<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[X] Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by
Rule 14a-7(e)(2))
[X] Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to (section) 240.14a-11(c) or
(section) 240.14a-12
Bernard Chaus, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
( Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
BERNARD CHAUS, INC.
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------------------
The Annual Meeting of Stockholders of Bernard Chaus, Inc., a New York
corporation (the "Company"), will be held on November 17, 1999 at 10:30 a.m. at
Rihga Royal Hotel, 151 West 54th Street, New York, New York, Broadway Room,
mezzanine level, for the following purposes:
1. To elect six directors of the Company to serve until the next
Annual Meeting of Stockholders and until their respective successors have been
elected and qualified.
2. To ratify the appointment of Deloitte & Touche LLP as auditors
of the Company to serve for the fiscal year ending June 30, 2000.
3. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Stockholders of record at the close of business on October 4, 1999 are
entitled to notice of and will be entitled to vote at the meeting.
YOU ARE REQUESTED TO FILL IN, DATE AND SIGN THE ENCLOSED PROXY, WHICH
IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY, AND TO MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
Stuart S. Levy
Secretary
New York, New York
October 22, 1999
================================================================================
IMPORTANT: Please sign, date and return your proxy card in the self-addressed,
stamped envelope enclosed for your convenience. No postage is required if mailed
within the United States.
================================================================================
<PAGE>
BERNARD CHAUS, INC.
----------------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 17, 1999
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Bernard Chaus, Inc., a New York
corporation (the "Company"), to be used at the Annual Meeting of Stockholders
which will be held on November 17, 1999 at 10:30 a.m. at the Rihga Royal Hotel,
151 West 54th Street, New York, New York, Broadway Room, mezzanine level, and
any adjournments or postponements thereof.
Stockholders who execute proxies retain the right to revoke them at any
time by notice in writing to the Secretary of the Company or by revocation in
person at the meeting; unless so revoked, the shares represented by proxies will
be voted at the meeting in accordance with the directions given therein. If no
directions are given, proxies will be voted (i) FOR the election of the nominees
named below under the caption "Election of Directors-Nominees for Election",
(ii) FOR the ratification of the appointment of Deloitte & Touche LLP as
auditors for the Company's fiscal year ending June 30, 2000, and (iii) in the
discretion of the proxies named on the proxy card with respect to such other
business as may properly come before the meeting and any adjournments or
postponements thereof.
The principal executive offices of the Company are located at 1410
Broadway, New York, New York 10018. The approximate date on which this Proxy
Statement and the enclosed form of proxy were first sent or given to
stockholders was October 22, 1999.
Stockholders of record at the close of business on October 4, 1999
are entitled to notice of and will be entitled to vote at the meeting. On
October 4, 1999, there were outstanding 27,115,907 shares of common stock, $.01
par value ("Common Stock"), of the Company. Each share of Common Stock is
entitled to one vote.
<PAGE>
VOTING PROCEDURES
Under the New York Business Corporation Law (the "BCL") and the
Company's By-Laws, the presence, in person or by proxy, of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum of the
stockholders to take action at the Annual Meeting. Abstentions and broker
non-votes are counted as shares present in the determination of whether the
shares of Common Stock represented at the Annual Meeting constitute a quorum.
Once a quorum of the stockholders is established, under the BCL and the
Company's By-Laws, the directors standing for election must be elected by a
plurality of the votes cast. Any other action to be taken must be approved by a
majority of the votes cast. For voting purposes, abstentions and broker
non-votes will not be counted in determining whether the directors standing for
election have been elected or whether any other action has been approved.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table represents information with respect to the persons
who are known to the Company to be the beneficial owners of more than five
percent of the Common Stock of the Company as of September 30, 1999.
AMOUNT
NAME AND ADDRESS OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
---------------- ----- --------
Josephine Chaus (1)............................... 18,848,415(2) 69.5%
1410 Broadway
New York, NY 10018
- -----------
(1) All shares listed are owned of record and beneficially, with sole
investment and voting power, except that, with respect to 72,936 shares
included in such amount, Josephine Chaus shares power to vote and
dispose of such shares with Daniel Rosenbloom which are held by them as
co-trustees for her children.
(2) Because of her stock ownership and positions with the Company,
Josephine Chaus may be deemed a control person of the Company.
2
<PAGE>
The following table presents information as of September 30, 1999 with respect
to the number of shares of Common Stock beneficially owned by each of the
current directors of the Company and each Named Executive Officer (as defined
herein), other than Josephine Chaus whose ownership is shown in the table above,
and all of the directors and executive officers of the Company as a group. The
information below stating amounts beneficially owned and percent of class owned
includes options exercisable within 60 days of September 30, 1999.
