SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
( MARK ONE )
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
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 of organization) Identification No.)
165 Main Street, Cortland, New York 13045-5428
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 607-756-2841
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $1.00 par value per share
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form l0-K or any amendment to
this Form 10-K. X
The aggregate market value of the voting stock held by non-affiliates
of Registrant as of March 29, 1996 was $2,608,168. .
At March 29, 1996, there were outstanding 4,375,492 shares of
Registrant's Common Stock, par value $1.00 per share.
Documents Incorporated by Reference: None
The Exhibit Index is on page 48.
Part I
Item 1. Business.
General
NCC Industries, Inc. (hereinafter referred to as
"Registrant") is engaged in the foundation garment business, which
consists of the design, manufacture and sale of brassieres,
panties and girdles.
On April 26, 1995, Maidenform Worldwide, Inc. ("Worldwide")
acquired approximately 92.4% of the common stock of Registrant
from Triumph International Overseas, Limited, a Liechtenstein
corporation ("Triumph"), Guenther Spiesshofer and Frank Magrone,
Registrant's Executive Vice President (the "Acquisition").
Following the closing of this Acquisition, Worldwide contributed
all of the purchased shares of Registrant's common stock to
Maidenform, Inc.("Maidenform"), a wholly owned subsidiary of
Worldwide. Simultaneously, Triumph purchased, along with Mr.
Magrone, approximately 28% of the outstanding shares of Class A
common stock of Worldwide and, therefore, Triumph remains a
related party to Registrant. Concurrent with the consummation
of the Acquisition, all members of Registrant's Board of
Directors (with the exception of Mr. Magrone) resigned and the
current board members were elected to replace the resigning
directors.
Classes of Similar Products
The revenues from sales of brassieres and panties and
girdles during the years ended December 31, 1995, 1994 and
1993 were as follows:
Year Ended December 31
1995 1994 1993
Net Percent Net Percent Net Percent
Sales of Sales Sales of Sales Sales of Sales
Brassieres $116,221,240 92.2% $117,793,706 92.0% $101,866,614 92.1%
Panties and
Girdles 9,766,086 7.8% 10,248,716 8.0% 8,731,168 7.9%
$125,987,326 100.0% $128,042,422 100.0% $110,597,782 100.0%
Sales
Most of the items manufactured by Registrant are
popularly priced, but Registrant manufactures some budget
priced and higher priced items. Sales are made to department,
specialty, discount and chain stores throughout the United
States.
Registrant owns the following trademarks: "Lilyette,"
"Minimizer," and "Reflections." In addition, Registrant
manufactured brassieres as a contractor under the trademark
"Bill Blass". Registrant has been notified by a customer that
the "Bill Blass" program has been terminated. Registrant's
management believes that this customer will at least partially
replace this volume with products in Registrant's current
manufacturing lines. Registrant holds a non-exclusive license
to manufacture brassieres under the trademark "Revlon".
Registrant holds no other trademarks, patents, licenses,
franchises or concessions which it deems material. During
1995, approximately 63% of Registrant's total sales were made
under Registrant's trademarks (as compared to 61% in 1994 and
1993), and substantially all the balance of sales were made
either under customers' names or as unbranded merchandise.
Sales of Registrant's trademarked products are made by 23
sales persons who are full time employees of Registrant and by
five independent regional sales representatives. Sales of
Registrant's unbranded and customers' named merchandise are
handled by account executives of Registrant. During 1995,
approximately 14% of Registrant's total sales were made to
Walmart, Inc. ("Walmart") (as compared to 18% in 1994 and 16%
in 1993), approximately 16% of the total sales were made to
J.C. Penney Company, Inc. ("Penney") (as compared to 17% in
1994 and 20% in 1993), approximately 4% of the total sales
were made to Mast Industries, Inc. ("Mast") (as compared to
10% in 1994 and 8% in 1993) and approximately 11% of total
sales were made to Mervyn's Department Stores, Inc.
("Mervyn's)(as compared to 9% in 1994 and 1993). Registrant
has no contracts or agreements with any of Walmart, Penney,
Mast, or Mervyn's with respect to purchase of merchandise
other than standard purchase orders. Although Registrant has
made substantial sales to Penney and Mervyn's for many years,
to Walmart since 1990, and to Mast since 1989 there can be no
assurance that Penney, Walmart, Mast or Mervyn's will continue
to purchase Registrant's products in the future. The loss of
any of Penney, Walmart, Mast or Mervyn's as a customer, or a
substantial decrease in their purchase of Registrant's
products, could have a materially adverse effect on
Registrant's business. Registrant does not engage in
significant sales in foreign markets.
Manufacturing Facilities and Purchases of Finished Goods
Registrant manufactures a portion of its products in
Registrant's plant located in Aguada, Puerto Rico. Registrant
also utilizes certain manufacturing facilities of both
Maidenform and Triumph and certain of Maidenform's affiliates
in the Caribbean, Mexico and Central America, and Triumph's
affiliates in the Far East and South America (see "Item 13.
Certain Relationships and Related Transactions") and utilizes
independent sewing contractors located in the United States,
the Dominican Republic,
El Salvador and Colombia. During 1993, 1994 and 1995,
Registrant significantly expanded its relationship with an
independent sewing contractor in the Dominican Republic.
Registrant provided loans to such contractor to finance the
expansion of its facilities to accommodate such increased
demand by Registrant. With regard to Registrant's utilization
of Maidenform's and Triumph's manufacturing facilities or
those of independent contractors, Registrant operates in three
ways. Registrant cuts raw materials in its plant in Cortland,
New York and ships such cut materials to the Far East, South
America, Puerto Rico and the Dominican Republic for assembly
by Triumph's or Maidenform's respective affiliate, or by a
licensee, or by independent contractor. The finished products
are returned to Registrant for finishing, packaging and sale
to customers. Registrant sends raw materials to Maidenform's
cutting facility in Jacksonville, Florida, who then cuts the
material and ships such cut materials to any of the same
affiliates, licensees or contractors for assembly. In
addition, Registrant purchases finished goods from Triumph and
its affiliates most of which are manufactured in the Far East.
In March 1996, Registrant made a decision to close its
subsidiary's two leased Puerto Rican manufacturing facilities
and subsequent to that date began a process of notification of
employees and the government of Puerto Rico. Although the
government of Puerto Rico has made offers to Registrant to
retain the facility which Registrant's management is
considering, management believes that the facility will be
closed and its sewing assembly operations will be transferred
to other locations.
Registrant's management believes that all equipment from
these facilities will be used at other locations; however, the
leases on these facilities, which have combined annual rental
of approximately $94,000, do not expire until 1999 and 2002.
Registrant's management has not determined the total expected
cost of the closure which will be recorded in 1996.
Sources of Raw Materials
Registrant purchases its raw materials from various
domestic suppliers. Three suppliers account for approximately
30% of the raw materials used by Registrant; however,
Registrant believes adequate alternative sources are
available for all its raw materials needs.
Working Capital
Historically, raw materials have been readily available
from a number of suppliers and it has not been necessary for
Registrant to maintain a substantial inventory in order to
fill orders. Registrant has been required to maintain higher
work-in-process inventories than other domestic manufacturers
because a substantial portion of the products that it
manufactures is cut at Registrant's main plant in the United
States, shipped to manufacturing facilities outside the
continental United States for sewing and then returned for
finishing, packaging and sale. In addition, since Registrant
has experienced long lead times in obtaining merchandise from
the Far East and South America, Registrant carries higher
inventories of finished goods to meet its shipment obligations
to customers. Registrant endeavors to utilize its domestic
production capacity to meet the short-term needs of its
customers. Registrant believes that its practices with
respect to working capital items are consistent with industry
practices of companies whose manner of production, shipment
levels or manufacturing sites, as the case may be, are similar
to Registrant's.
Backlog
Registrant's management estimates the dollar amounts of
backlogs of unfilled orders as of December 31, 1995 and
December 31, 1994 were $9,719,000 and $12,200,000,
respectively. Registrant's management believes that all
orders received and unfilled as of December 31, 1995 are firm
and will be filled within the current fiscal year.
Competitive Conditions
Marketing efforts by Registrant during 1995 involved
mainly catalog and newspaper advertising of its products,
including cooperative advertising.
While many factors can affect success in the marketplace,
those which affect Registrant's product lines include price,
cost, quality, style, color, fit and material content.
Registrant's management believes that no single factor
materially affects its competitive abilities. Registrant
endeavors to use creative approaches in the design,
manufacture and marketing of its products, and to combine
these elements in a manner which Registrant deems suitable for
success.
Management estimates that during 1995 sales by Registrant
accounted for approximately 8% of all domestic sales of
brassieres, panties and girdles. In the opinion of
management, there are at least five companies, including
Maidenform, which are of larger size and which sell more
brassieres, panties and girdles to the retail industry in the
United States than does Registrant.
Employees
At December 31, 1995, Registrant employed 1767 persons,
of whom 1346 were production employees. The remainder of such
employees were engaged in sales, distribution, design and
administrative activities. As a result of an organization
campaign, Union Needletrade Industrial Textile Employees
("UNITE") is now recognized as the collective bargaining agent
and representative of certain production workers at the
Cortland facilities. UNITE has demanded the right to
negotiate a contract, and Registrant has entered into
negotiations with the union. Approximately 30% of the
Registrant's employees will be covered by such a contract.
Item 2. Properties.
The location, terms of occupancy and general
character of the principal plants of Registrant as of
March 29, 1996 were as follows:
<TABLE>
<S> <C> <C> <C>
Area Expiration
(approx. Type of Date of
Location Sq.Ft.) Occupancy
Lease Use
Cortland, 150,000 Owned - Executive,
New York Administration,
Manufacturing,
Warehousing, and
Distribution
Cortland- 155,000 Owned - Administrative,
ville (Subject to Manufacturing,
New York Installment Sale Warehousing , and
Agreement with Distribution
Cortland County
Industrial
Development
Agency)
New York, 15,525 Leased 05/31/03 Executive,
New York Administrative,
and Sales
Office
Aguada, 32,233 Leased 05/31/99 Manufacturing
Puerto Rico Plant
Aguada, 23,082 Leased 09/30/03 Manufacturing
Puerto Rico Plant
</TABLE>
Management of Registrant believes that it has
accessibility to production capacity to meet its current needs
and its anticipated growth. Triumph and Maidenform have both
agreed to make their facilities available to fill such
purchase orders as Registrant may from time to time submit
(see "Item 13. Certain Relationships and Related
Transactions"). See also "Item 1. Business - Manufacturing
Facilities and Purchases of Finished Goods". See also Note 13
to Financial Statements.
Item 3. Legal Proceedings.
Registrant is subject to actions that arise in the
ordinary course of its business activities. Registrant's
Management believes that any resolution of such matters will
not materially affect the financial position or results of
operations of Registrant. Registrant's Management believes
that they have meritorious defenses and intends to vigorously
defend such actions.
Item 4. Submission of Matters to a Vote of Security
Holders.
Not Applicable.
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
Registrant's Common Stock is traded in the over-the-
counter market. The Common Stock is only sporadically traded
in such market and, accordingly, the bid prices listed below
do not necessarily represent actual transactions. The per
share range of high and low bid quotations, as reported by the
National Quotation Bureau, for each of the quarters during the
fiscal years ended December 31, 1995 and December 31, 1994 is
as follows:
Year Ended December 31, 1995
Quarter Bid
1 High 11 5/8
Low 6 3/4
2 High 15
Low 6 3/4
3 High 12 3/4
Low 6 3/4
4 High 12
Low 6
Year Ended December 31, 1994
Quarter Bid
1 High 6 1/2
Low 4 1/4
2 High 6 3/4
Low 6 1/2
3 High 6 3/4
Low 6 1/2
4 High 9
Low 6 3/4
The prices set forth above reflect inter-dealer prices without
adjustment for retail markups, markdowns or commissions.
There were no cash dividends paid during the periods shown
above. At March 29, 1996, there were 367 record holders of
Common Stock. As of March 29, 1996, the closing quoted bid
price per share was $8.00.
Item 6. Selected Financial Data.
A summary of selected financial data follows:
<TABLE>
<S> <C> <C> <C> <C>
Year ended December 31
1995 1994 1993 1992 1991
Revenue $125,987,326 $128,042,422 $110,597,782 $106,607,410 $ 89,131,826
Income before
extraordinary item $ 2,750,664 $ 5,901,012 $ 3,714,799 $ 7,097,181 $ 4,905,179
Net income $ 2,750,664 $ 5,901,012 $ 3,714,799 $ 6,212,775 $ 4,905,179
Income per share
before cumulative
effect of changes in $.63 $1.35 $.85 $1.55 $1.04
accounting principles
Cumulative effect of
changes in accounting - - - ($.20)(1) -
principles per share
Net income per share $.63 $1.35 $.85 $1.35 $1.04
Total Assets $ 75,368,742 $ 71,588,003 $ 76,664,638 $ 62,561,745 $ 49,276,554
Long-term obligations $ 3,581,371 $ 12,162,043 $ 13,479,802 $ 13,115,102 $ 13,908,805
Shareholders' equity $ 38,831,751 $ 35,983,648 $ 30,154,986 $ 26,581,770 $ 22,854,004
Cash dividends per
common share None None None None None
</TABLE>
(1) represents cumulative effect of changes in accounting principles for income
taxes and post-retirement benefits.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
Registrant's working capital decreased to $31,673,000 at
December 31, 1995 from $35,149,000 at December 31, 1994 primarily
due to repayment of long term debt of $7,000,000 offset by net
income of $2,75l,000. Registrant participates in the
consolidated cash management system of its ultimate parent,
Worldwide, and its subsidiaries, including Maidenform and the
Registrant, (collectively "the Maidenform Group"). As such,
Registrant is a party to, and its liquidity is dependent upon the
Maidenform Group's financing arrangements. In 1995, the
Maidenform Group entered into a revolving credit facility for
$120,000,000 coupled with a $50,000,000 term loan, and
$30,000,000 in senior notes, in connection with each of which
Registrant's assets and stock are pledged as collateral. Under
the revolving credit facility, the Maidenform Group may borrow,
repay, and reborrow through April 25, 1998, the facility
expiration date; however, borrowings are limited to certain
percentages of the Maidenform Group's trade accounts receivable
and inventories.
As of December 31, 1995, outstanding borrowings under the
revolving credit facility amounted to $81,000,000. In addition,
outstanding letters of credit (which reduce the maximum available
borrowing) issued by the bank for the account of the Maidenform
Group under the facility amounted to approximately $3,000,000.
In January and February 1996, the Maidenform Group borrowed the
remaining $36,000,000 available under the facility. On March 29,
1996, in order to address the liquidity needs of the Maidenform Group, the
bank loan agreement was amended to (1) provide an additional term loan in
the amount of $20,000,000 and (2) revise the financial covenants. The
Maidenform Group borrowed the entire additional amount to pay down certain
trade payables of the Maidenform Group and such amounts are repayable as
follows: $10,000,000 on August 15, 1996 and $5,000,000 on each of
October 30, 1996 and November 30, 1996.
Registrant's management believes that the Maidenform Group's line
of credit and debt capacity, together with continued vendor
support are adequate to meet its anticipated operating needs through
the end of 1996. However, in the event of any material adverse change in
either vendor support or in Registrant's currently anticipatd sales of 1996,
Registrant could experience an adverse impace on its liquidity.
As of December 31, 1995, Registrant did not have any material
commitments for capital expenditures.
Cash flows provided by operations, for the year ended
December 31, 1995 were $19,765,000 representing an increase of
$4,350,000 as compared to the year ended December 31, 1994. This
increase was primarily due to an increase in Accounts Payable in
1995 of $13,066,000 as compared to an increase in Accounts
Payable in 1994 of $1,880,000. This increase was partially
offset by an increase in inventory of $5,916,000 in 1995 as
compared to an decrease in inventory of $9,012,000 in 1994. In
connection with the Acquisition, Registrant's previous long and
short term bank debt was paid in full by the Maidenform Group as
an advance from some of the proceeds of the current bank
agreements. Cash flows provided by operations for the year ended
December 31, 1994 were $15,415,000, representing an increase of
$21,582,000 as compared to the year ended December 31, 1993.
This increase was due to a decrease in inventory in 1994 of
$9,012,000 as compared to an increase in inventory in 1993 of
$13,514,000. Such decrease resulted primarily from higher
shipments in 1994 as compared to lower than anticipated shipments
in 1993.
Cash used in investing activities for 1995 was $630,000
representing a decrease of $674,000 in 1995 as compared to 1994.
This decrease was primarily due to a reduction in purchase of
plant and equipment of $606,000. Cash used in investing
activities for 1994 was $1,304,000 representing a decrease of
$3,770,000 in 1994 as compared to 1993. This decrease was
primarily due to a reduction in purchases of plant and equipment
of $1,954,000 and a reduction in loans to an independent sewing
contractor of $1,579,000. Cash used in financing activities in
1995 was $19,445,000 representing an increase of $5,916,000 in
1995 as compared to 1994 due to repayment of bank debt by
Registrant from funds received from Maidenform. Cash used in
financing activities in 1994 was $13,529,000 representing an
increase of $23,527,000 in 1994 as compared to 1993 due to a
reduction in net borrowings of $13,081,000 in 1994 whereas
Registrant's net borrowings increased $10,481,000 in 1993.
Results of Operations
Net sales for 1995 were approximately 2% lower than in 1994,
principally due to a decrease in demand for Registrant's products
primarily at Walmart and Mast, partially off set by strength in
the Lilyette brand. Registrant's management believes that these
customers will at least partially replace this volume with the
products in Registrant's current manufacturing lines. Net sales
for 1994 were approximately 16% higher than in 1993, principally
due to an increase in demand for Registrant's products. Unit
volume of goods sold decreased 1% from 1994 to 1995 and increased
12% from 1993 to 1994. Sales mixture (a weighted average of
revenue per unit, taking into account the sales levels of
Registrant's various products and styles of products) resulted in
a decrease in the average revenue per unit sold of less than 1%
in 1995 over 1994 and a 2% increase of the average revenue per
unit sold in 1994 over 1993.
Gross margin decreased to $28,185,000 for the year ended
December 31, 1995 from $32,539,000 in 1994 and $28,446,000 in
1993. The gross margin percentage to net sales decreased to
22.4% in 1995 from 25.4% in 1994. The gross margin percentage to
net sales decreased slightly to 25.4% in 1994 from 25.7% in 1993.
Shipping and general and administrative expenses as a percentage
of net sales were generally consistent for the years ended
December 31, 1995, 1994 and 1993. Selling and advertising
expenses were consistent for the years ended December 31,1995 and
1994 and decreased as a percentage of net sales for the year
ended December 31, 1994 as compared to the year ended December
31, 1993 because of the non-recurrence in 1994 of expenditures
related to a national advertising campaign promoting one of
Registrant's related brands in 1993. Interest expense for 1995
was 15% higher than in 1994 due to higher interest rates
partially offset by lower average borrowings. Interest expense
was generally consistent for 1994 and 1993.
Registrant's effective tax rate was generally consistent in
1995, 1994 and 1993.
As a result of the above factors, Registrant's net income
decreased 54% in 1995 as compared to 1994 and increased 58.9% in
1994 as compared to 1993.
In March 1996, the Registrant made a decision to close its
leased facilities in Puerto Rico. See Note 13 to the Financial
Statements.
Item 8. Financial Statements and Supplementary Data.
The financial statements and supplementary data are
listed
under Item 14 in this Annual Report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of Registrant.
The table below sets forth the names and ages of all of the
directors and executive officers of Registrant as of March 29, 1996.
The term of each director expires at the next annual meeting of
stockholders and upon his successor being duly elected and qualified.
Each of the officers serves at the pleasure of the Board of Directors
subject, in the case of Mr. Magrone, to the terms of an employment
agreement. Each of the directors and officers of the Registrant who
are listed below are also directors and /or officers of Maidenform, as
such; such individuals devote their business time to the affairs of
both Maidenform and the Registrant, as required. Mr. Magrone devotes
substantially all of his business time to the affairs of the
Registrant.
Positions
Director Officer and Offices
Name Age Since Since with Registrant
Elizabeth Coleman 48 4/95 4/95 Chairman of the
Board, Chief
Executive Officer
David Masket 65 4/95 4/95 Director,
President
Steven Masket 42 4/95 4/95 Director, Executive
Vice President -
General Counsel,
Secretary
Ira Glazer 44 4/95 4/95 Director, Executive Vice
President Chief Operating
Officer, Treasurer
Frank Magrone 61 12/73 9/75 Director,
Executive Vice
President
Ms. Coleman has been Chairman of the Board and Chief
Executive Officer of Registrant since April 1995. Ms. Coleman is
also Chairman of the Board, Chief Executive Officer of Worldwide
and Maidenform. Ms. Coleman has been a member of the Board of
Directors of Worldwide since 1968. Maidenform is the owner of
approximately 92.4% of the issued and outstanding stock of
Registrant.
Mr. D. Masket has been President and a Director of
Registrant since April 1995. In February 1996, Mr. Masket was
named Vice Chairman of both Worldwide and Maidenform. Mr. Masket
joined Worldwide in 1955, became Executive Vice President in 1974
and Chief Operating Officer in 1990.
Mr. Masket is the father of Mr. Steven Masket who is Executive
Vice President - General Counsel and Secretary of Registrant.
Mr. Glazer has been Executive Vice President - Chief
Operating Officer, Treasurer and a Director of Registrant since
April 1995. In April 1995,
Mr. Glazer was named Executive Vice President - Chief Operating
Officer of both Worldwide and Maidenform. Mr. Glazer joined
Worldwide in 1983 as Assistant Vice President - Finance, became
Treasurer in 1985, Vice President of Finance and Treasurer in
1988 and Senior Vice President - Finance in 1991.
Mr. S. Masket has been Executive Vice President - General
Counsel and Secretary of Registrant since April 1995. In April
1995, Mr. Masket was named Executive Vice President - General
Counsel of both Worldwide and Maidenform.
Mr. Masket joined Worldwide in 1982 as Assistant Counsel, became
General Counsel and Assistant Secretary in 1984, Assistant Vice
President - Counsel in 1985, Vice President, Secretary and
General Counsel in 1988 and Senior Vice President - General
Counsel in 1991. Mr. Masket is the son of Mr. David Masket, who
is President and a Director of Registrant.
Mr. Magrone has been Executive Vice President and Director
of each of Registrant, Maidenform and Worldwide since April,
1995 and was President of Registrant from 1978 to 1995 and of its
former subsidiaries, Crescent Corset Company, Inc. ("Crescent")
and Lilyette Brassiere Co., Inc.("Lilyette"), since 1971 and
1976, respectively. Lilyette and Crescent were merged into
Registrant effective December 31, 1980. Mr. Magrone is a Director
and Executive Vice President of Worldwide.
