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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, 1998
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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
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BISCAYNE APPAREL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
FLORIDA 65-0200397
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<S> <C>
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1373 BROAD STREET, CLIFTON, NEW JERSEY 07013
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(Address of principal executive offices) (Zip Code)
</TABLE>
(Registrant's telephone number, including Area Code) (973) 473-3240
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Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock American Stock Exchange
$0.01 par value per share
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
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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 26, 1999, was as follows:
COMMON STOCK, PAR VALUE $.01 10,797,666
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(Title of each class) (Number of shares)
The aggregate market value of common stock held by non-affiliates of
the registrant at February 26, 1999 was zero, based on a lack of trading for
the common stock on the NASDAQ over-the-counter bulletin board (BISD) on or
near 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).
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PART I
This Annual Report on Form 10-K contains forward-looking statements
within the meaning of that term in Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934. Additional written or
oral forward-looking statements may be made by the Company from time to time,
in filings with the Securities Exchange Commission or otherwise. Statements
contained herein that are not historical facts are forward-looking statements
made pursuant to the safe harbor provisions referenced above.
Forward-looking statements may include, but are not limited to,
projections of revenues, income or losses, capital expenditures plans for
future operations, financing needs or plans, compliance with financial
covenants in loan agreements, plans for liquidation or sale of assets or
businesses, plans relating to products or services of the Company, assessments
of materiality, predictions of future events, the ability to obtain additional
financing, the Company's ability to meet obligations as they become due, the
impact of pending and possible litigation, as well as assumptions relating to
the foregoing. In addition, when used in this discussion, the words
"anticipate," "believes," "estimates," "expects," "intends," "plans" and
similar expressions are intended to identify forward-looking statements.
Forward-looking statements are inherently subject to risks and uncertainties,
including, but not limited to the collection of receivables, creditor claims,
accruals for estimated loss on disposal, litigation costs, ability to sell off
all final assets and legal entities and other risk factors detailed in the
Company's Securities and Exchange Commission filings, some of which cannot be
predicted or quantified based on current expectations.
Consequently, future events and actual results could differ materially
from those set forth in, contemplated by, or underlying the forward-looking
statements. Statements in the Annual report, particularly in Item 1. Business,
Item 3. Legal Proceedings, and Item 7.,Management's Discussion and Analysis of
Financial Condition and Results of Operations describe factors, among others,
that could contribute to or cause such differences.
Readers are cautioned not to place undue reliance on any
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
ITEM 1. BUSINESS
GENERAL
Biscayne Apparel, Inc. (the "Company" or "BAI") was 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. 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 (UK)
Limited and Amy Industries De Honduras, S.A. de C.V., which was organized in
1995. As of January 1, 1998, the assets, liabilities, and operations of Andy
Johns were contributed by BAII into Mackintosh. The result was that all BAI's
women's outerwear lines became part of Mackintosh. M&L's wholly-owned
subsidiaries are
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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.
Varon was a designer and manufacturer of girl's and boy's underwear
and girl's daywear; Mackintosh was a designer, manufacturer and distributor of
women's and children's wool coats and active outerwear; and M&L was a designer,
manufacturer, and distributor of infant's, toddler's, and children's outerwear,
sportswear, and swimwear.
Unless the context indicates otherwise, the "Company" includes
Biscayne Apparel, Inc., its subsidiaries, and their respective divisions.
RESTRUCTURE OF THE COMPANY
Due to the continuing losses sustained in BAII and Mackintosh through
1997 and the projected volume reduction realized in M&L in 1998 resulting from
the non-renewal of the OshKosh B'Gosh, Inc. outerwear license, Biscayne
retained an investment banking firm specializing in retailer and consumer
product companies, to advise the Company on strategic alternatives. As a result
of this process, the Company determined in September of 1998 to dispose of the
majority of the assets of BAII and Mackintosh. During the fourth quarter of
1998, the majority of the assets of BAII and Mackintosh were sold to several
purchasers, including inventory, property, plant and equipment and intellectual
property (trademarks and tradenames). Such sales did not include the accounts
receivable of BAII and Mackintosh, which continue to be collected.
From time to time, BAII and Mackintosh have not been able to make
timely payments to their trade and other creditors. BAII and Mackintosh will be
unable to fund the majority of their deficit from their remaining assets, other
than those liabilities that are subject to guarantees. The liabilities of BAII
and Mackintosh that are subject to such guarantees approximated $6,650,000 as
of December 31, 1998, and were primarily related to the Company's notes payable
to banks. Such notes payable to banks related to BAII and Mackintosh were
collateralized by all of their assets.
BAII and Mackintosh paid their bank lenders all of the net proceeds
arising from the sale of their assets. BAII and Mackintosh do not anticipate
that such net proceeds will be adequate to satisfy all liabilities of BAII and
Mackintosh, whether owed to its lenders or otherwise. Accordingly, BAII and
Mackintosh and their creditors will negotiate with respect to the payment of
less than all of such obligations, and BAII and Mackintosh cannot predict the
outcome of such negotiations. Additionally, BAII and Mackintosh cannot predict
whether their creditors other than the bank lenders will assert claims against
them arising from those operations. The Company believes that BAII and
Mackintosh will be unable to wholly satisfy their obligations and accordingly
each sought protection under Chapter 11 of the Bankruptcy Code on April 30,
1999.
The Company did not make the interest payment due on December 15, 1998
relating to its 13% Subordinated Notes due December 15, 1999 (the "Subordinated
Notes"). Pursuant to the Indenture for the Subordinated Notes, the Company's
non-payment of interest became an Event of Default. Once an Event of Default
occurs and is continuing, the Trustee by notice to the Company, or the holders
of a majority in principal amount of the Securities then outstanding by notice
to the
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Company and the Trustee, may declare to be due and payable immediately on all
outstanding Subordinated Notes an amount equal to the sum of the outstanding
principal balance of the Subordinated Notes and any accrued interest. If the
Subordinated Notes, and accrued interest thereon, were accelerated, the Company
would not be able to operate without immediate alternative financing becoming
available.
Additionally, the Company was not in compliance with certain
requirements of its Loan Agreement, relating to collateral coverage and levels
of tangible net worth. The Company's lenders allowed the Company to remain in
violation of its Loan Agreement. However, a Reservation of Rights and Waiver
Agreement was entered into, whereby the Company's bank lenders agreed to extend
credit at their discretion without waiving any rights that arose upon the
events of default.
The Company had discussed its continuing financing needs for 1999 with
its existing lenders and various other lenders. Neither existing lenders or any
such other lenders agreed to fund such needs or otherwise to provide working
capital financing that would permit the Company to operate as it has in the
past.
Without immediate financing available for M&L, the Company was faced
with the alternative of a sale or liquidation of M&L. As a result of this, the
Company determined in December of 1998 to dispose of the majority of the assets
of M&L. If M&L were unable to open letters of credit on a timely basis, the
value of M&L's assets and operations, as a going concern, would rapidly
diminish.
Therefore, the Company determined that the prompt sale of M&L's assets
before further deterioration of going concern value would produce the greatest
return for M&L's creditors and stockholders.
Accordingly, the Company negotiated and entered into an agreement,
dated February 5, 1999, with a recently formed affiliate of Amerex (USA), Inc.
("Amerex") for the sale of substantially all of M&L's assets (but excluding
accounts receivable) free and clear of all liens, claims and encumbrances (the
"M&L Asset Sale Agreement").
Therefore, in order to effect an orderly sale of M&L, the Company and
M&L filed for protection under Chapter 11 of the Bankruptcy Code on February 5,
1999.
The M&L Asset Sale Agreement was conditioned upon Bankruptcy Court
approval of the sale and that the sale be closed by no later than March 12,
1999 to avoid deterioration of the business. Amerex also agreed to fund certain
letters of credit for the Debtors which had to be opened before the M&L Asset
Sale Agreement could close. In light of the Company's precarious financial
condition, for its protection, Amerex requested Bankruptcy Court approval for
such funding as well as the sale of assets. Because time was of the essence, an
immediate Bankruptcy Court filing, followed by submission of orders to show
cause for the use of cash collateral, the sale of assets to Amerex and the
funding of letters of credit by Amerex, was necessary to maximize the value of
M&L's assets.
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By order dated February 11, 1999, the Bankruptcy Court approved the
preliminary commitments in the M&L Asset Sale Agreement, the auction bidding
procedures, manner of notice and scheduled a hearing on final approval of the
M&L Asset Sale Agreement for March 4, 1999. By order dated March 4, 1999, the
Bankruptcy Court authorized M&L to sell substantially all of its assets, and to
assume and assign certain executory contracts and leases, to Amerex. The sale
closed on March 5, 1999. After establishing an escrow pending resolution of
post-closing issues and using a portion of the sale proceeds to cure defaults
under assumed contracts, sale proceeds aggregating approximately $2.3 million
were paid to the Banks in reduction of their secured claims.
The Company's liabilities to its banks were wholly satisfied during
the first quarter of 1999.
M&L anticipates that the net proceeds from the finalization of the
sale, collection and liquidation of its assets shall be sufficient to
ultimately repay its liabilities.
Once the remaining assets of the Company and its subsidiaries are
sold, collected and/or liquidated and liabilities are paid or settled, the
Company will seek a buyer and/or an operating entity desiring to merge into a
publicy-held company. There can be no assurance that the Company will be
successful in completing such a transaction.
EMPLOYEES
The Company currently has three employees, including one executive
officer.
ITEM 2. PROPERTY
The Company is currently leasing space at 1373 Broad Street, Clifton,
New Jersey 07013, on a month-to-month basis, as needed.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are parties to numerous lawsuits
regarding non-payment to vendors and suppliers for services rendered and goods
received in the ordinary course of operations. The related liabilities have
been reflected in the Company's financial statements. To the extent the Company
is unable to settle and repay such liabilities, it may seek protection under
Chapter 11 of the Bankruptcy Code related to its BAII and Mackintosh
subsidiaries.
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 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
On November 24, 1998 the Company consented to removal of its Common
Stock from the American Stock Exchange ("Amex"), since it no longer fully
satisfied all of the guidelines of the Amex for continued listing. On December
3, 1998 the Company's Common stock began trading on the Nasdaq over-the-counter
("OTC") bulletin board. The following table sets forth the range of high and
low sales prices of the Common Stock, as reported by the American Stock
Exchange and the Nasdaq OTC bulletin board, for each quarterly period during
the past two fiscal years.
MARKET PRICES
1998 HIGH LOW
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First Quarter $11/16 $5/16
Second Quarter 1/2 1/4
Third Quarter 3/8 1/8
Fourth Quarter 3/16 1/200
1997 HIGH LOW
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First Quarter $ 1 3/8 $ 7/8
Second Quarter 1 1/8 7/8
Third Quarter 1 1/8 11/16
Fourth Quarter 1 9/16
APPROXIMATE NUMBER OF HOLDERS OF COMMON STOCK
The Company had 840 holders of record of Common stock as of February
26, 1999.
DIVIDENDS
The Company did not pay cash dividends on its common equity during the
fiscal years ended 1998, 1997 and 1996. The Company was 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, 1998, 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.
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BISCAYNE APPAREL, INC.
Selected Financial Data
(In Thousands, Except Per Share Data)
At and for the Years Ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
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<S> <C> <C> <C> <C> <C>
Financial Data
Net sales ............................................. $ 71,169 $93,206 $105,425 $100,294 $72,350
Operating income (loss) ............................... (14,839) 513 (6,182) (5,261) 4,960
Net earnings (loss) ................................... (18,843) (3,871) (8,724) (6,127) 2,048
Basic net earnings (loss) per common share ............ $ (1.75) $ (0.36) $ (0.81) $ (0.57) $ 0.22
Shares used in computing basic
net earnings (loss) per common share ................. 10,798 10,765 10,742 10,734 9,179
Diluted net earnings (loss)
per common share .................................... $ (1.75) $ (0.36) $ (0.81) $ (0.57) $ 0.21
Shares used in computing diluted net
earnings (loss) per common share .................... 10,798 10,765 10,742 10,734 9,652
Working capital (deficiency) ........................ $(11,185) $13,944 $ 19,540 $ 19,559 $23,167
Total assets ....................................... 14,384 34,817 36,110 61,742 60,578
Long-term debt, less current maturities ............ 0 8,944 10,944 12,694 7,944
Stockholders' equity (deficiency) .................. (11,185) 7,658 11,178 19,835 25,881
Book value (deficiency) per common share ............ $ (1.04) $ 0.71 $ 1.04 $ 1.85 $ 2.41
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and notes thereto appearing elsewhere in this
Report.
Due to the continuing losses sustained in BAII and Mackintosh through
1997 and the projected volume reduction realized in M&L in 1998 resulting from
the non-renewal of the OshKosh B'Gosh, Inc. outerwear license, Biscayne
retained an investment banking firm specializing in retailer and consumer
product companies, to advise the Company on strategic alternatives. As a result
of this process, the Company determined to dispose of the majority of the
assets and the operations of BAII, M&L and Mackintosh. Accordingly, the Company
changed its basis of accounting on December 31, 1998 from the going concern
basis to a liquidation basis. The Company recorded losses from its operations,
net of taxes, of $18,843,000, $3,871,000 and $8,724,000 in the years ended
December 31, 1998, 1997 and 1996, respectively. The increase in losses of
$14,972,000 in 1998 over the 1997 loss of $3,871,000 is due to increased losses
in the girls' underwear business, resulting from offshore production loss and
lower volume; lower sales of OshKosh licensed outerwear products, offset by
reduced losses in the women's outerwear business; write-down of assets to the
estimated sale value and/or market value, loss on fulfilling other obligations,
costs of disposal and future operating losses. Included within the 1998 net
loss of $18,843,000 is the loss on disposal of operations of $3,444,000, which
includes accounts receivable writeoffs of $144,000, inventory writeoffs of
$1,911,000, prepaid expenses and other asset writeoffs of $402,000 and
property, plant and equipment writeoffs of $1,742,000, offset by the writeoff
of negative goodwill and excess accrued liabilities of $755,000. The lower 1997
loss from operations of $3,871,000, compared to the 1996 loss of $8,724,000 is
primarily due to the 1996 writeoff of goodwill related to the children's
underwear and women's outerwear businesses. During the fourth quarter of 1998
and the first quarter of 1999, the majority of the assets (excluding accounts
receivable) and the operations of BAII, M&L and Mackintosh were sold.
Net sales were $71,169,000, $93,206,000 and $105,425,000 for the years
ended December 1998, 1997 and 1996, respectively. The 1998 decrease of
$22,037,000 includes decreases of $6,164,000, $9,717,000 and $6,156,000 in the
women's outerwear sales, children's outerwear sales and children's underwear
sales, respectively.
The decrease in women's outerwear sales is due to only producing
women's non-licensed active outerwear to orders, poor retail performance and
the negative impact on sales from the unseasonably warm 1998 Fall/Winter
weather. The decrease in 1998 Children's outerwear sales is primarily due to
the loss of the Oshkosh outerwear license for Fall 1998. The decrease in 1998
children's underwear sales is due to lower orders, poor deliveries due to
production problems and related cancellation of orders. The 1997 decrease of
$12,219,000 includes decreases of $6,798,000, $2,585,000 and $2,836,000 in the
Company's women's outerwear sales, children's outerwear sales and children's
underwear sales, respectively.
