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                                                November 27, 2002

S.L. Danielle Acquisition, LLC
c/o Bernard Chaus, Inc.
530 Seventh Avenue
New York, New York 10018


                               FACTORING AGREEMENT

Ladies and Gentlemen:

     We are pleased to confirm the terms and conditions that will govern our
funds in use accounting, non-borrowing, notification factoring arrangement with
you (the "Agreement").

     1.   SALE OF ACCOUNTS

     You sell and assign to us, and we purchase as absolute owner, all accounts
arising from your sales of inventory or rendition of services, including those
under any trade names, through any divisions and through any selling agent
(collectively, the "Accounts" and individually, an "Account").

     2.   CREDIT APPROVAL

     2.1.  Requests for credit approval for all of your orders must be submitted
to our Credit Department via computer by either: (a) On-Line Terminal Access, or
(b) Electronic Batch Transmission. If you are unable to submit orders via
computer, then orders can be submitted over the phone, by fax or in writing. All
credit decisions by our Credit Department (including approvals, declines and
holds) will be sent to you daily by a Credit Decisions Report, which constitutes
the official record of our credit decisions. Credit approvals will be effective
only if shipment is made or services are rendered within thirty (30) days from
the completion date specified in our credit approval. Credit approval of any
Account may be withdrawn by us any time before delivery is made or services are
rendered.

     2.2.  We assume the Credit Risk on each Account approved in the Credit
Decision Report. "Credit Risk" means the customer's failure to pay the Account
in full when due on its longest maturity solely because of its financial
inability to pay. If there is any change in the amount, terms, shipping date or
delivery date for any shipment of goods or rendition of services (other than
accepting returns and granting allowances as provided in section 8 below), you
must

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submit a change of terms request to us, and, if such pertains to a Factor Risk
Account, then we shall advise you of our decision either to retain the Credit
Risk or to withdraw the credit approval. Accounts on which we bear the Credit
Risk are referred to collectively as "Factor Risk Accounts", and individually as
a "Factor Risk Account". Accounts on which you bear some or all of the risk as
to credit are referred to collectively as "Client Risk Accounts", and
individually as a "Client Risk Account".

     2.3.  We shall have no liability to you or to any person, firm or entity
for declining, withholding or withdrawing credit approval on any order. If we
decline to credit approve an order and furnish to you any information regarding
the credit standing of that customer, such information is confidential and you
agree not to reveal same to the customer, your sales agent or any third party,
except for your legal counsel. You agree that we have no obligation to perform,
in any respect, any contracts relating to any Accounts.

     3.   INVOICING

     You agree to place a notice (in form and content acceptable to us) on each
invoice and invoice equivalent that the Account is sold, assigned and payable
only to us, and to take all necessary steps so that payments and remittance
information are directed to us. All invoices, or their equivalents, will be
promptly mailed or otherwise transmitted by you to your customers at your
expense. You will provide us with copies of all invoices (or the equivalent
thereof if the invoices were sent electronically), confirmation of the sale of
the Accounts to us and proof of shipment or delivery, all as we may reasonably
request. If you fail to provide us with copies of such invoices (or equivalents)
or such proofs when requested by us, we will not bear any Credit Risk as to
those Accounts.

     4.   REPRESENTATIONS AND WARRANTIES

     4.1.  You represent and warrant that: each Account is based upon a bona
fide sale and delivery of inventory or rendition of services made by you in the
ordinary course of business; the inventory being sold and the Accounts created
are your exclusive property and are not, and will not be, subject to any lien,
consignment arrangement, encumbrance or security interest other than in our
favor; all amounts are due in United States Dollars; all original invoices bear
notice of the sale and assignment to us; any taxes or fees relating to your
Accounts or inventory are solely your responsibility; and none of the Accounts
factored with us hereunder represent sales to any subsidiary, affiliate or
parent company. You also warrant and represent that, except for allowances in
the ordinary course of business, your customers have accepted the goods or
services and owe and are obligated to pay the full amounts stated in the
invoices according to their terms, without dispute, claim, offset, defense,
deduction, rejection, recoupment, counterclaim or contra account, other than as
to returns and allowances as provided in section 8 below (the foregoing being
referred to in this Agreement as "Customer Claims").