Compliance with Section 16(a) of the Securities Exchange Act of
1934.
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to Registrant by each person who, at any time
during the fiscal year ended December 31, 1995, was a director,
executive officer or beneficial owner of more than 10% of
Registrant's Common Stock with respect to the fiscal year ended
December 31, 1995, and Forms 5 and amendments thereto furnished
to Registrant by such persons with respect to such fiscal year,
and written representations from certain of such persons that no
Forms 5 were required for those persons, Registrant believes that
during and with respect to the fiscal year ended December 31,
1995, all filing requirements under Section 16(a) of the
Securities Exchange Act of 1934, as amended, applicable to its
directors, executive officers and the beneficial owners of more
than 10% of Registrant's Common Stock were complied with.
Item 11. Executive Compensation
The following table sets forth the compensation paid by
Registrant for the fiscal years ended December 31, 1995,
1994 and 1993 to its Chief Executive Officers and each other
officer whose compensation exceeded $100,000 with respect to
1995:
<TABLE>
<S> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION(1)
ANNUAL COMPENSATION AWARDS PAYOUTS
OTHER
ANNUAL ALL OTHER
NAME AND PRINCIPAL COMPEN STOCK OPTIONS/ LTIP COMPENS-
POSITION YEAR SALARY BONUS SATION AWARDS SARS PAYOUTS TION(2)
Elizabeth Coleman(3) 1995 - - - N/A N/A N/A -
Frank Magrone(4) 1995 $366,894 $ 63,610 - N/A N/A N/A $13,133
1994 $323,086 $200,000 $550,000(5) N/A N/A N/A $12,864
1993 $309,068 $138,000 - N/A N/A N/A $19,415
Angelo Sanguedolce 1995 $162,274 $ 45,000 - N/A N/A N/A $ 9,817
1994 $159,463 $ 89,000 - N/A N/A N/A $19,009
1993 $144,638 $ 61,000 - N/A N/A N/A $19,883
Guenther Spiesshofer(6)1995 - - - N/A N/A N/A -
1994 - - - N/A N/A N/A -
1993 - - - N/A N/A N/A -
Peter Muehlbauer(7) 1995 $125,000 - - N/A N/A N/A $ 5,943
1994 $115,000 $ 38,000 - N/A N/A N/A $ 3,275
1993 $110,000 $ 26,000 - N/A N/A N/A $ 5,168
</TABLE>
(1) Registrant has not provided restricted stock awards, stock
options, stock appreciation rights or long-term incentive payouts
to any executive officers.
(2) In 1995, includes (a) life insurance premiums (Mr. Magrone $1,170
and Mr. Sanguedolce $3,661),and (b) match of individual deferred
compensation amounts (Mr. Magrone $3,914, Mr. Sanguedolce $3,156,
and Mr. Muehlbauer $2,982) and (c) match of lost benefits caused
by IRS limitations on participation in Registrant's defined
contribution plan (Mr. Magrone $8,049, Mr. Sanguedolce $3,000,
and Mr. Muehlbauer $2,961).
Directors receive no special compensation for their
services as directors of Registrant. No Board of Directors
meetings were held in 1995. Registrant's Board of Directors
does not have an audit committee or a nominating
committee.0.97318624
On December 13, 1991, Registrant notified
participants of a defined benefit pension plan (the "Plan"),
in which substantially all of its employees in the Crescent
division participate, that benefits provided by the Plan were
curtailed as of December 31, 1991. The Plan provides that
upon retirement at age 65, each participant will receive a
monthly pension, for his life, or an actuarial equivalent
thereof, equal to two ($2.00) dollars per year of service
prior to December 1, 1971 and five ($5.00) dollars per year of
service after November 30, 1971. The maximum monthly pension
payable at normal retirement date under the plan is one
hundred ($100.00) dollars per month, with adjustment for
actuarially equivalent amounts for both early and late
retirement.
(3) Ms. Coleman is not paid any salary by the Registrant.
Ms. Coleman is an officer of Worldwide and all of her
compensation is paid to her by Worldwide; none of such
compensation is charged to the Registrant.
(4) Mr. Magrone's 1995 salary (commencing July 1995) was paid
to him by Worldwide under his Employment Agreement
(described below) for services rendered by Mr. Magrone on
behalf of the Registrant. Mr. Magrone's salary and bonus
are charged to the Registrant by Worldwide. Under his
Employment Agreement, Mr. Magrone participates in plans
made available to Worldwide's executive officers,
including a stock option plan, executive retirement plan,
profit sharing plan and defined benefit pension plan.
(5) In 1994, included $550,000 paid to Mr. Magrone upon
expiration of the then current term of his employment
agreement.
(6) In connection with the Acquisition, Mr. Spiesshofer
resigned.
(7) Mr. Muehlbauer resigned his position as of December 31,
1995.
Compensation is not considered by the Plan for the purpose of
computing benefits. Since the Plan defines benefits rather
than contributions, costs are not determined on an individual
basis. The amount of the contribution for all participating
employees for the year ending December 31, 1995 was
approximately $253,500. Mr. Magrone is the only officer of
Registrant who participates in the Plan. Mr. Magrone's years
of service, for Plan purposes, include his service time with
Registrant's former subsidiary, Crescent. As of December 31,
1995, Mr. Magrone has 23 years of service credit. Mr. Magrone
expects to receive an annual benefit of twelve hundred
($1,200.00) dollars from the Plan upon his retirement at age
65 from Registrant or an actuarial equivalent thereof.
Compensation Committee Interlocks and Insider Participation
Registrant's Board of Directors does not have a Compensation
Committee. No executive officer of Registrant served during
fiscal year 1995 (i) as a member of the compensation committee or
other board committee performing equivalent functions, or in the
absence of any such committee, the entire board of directors of
another entity, one of whose executive officers served on the
Board of Directors of Registrant; (ii) as a director of another
entity, one of whose executive officers served on the Board of
Directors of Registrant, except as described in Item 10 of Part
III, above; and (iii) as a member of the compensation committee
or other board committee performing equivalent functions or, in
the absence of any such committee, the entire board of directors
of another entity, one of whose executive officers served as a
director of Registrant.
Employment Agreements
Mr. Magrone, former President and Chief Operating Officer of
Registrant, is employed under an employment contract with
Registrant's controlling shareholder which terminates on April
25, 1998. The contract provides for an initial annual salary of
$390,000 subject to annual increases. Mr. Magrone will receive
$42,000 in exchange for Mr. Magrone's surrender of pre- and post-
retirement life insurance benefits which he is entitled to
receive from Registrant through 1999 if Mr. Magrone does not
continue in Maidenform's employ. The contract contains
additional provisions relating to termination in the case of
disability or illness, vacations, reimbursement for expenses, and
the right to participate in benefits generally available to
executive employees of Maidenform. Under the contract, Mr.
Magrone's employment may be terminated by Registrant, apart from
disability, commission of a felony, dishonesty, willful
malfeasance, gross negligence in the course of employment, or if
Mr. Magrone directly or indirectly competes with the Maidenform
Group, or materially breaches the terms of the contract.
Item 12. Security Ownership of Certain Beneficial
Owners and Management.
(a) The following table sets forth certain information
with respect to persons known to Registrant to own
beneficially more than 5% of Registrant's voting securities,
as of March 29, 1996.
Percent of
Amount and Out-
Nature of standing
Title of Name and Address of Beneficial Shares
Class Beneficial Owner Ownership (1) Owned (2)
Common Stock, Maidenform, Inc(3) 4,042,779 92.4%
$1 par value 154 Avenue E
Bayonne, NJ
Elizabeth Coleman(3) 4,049,471 92.5%
72 Westminster Drive
Atlanta, GA
(1) All persons listed have sole voting and investment power
with respect to their shares unless otherwise indicated.
(2) Computed on the basis of 4,375,492 shares of Common Stock
outstanding.
(3) Maidenform is the record owner of 4,042,779
shares of Common Stock. As the sole shareholder of
Maidenform, Worldwide beneficially owns indirectly
through Maidenform, such 4,042,779 shares of Common
Stock. Elizabeth Coleman, as a result of her
direct and indirect ownership of the capital stock
of Worldwide and certain voting rights and powers
with respect to the selection of and decision-
making by the Board of Directors of Worldwide, may
be deemed to beneficially own the 4,042,779 shares
of Common Stock indirectly beneficially owned by
Worldwide. Ms. Coleman disclaims the beneficial
ownership of all such shares.
(b) The following table sets forth certain
information with respect to each class of
Registrant's equity securities beneficially owned
by each director and each executive officer named
in the Summary Compensation Table of Registrant and
the directors and executive officers of Registrant
as a group, as of March 29, 1996
Percent of
Amount and Out-
Nature of standing
Title of Name and Address of Beneficial Shares
Class Beneficial Owner Ownership (1)
Owned (2)
Common Stock, Elizabeth Coleman(3) 4,049,471 92.5%
$1 par value
David Masket - -
Steven Masket - -
Ira Glazer - -
Frank Magrone - -
All executive officers
and directors as a
group (5 in number) 4,049,471 92.5%
(1) All persons listed have sole voting and investment power
with respect to their shares unless otherwise indicated.
(2) Computed on the basis of 4,375,492 shares of Common Stock
outstanding.
(3) Maidenform is the record owner of 4,042,779 shares of
Common Stock. As the sole shareholder of Maidenform,
Worldwide beneficially owns indirectly through Maidenform,
such 4,042,779 shares of Common Stock. Elizabeth Coleman,
as a result of her direct and indirect ownership of the
capital stock of Worldwide and certain voting rights and
powers with respect to the selection of and decision-
making by the Board of Directors of Worldwide, may be
deemed to beneficially own the 4,042,779 shares of Common
Stock indirectly beneficially owned by Worldwide. Ms.
Coleman disclaims the beneficial ownership of all such
shares.
Item 13. Certain Relationships and Related Transactions.
During 1995, 1994 and 1993, Registrant purchased
merchandise and contracted labor from Triumph and its affiliates
amounting to $25,601,000, $17,900,000, and $25,500,000,
respectively. During 1995, Triumph agreed to extend terms of
payment to Registrant and began charging interest on the amounts
owed which aged beyond 30 days payment terms. The rate of
interest charged is 9% and the amounts paid in 1995 were
$206,000. Until July 1993, Triumph guaranteed certain notes
payable and lines of credit, for which Registrant incurred loan
guarantee fees amounting to approximately $80,000 in 1993.
Registrant's sales to Maidenform, Inc. from April 26, 1995
to December 31, 1995 were $2,595,000. Registrant also has
remitted to Maidenform $13,894,000 as repayment of the advances
made by Maidenform used to satisfy Registrant's bank debt on
April 26, 1995.
Registrant participates in the consolidated cash
management system of the Maidenform Group. (See Item 7.
Management Discussion and Analysis of Financial Condition and
Results of Operations).
Item 14. Exhibits, Financial Statement Schedules, and Reports
on
Form 8-K:
(a) The following documents are filed as part of this
report:
Page No.
1. Financial Statements:
Independent auditor's report F-1
NCC Industries, Inc. and Subsidiary
financial statements:
Consolidated balance sheets as of
December 31, 1995 and 1994 F-2
Consolidated statements of income for
each of the three years in the
period ended December 31, 1995 F-3
Consolidated statements of shareholders'
equity for each of the three years in the
period ended December 31, 1995. F-5
Consolidated statements of cash flows
for each of the three years in the
period ended December 31, 1995. F-6
Notes to consolidated financial statements F-8
2. Financial statements schedules: F-9
Schedule II for each of the three
years in the period ended
December 31, 1995. F-20
Schedules other than those listed above
have been omitted because they are not
applicable or the required information
is shown in the financial statements or
notes thereto.
3. Exhibits:
The Exhibits Index is on Page 48.
(b) Reports on Form 8-K - None.
(c) Exhibit Index is on Page 48.
(d) See (a)2 above.
Report of Independent Auditors
Shareholders and Board of Directors
NCC Industries, Inc.
We have audited the accompanying consolidated balance sheet of NCC
Industries, Inc. and subsidiary as of December 31, 1995, and the
related consolidated statements
of income, shareholders' equity, and cash flows for the year then
ended. Our audit also included the information related to 1995 on the
financial statement schedule on page F-20 of this Form 10-K. These
financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of NCC Industries, Inc. and subsidiary at December 3l, 1995, and the
consolidated results of their operations and their cash flows for the
year then ended, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Syracuse, New York
February 16, 1996, except for Notes 4 and
13 as to which the date is March 29,1996
F-1
Report of Independent Auditors
Shareholders and Board of Directors
NCC Industries, Inc.
We have audited the accompanying consolidated balance sheet of NCC
Industries, Inc. and subsidiary as of December 31, 1994 and the
related consolidated statements of income, shareholders' equity and
cash flows for each of the two years in the period ended December 31,
1994. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of NCC Industries, Inc. and subsidiary at December 31, 1994, and the
consolidated results of their operations and their cash flows for each
of the two years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
Coopers & Lybrand LLP
Syracuse, New York
February 3, 1995
F-2
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
___________
<TABLE>
<S> <C> <C>
ASSETS
December 31,
1995 1994
Current assets:
Cash and cash equivalents $ 725,198 $ 1,034,820
Investments 671,382 -
Accounts receivable, less allowance
for doubtful accounts of $432,000
in 1995 and $350,000 in 1994 15,864,241 16,448,704
Inventories 45,020,477 39,104,654
Prepaid expenses 288,247 396,012
Income taxes refundable - 99,042
Deferred taxes 2,058,824 1,507,863
Total current assets 64,628,369 58,591,095
Property, plant and equipment, net 10,155,629 11,186,318
Other assets 584,744 1,810,590
Total assets $75,368,742 $71,588,003
The accompanying notes are an integral part
of the consolidated financial statements.
F-3
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31,
1995 1994
Current liabilities:
Notes payable, banks $ - $12,000,000
Accounts payable 15,638,193 5,352,165
Accrued expenses 5,795,273 3,112,645
Due to affiliates 11,077,154 2,532,502
Current portion of long-term debt 445,000 445,000
Total current liabilities 32,955,620 23,442,312
Long-term debt, less current portion 1,916,415 2,361,415
Long-term notes payable, bank - 7,000,000
Deferred taxes 309,203 628,053
Other liabilities 1,355,753 2,172,575
Total liabilities 36,536,991 35,604,355
Shareholders' equity:
$7 cumulative preferred stock,
$1 par value;
authorized 500,000 shares;
issued and outstanding - none
Common stock, $1 par value,
authorized 10,000,000 shares,
issued 4,866,841 shares 4,866,841 4,866,841
Additional paid-in capital 5,077,911 5,077,911
Retained earnings 31,645,396 28,894,732
Minimum pension liability ( 75,369) ( 172,808)
Less:
Common stock in treasury,
491,349 shares
at cost ( 2,683,028) ( 2,683,028)
Total shareholders' equity 38,831,751 35,983,648
Total liabilities and
shareholders' equity $75,368,742 $71,588,003
F-4
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
___________
Years Ended December 31,
1995 1994 1993
Net sales $125,987,326 $128,042,422 $110,597,782
Cost and expenses:
Cost of sales 97,802,166 95,503,504 82,151,733
Shipping, selling,
general and administrative 22,507,559 22,674,374 21,709,190
Interest, net 1,873,822 1,634,346 1,670,443
122,183,547 119,812,224 105,531,366
Income before income taxes 3,803,779 8,230,198 5,066,416
Income taxes:
Current:
Federal 1,616,442 1,923,221 1,386,234
State and local 306,485 265,849 247,174
Deferred ( 869,812) 140,116 ( 281,791)
1,053,115 2,329,186 1,351,617
Net income $2,750,664 $5,901,012 $3,714,799
Income per common share $.63 $1.35 $.85
Weighted average number of shares 4,375,563 4,375,563 4,379,721
The accompanying notes are an integral part
of the consolidated financial statements.
F-5
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Common Stock Additional Minimum Treasury Stock
Number of Paid-In Retained Pension Number of
Shares Issued Amount Capital Earnings Liability Shares Amount
Balance, December 31, 1992 4,866,841 $4,866,841 $5,077,911 $19,278,921 486,174 ($2,641,903)
Net income $ 3,714,799
Purchase of treasury stock 4,775 ($ 38,025)
Minimum pension liability ($103,558)
Balance, December 31, 1993 4,866,841 $4,866,841 $5,077,911 $22,993,720 ($103,558)
490,949 ($2 679,928)
Net income $5,901,012
Purchase of treasury stock 400 ($ 3,100)
Minimum pension liability ($ 69,250)
Balance, December 31, 1994 4,866,841 $4,866,841 $5,077,911 $28,894,732 ($172,808)
491,349 ($2,683,028)
Net income $ 2,750,664
Purchase of treasury stock
Minimum pension liability $ 97,439
Balance, December 31, 1995 4,866,841 $4,866,841 $5,077,911 $31,645,396 ($ 75,369)
491,349 ($2,683,028)
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
___________
Increase (Decrease) in Cash
Years Ended December 31,
1995 1994 1993
Cash flows from operating activities:
Net income $2,750,664 $5,901,012 $3,714,799
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation l,527,346 1,466,132 1,242,357
Amortization 19,440 22,765 25,897
Deferred income taxes ( 869,812) 140,116 ( 281,791)
Provision for losses
on accounts receivable 108,000 (16,447) 72,400
Loss on retirement
of plant and equipment 32,865 58,550 35,465
Changes in operating
assets and liabilities:
Accounts receivable 476,463 ( 4,078,586) 2,180,435
Inventories ( 5,915,823) 9,011,729 (13,514,288)
Prepaid expenses 107,765 (65,932) 121,029
Income taxes refundable/payable 99,042 133,250 ( 51,037)
Other assets 635,024 173,267 202,321
Accounts payable
and accrued expenses 13,066,094 1,879,566 ( 171,768)
Due to affiliate 8,544,652 544,646 ( 235,313)
Other liabilities ( 816,822) 245,309 492,623
Net cash (used in) provided
by operating activities 19,764,898 15,415,377 ( 6,166,871)
Cash flows from investing activities:
Purchase of plant and equipment ( 563,601) ( 1,170,042) ( 3,133,830)
Proceeds from sales of fixed assets 34,081 16,500 -
Increase in
short-term investments - ( 200,548)
Funds issued for supplier
note receivable ( 100,000) ( 150,000) ( 1,739,589)
Net cash used in
investing activities ( 629,520) ( 1,303,542) ( 5,073,967)
(Continued)
F-7
NCC INDUSTRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
___________
Increase (Decrease) in Cash
Years Ended December 31,
1995 1994 1993
Cash flows from financing activities:
Payments to acquire treasury stock $ - ($ 3,100) ($ 38,025)
Repayment of long-term debt ( 445,000) ( 445,000) ( 445,000)
Net (repayment) borrowings
under notes payable, banks ( 19,000,000) ( 13,081,000) 10,481,000
Net cash (used in) provided by
financing activities ( 19,445,000) ( 13,529,100) 9,997,975
Net (decrease) increase in cash ( 309,622) 582,735 ( 1,242,863)
Cash and cash equivalents,
beginning of year 1,034,820 452,085 1,694,948
Cash and cash equivalents,
end of year $ 725,198 $ 1,034,820 $ 452,085
Supplemental disclosures of cash flow information (see Note 1):
Cash paid during the year for:
Interest $ 1,173,235 $ 1,631,230 $1,645,747
Income taxes 251,553 2,271,231 1,572,823
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-8
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
The Company is engaged in the garment business, in which it
manufactures and distributes (predominantly to retail
businesses) popular priced ladies under-garments. Sales are made
to department, specialty and chain stores throughout the United
States. Triumph International Overseas Ltd., a Liechtenstein
corporation ("Triumph"), was the Company's majority shareholder
until April 26, 1995, when Triumph sold its interest, and who, at
December 31, 1994 owned approximately 84% of the outstanding
shares. Maidenform Worldwide, Inc., ("Worldwide") a Delaware
corporation, is the Company's ultimate majority shareholder by
ownership of Maidenform Inc. ("Maidenform"), the Company's
controlling shareholder, who, at December 3l, 1995 owned
approximately 92% of the Company's outstanding common shares.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
Investments
In May 1993, Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities", was issued by the
Financial Accounting Standards Board. As permitted, the Company
implemented
this Standard on January 1, 1994. The effect of the adoption was
immaterial to the Company. Investments consist primarily of
mutual funds and bonds and are stated at market, which
approximates cost. At December 31, 1994, investments were
included with other assets.
Inventories
Inventories are stated at the lower-of-cost or market. Cost is
determined on the first-in, first-out basis.
F-9
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost. Depreciation
has been computed by the straight-line method over the estimated
useful lives of the related assets.
Revenue Recognition
The Company's policy of recognizing revenue is to record sales
upon shipment of goods.
Income Per Common Share
Per share amounts are computed based on the weighted average
number of shares of common stock outstanding.
Income Taxes
Income tax expense consists of taxes currently payable and
deferred income
taxes which are based upon temporary differences between
financial accounting
and tax bases of assets and liabilities in accordance with SFAS
No. 109 as
measured by the enacted tax rates which are anticipated to be in
effect when
these differences reverse. The deferred tax provision is the
result of the net
change in the deferred tax assets and liabilities. A valuation
allowance is
established when it is necessary to reduce deferred tax assets to
amounts
expected to be realized.
Under a Tax Allocation Agreement with Maidenform, the Company files a
consolidated federal income tax return and a combined New York State
return with Maidenform. Current and deferred income tax liabilities
have been determined on a separate company basis. That is, each
member of the consolidated group will determine its respective
current and deferred income taxes as if it had not been included in a
consolidated, combined or unitary tax return. The total current tax
liabilities of the group determined on a separate company basis may
exceed taxes actually due to the respective tax authorities because
of the use of losses, (i.e. NOL) or credits of group members. To the
extent of such excess, the excess will be payable to those group
members whose losses or credits are utilized.
Other Assets
Other assets consist principally of notes receivable due from a
garment processor at December 31, 1995 and 1994 and long-term
investments at December 31, 1994. The notes bear interest at the
prime rate. Payments are made based on the billings by the
processor to the Company. The notes are being repaid by
deduction from amounts owed by the Company to the processor for
services performed. During 1995 and 1994, the Company deducted $
453,280 and $528,920 respectively, and applied such deductions to
the notes. It is estimated that the notes will be reduced by
$400,000 in 1996.
