<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 December 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
BERNARD CHAUS, INC.
(Exact Name of Registrant as Specified in its Charter)
New York 13-2807386
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
1410 Broadway, New York, New York 10018
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code
(212) 354-1280
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
---- ----- ------------------
February 9, 1998 Common Stock, $0.01 par value 27,115,907
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) PAGE
Condensed Consolidated Balance Sheets as of
December 31, 1997, June 30, 1997 and
December 31, 1996 3
Condensed Consolidated Statements of Operations
for the Six Months and Quarters ended
December 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows
for the Six Months and Quarters ended
December 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 15
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
2
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except number of shares and per share amounts)
<TABLE>
<CAPTION>
December 31, June 30, December 31,
1997 1997 1996
--------- --------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 481 $ 330 $ 39
Accounts receivable, net 12,526 7,451 7,124
Inventories 14,627 23,746 19,020
Prepaid expenses and other current assets 955 568 787
--------- --------- ---------
Total current assets 28,589 32,095 26,970
Fixed assets-- net 829 1,295 1,584
Other assets 617 748 1,003
--------- --------- ---------
$ 30,035 $ 34,138 $ 29,557
========= ========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities
Notes payable-- banks $ 23,087 $ 37,756 $ 29,906
Accounts payable 14,155 19,825 13,639
Accrued expenses 6,090 5,393 5,559
Accrued restructuring expenses 185 1,850 --
Term loan-- current 1,000 -- --
--------- --------- ---------
Total current liabilities 44,517 64,824 49,104
Subordinated promissory notes 27,888 26,374 24,957
Term loan 14,000 -- --
--------- --------- ---------
86,405 91,198 74,061
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 -- 2,689,997 at
December 31, 1997, June 30, 1997
and December 31, 1996 27 27 27
Additional paid-in capital 65,705 65,705 65,705
Deficit (120,622) (121,312) (108,756)
Less: Treasury stock, at cost --
62,270 shares at December 31, 1997,
June 30, 1997 and December 31, 1996 (1,480) (1,480) (1,480)
--------- --------- ---------
Total stockholders' deficiency (56,370) (57,060) (44,504)
--------- --------- ---------
$ 30,035 $ 34,138 $ 29,557
========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except number of shares and per share amounts)
<TABLE>
<CAPTION>
For the Six For the
Months Ended Quarter Ended
December 31, December 31,
1997 1996 1997 1996
------------ ------------ ----------- --------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net sales $105,951 $ 86,094 $ 47,095 $ 38,084
Cost of goods sold 80,241 65,746 35,809 30,214
-------- -------- -------- --------
Gross profit 25,710 20,348 11,286 7,870
Selling, general &
administrative expenses 20,231 20,428 10,180 10,173
-------- -------- -------- --------
Income (loss) from operations 5,479 (80) 1,106 (2,303)
Interest and other income, net 45 41 48 35
Interest expense (4,739) (3,832) (2,420) (1,994)
-------- -------- -------- --------
Income (loss) before income taxes 785 (3,871) (1,266) (4,262)
Income taxes 95 36 45 6
-------- -------- -------- --------
Net income (loss) $ 690 $ (3,907) $ (1,311) $ (4,268)
======== ======== ======== ========
Basic earnings (loss) per share $ 0.10 $ (0.58) $ (0.20) $ (0.64)
======== ======== ======== ========
Weighted average number of common
and common equivalent shares
outstanding 6,687,000 6,687,000 6,687,000 6,687,000
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Six Months Ended
December 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 690 $ (3,907)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 348 461
Provision (credit) for losses on accounts receivable 38 (60)
Deferred interest on
subordinated promissory notes 1,514 1,369
Changes in operating assets and liabilities:
Accounts receivable (5,113) 931
Inventories 9,119 2,236
Prepaid expenses and other assets (302) (444)
Accounts payable (5,670) (3,796)
Accrued expenses 697 (497)
Accrued restructuring expenses (1,434) (196)
-------- --------
Net Cash Used In Operating Activities (113) (3,903)
-------- --------
INVESTING ACTIVITIES
Purchases of fixed assets (42) (147)
Purchases of in-store fixtures (25) --
Net Cash Used In Investing Activities (67) (147)
-------- --------
FINANCING ACTIVITIES
Net (payments) proceeds from short-term
bank borrowings (14,669) 3,829
Net proceeds from issuance of term loan 15,000 --
Net proceeds from exercise of options 0 13
-------- --------
Net Cash Provided By Financing Activities 331 3,842
-------- --------
Increase (decrease) in cash and cash equivalents 151 (208)
Cash and Cash Equivalents, Beginning of Period 330 247
-------- --------
Cash and Cash Equivalents, End of Period $ 481 $ 39
======== ========
Cash Paid for:
Taxes 7 27
Interest 1,483 2,197
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Six Months Ended December 31, 1997 and December 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 six months and quarter ended December 31, 1997 are
not necessarily indicative of the results that may be expected for the year
ending June 30, 1998 or any other period. The balance sheet at June 30, 1997
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, 1997.
