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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998
COMMISSION FILE NUMBER 1-8509
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NANTUCKET INDUSTRIES, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 58-0962699
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
510 Broadhollow Road Melville, New York 11747
(Address of principal executive offices) (Zip Code)
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(516) 293-3172
(Registrant's telephone number)
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Common Stock, $.10 par value NASD Supplemental Market
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(Securities registered pursuant to (Name of each exchange on which registered)
Section 12(g) of the Act)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The aggregate market value of the outstanding Common Stock of the Registrant
held by non-affiliates of the registrant as of May 29, 1998, based on the
average bid and asked price of the Common Stock on the NASD Supplemental Market
on said date was $ 865,000.
AS OF MAY 22, 1998, THE REGISTRANT HAD OUTSTANDING 3,238,796 SHARES OF COMMON
STOCK NOT INCLUDING 3,052 SHARES CLASSIFIED AS TREASURY STOCK.
ITEMS OMITTED
THE FOLLOWING ITEMS HAVE BEEN OMITTED FROM THIS REPORT (SEE NOTIFICATION OF LATE
FILING ON FORM 12B-25 FILED CONCURRENTLY HEREWITH):
PART II - ITEMS 6, 7, 8, AND 9; FINANCIAL STATEMENTS AND RELATED FINANCIAL
SCHEDULES
ITEMS INCORPORATED BY REFERENCE.
THE FOLLOWING ITEMS ARE INCORPORATED BY REFERENCE FROM THE PROXY STATEMENT FOR
THE FISCAL YEAR ENDED FEBRUARY 28, 1998:
PART III - ITEMS 10, 11, 12, 13
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<PAGE>
PART I
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ITEM 1. BUSINESS
GENERAL
Nantucket Industries, Inc. (the "Company") produces and distributes
popular priced branded men's fashion undergarments for sale, throughout the
United States, to mass merchandisers and national chains. Until March 31, 1998,
Nantucket also produced, under the GUESS? label, women's innerwear for sale to
department and specialty stores. Packaging and distribution of the Company's
product lines is based in its leased facility in Cartersville, Georgia. From
November, 1992 to July 1, 1994, the Company had a manufacturing facility in Rio
Grande, Puerto Rico, and until September 1997 had a manufacturing facility in
Cartersville, Georgia. Currently, all of the Company's products are manufactured
by offshore production contractors located in Mexico, the Far East and the
Caribbean Basin.
Due to the lack of capital resources needed to properly develop and
support the GUESS? product line, the Company has initiated a strategy to
discontinue its GUESS? division to focus its resources on its core mens fashion
underwear business.
RESTRUCTURING STRATEGY
As more fully described in Note 12, Levi Strauss & Co., the parent
company of Brittania Sportswear Ltd.. a licensor which accounted for 49% of the
Company's fiscal 1997 sales, announced their intention to sell Brittania. In
light of the actions announced by Levi's, K-Mart, the largest retailer of the
Brittania brand and the Company's largest customer, accounting for approximately
$11 million of the Company's fiscal 1997 sales of Brittania product, advised the
Company that it would no longer continue its on-going commitment to the
Brittania trademark. In response, the Company has filed a multi-million lawsuit
against Levi Strauss & Co in March 1997.
The Company has experienced significant losses in recent years which
have generally resulted in severe cash flow problems that have negatively
impacted the ability of the Company to conduct its business as presently
structured. The Company has defaulted on interest payments to its subordinated
debt holder, and has no long term credit facility in place. As a result of the
Brittania matter, the continuing losses, the interest payment default, and the
lack of a long term credit facility, there can be no assurance that the Company
can continue as a going concern, or that the ultimate impact or resolution of
these matters will not have a materially adverse effect on the Company or on its
financial condition.
At the end of fiscal 1994, the Company began the implementation of a
restructuring strategy to improve operating results and enhance its financial
resources. Specific steps taken included:
The shutdown of the Puerto Rico facility
Improving the product mix by eliminating unprofitable lines (women's
products other than those sold under the GUESS? license and socks) and
terminating business with Avon Products, the principal customer of the
Puerto Rico facility
Terminating the employment contracts of its former chairman and vice
chairman.
Increasing equity through (a) the sale of $1 million of non-voting
convertible preferred stock to management in fiscal 1995; (b) the $ 2.9
million sale of treasury stock to GUESS? in fiscal 1995 and (c) the
completion, in August, 1996, of a private placement with net proceeds
comprised of 250,000 shares of common stock ($740,000) and 12-1/2%
convertible subordinated debentures ($2,351,000 net of expenses).
Obtaining additional working capital financing through the
restructuring of credit facilities.
<PAGE>
The Company has also taken additional steps to reduce operating costs
intended to provide the Company with the ability to continue in existence. These
steps, which management believes will result in a $3.5 million savings in
overhead costs, include:
The phase out of the GUESS? division, with a target completion date of
the first quarter of fiscal year 1999 (reduction of $2.0 million).
The sale of the Company's Cartersville, GA location, and the relocation
to more appropriate space for its packaging and distribution
facilities. (see Note 6)
The transfer of all domestic manufacturing requirements to foreign
manufacturing contracting facilities (reduction of $1.0 million).
Staff reductions associated with the transfer of manufacturing to
offshore contractors; closing the GUESS? Division, efficiencies and
reduced volume (reduction of $500,000).
The relocation of executive offices and showrooms to more appropriate,
lower cost facilities.
In connection with the implementation of these actions, the Company has
reflected, in its financial statements for the fiscal years ended February 26,
1994 through March 2, 1996, unusual charges aggregating $6.4 million. These
combined charges include approximately $760,000 of expenses incurred in closing
the Puerto Rico facility, write-downs and reserves of asset values and other
non-cash items ($1.5 million write-off of goodwill, $2.1 million writedowns of
inventory, $530,000 writedowns of fixed assets), the accrual for the severance
payments to the former Chairman and Vice Chairman of the Board ($1,765,000) and
, in fiscal 1996, an unusual credit, as described below, of $300,000 related to
the elimination of a subordinated note payable associated with the purchase of
the Puerto Rico facility since the likelihood of payment on such note was
considered remote. In the current fiscal year, the financial statements, through
operating results, reflects $1.8 million in charges including $1.2 million
associated with the phase out of the GUESS? division ($660,000 inventory
write-offs, $540,000 in deferred costs and other charges), with the balance
associated with write-downs, and reserves of asset values, and other non cash
items.
The Company has not yet realized the benefits of this restructuring
strategy and has incurred losses of $4,490,000, $2,747,000, and $239,000 for the
fiscal years ended February 28, 1998, March 1, 1997 and March 2, 1996,
respectively.
RECENT DEVELOPMENTS
The Company has experienced significant losses in recent years which
have generally resulted in severe cash flow problems that have negatively
impacted the ability of the Company to conduct its business as presently
structured. Due to the lack of capital resources necessary to develop and
support the GUESS? product line, the Company with the support of GUESS? Inc. has
initiated a strategy to discontinue its GUESS? Division by the first quarter of
fiscal year 1999, and to refocus its resources on its core men's fashion
underwear business.
On October 1, 1997 the Company sold its 152,000 sq. ft. manufacturing
and distribution facility in Cartersville GA to Mimms Enterprises, a Real Estate
Investment General Partnership, for cash aggregating $2,850,000. The Company
reflected a gain of $793,000, and used the proceeds to repay financing secured
by the property, and to reduce long term debt. (see note 6)
Since September, 1988, the Company has been a licensee of Brittania
Sportswear, Ltd., a wholly-owned subsidiary of Levi Strauss & Co. to manufacture
and market men's underwear and other products under the trademarks "Brittania"
and "Brittania from Levi Straus & Co.". Sales under this license aggregated $4.5
<PAGE>
million in fiscal 1998, $14.9 million in fiscal 1997 and $14.6 million in fiscal
1996. As of January 1, 1997, the license was renewed for a 5 year term,
including automatic renewals of 2 years if certain minimum sales levels were
achieved. On January 22, 1997, Levi's announced that it was seeking purchasers
of its Brittania subsidiary. Nantucket's largest customer and the largest
retailer of the Brittania brand, K-Mart, has advised the Company that, in light
of the actions announced by Levi's, it would no longer continue its on-going
commitment to the Brittania trademark.
The Company has filed a multimillion lawsuit against Levi Strauss & Co.
and Brittania Sportswear, Ltd. alleging that the licensor breached various
obligations under the licensing agreement, including without limitation, its
covenant of good faith and fair dealing. The litigation is scheduled for trial
during the summer of 1998. There can be no assurance that the ultimate
resolution of these matters will not have a materially adverse impact of the
Company or on its financial condition.
PHOENIX ASSOCIATES, INC.-THE PUERTO RICO FACILITY
As of November, 1992, the Company acquired all of the stock of Phoenix
Associates, Inc. ("Phoenix") located in Puerto Rico. Phoenix manufactured men's
and ladies' undergarments and ladies' apparel as an exclusive contractor of the
Company. The purchase price was $1,500,000 plus contingent payments based on
sales and margins of products sold to Avon Products, Inc., a major customer of
Phoenix. In April, 1993, in connection with the annual audit of the Company's
fiscal 1993 financial statements, the Company discovered an inventory variance
of $1,700,000 at the Phoenix facility. The Company determined that this was
principally attributable to previously unrecorded manufacturing and material
cost variances at the Phoenix facility. The ongoing manufacturing inefficiencies
and cost variances continued and in July, 1994, this facility was closed. A
final assessment associated with this closing required write-offs, reflected as
an unusual charge, of $1,252,400 in fiscal 1995. Fiscal 1994 charges aggregated
$3.3 million.
In 1993, the Company, and its wholly-owned subsidiary, Nantucket Mills,
Inc. initiated an action against the former owners of the Puerto Rico facility.
During the first quarter of fiscal year 1999 this action was settled, and in
connection with such settlement the Company received $675,000.
FINANCING ARRANGEMENTS
REVOLVING CREDIT
The Company has a $15 million revolving credit facility with Congress
Financial Corp. which expired in March, 1998, and has been extended to
August, 1998. The revolving credit agreement provides for loans based
upon eligible accounts receivable and inventory, a $3,000,000 letter of
credit facility and purchase money term loans of up to 75% of the
orderly liquidation value of newly acquired and eligible equipment.
Borrowings bear interest at 2-3/4% above prime. The agreement requires,
among other provisions, the maintenance of minimum working capital and
net worth levels and also contains restrictions regarding payment of
dividends. Borrowings under the agreement are collateralized by
substantially all of the assets of the Company. The Company is not in
compliance with the terms of the revolving credit facility; its ability
to borrow thereunder is accordingly limited.
