<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
X Securities Exchange Act of 1934
- ---
For the quarter ended March 31, 1995
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 1-5893
---------------------------------------------------------
MOVIE STAR, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-5651322
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
136 Madison Avenue, New York, N.Y. 10016
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 679-7260
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report.)
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
------ ------
The number of common shares outstanding on April 28, 1995 was 13,959,650.
<PAGE> 2
MOVIE STAR, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994*
----------- --------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash $ 280 $ 922
Receivables, net of allowances 11,654 10,091
Inventory (note 3) 34,378 44,812
Deferred income taxes (note 6) 2,757 2,915
Prepaid expenses and other
current assets 1,330 326
------- -------
Total current assets 50,399 59,066
Property, plant and equipment (net) 7,060 7,697
Other assets 1,887 1,949
Deferred income taxes (note 6) 1,101 1,094
------- -------
Total assets $60,447 $69,806
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $10,478 $19,509
Current maturities of long-term debt 39 118
Accounts payable and accrued expenses 13,466 13,921
------- -------
Total current liabilities 23,983 33,548
------- -------
Long-term debt 22,501 22,529
------- -------
Stockholders' equity
Common stock 160 160
Additional paid-in capital 3,731 3,731
Retained earnings 13,690 13,456
------- -------
17,581 17,347
Less: Treasury stock, at cost 3,618 3,618
------- -------
Total stockholders' equity 13,963 13,729
------- -------
Total liabilities and stockholders'
equity $60,447 $69,806
======= =======
</TABLE>
* Derived from audited financial statements.
See notes to consolidated condensed financial statements.
<PAGE> 3
MOVIE STAR, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------- --------------------
1995 1994 1995 1994
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net sales $17,327 $20,750 $85,764 $85,692
Cost of sales (note 3) 13,329 16,242 66,349 67,426
------- ------- ------- -------
Gross profit 3,998 4,508 19,415 18,266
------- ------- ------- -------
Selling, general and administrative
expenses 5,237 5,385 15,521 16,056
Special charge (note 4) - 3,800 - 3,800
Interest expense 955 926 3,504 3,144
------- ------- ------- -------
6,192 10,111 19,025 23,000
------- ------- ------- -------
(Loss) income from operations (2,194) (5,603) 390 (4,734)
Gain on sale of plant facilities (note 5) - - - (984)
------- ------- ------- -------
(Loss) income before (benefit from)
provision for income taxes and cumulative
effect of accounting change (2,194) (5,603) 390 (3,750)
(Benefit from) provision for
income taxes (note 6) (878) (2,242) 156 (1,500)
------- ------- ------- -------
Net (loss) income before cumulative effect
of accounting change (1,316) (3,361) 234 (2,250)
Cumulative effect of accounting change
for income taxes (note 6) - - - 861
------- ------- ------- -------
Net (loss) income $(1,316) $(3,361) $ 234 $(1,389)
======= ======= ======= =======
(Loss) income per share before cumulative
effect of accounting change $(.09) $(.24) $ .02 $(.16)
===== ===== ===== =====
Cumulative effect of accounting change per share $ .06
=====
Net (loss) income per share $(.09) $(.24) $ .02 $(.10)
===== ===== ===== =====
Weighted average number of shares
outstanding 13,959 14,051 13,959 14,101
====== ====== ====== ======
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 4
MOVIE STAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
-------------------------------------
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) before cumulative effect of accounting change $ 234 $(2,250)
Adjustments to reconcile income (loss) before cumulative
effect of accounting change to net cash provided by (used
in) operating activities:
Depreciation and amortization 929 968
Deferred income taxes 151 (1,500)
Gain on sale of plant facilities - (984)
Special charge - 3,800
Changes in operating assets and liabilities:
Accounts receivable (1,563) (1,804)
Inventory 10,434 4,038
Prepaid expenses and other current assets (1,004) (1,158)
Other assets 30 21
Accounts payable and accrued expenses (455) (1,944)
-------- -------
Net cash provided by (used in)
operating activities 8,756 (813)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for fixed assets (260) (858)
Reduction in notes receivable - 569
Proceeds from sale of plant facilities - 110
-------- -------
Net cash used in investing activities (260) (179)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payment of) proceeds from short-term obligations (9,031) 748
Payment of long-term debt obligations (107) (478)
Purchase of treasury stock - (340)
-------- -------
Net cash used in financing activities (9,138) (70)
-------- -------
NET DECREASE IN CASH (642) (1,062)
CASH, beginning of period 922 1,788
-------- -------
CASH, end of period $ 280 $ 726
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during period for:
Interest $ 2,654 $ 2,294
======== =======
Income taxes (net of refunds received) $ 19 $ 65
======== =======
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 5
MOVIE STAR, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position as of March 31, 1995 and the results of operations for the three
and nine-month periods ended March 31, 1995 and 1994 and cash flows for
the nine months ended March 31, 1995 and 1994.
