SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
(MARK ONE) FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 1995
_________ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission file number 0-3305
NCC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 62-0643336
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
165 MAIN STREET, CORTLAND, NEW YORK 13045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (607) 756-2841
Indicate by check mark whether 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 registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
At September 30, 1995, there were outstanding 4,375,492 shares of
registrant's Common Stock, par value $1.00 per share.
NCC INDUSTRIES, INC.
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets
Consolidated Statements of Income and Retained Earnings
Consolidated Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
-2-
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
NCC INDUSTRIES, INC. AND SUBSIDIARY
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<S> <C> <C>
September 30, December 31,
1995 1994
ASSETS
Current assets
Cash and cash equivalents $ 3,113,013 $1,034,820
Accounts receivable, net 16,072,800 16,448,704
Inventories (Note 2) 48,661,684 39,104,654
Other current assets 2,438,408 2,002,917
Total Current Assets 70,285,905 58,591,095
Property, plant and equipment at cost, net 10,524,060 11,186,318
Bond issuance cost 63,430 78,578
Other assets 1,437,299 1,732,012
$82,310,694 $71,588,003
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ - $12,000,000
Due to Majority Shareholder 16,202,835 -
Accounts payable and accrued expenses 21,610,943 10,997,312
Current portion of long-term debt 445,000 445,000
Total Current Liabilities 38,258,778 23,442,312
Long term debt, less current portion 1,916,415 9,361,415
Other liabilities 2,749,377 2,800,628
Shareholder's equity 39,386,124 35,983,648
$82,310,694 $71,588,003
See notes to financial statements.
</TABLE>
-3-
NCC INDUSTRIES, INC. AND SUBSIDIARY
STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended,
September 30, October 1, September30, October 1,
1995 1994 1995 1994
STATEMENTS OF INCOME
Net Sales $30,671,583 $32,895,829 $92,542,402 $94,528,993
Cost and expenses
Cost of sales, shipping, selling,
general and administrative expenses 28,424,587 29,752,270 87,078,946 86,335,904
Interest expense 552,121 400,576 1,405,427 1,332,480
28,976,708 30,152,846 88,484,373 87,668,384
Income before taxes 1,694,875 2,742,983 4,058,029 6,860,609
Income taxes
Current 124,575 853,580 997,817 1,764,285
Deferred ( 117,204) 168,842 (342,264) 254,363
Net Income $1,687,504 $1,720,561 $3,402,476 $ 4,841,961
Income per common share $.39 $.39 $.78 $1.11
Weighted average shares used in
computing per share amounts 4,375,492 4,375,492 4,375,492 4,375,587
-4-
Three Months Ended Nine Months Ended
September 30, October 1, September 30, October 1,
1995 1994 1995 1994
STATEMENTS OF RETAINED EARNINGS
Retained earnings, beginning $30,436,896 $26,011,562 $28,721,924 $22,890,162
Net income 1,687,504 1,720,561 3,402,476 4,841,961
Retained earnings, ending $32,124,400 $27,732,123 $32,124,400 $27,732,123
</TABLE>
See notes to financial statements.
-5-
NCC INDUSTRIES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C>
Nine months Ended
September 30, October 1,
1995 1994
Cash flows from operating activities
Net income $3,402,476 $ 4,841,961
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 1,138,783 1,086,753
Amortization 15,148 17,572
Provision for losses on accounts receivable 81,000 101,250
Loss from retirement of equipment 17,449 23,493
Transactions with Majority Shareholder 2,113,214 -
Net change in operating assets and liabilities
(Increase) decrease in accounts receivables 294,904 ( 5,261,545)
(Increase) decrease in inventory ( 9,557,030) 7,148,642
Increase in accounts
payable and accrued expenses 10,613,631 1,955,191
(Increase) decrease in other assets 294,713 ( 12,690)
Increase (decrease)in other liabilities ( 51,251) 138,034
(Increase) decrease in other current assets ( 435,491) 256,410
Net cash provided by operating activities 7,927,546 10,295,071
Cash flows from investing activities
Purchase of plant & equipment (493,974) ( 693,271)
Decrease in investments - ( 26,064)
Net cash used in investing activities (493,974) ( 719,335)
</TABLE>
See notes to financial statements.
-6-
NCC INDUSTRIES, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<S> <C> <C>
Nine months Ended Nine months Ended
September 30, October 1,
1995 1994
Cash flows from financing activities
Long term debt repayments ( 445,000) ( 445,000)
Net repayments under notes payable,
and bank overdrafts - (7,848,630)
Treasury stock purchases - ( 3,100)
Repayment of Majority Shareholder advances ( 4,910,379) -
Net cash used in financing activities ( 5,355,379) (8,296,730)
Net increase in cash 2,078,193 1,279,006
Cash, beginning of year $ 1,034,820 442,085
Cash, end of quarter $ 3,113,013 $1,721,091
Supplemental disclosure of cash flow information
Cash paid during the nine months for interest $ 766,333 $1,414,623
Cash paid during the nine months for income taxes $ 169,445 $1,189,035
</TABLE>
See notes to financial statements.
