Document:

exhibi101.htm

EXHIBIT 10.1

 

Execution Version

 

 

 

VOTING AGREEMENT

THIS VOTING AGREEMENT, dated as of April 3, 2012 (this “Agreement”), by and among Bernard Chaus, Inc., a New York corporation (the “Company”), the shareholders of the Company listed on the signature page(s) hereto (collectively, the “Family Shareholders” and each individually a “Family Shareholder”), BC Family Merger Corp., a New York corporation (“Family Newco”), Camuto Consulting, Inc., a Connecticut corporation (“CCI”), and Camuto Merger Sub, Inc., a New York corporation and a wholly owned direct subsidiary of CCI (“Investor Newco”).  Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned to them in the Merger Agreement referred to below.

WHEREAS, concurrently with the execution and delivery of this Agreement, the parties hereto have entered into an Agreement and Plan of Merger (as amended, restated or otherwise modified from time to time, the “Merger Agreement”), providing for, among other things, the merger of Family Newco and Investor Newco into the Company pursuant to the terms and conditions of the Merger Agreement (the “Merger”);

 

WHEREAS, as of the date hereof, Family Newco and the Family Shareholders beneficially own the shares of capital stock of the Company set forth on Schedule I hereto (such shares, or any other voting or equity securities of the Company acquired hereafter during the term of this Agreement, including but not limited to shares acquired by the Family Shareholders pursuant to the exercise of options (whether now held or granted after the execution of this Agreement) to acquire the common stock of the Company, being referred to herein collectively as the “Shares”);

 

WHEREAS, as a condition to CCI’s and Investor Newco’s willingness to enter into the Merger Agreement, CCI’s and Investor Newco have required that Family Newco and each of the Family Shareholders execute and deliver this Agreement; and

 

WHEREAS, in order to induce CCI and Investor Newco to enter into the Merger Agreement, Family Newco and the Family Shareholders are willing to enter into this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereby agree, severally and not jointly, as follows:

 

Section 1.   Voting of Shares.

 

(a)           Family Newco and each of the Family Shareholders hereby covenant and agree that, during the term of this Agreement, at any meeting of the shareholders of the Company, however called, including any adjournment or postponement thereof, or in connection with any written consent of Family Newco or the Family Shareholders, Family Newco and each of the Family Shareholders shall, in each case to the fullest extent that they are entitled to vote thereon or consent thereto:

 

  

  

  

(i)           appear at each such meeting or otherwise cause all of the Shares to be counted as present thereat for purposes of calculating a quorum; and

(ii)            vote (or cause to be voted), in person or by proxy, or deliver (or cause to be delivered) a written consent covering, all of the Shares in favor of the adoption of the Merger Agreement and the approval of the Merger; and

(iii)            vote (or cause to be voted), in person or by proxy, or deliver (or cause to be delivered) a written consent covering, all of the Shares against any Takeover Proposal, action, agreement or transaction that is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, discourage or adversely affect the Merger or the other transactions contemplated by the Merger Agreement or this Agreement or the performance by Family Newco or any of the Family Shareholders of their respective obligations under the Merger Agreement or this Agreement, including: (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its Subsidiaries (other than the Merger); (B) a sale, lease or transfer of a material amount of assets of the Company or any of its Subsidiaries or a reorganization, recapitalization or liquidation of the Company or any of its Subsidiaries; (C) an election of new members to the board of directors of the Company; (D) any material change in the present capitalization or dividend policy of the Company or any amendment or other change to the Company’s certificate of incorporation or bylaws; or (E) any other material change in the Company’s corporate structure or business.