Basic Earnings (Loss) Per Share
All share and per share data reflects the 1 for 10 reverse stock split
which was effected December 9, 1997. Basic earnings (loss) per share has been
computed by dividing the applicable net income by the weighted average number
of common shares outstanding.
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128 Earnings Per Share which was required to be adopted for
interim and annual periods ending after December 15, 1997. The statement
requires that the "bonus element" related to the issuance of rights at less
than fair value in connection with the Rights Offering, completed on January
23, 1998, be included in the computation of basic earnings per share on a
retroactive basis. As a result, prior year share and per share results have
been restated. The effect of this "bonus element" increases the number of
weighted average common shares outstanding from 2,628,000 to 6,687,000 shares
outstanding for all periods presented.
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 $9.8 million at December
31, 1997, $8.5 million at June 30, 1997 and $7.9 million at December 31, 1996.
6
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BERNARD CHAUS, INC. AND SUBSIDIARIES
3. New Financing Agreement
On October 10, 1997, the Company and BNY Financial Corporation, a
wholly-owned subsidiary of The Bank of New York ("BNYF"), entered into a new
revolving credit facility (the "New Revolving Facility") and a new term loan
facility (the "New Term Loan" and, together with the New Revolving Facility,
the "New Financing Agreement") which amended and restated in its entirety the
Company's February 1995 financing agreement with BNYF, as amended (the "Old
Bank Debt Agreement). The New Financing Agreement amended certain provisions of
the Old Bank Debt Agreement and provides for maximum availability of $81.0
million, and overadvances of up to $12.8 million. The New Financing Agreement
also amended certain financial covenants contained in the Old Bank Debt
Agreement. The New Financing Agreement provides for certain additional events
of default, among which are the default by Josephine Chaus, Chairwoman of the
Board, a principal stockholder of the Company and the owner of a majority of
the Company's Common Stock ("Josephine Chaus" or "Ms. Chaus"), under the Bank
Debt Put (as defined below), and the failure by the Company to close all of its
retail outlets by the end of January 1998. The Company closed all of its retail
outlets prior to January 14, 1998 and, as of January 26, 1998, the Bank Debt
Put was no longer applicable.
The New Financing Agreement consists of two facilities: (i) the New
Revolving Facility which is a $66.0 million five-year revolving credit line
with a $20.0 million sublimit for letters of credit, and (ii) the New Term Loan
which is a $15.0 million term loan facility. Each facility matures on December
31, 2002. In January 1998 an aggregate of $22.5 million held by BNYF as cash
collateral was applied by BNYF to retire $22.5 million of the revolving credit
line in connection with the Company's Restructuring (as defined below).
Interest on the New Revolving Facility accrues at 1/2 of 1% above the
Prime Rate (8.5% at December 31, 1997) and is payable on a monthly basis, in
arrears. Interest on the New Term Loan accrues at an interest rate ranging from
1/2 of 1% above the Prime Rate to 1 1/2% above the Prime Rate, which interest
rate will be determined, from time to time, based upon the Company's
availability under the New Revolving Facility. With the exception of warrants
issued to BNYF (as discussed below), the Company's execution of the New
Financing Agreement did not require the payment of any commitment, closing,
administration or facility fees. The New Financing Agreement provides for
service charges and letter of credit fees on substantially the same terms as
those existing under the Old Bank Debt Agreement. As part of the New Financing
Agreement, BNYF's existing warrants were extinguished, and BNYF received new
warrants to purchase 500,000 shares of the Company's Common Stock.
Amortization payments in the amount of $250,000 are payable quarterly
in arrears in connection with the New Term Loan. The first amortization payment
is due on March 31, 1998. A balloon payment in the amount of $10.25 million is
due on December 31, 2002. In the event of the earlier termination by the
Company of the New Financing Agreement, the Company will be liable for
termination fees initially equal to $2.8 million, and declining to $2.2 million
after October 8, 2000. The Company's obligations under the New Financing
Agreement are secured by a first priority lien on substantially all of the
Company's assets, including the Company's accounts receivable, inventory and
trademarks.
As an inducement to BNYF to enter into the New Financing Agreement,
Ms. Chaus agreed with BNYF that she will purchase, at the option of BNYF, a
$2.5 million junior participation in the New Financing Agreement in the event
that (i) an event of default occurs under the New Financing
7
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Agreement prior to May 15, 1998, or (ii) the Rights Offering (as defined below)
is not consummated prior to May 15, 1998 (the "Bank Debt Put"). The Rights
Offering was consummated on January 26, 1998 and, therefore, the Bank Debt Put
was no longer applicable. Refer to Note 4.
The New Financing Agreement contains financial covenants requiring,
among other things, the maintenance of minimum levels of tangible net worth,
working capital and maximum permitted loss (minimum permitted profit).