REAL ESTATE FINANCING
On June 8, 1994 the Company borrowed $1,500,000 under a separate
10-1/2% five year term loan with Congress Financial Corp. and repaid a
$1,700,000 Industrial Revenue Bond financing. This loan was secured by
the Company's facility in Cartersville, Georgia and was satisfied fully
upon sale of the property in October, 1997.
CAPITAL INVESTMENT AND CHANGE OF MANAGEMENT
In September, 1997 the Company entered into an agreement with NAN
Investors LP, the holder of two Convertible Subordinated Debentures in the
aggregate principal amount of $2,760,000, to release a security interest in the
property sold at 200 Cook St., Cartersville, Georgia, and to extend the cure
period with respect to an $172,500 interest payment default on the debentures.
Nantucket agreed to pay a portion of the net proceeds from the sale of the
property to retire an amount of the subordinated debt ($707,000), a prepayment
premium of $176,000, and to place a person, satisfactory to NAN, as a senior
operations/financial manager with the company. The forbearance agreement
<PAGE>
has been renewed on a monthly basis since November 1997. In May 1998, the
Company entered into an agreement with NAN to extend the cure period with
respect to $322,551 in prior interest payment defaults and for interest payments
due in August 1998, until December 1998. In return the Company agreed to secure
the Debentures by a first lien on all the assets of the Company to the extent
not otherwise prohibited under the Congress Facility, to issue to NAN five year
warrants to purchase 16,500,000 shares of Nantucket Industries, Inc. stock at a
price of $.10 per share, and to cause certain members of the Board of Directors
to be retained, reelected, or removed. There can be no assurances that given the
Company's financial condition, that the forbearance will continue to be extended
after December 1998, nor that the Company could continue as presently structured
if the agreement was terminated.
Simultaneously with the financing transactions with Congress Financial,
on March 22, 1994 the Samberg Group, L.L.C. (the "Group"), a limited liability
company organized under the laws of Delaware with certain senior managers of the
Company as members (the "Group Members") purchased 5,000 shares of the Company's
Non-Voting Convertible Preferred Stock ("Preferred Stock") for $1,000,000. The
Preferred Stock acquired by the Group was convertible into shares of Common
Stock, $.10 par value per share, of the Company ("Common Stock") at the rate of
$5.00 per share, and was redeemable by the Company at anytime after March 1999.
In May 1988 this conversion right was waived by the Samberg Group and the
Company conditionally agreed to redeem the Preferred Stock.
Also, on March 22, 1994, Stephen Samberg, who was then the President of
the Company, was elected Chairman of the Board, Chief Executive Officer and
Treasurer of the Company by the board of directors of the Company (the "Board").
Concurrently, George J. Gold resigned as Chairman of the Board and Treasurer of
the Company and Donald D. Gold resigned as Vice Chairman of the Board and
Secretary of the Company. (George J. Gold and Donald D. Gold are referred to
herein collectively as the "Gold's".)
The Gold's existing employment contracts (the terms of which were
scheduled to expire on February 28, 1999) have been canceled and replaced by a
Termination and Severance Agreement pursuant to which the Gold's are scheduled
to receive aggregate payments for severance of approximately $400,000 per year
and other benefits for five years. In fiscal 1994, $1.8 million, representing
the present value of this amount was accrued.
Finally, all of the Gold's, The Group, the Group Members and the
Company have entered into a voting trust agreement (the "Voting Trust
Agreement") for a term of five years, providing for the Voting Trustee
thereunder to vote shares owned by such parties as follows:
(i) in all elections for director through the 1996 election, in favor
of the two Golds, the Group Non-Employee Director (as defined in the
Voting Trust Agreement generally to mean a nominee of the Group who is
not an employee of the Company), Samberg, Wathen (or replacements
therefor designated by the Group), and Robert M. Rosen and/or one or
more other directors who are neither employees of the Company nor
affiliates or close associates of a competitor or licensor of the
Company ("Non-Employee Directors") nominated in accordance with the
Voting Trust Agreement (if any directors so elected fail to finish
their respective three-year terms, the election of their successor
would be subject to the same requirements);
(ii) in all elections for director through the remaining term of the
Voting Trust Agreement, in favor of the two Gold's, Samberg and one
other nominee designated by the Group, and with respect to other
nominees in accordance with the direction of the beneficial owners of
the shares in the voting trust with respect to their respective shares,
provided that any such owner wishing to vote against any nominee must
give notice thereof at least 15 days prior to the vote;
(iii) with respect to any merger, sale of assets, share issuance
requiring shareholder approval or similar transaction outside of the
ordinary course of business, as directed by the beneficial holders of
the shares held in the voting trust with respect to their respective
shares; and
(iv) with respect to any other matter in accordance with the vote of a
plurality of the holders of Common Stock other than the shares held in
the voting trust, provided that if fewer than 50% of such shares in the
aggregate are voted (either for or against) with respect to such
matter, the Trustee shall abstain from voting with respect to such
matter.
<PAGE>
The total number of shares of Common Stock subject to the Voting Trust
Agreement as of the date hereof is 708,923 which represents approximately 22% of
the outstanding Common Stock and which does not include shares of non-voting
Preferred Stock owned by the Group and convertible to Common Stock.
PRODUCTS AND SALES
The Company manufactures and sells men's fashion underwear to mass
merchandisers and, in the case of the GUESS? division, ladies' undergarments to
better department and specialty stores, primarily through direct contact by
salaried and commissioned Company sales personnel. All sales are made to
customers generally not affiliated with the Company. These goods are sold under
various licensed trademarks as well as under the private label of the customer.
The Company promotes its brand name undergarments with seasonal marketing
programs and sales events.
The Company operates as a single business segment. Net sales and
operating profits or losses for each of fiscal years ending February, 1998,
March, 1997 and March, 1996 are presented in the accompanying financial
statement captioned "Consolidated Statements of Operations".
MEN'S UNDERGARMENTS
The Company's men's fashion briefs are sold primarily under private
label, and the licensed trademarks "BRITTANIA", and "ARROW". Sales under the
Brittania brand were $4.6 million in fiscal year 1998, and are not expected to
be material for fiscal year 1999 (see Note 12). The Company targets
undergarments marketed under each of these trademarks to different segments of
the market.
GUESS? DIVISION
The Company sells ladies' innerwear under the licensed trademark
"GUESS?". These products are distributed through better department and specialty
stores. Sales of GUESS? products commenced at the end of the third fiscal
quarter of fiscal 1994. Sales in fiscal 1998, 1997 and 1996 of GUESS? products
aggregated $7.0, $ 4.7 million and $4.9 million, with gross margins of 6.4%,
13.2% and 23.8% respectively. The Company does not have the resources to
continue to support and develop the GUESS? product line into the levels required
in the licensing agreement. The Company, with the support of GUESS? Inc., has
initiated plans to terminate its licensing agreement, and to phase out this line
of business in the first quarter of fiscal year 1999.
SOURCES OF MATERIALS
The Company, as of February 28, 1998, purchases 100% of its production
requirements as complete garments from certain of many available foreign
manufacturers located in Mexico, the Far East and the Caribbean Basin.
The Company does not have any long term contracts with any of its
foreign manufacturers.
LICENSES AND TRADEMARKS
On December 7, 1992, the Company signed an agreement with GUESS?, Inc.
for the exclusive United States rights to produce and sell undergarments bearing
the "GUESS?" trademark and variations thereof. The Company began shipping
product under this trademark during the third quarter of fiscal 1994. Effective
May 31, 1996, the license was extended through the period ended May 31, 1999.
The license is subject to termination prior to its expiration if certain minimum
sales goals are not met. For the contract year ending May 31, 1997, required
minimum sales goals were not achieved, however, GUESS? has agreed not to
terminate the license agreement as of that date. For each contract year ending
after May, 1997, the minimum sales goal increases by $2,000,000. Minimum
royalties are $560,000, $700,000 and $840,000 for the contract years ended May
31, 1997, 1998 and 1999 respectively. Due to the lack of capital resources
necessary to develop and support the GUESS? product line, the Company with the
support of the licensor, GUESS? Inc., has initiated a strategy to terminate the
GUESS? license, and discontinue its GUESS? Division by the first quarter of
fiscal year 1999, with an anticipated net savings to the Company of $2.0 million
dollars in fiscal year 1999.
<PAGE>
Since September, 1988, the Company has been a licensee of Brittania
Sportswear, Ltd., a wholly-owned subsidiary of Levi Strauss & Co. to manufacture
and market men's underwear and other products under the trademarks "Brittania"
and "Brittania from Levi Strauss & Co.". Sales under this license aggregated
$4.5 million in fiscal 1998, $14.9 million in fiscal 1997 and $14.6 million in
fiscal 1996. As of January 1, 1997, the license was renewed for a 5 year term,
including automatic renewals of 2 years if certain minimum sales levels are
achieved. On January 22, 1997, Levi's announced that it was seeking purchasers
of its Brittania subsidiary. Nantucket's largest customer and the largest
retailer of the Brittania brand, K-Mart, has advised the Company that, in light
of the actions announced by Levi's, it would no longer continue its on-going
commitment to the Brittania trademark.
The Company has filed a multimillion dollar lawsuit against Levi
Strauss & Co. and Brittania Sportswear, Ltd. alleging that the licensor breached
various obligations under the license agreement, including without limitation
its covenant of good faith and fair dealing. There can be no assurance that the
ultimate resolution of these matters will not have a materially adverse impact
on the Company or on its financial condition.
On October 5, 1992, the Company signed an agreement with Cluett,
Peabody & Co., Inc. for the exclusive United States rights to produce and sell
men's and boys' fashion underwear, T-shirts, V-neck shirts, tank tops, briefs
and boxer shorts bearing the "ARROW" trademark during the period commencing
January 1, 1993 and expiring, as extended, December 31, 1999. A minimum royalty
of $162,500 is guaranteed under the license for each annual period
through December 31, 1996; increasing to $250,000 for each annual period from
January 1, 1997 through December 31, 1999. The Company began shipping product
under this trademark during the first quarter of fiscal 1994. Net sales under
this license were $4.8 million in fiscal 1998, $5.7 million in fiscal 1997 and
$4.8 million in fiscal 1996.
On December 21, 1992, the Company signed an agreement with McGregor
Corporation for the exclusive United States rights to produce and sell men's and
boys' fashion knit underwear briefs bearing the "BOTANY 500" trademark during
the period commencing on January 1, 1993 and expiring, pursuant to an extension,
December 31, 2001. McGregor Corporation may, at its option, terminate the
license prior to its expiration if certain minimum sales goals are not met.
