Employment Agreement - Bernard Chaus Inc. and Andrew Grossman
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made as of September 1, 1994,
by and between BERNARD CHAUS, INC., a New York corporation (the
"Company"), and ANDREW GROSSMAN (the "Executive").
The Board of Directors of the Company (the "Board") desires to
employ the Executive, and the Executive is willing to be employed by the
Company, on the terms and conditions set forth in this Agreement.
Accordingly, in consideration of the premises and the respective
covenants and agreements of the parties set forth below, and intending to
be legally bound hereby, the parties agree as follows:
a. Employment. The Company hereby employs the Executive for
the Term (as defined herein), to render exclusive and full-time services
to the Company, as Chief Executive Officer of the Company and as a member
of the Office of the Chairman of the Company, which Office shall consist
of Josephine Chaus (or her successor) and the Executive, and to perform
such other duties as may be assigned to the Executive by the Board and
Josephine Chaus. The Executive hereby accepts such employment and agrees
to render the services described herein.
b. Term.
(a) Subject to the provisions for earlier termination as
provided in Section 9(a) - (e) hereof, the term of Executive's employment
hereunder (the "Term") shall commence on November 7, 1994 or such earlier
date as the parties hereto may agree (the "Starting Date") and shall end
on the fifth anniversary of the Starting Date (the "Initial Term") or on
such later date to which the Term is extended pursuant to Section 2(b).
(b) Extension. Provided that the Company shall have
complied with its obligations to issue certain stock options pursuant to
the second sentence of Section 8 below, the Company may at any time during
the Initial Term elect to extend the Term for an additional five (5) years
ending on the tenth anniversary of the Starting Date (as so extended, the
"Extended Term").
c. Duties, Authority, Status and Responsibilities.
(a) Chief Executive Officer and Member of the Office of
the Chairman. The Executive shall serve as Chief Executive Officer and
member of the Office of the Chairman of the Company and shall have such
responsibilities, duties and authority as are generally associated with
the positions of Chief Executive Officer and member of the Office of the
Chairman and as may from time to time be assigned to the Executive by the
Board of Directors of the Company and Josephine Chaus (for so long as she
is Chairwoman) that are consistent with such responsibilities, duties and
authority. The Executive shall report directly to Josephine Chaus (for so
long as she is Chairwoman) and the Board. During the Term, the Executive
agrees to devote the Executive's entire business time, energy and skill to
such employment, and to use the Executive's best efforts, skill and
ability to promote the Company's interests, on the terms and conditions
set forth in this Agreement. Nothing in this Agreement shall preclude the
Executive from engaging in charitable and community affairs, sitting on
corporate boards, or giving attention to his personal affairs, provided
that such activities, in the reasonable judgment of the Board, do not
materially interfere with the regular performance of his duties and
responsibilities under this Agreement.
(b) Board Member. On the Starting Date the Executive
shall be appointed a director of the Company, and, following his re-
election by the shareholders of the Company, shall continue to serve as a
director of the Company for the duration of the Term. The Executive shall
serve as a director of the Company without additional compensation. Upon
the expiration of the Term, the Executive shall be deemed to have resigned
as a director of the Company and shall provide written evidence of such
resignation to the Company. The Board will consider in good faith the
recommendation of the Executive of an additional nominee to membership on
the Board.
d. Place of Performance. The Executive shall be based and
shall perform his duties primarily at the principal executive offices of
the Company in the City of New York or the New York City metropolitan
area, except for reasonable travel as the performance of the Executive's
duties may require.
e. Compensation.
(a) Compensation. During the Term, the Company shall pay
to the Executive (i) an annual salary for each year of the Term equal to
one million dollars ($1,000,000.00) (the "Annual Salary"); and (ii)
subject to receipt of approval by the Company's shareholders, five percent
(5%) of the Annual Net Profits (as hereinafter defined) of the Company for
such fiscal year ("Net Profit Participation"). "Annual Net Profits" for
any fiscal year shall mean the net income of the Company, as reflected on
the audited financial statements of the Company for such fiscal year
prepared in accordance with generally accepted accounting principles
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applied consistent with past practices and certified by the Company's
independent public accountants.
For any partial fiscal year in which the Executive is employed
hereunder (whether preceding or following any termination of this
Agreement), the Net Profit Participation for such partial fiscal year
shall be calculated by multiplying the Net Profit Participation otherwise
calculated for the full fiscal year by a fraction, the numerator of which
is the number of days in such partial fiscal year and the denominator of
which is 360.