AMOUNT BENEFICIALLY PERCENT
NAME OWNED(1) OF CLASS
---- -------- --------
DIRECTORS:
Philip G. Barach (2) 8,987 *
Nicholas DiPaolo (3) 20,000 *
Terri Kabachnick (4) 2,700 *
S. Lee Kling (5) 19,415 *
Harvey M. Krueger (6) 17,243 *
NAMED EXECUTIVE OFFICERS:
Stuart S. Levy (7) 10,000 *
All directors and executive officers as a 18,926,760 (8) 69.8% (8)
group (7 persons)
- -----------------------
* Less than one percent.
(1) Except as otherwise indicated below, the persons listed have advised
the Company that they have sole voting and investment power with
respect to the securities listed as owned by them.
(2) Includes options to purchase 4,750 shares of Common Stock granted under
the Bernard Chaus, Inc. 1998 Stock Option Plan (the "Stock Option
Plan"). Excludes options to purchase 16,250 shares of Common Stock
granted under the Stock Option Plan.
3) Excludes options to purchase 5,000 shares of Common Stock granted under
the Stock Option Plan. Excludes 5,000 shares of Common Stock owned by
his wife, as to which shares Mr. DiPaolo disclaims beneficial
ownership.
4) Includes options to purchase 2,200 shares of Common Stock granted under
the Stock Option Plan. Excludes options to purchase 5,000 shares of
Common Stock granted under the Stock Option Plan.
(5) Includes options to purchase 5,750 shares of Common Stock granted under
the Stock Option Plan. Excludes options to purchase 16,250 shares of
Common Stock granted under the Stock Option Plan.
(6) Includes options to purchase 8,750 shares of Common Stock granted under
the Stock Option Plan. Excludes options to purchase 16,250 shares of
Common Stock granted under the Stock Option Plan
(7) Includes options to purchase 10,000 shares of Common Stock granted
under the Stock Option Plan. Excludes options to purchase 130,000
shares of Common Stock granted under the Stock Option Plan.
(8) Includes beneficial ownership of Josephine Chaus; also includes options
to purchase an aggregate of 31,450 shares of Common Stock granted under
the Stock Option Plan.
3
<PAGE>
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
Six directors will be elected at the meeting to serve until the next annual
meeting of stockholders and until their respective successors have been elected
and qualified.
EACH PROXY RECEIVED WILL BE VOTED FOR THE ELECTION OF THE NOMINEES NAMED
BELOW UNLESS OTHERWISE SPECIFIED IN THE PROXY. Josephine Chaus possesses the
power to vote more than 50% of the outstanding shares of the Common Stock.
Accordingly, the affirmative vote of Josephine Chaus is sufficient to approve
the election of these nominees. Josephine Chaus has advised the Company that she
intends to vote all of her shares in favor of such election.
At this time, the Board of Directors of the Company knows of no reason why
any nominee might be unable to serve. Except as indicated below, there are no
arrangements or understandings between any director and any other person
pursuant to which such person was selected as a director or nominee.
The following table sets forth certain information with respect to the
nominees for director:
NAME OF NOMINEE AGE DIRECTOR SINCE
- --------------- --- --------------
Josephine Chaus 48 1977
Nicholas DiPaolo 58 1999
Terri Kabachnick 50 1999
S. Lee Kling 70 1989
Harvey M. Krueger 70 1992
Philip G. Barach 69 1993
Josephine Chaus has been an employee of the Company in various capacities
since its inception. She has been a director of the Company since 1977, and
Chief Executive Officer from 1991 through September 1994, and from December 1998
until present. In addition, she served as President from 1980 to February 1993,
and served as member of the Office of the Chairman from September 1994 until it
was eliminated in December 1998.
S. Lee Kling was elected a director of the Company on February 22, 1989. He
has served since 1991 as Chairman of the Board of Kling Rechter & Company, a
merchant banking company which works in partnership with First Chicago Equity
Capital Corp., and serves as Vice Chairman of Willis Corroon Corp. of Missouri
("Willis Corroon"). See "Certain Transactions." Mr. Kling served as Chairman of
the Board of Landmark Bancshares Corporation, a bank holding company in St.
