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                              BERNARD CHAUS, INC.
                             1998 STOCK OPTION PLAN

1.       PURPOSE.

         The purpose of this Plan is to strengthen Bernard Chaus, Inc. (the
"Company") by providing an incentive to its employees, officers, consultants
and directors and thereby encouraging them to devote their abilities and
industry to the success of the Company's business enterprise. It is intended
that this purpose be achieved by extending to employees, officers, consultants
and directors of the Company and its Subsidiaries an added long-term incentive
for high levels of performance and unusual efforts through the grant of
Incentive Stock Options and Nonqualified Stock Options (as each term is herein
defined).

2.       DEFINITIONS.

         For purposes of the Plan:

         2.1 "Affiliate" means any entity, directly or indirectly, controlled
by, controlling or under common control with the Company or any corporation or
other entity acquiring, directly or indirectly, all or substantially all the
assets and business of the Company, whether by operation of law or otherwise.

         2.2 "Agreement" means the written agreement between the Company and an
Optionee evidencing the grant of an Option and setting forth the terms and
conditions thereof.

         2.3 "Board" means the Board of Directors of the Company.

         2.4 "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company or another corporation, by reason of
a reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.

         2.5 A "Change in Control" shall mean the occurrence during the term of
the Plan of:

             (a) An acquisition (other than directly from the Company) of any
voting securities of the Company (the "Voting Securities") by any "Person" (as
the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) immediately
after which such Person has "Beneficial Ownership" (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) or
more of the then outstanding Shares or the combined voting power of the
Company's then outstanding Voting Securities; provided, however, in determining
whether a Change in Control has occurred, Shares or Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (i) an employee benefit plan (or a
trust forming a part thereof) maintained by (A) the Company or (B) any
corporation or other Person of which a

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majority of its voting power or its voting equity securities or equity interest
is owned, directly or indirectly, by the Company (for purposes of this
definition, a "Subsidiary"), (ii) the Company or its Subsidiaries, (iii) any
Person in connection with a "Non-Control Transaction" (as hereinafter defined),
or (iv) a trust or private foundation or other estate planning vehicle
established by a shareholder of the Company, of voting securities of the
Company from such shareholder and/or the acquisition by the heirs, executors or
administrators of a shareholder of the Company of voting securities of the
Company from such shareholder;

             (b) The individuals who, as of the close of business on the Rights
Offering Effective Date are members of the Board (the "Incumbent Board"), cease
for any reason to constitute at least two-thirds of the members of the Board;
provided, however, that if the election, or nomination for election by the
Company's common stockholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for purposes
of this Plan, be considered as a member of the Incumbent Board; provided
further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the Exchange Act) or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board (a
"Proxy Contest") including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or

             (c) The consummation of:

                 (i) A merger, consolidation or reorganization with or into the
             Company or in which securities of the Company are issued, unless
             such merger, consolidation or reorganization is a "Non-Control
             Transaction." A "Non-Control Transaction" shall mean a merger,
             consolidation or reorganization with or into the Company or in
             which securities of the Company are issued where:

                     (A) the stockholders of the Company, immediately before
                 such merger, consolidation or reorganization, own directly or
                 indirectly immediately following such merger, consolidation or
                 reorganization, at least fifty percent (50%) of the combined
                 voting power of the outstanding voting securities of the
                 corporation resulting from such merger or consolidation or
                 reorganization (the "Surviving Corporation") in substantially
                 the same proportion as their ownership of the Voting
                 Securities immediately before such merger, consolidation or
                 reorganization,

                     (B) the individuals who were members of the Incumbent
                 Board immediately prior to the execution of the agreement
                 providing for such merger, consolidation or reorganization
                 constitute at least two-thirds of the members of the board of
                 directors of the Surviving Corporation, or a corporation
                 beneficially directly or indirectly owning a majority of the
                 Voting Securities of the Surviving Corporation, and

                     (C) no Person other than (i) the Company, (ii) any
                 Subsidiary, (iii) any employee benefit plan (or any trust
                 forming a part thereof) that, immediately prior to such
                 merger, consolidation or reorganization, was maintained by the
                 Company or any Subsidiary, or (iv) any Person who, immediately
                 prior to such merger, consolidation or reorganization had
                 Beneficial Ownership of more than fifty percent

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                 (50%) or more of the then outstanding Voting Securities or
                 Shares, has Beneficial Ownership of more than fifty percent
                 (50%) or more of the combined voting power of the Surviving
                 Corporation's then outstanding voting securities or its common
                 stock.

                 (ii) A complete liquidation or dissolution of the Company; or

                 (iii) The sale or other disposition of all or substantially
             all of the assets of the Company to any Person (other than a
             transfer to a Subsidiary).

             Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the then outstanding
Shares or Voting Securities as a result of the acquisition of Shares or Voting
Securities by the Company which, by reducing the number of Shares or Voting
Securities then outstanding, increases the proportional number of shares
Beneficially Owned by the Subject Persons, provided that if a Change in Control
would occur (but for the operation of this sentence) as a result of the
acquisition of Shares or Voting Securities by the Company, and after such share
acquisition by the Company, the Subject Person becomes the Beneficial Owner of
any additional Shares or Voting Securities which increases the percentage of
the then outstanding Shares or Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.