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The decrease in 1997 women's outerwear sales is due to 1996 sales
including approximately $3,000,000 more sales of carryover goods, compared to
1997, and due to the negative impact on sales resulting from the unseasonably
warm 1997 Fall/Winter weather. The decrease in 1997 children's outerwear sales
is due to cancellation of orders resulting from late deliveries and due to the
negative impact on sales from the unseasonably warm 1997 Fall/Winter weather.
The decrease in 1997 children's underwear sales is due to cancellation of
orders resulting from late deliveries resulted in higher levels of inventories
and related markdowns in 1997.
Cost of goods sold was $60,804,000 (85% of net sales), $70,045,000
(75% of net sales) and $78,112,000 (74% of net sales) for the years ended
December 31, 1998, 1997 and 1996, respectively.
Cost of goods sold, as a percentage of sales, increased in 1998 due to
increased production costs and lower efficiencies at the Company's children's
underwear operations, lower margin on reduced sales prices of women's outerwear
products and lower margin on reduced sales of children's outerwear products,
primarily due to the loss of the higher margin Oshkosh licensed outerwear sales
for Fall 1998.
Cost of goods sold, as a percentage of sales increased in 1997 due to
increased production costs and lower efficiencies at the Company's children's
underwear operations, offset by lower production costs in children's outerwear.
Selling, general and administrative ("S,G&A") expenses, before
restructuring expense, impairment of long-lived assets and loss on disposal of
discontinued operations were $21,760,000 (31% of net sales), $22,183,000 (24%
of net sales) and $24,394,000 (23% of net sales), for the years ended December
31, 1998, 1997 and 1996, respectively. In 1998, S,G&A expenses increased as a
percentage of sales due to lower sales, costs of disposal and future estimated
operating losses, offset by reductions of personnel and operating expenses
throughout the Company. In 1997, S,G&A expenses were reduced by $2,211,000 from
the previous year, as a result of management's strategic actions to further
reduce S,G&A expenses including: the reduction of personnel and operating
expenses throughout the Company; consolidation of administrative functions and
consolidation of domestic warehousing and distribution.
RESTRUCTURING CHARGES AND IMPAIRMENT OF LONG-LIVED ASSETS
As more fully discussed in Note 6 to the Consolidated Financial
Statements, principally during the fourth quarter of 1996, certain events
occurred which led the Company to evaluate the recoverability of certain of its
long-lived assets, specifically the goodwill of the Andy Johns and Varon
divisions and certain manufacturing facilities. These events included certain
changes in government regulations regarding cotton sleepwear, changes in key
members of the management team, loss of market share and loss of key customers.
As a result, in December 1996, the Company recognized a one-time
non-cash charge for impairment of goodwill of $6,532,000, with no associated
tax benefit, and a fixed asset write-down of $530,000 related to a
manufacturing facility.
During 1997, the Company recorded restructuring charges of $465,000
relating to salary and separation costs. During 1996, the Company recorded
restructuring charges of $2,039,000, relating to termination of long-term
contracts and leases and facility closing costs (approximately $880,000) and
salary and separation costs (approximately $1,159,000).
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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 had two effects: i) sleepwear
manufacturers would now be able to produce their products in cotton, and ii)
such cotton sleepwear products would now have to be "tight fitting." As a
result of these regulations, the Company expected significant changes in
Varon's competitive environment related to such products. In the 1997 second
quarter, the CPSC announced that the March 1998 implementation date for the
above changes would be extended into late 1998. However, the specter of such
implementation caused delays in 1997 and 1998 orders of, and/or reduction of
orders for some of Varon's cotton thermal and long underwear products.
The impact on Varon's market position was unknown. Varon faced: i) a
decrease in market share due to increased competition from sleepwear
manufacturers, and ii) a potential market shift, due to customers who
previously purchased sleepwear when it was not required to the"tight fitting"
now purchasing other products.
OshKosh B'Gosh, Inc. ("OshKosh") notified M&L during the second
quarter of 1997 that it would not renew its outerwear license with M&L after
May 31, 1998. As part of a strategy adopted over the last several years,
OshKosh decided to sell its outerwear directly to retailers. For the years
ended December 31, 1998, 1997 and 1996, M&L's sales of OshKosh outerwear were
$11,623,000, $19,888,000 and $17,063,000, respectively. M&L's strategy was to
replace the OshKosh brand sales of outerwear with several well-known brand name
children's outerwear and activewear licenses.
In July 1997, M&L announced the signing of a licensing agreement with
the Starter Corporation to manufacture girls' activewear, swimwear, and
outerwear in sizes 4-6X and 7-16. Initial shipments of Starter girls'
activewear and outerwear began in Fall 1998.
Additionally, in November 1997, M&L announced the signing of a
licensing agreement with Healthtex, a division of VF Corporation, to
manufacture a new collection of children's outerwear under the Healthtex brand
name in sizes newborn through 16 for girls and newborn through 7 for boys.
Initial shipments began in Fall 1998.
In September 1997, the Company announced the signing of a licensing
agreement with Lola, Inc., the parent company of XOXO, to manufacture a line of
junior/women's outerwear. The XOXO outerwear line focused on the upscale
contemporary junior customer for distribution through major department and
better specialty stores. Initial shipments began in Fall 1998.
OTHER
Interest and other expenses were $4,004,000, $3,270,000 and $3,643,000
for the years ended December 31, 1998, 1997 and 1996, respectively.
The 1998 increase is the result of higher borrowing levels and higher
bank fees paid due to operating losses sustained. The 1997 decrease of $373,000
is the result of lower bank borrowings.
On March 27, 1996, the Company sold its 20% interest in Hartwell
Sports, Inc., a manufacturer of casual shirts and jackets, for $1,750,000,
which resulted in a 1996 gain of $123,000. Proceeds were used to reduce notes
payable to banks.
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INCOME TAXES
The Company's effective tax rates during 1998, 1997 and 1996 were
affected by valuation allowances related to deferred tax assets, Federal and
State net operating loss carryforwards and the non-deductibility of the
impairment of long-lived assets (primarily goodwill) (see Note 11 to the
Consolidated Financial Statements).
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $324,000 and $268,000 at December 31,
1998 and 1997, respectively. At December 31, 1998, the Company's working
capital deficiency was $11,185,000 compared to working capital of $13,944,000
at December 31, 1997. The 1998 negative change results from losses sustained of
$18,843,000 and from the subordinated notes of $6,444,000 moving from a
long-term liability to a current liability.
The Consolidated Statement of Cash flows for the year ended December
31, 1997 reflects net cash used in operations of $3,117,000, compared to cash
provided by operations of $16,210,000 in 1996. The change results primarily
from 1997 losses and the 1997 $2,704,000 increase in inventory, compared to
1996 reductions in inventory of $11,588,000. The 1997 use of cash was primarily
funded through borrowings under notes payable to banks.
Liabilities of $25,569,000 at December 31, 1998 exceed the assets of
$14,384,000 at December 31, 1998 by $11,185,000. This difference is subject to
a change in estimates. From time to time, the Company's operations have not
been able to make timely payments to their trade and other creditors. The
Company will be unable to fund the majority of this deficit. Liabilities, such
as bank debt, that are secured by the Company's remaining assets have priority
over unsecured creditors.
The Company has paid its bank lenders all of the net proceeds arising
from any sale or liquidation of its assets or operations. The Company does not
anticipate that such net proceeds will be adequate to satisfy all of its
liabilities. Accordingly, the Company and its creditors will negotiate with
respect to the payment of less than all of such obligations, and the Company
cannot predict the outcome of such negotiations. Additionally, the Company
cannot predict whether its creditors other than its bank lenders will assert
claims against the Company arising from its operations. The Company's
liabilities to its banks were wholly satisfied during the first quarter of
1999.
In order to have effected an orderly sale of the majority of the
assets, excluding accounts receivable, and the operations of M&L, the Company
and M&L filed for protection under Chapter 11 of the Bankruptcy Code on
February 5, 1999. The Company anticipates that the net proceeds from the
finalization of the M&L sale and the ultimate liquidation of M&L's remaining
assets, principally accounts receivable, shall be sufficient to repay M&L's
liabilities.
The Company believes that BAII and Mackintosh will be unable to wholly
satisfy their remaining obligations and accordingly, BAII and Mackintosh sought
protection under Chapter 11 of the Bankruptcy Code on April 30, 1999.
11
<PAGE> 12
Once the remaining assets of the Company and its subsidiaries are
sold, collected and/or liquidated, liabilities are paid or settled and matters
related to the Bankruptcy filing are resolved, the Company will seek a buyer
and/or an operating entity desiring to merge into a publicy-held company. There
can be no assurance that the Company will be successful in completing such a
transaction.
The Company did not make the interest payment due on December 15, 1998
relating to its 13% Subordinated Notes due December 15, 1999 (the "Subordinated
Notes"). Pursuant to the Indenture for the Subordinated Notes, once the Company
filed for protection, the Company's non-payment of interest became an Event of
Default and under Chapter 11 of the Bankruptcy Code the default amount above
shall IPSO FACTO become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any holder of the
Subordinated Notes.
Additionally, the Company was not in compliance with certain
requirements of its Loan Agreement, relating to collateral coverage and levels
of tangible net worth. The Company's lenders allowed the Company to remain in
violation of its Loan Agreement. However, a Reservation of Rights and Waiver
Agreement was entered into, whereby the Company's bank lenders agreed to extend
credit at their discretion without waiving any rights that arose upon the
events of default. During the first quarter of 1999, the Company wholly
satisfied its bank debt.
12
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BISCAYNE APPAREL, INC.
INDEX TO FINANCIAL STATEMENTS
(ITEM 14 (a))
<TABLE>
<CAPTION>
Page
----
<S> <C>
BISCAYNE APPAREL, INC.
Independent Auditors' Reports F-2
Consolidated statement of net liabilities in liquidation
at December 31, 1998 F-4
Consolidated statement of changes in net liabilities in
liquidation on December 31, 1998 F-4
Consolidated balance sheet at December 31, 1997 F-5
Consolidated statements of discontinued operations for each of the
three years in the period ended December 31, 1998 F-6
Consolidated statements of changes in stockholders'
equity (deficiency) for each of the three years in the
period ended December 31, 1998 F-7
Consolidated statements of cash flows for each of the
three years in the period ended December 31, 1998 F-8
Notes to consolidated financial statements F-9 to F-20
Consolidated financial statements schedules:
Schedule I - Condensed financial information
of registrant F-21 to F-25
Schedule II - Valuation and qualifying accounts F-26
</TABLE>
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.
F-1
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Biscayne Apparel, Inc.
Clifton, New Jersey
We have audited the accompanying consolidated statement of net liabilities in
liquidation of Biscayne Apparel, Inc. and subsidiaries as of December 31, 1998
and the related consolidated statement of changes in net liabilities in
liquidation on December 31, 1998 (each on a liquidation basis). In addition, we
have audited the related consolidated statements of discontinued operations,
changes in stockholders' equity and cash flows (each on a going concern basis)
for the year ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As discussed in Note 1 to the consolidated financial statements, effective
December 31, 1998, the Company changed its basis of accounting from the going
concern basis to the liquidation basis.
In our opinion, the consolidated financial statements enumerated above present
fairly, in all material respects, the consolidated net liabilities in
liquidation of Biscayne Apparel, Inc. and subsidiaries as of December 31, 1998,
the consolidated changes in net liabilities in liquidation on December 31,
1998, and the consolidated results of their operations and their cash flows for
the year ended December 31, 1998 in conformity with generally accepted
accounting principles applied on the basis described in the preceding
paragraphs.
Our audit referred to above included Schedule I and II for the year ended
December 31, 1998. In our opinion, such schedules present fairly the
information set forth therein in accordance with the applicable accounting
regulations of the Securities and Exchange Commission.
Richard A. Eisner & Company, LLP
New York, New York
March 19, 1999
F-2
<PAGE> 15
REPORT OF INDEPENDENT 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
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Biscayne Apparel, Inc. and Subsidiaries as of December 31, 1997, and the
consolidated results of their operations and their cash flows for each of the
two years ended December 31, 1997, 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 LLP
Parsippany, New Jersey
March 6, 1998, except for note 8, for which the date is March 25, 1998
F-3
<PAGE> 16
BISCAYNE APPAREL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET LIABILITIES IN LIQUIDATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents ........................................................... $ 324
Accounts receivable, net ............................................................ 9,106
Inventories ......................................................................... 4,850
Other current assets ................................................................ 104
-------
Current assets ...................................................................... $14,384
=======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Notes payable to banks .............................................................. $ 5,967
Current portion of long-term debt ................................................... 1,815
Subordinated notes and other current liabilities at estimated settlement amounts .... 6,602
Stockholders' equity (deficiency) ................................................... 0
-------
$14,384
=======
BISCAYNE APPAREL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION ON
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
Net liabilities in liquidation beginning .............................................. $(11,185)
Reduction in subordinated notes and other current liabilities to
estimated settlement amounts ....................................................... 11,185
--------
Net liabilities in liquidation ending ................................................. $ 0
--------
</TABLE>
See accompanying notes.
F-4
<PAGE> 17
BISCAYNE APPAREL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Going Concern Basis)
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1997
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................. $ 268
Trade accounts receivable, less allowances
of $2,278 ....................................... 13,509
Inventories ......................................... 17,258
Prepaid expenses and other .......................... 962
--------
Total current assets ............................. 31,997
Property, plant and equipment, net .................... 2,739
Other assets, net ..................................... 81
--------
$ 34,817
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................... $ 4,320
Accrued liabilities ................................. 4,878
Notes payable to banks .............................. 6,855
Current portion of long-term debt ................... 2,000
--------
Total current liabilities ........................ 18,053
Long term debt ........................................ 2,500
Subordinated notes .................................... 6,444
Other liabilities ..................................... 162
Stockholders' Equity:
Preferred stock - par value $0.01;
5,000,000 shares authorized; no shares issued
Common stock - par value $0.01; 25,000,000 shares
authorized; 10,771,308 shares outstanding at
December 31, 1997 ................................... 108
Additional paid-in capital ............................ 26,610
Accumulated deficit ................................... (19,060)
--------
Total stockholders' equity ....................... 7,658
--------
$ 34,817
========
</TABLE>
See accompanying notes.
F-5
<PAGE> 18
BISCAYNE APPAREL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
Years ended December 31, 1998, 1997 and 1996
(Dollars in thousands, except per share amounts)
(Going Concern Basis)
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales .............................................. $ 71,169 $ 93,206 $ 105,425
Operating cost and expenses:
Cost of goods sold ................................... 60,804 70,045 78,112
Selling, general and administrative .................. 21,760 22,183 24,394
Restructuring charges ................................ -- 465 2,039
Impairment of long-lived assets ...................... -- -- 7,062
Loss on disposal of operations ....................... 3,444 -- --
------------ ------------ ------------
86,008 92,693 111,607
Operating income (loss) ................................ (14,839) 513 (6,182)
Other income and (expenses):
Interest and other expenses .......................... (4,004) (3,270) (3,643)
Interest and other income ............................ -- 43 246
Gain on sale and equity in net income of investee .... -- -- 123
------------ ------------ ------------
Loss before provision (benefit)
for income taxes .................................... (18,843) (2,714) (9,456)
Provision (benefit) for income taxes ................... -- 1,157 (732)
------------ ------------ ------------
Net loss ............................................... $ (18,843) $ (3,871) $ (8,724)
============ ============ ============
Basic and diluted net loss per common share ............ $ (1.75) $ (0.36) $ (0.81)
============ ============ ============
Shares used in computing basic and diluted net
loss per common share ................................. 10,797,666 10,764,632 10,741,748
============ ============ ============
</TABLE>
See accompanying notes.
