<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 Person(s) 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 provide 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 15, 2000 at 9:00 a.m. at
Rihga Royal Hotel, 151 West 54th Street, New York, New York, Winter Garden
Room, Second Floor, for the following purposes:
1. To elect seven 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 amend the Company's Stock Option Plan to increase the number of
shares available for grant thereunder from 2,711,591 to 6,750,000 and to
increase the maximum number of options that can be awarded to any
employee thereunder from 2,200,000 to 4,000,000.
3. To ratify the appointment of Deloitte & Touche LLP as auditors of the
Company to serve for the fiscal year ending June 30, 2001.
4. 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 9, 2000 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,
Barton Heminover
Assistant Secretary
New York, New York
October 18, 2000
--------------------------------------------------------------------------------
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 15, 2000
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 15, 2000 at 9:00 a.m. at Rihga Royal Hotel, 151
West 54th Street, New York, New York, Winter Garden Room, Second Floor, 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 amendment to the Company's Stock Option Plan to
increase the number of shares available for grant thereunder from 2,711,591 to
6,750,000 and to increase the maximum number of options that can be awarded to
any employee thereunder from 2,200,000 to 4,000,000, (iii) FOR the ratification
of the appointment of Deloitte & Touche LLP as auditors for the Company's
fiscal year ending June 30, 2001 and (iv) 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 530 Seventh
Avenue, 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 19, 2000.
Stockholders of record at the close of business on October 9, 2000 are
entitled to notice of and will be entitled to vote at the meeting. On October
9, 2000, there were outstanding 27,215,907 shares of common stock, $.01 par
value ("Common Stock"), of the Company. Each share of Common Stock is entitled
to one vote.
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. All other actions to be taken at the meeting 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.
<PAGE>
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, 2000.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED OF CLASS
----------------------------- ------- --------
<S> <C> <C>
Josephine Chaus (1) ......... 18,848,415(2) 68.1%
530 Seventh Avenue, New York,
New York 10018
</TABLE>
----------
(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.
The following table presents information as of September 30, 2000 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,
2000.
<TABLE>
<CAPTION>
AMOUNT BENEFICIALLY PERCENT
NAME OWNED (1) OF CLASS
---- --------- --------
<S> <C> <C>
DIRECTORS:
Philip G. Barach (2) ................................................ 21,987 *
Nicholas DiPaolo (3) ................................................ 21,250 *
Terri Kabachnick (4) ................................................ 3,450 *
S. Lee Kling (5) .................................................... 34,415 *
Harvey M. Krueger (6) ............................................... 22,243 *
NAMED EXECUTIVE OFFICERS:
Ivy Karkut (7) ...................................................... 268,750 *
Barton Heminover (8) ................................................ 24,704 *
All directors and executive officers as a group (8 persons) ......... 19,245,214(9) 69.5%(9)
</TABLE>
----------
* 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 9,750 shares of Common Stock granted under
the Bernard Chaus, Inc. 1998 Stock Option Plan, as amended (the "Stock
Option Plan"). Excludes options to purchase 16,250 shares of Common Stock
granted under the Stock Option Plan.
(3) Includes options to purchase 1,250 shares of Common Stock granted under
the Stock Option Plan. Excludes options to purchase 8,750 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. Also excludes option compensation
currently under negotiations. See Proposal No.2 -- Interest of Certain
Persons in the Proposal.
(4) Includes options to purchase 3,450 shares of Common Stock granted under
the Stock Option Plan. Excludes options to purchase 8,750 shares of
Common Stock granted under the Stock Option Plan.
(5) Includes options to purchase 10,750 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.
2
<PAGE>
(6) Includes options to purchase 13,750 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 168,750 shares of Common Stock granted under
the Stock Option Plan. Excludes options to purchase 506,250 shares of
Common Stock granted under the Stock Option Plan.
(8) Includes options to purchase 24,704 shares of Common Stock granted under
the Stock Option Plan. Excludes options to purchase 21,704 shares of
Common Stock granted under the Stock Option Plan.
(9) Includes beneficial ownership of Josephine Chaus; also includes options
to purchase an aggregate of 232,404 shares of Common Stock granted under
the Stock Option Plan.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
Seven 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:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE DIRECTOR SINCE
---------------------------- ----- ---------------
<S> <C> <C>
Josephine Chaus ............ 49 1977
Nicholas DiPaolo ........... 59 1999
Terri Kabachnick ........... 51 1999
S. Lee Kling ............... 71 1989
Harvey M. Krueger .......... 71 1992
Philip G. Barach ........... 70 1993
Ivy Karkut ................. 46 1999
</TABLE>
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, Chief
Executive Officer from 1991 until September 1994 and from 1998 until present,
and Chairman of the Board 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 served as Vice Chairman of Willis Corroon Corp. of Missouri
until July 2000. 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. 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; Engineered Support
3
<PAGE>
Systems, Inc., a product manufacturer in the defense industry; Learn2.com, an
internet based learning service provider and Kupper Parker Communications, an
advertising and public relations 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; 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; 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. He was also a director of Union Central Life Insurance Company, an
insurance carrier, until May 2000.
Nicholas DiPaolo has been Chief Operating Officer and Vice Chairman of the
Company since September 2000 and a director of the Company since February 11,
1999. Mr. DiPaolo also 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.
Ivy Karkut has been President of the Company and a director since November
1999. Prior to joining the Company, Ms. Karkut was employed by the Tommy
Hilfiger Corporation as Senior Vice President of Sales for Tommy Jeans from
1995 to 1999. Prior to 1995, Ms. Karkut served as Vice President of Sales and
Marketing for Chaps by Ralph Lauren, as Vice President of Sales for Ralph
Lauren's Men's Sportswear, and as Head of Men's Sales for Liz Claiborne.
During fiscal 2000, the members of the Audit Committee were S. Lee Kling,
Nicholas DiPaolo and Harvey M. Krueger and the members of the Compensation
Committee were Philip G. Barach, Terri Kabachnick and S. Lee Kling. In view of
Mr. DiPaolo's election as officer of the Company in September 2000, Terry
Kabachnick was elected to serve in his place as a member of the Audit Committee
during that month. Accordingly, the three current members of the Audit
Committee are independent within the meaning of the SEC Release No. 34-42266.
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 employee of the Company whose annual
compensation exceeds $150,000. The Compensation Committee met on four occasions
during fiscal 2000.
4
<PAGE>
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 2000.
During fiscal 2000, the Board of Directors of the Company met on five
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 2000.
