<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended JUNE 30, 1998
---------------------------
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
1373 BROAD STREET, CLIFTON, NEW JERSEY 07013
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
(973) 473-3240
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the
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 [ ]
At June 30, 1998, there were 10,771,622 outstanding shares of the
registrant's Common Stock, $0.01 par value.
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BISCAYNE APPAREL, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997.................... 2
Consolidated Statements of Operations
Six Months Ended June 30, 1998 and 1997................ 3
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1998 and 1997................ 4
Notes to Consolidated Financial Statements............. 5-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 7-10
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings............................. 11
Item 6 - Exhibits and Reports on Form 8-K.............. 11
Signatures............................................. 13
1
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BISCAYNE APPAREL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 205 $ 268
Trade accounts receivable, less allowances
of $1,476 in 1998 and $2,278 in 1997 ........... 12,756 13,509
Inventories ..................................... 26,670 17,258
Prepaid expenses and other ...................... 1,371 962
Federal income tax receivable ................... -- --
-------- -------
Total current assets ......................... 41,002 31,997
Property, plant and equipment, less
accumulated depreciation of $2,846 in 1998
and $2,517 in 1997 .............................. 2,631 2,739
Other assets, net ................................. 210 81
-------- -------
$ 43,843 $34,817
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................ $ 8,216 $ 4,320
Accrued liabilities ............................. 3,228 4,878
Notes payable to banks .......................... 21,179 6,855
Current portion of long-term debt ............... 2,500 2,000
-------- -------
Total current liabilities .................... 35,123 18,053
Subordinated notes ................................ 6,444 6,444
Long-term debt .................................... 280 2,500
Other liabilities ................................. -- 162
Commitments and contingencies ..................... -- --
Stockholders, Equity:
Preferred stock - par value $0.01;
5,000 shares authorized; no shares issued
Common stock - par value $0.01; 25,000,000 shares
authorized; 10,771,622 and 10,771,308 shares
outstanding at June 30, 1998 and
December 31, 1997, respectively.................. 108 108
Additional paid-in capital......................... 26,610 26,610
Accumulated deficit ............................... (24,722) (19,060)
-------- -------
1,996 7,658
-------- -------
Total stockholders' equity ................... $ 43,843 $34,817
======== =======
</TABLE>
See accompanying notes.
2
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BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales ........................................... $ 14,517 $ 12,845 $ 25,828 $ 27,694
Operating costs and expenses:
Cost of goods sold ................................ 11,880 9,824 20,782 20,861
Selling, general and administrative ............... 4,623 4,791 9,182 9,738
------------ ------------ ------------ ------------
Operating loss ...................................... (1,986) (1,770) (4,136) (2,905)
Other income and (expenses):
Interest and other expenses ........................ (870) (707) (1,530) (1,262)
Interest and other income .......................... -- 8 4 21
------------ ------------ ------------ ------------
Loss before income tax provision (benefit) .......... (2,856) (2,469) (5,662) (4,146)
Income tax provision (benefit) ...................... 903 (1,011) -- (1,578)
------------ ------------ ------------ ------------
Net loss ............................................ $ (3,759) $ (1,458) $ (5,662) $ (2,568)
============ ============ ============ ============
Basic and diluted loss per common share ............. $ (0.35) $ (0.14) $ (0.53) $ (0.24)
============ ============ ============ ============
Shares used in computing basic and diluted loss
per common share ................................... 10,771,662 10,762,895 10,771,622 10,753,037
============ ============ ============ ============
</TABLE>
See accompanying notes.
3
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BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
Operating activities:
Net loss ...................................................... $ (5,662) $ (2,568)
Adjustments to reconcile net loss to net cash
used in operating activities:
Loss on sale of assets ...................................... -- 3
Depreciation expense ........................................ 328 288
Amortization expense ........................................ (9) 73
Amortization of unearned stock award compensation ........... -- 34
Amortization of warrant costs ............................... 35 104
Provision for losses and sales allowances on receivables .... 1,274 1,312
(Increase) decrease in operating assets:
Trade accounts receivable .................................... (521) 1,432
Inventories .................................................. (9,412) (13,476)
Prepaid expenses and other ................................... (409) 105
Federal income tax receivable ................................ -- (1,552)
Other assets ................................................. (155) (116)
Increase (decrease) in operating liabilities:
Accounts payable ............................................. 3,896 4,642
Accrued liabilities .......................................... (1,643) (2,048)
Other liabilities ............................................ 153 (115)
-------- --------
Net cash used in operating activities ...................... (12,125) (11,882)
Investing activities:
Capital expenditures .......................................... (220) (179)
-------- --------
Net cash used in investing activities ....................... (220) (179)
Financing activities:
Payments under notes payable to banks ......................... (26,141) (9,258)
Borrowings under notes payable to banks ....................... 40,465 23,079
Principal payments under term loan ............................ (2,000) (1,750)
Principal payments of long-term debt and capital leases ....... (42) (42)
Proceeds from exercise of employee stock options .............. -- 18
-------- --------
Net cash provided by financing activities ................... 12,282 12,047
Net decrease in cash and cash equivalents ...................... (63) (14)
Cash and cash equivalents at beginning of year ................. 268 327
-------- --------
Cash and cash equivalents at end of period ..................... $ 205 $ 313
======== ========
Interest expense paid ......................................... $ 1 ,464 $ 1,142
Income taxes paid ............................................. $ 12 $ --
</TABLE>
See accompanying notes.
4
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BISCAYNE APPAREL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements,
which are for an interim period, do not include all
disclosures provided in the annual consolidated financial
statements. These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial
statements and the footnotes with respect thereto, contained
in the Biscayne Apparel, Inc., ("Company") 1997 Annual Report
on Form 10-K.
The consolidated financial statements of the Company include the
accounts of the parent company, and its wholly-owned subsidiaries,
Biscayne Apparel International, Inc. ("BAII"), and M&L International,
Inc. ("M&L") 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. Through
December 31, 1997, BAII operated through two divisions, Andy Johns
Fashions International ("Andy Johns") and Varon, and its wholly-owned
subsidiaries, Mackintosh of New England Co., ("Mackintosh") Mackintosh
(U.K.) Limited, and Amy Industries De Honduras, S.A. de C.V. As of
January 1, 1998, the assets, liabilities and operations of Andy Johns
were contributed by BAII into Mackintosh. All material intercompany
balances and transactions have been eliminated. Certain amounts
included in prior period financial statements have been reclassified to
conform with the 1998 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. The most significant
assumptions and estimates relate to sales allowances, inventory
reserves, and recoverability of assets. Actual results could differ
from those estimates.
2. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of the financial
statements.
3. The results of operations for the six month periods ended June 30, 1998
and 1997 are not necessarily indicative of the results to be expected
for the full year.
5
<PAGE> 7
4. Effective for the year ending December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128 "Earnings Per
Share" ("FAS No. 128") which requires the presentation of basic
earnings per share ("Basic EPS"), and diluted earnings per share
("Diluted EPS"). Basic EPS excludes dilution and is computed by
dividing net income (loss) by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the dilutive
effect if securities or other contracts to issue common stock were
exercised or converted. FAS No. 128 requires the restatement of all
prior period earnings per share data presented including interim
periods.
