UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[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 1-9635
BISCAYNE APPAREL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0200397
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1373 Broad Street, Clifton, New Jersey 07013
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including Area Code)
(201) 473-3240
Securities registered pursuant to Section 12(b) of the Act:
[CAPTION]
<TABLE>
<S> <C>
Title of each Class Name of each Exchange on which registered
Common Stock American Stock Exchange
$0.01 par value per
share
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) 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 10-K
or any amendment to this Form 10-K. [ ]
The number of shares outstanding of the registrant's common
stock, as of February 29, 1996, was as follows:
Common Stock, par value $.01 10,741,368
(Title of each class) (Number of shares)
The aggregate market value of common stock held by non-
affiliates of the registrant at February 29, 1996 was $5,360,683,
based on a $0.75 average of the high and low sales prices for the
common stock on the American Stock Exchange on such date. For
purposes of this computation, all executive officers, directors and
beneficial owners of 5% or more of the registrant's common stock
have been deemed to be affiliates. Such determination should not
be deemed to be an admission that such persons are, in fact,
affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III (Items 10, 11, 12
and 13) is incorporated by reference from the Company's
definitive proxy statement (to be filed pursuant to
Regulation 14A).
PART I
ITEM 1. BUSINESS
GENERAL
Biscayne Apparel, Inc. (the "Company" or "BAI") is an apparel
manufacturer dedicated to designing, manufacturing and marketing
high quality products on a worldwide basis. Biscayne Apparel
International, Inc. ("BAII") and M&L International, Inc. ("M&L")
are wholly-owned subsidiaries of the Company. BAII operates
through two divisions, Andy Johns Fashions International ("Andy
Johns") and Varon, and its wholly-owned subsidiaries, Mackintosh of
New England Co. ("Mackintosh"), Mackintosh (UK) Limited and Amy
Industries De Honduras, S.A. de C.V., which was organized in 1995.
M&L's wholly-owned subsidiaries are Unidex Garments (Philippines),
Inc. ("Unidex"), Watersports Garment Manufacturing, Inc.
("Watersports"), Teri Outerwear Manufacturing, Inc. ("Teri"), GES
Sportswear Manufacturing Corp. ("GES") and M&L International (H.K.)
Limited. As of March 1, 1996, Unidex, Watersports, Teri and GES
ceased operations due to operating losses caused by labor cost
increases and production inefficiencies.
Andy Johns is a designer and distributor of women's and
children's outerwear; Varon is a designer and manufacturer of
girl's and boy's underwear and girls' daywear; Mackintosh is a
designer and manufacturer of women's wool coats and active
outerwear, and M&L is a designer, manufacturer and distributor of
infants', toddlers' and children's outerwear, sportswear, and
swimwear.
Unless the context indicates otherwise, the "Company" includes
Biscayne Apparel, Inc., its subsidiaries and their respective
divisions. All information relates to continuing operations of the
Company.
The Company operates in a single industry segment: women's
and children's apparel. For the year ended December 31, 1995,
Target, a division of Dayton Hudson Corporation ("Target")
accounted for approximately 11% of total sales. Approximately 34%
and 21% of the Company's total sales for the years ended December
31, 1994 and 1993, respectively, were derived from two major
customers. These customers, Wal-Mart Stores, Inc. ("Wal-Mart") and
Target, represented 19% and 15% of total sales in 1994 and 10% and
11% of total sales in 1993, respectively.
Products and Customers: Andy Johns', Mackintosh's and M&L's
principal products and customers are:
o WOMEN'S AND CHILDREN'S OUTERWEAR: Andy Johns, a designer
and distributor of women's and children's outerwear, was
founded in 1975. Andy Johns provides functional and
affordable women's and children's outerwear. To that
end, it provides a line known as "active outerwear",
which caters to the active woman. These products are
made for daily use, with several styles doubling as
exercise gear.
Andy Johns produces a broad product line, appealing to a
customer base of all age groups. Andy Johns is less
driven by near-term styles and fads than its competitors,
preferring to market outerwear that is contemporary in
design and responsive to customer preferences, yet has a
consistency to its appeal.
Also, unlike many others in the outerwear industry that
market almost exclusively fall lines, Andy Johns also
produces a spring line, providing continuing visibility,
which helps reduce the seasonality of its business.
To expand its product lines, Andy Johns Kids was begun in
mid-1987 and sells outerwear targeted for children in the
2 to 14 age range. In 1995 Andy Johns introduced its Lee
Lipton brand of outerwear, which initially had been
offered on an exclusive basis to one customer. In 1996
Biscayne will also market its outerwear under the well-
known FoxRunR label, which will reflect contemporary
designs catering to the moderate-to-better retail store
customer. Andy Johns and Andy Johns Kids share showroom
space in New York. Lee Lipton and FoxRun share showroom
space with Mackintosh in New York.
Andy Johns imports the majority of its inventory,
primarily from Asian manufacturers. Although not
foreseen, should import quotas be substantially
tightened, Andy Johns may need to import products from
alternate overseas sources or to engage in increased
domestic production, which could increase costs.
In 1991, the Company established Mackintosh to acquire
the operations, through an asset purchase, of New England
Mackintosh Co., Inc. ("Old Mackintosh"). Old Mackintosh
was a well-known domestic manufacturer of fine women's
wool coats. Mackintosh markets spring and fall lines.
The Company also established Mackintosh (UK) Limited to
distribute Mackintosh products into the European markets,
primarily the United Kingdom. Such sales were not
significant.
During 1994 Mackintosh introduced a new imported active
outerwear line. Pricing pressure from imported wool
products has prompted Mackintosh to seek offshore
production for a portion of its wool line. Mackintosh
primarily markets its products through a New York
showroom.
In November 1994, the Company acquired M&L International,
Inc. M&L, which was founded in 1919, is one of the
largest U.S. based manufacturers of children's outerwear.
M&L markets its outerwear products under the Weather
TamerR brand name, which it owns, and the OshKosh B'GoshR
and Bon JourR brand names, which it licenses. M&L also
produces children's sportswear and swimwear products,
which are marketed under its EclipseR brand name. M&L
markets spring and fall lines. M&L has showrooms in
Chicago, New York, Atlanta and Los Angeles and has
manufacturing and sourcing operations in Hong Kong,
Bangladesh, and Sri Lanka.
M&L's extensive overseas sourcing and quality assurance
operations, coupled with a proven network of
manufacturers, allow it to offer a fashionable quality
product at competitive prices to its customers, while
sustaining attractive profit margins. Although not
foreseen, should import quotas be substantially
tightened, M&L may need to import products from
alternative overseas sources or to engage in increased
domestic production, which could increase costs.
For the three years ended December 31, 1995, 1994 and
1993, Andy Johns', Mackintosh's and M&L's combined net
sales represented 76%, 72%, and 71% respectively, of the
Company's total net sales. M&L's net sales are included
from November 30, 1994, the date of acquisition.
o CHILDREN'S UNDERWEAR AND DAYWEAR: Varon has been
operating for approximately 70 years as a manufacturer of
girls' underwear and daywear and sells primarily to chain
stores, mass merchandisers and discounters.
In 1993, as an addition to its thermal underwear line,
Varon introduced an interlock cotton long underwear line.
The majority of Varon's underwear and interlock
underwear line is 100% cotton, while its thermal
underwear line is 65% cotton/35% polyester. Varon also
manufactures 50/50 poly/cotton underwear for selected
accounts. Varon's underwear line has been expanded to
include girls' daywear sets and boys' underwear in
thermal, cotton interlock and jersey fabrics. Varon
markets its products through a New York showroom.
For the three years ended December 31, 1995, 1994 and
1993, Varon's net sales represented 24%, 28% and 29%,
respectively, of total net sales.
MARKETING AND DISTRIBUTION: The Company markets and sells the
majority of its products directly to retailers with a portion sold
through sales representatives to retail specialty stores.
Andy Johns' finished goods and Mackintosh's imported inventory
are warehoused in Kentucky. Mackintosh manufactures and warehouses
inventories in Massachusetts, Varon manufactures and warehouses its
goods in Georgia, and M&L warehouses its finished goods in
Washington.
SUPPLIERS: The Company purchases the raw materials required
in connection with its operations from a variety of sources. The
Company believes that it has satisfactory relationships with its
suppliers, most of which have been suppliers to Biscayne for many
years.
BACKLOG: The dollar amounts of backlog orders as of December
31, 1995 and 1994, were $17,712,000 and $17,030,000, respectively.
The dollar amounts of backlog orders as of March 15, 1996 and March
17, 1995, were $52,148,000 and $38,851,000, respectively.
COMPETITION
The women's and children's outerwear business is highly
competitive. The principal areas of competition in this industry
are product quality, style and price. Andy Johns and M&L's
products are primarily sold to department stores, specialty stores
and mass merchandisers. Market entry is difficult, although many
major garment manufacturers produce active outerwear. Historically,
however, the majority of these companies tend not to remain in this
market very long, principally due to slow turnover and seasonality.
Andy Johns and M&L allocate their resources to produce contemporary
and timely merchandise, rather than trying to become a fashion
leader, which could result in loss of sales.
Mackintosh's principal area of competition in the women's wool
business is also product quality, style, and price. Mackintosh's
products are sold to department and specialty stores. Entry into
the market is difficult since successful companies need long
established brand name recognition and, because of the limited
season, the business is capital intensive. Mackintosh's products
are primarily classic in style and are generally not subject to
trends.
The girls' and boys' underwear and girls' daywear apparel
markets are highly competitive. Varon competes primarily in what
is referred to as the "downstairs" portion of the market through
sales to mass merchandisers, chain stores and discounters. Quality
of product and style, packaging, timely delivery, and price are the
principal areas of competition in this industry. The Company
believes the quality of Varon's products equals or exceeds that of
the similar higher priced products of its competition. Varon's
concentration on new product development, quality and timely
delivery has resulted in a broadening of its customer base.
TRADEMARKS
The Company has registered the Andy JohnsR, KAOSR, KaoticR,
Weather TamerR and EclipseR trademarks with the United States
Patent and Trademark Office. In the opinion of management, the
Company's trademark position is protected in all its business
markets. Additionally, M&L markets its outerwear under the OshKosh
B'GoshR and Bon JourR brand names, which it licenses.
SEASONALITY
Sales of women's and children's outerwear are seasonal.
Historically, Andy Johns, Mackintosh, M&L and Varon have
significantly higher revenues in the third and fourth quarters than
in the first and second quarters. Therefore, the results of any
interim period are not necessarily indicative of the results for a
full year. Additionally, there is a risk inherently related to the
outerwear industry, resulting from dependence on consumer reactions
to weather patterns, which have recently had a material effect on
the Company's sales and profitability.
ENVIRONMENTAL REGULATION
The Company is subject to certain federal, state and local
environmental laws and regulations. Compliance with environmental
laws and regulations has not had a material effect on the Company's
capital expenditures, earnings or competitive position in the past
and is not expected to have a material effect on the Company's
future operations.
EMPLOYEES
As of December 31, 1995 and March 1, 1996, the Company
employed approximately 2,175 and 667 persons, respectively. None
of the Company's employees are represented by a labor union, except
the Philippines manufacturing subsidiaries owned by M&L (Unidex,
Watersports, Teri and GES), which are represented by seven labor
unions. As previously stated, the Philippines operations ceased as
of March 1, 1996. The Company considers its relations with
employees to be satisfactory.
ITEM 2. PROPERTIES
The following table describes, as of December 31, 1995, the
operating facilities owned or leased by the Company containing an
aggregate of approximately 671,200 square feet. Management
believes that all of the Company's facilities are adequate for
their respective purposes.
[CAPTION]
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Annual
Approximate Square Lease Expiration Principal
Location Feet Rental Date Use
Arlington, GA 100,000 (1) (1) Administrative offices
and manufacturing
facility
for Varon
Atlanta, GA 500 $ 13,000 December, Showroom for M&L
1997
Calamba 5,400 $ 19,000 September Administrative
Laguna, 2004 office and
Philippines manufacturing facility
for GES
Chicago, IL 24,300 $234,000 March, Administrative office
1997 for M&L
Clifton, NJ 8,600 $123,000 July, Administrative offices
1998
Colquitt, GA 15,000 $ 30,000 December, Manufacturing facility
1996 for Varon
Hong Kong 8,000 $141,000 February, Administrative office
1998 for M&L
Lipa City, 21,500 $ 31,000 September, Administrative office
Batangas, 2004 and manufacturing
Phillipines facility for
Watersports
Los Angeles, 500 $ 12,000 September, Showroom for M&L
CA 1996
Metro Manila, 153,100 $277,000 December Administrative office
Philippines 1998 and manufacturing
facility for Unidex
New Bedford, 48,700 $ 92,000 December Manufacturing facility
1996 for Mackintosh
New York, NY 33,900 $600,000 September Showrooms
1996, May
1998,
December
2003 and
July 2005
Newton, GA 30,000 $ 36,000 July 1997 Warehousing facilities
for Varon
Rajagiriya, 5,500 $ 2,600 June 1997 Administrative office
Sri Lanka for M&L
San Pedro 25,000 $141,000 July 2000 Manufacturing facility
Sula, Honduras for Varon
Seattle, WA 191,200 $603,000 March Warehousing facilities
2002 for M&L
</TABLE>
(1) Owned by the Company; subject to mortgages.
The Company owns substantially all of its machines,
equipment and office fixtures, which are well maintained and
satisfactory for the purposes intended.
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time involved in routine
litigation. No litigation in which the Company is presently
involved is material to its financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of the fiscal year covered by this
report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
The Company's Common stock is traded on the American Stock
Exchange. The following table sets forth the range of high and
low sales prices of the Common stock, as reported by the American
Stock Exchange, for each quarterly period during the past two
fiscal years:
MARKET PRICES
[CAPTION]
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High Low
1995
First Quarter $2 1/2 $1 3/4
Second Quarter 2 1/8 1 1/2
Third Quarter 1 13/16 1 3/16
Fourth Quarter 1 3/8 3/4
1994
First Quarter $3 11/16 $2 1/4
Second Quarter 3 1/4 2 1/8
Third Quarter 2 7/8 2 3/8
Fourth Quarter 2 15/16 2 1/4
</TABLE>
APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
The Company had 1,355 holders of record of Common stock as
of February 29, 1996.
DIVIDENDS
The Company did not pay cash dividends on its common equity
during the fiscal years ended 1995, 1994 and 1993. The Company
is restricted from making any cash dividend payments under its
credit agreements with various commercial banks.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data presented below of the Company
and its subsidiaries, as of and for each of the five years in the
period ended December 31, 1995, are derived from the audited
Consolidated Financial Statements of the Company and should be
read in conjunction with such Consolidated Financial Statements
and related notes, thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
included elsewhere in this report.
BISCAYNE APPAREL, INC.
Selected Financial Data
(In Thousands, Except Per Share Data)
At and For the Years Ended December 31,
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
Financial
Data
Net sales.... $100,294 $72,350 $65,258 $57,906 $53,467
Operating income
(loss)........ (5,261) 4,960 4,053 1,737 (456)
Earnings from
continuing
operations, less
applicable income
taxes......... (6,127) 2,048 3,687 (34) (672)
Cumulative effect
of change in
accounting for
income taxes...... - - 208 - -
Extraordinary
items......... - - - 104 24
Net earnings
(loss)..... (6,127) 2,048 3,895 70 (648)
Working
capital.. $ 19,559 $23,167 $16,148 $12,045 $11,630
Total assets.. 61,742 60,578 34,791 31,015 34,003
Long-term
debt........ 12,694 7,944 6,444 6,444 6,467
Stockholders'
equity........ $ 19,835 25,881 19,560 15,597 15,484
Earnings (loss)
per common share: (1)
Earnings (loss)
from continuing
operations.... $ (0.57) $ 0.21 $ 0.41 $ - $(0.07)
Cumulative effect
of change in
accounting for
income taxes.. - - 0.02 - -
Extraordinary
items...... - - - 0.01 -
Net earnings
(loss) per
common share.. $ (0.57) $ 0.21 $ 0.43 $ 0.01 $(0.07)
Other Per Share Data:
Book value.... $ 1.85 $ 2.41 $ 2.18 $ 1.79 $ 1.79
Weighted average
number of shares
and share
equivalents
outstanding... 10,734 9,652 9,049 8,724 8,687
</TABLE>
(1) Earnings per common share are based on the weighted average
number of shares and share equivalents outstanding.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
OPERATIONS
Net sales were $100,294,000, $72,350,000 and $65,258,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
The 1995 increase of $27,944,000 includes a $44,739,000 increase
in M&L's sales, a $3,886,000 increase in Varon's sales, offset by
Andy Johns realizing a decrease of $17,634,000 in sales and
Mackintosh realizing a decrease of $3,047,000 in sales. M&L was
acquired on November 30, 1994.
A significant portion of the decrease in Andy Johns' sales
in 1995 was the result of Wal-Mart, its largest 1994 private
label customer, which represented $12,700,000 of Andy Johns' 1994
sales, refraining from ordering any goods in 1995. Sales to this
customer, along with other Andy Johns and Mackintosh customers,
reflected the significant impact that the warm 1994-1995 winter
had on 1995 outerwear coat sales. This factor resulted in high
levels of inventory carryover from 1994 to 1995. The problem was
exacerbated as stagnant apparel sales and warm weather continued
into the 1995 season and prompted retailers to reduce their Fall
1995 programs. The Company increased its product development and
sales staff to enhance sales. The initial 1996 results of these
investments are reflected in the current backlog discussed below.
The 1994 11% sales increase was the result of the addition
of M&L in November 1994 plus sales increases in all subsidiaries.
In particular, Mackintosh experienced a 23% sales increase and
Varon an 11% sales increase, primarily due to the introduction of
new product lines. Andy Johns sales increased by 2% in 1994.
Cost of goods sold was $80,121,000 (80% of net sales),
$51,697,000 (71% of net sales) and $46,637,000 (71% of net sales)
for the years ended December 31, 1995, 1994 and 1993,
respectively. Cost of goods sold increased in 1995 due to Andy
Johns and Mackintosh selling off unsold inventory at low margins
due to the effects of weather and the related softness of retail
sales; Varon sustaining higher raw material costs, primarily
cotton and labor costs; and M&L realized operating losses from
its Philippines subsidiaries due to labor cost increases and
production inefficiencies. These factors resulted in the Company
expensing inventory markdowns of $4,374,000, during the 1995
fourth quarter, compared to $179,000 during the 1994 fourth
quarter.
M&L's Philippines subsidiaries ceased operations on March 1,
1996, and Varon closed two of its domestic manufacturing
facilities in late 1995. M&L will transfer the Philippines
production to China and Indonesia, while Varon will transfer the
domestic production to its new Honduran facility. These actions,
the addition of new product development and sales personnel, and
the positive effect of the severe winter experienced from late
December 1995 to March 1996, should improve the Company's
prospects for better net sales and gross margins in 1996.
