Exhibit 10.66

                              EMPLOYMENT AGREEMENT

     THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made as of January 1, 2002,
by and  among  Harry A. Katz  (the  "Executive"),  Donnkenny  Apparel,  Inc.,  a
Delaware   corporation  (the  "Company"),   and  Donnkenny,   Inc.,  a  Delaware
corporation which is the parent corporation of the Company ("Donnkenny").

                              W I T N E S S E T H:
                              - - - - - - - - - -

            WHEREAS, the Board of Directors of the Company (the "Board") expects
that the Executive will make substantial contributions to the growth and
prospects of Donnkenny, the Company and their subsidiaries; and
            WHEREAS, the Board desires to obtain for the Company the services of
the Executive, and the Executive desires to be employed by the Company, all on
the terms and subject to the conditions set forth herein.
            NOW,  THEREFORE,  in consideration of the mutual  covenants and
agreements of the parties and other good and valuable  consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Executive Agree as follows:

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1.       Employment.

         a.  Position.  On the terms and  subject  to the  conditions  set forth
             --------
herein, the Company hereby employs the Executive as its Executive Vice President
and Chief  Administrative  Officer  throughout the Employment  Term (as
defined  below).  In addition,  the Company shall  continue to cause each of its
subsidiaries  to designate  Executive to the offices of Executive Vice President
and Chief  Administrative  Officer  throughout  the Employment  Term.  Donnkenny
hereby   designates   Executive  as  its  Executive  Vice  President  and  Chief
Administrative Officer throughout the Employment Term and agrees that during the
Employment  Term,  it shall  nominate the Executive for election to its Board of
Directors  at each annual  meeting of  shareholders  and use its best efforts to
cause the Executive to be duly elected to the Board at each such meeting.

         b. Duties and  Responsibilities.  The Executive  shall have such duties
            ----------------------------
and  responsibilities  consistent  with  his  position  as the  Board  or  Chief
Executive  Officer  determines  and shall perform such duties and carry out such
responsibilities  to the best of his ability for the  purpose of  advancing  the
business of the  Company  and its  subsidiaries  and  Donnkenny.  Subject to the
provisions of Section 1.c. below, and excluding any periods of vacation and sick
leave to which  Executive is entitled,  during the Employment Term the Executive
shall devote his full business time,  skill and attention to the business of the
Company and its subsidiaries and Donnkenny, and, except as specifically approved
by the Board,  shall not engage in any other business activity or have any other
business  affiliation.  During  the  Employment  Term,  Executive  shall  report
directly  to the Chief  Executive  Officer of  Donnkenny  and the  Company.  The
Executive  shall  not  be  required  to  perform  the

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principal  duties  of his employment outside of the New York, New York
metropolitan area without the prior written consent of the Executive, which may
be delayed or withheld by Executive in his sole discretion,  it being understood
however that Executive's  position may require considerable domestic and
foreign travel.

         c. Other Activities.  Notwithstanding anything else to the contrary set
            ----------------
forth herein,  Executive shall have the right to manage his personal investments
and may  participate  fully in social,  charitable and civic  activities and may
serve  on the  boards  of  directors  of  other  companies  provided  that  such
activities do not unreasonably and materially  interfere with the performance of
and do not involve a conflict of  interest  with his duties or  responsibilities
hereunder;  and further  provided that the serving on boards of other companies,
or the rendering of services to other companies, will require the prior approval
of the Chief Executive Officer of Donnkenny.
         Donnkenny and the Company each acknowledge that Executive currently has
a business interest in Retail Resources,  LP ("Retail") which, from time to time
during normal business hours, shall require Executive to devote some of his time
to the discharge of certain duties.

2.       Employment Term.

         a. Initial  Term.  Subject to the  termination  provisions of Section 5
            -------------
hereof,  the  "Employment  Term"  hereunder  shall be an ongoing and  continuous
period of one (1) year, commencing on January 1, 2002, with the result that each
day subsequent to January 1, 2002 shall, without further action or notice of any
kind by any party hereto,  be deemed to

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automatically  extend the term hereof by one day so that,  at all times
hereafter,  the  remaining  term hereof shall be deemed to be one (1) year.

         b.  Expanded  Term.  In the event that  Executive  is  employed  by the
             --------------
Company under this Agreement on January 1, 2003,  then the Employment  Term will
immediately  and without and further notice  automatically  convert to a two (2)
year  term so that  thereafter  the  Employment  Term  shall be an  ongoing  and
continuous  period of two (2) years,  commencing  with January 1, 2003, with the
result that each day subsequent to January 1, 2003 shall, without further action
or notice of any kind by any party hereto, be deemed to automatically extend the
term  hereof by one day so that,  at all times  after  December  31,  2002,  the
remaining term hereof shall be deemed to be two (2) years.