(b) Sign-On Bonus. As additional compensation for
services rendered, the Company shall pay to the Executive a sign-on bonus
equal to six million two hundred thousand dollars ($6,200,000.00) (the
"Sign-On Bonus") on the dates set forth in Section 5(c)(iii) of this
Agreement. In the event that the Executive voluntarily terminates his
employment for reasons other than set forth in Section 9(d) below prior to
the expiration of the Initial Term or if the Executive breaches any of the
provisions of Section 14(c) below or breaches, to the material detriment
of the Company, any of the provisions of Section 14(a) below or if the
Company terminates the Executive's employment for Due Cause (as defined in
Section 9(c) below), the Executive agrees promptly to pay back to the
Company (i) the full amount of the Net Sign-On Bonus (as defined below) in
the event of such termination or breach prior to the second anniversary of
the Starting Date, (ii) sixty percent (60%) of the Net Sign-On Bonus in
the event of such termination or breach after the second anniversary and
prior to the third anniversary of the Starting Date, (iii) forty percent
(40%) of the Net Sign-On Bonus in the event of such termination or breach
after the third anniversary and prior to the fourth anniversary of the
Starting Date and (iv) twenty percent (20%) of the Net Sign-On Bonus in
the event of such termination or breach after the fourth anniversary and
prior to the fifth anniversary of the Starting Date. For purposes of this
Agreement, the "Net Sign-On Bonus" shall mean the Sign-On Bonus, less the
amount of any federal, state or local taxes paid or payable by the
Executive in respect of the Sign-On Bonus (after taking into account any
tax benefits received or to be received by the Executive by reason of the
payment of any such taxes). In the event the Executive shall repay any
portion of the Sign-On Bonus to the Company pursuant to this provision,
the Executive agrees to file promptly for and use his best efforts to
obtain a refund of any income taxes previously paid by him on such portion
or if a refund is not available, the Executive agrees to use his best
efforts to claim a deduction on his next filed income tax returns for such
repayment. The Executive further agrees to remit promptly to the Company
any such refund received by him (or if a deduction is claimed the amount
of the combined net federal, state and local tax benefit received from
such deduction). The remission of such refund if any shall be paid to the
Company net of any taxes paid or payable in respect of such refund.
Notwithstanding the foregoing, the obligation on the part of the Executive
to pay back any or all of the Net Sign-On Bonus to the Company shall
terminate immediately upon a change in control of the Company as defined
in Section 12(a) below.
(c) Time of Payment. The Compensation shall be paid to
the Executive as follows:
(1) The Company shall pay to the Executive the Annual
Salary in monthly or more frequent installments in accordance with
the payroll practices for senior executives of the Company in effect
at the time of payment;
(2) Promptly after the relevant audited financial
statements are completed (but in no event later than the 105th day
following the end of each fiscal year of the Company), the Company
shall pay to the Executive the applicable Net Profit Participation,
if any; and
(3) The Company shall pay fifty percent (50%) of the
Sign-On Bonus ($3,100,000.00) to the Executive upon the execution of
this Agreement and the remaining fifty percent (50%) of the Sign-On
Bonus ($3,100,000.00) to the Executive within three business days
following the Starting Date.
(d) Performance Based Compensation. It is the intention
of the parties that, if section 162(m) of the Internal Revenue Code (the
"Code") is or will be applicable with respect to one or more payments
hereunder (other than the Sign-On Bonus), the Executive will consider in
good faith any requests by the Company to take actions to cause such
payments to meet the requirements of section 162(m)(4)(B) or (C) of the
Code, and thus to be excluded from the definition of "applicable employee
remuneration" within the meaning of section 162(m)(4) of the Code.
f. Expenses. The Executive shall be entitled to receive
prompt reimbursement from the Company for all reasonable out-of-pocket
expenses incurred by the Executive in performing his duties hereunder,
including, without limitation, all expenses of travel and living expenses
while away from home on business or at the request of and in the service
of the Company provided that the Executive submits documentation for the
reimbursement of such expenses in accordance with the policies and
procedures established by the Company for senior executives.
g. Executive Benefits.
(a) General. The Executive shall be entitled to
participate in all employee benefit plans, programs and arrangements of
the Company now or hereafter made available to senior executives of the
Company, as such plans, programs and arrangements may be in effect from
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time to time (including, without limitation, each retirement plan,
supplemental and excess retirement plan, group life insurance, accident
and death insurance, medical insurance, sick leave, pension plan and
disability plan), except that the provisions set forth in this Agreement
with regard to incentive stock options and bonus payments shall be in lieu
of participation in the Company's stock option and bonus plans. The
Executive shall also be eligible to participate in the Company's executive
perquisites in accordance with the terms and provisions of the
arrangements as in effect from time to time for the Company's senior
executives. In addition, during the Term the Company agrees to obtain or
otherwise provide medical insurance or coverage (including coverage for
pre-existing conditions) for Mrs. Bonnie Grossman and the Executive's
daughter ("Family Coverage"). In order to mitigate the costs to the
Company of such Family Coverage, the Executive agrees, at the Company's
request and sole expense, to use his best efforts to procure extended
coverage under his existing medical coverage (so-called COBRA coverage)
for as long as such extended coverage is available.
