SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
___________
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 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
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(State or other jurisdiction (I.R.S. employer identification number)
of incorporation or organization)
1410 Broadway, New York, New York 10018
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 354-1280
- - - -------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report
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 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
- - - -------------------------------------------------------------------------------
November 4, 1994 Common Stock, $0.01 par value 20,299,331
- - - -------------------------------------------------------------------------------
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited): PAGE
<S> <C>
Condensed Consolidated Balance Sheets as
of September 30, 1994, June 30, 1994 and
September 30, 1993 ................................... 3
Condensed Consolidated Statements of
Operations for the Quarters ended
September 30, 1994 and 1993 .......................... 4
Condensed Consolidated Statements of
Cash Flows for the Quarters ended
September 30, 1994 and 1993........................... 5
Notes to Condensed Consolidated Financial
Statements ........................................... 6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ........................................... 8 - 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ..................... 12
SIGNATURES ..................................................... 13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
BERNARD CHAUS, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, JUNE 30, SEPTEMBER 30,
1994 1994 1993
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $798 $468 $615
Accounts receivable - net 34,366 17,757 46,510
Inventories 23,904 25,503 37,237
Prepaid expenses and other current assets 2,200 3,608 3,320
Refundable and prepaid income taxes 19 135 681
--------- --------- ---------
Total Current Assets 61,287 47,471 88,363
Fixed Assets 3,445 3,612 5,936
Other Assets 557 536 978
--------- --------- ---------
$65,289 $51,619 $95,277
--------- --------- ---------
--------- --------- ---------
LIABILITIES AND STOCKHOLDERS'(DEFICIT) EQUITY
Current Liabilities
Notes payable - bank $29,958 $21,115 $23,343
Subordinated Promissory Notes - current 0 250 3,558
Accounts payable 19,319 14,290 17,258
Accrued expenses 6,991 6,710 4,938
Accrued restructuring costs 2,549 1,764
--------- --------- ---------
Total Current Liabilities 58,817 44,129 49,097
Accrued Restructuring Expenses 2,242 2,315
Subordinated Promissory Notes 19,354 18,789 14,730
--------- --------- ---------
80,413 65,233 63,827
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 -- 20,904,531 at
September 30, 1994, 18,975,031 at
June 30, 1994 and June 30, 1993 209 190 190
Additional paid-in capital 47,632 40,226 40,232
(Deficit) (61,485) (52,550) (7,492)
Less: Treasury stock, at cost --
622,700 shares (1,480) (1,480) (1,480)
--------- --------- ---------
Total Stockholders' (Deficit) Equity (15,124) (13,614) 31,450
--------- --------- ---------
$65,289 $51,619 $95,277
--------- --------- ---------
--------- --------- ---------
</TABLE>
Note: The balance sheet at June 30, 1994 has been derived from the audited
financial statements at that date, see notes to condensed consolidated
financial statements.