-7-
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation:
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have
been included. Operating results for the nine month period
ended September 30, 1995 are not necessarily indicative of
the results that may be expected for the year ending December
31, 1995. The balance sheet at December 31, 1994 has been
derived from the audited balance sheet at that date. For
further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31,
1994.
2. Inventory:
a) Inventories at September 30, 1995 are stated at the lower of cost
(first-in, first-out) or market (generally realizable net
amount), and are obtained from the perpetual inventory
records of the Company. No physical inventory was taken.
b) Inventories consist of:
September 30, December 31,
1995 1994
(unaudited)
Raw Materials $ 7,524,616 $7,744,328
Work in process 10,679,278 9,091,219
Finished goods 30,457,790 24,132,194
Total $ 48,661,684 $40,967,741
3. Net income per share:
Per share amounts are based on the weighted average number
of shares outstanding during the period.
4.Related party transactions:
Registrant's majority shareholder remitted to Registrant's banks
$22,000,000 plus interest on April 26, 1995 in
satisfaction of certain outstanding indebtedness of
Registrant and Registrant recorded a current liability to
Registrant's majority shareholder for this amount.
Registrant recorded this transaction as a non-cash
reduction of Notes Payable-Banks (long and short term).
During the period, the liability to Registrant's majority
shareholder was reduced by cash payments and other non-
cash transactions, principally relating to sales to the
Registrant's majority shareholder.
-8-
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations
Net sales for the third quarter of 1995 were 6.8% lower
than the third quarter of 1994 due to reduced demand for
Registrant's unbranded styles, some of which have been
discontinued. Net sales for the first nine months of 1995
were 2.1% lower than the first nine months of 1994 due to
reduced shipments of unbranded styles.
Unit volume decreased by 3.6% in the third quarter of
1995 as compared to the third quarter of 1994. Unit volume
was generally consistent for the first nine months of 1995
as compared to the first nine months of 1994.
Cost of sales as a percentage of sales increased in the
third quarter and the first nine months of 1995 as compared
to the third quarter and first nine months of 1994, because
of increased production costs. Shipping, selling,
advertising, general and administrative costs were
consistent as a percentage of sales in the third quarter and
the first nine months of 1995 as compared to the third
quarter and the first nine months of 1994.
As a result of additional profits generated by the
operations of Registrant's subsidiary, Registrant's tax
liability dropped in the third quarter of 1995 by
approximately $526,000 ($.12 per share). Registrant
anticipates that its effective tax rate for 1995 will be
approximately 25% as compared to 37% for 1994.
As a result of the aforementioned items, net income for
the third quarter of 1995 decreased slightly from the third
quarter of 1994, and is approximately 30% lower for the
first nine months of 1995 as compared to the first nine
months of 1994.
Financial Condition
Net cash flows provided by operating activities
decreased by approximately $2,368,000 during the first nine
months of 1995 as compared with the first nine months of
1994, primarily due to reduced net income and increased
inventory partially offset by increases in accounts payable
and accrued expenses as a result of continued vendor support
and increases in transactions with majority shareholder.
Inventories at September 30, 1995 were approximately
$9,557,000 higher than at December 31, 1994 due in part to
lower than anticipated shipments in the second and third
quarter of 1995.
Net cash flows from operating activities during the
first nine months of 1995 were primarily used to repay
majority shareholder working capital advances.
-9-
Registrant is a party to a $120,000,000 revolving
credit facility along with Registrant's majority
shareholders and its subsidiaries. At September 30, 1995,
approximately $19,000,000 of the aforementioned facility was
available to Registrant and Registrant's majority
shareholder and its subsidiaries. The availability of such
sources of funds is conditioned upon the Registrant's
business and the business of its majority shareholder
achieving certain financial results. There can be no
assurance, however, that such financial results will be
achieved. In order to finance its capital and other
corporate expenditures, Registrant expects to continue to
use cash from operations and amounts available to Registrant
under the revolving credit facility described
above. Registrant's management believes that Registrant's
sources of funds are sufficient for its foreseeable needs.
-10-
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
Exhibits No. Description
(a) 10 Employment Agreement dated April 26,
1995 between
Maidenform, Inc. and
Frank Magrone
27 Financial Data Schedule
(b) Reports on Form 8-K
A Report on Form 8-K was filed on September 25, 1995.
-11-
EXHIBIT INDEX
Title of Document Page
Employment Agreement dated April 26, 1995
between Maidenform, Inc. and Frank Magrone 14
Financial Data Schedule 26
-13-
SIGNATURES
Pursuant to the requirements to the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
NCC INDUSTRIES, INC.
Date 11-14-95 By: /s/ Peter Muehlbauer
Peter Muehlbauer
Vice President, Finance
Date 11-14-95 By: /s/ Ira Glazer
Ira Glazer
Executive Vice President -
Chief Operating Officer
-12-
EMPLOYMENT AGREEMENT
AGREEMENT, dated April 26, 1995, by and between MAIDENFORM, INC., a
New York corporation having its principal offices at 90 Park
Avenue, New York, New York
10016 ("Maidenform") and FRANK MAGRONE, residing in
Cortland, New York, (the "Employee").
