<PAGE>
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 February 28, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 0R 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition Period from ______________________ to _______________________
Commission file number 0-14674
ANDOVER TOGS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 13-5677957
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
One Penn Plaza, New York, New York 10119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,including area code: (212) 244-0700
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 twelve 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 _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 4,458,315 shares of common
stock, $.10 par value, of the Registrant were outstanding as of April 1, 1995.
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 1995
INDEX
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Consolidated financial statements:
Balance Sheets
February 28, 1995 (unaudited) and November 30, 1994
and February 28, 1994 (unaudited) 1
Statements of Operations (unaudited)
Three months ended February 28, 1995 and 1994 2
Statements of Stockholders' Equity (unaudited)
Three months ended February 28, 1995 and 1994 3
Statements of Cash Flows (unaudited)
Three months ended February 28, 1995 and 1994 4
Notes to Consolidated Financial Statements (unaudited) 5-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
Part II - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 9
Signatures 11
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 28, November 30, February 28,
ASSETS 1995 1994 1994
- ------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 626,000 $ 584,000 $ 627,000
Accounts receivable - net 11,956,000 12,659,000 8,487,000
Inventories (Notes 2 and 3) 18,299,000 13,972,000 13,058,000
Deferred income taxes 267,000 248,000 337,000
Other current assets 574,000 224,000 679,000
------------ ------------ -------------
Total current assets 31,722,000 27,687,000 23,188,000
PROPERTY, PLANT AND EQUIPMENT -
Net (Note 3) 8,427,000 8,554,000 9,216,000
RESTRICTED FUNDS 360,000 360,000 360,000
OTHER ASSETS 270,000 279,000 533,000
COST IN EXCESS OF ASSETS
ACQUIRED (Note 3) 500,000 - -
------------ ------------ -------------
TOTAL $ 41,279,000 $ 36,880,000 $ 33,297,000
============ ============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-bank (Note 3) $ 7,200,000 $ 2,400,000 $ 625,000
Accounts payable 4,498,000 4,632,000 3,404,000
Accrued expenses and other
current liabilities 3,197,000 3,049,000 2,494,000
Current portion of long-term
debt and obligations under
capital leases 1,520,000 1,520,000 1,474,000
------------ ------------ -------------
Total current liabilities 16,415,000 11,601,000 7,997,000
LONG-TERM DEBT AND OBLIGATIONS
UNDER CAPITAL LEASES 4,935,000 5,238,000 6,010,000
OTHER LIABILITIES 81,000 61,000 101,000
DEFERRED INCOME TAXES 985,000 1,025,000 1,131,000
------------ ------------ -------------
Total liabilities 22,416,000 17,925,000 15,239,000
------------ ------------ -------------
STOCKHOLDERS' EQUITY
Common stock (Note 3) 464,000 454,000 454,000
Additional paid-in
capital (Note 3) 11,135,000 10,870,000 10,870,000
Retained earnings 7,904,000 8,271,000 7,374,000
Less treasury stock, at cost (640,000) (640,000) (640,000)
------------ ------------ -------------
Total stockholders'equity 18,863,000 18,955,000 18,058,000
------------ ------------ -------------
TOTAL $ 41,279,000 $ 36,880,000 $ 33,297,000
============ ============ =============
</TABLE>
See notes to consolidated financial statements.
1
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ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NET SALES $ 15,016,000 $ 11,227,000
COST OF GOODS SOLD (Note 2) 12,278,000 9,127,000
------------- -------------
GROSS PROFIT 2,738,000 2,100,000
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 3,029,000 3,296,000
------------- -------------
OPERATING LOSS (291,000) (1,196,000)
INTEREST EXPENSE 249,000 163,000
------------- -------------
LOSS BEFORE INCOME TAX BENEFIT (540,000) (1,359,000)
INCOME TAX BENEFIT (173,000) (587,000)
------------- -------------
NET LOSS $ (367,000) $ (772,000)
============= =============
LOSS PER SHARE $ (.08) $ (.18)
============= =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 4,361,000 4,358,000
============= =============
</TABLE>
See notes to consolidated financial statements.
