-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SgkyzBWPZXE6oNCc5x6kBVwisLPbCr/EvKCYW4ADboad9C6pGjo6RRT+WPMD7Skh 9oq/eakxdTKtQq5+/DlFDw== 0000944209-99-001730.txt : 19991115 0000944209-99-001730.hdr.sgml : 19991115 ACCESSION NUMBER: 0000944209-99-001730 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GIANT GROUP LTD CENTRAL INDEX KEY: 0000041296 STANDARD INDUSTRIAL CLASSIFICATION: [9995] IRS NUMBER: 230622690 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04323 FILM NUMBER: 99749204 BUSINESS ADDRESS: STREET 1: 9000 SUNSET BLVD. STREET 2: 16TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90069 BUSINESS PHONE: 3102735678 MAIL ADDRESS: STREET 1: 9000 SUNSET BLVD. STREET 2: 16TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90069 FORMER COMPANY: FORMER CONFORMED NAME: GIANT PORTLAND & MASONRY CEMENT CO DATE OF NAME CHANGE: 19850610 FORMER COMPANY: FORMER CONFORMED NAME: GIANT PORTLAND CEMENT CO DATE OF NAME CHANGE: 19770921 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the third quarterly period ended September 30, 1999 GIANT GROUP, LTD. 9000 Sunset Boulevard, 16/th/ Floor, Los Angeles, California 90069 Registrant's telephone number: (310) 273-5678 Commission File Number: 1-4323 I.R.S. Employer Identification Number: 23-0622690 State of Incorporation: Delaware 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 - On November 12, 1999 the latest practicable date, there were 3,989,648 shares of Common Stock outstanding. GIANT GROUP, LTD. INDEX PART I. FINANCIAL INFORMATION - ------------------------------
Page No. -------- Item 1. Financial Statements Consolidated Statements of Operations - Three and Nine-Month Periods Ended September 30, 1999 and 1998 3 Consolidated Balance Sheets - September 30, 1999 and December 31, 1998 4 Consolidated Statements of Cash Flows - Nine-Month Periods Ended September 30, 1999 and 1998 5 Notes to Consolidated Financial Statements 6-10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11-15 PART II. OTHER INFORMATION - -------------------------- Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K 16 (a) Exhibits (b) Reports on Form 8-K Signature 17
2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements GIANT GROUP, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS for the three and nine-month periods ended September 30, 1999 and 1998 (Unaudited) (Dollars in thousands, except per share amounts)
Three-months ended Nine-months ended September 30, September 30, ------------------------- ------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net sales $ 21,971 $ - $ 58,963 $ - Cost of sales 17,608 - 46,166 - ---------- ---------- ---------- ---------- Gross profit 4,363 - 12,797 - ---------- ---------- ---------- ---------- Operating expenses: Selling and shipping 2,692 - 6,659 - General and administrative 1,950 794 5,351 2,603 Merger agreement and related legal - 325 - 325 Depreciation 95 46 290 234 Amortization of goodwill 172 - 515 - Co-ownership program, net of charter income of $812 and $1,308 - (354) - 140 ---------- ---------- ---------- ---------- 4,909 811 12,815 3,302 ---------- ---------- ---------- ---------- Loss from operations (546) (811) (18) (3,302) ---------- ---------- ---------- ---------- Other income (expense): Factoring and financing costs (1,015) - (2,317) (2) Investment and other income 20 518 1,088 1,857 Gain on sale of property - 10 269 2,855 ---------- ---------- ---------- ---------- (995) 528 (960) 4,710 ---------- ---------- ---------- ---------- Income (loss) before benefit for income taxes (1,541) (283) (978) 1,408 Benefit for income taxes (505) (1,047) (103) (350) ---------- ---------- ---------- ---------- Net income (loss) $ (1,036) $ 764 $ (875) $ 1,758 ========== ========== ========== ========== Basic and diluted earnings (loss) per common share $ (0.26) $ 0.24 $ (0.22) $ 0.55 ========== ========== ========== ========== Weighted average shares - basic and diluted 3,960,000 3,181,000 3,938,000 3,181,000 ========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 3 GIANT GROUP, LTD. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts)
September 30, December 31, 1999 1998 ------------- ------------ ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 1,074 $ 4,226 Marketable securities 9,602 7,797 Current portion of note receivable from related party 2,145 2,002 Note and other receivables 975 4,752 Inventories 12,176 12,438 Prepaid expenses and other assets 608 690 Deferred income taxes 1,852 892 ------------- ------------ Total current assets 28,432 32,797 Note receivable from related party 538 499 Property and equipment, net 1,936 1,983 Deferred income taxes 1,774 1,748 Goodwill, net of amortization of $553 and $38 27,252 27,415 Other assets 713 118 ------------- ------------ Total assets $ 60,645 $ 64,560 ============= ============ LIABILITIES Current liabilities: Due to factor $ 5,288 3,868 Accounts payable 4,051 7,134 Current portion of note payable to related party 400 400 Accrued expenses 1,223 1,297 Income taxes payable 252 554 ------------- ------------ Total current liabilities 11,214 13,253 Capital lease obligations 204 252 Note payable to related party 1,318 1,227 Deferred income taxes 7 7 ------------- ------------ Total liabilities 12,743 14,739 ------------- ------------ Commitments and contingencies STOCKHOLDERS' EQUITY Preferred stock, $.01 par value; authorized 2,000,000 shares, none issued - - Class A common stock, $.01 par value; authorized 5,000,000 shares, none issued - - Common stock, $.01 par value; authorized 12,500,000 shares, 7,266,000 shares issued 73 73 Capital in excess of par value 35,008 35,196 Accumulated other comprehensive loss - unrealized losses on marketable securities, net (1,585) (190) Retained earnings 42,708 43,583 ------------- ------------ 76,204 78,662 Less 3,276,000 shares of Common stock in treasury, at cost (28,302) (28,841) ------------- ------------ Total stockholders' equity 47,902 49,821 ------------- ------------ Total liabilities and stockholders' equity $ 60,645 $ 64,560 ============= ============
