DONNKENNY INC
EXHIBIT 10.65
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>a4177520-1065.txt
<DESCRIPTION>EXHIBIT 10.65
<TEXT>
                                                                   Exhibit 10.65

                   AMENDED AND RESTATED EMPLOYMENT AGREEMENT

         THIS AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT (the "Agreement"),  is
made as of  January  1,  2002,  by and among  Daniel H. Levy (the  "Executive"),
Donnkenny Apparel, Inc., a Delaware corporation (the "Company"),  and Donnkenny,
Inc.,  a Delaware  corporation  which is the parent  corporation  of the Company
("Donnkenny").

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, Executive, the Company and Donnkenny entered into that certain
Employment Agreement dated as of January 1, 2000, pursuant to which Executive
was employed as Chairman of the Board and Chief Executive Officer of the Company
and each of its subsidiaries as well as in the capacity of Chief Executive
Officer of Donnkenny (the "Employment Agreement") for a term which commenced
January 1, 2000 and which expires December 31, 2002; and
         WHEREAS, pursuant to the First Amendment to Employment Agreement dated
May 17, 2000 the Employment Agreement was amended in certain respects; and
         WHEREAS, the parties to the Employment Agreement deem it to be in their
mutual best interests to amend and restate the Employment Agreement in certain
respects in recognition of the desire of the parties to extend the term thereof
and to otherwise solidify their respective relationships on a long-term basis.
         NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, effective immediately the
Employment Agreement is hereby amended and restated as follows:

<PAGE>

         1.       Employment.
                  a. Position. On the terms and subject to the conditions set
         forth herein, the Company hereby employs the Executive as its Chairman
         of the Board and Chief Executive Officer throughout the Employment Term
         (as defined below). In addition, the Company shall continue to cause
         each of its subsidiaries to designate Executive to the offices of
         Chairman of the Board and Chief Executive Officer throughout the
         Employment Term. Donnkenny hereby designates Executive as its Chief
         Executive Officer throughout the Employment Term and agrees that during
         the Employment Term, it shall (i) nominate the Executive for election
         to its Board of Directors at each annual meeting of shareholders and
         use its best efforts to cause the Executive to be duly elected to the
         Board at each such meeting, and (ii) elect the Executive to the
         position of Chairman of the Board.

                  b. Duties and Responsibilities. The Executive shall have such
         duties and responsibilities consistent with his position as the Board
         determines and shall perform such duties and carry out such
         responsibilities to the best of his ability for the purpose of
         advancing the business of the Company and its subsidiaries and
         Donnkenny. Subject to the provisions of Section 1.c. below, and
         excluding any periods of vacation and sick leave to which Executive is
         entitled, during the Employment Term the Executive shall devote his
         full business time, skill and attention to the business of the Company
         and its subsidiaries and Donnkenny, and, except as specifically
         approved by the Board, shall not engage in any other business activity
         or have any other business affiliation. During the Employment Term,
         Executive shall report directly to the Board and all other executive
         officers of Donnkenny, the Company or any of its subsidiaries shall
         report to the Executive. The Executive shall not be required to perform
         the principal duties of his employment outside of the New York, New
         York metropolitan area without the prior written consent of the
         Executive, which may be delayed or withheld by Executive in his sole
         discretion.

                                       2
<PAGE>

                  c. Other Activities. Notwithstanding anything else to the
         contrary set forth herein, Executive shall have the right to manage his
         personal investments and, as part of the Executive's business efforts
         and duties on behalf of Donnkenny, the Company or any of its
         subsidiaries, Executive may participate fully in social, charitable and
         civic activities and may serve on the boards of directors of other
         companies provided that such activities do not unreasonably and
         materially interfere with the performance of and do not involve a
         conflict of interest with his duties or responsibilities hereunder and
         provided that the serving on boards of directors of other companies
         shall require the prior approval of the Board of Directors of
         Donnkenny. Donnkenny and the Company each acknowledge that Executive
         serves as of the date hereof as a director of Whitehall Jewelers, Inc.,
         which service is hereby approved.

         2. Employment Term. Subject to the termination  provisions of Section 5
hereof,  the  "Employment  Term"  hereunder  shall be an ongoing and  continuous
period of three (3) years,  commencing on January 1, 2002,  with the result that
each day subsequent to January 1, 2002 shall,  without  further action or notice
of any kind by any party  hereto,  be deemed to  automatically  extend  the term
hereof by one day so that, at all times  hereafter,  the  remaining  term hereof
shall be deemed to be three (3) years.

         3. Compensation.  During the  Employment  Term,  the Company  will pay
and/or otherwise provide the Executive with compensation and related benefits as
follows:

                                       3

<PAGE>
                  a. Base Salary. During the year of the Employment Term ending
         December 31, 2002, the Company agrees to pay the Executive, for
         services rendered hereunder, a base salary at the annual rate of Eight
         Hundred Fifty Thousand Dollars ($850,000) (the "Base Salary").
         Commencing January 1, 2003 and on each January 1 thereafter during the
         Employment Term, the base salary which was in effect on the immediately
         preceding December 31 shall be increased by the greater of (i) the
         percentage increase in the Cost of Living Index (as hereafter defined);
         or (ii) such higher rate as the Compensation Committee of the Board
         (the "Compensation Committee") may designate in its sole and absolute
         discretion (the adjusted base salary shall be deemed the effective
         "Base Salary" hereunder). The Base Salary shall be payable in equal
         periodic installments, not less frequently than monthly, less any sums
         which may be required to be deducted or withheld under applicable
         provisions of law. The Base Salary for any partial year shall be
         prorated based upon the number of days elapsed in such year. For
         purposes hereof, the Cost of Living Index shall mean the December 2001
         Revised Consumer Price Index ("CPI") for all Urban Consumers published
         by the Bureau of Labor Statistics of the United States Department of
         Labor, for New York City Metropolitan Area Average, All Items. If the
         manner in which the CPI is calculated shall be substantially revised,
         Executive and the Company shall select a means to adjust such revised
         Index which would produce results equivalent, as practicable, to those
         which would have been obtained if the CPI has not been so revised. If
         the CPI shall become unavailable to the public because publication is
         discontinued, or otherwise, Executive and the Company shall select a
         comparable substitute index based upon changes in the cost of living or
         purchasing power of the consumer dollar published by any other
         governmental agency, or, of no such index shall then be available, a
         comparable index published by a major bank or other financial
         institution or by a university or a recognized financial publication.
         In the event that the U.S. Department of Labor, Bureau of Labor
         Statistics, changes the publication frequency of the CPI so that a CPI
         is not available to make an adjustment for the period in question, the
         adjustment shall be based on the percentage increase in the CPI for the
         twelve (12) month period beginning with the closest month preceding the
         period in question for which a CPI is available.

