GROSSMAN’S BONUS TO SIGN ON AT CHAUS: $6.2 MILLION
Byline: Thomas J. Ryan
NEW YORK — Andrew Grossman snared a $6.2 million bonus for signing as chairman and chief executive officer at Bernard Chaus Inc., according to the firm’s proxy statement for its annual meeting Nov. 22.
His five-year contract also provides a $1 million base annual salary plus a bonus of 5 percent of net earnings. In addition, he received stock options for 1.5 million shares.
The options are exercisable at $2.25 a share, vesting at a rate of 20 percent a year over the next five years. Shares of Chaus, which have jumped ahead since word of Grossman’s arrival, are now trading at 5 1/4 each.
If he signs on for another five years, he will receive options for another 1.5 million shares exercisable at the closing price on date of the grant.
Portions of Grossman’s sign-on bonus must be paid back to the company if he is fired for cause or leaves for other than good reasons.
Grossman, formerly president at Jones Apparel Group, joined Chaus on Sept. 28. At Jones Apparel, Grossman earned a base salary of $750,000 plus a bonus of $150,000 for his services in 1993. He also left at Jones Apparel stock options valued at $14.1 million, as of Dec. 31, 1993, according to the firm’s latest proxy, which also showed that in 1993 he realized $2.4 million from exercising options.
Grossman’s bonus money came from Josephine Chaus, who, as reported, pledged $7.2 million of her own money in late September for costs and associated expenses related to the signing of Grossman. Chaus, who owns a 63 percent stake in the firm, shares the position and office of the chairman with Grossman.
Industry consultants were stunned by the size of the bonus.
“It’s absolutely a wild number in terms of a company that has lost so much money and in terms of a company that needs to reassess its market. But clearly they believe Andrew is the man that can turn that around,” said Andrew Jassin, president and partner of Marketing Management Group.
“I’ve never heard of anybody getting a signing bonus for a company that was underwater like that before,” he added.
“I would say that’s extremely generous,” concurred Barry Lyons, chairman at Executive Search Consultants International. Besides the risks involved in turning around the sportswear maker, Lyons said it “says a lot too about how Chaus feels about him and his ability to move the company forward.”
In all, Josephine Chaus pledged $14.4 million of her own money in the fourth quarter.
After the Grossman payment, the remainder was used to support Chaus’s credit facility with BNY Financial Corp. As a result, BNY has agreed to provide at least an additional $12.2 million under the company’s credit borrowing formula.
Josephine Chaus plans to convert the $14.4 million investment into Chaus stock and warrants, subject to a vote at Chaus’s upcoming annual meeting. If the plan is approved at the meeting, Josephine’s stake in Chaus would climb to 68.4 percent, or 14.7 million shares, from 63 percent, or 11.6 million shares.
Josephine Chaus earned $392,000 last year, the proxy statement shows, the same salary as in 1993. In its year ended June 30, as reported, Chaus’s loss widened to $46.8 million from $11 million. The latest year’s loss included a $5.3 million restructuring charge taken in June, with $2.1 million slated for store closings, $2.5 million for consolidation of office space in New York and New Jersey and the closing of its Philippines office, and $700,000 for employee severance.
The company plans to eliminate one lease at its technical production support facilities located at 520 Eighth Ave. here, to reduce its square feet in the building to 19,000 from 34,000.
Sales last year slid 12.5 percent to $206.3 million. According the Chaus’s 10-K, career casual sportswear sales declined 14.6 percent to $88.7 million, weekend casual sportswear sales fell 11 percent to $59.8 million, dresses were off 5 percent to $24.8 million, blouses tumbled 58.3 percent to $5.4 million, and its Canadian operations were off 13.9 percent to $3.7 million. Sales at its outlet stores rose 12.6 percent to $24 million, reflecting three store openings as same-store sales dipped 3.5 percent.
— Fairchild News Service