<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 1, 2000
-------------
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 1-8769
------
R. G. BARRY CORPORATION
-----------------------
(Exact name of registrant as specified in its charter)
OHIO 31-4362899
-----------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification Number)
13405 Yarmouth Road NW, Pickerington, Ohio 43147
------------------------------------------------
(Address of principal executive offices) (Zip Code)
614-864-6400
------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Common Shares, $1 Par Value, Outstanding as of APRIL 1, 2000 - 9,376,657
-------------------------
Index to Exhibits at page 12
Page 1 of 23 pages
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 1, 2000 January 1, 2000
------------- ---------------
ASSETS: (in thousands)
<S> <C> <C>
Cash and cash equivalents $ 3,429 10,006
Accounts receivable, less allowances 16,569 9,654
Inventory 44,599 40,652
Deferred income taxes 7,711 7,711
Prepaid expenses 1,943 2,538
-------- ------
Total current assets 74,251 70,561
-------- ------
Property, plant and equipment, at cost 43,417 43,333
Less accumulated depreciation & amortization 29,358 28,925
-------- ------
Net property, plant and equipment 14,059 14,408
-------- ------
Goodwill, net of amortization 2,501 2,602
Other assets 4,540 4,476
-------- ------
$ 95,351 92,047
======== ======
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term notes payable 3,000 682
Current installments of long-term debt 2,432 2,143
Accounts payable 8,286 8,424
Accrued expenses 4,189 5,554
-------- ------
Total current liabilities 17,907 16,803
-------- ------
Accrued retirement costs and other, net 6,416 6,262
Long-term debt, excluding current installments 10,004 8,571
-------- ------
Total liabilities 34,327 31,636
-------- ------
Minority interest 276 242
Shareholders' equity:
Preferred shares, $1 par value
Authorized 3,775,000 Class A shares,
225,000 Series I Junior Participating
Class A Shares, and 1,000,000
Class B Shares, none issued
Common shares, $1 par value
Authorized 22,500,000 shares
(excluding treasury shares) 9,377 9,349
Additional capital in excess of par value 12,131 12,050
Deferred compensation ( 579) ( 539)
Accumulated other comprehensive loss ( 84) ( 92)
Retained earnings 39,903 39,401
-------- ------
Net shareholders' equity 60,748 60,169
-------- ------
$ 95,351 92,047
======== ======
</TABLE>
Page 2 of 23 pages
<PAGE> 3
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 1, 2000 April 3, 1999
------------- -------------
(in thousands)
<S> <C> <C>
Net sales $24,238 20,734
Cost of sales 15,830 12,090
------- --------
Gross profit 8,408 8,644
Selling, general and
administrative expense 12,026 13,438
------- --------
Operating loss ( 3,618) ( 4,794)
Other income 207 145
Proceeds from litigation, net of
expenses incurred 4,476
Interest expense ( 280) ( 306)
Interest income 74 248
------- --------
Net interest expense ( 206) ( 58)
Income (loss) before
income tax (benefit) 859 ( 4,707)
Income tax (benefit) 323 ( 1,770)
Minority interest, net of tax 34 -
------- --------
Net income (loss) $ 502 ($ 2,937)
======= =========
Net income (loss)
per common share
Basic $ 0.05 ($ 0.30)
======= ========
Diluted $ 0.05 ($ 0.30)
======= ========
Average number of common
shares outstanding
Basic 9,367 9,705
======= ========
Diluted 9,444 9,705
======= ========
</TABLE>
Page 3 of 23 pages
<PAGE> 4
R. G. BARRY CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Thirteen Weeks Ended
April 1, 2000 April 3, 1999
------------- -------------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 502 ( 2,937)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization of
property, plant and equipment 551 452
Amortization of goodwill 33 28
Minority Interest 34 -
Amortization of Deferred Compensation 38
Net (increase) decrease in:
Accounts receivable, net ( 6,915) ( 1,647)
Inventory ( 4,022) ( 3,835)
Prepaid expenses 594 ( 42)
Recoverable income taxes - ( 1,214)
Other ( 9) 23
Net increase (decrease) in:
Accounts payable ( 138) ( 967)
Accrued expenses ( 1,334) ( 6,599)
Accrued retirement costs and other 232 282
--------- ---------
Net cash used in operating activities ( 10,434) ( 16,456)
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment, net ( 222) ( 487)
-------- --------
Cash flows from financing activities:
Proceeds from notes issued, net of repayments 1,040 -
Proceeds from short-term notes 3,000 -
Stock options exercised - 9
Treasury share acquisitions - ( 1,348)
-------- ---------
Net cash provided by (used in) financing activities 4,040 ( 1,339)
-------- ---------
Effect of exchange rates on cash 39 -
-------- ---------
Net decrease in cash ( 6,577) (18,282)
Cash at the beginning of the period 10,006 29,596
-------- ---------
Cash at the end of the period $ 3,429 $ 11,314
======== =========
Supplemental cash flow disclosures:
Interest paid $ 550 $ 624
======= ========
Income taxes paid $ 337 $ 5,410
======== =======
</TABLE>
Page 4 of 23 pages
<PAGE> 5
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under Item 1 of Part I of Form 10-Q
for the periods ended April 1, 2000 and April 3, 1999
1. The interim consolidated financial statements are unaudited. All
adjustments (consisting solely of normal recurring adjustments) have been
made which, in the opinion of management, are necessary to fairly present
the results of operations.