2. The results of operations for the nine months ended March 31, 1995 are not
necessarily indicative of the results to be expected for the full year.
3. Certain items included in these statements are based upon estimates. The
cost of sales is determined utilizing estimated gross profit rates. The
calculation of the actual cost of sales is predicated upon a physical
inventory taken only at the end of each fiscal year.
An approximate breakdown of the inventory in thousands is as follows:
<TABLE>
<CAPTION>
Mar. 31, June 30,
1995 1994
------- -------
<S> <C> <C>
Raw materials $ 9,734 $13,506
Work-in-process 4,789 5,673
Finished goods 19,855 25,633
------- -------
$34,378 $44,812
======= =======
</TABLE>
4. During the three months ended March 31, 1994, the Company recorded a
special charge of $3,800,000 related to the phase-out of a portion of the
inventory of its popular-priced intimate apparel division. The special
charge represented a write down, to its estimated realizable value, of
that portion of its inventory.
5. During fiscal 1993, the Company sold a plant facility for a gain of
$621,000 of which $548,000 was deferred at June 30, 1993. During the nine
months ended March 31, 1994, the Company realized the remaining gain of
$548,000 on such sale and sold another plant facility, which was connected
to the facility discussed above, for which a gain of $436,000 was
recognized.
6. The Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes," effective July 1, 1993. This
statement supersedes SFAS No. 96, "Accounting for Income Taxes," which was
adopted by the Company in 1989. The cumulative effect of adopting SFAS
No. 109 on the Company's financial statements was to increase income by
$861,000 ($.06 per share) for the nine months ended March 31, 1994.
<PAGE> 6
MOVIE STAR, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the three months ended March 31, 1995 decreased to $17,327,000
from $20,750,000, or a decrease of 16%, from the comparable period in 1994.
This decrease is attributable to reduced sales to existing customers in the
Company's popular-priced intimate apparel division, which phased-out a portion
of its business in the third quarter of fiscal 1994 (see below). Net sales for
the nine months ended March 31, 1995 increased slightly to $85,764,000 from
$85,692,000 in the comparable period in 1994.
The gross profit percentage increased from 21.7% in 1994 to 23.1% in 1995 and
from 21.3% in 1994 to 22.6% in 1995 for the three and nine- month periods,
respectively. The increase in the gross profit percentage was primarily due to
the higher gross margins in the Company's popular-priced intimate apparel
division, partially offset in the nine-month period by higher sales of the
Company's men's work and leisure shirt division which operates on a lower gross
margin percentage than the Company's other divisions, combined with
manufacturing inefficiencies in both periods.
As anticipated, gross profits related to the Company's popular-priced intimate
apparel division increased for the nine months ended March 31, 1995 as a result
of the Company's decision, during the third quarter of fiscal 1994, to
phase-out the portion of that division's business which was least profitable.
Although that division's gross profit percentage for the three months ended
March 31, 1995 increased over the comparable period in 1994, gross profit
dollars decreased as a result of lower sales in the current period.
As a result of the phase-out, during the third quarter of fiscal 1994, the
Company recorded a special charge of $3,800,000 which represented a write-down,
to its estimated realizable value, of that portion of its inventory.
The Company has, and will continue to seek to mitigate the loss of that
division's sales through a more concentrated effort on achieving higher profit
margins through improving its sourcing capabilities, further eliminating lower
margin business, and the replacement of such sales with sales of its higher
margin products.
For the three months ended March 31, 1995, selling, general and administrative
expenses decreased by $148,000 to $5,237,000 from the comparable period in
1994. This decrease is principally from a reduction in bad debt expense of
$200,000, partially offset by a net increase in other general and
administrative expenses.