         3.  Compensation.  During the  Employment  Term,  the Company  will pay
             ------------
and/or otherwise provide the Executive with compensation and related benefits as
follows:

         a. Base Salary.  During the year of the Employment Term ending December
            -----------
31,  2002,  the  Company  agrees to pay the  Executive,  for  services  rendered
hereunder,  a base salary at the annual rate of Four  Hundred  Thousand  Dollars
($400,000) (the "Base Salary"). Commencing January 1, 2003 and on each January 1
thereafter  during the  Employment  Term, the base salary which was in effect on
the immediately  preceding  December 31 shall be increased by the greater of (i)
the percentage increase in the Cost of Living Index (as hereafter  defined);  or
(ii)  such  higher  rate  as  the  Compensation  Committee  of  the  Board  (the
"Compensation Committee") may designate in its sole and absolute discretion (the
adjusted base salary shall be deemed the effective "Base Salary" hereunder). The
Base Salary shall be payable in equal periodic installments, not less frequently
than monthly, less any sums which

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<PAGE>

may be required to be deducted or withheld under applicable  provisions
of law.  The Base Salary for any partial  year shall be prorated  based upon the
number of days  elapsed in such year.  For purposes  hereof,  the Cost of Living
Index shall mean the December 2001 Revised  Consumer Price Index ("CPI") for all
Urban Consumers published by the Bureau of Labor Statistics of the United States
Department of Labor, for New York City Metropolitan Area Average,  All Items. If
the  manner  in which  the CPI is  calculated  shall be  substantially  revised,
Executive  and the Company  shall  select a means to adjust such  revised  Index
which would produce results  equivalent,  as  practicable,  to those which would
have been  obtained if the CPI has not been so revised.  If the CPI shall become
unavailable to the public because  publication  is  discontinued,  or otherwise,
Executive and the Company shall select a comparable  substitute index based upon
changes  in the  cost of  living  or  purchasing  power of the  consumer  dollar
published by any other  governmental  agency, or, of no such index shall then be
available,  a  comparable  index  published  by a major bank or other  financial
institution  or by a university or a recognized  financial  publication.  In the
event that the U.S. Department of Labor, Bureau of Labor Statistics, changes the
publication  frequency  of the  CPI so  that a CPI is not  available  to make an
adjustment  for the period in  question,  the  adjustment  shall be based on the
percentage  increase in the CPI for the twelve (12) month period  beginning with
the closest month preceding the period in question for which a CPI is available.

         b. Bonus.  During the Employment Term,  Executive shall  participate in
            -----
any bonus  plan that  includes  senior  executives  of the  Company on the terms
generally set forth in such plan from time to time,  or in any plan  substituted
therefor or in addition thereto.

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         c. Restricted  Stock and Stock Options.  In the event the  Compensation
            -----------------------------------
Committee  of Donnkenny  shall grant to the  Executive  any award of  restricted
shares of the  Common  Stock of  Donnkenny,  or options  to  purchase  shares of
Donnkenny  Common  Stock,  then 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  respecting such options;  provided,
however,  that,  anything  herein or in the  grant  agreements  to the  contrary
notwithstanding,  the  vesting  of such  shares  of  restricted  stock  shall be
accelerated  in the  event  of a  Change  in  Control  (as  defined  herein),  a
termination of Executive's  employment by the Company  without Cause (as defined
below),  a termination  of  Executive's  employment  for Good Reason (as defined
below),  or a termination of Executive's  employment as a result of the death or
disability  of  Executive.  With respect to the options,  such options  shall be
incentive  stock options to fullest  extent  permitted by applicable law and the
Stock Option Plan.
         In the event there  shall be a Change in Control,  all shares of common
stock of Donnkenny  previously or subsequently issued to Executive as restricted
shares or pursuant to stock  options upon the vesting  thereof from time to time
shall be  promptly  and duly  registered  and  fully  and  freely  tradeable  by
Executive  without  restriction at the sole cost and expense of the Company.  In
the event  Executive  shall require a resale  prospectus in connection  with any
intended sale of shares,  Donnkenny and the Company shall promptly  furnish such
resale prospectus to Executive at the Company's expense.

         d. Automobile  Allowance.  During the Employment Term the Company shall
            ---------------------
lease and provide to Executive an  automobile  whose  monthly lease payment does
not exceed

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$1,200. In addition, the Company shall be responsible for the payment of (i)
automobile  insurance,  parking in one garage,  maintenance,  repairs and
similar expenses,  and (ii) the federal,  state and local income taxes for which
Executive is liable on account of the payments or other benefits  referred to in
this Section 3d,  together with an amount  sufficient to satisfy any  additional
federal, state or local income taxes for which Executive is liable on account of
the amounts received  pursuant to this Section 3d, all of which shall be payable
within  fifteen (15) days after demand  therefor by Executive.  In the event the
employment  of Executive  with the Company shall cease for any reason other than
the death or Disability (as  hereinafter  defined) of Executive,  then Executive
shall assume, pay and perform, when due, all obligations under the lease for the
Company  automobile  provided to  Executive  hereunder  for the  remaining  term
thereof.
         e.  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
consistent  with past  practices  reasonably  required by the  Executive  in the
performance of his duties under this Agreement.
         f.  Vacation.  Executive  shall  be  entitled  to four (4)  weeks  paid
             --------
vacation in each  calendar  year.  Any  vacation  for the current  year to which
Executive  is entitled  and which has not been fully taken by  Executive  at the
time his employment  with the Company shall

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<PAGE>

terminate for any reason,  shall be fully paid to  Executive  within  thirty
(30) days after the  effective  date of Executive's termination of employment.
         g. Financial  Planning and Tax Preparation  Services.  Each year during
            -------------------------------------------------
the Employment Term, the Company shall pay or reimburse  Executive for financial
planning  services  and tax  preparation  services  provided to  Executive in an
amount not to exceed Ten Thousand  Dollars  ($10,000.00),  which amount shall be
payable upon submission of appropriate documentation .
         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 or Donnkenny  shall be deemed to have  occurred upon any
of the following  events,  provided that, as a result thereof,  or in connection
therewith, or at any time thereafter,  Executive shall no longer directly report
to Daniel H. Levy ("Levy):

               i.   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 or Donnkenny  representing  more than fifty  percent
                    (50%)  of  the  combined  voting  power  of the  issued  and
                    outstanding common stock of Donnkenny or the Company; or

               ii.  The  majority of the Board,  or the majority of the board of
                    directors  of  Donnkenny,  is no  longer  comprised  of  the
                    incumbent directors who constitute such

