Document:

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                               BERNARD CHAUS, INC.
                                 530 Seventh Avenue
                                 18th Floor
                                 New York, NY 10018

                                                 January 10, 2001

Mr. Nicholas DiPaolo
530 Seventh Avenue
18th Floor
New York, NY  10018

Dear Mr. DiPaolo:

         We are pleased to offer you employment with Bernard Chaus, Inc. (the
"Company") effective as of November 1, 2000 (the "Commencement Date"), on the
terms set forth below:

POSITION:          Chief Operating Officer and Vice Chairman of the Board of
                   Directors (reporting to Chief Executive Officer and Board of
                   Directors). You shall devote all of your business time and
                   attention to the business and affairs of the Company
                   consistent with your position with the Company. You shall not
                   be required to relocate out of the New York City area in
                   order to perform your duties hereunder.

TERM:              November 1, 2000 through November 30,  2003.

SALARY:            $300,000 per year, payable in intervals consistent with the
                   Company's payroll practices.

SIGN-ON OPTIONS:   Options to purchase 300,000 shares of Common Stock of the
                   Company (the "Sign-on Options") at a per share exercise price
                   of $.50 . The Sign- on Options became fully vested on
                   November 1, 2000 and shall expire on November 1, 2005.

ANNUAL BONUS:      You may receive an annual bonus, cash or otherwise, in the
                   sole discretion of the Compensation Committee of the Board of
                   Directors. Your entitlement to such bonus shall not be a
                   contractual right.

BOARD MEMBERSHIP:  You will be nominated to serve as a member of the Board of
                   Directors each year during the term of this Agreement. You
                   will be deemed to have resigned from the Board of Directors
                   if your employment is terminated for any reason.

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Mr. Nicholas DiPaolo
January 10, 2001
Page 2

AUTOMOBILE
  ALLOWANCE:       During the term of this Agreement, the Company will lease an
                   automobile for your business use at a monthly cost of
                   approximately $1,250. The Company will also pay the costs of
                   maintenance and insurance on such automobile.

BENEFITS:          Participant in the Company's 401(k) plan and other benefits
                   available to senior executives of the Company generally.

VACATION:          Four weeks paid vacation, not to be taken more than two weeks
                   at a time and not to be carried over from year to year.

PUT OPTIONS:       You are hereby awarded options to purchase 3,000,000 shares
                   of Common Stock of the Company at an exercise price of $.375
                   per share (the "Put Options"); the Put Options shall vest in
                   three equal annual increments on the first, second and third
                   anniversary dates of the Commencement Date (each, an "Annual
                   Vesting Date"), with the last Annual Vesting Date on November
                   1, 2003. The Put Options shall expire on November 1, 2005. As
                   soon as practicable after this Agreement is executed, the
                   Compensation Committee of the Board of Directors will
                   establish a three year cumulative EBITDA ("Cumulative
                   EBITDA") target for the three fiscal year period commencing
                   as of July 1, 2000 and ending on June 30, 2003 (the
                   "Cumulative EBITDA Target"). If the Company has attained the
                   Cumulative EBITDA Target, you shall have the right to sell to
                   the Company, and if offered by you, the Company shall have
                   the obligation to purchase in cash from you, all rights to
                   the then outstanding Put Options held by you (the "Put") at a
                   purchase price equal to the aggregate exercise price of the
                   vested Put Options, i.e. the number of shares of Common Stock
                   underlying the vested Put Options times the exercise price
                   per share of the Put Options (the "Put Price"). For purposes
                   of this Agreement, EBITDA means earnings before interest,
                   taxes, depreciation and amortization calculated in accordance
                   with generally accepted accounting principles. Not later than
                   October 1, 2003, the chief accounting officer of the Company
                   shall deliver to you a calculation of Cumulative EBITDA based
                   upon the audited financial statements for the three fiscal
                   years included within the Cumulative EBITDA Target. Such
                   calculation shall become final and binding ten days after the
                   date of delivery, unless you shall object to such
                   calculation. Any dispute as to such calculation shall be
                   resolved by the Compensation Committee of the Board of
                   Directors of the

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Mr. Nicholas DiPaolo
January 10, 2001
Page 3

                   Company in good faith, whose determination shall be final and
                   binding. Your right to exercise the Put shall commence on the
                   date the calculation of Cumulative EBITDA becomes final and
                   binding and shall terminate ninety days thereafter. In the
                   event that the Company shall terminate your employment
                   without "Cause" (as defined below) or there shall be a
                   "Change In Control" (as defined below), you shall also have
                   the right to exercise the Put, without regard to the
                   Company's performance against the Cumulative EBITDA Target,
                   as to your then vested Put Options as more fully set forth
                   below under the respective captions "Termination Benefits"
                   and "Change in Control Benefits".