Louis, Missouri ("Landmark"), until December 1991 when the company merged with
Magna Group, Inc. He had served in such capacity with Landmark since 1974 and
had also served as Chief Executive Officer of Landmark from 1974 through October
1990 except for the period from May 1978 to January 1979 when he served as
Assistant Special Counselor on Inflation for the White House and Deputy for
Ambassador Robert S.
4
<PAGE>
Strauss. Mr._Kling serves on the Boards of Directors of Falcon Products, Co., a
furniture and fixtures manufacturer; Top Air Manufacturing Inc., a manufacturer
of agricultural equipment; National Beverage Corp., a beverage manufacturer;
Electro Rent Corporation, an electronic equipment rental company; Union Planters
Corp., a bank holding company, all of which are public companies.
Harvey M. Krueger was appointed a director of the Company on January 2,
1992. He has been Vice Chairman of Lehman Brothers, Inc. ("Lehman Brothers"), an
investment banking firm, since 1997. From May 1984 to 1996, he was a Senior
Managing Director of Lehman Brothers. From December 1977 to May 1984, he was
Managing Director of Lehman Brothers Kuhn Loeb, Inc. From 1965 to 1977, he was a
Partner of Kuhn Loeb & Co. and in 1977, he served as President and Chief
Executive Officer of Kuhn Loeb & Co. Mr. Krueger currently serves as a director
of Automatic Data Processing Inc., a provider of payroll and related employer
services; International Telecommunication Data Systems, Inc., a provider of
transactional services to telecommunications providers; R.G. Barry, a
manufacturer of thermal comfort products; and Delta Galil Industries Ltd., a
manufacturer of boutique-quality apparel.
Philip G. Barach was appointed a director of the Company on November 26,
1993. He was, from July 1968 to March 1990, the Chief Executive Officer of U.S.
Shoe Corp., a shoe manufacturer. In addition, Mr. Barach served as Chairman of
the Board of Directors of U.S. Shoe Corp. from March 1990 to March 1993. Mr.
Barach currently serves as a director of Syms Corp., an off-price apparel
retailer; Union Central Life Insurance Company, an insurance carrier; Glimcher
Real Estate Investment Trust, a real estate company; and R.G. Barry, a
manufacturer of thermal comfort products, all of which are public companies.
Nicholas DiPaolo was elected a director of the Company on February 11, 1999
Mr. DiPaolo currently serves as a consultant to the apparel industry and as a
private investor. From 1991 through May 1997, he served as Chairman, President
and Chief Executive Officer of Salant Corporation, a diversified apparel company
("Salant"). In addition, Mr. DiPaolo served as President and Chief Operating
Officer of Salant from 1988 through 1991. Prior to 1998, he held executive
positions with a number of apparel and related companies, including Manhattan
Industries, a menswear company, and The Villager, a women's sportswear company.
Mr. DiPaolo currently serves as a director of JPS Industries Inc., a publicly
traded manufacturer of specialty extruded and woven materials.
Terri Kabachnick was elected a director of the Company on February 11,
1999. She is a retail consultant with 25 years of industry experience. Her firm,
Terri Kabachnick & Company, was founded in 1981 and specializes in retail
communications and productivity, serving an international client base that
includes some of the industry's most successful companies.
During fiscal 1999 until May 19, 1999, the members of the Audit and
Compensation Committees were Philip G. Barach, S. Lee Kling and Harvey M.
Krueger. On May 20, 1999, the committees were reconstructed as follows: S. Lee
Kling, Nicholas DiPaolo and Harvey M. Krueger were named as members of the Audit
Committee; and Philip G. Barach, Terri Kabachnick and S. Lee Kling were named as
members of the Compensation Committee. The Company does not have a standing
Nominating Committee.
The Compensation Committee is charged by the Board of Directors with
administering, reviewing and recommending changes in the Company's incentive
compensation plans for its executives and submitting such plans to the Board of
Directors for approval, allocating bonuses, determining the individuals to whom
stock options are to be granted, the number of shares subject to grant and the
terms of such operations, and recommending to the Board of Directors any changes
in the compensation of any
5
<PAGE>
employee of the Company whose annual compensation exceeds $150,000. The
Compensation Committee met on four occasions during fiscal 1999.
The Audit Committee has such powers as may be assigned to it by the Board
of Directors from time to time and is charged with recommending annually to the
Board of Directors the independent auditors to be retained by the Company,
reviewing the audit plan with the auditors, reviewing the results of the audit
with the officers of the Company and its auditors and reviewing with the
officers and internal auditors of the Company the scope and nature of the
Company's internal auditing system. The Audit Committee met on four occasions
during fiscal 1999.