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                    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  subsequently  elected  directors  elected by
                    directors elected by incumbent directors;  provided however,
                    that in  determining  whether a director has been so elected
                    by the incumbent directors or their successors, a person who
                    has been so elected by reason of having  made an  investment
                    in the Company or  Donnkenny  or by reason of a  transaction
                    agreement  with  Donnkenny or the  Company,  or otherwise in
                    connection  with any  Change  in  Control  transaction  with
                    Donnkenny or the  Company,  shall not be deemed to have been
                    elected by incumbent directors or their successors;

               iii. 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

               iv.  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 and Donnkenny's
benefit programs, including but

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not limited to qualified or non-qualified pension plans, other
qualified or nonqualified retirement 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 or Donnkenny for which key executives are or shall become eligible
(collectively, the "Benefit Plans"), on the same terms as other key executives
of the Company or Donnkenny, as the case may be, on a company wide basis. If
participation in any of such Benefit Plans is subject to or based on length of
service, the Executive, upon execution of this Agreement, shall be credited with
the greater of (i) ten (10) years of service, or (ii) whatever number of years
or period of service shall be required in order for Executive to immediately
commence participation therein at any time hereafter. In addition to and without
limiting the generality of the foregoing, (i) the Company may obtain and
maintain a "key man" life insurance policy under which the Company is the named
beneficiary in such amount as is determined by the Company, and (ii) the
Executive may obtain and maintain, at the sole expense of the Company, a life
insurance policy with a death benefit of up to $2,000,000, which policy shall be
owned by the Executive or his designee and payable to Executive's designated
beneficiary, and/or may be a joint life insurance policy providing for payment
upon the last to die of Executive and Executive's spouse, in each case from a
nationally-recognized insurance carrier reasonably acceptable to the Executive,
and (iii) the Company shall use its reasonable best efforts to provide, in
addition to any such insurance regularly provided to the Company's executives
and/or employees, long-term disability insurance which will pay to Executive at
least sixty percent (60%) of Executive's then current Base Salary until the
Executive reaches age 65. Upon termination of the employment of the Executive
with the Company for any reason, the Executive shall be entitled to purchase
from the Company any life insurance policy then owned by the Company on the life
of the

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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 (net of any loans or other reductions in
value chargeable upon such surrender). The Company may not borrow against any
life insurance policy owned by the Company on the life of the Executive, or
pledge or otherwise encumber said policy or the death benefit payable thereunder
without the prior written consent of Executive, which consent may be delayed or
withheld in the Executive's sole discretion. The Company shall be responsible
for any federal, state and local income taxes for which Executive is liable on
account of the payment by the Company of premiums for the maintenance of the
benefits referred to in this Section 4 above, together with an amount sufficient
to satisfy any additional federal, state or local income taxes for which
Executive is liable on account of the tax reimbursement amounts received
pursuant to this Section 4, all of which shall be payable within fifteen (15)
days after demand therefor by Executive.

5.       Termination of Employment.

         a. By the Company For Cause.  The Company may terminate the Executive's
            ------------------------
employment  under this  Agreement  at any time for Cause (as  defined  below) by
delivery of written notice of  termination to the Executive  (which notice shall
specify in reasonable  detail the basis upon which such  termination is made and
the specific  provision(s)  of the Agreement  upon which it relies,  and further
stating  the date,  time and place of the  special  meeting  of the Board or the
Board of Directors of Donnkenny at which the issue of Cause shall be  addressed)
at least ten days prior to the  termination  date set forth in such  notice.  No
such termination  shall become  effective until the Executive,  after receipt of
such notice,  shall have been offered the opportunity to attend a meeting of the
Board of  Directors  of the

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Company (or the Board of Directors of Donnkenny, whichever is
applicable) at which a quorum is present (with the Executive's counsel present
and participating, if desired by the Executive) regarding such termination
notice and the allegations set forth therein and, based upon such meeting, such
Board of Directors shall have elected to proceed with such termination. Except
as provided for in Section 21 below, in the event the Executive's employment is
terminated for Cause, all provisions of this Agreement and the Employment Term
shall be terminated; provided, however, that such termination shall not divest
the Executive of any previously vested benefit or right. In addition, the
Executive shall be entitled only to payment of his earned and unpaid Base Salary
to the date of termination, earned and unpaid bonus for the prior fiscal year,
additional salary payments in lieu of the Executive's accrued and unused
vacation, unreimbursed business and entertainment expenses in accordance with
the Company's policy, and unreimbursed medical, dental and other employee
benefit expenses incurred (including any tax gross-up payments required
hereunder), and other vested and accrued benefits payable in accordance with the
Company's or Donnkenny's employee benefit plans (hereinafter referred to as the
"Standard Termination Payments"). For purposes of this Agreement, "Cause" means
(1) the conviction of the Executive for the commission of (A) any felony, or (B)
a misdemeanor involving moral turpitude, or (2) willful misconduct or neglect of
duties by the Executive that results in material and demonstrable damage to the
business or reputation of the Company or (3) Executive's repeated failure to
follow a written Company policy previously delivered to Executive, or (4)
Executive's alcohol or drug abuse. 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