(b) Automobile. The Company shall provide Executive with
an automobile allowance of $1300.00 per month. The Executive shall also
have the right to use a car service provided that the Executive submits
documentation for the reimbursement of such expenses in accordance with
the policies and procedures established by the Company for senior
executives.
(c) Vacations. The Executive shall be entitled to four
(4) weeks paid vacation in each year, such vacations to be taken at such
time or times as are consistent with the requirements of the Company's
business and the performance of the Executive's duties and
responsibilities hereunder. Unused vacation time may not be accumulated
and carried forward to a subsequent year.
h. Stock Options. The Company hereby agrees, upon the
execution of this Agreement, to cause the Stock Option Committee (the
"Stock Option Committee") of the Board to award on the date of this
Agreement the Executive stock options ("Stock Options") embodying the
terms set forth below and otherwise containing terms and conditions set
forth in the form of the Stock Option Agreement attached hereto as
Attachment A, to purchase 1.5 million shares of Common Stock, with an
exercise price equal to the closing price per share of the Company's
Common Stock on the date of this Agreement. In addition, the Company
agrees to cause the Stock Option Committee to award on the date the
Company elects to extend the term of this Agreement pursuant to Section
2(b) above (the "Extension Date"), if any, Stock Options on the same terms
and conditions as those granted pursuant to the immediately preceding
sentence to purchase 1.5 million additional shares of Common Stock, but
with an exercise price equal to the closing price per share of the
Company's Common Stock on the Extension Date, which Stock Options shall be
granted in a manner that complies with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Act"), to the extent the benefits
of Rule 16b-3 are available with respect to such awards; provided, that if
such benefits are not available, the Company shall use its best efforts to
make the grant in a manner such that the Executive does not incur any
liability under Section 16b of the Act. Any awards of Stock Options to
the Executive shall be subject to receipt of approval by the Company's
shareholders. The Company agrees to reserve sufficient authorized but
unissued shares of Common Stock to be available at all times to satisfy
any obligation of the Company to issue shares of Common Stock to the
Executive upon exercise of any Stock Options.
i. Termination.
(a) Death. In the event of the death of the Executive
during the Term, the Agreement automatically shall be terminated. Annual
Salary shall be paid to the Executive's designated beneficiary, or, in the
absence of such designation, to the estate or other legal representative
of the Executive (such beneficiary or representative, the "Beneficiary")
for the lesser of (i) the balance of the Term or (ii) the period ending on
the third anniversary of the Executive's death. In addition, the
Beneficiary shall receive a percentage of the Net Profit Participation
payable with respect to the partial fiscal year of the Company ending on
the date of the Executive's death calculated in accordance with the second
paragraph of Section 5(a) above and payable in accordance with Section
5(c)(ii) above. The Executive's daughter and Mrs. Bonnie Grossman shall
be entitled to continued Family Coverage for the remainder of the Term.
(b) Disability. In the event of the Disability (as herein
defined) of the Executive during the Term, the Agreement automatically
shall be terminated. Sixty-five percent (65%) of the Annual Salary shall
be paid to the Executive for the period commencing with the date of
Disability through the balance of the Term (less any Disability
compensation which the Executive receives in accordance with the Company's
benefit programs and plans). In addition, the Executive shall receive a
percentage of the Net Profit Participation payable with respect to the
partial fiscal year of the Company ending on the date of the Executive's
Disability calculated in accordance with the second paragraph of Section
5(a) above and payable in accordance with Section 5(c)(ii) above.
"Disability," for purposes of the Agreement, shall mean the Executive has
failed as a result of his illness, physical or mental disability or other
incapacity, for a period of 90 consecutive days or 180 days within any
two-year period during the Term to render the services provided in the
Agreement, or has been adjudicated an incompetent. During the period of
his Disability (including any period after the date of termination), the
Executive shall be entitled to continued participation for himself under
the Company's medical insurance plan to the extent permitted under such
plan and for the remainder of the Term his daughter and Mrs. Bonnie
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Grossman shall be entitled to continued Family Coverage.
(c) Termination by the Company for Due Cause. Nothing
herein shall prevent the Company from terminating the Executive's
employment for Due Cause (as defined below). Upon such termination, the
Executive shall continue to receive Annual Salary and Net Profit
Participation only for the period ending with the date of such termination
and the obligation of the Company to make any further payments, or to
provide any benefits specified herein, to the Executive shall thereupon
cease and terminate. The Term "Due Cause", as used herein, shall mean a
felony conviction of the Executive or the entering of a plea of guilty or
nolo contendere to a felony by the Executive or the commission by the
Executive of fraud or theft against, or embezzlement from, the Company or
any of its subsidiaries or affiliates. Termination of employment pursuant
to this Section 9(c) shall be made by delivery to the Executive of a
written Notice of Termination (as defined in Section 9(f) below) setting
forth the particulars of the conduct which provides the basis for a
termination of the Executive for Due Cause.