         2.6 "Code" means the Internal Revenue Code of 1986, as amended.

         2.7 "Committee" means a committee, as described in Section 3.1,
appointed by the Board from time to time to administer the Plan and to perform
the functions set forth herein.

         2.8 "Company" means Bernard Chaus, Inc.

         2.9 "Disability" means:

             (a) in the case of an Optionee whose employment with the Company
or a Subsidiary is subject to the terms of an employment agreement between such
Optionee and the Company or Subsidiary, which employment agreement includes a
definition of "Disability", the term "Disability" as used in this Plan or any
Agreement shall have the meaning set forth in such employment agreement during
the period that such employment agreement remains in effect; and

             (b) in all other cases, the term "Disability" as used in this Plan
or any Agreement shall mean a physical or mental infirmity which impairs the
Optionee's ability to perform substantially his or her duties for a period of
one hundred eighty (180) consecutive days.

         2.10 "Division" means any of the operating units or divisions of the
Company designated as a Division by the Committee.

         2.11 "Eligible Individual" means any officer or employee of the
Company or a Subsidiary, or any director, consultant or advisor who is
receiving cash compensation from the Company or a Subsidiary, designated by the
Committee as eligible to receive Options subject to the conditions set forth
herein;

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provided, however, that only employees of the Company or any Subsidiary may
receive Incentive Stock Options under this Plan.

         2.12 "Employee Option" means an Option granted pursuant to Section 5.

         2.13 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

         2.14 "Fair Market Value" on any date means the closing sales prices of
the Shares on such date on the principal national securities exchange on which
such Shares are listed or admitted to trading, or, if such Shares are not so
listed or admitted to trading, the average of the per Share closing bid price
and per Share closing asked price on such date as quoted on the National
Association of Securities Dealers Automated Quotation System or such other
market in which such prices are regularly quoted, or, if there have been no
published bid or asked quotations with respect to Shares on such date, the Fair
Market Value shall be the value established by the Board in good faith and, in
the case of an Incentive Stock Option, in accordance with Section 422 of the
Code.

         2.15 "Incentive Stock Option" means an Option satisfying the
requirements of Section 422 of the Code and designated by the Committee as an
Incentive Stock Option.

         2.16 "Nonemployee Director" means a director of the Company who is a
"nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.

         2.17 "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.

         2.18 "Option" means a Nonqualified Stock Option, an Incentive Stock
Option, or any or all of them.

         2.19 "Optionee" means a person to whom an Option has been granted
under the Plan.

         2.20 "Outside Director" means a director of the Company who is an
"outside director" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder.

         2.21 "Parent" means any corporation which is a parent corporation
(within the meaning of Section 424(e) of the Code) with respect to the Company.

         2.22 "Plan" means the Bernard Chaus, Inc. 1998 Stock Incentive Plan,
as amended and restated from time to time.

         2.23 "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.

         2.24 "Shares" means the common stock, par value $.01 per share, of the
Company.

         2.25 "Subsidiary" means any corporation which is a subsidiary
corporation (within the meaning of Section 424(f) of the Code) with respect to
the Company.

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         2.26 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of
the Code applies.

         2.27 "Ten-Percent Stockholder" means an Eligible Individual, who, at
the time an Incentive Stock Option is to be granted to him or her, owns (within
the meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent or a Subsidiary.

3.       ADMINISTRATION.

         3.1 The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A quorum shall consist
of not fewer than two members of the Committee and a majority of a quorum may
authorize any action. Any decision or determination reduced to writing and
signed by a majority of all of the members of the Committee shall be as fully
effective as if made by a majority vote at a meeting duly called and held. The
Committee shall consist of at least two (2) directors of the Company; provided,
however, that (A) each member shall be a Nonemployee Director and (B) to the
extent necessary for any Option intended to qualify as performance-based
compensation under Section 162(m) of the Code to so qualify, each member of the
Committee shall be an Outside Director. No member of the Committee shall be
liable for any action, failure to act, determination or interpretation made in
good faith with respect to this Plan or any transaction hereunder, except for
liability arising from his or her own willful misfeasance, gross negligence or
reckless disregard of his or her duties. The Company hereby agrees to indemnify
each member of the Committee for all costs and expenses and, to the extent
permitted by applicable law, any liability incurred in connection with
defending against, responding to, negotiating for the settlement of or
otherwise dealing with any claim, cause of action or dispute of any kind
arising in connection with any actions in administering this Plan or in
authorizing or denying authorization to any transaction hereunder.

         3.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:

             (a) determine those Eligible Individuals to whom Employee Options
shall be granted under the Plan and the number of such Employee Options to be
granted and to prescribe the terms and conditions (which need not be identical)
of each such Employee Option, including the purchase price per Share subject to
each Employee Option, and make any amendment or modification to any Agreement
consistent with the terms of the Plan;

             (b) to construe and interpret the Plan and the Options granted
hereunder and to establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the Plan
or in any Agreement, in the manner and to the extent it shall deem necessary or
advisable so that the Plan complies with applicable law including Rule 16b-3
under the Exchange Act and the Code to the extent applicable, and otherwise to
make the Plan fully effective. All decisions and determinations by the
Committee in the exercise of this power shall be final, binding and conclusive
upon the Company, the Subsidiaries, the Optionees, and all other persons having
any interest therein;

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             (c) to determine the duration and purposes for leaves of absence
which may be granted to an Optionee on an individual basis without constituting
a termination of employment or service for purposes of the Plan;

             (d) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and

             (e) generally, to exercise such powers and to perform such acts as
are deemed necessary or advisable to promote the best interests of the Company
with respect to the Plan.