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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 Board of Directors of Donnkenny, or the written
advice of counsel for the Company or Donnkenny, 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.

         b. Upon Death or Disability.  If the Executive  dies, all provisions of
            ------------------------
this Agreement (other than rights or benefits arising as a result of such death)
and the Employment Term shall be automatically  terminated;  provided,  however,
that the  Standard  Termination  Payments and pro rata Bonus for the fiscal year
during which such death occurs shall be paid to the Executive's surviving spouse
or,  if none,  his  estate,  and the death  benefits  under  the  Company's  and
Donnkenny's employee benefit plans shall be paid to the Executive's  beneficiary
or  beneficiaries  as properly  designated in writing by the  Executive.  If the
Executive  is unable to perform his  responsibilities  under this  Agreement  by
reason of physical or mental  disability  or incapacity  and such  disability or
incapacity  shall  have  continued  for six  consecutive  months  or any  period
aggregating six months within any 12 consecutive  months (a  "Disability'),  the
Company  may  terminate  this  Agreement  and the  Employment  Term at any  time
thereafter. In such event, the Executive shall be entitled to receive his normal
compensation hereunder during said six (6) month period, and shall thereafter be
entitled to receive the Standard Termination Payments and the pro rata Bonus for
the fiscal year during  which such  disability  occurs.  Pro rata Bonus,  in the
event of the  Executive's  death or disability,  shall be an amount equal to the
Bonus at the amount  payable

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upon fully achieving the figure targeted in the annual business plan or
other documents relating to the Bonus approved by the Board, the Compensation
Committee or any other duly authorized designee of the Board for such year (the
"Target Amount") (regardless of the Company's actual performance) for the fiscal
year during which such death or disability occurs, prorated by a fraction, the
numerator of which is the number of days of employment elapsed during the fiscal
year prior to termination of employment and the denominator of which is 365. 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.
         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  to  Executive  and  to  such  spouse  and  dependents
including,  without limitation,  the Company's Execucare Program or any addition
thereto or substitution  therefor, for a period of three (3) 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  Company  provided  medical  coverage  and 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  becomes  eligible to receive
coverage and benefits as a full time employee under any plans,  programs  and/or
arrangements of a subsequent employer of Executive. Availability for coverage as
a spouse, principal or director of a company shall not

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be treated as eligibility for coverage within the meaning of this
paragraph. Subject to the provisions of this Agreement, which shall control in
the event of any conflicting provisions, 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 and options referred to in Section 3.c. above shall be determined in
accordance with the provisions of this Agreement and 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.          By the Company Without Cause.
            ----------------------------

               i.   The  Company  may  only  terminate  the  employment  of  the
                    Executive  for Cause or upon the death or  Disability of the
                    Executive.  If the  employment  of the  Executive  shall  be
                    terminated  without  Cause and prior to a Change in  Control
                    and  other  than as a result of death or  Disability  of the
                    Executive,  then  the  Executive  shall be  entitled  to the
                    payments,  rights and benefits  set forth in Section  5.d.v.
                    below.

d.          By the Executive.
            ----------------

               i.   The Executive may terminate his employment,  and any further
                    obligations  which Executive may have to perform services on
                    behalf  of   Donnkenny   or  the  Company  and  any  of  its
                    subsidiaries  hereunder  at any time after the date  hereof,
                    (i)  without  Good  Reason  (as  defined  below) by  sending
                    written  notice of such  termination to the Company not less
                    than  sixty (60) days  prior to the  effective  date of such
                    termination   (during  such  sixty  (60)  day  period,   the
                    Executive shall continue to

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<PAGE>

                    perform the normal  duties of his  employment  hereunder and
                    shall be entitled to receive when due all  compensation  and
                    benefits applicable to the Executive hereunder); or (ii) for
                    Good Reason  pursuant to the  procedure set forth in Section
                    5(d)iii below).

               ii.  For  purposes  of this  Agreement,  "Good  Reason"  shall be
                    defined as any of the following:

                    A.   failure by the Company or  Donnkenny  to  re-elect  the
                         Executive as a director,  Executive  Vice President and
                         Chief  Administrative  Officer or to an office of equal
                         or  greater  prominence,   or  the  assignment  to  the
                         Executive    of   any   duties   or    responsibilities
                         inconsistent   in  any  material   respect  with  those
                         customarily associated with the positions to be held by
                         the Executive pursuant to this Agreement;

                    B.   any failure by the Company or  Donnkenny 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  or  Donnkenny,  as the case  may be,  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 in New York City;

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

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<PAGE>

                    E.   any failure by the Company or  Donnkenny to comply with
                         Section 10 of this Agreement;

                    F.   any requirement that Executive report to a person other
                         than Levy,  as Chief  Executive  Officer of the Company
                         and Donnkenny,  in the circumstance  where Levy remains
                         in the employ of the Company and Donnkenny;

                    G.   the termination of Levy's employment as Chief Executive
                         Officer of the Company for any reason  whatsoever prior
                         to a Change In Control,  provided  that  Executive  has
                         remained  in the full  time  active  employment  of the
                         Company  hereunder  for a  period  of  six  (6)  months
                         immediately  following  the  effective  date of  Levy's
                         employment termination;