(d) Termination by Executive. The Executive may terminate
his employment hereunder if at any time during the Term, the Company shall
be in material breach of its obligations hereunder. The parties
acknowledge and agree that a material breach for purposes of this Section
9(d) shall include, but not be limited to, any material reduction in the
Executive's duties, authority, status or responsibilities (whether or not
accompanied by a change in title) all as set forth in Section 3 above. No
termination shall be permitted under this Section 9(d) unless the Company
shall have first received a written Notice of Termination and within 10
days following the delivery of such Notice of Termination the Company
shall not have cured or in good faith commenced the cure of the breach
specified in such Notice of Termination.
(e) Severance and Non-Competition Payments. If the
Agreement is terminated by the Company other than as a result of death or
Disability of the Executive or for Due Cause or by the Executive pursuant
to Section 9(d) above, the Company shall pay the Executive as severance
and non-competition payments (i) the Annual Salary that he would have
received had the Agreement not been terminated plus (ii) the Net Profit
Participation, if any, earned by the Executive pursuant to Section 5(a)
that the Executive would have received hereunder had the Agreement not
been terminated, less the amount of any compensation and bonuses received
by the Executive during such period from other employers. If the
Executive terminates his employment hereunder prior to the second
anniversary of the Starting Date for reasons other than pursuant to
Section 9(d) of this Agreement, the Company shall pay the Executive the
Annual Salary for a two-year period from the date of such termination,
provided that (i) during such two-year period the Executive complies with
the provisions set forth in Section 14(c) and, in a manner not resulting
in material detriment to the Company, the provisions of Section 14(a) of
this Agreement, and (ii) after the date hereof but prior to the expiration
of such two-year period the Executive does not enter into any agreement,
arrangement or understanding with his current employer with respect to the
future employment of the Executive in any capacity (whether as an
employee, consultant or otherwise) by his current employer during the Non-
Competition Period (as defined in Section 14(c) below) or any time
thereafter. Notwithstanding the foregoing, if after a "change in control"
(as defined in Section 12(a) below) the Agreement is terminated by the
Company other than as a result of death or Disability of the Executive or
for Due Cause or by the Executive pursuant to Section 9(d) above, the
Company shall pay the Executive, in lieu of the payment specified in
clause (i) of the immediately preceding sentence, a lump sum payment equal
to the aggregate Annual Salary that he would have received had the
Agreement not been terminated, discounted to present value at the
applicable Federal short-term rate (within the meaning of section 1274 of
the Code) in effect on the date of the Executive's termination of
employment hereunder.
(f) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other than
termination pursuant to Section 9(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section
13. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice containing the specific termination provision in this Agreement
relied upon and setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
j. Satisfaction for Termination-Related Claims. The parties
intend that the performance of the provisions herein relating to
termination of this Agreement and severance arrangements shall be in full
and complete satisfaction of any claim that either party may have against
the other for the termination of the Executive's employment hereunder.
k. Mitigation Not Required. The Executive shall not be
required to mitigate amounts payable pursuant to Section 10 by seeking
other employment or otherwise.
l. Indemnification.
(a) General Corporate Indemnification. The Company shall
also indemnify and hold harmless the Executive and his legal
representatives to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, from and against all judgments, finil,
criminal, administrative or investigative,
including an action by or in the right of the Company to procure a
judgment in es,
penalties, excise taxes, amounts paid in settlement, losses, expenses,
costs, liabilities and legal fees ("Losses") if he is made, or threatened
to be made, a party to any threatened, pending or completed action, suit <PAGE>
or proceeding, whether civits favor, by reason of the fact that the Executive
(i) is or
was a director or officer of the Company or (ii) is or was serving in any
capacity at the request of the Company for any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise. The right to indemnification provided by this Section 12(b)
shall not be deemed exclusive of any other rights to which the Executive
may have or hereafter be entitled under any law or the charter or By-laws
of the Company, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue
after the Executive has ceased to be a director or officer and shall inure
to the benefit of the heirs, executors and administrators of the
Executive. The Executive shall be entitled to the protection of director
and officer insurance which the Company shall maintain generally for the
benefit of its respective directors and officers; which coverage shall be
maintained during the Term, including any period following any change of
control of the Company. For purposes of this Agreement, a "change in
control" of the Company shall be deemed to have occurred if (x) the
Company shall have merged or consolidated with an unaffiliated entity or
the Company shall have transferred or sold all or substantially all of its
assets to an unaffiliated entity, (y) the majority of the directors on the
Board at any time have not been approved for election by the directors on
the Board immediately prior to any such election of directors or (z) any
person or group (within the meaning of Rule 13d-3 of the rules and
regulations promulgated under the Securities Exchange Act of 1934, as
amended (the "1934 Act Rules")) shall acquire in one or a series of
transactions such number of shares of the Company's Common Stock as shall
result in such person or group becoming the beneficial owner (within the
meaning of the 1934 Act Rules) of at least the number of shares of Common
Stock collectively owned at that time by Josephine Chaus, members of her
immediate family, her affiliates (as such term is defined in the 1934 Act
Rules), trusts or private foundations established by Josephine Chaus or
members of her immediate family, and the heirs, executors or
administrators of Josephine Chaus's estate.