F-10
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Concentration of Credit Risk
The Company performs periodic credit evaluations of its customers'
financial condition. The Company has granted credit to one
customer whose balance owed consisted of 10% of the Company's
accounts receivable at December 31, 1995 and 11% of the Company's
accounts receivable at December 31, 1994. The Company granted
credit to another customer whose balance owed consisted of less than
1% of the Company's accounts receivable at December 31,1995 and 20%
of the Company's accounts receivable balance at December 31, 1994.
The Company granted credit to a third customer whose balance owed
consisted of 10% of the Company's accounts receivable at December
31, 1995 and 5% of the Company's accounts receivable at December 31,
1994.
2. INVENTORIES
Inventories by major classifications are as follows:
1995 1994
Raw materials $ 7,566,204 $ 7,287,229
Work-in-process 10,659,170 9,639,312
Finished goods 26,795,103 22,178,113
$45,020,477 $39,104,654
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, consisted of the
following:
1995 1994
Land $ 239,867 $ 239,867
Building and building improvements 6,334,777 6,334,777
Machinery and equipment 10,201,234 9,798,420
Construction in progress 73,023 190,206
16,848,901 16,563,270
Less: Accumulated depreciation 6,693,272 5,376,952
$10,155,629 $11,186,318
F-11
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
4. NOTES PAYABLE, BANKS
The Company participates in the consolidated cash management
system of its ultimate parent, Worldwide, and its subsidiaries
("the Maidenform Group"). As such the Company is a party to and
its liquidity is dependent upon the Maidenform Group's financing
arrangements. Substantially all of the Company's non-payroll
disbursements are controlled by the Maidenform Group. The
Maidenform Group's long term debt includes a revolving credit
facility for $120,000,000, a $50,000,000 term loan and
$30,000,000 in senior notes for which the Company's assets and
stock are pledged as collateral. Under the revolving credit
facility, the Maidenform Group may borrow, repay, and reborrow
through April 25, 1998, the facility expiration date; however,
borrowings are limited to certain percentages of the Maidenform
Group's trade accounts receivable and inventories.
As of December 31, 1995, outstanding borrowings under the
revolving credit facility amounted to $81,000,000. In addition,
outstanding letters of credit (which reduce the maximum available
borrowings) issued by the bank for the account of the Maidenform
Group under the facility amounted to $3,000,000. In January and
February 1996, the Maidenform Group borrowed the remaining
$36,000,000 available under the facility. On March 29, 1996, the
bank loan agreement was amended and the Maidenform Group borrowed
an additional $20,000,000 under a new term loan, of which
$10,000,000 is repayable on August 15, 1996 and $5,000,000 is
repayable on each of October 30 and November 30, 1996. Proceeds
of the new loan are to be used to pay trade payables.
The term loan is repayable in increasing quarterly principal
installments ranging form $2,000,000 to $3,000,000 commencing on June
30, 1996 through maturity on March 31, 2001 and also provides for
prepayments of principal (i) from the proceeds received by the
Maidenform Group in connection with certain transactions and (ii)
based on a percentage of the Maidenform Group's net cash flow, as
defined, for each of the three years ending December 31,1995 through
1997, payable no later April 30 of the following year. In addition,
the senior notes also provide for similar prepayment at the option of
the noteholders. No amounts were subject to prepayment at December
31, 1995.
The senior notes are due September 30, 2003, payable in annual
principal installments of $4,285,714 on each September 30, commencing
1997 through 2003.
Notes payable under the above described financing arrangements
are collateralized by the assets of the Maidenform Group, which
include the assets of the Company.
The above described loan agreements contain covenants that, among
other matters, restrict additional borrowings, dividends and
other payments with respect to the Maidenform Group's capital
stock and provide for the maintenance of minimum consolidated
tangible net worth, and certain financial ratios, including
current assets (excluding inventory) to current liabilities, debt
to equity, fixed charge coverage and debt to operating cash flow
ratios (all as defined). At December 31, 1995, no amounts of
retained earnings were available for dividends.
F-12
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
4. NOTES PAYABLE, BANKS (Continued)
The Company, based on information supplied by Worldwide, believes
that these credit facilities together with continued vendor
support are sufficient for it to meet its cash flow needs.
As of December 31, 1994, the Company had long-term notes payable
of $7,000,000 with interest at rates which were periodically
negotiated (rates ranged from 6.82% to 7.49% as of December 31,
1994). At December 31, 1994, the Company also had $12,000,000
outstanding on various lines of credit. The notes payable and
lines of credit were repaid during 1995 by Maidenform (see Note
9).
5. LONG-TERM DEBT
Long-term debt at December 31, 1995, consisted of $2,361,415 Series
"A" Industrial Development Bonds (the Bonds) issued by Cortland
County Industrial Development Agency. The Bonds are tax-exempt and
bear interest at various rates based on maturity, ranging from
6.6% to 8%, and are payable on September 15 and March 15 of each
year. Annual maturities are $445,000 through 1998, $210,000 in
1999, and $205,000 thereafter, through September 15, 2003.
The Bonds are collateralized by a first mortgage on the land,
facility and certain equipment purchased with the proceeds of the
bond financing. The Bonds are also collateralized by an irrevocable
letter of credit for $2,542,068 which was issued for the account of
the Company in favor of the Bond Trustee for the benefit of the
bondholders.
The Bond Indenture requires, among other things, that the Company
maintain certain financial ratios.
6. INCOME TAXES
The temporary differences which give rise to a significant portion
of deferred tax assets and liability at December 31, 1995 and 1994
are as follows:
1995 1994
Inventory $1,415,103 $1,003,712
Accounts receivable 251,946 127,085
Depreciation ( 695,313) ( 757,354)
Accruals 853,627 563,957
Employee benefit plans 595,519 560,149
Other 65,496 41,822
2,486,378 1,539,371
Less: Valuation allowance( 736,756) (659,561)
$1,749,622 ($ 879,810
F-13
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
6. INCOME TAXES (Continued)
Net deferred taxes are classified as follows:
1995 1994
Current asset $2,058,824 $1,507,863
Long-term liability 309,203 628,053
$1,749,622 $ 879,810
Reconciliation of federal statutory rate to the effective income
tax rate for years ended December 31 follows:
<TABLE>
<S> <C> <C>
1995 1994 1993
Statutory federal taxes 34.0% 34.0% 34.0%
State income taxes, net of
federal income tax benefit 4.8 1.8 2.5
Adjustment of the valuation allowance 1.0 .4 3.7
Section 936 incentive credit and other (12.1) ( 7.9) (13.5)
27.7% 28.3% 26.7%
</TABLE>
7. RETIREMENT BENEFIT PLANS
Pension Plans
a. The Company has a noncontributory defined benefit pension
plan. Employees may no longer accrue service benefits due to an amendment in
1991, but may continue to receive service benefits for vesting purposes.
The Company funds an amount each year that is necessary to keep the plan
on a sound actuarial basis.
The discount rate used to determine the actuarial present
value of the projected benefit obligation was 7.0%, 7.5% and 6.25% at
December 31, 1995, 1994 and 1993, respectively. The expected long-term rate
of return on assets used to determine the net pension cost was 8%,8% and
7.5% during 1995, 1994 and 1993, respectively.
F-14
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
7. RETIREMENT BENEFIT PLANS (Continued)
A summary of the plan's funded status reconciled to the
amounts reported in the Company's consolidated balance sheet at December 31
is as follows:
<TABLE>
<S> <C> <C>
1995 1994
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $1,713,533 and $1,571,377. ($1,720,724) ($1,585,552)
Projected benefit obligation
for service provided to date ($1,720,724) ($1,585,552)
Plan assets at fair value, primarily
cash equivalents and U. S. government
securities 1,436,380 1,193,331
Projected benefit obligation
in excess of plan assets ( 284,344) ( 392,221)
Unrecognized net loss 75,369 ( 172,808
Accrued pension cost (208,975) (219,413)
Minimum pension liability ( 75,369) ( 172,808)
Unfunded pension liability
included in accrued expenses ($ 284,344) ($ 392,221)
1995 1994 1993
Net pension cost includes:
Interest cost $118,216 $108,896 $ 107,265
Actual return on plan assets (291,830) 106,687 (88,403)
Net amortization and deferral 198,880 (210,793) 9,765
$ 25,266 $ 4,790 $ 28,627
</TABLE>
b. On January 1, 1992, the Company implemented a defined
contribution plan covering all participants in the defined
benefit plan or active Continental U.S. employees age 21 or older
with one year of service except for certain executives.
Contributions to the plan are determined at the discretion of
the Board of Directors and are based on participants' age and
compensation. Salary deferrals may be made by the participants
commencing January 1, 1993. Total defined contributions costs for
1995, 1994 and 1993 were $253,500, $247,794, and $223,772,
respectively.
Postretirement Health Care and Life Insurance Plan
The Company provides for certain limited postretirement medical and
life insurance benefits covering certain employees hired prior to
December 1, 1977.
The Accumulated Postretirement Benefit Obligation was determined
using a discount rate of 7.0% and 6.5% at December 31, 1995 and
1994, respectively. The assumed healthcare cost trend rate used was
9.5% for 1995; the rate was assumed to decrease gradually to 5% by
the year 2008 and remain at that level thereafter.
F-15
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
7. RETIREMENT BENEFIT PLANS (Continued)
A summary of the plan's funded status reconciled to the amounts
reported in the company's consolidated balance sheets at December 31,
1995 and 1994 are as follows:
<TABLE>
<S> <C> <C>
1995 1994
Accumulated Postretirement
Benefit Obligation (APBO):
Retirees $ 712,830 $ 708,000
Active plan participants
fully eligible 271,467 320,600
Other active plan participants 293,920 264,500
Total APBO 1,278,217 1,293,100
Plan assets at fair value - -
APBO in excess of plan assets 1,278,217 1,293,100
Unrecognized net gain 77,536 30,200
Accrued postretirement benefit
obligation included in other
liabilities $1,355,753 $1,323,300
1995 1994 1993
Net Periodic Post-
retirement Benefit Expense:
Service cost $ 10,300 $ 12,200 $ 14,400
Interest cost 85,200 84,400 99,200
Amortization of gains in
excess of corridor (7,100) - -
Net periodic postretire-
ment benefit expense $ 88,400 $ 96,600 $113,600
A discount rate of 7.0%, 7.5% and 8% was used to determine the net
periodic postretirement benefit expense for December 31, 1995, 1994
and 1993.
Increasing the assumed healthcare cost trend rates by one percentage
point in
each year would increase the accumulated postretirement benefit
obligation as
of December 31, 1995 by $53,600 and increase the aggregate of the
service
cost and interest cost of net periodic postretirement benefit
expense by $4,800.
F-16
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
8. COMMITMENTS
Leases
Rent expense was approximately $467,000, $262,000 and $428,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
Minimum lease commitments, exclusive of real estate taxes and
other expenses, under all noncancelable real property operating
leases at December 31, 1995 are as follows:
1996 $552,962
1997 562,148
1998 583,960
1999 561,848
2000 527,738
Thereafter 1,141,625
The leases provide for the payment of increases in real estate
taxes and other costs.
9. RELATED PARTY TRANSACTIONS
During 1995, 1994 and 1993, the Company purchased merchandise and
contracted
labor from Triumph and its affiliates amounting to $25,601,000,
$17,900,000, and $25,500,000, respectively. During 1995, Triumph
agreed to extend terms of payment to the Company and began
charging interest on the amounts owed which aged beyond 30 days
payment terms. The rate of interest charged is 9% and the amounts
paid in 1995 were $206,000. As of December 31, 1995 and 1994 the
payable to Triumph was $5,172,771 and $2,532,502, respectively.
The Company's sales to Maidenform from April 26, 1995 to
December 31, 1995 were $2,595,000. The Company also has
remitted to Maidenform $13,894,000 as repayment of the advances
made by Maidenform used to satisfy the Company's bank debt on
April 26, 1995. The Company is charged a rate which
approximates prime plus 1% on its intercompany balance with
Maidenform. As of December 31, 1995, $5,904,383 was payable to
Maidenform.
Until July 1993, Triumph guaranteed certain notes payable and
lines of credit, for which the Company incurred loan guarantee
fees amounting to approximately $80,000 in 1993.
In July 1986, the Company's former President acquired 250,000
shares of the Company's common stock for $1 per share, which
approximated market value, in exchange for a $250,000 promissory
note. The promissory note called for semi-annual interest
payments at an annual interest rate of 7.5%, with principal due on
October 31, 1994. The former President's employment agreement
also included a bonus of $550,000 which was paid upon expiration
of the agreement on October 31, 1994. At such time the
aforementioned note was paid in full.
F-17
NCC INDUSTRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
___________
10. MAJOR CUSTOMERS
The Company had sales to one customer which approximated 16% in 1995, 17%
in 1994, and 20% in 1993. Sales to another customer approximated 14% in
1995, 18% in 1994, and 16% in 1993 and sales to a third customer
approximated 11% in 1995, and 9% in 1994.
11. CONTINGENCIES
The Company is subject to actions that arise in the ordinary course of
its business activities. Management believes that any resolution of such
matters will not materially affect the financial position or results of
operations of the Company. Management believes that they have
meritorious defenses and intends to vigorously defend such actions.
12. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates its fair
value.
Investment securities: The fair value for marketable debt and equity
securities are based on quoted market prices. Fair value approximates
carrying value at December 31, 1995.
Long term debt: The Company believes the fair value of its long-term
debt approximates its carrying value as the debt is at a fixed rate that
approximates the rate at which the company could currently borrow similar
funds in the same jurisdiction.
13. SUBSEQUENT EVENTS
In March 1996, the Company made a decision to close its subsidiary's two
leased
Puerto Rican manufacturing facilities and subsequent to that date began a
process of notification of employees and the government of Puerto Rico.
Although the
government of Puerto Rico has made offers to the Company to retain the
facility, which Registrant's management is considering, management
believes that the facility will be closed and its sewing assembly
operations will be transferred to other locations.
Management believes that all equipment from these facilities will be used
at other locations; however, the leases on these facilities, which have
combined annual rental of approximately $94,000, do not expire until 1999
and 2002. Management has not determined the total expected cost of the
closure which will be recorded in 1996.
F-18
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
NCC Industries, Inc.
Cortland, New York
Our report on the consolidated financial statements of NCC Industries,
Inc. and Subsidiary is included on page F-2 of this Form 10-K. In
connection with our audits of such financial statements, we have also
audited the respective years financial statement schedule on page F-20 of
this Form 10-K.
In our opinion, the financial statement schedule for the respective years
referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information required to be included therein.
Coopers & Lybrand
L.L.P.
Syracuse, New York
February 3, l995
F-19
NCC INDUSTRIES, INC. AND SUBSIDIARY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
___________
Col. A Col. B Col. C Col. D Col. E
Additions
Balance at Charged to Balance at
Beginning Costs and End
Description of Period Expenses Deductions
of Period
1995
Allowance for doubtful
accounts receivable $350,000 $108,000 $ 26,000 (a) $432,000
1994
Allowance for doubtful
accounts receivable $350,000 ($ 16,447) ($ 16,447) (b) $350,000
1993
Allowance for doubtful
accounts receivable $312,700 $ 72,400 $ 35,100 (a) $350,000
(a) Uncollectible accounts written off.
(b) Uncollectible accounts written off net of bad debt recoveries.
F-20
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DATED:
NCC INDUSTRIES INC.
By/s/
Steven Masket Date
Executive Vice President -
General Counsel,
Secretary
By/s/
Ira Glazer Date
Executive Vice President -
Chief Operating Officer
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 and on the date indicated:
/s/ /s/
Elizabeth Coleman Date Steven Masket Date
Chairman, President, and Executive Vice President
-
Chief Executive Officer General Counsel,
Secretary
/s/ /s/
David Masket Date Frank Magrone
Vice Chairman Executive Vice President
/s/
Ira Glazer Date
Executive Vice President -
Chief Operating Officer
F-21
EXHIBIT INDEX
Exhibit No. Description Page
3(i) (1) Certificate of Incorporation of Registrant *
(incorporated by reference to Exhibit 3(a) of
Registrant Form 10-K for the Year ended
December 31, 1980).
(i) (2) Amendment to Certificate of Incorporation of
*
Registrant, dated June 13, 1986 (incorpoprated by
reference to Exhibit 3(c) of Registrant's Form 10-K for
the year ended December 31, 1986).
(ii) Bylaws of Registrant (incorporated by reference to
*
exhibit 3(b) of Registrant's
Form 10-K for the year ended December 31, 1980).
4 Omitted (Inapplicable). *
10(a) (1) Omitted (Inapplicable). *
(2) Omitted (Inapplicable). *
(3) Omitted (Inapplicable). *
(4) Letter Agreement, dated July 30, 1991, *
between Registrant and Bratex Dominicana, C.
por A. ("Bratex"), providing for a loan to
Bratex and for the provisions of product
assembling, sewing, packaging and shipping
services for Registrant by Bratex (incorporated
by reference to Exhibit 10(a)(5) of Registrant's
Form 10-K for the year ended December 31, 1993).
(5) Letter Agreement, dated November 19, *
1992, between Registrant and Bratex, providing
for an additional loan to Bratex for the
packaging and shipping services for Registrant
by Bratex (incorporated by reference to Exhibit
10(a)(6) of Registrant's Form 10-K for the year
ended December 31, 1993).
(6) Letter Agreement, dated as of June 18, *
1993, between Registrant and Bratex, providing
for additional loans and advances to Bratex
and for the provision of product assembling,
sewing, packaging and shipping services for
Registrant by Bratex (incorporated by reference
to Exhibit 10(a)(7) of Registrant's Form 10-K
for the year ended December 31,1993) .
*Incorporated by Reference
EXHIBIT INDEX
Exhibit No. Description Page
10(b) (1) Omitted (Inapplicable). *
(2) Lease of New York, New York property at *
465 Park Avenue, (incorporated by reference to
Exhibit 10(b)(3) of Registrant's Form 10-K for
the year ended December 31, 1991).
(3) Omitted (Inapplicable). *
(4) Stock Purchase Agreement dated April 26 1995 *
between Maidenform Worldwide, Inc. And Certain
Stockholders of NCC Industries, Inc., as Sellers.
(incorporated by reference to Exhibit 10(a)(1) of
Registrant's Form 10-Q for the quarter ended
April 1, 1995.
(5) Stock Sale Agreement dated April 26, 1995 *
between Triumph International Overseas Ltd.,
various Sellers and Catherine C. Brawer,
as agent for the Sellers.
(incorporated by reference to Exhibit 10(a)(2) of
Registrant's Form 10-Q for the quarter ended
April 1, 1995.
(6) Loan Agreement dated April 26, 1995 *
from various banks to Maidenform Worldwide
and its affiliates.
(incorporated by reference to Exhibit 10(a)(3) of
Registrant's Form 10-Q for the quarter ended
April 1, 1995.
(7) Amended and Restated Note Purchase Agreement *
dated April 26, 1995.
(incorporated by reference to Exhibit 10(a)(4) of
Registrant's Form 10-Q for the quarter ended
April 1, 1995.
(8) Security Agreement dated April 26, 1995. *
(incorporated by reference to Exhibit 10(a)(5) of
Registrant's Form 10-Q for the quarter ended
April 1, 1995.
(9) Pledge Agreement dated April 26, 1995. *
(incorporated by reference to Exhibit 10(a)(6) of
Registrant's Form 10-Q for the quarter ended
April 1, 1995.
* Incorporated by reference
EXHIBIT INDEX
Exhibit No. Description
Page
10(b)cont (10) Amendment to Series A Credit and Reimbursement
*
Agreement.
(incorporated by reference to Exhibit 10(a)(8) of
Registrant's Form 10-Q for the quarter ended
April 1, 1995.
(11) Consent to Second Lien.
*
(incorporated by reference to Exhibit 10(a)(9) of
Registrant's Form 10-Q for the quarter ended
April 1, 1995.
(12) First Amendment to Loan Agreement dated
53
March 29, 1996. See Exhibit 10(a)(6).
(13) Amendment to the Amended and Restated Note
90
Purchase Agreement dated March 29, 1996.
See Exhibit 10(a)(7).
(14) Reaffirmation Agreement dated March 29, 1996.
118
See Exhibit 10(a)(8).
10(c) (1) Omitted (Inapplicable).
(2) Omitted (Inapplicable).
(3) Omitted (Inapplicable).
(4) Omitted (Inapplicable).
(5) Omitted (Inapplicable).
(6) Omitted (Inapplicable).
(7) Omitted (Inapplicable).
(8) Employment Agreement dated April 26, 1995
*
between Maidenform , Inc. and Frank Magrone.
(incorporated by reference to Exhibit 10(a)(10) of
Registrant's Form 10-Q for the quarter ended
April 1, 1995.
* Incorporated by reference.
EXHIBIT INDEX
Exhibit No. Description
Page
10(c)(cont) (10) Letter Agreement, between Registrant and
*
Intimate Apparel Designs Incorporated, dated
February 25, 1994, with respect to services
of Arthur Rubin (incorporated by reference to
Exhibit 10(c)(11) of Registrant's Form 10-K
for the year ended December 31, 1993).
10(d) (1) Installment Sale Agreement, dated as of *
August 1, 1988, between the Cortland County
Industrial Development Agency (the "IDA") and
Registrant (incorporated by reference to
Exhibit 28(a)(1) of Registrant's Form 10-Q for
the quarter ended October 1, 1988).
( 2) Amendment to Installment Sale Agreement, *
dated as of September 1, 1998, between the IDA
and Registrant (incorporated by reference
Exhibit 28(a)(2) of Registrant's Form 10-K for
the year ended December 31, 1988).
(1) Trust Indenture, dated as of September 1,
* 1988, between the IDA and Key Trust Company
(the "Trustee"), approved and consented to by
Registrant (incorporated by reference to Exhibit
28(b)(2) of Registrant's Form 10-Q for the
quarter ended October 1, 1988).
(2) Irrevocable Transferable Letter of Credit, *
dated September 30, 1988, from Norstar to the
Trustee for the account of Registrant (incor-
porated by reference to Exhibit 28(b)(3) of
Registrant's Form 10-Q for the quarter ended
October 1, 1988).
(3) Series A Credit and Reimbursement
* Agreement, dated as of September 1, 1988,
between Registrant and Norstar (incorpor-
ated by reference to Exhibit 28(b)(4) of
Registrant's Form 10-Q for the quarter
ended October 1, 1988).
(4) Series A Mortgage, dated as of September 1,
* 1988, from the IDA and Registrant to the Trustee
and Norstar (incorporated by reference to
Exhibit 28(b)(5) of Registrant's Form 10-Q
the quarter ended October 1, 1988).