Minimum sales levels for calendar 1996 are $750,000 and $1 million for each
calendar year thereafter through December 31, 1998. Net sales under this license
were $225,000 in fiscal 1998, $652,000 in fiscal 1997 and $1.1 million in fiscal
1996. McGregor Corporation has not terminated this license in view of the fiscal
1998 sales levels. The Company is not currently producing, nor is it projecting
sales under this license.
The loss of the right to sell products under the continuing labels
would have a material adverse effect on the Company.
SEASONALITY
Sales of the Company's products are traditionally highest in the third
fiscal quarter, which extends through autumn, when many of the pre-Christmas
sales are made, and are typically lowest in the fourth fiscal quarter.
CUSTOMERS
Three of the Company's customers each accounted for more than 10% of
the Company's consolidated net sales during fiscal 1998, 1997 and 1996.
For the fiscal year ended February 28, 1998, net sales to K-Mart
represented 16% of total net sales for the Company, as compared to approximately
40% for fiscal years 1997 and 1996. As previously described , K-Mart, the
largest retailer of the Brittania brand, has advised the Company that in light
of Levi's announced decision to sell the Brittania brand, K-Mart would no longer
continue its on-going commitment to the Brittania trademark While the pending
lawsuit against Levi's may ultimately mitigate the effect of K-Mart's decision
on the Company, there can be no assurance that the ultimate resolution of this
matter will not have a materially adverse impact on the Company or its financial
condition.
For the fiscal year ended February 28, 1998, approximately 22% of the
Company's consolidated net sales were made to Target Stores, as compared to 19%
for fiscal 1997 and 21% for fiscal 1996.
<PAGE>
For the fiscal year ended February 28, 1998, approximately 23% of the
Company's consolidated net sales were made to Sears, as compared to sales in the
prior fiscal year of 18%. Sales in fiscal 1996 were 13% of consolidated sales.
The Company had long standing relationships with these customers and
believes that, with the exception of K-Mart, such relationships will continue.
However, the loss of any of the other customers could have a material adverse
effect on the Company.
No other customer accounted for more than 10% of the Company's
consolidated net sales for fiscal 1998, 1997 or 1996.
DELIVERY REQUIREMENTS
All purchase orders are taken for current delivery and the Company has
no long-term sales contracts with any customer, or any contract entitling the
Company to be the exclusive supplier of merchandise to a retailer or
distributor.
BACKLOG
The backlog of orders for the Company's products at the end of
February, 1998 was approximately $1 million, as compared to in excess of $2
million at the end of February, 1997 and 1996. The backlog at the beginning of
each fiscal year is traditionally lower than at other times during the year, and
is not necessarily indicative of sales prospects for an entire year. Although
substantially all of such orders are subject to cancellation, the Company
expects them to be filled within the current fiscal year.
Backlog levels have decreased primarily due to the reduction in sales
volume. The reduction in sales volumes is directly due to the wrongful actions
of Levi's in exiting the "BRITTANIA from Levi Strauss & Co", and the BRITTANIA
business. In addition, the backlog does not include orders for GUESS? Products
with fill dates beyond March 31, 1998.
COMPETITION
All of the Company's markets are highly competitive.
During the past several years there has occurred a reduction in the
number of retailers available to purchase the Company's products. The remaining
retailers are relatively larger and possess strengthened negotiating positions.
It has become increasingly important that the Company cooperate closely with its
customers, who are among the largest retailers in the United States, in the
development of products, programs and packaging and that it be able to quickly
and completely ship orders which it receives through EDI. In prior years the
Company experienced difficulty in filling all of its orders, caused in large
part by the cash shortage resulting from losses at its Puerto Rico facility, the
expiration of its financing arrangement with Chemical Bank, and the investment
necessary to support and develop the GUESS? product line. The Company has
addressed its liquidity issues by the refinancing in March 1994; the additional
equity of $3.9 million raised in fiscal 1995; the $3.5 million private placement
completed in August, 1996; the reduction in costs associated with the
consolidation and restructuring of the operations in fiscal 1998, and the more
effective management of working capital.
The Company competes in the manufacture of its products with numerous
other companies, many of which have substantially greater financial resources
than the Company. The Company's competitors include manufacturers of retailers'
private label, designer label and unbranded merchandise, as well as
manufacturers which produce goods for sale under their own recognized name
brands, including Fruit of the Loom, Inc. and Hanes.
<PAGE>
The Company's largest competition in the GUESS? Division's business
are Calvin Klein and Jockey.
The Company has succeeded in licensing significant brand names,
primarily as a result of its past successes in extending brand names to its
products. The successful implementation of a typical brand name program requires
close coordination between the licensor of the trademark (who is concerned about
the design and quality of product to be sold under its mark as well as the type
of retail outlet in which the products will be sold), the manufacturer and the
retailer. The Company considers that it has particular expertise in developing
such programs. Other competitive considerations include product design
expertise, packaging and shipping reliability, all of which are strong areas for
the Company. As recent events indicate, the acquisition and retention of
licenses to use desirable brand names is subject to legal risks as well as
business considerations.
The Company has developed and patented packaging which it believes
makes its products more attractive to the consumer and more theft and damage
resistant than its competitors' packaging. It involves a transparent plastic
blister pack which allows single or multiple garments to be visible in a package
which is heat sealed. Unlike the typical cardboard box with only a small
transparent window, all garments are visible without the need to open the
package and, in fact, the package cannot be opened without a cutting implement.
As a result, the Company has received fewer returns of damaged merchandise. This
packaging continues to receive strong acceptance, and over the years has been
imitated by several of the Company's competitors.
IMPORTS
Effective June, 1997 the Company achieved 100% sourcing of its
production requirements through imported merchandise produced in factories in
Mexico, the Caribbean Basin and the Far East. The Company has determined that,
as a result of the high labor content of its products and the reduced delivery
times due to the proximity of Mexico and the Caribbean Basin, the importing of
all the Company's production requirements is advantageous.
ENVIRONMENTAL MATTERS
The Company believes that its Cartersville, Ga. packaging and
distribution facility materially conforms to all governmental regulations
pertaining to environmental quality as presently promulgated.
EMPLOYEES
On February 28, 1998, the Company had 88 employees, of which 75 were
located in Cartersville, Georgia. This represents a 59% reduction from the prior
year's level of 214 employees and an overall 75% reduction in staffing since
fiscal year ending 1996. This reflects the Company's decision to transfer
domestic production to offshore contracting , reduction in sales volume as a
result of Levi's decision to exit the Brittania business and the restructuring
of the Company's operations.
None of the Company's employees is covered by a collective bargaining
agreement. The Company has never experienced a work stoppage due to labor
difficulties and believes that its relations with its employees are
satisfactory.
ITEM 2. PROPERTIES
The Company's executive offices and showrooms, containing an aggregate
of 10,000 square feet of floor area, were located at 105 Madison Avenue, New
York, New York. The Company occupied these premises under a lease which expired
in May, 1997 and provided for aggregate annual rentals of approximately
$242,000, plus increases for certain taxes, energy costs, and any legally
required safety improvements.
Effective June 1, 1997 the Company moved its executive offices to 510
Broadhollow Road, Melville, New York. The Company occupies 2,000 square feet
under a lease which will expire July 31, 2002. This lease provides for aggregate
rentals which increase 4% annually from $46,000 to $52,000 plus increases for
certain taxes and energy costs. The Company also moved its showroom and design
facility to a 2,300 square foot location at 180 Madison Avenue, New York, New
York effective June 1, 1997. The lease for these premises will expire May 31,
2002, with an option (that has
<PAGE>
subsequently been exercised) to terminate the lease May 31, 1998, for a nominal
fee ($8770), and provides for annual rentals of $52,000.
The Company on October 1, 1997 completed the sale of its manufacturing
and distribution facility in Cartersville, Georgia. and entered into a five year
lease for approximately 71,000 square feet of space at 435 Industrial Park Road,
Cartersville, Georgia, commencing on January 1, 1998. The annual rental is
$188,148 increasing based on an established formula over the five year lease
term. The leased Cartersville facility is used for the packaging and
distribution of the Company's products.
ITEM 3. LEGAL PROCEEDINGS
On September 27, 1993, a civil action (case No. 93-6766) was instituted
by the Company and its wholly-owned subsidiary, Nantucket Mills, Inc. ("Mills")
in the United States District Court, Southern District of New York, against
Stanley R. Varon and others, seeking compensatory damages of approximately
$4,000,000 plus declaratory and injunctive relief for acts of alleged securities
fraud, fraudulent conveyance, breach of fiduciary trust and unfair competition.
The action arises out of the acquisition by Mills of all of the common stock of
Phoenix Associates, Inc. ("Phoenix") from Mr. Varon and Armando Lugo on February
22, 1993. Certain claims against Mr. Varon arise from facts which predate the
acquisition of Phoenix as well as from his former positions as a director,
officer and employee of Nantucket. On November 16, 1993 in connection with such
civil action and arbitration proceeding, Mr. Varon filed certain counterclaims
against the Company and Mills alleging improper termination and breach of his
Employment Agreement with the Company and breach by the Company and Mills of the
Stock Purchase Agreement pursuant to which all of the stock of Phoenix was
acquired from Messrs. Varon and Lugo. In his counterclaims Mr. Varon is also
seeking indemnification and contribution from the Company, Mills and their
respective principal officers, directors and employees. On March 29, 1996, the
Company and Mills filed an amended Complaint and Demand for Jury Trial which
added certain parties as defendants and alleges certain fraudulent activities
which constitute a pattern of racketeering activity under the Racketeering
Influenced Corrupt Organization Act. The Company has settled this litigation and
will realize $675,000 from this matter in the first quarter of its fiscal year
1999.
Levi Strauss & Co., the parent company of Brittania Sportswear Ltd.. a
licensor which accounted for 49% of the Company's fiscal 1997 sales, announced,
in January, 1997, their intention to sell Brittania. In light of the actions
announced by Levi's, a customer accounting for approximately $11 million of the
Company's sales of Brittania product has advised the Company that it would no
longer continue its on-going commitment to the Brittania trademark. In response,
the Company has filed a multimillion dollar lawsuit against Levi Strauss & Co.
and Brittania Sportswear Ltd. alleging that the licensor breached its
obligations under the licensing agreement, including without limitations its
covenant of good faith and fair dealings. This lawsuit is scheduled for trial in
the summer of 1998.