2. The Company operates on a fifty-two or fifty-three week annual fiscal year,
ending annually on the Saturday nearest December 31st. Fiscal 2000 and 1999
are both fifty-two week years.
3. A substantial portion of inventory is valued using the dollar value LIFO
method and, therefore, it is impractical to separate inventory values
between raw materials, work-in-process and finished goods.
4. Income tax (benefit) for the periods ended April 1, 2000 and April 3, 1999
consisted of:
2000 1999
---- ----
Current:
U. S. Federal tax (benefit) $ 300 ($ 1,652)
State & Local tax (benefit) 23 ( 118)
------ ---------
Total $ 323 ($ 1,770)
====== =========
The income tax (benefit) reflects a combined federal, foreign, state and
local effective rate of approximately 37.5 percent for the first quarter of
2000 and 1999, as compared to the statutory U. S. federal rate of 35.0
percent in both years.
Income tax (benefit) for the periods ended April 1, 2000 and April 3, 1999
differed from the amounts computed by applying the U. S. federal income tax
rate of 35.0 percent to pretax income (loss) as a result of the following:
2000 1999
---- ----
Computed "expected"
tax (benefit):
U. S. Federal tax (benefit) $ 301 ($ 1,647)
Other 7 ( 46)
State & Local tax (benefit),
net of federal income
tax (benefit) 15 ( 77)
----- ---------
Total $ 323 ($ 1,770)
===== =========
5. The computation of basic net income (loss) per common share has been
computed based on the weighted average number of common shares outstanding
during each period. Diluted net income (loss) per common share is based on
the weighted average number of outstanding common shares during the period,
plus, when their effect is dilutive, potential common shares consisting of
certain common shares subject to stock options and the stock purchase plan.
Page 5 of 23 pages
<PAGE> 6
R. G. BARRY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Under Item 1 of Part I of Form 10-Q for
the periods ended April 1, 2000 and April 3, 1999 - continued
6. Segment Information - The Company manufactures and markets comfort footwear
for at-and-around-the-home and supplies thermal retention technology
products. The Company considers its "Barry Comfort" at-and-around-the-home
comfort footwear groups in North America and in Europe, and the thermal
retention technology group, "Thermal", as its three operating segments. The
accounting policies of the operating segments are substantially similar,
except that the disaggregated information has been prepared using certain
management reports, which by their very nature require estimates. In
addition, certain items from these management reports have not been
allocated among the operating segments, including such items as a) costs of
certain administrative functions, b) current and deferred income tax
expense (benefit) and deferred tax assets (liabilities), and c) in some
periods, certain other operating provisions.
<TABLE>
<CAPTION>
Barry Comfort
-------------
2000 North Intersegment
(In thousands) America Europe Thermal Eliminations Total
------- ------ ------- ------------ -----
<S> <C> <C> <C> <C> <C>
Net sales $ 19,647 $ 3,786 $ 805 $ 24,238
Depreciation and
amortization 430 64 57 551
Interest income 187 - - ( 113) 74
Interest expense 276 4 113 ( 113) 280
Pre tax earnings (loss) ( 1,591) ( 197) 2,647 859
Additions to property, plant
and equipment 173 49 - 222
Total assets devoted $ 85,546 $ 8,741 $ 3,497 ($ 2,433) $ 95,351
======== ======= ======= ========= ========
</TABLE>
<TABLE>
<CAPTION>
Barry Comfort
-------------
1999 North Intersegment
(in thousands) America Europe Thermal Eliminations Total
------- ------ ------- ------------ -----
<S> <C> <C> <C> <C> <C>
Net sales $ 17,368 $ 1,883 $ 1,483 $ 20,734
Depreciation and
amortization 372 17 63 452
Interest income 297 - - ( 49) 248
Interest expense 306 - 49 ( 49) 306
Pre tax earnings (loss) ( 3,142) ( 677) ( 888) ( 4,707)
Additions to property, plant
and equipment 407 - 80 487
Total assets devoted $ 85,064 $ 7,407 $ 10,796 ($ 3,475) $ 99,792
======== ======= ======== ========= ========
</TABLE>
7. Restructuring Charges - In December 1999, the Company announced a plan to
reduce costs and improve operating efficiencies, and recorded a
restructuring charge of $1,794 as a component of 1999 operating expense.
The following schedule highlights actual charges related to those
activities through April 1, 2000.
<TABLE>
<CAPTION>
As of Adjustments As of
January 1, 2000 in 2000 Paid in 2000 April 1, 2000
--------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Employee separations $ 1,487 ( 135) 404 948
Other exit costs 94 4 90
Noncancelable lease costs 213 128 41 300
-------- -------- ------- -------
Restructuring costs $ 1,794 ($ 7) $ 449 $ 1,338
======== ======== ======= ========
</TABLE>
Page 6 of 23 pages
<PAGE> 7
R. G. BARRY CORPORATION AND SUBSIDIARIES
ITEM 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of the end of the first quarter of 2000, we had $56.3 million in net working
capital. This compares with $69.0 million at the end of the first quarter of
1999, and $53.8 million at fiscal year-end 1999. The decline in net working
capital from the end of the first quarter of 1999 to the end of the first
quarter of 2000 is primarily the result of the loss we incurred in fiscal 1999,
offset by the modest net income realized during the first quarter of 2000. The
increase in net working capital from fiscal year-end 1999 to the end of the
first quarter of 2000, is mainly due to the modest net income realized in the
first quarter of 2000. In addition, during the first quarter, our French
subsidiary borrowed the equivalent of approximately $2.1 million in French
Francs to repay other indebtedness and to fund its operations.
