CHAUS BERNARD INC, 10-K, 1994-09-28

CHAUS BERNARD INC
10-K, 1994-09-28
WOMEN'S, MISSES', AND JUNIORS OUTERWEAR

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
___________

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended June 30, 1994
- - -------------------------------------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from
______________________to________________________.

Commission file number 1-9169
--------
BERNARD CHAUS, INC.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

New York 13-2807386
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S employer identification number)
incorporation or organization)

1410 Broadway, New York, New York 10018
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 354-1280
-------------------------
Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
--------------------- -------------------------------------------
Common Stock, $0.01 par value New York Stock Exchange
- - ------------------------------- -------------------------------------------
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days Yes X No .
--- ----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant on September 16, 1994 was $27,112,524.

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable
date

Date Class Shares Outstanding
------ --------- --------------------
September 16, 1994 Common Stock, $0.01 par value 18,352,331

Documents Incorporated by Reference Location in Form 10-K in which Incorporated
- - ----------------------------------- -------------------------------------------
Portions of registrant's Proxy Part III
Statement for the Annual Meeting
of Shareholders to be held on
November 22, 1994.

The Exhibit Index is located at page _______ of the manually executed
and sequentially numbered copy of this Form 10-K, totalling ________ pages.

<PAGE>

PART I

ITEM 1. BUSINESS

Bernard Chaus, Inc., a New York corporation organized in 1975, together
with its subsidiaries, designs, arranges for the manufacture of and
markets an extensive range of women's clothing, principally under the
CHAUS and CHAUS SPORT trademarks. (Hereinafter, Bernard Chaus, Inc. and
its subsidiaries are referred to as the "Company".) The Company
provides apparel appropriate in a business environment as well as
apparel suitable for leisure and active wear. The Company's clothing
embodies "updated" styling, which combines contemporary fashion
influences with traditional or classic design, and is sold within the
"moderate" price category. The Company offers an extensive selection of
styles, colors, fabrics and size categories and directs its product mix
toward well-received styles. The Company believes that the increasing
number of career women contributed in prior years to the Company's
growth and to the growth of the market for updated women's apparel in
general. In recent years the Company has begun to tailor styles and
size categories to a somewhat older and more conservative customer
because the female population over thirty-five years of age is
increasing faster than that under thirty-five as a result of the aging
of the post-war or "baby boom" generation.

In September of 1994, the Company announced a restructuring plan which
entailed several initiatives designed to reduce expenses and improve and
control inventory position. These included overhead reductions,
centralization of certain functions, consolidation and closing of office
space and closing of selected retail outlets. Additionally the Company
announced the hiring of Andrew Grossman, former President of Jones
Apparel Group, as its new Chief Executive Officer.

To further strengthen the Company's operations, Josephine Chaus, Chief
Executive Officer and Chairwoman, has provided additional financial
support to the Company of $14.4 million. Half of the sum is in the form
of an increased letter of credit to provide additional working capital.
The remaining half represents proceeds from a cash infusion (See
Financial Condition, Liquidity And Capital Resources) that will be used
for costs and associated expenses related to the signing of the new
Chief Executive Officer.

PRODUCTS

The Company's four principal product lines are: a broad selection of
related separates, referred to in the apparel industry as career casual
sportswear (marketed under the CHAUS, CHAUS WOMAN and CHAUS PETITE
labels); blouses (marketed under the JOSEPHINE label); dresses (marketed
under the CHAUS DRESSES, CHAUS WOMAN DRESSES and CHAUS PETITE DRESSES
labels); and weekend casual sportswear (marketed under the CHAUS SPORT
and CHAUS JEANSWEAR labels). The Company produces collections of each
of these product lines for each of its six principal selling seasons:
Spring I, Spring II, Summer, Fall I, Fall II and Holiday. Spring and
Fall have been traditionally the Company's major selling seasons.

Career Casual Sportswear. The Company markets an extensive line of
career casual sportswear under the CHAUS label for misses sizes, the
CHAUS WOMAN label for larger sizes and the CHAUS PETITE label for smaller
sizes.

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These labels accounted for approximately 26%, 11% and 6%,
respectively, of the Company's net sales in fiscal 1994. Although the
Company adjusts its product mix to meet anticipated consumer demand, each
sportswear collection typically includes a broad selection of blouses,
jackets, sweaters, pants and skirts, as well as more casual apparel such
as knit tops, shirts, shorts and jumpsuits. Substantially all items in
these collections are sold as "separates" rather than as ensembles such as
suits. However, the collections are harmonized as to styles, color
schemes and fabrics to enable a consumer to assemble outfits consisting of
separate styles which are designed to be worn together.

Blouses. Under the JOSEPHINE label, the Company offers women's blouses
primarily appropriate in a business environment which are intended to
appeal to the more value-conscious consumer. On January 1, 1993, this
operation was consolidated into the Chaus Division to save costs and
refocus the product.

Dresses. The Company offers its line of moderately-priced dresses under
the CHAUS DRESSES, CHAUS WOMAN DRESSES and CHAUS PETITE DRESSES labels.
Dresses accounted for approximately 12% of fiscal 1994 net sales.

Weekend Casual Sportswear. The CHAUS SPORT and CHAUS JEANSWEAR labels,
consisting of casual jackets, sweaters, pants and skirts, knit tops,
shirts, shorts, and denim wearing apparel accounted for approximately 29%
of fiscal 1994 net sales.

The Company from time to time produces and makes available to certain of
its customers on a special order basis a limited number of styles of its
products.

The Company's products and certain of the fabrics from which they are made
are designed by a 29-person in-house staff of fashion designers.
Josephine Chaus, who is instrumental in the design function, and the design
staff meets from time to time with representatives of the Company's sales,
merchandising and production staffs to review the status of each
collection and to discuss adjustments in line composition, fabric and
color selection, garment construction and product mix. While the Company
believes that it has a highly professional design staff, there can be no
assurance that its present level of sales could be maintained if Josephine
Chaus's personal design and supervisory skills were no longer available to
the Company.

SALES AND MARKETING

During fiscal 1994, the Company's products were sold to over 340 trade
customers, principally major multi-unit department stores and retail
outlets throughout the United States. The Company's products are often
displayed together with moderately-priced, updated apparel produced by
competing manufacturers, including, in department stores, such stores' own
private label merchandise.

During fiscal 1994, approximately 74% of the Company's gross sales were
made to the Company's ten largest customers and approximately 87% of gross
sales were made to its 100 largest customers. Certain of these customers

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are under common ownership. For example, ten different multi-unit
department store customers owned by The May Department Stores Company
accounted for approximately 17% of gross sales and six different multi-
unit department store customers owned by Dillards Department Stores
accounted for approximately 17% and six different multi-unit department
store customers owned by Federated Department Stores accounted for
approximately 9% of the Company's gross sales in fiscal 1994. Assuming
the Federated/Macy's merger had occurred for fiscal 1994, sales to
department stores owned by the combined entity would have approximated
12%. Although the Company believes multi-unit department store customers
make their own decisions regarding purchases of the Company's products,
these decisions are affected generally by policies and guidelines adopted
by their parent companies. The Company believes that there is a trend
among such customers toward more centralized buying decisions. The
Company expects that its 100 largest customers will continue to account
for the overwhelming majority of its sales. In addition, during fiscal
1994 the Company generated approximately $9,000,000 in foreign sales.

The Company's selling operation is highly centralized. Sales are made by
the Company's employees primarily through the Company's New York City
showrooms. The Company does not employ outside sales representatives or
operate regional sales offices, but it does occasionally participate in
regional merchandise marts. This sales structure enables management to
control the Company's selling operation more effectively, limit travel
expenses, as well as to deal directly with, and be readily accessible to,
major customers. The Company assists its customers in allocating their
purchasing budgets among the items in the various product lines to enable
consumers to view the full range of the Company's offerings in each
collection. During the course of the retail selling seasons, the Company
monitors its customers' retail sales in order to assess directly, consumer
response to its products.

At June 30, 1994, the Company had 35 retail outlet stores as compared to
32 stores at June 30, 1993. The retail outlet stores operation is now
located throughout the country from New York to California. These outlet
stores are operated in traditional factory outlet centers in locations
intended not to conflict with the Company's major retail department store
customers. As part of the Company's restructuring, one store was closed
in fiscal 1994 and four stores will be closed in fiscal 1995.

The Company maintains a limited cooperative advertising program under
which it reimburses, in certain circumstances, a portion of a customer's
advertising expenditures to promote the Company's products. Except for
this cooperative advertising program, the Company has not engaged in any
direct advertising to the public. The Company's cooperative advertising
expenditures were approximately $1,649,000 in fiscal 1994.

MANUFACTURING

The Company does not own any manufacturing facilities. The Company
obtained substantially all (approximately 85%) of its products directly
from over 260 independent suppliers located primarily in South Korea, Hong
Kong, Taiwan, the Philippines, China, Indonesia and elsewhere in the Far
East. Approximately 15% of the Company's products were manufactured in
Israel, India and the Caribbean Basin. No contractual obligations exist
between the Company and its manufacturers except on an order-by-order

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basis. During fiscal 1994, the Company purchased approximately 47% of its
finished goods from its ten largest manufacturers, including approximately
10% of its finished goods from its largest manufacturer, which is located
in the Philippines and Sri Lanka. Contracting with foreign manufacturers
enables the Company to take advantage of prevailing lower labor rates, to
use a skilled labor force to produce high quality products and to have
more flexibility to provide raw materials (piece goods) to the
manufacturer.

Normally, each manufacturer agrees to produce finished garments on the
basis of purchase orders from the Company, supported by a letter of credit
naming the manufacturer as beneficiary to secure payment for the finished
garments. The manufacturer generally purchases all necessary fabrics and
raw materials from suppliers from which such fabrics and raw materials
have been previously ordered by the Company. The Company itself will
occasionally purchase fabrics and other raw materials.

The Company's technical production support staff located in New York City
produces patterns, prepares production samples from the patterns for
modification and approval by the Company's design staff, and marks and
grades the patterns in anticipation of production. While the factories
have the capability to perform these services, the Company believes that
its personnel can best express its design concepts and efficiently
supervise production to better ensure that a quality product is produced.
Once production fabric is shipped to them, the manufacturers produce
finished garments in accordance with the production samples and obtain
necessary quota allocations and other requisite customs clearances.
Branch offices of the Company's subsidiaries in Korea, Hong Kong, and
Taiwan and the Company's employees based in Italy and India, monitor
production at each manufacturing facility to control quality, compliance
with the Company's specifications and timely delivery of finished
garments, and arrange for the shipment of finished products to the
Company's New Jersey distribution center.

The Company believes that the number and geographical diversity of its
manufacturing sources minimize the risk of adverse consequences that would
result from termination of its relationship with any of its larger
manufacturers. The Company also believes that it would have the ability
to develop, over a reasonable period of time, adequate alternate
manufacturing sources should any of its existing arrangements terminate.
However, should any substantial number of such manufacturers become unable
or unwilling to continue to produce apparel for the Company or to meet
their delivery schedules, or if the Company's present relationships with
such manufacturers were otherwise materially adversely affected, there can
be no assurance that the Company would find alternate manufacturers of
finished goods on satisfactory terms to permit the Company to meet its
commitments to its customers on a timely basis. In such event, the
Company's operations could be materially disrupted, especially over the
short-term. The Company believes that relationships with its major
manufacturers are satisfactory.

The Company uses a broad range of fabrics in the production of its
clothing, which is primarily made from synthetic fibers (including
polyester and acrylic), as well as from natural fibers (including cotton
and wool) and blends of natural and synthetic fibers. The Company does
not have any formal, long-term arrangements with any fabric or other raw

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material supplier. During fiscal 1994, virtually all of the fabrics used
in the Company's products were ordered from the Company's five largest
suppliers, which are located in Japan, Taiwan and Korea. The Company
selects the fabrics to be purchased, which are generally produced for it
in accordance with its own specifications. To date, the Company has not
experienced any significant difficulty in obtaining fabrics or other raw
materials and considers its sources of supply to be adequate.

The Company operates under substantial time constraints in producing each
of its collections. Orders from the Company's customers generally precede
the related shipping period by up to five months. However, proposed
production budgets are prepared substantially in advance of the Company's
initial commitments for each collection. In order to make timely delivery
of merchandise which reflects current style trends and tastes, the Company
attempts to schedule a substantial portion of its fabric and manufacturing
commitments relatively late in a production cycle. In order to secure
adequate amounts of quality raw materials, especially greige (i.e.,
"undyed") goods, the Company must make substantial advance commitments to
suppliers of such goods, often as much as seven months prior to the
receipt of firm orders from customers for the related merchandise. Many
of these early commitments are made subject to changes in colors,
assortments and/or delivery dates.

The Company's arrangement with its manufacturers and suppliers are subject
to the risks attendant to doing business abroad, including the
availability of quota and other requisite customs clearances, the
imposition of export duties, political and social instability, currency
revaluations and restrictions on the transfer of funds. Bilateral
agreements between exporting countries, including those from which the
Company imports substantially all of its products, and the United States
imposition of quotas limits the amount of certain categories of
merchandise, including substantially all categories of merchandise
manufactured by the Company, that may be imported into the United States.
Furthermore, the majority of such agreements contain "consultation
clauses" which allow the United States to impose at any time restraints on
the importation of categories of merchandise which, under the terms of the
agreements, are not subject to specified limits. The bilateral agreements
through which quotas are imposed have been negotiated under the framework
established by the Arrangement Regarding International Trade in Textiles,
known as the Multifiber Arrangement.

The United States and the countries in which the Company's products are
manufactured may, from time to time, impose new quotas, duties, tariffs or
other restrictions, or adversely adjust presently prevailing quotas, duty
or tariff levels, with the result that the Company's operations and its
ability to continue to import products at current or increased levels
could be adversely affected. The Company cannot now predict the
likelihood or frequency of any such events occurring.

The Company monitors duty, tariff and quota-related developments, and
seeks continually to minimize its potential exposure to quota-related
risks through, among other measures, geographical diversification of its
manufacturing sources, allocation of production of merchandise categories
where more quota is available and shifts of production among countries and
manufacturers. The expansion in the past few years of the Company's
varied manufacturing sources and the variety of countries in which it has

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manufacturing arrangements, although not the result of specific import
restrictions, have had the result of reducing the adverse effect of any
increase in such restrictions.

Substantially all of the Company's products are subject to United States
customs duties. In the ordinary course of business, the Company, from
time to time, is subject to claims by the United States Customs Service
("Customs") for duties and other charges and is entitled to refunds from
Customs due to overpayment of duties by the Company and may be required to
pay penalties with respect to underpayment of duties. The Company
conducted an internal review, on its own initiative, with respect to the
declared price of certain of its imported finished goods to determine
whether such price had been understated because of a failure to include
the cost of raw materials provided by the Company to certain of its
manufacturers, as well as the cost of shipping such raw materials by air
freight to such manufacturers. During fiscal 1987, the Company made a
voluntary tender to Customs of duties and other charges believed to be due
with regard to such finished goods and as a result, in accordance with
routine administrative procedure in voluntary disclosure and tender
situations, Customs initiated an audit to verify the accuracy of the
Company's submission and records. At the conclusion of the audit, Customs
officials informally advised the Company that further duties in the amount
of approximately $700,000 plus penalties and interest may be assessed
against the Company. The Company believes that these additional duties
relate principally to items of U.S. origin which are not dutiable and
intends to vigorously contest any claims that may be made by Customs. The
Company and Customs have been reviewing the $700,000 duty amount which has
now been substantially reduced; penalties and interest, however, may still
be imposed. In addition to the original 1987 tender of $161,000, the
Company tendered $500,000 to U.S. Customs in December 1991 as an offer-in-
compromise in order to settle this matter. The offer is pending at U.S.
Customs headquarters and the Company is awaiting a decision.

Almost all finished goods are shipped to the Company's New Jersey
distribution center for final inspection, assembly into collections,
allocation and shipment to customers.

BACKLOG

At September 20, 1994, the Company's order book reflected unfilled
customer orders for approximately $62.6 million of merchandise (compared
to a backlog of $44.2 million at September 20, 1993), all of which is
scheduled for delivery during fiscal 1995. The Company does not believe
that cancellations, rejections or returns will materially reduce the
amount of sales realized from such backlog. Order book data at any date
are materially affected by the timing of the initial showing of
collections to the trade, as well as by the timing of recording of orders
and of shipments. Accordingly, order book data do not provide meaningful
period to period comparisons as of specific dates, and comparisons of
backlog information with such information as of specific dates for prior
periods is not necessarily indicative of future results.

TRADEMARKS

CHAUS, CHAUS ESSENTIAL, CHAUS SPORT, CHAUS WOMAN and MS. CHAUS are
registered trademarks of the Company in the United States for use on

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ladies' garments. These trademarks are renewable in the years 2004, 2008,
2002, 2004 and 2005, respectively. JOSEPHINE is also a registered
trademark of the Company in the United States, renewable in the year 2001
for use on ladies' blouses and sweaters. The Company considers its
trademarks to have significant value in the marketing of its products.

The Company has also registered its CHAUS and JOSEPHINE marks for ladies'
gamrments in certain foreign countries and has applied for registration of
its trademarks in certain foreign countries for selected women's
accessories including handbags, small leather goods and footwear.

COMPETITION

The women's apparel industry is highly competitive, both within the United
States and abroad. Many apparel companies are larger in size and have
greater financial resources than the Company. The updated, moderately-
priced apparel which the Company produces constitutes only one of the many
types of women's apparel, and the Company is not aware of any
comprehensive trade statistics to enable it to determine how many
companies in the apparel industry produce garments which compete with the
Company's products. However, management believes, based on its knowledge
of the market, that the Company is one of the largest producers (measured
by sales) of updated, moderately-priced women's sportswear in the United
States.

The Company believes that an ability to effectively anticipate, gauge and
respond to changing consumer demand and tastes relatively far in advance,
as well as an ability to operate within substantial production and
delivery constraints (including obtaining necessary quota allocations), is
necessary to compete successfully in the women's apparel field. Consumer
and customer acceptance and support, which depend primarily upon styling,
pricing, quality (both in material and production), and product identity,
are also important aspects of competition in this industry. The Company
believes that its success will depend upon its ability to remain
competitive in these areas.

Furthermore, the Company's traditional department store customers, which
account for a very substantial portion of the Company's business,
encounter intense competition from so-called "off-price" and discount
retailers, mass merchandisers, and specialty stores. The Company believes
that its ability to increase its present levels of sales will depend on
such department store customers' ability to maintain their competitive
position and the Company's ability to increase its market share of sales
to department stores.

EMPLOYEES

At June 30, 1994, the Company employed 797 full-time employees. Of such
employees, 109 were engaged in management and internal administration; 29
in design; 140 in production and production administration; 275 in
marketing, merchandising and sales (including 222 employees in the retail
outlet store operation); and 107 in shipping. Of the Company's total
employees, approximately 137 were located in the Far East and Europe.

The Company is a party to a collective bargaining agreement with the
Amalgamated Workers Union, Local 88, covering approximately 160 full-time

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employees. This agreement expires in August 1996.

The Company considers its relations with its employees to be satisfactory
and has not experienced any interruption of operations due to labor
disagreements with its employees.

EXECUTIVE OFFICERS

The executive officers of the Company are:
<TABLE>
<CAPTION>
Name Age Position
------ ----- ----------
<S> <C> <C>
Richard A. Baker 48 President

Josephine Chaus 43 Chief Executive Officer and Chairwoman of
the Board (1)

Michael Fieman 63 Executive Vice President - Production

Wayne S. Miller 37 Executive Vice President - Finance and
Administration, Chief Financial Officer

Marc A. Zuckerman 43 Treasurer
</TABLE>
_____________________

(1) Effective September 28, 1994, Andrew Grossman commences employment as
the Company's Chief Executive Officer and a member of the two-person
Office of the Chairman, which he will share with Josephine Chaus. Since
September 13, 1994, Mr. Grossman has been a director of the Company.
Prior to September 2, 1994, Mr. Grossman was President from 1991-1994 and
Executive Vice President from 1990 to 1991 of Jones Apparel Group and Vice
President of Merchandising for Jones New York from 1987 through 1990.
Prior to joining Jones in 1986, Mr. Grossman was employed by Willi Wear
Ltd., Herbert Grossman Enterprises, the Ralph Lauren Womens Wear division
of Bidermann Industries, Inc. and the Evan Picone division of Palm Beach
Inc.

Executive officers serve at the discretion of the Board of Directors.

Bernard Chaus was Chairman of the Board and Chief Executive Officer since
founding the Company in 1975 until his death on May 31, 1991.

Richard Baker has been the President of the Company since February 15,
1993. From 1986 to 1992 he was employed by Esprit de Corp., a firm
engaged in the apparel business, first as president of Esprit Sport and
then, for five years as president of Esprit de Corp. Womenswear.

Josephine Chaus has been employed by the Company in various capacities
since its inception. She has been a director of the Company since 1977,
President from 1980 through February 1993, Vice Chairman of the Board
from 1982 through 1991 and Chief Executive Officer and Chairwoman of the
Board since July 22, 1991. In September 1994, the Company engaged Andrew
Grossman as its Chief Executive Officer (see note (1) above).

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Michael Fieman joined the Company and was appointed Executive Vice
President - Production in November 1991. Prior to that he was Vice
President - International Operations at Liz Claiborne from 1990 to 1991.
From 1988 to 1990 he was with Leslie Fay as President of the Shapely
Division.

Wayne S. Miller joined the Company and was appointed Executive Vice
President - Finance and Administration and Chief Financial Officer of the
Company in June 1994. From April 1994 to June 1994 he was Crisis Manager
at USA Classic, Inc. From February 1994 to March 1994 he was a consultant
to various apparel companies. From October 1990 to January 1994 he was
President and Chief Executive Officer of Publix Group, L.P. Prior to that
he was Chief Financial Officer at Basco All-American Sportswear Corp.

Marc A. Zuckerman was appointed Treasurer of the Company in October 1989.
He had been employed by the Company from March 1988 to July 1989, as its
Director of Corporate Credit. From July to October 1989, he was Director
of Corporate Credit and then Assistant Treasurer of Warnaco.

ITEM 2. PROPERTIES

The Company's principal executive offices are located in modern, leased
facilities at 1410 Broadway, New York City, consisting of approximately
39,000 square feet. These facilities also house the Company's showrooms
and its sales, design and merchandising staffs. This space is occupied
under several leases expiring through 1996. Net base rental expense
aggregated approximately $2,060,000 (approximately $800,000 of which is
included in restructuring expenses) for fiscal 1994 and are expected to
aggregate approximately $1,165,000 (plus an amount to reflect increases in
the consumer price index) for fiscal 1995.

The Company also leases (pursuant to two leases) approximately 34,000
square feet of space at 520 Eighth Avenue, New York City, which houses its
technical production support facilities (including its sample and pattern
makers). Net base rental expense for this space aggregated approximately
$413,000 for fiscal 1994. The leases for this facility expire in January
1995 and the Company will eliminate one lease, reduce its square feet of
space to 19,000 and expects the aggregate base rental expense to be
approximately $305,000 for fiscal 1995.

The Company leases approximately 455,000 square feet in Secaucus, New
Jersey. Such facilities house the Company's production, administrative,
finance and accounting personnel, computer operations, one retail outlet
store, and serve as its warehouse and distribution centers. The leases
for the Secaucus facilities expire in 1996. Base rental expense for the
Secaucus facilities aggregated approximately $2,382,000 (approximately
$600,000 of which is included in restructuring expenses) for fiscal 1994
and are expected to aggregate approximately $1,403,000 in fiscal 1995.

The Company also leases space in Hong Kong, Korea, Taiwan, the Philippines
(closed in June 1994) and Italy with annual aggregate rental expense of
approximately $715,000 for fiscal 1994. The Company anticipates that
aggregate annual rental expense in fiscal 1995 will be comparable to the
rental expense made in fiscal 1994.

The Company also leases space for its retail outlet operation with the

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average store consisting of approximately 3,000 square feet. The annual
aggregate base rental expense for such facilities in fiscal 1994 was
approximately $3,300,000 (approximately $1,400,000 of which is included in
restructuring expenses) and is expected to be approximately $1,800,000 for
fiscal 1995.