3
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BERNARD CHAUS, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - (Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
<S> <C>
Net sales $65,391 $69,600
Cost of goods sold 51,702 56,482
-------- ----------
Gross profit 13,689 13,118
Selling, general and
administrative expenses 12,200 13,834
Restructuring expenses 1,200
Unusual expenses 7,833
-------- ----------
(7,544) (716)
Interest and other income (expense), net 35 (2)
Interest expense (1,350) (942)
-------- ----------
Loss before provision for income taxes (8,859) (1,660)
Provision for income taxes 76 37
-------- ----------
Net loss ($8,935) ($1,697)
-------- ----------
-------- ----------
Net loss per common share ($0.48) ($0.09)
-------- ----------
-------- ----------
Weighted average number of common and
common equivalent shares outstanding 18,718 18,352
-------- ----------
-------- ----------
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
BERNARD CHAUS, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
<S> <C>
OPERATING ACTIVITIES
Net loss ($8,935) ($1,697)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 158 411
Provision (recovery of) losses on accounts receivable 45 (25)
Unpaid interest on subordinated promissory notes 565 935
Changes in operating assets and liabilities:
Accounts receivable (16,654) (15,923)
Inventories 1,599 8,737
Prepaid expenses and other assets 1,387 1,353
Income taxes receivable 116 41
Accounts payable 5,029 (2,231)
Accrued restructuring costs 712
Accrued expenses 281 (400)
-------- ----------
NET CASH USED IN OPERATING ACTIVITIES (15,697) (8,799)
INVESTING ACTIVITIES
Purchases of fixed assets - net of disposal 9 (415)
FINANCING ACTIVITIES
Net proceeds from short term bank borrowings 8,843 8,462
Principal payments on subordinated promissory notes (250)
Net proceeds from sale of stock 7,425
-------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 16,018 8,462
-------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 330 (752)
Cash and cash equivalents at beginning of period 468 1,367
-------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $798 $615
-------- ----------
-------- ----------
Supplemental cash information
Cash paid for:
Taxes $5 $1
Interest $575 $420
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1994
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the
quarter ended September 30, 1994 are not necessarily indicative of
the results that may be expected for the fiscal year 1995. For
further information, refer to the financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the
year ended June 30, 1994.
Net Loss Per Share: Net loss per share has been computed by
dividing the applicable net loss by the weighted average number of
common and common equivalent shares outstanding (September 30, 1994 -
18,718,000, June 30, 1994 - 18,352,000 and September 30, 1993 -
18,352,000). Common equivalent shares were not considered as the
inclusion of such would have been antidilutive.
NOTE 2. INVENTORIES
Inventories are stated at the lower of cost, using the first-in
first-out method, or market.
Inventories consist of:
<TABLE>
<CAPTION>
September 30, June 30, September 30,
1994 1994 1993
------------- -------- -------------
(In thousands)
<S> <C> <C> <C>
Finished goods $23,653 $25,075 $36,055
Work-in-process 102 124 615
Raw material 149 304 567
-------- ------- -------
$23,904 $25,503 $37,237
-------- ------- -------
-------- ------- -------
</TABLE>
Inventories included merchandise in transit (principally
finished goods) of approximately $9,690,000 at September 30,
1994, $11,176,000 at June 30, 1994 and $7,750,000 at September
30, 1993.
6
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
NOTE 3: 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.
During the first quarter of fiscal year 1995, 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.
During the 1994 fiscal year, the Company required availability under
its working capital credit line with BNY Financial Corporation (the
"Bank") in excess of the amount available under its borrowing base
formula. To assist the Company, Josephine Chaus agreed to provide
credit support in the form of a letter of credit. She initially
provided a letter of credit in the amount of $3 million on April 15,
1994 which was increased to $5 million on June 14, 1994 and further
increased on September 13, 1994 to $7.2 million. The expiration date
of the letter of credit, initially in effect through October 15,
1994, was extended to April 15, 1995 (the "Extension"). The Bank has
increased the Company's borrowing availability by various amounts as
the amount and expiration date of the letter of credit has been
increased and extended.
Josephine Chaus has also agreed to purchase, subject to shareholder
approval, $7.2 million of Common Stock of the Company at a purchase
price determined by a special committee of independent members of the
Board of Directors of the Company (the "Special Committee") equal to
the five day trading average of the closing sale price of the
Company's Common Stock commencing September 27, 1994. Such price was
equal to $3.85 per share, resulting in an aggregate purchase of
1,914,500 shares.
Pending shareholder approval of her purchase of the shares of Common
Stock, Josephine Chaus has loaned $7.2 million to the Company and the
Company has issued promissory notes in the aggregate principal amount
of $7.2 million to Josephine Chaus, bearing interest at 12%. The
notes will be exchanged for the shares of Common Stock upon the
approval by the shareholders. Proceeds from such cash infusion were
used for costs and associated expenses related to the signing of the
Company's new Chief Executive Officer.