The primary components of net working capital have changed as follows:
- - Accounts receivable increased from $13.2 million at the end of the first
quarter of 1999, to $16.6 million at the end of the first quarter of 2000,
and increased by about by $6.9 million since the end of fiscal 1999.
Included in receivables at the end of the first quarter of 2000, is $5
million due from the settlement of patent litigation with Domino's Pizza,
Inc. (see also Part II, Item 1 - Legal Proceedings). Were it not for the $5
million due from Domino's Pizza, accounts receivables would have actually
declined from 1999 to 2000, and been nearly flat with balances at the end
of fiscal 1999.
- - Inventories ended the first quarter of 2000, at $44.6 million compared with
$46.9 million one year ago, and $40.7 million as of the end of fiscal 1999.
During 1999, we set an objective for ourselves of reducing inventory
levels, from those levels maintained in prior periods. The decline in the
first quarter when compared with the same quarter one year ago reflects the
implementation of that objective. The increase in inventories from the end
of fiscal 1999 to the end of the first quarter 2000 reflects a normal
seasonal pattern of inventory values.
- - We ended the first quarter of 2000 with $3.4 million in cash and cash
equivalents, compared with $11.3 million at the end of the first quarter of
1999. At the end of fiscal 1999, we had $10.0 million in cash and cash
equivalents. There were $3 million in short-term seasonal bank loans
outstanding at the end of the first quarter of 2000. There were no
short-term seasonal bank loans outstanding at the end of the first quarter
of 1999, or as of the end of fiscal 1999.
Capital expenditures during the first quarter of 2000, amounted to $222
thousand, compared with $487 thousand during the same period of 1999. Capital
expenditures in both years were funded out of working capital.
We currently have in place a Revolving Credit Agreement ("Revolver"), with our
three main lending banks. The multi-year Revolver provides a seasonally adjusted
available line of credit ranging from $6 million during January, to a peak of
$42 million from July through November. The Revolver contains financial
covenants that we believe are typical of agreements of similar type and
duration. We are in compliance with all the covenants of the Revolver, and all
other debt agreements. The Revolver currently extends through 2001 and provides
for periodic extensions upon request and with the approval of the banks.
During the first quarter of 2000, our subsidiary in France entered into a bank
loan for 14,800,000 French Francs, approximately $2.1 million, repayable in
quarterly installments, at varying interest rates over the next seven years. The
proceeds of the loan were used to repay other outstanding indebtedness and to
provide working capital in France.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
The FASB issued Statement No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of Effective Date of FASB Statement No. 133",
which is required to be adopted in fiscal years beginning after June 15, 2000.
The Statement permits early adoption as of the beginning of any fiscal quarter
after its issuance. The Company expects to adopt the new Statement effective
January 1, 2001. The Statement will require companies to recognize all
derivatives on the balance sheet at fair value.
Page 7 of 23 pages
<PAGE> 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations - continued
Derivatives that are not hedges must be adjusted to fair value through income.
If a derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivative will either be offset against the change in fair
value of the hedged asset, liability, or firm commitment through earnings, or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. We do not anticipate that the adoption of
this Statement will have a significant effect on our results of operations or
financial position.
RESULTS OF OPERATIONS
During the first quarter of 2000, net sales amounted to $24.2 million, a 16.9
percent increase in net sales from the first quarter of 1999. Net sales growth
occurred in Barry Comfort North America, with a large portion of that increase
in sales to mass merchandising customers, and in Barry Comfort Europe, mainly as
a result of inclusion of the net sales of Fargeot, which we acquired in July
1999. (See also note 6 of notes to consolidated financial statements for
selected segment information.) We expect net sales growth for the remainder of
the year to be more modest.
Gross profit during the first quarter, amounted to $8.4 million, compared with
$8.6 million during the same quarter in 1999. In March 2000, after reevaluating
the Soluna(TM) Spa-at-Home program, we decided to discontinue that line, and
wrote off approximately $600 thousand of Soluna(TM) raw materials. We believe
that we have adequately reserved for the disposal of Soluna(TM) finished goods.
Without the $600 thousand additional write-off, gross profit would have
increased to approximately $9.0 million.
As a percent of net sales, gross profit during the first quarter of 2000 was
34.7 percent compared with 41.7 percent during the first quarter of 1999. The
$600 thousand Soluna(TM) write-off adversely impacted gross profit percent, by
about 2.5 percent in the first quarter of 2000. In addition, much of the sales
growth in the first quarter occurred as a result of including the net sales of
Fargeot products (included in Barry Comfort Europe), and net sales to mass
merchandising customers (included in Barry Comfort North America), where, in
both cases, gross profit margins are typically lower than margins on net sales
of branded Dearfoams(R) products.
Selling, general and administrative expenses during the quarter, at $12.0
million, declined from $13.4 million in the same quarter last year. The decline
reflects a portion of the planned reduction in expense that we announced in our
restructuring late in 1999.
Late in the first quarter of 2000, we reached a resolution of patent
infringement litigation. The settlement of the litigation, yielded a $5 million
cash payment, received in early April 2000.
Net interest expense increased from 1999 to 2000. During the first quarter of
2000, net interest expense amounted to $206 thousand compared with $58 thousand
in the first quarter of 1999. In 2000, we started the year with lower cash
balances than in 1999, and as a result had fewer dollars on which to earn
interest on short-term investments. Lower interest income was primarily
responsible for the increase in net interest expense for the quarter.
