<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1 TO ANNUAL REPORT
For the Fiscal Year Ended June 30, 1995
Filed Pursuant to Section 12, 13 or 15(d) of
The Securities Exchange Act of 1934
MOVIE STAR, INC.
(Exact name of registrant as specified in charter)
Commission File Number 1-5893
New York 13-56513222
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
136 Madison Avenue, New York, NY 10016
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code (212) 679-7260
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $.01 par value American Stock Exchange
$25,000,000 12-7/8% Debenture American Stock Exchange
due October 1, 2001
Securities registered pursuant to Section 12(g) of the Act:
None
(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
---- ----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference on Part III of Form 10-K or this amendment to the Form
10-K. / /
The aggregate market value of voting stock held by nonaffiliates of the
Registrant totalled $8,204,731 on August 31, 1995, based upon the closing price
of $0.875 at the close of trading on August 31, 1995.
As of August 31, 1995 there were 13,959,650 common shares outstanding.
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for the
year ended June 30, 1995 as set forth in the pages attached hereto:
Item 10. Executive Officers and Directors of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Item 14. Exhibits
Page 1 of 14 Total Pages
<PAGE> 2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this Amendment to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: October 30, 1995
MOVIE STAR, INC.
BY: /s/ Saul Pomerantz
--------------------------
SAUL POMERANTZ
Senior Vice President
<PAGE> 3
ITEM 10 EXECUTIVE OFFICERS AND DIRECTORS OF THE REGISTRANT
<TABLE>
<CAPTION>
DIRECTOR
SINCE NAME AGE POSITION
- -------- ---- --- --------
<S> <C> <C> <C>
1981 Mark M. David 48 Chairman of the Board;
Director
1987 Clayton E. Medley 47 President; Chief Operating Officer;
Director
1983 Saul Pomerantz 46 Senior Vice President; Chief
Financial Officer; Secretary;
Director
1981 Helen Samuels 64 Vice President; Treasurer; Director
OFFICER
SINCE
- --------
1995 Barbara T. Khouri 47 Chief Executive Officer
</TABLE>
- --------------
Mark M. David was re-elected Chairman of the Board and Chief Executive
Officer on December 8, 1994. On August 14, 1995 Mr. David relinquished the
position of Chief Executive Officer, but remained as Chairman of the Board. He
had been Chairman of the Board and Chief Executive Officer since December 1985,
President from April 1983 to December 1987 and Chief Operating Officer of the
Company since the merger with Stardust Inc. in 1981 until December 1987. Prior
to the merger, he was founder, Executive Vice President and Chief Operating
Officer of Sanmark Industries Inc.
Barbara T. Khouri joined the Company and was appointed Chief Executive
Officer on August 14, 1995. Prior to joining the Company, Ms. Khouri was
Executive Director of the Accessories Council, an apparel industry trade
organization. From 1992 to 1994, she was Senior Vice President of Leslie Fay
Companies, Inc. responsible for that company's accessories and licensing
business. Before joining Leslie Fay, from 1989 to 1992, Ms. Khouri was
President and Chief Executive of Mutterperl Group Ltd., a leather goods
accessories company.
Clayton E. Medley was elected President and Chief Operating Officer on
December 3, 1987 and was re-elected on December 8, 1994. He had been the Vice
President-Manufacturing of the Company since September 1985. He has been
employed by the Company in various capacities since 1978, consisting of Chief
Engineer, General Manager and President of the Georgia-based operations.
Saul Pomerantz, CPA, was elected Senior Vice President on December
3, 1987 and was re-elected on December 8, 1994. Previously, he was Vice
President-Finance since 1981. He has been Chief Financial Officer since 1982 and
Secretary of the Company since 1983.
<PAGE> 4
Helen Samuels was elected Vice President on December 3, 1987 and was
re-elected on December 8, 1994. She has been the Treasurer of the Company since
April 1983. She was the Controller of Sanmark from 1979 until the merger with
Stardust Inc. in March 1981, and continued as Controller of the merged Company
until she became Treasurer in 1983.