F-6
<PAGE> 19
BISCAYNE APPAREL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
(Going Concern Basis)
Years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Retained
Additional Earnings
Common Paid-in (Accumulated
Stock Capital Deficit) Total
-------- ---------- ------------ --------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 ......................... $ 107 $ 26,309 ($ 6,581) $ 19,835
Issuance of 507 shares of common stock due to
stock dividend ...................................... -- 2 (2) --
Amortization of unearned stock award ................. -- -- 67 67
Net loss ............................................. -- -- (8,724) (8,724)
-------- -------- -------- --------
Balance at December 31, 1996 ......................... 107 26,311 (15,240) 11,178
Issuance of 625,000 warrants ......................... -- 265 -- 265
Issuance of 6,131 shares of common stock due to
stock dividend ...................................... 1 16 (17) --
Exercise of employee stock options ................... -- 18 -- 18
Amortization of unearned stock award ................. -- -- 68 68
Net loss ............................................. -- -- (3,871) (3,871)
-------- -------- -------- --------
Balance at December 31, 1997 ......................... 108 26,610 (19,060) 7,658
Issuance of 1,001 shares of common stock due to
stock dividend ...................................... -- 2 (2) 0
Net loss ............................................. -- -- (18,843) (18,843)
-------- -------- -------- --------
Balance at December 31, 1998 ......................... $ 108 $ 26,612 ($37,905) ($11,185)
======== ======== ======== ========
</TABLE>
See accompanying notes.
F-7
<PAGE> 20
BISCAYNE APPAREL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
(Going Concern Basis)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net loss ....................................................... $(18,843) $ (3,871) $ (8,724)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation expense ......................................... 639 618 544
Amortization expense ......................................... 88 83 95
Amortization of unearned stock award compensation ............ -- 109 --
Noncash stock compensation expense ........................... -- 68 67
Loss (gain) on disposition of assets ......................... -- 3 (11)
Gain on sale and equity in net income of investee ............ -- -- (123)
Provision for losses and sales allowances on receivables ..... 4,425 4,615 5,158
Impairment of long-lived assets .............................. -- -- 7,062
Loss from net write-down of assets ........................... 3,444 -- --
(Increase) decrease in operating assets:
Trade accounts receivable .................................... (166) (3,750) (951)
Inventories .................................................. 10,497 (2,704) 11,588
Prepaid expenses and other ................................... 802 1,299 (360)
Federal income tax receivable ................................ -- 1,455 514
Other assets ................................................. 190 277 1,516
Increase (decrease) in operating liabilities:
Accounts payable ............................................. (57) 296 60
Accrued liabilities .......................................... 2,335 (1,302) (511)
Other liabilities ............................................ -- (313) 286
-------- -------- --------
Net cash provided by (used in) operating activities ........ 3,354 (3,117) 16,210
-------- -------- --------
Investing activities:
Capital expenditures ........................................... (289) (506) (257)
Proceeds from net sale of assets ............................... 640 -- 11
Proceeds on sale of Hartwell Sports, Inc. ...................... -- -- 1,750
-------- -------- --------
Net cash provided by (used in) investing activities ......... 351 (506) 1,504
-------- -------- --------
Financing activities:
Payments under notes payable to banks .......................... (73,282) (30,599) (87,402)
Borrowings under notes payable to banks ........................ 72,394 35,981 71,025
Principal payments of long-term debt and capital leases ........ (2,761) (1,836) (1,322)
Proceeds from exercise of employee stock options ............... -- 18 --
-------- -------- --------
Net cash provided by (used in) financing activities ........ (3,649) 3,564 (17,699)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ............ 56 (59) 15
Cash and cash equivalents at beginning of year .................. 268 327 312
-------- -------- --------
Cash and cash equivalents at end of year ........................ $ 324 $ 268 $ 327
======== ======== ========
</TABLE>
See accompanying notes.
F-8
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
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"), 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., which was organized in 1995. 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. As discussed in Note 2, BAI, M&L, BAII and Mackintosh have filed
for bankruptcy, and the company has determined to dispose of all its assets and
operations.
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.
As discussed more thoroughly in Note 2, as of December 31, 1998 the
Company and its subsidiaries have disposed of substantially all of their assets
and operations and have provided in the estimated loss on disposal for the
writedown of assets to the sale value and/or market value, loss on fulfilling
other obligations, costs of disposal and future operating losses. Accruals of
future costs or actual loss on disposal could materially differ from final
amounts realized on the loss or disposal of operations.
Effective December 31, 1998, the Company changed its basis of accounting from
the going concern basis to a liquidation basis.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
F-9
<PAGE> 22
INVENTORIES
Inventories are stated at the lower of cost, (first-in, first-out)
(FIFO) or net realizable value, for all subsidiaries except M&L, whose
inventory is stated at lower of cost, (last-in, first-out) (LIFO), or net
realizable value.
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,
as follows:
Buildings and Building Improvements............ 1 to 30 years
Machinery and Equipment........................ 3 to 10 years
Maintenance and repair costs are charged to expense as incurred, and
renewals and improvements are capitalized. When capital assets are retired or
disposed of, the asset and related accumulated depreciation accounts are
adjusted accordingly, and any gain or loss is recorded.
The Company follows Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" (FAS 121), which requires an impairment loss be
recognized if an event or change in circumstances indicate that the carrying
amount of an asset may not be recoverable. The impairment loss is measured as
the amount by which the carrying amount of the asset exceeds the fair value
less the estimated selling costs (see Note 6).
GOODWILL
Negative goodwill, which related to the acquisition of M&L, was being
amortized on a straight line basis over 40 years. Accumulated amortization of
negative goodwill was $47,000 and $29,000 at December 31, 1997 and 1996,
respectively. Due to the sale of the majority of M&L's assets, negative
goodwill was written off at December 31, 1998.
Goodwill had been amortized on a straight-line basis over forty years
from the date of each acquisition. The Company has historically used various
criteria to evaluate the amortization period of goodwill, including the
following: established market position (with stable customer relationships);
experienced management team; history of profitable operations and positive cash
flows at or above industry levels, with prospective growth opportunities; and
longevity of entity and industry.
The carrying value of goodwill is reviewed if the facts and
circumstances suggest it may be impaired. Such facts and circumstances resulted
in the write off of $6,532,000 of goodwill relating to the Company's Andy Johns
and Varon divisions, for the year ended December 31, 1996 (see Note 6).
F-10
<PAGE> 23
FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximates fair value
because of the short-term duration of such items. 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 prices noted in nominal trading activity.
REVENUE RECOGNITION
The Company records revenues at the time of shipment of merchandise.
The Company establishes reserves for sales returns and allowances based upon
actual and historical levels of returns.
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 may not be realized.
DISPOSITIONS
On March 27, 1996, the Company sold its 20% interest in Hartwell
Sports, Inc. for $1,750,000. Proceeds from the sale were used to reduce notes
payable to banks.
2. SALE OF THE COMPANY'S OPERATIONS
Due to the continuing losses sustained in BAII and Mackintosh through
1997 and the projected volume reduction incurred in M&L in 1998 resulting from
the non-renewal of the OshKosh B'Gosh, Inc. outerwear license, Biscayne
retained an investment banking firm specializing in retailer and consumer
product companies, to advise the Company on strategic alternatives. As a result
of this process, the Company determined to dispose of the majority of the
assets and the operations of BAII, M&L and Mackintosh. During the fourth
quarter of 1998 and the first quarter of 1999, the majority of the assets,
excluding accounts receivable, and the operations of BAII, M&L and Mackintosh
were sold.
Included within the 1998 net loss of $18,843,000 is the loss on
disposal of discontinued operations of $3,444,000, which includes accounts
receivable writeoffs of $144,000, inventory writeoffs of $1,911,000, prepaid
expenses and other asset writeoffs of $402,000 and property, plant and
equipment writeoffs of $1,742,000, offset by the write off of negative goodwill
and excess accrued liabilities of $755,000. Liabilities of $25,569,000 at
December 31, 1998 exceed the related
F-11
<PAGE> 24
assets of $14,384,000 by $11,185,000. This difference is subject to a change in
estimates. From time to time, the Company's operations have not been able to
make timely payments to their trade and other creditors. The Company will be
unable to fund the majority of this deficiency. Liabilities, such as bank debt,
that are secured by the Company's remaining assets have priority over unsecured
creditors. Accrued liabilities at December 31, 1998 include $3,671,000 of
compensation costs, professional fees and other expenses relating to the
discontinuance and disposal of operations.
The Company has paid its bank lenders all of the net proceeds arising
from any sale or liquidation of assets. The Company does not anticipate that
such net proceeds will be adequate to satisfy all of its liabilities.
Accordingly, the Company and its creditors will negotiate with respect to the
payment of less than all of such obligations, and the Company cannot predict
the outcome of such negotiations. Additionally, the Company cannot predict
whether its creditors other than its bank lenders will assert claims against
the Company arising from those operations. The Company's liabilities to its
banks were wholly satisfied during the first quarter of 1999.
In order to have effected an orderly sale of the majority of the
assets, excluding accounts receivable, and the operations of M&L, the Company
and M&L filed for protection under Chapter 11 of the Bankruptcy Code on
February 5, 1999. The Company anticipates that the net proceeds from the
finalization of the M&L sale and the ultimate liquidation of M&L's remaining
assets, principally accounts receivable, will be sufficient to repay M&L's
liabilities.
The Company believes that BAII and Mackintosh will be unable to wholly
satisfy their remaining obligations and accordingly, BAII and Mackintosh sought
protection under Chapter 11 of the Bankruptcy Code on April 30, 1999
Once the remaining assets of the Company and its subsidiaries are
sold, collected and/or liquidated, liabilities are paid or settled and matters
related to the Bankruptcy filing are further resolved, the Company will seek a
buyer and/or an operating entity desiring to merge into a publicy- held
company. There can be no assurance that the Company will be successful in
completing such a transaction. Further, assets of some of the entities may be
restricted to satisfy the liabilities of those entities and may not be
available for other purposes.
3. EARNINGS PER COMMON SHARE
The Company has 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 Company has not included potential common shares in the diluted
EPS computations as the results are antidilutive.
F-12
<PAGE> 25
4. INVENTORIES
Inventories at December 31, 1998 (substantially all M&L) and 1997 are
comprised of the following:
(In thousands) 1998 1997
------- -------
Raw materials $ 85 $ 4,067
Work-in-process 0 1,944
Finished goods 4,765 11,247
------- -------
$ 4,850 $17,258
======= =======
M&L's inventory at December 31, 1998 was valued at the price it was
sold for in 1999. Included in inventory at December 31, 1997 is $7,120,000
relating to M&L's inventory, which was valued under the LIFO method. M&L's
inventory at December 31, 1997 would have been $76,000 higher, had the
inventory been valued under FIFO.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1998 and 1997 is as
follows:
(In thousands) 1998 1997
---- -------
Land $0 $ 17
Buildings and building improvements 0 1,066
Machinery and equipment 7 4,173
-- -------
7 5,256
Less accumulated depreciation and amortization 0 (2,517)
-- -------
$7 $ 2,739
== =======
Property, plant and equipment at December 31, 1998 was valued at the price it
was sold for in 1999.
6. WRITEDOWN OF GOODWILL, IMPAIRMENT OF LONG-LIVED ASSETS AND RESTRUCTURING
CHARGES
During 1997 and 1996, the Company recorded restructuring charges of
$465,000 and $2,039,000, respectively. Approximately $465,000 in 1997 and
$1,159,000 in 1996 relate to salary and separation costs, primarily relating to
senior and middle managers, and approximately $880,000 in 1996 related to
termination of long-term contracts and leases and facility closing costs.
F-13
<PAGE> 26
During the fourth quarter of 1996, certain events occurred which led the
Company to evaluate the recoverability of goodwill of its Andy Johns and Varon
Divisions. Since the goodwill under evaluation was related to the specific
enterprises and not to any of their long-term assets, the evaluation was done
pursuant to Accounting Principles Board Opinion No. 17, "Intangible Assets".
These events included certain changes in government regulations regarding
cotton sleepwear, changes in key members of the management team, loss of market
share and loss of a key customer. As a result, in December 1996, the Company
recognized a one-time non-cash charge for impairment of goodwill of $6,532,000,
with no associated tax benefit.
Also during the fourth quarter of 1996, the Company evaluated the
recoverability of a manufacturing facility and, as a result of such analysis,
the Company recorded a fixed asset writedown of $530,000.
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1998 and
1997:
(In thousands) 1998* 1997
----- ----
Wages, commissions and bonus
and severance $1,882 $2,882
Royalties and advertising 714 --
Professional fees
(legal, audit, tax, etc.) 1,759 --
Interest 620 --
Other 2,019 1,996
------ ------
$6,994 $4,878
====== ======
- ----------------------------
*Before adjustment to estimated settlement amount.
8. DEBT
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"). The Revolver Agreement was available for loans, letters of
credit and letters of indemnity.
The Company had notes payable to banks under the Revolver Agreement at
December 31, 1998 and 1997 of $5,967,000 and $6,855,000, respectively.
Additionally, at December 31, 1998 and 1997, the Company had letters of credit
outstanding of $1,308,000 and $9,455,000, respectively.
At December 31, 1998 and 1997, the Company was at its available credit
limits. The interest rate was prime plus 3.0% at December 31, 1998 and prime
plus 1.0% at December 31,1997 on the Revolver Agreement. The prime rate was
7.75% and 8.5% at December 31, 1998 and 1997, respectively.
F-14
<PAGE> 27
The weighted average interest rate on outstanding short-term
borrowings and the term loan at December 31, 1998 and 1997 was 10.75% and
9.86%, respectively.
The final principal payment of the Term Loan of $1,815,000 was paid on
March 16, 1999.
On March 28, 1996, the Loan Agreement was amended to reduce the
Revolver Agreement facility to $50,000,000; adjust the interest rate under
Revolver Agreement borrowings to prime plus 1.0%, or prime plus 1.25% during
agreed upon collateral overadvance periods; adjust 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 $250,000, collateral
monitoring costs of 0.2% of net sales, and provide for the issuance of warrants
to the banks to purchase 425,000 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. The Company was amortizing the capitalized valuation
of these warrants (approximately $156,000) through the period ending March 31,
1999.
On March 24, 1997, the Loan Agreement was amended to reduce the
Revolver Agreement to $45,000,000; adjust the interest rate for Revolver
Agreement borrowings to prime plus 1.0%, or prime plus 1.75% during agreed upon
collateral overadvance periods; require additional fees of $325,000 and waive
violations of certain covenants during 1996.