(b)           Family Newco and each of the Family Shareholders hereby irrevocably grant to and appoint CCI and any individual designated in writing by CCI, and each of them individually, as proxy and attorney-in-fact (with full power of substitution), for and in each of their name, place and stead, to vote or act by written consent with respect to all of the Shares with respect to any of the matters specified in, and in accordance and consistent with, this Agreement. Family Newco and each of the Family Shareholders understand and acknowledge that CCI and Investor Newco are entering into the Merger Agreement in reliance upon the execution and delivery of this Agreement by Family Newco and each of the Family Shareholders. Family Newco and each of the Family Shareholders hereby affirm that the irrevocable proxy set forth in this Section 1(b) is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of Family Newco and each Family Shareholder under this Agreement.  Except as otherwise provided for herein, Family Newco and each of the Family Shareholders hereby affirm that this proxy is coupled with an interest and is irrevocable, and Family Newco and each Family Shareholder will take such further action or execute such other instruments as may be necessary to effectuate the intent of this proxy and hereby revoke any proxy previously granted by Family Newco or any Family Shareholder with respect to the Shares. Notwithstanding any other provisions of this Agreement, the irrevocable proxy granted hereunder shall automatically terminate upon the termination of this Agreement.

 

(c)           Except as set forth in Section 1(a), Family Newco and the Family Shareholders shall not be restricted from voting in favor of, against or abstaining with respect to any matter presented to the shareholders of the Company.  In addition, nothing in this Agreement shall give CCI or Investor Newco or any of their designees the right to vote any Shares in connection with the election of directors.

 

 

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Section 2.   No Inconsistent Agreements.  Family Newco and each of the Family Shareholders hereby covenant and agree that, except for this Agreement, he, she or it (a) has not entered into, and shall not enter into at any time while this Agreement remains in effect, any voting agreement or voting trust with respect to the Shares and (b) has not granted, and shall not grant at any time while this Agreement remains in effect, a proxy, consent or power of attorney with respect to the Shares.

Section 3.   Transfer of Shares.  Family Newco and each of the Family Shareholders hereby covenant and agree that while this Agreement is in effect he, she or it will not (a) sell, assign, transfer, pledge, encumber or otherwise dispose of any of the Shares, (b) deposit any of the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares or grant any proxy or power of attorney with respect thereto that is inconsistent with this Agreement or (c) enter into any contract, option or other arrangement or undertaking with respect to the direct or indirect sale, assignment, transfer or other disposition of any Shares; provided that the foregoing shall not prevent (i) the transfer of Shares upon the death of a Family Shareholder pursuant to the terms of any trust or will of the Family Shareholder or by the laws of intestate succession, but only if, and any such transfer shall be void ab initio unless, the transferee executes and delivers to CCI and Investor Newco an agreement to be bound by the terms of this Agreement to the same extent as the Family Shareholder or (ii) the conversion of the Shares into the right to receive Merger Consideration pursuant to the Merger in accordance with the terms of the Merger Agreement.

Section 4.   Representations and Warranties.  Family Newco and each of the Family Shareholders, on his, her or its own behalf, hereby severally represents and warrants to CCI and Investor Newco with respect to his, her or its ownership of the Shares as follows:

 

(a)           Ownership of Shares.  Family Newco and each of the Family Shareholders beneficially own all of the Shares as set forth on Schedule I hereto and have good and marketable title to such Shares, free and clear of any claims, liens, encumbrances and security interests.  Family Newco and the Family Shareholders do not own any shares of Company Common Stock or Company Preferred Stock, or a right to acquire Company Common Stock or Company Preferred Stock, other than the Shares set forth on Schedule I hereto.  Family Newco and the Family Shareholders have sole voting power, without restrictions (other than those created by this Agreement), with respect to all of the Shares owned by such shareholder as set forth on Schedule I hereto.

(b)           Power, Binding Agreement. Family Newco and each of the Family Shareholders have the legal capacity and all requisite power and authority to enter into and perform all of his, her or its obligations under this Agreement.  This Agreement has been duly and validly executed and delivered by Family Newco and each of the Family Shareholders and constitutes a valid and binding obligation, enforceable against each of them in accordance with its terms.