In approving the sale of the shares of Common Stock the Special
Committee sought the advice of Lehman Brothers, which provided its
view as to the commercial reasonableness of the transaction.
Josephine Chaus possesses the power to vote more than 50% of the
outstanding shares of Common Stock. Consequently, the affirmative
vote of Josephine Chaus is sufficient to approve the Company's sale
7
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
to Josephine Chaus of the Common Stock without the vote of any other
shareholders. Josephine Chaus has advised the Company that she
intends to vote all of her shares in favor of such sale. As a
result, the Company has reflected the purchase of 1,914,500 shares of
Common Stock at September 30, 1994. Included in the 1,914,500 shares
of Common Stock is a certain number of shares in satisfaction of
interest earned under the $7.2 million note to Josephine Chaus
through the date of shareholder approval.
NOTE 4: SUBORDINATED PROMISSORY NOTES
The Company has outstanding at September 30, 1994 $19,354,000 of
subordinated promissory notes payable to Josephine Chaus and the
Estate of Bernard Chaus (the "Noteholders"), certain of which were
originally issued on June 30, 1986 and the remainder in February and
March 1991 (the "Subordinated Notes"). The Company has been unable
to make payments of principal or interest on the Subordinated Notes
since 1993 (with the exception of principal payments of $500,000,
$250,000 and $250,000 in November 1993, February 1994 and August
1994, respectively) as a result of restrictive covenants under the
Financing Agreement. The Noteholders agreed to extend the maturity
date for the remaining principal and interest payments on all of the
Subordinated Notes, which were to have been due (based on previous
extensions) on July 1, 1995, to October 1, 1995.
NOTE 5: RESTRUCTURING AND UNUSUAL EXPENSES
For the quarter ended September 30, 1994, the Company initiated a
number of actions to strengthen its financial position, including a
cash infusion of $7.2 million from its principal shareholder, cost
reductions largely related to additional layoffs in the Company's
U.S. and overseas offices, and the hiring of the Company's new Chief
Executive Officer. The Company believes these actions will have a
positive impact on future operating results.
Relative to the aforementioned programs, the Company recorded
restructuring expenses of $1.2 million. These costs primarily relate
to employee severance as the Company continues to reduce overhead
costs.
In addition, for the quarter ended September 30, 1994, the Company
recorded unusual expenses of $7.8 million primarily related to the
signing of the Company's new Chief Executive Officer.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Operating results for the quarter ended September 30, 1994 are not
necessarily indicative of the results that may be expected for the
fiscal year 1995.
For the quarter ended September 30, 1994, net sales decreased by
$4.2 million or 6.1% compared to the corresponding period ended
September 30, 1993. The sales decrease is primarily due to a
8
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
reduction in the number of units sold, lower standard selling
prices, higher returns, discounts and promotional allowances,
partially offset by lower discounts from standard selling prices.
The promotional allowances are to accelerate and increase sell-
through at the retail level.
Cost of goods sold as a percent of net sales decreased to 79.1% for
the quarter ended September 30, 1994, from 81.2% for the comparable
prior period of 1993. The decrease in cost, as a percent of sales,
came from proportionately more net sales as a result of more units
sold at standard selling price and a lower discount from standard
selling price.
Selling, general and administrative expenses, as a percent of net
sales, decreased to 18.7% from 19.9% as compared to the prior year.
The actual dollar expense decrease of $1.6 million is attributable
to the implementation of cost reduction programs.
In September 1994, the Company recorded restructuring expenses of
$1.2 million. The restructuring expenses primarily relate to
employee severance as the Company continues to reduce overhead
costs.
In September 1994 the Company recorded unusual expenses of $7.8
million primarily related to the signing of the Company's new Chief
Executive Officer.
Interest expense increased compared with last year primarily due to
higher bank borrowings, the $7.2 million promissory notes and a
higher interest rate.
Financial Position, Liquidity and Capital Resources
For the quarter ended September 30, 1994 the Company used net cash
of $15.7 million in operating activities compared to $8.8 million of
net cash used in the corresponding period in the previous year.