On March 25, 1998, the Loan Agreement was amended 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 March
1998 to March 1999 and waive violations of certain covenants during 1997.
Additionally, since certain Revolver borrowing levels and related covenant
levels were exceeded beginning in the 1998 fourth quarter, the interest rates
for the Revolver were increased to prime plus 3% and the interest rate for the
Term Loan was increased to prime plus 3% or LIBOR plus 5.5% and additional fees
of $250,000 were paid.
The Revolver Agreement and the Term Loan were collateralized by all of
the Company's assets. Additionally, the Revolver Agreement and the Term Loan
contained various financial covenants, reporting requirements and limits on
capital expenditures, cash dividends, other indebtedness, affiliate
transactions, mergers and acquisitions and other items.
The Company was not in compliance with certain requirements of its
Loan Agreement, relating to collateral coverage and levels of tangible net
worth. The Company's lenders allowed the Company to remain in violation of its
Loan Agreement. However, a Reservation of Rights and Waiver Agreement was
entered into, whereby the Company's bank lenders agreed to extend credit at
their discretion without waiving any rights that arose upon the events of
default. During the first quarter of 1999, the Company wholly satisfied its
bank debt.
Interest expense paid on notes payable to banks and subordinated notes
(see Note 9) was approximately $2,604,000, $3,199,000 and $3,688,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.
F-15
<PAGE> 28
9. SUBORDINATED DEBT
At December 31, 1998, 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
below par value based on prices noted in nominal trading.
The Company did not make the interest payment due on December 15, 1998
relating to the Subordinated Notes. Pursuant to the Indenture for the
Subordinated Notes, the Company's non-payment of interest became an Event of
Default and once the Company filed for protection under Chapter 11 of the
Bankruptcy Code the default amount above shall IPSO FACTO become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any holder of the Subordinated Notes.
10. 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, 1998 and 1997, respectively, the Company had
10,797,666 and 10,771,308 shares of common stock outstanding. No shares of
preferred stock have been issued.
In March 1996, in connection with the Company's Revolver Agreement and
Term Loan, warrants were issued to purchase 425,000 shares of the Company's
common stock (see Note 8). Additionally, in 1996, the Company issued warrants
to purchase 200,000 shares, at an exercise price of $0.75 per share, to Trivest
as part of the amendment to the Company's management agreement (see Note 13).
These warrants became fully exercisable effective January 1, 1997 and expire
December 31, 2001.
In October 1997, the Company issued a warrant to purchase 36,383
shares of the Company's common stock at a purchase price of $1.62 per share,
which is exercisable from October 1997 through December 2000.
The Company has four nonqualified stock option plans; the 1987 Stock
Option Plan ("1987 SOP"), the 1990 Stock Option Plan ("1990 SOP"), the 1994
Stock Option Plan ("1994 SOP") and the 1997 Stock Option Plan ("1997 SOP").
Under the terms of the 1987 SOP, 1990 SOP, 1994 SOP and 1997 SOP, 550,000
shares, 650,000 shares, 150,000 shares, and 306,695 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.
F-16
<PAGE> 29
The following table summarizes the activity of the Company's stock
option plans:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Balance outstanding at beginning of year 828,154 1,202,610 1,225,637
Granted 0 140,000 45,000
Canceled 0 (491,027) (68,027)
Exercised (191,024) (23,429) --
----------- ----------- -----------
Balance outstanding at December 31 637,130 828,154 1,202,610
=========== =========== ===========
Price range per share $0.75-$2.44 $0.75-$2.44 $0.75-$2.44
=========== =========== ===========
Exercisable at December 31 637,130 699,669 928,367
=========== =========== ===========
Available for grant at December 31 1,059,236 709,119 110,417
=========== =========== ===========
</TABLE>
The following table summarizes information about fixed-price stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Weighted-
Average Weighted- At December 31, 1998
Remaining Average ------------------------------------------
Exercise Contractual Exercise Options Options
Price Life Price Outstanding Exercisable
- -------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
$0.7500 7 yrs $0.7500 33,750 33,750
$0.7936 3 yrs $0.7936 8,820 8,820
$0.8125 4 yrs $0.8125 100,000 100,000
$0.8750 4 yrs $0.8750 25,000 25,000
$1.1250 8 yrs $1.1250 15,000 15,000
$1.2471 1 yrs $1.2471 169,235 169,235
$1.9274 5 yrs $1.9274 162,621 162,621
$2.2619 1 yrs $2.2619 4,199 4,199
$2.3810 6 yrs $2.3810 92,925 92,925
$2.4376 6 yrs $2.4376 25,580 25,580
------- -------
637,130 637,130
======= =======
</TABLE>
The Company applies the provisions of Opinion 25 ("APB 25") and
related interpretations in accounting for its stock based compensation plans.
Accordingly, compensation expense has been recognized in the financial
statements with respect to the above plans to the extent required by APB 25.
Had compensation costs for the above plans been determined based on the fair
value at the grant dates for awards under those plans consistent with the
method of Statement of Financial Accounting Standards No. 123 "Accounting for
Stock Based Compensation", the Company's net loss and net loss per share would
have been substantially the same as reported.
F-17
<PAGE> 30
As discussed in Notes 1 and 2, the Company has either sold or will
sell the majority of its assets and has ceased its operations. Therefore, the
disclosures required by SFAS No. 123 of net loss and net loss per share and the
weighted average fair value of options granted during each year, in light of
the Company's adoption of the liquidation basis of accounting, are not deemed
material to the Company's financial statements. Accordingly, such items have
not been disclosed for any of the years presented. Additionally, the
disposal/sale of the majority of the Company's assets causes the options issued
under the Company's stock option plans to be fully vested, which is reflected
above.
11. INCOME TAXES
The components of the provision (benefit) for income taxes for each of
the three years in the period ended December 31, 1998 are as follows:
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
Current $ 0 $ (61) $(1,577)
Deferred 0 1,218 845
------- ------- --------
$ 0 $1,157 $ (732)
======= ======= ========
The total Federal and state provision (benefit) for income taxes is as
follows:
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
Federal $ 0 $ 844 $ (498)
State 0 313 (234)
------ ------ --------
$ 0 $1,157 $ (732)
====== ====== ========
A reconciliation of the statutory provision and the effective
provision for income taxes is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income tax (benefit) at statutory rate $(6,407) $ (923) $(3,215)
State income tax (benefit), net of federal benefit (387) 195 7
Adjustment of NOL carry forwards 1,403 -- --
Impairment of goodwill -- -- 2,173
Amortization expense -- 54 45
Refund of prior year's income
taxes and related adjustments -- -- (473)
Other, net 34 (17) (157)
Change in valuation allowance 5,357 1,848 888
-------- ------ ------
$ 0 $1,157 $ (732)
======== ====== ======
</TABLE>
F-18
<PAGE> 31
The components of the net deferred tax (assets) and liabilities
recorded on the statement of net liabilities in liquidation (1998) and balance
sheet (1997) at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1998 1997
---- ----
<S> <C> <C>
Deferred Tax Liabilities:
LIFO inventory adjustments $ 0 $ 1,157
Depreciation 0 49
------ -------
Total deferred tax liabilities 0 1,206
Deferred Tax (Assets):
Federal net operating loss carryovers (7,131) (3,159)
State net operating loss carryover (1,575) (1,188)
State jobs credit carryover (237) (237)
Alternative minimum tax credit carryover (199) (199)
Accruals for disposal of operations (1,118) --
Accounts receivable and sales allowances (645) (1,022)
Capitalized trademarks -- (599)
Capitalized inventory -- (236)
Deferred compensation -- (73)
Employee benefits (241) (140)
Operating leases -- (90)
Other (11) (63)
-------- -------
(11,157) (7,006)
Valuation allowance on deferred tax (assets) 11,157 5,800
-------- -------
Total deferred tax (assets) 0 (1,206)
-------- -------
Net Deferred Taxes $ -- $ --
======== =======
</TABLE>
As of December 31, 1998, the Company had approximately $21,000,000 of
net operating loss carryforwards for U.S. Federal income tax purposes. These
carryforwards expire through the year 2018.
The Company has valuation allowances of $11,157,000 and $5,800,000 at
December 31, 1998 and 1997, respectively, to reflect management's estimate of
the total amount of deferred tax assets and net operating loss carryforward,
which may not be realized depending on future operating results of the Company.
The increase in the valuation allowance is due to continuing operating losses.
Income taxes paid during 1998, 1997 and 1996 were $5,000, $2,000, and
$82,000, respectively.
F-19
<PAGE> 32
12. EMPLOYEE BENEFIT PLANS
The Company maintains employee profit sharing plans covering all
domestic employees. No contribution was made for the years ended December 31,
1998, 1997, and 1996.
13. RELATED PARTY TRANSACTIONS
As of January 1, 1987, the Company entered into a management agreement
with Trivest, Inc. ("Trivest"). Trivest and the Company have certain common
shareholders, officers and directors. Pursuant to the management agreement,
Trivest provides corporate finance, financial relations, strategic and capital
planning and other management advice to the Company. The term of the management
agreement was 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 management 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.
Effective December 1, 1994, the management agreement was amended and
restated due to the acquisition of M&L. This amendment increased the yearly fee
to $350,000 (subject to inflation adjustments). Effective January 1, 1996, the
management agreement was amended to reduce the yearly fee to $180,000 (subject
to inflation adjustments). Additionally, the agreement provided for the
issuance of a warrant to purchase 200,000 shares of the Company's stock. The
Company recognized expense of approximately $109,000 in 1997 relating to the
valuation of this warrant.
Effective January 1, 1998, the Company entered into a new management
agreement with Trivest (the "New Agreement"). The New Agreement requires an
annual cash management fee of $200,000, payable in advance in equal quarterly
installments and was to have expired on December 31, 1998. The New Agreement
was terminated on September 30, 1998.
The Company expensed approximately $150,000, $186,000, and $180,000
for services rendered under the management agreement during the years ended
December 31, 1998, 1997, and 1996, respectively.
Certain former officers of the Company had a minority interest in the
equity securities of a vendor. The vendor supplied warehousing and distribution
facilities to Andy Johns and Mackintosh. This vendor relationship, which was
under contract until 1999, was terminated as of December 31, 1996 for a
negotiated payment of $525,000 (of which $125,000 was paid out in 1997), and
has been included as part of restructuring expenses in 1996. During the year
ended December 31, 1996, actual warehousing and shipping expenses to this
vendor totaled approximately $884,000.
F-20
<PAGE> 33
Schedule I - Condensed Financial Information of Registrant
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENT OF NET LIABILITIES IN LIQUIDATION
(PARENT COMPANY ONLY)
December 31, 1998
(Dollars in thousands)
<TABLE>
<S> <C>
ASSETS
Current assets ................................................................................. $ 47
Investment in affiliates at liquidation value .................................................. 4,805(1)
-------
$ 4,852
=======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Subordinated notes and other current liabilities at estimated settlement amounts ............... $ 4,852
Stockholders' equity (deficiency) .............................................................. 0
-------
$ 4,852
=======
</TABLE>
(1) Net liabilities of certain affiliates are not included.
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION ON
DECEMBER 31, 1998
(PARENT COMPANY ONLY)
(Dollars in thousands)
<TABLE>
<S> <C>
Net liabilities in liquidation beginning ......................................................... ($3,064)
Reduction in subordinated notes and other current liabilities to estimated settlement amounts .... 3,064
-------
Net liabilities in liquidation ending ............................................................ $ 0
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE> 34
Schedule I - Condensed Financial Information of Registrant (Continued)
BISCAYNE APPAREL, INC.
(PARENT COMPANY ONLY)
BALANCE SHEET
(Going Concern Basis)
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1997
-----------
<S> <C>
ASSETS
Current assets:
Accounts receivable .................... $ 7
Intercompany receivable ................ 1,095
Prepaid expenses and other ............. 5
--------
Total current assets ................ 1,107
Investment in subsidiaries ............... 13,220
Property, plant and equipment, net ....... 32
Other assets, net ........................ 88
--------
$ 14,447
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................... $ 110
Accrued liabilities .................... 214
--------
Total current liabilities ........... 324
Subordinated notes ....................... 6,444
Other liabilities ........................ 21
Stockholders' Equity:
Common stock ............................. 108
Additional paid-in capital ............... 26,610
Accumulated deficit ...................... (19,060)
--------
Total stockholders' equity .......... 7,658
--------
$ 14,447
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE> 35
Schedule I - Condensed Financial Information of Registrant (Continued)
BISCAYNE APPAREL, INC.
(PARENT COMPANY ONLY)
STATEMENTS OF DISCONTINUED OPERATIONS
(Going Concern Basis)
Years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Expenses:
General and administrative expenses ............... $ 885 $ 200 $ 67
Management fee to Trivest, Inc. ................... 150 186 180
-------- -------- --------
Operating expenses .................................. (1,035) (386) (247)
Other income and (expenses):
Interest and other expenses ....................... (925) (883) (838)
Intercompany interest income ...................... 304 495 519
Interest and other income ......................... -- 11 37
Equity in and gain on sale of investee ............ -- -- 123
Share of loss of subsidiaries, net of
applicable income taxes (1) ...................... (9,216) (2,089) (8,673)
Management fee from subsidiaries .................. 150 186 180
-------- -------- --------
Loss before provision (benefit) for income taxes .... (10,722) (2,666) (8,899)
Provision (benefit) for income taxes ................ -- 1,205 (175)
-------- -------- --------
Net loss ............................................ ($10,722) ($ 3,871) ($ 8,724)
======== ======== ========
</TABLE>
(1) Losses of certain affiliates of $8,121 in 1998 were not recorded on the
equity method because losses exceed investments and advances.
See accompanying notes to consolidated financial statements.
F-23
<PAGE> 36
Schedule I - Condensed Financial Information of Registrant (Continued)
BISCAYNE APPAREL, INC.
(PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS
Years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
(Going Concern Basis)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net loss .................................................... $(10,722) ($ 3,871) ($ 8,724)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation expense ...................................... 41 5 6
Amortization expense ...................................... -- 69 --
Amortization of debt issuance cost ........................ 88 109
Noncash stock compensation expense ........................ -- 68 67
Share of loss of subsidiaries ............................. 9,216 2,089 8,673
Gain on sale and equity in net income of investee ......... -- -- (123)
(Increase) decrease in operating assets:
Trade accounts receivable ................................. -- 17 3
Prepaid expenses and other ................................ 5 26 --
Federal income tax receivable ............................. -- 1,455 514
Other assets .............................................. -- 68 (42)
Increase (decrease) in operating liabilities:
Accounts payable .......................................... (110) 62 49
Accrued liabilities ....................................... 1,292 (242) 74
Other liabilities ......................................... -- (17) (10)
-------- -------- --------
Net cash provided by (used in) operating activities ..... (190) (162) 487
-------- -------- --------
Investing activities:
Capital expenditures ........................................ (9) (19) (1)
Proceeds on sale of Hartwell Sports, Inc. ................... -- -- 1,750
-------- -------- --------
Net cash provided by (used in) investing activities ...... (9) (19) 1,749
-------- -------- --------
Financing activities:
Repayments (advances) of intercompany loans ................. 251 134 (2,236)
Principal payments of long-term debt and capital leases ..... (13) -- --
Proceeds from exercise of employee stock options ............ -- 18 --
-------- -------- --------
Net cash provided by (used in) financing activities ..... 238 152 (2,236)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ......... 39 (29) 0
Cash and cash equivalents at beginning of year ............... 0 29 29
-------- -------- --------
Cash and cash equivalents at end of year ..................... $ 39 $ 0 $ 29
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-24
<PAGE> 37
Schedule I - Condensed Financial Information of Registrant (Continued)
BISCAYNE APPAREL, INC.