<PAGE> 7
For the nine months ended March 31, 1995, selling, general and administrative
expenses decreased by $535,000 to $15,521,000 from the comparable period in
1994. This decrease is principally from reductions in bad debt expense of
$135,000, selling expenses of $332,000 and salaries of $305,000. These
decreases were partially offset by a net increase in other general and
administrative expenses. Additionally, in connection with the reduction in
inventory levels described below, associated costs have been reduced.
Interest expense for the three months ended March 31, 1995 increased slightly
by $29,000 to $955,000 compared to the similar period in 1994. Interest
expense for the nine months ended March 31, 1995 increased by $360,000 to
$3,504,000 compared to the similar period in 1994 due to higher short-term
rates and increased borrowing in the first quarter of 1995.
The Company had a loss from operations of $2,194,000 for the three months ended
March 31, 1995 compared to a loss from operations of $5,603,000 for the same
period in 1994 due primarily to the special charge incurred in 1994. The
Company had income from operations of $390,000 for the nine months ended March
31, 1995 compared to a loss from operations of $4,734,000 for the similar
period in 1994 due principally to higher gross profits and lower selling,
general and administrative expenses, offset partially by increased interest
expense in 1995 and the special charge incurred in 1994.
During the second quarter of fiscal 1994, the Company realized a gain of
$984,000 from the sale of certain plant facilities.
The Company's effective income tax rate was 40%. The Company adopted Statement
of Financial Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes,"
effective July 1, 1993, which resulted in a cumulative benefit from a change in
accounting amounting to $861,000 for the nine-month period ending March 31,
1994. The effective income tax rate differs from the statutory federal income
tax rate principally as a result of certain non- deductible expenses and the
effect of state income taxes.
As a result of the above factors, the net loss decreased by $2,045,000 to
$1,316,000 for the three months ended March 31, 1995 and net income was
$234,000 for the nine months ended March 31, 1995 as compared to a net loss of
$1,389,000 in the comparable period last year.
Liquidity and Capital Resources
For the nine months ended March 31, 1995, the Company's working capital
increased by $898,000 to $26,416,000, principally from the reduction of
short-term debt with funds provided by operations.
During the nine months ended March 31, 1995, cash decreased by $642,000. The
Company used cash for the purchase of fixed assets of
<PAGE> 8
$260,000, the payment of notes payable of $9,031,000 and the payment of
long-term obligations of $107,000. These activities were principally funded by
cash generated by operating activities of $8,756,000.
Inventory at March 31, 1995 decreased by $4,180,000 to $34,378,000 from
$38,558,000 at March 31, 1994 due primarily to lower inventory levels in the
Company's popular-priced intimate apparel division, offset partially by the
increase in the inventory of the Company's men's work and leisure shirt
division which resulted from the earlier production of goods for received and
anticipated orders.
The Company intends to reduce the required sinking fund payment of $3,750,000
due in October 1996 on its outstanding subordinated debentures by the
$2,550,000 of debentures previously purchased by the Company. Based upon the
Company's recent financial results and the continuing weak retail climate for
the Company's intimate apparel products, the Company does not presently
anticipate that it will be able to pay the balance of the payment due in 1996
and future sinking fund requirements in each year after 1996 from earnings.
The Company is examining various alternative means of refinancing such debt
through the issuance of new debt instruments or equity securities, the sale of
certain assets or, a combination of these and other means. The Company does
not anticipate any further significant purchases of its stock or debentures and
anticipates capital expenditures for fiscal 1995 to be less than the amount
spent in fiscal 1994.
The Company has recently negotiated an extension of its lines of credit with
two banks, from $35,000,000 to approximately $27,500,000, subject to monthly
borrowing limitations based on the Company's anticipated working capital
requirements. The credit lines bear interest of up to 1% above the banks'
prime rate. As collateral for such lines, the Company will continue to pledge
all of its accounts receivable and its finished goods inventory imported
pursuant to letters of credit issued under such lines. These lines of credit,
which were previously to expire on June 30, 1995, have been extended until
December 31, 1995. The extension is subject to the execution by the Company of
definitive documents containing the terms and conditions of the loans. The
Company intends to request renewal of such lines prior to their expiration.
Management believes its available borrowing under these lines of credit through
December 31, 1995, along with anticipated internally generated funds, will be
sufficient to cover its working capital requirements.