     4.2.  You further represent and warrant that: your legal name is exactly as
set forth on the signature page of this Agreement, you are a duly organized and
validly existing business organization incorporated or registered in the State
of New York and are qualified to do business in all states where required; the
most recent financial statements provided by you to us accurately


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reflect your financial condition in all material respects as of that date and
there has been no material adverse change in your financial condition since the
date of those financial statements. You agree to furnish us with such
information concerning your business affairs and financial condition as we may
reasonably request from time to time, including financial statements as of the
end of each fiscal year.

     4.3.  You agree that you will promptly notify us of any change in your:
name, state of incorporation or registration, location of your chief executive
office, place(s) of business, and legal or business structure. Further, you
agree that you will promptly notify us of any change in control of the ownership
of your business organization, and of significant law suits or proceedings
against you.

     5.   PURCHASE OF ACCOUNTS

     We shall purchase the Accounts for the gross amount of the respective
invoices, less: factoring fees or charges, trade and cash discounts allowable
to, or taken by, your customers, credits, cash on account and allowances
("Purchase Price"). Our purchase of the Accounts will be reflected on the
Statement of Account (defined in section 10 below), which we shall render to
you, which will also reflect all credits and discounts made available to your
customers.

     6.   ADVANCES

     6.1.  At your request, and in our sole discretion, we may advance funds to
you on the terms set forth in the Financing Agreement by and between us and
Bernard Chaus, Inc. ("Chaus"), dated September 27, 2002 (the "Financing
Agreement"), as further amended pursuant to that Joinder Agreement by and among
Chaus, us and you, dated the date the date hereof ("the Joinder Agreement"),
subject to such additional terms and conditions as we may reasonably request. We
have the right, at any time and from time to time, to hold such reserves as we
deem reasonably necessary as security for the payment and performance of any and
all of your Obligations in accordance with Section 10.3 of the Financing
Agreement. All amounts you owe us, including all advances to you and any debit
balance in your Client Position Account (defined in section 10 below), and any
Obligations, are payable on demand and may be charged to your account at any
time.

     7.   PAYMENT OF ACCOUNTS

     7.1.  All payments received by us on the Accounts will be promptly applied
to your account with us after crediting your customer's account. In exchange for
such application, we shall charge your account monthly with the cost of two (2)
additional business days on all such payments at the rate charged by us in
section 14.1 below on debit balances. No checks, drafts or other instruments
received by us will constitute final payment of an Account unless and until such
items have actually been collected.

     7.2.  The amount of the Purchase Price of any Factor Risk Account which
remains unpaid will be deemed collected and will be credited to your account as
of the earlier of the following dates:


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          (a)  the date of the Account's longest maturity if a proceeding or
               petition is filed by or against the customer under any state or
               federal bankruptcy or insolvency law, or if a receiver or trustee
               is appointed for the customer; or

          (b)  the last day of the third month following the Account's longest
               maturity date if such Account remains unpaid as of said date
               without the occurrence of any of the events specified in clause
               (a) above.

If any Factor Risk Account credited to you was not paid for any reason other
than Credit Risk, we shall reverse the credit and charge your account
accordingly, and such Account is then deemed to be a Client Risk Account.

     8.   CUSTOMER CLAIMS AND CHARGE BACKS

     8.1.  You must notify us promptly of any matter affecting the value,
enforceability or collectibility of any Account and of all Customer Claims. You
agree to promptly issue credit memoranda or otherwise adjust the customer's
account upon accepting returns with a value in excess of $25,000 in the
aggregate. For full invoice credit memoranda, you agree to send duplicate copies
thereof to us and to confirm their assignment to us. We shall cooperate with you
in the adjustment of Customer Claims, but we retain the right to adjust Customer
Claims on Factor Risk Accounts directly with customers, upon such terms as we in
our sole discretion may deem advisable.

     8.2.  We may at any time charge back to your account the amount of: (a) any
Factor Risk Account which is not paid in full when due for any reason other than
Credit Risk; (b) any Factor Risk Account which is not paid in full when due
because of an act of God, civil strife, or war; (c) anticipation (interest)
deducted by a customer on any Account; (d) Customer Claims; (e) any Client Risk
Account which is not paid in full when due; and (f) any Account for which there
is a breach of any representation or warranty set forth in Section 4.1 of this
Agreement. A charge back does not constitute a reassignment of an Account. We
shall immediately charge any deduction taken by a customer to your account.

