<PAGE>
UNITED STATES
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 March 31, 1997 .
--------------------------
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
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BERNARD CHAUS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
New York 13-2807386
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
1410 Broadway, New York, New York 10018
- --------------------------------------------------------------------------------
(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
------------ ------------ ------------------
May 1, 1997 Common Stock, $0.01 par value 26,277,274
------------- ----------------------------- ------------------
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) PAGE
Condensed Consolidated Balance Sheets as of
March 31, 1997, June 30, 1996 and
March 31, 1996 3
Condensed Consolidated Statements of Operations
for the Nine Months and Quarters ended
March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-11
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11-12
SIGNATURES 13
2
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BERNARD CHAUS, INC. AND SUBSIDIARIES
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and per share amounts)
March 31, June 30, March 31,
1997 1996 1996
---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 118 $ 247 $ 251
Accounts receivable, net 27,627 7,995 24,819
Inventories 20,299 21,256 25,736
Prepaid expenses and other current assets 448 783 1,268
--------- --------- ---------
Total current assets 48,492 30,281 52,074
Fixed assets -- net 1,420 1,898 1,964
Other assets 758 563 426
--------- --------- ---------
$ 50,670 $ 32,742 $ 54,464
========= ========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Notes payable -- banks $ 48,511 $ 26,077 $ 34,834
Accounts payable 19,026 17,435 20,857
Accrued expenses 5,209 6,056 5,337
Accrued restructuring expenses -- 196 465
--------- --------- ---------
Total current liabilities 72,746 49,764 61,493
Subordinated promissory notes 25,653 23,588 22,935
--------- --------- ---------
98,399 73,352 84,428
STOCKHOLDERS' DEFICIENCY
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 -- 26,899,974 at
March 31, 1997, 26,893,724 at
June 30, 1996 and 26,886,516 at
March 31, 1996 269 269 269
Additional paid-in capital 65,463 65,450 65,436
Deficit (111,981) (104,849) (94,189)
Less: Treasury stock, at cost --
622,700 shares (1,480) (1,480) (1,480)
--------- --------- ---------
Total stockholders' deficiency (47,729) (40,610) (29,964)
--------- --------- ---------
$ 50,670 $ 32,742 $ 54,464
========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except number of shares and per share amounts)
For the Nine For the
Months Ended Quarter Ended
March 31, March 31,
1997 1996 1997 1996
------------ ------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales $129,040 $137,881 $42,946 $39,961
Cost of goods sold 99,308 116,454 33,562 37,154
------- -------- ------- -------
Gross profit 29,732 21,427 9,384 2,807
Selling, general &
administrative expenses 31,046 30,114 10,618 10,437
------- -------- ------- -------
Loss from operations (1,314) (8,687) (1,234) (7,630)
Interest and other income, net 85 74 44 24
Interest expense (5,860) (4,887) (2,028) (1,759)
------- -------- ------- -------
Loss before income taxes (7,089) (13,500) (3,218) (9,365)
Income taxes 43 226 7 75
------- -------- ------- -------
Net loss ($ 7,132) ($13,726) ($ 3,225) ($ 9,440)
========= ========= ========= =========
Net loss per common share ($0.27) ($0.59) ($0.12) ($0.36)
====== ====== ====== ======
Weighted average number of common
and common equivalent shares
outstanding 26,277,000 23,233,000 26,277,000 26,262,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
FOR THE NINE MONTHS ENDED
March 31, March 31,
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ($ 7,132) ($13,726)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 620 814
(Credit) provision for losses on accounts receivable (40) 36
Deferred interest on
subordinated promissory notes 2,065 1,869
Non-cash interest expense -- 520
Changes in operating assets and liabilities:
Accounts receivable (19,592) (17,209)
Inventories 957 (9,533)
Prepaid expenses and other assets 66 307
Accounts payable 1,591 7,935
Accrued expenses (847) (212)
Accrued restructuring expenses (196) (2,339)
-------- --------
Net Cash Used In Operating Activities (22,508) (31,538)
INVESTING ACTIVITIES
Purchases of fixed assets -- net of disposal (68) (386)
-------- --------
Net Cash Used In Investing Activities (68) (386)
FINANCING ACTIVITIES
Net proceeds on short-term bank borrowings 22,434 16,136
Net proceeds from issuance of stock -- 15,423
Net proceeds from exercise of options 13 198
-------- --------
Net Cash Provided By Financing Activities 22,447 31,757
-------- --------
Decrease in cash and cash equivalents (129) (167)
Cash and Cash Equivalents, Beginning of Period 247 418
-------- --------
Cash and Cash Equivalents, End of Period $ 118 $ 251
======== ========
Cash Paid for:
Taxes -- 12
Interest 3,418 2,734
Supplemental schedule of non-cash financing activities:
Issuance of warrants for credit support
by principal stockholder 520
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Nine Months Ended March 31, 1997 and March 31, 1996
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 and nine months ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1997 or any other period. The balance sheet at June 30, 1996 has been
derived from the audited financial statements at that date. 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, 1996.
Net Loss Per Share: Net loss per share has been computed by dividing
the applicable net loss by the weighted average number of common shares
outstanding. Common equivalent shares were not included as their inclusion
would have been antidilutive.
2. Inventories
Inventories (principally finished goods) are stated at the lower of
cost, using the first-in first-out (FIFO) method, or market. Included in
inventories is merchandise in transit of approximately $8.1 million at March
31, 1997, $9.0 million at June 30, 1996 and $9.7 million at March 31, 1996.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Operating results for the nine months and quarter ended March 31, 1997
are not necessarily indicative of the results that may be expected for the year
ending June 30, 1997 or any other period.
For the nine months ended March 31, 1997, net sales decreased by $8.8
million or 6.4% as compared to the nine months ended March 31, 1996. Net sales
for the quarter ended March 31, 1997, increased by $3.0 or 7.5% as compared to
the quarter end March 31, 1996. The sales decrease for the nine months ended
March 31, 1997 as compared to the nine months ended March 31, 1996 was
primarily due to a decrease in sales of Chaus products including the
discontinuation of the Chaus dress product line. The decrease was partially
offset by sales of the Company's
6
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
licensed Nautica(R) product line which the Company began shipping to customers
in August 1996. Units shipped for the nine months ended March 31, 1997
decreased by 14%, which decrease was partially offset by an increase in the
average selling price per unit. The sales increase for the quarter ended March
31, 1997 as compared to the quarter ended March 31, 1996 was due to sales of
the Company's licensed Nautica(R) product line, which sales had not yet
commenced in the earlier period. This increase was partially offset by a
decrease in sales of Chaus products, including the discontinuation of the
Company's dress product line. Units shipped for the quarter ended March 31,
1997 decreased by 2.0% which decrease was partially offset by an increase in
the average selling price per unit.
Gross profit as a percentage of net sales was 23.0% for the nine
months ended and 21.9% for the quarter ended March 31, 1997 as compared to
15.5% and 7.0% for the nine months and three months ended March 31, 1996,
respectively. The increase in gross profit as a percentage of net sales for the
quarter was attributable to the initial sales of the Nautica(R) product line,
an improved gross profit percentage for the Chaus products due to lower off
price sales and higher sales at regular prices this year which resulted in
higher gross profits than the prior period. The increase in gross profit as a
percentage of net sales for the nine months was attributable to the initial
sales of the Nautica(R) product line, and an improved gross profit percentage
for the Chaus products due to lower off price sales which resulted in higher
gross profits than the prior period.
Selling, general and administrative expenses increased by $0.9 million
and $0.2 million for the nine months and quarter ended March 31, 1997,
respectively, as compared to the comparable periods in the prior fiscal year.