PARENT COMPANY ONLY
STATEMENTS OF CASH FLOWS (Cont'd)
(Going Concern Basis)
Years Ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Supplemental disclosure:
Interest paid $ 419 $ 838 $ 838
Income taxes paid $ 5 $ 2 $ 1
Supplemental schedule of noncash financing
activities:
Net non-cash changes in investments in subsidiaries $ 500 $2,963 $ 500
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE> 38
Schedule II - Valuation And Qualifying Accounts
BISCAYNE APPAREL, INC. AND SUBSIDIARIES
Years ended December 31, 1998, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------------------------------------------------------------------------------------------------------------------------------
Additions
Balance at Charged to Charged to Balance
beginning costs and other at end
Description of year expenses accounts Deductions of year
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1998
Allowance for doubtful accounts $ 168 $ 277 $ 0 $ 252 $ 193
Allowance for sales discounts 100 2,240 0 1,839 $ 501
Reserve for sales allowance 527 272 0 275 $ 524
Reserve for advertising allowance 168 88 0 209 $ 47
Reserve for freight and warehouse discounts 123 122 0 207 $ 38
Reserve for returns $1,192 $1,773 $ 0 $2,128 $ 837
Year ended December 31, 1997:
Allowance for doubtful accounts $ 169 $ 204 $ 0 $ 205 $ 168
Allowance for sales discounts 96 456 0 452 $ 100
Reserve for sales allowance 300 566 0 339 $ 527
Reserve for advertising allowance 123 248 0 203 $ 168
Reserve for freight and warehouse discounts 105 272 0 254 $ 123
Reserve for returns $1,225 $3,075 $ 0 $3,108 $1,192
Year ended December 31, 1996:
Allowance for doubtful accounts $ 227 $ 223 $ 44 $ 325 $ 169
Allowance for sales discounts 162 522 0 588 $ 96
Reserve for sales allowance 404 671 0 775 $ 300
Reserve for advertising allowance 99 222 0 198 $ 123
Reserve for freight and warehouse discounts 72 396 0 363 $ 105
Reserve for returns $1,003 $3,875 $ 0 $3,653 $1,225
</TABLE>
F-26
<PAGE> 39
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.
Information relating to the change in the Company's accountants is
incorporated by reference from the Company's Current Report on Form 8-K, dated
June 16, 1998, heretofore filed with the commission on June 16, 1998.
13
<PAGE> 40
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION(S) HELD WITH THE COMPANY
- ---- --- ---------------------------------
<S> <C> <C>
Earl W. Powell 60 Chairman of the Board and Chief
Executive Officer
Peter Vandenberg, Jr. 44 President, Chief Operating Officer, Chief
Financial Officer, Treasurer and Director
Phillip T. George, M.D. 59 Director
R. Stephen Lefler 49 Director
</TABLE>
Mr. Powell has served as Chairman of the Board of the Company since
October 1985 and is also presently serving as Chief Executive Officer. He has
also previously served as President and Chief Executive Officer of the Company
at various times since October 1985. Since May 1984, Mr. Powell has served as
Chairman of Atlantis Plastics, Inc., an American Stock Exchange company whose
subsidiaries are engaged in the plastics industry ("Atlantis"). Mr. Powell also
serves as (i) Chairman of the Board, President and Chief Executive officer of
Trivest, a private investment firm formed by Messrs. Powell and George in 1981
that specializes in management services and acquisitions, dispositions and
leveraged buyouts ("Trivest"), and (ii) Chairman of the Board of Directors of
WinsLoew Furniture, Inc., a Nasdaq National Market company engaged in the
manufacture of contract seating and casual and ready-to-assemble furniture
("WinsLoew"). From 1971 until 1985, Mr. Powell was a partner with KPMG/Peat
Marwick, Certified Public Accountants ("Peat Marwick"), where his positions
included serving as managing partner of Peat Marwick's Miami office.
Mr. Vandenberg, a Certified Public Accountant, has served as President
of the Company since November 1997 and as Chief Operating Officer since March
1998. Mr. Vandenberg joined the Company in January 1987 and has served as Vice
President (Executive Vice President from December 1996 until becoming
President), Treasurer and Chief Financial Officer since such time (except for
the period from April 1991 to September 1991, when he served as a Vice
President of the Company and as an executive officer of Trivest). Mr.
Vandenberg also began serving as a Managing Director of Trivest in January
1999. He was appointed a director of the Company in November 1994. Mr.
Vandenberg served in various capacities with Peat Marwick from December 1977
until January 1987, and was a senior manager of that firm from July 1984 until
joining the Company.
Dr. George has served as a director of the Company since October 1985
and previously served as Vice Chairman of the Board. Dr. George also serves as
Vice Chairman of Atlantis' Board of Directors, as a director of WinsLoew and as
Vice Chairman of the Board of Trivest. Dr. George's executive position with
Trivest has been his principal occupation since retiring from the private
practice of plastic and reconstructive surgery in February 1986.
Mr. Lefler was appointed a director of the Company in March 1997.
Since February 1997,
14
<PAGE> 41
Mr. Lefler has been President, Chief Executive Officer and a director of
Hartwell Industries, Inc., a manufacturer of sportswear, which is an affiliate
of Trivest. From 1982 through January 1997, he was employed by
Williamson-Dickie Manufacturing Company in various positions, most recently as
President and Chief Operating Officer.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries, for the
fiscal years ended December 31, 1998, 1997 and 1996, to or on behalf of the
Company's Chief Executive Officer and each of the most highly compensated
executive officers of the Company whose total annual salary and bonus for 1998
exceeded $100,000 (the "Named Executive Officers"):
<TABLE>
<CAPTION>
Long Term
Compensation
--------------------
Annual Compensation Awards Payouts
-------------------------------------------------- ------ -------
Other Awards LTIP All Other
Name and Annual Options Payouts Compensation
Principal Position Year Salary ($) Bonus ($) Compensation (#) ($) ($)
------------------ ---- ---------- --------- ------------ ------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earl W. Powell 1998 -- -- -- -- -- --
Chairman and Chief 1997 -- -- -- -- -- --
Executive Officer 1996 -- -- -- -- -- --
Kurt C. Gutfreund 1998 $330,000 $ 89,721 -- -- -- --
Vice Chairman, 1997 320,000 537,828 -- -- -- --
President and Chief 1996 310,000 576,223 -- -- -- --
Executive Officer of
M&L
Peter Vandenberg, Jr. 1998 $250,000 $ 75,000 -- -- -- --
President, Chief 1997 200,000 120,000 -- 100,000(2) -- --
Operating Officer, Chief 1996 170,000(1) 50,000 -- 15,000(1) -- --
Financial Officer and
Treasurer
</TABLE>
- -----------------
(1) 1996 compensation was modified pursuant to a salary deferral
agreement. See "Employment Contracts and Termination of Employment
Arrangements" below.
(2) 51,451 of such options were issued in exchange for options previously
granted.
STOCK OPTION GRANTS
The Company did not grant any stock options in 1998. The Company did not
grant any stock appreciation rights in 1998.
15
<PAGE> 42
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUE TABLE
No Named Executive Officer exercised stock options during the year ended
December 31, 1998. The following table sets forth information, with respect to
the Named Executive Officers, concerning unexercised options held by them as of
the end of such fiscal year:
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
AND FISCAL YEAR-END OPTION VALUE
------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998 ($)
--------------------------------------- --------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- ----------------- ----------------- ------------------
<S> <C> <C> <C>
Earl W. Powell......................... 88,200 -- -0-(1) -0-(1)
Peter Vandenberg, Jr................... 100,000 -- -0-(1) --
</TABLE>
- ----------------
(1) The closing sale price for the Company's Common Stock as reported by
the NASDAQ OTC on December 31, 1998 was $.0075. As of such date, no
such options were in-the-money since the exercise price of the options
exceeded the fair market value of the underlying securities.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Effective January 1, 1998, the Board of Directors approved an
employment arrangement with Mr. Vandenberg, the Company's President, Chief
Operating Officer, Treasurer and Chief Financial Officer. Pursuant to this
arrangement, which has an initial term of two years, Mr. Vandenberg received an
annual base salary of $250,000 in 1998 and $275,000 in 1999. The arrangement
also provides for a Special Benefit Payment of 10% of the annual base salary;
discretionary bonuses; severance equal to one year's salary, Special Benefit
Payment, bonus and benefits; and Disposition Incentive Compensation of $125,000
for the disposition or liquidation of each of the Company's operations. Such
amounts have been earned by Mr. Vandenberg, as each of the Company's operations
have now been disposed of or liquidated, however, the payments have not yet
been made to Mr. Vandenberg. An amendment to Mr. Vandenberg's employment
agreement has been submitted to the bankruptcy court for approval.
In connection with the Company's acquisition of M&L in November 1994,
M&L entered into an employment agreement with Mr. Gutfreund pursuant to which
he is employed as President and Chief Executive Officer of M&L. In February
1998 the agreement was amended to extend the term for three additional years
from December 31, 1997 through December 31, 2000, with a base salary of
$330,000, $340,000 and $350,000 for 1998, 1999 and 2000, respectively. On
February 3, 1999 in connection with the Asset Purchase Agreement by and among
NewCo, M&L International (HK) Limited, the Company and M&L Hong Kong, Ltd. (the
"Purchase Agreement"), Mr. Gutfreund's employment with the Company was
terminated, by mutual consent, effective as of the Closing Date of the Purchase
Agreement. The employment agreement included Mr. Gutfreund's covenant not to
compete with M&L during his employment, and for a period of up to two years
following termination of employment (with the duration of the period depending
upon the circumstances under which employment is terminated).
Each of the Named Executive Officers has received options to purchase
Common Stock granted under the Company's Stock Option Plans. To the extent not
already exercisable, such options generally become exercisable upon liquidation
or dissolution of the Company, a sale or other disposition of all or
substantially all of the Company's assets, or a merger or consolidation
pursuant to which either (i) the Company does not survive, or (ii) a
controlling amount of the voting power of the Company's voting stock is
acquired. In addition, the Compensation Committee of the Board of Directors has
the discretion to grant "limited stock appreciation rights" with respect to
options granted under the 1987 Stock Option Plan, pursuant to which, in the
event of any tender offer or exchange offer by a third party for more than 20%
of the Company's outstanding Common Stock, the options will automatically be
canceled in return for cash payment to the optionee in an amount equal to the
difference between the highest price paid per share by the acquirer in such
transaction and the exercise price. As of March 5, 1999, substantially all of
the Company's assets and operations, excluding accounts receivable, were sold.
Therefore, all options are thereafter 100% vested.
16
<PAGE> 43
DIRECTOR COMPENSATION
The Company's standard arrangement for compensation of non-employee
directors is payment of an annual retainer of $15,000 ($25,000 in the case of
Mr. Lefler), payable quarterly, and a $750 fee for each meeting of the Board
attended ($500 in the case of telephonic meetings.) In addition, members of the
Audit Committee and the Compensation Committee receive a $750 fee for
attendance at each committee meeting ($500 in the case of telephonic meetings.)
The Company reimburses all directors for their expenses in connection with
their activities as directors of the Company. Other than the $25,000 payment to
Mr. Lefler all other director fees were suspended in the fourth quarter of
1998.
Each of the Company's directors participates or is eligible to
participate in one or more of the Company's stock option plans. No options were
granted in 1998 to any non-employee directors.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers, and persons who
own more than 10 percent of the Company's Common Stock, to file with the
Securities and Exchange Commission (the "SEC") initial reports of ownership and
reports of changes in ownership of Common Stock. Officers, directors and
greater than 10 percent shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and representations that no other reports
were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were
complied with during the fiscal year ended December 31, 1998.
ITEM 12. SECURITY OWNERSHIP
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock as of March 15, 1999 by (a)
each person known to the Company to own beneficially more than 5 percent of the
Company's outstanding Common Stock, (b) each director (including nominees) who
owns any such shares, (c) each Named Executive Officer who owns any such shares
(see "Executive Compensation-Summary Compensation Table"), and (d) the
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Common Stock
Beneficially Owned(2)
---------------------------
Name and Address of Beneficial Owner(1) Shares Percent
- --------------------------------------- --------- -------
<S> <C> <C>
Trivest Special Situations Fund 1985, L.P.(3)............................. 1,757,836 16.3%
Earl W. Powell(4)......................................................... 902,619 8.3
Phillip T. George, M.D.(5)................................................ 850,635 7.9
Peter Vandenberg, Jr.(6).................................................. 117,523 1.1
R. Stephen Lefler(7)...................................................... 6,000 *
Directors and executive officers as a group (5 persons)(8)................ 3,634,613 33.1%
</TABLE>
- ------------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the beneficial
owners identified is 2665 South Bayshore Drive, Suite 800, Miami,
Florida 33133.
(2) Based on 10,797,666 shares outstanding as of March 15, 1999. Unless
otherwise indicated, each person or group has sole voting and
investment power with respect to all such shares. For purposes of this
table, a person is deemed to have "beneficial ownership" of any shares
as of a given date which the person has the right to acquire within 60
days after such date. For purposes of computing the outstanding shares
held by each person named above on a given date, any shares which such
person has the right to acquire within 60 days after such date is
deemed to be outstanding, but is not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person.
(3) Trivest Special Situations Fund 1985, L.P. ("TSSF") is a Delaware
limited partnership of which Trivest Associates, L.P., a Delaware
limited partnership ("Associates"), is general partner. The general
partner of Associates is Trivest, Inc., a Delaware corporation
("Trivest"), whose shares are owned by Messrs. George and Powell. Blue
Sky
17
<PAGE> 44
Partners, a Florida general partnership whose partners are Messrs.
George and Powell; Messrs. Powell and Dr. George and his spouse are
limited partners of TSSF. In addition, Messrs. George and Powell are
limited partners of Associates.
(4) Includes (i) 814,419 shares of Common Stock directly owned; and (ii)
55,125 shares of Common Stock issuable upon exercise of presently
exercisable options granted pursuant to the Company's 1987 Stock
Option Plan; and (iii) 33,075 shares of Common Stock issuable upon
exercise of presently exercisable options granted pursuant to the
Company's Amended and Restated 1990 Stock Option Plan. Does not
include shares indicated as owned of record by TSSF (see footnote 3
above), or 200,000 shares issuable pursuant to a warrant held by
Trivest.