4. Restructuring of Indebtedness
In June 1997, the Company announced a proposed restructuring program
to be implemented by the Company. In September 1997, the disinterested members
of the Board of Directors of the Company unanimously approved the restructuring
plan (the "Restructuring") which provided for the following: (i) the Company
would raise, through an offer of rights to subscribe ("Rights"), up to $20.0
million, but not less than $12.5 million, of equity through a rights offering
to all shares of Common Stock of the Company (the "Rights Offering") of up to
13,977,270 shares of Common Stock of the Company (on a post stock split basis);
(ii) the conversion of approximately $40.6 million of the Company's
indebtedness to Ms. Chaus, consisting of $28.1 million of existing subordinated
indebtedness (including accrued interest through January 15, 1998) and $12.5
million of indebtedness which will be owed to Ms. Chaus, into 10,510,910 shares
of Common Stock of the Company; (iii) the New Financing Agreement; (iv) the
implementation of a reverse stock split of the Company's Common Stock such that
every ten (10) shares of Common Stock would be converted into one (1) share of
Common Stock; and (v) the liquidation of the Company's retail outlet stores
during the second quarter of fiscal 1998. On October 10, 1997, the Company
entered into the New Financing Agreement. On December 9, 1997, the reverse
stock split described in (iv) above became effective. Prior to January 14,
1998, the Company closed all of its retail outlet stores as referenced in (v)
above. On January 26, 1998, the Rights Offering described in (i) above was
consummated. On January 29, 1998, the conversion of indebtedness into equity
described in (ii) above was completed.
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1997 and the unaudited pro forma consolidated
capitalization of the Company after giving effect to the Restructuring as if
certain items had occurred at December 31, 1997. Such items include (i)
subordinated indebtedness owed and to be owed to Josephine Chaus being
converted into 10,510,910 shares of Common Stock of the Company, (ii) as part
of the Rights Offering, the Company raised $20.0 million of equity (less
expenses of the Rights Offering of $0.9 million) from Ms. Chaus and/or other
stockholders, and (iii) $12.5 million in respect of borrowings previously
guaranteed by Ms. Chaus being satisfied in full out of proceeds from a loan
made by BNYF to Ms. Chaus.
8
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
As of
December 31, 1997
-----------------
Actual Pro forma
------ ---------
Total Debt
Bank Debt $ 23,807 $ --
Subordinated Promissory Notes 27,888 --
Term Loan 15,000 15,000
-------- -------
Total debt 65,975 15,000
Total stockholders' (deficiency) equity (56,370) 3,118
-------- -------
Total capitalization $ 9,605 18,118
======== =======
Although there can be no assurance, the Company believes that, with
the consummation of the Restructuring, the Company will have adequate resources
to meet its needs for the foreseeable future, assuming it meets its business
plan.
9
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the six months ended December 31, 1997, net sales increased by
$19.9 million or 23.1% as compared to the six months ended December 31, 1996.
Net sales for the quarter ended December 31, 1997 increased by $9.0 million or
23.7% as compared to the quarter ended December 31, 1996. The sales increases
for the six months and the quarter ended December 31, 1997 as compared to the
comparable periods last year are primarily due to an increase in sales at
regular and incentive prices of the Company's Chaus product lines. For the six
months ended December 31, 1997, units shipped increased by approximately 7.8%
with a 9.5% increase in average selling price from the comparable period last
year. For the quarter ended December 31, 1997 average selling prices increased
by 25.3% from the comparable period last year as a result of the Company's
ability to increase its selling price per unit and decrease its sales to off
price vendors. Units shipped decreased by 8.4% for the quarter ended December
31, 1997 from the comparable period last year due to a decrease in sales to off
price vendors.
As a percentage of net sales, gross profit increased to 24.3% and
24.0% for the six months and quarter ended December 31, 1997, respectively, as
compared to 23.6% and 20.7% for the comparable periods last year. The increase
in gross profit as a percentage of net sales for both the six months and the
quarter is primarily due to improved gross margins on the Chaus product lines
partially offset by a decrease in gross margins associated with the Company's
Nautica licensed product line.
Selling, general and administrative expenses decreased by $0.2 million
for the six months ended December 31, 1997 as compared to the six months ended
December 31, 1996 primarily due to a decrease in payroll related expenses.
Selling, general and administrative expenses remained approximately the same
for the quarter ended December 31, 1997 and December 31, 1996. As a percentage
of net sales, selling, general and administrative expenses decreased to 19.1%
and 21.6% for the six months and quarter ended December 31, 1997, respectively,
as compared to 23.7% and 26.7% for the comparable periods last year. These
decreases resulted primarily from the Company's ability to keep expenses
relatively constant as net sales increased.
Interest expense for the six months and quarter ended December 31,
1997 increased by 23.7% and 21.4%, respectively, as compared to the comparable
periods last year primarily as a result of higher average bank borrowings and
an increase in interest rates.
Financial Position, Liquidity and Capital Resources
General
Net cash used in operating activities was $0.3 million for the six
months ended December 31, 1997 as compared to $3.9 million for the six months
ended December 31, 1996. The decrease in net cash used in operating activities
resulted primarily from a $9.1 million
10
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
decrease in inventory and net income of $0.7 million offset by a decrease in
accounts payable of $5.7 million and an increase in accounts receivable of $5.1
million.