On December 9, 1997, Donald Gold, a Director of the Company
(subsequently resigned), filed a Complaint against the Company in the State
Court of Fulton County, State of Georgia relating to payments allegedly due him
under the March 18, 1994 Severance Agreement, and is seeking damages in the
amount of $219,471.76.
On January 15, 1998 in the Supreme Court of the State of New York,
Weschester County, George Gold, a Director of the Company, filed a Complaint
against the Company for breach of the March 18, 1994 Severance Agreement. He is
seeking damages in the amount of $559,456 plus applicable interest and legal
fees, to which, on March 9, 1998, the Company filed counterclaims in a
significantly larger amount.
On February 17, 1998, Theresa M. Bohenberger, a former Vice President
and Director of the Company, filed a complaint against the Company in the United
States District Court for the Southern District of New York, relating to
payments due her under the May 2, 1992 Severance Agreement. The Company has been
in discussion with Ms. Bohenberger's counsel concerning settlement of the
issues.
Nantucket Industries, Inc. is subject to other legal proceedings and
claims which are in the ordinary course of its business. In the Company's
opinion, the Donald and George Gold, Theresa Bohenberger and other legal
proceedings in which the Company is defendant will be successfully defended or
resolved without a material adverse effect on the financial position of the
Company.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
<PAGE>
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The Company's Common Stock, $.10 par value, was traded on the American
Stock Exchange under the symbol "NAN" until April 17, 1998. Because the Company
had fallen below American Stock Exchange guidelines for continued listing,
effective April 17, 1998 the Company's Stock was delisted. It is currently
traded on the NASD Supplemental Market under the symbol "NANK".
Set forth below are the reported high and low prices of the Common
Stock for each quarterly period during the past two years, as reported by the
American Stock Exchange:
<TABLE>
<CAPTION>
HIGH LOW
FISCAL 1998
<S> <C> <C>
First Quarter $2-5/8 $1-1/16
Second Quarter 1-9/16 1
Third Quarter 1-3/16 1/4
Fourth Quarter 1-3/8 1/4
FISCAL 1997
First Quarter $7 $2-3/4
Second Quarter 7-1/4 4
Third Quarter 5 3-3/8
Fourth Quarter 2-11/16 2
</TABLE>
As of May 18, 1998, the Company's Common Stock was held by
approximately 272 holders of record.
The Company has never paid any cash dividends on its Common Stock, and
has no present intention of so doing in the foreseeable future. The Company is
prohibited from declaring and paying cash dividends on its Common Stock by the
terms of its credit agreements with Congress Financial Corporation dated March
22, 1994.
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to Directors and Executive Officers is set forth
on the Proxy Statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended,
and is hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is set forth in the
Proxy Statement to be filed with the Securities and Exchange Commission pursuant
to Regulation 14A of the Securities Exchange Act of 1934, as amended, and is
hereby incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial owners
and Management is set forth in the Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A of the Securities
Exchange Act of 1934, as amended, and is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related transactions
is set forth in the Proxy Statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934, as
amended, and is hereby incorporated by reference.
<PAGE>
PART IV
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ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K
The following is a list of all exhibits and financial statement
schedules filed as part of this report, certain of which documents have been
incorporated by reference to documents previously filed on behalf of the
Registrant.
(a)(1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF NANTUCKET INDUSTRIES, INC.
------------------------------------------------------------------------
<TABLE>
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Page
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Report of Independent Certified Public Accounts - Grant Thornton LLP F-1
Consolidated Balance Sheets-
February 28, 1998 and March 1, 1997 F-2
Consolidated Statements of Operations - Years Ended
February 28, 1998, March 1, 1997, and March 2, 1996 F-3
Consolidated Statements of Stockholders' Equity -Years Ended
February 28, 1998, March 1, 1997 and March 2, 1996 F-4
Consolidated Statements of Cash Flows - Years Ended
February 28, 1998, March 1, 1997 and March 2, 1996 F-5
Notes to Consolidated Financial Statements F-6
(a)(2) FINANCIAL STATEMENT SCHEDULE
----------------------------
Schedule II - Consolidated valuation and qualifying accounts F-20
</TABLE>
(a) (3) EXHIBITS
--------
Exhibits which, in their entirety, are incorporated by reference to any
report, exhibit or other filing previously made with the Securities and Exchange
Commission are designated by an asterisk () and the location of such material is
included in its description.
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- - ------- ----------- ------
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(3)(a) Certificate of Incorporation as currently in effect (filed as Exhibit 3(a) to *
Form 10-K Report for the fiscal year ended February 27, 1988 (the "1988
10-K").
(3)(b) By-Laws as currently in effect (filed as Exhibit 3(b) to the Form *
8-K dated August 15, 1996).
(4)(a) Specimen Stock Certificate (filed as Exhibit 4(b) to Registration *
Statement on Form S-1, No. 2-87229 filed October 17, 1983 (the
"1983 Form S-1").
<PAGE>
(4)(b) Share Purchase Rights Agreement, dated as of September 6, 1988, *
between the Company and State Street Bank and Trust Company
(filed as Exhibit 4(a) to Form 8-K Report dated as of September
6, 1988), as amended by the following: Amendment No. 1 dated
October 3, 1988 (filed as Exhibit 9 to Schedule 14D-9 Amendment
No. 1 dated October 4, 1988), Amendment No. 2 dated October 18,
1988 (filed as Exhibit 14 to Schedule 14D-9 Amendment No. 2 dated
October 19, 1988) and Amendment No. 3 dated November 1, 1988
(filed as Exhibit 4(c) to Form 10-K Report for the fiscal year
ended February 25, 1989 (the "1989 10-K"), Amendment No. 4 dated
as of November 17, 1988 (filed as Exhibit 1 to Amendment No. 1 to
Form 8-A, dated November 18, 1988) and Amendment dated as of
August 15, 1994 (filed as Exhibit 4(e) to Form 8-K dated August
19, 1994)
(4)(c) Note Acquisition Rights Agreement dated as of September 6, 1988 *
between the Company and State Street Bank and Trust Company, as
amended on September 19, 1988 (filed as Exhibit 4(b) to Form 8-K
Report dated September 6, 1988) as amended by the following:
Amendment No. 2 dated October 3, 1988 (filed as Exhibit 10 to
Schedule 14D-9 Amendment No. 2 dated October 4, 1988), Amendment
No. 3 dated October 18, 1988 (filed as Exhibit 15 to Schedule
14D-9 Amendment No. 2 dated October 19, 1988), Amendment No. 4
dated November 1, 1988, (filed as Exhibit 4(d) to the 1989 10-K)
and Amendment No. 5 dated as of November 17, 1988 (filed as
Exhibit 2 to Amendment No. 1 to Form 8-A, dated November 18,
1988).
(4)(d) Certificate of Designation, Preferences and Rights of Non-Voting *
Convertible Preferred Stock of Nantucket Industries, Inc. (filed
as Exhibit 4 to Form 8-K Current Report dated March 22, 1994
(the "1994 8-K").
(4)(e) Common Stock Purchase Agreement dated as of August 18, 1994 by *
and among Registrant, Guess ?, Inc., the Maurice Marciano 1990
Children's Trust, the Paul Marciano Trust u/t/d 2/20/86, the
Armand Marciano Trust u/t/d 2/20/86 and The Samberg Group, L.L.C.
(filed as Exhibit 4(d) to Form 8-K dated August 19, 1994).
(4)(f) Common Stock and Convertible Subordinated Debenture Purchase *
Agreement dated as of August 13, 1996 by and among Nantucket
Industries, Inc. and NAN Investors, L.P. (filed as Exhibit 4(f)
to the Form 8-K dated August 15, 1996).
(4)(g) Sixth Amendment dated as of August 15, 1996 to that certain *
Rights Agreement dated as of September 6, 1988 between Nantucket
Industries, Inc., and State Street Bank & Trust Company (filed as
Exhibit 4(g) to the Form 8-K dated August 15, 1996).
(9) Voting Trust Agreement by and among the Samberg Group, L.L.C., *
George Gold, Donald Gold, Stephen Samberg, Stephen Sussman,
Robert Polen, Ray Wathen, Nantucket Industries, Inc., Robert
Rosen and Joseph Mazzella dated as of March 21, 1994 (filed as
Exhibit 99(b) to 1994 8-K).
</TABLE>
<PAGE>
<TABLE>
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(10)(a) Nantucket Industries, Inc. Savings Plan effective June 1, 1988 by *
and between the Registrant and George Gold and Donald Gold as
Trustees, Amendment No. 1 thereto dated June 22, 1990 and
Amendment No. 2 thereto dated November 19, 1990 (filed as Exhibit
(10)(a) to Form 10-K Report for the fiscal year ended February
29, 1992 (the "1992 10-K")).
(10)(b) Incentive Stock Option Plan (filed as Exhibit10(d) to the 1988
10-K). *
(10)(c) 1988 Nantucket Industries, Inc. Nonstatutory Stock Option Plan *
(filed as Exhibit 10(c) to the 1989 10-K).
(10)(e)(i) Trademark Agreement between Registrant and Faberge, Incorporated *
dated November 1, 1980 ("Trademark Agreement") regarding the
trademarks "Faberge" and "BRUT" for use with men's and boy's
underwear and bathing suits (filed as Exhibit 10(g)(i) to 1987
10-K); Amendment dated November 16, 1982 regarding the trademark
"BRUT 33" (filed as Exhibit 10(m) to 1983 S-1); Letter dated
August 24, 1983 from Faberge to Registrant with respect to
renewal of the Trademark Agreement for an additional five year
period (filed as Exhibit 10(g)(iii) to 1987 10-K); Amendment
dated May 6, 1983 regarding the trademarks "BRUT Medallion
Design" and "Brut Royale" (filed as Exhibit 10(k)(ii) to 1983 S-
1; Amendment dated December 5, 1983 (filed as Exhibit 10(g)(iv)
to the Form 10-K Report for the fiscal year ended March 3, 1984
(the "1984 10- K"); Amendment dated October 31, 1984 (filed as
Exhibit 10(g)(xiii) to the Form 10-K Report for the fiscal year
ended March 2, 1985 (the "1985 10- K")); Amendment dated March
14, 1986 extending license to include swimwear tops (filed as
Exhibit 10(g)(v) to the 1986 10-K; Amendment dated April 25, 1984
(filed as Exhibit 10(g)(v) to the 1984 10-K); Letter dated
December 31, 1987, extending term of Trademark Agreement for an
additional five year period and deleting men's and boy's bathing
suits from coverage (filed as Exhibit 10(g)(iii) to the 1988
10-K); extension dated February 24, 1989, extending expiration
date of the Trademark Agreement to February 28, 1998 (filed as
Exhibit 10(e)(ii) to the 1989 10-K).