(5) Includes (i) 748,764 shares of Common Stock directly owned; and (ii)
52,258 shares of Common Stock held of record by Dr. George as
custodian for his minor children under the Florida Uniform Gift to
Minors Act, as to which Dr. George disclaims beneficial ownership; and
(iii) 25,908 shares of Common Stock issuable upon exercise of
presently exercisable options granted pursuant to the Company's 1987
Stock Option Plan; and (iv) 23,705 shares of Common Stock issuable
upon exercise of presently exercisable options granted pursuant to the
Company's Amended and Restated 1990 Stock Option Plan. Does not
include shares indicated as owned of record by TSSF (see footnote 3
above) or 200,000 shares issuable pursuant to a warrant held by
Trivest.
(6) Includes (i) 17,523 shares of Common Stock directly owned; and (ii)
100,000 shares of Common Stock issuable upon exercise of presently
exercisable options granted pursuant to the Company's 1997 Stock
Option Plan.
(7) Represents 6,000 shares of Common Stock issuable upon exercise of
presently exercisable options granted pursuant to the Company's 1994
Stock Option Plan. Mr. Lefler's address is 97 Winfield Circle,
Hartwell, Georgia 30643.
(8) Includes shares owned of record by TSSF and shares beneficially owned
by directors and executive officers, as described in the table and
footnotes above.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
1998 MANAGEMENT AGREEMENT. Since October 1985, Trivest has rendered
consulting, financial and management services to the Company, including advice
and assistance with respect to acquisitions, pursuant to management agreements
between the parties which have been replaced and amended from time to time. The
Management Agreement commenced as of January 1, 1998 and continued through
December 31, 1998. The Management Agreement provided for Trivest to be the
exclusive manager and consultant of the Company's business. Trivest's services
included advice and assistance concerning any and all aspects of the
operations, planning and financing of the Company as needed from time to time,
including identifying and assisting with acquisitions and identifying executive
personnel for the Company. Trivest's compensation in fiscal 1998 was $150,000.
SUBORDINATED NOTES. Trivest Special Situations Fund 1985, L.P., a
Delaware limited partnership, is the holder of record of $1,400,800 principal
amount of the 13% Subordinated Notes due December 1999 issued by the Company in
December 1989 (the "Notes"). Certain directors of the Company and their
affiliates are limited partners of TSSF and/or its general partner, Trivest
Associates, L.P. See "Security Ownership," Note 3. In 1998, the Company made
interest payments totaling $91,052 to TSSF as a result of its ownership of its
Notes. The Company defaulted on these notes in December 1998.
18
<PAGE> 45
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 Asset Purchase Agreement, dated February 5,
1999, by and among M&L International, Inc.
and M&L International (H.K.) Limited, as
Sellers and M&L International Group, LLC,
M&L Hong Kong, Ltd. and Amerex (USA) Inc.,
as Buyer, incorporated by reference to
Exhibit 10.1 filed with the Registrant's
Quarterly Report on Form 8-K, filed
February 12, 1999.
2.2 Interim Agreement, dated February 5, 1999,
by and among M&L International, Inc.,
Amerex (USA) Inc. and M&L International
Group, LLC, incorporated by reference to
Exhibit 10.2 filed with the Registrant's
Quarterly Report on Form 8-K, filed
February 12, 1999.
2.3 Amendment to Asset Purchase Agreement and
Interim Agreement by and among M&L
International, Inc. and M&L International
(H.K.) Limited and M&L International Group,
LLC, M&L Hong Kong, Ltd. and Amerex (USA)
Inc., incorporated by reference to Exhibit
10.2 filed with the Registrant's Quarterly
Report on Form 8-K, filed March 12, 1999.
2.4 Amendment No. 2 to Asset Purchase Agreement
by and among M&L International, Inc. and
M&L International (H.K.) Limited and M&L
International Group, LLC, M&L Hong Kong,
Ltd. and Amerex (USA) Inc., incorporated by
reference to Exhibit 10.3 filed with the
Registrant's Quarterly Report on Form 8-K,
filed March 12, 1999.
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
19
<PAGE> 46
Exhibit 10.1 filed with the Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1989.
4.3 Tripartite Agreement, dated as of February
2, 1999, among the Registrant, First Union
National Bank, as successor Trustee to
Southeast Bank, N.A., as Trustee and U.S.
Bank National Association. (1)
10.1 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.
10.2 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.
10.3 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).
10.4 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).
10.5 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).
10.6 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).
10.7 1997 Stock Option Plan of Registrant,
incorporated by reference to Exhibit A
filed with the Registrant's Schedule 14A on
April 28, 1997.
10.8 Warrant for the Purchase of Shares of
Common Stock dated as of March 26, 1996
among the Registrant and Trivest, Inc.,
incorporated by reference to Exhibit 10.2
filed with the Registrant's Quarterly
Report on Form 10-Q, for the quarter ended
June 30, 1996.
10.9 License Agreement dated as of August 26,
1997 among the Registrant and Lola Inc.,
incorporated by reference to Exhibit 10.2
filed with the Registrant's Quarterly
Report on Form 10-Q, for the quarter ended
September 30, 1997.
10.10 Second Amended and Restated Credit
Agreement and Guaranty dated as of March
24, 1997 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, incorporated by
reference to Exhibit 10 filed with the
Registrant's Quarterly Report on Form 10-Q,
for the quarter ended March 31, 1997.
10.11 First Amendment to Second Amended and
Restated Credit Agreement and Guaranty
dated as of May 22, 1997 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, incorporated by reference
to Exhibit 10 filed with the Registrant's
Quarterly Report on Form 10-Q, for the
quarter ended June 30,1997.
20
<PAGE> 47
10.12 Second Amendment to Second Amended and
Restated Credit Agreement and Guaranty
dated as of February 18, 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,
incorporated by reference to Exhibit 10.30
filed with the Registrant's Annual Report
on Form 10-K for the year ended December
1997.
10.13 Third Amendment to Second Amended and
Restated Credit Agreement and Guaranty
dated as of March 6, 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,
incorporated by reference to Exhibit 10.31
filed with the Registrant's Annual Report
on Form 10-K for the year ended December
1997.
10.14 Sublease Agreement, dated January 1, 1996,
between Richland Mills, Inc., as
sublandlord and Varon (a division of
Biscayne Apparel International, Inc.) as
subtenant, incorporated by reference to
Exhibit 10.31 filed with the Registrant's
Annual Report on Form 10-K for the year
ended December 31, 1995.
10.15 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., incorporated by
reference to Exhibit 10.32 filed with the
Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995.
10.16 Fourth Amendment and Waiver to Second
Amended and Restated Credit Agreement and
Guaranty dated as of March 25, 1998 among
the Registrant, Biscayne Apparel
International, Inc., Mackintosh of New
England Co., M&L International, Inc. and
The Chase Manhattan Bank (National
Association) as Agent and Milberg Factors,
Inc. as Servicing Agent, incorporated by
reference to Exhibit 10 filed with the
Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1998.
10.17 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, incorporated by reference
to Exhibit 10.1 filed with the Registrant's
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
10.18 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,
incorporated by reference to Exhibit 10.2
filed with the Registrant's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1998.
10.19 Security Agreement and Mortgage-Trademarks
Agreement, dated as of March 25, 1998,
between Mackintosh of New England Co. and
The Chase Manhattan Bank, incorporated by
reference to Exhibit 10.2 filed with the
Registrant's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998.
10.20 Sixth Amendment to the Second Amended and
Restated Credit Agreement and Guaranty
dated as of June 30, 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, incorporated by reference
to Exhibit 10.1 filed with the Registrant's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
21
<PAGE> 48
10.21 Seventh Amendment to Second Amended and
Restated Credit Agreement and Guaranty
dated as of September 21, 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, incorporated by reference
to Exhibit 10.2 filed with the Registrant's
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
10.22 Employment Agreement dated as of January 1,
1998 between the Registrant and Peter
Vandenberg, Jr. (1)
10.23 Amended Vandenberg Employment Agreement
dated as of February 5, 1999 between the
Registrant and Peter Vandenberg, Jr. (1)
21 Subsidiaries of the Registrant. (1)
23 Consent of Richard A. Eisner & Company (1)
23.1 Consent of PricewaterhouseCoopers LLP (1)
27 Financial Data Schedule (for SEC use only).
- -------------------------
(1) Filed herewith
(2) No reports on Form 8-K were filed by the Registrant during the last quarter
of the period covered by this report.
(3) Not applicable.
22
<PAGE> 49
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: May , 1999 By: /s/ Peter Vandenberg, Jr.
-----------------------------------
Peter Vandenberg, Jr.
President, Chief Operating
Officer, 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: May , 1999 By: /s/ Earl W. Powell
-----------------------------------
Earl W. Powell
Chairman and Chief
Executive Officer
Date: May , 1999 By: /s/ Peter Vandenberg, Jr.
-----------------------------------
Peter Vandenberg, Jr.
President, Chief Operating
Officer, Treasurer, and Chief
Financial Officer (Principal
Financial and Accounting
Officer)
Date: May , 1999 By: /s/ Phillip T. George, M.D.
-----------------------------------
Director
Date: May , 1999 By: /s/ R. Stephen Lefler
-----------------------------------
R. Stephen Lefler
Director
<PAGE> 1
TRIPARTITE AGREEMENT
AGREEMENT OF RESIGNATION, APPOINTMENT AND ACCEPTANCE, (the "Agreement:) dated as
of February 2, 1999, among BISCAYNE APPAREL, INC. (the "Company"), FIRST UNION
NATION BANK, as successor Trustee to Southeast Bank, N.A., as Trustee,
("Resigning Trustee") and U.S. BANK NATIONAL ASSOCIATION ("Successor Trustee").
FIRST: The Company and the Resigning Trustee have entered into an Indenture
dated as of December 15, 1989, (the "Indenture") related to the issuance of
$9,014,700 in initial principal amount of the Company's 13% Subordinated Notes
due December 15, 1999.
SECOND: Section 7.8 of the Indenture provides that the Resigning Trustee may
resign by so notifying the Company.
THIRD: Section 7.8 of the Indenture further provides that if the trustee
resigns, the Company shall promptly appoint a successor Trustee.
FOURTH: The Resigning Trustee desires to resign and the Company desires to
appoint the Successor Trustee as Trustee. Paying Agent, Registrar and Agent for
Service of Notices to succeed the resigning Trustee in these capacities under
the Indenture;
FIFTH: The Successor Trustee is willing to accept the appointment as Trustee,
Paying Agent, Registrar, and Agent for Service of Notices subject to certain
terms and conditions;
NOW, THEREFORE, in consideration of the covenants herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. ACCEPTANCE OF RESIGNATION OF RESIGNING TRUSTEE: APPOINMENT OF SUCCESSOR
TRUSTEE. The Company accepts the resignation of the Resigning Trustee as
Trustee, Paying Agent, Registrar, and Agent for Service of Notices and, pursuant
to the authority vested in it by Section 7.8 of the Indenture, the Company
hereby appoints the Successor Trustee as Successor Trustee, Paying Agent,
Registrar and Agent for Service of Notices under the Indenture with all of the
rights, powers and duties heretofore vested in the Resigning Trustee under the
Indenture, such appointment to become effective at the close of business on
February 2, 1999 (the "Effective Date").
2. COMPANY REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to the Successor Trustee that:
a. It is duly organized and validly existing;
b. It has not entered into any amendment or supplement to the indenture,
therefore the Indenture is in full force and effect;
1
<PAGE> 2
c. To the best of the actual knowledge of the Company, the execution and
delivery of this Agreement and the consummation of the Transactions
contemplated hereby do not and will not conflict with, or result in a
breach of, any of the terms or provisions of, or constitute a default
under, any contract, agreement, indenture or other instrument (including,
without limitation its certificate of incorporation and by-laws) to which
it is a party or by which it or its property is bound or any judgement,
decree or order or order of any court or governmental agency or
regulatory body or law, rule or regulation applicable to it or its
property; and
d. To the best of the actual knowledge of the Company, the Company
represents and warrants to the Successor Trustee that the securities were
validly issued.
3. RESIGNING TRUSTEE REPRESENTATIONS AND WARRANTIES. The Resigning Trustee
hereby represents and warrants to the Successor Trustee that:
a. No covenant or condition contained in the Indenture has been waived by
the Resigning Trustee or to the best of the knowledge of the Resigning
Trustee by the security holders of the percentage in aggregate principal
amount of the securities required by the Indenture to effect any such
waiver;
b. There is no action, suit or proceeding pending or, to the best of the
knowledge of the Resigning Trustee threatened, against the Resigning
Trustee before any court or governmental authority arising out of any
action or omission by the Resigning Trustee as Trustee under the
Indenture;
c. It has made, or promptly will make, available to the Successor Trustee
originals, if available, or copies in its possession, of all Documents
relating to the trusts created by the Indenture (the "Trusts") and all
information in the possession of its corporate trust administration
department relating to the administration and status of the Trusts and
will furnish to the Successor Trustee such Documents or information on or
before the Effective Date;
d. To the best of its knowledge, it has lawfully discharged its duties as
Trustee, Paying Agent, Registrar and Agent for Service of Notices under
the Indenture;
e. The Indenture has not been amended or modified and is in full force
and effect except as noted;
f. The Resigning Trustee certifies that $6,443,500 in principal amount on
the 13% Subordinated Notes is outstanding as of January 19, 1999 and
interest has been paid through June 15, 1998.
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<PAGE> 3
4. SUCCESSOR TRUSTEE REPRESENTATION AND WARRANTY. The Successor Trustee
represents and warrants to the Resigning Trustee and the Company that:
a. it is eligible to serve as Trustee, Paying Agent, Registrar and Agent
for Service of Notices under the Indenture and the Trust Indenture Act of
1939, as amended (the "Act") and under the Rules of the New York Stock
Exchange;
b. it has a combined capital and surplus of at least $100,000,000 as set
forth in its most recent published annual report of condition.
5. ACCEPTANCE BY SUCCESSOR TRUSTEE. The Successor Trustee hereby accepts,
effective at the close of business on the Effective Date, its appointment as
Successor Trustee, Paying Agent, Registrar and Agent for Service of Notices and
assumes all rights, powers and duties of the Trustee under the Indenture. The
Successor Trustee will perform said rights, powers and duties upon the terms and
conditions set forth in the Indenture.
6. ASSIGMENT ETC. BY RESIGNING TRUSTEE. Effective at the close of business on
the Effective Date, the Resigning Trustee hereby confirms, assigns, transfers,
delivers and conveys to the Successor Trustee, as Successor Trustee, Paying
Agent, Registrar and Agent for Service of Notices under the Indenture, upon the
Trusts expressed in the Indenture, all rights, powers and trusts, which the
Resigning Trustee, as Trustee, Paying Agent, Registrar and Agent for Service of
Notices now holds under and by virtue of the Indenture, and effective as of such
date does hereby pay over to the Successor Trustee under the Indenture, any and
all property and moneys held by the Resigning Trustee under and by virtue of the
Indenture, subject nevertheless to the lien provided by Section 7.7 of the
Indenture.