The increase in expenses for the nine months and quarter are primarily due to
expenses associated with the Nautica(R) product line, which increase was
partially offset by decreases in payroll and payroll related items and a
decrease in other selling, general and administrative expenses as the Company
further reduced its overhead structure. As a percentage of net sales, selling,
general, and administrative expenses were 24.1% and 24.7% for the nine months
and quarter ended March 31, 1997, respectively, as compared to 21.8% and 26.1%
for the nine months and quarter ended March 31, 1996, respectively.
Interest expense for the nine months and quarter ended March 31, 1997
increased as compared to the comparable periods in the prior fiscal year
primarily as a result of higher average bank borrowings.
Financial Position, Liquidity and Capital Resources
General
Net cash used in operating activities was $22.5 million for the nine
months ended March 31, 1997 as compared to $31.5 million in the nine months
ended March 31, 1996. The net cash used in operating activities resulted
primarily from a net loss of $7.1 million (inclusive of the $2.1 million
non-cash interest charge), and an increase in accounts receivable of $19.6
million, which was partially offset by a decrease in accounts payable of $1.6
million.
7
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Amended Financing Agreement
The Company and BNY Financial Corporation ("BNYF") entered into a
financing agreement in July 1991, which was amended and restated effective as
of February 21, 1995 and further amended, effective as of September 28, 1995
(the "September 1995 Amendment"), May 9, 1996 (the "May 1996 Amendment"),
September 17, 1996 (the "September 1996 Amendment"), January 31, 1997 (the
"January 1997 Amendment"), March 21, 1997 (the "March 1997 Amendment"), April
1, 1997 (the "April 1, 1997 Amendment") and April 29, 1997 (the "April 29, 1997
Amendment"), (collectively, the "Amended Financing Agreement"). The Amended
Financing Agreement provides the Company with a $70 million credit facility for
letters of credit and direct borrowings, with a sublimit for loans and advances
ranging between $40.0 and $57.0 million. The amount of financing available is
based upon a formula incorporating eligible receivables and inventory, cash
balances, other collateral and permitted overadvances, all as defined in the
Amended Financing Agreement. The April 29, 1997 Amendment allows for
overadvances ranging between $13.0 and $16.5 million through June 1997, subject
to compliance with certain financial covenants through such date. At March 31,
1997, the Company had availability of approximately $0.6 million (inclusive of
overadvance availability) under the Amended Financing Agreement. The Company's
obligations under the Amended Financing Agreement are secured by the Company's
accounts receivable, inventory and trademarks.
The Amended Financing Agreement contains certain financial covenants
including covenants regarding the Company's tangible net worth deficit and
working capital deficiency. In addition to a cap on personal property leases,
the Company is also prohibited from declaring or paying dividends or making
other distributions on its capital stock, with certain exceptions. In a Waiver,
dated May 5, 1997 (the "Waiver"), BNYF waived covenant compliance with the net
worth, working capital and quarterly minimum profit requirement for the period
ended March 31, 1997.
Interest on direct borrowings is payable monthly at an annual rate
equal to the higher of (I) The Bank of New York's prime rate (8.50% at March
31, 1997) plus 0.5% (The Bank of New York prime rate plus 1.5% in the event the
Company's overadvance position exceeds the allowable overadvances) or (ii) the
Federal Funds Rate (8.50% at March 31, 1997) in effect plus 1% (Federal Funds
Rate in effect plus 2% in the event the Company's overadvance position exceeds
the allowable overadvances). There is an annual commitment fee of 0.375% of the
unused portion of the line, payable monthly, and letter of credit fees equal to
0.125% of the outstanding letter of credit balance, payable monthly. The
Amended Financing Agreement requires the payment of minimum service charges of
$0.6 million per annum. In connection with the May 1996 Amendment, BNYF was
paid a fee of $25,000, and additional fees of $10,000 per month through
December 1996 were provided for, with BNYF agreeing to provide specified levels
of overadvances up to $10.0 million through the same period. In connection with
the Waiver, BNYF was paid a fee of $25,000 and the Company issued warrants to
purchase 125,000 shares of the Company's common stock to BNYF at an exercise
price of $.625 per share (the market price per share on the date of approval of
such warrants). The Company may terminate the Amended Financing Agreement upon
90 days' prior written notice at any time, subject to
8
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
termination fees. BNYF may terminate the Amended Financing Agreement after
February 20, 1999, upon 60 days' written notice to the Company.
Credit Support
Josephine Chaus has arranged for a letter of credit (the "Letter of
Credit") in various amounts since April 1994 in return for which BNYF has
increased the availability under the Amended Financing Agreement. In
consideration for credit support provided by Ms. Chaus to the Company prior to
February 1995, Ms. Chaus was granted 1,216,500 warrants (the "1994 Warrants"),
exercisable through November 22, 1999, at prices ranging between $2.25 and
$4.62 per share. As part of the negotiations with BNYF in connection with the
Amended Financing Agreement, in February 1995 Josephine Chaus increased the
Letter of Credit to $10.0 million and extended its term to October 31, 1995
(the "February 1995 Increase/Extension"). In addition, in February 1995, Ms.
Chaus provided a $5.0 million personal guarantee (the "$5.0 Million
Guarantee"), to be in effect during the Amended Financing Agreement's term. In
September 1995, Ms. Chaus further extended the term of the Letter of Credit to
January 31, 1996 (the "September 1995 Extension"). In consideration of her
provision of the February 1995 Increase/Extension, the $5.0 Million Guarantee
and the September 1995 Extension, a special committee consisting of
disinterested members of the Board of Directors of the Company (the "Special
Committee") authorized the issuance to Ms. Chaus of warrants (the "1995
Warrants") to purchase an aggregate of 1,580,000 shares of Common Stock at
prices ranging between $4.05 and $6.75 per share. The issuance of the 1995
Warrants was approved at the 1995 Annual Meeting of Stockholders. The issuance
of the 1994 Warrants, the warrants for the February 1995 Increase/Extension and
the warrants for the $5.0 Million Guarantee was recorded in fiscal 1995 at a
value of $1.1 million, and was included as a charge to interest expense with a
corresponding increase to additional paid-in capital. The issuance of the
warrants for the September 1995 Extension was recorded in the second quarter of
fiscal 1996 at a value of $0.2 million, and was included as a charge to
interest expense with a corresponding increase to additional paid-in capital.
Ms. Chaus received warrant compensation for her provision of the $5.0 Million
Guarantee only through October 31, 1995. Thereafter, for each three month
period of the $5.0 Million Guarantee, she has received cash compensation of
$50,000, as authorized by the Special Committee.
In connection with the September 1995 Amendment, Ms. Chaus provided
the Company with an option to further extend the Letter of Credit to July 31,
1996 (the "July 1996 Option"), subject to the consummation of the Company's
November 1995 public offering of Common Stock. In January 1996, the Company
exercised the July 1996 Option to extend the Letter of Credit to July 31, 1996
(the "July 1996 Extension"). In consideration of her provision of the July 1996
Extension, the Special Committee authorized the issuance to Ms. Chaus, of
warrants (the "1996 Warrants") to purchase an aggregate of 682,012 shares of
Common Stock at a price of $4.20 per share. The issuance of the 1996 Warrants
was approved by the stockholders of the Company at the 1996 Annual Meeting of
Stockholders. The issuance of the 1996 Warrants ($0.3 million) was recorded in
the second quarter of fiscal 1997, at a value of $0.3 million and was included
as a charge to interest expense with a corresponding increase to additional
paid-in capital.
9
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
In connection with the May 1996 Amendment, Ms. Chaus agreed to extend
the Letter of Credit to January 31, 1997 (the "January 1997 Extension") and
additionally provided a collateralized increase of $5.0 million in the $5.0
million Guarantee to $10.0 million (the "$10.0 Million Guarantee"). In
connection with the January 1997 Extension, the Special Committee approved the
payment of cash compensation to Ms. Chaus of $100,000 for each three month
period of the Letter of Credit as extended from July 31, 1996 to January 31,
1997. For her provision of the $10.0 Million Guarantee, the Special Committee
approved an increase in the amount of cash compensation payable to Ms. Chaus
for her guaranty, to $100,000 for each three month period of the $10.0 Million
Guarantee.