For the first quarter of 2000, we realized net income after taxes amounting $502
thousand, or $0.05 per share, including the affects of the patent infringement
litigation settlement. We estimate that without the affects of the settlement
(and net of the litigation expenses incurred), we would have incurred a net loss
after taxes of approximately $2.3 million, or $0.24 per share. By comparison,
during the first quarter of 1999, we incurred a net loss after taxes of $2.9
million, or $0.30 per share. Per share calculations for both periods are yielded
the same result for both basic net income (loss) per share and for diluted net
income (loss) per share.
Page 8 of 23 pages
<PAGE> 9
Management's Discussion and Analysis of Financial Condition
and Results of Operations - continued
- --------------------------------------------------------------------------------
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995:
The statements in this Quarterly Report on Form 10-Q, which are not historical
fact are forward looking statements based upon the Company's current plans and
strategies, and reflect the Company's current assessment of the risks and
uncertainties related to business, including such things as product demand and
market acceptance; the economic and business environment and the impact of
governmental regulations, both in the United States and abroad; the effects of
direct sourcing by customers of competitive products from alternative suppliers;
the effect of pricing pressures from retailers; inherent risks of international
development, including foreign currency risks, the implementation of the Euro,
economic, regulatory and cultural difficulties or delays in the Company's
development outside the United States; the Company's ability to improve its
processes and business practices to keep pace with the economic, competitive and
technological environment; capacity, efficiency, and supply constraints;
weather; and other risks detailed in the Company's press releases, shareholder
communications, and Securities and Exchange Commission filings. Actual events
affecting the Company and the impact of such events on the Company's operations
may vary from those currently anticipated.
- --------------------------------------------------------------------------------
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk
No response required
Page 9 of 23 pages
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In September 1998, the Company filed a lawsuit for patent infringement
of United States Patent No. 5,790,962 against Domino's Pizza, Inc. and
Phase Change Laboratories, Inc. The case was filed on behalf of both
the Company and its subsidiary Vesture Corporation in the United
States District Court for the Middle District of North Carolina. In
March 2000, this lawsuit was settled. As a part of the settlement
filed with the United States District Court for the Middle District of
North Carolina, Domino's Pizza, Inc. agreed to pay the Company $5
million. As a part of the settlement, the parties entered into a
licensing arrangement for use of the Company's patented thermal
retention technology going forward.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) and (b) Not Applicable
(c) As of March 1, 2000, Christian Galvis was issued 1,250 common
shares of the Company. These common shares were issued in respect of
the Company's 1999 fiscal year in accordance with the terms of a
Restricted Stock Agreement, effective as of January 4, 1998, between
the Company and Mr. Galvis. The common shares had a market value of
$2.9375 per share on the date of issuance. As of March 23, 2000, the
Company issued 26,000 restricted common shares formerly held in
treasury, pursuant to the terms of a Restricted Stock Agreement
between the Company and Mr. Galvis. These common shares had a market
value of $3.00 per share as of the date of issuance. The common shares
were issued in reliance upon the exemptions from registration provided
by Sections 4(2) and 4(6) under the Securities Act of 1933 based upon
the fact that there was only one individual to whom the common shares
were "sold" and the status of Mr. Galvis as an executive officer and
director of the Company.
(d) Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a), (b) Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) - (d) Not Applicable
ITEM 5. OTHER INFORMATION
No response required
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS: See Index to Exhibits at page 12.
(b) REPORTS ON FORM 8-K: No reports on Form 8-K were filed during the
quarter ended April 1, 2000.
Page 10 of 23 pages
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
R. G. BARRY CORPORATION
-----------------------
Registrant
MAY 12, 2000 /s/ RICHARD L. BURRELL
- ------------ -------------------------------
date Richard L. Burrell
Senior Vice President - Finance
(Principal Financial Officer)
(Duly Authorized Officer)
Page 11 of 23 pages
<PAGE> 12
R. G. BARRY CORPORATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description LOCATION
- -------------- ----------- --------
<S> <C> <C> <C>
4 Loan Agreement, dated as of January 21, 2000, among Filed herewith
Banque Tarneaud, SA, Banque Nationale de Paris, and
Escapade SA
10 Restricted Stock Agreement, effective as of March 23, Filed herewith
2000, between R. G. Barry Corporation and Christian
Galvis
27 Financial Data Schedule 23
(Period ended April 1, 2000)
</TABLE>
Page 12 of 23 pages
<PAGE> 1
Exhibit 4
Translated from the original in French
LOAN AGREEMENT
Between the Undersigned:
The BANQUE TARNEAUD, SA, with a capital amounting to 21,172,976 Euros,
headquartered at 2 and 6, rue Turgot, 87011 Limoges cedex, Corporate and Trade
Register No. 754-500-551 LIMOGES; Represented by Acting as
The BANQUE NATIONALE DE PARIS, with a capital of 873,955,200 Euros,
headquartered at 16 boulevard des Italiens, 75009 Paris, Corporate and Trade
Register No. 662-042-449 PARIS; Represented by Mr. Jimmy Aivazis; Acting in his
capacity of Branch Director of the Banque Nationale de Paris in Dordogne;
Hereafter referred to as "the Banks";
ON THE ONE HAND;
And the SA ESCAPADE Company, with a capital of FF 250,000, Corporate and Trade
Register No. 384-486-601 Perigueux, headquartered in Le Petit Gue, 24800
Nantheuil de Thiviers, represented by its CEO, Mr. Thierry Civetta;
Hereafter referred to as "the Client," without affecting the joint and several
liability of the borrowers should there be several of them;
ON THE OTHER HAND;
THE FOLLOWING HAS BEEN CONVENED AND AGREED UPON:
The Banks agree to lend to the Client, without any solidarity between them, a
total amount of FF 14,800,000, to assist the Client in financing the acquisition
of 49% of the shares of SA LA THIBERIENNE ETS FARGEOT ET CIE.