During fiscal 1999, the Board of Directors of the Company met on four
occasions. While serving as a director, each of the directors attended at least
75% of the meetings of the Board of Directors and of the meetings held by all
committees of the Board on which he or she served during fiscal 1999.
COMPLIANCE WITH SECTION 16(A) OF SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers and
persons who own beneficially more than ten percent of the Common Stock of the
Company to file with the Securities and Exchange Commission initial reports of
beneficial ownership and reports of changes in beneficial ownership of the
Common Stock. Officers, directors and persons owning more than ten percent of
the Common Stock of the Company are required to furnish the Company with copies
of all such reports. To the Company's knowledge, based solely on a review of
copies of such reports furnished to the Company, the Company believes that
during fiscal 1999, all Section 16(a) filing requirements applicable to its
officers, directors and persons owning beneficially more than ten percent of the
Common Stock of the Company were complied with.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid or accrued by the
Company for fiscal 1999, fiscal 1998 and fiscal 1997 with respect to (a)
Josephine Chaus, a member of the Office of the Chairman, and (b) the other most
highly compensated executive officers of the Company whose compensation exceeded
$100,000 (collectively, the "Named Executive Officers"), for services rendered
by such persons in all capacities to the Company.
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
---------------------------------------- ----------------------------------------
NUMBER OF
SECURITIES
NAME AND PRINCIPAL POSITION UNDERLYING ALL OTHER
HELD DURING FISCAL 1999 YEAR SALARY BONUS OPTIONS COMPENSATION (4)
- ---------------------------- ---- ------ ----- ------- ----------------
<S> <C> <C> <C> <C> <C>
Andrew Grossman (1)
Chief Executive Officer and 1999 $ 875,000 $271,125 -- --
Member, Office of the Chairman 1998 $1,000,000 $215,550 1,375,137 --
1997 $1,000,000 -- -- --
Josephine Chaus
Chairwoman of the Board and 1999 $ 525,000 -- -- --
Member, Office of the Chairman 1998 $ 390,000 -- -- --
1997 $ 390,000 -- -- --
Stuart S. Levy
Chief Financial Officer and
Secretary 1999 $ 245,770(2) $50,000 140,000 --
Barton Heminover
Vice President - Corporate 1999 $ 151,462 $ 5,000 -- --
Controller and Assistant
Secretary 1998 $ 135,000 -- 46,408(3) --
1997 $ 129,808 -- 3,000 --
</TABLE>
(1) Mr. Grossman's employment with the Company was terminated on December
21, 1998. The Company is currently involved in an arbitration
proceeding with respect to certain amounts accrued (but not paid) by
the Company and included in the table above. See "Employment
Arrangements - Andrew Grossman".
(2) Annual compensation represents prorated compensation from date of hire
on September 8, 1998.
(3) Includes options to purchase 3,000 shares of Common Stock issued upon
cancellation of options to purchase 3,000 shares of Common Stock
granted during fiscal 1997.
(4) Theamounts in this column include the aggregate value of certain
personal benefits to a named executive officer only where such value is
greater than the lesser of either $50,000 or 10% of such executive's
salary and bonus for the fiscal year.
7
<PAGE>
OPTION GRANTS TABLE
The following table sets forth information with respect to the Named
Executive Officers concerning the grant of stock options during fiscal 1999. The
Company did not have during such fiscal year, and currently does not have, any
plans providing for the grant of stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term(2)
---------------------------------------------- -----------------------------------
Securities % of Total
Underlying Options
Options Granted to Exercise
Granted Employees in or Base Expiration
Name (#)(1) Fiscal Year Price Date 5% 10%
- ---- ---------- ------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Andrew Grossman -- -- -- -- -- --
Josephine Chaus -- -- -- -- -- --
Stuart S. Levy 140,000 18.1% $2.34 (3) $205,963 $521,951
Barton Heminover -- -- -- -- -- --
</TABLE>
(1) All options were granted under the Stock Option Plan.
(2) Potential pre-tax realizable value is based on the assumption that the
stock appreciates from the market value on the date of grant at the
annual rates of appreciation shown on the table over the option term
(ten years). This is a theoretical value. The actual realized value
depends upon the market value of the Company's stock at the exercise
date.
(3) Options to purchase 40,000 shares of Common Stock expire on September
8, 2008; options to purchase 100,000 shares of Common Stock expire on
February 11, 2009.