4.       STOCK SUBJECT TO THE PLAN.

         4.1 The maximum number of Shares that may be made the subject of
Options granted under the Plan shall be ten percent (10%) of the issued and
outstanding Shares at the close of business on the Rights Offering Effective
Date (which shall be between 2,187,443 and 2,711,591 Shares); provided,
however, that the maximum number of Shares that an Eligible Individual may be
granted in respect of Options may not exceed 2,200,000 Shares. Upon a Change in
Capitalization, the maximum number of Shares referred to in the first sentence
of this Section 4.1 shall be adjusted in number and kind pursuant to Section
12. The Company shall reserve for the purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the Company's treasury,
or partly out of each, such number of Shares as shall be determined by the
Board.

         4.2 Upon the granting of an Option, the number of Shares available
under Section 4.1 for the granting of further Options shall be reduced as
follows: In connection with the granting of an Option, the number of Shares
shall be reduced by the number of Shares in respect of which the Option is
granted or denominated.

         4.3 Whenever any outstanding Option or portion thereof expires, is
canceled or is otherwise terminated for any reason without having been
exercised or payment having been made in respect of the entire Option, the
Shares allocable to the expired, canceled or otherwise terminated portion of
the Option may again be the subject of Options granted hereunder.

5.       OPTION GRANTS FOR ELIGIBLE INDIVIDUALS.

         5.1 AUTHORITY OF COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible
Individuals who will receive Employee Options, and the terms and conditions of
the grant to such Eligible Individuals shall be set forth in an Agreement.

         5.2 PURCHASE PRICE. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Employee Option shall
be determined by the Committee and set forth in the Agreement; provided,
however, that the purchase price per Share under each Incentive Stock Option
shall not be less than 100% of the Fair Market Value of a Share on the date the
Employee Option is granted (110% in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder). Subject to Section 5.5, the Committee
shall have the authority to change the purchase price for Shares under an
Employee Option subsequent to its grant.

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         5.3 MAXIMUM DURATION. Employee Options granted hereunder shall be for
such term as the Committee shall determine, provided that an Incentive Stock
Option shall not be exercisable after the expiration of ten (10) years from the
date it is granted (five (5) years in the case of an Incentive Stock Option
granted to a Ten-Percent Stockholder) and a Nonqualified Stock Option shall not
be exercisable after the expiration of ten (10) years from the date it is
granted. The Committee may, subsequent to the granting of any Employee Option,
extend the term thereof, but in no event shall the term as so extended exceed
the maximum term provided for in the preceding sentence.

         5.4 VESTING. Subject to Section 6.4, each Employee Option shall become
exercisable in such installments (which need not be equal) and at such times as
may be designated by the Committee and set forth in the Agreement. To the
extent not exercised, installments shall accumulate and be exercisable, in
whole or in part, at any time after becoming exercisable, but not later than
the date the Employee Option expires. The Committee may accelerate the
exercisability of any Employee Option or portion thereof at any time.

         5.5 MODIFICATION. No modification of an Employee Option shall
adversely alter or impair any rights or obligations under the Employee Option
without the Optionee's consent.

6.       TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.

         6.1 NON-TRANSFERABILITY. Unless set forth in the Agreement evidencing
the Option (other than an Incentive Stock Option) at the time of grant or at
any time thereafter, an Option granted hereunder shall not be transferable by
the Optionee to whom granted except by will or the laws of descent and
distribution or pursuant to a domestic relations order (within the meaning of
Rule 16a-12 promulgated under the Exchange Act), and an Option may be exercised
during the lifetime of such Optionee only by the Optionee or his or her
guardian or legal representative. The terms of such Option shall be final,
binding and conclusive upon the beneficiaries, executors, administrators, heirs
and successors of the Optionee.

         6.2 METHOD OF EXERCISE. The exercise of an Option shall be made only
by a written notice delivered in person or by mail to the Secretary of the
Company at the Company's principal executive office, specifying the number of
Shares to be purchased and accompanied by payment therefor and otherwise in
accordance with the Agreement pursuant to which the Option was granted. The
purchase price for any Shares purchased pursuant to the exercise of an Option
shall be paid, as determined by the Committee in its discretion, in either of
the following forms (or any combination thereof): (i) cash and/or (ii) the
transfer of Shares to the Company upon such terms and conditions as determined
by the Committee. In addition, Employee Options may be exercised through a
registered broker-dealer pursuant to such cashless exercise procedures which
are, from time to time, deemed acceptable by the Committee, and the Committee
may authorize that the purchase price payable upon exercise of an Employee
Option may be paid by having Shares withheld that otherwise would be acquired
upon such exercise. Any Shares transferred to the Company (or withheld upon
exercise) as payment of the purchase price under an Option shall be valued at
their Fair Market Value on the day preceding the date of exercise of such
Option. The Optionee shall deliver the Agreement evidencing the Option to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such Agreement to the Optionee. No fractional Shares (or cash in
lieu thereof) shall be issued upon exercise of an Option and the number of
Shares that may be purchased upon exercise shall be rounded to the nearest
number of whole Shares.