                    H.   the   institution   of   bankruptcy,    reorganization,
                         arrangement,  insolvency or liquidation  proceedings by
                         or against the Company or Donnkenny (which proceedings,
                         if instituted  against the Company or  Donnkenny,  have
                         been  consented to by the Company or Donnkenny,  as the
                         case may be, or have remained  undismissed for a period
                         of sixty (60) days after the filing date thereof); or

                    I.   any  other  material  breach of this  Agreement  by the
                         Company or  Donnkenny  that either is not taken in good
                         faith or is not  remedied by the Company or  Donnkenny,
                         as the case may be,  within  twenty(20)  business  days
                         after  receipt of notice  thereof  from the  Executive;
                         provided, however, that with respect to any breach of a
                         payment  obligation of the Company or

                                       17
<PAGE>

                         Donnkenny, such breach must be remedied within five (5)
                         business  days after  written  notice  thereof from the
                         Executive.

         iii. 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 or other event(s) that  constitutes Good Reason
and the specific  provision(s)  of this Agreement on which the Executive  relies
with such notice to be provided  within 90 days of such alleged conduct or other
event.  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 thirty (30) days after the notice is
given.  Upon the  occurrence of a termination of employment by the Executive for
Good Reason prior to a Change in Control, the Company shall pay to the Executive
the Standard Termination Payments and the Additional Termination Payments.
         iv. If the Executive shall elect to terminate his employment  hereunder
(other than as a result of his death or  disability)  without Good Reason,  then
the Executive shall remain vested in all vested benefits  provided for hereunder
or under any benefit plan of the Company in which Executive is a participant and
shall be entitled to receive the Standard Termination payments,  but the Company
shall have no further  obligation  to make  payments or provide  benefits to the
Executive.

                                       18
<PAGE>

         v. If, on or before  December  31,  2002,  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 continue to
pay to the Executive the sum of (x) the aggregate  Base Salary  Executive  would
have been entitled to receive during the twelve (12) month period following such
termination (assuming for these purposes,  that Executive would have remained in
the full and continuous  employment of the Company during such twelve (12) month
period,  and that Base Salary shall not increase above the rate in effect at the
date of termination); or if, on or after January 1, 2003, 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 continue to
pay to the Executive the sum of (x) the aggregate  Base Salary  Executive  would
have been entitled to receive during the twenty-four (24) month period following
such  termination  (assuming  for these  purposes,  that  Executive  would  have
remained  in the full and  continuous  employment  of the  Company  during  such
twenty-four (24) month period, and that Base Salary shall not increase above the
rate  in  effect  at the  date  of  termination);  and in  either  the  case  of
termination as described  above whether on or before  December 31, 2002 or on or
after  January 1, 2003 also shall pay  Executive (y) a one time payment which is
equal to the maximum Bonus payable to Executive upon fully  achieving the figure
targeted in the annual  business plan or other  documents  relating to the Bonus
approved by the Board, the  Compensation  Committee or any other duly authorized
designee of the Board for the year in which

                                       19
<PAGE>

such employment termination occurs (regardless of the Company's actual
performances) or, in the event no such figure shall be targeted for such year,
for the most recent year with respect to which such figure was targeted (the sum
of (x) and (y) are hereinafter collectively referred to as the "Additional
Termination Payments"). when same would otherwise be due and payable in the
ordinary cause of business assuming, for these purposes, that Executive remained
in the full time continuous employment of the Company during such period On or
before the effective termination date under this 5.d.v., the Company, at its
expense, shall deliver to Executive a bank letter of credit in an amount equal
to the aggregate payments to be received by Executive hereunder, naming
Executive as beneficiary and issued by the Bank which is then providing
financing for the Company or such other bank reasonably approved by Executive on
terms and conditions which are reasonably approved by Executive, or secured by
such other collateral which is not subject to the claims of the creditors of the
Company as Executive shall approve in Executive's sole discretion, the value of
which shall be 100% of the aggregate payments to be received by Executive. In
the event the payment obligations hereunder shall be secured by collateral other
than a bank letter of credit, and in the event the fair market value of such
collateral shall fall below the then remaining balance of the amounts payable to
Executive, then, within five (5) business days after written notice thereof, the
Company shall deliver to Executive such additional or substituted collateral
which, in the aggregate with any collateral to be continually held by Executive,
has a value which shall be not less than 100% of the remaining payments to be
made to

                                       20
<PAGE>

Executive. In the event there shall be any default in payment of any installment
of the  Additional  Termination  Payments  which is not  cured  within  five (5)
business  days after  written  notice  thereof,  or in the event  additional  or
substituted  collateral  shall not be timely  delivered to Executive as provided
for above,  then the remaining  unpaid balance  thereof shall be immediately due
and payable without further notice and, among other things, Executive shall have
the  unrestricted  right to  proceed  against  the  letter  of  credit  or other
collateral, as the case may be.

         vi. In addition to the  foregoing,  the Company shall also be obligated
to pay to the Executive the Standard Termination Payments as and when they shall
become due. Furthermore, 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 to Executive and his spouse and dependents
including,  without limitation,  the Company's Execucare Program or any addition
thereto or substitution  therefor, for a period of three (3) 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  Company  provided  medical  coverage  and 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  becomes eligible for coverage
and  benefits  as  a  full  time  employee  under  any  plans,  programs  and/or
arrangements of a subsequent employer of Executive. Availability for coverage as
a spouse, principal or director of a company shall not be treated as eligibility
for coverage within the meaning of this