As a result of the resignations of Harold B. Pomeranz and John J. Ross
as directors of the Company effective on February 1, 1995 and June 1, 1995,
respectively, the Company does not have any independent directors and is
currently not in compliance with the listing requirements of the American Stock
Exchange. Based on its recent poor financial performance, the Company's efforts
to attract suitable candidates to serve as independent members of its Board of
Directors have been unsuccessful. The Company will diligently continue to
attempt to recruit qualified individuals to serve as outside directors. If the
Company is unable to add at least two independent directors to its Board within
a reasonable time, the governing body of the American Stock Exchange may
initiate steps to have the Company's shares delisted from trading on that
exchange.
There are no family relationships between the various executive
officers and directors.
ITEM 11 EXECUTIVE COMPENSATION
Report of the Compensation Committee on Executive Compensation
During fiscal year 1995, two directors of the Company, Harold B. Pomeranz
and John J. Ross, each an outside director who had previously served as members
of the Compensation Committee of the Board of Directors (the "Committee"),
resigned their directorships. Accordingly, there were no outside directors
available to serve as a Compensation Committee and this function was carried out
by the Board of Directors, as a whole.
Effective in May 1995, all of the executive officers of the Company
decided to reduce their salaries in light of the Company's continuing poor
financial performance.
Compensation Policies
In formulating its decision to reduce executive officers' salaries, the
Board of Directors did not adhere to the policies previously established for
determining compensation; rather it based its decision solely on the Company's
current financial condition.
In the past, the Committee has based its recommendations to the Board of
Directors on (1) the Company's ability to attract and retain experienced
individuals with proven leadership and managerial skills, (2) the executives'
motivation to enhance the Company's performance for the benefit of its
shareholders and customers and (3) the executives' contributions to the
accomplishment of the Company's annual and long-term business objectives.
Salaries generally have been determined based on the Committee's evaluation
of the value of each executive's contribution to the Company, results of the
past fiscal year in
<PAGE> 5
light of prevailing business conditions, the Company's goals for the ensuing
fiscal year and prevailing levels at companies considered to be comparable to
and competitors of the Company.
The Committee has also recommended that stock options be granted to the
executive officers of the Company in order to reward the officers' commitment to
maximizing shareholder return and long-term results.
Base Salary Compensation
Based on recommendations from the Company's Chairman of the Board and the
other Committee members' collective experience in the Company's industry, base
salaries have been determined from year to year. The Committee did not utilize
outside consultants to obtain comparative salary information, but believed that
the salaries paid by the Company are competitive, by industry standards, with
those paid by companies with similar sales volume to the Company. The Committee
placed considerably more weight on each executive's contribution to the
Company's development and maintenance of its sources of supply, manufacturing
capabilities, marketing strategies and customer relationships than on the
compensation policies of the Company's competitors; however, the Committee did
not establish or rely on target levels of performance in any of these areas to
arrive at its recommendations. The current senior executives of the Company,
except Ms. Khouri, have been associated with the Company in senior management
positions for periods ranging from thirteen to more than twenty-five years. The
Committee believed that base salary levels for fiscal year 1995, which were
originally established in fiscal year 1994, were appropriate.
Stock Option Grants
In 1983, the Company adopted an Incentive Stock Option Plan (the "ISOP") to
provide a vehicle to supplement the base salary compensation paid to key
employees. All of the Company's senior executives were eligible to receive
grants under the ISOP. Options under the ISOP were granted at fair market value
at the date of grant. In the past, the Committee has recommended and the Board
of Directors has granted options under the ISOP to each of the senior
executives, except the Chairman of the Board. Mark M. David was not eligible
to receive options under the ISOP because his ownership of shares of the Company
exceeds 10% of the outstanding shares of the Company. The options granted under
the ISOP were exercisable at a rate of 11% per year for the first eight years of
service after grant and 12% for the ninth year after grant. No options have been
granted to the Company's senior executives under the ISOP since 1986 and no
further options may be granted under the ISOP.
<PAGE> 6
On July 15, 1994 the Committee adopted a new Incentive Stock Option
Plan (the "1994 ISOP") to replace the expired 1983 ISOP. All of the Company's
management and administrative employees are eligible to receive grants under the
1994 ISOP. The 1994 ISOP was approved by the Company's shareholders at the
Company's annual meeting on December 8, 1994. Subject to shareholder approval,
options under the 1994 ISOP were granted to each of the Company's senior
executives (except Mark M. David) on July 15, 1994 at fair market value at that
date. As a condition to the grant of options to the Company's senior
executives, the Committee required each of the recipients to surrender for
cancellation any interest in options granted prior to July 15, 1994.