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 2000, 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, except that Ms. Karkut
inadvertently failed to file an initial statement on Form 3 upon being elected
as a director and each of the outside directors inadvertently failed to file a
Form 5 with respect to their annual option grant, each of which shall be filed
promptly.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid or accrued by
the Company for fiscal 2000, fiscal 1999 and fiscal 1998 with respect to (a)
Josephine Chaus, Chairwoman of the Board and Chief Executive Officer, 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 COMPENSATION LONG TERM COMPENSATION
----------------------------------- ------------------------------------
NUMBER OF
SECURITIES
NAME AND PRINCIPAL POSITION UNDERLYING ALL OTHER
HELD DURING FISCAL YEAR 2000 YEAR SALARY BONUS OPTIONS COMPENSATION (5)
-------------------------------- ---- ------ ----- ------- ----------------
<S> <C> <C> <C> <C> <C>
Josephine Chaus
Chairwoman of the Board and 2000 525,000 -- -- --
Chief Executive Officer 1999 525,000 -- -- --
1998 390,000 -- -- --
Ivy Karkut
President and Director 2000 455,385 (1) 250,000 675,000 --
Barton Heminover
Vice President of Finance and 2000 164,615 10,000 -- --
Assistant Secretary 1999 151,462 5,000 -- --
1998 135,000 -- 46,408(3) --
Stuart S. Levy (4)
Chief Financial Officer 2000 289,385 50,000 -- --
and Secretary 1999 245,770 (2) 50,000 140,000 --
</TABLE>
----------
(1) Annual Compensation represents prorated compensation from date of hire on
November 29, 1999.
(2) Annual compensation represents prorated compensation from date of hire on
September 8, 1998.
5
<PAGE>
(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) Effective January 15, 2000, Stuart Levy, the Company's Chief Financial
Officer, left the Company to pursue other business interests. He is
currently serving as a consultant to the Company. $126,500 of the amount
shown in the table above represents consulting fees.
(5) The amounts 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.
OPTION GRANTS TABLE
The following table sets forth information with respect to the Named
Executive Officers concerning the grant of stock options during fiscal 2000.
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)
------------------------------------------------------ ------------------------
% OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN OR BASE EXPIRATION
NAME (#)1 FISCAL YEAR PRICE DATE 5% 10%
-------------------------- ---- ----------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Josephine Chaus .......... -- -- -- -- -- --
Stuart S. Levy ........... -- -- -- -- -- --
Barton Heminover ......... -- -- -- -- -- --
Ivy Karkut ............... 675,000 75.6 $ 2.50 9/29/2009 1,061,260 2,689,440
</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.
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 2000 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
SECURITIES SECURITIES VALUE OF VALUE OF
UNDERLYING UNDERLYING UNEXERCISED IN- UNEXERCISED
UNEXERCISED UNEXERCISED THE-MONEY IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT OPTIONS AT OPTIONS AT
ACQUIRED VALUE JUNE 30, 2000 JUNE 30, 2000 JUNE 30, 2000(1) JUNE 30, 2000(1)
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------------- ------------- ---------- --------------- --------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Josephine Chaus .......... -- -- -- -- -- --
Stuart S. Levy ........... -- -- -- -- -- --
Barton Heminover ......... -- -- 23,954 22,454 -- --
Ivy Karkut ............... -- -- -- 675,000 -- --
</TABLE>
----------
(1) The value is based on the excess of the market price of the Company's
Common Stock at the end of fiscal 2000 over the option price of the
unexercised options.
6
<PAGE>
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 ("AAA") in
New York alleging breach of his employment contract. Specifically, Mr. Grossman
sought severance and non-competition payments for the period from April 1, 1999
through September 1, 2000, and his costs, in an amount in excess of $1million.
By Award of Arbitrators (the "Award") dated June 30, 2000, a panel of the AAA
awarded Mr. Grossman a portion of the relief he had requested. Pursuant to the
Award, the Company paid Mr. Grossman $848,347 (less applicable withholding
taxes) on July 25, 2000. The Company made two additional payments of $83,333
each (less applicable withholding taxes) on July 31, 2000 and August 31, 2000.
Pursuant to the Award, Mr. Grossman also received net profit participation of
2.5% of the annual net profit (as that term is defined in the employment
contract between Mr. Grossman and the Company) of the Company for the fiscal
year ended June 30, 2000 upon filing of the Company's fiscal year 2000 Form
10-K report. The amount paid was $4,800. Mr. Grossman is to also receive net
profit participation of .4166% of the annual net profit (as that term is
defined in the employment contract between Mr. Grossman and the Company) for
the fiscal year ended June 30, 2001 upon filing of the Company's fiscal year
2001 Form 10-K report.
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 2000.
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 received an annual
salary of $300,000 and was 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 were
vested 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 was 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
had to 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 were to vest in full on June 30, 2000,
subject to employment on that date.
If the employment letter agreement had been terminated by the Company
other than for cause (including a termination resulting from a change in
control), the Company would have been required to
7
<PAGE>
pay Mr. Levy his annual salary for a one-year period. Such obligation would
have been terminated upon Mr. Levy's acceptance of a position as an employee or
consultant with another entity. Effective as of January 15, 2000, Mr. Levy left
the Company to pursue other business interests. He is currently serving as a
consultant to the Company for a one year term at a monthly rate of $23,000.
Ivy Karkut. On November 5, 1999, the Company entered into an employment
letter agreement with Ms. Karkut providing for her to serve as President of the
Company for a three year term. Under the employment letter agreement, Ms.
Karkut received a sign-on bonus of $250,000 and she received an annual salary
of $800,000 per year from November 29, 1999 through June 30, 2000; thereafter
she is entitled to $900,000 per year from July 1, 2000 to June 30, 2001 and
$1,000,000 per year from July 1, 2001 to November 29, 2002. Ms. Karkut is
entitled to an annual bonus amounting to 2 1/2 % of the net income of the
Company only if the profit goals established by the Board of Directors for such
year are achieved, subject for the fiscal year ended June 30, 2000 to a minimum
bonus of $250,000. In addition, in connection with the execution of Ms.
Karkut's employment letter agreement, Ms. Karkut was granted options to
purchase an aggregate of 675,000 shares of Common Stock. The options were
granted at an exercise price of $2.50 per share, vesting at a rate of 25% per
year, commencing on November 29, 1999. Ms. Karkut was also granted 100,000
shares of restricted stock of the Company. If the agreement is terminated by
the Company without a cause, Ms. Karkut is entitled to non-competition payments
equal to two years base salary if the termination occurs during the first year
of employment or following a change of control and to one year base salary if
the termination occurs during the remainder of the term.