                                       21
<PAGE>

paragraph. The rights and benefits of the Executive with respect to the
shares of restricted stock and options referred to in Section 3.c. above shall
be determined in accordance with the provisions of this Agreement and the plans
and grant agreements governing such shares and options; provided, however, that
in the event there shall be a conflict between the terms of this Agreement and
the terms of any such plan or grant agreement, then the provisions of this
Agreement shall govern and control. 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 Section 5.d.vi. 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 and shall be the sole and exclusive
remedy therefor. Executive shall have no obligation whatsoever to mitigate any
damages, costs or expenses suffered or incurred by the Company with respect to
any payments made pursuant to this Section 5.d., and no such payment shall be
subject to any cancellation, reduction, offset, rebate or repayment as a result
of any subsequent employment or other business activity by the Executive
including, without limitation, self employment, except for such deductions at
the source as from time to time may be required to be made pursuant to any law,
rule, regulation or order.

         vii.  Anything in this Agreement to the contrary  notwithstanding,  if,
during the  Employment  Term the  Executive's  employment  is  terminated by the
Executive

                                       22
<PAGE>

for any or no reason or by the  Company  other  for  Cause,  death or
Disability,  and such termination  shall occur upon or after the occurrence of a
Change in Control,  and Levy shall either have given  notice of his  resignation
from the employ of the Company,  shall have received a notice of  termination of
employment  from the Company or  Donnkenny or shall no longer be employed by the
Company or Donnkenny,  the Company shall pay to the Executive,  by wire transfer
of  immediately  available  funds  within  ten (10) days  after the  Executive's
Termination  Date,  an amount  equal to the sum of (x) two  times the  amount of
annual Base Salary of  Executive in effect on the Date of  Termination;  and (y)
two times the amount of Bonus included  within the  determination  of Additional
Termination Payments hereunder (the "Change in Control Payment"). In addition to
the  foregoing,  the Company shall also be obligated to pay to the Executive the
Standard Termination Payments as and when they shall become due.
         Anything in this  Section  5.d.vii.  to the  contrary  notwithstanding,
subsequent to the consummation of the Change in Control  transaction and, within
thirty (30) days after  Executive's  termination of employment  with the Company
which  gives rise to a payment  obligation  by the  Company  under this  Section
5.d.vii., the Company shall have the right to elect to pay to the Executive (and
to the Executive's  surviving spouse in the event of Executive's death or, if no
spouse shall then be surviving,  to Executive's estate) the amount of the Change
in Control Payment in twenty-four (24) equal or substantially  equal consecutive
monthly  installments,  commencing  on the first  day of the  month  immediately
succeeding the Termination Date and on the first

                                       23
<PAGE>

day of each month thereafter, without interest, provided that the
Company has first provided to Executive, and maintains in full force and effect
during the entire twenty-four (24) month period referred to above, at the
Company's expense, a bank letter of credit (with Executive as beneficiary) or
other collateral security for such payment which is not subject to the claims of
the Company's creditors and which is in an amount that is equal (in the case of
the bank letter of credit) to the unpaid balance of the Change in Control
Payment or (in the case of collateral other than the bank letter of credit)
which is equal to 100% in value of the unpaid balance of the Change in Control
Payment. The election provided for above shall be effective only if Executive
receives written notice thereof within the aforesaid thirty (30) day period.
Executive will have the right to reasonably approve the financial institution
issuing any such letter of credit and the terms thereof, as well as the form of
other security or the terms of any pledge relating thereto; provided that if the
financial institution is the institution then providing financing for the
Company, said institution shall be deemed approved for purposes of this
paragraph. In the event there shall be any default in payment of any installment
of the Change in Control Payment which is not cured within five (5) business
days after written notice thereof, or in the event additional or substituted
collateral shall not be timely delivered to Executive as provided for above,
then the remaining unpaid balance thereof shall be immediately due and payable
without further notice and, among other things, Executive shall have the
unrestricted right to proceed against the letter of credit or other collateral,
as the case may be.

                                       24
<PAGE>

         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 to Executive and his spouse and  dependents  including,
without  limitation,  the Company's Execucare Program or any addition thereto or
substitution therefor, for a period of three (3) 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
Company  provided  medical  coverage and 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  becomes  eligible  to receive  coverage  and
benefits under any plans, programs and/or arrangements of a subsequent employer.
Availability for coverage as a spouse,  principal or director of a company shall
not be treated as eligibility for coverage absent full time employment.  Subject
to the  provisions  of this  Agreement,  which shall control in the event of any
conflicting  provisions,  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 and options referred to
in Section 3.c.  above shall be determined  in accordance  with the provision of
this  Agreement  and the plans and grant  agreements  governing  such shares and
options; provided,  however, that in the event there shall be a conflict between
the terms of this  Agreement and the terms of any such plan or grant  agreement,
then the  provisions  of this  Agreement  shall  govern and  control.  Except as
otherwise

                                       25
<PAGE>

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 Section 5.d.vi. 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 in connection with, on or after the occurrence of a Change
in Control, and shall be the sole and exclusive remedy therefor. Executive shall
have no obligation whatsoever to mitigate any damages, costs or expenses
suffered or incurred by the Company with respect to any payments made pursuant
to this Section 5.d.vi., and no such payment shall be subject to any
cancellation, reduction, offset, rebate or repayment as a result of any
subsequent employment or other business activity by the Executive including,
without limitation, self employment, except for such deductions at the source as
from time to time may be required to be made pursuant to any law, rule,
regulation or order.
         Notwithstanding  the foregoing,  if the aggregate value of all payments
to be received by the Executive in connection  with a Change in Control would be
subject to excise tax under Internal Revenue Code Section 4999 and any successor
provision,  or any  comparable  provision  of state or local  tax law,  then the
payments to the Executive  will be reduced to an amount  sufficient to eliminate
any excise tax, but only if, after such reduction, the Executive would be placed
in a better after-tax  financial  position than the Executive would otherwise be
in had no reduction occurred.