 

 

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(c)           No Conflicts.  The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, conflict with or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, any provision of any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Family Newco, the Family Shareholders, the Shares or any of Family Newco’s or the Family Shareholders’ properties or assets.  Except as expressly contemplated in the Merger Agreement or this Agreement, neither Family Newco nor any of the Family Shareholders are a party to, and the Shares are not subject to or bound in any manner by, any contract or agreement relating to the Shares, including without limitation, any voting agreement, option agreement, purchase agreement, shareholders’ agreement, partnership agreement or voting trust. Except as set forth in Section 3.01(d)(iii) of the Merger Agreement, no consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality, domestic, foreign or supranational, is required by or with respect to Family Newco and the Family Shareholders in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.

 

Section 5.   Waiver of Appraisal Rights.  Family Newco and each of the Family Shareholders hereby waive any rights of appraisal or rights to dissent from the Merger that he, she or it may have under applicable law or otherwise.

Section 6.   Termination.  This Agreement shall terminate upon the first to occur of:

 

(a)           the Effective Time;

(b)           delivery of written notice of termination of this Agreement by CCI and Investor Newco to Family Newco and the Family Shareholders; or

(c)           the date of termination of the Merger Agreement.

 

Section 7.   Fiduciary Duties.  Notwithstanding anything herein to the contrary, Family Newco and each of the Family Shareholders is signing this Agreement solely in his, her or its capacity as an owner of their respective Shares, and nothing herein shall prohibit, prevent or preclude Family Newco or the Family Shareholders from taking or not taking any action in their capacity as an officer or director of the Company to the extent permitted by the Merger Agreement.

 

Section 8.   Consent and Waiver.  Family Newco and each of the Family Shareholders hereby give any consent or waiver that is reasonably required for the consummation of the Merger under the terms of any agreement to which he, she or it is a party or pursuant to any rights he, she or it may have in their capacity as a shareholder of the Company.

 

Section 9.   Miscellaneous.

 

(a)           Entire Agreement; Amendment.  This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement. This Agreement may not be amended, modified or rescinded except by an instrument in writing signed by each of the parties hereto.

 

 

 

 

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(b)           Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated to the fullest extent possible.

(c)           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

 

(d)           Counterparts.  This Agreement may be executed in one or more counterparts (including by facsimile), all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.

(e)           Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile (with confirmation) at the facsimile telephone number specified in this Section 9(e) prior to 5:00 p.m. (New York time) on a business day, (ii) the business day after the date of transmission, if such notice or communication is delivered via facsimile (with confirmation) at the facsimile telephone number specified in this Section 9(e) later than 5:00 p.m. (New York time) on any date and earlier than 11:59 p.m. (New York time) on such date, (iii) when received, if sent by nationally recognized overnight courier service (providing proof of delivery) or (iv) upon actual receipt by the party to whom such notice is required to be given.  The addresses for such notices and communication shall be as follows:

 

if to the Family Shareholder or Family Newco, to:

 

c/o Bernard Chaus, Inc.

530 Seventh Avenue

New York, NY 10018

Attention:  Josephine Chaus

 

 

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with a copy to:

 

Dechert LLP

1095 Avenue of the Americas

New York, NY 10036

Facsimile:  (215) 994-4000

Attention:  Martin Nussbaum, Esq.

    Geraldine A. Sinatra, Esq.

 

if to CCI or Investor Newco, to:

 

Camuto Consulting Inc.

411 West Putnam Avenue

Greenwich, CT 06830

Facsimile:  (866) 257-8234

Attention:  Jeffrey Howald, CFO

with a copy to (which shall not constitute notice):

 

Robinson & Cole LLP

1055 Washington Boulevard

Stamford, CT 06901

Facsimile:  (203) 462-7599

Attention:  Eric J. Dale, Esq.

 

 

if to the Company, to:

 

c/o Bernard Chaus, Inc.

530 Seventh Avenue

New York, NY 10018

Attention:  Josephine Chaus

 

with a copy to:

 

Dechert LLP

1095 Avenue of the Americas

New York, NY 10036

Facsimile:  (215) 994-4000

Attention:  Martin Nussbaum, Esq.

    Geraldine A. Sinatra, Esq.