The numerator and denominator of the basic and dilutive per share
computations are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
------------------------------- -------------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Numerator: Net Loss $ (3,759) $ (1,458) $ (5,662) $ (2,568)
Denominator:
Shares
Outstanding 10,771,622 10,762,895 10,771,622 10,753,037
Basic and Dilutive
Net Loss Per Share $ (0.35) $ (0.14) $ (0.53) $ (0.24)
</TABLE>
The Company has not included potential common shares in the Diluted EPS
computation as the result is antidilutive.
Options and warrants to purchase 1,311,838 and 982,903 shares of common
stock at prices ranging from $0.75 to $2.44 per share were outstanding
at June 30, 1998 and 1997, respectively. These shares were not included
in the computation of Diluted EPS because the options' exercise price
was greater than the average market price of the common shares. The
options outstanding at June 30, 1998 expire from November 1998 to
November 2007.
5. Inventories at June 30, 1998 and December 31, 1997 are comprised of the
following:
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
Raw materials $ 6,423,000 $ 4,067,000
Work-in-process 4,315,000 1,944,000
Finished goods 15,932,000 11,247,000
----------- -----------
$26,670,000 $17,258,000
=========== ===========
6. Included in accounts payable at June 30, 1998 and June 30, 1997 are the
Company's obligations under outstanding letters of credit of $3,532,000
and $3,761,000, respectively.
6
<PAGE> 8
7. On March 25, 1998 Biscayne amended its Loan Agreement to reduce the
Revolver Agreement to $39,000,000; adjust the interest rate for the
Revolver Agreement borrowings to prime plus 1.5%, require fees of
$350,000 for the period March 1998 to March 1999 and waive violations
of certain covenants during the 1997 period. Additionally, if certain
Revolver borrowing levels are exceeded beginning in the 1998 fourth
quarter, the interest rates for the Revolver are increased to prime
plus 3% and the interest rate for the Term Loan is increased to prime
plus 3% or LIBOR plus 5.5%.
8. In June 1997, Statement of Financial Accounting Standards No. 131
"Disclosures about Segments of an Enterprise and Related Information"
was issued, effective for the fiscal year ending December 31, 1998.
Earlier adoption for interim periods is not required, and the Company
is currently evaluating the financial statement impact.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1998 VERSUS QUARTER ENDED JUNE 30, 1997:
Net sales for the second quarter of 1998 were $14,517,000, which exceeded the
second quarter 1997 sales by 13%. The increase was the result of a sales
increase at M&L offset by slight sales decreases at Mackintosh and Varon. Second
quarter sales typically approximate 10-15% of total year sales, due to the
Company's seasonal business.
Cost of goods sold, as a percentage of net sales was 82% versus 76% for the
quarter ended June 30, 1998 and 1997, respectively. The increase is primarily
due to higher costs of production at Varon.
Selling, general and administrative expenses ("S,G&A") as a percentage of net
sales decreased to 32% in 1998 from 37% in 1997. This decrease is a result of
management's continuous efforts to reduce costs.
OTHER
Interest and other expense for the quarter ended June 30, 1998 increased to
$870,000 from $707,000 in the 1997 second quarter due to higher borrowings.
7
<PAGE> 9
SIX MONTHS ENDED JUNE 30, 1998 VERSUS SIX MONTHS ENDED JUNE 30,
1997:
Net sales for the first six months of 1998 decreased to $25,828,000 from the
first six months of 1997 sales of $27,694,000. The 7% decrease was due to soft
spring sales at Mackintosh and Varon. First half sales are historically low, due
to the Company's seasonal business.
Consolidated sales backlog at July 17, 1998 was $45,585,000, compared to
$62,294,000 at July 16, 1997. The decrease of 27% is largely due to decreased
sales backlog in each of the Company's operating units.
Cost of goods sold, as a percentage of net sales, was 80% versus 75% for the six
months ended June 30, 1998 and 1997, respectively. The increase is mainly
attributable to higher costs of production at Varon.
S,G&A decreased to $9,182,000 for the six months ended June 30, 1998, compared
to $9,738,000 in 1997. This 6% decrease results from further cost reductions,
particularly in Mackintosh, and lower sales volume.
During the fourth quarter of 1996, the Consumer Product Safety Commission
("CPSC") issued 1998 rules for the manufacturing of all cotton thermal and long
underwear products. These rules have had two effects: i) sleepwear manufacturers
are now able to produce their products in cotton, and ii) such cotton sleepwear
products now have to be "tight fitting". As a result of these regulations, the
Company expects significant changes in Varon's competitive environment related
to such products. The impact on Varon's market position is unknown. Varon could
face the following: i) a decrease in market share due to increased competition
from sleepwear manufacturers, and ii) a potential market shift, from customers
who previously purchased sleepwear when it was not required to be "tight
fitting", now purchasing other products. Alternatively, Varon may be able to
increase its market share of newly-approved cotton sleepwear, due to its current
expertise in manufacturing, if it can take away market share from heretofore
non-cotton sleepwear product sales. These regulations could impact up to
one-third of Varon's revenues.
OshKosh B'Gosh, Inc. ("OshKosh") notified M&L during the second quarter of 1997
that it will not renew its outerwear license with M&L after May 31, 1998. As
part of a strategy adopted over the last several years, OshKosh will sell
directly to retailers. For the six months ended June 30, 1998 and 1997, M&L's
sales of OshKosh outerwear were $9,336,000 and $5,290,000 respectively, and for
the year ended December 31, 1997 M&L's sales of OshKosh outerwear were
$19,888,000. M&L's strategy is to replace the OshKosh brand sales of outerwear
with several well-known brand name children's outerwear and activewear licenses.
It is unknown whether M&L's strategy will be successful in replacing such levels
of OshKosh sales and related margins in the future.
8
<PAGE> 10
The apparel industry is 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.
Certain information included herein contains forward-looking statements which
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from the
forward- looking statements. Those risks include, but are not limited to,
product acceptance and availability, changes in the level of consumer demand
and/or spending, fashion trends, weather patterns, further governmental
regulations, etc. All forward-looking statements should be considered in light
of these risks and uncertainties.
OTHER
Interest and other expenses for the six months ended June 30, 1998 increased to
$1,530,000 from $1,262,000 for the comparable period of 1997. The increase is
primarily due to higher borrowings.
INCOME TAXES
For the six months ended June 30, 1998, the Company recorded valuation
allowances relating to deferred tax assets and Federal and state net operating
loss carryforwards, due to the Company sustaining operating losses. Any future
tax provisions would be offset against such valuation allowances and net
operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $205,000 and $268,000 at June 30, 1998 and
December 31, 1997, respectively. At June 30, 1998, the Company's working capital
was $5,879,000, representing a current ratio of 1.17 to 1. This compares to
working capital of $13,944,000 and a current ratio of 1.77 to 1 at December 31,
1997. These changes are due to seasonal reductions of accounts receivable,
increased inventories, increased bank debt and operating losses sustained.
As presented in the Consolidated Statements of Cash Flows for the six months
ended June 30, 1998, the increase in inventories of $9,412,000 and accounts
payable of $3,896,000 and the decrease in accrued liabilities of $1,643,000 are
due to the seasonality of the Company's operations. On March 31, 1998 the
Company repaid $2,000,000 of its long-term debt.
Capital expenditures for the six months ended June 30, 1998 increased to
$220,000 from $179,000 in 1997. The increase is mainly attributable to increased
leasehold improvements at Mackintosh offset by decreased equipment expenditures
at M&L.