                                       26
<PAGE>

         e. 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.
         f. 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.  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 shall  anything  in this
Agreement limit or otherwise  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 Stock Option Plan, or any other
plan,  policy,  practice or program of, or any contract of agreement  (including
this 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.
         7.  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

                                       27
<PAGE>

(which, as used in this Section 7, 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.
         8.  Confidential  Information.  The  Executive  shall  hold  in  strict
             -------------------------
confidence all secret or confidential information, knowledge or data 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; provided, however, that Executive's obligations
under this Section 8 with respect to any specific Confidential Information shall
cease when that  specific  Confidential  Information  becomes  public  knowledge
(other  than  as a  result  of the  Executive's  violation  of this  Section  8)
("Confidential  Information")  or  when it is  disclosed  by any  person,  firm,
corporation  or  business   entity  which  is  not  bound  by  the  terms  of  a
confidentiality   agreement  with  the  Company  which  contains   substantially
identical provisions as the terms hereof.

                                       28
<PAGE>

Except as is otherwise provided for herein, 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 shall 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, at the Company's expense, shall use his best efforts to
limit any such disclosure to the precise terms of such request or requirement.
         9. Non-Competition.  The Executive acknowledges that the services to be
            ---------------
rendered by him to the Company (which, as used in this Section 9 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  which  entitles  Executive  to a Change in
Control  Payment)  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)

                                       29
<PAGE>

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 or hire any person who was or is an officer, employee or sales
representative of the Company within the ninety (90) day period immediately
preceding Executive's termination of employment, 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 with respect to the business of the Company. 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, or any other trade name or trademark or corporate name used by
Donnkenny, the Company or any of their subsidiaries during the Employment Term.

10.      Indemnification.

         a. The Company and  Donnkenny  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,

                                       30
<PAGE>

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 10a. "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 Donnkenny,
or is or was serving as an officer, director, member, employee, trustee or agent
of any other entity at the request of the Company or Donnkenny, 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  and  Donnkenny  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 or Donnkenny, as the case may be, 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.
         c. The Executive  shall not be entitled to  indemnification  under this
Section 10 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 or Donnkenny  only as authorized in the
specific case upon a determination that

                                       31
<PAGE>

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 or the Board
of Directors of Donnkenny, as the case may be, 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. Neither the Company nor  Donnkenny  shall 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 Donnkenny
nor the Executive will unreasonably  withhold its or his consent to any proposed
settlement.
         e. The indemnification in this Section 10 shall inure to the benefit of
the Executive's heirs, executors and administrators.
         f. The Company and Donnkenny agree to use their respective 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 or Donnkenny  provides such coverage for its other  executive
officers.  Upon request by Executive,  the Company and  Donnkenny  shall furnish
Executive with written evidence that such coverage is in full force and effect.
         g.  Donnkenny  and the Company  agree to indemnify  and hold  Executive
harmless  from  all  losses,   costs,  fees  and  expenses  including,   without
limitation, reasonable legal fees and litigation expenses, which Executive shall
suffer,  sustain or incur as a result of,

                                       32
<PAGE>

in connection with or arising from any breach of this Agreement by Donnkenny or
the Company.

11. 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, if and only if
the Executive prevails in any contest, to the fullest extent permitted by law,
all legal fees and expenses that the Executive may reasonably incur as a result
of any contest by Donnkenny, 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.

12.      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.  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 or  Donnkenny,  as the case may be,  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 or Donnkenny  expressly to assume and agree to perform this Agreement in
the same manner and to the same extent that  Donnkenny or the Company would have
been  required to perform it if no such  succession

                                       33
<PAGE>

had taken place; provided, however, that no such assignment or transfer
shall have the effect of releasing or relieving Donnkenny or the Company of any
liability or obligation to the Executive hereunder or in any other agreement,
plan or document contemplated herein. 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 and
"Donnkenny" shall mean both Donnkenny as defined above and any such successor
that assumes and agrees to perform this Agreement by operation of law or
otherwise.
         13. 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.
         14. Notices.  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 or by
overnight mail, addressed as follows:

                                           If to the Executive:
                                           Mr. Harry A. Katz
                                           PO Box 1128
                                           Old Stone Highway
                                           Amagansett, New York 11930

                                       34
<PAGE>

                                           With a copy to:

                                           Piper Rudnick
                                           Suite 1800
                                           203 North LaSalle Street
                                           Chicago, Illinois 60601-1293
                                           Attn:  Stephen A. Landsman, Esq.

                                           If to Donnkenny or the Company:

                                           Donnkenny Apparel, Inc.
                                           1411 Broadway
                                           New York, New York 10018
                                           Attention:   Chief Executive Officer

or to such other address as either party furnishes to the other in writing in
accordance with this Section 13. Notices and communications shall be effective
when actually received by the addressee.