The net cash used in operating activities for the quarter ended
September 30, 1994 resulted primarily from the net loss ($8.9
million), a reduction in accounts receivable ($16.7 million), offset
somewhat by an increase in accounts payable ($5.0 million),
decreases in inventories ($1.6 million), prepaid expenses and other
assets ($1.4 million) and increases in various accrued expenses
($1.6 million).
Inventory decreased to $23.9 million at September 30, 1994 compared
with $37.2 million at September 30, 1993. This change resulted
primarily from approximately a 50% reduction of both units and
dollars of merchandise available for sale at the Company's
distribution center combined with less merchandise in transit
(principally finished goods).
The Company's anticipated capital expenditures for fiscal 1995 are
approximately $1.5 million, consisting primarily of expenditures for
its warehouses, design facilities and the purchase of additional
computer software systems.
9
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
The Company's operations over the past several years have been
financed primarily through the use of internally generated funds,
subordinated debt, lines of credit and the equity infusion from
Josephine Chaus. The Company anticipates that its future operations
will be financed through the retention of internally generated funds
and borrowings under the Financing Agreement.
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.
During the first quarter of fiscal year 1995, 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.
During the 1994 fiscal year, the Company required availability under
its working capital credit line with BNY Financial Corporation (the
"Bank") in excess of the amount available under its borrowing base
formula. To assist the Company, Josephine Chaus agreed to provide
credit support in the form of a letter of credit. She initially
provided a letter of credit in the amount of $3 million on April 15,
1994 which was increased to $5 million on June 14, 1994 and further
increased on September 13, 1994 to $7.2 million. The expiration
date of the letter of credit, initially in effect through October
15, 1994, was extended to April 15, 1995 (the "Extension"). The
Bank has increased the Company's borrowing availability by various
amounts as the amount and expiration date of the letter of credit
has been increased and extended.
In consideration for her provision of credit support to the Company,
the Special Committee has authorized the issuance to Josephine
Chaus, subject to shareholder approval, of (i) warrants to purchase
338,000 shares of Common Stock at an exercise price of $3.00 per
share (the "$3.00 Warrants") for the initial $3 million letter of
credit; (ii) warrants to purchase 206,000 shares of Common Stock at
an exercise price of $2.25 per share (the "$2.25 Warrants") for the
$2 million increase in the letter of credit; (iii) warrants to
purchase 32,500 shares of Common Stock at an exercise price of $4.62
per share (the "$4.62 Warrants") for the $2.2 million increase to
the letter of credit; and (iv) warrants to purchase 640,000 shares
of Common Stock at an exercise price of $4.62 per share for the
Extension (the "Extension Warrants"). The exercise prices of the
$3.00 Warrants and $2.25 Warrants represent a 20% premium over the
closing price of the Common Stock on the New York Stock Exchange on
April 15, 1994 and June 23, 1994, respectively, the dates when the
Special Committee approved the issuance of such warrants. The
exercise prices of the $4.62 Warrants and the Extension Warrants
represent a 20% premium over the average closing price of the
10
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BERNARD CHAUS, INC. AND SUBSIDIARIES
Company's Common Stock on the New York Stock Exchange over the five-
day period commencing September 27, 1994 (i.e., subsequent to the
public announcement of Andrew Grossman's employment by the Company
as the new Chief Executive Officer and two trading days after the
announcement of the Company's 1994 fiscal year results).
The warrants will be exercisable upon issuance, will expire five
years from the date of issuance and will not be transferable. The
warrants will contain customary antidilution provisions. The
Company has borne all out-of-pocket expenses incurred by Josephine
Chaus in providing the letter of credit. Josephine Chaus has agreed
to forfeit a pro rata portion of the Extension Warrants if the
letter of credit is terminated before April 15, 1995.
In approving such warrants, the Special Committee sought the advice
of Lehman Brothers, which provided its view as to the commercial
reasonableness of the transaction.