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         6.3 RIGHTS OF OPTIONEES. No Optionee shall be deemed for any purpose
to be the owner of any Shares subject to any Option unless and until (i) the
Option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered Shares to the Optionee, and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares, subject to such terms and
conditions as may be set forth in the applicable Agreement.

         6.4 EFFECT OF CHANGE IN CONTROL. In the event of a Change in Control,
all Options outstanding on the date of such Change in Control shall become
immediately and fully exercisable. In the event an Optionee's employment with
the Company terminates following a Change in Control, each Option held by the
Optionee that was exercisable as of the date of termination of the Optionee's
employment shall remain exercisable for a period ending not before the earlier
of (A) the first anniversary of the termination of the Optionee's employment or
(B) the expiration of the stated term of the Option; but in no event shall the
exercise period exceed the maximum term provided in Section 5.3.

7.       EFFECT OF A TERMINATION OF EMPLOYMENT.

         The Agreement evidencing the grant of each Option shall set forth the
terms and conditions applicable to such Option upon a termination or change in
the status of the employment of the Optionee by the Company, a Subsidiary or a
Division (including a termination or change by reason of the sale of a
Subsidiary or a Division), which shall be as the Committee may, in its
discretion, determine at the time the Option is granted or thereafter.

8.       ADJUSTMENT UPON CHANGES IN CAPITALIZATION.

              (a) In the event of a Change in Capitalization, the Committee
shall conclusively determine the appropriate adjustments, if any, to (i) the
maximum number and class of Shares or other stock or securities with respect to
which Options may be granted under the Plan, (ii) the maximum number and class
of Shares or other stock or securities with respect to which Options may be
granted to any Eligible Individual during any fiscal year during the term of
the Plan, and (iii) subject to the provisions of Section 162(m) of the Code,
the number and class of Shares or other stock or securities which are subject
to outstanding Options granted under the Plan and the purchase price therefor,
if applicable.

              (b) Any such adjustment in the Shares or other stock or
securities subject to outstanding Incentive Stock Options (including any
adjustments in the purchase price) shall be made in such manner as not to
constitute a modification as defined by Section 424(h)(3) of the Code and only
to the extent otherwise permitted by Sections 422 and 424 of the Code.

              (c) If, by reason of a Change in Capitalization, an Optionee
shall be entitled to exercise an Option with respect to, new, additional or
different shares of stock or securities, such new, additional or different
shares shall thereupon be subject to all of the conditions, and restrictions
which were applicable to the Shares subject to the Option, as the case may be,
prior to such Change in Capitalization.

9.       EFFECT OF CERTAIN TRANSACTIONS.

         Subject to Section 8.4 or as otherwise provided in an Agreement or
otherwise by the Committee, in the event of (i) the liquidation or dissolution
of the Company or (ii) a merger or consolidation of the

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Company (a "Transaction"), the Plan and the Options issued hereunder shall
continue in effect in accordance with their respective terms, except that
following a Transaction each Optionee shall be entitled to receive in respect
of each Share subject to any outstanding Options, as the case may be, upon
exercise of any Option, the same number and kind of stock, securities, cash,
property or other consideration that each holder of a Share was entitled to
receive in the Transaction in respect of a Share; provided, however, that such
stock, securities, cash, property, or other consideration shall remain subject
to all of the conditions, restrictions and performance criteria which were
applicable to the Options prior to such Transaction.

10.      INTERPRETATION.

              The Plan is intended to comply with Rule 16b-3 promulgated under
the Exchange Act and the Committee shall interpret and administer the
provisions of the Plan or any Agreement in a manner consistent therewith. Any
provisions inconsistent with such Rule shall be inoperative and shall not
affect the validity of the Plan.

              (a) Unless otherwise expressly stated in the relevant Agreement,
each Employee Option granted under the Plan is intended to be performance-based
compensation within the meaning of Section 162(m)(4)(C) of the Code. The
Committee shall not be entitled to exercise any discretion otherwise authorized
hereunder with respect to such Options if the ability to exercise such
discretion or the exercise of such discretion itself would cause the
compensation attributable to such Options to fail to qualify as
performance-based compensation.

11.      POOLING TRANSACTIONS.

         Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event of a Change in Control which is also intended to
constitute a Pooling Transaction, the Committee shall take such actions, if
any, as are specifically recommended by an independent accounting firm retained
by the Company to the extent reasonably necessary in order to assure that the
Pooling Transaction will qualify as such, including but not limited to (i)
deferring the vesting, exercise, payment, settlement or lapsing of restrictions
with respect to any Option, (ii) providing that the payment or settlement in
respect of any Option be made in the form of cash, Shares or securities of a
successor or acquirer of the Company, or a combination of the foregoing, and
(iii) providing for the extension of the term of any Option to the extent
necessary to accommodate the foregoing, but not beyond the maximum term
permitted for any Option.