Cost of goods sold, as a percentage of net sales, remained
relatively constant in 1994 compared to 1993, due to controlled
imported and domestic production costs.
Selling, general and administrative ("S,G&A") expenses were
$25,434,000 (25% of net sales), $15,693,000 (22% of net sales)
and $14,568,000 (22% of net sales), for the years ended December
31, 1995, 1994 and 1993, respectively. S,G&A expenses increased
to 25% of net sales due to lower sales volume at Andy Johns and
Mackintosh. However, the 1995 S,G&A expenses actually decreased
by $2,002,000 from the 1994 pro-forma S,G&A expenses, which
assumed M&L was acquired as of January 1, 1994. The Company has
taken strategic actions to further reduce S,G&A expenses
including the reduction of personnel and operating expenses
throughout the Company; consolidation of administration functions
and operating divisions and consolidation of domestic outerwear
warehousing and distribution.
The relatively constant percentage of S,G&A as a percentage
of sales (22%) for 1994 versus 1993 is a result of reductions in
overall S,G&A costs, offset by the inclusion of M&L from November
1994.
The apparel industry historically has been subject to
substantial cyclical variation, with purchases of apparel and
related goods tending to decline during recessionary periods when
disposable income is low. This could have a material adverse
effect on the Company's business. The Company believes that the
weakness of retail sales of outerwear in 1995 adversely affected
its operating results, and believes that its operating results
will continue to be adversely affected as long as this weakness
continues. In addition, various retailers, including some of
Biscayne's customers, have experienced financial difficulties
during recent years which have increased the risk of extending
credit to such retailers.
OTHER
Interest and other expenses were $3,805,000, $1,673,000 and
$1,352,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. Interest expense was $3,715,000, $1,662,000 and
$1,349,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
Interest expense increased in 1995 and 1994 due to higher
interest rates and increased borrowings from higher inventory
levels, 1995 losses and increased M&L acquisition debt. Interest
expense increased in 1994 versus 1993 due to higher interest
rates, increased bank borrowings and increased debt from the M&L
acquisition. Other expenses were $90,000, $11,000 and $3,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
The 1995 and 1994 other expense amounts relate to losses on
disposal of assets.
Interest and other income was $109,000, $115,000, and
$106,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. The increase in interest and other income in 1994
versus 1993 is primarily due to the addition of M&L.
In March 1994, the Company paid $1,500,000 for a 20%
interest in Hartwell Sports, Inc. ("Hartwell"), a manufacturer of
casual shirts and jackets. The investment resulted in the
Company recognizing $122,000 and $5,000 of equity in the income
from Hartwell in 1995 and 1994, respectively. On March 27, 1996,
the Company sold its 20% interest in Hartwell for $1,750,000.
Proceeds will be used to reduce notes payable to banks.
On November 30, 1994, the Company acquired M&L
International, Inc. ("M&L"). The Company paid $1,723,500 in
cash, retired $2,064,000 of M&L's existing debt, assumed
$1,500,000 of Junior Subordinated Sub Notes, issued $776,500 of
Bridge Notes and issued 1,666,997 shares of its common stock in
connection with the acquisition. The Acquisition has been
accounted for under the purchase method of accounting, therefore,
M&L's operating results are included with the Company's from
November 30, 1994.
In order to finance the acquisition of M&L, the Company
borrowed $4,776,000 in accordance with a 12% Senior Subordinated
Bridge Note Purchase Agreement, (the "Bridge Notes"). In
connection with the Bridge Note Purchase Agreement, the Company
paid an origination fee to the Bridge Note holders in the amount
of $191,000 (4% of the principal amount of the Bridge Notes).
The Bridge Notes were paid off on March 16, 1995.
In connection with the acquisition of M&L, the Company
assumed $1,500,000 aggregate principal amount of M&L's junior
subordinated indebtedness (the "Junior Sub Notes") payable to two
senior executives of M&L. The Junior Sub Notes required
quarterly interest payments at a rate of 13% with principal due
on December 15, 1999. The Junior Sub Notes were paid off on
March 16, 1995.
In March 1993, the Company sold its 18.5% limited
partnership interest in SP Industries Limited Partnership to the
partnership and recognized a gain of $3,100,000.
INCOME TAXES
Effective January 1, 1993, the Company adopted the
provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes". The cumulative effect of
this change in accounting principle amounted to $208,000, which
was recorded in 1993.
EFFECT OF INFLATION AND SEASONALITY
The Company believes that inflation will not significantly
affect its profit margins or have a material effect on the prices
of other goods and services used in its business operations.
Further, in connection with recent increases in wool and cotton
raw material costs, the Company will seek additional offshore
production opportunities.
Sales of women's and children's outerwear are seasonal.
Historically, Andy Johns, Mackintosh, M&L and Varon have
significantly higher revenues in the third and fourth quarters
than in the first and second quarters. Therefore, the results of
any interim period are not necessarily indicative of the results
which might be expected during a full year. Additionally, there
is a risk inherently related to the outerwear industry, resulting
from dependence on consumer reactions to weather patterns, which
have recently had a material effect on the Company's sales and
profitability.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $312,000 and $4,178,000 at
December 31, 1995 and 1994, respectively. At December 31, 1995,
the Company's working capital was $19,559,000, representing a
current ratio of 1.68 to 1.00. This compares to working capital
of $23,167,000 and a current ratio of 1.89 to 1.00 at December
31, 1994. The change in cash, working capital and the current
ratio was primarily a result of the losses sustained in 1995.
As presented in the Consolidated Statement of Cash Flows for
the year ended December 31, 1995, the decrease in cash and cash
equivalents in 1995, versus 1994, was due to the losses sustained
in 1995, increases in inventories, decreases in accounts payable
and accrued liabilities and capital expenditures, offset by
increased borrowings under notes payable to banks.
At December 31, 1994, the Company had a $32,000,000
uncommitted credit agreement (the "BAI Agreement") with several
commercial banks. Under the BAI Agreement, the aggregate amount of
all loans, advances and acceptances outstanding at any time could
not exceed $22,600,000, with the remainder available to fund
letters of credit. The BAI Agreement was retired on March 16, 1995
with proceeds from the new Revolver (see below).
In connection with the acquisition of M&L, M&L entered into a
three year committed revolving credit agreement with a bank ("The
M&L Agreement"), which the Company guaranteed. The M&L Agreement
provided for an aggregate credit facility of $23,000,000, which
included international letters of credit, bankers' acceptances,
steamship guarantees and standby letters of credit and limited
revolving loans to $3,500,000. The M&L Agreement was retired on
March 16, 1995 with proceeds from the new Revolver (see below).
The Company has entered into an agreement with several banks
(the "Loan Agreement") for a $56,000,000 two year committed
revolving credit facility (the "Revolver") and a $7,500,000 four
year term loan (the "Term Loan"), which replaced the existing 1994
BAI Agreement and the M&L Agreement, and was used to repay the
Bridge Notes, Junior Subordinated Notes, and other related costs
associated with the M&L acquisition. The Revolver is available for
loans, letters of credit and letters of indemnity.
In March 1996, the Loan Agreement was amended to reduce the
Revolver to $50,000,000; increase the interest rate under Revolver
borrowings to prime plus 1.0%, or prime plus 1.25% during agreed
upon collateral overadvance periods; increase the interest rate
under the Term Loan to prime plus 2.00% or Libor plus 4.50% on
outstanding borrowings; require additional fees of $200,000 and
provide for the issuance of warrants to the banks to purchase
400,000 shares of the Company's common stock for an exercise price
of $1.00 per share. The warrants are exercisable at any time on or
after March 31, 1998, except that the warrants will be canceled, if
prior to March 31, 1998, the Company repays the Term Loan through
the sale of assets or operations, or if the Term Loan is reduced to
$1,250,000, or lower, through operating cashflows or the infusion
of additional equity or subordinated debt.
The Revolver is collateralized by all of the Company's assets,
excluding Mackintosh's domestic inventory and Varon's domestic raw
materials and work-in-process inventories, and including all
trademarks. Additionally, the Revolver contains various financial
covenants, reporting requirements and limits capital expenditures,
cash dividends, other indebtedness, affiliate transactions, mergers
and acquisitions and other items.
Capital expenditures for the year ended December 31, 1995,
decreased to $941,000 from $1,090,000 in 1994 primarily due to 1994
purchases of machinery relating to the expansion of Varon's
Arlington, Georgia facility and increased 1994 expenditures
relating to the new Andy Johns and Mackintosh New York showrooms.
On March 27, 1996, the Company sold its 20% interest in
Hartwell for $1,750,000. Proceeds will be used to reduce notes
payable to banks.
The Company expects that cash on hand, investments in short-
term securities, cash from operations and borrowings under its new
revolving credit agreement will be sufficient to fund current
operations and to enable the Company to meet its obligations as
they become due.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages F-1 through F-24 of this Form 10-K, incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The Company has not had any disagreements on accounting or
financial disclosure with its accountants required to be reported
hereunder.
PART III
ITEMS 10, 11, 12 AND 13.
The information called for by Items 10, 11, 12 and 13 is
incorporated by reference to the Company's definitive proxy
statement which involves the election of directors and will be
filed with the Commission within 120 days after the end of the
fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements:
An index to the financial statements appears
on Page F1, which index is incorporated herein
by reference.
2. Financial Statement Schedules:
An index to the financial statement schedules
appears on Page F1, which index is
incorporated herein by reference.
3. Exhibits:
(An asterisk to the left of an exhibit number
denotes a management contract or compensatory
arrangement required to be filed as an exhibit to
this Annual Report on Form 10-K.)
2.1 Subscription and Stock Purchase Agreement
between HSD Acquisition Corporation and the
Registrant, dated as of February 28, 1994,
incorporated by reference to Exhibit 2.1 filed
with the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994.
2.2 Shareholders' Agreement and Plan of Merger,
dated as of March 4, 1994, by and among
Trivest Institutional Fund, Ltd., Trivest
Investors Fund, Ltd., Blue Sky Partners, the
Registrant and HSD Acquisition Corporation,
incorporated by reference to Exhibit 2.2 filed
with the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994.
2.3 Agreement and Plan of Merger, dated as of
November 1, 1994, by and among the Registrant
and M&L Acquisition Corp. and New M&L Holding,
Inc., incorporated by reference to Exhibit 2.1
filed with the Registrant's Quarterly Report
on Form 8-K, filed December 14, 1994.
2.4 Company Shareholders Agreement, dated as of
November 1, 1994, by and among the Registrant
and M&L Acquisition Corp. and New M&L Holding,
Inc. and certain Company shareholders,
incorporated by reference to Exhibit 2.2 filed
with the Registrant's Quarterly Report on Form
8-K, filed December 14, 1994.
2.5 Escrow Agreement, dated as of November 1,
1994, by and among Gordon and Einstein, Ltd.,
the Registrant and M&L Acquisition Corp., New
M&L Holding, Inc., Odyssey Partners, L.P.,
Merrill Lynch Capital Corporation, Gregg H.
Feinstein, Steven M. Friedman, Kurt C.
Gutfreund and Eugene S. Weiner, incorporated
by reference to Exhibit 2.3 filed with the
Registrant's Quarterly Report on Form 8-K,
filed December 14, 1994.
2.6 Registration Rights Agreement, dated as of
November 30, 1994, among the Registrant, the
Federal Deposit Insurance Corporation, as
Receiver for Goldome FSB, Odyssey Partners,
L.P., Merrill Lynch Capital Corporation, Gregg
H. Feinstein, Steven M. Friedman, Kurt C.
Gutfreund and Eugene S. Weiner, incorporated
by reference to Exhibit 2.4 filed with the
Registrant's Current Report on Form 8-K, filed
December 14, 1994.
2.7 Note Modification Agreement, dated as of
November 30, 1994, between the Registrant, M&L
International, Inc., and Kurt C. Gutfreund,
incorporated by reference to Exhibit 2.5 filed
with the Registrant's Current Report on Form
8-K, filed December 14, 1994.
2.8 Note Modification Agreement, dated as of
November 30, 1994, between the Registrant, M&L
International, Inc. and Eugene S. Weiner,
incorporated by reference to Exhibit 2.6 filed
with the Registrant's Current Report on Form
8-K, filed December 14, 1994.
2.9 Stock Purchase Agreement, dated September 13,
1994, between New M&L Holding, Inc. and the
Federal Deposit Insurance Corporation,
incorporated by reference to Exhibit 2.7 filed
with the Registrant's Current Report on Form
8-K, filed December 14, 1994.
3.1 Registrant's Amended and Restated Articles of
Incorporation, as amended, incorporated by
reference to Exhibit 3.1 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994.
3.2 Registrant's Bylaws, as amended, incorporated
by reference to Exhibit 3.2 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991.
4.1 Form of stock certificate evidencing ownership
of the Registrant's Common Stock, incorporated
by reference to Exhibit 4.1 filed with the
Registrant's Quarterly Report on Form 10-Q,
for the quarter ended September 30, 1994.
4.2 Indenture of the Registrant to First Union
National Bank of Florida as successor in
interest to Southeast Bank, N.A., dated as of
December 5, 1989, $9,014,700 Principal Amount
of 13% Subordinated Notes due December 15,
1999, filed with the Registrant's Registration
Statement on Form S-2 (No. 33-32161),
incorporated by reference to Exhibit 10.1
filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31,
1989.
*10.1 Amended and Restated Management Agreement,
dated as of November 30, 1994, by and between
the Registrant and Trivest, Inc., incorporated
by reference to Exhibit 10.1 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994.
10.2 Form of Amended and Restated Indemnification
Agreement entered into between the Registrant
and its directors and certain of its officers,
incorporated by reference to Exhibit 10.36
filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31,
1990.
*10.3 1994 Stock Option Plan of Registrant with form
of Stock Option Agreement, incorporated by
reference to Exhibit 10.3 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994.
*10.4 1987 Stock Option Plan for Biscayne Apparel,
Inc., incorporated by reference to Exhibit
10.3 filed with the Registrant's Registration
Statement on Form S-8 (No. 33-20871).
*10.5 Form of Stock Option Agreement entered into
between the Registrant and optionees,
incorporated by reference to Exhibit 10.4
filed with the Registrant's Registration
Statement on Form S-8 (No. 33-20871).
*10.6 Amended and Restated 1990 Stock Option Plan
for Biscayne Apparel, Inc., incorporated by
reference to Exhibit 10.1 filed with the
Registrant's Registration Statement on Form S-
8 (No. 33-41139).
*10.7 Form of Stock Option Agreement entered into
between the Registrant and optionees
incorporated by reference to Exhibit 10.2
filed with the Registrant's Registration
Statement on Form S-8 (No. 33-41139).
*10.8 Compensation Plan With Respect to Certain
Executive Officers, dated as of March 17,
1992, between the Registrant and certain of
its officers incorporated by reference to
Exhibit 10.11 filed with the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1992.
10.9 Domestic License Agreement by and between Bon
Jour Group, Ltd. and M & L International,
Inc., dated as of January 25, 1995,
incorporated by reference to Exhibit 10.4
filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31,
1994.
10.10 Agreement of Lease, dated July 16, 1990,
between Broad Park Associates and Biscayne
Apparel, Inc. (Andy Johns Fashions Division),
with term commencing February 15, 1993,
incorporated by reference to Exhibit 10.24
filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31,
1990.
10.11 First Amendment, dated August 21, 1990, to the
Sub-Lease Agreement between Broad Park
Associates and Biscayne Apparel, Inc. (Andy
Johns Fashions Division), incorporated by
reference to Exhibit 10.25 filed with
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990.
10.12 Second Amendment, dated May 25, 1993, to the
Sublease Agreement between Broad Park
Associates and Biscayne Apparel, Inc. (Andy
Johns Fashion Division), incorporated by
reference to Exhibit 10.19 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.
10.13 Lease Agreement, dated February 18, 1992, by
and between The Miller County Development
Authority and Biscayne Apparel, Inc. (Amy
Industries), incorporated by reference to
Exhibit 10.32 filed with the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1991.
10.14 Sublease Agreement, dated August 1, 1993,
between Ithaca Industries, Inc. and Biscayne
Apparel, Inc. (Varon Division), incorporated
by reference to Exhibit 10.21 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.
10.15 Lease Agreement, dated May 12, 1993, between
Dah Chong Hong Trading Corp. and Biscayne
Apparel, Inc. (Varon Division), incorporated
by reference to Exhibit 10.22 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.
10.16 Lease Modification Agreement, dated September
30, 1993, between Dah Chong Hong Trading Corp.
and Biscayne Apparel, Inc. (Varon Division),
incorporated by reference to Exhibit 10.23
filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31,
1993.
10.17 Indenture Agreement by and between Clark's
Cove Realty, Co. and Mackintosh of New England
Co., dated June 17, 1991, incorporated by
reference to Exhibit 10.35 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991.
10.18 Indenture Agreement, dated December 30, 1992,
between Clark's Cove Realty Co. and Mackintosh
of New England Co., incorporated by reference
to Exhibit 10.25 filed with the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1993.
10.19 Lease Agreement, dated February 18, 1993,
between The Arsenal Company and Biscayne
Apparel, Inc. (Andy Johns Fashion Division),
incorporated by reference to Exhibit 10.27
filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31,
1993.
10.20 Modification Agreement, dated June 23, 1993,
between the Arsenal Company and Biscayne
Apparel, Inc. (Andy Johns Fashion Division),
incorporated by reference to Exhibit 10.28
filed with the Registrant's Annual Report on
Form 10-K for the year ended December 31,
1993.
10.21 Lease Agreement between S.A.I. Realty Trust
and Mackintosh of New England Co., commencing
on August 1, 1992, incorporated by reference
to Exhibit 10.36 filed with the Registrant's
Annual Report on form 10-K for the year ended
December 31, 1992.
10.22 Unsecured Promissory Note from Quality Prints,
Inc. to E&B Acquisition, Inc., Elliot Estes
and Becky Estes, in the amount of $150,000,
dated November 24, 1994, incorporated by
reference to Exhibit 10.25 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994.
10.23 License Agreement between OshKosh B'Gosh, Inc.
and M&L International, Inc., dated September
16, 1994, incorporated by reference to Exhibit
10.30 filed with the Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1994.
*10.24 Employment Agreement between M&L
International, Inc. and Kurt C. Gutfreund,
dated as of November 30, 1994, incorporated by
reference to Exhibit 10.31 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994.
10.25 Credit Agreement, dated March 16, 1995, among
the Registrant, Biscayne Apparel
International, Inc., Mackintosh of New England
Co. and M&L International, Inc. and The Chase
Manhattan Bank (National Association) as
Agent, incorporated by reference to Exhibit
10.32 filed with the Registrant's Annual
Report on Form 10-K for the year ended
December 31, 1994.