9
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The Company expects that cash on hand, cash from operations, and borrowings
under its revolving credit agreement will be sufficient to fund current
operations and to enable the Company to meet its obligations as they become due.
EFFECT OF INFLATION AND SEASONALITY
The Company believes that inflation will not significantly effect 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 increases in wool
and cotton costs over the last several years, the Company has increased offshore
production.
Sales of women's and children's outerwear are seasonal. Historically,
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 consumer reactions to weather patterns,
which have had a material effect on the Company's sales and profitability in the
past.
10
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is, from time to time, involved in routine
litigation. None of such litigation in which the Company is presently involved
is material to its financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
a) The Registrant held its Annual Meeting of Shareholders on June
3, 1998.
b) Not required.
c) The matter voted on at the Annual Meeting of Shareholders, and
the tabulation of votes on such matter is as follows:
1. ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
BROKER
NAME FOR WITHHELD NON-VOTES
<S> <C> <C> <C>
Harold E. Berritt 8,062,141 348,792 -0-
Phillip T. George, M.D 8,073,138 337,795 -0-
Joseph B. Gildenhorn 8,073,210 337,723 -0-
Kurt C. Gutfreund 8,072,108 338,825 -0-
R. Stephen Lefler 8,064,728 346,205 -0-
James J. Pinto 8,064,800 346,133 -0-
Earl Powell 8,073,066 337,867 -0-
Peter Vandenberg, Jr 8,073,138 337,795 -0-
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
10.1 Fifth Amendment and Waiver to Second Amended and
Restated Credit Agreement and Guaranty dated as of June
8, 1998 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 and Milberg Factors,
Inc. as Servicing Agent.
10.2 Second Amendment to Stock Purchase Warrants certificate
numbers W-1 through W-5 issued March 28, 1996 dated as
of June 4, 1998 between the Registrant and The Chase
Manhattan Bank, Corestates Bank, N.A., BankBoston, N.A.,
Fleet Bank, N.A. and Milberg Factors, Inc.,
respectively.
11
<PAGE> 13
10.3 Security Agreement and Mortgage-Trademarks Agreement,
dated as of March 25, 1998, between Mackintosh of New
England Co. and The Chase Manhattan Bank.
11 Computation of Per Share Earnings
27 Financial Data Schedule
b) Reports on Form 8-K:
During the quarter for which this Quarterly Report on Form
10-Q is filed, the Registrant filed a current report on Form
8-K, dated June 16, 1998.
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
BISCAYNE APPAREL, INC.
Date: August 13, 1998 By: /s/ Earl W. Powell
--------------------------------------
Earl W. Powell
Chairman of the Board and Chief
Executive Officer
Date: August 13, 1998 By: /s/ Peter Vandenberg, Jr.
--------------------------------------
Peter Vandenberg, Jr.
President, Chief Operating Officer,
Treasurer and Chief Financial
Officer
13
<PAGE> 1
EXHIBIT 10.1
FIFTH AMENDMENT AND WAIVER TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND GUARANTY
FIFTH AMENDMENT AND WAIVER TO SECOND AMENDED AND RESTATED
CREDIT AGREEMENT AND GUARANTY (the "FOURTH AMENDMENT") dated as of June 8, 1998
among BISCAYNE APPAREL, INC., BISCAYNE APPAREL INTERNATIONAL, INC. MACKINTOSH OF
NEW ENGLAND CO. AND M & L INTERNATIONAL, INC. (individually, each a "BORROWER"
and collectively, the "BORROWERS" and individually, each a "GUARANTOR" and
collectively, the "GUARANTORS"), THE CHASE MANHATTAN BANK, CORESTATES BANK,
N.A., BANKBOSTON, N.A. (formerly known as The First National Bank of Boston),
FLEET BANK N.A. and MILBERG FACTORS, INC. (individually, each a "LENDER" and
collectively, the "LENDERS"), THE CHASE MANHATTAN BANK, as agent for the Lenders
(in such capacity, together with its successors in such capacity, the "AGENT")
and MILBERG FACTORS, INC., as servicing agent for the Lenders (in such capacity,
together with its successors in such capacity, the "SERVICING AGENT" and
together with the Agent, the "AGENTS").
PRELIMINARY STATEMENTS:
WHEREAS, the Borrowers, the Guarantors, the Lenders and the
Agents have entered into a Second Amended and Restated Credit Agreement and
Guaranty dated as of March 24, 1997, as amended by a First Amendment, dated as
of May 22, 1997, a Second Amendment, dated as of February 18, 1998, a Third
Amendment, dated as of March 6, 1998 and a Fourth Amendment, dated as of March
25, 1998 (as so amended, the "CREDIT AGREEMENT"); and
WHEREAS, the terms defined in the Credit Agreement are used in
this Fifth Amendment as in the Credit Agreement unless otherwise defined herein;
WHEREAS, the Borrowers and the Guarantors have requested that
certain provisions of the Credit Agreement be amended and certain Defaults and
Events of Default be waived as hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. PERMANENT WAIVER. Each Lender and each Agent hereby
waive (i) the non-compliance with the provisions contained in the definition of
Revolving Credit Loans Permitted Overadvance (Month End) which requires that the
aggregate outstanding amount of Revolving Credit Loans made to BAI as of May 31,
1998 which were used to finance Varon shall be less than the Eligible Accounts
of Varon included in the computation of the Collateral Borrowing Base as set
forth on the Reconciliation Report for the month ended May 31, 1998 in an amount
equal to or greater than $3,000,000 and (ii) the Event of Default arising as a
result of the failure by the Borrowers to make mandatary prepayments pursuant to
Section 2.08(ii) of the Credit Agreement following the occurrence of the
foregoing event.
<PAGE> 2
SECTION 2. LIMITED WAIVER. During the period June 1, 1998
through June 30, 1998 (the "WAIVER PERIOD"), each Lender and each Agent hereby
waive compliance with:
(i) the provisions contained in the definition of Revolving Credit
Loans Permitted Overadvance (During the Month) which requires
that the aggregate outstanding amount of Revolving Credit
Loans made to BAI during the month of June 1998 which are used
to finance Varon shall be less than the Eligible Accounts of
Varon included in the computation of the Collateral Borrowing
Base as set forth on the Reconciliation Report for the month
of June 1998 in an amount equal to or greater than $3,750,000;
PROVIDED, that the amount by which such Revolving Credit Loans
shall be less than such Eligible Accounts shall not be equal
to or greater than $4,500,000 during the Waiver Period;
(ii) the provisions contained in the definition of Revolving Credit
Loans Permitted Overadvance (During the Month) which requires
that the aggregate outstanding amount of Revolving Credit
Loans during the month of June 1998 shall be less than the
Eligible Accounts included in the computation of the
Collateral Borrowing Base as set forth on the Reconciliation
Report during the month of June 1998 in an amount equal to or
greater than $9,000,000; PROVIDED, that the amount by which
the Revolving Credit Loans shall be less than such Eligible
Accounts shall not be equal to or greater than $12,500,000;
and
(iii) the provisions contained in the definition of Revolving Credit
Loan Maximum Outstanding for the period June 1, 1998 through
June 30, 1998 which require that Revolving Loans should not
exceed $18,250,000 during such period, PROVIDED, that
Revolving Loans shall not exceed $25,000,000 during such
period.