Old Bank Debt Agreement
The Company and BNYF (as defined below) 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 "Old Bank Debt Agreement"). The Old Bank Debt Agreement
provided the Company with a $72.0 million credit facility for letters of credit
and direct borrowings, with a sublimit for loans and advances ranging between
$40.0 and $58.0 million. The amount of financing available was based upon a
formula incorporating eligible receivables and inventory, cash balances, other
collateral and permitted overadvances, all as defined in the Old Bank Debt
Agreement. The Company's obligations under the Old Bank Debt Agreement were
secured by the Company's accounts receivable, inventory and trademarks.
The Old Bank Debt Agreement contained 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 was 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 net
worth, working capital and quarterly minimum profit requirements for the period
ended March 31, 1997.
Interest on direct borrowings was payable monthly at an annual rate
equal to the higher of (i) The Bank of New York's prime rate (8.50% at December
31, 1997) plus 0.5% (The Bank of New York prime rate plus 1.5% in the event the
Company's overadvance position exceeded the allowable overadvances) or (ii) the
Federal Funds Rate (5.625% at September 30, 1997) in effect plus 1% (Federal
Funds Rate in effect plus 2% in the event the Company's overadvance position
exceeded the allowable overadvances). There was 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 Old Bank Debt Agreement required 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 certain warrants to BNYF.
New Financing Agreement
On October 10, 1997, the Company and BNY Financial Corporation, a
wholly-owned subsidiary of The Bank of New York ("BNYF"), entered into a new
revolving credit facility (the "New Revolving Facility") and a new term loan
facility (the "New Term Loan" and, together with the New Revolving Facility,
the "New Financing Agreement") which amended and restated in its
11
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BERNARD CHAUS, INC. AND SUBSIDIARIES
entirety the Old Bank Debt Agreement. The New Financing Agreement amended
certain provisions of the Old Bank Debt Agreement and provides for maximum
availability of $81.0 million, and overadvances of up to $12.8 million. At
December 31, 1997, the Company had availability of approximately $9.3 million
(inclusive of overadvance availability) under the New Financing Agreement. The
New Financing Agreement also amended certain financial covenants contained in
the Old Bank Debt Agreement. The New Financing Agreement provides for certain
additional events of default, among which are the default by Josephine Chaus,
Chairwoman of the Board, a principal stockholder of the Company and the owner
of a majority of the Company's Common Stock ("Josephine Chaus" or "Ms. Chaus"),
under the Bank Debt Put (as defined below), and the failure by the Company to
close all of its retail outlets by the end of January 1998. The Company closed
all of its retail outlets prior to January 14, 1998 and, as of January 26,
1998, the Bank Debt Put was no longer applicable.
The New Financing Agreement consists of two facilities: (i) the New
Revolving Facility which is a $66.0 million five-year revolving credit line
with a $20.0 million sublimit for letters of credit, and (ii) the New Term Loan
which is a $15.0 million term loan facility. Each facility matures on December
31, 2002. In January 1998 an aggregate of $22.5 million held by BNYF as cash
collateral was applied by BNYF to retire $22.5 million of the revolving credit
line in connection with the Company's Restructuring (as defined below).
Interest on the New Revolving Facility accrues at 1/2 of 1% above the
Prime Rate (8.5% at December 31, 1997) and is payable on a monthly basis, in
arrears. Interest on the New Term Loan accrues at an interest rate ranging from
1/2 of 1% above the Prime Rate to 1 1/2% above the Prime Rate, which interest
rate will be determined, from time to time, based upon the Company's
availability under the New Revolving Facility. With the exception of warrants
issued to BNYF (as discussed below), the Company's execution of the New
Financing Agreement did not require the payment of any commitment, closing,
administration or facility fees. The New Financing Agreement provides for
service charges and letter of credit fees on substantially the same terms as
those existing under the Old Bank Debt Agreement. As part of the New Financing
Agreement, BNYF's existing warrants were extinguished, and BNYF received new
warrants to purchase 212,500 shares of the Company's Common Stock on a post
stock split basis.
Amortization payments in the amount of $250,000 are payable quarterly
in arrears in connection with the New Term Loan. The first amortization payment
is due on March 31, 1998. A balloon payment in the amount of $10.25 million is
due on December 31, 2002. In the event of the earlier termination by the
Company of the New Financing Agreement, the Company will be liable for
termination fees initially equal to $2.8 million, and declining to $2.2 million
after October 8, 2000. The Company's obligations under the New Financing
Agreement are secured by a first priority lien on substantially all of the
Company's assets, including the Company's accounts receivable, inventory and
trademarks.
The New Financing Agreement contains financial covenants requiring,
among other things, the maintenance of minimum levels of tangible net worth,
working capital and maximum permitted loss (minimum permitted profit).
12
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
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 Old Bank Debt Agreement. In consideration
for credit support provided by Ms. Chaus to the Company prior to February 1995,
Ms. Chaus was granted warrants (the "1994 Warrants"), exercisable through
November 22, 1999, to purchase an aggregate of 1,216,500 shares of Common Stock
at prices ranging between $2.25 and $4.62 per share. As part of the
negotiations with BNYF in connection with the Old Bank Debt 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 Old Bank Debt 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 third quarter of fiscal 1996, 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.