12.      TERMINATION AND AMENDMENT OF THE PLAN.

         The Plan shall terminate on the day preceding the tenth anniversary of
the date of its adoption by the Board and no Option may be granted thereafter.
Subject to Section 11, the Board may sooner terminate the Plan and the Board
may at any time and from time to time amend, modify or suspend the Plan;
provided, however, that:

              (a) no such amendment, modification, suspension or termination
shall impair or adversely alter any Options theretofore granted under the Plan,
except with the consent of the Optionee, nor shall any amendment, modification,
suspension or termination deprive any Optionee of any Shares which he or she
may have acquired through or as a result of the Plan; and

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              (b) to the extent necessary under applicable law, no amendment
shall be effective unless approved by the stockholders of the Company in
accordance with applicable law.

13.      OTHER ARRANGEMENTS.

         The adoption of the Plan by the Board shall not be construed as
creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of stock options otherwise than under the Plan, and such
arrangements may be either applicable generally or only in specific cases.

14.      LIMITATION OF LIABILITY.

         As illustrative of the limitations of liability of the Company, but
not intended to be exhaustive thereof, nothing in the Plan shall be construed
to:

                   (i) give any person any right to be granted an Option other
              than at the sole discretion of the Committee;

                   (ii) give any person any rights whatsoever with respect to
              Shares except as specifically provided in the Plan;

                   (iii) limit in any way the right of the Company or any
              Subsidiary to terminate the employment of any person at any time;
              or

                   (iv) be evidence of any agreement or understanding,
              expressed or implied, that the Company will employ any person at
              any particular rate of compensation or for any particular period
              of time.

15.      REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.

         15.1 Except as to matters of federal law, the Plan and the rights of
all persons claiming hereunder shall be construed and determined in accordance
with the laws of the State of New York without giving effect to conflicts of
laws principles thereof.

         15.2 The obligation of the Company to sell or deliver Shares with
respect to Options granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.

         15.3 The Board may make such changes as may be necessary or
appropriate to comply with the rules and regulations of any government
authority, or to obtain for Eligible Individuals granted Incentive Stock
Options the tax benefits under the applicable provisions of the Code and
regulations promulgated thereunder.

         15.4 Each Option is subject to the requirement that, if at any time
the Committee determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental

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regulatory body is necessary or desirable as a condition of, or in connection
with, the grant of an Option or the issuance of Shares, no Options shall be
granted or payment made or Shares issued, in whole or in part, unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.

         15.5 Notwithstanding anything contained in the Plan or any Agreement
to the contrary, in the event that the disposition of Shares acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer
to the extent required by the Securities Act and Rule 144 or other regulations
thereunder. The Committee may require any individual receiving Shares pursuant
to an Option granted under the Plan, as a condition precedent to receipt of
such Shares, to represent and warrant to the Company in writing that the Shares
acquired by such individual are acquired without a view to any distribution
thereof and will not be sold or transferred other than pursuant to an effective
registration thereof under said Act or pursuant to an exemption applicable
under the Securities Act or the rules and regulations promulgated thereunder.
The certificates evidencing any of such Shares shall be appropriately legended
to reflect their status as restricted securities as aforesaid.

16.      MISCELLANEOUS.

         16.1 MULTIPLE AGREEMENTS. The terms of each Option may differ from
other Options granted under the Plan at the same time, or at some other time.
The Committee may also grant more than one Option to a given Eligible
Individual during the term of the Plan, either in addition to, or in
substitution for, one or more Options previously granted to that Eligible
Individual.

         16.2 WITHHOLDING OF TAXES.

              (a) At such times as an Optionee recognizes taxable income in
connection with the receipt of Shares or otherwise hereunder (a "Taxable
Event"), the Optionee shall pay to the Company an amount equal to the federal,
state and local income taxes and other amounts as may be required by law to be
withheld by the Company in connection with the Taxable Event (the "Withholding
Taxes") prior to the issuance, or release from escrow, of such Shares or
otherwise. The Company shall have the right to deduct from any payment of cash
to an Optionee an amount equal to the Withholding Taxes in satisfaction of the
obligation to pay Withholding Taxes. In satisfaction of the obligation to pay
Withholding Taxes to the Company, the Optionee may make a written election (the
"Tax Election"), which may be accepted or rejected in the discretion of the
Committee, to have withheld a portion of the Shares then issuable to him or her
having an aggregate Fair Market Value equal to the Withholding Taxes.

              (b) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any Share
or Shares issued to such Optionee pursuant to the exercise of an Incentive
Stock Option within the two-year period commencing on the day after the date of
the grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal
executive office.

         16.3 EFFECTIVE DATE. The effective date of this Plan shall be the
effective date of the Company's rights offering as contemplated by the Form S-3
Registration Statement under the Securities Act of 1933, as amended, which was
filed by the Company with the Securities and Exchange Commission on October 30,

                                       11

<PAGE>

1997 (the "Rights Offering Effective Date"), subject only to the approval by
the affirmative vote of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting of
stockholders duly held in accordance with the applicable laws of the State of
New York within twelve (12) months of the adoption of the Plan by the Board.