 

 

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and

 

 

Pryor Cashman LLP

7 Times Square

New York, NY 10036

Facsimile: (212) 798-6312

Attention: Richard S. Frazer, Esq.

 

(f)   No Third Party Beneficiaries.  This Agreement is not intended, and shall not be 

deemed, to confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns, to create any agreement of employment with any person or to otherwise create any third-party beneficiary hereto.

 

(g)           Assignment.  Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by operation of law or otherwise by any of the parties hereto without the prior written consent of the other parties, and any such assignment without such prior written consent shall be void ab initio, except that CCI or Investor Newco may assign this Agreement to any direct or indirect wholly owned subsidiary or Affiliate without the consent of the Company, Family Newco or the Family Shareholders. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties hereto and their respective successors and permitted assigns.

 

(h)           Interpretation.  When reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement, unless otherwise indicated. The headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.  Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa. Any reference to any federal, state, local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” No summary of this Agreement prepared by the parties shall affect in any way the meaning or interpretation of this Agreement.

 

(i)           Specific Enforcement; Consent to Jurisdiction.  Notwithstanding anything in this Agreement to the contrary, the parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Federal court located in the Southern District of New York or in any state

 

 

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court in New York County, this being in addition to any other remedy to which they are entitled at Law or in equity.  In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Federal court located in the Southern District of New York or of any state court in New York County in the event any dispute arises out of this Agreement or the transactions contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Agreement or the transactions contemplated by this Agreement in any court other than a Federal court located in the Southern District of New York or a state court in New York County. 

 

(j)           WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE PARTIES HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.

(k)           Non-Survival of Representations, Warranties and Covenants.  The representations, warranties, covenants and agreements of Family Newco and the Family Shareholders contained herein shall not survive the termination of this Agreement, except for Section 4 of this Agreement which shall survive the Effective Time for a period of three (3) years.

(l)           No Control.  Nothing contained in this Agreement shall give CCI or Investor Newco the right to control or direct the Company or the Company’s operations.

(m)           Further Assurances.  From time to time, at the request and expense of CCI’s or Investor Newco’s, and without further consideration, Family Newco and each of the Family Shareholders shall execute and deliver such additional documents and take all such further action as maybe necessary or desirable to effect the actions and consummate the transactions contemplated by this Agreement.

(n)           Severability.  If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect.  Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

 

[Signature page follows]

 

 

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[Signature page to Voting Agreement]

 

 

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed individually or by its respective duly authorized officer as of the date first written above.

 

 

 

	 	JOSEPHINE CHAUS,	 
	 	 	 
	 	/s/ Josephine Chaus	 
	 	 	 
	 	 	 
	 	ARIEL CHAUS,	 
	 	 	 
	 	/s/ Ariel Chaus	 
	 	 	 
	 	 	 
	 	AARON CHAUS,	 
	 	 	 
	 	by /s/ Josephine Chaus	 
	 	Name: Josephine Chaus	 
	 	Title:   Custodian	 
	 	 	 
	 	 	 
	 	AARON CHAUS 2003 TRUST, 	 
	 	 	 
	 	by /s/ Ilya Chaus Hyatt	 
	 	
Name:Ilya Chaus Hyatt

Title:  Trustee

	 
	 	 	 
	 	 	 
	 	 	 
	 	ARIEL CHAUS 2003 TRUST,	 
	 	 	 
	 	by /s/ Ilya Chaus Hyatt	 
	 	
Name: Ilya Chaus Hyatt

Title:   Trustee

	 

 

 

  

  

  

 

	 	BC FAMILY MERGER CORP,	 
	 	 	 
	 	by /s/ Josephine Chaus	 
	 	
Name: Josephine Chaus

Title:   Chief Executive Officer

	 
	 	 	 
	 	 	 
	 	CAMUTO CONSULTING, INC.,	 
	 	 	 
	 	by /s/ Vincent Camuto	 
	 	
Name: Vincent Camuto

Title:   Chairman and CEO

	 
	 	 	 