                                       4
<PAGE>

                  b.  Bonus.   During  the  Employment  Term,   Executive  shall
         participate in any bonus plan that includes senior  executives of the
         Company on the terms  generally  set  forth in such plan from time to
         time,  or in any plan substituted therefor or in addition thereto.
                  c. Stock Options and Restricted Stock. Prior to the date
         hereof, the Compensation Committee of Donnkenny granted to the
         Executive options to purchase 37,500 shares of Donnkenny Common Stock
         pursuant to the Donnkenny's Inc. 1992 Stock Option Plan (the "Stock
         Option Plan"), with the purchase price upon exercise of such options
         equal to $2.75 per share i.e. the closing price of the Common Stock on
         the date of such grant, all of which options are vested. (Said
         Donnkenny options and exercise price reflect the four for one reverse
         stock split effective April 20, 2001).
                  In the event the Compensation Committee of Donnkenny shall
         grant to the Executive any additional awards of restricted shares of
         the Common Stock of Donnkenny, or additional options to purchase shares
         of Donnkenny Common Stock, then with respect to the options, such
         options shall remain exercisable during the remainder of their
         respective terms notwithstanding any termination of the Executive's
         employment except as otherwise provided in the grant agreements
         respecting such options; provided, however, that, anything herein or in
         the grant agreements to the contrary notwithstanding, the vesting of
         such shares of restricted stock and such options shall be accelerated
         in the event of a Change in Control (as defined herein), a termination
         of Executive's employment by the Company without Cause (as defined
         below), a termination of Executive's employment for Good Reason (as
         defined below), or a termination of Executive's employment as a result
         of the death or disability of Executive. With respect to the options,
         such options shall be incentive stock options to fullest extent
         permitted by applicable law and the Stock Option Plan.

                                        5
<PAGE>

                  In the event there shall be a Change in Control, all shares of
         common stock of Donnkenny previously or subsequently issued to
         Executive as restricted shares or pursuant to stock options upon the
         vesting thereof from time to time shall be promptly and duly registered
         and fully and freely tradeable by Executive without restriction at the
         sole cost and expense of the Company. In the event Executive shall
         require a resale prospectus in connection with any intended sale of
         shares, Donnkenny and the Company shall promptly furnish such resale
         prospectus to Executive at the Company's expense.
                  d. Automobile Allowance. During the Employment Term the
         Company shall provide to Executive an automobile which is reasonably
         acceptable to him and which is consistent with his position with the
         Company, and a driver. In addition, the Company shall be responsible
         for the payment of (i) all of Executive's automobile expenses
         including, without limitation, gasoline, tolls, insurance, parking,
         maintenance, repairs and similar expenses, and (ii) the federal, state
         and local income taxes for which Executive is liable on account of the
         payments or other benefits referred to in this Section 3d above,
         together with an amount sufficient to satisfy any additional federal,
         state or local income taxes for which Executive is liable on account of
         the amounts received pursuant to this Section 3d, all of which shall be
         payable within fifteen (15) days after demand therefor by Executive.

                                       6
<PAGE>

                  e. Reimbursement of Expenses and Administrative Support. The
         Company shall pay or reimburse the Executive, upon the presentation of
         appropriate documentation of such expenses, for all reasonable travel
         and other expenses incurred by the Executive in performing his
         obligations under this Agreement. The Company further agrees to furnish
         the Executive with office space and administrative support, and any
         other assistance and accommodations as shall be consistent with past
         practices in the performance of his duties under this Agreement.
                  f. Vacation. Executive shall be entitled to four (4) weeks
         paid vacation in each calendar year. Any vacation for the current year
         to which Executive is entitled and which has not been fully taken by
         Executive at the time his employment with the Company shall terminate
         for any reason, shall be fully paid to Executive within thirty (30)
         days after the effective date of Executive's termination of employment.
                  g. Financial  Planning and Tax Preparation  Services.  Each
         year during the Employment  Term, the Company shall pay or reimburse
         Executive for financial  planning  services and tax preparation
         services provided to Executive in an amount not to exceed Ten Thousand
         Dollars ($10,000.00), which amount shall be payable upon submission of
         appropriate documentation.

                                       7
<PAGE>

                  h. Deductions.  All payments  made under this  Agreement
         shall be subject to such  deductions at the source as from time to
         time may be required to be made pursuant to any law, rule, regulation
         or order.
                  i. Change in Control.  For purposes of this Agreement,  a
         "Change in Control" of the Company or Donnkenny shall be deemed to
         have occurred upon any of the following events:

                           (A) A person or entity or group of persons or
                  entities, acting in concert, shall become the direct or
                  indirect beneficial owner (within the meaning of Rule 13d-3 of
                  the Securities Exchange Act of 1934, as amended), of
                  securities of the Company or Donnkenny representing more than
                  fifty percent (50%) of the combined voting power of the issued
                  and outstanding common stock of Donnkenny or the Company; or
                           (B) The majority of the Board, or the majority of the
                  board of directors of Donnkenny, is no longer comprised of the
                  incumbent directors who constitute such board on the date of
                  this Agreement and any other individual(s) who becomes a
                  director subsequent to the date of this Agreement whose
                  initial election or nomination for election as a director, as
                  the case may be, was approved by at least a majority of the
                  directors who comprised the incumbent directors as of the date
                  of such election or nomination or subsequently elected
                  directors elected by directors elected by incumbent directors;
                  provided however, that in determining whether a director has
                  been so elected by the incumbent directors or their
                  successors, a person who has been so elected by reason of
                  having made an investment in the Company or Donnkenny or by
                  reason of a transaction agreement with Donnkenny or the
                  Company, or otherwise in connection with any Change in Control
                  transaction with Donnkenny or the Company, shall not be deemed
                  to have been elected by incumbent directors or their
                  successors; or

                                       8
<PAGE>

                           (C) The Board shall approve a sale of all or
                  substantially all of the assets of the Company, or the board
                  of directors of Donnkenny shall approve a sale of all or
                  substantially all of the assets of Donnkenny; or
                           (D) The Board, or the board of directors of
                  Donnkenny, shall approve any merger, consolidation, or like
                  business combination or reorganization of the Company, or of
                  Donnkenny, the consummation of which would result in the
                  occurrence of any event described in clause (A) or (B) above,
                  and such transaction shall have been consummated.

         4. Participation in Benefit Plans. The Executive shall be entitled to
participate, during the term of this Agreement, in the Company's and Donnkenny's
benefit programs, including but not limited to qualified or non-qualified
pension plans, other qualified or nonqualified retirement plans, supplemental
pension plans, group hospitalization, health, dental care, death benefit,
post-retirement welfare plans, or other present or future group employee benefit
plans or programs of the Company or Donnkenny for which key executives are or
shall become eligible (collectively, the "Benefit Plans"), on the same terms as
other key executives of the Company or Donnkenny, as the case may be. If
participation in any of such Benefit Plans is subject to or based on length of
service, the Executive, upon execution of this Agreement, shall be credited with
the greater of (i) ten (10) years of service, or (ii) whatever number of years
or period of service shall be required in order for