The Company believes that its existing facilities are well maintained and
in good operating condition and will continue to be adequate for its
present and anticipated levels of operations.

See Note 10 of Notes to Financial Statements for further information
regarding the Company's current material lease obligations.

ITEM 3. LEGAL PROCEEDINGS

By order dated September 1, 1992, Federal Judge Shirley Wohl Kram
dismissed with prejudice as time-barred the Amended Complaint against the
Company and others, in the previously reported consolidated class actions
entitled Phifer v. Chaus et al., Goldschlack v. Chaus et al., Susman v.
Chaus et al. and I. Bibcoff Inc. Pension Trust Fund v. Chaus et al. In
such actions, claims were asserted against the Company and others,
including the Company's lead underwriters, for alleged misstatements and
omissions contained in the Company's July 1986 Prospectus delivered in
connection with the Company's initial public offering and its 1986 and
1987 Annual Reports. Plaintiffs's attorneys filed a notice of appeal,
which they subsequently withdrew subject to the right to restore the
appeal by January 8, 1993. No such appeal was made and the action was
automatically deemed dismissed with prejudice.

On April 19, 1993, a Class Action Complaint was filed in the Superior
Court of New Jersey, Hudson County, against the Company and others,
including the lead underwriter of the Company's 1986 initial public
offering, alleging common law fraud and negligent misrepresentation in the
sale of the Company's stock in its initial public offering, allegations
that are substantially similar to the claims that were dismissed with
prejudice in the federal court. One of the plaintiffs from the federal
action was originally a party in this action in state court. On June 18,
1993, the Company received by mail, a copy of Jury Demand Class Action in
the Superior Court of New Jersey, Hudson County entitled Theodore M.
Wietecha and Lisa A. Phifer v. Bernard Chaus, Inc. et al. The complaint
was amended in September 1993 to delete Lisa Phifer as a plaintiff. On
May 27, 1994, the Company moved to dismiss the complaint and/or to deny or
limit class status. The motion is before the court for decision.

While a negative outcome in this action could have a material adverse
effect on the Company, management believes that such action is without
merit and that the Company has both substantive and procedural bases for
contesting this latest action. The Company intends to defend itself
vigorously against this claim. Because the underlying claims asserted in
the action have not been the subject of discovery and because of the
preliminary procedural posture of the action, no estimate of any possible
loss due to this action can presently be made.

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connection with these actions because a portion of such expenses may be
attributable to the defense of its directors and officers, with full
reservation of rights under the policy of the Company, the directors and
officers and the insurance carrier upon the ultimate disposition of the
actions.

A claim for indemnification has been asserted by the Company's
former Underwriters against the Company. The indemnification claim
demands repayment of the legal fees and expenses incurred by the
Underwriters in connection with the consolidated class actions entitled
Pfifer v. Chaus, et al. Discussions are ongoing with counsel for the
Underwriters to resolve this claim.

The Company is also involved in various other legal proceedings arising
out of the conduct of its business.

The Company believes that the eventual outcome of the proceedings referred
to above will not have a material adverse effect on the Company's
financial condition.

For a description of certain duties which may be assessed by Customs
against the Company, see "Manufacturing" under Item 1 "Business" above.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------

None.

I-11

<PAGE>

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED STOCKHOLDERS MATTERS.

The Company's Common Stock is traded on the New York Stock Exchange
("NYSE") under the symbol "CHS". The range of high and low sales prices
for the Common Stock on the New York Stock Exchange composite tape (as
reported by The National Quotation Bureau) through September 16, 1994 is
as follows:
<TABLE>
<CAPTION>
Fiscal 1994 Fiscal 1993
---------------- ----------------
High Low High Low
---------------- ----------------
<S> <C> <C> <C> <C>
1st Quarter......... $3.75 $2.625 $ 9.25 $6.125
2nd Quarter......... 3.125 1.75 10.00 6.25
3rd Quarter......... 2.625 1.625 7.25 4.50
4th Quarter......... 3.75 1.75 5.625 3.25
<CAPTION>
Fiscal 1995
----------------
High Low
----------------
1st Quarter to Sept. 16, 1994 ............ $4.375 $1.75
</TABLE>

On September 16, 1994, the last sales price of the Company's Common
Stock, as reported on the New York Stock Exchange Composite Tape (as
reported by The Wall Street Journal), was $4.00.

As of June 30, 1994 the approximate number of record holders of the
Company's Common Stock was 1,300.

The Company does not plan to pay any dividends on its Common Stock
within the foreseeable future. Any such dividend would, in any event,
be subject to compliance with covenants contained in the Company's
Financing Agreement (as defined herein), which currently prohibits
payment of dividends.

I-12

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA.

The following financial information is qualified by reference to, and
should be read in conjunction with, the Financial Statements, related
Notes, and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained elsewhere herein.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

INCOME STATEMENT DATA: Fiscal Year Ended June 30,
------------------------------------------------
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net sales ............$206,332 $235,819 $254,190 $232,444 $291,101
Cost of goods
sold ............... 186,594 187,423 196,415 192,369 233,657
Selling, general
and administra-
tive expenses ....... 55,400 57,410 50,016 51,600 53,190
Restructuring expenses. 5,300
Unusual expenses....... 1,900
Interest expense....... 3,439 2,322 2,474 1,968 2,020
(Loss) income before
income taxes.........(46,491) (10,887) 5,757 (12,839) 2,488
Net (loss) income......(46,755) (10,989) 5,469 (12,004) 1,515
Net (loss) income
per share (1)........ (2.55) (.60) .30 (.66) .08

BALANCE SHEET DATA:
<CAPTION>
June 30, June 30, June 30, June 30, June 30,
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Working capital........$ 3,342 $40,923 $51,964 $57,397 $60,055
Total assets .......... 51,619 90,208 86,489 82,571 81,757
Short-term debt,
including current
portion of
long-term debt....... 21,365 17,504 9,910 51
Long-term debt......... 18,789 14,730 14,820 24,730 14,730
Shareholders' (deficit)
equity ..............(13,614) 33,147 43,328 37,683 51,249
</TABLE>
____________________

(1) Computed by dividing net (loss) income by the weighted average
number of Common and Common Equivalent Shares outstanding during
the years. For the fiscal years ended 1994, 1993, and 1991, Common
Equivalent Shares were not considered as the inclusion of such
would have been antidilutive.

I-13

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

The following table sets forth, for the years indicated, certain items
expressed as a percentage of net sales.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
---------------------------
1994 1993 1992
------ ------ -------
<S> <C> <C> <C>
Net sales............................... 100.0% 100.0% 100.0%
Cost of goods sold...................... 90.4 79.5 77.3
Selling, general and administrative
expenses.............................. 26.9 24.3 19.7
Restructuring expenses.................. 2.5
Unusual expenses........................ 0.9
Interest and other income............... (0.1) 0.2 0.2
Interest expense........................ 1.7 1.0 1.0
(Loss) income before
extraordinary item.................... (22.7) (4.6) 1.4
Net (loss) income....................... (22.7) (4.6) 2.2
</TABLE>

FISCAL 1994 COMPARED TO FISCAL 1993

For the fiscal year ended June 30, 1994, net sales decreased by $29.5
million (12.5%) compared to the prior year. Of this decrease, $7.5
million (58.3%) was attributable to blouses, $7.4 million (11.0%) was
attributable to weekend casual sportswear, $1.3 million (5.0%) was
attributable to dresses, $15.3 million (14.6%) was attributable to
sportswear and $.6 million (13.9%) was attributable to the Company's
Canadian operation, offset somewhat by an increase of $2.6 million (12.1%)
attributable to the retail outlet operation. All percentages in parenthesis
compare net sales in fiscal 1994 to net sales in fiscal 1993. Sales amounts
by product line are exclusive of merchandise sold by the retail outlet
operation.

The sales decrease is primarily due to lower average unit selling prices and
higher promotional allowances to accelerate and increase sell-through at the
retail level. The Company reduced domestic standard selling prices and
anticipated a more favorable business trend which would have enabled it to
increase sales; however, the unanticipated continuation of reduced consumer
spending for women's apparel resulted in less purchasing of the Company's
product. As a result, the Company sold less units at regular price,
liquidated excess inventory at reduced prices and had higher promotional
allowances to accelerate and increase sell-through at the retail level.

During fiscal year 1994, the Company's retail outlet operation increased
from 32 stores on June 30, 1993 to 35 stores on June 30, 1994. The new
stores that were opened contributed approximately $1.7 million of the
$2.6 million increase in retail operation sales. Comparative same store
operations from last year to this year (twenty-one stores) showed a combined
total sales decrease of approximately 3.5%. Pursuant to the Company's
restructuring as indicated below, the Company closed one store during fiscal
1994 and plans to close four stores in fiscal 1995.

I-14

<PAGE>

Cost of goods sold as a percentage of net sales increased to 90.4% from
79.5% as compared to the prior year. The increase in such costs, as a
percentage of net sales, was primarily attributable to the disposal of
excess inventories throughout the year at reduced prices, combined with an
increase in promotional allowances.

Selling, general and administrative expenses, as a percent of net sales,
increased to 26.9% from 24.3% as compared to the prior year. The actual
dollar expense decrease of $2.0 million represents expenses recorded as
restructuring and unusual expenses.

In June 1994, the Company recorded restructuring expenses of $5,300,000.
The restructuring expenses primarily relate to the Company's plan to reduce
overhead costs, consolidate its office locations and close selected retail
outlet stores. The restructuring expenses include $2,100,000 for the
closing of selected retail stores, $2,500,000 for the consolidation of
office space in New York, office and warehouse space in New Jersey and the
closing of the Company's Philippines office and $700,000 for employee
severance. The Company believes that its remaining retail stores will not
only provide direct contributions to income but will also enhance the
Company's ability to manage its inventory without affecting its principal
channels of distribution.

In addition, in June 1994, the Company recorded unusual expenses of
$1,900,000. These primarily relate to expenses arising from the
abandonment of fixed assets, legal fees and winding down of the Company's
Canadian joint venture operation.

Interest expense increased compared with last year primarily due to higher
bank borrowings as well as the higher interest rate on subordinated debt.

FISCAL 1993 COMPARED TO FISCAL 1992

For the fiscal year ended June 30, 1993, net sales decreased by $18.4
million (7.2%) compared to the prior year. Of this decrease, $22.1 million
(63.1%) was attributable to blouses, $12.7 million (16.1%) was attributable
to weekend casual sportswear, $7.9 million (24.0%) was attributable to
dresses and $3.1 million (100.0%) was attributable to better sportswear, an
operation that was discontinued in fiscal 1992, offset somewhat by increases
of $15.4 million (17.2%) attributable to sportswear and $8.0 million (59.8%)
attributable to the retail outlet operation. All percentages in parenthesis
compare net sales in fiscal 1993 to net sales in fiscal 1992. Sales amounts
by product line are exclusive of merchandise sold by the retail outlet
operation.

The sales decrease was primarily due to a combination of reduced unit sales
and lower average unit selling prices. The Company continued its strategy
of reduced domestic standard selling prices and anticipated a more favorable
business trend which would have enabled it to increase sales; however, weak
retail spending patterns for women's apparel resulted in the Company's
customers ordering less than was anticipated. As a result, the Company sold
less units and had higher than anticipated inventory levels at June 30,
1993.

During fiscal year 1993, the Company continued the expansion of its retail
outlet operation from 23 stores on June 30, 1992 to 32 stores on June 30,

I-15

<PAGE>

1993. The new stores that were opened contributed approximately $5.0
million of the $8.0 million increase in retail operation sales. Comparative
same store operations from last year to this year (nine stores) showed a
combined total sales decrease of approximately 8.5%.

Cost of goods sold as a percentage of net sales increased to 79.5% from
77.3% as compared to the prior year. The increase in such costs, as a
percentage of net sales, was primarily attributable to an increase in the
markdown required on our excessive inventory at June 30, 1993 which
increased cost of goods sold combined with an increase in returns and
allowances which reduced net sales.

Selling, general and administrative expenses, as a percent of net sales,
increased to 24.3% from 19.7% as compared to the prior year. The actual
dollar increase of $7.4 million was comprised primarily of increases in the
retail outlet operation due to expansion ($2.8 million), an increase in the
international operation ($1.0 million) and increased design, merchandising
and production costs.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Net cash (used in) provided by operating activities was ($5,020,000) in
fiscal 1994, ($29,053,000) in fiscal 1993 and $16,074,000 in fiscal 1992.
The net cash used in operating activities in the current fiscal year
resulted primarily from the net loss ($46.8 million) and a reduction in
accounts payable ($5.2 million), offset somewhat by decreases in accounts
receivable ($12.7 million) and inventories ($20.5 million).

Historically, the Company has not required major capital expenditures. In
fiscal 1994 and 1993, purchases of fixed assets were $1.4 million and $2.3
million, respectively, consisting primarily of improvements in the Company's
New Jersey warehouse facilities, New York design and showroom facilities,
additional computer and telecommunications equipment, and for the expansion
of the retail outlet operation. In fiscal 1995, the Company anticipates
capital expenditures of approximately $1.5 million, consisting primarily of
expenditures for its warehouses, design facilities and the purchase of
additional computer software systems.

I-16

<PAGE>

30, 1993) or (b) 1% above the federal funds rate, as defined. Additional
interest at 2-1/2% per annum is due on amounts not paid when due. In
addition, the agreement provides for the payment of minimum service charges
and/or interest which for the fiscal year ended June 30, 1994, aggregated
approximately $900,000. The Financing Agreement may be cancelled by the
Company any time after July 1, 1995, upon 60 days prior written notice to
BNYF or prior to July 1, 1995 upon 60 days written notice to BNYF and the
payment of an early termination fee. The Financing Agreement is cancellable
by BNYF effective July 1, 1995 or any July 1 thereafter, upon 60 days
written notice to the Company.

During all four quarters of fiscal year 1994, the Company was not in
compliance with certain financial covenants. BNYF has waived such
noncompliance.

The Company is currently negotiating with its bank for modification of
certain financial covenants for the future in order to provide the latitude
and resources necessary for future programs. The Company believes that this
negotiation will be successfully completed in the near future. However,
there can be no assurance that the Company will be able to obtain the
necessary modifications.

Josephine Chaus has provided a $7.2 million letter of credit expiring April
15, 1995 (increased from previous amounts provided by her of $3.0 million in
April 1994 and $5.0 million in June 1994 and extended from the previous
expiration date of October 15, 1994) to support the Company's credit
facility. In exchange for this letter of credit, BNYF is providing at least
an additional $12.2 million of credit availability under the Company's
borrowing formula. To compensate Ms. Chaus for the letter of credit, an
independent committee of the Company's Board of Directors has authorized the
issuance to her of warrants to purchase an aggregate of 544,000 shares of
Common Stock at exercise prices ranging from $2.25 to $3.00 (in each case equal
to 120% of the market price on the authorization date) and warrants to
purchase additional shares of Common Stock at an exercise price
equal to 120% of the five days trading average of the closing sale price of
the Company's Common Stock commencing September 27, 1994. The precise number
of such shares shall be set after the exercise price is determinded. Issuance
of the warrants is subject to (i) receipt of an opinion from a nationally
recognized investment banking firm that the terms of the warrants are
commercially reasonable and (ii) shareholder approval.

Josephine Chaus has also agreed to purchase $7.2 million of Common Stock of
the Company at a purchase price determined by the independent committee
equal to the five trading day average of the closing sale price of the
Company's Common Stock commencing September 27, 1994. Issuance of the
shares is subject to (i) receipt of an opinion from a nationally recognized
investment banking firm that the purchase price terms are commercially
reasonable and (ii) shareholder approval. Pending such approval, Ms. Chaus has
loaned the $7.2 million to the Company and the Company has issued a $7.2
million promissory note to Ms. Chaus, bearing interest at 12%. The note
will be exchanged for the shares of Common Stock when the conditions to
issuance have been satisfied. Proceeds from such cash infusion are being
used for costs and associated expenses related to the signing of the new
Chief Executive Officer which costs will be charged to operations in the
quarter ending September 30, 1994.

The Company has outstanding at June 30, 1994 $19,039,000 of subordinated

I-17

<PAGE>

promissory notes payable to Josephine Chaus and the Estate of Bernard Chaus,
which were originally issued on June 30, 1986 (the "First Promissory
Notes"). In October 1993 an independent committee of the Board of Directors
agreed in principle with the noteholders to modify the First Promissory
Notes. The maturity date of the notes was extended until July 1, 1995 and,
effective October 18, 1993, it was agreed that the notes would bear interest
at a rate of 12% per annum, payable quarterly. It was further agreed that
interest which had to be deferred as a result of bank covenant requirements
would be added to the New Promissory Note (see below). The noteholder has
agreed that all accrued interest added quarterly to the New Promissory Note
will be payable on July 1, 1995.

In February and March 1991, Bernard Chaus and Josephine Chaus each provided
subordinated financing to the Company in the aggregate amount of $10.0
million (the "Second Promissory Notes"). In September 1993, both Josephine
Chaus and the Estate of Bernard Chaus agreed to convert the remaining
balance of the Second Promissory Notes ($2,623,000) and the interest for the
quarter ended June 30, 1993 for both the First Promissory Notes and the
Second Promissory Notes ($417,432) into a demand note (the "Demand Note") in
the aggregate amount of $3,040,432.

In October 1993, an independent committee of the Board of Directors agreed
in principle with the noteholders to modify the Demand Note. The Demand
Note was converted into new promissory notes (collectively the "New
Promissory Notes"). It was agreed that the New Promissory Notes would bear
interest at the rate of 10% per annum effective from July 1, 1993, and that
such interest would be payable on July 1, 1994. Principal payments on the
New Promissory Notes were made in November 1993 ($500,000), February 1994
($250,000) and August 15, 1994 ($250,000). The noteholder agreed to extend
the maturity date for the remaining principal and interest payments which
were to have been due on July 1, 1994 to July 1, 1995.

Aggregate annual principal payments of subordinated debt as of June 30, 1994
are $250,000 in fiscal year 1995, and $18,789,000 in fiscal year 1996.

The Company has undertaken a number of initiatives to strengthen its
financial position, including a cash infusion of $7.2 million from its
principal shareholder, a letter of credit issued by this shareholder to
facilitate an increase in loan availability, closure of certain retail
operations, consolidation of other office facilities, an overhead reduction
program and the hiring of certain senior management personnel. The Company
believes that these initiatives will have a positive impact on future
operating results.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements are included herein commencing on page F-1.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Previously reported on Form 8-K filed by the Company on June 16, 1994.

I-18

<PAGE>

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information with respect to the executive officers of the Company is set
forth in Part I of this Annual Report on Form 10-K.

Information with respect to the directors of the Company is incorporated
by reference to the information to be set forth under the heading
"ELECTION OF DIRECTORS" in the Company's definitive proxy statement
relating to its 1994 Annual Meeting of Shareholders to be filed pursuant
to Regulation 14A (the "Company's 1994 Proxy Statement").

ITEM 11. EXECUTIVE COMPENSATION.

Information called for by Item 11 is incorporated by reference to the
information to be set forth under the heading "EXECUTIVE COMPENSATION" in
the Company's 1994 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information called for by Item 12 is incorporated by reference to the
information to be set forth under the heading "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the Company's 1994 Proxy
Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information called for by Item 13 is incorporated by reference to the
information to be set forth under the headings "EXECUTIVE COMPENSATION"
and "CERTAIN TRANSACTIONS" in the Company's 1994 Proxy Statement.

I-19

<PAGE>

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-
K.

(a) Financial Statements and Financial Statement Schedules: See List
of Financial Statements and Financial Statement Schedules on page
F-1.

(b) The Company filed a Form 8-K during the last quarter of its fiscal
year ended June 30, 1994.

Sequentially
Numbered
Page
------------
Exhibit No.
- - -----------
3.1 Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit
3.1 of the Company's Registration Statement on
Form S-1,Registration No. 33-5954).

3.2 By-laws of the Company, as amended
(incorporated by reference to Exhibit 3.1 of
the Company's Form 10-Q for the quarter ended
December 31, 1987).

10.1 Restricted Stock Purchase Plan (incorporated
by reference to Exhibit 10.1 of the Company's
Form 10-K for the year ended June 30, 1987).

10.2 1986 Stock Option Plan, as amended and
restated as of January 1, 1987 (incorporated
by reference to Exhibit 10.2 of the Company's
Form 10-K for the year ended July 1, 1989).

10.3 Amendment No. 1 to 1986 Stock Option Plan
(incorporated by reference to Exhibit 10.3 of
the Company's Form 10-K for the year ended
July 1, 1989).

10.4 Incentive Award Plan (incorporated by
reference to Exhibit 10.6 of the Company's
Registration Statement on Form S-1,
Registration No. 33-5954).

10.13 Agreement, dated June 15, 1988, between the
Company and Bernard Chaus and Josephine Chaus,
amending the terms of the Company's
Subordinated Promissory Notes to each of them,
each in the principal amount of $7,365,000,
the form of which was filed as Exhibit 10.13
of the Company's Registration Statement on

IV-20

<PAGE>

Form S-1, Registration No. 33-5954
(incorporated by reference to Exhibit 10.11 of
the Company's Form 10-K for the year ended
July 2, 1988).

10.14 Agreement, dated May 17, 1990 between the
Company and Bernard Chaus and Josephine Chaus
amending the terms of the Company's
subordinated Promissory Notes to each of them,
each in the principal amount of $7,365,000,
the form of which was filed as Exhibit 10.13
of the Company's Registration Statement on
Form S-1, Registration No. 33-5954.

10.15 Agreement, dated August 28, 1987, between
Amalgamated Workers Union Local 88,R.W.D.S.U.,
AFL-CIO and Company, and the Collective
Bargaining Agreement, dated September 1, 1984
related thereto (incorporated by reference to
Exhibit 10.3 of the Company's Form 10-K for
the year ended June 30, 1987).

10.16 Agreement, dated September 1, 1990, between
Amalgamated Workers Union Local 88,
R.W.D.S.U., AFL-CIO and Company, and the
Collective Bargaining Agreement, dated
September 1, 1984 related thereto
(incorporated by reference to Exhibit 10.16 of
the Company's Form 10-K for the year ended
June 30, 1990).

10.19 Lease, dated January 29, 1987, between L.H.
Charney Associates and the Company, of space
at the Company's facility at 1410 Broadway,
New York, New York (incorporated by reference
to Exhibit 10.19 of the Company's Form 10-K
for the year ended June 30, 1987).

10.23 Lease, dated July 27, 1987, between L. H.
Charney Associates and the Company, of space
at the Company's facility at 1410 Broadway,
New York, New York (incorporated by reference
to Exhibit 10.23 of the Company's Form 10-K
for the year ended July 2, 1988).

10.31 Agreement dated December 3, 1990 among
Bernard Chaus, Inc., Bernard Chaus, Josephine
Chaus and National Union Fire Insurance
Company of Pittsburgh, Pa., the Company's
directors and officers liability carrier.

10.38 Financing Agreement dated July 1, 1991 between
the Company and BNY Financial Corporation.

10.39 Employment Agreement, dated July 1, 1991,

IV-21

<PAGE>

between the Company and Josephine Chaus.

10.43 Distribution Agreement, effective June 1,
1991. between Confeccionistas Unidos, S.A. de
C.V. and Bernard Chaus, Inc.

10.60 Employment Agreement, dated November 4, 1991
between Michael Fieman and the Company
(incorporated by reference to Exhibit 10.60 of
the Company's Form 10-K for the year ended
June 30, 1992).

10.61 Amended and Restated Financing Agreement,
dated September 24, 1992, to the Financing
Agreement dated July 1, 1991 between the
Company and BNY Financial Corporation
(incorporated by reference to Exhibit 10.61 of
the Company's Form 10-K for the year ended
June 30, 1992.

10.68 Waiver and amendment dated May 13, 1993 to the
Restated and Amended Financing Agreement
between the Company and BNY Financial
corporation effective July 1, 1992
(incorporated by reference to Exhibit 10.68 of
the Company's Form 10-Q for the quarter ended
March 31, 1993.

10.71 Employment Agreement, dated February 15, 1993
between Richard A. Baker and the Company
(incorporated by reference to Exhibit 10.71 of
the Company's Form 10-K for the year ended
June 30, 1993).