         15.  Modification  or  Waiver.  No  amendment,   modification,  waiver,
termination or  cancellation of this Agreement shall be binding or effective for
any  purpose  unless it is made in a writing  signed by the party  against  whom
enforcement of such amendment, modification, waiver, termination or cancellation
is sought.  No course of dealing  between or among the parties to this Agreement
shall be deemed to affect or to modify, amend or discharge any provision or term
of this  Agreement.  No delay  on the  part of  Donnkenny,  the  Company  or the
Executive in the exercise of any of their  respective  rights or remedies  shall
operate as a waiver thereof, and no single or partial exercise by Donnkenny, the
Company or the  Executive  of any such right or remedy shall  preclude  other or
further  exercises  thereof.  A waiver of a right or remedy on any one  occasion
shall not be  construed as a bar to or waiver of any such right or remedy on any
other occasion.
         16.  Governing  Law;  Jurisdiction.  This  Agreement  and  all  rights,
remedies and obligations  hereunder,  including,  but not limited to, matters of
construction,  validity  and

                                       35
<PAGE>

performance shall be governed by the laws of the State of New York
without regard to its conflict of laws principles or rules.

         17.  Severability.  Whenever  possible each  provision and term of this
Agreement  shall be  interpreted  in such a manner as to be effective  and valid
under  applicable  law, but if any provision or term of this Agreement  shall be
held to be  prohibited  by or  invalid  under  such  applicable  law,  then such
provision or term shall be ineffective only to the extent of such prohibition or
invalidity,  without  invalidating  or  affecting in any manner  whatsoever  the
remainder of such  provisions  or term or the  remaining  provisions or terms of
this Agreement.
         18.   Counterparts.   This   Agreement  may  be  executed  in  separate
counterparts,  each of which is deemed to be an original  and all of which taken
together constitute one and the same Agreement.
         19.  Headings.  The  headings  of the  Sections of this  Agreement  are
inserted  for  convenience  only and shall not be  deemed to  constitute  a part
hereof  and  shall  not  affect  the  construction  or  interpretation  of  this
Agreement.
         20. Entire Agreement.  This Agreement  (together with all documents and
instruments  referred to herein) constitutes the entire agreement and supersedes
all other prior  agreements and  undertakings,  both written and oral, among the
parties with respect to the subject matter hereof.
         21. Arbitration.  If any controversy or dispute shall arise between the
parties  hereto  in  connection  with,  arising  from,  or in  respect  to  this
Agreement,  any provision hereof, or any provision of any instrument,  document,
agreement or other writing  delivered  pursuant  hereto,  or with respect to the
validity of this Agreement or any such document, agreement or other writing, and
if such  controversy  or dispute  shall not be resolved  within thirty (30) days
after the same shall arise, then

                                       36
<PAGE>

such dispute or controversy shall be submitted for arbitration to the
New York, New York office of the American Arbitration Association in accordance
with its commercial arbitration rules then in effect. Any such dispute or
controversy shall be determined by one (1) arbitrator. Such arbitrator may award
any relief which such arbitrator shall deem proper in the circumstances, without
regard to the relief which would otherwise be available to either party hereto
in a court of law or equity, including, without limitation, an award of money
damages (including interest on unpaid amounts, calculated from the due date of
any such amount, at a rate per annum determined by said arbitrator), specific
performance and injunctive relief. The award and findings of such arbitrator
shall be conclusive and binding upon the parties thereto, and judgment upon such
award may be entered in any court of competent jurisdiction. Any party against
whom an arbitrator's award shall be issued shall not, in any manner, oppose or
defend against any suit to confirm such award, or any enforcement proceedings
brought against such party, whether within or outside of the United States of
America, with respect to any judgment entered upon the award, and such party
hereby consents to the entry of a judgment against such party, in the full
amount thereof, or other relief granted therein, in any jurisdiction in which
such enforcement is sought.
         22. Survival.  The respective  obligations of Donnkenny and the Company
and the Executive under Sections 5 (with respect to amounts owing as a result of
any  termination),  6, (with respect to amounts owing), 7, 8, 9, 10, 11, 12, 13,
21 or this Section 22 shall survive any  termination of Executive's  employment;
provided,   however,   that  the   Executive's   obligations   under  Section  9
(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

                                       37
<PAGE>

Executive's employment is terminated for any or no reason following a
Change in Control which entitles Executive to a Change in Control Payment.
         23.  Conflicting Terms. In the event any of the terms of this Agreement
shall  conflict  with any of the terms of any  benefit  plan of the  Company  or
Donnkenny in which Executive is a participant,  then the terms of this Agreement
shall govern and control.

                                       38
<PAGE>

         IN WITNESS WHEREOF,  the undersigned have executed this Agreement as of
the date first above written.

                   DONNKENNY, INC., a Delaware
                   corporation


                   By:         /s/ Daniel H. Levy
                               -------------------------------------------------
                               Name:        Daniel H. Levy
                                           -------------------------------------
                               Title:       Chairman and CEO
                                           -------------------------------------


                   DONNKENNY APPAREL, INC., a
                   Delaware corporation


                   By:         /s/ Daniel H. Levy
                               -------------------------------------------------
                               Name:        Daniel H. Levy
                                           -------------------------------------
                               Title:       Chairman and CEO
                                           -------------------------------------


                   EXECUTIVE


                   /s/ Harry A. Katz
                   -------------------------------------------------------------
                   HARRY A. KATZ

                                       39
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