W I T N E S S E T H :
WHEREAS, Employee has been employed as the chief
executive officer of NCC
Industries, Inc. ("NCC") and certain of its subsidiaries;
WHEREAS, concurrent with the execution of this
Agreement, Maidenform, together with its parent Maidenform Worldwide, Inc.
("Worldwide") has acquired approximately
92.4% of the issued and outstanding stock of NCC;
WHEREAS, Maidenform desires to continue the services of
the Employee in a senior executive capacity with Maidenform on the terms and
conditions hereinafter set forth;
NOW, THEREFORE, it is agreed as follows:
1. Employment and Term. (a) Maidenform hereby employs the Employee, and
the Employee hereby agrees to serve, as the Executive Vice-
President - NCC/Lilyette. In addition, the Employee shall serve as one of
the executive vice-presidents of Worldwide and
a director and/or officer of one or more of the other
Affiliated Companies (as hereinafter
defined), if so elected, without any additional salary or
other compensation. The Employee
shall perform such duties to the best of his ability and in
a diligent and proper manner. The
term "Affiliated Companies" shall mean all companies that
are directly or indirectly
Controlled by Worldwide. "Control" and "Controlled" shall
mean ownership of such
number of shares of the outstanding stock of the corporation
involved as shall entitle the
owner(s) to cast 51% or more of the total number of votes
which may be cast by owners of
all of the shares of outstanding stock of such corporation
of all classes entitled to vote.
(b) The term of the Employee's employment
hereunder shall commence
on the date hereof and shall, unless sooner terminated as
hereinafter provided, end on
April 25, 1998, provided that so long as the Employee has
not received notice from
Maidenform that he is in material default hereunder, the
Employee shall have the right, upon
written notice to Maidenform given at least six months prior
to the expiration of the initial
term, to extend such term for a period of one year upon the
terms and conditions hereof,
and provided further that so long as the Employee has not
received notice from Maidenform
that he is in material default hereunder, the Employee shall
have the right, upon written
notice to Maidenform given within six months prior to the
expiration of such one year
extension, to extend the term for an additional year upon
the terms and conditions hereof
(such initial term, together with any extended term, being
hereinafter referred to as the
"Term"), provided that the failure of Maidenform to have
given any notice of material default
to the Employee prior to any election by the Employee to
extend the Term pursuant to this
paragraph 1(b) shall in no way limit the right of Maidenform
to terminate this Agreement
pursuant to paragraph 8(a).
2. Duties. (a) Subject to the ultimate control and
responsibility of the Board of
Directors of Maidenform, any committees thereof and of the
chief executive officer of
Maidenform, the Employee shall have such powers and duties
with respect to the operations
of NCC and if NCC is merged into Maidenform or an Affiliated
Company, the division or
subsidiary resulting therefrom as generally pertain to
executive vice presidents of
Maidenform or its Affiliated Companies who have primary day-
to-day responsibility for
operation of a division. In addition, the Employee shall
have such other specific
responsibilities or duties as are consistent with the
Employee's position, as may be assigned
to him from time to time by the Board of Directors, any
committee thereof or the chief
executive officer of Maidenform.
(b) During the Term, the Employee shall devote
substantially all of his
business time and attention to his obligations hereunder,
subject to vacations with pay
aggregating five weeks per calendar year and normal
holidays. Unused vacation days shall
not be carried forward to another year without the prior
consent of the Board of Directors
or chief executive officer of Maidenform. The Employee
shall be free to engage in other
activities which do not interfere and are not in conflict
with his duties and responsibilities
hereunder and/or the business of any Affiliated Company.
3. Base Salary. During the Term, Maidenform shall
cause the Employee to
receive a total base salary (the "Base Salary") at the rate
of three hundred ninety thousand
($390,000) dollars per calendar year, payable in accordance
with present payroll practices;
with an annual increase, commencing on the first Monday of
each calendar year during the
Term, of five (5%) percent of his prior year's Base Salary
(which increased amount shall then
be the Employee's Base Salary). It is understood that
nothing herein contained shall prevent
the Board of Directors of Maidenform, in its sole and
absolute discretion, from, at any time,
increasing the compensation herein provided to be paid to
the Employee, either permanently
or for a limited period, or from providing additional
compensation to the Employee based
upon the earnings or business of Maidenform, in the event
the Board of Directors in its sole
discretion, evidenced by a resolution duly adopted by said
Board, shall deem it advisable
to do so in order to recognize and fairly compensate the
Employee for the value of his
services to Maidenform and its Affiliated Companies;
provided that this paragraph 3 shall
not in any manner obligate the Board of Directors to make
any such increase or provide any
such additional compensation or benefits.