2
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ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED FEBRUARY 28, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
----------------------- Paid-in Retained ---------------------
Shares Amount Capital Earnings Shares Amount Total
------ ------ ----------- -------- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED
FEBRUARY 28, 1995
BALANCE
DECEMBER 1, 1994 4,542,990 $ 454,000 $10,870,000 $ 8,271,000 184,675 $ (640,000) $18,955,000
Issuance of stock (Note 3) 100,000 10,000 265,000 275,000
Net loss (367,000) (367,000)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE
FEBRUARY 28, 1995 4,642,990 $ 464,000 $11,135,000 $ 7,904,000 184,675 $ (640,000) $18,863,000
=========== =========== =========== =========== =========== =========== ===========
THREE MONTHS ENDED
FEBRUARY 28, 1994
BALANCE
DECEMBER 1, 1993 4,542,990 $ 454,000 $10,870,000 $ 8,146,000 184,675 $ (640,000) $18,830,000
Net loss (772,000) (772,000)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCE
FEBRUARY 28 1994 4,542,990 $ 454,000 $10,870,000 $ 7,374,000 184,675 $ (640,000) $18,058,000
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED FEBRUARY 28, 1995 AND 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (367,000) $ (772,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 330,000 361,000
Deferred income taxes (59,000) (63,000)
Changes in assets and liabilities, net
of effect of acquisition:
Decrease in accounts receivable 703,000 2,186,000
Increase in inventories (627,000) (1,846,000)
Increase in other assets (566,000) (156,000)
Decrease in accounts payable (134,000) (572,000)
Increase (decrease) in accrued
expenses and other liabilities 168,000 (687,000)
------------ ------------
Net cash used in operating
activities (552,000) (1,549,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition (3,800,000) --
Capital expenditures (103,000) (23,000)
------------ ------------
Net cash used in investing
activities (3,903,000) (23,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in notes payable - bank 4,800,000 625,000
Repayments of long-term debt (303,000) (521,000)
------------ ------------
Net cash provided by financing
activities 4,497,000 104,000
------------ ------------
NET INCREASE (DECREASE) IN CASH 42,000 (1,468,000)
CASH, BEGINNING OF PERIOD 584,000 2,095,000
------------ ------------
CASH, END OF PERIOD $ 626,000 $ 627,000
============ ============
SUPPLEMENTAL INFORMATION:
Cash paid during the period for:
Interest $ 119,000 $ 261,000
============ ============
Income taxes $ 131,000 $ 37,000
============ ============
</TABLE>
See notes to consolidated financial statements.
4
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ANDOVER TOGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated balance sheets as of February 28, 1995 and February
28, 1994 and the related consolidated statements of operations,
stockholders' equity and cash flows for the periods presented have been
prepared by the Company without audit. In the opinion of management,
all adjustments consisting of only normal recurring adjustments
necessary for a fair presentation of the financial position of the
Company, the results of its operations, and cash flows have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report to Shareholders for the year ended November 30, 1994.
The results of operations for the period ended February 28, 1995 are
not necessarily indicative of the operating results for the full year.
Per share information is computed by dividing the net loss amounts by
the weighted average number of shares of common stock outstanding
during each period.
2. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
February 28, November 30, February 28,
1995 1994 1994
------------ ------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Raw materials $ 4,044,000 $ 3,458,000 $ 2,974,000
Work in process 5,377,000 4,597,000 2,849,000
Finished goods 8,878,000 5,917,000 7,235,000
------------ ------------ -----------
$18,299,000 $13,972,000 $13,058,000
=========== =========== ===========
</TABLE>
Inventories and cost of goods sold at February 28, 1995 and 1994 are
determined based upon the estimated gross profit method. At February
28, 1995, inventories include approximately $3,700,000 from the Dobie
acquisition (Note 3).
5
<PAGE>
3. ACQUISITION
On February 27, 1995, the Company acquired the inventory, trade names,
customer orders and certain items of machinery and equipment of Dobie
Industries, Inc. ("Dobie"), a manufacturer of children's and ladies
apparel. The purchase price was approximately $3,800,000 in cash,
subject to final adjustments; 100,000 shares of the Company's common
stock, valued at $275,000; and a warrant to purchase 50,000 additional
shares of stock at $2.50 per share. The cash portion of the purchase
price was obtained by utilizing the Company's existing line of credit.
Under certain conditions the holders of the 100,000 shares have the
right to require the Company to purchase the 100,000 shares at $5.00
per share at the expiration of five years. Additionally the purchase
price includes contingent payments of up to $4,000,000 over the next
five years based on the Company's consolidated future operations.