In connection with the September 1996 Amendment, Ms. Chaus agreed to
extend the Letter of Credit to July 31, 1997 (the "July 1997 Extension"),
increase the amount of the $10.0 Million Guarantee by $2.5 million to $12.5
million (the "$12.5 Million Guarantee") and fully collateralize the $12.5
Million Guarantee. In connection with the July 1997 Extension, the Special
Committee approved the payment of cash compensation to Ms. Chaus of $100,000
for each additional three month period of the Letter of Credit as extended from
January 31, 1997 to July 31, 1997. For her provision of the $12.5 Million
Guarantee, the Special Committee approved an increase in the amount of cash
compensation payable to Ms. Chaus for her guaranty, to $125,000 for each three
month period of the $12.5 Million Guarantee.
Subordinated Debt
The Company has outstanding at March 31, 1997, $25.7 million of
subordinated notes payable to Josephine Chaus (the "Subordinated Notes"). In
connection with the Company's November 1995 public offering (see "-- Nautica(R)
License Agreement"), Josephine Chaus extended the maturity date of the
Subordinated Notes (which were to mature on July 1, 1996) to July 1, 1998. The
Company has been unable to pay principal or interest, with certain exceptions,
under the Subordinated Notes as a result of covenants in the Amended Financing
Agreement (see "--Amended Financing Agreement").
Nautica(R) License Agreement
In September 1995, the Company entered into a license agreement with
Nautica(R) Apparel, Inc. (the "Nautica(R) License Agreement"), pursuant to
which the Company has an exclusive license to arrange for the manufacture of,
market, distribute and sell a new women's career and casual sportswear line
under the Nautica(R) name. The Nautica(R) License Agreement runs through
December 31, 1999. The Company has been required to devote at least $7.0
million to the fulfillment of the Company's obligations under the Nautica(R)
License Agreement, including related capital expenditures. The Company's
obligations also include minimum royalty and advertising payments.
Under the Nautica(R) License Agreement, the Company was obligated to
raise $10.0 million in equity capital. On November 22, 1995, the Company
consummated an underwritten public offering of 5,750,000 shares of Common Stock
at a price of $3.00 per share. Net proceeds, after expenses and commissions of
$1.8 million, were $15.4 million. Under the Nautica(R) License
10
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Agreement the Company granted Nautica options to purchase 150,000 shares of
Common Stock at an exercise price of $5.00 per share.
Future Financing Requirements
At March 31, 1997, the Company had a working capital deficiency of
$24.3 million. The Company requires the availability of sufficient cash flow
and borrowing capacity to finance its Chaus product lines and to develop and
market its licensed Nautica(R) product lines. In order to meet its anticipated
commitments through the end of the current fiscal year, the Company must obtain
additional sources of financing which may be from its existing bank lender,
another third party, or a combination of both. As previously announced, the
Company continues to work with Lehman Brothers in obtaining additional sources
of financing and exploring other alternatives. However, there can be no
assurances the Company will be successful in obtaining additional sources of
financing.
The foregoing discussion contains forward-looking statements which are
based upon current expectations and involve a number of uncertainties,
including the Company's ability to obtain additional financing, retail market
conditions, consumer acceptance of the Company's products and Josephine Chaus's
willingness to continue to provide the Company with credit support. Further
information on potential factors which could affect the company's financial
results is included in the Company's Form 10-K for the year ended June 30,
1996.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a defendant in an action which was commenced in federal
district court in New York by the Equal Employment Opportunity Commission
("EEOC") on behalf of three patternmakers, each of whom was terminated by the
Company in late 1995. The complaint alleges discrimination on the basis of age
and national origin. The Company was served with the complaint on April 7,
1997. The Company's answer is due on June 6, 1997. The complaint seeks
equitable relief, including (i) reinstatement of the three individuals at
issue, (ii) an injunction against the Company engaging in age or
national-origin discrimination, and (iii) an order that the Company carry out
an affirmative action program for individuals over 40 and for individuals of
Italian and/or non-Asian origin. The complaint also seeks back pay, front pay,
liquidated damages, compensatory damages, punitive damages, and the EEOC's
costs in the action. The company will deny the material allegations of the
complaint and intends to vigorously oppose the action.
Item 6. Exhibits and Reports on Form 8-K.
(a) Attached hereto as Exhibits are the following:
10.70 Agreement dated February 19, 1997, between the
Company and BNY Financial Corp. issuing 125,000
warrants to purchase Common Stock of the Company
11
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
10.71 Amendment dated March 21, 1997, to the Financing Agreement.
10.72 Amendment dated April 1, 1997, to the Financing Agreement.
10.73 Amendment dated April 29, 1997, to the Financing Agreement.
10.74 Waiver dated May 5, 1997, to the Financing Agreement.
27 Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the quarter ended
March 31, 1997.
12
<PAGE>
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)
Date: May 8, 1997 By: /s/ Josephine Chaus
------------------------------
JOSEPHINE CHAUS
Chairwoman of the Board and
Office of the Chairman
Date: May 8, 1997 By: /s/ Andrew Grossman
------------------------------
ANDREW GROSSMAN
Chief Executive Officer and
Office of the Chairman
Date: May 8, 1997 By: /s/ Wayne S. Miller
------------------------------
WAYNE S. MILLER
Executive Vice President--
Finance and Administration and
Chief Financial Officer
13
</TABLE>
<PAGE>
=============================================================================
BERNARD CHAUS, INC.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
=============================================================================
<PAGE>
=============================================================================
THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT IN
COMPLIANCE WITH THIS AGREEMENT AND (I) PURSUANT TO A REGISTRATION STATEMENT
UNDER THE ACT WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO THE
SECURITIES, OR (II) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER
THE ACT BUT ONLY UPON THE HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN
OPINION OF COUNSEL TO THE COMPANY, OR OTHER COUNSEL ACCEPTABLE TO THE COMPANY,
THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH ALL APPLICABLE PROVISIONS OF
THE ACT AS WELL AS ANY APPLICABLE "BLUE SKY" OR SIMILAR SECURITIES LAW.
=============================================================================
February 19, 1997
BERNARD CHAUS, INC.
For good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by Bernard Chaus, Inc., a New York corporation,
with its principal office at 1410 Broadway, New York, New York 10018 (the
"Company"), BNY Financial Corporation (the "Holder" or "BNY"), of 1290 Avenue
of the Americas, New York, New York 10104, subject to the terms and conditions
of this Warrant, is hereby granted the right to purchase, at the initial
Purchase Price of $0.625 per share, at any one or more times from the date
hereof until 5:00 p.m. on February 19, 2002, in the aggregate, one hundred
twenty five thousand (125,000) shares of Common Stock of the Company, $.01 par
value (the "Shares").
This Warrant initially is exercisable at a price of $0. 625 (the
"Purchase Price") per Share payable in cash, by certified or official bank
check in New York Clearing House funds or other
2
<PAGE>
form of payment satisfactory to the Company, subject to adjustment as provided
in Section 5 hereof.
1. Exercise of Warrant. The purchase rights represented by this
Warrant are exercisable at the option of the Holder hereof, in whole or in
part, at one or more times during any period in which this Warrant may be
exercised as set forth above. The Holder shall not be deemed to have exercised
its purchase rights hereunder until the Company receives written notice of the
Holder's intent to exercise its purchase rights hereunder along with payment
for the purchased Shares. The written notice shall be in the form of a duly
executed Subscription Form a form of which is attached hereto and made a part
hereof. Less than all of the Shares may be purchased under this Warrant.
2. Issuance of Certificates. Upon the exercise of this Warrant, the
issuance of certificates for Shares underlying this Warrant which are
purchased shall be made forthwith (and in any event within ten (10) business
days after the Company's receipt of written notice and payment for the
purchased Shares specified in Section 1 above) and such certificates shall be
issued in the name of the Holder hereof.