The Company has historically achieved higher sales and profits in the first
half of its fiscal year, due to the seasonality of the market for the Company's
intimate apparel and men's work and leisure shirt products. The Company has
typically been unprofitable in the second half of its fiscal year, due to its
fixed overhead and lower sales. As a result of the foregoing factors, the
Company estimates operating losses in the fourth quarter in excess of
$1,500,000. However, because of the weak retail environment and the continued
<PAGE> 9
deferral of the receipt of goods previously ordered by certain of its
customers, the Company cannot presently quantify the full extent of these
losses.
<PAGE> 10
PART II Other Information
Item 1 - Legal Proceedings - Not Applicable
Item 2 - Changes in Securities - Not Applicable
Item 3 - Defaults Upon Senior Securities - Not Applicable
Item 4 - Submission of Matters to a Vote of Security
Holders - None
Item 5 - Other Information
On February 28, 1995 Harold B. Pomeranz tendered
his resignation as a Director of the Company,
effective immediately. Mr. Pomeranz and his law
firm continue to serve as legal counsel for the
Company.
Item 6 - (a) Exhibits
Exhibit
Number Exhibit Method of Filing
- ------- ------- ----------------
10.6.6 Interest Bearing Grid Filed herewith.
Note dated as of
March 31, 1995 in the
sum of $13,000,000
between National
Westminster Bank USA and
the Registrant.
(b) Form 8-K Report - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
MOVIE STAR, INC.
By: /S/ CLAYTON E. MEDLEY
----------------------
CLAYTON E. MEDLEY
President
By: /S/ SAUL POMERANTZ
-------------------
SAUL POMERANTZ
Senior-Vice President;
Chief Financial Officer
May 12, 1995
<PAGE> 11
EXHIBIT INDEX
Exhibit
Number Exhibit Method of Filing
- ------- ------- ----------------
10.6.6 Interest Bearing Grid Filed herewith.
Note dated as of
March 31, 1995 in the
sum of $13,000,000
between National
Westminster Bank USA and
the Registrant.
27 Financial Data Schedule Filed herewith.
<PAGE> 1
Exhibit 10.6.6
[LOGO] NATIONAL WESTMINSTER BANK USA
- -------------------------------------------------------------------------------
INTEREST BEARING GRID NOTE
$13,000,000 OFFICE ADDRESS 1133 Sixth Avenue, New York, NY, March 31, 1995
On June 30, 1995 for value received, the undersigned jointly and severally
promise(s) to pay to the order of National Westminster Bank USA (hereinafter
called the Bank) at its Office in the place first above stated, or if no place
is stated, at 44 Wall Street, New York, New York, in funds current at the New
York Clearing House, the sum of Thirteen Million Dollars ($13,000,000) Dollars,
or if less than such principal sum, the aggregate unpaid principal amount of
all loans made by the Bank to the undersigned hereunder as indicated on the
schedule on the reverse side hereof. The undersigned also promises to pay
interest at said office in like money on the unpaid principal amount hereof
from time to time outstanding prior to maturity at an annual rate equal to the
Bank's Prime Rate (the rate of interest established from time to time by the
Bank as its "prime rate") plus 1/2%, which interest rate shall change when and
as the Prime Rate changes. If all or a portion of the principal or interest of
the Liabilities (as hereinafter defined), or any fee 15 days after the due date
or other amount due in connection therewith, shall not be paid when due
(whether after stated maturity, acceleration or otherwise), such amount, to the
extent permitted by applicable law, shall bear interest at a rate of 2% per
annum in excess of the rate hereinbefore provided, but in no event in excess of
the maximum rate of interest permitted under applicable law. Interest shall be
payable on the first day of each month commencing the first such day to occur
after the date the first loan is made hereunder and on the maturity hereof. The
Bank shall have no obligation to make any loan hereunder.
The undersigned hereby expressly authorizes the Bank to record on the schedule
on the reverse hereof the amount and date of each loan made hereunder and the
date and amount of each payment of principal thereon. All such notations shall
be presumptive as to the correctness thereof and the aggregate unpaid amount of
loans set forth on such schedule shall be presumed to be the unpaid principal
amount hereof.
Any loan may be prepaid in whole or in part at any time and from time to time
without premium or penalty together with interest accrued on the amount prepaid
to the date of any such prepayment.