The acquisition has been accounted for as a purchase, and the assets
are included in the Company's Consolidated Financial Statements
beginning February 27, 1995. The purchase price has been allocated to
the assets of Dobie based on preliminarily estimated fair values and is
subject to further adjustment as more information becomes available.
The purchase price and expenses associated with the acquisition
exceeded the fair value of Dobie's assets by approximately $500,000,
subject to future adjustment, which has been assigned to cost in excess
of assets acquired. The cost in excess of assets acquired is being
amortized over 15 years.
6
<PAGE>
ANDOVER TOGS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the three months ended February 28, 1995 were $15,016,000
an increase of $3,789,000 or 33.7% as compared with the 1994 period of
$11,227,000. In fiscal 1995, the Company recaptured some of the sales
it lost in fiscal 1994.
The Company's acquisition of certain assets of Dobie on February 27,
1995 had no material impact on the Company's sales for the quarter
ended February 28, 1995.
The Company expects competition to continue to be intense and customers
to continue to buy conservatively. The Dobie acquisition reflects the
Company's continuing efforts to increase its sales penetration by
expanding its accounts. The acquisition is expected to have a positive
impact on fiscal 1995 sales.
Gross profit as a percentage of net sales decreased to 18.2% from 18.7%
in the comparable 1995 three-month period. The majority of the
Company's sales are still of non-branded merchandise where pricing
pressures remain intense and therefore the Company is unable to pass
through cost increases to its customers. The Company has accepted
business at lower margins in order to maintain market share. The
Company does not expect any significant improvement in its profit
margins in 1995.
Selling, general and administrative expenses for the three months ended
February 28, 1995 were $3,029,000 or 20.2% of sales as compared to
$3,296,000 or 29.4% of sales for the three months ended February 28,
1994. The decrease of $267,000 was attributable to approximately
$150,000 of reduced payrolls, related benefits and commission expenses
and approximately $90,000 as a reduction of rent expense due to a new
lease. The decrease as a percentage of sales is primarily a result of
the increased sales volume in the first quarter of fiscal 1995.
The increase in interest expense of $86,000 is a reflection of higher
borrowing levels due to increased inventory levels based on increased
Spring orders and higher interest rates.
FINANCIAL CONDITION
The Company's working capital at February 28, 1995 decreased $779,000
to $15,307,000 as compared to $16,086,000 at November 30, 1994, due
primarily to principal payments of long-term debt, the Company's net
loss for the period and Dobie acquisition costs. The Company's
long-term debt decreased $1,075,00 at February 28, 1995 compared to
February 28, 1994.
7
<PAGE>
Inventory at February 28, 1995 was approximately $5,241,000 higher than
February 28, 1994 primarily as a result of higher bookings for Spring
1995 and the addition of Dobie inventory.
The Company does not traditionally make material commitments to
purchase piece goods without corresponding orders. The Company
generally does not have long term commitments other than under its
lease for its New York premises and the financings associated with its
manufacturing facilities.
The Company maintains a $22,000,000 revolving credit facility and a
$7,000,000 letter of credit facility subject to maximum aggregate
borrowings of $26,000,000. The facilities are secured by the Company's
accounts receivable, imported inventory under letters of credit and
certain personal property and equipment. The revolving credit and
letter of credit facilities terminate May 1, 1995. The Company expects
to renew these or obtain substantially similar facilities.
The Company believes that cash generated from operations and available
borrowings will be sufficient to meet its anticipated working capital
needs.
8
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit
Number Description
- ------- -----------
3(a) Certificate of Incorporation of the Company, incorporated by
reference to Exhibit 3(a) to Registration Statement on Form S-1 (SEC
File No. 33-5363) of the Company (the "Form S-1").
3(b) Certificate of Merger of Andover Togs, Inc., a New York corporation,
into and with Andover Togs, Inc., a Delaware corporation,
incorporated by reference to Exhibit 3(b) to the Form S-1.
3(c) Certificate of Amendment of Certificate of Incorporation, filed June
1, 1987, incorporated by reference to Exhibit 3(a) to the Company's
quarterly report on Form 10-Q dated May 31, 1994 (the "May 1994
10-Q").
3(d) By-laws of the Company, as amended through November 12, 1986,
incorporated by reference to Exhibit 3(b) to the May 1994 10-Q.
4(a) Specimen of certificate for shares of Common Stock of the Company,
incorporated by reference to Exhibit 4(a) to the Form S-1.