In addition to the ISOP, in 1988, the Committee recommended and the Board
of Directors adopted a non-qualified stock option plan to provide an additional
continuing form of long-term incentive to selected officers of the Company.
Generally these options are issued with a 10-year exercise period in order to
encourage the executive officers to take a long-term approach to the formulation
and accomplishment of the Company's goals. In 1988, the Committee recommended
and the Board of Directors approved the grant of options under the non-qualified
option plan to each of the executive officers. No options have been granted
under the non-qualified option plan since 1988. Each of the executive officers
receiving options under the 1994 ISOP surrendered their outstanding options
under the 1988 non-qualified plan.
Compensation of the Chief Executive Officer
For fiscal year 1995, the annual base salary paid to Mark M. David, the
Company's Chairman of the Board and Chief Executive Officer, was not increased.
The Committee believed that in view of the Company's results of operations for
the fiscal year ended June 30, 1994, no increase in Mr. David's compensation was
warranted.
In May 1995, Mr. David's base salary for the remainder of the fiscal year
and for fiscal year 1996 was reduced by fifty (50%) percent.
Compensation Committee Interlocks and Insider Participation
John J. Ross, a former director of the Company, owned or was a shareholder
in insurance agencies which have written policies covering automobiles,
property, casualty, and directors' and officers' insurance for the Company with
premiums totaling approximately $422,000 during the 1995 fiscal year. These
policies were written at competitive rates and on competitive terms.
<PAGE> 7
Harold B. Pomeranz, also a former director of the Company, is a member of
the firm of Graubard Mollen & Miller. The Company paid legal fees and
disbursements for the fiscal year ended June 30, 1995 to said firm. The fees
paid by the Registrant were less than 5% of the total revenues of the law firm.
Mark M. David
Clayton E. Medley
Saul Pomerantz
Helen Samuels
<PAGE> 8
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------------------
ANNUAL
COMPENSATION LONG TERM COMPENSATION
------------------------------------------------------------
RESTRICTED
FISCAL STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) AWARDS($) (# SHARES) COMPENSATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Mark M. David 1995 522,857 - 333,333(1) 8,145(8)
Chairman of the Board and 1994 550,000 - 333,333(1) 8,145(8)
Chief Executive Officer of the 1993 550,000 - 333,333(1) 8,145(8)
Company
- -----------------------------------------------------------------------------------------------------------------------------------
Clayton E. Medley 1995 270,846 - 477,467(2)(9) _
President and Chief Operating 1994 275,000 - 423,889(3) _
Officer of the Company; 1993 275,000 - 423,889(3) _
Director
- -----------------------------------------------------------------------------------------------------------------------------------
Saul Pomerantz 1995 161,663 - 312,467(4)(9) _
Senior Vice President and 1994 165,000 - 312,778(5) _
Chief Financial Officer of the 1993 165,000 - 312,778(5) _
Company; Director
- -----------------------------------------------------------------------------------------------------------------------------------
Helen Samuels 1995 127,476 - 219,648(6)(9) _
Vice President and Treasurer 1994 130,000 - 218,667(7) _
of the Company; Director 1993 130,000 - 218,667(7) _
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents options to purchase 333,333 shares of Common Stock granted
under the Company's Non-Qualified Stock Option Plan ("1988 Plan").
(2) Represents options to purchase 477,467 shares of Common Stock granted
under the Company's 1994 Incentive Stock Option ("1994 Plan").
(3) Represents options to purchase 222,222 shares of Common Stock granted
under the 1988 Plan and 201,667 shares of Common Stock under the
Company's 1983 Incentive Stock Option Plan ("1983 Plan").
(4) Represents options to purchase 312,467 shares of Common Stock under the
1994 Plan.
(5) Represents options to purchase 111,111 shares of Common Stock under the
1988 Plan and 201,667 shares of Common Stock under the 1983 Plan.
(6) Represents options to purchase 219,648 shares of Common Stock under the
1994 Plan.
(7) Represents options to purchase 111,111 shares of Common Stock under the
1988 Plan and 107,556 shares of Common Stock under the 1983 Plan.
(8) Represents annual premiums paid by the Company for a split dollar form
of life insurance policy on the life of Mark M. David.