(b) Certain Losses Resulting from Execution of Agreement.
The Company shall reimburse the Executive for any Losses incurred by the
Executive as a result of any claim brought against the Executive by his
current employer or any of its affiliates by reason of the Executive's
entering into this Agreement; provided, however, that the Company's
liability under this Section 12(b) shall not exceed $150,000.00.
m. Notice. All notices, demands, requests and all other
communications required or permitted to be given hereunder shall be in
writing and shall be deemed to have been duly given when delivered
personally or sent by prepaid telegram, or mailed first-class, postage
prepaid, by certified or registered mail, return receipt requested,
addressed as follows:
If to the Executive:
Mr. Andrew Grossman
210 East 65th Street
Apartment 14D
New York, New York 10021
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004-1980
Attention: Robert Schwenkel, Esq.
If to the Company:
Bernard Chaus, Inc.
1410 Broadway
New York, New York 10018
Attention: Chairwoman
with a copy to:
Shereff, Friedman, Hoffman &
Goodman
919 Third Avenue
New York, New York 10022
Attention: Martin Nussbaum, Esq.
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
n. Protection of Confidential Information: Non-Competition;
Non-Solicitation.
(a) The Executive agrees not to use, disclose or make
accessible to any other person, firm, partnership, corporation or any
other entity any Confidential Information (as herein defined) pertaining
to the business of the Company except (i) while employed by the Company,
in the business of and for the benefit of the Company or (ii) when
required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order the Executive to divulge,
disclose or make accessible such information. For purposes of the
Agreement, "Confidential Information" shall mean non-public information
<PAGE>
concerning the Company's financial data, statistical data, strategic
business plans, product development (or other proprietary product data),
customer and supplier lists, information relating to governmental
relations, discoveries, practices, processes, methods, trade secrets,
marketing plans and other non-public, proprietary and confidential
information of the Company, that, in any case, is not otherwise generally
available to the public and has not been disclosed by the Company to
others not subject to confidentiality agreements. In the event the
Executive's employment is terminated hereunder for any reason, he
immediately shall return to the Company all Confidential Information in
his possession.
(b) The Executive and the Company agree that this covenant
regarding Confidential Information is a reasonable covenant under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction, such covenant is not reasonable in any respect,
such court shall have the right, power and authority to excise or modify
such provision or provisions of this covenant as to the court shall appear
not reasonable and to enforce the remainder of the covenant as so amended.
The Executive agrees that any breach of the covenant contained in this
Section 14 would irreparably injure the Company. Accordingly, the
Executive agrees that the Company, in addition to pursuing any other
remedies it may have in law or in equity, may obtain an injunction against
the Executive from any court having jurisdiction over the matter,
restraining any further violation of this Section 14.
(c) The Executive agrees that during the Term and (i) if
the Agreement is terminated by the Company, other than as a result of
death, or Disability of the Executive or for Due Cause, for the shorter of
one year or the period ending on the date that the Term would have expired
had the Agreement not been terminated or (ii) in any case of termination
by the Company for Due Cause or by the Executive other than pursuant to
Section 9(d) of this Agreement (other than any termination of this
Agreement or the Executive's employment upon or following the expiration
of the Term) for two years from the date of termination (herein referred
to as the "Non-Competition Period"), without the prior written consent of
the Company; (i) he shall not, directly or indirectly, either as
principal, manager, agent, consultant, officer, greater than two percent
(2%) holder of any class or series of equity securities, partner,
investor, lender or employee or in any other capacity, carry on, be
engaged in or have any financial interest in or otherwise be connected
with, any entity which is now or at the time, engaged in any business
activity competitive (directly or indirectly) with the business of the
Company including, for these purposes, any business in which, at the
termination of his employment, there was a bona fide intention on the part
of the Company to engage in the future; and (ii) he shall not, on behalf
of any competing entity, directly or indirectly, have any dealings or
contact with any suppliers or customers of the Company. Nothing contained
in this Section 9(d) shall preclude the Executive from owning (as a
passive investor only) all or any capital stock of Herbert Grossman
Enterprises.
(d) During the Term and during the Non-Competition Period,
the Executive agrees that, without the prior written consent of the
Company (and other than on behalf of the Company), the Executive shall
not, on his own behalf or on behalf of any person or entity, directly or
indirectly hire or solicit the employment of any employee who has been
employed by the Company at any time during the six (6) months immediately
preceding such date of hiring or solicitation.