10.26 First Amendment to Revolving Credit and Term
Loan Agreement, dated as of June 1, 1995,
among the Registrant, Biscayne Apparel
International, Inc., Mackintosh of New England
Co. and M&L International, Inc. and The Chase
Manhattan Bank (National Association) as
Agent. (1)
10.27 Second Amendment to Revolving Credit and Term
Loan Agreement, dated as of November 1, 1995,
among the Registrant, Biscayne Apparel
International, Inc., Mackintosh of New England
Co. and M&L International, Inc. and The Chase
Manhattan Bank (National Association) as
Agent. (1)
10.28 Amendment to Credit Agreement, dated as of
January 31, 1996, among the Registrant,
Biscayne Apparel International, Inc.,
Mackintosh of New England Co. and M&L
International, Inc. and The Chase Manhattan
Bank (National Association) as Agent. (1)
10.29 Fourth Amendment to Credit Agreement and
Waiver, dated as of February 14, 1996, among
the Registrant, Biscayne Apparel
International, Inc., Mackintosh of New England
Co. and M&L International, Inc. and The Chase
Manhattan Bank (National Association) as
Agent. (1)
10.30 Fifth Amendment to Credit Agreement, dated as
of March 5, 1996, among the Registrant,
Biscayne Apparel International, Inc.,
Mackintosh of New England Co. and M&L
International, Inc. and The Chase Manhattan
Bank (National Association) as Agent. (1)
10.31 Sublease Agreement, dated January 1, 1996,
between Richland Mills, Inc., as sublandlord
and Varon (a division of Biscayne Apparel
International, Inc.) as subtenant. (1)
10.32 Lease Agreement, dated June 10, 1995, between
Buena Vista Export Processing Zone (ZIP Buena
Vista, S.A.) and Amy Industries de Honduras,
S.A., de C.V. (1)
11 Statement re: Computation of Per Share
Earnings. (1)
21 Subsidiaries of the Registrant. (1)
24 Consent of Coopers and Lybrand. (1)
(1) Filed herewith
(b) No reports on Form 8-K were filed by the Registrant
during the last quarter of the period covered by this
report.
(c) Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned.
BISCAYNE APPAREL, INC.
Date: March 28, 1996 By: /s/ Peter Vandenberg, Jr.
Peter Vandenberg, Jr.
Vice President, Treasurer and
Chief Financial 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 dates
indicated.
Date: March 28, 1996 By: /s/ Earl W. Powell
Earl W. Powell
Chairman
Date: March 28, 1996 By: /s/ Peter Vandenberg, Jr.
Peter Vandenberg, Jr.
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: March 28, 1996 By: /s/ Phillip T. George, M.D.
Phillip T. George, M.D.
Vice Chairman
Date: March 28, 1996 By: /s/ John E. Pollack
John E. Pollack
President and Chief
Executive Officer
(Principal Executive Officer)
Date: March 28, 1996 By: /s/ Harold E. Berritt
Harold E. Berritt
Director
Date: March 28, 1996 By: /s/ Joseph B. Gildenhorn
Joseph B. Gildenhorn
Director
Date: March 28, 1996 By: /s/ Kurt C. Gutfreund
Kurt C. Gutfreund
Director
Date: March 28, 1996 By: /s/ John W. Partridge
John W. Partridge
Director
Date: March 28, 1996 By: /s/ James J. Pinto
James J. Pinto
Director
BISCAYNE APPAREL, INC.
INDEX TO FINANCIAL STATEMENTS
(Item 14 (a))
Biscayne Apparel, Inc. Page
Report of Independent Accountants F-2
Consolidated balance sheets at December 31, 1995 F-3
and 1994
Consolidated statements of operations for each of the F-4
three years in the period ended December 31, 1995
Consolidated statements of stockholders' equity for F-5
each of the three years in the period ended
December 31, 1995
Consolidated statements of cash flows for each of the F-6
three years in the period ended December 31, 1995
Notes to consolidated financial statements F-7 to
F-19
Consolidated financial statements schedules:
Schedule I - Condensed financial information F-20 to
of registrant F-23
Schedule II - Valuation and qualifying accounts F-24
All other schedules are omitted since the required information is
not present, or is not present in amounts sufficient to require
submission of the schedules, or because the information required is
included in the financial statements and notes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Biscayne Apparel, Inc.:
We have audited the consolidated financial statements and the
financial statement schedules of Biscayne Apparel, Inc., and
subsidiaries as of December 31, 1995 and 1994, and for the years in
the period ended December 31, 1995 listed in Item 14(a) of this
Form 10-K. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedules based on our audit.
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 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 Biscayne Apparel, Inc. and subsidiaries as of
December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for the three years in the period
ended December 31, 1995, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial
statement schedules 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.
Parsippany, New Jersey
February 23, 1996, except for the first paragraph of Note 2, for
which the date is March 27, 1996 and Note 6, for which the date is
March 28, 1996.
BISCAYNE APPAREL, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
(Dollars in thousands)
[CAPTION]
<TABLE>
<S> <C> <C>
ASSETS 1995 1994
Current assets:
Cash and cash equivalents................. $ 312 $ 4,178
Trade accounts receivable, less allowances of
$1,967 in 1995 and $1,754 in 1994...... 18,271 21,009
Inventories............................... 25,890 22,584
Federal income tax receivable............. 1,969 -
Prepaid expenses and other................ 1,972 1,573
Total current assets............. 48,414 49,344
Property, plant and equipment, net.......... 3,652 2,984
Investment in Hartwell Sports, Inc.......... 1,627 1,505
Goodwill, net............................... 6,072 5,202
Other assets, net........................... 1,977 1,543
$61,742 $60,578
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 3,841 $ 6,060
Accrued liabilities....................... 5,914 6,841
Notes payable to banks.................... 17,850 8,500
Current portion of long-term debt......... 1,250 -
Senior subordinated bridge notes.......... - 4,776
Total current liabilities....... 28,855 26,177
Subordinated notes.......................... 6,444 7,944
Long-term debt.............................. 6,250 -
Other liabilities........................... 358 576
Commitments and contingencies............... - -
Stockholders' Equity:
Common stock............................... 107 102
Additional paid-in capital................. 26,309 25,225
Unearned stock award....................... (135) (203)
Retained earnings (deficit)................ (6,446) 757
Total stockholders' equity....... 19,835 25,881
$61,742 $60,578
See accompanying notes.
</TABLE>
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1995,
1994 and 1993
(Dollars in thousands,
except per share amounts)
[CAPTION]
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Net sales $ 100,294 $ 72,350 $ 65,258
Operating costs and expenses:
Cost of goods sold 80,121 51,697 46,637
Selling, general
and administrative 25,434 15,693 14,568
105,555 67,390 61,205
Operating income (loss) (5,261) 4,960 4,053
Other income and (expenses):
Interest and other expenses (3,805) (1,673) (1,352)
Interest and other income 109 115 106
Equity in and gain on sale
of investees 122 5 3,100
Earnings (loss) before
provision (benefit) for
income taxes and cumulative
effect of change in accounting
for income taxes (8,835) 3,407 5,907
Provision (benefit)
for income taxes (2,708) 1,359 2,220
Earnings (loss) before cumulative
effect of change in accounting
for income taxes (6,127) 2,048 3,687
Cumulative effect of
change in accounting
for income taxes $ 208
Net earnings (loss) $ (6,127) $ 2,048 $ 3,895
Earnings (loss)
per common share:
Earnings (loss) before
cumulative effective
of change in accounting
for income taxes $ (0.57) $ 0.21 $ 0.41
Cumulative effect of change
in accounting for income taxes 0.02
Net earnings (loss) $ (0.57) $ 0.21 $ 0.43
Shares used in
computing earnings
(loss) per common share 10,733,551 9,651,637 9,048,562
See accompanying notes.
</TABLE>
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
[CAPTION]
<TABLE>
<S> <C> <C> <C>
Additional Unearned
Common Paid-in Stock
Stock Capital Award
Balance at December 31, 1992 $ 79 $19,502 $ -
Issuance of 225,000 shares
of common stock due to
unearned stock award 2 336 (270)
Net earnings - - -
Balance at December 31, 1993 81 19,838 (270)
Issuance of 400,440 shares of
common stock due to stock
dividend 4 1,198 -
Issuance of 1,666,997 shares of
restricted common stock due
to acquisition of M&L Interna-
tional, Inc. 17 4,150 -
Exercise of employee stock
options - 39 -
Amortization of unearned stock
award - - 67
Net earnings - - -
Balance at December 31, 1994 102 25,225 (203)
Issuance of 505,862 shares of
common stock due to stock
dividend 5 1,071 -
Exercise of employee stock
options - 13 -
Amortization of unearned
stock award - - 68
Net earnings (loss) - - -
Balance at December 31, 1995 $ 107 $26,309 $ (135)
(continued)
<S> <C> <C> <C>
Retained
Earnings Treasury
(Deficit) Stock Total
Balance at December 31, 1992 $(3,984) $ - $15,597
Issuance of 225,000 shares
of common stock due to
unearned stock award - - 68
Net earnings 3,895 - 3,895
Balance at December 31, 1993 (89) - 19,560
Issuance of 400,440 shares of
common stock due to stock
dividend (1,202) - -
Issuance of 1,666,997 shares of
restricted common stock due
to acquisition of M&L Interna-
tional, Inc. - - 4,167
Exercise of employee stock
options - - 39
Amortization of unearned
stock award - - 67
Net earnings 2,048 - 2,048
Balance at December 31, 1994 757 - 25,881
Issuance of 505,862 shares of
common stock due to stock
dividend (1,076) - -
Exercise of employee stock
options - - 13
Amortization of unearned
stock award - - 68
Net earnings (6,127) - (6,127)
Balance at December 31, 1995 $(6,446) $ - $19,835
</TABLE>
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
[CAPTION]
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Operating activities:
Net earnings (loss) $ (6,127) $ 2,048 $ 3,895
Adjustments to reconcile net
earnings to net cash provided
by (used in) operating
activities:
Noncash stock compensation
expense 68 67 68
(Gain) loss on sale of assets 91 (2) (302)
Equity in net income of
investees (122) (5) -
Gain on sale and refinancing
of equity investee - - (3,100)
Cumulative effect of change in
accounting for income taxes - - (208)
Depreciation expense 584 409 384
Amortization expense (35) 230 398
Provision for losses and sales
allowances on receivables 4,584 3,558 3,750
(Increase) decrease in
operating assets:
Trade accounts receivable (1,846) (1,151) (9,299)
Inventories (3,737) (4,901) (1,253)
Prepaid expenses and other (410) (613) 109
Federal income tax
receivable (1,969) - -
Other assets (499) 583 (138)
Increase (decrease) in operating
liabilities:
Accounts payable (2,398) 1,994 557
Accrued liabilities (1,178) (1,476) 2,119
Other liabilities (501) 269 83
Net cash (used in) provided
by operating activities (13,495) 1,010 (2,937)
Investing activities:
Proceeds from net sale of
assets 9 15 452
Capital expenditures (941) (1,090) (537)
Purchase of subsidiary, net
of cash acquired - 1,858 -
Investment in Hartwell
Sports, Inc. - (1,500) -
Proceeds from sale and
refinancing of equity
investee - - 3,100
Net cash (used in) provided
by investing activities (932) (717) 3,015
Financing activities:
Payments under notes payable
to banks (72,155) (66,845) (27,842)
Borrowings under notes payable
to banks 81,505 69,160 25,292
Proceeds from term loan 7,500 - -
Repayment of subordinated
notes (6,276) - -
Principal payments on capital
leases (26) (37) (239)
Proceeds from exercise of employee
stock options 13 39 -
Net cash provided by (used
in) financing activities 10,561 2,317 (2,789)
Net (decrease) increase in cash
and cash equivalents (3,866) 2,610 (2,711)
Cash and cash equivalents at
beginning of year 4,178 1,568 4,279
Cash and cash equivalents at
end of year $ 312 $ 4,178 $ 1,568
See accompanying notes.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995, 1994 and 1993
1. Summary of Significant Accounting Policies
Basis of presentation
The consolidated financial statements of Biscayne Apparel,
Inc. (the "Company" or "BAI") include the accounts of the parent
company, Biscayne Apparel, Inc., and its wholly-owned subsidiaries,
Biscayne Apparel International, Inc. ("BAII") and M&L
International, Inc. ("M&L"), which was acquired in 1994 (see Note
2), and its wholly-owned subsidiaries, Unidex Garments
(Philippines), Inc., Watersports Garment Manufacturing, Inc., Teri
Outerwear Manufacturing, Inc., GES Sportswear Manufacturing Corp.
and M&L International (H.K.) Limited. As of March 1, 1996, Unidex,
Watersports, Teri and GES ceased operations due to operating losses
caused by labor increases and production inefficiencies. BAII
operates through two divisions, Andy Johns Fashions International
("Andy Johns") and Varon, and its wholly-owned subsidiaries,
Mackintosh of New England Co., Mackintosh (U.K.) Limited and Amy
Industries De Honduras, S.A. de C.V., which was organized in 1995.
The Company holds a 20% interest in Hartwell Sports, Inc. and
accounts for investments in less than 50% owned affiliates, over
which it exercises significant influence, under the equity method
in accordance with Accounting Principle Board Opinion No. 18. All
material intercompany balances and transactions have been
eliminated. Certain amounts in the 1994 and 1993 financial
statements and related notes have been reclassified to conform with
the 1995 presentation.
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.
Cash and cash equivalents
The Company considers all highly liquid investments with
original maturities of three months or less to be cash equivalents.
The carrying amounts of these investments approximate fair market
value due to their short-term maturities.
Inventories
Inventories are stated at the lower of cost, (first-in, first-
out) (FIFO) or market, for all subsidiaries except M&L, which
inventory is stated at lower of cost, (last-in, first-out) (LIFO),
or market.
Property, plant and equipment
Property, plant and equipment are stated at cost and are
depreciated using the straight-line method over the estimated
useful lives of the assets, which range from 3 to 30 years.
Maintenance and repair costs are charged to expense as incurred,
and renewals and improvements are capitalized. When capital assets
are retired or disposed, the asset and related accumulated
depreciation accounts are adjusted accordingly, and any gain or
loss is recorded.
Goodwill
Goodwill and negative goodwill are amortized on a straight-
line basis over forty years from the date of acquisition.
Accumulated amortization was approximately $1,812,000, net of
$12,000 of negative goodwill amortization relating to the M&L
acquisition, (see Note 2), at December 31, 1995 and $1,606,000, net
of $5,000 of negative goodwill amortization, at December 31, 1994.
Debt
The estimated fair market value of notes payable to banks and
long-term debt approximate their carrying value, since, in
accordance with the Company's loan agreement with several banks,
these obligations are subject to fluctuating market rates of
interest and can be settled at any time at the fair market value
rate. The fair market value of the Company's Subordinated Notes is
estimated to be below par value based on nominal trading activity.
Income taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" (FAS 109), which requires the liability method
for computing deferred income taxes. Deferred income taxes are
recognized for the effect of temporary differences between the
financial and tax bases of assets and liabilities and for operating
loss and tax credit carryforwards. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is
more likely than not, that some portion of the deferred tax assets
will not be realized.
Earnings per common share
Earnings per common share is based upon the weighted average
number of common and common equivalent shares outstanding during
the period, if dilutive. Common stock equivalents include
incremental shares from the exercise of stock options and warrants
under the treasury stock method. For the years ended December 31,
1994 and 1993, fully diluted earnings per common share approximate
primary earnings per common share. All prior period earnings per
common share amounts have been restated due to the Company's stock
dividends in 1995 and 1994 (see Note 9).
Concentration of Credit Risk
The Company performs ongoing credit evaluations of its
customers' financial condition. At December 31, 1995, the Company
had no significant concentrations of credit risk due to a large,
geographically dispersed customer base. For the year ended
December 31, 1995, one customer accounted for approximately 11% of
total sales. For the years ended December 31, 1994 and 1993,
respectively, approximately 34% and 21% of the Company's total
sales were from two major customers. These customers represented
19% and 15% of total sales in 1994 and 10% and 11% of total sales
in 1993.
2. Acquisitions/Dispositions
On March 4, 1994, the Company paid $1,500,000 for a 20%
interest in Hartwell Sports, Inc. ("Hartwell"), a manufacturer of
casual shirts and jackets. On March 27, 1996, the Company sold its
20% interest in Hartwell for $1,750,000. Proceeds from the sale
will be used to reduce notes payable to banks.
On November 30, 1994, the Company acquired M&L International,
Inc. ("M&L"), a Chicago-based designer, manufacturer and marketer
of infants', toddlers' and children's outerwear, sportswear and
swimwear, with showrooms in Chicago, New York, Atlanta and Los
Angeles and manufacturing and sourcing operations in the
Philippines, Hong Kong, Bangladesh and Sri Lanka ("the
Acquisition").
The Company paid $1,723,500 in cash, retired $2,064,000 of
M&L's existing debt, assumed $1,500,000 of Junior Subordinated Sub
Notes (see Note 8), issued $776,500 of Bridge Notes and issued
1,666,997 shares of its common stock in connection with the
Acquisition. The Acquisition has been accounted for under the
purchase method of accounting. Therefore, M&L's operating results
are included with the Company's from November 30, 1994.
The following table summarizes the cash payment relating to the
acquisition of M&L (in thousands):
Fair value of assets acquired................ $ 20,755
Less: liabilities assumed.................... (9,636)
Less: cash acquired.......................... (2,173)
Total purchase price less cash acquired...... 8,946
Less: debt issued............................ (6,637)
Less: common stock issued.................... (4,167)
Purchase of M&L, net of cash acquired........ $ (1,858)
The excess of net assets acquired over the purchase price, as
adjusted, amounted to $739,000 of negative goodwill, which was
offset against consolidated goodwill and is being amortized over
forty years from the date of acquisition (see Note 1).
2. Acquisitions/Dispositions (Cont'd)
The following pro forma consolidated financial data reflects
the results of the Company and M&L as if the Acquisition had
occurred on January 1, 1994 (in thousands):
Pro Forma data
for the year
ended
(Unaudited) December 31, 1994
Net sales.......................... $ 119,506
Income before cumulative
effect of change in accounting
for income taxes................. $ 3,617
Net Income......................... $ 3,617
Earnings per share................. $ 0.32
Shares used in computing pro
forma earnings per share.......... 11,172,486
3. Inventories
Inventories at December 31, 1995 and 1994 are comprised of the
following:
(In thousands) 1995 1994
Raw materials............... $ 5,037 $ 6,121
Work-in-process............. 1,075 1,616
Finished goods.............. 19,778 14,847
$25,890 $22,584
Included in inventory at December 31, 1995 and 1994
respectively, is $10,524,000 and $10,473,000 valued under the LIFO
method, for which there exists no material financial reporting LIFO
adjustments.