3. Restriction on Transfer and Registration Rights. Neither this
Warrant nor any Shares issuable upon exercise hereof have been registered
under the Securities Act of 1933, as amended (the "Act"), and neither may be
sold or transferred in whole or in part unless the Holder shall have first
given prior written notice to the Company describing such sale or transfer and
furnished to the Company an opinion, satisfactory to counsel for the Company
as determined by such counsel in its sole discretion, to the effect that the
proposed sale or transfer may be made without registration under the Act;
provided, however, that the foregoing shall not apply if there
3
<PAGE>
is in effect a registration statement with respect to this Warrant or the
Shares issuable upon exercise hereof, as the case may be, at the time of the
proposed sale or transfer. Upon exercise, in part or in whole, of this
Warrant, each certificate issued representing the Shares underlying this
Warrant shall bear a legend to the foregoing effect. The Holder shall have
such rights to request the Company to register all or any of the Shares
issuable upon exercise of this Warrant as set forth in Annex B hereto (the
"Registration Rights") subject to the terms of Annex B.
4. Price.
4.1 Initial and Adjusted Purchase Price. The initial Purchase Price
shall be $0.625 per Share. The adjusted Purchase Price shall be the price
which shall result from time to time from any and all adjustments of the
initial Purchase Price in accordance with the provisions of Section 5 hereof.
4.2 Purchase Price. The term "Purchase Price" herein shall mean the
initial Purchase Price or the adjusted Purchase Price, as the case may be.
5. Adjustments of Purchase Price and Number of Shares. The Shares
subject to this Warrant and the Purchase Price thereof shall be appropriately
adjusted by the Company in accordance with the Statement of Rights to Warrants
included in Annex A hereto.
6. Replacement of Warrant. Upon receipt by the Company of (i)
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and, in case of such loss, theft, destruction or
mutilation, and (ii) an indemnity or other security reasonably satisfactory to
it in its sole discretion, and upon reimbursement to the Company of all
expenses incidental or relating thereto, and in the event of mutilation upon
surrender and cancellation of
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<PAGE>
this Warrant, the Company will make and deliver a new Warrant of like tenor,
in lieu of this Warrant.
7. Notices to Warrant Holder. Nothing contained in this Warrant shall
be construed as conferring upon the Holder hereof the right to vote or to
consent or to receive notice as a shareholder in respect of any meetings of
shareholders for the election of directors or any other matter, or as having
any rights whatsoever as a shareholder of the Company.
8. Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
delivered, or mailed by registered or certified mail, return receipt
requested:
(a) If to the registered Holder of this Warrant, to the
address of such Holder as shown on the books of the Company, or
(b) If to the Company, to the address set forth on the first
page of this Warrant or to such other address as the Company may
designate by notice to the Holder.
9. Successors. All the agreements contained in this Warrant shall
bind the parties hereto and their respective heirs, executors, administrators,
distributees, permitted successors and assigns. The Holder may assign this
Warrant without the Company's prior written consent provided that the Holder
complies with the provisions of this agreement and applicable securities laws.
Any attempted assignment in violation of the preceding sentence shall be void
and of no effect.
10. Headings. The headings in this Warrant are inserted for purposes
of convenience only and shall have no substantive effect.
5
<PAGE>
11. Law Governing. This Warrant is delivered in the State of New York
and shall be construed and enforced in accordance with, and governed by, the
laws of the State of New York, without giving effect to conflicts of law
principles.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
in its corporate name by, and such signature to be attested to by, a duly
authorized officer as of the date first above written.
BERNARD CHAUS, INC.
By: /s/ Wayne Miller
----------------------------
Its: Chief Financial Officer
Attest:
/s/ Barton Heminover
- ---------------------------
6
<PAGE>
ANNEX A
STATEMENT OF RIGHTS TO WARRANTS
AND
FORMS OF SUBSCRIPTION AND ASSIGNMENT
(a) Adjustment to Purchase Price and Number of Shares. In case, prior
to the expiration of this Warrant by exercise or by its terms, the Company
shall issue any shares of its Common Stock as a stock dividend or subdivide
the number of outstanding shares of its Common Stock into a greater number of
shares, then in either of such cases, the then applicable Purchase Price per
share of the Shares of Common Stock purchasable pursuant to this Warrant in
effect at the time of such action shall be proportionately reduced and the
number of shares at that time purchasable pursuant to this Warrant shall be
proportionately increased; and conversely, in the event the Company shall
contract the number of outstanding shares of Common Stock by combining such
shares into a smaller number of shares, then, in such case, the then
applicable Purchase Price per share of the shares of Common Stock purchasable
pursuant to this Warrant in effect at the time of such action shall be
proportionately increased and the number or shares of Common Stock purchasable
pursuant to this Warrant shall be proportionately decreased. If the Company
shall, at any time during the term of this Warrant, declare a dividend payable
in cash on its Common Stock and shall, at substantially the same time, offer
to its stockholders a right to purchase new Common Stock from the proceeds of
such dividend or for an amount substantially equal to the dividend, all Common
Stock so issued shall, for the purpose of this Warrant, be deemed to have been
issued as a stock dividend.
(b) Recapitalization. In case, prior to the expiration of this
Warrant by exercise or by its terms, the Company shall be recapitalized by
reclassifying its outstanding Common Stock, (other than a change in par value
to no par value), or the Company or a successor corporation shall consolidate
or merge with or convey all or substantially all of its or of any successor
corporation's property and assets to any other corporation or corporations
(any such other corporations being included within the meaning of the term
"successor corporation" hereinbefore used in the event of any consolidation or
merger of any such other corporation with, or the sale of all or substantially
all of the property of any such other corporation to, another corporation or
corporations), then, as a condition of such recapitalization, consolidation,
merger or conveyance, lawful and adequate provision shall be made whereby the
Holder of this Warrant shall thereafter have the right to purchase, upon the
basis and on the terms and conditions specified in this Warrant, in lieu of
the Shares of Common Stock of the Company theretofore purchasable upon the
exercise of this Warrant, such shares of stock, securities, property or assets
of the other corporation (including, without limitation, cash) as to which the
Holder of this Warrant would have been entitled had this Warrant been
exercised immediately prior to such recapitalization, consolidation, merger or
conveyance; and in any such event, the rights of the Warrant Holder to any
adjustment in the number of Shares of Common Stock purchasable upon the
exercise of this Warrant, as hereinbefore provided, shall continue and be
preserved in respect of any stock which the Warrant Holder becomes entitled to
purchase.
7
<PAGE>
(c) Dissolution. In case the Company at any time, while this Warrant
shall remain both unexpired and unexercised, shall sell all or substantially
all of its property, other than as provided in subsection (b) above or
dissolve, liquidate or wind up its affairs, lawful provision shall be made as
part of the terms of any such sale, dissolution, liquidation or winding up, so
that the Holder of this Warrant may thereafter receive upon exercise hereof in
lieu of each Share of Common Stock of the Company which it would have been
entitled to receive, the same kind and amount of any securities or assets as
may be issuable, distributable or payable upon any such sale, dissolution,
liquidation or winding up with respect to each share of Common Stock of the
Company; provided, however, that in any case of any such sale or of
dissolution, liquidation or winding up, the right to exercise this Warrant
shall terminate on a date fixed by the Company. Such date so fixed shall be no
earlier than 3 P.M. New York City Time, on the forty-fifth (45th) day next
succeeding the date on which notice of such termination of the right to
exercise this Warrant has been given by mail to the registered Holder of this
Warrant at its address as it appears on the books of the Company.
(d) No Fractional Shares. Upon any exercise of this Warrant by the
Warrant Holder, the Company shall not be required to deliver- fractions of one
Share, but adjustment in the Purchase Price payable by the Warrant Holder
shall be made in respect of any such fraction of one Share on the basis of the
Purchase Price per Share then applicable upon exercise of this Warrant.