                                       9
<PAGE>


Executive to immediately commence participation therein at any
time hereafter. In addition to and without limiting the generality of the
foregoing, (i) the Company may obtain and maintain a "key man" life insurance
policy under which the Company is the named beneficiary in the amount of
$2,500,000, and (ii) the Executive may obtain and maintain, at the sole expense
of the Company, life insurance policy with a death benefit of not more than
$2,500,000, which policy shall be owned by the Executive or his designee and
payable to Executive's designated beneficiary, and/or may be a joint life
insurance policy providing for payment upon the last to die of Executive and
Executive's spouse, in each case from a nationally-recognized insurance carrier
reasonably acceptable to the Executive, and (iii) the Company shall use its
reasonable best efforts to provide, in addition to any such insurance regularly
provided to the Company's executives and/or employees, long-term disability
insurance which will pay to Executive at least sixty percent (60%) of
Executive's then current Base Salary until the Executive reaches age 65. Upon
termination of the employment of the Executive with the Company for any reason,
the Executive shall be entitled to purchase from the Company any life insurance
policy then owned by the Company on the life of the Executive and the
aforementioned disability insurance policy (if permitted under the terms of such
policy) for a purchase price equal to the cash surrender value of each policy,
if any (net of any loans or other reductions in value chargeable upon such
surrender). The Company may not borrow against any life insurance policy owned
by the Company on the life of the Executive, or pledge or otherwise encumber
said policy or the death benefit payable thereunder without the prior written
consent of Executive, which consent may be delayed or withheld in the
Executive's sole discretion. The Company shall be responsible for the federal,
state and local income taxes for which Executive is liable on account of the
payment by the Company of the premiums for the maintenance of the

                                       10
<PAGE>

benefits referred to in this Section 4 above, together with an amount sufficient
to satisfy any additional federal, state or local income taxes for which
Executive is liable on account of the tax reimbursement amounts received
pursuant to this Section 4, all of which shall be payable within fifteen (15)
days after demand therefor by Executive.

         5. Termination of Employment.
         a. By the Company For Cause. The Company may terminate the Executive's
employment under this Agreement at any time for Cause (as defined below) by
delivery of written notice of termination to the Executive (which notice shall
specify in reasonable detail the basis upon which such termination is made and
the specific provision(s) of the Agreement upon which it relies, and further
stating the date, time and place of the special meeting of the Board or the
Board of Directors of Donnkenny at which the issue of Cause shall be addressed)
at least ten days prior to the termination date set forth in such notice. No
such termination shall become effective until the Executive, after receipt of
such notice, shall have been offered the opportunity to attend a meeting of the
Board of Directors of the Company (or the Board of Directors of Donnkenny,
whichever is applicable) at which a quorum is present (with the Executive's
counsel present and participating, if desired by the Executive) regarding such
termination notice and the allegations set forth therein and, based upon such
meeting, such Board of Directors shall have elected to proceed with such
termination. Except as provided for in Section 22 below, in the event the
Executive's employment is terminated for Cause, all provisions of this Agreement
and the Employment Term shall be terminated; provided, however, that such
termination shall not divest the Executive of any previously vested benefit or
right. In addition, the Executive shall be entitled only to payment of his
earned and unpaid Base Salary to the date of termination, earned and unpaid
bonus for the prior fiscal year,

                                       11
<PAGE>

additional salary payments in lieu of the Executive's accrued
and unused vacation, unreimbursed business and entertainment expenses in
accordance with the Company's policy, and unreimbursed medical, dental and other
employee benefit expenses incurred (including any tax gross-up payments required
hereunder), and other vested and accrued benefits payable in accordance with the
Company's or Donnkenny's employee benefit plans (hereinafter referred to as the
"Standard Termination Payments"). For purposes of this Agreement, "Cause" means
(1) the conviction of the Executive for the commission of (A) any felony, or (B)
a misdemeanor involving moral turpitude, or (2) willful misconduct or neglect of
duties by the Executive that results in material and demonstrable damage to the
business or reputation of the Company or (3) Executive's repeated failure to
follow a written company policy previously delivered to Executive, or (4)
Executive's alcohol or drug abuse. No act or failure to act on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any act
or failure to act that is based upon authority given pursuant to a resolution
duly adopted by the Board or the Board of Directors of Donnkenny, or the written
advice of counsel for the Company or Donnkenny, shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company.

                  b. Upon Death or Disability. If the Executive dies, all
         provisions of this Agreement (other than rights or benefits arising as
         a result of such death) and the Employment Term shall be automatically
         terminated; provided, however, that the Standard Termination Payments
         and pro rata Bonus for the fiscal year during which such death occurs
         shall be paid to the Executive's surviving spouse or, if none, his
         estate, and the death benefits

                                       12
<PAGE>

         under the Company's and  Donnkenny's  employee  benefit plans shall be
         paid to the  Executive's  beneficiary  or  beneficiaries  as  properly
         designated in writing by the Executive.  If the Executive is unable to
         perform  his  responsibilities  under  this  Agreement  by  reason  of
         physical or mental  disability  or incapacity  and such  disability or
         incapacity  shall have  continued  for six  consecutive  months or any
         period  aggregating  six months  within any 12  consecutive  months (a
         "Disability'),  the  Company  may  terminate  this  Agreement  and the
         Employment Term at any time  thereafter.  In such event, the Executive
         shall be entitled to receive his normal compensation  hereunder during
         said six (6) month period, and shall thereafter be entitled to receive
         the  Standard  Termination  Payments  and the pro rata  Bonus  for the
         fiscal year during which such  disability  occurs.  Pro rata Bonus, in
         the event of the Executive's  death or disability,  shall be an amount
         equal to the Bonus at the  amount  payable  upon fully  achieving  the
         figure  targeted  in the  annual  business  plan  or  other  documents
         relating  to  the  Bonus  approved  by  the  Board,  the  Compensation
         Committee or any other duly authorized  designee of the Board for such
         year  (the  "Target  Amount")  (regardless  of  the  Company's  actual
         performance) for the fiscal year during which such death or disability
         occurs,  prorated by a fraction,  the numerator of which is the number
         of  days of  employment  elapsed  during  the  fiscal  year  prior  to
         termination  of  employment  and the  denominator  of which is 365.  A
         termination  of  the   Executive's   employment  by  the  Company  for
         Disability  shall be  communicated to the Executive by written notice,
         and shall be effective on the 30th day after receipt of such notice by
         the Executive (the "Disability  Effective Date"), unless the Executive
         returns to full-time  performance of the Executive's duties before the
         Disability Effective Date.

                                       13
<PAGE>

                  The Company shall continue to provide the Executive and the
         spouse and dependents of the Executive, at the expense of the Company,
         with the medical insurance then provided to Executive and to such
         spouse and dependents including, without limitation, the Company's
         Execucare Program or any addition thereto or substitution therefor, for
         a period of five (5) years following the termination of the employment
         of the Executive, which medical insurance coverage shall be included as
         part of any required COBRA Coverage; provided, however, that the
         Company provided medical coverage and the COBRA Coverage shall
         terminate with respect to the Executive, the spouse and/or dependents
         of the Executive as of the date that any such individual becomes
         eligible to receive coverage and benefits as a full time employee under
         any plans, programs and/or arrangements of a subsequent employer of
         Executive. Availability for coverage as a spouse, principal or director
         of a company shall not be treated as eligibility for coverage. Subject
         to the provisions of this Agreement, which shall control in the event
         of any conflicting provisions, the rights and benefits of the Executive
         under the benefit plans and programs of the Company shall be determined
         in accordance with the provisions of such plans and programs. The
         rights and benefits of the Executive with respect to the shares of
         restricted stock and options referred to in Section 3.c. above shall be
         determined in accordance with the provisions of this Agreement and the
         plans and grant agreements governing such shares and options. Except as
         otherwise specified in this Agreement, neither the Executive nor the
         Company shall have any further rights or obligations under this
         Agreement.