As collateral security for the payment of this note and of all other notes
and/or obligations or Liabilities (as hereinafter defined) of the Obligor (as
hereinafter defined), or any one or more of them, now or hereafter owned or held
by the Bank, the Obligor grants the Bank a security interest in and pledges with
the Bank all moneys and/or other property now or hereafter held by the Bank on
deposit, in safekeeping, or otherwise, for the account of or to the credit of or
belonging to any Obligor (which term as used herein shall be deemed to include
each and all of the undersigned and each and every endorser or guarantor hereof)
or in which any Obligor shall have any interest, all of which is hereinafter
termed the collateral security. The Bank at any time, before or after an Event
or Default (as hereinafter defined), may, but shall not be obligated to,
transfer into or out of its own name or that of its nominee all or any of the
collateral security, including stocks, bonds, and other securities, and the Bank
or its nominee may demand, sue for, collect, receive and hold as like collateral
security any or all interest, dividends and income thereon and if the securities
are held in the name of the Bank or its nominee, the Bank may, after an Event of
Default, exercise all voting and other rights pertaining thereto as if the Bank
were the absolute owner thereof; but the Bank shall not be obligated to demand
payment of, protest, or take any steps necessary to preserve any rights in the
collateral against prior parties, or to take any action whatsoever in regard to
the collateral security or any part thereof, all of which the Obligor assumes
and agrees to do. Without limiting the generality of the foregoing, the Bank
shall not be obligated to take any action in connection with any conversion,
call, redemption, retirement or any other event relating to any of the
collateral security, unless the Obligor gives written notice to the Bank that
such action shall be taken not more than thirty (30) days prior to the time such
action may first be taken and not less than ten (10) days prior to the
expiration of the time during which such action may be taken. The term
"Liabilities" shall include this note and all other indebtedness and obligations
and liabilities of any kind of any Obligor to the Bank, now or hereafter
existing, arising directly between any Obligor and the Bank or acquired by
assignment, conditionally or as collateral security by the Bank, absolute or
contingent, joint and/or several, secured or unsecured, due or not due,
contractual or tortious, liquidated or unliquidated, arising by operation of law
or otherwise, direct or indirect, including, but without limiting the generality
of the foregoing, indebtedness, obligations or liabilities to the Bank of any
Obligor as a member of any partnership, syndicate, association or other group,
and whether incurred by any Obligor as principal, surety, endorser, guarantor,
accommodation party or otherwise.
If any of the following events shall occur with respect to any Obligor (each an
"Event of Default"): failure to comply forthwith with any such demand for
additional collateral; default in payment of any liability to the holder hereof
(however acquired); default in the due payment of any other indebtedness for
borrowed money or default in the observance or performance of any covenant or
condition in any agreement or instrument evidencing, securing or relating to
any such indebtedness which causes or permits the acceleration of the maturity
thereof; suspension or liquidation of usual business; calling of a meeting of
creditors; assignment for the benefit of creditors; dissolution, bulk sale or
notice thereof; mortgage or pledge of, creation of a security interest in, any
assets without prior written notice of the holder of this note; insolvency of
any kind, attachment, distraint, garnishment, levy, execution, judgment, death,
application for or appointment of a receiver, filing of a voluntary or
involuntary petition or entry of any order for relief under any provision of
the Federal Bankruptcy Code as now or hereafter in effect; failure to pay its
debts as they become due; failure to comply with the terms of any agreement
with the Bank; failure on request of any Obligor or any Obligor's accountant,
to furnish any reasonable material financial information, or to permit
inspection of any books or records; any change in, or discovery with regard
to, the condition or affairs which, in the Bank's opinion, increases its credit
risk; or if the Bank for any other reason deems itself insecure; the
Liabilities shall become absolute, due and payable without demand or notice to
any Obligor. Upon default in the due payment of this note or any other Event of
Default, or whenever this note or any payment of principal or interest hereof
shall become due in accordance with any of the provisions hereof, the Bank may,
but shall not be required to (1) proceed to apply to the payment hereof the
balance to the credit of any account or accounts maintained with the Bank by
any Obligor and (2) sell (without demand of performance, advertisement, notice
of intention to sell, notice of time or place of sale, notice to redeem or
other notice whatsoever, all of which are hereby waived) all or any part of the
collateral security (on all of which the Obligor does hereby give to the Bank a
continuing lien, security interest and/or right of set-off) at public or
private sale or sales, or at any exchange or broker's board, or at the Bank's
office, at such prices as it shall deem best, for cash or credit, with the
right of the Bank at such sale to purchase all or any part thereof, free from
any right or equity of redemption, applying the net proceeds of such sale to
the payment of this note and of any other liabilities, claims or obligations to
the Bank of any of the Obligors, or of any partnership in which any of the
