Settlement Agreement - Nicole Eskenazi, Bernard Chaus Inc., Josephine Chaus and Richard A. Baker
SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT, dated as of September 23, 1994,
among NICOLE ESKENAZI, a resident of New York, New York
("Eskenazi"), BERNARD CHAUS, INC., a New York corporation ("Chaus,
Inc."), JOSEPHINE CHAUS, a resident of New York, New York
("J. Chaus"), and RICHARD A. BAKER, a resident of New York, New
York ("Baker").
WHEREAS, Eskenazi and Chaus, Inc. entered into a letter
agreement dated as of July 22, 1991, which set forth the terms
pursuant to which Eskenazi was to be employed by Chaus, Inc. for a
period of three years, concluding on July 31, 1994 (the "Employment
Agreement"),
WHEREAS, Eskenazi was employed by Chaus, Inc., as an
executive of that Company pursuant to the Employment Agreement,
from August 1, 1991 until a date prior to January 13, 1994, at
Eskenazi's employment with Chaus, Inc. was terminated and Chaus,
Inc. continued to make salary payments to Eskenazi, at the base
rate set forth in the Employment Agreement, until May 20, 1994, at
which date Chaus, Inc. terminated such payments;
WHEREAS, Chaus and Baker are officers and employees of
Chaus, Inc., and acted in their corporate capacity in connection
with the termination of Eskenazi's employment with Chaus, Inc.;
WHEREAS, Eskenazi is a shareholder of Chaus, Inc.;
WHEREAS, Eskenazi commenced an action on June 8, 1994 in
Supreme Court of the State of New York for New York County,
entitled Nicole Eskenazi v. Bernard Chaus, Inc., Josephine Chaus
and Richard A. Baker, Index No. 94/116595 (the "Action"), wherein
Eskenazi sought relief for breach of contract on the ground that
the defendants had allegedly breached the Employment Agreement and
for tortious conduct of the defendants by allegedly terminating her
employment in violation of Section 290 of Article 15 of the New
York Executive Law, allegedly causing compensable injuries to
Eskenazi; and
WHEREAS, the parties hereto desire to settle the dispute
among them.
NOW, THEREFORE, in consideration of the covenants and
undertakings contained herein, the parties hereto agree as follows:
1. The Closing of this Agreement (the "Closing") shall
take place on September 30, 1994, at a time and place to be agreed
upon by the parties.
2. At the Closing, Chaus, Inc. shall pay to Eskenazi
the sum of two hundred twenty thousand dollars ($220,000.00) in
consideration of and in full settlement of any and all claims of
Eskenazi to salary, bonuses, salary increases or benefits under the
Employment Agreement. Chaus, Inc. shall treat the payment under
this Section 2 as salary, deducting therefrom (a) federal and state
income tax withholding at the minimum rates provided by law or
regulation with respect to lump sum payments by employers to
employees; (b) any and all payroll taxes required to be deducted
from lump sum salary payments by employers to employees; and (c)
the maximum contribution to the retirement savings plan maintained
by Chaus, Inc. for its employees, pursuant to Section 401 of the
U.S. Internal Revenue Code permitted to be deducted for Federal
income tax purposes by Eskenazi (the "401(k) Contribution"). The
amount provided for the 401(k) Contribution shall be credited to
Eskenazi's account in Chaus, Inc.'s retirement savings plan
maintained pursuant to Section 401 of the U.S. Internal Revenue
Code, and shall be subject to matching contributions by Chaus, Inc.
to the same extent and on the same basis of contributions of other
employees of Chaus, Inc. made to that retirement savings plan
during the year 1994.
3. At the Closing, Chaus, Inc. shall pay to Eskenazi
the sum of one hundred thirty thousand dollars ($130,000.00), in
consideration of, and solely for the purpose of compromising and
settling Eskenazi's claim in the Action for tortious conduct and
for the alleged injuries to Eskenazi caused thereby. Said amount
shall be paid without set-off or deduction of any kind or
character.
4. Chaus, Inc. and Eskenazi may release a statement
regarding Eskenazi's departure from Chaus, Inc., in the form set
forth as Exhibit A hereto, provided that the party releasing the
statement shall give prior notice to all other parties of the
contents of any statement to be released to the public. Other than
what is set forth in that statement, none of the parties hereto
shall make any statements or comments to any third parties
regarding Eskenazi's departure from Chaus, Inc. or the reasons for
her departure, except (a) Eskenazi may explain her departure to
prospective employers (or their agents) on terms consistent with
that statement; (b) Chaus, Inc. will respond to inquiries directed
to the current Director of personal, by confirming the dates of
Eskenazi's employment with Chaus, Inc., the positions that she
held, and the basis for her departure from employment with that
company as set forth in the statement annexed as Exhibit A hereto;
(c) Chaus, Inc. may make any statements that may be required in its
proxy statement or any other required public disclosure, provided
that they are not inconsistent with the substance of the statement
annexed as Exhibit A hereto; and (d) to their legal or accounting
advisors to the extent necessary in connection with the performance
of those advisor's professional obligations, and to the extent
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necessary to respond to law, regulation or administrative or court
order or directive. In addition, Chaus, Inc. shall provide a
letter of reference for Eskenazi in the form set forth in Exhibit
B hereto, and shall direct such letter of reference to such persons
or entities as Eskenazi may reasonably request.