                                       14
<PAGE>

                  c. By the Company Without Cause.
                     ----------------------------
                  i. The Company may only terminate the employment of the
         Executive for Cause or upon the death or Disability of the Executive.
         If the employment of the Executive shall be terminated without Cause
         prior to a Change in Control and other than as a result of death or
         Disability of the Executive, then the Executive shall be entitled to
         the payments, rights and benefits set forth in Section 5.d.v. below.
                  d. By the Executive.
                     ----------------
                     i. The Executive may terminate his employment, and
                  any further obligations which Executive may have to perform
                  services on behalf of Donnkenny or the Company and any of its
                  subsidiaries hereunder at any time after the date hereof, (i)
                  without Good Reason (as defined below) by sending written
                  notice of such termination to the Company not less than sixty
                  (60) days prior to the effective date of such termination
                  (during such sixty (60) day period, the Executive shall
                  continue to perform the normal duties of his employment
                  hereunder and shall be entitled to receive when due all
                  compensation and benefits applicable to the Executive
                  hereunder); or (ii) for Good Reason pursuant to the procedure
                  set forth in Section 5(d)iii below).
                    ii.  For purposes of this Agreement, "Good Reason" shall be
                  defined as any of the following:

                                    A. failure by the Company or Donnkenny to
                           re-elect the Executive as a director, Chairman of the
                           Board and Chief Executive Officer, or the assignment
                           to the Executive of any duties or responsibilities

                                       15
<PAGE>
                           inconsistent in any respect with those customarily
                           associated with the positions to be held by the
                           Executive pursuant to this Agreement, or any other
                           action by the Company that results in a diminution in
                           the Executive's position, authority, duties or
                           responsibilities, other than an isolated,
                           insubstantial and inadvertent action that is not
                           taken in bad faith and is remedied by the Company
                           promptly after receipt of notice thereof from the
                           Executive;
                                    B. any failure by the Company or Donnkenny
                           to comply with any provision of Section 3 of this
                           Agreement, other than an isolated, insubstantial and
                           inadvertent failure that is not taken in bad faith
                           and is remedied by the Company or Donnkenny, as the
                           case may be, promptly after receipt of notice thereof
                           from the Executive;
                                    C. Any requirement by the Company that the
                           Executive's  services be rendered  primarily at a
                           location or locations other than in New York City;
                                    D. any purported  termination of the
                           Executive's  employment by the Company or Donnkenny
                           for a reason or in a manner not expressly permitted
                           by this Agreement;
                                    E. any failure by the Company or Donnkenny
                           to comply with Section 11 of this Agreement;
                                    F. any Change in Control of the Company or
                           Donnkenny;
                                    G. the institution of bankruptcy,
                           reorganization, arrangement, insolvency or

                                       16
<PAGE>

                           liquidation proceedings by or against the Company or
                           Donnkenny (which proceedings, if instituted against
                           the Company or Donnkenny, have been consented to by
                           the Company or Donnkenny, as the case may be, or have
                           remained undismissed for a period of sixty (60) days
                           after the filing date thereof); or
                                    H. any other material breach of this
                           Agreement by the Company or Donnkenny that either is
                           not taken in good faith or is not remedied by the
                           Company or Donnkenny, as the case may be, within
                           twenty (20) business days after receipt of notice
                           thereof from the Executive; provided, however, that
                           with respect to any breach of a payment obligation of
                           the Company or Donnkenny, such breach must be
                           remedied within five (5) business days after written
                           notice thereof from the Executive.
                           iii. A termination of employment by the Executive for
                  Good Reason shall be effectuated by giving the Company written
                  notice ("Notice of Termination for Good Reason") of the
                  termination, setting forth in reasonable detail the specific
                  conduct of the Company or Donnkenny or other event(s) that
                  constitutes Good Reason and the specific provision(s) of this
                  Agreement on which the Executive relies; such notice to be
                  provided within 90 days of such alleged conduct or other
                  event. A termination of employment by the Executive for Good
                  Reason shall be effective on the fifth business day following
                  the date when the Notice of Termination for Good Reason is
                  given, unless the notice sets forth a later date (which date
                  shall in no event be later than thirty (30) days after the
                  notice is given). Upon the occurrence of a termination of
                  employment by the Executive for Good Reason prior to the

                                       17
<PAGE>

                  Change of Control, the Company shall pay to the Executive the
                  Standard Termination payments and the Additional Termination
                  payments.
                           iv. If the Executive shall elect to terminate his
                  employment hereunder (other than as a result of his death or
                  disability) without Good Reason, then the Executive shall
                  remain vested in all vested benefits provided for hereunder or
                  under any benefit plan of the Company in which Executive is a
                  participant and shall be entitled to receive the Standard
                  Termination payments, but the Company shall have no further
                  obligation to make payments or provide benefits to the
                  Executive.
                           v. Subject to the provisions of Section 5.d.vi.
                  below, if the Company terminates the Executive's employment,
                  other than for Cause, death or Disability, or the Executive
                  terminates employment for Good Reason, the Company shall, at
                  the option of the Company, (i) continue to pay to the
                  Executive an amount which is equal to the sum of (x) the
                  aggregate Base Salary Executive would have been entitled to
                  receive during the thirty six (36) month period following such
                  termination (assuming, for these purposes, that Executive
                  would have remained in the full and continuous employment of
                  the Company during such thirty six (36) month period and that
                  Base Salary shall not increase above the rate in effect at the
                  date of termination); and (y) a one time payment which is
                  equal to the maximum Bonus payable to Executive upon fully
                  achieving the figure targeted in the annual business plan or
                  other documents relating to the Bonus approved by the Board,
                  the Compensation Committee or any other duly authorized
                  designee of the Board for the year in which such termination
                  occurs (regardless of the Company's actual

                                       18
<PAGE>

                  performance)  or,  in the  event  no such  figure  shall  be
                  targeted  for such  year,  for the  most  recent  year  with
                  respect to which such  figure was  targeted  (the sum of (x)
                  and  (y) are  hereinafter  collectively  referred  to as the
                  "Additional Termination Payments") when same would otherwise
                  be due  and  payable  in the  ordinary  course  of  business
                  assuming, for these purposes, that Executive remained in the
                  full time  continuous  employment of the Company during such
                  period;  provided  however,  that the Company  shall only be
                  entitled to elect this  continued  payment  option if, on or
                  before the effective  termination date, the Company,  at its
                  expense,  has delivered to Executive a bank letter of credit
                  in an amount equal to the aggregate  payments to be received
                  by Executive,  naming Executive as beneficiary and issued by
                  a bank approved by Executive (it being understood and agreed
                  that a letter of credit issued by the bank which is then the
                  principal  current  lender  to the  Company  shall be deemed
                  acceptable  for  purposes  hereof)  on terms and  conditions
                  which  are  approved  by  Executive  in   Executive's   sole
                  discretion, or secured by such other collateral which is not
                  subject to the  claims of the  creditors  of the  Company as
                  Executive shall approve in Executive's sole discretion,  the
                  value of which shall be 100 % of the  aggregate  payments to
                  be received by Executive or (ii) contemporaneously with such
                  termination,  pay the  Executive a lump sum amount  equal to
                  the  present  value  (using  a  discount  rate of 3%) of the
                  amount  referred  to in  5.d.v(i)  above.  In the  event the
                  payment obligations  herewith shall be secured by collateral
                  other  than a bank  letter of  credit,  and in the event the
                  fair market  value of such  collateral  shall fall below the
                  then remaining