4. Bonus. The Employee shall be entitled to
participate to the same extent as
other executive vice-presidents of Maidenform in such bonus
plans as shall be developed
by Maidenform for the benefit of executive vice-presidents
of Maidenform.
5. Automobile. Maidenform agrees to make or cause an
Affiliated Company to
continue to make monthly lease payments with respect to the
1995 Mercedes Benz S500
automobile, vehicle identification number WDBGA51E8SA212210
(the "Automobile")
presently leased by NCC for the Employee's personal use.
Maidenform agrees that upon the
expiration of the present lease for the Automobile, it will
(i) exercise the purchase option
contained in such lease in the manner and within the time
specified therein, (ii) purchase
the Automobile, and (iii) upon consummation of such
purchase, transfer to the Employee
good title to the Automobile as a bonus and, except as
hereinafter provided, without cost
to the Employee. Such bonus shall be in addition to, and
not in lieu of, any other bonus
to which the Employee may become entitled. The Employee
shall be responsible for any
transfer costs in connection with such transfer and for any
federal, state or local taxes of any
kind or nature whatsoever, including income taxes, in
connection with such transfer.
6. Working Facilities; Expenses. (a) Maidenform
shall furnish or cause to be
furnished to the Employee suitable offices in New York, New
York and so long as
Maidenform or NCC maintains an office there, in Cortland,
New York; and such other
facilities and services as are suitable to his position and
are adequate for the performance
of his duties hereunder. Maidenform agrees promptly to
reimburse the Employee, or cause
the Employee to be reimbursed, for all reasonable expenses
paid or incurred by the
Employee in connection with the performance of his duties
hereunder upon presentation of
expense reports and receipts as are generally required from
other senior executive officers
of Maidenform.
(b) Maidenform agrees that during the Term the
Employee shall be entitled
to continue to use the co-op apartment owned by NCC at 211
East 53rd Street, New York,
New York (the "Apartment") when he is in New York City. The
Employee understands and
agrees that the Apartment may also be used by other
employees or guests of Maidenform
or its Affiliated Companies, provided that in the event of a
conflict between any planned use
by another employee or guest, the Employee shall have the
first right to use the Apartment.
The Employee agrees to cooperate with Maidenform with regard
to the use of the Apartment
and to reasonably accommodate any conflicting need for use
of the Apartment which
Maidenform may have. It is agreed that the Employee shall
be responsible for scheduling
the use of the Apartment. In the event Maidenform desires
to use the Apartment for another
employee or a guest, it will notify the Employee and arrange
for scheduling with the
Employee.
7. Additional Benefits. (a) The Employee shall be
entitled to participate on the
same basis as all other senior executive officers of
Maidenform in all employee benefits
generally available to such officers, including without
limitation, all group life, long-term
disability and medical benefit, any pension plan (whether
defined benefit, defined
contribution or 401(k)) and other programs generally
available to senior executive officers
of Maidenform; it is specifically understood that, except as
to benefits which accrued prior
to the date hereof, the Employee will not participate in
benefits payable to NCC employees
which are not payable to Maidenform employees. The Employee
shall also be entitled to
accrue benefits under the non-qualified Executive Pension
Plan for Certain Designated
Employees of Maidenform, Inc. (the "Executive Plan") as
amended to provide that the
Employee shall accrue an annual benefit payable for the
Employee's life, commencing at age
sixty-five (65) equal to one (1%) percent of his "Final
Average Compensation" (as hereinafter
defined) for each year (and a prorated portion thereof for
each partial year) the Employee
is employed by Maidenform, commencing with the date of this
Agreement. For purposes
of the computation pursuant to this paragraph, compensation
shall include Base Salary and
bonus. Notwithstanding the five years of service
requirement for vesting under the
Executive Plan, the Employee shall be deemed vested with
respect to all accrued benefits
thereunder. The monthly benefit under the Executive Plan
payable to the Employee shall
be reduced by (i) the actuarial equivalent of any pension
benefit (excluding any amount (x)
attributable to contributions by the Employee, (y)
attributable to NCC contributions for the
period prior to the date hereof, and (z) interest accruing
prior to or after the date hereof on
any amounts included in clauses (x) or (y) hereof) received
under any other pension plans
of NCC which accrues after the date of this Agreement and
(ii) any benefit (excluding any
amount attributable to contributions by the Employee) under
any qualified plan of
Maidenform. The Employee acknowledges that the Executive
Plan is non-qualified and is
an unfunded plan and that the benefits thereunder will be
paid out of the general assets of
Maidenform. In accordance with the Executive Plan, the
Employee will be permitted to
commence to receive benefits prior to his attainment of age
sixty-five, if he retires, at an
amount which is reduced to an actuarial equivalent annual
benefit for the Employee's life.
Such Executive Plan permits the election of a joint and
survivor one hundred percent
annuity which will result in a further reduction to provide
for an actuarial equivalent amount
to be paid for the lives of the Employee and his spouse.
For purposes hereof, "Final
Average Compensation" shall mean the annual average of the
highest sixty (60) months of
compensation in the last one hundred and twenty (120) months
of employment or, if less
than sixty (60) months, the annual average for the period of
employment.
