SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended January 30, 1999.
Commission File Number 0-22102
CYGNE DESIGNS, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 04-2843286
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
680 FIFTH AVENUE, NEW YORK, NEW YORK 10019
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 489-3900
Securities registered pursuant to Section 12(b) of the Act:
None
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(Title of class)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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. [X]
Aggregate market value of the Registrant's Common Stock held by non-affiliates
at April 16, 1999 (based on the closing sale price for such shares as reported
by the OTC Bulletin Board): $1,216,252. Common Stock outstanding as of April 16,
1999: 12,438,038 shares.
Documents incorporated by reference: None
<PAGE>
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS:
The directors of the Company are as follows:
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION
DIRECTOR AGE BECAME DIRECTOR DURING THE PAST FIVE YEARS
- -------- --- --------------- --------------------------
<S> <C> <C> <C>
James G. Groninger 55 1993 President of The BaySouth Company since
January 1995; Managing Director
of PaineWebber Incorporated from
April 1988 through December 1994.
Bernard M. Manuel 51 1988 Chief Executive Officer of Cygne since
October 1988 and Chairman of the Board
since December 1989.
</TABLE>
Mr. Groninger is a director of Designs, Inc. and NPS Pharmaceuticals.
Mr. Manuel is a director of Designs, Inc.
In September 1993 the Company established an Audit Committee and a
Compensation Committee. Mr. Groninger is the sole member of the Compensation
Committee and the Audit Committee. The Audit Committee is charged with reviewing
the Company's annual audit and meeting with the Company's independent
accountants to review the Company's internal controls and financial management
practices. The Compensation Committee reviews compensation practices, recommends
compensation for the Company's executives and key employees and functions as the
Committee under the Company's 1993 Stock Option Plan. Each of the Compensation
Committee and the Audit Committee met once during the year ended January 30,
1999.
During the fiscal year ended January 30, 1999, the Board of Directors
held five meetings. Each director attended at least 75% of the meetings of the
Board of Directors held when he was a director and of all committees of the
Board of Directors on which he served.
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 executive officers and directors, and persons who
beneficially own more than ten percent of the Company's Common Stock, to file
initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission (the "SEC"). Executive officers, directors
and greater than ten percent beneficial owners are required by the SEC to
furnish the Company with copies of all Section 16(a) forms they file.
Based upon a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and directors,
the Company believes that during the fiscal year ended January 30, 1999 all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with.
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<PAGE>
EXECUTIVE OFFICERS:
See "Item 1. Business - Executive Officers of the Registrant."
Item 11. EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid or to be paid
by the Company or its subsidiaries as well as certain other compensation paid or
accrued, during the fiscal years indicated, in all capacities in which they
served, to (i) the Company's Chief Executive Officer, (ii) the Company's only
other executive officer at January 30, 1999, and (iii) those persons who would
have been included in this table because they were among the most highly
compensated executive officers during 1998 except they were not serving as
executive officers at January 30, 1999.
SUMMARY COMPENSATION TABLE
Annual Compensation
All Other
Year Salary Compensation(1)
---- ------ ---------------
Bernard M. Manuel 1998 $403,000 $ 1,001(2)
Chairman of the Board 1997 448,620 1,224(2)
and Chief Executive Officer 1996 433,983 142
Roy E. Green 1998 245,000 3,685(3)
Senior Vice President--Chief Financial 1997 245,000 3,181(3)
Officer, Treasurer and Secretary 1996 234,612 1,337
Gary C. Smith 1998 271,655(5) 3,964(6)
Former Senior Vice President-- 1997 271,656 2,863(6)
Manufacturing (4) 1996 271,656 331
Paul D. Baiocchi 1998 205,000(8) 3,302(9)
Former Vice President, General Counsel 1997 205,000 2,385(9)
and Secretary (7) 1996 195,000 342
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(1) Consists of certain insurance premiums on term life insurance paid by
Cygne for the benefit of the named individuals, except as otherwise
indicated.