SECTION 3. AMENDMENTS TO CREDIT AGREEMENT. Section 10.02 of
the Credit Agreement is amended by (i) adding the words "and Apparel" after the
phrase "guaranties by BAI" appearing in clause (b) of such section and (ii)
adding the following proviso at the end of such section immediately before the
period:
; PROVIDED, that any guaranty by Apparel shall be limited (i)
in the case of guaranties provided to Fortsmann Co. and
NationsBank, as factor for Warshaw Woolens, to $500,000 per
entity in respect of all extensions of credit by such
creditors and (ii) for all other entities to orders for the
purchase of raw materials which are placed on or after June 8,
1998.
SECTION 4. CONDITIONS OF EFFECTIVENESS TO THIS FIFTH
AMENDMENT. This Fifth Amendment shall become effective on the date on which each
of the following conditions have been satisfied or waived:
(i) the Borrowers, the Lenders and the Agents shall each have
executed and delivered this Fifth Amendment;
(ii) payment by the Borrower of all costs and expenses of the
Agents and the Lenders (including, without limitation,
reasonable attorneys' fees and expenses) incurred in
connection with this Fifth Amendment and the Credit Agreement;
and
2
<PAGE> 3
(iii) receipt of such other documents, opinions or agreements as
either of the Agents or any of the Lenders may reasonably
request.
SECTION 5. REFERENCE TO AND EFFECT ON THE FACILITY DOCUMENTS.
Upon the effectiveness of Section 4 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. Except as specifically amended above, the Credit
Agreement and all other Facility Documents shall remain in full force and effect
and are hereby ratified and confirmed. Except as specifically waived herein, the
execution, delivery and effectiveness of this Fifth Amendment shall not operate
as a waiver of any right, power or remedy of any Lender or Agent under any of
the Facility Documents, nor constitute a waiver of any provision of the Facility
Documents.
SECTION 6. RESERVATION OF RIGHTS. Each of the Borrower agrees
that notwithstanding any present decision of the Lenders and the Agents to waive
certain Events of Default and to waive compliance with certain provisions of the
Credit Agreement as provided in Sections 2 and 3 of this Fifth Amendment, such
course of conduct by the Lenders and the Agents and the execution and delivery
of this Fifth Amendment does not now, and will not in the future, constitute a
waiver by any such party of its right to exercise any of its rights and remedies
at any time now or in the future with respect to such Events of Default or any
other Event of Default. Each of the Borrowers further agrees that, in the
absence of an extension of the Waiver Period or other agreement waiving the
provisions specified in Section 2 hereof (or upon the occurrence of an Event of
Default), the Lenders and the Agents shall be entitled to exercise all rights
and remedies set forth in the Facility Documents which arise upon the occurrence
of an Event of Default relating to the provisions of the Credit Agreement which
are being waived during the Waiver Period (or any other Event of Default).
SECTION 7. REPRESENTATIONS AND WARRANTIES. The Borrowers
hereby represent and warrant that each of the representations and warranties
contained in Article 8 of the Credit Agreement and in each of the other Facility
Documents is true and correct as of the date hereof (provided that any
representations and warranties which speak to a specific date shall remain true
and correct as of such date).
SECTION 8. COSTS AND EXPENSES. The Borrowers agree to pay the
Agent, the Servicing Agent, and the Lenders on demand all costs, expenses and
charges, in connection with the preparation, reproduction, execution, delivery,
filing, recording and administration of this Fifth Amendment and any other
instruments and documents to be delivered hereunder, including, without
limitation, the fees and out-of-pocket expenses of counsel for the Agent, the
Servicing Agent, and each Lender with respect thereto and with respect to
advising the Agent, the Servicing Agent, and each Lender as to its rights and
responsibilities under such documents, and all costs and expenses, if any, in
connection with the enforcement of any such documents.
SECTION 9. GOVERNING LAW. This Fifth Amendment shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed wholly within such State.
3
<PAGE> 4
SECTION 10. 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 11. COUNTERPARTS. This Fifth Amendment may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument, and any party hereto may execute this Fifth Amendment
by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed as of the day and year first above written.
BISCAYNE APPAREL, INC.
By: /s/ Peter Vandenberg
-------------------------------------
Name: Peter Vandenberg
Title: President
BISCAYNE APPAREL INTERNATIONAL, INC.
By: /s/ Peter Vandenberg
-------------------------------------
Name: Peter Vandenberg
Title: President
MACKINTOSH OF NEW ENGLAND CO.
By: /s/ Peter Vandenberg
-------------------------------------
Name: Peter Vandenberg
Title: President
M & L INTERNATIONAL, INC.
By: /s/ Peter Vandenberg
-------------------------------------
Name: Peter Vandenberg
Title: President
4
<PAGE> 5
THE CHASE MANHATTAN BANK,
as Lender
By: /s/ John Murphy
------------------------------------
Name: John Murphy
Title: Vice President
MILBERG FACTORS, INC., as Lender
By: /s/ David J. Milberg
------------------------------------
Name: David J. Milberg
Title: Vice President
CORESTATES BANK, N.A., as Lender
By: /s/ Don D. Mishlien
------------------------------------
Name: Don D. Mishlien
Title: Vice President
BANKBOSTON, N. A., as Lender
By: /s/ Corrine M. Barrett
------------------------------------
Name: Corrine M. Barrett
Title: Vice President
FLEET BANK, N.A., as Lender
By: /s/ Amy H. Witryil
------------------------------------
Name: Amy H. Witryil
Title: Vice President
THE CHASE MANHATTAN BANK, as Agent
By: /s/ John Murphy
------------------------------------
Name: John Murphy
Title: Vice President
MILBERG FACTORS, INC., as
Servicing Agent
By: /s/ David J. Milberg
------------------------------------
Name: David J. Milberg
Title: Vice President
5
<PAGE> 1
EXHIBIT 10.2
SECOND AMENDMENT TO
STOCK PURCHASE WARRANT
SECOND AMENDMENT TO STOCK PURCHASE WARRANT certificate number
W-___ issued March 28, 1996 (the "AMENDMENT") dated as of June 4, 1998 between
BISCAYNE APPAREL, INC. (the "COMPANY"), and [BANK] (the "LENDER").
PRELIMINARY STATEMENTS:
WHEREAS, the Company and the Lender are party to that certain
Stock Purchase Warrant issued on March 28, 1996, certificate number W-_____ (as
amended by that certain First Amendment to Stock Purchase Warrant dated March
25, 1998 and as may be further amended from time to time, the "STOCK PURCHASE
WARRANT");
WHEREAS, the Company and the Lender are also party to that
certain Second Amended and Restated Credit Agreement and Guaranty, dated as of
March 24, 1997 among the Company, the financial institutions named therein, The
Chase Manhattan Bank, as Agent and Milberg Factors, Inc., as Servicing Agent as
amended by a First Amendment, dated as of May 22, 1997, a Second Amendment,
dated as of February 18, 1998, a Third Amendment, dated as of March 6, 1998 and
a Fourth Amendment, dated as of March 25, 1998 (as so amended and as may be
further amended from time to time, the "CREDIT AGREEMENT");
WHEREAS, the terms defined in the Credit Agreement are used in
this Amendment as in the Credit Agreement unless otherwise defined in this
Amendment;
WHEREAS, the Company and the Lender have agreed to amend
certain provisions of the Stock Purchase Warrant but only upon the terms and
conditions set forth herein;
NOW, THEREFORE, the Company and the Lender hereby agree as
follows:.