5. Eskenazi hereby acknowledges that any and all stock
options that Eskenazi holds for the stock of Chaus, Inc. have
expired and that she has no right to exercise such options. To the
extent that Eskenazi holds stock options for the stock of Chaus,
Inc. that may not have expired, she hereby cancels and gives up any
such stock options. Eskenazi shall have no rights with respect to
any stock options for the stock of Chaus, Inc. under Chaus, Inc.'s
Stock Option Plan or under the Employment Agreement.
6. Eskenazi hereby acknowledges that she received all
required information regarding her COBRA rights with respect to
continued participation in any health insurance plans offered to
employees of Chaus, Inc., and hereby acknowledges that she declined
to exercise any such rights. Eskenazi agrees that she will not
seek to participate in any health insurance plan offered to
employees of Chaus, Inc.
7. (a) Eskenazi hereby covenants that she shall not
institute any action or suit in law or in equity against J. Chaus,
Baker or Chaus, Inc.'s directors, officers, agents or
representatives, nor institute, prosecute, participate in or
voluntarily cooperate with, directly or indirectly, any way in the
institution or prosecution of any claim, demand, action or cause of
action against said parties for damages, losses, injunctive relief,
costs, expenses or compensation for or on account of any damage,
loss or injury, whether developed or undeveloped, resulting or to
result, known or unknown, past, present or future, arising out of
or relating to Eskenazi's ownership of stock and stock options of
Chaus, Inc., or the management and operations of Chaus, Inc., or
the financial performance of Chaus, Inc. or of the stock of Chaus,
Inc. Nothing contained in this subparagraph (a) of Section 7 shall
prohibit Eskenazi from truthfully responding to any subpoena or to
any investigative demand issued by any governmental body or entity,
or shall preclude her from sharing exclusively as a group or class
member in any recovery obtained or awarded to shareholders of
Chaus, Inc. or to any group or class of shareholders of Chaus, Inc.
to the extent she would otherwise be eligible therefore, provided
that she shall otherwise have complied with the terms of this
Section 7.
(b) Chaus, Inc., Chaus and Baker hereby covenant
that they will not institute any action or suit in law or in equity
against Eskenazi, her heirs, executors, administrators, successors
or assigns, nor institute, prosecute, participate in or voluntarily
cooperate with, directly or indirectly, any way in the institution
or prosecution of any claim, demand, action or cause of action
against Eskenazi for damages, losses, injunctive relief, costs,
expenses or compensation for or on account of any damage, loss or
injury, whether developed or undeveloped, resulting or to result,
known or unknown, past, present or future, arising out of or
relating to Eskenazi's employment with Chaus, Inc., except as to
the surviving terms of the Employment Agreement described in
Section 10 hereof. Nothing contained in this subparagraph (b) of
Section 7 shall prohibit Chaus, Inc., Chaus or Baker from
truthfully responding to any subpoena or to any investigative
demand issued by any governmental body or entity.
8. Eskenazi shall not initiate any contact with any
employees of Chaus, Inc. regarding Eskenazi's dispute with the
parties hereto, the terms of this Settlement Agreement, the
operations, business activities and management of Chaus, Inc. or
the June 15 Letter.
9. The parties hereto shall enter into a stipulation
dismissing the Action with prejudice, with the parties to bear
their own costs, in the form annexed hereto as Exhibit C. Upon
payment to Eskenazi pursuant to Sections 2 and 3 hereof, Eskenazi
shall file said stipulation forthwith with the Clerk of the County
of New York.