4(b) The Company's Incentive Stock Option Plan, as amended April 20, 1987,
incorporated by reference to Exhibit 4(a) to the Registration
Statement on Form S-8 (SEC File No. 33-33963) as filed with the
Securities and Exchange Commission on March 22, 1990.
4(c) The Company's Non-Qualified Stock Option Plan, as amended May 21,
1987 and April 9, 1992, incorporated by reference to Exhibit 4(a) to
the Amendment to the Registration Statement on Form S-8 (SEC File No.
33- 33963) as filed with the Securities and Exchange Commission on
November 2, 1992.
4(d) Common Stock Purchase Warrant, dated February 27, 1995, issued to
Dobie Industries, Inc., incorporated by reference to Exhibit 4(d) to
the Company's annual report on Form 10-K for the year ended November
30, 1994 (the "1994 10-K").
4(e) Registration Rights Agreement, dated February 27, 1995, by and
between the Company and Dobie Industries, Inc., incorporated by
reference to Exhibit 4(e) to the 1994 10-K.
9
<PAGE>
Exhibit
Number Description
- ------- -----------
*10(a) Insurance Agreement dated as of September 1, 1994, by and among the
Company, William L. Cohen and Peter A. Cohen and Stanley I.
Schachter, as trustees of the William L. Cohen Irrevocable Life
Insurance Trust Agreement, dated January 31, 1984.
*27 Financial Data Schedule.
- ---------------
* Filed herewith
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended February
28, 1995. However, one report on Form 8-K was filed on March 14, 1995 to report
the acquisition by the Company on February 27, 1995 of the inventory, customer
orders, trademarks and other intellectual property and certain machinery and
equipment of Dobie Industries, Inc., a New York corporation.
10
<PAGE>
<PAGE>
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.
ANDOVER TOGS, INC.
(Registrant)
Date April 12, 1995 By /s/ William L. Cohen
--------------------- -----------------------------
Chairman of the Board and
President
Date April 12, 1995 By /s/ Alan Kanis
--------------------- -----------------------------
Treasurer and Chief Financial
and Accounting Officer
11
<PAGE>
<PAGE>
THIS AGREEMENT made as of this 1st day of September, 1994, by and among
Andover Togs, Inc., a New York corporation, having its principal office at One
Penn Plaza, New York, New York 10119 (hereinafter referred to as the
"Corporation"), William L. Cohen, residing at 1120 Park Avenue, Apartment 9A,
New York, New York 10128, (hereinafter referred to as "Cohen"), and Peter A.
Cohen and Stanley I. Schachter, as Trustees of the William L. Cohen Irrevocable
Life Insurance Trust Agreement, dated January 31, 1984 (hereinafter referred to
as the "Trustees").
WHEREAS, Cohen is employed by the Corporation and has rendered competent
efforts on behalf of the Corporation and the Corporation wishes to give
recognition to Cohen for such efforts; and
WHEREAS, in recognition of the foregoing, the Corporation wishes to help
Cohen provide for the security of his family through participation in a
split-dollar insurance program; and
WHEREAS, Cohen and the Trustees agree to participate in such program to the
extent hereafter provided.
NOW, THEREFORE, it is mutually agreed that:
ARTICLE I
APPLICATION FOR LIFE INSURANCE
1. In furtherance of the purposes of this Agreement, the Trustees own a
policy of life insurance insuring Cohen's life with the Equitable Life Assurance
Society (hereinafter referred to as "the Insurer"), in the total face amount of
$4,000,000 (hereinafter referred to as the
<PAGE>
"Policy"), which is described in Exhibit A attached hereto and by this reference
made a part hereof.
2. The parties hereby agree that the Policy shall be subject to the terms
and conditions of this Agreement.
ARTICLE II
OWNERSHIP OF LIFE INSURANCE
The Trustees, and their successors, shall be the sole and absolute owner of
the Policy and may exercise all ownership rights granted to the owner thereof by
the terms of the Policy, without the consent of any other person, except as may
otherwise be provided herein.