The accompanying notes are an integral part of these consolidated financial statements. 4 GIANT GROUP, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS for the nine-month periods ended September 30, 1999 and 1998 (Unaudited) (Dollars in thousands)
Nine-months ended September 30, ---------------------------------- 1999 1998 ------- -------- Operating Activities: Net income (loss) $ (875) $ 1,758 Adjustments to reconcile net income (loss) to net cash (used) provided by operating activities: Depreciation and amortization 998 234 Provision for impairment of assets held-for-sale - 541 Gain on sale of land and property and equipment (269) (2,855) Gain on sale of marketable securities (419) (128) Deferred income taxes (56) (450) Accretion of discounts on investments, net (323) (532) Changes in assets and liabilities: Decrease in income tax receivables - 1,100 Decrease in inventories 262 - Decrease (increase) in receivables and prepaid expenses and 403 (455) other assets Increase in due to factor 1,420 - Decrease in accounts payable and accrued expenses (3,161) (157) (Decrease) increase in income taxes payable (302) 1,224 ------- -------- Net cash (used) provided by operating activities (2,322) 280 ------- -------- Investing Activities: Sales of marketable securities 4,445 22,362 Purchases of marketable securities (5,111) (41,937) Net proceeds from sale of assets 284 19,843 Debt payment - 99 Purchase of assets held-for-sale and related costs - (49) Purchases of property and equipment (261) (46) ------- -------- Net cash (used) provided by investing activities (643) 272 ------- -------- Financing Activities: Proceeds from short-term loan 1,662 - Principal payment on short-term loan (1,662) - Principal payments on capital lease obligations (44) - Increase in note receivable from related party (143) - ------- -------- Net cash used by financing activities (187) - ------- -------- (Decrease) increase in cash and cash equivalents (3,152) 552 Cash and cash equivalents: Beginning of period 4,226 1,137 ------- -------- End of period $ 1,074 $ 1,689 ======= ======== Supplemental disclosure of cash (paid) received for: Income taxes $ (323) $ 2,193 Interest (1,659) (2)
The accompanying notes are an integral part of these consolidated financial statements. 5 GIANT GROUP, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands, except per share amounts) 1. Basis of Presentation --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 1999, the results of operations for the three and nine-month periods ended September 30, 1999 and 1998 and cash flows for the nine-month periods ended September 30, 1999 and 1998. These results have been determined on the basis of generally accepted accounting principles and practices applied consistently with those used in the preparation of the Company's 1998 Annual Report on Form 10-K. However, for interim periods, customer returns and allowances are accrued based on expected annualized activity and cost of sales are computed using the gross profit method. Certain 1998 amounts have been reclassified to conform to the 1999 presentation. Operating results for the three and nine-month periods ended September 30, 1999 are not necessarily indicative of the results that may be expected for the full year. It is suggested that the accompanying unaudited consolidated financial statements be read in conjunction with the financial statements and notes in the Company's 1998 Annual Report on Form 10-K. 2. Acquisition ----------- On December 11, 1998 the Company acquired 100% of the outstanding common stock of Periscope, which designs, sources and markets an extensive line of high quality moderate priced, women and children's clothing to mass merchandisers and major retailers, primarily for sale under private labels. Periscope uses only outside manufacturers, primarily in Mexico, and then ships direct to its retail customers. It also imports finished products primarily from China and Taiwan. It only manufactures products based on firm orders and, once a product is shipped to a customer, returns are not accepted unless the product is defective or delivered late. The acquisition has been accounted for by the purchase method of accounting, and, accordingly, Periscope's assets and liabilities have been recorded at their fair value as of the date of acquisition. Periscope's results of operations are included in the Company's consolidated statement of operations for the three and nine-month periods ended September 30, 1999. On December 11, 1998, prior to the effective date of the acquisition, the Company made a gross advance of $28,500 in cash to Periscope, which Periscope used to reduce certain borrowings. On May 18, 1999, the Company's Board of Directors approved the capitalization of this advance. The initial cost of the acquisition included 953,093 shares of Company common stock, which were held in treasury and valued at $6,493, 75,000 Company warrants valued at $195 and exercisable at $7.25 over a five year period, and transaction costs of $259. In August, the