(9) As a condition to the grant of options under the 1994 Plan, each
recipient was required to surrender all of the outstanding options
previously granted to him or her under the 1983 Plan and the 1988 Plan.
The exercise prices of options granted under the 1983 Plan and the 1988
Plan were higher than the exercise price of options granted under the
1994 Plan.
<PAGE> 9
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS
- -----------------------------------------------------------------------------------------------------------------------------------
% OF TOTAL
OPTIONS/SHARES
OPTIONS/ GRANTED TO EXERCISE MARKET PRICE
SHARES EMPLOYEES IN PRICE ON DATE OF EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) GRANT ($) DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Clayton E. Medley 477,467(1) 34.56% 1.125 1.125 2004
President and Chief
Operating Officer
of the Company; Director
- -----------------------------------------------------------------------------------------------------------------------------------
Saul Pomerantz 312,467(1) 22.62% 1.125 1.125 2004
Senior Vice President and
Chief Financial Officer
of the Company; Director
- -----------------------------------------------------------------------------------------------------------------------------------
Helen Samuels 219,648(1) 15.90% 1.125 1.125 2004
Vice President and
Treasurer of the Company;
Director
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents options granted on July 15, 1994 under the 1994 Plan.
<PAGE> 10
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AS OF AUGUST 31, 1995
The following table sets forth as of August 31, 1995 certain
information with respect to ownership of the Common Stock of the Company by (i)
all persons known by the Company to own beneficially more than five percent of
its Common Stock, (ii) each director of the Company, and (iii) all directors and
officers of the Company as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL AMOUNT AND NATURE OF PERCENT OF
OWNER BENEFICIAL OWNERSHIP CLASS(L)
- ------------------ ------------------- ----------
<S> <C> <C>
Mark M. David
110 East 57th Street
New York, NY 10022 2,990,773(2)(7) 20.9248%
Republic National
Bank as Trustee for
the ESOP
452 Fifth Avenue
New York, NY 10018 1,438,655; Direct 10.3058%
Mrs. Abraham David
8710 Banyan Court
Tamarac, FL 33321 1,622,959(3)(8) 11.6261%
Saul Pomerantz 114,132(4) 0.8124%
Clayton E. Medley 199,466(5) 1.4109%
Helen Samuels 313,370(6) 2.2306%
Dimensional Fund
Advisors Inc.
1299 Ocean Avenue
Santa Monica,
CA 90401 943,645; Direct(10)(11) 6.7598%
Abraham David
8710 Banyan Court
Tamarac, FL 33321 31,000; Direct 0.2221%
All directors and
officers as a group 5,240,700(2)(4)(5)
(4 persons) (6)(9) 35.7763%
</TABLE>
<PAGE> 11
- ------------------
(1) Based upon 13,959,650 shares (excluding 2,016,802 treasury shares)
outstanding and options, where applicable, to purchase shares of Common Stock,
exercisable within 60 days.
(2) Includes 58,674 shares owned as custodian for his children, 30,000 shares
owned as custodian for his sisters' children and 26,560 shares owned by his
spouse. Also includes the options granted to him for 333,333 shares, under
the 1988 Non-Qualified Stock Option Plan, exercisable within 60 days.
(3) Includes 506,695 shares owned by Annie David as a trustee for the benefit
of her daughters, Marcia Sussman and Elaine Greenberg.
(4) Includes options granted to Saul Pomerantz for 88,888 shares pursuant to
the 1994 ISOP, exercisable within 60 days; and 244 shares owned by his spouse
and 8,000 held jointly with his spouse.
(5) Includes options granted to Clayton E. Medley for 177,776 shares pursuant
to the 1994 ISOP, exercisable within 60 days.
(6) Includes 28,554 shares owned by Helen Samuels with her husband, as joint
tenants, and 88,888 shares pursuant to the 1994 ISOP, exercisable within 60
days.
(7) Does not include Mrs. Abraham David's shares for which he holds
the proxy.
(8) Mark M. David holds a proxy for these shares.
(9) Includes the shares held by Mrs. Abraham David.
(10) Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 943,645
shares of Movie Star, Inc. stock as of June 30, 1995. The information
set forth herein with respect to Dimensional is derived from Schedule
13g filed by Dimensional with the Securities and Exchange Commission.