	 	CAMUTO MERGER SUB, INC.,	 
	 	 	 
	 	by /s/ Vincent Camuto	 
	 	
Name: Vincent Camuto

Title:    Chairman and CEO

	 
	 	 	 
	 	 	 
	 	BERNARD CHAUS, INC.,	 
	 	 	 
	 	by /s/ Josephine Chaus	 
	 	
Name: Josephine Chaus

Title:   Chief Executive Officer

	 

 

 

 

  

  

  

Schedule I

	
Family Shareholder Name

	
Number of Shares

Underlying Options

 

	
Number of Shares

of Common Stock

	
Total

	
Josephine Chaus

	
0

	
16,775,489

	
16,775,489

	
Aaron Chaus

	
0

	
683

	
683

	
Ariel Chaus

	
0

	
683

	
683

	
Aaron Chaus 1986 Trust

	
0

	
30,568

	
30,568

	
Ariel Chaus 1986 Trust

	
0

	
30,568

	
30,568

	
Aaron Chaus 2003 Trust

	
0

	
1,000,000

	
1,000,000

	
Ariel Chaus 2003 Trust

	
0

	
1,000,000

	
1,000,000exhibit102.htm

EXHIBIT 10.2

 

 

SUPREME COURT OF THE STATE OF NEW YORK

 

NEW YORK COUNTY

 

 

	
 

KENNETH BRAUN, individually and on behalf of all others similarly situated,

 

Plaintiff,

 

-against-

 

JOSEPHINE CHAUS, PHILIP G. BARACH, HARVEY M. KRUEGER, ROBERT FLUG, DAVID STIFFMAN, BERNARD CHAUS, INC. and CAMUTO CONSULTING, INC.,

 

Defendants.

	
 

 

Index No.  652663/2011

 

 

 

 

 

 

MEMORANDUM OF UNDERSTANDING

 

IN THE BERNARD CHAUS, INC. SHAREHOLDER LITIGATION

 

This memorandum of understanding (“MOU”) contains essential terms of a settlement (“Settlement”) agreed to in principle between defendants Josephine Chaus, Philip G. Barach, Robert Flug, Bernard Chaus, Inc. (collectively, “Chaus” or “Company”) and Camuto Consulting Inc. (“Camuto”) (collectively, “Defendants”), and plaintiff in the action Braun v. Chaus, Index No. 652663/2011 (the “Action”) and Dr. Barry Berkowitz (“Berkowitz”) on behalf of themselves as well as members of the putative classes alleged in the Action (collectively “Plaintiffs”).

 

WHEREAS, promptly following the execution and delivery of this MOU, the Company will enter into an Agreement and Plan of Merger (as amended, restated or otherwise modified from time to time, the “Merger Agreement”), providing for, among other things, the merger of certain entities into the Company pursuant to the terms and conditions of the Merger Agreement (the “Merger”);

 

WHEREAS, as of the date hereof, Plaintiffs beneficially own certain shares of capital stock of the Company (such shares, or any other voting or equity securities of the Company acquired hereafter during the term of this Agreement, including but not limited to shares acquired by the Plaintiffs pursuant to the exercise of options (whether now held or granted after the execution of this MOU) to acquire the common stock of the Company, being referred to herein collectively as the “Shares”);

 

  

  

  

WHEREAS, on September 15, 2011, Camuto Consulting, Inc. (“Camuto”) made an offer (the “Offer”) to take the Company private which contemplated, amongst other things, a payment to the non-affiliated shareholders of the Company, such as Plaintiffs, of $0.13 per share;

 

WHEREAS, after receipt of the Offer, the board of directors of the Company formed a special committee of disinterested, independent directors (the “Special Committee”) to consider and negotiate the terms of any transaction effecting the Offer and any other transaction proposals received by the Company;

 

WHEREAS, following the public announcement of the Offer, Berkowitz, on his own behalf and on behalf of certain other shareholders, contacted the Company to express their opinion that the Offer was inadequate;

 

WHEREAS, also following the public announcement of the Offer, the Action was commenced by Complaint filed on September 28, 2011, alleging among other things that the Offer was inadequate;