4. Property, Plant and Equipment
Property, plant and equipment at December 31, 1995 and 1994 is
as follows:
(In thousands) 1995 1994
Land........................ $ 17 $ 17
Buildings and building
improvements............... 2,015 1,793
Machinery and equipment..... 3,537 2,562
5,569 4,372
Less accumulated depreciation
and amortization............ (1,917) (1,388)
$3,652 $2,984
5. Accrued Liabilities
Accrued liabilities consist of the following at December 31,
1995 and 1994:
(In thousands) 1995 1994
Wages, salaries, bonus and
profit sharing.......... $2,247 $2,564
Taxes payable................ 546 1,163
Other........................ 3,121 3,114
$5,914 $6,841
6. Debt
At December 31, 1994, the Company had a $32,000,000
uncommitted credit agreement (the "BAI Agreement") with several
commercial banks. Under the BAI Agreement, the aggregate amount of
all loans, advances and acceptances outstanding at any time could
not exceed $22,600,000, with the remainder available to fund
letters of credit. The BAI Agreement was retired on March 16, 1995
with proceeds from the new Revolver Agreement (see below).
In connection with the acquisition of M&L, M&L entered into a
three year committed revolving credit agreement with a bank ("The
M&L Agreement"), which the Company guaranteed. The M&L Agreement
provided for an aggregate credit facility of $23,000,000, which
included international letters of credit, bankers' acceptances,
steamship guarantees and standby letters of credit and limited
revolving loans to $3,500,000. The M&L Agreement was retired on
March 16, 1995 with proceeds from the new Revolver Agreement (see
below).
On March 16, 1995, the Company entered into an agreement (the
"Loan Agreement") with several banks for a $56,000,000 two year
committed revolving credit facility (the "Revolver Agreement") and
a $7,500,000 four year term loan (the "Term Loan"), which replaced
the existing 1994 BAI Agreement and the M&L Agreement, and was used
to repay the Bridge Notes, Junior Subordinated Notes, and other
related costs associated with the M&L acquisition (see Note 8).
The Revolver Agreement is available for loans, letters of credit
and letters of indemnity.
The Company had notes payable to banks under the Revolver
Agreement at December 31, 1995 of $17,850,000 and under the BAI
Agreement and the M&L Agreement at December 31, 1994 of $8,500,000.
Additionally, at December 31, 1995 and 1994, the Company had
letters of credit outstanding of $4,958,000 and $12,843,000,
respectively.
At December 31, 1995, the Company was at its available credit
limits, while at December 31, 1994, the Company had $23,464,000
available under the BAI Agreement and $12,394,000 available under
the M&L Agreement. The interest rate was prime (8.5%) plus 1.25%
at December 31, 1995 on the Revolver Agreement, prime (8.5%) plus
.5% at December 31, 1994 on the BAI Agreement and prime (8.5%) plus
1.0% on the M&L Agreement at December 31, 1994.
The weighted average interest rate on outstanding short-term
borrowings at December 31, 1995 and 1994, was 9.26% and 7.73%,
respectively.
Principal payments of the Term Loan are payable on March 16 in
each of the following years:
1996 - $1,250,000
1997 - $1,750,000
1998 - $2,000,000
1999 - $2,500,000
Total $7,500,000
The Term Loan initially bore interest, at the Company's
election, of prime plus 1 1/4%, or LIBOR plus 3% and interest under
the Revolver Agreement, at the Company's election, was prime plus
3/4% or LIBOR plus 2 1/2% on outstanding borrowings. During this
period, the Company was also required to pay a 1/4% fee on the
unused commitment balance.
On March 28, 1996, the Loan Agreement was amended to reduce
the Revolver Agreement facility to $50,000,000; increase the
interest rate under Revolver Agreement borrowings to prime plus
1.0%, or prime plus 1.25% during agreed upon collateral overadvance
periods; increase the interest rate under the Term Loan, to prime
plus 2.00%, or, at the Company's election, LIBOR plus 4.50% on
outstanding borrowings; require an additional fee of $200,000 and
provide for the issuance of warrants to the banks to purchase
400,000 shares of the Company's common stock for an exercise price
of $1.00 per share. The warrants are exercisable at any time on or
after March 31, 1998, except that the warrants will be canceled if,
prior to March 31, 1998, the Company repays the Term Loan through
the sale of assets or operations, or if the Term Loan is reduced to
$1,250,000, or lower, through operations or infusion of additional
equity or subordinated debt.
The Revolver Agreement is collateralized by all of the
Company's assets, excluding Mackintosh's domestic inventory and
Varon's domestic raw materials and work-in-process inventories, and
including all trademarks. Additionally, the Revolver Agreement
contains various financial covenants, reporting requirements and
limits capital expenditures, cash dividends, other indebtedness,
affiliate transactions, mergers and acquisitions and other items.
Interest expense paid on notes payable to banks and
subordinated notes (see Note 8) was approximately $3,715,000,
$1,665,000, and $1,351,000 for the years ended December 31, 1995,
1994 and 1993, respectively.
7. Commitments and Contingencies
The Company leases warehouses, office space and transportation
equipment under operating leases expiring at various times. Most
of the operating leases contain renewal options. Rent free periods
granted under certain leases and scheduled rent increases are
charged to rent expense on a straight-line basis over the related
lease terms. Total rent expense for all operating leases was
$2,385,000 in 1995, $860,000 in 1994, and $841,000 in 1993.
Future minimum operating lease payments at December 31, 1995
are as follows (in thousands):
1996............ $ 2,390
1997............ 2,091
1998............ 1,814
1999............ 1,425
2000............ 1,316
Thereafter...... 2,558
$11,594
At December 31, 1995, the present value of future minimum
capital lease payments was $383,000, which is included in other
liabilities on the balance sheets. In 1995, the Company, through
a financing lease, obtained computer equipment at a cost of
$363,000, which for financial reporting purposes, has been
accounted for as a capital lease.
The Company licenses the rights to use certain brand names on
its products, for which it is contingently obligated to pay minimum
royalty and advertising fees through 1998 in the amount of
approximately $2,030,000.
8. Subordinated Notes
In order to finance the acquisition of M&L on November 30,
1994, the Company borrowed $4,776,000 in accordance with a 12%
Senior Subordinated Bridge Note Purchase Agreement , (the "Bridge
Notes") (see Note 12). In connection with the Bridge Note Purchase
Agreement, the Company paid an origination fee to the Bridge Note
holders in the amount of $191,000 (4% of the principal amount of
the Bridge Notes). The Bridge Notes bore interest at the rate of
12%. The Bridge Notes were retired on March 16, 1995 with proceeds
from the Term Loan (see Note 6).
In connection with the acquisition of M&L on November 30,
1994, (see Note 2), the Company assumed $1,500,000 aggregate
principal amount of M&L's junior subordinated indebtedness (the
"Junior Sub Notes") (see Note 12) payable to two senior executives
of M&L. The Junior Sub Notes required quarterly interest payments
at a rate of 13% with principal due on December 15, 1999. The
Junior Sub Notes were retired on March 16, 1995 with proceeds from
the Term Loan (see Note 6).
At December 31, 1995, the Company had outstanding $6,444,000
of 13% Subordinated notes (the "Subordinated Notes") due December
15, 1999 with interest payable biannually on June 15 and December
15. The Subordinated Notes are subordinated in right of payment to
all existing and future senior indebtedness of the Company. The
Company may redeem all or part of the Subordinated Notes at any
time at a price equal to the principal amount plus accrued
interest.
The fair value of the Company's Subordinated Notes is
estimated to be 60% to 70% of par value at December 31, 1995, based
on nominal trading activity during the year.
9. Stockholders' Equity
The Company is authorized to issue 25,000,000 shares of common
stock, par value $0.01 per share, and 5,000,000 shares of preferred
stock, par value $0.01 per share. At December 31, 1995 and 1994,
the Company had 10,741,253 and 10,223,899 shares of common stock,
issued and outstanding, respectively. No shares of preferred stock
have been issued.
In March 1995 and 1994, the Company's Board of Directors
declared a five percent stock dividend with respect to its common
stock par value, $0.01 per share. Each holder of record on May 24,
1995 and April 1, 1994, respectively, received one share of common
stock for every 20 shares held, with cash being paid in lieu of
issuing fractional shares. The distribution dates were May 31,
1995 and April 15, 1994, respectively. Accordingly, retained
earnings and paid-in-capital reflect the stock dividend
distribution and all prior year stock option information has been
restated to reflect the 1995 and 1994 stock dividends.
In November 1994, the Company issued 1,666,997 shares of its
common stock, par value $0.01, per share in connection with the
acquisition of M&L (see Note 2).
In 1993, in accordance with the Company's management agreement
with Trivest, Inc. ("Trivest"), an affiliate of the Company, (see
Note 12), the Company issued 225,000 shares of restricted common
stock, $0.01 par value.
In 1996, as part of an amendment to the Company's Revolver
Agreement and Term Loan, warrants to purchase 400,000 shares of the
Company's common stock were issued to the banks underlying the
Revolver Agreement and Term Loan (see Note 6).
The Company has three nonqualified stock option plans, the
1987 Stock Option Plan ("1987 SOP"), the 1990 Stock Option Plan
("1990 SOP") and the 1994 Stock Option Plan ("1994 SOP"). Under
the terms of the 1987 SOP, 1990 SOP, and 1994 SOP, 550,000 shares,
650,000 shares, and 150,000 shares, respectively, may be issued at
not less than 100% of market value at the date of grant. Options
issued under the plans expire ten years from date of grant and
generally vest over five years from date of grant.
The following table summarizes the activity of the Company's
stock option plans:
1995 1994 1993
Balance outstanding at
beginning of year.......... 1,248,403 1,086,703 579,553
Granted..................... 5,250 193,200 512,663
Canceled.................... (16,991) - (5,513)
Exercised................... (11,025) (31,500) -
Balance outstanding at
December 31.............. 1,225,637 1,248,403 1,086,703
Price range per share....... $0.79-$2.44 $0.79-$2.44 $0.79-$2.27
Exercisable at December 31.. 751,465 541,217 388,374
Available for grant at
December 31............... 87,401 75,647 111,352
10. Income Taxes
Effective January 1, 1993, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". The cumulative effect of this change in
accounting principle amounted to $208,000.
The components of the provision (benefit) for income taxes for
each of the three years in the period ended December 31, 1995 are
as follows:
(In thousands) 1995 1994 1993
Current.................. $(2,039) $1,333 $2,177
Deferred................. (669) 26 43
$(2,708) $1,359 $2,220
The total Federal and state provision (benefit) for income
taxes is as follows:
(In thousands) 1995 1994 1993
Federal.................. $(2,712) $1,082 $1,940
State.................... 4 277 280
$(2,708) $1,359 $2,220
A reconciliation of the statutory provision and the effective
provision for income taxes is as follows:
(In thousands) 1995 1994 1993
Income tax at statutory rate.... $(3,004) $1,158 $2,008
State income taxes,
net of federal benefit........ 200 185 216
Tax exempt interest income....... (3) (1) (5)
Amortization of goodwill......... 70 72 135
Refund of prior year's
income taxes and related
adjustments.................... (37) (17) (99)
Other, net....................... 66 (38) (35)
$(2,708) $1,359 $2,220
The components of the net deferred tax (assets) and
liabilities recorded on the balance sheets at December 31, 1995
and 1994 are as follows:
(In thousands) 1995 1994
Deferred Tax Liabilities:
Depreciation..................... $ 111 $ 13
LIFO inventory adjustments....... 1,245 1,332
Equity in investee............... 41 2
1,397 1,347
Deferred Tax (Assets):
Capitalized inventory............ (498) (292)
Accounts receivable and sales
allowances...................... (2,164) (1,427)
Employee benefit reserves........ (109) (69)
Deferred compensation............ (33) (24)
Capital loss carryback........... - (59)
Capitalized trademarks........... (598) (652)
Operating leases................. (99) (93)
State net operating loss
carryover....................... (829) -
State jobs credit carryover...... (208) -
Other............................ (30) (33)
(4,568) (2,649)
Valuation allowance on deferred
tax assets...................... 1,032 -
(3,536) (2,649)
Total............................ $(2,139) $(1,302)
The Company has recorded a valuation allowance of $1,032,000
in 1995 to reflect the estimated amount of deferred state tax
assets, which arose due to net operating loss and tax credit
carryforwards. The majority of these carryforwards expire in the
year 2010. This valuation allowance reflects management's
estimate of the total amount of deferred tax assets which may not
be realized depending on future operating results of the Company.
Income taxes paid during 1995, 1994 and 1993 were $215,000,
$2,022,000 and $1,440,000, respectively.
11. Employee Benefit Plans
The Company maintains employee profit sharing plans covering
employees of Andy Johns and M&L. No contribution was made for
the year ended December 31, 1995. The Company made contributions
of $150,000 and $57,000 to the plans for the years ended December
31, 1994 and 1993, respectively.
12. Related Party Transactions
In connection with the acquisition of M&L, (see Note 2), the
Company assumed $1,500,000 of M&L's junior subordinated debt,
payable to two senior executives of M&L, incurred $4,776,000 of
Bridge Notes, paid an origination fee of $191,000 to the holders
of the Bridge Notes (see Note 8), and paid a $360,000 deal fee to
Trivest, Inc. ("Trivest"), an affiliate of the Company. Trivest
has certain common shareholders, officers and directors with the
Company. The holders of the Bridge Notes included two senior
executives of M&L, Trivest Special Situations Fund 1985, L.P.
("TSSF"), Trivest Segregated Asset Account ("TSAA"), Earl W.
Powell, Chairman of the Board of the Company and James J. Pinto,
a director of the Company. Both TSSF and TSAA are controlled by
Trivest and TSSF is also a holder of the Company's common stock
and 13% Subordinated Notes.
As of January 1, 1987, the Company entered into a management
agreement with Trivest, for a seven-year period, which required
payment of an annual cash management fee of $675,000 (subject to
inflation adjustments), payable in advance in equal quarterly
installments. The management agreement was amended, effective
January 1, 1992, to reduce the annual management fee to $475,000
(subject to inflation adjustments) and was again amended,
effective January 1, 1993, to further reduce the annual
management fee to $250,000 (subject to inflation adjustments).
Pursuant to the second amendment, the term of the agreement
was extended four years (expiring December 31, 1997) and Trivest
received a restricted stock award consisting of 225,000 shares of
the Company's $.01 par value common stock. The stock award
restrictions lapse in five equal annual installments commencing
January 1, 1994, subject to acceleration of vesting in certain
circumstances, including a change of control of the Company. The
Company recognized $338,000 of deferred management fee expense,
relating to the stock award, based upon the fair market value at
date of grant. The $338,000 is being amortized over the five
year vesting period and accordingly, the Company recognized
approximately $68,000, $67,000 and $68,000 of management fee
expense for the years ended December 31, 1995, 1994 and 1993,
respectively. Effective December 1, 1994, the management
agreement was amended and restated due to the acquisition of M&L
(see Note 2). This amendment increased the yearly fee to
$350,000 (subject to inflation adjustments).
The Company expensed approximately $366,000, $265,000 and
$250,000 for services rendered under the management agreement
during the years ended December 31, 1995, 1994 and 1993,
respectively.
In March 1993, the Company sold its 18.5% limited
partnership interest in SP Industries Limited Partnership (the
"Partnership") to the Partnership and recognized a gain of
$3,100,000. The Partnership is a related party to Trivest and
the Company.
In June 1993, the Company entered into a cost sharing
agreement with the Partnership whereby certain of the Company's
employees provided the Partnership with consulting and financial
services. In return, the Company received an annualized cash fee
of $125,000 subject to a $5,000 increase in 1994. The Company
recognized income of $32,500, $130,000 and $73,000 in 1995, 1994
and 1993, respectively, relating to such agreement. The
agreement terminated March 31, 1995.
Certain officers of the Company have a minority interest in
the equity securities of a vendor. The vendor supplies
warehousing and distribution facilities to Andy Johns and
Mackintosh. The Company has a right of first refusal to purchase
this interest in the event of sale. During the years ended
December 31, 1995, 1994 and 1993, warehousing and shipping
expenses to this vendor totaled approximately $633,000, $938,000
and $1,045,000, respectively.
13. Quarterly Financial Data (Unaudited)
Unaudited consolidated quarterly financial data for fiscal
years 1995 and 1994 is as follows (in thousands, except Per Share
amounts):
First Second Third Fourth
Quarter Quarter Quarter Quarter
1995 1995 1995 1995(1)
Net sales........... $15,389 $14,517 $40,898 $29,490
Gross profit........ $ 3,865 $ 3,323 $10,607 $ 2,378
Net earnings
(loss)............. $(1,588) $(1,787) $ 1,355 $(4,107)
Net earnings (loss)
per common share... $ (0.15) $ (0.17) $ 0.12 $ (0.38)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994 1994 1994 1994
Net sales........... $ 6,547 $ 9,367 $34,446 $21,990
Gross profit........ $ 1,396 $ 2,291 $ 9,983 $ 6,983
Net earnings
(loss)............. $(1,148) $ (570) $ 3,077 $ 689
Net earnings (loss)
per common share... $ (0.13) $ (0.06) $ 0.33 $ 0.07
(1) Each quarter is calculated independently and as such does
not total year-end 1995 earnings (loss) per share of
$(0.57).
The 1995 fourth quarter includes the adverse results on the
outerwear industry of high levels of carryover inventory, at both
the retail and manufacturer's level, from 1994 to 1995, due to the
effects of the 1994-1995 warm Winter season. This caused retailers
to delay and reduce ordering Fall 1995 merchandise, including the
Company's largest 1994 customer, who refrained from ordering
previously programmed Fall 1995 outerwear. The weather in early
Fall 1995 was also unseasonably warm, which further mitigated the
demand for outerwear. These factors caused the Company to sustain
significant losses due to the sale of inventory during the 1995
third and fourth quarters at low margins and markdowns of remaining
Fall 1995 and 1994 inventory. During the 1995 fourth quarter, the
Company expensed inventory markdowns of $4,374,000, compared to
$179,000 during the 1994 fourth quarter.
Schedule I
BISCAYNE APPAREL, INC.
(PARENT COMPANY ONLY)
BALANCE SHEETS
December 31, 1995 and 1994
(Dollars in thousands)
[CAPTION]
<TABLE>
<S> <C> <C>
ASSETS 1995 1994
Current assets:
Cash and cash equivalents............ $ 29 $ 804
Accounts receivable.................. 28 64
Intercompany accounts receivable..... 2,455 8,216
Federal income tax receivable........ 1,969 -
Prepaid expenses and other........... 31 85
Total current assets............. 4,512 9,169
Investments in subsidiaries........... 20,519 26,345
Intercompany subordinated notes
receivable........................... - 1,000
Property, plant and equipment, net.... 23 22
Investment in Hartwell Sports, Inc.... 1,627 1,505
Other assets, net..................... 27 76
$26,708 $38,117
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $ - $ 45
Accrued liabilities.................. 381 917
Senior subordinated bridge notes..... - 4,776
Total current liabilities........ 381 5,738
Subordinated notes.................... 6,444 6,444
Other liabilities..................... 48 54
Stockholders' Equity:
Common stock......................... 107 102
Additional paid-in capital........... 26,309 25,225
Unearned stock award................. (135) (203)
Accumulated deficit.................. (6,446) 757
Total stockholders' equity....... 19,835 25,881
26,708 38,117
</TABLE>
Schedule I
Cont'd
BISCAYNE APPAREL, INC.