SPECIFICATIONS OF THE LOANS GRANTED BY THE BANQUE TARNEAUD
FIRST PART:
- --------------------------------------------------------------------------------
Amount: FF 3,700,000
Term: Seven (7) years
Starting Date: 5 Jan 2000
Capital Reimbursement Modalities: 27 quarterly installments of
FF 132,200 and one quarterly
installment of FF 130,600
First Due Date: 5 Apr 2000
Last Due Date: 5 Jan 2007
Administrative Costs: FF 18,090 all taxes included,
including FF 3,090 in VAT
- --------------------------------------------------------------------------------
The Client shall execute promissory notes at maximum 90 days, payable to the
Banque Tarneaud, domiciled at the Banque Tarneaud Branch where the Client has
his account. These notes shall be renewable for the same amount and for the
duration of the credit opened, taking into account the capital amortization
indicated above.
The amount of the note shall be credited to the account opened in the Client's
name.
At each due date, the note due shall be charged to said account and shall be
renewed.
Interest rate: The notes shall be cashed at three months at the EURIBOR rate (or
any other equivalent index substituted for it), plus 1% per year (advance agio).
<PAGE> 2
By way of indication, the EURIBOR rate at three months on 9/21/1999 was 2.68%
per year.
Assuming that the index would cease to be published or would disappear before
the entire reimbursement of the Credit, a replacement index shall be
substituted, provided it has been anticipated. The lack of a replacement index
shall in no way authorize the Client to delay his payment of the interests, and
said interests must be settled based on the most recent applicable rate and
shall be revised at the latest on the last reimbursement due date and
retroactively once the replacement index is known.
COMMITMENT FEE
Additionally, a 0.20% per year Commitment Fee shall be levied.
This Fee shall be subtracted and collected at the beginning of each quarter and
in advance from the credit amount authorized for such period. The amounts levied
shall be entirely and definitely acquired, even in case of prepayment during the
quarter.
GLOBAL EFFECTIVE RATE
It must be noted that the global effective rate of aforementioned credit amounts
to 4.02% per year, including interests, commissions and expenses linked to the
Contract, taking into account the three-month EURIBOR rate on 09/21/1999. The
usury threshold at the date of execution of the Agreement is 6.85% a year.
SECOND PART
- --------------------------------------------------------------------------------
Amount: FF 3,700,000
Term: Seven years
Deductible Amount: None
Number of Reimbursements: 28
Frequency: Quarterly
Interest rate: 5.50% per year
Installment Amount: FF 160,103.95
Starting Date: 5 Jan 2000
First Due Date: 5 Apr 2000
Last Due Date: 5 Jan 2007
Administrative Expenses: FF 18,090 all taxes included,
including FF 3,090 in VAT
- --------------------------------------------------------------------------------
The Client agrees to pay the reimbursements indicated above to the Banque
Tarneaud. Each payment shall include, not only the reimbursement of a fraction
of the capital, but also the interests on the remaining capital due for the
period according to the amortization schedule, a copy of which shall be given to
the Client.
GLOBAL EFFECTIVE RATE
It must be noted that the global effective rate of aforementioned credit amounts
to 5.61% per year, including interests, commissions and expenses linked to the
Agreement. The usury threshold at the date of execution of the Agreement is
7.53% a year.
SPECIFICATIONS OF THE LOANS GRANTED BY THE BANQUE NATIONALE DE PARIS
FIRST PART:
- --------------------------------------------------------------------------------
Amount: FF 3,700,000
Term: Seven (7) years
Starting Date: 5 Jan 2000
Capital Reimbursement Modalities: 27 quarterly installments of
FF 132,200 and one quarterly
installment of FF 130,600
First Due Date: 5 Apr 2000
Last Due Date: 5 Jan 2007
Administrative Costs: FF 15,075 all taxes included,
including FF 2,575 in VAT
- --------------------------------------------------------------------------------
<PAGE> 3
The Client shall execute promissory notes at maximum 90 days, payable to the
Banque Nationale de Paris domiciled at the branch of the Banque Nationale de
Paris where the Client has his account. These notes shall be renewable for the
same amount and for the duration of the credit opened, taking into account the
capital amortization indicated above.
The amount of the note shall be credited to the account opened in the Client's
name.
At each due date, the note due shall be charged to said account and shall be
renewed.
Interest rate: The notes shall be cashed at three months at the EURIBOR rate (or
any other equivalent index substituted for it), plus 1% per year (advance agio).
By way of indication, the EURIBOR rate at three months on 9/21/1999 was 2.68%
per year.
Assuming that the index would cease to be published or would disappear before
the entire reimbursement of the Credit, a replacement index shall be
substituted, provided it has been anticipated. The lack of a replacement index
shall in no way authorize the Client to delay his payment of the interests, and
said interests must be settled based on the most recent applicable rate and
shall be revised at the latest on the last reimbursement due date and
retroactively once the replacement index is known.
COMMITMENT FEE
Additionally, a 0.20% per year Commitment Fee shall be levied.