10.72 Employment Agreement, dated July 1, 1993
between Michael Root and the Company
(incorporated by reference to Exhibit 10.72 of
the Company's Form 10-K for the year ended
June 30, 1993).

10.73 Waiver dated September 1, 1993 to the
Restated and Amended Financing Agreement
between the Company and BNY Financial
Corporation effective July 1, 1992
(incorporated by reference to Exhibit 10.73 of
the Company's Form 10-K for the year ended
June 30, 1993).

10.74 Agreement, dated February 21, 1991 between the
Company and Bernard Chaus and Josephine Chaus
amending the terms of the Company's
Subordinated Promissory Notes to each of them,
each in the principal amount of $7,365,000
(incorporated by reference to Exhibit 10.74 of
the Company's Form 10-K for the year ended

IV-22

<PAGE>

June 30, 1993).

10.75 Subordinated Promissory Notes dated March 12,
1991, between the Company and Bernard Chaus
and Josephine Chaus, separately, each in the
amount of $5,000,000 (incorporated by
reference to Exhibit 10.75 of the Company's
Form 10-K for the year ended June 30, 1993).

10.76 Agreement, dated July 31, 1991, between the
Company and the Estate of Bernard Chaus and
Josephine Chaus amending the terms of the
Company's Subordinated Promissory Notes to
each of them, each in the principal amount of
$7,365,000, (incorporated by reference to
Exhibit 10.76 of the Company's Form 10-K for
the year ended June 30, 1993).

10.77 Agreement, dated July 31, 1991, between the
Company and the Estate of Bernard Chaus and
Josephine Chaus amending the terms of the
Company's Subordinated Promissory Notes to
each of them, each in the principal amount of
$5,000,000 (incorporated by reference to
Exhibit 10.77 of the Company's Form 10-K for
the year ended June 30, 1993).

10.78 Agreement, dated July 15, 1992, between the
Company and the Estate of Bernard Chaus and
Josephine Chaus amending the terms of the
Company's Subordinated Promissory Notes to
each of them, each in the principal amount of
$5,000,000 (incorporated by reference to
Exhibit 10.78 of the Company's Form 10-K for
the year ended June 30, 1993).

10.79 Agreement, dated October 30, 1992, between the
Company and the Estate of Bernard Chaus and
Josephine Chaus amending the terms of the
Company's Subordinated Promissory Notes to
each of them, each in the principal amount of
$7,365,000 (incorporated by reference to
Exhibit 10.79 of the Company's Form 10-K for
the year ended June 30, 1993).

10.80 Demand Notes, dated June 30, 1993, between the
Company and the Estate of Bernard Chaus and
Josephine Chaus, each in the principal amount
of $1,520,216 (incorporated by reference to
Exhibit 10.80 of the Company's Form 10-K for
the year ended June 30, 1993).

10.81 Agreement, dated September 21, 1993, between
the Company and the Estate of Bernard Chaus
and Josephine Chaus amending the terms of the
Company's Subordinated Promissory Notes to

IV-23

<PAGE>

each of them, each in the principal amount of
$7,365,000 (incorporated by reference to
Exhibit 10.81 of the Company's Form 10-K for
the year ended June 30, 1993).

10.82 Waiver dated September 23, 1993 to the
Restated and Amended Financing Agreement
between the Company and BNY Financial
Corporation effective July 1, 1992
(incorporated by reference to Exhibit 10.82 of
the Company's Form 10-K for the year ended
June 30, 1993).

10.83 Waiver dated November 5, 1993 to the Restated
and Amended Financing Agreement between the
Company and BNY Financial Corporation
(incorporated by reference to Exhibit 10.83 of
the Company's Form 10-Q for the quarter ended
September 30, 1993).

10.84 Amendment, effective October 1, 1993, to the
Restated and Amended Financing Agreement
between the Company and BNY Financial
Corporation (incorporated by reference to
Exhibit 10.84 of the Company's Form 10-Q for
the quarter ended December 31, 1993).

10.85 Waiver dated January 13, 1994 to the Restated
and Amended Financing Agreement between the
Company and BNY Financial Corporation
(incorporated by reference to Exhibit 10.85 of
the Company's Form 10-Q for the quarter ended
December 31, 1993).

10.86 Waiver dated February 10, 1994 to the
Restated and Amended Financing Agreement
between the Company and BNY Financial
Corporation (incorporated by reference to
Exhibit 10.86 of the Company's Form 10-Q for
the quarter ended December 31, 1993).

10.87 Waiver dated May 4, 1994 to the Restated and
Amended Financing Agreement between the
Company and BNY Financial Corporation
(incorporated by reference to Exhibit 10.87 of
the Company's Form 10-Q for the quarter ended
March 31, 1994).

*10.89 Employment Agreement dated June 3, 1994
between the Company and Wayne Miller.

*10.90 Employment Agreement dated September 1, 1994
between the Company and Andrew Grossman with
Stock Option Agreement dated as of September
1, 1994 by and between the Company and Andrew
Grossman.

IV-24

<PAGE>

*10.91 Settlement Agreement dated as of September
1994 among Nicole Eskenazi, the Company and
certain others.

*10.92 Severance Agreement dated as of June 16, 1994
between the Company and Anthony M. Pisano.

*10.93 Waiver dated September 20, 1994 to the
Restated and Amended Financing Agreement
between the Company and BNY Financial
Corporation.

*10.94 Subordinated Promissory Notes dated August 1,
1993, between the Company and Josephine Chaus
and the Estate of Bernard Chaus, separately,
each in the amount of $208,716.

*10.95 Subordinated Promissory Note dated August 1,
1993, between the Company and Josephine Chaus
in the amount of $1,311,500.

*10.96 Subordinated Promissory Note dated August 1,
1993, between the Company and the Estate of
Bernard Chaus, in the amount of $1,000,000.

*10.97 Subordinated Promissory Note dated August 1,
1993, between the Company and the Estate of
Bernard Chaus, in the amount of $311,500.

*10.98 Subordinated Promissory Notes dated December
31, 1993, between the Company and Josephine
Chaus and the Estate of Bernard Chaus,
separately, each in the amount of $181,056.

*10.99 Subordinated Promissory Notes dated December
31, 1993, between the Company and Josephine
Chaus and the Estate of Bernard Chaus,
separately, each in the amount of $412,950.

*10.100 Agreements dated September 9, 1993, between
the Company and Josephine Chaus and the Estate
of Bernard Chaus, separately, reflecting
amendments to subordinated promissory notes,
each in the principal amount of $5,000,000.

*10.101 Agreements dated October 18, 1993, between the
Company and Josephine Chaus and the Estate of
Bernard Chaus, separately, reflecting
amendments to subordinated promissory notes,
each in the principal amount of $1,520,216.

*10.102 Agreements dated October 18, 1993, between the
Company and Josephine Chaus and the Estate of
Bernard Chaus, separately, reflecting
amendments to subordinated promissory notes,
each in the principal amount of $7,365,000.

IV-25

<PAGE>

*10.103 Agreement dated December 31, 1993, between the
Company and Josephine Chaus reflecting
amendments to a subordinated promissory note,
in the principal amount of $1,311,500.

*10.104 Agreement dated December 31, 1993, between the
Company and the Estate of Bernard Chaus,
reflecting amendments to subordinated
promissory notes in the principal amounts of
$1,000,000 and $311,500.

22 List of Subsidiaries of the Company
(incorporated by reference to Exhibit 22 of
the Company's Registration Statement on Form
S-1, Registration No. 33-5954).

IV-26

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Annual Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized, on September 27, 1994.

BERNARD CHAUS, INC.

By: /s/ Josephine Chaus
------------------------------------
Josephine Chaus
Chairwoman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons
on behalf of the registrant and in the capacities indicated, on September
27, 1994.

<TABLE>
<CAPTION>
Signature Title

<S> <C>
/s/ Josephine Chaus
- - ----------------------------- Chairwoman of the Board and
Josephine Chaus Chief Executive Officer

/s/ Richard A. Baker
- - ----------------------------- President
Richard A. Baker

/s/ Wayne S. Miller
- - ----------------------------- Executive Vice President -
Wayne S. Miller Finance and Administration, Chief
Financial Officer

/s/ Marc A. Zuckerman
- - ----------------------------- Treasurer
Marc A. Zuckerman

/s/ Jeffrey Goldstein
- - ----------------------------- Controller and Chief Accounting
Jeffrey Goldstein Officer

/s/ Philip G. Barach
- - ----------------------------- Director
Philip G. Barach

/s/ John W. Burden, III
- - ----------------------------- Director
John W. Burden, III

/s/ S. Lee Kling
- - ----------------------------- Director
S. Lee Kling

/s/ Harvey M. Krueger
- - ----------------------------- Director
Harvey M. Krueger

/s/ Andrew Grossman
- - ----------------------------- Director
Andrew Grossman
</TABLE>
IV-27

<PAGE>

FORM 10-K--ITEM 14(A)(1) AND (2)

BERNARD CHAUS, INC. AND SUBSIDIARIES

INDEX OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

The following consolidated financial statements of Bernard Chaus, Inc. and
subsidiaries are included in Item 8:

Reports of Independent Auditors .............................. F- 2
Consolidated Balance Sheets--June 30, 1994
and 1993 ................................................... F- 4
Consolidated Statements of Operations--Years Ended
June 30, 1994, 1993 and 1992 ............................... F- 5
Consolidated Statements of Stockholders' Equity--
Years Ended June 30, 1994, 1993 and 1992.................... F- 6
Consolidated Statements of Cash Flows--Years Ended
June 30, 1994, 1993 and 1992 ............................... F- 7
Notes to Consolidated Financial Statements ................... F- 8

The following consolidated financial statement schedules of Bernard Chaus,
Inc. and subsidiaries are included in Item 14(d):

Schedule II --Amounts Receivable from Related Parties
and Underwriters, Promoters, and
Employees Other than Related Parties ..........F-16
Schedule VIII--Valuation and Qualifying Accounts ...............F-17
Schedule IX --Short-Term Borrowings ...........................F-18

All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been
omitted.

F-1

<PAGE>

REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of Directors
Bernard Chaus, Inc.

We have audited the accompanying consolidated balance sheets of Bernard
Chaus, Inc. and subsidiaries as of June 30, 1994 and the related
consolidated statement of operations, stockholders' deficit, and cash flows
for the year then ended. Our audit also included the financial statements
schedules listed in the Index at Item 14(a). These financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements and financial statement schedules
referred to above present fairly, in all material respects, the consolidated
financial position of Bernard Chaus, Inc. and subsidiaries at June 30, 1994,
and the consolidated results of their operations and their cash flows for
the year then ended, in conformity with generally accepted accounting
principles.

Deloitte & Touche LLP

New York, New York
September 21, 1994

F-2

<PAGE>

REPORT OF INDEPENDENT AUDITORS

Stockholders and Board of Directors
Bernard Chaus, Inc.

We have audited the accompanying consolidated balance sheet of Bernard
Chaus, Inc. and subsidiaries as of June 30, 1993 and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the two years in the period ended June 30, 1993. Our audits
also included the financial statement schedules listed in the index at Item
14 (a) for each of the two years in the period ended June 30, 1993. These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Bernard Chaus, Inc. and subsidiaries at June 30, 1993, and the
consolidated results of their operations and their cash flows for each of
the two years in the period ended June 30, 1993, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material
respects the information set forth there in.

ERNST & YOUNG LLP

New York, New York
August 18, 1993

F-3

<PAGE>

<TABLE>

BERNARD CHAUS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<CAPTION>
JUNE 30, JUNE 30,
1994 1993
- - -------------------------------------------------------------------------------
(In thousands except number of shares)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents................... $ 468 $ 1,367
Accounts receivable, less allowance for
doubtful accounts, sales discounts,
returns and allowances of $6,340
and $4,341 ................................ 17,757 30,562
Inventories................................. 25,503 45,974
Prepaid expenses............................ 3,608 4,629
Refundable and prepaid income taxes......... 135 722
------- -------
Total Current Assets...................... 47,471 83,254
Fixed Assets.................................. 3,612 5,932
Other Assets.................................. 536 1,022
$51,619 $90,208
======= =======

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current Liabilities
Notes payable - banks....................... $21,115 $14,881
Subordinated promissory notes - current .... 250 2,623
Accounts payable............................ 14,290 19,489
Accrued expenses............................ 6,710 5,338
Accrued restructuring expenses.............. 1,764
------- -------
Total Current Liabilities................. 44,129 42,331
Subordinated Promissory Notes................. 18,789 14,730
Accrued Restructuring Expenses................ 2,315
------- -------
65,233 57,061
Stockholders' (Deficit) Equity
Preferred stock, $.01 par value,
authorized shares -- 1,000,000;
outstanding shares -- none
Common stock, $.01 par value;
authorized shares -- 50,000,000;
issued shares -- 18,975,031 at
June 30, 1994 and June 30, 1993 .......... 190 190
Additional paid-in capital................. 40,226 40,232
Deficit .................................. (52,550) (5,795)
Less: Treasury stock, at cost --
622,700 shares.................... (1,480) (1,480)
------- -------
Total Stockholders' (Deficit) Equity..... (13,614) 33,147
------- -------
$51,619 $90,208
======= =======

</TABLE>
See accompanying notes.

F-4

<PAGE>

<TABLE>
BERNARD CHAUS, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
Fiscal Year Ended June 30,
-----------------------------
1994 1993 1992
------ ------ ------
(In thousands, except share and per share amounts)

<S> <C> <C> <C>
Net sales.............................. $206,332 $235,819 $254,190
Cost of goods sold..................... 186,594 187,423 196,415
-------- -------- --------
Gross profit........................... 19,738 48,396 57,775
Selling, general and
administrative expenses.............. 55,400 57,410 50,016
Restructuring expenses................. 5,300
Unusual expenses....................... 1,900
-------- -------- --------
(42,862) (9,014) 7,759

Interest income........................ 20 293 444
Interest expense....................... (3,439) (2,322) (2,474)
Other income (expense)................. (210) 156 28
-------- -------- --------
(Loss) income before provision
for income taxes & extraordinary item. (46,491) (10,887) 5,757
Provision for income taxes.............. 264 102 2,245
-------- -------- --------
(Loss) income before extraordinary item (46,755) (10,989) 3,512
Extraordinary item:
Benefit from utilization of net
operating loss carryforward .......... 1,957

Net (loss) income....................... ($46,755) ($10,989) $5,469
======== ======== ========
(Loss) income per common share
before extraordinary item.............. ($2.55) ($0.60) $0.19
Income per common share
from extraordinary item............... 0.11
-------- -------- --------
Net (loss) income per share............. ($2.55) ($0.60) $0.30
======== ======== ========
Weighted average number of common and
common equivalent shares outstanding 18,352,000 18,272,000 18,363,000
</TABLE>
See accompanying notes.

F-5

<PAGE>

<TABLE>
BERNARD CHAUS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
<CAPTION>
Common Stock Treasury Stock
--------------- Additional (Deficit) --------------
Number of Paid-in Deferred Retained Number of
Shares Amount Capital Compensation Earnings Shares Amount Total
------ ------ --------- ------------ -------- ------ ------
(In thousands, except number of shares)

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1991.... 18,680,738 $187 $39,259 ($8) ($275) 622,700 ($1,480) $37,683
Net income................... 5,469 5,469
Exercise of stock options.... 54,770 168 168
Deferred compensation
amortization .............. 8 8
---------- ---- ------- -- ------- ------- ------ -------
Balance at June 30, 1992 18,735,508 187 39,427 0 5,194 622,700 (1,480) 43,328
Net loss................... (10,989) (10,989)
Exercise of stock options... 239,523 3 805 808
---------- ---- ------- -- ------- ------- ------ -------
Balance at June 30, 1993.... 18,975,031 190 40,232 0 (5,795) 622,700 (1,480) 33,147
Net loss.................... (46,755) (46,755)
Restricted stock purchase
and retirement - net...... (6) (6)
---------- ---- ------- -- ------- ------- ------ -------
Balance at June 30, 1994 18,975,031 $190 $40,226 $0 ($52,550) 622,700 ($1,480) ($13,614)
========== ==== ======= == ======= ======= ====== =======
</TABLE>

See accompanying notes.

F-6

<PAGE>

<TABLE>
BERNARD CHAUS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Fiscal Year Ended June 30,
------------------------------
1994 1993 1992
------ ------ ------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income........................ ($46,755) ($10,989) $ 5,469
Adjustments to reconcile net
(loss) income to net cash provided by
(used in) operating activities:
Depreciation and amortization.......... 2,485 1,553 1,737
Loss on disposal of fixed assets....... 1,192
Provision for (recovery of) losses on
accounts receivable................... 117 (25) (951)
Deferred compensation - net............ 8
Unpaid interest on subordinated
promissory notes...................... 2,436
Changes in operating assets and
liabilities:
Accounts receivable................... 12,688 2,764 6,217
Inventories........................... 20,471 (26,097) 4,116
Prepaid expenses and other assets..... 1,507 (2,574) (783)
Income taxes receivable............... 587 (81) 1,988
Accounts payable...................... (5,199) 4,588 (1,214)
Accrued expenses...................... 1,372 1,808 (513)
Accrued restructuring expenses........ 4,079
------- ------- -------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES..................... (5,020) (29,053) 16,074

INVESTING ACTIVITIES
Purchase of fixed assets................. (1,357) (2,275) (2,254)
------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES.... (1,357) (2,275) (2,254)

FINANCING ACTIVITIES
Net proceeds from short term bank
borrowings.............................. 6,234 14,881
Principal payments on subordinated
promissory notes........................ (750) (7,377)
Purchase and retirement of restricted
stock................................... (6)
------- ------- -------
Net proceeds from sale of stock.......... 808 168

NET CASH PROVIDED BY FINANCING
ACTIVITIES.............................. 5,478 8,312 168
------- ------- -------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS......................... (899) (23,016) 13,988
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR........................ 1,367 24,383 10,395
------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR... $ 468 $ 1,367 $24,383
======= ======= =======
</TABLE>
See accompanying notes.

F-7

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY: Bernard Chaus, Inc. designs, arranges for the manufacture of and
markets an extensive range of women's clothing. The Company sells its products
primarily to department and specialty stores throughout the United States.

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its subsidiaries. Material intercompany accounts
and transactions have been eliminated.

NET (LOSS) INCOME PER SHARE: Net (loss) income per share has been computed by
dividing the applicable net (loss) income by the weighted average number of
common and common equivalent shares outstanding during the year (1994 -
18,352,000, 1993 - 18,272,000 and 1992 - 18,363,000). For the fiscal years
ended 1994 and 1993, common equivalent shares were not considered as the
inclusion of such would have been antidilutive.

REVENUE RECOGNITION: Revenues are recorded at time of merchandise shipment.

CREDIT TERMS: The Company extends credit to its customers based upon an
evaluation of the customer's financial condition and credit history. The
Company generally does not require collateral. There have been minimal net
credit losses in each of the last three fiscal years. The historic level of
credit losses is 0.14% of net sales, and the Company provides for estimated
losses. These losses have consistently been below management's expectations.
At June 30, 1994 and 1993, respectively, there was approximately 41.5% and 36%
of the Company's accounts receivable balance due from the department store
customers.

SALES RETURNS: The Company records sales returns as a reduction to gross
sales.

COOPERATIVE ADVERTISING: The Company records charges for cooperative
advertising as advertising expense, a component of selling, general and
administrative expenses.

FOREIGN CURRENCY TRANSACTIONS: The Company negotiates substantially all of its
purchase orders with foreign manufacturers in United States dollars. The
Company considers the United States dollar to be the functional currency of its
overseas subsidiaries. All foreign currency gains and losses are recorded in
the Statement of Operations.

EMPLOYEE BENEFITS: The Company does not provide postretirement benefits other
than pensions to union employees. Accordingly, Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
other than Pensions" will not affect the Company's financial statements. The
Company does not typically provide post employment benefits to its employees.
Accordingly, Statement of Financial Accounting Standards No. 112 "Employers'
Accounting for Postemployment Benefits" will not have a material affect on the
Company's financial statements.

INVENTORIES: Inventories are stated at the lower of cost, using the first-in,
first-out method, or market.

FIXED ASSETS: Furniture and equipment are depreciated principally using the
straight-line method over eight years. Leasehold improvements are amortized
using the straight-line method over either the term of the lease or the
estimated useful life of the improvement, whichever period is shorter.
Automobiles are depreciated principally using the straight-line method over
five years. Computer software is depreciated using the straight-line method
over five years.

INCOME TAXES: Effective July 1, 1993, the Company adopted Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes." Under
Statement

F-8

<PAGE>

109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Prior to the adoption of Statement 109,
income tax expense was determined using the deferred method. Deferred tax
expense was based on items of income and expenses that were reported in
different years in the financial statements and tax returns and were measured
at the tax rate in effect in the year the difference originated.

As permitted by Statement 109, the Company has elected not to restate the
financial statements of any prior years. There was no cumulative effect of the
change, as well as there being no effect on pre-tax loss for the year ended
June 30, 1994.

CASH EQUIVALENTS: Cash equivalents are short-term, highly liquid investments
purchased with an original maturity of three months or less.

2. INVENTORIES

Inventories consist of:
<TABLE>
<CAPTION>
June 30, June 30,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Finished goods ................ $25,075 $43,666
Work-in-process ............... 124 526
Raw materials ................. 304 1,782
------- -------
$25,503 $45,974
======= =======
</TABLE>

Inventories include merchandise in transit (principally finished goods) of
approximately $11,176,000 at June 30, 1994 and $15,709,000 at June 30, 1993.

3. FIXED ASSETS
Fixed assets at cost, net of accumulated depreciation and amortization, consist
of:
<TABLE>
<CAPTION>
June 30, June 30,
1994 1993
-------- --------
(In thousands)
<S> <C> <C>
Furniture and equipment ...... $11,781 $12,348
Leasehold improvements ....... 9,303 9,412
Automobiles .................. 340 484
------- -------
21,424 22,244
Less accumulated depreciation and
amortization ............... 17,812 16,312
------- -------
$3,612 $5,932
======= =======
</TABLE>

F-9

<PAGE>

4. INCOME TAXES

Effective July 1, 1993, the Company adopted Financial Accounting Standards
Board Statement No. 109, "Accounting for Income Taxes". Under Statement 109,
the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and
operating loss carryforwards are measured using enacted tax rates and laws that
will be in effect when the differences are expected to reverse. Prior to the
adoption of Statement 109, income tax expense was based on items of income and
expenses that were reported in different years in the financial statements and
tax returns and were measured at the tax rate in effect in the year the
difference originated.

Significant components of the Company's net deferred tax assets as of June 30,
1994 are as follows:

<TABLE>
<CAPTION>
(in thousands)

<S> <C>
Deferred tax assets:
Net operating loss carryforwards $20,300
Costs capitalized to inventory for
tax purposes 1,000
Allowance for doubtful accounts 100
Book over tax depreciation 1,300

Restructuring reserves not currently deductible 1,600
Other nondeductible accruals 800
-------
25,100
Valuation allowance for deferred tax assets (25,100)
-------
Net deferred tax asset $ 0
=======
</TABLE>

There was a change in the valuation allowance for the year ended June 30, 1994
of $19,600,000.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30,
--------------------------------
1994 1993 1992
------ ------ ------
(In thousands)
<S> <C> <C> <C>
(Credit) provision for federal
income taxes at the stat-
utory rate of 35.0% in 1994 34.5%
in 1993 and 34% in 1992.......... ($16,272) ($3,756) $1,957
State and local income taxes
net of federal tax benefit....... 264 102 288
Effect of unrecognized tax loss
carryforwards.................... 16,272 3,756
------- ------ ------
Provision for income taxes........ $ 264 $ 102 $2,245
======= ====== ======
</TABLE>

At June 30, 1994, the Company has a federal net operating loss carryforward for
income tax purposes of approximately $50 million, which will expire between
2006 and 2009.