8
<PAGE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides information with respect to the exercise of
stock options during fiscal 1999 by the Named Executive Officers and the value
of unexercised options at fiscal year end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Number of Value of Value of
Securities Securities Unexercised Unexercised
Underlying Underlying In-the-Money In-the-Money
Unexercised Unexercised Options at Options at
Options at Options at June 30, June 30,
Shares June 30, 1999 June 30, 1999 1999(1) 1999(1)
Acquired Value ----------- ------------- ----------- -------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Andrew Grossman -- -- -- -- -- --
Josephine Chaus -- -- -- -- -- --
Stuart S. Levy -- -- 10,000 130,000 $630 $83,190
Barton Heminover -- -- 750 45,658 -- --
</TABLE>
(1) The value is based on the excess of the market price of the Company's
Common Stock at the end of fiscal 1999 over the option price of the
unexercised options.
EMPLOYMENT ARRANGEMENTS
Andrew Grossman. On September 1, 1994, the Company entered into a five-year
employment agreement with Andrew Grossman, Chief Executive Officer and Member of
the Office of the Chairman of the Company, with an option to extend the term of
Mr. Grossman's agreement for an additional five years. On September 13, 1995,
the Company exercised the option to extend his employment agreement. As of
January 1, 1998, the Company amended the employment agreement. Under the amended
employment agreement, the term of the agreement was modified to extend through
September 1, 2000, and the Company was provided with an election to extend the
term to September 1, 2004 by giving notice to Mr. Grossman on or before March 1,
2000. On December 21, 1998 the employment agreement with Andrew Grossman was
terminated by the Company.
In connection with the termination, the Company became obligated to pay Mr.
Grossman up to $1.66 million over a period of 20 months in consideration of Mr.
Grossman's agreement not to compete for twelve months. In addition, the Company
became obligated to make bonus payments in an amount equal to 2 1/2 % of net
profits for fiscal years 1999 and 2000, and the pro rated portion of fiscal year
2001 (i.e. 1/6 of such year). The Company continued such payments until April
1999 when Mr. Grossman commenced employment with another women's apparel
company. By Demand for Arbitration filed on June 9, 1999, Mr. Grossman commenced
an arbitration before the American Arbitration Association in New York alleging
breach of his employment contract. Specifically, Mr. Grossman seeks severance
and non-competition payments for the period from April 1, 1999 through September
1, 2000, and his costs, in an amount allegedly in excess of $1 million. The
Company has served an answer dated July 2, 1999 that
9
<PAGE>
denies Mr. Grossman's claims on the grounds that (i) he is not entitled to any
further severance and non-competition payments, because, among other things, he
is now chief operating officer of another women's apparel company; and (ii) even
if any such severance and non-competition payments were due, they are subject to
set-off by Mr. Grossman's post-severance salary and bonuses. The parties have
each appointed an arbitrator and the process of selecting a third, neutral
arbitrator is nearly complete. The Company believes that its defenses are
meritorious and intends to vigorously defend this action.
Josephine Chaus. The Company's employment agreement with Josephine Chaus,
Chairwoman of the Board, commenced on July 1, 1992 and expired on June 30, 1994.
Since such date, she has been employed without a written agreement. Ms. Chaus'
annual base salary was $525,000 for fiscal 1999.
Stuart S. Levy. On July 22, 1998, the Company entered into a employment
letter agreement with Stuart S. Levy, Chief Financial Officer and Secretary of
the Company. Under the employment letter agreement, Mr. Levy receives an annual
salary of $300,000 and is entitled to an annual bonus in the sole discretion of
the Board of Directors. In addition, in connection with the execution of Mr.
Levy's employment letter agreement, Mr. Levy was granted options, effective
September 8, 1998, to purchase an aggregate of 40,000 shares of Common Stock.
The options were granted at an exercise price of $2.58 per share and vest at a
rate of 25% per year, commencing on September 8, 1999.
On February 23, 1999, the Company entered into a supplemental employment
letter agreement with Mr. Levy. Under the supplemental letter agreement, Mr.
Levy is entitled to a portion of a bonus pool, with a minimum bonus of $50,000,
containing 5% of the Company's net income for each of fiscal 1999 and fiscal
2000. To be eligible for fiscal 1999 and fiscal 2000 bonuses, Mr. Levy must be
employed by the Company on June 30, 1999 and June 30, 2000, respectively. Mr.
Levy was awarded a bonus of $50,000 for fiscal 1999. In addition, in connection
with the execution of Mr. Levy's supplemental employment letter agreement, Mr.
Levy was granted options to purchase an aggregate of 100,000 shares of Common
Stock. The options were granted at an exercise price of $2.125 per share and
vest in full on June 30, 2000.