                                       12

<PAGE>

                   [Form of Agreement for New Option Grants]

                              BERNARD CHAUS, INC.
                             1998 STOCK OPTION PLAN
                      NON-INCENTIVE STOCK OPTION AGREEMENT


         AGREEMENT made and entered into as of _______________, by and between
BERNARD CHAUS, INC. (the "Company"), a New York corporation with offices at
1410 Broadway, New York, New York 10018, and _________________ (the
"Optionee"), an individual residing at _____________________________________.

                             W I T N E S S E T H :

         WHEREAS, the Board of Directors (the "Board") of the Company by
resolution dated November 7, 1997, adopted the Bernard Chaus, Inc. 1998 Stock
Option Plan (the "Plan") which authorizes the grant of options to purchase
shares of the common stock, $.01 par value per share, of the Company (the
"Common Stock") to certain employees, officers, consultants and directors of
the Company;

         WHEREAS, the administration of the Plan has been delegated under its
provision to a committee (the "Committee") appointed by the Board; and

         WHEREAS, the Optionee is now [employed by][serving as a non-employee
director of] the Company and the Company desires that (s)he remain in such
[employ][service] and that (s)he increase her/his stock ownership in the
Company in order to increase her/his incentive and personal interest in the
welfare of the Company; and

         WHEREAS, at a meeting of the Committee held on _________________ (the
"Date of Grant"), the Committee granted to the Optionee options to purchase
shares of Common Stock of the Company, pursuant to the terms and subject to the
conditions specified herein and in the Plan.

         NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements herein contained, the parties hereby agree as
follows:

         1. (a) Subject to the terms and conditions set forth herein, the
Company grants to the Optionee an option (the "Option") to purchase from the
Company all or any part of an aggregate of ________ shares of the Common Stock
(the "Shares") pursuant to the terms and subject to the conditions specified
herein and in the Plan. The Option is not intended to be an incentive stock
option within the meaning of Section 422A(b) of the Internal Revenue Code of
1986 (the "Code") and this Agreement shall be construed and interpreted in
accordance with such intention.

            (b) In the case of any conflict between the provisions hereof and
those of

                                      -1-

<PAGE>

the Plan, the provisions of the Plan shall be controlling. A copy of the Plan
(as such may have been amended to date) will be made available for inspection
by the Optionee during normal business hours at the principal office of the
Company. All capitalized terms used but not defined herein shall have the
respective meanings ascribed to them in the Plan. The Company makes no
representations or warranties as to the income, estate or other tax
consequences to the Optionee of the grant of exercise of the Option or the sale
or other disposition of the Shares acquired pursuant to the exercise thereof.

         2. The purchase price for the Shares shall be $_____ per share,
subject to adjustment as hereinafter provided (the "Option Price").

         3. (a) The Option shall vest and be exercisable at the rate of
twenty-five percent (25%) on each of the first four (4) anniversaries of the
Date of Grant, subject to the Optionee's continued employment on the applicable
vesting date. For purposes of vesting, all fractional amounts shall be rounded
to the nearest number of whole Shares. Notwithstanding the foregoing, in no
event shall the Option be exercised, and the Option shall no longer be
exercisable, at any time after ten (10) years from the Date of Grant (the
"Expiration Date"). Subject to the foregoing, any exercise of the Option may be
either in whole at any time or in part at any time or from time to time.

            (b) Except as provided in subparagraph 3(c) or Paragraph 7
hereof, the Option shall cease to be exercisable thirty (30) days after the
date the Optionee terminates services as an employee, consultant or
non-employee director of the Company or any affiliate of the Company for
reasons other than a "Discharge for Cause" (as defined below), retirement with
the consent of the Company ("Retirement"), Disability or death and immediately
upon the termination of the Optionee as a result of a Discharge for Cause, and
all rights of the Optionee hereunder shall thereupon terminate. For purposes of
this Agreement, a "Discharge for Cause" shall be defined in the Optionee's
employment agreement or, if the Optionee is not party to an employment
agreement with the Company, a "Discharge for Cause" shall mean the discharge of
the Optionee from his or her employment or service as a consultant or
non-employee director by the Company and the affiliates of the Company after a
good faith determination by the Board that such termination of employment or
service as a consultant or non-employee director is necessary or desirable by
reason of (i) the commission by such Optionee of any act which, if successfully
prosecuted by the appropriate authorities, would constitute a felony under
state or federal law; (ii) the disclosure or furnishing to any one other than
the Company and its Subsidiaries, or the directors, officers, employees,
auditors and legal advisors of any of them, other in the regular course of
business of the Company and its Subsidiaries, any knowledge or information with
respect to the customers, employees, operations, financial condition, revenues
or projections of the Company and/or its Subsidiaries, other than any such
knowledge or information in the public domain which has not been improperly
disclosed by such Optionee; (iii) the commission by such Optionee of an act of
moral turpitude; (iv) the material violation by such Optionee of the terms and
provisions of an employment agreement between such Optionee and the Company
and/or any Subsidiary; or (v) a material dereliction by such Optionee of his
duties to the Company and/or any Subsidiary.