SECTION 1. AMENDMENTS TO STOCK PURCHASE WARRANT. The Stock
Purchase Warrant is, subject to the satisfaction of the conditions precedent set
forth in Section 2 hereof, hereby amended as follows:
The first paragraph of the Stock Purchase Warrant is hereby
amended by deleting the amount "$1.00" that is set forth in the sixth line of
such paragraph and inserting in lieu thereof the amount "$0.65".
SECTION 2. CONDITIONS OF EFFECTIVENESS TO THIS AMENDMENT. This
Amendment shall become effective on the date on which each of the following
conditions have been satisfied: (i) the Company and the Lender shall each have
executed and delivered this Amendment and (ii) receipt of such other documents,
opinions or agreements as the Lender may reasonably reques.
SECTION 3. REFERENCE TO AND EFFECT ON THE FACILITY DOCUMENTS.
Upon the effectiveness of Section 1 hereof, on and after the date hereof each
reference in the Stock Purchase
<PAGE> 2
Warrant to "this Warrant", "hereunder", "hereof", "herein" or words of like
import, and each reference in the other Facility Documents to the Stock Purchase
Warrant, shall mean and be a reference to the Stock Purchase Warrant as amended
hereby. Except as specifically amended above, the Stock Purchase Warrant and all
other Facility Documents shall remain in full force and effect and are hereby
ratified and confirmed. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of the
Lender under any of the Facility Documents or the Stock Purchase Warrant, nor
constitute a waiver of any provision of the Facility Documents or the Stock
Purchase Warrant.
SECTION 4. COSTS AND EXPENSES. The Company agrees to pay the
Lender on demand all costs, expenses and charges, in connection with the
preparation, reproduction, execution, delivery, filing, recording and
administration of this Amendment and any other instruments and documents to be
delivered hereunder, including, without limitation, the fees and out-of-pocket
expenses of counsel for the Lender with respect thereto and with respect to
advising the Lender as to its rights and responsibilities under such documents,
and all costs and expenses, if any, in connection with the enforcement of any
such documents.
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, all of which taken together shall constitute one and the
same instrument, and either party hereto may execute this Amendment by signing
any such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above written.
BISCAYNE APPAREL, INC.
By:
----------------------------------
Name:
Title:
[BANK]
as Lender
By:
----------------------------------
Name:
Title:
2
<PAGE> 1
EXHIBIT 10.3
SECURITY AGREEMENT AND MORTGAGE - TRADEMARKS
AGREEMENT, dated as of March 25, 1998, between MACKINTOSH OF NEW
ENGLAND, CO., a Delaware corporation (the "Grantor") having an office at 1373
Broad Street, 3rd Floor, Clifton, New Jersey 07013, and THE CHASE MANHATTAN BANK
having an office at 111 W 40th Street, New York, N.Y. 10018 (the "Agent") as
Agent for the Lenders signatory to the Credit Agreement as hereinafter defined.
RECITALS
A. The Grantor has acquired and is the owner of the terms and designs
described in Schedule A annexed hereto and made a part hereof;
B. As a post closing condition to the continued extension of credit to
the Borrowers pursuant to the Fourth Amendment and Waiver to Second Amended and
Restated Credit Agreement and Guaranty dated as of March 25, 1998 in respect of
that certain Second Amended and Restated Credit Agreement and Guaranty dated as
of March 24, 1997 (as amended, supplemented or restated from time to time, the
"Credit Agreement") among BISCAYNE APPAREL, INC., BISCAYNE APPAREL
INTERNATIONAL, INC., MACKINTOSH OF NEW ENGLAND CO., M & L INTERNATIONAL, INC.
and the Agent and the Lenders signatory thereof, the execution and delivery
hereof by the Grantor is required;
NOW, THEREFORE IT IS AGREED that, for and in consideration of the loans
and advances to be made under the Credit Agreement and other good and valuable
consideration, the receipt of which is hereby acknowledged, and as collateral
security for the full and prompt payment and performance of all Obligations (as
hereinafter defined), the Grantor does hereby mortgage to and pledge with Agent,
and grant to Agent for the ratable benefit of the Lenders, a security interest
in, all of its right, title and interest in and to (i) each of the Trademarks
(as hereinafter defined), and the goodwill of the business symbolized by each of
the Trademarks, all customer lists and other records of the Grantor relating to
the distribution of products bearing the Trademarks described in Schedule A;
(ii) any claims by the Grantor against third parties for infringement of the
Trademarks; and (iii) any and all proceeds of the foregoing, (collectively, the
"Collateral").
1. DEFINITIONS: Terms defined in the Credit Agreement and not otherwise
defined herein, shall have the meaning set forth in the Credit Agreement. As
used in this Agreement, unless the context otherwise requires:
"OBLIGATIONS" shall mean all now existing and future obligations of
Grantor to Agent and the Lenders of every kind and description, direct or
indirect, absolute or contingent, whether arising under the Credit Agreement,
this Agreement or any other Facility Document, as that term is defined in the
Credit Agreement and all extensions, renewals, refundings, replacements and
modifications of the foregoing.
"TRADEMARKS" shall mean (i) all trademarks, trade names, trade styles,
service marks, prints and labels on which said trademarks, trade names, trade
styles and service marks have appeared or
<PAGE> 2
appear, designs and general intangibles of like nature, now existing or
hereafter adopted or acquired, all right, title and interest therein and
thereto, and all registrations and recordings thereof, including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof, or any other country or any political subdivision
thereof, all whether now owned or hereafter acquired by the Grantor, including
but not limited to, those described in Schedule A annexed hereto and made a part
hereof, and (ii) all reissues, extensions or renewals thereof and all licenses
thereof.
2. REPRESENTATIONS AND COVENANTS: The Grantor hereby represents,
warrants, covenants and agrees as follows:
(a) The Grantor has good and valid title free and clear of all liens to
the Trademarks registered in the United States for the goods and services
covered by the registrations thereof and such registrations are valid and
subsisting and in full force and effect.
(b) The Grantor will perform all acts and execute all documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, substantially in the
forms of Exhibit 1 hereof, requested by Agent at any time to evidence, perfect,
maintain, record and enforce Agent's interest in the Collateral or otherwise in
furtherance of the provisions of this Agreement, and the Grantor hereby
authorizes Agent to execute and file one or more financing statements (and
similar documents) or copies thereof or of this Agreement with respect to the
Collateral signed only by Agent.
(c) Except to the extent that Agent, upon prior written notice from the
Grantor, shall consent (which consent shall not unreasonably be withheld), the
Grantor (either itself or through licensees) will continue to use the Trademarks
on each and every trademark class of goods applicable to its current line as
reflected in its current catalogs, brochures and price lists in order to
maintain the Trademarks in full force free from any claim of abandonment for
nonuse and the Grantor will not (and will not permit any licensee thereof to) do
any act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(d) The Grantor will promptly pay Agent for any and all sums, costs,
and expenses which Agent may pay or incur pursuant to the provisions of this
Agreement or in enforcing the Obligations, the Collateral or the security
interest granted hereunder, including, but not limited to, all filing or
recording fees, court costs, collection charges, travel and reasonable
attorneys' fees, all of which together with interest at the highest rate then
payable on the Obligations shall be part of the Obligations and be payable on
demand.