PROPOSAL NO. 2
AMENDMENT NO. 1 TO THE STOCK OPTION PLAN
General
The Board of Directors of the Company adopted the Bernard Chaus, Inc. 1998
Stock Option Plan on November 7, 1997, the purpose of which is to enhance the
Company's ability to attract and retain employees, officers, consultants and
directors and to incentivize such persons to devote their abilities and
industry to the success of the Company's business enterprise.
Proposal
At the Annual Meeting, the stockholders will be asked to approve Amendment
No.1 to the Company's Stock Option Plan in the form attached hereto as Exhibit
A. The purpose of such amendment is to increase the number of shares available
for grant under the Stock Option Plan from 2,711,591 to 6,750,000 and to
increase the maximum number of options that can be awarded to any employee
thereunder from 2,200,000 to 4,000,000. The Board of Directors believes that
these increases will be important in the future success of the Company by
allowing it to remain competitive in attracting and retaining qualified
individuals to serve as officers, key personnel and directors.
As of June 30, 2000, options to purchase an aggregate of 2,181,310 shares
had been granted and were outstanding under the Stock Option Plan at a weighted
average exercise price of $2.63 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 11, 2000 which was the first day of quotation of the Common Stock on
the OTC Bulletin Board after the delisting of the Company's Common Stock from
The New York Stock Exchange, the range of high and low prices for the Common
Stock was $.25 to $.75 (such over the counter market quotations reflect
interdealer prices without retail mark-up, mark-down or commission and do not
necessarily represent actual transactions).
Summary of 1998 Stock Option Plan
The following summary description of the principal terms of the 1998 Stock
Option Plan does not purport to be complete and is qualified in its entirety by
the full text of the 1998 Stock Option Plan, a copy of which has been attached
as Exhibit B to this Proxy Statement.
8
<PAGE>
Pursuant to the 1998 Stock Option Plan, employees, officers, consultants
and directors of the Company chosen by the Committee (as defined below) will be
eligible to receive awards of stock options ("Options") in consideration for
services performed for the Company (such individuals, "Optionees"); provided,
however, that only employees of the Company or its future subsidiaries may
receive Incentive Stock Options (as defined below) under the 1998 Stock Option
Plan. There are approximately 500 persons eligible to receive awards under the
1998 Stock Option Plan. Options granted under the 1998 Stock Option Plan may be
either nonqualified stock options ("Nonqualified Options") or "incentive stock
options," within the meaning of Section 422 of the Code ("Incentive Stock
Options").
The total number of shares of Common Stock with respect to which Options
may be awarded under the 1998 Stock Option Plan (subject to antidilution and
similar adjustments) was initially fixed at 2,711,591 and would be increased to
6,750,000 if Proposal No. 2 is approved by the shareholders of the Company.
The 1998 Stock Option Plan is administered by a committee consisting of at
least two members of the Board (the "Committee"). Subject to the provisions of
the 1998 Stock Option Plan, the Committee will determine when and to whom
Options will be granted, the number of shares covered by each Option and the
terms and provisions applicable to each Option; provided, however, that the
Committee may not award Options to any employee with respect to more than
2,200,000 shares of Common Stock during the term of the 1998 Stock Option Plan.
If Proposal No. 2 is adopted, such maximum shall be increased to 4,000,000. The
Committee may construe and interpret the 1998 Stock Option Plan and may at any
time establish, amend and revoke such rules and regulations for the 1998 Stock
Option Plan as it deems advisable.
An Option may be granted on such terms and conditions as the Committee may
approve, provided that all Incentive Stock Options must be granted with an
exercise price equal to the fair market value of the underlying shares as of
the date of grant (110% in the case of Incentive Stock Options granted to a
"ten percent shareholder" (as defined in Section 422 of the Code)). The 1998
Stock Option Plan imposes no such minimum exercise price on Nonqualified
Options. Payment of the Option exercise price may be made by cash and/or the
transfer of shares of Common Stock to the Company upon such terms and
conditions as determined by the Committee. Each Option shall become exercisable
in such installments and at such times as determined by the Committee and set
forth in an agreement evidencing the grant of an Option. Each Option shall be
for such term as the Committee shall determine, provided that no Option shall
have a term of greater than ten years (five years in the case of an Incentive
Stock Option granted to a "ten percent shareholder"). In the event of certain
change in control transactions, each outstanding Option shall become
immediately and fully exercisable.
The Board of Directors may at any time and from time to time suspend,
amend, modify or terminate the 1998 Stock Option Plan; provided, however, that,
to the extent necessary under applicable law, no amendment shall be effective
unless approved by stockholders of the Company. In addition, no such change may
adversely affect any Option previously granted, except with the written consent
of the Optionee.
Interest of Certain Persons in Proposal No. 2
In connection with the election of Nicholas DiPaolo, a director of the
Company, as Vice Chairman and Chief Operating Officer of the Company, a
compensation package is being negotiated which is expected to include a
substantial option component. The compensation package is expected to be
weighted towards equity, with a below market salary and options to acquire
shares representing between 10% and 12% of the outstanding shares of the
Company. The options would be granted at a per share exercise price equal to
the fair market value per share on the date of grant, and vest over three
years. The option grant under discussion with Mr. DiPaolo would be subject to
approval of Proposal No. 2. Accordingly, Mr. DiPaolo has an interest in such
proposal.
All Executive Officers of the Company also have an interest in the
approval of Proposal No.2 insofar as they are eligible for future options
awards, however, no specific option grant is currently contemplated. Outside
directors of the Company have an interest in the proposal insofar as they
receive an automatic annual grant of 5,000 shares of Common Stock of the
Company on July 1st of each year and from time
9
<PAGE>
to time may be awarded additional options. For a description of options owned by
the Named Executive Officers as of June 30, 2000 and options received by such
Named Executive Officers during the fiscal year ended June 30, 2000, see
"Executive Compensation" above. As of June 30, 2000, the current executive
officers as a group had received options to purchase an aggregate of 726,408
shares pursuant to the Stock Option Plan, and the current non-employee directors
as a group had received options to purchase 75,200 shares pursuant to the Stock
Option Plan.
Certain Federal Income Tax Consequences
The following discussion is a brief summary of the principal United States
federal income tax consequences under current federal income tax laws relating
to Options awarded under the 1998 Stock Option Plan. This summary is not
intended to be exhaustive and, among other things, does not describe state,
local or foreign income and other tax consequences.
An Optionee will not recognize any taxable income upon the grant of a
Nonqualified Option and the Company will not be entitled to a tax deduction
with respect to such grant. Upon exercise of a Nonqualified Option, the excess
of the fair market value of the Common Stock on the exercise date over the
exercise price will be taxable as compensation income to the Optionee, subject,
in the case of an employee, to tax withholding. Subject to the Optionee
including such excess amount in income or the Company satisfying applicable
reporting requirements, the Company should be entitled to a tax deduction in
the amount of such compensation income. The Optionee's tax basis for the Common
Stock received pursuant to the exercise of a Nonqualified Option will equal the
sum of the compensation income recognized and the exercise price.