TERMS OF
OPTIONS:           The Sign-on Options and the Put Options are granted under and
                   subject to the terms of the Company's 1998 Stock Option Plan,
                   as amended which shall govern the Sign-On Options and Put
                   Options, except as specifically set forth herein. The Sign-on
                   Options and Put Options shall be Incentive Stock Options
                   within the meaning of Section 422 of the Internal Revenue
                   Code, as amended, to the maximum extent permitted by law. In
                   the event your employment is terminated by the Company
                   without Cause, all of your unvested Put Options shall be
                   forfeited and you shall have one year from the termination
                   date to exercise the Sign-on Options (all of which have
                   already vested) and your vested Put Options. In the event
                   your employment is terminated due to your voluntary
                   resignation from your employment with the Company, or as a
                   result of your death or a disability which prevents you from
                   performing your duties for three consecutive months or one
                   hundred and eighty days within any two year period
                   ("Disability"), all of your unvested Put Options shall be
                   forfeited and you (or your legal representatives) shall have
                   six months from the termination date to exercise your Sign-on
                   Options and your vested Put Options. In the event of your
                   termination for Cause, all the unvested Put Options shall be
                   forfeited and you shall have thirty days from the termination
                   date to exercise your Sign-on Options and your vested Put
                   Options.

REGISTRATION
STATEMENT:         All shares of the Common Stock of the Company underlying the
                   outstanding Sign-on Options and the Put Options shall be
                   included in the Company's Registration Statement on Form S-8
                   (or successor form) filed with the Securities and Exchange
                   Commission (the "Registration Statement") in respect of the
                   Company's 1998 Stock Option Plan, as amended. The Company
                   shall amend the Registration Statement to cover such shares
                   as soon as practicable after the date hereof and shall use

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Mr. Nicholas DiPaolo
January 10, 2001
Page 4

                   commercially reasonable efforts to cause the Registration
                   Statement to remain effective for so long as the Company is
                   eligible to use the Registration Statement and any of your
                   Sign-on Options or Put Options are outstanding or, if you
                   have exercised any of such options, you still own any of the
                   underlying shares of Common Stock.

TERMINATION
  BENEFITS:        In the event your employment is terminated by the Company
                   without Cause, other than as a result of your death or
                   Disability, you shall be entitled to receive the following
                   payments and benefits, in full satisfaction of your rights
                   against the Company for termination of your employment: (x)
                   non-competition payments equal to one year base salary,
                   payable in twelve monthly installments; (y) your medical
                   insurance will remain in effect during the period of monthly
                   installments of non-competition payments that are made to you
                   and (z) for a period of 90 days from the date of your
                   termination, you shall have the right to exercise the Put and
                   to receive the Put Price as to your vested Put Options on the
                   date of termination. The foregoing payments and benefits
                   described in clauses (x) and (y) of the preceding sentence
                   shall terminate immediately upon your acceptance of a
                   position as employee (including self-employment) or
                   consultant with another entity, and you agree to provide
                   immediate notice to the Company of your acceptance of any
                   such position. In the event your employment is terminated by
                   the Company for Cause or as a result of your voluntary
                   resignation from the Company or your death or Disability, you
                   shall be paid only your accrued salary and benefits through
                   the date of termination and you shall have no further rights
                   under this Agreement except for the right to exercise your
                   vested options for the period specified under the caption
                   "Terms of Options" above.

CAUSE              Conviction of or plea of guilty or nolo contendere to a
                   felony; gross negligence or willful misconduct in performing
                   your duties resulting in material harm to the Company or
                   material diminution in the value of the Common Stock; failure
                   to comply with this Agreement in any material respect or
                   failure to carry out responsibilities assigned by management
                   or the Board of Directors, in either such case, which failure
                   results in material harm to the Company or material
                   diminution in the value of the Common Stock and after, in
                   either case, notice of such failure and a thirty day cure
                   period; commission of fraud, theft against or embezzlement
                   from the Company.

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Mr. Nicholas DiPaolo
January 10, 2001
Page 5

CHANGE IN CONTROL: The Company shall be merged or consolidated with an
                   unaffiliated entity resulting in a change in a majority of
                   the Board of Directors or the Company shall have sold
                   substantially all of its assets to an unaffiliated entity;
                   the acquisition by any person or group of beneficial
                   ownership (as such terms are defined under Regulation 13D of
                   the rules and regulations adopted under the Securities
                   Exchange Act of 1934, as amended) of more than 50% of the
                   Company's then outstanding common stock resulting in a change
                   in a majority of the Board of Directors.

CHANGE IN CONTROL
BENEFIT:           Your Put Options scheduled to vest on the next Annual Vesting
                   Date shall vest immediately upon a Change in Control. For a
                   period of ninety days following a Change in Control, you
                   shall have the right to exercise the Put and to receive the
                   Put Price, as to your vested Put Options on the date of the
                   Change in Control. In such event, the Company shall reimburse
                   you for the 20% excise tax payable under Section 280G of the
                   Internal Revenue Code of 1954, as amended (or a successor
                   provision thereof) to the extent that such tax is applicable
                   to the Put; provided, however, you shall be responsible for
                   any taxes that are payable by you on the amount of such
                   reimbursement.