F-10

<PAGE>

5. FINANCIAL AGREEMENTS

The Company has in place a Restated and Amended Financing Agreement (the
"Financing Agreement") with BNY Financial Corporation ("BNYF"), a wholly owned
subsidiary of The Bank of New York. Effective as of October 1, 1993, the
Financing Agreement provides to the Company a total line of credit up to an
aggregate of $60 million, including letter of credit and direct borrowings,
with a sublimit for loans and advances of $20 million. The Financing Agreement
contains a borrowing base formula which is the sum of (i) 85% of eligible
receivables, less reserves, (ii) 40% of eligible inventory, up to $27 million
and (iii) 100% of excess cash balances, all as defined in the agreement.
However, BNYF may decrease or increase the above percentages in the borrowing
base. The Company's indebtedness under the Financing Agreement is
collateralized by the Company's accounts receivable and inventory.
Such agreement requires the Company to comply quarterly with various financial
tests including tangible net worth of at least $47.5 million, working capital
of at least $40 million and restrictions on payment of principal and interest
on subordinate indebtedness unless certain conditions are met. Such agreement
also requires the Company to comply with various other
restrictions including, but not limited to, a restriction on the payment of
dividends. Interest on direct borrowings is payable monthly at an annual rate
which is the higher of (a) 1/2 of 1% above the prime rate of the Bank of New
York (7.25% at June 30, 1994, and 6.0% at June 30, 1993) or (b) 1% above the
federal funds rate, as defined. Additional interest at 2-1/2% per annum is due
on amounts not paid when due. In addition, the agreement provides for the
payment of minimum service charges and/or interest which for the fiscal year
ended June 30, 1994, aggregated approximately $900,000. The Financing
Agreement may be cancelled by the Company any time after July 1, 1995, upon 60
days prior written notice to BNYF or prior to July 1, 1995 upon 60 days written
notice to BNYF and the payment of an early termination fee. The Financing
Agreement is cancellable by BNYF effective July 1, 1995 or any July 1
thereafter, upon 60 days written notice to the Company.

During all four quarters of fiscal year 1994, the Company was not in compliance
with certain financial covenants. BNYF has waived such noncompliance.

The Company is currently negotiating with its bank for modification of certain
financial covenants for the future in order to provide the latitude and
resources necessary for future programs. The Company believes that this
negotiation will be successfully completed in the near future. However, there
can be no assurance that the Company will be able to obtain the necessary
modifications.

Josephine Chaus has provided a $7.2 million letter of credit expiring April 15,
1995 (increased from previous amounts provided by her of $3.0 million in April
1994 and $5.0 million in June 1994 and extended from the previous expiration
date of October 15, 1994) to support the Company's credit facility. In
exchange for this letter of credit, BNYF is providing at least an additional
$12.2 million of credit availability under the Company's borrowing formula. To
compensate Ms. Chaus for the letter of credit, an independent committee of the
Company's Board of Directors has authorized the issuance to her of warrants to
purchase an aggregate of 544,000 shares of Common Stock at exercise prices
ranging from $2.25 to $3.00 (in each case equal to 120% of the market price on
the authorization date) and warrants to purchase additional shares of Common
Stock at an excerise price equal to 120% of the five days trading average of
the closing sale price of the Company's Common Stock commencing September 27,
1994. The precise number of such shares shall be set after the exercise price
is determined. Issuance of the warrants is subject to (i) receipt of an opinion
from a nationally recognized investment banking firm that the terms of the
warrants are commercially reasonable and (ii) shareholder approval.

Josephine Chaus has also agreed to purchase $7.2 million of Common Stock of the
Company at a purchase price determined by the independent committee equal to
the five trading day average of the closing sale price of the Company's Common
Stock commencing September 27, 1994. Issuance of the shares is subject to
(i) receipt of an opinion from a nationally recognized investment banking firm
that the purchase price terms are commercially reasonable and (ii) shareholder
approval. Pending such approval, Ms. Chaus has loaned the $7.2 million to the
Company and the Company has issued a $7.2 million promissory note to Ms. Chaus,
bearing interest at 12%. The note will be exchanged for the shares of Common
Stock when the conditions to

F-11

<PAGE>

issuance have been satisfied. Proceeds from such cash infusion are being used
for costs and associated expenses related to the signing of the new Chief
Executive Officer which costs will be charged to operations in the quarter
ending September 30, 1994.

6. SUBORDINATED PROMISSORY NOTES

The Company has outstanding at June 30, 1994 $19,039,000 of subordinated
promissory notes payable to Josephine Chaus and the Estate of Bernard Chaus,
which were originally issued on June 30, 1986 (the "First Promissory Notes").
In October 1993 an independent committee of the Board of Directors agreed in
principle with the noteholders to modify the First Promissory Notes. The
maturity date of the notes was extended until July 1, 1995 and, effective
October 18, 1993, it was agreed that the notes would bear interest at a rate of
12% per annum, payable quarterly. It was further agreed that interest which
had to be deferred as a result of bank covenant requirements would be added to
the New Promissory Note (see below). The noteholder has agreed that all
accrued interest added quarterly to the New Promissory Note will be payable on
July 1, 1995.

In February and March 1991, Bernard Chaus and Josephine Chaus each provided
subordinated financing to the Company in the aggregate amount of $10.0 million
(the "Second Promissory Notes"). In September 1993, both Josephine Chaus and
the Estate of Bernard Chaus agreed to convert the remaining balance of the
Second Promissory Notes ($2,623,000) and the interest for the quarter ended
June 30, 1993 for both the First Promissory Notes and the Second Promissory
Notes ($417,432) into a demand note (the "Demand Note") in the aggregate amount
of $3,040,432.

In October 1993, an independent committee of the Board of Directors agreed in
principle with the noteholders to modify the Demand Note. The Demand Note was
converted into new promissory notes (collectively the "New Promissory Notes").
It was agreed that the New Promissory Notes would bear interest at the rate of
10% per annum effective from July 1, 1993, and that such interest would be
payable on July 1, 1994. Principal payments on the New Promissory Notes were
made in November 1993 ($500,000), February 1994 ($250,000) and August 15, 1994
($250,000). The noteholder agreed to extend the maturity date for the
remaining principal and interest payments which were to have been due on July
1, 1994 to July 1, 1995.

Aggregate annual principal payments of subordinated debt as of June 30, 1994
are $250,000 in fiscal year 1995, and $18,789,000 in fiscal year 1996.

7. EMPLOYEE BENEFIT PLANS

PENSION PLAN: Pursuant to a collective bargaining agreement, all of the
Company's union employees are covered by a defined benefit pension plan.
Pension expense (recovery) amounted to approximately $61,000, $28,000 and
($33,000) in fiscal 1994, 1993 and 1992, respectively. As of December 31,
1993, the actuarial present value of the accumulated vested and non-vested plan
benefits amounted to $415,000 and net assets available for benefits amounted to
$308,000.

SAVINGS PLAN: The Company has a savings plan (the "Savings Plan") under which
eligible employees may contribute a percentage of their compensation which the
Company (subject to certain limitations) will match 50% of the employee's
contribution. Company contributions will be invested half in the Common Stock
of the Company and half in investment funds selected by the participant and are
subject to vesting provisions of the Savings Plan. Expense under the plan was
approximately $301,000, $287,000 and $204,000 in fiscal 1994, 1993 and 1992,
respectively. An aggregate of 100,000 shares of Common Stock has been reserved
for issuance under the Savings Plan.

INCENTIVE AWARD PLAN: Eligible participants in the Incentive Award Plan may be
allocated additional compensation from an annual bonus pool and, in the case of
participating sales executives, from their divisions' net sales performance as
determined in accordance with the Incentive Award Plan. On January 22, 1992,
however, the Incentive Award Plan was terminated by the Board of Directors and

F-12

<PAGE>

replaced by a simplified plan (the "Simplified Plan"). Under the Simplified
Plan, bonuses may be awarded if net earnings of the Company reach a pre-
determined level. In fiscal 1994 no additional compensation was awarded under
the Simplified Plan.

RESTRICTED STOCK PLAN: In November 1987, the Company's shareholders approved
the adoption of a restricted stock plan (the "Plan"). Pursuant to the Plan,
250,000 restricted shares of the Company's Common Stock were reserved for
allocation to key employees of the Company. The restrictions on the shares
terminate as to 25 percent of such shares on each anniversary of their date of
allocation. As of June 30, 1994, all restricted shares previously allocated
have been vested and purchased by certain officers and employees of the
Company. The difference between the market value of the shares on the date of
allocation and the purchase price has been reflected as deferred compensation
on the Company's balance sheet and was amortized over the vesting period of
such shares.

STOCK OPTION PLAN: Pursuant to the Stock Option Plan, the Company may grant
to eligible individuals incentive stock options, as defined in the Internal
Revenue Code, and non incentive stock options. At the annual meeting of
shareholders in November 1993, the shareholders approved the increase in the
number of shares of Common Stock with respect to which options may be granted
from 1,500,000 shares to 2,500,000 shares. No stock options may be granted
subsequent to 1996 and the exercise price may not be less than 100% of the fair
market value on the date of grant for incentive stock options and 85% of the
fair market value on the date of grant for non incentive stock options.

<TABLE>
<CAPTION>
Nonincentive
Stock Options
-------------------------------
Number Exercise
of Shares Price Range
--------- -----------

<S> <C> <C>
Outstanding at
June 30, 1991 606,116 $2.125 - $6.50
Options granted
in fiscal 1992......... 935,726 $2.375 - $4.25
Options cancelled........ (200,964) $2.125 - $4.88
Options exercised........ (54,770) $2.125 - $4.88
--------- ---------------
Outstanding at
June 30, 1992.......... 1,286,108 $2.375 - $6.50
Options granted
in fiscal 1993......... 86,906 $2.875 - $9.375
Options cancelled........ (21,027) $4.25 - $5.375
Options exercised........ (239,523) $2.375 - $6.50
--------- ---------------
Outstanding at
June 30, 1993.......... 1,112,464 $2.375 - $9.375
Options granted
in fiscal 1994......... 630,000 $1.875 - $4.750
Options cancelled........ (323,316) $2.875 - $6.50
--------- ---------------
Outstanding at
June 30, 1994.......... 1,419,148 $1.875 - $9.375
========= ===============
</TABLE>

The stock options become exercisable one year after issuance as to 25%; an
additional 25% becomes exercisable on each of the next three anniversary dates.
As of June 30, 1994 options to purchase approximately 597,000 shares were
exercisable.

At June 30, 1994, approximately 2,546,000 shares of Common Stock were reserved
for issuance under the Stock Option, Savings and Restricted Stock plans
combined.

F-13

<PAGE>

8. LICENSE AGREEMENTS

In fiscal year 1992 the Company terminated its two licensing agreements
("Agreements") originally entered into in fiscal year 1990, whereby the Company
had granted certain manufacturers an exclusive right to use the Company's
trademarks in connection with the manufacture, sale and promotion of ladies
footwear, handbags and small leather accessories.

During fiscal year 1992, the Company recognized royalties of approximately
$700,000 under these agreements.

9. RESTRUCTURING AND UNUSAL EXPENSES

The Company has undertaken a number of initiatives to strengthen its financial
position, including a cash infusion of $7.2 million from its principal
shareholder, a letter of credit issued by this shareholder to facilitate an
increase in loan availability, closure of certain retail operations,
consolidation of other office facilities, an overhead reduction program and the
hiring of certain senior management personnel. The Company believes that these
initiatives will have a positive impact on future operating results.

Relative to the initiatives described, in June 1994, the Company recorded
restructuring expenses of $5,300,000. The restructuring expenses primarily
relate to the Company's plan to reduce overhead costs, consolidate its office
locations and close selected retail outlet stores. The restructuring expenses
include $2,100,000 for the closing of selected retail stores, $2,500,000 for
the consolidation of office space in New York, office and warehouse space in
New Jersey and the closing of the Company's Philippines office and $700,000 for
employee severance. The Company believes that its remaining retail stores will
not only provide direct contributions to income but will also enhance the
Company's ability to manage its inventory without affecting its principal
channels of distribution.

In addition, in June 1994, the Company recorded unusual expenses of $1,900,000.
These primarily relate to expenses arising from the abandonment of fixed
assets, legal fees and winding down of the Company's Canadian joint venture
operation.

10. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

The Company leases showroom, distribution and office facilities, retail outlet
facilities and equipment under various noncancellable operating lease
agreements which expire through 2005. Rental expense for the years ended June
30, 1994, 1993 and 1992 was approximately $12,909,000 (approximately $4,100,000
of which is included in restructuring expenses), $8,066,000 and $6,772,000,
respectively.

The minimum aggregate rental commitments at June 30, 1994 are as follows:
<TABLE>
<CAPTION>
Fiscal year ending: (In thousands)
<S> <C>
1995 .................................. 6,001
1996 .................................. 4,649
1997 .................................. 2,648
1998 .................................. 1,795
1999 .................................. 1,567
Subsequent to 1999 .......................... 4,242
-------
$20,902
=======
</TABLE>

The Company is contingently liable under letters of credit issued by banks to
cover contractual commitments for merchandise purchases of approximately
$17,000,000 at June 30, 1994.

F-14

<PAGE>

By order dated September 1, 1992, Federal Judge Shirley Wohl Kram dismissed
with prejudice as time-barred the Amended Complaint against the Company and
others, in the previously reported consolidated class actions entitled Phifer
v. Chaus et al., Goldschlack v. Chaus et al., Susman v. Chaus et al. and I.
Bibcoff Inc. Pension Trust Fund v. Chaus et al. In such actions, claims were
asserted against the Company and others, including the Company's lead
underwriters, for alleged misstatements and omissions contained in the
Company's July 1986 Prospectus delivered in connection with the Company's
initial public offering and its 1986 and 1987 Annual Reports. Plaintiffs's
attorneys filed a notice of appeal, which they subsequently withdrew subject to
the right to restore the appeal by January 8, 1993. No such appeal was
made and the action was automatically deemed dismissed with prejudice.

On April 19, 1993, a Class Action Complaint was filed in the Superior Court of
New Jersey, Hudson County, against the Company and others, including the lead
underwriter of the Company's 1986 initial public offering, alleging common law
fraud and negligent misrepresentation in the sale of the Company's stock in its
initial public offering, allegations that are substantially similar to the
claims that were dismissed with prejudice in the federal court. One of the
plaintiffs from the federal action was originally a party in this action in
state court. On June 18, 1993, the Company received by mail, a copy of Jury
Demand Class Action in the Superior Court of New Jersey, Hudson County entitled
Theodore M. Wietecha and Lisa A. Phifer v. Bernard Chaus, Inc. et al. The
complaint was amended in September 1993 to delete Lisa Phifer as a plaintiff.
On May 27, 1994, the Company moved to dismiss the complaint and/or to deny or
limit class status. The motion is before the court for decision.

While a negative outcome in this action could have a material adverse effect on
the Company, management believes that such action is without merit and that the
Company has both substantive and procedural bases for contesting this latest
action. The Company intends to defend itself vigorously against this claim.
Because the underlying claims asserted in the action have not been the subject
of discovery and because of the preliminary procedural posture of the action,
no estimate of any possible loss due to this action can presently be made.

The Company has also negotiated an agreement with its directors and officers
liability insurance carrier whereby the Company will obtain interim
reimbursement of certain expenses incurred by the Company in connection with
these actions because a portion of such expenses may be attributable to the
defense of its directors and officers, with full reservation of rights under
the policy of the Company, the directors and officers and the insurance carrier
upon the ultimate disposition of the actions.

The Company is also involved in various other legal proceedings arising out of
the conduct of its business. The Company believes that the eventual outcome of
the proceedings referred to above will not have a material adverse effect on
the Company's financial condition or results of operations.

Advertising expenses for the fiscal years ended June 30, 1994, 1993, and 1992,
were approximately $1,649,000, $1,914,000 and $1,740,000.

The Company's gross sales in fiscal 1994 to department store customers owned by
three single corporate entities were approximately $38,000,000, $38,000,000 and
$21,000,000. The Company's gross sales in fiscal 1993 to these department
store customers were $52,000,000, $34,000,000 and $22,000,000. In fiscal 1992
gross sales to these department store customers were approximately $63,000,000,
$35,000,000 and $24,000,000.

Taxes paid (refunded) amounted to ($361,000) in fiscal 1994, $180,000 in fiscal
1993 and ($2,000,000) in fiscal 1992. Interest paid amounted to $1,400,000 in
fiscal 1994, $1,900,000 in fiscal 1993 and $2,470,000 in fiscal 1992.

F-15

<PAGE>

SCHEDULE II

<TABLE>
BERNARD CHAUS, INC. & SUBSIDIARIES

AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES

<CAPTION>
Balance at Deductions Balance
Beginning Amounts at End
Name of Debtor of Year Additions Collected of Year
- - -------------- ---------- --------- ---------- -------
(In thousands)
<S> <C> <C> <C> <C>
Year ended June 30, 1994:
Jeffrey Chaus (1) $51 $138 $178 $11
=== ==== ==== ====
Richard Baker (2) $83 $364 $301 $146
=== ==== ==== ====
Year ended June 30, 1993:
Jeffrey Chaus (1) $40 $123 $112 $51
=== ==== ==== ====
Year ended June 30, 1992:
Jeffrey Chaus (1) $19 $132 $111 $40
=== ==== ==== ====
Tina Ferraro (1) $72 $89 $113 $48
=== ==== ==== ====

</TABLE>

_____________________

Note (1): Represents trade accounts receivable from entities controlled by
these individuals with usual repayment terms. See "Certain
Transactions" in the Company's 1994 Proxy Statement.

Note (2): See "Certain Transactions" in the Company's 1994 Proxy Statement.

F-16

<PAGE>

<TABLE>
SCHEDULE VIII
BERNARD CHAUS, INC. & SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Year Expenses Deductions of Year
- - ----------- ---------- ---------- ---------- -------
(In thousands)
<S> <C> <C> <C> <C>
Year ended June 30, 1994
Allowance for doubtful accounts $ 412 $ 117 $ 174 1 $ 355
====== ======= ======= =======
Reserve for sales discounts and
customer allowances and deductions $3,929 $33,955 $31,899 2 $ 5,985
====== ======= ======= =======
Accrued restructuring expenses $ 0 $ 5,300 $ 1,221 $ 4,079
====== ======= ======= =======
Year ended June 30, 1993
Allowance for doubtful accounts $ 305 $ (25) $ (132)1 $ 412
====== ======= ======= =======
Reserve for sales discounts and
customer allowances and deductions $3,711 $22,958 $22,740 2 $ 3,929
====== ======= ======= =======
Year ended June 30, 1992
Allowance for doubtful accounts $ 342 $ (951) $ (914)1 $ 305
====== ======= ======= =======
Reserve for sales discounts and
customer allowances and deductions $5,977 $21,429 $23,695 2 $ 3,711
====== ======= ======= =======
</TABLE>

F-17

<PAGE>

<TABLE> SCHEDULE IX

BERNARD CHAUS, INC. & SUBSIDIARIES
SHORT-TERM BORROWINGS

<CAPTION>
Maximum Average
Weighted Amount Amount Weighted Average
Balance Average Outstanding Outstanding Interest Rate
Category of Aggregate at End Interest During During the During the
Short-Term Borrowings of Year Rate the Year Year (1) Year (2)
- - --------------------- ------- -------- ----------- ----------- ----------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1994:
Banks $21,115 6.7% $35,557 $19,916 6.7%
======= ==== ======= ======= ====
Year ended June 30, 1993:
Banks $14,881 6.5% $24,170 $ 6,430 6.5%
======= ==== ======= ======= ====

Year ended June 30, 1992:
Banks $0 N/A $ 6,715 $ 213 8.7%
======= ==== ======= ======= ====

</TABLE>

___________________________

(1) The average amount outstanding during the year was computed
by dividing the total of the average daily balances by the
number of days in the year.

(2) The weighted average interest rate during the year was
computed by dividing the actual interest expense by average
short-term borrowings outstanding.

F-18

EXHIBIT 10.89
EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT dated as of June 3, 1994, by and between BERNARD
CHAUS, INC., a New York corporation (the "Company"), and WAYNE MILLER (the
"Employee").

W I T N E S S E T H

WHEREAS, the Company desires to employ the Employee and to enter
into an agreement (the "Agreement") embodying the terms of such
employment; and

WHEREAS, the Employee desires to accept such employment with the
Company and to enter into the Agreement.

NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the Company and
the Employee hereby agree as follows:

1. Employment.
The Company hereby agrees to employ the Employee, and the
Employee hereby agrees to accept employment with the Company, for the Term
(as defined in Section 2 below), in the position, and with the duties and
responsibilities set forth in Section 3 below, and upon the other terms
and conditions hereinafter stated.

2. Term.
The initial term of the Agreement shall commence on
July 5, 1994 and shall continue through July 5, 1996 (the "Initial
Term"); provided, however, that the Agreement at all times shall be
subject to earlier termination in accordance with the provisions hereof.
Thereafter, the term of this Agreement shall automatically be extended for
additional one year terms (the "Extended Term") unless either party hereto
shall have provided written notice to the other party hereto of its intent
not to extend this Agreement not less than thirty days prior to the end of
the Initial Term or the Extended Term, as the case may be. For purposes
of this Agreement, the "Term" of this Agreement means the Initial Term
and, if extended, the Extended Term.

3. Position, Duties, Responsibilities.
3.1 Appointment as Executive Vice President -- Finance and
Administration and Chief Financial Officer.
(a) During the Term, the Employee shall serve, and the
Company shall employ Employee, as Executive Vice President -- Finance and
Administration and Chief Financial Officer of the Company, and shall be
responsible for the duties attendant to such office, and such other duties
and responsibilities with the Company, subsidiaries or divisions,
consistent with such positions, as may be assigned by the Chief Executive
Officer of the Company (the "Chief Executive Officer"). The Employee
shall report directly to the Chief Executive Officer.

(b) During the Term, the Employee shall devote his full
working time, attention and energies, to the best of his ability,
experience and talent, to the business and affairs of the Company, and
shall use his best efforts to promote the best interests of the Company.
Without limiting the generality of the foregoing, the Employee shall
perform such duties and responsibilities as may be assigned to him by the
Chief Executive Officer consistent with Employee's positions as Executive
Vice President -- Finance and Administration and Chief Financial Officer
of the Company. Nothing in the Agreement shall preclude the Employee from
engaging in charitable and community affairs, or giving attention to his
passive personal investments; provided, such activities, in the reasonable
judgment of the Chief Executive Officer, do not interfere with the regular
performance of his duties and responsibilities under the Agreement;
provided, further, without the prior approval of the Chief Executive
Officer of the Company, which approval shall not unreasonably be withheld
(i) no such investment (other than an investment in real estate) may
exceed two percent (2%) of any class or series of equity securities of any
entity and (ii) the Employee may not serve as a member of the board of
directors or as a trustee of any other company, association or entity.

3.2 Representation.

In order to induce the Company to enter into the Agreement
on the terms and conditions set forth herein, the Employee hereby
represents and warrants to the Company that his execution of the Agreement
and the performance of his duties and responsibilities hereunder will not
violate or result in a breach of, or in any manner be prohibited or
restricted by, the terms of any agreement, arrangement, understanding
(written or otherwise), order or decree to which he is a party or by which
he is bound.

4. Compensation.
4.1 Salary.

The Company hereby agrees to pay to the Employee, and the
Employee hereby agrees to accept, as cash compensation for all services
rendered during the term of the Agreement, a base salary (the "Base
<PAGE>

Salary") at the rate of $250,000 per annum, payable in equal monthly
installments.

4.2 Initial Bonus.

If Employee is employed by the Company on the date which is
three months from the date of this Agreement, the Company hereby agrees to
pay to Employee an initial bonus equal to $25,000 on such date.

4.3 Annual Cash Bonus.

In addition to the Base Salary provided in clause 4.1 above
and the initial bonus provided in clause 4.2 above, the Employee shall
participate in any bonus plans in which the senior management of the
Company participate.

4.4 Stock Options.

On the date of commencement of employment pursuant to this
Agreement, Employee shall be awarded stock options ("Stock Options") under
the Company's 1986 Stock Option Plan, as amended (the "Stock Option
Plan"), to purchase 50,000 shares of Common Stock (subject to the vesting
provisions and otherwise in accordance with the terms of the Stock Option
Plan, but subject to accelerated vesting as provided in clause 9.2(b)
below). The per share exercise of each such Stock Option shall be equal
to the closing price of the Company's Common Stock on the date of the
award thereof.

