, as amended, and acknowledge receipt of a copy of this Agreement.
I have read and understand all the provisions and limitations of the Plan,
particularly those relating to incentive stock options and the provisions of
Section 8 of the Plan relating to securities regulations.



Dated: As of April 14, 1997
       ---------------------



------------------------------
  Signature


------------------------------
  Social Security Number


         Name:     Harvey A. Appelle
                   --------------------------
         Address:
                   --------------------------

         ------------------------------------






                                     B-2-5



<PAGE>








                                DONNKENNY, INC.
               NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION


                        ------------------------------
                             (Name, please print)


                        ------------------------------
                                    (Date)

DONNKENNY, INC.
1411 Broadway
New York, New York 10018

Gentlemen:

I hereby exercise my right to purchase _______________ shares of Common Stock
of Donnkenny, Inc., a Delaware corporation ("Donnkenny"), pursuant to, and in
accordance with, the Donnkenny, Inc. 1992 Stock Option Plan and the
Non-Qualified Stock Option Agreement ("Agreement") dated as of April 14, 1997.
As provided in that Agreement, I hereby: [check one]

                  [ ]      deliver herewith a certified or bank cashier's
                           check in the amount of the aggregate option
                           exercise price; or

                  [ ]       undertake to deliver shares of the capital stock
                           of Donnkenny held by me having a fair market value
                           at the time of exercise, as determined in good
                           faith by the Plan Administrator, equal to the
                           aggregate option exercise price; or

                  [ ]      authorize Donnkenny to withhold from the shares
                           that would otherwise be issued upon exercise that
                           number of shares having a fair market value equal
                           to the aggregate option exercise price.

                  Please deliver to me stock certificates representing the
subject shares registered as follows:

         Name:
              -------------------------------------------
         Address:
                 ----------------------------------------

         ------------------------------------------------

         Social Security Number
                               --------------------------



                                     B-2-6



<PAGE>








         The aggregate exercise price is $ _________ (total number of shares
to be purchased x $________).

         (1) Tax Implications. I understand that there are certain tax
implications to my exercise of my right to purchase shares of Common Stock
under the Agreement. I further understand that it is my obligation to confer
with my own tax advisor with respect to such tax implications.

         (2) Securities Regulation. I understand that the Company may require
me to represent that the shares of Common Stock I propose to purchase are not
being acquired for resale of such securities.


                                                Very truly yours,


                                                 ---------------------------
                                                 Name:



                                     B-2-7



<PAGE>

                                                                       ANNEX C



                 CASH-PAY STOCK APPRECIATION RIGHTS AGREEMENT


                                                      As of April 14, 1997



Mr. Harvey A. Appelle
25 Erie Street
Irvington, New York 10573

                  As referenced in your employment agreement with Donnkenny
Apparel, Inc. (the "Company") dated April 14, 1997, the Compensation Committee
of the Board of Directors (the "Committee") of the Company has awarded you
cash-pay stock appreciation rights. This letter will confirm the following
agreement made today between you and the Company pursuant to your employment
agreement.

                  1. The Company hereby grants you cash-pay stock appreciation
rights relating to 50,000 shares of Common Stock of Donnkenny, Inc. (the
"Common Stock") at an exercise price of $2.9375 (i.e., $2-15\16) per share.

                  2. Your stock appreciation rights entitle you to receive
from the Company an amount in cash equal to the product of (x) the amount, if
any, by which the Fair Market Value (as defined below) of a share of Common
Stock on the date of exercise exceeds the exercise price per share specified
in Paragraph 1 hereof and (y) the number of shares with respect to which such
stock appreciation rights shall have been exercised.

                  For purposes of the foregoing, the Fair Market Value of the
Common Stock shall be deemed to be the average of the daily closing prices per
share of Common Stock for the ten consecutive Trading Days (as such term is
hereinafter defined) immediately prior to the date of exercise. The closing
price for any day shall be the last quoted price (or, if not so quoted, the
average of the high bid and low asked prices) in the over-the-counter market,
as reported by The Nasdaq Stock Market or such other system then in use; or,
if no bids for such security are quoted by any such organization, the average
of the closing bid and asked prices as furnished by a professional market
maker making a market in such security selected by the Committee. The term
"Trading Day" shall mean a day on which The Nasdaq Stock Market is open for
trading. If at the time of exercise the Common Stock is not publicly held or
not so listed or traded, "Fair Market



                                      C-1



<PAGE>









Value" shall mean the fair value per share of Common Stock, as determined by
an independent investment banking firm experienced in the valuation of
securities selected in good faith by the Committee, or, if no such investment
banking firm is, in the good faith judgment of the Committee, available to
make such determination, in good faith by the Committee.

                  3. The stock appreciation rights shall vest and become
exercisable as to all 50,000 shares of Common Stock on March 31, 1999;
provided, however, that such "vesting" shall be accelerated in the event of
(i) the termination of Executive's employment by the Company other than for
Cause or by the Executive for Good Reason in either case prior to March 31,
1999, or (ii) a Change in Control, as such terms are defined in your
employment agreement.

                  4. Payment shall be made in cash only, and you shall not be
entitled to receive any shares of Common Stock or any other securities of the
Company or Donnkenny. Your exercise of your stock appreciation rights may be
effected only during the period beginning on the eleventh business day
following the date of release of the Company's quarterly or annual statement
of sales and earnings and ending on the twentieth business day following such
date.

                  5. The unexercised portion of the stock appreciation rights
granted herein will automatically and without notice terminate and become null
and void on April 14, 2002 (i.e., the fifth anniversary of the date of grant),
notwithstanding the fact that your employment by the Company or its
subsidiaries may have terminated prior to such date.

                  6. During your lifetime the stock appreciation rights
granted herein shall be exercisable only by you or by your guardian or legal
representative in the event of your incompetence or incapacity; provided,
however, that you may transfer the stock appreciation rights to a trust for
the benefit of yourself, your spouse and/or your children or grandchildren or
other members of your family. Subject to the foregoing, this agreement and the
stock appreciation rights granted herein may not be assigned or transferred in
whole or in part, except by will or by the laws of the descent and
distribution.

                  7. Any exercise of the stock appreciation rights granted
herein shall be in writing addressed to the Secretary of the Company at its
general offices and shall be substantially in the form attached hereto. In
connection with such exercise, the Company shall make such provisions as it
deems necessary and



                                      C-2



<PAGE>








appropriate to satisfy its obligation to withhold federal, state or local
income taxes or other taxes incurred by reason of such exercise.

                  Please indicate your acceptance of all of the terms and
conditions of this agreement by signing and returning one copy of this letter.

                                            Very truly yours,

                                            DONNKENNY, INC.



                                             By
                                                -----------------------------

Accepted:




--------------------------------
  Harvey A. Appelle
  Date: As of April 14, 1997




                                      C-3