(10)(e)(ii) Intentionally Omitted
(10)(e)(iii) License Agreement between the Company and BRITTANIA Sportswear, *
Ltd. (subsidiary of Levi Strauss) dated September 6, 1988 for the
manufacture and sale of men's and ladies' underwear under the
"BRITTANIA" trademark (filed as Exhibit 19 to Form 10-Q for the
Quarter ended August 27, 1988).
(10)(e)(iv) License Agreement between the Company and BRITTANIA Sportswear, *
Ltd. (subsidiary of Levi Strauss) dated December 31, 1991 for the
manufacture and sale of men's and ladies' underwear under the
"BRITTANIA" trademark (filed as Exhibit 10(e)(iv) to Form 10-K
for the fiscal year ending February 26, 1994.
(10)(e)(v) Amendment dated January 31, 1996 to License Agreement between the *
Registrant and BRITTANIA Sportswear, Ltd. (subsidiary of Levi
Strauss) for the manufacture and sale of men's and ladies'
loungewear under the "BRITTANIA" trademark. (Filed as Exhibit
(10)(e)(v) to Form 10-K for the fiscal year ending Febuary
27,1996)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(10)(e)(vi) Intentionally omitted
(10)(e)(vii) License Agreement between the Company and Brittania Sportswear *
Limited, a subsidiary of Levi Strauss & Co. effective as of
January 1, 1997, extending the Company's license through December
31, 1999, for the manufacture and sale of men's underwear and
loungewear under the "BRITTANIA" trademark (filed as Exhibit
10(e)(iii) to the Form 10-Q for the quarter ended August 31,
1996).
*
(10)(f) Modification and Extension of Lease dated November 30, 1982
between Registrant and Satti Development Corp. (filed as Exhibit
10(1) to the 1983 10-K);
(i) amendment dated February 16, 1988 extending term of lease *
through April 30, 1993 (filed as Exhibit 10(h) to the 1988 10-K);
(ii) amendment dated August 15, 1991 expanding demised premises, *
extending term of lease through May 31, 1997 and modifying annual
rental (filed as Exhibit 10(f)(ii) to 1992 Form 10-K).
(10)(f)(i) Intentionally omitted.
(10)(g) Promissory Notes from George J. Gold and Donald D. Gold to *
Registrant (filed as Exhibit 10(s) to 1983 S-1).
(10)(h) Intentionally omitted.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(10)(i) Amended and Restated Credit Agreement dated December 8, 1989, *
between Registrant and Manufacturers Hanover Trust Company
("MHTC") for the borrowing of up to $11,500,000 of which
$8,500,000 is on a revolving credit basis until March 5, 1993,
the balance to be used against letters of credit issued by MHTC
for the benefit of the Registrant; $8,500,000 Note dated December
8, 1989, from Registrant to MHTC; Continuing Letter of Credit
Security Agreement dated December 8, 1989, between Registrant and
MHTC. (filed as Exhibit 10(i) to the Form 10-K Report for the
fiscal year ended March 3, 1990 (the "1990 10-K") Omitted
exhibits to said Agreement will be furnished to the Commission
upon request.
(i) First Amendment dated August 1, 1990 to Loan *
Agreement between Registrant and MHTC (filed as Exhibit
10(i)(i) to the Form 10-K Report for the fiscal
year ended March 2, 1991);
(ii) Second Amendment and Waiver dated as of May 23, *
1991 to Loan Agreement between Registrant and MHTC
(filed as Exhibit (10)(i)(ii) to the 1992 Form 10-K);
(iii) Fifth Amendment and Waiver dated as of February *
22, 1993, to Amended and Restated Credit Agreement dated
as of December 8, 1989, between the Registrant
and Chemical Bank, as successor by merger to MHTC
(filed as Exhibit (iii) to the Form 8-K dated March 4,
1993);
(iv) Sixth Amendment and Waiver dated as of March 4, *
1993, to Amended and Restated Credit Agreement (filed as
Exhibit 10(k)(iv) to 1993 10-K).
(10)(j)(i) Revolving Credit Agreement dated as of December 30, 1993 by and *
between Chemical Bank, Nantucket Industries, Inc., Nantucket
Mills, Inc. and Nantucket Management Corporation (the "Credit
Agreement") (filed as Exhibit 10(j)(i) to the 1994 Form 10-K).
(10)(j)(ii) First Amendment to Credit Agreement dated as of February 28, 1994 *
by and between Chemical Bank, Nantucket Industries, Inc.,
Nantucket Mills, Inc. and Nantucket Management Corporation (filed
as Exhibit 10(j)(ii) to the 1994 10-K).
(10)(j)(iii) Second Amendment to Credit Agreement dated as of March 17, 1994 *
by and between Chemical Bank, Nantucket Industries, Inc.,
Nantucket Mills, Inc. and Nantucket Management Corporation (filed
as Exhibit 10(j)(iii) to the 1994 10-K).
(10(k) Intentionally omitted.
(10)(n) Intentionally omitted
(10)(o) Intentionally omitted
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(10)(q) Intentionally omitted
.
(10)(p) Intentionally omitted
(10)(t) Intentionally omitted
(10)(u) Intentionally omitted
(10)(v) Sublicense Agreement dated November 20, 1991 by and among Dawson *
Consumer Products, Inc., Registrant and PGH Company regarding the
use of the trademark "Adolfo" on men's high fashion underwear
briefs (filed as Exhibit (10)(v) to the 1992 Form 10-K).
(10)(w) Sublicense Agreement dated October 16, 1992 by and among Salant *
Corporation, Dawson Consumer Products, Inc. and the Registrant
regarding the use of the trademark "John Henry" on men's high
fashion underwear briefs (filed as Exhibit (10)(w) to the 1992
Form 10-K).
(10)(x) Employment Agreement dated May 26, 1992 by and between the *
Registrant and Stephen P. Sussman (filed as Exhibit 10(x) to the
Form 10Q Report for November 28, 1992) as amended by the
Amendment dated August 8, 1994 (filed as Exhibit 99(a) to Form
8-K dated August 19, 1994).
(10)(x)(i) Amendment No. 2 dated August 9, 1996 to that certain Employment *
Agreement dated as of May 26, 1992 by and between Nantucket
Industries, Inc. and Stephen P. Sussman (filed as Exhibit 99(a)
to the Form 8-K dated August 15, 1996).
(10)(y) Purchase and Sale Agreement dated as of July 31, 1997 by and *
among Mimms Investments, a Georgia general partnership and
Nantucket Industries, Inc. regarding the sale of the Registrant's
property at 200 Cook St., Cartersville, GA.(filed as Exhibit
(10)(y) to 10Q report for August 30, 1997)
(10)(y)(i) Amendment dated August 14, 1997 to Purchase and Sale Agreement *
dated as of July 31, 1997 by and among Minns Investments, a
Georgia general partnership regarding the sale of the Registrants
property located at 200 Cook St., Cartersville, GA (filed as
Exhibit (10)(y)(i) to 10Q report for August 30, 1997).
(10)(y)(ii) Amendment dated August 27, 1997 to Purchase and Sale Agreement *
dated as of July 31, 1997 by and among Minns Investments, a
Georgia general partnership regarding the sale of the Registrants
property located at 200 Cook St., Cartersville, GA(filed as
Exhibit (10)(y)(ii) to 10Q report for August 31,1997)
(10)(z)(i) Intentionally omitted
(10)(z)(ii) Amended and Restated Employment Agreement by and between *
Nantucket Industries, Inc. and Stephen M. Samberg (filed as
Exhibit 10(z)(ii) to the 1994 Form 10-K) as amended by the
Amendment dated August 8, 1994 (filed as Exhibit 99(c) to Form
8-K dated August 19, 1994).
</TABLE>
<PAGE>
<TABLE>
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(10)(z)(iii) Amendment No. 2 dated August 9, 1996 to that certain Employment *
Agreement dated as of March 18, 1994 by and between Nantucket
Industries, Inc. and Stephen M. Samberg (filed as Exhibit 99(c)
to the Form 8-K dated August 15, 1996).
(10)(z)(iv) Amendment No. 3 dated July 1, 1997 to that certain Employment Filed Herewith
Agreement dated as of March 18, 1994 by and between Nantucket
Industries, Inc and Stephen M. Samberg.
(10)(aa) License Agreement dated October 5, 1992 between Cluett Peabody & *
Co., Inc. and Registrant with respect to the ARROW trademark
(filed as Exhibit 2 to Form 10Q Report for November 28, 1992).
(10)(bb) License Agreement dated December 9, 1992 between GUESS?, Inc. and *
Registrant with respect to the GUESS? trademark (filed as Exhibit
3 to Form 10Q Report for November 28, 1992)
(10)(cc) Registrant's 1992 Long-Term Stock Option Plan (filed as Exhibit 4 *
to Form 10Q Report for November 28, 1992).
(10)(dd) Registrant's 1992 Executive Performance Benefit Plan (filed as *
Exhibit 5 to Form 10Q for November 28, 1992).
(10)(ee) Management Agreement made as of January 1, 1993 by and between *
Nantucket Management Corp. (a subsidiary of Registrant) and
Registrant (filed as Exhibit 10(ee) to 1993 10-K).
(10)(ff) License Agreement dated December 21, 1992 between Registrant and *
McGregor Corporation with respect to the Botany 500 Trademark
(filed as Exhibit 10(ff) to 1993 10-K).
(10)(ff)(i) Letter Agreement dated July 10, 1995 amending License Agreement *
between the Registrant and McGregor Corporation with respect to
the Botany 500 Trademark (filed as Exhibit 10(ff)(i) to 1996
10-K.)
(10)(gg) Severance Agreement dated as of March 18, 1994 by and among *
Nantucket Industries George J. Gold and Donald Gold (Filed as
Exhibit 10(gg) to the 1994 Form 10-K), as amended by Amendment
dated August 17, 1994 (filed as Exhibit 99(b) to Form 8-K dated
August 15, 1996)
(10)(gg)(i) Letter dated February 28, 1995 amending Severance Agreement by *
and among Registrant, George J. Gold and Donald D. Gold (filed as
Exhibit 10(gg)(i) to the Form 10-K Report for the fiscal year
ended February 25, 1995).