5. Employee Benefits.
5.1 Employee Benefit Programs and Plans.

During the Term, the Employee will be entitled to
participate in all benefit programs and plans now or hereafter made
available by the Company to its senior executive officers, including, but
not limited to, pension and other retirement plans, hospitalization,
surgical, dental and major medical coverage and short and long term
disability; provided, however, life insurance coverage (other than any
group coverage) shall be provided separately pursuant to clause 5.2 below.

5.2 Life Insurance.

During the Term, the Company will reimburse the Employee
for the cost of any long-term disability and term life insurance policies
covering the Employee maintained by the Employee; provided, that such cost
shall not be in excess of $8,000 per year. The Employee represents that
he is in good physical and mental health, has never been rated an
insurance risk on account of any past physical or mental history or
condition and does not suffer from any physical or mental condition which
could cause him not to be insurable for life insurance in the amount
provided above at normal premium rates (consistent with general industry
practice in New York). All benefits of such term life insurance policy
shall inure to the Employee's designated beneficiaries.

5.3 Vacations.

The Employee shall be entitled to four (4) weeks paid
vacation in each year, such vacation to be taken at such time or times as
are consistent with the requirements of the Company's business and the
performance of the Employee's duties and responsibilities hereunder.
Unused vacation time may not be accumulated and carried forward to a
subsequent year.

6. Expense Reimbursement and perquisites.
6.1 Out-of-Pocket Expenses.

During the Term, the Company shall reimburse the Employee
for all reasonable, out-of-pocket, expenses incurred by him (in accordance
with the policies and procedures established by the Company for its senior
executive officers) in carrying out his duties and responsibilities
hereunder; provided, the Employee presents appropriately itemized accounts
of, and receipts for, such expenditures.

6.2 Automobile.

During the Term, the Company shall reimburse the Employee
for the cost of leasing an automobile selected by Employee and purchasing
insurance for the automobile and for the reasonable cost of a garage for,
and maintenance on, the automobile; provided, the Company shall not be
required to reimburse the Employee in excess of $600 per month to lease
such automobile and for the related expenses enumerated above.

7. Death or Disability of Employee.
7.1 Death.

In the event of the death of the Employee during the Term,
the Agreement automatically shall be terminated. Base Salary shall be
paid to the Employee's designated beneficiary, or, in the absence of such
designation, to the estate or other legal representative of the Employee
for the month in which death occurs. The Employee shall be entitled to
other death benefits in accordance with the terms of the Company's benefit
programs and plans.

7.2 Disability.

In the event of the Disability (as herein defined) of the
Employee during the Term, the Agreement automatically shall be terminated.
<PAGE>

Base Salary shall be paid to the Employee for the month in which
Disability occurs and for a period of six (6) months thereafter (less any
Disability compensation which the Employee receives in accordance with the
Company's benefit programs and plans). The Employee shall be entitled to
other Disability compensation in accordance with the Company's benefit
programs and plan. "Disability," for purposes of the Agreement, shall
mean the Employee has failed as a result of his illness, physical or
mental disability or other incapacity, for a period of 90 consecutive days
or 180 days during any one year period of the Term to render the services
provided in the Agreement, or has been adjudicated an incompetent.

8. Termination by the Company for Due Cause.

Nothing herein shall prevent the Company from terminating
the Employee's employment for Due Cause (as defined below). Upon such
termination, the Employee shall continue to receive salary only for the
period ending with the date of such termination and the obligation of the
Company to make any further payments, or to provide any benefits specified
herein, to the Employee shall thereupon cease and terminate. The term
"Due Cause", as used herein, shall mean (a) the Employee's willful
misconduct or gross negligence in the performance of his duties on behalf
of the Company, or the Employee's dishonesty in the performance of his
duties on behalf of the Company, (b) the neglect, failure or refusal of
the Employee (continuing for at least 30 days) to carry out any reasonable
request of the Board of Directors or the Chief Executive Officer for the
provision of services hereunder consistent with his duties and
responsibilities hereunder, (c) the material breach of any provision of
the Agreement by the Employee (including, without limitation, the breach
of his representation in clause 3.2 above) provided that in the case of
the breach of the Employee's obligations under clause 3.1(a) and 3.1(b),
said breach shall be continuing for at least 30 days (other than the
obligation to devote full working time, as to which the breach need not be
continuing) or (d) the entering of a plea of guilty or nolo contendere to,
or the Employee's conviction of, a felony or other crime involving moral
turpitude, dishonesty, theft or unethical business conduct. Termination
of employment pursuant to this Section 8 shall be made by delivery to the
Employee of a copy of a letter from the Chief Executive Officer setting
forth the particulars of the conduct which provides the basis for a
termination of the Employee for Due Cause.

9. Termination Other than for Due Cause.
9.1 Termination.

The Agreement may be terminated (a) by the Company (in
addition to termination pursuant to Section 7 or 8) at any time and for
any reason, (b) by the Employee at any time and for any reason or (c) upon
the expiration of the Term.

9.2 Severance and Non-Competition Payments.

(a) If the Agreement is terminated by the Company
(including a termination by not extending the Term) other than as a result
of death or Disability of the Employee or for Due Cause (and other than in
connection with a change in control (as herein defined) of the Company),
the Company shall pay the Employee a severance and non-competition payment
as follows: (i) if such termination is during the Initial Term, the
Company shall pay the Employee a severance and non-competition payment
equal to the Base Salary in effect at the time of termination for the
period equal to the greater of (x) twelve months and (y) the remainder of
the Initial Term and (ii) if such termination is during the Extended Term,
the Company shall pay the Employee a severance and non-competition payment
equal to the Base Salary in effect at the time of termination for the
period equal to twelve months. Such severance and non-competition payment
shall be payable in twelve equal monthly installments (except in the case
of payments made pursuant to clause (i)(y) above, which shall be payable
in monthly installments for the remainder of the Initial Term) commencing
on the first day of the month following termination.

(b) If the Agreement is terminated by the Company or by
the Employee For Good Reason (as herein defined) in connection with or
following a change in control of the Company, other than as a result of
death or Disability of the Employee or for Due Cause, the Company shall
pay the Employee a severance and non-competition payment equal to the sum
of (x) two times the Base Salary in effect at the time of termination plus
(y) an amount equal to two times the annual cash bonus award earned by the
Employee pursuant to clause 4.3 above in respect of the year immediately
preceding the year of termination. Such severance and non-competition
payment shall be paid in a lump sum on the first day of the month
following termination. In addition, all Stock Options which have not yet
vested shall be deemed to have vested on the date of such termination.
"Good Reason" for purposes of this Section 9(b) only shall mean (i) the
Company shall have materially breached the provisions of the Agreement
which breach shall continue for at least 30 days (except that the
termination of the Employee's employment by the Company for Due Cause or
as a result of the Disability of the Employee shall not be deemed a breach
of the Agreement) or (ii) the assignment to the Employee by the Board of
Directors and/or Chief Executive Officer of duties materially inconsistent
with the Employee's position (including status, corporate office(s),
title(s) or reporting responsibility), authority, duties or
responsibilities as contemplated by Section 3 of the Agreement, or any
action by the Board or Chief Executive Officer which results in a material
diminution of the position, authority, duties or responsibilities of the
Employee as contemplated by Section 3 of the Agreement. A "change in
control" of the Company shall be deemed to have occurred if (x) the
Company shall have merged or consolidated with an unaffiliated entity or
the Company shall have transferred or sold all or substantially all of its
<PAGE>

assets to an unaffiliated entity, (y) the majority of the directors on the
Board at any time have not been nominated for election by the directors on
the Board immediately prior to any such election of directors, or (z) any
person or group shall have acquired a majority of the voting securities of
the Company.

(c) After the termination of the Agreement, any severance
and non-competition payments due to Employee from the Company hereunder
shall be reduced by an amount equal to 50% of all amounts received by the
Employee in connection with any other employment (including self-
employment); provided, however, that any such severance and non-
competition payments due to Employee from the Company hereunder shall be
reduced by an amount equal to 100% of all amounts received by the Employee
in connection with any other employment if the Company agrees, at its
option, to waive Employee's non-competition obligations pursuant to
Section 11(a) herein; provided, further, however, that as liquidated
damages and the sole remedy for the breach by Employee of his non-
competition obligations under Section 11(a), if not so waived by the
Company, any such severance and non-competition payments shall be
immediately terminated and Employee shall return to the Company any such
payments made for periods after the date of commencement of employment
with a competitor in breach of such obligations.

10. Confidential Information.

(a) The Employee agrees not to use, disclose or make
accessible to any other person, firm, partnership, corporation or any
other entity any Confidential Information (as herein defined) pertaining
to the business of the Company except (i) while employed by the Company,
in the business of and for the benefit of the Company or (ii) when
required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order the Company to divulge,
disclose or make accessible such information. For purposes of the
Agreement, "Confidential Information" shall mean non-public information
concerning the Company's financial data, statistical data, strategic
business plans, product development (or other proprietary product data),
customer and supplier lists, customer and supplier information,
information relating to governmental relations, discoveries, practices,
processes, methods, trade secrets, marketing plans and other non-public,
proprietary and confidential information of the Company, that, in any
case, is not otherwise generally available to the public and has not been
disclosed by the Company to others not subject to confidentiality
agreements. In the event the Employee's employment is terminated
hereunder for any reason, he immediately shall return to the Company all
Confidential Information in his possession.

(b) The Employee and the Company agree that this covenant
regarding confidential information is a reasonable covenant under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction, such covenant is not reasonable in any respect,
such court shall have the right, power and authority to excise or modify
such provision or provisions of this covenant as to the court shall appear
not reasonable and to enforce the remainder of the covenant as so amended.
The Employee agrees that any breach of the covenant contained in this
Section 10 would irreparably injure the Company. Accordingly, the
Employee agrees that the Company, in addition to pursuing any other
remedies it may have in law or in equity, may obtain an injunction against
the Employee from any court having jurisdiction over the matter,
restraining any further violation of this Section 10.

11. Non-Competition; Non-Solicitation.

(a) The Employee agrees that, except for a termination
following a change in control, during the Term and for a period of one
year thereafter (herein referred to as the "Non-Competition Period"),
without the prior written consent of the Company: (i) he shall not,
directly or indirectly, either as principal, manager, agent, consultant,
officer, director, greater than two percent (2%) holder of any class or
series of equity securities, partner, investor, lender or employee or in
any other capacity, carry on, be engaged in or have any financial interest
in or otherwise be connected with, any entity which is now or at the time,
engaged in any business activity competitive (directly or indirectly) with
the business of the Company; and (ii) he shall not, on behalf of any such
competing entity, directly or indirectly, have any dealings or contact
with any suppliers or customers of the Company. For purposes of this
Section 11, the business of the Company shall mean the manufacture and
sale of women's apparel at price points comparable to those of the
Company. All severance and non-competition payments pursuant to Section 9
shall be in consideration of the Employee's agreement not to compete with
the Company; it being understood, however, that the Employee will have no
obligations under this Section 11(a) if following the termination of his
employment for any reason (including termination by the Employee) the
Employee is not receiving or is not entitled to severance and non-
competition payments under Section 9.

(b) During the Term and during the Non-Competition Period,
the Employee agrees that, without the prior written consent of the Company
(and other than on behalf of the Company), the Employee shall not, on his
own behalf or on behalf of any person or entity, directly or indirectly
hire or solicit the employment of any employee who has been employed by
the Company at any time during the one (1) year immediately preceding such
<PAGE>

date of hiring or solicitation and was also an employee of the Company at
the time the Employee was employed by the Company.

(c) The Employee and the Company agree that the covenants
of non-competition and non-solicitation are reasonable covenants under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction such covenants are not reasonable in any respect,
such court shall have the right, power and authority to excise or modify
such provision or provisions of these covenants as to the court shall
appear not reasonable and to enforce the remainder of these covenants as
so amended. The Employee agrees that any breach of the covenants
contained in Section 11(b) would irreparably injure the Company.
Accordingly, the Employee agrees that the Company, in addition to pursuing
any other remedies it may have in law or in equity, may obtain an
injunction against the Employee from any court having jurisdiction over
the matter, restraining any further violation of Section 11(b).

(d) The provisions of this Section 11 shall survive the
termination of the Agreement.

12. Notices.

All notices, request, demands or other communications
required or permitted under the Agreement shall be in writing and shall be
deemed duly to have been given when mailed by registered or certified
mail, return receipt requested, postage prepaid, sent by facsimile or
personally delivered by hand or overnight courier to the address stated
below or to such changed address as the addressee may have given by
similar notice.

To the Company: Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
Attention: Chairman

With a copy to: Shereff, Friedman, Hoffman & Goodman
919 Third Avenue
New York, New York 10022
Attention: Martin Nussbaum, Esq.

To the Employee: Mr. Wayne Miller
1365 York Avenue, Apt. 26B
New York, New York 10021

With a copy to: Davis & Gilbert
1740 Broadway
New York, New York 10019
Attention: Lewis Rubin, Esq.

Communications delivered by hand or overnight courier or by facsimile
shall be deemed received on the date of delivery and communications sent
by registered or certified mail shall be deemed received three (3)
business days after the sending thereof.

13. Entire Agreement.

The Agreement contains the entire agreement between the
parties hereto with respect to the matters contemplated herein and
supersedes all prior agreements or understandings among the parties
related to such matters.

14. Binding Effect; Assignment.

The Agreement shall be binding upon and inure to the
benefit of the Company and its successors and assigns and upon the
Employee and his successors and assigns. "Successors and assigns" shall
mean, in the case of the Company, any successor pursuant to a merger,
consolidation, or sale or a transfer of all or substantially all of the
assets of the Company and, in the case of the Employee, his heirs and/or
legal representatives as determined by will or by operation of law.
Neither the Agreement nor any rights hereunder shall be assignable or
otherwise subject to hypothecation by the Employee (except by will or by
operation of law). The Company may assign the Agreement and all of its
rights hereunder to any of its successors and assigns.

15. Amendment or Modification; Non-Waiver.

No provision of the Agreement may be amended or waived
unless agreed to in writing, signed by the parties hereto. The waiver of,
or failure to take action with regard to, any breach of any term or
condition of the Agreement shall not be deemed to constitute a continuing
waiver or a waiver of any other breach of the same or any other term or
condition.

16. Beneficiaries; References.

The Employee shall be entitled to select (and change, to
the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder
following the Employee's death, and may change such election by giving the
Company written notice thereof. In the event of the Employee's death,
Disability or a judicial determination of his incompetence, reference in
the Agreement to the Employee shall be deemed, where appropriate, to refer
to his beneficiary, estate or other legal representative.

17. Survivorship.
<PAGE>

The respective rights and obligations of the parties
hereunder shall survive any termination of the Agreement to the extent
necessary to the intended preservation of such rights and obligations.
The provisions of this Section 17 are in addition to the survivorship
provisions of any other section of the Agreement.

18. Governing Law.

The validity, interpretation, construction, performance and
enforcement of the Agreement shall be governed by the laws of the State of
New York, without reference to rules relating to conflict of law.

19. Severability.

If any provision of the Agreement shall be determined to be
invalid or unenforceable (in whole or in part) for any reason, the
remaining provisions of the Agreement shall be unaffected thereby and
shall remain in full force and effect to the fullest extent permitted by
law. The provisions of this Section 20 are in addition to the
severability provisions of any other section of the Agreement.

20. Withholding.

The Company shall withhold from any payments due to the
Employee hereunder, all taxes, FICA or other amounts required to be
withheld pursuant to any applicable law.

21. Headings.

The headings contained in the Agreement are intended solely
for convenience of reference and shall not affect in any way the meaning
or interpretation of the Agreement.

22. Counterparts.

The Agreement may be executed in one or more counterparts,
each of which for all purposes shall be deemed to be an original, and all
of which when taken together shall constitute but one and the same
instrument.

IN WITNESS WHEREOF, the parties hereto have executed the
Agreement as of the day and year first above written.

BERNARD CHAUS, INC.

By: /s/ Josephine Chaus
Name:
Title:

By: /s/ Wayne Miller
Wayne Miller

EXHIBIT 10.90

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT ("Agreement") made as of September 1, 1994,
by and between BERNARD CHAUS, INC., a New York corporation (the
"Company"), and ANDREW GROSSMAN (the "Executive").

The Board of Directors of the Company (the "Board") desires to
employ the Executive, and the Executive is willing to be employed by the
Company, on the terms and conditions set forth in this Agreement.

Accordingly, in consideration of the premises and the respective
covenants and agreements of the parties set forth below, and intending to
be legally bound hereby, the parties agree as follows:

a. Employment. The Company hereby employs the Executive for
the Term (as defined herein), to render exclusive and full-time services
to the Company, as Chief Executive Officer of the Company and as a member
of the Office of the Chairman of the Company, which Office shall consist
of Josephine Chaus (or her successor) and the Executive, and to perform
such other duties as may be assigned to the Executive by the Board and
Josephine Chaus. The Executive hereby accepts such employment and agrees
to render the services described herein.

b. Term.

(a) Subject to the provisions for earlier termination as
provided in Section 9(a) - (e) hereof, the term of Executive's employment
hereunder (the "Term") shall commence on November 7, 1994 or such earlier
date as the parties hereto may agree (the "Starting Date") and shall end
on the fifth anniversary of the Starting Date (the "Initial Term") or on
such later date to which the Term is extended pursuant to Section 2(b).

(b) Extension. Provided that the Company shall have
complied with its obligations to issue certain stock options pursuant to
the second sentence of Section 8 below, the Company may at any time during
the Initial Term elect to extend the Term for an additional five (5) years
ending on the tenth anniversary of the Starting Date (as so extended, the
"Extended Term").
c. Duties, Authority, Status and Responsibilities.
(a) Chief Executive Officer and Member of the Office of
the Chairman. The Executive shall serve as Chief Executive Officer and
member of the Office of the Chairman of the Company and shall have such
responsibilities, duties and authority as are generally associated with
the positions of Chief Executive Officer and member of the Office of the
Chairman and as may from time to time be assigned to the Executive by the
Board of Directors of the Company and Josephine Chaus (for so long as she
is Chairwoman) that are consistent with such responsibilities, duties and
authority. The Executive shall report directly to Josephine Chaus (for so
long as she is Chairwoman) and the Board. During the Term, the Executive
agrees to devote the Executive's entire business time, energy and skill to
such employment, and to use the Executive's best efforts, skill and
ability to promote the Company's interests, on the terms and conditions
set forth in this Agreement. Nothing in this Agreement shall preclude the
Executive from engaging in charitable and community affairs, sitting on
corporate boards, or giving attention to his personal affairs, provided
that such activities, in the reasonable judgment of the Board, do not
materially interfere with the regular performance of his duties and
responsibilities under this Agreement.

(b) Board Member. On the Starting Date the Executive
shall be appointed a director of the Company, and, following his re-
election by the shareholders of the Company, shall continue to serve as a
director of the Company for the duration of the Term. The Executive shall
serve as a director of the Company without additional compensation. Upon
the expiration of the Term, the Executive shall be deemed to have resigned
as a director of the Company and shall provide written evidence of such
resignation to the Company. The Board will consider in good faith the
recommendation of the Executive of an additional nominee to membership on
the Board.

d. Place of Performance. The Executive shall be based and
shall perform his duties primarily at the principal executive offices of
the Company in the City of New York or the New York City metropolitan
area, except for reasonable travel as the performance of the Executive's
duties may require.

e. Compensation.

(a) Compensation. During the Term, the Company shall pay
to the Executive (i) an annual salary for each year of the Term equal to
one million dollars ($1,000,000.00) (the "Annual Salary"); and (ii)
subject to receipt of approval by the Company's shareholders, five percent
(5%) of the Annual Net Profits (as hereinafter defined) of the Company for
such fiscal year ("Net Profit Participation"). "Annual Net Profits" for
any fiscal year shall mean the net income of the Company, as reflected on
the audited financial statements of the Company for such fiscal year
prepared in accordance with generally accepted accounting principles
<PAGE>

applied consistent with past practices and certified by the Company's
independent public accountants.

For any partial fiscal year in which the Executive is employed
hereunder (whether preceding or following any termination of this
Agreement), the Net Profit Participation for such partial fiscal year
shall be calculated by multiplying the Net Profit Participation otherwise
calculated for the full fiscal year by a fraction, the numerator of which
is the number of days in such partial fiscal year and the denominator of
which is 360.

(b) Sign-On Bonus. As additional compensation for
services rendered, the Company shall pay to the Executive a sign-on bonus
equal to six million two hundred thousand dollars ($6,200,000.00) (the
"Sign-On Bonus") on the dates set forth in Section 5(c)(iii) of this
Agreement. In the event that the Executive voluntarily terminates his
employment for reasons other than set forth in Section 9(d) below prior to
the expiration of the Initial Term or if the Executive breaches any of the
provisions of Section 14(c) below or breaches, to the material detriment
of the Company, any of the provisions of Section 14(a) below or if the
Company terminates the Executive's employment for Due Cause (as defined in
Section 9(c) below), the Executive agrees promptly to pay back to the
Company (i) the full amount of the Net Sign-On Bonus (as defined below) in
the event of such termination or breach prior to the second anniversary of
the Starting Date, (ii) sixty percent (60%) of the Net Sign-On Bonus in
the event of such termination or breach after the second anniversary and
prior to the third anniversary of the Starting Date, (iii) forty percent
(40%) of the Net Sign-On Bonus in the event of such termination or breach
after the third anniversary and prior to the fourth anniversary of the
Starting Date and (iv) twenty percent (20%) of the Net Sign-On Bonus in
the event of such termination or breach after the fourth anniversary and
prior to the fifth anniversary of the Starting Date. For purposes of this
Agreement, the "Net Sign-On Bonus" shall mean the Sign-On Bonus, less the
amount of any federal, state or local taxes paid or payable by the
Executive in respect of the Sign-On Bonus (after taking into account any
tax benefits received or to be received by the Executive by reason of the
payment of any such taxes). In the event the Executive shall repay any
portion of the Sign-On Bonus to the Company pursuant to this provision,
the Executive agrees to file promptly for and use his best efforts to
obtain a refund of any income taxes previously paid by him on such portion
or if a refund is not available, the Executive agrees to use his best
efforts to claim a deduction on his next filed income tax returns for such
repayment. The Executive further agrees to remit promptly to the Company
any such refund received by him (or if a deduction is claimed the amount
of the combined net federal, state and local tax benefit received from
such deduction). The remission of such refund if any shall be paid to the
Company net of any taxes paid or payable in respect of such refund.
Notwithstanding the foregoing, the obligation on the part of the Executive
to pay back any or all of the Net Sign-On Bonus to the Company shall
terminate immediately upon a change in control of the Company as defined
in Section 12(a) below.

(1) The Company shall pay to the Executive the Annual
Salary in monthly or more frequent installments in accordance with
the payroll practices for senior executives of the Company in effect
at the time of payment;

(2) Promptly after the relevant audited financial
statements are completed (but in no event later than the 105th day
following the end of each fiscal year of the Company), the Company
shall pay to the Executive the applicable Net Profit Participation,
if any; and

(3) The Company shall pay fifty percent (50%) of the
Sign-On Bonus ($3,100,000.00) to the Executive upon the execution of
this Agreement and the remaining fifty percent (50%) of the Sign-On
Bonus ($3,100,000.00) to the Executive within three business days
following the Starting Date.

(d) Performance Based Compensation. It is the intention
of the parties that, if section 162(m) of the Internal Revenue Code (the
"Code") is or will be applicable with respect to one or more payments
hereunder (other than the Sign-On Bonus), the Executive will consider in
good faith any requests by the Company to take actions to cause such
payments to meet the requirements of section 162(m)(4)(B) or (C) of the
Code, and thus to be excluded from the definition of "applicable employee
remuneration" within the meaning of section 162(m)(4) of the Code.

f. Expenses. The Executive shall be entitled to receive
prompt reimbursement from the Company for all reasonable out-of-pocket
expenses incurred by the Executive in performing his duties hereunder,
including, without limitation, all expenses of travel and living expenses
while away from home on business or at the request of and in the service
of the Company provided that the Executive submits documentation for the
reimbursement of such expenses in accordance with the policies and
procedures established by the Company for senior executives.

g. Executive Benefits.