In the event of a sale of Common Stock received upon the exercise of a
Nonqualified Option, any appreciation or depreciation after the exercise date
generally will be taxed as capital gain or loss, provided that any gain will be
subject to reduced rates of tax if the Common Stock was held for more than
twelve months.
Generally, an Optionee should not recognize taxable income at the time of
grant or exercise of an Incentive Stock Option and the Company should not be
entitled to a tax deduction with respect to such grant or exercise. The
exercise of an Incentive Stock Option generally will give rise to an item of
tax preference that may result in alternative minimum tax liability for the
Optionee.
A sale or other disposition by an Optionee of shares acquired upon the
exercise of an Incentive Stock Option more than one year after the transfer of
the shares to such Optionee and more than two years after the date of grant of
the Incentive Stock Option should result in any difference between the net sale
proceeds and the exercise price being treated as longterm capital gain or loss
to the Optionee with no deduction being allowed to the Company. Upon a sale or
other disposition of shares acquired upon the exercise of an Incentive Stock
Option within one year after the transfer of the shares to the Optionee or
within two years after the date of grant of the Incentive Stock Option
(including the delivery of such shares in payment of the exercise price of
another Incentive Stock Option within such period), any excess of (a) the
lesser of (i) the fair market value of the shares at the time of exercise of
the Option and (ii) the amount realized on such disqualifying sale or other
disposition of the shares over (b) the exercise price of such shares, should
constitute ordinary income to the Optionee and the Company should be entitled
to a deduction in the amount of such income. The excess, if any, of the amount
realized on a disqualifying sale over the fair market value of the shares at
the time of the exercise of the Option generally will constitute capital gain
subject to tax at a rate which is based on the holding period for the shares,
and will not be deductible by the Company.
Under certain circumstances the accelerated vesting or exercise of Options
in connection with a change of control of the Company might be deemed an
"excess parachute payment" for purposes of the golden parachute tax provisions
of Section 28OG of the Code. To the extent it is so considered, the Optionee
may be subject to a 20% excise tax and the Company may be denied a tax
deduction.
Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of
$1 million in any taxable year to the chief executive officer or any of the
four other most highly compensated executive officers who are employed by the
Company
10
<PAGE>
on the last day of the taxable year. Compensation attributable to Options
granted under the 1998 Stock Option Plan with an exercise price at least equal
to the fair market value of the underlying Common Stock on the date of grant
should not be subject to the deduction limitation. Compensation attributable to
Options granted under the 1998 Stock Option Plan with an exercise price below
fair market value of the underlying Common Stock on the date of grant may be
subject to the deduction limitations of Section 162(m) of the Code.
Stockholder Approval
The approval of Proposal No. 2 requires the affirmative vote of a majority
of the votes cast at the Annual Meeting.
The Board of Directors recommends a vote for the approval of Proposal No.
2. Each proxy received will be voted for approval of Proposal No. 2 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 Proposal No. 2 without the vote of any
other stockholders. Josephine Chaus has advised the company that she intends to
vote all of her shares in favor of such proposal.
DIRECTORS' COMPENSATION
During fiscal 2000, 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 $2,100 for
special projects assigned by the Board of Directors. Mr. DiPaolo was paid
advisory fees aggregating to $7,000 during fiscal 2000. See "Compensation
Committee Interlocks" for advisory fees paid to certain other directors during
fiscal 2000.
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 its authority under the
Stock Option Plan, the Compensation Committee has provided for each
non-employee director to be automatically 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 and S. Lee Kling served as members of the
Compensation Committee during all of a portion of fiscal 2000. Mr. Kling has
served until July 2000 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). Until September 1, 2000,
a son of Mr. Kling was also employed by Willis Corroon. The total aggregate
premium payments paid to Willis Corroon in respect of such insurance during
fiscal 2000 were approximately $226,000. Mr. Barach and Ms. Kabachnick are
directors of the Company who provided advisory consulting services during
fiscal 2000 and were paid $27,650 and $2,779, 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 certain key employees, other than Josephine Chaus, are
eligible to participate. The Compensation Committee from time to time may
establish 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 2000. 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
executive and the Chief Executive Officer. The Compensation Committee may
determine to establish earnings targets for future fiscal years. Certain
employment agreements with officers contain minimum bonus arrangements.
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, the
participating employees must be employed by the Company on June 30, 1999 and
June 30, 2000, respectively. Mr. Levy was
12
<PAGE>
awarded a bonus in the amount of $50,000 for fiscal 1999 but was ineligible to
participate in the fiscal 2000 award because he left the Company prior to that
date. Such employees also received options for an aggregate of 700,000 shares
vesting on June 30, 2000, subject to continued employment on that date.
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.
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
2000, Ms. Chaus's annual salary was $525,000 and her salary was not increased
when she resumed the chief executive officer position 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 1999. Andrew Grossman served
as Chief Executive Officer from September 1994 through December 1998. Mr.
Grossman's salary had been $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, 2000 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, 1995.
THE NARRATIVE AND/OR TABULAR INFORMATION BELOW IS A FAIR AND ACCURATE
DESCRIPTION OF GRAPHIC OR IMAGE MATERIAL OMITTED FOR THE PURPOSE OF EDGAR
FILING.
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------------------------------------------
6/95 6/96 6/97 6/98 6/99 6/00
----------- ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BERNARD CHAUS, INC. ............ 100.00 65.00 21.25 6.88 5.88 1.38
S&P 500 ........................ 100.00 126.00 169.73 220.92 271.19 290.85
S&P TEXTILES (APPAREL) ......... 100.00 124.96 137.88 159.52 110.83 78.24
</TABLE>
14
<PAGE>
CERTAIN TRANSACTIONS
S. LEE KLING
S. Lee Kling, a director of the Company, served until July 2000 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). The total aggregate premium payments paid to Willis Corroon in
respect of such insurance during fiscal 2000 were approximately $226,000.
PROPOSAL NO. 3
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, 2001. 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.
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 18, 2001.
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, 2001;
provided, however, that if the 2001 Annual Meeting of Stockholders is held
prior to October 15, 2001, 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 2000 Annual Report to Stockholders, including financial
statements for the fiscal year ended June 30, 2000, are being mailed to the
stockholders prior to or simultaneously with this Proxy Statement.