                                      -2-

<PAGE>

         (c) (i) If the Optionee ceases to be an employee of or consultant to
the Company or any affiliate of the Company and this cessation is due to
Retirement, Disability or death, the Option shall be exercisable as provided in
this subparagraph. The Optionee, or in the event of the Optionee's Disability,
the Optionee's duly appointed guardian or conservator, or in the event of the
Optionee's death, the Optionee's executor or administrator, shall have the
privilege of exercising the unexercised portion of the Option which the
Optionee could have exercised on the day on which the Optionee ceased to be an
employee of or consultant to the Company or any affiliate of the Company,
provided, however, that such exercise must be in accordance with the terms of
this Agreement and within (x) three (3) months after the Optionee's Retirement
or Disability or (y) (A) twelve (12) months after the Optionee's death or (B)
three (3) months after the Optionee's death if such death occurs during the
three (3) month period following the termination of the Optionee's employment
or service as a consultant by reason of Retirement or Disability, as the case
may be. In no event, however, shall the Optionee or the Optionee's executor or
administrator, as the case may be, exercise the Option after the Expiration
Date. For all purposes of this Agreement, an approved leave of absence shall
not constitute an interruption or cessation of the Optionee's service as an
employee or consultant of the Company or any affiliate of the Company.

              (ii) If the Optionee ceases to be an non-employee director of the
Company and this cessation is due to Retirement, Disability or death, the
Option shall be exercisable as provided in this subparagraph. The Optionee, or
in the event of the Optionee's Disability, the Optionee's duly appointed
guardian or conservator, or in the event of the Optionee's death, the
Optionee's executor or administrator, shall have the privilege of exercising
the unexercised portion of the Option which the Optionee could have exercised
on the day on which the Optionee ceased to be a non-employee director of the
Company, provided, however, that such exercise must be in accordance with the
terms of this Agreement and within twelve (12) months after the Optionee's
Retirement, Disability or death. In no event, however, shall the Optionee or
the Optionee's executor or administrator, as the case may be, exercise the
Option after the Expiration Date.

              (iii) Except as set forth in this subparagraph 3(c), during the
Optionee's lifetime, the Option may be exercised only by the Optionee.

         4. No Optionee shall be deemed for any purpose to be the owner of any
Shares unless and until (i) the Option shall be exercised pursuant to the terms
thereof, (ii) the Company shall have issued and delivered Shares to the
Optionee and (iii) the Optionee's name shall have been entered as a stockholder
of record on the books of the Company. Thereupon, the Optionee shall have full
voting, dividend and other ownership rights with respect to such Shares,
subject to the terms and conditions hereof.

         5. The Option shall be exercised when written notice of such exercise,
signed by the person entitled to exercise the Option, has been delivered or
transmitted by registered or certified mail, to the Secretary of the Company at
its principal executive office. Said written notice shall specify the number of
Shares purchasable under the Option which such person then wishes to

                                      -3-

<PAGE>

purchase and shall be accompanied by this Agreement and such other
documentation, if any, as may be required by the Company as provided in
Paragraph 6 below and be accompanied by payment of the aggregate Option Price.
Such payment shall be in the form of (i) cash or, to the extent the Committee
shall have adopted provisions therefor, Shares or other consideration, or any
combination thereof, having a Fair Market Value on the day preceding the
exercise date equal to the exercise price of the Option or portion thereof
being exercised or (ii) the sale of Shares underlying Employee Options, through
a registered broker-dealer, pursuant to the Company's broker-assisted cashless
exercise program, to the extent such program has been established by the
Committee. In connection with any payment of Shares, the Optionee shall, to the
extent requested by the Committee, certify to the Company that such delivery
will not result in "short-swing" profit to him under Section 16 of the
Securities and Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations promulgated thereunder ("Section 16"). Delivery of said notice and
such documentation shall constitute an irrevocable election to purchase the
Shares specified in said notice and the date on which the Company receives said
notice and documentation shall, subject to the provisions of Paragraph 6, be
the date as of which the Shares so purchased shall be deemed to have been
issued. The person entitled to exercise the Option shall not have the right or
status as a holder of the Shares to which such exercise relates prior to
receipt by the Company of such payment, notice and documentation. No fractional
Shares (or cash in lieu thereof) shall be issued upon exercise of an Option and
the number of Shares that may be purchased upon exercise shall be rounded to
the nearest number of whole Shares.

         6. (a) In the event that the disposition of Shares acquired pursuant
to the Option is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer
to the extent required by the Securities Act and Rule 144 or other regulations
promulgated thereunder. The Committee may require as a condition to the right
to exercise the Option hereunder that the Company receive from the person
exercising the Option, representations, warranties and agreements, at the time
of any such exercise, to the effect that the Shares are being purchased for
investment only and without any present intention to sell or otherwise
distribute such Shares and that the Shares will not be disposed of in
transactions which, in the opinion of counsel to the Company, would violate the
registration provisions of the Securities Act. The certificate issued to
evidence such Shares shall bear appropriate legends summarizing such
restrictions on the disposition thereof.