(e) The Executive and the Company agree that the covenants
of non-competition and non-solicitation are reasonable covenants under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction such covenant are not reasonable in any respect,
such court shall have the right, power and authority to excise or modify
such provision or provisions of these covenants as to the court shall
appear not reasonable and to enforce the remainder of these covenants as
so amended. The Executive agrees that any breach of the covenants
contained in this Section 14 would irreparably injure the Company.
Accordingly, the Executive agrees that the Company, in addition to
pursuing any other remedies it may have in law or in equity, may obtain an
injunction against the Executive from any court having jurisdiction over
the matter, restraining any further violation of this Section 14.
(f) The provisions of this Section 14 shall survive the
termination of the Agreement.
o. Resolution of Disputes. Any controversy or claim arising
out of or relating to this Agreement, or any breach thereof, shall be
settled by arbitration in accordance with the rules of the American
Arbitration Association before a board of three disinterested persons,
consisting of one arbitrator to be appointed by the Company, one by the
Executive, and one by the arbitrators so chosen. Judgment upon an award
rendered by the arbitrators may be entered in any court having
jurisdiction thereover. The arbitration shall be held in New York, New
York or in such other place as the parties may agree. The Company may
seek injunctive relief to prevent harm to the Company pending a decision
by the arbitrators.
p. Certain Representations, Warranties and Covenants.
(a) In order to induce the Company to enter into this
Agreement on the terms and conditions set forth herein, the Executive
hereby represents and warrants to the Company that his execution of the
Agreement and the performance of his duties and responsibilities hereunder
will not violate or result in a breach of, or in any manner be prohibited
or restricted by, the terms of any agreement, arrangement, understanding
<PAGE>
(written or otherwise), order or decree to which he is a party or by which
he is bound. The Executive further represents that he is not a party to
any agreement with his current employer relating to non-competition or
confidentiality.
(b) The Executive represents to the Company, for purposes
of the Company's obtaining a "key man" life insurance policy that he is in
good physical and mental health, has never been rated an insurance risk on
account of any past physical or mental history or condition and does not
suffer from any physical or mental condition which could cause him not to
be insurable for "key man" life insurance in the amount provided above at
normal premium rates (consistent with general industry practice in New
York). The Executive will cooperate with the Company to enable it to
obtain such "key man" life insurance. All benefits of such "key man" life
insurance policy shall inure to the
Company.
(c) The Company agrees to seek shareholder approval (i) at
its next regularly scheduled meeting of shareholders of the re-election of
the Executive to the Board, of the bonus plan set forth herein providing
for the Net Profit Participation and of the Stock Options granted on the
date of this Agreement and to be granted on the Extension Date, if any.
q. Miscellaneous.
(a) Modification, Waiver, etc. No provisions of this
Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the Executive
and a duly authorized officer of the Company. No waiver by any party
hereto at any time of any breach of another party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. This
Agreement shall be binding on and inure to the benefit of the successors
and assigns of the Company. THE VALIDITY, INTERPRETATION, CONSTRUCTION
AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY IN NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF
SUCH STATE.
(b) Severability of Invalid or Unenforceable Provisions.
The invalidity or unenforceability of any provision or provisions of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect,
unless such action would substantially impair the value to the Executive
of this Agreement in which event the Executive shall have the right in his
discretion to terminate this Agreement.
(c) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
(d) Entire Agreement. This Agreement sets forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party hereto
and any prior agreement of the parties hereto in respect of the subject
matter contained herein.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
BERNARD CHAUS, INC.
By: /s/ Josephine Chaus
Name: Josephine Chaus
Title: Chairwoman
/s/ Andrew Grossman
ANDREW GROSSMAN
<PAGE>
BERNARD CHAUS, INC.
STOCK OPTION AGREEMENT
AGREEMENT made and entered into as of September 1, 1994, by and
between BERNARD CHAUS, INC. (the "Company"), a New York corporation with
offices at 1410 Broadway, New York, New York 10018 and ANDREW GROSSMAN (the
"Optionee"), an individual residing at 210 East 65th Street, Apartment 14D, New
York, New York 10021.
W I T N E S S E T H :
WHEREAS, the Company has entered into an employment agreement
(the "Employment Agreement") with the Optionee dated as of the date hereof to
engage the Optionee's services for the Company; and
WHEREAS, pursuant to the Employment Agreement, the Company
agreed to grant to the Optionee options to purchase shares of the common stock,
par value $.01 per share (the "Common Stock"), of the Company pursuant to the
terms and conditions specified herein and in the Employment Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and
of the mutual covenants and agreements herein contained, the parties hereby
agree as follows:
1. Subject to the terms and conditions set forth herein,
the Company grants to the Optionee an option (the "Option") to purchase from
the Company all or any part of an aggregate of 1,500,000 shares of the Common
Stock (the "Optioned Shares").
2. The purchase price for the Optioned Shares shall be
$2.25 per share, subject to adjustment as hereinafter provided (the "Option
Price") (which is the closing sale price on the New York Stock Exchange on the
date hereof).