(e) In no event shall the Grantor, either itself or through an agent,
employee, licensee or designee, (i) file an application for the registration of
any Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof, or
(ii) file any assignment of any trademark, which the Grantor may acquire from a
third party, with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof,
unless the Grantor shall, on or prior to the date of such filing, notify Agent
thereof, and, upon request of Agent, execute and deliver any and all
assignments,
2
<PAGE> 3
agreements, instruments, documents and papers as Agent may request to evidence
Agent's interest in such trademark and the goodwill and general intangibles of
the Grantor relating thereto or represented thereby, and the Grantor hereby
constitutes Agent its attorney-in-fact to execute and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations are paid in full. Any Trademark acquired by Grantor whether or not
the Grantor complies with clause (ii) hereof shall be included in the
Collateral.
(f) The Grantor has the right and power to make the assignment and to
grant the security interest herein granted; and the Collateral is not now, and
at all times hereafter will not be, subject to any liens, mortgages,
assignments, security interests or encumbrances of any nature whatsoever, except
in favor of Agent, and to the best knowledge of Grantor none of the Collateral
is subject to any claim.
(g) Except to the extent that Agent, upon prior written notice from the
Grantor, shall consent (which consent shall not unreasonably be withheld), the
Grantor will not assign, sell, mortgage, lease, transfer, pledge, hypothecate,
grant a security interest in or lien upon, grant an exclusive or non-exclusive
license, or otherwise dispose of any of the Collateral, and nothing in this
Agreement shall be deemed a consent by Agent to any such action except as
expressly permitted herein.
(h) As of the date hereof neither the Grantor nor any affiliate or
subsidiary of (collectively the "Affiliates") owns any Trademarks or has any
Trademarks registered in or the subject of pending applications in, the United
States Patent and Trademark Office or any similar office or agency in any other
country or any political subdivision thereof, other than those described in
Schedule A hereto.
(i) The Grantor will take all necessary steps in any proceeding before
the United States Patent and Trademark Office or any similar office or agency in
any other country or any political subdivision thereof, to maintain each
application and registration of the Trademarks including, without limitation,
filing of renewals, affidavits of use, affidavits of incontestability and
opposition, interference and cancellation proceedings (except to the extent that
dedication, abandonment or invalidation is permitted under paragraph 2(c)
hereof).
(j) The Grantor assumes all responsibility and liability arising from
the use of the Trademarks and the Grantor hereby indemnifies and holds Agent and
the Lenders harmless from and against any claim, suit, loss, damage or expense
(including reasonable attorneys' fees) arising out of any alleged defect in any
product manufactured, promoted or sold by the Grantor or any Affiliate in
connection with any Trademark or out of the manufacture, promotion, labeling,
sale or advertisement of any such product by the Grantor or any Affiliate. The
Grantor agrees that the Agent and the Lenders do not assume, and shall have no
responsibility for, the payment of any sums due or to become due under any
agreement or contract included in the Collateral or the performance of any
obligations to be performed under or with respect to any such agreement or
contract by the Grantor, and the Grantor hereby agrees to indemnify and hold
Agent and the Lenders harmless with respect to any and all claims by any person
relating thereto. The provisions of this subparagraph (j) shall survive the
termination of this Agreement.
3
<PAGE> 4
(k) Agent may, in its sole discretion, pay any amount or do any act
required of the Grantor hereunder or requested by Agent to preserve, defend,
maintain, record or enforce the Grantor's obligations contained herein, the
Obligations, the Collateral, or the right, title and interest granted Agent
herein, and which the Grantor fails to do or pay, and any such payment shall be
deemed an advance by Agent to the Grantor and shall be payable on demand
together with interest at the highest rate then payable on the Obligations and
shall be added to the Obligations.
(l) The Grantor agrees that if it, or any Affiliate, learns of any use
by any person of any term or design likely to cause confusion with the
Trademarks, it shall promptly notify Agent of such use and, if requested by
Agent, shall join with Agent, at the Grantor's expense, in such action as Agent,
in its reasonable discretion, may deem advisable for the protection of Agent's
interest in and on the Trademarks.
(m) All licenses of the Trademarks which the Grantor has granted to
third parties are set forth in Schedule B hereto.
3. EVENTS OF DEFAULT AND REMEDIES: Upon the occurrence of an Event of
Default (as defined in the Credit Agreement), in addition to all other rights
and remedies of Agent, whether under law, the Credit Agreement or otherwise, all
such rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively or concurrently, without (except as provided herein)
notice to, or consent by, the Grantor, Agent shall have the following rights and
remedies: (a) upon seven (7) days' prior notice from Agent, the Grantor shall
not make any further use of the Trademarks or any mark similar thereto for any
purpose; (b) Agent may, at any time and from time to time, upon seven (7) days'
prior notice to the Grantor, license, whether general, special or otherwise, and
whether on an exclusive or nonexclusive basis, any of the Trademarks, throughout
the world for such term of terms, on such conditions, and in such manner, as
Agent shall in its sole discretion determine; (c) Agent may (without assuming
any obligations or liability thereunder), at any time, enforce (and shall have
the exclusive right to enforce) against any licensee or sublicensee all rights
and remedies of the Grantor in, to and under any one or more license agreements
with respect to the Collateral, and take or refrain from taking any action under
any thereof, and the Grantor hereby releases Agent from, and agrees to hold
Agent free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement; (d)
Agent may, at any time and from time to time, upon seven (7) days' prior notice
to the Grantor, assign, sell, or otherwise dispose of, the Collateral or any of
it, either with or without special or other conditions or stipulations, with
power to buy the Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing the assignment, sale
or dispos3.ab ition which Agent shall, in its sole discretion, deem appropriate
or proper; and (e) in addition to the foregoing, in order to implement the
assignment, sale or other disposal of any of the Collateral pursuant to
subparagraph 3(d) hereof, Agent may, at any time, pursuant to the authority
granted in the Powers of Attorney described in paragraph 4 hereof (such
authority becoming effective on the occurrence or continuation as hereinabove
provided of an Event of Default), execute and deliver on behalf of the Grantor,
one or more instruments of assignment of the Trademarks (or any application or
registration thereof), in form suitable for filing, recording or registration in
any country. The Grantor agrees to pay when due all reasonable costs incurred in
any such transfer of the Trademarks, including any taxes, fees and reasonable
attorneys' fees, and all such costs shall be added to the Obligations. Agent
4
<PAGE> 5
may apply the proceeds actually received from any such license, assignment, sale
or other disposition to the reasonable costs and expenses thereof, including,
without limitation, reasonable attorneys' fees and all legal, travel and other
expenses which may be incurred by Agent, and then to the Obligations, in such
order as provided in the Credit Agreement; and the Grantor shall remain liable
and will pay Agent on demand any deficiency remaining, together with interest
thereon at a rate equal to the highest rate then payable on the Obligations and
the balance of any expenses unpaid. Nothing herein contained shall be construed
as requiring Agent to take any such action at any time. In the event of any such
license, assignment, sale or other disposition of the Collateral, or any of it,
after the occurrence or continuation as hereinabove provided of an Event of
Default, the Grantor shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing or in connection with the
Trademarks are used, and its customer lists and other records relating to the
Trademarks and to the distribution of said products, to Agent or its designee.