(PARENT COMPANY ONLY)
STATEMENTS OF OPERATIONS
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
[CAPTION]
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Expenses:
General and administra-
tive expenses $ 35 $ (72) $ (118)
Management fee to
Trivest, Inc. 366 265 250
Operating expenses (401) (193) (132)
Other income and (expenses):
Interest and other
expenses (954) (889) (836)
Intercompany interest
income 551 365 383
Interest and other
income 40 75 45
Equity in and gain on sale
of investees 122 5 3,100
Equity in earnings (loss)
of subsidiaries, net of
applicable income taxes (5,826) 2,271 1,835
Management fee from
subsidiaries 366 265 250
Earnings (loss) before provision
for income taxes and cumulative
effect of change in accounting
for income taxes (6,102) 1,899 4,645
Provision (benefit) for income
taxes 25 (149) 958
Earnings (loss) before cumulative
effect of change in accounting
for income taxes $ (6,127) $2,048 $3,687
Cumulative effect of change in
accounting for income taxes - - 208
Net earnings (loss) $ (6,127) $2,048 $3,895
</TABLE>
Schedule I
Cont'd
BISCAYNE APPAREL, INC.
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
[CAPTION]
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Operating activities:
Net earnings (loss)...... $(6,127) $ 2,048 $ 3,895
Adjustments to reconcile
net earnings (loss) to net
cash used in operating
activities:
Noncash stock
compensation
expense............ 68 67 68
Equity in earnings (loss) of
subsidiaries.............. 5,826 (2,271) (1,835)
Equity in net income of
investees................. (122) (5) -
Gain on sale and refinancing
of equity investee......... - -(3,100)
Cumulative effect of change
in accounting for income
taxes............. - - (208)
Depreciation expense........ 5 4 3
(Increase) decrease in operating
assets:
Trade accounts receivable.... 36 (39) (7)
Prepaid expenses and other... 54 10 93
Federal income tax
receivable............... (1,969) - -
Other assets............... 49 22 (28)
Increase (decrease) in operating
liabilities:
Accounts payable........... (45) 9 16
Accrued liabilities........ (536) (508) 979
Other liabilities.......... (6) (9) (9)
Net cash used in operating
activities.............. (2,767) (672) (133)
Investing activities:
Capital expenditures........... (6) (10) (4)
Purchase of subsidiary,
net of cash acquired........... - (315) -
Investment in Hartwell
Sports, Inc.................... - (1,500) -
Proceeds from sale and
refinancing of equity investee. - - 3,100
Net cash (used in) provided
by investing activities..... (6) (1,825) 3,096
Financing activities:
Repayments (advances) of
intercompany loans.............6,761 2,462 (4,913)
Payment on subordinated notes..(4,776) - (1,000)
Proceeds from exercise of
employee stock options......... 13 39 -
Net cash provided by (used
in) financing activities.... 1,998 2,501 (5,913)
Net increase (decrease) in cash
and cash equivalents.......... (775) 4 (2,950)
Cash and cash equivalents at
beginning of year............. 804 800 3,750
Cash and cash equivalents at
end of year.................. $ 29 $ 804 $ 800
(Continued on following page)
Schedule I
Cont'd
BISCAYNE APPAREL, INC.
PARENT COMPANY ONLY
STATEMENTS OF CASH FLOWS (Cont'd)
Years Ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
<CAPTION>
</TABLE>
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
Supplemental disclosure:
Interest paid $ 957 $ 838 $ 838
Income taxes paid $ 10 $ 1,603 $1,340
Supplemental schedule of
noncash financing
activities:
Net changes in
investments in
subsidiaries $ - $ 139 $ 280
Acquisition of subsidiary:
Fair value of assets
acquired $ 20,755
Liabilities assumed (9,636)
Total purchase price 11,119
Less: debt issued (6,637)
Less: common stock issued (4,167)
Net cash paid for acquisition
of subsidiary (1) $ 315
</TABLE>
(1) Exclusive of cash acquired of $2,173,000 which is included
in the Statement of Cash Flows for M&L International, Inc.
Schedule II
BISCAYNE APPAREL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1995, 1994 and 1993
(Dollars in Thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
COLUMN A COLUMN B COLUMN C
Additions
Balance at Charged to Charged to
beginning of costs and other
Description year expenses accounts
Year ended December 31, 1995:
Allowance for doubtful accounts$422 $400 (71)
Allowance for sales discounts156 561
Reserve for sales allowance 334 371
Reserve for advertising allowance97 203
Reserve for freight and warehouse
discounts 15 258
Reserve for returns 730 2,866
Year ended December 31, 1994:(1)
Allowance for doubtful accounts$344 $763 $-
Allowance for sales discounts288 686 -
Reserve for sales allowance 226 1,157 -
Reserve for advertising allowance57 313 -
Reserve for freight and warehouse
discounts 18 157 -
Reserve for returns 491 1,359 -
Year ended December 31, 1993:
Allowance for doubtful accounts$376 $137 $-
Allowance for sales discounts165 926 -
Reserve for sales allowance 134 783 -
Reserve for advertising allowance66 242 -
Reserve for freight and warehouse
discounts 27 264 -
Reserve for returns 368 1,449 -
(continued)
<S> <C> <C>
COLUMN D COLUMN E
Deductions Balance at end of year
Year ended December 31, 1995:
Allowance for doubtful accounts 524 227
Allowance for sales discounts 555 162
Reserve for sales allowance 301 404
Reserve for advertising allowance201 99
Reserve for freight and warehouse
discounts 201 72
Reserve for returns 2,593 1,003
Year ended December 31, 1994:(1)
Allowance for doubtful accounts$ 685 $ 422
Allowance for sales discounts 818 156
Reserve for sales allowance 1,049 334
Reserve for advertising allowance273 97
Reserve for freight and warehouse
discounts 160 15
Reserve for returns 1,120 730
Year ended December 31, 1993:
Allowance for doubtful accounts$ 169 $ 344
Allowance for sales discounts 803 288
Reserve for sales allowance 691 226
Reserve for advertising allowance251 57
Reserve for freight and warehouse
discounts 273 18
Reserve for returns 1,326 491
</TABLE>
(1) For the year ended December 31, 1994, additions per Column C
include
amounts from M&L International, Inc.'s date of acquisition,
November
30, 1994.
EXHIBIT 10.26
FIRST AMENDMENT TO REVOLVING CREDIT
AND TERM LOAN AGREEMENT
THIS AMENDMENT dated as of June 1, 1995 (the "First
Amendment") is to the Credit Agreement dated as of March 16, 1995
(as amended from time to time the "Agreement") among Biscayne
Apparel, Inc., Biscayne Apparel International, Inc., Mackintosh
of New England Co., M&L International, Inc., each of the banks
which is a signatory thereto and The Chase Manhattan Bank
(National Association) as agent.
In connection with the formation of a new subsidiary by
Biscayne Apparel International, Inc., the Borrowers and the Banks
desire to amend certain terms of the Credit Agreement on the
terms and conditions set forth herein.
Except as otherwise provided herein, the capitalized terms
used in this First Amendment shall have the respective meanings
assigned to such terms in the Agreement.
AGREEMENT
In consideration of the foregoing, and the mutual covenants
and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. Section 1 of the Agreement is amended by adding the
following definition: ""Amy" means Amy Industries de Honduras,
S.A. de C.V."
2. Schedule l to the Agreement is amended to add Amy as a
Subsidiary as shown on the Addendum to Schedule l attached
hereto.
3. Section 10.05. INVESTMENTS is amended by adding a new
sub-section (f) reading "(f) Biscayne Apparel International, Inc.
may make an investment of up to $500,000 in Amy."
4. The Banks hereby waive the noncompliance by the
Borrower with the provisions of Section 10.07 of the Agreement to
the extent that the transfer of equipment in connection with the
start-up of Amy and the transfer of raw materials and piece goods
to Amy may violate such Section.
5. The execution and delivery of this First Amendment and
the performance of the Agreement as amended by this First
Amendment shall constitute a representation and warranty that the
following statements are true:
(a) the representations and warranties contained in
Article 8 of the Agreement are correct on and as of the date
hereof as though made on and as of the date hereof; and
(b) no Event of Default has occurred and is
continuing, or would result from the taking effect of this First
Amendment.
6. Except as provided in this First Amendment and waiver,
all terms and provisions of the Agreement shall continue in full
force and effect. This waiver shall be effective only for the
specific transaction, and for the specific provisions for which
given and the Borrowers must hereafter be in compliance with all
provisions of the Agreement.
7. This First Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all
of which when taken together shall constitute but one agreement.
IN WITNESS WHEREOF, the Borrowers, the Banks and the Agent
have caused this Amendment to be duly executed by their duly
authorized officers, all as of the day and year first above
written.
BISCAYNE APPAREL, INC. BISCAYNE APPAREL
INTERNATIONAL, INC.
By By
Name: Name:
Title: Title:
MACKINTOSH OF NEW ENGLAND M & L INTERNATIONAL, INC.
CO.
By By
Name: Name:
Title: Title:
THE CHASE MANHATTAN BANK THE CHASE MANHATTAN BANK
NATIONAL ASSOCIATION NATIONAL ASSOCIATION
(AS AGENT)
By By
Name: Name:
Title: Title:
NATWEST BANK N.A. THE FIRST NATIONAL BANK OF
BOSTON
By By
Name: Name:
Title: Title:
CORESTATES BANK, N.A.
By
Name:
Title:
By
Name:
Title:
ADDENDUM TO SCHEDULE l
to
CREDIT AGREEMENT DATED AS OF MARCH 16, 1995
Biscayne Apparel International, Inc. has the following foreign
subsidiary:
Amy Industries de Honduras, S.A. de C.V.
Incorporated: Honduras
Shareholder Ownership %
Biscayne Apparel International, Inc.96%
Earl W. Powell 1%
Philip T. George 1%
Troy D. Templeton 1%
Peter W. Klein 1%
EXHIBIT 10.27
SECOND AMENDMENT TO REVOLVING CREDIT
AND TERM LOAN AGREEMENT
THIS AMENDMENT dated as of November 1, 1995 (the "Second
Amendment") is to the Credit Agreement dated as of March 16, 1995
(as amended from time to time the "Agreement") among Biscayne
Apparel, Inc., Biscayne Apparel International, Inc., Mackintosh of
New England Co., M&L International, Inc., each of the banks which
is a signatory thereto and The Chase Manhattan Bank (National
Association) as agent.
The Borrowers have notified the Banks that they expect to be
out of compliance with certain covenants and restrictions contained
in the Agreement. The Borrowers have requested and the Banks
desire to grant a waiver of compliance with certain provisions of
the Agreement for the period ending September 30, 1995; to amend
the definition of Permitted Overadvances to create Permitted
Overadvances for October and November 1995; to increase the Direct
Debt sublimit for December 1995; and reduce the minimum borrowing
amount for Variable Rate Loans on the terms and conditions set
forth herein.
Except as otherwise provided herein, the capitalized terms
used in this Second Amendment shall have the respective meanings
assigned to such terms in the Agreement.
AGREEMENT
In consideration of the foregoing, and the mutual covenants
and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. The definition of Permitted Overadvance is amended to
read as follows:
"Permitted Overadvance" means, (a) with respect to the
Aggregate Borrowing Base the following amounts during the following
months:
March $ 2,750,000
April $ 8,250,000
May $12,750,000
June $14,750,000
July $13,250,000
August $ 7,250,000
(b) with respect to the Direct Debt Borrowing Base, the following
amounts during the following months:
April $ 5,500,000
May $14,000,000
June $19,000,000
July $21,750,000
August $17,500,000
September $ 5,500,000
and (c) with respect to the Direct Debt Borrowing Base, the
following amounts for the following periods only, October 1995
$3,700,000 and November 1995 $700,000."
2. The definition of Direct Debt Borrowing Base is amended
to read as follows:
"Direct Debt Borrowing Base" means, during the period from the
delivery of a Borrowing Base Certificate until the delivery of a
more current Borrowing Base Certificate, an amount equal to the
lesser of (1) the sum of (a) 80% of the difference of (i) Eligible
Accounts, less (ii) the amount of the Borrowers' accounts
receivable reserve maintained and revised monthly in accordance
with GAAP applied consistently with previous periods, plus (b) the
amount of any Permitted Overadvance; or (2) $15,000,000 for the
period from December 1 through and including April 30 of each year
and $45,000,000 for the period from May 1 through and including
November 30 of each year, provided that, for the period from
December 1, 1995 through December 19, 1995 such amount shall be
$30,000,000 and for the period from December 20, 1995 through
December 31, 1995 such amount shall be $25,000,000.
3. Section 2.11 is amended to read as follows:
"Section 2.11. MINIMUM AMOUNTS. Except for borrowings which
exhaust the full remaining amount of the Commitments, prepayments
of Variable Rate Loans which may be in a minimum amount of
$500,000, prepayments or conversions which result in the prepayment
or conversion of all Loans of a particular type, or conversions
made pursuant to Section 6.04, each borrowing, prepayment,
conversion and renewal of principal of Loans shall be in an amount
at least equal to $2,000,000 in the aggregate for all Banks for
Eurodollar Loans and $500,000 in the aggregate for Variable Rate
Loans and $1,000,000 in the aggregate for Quoted Rate Loans
(borrowings, prepayments, conversions or renewals of or into Loans
of different types or, in the case of Eurodollar Loans, having
different Interest Periods at the same time hereunder to be deemed
separate borrowings prepayments, conversions and renewals for the
purposes of the foregoing, one for each type of Interest Period)."
4. The Banks hereby waive the noncompliance by the Borrowers
with the provisions of (a) Section 2.07 of the Agreement to the
extent that they exceeded the Aggregate Borrowing Base and Direct
Debt Borrowing Base for 9/30/95; (b) Section 11.05 for the fiscal
quarter ended 9/30/95 provided that the ratio is not less than .30
to 1.0 for such fiscal quarter end; and (c) Section 11.06 for the
fiscal quarter ended 9/30/95 provided that the ratio is not less
than .43 to 1.0 for such fiscal quarter end.
5. The execution and delivery of this Second Amendment and
the Borrowers' performance of the Agreement as amended by this
Second Amendment shall constitute a representation and warranty of
the Borrowers that the following statements are true:
(a) the representations and warranties contained in
Article 8 of the Agreement are correct on and as of the date hereof
as though made on and as of the date hereof; and
(b) no Event of Default has occurred and is continuing,
or would result from the taking effect of this Second Amendment.
6. Except as provided in this Second Amendment and waiver,
all terms and provisions of the Agreement shall continue in full
force and effect. This waiver shall be effective only for the
specific transaction, and for the specific provisions for which
given and the Borrowers must hereafter be in compliance with all
provisions of the Agreement.
7. This Second Amendment shall be governed by, and construed
in accordance with, the laws of the State of New York.
8. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all
of which when taken together shall constitute but one agreement.
IN WITNESS WHEREOF, the Borrowers, the Banks and the Agent
have caused this Amendment to be duly executed by their duly
authorized officers, all as of the day and year first above
written.
BISCAYNE APPAREL, INC. BISCAYNE APPAREL INTERNATIONAL,
INC.
By By
Name: Name:
Title: Title:
MACKINTOSH OF NEW ENGLAND M & L INTERNATIONAL, INC.
CO.
By By
Name: Name:
Title: Title:
THE CHASE MANHATTAN BANK THE CHASE MANHATTAN BANK
NATIONAL ASSOCIATION NATIONAL ASSOCIATION
(AS AGENT)
By By
Name: Name:
Title: Title:
NATWEST BANK N.A. THE FIRST NATIONAL BANK OF
BOSTON
By By
Name: Name:
Title: Title:
CORESTATES BANK, N.A.
By
Name:
Title:
By
Name:
Title:
EXHIBIT 10.28
AMENDMENT TO CREDIT AGREEMENT
AMENDMENT dated as of January 31, 1996 among Biscayne Apparel,
Inc., a Florida corporation, Biscayne Apparel International, Inc.,
a Delaware corporation, Mackintosh of New England Co., a Delaware
corporation, and M & L International, Inc., an Illinois
corporation, (individually a "Borrower" and collectively the
"Borrowers"), The Chase Manhattan Bank, N.A., Corestates Bank,
N.A., The First National Bank of Boston and Natwest Bank, N.A.
(individually, a "Bank" and collectively, the "Banks") and The
Chase Manhattan Bank, N.A., as agent for the Banks (in such
capacity, together with its successors in such capacity, the
"Agent").
PRELIMINARY STATEMENT. The Borrowers, the Banks and the Agent
have entered into a Credit Agreement dated as of March 16, 1995
(the "Credit Agreement"). Any term used in this Amendment and not
defined in this Amendment shall have the meaning assigned to such
term in the Credit Agreement.
The Borrowers, the Banks and the Agent have agreed to amend
the Credit Agreement as hereinafter set forth.
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit
Agreement is, effective as of this date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 2
hereof, hereby amended as follows:
(a) The definition of "Permitted Overadvance" in Section 1.01
is amended in full to read as follows:
" 'Permitted Overadvance' means, (a) with respect to the
Aggregate Borrowing Base during the month of January,
1996, One Million Six Hundred Thousand Dollars
($1,600,000) and, (b) with respect to the Direct Debt
Borrowing Base, during the month of January, 1996, Four
Million Seven Hundred Thousand Dollars ($4,700,000)."
(b) Section 3.01 LETTERS OF CREDIT is amended by adding the
following at the end of the first paragraph of such Section:
"Notwithstanding anything to the contrary contained in
this Agreement or in any other Facility Document, during
the period from January 31, 1996 to and including
February 28, 1996, and while each of the Borrowers are
still required to satisfy all the terms and provisions of
this Agreement that must be satisfied before Chase is
required to issue a Letter of Credit, Chase will only be
required to issue Letters of Credit during such period
for each of the Borrowers specified below with an
aggregate face amount for all Letters of Credit issued
during such period of up to the amount specified below
for such Borrower:
BORROWER AGGREGATE FACE AMOUNT OF ALL
LETTERS OF CREDIT THAT CAN BE
ISSUED BETWEEN JANUARY 31, 1996
AND FEBRUARY 28, 1996
M&L International, Inc. $6,000,000
Biscayne Apparel
International, Inc. $1,900,000
Mackintosh of New England Co. $ 500,000
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment
shall become effective on the date on which each Borrower, each
Bank and the Agent shall each have executed and delivered this
Amendment.