(e) Notices. In the event that, prior to the expiration of this
Warrant by exercise or by its terms, the Company shall determine to take a
record of its stockholders for the purpose of determining stockholders
entitled to receive any dividend, stock dividend, distribution or other right
that may cause any change or adjustment in the number, amount, price or nature
of the securities or assets deliverable upon the exercise of this Warrant
pursuant to the foregoing provisions, the Company shall give at least ten (10)
days' prior written notice to the effect that it intends to take such record
to the registered Holder of this Warrant at its address as it appears on the
books of the Company, said notice to specify the date as of which such record
is to be taken, the purpose for which such record is to be taken, and the
effect which the action which may be taken will have upon this Warrant.
(f) Registered Owner. The Company may deem and treat the registered
Holder of the Warrant at any time as the absolute owner hereof for all
purposes, and shall not be affected by any notice to the contrary.
(g) Status. This Warrant shall not entitle any Holder hereof to any
of the rights of a stockholder, and shall not entitle any Holder hereof to any
dividend declared upon the Common Stock unless the Holder shall have exercised
the within Warrant and purchased the Shares of Common Stock prior to the
record date fixed by the Board of Directors for the determination of holders
of Common Stock entitled to exercise any such rights or receive said dividend.
8
<PAGE>
(h) No Adjustment for Small Amounts. Anything in the Statement of
Rights to Warrants to the contrary notwithstanding, the Company shall not be
required to give effect to any adjustment in the Purchase Price unless and
until the net effect of one or more adjustments, determined as above provided,
shall have required a change of the Purchase Price by at least ten cents, but
when the cumulative net effect of more than one adjustment so determined shall
be to change the actual Purchase Price by at least ten cents, such change in
the Purchase Price shall thereupon be given effect.
9
<PAGE>
ASSIGNMENT
(To Be Executed By the Registered Holder
to Effect a Transfer of the Within Warrant)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
-------------------------------------
- ------------------------------------------------------------------------------
(Name)
- ------------------------------------------------------------------------------
(Address)
- ------------------------------------------------------------------------------
the right to purchase Common Stock evidenced by the within Warrant, to the
extent ___________ of shares of Common Stock, and does hereby irrevocably
constitute and appoint _________________
- -------------------------------------------------------------------
to transfer the said right on the books of the Company, with full power of
substitution.
Dated: __________________, 19 .
---------------------------------
(Signature)
NOTICE: The signature to this assignment must correspond with the
name as written upon the case of the within Warrant in every
particular, without alteration or enlargement, or any change
whatsoever and must be guaranteed by a bank, other than a
savings bank or trust company, having an office or
correspondent in New York, or by a firm having membership on
a registered national securities exchange and an office in
New York, New York.
10
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To Bernard Chaus, Inc.
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _________1 shares of Common Stock of Bernard Chaus, Inc.
and herewith makes payment of $ therefor, and requests that the certificate or
certificates for such shares be issued in the name of and delivered to the
undersigned.
Dated
---------------------------------------
(Signature must conform in all
respects to name of Holder as
specified on the face of the Warrants)
---------------------------------------
(Address)
- -----------------
1 Insert here the maximum number of shares or, in the case of a partial
exercise, the portion thereof as to which the Warrant is being
exercised.
11
<PAGE>
ANNEX B
REGISTRATION RIGHTS
(a) If, at any time prior to February , 2002 the Company
proposes to register any of its securities for its own account under the
Securities Act of 1933, as amended, (the "Securities Act") (other than
securities to be issued pursuant to a stock option or other employee benefit
or similar plan and other than in connection with a business combination
transaction), the Company shall, promptly give written notice (the
"Registration Notice") to BNY of the Company's intention to effect such
registration. If, within 15 days after receipt of such notice, BNY submits a
written request to the Company specifying the number of shares of Common Stock
which it will receive upon exercise of the Warrant and which it proposes to
sell or otherwise dispose of, (the "Subject Stock") the Company shall include
the Subject Stock in such registration statement. Notwithstanding anything
herein to the contrary BNY shall not be entitled to require the Company to
include the Subject Stock in a registration statement more frequently than
twice during the term hereof. BNY when requesting inclusion of the Subject
Stock in any such registration statement, may in its discretion delay exercise
of the Warrant and notify the Company that it will exercise its Warrant as to
the Subject Stock immediately upon the registration statement becoming
effective or for delivery upon closing of a related offering. The Company will
use its reasonable best efforts in good faith to effect promptly (but in no
event later than one hundred and twenty (120) days after the receipt from BNY
of the request to register the Subject Stock, provided, however, that such
period shall be extended for up to sixty (60) additional days in the event of
a material development that shall hinder the Company from effecting such
registration) the registration of the Subject Stock. The Company shall keep
each registration statement covering any Subject Stock in effect for a period
of not less than 90 days following the effectiveness of such registration
statement (except for an underwritten offering which is closed sooner) and
maintain compliance with each applicable federal and state law and regulation.
Notwithstanding the foregoing, if the offering of the Company's securities
pursuant to such registration statement is to be made by or through
underwriters, the Company shall not be required to include Subject Stock
therein if and to the extent that the underwriter managing the offering
advises the Company in writing that such inclusion would materially adversely
affect such offering.
(b) In connection with any offering of shares of Subject
Stock registered pursuant to this Annex B the Company (i) shall furnish to BNY
such number of copies of each registration statement, each prospectus and each
preliminary prospectus, and of each amendment and supplement to any thereof as
BNY may reasonably request in order to effect the offering and sale of the
Subject Stock to be offered and sold, but only while the Company shall be
required under the provisions hereof to cause the registration statement to
remain current and (ii) take such action as shall be necessary to qualify the
shares covered by such registration statement under such blue sky or other
state securities laws for offer and sale as BNY shall request; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any jurisdiction in which it
shall not then be qualified or to file any
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<PAGE>
general consent to service of process in any jurisdiction in which such a
consent has not been previously filed or subject itself to taxation in any
jurisdiction in which the Company is not already subject to taxation. The
Company shall enter into an underwriting agreement (the "Agreement") with a
managing underwriter or underwriters selected by it containing
representations, warranties, indemnities and agreements then customarily
included by an issuer in underwriting agreements with respect to secondary
distributions and BNY agrees as a condition to participation in such offering
to make such representations and warranties with respect to information as to
it as selling stockholder, and as to its holdings, which is furnished in
writing to the underwriter for use in the registration statement as are
customary and appropriate and to otherwise reasonably cooperate with the
Company in connection with any registration statement with respect to the
Subject Stock. In connection with any offering of Subject Stock registered
pursuant to this Annex B, the Company shall furnish to the underwriter, at the
Company's expense, unlegended certificates representing ownership of the
Subject Stock being sold in such denominations as requested and instruct any
transfer agent and registrar of the Subject Stock to release any stop transfer
orders with respect to such Subject Stock.
(c) Upon receipt of notice from the Company to suspend sales
to permit the Company to correct or update a registration statement or
prospectus, BNY will not (until a receipt of a notice to the contrary) effect
sales of Subject Stock included in any registration statement. The obligations
of the Company with respect to maintaining any registration statements current
and effective shall be extended by a period of days equal to the period that
such suspension is in effect.
(d) In connection with any registration pursuant to this
Annex B all expenses of registration shall be borne by the Company (unless
contrary to the federal securities laws or the laws of any state where the
Subject Stock is to be offered), provided, however, in connection with any
such registration, BNY shall be obligated to pay any and all underwriter's
commissions and filing fees incurred by the Company, to the extent that such
fees and commissions would not have been so incurred in the absence of the
registration of such Subject Stock. Under no circumstances shall the Company
have any liability for any fees and expenses of underwriters, counsel,
accountants or other agents of BNY with respect to any registration statement
filed pursuant hereto, including but not limited to the costs of any
investigations by or on behalf of BNY of the accuracy and completeness of such
registration statement or related to the furnishing of information by BNY in
connection with such registration statement.