(a) General. The Executive shall be entitled to
participate in all employee benefit plans, programs and arrangements of
the Company now or hereafter made available to senior executives of the
Company, as such plans, programs and arrangements may be in effect from
<PAGE>

time to time (including, without limitation, each retirement plan,
supplemental and excess retirement plan, group life insurance, accident
and death insurance, medical insurance, sick leave, pension plan and
disability plan), except that the provisions set forth in this Agreement
with regard to incentive stock options and bonus payments shall be in lieu
of participation in the Company's stock option and bonus plans. The
Executive shall also be eligible to participate in the Company's executive
perquisites in accordance with the terms and provisions of the
arrangements as in effect from time to time for the Company's senior
executives. In addition, during the Term the Company agrees to obtain or
otherwise provide medical insurance or coverage (including coverage for
pre-existing conditions) for Mrs. Bonnie Grossman and the Executive's
daughter ("Family Coverage"). In order to mitigate the costs to the
Company of such Family Coverage, the Executive agrees, at the Company's
request and sole expense, to use his best efforts to procure extended
coverage under his existing medical coverage (so-called COBRA coverage)
for as long as such extended coverage is available.

(b) Automobile. The Company shall provide Executive with
an automobile allowance of $1300.00 per month. The Executive shall also
have the right to use a car service provided that the Executive submits
documentation for the reimbursement of such expenses in accordance with
the policies and procedures established by the Company for senior
executives.

(c) Vacations. The Executive shall be entitled to four
(4) weeks paid vacation in each year, such vacations to be taken at such
time or times as are consistent with the requirements of the Company's
business and the performance of the Executive's duties and
responsibilities hereunder. Unused vacation time may not be accumulated
and carried forward to a subsequent year.

h. Stock Options. The Company hereby agrees, upon the
execution of this Agreement, to cause the Stock Option Committee (the
"Stock Option Committee") of the Board to award on the date of this
Agreement the Executive 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 hereto as
Attachment A, to purchase 1.5 million shares of Common Stock, with an
exercise price equal to the closing price per share of the Company's
Common Stock on the date of this Agreement. 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 on the same terms
and conditions as those granted pursuant to the immediately preceding
sentence to purchase 1.5 million additional shares of Common Stock, but
with an exercise price equal to the closing price per share of the
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 16b of the Act. Any awards of 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.

i. Termination.

(a) Death. In the event of the death of the Executive
during the Term, the Agreement automatically shall be terminated. Annual
Salary shall be paid to the Executive's designated beneficiary, or, in the
absence of such designation, to the estate or other legal representative
of the Executive (such beneficiary or representative, the "Beneficiary")
for the lesser of (i) the balance of the Term or (ii) the period ending on
the third anniversary of the Executive's death. In addition, the
Beneficiary shall receive a percentage of the Net Profit Participation
payable with respect to the partial fiscal year of the Company ending on
the date of the Executive's death calculated in accordance with the second
paragraph of Section 5(a) above and payable in accordance with Section
5(c)(ii) above. The Executive's daughter and Mrs. Bonnie Grossman shall
be entitled to continued Family Coverage for the remainder of the Term.

(b) Disability. In the event of the Disability (as herein
defined) of the Executive during the Term, the Agreement automatically
shall be terminated. Sixty-five percent (65%) of the Annual Salary shall
be paid to the Executive for the period commencing with the date of
Disability through the balance of the Term (less any Disability
compensation which the Executive receives in accordance with the Company's
benefit programs and plans). In addition, the Executive shall receive a
percentage of the Net Profit Participation payable with respect to the
partial fiscal year of the Company ending on the date of the Executive's
Disability calculated in accordance with the second paragraph of Section
5(a) above and payable in accordance with Section 5(c)(ii) above.
"Disability," for purposes of the Agreement, shall mean the Executive has
failed as a result of his illness, physical or mental disability or other
incapacity, for a period of 90 consecutive days or 180 days within any
two-year period during the Term to render the services provided in the
Agreement, or has been adjudicated an incompetent. During the period of
his Disability (including any period after the date of termination), the
Executive shall be entitled to continued participation for himself under
the Company's medical insurance plan to the extent permitted under such
plan and for the remainder of the Term his daughter and Mrs. Bonnie
<PAGE>

Grossman shall be entitled to continued Family Coverage.

(c) Termination by the Company for Due Cause. Nothing
herein shall prevent the Company from terminating the Executive's
employment for Due Cause (as defined below). Upon such termination, the
Executive shall continue to receive Annual Salary and Net Profit
Participation only for the period ending with the date of such termination
and the obligation of the Company to make any further payments, or to
provide any benefits specified herein, to the Executive shall thereupon
cease and terminate. The Term "Due Cause", as used herein, shall mean a
felony conviction of the Executive or the entering of a plea of guilty or
nolo contendere to a felony by the Executive or the commission by the
Executive of fraud or theft against, or embezzlement from, the Company or
any of its subsidiaries or affiliates. Termination of employment pursuant
to this Section 9(c) shall be made by delivery to the Executive of a
written Notice of Termination (as defined in Section 9(f) below) setting
forth the particulars of the conduct which provides the basis for a
termination of the Executive for Due Cause.

(d) Termination by Executive. The Executive may terminate
his employment hereunder if at any time during the Term, the Company shall
be in material breach of its obligations hereunder. The parties
acknowledge and agree that a material breach for purposes of this Section
9(d) shall include, but not be limited to, any material reduction in the
Executive's duties, authority, status or responsibilities (whether or not
accompanied by a change in title) all as set forth in Section 3 above. No
termination shall be permitted under this Section 9(d) unless the Company
shall have first received a written Notice of Termination and within 10
days following the delivery of such Notice of Termination the Company
shall not have cured or in good faith commenced the cure of the breach
specified in such Notice of Termination.

(e) Severance and Non-Competition Payments. If the
Agreement is terminated by the Company other than as a result of death or
Disability of the Executive or for Due Cause or by the Executive pursuant
to Section 9(d) above, the Company shall pay the Executive as severance
and non-competition payments (i) the Annual Salary that he would have
received had the Agreement not been terminated plus (ii) the Net Profit
Participation, if any, earned by the Executive pursuant to Section 5(a)
that the Executive would have received hereunder had the Agreement not
been terminated, less the amount of any compensation and bonuses received
by the Executive during such period from other employers. If the
Executive terminates his employment hereunder prior to the second
anniversary of the Starting Date for reasons other than pursuant to
Section 9(d) of this Agreement, the Company shall pay the Executive the
Annual Salary for a two-year period from the date of such termination,
provided that (i) during such two-year period the Executive complies with
the provisions set forth in Section 14(c) and, in a manner not resulting
in material detriment to the Company, the provisions of Section 14(a) of
this Agreement, and (ii) after the date hereof but prior to the expiration
of such two-year period the Executive does not enter into any agreement,
arrangement or understanding with his current employer with respect to the
future employment of the Executive in any capacity (whether as an
employee, consultant or otherwise) by his current employer during the Non-
Competition Period (as defined in Section 14(c) below) or any time
thereafter. Notwithstanding the foregoing, if after a "change in control"
(as defined in Section 12(a) below) the Agreement is terminated by the
Company other than as a result of death or Disability of the Executive or
for Due Cause or by the Executive pursuant to Section 9(d) above, the
Company shall pay the Executive, in lieu of the payment specified in
clause (i) of the immediately preceding sentence, a lump sum payment equal
to the aggregate Annual Salary that he would have received had the
Agreement not been terminated, discounted to present value at the
applicable Federal short-term rate (within the meaning of section 1274 of
the Code) in effect on the date of the Executive's termination of
employment hereunder.

(f) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other than
termination pursuant to Section 9(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section
13. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice containing the specific termination provision in this Agreement
relied upon and setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.

j. Satisfaction for Termination-Related Claims. The parties
intend that the performance of the provisions herein relating to
termination of this Agreement and severance arrangements shall be in full
and complete satisfaction of any claim that either party may have against
the other for the termination of the Executive's employment hereunder.

k. Mitigation Not Required. The Executive shall not be
required to mitigate amounts payable pursuant to Section 10 by seeking
other employment or otherwise.

l. Indemnification.

(a) General Corporate Indemnification. The Company shall
also indemnify and hold harmless the Executive and his legal
representatives to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, from and against all judgments, finil,
criminal, administrative or investigative,
including an action by or in the right of the Company to procure a
judgment in es,
penalties, excise taxes, amounts paid in settlement, losses, expenses,
costs, liabilities and legal fees ("Losses") if he is made, or threatened
to be made, a party to any threatened, pending or completed action, suit <PAGE>

or proceeding, whether civits favor, by reason of the fact that the Executive
(i) is or
was a director or officer of the Company or (ii) is or was serving in any
capacity at the request of the Company for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise. The right to indemnification provided by this Section 12(b)
shall not be deemed exclusive of any other rights to which the Executive
may have or hereafter be entitled under any law or the charter or By-laws
of the Company, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue
after the Executive has ceased to be a director or officer and shall inure
to the benefit of the heirs, executors and administrators of the
Executive. The Executive shall be entitled to the protection of director
and officer insurance which the Company shall maintain generally for the
benefit of its respective directors and officers; which coverage shall be
maintained during the Term, including any period following any change of
control of the Company. For purposes of this Agreement, a "change in
control" of the Company shall be deemed to have occurred if (x) the
Company shall have merged or consolidated with an unaffiliated entity or
the Company shall have transferred or sold all or substantially all of its
assets to an unaffiliated entity, (y) the majority of the directors on the
Board at any time have not been approved for election by the directors on
the Board immediately prior to any such election of directors or (z) any
person or group (within the meaning of Rule 13d-3 of the rules and
regulations promulgated under the Securities Exchange Act of 1934, as
amended (the "1934 Act Rules")) shall acquire in one or a series of
transactions such number of shares of the Company's Common Stock as shall
result in such person or group becoming the beneficial owner (within the
meaning of the 1934 Act Rules) of at least the number of shares of Common
Stock collectively owned at that time by Josephine Chaus, members of her
immediate family, her affiliates (as such term is defined in the 1934 Act
Rules), trusts or private foundations established by Josephine Chaus or
members of her immediate family, and the heirs, executors or
administrators of Josephine Chaus's estate.

(b) Certain Losses Resulting from Execution of Agreement.
The Company shall reimburse the Executive for any Losses incurred by the
Executive as a result of any claim brought against the Executive by his
current employer or any of its affiliates by reason of the Executive's
entering into this Agreement; provided, however, that the Company's
liability under this Section 12(b) shall not exceed $150,000.00.

m. Notice. All notices, demands, requests and all other
communications required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given when delivered
personally or sent by prepaid telegram, or mailed first-class, postage
prepaid, by certified or registered mail, return receipt requested,
addressed as follows:
If to the Executive:

Mr. Andrew Grossman
210 East 65th Street
Apartment 14D
New York, New York 10021

with a copy to:

Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004-1980
Attention: Robert Schwenkel, Esq.

If to the Company:

Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
Attention: Chairwoman

with a copy to:

Shereff, Friedman, Hoffman &
Goodman
919 Third Avenue
New York, New York 10022
Attention: Martin Nussbaum, Esq.

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.

n. Protection of Confidential Information: Non-Competition;
Non-Solicitation.

(a) The Executive agrees not to use, disclose or make
accessible to any other person, firm, partnership, corporation or any
other entity any Confidential Information (as herein defined) pertaining
to the business of the Company except (i) while employed by the Company,
in the business of and for the benefit of the Company or (ii) when
required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order the Executive to divulge,
disclose or make accessible such information. For purposes of the
Agreement, "Confidential Information" shall mean non-public information
<PAGE>

concerning the Company's financial data, statistical data, strategic
business plans, product development (or other proprietary product data),
customer and supplier lists, information relating to governmental
relations, discoveries, practices, processes, methods, trade secrets,
marketing plans and other non-public, proprietary and confidential
information of the Company, that, in any case, is not otherwise generally
available to the public and has not been disclosed by the Company to
others not subject to confidentiality agreements. In the event the
Executive's employment is terminated hereunder for any reason, he
immediately shall return to the Company all Confidential Information in
his possession.

(b) The Executive and the Company agree that this covenant
regarding Confidential Information is a reasonable covenant under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction, such covenant is not reasonable in any respect,
such court shall have the right, power and authority to excise or modify
such provision or provisions of this covenant as to the court shall appear
not reasonable and to enforce the remainder of the covenant as so amended.
The Executive agrees that any breach of the covenant contained in this
Section 14 would irreparably injure the Company. Accordingly, the
Executive agrees that the Company, in addition to pursuing any other
remedies it may have in law or in equity, may obtain an injunction against
the Executive from any court having jurisdiction over the matter,
restraining any further violation of this Section 14.

(c) The Executive agrees that during the Term and (i) if
the Agreement is terminated by the Company, other than as a result of
death, or Disability of the Executive or for Due Cause, for the shorter of
one year or the period ending on the date that the Term would have expired
had the Agreement not been terminated or (ii) in any case of termination
by the Company for Due Cause or by the Executive other than pursuant to
Section 9(d) of this Agreement (other than any termination of this
Agreement or the Executive's employment upon or following the expiration
of the Term) for two years from the date of termination (herein referred
to as the "Non-Competition Period"), without the prior written consent of
the Company; (i) he shall not, directly or indirectly, either as
principal, manager, agent, consultant, officer, greater than two percent
(2%) holder of any class or series of equity securities, partner,
investor, lender or employee or in any other capacity, carry on, be
engaged in or have any financial interest in or otherwise be connected
with, any entity which is now or at the time, engaged in any business
activity competitive (directly or indirectly) with the business of the
Company including, for these purposes, any business in which, at the
termination of his employment, there was a bona fide intention on the part
of the Company to engage in the future; and (ii) he shall not, on behalf
of any competing entity, directly or indirectly, have any dealings or
contact with any suppliers or customers of the Company. Nothing contained
in this Section 9(d) shall preclude the Executive from owning (as a
passive investor only) all or any capital stock of Herbert Grossman
Enterprises.

(d) During the Term and during the Non-Competition Period,
the Executive agrees that, without the prior written consent of the
Company (and other than on behalf of the Company), the Executive shall
not, on his own behalf or on behalf of any person or entity, directly or
indirectly hire or solicit the employment of any employee who has been
employed by the Company at any time during the six (6) months immediately
preceding such date of hiring or solicitation.

(e) The Executive and the Company agree that the covenants
of non-competition and non-solicitation are reasonable covenants under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction such covenant are not reasonable in any respect,
such court shall have the right, power and authority to excise or modify
such provision or provisions of these covenants as to the court shall
appear not reasonable and to enforce the remainder of these covenants as
so amended. The Executive agrees that any breach of the covenants
contained in this Section 14 would irreparably injure the Company.
Accordingly, the Executive agrees that the Company, in addition to
pursuing any other remedies it may have in law or in equity, may obtain an
injunction against the Executive from any court having jurisdiction over
the matter, restraining any further violation of this Section 14.

(f) The provisions of this Section 14 shall survive the
termination of the Agreement.

o. Resolution of Disputes. Any controversy or claim arising
out of or relating to this Agreement, or any breach thereof, shall be
settled by arbitration in accordance with the rules of the American
Arbitration Association before a board of three disinterested persons,
consisting of one arbitrator to be appointed by the Company, one by the
Executive, and one by the arbitrators so chosen. Judgment upon an award
rendered by the arbitrators may be entered in any court having
jurisdiction thereover. The arbitration shall be held in New York, New
York or in such other place as the parties may agree. The Company may
seek injunctive relief to prevent harm to the Company pending a decision
by the arbitrators.

p. Certain Representations, Warranties and Covenants.
(a) In order to induce the Company to enter into this
Agreement on the terms and conditions set forth herein, the Executive
hereby represents and warrants to the Company that his execution of the
Agreement and the performance of his duties and responsibilities hereunder
will not violate or result in a breach of, or in any manner be prohibited
or restricted by, the terms of any agreement, arrangement, understanding
<PAGE>

(written or otherwise), order or decree to which he is a party or by which
he is bound. The Executive further represents that he is not a party to
any agreement with his current employer relating to non-competition or
confidentiality.

(b) The Executive represents to the Company, for purposes
of the Company's obtaining a "key man" life insurance policy that he is in
good physical and mental health, has never been rated an insurance risk on
account of any past physical or mental history or condition and does not
suffer from any physical or mental condition which could cause him not to
be insurable for "key man" life insurance in the amount provided above at
normal premium rates (consistent with general industry practice in New
York). The Executive will cooperate with the Company to enable it to
obtain such "key man" life insurance. All benefits of such "key man" life
insurance policy shall inure to the
Company.

(c) The Company agrees to seek shareholder approval (i) at
its next regularly scheduled meeting of shareholders of the re-election of
the Executive to the Board, of the bonus plan set forth herein providing
for the Net Profit Participation and of the Stock Options granted on the
date of this Agreement and to be granted on the Extension Date, if any.

q. Miscellaneous.

(a) Modification, Waiver, etc. No provisions of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the Executive
and a duly authorized officer of the Company. No waiver by any party
hereto at any time of any breach of another party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. This
Agreement shall be binding on and inure to the benefit of the successors
and assigns of the Company. THE VALIDITY, INTERPRETATION, CONSTRUCTION
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY IN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF
SUCH STATE.

(b) Severability of Invalid or Unenforceable Provisions.
The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect,
unless such action would substantially impair the value to the Executive
of this Agreement in which event the Executive shall have the right in his
discretion to terminate this Agreement.

(c) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.

(d) Entire Agreement. This Agreement 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.

IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.

BERNARD CHAUS, INC.

By: /s/ Josephine Chaus
Name: Josephine Chaus
Title: Chairwoman

/s/ Andrew Grossman
ANDREW GROSSMAN

<PAGE>

BERNARD CHAUS, INC.
STOCK OPTION AGREEMENT

AGREEMENT made and entered into as of September 1, 1994, by and
between BERNARD CHAUS, INC. (the "Company"), a New York corporation with
offices at 1410 Broadway, New York, New York 10018 and ANDREW GROSSMAN (the
"Optionee"), an individual residing at 210 East 65th Street, Apartment 14D, New
York, New York 10021.

W I T N E S S E T H :

WHEREAS, the Company has entered into an employment agreement
(the "Employment Agreement") with the Optionee dated as of the date hereof to
engage the Optionee's services for the Company; and

WHEREAS, pursuant to the Employment Agreement, the Company
agreed to grant to the Optionee options to purchase shares of the common stock,
par value $.01 per share (the "Common Stock"), of the Company pursuant to the
terms and conditions specified herein and in the Employment Agreement.

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

1. 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 1,500,000 shares of the Common
Stock (the "Optioned Shares").

2. The purchase price for the Optioned Shares shall be
$2.25 per share, subject to adjustment as hereinafter provided (the "Option
Price") (which is the closing sale price on the New York Stock Exchange on the
date hereof).

3. The Option shall vest and be exercisable at the rate of
twenty percent (20%) a year on a cumulative basis commencing on the first
anniversary of the date hereof and each anniversary date thereafter.

Notwithstanding the foregoing, in no event shall the
Option be exercised, and the Option shall no longer be exercisable, at any time
after ten years from the date hereof. Any exercise of the Option may be either
in whole at any time or in part at any time or from time to time.

4. Neither the Optionee nor the Optionee's legal
representatives, legatees or distributees shall be or be deemed to be the
holder of any shares of the Common Stock covered by the Option unless and until
certificates for such shares have been issued. Upon payment of the purchase
price thereof, shares issued upon exercise of the Option shall be validly
issued, fully paid and nonassessable.

5. In order to exercise the Option, the Optionee shall
give a signed written notice of intent to exercise the Option to the Treasurer
of the Company specifying the number of shares of the Common Stock with respect
to which the Option is being exercised, and accompanied by payment to the
Company of the full amount of the Option Price for the number of shares of the
Common Stock so specified. All or any portion of such payment may be made
through a "cashless exercise" arrangement with a broker designated by the
Optionee by delivery of shares of the Common Stock having a fair market value
(as hereinafter determined) on the date of delivery equal to the portion of the
Option Price so paid; provided, that in connection therewith the Optionee shall
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").

For the purposes hereof, the fair market value of a
share of the Common Stock on any date shall be equal to the closing sale price
of a share of the Common Stock as published by the national securities exchange
on which the shares of the Common Stock are primarily traded on such date or,
if there is no such sale of the Common Stock on such date, the average of the
bid and asked price on such exchange at the close of trading on such date or,
if the shares of the Common Stock are not listed on a national securities
exchange on such date, the average of the bid and asked prices in the over the
counter market on such date or, if the Common Stock is not traded on a national
securities exchange or the over the counter market, the fair market value of a
share of the Common Stock on such date as shall be determined in good faith by
the Company.

6. (a) Unless the shares to be issued upon the
exercise of the Option shall be registered under the Securities Act of 1933, as
amended (the "Act"), prior to the issuance thereof, the Optionee shall, as a
condition to the Company's obligation to issue such shares, give a
representation in writing that he is acquiring such shares for his own account
as an investment and not with a view to, or for sale in connection with, the
distribution of any 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.

<PAGE>

(c) The Optionee shall, as an additional condition
of exercising the Option, make appropriate arrangements with the Company for
the payment of all federal, state or local withholding taxes applicable as a
result of the exercise of the Option. All or any portion of such payment may
be made through a "cashless exercise" arrangement with a broker designated by
the Optionee by delivery of shares of the Common Stock having a fair market
value (as determined pursuant to paragraph 5 hereof) on the date of delivery
equal to the portion of such taxes so paid; provided, that in connection
therewith the Optionee shall certify to the Company that such delivery will not
result in "short-swing" profit to him under Section 16.

7. In the event of a "change in control" of the Company as
defined in Section 12(a) of the Employment Agreement or if the Optionee's
employment is terminated (a) by the Company for any reason other than for Due
Cause (as defined in the Employment Agreement) or (b) by the Optionee pursuant
to Section 9(d) of the Employment Agreement, any unvested portion of the Option
shall vest immediately and shall remain exercisable for a period of six months
after such date, unless the Option is earlier terminated pursuant to paragraph
3 of this Agreement. If the Optionee's employment is terminated by the Company
for Due Cause or by the Optionee for reasons other than pursuant to Section
9(d) of the Employment Agreement, any unvested portion of the Option shall be
forfeited and any vested portion of the Option must be exercised within thirty
days from the date of such termination, unless the Option is earlier terminated
pursuant to paragraph 3 of this Agreement.

8. In the event that a dividend shall be declared upon the
Common Stock payable in shares of the Common Stock, the Optioned Shares shall
be adjusted by adding to each such share the number of shares which would be
distributable thereon if such share had been outstanding on the date fixed for
determining the shareholders entitled to receive such stock dividend. In the
event that the outstanding shares of the Common Stock shall be changed into or
exchanged for a different number of kind of shares of stock and/or other
securities of the Company or of another corporation or cash or other property,
whether through reorganization, recapitalization, extraordinary dividend, stock
split-up, combination of shares, sale of assets, spin off or merger or
consolidation in which the Company is the surviving corporation, then, there
shall be substituted for each Optioned Share the number and kind of shares of
stock and/or other securities, cash or other property into which each
outstanding share of the Common Stock shall be so changed or for which each
such share shall be exchanged. In the event that there shall be any change,
other than as specified in this paragraph 8, in the number or kind of
outstanding shares of the Common Stock, or of any stock or other securities
into which the Common Stock shall have been changed, or for which it shall have
been exchanged, then, the Board of Directors of Company shall, in its
reasonable discretion, equitably adjust the Option with respect to the number
or kind of Optioned Shares and the Option Price, such adjustment to be made by
the Company and notice thereof shall be delivered to the Optionee within 30
calendar days thereafter, accompanied by a certificate of the Chief Financial
Officer of the Company setting forth such adjustment, the method of calculation
of such adjustment and the facts upon which such adjustment was based, all in
reasonable detail. In the case of any such substitution or adjustment as
provided for in this paragraph 8, the Option Price for each Optioned Share
shall be the Option Price for all shares of stock or other securities which
shall have been substituted for such Optioned Share or to which such shares
shall have been adjusted in accordance with the provisions in this paragraph 8.
No adjustment or substitution provided for in this paragraph 8 shall require
the Company to sell a fractional share hereunder.