____________________
* Incorporated by Reference
EXHIBIT INDEX
Exhibit No. Description Page
10(d)(cont) (5) Series A Pledge and Assignment, dated as *
of September 1, 1988, from the IDA to the
Trustee, acknowledged by Registrant (incor-
porated by reference to Exhibit 28(b)(6) of
Registrant's Form 10-Q for the quarter
ended October 1, 1988).
(6) Series A Guaranty, dated as of September 1, *
1988, from Registrant to Norstar (incorporated
by reference to Exhibit 28(b)(7) of Registrant's
Form 10-Q for the quarter ended October 1, 1988).
(7) Tax Regulatory Agreement, dated October 6, *
1985, for Registrant for the benefit of the IDA,
the Trustee and Norstar (incorporated by
reference to Exhibit 28(b)(8) of Registrant's
Form 10-Q for the quarter ended October 1, 1988).
(8) Bond Purchase Agreement, dated September 29, *
1988,among the IDA, Registrant, Norstar and First
Albany Corporation (incorporated by reference to
Exhibit 28(b)(10) of Registrant's Form 10-K for the
year ended December 31, 1988).
21 Subsidiaries of Registrant (incorporated by *
reference to Exhibit 22 of Registrant's
Form 10-K for the year ended December 31,
1991).
24(a) Omitted (Inapplicable).
(b) Omitted (Inapplicable).
27 Financial Data Schedule 126
____________________
* Incorporated by reference
EXHIBIT INDEX
Exhibit No. Description Page
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made as of
the 29th day of March, 1996, among MAIDENFORM WORLDWIDE, INC. ("Worldwide-DE"),
a Delaware corporation, MAIDENFORM, INC. ("Maidenform"), a New York
corporation, BETEX, S.A. ("Betex"), a Costa Rican corporation, CREACIONES
TEXTILES de MERIDA, S.A. de C.V. ("Creaciones"), a Mexican corporation,
ELIZABETH NEEDLE CRAFT, INC. ("Elizabeth"), a New York corporation, JAMAICA
NEEDLECRAFT, LTD. ("Jamaica"), a Jamaican corporation, MAIDENFORM
INTERNATIONAL, LTD. ("International"), a New York corporation, NICHOLAS
NEEDLECRAFT, INC. ("Nicholas"), a New York corporation, NCC INDUSTRIES, INC.
("NCC"), a Delaware corporation, CRESCENT INDUSTRIES, INC. ("Crescent"), a
Delaware corporation (Worldwide-DE, Maidenform, Betex, Creaciones, Elizabeth,
Jamaica, International, Nicholas, NCC and Crescent are each hereinafter
referred to individually as "Borrower" and collectively as "Borrowers"),
CORESTATES BANK, N.A. ("CoreStates"), a national banking association,
NATIONSBANK, N.A. ("Nationsbank"), a national banking association, THE CHASE
MANHATTAN BANK N.A. ("Chase"), a national banking association, NATIONAL CITY
BANK ("City"), a national banking association, NBD BANK ("NBD"), a Michigan
banking corporation, COMERICA BANK ("Comerica"), a Michigan banking
corporation, EUROPEAN AMERICAN BANK ("EAB"), a New York banking corporation,
and UNITED JERSEY BANK ("UJB"), a New Jersey banking corporation (CoreStates,
Nationsbank, Chase, City, NBD, Comerica, EAB and UJB are hereinafter each
referred to as a "Bank", and collectively as "Banks"), CoreStates, as agent for
the Banks (CoreStates, in such capacity, and any successor agent shall be
hereinafter referred to as "Agent"), and CoreStates, as issuing bank for the
Letters of Credit (CoreStates, in such capacity, and any successor issuing bank
shall be hereinafter referred to as "Issuing Bank").
BACKGROUND
Borrowers, Maidenform Worldwide, Inc. ("Worldwide-NY"), a New York
corporation, Banks, Agent and the Issuing Bank executed a Loan Agreement dated
as of April 26, 1995 (such Loan Agreement as amended hereby and hereafter from
time to time shall be referred to herein as the "Loan Agreement") pursuant to
which Banks made available to Borrowers and Worldwide-NY the Revolving Credit
in the maximum principal amount of $120,000,000.00 and the Term Loan in the
principal amount of $50,000,000.00. Capitalized terms used herein and not
otherwise defined shall have the meanings given to such terms in the Loan
Agreement.
The Term Loan is evidenced by eight separate Term Loan Notes executed
by Borrowers and Worldwide-NY, each dated as of April 26, 1995, and each
payable to the order of a different Bank in the principal amount of such Bank's
interest in the Term Loan. The Revolving Credit is evidenced by eight separate
Revolving Credit Notes each dated as of April 26, 1995, and each payable to a
different Bank in the principal amount of such Bank's maximum Commitment.
On or about the Closing Date, Maidenform Worldwide-NY was merged into
Maidenform Worldwide-DE.
Borrowers' obligations under the Loan Agreement, the Term Loan Notes
and the Revolving Credit Notes were and are secured by, among other things, (i)
the Florida Mortgage, (ii) the Collateral Assignments (iii) the North Carolina
Mortgage, (iv) the New York Mortgage, (v) the Trademark Agreement, (vi) the
Security Agreement, and (vii) the Pledge Agreement.
The Collateral Agent presently holds a lien on and security interest
in the Collateral and is legally entitled to enforce collection of the
indebtedness evidenced by the Loan Agreement, the Term Loan Notes, and the
Revolving Credit Notes and secured by the Security Documents in accordance with
the terms of the Notes, the Security Documents and the Intercreditor Agreement.
Borrowers have asked that Banks extend a new term loan in the amount
of $20,000,000.00 to finance the payment of current payables and amend certain
of the financial covenants in the Loan Agreement. Subject to the terms and
conditions set forth herein, certain of the Banks have agreed to make a new
term loan in the amount of $20,000,000.00 and otherwise amend the Loan
Agreement as set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and intending to be legally bound,
the parties hereto agree as follows:
Amendments to Loan Agreement. Borrowers and Banks agree to modify
the terms and conditions of Borrowers' obligations to Banks and Banks'
obligations to Borrowers under the Loan Agreement in accordance with the terms
and conditions set forth herein. The parties hereto agree that all the terms
and conditions of the Loan Agreement shall continue unchanged and remain in
full force and effect except as amended herein as follows:
The following definitions in Section 1.1 of the Loan Agreement are
hereby amended to read as follows:
"Applicable Margin" means (A) for the Second Term Loan, for the period
from the date of the Amendment to Loan Agreement through and including
August 15, 1996, 2.50% per annum, and thereafter 3.00% per annum, and (B)
for Revolving Credit Base Rate Tranches, 0.50% per annum, for Revolving
Credit LIBO Rate Tranches, 2.25% per annum, for Term Loan Base Rate
Tranches, 1.50% per annum, for Term Loan LIBO Rate Tranches, 3.25% per
annum, provided that after repayment in full of all interest on and the
principal of the Second Term Loan and payment of all other fees in
connection therewith (but in any event no earlier than March 31, 1996),
the foregoing shall continue in effect unless otherwise specified in
accordance with the table and text below:
With respect to the Revolving Credit:
If Fixed Charge Coverage Then Applicable Margin is:
Ratio is: If the Leverage Ratio is: Base Rate
Tranches: LIBO Rate Tranches:
1.25 or greater and 0.60 or less 0% 1.75%
UNLESS:
1.50 or greater and 0.55 or less (.25%) 1.50%
UNLESS:
2.25 or greater and 0.50 or less (.50%) 1.25%
With respect to the Term Loan:
If Fixed Charge Coverage The Applicable Margin is:
Ratio is: If the Leverage Ratio is: Base Rate
Tranches: LIBO Rate Tranches:
1.25 or greater and 0.60 or less 1.00% 2.75%
UNLESS:
1.50 or greater and 0.55 or less .75% 2.50%
UNLESS:
2.25 or greater and 0.50 or less .50% 2.25%
The calculation of the Applicable Margin pursuant to the above table shall
be made quarterly, commencing with the first fiscal quarter ending
immediately after repayment in full of all interest on and principal of
the Second Term Loan and payment of all other fees in connection
therewith, for the immediately preceding twelve month period, and shall be
based upon the Consolidated balance sheet and income statement of the
Borrowers for such period, provided that for calculations made for any
period which includes any time prior to the Closing Date, such calculation
shall also be based on the portion of the Combined Pro Forma relating to
such period prior to the Closing Date. In the event that the Applicable
Margin changes, such change shall become effective, for all Loans then
existing or thereafter made, as of the first day of the month immediately
following the month in which the Borrowers' quarterly financial statements
are delivered to Agent except that the Applicable Margin, once reset,
shall remain in effect for not less than ninety (90) days.
Notwithstanding anything contained in this definition of "Applicable
Margin", if at any time commencing with the fiscal quarter ending
September 30, 1996, Borrowers' Leverage Ratio is greater than 0.60, the
Applicable Margin shall be as follows, effective, for all Loans (other
than the Second Term Loan) then existing or thereafter made, on the first
day of the fiscal quarter immediately following the fiscal quarter for
which the Leverage Ratio is greater than 0.60 and ending on the first day
of the month immediately following the month in which the Borrowers'
quarterly financial statements, indicating a Leverage Ratio of 0.60 or
less, are delivered to Agent:
Revolving Credit Revolving Credit Term Loan Term Loan
Base Rate Tranches: LIBO Rate Tranches: Base Rate Tranches: LIBO Rate
Tranches:
0.75% 2.50% 1.75% 3.50%
$105,000,000.00 from the First Amendment Closing Date through
June 30, 1996, (b) $100,000,000.00 from July 1, 1996 through September 30,
1996, or (c) $95,000,000.00 from October 1, 1996 through December 31,
1996.
"Facilities" means collectively, the Term Loan, the Second Term Loan and
the Revolving Credit.
"Fees" means all payments except for interest and principal which the
Borrowers are required to make to the Agent, the Issuing Bank, and/or the
Banks hereunder and shall include, without limitation, amounts owing in
connection with any prepayment under any LIBO Loan, the Commitment Fee,
the Agent's Fee, the Facility Fee, the Second Term Loan Facility Fee, any
fees associated with the issuance of any Letter of Credit or otherwise
required under Section 2.19 hereof, the costs of hedging and any amounts
payable pursuant to Section 8.9.
"Fixed Charges" means at any time (A) amounts paid over the prior twelve
(12) months by the Borrowers (determined on a Consolidated basis for
quarters commencing with the quarter ending September 30, 1995, determined
with reference to the Combined Pro Forma for quarters ending prior to the
date hereof, and determined on a Consolidated basis and with reference to
the Combined Pro Forma for the quarter ending prior to the date hereof,
and determined on a Consolidated basis and with reference to the Combined
Pro Forma for the quarter ending June 30, 1995) under operating leases,
whether characterized as rents or otherwise (other than payments under
such leases in respect of insurance, real estate taxes, utilities,
maintenance or similar charges, and additional rentals, in excess of the
minimum based on percentage of sales), interest in connection with any
Credit Obligation (including without limitation the Revolving Credit and
the Term Loan but excluding the Subordinated Debt), and the cash payments,
consistent with the one-time charge accrued in the second quarter of 1995,
in connection with the retirement of Robert Brawer, and (B) Current
Maturities, provided however that principal payments due on the Second
Term Loan shall not be included in Fixed Charges.
"Funded Debt" means at any time with respect to the Borrowers on a
Consolidated basis, without duplication, the sum of (A) all Credit
Obligations (including without limitation the Term Loan and the Revolving
Credit but excluding the Subordinated Debt) which have a final maturity of
one or more years from the date of origination, (B) the indebtedness
outstanding under the Second Term Loan, (C) the maximum aggregate
liability under all guarantees other than guarantees of the tenant's
obligations to pay rent and operating expenses under operating leases, (D)
the indebtedness attributed to all capitalized leases, and (E) short term
indebtedness (other than the Subordinated Debt) which has not been paid in
full for a period of 60 consecutive days or more during the immediately
previous four fiscal quarters.
"GAAP" means generally accepted accounting principles in the United States
in effect from time to time as promulgated in statements, opinions and
pronouncements by the American Institute of Certified Public Accountants,
the Financial Accounting Standards Board and any successor entities,
consistently applied, provided, however, that if GAAP changes after the
First Amendment Closing Date so as to change the calculations of the
financial covenants set forth in Sections 5.18, 5.19, 5.20, 5.21 and 5.22,
such financial covenants shall be reset on a dollar-for-dollar basis to
take into account such change in GAAP.
"Loan Documents" means the documents associated with this transaction,
including but not limited to this Agreement, the First Amendment to Loan
Agreement, the Notes, the Intercreditor Agreement, the Environmental
Indemnity, the Protection Agreements, and the Security Documents, as each
may be amended or supplemented from time to time.
"Loans" means all Advances under the Revolving Credit, the Term Loan and
the Second Term Loan.
"Notes" means the Revolving Credit Notes, the Term Loan Notes and the
Second Term Loan Notes.
"Pro Rata Share" of a Bank means:
(A) for purposes of (i) making Advances and receiving payments with
respect to the Revolving Credit as set forth in Section 2.4; (ii)
determining the obligations of a Bank to reimburse the Collateral Agent
for returned or dishonored checks as set forth in Section 2.9(D), (iii)
determining a Bank's participation in any Letter of Credit, reimbursement
obligations with respect thereto, and right to receive payments from the
Letter of Credit Cash Collateral Account and fees from Letters of Credit,
all as set forth in Section 2.19, (iv) applying payments, after an Event
of Default and acceleration of the Loans, against the Term Loan or the
Revolving Credit pursuant to clause "fifth" of Section 2.9(C), and (v)
applying mandatory prepayments from Borrower's Net Cash Flow pursuant to
Section 2.2(B) or made pursuant to Section 2.6, such Bank's pro rata
percentage as set forth on Exhibit 2.1 hereof;
(B) for purposes of (i) applying payments made prior to an Event of
Default and acceleration of the Loans, pursuant to Section 2.9(B), (ii)
applying interest payments made after an Event of Default and acceleration
of the Loans, pursuant to clause "fifth" of Section 2.9(C), (iii)
determining such Bank's rights to sell participations pursuant to Section
8.14, such Bank's pro rata percentage (as set forth on Exhibit 2.1 with
respect to the Term Loan and Revolving Credit or on Exhibit 2.2.1 with
respect to the Second Term Loan) of the Loan to which such payment or
participation interest under the circumstances relates;
(C) for purposes of applying payments made after an Event of Default
and acceleration of the Loans, against the Second Term Loan pursuant to
clause "fifth" of Section 2.9(C), such Bank's pro rata percentage, if any,
as set forth on Exhibit 2.2.1 hereof; and
(D) for purposes of (i) applying payments made after an Event of
Default and acceleration of the Loans, pursuant to clause "sixth" of
Section 2.9(C), (ii) determining the indemnification obligations of the
Banks pursuant to Section 7.9, (iii) calculating each Bank's interest in
any set-off pursuant to Section 8.3, and (iv) for all other purposes not
expressly set forth above, that percentage calculated from a fraction, the
numerator of which is such Bank's Commitment plus such Bank's portion of
the outstanding principal amount of the Term Loan, plus such Bank's
portion, if any, of the outstanding principal amount of the Second Term
Loan, and the denominator of which is the aggregate of all Commitments,
plus the aggregate amounts outstanding under the Term Loan and the Second
Term Loan.
The following definitions are hereby incorporated into Section
1.1 of the Loan Agreement and shall read as follows:
"First Amendment to Loan Agreement" means the First Amendment to Loan
Agreement by and among Borrowers, the Agent and the Banks dated as of
March __, 1996.
"First Amendment Closing Date" means the date on which the Banks advance
the Second Term Loan.
"Lockbox" shall have the meaning given to such term in Section 2.9(D)
hereof.
"Lockbox Agreement" shall have the meaning given to such term in Section
2.9(D) hereof.
"Master Collection Account" shall have the meaning given to such term in
Section 2.9(D) hereof.
"Second Term Loan" has the meaning given to such term in Section 2.2.1
hereof.
"Second Term Loan Facility Fee" means $150,000.00, constituting three-
quarters of one percent (3/4%) of the aggregate amount of the Second Term
Loan, payable to the Agent for the account of the Banks making the Second
Term Loan, based on each Bank's pro rata share of the Second Term Loan as
set forth on Exhibit 2.2.1 hereof.
"Second Term Loan Maturity Date" means November 30, 1996.
"Second Term Loan Notes" has the meaning given to such term in Section
2.2.1 hereof.
"Significant Asset" means (A) any intangible asset including, without
limitation, any patent, trademark, license or copyright of any Borrower,
provided that until the Borrowers transfer such general intangibles having
a value in the aggregate of $500,000.00 while this Agreement remains in
effect, the term "Significant Asset" shall not include the first
$100,000.00 in value of general intangibles transferred by the Borrowers
in any fiscal year and (B) any other asset of any Borrower (other than
Inventory in the ordinary course of business), provided that the term
"Significant Asset" shall not include the first $1,000,000.00 in the
aggregate net value of assets referred to in clause (B) above transferred
by the Borrowers in any fiscal year, with "value" as used in clause (A)
hereof to be determined at the higher of fair market value or book value
as determined by the Borrowers' books and records and "net value" as used
in clause (B) hereof to be determined at the higher of fair market value
or book value as determined by the Borrowers' books and records less the
amount expended or committed to be expended by the Borrowers (in an amount
not to exceed $10,000,000.00) with respect to any one sale of Significant
Assets, within one hundred twenty (120) days before and/or after such
transfer for the acquisition of any other asset, the use of which the
Borrowers reasonably intend will replace the use of the asset transferred,
provided that the "net value" of any asset shall never be less than zero.
The following sentence shall be added to the end of Section 2.1 of
the Loan Agreement:
In addition, subject to the terms and conditions hereinafter provided,
each Bank identified on Exhibit 2.2.1 hereto, for itself only, agrees to
make on the First Amendment Closing Date its portion of the Second Term
Loan in the principal amount set forth opposite its name on Exhibit 2.2.1
hereto.
Section 2.2(B) of the Loan Agreement is hereby amended by changing
the date "March 31, 1996" appearing in the sixth line of such subsection to
"June 30, 1996."
Section 2.2.1 shall be added to the Loan Agreement immediately after
Section 2.2 and immediately prior to Section 2.3, to read as follows:
SECTION 2.2.1 The Second Term Loan.
(A) Subject to the terms and conditions of this Agreement, the Banks
identified on Exhibit 2.2.1 hereto shall extend to the Borrowers a second
term loan in the principal amount of Twenty Million Dollars
($20,000,000.00) (the "Second Term Loan"). The Second Term Loan shall be
advanced by such Banks on the First Amendment Closing Date and shall be
used by the Borrowers for the purposes set forth in the Background Section
of the First Amendment to Loan Agreement. The Second Term Loan shall earn
interest at the Adjusted Base Rate. Amounts repaid or prepaid by the
Borrowers under the Second Term Loan shall not be available to the
Borrowers for reborrowing.
(B) The Borrowers shall pay interest on the principal amount of the
Second Term Loan outstanding from time to time at the Adjusted Base Rate
applicable to the Second Term Loan. The Adjusted Base Rate shall change
(a) simultaneously with each change in the Base Rate and (b) with any
change in the Applicable Margin in accordance with the definition thereof.
With respect to the Second Term Loan, the Borrowers shall pay to the Agent
for the account of each Bank making a portion of the Second Term Loan
interest monthly in arrears from the First Amendment Closing Date until
the principal amount of the Second Term Loan has been repaid in full, on
the last day of each month commencing with the last day of the month in
which the First Amendment Closing Date occurs. The Borrowers shall repay
the principal balance of the Second Term Loan in the amounts and on the
dates set forth below:
Date Each Principal Repayment
August 15, 1996 $10,000,000.00
October 30, 1996 $ 5,000,000.00
November 30, 1996 $ 5,000,000.00
(C) The joint and several obligation of the Borrowers to repay the
Second Term Loan and interest thereon shall be evidenced by promissory
notes of the Borrowers dated the date hereof, each payable to the order of
a Bank making a portion of the Second Term Loan in a principal amount
equal to the amount set forth opposite such Bank's name with respect to
the Second Term Loan on Exhibit 2.2.1 hereto and otherwise substantially
in the form of Exhibit 2.2.2 attached hereto (the "Second Term Loan
Notes").
Section 2.4(B) of the Loan Agreement is hereby amended by deleting
the number "$7,500,000.00" from the eighth line of such subsection and
replacing it with "$15,000,000.00".
Section 2.5 of the Loan Agreement is hereby amended by adding
subsection 2.5(D) to the end of Section 2.5 and immediately prior to Section
2.6, to read as follows:
(D) Second Term Loan Facility Fee. The Borrowers shall pay the
Second Term Loan Facility Fee to the Agent for the benefit of those Banks
making a portion of the Second Term Loan, on the First Amendment Closing
Date.