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
13
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
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. Such increased amount was paid to
Ms. Chaus through January 29, 1998 (on a pro-rated basis).
Ms. Chaus previously entered into a deposit letter dated July 23, 1997
(the "July Deposit Letter") pursuant to which she provided $10.0 million in
cash collateral to secure the Bank Debt (as defined below) in substitution for
the letter of credit previously provided by her. The July Deposit Letter was
amended on October 10, 1997 to provide that the $10.0 million in cash
collateral shall be held as collateral to secure indebtedness under the New
Financing Agreement. On January 23, 1998, in connection with the Rights
Offering, such collateral was released and used by Ms. Chaus to purchase shares
of Common Stock issuable to her upon the exercise of subscription rights, in
satisfaction of her agreement to exercise her full $10.0 million subscription
(the "Purchase Commitment") in connection with the Rights Offering.
On October 10, 1997, in substitution for the $12.5 Million Guarantee
previously provided by Ms. Chaus, she entered into a deposit letter (the
"October Deposit Letter") pursuant to which she provided $12.5 million in cash
collateral and secured the secured bank debt owing to BNYF by the Company (the
"Bank Debt"). The cash collateral was provided from the proceeds of a loan made
by BNYF to Ms. Chaus. On January 29, 1998, pursuant to the terms of a cash
collateral deposit release letter, the $12.5 million in cash collateral was
released to BNYF and used to retire $12.5 million of the Bank Debt. As a result
of such repayment, the Company became indebted to Ms. Chaus for $12.5 million,
and Ms. Chaus became subrogated to the rights of BNYF with respect to such loan
amount (the "Subrogated Loan") until the Subrogated Loan and the Subordinated
Notes (as defined below) were converted into 10,510,910 shares of Common Stock
of the Company. Pursuant to the terms of a conversion agreement dated as of
January 29, 1998, the Subrogated Loan and the Subordinated Notes were converted
by Ms. Chaus into 10,510,910 shares of Common Stock of the Company.
The cash collateral held under the July Deposit Letter and the October
Deposit Letter was applied by BNYF to retire $22.5 million of the Bank Debt.
In connection with the restructuring, Ms. Chaus relinquished, for no
value, all of her rights under the 1994 Warrants, the 1995 Warrants and the
1996 Warrants.
14
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Subordinated Debt
The Company had outstanding at December 31, 1997 $27.9 million of
subordinated notes payable to Josephine Chaus (the "Subordinated Notes"). In
connection with the Company's November 1995 public offering, Ms. 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 Old Bank Debt Agreement. Pursuant to the terms of a conversion
agreement dated as of Janaury 29, 1998, the Subrogated Loan and the
Subordinated Notes were converted by Ms. Chaus into 10,510,910 shares of Common
Stock of the Company.
Restructuring of Indebtedness
In June 1997, the Company announced a proposed restructuring program
to be implemented by the Company. In September 1997, the disinterested members
of the Board of Directors of the Company unanimously approved the restructuring
plan (the "Restructuring") which provided for the following: (i) the Company
would raise, through an offer of rights to subscribe ("Rights"), up to $20.0
million, but not less than $12.5 million, of equity through a rights offering
to all shares of Common Stock of the Company (the "Rights Offering") of up to
13,977,270 shares of Common Stock of the Company (on a post stock split basis);
(ii) the conversion of approximately $40.6 million of the Company's
indebtedness to Ms. Chaus, consisting of $28.1 million of existing subordinated
indebtedness (including accrued interest through January 15, 1998) and $12.5
million of indebtedness which will be owed to Ms. Chaus, into 10,510,910 shares
of Common Stock of the Company; (iii) the New Financing Agreement; (iv) the
implementation of a reverse stock split of the Company's Common Stock such that
every ten (10) shares of Common Stock would be converted into one (1) share of
Common Stock; and (v) the liquidation of the Company's retail outlet stores
during the second quarter of fiscal 1998. On October 10, 1997, the Company
entered into the New Financing Agreement. On December 9, 1997, the reverse
stock split described in (iv) above became effective. Prior to January 14,
1998, the Company closed all of its retail outlet stores as referenced in (v)
above. On January 26, 1998, the Rights Offering described in (i) above was
consummated. On January 29, 1998, the conversion of indebtedness into equity
described in (ii) above was completed.
Newly Adopted Accounting Standards
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128 Earnings Per Share which was required to be adopted for
interim and annual periods ending after December 15, 1997. The statement
establishes standards for computing and presenting earnings per share ("EPS")
and simplifies the standards for computing EPS currently found in Accounting
Principles Board ("APB") Opinion No. 15, Earnings Per Share. Common stock
equivalents under APB No. 15, with the exception of contingently issuable
shares (shares issuable for little or no cash consideration), are no longer
included in the calculation of primary, or basic EPS. Under SFAS No. 128,
contingently issuable shares are included in the calculation of basic EPS.