10. Simultaneously with the payment to Eskenazi pursuant
to Sections 2 and 3 hereof, the parties hereto shall exchange
general releases in the form annexed hereto as Exhibit D. Said
general releases shall release the respective parties from any and
all claims that they may have against each other, except that
Chaus, Inc. shall not release Eskenazi with respect to her
continuing obligations under Section 6 of the Employment Agreement
regarding (a) Chaus, Inc.'s confidential information (as defined
therein), (b) the solicitation of any present or future Chaus, Inc.
employee during such time as such individual is in the employ of
Chaus, Inc., (c) the solicitation of any Chaus, Inc. supplier, to
the extent that knowledge of the existence of said supplier is
confidential and not ascertainable from sources other than
Eskenazi's experience at Chaus, Inc., (d) Chaus, Inc. proprietary
documents and trade secrets. Chaus, Inc. waives its rights under
Section 6(b) of the Employment Agreement with respect to the
noncompetition clause, and releases Eskenazi from any obligations
thereunder. Notwithstanding any other provision or statement
contained in this Agreement or in the Employment Agreement, the
time periods provided for under section 6(b) of the Employment
Agreement applicable with respect to the obligations of Eskenazi
remaining in effect as a result of the preceding sentence shall
expire on March 31, 1995. Eskenazi hereby acknowledges that she
has the right to consider whether to execute her General Release
for a period of twenty-one (21) days after the date of this
Settlement Agreement, and acknowledges that she has the right to
execute the General Release no later than October 7, 1994. The
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General Release signed by Eskenazi shall become effective,
enforceable and irrevocable seven (7) days after the date on which
Eskenazi signs it. During such 7-day period, Eskenazi may revoke
the General Release, but such revocation shall be conditioned upon
revocation of the Settlement Agreement and all Eskenazi's rights
thereunder, including any right to receive payment pursuant to
Sections 2 and 3 hereof.
11. This Settlement Agreement does not constitute an
admission of liability or wrongdoing by any of the parties hereto.
12. This Settlement Agreement shall not be filed with
the Clerk of the County of New York, and the parties hereto shall
not disclose the terms of this Settlement Agreement to any
individual or entity without the prior written consent of all the
parties hereto, except as may be otherwise required by law,
including with respect to the proxy statement that Chaus, Inc. must
prepare in connection with its annual meeting. In the event that
any party receives a subpoena, an order or other compulsory request
directing the disclosure of the terms of this Settlement Agreement,
such party shall advise all the other parties hereto of such
subpoena, order or request no later than ten (10) days before the
time by which such party must comply with such order, subpoena or
request in order to permit the other parties hereto to take any
action, as they may deem appropriate, to prevent the disclosure of
the terms of this Settlement Agreement.
13. Any notices under this Settlement Agreement shall be
sent to the parties by hand delivery or by pre-paid registered
mail, return receipt requested, as follows:
(a) if to Eskenazi to:
Ms. Nicole Eskenazi
363 East 76th Street
Apartment 12 F
New York, N.Y. 10021
with a copy to:
Davis, Scott, Weber & Edwards, P.C.
100 Park Avenue
New York, N.Y. 10017
Attention: David Dunn, Esq.
(b) if to Chaus, Inc. to:
Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
Attn: Josephine Chaus
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attn: H. Peter Haveles, Jr.
("Cadwalader")
(c) if to J. Chaus to:
Ms. Josephine Chaus
c/o Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
with a copy to:
Cadwalader
(d) if to Baker to:
Mr. Richard A. Baker
c/o Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
with a copy to:
Cadwalader
Any such notice shall be effective upon delivery by hand or three
business days after mailing. The place for notice may be altered
by any party in anotice that conforms to this section.
14. This Settlement Agreement sets forth the entire
agreement among the parties hereto with respect to the subject
matter hereof, and supersedes all agreements and understandings
prior hereto. No modification or revision hereof shall have any
force or effect unless in writing and executed by the parties
hereto, provided, however, that matters relating to obligations as
between Eskenazi and Chaus, Inc. only may be modified or revised in
a writing executed by those parties without the consent of J. Chaus
or Baker.
15. This Settlement Agreement shall be governed by the
laws of the State of New York, without reference to choice of law
principles.
16. This Settlement Agreement may be executed in one or
more identical counterparts, each of which shall constitute an
original document, and all of which, taken together, shall
constitute one and the same instrument.
17. Chaus, Inc. represents and warrants to Eskenazi that
all necessary corporate formalities and approvals in connection
with this Settlement Agreement and the performance thereof have
been or will be obtained, and that the person executing this
Settlement Agreement on behalf of Chaus, Inc. is duly authorized to
do so and to bind that company with respect to the provisions
hereof.
18. Each of the parties to this Settlement Agreement
represents and warrants to the others that it has been advised by
and has consulted with counsel of its choosing in connection with
the negotiation and execution of this Settlement Agreement and
understands and agrees to the rights and obligations conferred and
surrendered by this Settlement Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Settlement Agreement as of the date first written above.
__________________________________
NICOLE ESKENAZI
BERNARD CHAUS, INC.
By:________________________________
Title:
___________________________________
JOSEPHINE CHAUS
___________________________________
RICHARD A. BAKER