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 October 15, 1996

Mr. Joseph B. Parsons
37 Hemlock Trail
Trumbull, Connecticut  06611

    RE:  EMPLOYMENT AGREEMENT

Dear Joe:

    On behalf of The Donna Karan Company (the "Company"), a New York
partnership, I am pleased to confirm your employment with the Company on the
terms set forth in this letter. If you agree with the following terms, please
sign a copy of this letter and return it to me.

1.         You agree to be employed by the Company as its Executive Vice
           President and Chief Financial Officer.  You will also serve as
           Chief Financial Officer of Donna Karan International, Inc.  You
           agree to perform such duties as are customary for such positions,
           including assisting in the day-to-day business operations of the
           Company and its Affiliates as hereinafter defined, and such executive
           duties as may, from time-to-time, be assigned by the President and
           Chief Operating Officer of the Company or such other senior officer
           designated by the Board of Directors. You will report to the
           President and Chief Operating Officer of the Company or such other
           senior officer designated by the Board of Directors and you agree to
           devote all of your normal working time and efforts to the performance
           of your duties in these positions.  "Affiliates" shall mean all
           companies or entities which the Company directly or indirectly
           controls, is controlled by, or is under common control with.

                  Your salary for your services under this Agreement will be as
                  follows:  a base salary at the rate of $300,000 per year
                  payable pursuant to the Company's standard payroll policies
                  as in effect from time-to-time.

                  The base salary shall be reviewed annually and shall be
                  subject to increase, if any, in the discretion of the
                  Company.

           You shall receive a bonus for each calendar year of employment,
           which bonus shall be determined in accordance with the Company's
           Incentive Compensation Plan.  The target amount of such bonus under
           such Incentive Compensation Plan shall be 50% of your annual base
           salary; provided, however, that in 1996, your bonus shall not be less
           than $140,000 and shall be paid as set forth in paragraph 4 of this
           Agreement.

2.         You will be entitled to paid vacations aggregating to four weeks per
           year to be taken at times reasonably acceptable to the President and
           Chief Operating Officer of the Company.  You will be eligible to
           participate in the Company's retirement, medical and any other
           benefit plans as may be established from time to time and applicable
           to senior executives generally. In addition, you will be

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           entitled to an allowance under the Company's wear test program at the
           rate of $10,000 per year and a car allowance of $1,200 per month,
           plus monthly parking expenses.

3.         Your employment under this Agreement will commence on
           the date hereof and will continue in effect until terminated by
           either of us by written notice to the other as provided below.
           This Agreement shall remain in effect for as long as necessary to
           the enforcement of the rights and obligations set forth herein.

4.         If during your employment under this Agreement and prior to
           September 1, 1997 you determine to relocate to the New York City
           area:

                   The Company agrees to pay for the following relocation and
                   other expenses:

i)                      The reasonable actual closing costs incurred by you
                        in selling your existing home.

ii)                     Competitive points and the reasonable actual closing
                        costs incurred by you for the purchase of a new home.

iii)                    Actual moving costs incurred by you based upon at least
                        two competitive bids to be approved by the Company in
                        advance.

iv)                     With regard to any of the foregoing reimbursed
                        relocation expenses that are taxable to you, the Company
                        shall reimburse you not only for such relocation
                        expenses but also an additional amount (the "Additional
                        Amount") such that after paying federal, state and local
                        income and payroll taxes on the reimbursed relocation
                        expenses and the Additional Amount, you will be in the
                        same economic position as you would have been in had
                        such taxes not applied.  Such reimbursement of
                        relocation expenses shall be consistent with the policy
                        memorandum previously discussed by us.


                   In connection with such relocation, the Company agrees to
                   provide you with a bonus advance of $140,000, which amount
                   shall be credited


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                   against your bonus payable for 1996.  This bonus advance
                   shall be paid at the earlier of (i) the date of the closing
                   of your new home and (ii) the date on which 1996 bonuses
                   shall be paid to the executives of the Company in accordance
                   with the Company's Incentive Compensation Plan.

                   Relocation expenses shall be reimbursed to you upon
                   submission and approval of written statements and bills in
                   accordance with the then regular procedures of the Company.

