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                              BERNARD CHAUS, INC.
                                 1410 Broadway
                            New York, New York 10018



                                                 As of January 1, 1998


Andrew Grossman
125 Pecksland Road
Greenwich, CT  06830

Dear Andrew:

         Reference is made to the Employment Agreement, made as of September 1,
1994, by and between Bernard Chaus, Inc. and you for a term beginning on
September 1, 1994 (the "Agreement"). This letter amendment (the "Letter
Amendment") when signed by both parties constitutes an amendment to the
Agreement. Except as the context may otherwise require, any reference herein or
in the Agreement to the "Agreement" shall mean the Agreement as amended by the
Letter Agreement. Capitalized terms used and not separately defined herein
shall have the meanings ascribed to such terms in the Agreement.

         1. Employment. Section 1 of the Agreement shall be amended to add the
following phrase in the sixth line after the words "Josephine Chaus":

         an active, full time executive chairwoman,

         2. Term. The Company's previous election to extend the Term for an
additional five (5) years, is replaced by this Amendment. Section 2 of the
Agreement is hereby amended to provide that the Initial Term shall end on
September 1, 2000.

         3. Extension. Section 2(b) of the Agreement shall be amended to read
in its entirety as follows:

         Provided that the Company shall have complied with its obligations to
issue certain stock options pursuant to the third sentence of Section 8 of the
Agreement, the Company may at any time during the Initial Term elect to extend
the Term for an additional four years

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Andrew Grossman
As of January 1, 1998
Page 2


ending on September 1, 2004 (as so extended, the "Extended Term") by providing
the Executive with notice not later than March 1, 2000 of its intention to
extend the Term.

         4. Board Member. Section 3(b) of the Agreement shall be amended by
deleting the last sentence thereof.

         5. Compensation. Clause (ii) of the first sentence of Section 5(a) of
the Agreement shall be amended to read in its entirety as follows:

         (ii) (A) five percent (5.0%) of the Annual Net Profits (as hereinafter
defined) of the Company for the fiscal year ended June 30, 1998 and (B) two and
one-half percent (2.5%) of the Annual Net Profits of the Company for each
fiscal year thereafter during the Term ("Net Profit Participation").

         6. Stock Options. Section 8 of the Agreement shall be amended to read
in its entirety as follows:

         The Company agrees to cause the issuance under the Company's 1998
Stock Option Plan, heretofore authorized by the Compensation Committee of the
Board of Directors, effective February 23, 1998, to the Executive of stock
options ("Stock Options") embodying the terms set forth below and otherwise
containing terms and conditions set forth in the form of the Stock Option
Agreement attached to the Letter Amendment as Attachment A, to purchase
1,375,137 shares of Common Stock (representing five percent (5%) of the
outstanding shares of Common Stock on a fully diluted basis calculated in
accordance with the "so called" "treasury method" under U.S. generally accepted
accounting principles ("GAAP")), with an exercise price equal to $3.11 per
share (which is the average of the closing sale prices of the Common Stock on
the New York Stock Exchange over the thirty (30) days commencing on January 24,
1998 and ending February 22, 1998). The Executive agrees that in consideration
for such replacement options, he is surrendering effective immediately, all
Stock Options received by him pursuant to the Agreement (i.e., stock options
for an aggregate of 3,000,000 shares as the same may have been adjusted under
applicable provisions of the stock option agreement(s) evidencing the same). In
addition, the Company agrees to cause the Stock Option Committee to award on
the date the Company elects to extend the term of this Agreement pursuant to
Section 2(b) above (the "Extension Date"), if any, Stock Options to purchase
additional shares of Common Stock equal to three percent (3%) of the then
outstanding shares of Common Stock on a fully diluted basis calculated in
accordance with the so called "treasury method" under GAAP (the "Extension
Stock Options"), with an exercise price equal to the closing sales price per
share of the

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Andrew Grossman
As of January 1, 1998
Page 3