(e) For a period of ninety (90) days from and after the
effective date of any registration statement filed pursuant hereto in which
any of the Subject Stock is included, the Company shall from time to time
amend or supplement the registration statement and the prospectus used in
connection therewith as may be necessary to permit such sale and disposition
and to the extent necessary in order to keep such registration statement
effective and such prospectus current under the Securities Act so that neither
the registration statement nor the prospectus contains any untrue statement as
to any material fact, omits any statements necessary to make the statements
contained therein not misleading.
13
<PAGE>
(f) In the case of any offering registered pursuant to this
Annex B, the Company agrees to indemnify and hold harmless BNY and each
controlling person of BNY within the meaning of Section 15 of the Securities
Act, and the directors and officers of BNY, against any and all losses,
claims, damages or liabilities to which they or any of them may become subject
under the Securities Act or any other statute or common law or otherwise, and
to reimburse them, from time to time upon request, for any legal or other
expenses reasonably incurred by them in connection with investigating any
claims and defending any actions, insofar as any such losses, claims, damages,
liabilities or actions shall arise out of or shall be based upon (i) any
untrue statement or alleged untrue statement contained in the registration
statement relating to the sale of such Subject Stock in any preliminary
prospectus or in any prospectus or in any supplement or amendment to any of
the foregoing of a material fact, or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading or (ii) any failure or omission on the part of the Company to
comply with any provision of the Act and the rules and regulations of the
Securities and Exchange Commission (or other Federal agency at the time
charged with administration of the Securities Act) applicable to such
offering; provided, however, that the indemnification agreement contained in
this paragraph (f) shall not apply to such losses, claims, damages,
liabilities or actions which shall arise from the sale of Subject Stock if
such losses, claims, damages, liabilities or actions shall arise out of or
shall be based upon any such untrue statement or alleged untrue statement, or
any such omission or alleged omission, if such statement or omission shall
have been made in reliance upon and in conformity with information furnished
in writing to the Company by BNY specifically for use in connection with the
preparation of the registration statement or any preliminary prospectus or
prospectus contained in the registration statement or any amendment thereof or
supplement thereto provided further, however, that the indemnification
agreement contained in this paragraph (f) shall not apply to such losses,
claims, damages, liabilities or actions to the extent that they arise out of
or are based upon any untrue statement or omission made in any preliminary
prospectus if (i) BNY failed to send or deliver a copy of the final prospectus
with or prior to the delivery of written confirmation of the sale by BNY to
the person asserting the claim from which such damages arise, and (ii) the
final prospectus would have corrected such untrue statement or such omission;
provided further, that the Company shall not be liable to BNY in any such case
to the extent that any such damages arise out of or are based upon any untrue
statement or omission in any prospectus if (x) such untrue statement or
omission is corrected in an amendment or supplement to such prospectus, and
(y) having previously been furnished by or on behalf of the Company with
copies of such prospectus as so amended or supplemented, BNY thereafter fails
to deliver such prospectus as so amended or supplemented prior to or
concurrently with the sale of a Subject Stock to the person asserting the
claim from which such damages arise.
(g) In connection with any registration statement in which
BNY is participating, BNY will indemnify, to the extent permitted by law, the
underwriters, the Company and its directors and officers against any losses,
claims, damages, liabilities and expenses resulting solely by reason of any
untrue statement of a material fact or any omission of a material fact
necessary to make the statements therein not misleading, in the registration
14
<PAGE>
statement or any prospectus or preliminary prospectus or any amendment or
supplement thereto, but only to the extent that such untrue statement is
contained in, or such omission is omitted from, information so furnished to
the Company by BNY in writing; provided, however, that BNY shall not be liable
in the aggregate for any amounts exceeding the product of the sale price minus
the Purchase Price per share of Subject Stock of BNY sold in such registered
offering and the number of shares of Subject Stock sold pursuant to such
registration statement or prospectus by BNY.
(h) Each party indemnified under paragraph (f) or (g) of
this Annex B shall, promptly after receipt of notice of the commencement of
any action against such indemnified party in respect of which indemnity may be
sought hereunder, notify the indemnifying party in writing of the commencement
thereof. The omission of any indemnified party to so notify an indemnifying
party of any such action shall not relieve the indemnifying party from any
liability in respect of such action which it may have to such indemnified
party on account of the indemnity agreement contained in paragraph (f) or (g)
of this Annex B, unless the indemnifying party was prejudiced by such
omission, and in no event shall relieve the indemnifying party from any other
liability which it may have to such indemnified party. In case any such action
shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it may desire to
assume the defense thereof through counsel satisfactory to the indemnified
party, and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under paragraph (f) or (g) of this
Annex B for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof, other than
reasonable costs of investigation (unless such indemnified party reasonably
objects to such assumption on the grounds that there may be defenses available
to it which are different from or in addition to such indemnifying party in
which event the indemnified party shall be reimbursed by the indemnifying
party for the expenses incurred in connection with retaining separate legal
counsel).
(i) Nothing in paragraph (f) or (g) of this Annex B shall
prevent the indemnified party from retaining counsel of its own choosing, at
its own expense, to defend or cooperate in the defense or investigation of any
claim in respect of which indemnification is available hereunder. No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation.
15
<PAGE>
AMENDMENT NO. 6
TO
RESTATED AND AMENDED FINANCING AGREEMENT
THIS AMENDMENT NO. 6 ("Amendment") is entered into as of
March 21, 1997, by and between BERNARD CHAUS, INC., a New York corporation
("Borrower") and BNY FINANCIAL CORPORATION ("Lender").
BACKGROUND
Borrower and Lender are parties to a Restated and Amended
Financing Agreement dated as of February 21, 1995 (as amended, supplemented or
otherwise modified from time to time, the "Financing Agreement") pursuant to
which Lender provided Borrower with certain financial accommodations.
Borrower has requested that Lender amend certain provisions
of the Financing Agreement and Lender is willing to do so on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the account of Borrower
by Lender, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings given to them in the Financing Agreement.
2. Amendment to Financing Agreement. Subject to satisfaction
of the conditions precedent set forth in Section 3 below, the Financing
Agreement is hereby amended as follows:
2.1. The fifth sentence of Section 2(a) is hereby amended by
deleting subsection "(ii)" hereof in its entirety and replacing it with the
following in its place and stead:
"(ii) $57,000,000 from January 1, 1997 through
March 31, 1997;"
3. Conditions of Effectiveness. This Amendment shall become
effective as of March ___, 1997, when and only when Lender shall have received
four (4) copies of this Amendment executed by Borrower and consented and
agreed to by Josephine Chaus as guarantor.
1
<PAGE>
4. Representations and Warranties. Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Financing Agreement, as
amended hereby, constitute legal, valid and binding
obligations of Borrower and are enforceable against Borrower
in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment,
Borrower hereby reaffirms all covenants, representations and
warranties made in the Financing Agreement to the extent the
same are not amended hereby and agree that all such
covenants, representations and warranties shall be deemed to
have been remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and
is continuing or would exist after giving effect to this
Amendment.
(d) Borrower has no defense, counterclaim or offset
with respect to the Financing Agreement.
5. Effect on the Financing Agreement.
(a) Upon the effectiveness of Section 2 hereof,
each reference in the Financing Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like
import shall mean and be a reference to the Financing
Agreement as amended hereby.
(b) Except as specifically amended herein, the
Financing Agreement, and all other documents, instruments
and agreements executed and/or delivered in connection
therewith, shall remain in full force and effect, and are
hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of
this Amendment shall not operate as a waiver of any right,
power or remedy of Lender, nor constitute a waiver of any
provision of the Financing Agreement, or any other
documents, instruments or agreements executed and/or
delivered under or in connection therewith.
6. Governing Law. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and shall be governed by and construed in accordance with the laws of
the State of New York.