(10)(gg)(ii) Third Amendment dated August 9, 1996 to that certain Severance *
Agreement dated as of March 18, 1994 by and among Nantucket
Industries, Inc. George J. Gold and Donald D. Gold (filed as
Exhibit 99(b) to the Form 8-K dated August 15, 1996).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(10)(hh) Agreement dated as of March 1, 1994 by and among the Samberg *
Group, L.L.C., George J. Gold, Donald D. Gold, Stephen M.
Samberg, Stephen P. Sussman, Robert Polen, Raymond L. Wathen and
Nantucket Industries, Inc. (filed as Exhibit 10(hh) to the 1994
Form 10-K)
(10)(ii) Loan and Security Agreement by and between Nantucket Industries, *
Inc. and Congress Financial Corp. dated as of March 21, 1994
(filed as Exhibit 99(b) to 1994 8-K).
(10)(ii)(i) Amendment No. 2 dated July 31, 1996, to Loan and Security
Agreement dated as of March 21, 1994, among Nantucket Industries,
Inc. and Congress Financial Corp. (filed as Exhibit 99(o) to the
Form 8-K dated August 15, 1996)
(10)(ii)(ii) Amendment No. 3 dated August 15, 1996, to Loan and Security *
Agreement dated as of March 21, 1994, among Nantucket Industries,
Inc. and Congress Financial Corp. (filed as Exhibit 99(p) to the
Form 8-K dated August 15, 1996).
(10)(ii)(iii) Amendment No.4 dated March 18, 1997 to Loan and Security *
Agreement dated as of March 21, 1994 among Nantucket Industries,
Inc and Congress Financial Corp (filed as Exhibit (10)(ii)(iii)
to 10Q report for August 30, 1997).
(10)(ii)(iv) Amendment No. 5 dated March 31, 1997 to Loan and Security *
Agreement dated as of March 21, 1994 among Nantucket Industries,
Inc and Congress Financial Corp (filed as Exhibit (10)(ii)(iv) to
10Q report for August 30, 1997).
(10)(ii)(v) Amendment No. 6 dated May 4, 1997, to Loan and Security Agreement *
dated as of March 21, 1994, among Nantucket Industrie, Inc and
Congress Financial Corp (filed as Exhibit (10)(ii)(v) to 10Q
report for August 30, 1997).
(10)(ii)(vi) Extention dated March 20, 1998 to the Loan and Security Agreement Filed Herewith
dated as of March 21, 1994, among Nantucket Industries, Inc and
Congress Financial Corp.
(10)(ii)(vii) Extention No. 2 dated May 20, 1998 to the Loan and Security Filed Herewith
Agreement dated as of March 21, 1994, among Nantucket Industries.
Inc and Congress Financial Corp.
(10)(jj) Guaranty by Nantucket Mills, Inc. in favor of Congress Financial *
Corp. dated as of March 21, 1994 (filed as Exhibit 99(c) to 1994
8-K).
(10)(kk) General Security Agreement by Nantucket Mills, Inc. in favor of *
Congress Financial Corp. dated as of March 21, 1994 (filed as
Exhibit 99(d) to 1994 8-K).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(10)(ll) Guarantee of Nantucket Management Corporation in favor of *
Congress Financial Corp. dated as of March 21, 1994 (filed as
Exhibit 99(e) to 1994 8-K).
(10)(mm) General Security Agreement by Nantucket Management Corporation in *
favor of Congress Financial Corp. dated as of March 21, 1994
(filed as Exhibit 99(f) to 1994 8-K).
(10)(nn) Amended and Restated Credit Agreement by and among Chemical Bank, *
Nantucket Industries, Inc., Nantucket Mills, Inc. and Nantucket
Management Corporation dated as of March 21, 1994 (filed as
Exhibit 99(g) to 1994 8-K) and amended by the Amendment dated as
of August 18, 1994 (filed as Exhibit 99(e) to the Form 8-K dated
August 19, 1994).
(10)(oo) Amended and Restated Security Agreement by and between Nantucket *
Industries, Inc. and Chemical Bank dated as of March 21, 1994
(filed as Exhibit 99(h) to 1994 Form 8-K).
(10)(pp) Amended and Restated Security Agreement by and between Nantucket *
Mills, Inc. and Chemical Bank dated as of March 21, 1994 (filed
as Exhibit 99(i) to 1994 8-K).
(10)(qq) Security Agreement by and between Management Corporation and *
Chemical Bank dated as of March 21, 1994 (filed as Exhibit 99(j)
to 1994 8-K).
(10)(rr) Deed to Secure Debt, Security Agreement and Assignment of Leases *
and Rents by Nantucket Industries, Inc. to Chemical Bank dated as
of June 8, 1994 (filed as Exhibit 10(ss) to the 1994 Form
10-K).and Assignment of Leases and Rents by Nantucket Industries,
Inc. to Congress Financial Corporation dated June 8, 1994 (filed
as Exhibit 10(rr) to the 1994 Form 10-K).
(10)(ss) Deed to Secure Debt, Security Agreement and Assignment of Leases *
and Rents by Nantucket Industries, Inc. to Chemical Bank dated as
of June 8, 1994 (filed as Exhibit 10(ss) to the 1994 Form 10-K)
(10)(tt) Employment Agreement dated November 23, 1994 by and between *
Registrant and Raymond L. Wathen (filed as Exhibit 10(tt) to Form
10-K Report for the fiscal year ended February 25, 1995).
(10)(tt) Amendment to Employment Agreement entered into as of January 1, *
1996 between Registrant and Raymond L. Wathen. (Filed as Exhibit
10(tt)(i) to 1996 10-K)
(10)(uu) Employment Agreement dated July 1, 1994 by and between Registrant *
and Ronald S. Hoffman (filed as Exhibit 10(uu) to Form 10-K
Report for the fiscal year ended February 25, 1995).
(10)(uu)(i) Letter Agreement dated June 12, 1995 between Registrant and *
Ronald S. Hoffman, extending the term of his employment to June
30, 1996. (Filed as Exhibit 10(uu)(i) to 1996 10-K)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
(10)(uu)(ii) Letter Agreement dated August 9, 1996 between Registrant and *
Ronald S. Hoffman amending the change of control provision in his
employment agreement (filed as Exhibit 99(e) to the Form 8-K
dated August 15, 1996).
(10)(uu)(iv) Letter Agreement dated as of June 30, 1996 between Registrant and *
Ronald S. Hoffman, extending the term of his employment to June
30, 1997 (filed as Exhibit 99(j) to the Form 8-K dated August 15,
1996).
(10)(vv) Employment Agreement dated as of January 1996 by and between *
Registrant and Joseph Visconti.(Filed as Exhibit 10(vv) to 1996
10-K)
(10)(vv)(i) Amendment dated August 9, 1996 to that certain Employment *
Agreement dated as of January 1, 1996 by and between Nantucket
Industries, Inc and Joseph Visconti (filed as Exhibit 99(d) to
the Form 8-K dated August 15, 1996).
(10)(vv)(ii) Amendment No. 2 dated as of July 1, 1997 to that certain Filed Herewith
Employment Agreement dated as of January 1, 1996 by and between
Nantucket Industries and Joseph Visconti.
(10)(ww) First Amendment, dated as of December 15, 1995 to Amended and *
Restated Credit Ageement dated as of March 21, 1994, among
Nantucket Industries, Inc. and its subsidiaries and Chemical Bank
(filed as Exhibit (10)(vv) to Form 10-Q Report for the quarter
ended November 25, 1995.
(10)(xx) Complaint filed on March 7, 1997 with Superior Court of *
California for the County of San Francisco C.A. No. 985160,
Nantucket Industries, Inc. v. Levi Strauss & Co., and Brittania
Sportswear Limited (filed as Exhibit 99(q) to the Form 8-K dated
March 7, 1997).
(10)(zz) Press Release dated March 10, 1997 (filed as Exhibit 99(r) to the *
Form 8-K dated March 7, 1997).
(10)(aaa) Lease between Registrant and First Industrial LP dated December *
3, 1997 (filed as Exhibit 99(S) to Form 8-K dated November 26,
1997)
(10)(bbb) Letter Agreement dated September 30, 1997 from Nantucket *
Industries, Inc. to NAN Investers,LP(filed as Exhibit 99(t) to
the 10Q report for November 29, 1997.)
(10)(bbb)(i) Letter Agreement No. 2 dated May 19, 1998 from Nantucket Filed Herewith
Industries to NAN Investers LP.
(10)(ccc) Termination of License Agreement dated March 25, 1998 between Filed Herewith
GUESS? Inc. and the Registrant.
</TABLE>
<PAGE>
(c) SUBSIDIARIES OF THE COMPANY
---------------------------
<TABLE>
<CAPTION>
STATE OF DOING BUSINESS
NAME INCORPORATION NAME
---- ------------- --------------
<S> <C> <C>
Nantucket Mills, Inc Delaware Phoenix Associates,
Inc. (in Puerto Rico)
Nantucket Management Corp* New York N/A
* Dissolved as of December, 1995, pursuant to vote dated October 17, 1995
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York.
NANTUCKET INDUSTRIES, INC.
<S> <C>
June 15, 1998 By: /S/ Stephen M. Samberg
--------------------------------------------------
Stephen M. Samberg, Chairman of the Board
and Chief Executive Officer/
(principal executive officer)
June 15, 1998 By: /S/ Nicholas J. Dmytryszyn
--------------------------------------------------
Nicholas J. Dmytryszyn, Chief Financial Officer
(principal financial and accounting officer)
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities on the dates indicated.
June 15, 1998 /S/ Stephen M. Samberg
------------------------------------------
Stephen M. Samberg, Chairman of the Board
and Chief Executive Officer
June 15, 1998 /S/ Steven Schneider
------------------------------------------
Steven Schneider, Director
June 15, 1998 By: /S/ Kenneth Klein
------------------------------------------
Kenneth Klein, Director
June 15, 1998 By: /S/ Mark M. Feder
------------------------------------------
Mark M. Feder, Director
EXHIBIT (10)(Z)(IV)
AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 3 to that certain Employment Agreement dated as of March
18, 1994 as amended by Amendments dated August 8, 1994 and August 8, 1996,
(collectively, the "Agreement") by and between Nantucket Industries, Inc., a
Delaware corporation having its principal office at 510 Broadhollow Road,
Melville, New York 11747 (the "Company") and Stephen M. Samberg, residing at 110
Tall Oak Crescent, Syosset, New York 11791-1121 (the "Executive").