15
<PAGE>
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, 2000 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: Barton Heminover
Vice President of Finance
and Assistant Secretary
16
<PAGE>
EXHIBIT A
AMENDMENT NO. 1 TO THE BERNARD CHAUS, INC. 1998 STOCK OPTION PLAN
Pursuant to Section 12 of the 1998 Stock Option Plan of Bernard Chaus,
Inc. (the "Stock Option Plan"), the Board of Directors hereby amends and
restates Section 4.1 of the Stock Option Plan so that it reads in its entirety
as follows:
"4.1 The maximum number of Shares that may be made the subject of Options
granted under the Plan shall be 6,750,000; provided, however, that the maximum
number of Shares that an Eligible Individual may be granted in respect of
Options may not exceed 4,000,000 Shares. Upon a Change in Capitalization, the
maximum number of Shares referred to in the first sentence of this Section 4.1
shall be adjusted in number and kind pursuant to Section 12. The Company shall
reserve for the purposes of the Plan, out of its authorized but unissued Shares
or out of Shares held in the Company's treasury, or partly out of each, such
number of Shares as shall be determined by the Board."
A-1
<PAGE>
EXHIBIT B
BERNARD CHAUS, INC.
1998 STOCK OPTION PLAN
1. PURPOSE.
The purpose of this Plan is to strengthen Bernard Chaus, Inc. (the
"Company") by providing an incentive to its employees, officers, consultants
and directors and thereby encouraging them to devote their abilities and
industry to the success of the Company's business enterprise. It is intended
that this purpose be achieved by extending to employees, officers, consultants
and directors of the Company and its Subsidiaries an added long-term incentive
for high levels of performance and unusual efforts through the grant of
Incentive Stock Options and Nonqualified Stock Options (as each term is herein
defined).
2. DEFINITIONS.
For purposes of the Plan:
2.1 "Affiliate" means any entity, directly or indirectly, controlled by,
controlling or under common control with the Company or any corporation or
other entity acquiring, directly or indirectly, all or substantially all the
assets and business of the Company, whether by operation of law or otherwise.
2.2 "Agreement" means the written agreement between the Company and an
Optionee evidencing the grant of an Option and setting forth the terms and
conditions thereof.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company or another corporation, by reason of
a reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.
2.5 A "Change in Control" shall mean the occurrence during the term of the
Plan of:
(a) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than
fifty percent (50%) or more of the then outstanding Shares or the combined
voting power of the Company's then outstanding Voting Securities; provided,
however, in determining whether a Change in Control has occurred, Shares or
Voting Securities which are acquired in a "Non-Control Acquisition" (as
hereinafter defined) shall not constitute an acquisition which would cause
a Change in Control. A "Non-Control Acquisition" shall mean an acquisition
by (i) an employee benefit plan (or a trust forming a part thereof)
maintained by (A) the Company or (B) any corporation or other Person of
which a majority of its voting power or its voting equity securities or
equity interest is owned, directly or indirectly, by the Company (for
purposes of this definition, a "Subsidiary"), (ii) the Company or its
Subsidiaries, (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined), or (iv) a trust or private
foundation or other estate planning vehicle established by a shareholder of
the Company, of voting securities of the Company from such shareholder
and/or the acquisition by the heirs, executors or administrators of a
shareholder of the Company of voting securities of the Company from such
shareholder;
(b) The individuals who, as of the close of business on the Rights
Offering Effective Date are members of the Board (the "Incumbent Board"),
cease for any reason to constitute at least two-thirds of the members of
the Board; provided, however, that if the election, or nomination for
election by the Company's common stockholders, of any new director was
approved by a vote of at
B-1
<PAGE>
least two-thirds of the Incumbent Board, such new director shall, for
purposes of this Plan, be considered as a member of the Incumbent Board;
provided further, however, that no individual shall be considered a member
of the Incumbent Board if such individual initially assumed office as a
result of either an actual or threatened "Election Contest" (as described
in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy
Contest; or
(c) The consummation of:
(i) A merger, consolidation or reorganization with or into the
Company or in which securities of the Company are issued, unless such
merger, consolidation or reorganization is a "Non-Control Transaction."
A "Non-Control Transaction" shall mean a merger, consolidation or
reorganization with or into the Company or in which securities of the
Company are issued where:
(A) the stockholders of the Company, immediately before such
merger, consolidation or reorganization, own directly or indirectly
immediately following such merger, consolidation or reorganization, at
least fifty percent (50%) of the combined voting power of the
outstanding voting securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their ownership
of the Voting Securities immediately before such merger, consolidation
or reorganization,
(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for such
merger, consolidation or reorganization constitute at least two-thirds
of the members of the board of directors of the Surviving Corporation,
or a corporation beneficially directly or indirectly owning a majority
of the Voting Securities of the Surviving Corporation, and
(C) no Person other than (i) the Company, (ii) any Subsidiary,
(iii) any employee benefit plan (or any trust forming a part thereof)
that, immediately prior to such merger, consolidation or
reorganization, was maintained by the Company or any Subsidiary, or
(iv) any Person who, immediately prior to such merger, consolidation
or reorganization had Beneficial Ownership of more than fifty percent
(50%) or more of the then outstanding Voting Securities or Shares, has
Beneficial Ownership of more than fifty percent (50%) or more of the
combined voting power of the Surviving Corporation's then outstanding
voting securities or its common stock.
(ii) A complete liquidation or dissolution of the Company; or
(iii) The sale or other disposition of all or substantially all of
the assets of the Company to any Person (other than a transfer to a
Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the then outstanding Shares or
Voting Securities as a result of the acquisition of Shares or Voting Securities
by the Company which, by reducing the number of Shares or Voting Securities
then outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Persons, provided that if a Change in Control would occur
(but for the operation of this sentence) as a result of the acquisition of
Shares or Voting Securities by the Company, and after such share acquisition by
the Company, the Subject Person becomes the Beneficial Owner of any additional
Shares or Voting Securities which increases the percentage of the then
outstanding Shares or Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.
2.6 "Code" means the Internal Revenue Code of 1986, as amended.
2.7 "Committee" means a committee, as described in Section 3.1, appointed
by the Board from time to time to administer the Plan and to perform the
functions set forth herein.
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2.8 "Company" means Bernard Chaus, Inc.
2.9 "Disability" means:
(a) in the case of an Optionee whose employment with the Company or a
Subsidiary is subject to the terms of an employment agreement between such
Optionee and the Company or Subsidiary, which employment agreement includes
a definition of "Disability", the term "Disability" as used in this Plan or
any Agreement shall have the meaning set forth in such employment agreement
during the period that such employment agreement remains in effect; and
(b) in all other cases, the term "Disability" as used in this Plan or
any Agreement shall mean a physical or mental infirmity which impairs the
Optionee's ability to perform substantially his or her duties for a period
of one hundred eighty (180) consecutive days.