            (b) In the event of the death of the Optionee, an additional
condition of exercising the Option shall be the delivery to the Company of such
tax waivers and other documents as the Company shall reasonably determine. The
executors, administrators, legal representatives, distributees and legatees of
the Optionee are, after the death of the Optionee, referred to as the Optionee
with respect to the Option.

            (c) The Optionee shall, as an additional condition of exercising
the Option, make appropriate arrangements with the Company for the payment of
all Withholding Taxes applicable as a result of the exercise of the Option
prior to the issuance or release from escrow of

                                      -4-

<PAGE>

such Shares.

            (d) Anything in this Agreement to the contrary notwithstanding, in
no event may the Option be exercisable if the Company shall, at any time and in
its sole discretion, determine that (i) the listing, registration or
qualification of any shares otherwise deliverable upon such exercise, upon any
securities exchange or under any state or federal law, or (ii) the consent or
approval of any regulatory body or the satisfaction of withholding tax or other
withholding liabilities, is necessary or desirable in connection with such
exercise. In such event, such exercise shall be held in abeyance and shall not
be effective unless and until such withholding, listing, registration,
qualification, or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.

         7. In the event of a Change in Control of the Company, all Options
outstanding on the date of such Change in Control shall become immediately and
fully exercisable. If the Optionee's employment is terminated for any reason
following a Change in Control, each Option held by the Optionee that was
exercisable as of the date of termination of the Optionee's employment shall
remain exercisable for a period ending not before the earlier of (A) the first
anniversary of the termination of the Optionee's employment or (B) the
Expiration Date.

         8. (a) In the event of a Change in Capitalization, if an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
necessary to prevent dilution or enlargement of the benefits or potential
benefits intended to be made under the Plan, adjust any or all of (x) the
number and type of Shares subject to the unexercised portion of the Option, and
(y) the exercise price with respect to the unexercised portion of the Option
or, if deemed appropriate, make provision for a cash payment with respect to
the unexercised portion of the Option. In computing any adjustment under this
paragraph, the number of Shares that may be purchased upon exercise shall be
rounded to the nearest number of whole Shares.

            (b) Subject to subparagraph 8(a) or as otherwise provided by the
Committee, in the event that a Transaction is consummated, the Option shall,
after the consummation of such Transaction, be exercisable into the kind and
number of shares of stock, securities, cash, property or other consideration
which the Optionee would have been entitled to receive if the Optionee had held
the Shares issuable upon the exercise of the Option immediately prior to such
Transaction; provided, however, that such stock, securities, cash, property or
other consideration shall remain subject to all of the conditions, restrictions
and performance criteria which were applicable to the Options prior to such
Transaction.

         9. The existence of the Option shall not affect in any way the right
or power of the Company or its shareholders to make or authorize any or all
Changes in Capitalization, Changes in Control or Transactions.

                                      -5-

<PAGE>

         10. Nothing contained herein shall be construed (i) to confer on the
Optionee any right to continue as an employee of the Company or any affiliate,
Subsidiary or Division of the Company at any particular rate of compensation or
for any particular length of time or (ii) to derogate from any right of the
Company or any affiliate, Subsidiary or Division thereof to retire, request the
resignation thereof or discharge the Optionee, or to layoff or require a leave
of absence of the Optionee, with or without pay, at any time, with or without
cause.

         11. This Agreement shall be construed and enforced in accordance with
the laws of the State of New York and applicable Federal law, without giving
effect to conflicts of laws principles thereof. Subject to subparagraph 3(c)
hereof, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, personal representatives,
successors or assigns, as the case may be.

         12. This Agreement and the Plan set forth the entire understanding of
the parties with respect to the subject matter hereof, supersede all existing
agreements between them concerning such subject matter. No amendment,
modification, suspension or termination of this Agreement may be made without
the consent of each party hereto; provided, however, that the Company may amend
modify, suspend or terminate this Agreement in a manner which does not impair
or adversely alter any Options without the written consent of the Optionee.

         13. Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt request, or delivered against receipt to the party to whom it is
to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in
writing in accordance with the provisions of this paragraph 13). Notice to the
estate of the Optionee shall be sufficient if addressed to the Optionee as
provided in this paragraph 13. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.

         14. Any waiver by either party of a breach of any provision of this
Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.

         15. The Option is not assignable, alienable, saleable or transferable
otherwise than (a) by will or the laws of descent and distribution, (b)
pursuant to a domestic relations order (within the meaning of Rule 16a-12
promulgated under the Exchange Act, (c) as provided in subparagraph 3(c) above
or (d) with the consent of, or in accordance with rules and procedures
established by, the Board of Directors of the Company. The Optionee's rights
shall not be subject to commutation, encumbrance or the claims of the
Optionee's creditors, and any attempt to do any of the foregoing

                                      -6-

<PAGE>

shall be void. The provisions of this Agreement shall be final, binding and
conclusive upon the beneficiaries, executors, administrators, heirs and
successors of the Optionee.

         IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by a duly authorized officer and its corporate seal hereunto affixed,
and the Optionee has hereunto affixed his hand and seal, the day and year first
above written.

                                            BERNARD CHAUS, INC.


                                            By
                                              ------------------------------
                                              Name:
                                              Title:

ACCEPTED AND AGREED TO:


By
  ---------------------------
  Optionee

                                      -7-