ARTICLE III
PAYMENTS OF PREMIUMS ON POLICY
1. Thirty (30) days prior to the due date of each premium payable on the
Policy, the Corporation shall notify Cohen and the Trustees of the exact amount
due from the Trustees, which shall be an amount equal to the annual cost of
current life insurance protection in the life of Cohen measured by the lower of
the PS 58 Rate, set forth in Revenue Ruling 55-747 (or the corresponding
applicable rate or other measure set forth in any Revenue Ruling or Treasury
Regulation or other Treasury notice modifying or revoking Revenue Ruling
55-747), or the insurer's current published premium rate for annually renewable
term insurance for standard risks. The Trustees shall pay such required
contribution to the Corporation prior to the premium due date. If the Trustees
fail to make such timely payment, the Corporation, in its sole and absolute
discretion, may elect to make the Trustees' portion of the premium payment,
which payment shall be recovered by the Corporation as provided herein.
2
<PAGE>
2. On or before the due date of each premium payable on the Policy, or
within the grace period provided therein, the Corporation shall pay the full
amount of the premium to the Insurer, and shall, upon request, promptly furnish
Cohen and/or the Trustees evidence of timely payment of such premium. The
Corporation annually shall furnish Cohen with a statement of the amount of
income reportable by him for Federal and State income tax purposes, if any, as a
result of the Corporation's payment of the premiums by the Corporation in that
year as hereinabove provided.
ARTICLE IV
ELECTION OF DIVIDEND OPTION
The Trustees, as the Owners of the Policy, may elect, in their sole and
absolute discretion, to have all dividends declared by the Insurer on the Policy
applied to:
A. reduce the premium payable on the Policy; or
B. purchase paid-up additional insurance on the life of Cohen.
ARTICLE V
COLLECTION AND PAYMENT OF DEATH BENEFIT
1. Within thirty (30) days after the death of Cohen, the Corporation and
the Trustees shall apply to the Insurer for the death benefit and take all
action necessary to obtain such payment. The proceeds shall be divided into two
parts. The First Part shall be an amount equal to the total amount of the
premiums which the Corporation, its successors and assigns, have paid with
respect to the Policy reduced by an outstanding indebtedness which was incurred
by the Corporation, its successors and assigns, and which is secured by the
Policy, including any interest due on such indebtedness. The Second Part, if
any, shall be the balance of the proceeds.
3
<PAGE>
(a) The First Part shall be paid to the Corporation, its successors or
assigns. The parties hereby confirm that in no event shall the amount payable to
the Corporation exceed the Policy proceeds payable as a result of the maturity
of the Policy as a death claim.
(b) The Second Part shall be paid to the beneficiary designated by the
Trustees, or their successors. No portion of the proceeds shall be paid to the
beneficiary designated by the Trustees until the First Part of the proceeds has
been paid fully to the Corporation.
2. The Insurer may rely upon a sworn statement in form satisfactory to the
Insurer furnished by the Corporation, its successors or assigns, as to the
amount of the First Part, and any payment made on account of such statement
shall discharge the Insurer accordingly.
ARTICLE VI
COLLATERAL ASSIGNMENT
1. To secure repayment to the Corporation of the amount of the premiums on
the Policy paid by it, upon maturity of the policy as provided in the preceding
Article V of this Agreement or upon termination of this Agreement as provided in
the succeeding Article VII of this Agreement, the Trustees have assigned,
contemporaneously herewith, the Policy to the Corporation as collateral, under
the form used by the Insurer for such assignments. The parties hereby confirm
that the Policy shall be subject to the terms and conditions of the collateral
assignment filed with the Insurer relating to the Policy. The collateral
assignment of the Policy to the Corporation hereunder shall not be terminated,
altered or amended by the Trustees, without the written consent of the
Corporation.
4
<PAGE>
2. Except as otherwise provided herein, the Trustees shall not sell,
assign, transfer, borrow against, surrender or cancel the Policy nor change the
beneficiary designation provisions thereof, without the written consent of the
Corporation.
ARTICLE VII
TERMINATION OF AGREEMENT AND OPTION ON TERMINATION
1. This Agreement shall terminate upon the occurrence of any one of the
following events:
(a) The insolvency or dissolution of the Corporation, provided, however,
that under no circumstances shall the creditors of the Corporation have any
claim to the Policy or proceeds thereunder. For the purposes of this Agreement,
the term "insolvency" shall mean (i) the filing of a voluntary petition in
bankruptcy or for an arrangement, reorganization or other relief from creditors
under the Federal Bankruptcy Code or any similar law, (ii) the appointment of a
receiver for a substantial part of the assets of the Corporation which
appointment has not been vacated within ninety (90) days, or (iii) the failure,
within ninety (90) days, to obtain dismissal of any involuntary petition in
bankruptcy or for reorganization filed against the Corporation.