Josephine Chaus has also agreed to purchase, subject to shareholder
approval, $7.2 million of Common Stock of the Company at a purchase
price determined by a special committee of independent members of
the Board of Directors of the Company (the "Special Committee")
equal to the five day trading average of the closing sale price of
the Company's Common Stock commencing September 27, 1994. Such
price was equal to $3.85 per share, resulting in an aggregate
purchase of 1,914,500 shares.
Pending shareholder approval of her purchase of the shares of Common
Stock, Josephine Chaus has loaned $7.2 million to the Company and
the Company has issued promissory notes in the aggregate principal
amount of $7.2 million to Josephine Chaus, bearing interest at 12%.
The notes will be exchanged for the shares of Common Stock upon the
approval by the shareholders. Proceeds from such cash infusion were
used for costs and associated expenses related to the signing of the
Company's new Chief Executive Officer.
In approving the sale of the shares of Common Stock the Special
Committee sought the advice of Lehman Brothers, which provided its
view as to the commercial reasonableness of the transaction.
Josephine Chaus possesses the power to vote more than 50% of the
outstanding shares of Common Stock. Consequently, the affirmative
vote of Josephine Chaus is sufficient to approve the Company's sale
to Josephine Chaus of the Common Stock without the vote of any other
shareholders. Josephine Chaus has advised the Company that she
intends to vote all of her shares in favor of such sale. As a
result, the Company has reflected the purchase of 1,914,500 shares
of Common Stock at September 30, 1994. Included in the 1,914,500
shares of Common Stock is a certain number of shares in satisfaction
of interest earned under the $7.2 million note to Josephine Chaus
through the date of shareholder approval.
The Company has outstanding at September 30, 1994 $19,354,000 of
subordinated promissory notes payable to Josephine Chaus and the
Estate of Bernard Chaus (the "Noteholders"), certain of which were
originally issued on June 30, 1986 and the remainder in February and
11
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BERNARD CHAUS, INC. AND SUBSIDIARIES
March 1991 (the "Subordinated Notes"). The Company has been unable
to make payments of principal or interest on the Subordinated Notes
since 1993 (with the exception of principal payments of $500,000,
$250,000 and $250,000 in November 1993, February 1994 and August
1994, respectively) as a result of restrictive covenants under the
Financing Agreement. The Noteholders agreed to extend the maturity
date for the remaining principal and interest payments on all of the
Subordinated Notes, which were to have been due (based on previous
extensions) on July 1, 1995, to October 1, 1995.
For the quarter ended September 30, 1994, the Company initiated a
number of actions to strengthen its financial position, including a
cash infusion of $7.2 million from its principal shareholder,
continued consolidation of its office locations worldwide, ongoing
overhead reduction programs, and the hiring of the Company's new
Chief Executive Officer. The Company believes these actions will
have a positive impact on future operating results.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Attached hereto as Exhibits are the following:
10.105 Amendment to By-Laws dated September 13, 1994.
10.106 Waiver dated November 7, 1994, to the Restated and
Amended Financing Agreement between the Company and BNY
Financial Corporation.
10.107 Agreement dated November 9, 1994, between the
Company and Josephine Chaus extending the due dates on
subordinated promissory notes.
10.108 Agreement dated November 9, 1994, between the
Company and the Estate of Bernard Chaus extending the due
dates on subordinated promissory notes.
27 Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the
quarter ended September 30, 1994.
12
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BERNARD CHAUS, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BERNARD CHAUS, INC.
(Registrant)
<TABLE>
<S> <C>
Date: November 14, 1994 By: /s/ Josephine Chaus
Josephine Chaus
Chairwoman of the Board and
Office of the Chairman
Date: November 14, 1994 By: /s/ Andrew Grossman
Andrew Grossman
Chief Executive Officer and
Office of the Chairman
Date: November 14, 1994 By: /s/ Wayne S. Miller
Wayne S. Miller
Executive Vice President
Finance & Administration and
Chief Financial Officer
(Principal Financial Officer)
</TABLE>
<PAGE>
AMENDMENT TO BY-LAWS
OF BERNARD CHAUS, INC.