                                       19
<PAGE>

                  balance of the amounts  payable to Executive,  then,  within
                  five (5) business days after  written  notice  thereof,  the
                  Company  shall  deliver  to  Executive  such  additional  or
                  substituted  collateral  which,  in the  aggregate  with any
                  collateral to be continually held by Executive,  has a value
                  which shall be not less than 100% of the remaining  payments
                  to be made to  Executive.  In the event  there  shall be any
                  default  in  payment of any  installment  of the  Additional
                  Termination  Payments  which is not  cured  within  five (5)
                  business days after written notice thereof,  or in the event
                  additional  or  substituted  collateral  shall not be timely
                  delivered  to  Executive  as  provided  for above,  then the
                  remaining  unpaid balance  thereof shall be immediately  due
                  and payable  without further notice and, among other things,
                  Executive  shall  have the  unrestricted  right  to  proceed
                  against  the  letter of credit or other  collateral,  as the
                  case may be.
                           In addition to the foregoing, the Company shall also
                  be obligated to pay to the Executive the Standard Termination
                  Payments as and when they shall become due. Furthermore, the
                  Company shall continue to provide the Executive and the spouse
                  and dependents of the Executive, at the expense of the
                  Company, with the medical insurance then provided to Executive
                  and his spouse and dependents including, without limitation,
                  the Company's Execucare Program or any addition thereto or
                  substitution therefore, for a period of five (5) years
                  following the termination of the employment of the Executive,
                  which medical insurance coverage shall be included as part of
                  any required COBRA Coverage; provided, however, that the
                  Company provided medical coverage and the COBRA Coverage

                                       20
<PAGE>

                  shall  terminate with respect to the  Executive,  the spouse
                  and/or  dependents  of the Executive as of the date that any
                  such  individual  becomes  eligible to receive  coverage and
                  benefits as a full time employee  under any plans,  programs
                  and/or  arrangements of a subsequent  employer of Executive.
                  Availability for coverage as a spouse, principal or director
                  of a  company  shall  not  be  treated  as  eligibility  for
                  coverage.  The rights and  benefits  of the  Executive  with
                  respect  to the  shares  of  restricted  stock  and  options
                  referred to in Section  3.c.  above shall be  determined  in
                  accordance  with the  provisions  of this  Agreement and the
                  plans  and  grant  agreements   governing  such  shares  and
                  options; provided, however, that in the event there shall be
                  a conflict between the terms of this Agreement and the terms
                  of any such plan or grant agreement,  then the provisions of
                  this Agreement shall govern and control. Except as otherwise
                  specified in this  Agreement,  neither the Executive nor the
                  Company shall have any further rights or  obligations  under
                  this Agreement. Except as is provided for in Section 5.d.vi.
                  below, the payments and benefits  provided  pursuant to this
                  Section  5.d.v.  are  intended as  liquidated  damages for a
                  termination  of the  Executive's  employment  by the Company
                  other than for Cause or Disability or for the actions of the
                  Company   leading  to  a  termination  of  the   Executive's
                  employment by the Executive for Good Reason and shall be the
                  sole and exclusive remedy therefore. Executive shall have no
                  obligation  whatsoever  to mitigate  any  damages,  costs or
                  expenses suffered or incurred by the Company with respect to
                  any payments made pursuant to this Section  5.d..v.,  and no
                  such payment shall be subject to any cancellation,

                                       21
<PAGE>

                  reduction, offset, rebate or repayment as a result of any
                  subsequent employment or other business activity by the
                  Executive including, without limitation, self employment,
                  except such deductions at the source as from time to time may
                  be required to be made pursuant to any law, rule regulation
                  or order.
                           vi. Anything in this Agreement to the contrary
                  notwithstanding, if, during the Employment Term and, in
                  connection with, upon or after the occurrence of a Change in
                  Control, the Executive's employment is terminated by the
                  Company or the Executive for any or no reason other than by
                  the Company for Cause, death or Disability, the Company shall
                  pay to the Executive, by wire transfer of immediately
                  available funds within ten (10) days after the Termination
                  Date, an amount equal to the sum of (x) three times the
                  Executive's Base Salary in effect on the Date of Termination
                  and (y) three times the Bonus which is included in the
                  determination of the Additional Termination Payments hereunder
                  (the "Change of Control Payment"). In addition to the
                  foregoing, the Company shall also be obligated to pay to the
                  Executive the Standard Termination Payments as and when they
                  shall become due
                           Anything in this Section 5.d.vi. to the contrary
                  notwithstanding, subsequent to the consummation of the Change
                  of Control transaction and, within seven (7) days after
                  Executive's termination of employment with the Company, the
                  Company shall have the right to elect to pay to the Executive
                  (and to the Executive's surviving spouse in the event of
                  Executive's death or, if no spouse shall then be surviving, to
                  Executive's estate) the amount of the Change of

                                       22
<PAGE>

                  Control  Payment in thirty-six  (36) equal or  substantially
                  equal consecutive  monthly  installments,  commencing on the
                  first  day  of  the   month   immediately   succeeding   the
                  Termination  Date  and  on  the  first  day  of  each  month
                  thereafter,  without interest, provided that the Company has
                  first provided to Executive, and maintains in full force and
                  effect  during  the  entire  thirty-six  (36)  month  period
                  referred to above, at the Company's  expense,  a bank letter
                  of  credit  (with   Executive  as   beneficiary)   or  other
                  collateral security for such payment which is not subject to
                  the  claims of the  Company's  creditors  and which is in an
                  amount  that is equal  (in the case of the  bank  letter  of
                  credit)  to the  unpaid  balance  of the  Change of  Control
                  Payment  or (in the case of  collateral  other than the bank
                  letter  of  credit)  which  is equal to 100% in value of the
                  unpaid  balance  of  the  Change  of  Control  Payment.  The
                  election  provided  for  above  shall be  effective  only if
                  Executive   receives   written  notice  thereof  within  the
                  aforesaid  seven  (7) day  period.  Executive,  in his  sole
                  discretion  which  may be  withheld  for any  reason  deemed
                  appropriate   by  Executive,   must  approve  the  financial
                  institution  issuing  any such  letter of  credit  (it being
                  understood  and agreed that a letter of credit issued by the
                  bank  which  is then the  principal  current  lender  to the
                  Company shall be deemed  acceptable for purposes hereof) and
                  the terms thereof,  as well as the form of other security or
                  the terms of any pledge relating  thereto.  In the event the
                  payment obligations hereunder shall be secured by collateral
                  other  than a bank  letter of  credit,  and in the event the
                  fair market  value of such  collateral  shall fall below the
                  then remaining  balance of the amounts payable to Executive,
                  then,

                                       23
<PAGE>


                  within five (5) business days after written notice thereof,
                  the Company shall deliver to Executive such additional or
                  substituted collateral which, in the aggregate with any
                  collateral to be continually held by Executive, has a value
                  which shall be not less than 100% of the remaining payments to
                  be made to Executive. In the event there shall be any default
                  in payment of any installment of the Change of Control Payment
                  which is not cured within five (5) business days after written
                  notice thereof, or in the event additional or substituted
                  collateral shall not be timely delivered to Executive as
                  provided for above, then the remaining unpaid balance thereof
                  shall be immediately due and payable without further notice
                  and, among other things, Executive shall have the unrestricted
                  right to proceed against the letter of credit or other
                  collateral, as the case may be. The installment payment of the
                  Change of Control Payment shall not in any manner cause a
                  delay or postponement of the due date for the Gross-Up Payment
                  referred to in Section 6 below, which shall be due and payable
                  within ten (10) days after Executive's employment shall
                  terminate.