7. ADDITIONAL DOCUMENTATION. The Company and the Resigning Trustee, for the
purposes of more fully and certainly vesting in and confirming to the Successor
Trustee, as Successor Trustee, Paying Agent, Registrar and Agent for Service of
Notices under the Indenture, said rights, powers and trusts, agrees, upon
reasonable request of the Successor Trustee, to execute, acknowledge and deliver
such further instruments of conveyance and further assurance and to do such
other things as many reasonably be required for more fully and certainly vesting
and confirming to the Successor Trustee all rights, powers and trusts which the
Resigning Trustee now holds under and by virtue of the Indenture.
8. CAPITALIZED TERMS. All capitalized terms in this Agreement shall have the
meanings ascribed to them in the Indenture unless this Agreement specifically
provides otherwise.
9. CHOICE OF LAW/VENUE. This Agreement shall be governed by Florida Law. The
Company, the Resigning Trustee and the Successor Trustee consent to the personal
jurisdiction of the state and federal courts located in the State of Florida in
connection with any controversy related to this Agreement and waive any argument
that venue in such forums is not convenient.
10. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which, when so executed and delivered, shall be an original, but all
counterparts shall constitute but one and the same agreement.
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<PAGE> 4
11. SURVIVAL OF COMPANY"S OBLIGATIONS TO RESIGNING TRUSTEE. Nothing contained in
this Agreement shall in any way affect the obligations of the Company to the
Resigning Trustee under the Indenture or any lien created thereunder.
THE REMAINDER OF THIS PAGE IS PURPOSEFULLY LEFT BLANK
<PAGE> 5
12. NOTICES. All notices, whether faxed or mailed will be deemed received when
sent pursuant to the following instructions:
TO FIRST UNION NATIONAL BANK
Rhonda Caraway
Corporate Trust Administrator
Corporate Trust Group
Fist Union National Bank
FL0122
225 Water Street, Third Floor
Jacksonville, FL 32202
FAX: (904) 361-7735
TELEPHONE: (904) 361-5581
TO U.S. BANK NATIONAL ASSOCIATION
Timothy J. Sandell
180 East Fifth Street
St. Paul, MN 55101
TO BISCAYNE APPAREL, INC.
Biscayne Apparel, Inc.
1373 Broad Street
Clifton, New Jersey 07013
FAX:
TELEPHONE: (973) 473-3240
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<PAGE> 6
IN WITNESSETH WHEREOF, Biscayne Apparel, Inc., First Union National Bank and
U.S. Bank National Association have executed this Agreement as of the dates set
forth below.
BISCAYNE APPAREL, INC.
By: /s/
-----------------------------------
Its: President Date: 1/21/99
--------------------------------- ----------------------
FIRST UNION NATIONAL BANK
By
-----------------------------------
Its Date:
---------------------------------- ----------------------
U.S. NATIONAL ASSOCIATION
By
-----------------------------------
Its Date:
---------------------------------- ----------------------
6
<PAGE> 1
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
This Agreement is made as of January 1, 1998, between BISCAYNE APPAREL
INC., a Florida corporation (the "COMPANY"), and Peter Vandenberg, Jr. (the
"EXECUTIVE").
NOW THEREFORE, in consideration of (a) the Executive's employment and
continued employment with the Company, (b) the compensation paid to the
Executive for his services hereunder and the benefits provided to the Executive
in connection therewith, (c) the use by the Executive of the facilities and
other resources of the Company, (d) the opportunity provided by the Company to
the Executive to acquire or use information relating to or based on the
business of the Company, and (e) the opportunity provided by the Company to the
Executive to acquire shares of its capital stock, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. INTERPRETATION OF THIS AGREEMENT.
(a) TERMS DEFINED. As used herein, the following terms when
used in this Agreement have the meanings set forth below:
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"BASE SALARY" shall have the meaning given to it under
Section 2(b) of this Agreement.
"BOARD" means the Board of Directors of the Company.
"BONUS YEAR" shall have the meaning given to it in Section
2(e) of this Agreement.
"CAUSE" means (i) the commission of any act by the Executive
constituting a material financial dishonesty against the Company or its
Affiliates, (ii) the conviction of the Executive of a felony, (iii) any breach
by the Executive of any of the material terms of this Agreement (including
without limitation Sections 3, 4, 5, and 6 hereof) that is not cured
<PAGE> 2
within 30 days of written notice by the Company to the Executive, or (iv)
grossly negligent conduct by the Executive which the Board in good faith
determines could reasonably be expected to have a material adverse effect on
the business, assets, results of operations, financial condition or prospects
of the Company or its Subsidiaries and that is not cured within 30 days of
written notice by the Company to the Executive.
"CHANGE OF CONTROL" means that designees of Trivest, Inc., a
Delaware corporation, shall cease to constitute a majority of the members of
the Board of Directors of the Company or the majority of the Company's common
stock or substantially all of its assets are sold or liquidated. As of the date
hereof, each of the members of the Company's Board of Directors shall be deemed
to be a designee of Trivest, Inc.
"COMPANY" has the meaning given to it in the first sentence
of this Agreement.
"COMPANY INFORMATION" means Confidential Information and
Trade Secrets.
"CONFIDENTIAL INFORMATION" means confidential data and
confidential information relating to the business of the Company and/or its
Affiliates (which does not rise to the status of a Trade Secret under
applicable law) which is or has been disclosed to the Executive or of which the
Executive became aware as a consequence of or through his employment with the
Company and which has value to the Company and/or its Affiliates and is not
generally known to the competitors of the Company and/or its Affiliates.
Confidential Information shall not include any data or information that (i) has
been voluntarily disclosed to the general public by the Company or its
Affiliates, (ii) has been independently developed and disclosed to the general
public by others, or (iii) otherwise entered the public domain through lawful
means.
"DISABILITY" means the Executive's inability to perform his
normal duties for any 90 consecutive calendar day period or any 90 business
days (whether or not consecutive) during any 365 calendar day period.
"DISPOSITION INCENTIVE COMPENSATION" shall have the meaning
given to it in Section 2 (f) of this Agreement.
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<PAGE> 3
"EMPLOYMENT PERIOD" shall have the meaning given to it in
Section 2(a) hereof.
"EMPLOYMENT YEAR" means each calendar year during the
Employment Period beginning on January 1.
"EXECUTIVE" shall have the meaning given to it in the first
sentence of this Agreement.
"GOOD REASON" means (i) the assignment to the Executive of
any duties which, taken as a whole, are materially inconsistent with the
position of President, COO and CFO of the Company (excluding an isolated,
insubstantial or inadvertent action not taken in bad faith and which is
remedied by the Company after receipt of written notice from the Executive
setting forth in reasonable detail a description thereof), (ii) a reduction in
the Executive's Base Salary, or (iii) a requirement that the Executive be based
at any location other than the New York/New Jersey metropolitan area.
"INCENTIVE COMPENSATION" shall have the meaning given to it
in Section 2(e) of this Agreement.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a government entity (or any
department, agency or political subdivision thereof).
"SPECIAL BENEFIT PAYMENT" shall have the meaning given to it
in Section 2(b)(vi) of this Agreement.
"STOCK OPTION PLAN" means the Biscayne Apparel, Inc. 1997
Stock Option Plan, as the same may be amended from time to time.
"SUBSIDIARY" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns, directly or indirectly, a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
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<PAGE> 4
"TRADE SECRETS" means information of the Company and its
Subsidiaries including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations, programs, financial data, financial plans,
product or service plans or lists of actual or potential customers or suppliers
which (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use, and (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy.
(b) INTERPRETATION. The words "HEREIN", "HEREUNDER" and other
words of similar import refer to this Agreement as a whole, as the same from
time to time may be amended or supplemented and not any particular section,
paragraph, subparagraph or clause contained in this Agreement. Wherever from
the context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and the pronouns stated in
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter.
2. EMPLOYMENT.
(a) DURATION. The Company agrees to employ the Executive and
the Executive accepts such employment for the period (the "EMPLOYMENT PERIOD")
beginning on the date hereof and ending upon the first to occur of (i) December
31, 1999 (the period from January 1, 1998 to December 31, 1999 being the
"Initial Term"), (ii) the Executive's voluntary resignation, (iii) the date on
which the Executive is terminated for Cause, (iv) the date on which the Board
determines in its absolute discretion that the Executive's employment with the
Company is no longer, in the best interest of the Company (termination pursuant
to this clause (iv) is sometimes referred to in this Agreement as "TERMINATION
WITHOUT CAUSE"), (v) the Executive's death, (vi) the Executive's Disability, or
(vii) if a Change of Control has occurred and the Executive terminates his
employment within 30 days after such event, or if the Executive terminates his
employment for Good Reason within 30 days after such event. The Executive
agrees to give the Board at least 30 days prior written notice of his
resignation for any reason other than Good Reason and he agrees to give the
Board 15 days prior written notice of his resignation for Good Reason.
Notwithstanding any provision of this Agreement to the contrary, the Company
shall not have the right to terminate the Executive's employment hereunder
without Cause at any time prior to December 31, 1998.
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<PAGE> 5
(b) SALARY AND BENEFITS. During the Employment Period, the
Company will pay the Executive a base salary at the rate set forth below (the
"BASE SALARY"), payable in installments consistent with the Company's normal
payroll schedule, subject to applicable withholding and other taxes:
January 1, 1998 - December 31, 1998 $250,000
January 1, 1999 - December 31, 1999 275,000
The Executive's Base Salary for any partial year during the Employment Period
will be prorated based upon the number of days elapsed in such year. In
addition to the salary payable to Executive pursuant to this Section 2(b), the
Executive will be entitled to the following benefits during the Employment
Period:
(i) The Executive will be entitled to participate in
all medical and hospitalization plans, group life insurance plans, long-term
disability insurance plans, deferred compensation plans, dental plans, and any
and all other fringe benefit plans as are presently and hereafter provided by
the Company to its executives.
(ii) The Executive will be entitled to timely
reimbursement for reasonable business expenses incurred by the Executive, upon
submission of appropriate substantiation by the Executive.
(iii) The Executive will be entitled to at least
four weeks of vacation each year with salary in accordance with the Company's
prevailing policy for its executives; PROVIDED, HOWEVER, that in no event may a
vacation be taken at a time when to do so could, in the reasonable judgment of
the Company's Chairman and CEO, adversely affect the business of the Company.
(iv) During the term of this Agreement, the Company
shall continue to provide the Executive with the automobile presently provided
to the Executive, together with insurance and operating expenses thereof.
(v) The Company shall furnish the Executive with an
office, secretarial help and other facilities and services suitable to his
position and adequate for the performance of his duties hereunder.
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<PAGE> 6
(vi) The Company shall pay the Executive an annual
lump sum amount of 10% of his base salary, or $25,000 for 1998 and $27,500 for
1999, (subject to applicable withholding and other taxes), which amount shall
be paid in equal quarterly installments, in advance, commencing on January 1,
1998 and continuing on the first day of each April, July and October thereafter
during the Employment Period (the "SPECIAL BENEFIT PAYMENT").
(c) SERVICES. During the Employment Period, the Executive
will serve as the President, COO and CFO of the Company and will render such
services of an executive and administrative character to the Company as the
Board or the Company's Chairman and CEO may reasonably from time to time
direct. The Executive will devote his best efforts and his full business time
and attention (except for vacation periods and reasonable periods of illness or
other incapacity) to the business of the Company.
(d) SEVERANCE PAY. In the event that
(i) this Agreement is not renewed by the Board,
for a term of at least one year, upon
expiration of the Initial Term or any
renewal term hereof, or in the event that
the Executive's employment is terminated
without Cause pursuant to Section 2(a)(iv)
above or as a result of the Executive's
Disability, or by the Executive for Good
Reason or following a Change of Control
pursuant to Section 2(a)(vii) above, or
(ii) in the event that the Executive's
employment terminates as a result of the
Executive's death,
the Company will pay to the Executive all amounts due to the Executive as Base
Salary pursuant to Section 2(b) above for a period of one year following the
date on which the Executive's employment is so terminated, such date being the
"Effective Termination Date". Any such severance pay shall be payable in
installments on the payment dates on which such Base Salary would have been
paid if the Employment Period had continued for such one year period. In
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<PAGE> 7
addition, the Company will pay to the Executive an amount equal to the Special
Benefit Payment that would have otherwise been payable to him pursuant to
Section 2(b)(vi) above from the Effective Termination Date and continuing for
one year thereafter. In addition, during the one year period commencing on the
Effective Termination Date, the Company will use commercially reasonable
efforts to cause the Executive, his spouse and dependents to be provided with
dental, medical, hospitalization, group term life insurance, long-term
disability insurance and any other health benefits and coverage in amounts and
on terms no less favorable than provided immediately prior to the Effective
Termination Date, and in all other respects shall use all reasonable efforts to
cause the Executive to be treated in a manner that will cause him to remain
eligible for said coverage through and until the expiration of one year from
the Effective Termination Date at no cost to him (subject, however, to (x) any
applicable deductibles, (y) current co-payment charges, and (z) the current
employee portion of premium charges, if applicable). The Executive shall be
entitled to the use of the automobile presently provided by the Company,
together with insurance and operating expenses thereof, for one year from the
Effective Termination Date. Following termination of the Executive's employment
as contemplated in this section 2(d) (other than by reason of the Executive's
death), the Company shall reimburse the Executive for up to $25,000 of his
expenses for the use of outplacement consulting, secretarial and temporary
office services. Except as otherwise provided in Section 2(e) hereof, the
Company will have no further obligation to the Executive. If the Executive
commences full or part-time employment subsequent to the Effective Termination
Date, but within one year of the Effective Termination Date, all payments of
salary, benefits and the Special Benefit per this Section 2(d) and "Full
Incentive Compensation", as defined in Section 2(e), previously paid or payable
to the Executive subsequent to the Effective Termination Date shall be
pro-rated to the commencement of such subsequent employment, and all further
payments thereof shall be reduced by the amount of the Executive's part-time
earnings and shall cease upon the commencement of such full-time employment.
(e) INCENTIVE COMPENSATION. The Executive shall be entitled
to receive such Incentive Compensation, if any with respect to each of the
Company's fiscal years ending December 31, 1998 and 1999 (a "BONUS YEAR") as
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<PAGE> 8
shall be determined annually at the discretion of the Board. For purposes of
this Agreement, the amount of Incentive Compensation payable with respect to
any Bonus Year (net of any tax or other amount properly withheld therefrom)
shall be paid by the Company to the Executive within 75 days after the end of
such Bonus Year. Notwithstanding the foregoing, if the Executive's employment
hereunder is terminated during any Bonus Year pursuant to Section 2(d)(i) or
(ii) herein, then notwithstanding the fact that the Executive is not employed
by the Company through the end of the Bonus Year in which such termination
occurs, the Executive shall be entitled to receive an amount equal to the
Incentive Compensation paid to the Executive for the calendar year immediately
preceding the year in which the Executive's employment is terminated, prorated
based upon the number of days elapsed in such year through the Effective
Termination Date. The Executive shall also be entitled to receive an amount
equal to the full Incentive Compensation (the "Full Incentive Compensation")
paid to the Executive for the calendar year immediately preceding the year of
the Effective Termination Date. Any such Incentive Compensation payable due to
termination, as noted herein, shall be paid to the Executive within 75 days of
the Effective Termination Date, net of any tax or other amount properly
withheld therefrom.