     8.3.  We may at any time charge to your account the amount of: (a) payments
we receive on Client Risk Accounts which we are required at any time to turnover
or return (including preference claims); (b) all remittance expenses (including
incoming wire charges, currency conversion fees and stop payment fees), other
than stop payment fees on Factor Risk Accounts; (c) actual expenses, collection
agency fees and reasonable attorneys' fees incurred by us in collecting or
attempting to collect any Client Risk Account or any Obligation (defined in
section 12 below); and (d) our fees for handling collections on Client Risk
Accounts which you have requested us to process, as provided in the Guide (see
section 18.2 below).

     9.   HANDLING AND COLLECTING ACCOUNTS; RETURNED GOODS

     9.1.  As owners of the Factor Risk Accounts, we have the right to:
(a) bring suit, or otherwise enforce collection, in your name or ours; (b)
modify the terms of payment, (c) settle,


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compromise or release, in whole or in part, any amounts owing, and (d) issue
credits in your name or ours. To the extent applicable, you waive any and all
claims and defenses based on suretyship. If moneys are due and owing from a
customer for both Factor Risk Accounts and Client Risk Accounts, you agree that
any payments or recoveries received on such Accounts may be applied first to any
Factor Risk Accounts. Once you have granted or issued a discount, credit or
allowance on any Account, you have no further interest therein. Any checks,
cash, notes or other documents or instruments, proceeds or property received
with respect to the Accounts must be held by you in trust for us, separate from
your own property, and promptly turned over to us with proper endorsements. We
may endorse your name or ours on any such check, draft, instrument or document.

     9.2.  As owners and assignees of the Accounts and all proceeds thereof,
upon our written notice, you will, at your expense, comply with our instructions
relative to any and all returned, rejected, reclaimed or repossessed inventory
("Returned Goods").

     10.  STATEMENT OF ACCOUNT

     After the end of each month, we shall send you certain reports reflecting
Accounts purchased, advances made, if any, fees and charges and all other
financial transactions between us during that month ("Reports"). The Reports
sent to you each month include a Statement of Account reflecting transactions in
three sections: Accounts Receivable, Client Position Account and Funds In Use.
The Reports shall be deemed correct and binding upon you and shall constitute an
account stated between us unless we receive your written statement of exceptions
within thirty (30) days after same are mailed to you.

     11.  GRANT OF SECURITY INTEREST

     11.1.  You hereby assign and grant to us a continuing security interest in
all of your right, title and interest in and to all of your now existing and
future Collateral as such term is defined in the Financing Agreement.

     11.2.  You agree to comply in all material respects with all applicable
laws in order to perfect our security interest in the Collateral, subject only
to Permitted Encumbrances, as such term is defined in the Financing Agreement,
and to execute such documents as we may require to effectuate the foregoing and
to implement this Agreement. You irrevocably authorize us to file financing
statements, and all amendments and continuations with respect thereto, all in
order to create, perfect or maintain our security interest in the Collateral,
and you hereby ratify and confirm any and all financing statements, amendments
and continuations with respect thereto heretofore and hereafter filed by us
pursuant to the foregoing authorization.

     12.  OBLIGATIONS SECURED

     The security interest granted hereunder and any lien or security interest
that we now or hereafter have in the Collateral secure the payment and
performance of all of your Obligations as such term is defined in the Financing
Agreement. Any reserves or balances to your credit and

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any other assets, collateral or property of yours in our possession constitutes
security for any and all Obligations.

     13.  BOOKS AND RECORDS AND EXAMINATIONS

     13.1.  You agree to maintain such Books and Records concerning the Accounts
as we may reasonably request and to reflect our ownership of the Accounts
therein. "Books and Records" means your accounting and financial records
(whether paper, computer or electronic), data, tapes, discs, or other media, and
all programs, files, records and procedure manuals relating thereto, wherever
located.

     13.2.  Upon our reasonable request, you agree to make your Books and
Records available to us for examination and to permit us to make copies or
extracts thereof. Also, you agree to permit us to visit your premises during
your business hours and to conduct such examinations as we deem reasonably
necessary. To cover our costs and expenses of any such examinations, we shall
charge you a fee for each day, or part thereof, during which such examination is
conducted, plus any out-of-pocket costs and expenses incurred by us, as provided
in Section 15.4 hereof and in the Guide (see section 18.2 below).