(b) The parties recognize that prior to the date
hereof NCC has reimbursed
the Employee for life insurance premiums of approximately
$42,000 per year payable by an
insurance trust created by the Employee with respect to a
$1,000,000 life insurance policy
(the "Policy") on the life of the Employee. Said
reimbursement was taken into account in
fixing the Employee's Base Salary hereunder. In the event
this Agreement is terminated for
any reason (other than pursuant to paragraph 8(a)(i), (iii)
or (iv)) prior to December 31, 1999,
Maidenform agrees to pay to the Employee, in each calendar
year through the 1999
calendar year, at least ten (10) days prior to the due date
of any premium on the Policy, the
sum of $42,000 less in the calendar year of termination the
product of (i) the number of
months, if any, during such calendar year preceding the due
date for which the Employee
received a payment with respect to his Base Salary, and (ii)
$3,500). The Employee
represents that premiums are payable annually on September
1st of each year.
(c) Without limiting any other perquisites, the
Employee is entitled to the use
of an automobile leased by Maidenform (and payment or
reimbursement of maintenance
expenses), to the extent and on the same terms as Maidenform
makes leased automobiles
available to senior executives (vice-presidents and above)
of Maidenform generally.
8. Termination of Employment. Notwithstanding any
other provision of this
Agreement, the Employee's employment under this Agreement
may be terminated prior to
the expiration of the Term only as follows:
(a) at the option of Maidenform, only in the
event of:
(i) the death of the Employee;
(ii) the Employee's permanent disability,
which shall mean the
Employee's inability for a period of one
hundred and eighty (180)
consecutive days, or for a total of two
hundred and seventy (270) days
in any consecutive five hundred and forty
(540) day period, because
of a physical or mental condition
substantially to render the services
required hereunder;
(iii)the commission by the Employee of a
felony or an act of
dishonesty or willful malfeasance in the
course of his employment by
Maidenform or any Affiliated Company; or
(iv) the Employee's material breach of the
terms of this Agreement,
which breach continues uncured for a period
of thirty (30) days after
written notice from Maidenform to the
Employee.
(b) at the option of the Employee, only:
(i) in the event of any attempt by
Maidenform to terminate the
Employee's employment for any reason not
expressly set forth in
paragraph 8(a);
(ii) for "Good Reason" upon not less than
thirty (30) days written
notice from the Employee to Maidenform or
such shorter notice as is
reasonable under the circumstances. For
purposes hereof, Good
Reason shall mean the occurrence of a
material adverse change,
beyond the Employee's control, in his
personal life (such as, but not
limited to, the serious illness of the
Employee or a member of his
immediate family) as a result of which the
Employee no longer desires
to work and desires to terminate this
Agreement with no contemplation
of working for any other party or becoming
engaged in any activity
which would violate the provisions of
paragraph 11 hereof;
(iii)for "Constructive Termination". For
purposes hereof,
Constructive Termination shall mean (x) the
Assignment to the
Employee of any duties inconsistent in any
material respect with the
Employee's positions (including status,
offices, titles and reporting
requirements), authority, duties or
responsibilities as contemplated by
paragraph 2 of this Agreement or (y) any
other action by Maidenform
which results in a material diminishment in
the Employee's duties or
responsibilities, other than action or
inaction which is remedied by
Maidenform prior to the date of termination
specified in a written
notice from the Employee of termination of
employment by the
Employee for Constructive Termination given
at least thirty (30) days
prior to the proposed date of termination; or
(iv) Maidenform's material breach of the
terms of this Agreement,
which breach continues uncured for a period
of thirty (30) days after
written notice from the Employee to
Maidenform.
(c) Upon the termination of the Employee's
employment for any reason,
the Employee or his legal representatives shall be entitled
to receive promptly any Base
Salary and bonus accrued to the date of such termination.
If such termination is for any
reason other than pursuant to paragraphs 8(a) or 8(b)(ii),
the payments pursuant to the
preceding sentence shall be in addition to any other rights
the Employee may have.
9. Indemnification. Maidenform will indemnify the
Employee to the fullest extent
permitted by law and the existing certificate of
incorporation and by-laws of Maidenform
and its Affiliated Companies, and the Employee shall also be
entitled to the full protection
of any insurance policy which Maidenform or any other
Affiliated Company may elect to
maintain generally for the benefit of its directors and
officers, against all costs, charges, and
expenses whatsoever incurred or sustained by him or his
legal representatives in connection
with any action, suit, or proceeding to which he may be made
a party by reason of his
being or having been at any time a director or officer of
Maidenform or any of its Affiliated
Companies or by reason of any action at any time taken by
him in good faith on behalf of
Maidenform or any of its Affiliated Companies.