Obligors is a partner, all of whom together with any endorser or guarantor
hereby expressly agree to remain jointly and severally liable for any
deficiency. The Bank may exercise any other right or remedy hereby granted or
allowed to it by law, including but not limited to, the rights and remedies of
a Secured Party under the Uniform Commercial Code of New York, and each and
every right and remedy hereby granted to the Bank or allowed to it by law shall
be cumulative and not exclusive the one of the other, and may be exercised by
the Bank from time to time and as often as may be necessary. The Bank shall
have at any time in its discretion the right to enforce collection and payment
or liquidation of any of the collateral security by appropriate action or
proceedings, and the net amounts received therefrom, after deducting all costs
and expenses incurred in connection therewith, shall be applied on account of
this note and any other indebtedness or liabilities of the Obligor aforesaid,
all without notice to any Obligor. The Bank shall not be bound to take any
steps necessary to preserve any rights in the collateral against prior parties,
which the Obligor hereby assumes to do. Any demand or notice, if made or given,
shall be sufficiently made upon or given to any Obligor if left at or mailed to
the last address of such Obligor known to the Bank or if made or given in any
other manner reasonably calculated to come to the attention of such Obligor or
the personal representatives, successors or assigns of such Obligor, whether or
not in fact received by them respectively. Unless the collateral is perishable
or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Bank will give the undersigned reasonable notice of the
time and place of any public sale thereof or of the time after which any
private sale or other intended disposition is to be made. Five (5) days prior
notice shall be deemed reasonable notice. The Bank may assign and transfer this
note to any other person, firm or corporation and may deliver and repledge the
collateral security or any part thereof to the assignee or transferee of this
note, who shall thereupon become vested with all the powers and rights above
given to the Bank in respect thereof, and the Bank shall thereafter be forever
released and discharged of and from all responsibility or liability to the
Obligor for or on account of the collateral security so delivered. If an
attorney is used to enforce or collect this note, the Obligor agrees to pay
reasonable attorneys fees, which the Obligor agrees to be reasonable. The
Obligor jointly and severally promises to pay all expenses of any nature as
soon as incurred whether in or out of court and whether incurred before or
after this note shall become due at its maturity date or otherwise and costs
which the Bank may deem necessary or proper in connection with the satisfaction
of the indebtedness or the administration, supervision, preservation,
protection (including but not limited to maintenance of adequate insurance) or
of the realization upon the collateral. The Obligor and the Bank in any
litigation (whether or not arising out of or relating to this note) in which
any of them shall be adverse parties waive the right of trial by jury. The note
shall be deemed to have been made and delivered in the State of New York, the
Obligor consents to the jurisdiction of the courts of New York in any action
brought to enforce any rights of the Bank under this note and the Bank and the
Obligor shall be determined in accordance with the laws of the State of New
York. Interest shall be calculated on the basis of a 360-day year and actual
days elapsed, provided that any interest so calculated hereunder shall in no
event be in excess of the maximum permitted under applicable law. This note and
any other agreements, documents and instruments executed and delivered pursuant
to or in connection with the Liabilities contain the entire agreement between
the parties relating to the subject matter hereof and thereof. The undersigned
expressly acknowledges that the Bank has not made and the undersigned is not
relying on any oral representations, agreements or commitments of the Bank or
of any officer, employee, agent or representative thereof. No change,
modification, termination, waiver, or discharge, in whole or in part, of this
instrument shall be effective unless in writing and signed by the party against
whom such change, modification, termination, waiver, or discharge is sought to
be enforced. The Obligor hereby waives presentment, demand for payment,
protest, notice of protest, notice of dishonor, and any and all other notices
or demands in connection with the delivery, acceptance, performance, default,
or enforcement of this
<PAGE> 2
note, consents to any and all delays, extensions of time, renewals, releases of
any Obligor and of any available security, waivers or modifications that may be
granted or consented to by the Bank with regard to the time of payment or with
respect to any other provisions of this note and agrees that no such action or
failure to act on the part of the Bank shall in any way affect or impair the
obligations of any Obligor or be construed as a waiver by the Bank of, or
otherwise affect, its right to avail itself of any remedy hereunder with the
same force and effect as if each Obligor had expressly consented to such action
or inaction upon the part of the Bank. Each Obligor hereby authorizes the Bank
to request his accountant or accountants to furnish such reasonable financial
information relating to such Obligor as the Bank shall from time to time
desire; each such accountant is hereby authorized to deliver such reasonable
financial information to the Bank. The Obligors hereby authorize the Bank to
date this note as of the day when the first loan evidenced hereby is made and
to complete and fill in any blank spaces in this note in order to conform to
the terms upon which any loan is granted.