SECTION 3. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS.
(a) Upon the effectiveness of Section 1 hereof, on and after the
date hereof each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference in the other Facility Documents to the
Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except (1) that the Borrowers may no longer have
Eurodollar Loans outstanding under the Credit Agreement and, (2) as
specifically amended above, the Credit Agreement and the Notes, and
all other Facility Documents, shall remain in full force and effect
and are hereby ratified and confirmed. Also, the providing of any
Loans, Letters of Credit or Letters of Indemnity prior to or after
the date of this Amendment while a Default or Event of Default was
or is outstanding does not constitute a waiver of any rights or
remedies available to the Agent or the Banks due to the occurrence
of such Default or Event of Default. Finally, the providing of any
Loans, Letters of Credit or Letters of Indemnity prior to the
receipt by each of the Banks of the financial statements required
under subsection (a) of Section 9.09 REPORTING REQUIREMENTS shall
not constitute a waiver of any of the rights and remedies available
to the Agent and the Banks if the Borrowers are not in compliance
with any or all of the Financial Covenants set forth in Article 11
Financial Covenants.
(c) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or
remedy of any Bank or the Agent under any of the Facility
Documents, nor constitute a waiver of any provisions of any of the
Facility Documents.
SECTION 4. COSTS, EXPENSES AND TAXES. The Borrowers agree
to pay on demand all reasonable costs and expenses of the Banks
and/or Agent in connection with the preparation, reproduction,
execution and delivery of this Amendment and the other instruments
and documents to be delivered hereunder, including the fees and
out-of-pocket expenses of counsel for the Agent, with respect
thereto.
SECTION 5. GOVERNING LAW. This Amendment shall be governed
by and construed in accordance with the laws of the State of New
York.
SECTION 6. HEADINGS. Section headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose.
SECTION 7. COUNTERPARTS. This Amendment may be executed in
any number of counterparts and by different parties to this
Amendment in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together
shall constitute one and the same agreement.
[Intentionally Left blank]
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized as of the date first above written.
BISCAYNE APPAREL, INC.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
BISCAYNE APPAREL INTERNATIONAL,
INC.
By:
Name: Peter Vandenberg, Jr.
Title: Vice President
MACKINTOSH OF NEW ENGLAND CO.
By:
Name: Peter Vandenberg, Jr.
Title: Vice President
M & L INTERNATIONAL, INC.
By:
Name: Peter Vandenberg, Jr.
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.,
As Agent
By:
Name:
Title:
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized as of the date first above written.
BISCAYNE APPAREL, INC.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
BISCAYNE APPAREL INTERNATIONAL,
INC.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
MACKINTOSH OF NEW ENGLAND CO.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
M & L INTERNATIONAL, INC.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.,
As Agent
By:
Name:
Title:
THE CHASE MANHATTAN BANK, N.A., as a
Bank
By:
Name:
Title:
CORESTATES BANK, N.A.
By:
Name:
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:
Name:
Title:
NATWEST BANK N.A.
By:
Name:
Title:
EXHIBIT 10.29
FOURTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
FOURTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER dated as of
February 14, 1996 ("Fourth Amendment and Waiver") among Biscayne
Apparel, Inc., a Florida corporation, Biscayne Apparel
International, Inc., a Delaware corporation, Mackintosh of New
England Co., a Delaware corporation, and M & L International,
Inc., an Illinois corporation, (individually a "Borrower" and
collectively the "Borrowers"), The Chase Manhattan Bank, N.A.,
Corestates Bank, N.A., The First National Bank of Boston and
Natwest Bank, N.A. (individually, a "Bank" and collectively, the
"Banks") and The Chase Manhattan Bank, N.A., as agent for the Banks
(in such capacity, together with its successors in such capacity,
the "Agent").
PRELIMINARY STATEMENT. The Borrowers, the Banks and the Agent
have entered into a Credit Agreement dated as of March 16, 1995, as
amended by the First Amendment to Revolving Credit and Term Loan
Agreement dated as of June 1, 1995, as further amended by the
Second Amendment to Revolving Credit and Term Loan Agreement dated
as of November 1, 1995, and as further amended by the Amendment to
Credit Agreement dated as of January 31, 1996 ("January Amendment")
(as so amended, the "Credit Agreement"). Any term used in this
Fourth Amendment and Waiver and not defined in this Fourth
Amendment and Waiver shall have the meaning assigned to such term
in the Credit Agreement.
The Borrowers, the Banks and the Agent have agreed to amend
and waive certain provisions of the Credit Agreement as hereinafter
set forth.
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit
Agreement is, effective as of this date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 4
hereof, hereby amended as follows:
(a) The definition of "Permitted Overadvance" in Section
1.01 is amended in full to read as follows:
" 'Permitted Overadvance' means, (a) with
respect to the Aggregate Borrowing Base (i)
during the month of January, 1996, One Million
Six Hundred Thousand Dollars ($1,600,000),
(ii) during the month of February, 1996, One
Million Seven Hundred Thousand Dollars
($1,700,000) and, (b) with respect to the
Direct Debt Borrowing Base (i) during the
month of January, 1996, Four Million Seven
Hundred Thousand Dollars ($4,700,000), (ii)
during the month of February, 1996, Five
Million Three Hundred Fifty Thousand Dollars
($5,350,000)."
(b) Section 3.01, LETTERS OF CREDIT, is amended by
deleting the provision added at the end of the first paragraph of
such Section which begins with the following: "Notwithstanding
anything to the contrary contained in this Agreement."
SECTION 2. AMENDMENT TO JANUARY AMENDMENT. The January
Amendment is, effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 4
hereof, hereby amended as follows:
"Section 4. COSTS, EXPENSES AND TAXES, is amended
by adding 'reasonable' before 'costs' in the second line
thereof."
SECTION 3. WAIVER. Each Borrower has not complied with (i)
Section 9.09(l), REPORTING REQUIREMENTS, of the Credit Agreement by
its failure to deliver to each of the Banks a Borrowing Base
Certificate by January 20, 1996 for the month ended December 31,
1995 and such noncompliance creates an Event of Default under the
Credit Agreement (the "Borrowing Base Default"), and (ii) Sections
2.01(a), THE LOANS, and 2.07(a), MANDATORY PREPAYMENTS AND CLEAN
DOWN, of the Credit Agreement by maintaining an overadvance on the
Direct Debt Borrowing Base in an amount equal to Three Million Five
Hundred Fifty Thousand Dollars ($3,550,000) during the month of
December, 1995 and such noncompliance creates Events of Default
under the Credit Agreement (the "Overadvance Defaults").
Each Borrower has requested that each Bank waive the Borrowing
Base Default and the Overadvance Defaults. Upon the satisfaction
of the conditions precedent set forth in Section 4 hereof, each
Bank waives each such Event of Default. None of the Banks waive
any future noncompliance with Sections 2.01(a), 2.07(a), or
9.09(l), including without limitation, none of the Banks waive any
noncompliance by any Borrower with Sections 2.01(a) or 2.07(a) as
of January 31, 1996.
SECTION 4. CONDITIONS OF EFFECTIVENESS. This Fourth
Amendment and Waiver shall become effective on the date on which
each Borrower, each Bank and the Agent shall each have executed and
delivered this Fourth Amendment and Waiver.
SECTION 5. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS.
(a) Upon the effectiveness of Section 1 hereof, on and after the
date hereof each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference in the other Facility Documents to the
Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except (1) that the Borrowers may no longer have
Eurodollar Loans outstanding under the Credit Agreement and, (2) as
specifically amended above, the Credit Agreement and the Notes, and
all other Facility Documents, shall remain in full force and effect
and are hereby ratified and confirmed. Also, the providing of any
Loans, Letters of Credit or Letters of Indemnity prior to or after
the date of this Fourth Amendment and Waiver while a Default or
Event of Default was or is outstanding does not constitute a waiver
of any rights or remedies available to the Agent or the Banks due
to the occurrence of such Default or Event of Default. Finally,
the providing of any Loans, Letters of Credit or Letters of
Indemnity prior to the receipt by each of the Banks of the
financial statements required under subsection (a) of Section 9.09
REPORTING REQUIREMENTS shall not constitute a waiver of any of the
rights and remedies available to the Agent and the Banks if the
Borrowers are not in compliance with any or all of the Financial
Covenants set forth in Article 11 FINANCIAL COVENANTS.
(c) The execution, delivery and effectiveness of this
Fourth Amendment and Waiver shall not, except as specifically
provided above, operate as a waiver of any right, power or remedy
of any Bank or the Agent under any of the Facility Documents, nor,
except as specifically provided above, constitute a waiver of any
provision of any of the Facility Documents.
SECTION 6. COSTS, EXPENSES AND TAXES. The Borrowers agree
to pay on demand all reasonable costs and expenses of the Banks
and/or Agent in connection with the preparation, reproduction,
execution and delivery of this Fourth Amendment and Waiver and the
other instruments and documents to be delivered hereunder,
including the fees and out-of-pocket expenses of counsel for the
Agent, with respect thereto.
SECTION 7. GOVERNING LAW. This Fourth Amendment and Waiver
shall be governed by and construed in accordance with the laws of
the State of New York.
SECTION 8. HEADINGS. Section headings in this Fourth
Amendment and Waiver are included herein for convenience of
reference only and shall not constitute a part of this Fourth
Amendment and Waiver for any other purpose.
SECTION 9. COUNTERPARTS. This Fourth Amendment and Waiver
may be executed in any number of counterparts and by different
parties to this Fourth Amendment and Waiver in separate
counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment and Waiver to be executed by their respective officers
thereunto duly authorized as of the date first above written.
BISCAYNE APPAREL, INC.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
BISCAYNE APPAREL
INTERNATIONAL, INC.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
MACKINTOSH OF NEW ENGLAND CO.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
M & L INTERNATIONAL, INC.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
THE CHASE MANHATTAN BANK,
N.A., As Agent
By:
Name: Elizabeth A. Burgess
Title: Vice President
THE CHASE MANHATTAN BANK,
N.A., as a Bank
By:
Name: Elizabeth A. Burgess
Title: Vice President
CORESTATES BANK, N.A.
By:
Name:
Title:
THE FIRST NATIONAL BANK OF
BOSTON
By:
Name: Katherine Steiger
Title: Vice President
NATWEST BANK N.A.
By:
Name: Anthony Santoro
Title: Vice President
EXHIBIT 10.30
FIFTH AMENDMENT TO CREDIT AGREEMENT
FIFTH AMENDMENT TO CREDIT AGREEMENT dated as of March 5, 1996
("Fifth Amendment") among Biscayne Apparel, Inc., a Florida
corporation, Biscayne Apparel International, Inc., a Delaware
corporation, Mackintosh of New England Co., a Delaware corporation,
and M & L International, Inc., an Illinois corporation,
(individually a "Borrower" and collectively the "Borrowers"), The
Chase Manhattan Bank, N.A., Corestates Bank, N.A., The First
National Bank of Boston and Natwest Bank, N.A. (individually, a
"Bank" and collectively, the "Banks") and The Chase Manhattan Bank,
N.A., as agent for the Banks (in such capacity, together with its
successors in such capacity, the "Agent").
PRELIMINARY STATEMENT. The Borrowers, the Banks and the Agent
have entered into a Credit Agreement dated as of March 16, 1995, as
amended by the First Amendment to Revolving Credit and Term Loan
Agreement dated as of June 1, 1995, as further amended by the
Second Amendment to Revolving Credit and Term Loan Agreement dated
as of November 1, 1995, as further amended by the Amendment to
Credit Agreement dated as of January 31, 1996, and as further
amended by the Fourth Amendment to Credit Agreement and Waiver
dated as of February 14, 1996 (as so amended, the "Credit
Agreement"). Any term used in this Fifth Amendment and not defined
in this Fifth Amendment shall have the meaning assigned to such
term in the Credit Agreement.
The Borrowers, the Banks and the Agent have agreed to amend
certain provisions of the Credit Agreement as hereinafter set
forth.
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit
Agreement is, effective as of this date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 2
hereof, hereby amended as follows:
(a) The definition of "Permitted Overadvance" in Section 1.01
is amended in full to read as follows:
"'Permitted Overadvance' means, (a) with respect to the
Aggregate Borrowing Base (i) during the month of January,
1996, One Million Six Hundred Thousand Dollars
($1,600,000), (ii) during the month of February, 1996,
One Million Seven Hundred Thousand Dollars ($1,700,000),
(iii) during the month of March, 1996, Six Million Five
Hundred Thousand Dollars ($6,500,000), and, (b) with
respect to the Direct Debt Borrowing Base (i) during the
month of January, 1996, Four Million Seven Hundred
Thousand Dollars ($4,700,000), (ii) during the month of
February, 1996, Five Million Three Hundred Fifty Thousand
Dollars ($5,350,000), (iii) during the month of March,
1996, Seven Million Two Hundred Thousand Dollars
($7,200,000)."
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Fifth
Amendment shall become effective on the date on which each
Borrower, each Bank and the Agent shall each have executed and
delivered this Fifth Amendment.
SECTION 3. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS.
(a) Upon the effectiveness of Section 1 hereof, on and after the
date hereof each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein" or words of like
import, and each reference in the other Facility Documents to the
Credit Agreement, shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except (1) that the Borrowers may no longer have
Eurodollar Loans outstanding under the Credit Agreement and, (2) as
specifically amended above, the Credit Agreement and the Notes, and
all other Facility Documents, shall remain in full force and effect
and are hereby ratified and confirmed. Also, the providing of any
Loans, Letters of Credit or Letters of Indemnity prior to or after
the date of this Fifth Amendment while a Default or Event of
Default was or is outstanding does not constitute a waiver of any
rights or remedies available to the Agent or the Banks due to the
occurrence of such Default or Event of Default. Finally, the
providing of any Loans, Letters of Credit or Letters of Indemnity
prior to the receipt by each of the Banks of the financial
statements required under subsection (a) of Section 9.09 REPORTING
REQUIREMENTS shall not constitute a waiver of any of the rights and
remedies available to the Agent and the Banks if the Borrowers are
not in compliance with any or all of the Financial Covenants set
forth in Article 11 FINANCIAL COVENANTS.
(c) The execution, delivery and effectiveness of this
Fifth Amendment shall not operate as a waiver of any right, power
or remedy of any Bank or the Agent under any of the Facility
Documents, nor constitute a waiver of any provision of any of the
Facility Documents.
SECTION 4. COSTS, EXPENSES AND TAXES. The Borrowers agree
to pay on demand all reasonable costs and expenses of the Banks
and/or Agent in connection with the preparation, reproduction,
execution and delivery of this Fifth Amendment and the other
instruments and documents to be delivered hereunder, including the
fees and out-of-pocket expenses of counsel for the Agent, with
respect thereto.
SECTION 5. GOVERNING LAW. This Fifth Amendment shall be
governed by and construed in accordance with the laws of the State
of New York.
SECTION 6. HEADINGS. Section headings in this Fifth
Amendment are included herein for convenience of reference only and
shall not constitute a part of this Fifth Amendment for any other
purpose.
SECTION 7. COUNTERPARTS. This Fifth Amendment may be
executed in any number of counterparts and by different parties to
this Fifth Amendment in separate counterparts, each of which when
so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be executed by their respective officers thereunto
duly authorized as of the date first above written.
BISCAYNE APPAREL, INC.
By:
Name: Peter Vandenberg Jr.
Title: Vice President
BISCAYNE APPAREL INTERNATIONAL,
INC.
By:
Name: Peter Vandenberg, Jr.
Title: Vice President
MACKINTOSH OF NEW ENGLAND CO.
By:
Name: Peter Vandenberg, Jr.
Title: Vice President
M & L INTERNATIONAL, INC.
By:
Name: Peter Vandenberg, Jr.
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.,
As Agent
By:
Name:
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.,
as a Bank
By:
Name:
Title: Vice President
CORESTATES BANK, N.A.
By:
Name:
Title:
THE FIRST NATIONAL BANK OF
BOSTON
By:
Name: Katherine Steiger
Title: Vice President
NATWEST BANK N.A.
By:
Name: Anthony Santoro
Title: Vice President
EXHIBIT 10.31
SUBLEASE
THIS SUBLEASE is made as of January 1, 1996 between RICHLAND
MILLS, INC., a Florida corporation, having an office at 3965 East
10 Court, Hialeah, FL 33014 ("Sublandlord"), and VARON,* a
corporation, having an office at 1 West 34th Street, New
York, NY 10016 ("Subtenant"). *a Division of Biscayne Apparel
International, Inc.
RECITALS
A. J.R. Realty Corporation, a Florida corporation, as
Landlord ("Landlord"), and Richland Mills, Inc., a Florida
corporation, as Tenant ("Sublandlord"), has entered into that
certain Warehouse Lease dated November 1, 1995 (the "Master
Lease"), whereby Landlord leased to Sublandlord and Sublandlord
leased from Landlord the property located at 1100 East 41st Street,
consisting of approximately 40,282 square feet of office/warehouse
space (the "1100 Building"), as well as the property located at
4005 East 10th Court, 3965 East 10th Court and 3925 East 10th
Court, Hialeah, Florida (collectively, the "Other Buildings") and
the land on which the 1100 Building and the Other Buildings are
situated (the "Land"). The 1100 Building, Other Buildings and Land
are collectively referred to in the Lease and in this Sublease as
the "Premises". The Master Lease, as modified and/or amended from
time to time in the future, is referred to in this Sublease as the
"Lease".
B. Sublandlord desires to sublease to Subtenant, and
Subtenant desires to hire from Sublandlord, a portion of the
Premises as more particularly described in this Sublease upon the
terms and conditions described in this Sublease.
Terms
In consideration of the mutual covenants and promises
contained in this Sublease and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged by Sublandlord and Subtenant, Sublandlord and
Subtenant agree as follows:
1. RECITALS. The foregoing recitals are true and are made
a part of this Sublease.
2. DEFINED TERMS. Unless otherwise defined in this Sublease
or unless the context requires otherwise, all capitalized terms
used in this Sublease shall have the meanings ascribed to them in
the Lease.
3. DEMISE. Sublandlord hereby leases to Subtenant, and
Subtenant hereby hires from Sublandlord, those certain premises
(the "Subleased Premises") consisting of 36,199 square feet of
warehouse space located in the northern portion of the 1100
Building, as more particularly depicted on Exhibit A attached to
and made a part of this Sublease. In addition, during the term of
this Sublease, Subtenant shall have a non-exclusive right to
pedestrian ingress to and egress from the Subleased Premises over
and across such portion of the Land as is necessary to have access
to the Subleased Premises identified in Exhibit A. Subtenant shall
have no other rights with respect to the Premises except as may
otherwise be specifically provided for by this Sublease.