2.10 "Division" means any of the operating units or divisions of the
Company designated as a Division by the Committee.
2.11 "Eligible Individual" means any officer or employee of the Company or
a Subsidiary, or any director, consultant or advisor who is receiving cash
compensation from the Company or a Subsidiary, designated by the Committee as
eligible to receive Options subject to the conditions set forth herein;
provided, however, that only employees of the Company or any Subsidiary may
receive Incentive Stock Options under this Plan.
2.12 "Employee Option" means an Option granted pursuant to Section 5.
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.14 "Fair Market Value" on any date means the closing sales prices of the
Shares on such date on the principal national securities exchange on which such
Shares are listed or admitted to trading, or, if such Shares are not so listed
or admitted to trading, the average of the per Share closing bid price and per
Share closing asked price on such date as quoted on the National Association of
Securities Dealers Automated Quotation System or such other market in which
such prices are regularly quoted, or, if there have been no published bid or
asked quotations with respect to Shares on such date, the Fair Market Value
shall be the value established by the Board in good faith and, in the case of
an Incentive Stock Option, in accordance with Section 422 of the Code.
2.15 "Incentive Stock Option" means an Option satisfying the requirements
of Section 422 of the Code and designated by the Committee as an Incentive
Stock Option.
2.16 "Nonemployee Director" means a director of the Company who is a
"nonemployee director" within the meaning of Rule 16b-3 promulgated under the
Exchange Act.
2.17 "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.
2.18 "Option" means a Nonqualified Stock Option, an Incentive Stock
Option, or any or all of them.
2.19 "Optionee" means a person to whom an Option has been granted under
the Plan.
2.20 "Outside Director" means a director of the Company who is an "outside
director" within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder.
2.21 "Parent" means any corporation which is a parent corporation (within
the meaning of Section 424(e) of the Code) with respect to the Company.
2.22 "Plan" means the Bernard Chaus, Inc. 1998 Stock Incentive Plan, as
amended and restated from time to time.
2.23 "Pooling Transaction" means an acquisition of the Company in a
transaction which is intended to be treated as a "pooling of interests" under
generally accepted accounting principles.
2.24 "Shares" means the common stock, par value $.01 per share, of the
Company.
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2.25 "Subsidiary" means any corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the Company.
2.26 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of
the Code applies.
2.27 "Ten-Percent Stockholder" means an Eligible Individual, who, at the
time an Incentive Stock Option is to be granted to him or her, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company, or of a Parent or a Subsidiary.
3. ADMINISTRATION.
3.1 The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A quorum shall consist
of not fewer than two members of the Committee and a majority of a quorum may
authorize any action. Any decision or determination reduced to writing and
signed by a majority of all of the members of the Committee shall be as fully
effective as if made by a majority vote at a meeting duly called and held. The
Committee shall consist of at least two (2) directors of the Company; provided,
however, that (A) each member shall be a Nonemployee Director and (B) to the
extent necessary for any Option intended to qualify as performance-based
compensation under Section 162(m) of the Code to so qualify, each member of the
Committee shall be an Outside Director. No member of the Committee shall be
liable for any action, failure to act, determination or interpretation made in
good faith with respect to this Plan or any transaction hereunder, except for
liability arising from his or her own willful misfeasance, gross negligence or
reckless disregard of his or her duties. The Company hereby agrees to indemnify
each member of the Committee for all costs and expenses and, to the extent
permitted by applicable law, any liability incurred in connection with
defending against, responding to, negotiating for the settlement of or
otherwise dealing with any claim, cause of action or dispute of any kind
arising in connection with any actions in administering this Plan or in
authorizing or denying authorization to any transaction hereunder.
3.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:
(a) determine those Eligible Individuals to whom Employee Options shall
be granted under the Plan and the number of such Employee Options to be
granted and to prescribe the terms and conditions (which need not be
identical) of each such Employee Option, including the purchase price per
Share subject to each Employee Option, and make any amendment or
modification to any Agreement consistent with the terms of the Plan;
(b) to construe and interpret the Plan and the Options granted hereunder
and to establish, amend and revoke rules and regulations for the
administration of the Plan, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the
Plan or in any Agreement, in the manner and to the extent it shall deem
necessary or advisable so that the Plan complies with applicable law
including Rule 16b-3 under the Exchange Act and the Code to the extent
applicable, and otherwise to make the Plan fully effective. All decisions
and determinations by the Committee in the exercise of this power shall be
final, binding and conclusive upon the Company, the Subsidiaries, the
Optionees, and all other persons having any interest therein;
(c) to determine the duration and purposes for leaves of absence which
may be granted to an Optionee on an individual basis without constituting a
termination of employment or service for purposes of the Plan;
(d) to exercise its discretion with respect to the powers and rights
granted to it as set forth in the Plan; and
(e) generally, to exercise such powers and to perform such acts as are
deemed necessary or advisable to promote the best interests of the Company
with respect to the Plan.
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4. STOCK SUBJECT TO THE PLAN.
4.1 The maximum number of Shares that may be made the subject of Options
granted under the Plan shall be ten percent (10%) of the issued and outstanding
Shares at the close of business on the Rights Offering Effective Date (which
shall be between 2,187,443 and 2,711,591 Shares); provided, however, that the
maximum number of Shares that an Eligible Individual may be granted in respect
of Options may not exceed 2,200,000 Shares. Upon a Change in Capitalization,
the maximum number of Shares referred to in the first sentence of this Section
4.1 shall be adjusted in number and kind pursuant to Section 12. The Company
shall reserve for the purposes of the Plan, out of its authorized but unissued
Shares or out of Shares held in the Company's treasury, or partly out of each,
such number of Shares as shall be determined by the Board.
4.2 Upon the granting of an Option, the number of Shares available under
Section 4.1 for the granting of further Options shall be reduced as follows: In
connection with the granting of an Option, the number of Shares shall be
reduced by the number of Shares in respect of which the Option is granted or
denominated.
4.3 Whenever any outstanding Option or portion thereof expires, is
canceled or is otherwise terminated for any reason without having been
exercised or payment having been made in respect of the entire Option, the
Shares allocable to the expired, canceled or otherwise terminated portion of
the Option may again be the subject of Options granted hereunder.
5. OPTION GRANTS FOR ELIGIBLE INDIVIDUALS.
5.1 AUTHORITY OF COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have full and final authority to select those Eligible
Individuals who will receive Employee Options, and the terms and conditions of
the grant to such Eligible Individuals shall be set forth in an Agreement.