(2) Includes $822 and $999 for 1998 and 1997, respectively, representing
Cygne's matching contribution pursuant to its 401(k) defined
contribution plan.
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<PAGE>
(3) Includes $2,425 representing Cygne's matching contribution pursuant to
its 401(k) defined contribution plan.
(4) Mr. Smith resigned as an officer and employee on June 30, 1998. See
"Item 13. Certain Relationships and Related Transactions."
(5) Includes $158,465 of severance paid in 1998 to Mr. Smith under the terms
of his employment agreement. Does not include $113,190 of severance to
be paid in 1999 to Mr. Smith under the terms of his employment
agreement. See "Item 13. Certain Relationships and Related
Transactions."
(6) Includes $3,723 and $2,689 for 1998 and 1997, respectively, representing
Cygne's matching contribution pursuant to its 401(k) defined
contribution plan.
(7) Mr. Baiocchi resigned as an officer and employee on December 15, 1998.
See "Item 13. Certain Relationships and Related Transactions."
(8) Includes $25,625 of severance paid in 1998 to Mr. Baiocchi under the
terms of his employment agreement. Does not include $85,417 of severance
to be paid in 1999 to Mr. Baiocchi under the terms of his employment
agreement. See "Item 13. Certain Relationships and Related
Transactions."
(9) Includes $2,904 and $2,097 for 1998 and 1997, respectively, representing
Cygne's matching contribution pursuant to its 401(k) defined
contribution plan.
During the fiscal year ended January 30, 1999 no options were granted to
the persons named in the Summary Compensation Table.
The following table sets forth information with respect to (i) stock
options exercised in the fiscal year ended January 30, 1999 by the persons named
in the Summary Compensation Table and (ii) unexercised stock options held by
such individuals on January 30, 1999.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised,
Options Held at In-the-Money Options at
Fiscal Year End (#) Fiscal Year End (1)
Shares --------------------------- -------------------------
Acquired on Value
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ------------ -------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bernard M. Manuel - - 55,000 - $ 0 $ 0
Roy E. Green - - 80,000 - $ 0 $ 0
Gary Smith - - - - $ 0 $ 0
Paul D. Baiocchi - - - - $ 0 $ 0
- ------------------------------
</TABLE>
(1) Based on the closing stock price of the Common Stock on January 29, 1999
of $0.10.
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<PAGE>
EMPLOYMENT AGREEMENTS
The Company currently has employment agreements with Bernard M. Manuel,
its Chairman and Chief Executive Officer, and Roy Green, its Senior Vice
President--Chief Financial Officer. These employment agreements, which currently
expire April 30, 2000, provide for automatic renewal for successive one year
terms unless either party notifies the other to the contrary at least 90 days
prior to its expiration. The employment agreements require each employee to
devote substantially all of his time and attention to the Company's business as
necessary to fulfill his duties. Pursuant to the employment agreements Messrs.
Manuel and Green are currently entitled to an annual salary at a rate of
$494,000 and $245,000, respectively, subject to annual cost of living increases.
The employment agreements also provide for the payment of bonuses in such
amounts as may be determined by the Board. Under the employment agreements, the
employee may terminate his employment upon 30 days' notice. The employment
agreements provide that in the event the employee's employment is terminated by
the Company at any time for any reason other than justifiable cause, disability
or death, or the Company fails to renew the agreement at any time within two
years following a "Change of Control of the Company," the Company must pay the
employee his base salary and permit participation in benefit programs for the
greater of (i) the remaining term of the agreement or (ii) two years in the case
of Mr. Manuel and one year in the case of Mr. Green. In the event the Company
elects not to renew the agreement (other than within two years following a
"Change in Control of the Company"), the Company will, (a) in the case of Mr.