4. ACCEPTANCE OF SUBLEASED PREMISES. Subtenant hereby
accepts the Subleased Premises in its "as is" condition.
5. CERTIFICATE OF OCCUPANCY. Prior to the Commencement
Date, as hereinafter defined, Subtenant shall obtain, at its own
cost and expense, any and all permits, licenses, and/or
certificates, of any kind or nature, from any and all authorities
having jurisdiction over the Subleased Premises, necessary or
required for the occupancy and use of the Subleased Premises as
provided for in this Sublease.
6. TERM. The term of this Sublease shall be for the period
of one (1) year ("Initial Term"), commencing on January 1, 1996
("Commencement Date") and ending on December 31, 1996 (the
"Expiration Date"). Subject to the terms and conditions set forth
in Section 11 of this Sublease, Subtenant shall have the Renewal
Option described in Section 11.
7. BASE RENT. Subtenant shall pay a base rent (the "Base
Rent") under this Sublease at an annual rate of $152,035.80 in
equal monthly installments of $12,669.65 in advance on the first
day of each month during the Initial Term of this Sublease. In
addition to the Base Rent and Additional Rent (as defined below),
Subtenant shall pay all applicable state and local sales tax
thereon. In the event this Lease commences on a date other than
the first day of the month or terminates on a date other than the
last day of the month, Subtenant shall be responsible for payment
of a prorated portion of the monthly Base Rent divided by the
number of days in the applicable calendar month.
8. ADDITIONAL RENT. In addition to the Base Rent, Subtenant
shall pay as additional rent (the "Additional Rent") during the
Initial Term and Option Term if any, when and as due and payable by
the Tenant under the Lease, Subtenant's proportionate share
("Subtenant's Share") of (i) increases in insurance premiums above
the 1995 premium charge as provided by Paragraph 9(c) of the Lease,
(ii) increases in Real Property Taxes above the 1994 amount as
provided by Paragraph 30 of the Lease, and (iii) any other sums due
under the Lease. The parties hereby agree that in the event any of
the foregoing expenses as billed relates only to the 1100 Building,
then Subtenant's Share shall be 89.9% (i.e., 36,199, being the
number of square feet of the Subleased Premises, divided by 40,282,
being the number of square feet in the 1100 Building). In the
event any of the foregoing expenses as billed relates to the 1100
Building and the Other Buildings, then Subtenant's Share shall be
24.1% (i.e., 36,199, being the number of square feet of the
Subleased Premises, divided by 150,034, being the total number of
square feet of the 1100 Building and the Other Buildings).
9. PAYMENT OF RENT. The Base Rent and the Additional Rent
shall be paid promptly when due, without notice or demand, and
without deduction, abatement, counterclaim, or setoff of any amount
or for any reason whatsoever. Each installment of Base Rent and
all payments of Additional Rent under this Sublease shall be paid
by Subtenant directly to Sublandlord in lawful money of the United
States to 3965 East 10 Court, Hialeah, FL 33014, or to such other
address as Sublandlord may from time to time designate by notice to
Subtenant.
10. SECURITY DEPOSIT. Subtenant, concurrently with the
execution of this Sublease, has deposited with Sublandlord the sum
of $25,000, the receipt of which is hereby acknowledged by
Sublandlord, which sum shall be retained by Sublandlord as security
for the payment by Subtenant of the rents agreed to be paid by
Subtenant and for the faithful performance by Subtenant of the
terms and covenants of this Sublease. Sublandlord, at
Sublandlord's option, may at any time apply said sum or any part
thereof toward the payment of the rents and all other sums payable
by Subtenant under this Sublease, and towards the performance of
each and every of Subtenant's covenants under this Sublease, but
such covenants and Subtenant's liability under this Sublease shall
thereby be discharged only pro tanto; that Subtenant shall remain
liable for any amounts that such sum shall be insufficient to pay;
that Sublandlord may exhaust any or all rights and remedies against
Subtenant before resorting to said sum, but nothing herein
contained shall require or be deemed to require Sublandlord so to
do; that, in the event this deposit shall not be utilized for any
such purposes, then such deposit shall be returned by Sublandlord
to Subtenant within ten days after the expiration of the term of
this Sublease. Sublandlord shall not be required to pay Subtenant
any interest on said security deposit and may commingle it with
other funds of Sublandlord. Subtenant shall have no right, title,
or interest of any kind with respect to Sublandlord's security
deposit described in the Lease.
11. RENEWAL OPTION.
(a) RENEWAL OPTION. Provided that (i) Subtenant is not
in default under any of the terms and conditions of this Sublease
on the date of exercise and the Option Commencement Date, as
hereinafter defined; (ii) Subtenant has, from the Commencement
Date, continuously occupied without interruption, sublease or
assignment, and does occupy not less than the entire Subleased
Premises; and (iii) Subtenant provides notice of its election in a
proper and timely fashion as set forth below, Subtenant shall have
the option (the "Renewal Option") to extend this Sublease for the
entire Subleased Premises for one (1) additional term of three (3)
years (the "Option Term") with such Option Term commencing
immediately upon the expiration of the Initial Term on January 1,
1997 ("Option Commencement Date") and ending on December 31, 1999
(the "Option Expiration Date").
(b) EXERCISE OF RENEWAL OPTION. In order to exercise
the Renewal Option, Subtenant must give Sublandlord written notice
(the "Renewal Notice") of its intention to exercise, with such
notice to be delivered to Sublandlord, in accordance with the
notice provision of the Sublease, not less than ninety (90) days
prior to the expiration of the Initial Term.
(c) TERMINATION OF RENEWAL OPTION. In the event
Subtenant at any time fails to deliver to Sublandlord such written
notice exercising the Renewal Option as specified herein, or
Subtenant is otherwise not permitted to exercise the Renewal Option
pursuant to other terms hereof, then the unexercised Renewal Option
shall terminate and be null and void and this Sublease shall expire
on the expiration date of the Initial Term.
(d) TERM OF RENEWAL OPTION. In the event Subtenant
exercises the Renewal Option, all of the terms of the Sublease,
including, but not limited to, Subtenant's obligation to pay
Additional Rent, shall continue to be applicable to such Option
Term.
(e) BASE RENT. Subtenant shall pay a base rent (the
"Base Rent") under this Sublease at an annual rate of $167,239.44
in equal monthly installments of $13,936.62 in advance on the first
day of each month during the Option Term of this Sublease.
(f) NO ASSIGNMENT OF OPTION. Sublandlord grants to
Subtenant the Renewal Option specifically due to the character and
nature of Subtenant. As such, the Renewal Option cannot be
separately transferred and if Subtenant shall, during the Lease
term or any extension thereof, assign or sublet any or all of the
Subleased Premises, then the Renewal Option shall not pass to such
assignees or sublessees and, instead, the theretofore unexercised
Renewal Option shall thereupon and thereafter be null, void and of
no further force or effect.
12. USE OF SUBLEASED PREMISES. The Subleased Premises shall
be used only for the cutting, sewing, storage and distribution of
garments, piece goods or related products. Subtenant shall comply
with any certificate of occupancy related to the Subleased Premises
and with all laws, statutes, ordinances, orders, rules, regulations
and requirements of all federal, state and municipal governments
and the appropriate agencies, officers, departments, boards and
commissions thereof, the board of fire underwriters and/or the fire
insurance rating organization or similar organization performing
the same or similar functions, and with all requirements of
Landlord's property and liability insurers, whether now or in the
future in force, applicable to the Subleased Premises.
13. INSURANCE. Subtenant shall maintain throughout the term
of this Sublease with respect to the Subleased Premises such
insurance as is required to be maintained by the Tenant under the
Lease with respect to the Premises. Subtenant shall also procure
hazard insurance covering the full replacement value of any
leasehold improvements made by Sublandlord or Subtenant to the
Subleased Premises. All insurance policies required under this
Sublease shall name Landlord and Sublandlord as additional
insureds, and evidence of same and the renewal of same shall be
delivered to Landlord in accordance with the provisions of the
Lease.
14. SERVICES. Subtenant shall not be entitled to any
facilities or utility or other services with respect to the
Subleased Premises except to the extent that the Lease may provide
for same to be provided generally to the Premises. Sublandlord and
Subtenant shall allocate between themselves the responsibility of
the payment of electricity and any other utilities, but such
allocation shall not affect in any way the joint and several
liability of each of them to Landlord as provided by Paragraph 20
of this Sublease.
15. MAINTENANCE. Subtenant shall be responsible for
maintaining and repairing the Subleased Premises, as well as all
leasehold improvements within the Subleased Premises, in accordance
with the provisions of the Lease concerning maintenance and repair
of the Premises by the Tenant under the Lease. In addition,
Subtenant shall be required to maintain at its sole expense at all
times during the term of this Sublease a maintenance contract on
the HVAC systems serving the Subleased Premises with Classic Air or
such other maintenance company as is satisfactory to Landlord in
Landlord's sole discretion. Prior to the Commencement Date,
Subtenant shall procure such maintenance contract and deliver a
copy of same to Landlord.
16. ALTERATIONS. Subtenant shall not make or cause, suffer
or permit the making of any alteration, addition, change,
replacement, installation, or addition in or to the Subleased
Premises without the prior written consent of Sublandlord and
consent of Landlord in accordance with the Lease. Neither
Sublandlord nor Subtenant shall make such alterations with respect
to any utilities servicing any part of the Premises without the
consent of Landlord as provided by the Lease.
17. ENVIRONMENTAL.
(a) Subtenant shall not use or suffer the Subleased
Premises to be used in any manner so as to create an environmental
violation or hazard, nor shall Subtenant cause or suffer to be
caused any chemical contamination or discharge of a substance of
any nature which is noxious, offensive or harmful or which under
any law, rule or regulation of any governmental authority having
jurisdiction constitutes a Hazardous Substance or Hazardous Waste.
Subtenant shall also immediately notify Landlord and Sublandlord in
writing of any environmental concerns relating to Hazardous
Substances or Hazardous Waste. Subtenant shall also immediately
notify Landlord and Sublandlord in writing of any environmental
concerns of which Subtenant is or becomes aware and which are
raised by any private party or government agency with regard to
each of the Environmental Laws. Subtenant shall also notify
Landlord and Sublandlord immediately of any spills or release of a
Hazardous Substance or Hazardous Waste at the Subleased Premises
and of any other hazardous substance or hazardous waste of which
Subtenant becomes aware. Not in limitation of the generality of
the foregoing, but as additional covenants, Subtenant specifically
agrees that (i) Subtenant shall not generate, manufacture, refine,
transport, treat, store, handle, dispose of or otherwise deal with
any Hazardous Substances or Hazardous Waste as now or hereafter
defined by applicable law; and (ii) Subtenant shall defend,
indemnify and hold Landlord and Sublandlord harmless against any
liability, loss, cost or expense, including reasonable attorneys'
fees and costs (whether or not legal action has been instituted) at
investigative, trial and appellate levels incurred by reason of the
existence of or any failure by Subtenant to comply with any
environmental law now or hereafter in effect. For the purposes
hereof, the phrase Hazardous Substance or Hazardous Waste includes
but is not limited to, (i) materials defined as "hazardous waste"
under the Federal Resource Conservation and Recovery Act and
similar state laws, (ii) "hazardous substances" as identified under
the Federal Comprehensive Environmental Response, Compensation and
Liability Act and as set forth in Title 40, Code of Federal
Regulations, Part 302, as amended, (iii) those elements or
compounds which are contained in the list of hazardous substances
adopted by the United States Environmental Protection Agency (the
"EPA") and the list of toxic pollutants designated by Congress or
the EPA or defined by any other federal, state or local statute,
law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct
concerning any hazardous, toxic, polluting or dangerous waste,
substance or materials, as such lists are now or at any time
hereafter in effect, (iv) asbestos and radon, (v) polychlorinated
biphenyl's, (vi) petroleum products, (vii) such other materials,
substances or waste which are otherwise dangerous, hazardous,
harmful or deleterious to human, plant or animal health or well
being.
(b) Subtenant shall fully cooperate in allowing, from
time to time, such examinations, tests, inspections, and reviews of
the Subleased Premises as Landlord or Sublandlord, each in its sole
and absolute discretion, shall determine to be advisable in order
to evaluate any potential environmental problems. Landlord and
Sublandlord expressly reserve the right to conduct examinations,
tests (including but not limited to a geohydrologic survey of soil
and subsurface conditions), inspections, and reviews of the
Subleased Premises as Landlord or Sublandlord, each in its sole and
absolute discretion may determine to be necessary.
(c) This Section shall survive termination of the
Sublease.
18. SUBORDINATION. This Sublease and the rights of Subtenant
under this Sublease and otherwise with respect to the Subleased
Premises are and shall at all times be subject and subordinate to
the Lease and to any mortgage, deed of trust, lease, or other
matter to which the Lease is or shall be subject and subordinate
from time to time.
19. INCORPORATION OF TERMS OF LEASE. Except for monetary
covenants and obligations of Sublandlord set forth in the Lease or
except for covenants or obligations inconsistent with the terms and
conditions expressed in this Sublease, the terms, covenants, and
conditions of the Lease are incorporated in this Sublease by
reference and Subtenant shall be bound by each and every term of
the Lease as they relate to the Subleased Premises, and as they
relate to the balance of the Premises with respect to Subtenant's
activities thereon. Subtenant shall not do any act which shall
constitute a breach of the Lease. If any of the express provisions
of this Sublease shall conflict with any of the provisions
incorporated by reference, such conflict shall be resolved in every
instance in favor of the express provisions of this Sublease.
20. JOINT AND SEVERAL LIABILITY. This Sublease shall in no
way release Sublandlord from the full performance of all of the
obligations of the Tenant under the Lease, including the payment of
all rent and additional rent as provided by the Lease, except and
only to the extent such obligations are actually performed by
Subtenant. Sublandlord and Subtenant shall be jointly and
severally liable to Landlord for the performance of the obligations
of the Tenant under the Lease as they relate to the Subleased
Premises and any additional obligations of Subtenant under this
Sublease, and Landlord shall not be required to look first to
either Sublandlord or Subtenant for such performance. Any notices
of default under the Lease or other notices given by Landlord under
the Lease shall be sent both to Sublandlord (in accordance with the
notice provisions of the Lease) and to Subtenant (in accordance
with the notice provisions of this Sublease).
21. LANDLORD'S RIGHTS AND REMEDIES. Nothing in this Sublease
shall be deemed to diminish or derogate from any of Landlord's
rights and remedies provided by the Lease or any of the Tenant's
obligations under the Lease, or extend or modify in any way any
times for performance (including cure periods, if any) of the
Tenant's obligations under the Lease. To the extent that this
Sublease creates any additional rights or remedies of Landlord,
Landlord shall be deemed a third-party beneficiary of this
Sublease.
22. NO PRIVITY OF ESTATE. Nothing contained in this Sublease
shall be construed to create privily of estate between Subtenant
and Landlord under the Lease. This Sublease shall for all purposes
be deemed a sublease and not an assignment or transfer of the
Lease.
23. NOTICES. All notices, consents, approvals, demands and
requests which are required or desired to be given by either party
to the other under this Lease shall be in writing and shall be sent
by United States registered or certified mail and deposited in a
United States post office, return receipt requested and postage
prepaid or by a courier or recognized overnight delivery service to
other party at the addresses set forth above.
24. BROKERAGE. Both Sublandlord and Subtenant represent that
except for The Fiur Organization, Inc., no broker, salesman, or
finder, or other person had any part, or was instrumental in any
way, in bringing about this Sublease. If a claim for brokerage in
connection with this Sublease is made by any broker, salesman, or
finder other than the above-named broker claiming to have dealt
through or on behalf of one of the parties (the "indemnitor"), the
indemnitor agrees to indemnify, defend and hold harmless the other
party and Landlord under the Lease (jointly, the "indemnities")
from and against any claims made by any broker or other person for
a brokerage commission, finder's fee, or similar compensation, by
reason of or in connection with this Sublease, and any loss,
liability, damage, cost and expense (including, without limitation,
reasonable attorneys' fees) in connection with such claims.
25. COMPLETE AGREEMENT. There are no representations,
agreements, arrangements, or understandings, oral or written,
between the parties related to the subject matter of this Sublease
which are not fully expressed in this-Sublease. This Sublease
cannot be changed or terminated orally or in any manner other than
by a written agreement executed by both parties and consented to in
writing by Landlord.
26. BINDING EFFECT. The provisions of this Sublease shall
extend to, bind, and inure to the benefit of, Sublandlord and
Subtenant and their respective legal representatives, successors,
and permitted assigns. Neither Sublandlord nor Subtenant shall
assign all or any part of this Sublease without the consent of the
other and without Landlord's consent, which may be arbitrarily
withheld. Subtenant shall not further sublet the Subleased
Premises or otherwise permit any other party to occupy the
Subleased Premises without Landlord's prior written consent, which
may be arbitrarily withheld. This Sublease shall have no effect
until Landlord shall have given its written consent to this
Sublease in accordance with the terms of the Lease.
27. SURVIVAL. Landlord's and Subtenant's obligations to
observe and perform the terms, covenants, conditions and agreements
in this Sublease shall survive the expiration or sooner termination
of this Sublease.
28. ATTORNEYS' FEES. In the event that any suit or other
legal proceeding is brought for the enforcement of any of the
provisions of this Sublease, the prevailing party shall be entitled
to recover from the other party reasonable attorneys' fees,
including attorneys' fees for any appeal, and costs incurred in
bringing such suit or proceeding.
29. TIME OF THE ESSENCE. Time shall be of the essence as to
all terms and conditions of this Sublease.
30. RADON GAS. Radon is a naturally occurring radioactive
gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to
it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from
your county public health unit.
31. WAIVER OF JURY TRIAL. SUBTENANT AND SUBLANDLORD HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY
HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS SUBLEASE, THE
LEASE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR SUBLANDLORD ENTERING INTO
THIS SUBLEASE WITH SUBTENANT.
IN WITNESS WHEREOF, Sublandlord and Subtenant have executed
this Sublease as of the day and year first above written.
Signed, sealed, and delivered
in the presence of: SUBLANDLORD:
RICHLAND MILLS, INC.,
Name: a Florida corporation
By:
Name: Name:
Title:
[CORPORATE SEAL]
SUBTENANT:
VARON,*
Name: a corporation
By:
Name: Name:
Title:
[CORPORATE SEAL]
*a Division of Biscayne Apparel
International, Inc.
CONSENT OF LANDLORD
A. J.R. Realty Corporation, a Florida corporation, as
Landlord ("Landlord"), and Richland Mills, Inc., a Florida
corporation, as Tenant ("Sublandlord"), has entered into that
certain Warehouse Lease dated November 1, 1995 (the "Master
Lease"), whereby Landlord leased to Sublandlord and Sublandlord
leased from Landlord the property more particularly described
therein.