3. The Option shall vest and be exercisable at the rate of
twenty percent (20%) a year on a cumulative basis commencing on the first
anniversary of the date hereof and each anniversary date thereafter.
Notwithstanding the foregoing, in no event shall the
Option be exercised, and the Option shall no longer be exercisable, at any time
after ten years from the date hereof. Any exercise of the Option may be either
in whole at any time or in part at any time or from time to time.
4. Neither the Optionee nor the Optionee's legal
representatives, legatees or distributees shall be or be deemed to be the
holder of any shares of the Common Stock covered by the Option unless and until
certificates for such shares have been issued. Upon payment of the purchase
price thereof, shares issued upon exercise of the Option shall be validly
issued, fully paid and nonassessable.
5. In order to exercise the Option, the Optionee shall
give a signed written notice of intent to exercise the Option to the Treasurer
of the Company specifying the number of shares of the Common Stock with respect
to which the Option is being exercised, and accompanied by payment to the
Company of the full amount of the Option Price for the number of shares of the
Common Stock so specified. All or any portion of such payment may be made
through a "cashless exercise" arrangement with a broker designated by the
Optionee by delivery of shares of the Common Stock having a fair market value
(as hereinafter determined) on the date of delivery equal to the portion of the
Option Price so paid; provided, that in connection therewith the Optionee shall
certify to the Company that such delivery will not result in "short-swing"
profit to him under Section 16 of the Securities and Exchange Act of 1934 (the
"Exchange Act") and the rules and regulations promulgated thereunder ("Section
16").
For the purposes hereof, the fair market value of a
share of the Common Stock on any date shall be equal to the closing sale price
of a share of the Common Stock as published by the national securities exchange
on which the shares of the Common Stock are primarily traded on such date or,
if there is no such sale of the Common Stock on such date, the average of the
bid and asked price on such exchange at the close of trading on such date or,
if the shares of the Common Stock are not listed on a national securities
exchange on such date, the average of the bid and asked prices in the over the
counter market on such date or, if the Common Stock is not traded on a national
securities exchange or the over the counter market, the fair market value of a
share of the Common Stock on such date as shall be determined in good faith by
the Company.
6. (a) Unless the shares to be issued upon the
exercise of the Option shall be registered under the Securities Act of 1933, as
amended (the "Act"), prior to the issuance thereof, the Optionee shall, as a
condition to the Company's obligation to issue such shares, give a
representation in writing that he is acquiring such shares for his own account
as an investment and not with a view to, or for sale in connection with, the
distribution of any thereof.
(b) In the event of the death of the Optionee, an
additional condition of exercising the Option shall be the delivery to the
Company of such tax waivers and other documents as the Company shall reasonably
determine. The executors, administrators, legal representatives, distributees
and legatees of the Optionee are, after the death of the Optionee, referred to
as the Optionee with respect to the Option.
<PAGE>
(c) The Optionee shall, as an additional condition
of exercising the Option, make appropriate arrangements with the Company for
the payment of all federal, state or local withholding taxes applicable as a
result of the exercise of the Option. All or any portion of such payment may
be made through a "cashless exercise" arrangement with a broker designated by
the Optionee by delivery of shares of the Common Stock having a fair market
value (as determined pursuant to paragraph 5 hereof) on the date of delivery
equal to the portion of such taxes so paid; provided, that in connection
therewith the Optionee shall certify to the Company that such delivery will not
result in "short-swing" profit to him under Section 16.
7. In the event of a "change in control" of the Company as
defined in Section 12(a) of the Employment Agreement or if the Optionee's
employment is terminated (a) by the Company for any reason other than for Due
Cause (as defined in the Employment Agreement) or (b) by the Optionee pursuant
to Section 9(d) of the Employment Agreement, any unvested portion of the Option
shall vest immediately and shall remain exercisable for a period of six months
after such date, unless the Option is earlier terminated pursuant to paragraph
3 of this Agreement. If the Optionee's employment is terminated by the Company
for Due Cause or by the Optionee for reasons other than pursuant to Section
9(d) of the Employment Agreement, any unvested portion of the Option shall be
forfeited and any vested portion of the Option must be exercised within thirty
days from the date of such termination, unless the Option is earlier terminated
pursuant to paragraph 3 of this Agreement.