4. POWER OF ATTORNEY: Concurrently with the execution and delivery
hereof, the Grantor is executing and delivering to Agent, in the form of Exhibit
2 hereto, five originals of a Power of Attorney for the implementation of the
assignment, sale or other disposal of the Trademarks pursuant to paragraphs 3(d)
and (e) hereof and the Grantor hereby releases Agent from any claims, causes of
action and demands at any time arising out of or with respect to any actions
taken or omitted to be taken by Agent or its representatives under the powers of
attorney granted herein, other than actions taken or omitted to be taken through
the gross negligence or willful misconduct of Agent finally declared by a court
of competent jurisdiction.
5. GOVERNING LAW: JURISDICTION, WAIVER OF JURY, ETC.: No provision
hereof shall be modified, altered or limited except by a written instrument
expressly referring to this Agreement and executed by the party to be charged.
The execution and delivery of this Agreement has been authorized by the Board of
Directors of the Grantor and by any necessary vote or consent of stockholders
thereof. This Agreement shall be binding upon the successors, assigns or other
legal representatives of the Grantor, and shall, together with the rights and
remedies of Agent inure to the benefit of Agent and the Lenders, their
successors, assigns or other legal representatives. This Agreement, the
Obligations and the Collateral shall be governed in all respects by the internal
laws of the United States and the internal laws of the State of New York. The
Grantor hereby submits to the nonexclusive jurisdiction of the Supreme Court of
the State of New York and the federal courts of the United States of America
located in such State in any action or proceeding arising under this Agreement
and each hereby waive trial by jury. If any term of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity of all other terms hereof
shall in no way be affected thereby.
6. MISCELLANEOUS: (a) Any failure or delay by Agent to require strict
performance by Grantor of any of the provisions, warranties terms, and
conditions contained herein or in any other agreement, document, or instrument,
shall not affect Agent's right to demand strict compliance and performance
therewith, and any waiver of any default shall not waive or affect any other
default, whether prior or subsequent thereto, and whether of the same or of a
different type. None of the warranties, conditions, provisions, and terms
contained herein or in any other agreement, document or instrument shall be
deemed to have been waived by any act or knowledge of Agent, its agents,
officers, or employees, but only by an instrument in writing, signed by an
officer of Agent and
<PAGE> 6
directed to Grantor, specifying such waiver.
(b) All notices requests and demands to or upon the respective parties
hereto shall be deemed to have been duly given or made: if by hand, immediately
upon delivery; if by telecopier, immediately upon sending; if by any overnight
delivery service, one day after dispatch; and if mailed by certified mail,
return receipt requested, two (2) days after mailing. All notices, requests and
demands are to be given or made to the respective parties at the following
addresses (or to such other addresses as either party may designate by notice in
accordance with the provisions of this paragraph):
If to Grantor: Mackintosh of New England, Co.
1373 Broad Street, 3rd Floor
Clifton, New Jersey 07013
Attention: Peter Vandenberg, Jr., President
If to Agent: The Chase Manhattan Bank
111 W 40th Street - 10th Floor
New York, New York 10018
Attention: Textile and Apparel
(c) In the event any term or provision of this Agreement conflicts with
any term or provision of the Credit Agreement, the term or provision of the
Credit Agreement shall control.
(d) In the event that any provision hereof shall be deemed to be
invalid by any court, such invalidity shall not affect the remainder of this
Agreement.
C. IN WITNESS WHEREOF, the Grantor and Agent have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
MACKINTOSH OF NEW ENGLAND, CO.
AS GRANTOR
By: /s/ Peter Vandenberg, Jr.
-------------------------------------
Title: President
----------------------------------
THE CHASE MANHATTAN BANK,
AS AGENT
By:
-------------------------------------
Title: Vice President
----------------------------------
6
<PAGE> 7
SCHEDULE A TO SECURITY AGREEMENT
MACKINTOSH OF NEW ENGLAND, CO.
TRADEMARKS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
REGISTRATION NO./
TRADEMARK JURISDICTION FILED/REG. DATE APPLICATION NO.
- --------- ------------ --------------- -----------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS USPTO 10/24/89 1,562,284
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS USPTO 3/8/77 1,060,825
- ----------------------------------------------------------------------------------------------------------------
KAOS USPTO 6/15/82 1,197,990
- ----------------------------------------------------------------------------------------------------------------
KAOS USPTO 5/14/86 1,419,300
- ----------------------------------------------------------------------------------------------------------------
KAOTIC USPTO 1/13/98 2,128,671
- ----------------------------------------------------------------------------------------------------------------
THE KIDS ANDY JOHNS (STYLIZED) USPTO 3/11/97 2,045,161
- ----------------------------------------------------------------------------------------------------------------
ALL OUTDOORS USPTO 9/13/77 1,073,221
- ----------------------------------------------------------------------------------------------------------------
VESTCOAT & DESIGN USPTO 7/14/87 1,447,591
- ----------------------------------------------------------------------------------------------------------------
CHAS. MACKINTOSH & CO. LTD. & DESIGN USPTO 5/26/42 395,402
- ----------------------------------------------------------------------------------------------------------------
THE KIDS ANDY JOHNS (STYLIZED) USPTO 4/4/95 74/656,057
- ----------------------------------------------------------------------------------------------------------------
MACKINTOSH NEW ENGLAND USPTO 10/16/92 74/322,876
- ----------------------------------------------------------------------------------------------------------------
MACKINTOSH NEW ENGLAND USPTO 10/16/92 74/322,866
- ----------------------------------------------------------------------------------------------------------------
MACKINTOSHSPORT USPTO 1/29/97 75/232,744
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS BENELUX 6/27/91 503,769
- ----------------------------------------------------------------------------------------------------------------
KAOS BENELUX 6/27/91 503,770
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS CANADA 6/8/90 369,160
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS CHINA 8/7/96 861,735
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS FRANCE 6/14/91 1,671,502
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
<TABLE>
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
KAOS FRANCE 6/14/91 1,671,501
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS HONG KONG 8/15/86 2,379
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS ITALY 6/21/91 609,961
- ----------------------------------------------------------------------------------------------------------------
KAOS ITALY 6/21/91 609,962
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS JAPAN 2/21/89 2,111,988
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS KOREA 12/1/87 147,892
- ----------------------------------------------------------------------------------------------------------------
KAOS SWEDEN 4/22/94 257,349
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS SWITZERLAND 6/19/91 392,406
- ----------------------------------------------------------------------------------------------------------------
KAOS SWITZERLAND 6/19/91 392,407
- ----------------------------------------------------------------------------------------------------------------
ANDY JOHNS UNITED KINGDOM 6/24/94 1,576,324
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 9
SCHEDULE B TO SECURITY AGREEMENT
MACKINTOSH OF NEW ENGLAND, CO.