Pursuant to the provisions of the Lease, J.R. REALTY
CORPORATION, a Florida corporation, hereby consents to the terms
and conditions of that Sublease between RICHLAND MILLS, INC., a
Florida corporation, and VARON,* a , corporation,
dated January 1, 1996 ("Sublease"); provided, however, that nothing
contained in the Sublease shall be deemed to release Sublandlord in
any way from the full performance of all of the obligations of the
Tenant under the Lease, nor shall Landlord's consent constitute a
waiver of any condition or covenant contained in the Lease,
including, but not limited to, the right of Landlord to require any
subsequent assignee, transferee, or sublessee to satisfy the
requirements contained in the Lease as a condition to any
assignment, transfer, or sublease. *a Division of Biscayne Apparel
International, Inc.
Signed, sealed, and delivered
in the presence of: SUBLANDLORD:
RICHLAND MILLS, INC.,
Name: a Florida corporation
By:
Name: Name:
Title:
EXHIBIT 10.32
LEASE CONTRACT
We, JUAN M. CANAHUATI, Businessman, married, Honduran, resident of
San Pedro Sula, acting as President of the Board of Directors and
Legal Representative of the merchantile society named as BUENA
VISTA EXPORT PROCESSING ZONE (ZIP BUENA VISTA, S.A.), constituted
under number Twenty-three (23), on the Third of August of Nineteen
Ninety-One, authorized before the Public Notary Sergio Zavala Leiva
and registered under number Ninety-Four (94) Tome One Hundred
Twenty-Five (125) of the Local Registry, who will from now on be
referred as THE LESSOR on one hand, and on the other hand Mr.
FREDERICK VINCENT KNOX, businessman, married from Maryland, U.S.A.,
in transit through this city, acting as President of Amy Industries
de Honduras, S.A. de C.V. that is properly registered under number
60 of Tome 189 of the Merchantile Registry, who will from now on be
referred to as THE LESSEE. Both parties being in full use of their
rights freely and spontaneously declare. FIRST: THE LESSOR
declares to be the owner of the property located in the
Municipality of Villanueva, Department of Cortes, in the place
known as Buena Vista Export Processing Zone (ZIP BUENA VISTA),
properly registered under number Ninety-four (94) of tome One
Hundred Twenty-Five (125) of the Property Registry, Mortgages and
Preventive Annotation of this Judicial Section where appears a
building described as J-2 who is duly authorized to operate through
the Export Processing Zone decree number 37-87 dated April 27, 1987
as granted in the Executive Agreement, number 40-92 of The Ministry
of Economy dated October 30, 1992. SECOND: The Lessor continues
stating that the building to lease has 2,403.461 square meters or
25,861.24 square feet which is being leased to AMY INDUSTRIES DE
HONDURAS, S.A. DE C.V. from June 10, 1995. Said building contains
the following specifications: BUILDING SPECIFICATIONS: The
building foundations consist of footings and perimetral beams of
reinforced concrete. The walls are of cement blocks of 15 cms. x
40 cms. of vibrated concrete, the walls and reinforced structure
are detailed on drawing #3 (Elevations). The production area,
mezzanine areas, and concrete slabs have metal columns of the type
indicated on drawing # 5 (Structural). The roof is also
constructed of metal structure and covered by fiber cement sheets,
the roof is design to support a total weight of 90 kilograms per
square meter (dead and live load). The floor is of tile of 25 cms.
x 25 cms. gray color in the production, cafeteria, restrooms and
miscellaneous areas, and in the office area the tile is of 30 X 30
cms. (blue-beige color). The foundation of the building consist
of reinforced concrete structure (footings for metal columns,
reinforced concrete columns for the office and cafeteria areas.)
All the reinforced concrete is mixed on site and tested in
compression cylinders, after 28 days its resistance is equal to
3000 pounds per square inch. The reinforced steel used is of grade
40. The ground has been compacted to support 12 tons per square
meter, as indicated on drawing #1 (Foundation). There are 7
drawings that describe the building which include: 1) Foundation,
2) Architectural Layout, 3) Elevations, 4) Plumbing, 5) Details
Layout, 6) Mezzanine, 7) Roof Structure. The building has the
following distribution: Office area, Production Area, Cafeteria,
Machine Room, Garbage Area, Rest Rooms. The building also includes
a mezzanine with an area of 526.063 square meters or (5660.437
square feet) built of metal structure with concrete floor with a
live load capacity of 90 pounds per square foot. The wood and
metal doors are described on drawing #5 (Details Layout). The
doors are made of hard wood with and without louvers of 0.94 mts.
by 2.05 mts. with brass accessories of 3 1/2" brass and latchkey
with lock. The private restrooms are of hard wood of 8 sections by
70 cms. width X 2.05 mts. height the other restroom doors are made
of plywood pine of 3/16 thick, the other type of windows (aluminum
and glass) for interior and exterior are described on drawing #5
(Details Layout). The plumbing consist of toilets (Incehsa
Standard or its equivalent) white and beige color, the white is
used in the production area, and the beige in the office areas.
White tile is used in the restrooms of the plant area as well as
the 15x15 cms. tile to cover the walls of these restrooms, and the
beige tile in the office area. The potable water piping is PVC
type SDR-26, with connection of 3/4" in diameters the toilet drain
systems is PVC SDR-41 with diameters 2", 4" and 6" as described on
drawing #4 (Plumbing). There are also 2 emergency doors on the
north side of the building, there are metal doors installed for the
kitchen exit, garbage, machine room, loading and unloading areas.
Also two roll-up doors 8 by 9 feet for the dock area. It includes
also a ramp with handrails made of galvanized piping 1 1/2" in
diameter and a concrete ramp with steps. In the porch at the main
entrance the ceiling made of hard wood and has a similar
architectural design as the other buildings in the park. The front
of the building includes parking spaces for compact cars, and in
the back of the building there two parking areas for loading and
unloading containers. The office walls are made of panelit 1.22
mts. x 3.04 mts. by 8 mm., its structure is made of pressure cured
pine wood. The paint used varies according to the area: Cements
blocks, finished areas, wood doors, metal doors, panelit, exterior,
etc. The building has metal gutters of 2 mm. thick by .30 by .25
mts. which drain to 4" SDR-41 downspouts connected to the gutters
with PVC adapters which drain to 8" SDR-41 main PVC collector. The
concrete slabs to support the air conditioning units are designed
to support these weights the floor of the slab has a 2% inclination
towards the metal gutter and PVC downspouts of the rain system
described on drawing #7 (Roof Structure). This concrete slab is
supported by H type steel columns, and have secondary structures
separated every 60 cms. which rest on its end on the H columns, the
concrete slabs are located above the miscellaneous, cafeteria,
kitchen and the office areas as indicated in the corresponding
drawing # 7 (Roof Structure). ELECTROMECHANICAL INSTALLATIONS: The
building is equipped with an air conditioning system which consist
of 4 units (Carrier) of 27.5 Tons each for the production area and
5 split units (Janitrol) of 5 Ton each, all units are installed
complete with duct work, difusers, extractors and accessories for
the office, cafeteria and maintenance areas. The drop ceiling
system consists of sections of 2'x4' of fiber ceiling material
(Orion 220) the crap ceiling structure is constructed with angles,
cross-tees, main-tees, above the drop ceiling is covered with
insulation material (type R-19) all this hangs from a structure
constructed with U angles of 1"x2"x3/16"x20', steel rod of 318" x
30', nuts of 3/8", angles of 2"x2"x1/4,x20. The electric
installations of the building include the following: 248 lamps
2x96 277V., 59 lamps 4x40 120 Volts, 7 lamps 2x40 120 Volts, 5
lamps 2x20 120 Volts., 2 panelboard 42 space 120/208 Volt, 1
panelboard 42 space 277/480 Volt., 1 panelboard 42 space 217/480
Volt., 1 panelboard 42 space 120/208 Volt, 1 panelboard 32 space
120/208 Volt, 1 Switchboard 3P4W 277/480 1200 Amps., 1 dry
transformer of 300 KVA480/208 120 Volts., 1 dry transformer of
112.5 KVA 480/208 120 Volts., 1 dry transformer of 45 KVA 480/208
120 Volts., 1 ABB transformer of 750 KVA 34.5 KV 480 Volts. All
the equipment is installed with accessories and electric cables.
The building also has a Flex-A-Power installation, which is located
below the drop ceiling hanging from the same structure, the system
consist of 19 lines of 8 rails of 10 feet long each making a total
of 150 rails, it also has 38 feed in boxes, end caps with screw,
coupling sets, rod and hangers. There are eight drawings that
describe the electromechanical installations: 1) Office Lighting,
2) Office Outlets, 3) Cafeteria Lighting, 4) Cafeteria Outlets, 5)
Air Conditioning, 6) Flex-A-Power Installations, 7) Production
Plant Lighting, 8) Electric Diagram. THIRD: Both parties have
agreed to formalize and in fact are formalizing the current lease
contract in accordance to the Export Processing Zone Law (Article
Number 10 Letter B) and adjusted to the following terms and
conditions a) THE LESSOR states that the leased building described
above will only be used for the specific activities regarding the
nature of the lessee's operation. The LESSEE is not entitled to
sublease, modify or make any type of construction without the
written consent of a representative of ZIP BUENA VISTA. Once a
written request is received by Zip Buena Vista this written consent
shall be answered within the following seven working days. THE
LESSOR also agrees that in the event that the company that has the
first lease option on the building of 25,861.24 sq.2 known as
building J-2 does not execute its option, AMY INDUSTRIES DE
HONDURAS, S.A. DE C.V. will have the first option on that building.
Also the Lessor states that it will make available a building of
approximately 44,000 sq.ft. no later than June 10 of 1996. THE
LESSOR also gives an option for a second building of approximately
44,000 sq.ft., nevertheless this option will have to be executed by
Lessee not later than April 10 of 1997 (10 months). b) The Lessee
will remit the amount of US$59,265.34 to the Bank Account Number
2189-770418414 at the First Union National Bank of Florida in favor
of Zip Buena Vista, this amount represents a five-month security
deposit, as a guarantee on the building, the deposit can be applied
to any delinquent rent under this lease. Of this deposit two
months will be credited to the 13th and 25th month rent
respectively. In the case that ZIP BUENA VISTA is to make total or
partial use of this security deposit the Lessee is committed to
replace the used amount. Likewise, the Lessor agrees once the
contract expires to return said deposit. c) The Lessor declares
that the lease term is fixed at FIVE YEARS counting from the day
the Lessor moves into building (J-2). C-1) The building has a
mezzanine and its construction cost is paid by the Lessee. THE
LESSOR agrees to return this amount to THE LESSEE at a depreciated
value at the end of the lease term, value to be based on a 15 year
period. C-2) The Lessor agrees to deliver the building (J-2) on
the date stipulated; any delay will exempt THE LESSEE from paying
the rent, on the building which is currently renting, known as
building (P-1) up to date that it is delivered. d) The Lessor
continues to state that the price of the rent is fixed at
US$11,853.06 per month equal to US$4.9316657 per square meter per
month to be deposited on or before the 5th of every month to the
account of ZIP BUENA VISTA, proof of payment will be the date that
appears on the wire transfer or deposit. A 2% interest per month
will be charged if there is a delay in payment, said interest will
not to be charged if the Lessee proves that the delay is justified
and out of his control. Such rent shall be increased on the fourth
and fifth anniversaries of the day THE LESSEE moves into the first
building such increase will be based on the Consumer Price Index
(all urban consumers) for the Miami, Florida U.S.A. metropolitan
area, as published by the United States Department of Labor (but in
any case not more than five percent per year). e) The delay in
payment of three consecutive monthly payments or the failure to
comply with any of the clauses mentioned will grant the Lessor
enough grounds to declare the lease terminated, and AMY INDUSTRIES
OF HONDURAS, S.A. DE C.V. will pay 50% of the rent due for the
period from the termination date to the expiration of the five year
lease term. f) During the term of this lease, Lessor agrees to
keep and maintain the foundation, structural supports, roof,
gutters and downspouts of the building in good condition and
repair. Lessor also agrees to keep and maintain all common areas
including perimeter lighting, roads and perimeter fencing in good
condition and repair. The Lessor states that he will provide the
Lessee with the installations for water, sewer system, electric
energy and telephone, being the payment at the last two
responsibility of the Lessee. The Lessor will also provide the
following services: 1) 24 hour perimeter security 7 days per week,
2) garbage collection, 3) maintenance of park grounds, 4) street
lighting, 5) customs, 6) potable water and for industrial use up to
13,200 gallons per day. 7) workforce recruitment assistance, and
other optional services as required. g) The Lessor is not
responsible for any inconvenience, loss or damage caused to the
Lessee or his property as consequence of a malfunction or any other
hazards due to the utility companies. h) The Lessor continues to
state that the insurance of the leased building will be covered by
the Lessor, but that such insurance will only and exclusively cover
the damages suffered to the Lessors property being the Lessee's
responsibility to cover the costs and damages caused to his
property or to third parties. i) The Lessor also states that none
of the parties will be responsible for damages arising out of acts
of war or acts of nature. j) The Lessor continues to state that
both parties can by mutual agreement terminate this lease without
any party being liable to complete the terms of the lease. In the
case of not reaching an agreement to terminate, the party that does
not comply with the lease will be responsible for reasonable
legal costs incurred to enforce the lease. There of shall be
resolved in San Pedro Sula in accordance with the arbitration of
the Chamber of Commerce and Industry of Cortes with representation
of the President of Zip Buena Vista or his Representative, the
President of Amy Industries de Honduras, S A. de C.V. or his
Representative and the President of The Chamber of Commerce and
Industry of Cortes or his Representative as a first step towards
resolving any dispute. k) The Lessor states that once the contract
has expired the Lessee is compelled to surrender the leased
building on the day of expiration in good condition acceptable by
the LESSOR, functional, broom clean and with the maintenance
required up to date except those which are due to structural
upkeep, defects or common area problems. The Lessee will be
responsible for payment of repairs to correct damages to the
building, installations and other property of the park caused by
the Lessee from abuse or negligence in their use, except those
produced by the normal wear of the building. l) At the expiration
of this Lease, Lessee shall have an option to renew this Lease on
the same terms and conditions set forth herein for a period of five
years from the date of expiration. Lessee may exercise this option
by giving written notice to Lessor at least 180 days prior to the
expiration date of the initial term. The rent to be paid by Lessee
during each of the first three years of the renewal term of five
years shall be the same as the rent paid by Lessee during the fifth
year of the initial lease contract. Such rent shall be increased
on the fourth and fifth anniversary of the renewal date such
increase will be based on the Consumer Price Index (all urban
consumers) for the Miami, Florida U.S.A. metropolitan area, as
published by the United States Department of Labor (but in any case
not more than five percent per year). m) In the case of not
reaching an agreement between the parties to renew, extend or sign
a new contract the Lessee must surrender the leased facilities in
compliance with the conditions states in letter "K" of this
document, in the event that this does not occur, the Lessee will be
subject to a fee of US$1,000.00 for every day he delays the
surrendering of the building. n) Everything contained in this
contract will be ruled by all the applicable provisions contained
in the Export Processing Zone Law, the Civil Code, The Commerce
Code, Zip Buena Vista Internal regulations and other related laws.
FOURTH: The Lessee states that he accepts this in all and each of
its parts, and accordingly commits itself to faithfully comply with
the same and for pertinent legal purpose, we the undersigned, with
the power indicated above, sign this contract in two copies of one
and the same tenor, one for each party. SIGNATURES FOLLOW.
MR. FREDERICK VINCENT KNOX MR. JUAN M. CANAHUATI
PRESIDENT PRESIDENT
AMY INDUSTRIES DE HONDURAS,
S.A. DE C.V. ZIP BUENA VISTA, S.A.
EXHIBIT 11
Biscayne Apparel, Inc.
Computation of Earnings (Loss) Per Share
(Dollars in Thousands, Except Per Share Amounts)
[CAPTION]
<TABLE>
<S> <C>
Years Ended December 31,
1995 1994 1993
Earnings (loss) before
cumulative effect of
change in accounting for
income taxes $ (6,127) $ 2,048 $ 3,687
Cumulative effect of change
in accounting for income
taxes - - 208
Net earnings (loss) $ (6,127) $ 2,048 $ 3,895
PRIMARY:
Common and common
equivalent shares:
Weighted average common
shares outstanding 10,733,551 9,179,461 8,899,032
Potential dilution upon
excercise of stock options
and warrants - 472,176 149,530
Shares used in computation
of earnings (loss) per common
share 10,733,551 9,651,637 9,048,562
PER SHARE AMOUNTS:
Earnings (loss) before
cumulative effect of change
in accounting for income
taxes $ (0.57) $ 0.21 $ 0.41
Cumulative effect of change
in accounting for income
taxes - - 0.02
Net earnings (loss) $ (0.57) $ 0.21 $ 0.43
FULLY DILUTED:
Common and common equivalent
shares:
Weighted average common
shares outstanding 10,733,551 9,179,461 8,899,032
Potential dilution upon
exercise of stock options
and warrants - 472,176 273,516
Shares used in computation
of earnings (loss) per common
share 10,733,551 9,651,637 9,172,548
PER SHARE AMOUNTS:
Earnings (loss) before
cumulative effect for
income taxes $ (0.57) $ 0.21 $ 0.40
Cumulative effect of
change in accounting
for income taxes - - 0.02
Net earnings (loss) $ (0.57) $ 0.21 $ 0.42
</TABLE>
EXHIBIT 21
Biscayne Apparel, Inc.
Subsidiaries of the Registrant
For the Year Ending December 31, 1995
Biscayne Apparel International, Inc., a Delaware corporation
d/b/a: Andy Johns Fashions International
Andy Johns Kids
KAOS
Varon, Inc.
Varon & Sons, Inc.
Amy Industries
Mackintosh of New England Co., a Delaware corporation
Mackintosh (UK) Limited, a United Kingdom corporation
Amy Industries De Honduras, S.A. de C.V., a Honduran corporation
M&L International, Inc., an Illinois corporation
Unidex Garmets (Philippines), Inc., a Philippine corporation
Watersports Garmet Manufacturing, Inc., a Philippine corporation
GES Sportswear Manufacturing Corporation, a Philippine
corporation
Teri Outerwear Manufacturing, Inc., a Philippine corporation
M&L Holding (Hong Kong) Limited, a Hong Kong corporation
EXHIBIT 24
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of Biscayne Apparel, Inc. and Subsidiaries on Forms S-8
and S-3 of our report dated February 23, 1996, except for the
first paragraph of Note 2, for which the date is March 27, 1996,
and Note 6, for which the date is March 28, 1996, on our audit of
the consolidated financial statements and financial statement
schedules of Biscayne Apparel, Inc. and Subsidiaries as of
December 31, 1995, and for the year then ended, which report is
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
COOPERS & LYBRAND LLP
Parsippany, New Jersey
March 28, 1996