Special provisions This note is secured by the collateral as more fully
-------------------------------------------------------------
described in the Continuing General Security Agreement dated 5/19/93.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Movie Star, Inc.
GUARANTEE
In consideration of the making of the loan evidenced by the within note, hereby
requested by the undersigned, the undersigned hereby jointly and severally
guarantee(s) to National Westminster Bank USA, its successors, endorsees or
assigns, irrespective of the genuineness, validity or enforceability hereof,
the payment when due, including all interest payable hereon and the payment of
all legal expenses incurred by the holder hereof to enforce the same or to
enforce this guarantee, and hereby consent(s) to and agree(s) to be bound by
the terms and conditions hereof and agree(s) that the collateral may be
exchanged or surrendered in whole or in part from time to time and that the
time of payment hereof may be extended, or the rate of interest altered, or the
full amount of any part hereof may be renewed one or more times without notice
to the undersigned and that this guarantee shall apply to such extension or
extensions, renewal or renewals. The Bank has no duty to any Guarantor to
protect, secure or insure any security interest or lien and the obligations of
each Guarantor hereunder are valid, binding and enforceable, notwithstanding
any defect the Bank causes permits or suffers to exist in any security interest
or lien. The undersigned waive(s) presentment, demand, protest, notice of
protest and notice of dishonor and each of them consents to any and all delays,
extensions of time, renewals, release of any part hereof and of any available
security, waivers or modifications that may be granted or consented to by the
Bank with regard to the time of payment or with respect to any other provisions
hereof and agrees that no such action or failure to act on the part of the
Bank shall in any way affect or impair the obligations of the undersigned or be
construed as a waiver by the Bank of, or otherwise affect, its right to avail
itself of any remedy hereunder with the same force and effect as if the
undersigned had expressly consented to such action upon the part of the Bank.
As security for the performance of any and of all the obligation of the
undersigned, the undersigned does hereby give the Bank a continuing lien,
security interest and/or a right of set-off in respect to any and all property,
interest or estate and moneys of the undersigned now or at any time hereafter
held by, or in possession of, or under control of, or on deposit with, the Bank.
By: /s/ Saul Pomerantz, Sr. V.P.
- -------------------------------------------------------------------------------
Signature of Borrower
Saul Pomerantz, SVP
136 Madison Avenue, New York, N.Y. 10016
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
Signature of Borrower
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
Signature of Guarantor
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
Signature of Guarantor
- -------------------------------------------------------------------------------
Address
SCHEDULE OF LOANS AND PAYMENTS
<TABLE>
<CAPTION>
==============================================================================================================================
Date Amount of Loan Amount of Principal Paid Balance Remaining Unpaid Notation Made By
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 280
<SECURITIES> 0
<RECEIVABLES> 13,229
<ALLOWANCES> 1,575
<INVENTORY> 34,378
<CURRENT-ASSETS> 50,399
<PP&E> 16,435
<DEPRECIATION> 9,375
<TOTAL-ASSETS> 60,447
<CURRENT-LIABILITIES> 23,983
<BONDS> 22,501
<COMMON> 160
0
0
<OTHER-SE> 13,803
<TOTAL-LIABILITY-AND-EQUITY> 60,447
<SALES> 85,764
<TOTAL-REVENUES> 85,764
<CGS> 66,349
<TOTAL-COSTS> 66,349
<OTHER-EXPENSES> 15,521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,504
<INCOME-PRETAX> 390
<INCOME-TAX> 156
<INCOME-CONTINUING> 234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 234
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