WHEREAS, due to the financial difficulties the Company is currently
experiencing, it is determined to be in the best interests of the Company that
certain cost-cutting measures should be instituted and in connection therewith,
the compensation of certain of its executive officers should be reduced;
WHEREAS, Executive has an economic interest in the success of the
Company and Executive desires that the Company take whatever steps are necessary
at this time;
WHEREAS, Company and the Executive are both willing to modify the
Agreement to adjust the Executive's compensation arrangements;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, do hereby agree:
1. That Section I.C. of the Agreement be amended by deleting the first
paragraph of said Section I.C. in its entirety and substituting the following in
place thereof, effective as of July 1, 1997:
"C. Compensation. As partial compensation for all such services to be
rendered by the Executive in all capacities hereunder, including services as an
officer or director of the Company or any of its affiliates, the Company will
pay or cause to be paid to the Executive during each one-year period beginning
March 1 of the Term (a "Term Year"), (i) the annual Base Rate of $300,000 per
annum; (ii) an annual bonus of up to $300,000, as determined in accordance with
standards adopted from time to time by the Compensation Committee of the Board
of Directors of the Company; and (iii) Commissions on sales of the Company's
product lines for which the Executive is granted responsibility by the
Compensation Committee equal to 1 1/2% of the Company's Net Sales with respect
to such product lines. The sum of (i) and (iii) for any Term Year is sometimes
referred to herein as the Executive's Annual Cash Compensation and it shall not
exceed $500,000 in any one year. The Base Rate shall be payable to the Executive
in equal semi-monthly or more frequent installments, as the Company shall
determine; bonus
<PAGE>
compensation under clause (ii) of this paragraph shall be payable to the
Executive at such intervals as are provided for by the Compensation Committee,
but not less frequently than annually promptly after the same is reasonably
determinable; and commissions under clause (iii) of this paragraph, shall be
payable to the Executive monthly, within three (3) weeks after the end of each
month during the term of this Agreement. For purposes of this Section, Net Sales
with respect to a product line shall mean the aggregate gross sales revenue of
the Company with respect to such product line, less returns, discounts and other
customary allowances each as computed in accordance with GAAP."
Commencing July 1, 1997, the Company shall be responsible for lease
payments of up to $1,705 per month on the automobile used by Executive during
the balance of the Term.
Except as expressly amended herein, the Agreement shall remain
unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be
duly executed and effective as of the 1st day of July 1997.
NANTUCKET INDUSTRIES, INC.
By: /s/ Ronald S. Hoffman
----------------------------
Ronald S. Hoffman
Vice President - Finance
EXECUTIVE
/s/ Stephen M. Samberg
-------------------------------
Stephen M. Samberg
EXHIBIT (10)(II)(VI)
March 20, 1998
Nantucket Industries, Inc.
510 Broadhollow Road, Suite 300
Melville, New York 11747
Re: Extension of Effective Date of Termination of Financing
Agreement
Gentlemen:
Reference is made to the Loan and Security Agreement, dated
March 21, 1994 (as previously amended, the "Loan Agreement") between Congress
Financial Corporation ("Lender") and Nantucket Industries, Inc. ("Borrower"),
and to the other Financing Agreements referred to in the Loan Agreement
(collectively, with the Loan Agreement, the "Financing Agreements"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to them in the Loan Agreement.
Reference is also made to the letter re: Termination of
Financing Agreements, dated January 16, 1998, from Lender to Borrower ("Notice
of Termination"), by which letter Lender gave Borrower notice that the financing
arrangements under the Loan Agreement and other Financing Agreements shall
terminate effective as of March 20, 1998 (the "Termination Date").
In consideration of the mutual agreements contained herein and
other good and valuable consideration, Borrower and Lender hereby agree as
follows:
1. Extension of Termination Date. Solely as an accommodation to Borrower, in
order to permit Borrower additional time to arrange for refinancing or make
other arrangements for the payment and satisfaction in full of the Obligations,
Lender hereby agrees with Borrower that, notwithstanding the effective date of
termination pursuant to the Notice of Termination, the Termination Date shall be
extended to May 20, 1998, on which date all of Borrower's Obligations to Lender
under the Financing Agreements will automatically become due and payable,
without further notice, and all obligations of Lender to provide further
financing to Borrower will automatically cease, without further notice.
2. MISCELLANEOUS.
(a) FURTHER ASSURANCES. Borrower shall execute and deliver such
additional documents and take such additional action as may be requested by
Lender to effectuate the provisions and purposes of this letter agreement.
<PAGE>
(b) EFFECT OF THIS LETTER AGREEMENT. This letter agreement
contains the entire agreement of the parties with respect to the subject matter
hereof and supersedes all correspondence, memoranda, communications, discussions
or negotiations with respect thereto. No existing defaults or Events of Default
and no rights or remedies of Lender have been or are being waived hereby, and
the Notice of Termination, as modified by the terms hereof, remains in effect.
No changes or modifications to the Financing Agreements have been or are being
made or are intended hereby, and, subject to the Notice of Termination, as
modified by the terms hereof, in all other respects the Financing Agreements are
hereby specifically ratified, restated and confirmed by all parties hereto as of
the date hereof. Lender hereby reserves all of its rights and remedies set forth
in the Financing Agreements, whether exercisable on or prior to the Termination
Date or in connection with such termination or otherwise. In the event that any
term or provision of this letter agreement conflicts with any term or provision
of the other Financing Agreements, the term or provision of this letter
agreement shall control.
(c) COUNTERPARTS. This letter agreement may be executed and
delivered in counterparts.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: /s/ Josephine Norris
----------------------------
Title: Vice President
-------------------------
AGREED:
NANTUCKET INDUSTRIES, INC.
By:/s/ Steven Samberg
---------------------------
Title: CEO
------------------------
<PAGE>
CONSENT AND AGREEMENT
The undersigned guarantor hereby consents to the foregoing
letter agreement and ratifies and confirms the terms of its Guarantee in favor
of Lender as applicable to all present and future indebtedness, liabilities and
obligations of Borrower to Lender, including, without limitation, all
indebtedness, liabilities and obligations under the Financing Agreements,
including the foregoing letter agreement.
NANTUCKET MILLS, INC.
By: /s/ Steven Samberg
-------------------------
Title: CEO
----------------------
EXHIBIT (10)(II)(VII)
May 20, 1998
Nantucket Industries, Inc.
510 Broadhollow Road
Suite 300
Melville, New York 11747
Re: Second Extension of Effective Date of Termination of
Financing Agreements
Gentlemen:
Reference is made to the Loan and Security Agreement# dated
March 21, 1994 (as previously amended, the "Loan Agreement") between Congress
Financial Corporation ("Lender") and Nantucket Industries, Inc. ("Borrower") and
to the other Financing Agreements referred to in the Loan Agreement
(collectively, with the Loan Agreement, the "Financing Agreements"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to them in the Loan Agreement.
Reference is also made to: (i) the letter re: Termination of
Financing Agreements, dated January 16, 1998, from Lender to Borrower ("Notice
of Termination"), by which letter Lender gave Borrower notice that the financing
arrangements under the Loan Agreement and other Financing Agreements was to
terminate effective as of March 20, 1998 (the "Termination Date"), and (ii) the
letter agreement re: Extension of Effective Date of Termination of Financing
Agreements, dated March 20, 1998, between Lender and Borrower, pursuant to which
agreement (the "First Extension"), the Termination Date was extended to Mary 20,
1998.
In consideration of the mutual agreements contained herein and
other good and valuable consideration, Borrower and Lender hereby agree as
follows:
1. EXTENSION OF TERMINATION DATE. Solely as an accommodation to
Borrower, in order to permit Borrower additional time to arrange for refinancing
or make other arrangements for the payment and satisfaction in full of the
Obligations, Lender hereby agrees with Borrower that notwithstanding the
effective date of termination pursuant to the Notice of Termination, as extended
by the First Extension, the Termination Data shall be further extended to August
18, 1998, an which date all of Borrower's Obligations to Lender under the
Financing Agreements will automatically become du and payable, without further
notice, and all obligations of Lender to provide further financing to Borrower
will automatically cease, without further notice.
2. FEE. In consideration Of Lender's entering into this
agreement, Borrower shall pay Lender a fee in the amount of $5,000, which is
fully earned and payable on the date hereof,
<PAGE>
and may, at Lender's option, be charged directly to any of Borrower's loan
account(s) maintained by Lender under the Loan Agreement.
3 . MISCELLANEOUS.
(a) FURTHER ASSURANCES. Borrower shall execute and deliver such
additional documents and take such additional action as may be requested by
Lender to effectuate the provisions and purposes of this letter agreement.
(b) EFFECT OF THIS LETTER AGREEMENT. This letter agreement
contains the entire agreement of the parties with respect to the subject matter
hereof and supersedes all correspondence, memoranda, communications, discussions
or negotiations with respect thereto. No existing defaults or Events of Default
and no rights or remedies of Lender have been or are being waived hereby, and
the Notice of Termination, as modified by the First Extension and by the terms
hereof, remains in effect. No changes or modifications to the Financing
Agreements have been or are being made or are intended hereby, and, subject to
the Notice of Termination, as modified by the First Extension and by the terms
hereof, in all other respects the Financing Agreements are hereby specifically
ratified, restated and confirmed by all parties hereto as of the date hereof.
Lender hereby reserves all of its rights and remedies set forth in the Financing
Agreements, whether exercisable on or prior to the Termination Date or in
connection with such termination or otherwise. In the event that any term or
provision of this letter agreement conflicts with any term or provision of the
other Financing Agreements, the term or provision of this letter agreement shall
control.
(c) COUNTERPARTS. This letter agreement may be executed and
delivered in counterparts.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: /s/ Janet Laft
----------------------------
Title: V.P.
-------------------------
AGREED:
NANTUCKET INDUSTRIES, INC.
By: /s/ Steven Samberg
--------------------------
Title: CEO
-----------------------
<PAGE>
CONSENT AND AGREEMENT
The undersigned guarantor hereby consents to the foregoing
letter agreement and ratifies and confirms the terms of its Guarantee in favor
of Lender as applicable to all present and future, indebtedness, liabilities and
obligations of Borrower to Lender, including, without limitation, all
indebtedness, liabilities and obligations under the Financing Agreements,
including the foregoing letter agreement.
NANTUCKET MILLS, INC.
By: /s/ Steven Samberg
------------------------
Title: CEO
---------------------
EXHIBIT (10)(VV)(II)
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 2 to that certain Employment Agreement dated as of January
1, 1996 as amended by Amendment dated August 8, 1996, (collectively, the
"Agreement") by and between Nantucket Industries, Inc., a Delaware corporation
having its principal office at 510 Broadhollow Road, Melville, New York 11747
(the "Company") and Joseph Visconti, residing at 39 Struly Drive, Massapequa
Park, New York 11762 (the "Executive").