Company's Common Stock on the Extension Date, which Stock Options shall be
granted in a manner that complies with Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Act"), to the extent the benefits of Rule 16b-3
are available with respect to such awards; provided, that if such benefits are
not available, the Company shall use its best efforts to make the grant in a
manner such that the Executive does not incur any liability under Section 16(b)
of the Act. The Extension Stock Options shall vest and be exercisable at the
rate of 331/3% a year on a cumulative basis commencing on the first anniversary
of the date of grant and will otherwise be issued on the same terms and
conditions as those Stock Options granted pursuant to the first sentence of
this Section 8. The award of the Extension Stock Options to the Executive shall
be subject to receipt of approval by the Company's shareholders. The Company
agrees to reserve sufficient authorized but unissued shares of Common Stock to
be available at all times to satisfy any obligation of the Company to issue
shares of Common Stock to the Executive upon exercise of any stock options.

         7. Termination. Section 9(e) of the Agreement shall be amended by
inserting after the words "Annual Salary", in clause (i) of the first sentence
thereof, the following: "(in monthly installments)".

         8. Notice. Section 13 of the Agreement shall be amended by replacing
Mr. Andrew Grossman's address for notices and copies with the following:

              Mr. Andrew Grossman
              125 Pecksland Road
              Greenwich, Connecticut 06830

         with a copy to:

              Hughes Hubbard & Reed LLP
              One Battery Park Plaza
              New York, New York 10004
              Attention:  Kenneth Lefkowitz, Esq.

         9. Non-competition. Section 14(c) of the Agreement shall be amended by
adding, immediately prior to the final sentence thereof, the following:

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Andrew Grossman
As of January 1, 1998
Page 4


         Notwithstanding anything else contained herein, if the Company does
not elect to extend the Term pursuant to Section 2(b), the Non-Competition
Period shall terminate on the last day of the Initial Term.

         10. Non-solicitation. Section 14(d) of the Agreement shall be amended
by inserting after the words "Non-Competition Period" in the second line
thereof the following: "(but in no event less than one year from March 1, 2000
in the event the Company does not provide a notice of its intention to extend
the Term pursuant to Section 2(b))".

         11. Shareholder Approval. Section 16(c) of the Agreement shall be
amended to read in its entirety as follows:

         The Company agrees to seek shareholder approval at its next regularly
scheduled-meeting of shareholders of the re-election of the Executive to the
Board. The Company agrees to seek shareholder approval of the Extension Stock
Options at the next regularly scheduled meeting of shareholders following the
exercise by the Company, if any, of its right to extend the Term pursuant to
Section 2(b).

         12. Entire Agreement. Section 17(d) of the Agreement shall be amended
to read in its entirety as follows:

         This Agreement and the Stock Option Agreement attached to the Letter
Amendment as Attachment A sets forth the entire agreement of the parties hereto
in respect of the subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto and any prior agreement of the parties
hereto in respect of the subject matter contained herein, including, without
limitation, the Stock Option Agreement originally attached to the Agreement as
Attachment A.

         13. Attorney's Fees. Section 17 of the Agreement shall be amended by
adding a new Section 17(e) which shall read in its entirety as follows:

         The Company shall pay or reimburse the Executive for up to $7,500 of
the documented fees and expenses of his counsel in negotiating the Letter
Amendment.

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Andrew Grossman
As of January 1, 1998
Page 5


         14. Agreement Otherwise Remains in Full Force and Effect. Except as
specifically amended by this Letter Agreement, all other terms of the
Agreement, including without limitation, your Annual Salary as currently in
effect, remain unmodified and in full force and effect.


                                            Very truly yours,

                                            BERNARD CHAUS, INC.


                                            By: /s/ Josephine Chaus
                                               ------------------------------
                                                Josephine Chaus
                                                Chairwoman of the Board

The foregoing Letter Amendment
to the Employment Agreement,
made as of September 1, 1994,
between Bernard Chaus, Inc.
and Andrew Grossman is
accepted and agreed to by:


/s/ Andrew Grossman
-------------------
Andrew Grossman
Date: March 13, 1998