(b) The termination of Cohen's employment by the Corporation for any reason
other than his death.
(c) The failure of the Trustees to make timely payment to the Corporation
of its portion of the premium, if any, due hereunder, unless the Corporation
elects to make payment on behalf of the Trustees, as hereinabove provided.
5
<PAGE>
(d) The death of Cohen, subject to the provisions of Article V which shall
continue in full force and effect following Cohen's death.
2. Upon termination of this Agreement, the obligation of the Corporation to
make payments on account of policy premiums and interest due on policy loans
shall cease.
3. For ninety (90) days after termination of this Agreement, the Trustees
shall have the option of obtaining the release of the collateral assignment of
the Policy to the Corporation. To obtain such release, the Trustees shall repay
to the Corporation an amount equal to (a) the lesser of (i) the total amount of
the premiums which the Corporation, its successors and assigns, have paid with
respect to the Policy, or (ii) the then cash surrender value of the Policy, as
defined in the Policy, plus any unearned premiums, reduced by (b) any
outstanding indebtedness which was incurred by the Corporation, its successors
and assigns, and secured by the Policy, including any interest due on such
indebtedness. Upon receipt of such amount, the Corporation shall release the
collateral assignment of the Policy, by the execution and delivery to the
Trustees of an appropriate instrument of release in form satisfactory to the
Insurer and Trustees.
4. If the Trustees fail to exercise the option provided for in the
preceding paragraph 3 of this Article VII, within ninety (90) days after the
date of termination of the Agreement, then, the Corporation may enforce its
right to be repaid the total amount of the premiums on the Policy paid by the
Corporation, its successors and assigns (which amount shall be reduced by any
outstanding indebtedness, which was incurred by the Corporation, its successors
and assigns, and secured by the Policy, included any interest due on such
indebtedness) from the cash surrender value of the Policy under the collateral
assignment of the
6
<PAGE>
Policy; provided that in the event the cash surrender value of the Policy
exceeds the amount due the Corporation, such excess shall be paid to the
Trustees.
ARTICLE VIII
MISCELLANEOUS PROVISION
1. This Agreement is governed by the laws of the State of New York.
2. The parties to this Agreement agree that this Agreement is among the
Corporation, Cohen and the Trustees to the exclusion of all other persons or
entities herein mentioned. The filing of copies of this Agreement with the
Insurer in no way operates to make the Insurer a party to this Agreement, or any
modification or amendment hereof. No provision of this Agreement nor any
modification hereof, shall in any way be construed as enlarging, changing,
varying, or in any other way affecting the obligations of the Insurer as
expressly provided in the Policy, except insofar as the provisions are made a
part of the Policy by the collateral assignment executed by the Trustees and
filed with the Insurer in connection herewith. The Insurer shall be fully
discharged from its obligations under the Policy by payment of the Policy death
benefit to he beneficiary named in the Policy, subject to the terms and
conditions of the Policy.
3. The parties to this Agreement agree to execute such documents as are
necessary to carry out this Agreement.
4. This Agreement may not be amended or revoked, except by an instrument in
writing signed by the parties hereto or their respective successors assigns,
before a Notary and mutually acknowledge expressly modifying or revoking the
provisions hereof.
7
<PAGE>
5. The article headings and numbers and the paragraph numbers are included
herein for convenience only and in no way are to be considered to be a part of
this Agreement.
6. In the event that any provisions of this Agreement shall be held
illegal, unenforceable or in conflict with the laws of New York or the Untied
States, such provisions shall be deemed separable from the other provisions of
this Agreement and all the other provisions shall continue in full force and
effect.
7. This Agreement and all obligations and covenants hereunder shall bind
the parties hereto, their successors and assigns.
8. Any waiver by a party of any of the provisions of this Agreement or any
right or rights hereunder, shall not be deemed to be a continuing waiver and
shall not prevent or estop such parties from thereafter enforcing such
provisions or rights as to the future, and the failure of any party to insist in
one or more instances upon the strict performance of any one or more of the
terms of the provisions of this Agreement by the other parties shall not be
construed as a waiver or relinquishment of any such terms or provisions, but the
same shall continue in full force and effect.