Manuel, pay him a severance payment equal to the lesser of (i) two months'
salary plus one-sixth of his most recently declared bonus for each year he has
been employed by the Company or (ii) one year's annual salary, and (b) in the
case of Mr. Green, pay him a severance payment equal to the lesser of (i) one
month's salary plus one-twelfth of his most recently declared bonus for each
year he has been employed by the Company or (ii) six months' salary. Each
agreement contains confidentiality provisions, whereby each executive agrees not
to disclose any confidential information regarding the Company, as well as
non-competition covenants. The non-competition covenants survive the termination
of an employee's employment for the greater of (i) the remaining term of the
agreement or (ii) two years in the case of Mr. Manuel and one year in the case
of Mr. Green.
For purposes of the employment agreements, a "Change in Control of the
Company" shall be deemed to occur if (i) there shall be consummated (x) any
consolidation or merger of Cygne in which Cygne is not the continuing or
surviving corporation or pursuant to which shares of the Company's Common Stock
would be converted into cash, securities or other property, other than a merger
of Cygne in which the holders of the Company's Common Stock immediately prior to
the merger have the same proportionate ownership of common stock of the
surviving corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the Company's assets, or (ii) the
Company's stockholders shall approve any plan or proposal for liquidation or
dissolution of Cygne or (iii) any person (as such term is used in Sections 13(d)
and 14(d)(2) of the Exchange Act), shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act) of 40% or more of the Company's
outstanding Common Stock other than pursuant to a plan or arrangement entered
into by such person and us, or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constitute the entire Board of
Directors shall cease for any reason to constitute a majority thereof unless the
election, or the nomination for election by the Company's stockholders, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period.
The employment agreements also provide that if, in connection with a
change of ownership or control of Cygne or a change in ownership of a
substantial portion of the Company's assets (all within the meaning
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<PAGE>
of Section 280G(b)(2) of the Internal Revenue Code of 1986, as amended (the
"Code")), an excise tax is payable by the employee under Section 4999 of the
Code, then the Company will pay to the employee additional compensation which
will be sufficient to enable the employee to pay such excise tax as well as the
income tax and excise tax on such additional compensation, such that, after the
payment of income and excise taxes, the employee is in the same economic
position in which he would have been if the provisions of Section 4999 of the
Code had not been applicable.
The Company terminated its employment agreement with Gary C. Smith, the
Company's former Senior Vice President--Manufacturing, on June 30, 1998, and its
employment agreement with Paul D. Baiocchi, formerly the Company's Vice
President and General Counsel, on December 15, 1998. See "Item 13. Certain
Relationships and Related Transactions."
COMPENSATION OF DIRECTORS
Each non-employee director receives $3,500 for each Board of Directors
meeting attended, and $1,500 for each meeting of any committee of the Board of
Directors attended. In addition, directors who are not employees are compensated
through stock options.
The Company adopted a Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"), pursuant to which options to acquire a maximum aggregate of
100,000 shares of Common Stock may be granted to non-employee directors. Options
granted under the Directors' Plan do not qualify as incentive stock options
within the meaning of Section 422 of the Code. The Directors' Plan provides for
the automatic grant to each of the Company's non-employee directors of (1) an
option to purchase 10,000 shares of Common Stock on the date of such director's
initial election or appointment to the Board to Directors, and (2) an option to
purchase 2,000 shares of Common Stock on each annual anniversary of such
election or appointment, provided that such individual is on such anniversary
date a non-employee director. The options have an exercise price of 100% of the
fair market value of the Company's Common Stock on the date of grant, have a
ten-year term and become exercisable in four equal annual installments
commencing on the first anniversary of the grant thereof, subject to
acceleration in the event of a change of control (as defined in the Directors'
Plan). The options may be exercised by payment in cash, check or shares of
Common Stock. On April 15, 1993 Mr. Groninger was elected as a director of Cygne
and was granted an option to purchase 10,000 shares of Common Stock at a
purchase price of $4.00 per share, the fair market value of the Common Stock on
the date of grant. On each of April 15, 1994, April 15, 1995, April 15, 1996,
April 15, 1997, April 15, 1998 and April 15, 1999, the anniversary dates of his
initial election to the Board of Directors, Mr. Groninger was granted options to
purchase 2,000 shares of Common Stock at a purchase price of $23.50, $11.75,
$1.75, $0.687, $0.281 and $0.156 per share, respectively, the fair market values
of the Company's Common Stock on the dates of grant.