NON-COMPETITION:   You agree not to compete with the business of the Company,
                   directly or indirectly, whether as principal, manager, agent,
                   employee, consultant, investor, advisor or representative,
                   during the term of your employment and for a period
                   thereafter equal to the period of payment of non- competition
                   payments; if your employment is terminated for Cause, the
                   non-competition period shall be one year from the date of
                   such termination. The foregoing will not prohibit a passive
                   investment by you in a public company not exceeding 2% of any
                   class of equity securities of such company.

NON-SOLICITATION
PERIOD:            You agree that, for one year after the termination of your
                   employment for any reason, you will not solicit or hire any
                   persons who were employed or acting as a consultant to the
                   Company during the one year period prior to the termination
                   of your employment.

CONFIDENTIALITY:   You agree that you will, during and after the end of the term
                   of your employment, keep confidential all non-public
                   information concerning the Company or its business, except
                   for purposes consistent with the business of the Company or
                   for the benefit of the Company, and you will not,

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Mr. Nicholas DiPaolo
January 10, 2001
Page 6

                   directly or indirectly, use for your own account any of such
                   information. If you are compelled by operation of law or by
                   court order or subpoena to disclose any confidential
                   information concerning the Company or its business, you will
                   provide the Company with notice as soon as practicable after
                   you become aware of such requirement and cooperate with the
                   Company at its expense in seeking a protective order to
                   preserve the confidentiality of the information to the
                   greatest extent practicable.

REMEDIES:          As you can understand, since we have to be protected, the
                   Company will be entitled, in addition to other remedies, to
                   obtain an injunction against any potential or actual
                   violations of your non-competition, non-solicitation or
                   confidentiality agreements.

WITHHOLDING TAXES: All compensation hereunder, including in respect of the Put,
                   shall be subject to applicable withholding taxes.

GOVERNING LAW:     New York

REPRESENTATION:    You represent that your execution of this letter and your
                   performance of your obligations hereunder will not violate
                   the terms of any agreement, arrangement, or understanding,
                   order or decree to which you are a party or by which you are
                   bound.

         Please indicate your acceptance of the terms of this offer letter by
your signature below. Once signed by both parties, this offer letter shall be
binding on both parties.

                                       Sincerely,

                                       Bernard Chaus, Inc.

                                       By: /s/ Josephine Chaus
                                           ------------------------------------
                                           Josephine Chaus
                                           Chief Executive Officer

Accepted and Agreed to as of the date set forth above:

/s/ Nicholas DiPaolo
------------------------------------
Nicholas DiPaolo<PAGE>

[GMAC LETTERHEAD]

January 19, 2001

Bernard Chaus, Inc.
1410 Broadway
New York, NY 10018
Attention: Josephine Chaus, Chairwoman of the Board

Bernard Chaus, Inc.
800 Secaucus Road
Secaucus, NJ 07094
Attention: Barton Heminover, Vice President of Finance

Ladies/Gentlemen:

         Reference is made to the Second Restated and Amended Financing
Agreement between you and our predecessor-in-interest, BNY Financial
Corporation, dated as of October 10, 1997, as supplemented and/or amended (the
"Financing Agreement"). Initially capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Financing Agreement.

         This letter will confirm that the Financing Agreement is hereby amended
as follows:

         1.  Section 9.1.(d) of the Financing Agreement is hereby amended to add
             the following additional covenants for the time periods set forth
             below immediately after the existing covenants in said section:

                  "As of September 30, 2000          $15,000,000
                  As of December 31, 2000            $12,000,000
                  As of March 31, 2001               $12,000,000
                  As of June 30, 2001                $12,000,000"

         2.  Section 9.1(e) of the Financing Agreement is hereby amended by
             adding the following covenants for the time periods set forth below
             immediately after the existing covenants in said section:

                  "As of September 30, 2000          $19,000,000
                  As of December 31, 2000            $16,000,000
                  As of March 31, 2001               $16,000,000
                  As of June 30, 2001                $16,000,000"

         3.  Section 9.1(g) of the Financing Agreement is hereby amended by
             adding the following covenants for the time periods set forth below
             immediately after the existing covenants in said section:

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                  "Fiscal quarter ended September 30, 2000  ($1,000,000)
                  Fiscal quarter ended December 31, 2000    ($4,600,000)
                  Fiscal quarter ended March 31, 2001       ($  500,000)
                  Fiscal quarter ended June 30, 2001        ($1,000,000)
                  Fiscal quarter ended June 30, 2001        ($6,000,000)"

         Except as heretofore and hereby amended, the Financing Agreement shall
remain in full force and effect in accordance with its terms.

         If the foregoing accurately reflects your agreement with us, please so
indicate by signing below and returning a copy of this letter to our offices.

                                             Very truly yours,

                                             GMAC COMMERCIAL CREDIT LLC

                                             By: /s/ John H. McGowan
                                                 ----------------------
                                             Title: Vice President

READ AND AGREED:

BERNARD CHAUSE, INC.

By: /s/ Barton Heminover
    ----------------------------
Title: Vice President of Finance

GUARANTOR:

CHAUS RETAIL, INC.

By: /s/ Barton Heminover
    ----------------------------
Title: Vice President of Finance

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