WHEREAS, due to the financial difficulties the Company is currently
experiencing, it is determined to be in the best interests of the Company that
certain cost-cutting measures should be instituted and in connection therewith,
the compensation of certain of its executive officers should be reduced;
WHEREAS, Executive has an economic interest in the success of the
Company and Executive desires that the Company take whatever steps are necessary
at this time;
WHEREAS, Company and the Executive are both willing to modify the
Agreement to adjust the Executive's compensation arrangements;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties, intending to be legally bound, do hereby agree:
1. That Section I.D.(i) of the Agreement shall be amended by deleting
the amount of "$200,000" and substituting "$150,000" therefor.
2. That Sections I.D.(ii), I.E. and I.F. of the Agreement be amended by
deleting said Sections I.D.(ii), I.E. and I.F. in their entirety and the
substituting the following in place thereof:
"(ii) Commissions shall be paid to Executive based upon sales of the
Company's products marketed under the "Guess" trademark equal to (a) 1 1/2% of
Net Sales to the customers listed in Schedule A and (b) 1/2% of Net Sales to the
customers listed on Schedule B attached hereto. Such Schedules may be changed
from time to time either upon mutual agreement in writing of Company and
Executive, or by Company or 90 days written notice to Executive.
E. COMMISSION. The amount of the commissions to be paid to Executive
pursuant to Section I.D.(ii) shall be determined in accordance with the Section
I.E.:
(i) Net Sales with respect to a product line shall mean the aggregate
gross sales revenue of the Company with respect to such product line, less
returns, discounts and other customary allowances each as computed in accordance
with GAAP; provided that all such Net Sales shall be at prices and or terms
satisfactory to the Company's Chief Executive Officer.
<PAGE>
(ii) Payments shall be made monthly, within twenty (20) days after the
end of each month during the term of this Agreement."
3. The foregoing changes to compensation shall become effective as of
July 1, 1997. Except as expressly amended herein, the Agreement shall remain
unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be
duly executed and effective on July 1, 1997.
NANTUCKET INDUSTRIES, INC.
By: /s/ Stephen M. Samberg
--------------------------
Stephen M. Samberg,
Chairman of the Board and
Chief Executive Officer
EXECUTIVE
/s/ Joseph Visconti
-----------------------------
Joseph Visconti
EXHIBIT (10)(BBB)(I)
NANTUCKET INDUSTRIES, INC.
May 19, 1998
NAN Investors, L.P.
c/o Fundamental Capital Corp.
291 Ocean Avenue
Lawrence, New York 11559
Attention: Murray Forman
Re. Forbearance Agreement
Dear Murray:
Nantucket Industries, Inc. (the "Company") hereby confirm to you as
follows:
1. The Company is currently in default under the two Convertible
Subordinated Debentures payable to NAN investors, L.P. ("NAN"), dated August 15,
1996 (collectively: the "Debentures"), in the original principal amounts of
$1,166,150 (the "A Debenture") and $1,591,850 (the "B Debenture"), respectively,
among other things for failure by the Company to make timely payment of the
interest payments due under the Debentures on August 15, 1997 February 15, 1998
(the "Interest Payment Defaults").
2. Furthermore, the Company acknowledges that it defaulted under the
letter agreement with the Company, dated September 30, 1998, by failing to make
the August 15, 1997 interest payment, plus interest thereon at an annual rate of
12.5 accruing from the originally scheduled payment date, on or before November
30, 1997.
3. The Company acknowledges that, as of the date hereof, the principal
amount outstanding under the A Debenture is $1,168,150 and the principal amount
outstanding under the B Debenture is $884,650. In addition, the Company
acknowledges that the August 15, 1997 and February 15, 1998 interest payments,
together with interest accruing thereon at an annual rate of 12.5% accruing from
the originally scheduled payment date, is currently due and payable.
4. NAN hereby agrees to (a) extend the cure period under section
8(a)(ii) of each of the Debentures with respect to the Interest Payment Defaults
until December 31, 1998, and (b) extend until December 31, 1998 the cure period
under Section B(a)(ii) of each, of the Debentures with respect to the interest
payment due under the Debentures on or before August 15, 1998, provided,
however, that (i) each such extension shall be automatically and immediately
terminated upon the earlier to occur of any other default or Event of Default
<PAGE>
under either of the Debentures, the Common Stock and Convertible Subordinated
Debenture Purchase Agreement, dated as of August 13, 1996 (the "Purchase
Agreement"), or this Agreement, and (ii) the interest payment due on August 15,
1998 shall bear interest from such date, calculated at an annual rate of 12.5%
per annum, from August 15, 1998 until its payment in full.
5. Within 5 days of recovery of any amounts by the Company (whether by
compromise, settlement, judgment, execution or otherwise) arising out of the
Nantucket v. Levi and Brittania litigation before the California Superior Court,
San Francisco, the Company shall offer to prepay all or any portion of the
amounts then outstanding under the Debentures at a price equal to 125% of the
aggregate principal amount thereof, together with any interest accrued and
unpaid thereon (including any interest accrued on any defaulted interest payment
in accordance with the provisions of this Agreement) up to and including the
prepayment date.
6. In consideration of NAN's aforesaid agreement, the Company agrees as
follows:
(a) The Debentures shall be secured by a first priority lien
on all of the assets of the Company, which lien shall automatically and
immediately take effect at such time as no amounts remain outstanding
under the Loan and Security Agreement, dated March 21, 1994, as
amended, among the Company and Congress Financial Corporation (the
"Congress Facility") or to the extent not otherwise prohibited under
the Congress Facility.
(b) On or before May 21, 1998, the Company shall issue to NAN
16,500,000 warrants (the "Warrants"), in form satisfactory to NAN, each
of which Warrants shall be exercisable for and convertible into one
fully-paid and nonassessable share of Common Stock of the Company, par
value $.10 per share, at any time following the date of issuance and
through the fifth anniversary thereof at an exercise price of $0.10 per
share of Common Stock. To the extent that the Company has insufficient
authorized and unissued shares of Common Stock to satisfy a notice by
NAN of the exercise of the Warrants, the Company shall use its best
efforts to promptly cause its authorized capital to be increased to the
extent necessary to satisfy NAN's conversion right in full.
7. On or before May 21, 1998, the Company shall cause its Board of
Directors to: (a) take action so that Messrs. Ken Klein, James Carey, Marc Feder
and Steven Schneider shall be continuing members of the Company's Board of
Directors or nominated for reelection as director of the Company at the
forthcoming annual meeting of shareholders, (b) prior to a "Distribution Date"
occurring thereunder, repeal the Company's Share Purchase Right B Agreement,
dated as of September 6, 1988, and (c) ratify this Agreement.
8. The Company shall cause Messrs. Richard Ryan and Robert Rosen to
resign from the Company's Board of Directors on or before May 21, 1998.
<PAGE>
9. The Company shall do all things reasonably necessary to effectuate
the provisions of this Agreement. The Company confirms that it has no claims or
rights of action of any kind against NAN, NAN (GP) Investors, L.P., Fundamental
Capital Corp. or any of their respective officers, directors, partners or
shareholders.
10. NAN agrees that the Company shall enter into the letter agreement
of even date herewith with the Samberg Group, L.L.C., in the form annexed
hereto.
11. NAN agrees that the Company shall pay to third-party vendors (other
than Lane Altman & Owens) up to an amount of $75,000 on account of charges
incurred in connection with the litigation referred to paragraph 5 above, which
charges shall be reviewed and approved by the Board after May 21, 1998.
12. In the event the Company shall fail to comply timely with any of
the provisions of this Agreement, this Agreement shall automatically terminate,
and shall be without any further force or effect with respect to any of the
parties hereto.
If the foregoing correctly sets forth the terms of our agreement,
please so indicate by signing in the space indicated below.
Very truly yours,
Nantucket Industries, Inc.
By: /s/ Steven Samberg
-------------------------
Title: President
---------------------
We agree to the foregoing.
NAN Investors, L.P.
By: NAN (GP) Investors, L.P.
General Partner
By: Fundamental Capital Corp.
General Partner
By: /s/ Murray Forman
---------------------------
Title: President
------------------------
EXHIBIT (10)(CCC)
March 25, 1998
Mr. Steve Samberg
Chairman
NANTUCKET INDUSTRIES, INC.
105 Madison Avenue
New York, NY 10016
Re: Termination of License Agreement
Dear Steve:
Reference is made to the Technical Assistance and Trademark License
Agreement between GUESS? Licensing, Inc., successor to Guess ?, Inc. ("Guess")
and Nantucket Industries, Inc. ("Nantucket") effective December 9, 1992, as
amended (the "Agreement"). Capitalized terms not defined herein will have the
meanings ascribed to such terms in the Agreement.
Guess and Nantucket hereby agree that the Agreement will terminate
effective March 31, 1998. Nantucket will fully comply with Sections li and 12 of
the Agreement regarding its obligations upon termination, however, all remaining
inventory of Products shall be sold to Guess-approved accounts (which for these
purposes only may include Marshall's, Ross, TJ Maxx and Filene's) no later than
April 30, 1998. All such sales shall comply with the provisions of the
Agreement, and Nantucket shall pay Trademark Royalties to Guess thereon if
required to do so under the Agreement. Nantucket shall not, however, be required
to pay Trademark Royalties on its sales of Products to Assa International
Corporation ("Assa"), if Assa pays royalties to Guess on its resale of such
Products.
Nothing contained herein will affect any outstanding payment
obligations of Nantucket or other obligations of any nature that arise under the
Agreement prior to or which survive termination, all of which remain in full
force and effect, unless otherwise agreed in writing by Guess. Nantucket will
pay Guess the Royalty Minimum of $58,333 due for March, 1998 no later than March
27, 1998.
This letter may be signed in counterparts, and faxed copies may be
exchanged, which will nonetheless be effective and binding. In order to signify
your acceptance of these terms and conditions, please sign and date this letter
below and return it to me.
Sincerely,
/s/ Timothy J. Oswald
-----------------------------
Timothy J. Oswald
General Counsel/Licensing
AGREED AND ACCEPTED:
- - --------------------
NANTUCKET INDUSTRIES, INC.
/s/ Steve Samberg
- - ---------------------------
Steve Samberg, Chairman
Dated: April 1, 1998
--------------------