10. Stock Repurchase. The Employee and, by its
execution of this Agreement,
Worldwide, agree that:
(a) Upon (i) expiration of the Term; or (ii)
termination of this Agreement by
Maidenform pursuant to paragraphs 8(a)(i) or (ii) for other
reason other than pursuant to
paragraphs 8(a)(iii) or (iv); or (iii) termination hereof by
the Employee pursuant to paragraph
8(b) (each event described in clauses (i) through (iii) is
hereinafter referred to as a "Purchase
Event"):
(x) if the Purchase Event shall occur prior
to the "IPO Date" (as
said term is defined in the "Shareholders'
Agreement" dated the date hereof
by and among Worldwide and its shareholders),
Worldwide shall purchase
and the Employee or his personal representative
shall sell all of the shares of
Class A Common Stock obtained by the Employee on
the date hereof pursuant
to the Stock Purchase Agreement dated the date
hereof between Worldwide,
the Employee and certain other stockholders of NCC
(the "Acquisition Shares")
at a price equal to the greater of the fair market
value of such shares (as
determined in paragraph 10(c) below) and
$3,255,000, payable in cash on a
date, specified by Worldwide, which shall be
within sixty (60) days after the
occurrence of any Purchase Event, unless any such
purchase would (i) be
prohibited by, or result in a default (after the
giving of notice or the passage
of time or otherwise) or a mandatory payment under
any loan agreement
("Loan Agreement") to which Worldwide is a party
or by which it is bound
or (ii) would violate any applicable law (each
such event being referred to
herein as a "Blocking Event"), in which event
payment would be made to the
extent, if any, then permitted under such Loan
Agreement or by law (with the
proportional number of shares sold and delivered
to Worldwide upon such
payment). The balance of the payment shall be
made (and corresponding
shares delivered) within five (5) business days
after the cessation of any
applicable Blocking Event. Notwithstanding
anything contained in this
paragraph 10(a), the Employee or his personal
representative shall have the
right to elect by written notice to Worldwide at
least thirty (30) days prior to
the expiration of the Term or within fifteen (15)
days after the occurrence of
any other Purchase Event to retain the Acquisition
Shares in which case
Worldwide shall have no obligation to buy and the
Employee shall have no
obligation to sell hereunder; or
* (y) if the Purchase Event shall occur after
the IPO Date, and if within
eighteen (18) months after the occurrence of such
Purchase Event, the
Employee or his personal representative has sold
all of the Acquisition Shares
in the public market (or for any reason consented
to by Worldwide (which
consent shall not be unreasonably withheld) has
been unable to sell all of
such shares) for less than XXXXXXXXXX, the
Employee or his personal
representative shall have the right, by written
notice to Worldwide given not
later than ten (10) days after the expiration of
such eighteen (18) month period
to require Worldwide to pay to the Employee the
amount by which
XXXXXXXXXX exceeds the amount realized by the
Employee or his personal
representative upon such sales and the Employee or
his personal
representative shall concurrently deliver to
Worldwide the unsold Acquisition
Shares. The closing of such sale shall take place
on a date specified by
Worldwide, which shall be within sixty (60) days
after the earlier to occur of
(a) the sale of all of the Acquisition Shares and
the delivery of evidence
thereof by the Employee or his personal
representative to Worldwide, and (b)
the expiration of such eighteen (18) month period,
unless any such purchase
would be prevented by a Blocking Event in which
event payment would be
made to the extent, if any, then permitted under
such Loan Agreement or by
law (with the proportional number of shares sold
and delivered to Worldwide
upon such payment, to the extent that the payment
includes a payment for
shares which Worldwide is obligated to buy
hereunder). The balance of the
payment shall be made (and corresponding shares
delivered) within five (5)
business days after cessation of any applicable
Blocking Event.
*REQUEST FOR CONFIDENTIALITY
(b) Upon termination of this Agreement for any
reason other than a Purchase
Event (such other reasons are each hereinafter referred to
as an "Additional Purchase Event"):
* (x) if the Additional Purchase Event shall
occur prior to the IPO Date, the Employee or his personal representative
shall have the right to elect,
by written notice to Worldwide at least sixty (60)
days prior to date on which
this Agreement would have expired if such
Additional Purchase Event had not
occurred, to sell to Worldwide, and Worldwide
shall be obligated to
purchase, the Acquisition Shares at a price equal
to XXXXXXXXXX, payable in
cash on a date specified by Worldwide, which shall
be within sixty (60) days
following the date on which this Agreement would
have expired if such
Additional Purchase Event had not occurred, unless
any such purchase would
be prevented by a Blocking Event, in which event
payment would be made
to the extent, if any, then permitted under such
Loan Agreement or by law
(with the proportional number of shares sold and
delivered to Worldwide
upon such payment). The balance of the payment
shall be made (and
corresponding shares delivered) within five (5)
business days after the
cessation of any applicable Blocking Event; or
* (y) if the Additional Purchase Event shall
occur after the IPO Date, and
if within eighteen (18) months after the
occurrence of such Additional
Purchase Event, the Employee or his personal
representative has sold all of the
Acquisition Shares in the public market (or for
any reason consented to by
Worldwide (which consent shall not be unreasonably
withheld) has been
unable to sell all of the shares) for less than
XXXXXXXXXX, the Employee or his
personal representative shall have the right, by
written notice to Worldwide
within thirty (30) days after such eighteen (18)
month period, to require
Worldwide to pay to the Employee or his personal
representative the amount
by which XXXXXXXXXX exceeds the amount realized by
the Employee or his
personal representative upon such sales and the
Employee or his personal
representative shall concurrently deliver to
Worldwide the unsold Acquisition
Shares. The closing of such sale shall take place
on a date specified by
Worldwide which shall be within the later to occur
of sixty (60) days (i) after
the delivery of such notice and (ii) following the
date this Agreement would
have expired if such event had not occurred,
unless any such purchase would
be prevented by a Blocking Event, in which event
payment would be made
to the extent, if any, then permitted under such
Loan Agreement or by law
(with the proportional number of shares sold and
delivered to Worldwide
upon such payment, to the extent that the payment
includes a payment for
shares which Worldwide is obligated to buy
hereunder). The balance of the
payment shall be made (and corresponding shares
delivered) within five (5)
business days after cessation of any applicable
Blocking Event.