This Fee shall be subtracted and collected at the beginning of each quarter and
in advance from the credit amount authorized for such period. The amounts levied
shall be entirely and definitely acquired, even in case of prepayment during the
quarter.
GLOBAL EFFECTIVE RATE
It must be noted that the global effective rate of aforementioned credit amounts
to 4.01% per year, including interests, commissions and expenses linked to the
Contract, taking into account the three-month EURIBOR rate on 09/21/1999. The
usury threshold at the date of execution of the Agreement is 6.85% a year.
SECOND PART
- --------------------------------------------------------------------------------
Amount: FF 3,700,000
Term: Seven years
Deductible Amount: None
Number of Reimbursements: 28
Frequency: Quarterly
Interest rate: 5.50% per year
Installment Amount: FF 160,103.95
Starting Date: 5 Jan 2000
First Due Date: 5 Apr 2000
Last Due Date: 5 Jan 2007
Administrative Expenses: FF 15,075 all taxes included,
including FF 2,575 in VAT
- --------------------------------------------------------------------------------
The Client agrees to pay the reimbursements indicated above to the Banque
Nationale de Paris. Each payment shall include, not only the reimbursement of a
fraction of the capital, but also the interests on the remaining capital due for
the period according to the amortization schedule, a copy of which shall be
given to the Client.
GLOBAL EFFECTIVE RATE
It must be noted that the global effective rate of aforementioned credit amounts
to 5.630% per year, including interests, commissions and expenses linked to the
Agreement. The usury threshold at the date of execution of the Agreement is
7.53% a year.
<PAGE> 4
GENERAL LENDING CONDITIONS
The Client hereby irrevocably authorizes the Banks to withdraw the necessary
funds from its account on each reimbursement due date without preliminary notice
or the need to draw up a debit note.
Any extension of one or several due dates possibly granted by the Banks must be
recorded in a rider to this Agreement. Interest on arrears shall be demanded on
any amount that is still unpaid on the due date and has been the object of a
rider, computed at the credit rate plus three percent per year and charged on
the entire unpaid amount.
UNPAID AMOUNTS - LATE PENALTY
In case of non-payment of one of the installments stipulated above, independent
from the acceleration of maturity clause mentioned hereafter, an additional
three percent shall be added to the interest rate to be levied on the
outstanding principal amount as of the starting date of the unpaid installments.
This provision cannot detract from the payability and consequently count as an
agreement to delay the settlement.
To these late penalties shall be added the tax on services performed, and, if
applicable, all other taxes possibly due in the future as well as all
commissions or increases generally decided upon by the Conseil national du
credit or any other body with regulative jurisdiction.
In case of non-payment of one single installment, an event of default shall
rightfully be declared and the total amount of all future installments shall be
immediately payable.
EXCLUSION OF THE CLIENT'S CURRENT ACCOUNT
The transactions resulting from the execution of this loan are excluded from any
current account(s) the Client has or could have with the Banks. The account kept
at each Bank in view of keeping track of the transactions carried out at the
Bank to implement the loan shall be a simple accounting instrument and shall
have no effect on the current account.
DESTINATION OF FUNDS
The Banks may, at any time, request all justifications necessary to control the
use of the funds but do not have to verify their application.
Should the Banks discover that the funds have been used for a purpose other than
the one mentioned above, they may, but are not required to, end the loan and
demand the reimbursement of the borrowed funds.
ACCELERATION OF MATURITY
All sums still due in principal, interests and accessories shall be immediately
and rightfully due without any preliminary notice:
- - In case of bankruptcy, insolvency, legal redress or liquidation by order of
court, cessation of business, Client's failure to pay, death of the insured
person (when applicable). In one of the above cases, all outstanding
installments due shall be rightfully expected to be prepaid.
The Client must warn the Banks of his intention to effect a prepayment at least
ten days before the payment, indicating the amount.
For any prepayment, the Banks shall charge a compensation equal to 1.5% of the
prepaid capital.
For any modification of the rate or term of this credit requested by the Client,
the Banks shall charge an indemnity as provided for in the clause entitled
"Possibility of early release," as well as the administrative expenses according
to the rates listed in their General Conditions.
<PAGE> 5
REQUIRED COMMUNICATIONS TO THE BANKS
As long as the Client is a debtor pursuant to this Agreement, he must:
1. Communicate to the Banks within a 15-day term all facts that are
susceptible to seriously affect the importance or the value of his assets
or to considerably increase the breadth of his commitments;
2. On December 31 of each year, deliver to the Banks a statement certifying
that he is up-to-date in his payments of direct or indirect taxation and
the state and city taxes payable by him, as well as of all social charges.
If necessary and upon simple request, the Banks should be able to receive
confirmation of these payments of said taxes and charges from the
collection services and Social Security office.
NON-RENEWAL CLAUSE
The guarantees under the provisions of this Agreement are granted and accepted
without any renewal but are formally subject to all rights and actions of the
Banks with regard to the Client.
They shall in no way prejudice these rights and actions and cannot affect the
nature and extent of all commitments and all real or personal guarantees that
the Client or any other third party may take out or deliver to the Banks.
SWITCHING TO SINGLE CURRENCY
As needed and in conformance with the general principles of monetary law,
monetary debts denominated and/or payable in the currency of a country that is a
member of the European Community (National Monetary Unit) pursuant to this
Agreement shall rightfully be considered as denominated and/or payable in
European Single Currency when the National Monetary Unit shall have ceased to
exist or, more generally, shall have been replaced by the European Single
Currency according to the applicable community and/or national regulations.