         The Company shall  continue to provide the Executive and the spouse and
dependents  of the  Executive,  at the expense of the Company,  with the medical
insurance  then provided to Executive and his spouse and  dependents  including,
without  limitation,  the Company's Execucare Program or any addition thereto or
substitution therefore, for a period of five (5) years following the termination
of the employment of the Executive,  which medical  insurance  coverage shall be
included as part of any required COBRA  Coverage;  provided,  however,  that the
Company  provided  medical  coverage and the

                                       24
<PAGE>

COBRA Coverage shall terminate with respect to the Executive, the
spouse and/or dependents of the Executive as of the date that any such
individual becomes eligible to receive coverage and benefits as a full time
employee under any plans, programs and/or arrangements of a subsequent employer
of Executive. Availability for coverage as a spouse, principal or director of a
company shall not be treated as eligibility for coverage. Subject to the
provisions of this Agreement, which shall control in the event of any
conflicting provisions, the rights and benefits of the Executive under the
benefit plans and programs of the Company shall be determined in accordance with
the provisions of such plans and programs; provided, however, that, in the event
the Company shall timely elect to pay the Change of Control Payment over a
period of thirty-six (36) months, as provided for above (or any other term of
extended payment agreed upon by Executive and the Company), then the Company
shall continue to provide Executive with the benefits to which he was entitled
immediately prior to his termination of employment until the Change of Control
Payment is paid to Executive in full. The rights and benefits of the Executive
with respect to the shares of restricted stock and options referred to in
Section 3.c. above shall be determined in accordance with the provision of this
Agreement and the plans and grant agreements governing such shares and options;
provided, however, that in the event there shall be a conflict between the terms
of this Agreement and the terms of any such plan or grant agreement, then the
provisions of this Agreement shall govern and control. Except as otherwise
specified in this Agreement, neither the Executive nor the Company shall have
any further rights or obligations under this Agreement. The payments and
benefits provided pursuant to this Section 5.d.vi. are

                                       25
<PAGE>

intended as liquidated damages for a termination of the Executive's
employment by the Company other than for Cause or Disability or for the actions
of the Company leading to a termination of the Executive's employment by the
Executive for Good Reason, in each case in connection with, on or after the
occurrence of a Change in Control, and shall be the sole and exclusive remedy
therefor. Executive shall have no obligation whatsoever to mitigate any damages,
costs or expenses suffered or incurred by the Company with respect to any
payments made pursuant to this Section 5.d.vi., and no such payment shall be
subject to any cancellation, reduction, offset, rebate or repayment as a result
of any subsequent employment or other business activity by the Executive
including, without limitation, self employment, except such deductions at the
source as from time to time may be required to be made pursuant to any law, rule
regulation or order.
                  e. No Waiver. The failure to set forth any fact or
         circumstance in a Notice of Termination for Cause or a Notice of
         Termination for Good Reason shall not constitute a waiver of the right
         to assert, and shall not preclude the party giving notice from
         asserting, such fact or circumstance in an attempt to enforce any right
         under or provision of this Agreement.
                  f. Date of Termination. The "Date of Termination" means the
         date of the Executive's death, the Disability Effective Date, the date
         on which the termination of the Executive's employment by the Company
         for Cause or without Cause or by the Executive for Good Reason is
         effective, or the date on which the Executive gives the Company notice
         of a termination of employment without Good Reason, as the case may be.

                                       26
<PAGE>

         6. Tax Indemnification. If the compensation, benefits, payment
accelerations, share option acceleration, appreciation rights or loan
forgiveness received by Executive from Donnkenny or the Company hereunder, or
otherwise, (the "Payments") will be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code and any successor provision, or any comparable
provision of state or local tax law (collectively, "Section 4999"), or any
interest, penalty or addition to tax will be incurred by Executive with respect
to such excise tax (such excise tax, together with any such interest, penalty or
addition to tax being referred to herein as the "Excise Tax"), then Executive
shall receive an additional cash payment (a "Gross-Up Payment") in an amount
such that after the payment by Executive of all taxes, interest, penalties, and
additions to tax imposed with respect to the Gross-Up Payment (including,
without limitation, any income tax, employment tax payable by Executive and
Excise Tax imposed upon the Gross-Up Payment), Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon such Payments. In
calculating the Gross-Up Payment, Executive will be deemed to pay Federal income
taxes at the highest marginal rate of Federal income taxation as of the year in
which the Gross-Up Payment is to be made and state and local taxes at the
highest marginal rate of taxation in the state or locality of the Gross-Up
Payment recipient's state of residence as of the date the tax obligation is
incurred, net of the maximum reduction in Federal income taxes which could be
obtained from deducting the state and local taxes if paid in the year in which
the tax obligation is incurred.
         7. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor shall anything in this
Agreement limit or otherwise affect such rights as the Executive may have under
any

                                       27
<PAGE>

contract or agreement with the Company or any of its affiliated companies.
Vested benefits and other amounts that the Executive is otherwise entitled to
receive under the Restricted Stock Plan, the Stock Option Plan, or any other
plan, policy, practice or program of, or any contract of agreement (including
this Agreement) with, the Company or any of its affiliated companies on or after
the Date of Termination shall be payable in accordance with the terms of each
such plan, policy, practice, program, contract or agreement, as the case may be.
         8. Inventions. Any and all inventions, innovations or improvements
("inventions") made, developed or created by the Executive (whether at the
request or suggestion of the Company (which, as used in this Section 8, shall be
deemed to include the Company and each of its subsidiaries) or otherwise,
whether alone or in conjunction with others, and whether during regular hours of
work or otherwise) during the period of his employment with the Company which
may be directly or indirectly useful in, or relate to, the business of the
Company and shall be the Company's exclusive property as against the Executive,
and the Executive shall promptly deliver to an appropriate representative of the
Company . The Executive shall, at the request of the Company and without any
payment therefore, execute any documents necessary or advisable in the opinion
of the Company's counsel to direct issuance of patents or copyrights to the
Company with respect to such inventions as are to be the Company's exclusive
property as against the Executive or to vest in the Company title to such
inventions as against the Executive. The expense of securing any such patent or
copyright shall be borne by the Company.
         9. Confidential Information. The Executive shall hold in strict
confidence all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies and their respective businesses
that the Executive obtains during the Executive's