9. Any notices, consent or demand required or permitted under this
Agreement shall be in writing and shall be signed by the party giving or making
the same. If such notice, consent or demand is mailed to a party hereto, it
shall be sent by United States Certified Mail, postage prepaid, addressed to
such party's last known address as shown on the records of the Corporation. The
date of such mailing shall be deemed the date of notice, consent or demand.
8
<PAGE>
10. This Agreement may be executed in three counterparts which together
shall constitute one Agreement with the same effects as if the parties executing
the counterparts had all executed this Agreement as of the day and year first
above written.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
ANDOVER TOGS, INC.
By:/s/ Alan Kanis
----------------------------------
ATTESTED:
/s/ Donald D. Shack
- ---------------------------
SECRETARY
/s/ William L. Cohen
-------------------------------------
WILLIAM L. COHEN
WILLIAM L. COHEN IRREVOCABLE
LIFE INSURANCE TRUST AGREEMENT
By:/s/ Peter A. Cohen
-------------------------------------
PETER A. COHEN, TRUSTEE
By:/s/ Stanley I. Schachter
-------------------------------------
STANLEY I. SCHACHTER, TRUSTEE
9
<PAGE>
STATE OF NEW YORK )
): ss.:
COUNTY OF NEW YORK )
On this 8th day of September 1994, before me personally came Alan Kanis to
me known, who, being duly sworn, did depose and say that he resides at
One Penn Plaza NY, that he is the CFO of Andover Togs, Inc., the corporation
described in and which executed the foregoing instrument; that he knows the
seal for said Corporation, that the seal affixed to said instrument is such
corporate seal, that it was so affixed by order of the Board of Directors of
said corporation, and that he signed his name thereto by like order.
/s/ Susan Rosenman
-------------------------------------
Notary Public
STATE OF NEW YORK )
): ss.:
COUNTY OF NEW YORK )
On this 1st day of September, 1994, before me personally came William L.
Cohen, to me known and known to me to be the individual described in and who
executed the foregoing instrument and duly acknowledged to me that he executed
the same.
/s/ Susan J. Henry
-------------------------------------
Notary Public
STATE OF NEW YORK )
): ss.:
COUNTY OF NEW YORK )
On this 1st day of September, 1994, before me personally came Peter A.
Cohen, to me known and known to me to be the individual described in and who
executed the foregoing instrument and duly acknowledged to me that he executed
the same.
/s/ Susan J. Henry
-------------------------------------
Notary Public
10
<PAGE>
STATE OF NEW YORK )
): ss.:
COUNTY OF NEW YORK )
On this 24th day of August, 1994, before me personally came Stanley I.
Schachter, to me known and known to me to be the individual described in and who
executed the foregoing instrument and duly acknowledged to me that he executed
the same.
/s/ Ralph A. Matalon
-------------------------------------
Notary Public
11
<PAGE>
EXHIBIT A
The following insurance policy is subject to the annexed Agreement:
Equitable Life Assurance Society Policy No. 94031226
ANDOVER TOGS, INC.
By:/s/ Alan Kanis
-------------------------------------
ATTESTED:
/s/ Donald D. Shack
- ----------------------------------
/s/ William L. Cohen
-------------------------------------
WILLIAM L. COHEN
WILLIAM L. COHEN IRREVOCABLE
LIFE INSURANCE TRUST AGREEMENT
By:/s/ Peter A. Cohen
-------------------------------------
PETER A. COHEN, TRUSTEE
By:/s/ Stanley I. Schachter
-------------------------------------
STANLEY I. SCHACHTER, TRUSTEE
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1994
<PERIOD-START> DEC-1-1994
<PERIOD-END> FEB-28-1995
<CASH> 626,000
<SECURITIES> 0
<RECEIVABLES> 11,999,000
<ALLOWANCES> 43,000
<INVENTORY> 18,299,000
<CURRENT-ASSETS> 31,722,000
<PP&E> 19,746,000
<DEPRECIATION> 11,319,000
<TOTAL-ASSETS> 41,279,000
<CURRENT-LIABILITIES> 16,415,000
<BONDS> 4,935,000
<COMMON> 464,000
0
0
<OTHER-SE> 11,599,000
<TOTAL-LIABILITY-AND-EQUITY> 18,863,000
<SALES> 15,016,000
<TOTAL-REVENUES> 15,016,000
<CGS> 12,278,000
<TOTAL-COSTS> 12,278,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 249,000
<INCOME-PRETAX> (540,000)
<INCOME-TAX> (173,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (367,000)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
<PAGE>