Section 2.6 of the Loan Agreement is hereby amended to read as
follows:
The Borrowers shall pay to the Agent, for the benefit of each Bank based
on such Bank's Pro Rata Share, promptly upon consummation of each of the
transactions set forth below: (A) the gross proceeds from the sale of any
Significant Asset of the Borrowers, less (i) any reasonable costs and
expenses thereof incurred to Persons other than any Borrower or any
Borrower's Subsidiaries or Affiliates and (ii) the amount expended or
committed to be expanded by the Borrowers (in an amount not to exceed
$10,000,000.00 with respect to any one sale of Significant Assets) within
one hundred twenty (120) days before and/or after such sale for the
acquisition of any other asset, the use of which the Borrowers reasonably
intend will replace the use of the Significant Asset sold, (B) the gross
proceeds when received by the Borrowers as a result of the termination of
any over-funded Plan, net of any (i) reasonable out-of-pocket costs and
expenses incurred by the Borrowers to Persons other than any Borrower or
any Borrower's Subsidiaries or Affiliates related to the termination which
would not have been incurred but for such termination; (ii) amount set
aside for a successor Plan; (iii) surplus assets of the terminated Plan
attributable to employee contributions; and (iv) federal, state or city
excise and income taxes, including alternative minimum taxes, that would
not have been incurred but for receipt of such proceeds, net of any
Borrower's net loss carry forwards or other credits available to be
applied against such taxes, (C) the gross proceeds of any private
placement of equity by the Borrowers, net of any reasonable costs and
expenses thereof incurred to Persons other than any Borrower or any
Borrower's Subsidiaries or Affiliates; (D) the gross proceeds of any
public sale of equity by the Borrowers, net of any reasonable costs and
expenses thereof incurred to Persons other than any Borrower or any
Borrower's Subsidiaries or Affiliates and (E) the gross amount of any debt
for borrowed money (whether by private placement or public sale) described
in Section 5.24(A)(5) incurred by Borrowers or any of them, provided that
if the Intercreditor Agreement, the Private Placement Notes or related
documents require a prepayment of the Private Placement Notes or permit
the holders thereof to require such a prepayment as a result of the
occurrences described in clauses (A), (B), (C), (D) and/or (E) of this
sentence, then the amount Borrowers shall be obligated to prepay hereunder
as a result of the occurrences described in clauses (A), (B), (C), (D)
and/or (E) of this sentence shall be equal to (1) the amount which
otherwise would be payable but for this proviso times a fraction the
numerator of which shall be the aggregate principal amounts of the Term
Loan and the Second Term Loan then outstanding plus the aggregate of the
Commitments and the denominator of which shall be the sum of the principal
amount of the Private Placement Notes then outstanding plus the principal
amounts of the Term Loan and the Second Term Loan then outstanding, plus
the aggregate of the Commitments, plus (2) if positive, the amount which
otherwise would be payable but for this proviso minus the amount of
prepayment actually required by the Intercreditor Agreement, the Private
Placement Notes, the related documents, and/or the holders of the Private
Placement Notes, and minus the amount of prepayment required under (1);
provided further that neither the foregoing provision nor any payment made
by Borrowers and accepted by the Agent shall constitute a waiver by the
Agent or the Banks of any breach of any covenant by Borrowers which may
have occurred hereunder as a result of any of the events described in
clauses (A), (B), (C), (D) and/or (E) hereof. Amounts prepaid in
accordance with this Section shall be applied when received first against
the Term Loan Base Rate Tranches and thereafter against the Term Loan
LIBO Rate Tranches, if any. To the extent the application of this
subsection requires a paydown of any LIBO Loan prior to the end of the
applicable Interest Period(s) the Borrowers shall pay any prepayment
compensation provided by Section 2.17(B) herein. Mandatory repayments
hereunder shall in no way postpone, decrease or otherwise affect the
Borrower's obligations to make the regularly scheduled installments on the
Term Loan as set forth in Section 2.2.
Clause fifth of Section 2.9(C) of the Loan Agreement is hereby
amended to read as follows:
fifth, to (i) the outstanding principal amount of the Second Term
Loan, to each Bank which makes a portion of such Loan ratably in
accordance with such Bank's Pro Rata Share (ii) the outstanding principal
amount of the Term Loan, to each Bank ratably in accordance with its Pro
Rata Share, (iii) the principal amount of the Advances, and (iv)
obligations under the Protection Agreements(with such obligations being
calculated or recalculated, as the case may be, on and as of the date(s)
on which such payments or collections are to be applied), all on a pro
rata basis;
Section 2.9 of the Loan Agreement is hereby amended to add subsection
2.9(D) to Section 2.9 immediately after Section 2.9(C) and prior to Section
2.10, to read as follows:
(D) Within ten (10) days of the First Amendment Closing Date, the
Borrowers shall direct all of their account debtors to make payments to
Borrowers in care of one of the post office boxes (each, a "Lockbox")
identified in the Lockbox applications previously executed by the
Borrowers and accepted by CoreStates and any Lockbox applications
hereafter executed by the Borrowers or any of them and accepted by
CoreStates, which Lockboxes (i) will be under the exclusive control of
CoreStates in its capacity as Collateral Agent, and (ii) shall at all
times be subject to the terms and conditions (including without limitation
terms and conditions relating to the payment of fees for providing lockbox
services, the availability of funds and the Collateral Agent's rights with
respect to returned or dishonored checks) set forth in said Lockbox
applications and in CoreStates' brochure of terms and conditions for
lockbox accounts previously delivered to the Borrowers as such brochure
may be amended by CoreStates in its sole discretion from time to time (all
such Lockbox applications and brochures in effect from time to time are
hereinafter referred to collectively as the "Lockbox Agreements"). Each
Business Day, Collateral Agent shall deposit receipts from each Lockbox
into the non-interest bearing Maidenform Collection Account #00012-55267
with the Collateral Agent or such other non-interest bearing, restricted
access Maidenform account as the Collateral Agent may require (account
#00012-55267 and such other accounts, if any, are hereinafter referred to
as the "Master Collection Account"). On the Wednesday (or the next
Business Day if any Wednesday is not a Business Day) after receipt or at
such other times (which may be more often than weekly) as the Collateral
Agent may otherwise direct in its reasonable discretion, Borrowers shall
cause the receipts from each retail store or outlet owned and/or operated
by Borrowers or any of them to be deposited by wire or other electronic
transfer into the Master Collection Account, so that collected funds
therefor are in the Master Collection Account at the opening of business
on the following Business Day. Borrowers shall cause all credit card
payments to be deposited daily into the Master Collection Account directly
by wire or other electronic transfer. Borrowers shall cause all other
payments of accounts, instruments, general intangibles or otherwise not
otherwise referred to above to be deposited into the Master Collection
Account promptly upon receipt. Subject to the provisions of the
Intercreditor Agreement, provided that there has not occurred an Event of
Default and acceleration of the Loans as set forth in Section 6.2 hereof,
and Borrowers have paid all amounts then due, at the beginning of each
Business Day, Collateral Agent shall withdraw and, in its capacity as
Agent, shall apply any collected funds held in the Master Collection
Account against the outstanding principal amount of the Revolving Credit.
Subject to the provisions of the Intercreditor Agreement, after the
occurrence of an Event of Default and the acceleration of the Loans as set
forth in Section 6.2 hereof, or if the Borrowers shall have failed to pay
all amounts which have come due on or prior to such applicable due date,
at the beginning of each Business Day the Collateral Agent shall withdraw
and apply any collected funds held in the Master Collection Account in
accordance with the Intercreditor Agreement, and the Agent shall apply any
funds received by it under the Intercreditor Agreement in accordance with
Section 2.9(C) above. Each Bank agrees to reimburse the Collateral Agent
in the amount of such Bank's Pro Rata Share (net of such Bank's Pro Rata
Share of any amount reimbursed by the Noteholders under the Intercreditor
Agreement) of any returned or dishonored check which is not reimbursed by
Borrowers, immediately upon demand by the Collateral Agent. Borrowers
agree that any portion of the Loans repaid with proceeds from checks which
are returned or dishonored will be immediately reinstated and continue to
be owing as if no payment thereon were made. Borrowers hereby grant,
bargain, convey and set over to the Collateral Agent for the benefit of
Agent, Issuing Bank, the Banks and the Noteholders a security interest in
and lien upon the Lockboxes, the Master Collection Account and all cash
and other assets at any time hereafter contained therein. No Borrower
shall have access to any of the funds maintained in the Lockboxes or the
Master Collection Account, or any of the payments made therein. Each
Borrower hereby appoints the Collateral Agent, acting through any
employee, officer or agent of the Collateral Agent, as such Borrower's
true and lawful attorney-in-fact, to receive all incoming mail delivered
to any Lockbox, open all such mail, remove all collections or admittances
therefrom in payment of or on account of any Borrower's accounts and use
the Collateral Agent's reasonable efforts to promptly forward all other
mail so received to Borrowers' place of business, with power to sign and
endorse the name of any Borrower on any note, check, draft, money order or
other instrument of payment made to any Lockbox or the Master Collection
Account, to give written notices after a Default or Event of Default or
during any Enforcement Period to account debtors in connection with any
accounts, to give written notice after a Default or Event of Default or
during any Enforcement Period to officers and officials of the United
States Postal Service to affect a change or changes of address so that all
mail addressed to any Borrower may be delivered directly to a post office
box identified in any Lockbox Agreement, and to do any and all things
necessary to be done with respect to the creation and maintenance of the
Lockboxes and/or Master Collection Account. Borrowers hereby ratify all
actions undertaken by the Collateral Agent pursuant to said power of
attorney hereinabove granted, if done in good faith. Such power of
attorney shall be deemed to be coupled with an interest and irrevocable as
long as any of the Loans are outstanding. Borrowers agree not to change
any direction given to any account debtor to make payments to the post
office boxes identified in the Lockbox Agreements without the Collateral
Agent's prior written consent. Borrowers represent and warrant that as of
the date hereof, all account debtors have been instructed to make payments
to Borrowers into lockboxes maintained with either CoreStates or Chase.
Borrowers hereby direct Chase to transfer daily to the Master Collection
Account by wire or other electronic transfer all collected funds paid into
any lockboxes maintained by any Borrower with Chase. Except as set forth
in the immediately preceding sentence, Borrowers agree to deliver to the
Collateral Agent immediately upon receipt, any payment received by any
Borrower from an account debtor after the First Amendment Closing Date in
the medium so received, for deposit into the Master Collection Account.
Section 2.17(A) of the Loan Agreement is hereby amended to read as
follows:
(A) The Borrowers may prepay Base Rate Loans (including without
limitation the Second Term Loan) in whole or in part at any time and from
time to time upon one Business Day's notice to the Agent, without premium
or penalty; provided, however, that any prepayment of the Second Term Loan
shall be in an amount not less than $3,000,000.00 or the entire remaining
unpaid balance, if less.
Section 3.2 of the Loan Agreement is hereby amended by changing the
"." after the word "whole" in subsection 3.2(C) to "; and" and adding
subsection 3.2(D) thereafter, to read as follows:
(D) If the covenants set forth in Sections 5.19, 5.20, 5.21, 5.22 and
5.31 were to be calculated on the date of such Advance, disbursement or
selection, the Borrowers would be in compliance with such Sections.
The second sentence of Section 4.4 of the Loan Agreement is hereby
amended to read as follows:
Between December 31, 1994 and the Closing Date, there has been no material
adverse changes to the financial condition (other than as reflected on the
Combined Pro Forma), business or prospects of the Borrowers taken as a
whole or the Domestic Borrowers taken as a whole, either in such positions
or in such results of operations.
Section 5.1 of the Loan Agreement is hereby amended to read as
follows:
SECTION 5.1 Use of Proceeds. The proceeds of the Term Loan and
Revolving Credit will be used for the purposes set forth in the Background
Section of this Agreement. The proceeds of the Second Term Loan will be
used for the purposes set forth of the Background Section of the First
Amendment to Loan Agreement.
The second sentence of Section 5.2(A) of the Loan Agreement is hereby
amended to read as follows:
Concurrently with such year-end Financial Statements, the Borrowers shall
furnish to each Bank a written statement by such accounting firm stating
that nothing came to their attention that caused them to believe that a
Borrower failed to comply with the covenants contained in Sections 5.16
through 5.24 hereof inclusive and Sections 5.4, 5.5, 5.13, 5.14, 5.26,
5.27 and 5.31 hereof insofar as they relate to accounting matters (which
statement may contain such qualifications and limitations as are
customarily included in such a report).
Section 5.2(B) of the Loan Agreement is hereby amended in its
entirety to read as follows:
(B) In addition, the Borrowers will furnish to each Bank, (i) within
sixty (60) days from the Closing Date the Combined Pro Forma for the
period from January 1, 1995 through the Closing Date, and (ii) within (60)
days of the close of each fiscal quarter other than the last fiscal
quarter of each fiscal year, Borrowers' Interim Financial Statements for
such fiscal quarter and the period then ended prepared by the Borrowers in
accordance with GAAP, consistently applied, subject only to usual year-end
adjustments and the absence of footnotes, provided that Interim Financial
Statements for the fiscal quarter ending June 30, 1996 and for each fiscal
quarter thereafter (except for the last fiscal quarter in each fiscal
year) shall be reviewed by ERNST & YOUNG or other independent certified
public accountants reasonably satisfactory to the Agent.
Section 5.2(C) of the Loan Agreement is hereby amended by adding the
following to the end of such Section:
In addition, commencing on the First Amendment Closing Date and
thereafter, at any time while Borrowers' Leverage Ratio is 0.60 or greater
the Borrowers will also furnish to each Bank, by Friday of each week (as
of the end of the seven-day week ended on the previous Tuesday) prior to
the Termination Date or at such more frequent intervals as Agent may
request, a completed Borrowing Base Certificate substantially in the form
of Exhibit 1.1A hereto executed by the chief financial officer(s) of the
Borrowers or, if not available, by the assistant controller(s) of the
Borrowers.
Section 5.19 of the Loan Agreement is hereby amended in its entirety
to read as follows:
SECTION 5.19 Leverage Ratio. The Borrowers will maintain its
Leverage Ratio at not more than the following levels at any time during
the following periods:
Maximum Leverage
Period Ratio
as of the end of each fiscal
quarter, through the quarter
ending December 31, 1995 0.70:1
as of the fiscal quarters
ending March 31, 1996 and
June 30, 1996 0.80:1
as of the end of the fiscal quarter
ending September 30, 1996 0.75:1
as of the fiscal quarter
ending December 31, 1996 0.65:1
as of the end of each fiscal
quarter from January 1, 1997
through the quarter ending
September 30, 1997 0.60:1
as of the end of each fiscal
quarter from and after
October 1, 1997 0.55:1
Section 5.20 of the Loan Agreement is hereby amended in its entirety
to read as follows:
SECTION 5.20 Tangible Net Worth. Until the Borrowers provide the Banks
with the Combined Pro Forma for the period from January 1, 1995 through
the Closing Date required by Subsection 5.2(B)(i) hereof, the Borrowers
will not permit Tangible Net Worth at any time to be less than
$72,000,000.00. From the Closing Date through December 31, 1995, the
Borrowers will not permit Tangible Net Worth to be less that (A) 90% of
the Tangible Net Worth as of the Closing Date, minus (B) $5000.00,
being the amount expended between the Closing Date and December 31, 1995
to acquire 300 shares of the outstanding NCC stock not purchased on the
Closing Date, plus (C) 70% of the aggregate Consolidated net profit after
taxes since the Closing Date, provided that Consolidated losses incurred
for any reporting period shall not be used to reduce aggregate
Consolidated net profit after taxes for purposes of this Section 5.20.
From January 1, 1996 through June 30, 1996, the Borrowers will not permit
Tangible Net Worth to be less than the amounts set forth below:
Period Tangible Net Worth
through March 31, 1996 $ 68,000,000.00
through June 30, 1996 $ 76,000,000.00
Thereafter, the Borrowers will not permit Tangible Net Worth to be less
than the greater of (A) $76,000,000.00, or (B) the sum of (i) the Tangible
Net Worth covenant level which the Borrowers are obligated to meet on
December 31, 1995 plus (ii) 70% of the aggregate Consolidated net profit
after taxes since January 1, 1996, provided that Consolidated losses
incurred for any reporting period shall not be used to reduce aggregate
Consolidated net profits after taxes for purposes of this Section 5.20.
Section 5.21 of the Loan Agreement is hereby amended in its entirety
to read as follows:
SECTION 5.21 Fixed Charge Coverage Ratio. The Borrowers will not permit
the Fixed Charge Coverage Ratio for the immediately preceding four fiscal
quarters (including the fiscal quarter ending on such date) to be less
than the following amounts as of the end of each fiscal quarter ending
during the following periods:
Minimum Fixed Charge
Period Coverage Ratio
September 30, 1996 through
December 30, 1996 1.00:1
December 31, 1996 and each
fiscal quarter ending thereafter 1.10:1
Section 5.22 of the Loan Agreement is hereby amended in its entirety
to read as follows:
SECTION 5.22 Funded Debt to Operating Cash Flow. The Borrowers
will not permit the ratio of Funded Debt to Operating Cash Flow for the
immediately preceding four fiscal quarters (including the fiscal quarter
ending on such date) to be greater than the following amounts as of the
end of each fiscal quarter ending during the following periods:
Date Maximum Ratio
Closing through the fiscal quarter
ending September 30, 1995 5.25:1
for the fiscal quarter ended
December 31, 1995 7.00:1
for the fiscal quarter
ending March 31, 1996 9.00:1
for the fiscal quarter
ending June 30, 1996 7.00:1
for the fiscal quarter ending
September 30, 1996 4.75:1
from October 1, 1996 through
the fiscal quarter ending
September 30, 1997 4.25:1
from October 1, 1997 and each fiscal
quarter ending thereafter 4.00:1
Section 5.23 of the Loan Agreement is hereby amended in its entirety
to read as follows:
SECTION 5.23 Dividends and Distributions. Prior to June 30, 1997, no
Borrower shall make or declare any dividend upon any capital stock of any
Borrower or return any capital to any of its shareholders, or make or
declare any other payment or distribution or delivery of any property to
any Borrower's shareholders in their capacity as such, or redeem, return,
purchase or acquire directly or indirectly, any shares of any Borrower's
capital stock now or hereafter outstanding except (A) for the distribution
of dividends from Borrowers to Domestic Borrowers, which shall be
permitted provided that there does not then exist after giving affect to
such distribution, an Event of Default or Unmatured Event of Default , (B)
between the Closing Date and December 31, 1995, Borrowers shall be
entitled to purchase 300 shares of NCC stock not otherwise purchased on or
about the Closing Date at a price not to exceed $5000.00, provided that
such shares are delivered to the Collateral Agent to be held subject to
the Pledge Agreement, and (C) if, but only if, the Second Term Loan has
been repaid in full and Borrower's Leverage Ratio, Tangible Net Worth,
Fixed Charge Coverage Ratio and ratio of Funded Debt to Operating Cash
Flow each have reached such levels at such times as would be in compliance
with Sections 5.19, 5.20, 5.21 and 5.22 as in effect prior to the First
Amendment to Loan Agreement, the Borrowers shall be in entitled to
purchase the remaining outstanding shares of NCC as described in the
Background Section hereof provided that such shares are delivered to the
Collateral Agent to be held subject to the Pledge Agreement. After June
30, 1997, Borrowers shall be entitled to make or declare dividends upon
any capital stock of any Borrower or return any capital to any of its
shareholders or make or declare any other payment or distribution to any
Borrower's shareholders in their capacity as such, provided that there
does not exist any Event of Default or Unmatured Event of Default at the
time such dividend, payment or distribution is made or declared, provided
further that no Event of Default or Unmatured Event of Default would
otherwise result after giving effect to the making or declaring of such
dividends, payment or distribution, and provided further that the Second
Term Loan has been repaid in full and Borrowers' Leverage Ratio, Tangible
Net Worth, Fixed Charge Coverage Ratio and ratio of Funded Debt to
Operating Cash Flow each have reached such levels at such times as would
be in compliance with Sections 5.19, 5.20, 5.21 and 5.22 as in effect to
the First Amendment to Loan Agreement.
Section 5.24(C) of the Loan Agreement is hereby amended in its
entirety to read as follows:
(C) The Borrowers shall not enter into or consent to any amendment to the
Subordinated Debt without the Majority Banks prior written consent, except
to extend the term for payment thereof. The Borrowers shall not make any
payment on the Subordinated Debt (i) until the Second Term Loan has been
repaid in full and Borrowers' Leverage Ratio, Tangible Net Worth, Fixed
Charge Coverage Ratio and ratio of Funded Debt to Operating Cash Flow each
have reached such levels at such times as would be in compliance with
Sections 5.19, 5.20, 5.21 and 5.22 as in effect prior to the First
Amendment to Loan Agreement or (ii) while there exists an Event of Default
or Unmatured Event of Default or if an Event of Default or Unmatured Event
of Default would otherwise result after giving effect to such payment.
The Loan Agreement is hereby amended to add a new Section 5.31, to
read as follows:
SECTION 5.31 Inventory. The Borrowers will not permit the
aggregate value of all Inventory of the Borrowers, as reflected on the
year-end audited Financial Statements provided to the Banks for the fiscal
period ending December 31, 1996, to exceed $170,000,000.00.
The Loan Agreement is hereby amended to add a new Section 5.32 to
read as follows:
SECTION 5.32 Management Consultant. Within ten (10) days after the
First Amendment Closing Date, Borrowers shall engage a management
consultant satisfactory to the Agent, to determine the cause of the rapid
build up of Borrowers' inventory, to review and report upon the
effectiveness of the Borrowers' inventory liquidation plan, and inventory
accounting and production planning systems, and to review and report on
such other matters as reasonably determined by the Agent. Borrowers will
agree in writing to the scope of such review consistent with the foregoing
sentence. Borrowers shall cooperate fully with such management
consultant, shall permit the Agent to contact and discuss with such
management consultant its progress and findings from time to time, and
cause such management consultant to prepare and deliver to the Banks and
Borrowers an initial written report of its study, in form and detail
reasonably satisfactory to the Agent, promptly upon completion of such
review but in no event later than May 31, 1996. Thereafter, at the
request of the Agent, which may be made at any time and from time to time
until Borrowers' Leverage Ratio, Tangible Net Worth, Fixed Charge Coverage
Ratio and ratio of Funded Debt to Operating Cash Flow each have reached
such levels at such times as would be in compliance with Sections 5.19,
5.20, 5.21 and 5.22 as in effect prior to the First Amendment to Loan
Agreement, Borrowers shall engage a management consultant, satisfactory to
the Agent, to review Borrowers' business operations or any aspect thereof,
and to prepare a written report of any such review which shall be made
available to the Banks and Borrowers which report shall be in form and
detail reasonably satisfactory to Agent. Borrowers shall cooperate fully
and in good faith with such management consultant so as to enable any
required review and report to be completed promptly and accurately.
The Loan Agreement is hereby amended to add a new Section 5.33 to
read as follows:
SECTION 5.33 Termination of Plan. Borrowers have indicated to the
Agent and the Banks that Borrowers intend to terminate the Maidenform,
Inc. Retirement Plan and replace it with a successor Plan. Borrowers have
indicated that they are now preparing data to make the necessary
calculations to commence the termination and intend diligently to pursue
such termination to complete such termination and effect a reversion of
assets from the Plan by December 31, 1996, or as soon thereafter as is
reasonably practicable after the IRS issues: (i) a favorable determination
letter as to the qualification of the Plan as terminated; and (ii) a
private letter ruling that not more than a 20% excise tax will be imposed
pursuant to Code Section 4980, if the IRS is issuing private letter
rulings on this subject. If Borrowers implement such termination,
Borrower's shall use special ERISA counsel and enrolled actuaries and
Borrowers shall comply with ERISA, the Code, any and all other laws and
regulations applicable thereto and all Plan documents in proceeding with
such termination, and shall satisfy all liabilities of the Plan to
participants and beneficiaries in accordance with 4044(d)(1) of ERISA.