Dated September 13, 1994
Pursuant to the provisions of Section 805 of the Business Corporation
Law of the State of New York and Article XI of the By-Laws of Bernard Chaus,
Inc. (the "Corporation"), the By-Laws of the Corporation are amended as
follows:
1) Section 4 of Article III shall be deleted in its entirety and replaced
with the following:
"Powers and Duties of Office of the Chairman of the Corporation.
The Office of the Chairman of the corporation shall consist of two members.
Members of the Office of the Chairman shall be executive officers of the
Corporation. The Office of the Chairman shall from time to time make such
reports concerning the Corporation as the Board of Directors may direct.
One or both members of the Office of the Chairman shall preside at all
meetings of shareholders and the Board of Directors. The members of the
Office of the Chairman shall have such other powers and shall perform such
other duties as may from time to time be assigned to them by the Board of
Directors."
2) Section 5 of Article III shall be amended by deleting the first
sentence thereof in its entirety and replacing it with the following:
"The Vice-Chairman shall preside at all meetings of the
Shareholders and the Board of Directors in the absence of the members of
the Office of the Chairman."
3) Sections 5 through 10 of Article III shall be redesignated
Sections 6 through 11, respectively, and a new Section 5 shall be added to
Article III to read as follows:
"Powers and Duties of the Chief Executive Officer. The Chief
Executive Officer of the Corporation shall have general charge and
supervision of the Corporation's business, affairs, administration and
operations (subject to the reporting requirement set forth below). The
Chief Executive Officer shall report to the Office of the Chairman as well
as to the Board of Directors; provided that if the Chief Executive Officer
is also a member of the Office of the Chairman then the reporting
obligation of the Chief Executive Officer set forth herein shall be to the
other member of the Office of the Chairman and to the Board of Directors.
The Chief Executive Officer shall have such other powers and shall perform
such other duties as may be from time to time assigned to him or her by
either the Office of the Chairman (or, if the Chief Executive Officer is
also a member of the Office of the Chairman, by the other member of the
Office of the Chairman) or the Board of Directors."
November 7, 1994
Bernard Chaus, Inc.
1410 Broadway
New York, NY 10018
Gentlemen/Ladies:
We refer to our Restated and Amended Financing Agreement with
you executed September 24, 1991 which was effective as of July 1,
1992, as amended ("Agreement"). Capitalized terms herein have the
meaning given them in the Agreement unless otherwise indicated
herein.
In consideration of payment to us of a fee of $25,000, we
hereby waive any rights we would otherwise have as a result of the
fact that for the fiscal quarter ending September 30, 1994, your
Tangible Net Worth was less than $44,000,000 and your Working
Capital was less than $35,000,000. The above-referenced fee shall
be charged to your account with us.
Except as hereinabove amended, the Agreement, is hereby
ratified and confirmed.
Very truly yours,
BNY FINANCIAL CORPORATION
By: /s/ Burt Rubenstein
Title: S.V.P.
AGREED:
BERNARD CHAUS, INC.
By: /s/ Marc A. Zuckerman
Title: MARC A. ZUCKERMAN, CCE, CCM
TREASURER
Josephine Chaus
November 9, 1994
Board of Directors
Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
Re: Extension of Due Date on Subordinated Notes
of Bernard Chaus, Inc. (the "Company")
Gentlemen:
Reference is made to the Subordinated Notes payable to me by the
Company which are set forth on Schedule A (the "Notes"), each of
which become due and payable on July 1, 1995. In view of the
covenants under the Company's credit facility with BNY Financial
Corp. which continue to prohibit payments of interest or principal
under the Notes, I have agreed to extend the maturity date of the
Notes for 90 days. This letter shall constitute an amendment to
each of the Notes to extend the due date thereof until October 1,
l995. Except as expressly modified herein, all of the provisions,
terms and conditions contained in the Notes, as they may have been
previously amended, shall remain in full force and effect.