(f) DISPOSITION INCENTIVE COMPENSATION. Upon the disposition
of or liquidation of the majority of the common stock or the assets of one or
more of the Company's subsidiaries during the term of this Agreement (or within
18 months following an Effective Termination Date), the Executive shall be
entitled to receive Disposition Incentive Compensation, as follows:
Entity, for which the majority Disposition
of its common stock or assets Incentive
are disposed of or liquidated Compensation
------------------------------ ------------
. M&L International, Inc. $125,000
. Mackintosh of New England $125,000
. Varon Division of Biscayne Apparel
International, Inc. $125,000
If none of the majority of the above subsidiaries' common stock or assets are
disposed of or liquidated AND the majority of the Company's common stock or
assets are disposed or liquidated during the term of this Agreement (or within
18 months following an Effective Termination Date), the Executive shall be
entitled to $375,000. In no event shall the Executive be entitled to more than
$375,000 of Disposition Incentive Compensation. Payment of any or all such
earned Disposition Incentive Compensation amounts shall be made to the
Executive on the closing date of each such respective transaction.
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<PAGE> 9
3. NONDISCLOSURE. While employed by the Company and during the periods
described in the last sentence of this Section 3 the Executive (a) will receive
and hold all Company Information in trust and in strictest confidence, (b) will
take reasonable steps to protect the Company Information from disclosure and
will in no event take any action causing, or fail to take any action reasonably
necessary to prevent, any Company Information to lose its character as Company
Information, and (c) except as required by the Executive's duties in the course
of his employment by the Company, will not, directly or indirectly, use,
disseminate or otherwise disclose any Company Information to any third party
without the prior written consent of the Company's Chief Executive Officer,
which may be withheld in such officer's absolute discretion. The provisions of
this Section 3 shall survive the termination of the Executive's employment (i)
for a period of two years with respect to Confidential Information, and (ii)
with respect to Trade Secrets, for so long as any such information qualifies as
a Trade Secret under applicable law.
4. BOOKS AND RECORDS. All books, records, reports, writings, notes,
notebooks, computer programs, sketches, drawings, blueprints, prototypes,
formulas, photographs, negatives, models, equipment, chemicals, reproductions,
proposals, flow sheets, supply contracts, customer lists and other documents
and/or things relating in any specific manner to the business of the Company
and its Affiliates (including but not limited to any of the same embodying or
relating to any Confidential Information or Trade Secrets), whether prepared by
the Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall not be copied, duplicated,
replicated, transformed, modified or removed from the premises of the Company
except pursuant to the business of the Company and its Affiliates and shall be
returned immediately to the Company upon the Company's request at any time.
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<PAGE> 10
5. INVENTIONS AND PATENTS. The Executive agrees that all inventions,
innovations or improvements in the Company's method of conducting its business
(including new contributions, improvements, ideas and discoveries, whether
patentable or not) conceived or made by him during his employment with the
Company belong to the Company. The Executive will promptly disclose such
inventions, innovations or improvements to the Board and perform all actions
reasonably requested by the Board to establish and confirm such ownership.
6. OTHER BUSINESSES. During the Employment Period, the Executive
agrees that he will not, except with the express written consent of the Board,
become engaged in, render services for, or permit his name to be used in
connection with, any business other than the business of the Company and its
Subsidiaries and Affiliates, including Trivest, Inc.
7. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, or mailed by certified or
registered mail, return receipt requested, postage prepaid to the recipient at
the address below indicated:
To the Company:
Biscayne Apparel, Inc.
c/o Trivest, Inc.
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133
Attention: Peter W. Klein, Esq.
To the Executive:
Peter Vandenberg, Jr.
c/o Biscayne Apparel, Inc.
1373 Broad Street
Clifton, New Jersey 07013
Attention: Peter Vandenberg, Jr., President, COO and CFO
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
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<PAGE> 11
8. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
9. COMPLETE AGREEMENT. This Agreement embodies the complete agreement
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way.
10. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement. Any telecopied signature shall
be deemed a manually executed and delivered original.
11. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the Executive and the Company,
the Company's successors and assigns and, in the case of the Executive, his
heirs and personal representatives.
12. REMEDIES. The Company and the Executive shall be entitled to
enforce its or his rights under this Agreement specifically, to recover damages
by reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its or his favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that the Company or the Executive may in
their sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement.
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<PAGE> 12
13. DAMAGES. Nothing contained herein shall be construed to prevent
any party hereto from seeking and recovering from the other damages sustained
by either or both of them as a result of its or his breach of any term or
provision of this Agreement. In the event that either party hereto brings suit
for the collection of any damages resulting from, or for the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable costs,
fees (including reasonable attorneys' fees) and expenses of the other party.
14. CHOICE OF LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida without regard to conflicts of
laws, principles thereof and all questions concerning the validity and
construction hereof shall be determined in accordance with the laws of said
state. Each party hereby irrevocably submits to the exclusive jurisdiction of
any state or federal court sitting in the County of Bergen, New Jersey, in any
action or proceeding arising out of or relating to this Agreement and hereby
irrevocably agrees, on behalf of himself or itself and on behalf of such
party's successor's and assigns, that all claims in respect of such action or
proceeding may be heard and determined in any such court and irrevocably waives
any objection such person may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The parties further agree that the mailing by certified or
registered mail, return receipt requested, to the addresses specified for
notice in this Agreement, of any process or summons required by any such court
shall constitute valid and lawful service of process against them, without the
necessity for service by any other means provided by statute or rule of court.
In the event that an action or proceeding arising out of or relating to this
Agreement shall be commenced in a court described in the second sentence of
this Section 14 and such court, by a final and nonappealable order, shall
refuse to exercise IN PERSONAM jurisdiction over the Company or the Executive,
as the case may be, then the parties hereto shall not be precluded from
litigating such action or proceeding in any other court of competent
jurisdiction.
15. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
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16. AMENDMENTS AND WAIVERS. No provision of this Agreement may be
amended or waived without the prior written consent of the parties hereto.
17. BUSINESS DAYS. Whenever the terms of Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
18. NO THIRD PARTY BENEFICIARY. Except for the parties to this
Agreement, the Company's successors and assigns, and in the case of the
Executive, his heirs and personal representatives, nothing expressed or implied
in this Agreement is intended, or will be construed, to confer upon or give any
person any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
-------------------------------------
Peter Vandenberg, Jr.
BISCAYNE APPAREL, INC.
By:
---------------------------------
Earl W. Powell
Chairman and CEO
13
<PAGE> 1
EXHIBIT 10.23
AMENDED VANDENBERG EMPLOYMENT AGREEMENT
AMENDMENT (the "Amendment") dated as of February 5, 1999, among
Biscayne Apparel, Inc. ("BAI"), a Florida corporation, and M&L International,
Inc. ("M&L"), an Illinois corporation (together the "Companies"), and Peter
Vandenberg, Jr. (the "Executive").
RECITALS
A. BAI and the Executive entered into an Employment Agreement dated as
of January 1, 1998 (the "Employment Agreement"), a copy of which is annexed
hereto as an Exhibit; and
B. The terms defined in the Employment Agreement are used in this
Amendment as in the Employment Agreement unless otherwise defined herein; and
C. On February 5, 1999 (the "Filing Date"), the Companies filed
voluntary petitions for relief under chapter 11 of title 11 of the United
States Code (the "Bankruptcy Cases") in the United States Bankruptcy Court for
the Southern District of New York (the "Bankruptcy Court"); and
D. By order dated March 4, 1999, M&L was authorized to sell
substantially all of its assets, and to assume and assign certain executory
contracts and leases, to an affiliate of Amerex (USA), Inc. (the "M&L Asset
Sale"), pursuant to the applicable provisions of the Bankruptcy Code; and
E. The M&L Asset Sale closed on March 5, 1999; and
F. After the closing of the M&L Asset Sale, M&L's principal assets
consisted of eligible accounts receivable in the aggregate amount of
approximately $4.2 million and claims against third parties; and
<PAGE> 2
G. The Companies have determined that their success in the bankruptcy
proceedings is largely dependent on the continued employment of the Executive
during the pendency of the Bankruptcy Cases; and
H. As an incentive for the Executive to remain with the Companies
during the pendency of their respective Bankruptcy Cases, the Companies and the
Executive have requested that the Employment Agreement be amended as
hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
AMENDMENT
1. AMENDMENT TO EMPLOYMENT AGREEMENT. The Employment Agreement is
hereby amended as follows:
(a) Section 1(a) of the Employment Agreement is hereby amended to add
the following definition:
"COMPANIES" means Biscayne Apparel, Inc. and M&L International, Inc.
(b) Section 2(b) of the Employment Agreement is hereby amended and
restated in its entirety as follows:
SALARY AND BENEFITS. For the period from February 5, 1999 to
June 30, 1999, the Companies shall pay the Executive a base annual salary of
$200,000, payable in installments consistent with the Companies' normal payroll
schedule, subject to applicable withholding and other taxes. Following June 30,
1999, the Executive shall be paid on an hourly basis at the rate of $100 per
hour, payable on a weekly basis consistent with the Companies' normal payroll
schedule, subject to applicable withholding and other taxes.
2
<PAGE> 3
(c) Section 2(b)(i), (iii), (vi) of the Employment Agreement is hereby
deleted in its entirety.
(d) Section 2(b)(iv) of the Employment Agreement is hereby amended and
restated in its entirety as follows:
For the term of the Employment Period, the Companies shall continue to
provide the Executive with the automobile presently provided to the Executive,
together with insurance and operating expenses thereof with payments therefore
not to exceed $10,000.
(e) Section 2(c) of the Employment Agreement is hereby amended and
restated in its entirety as follows:
SERVICES: The Executive shall serve as the President, Chief Operating
Officer and Chief Financial Officer of BAI and Vice President of M&L and will
render services of an executive and administrative character to the Companies,
and their affiliates. In addition, the Executive shall be responsible for any
and all actions needed to be undertaken by the Debtors during the Bankruptcy
Cases, including but not limited to collection of M&L's accounts receivable,
assertion of claims against third parties, sale of BAI, objections to disputed
claims, preparation of SEC Form 10K and 10Q, corporate tax returns, cash
collateral and/or financing agreements, and negotiations and relations with the
secured lenders, other creditors, Board and shareholders.
(f) Section 2(d) of the Employment Agreement is hereby deleted in its
entirety.
(g) Section 2(e) of the Employment Agreement is hereby amended and
restated in its entirety as follows:
3
<PAGE> 4
The Executive's Incentive Compensation, with respect to the Companies'
fiscal year ending December 31, 1998 as determined by the Board of Directors of
the Companies in the amount of $50,000, is hereby ratified.
(h) Section 2(f) of the Employment Agreement is hereby amended and
restated in its entirety as follows:
The Executive shall receive Disposition Incentive Compensation in the
amount of $125,000 with respect to the M&L Asset Sale, payable as follows: (a)
$100,000 upon satisfaction of the claims of the Companies' secured creditors,
The Chase Manhattan Bank, N.A., Milberg Factors, Inc., BankBoston, N.A., First
Union National Bank, N.A., and Fleet Bank, N.A. (the "Banks"), including
reservation for any disputed portions of the claims of the Banks, and (b)
$25,000 upon the earlier to occur of (i) June 30, 1999 or (ii) the date on
which M&L has collected $3 million on account of its eligible accounts
receivable outstanding as of March 8, 1999 in the aggregate amount of
approximately $4.2 million. In consideration for and subject to the payment of
$25,000, payable on June 30, 1999, and the other promises contained herein, the
Executive hereby (a) releases his claim against BAI in the aggregate amount of
$250,000 arising under section 2(f) of the Employment Agreement with respect to
the disposition of or liquidation of the majority of the common stock or assets
of BAI's affiliates, Biscayne Apparel International, Inc. and Mackintosh of New
England, Inc., (b) releases his severance claim against BAI in the aggregate
amount of $352,500 arising under section 2(d) of the Employment Agreement, (c)
releases his claim for a Special Benefit Payment in the amount of $27,500, and
(d) agrees to the reduction of his Base Salary from $275,000 to $200,000.
2. ESTABLISHMENT OF ESCROW ACCOUNT. Upon payment of amounts due to the
Banks on account of their secured claims against the Companies, the
4
<PAGE> 5
Companies shall establish an account into which $50,000 shall be deposited by
the Companies (the "Escrow Account") on account of the deferred payments due to
the Executive under this Amendment. Such Escrow Account shall be maintained by
the Companies' bankruptcy counsel, Salomon Green & Ostrow, P.C., 919 Third
Avenue, 15th Floor, New York, New York 10022.
3. CONDITION PRECEDENT. This Agreement is subject to the approval of
the Bankruptcy Court. The Companies agree to use responsible efforts to obtain
such approval.
4. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York.
5. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of the
Amendment for any other purpose.
6. COUNTERPARTS. The Amendment may be executed in counterparts, all of
which taken together shall constitute one and the same instrument, and any
party hereto may execute this Amendment by signing such counterpart.
7. EFFECT OF AMENDMENT. Except as expressly modified herein, the
Employment Agreement shall remain in full force and effect.
IN WITNESS THEREOF, the parties hereto have caused this Amendment to
be duly executed as of the day and year first above written.
By: /s/ Peter Vandenberg, Jr.
--------------------------------
Peter Vandenberg, Jr.
BISCAYNE APPAREL, INC.
By: /s/ Earl W. Powell
-------------------------------
Name: Earl W. Powell
Title: Chairman and CEO
5
<PAGE> 6
M&L INTERNATIONAL, INC.
By: /s/ Earl W. Powell
--------------------------------
Name: Earl W. Powell
Title: Vice President
6
<PAGE> 1
EXHIBIT 21
Biscayne Apparel, Inc.
Subsidiaries of the Registrant
For the Year Ending December 31, 1998
Biscayne Apparel International, Inc., a Delaware Corporation
d/b/a Andy Johns Fashions International
Andy Johns Kids
KAOS
KAOTIC
Judy Simon
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
Scientific Products, Inc.
M&L International, Inc., an Illinois corporation
Unidex Garments (Philippines), Inc., a Philippine corporation
Watersports Garment 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
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the registration statement No..
33-36969 of Biscayne Apparel, Inc. on Form S-3 and Nos. 33-41139, 333-2119 and
333-35007 on Form S- 8 of our report dated March 19, 1999, appearing in the
Annual Report on Form 10-K of Biscayne Apparel, Inc. for the year ended
December 31, 1998. Our report contains an explanatory paragraph that states
that the Company changed its basis of accounting from the going concern basis
to the liquidation basis, effective December 31, 1998.
Richard A. Eisner and Company, LLP
New York, New York
May 13, 1999
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
May 13, 1999
We consent to the incorporation by reference in the registration statements of
Biscayne Apparel, Inc. on Form S-8 (File Nos. 333-2119, 33-41139 and 333-35007)
and Form S-3 (file No. 33-36969) of our report dated March 6, 1998, except for
note 8, for which the date is March 25, 1998, on our audits of the consolidated
financial statements of Biscayne Apparel, Inc. as of December 31,1997, and for
the years ended December 31, 1997, and 1996, which report is included in this
Annual Report on Form 10-K.
PRICEWATERHOUSECOOPERS LLP
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