2
<PAGE>
7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall be deemed an
original and all of which taken together shall be deemed to constitute one and
the same agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
BERNARD CHAUS, INC.
By: /s/ Wayne S. Miller
------------------------------
Name: Wayne S. Miller
Title: Chief Financial Officer
BNY FINANCIAL CORPORATION
By: /s/ Andrew Rogow
------------------------------
Name: Andrew Rogow
Title: Senior Vice President
CONSENTED AND AGREED TO:
/s/ Josephine Chaus
- ------------------------------
JOSEPHINE CHAUS
3
<PAGE>
AMENDMENT NO. 7
TO
RESTATED AND AMENDED FINANCING AGREEMENT
THIS AMENDMENT NO. 7 ("Amendment") is entered into as of
April 1, 1997, by and between BERNARD CHAUS, INC., a New York corporation
("Borrower") and Bny Financial Corporation ("Lender").
BACKGROUND
Borrower and Lender are parties to a Restated and Amended
Financing Agreement dated as of February 21, 1995 (as amended, supplemented or
otherwise modified time to time, the "Financing Agreement") pursuant to which
Lender provided Borrower with certain financial accommodations.
Borrower has requested that Lender amend certain provisions
of the Financing Agreement and Lender is willing to do so on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the account of Borrower
by Lender, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings given to them in the Financing Agreement.
2. Amendment to Financing Agreement. Subject to satisfaction
of the conditions precedent set forth in Section 3 below, the Financing
Agreement is hereby amended as follows:
2.1. Section 2(a) is hereby amended by deleting the fifth
sentence thereof in its entirety and replacing it with the following:
"Furthermore, at no time will the outstanding amount of
Loans in the aggregate exceed: (i) $57,000,000 from January
1, 1997 through March 31, 1997; (ii) $53,500,000 from April
1, 1997 through April 30, 1997; (iii) $45,000,000 from May
1, 1997 through June 30, 1997; and (iv) $40,000,000, at any
time thereafter (the "Peak Permitted Loan")."
2.2. Section 8 is hereby amended by amending the definition
of Applicable Permitted Overadvance in its entirety to provide as follows:
1
<PAGE>
"Applicable Permitted Overadvances" shall mean solely with
respect to the periods set forth below, provided that no Event of Default has
occurred or is continuing (in which event the Applicable Permitted Overadvance
shall be immediately reduced to zero), the following amounts:
December 6, 1996 through April 4, 1997 $15,000,000
April 5, 1997 through April 28, 1997 $16,500,000
April 29, 1997 through May 8, 1997 $10,750,000
May 9, 1997 through May 25, 1997 $13,000,000
May 26, 1997 through June 5, 1997 $13,500,000
June 6, 1997 through June 25, 1997 $15,000,000
June 26, 1997 through June 30, 1997 $13,750,000
July 1, 1997 and thereafter $ - 0 -
On July 1, 1997 and thereafter there shall be no further
Applicable Permitted Overadvances."
3. Conditions of Effectiveness. This Amendment shall become
effective as of April 1, 1997, when and only when Lender shall have received
four (4) copies of this Amendment executed by Borrower and consented and
agreed to by Josephine Chaus as guarantor.
4. Representations and Warranties. Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Financing Agreement, as
amended hereby, constitute legal, valid and binding
obligations of Borrower and are enforceable against Borrower
in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment,
Borrower hereby reaffirms all covenants, representations and
warranties made in the Financing Agreement to the extent the
same are not amended hereby and agree that all such
covenants, representations and warranties shall be deemed to
have been remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and
is continuing or would exist after giving effect to this
Amendment.
(d) Borrower has no defense, counterclaim or offset
with respect to the Financing Agreement.
2
<PAGE>
5. Effect on the Financing Agreement.
(a) Upon the effectiveness of Section 2 hereof, each
reference in the Financing Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a reference to
the Financing Agreement as amended hereby.
(b) Except as specifically amended herein, the
Financing Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain in full force
and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of
this Amendment shall not operate as a waiver of any right, power or remedy of
Lender, nor constitute a waiver of any provision of the Financing Agreement,
or any other documents, instruments or agreements executed and/or delivered
under or in connection therewith.
6. Governing Law. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and shall be governed by and construed in accordance with the laws of
the State of New York.
7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall be deemed an
original and all of which taken together shall be deemed to constitute one and
the same agreement.
3
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
BERNARD CHAUS, INC.
By: /s/ Wayne S. Miller
------------------------------
Name: Wayne S. Miller
Title: Chief Financial Officer
BNY FINANCIAL CORPORATION
By: /s/ Andrew Rogow
------------------------------
Name: Andrew Rogow
Title: Senior Vice President
CONSENTED AND AGREED TO:
/s/ Josephine Chaus
- --------------------------------
JOSEPHINE CHAUS
4
<PAGE>
AMENDMENT NO. 8
TO
RESTATED AND AMENDED FINANCING AGREEMENT
THIS AMENDMENT NO. 8 ("Amendment") is entered into as of
April 29, 1997, by and between BERNARD CHAUS, INC., a New York corporation
("Borrower") and BNY FINANCIAL CORPORATION ("Lender").
BACKGROUND
Borrower and Lender are parties to a Restated and Amended
Financing Agreement dated as of February 21, 1995 (as amended, supplemented or
otherwise modified from time to time, the "Financing Agreement") pursuant to
which Lender provided Borrower with certain financial accommodations.
Borrower has requested that Lender amend certain provisions
of the Financing Agreement and Lender is willing to do so on the terms and
conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or
grant of credit heretofore or hereafter made to or for the account of Borrower
by Lender, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
1. Definitions. All capitalized terms not otherwise defined
herein shall have the meanings given to them in the Financing Agreement.
2. Amendment to Financing Agreement. Subject to satisfaction
of the conditions precedent set forth in Section 3 below, the Financing
Agreement is hereby amended as follows:
2.1. Section 2 (a) is hereby amended by deleting the fifth
sentence thereof in its entirety and replacing it with the following:
"Furthermore, at no time will the outstanding amount of
Loans in the aggregate exceed: (i) $53,500,000 from April 1,
1997 through May 15, 1997; (ii) $45,000,000 from May 16,
1997 through June 30, 1997; and (iii) $40,000,000, at any
time thereafter (the "Peak
Permitted Loan")."
2.2. Section 8 is hereby amended by amending the definition
of Applicable Permitted Overadvance in its entirety to provide as follows:
<PAGE>
"Applicable Permitted Overadvances" shall mean solely with
respect to the periods set forth below, provided that no Event of Default has
occurred or is continuing (in which event the Applicable Permitted Overadvance
shall be immediately reduced to zero), the following amounts:
April 29, 1997 through May 15, 1997 $16,500,000
May 16, 1997 through May 25, 1997 $13,000,000
May 26, 1997 through June 5, 1997 $13,500,000
June 6, 1997 through June 25, 1997 $15,000,000
June 26, 1997 through June 30, 1997 $13,750,000
July 1, 1997 and thereafter $ - 0 -
On July 1, 1997 and thereafter there shall be no further
Applicable Permitted Overadvances."
3. Conditions of Effectiveness. This Amendment shall become
effective as of April 29, 1997, when and only when Lender shall have received
four (4) copies of this Amendment executed by Borrower and consented and
agreed to by Josephine Chaus as guarantor.
4. Representations and Warranties. Borrower hereby
represents and warrants as follows:
(a) This Amendment and the Financing Agreement, as
amended hereby, constitute legal, valid and binding
obligations of Borrower and are enforceable against Borrower
in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment,
Borrower hereby reaffirms all covenants, representations and
warranties made in the Financing Agreement to the extent the
same are not amended hereby and agree that all such
covenants, representations and warranties shall be deemed to
have been remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and
is continuing or would exist after giving effect to this
Amendment.
(d) Borrower has no defense, counterclaim or offset
with respect to the Financing Agreement.