Very truly yours,
/s/ Josephine Chaus
Josephine Chaus
Accepted and agreed to:
Bernard Chaus, Inc.
By: /s/ Wayne Miller
Date: 11/9/94
<PAGE>
Subordinated Notes
Payor: Bernard Chaus, Inc.
Payee: Josephine Chaus
Principal Amount Date
$ 7,365,000 6/30/86 as amended by letters
dated 6/15/88, 5/17/90,
2/21/91, 7/31/91, 10/30/92,
9/9/93, 10/18/93 and 12/31/93
$ 208,716 8/1/93 as amended by letter
dated 10/18/93
$ 1,311,500 8/1/93 as amended by letters
dated 10/18/93 and 12/31/93
$ 181,056 12/31/93
$ 412,950 12/31/93
Estate of Bernard Chaus
November 9, 1994
Board of Directors
Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
Re: Extension of Due Date on Subordinated Notes
of Bernard Chaus, Inc. (the "Company")
Gentlemen:
Reference is made to the Subordinated Notes payable to the Estate
of Bernard Chaus by the Company which are set forth on Schedule A
(the "Notes"), each of which become due and payable on July 1,
1995. In view of the covenants under the Company's credit
facility with BNY Financial Corp. which continue to prohibit
payments of interest or principal under the Notes, the undersigned
has agreed to extend the maturity date of the Notes for 90 days.
This letter shall constitute an amendment to each of the Notes to
extend the due date thereof until October 1, l995. Except as
expressly modified herein, all of the provisions, terms and
conditions contained in the Notes, as they may have been previously
amended, shall remain in full force and effect.
Very truly yours,
Estate of Bernard Chaus
By: /s/ Josephine Chaus
Josephine Chaus
Executrix
By: /s/ Daniel Rosenbloom
Daniel Rosenbloom
Executor
Accepted and agreed to:
Bernard Chaus, Inc.
By: /s/ Wayne Miller
Date: 11/9/94
<PAGE>
Subordinated Notes
Payor: Bernard Chaus, Inc.
Payee: Estate of Bernard Chaus
Principal Amount Date
$7,365,000 6/30/86 as amended by letters
dated 6/15/88, 5/17/90,
2/21/91, 7/31/91, 10/30/92,
9/9/93, 10/18/93 and 12/31/93
$ 208,716 8/1/93 as amended by letter
dated 10/18/93
$1,000,000* 8/1/93 as amended by letters
dated 10/18/93 and 12/31/93
$ 311,500 8/1/93 as amended by letters
dated 10/18/93 and 12/31/93
$ 181,056 12/31/93
$ 412,950 12/31/93
*Principal on this note has been paid;
only accrued interest remains unpaid
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> SEP-30-1994
<PERIOD-TYPE> QTR-1
<CASH> 798
<SECURITIES> 0
<RECEIVABLES> 42,858
<ALLOWANCES> 405
<INVENTORY> 23,904
<CURRENT-ASSETS> 61,287
<PP&E> 21,509
<DEPRECIATION> 18,064
<TOTAL-ASSETS> 65,289
<CURRENT-LIABILITIES> 58,817
<BONDS> 0
0
0
<COMMON> 209
<OTHER-SE> (15,333)
<TOTAL-LIABILITY-AND-EQUITY> 65,289
<SALES> 65,391
<TOTAL-REVENUES> 65,391
<CGS> 51,702
<TOTAL-COSTS> 51,702
<OTHER-EXPENSES> 21,233
<LOSS-PROVISION> 345
<INTEREST-EXPENSE> 1,350
<INCOME-PRETAX> (8,859)
<INCOME-TAX> 76
<INCOME-CONTINUING> (8,935)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,935)
<EPS-PRIMARY> (.48)
<EPS-DILUTED> (.48)
</TABLE>