                   If you provide notice of termination of your employment to
                   the Company other than for "Good Reason", as defined below,
                   within 12 months following your relocation, you agree to
                   return to the Company payment of the reimbursed relocation
                   expenses and, to the extent that payment has not been made to
                   the Internal Revenue Service, the Additional Amount.  The
                   Company shall be entitled to offset any amounts owed to you
                   by the Company against such amounts to be repaid by you.


5.         TERMINATION IN GENERAL.

                   Your employment under this Agreement may be terminated by
                   either of us on not less than two months prior written
                   notice to the other, except that, in the case of termination
                   of your employment for cause, as defined below, no prior
                   notice need be given.  You or the Company may waive the right
                   to such notice in writing.  In the event of termination
                   of your employment hereunder as of any date ("Termination
                   Date"), the rights and obligations of the parties hereto
                   (the "Parties") in respect of such termination of your
                   employment shall be as set forth below.

                   TERMINATION WITHOUT CAUSE.

                   In consideration for your commitments set forth herein,
                   we agree that, if we terminate your employment hereunder
                   without cause as of any date, we will pay you a sum
                   ("Severance Pay") as hereafter provided, together with any
                   unpaid salary, and other accrued benefits which you are
                   entitled to on the Termination


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                  Date. In exchange for these payments, you will execute
                  an appropriate release to the Company of all claims
                  arising out of or relating to your employment under this
                  Agreement, and/or  the termination thereof.

ii)               As used in this Agreement, "cause" shall mean (A) repeated
                  neglect of your duties if you have failed to attend to those
                  duties within ten (10) business days after written notice
                  from the Company, (B) your commission of (x) an act
                  constituting fraud, or (y) a felony, or (z) any other
                  dishonest act intended to enrich you at the expense of the
                  Company or any of its Affiliates, (C) gross negligence in the
                  performance of your duties resulting in material harm to the
                  Company or any of its Affiliates, (D) any other material
                  breach of the terms of this Agreement after written notice
                  from the Company and ten (10) business days to correct same.

iii)              The Severance Pay, if payable hereunder, will be in an amount
                  equal to the total of (a) your then current annual salary and
                  (b) the bonus which you earned during the last fiscal year of
                  the Company which ended prior to the Termination Date;
                  provided, however, that if the Company terminates your
                  employment hereunder without cause prior to the determination
                  and payment of your 1996 bonus, the amount in clause (b) shall
                  be equal to $150,000.  The Severance Pay will be payable to
                  you according to the regular payroll practices of the Company
                  commencing one month after the Termination Date.

     c)    GOOD REASON.

           In the event that either the Company or Donna Karan International,
           Inc. reduces your title, or materially reduces your authority, in
           either case without your consent or that the Company otherwise
           breaches this Agreement resulting in any material harm to you,
           then, following written notice to the Company giving the Company ten
           (10) business days to correct same,  you shall be entitled to
           terminate your employment, and such termination


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           shall be treated as a termination by the Company without cause,
           as described in subparagraph (b) above.

     d)    DEATH.

           If you shall die during the term of this Agreement, the Company
           shall immediately pay your estate any salary and other amounts
           which had accrued but were unpaid as of the date of your death,
           and for a period of six months after your death shall continue
           to pay your estate all compensation which would otherwise be payable
           to you pursuant to this Agreement.  The Company may elect to purchase
           an insurance policy on your life and to pay the premiums thereon, of
           which policy your estate will be the named beneficiary.  If the
           Company so elects, you will cooperate in the Company's efforts to
           obtain such a policy.  To the extent that the Company designates such
           policy in writing as pertaining to the Company's obligations under
           this paragraph and your estate receives the proceeds of such policy,
           such proceeds will be credited against the Company's obligations to
           you pursuant to this paragraph. This provision is in addition to, and
           shall not affect, any rights you may have to death or other benefits
           under any employee benefit or retirement plan of the Company in which
           you may from time-to-time be a participant.

     e)    DISABILITY.