Before making application to terminate said Retirement Plan, Borrowers
shall deliver to Agent a written summary of their proposed method of
terminating the Plan, including an explanation of how the method will
avoid the imposition of a 50% excise tax pursuant to Code Section 4980(d),
along with a projected estimate by their enrolled actuaries of the amount
of the proceeds described in Section 2.6(B). Borrowers shall deliver to
the Agent copies of the applications for the determination letter and
private letter ruling, if any, described above, and copies of all filings
with the PBGC in advance of filing and final copies of these applications
and filings when filed, any correspondence with and from the IRS and PBGC
in relation thereto, and any other information or documents as Agent may
reasonably request with respect to the termination. Upon termination of
any such Plans, proceeds received by Borrowers as a result of such
termination shall be applied in accordance with Section 2.6 of this
Agreement. After implementation of the proposal, if the Agent so requests
in writing, Borrowers shall deliver to the Agent a written opinion of
Borrower's ERISA counsel, in form and substance reasonably satisfactory to
the Agent, upon which the Banks shall be entitled to rely, substantially
to the effect that the Borrower has complied in all material respects with
the procedural requirements imposed by Title I of ERISA in connection with
the termination of the Retirement Plan provided, however, that such
counsel may rely on any favorable determination letter from the Internal
Revenue Service which has not been withdrawn, as to the qualification of
the Plan under ERISA after its termination; and on such certifications,
representations, warranties and other statements provided by officers,
employees, accountants, and other agents of the Borrower, and governmental
officials and other third parties, as to such factual and other matters as
such counsel determines to be necessary (including without limitation
matters of judgment or professional opinion made by actuaries or others),
which such counsel may rely upon without investigation; and provided
further that such opinion shall not be required to address compliance by
any person or entity with its fiduciary duties as required by Title I of
ERISA or other federal or state law.
From and after the date of this Amendment, Exhibit 2.2.1 and Exhibit
2.2.2 attached to this Amendment shall become Exhibits to the Agreement and be
made a part thereof.
Section 7.5 of the Loan Agreement is hereby amended to read in its
entirety as follows:
SECTION 7.5 Rights as a Bank. With respect to its Commitment and its Pro
Rata Share of the Term Loan and the Second Term Loan, the Agent shall have
the same rights and powers hereunder as any Bank and may exercise the same
as though it were not the Agent. The terms "Bank" and "Banks" shall,
unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to
and generally engage in any kind of commercial banking, investment banking
or trust business with any Borrower or Affiliates of any Borrower as if
Agent were not the Agent.
Outstanding Indebtedness. This Amendment is an acknowledgement of
the outstanding indebtedness presently owed by each Borrower, jointly and
severally, and reaffirmation by Borrowers to pay the indebtedness to the Agent
on account of the Banks in full according to the terms of the Loan Agreement.
Representations and Warranties. Each Borrower represents and
warrants to the Agent, the Banks and the Issuing Bank that (a) the
representations and warranties of Borrowers contained in the Loan Agreement are
true and correct as of the date hereof except for (i) changes permitted thereby
or in writing by the Banks or Majority Banks in accordance with Sections 8.1 or
8.4 of the Loan Agreement, as applicable, (ii) representations and warranties
which, by their express terms, relate to a particular period or date which has
since passed, and (iii) representations and warranties of Borrowers contained
in the Loan Agreement with respect to the subject matter contained on Exhibits
4.5, 4.16 and 5.14, which the Borrowers represent and warrant are true and
correct as of the date hereof as amended by the Supplement to Exhibit 4.5,
Supplement to Exhibit 4.16 and Supplement to Exhibit 5.14 respectively, which
are attached hereto and made a part hereof, (b) the Borrowers are in compliance
with the covenants contained in the Loan Documents as amended hereby, (c) after
giving effect to this Amendment, there exists no Event of Default or Unmatured
Event of Default under the Loan Agreement, (d) there exists no event of default
or event which with the passage of time or giving of notice or both would
constitute an event of default under any other agreement for borrowed money to
which the Borrowers (or any of them) are a party not otherwise waived in
writing by the creditor thereof, and (e) the conditions precedent set forth in
Paragraph 5 hereof have been fully satisfied.
Defenses. The Borrowers acknowledge that the Loan Documents continue
in full force and effect and that the Borrowers have no charge, lien, claim or
offset against the Banks, or defenses to enforcement of the Loan Documents by
the Agent or the Collateral Agent on behalf of the Banks.
Conditions Precedent. The obligation of the Banks hereunder is
conditioned upon satisfaction of the following conditions precedent:
Borrowers shall deliver to the Agent this Amendment duly
executed by Borrowers;
Borrowers shall deliver to the Agent the Second Term Notes, each
accurately completed and executed by Borrowers;
Borrowers shall deliver or cause to be delivered to the Agent:
such amendments, agreements, acknowledgments, financing
statements or other instruments as the Agent may request in order to cause,
confirm and acknowledge that the Collateral pledged pursuant to the Security
Documents shall secure Borrowers' obligations with respect to the Second Term
Loan on the same perfected priority basis as the Borrowers' other obligations
under or in connection with the Loan Agreement (including without limitation
the Term Loan and the Revolving Credit) and the Private Placement;
an amendment to the Intercreditor Agreement in form and
substance acceptable to the Banks duly executed by the Borrowers, the Banks,
the Noteholders, the Agent, the Issuing Bank and the Collateral Agent;
all other amendment and modification documents requested by the
Agent in connection herewith;
certified copies of (i) resolutions of each of the Borrowers
authorizing the execution of this Amendment, all modification documents to
which such Borrower is a party and all transactions contemplated herein and
(ii) each document evidencing any other necessary corporate action and any
required approvals from governmental authorities for each of such Borrowers
with respect to this Amendment and the other documents contemplated hereby;
a certificate dated as the date of this Amendment by the
Secretary or an Assistant Secretary of each of the Borrowers stating that the
Articles and by-laws of such Borrower have not been amended since April 26,
1995, except as stated in said certificate, with copies of all amendments
attached;
a favorable opinion of outside counsel for the Borrowers
dated the date of this Amendment on such matters as the Agent shall require and
in form and substance reasonably satisfactory to the Agent;
a certificate dated the date of this Amendment by the
Secretary or an Assistant Secretary of each Borrower as to the names and
signatures of the officers of such Borrower authorized to sign this Amendment,
the Second Term Notes and the Loan Documents and the other documents or
certificates of such Borrower to be executed and delivered pursuant hereto;
copies of the Maidenform, Inc. Retirement Plan document as
in effect on the date hereof; and
such other documents as may be reasonably requested by
Lender.
Borrowers shall deliver to the Agent financial projections,
including a balance sheet, income statement, statement of changes in cash flow
and any other projected statement requested by the Agent, each prepared in
accordance with GAAP, for the twelve months ending December 31, 1996. In
addition, the Borrowers shall deliver month by month projected cash
expenditures and cash receipts, quarter by quarter income statements and
balance sheets and a Borrowing Base Certificate dated no earlier than five
Business Days prior to the First Amendment Closing Date.
Each Bank shall have completed such due diligence as it
determines necessary with the results thereof satisfactory to such Bank.
There shall have been no material adverse change in the
financial condition, assets, nature of the assets, operations or prospects of
the Borrowers which has not been previously disclosed in writing to the Agent
and the Banks.
The Agent and the Banks shall have received a written audit
report prepared by an independent auditing firm satisfactory to the Agent with
respect to Borrowers' accounts receivable and accounts payable, the scope, form
and results of which shall be satisfactory to the Agent and the Banks.
Borrowers shall pay to the Agent the Second Term Loan Facility
Fee, which fee shall be due and payable upon execution of this Amendment and
shall be deemed fully earned and non-refundable when due.
Borrowers shall pay all costs and out-of-pocket expenses
(including, without limitation, reasonable fees and costs of the Agent's
attorneys and the auditors engaged pursuant to Paragraph 5(g) of this
Amendment, and the management consultant engaged pursuant to Section 5.32 of
the Loan Agreement) of the Agent in connection with the amendment of the Loan
Agreement and modification of the Loan Documents which includes, among other
things, the preparation of this Amendment and related modification documents,
all related filings and recordation fees and taxes, and the enforcement of the
Loan Agreement and all costs and expenses incurred in connection with the
above.
The representations and warranties set forth in Paragraph 3 are
true, correct and not misleading in any material respect.
Miscellaneous. The indebtedness evidenced by the Loan Agreement and
the Notes shall continue to be secured as set forth in the Loan Agreement as
amended by this Amendment and all of the Security Documents, including those
Security Documents modified in connection herewith. This Amendment contains
all of the modifications to the Loan Agreement. No further modifications shall
be deemed effective, unless in writing executed by all parties. This Amendment
shall be binding upon the parties hereto, their successors and assigns. Except
as expressly modified and amended herein, the Loan Agreement and all documents
executed in connection with the Loan Agreement, will remain in full force and
effect in accordance with their respective terms. This Amendment shall be
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania. This Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any of the parties hereto may execute this Amendment by signing any such
counterpart. This Amendment shall become effective when it shall have been
executed by the Borrowers, the Agent, the Issuing Bank and the Banks, and it
shall thereafter be binding upon and inure to the benefit of the Borrowers, the
Agent, the Issuing Bank and the Banks and their respective successors and
assigns, except that no Borrower shall have the right to assign any right or
obligation hereunder or any interest herein. The Loan Agreement, as amended
hereby, shall remain in full force and effect. Execution of this Amendment
shall not constitute a novation between the Borrowers and the Banks.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have caused this Amendment to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
MAIDENFORM WORLDWIDE, INC.
BETEX, S.A. MAIDENFORM, INC.
CREACIONES TEXTILES de NCC INDUSTRIES, INC.
MERIDA, S.A. de C.V. CRESCENT INDUSTRIES, INC.
ELIZABETH NEEDLE CRAFT, INC.
JAMAICA NEEDLECRAFT, LTD.
MAIDENFORM INTERNATIONAL, LTD. By/s/ Ira Glazer
NICHOLAS NEEDLECRAFT, INC. Name:Ira Glazer
Title: Executive Vice
President
By /s/ Ira Glazer
Name:Ira Glazer (as to all Borrowers
listed above)
Title: Executive Vice President
(as to all Borrowers listed above)
Attest:Steven N. Masket Attest:Steven N. Masket
CORESTATES BANK, N.A. COMERICA BANK
By: /s/ Charles H. Dietrich By: /s/ Martin G. Ellis
Name:Charles H. Dietrich Name: Martin G. Ellis
Title:Sr. Vice President Title:Vice President
THE CHASE MANHATTAN BANK, N.A. NATIONSBANK, N.A.
By: /s/ Jeffery Lobb By: /s/ Joseph R. Netzel
Name:Jeffery Lobb Name: Joseph R. Netzel
Title:Vice President Title: Vice President
CORESTATES BANK, N.A., as Agent NATIONAL CITY BANK
By: /s/ David A. Burns
By /s/ Charles H. Dietrich Name: David A. Burns
Name: Charles H. Dietrich Title: Vice President
Title: Sr. Vice President
NBD BANK
By: /s/ Steven Franklin
Name: Steven Franklin
Title: Vice President
EUROPEAN AMERICAN BANK UNITED JERSEY BANK
By:/s/ Dennis Nochowitz By: /s/ Richard O. Carmichael
Name:Dennis Nochowitz Name:Richard O. Carmichael
Title:Asst. Vice President Title:Sr. Vice President
1
2
MAIDENFORM WORLDWIDE, INC.
MAIDENFORM, INC.
BETEX, S.A.
CREACIONES TEXTILES DE MERIDA, S.A. DE C.V.
ELIZABETH NEEDLE CRAFT, INC.
JAMAICA NEEDLECRAFT, LTD.
MAIDENFORM INTERNATIONAL, LTD.
NICHOLAS NEEDLECRAFT, INC.
NCC INDUSTRIES, INC.
CRESCENT INDUSTRIES, INC.
AMENDMENT AGREEMENT
Dated as of March 29, 1996
$30,000,000 10.75% Senior Notes due September 30, 2003
AMENDMENT AGREEMENT
AMENDMENT AGREEMENT (this "Agreement"), dated as of March
29, 1996, among MAIDENFORM WORLDWIDE, INC. ("Worldwide"), a
Delaware corporation, MAIDENFORM, INC. ("Maidenform"), a New York
corporation, BETEX, S.A., a Costa Rican corporation, CREACIONES
TEXTILES DE MERIDA, S.A. DE C.V., a Mexican corporation,
ELIZABETH NEEDLE CRAFT, INC., a New York corporation, JAMAICA
NEEDLECRAFT, LTD., a Jamaican corporation, MAIDENFORM
INTERNATIONAL, LTD., a New York corporation, NICHOLAS
NEEDLECRAFT, INC., a New York corporation, NCC INDUSTRIES, INC.,
a Delaware corporation, and CRESCENT INDUSTRIES, INC., a Delaware
corporation (each such entity, together with Worldwide and
Maidenform, individually, a "Company" and collectively, the
"Companies"), MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
("MassMutual"), PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
("Principal") and TMG LIFE INSURANCE COMPANY ("TMG," MassMutual,
Principal and TMG are herein collectively referred to as the
"Noteholders").
RECITALS:
A. Pursuant to separate Amended and Restated Note Purchase
Agreements, each dated as of April 1, 1995 (collectively, the
"Existing Note Agreement," and, as amended by this Agreement, the
"Amended Note Agreement"), the Companies issued Thirty Million
Dollars ($30,000,000) in aggregate principal amount of their
joint and several ten and seventy-five one hundredths percent
(10.75%) Senior Notes due September 30, 2003 (the "Notes"). The
Notes are substantially in the form of Exhibit A attached to the
Existing Note Purchase Agreement.
B. The Companies' obligations under the Existing Note
Agreement and the Notes were and are secured by, among other
things, certain security agreements, mortgages, deeds of trust
and other similar documents (collectively, the "Existing Security
Documents"), executed by one or more of the Companies in favor of
CoreStates Bank, N.A., as collateral agent (the "Collateral
Agent").
C. The Companies have requested that the Noteholders amend
or waive certain terms of the Existing Note Agreement, as more
particularly set forth in this Agreement.
D. Subject to the terms and conditions hereinafter set
forth, the Noteholders are willing to amend certain terms of the
Existing Note Agreement and waive other terms of the Existing
Note Agreement, all as more particularly set forth in this
Agreement.
E. Each of the Companies and the Noteholders are desirous
of entering into this Agreement on the terms and conditions
hereinafter set forth.
AGREEMENT:
NOW THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
. DEFINED TERMS
The terms used herein and not defined herein shall have the
meanings assigned to such terms in the Existing Note Agreement.
The Existing Note Agreement, the Notes and the Existing Security
Documents are referred to herein as the "Financing Documents",
and, as amended and supplemented by this Agreement and the other
agreements and instruments to be executed in connection herewith
and therewith, as each may be amended from time to time, are
referred to herein as the "Amended Financing Documents".
AMENDMENT TO EXISTING NOTE AGREEMENT.
Each of the Companies and, subject to the satisfaction of
the conditions set forth in Section 5 hereof, the Noteholders
hereby consents and agrees to the amendments to the Existing Note
Agreement, as set forth in Exhibit A to this Agreement. Each
such amendment shall become effective on the Amendment Effective
Date and is incorporated herein by reference as if set forth
verbatim in this Agreement.
. WAIVER OF NON-COMPLIANCE.
Effective upon the satisfaction of the conditions set forth
in Section 5 hereof, the Noteholders hereby waive any non-
compliance with Section 6.7 of the Existing Note Agreement by the
Companies through September 29, 1996.
. WARRANTIES AND REPRESENTATIONS.
To induce the Noteholders to enter into this Agreement, the
Companies jointly and severally warrant and represent to the
Noteholders that as of the Amendment Effective Date:
Organization, Existence and Authority. Each of the
Companies is a corporation duly incorporated, validly existing
and, with respect to the Domestic Companies, is in good standing
under the laws of its jurisdiction of incorporation. Each of the
Companies has all requisite power and authority to execute and
deliver this Agreement and to perform its obligations under the
Amended Financing Documents.
Authorization, Execution and Enforceability. The
execution and delivery by each of the Companies of this Agreement
and the performance by the Companies of their respective
obligations under the Amended Financing Documents have been duly
authorized by all necessary action on the part of each of the
Companies. This Agreement has been duly executed and delivered
by each of the Companies. Each of the Amended Financing
Documents constitutes a valid and binding obligation of each of
the Companies, enforceable in accordance with its respective
terms, except that the enforceability thereof may be:
limited by bankruptcy, insolvency or other similar
laws affecting the enforceability of creditors' rights
generally; and
subject to the availability of equitable remedies.
No Conflicts or Defaults. Neither the execution and
delivery by any of the Companies of this Agreement, nor the
performance by any of the Companies of its obligations under each
of the Amended Financing Documents, conflicts with, results in
any breach in any of the provisions of, constitutes a default
under, violates or results in the creation of any Lien (other
than pursuant to the Amended Financing Documents) upon any
Property of any of the Companies under the provisions of:
any charter document, partnership agreement or
bylaws of any of the Companies;
(b) assuming the contemporaneous execution and
delivery of an amendment to the Bank Loan Agreement, any
agreement, instrument or conveyance to which the any of the
Companies or any Properties of any of the Companies may be
bound or affected; or
(c) any statute, rule or regulation or any order,
judgment or award of any court, tribunal or arbitrator by
which any of the Companies or any Properties of any of the
Companies may be bound or affected.
Governmental Consent. Neither the execution and
delivery by each of the Companies of this Agreement nor the
performance by each of the Companies of its respective
obligations under each of the Amended Financing Documents, is
such as to require a consent, approval or authorization of, or
filing, registration or qualification with, any Governmental
Authority on the part of any of the Companies as a condition
thereto under the circumstances and conditions contemplated by
this Agreement and each of the Amended Financing Documents.
No Defaults or Events of Default. After giving effect
to the transactions contemplated by this Agreement, including the
contemporaneous execution and delivery of an amendment to the
Bank Loan Agreement, no Default or Event of Default will exist
under any of the Amended Financing Documents.
Disclosure. The financial statements and certificates
delivered to the Noteholders by the Companies or the Companies'
accountants, as the case may be, pursuant to Section 7.1, Section
7.2 and Section 7.3 of the Existing Note Agreement do not, nor
does this Agreement or any written statement furnished by any of
the Companies in connection herewith, contain any untrue
statement of a material fact or omit a material fact necessary to
make the statements contained therein or herein not misleading.
There is no fact which the Companies have not disclosed to the
Noteholders in writing which has had or, so far as any of the
Companies can now foresee, could reasonably be expected to have,
a Material Adverse Effect.
True and Correct Copies. The Companies have delivered
to each of the Noteholders true and correct copies of the Bank
Loan Agreement and each of the Amended Security Documents
(including, without limitation, all schedules and exhibits
thereto and all miscellaneous agreements and certificates
delivered in connection therewith), each as in effect on the
Amendment Effective Date.
Certain Representations and Warranties. As supplemented
by the information set forth on Annex 1 hereto, all of the
representations and warranties contained in Section 2 of the
Existing Note Agreement are true and correct in all material
respects as of the Amendment Effective Date as if such
representations and warranties were made on the Amendment
Effective Date. All of the representations and warranties
contained in the most recent amendments to the Bank Loan
Agreement and each of the Security Documents, each as in effect
on the Amendment Effective Date, are true and correct in all
respects.
. CONDITIONS PRECEDENT.
The amendments set forth in Section 2 hereof and the waiver
set forth in Section 3 hereof shall not become effective unless
all of the following conditions precedent shall have been
satisfied on or before April 1, 1996 (the date of such
satisfaction being herein referred to as the "Amendment Effective
Date"):
Execution and Delivery of this Agreement. Each of the
Companies shall have executed and delivered to each of the
Noteholders a counterpart of this Agreement.
Execution and Delivery of Other Amendments. The
following documents, each in form and substance satisfactory to
the Noteholders and their special counsel, shall have been duly
executed and delivered by the parties thereto, and shall be in
full force and effect:
(a) Amendment to Bank Loan Agreement, among the
Companies, CoreStates Bank N.A., as Agent, CoreStates Bank
N.A., Nationsbank, N.A., The Chase Manhattan Bank, N.A.,
National City Bank, NBD Bank, Comerica Bank, European
American Bank, and United Jersey Bank;
(b) Amendment to Intercreditor Agreement, among all of
the parties to the Intercreditor Agreement; and
(c) Reaffirmation Agreement among the Companies and
the Collateral Agent, reaffirming the Liens created by the
Security Documents.
5.11 Collateral. The Amended Financing Documents shall be
in full force and effect and there shall be no Default or Event
of Default thereunder and as defined therein which would not be
waived by this Agreement. All actions necessary to perfect the
Lien of the Collateral Agent as provided by the Amended Financing
Documents (including, without limitation, the filing of all
appropriate financing statements and the recording of all
appropriate documents with appropriate public officials) shall
have been taken in accordance with the terms of the Amended
Financing Documents and confirmation thereof shall be received by
the Noteholders. The Lien of the Collateral Agent as provided by
the Amended Financing Documents shall be valid, enforceable and
perfected and the Property of the Companies shall be subject to
no other Lien not otherwise permitted under Section 6.5 of the
Amended Note Agreement.
No Default; Representations And Warranties True. The
warranties and representations set forth in Section 4 hereof
shall be true and correct on the Amendment Effective Date and no
Default or Event of Default shall exist which would not be waived
by this Agreement.
Authorization of Transactions. Each of the Companies
shall have authorized, by all necessary action, the execution and
delivery of this Agreement and each of the documents executed and
delivered in connection herewith and the performance of all
obligations of, and the satisfaction of all closing conditions
pursuant to this Section 5 by, and the consummation of all
transactions contemplated by this Agreement by, the Companies.
Opinion of Counsel. The Noteholders shall have
received from Baer Marks & Upham, counsel to the Companies, a
legal opinion substantially in the form set forth in Exhibit B to
this Agreement.
Payment of Certain Expenses. The Companies shall have
paid all reasonable costs and expenses of the Noteholders
relating to this Agreement and the other Amended Financing
Documents, including without limitation the fees and expenses of
Hebb & Gitlin, the Noteholder's special counsel.
Proceedings Satisfactory. All documents executed and
delivered, and actions and proceedings taken, in connection with
this Agreement shall be satisfactory to the Noteholders and their
special counsel. The Noteholders and their special counsel shall
have received copies of such documents and papers as they may
reasonably request in connection therewith, in form and substance
satisfactory to them.
. NO PREJUDICE OR WAIVER; REAFFIRMATION.