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 adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.

10. Nothing herein contained shall be deemed to confer upon
the Optionee any right to continue in the employ of the Company, nor to
interfere in any way with the right of the Company to terminate the employment
of the Optionee at any time.

11. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.

12. Prior to the first Anniversary of the Starting Date (as
defined in the Employment Agreement) the Company agrees to file one or more
registration statements with the Securities and Exchange Commission in order to
register the resale by the Optionee (subject to the applicable rules and
regulations of the Securities and Exchange Commission) of Optioned Shares. The
Company will use its best efforts to cause each such registration statement to
become effective and to comply with all requirements of the Securities and
Exchange Commission necessary to keep each such registration statement
effective.

13. This Agreement is subject to the terms and conditions
of the Employment Agreement, and in the event of a conflict between the two,
the Employment Agreement shall govern. Subject to the preceding sentence, this
Agreement sets forth the entire understanding of the parties with respect to
the subject matter hereof, supersedes all existing agreements between them
concerning such subject matter, and may be modified only by a written
instrument duly executed by each party; provided, however, that if such
modification materially increases the benefits to the Optionee under this
Agreement it shall become effective only upon approval by the affirmative vote
of the holders of a majority of the outstanding shares of the Company entitled
<PAGE>

to vote thereon.

14. 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 15). Notice to the
estate of the Optionee shall be sufficient if addressed to the Optionee as
provided in this paragraph 15. 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.

15. 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.

16. Except as may be permitted by Rule 16b-3 promulgated
under the Exchange Act for transfers to a trust or similar estate planning
vehicle, the Option is not transferable otherwise than by will or the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by him or, in the event of his disability, his duly appointed
guardian or conservator. 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 shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Optionee and
his heirs and personal representatives under this Agreement.

17. This Agreement does not create, and shall not be
construed as creating, any rights enforceable by any person not a party to this
Agreement (except as expressly provided in this Agreement).

18. This Agreement shall become effective upon approval by
the affirmative vote of the holders of a majority of the outstanding shares of
the Company entitled to vote thereon. In the event such approval is not
obtained, this Agreement and all options granted under this Agreement shall
become null and void.

19. Any controversy or claim arising out of or relating to
this Agreement or any breach thereof shall be resolved in accordance with the
provisions of Section 15 of the Employment Agreement.

<PAGE>

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
Josephine Chaus
Chairman of the Board and
Chief Executive Officer

ACCEPTED AND AGREED TO:

By
Andrew Grossman

(Date)

EXHIBIT 10.91

SETTLEMENT AGREEMENT

SETTLEMENT AGREEMENT, dated as of September 23, 1994,
among NICOLE ESKENAZI, a resident of New York, New York
("Eskenazi"), BERNARD CHAUS, INC., a New York corporation ("Chaus,
Inc."), JOSEPHINE CHAUS, a resident of New York, New York
("J. Chaus"), and RICHARD A. BAKER, a resident of New York, New
York ("Baker").
WHEREAS, Eskenazi and Chaus, Inc. entered into a letter
agreement dated as of July 22, 1991, which set forth the terms
pursuant to which Eskenazi was to be employed by Chaus, Inc. for a
period of three years, concluding on July 31, 1994 (the "Employment
Agreement"),
WHEREAS, Eskenazi was employed by Chaus, Inc., as an
executive of that Company pursuant to the Employment Agreement,
from August 1, 1991 until a date prior to January 13, 1994, at
Eskenazi's employment with Chaus, Inc. was terminated and Chaus,
Inc. continued to make salary payments to Eskenazi, at the base
rate set forth in the Employment Agreement, until May 20, 1994, at
which date Chaus, Inc. terminated such payments;
WHEREAS, Chaus and Baker are officers and employees of
Chaus, Inc., and acted in their corporate capacity in connection
with the termination of Eskenazi's employment with Chaus, Inc.;
WHEREAS, Eskenazi is a shareholder of Chaus, Inc.;
WHEREAS, Eskenazi commenced an action on June 8, 1994 in
Supreme Court of the State of New York for New York County,
entitled Nicole Eskenazi v. Bernard Chaus, Inc., Josephine Chaus
and Richard A. Baker, Index No. 94/116595 (the "Action"), wherein
Eskenazi sought relief for breach of contract on the ground that
the defendants had allegedly breached the Employment Agreement and
for tortious conduct of the defendants by allegedly terminating her
employment in violation of Section 290 of Article 15 of the New
York Executive Law, allegedly causing compensable injuries to
Eskenazi; and
WHEREAS, the parties hereto desire to settle the dispute
among them.
NOW, THEREFORE, in consideration of the covenants and
undertakings contained herein, the parties hereto agree as follows:
1. The Closing of this Agreement (the "Closing") shall
take place on September 30, 1994, at a time and place to be agreed
upon by the parties.
2. At the Closing, Chaus, Inc. shall pay to Eskenazi
the sum of two hundred twenty thousand dollars ($220,000.00) in
consideration of and in full settlement of any and all claims of
Eskenazi to salary, bonuses, salary increases or benefits under the
Employment Agreement. Chaus, Inc. shall treat the payment under
this Section 2 as salary, deducting therefrom (a) federal and state
income tax withholding at the minimum rates provided by law or
regulation with respect to lump sum payments by employers to
employees; (b) any and all payroll taxes required to be deducted
from lump sum salary payments by employers to employees; and (c)
the maximum contribution to the retirement savings plan maintained
by Chaus, Inc. for its employees, pursuant to Section 401 of the
U.S. Internal Revenue Code permitted to be deducted for Federal
income tax purposes by Eskenazi (the "401(k) Contribution"). The
amount provided for the 401(k) Contribution shall be credited to
Eskenazi's account in Chaus, Inc.'s retirement savings plan
maintained pursuant to Section 401 of the U.S. Internal Revenue
Code, and shall be subject to matching contributions by Chaus, Inc.
to the same extent and on the same basis of contributions of other
employees of Chaus, Inc. made to that retirement savings plan
during the year 1994.
3. At the Closing, Chaus, Inc. shall pay to Eskenazi
the sum of one hundred thirty thousand dollars ($130,000.00), in
consideration of, and solely for the purpose of compromising and
settling Eskenazi's claim in the Action for tortious conduct and
for the alleged injuries to Eskenazi caused thereby. Said amount
shall be paid without set-off or deduction of any kind or
character.
4. Chaus, Inc. and Eskenazi may release a statement
regarding Eskenazi's departure from Chaus, Inc., in the form set
forth as Exhibit A hereto, provided that the party releasing the
statement shall give prior notice to all other parties of the
contents of any statement to be released to the public. Other than
what is set forth in that statement, none of the parties hereto
shall make any statements or comments to any third parties
regarding Eskenazi's departure from Chaus, Inc. or the reasons for
her departure, except (a) Eskenazi may explain her departure to
prospective employers (or their agents) on terms consistent with
that statement; (b) Chaus, Inc. will respond to inquiries directed
to the current Director of personal, by confirming the dates of
Eskenazi's employment with Chaus, Inc., the positions that she
held, and the basis for her departure from employment with that
company as set forth in the statement annexed as Exhibit A hereto;
(c) Chaus, Inc. may make any statements that may be required in its
proxy statement or any other required public disclosure, provided
that they are not inconsistent with the substance of the statement
annexed as Exhibit A hereto; and (d) to their legal or accounting
advisors to the extent necessary in connection with the performance
of those advisor's professional obligations, and to the extent
<PAGE>

necessary to respond to law, regulation or administrative or court
order or directive. In addition, Chaus, Inc. shall provide a
letter of reference for Eskenazi in the form set forth in Exhibit
B hereto, and shall direct such letter of reference to such persons
or entities as Eskenazi may reasonably request.
5. Eskenazi hereby acknowledges that any and all stock
options that Eskenazi holds for the stock of Chaus, Inc. have
expired and that she has no right to exercise such options. To the
extent that Eskenazi holds stock options for the stock of Chaus,
Inc. that may not have expired, she hereby cancels and gives up any
such stock options. Eskenazi shall have no rights with respect to
any stock options for the stock of Chaus, Inc. under Chaus, Inc.'s
Stock Option Plan or under the Employment Agreement.
6. Eskenazi hereby acknowledges that she received all
required information regarding her COBRA rights with respect to
continued participation in any health insurance plans offered to
employees of Chaus, Inc., and hereby acknowledges that she declined
to exercise any such rights. Eskenazi agrees that she will not
seek to participate in any health insurance plan offered to
employees of Chaus, Inc.
7. (a) Eskenazi hereby covenants that she shall not
institute any action or suit in law or in equity against J. Chaus,
Baker or Chaus, Inc.'s directors, officers, agents or
representatives, nor institute, prosecute, participate in or
voluntarily cooperate with, directly or indirectly, any way in the
institution or prosecution of any claim, demand, action or cause of
action against said parties for damages, losses, injunctive relief,
costs, expenses or compensation for or on account of any damage,
loss or injury, whether developed or undeveloped, resulting or to
result, known or unknown, past, present or future, arising out of
or relating to Eskenazi's ownership of stock and stock options of
Chaus, Inc., or the management and operations of Chaus, Inc., or
the financial performance of Chaus, Inc. or of the stock of Chaus,
Inc. Nothing contained in this subparagraph (a) of Section 7 shall
prohibit Eskenazi from truthfully responding to any subpoena or to
any investigative demand issued by any governmental body or entity,
or shall preclude her from sharing exclusively as a group or class
member in any recovery obtained or awarded to shareholders of
Chaus, Inc. or to any group or class of shareholders of Chaus, Inc.
to the extent she would otherwise be eligible therefore, provided
that she shall otherwise have complied with the terms of this
Section 7.
(b) Chaus, Inc., Chaus and Baker hereby covenant
that they will not institute any action or suit in law or in equity
against Eskenazi, her heirs, executors, administrators, successors
or assigns, nor institute, prosecute, participate in or voluntarily
cooperate with, directly or indirectly, any way in the institution
or prosecution of any claim, demand, action or cause of action
against Eskenazi for damages, losses, injunctive relief, costs,
expenses or compensation for or on account of any damage, loss or
injury, whether developed or undeveloped, resulting or to result,
known or unknown, past, present or future, arising out of or
relating to Eskenazi's employment with Chaus, Inc., except as to
the surviving terms of the Employment Agreement described in
Section 10 hereof. Nothing contained in this subparagraph (b) of
Section 7 shall prohibit Chaus, Inc., Chaus or Baker from
truthfully responding to any subpoena or to any investigative
demand issued by any governmental body or entity.
8. Eskenazi shall not initiate any contact with any
employees of Chaus, Inc. regarding Eskenazi's dispute with the
parties hereto, the terms of this Settlement Agreement, the
operations, business activities and management of Chaus, Inc. or
the June 15 Letter.
9. The parties hereto shall enter into a stipulation
dismissing the Action with prejudice, with the parties to bear
their own costs, in the form annexed hereto as Exhibit C. Upon
payment to Eskenazi pursuant to Sections 2 and 3 hereof, Eskenazi
shall file said stipulation forthwith with the Clerk of the County
of New York.
10. Simultaneously with the payment to Eskenazi pursuant
to Sections 2 and 3 hereof, the parties hereto shall exchange
general releases in the form annexed hereto as Exhibit D. Said
general releases shall release the respective parties from any and
all claims that they may have against each other, except that
Chaus, Inc. shall not release Eskenazi with respect to her
continuing obligations under Section 6 of the Employment Agreement
regarding (a) Chaus, Inc.'s confidential information (as defined
therein), (b) the solicitation of any present or future Chaus, Inc.
employee during such time as such individual is in the employ of
Chaus, Inc., (c) the solicitation of any Chaus, Inc. supplier, to
the extent that knowledge of the existence of said supplier is
confidential and not ascertainable from sources other than
Eskenazi's experience at Chaus, Inc., (d) Chaus, Inc. proprietary
documents and trade secrets. Chaus, Inc. waives its rights under
Section 6(b) of the Employment Agreement with respect to the
noncompetition clause, and releases Eskenazi from any obligations
thereunder. Notwithstanding any other provision or statement
contained in this Agreement or in the Employment Agreement, the
time periods provided for under section 6(b) of the Employment
Agreement applicable with respect to the obligations of Eskenazi
remaining in effect as a result of the preceding sentence shall
expire on March 31, 1995. Eskenazi hereby acknowledges that she
has the right to consider whether to execute her General Release
for a period of twenty-one (21) days after the date of this
Settlement Agreement, and acknowledges that she has the right to
execute the General Release no later than October 7, 1994. The
<PAGE>

General Release signed by Eskenazi shall become effective,
enforceable and irrevocable seven (7) days after the date on which
Eskenazi signs it. During such 7-day period, Eskenazi may revoke
the General Release, but such revocation shall be conditioned upon
revocation of the Settlement Agreement and all Eskenazi's rights
thereunder, including any right to receive payment pursuant to
Sections 2 and 3 hereof.
11. This Settlement Agreement does not constitute an
admission of liability or wrongdoing by any of the parties hereto.
12. This Settlement Agreement shall not be filed with
the Clerk of the County of New York, and the parties hereto shall
not disclose the terms of this Settlement Agreement to any
individual or entity without the prior written consent of all the
parties hereto, except as may be otherwise required by law,
including with respect to the proxy statement that Chaus, Inc. must
prepare in connection with its annual meeting. In the event that
any party receives a subpoena, an order or other compulsory request
directing the disclosure of the terms of this Settlement Agreement,
such party shall advise all the other parties hereto of such
subpoena, order or request no later than ten (10) days before the
time by which such party must comply with such order, subpoena or
request in order to permit the other parties hereto to take any
action, as they may deem appropriate, to prevent the disclosure of
the terms of this Settlement Agreement.
13. Any notices under this Settlement Agreement shall be
sent to the parties by hand delivery or by pre-paid registered
mail, return receipt requested, as follows:
(a) if to Eskenazi to:
Ms. Nicole Eskenazi
363 East 76th Street
Apartment 12 F
New York, N.Y. 10021
with a copy to:
Davis, Scott, Weber & Edwards, P.C.
100 Park Avenue
New York, N.Y. 10017
Attention: David Dunn, Esq.
(b) if to Chaus, Inc. to:
Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
Attn: Josephine Chaus
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: H. Peter Haveles, Jr.
("Cadwalader")
(c) if to J. Chaus to:
Ms. Josephine Chaus
c/o Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
with a copy to:
Cadwalader
(d) if to Baker to:
Mr. Richard A. Baker
c/o Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
with a copy to:
Cadwalader

Any such notice shall be effective upon delivery by hand or three
business days after mailing. The place for notice may be altered
by any party in anotice that conforms to this section.
14. This Settlement Agreement sets forth the entire
agreement among the parties hereto with respect to the subject
matter hereof, and supersedes all agreements and understandings
prior hereto. No modification or revision hereof shall have any
force or effect unless in writing and executed by the parties
hereto, provided, however, that matters relating to obligations as
between Eskenazi and Chaus, Inc. only may be modified or revised in
a writing executed by those parties without the consent of J. Chaus
or Baker.
15. This Settlement Agreement shall be governed by the
laws of the State of New York, without reference to choice of law
principles.
16. This Settlement Agreement may be executed in one or
more identical counterparts, each of which shall constitute an
original document, and all of which, taken together, shall
constitute one and the same instrument.
17. Chaus, Inc. represents and warrants to Eskenazi that
all necessary corporate formalities and approvals in connection
with this Settlement Agreement and the performance thereof have
been or will be obtained, and that the person executing this
Settlement Agreement on behalf of Chaus, Inc. is duly authorized to
do so and to bind that company with respect to the provisions
hereof.
18. Each of the parties to this Settlement Agreement
represents and warrants to the others that it has been advised by
and has consulted with counsel of its choosing in connection with
the negotiation and execution of this Settlement Agreement and
understands and agrees to the rights and obligations conferred and
surrendered by this Settlement Agreement.

<PAGE>

IN WITNESS WHEREOF, the parties have duly executed this
Settlement Agreement as of the date first written above.

__________________________________
NICOLE ESKENAZI

BERNARD CHAUS, INC.

By:________________________________
Title:

___________________________________
JOSEPHINE CHAUS

___________________________________
RICHARD A. BAKER

EXHIBIT 10.92

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

June 16, 1994

Mr. Anthony M. Pisano
143 Hoyt Street, Unit 2-J
Stamford, CT 06905

Dear Tony:

This letter, when accepted by you, shall constitute our
agreement under which your employment by Bernard Chaus, Inc. (the
"Company") shall be terminated effective at the close of business
on Wednesday, August 31, 1994. The conditions of this
arrangement shall be as follows:

1. You shall continue to be paid through our bi-weekly payroll
your salary, automobile allowance and related expenses
through to August 31, 1994. Thereafter, you shall be paid,
as severance, an amount equal to your salary and car
payments on a bi-weekly basis, until the first to occur of
(i) the date on which you accept employment with another
company, or (ii) December 31, 1994. You agree to
immediately notify the Company of your acceptance of any
such new employment. In clarification of the foregoing, if
you shall accept employment with USA Classics Company or any
other company prior to August 31, 1994, such employment
shall not affect your entitlement under this paragraph to
salary and automobile allowance prior to August 31, 1994,
but if such employment continues after August 31, 1994, the
Company's obligation to pay your salary and automobile
allowance under this paragraph shall be terminated.

2. You will remain as Chief Financial Officer and Corporate
Secretary of the Company until June 17, 1994, at which time
this Agreement shall constitute your resignation from such
positions.

3. Your benefits under the Company's healthcare plan and,
participation in the 401(k) plan (but not vacation accrual
which shall continue only through June 17, 1994) shall
continue until August 31, 1994, subject to COBRA rights
noted below. You will be reimbursed for any business
related expense approved for expenditure through to August
31, 1994.

4. On or about August 31, 1994, you will receive a letter from
our Human Resources Department concerning your COBRA benefit
continuation plan for your healthcare benefits. You will
have sixty (60) days to enroll after August 31, 1994, and
any such enrollment will be retroactive back to that date.
You can continue to carry this coverage for a maximum of
eighteen (18) months starting from September 1, 1994. Also,
the Company will provide you a continuation of your
disability insurance throughout the COBRA period, at your
expense, if permitted by the insurer for a nonemployee.

5. Since you will remain an employee until August 31, 1994, you
will be eligible to vest in that portion of your stock
options which are due to vest on or before that date. You
can then exercise those options within thirty (30) days
after August 31, 1994. The exercise price of the shares is
in your contract. If you decide to exercise them, please
contact Marc Zuckerman, our Treasurer.

6. In consideration for this advance notice of termination and
the payments set forth herein, you have agreed to release
and forever hold harmless the Company, its subsidiaries,
divisions, affiliates, owners, shareholders, directors,
officers, employees, and agents from any and all claims,
demands, or causes of action of any kind or nature,
including but not limited to any claims for wages, salaries,
or benefits of any kind or nature (other than as set forth
herein); and any claims for employment discrimination
including but not limited to any claims under the Federal
Age Discrimination in Employment Act or the New Jersey law
against discrimination; any claims pursuant to any other
federal, state, or local statute, regulations or ordinance;
and claims based in contract, expressed or implied; or any
claims based in tort, compensatory damages or punitive
damages. This release shall not apply to obligations set
<PAGE>

forth in this Agreement or any other claims that may arise
after the date on which the Company signs this Agreement.

7. The Company agrees to release, remise, acquit and discharge
you from any and all claims known to it, which it may have
against you, whether denominated claims, demands, causes of
action, obligations, damages or liabilities arising from and
during your employment relationship with the Company or as a
result of the termination of such relationship; provided,
however, that this release shall not apply to claims against
you which may be discovered by the Company after the date
hereof. This release shall not apply to the obligations set
forth in this Agreement, or any other claims that may arise
after the date on which you sign the acknowledgement copy of
this Agreement.

8. You agree that until August 31, 1995, you will not solicit
or induce either directly or indirectly, any employee of the
Company to terminate their employee relationship. You
further agree that for the same period of time not to use,
discuss or otherwise disclose in any manner, confidential or
proprietary, information concerning the Company which you
may have acquired while in its employ.

9. Notwithstanding anything contained in this agreement, upon
your termination from employment with the Company, you shall
be free to work with any company whether or not it is a
competitor of the Company so long as you do not violate the
covenants referred to above.

10. Until August 31, 1994, you will perform such services as are
reasonably requested by the Chief Executive Officer. The
Company will provide secretarial help for any such requested
services but shall be under no obligation to provide office
space to you.

11. You agree to promptly return to the Company, any of the
Company's personal property such as keys and company credit
cards.

12. You acknowledge and agree that, notwithstanding any other
provision of this Agreement, in the event of your breach of
any of your obligations under this Letter Agreement, you
will forfeit your right to receive all payments and benefits
provided for hereunder.

13. The releases contained in this Letter Agreement do not
constitute an admission of liability of any kind by either
you or the Company.

14. This Agreement is personal to you and, without the prior
written consent of the Company shall not be assignable by
you otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of
and be enforceable by your heirs and legal representatives.
The terms of this Agreement shall inure to the benefit of
and shall be binding on the Company and shall be binding
upon and inure to the benefit of its respective successors
and assigns.

15. This Agreement constitutes the entire understanding of the
Company and you with respect to the subject matter hereof,
and supersedes all prior understandings, written or oral.
The terms of this Agreement may be changed, modified or
discharged only by an instrument in writing signed by the
parties hereto. A failure of a party to insist on strict
compliance with any provision of this Agreement shall not be
deemed a waiver of such provision or any other provision
hereof. The invalidity of unenforceability of any provision
of this Agreement shall in no way affect the validity or
enforceability of any other provision. In the event that
any provision of this Agreement is determined to be so broad
as to be unenforceable, such provision shall be interpreted
to be only so broad as is enforceable.

16. This Agreement shall be construed, enforced and interpreted
in accordance with and governed by the laws of the State of
New York without reference to the principles of conflicts of
law.

17. The payments hereunder will not constitute compensation for
any purpose under any retirement plan maintained by Chaus.

18. You understand that you may consider whether to agree to the
terms contained herein for a period of twenty-one days after
the date hereof. Accordingly, you may sign and return the
acknowledgment copy of this Agreement no later than July 8,
1994 to acknowledge your understanding of and agreement with
the foregoing. Prior to your signing this Agreement, you
are advised to consult with an attorney.

19. This Letter Agreement will become effective, enforceable and
irrevocable seven days after the date on which you sign it
(the "Effective Date"). During the seven-day period ending
the Effective Date, you may revoke your agreement to accept
the terms hereof by indicating in writing to the Company
<PAGE>

your intention to revoke. Of course, if you exercise your
right to revoke hereunder, you will forfeit your right to
receive any of the payments or benefits offered to you
hereunder.

Please acknowledge by your signature below that you have
consulted with your attorney with respect to this Agreement. If
you wish to accept the arrangement and agree to abide by the
conditions, including the release, please sign this letter in the
space provided below and return it to my office at 1410 Broadway,
New York, New York 10018.

Good luck and success in your future plans.

Sincerely,

Josephine Chaus
Chief Executive Officer

JC:cs

ACCEPTED AND AGREED:

I, Anthony M. Pisano, do hereby state that I have read and
understand the terms of this Agreement that has been offered to
me and that I have discussed this Agreement with an attorney. I
further state that I agree to fully abide by the terms of this
Agreement as described above. This Agreement will become
effective and irrevocable seven days from the date set forth
below, until which time I may withdraw my acceptance of this
Agreement.

June 17, 1994
(Date) (Anthony Pisano)

Exhibit 10.93

September 20, 1994

Bernard Chaus, Inc.
1410 Broadway
New York, NY 10018

Gentlemen/Ladies:

We refer to our Restated and Amended Financing Agreement with you bearing
effective date of July 1, 1992, as amended ("Agreement"). Capitalized terms
herein have the meaning ascribed to them in the Agreement unless otherwise
indicated.

1. We waive any rights we would otherwise have as a result of the fact
that, on June 30, 1994, Loans exceeded the Credit Limit, Tangible Net Worth was
less than $47,500,000, and Working Capital was less than $40,000,000.