15
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
Future Financing Requirements
At December 31, 1997, the Company had a working capital deficiency of
$15.9 million; however, on a pro forma basis, after giving effect to the rights
offering and the conversion by Ms. Chaus of indebtedness owed to her by the
Company into equity, the working capital is $15.7 million. The Company requires
the availability of sufficient cash flow and borrowing capacity to finance its
existing product lines and to develop and market its licensed Nautica product
lines. The Company expects to satisfy such requirements through cash flow
operations, borrowings under the New Financing Agreement and proceeds from the
Rights Offering.
Although there can be no assurance, the Company believes that, with
the consummation of the Restructuring, the Company will have adequate resources
to meet its needs for the foreseeable future, assuming it meets its business
plan.
The foregoing discussion contains forward-looking statements which are
based upon current expectations and involve a number of uncertainties,
including continuation of the favorable trend in the Company's sales, retail
market conditions, consumer acceptance of the Company's products and continued
ability to maintain costs and quality controls.
16
<PAGE>
BERNARD CHAUS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Attached hereto as Exhibits are the following:
10.83 Letter Agreement dated December 9, 1997 between Josephine
Chaus and the Company.
10.84 Cash Collateral Deposit Release Letter Agreement dated as
of January 29, 1998 Agreement among Josephine Chaus, the
Company and BNY Financial Corporation.
10.85 Subrogated Subordinated Promissory Note dated as of
January 29, 1998 from the Company to Josephine Chaus in the
principal amount of $12.5 million.
10.86 Conversion Agreement dated as of January 29, 1998 between
Josephine Chaus and the Company.
27 Financial Data Schedule
(b) The Company filed no reports on Form 8-K during the quarter ended
December 31, 1997.
17
<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: February 17, 1998 By: /s/ Josephine Chaus
-------------------------
JOSEPHINE CHAUS
Chairwoman of the Board and
Office of the Chairman
Date: February 17, 1998 By: /s/ Andrew Grossman
-------------------------
ANDREW GROSSMAN
Chief Executive Officer and
Office of the Chairman
Date: February 17, 1998 By: /s/ Barton Heminover
-------------------------
BARTON HEMINOVER
Vice President -- Corporate Controller
18
<PAGE>
EXHIBIT INDEX
10.83 Letter Agreement dated December 9, 1997 between Josephine
Chaus and the Company.
10.84 Cash Collateral Deposit Release Letter Agreement dated as
of January 29, 1998 Agreement among Josephine Chaus, the
Company and BNY Financial Corporation.
10.85 Subrogated Subordinated Promissory Note dated as of
January 29, 1998 from the Company to Josephine Chaus in the
principal amount of $12.5 million.
10.86 Conversion Agreement dated as of January 29, 1998 between
Josephine Chaus and the Company.
27 Financial Data Schedule
19
<PAGE>
JOSEPHINE CHAUS
C/O BERNARD CHAUS, INC.
1410 BROADWAY
NEW YORK, NEW YORK 10018
December 9, 1997
Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
Re: Subscription Agreement
Ladies and Gentlemen:
This letter sets forth our agreement regarding the exercise
of subscription rights in the rights offering (the "Rights Offering") described
in the Registration Statement (File No. 333-39041) filed with the Securities
and Exchange Commission on October 30, 1997, as amended by Amendment No. 1
thereto filed with the Securities and Exchange Commission on December 9, 1997
(as such may be amended or supplemented after the date of this letter, the
"Registration Statement"). This letter constitutes the "Purchase Agreement"
specified in the Registration Statement.
I hereby agree to subscribe for and purchase for $10.0
million at the consummation of the Rights Offering all of the 6,988,935 shares
of common stock, par value $.01 per share ("Common Stock"), of Bernard Chaus,
Inc., a New York corporation (the "Company"), issuable to me upon exercise of
the nontransferable subscription rights distributed to me in the rights
offering described in the Registration Statement (the "Rights Offering"). The
$10.0 million purchase price shall be satisfied out of the $10.0 million in
cash collateral currently held by BNY Financial Corporation under the terms of
the July Deposit Letter (as such term is defined in the Registration
Statement). I also agree that, in the event that at least 1,747,160 shares of
Common Stock (the "Standby Commitment Shares") are not purchased by the holders
of the subscription rights distributed in the Rights Offering, other than by me
(or purchases by the other directors of the Company in the Rights Offering in
excess of $100,000), pursuant to the Basic Subscription Privilege or the
Oversubscription Privilege (as such terms are defined in the Registration
Statement), I will purchase the unsubscribed portion of such Standby Commitment
Shares at the Subscription Price (as such term is defined in the Registration
Statement), for an aggregate purchase price of up to $2.5 million.
As part of the Company's restructuring plan, I also agree to
convert, immediately prior to the closing of the Rights Offering, approximately
$40.6 million of indebtedness owed to me, consisting of approximately $28.1
million of existing subordinated indebtedness (including accrued interest
through January 23, 1998) and $12.5 million of indebtedness which will be owed
to me by
<PAGE>
the Company pursuant to the Subrogated Loan (as such term is defined in the
Registration Statement), into 10,510,910 shares of Common Stock.