     14.  INTEREST

     14.1.  Interest is charged on any adjustments under this Agreement and on
any advances that may be made under section 6 above, as of the last day of each
month based on the daily debit balances in your Funds In Use account for that
month, at a rate equal to the sum of the Applicable Margin (as defined in the
Financing Agreement as defined in Section 17.1 below) plus the Chase Prime Rate
(defined below). The Chase Prime Rate is the per annum rate of interest publicly
announced by JPMorganChase Bank (or its successor) in New York, New York from
time to time as its prime rate, and is not intended to be the lowest rate of
interest charged by JPMorganChase Bank to its borrowers. Any change in the rate
of interest hereunder due to a change in the Chase Prime Rate will take effect
as of the first of the month following such change in the Chase Prime Rate.
Interest will be credited as of the last day of each month based on the daily
credit balances in your Funds In Use account for that month, at a rate three
percent (3%) per annum below the Chase Prime Rate being used to calculate
interest for the period. All interest is calculated on a 360 day year.

     14.2.  If you, as a client of ours, purchase goods or services from another
factored client of ours or another client subject to an ARM Services Agreement,
as such term is defined in the Financing Agreement, and your payments on these
invoices are not timely received, a late interest payment (but without
duplication of other late interest charges to be paid to such client by the
Company), at our then late interest rate, will be charged to your account with
us and shall be deemed an Obligation under this Agreement.

     14.3.  In no event will interest charged hereunder exceed the highest
lawful rate. In the event, however, that we do receive interest in excess of the
highest lawful rate, you agree that your sole remedy would be to seek repayment
of such excess, and you irrevocably waive any and all other rights and remedies
which may be available to you under law or in equity.

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     15.  FACTORING FEES AND OTHER CHARGES

     15.1.  For our services hereunder, you will pay us a factoring fee or
charge of four-tenths of one percent (.40%) of the gross face amount of all
Accounts factored with us, but in no event less than $1.50 per invoice. In
addition, you will pay a fee of one-quarter of one percent (1/4 of 1%) of the
gross face amount of each Account for each thirty (30) day period or part
thereof by which the longest terms of sale applicable to such Account exceed
sixty (60) days (whether as originally stated or as a result of a change of
terms requested by you or the customer). For Accounts arising from sales to
customers located outside the fifty states of the United States of America, you
will pay us an additional factoring fee of one percent (1%) of the gross face
amount of all such Accounts. All factoring fees or charges are due and charged
to your account upon our purchase of the underlying Account. Commencing on even
date herewith, if the actual factoring fees or charges collectively paid to us
by (i) Chaus pursuant to that certain Factoring Agreement dated as of September
27, 2002 by and between us and Chaus and (ii) you pursuant to this Agreement
during any year or part thereof (each a "Period"), are less than five hundred
thousand dollars ($500,000) in the aggregate ("Minimum Factoring Fees"), we
shall charge your account as of the end of such Period with an amount equal to
the difference between the actual factoring fees or charges paid during such
Period and said Minimum Factoring Fees.

     15.2.  You agree to pay all costs and expenses incurred by us in connection
with the preparation, execution, administration and enforcement of this
Agreement, including all reasonable fees and expenses attributable to the
services of our attorneys (whether in-house or outside), search fees and public
record filing fees. Furthermore, you agree to pay to us our fees (as more fully
set forth in the Guide, see section 18.2 below) including fees for: (a) special
reports prepared by us at your request; (b) wire transfers; (c) handling change
of terms requests relating to Accounts; and (d) your usage of our on-line
computer services. Beginning on the first of the month six months from the date
hereof, you also agree to pay us our fees for: (i) each new customer set-up on
our customer accounts receivable data base and each new customer relationship
established for you; (ii) crediting your account with proceeds of non-factored
invoices received by us; and (iii) charge backs of invoices factored with us
that were paid directly to you. All such fees will be charged to your account
when incurred. Our fees may be changed by us from time to time upon notice to
you; however, any failure to give you such notice does not constitute a breach
of this Agreement and does not impair our ability to institute any such change.