*REQUEST FOR CONFIDENTIALITY
(c) As used herein, "Fair Market Value" shall
mean such amount as the
Employee and Worldwide may agree upon, or if the Employee
and Worldwide shall be
unable to agree, then the price that would be paid for
Acquisition Shares in a sale by a
willing seller under no compulsion to sell and a willing
buyer under no compulsion to buy
and shall be determined by an investment banking firm of
nationally recognized standing
mutually acceptable to and selected by the Employee and
Worldwide within ten days after
either shall give notice to the other of a request for the
determination of such amount by an
investment banking firm, provided however, if the Employee
and Worldwide cannot agree
upon a mutually acceptable investment banking firm within
such ten (10) day period, the
Employee and Worldwide shall, within such ten day period,
each choose one investment
banking firm of recognized standing and the respective
chosen firms shall, within five (5)
days after the latter of such firms is chosen, agree on
another investment banking firm which
shall be engaged to make the determination of Fair Market
Value. The determination by the
engaged firm shall be made as soon as practicable but not
later than thirty (30) days after
the date such firm is engaged. The cost of the investment
banking firm or firms selected
pursuant to this provision shall be equally divided by the
Employee and Worldwide.
(d) In the event the Employee determines to
dispose of any of the Acquisition
Shares under circumstances where the provisions of paragraph
10(a)(y) or (b)(y) might apply,
in order to maintain an orderly market for Worldwide's
publicly traded shares, the Employee
agrees to consult with Worldwide as to the method of sale
and further agrees to adhere to
any reasonable requirements Worldwide may impose upon the
Employee with respect to
such sales. It is understood and agreed that if as a result
of complying with any such
request of Worldwide, the Employee is unable to dispose of
all of the Acquisition Shares,
Worldwide shall be deemed to have consented to such failure
to sell.
(e) Worldwide agrees that from and after the
accrual of any obligation to the
Employee pursuant to this paragraph 10, it will not make nor
will it permit any of its
subsidiaries to make, any payment or distribution to any of
its shareholders (in their capacity
as such), which if made would inhibit the ability of
Worldwide to make any payment which
may be due to the Employee pursuant to this paragraph 10.
11. Covenant Not to Compete; Confidentiality.
(a) The Employee agrees that, except as provided
below, during the Term
hereof and for a period of two years thereafter, the
Employee shall not, without the prior
written approval of Maidenform, directly or indirectly,
become an officer or director of, or
become employed by, or render consulting, advisory or other
services to, or engage or
participate in, or make any financial investment in, any
firm, corporation or business
enterprise, wherever located, which is engaged, directly or
indirectly, in competition with
any of the business operations or activities of Maidenform
or the Affiliated Companies as
conducted on the date this Agreement is terminated. Nothing
herein shall prohibit the
Employee from owning (i) not more than 2% of the outstanding
amount of any class of stock
or other securities of any corporation any of whose stock or
other securities are publicly
held and traded on a national securities exchange or on a
generally recognized over-the-
counter market, or (ii) a passive noncontrolling investment
interest in a private company
which was not in competition with the business of Maidenform
or that of any Affiliated
Company as conducted on the date this Agreement is
terminated. In addition, nothing
herein shall prevent the Employee from owning approximately
five (5%) percent of the
outstanding stock of the Marietta Corporation ("Marietta"),
and from serving as a member
of its board of directors, provided that the Employee's
duties as a director of Marietta do not
interfere with the Employee's duties and responsibilities
hereunder and further provided that
Marietta does not become involved or associated in any way
with any business in
competition with the business of Maidenform or that of any
Affiliated Company.