           If you are unable to perform your duties by reason of disability,
           illness or accidental cause, the compensation otherwise payable to
           you shall remain in full force and effect for a period of up to 90
           days. If you are unable to perform your duties by reason of
           disability, illness or accidental cause for a period of more than
           90 consecutive days, or more than 90 days, whether or not
           consecutive, in any 365-period, the compensation otherwise payable
           to you during such period shall be discontinued for any portion of
           such period in excess of 90 days, and the Company at its option may
           at any time after such period terminate your employment under
           this Agreement at once upon written notice to you and, in the event
           of such termination of employment, you will not be entitled to the
           Severance Pay referred to above.  You will be entitled to your share
           of any bonus for the year of such termination pro-rated for that
           portion of the calendar year during which you were not disabled, plus
           90 days.

1.        Upon the termination of your employment under this Agreement for any
          reason, you agree that, for a period of 6 months from the date of such
          termination, you will not hire,


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          engage or retain, or become employed by or a consultant to, or have
          any interest in, any firm or company that hires, engages or retains
          (a) any designers of the Company or any of its Affiliates or any
          person who held the position of Vice President (or any equivalent
          or superior position) at the Company or  of any of its Affiliates,
          or any person who acted as one of the Company's or any of its
          Affiliates' outside consultants, at the time  of your termination of
          employment or within the six-month period prior thereto, or (b) any
          person or company that supplied piece goods or designs to, or that
          manufactured or sold apparel to, the Company or any of its
          Affiliates during the 12-month period prior to such termination.

2.        As Executive Vice President and Chief Financial Officer, you will
          learn of non-public, confidential business, personal and
          other information and trade secrets of the Company and their
          Affiliates and their respective personnel.  You agree, both during
          the term of your employment under this Agreement and after its
          termination, that you will not use or disclose any such confidential
          information except in the ordinary course of your duties or as
          authorized in advance by the Company in writing.

3.        Any dispute arising out of, or in any manner relating to, the
          termination of your employment under this Agreement shall be resolved
          in  arbitration before a panel of three arbitrators before the
          American Arbitration Association in the City of New York according
          to its then existing commercial rules and regulations.  The parties
          agree that in any such arbitration, the arbitrators shall not have
          the power to reform or modify this Agreement in any way and to that
          extent their powers are so limited.  The determination of the
          arbitrators shall be final and binding on the parties hereto and
          judgment thereon may be entered in any court of competent
          jurisdiction.  Except as required by law, neither the Company nor
          you shall issue any press release or make any statement which is
          reasonably foreseeable to become public with respect to any
          arbitration or dispute between the parties without receiving the
          prior written consent of the other party to the content of such
          press release or statement.

4.        This Agreement shall be deemed entered into in the State of New York
          and shall be governed in all respects by the laws of New York
          applicable to agreements made and wholly to be performed there,
          without giving effect to conflicts of law principles.

5.        This Agreement represents our entire understanding relating to the
          subject matter hereof and it may not be amended, terminated or
          discharged orally.


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6.        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 requested, or delivered by hand or by telecopy against
          receipt to the party to whom it is to be given at the address of such
          party set forth in this Agreement (or to such other address as the
          party shall have furnished in writing in accordance with the
          provisions of this paragraph 11).  Notice to your estate shall be
          sufficient if addressed to you as provided in this paragraph.
          Any notice or other communication given by certified mail shall
          be deemed given three days after 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.

7.        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, signed by the
          party giving the waiver.

8.        Your rights and obligations hereunder shall not be transferable by
          assignment or otherwise, such rights shall not be subject to
          commutation, encumbrance, or the claims of your creditors, and
          any attempt to do any of the foregoing shall be void.  The provisions
          of this Agreement shall be binding upon and inure to the benefit of
          you and your heirs and personal representatives, and shall be binding
          upon and inure to the benefit of the Company and its successors and
          assigns.

9.        If any provision of this Agreement or any part thereof is found to be
          void or unenforceable, the same shall in no way affect any other
          provision of this Agreement or remaining part thereof, which shall be
          given full effect without regard to the invalid or unenforceable part
          thereof, or the validity or enforceability of this Agreement.

10.       You warrant that you are free to enter into and perform this
          Agreement.



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If the foregoing is correct, please sign and return to us a copy of this
letter which when signed shall constitute a binding agreement.

                             Very truly yours,

                             THE DONNA KARAN COMPANY



                             By:  /S/  Stephen L. Ruzow
                                  ---------------------------
                                  Stephen L. Ruzow, President



Agreed To:


       /S/ Joseph B. Parsons
       --------------------------
       Joseph B. Parsons





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