5.2 PURCHASE PRICE. The purchase price or the manner in which the purchase
price is to be determined for Shares under each Employee Option shall be
determined by the Committee and set forth in the Agreement; provided, however,
that the purchase price per Share under each Incentive Stock Option shall not
be less than 100% of the Fair Market Value of a Share on the date the Employee
Option is granted (110% in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder). Subject to Section 5.5, the Committee shall have the
authority to change the purchase price for Shares under an Employee Option
subsequent to its grant.
5.3 MAXIMUM DURATION. Employee Options granted hereunder shall be for such
term as the Committee shall determine, provided that an Incentive Stock Option
shall not be exercisable after the expiration of ten (10) years from the date
it is granted (five (5) years in the case of an Incentive Stock Option granted
to a Ten-Percent Stockholder) and a Nonqualified Stock Option shall not be
exercisable after the expiration of ten (10) years from the date it is granted.
The Committee may, subsequent to the granting of any Employee Option, extend
the term thereof, but in no event shall the term as so extended exceed the
maximum term provided for in the preceding sentence.
5.4 VESTING. Subject to Section 6.4, each Employee Option shall become
exercisable in such installments (which need not be equal) and at such times as
may be designated by the Committee and set forth in the Agreement. To the
extent not exercised, installments shall accumulate and be exercisable, in
whole or in part, at any time after becoming exercisable, but not later than
the date the Employee Option expires. The Committee may accelerate the
exercisability of any Employee Option or portion thereof at any time.
5.5 MODIFICATION. No modification of an Employee Option shall adversely
alter or impair any rights or obligations under the Employee Option without the
Optionee's consent.
6. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
6.1 NON-TRANSFERABILITY. Unless set forth in the Agreement evidencing the
Option (other than an Incentive Stock Option) at the time of grant or at any
time thereafter, an Option granted hereunder shall not be transferable by the
Optionee to whom granted except by will or the laws of descent and
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distribution or pursuant to a domestic relations order (within the meaning of
Rule 16a-12 promulgated under the Exchange Act), and an Option may be exercised
during the lifetime of such Optionee only by the Optionee or his or her
guardian or legal representative. The terms of such Option shall be final,
binding and conclusive upon the beneficiaries, executors, administrators, heirs
and successors of the Optionee.
6.2 METHOD OF EXERCISE. The exercise of an Option shall be made only by a
written notice delivered in person or by mail to the Secretary of the Company
at the Company's principal executive office, specifying the number of Shares to
be purchased and accompanied by payment therefor and otherwise in accordance
with the Agreement pursuant to which the Option was granted. The purchase price
for any Shares purchased pursuant to the exercise of an Option shall be paid,
as determined by the Committee in its discretion, in either of the following
forms (or any combination thereof): (i) cash and/or (ii) the transfer of Shares
to the Company upon such terms and conditions as determined by the Committee.
In addition, Employee Options may be exercised through a registered
broker-dealer pursuant to such cashless exercise procedures which are, from
time to time, deemed acceptable by the Committee, and the Committee may
authorize that the purchase price payable upon exercise of an Employee Option
may be paid by having Shares withheld that otherwise would be acquired upon
such exercise. Any Shares transferred to the Company (or withheld upon
exercise) as payment of the purchase price under an Option shall be valued at
their Fair Market Value on the day preceding the date of exercise of such
Option. The Optionee shall deliver the Agreement evidencing the Option to the
Secretary of the Company who shall endorse thereon a notation of such exercise
and return such Agreement to the Optionee. No fractional Shares (or cash in
lieu thereof) shall be issued upon exercise of an Option and the number of
Shares that may be purchased upon exercise shall be rounded to the nearest
number of whole Shares.
6.3 RIGHTS OF OPTIONEES. No Optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (i) the Option
shall have been exercised pursuant to the terms thereof, (ii) the Company shall
have issued and delivered Shares to the Optionee, and (iii) the Optionee's name
shall have been entered as a stockholder of record on the books of the Company.
Thereupon, the Optionee shall have full voting, dividend and other ownership
rights with respect to such Shares, subject to such terms and conditions as may
be set forth in the applicable Agreement.
6.4 EFFECT OF CHANGE IN CONTROL. In the event of a Change in Control, all
Options outstanding on the date of such Change in Control shall become
immediately and fully exercisable. In the event an Optionee's employment with
the Company terminates following a Change in Control, each Option held by the
Optionee that was exercisable as of the date of termination of the Optionee's
employment shall remain exercisable for a period ending not before the earlier
of (A) the first anniversary of the termination of the Optionee's employment or
(B) the expiration of the stated term of the Option; but in no event shall the
exercise period exceed the maximum term provided in Section 5.3.
7. EFFECT OF A TERMINATION OF EMPLOYMENT.
The Agreement evidencing the grant of each Option shall set forth the
terms and conditions applicable to such Option upon a termination or change in
the status of the employment of the Optionee by the Company, a Subsidiary or a
Division (including a termination or change by reason of the sale of a
Subsidiary or a Division), which shall be as the Committee may, in its
discretion, determine at the time the Option is granted or thereafter.
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to (i) the
maximum number and class of Shares or other stock or securities with
respect to which Options may be granted under the Plan, (ii) the maximum
number and class of Shares or other stock or securities with respect to
which Options may be granted to any Eligible Individual during any fiscal
year during the term of the Plan, and (iii) subject to the provisions of
Section 162(m) of the Code, the number and class of Shares or other stock
or securities which are subject to outstanding Options granted under the
Plan and the purchase price therefor, if applicable.
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(b) Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any adjustments
in the purchase price) shall be made in such manner as not to constitute a
modification as defined by Section 424(h)(3) of the Code and only to the
extent otherwise permitted by Sections 422 and 424 of the Code.
(c) If, by reason of a Change in Capitalization, an Optionee shall be
entitled to exercise an Option with respect to, new, additional or
different shares of stock or securities, such new, additional or different
shares shall thereupon be subject to all of the conditions, and
restrictions which were applicable to the Shares subject to the Option, as
the case may be, prior to such Change in Capitalization.
9. EFFECT OF CERTAIN TRANSACTIONS.
Subject to Section 8.4 or as otherwise provided in an Agreement or
otherwise by the Committee, in the event of (i) the liquidation or dissolution
of the Company or (ii) a merger or consolidation of the Company (a
"Transaction"), the Plan and the Options issued hereunder shall continue in
effect in accordance with their respective terms, except that following a
Transaction each Optionee shall be entitled to receive in respect of each Share
subject to any outstanding Options, as the case may be, upon exercise of any
Option, the same number and kind of stock, securities, cash, property or other
consideration that each holder of a Share was entitled to receive in the
Transaction in respect of a Share; provided, however, that such stock,
securities, cash, property, or other consideration shall remain subject to all
of the conditions, restrictions and performance criteria which were applicable
to the Options prior to such Transaction.