(b) The Employee further agrees that, during the
Term and thereafter, he
will not disclose (except he may disclose to Triumph
International Overseas, Limited
("Triumph") and its affiliates so long as Triumph is
entitled pursuant to the terms of the
Shareholders' Agreement to designate any member of the Board
of Directors of Worldwide)
or use any confidential or proprietary information
pertaining to (i) the business of
Maidenform or any Affiliated Company or (ii) the past,
present, planned or considered
business activities of Maidenform or any Affiliated Company
("Information") of which he
learned or learns while an officer, director or employee of
Maidenform or any Affiliated
Company; provided, however that Information shall not
include any information that at the
time of disclosure is generally available to and known by
the public or in the foundation
garment industry (other than as a result of a breach by the
Employee of this paragraph
11(b)).
(c) If a court finds any provision of this
paragraph 11 to be unreasonable,
the parties authorize the court to reformulate the
provisions so that they would be deemed
reasonable.
(d) The Employee represents and admits that, as
of the date hereof, the
Employee's experience and capabilities are such that he can
obtain employment in a
business engaged in other lines and/or of a different
nature, and that the enforcement of this
paragraph 11 by way of injunction will not prevent the
Employee from earning a livelihood.
(e) In the event the Employee terminates this
Agreement pursuant to
paragraphs 8(b)(i), (iii) or (iv) hereof, paragraph 11(a)
hereof, Section 5.13 of the Stock
Purchase Agreement and Section 15 of the Stockholders'
Agreement shall terminate and be
of no further force or effect with respect to the Employee.
12. Relief Available to Employers for Certain
Breaches. The Employee
acknowledges that in the event of a breach by him of any of
Employee's agreements
contained in paragraph 11, Maidenform or any of the
Affiliated Companies shall be entitled
to immediate relief enjoining such violations in any court
or before any judicial body having
jurisdiction over such a claim.
13. Entire Agreement; Amendment. This Agreement
contains the entire agreement
between Maidenform and the Employee with respect to the
subject matter hereof. This
Agreement may not be amended, waived, change, modified, or
discharged except by an
instrument in writing executed by or on behalf of the party
or parties against whom any
amendment, waiver, change, modification, or discharge is
sought to be enforced.
14. Notices. All notices, requests, demands, and
other communications hereunder
shall be in writing and shall be deemed to have been duly
given if delivered or mailed by
certified mail, return receipt requested, as follows:
(a) To Maidenform or any of the Affiliated
Companies:
Maidenform, Inc.
90 Park Avenue
New York, New York 10016
Attention: Steven N. Masket
with a copy to:
Baer Marks & Upham
805 Third Avenue
New York, New York 10022
Attention: Stanley E. Bloch, Esq.
(b) To the Employee:
Mr. Frank Magrone
Cosmos Heights, R.D. 4
Cortland, New York 13045
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
and/or to such other persons and addresses as any
party shall have specified
in writing to the other by notice as aforesaid.
15. Governing Law. This Agreement shall be governed
by and construed in
accordance with the laws of the State of New York applicable
to contracts executed and to
be entirely performed within said State.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the
date first above written.
ATTEST: MAIDENFORM, INC.
By:/S/ FRANK MAGRONE
WITNESS:
Frank Magrone
Agreed to as to Paragraph 10:
MAIDENFORM WORLDWIDE, INC.
By:
GUARANTY
MAIDENFORM WORLDWIDE, INC. (the "Parent") hereby
unconditionally guarantees
the full and timely performance of the foregoing Employment
Agreement by its wholly
owned subsidiary, Maidenform, Inc. (the "Company"). This is
a guarantee of performance
and payment, not of collection, and shall be binding upon
the Parent's successors and
assigns. If any event or circumstance, other than the
bankruptcy or insolvency of the
Company, arising out of any action or inaction of Frank
Magrone ("Event") should occur
which under any statute or case law doctrine would
constitute a legal or equitable discharge
of or defense to a guarantor's obligations, but which Event
does not constitute a legal or
equitable discharge of or defense to the Company's (as
principal) obligations, then the
obligations of the Parent hereunder shall not be affected,
modified or in any other manner
impaired in whole or in part (other than to give the Parent
the benefit of any waiver,
modification or other Event to which the Company as
principal would be entitled).
MAIDENFORM WORLDWIDE, INC.
By:/S/ STEVEN N. MASKET
Steven N. Masket
Executive Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,113,013
<SECURITIES> 0
<RECEIVABLES> 16,072,800
<ALLOWANCES> 0
<INVENTORY> 48,661,684
<CURRENT-ASSETS> 70,285,905
<PP&E> 10,524,060
<DEPRECIATION> 0
<TOTAL-ASSETS> 82,310,694
<CURRENT-LIABILITIES> 38,258,778
<BONDS> 0
<COMMON> 4,866,841
0
0
<OTHER-SE> 34,519,283
<TOTAL-LIABILITY-AND-EQUITY> 82,310,694
<SALES> 92,542,402
<TOTAL-REVENUES> 92,542,402
<CGS> 87,078,946
<TOTAL-COSTS> 87,078,946
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,405,427
<INCOME-PRETAX> 4,058,029
<INCOME-TAX> 655,553
<INCOME-CONTINUING> 3,402,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,402,476
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
</TABLE>