If the employment letter agreement is terminated by the Company other than
for cause (including a termination resulting from a change in control), the
Company is required to pay Mr. Levy his annual salary for a one-year period.
Such obligation will be terminated upon Mr. Levy's acceptance of a position as
an employee or consultant with another entity.
STOCK OPTION PLAN
The Company has in effect the Stock Option Plan. As of June 30, 1999,
options to purchase an aggregate of 1,834,338 shares had been granted and were
outstanding under the Stock Option Plan at a weighted average exercise price of
$2.73 per share. All options granted during the past three fiscal years were
granted at an exercise price at least equal to the market price of the Common
Stock on the date of the grant of such options. On October 4, 1999, the closing
sales price of the Common Stock on the New York Stock Exchange was $2.625. For a
description of options owned by the Named Executive Officers as of June 30, 1999
and options received by such Named Executive Officers during the fiscal year
ended June 30, 1999, see "Executive Compensation" above. As of June 30, 1999,
the current executive officers as a group had received options to purchase an
aggregate of 140,000 shares pursuant to the Stock Option Plan, and the current
non-employee directors as a group had received options to purchase 80,200 shares
pursuant to the Stock Option Plan.
10
<PAGE>
DIRECTORS' COMPENSATION
During fiscal 1999, directors who were not employees of the Company
received an annual fee of $20,000 for serving on the Board of Directors, plus a
cash fee of $1,500 per meeting day.
In addition, directors are paid a per diem advisory fee of $2100 for
special projects assigned by the Board of Directors.
On February 11, 1998, each nonemployee director serving on such date was
granted an option to purchase 10,000 shares of Common Stock with an exercise
price of $3.11 per share, exercisable up to 25% on each of the first four
anniversaries after the grant. In addition, pursuant to the Stock Option Plan,
each non-employee director is granted options to purchase 5,000 shares of Common
Stock annually on July 1 based on the market price of the Common Stock on the
date of grant, exercisable up to 25% on each of the first four anniversaries
after the grant.
The Company has purchased and will maintain a $50,000 term life insurance
policy on behalf of each director with the benefits to be paid to each
director's designated beneficiary.
COMPENSATION COMMITTEE INTERLOCKS
Philip Barach, Terri Kabachnick, S. Lee Kling and Harvey M. Krueger served
as members of the Compensation Committee during all of a portion of fiscal 1999.
Mr. Krueger is a Senior Managing Director of Lehman Brothers, which provided
certain advisory services to the Company during fiscal 1998 for which it
received fees aggregating $250,000 in fiscal 1998. In addition, Lehman Brothers
served as managing underwriter to the Company in connection with an underwritten
public offering of 575,000 shares of Common Stock (including 75,000 shares of
Common Stock to cover over-allotments), which public offering was consummated in
November 1995. Mr. Kling serves as Vice Chairman of an insurance broker, Willis
Corroon, from which the Company obtains various insurance policies (i.e.,
travel, directors and officers liability, and life insurance). A son of Mr.
Kling is also employed by Willis Corroon. The total aggregate premium payments
paid to Willis Corroon in respect of such insurance during fiscal 1999 were
approximately $242,000. Mr. Barach and Ms. Kabachnick are directors of the
Company who provided advisory consulting services during fiscal 1999 and were
paid $11,550 and $4,200, respectively.
11
<PAGE>
COMPENSATION COMMITTEE REPORT
Committee. The Compensation Committee establishes and reviews the Company's
arrangements and programs for compensating its executive officers, including the
Named Executive Officers. The Compensation Committee is composed of Philip
Barach, Terri Kabachnick and S. Lee Kling, none of whom are either officers or
employees of the Company.
Background, Objectives and Philosophy. The Compensation Committee's
objective is to establish an overall compensation program that rewards
executives as the Company's net income reaches certain targeted levels and,
through the grant of options, as the market price of the Company's Common Stock
increases.
The Compensation Committee believes that there are three principal
components which should be included in a compensation program:
1) base salary;
2) annual cash incentives; and
3 stock option incentives.
Under this approach, the attainment of yearly earnings and other short-term
targets is compensated through yearly bonuses under an Incentive Award Plan (the
"Incentive Award Plan") and long-term performance of the Company is rewarded
through the grant of stock options pursuant to the Stock Option Plan. Unless
otherwise provided by the Compensation Committee at the time an option is
granted, options granted under the Stock Option Plan vest ratably over a
four-year period. This approach is consistent with the Compensation Committee's
view that incentive programs should be based upon performance and that awards of
stock options should ally the economic interests of the Company's officers and
other key employees with those of the Company's stockholders.