 

WHEREAS, on October 26, 2011, the Company received a letter from counsel for Dr. Berkowitz and others demanding discussions with the Company, the Special Committee and Camuto concerning the Offer and threatening legal action if their demand was not met;

 

WHEREAS, Berkowitz was actively involved in the negotiations between the Company and Camuto concerning the Offer, and during such negotiations and while this Action was pending, Camuto amended their Offer to include a payment to the non-affiliated shareholders of the Company of $0.21 per share (the “Additional Shareholder Consideration”);

 

WHEREAS, as a condition to enter into the Merger Agreement, certain investing parties have required that the Company and Plaintiffs execute and deliver this Agreement;

 

  

  

  

WHEREAS, counsel for Plaintiffs and counsel for Defendants thereafter engaged in arm’s length discussions and negotiations concerning a possible settlement of the Actions based on the Additional Shareholder Consideration and potentially any negotiated changes to the Preliminary Proxy as defined below;

 

WHEREAS, defendants Harvey M. Krueger and David Stiffman no longer serve on the Board of Directors of Bernard Chaus, Inc. and thus are not parties to this agreement and the Action will be voluntarily discontinued and dismissed as to such defendants; and

 

WHEREAS, in order to induce the parties to enter into the Merger Agreement, the Company and the Releasing Shareholders are willing to enter into this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereby agree, severally and not jointly, as follows:

 

1.           Berkowitz represents and warrants that he beneficially owns, and has voting and dispositive power over, 5,038,846 Shares.

 

2.           Defendants shall provide Plaintiffs with a copy of the Preliminary Proxy Statement on Schedule 14A (the “Preliminary Proxy”), relating to the Transaction before filing with the United States Securities and Exchange Commission (the “SEC”) for Plaintiffs’ review, and consider in good faith any changes to the Preliminary Proxy proposed by Plaintiffs.

 

3.           Defendants will provide to Plaintiffs additional reasonable discovery as agreed by the parties to investigate the claims asserted in the Action and confirm the fairness and reasonableness of the Settlement.  The parties agree to conduct said confirmatory discovery as promptly as possible, and will accomplish the discovery within 30 days of the signing of this MOU.

 

4.           The parties agree that the Additional Shareholder Consideration represents valuable and fair benefits to the alleged Class, and that such increase in compensation to the unaffiliated shareholders was agreed during the pendency of the Action and while Berkowitz was participating in the related discussions.  Plaintiffs and their counsel believe that the MOU provides a fair, reasonable and adequate settlement based upon the claims asserted in the Action and considering the risks, uncertainty and inherent delays associated with litigation.  It is contemplated that this MOU will be ultimately replaced by a “Stipulation of Settlement” to be prepared by the parties and submitted to the court for approval.  The Stipulation of Settlement will include terms proposing the certification of a non-opt out Class.

 

  

  

  

5.           In consideration of the benefits provided to the members of the putative classes, Plaintiffs agree to the dismissal with prejudice and without costs (except as otherwise specifically provided herein) of the Action and of all claims pending in the Action against Defendants following final court approval of the Stipulation of Settlement.

 

6.           The Stipulation of Settlement will be subject to, among other things, the satisfactory completion of confirmatory discovery and the parties’ negotiation of any proposed changes to the Preliminary Proxy or Plaintiffs’ confirmation that they do not have any objection to the Preliminary Proxy.  The Stipulation of Settlement will include a general release (in a form acceptable to the Defendants) to all of the Defendants in the Action, and their counsel, agents, affiliates, family members and others, of all claims, including all claims that were brought or could have been brought in the Action, arising out of or relating to any of the allegations that are the subject of the Action, including all claims arising out of the institution, prosecution, or resolution of the Action.

 

7.           The Stipulation of Settlement will include a release by Defendants to the named Plaintiffs and their counsel, agents, affiliates, family members and others of all claims, including all claims arising out of the institution, prosecution, or resolution of the Action.