On September 20, 1996, the Company engaged in the Ann Taylor
Disposition. As a result of the Ann Taylor Disposition, a change in control
under the Directors' Plan was deemed to have occurred and all options granted
under the Directors' Plan prior to September 20, 1996 became vested. If the
proposed sale of the Company's knit business is consummated, all options granted
under the Director's Plan after September 20, 1996 and prior to the date of the
sale will become fully vested on the date the sale closes.
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<PAGE>
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information as of April 30, 1999 (except
as otherwise noted in the footnotes) regarding the beneficial ownership (as
defined by the SEC) of the Company's Common Stock by (i) each person known by
the Company to own beneficially more than five percent of the Company's
outstanding Common Stock; (ii) each director and nominee for election as a
director of Cygne; (iii) each executive officer named in the Summary
Compensation Table (see "Item 11. Executive Compensation"); and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
specified, the named beneficial owner has the sole voting and investment power
over the shares listed.
<TABLE>
<CAPTION>
Amount and Nature of Percentage of
Beneficial Ownership Cygne
Name and Address of Cygne Common Stock (1) Common Stock
- ---------------- ------------------------- ------------
<S> <C> <C>
World Textile Co., Ltd.
c/o TMI Associates
37, Mori Building
5-1, Toranomon 3-Chome
Minator-ku
Tokyo, 105-0001, Japan....................................... 622,285 5.0%
James G. Groninger (3)........................................ 22,500 *
Bernard M. Manuel (4)......................................... 5,001,975 40.0%
Roy E. Green (5).............................................. 80,000 *
Gary C. Smith................................................. - *
Paul D. Baiocchi.............................................. - *
Directors and executive officers as a group (3 persons)(6) ... 5,104,475 40.5%
</TABLE>
- -----------------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
SEC, which generally attribute beneficial ownership of securities to
persons who possess sole or shared voting power and/or investment power
with respect to those securities.
(2) These shares were acquired by World Textile Co., Ltd. upon foreclosure
from Cleveland Investment Limited ("CIL"). CIL has granted Mr. Manuel
the right to vote the 622,285 shares owned by it (the "CIL Shares") for
a period of five years from February 24, 1998.
(3) Includes 17,500 shares issuable pursuant to options which are
exercisable within 60 days of April 30, 1999. Does not include 5,000
shares which are the subject of options which are not exercisable within
60 days of April 30, 1999.
(4) Includes 4,324,690 shares owned by Bernard M. Manuel, 622,285 shares for
which Mr. Manuel received a voting proxy from CIL, and 55,000 shares
issuable pursuant to options. Mr. Manuel's address is c/o Cygne Designs,
680 Fifth Avenue, New York, New York 10019.
(5) Consists of shares issuable pursuant to options.
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<PAGE>
(6) Includes 622,285 shares for which Mr. Manuel received a voting proxy
from CIL, and 152,500 shares issuable pursuant to options which are
exercisable within 60 days of April 30, 1999. See Notes 2, 3, 4 and 5.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Effective June 30, 1998, the Company terminated the employment of Gary
C. Smith, Senior Vice President--Manufacturing. As a result of the termination
of his employment, Mr. Smith received a severance payment of $271,655, payable
in twelve equal monthly payments starting in July 1998.
Effective December 15, 1998, the Company terminated the employment of
Paul D. Baiocchi, Vice President, General Counsel and Secretary. As a result of
the termination of his employment, Mr. Baiocchi received a severance payment of
$113,670, payable in thirteen equal monthly payments starting in December 1998.
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<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CYGNE DESIGNS, INC.
May 28, 1999
By: /s/ Roy E. Green
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Roy E. Green
Senior Vice President-Chief
Financial Officer and Treasurer
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