8. In the event that a dividend shall be declared upon the
Common Stock payable in shares of the Common Stock, the Optioned Shares shall
be adjusted by adding to each such share the number of shares which would be
distributable thereon if such share had been outstanding on the date fixed for
determining the shareholders entitled to receive such stock dividend. In the
event that the outstanding shares of the Common Stock shall be changed into or
exchanged for a different number of kind of shares of stock and/or other
securities of the Company or of another corporation or cash or other property,
whether through reorganization, recapitalization, extraordinary dividend, stock
split-up, combination of shares, sale of assets, spin off or merger or
consolidation in which the Company is the surviving corporation, then, there
shall be substituted for each Optioned Share the number and kind of shares of
stock and/or other securities, cash or other property into which each
outstanding share of the Common Stock shall be so changed or for which each
such share shall be exchanged. In the event that there shall be any change,
other than as specified in this paragraph 8, in the number or kind of
outstanding shares of the Common Stock, or of any stock or other securities
into which the Common Stock shall have been changed, or for which it shall have
been exchanged, then, the Board of Directors of Company shall, in its
reasonable discretion, equitably adjust the Option with respect to the number
or kind of Optioned Shares and the Option Price, such adjustment to be made by
the Company and notice thereof shall be delivered to the Optionee within 30
calendar days thereafter, accompanied by a certificate of the Chief Financial
Officer of the Company setting forth such adjustment, the method of calculation
of such adjustment and the facts upon which such adjustment was based, all in
reasonable detail. In the case of any such substitution or adjustment as
provided for in this paragraph 8, the Option Price for each Optioned Share
shall be the Option Price for all shares of stock or other securities which
shall have been substituted for such Optioned Share or to which such shares
shall have been adjusted in accordance with the provisions in this paragraph 8.
No adjustment or substitution provided for in this paragraph 8 shall require
the Company to sell a fractional share hereunder.
9. The existence of the Option shall not affect in any way
the right or power of the Company or its shareholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or
dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any other corporate act or proceeding
whether of a similar character or otherwise.
10. Nothing herein contained shall be deemed to confer upon
the Optionee any right to continue in the employ of the Company, nor to
interfere in any way with the right of the Company to terminate the employment
of the Optionee at any time.
11. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
12. Prior to the first Anniversary of the Starting Date (as
defined in the Employment Agreement) the Company agrees to file one or more
registration statements with the Securities and Exchange Commission in order to
register the resale by the Optionee (subject to the applicable rules and
regulations of the Securities and Exchange Commission) of Optioned Shares. The
Company will use its best efforts to cause each such registration statement to
become effective and to comply with all requirements of the Securities and
Exchange Commission necessary to keep each such registration statement
effective.
13. This Agreement is subject to the terms and conditions
of the Employment Agreement, and in the event of a conflict between the two,
the Employment Agreement shall govern. Subject to the preceding sentence, this
Agreement sets forth the entire understanding of the parties with respect to
the subject matter hereof, supersedes all existing agreements between them
concerning such subject matter, and may be modified only by a written
instrument duly executed by each party; provided, however, that if such
modification materially increases the benefits to the Optionee under this
Agreement it shall become effective only upon approval by the affirmative vote
of the holders of a majority of the outstanding shares of the Company entitled
<PAGE>
to vote thereon.
14. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be mailed by certified
mail, return receipt request, or delivered against receipt to the party to whom
it is to be given at the address of such party set forth in the preamble to
this Agreement (or to such other address as the party shall have furnished in
writing in accordance with the provisions of this paragraph 15). Notice to the
estate of the Optionee shall be sufficient if addressed to the Optionee as
provided in this paragraph 15. Any notice or other communication given by
certified mail shall be deemed given at the time of certification thereof,
except for a notice changing a party's address which shall be deemed given at
the time of receipt thereof.
15. Any waiver by either party of a breach of any provision
of this Agreement shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing.
16. Except as may be permitted by Rule 16b-3 promulgated
under the Exchange Act for transfers to a trust or similar estate planning
vehicle, the Option is not transferable otherwise than by will or the laws of
descent and distribution and may be exercised, during the lifetime of the
Optionee, only by him or, in the event of his disability, his duly appointed
guardian or conservator. The Optionee's rights shall not be subject to
commutation, encumbrance, or the claims of the Optionee's creditors, and any
attempt to do any of the foregoing shall be void. The provisions of this
Agreement shall be binding upon and inure to the benefit of the Optionee and
his heirs and personal representatives under this Agreement.
17. This Agreement does not create, and shall not be
construed as creating, any rights enforceable by any person not a party to this
Agreement (except as expressly provided in this Agreement).
18. This Agreement shall become effective upon approval by
the affirmative vote of the holders of a majority of the outstanding shares of
the Company entitled to vote thereon. In the event such approval is not
obtained, this Agreement and all options granted under this Agreement shall
become null and void.
19. Any controversy or claim arising out of or relating to
this Agreement or any breach thereof shall be resolved in accordance with the
provisions of Section 15 of the Employment Agreement.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to
be executed by a duly authorized officer and its corporate seal hereunto
affixed, and the Optionee has hereunto affixed his hand and seal, the day and
year first above written.
BERNARD CHAUS, INC.
By
Josephine Chaus
Chairman of the Board and
Chief Executive Officer
ACCEPTED AND AGREED TO:
By
Andrew Grossman
(Date)