     15.3.  Any tax or fee of any governmental authority imposed on or arising
from any transactions between us, any sales made by you, or any inventory
relating to such sales is your sole responsibility (other than income and
franchise taxes imposed on us which are not related to any specific transaction
between us). If we are required to withhold or pay any such tax or fee, or any
interest or penalties thereon, you hereby indemnify and hold us harmless
therefor and we shall charge your account with the full amount thereof.


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     15.4.  In addition to the fees and charges which may be payable by you to
us under this Agreement, you will also pay to us upon our performance of any
field examination or other business analysis (including, without limitation,
audits or inspections), the need for which is to be determined by us, on demand,
a fee in an amount equal to Seven Hundred Fifty Dollars ($750.00) per day, per
person, for each person employed to perform such field examination, together
with all actual out-of-pocket costs and expenses incurred in conducting any such
audit or inspection (including, without limitation, the fees, costs and expense
of third parties), but in no event shall any such fees be duplicative of any
other fees or expenses set forth in this Agreement or in the Factoring Agreement
with Bernard Chaus, Inc. dated as of September 27, 2002, as amended by Amendment
No. 1 to Factoring Agreement.

     15.5.  If by the end of three (3) months from the date hereof, you have not
begun to process your invoices with us by means of Electronic Batch
Transmission, then we will charge you a factoring fee of 0.55% instead of the
fee provided in Section 15.1, until such time as your invoices are processed by
means of Electronic Batch Transmission; provided, however, that no such
additional fee shall apply if your failure to process your invoices by means of
Electronic Batch Transmission is due to any fault of ours.

     16.  TERMINATION

     16.1.  The term of this Agreement shall begin as of the date hereof and
continue until the last day of the eighteenth month anniversary of September 27,
2002 (the "Initial Term"). In the event that this Agreement is terminated by you
prior to the end of the Initial Term, we shall be entitled to the unpaid portion
of the Minimum Factoring Fees, if any, for such Period, as provided in section
15.1 above, as of the effective date of termination (the "Full Fees"); provided,
however, if such termination occurs after the twelfth month anniversary of
September 27, 2002 but before the end of the Initial Term we shall be entitled
to 50% of the Full Fee. After the Initial Term, you may terminate this Agreement
only as of an Anniversary Date and then only by giving us at least sixty (60)
days prior written notice of termination. "Anniversary Date" means the last day
of the month occurring on the two year anniversary of September 27, 2002, and
the same date in each year thereafter. After the Initial Term, in the event that
this Agreement is terminated by you prior to an Anniversary Date, we shall be
entitled to the unpaid portion of the Minimum Factoring Fees, if any, for such
Period, as provided in section 15.1 above, as of the effective date of
termination. Except as otherwise provided, we may terminate this Agreement at
any time by giving you at least sixty (60) days prior written notice of
termination. However, we may terminate this Agreement immediately, without prior
notice to you, upon the occurrence of an Event of Default (defined in section
17.1 below).

     16.2.  This Agreement remains effective between us until terminated as
herein provided. Unless sooner demanded, all Obligations will become immediately
due and payable upon any termination of this Agreement or the Financing
Agreement.

     16.3.  Notwithstanding the foregoing Sections 16.1 and 16.2, this Agreement
may be terminated in accordance with that certain Factoring Termination
Agreement dated as of the date hereof among us, you and the agent for the
lenders under the Financing Agreement, as amended, modified and supplemented
from time to time


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     16.4.  All of our rights, liens and security interests hereunder continue
and remain in full force and effect after any termination of this Agreement and
pending a final accounting, we may withhold any balances in your account unless
we are supplied with an indemnity satisfactory to us to cover all Obligations,
other than termination in accordance with the Factoring Termination Agreement.
You agree to continue to assign accounts receivable to us and to remit to us all
collections on accounts receivable, until all Obligations have been paid in full
or we have been supplied with an indemnity satisfactory to us to cover all
Obligations.

     17.  EVENTS OF DEFAULT AND REMEDIES UPON DEFAULT

     17.1.  It is an "Event of Default" under this Agreement if: (a) you breach
any representation, warranty or covenant contained in this Agreement in any
material respect; or (b) the occurrence of an Event of Default under the
Financing Agreement, as now existing or hereafter amended.