LICENSES
NONE
9
<PAGE> 10
EXHIBIT 1
TO SECURITY AGREEMENT
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, MACKINTOSH OF NEW ENGLAND, CO., a Delaware corporation (herein
referred to as "Assignor"), has adopted, used and is using the trademarks listed
on the annexed Schedule A, which trademarks are registered in the United States
Patent and Trademark Office (the "Trademarks");
WHEREAS, Assignor is obligated under the continued extension of credit
to the Borrowers pursuant to the Second Amended and Restated Credit Agreement
and Guaranty dated as of March 24, 1997 (as amended, supplemented or restated
from time to time) among it and the Lenders signatory thereto and THE CHASE
MANHATTAN BANK, as Agent for the Lenders signatory thereto (herein referred to
as "Assignee"), and has entered into a Security Agreement and
Mortgage-Trademarks (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee
and granted to Assignee a security interest in, and mortgage on, all right,
title and interest of Assignor in and to the Trademarks, together with the
goodwill of the business symbolized by the Trademarks and the applications and
registrations hereof, and all proceeds thereof, including, without limitation,
any and all causes of action which may exist by reason of infringement thereof
(the "Collateral"), to secure the payment, performance and observance of the
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, Assignor does hereby further assign unto Assignee and
grant to Assignee a security interest in, and mortgage on, the Collateral to
secure the prompt payment, performance and observance of the Obligations.
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the Collateral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 111 W 40th Street - 10th Floor, New York, NY
10018.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the 25th day of March,
1998.
MACKINTOSH OF NEW ENGLAND, CO.
By: /s/ Peter Vandenberg
-----------------------------------
Name: Peter Vandenberg
---------------------------------
Title: President
--------------------------------
10
<PAGE> 11
SCHEDULE A TO ASSIGNMENT FOR SECURITY TRADEMARKS
MACKINTOSH OF NEW ENGLAND, CO.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARK REGISTRATION DATE REGISTRATION NO.
- ---- ----------------- ----------------
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Andy Johns 10/24/89 1,562,284
- ------------------------------------------------------------------------------------------------------------------
Andy Johns 3/8/77 1,060,825
- ------------------------------------------------------------------------------------------------------------------
Kaos 6/15/82 1,197,990
- ------------------------------------------------------------------------------------------------------------------
Kaos 5/14/86 1,419,300
- ------------------------------------------------------------------------------------------------------------------
Kaotic 1/13/98 2,128,671
- ------------------------------------------------------------------------------------------------------------------
The Kids Andy Johns (Stylized) 3/11/97 2,045,161
- ------------------------------------------------------------------------------------------------------------------
All Outdoors 9/13/77 1,073,221
- ------------------------------------------------------------------------------------------------------------------
Vestcoat & Design 7/14/87 1,447,591
- ------------------------------------------------------------------------------------------------------------------
Chas. Mackintosh & Co. Ltd. & Design 5/26/42 395,402
- ------------------------------------------------------------------------------------------------------------------
The Kids Andy Johns (Stylized) 4/4/95 74/656,057
- ------------------------------------------------------------------------------------------------------------------
AJ Sport 5/22/97 75/296,362
- ------------------------------------------------------------------------------------------------------------------
Judy Simon 12/18/97 75/408,011
- ------------------------------------------------------------------------------------------------------------------
Mackintosh New England 10/16/92 74/322,876
- ------------------------------------------------------------------------------------------------------------------
Mackintosh New England 10/16/92 74/322,866
- ------------------------------------------------------------------------------------------------------------------
Mackintoshsport 1/29/97 75/232,744
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 12
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 28th day of May, 1998, before me personally came Peter
Vandenberg, Jr., to me known, who stated that he is the President of MACKINTOSH
OF NEW ENGLAND, CO., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by order of the Board
of Directors of said corporation.
/s/ Judith Ann Maioran
---------------------------------
Notary Public
12
<PAGE> 13
Exhibit 2 to Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT MACKINTOSH OF NEW ENGLAND, CO., a
Delaware Corporation with its principal office at 1373 Broad Street, 3rd Floor,
Clifton, New Jersey 07013 (hereinafter called "Assignor") hereby appoints and
constitutes THE CHASE MANHATTAN BANK, (hereinafter called "Assignee"), its true
and lawful attorney, with full power of substitution, and with full power and
authority to perform the following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Assignor in and to any trademarks,
trade names, trade styles and service marks, and all registrations, recordings,
reissues, extensions and renewals thereof, and all pending applications
therefor, and for the purpose of the recording, registering and filing of, or
accomplishing any other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose; and
2. To execute any and all documents, statements, certificates or other
papers necessary or advisable in order to obtain the purposes described above as
Assignee may in its sole discretion determine.
This power of attorney is made pursuant to a Security Agreement and
Mortgage-Trademarks, dated the date hereof, between Assignor and Assignee and
takes effect solely for the purposes of paragraphs 3(d) and (e) thereof and is
subject to the conditions thereof and may not be revoked until the payment in
full of all "Obligations" as defined in such Security Agreement and
Mortgage-Trademarks.
Dated: May 28, 1998
------------
[Corporate Seal] MACKINTOSH OF NEW ENGLAND, CO.
By: /s/ Peter Vandenberg
-----------------------------------
Name: Peter Vandenberg
---------------------------------
Title: President
--------------------------------
13
<PAGE> 14
STATE OF NEW YORK )
) ss:
COUNTY OF NEW YORK )
On this 28th day of May 1998 before me personally appeared Peter
Vandenberg, to me known who being by me duly sworn, did depose and say that he
resides at __________ and that he is President of MACKINTOSH OF NEW ENGLAND,
CO., the Delaware corporation described in and which executed the foregoing
instrument; and that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that is was affixed to said
instrument is such corporate seal; that it was affixed pursuant to authority of
the Board of Directors of said corporation, and that he signed his name thereto
pursuant to such authority.
/s/ Judith Ann Maioran
---------------------------------
Notary Public
Judith Ann Maioran
Notary Public of New Jersey
My Commission Expires Oct. 11, 2001
14
<PAGE> 1
EXHIBIT 11
Biscayne Apparel, Inc.
Computation of Per Share Earnings
(Dollars in Thousands, Except
Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1998 1997 1998 1997
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net loss ........................................ $ (3,759) $ (1,458) $ (5,662) $ (2,568)
=========== ============ =========== ===========
BASIC:
- ------
Weighted average common shares outstanding ...... 10,771,662 10,762,895 10,771,662 10,753,037
=========== ============ =========== ===========
Basic net loss per share ........................ $ (0.35) $ (0.14) $ (0.53) $ (0.24)
=========== ============ =========== ===========
DILUTED:
- --------
Weighted average common shares outstanding....... 10,771,662 10,762,895 10,771,662 10,753,037
Potential dilution upon exercise of stock
options and warrants ........................... -- -- -- --
----------- ------------ ----------- -----------
Shares used in computing net loss
per common share .............................. 10,771,662 10,762,895 10,771,662 10,753,037
=========== ============ =========== ===========
Diluted net loss per share ...................... $ (0.35) $ (0.14) $ (0.53) $ (0.24)
=========== ============ =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 205
<SECURITIES> 0
<RECEIVABLES> 14,232
<ALLOWANCES> (1,476)
<INVENTORY> 26,670
<CURRENT-ASSETS> 41,002
<PP&E> 5,477
<DEPRECIATION> (2,846)
<TOTAL-ASSETS> 43,843
<CURRENT-LIABILITIES> 35,123
<BONDS> 0
108
0
<COMMON> 0
<OTHER-SE> 1,888
<TOTAL-LIABILITY-AND-EQUITY> 43,843
<SALES> 25,828
<TOTAL-REVENUES> 25,828
<CGS> 20,782
<TOTAL-COSTS> 20,782
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,530
<INCOME-PRETAX> (5,662)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,662)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,662)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