 

8.           The release of claims contemplated in Paragraphs 6 and 7 will not include claims by the parties to enforce the terms of the Settlement.

 

9.           The Defendants shall be responsible for providing notice of the Settlement to all settlement class members who will be bound by the release specified in Paragraph 6, and the Company shall pay all reasonable costs and expenses incurred in providing that notice, with the understanding that such notice shall be effected by mail and internet publication, or such other method or methods as the Court deems appropriate.  It is hereby agreed that notice by mail and internet publication is a reasonable and adequate method of providing notice to the putative class members.

 

  

  

  

10.           Plaintiffs shall prepare and Defendants shall cooperate in finalizing a joint stipulation and proposed order promptly after the execution of the MOU allowing Berkowitz to intervene as a plaintiff in the Action pursuant to CPLR 1013, and for his counsel, Giskan Solotaroff Anderson & Stewart to appear as additional class counsel.

 

11.           Plaintiffs and their counsel intend to petition the court for an award of fees and expenses in connection with the Action.  Any award to Plaintiffs’ counsel for fees and expenses shall be determined by the Court, or by a later agreement of the Plaintiffs and Defendants (subject to approval of the Court or courts).  Defendants shall not object to or oppose any application for fees and expenses made by Plaintiffs’ counsel in the Action, provided that such application is for an award no more than the amount of $75,000.  Plaintiffs shall not make any application, or otherwise seek, counsel fees and expenses in the Action, in excess of $75,000.  The parties acknowledge and agree that Chaus or its successor(s) in interest shall cause to be paid on behalf of the Chaus directors and the Company, any fees and expenses awarded by the Court to Plaintiffs’ counsel.  Subject to the terms and conditions of this MOU, and the terms and conditions of the Stipulation of Settlement contemplated hereby, the Company shall, within the later of ten (10) business days after the latest date on which any final and non-appealable order has been entered and/or an appeal therefrom can be taken: (i) approving the Stipulation of Settlement, (ii) awarding attorneys’ fees and/or expenses to Plaintiffs’ counsel; or (iii) dismissing the Action with prejudice (“Fee Payment Date”), pay the amount of such award to Giskan Solotaroff Anderson & Stewart, as agent for Plaintiffs’ counsel for distribution to and among Plaintiffs’ counsel.  Plaintiffs and their counsel agree not to appeal any order entered in the Action dismissing or otherwise resolving the Action.

 

12.           Defendants shall not be liable for, and shall not be required to make, any other payments in connection with the Action other than as provided above.

 

  

  

  

13.           The approval of the fees and expenses in the negotiated amount or any other amount shall be in the sole discretion of the Court, and shall not be a condition of the resolution of the Action, including dismissal with prejudice, agreed herein.  Any order or proceedings related to such application for fees and expenses, or any appeal related thereto, shall not operate to terminate the Stipulation of Settlement or affect the releases therein.  The finality of the Stipulation of Settlement and the dismissal of the Action with prejudice shall not be conditioned on any ruling by the Court or any other court concerning any application for fees or expenses herein.

 