2
<PAGE>
5. Effect on the Financing Agreement.
(a) Upon the effectiveness of Section 2 hereof, each
reference in the Financing Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import shall mean and be a reference to
the Financing Agreement as amended hereby.
(b) Except as specifically amended herein, the
Financing Agreement, and all other documents, instruments and agreements
executed and/or delivered in connection therewith, shall remain in full force
and effect, and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of
this Amendment shall not operate as a waiver of any right, power or remedy of
Lender, nor constitute a waiver of any provision of the Financing Agreement,
or any other documents, instruments or agreements executed and/or delivered
under or in connection therewith.
6. Governing Law. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns and shall be governed by and construed in accordance with the laws of
the State of New York.
7. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of
this Amendment for any other purpose.
8. Counterparts. This Amendment may be executed by the
parties hereto in one or more counterparts, each of which shall be deemed an
original and all of which taken together shall be deemed to constitute one and
the same agreement.
3
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the day and year first written above.
BERNARD CHAUS, INC.
By: /s/ Wayne S. Miller
-----------------------------
Name: Wayne S. Miller
Title: Chief Financial Officer
BNY FINANCIAL CORPORATION
By: /s/ Frank Imperato
-----------------------------
Name: Frank Imperato
Title: Vice President
CONSENTED AND AGREED TO:
/s/ Josephine Chaus
- ---------------------------
JOSEPHINE CHAUS
4
<PAGE>
BERNARD CHAUS, INC.
800 SECAUCUS ROAD
SECAUCUS, NEW JERSEY 07094
May 5, 1997
BNY Financial Corporation
1290 Avenue of the Americas
New York, New York 10036
Gentlemen:
Reference is made to the Restated and Amended Financing
Agreement dated as of February 21, 1995 (as same has been amended,
supplemented or otherwise modified, from time to time, the "Financing
Agreement") by and between Bernard Chaus, Inc. ("Borrower") and BNY Financial
Corporation ("Lender"). All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Financing Agreement.
Borrower has failed to comply with the provisions of
Sections 9(a) (vi), 9(a)(vii) and 9(a)(xvii) of the Financing Agreement for
the third quarter of fiscal year 1997 comprising the period from January 1,
1997 through and including March 31, 1997 (the "Period") by failing to
maintain: (i) Tangible Net Worth for the Period not less than ($17,250,000),
(ii) Working Capital for the Period not less than ($30,500,000) and (iii) a
Profit before taxes (as defined under GAAF) for the Period not less than
$500,000.
Without in any way limiting any other rights of Lender under
the Financing Agreement, by signing below Lender agrees that Borrower's
violation of the (i) Tangible Net Worth covenant contained in Section 9(a)(vi)
of the Financing Agreement, (ii) Working Capital covenant contained in Section
9(a)(vii) of the Financing Agreement and (iii) Maximum Permitted Loss covenant
contained in Section 9(a)(xvii) of the Financing Agreement, each only as
respects the Period, is hereby waived, but only to the extent that the actual
covenant calculations as be prepared by Borrower do not reflect in any case
breaches by Borrower of a magnitude greater than as reflected by the estimated
covenant calculations as prepared by Borrower and as attached hereto as
Exhibit 1.
Except as expressly waived or otherwise specifically
provided herein, all of the representations, warranties, terms, covenants and
conditions of the Financing Agreement shall remain unamended and unwaived and
shall continue to be and shall remain in full force and effect in accordance
with their respective terms. The waivers set forth herein shall be limited
precisely as provided for herein to the provisions expressly waived herein and
shall not be deemed a waiver of, amendment of, consent to or modification of
any other term or provision of
<PAGE>
the Financing Agreement or of any transaction or future action on the part of
Borrower requiring Lender's consent under the Financing Agreement.
This letter shall become effective upon receipt by Lender of
(i) four (4) copies of this Waiver Letter executed by Borrower and agreed to
by Josephine Chaus as guarantor and (ii) a $25,000 waiver fee, which may be
charged to Borrower's loan account with Lender simultaneously with Lender's
execution below.
This letter may be signed in one or counterparts, each of
which taken together shall constitute one and the same agreement.
Very truly yours,
BERNARD CHAUS, INC.
By: /s/ Wayne S. Miller
--------------------------
Its: Chief Executive Officer
AGREED AND ACKNOWLEDGED:
/s/ Josephine Chaus
- --------------------------
JOSEPHINE CHAUS
AGREED AND ACKNOWLEDGED:
BNY FINANCIAL CORPORATION
By: /s/ Frank Imperato
-----------------------
Its: Vice President
<PAGE>
EXHIBIT 1
BERNARD CHAUS, INC.
COVENANT CALCULATION
QUARTER ENDED MARCH 31, 1997
TANGIBLE NET WORTH
As calculated: Equity ($47,729,000)
Subordinated debt 25,653,000
Goodwill & intangible assets 0
--------------
Calculated Tangible Net Worth ($22,076,000)
==============
Minimum required:
Tangible Net Worth ($17,250,000)
--------------
WORKING CAPITAL
As calculated:
Current Assets $48,492,000
Current Liabilities 72,746,000
--------------
Working Capital ($24,254,000)
==============
Minimum required:
Working Capital Minimum ($20,500,000)
==============
NET PROFIT (LOSS) BEFORE TAXES
FOR QUARTER ENDED MARCH 31, 1997
As calculated: ($3,218,000)
==============
Minimum required profit before taxes: $ 500,000
==============
<PAGE>
EXHIBIT 1
CHAUS
May 1, 1997
Mr. Andy Rogow
BNY FINANCIAL CORPORATION
1290 Avenue of the Americas, 3rd Floor
New York, New York 10104
RE: FINANCING AGREEMENT BETWEEN US, ORIGINALLY
EXECUTED BY YOU ON SEPTEMBER 24, 1991, AS RESTATED
AND AMENDED EFFECTIVE AS OF JULY 1, 1992, AS AMENDED
AND SUPPLEMENTED AS OF FEBRUARY 21, 1995, AND AS
RESTATED AND AMENDED APRIL 29,1997, (THE "FINANCING
AGREEMENT")
Dear Andy:
As detailed by the attached calculations, Bernard Chaus, Inc. is not in
compliance with the following covenants:
9(a)(vi) Our "Tangible Net Worth" is greater than ($17.3) million.
9(a)(vii) Our "Working Capital" is greater than $(20.5) million.
9(a)(xvii) Our "Minimum Required Profit" for the quarter is less than
$0.5 million.
We hereby request a waiver of these covenants for the third quarter of
fiscal year 1997, the period from January 1, 1997 through and including March
31, 1997. Thank you in advance for your cooperation and assistance in this
matter.
Very truly yours,
BERNARD CHAUS, INC.
/s/ Wayne S. Miller
Wayne S. Miller
Chief Financial Officer
WSM:nj
800 Secaucus Road o Secaucus, NJ 07094 o 201-863-4646
o Fax 201-863-1171 o Fax 201-863-4269
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> MAR-31-1997
<CASH> 118
<SECURITIES> 0
<RECEIVABLES> 40,717
<ALLOWANCES> 13,090
<INVENTORY> 20,299
<CURRENT-ASSETS> 48,492
<PP&E> 18,420
<DEPRECIATION> 17,000
<TOTAL-ASSETS> 50,670
<CURRENT-LIABILITIES> 72,746
<BONDS> 0
0
0
<COMMON> 269
<OTHER-SE> (47,729)
<TOTAL-LIABILITY-AND-EQUITY> 50,670
<SALES> 129,040
<TOTAL-REVENUES> 129,040
<CGS> 99,308
<TOTAL-COSTS> 130,354
<OTHER-EXPENSES> (85)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,860
<INCOME-PRETAX> (7,089)
<INCOME-TAX> 43
<INCOME-CONTINUING> (7,132)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,132)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.27)
</TABLE>