FINANCIAL INSTRUMENT ACCOUNT COLLATERAL
A financial instrument account collateral equal to FF 14,800,000 must accompany
this credit.
- - 1980 shares issued by SA LA THIBERIENNE ETS FARGEOT ET CIE., with a capital
of FF 2,000,000, Corporate and Trade Register No. 681-980-165 Perigueux,
headquartered at Le Petit Gue 24800 Thiviers.
This collateral shall be placed on record by an act under private writing signed
separately from this Contract.
In case it is not possible to formalize this guarantee under the conditions
provided for, the Banks may demand the accelerated redemption of all amounts due
under this loan.
ASSIGNMENT OF A DEATH AND DISABILITY INSURANCE
Mr. Thierry CIVETTA agrees to assign to the benefit of the Banks a special death
and disability insurance for ten million Francs (five million Francs per Bank)
that he will take out with an insurance company of his choice, it being
understood that the assigned amount may not be less than 67.5% of the
outstanding credit during the entire term of the loan.
The Banks must receive a rider to this policy attesting this assignment.
In case it is not possible to formalize this assignment under the conditions
provided for, the Banks may demand the accelerated redemption of all amounts due
under this loan.
SPECIFIC CLAUSES
- - The agreement of merger-absorption of SA LA THIBERIENNE ETS. FARGEOT ET CIE
by SA MICHEL FARGEOT at the latest on 06/30/2000;
<PAGE> 6
- - A promise to place the SA MICHEL FARGEOT shares as collateral after the
merger-absorption of SA LA THIBERIENNE ETS FARGEOT ET CIE;
- - SA ESCAPADE is authorized to distribute dividends in case of partial use of
the loan and subject to the respect of the financial covenants as defined
hereafter:
- The net consolidated earnings must be at least FF 3,000,000
- The distribution must be less than 25% of the net earnings
EXPENSES
The Client recognizes that any amendment of this credit that would require a
rider shall force the Banks to levy administrative charges according to the
rates that are listed in their General Conditions and are valid at the time the
rider is being drawn up.
The Client agrees to pay all charges and rights linked to this document as well
as all possible charges and rights linked to its execution.
The Agreement is governed by the laws of France.
The competent courts of Limoges have jurisdiction with respect to the execution
of this Agreement.
Drawn up in Limoges on 21 Jan 2000, in as many copies as there are Parties.
- --------------------------------------------------------------------------------
THE CLIENT THE BANKS
"Good for FF 14,800,000 (in numbers and in letters)
and good for agreement according to the preceding [Illegible signature]
terms."
Signature and commercial stamp. Jimmy AIVAZIS
[Same text as above, but handwritten]
[Illegible signature]
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10 - RESTRICTED STOCK AGREEMENT
CONFORMED COPY
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into to be
effective as of March 23, 2000, by and between R. G. Barry Corporation, a
corporation organized and existing under the laws of the State of Ohio
("Company"), and Christian Galvis ("Executive").
R E C I T A L S:
- - - - - - - -
1. Executive currently serves as Executive Vice President - Operations
of the Company and President - Operations of the Barry Comfort Group.
2. As an inducement to Executive to continue in the employment of the
Company and to provide additional compensation for his past service to the
Company, the Company has agreed to issue Executive 26,000 "restricted shares" of
the Company on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants expressed in this Agreement and in consideration of the sum of $26.00
payable by Executive to the Company and the other consideration described
herein, the parties hereto make the following agreements, intending to be
legally bound thereby:
SECTION 1. GRANT OF RESTRICTED SHARES. In consideration of Executive's
agreement to continue in the employment of the Company, the Executive's payment
to the Company of the sum of $26.00 and as additional compensation for his past
services to the Company, the Company hereby issues to Executive 26,000
restricted common shares, par value $1.00 per share, of the Company (the
"Restricted Shares"). Executive shall exercise all voting rights with respect to
the Restricted Shares and shall be entitled to receive all dividends, if any,
payable thereon. The Restricted Shares are being issued from the Company's
treasury shares.
SECTION 2. RESTRICTIONS ON TRANSFER. Each Restricted Share shall
represent one issued and outstanding common share, par value $1.00 per share, of
the Company but shall be subject to the following transfer restrictions: NONE OF
THE RESTRICTED SHARES MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE ALIENATED
OR ENCUMBERED UNTIL OR UNLESS SUCH RESTRICTIONS HAVE LAPSED ACCORDING TO THE
PROVISIONS OF THIS AGREEMENT.
<PAGE> 2
SECTION 3. LAPSE OF RESTRICTIONS. Subject to the provisions of Sections
4, 5 and 6 of this Agreement, restrictions on transfer of 5,200 of the
Restricted Shares (subject to adjustment for stock splits, stock dividends and
similar transactions) shall lapse and terminate on each of the first, second,
third, fourth and fifth anniversaries of the date of this Agreement, namely on
March 23, 2001, March 23, 2002, March 23, 2003, March 23, 2004, and March 23,
2005.
SECTION 4. DISABILITY. In the event during the term of this Agreement
Executive's employment is terminated by the Company because he is unable to
perform his job responsibilities due to ill health or physical or mental
disability, restrictions on transfer shall lapse immediately with respect to all
of the Restricted Shares on which transfer restrictions have not previously
lapsed.
SECTION 5. DEATH OF EXECUTIVE. In the event of the death of Executive,
transfer restrictions shall lapse immediately with respect to all of the
Restricted Shares on which transfer restrictions have not previously lapsed.