                                       28
<PAGE>

employment by the Company or any of its affiliated companies; provided,
however, that Executive's obligations under this Section 9 with respect to any
specific Confidential Information shall cease when that specific Confidential
Information becomes public knowledge (other than as a result of the Executive's
violation of this Section 9) ("Confidential Information") or when it is
disclosed by any person, firm, corporation or business entity which is not bound
by the terms of a confidentiality agreement with the Company which contains
substantially identical provisions as the terms hereof. Except as is otherwise
provided for herein, the Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the Executive's employment
with the Company, except with the prior written consent of the Company or as
otherwise required by law or regulation or by legal process. If the Executive is
requested pursuant to, or required by, applicable law or regulation or by legal
process to disclose any Confidential Information, the Executive shall provide
the Company, as promptly as the circumstances reasonably permit, with notice of
such request or requirement and, unless a protective order or other appropriate
relief is previously obtained, the Confidential Information, subject to such
request, may be disclosed pursuant to and in accordance with the terms of such
request or requirement, provided that the Executive, at the Company's expense,
shall use his best efforts to limit any such disclosure to the precise terms of
such request or requirement.
         10. Non-Competition. The Executive acknowledges that the services to be
rendered by him to the Company (which, as used in this Section 10 shall be
deemed to include the Company and each of its subsidiaries) are of a special and
unique character. In consideration of his employment hereunder, the Executive
agrees, for the benefit of the Company, that he will not, during the term of
this Agreement and (except in a case where the Executive's employment is
terminated (x) by the

                                       29
<PAGE>

Company other than for Cause, (y) by the Executive for Good Reason, or
(z) by the Executive or the Company for any or no reason following the
occurrence of a Change in Control) thereafter until the expiration of a period
of twelve (12) months commencing on the date of termination of his employment
with the Company (a) engage, directly or indirectly, whether as principal,
agent, distributor, representative, consultant, employee, partner, stockholder,
limited partner or other investor (other than an investment of not more than (i)
five percent (5%) of the stock or equity of any corporation the capital stock of
which is publicly traded or (ii) five percent (5%) of the ownership interest of
any limited partnership or other entity) or otherwise, within the United States
of America, in any apparel business which is competitive with the business now,
or at any time during the term of this Agreement, conducted by the Company, (b)
solicit or entice to endeavor to solicit or entice away from the Company or hire
any person who was or is an officer, employee or sales representative of the
Company within the ninety (90) day period immediately preceding Executive's
termination of employment, either for his own account or for any individual,
firm or corporation, whether or not such person would commit any breach of his
contract of employment by reason of leaving the service of the Company, and the
Executive agrees not to employ, directly or indirectly, any person who was an
officer, employee or sales representative of the Company or who by reason of
such position at any time is or may be likely to be in possession of any
confidential information or trade secrets relating to the businesses or products
of the Company, or (c) solicit or entice or endeavor to solicit or entice away
from the Company any customer or prospective customer of the Company, either for
his own account or for any individual, firm or corporation with respect to the
business of the Company. In addition, the Executive shall not, at any time
during the term of this Agreement or at any time thereafter, engage in the
business which uses as its name, in whole or in part, Donnkenny, Kenny

                                       30
<PAGE>

Classics or any other trade name or trademark or corporate name used by
Donnkenny, the Company or any of their subsidiaries during the Employment Term.
         11.      Indemnification.
                  a The Company and Donnkenny shall indemnify the Executive to
         the fullest extent permitted by Delaware law in effect as of the date
         hereof against all costs, expenses, liabilities and losses (including,
         without limitation, attorneys' fees, judgments, fines, penalties, ERISA
         excise taxes, penalties and amounts paid in settlement) reasonably
         incurred by the Executive in connection with a Proceeding. For the
         purposes of this Section 11a, "Proceeding" shall mean any action, suit
         or proceeding, whether civil, criminal, administrative or
         investigative, in which the Executive is made, or is threatened to be
         made, a party to, or a witness in, such action, suit or proceeding by
         reason of the fact that he is or was an officer, director or employee
         of the Company or Donnkenny, or is or was serving as an officer,
         director, member, employee, trustee or agent of any other entity at the
         request of the Company or Donnkenny, whether or not the basis of such
         Proceeding arises out of or in connection with the Executive's alleged
         action or omission in an official capacity.
                  b The Company and Donnkenny shall advance to the Executive all
         reasonable costs and expenses incurred by him in connection with a
         Proceeding within 20 days after receipt by the Company or Donnkenny, as
         the case may be, of a written request for such advance. Such request
         shall include an itemized list of the costs and expenses and an
         undertaking by the Executive to repay the amount of such advance if it
         shall ultimately be determined that he is not entitled to be
         indemnified against such costs and expenses. Upon a request under
         subsection (b), the Executive shall be deemed to have met the standard
         of

                                       31
<PAGE>

         conduct required for such indemnification unless the contrary shall
         be established by a court of competent jurisdiction.
                  c The Executive shall not be entitled to indemnification under
         this Section 11 unless he meets the standard of conduct specified in
         the Delaware General Corporation Law. Any indemnification under
         subsection a. (unless ordered by a court) shall be made by the Company
         or Donnkenny only as authorized in the specific case upon a
         determination that indemnification of the Executive is proper in the
         circumstances because he has met the applicable standard of conduct set
         forth in the Delaware Corporation Law. Such determination shall be made
         (1) by the Board or the Board of Directors of Donnkenny, as the case
         may be, by a majority vote of a quorum consisting of directors who were
         not parties to such Proceeding, or (2) if such a quorum is not
         obtainable, or, even if obtainable a quorum of disinterested directors
         so directs, by independent legal counsel in a written opinion, or (3)
         by the stockholders.
                  d Neither the Company nor Donnkenny shall settle any
         Proceeding or claim in any manner which would impose on the Executive
         any penalty or limitation without his prior written consent. Neither
         the Company nor Donnkenny nor the Executive will unreasonably withhold
         its or his consent to any proposed settlement.
                  e The indemnification in this Section 11 shall inure to the
         benefit of the Executive's  heirs,  executors and administrators.
                  f The Company and Donnkenny agree to use their respective best
         efforts to obtain, continue and maintain an adequate directors and
         officers' liability insurance policy and shall cause such policy to
         cover the Executive to the extent the Company or Donnkenny

                                       32
<PAGE>

         provides such coverage for its other executive officers. Upon request
         by Executive, the Company and Donnkenny shall furnish Executive with
         written evidence that such coverage is in full force and effect.
                  g Donnkenny and the Company agree to indemnify and hold
         Executive  harmless from all losses,  costs,  fees and expenses
         including,  without limitation,  reasonable legal fees and litigation
         expenses, which Executive shall suffer, sustain or incur as a result
         of, in connection with or arising from any breach of this Agreement by
         Donnkenny or the Company.
         12.      Attorneys'  Fees.  The Company  agrees to pay, as incurred,
all legal fees and expenses  incurred by the Company and the Executive in
connection with the preparation of this Agreement. The Company further agrees
to pay, if and only if the Executive prevails in any contest, to the fullest
extent permitted by law, all legal fees and expenses that the Executive may
reasonably incur as a result of any contest by Donnkenny, the Company, the
Executive or others of the validity or enforceability of or liability under, or
otherwise involving, any provision of this Agreement, together with interest on
any delayed payment at the applicable federal rate provided for in Section
7872(f)(2)(A) of the Code.
         13.      Successors; Beneficiaries.
                  h This Agreement is personal to the Executive and, without the
         prior written consent of the Company, shall not be assignable by the
         Executive otherwise than by will or the laws of descent and
         distribution. This Agreement shall inure to the benefit of and be
         enforceable by the Executive's legal representatives.