The share amounts in this letter give effect to the
one-for-ten reverse stock split to be effective on the close of business today.
The actions to be taken by me as described in this letter are
subject only to the condition that there not be any litigation or governmental
action challenging or seeking to enjoin the Rights Offering which, in the sole
judgment of the Company, makes it inadvisable to proceed with the Rights
Offering.
Sincerely,
/s/ Josephine Chaus
Josephine Chaus
Agreed to and accepted as of
this 9th day of December, 1997:
BERNARD CHAUS, INC.
/s/ Andrew Grossman
- -----------------------
Andrew Grossman
Chief Executive Officer
<PAGE>
CASH COLLATERAL DEPOSIT RELEASE LETTER
As of January 29, 1998
BNY Financial Corporation
1290 Avenue of the Americas
New York, New York
Attention: Andrew Rogow
Gentlemen:
Reference is made to (a) the Second Restated and Amended
Financing Agreement dated as of October 10, 1997 (as the same has been and may
be further amended, modified, supplemented and restated from time to time, the
"Financing Agreement") between BNY Financial Corporation ("Lender") and Bernard
Chaus, Inc. ("Borrower"), (b) that certain $12,500,000 Promissory Note dated as
of October 10, 1997 (as the same has been and may be further amended, modified,
supplemented and restated from time to time, the "Note") executed by the
undersigned in favor of Lender and (c) that certain Cash Collateral Deposit
Letter from the undersigned to Lender dated as of October 10, 1997 (as the same
has been and may be further amended, modified, supplemented and restated from
time to time, the "Deposit Letter"). All capitalized terms used herein which
are not defined shall have the meanings given to them in the Financing
Agreement.
The Collateral Deposit is hereby released to Lender in
accordance with the Deposit Letter and shall be applied as provided in Section
12.3 of the Financing Agreement. The parties acknowledge that the undersigned
shall become subrogated to the rights of Lender with respect to such loan
amount (which will be reflected in a Subrogated Subordinated Promissory Note
dated as of the date hereof from Borrower to the undersigned) until such
Subrogated Subordinated Promissory Note is exchanged for equity.
Very truly yours,
/s/ JOSEPHINE CHAUS
-------------------
JOSEPHINE CHAUS
Receipt of the Collateral Deposit is hereby acknowledged as of this 29th day of
January, 1998:
BNY FINANCIAL CORPORATION
By: /s/ Andrew Rogow
----------------------------
Title: Senior Vice President
<PAGE>
Subrogation of the amount equal to the Collateral Deposit by means of a
Subrogated Subordinated Promissory Note is hereby acknowledged as of this 29th
day of January, 1998:
BERNARD CHAUS, INC.
By: /s/ Andrew Grossman
------------------------
Andrew Grossman
Chief Executive Officer
<PAGE>
SUBROGATED SUBORDINATED PROMISSORY NOTE
$12,500,000 New York, New York
As of January 29, 1998
FOR VALUE RECEIVED, Bernard Chaus, Inc. (herein collectively
with all successors called the "Maker"), with an address at 1410 Broadway, New
York, New York, hereby promises to pay to the order of Josephine Chaus (the
"Payee"), with an address at 128 East 73rd Street, New York, New York, the
principal sum of Twelve Million Five Hundred Thousand Dollars ($12,500,000),
plus interest thereon at the rate set forth below at such times as are
specified below.
Interest shall accrue on the outstanding principal amount of
this Subrogated Subordinated Promissory Note (this "Note") and on overdue
interest at the rate of 12% per annum, based on a year of 360 days, comprised
of twelve 30-day months, for the number of days actually elapsed, until the
date on which the last payment of principal and interest under this Note shall
have been paid. All principal, accrued interest and any other amounts due
hereunder shall be due and payable on July 1, 1998 (the "Maturity Date").
This Note may be prepaid, in whole or in part, at any time or
from time to time, without premium or penalty. Any prepayments of this Note
shall be applied first to the payment of all interest accrued on this Note as
of the date of the payment, and then to the outstanding and unpaid principal
amount of this Note.
All payments or prepayments of principal and interest and
other sums due pursuant to this Note shall be made in immediately available
funds by wire transfer to an account or accounts designated in writing by Payee
or by certified or bank cashier's check made payable to the order of Payee at
such place in the United States of America as Payee shall have designated to
Maker, in any case not later than 5:00 p.m. New York time on the date on which
such payment becomes due.
The payment of all obligations on this Note is subordinated
in right of payment to the prior payment in full of all obligations of Maker to
BNY Financial Corporation or its successors or assigns pursuant to the Second
Restated and Amended Financing Agreement dated as of October 10, 1997 (the
"Senior Indebtedness"). Payee is hereby subrogated to all rights of any holders
of Senior Indebtedness to receive any further payments or distributions
applicable to the Senior Indebtedness until this Note shall have been paid in
full, and such payments or distributions received by Payee by reason of such
subrogation, of cash, securities or other property which otherwise would be
paid or distributed to the holders of Senior Indebtedness, shall between Maker
and its creditors other than holders of Senior Indebtedness, on the one hand,
and Payee on the other hand, be deemed to be a payment by Maker on account of
the Senior Indebtedness and not on account of this Note.