SECTION 6. TERMINATION OF THE EMPLOYMENT OF EXECUTIVE; CHANGE OF
CONTROL. If the employment of Executive is terminated by the Company for cause
or if Executive voluntarily terminates his employment prior to March 23, 2005,
Executive shall, at the time of such termination of employment, forfeit all of
the Restricted Shares on which transfer restrictions have not previously lapsed
in accordance with this Agreement. In the event that the employment of Executive
is terminated by the Company for any reason other than for cause, restrictions
on transfer shall lapse, effective on the date of such termination of
employment, with respect to all of the Restricted Shares on which transfer
restrictions have not previously lapsed. Further, all transfer restrictions on
the Restricted Shares shall lapse effective on a Change of Control of the
Company. For purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if (i) any individual, firm, corporation, partnership, joint
venture or other entity or any group (as the term "group" is defined in Section
13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules thereunder) shall acquire beneficial ownership (as that term is defined in
Section 13(d) of the Exchange Act and the rules thereunder) of shares of the
Company which results in such person, firm, corporation, partnership, joint
venture, other entity or group possessing more than a majority of the total
voting power of the Company's outstanding voting securities ordinarily having
the right to vote for the election of directors of the Company; or (ii) as the
result of, or in connection with, any tender or exchange offer, merger or other
business combination, sale of assets or contested election of directors, or any
<PAGE> 3
combination of the foregoing transactions, the persons who were directors of the
Company immediately before such transaction or transactions shall cease to
constitute a majority of the Board of Directors of the Company or any successor
to the Company.
SECTION 7. SECURITIES LAW MATTERS. Executive hereby represents,
warrants, covenants and agrees with the Company as follows: (a) The Restricted
Shares are being acquired by him for his own account without the participation
of any other person and with the intent of holding the Restricted Shares for
investment and not with a view to, or for resale in connection with, any
distribution of the Restricted Shares.
(b) Executive understands and agrees that the Restricted Shares will be
issued to him without registration under any state law relating to the
registration of securities for sale, and will be issued and sold in reliance on
the exemptions from registration under the Securities Act of 1933 (the "1933
Act").
(c) Because the Restricted Shares are being issued to Executive in a
transaction which is not registered under the 1933 Act or under any state
securities laws, the Restricted Shares cannot be offered for sale, sold or
transferred after the restrictions on transfer imposed by this Agreement have
lapsed other than pursuant to: (A) an effective registration under the 1933 Act
or in a transaction otherwise in compliance with the 1933 Act; and (B) evidence
satisfactory to the Company of compliance with the applicable state securities
laws.
(d) Each certificate representing the Restricted Shares shall be
endorsed with a legend substantially in the following form and Executive shall
not make any transfer of the Restricted Shares without first complying with the
restrictions on transfer described in such legend:
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, OR HYPOTHECATED UNLESS (1) THERE IS AN
EFFECTIVE REGISTRATION UNDER SUCH ACT COVERING SUCH SECURITIES, (2)
THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER
SUCH ACT, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT.
SECTION 8. LEGENDS. In addition to the legend referred to in Section
7(d), all certificates for the Restricted Shares shall bear a legend prohibiting
the sale, transfer, pledge or other alienation thereof until
<PAGE> 4
the Company notifies the Company's transfer agent that, and the extent to which,
the restrictions on transfer on such shares imposed by this Agreement have
lapsed.
SECTION 9. MISCELLANEOUS.
(a) The issuance and/or vesting of the Restricted Shares shall be
subject to any applicable tax withholding or other requirements of applicable
law.
(b) This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio.
(c) This Agreement embodies the entire agreement of the parties in
respect of the subject matter of this Agreement, and this Agreement supersedes
all prior and contemporaneous agreements between the parties in connection with
the subject matter of this Agreement.
(d) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns (including successive, as well as immediate,
successors and assigns) of the Company; provided, however, that the Company may
not assign this Agreement or any of its rights or obligations hereunder to any
party other than a corporation which succeeds to substantially all of the
business and assets of the Company by merger, consolidation, sale of assets or
otherwise. This Agreement shall inure to the benefit of and be binding upon the
successors and assigns (including successive, as well as immediate, successors
and assigns) of Executive; provided, however, that the rights of Executive under
this Agreement may be assigned only to his personal representative by will or
trust or pursuant to applicable laws of descent and distribution.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
R. G. BARRY CORPORATION
By /s/ Gordon Zacks
----------------------------------
Gordon Zacks
Chairman of the Board and
Chief Executive Officer
/s/ Christian Galvis
------------------------------------
Christian Galvis
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 3,429
<SECURITIES> 0
<RECEIVABLES> 23,433
<ALLOWANCES> 6,864
<INVENTORY> 44,599
<CURRENT-ASSETS> 74,251
<PP&E> 43,417
<DEPRECIATION> 29,358
<TOTAL-ASSETS> 95,351
<CURRENT-LIABILITIES> 17,907
<BONDS> 10,004
0
0
<COMMON> 9,377
<OTHER-SE> 51,371
<TOTAL-LIABILITY-AND-EQUITY> 95,351
<SALES> 24,238
<TOTAL-REVENUES> 24,238
<CGS> 15,830
<TOTAL-COSTS> 15,830
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206
<INCOME-PRETAX> 859
<INCOME-TAX> 323
<INCOME-CONTINUING> 502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 502
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
</TABLE>