                                       33
<PAGE>

                  i This Agreement shall inure to the benefit of and be binding
         upon the Company and its successors and assigns.
                  j The Company or Donnkenny, as the case may be, shall require
         any successor (whether direct or indirect, by purchase, merger,
         consolidation or otherwise) to all or substantially all of the business
         and/or assets of the Company or Donnkenny expressly to assume and agree
         to perform this Agreement in the same manner and to the same extent
         that Donnkenny or the Company would have been required to perform it if
         no such succession had taken place; provided, however, that no such
         assignment or transfer shall have the effect of releasing or relieving
         Donnkenny or the Company of any liability or obligation to the
         Executive hereunder or in any other agreement, plan or document
         contemplated herein. As used in this Agreement, "Company" shall mean
         both the Company as defined above and any such successor that assumes
         and agrees to perform this Agreement, by operation of law or otherwise
         and "Donnkenny" shall mean both Donnkenny as defined above and any such
         successor that assumes and agrees to perform this Agreement by
         operation of law or otherwise.
                  k The Executive shall be entitled, to the extent permitted
         under any applicable law, to select and change the beneficiary or
         beneficiaries to receive any compensation or benefit payable hereunder
         following the Executive's death by giving the Company written notice
         thereof. In the event of the Executive's death or a judicial
         determination of his incompetence, reference in this Agreement to the
         Executive shall be deemed, where appropriate, to refer to his
         beneficiary, estate or other legal representative.

                                       34
<PAGE>

         14.      Notices.  All notices and other communications under this
Agreement  shall be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt  requested,  postage
prepaid,  or overnight mail service addressed as follows:

                                            If to the Executive:
                                            Mr. Daniel H. Levy
                                            c/o Donnkenny Apparel, Inc.
                                            1411 Broadway
                                            New York, New York 10018

                                            With a copy to:

                                            Piper Rudnick
                                            Suite 1800
                                            203 North LaSalle Street
                                            Chicago, Illinois 60601-1293
                                            Attn:  Stephen A. Landsman, Esq.

                                            If to Donnkenny or the Company:

                                            Donnkenny Apparel, Inc.
                                            1411 Broadway
                                            New York, New York 10018
                                            Attention:   President

or to such other address as either party furnishes to the other in writing in
accordance with this Section 14. Notices and communications shall be effective
when actually received by the addressee.

         15. Modification or Waiver. No amendment, modification, waiver,
termination or cancellation of this Agreement shall be binding or effective for
any purpose unless it is made in a writing signed by the party against whom
enforcement of such amendment, modification, waiver, termination or cancellation
is sought. No course of dealing between or among the parties to this Agreement
shall be deemed to affect or to modify, amend or discharge any provision or term
of this Agreement. No delay on the part of Donnkenny, the Company or the
Executive in the exercise of

                                       35
<PAGE>


any of their respective rights or remedies shall operate as a waiver thereof,
and no single or partial exercise by Donnkenny, the Company or the Executive of
any such right or remedy shall preclude other or further exercises thereof. A
waiver of a right or remedy on any one occasion shall not be construed as a bar
to or waiver of any such right or remedy on any other occasion.
         16. Governing Law; Jurisdiction.  This Agreement and all rights,
remedies and obligations hereunder,  including,  but not limited to, matters of
construction,  validity and  performance  shall be governed by the laws of the
State of New York without regard to its conflict of laws principles or rules.
         17. Severability. Whenever possible each provision and term of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision or term of this Agreement shall be
held to be prohibited by or invalid under such applicable law, then such
provision or term shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating or affecting in any manner whatsoever the
remainder of such provisions or term or the remaining provisions or terms of
this Agreement.
         18. Counterparts.  This  Agreement  may be executed in separate
counterparts,  each of which is deemed to be an original and all of which taken
together constitute one and the same Agreement.
         19. Headings.  The headings of the Sections of this Agreement are
inserted for  convenience  only and shall not be deemed to constitute a part
hereof and shall not affect the construction or interpretation of this
Agreement.

                                       36
<PAGE>

         20. Entire Agreement.  This Agreement  (together with all documents
and instruments  referred to herein)  constitutes the entire agreement and
supersedes all other prior agreements and  undertakings,  both written and
oral, among the parties with respect to the subject matter hereof.

         21. Arbitration. If any controversy or dispute shall arise between the
parties hereto in connection with, arising from, or in respect to this
Agreement, any provision hereof, or any provision of any instrument, document,
agreement or other writing delivered pursuant hereto, or with respect to the
validity of this Agreement or any such document, agreement or other writing, and
if such controversy or dispute shall not be resolved within thirty (30) days
after the same shall arise, then such dispute or controversy shall be submitted
for arbitration to the New York, New York office of the American Arbitration
Association in accordance with its commercial arbitration rules then in effect.
Any such dispute or controversy shall be determined by one (1) arbitrator. Such
arbitrator may award any relief which such arbitrator shall deem proper in the
circumstances, without regard to the relief which would otherwise be available
to either party hereto in a court of law or equity, including, without
limitation, an award of money damages (including interest on unpaid amounts,
calculated from the due date of any such amount, at a rate per annum determined
by said arbitrator), specific performance and injunctive relief. The award and
findings of such arbitrator shall be conclusive and binding upon the parties
thereto, and judgment upon such award may be entered in any court of competent
jurisdiction. Any party against whom an arbitrator's award shall be issued shall
not, in any manner, oppose or defend against any suit to confirm such award, or
any enforcement proceedings brought against such party, whether within or
outside of the United States of America, with respect to any judgment entered
upon the award, and such party hereby consents to the entry of

                                       37
<PAGE>

a judgment against such party, in the full amount thereof, or other relief
granted therein, in any jurisdiction in which such enforcement is sought.
         22. Survival. The respective obligations of Donnkenny and the Company
and the Executive under Sections 5 (with respect to amounts owing as a result of
any termination), 6, 7 (with respect to amounts owing), 8, 9, 10, 11, 12, 13, 21
or this Section 22 shall survive any termination of Executive's employment;
provided, however, that the Executive's obligations under Section 11
(Non-Competition) shall terminate and shall not survive in the event (i) the
Executive's employment is terminated by the Company other than for Cause or by
the Executive for Good Reason, or (ii) the Executive's employment is terminated
for any or no reason following a Change in Control.
         23. Conflicting  Terms.  In the event  any of the terms of this
Agreement  shall  conflict  with any of the terms of any benefit  plan of the
Company or  Donnkenny  in which  Executive is a  participant,  then the terms
of this  Agreement  shall govern and control.

                                       38
<PAGE>


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

                                DONNKENNY, INC., a Delaware
                                corporation


                               By:         /s/ Lynn Siemers
                                           -------------------------------------
                               Name:        Lynn Siemers
                                           -------------------------------------
                               Title:       President and COO
                                           -------------------------------------


                                DONNKENNY APPAREL, INC., a
                                Delaware corporation


                                By:        /s/ Lynn Siemers
                                           -------------------------------------
                                Name:       Lynn Siemers
                                           -------------------------------------
                                Title:      President and COO
                                           -------------------------------------


                                EXECUTIVE
                                /s/ Daniel H. Levy
                                ------------------------------------------------
                                DANIEL H. LEVY


                                       39
<PAGE>

</TEXT>
</DOCUMENT>