14.           This MOU and the Stipulation of Settlement are conditioned upon non-opt out class certification, final approval of the terms of the Stipulation by the appropriate court, and dismissal of the Action with prejudice and the absence of any appeal thereof by Plaintiffs.  Defendants agree that the Actions may be maintained as a class action, solely for the purpose of effectuating the Stipulation of Settlement and the non-opt-out settlement of all the claims alleged in the Action.  In the event the Stipulation of Settlement does not become final for any reason, Defendants reserve the right to oppose class certification in any subsequent proceedings.  Berkowitz hereby covenants and agrees that so long as the approval of the Merger Agreement is recommended by the Company’s Board of Directors, at any meeting of the shareholders of the Company, however called, including any adjournment or postponement thereof, or in connection with any shareholder written consent, he shall, in each case to the fullest extent that he is entitled to vote thereon or consent thereto: (i) appear at each such meeting or otherwise cause all of the Shares to be counted as present thereat for purposes of calculating a quorum; and (ii) vote (or cause to be voted), in person or by proxy, or deliver (or cause to be delivered) a written consent covering, all of his shares in favor of the adoption of the Merger Agreement and the approval of the Merger; and (iii) vote (or cause to be voted), in person or by proxy, or deliver (or cause to be delivered) a written consent covering, all of the shares against any alternative takeover proposal, action, agreement or transaction that is intended, or could reasonably be expected, to impede, interfere with, delay, postpone, discourage or adversely affect the Merger or the other transactions contemplated by the Merger Agreement or this MOU or the performance by the Company of its obligations under the Merger Agreement or this agreement, including: (A) any extraordinary corporate transaction, such as a merger, consolidation or other business combination involving the Company or its subsidiaries (other than the Merger); (B) a sale, lease or transfer of a material amount of assets of the Company or any of its subsidiaries or a reorganization, recapitalization or liquidation of the Company or any of its Subsidiaries; (C) an election of new members to the board of directors of the Company; (D) any material change in the present capitalization or dividend policy of the Company or any amendment or other change to the Company’s certificate of incorporation or bylaws; or (E) any other material change in the Company’s corporate structure or business.  Except as set forth herein, Berkowitz shall not be restricted from voting in favor of, against or abstaining with respect to any matter presented to the shareholders of the Company.

 

  

  

  

15.           Neither this MOU nor any of the terms of the settlement shall be deemed to constitute an admission of the validity of any claim against any or all of the Defendants, or the liability of any or all of the defendants, and they may not be used in any proceeding for any purpose (other than to enforce and effectuate the terms of the settlement).

 

16.           Each of the Defendants has denied and continues to deny that he or it has committed any act or omission giving rise to any liability and/or violation of law, rule or regulation.  Defendants are entering into this settlement to eliminate the burden and expense of further litigation.  Defendants believe they have meritorious defenses to the Action.

 

17.           Plaintiffs continue to believe that they have raised meritorious claims, but also believe that the relief resulting from the Stipulation of Settlement will benefit the Company’s shareholders and allow them to make a fully informed decision with respect to the acquisition proposal.  This MOU may be executed in counterparts, including by signature transmitted by facsimile.  Each counterpart when so executed shall be deemed to be an original, and all such counterparts together shall constitute the same instrument.

 

18.           The terms of this MOU and the settlement shall be binding upon the parties and inure to the benefit of the successors, assigns, executors, administrators, heirs and legal representatives of the parties hereto, provided, however, that no assignment by any party shall operate to relieve such party of its obligations hereunder.

 

  

  

  

 

AGREED TO ON MARCH 29, 2012

	
 

 

Brower, Piven

A Professional Corporation

 

 

 

/s/ David A.P. Brower                                                        

David A.P. Brower, Esq.

Brian C. Kerr, Esq.

488 Madison Avenue

Eighth Floor

New York, New York 10022

Attorneys for Plaintiff Kenneth Braun

 

	  	
 

 

Dechert LLP

 

 

 

 

/s/ Gary J. Mennitt                                                      

Gary J. Mennitt, Esq.

Jason O. Billy, Esq.

1095 Avenue of the. Americas

New York, New York  10036

Attorneys for Defendants

Josephine Chaus and Bernard Chaus, Inc.

 

 

	
Pryor Cashman LLP

 

 

 

/s/ Richard S. Frazer                                                             

Richard S. Frazer, Esq.

7 Times Square

New York, New York 10036

Attorneys for Defendants

Philip G. Barach and Robert Flug

 

	  	
Robinson & Cole LLP

 

 

 

/s/ Katherine Smith                                                              

Katherine Smith, Esq.

855 Third Avenue, Suite 2800

New York, New York 10022

Attorneys for Defendant

Camuto Consulting Inc.

	
 

GISKAN SOLOTAROFF ANDERSON & STEWART LLP

 

 

 

/s/ Oren S. Giskan                                                             

Oren S. Giskan, Esq.

11 Broadway, Suite 2150

New York, New York 10004

Attorneys for Dr. Barry Berkowitz

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