No Prejudice or Waiver. Except as provided herein, the
terms of this Agreement shall not operate as a waiver by the
Noteholders of, or otherwise prejudice the Noteholders' rights,
remedies or powers under, the Amended Financing Documents or
under applicable law. Except as expressly provided herein:
(a) no terms and provisions of any agreement are
modified or changed by this Agreement; and
(b) the terms and provisions of the Financing
Documents shall continue in full force and effect.
Reaffirmation. Each of the Companies hereby
acknowledges and reaffirms all of its obligations and duties
under the Amended Financing Documents.
. MISCELLANEOUS.
Governing Law. This Agreement shall be construed,
interpreted and enforced in accordance with, and governed by,
internal New York law.
Duplicate Originals. Two or more duplicate originals
of this Agreement may be signed by the parties, each of which
shall be an original but all of which together shall constitute
one and the same instrument. This Agreement may be executed in
one or more counterparts and shall be effective when at least one
counterpart shall have been executed by each party hereto, and
each set of counterparts which, collectively, show execution by
each party hereto shall constitute one duplicate original.
Waivers and Amendments. Neither this Agreement nor any
term hereof may be changed, waived, discharged or terminated
orally, or by any action or inaction, but only by an instrument
in writing signed in accordance with the amendment provisions set
forth in the Existing Note Agreement.
Section Headings. The titles of the sections hereof
appear as a matter of convenience only, do not constitute a part
of this Agreement and shall not affect the construction hereof.
Costs and Expenses. On the Amendment Effective Date,
the Companies shall pay all costs and expenses of the Noteholders
relating to this Agreement and the other Amended Financing
Documents, including, but not limited to, the statement for
reasonable fees and disbursements of the Noteholders' special
counsel presented to the Companies on the Amendment Effective
Date. The Companies will also pay upon receipt of any statement
thereof, each additional statement for reasonable fees and
disbursements of the Noteholders' special counsel rendered after
the Amendment Effective Date in connection with the Amended
Financing Documents.
Survival. All warranties, representations,
certifications and covenants made by or on behalf of the
Companies in the Amended Financing Documents or in any
certificate or other instrument delivered pursuant to the Amended
Financing Documents shall be considered to have been relied upon
by the Noteholders and shall survive the execution of the Amended
Financing Documents, regardless of any investigation made by or
on behalf of the Noteholders. All statements in any such
certificate or other instrument shall constitute warranties and
representations of the Companies hereunder.
[REMAINDER OF PAGE IS INTENTIONALLY BLANK. NEXT PAGE IS SIGNATU
RE PAGE.]
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on their behalf by a duly authorized
officer or agent thereof, as the case may be, as of the date
first above written.
MAIDENFORM WORLDWIDE, INC.
MAIDENFORM, INC.
JAMAICA NEEDLECRAFT, LTD.
BETEX, S.A.
CREACIONES TEXTILES DE
MERIDA, S.A. DE C.V.
ELIZABETH NEEDLE CRAFT, INC.
MAIDENFORM INTERNATIONAL,
LTD.
NICHOLAS NEEDLECRAFT, INC.
NCC INDUSTRIES, INC.
CRESCENT INDUSTRIES, INC.
By: /s/ Ira Glazer
Name: Ira Glazer
Title: Executive Vice
President
By: /s/ Steven N. Masket
Name: Steven N. Masket
Title: Executive Vice
President
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Michael P. Hermsen
Name: Michael P. Hermsen
Title: Second Vice
President
PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY
By: /s/ James C. Fifield
Name: James C. Fifield
Title: Counsel
By: /s/ Mary E. Kiener
Name: Mary E. Kiener
Title: Counsel
TMG LIFE INSURANCE COMPANY
By: The Mutual Group (U.S.),
Inc.
Its: Agent
By: /s/ Michael J. Carew
Name: Michael J. Carew
Title: Asst. Vice
President
By: /s/ Michael J. Stippe
Name: Michael J. Stippe
Title: Vice President
ANNEX 1
INFORMATION AS TO COMPANIES
Part 2.1 -- Nature of Business.
[TO BE SUPPLIED BY COMPANIES].
Part 2.2(d) -- Debt.
[TO BE SUPPLIED BY COMPANIES]
Part 2.3 -- Subsidiaries and Affiliates.
[TO BE SUPPLIED BY COMPANIES]
Part 2.6(a) -- Litigation.
[TO BE SUPPLIED BY COMPANIES]
Part 2.8 -- Qualification as Foreign Corporation.
[TO BE SUPPLIED BY COMPANIES]
Part 2.10(b) -- Agreements Restricting Ability to Incur Debt.
[TO BE SUPPLIED BY COMPANIES]
Part 2.17(b) -- Certain Transaction Since December 31, 1994
[TO BE SUPPLIED BY COMPANIES]
EXHIBIT A
AMENDMENT TO EXISTING NOTE AGREEMENT
1. Amendment to Section 4.4. Section 4.4 of the Existing
Note Agreement is hereby amended in its entirety to read as
follows:
"4.4 Mandatory Prepayments at Option of Noteholders.
If at any time the Companies become obligated to prepay a
principal amount of the Bank Loan (pursuant to Section
2.2(B) or Section 2.6 of the Bank Loan Agreement or any
successor provisions thereto) as a result of (i) the
generation of Net Cash Flow, (ii) the sale of any
Significant Assets (as defined in the Bank Loan Agreement),
(iii) the realization of proceeds from an issuance of debt
or equity, or (iv) the realization of proceeds resulting
from the termination of any over-funded Plan (as defined in
the Bank Loan Agreement), Worldwide will (on behalf of the
Companies), within three (3) Business Days of becoming aware
of such obligation, give notice of such obligation to each
holder of Notes by registered mail (with a copy thereof sent
via an overnight courier of national reputation) and,
simultaneously with the sending of such written notice, give
telephone advice of such obligation to an investment officer
or other similar representative or agent of each such holder
specified on Annex 1 hereto at the telephone number
specified thereon, or to such other person at such other
telephone number as any holder of a Note may specify
thereon, or to such other person at such other telephone
number as any holder of Note may specify to Worldwide in
writing. Such notice shall set forth the nature of the
prepayment which is required to be made, the amount of
Excess Cash Flow, proceeds from the sale of Significant
Assets, debt proceeds, equity proceeds, or proceeds
resulting from the termination of any over-funded Plan, as
the case may be, and the minimum prepayment to which each
holder of Notes is entitled (together with detailed
calculations supporting such minimum amount). Upon receipt
of such notice (or upon the date such notice should have
been received), each holder of Notes shall have the right
for ten days (by written notice to Worldwide) to cause the
Companies to prepay a principal amount of the Notes held by
it equal to such holder's Pro Rata Share of such Excess Cash
Flow, proceeds from the sale of Significant Assets, debt
proceeds, equity proceeds, or proceeds resulting from the
termination of any over-funded Plan, as the case may be. If
a holder of Notes has not responded within such ten day
period, the Companies shall give such holder a second notice
containing the same information as the first, and the holder
shall have five additional days within which to give notice
of acceptance. If such holder does not respond to such
second notice within such five day period, its rights under
this Section 4.4 (as to such prepayment) shall lapse. If a
notice of acceptance is given by a holder as to a principal
amount of its Notes, such principal amount of such holder's
Notes shall thereupon become due and payable on the
fifteenth (15th) day following such notice by such holder.
Each such prepayment shall be at one hundred percent (100%)
of the principal amount so prepaid without Make-Whole
Amount, and shall be applied to the Mandatory Principal
Amortization Payments on the Notes so prepaid in inverse
order of maturity."
2. Amendment to Section 6.6. Section 6.6 of the Existing
Note Agreement is hereby amended in its entirety to read as
follows:
"6.6 Consolidated Tangible Net Worth. From the
Effective Date through December 31, 1995, the Companies will
not permit Consolidated Tangible Net Worth to be less than
(a) ninety percent (90%) of the Consolidated
Tangible Net Worth on the Effective Date, minus
(b) Five Thousand Dollars ($5,000), being
the amount expended between the Effective Date and
December 31, 1995 to acquire a de minimis number of
shares of the outstanding stock of NCC which shares had
not been purchased by the Companies on the Effective
Date, plus
(c) seventy percent (70%) of the aggregate
consolidated net profit after taxes of the Companies
since the Effective Date, provided, that consolidated
losses of the Companies incurred for any reporting
period shall not be used to reduce aggregate
consolidated net profit after taxes of the Companies
for purposes of this Section 6.6.
The Companies will not during any period set forth
below permit Consolidated Tangible Net Worth to be less than
the amount set forth opposite such period:
Minimum Consolidated
Period Tangible Net Worth
January 1, 1996 through March 31, 1996
$68,000,000
April 1, 1996 through June 30, 1996
$76,000,000
From and after July 1, 1996, the Companies will not at any
time permit Consolidated Tangible Net Worth to be less than
the greater of
(1) $76,000,000, or
(2) the sum of
(A) the amount of Consolidated
Tangible Net Worth required to be maintained by
the Companies on December 31, 1995 pursuant to
this Section 6.6 plus
(B) seventy percent (70%) of the
aggregate consolidated net profit after taxes
since January 1, 1996, provided that consolidated
losses of the Companies incurred for any reporting
period shall not be used to reduce aggregate
consolidated net profits after taxes of the
Companies for purposes of this Section 6.6."
3. Amendment to Section 6.7. Section 6.7 of the Existing
Note Agreement is hereby amended in its entirety to read as
follows:
"6.7 Fixed Charge Coverage.
The Companies will not at any date permit the Fixed
Charge Coverage Ratio for the immediately preceding four
fiscal quarters (including any fiscal quarter ending on such
date) to be less than the following amounts during the
following periods:
Minimum Fixed Charge
Period Coverage Ratio
September 30, 1996 through December 30, 1996 1.0 : 1.0
December 31, 1996 and thereafter 1.1 : 1.0"
4. Amendment to Section 6.9. Section 6.9 of the Existing
Note Agreement is hereby amended in its entirety to read as
follows:
"6.9 Leverage Ratio.
The Companies will not at any time permit the ratio of
Consolidated Funded Debt at such time
to
Consolidated Capitalization at such time
to exceed
0.7 to 1.0, if such time is on or before
December 31, 1995,
0.8 to 1.0 from January 1, 1996 until June
30, 1996,
0.75 to 1.0 from July 1, 1996 until September
30, 1996,
0.65 to 1.0 from October 1, 1996 until
December 31, 1996,
0.6 to 1.0 from January 1, 1997 until
September 30, 1997, and
0.55 to 1.0 from October 1, 1997 and
thereafter."
5. Amendment to Section 6.10. Section 6.10 of the
Existing Note Agreement is hereby amended in its entirety to read
as follows:
"6.10 Consolidated Funded Debt to Consolidated Operating
Cash Flow.
The Companies will not at any time permit the ratio of
(a) Consolidated Funded Debt, determined as
of the end of the fiscal quarter of the Companies then
most recently ended,
to
(b) Consolidated Operating Cash Flow, for
the period of four (4) consecutive fiscal quarters of
the Companies then most recently ended,
to be greater than
(i) 5.25 to 1.0, if such time is on or
before September 30, 1995,
(ii) 7.0 to 1.0 from October 1, 1995 through
December 31, 1995,
(iii) 9.0 to 1.0 from January 1, 1996
through March 31, 1996,
(iv) 7.0 to 1.0 from April 1, 1996 through
June 30, 1996,
(v) 4.75 to 1.0 from July 1, 1996 through
September 30, 1996,
(vi) 4.25 to 1.0 from October 1, 1996 through
September 30, 1997, and
(vii) 4.0 to 1.0 from October 1, 1997 and
thereafter."
6. Amendment to Section 6.12. Section 6.12 of the
Existing Note Agreement is hereby amended in its entirety to read
as follows:
"6.12 Restricted Payments.
No Company or Subsidiary will declare or make any
Restricted Payment on or prior to January 1, 1998; and no
Company or Subsidiary will declare or make any Restricted
Payment thereafter unless, at the time of such declaration
and immediately before and after giving effect to such
Restricted Payment, (a) the aggregate amount of all
Restricted Payments made after January 1, 1998 would not
exceed one hundred percent (100%) of Consolidated Net Income
earned after June 30, 1997 minus any amounts paid pursuant
to the final sentence of this Section 6.12, and (b) no
Default or Event of Default would exist. Notwithstanding
the foregoing sentence, the Companies may make Restricted
Payments, not exceeding one hundred percent (100%) of the
lesser of (i) Consolidated Net Income during the fiscal year
beginning January 1, 1997, and (ii) Six Million Dollars
($6,000,000), during the period July 1, 1997 through
December 31, 1997, if at the time of each such Restricted
Payment and after giving effect thereto, (x) no Default or
Event of Default would exist and (y) Consolidated Tangible
Net Worth, Fixed Charge Coverage Ratio, the ratio of
Consolidated Funded Debt to Consolidated Capitalization, and
the ratio of Consolidated Funded Debt to Consolidated
Operating Cash Flow each have reached such levels at such
times as would be in compliance with Section 6.6, Section
6.7, Section 6.9, and Section 6.10 hereof, in each case as
in effect prior to the Amendment Effective Date."
7. Amendment to Section 6.14. Section 6.14 of the
Existing Note Agreement is hereby amended in its entirety to read
as follows:
"6.14 Transfers of Property.
No Company or Subsidiary will sell (including, without
limitation, any sale and subsequent leasing as lessee of
such Property), lease as lessor, transfer or otherwise
dispose of (collectively referred to as "Transfers") any
Property (including, without limitation, stock of a
Subsidiary), except:
(a) Transfers of inventory or obsolete or
worn out Property or Property no longer useful in the
business of such Company or such Subsidiary, in each
case in the ordinary course of business of such Company
or such Subsidiary,
(b) Transfers from a Subsidiary to any of
the Companies or to a Wholly-Owned Subsidiary;
(c) the liquidation for cash of the assets
representing all or a portion of the over-funding of
any "employee pension benefit plan" (as defined in
section 3 of ERISA), provided that the payment required
by Section 4.4(iv) is made in connection therewith; and
(d) Transfers of assets disposed of in arm's
length transactions for not less than the greater of
(i) Fair Market Value (as reasonably determined by
Maidenform) or (ii) book value, provided that the
aggregate Fair Market Value of all assets disposed of
pursuant to this clause (c) after the Effective Date
shall not exceed Seven Million Five Hundred Thousand
Dollars ($7,500,000)."
8. Amendment to Section 6.15. Section 6.15 of the
Existing Note Agreement is hereby amended in its entirety to read
as follows:
"6.15 Debt Incurrence.
The Companies will not, at any time, incur any Debt
other than the Notes, the Coleman Note, the Bank Term Loan,
the Second Bank Term Loan, Debt not to exceed One Hundred
Thirty-Two Million Dollars ($132,000,000) in principal
amount outstanding under the Bank Revolver, Debt secured by
Capital Leases allowed by Section 6.5(a)(vi), Debt secured
by purchase money Liens allowed by Section 6.5(a)(vii) and
Debt outstanding on the Effective Date and listed on Part
2.2(d) of Annex 2, unless at the time of such incurrence and
after giving effect thereto, no Default or Event of Default
would exist and the Companies would be in compliance with
all financial covenants herein contained (including, in the
case of financial covenants which vary with the passage of
time, compliance with such covenants in their strictest
form, regardless of whether or not the strictest form of
such financial covenants would otherwise be applicable at
such time). Nothing in this Section 6.15 shall be deemed to
excuse compliance with any other covenant or provision of
this Agreement."
9. Amendment to Section 6.24(b). Section 6.24(b) of the
Existing Note Agreement is hereby amended in its entirety to read
as follows:
"(b) Coleman Note. No Company will amend the
Coleman Note so as to increase the amount thereof or
the rate of interest payable thereon. No Company shall
make any payment on the Coleman Note
(i) until the Second Term Loan has
been repaid in full and Consolidated Tangible Net
Worth, Fixed Charge Coverage Ratio, the ratio of
Consolidated Funded Debt to Consolidated
Capitalization, and the ratio of Consolidated
Funded Debt to Consolidated Operating Cash Flow
each have reached such levels at such times as
would be in compliance with Section 6.6, Section
6.7, Section 6.9 and Section 6.10 hereof, in each
case as in effect prior to the Amendment Effective
Date, or
(ii) while there exists a Default
or an Event of Default."
10. Amendment to Section 6. Section 6 of the Existing Note
Agreement is hereby amended by adding to the end of such Section
the following Sections 6.25 and 6.26:
"6.25 Inventory.
The Companies will not permit the aggregate value of
all Inventory of the Companies, as reflected in the
financial statements for the fiscal year ending December 31,
1996 delivered to each holder of Notes pursuant to Section
7.1(b) hereof, to exceed One Hundred Seventy Million Dollars
($170,000,000).
6.26 Additional Interest and Additional Fee.
(a) During any period in which the Companies
are obligated to pay interest to the Banks on an amount
outstanding under the Bank Loan Agreement (other than
the Second Bank Term Loan) at a rate in excess of the
Adjusted Base Rate (as such term, and all terms used in
the definition thereof, were defined in the Bank Loan
Agreement on the Effective Date) (the amount of such
excess being hereinafter referred to as the "Rate
Increase"), the Companies shall thereupon be obligated
to pay to each holder of Notes additional interest in
an amount equal to the principal amount of Notes held
by such holder of Notes multiplied by a rate per annum
equal to the Rate Increase; such additional interest to
be payable quarterly in arrears on each date a payment
of interest on the Notes is due so long as the Rate
Increase is in effect.
(b) In the event that, on September 30,
1996,
(i) the ratio of Consolidated
Funded Debt to Consolidated Capitalization exceeds
0.65 : 1.0, or
(ii) the ratio of Consolidated
Funded Debt to Consolidated Operating Cash Flow
for the period of four (4) consecutive fiscal
quarters of the Companies then most recent ended,
exceeds 4.75 : 1.0,
the Companies shall thereupon be obligated to pay
to each holder of Notes, on or before December 1, 1996,
an additional fee in an amount equal to the principal
amount of Notes held by such holder multiplied by fifty
one-hundredths percent (.50%)."
11. Amendment to Section 7.1(a). Section 7.1(a) of the
Existing Note Agreement is hereby amended and restated in its
entirety to read as follows:
"(a) Quarterly Statements -- as soon as
practicable after the end of each quarterly fiscal
period in each fiscal year of the Companies (other than
the last quarterly fiscal period of each such fiscal
year), and in any event within sixty (60) days (or, if
Worldwide shall at such time have any class of
Securities required to be registered pursuant to
section 12 of the Exchange Act, within forty-five (45)
days) thereafter, duplicate copies of
(i) consolidated balance sheets of
Worldwide and its subsidiaries as at the end of
such quarter, and
(ii) consolidated statements of
income, changes in stockholders' equity and cash
flows of Worldwide and its subsidiaries for such
quarter and (in the case of the second and third
quarters) for the portion of the fiscal year
ending with such quarter,
setting forth in each case in comparative form the
figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial
statements generally, reviewed by Ernst & Young or
other independent certified accountants reasonably
satisfactory to the Required Holders, and certified as
complete and correct in all material respects, subject
to changes resulting from year-end adjustments and
subject to the absence of footnotes, by a Senior
Financial Officer on behalf of Worldwide, and
accompanied by the certificates required by Section 7.2
hereof;"
12. Amendment to Section 7.1(f). Section 7.1(f) of the
Existing Note Agreement is hereby amended by adding thereto a new
subsection (iii) which shall read in its entirety as follows:
"(iii) prior to the termination of any over-funded
Pension Plan of the Companies
(A) copies of all reports,
notices, applications for any determination letter
or private letter ruling and other information
filed with the PBGC or the IRS relating to the
termination of such Pension Plans, including,
without limitation, the Companies' termination
proposal, prior to commencement of the termination
process,
(B) within three (3) Business Days
after receipt by the Companies thereof, copies of
any determination letter or private letter ruling
issued by the IRS,
(C) simultaneously with delivery
of the Companies' proposal relating to the
termination of any Pension Plan, a projected
estimate by the Companies' enrolled actuaries of
the amount of proceeds which would result from the
termination of any such over-funded Pension Plan,
and
(D) upon the request of the
Required Holders after the implementation of any
proposal of the Companies relating to the
termination of any over-funded Pension Plan, a
written opinion of the Companies' ERISA counsel,
in form and substance reasonably satisfactory to
the Required Holders, upon which the holders of
Notes shall be entitled to rely, substantially to
the effect that the Companies have complied in all
material respects with the procedural requirements
imposed by Title I of ERISA in connection with the
termination of such over-funded Pension Plan,
provided, however, that such ERISA counsel may
rely on any favorable determination letter from
the IRS which has not been withdrawn as to the
qualification of the over-funded Pension Plan
under ERISA after such over-funded Pension Plan's
termination; and on such certifications,
representations, warranties and other statements
provided by officers, employees, accountants, and
other agents of the Companies, and governmental
officials and other third parties, as to such
factual and other matters as such ERISA counsel
determines to be necessary (including, without
limitation, matters of judgment or professional
opinion made by actuaries or others), upon which
such ERISA counsel may rely without investigation;
and, provided further, that such opinion shall not
be required to address compliance by any person or
entity with its fiduciary duties as required by
Title I of ERISA or other federal or state law;"
13. Amendments to Section 9.1. Section 9.1 of the Existing
Note Agreement is hereby amended to modify in their entirety or
add, each in their proper alphabetical order, the following
definitions:
"Amended Financing Documents -- has the meaning
assigned to such term in the Amendment Agreement."
"Amendment Agreement -- means the Amendment Agreement,
dated as of March 29, 1996, among each of the Companies and
the Purchasers."
"Amendment Effective Date -- has the meaning assigned
to such term in the Amendment Agreement."
"Fixed Charges -- means, for any period, the sum of the
amounts payable by the Companies and the Subsidiaries
(determined on a consolidated basis) in respect of (a)
operating leases, whether characterized as rents or
otherwise, but excluding payments under such leases in
respect of insurance, taxes, utilities, maintenance and
similar charges and additional rentals in excess of the
minimum based on percentage of sales, (b) Consolidated
Interest Expense, (c) cash payments consistent with the one-
time charge, not to exceed Four Million Dollars
($4,000,000), accrued in the second quarter of 1995 in
connection with the retirement of Robert Brawer, and (d)
current maturities of all Funded Debt other than the Second
Term Loan, except any obligation to make a prepayment
pursuant to Section 4.4 hereof or Section 2.2 of the Bank
Loan Agreement in respect of Net Cash Flow, in each case for
such period."