2. In consideration of the foregoing, you agree to pay us $25,000 on
execution hereof. In addition to our other rights, we may charge said amount to
your account.

The waivers herein are limited to the date and the provisions specified
above. We reserve all of our other rights, including but not limited to our
rights arising out of your failure to comply with other provisions, or your
failure to comply with the provisions specified above on a date other than that
specified above. Accordingly, nothing herein is, or should be construed to be,
a precedent. Without limiting the foregoing, Loans, if any, outstanding from
time to time exceeding the Credit Limit are within our sole and absolute
discretion and, at our election at any time and from time to time, we may
refuse to make such excess Loans and we may require such excess Loans, if any,
outstanding to be paid down to the Credit Limit.

Subject to the foregoing, the Agreement is ratified and confirmed.

Very truly yours,
BNY Financial Corporation

By: /s/
---------------------------
S.V.P.

AGREED:
Bernard Chaus, Inc.

By: /s/ Marc A. Zuckerman
-------------------------------
Marc A. Zuckerman, Treasurer

EXHIBIT 10.94

BERNARD CHAUS, INC.
SUBORDINATED PROMISSORY NOTE

$208,716.00 August 1, 1993

FOR VALUE RECEIVED, BERNARD CHAUS, INC., a New York
corporation (the "Company"), promises to pay to the order of the
Estate of Bernard Chaus (the "Holder") the principal amount of
Two Hundred and Eight Thousand Seven Hundred Sixteen Dollars
($208,716), payable on July 1, 1994. The unpaid principal amount
shall bear interest at the rate of ten percent (10%) per annum
from and after July 1, 1993, such interest to be payable on July
1, 1994.

All payments of principal of, and interest on, this Note
shall be made in lawful money of the United States of America at
the principal executive offices of the Company now located at
1410 Broadway, New York, New York 10018, or at such other
location as the Holder may designate by notice hereunder.

If the date for any payment under this Note shall be a
Saturday, Sunday or a day on which banks are permitted to close
in the City of New York (a "non-business day"), payment hereon
shall instead be due and payable on the next succeeding day which
is not a non-business day.

This Note is one of a series of promissory notes of the same
character in the aggregate principal amount of $3,040,432 issued
by the Company on the date hereof (collectively, the "Notes").
The following provisions shall apply to this Note:

1. The existence of any of the following conditions shall
constitute an Event of Default:

(A) If the Company fails to pay any installment of
principal of or interest on any of the Notes when the same
becomes due and payable and such failure continues for ten
(10) days after notice to the Company of such default by any
of the registered holders of the Notes.

(B) If the Company makes an assignment for the benefit
of its creditors or admits in writing its inability to pay
its debts as they become due.

(C) If the Company shall be in default in connection
with any Senior Indebtedness (as such term is hereinafter
defined) of the Company, and the holder of any such Senior
Indebtedness shall have the right to, or shall, accelerate
such Senior Indebtedness pursuant to the terms thereof.

(D) If, under any bankruptcy or insolvency law or
other law for the reorganization, arrangement, composition
or similar relief or aid of debtors or creditors:

(i) the Company is adjudicated a bankrupt, or
takes or seeks to take or to have taken, or consents to
the taking of, any such action with respect to it or a
substantial part of its property or affairs; or

(ii) without the consent of the Company, a court
or other governmental authority of competent
jurisdiction;

(1) approves a petition seeking any such
relief or aid with respect to the Company,

(2) appoints a trustee, receiver, custodian
or liquidator of the Company or of a substantial
part of its property or affairs, or

(3) assumes custody or control of all or a
substantial part of the property or affairs of the
Company for operation to the exclusion of the
management,

and the approval or appointment is not vacated, or the
custody or control is not terminated, within sixty (60)
days or stayed on appeal.

2. If an Event of Default occurs, the unpaid balance of
the principal amount of, and accrued interest to the date of
declaration on, the Notes shall, upon written notice to the
<PAGE>

Company by the registered holders owning at least 40% of the
principal amount of the then outstanding Notes, become
immediately due and payable, subject to the provisions of
paragraph 3 hereof.

3. (a) The Company, the Holder and all subsequent holders
of this Note agree that this Note shall be subordinate and junior
in right of payment, on the terms and to the extent herein
provided, to all indebtedness of the Company for borrowed money
or credit now or hereafter extended by Marine Midland Bank, N.A.,
Manufacturers Hanover Trust Company and The Philadelphia National
Bank (individually, a "Bank" and collectively, the "Banks"),
including without limitation, any indebtedness or obligation to
the Banks secured by or made in connection with the Security and
Intercreditor Agreement (the "Security Agreement"), dated as of
March 15, 1985, among the Banks and the Company (the "Senior
Indebtedness"). No waiver, consent, release or failure to act by
the holders of the Senior Indebtedness shall affect the subordination
herein provided for.

(b) The subordination provisions of this Note are as
follows: (i) If an Event of Default (as defined in the Security
Agreement or any loan agreement, note or other document hereafter
evidencing the Senior Indebtedness), or any default or breach or
an event which, with the giving of notice of lapse of time or
both would become an Event of Default or any event giving rise to
a right of acceleration, shall occur and be continuing, then each
bank shall be entitled to receive payment in full of all
principal of and interest on the Senior Indebtedness before any
holder of this Note is entitled to receive any payment on account
of principal (or premium, if any) or interest on this Note, and
to that end, each Bank shall be entitled to receive, for
application in payment of the Senior Indebtedness, any payment or
distribution of any kind or character, whether in cash or
property or securities, which may be payable or deliverable in
respect of this Note, other than securities which are subordinate
and junior in right of payment to the payment of the Senior
Indebtedness then outstanding on the same terms or substantially
the same terms as set forth in this Note; (ii) none of the Banks
shall be prejudiced in its right to enforce the subordination of
this Note by any act or failure to act on the part of the Company
or anyone in custody of its properties or assets; provided,
however, that the foregoing provisions are solely for the purpose
of defining the relative rights of the Banks, on the one hand,
and the Holder on the other hand, and that nothing herein shall
impair, as between the Company and the Holder, the obligation of
the Company, which shall be unconditional and absolute, to pay to
the Holder the principal hereof and interest hereon in accordance
with the terms of this Note, nor shall anything herein prevent
the Holder or any subsequent holder of this Note from exercising
all remedies otherwise permitted by applicable law or hereunder
upon default hereunder, subject to the rights of the Banks under
clauses (i) and (ii) above to receive in respect of the Senior
Indebtedness cash, securities or other property otherwise payable
or deliverable to the Holder.

4. All acknowledgements, notices, approvals, responses,
waivers and demands of any kind, which either party hereto may be
required, or desires, to serve upon the other party under the
terms of, or in connection with, this Note shall be in writing,
and shall be served on the other party by mailing a copy thereof,
postage prepaid, by certified or registered mail, addressed as
follows:

TO HOLDER: Estate of Bernard Chaus
c/o Josephine Chaus, Executrix
c/o Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018

TO COMPANY: Bernard Chaus, Inc.
800 Secaucus Road
Secaucus, New Jersey 07094
Attention: Anthony M. Pisano
Chief Financial Officer

Notice shall be deemed received on the third business day
following the date of mailing. The above addresses or persons
may be changed from time to time by notice served, as hereinabove
provided, by the party desiring a change of address to the other
party.

5. The provisions and covenants contained herein shall
inure to and be binding upon the legal representatives,
successors and assigns of the parties hereto. The subordination
provisions of this Note shall inure to the benefit of the Banks.

6. The Company hereby waives diligence, presentment,
protest, demand and notice of protest, default, demand, dishonor
and non-payment of the Note.

thereof; and no modification, alteration or change of any of the
provisions hereof shall be effective unless in writing signed by
the Company and the Holder of any subsequent holder of this Note
and only to the extent herein set forth.

8. The Company agrees to pay all costs of collection
incurred by the older, including, without limitation, attorneys'
fees and expenses and court costs.

9. This Note and the legality, validity and performance of
the terms hereof, shall be governed by and enforced, determined
and construed in accordance with the laws of the State of New
York applicable to contracts, transactions and obligations
entered into, and to be performed in, New York.

10. This Note is executed and delivered by the Company in
partial substitution for and replacement of the Demand Note dated
June 30, 1993, in the amount of $1,520,216.00 to the order of the
Estate of Bernard Chaus. The Demand Note is being cancelled
simultaneously with the execution and delivery of this Note and
other promissory notes of the Company relating to the balance of
outstanding principal and accrued interest on the Demand Note.

BERNARD CHAUS, INC.

By: _____________________________
Anthony M. Pisano
Executive Vice President
Finance and Administration,
Chief Financial Officer
and Corporate Secretary

<PAGE>

BERNARD CHAUS, INC.
SUBORDINATED PROMISSORY NOTE

$208,716.00 August 1, 1993

FOR VALUE RECEIVED, BERNARD CHAUS, INC., a New York corporation (the
"Company"), promises to pay to the order of Josephine Chaus (the "Holder") the
principal amount of Two Hundred and Eight Thousand Seven Hundred Sixteen
Dollars ($208,716), payable on July 1, 1994. The unpaid principal amount shall
bear interest at the rate of ten percent (10%) per annum from and after July 1,
1993, such interest to be payable on July 1, 1994.

All payments of principal of, and interest on, this Note shall be made
in lawful money of the United States of America at the principal executive
offices of the Company now located at 1410 Broadway, New York, New York 10018,
or at such other location as the Holder may designate by notice hereunder.

If the date for any payment under this Note shall be a Saturday, Sunday
or a day on which banks are permitted to close in the City of New York (a "non-
business day"), payment hereon shall instead be due and payable on the next
succeeding day which is not a non-business day.

This Note is one of a series of promissory notes of the same character
in the aggregate principal amount of $3,040,432 issued by the Company on the
date hereof (collectively, the "Notes"). The following provisions shall apply
to this Note:

1. The existence of any of the following conditions shall
constitute an Event of Default:

(a) If the Company fails to pay any installment of
principal of or interest on any of the Notes when the same becomes due and
payable and such failure continues for ten (10) days after notice to the
Company of such default by any of the registered holders of the Notes.

(b) If the Company makes an assignment for the benefit of
its creditors or admits in writing its inability to pay its debts as they
become due.

(c) If the Company shall be in default in connection with
any Senior Indebtedness (as such term is hereinafter defined) of the Company,
and the holder of any such Senior Indebtedness shall have the right to, or
shall, accelerate such Senior Indebtedness pursuant to the terms thereof.

(d) If, under any bankruptcy or insolvency law or other law
for the reorganization, arrangement, composition or similar relief or aid of
debtors or creditors:

(i) the Company is adjudicated a bankrupt, or takes
or seeks to take or to have taken, or consents to the taking of, any such
action with respect to it or a substantial part of its property or affairs; or

(ii) without the consent of the Company, a court or
other governmental authority of competent jurisdiction;

(1) approves a petition seeking any such
relief or aid with respect to the Company,

(2) appoints a trustee, receiver, custodian
or liquidator of the Company or of a substantial part of its property or
affairs, or

(3) assumes custody or control of all or a
substantial part of the property or affairs of the Company for operation to the
exclusion of the management,

and the approval or appointment is not vacated, or the custody
or control is not terminated, within sixty (60) days or stayed on appeal.

2. If an Event of Default occurs, the unpaid balance of the
principal amount of, and accrued interest to the date of declaration on, the
Notes shall, upon written notice to the Company by the registered holders
owning at least 40% of the principal amount of the then outstanding Notes,
become immediately due and payable, subject to the provisions of paragraph 3
hereof.

3. (a) The Company, the Holder and all subsequent holders of
this Note agree that this Note shall be subordinate and junior in right of
payment, on the terms and to the extent herein provided, to all indebtedness of
the Company for borrowed money or credit now or hereafter extended by Marine
Midland Bank, N.A., Manufacturers Hanover Trust Company and The Philadelphia
National Bank (individually, a "Bank" and collectively, the "Banks"), including
without limitation, any indebtedness or obligation to the Banks secured by or
made in connection with the Security and Intercreditor Agreement (the "Security
Agreement"), dated as of March 15, 1985, among the Banks and the Company (the
"Senior Indebtedness"). No waiver, consent, release or failure to act by the
holders of the Senior Indebtedness shall affect the subordination herein
provided for.

(b) The subordination provisions of this Note are as
follows: (i) If an Event of Default (as defined in the Security Agreement or
<PAGE>

any loan agreement, note or other document hereafter evidencing the Senior
Indebtedness), or any default or breach or an event which, with the giving of
notice of lapse of time or both would become an Event of Default or any event
giving rise to a right of acceleration, shall occur and be continuing, then
each bank shall be entitled to receive payment in full of all principal of and
interest on the Senior Indebtedness before any holder of this Note is entitled
to receive any payment on account of principal (or premium, if any) or interest
on this Note, and to that end, each Bank shall be entitled to receive, for
application in payment of the Senior Indebtedness, any payment or distribution
of any kind or character, whether in cash or property or securities, which may
be payable or deliverable in respect of this Note, other than securities which
are subordinate and junior in right of payment to the payment of the Senior
Indebtedness then outstanding on the same terms or substantially the same terms
as set forth in this Note; (ii) none of the Banks shall be prejudiced in its
right to enforce the subordination of this Note by any act or failure to act on
the part of the Company or anyone in custody of its properties or assets;
provided, however, that the foregoing provisions are solely for the purpose of
defining the relative rights of the Banks, on the one hand, and the Holder on
the other hand, and that nothing herein shall impair, as between the Company
and the Holder, the obligation of the Company, which shall be unconditional and
absolute, to pay to the Holder the principal hereof and interest hereon in
accordance with the terms of this Note, nor shall anything herein prevent the
Holder or any subsequent holder of this Note from exercising all remedies
otherwise permitted by applicable law or hereunder upon default hereunder,
subject to the rights of the Banks under clauses (i) and (ii) above to receive
in respect of the Senior Indebtedness cash, securities or other property
otherwise payable or deliverable to the Holder.

4. All acknowledgements, notices, approvals, responses, waivers
and demands of any kind, which either party hereto may be required, or desires,
to serve upon the other party under the terms of, or in connection with, this
Note shall be in writing, and shall be served on the other party by mailing a
copy thereof, postage prepaid, by certified or registered mail, addressed as
follows:

TO HOLDER: Josephine Chaus
c/o Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018

TO COMPANY: Bernard Chaus, Inc.
800 Secaucus Road
Secaucus, New Jersey 07094
Attention: Anthony M. Pisano
Chief Financial Officer

Notice shall be deemed received on the third business day following the date of
mailing. The above addresses or persons may be changed from time to time by
notice served, as hereinabove provided, by the party desiring a change of
address to the other party.

5. The provisions and covenants contained herein shall inure to
and be binding upon the legal representatives, successors and assigns of the
parties hereto. The subordination provisions of this Note shall inure to the
benefit of the Banks.

6. The Company hereby waives diligence, presentment, protest,
demand and notice of protest, default, demand, dishonor and non-payment of the
Note.

7. No delay or failure on the part of the Holder of any subsequent
holder of this Note in exercising any right, remedy or option hereunder or
otherwise shall operate as a waiver of such right, remedy or option; nor shall
any single or partial exercise of any such right, remedy or option preclude any
further exercise thereof; and no modification, alteration or change of any of
the provisions hereof shall be effective unless in writing signed by the
Company and the Holder of any subsequent holder of this Note and only to the
extent herein set forth.

8. The Company agrees to pay all costs of collection incurred by
the older, including, without limitation, attorneys' fees and expenses and
court costs.

9. This Note and the legality, validity and performance of the
terms hereof, shall be governed by and enforced, determined and construed in
accordance with the laws of the State of New York applicable to contracts,
transactions and obligations entered into, and to be performed in, New York.

10. This Note is executed and delivered by the Company in partial
substitution for and replacement of the Demand Note dated June 30, 1993, in the
amount of $1,520,216.00 to the order of Josephine Chaus. The Demand Note is
being cancelled simultaneously with the execution and delivery of this Note and
other promissory notes of the Company relating to the balance of outstanding
principal and accrued interest on the Demand Note.

BERNARD CHAUS, INC.

By: _____________________________
Anthony M. Pisano
Executive Vice President
Finance and Administration,
Chief Financial Officer
and Corporate Secretary

EXHIBIT 10.95

BERNARD CHAUS, INC.
SUBORDINATED PROMISSORY NOTE

$1,311,500.00 August 1, 1993

FOR VALUE RECEIVED, BERNARD CHAUS, INC., a New York
corporation (the "Company"), promises to pay to the order of Josephine Chaus
(the "Holder") the principal amount of One Million Three Hundred and Eleven
Thousand Five Hundred Dollars ($1,311,500), payable on July 1, 1994. The
unpaid principal amount shall bear interest at the rate of ten percent (10%)
per annum from and after July 1, 1993, such interest to be payable on July 1,
1994.

All payments of principal of, and interest on, this Note shall be made in
lawful money of the United States of America at the principal executive offices
of the Company now located at 1410 Broadway, New York, New York 10018, or at
such other location as the Holder may designate by notice hereunder.

If the date for any payment under this Note shall be a Saturday, Sunday or
a day on which banks are permitted to close in the City of New York (a "non-
business day"), payment hereon shall instead be due and payable on the next
succeeding day which is not a non-business day.

This Note is one of a series of promissory notes of the same character in
the aggregate principal amount of $3,040,432 issued by the Company on the date
hereof (collectively, the "Notes"). The following provisions shall apply to
this Note:

1. The existence of any of the following conditions shall constitute an
Event of Default:

(a) If the Company fails to pay any installment of principal of or
interest on any of the Notes when the same becomes due and payable and such
failure continues for ten (10) days after notice to the Company of such default
by any of the registered holders of the Notes.

(b) If the Company makes an assignment for the benefit of its
creditors or admits in writing its inability to pay its debts as they become
due.

(c) If the Company shall be in default in connection with any Senior
Indebtedness (as such term is hereinafter defined) of the Company, and the
holder of any such Senior Indebtedness shall have the right to, or shall,
accelerate such Senior Indebtedness pursuant to the terms thereof.

(d) If, under any bankruptcy or insolvency law or other law for the
reorganization, arrangement, composition or similar relief or aid of debtors or
creditors:

(i) the Company is adjudicated a bankrupt, or takes or seeks
to take or to have taken, or consents to the taking of, any such action
with respect to it or a substantial part of its property or affairs; or

(ii) without the consent of the Company, a court or other
governmental authority of competent jurisdiction;

(1) approves a petition seeking any such relief or aid
with respect to the Company,

(2) appoints a trustee, receiver, custodian or liquidator
of the Company or of a substantial part of its property or affairs, or

(3) assumes custody or control of all or a substantial
part of the property or affairs of the Company for operation to
the exclusion of the management,

and the approval or appointment is not vacated, or the custody or
control is not terminated, within sixty (60) days or stayed on appeal.

2. If an Event of Default occurs, the unpaid balance of the principal
amount of, and accrued interest to the date of declaration on, the Notes shall,
upon written notice to the Company by the registered holders owning at least
40% of the principal amount of the then outstanding Notes, become immediately
due and payable, subject to the provisions of paragraph 3 hereof.

3. (a) The Company, the Holder and all subsequent holders of this Note
agree that this Note shall be subordinate and junior in right of payment, on
the terms and to the extent herein provided, to all indebtedness of the Company
for borrowed money or credit now or hereafter extended by Marine Midland Bank,
N.A., Manufacturers Hanover Trust Company and The Philadelphia National Bank
(individually, a "Bank" and collectively, the "Banks"), including without
limitation, any indebtedness or obligation to the Banks secured by or made in
connection with the Security and Intercreditor Agreement (the "Security
<PAGE>

Agreement"), dated as of March 15, 1985, among the Banks and the Company (the
"Senior Indebtedness"). No waiver, consent, release or failure to act by the
holders of the Senior Indebtedness shall affect the subordination herein
provided for.

(b) The subordination provisions of this Note are as follows: (i)
If an Event of Default (as defined in the Security Agreement or any loan
agreement, note or other document hereafter evidencing the Senior
Indebtedness), or any default or breach or an event which, with the giving of
notice of lapse of time or both would become an Event of Default or any event
giving rise to a right of acceleration, shall occur and be continuing, then
each bank shall be entitled to receive payment in full of all principal of and
interest on the Senior Indebtedness before any holder of this Note interest on
this Note, and to that end, each Bank shall be entitled to receive, for
application in payment of the Senior Indebtedness, any payment or distribution
of any kind or character, whether in cash or property or securities, which may
be payable or deliverable in respect of this Note, other than securities which
are subordinate and junior in right of payment to the payment of the Senior
Indebtedness then outstanding on the same terms or substantially the same terms
as set forth in this Note; (ii) none of the Banks shall be prejudiced in its
right to enforce the subordination of this Note by any act or failure to act on
the part of the Company or anyone in custody of its properties or assets;
provided, however, that the foregoing provisions are solely for the purpose of
defining the relative rights of the Banks, on the one hand, and the Holder on
the other hand, and that nothing herein shall impair, as between the Company
and the Holder, the obligation of the Company, which shall be unconditional and
absolute, to pay to the Holder the principal hereof and interest hereon in
accordance with the terms of this Note, nor shall anything herein prevent the
Holder or any subsequent holder of this Note from exercising all remedies
otherwise permitted by applicable law or hereunder upon default hereunder,
subject to the rights of the Banks under clauses (i) and (ii) above to receive
in respect of the Senior Indebtedness cash, securities or other property
otherwise payable or deliverable to the Holder.

4. All acknowledgements, notices, approvals, responses, waivers and
demands of any kind, which either party hereto may be required, or desires, to
serve upon the other party under the terms of, or in connection with, this Note
shall be in writing, and shall be served on the other party by mailing a copy
thereof, postage prepaid, by certified or registered mail, addressed as
follows:

TO HOLDER: Josephine Chaus
c/o Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018

TO COMPANY: Bernard Chaus, Inc.
800 Secaucus Road
Secaucus, New Jersey 07094
Attention: Anthony M. Pisano
Chief Financial Officer

Notice shall be deemed received on the third business day following the date of
mailing. The above addresses or persons may be changed from time to time by
notice served, as hereinabove provided, by the party desiring a change of
address to the other party.

5. The provisions and covenants contained herein shall inure to and be
binding upon the legal representatives, successors and assigns of the parties
hereto. The subordination provisions of this Note shall inure to the benefit
of the Banks.

6. The Company hereby waives diligence, presentment, protest, demand and
notice of protest, default, demand, dishonor and non-payment of the Note.

8. The Company agrees to pay all costs of collection incurred by the
older, including, without limitation, attorneys' fees and expenses and court
costs.

9. This Note and the legality, validity and performance of the terms
hereof, shall be governed by and enforced, determined and construed in
accordance with the laws of the State of New York applicable to contracts,
transactions and obligations entered into, and to be performed in, New York.

<PAGE>

10. This Note is executed and delivered by the Company in partial
substitution for and replacement of the Demand Note dated June 30, 1993, in the
amount of $1,520,216.00 to the order of Josephine Chaus. The Demand Note is
being cancelled simultaneously with the execution and delivery of this Note and
other promissory notes of the Company relating to the balance of outstanding
principal and accrued interest on the Demand Note.

BERNARD CHAUS, INC.

By: _____________________________
Anthony M. Pisano
Executive Vice President
Finance and Administration,
Chief Financial Officer
and Corporate Secretary

EXHIBIT 10.96

BERNARD CHAUS, INC.
SUBORDINATED PROMISSORY NOTE

$1,000,000.00 August 1, 1993

FOR VALUE RECEIVED, BERNARD CHAUS, INC., a New York
corporation (the "Company"), promises to pay to the order of the Estate of
Bernard Chaus (the "Holder") the principal amount of One Million Dollars
($1,000,000), payable as follows: Five Hundred Thousand Dollars ($500,000) on
November 15, 1993; Two Hundred Fifty Thousand Dollars ($250,000) on February
15, 1994; and Two Hundred Fifty Thousand Dollars ($250,000) on August 15, 1994.
The unpaid principal amount shall bear interest at the rate of ten percent
(10%) per annum from and after July 1, 1993, such interest to be payable on
July 1, 1994.