(11) All of the information set forth in the foregoing tables is as of August
31, 1995, except the information with respect to Dimensional Fund Advisors
Inc. which is as of June 30, 1995.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and officers and persons who beneficially own more than
ten percent of the Company's Common Stock to file with the Securities and
Exchange Commission ("SEC") and the American Stock Exchange initial reports of
ownership and reports of changes in ownership of Common Stock of the Company.
Officers, directors and greater-than-ten percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) reports
they filed. To the Company's knowledge, based solely on review of the copies
of such reports furnished to the Company and written representations that no
other reports were required, during
<PAGE> 12
the two fiscal years ended June 30, 1995, all Section 16(a) filing
requirements were complied with, except that during fiscal year 1995 Clayton
E. Medley, Saul Pomerantz and Helen Samuels did not file monthly reports in
connection with surrender of certain options and the grant of new options.
These reports were subsequently filed late.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
John J. Ross, was a director of the Company until June 1, 1995 and owned or
was a shareholder in insurance agencies which have written policies covering
automobiles, property, casualty, and directors' and officers' insurance for
the Company with premiums totalling approximately $422,000 during the 1995
fiscal year. These policies were written at competitive rates and on
competitive terms.
Harold B. Pomeranz, was a director of the Company until February 1, 1995 and
is of counsel to the firm of Graubard Mollen & Miller. The Company paid legal
fees and disbursements for the fiscal year ended June 30, 1995 to said firm.
The fees paid by the Registrant were less than 5% of the total revenues of the
law firm.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Method of Filing
- ------- ------- ----------------
<S> <C> <C>
10.6.6 Letter Agreement dated October Filed herewith.
13, 1995 among Republic National
Bank of New York and NatWest Bank
N.A. and Registrant amending the
Credit and Security Agreement
dated September 14, 1995 among
Republic National Bank of New
York and NatWest Bank N.A. and
the Registrant.
</TABLE>
<PAGE> 13
EXHIBIT INDEX
-------------
Exhibit
No Exhibit
- ------- -------
10.6.6 Letter Agreement dated October 13, 1995 among
Republic National Bank of New York and NatWest
Bank N.A. and Registrant amending the Credit and
Security Agreement dated September 14, 1995 among
Republic National Bank of New York and NatWest
Bank N.A. and the Registrant.
<PAGE> 1
REPUBLIC NATIONAL BANK OF NEW YORK
INDIVIDUALLY AND AS AGENT
452 FIFTH AVENUE
NEW YORK, NY 10018
NATWEST BANK N.A.
1133 AVENUE OF THE AMERICAS
NEW YORK, NY 10036
October 13, 1995
Movie Star, Inc.
136 Madison Avenue
New York, NY 10016
Re: Credit & Security Agreement among Republic
National Bank of New York and NatWest Bank
N.A. dated as of September 11, 1995 (the "Agreement")
Gentlemen:
You have requested that the Agreement be amended and upon your delivery to us of
a duly executed counterpart of this letter, the Agreement shall be amended as
follows:
Section 1.17 Due Date shall be amended by deleting December 31, 1995
and substituting the date June 30, 1996.
Section 1.34 shall be amended by deleting August 9, 1995 and
substituting the date October 31, 1995.
Section 8.1 shall be amended by deleting clause (vi) from Section 8.1.
The provisions of Section 6.14 (b) are hereby waived solely with
respect to your obligation to furnish us with audited financial
statements for fiscal year 1995 within ninety (90) days of the end of
the fiscal year; provided that such audited financial statements are
furnished to us by the close of business on october 13, 1995.
Notwithstanding any provision of the Agreement to the contrary, an
unfavorable variance from the Projections of not more than ten percent
(10%) shall not be a breach of (i) any term, covenant or condition of
the Agreement by which Movie Star, Inc. is bound, or (ii) any
representation or warranty made therein by Movie Star, Inc.
Except as modified herein all terms and conditions of the Agreement shall remain
in full force and effect. Please indicate your acceptance of these changes by
your signature below.
Very truly yours,
Republic National Bank of New York NatWest Bank N.A.
/S/ JOEL BURBANK /S/ CYNTHIA E. SACHS
- ----------------------------- ------------------------------
By: Joel Burbank By: Cynthia E. Sachs
Sr. Vice President Vice President
ACCEPTED AND AGREED:
Movie Star, Inc.
/S/ SAUL POMERANTZ
- -----------------------------
By: Saul Pomerantz
Sr. Vice President