The obligations of Maker under this Note are absolute and
unconditional, and are not subject to any counterclaim, set-off, deduction or
defense that Maker may have against Payee. If Holder is required to resort to
legal action to collect any sums due under this Note, Maker promises to pay all
costs and expenses (including, but not limited to, all legal and accounting
expenses) incurred in connection with such action. Maker waives presentment for
payment, demand, notice of non-payment, protest and notice of protest. No delay
on the part of Holder in exercising any right
<PAGE>
hereunder shall operate as a waiver of such right under this Note. This Note
shall be construed in accordance with, and governed by, the laws of the State
of New York as applied to contracts made and to be performed entirely in the
State of New York without regard to principles of conflicts of law.
BERNARD CHAUS, INC.
By: /s/ Andrew Grossman
----------------------------------------
Andrew Grossman, Chief Executive Officer
<PAGE>
CONVERSION AGREEMENT
This CONVERSION AGREEMENT is made and entered into as of this
29th day of January, 1998 by and between Bernard Chaus, Inc., a New York
corporation (the "Company"), and Josephine Chaus, with an address at 128 East
73rd Street, New York, New York ("J.Chaus").
WHEREAS, the Company is indebted to J.Chaus for approximately
$28.1 million under 12% Subordinated Promissory Notes issued to J.Chaus in June
1986, February 1991 and March 1997, including approximately $11.6 million in
accrued and unpaid interest on an income tax basis as of the date hereof
(collectively, the "Old Notes"), and the Company has never taken nor does it
intend to take any tax deduction for any or all of such accrued or unpaid
interest; and
WHEREAS, BNY Financial Corporation ("Lender"), in negotiating
the terms of its Second Restated and Amended Financing Agreement dated as of
October 10, 1997, required J.Chaus to place $12.5 million in a cash collateral
account with Lender in order to guarantee the obligations of the Company under
such financing agreement; and
WHEREAS, at the conclusion of the Company's rights offering,
J.Chaus released the $12.5 million to Lender and the Company issued $12.5
million in aggregate principal amount of a Subrogated Subordinated Promissory
Note to J.Chaus which is subrogated to the rights of Lender with respect to
such amount until such Subrogated Subordinated Promissory Note is exchanged for
equity (the "New Note"; collectively with the Old Notes, the "Notes"); and
WHEREAS, in October 1997, the Company and J.Chaus negotiated
a settlement pursuant to which J.Chaus agreed to convert the aggregate
principal amount of the Notes into an aggregate of 10,510,910 shares of common
stock, par value $.01 per share ("Common Stock"), of the Company; and
WHEREAS, in connection with the settlement, J.Chaus agreed to
forgive the payment of interest on the Notes; and
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, each intending to be legally bound, do hereby
agree as follows:
1. Conversion of Notes into Common Stock. Effective as of the
date hereof, the aggregate principal amount of the Notes shall have been
converted into an aggregate of 10,510,910 shares of Common Stock of the Company
and the payment of interest on the Notes shall have been forgiven by J.Chaus.
Effective as of the date hereof, the Notes shall be canceled and of no further
force and effect. Simultaneously with the execution of this Agreement, J.Chaus
shall deliver each of the Notes, each marked "Canceled", to the Company.
2. Issuance of Stock Certificate. The Company shall use its
commercially reasonable best efforts to cause the Company's transfer agent to
promptly issue to J.Chaus a stock certificate evidencing 10,510,910 shares of
Common Stock of the Company.
<PAGE>
3. Governing Law. This Agreement shall be construed in
accordance with, and governed by, the internal laws of the State of New York,
without giving effect to the principles of conflict of laws thereof.
4 Entire Agreement. This Agreement sets forth the entire
understanding and agreement of the parties with respect to their subject matter
and supersedes any and all prior understandings, negotiations or agreements
among the parties hereto, both written and oral, with respect to such subject
matter.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth above.
BERNARD CHAUS, INC.
By: /s/ Andrew Grossman
-----------------------
Andrew Grossman
Chief Executive Officer
/s/ JOSEPHINE CHAUS
-----------------------
JOSEPHINE CHAUS
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<PAGE>
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<PERIOD-TYPE> 6-MOS 3-MOS
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<PERIOD-START> JUL-01-1997 OCT-01-1997
<PERIOD-END> DEC-31-1997 DEC-31-1997
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<ALLOWANCES> 5,012 5,012
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<CURRENT-ASSETS> 28,589 28,589
<PP&E> 4,461 4,461
<DEPRECIATION> 3,632 3,632
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<TOTAL-LIABILITY-AND-EQUITY> 30,035 30,035
<SALES> 105,951 47,095
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<CGS> 80,241 35,809
<TOTAL-COSTS> 100,472 45,989
<OTHER-EXPENSES> (45) (48)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,739 2,420
<INCOME-PRETAX> 785 (1,266)
<INCOME-TAX> 95 45
<INCOME-CONTINUING> 690 (1,311)
<DISCONTINUED> 0 0
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