     17.2.  After the occurrence of an Event of Default which is not waived by
us, we may terminate this Agreement without notice to you. We shall then have
immediate access to any and all Books and Records as may pertain to the
Accounts, Returned Goods and any other collateral hereunder. Furthermore, as may
be necessary to administer and enforce our rights in the Accounts, Returned
Goods and any other collateral hereunder, or to facilitate the collection or
realization thereof, we have your permission to use (at your expense) your
personnel, supplies, equipment, computers and space, at your place of business
or elsewhere.

     17.3.  After the occurrence of an Event of Default which is not waived by
us, with respect to any other property or collateral in which we have a security
interest, we shall have all of the rights and remedies of a secured party under
Article 9 of the Uniform Commercial Code. If notice of intended disposition of
any such property or collateral is required by law, it is agreed that ten (10)
days notice constitutes reasonable notice. The net cash proceeds resulting from
the exercise of any of the foregoing rights, after deducting all charges, costs
and expenses (including reasonable attorneys' fees) will be applied by us to the
payment or satisfaction of the Obligations, whether due or to become due, in
such order as we may elect. You remain liable to us for any deficiencies. With
respect to Factor Risk Accounts and Returned Goods relating thereto, you hereby
confirm that we are the owners thereof, and that our rights of ownership permit
us to deal with this property as owner and you confirm that you have no interest
therein.

     18.  MISCELLANEOUS PROVISIONS

     18.1.  This Agreement, and all attendant documentation, together with the
Loan Documents, as the same may be amended from time to time, constitutes the
entire agreement between us with regard to the subject matter hereof, and
supersedes any prior agreements or understandings. This Agreement can be changed
only by a writing signed by both of us. Our failure or delay in exercising any
right hereunder will not constitute a waiver thereof or bar us from exercising
any of our rights at any time. The validity, interpretation and enforcement of
this Agreement is governed by the laws of the State of New York, excluding the
conflict laws of such State.


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     18.2.  The Client Service Guide, as supplemented and amended from time to
time (the "Guide") has been furnished to you or is being furnished to you
concurrently with the signing of this Agreement, and by your signature below you
acknowledge receipt thereof. The Guide provides information on credit approval
processes, accounting procedures and fees. The procedures for Electronic Batch
Transmission are covered in supplemental instructions to the Guide. From time to
time, we may provide you with amendments, additions, modifications, revisions or
supplements to the Guide, which will be operative for transactions between us.
All information and exhibits contained in the Guide, on any screen accessed by
you, and on any print-outs, reports, statements or notices received by you are,
and will be, our exclusive property and are not to be disclosed to, or used by,
anyone other than you, your employees or your professional advisors, in whole or
in part, unless we have consented in writing.

     18.3.  This Agreement binds and benefits each of us and our respective
successors and assigns, provided, however, that you may not assign this
Agreement or your rights hereunder without our prior written consent.

     18.4.  Section headings are for convenience only and are not controlling.
The use of "including" means "including without limitation".

     18.5.  If any provision of this Agreement is contrary to, prohibited by, or
deemed invalid under applicable laws or regulations, such provision will be
inapplicable and deemed omitted to such extent, but the remainder will not be
invalidated thereby and will be given effect so far as possible.




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     19.  JURY TRIAL WAIVER

     To the extent permitted by applicable law, we each hereby waive any right
to a trial by jury in any action or proceeding arising directly or indirectly
out of this Agreement, or any other agreement or transaction between us or to
which we are parties.

     If the foregoing is in accordance with your understanding, please so
indicate by signing and returning to us the original and one copy of this
Agreement. This Agreement will take effect as of the date set forth above but
only after being accepted below by one of our officers in New York, after which
we shall forward a fully executed copy to you for your files.


                                       Very truly yours,


                                       THE CIT GROUP/COMMERCIAL SERVICES, INC.


                                       By: : /s/ John Szwalek
                                             -----------------------------------


Read and Agreed to:

S.L. DANIELLE ACQUISITION, LLC


By:  /s/ Nicholas P. DiPaolo
    -----------------------------------



                                       Accepted at:


                                       THE CIT GROUP/COMMERCIAL SERVICES, INC.


                                       By Mignon Winston
                                          --------------------------------------