"GAAP -- means generally accepted accounting principles
in the United States of America as promulgated from time to
time in statements, opinions and pronouncements by the
American Institute of Certified Public Accountants, the
Financial Accounting Standards Board, and any successor
entities. If any changes in GAAP or the application thereof
occur after the Amendment Effective Date and such changes
result in a meaningful change in the calculation of the
financial covenants set forth in Section 6.6, Section 6.7,
Section 6.8, Section 6.9 or Section 6.10 hereof (each a
"GAAP Affected Covenant"), then the Companies shall give
written notice (the "GAAP Notice") of any such change in
GAAP to each holder of Notes, certified by two Senior
Officers of Worldwide. Any such GAAP Notice shall describe
the change in GAAP and set forth in reasonable detail
(including detailed calculations) the manner and extent to
which the covenant or covenants listed in the certificate
are affected by the change in GAAP. After any such GAAP
Notice is received by the holders of Notes the parties
hereto agree
(a) to enter into and diligently pursue good
faith negotiations to amend such financial covenants so
as to equitably reflect such changes, with the desired
result that the criteria for evaluating the financial
condition and results of operations of the Companies
shall be neither more strict nor more lenient, and
(b) that for a period of sixty (60) days,
the Companies shall be deemed not to be in violation of
the GAAP Affected Covenant or GAAP Affected Covenants
listed in the GAAP Notice solely by reason of such
change in GAAP."
"Inventory -- means "inventory" as defined in the
Pennsylvania Uniform Commercial Code as in effect on the
date hereof."
"Material Adverse Effect -- means a material adverse
effect on the business, prospects, profits, Properties or
condition (financial or otherwise) of the Companies and the
Subsidiaries, taken as a whole, or on the ability of either
of Worldwide or Maidenform to perform its respective
obligations set forth in any of the Amended Financing
Documents."
"Restricted Payment -- means:
(a) any dividend or other distribution,
direct or indirect, on account of any shares of capital
stock of any of the Companies or any Subsidiary (other
than on account of capital stock of a Subsidiary owned
legally and beneficially by any of the Companies or a
Wholly-Owned Subsidiary) now or hereafter outstanding,
whether in cash or other Property, except a dividend or
other distribution payable solely in shares of common
stock of such Person; and
(b) any redemption, retirement, purchase or
other acquisition, direct or indirect, of any shares of
capital stock of any of the Companies or any Subsidiary
(other than on account of capital stock of a Subsidiary
owned legally and beneficially by any of the Companies
or a Wholly-Owned Subsidiary) now or hereafter
outstanding, or of any warrants, rights or options to
acquire any shares of such stock, provided, that the
acquisition by the Companies of a de minimis number of
shares of the outstanding stock of NCC prior to
December 31, 1995 at a price not in excess of Five
Thousand Dollars ($5,000) shall not constitute a
Restricted Payment, and, provided further, that so long
as the Second Term Loan shall have been repaid in full
and Consolidated Tangible Net Worth, Fixed Charge
Coverage Ratio, the ratio of Consolidated Funded Debt
to Consolidated Capitalization, and the ratio of
Consolidated Funded Debt to Consolidated Operating Cash
Flow each have reached such levels at such times as
would be in compliance with Section 6.6, Section 6.7,
Section 6.9 and Section 6.10 hereof, in each case as in
effect prior to the Amendment Effective Date, neither
(i) any payment made by the Companies in respect of the
Coleman Note, nor (ii) any acquisition by NCC of the
balance of its common stock not owned by the Companies
immediately after the Effective Date, shall constitute
a Restricted Payment."
"Second Bank Term Loan -- means the Second Term Loan
made pursuant to Section 2.2.1 of the Bank Loan Agreement."
EXHIBIT B
FORM OF OPINION OF BAER MARKS & UPHAM
March 29, 1996
To each of the Persons
listed on Annex I hereto
Re: Maidenform Worldwide, Inc., a Delaware corporation
("Worldwide-DE"), Maidenform, Inc. ("Maidenform"), a
New York corporation, Betex, S.A., a Costa Rican
corporation, Creaciones Textiles de Merida, S.A. de
C.V., a Mexican corporation, Elizabeth Needle Craft,
Inc., a New York corporation ("ENC"), Jamaica
Needlecraft, Ltd. a Jamaican corporation, Maidenform
International, Ltd., a New York corporation
("International"), Nicholas Needlecraft, Inc., a New
York corporation, ("NNC"), NCC Industries, Inc., a
Delaware corporation ("NCC"), Crescent Industries,
Inc., a Delaware corporation ("Crescent", and together
with each of Worldwide-DE, Maidenform, ENC,
International, NNC and NCC, collectively referred to as
the "Domestic Companies" and individually as a
"Domestic Company".
Ladies and Gentlemen:
Reference is made to (i) the separate Amended and Restated
Note Purchase Agreements, each dated as of April 1, 1995
(collectively, the "Restated Note Agreement"), between the
Companies and each of the purchasers listed on Annex I thereto
(the "Purchasers"), which provide, among other things, for the
issuance by the Companies of their joint and several 10.75%
Senior Notes due September 30, 2003, in the aggregate principal
amount of Thirty Million Dollars ($30,000,000), and (ii) that
certain Amendment Agreement, dated of even date herewith,
amending the Restated Note Agreement (the "Amendment Agreement").
The capitalized terms used herein and not defined herein have the
meanings specified by the Restated Note Agreement as amended by
the Amendment Agreement.
We have acted as special counsel to the Domestic Companies
in connection with the transactions contemplated by the Amendment
Agreement. This opinion is being delivered pursuant to Section
5.6 of the Amendment Agreement.
In acting as such counsel, we have examined:
the Restated Note Agreement;
the Amendment Agreement;
the bylaws of each of the Domestic Companies, the
records of proceedings of the board of directors of each of
the Domestic Companies that we have deemed relevant for the
purposes of rendering the opinions expressed herein and a
certified copy of the articles of incorporation of each of
the Domestic Companies, as in effect on the date hereof;
the Reaffirmation Agreement of even date herewith
between the Companies and the Collateral Agent (the
"Reaffirmation Agreement"); and
originals, or copies certified or otherwise
identified to our satisfaction, of such other documents,
records, instruments and certificates of public officials as
we have deemed necessary or appropriate to enable us to
render this opinion.
We have assumed the genuineness of all signatures (other
than signatures of officers of each of the Companies) and
documents submitted to us as originals, that all copies submitted
to us conform to the originals (and the authenticity of such
originals), the legal capacity of all natural Persons, and, as to
documents executed by Persons other than the Domestic Companies,
that each such Person executing documents had the power to enter
into and perform its obligations under such documents, and, as to
documents executed by Persons other than the Domestic Companies,
that such documents have been duly authorized, executed and
delivered by, and are binding upon and enforceable against, such
Persons.
As to various questions of fact material to our opinion, we
have relied, to the extent we deem necessary and proper, on the
warranties and representations contained in the Amendment
Agreement, and we have no knowledge of any material inaccuracies
in any of such warranties or representations. This opinion
addresses matters only as of the date hereof and we specifically
disclaim any responsibility for advising you of changes in
matters addressed herein occurring after this date.
Based upon and subject to the foregoing, and subject to the
limitations, qualifications and exceptions set forth below, we
are of the following opinions:
Each of the Domestic Companies is a corporation duly
incorporated and validly existing under the laws of its state of
incorporation, and, based solely on certificates of good standing
of recent date issued by the Secretary of State of its state of
incorporation, is in good standing in its state of incorporation.
Each of the Domestic Companies has all requisite corporate power
and authority to carry on its business and own its Property.
Each of the Domestic Companies has the requisite
corporate power and authority to execute and deliver the
Amendment Agreement and Reaffirmation Agreement and to perform
its obligations set forth in the Amendment Agreement and the
Reaffirmation Agreement.
The execution of the Amendment Agreement and the
Reaffirmation Agreement has been duly authorized by all necessary
corporate action on the part of each of the Domestic Companies,
and the Amendment Agreement and the Reaffirmation Agreement have
been executed and delivered by duly authorized officers of each
of the Domestic Companies.
Each of the Amendment Agreement and the Reaffirmation
Agreement constitutes a legal, valid and binding obligation of
the Domestic Companies, enforceable against each of the Domestic
Companies in accordance with its terms except that the validity
and enforceability of the rights and remedies set forth therein
are subject to
(a) bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws affecting the
enforcement of creditors' rights and remedies generally; and
(b) the application of principles of equity whether in
an action at law or a proceeding in equity. The foregoing
does not constitute an opinion as to the priority of any
security interests in favor of the Collateral Agent or the
Noteholders referred to in either the Amendment Agreement or
the Reaffirmation Agreement.
Our opinions herein are further subject to the following
limitations:
(i) We express no opinion as to the enforceability of
any waiver of any constitutional right or other right to
notice or a hearing contained in the Amendment Agreement or
the Reaffirmation Agreement.
(ii) We express no opinion as to the solvency of any of
the Companies and have assumed for the purposes of rendering
this opinion that the execution, delivery and performance by
the Borrowers of their respective obligations under the
Amendment Agreement and the Reaffirmation Agreement will not
render any of the Companies insolvent.
(iii) Enforceability of the Amendment Agreement and
the Reaffirmation Agreement may be limited to the extent
that the Noteholders and the Collateral Agent are determined
not to have acted in good faith and in a commercially
reasonable manner or to the extent that enforcement would be
unreasonable under the then-existing circumstances and
public policy considerations may limit the rights of the
Noteholders and the Collateral Agent to obtain certain
rights and remedies and to indemnification.
This opinion is furnished at the request of the Companies
for the sole benefit of the named addressees and their successors
and assigns and counsel and may not be relied upon by any other
person or entity. Further, this opinion cannot be published,
quoted or otherwise used for any other purpose without our prior
written consent except that any holder of Notes may furnish this
opinion to any person exercising regulatory authority over it and
to the National Association of Insurance Commissioners. This
opinion is based on the law (and interpretations thereof) and
facts existing as of the date hereof, and we disclaim any
obligation to advise you of any changes therein that may be
brought to our attention after the date hereof.
Very truly yours,
ANNEX I
ADDRESSEES
Massachusetts Mutual Life Insurance Company
1295 State Street
Springfield, MA 01111-0001
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0800
TMG Life Insurance Company
401 North Executive Drive
Brookfield, WI 53008
REAFFIRMATION AGREEMENT
THIS REAFFIRMATION AGREEMENT (this "Amendment") is made as of the 29th_ day
of March, 1996, among MAIDENFORM WORLDWIDE, INC., a Delaware corporation
("Worldwide-Delaware"), MAIDENFORM, INC. ("Maidenform"), BETEX, S.A. ("Betex"),
CREACIONES TEXTILES de MERIDA, S.A. de C.V. ("Creaciones"), ELIZABETH NEEDLE
CRAFT, INC. ("Elizabeth"), JAMAICA NEEDLECRAFT, LTD. ("Jamaica"), MAIDENFORM
INTERNATIONAL, LTD. ("International"), NICHOLAS NEEDLECRAFT, INC. ("Nicholas"),
NCC INDUSTRIES, INC. ("NCC") and CRESCENT INDUSTRIES, INC. ("Crescent"),
Worldwide-Delaware, Maidenform, Betex, Creaciones, Elizabeth, Jamaica,
International, Nicholas, NCC and Crescent are each hereinafter referred to
individually as a "Borrower" and collectively as "Borrowers"); ELIZABETH J.
COLEMAN, DAVID C. MASKET, ROBERT A. BRAWER, ABRAHAM P. KANNER and JOHN MUIRHEAD
(individually and collectively referred to herein, together with Worldwide-
Delaware, Maidenform and NCC, as "Pledgor"); to CORESTATES BANK, N.A., a
national banking association ("CoreStates"), as Collateral Agent under the
Intercreditor Agreement (as defined hereinafter) for itself in its capacity as
Issuing Bank, in its capacity as the Agent, and in its individual capacity, The
Chase Manhattan Bank, N.A. ("Chase"), a national banking association, National
City Bank, ("City"), a national banking association, Nationsbank, N.A.
("Nationsbank"), a national banking association, NBD Bank ("NBD"), a Michigan
banking corporation, Comerica Bank ("Comerica"), a Michigan banking
corporation, European American Bank ("EAB"), a New York banking corporation and
United Jersey Bank ("UJB"), a New Jersey banking corporation (CoreStates, in
its individual capacity, Chase, City, Nationsbank, FCB, Comerica, EAB and UJB
are collectively referred to herein as the "Banks"), Massachusetts Mutual Life
Insurance Company ("Mass Mutual"), Principal Mutual Life Insurance Company
("Principal") and TMG Life Insurance Company ("TMG"; Mass Mutual, Principal and
TMG, together with their respective successors and assigns, are collectively
referred to herein as the "Noteholders"). CoreStates, in its capacity as
collateral agent for the Banks, the Issuing Bank, the Agent and the
Noteholders, and any successor collateral agent shall hereinafter be referred
to as the "Collateral Agent."
BACKGROUND
Borrowers, Maidenform Worldwide, Inc., a New York corporation
("Worldwide-NY"), Banks, Agent and the Issuing Bank executed a Loan Agreement
dated as of April 26, 1995 (the "Original Loan Agreement") pursuant to which
Banks made available to Borrowers and Worldwide-NY the Revolving Credit in the
maximum principal amount of $120,000,000.00 and the Term Loan in the principal
amount of $50,000,000.00. Thereafter Worldwide-NY merged into Worldwide-
Delaware. Borrowers, Banks, Agent and the Issuing Bank have entered into a
First Amendment to Loan Agreement of even date herewith (the "Amendment to Loan
Agreement") whereby certain of the Banks have agreed to make a new term loan in
the amount of $20,000,000.00 (the "Second Term Loan") and otherwise amend the
Original Loan Agreement as set forth therein. The Original Loan Agreement as
amended by the Amendment to Loan Agreement is referred to herein as the "Loan
Agreement". Capitalized terms used herein and not otherwise defined shall have
the meanings given to such terms in the Loan Agreement.
The Noteholders and the Borrowers and Worldwide-NY entered into
separate amended and restated Note Purchase Agreements, each dated as of April
1, 1995 (collectively the "Original Note Purchase Agreement") pursuant to which
the Borrowers and Worldwide-NY executed and delivered to the Noteholders joint
and several senior notes in the aggregate principal amount of $30,000,000.00.
The Borrowers and the Noteholders have entered into an Amendment Agreement as
of the date hereof (the "Amendment to Note Purchase Agreement"), amending the
Original Note Purchase Agreement (the Original Note Purchase Agreement, as so
amended shall be referred to herein as the "Note Purchase Agreement").
Borrowers' obligations under the Loan Agreement, the Note Purchase
Agreement, and the notes issued thereunder were and are secured by, among other
things, (i) the Florida Mortgage, (ii) the Collateral Assignments (iii) the
North Carolina Mortgage, (iv) the New York Mortgage, (v) the Trademark
Agreement, (vi) the Security Agreement, and (vii) the Pledge Agreement. The
Borrowers and Maidenform - NY also executed and delivered to the Collateral
Agent, the Agent, the Issuing Bank, the Banks and the Noteholders the
Environmental Indemnity.
The Collateral Agent, the Agent, the Issuing Bank, the Banks, the
Noteholders, the Borrowers and Worldwide-NY entered into an Intercreditor
Agreement dated as of April 26, 1995 (the "Original Intercreditor Agreement").
The Collateral Agent, the Agent, the Issuing Bank, the Banks, the Noteholders
and the Borrowers have entered into an Amendment to Intercreditor Agreement of
even date herewith (the "Amendment to Intercreditor Agreement"). The Original
Intercreditor Agreement as amended by the Amendment to Intercreditor Agreement
and as amended from time to time hereafter, is referred to herein as the
"Intercreditor Agreement".
The Collateral Agent presently holds a lien on and security interest
in the Collateral and is legally entitled to enforce collection of the
indebtedness secured by the Security Documents in accordance with the terms of
the Notes, the Security Documents and the Intercreditor Agreement.
To induce the Banks to agree to enter into the Amendment to Loan
Agreement and the Noteholders to enter into the Amendment to Note Agreement,
each Borrower and each Pledgor has agreed to reaffirm its respective
obligations under the Security Documents and the Environmental Indemnity to
which it is a party.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and intending to be legally bound,
the parties hereto agree as follows:
Reaffirmation of Security Documents and Environmental Indemnity.
Each Borrower hereby reaffirms the Security Documents and Environmental
Indemnity in accordance with the terms and conditions set forth herein and
confirms that the Security Documents as herein reaffirmed continue to secure
the obligations evidenced by the Loan Agreement, the Term Loan Notes, the
Revolving Credit Notes, the Note Purchase Agreement and the notes issued
thereunder, and, as of the date hereof, secure the obligations evidenced by the
Second Term Loan Notes, all in accordance with the terms thereof and of the
Intercreditor Agreement. Each Pledgor hereby reaffirms the Pledge Agreement in
accordance with the terms and conditions set forth herein and confirms that the
Pledge Agreement as herein reaffirmed continues to secure the obligations
evidenced by the Loan Agreement, the Term Loan Notes, the Revolving Credit
Notes, the Note Purchase Agreement and the notes issued thereunder, and, as of
the date hereof, secures the obligations evidenced by the Second Term Loan
Notes, all in accordance with the terms thereof and of the Intercreditor
Agreement.
Amendments to the Security Documents and Environmental Indemnity.
The parties hereto agree that all of the terms and conditions of the Security
Documents and the Environmental Indemnity shall continue unchanged and remain
in full force and effect, except as modified and amended herein as follows:
All references in the Security Documents and the Environmental
Indemnity to the "Loan Agreement" shall mean the Loan Agreement, as such
term is hereinabove defined.
All references in the Security Documents and the Environmental
Indemnity to the "Loans" shall mean the Loans, as such term is defined in
the Loan Agreement.
All references in the Security Documents and the Environmental
Indemnity to the "Intercreditor Agreement" shall mean the Intercreditor
Agreement, as such term is hereinabove defined and as such Intercreditor
Agreement may be extended, modified or amended from time to time.
All references in the Security Documents and the Environmental
Indemnity to the "Note Purchase Agreement" shall mean the Note Purchase
Agreement, as such term is hereinabove defined.
Representations and Warranties. (a) Each Borrower represents and
warrants to the Collateral Agent that (i) the representations and warranties of
Borrowers contained in the Security Documents and the Environmental Indemnity
are true and correct as of the date hereof except for changes permitted thereby
or in writing by the Noteholders and Banks and except for representations and
warranties which, by their express terms, relate to a particular period or date
which has since passed, (ii) the Borrowers are in compliance with the covenants
contained in the Security Documents and the Environmental Indemnity, and (iii)
after giving effect to the Amendment to Loan Agreement and Amendment to Note
Purchase Agreement there exists no Event of Default or Default under the
Security Documents and the Environmental Indemnity.
Each Pledgor represents and warrants to the Collateral Agent that (i) the
representations and warranties contained in the Pledge Agreement are true and
correct as of the date hereof, except for changes permitted thereby or in
writing by the Noteholders and Banks and except for representations and
warranties which, by their express terms relate to a particular period or date
which has since passed, (ii) Pledgor is in compliance with the covenants
contained in the Pledge Agreement and (iii) after giving effect to the
Amendment to Loan Agreement and Amendment to Note Purchase Agreement there
exists no Event of Default or Default under the Pledge Agreement.
Continued Priority and Liens. The parties by entering into this
Amendment do not intend to and do not disturb or hereby affect the priority of
the liens on the Collateral held by the Collateral Agent. The indebtedness
evidenced by the Loan Agreement, the Term Loan Notes, the Second Term Loan
Notes, the Revolving Credit Notes and the Private Placement Notes shall
continue to be secured as set forth in the Loan Agreement and all of the
Security Documents.
Miscellaneous. This Amendment contains all of the modifications to
the Security Documents and the Environmental Indemnity. No further
modifications shall be deemed effective, unless in writing executed by all
parties. This Amendment shall be binding upon the parties hereto, their
successors and assigns. Except as expressly modified and amended herein, the
Security Documents and the Environmental Indemnity will remain in full force
and effect in accordance with their respective terms. This Amendment shall be
construed and enforced in accordance with the laws of the Commonwealth of
Pennsylvania. This Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument, and
any of the parties hereto may execute this Amendment by signing any such
counterpart. This Amendment shall become effective when it shall have been
executed by the Borrowers, Pledgor and the Collateral Agent, and it shall
thereafter be binding upon the Borrowers and Pledgor, and inure to the benefit
of the Collateral Agent and their respective successors and assigns, except
that no Borrower shall have the right to assign any right or obligation
hereunder or any interest herein.
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have caused this Amendment to be executed by their
respective officers thereunto duly authorized, as of the date
first above written.
BETEX, S.A. MAIDENFORM WORLDWIDE, INC.
CREACIONES TEXTILES de MAIDENFORM, INC.
MERIDA, S.A. de C.V. NCC INDUSTRIES, INC.
ELIZABETH NEEDLE CRAFT, INC. CRESCENT INDUSTRIES, INC.
JAMAICA NEEDLECRAFT, LTD.
MAIDENFORM INTERNATIONAL, LTD. By: /s/ Ira Glazer
NICHOLAS NEEDLECRAFT, INC. Name: Ira Glazer
Title: Executive Vice
President
By:/s/ Ira Glazer
Name:Ira Glazer (as to all
Borrowers listed
Title:Executive Vice above)
President
(as to all Borrowers listed above)
Attest:/s/ Steven N. Masket Attest:/s/ Steven N. Masket
/s/ Elizabeth J. Coleman /s/ David C. Masket
ELIZABETH J. COLEMAN DAVID C. MASKET
Address:90 Park Ave. Address: 90 Park Ave.
New York, NY New York, NY
/s/ Robert A. Brawer /s/ Abraham P. Kanner
ROBERT A. BRAWER ABRAHAM P. KANNER
Address:90 Park Ave. Address: 90 Park Ave.
New York, NY New York, NY
/s/ John Muirhead
JOHN MUIRHEAD
Address:30 Knutsford Blvd.
7th Floor
Kingston 5 Jamaica
JOINDER
IN WITNESS WHEREOF, CoreStates Bank, N.A., as Collateral Agent under the
Security Documents, hereby accepts the Reaffirmation Agreement from the
Borrowers and the Pledgors, and agrees to the amendments to the Security
Documents and the Environmental Indemnity contained therein, as of the date
first written in the Reaffirmation Agreement.
CORESTATES BANK, N.A.,
as Collateral Agent
By:/s/ Charles H. Dietrich
Name:Charles H. Dietrich
Title: Sr. Vice President
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGIS-
ANT'S
TRANT'S FINANCIAL STATEMENTS FOR DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFENENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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