Compensation Program Components.
Base Salary. Base salaries are set at levels that are competitive within
the apparel industry. An annual salary adjustment within each applicable
position/salary level is determined by evaluating the performance of the
individual, including the achievement of numerate and non-numerate objectives,
in the context of the financial results of the Company.
Annual Cash Incentives. Cash incentive awards are based on performance as
measured by the Company's net income. The Compensation Committee believes that
net income is an appropriate measure of performance because it promotes the
achievement of corporate-wide goals. The Company has in effect the Incentive
Award Plan in which key employees, other than Josephine Chaus, are eligible to
participate. Generally, the Compensation Committee establishes corporate-wide
objectives for net earnings each year, the attainment of which serve as the
basis for computing annual bonuses. No earnings targets were fixed for fiscal
1999. In the past, individual bonuses for key employees under the Incentive
Award Plan have been recommended by management to the Compensation Committee
which, in turn, makes the final determination. A portion of each executive's
bonus has also been dependent on the achievement of written numerate objectives,
which are jointly established in advance by each such
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executive and the Chief Executive Officer. The Compensation Committee may
determine to establish earnings targets for future fiscal years.
At a meeting of the Compensation Committee held on February 11, 1999, the
Compensation Committee determined that, in the wake of Andrew Grossman's
departure, it would be desirable to solidify the employment relationships and
consider option grants and a bonus formula for certain key personnel of the
Company, including Stuart S. Levy but excluding Josephine Chaus. The
Compensation Committee approved the institution of a bonus pool, with a minimum
aggregate bonus of $200,000, equal to 5% of the Company's net income for each of
the fiscal years ended June 30, 1999 and June 30, 2000 for certain key
personnel. To be eligible for fiscal 1999 and fiscal 2000 bonuses, Mr. Levy must
be employed by the Company on June 30, 1999 and June 30, 2000, respectively. Mr.
Levy was awarded a bonus in the amount of $50,000 for fiscal 1999.
Stock Option Plan. The Compensation Committee believes that the use of stock
options as the principal basis for creating long-term incentives satisfies the
objective of aligning the interests of executive management with those of the
Company's stockholders. The Company has in effect the Stock Option Plan pursuant
to which the Compensation Committee may grant executives, other than Josephine
Chaus, options to purchase Common Stock of the Company. The Company utilizes
vesting periods to encourage key executives to continue in the employ of the
Company. Unless otherwise provided by the Compensation Committee at the time an
option is granted, options granted under the Stock Option Plan vest ratably over
a four-year period. Levels of participation in the Stock Option Plan generally
vary on the basis of the recipient's position in the Company. In connection with
the Company's restructuring program, as an incentive to employees, the Company
offered all employees holding options the right to exchange such options for new
options at a lower exercise price.
At a meeting of the Compensation Committee held on February 11, 1999, the
Compensation Committee determined that, in the wake of Andrew Grossman's
departure, it would be desirable to solidify the employment relationships and
consider option grants and a bonus formula for certain key personnel of the
Company, including Stuart S. Levy but excluding Josephine Chaus. The
Compensation Committee granted certain key personnel options to purchase an
aggregate of 700,000 shares of Common Stock, of which Mr. Levy was granted
options to purchase 100,000 shares of Common Stock. The options were granted at
an exercise price of $2.125 per share and vest in full on June 30, 2000.
Compensation of the Chief Executive Officer. Josephine Chaus has served as Chief
Executive Officer of the Company from 1991 through September 1994 and from
December 1998 until present. She served as member of the Office of the Chairman
of the Company from September 1994 until December 1998 when the position was
eliminated. As Josephine Chaus is a controlling stockholder of the Company, the
Compensation Committee did not believe there was a need for bonus compensation
or stock incentives. As a result, Josephine Chaus did not participate in the
Company's bonus program or the Stock Option Plan. For fiscal 1999, Ms. Chaus's
annual salary was $525,000 and her salary was not increased upon Mr. Grossman's
termination. The Compensation Committee took into account cash compensation
levels for chief executive officers of similarly situated companies and the
successful operations of the Company during fiscal 1998. Andrew Grossman served
as Chief Executive Officer from September 1994 through December 1998. Mr.
Grossman's salary was $1,000,000 per year.