10. INTERPRETATION.
The Plan is intended to comply with Rule 16b-3 promulgated under the
Exchange Act and the Committee shall interpret and administer the provisions of
the Plan or any Agreement in a manner consistent therewith. Any provisions
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan.
(a) Unless otherwise expressly stated in the relevant Agreement, each
Employee Option granted under the Plan is intended to be performance-based
compensation within the meaning of Section 162(m)(4)(C) of the Code. The
Committee shall not be entitled to exercise any discretion otherwise
authorized hereunder with respect to such Options if the ability to
exercise such discretion or the exercise of such discretion itself would
cause the compensation attributable to such Options to fail to qualify as
performance-based compensation.
11. POOLING TRANSACTIONS.
Notwithstanding anything contained in the Plan or any Agreement to the
contrary, in the event of a Change in Control which is also intended to
constitute a Pooling Transaction, the Committee shall take such actions, if
any, as are specifically recommended by an independent accounting firm retained
by the Company to the extent reasonably necessary in order to assure that the
Pooling Transaction will qualify as such, including but not limited to (i)
deferring the vesting, exercise, payment, settlement or lapsing of restrictions
with respect to any Option, (ii) providing that the payment or settlement in
respect of any Option be made in the form of cash, Shares or securities of a
successor or acquirer of the Company, or a combination of the foregoing, and
(iii) providing for the extension of the term of any Option to the extent
necessary to accommodate the foregoing, but not beyond the maximum term
permitted for any Option.
12. TERMINATION AND AMENDMENT OF THE PLAN.
The Plan shall terminate on the day preceding the tenth anniversary of the
date of its adoption by the Board and no Option may be granted thereafter.
Subject to Section 11, the Board may sooner terminate the Plan and the Board
may at any time and from time to time amend, modify or suspend the Plan;
provided, however, that:
(a) no such amendment, modification, suspension or termination shall
impair or adversely alter any Options theretofore granted under the Plan,
except with the consent of the Optionee, nor shall any amendment,
modification, suspension or termination deprive any Optionee of any Shares
which he or she may have acquired through or as a result of the Plan; and
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(b) to the extent necessary under applicable law, no amendment shall
be effective unless approved by the stockholders of the Company in
accordance with applicable law.
13. OTHER ARRANGEMENTS.
The adoption of the Plan by the Board shall not be construed as creating
any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either applicable generally or only in specific cases.
14. LIMITATION OF LIABILITY.
As illustrative of the limitations of liability of the Company, but not
intended to be exhaustive thereof, nothing in the Plan shall be construed to:
(i) give any person any right to be granted an Option other than at
the sole discretion of the Committee;
(ii) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(iii) limit in any way the right of the Company or any Subsidiary to
terminate the employment of any person at any time; or
(iv) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person at any particular rate of
compensation or for any particular period of time.
15. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
15.1 Except as to matters of federal law, the Plan and the rights of all
persons claiming hereunder shall be construed and determined in accordance with
the laws of the State of New York without giving effect to conflicts of laws
principles thereof.
15.2 The obligation of the Company to sell or deliver Shares with respect
to Options granted under the Plan shall be subject to all applicable laws,
rules and regulations, including all applicable federal and state securities
laws, and the obtaining of all such approvals by governmental agencies as may
be deemed necessary or appropriate by the Committee.
15.3 The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority, or to obtain
for Eligible Individuals granted Incentive Stock Options the tax benefits under
the applicable provisions of the Code and regulations promulgated thereunder.
15.4 Each Option is subject to the requirement that, if at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification, consent or approval
has been effected or obtained free of any conditions as acceptable to the
Committee.
15.5 Notwithstanding anything contained in the Plan or any Agreement to
the contrary, in the event that the disposition of Shares acquired pursuant to
the Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), and is not otherwise
exempt from such registration, such Shares shall be restricted against transfer
to the extent required by the Securities Act and Rule 144 or other regulations
thereunder. The Committee may require any individual receiving Shares pursuant
to an Option granted under the Plan, as a condition precedent to receipt of
such Shares, to represent and warrant to the Company in writing that the Shares
acquired by such individual are acquired without a view to any distribution
thereof and will not be sold or transferred other than pursuant to an effective
registration thereof under said Act or pursuant to an exemption applicable
under the Securities Act or the rules and regulations promulgated thereunder.
The certificates evidencing any of such Shares shall be appropriately legended
to reflect their status as restricted securities as aforesaid.
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16. MISCELLANEOUS.
16.1 MULTIPLE AGREEMENTS. The terms of each Option may differ from other
Options granted under the Plan at the same time, or at some other time. The
Committee may also grant more than one Option to a given Eligible Individual
during the term of the Plan, either in addition to, or in substitution for, one
or more Options previously granted to that Eligible Individual.
16.2 WITHHOLDING OF TAXES.
(a) At such times as an Optionee recognizes taxable income in
connection with the receipt of Shares or otherwise hereunder (a "Taxable
Event"), the Optionee shall pay to the Company an amount equal to the
federal, state and local income taxes and other amounts as may be required
by law to be withheld by the Company in connection with the Taxable Event
(the "Withholding Taxes") prior to the issuance, or release from escrow, of
such Shares or otherwise. The Company shall have the right to deduct from
any payment of cash to an Optionee an amount equal to the Withholding Taxes
in satisfaction of the obligation to pay Withholding Taxes. In satisfaction
of the obligation to pay Withholding Taxes to the Company, the Optionee may
make a written election (the "Tax Election"), which may be accepted or
rejected in the discretion of the Committee, to have withheld a portion of
the Shares then issuable to him or her having an aggregate Fair Market
Value equal to the Withholding Taxes.
(b) If an Optionee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any Share or
Shares issued to such Optionee pursuant to the exercise of an Incentive
Stock Option within the two-year period commencing on the day after the
date of the grant or within the one-year period commencing on the day after
the date of transfer of such Share or Shares to the Optionee pursuant to
such exercise, the Optionee shall, within ten (10) days of such
disposition, notify the Company thereof, by delivery of written notice to
the Company at its principal executive office.
16.3 EFFECTIVE DATE. The effective date of this Plan shall be the
effective date of the Company's rights offering as contemplated by the Form S-3
Registration Statement under the Securities Act of 1933, as amended, which was
filed by the Company with the Securities and Exchange Commission on October 30,
1997 (the "Rights Offering Effective Date"), subject only to the approval by
the affirmative vote of the holders of a majority of the securities of the
Company present, or represented, and entitled to vote at a meeting of
stockholders duly held in accordance with the applicable laws of the State of
New York within twelve (12) months of the adoption of the Plan by the Board.
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