COMPENSATION COMMITTEE
Philip Barach
Terri Kabachnick
S. Lee Kling
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PERFORMANCE GRAPH
The following Performance Graph compares the total cumulative return (assuming
dividends are reinvested) on the Company's Common Stock during the five fiscal
years ended June 30, 1999 with the cumulative return on the Standard & Poor's
500 Index and the Standard & Poor's Textiles (Apparel) Index, assuming
investment of $100 in each of the above at their closing stock prices on June
30, 1994.
[THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRXIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.]
CUMULATIVE TOTAL RETURN
-------------------------------------------------------
6/94 6/95 6/96 6/97 6/98 6/99
BERNARD CHAUS, INC. 100 267 173 57 18 16
S&P 500 100 126 159 214 279 342
S&P TEXTILES (APPAREL) 100 104 130 144 166 116
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CERTAIN TRANSACTIONS
S. LEE KLING
S. Lee Kling, a director of the Company, serves as Vice Chairman of an
insurance broker, Willis Corroon, from which the Company obtains various
insurance policies (i.e., travel, directors and officers liability, and life
insurance). In addition, a son of Mr. Kling is employed by Willis Corroon. The
total aggregate premium payments paid to Willis Corroon in respect of such
insurance during fiscal 1999 were approximately $242,000.
SELECTION OF AUDITORS
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed Deloitte & Touche LLP, independent auditors, as the Company's auditors
for the fiscal year ending June 30, 2000. Deloitte & Touche has served as the
Company's independent auditors since June 10, 1994. Although stockholder
ratification of the selection of Deloitte & Touche LLP is not required, the
Board considers it desirable for stockholders to pass upon the selection of
auditors.
It is expected that one or more representatives of Deloitte & Touche LLP
will be present at the meeting and will have the opportunity to make a statement
if they so desire and will be available to respond to appropriate questions of
stockholders.
The Board of Directors recommends a vote for the ratification of the
appointment of the auditors. Each proxy received will be voted for the
ratification of the appointment of the auditors unless otherwise specified in
the proxy.
Josephine Chaus possesses the power to vote more than 50% of the
outstanding shares of the Common Stock. Accordingly, the affirmative vote of
Josephine Chaus is sufficient to ratify the appointment of the auditors.
Josephine Chaus has advised the Company that she intends to vote all of her
shares in favor of such ratification of the appointment.
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PROPOSALS FOR NEXT YEAR'S MEETING
Any proposal by a stockholder who intends to be present at the next Annual
Meeting of Stockholders must be received by the Company at its offices at 800
Secaucus Road, Secaucus, New Jersey 07094 for inclusion in its proxy statement
and form of proxy relating to that Annual Meeting no later than June 17, 2000.
Such proposals should be sent to the Secretary of the Company by certified mail,
return receipt requested. A proxy will confer discretionary authority to
management of the Company to vote on any matter other than matters for which the
Company received notice by a stockholder prior to September 5, 2000; provided,
however, that if the 2000 Annual Meeting of Stockholders is held prior to
October 18, 2000, the Company will notify the stockholders of a revised date for
submitting notice to the Company.
MISCELLANEOUS
The Board of Directors of the Company does not intend to present, and does
not have any reason to believe that others intend to present, any matter of
business at the meeting other than as set forth in the accompanying Notice of
Annual Meeting of Stockholders. However, if other matters properly come before
the meeting, it is the intention of the persons named in the enclosed form of
proxy to vote any proxies in accordance with their judgment.
The Company will bear the cost of preparing, assembling and mailing the
enclosed form of proxy, this Proxy Statement and other material which may be
sent to stockholders in connection with this solicitation. The Board of
Directors may use the services of the Company's directors, officers and other
regular employees to solicit proxies. The Company may reimburse persons holding
shares in their names or in the names of nominees for their expenses in sending
proxies and proxy material to their principals.
Copies of the 1999 Annual Report to Stockholders, including financial
statements for the fiscal year ended June 30, 1999, are being mailed to the
stockholders prior to or simultaneously with this Proxy Statement.
THE COMPANY WILL PROVIDE A COPY OF ITS ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION (FORM 10-K) FOR THE FISCAL YEAR ENDED JUNE 30, 1999 TO EACH
STOCKHOLDER WITHOUT CHARGE (OTHER THAN A REASONABLE CHARGE FOR ANY EXHIBIT
REQUESTED) UPON WRITTEN REQUEST TO:
Bernard Chaus, Inc.
800 Secaucus Road
Secaucus, New Jersey 07094
Attention: Stuart S. Levy
Chief Financial Officer and
Secretary
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