Company issued an additional 62,500 shares of common stock, valued at $352, to Periscope stockholders (see next paragraph). The excess of the total cost over the estimated fair value of the net assets acquired of $27,805, based on the Company's allocation of the purchase price, was allocated to goodwill and is being amortized on a straight- line basis over 40 years. The Company will finalize the allocation of the purchase price during the year 1999, subject to any contingent shares issued in 2000 (see next paragraph). The Company was under an obligation to issue 225,000 shares of additional Company common stock to the former Periscope stockholders based on the level of Periscope pre-tax profits, as defined in the merger agreement, which exceeded $13 million dollars for the year ended December 31, 1999. On May 18, 1999, the Company's Board of Directors approved an election that was given to the Periscope stockholders on July 23, 1999. The election gave the Periscope stockholders a choice of receiving their pro-rata portion of 62,500 shares of the Company's common stock and also their pro-rata portion of an additional 62,500 shares of the Company's common stock should Periscope's pre-tax profits for the twelve months ended June 30, 2000 exceed $13 million, instead of receiving 225,000 shares of the Company's common stock, as previously discussed. On August 13, 1999 ("Election Date"), all Periscope stockholders elected to receive their pro-rata portion of 62,500 shares of the Company's common stock. The Company valued the stock at $352, which represented the fair market value of 6 GIANT GROUP, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands, except per share amounts) the common stock on the Election Date. The stockholders received the common stock, which was held in treasury, in September of this year. During the third quarter of 1999 the Company determined that a receivable acquired in the acquisition would not be collected within one year. The Company recorded a discount of $139 and has reclassified $602 to long-term other assets. 3. Factor and Financing Arrangements --------------------------------- On August 10, 1999, Periscope signed an agreement ("Factoring Agreement") with a major factor to obtain a new factoring line which permits, as defined in the Factoring Agreement, daily working capital borrowing of 90.0% of eligible accounts receivable (non-recourse), 50.0% of letters of credit outstanding issued by Periscope and 50% of eligible inventory. The maximum borrowings under the Factoring Agreement are $36 million. The outstanding debt is collateralized by Periscope's receivables, inventory and other assets as defined in the Factoring Agreement. In addition, $4million is guaranteed by the Company and $1million is personally guaranteed by Glenn Sands, Periscope's President and Chief Executive Officer. Borrowings are subject to a processing charge equal to 0.45% on factor credit approved accounts receivable and .30% on non-factor credit approved accounts receivable. In addition, an interest charge is applied to the total outstanding debt equal to the greater of 6% or the prime rate plus one-quarter of one percent. On October 1, 1999 this interest rate is subject to a 3% increase on certain borrowings as defined in the Factoring Agreement. Periscope is required under the Factoring Agreement to maintain certain financial ratios and places certain limitations on capital expenditures, indebtedness and dividend payments. The factoring line shall continue until the last day of the 24/th/ month from the date the Factoring Agreement was signed and thereafter automatically renews from year to year unless terminated at the option of Periscope with 60 days of acceptable written notice given to the factor or terminated by the factor by giving 5 days written notice to Periscope. The uncollected balance of receivables held by the factor was approximately $29 million and $12 million for the periods ended September 30, 1999 and December 31, 1998, respectively. The net outstanding balance under this factoring line was $5.3 million at September 30, 1999 and $3.9 million under the previous factoring line at December 31, 1998. Interest on the total outstanding debt was 8.50% and 8.25%, respectively, at September 30, 1999 and December 31, 1998. Periscope had approximately $6.8 million of open letters of credit at September 30, 1999. This Factoring Agreement arranged by Periscope replaced the Company's May 1999 new letter of credit agreement. Both agreements were with the same factor. The new letter of credit agreement had provided for an additional letter of credit accommodation to collateralize the Company's obligations to third parties for Periscope's purchase of goods and inventory. The Company was subject to an interest rate equal to the greater of 6% or prime plus one-quarter of one percent on any money paid in connection with the New LC and other fees stated in the agreement. Upon the termination of the new letter of credit agreement, the Company received back from the factor its collateral security deposit of $2,000, plus interest. At September 30, 1999, Periscope was in technical default of certain covenants under the Factoring Agreement. In addition, the factor has provided an overadvance in excess of the amount provided for in the Factoring Agreement and the total outstanding, including letters of credit of $6.8 million, exceeds the maximum line of $36 million by approximately $2.2 million. As of November 1, 1999, the factor has restricted the borrowing by Periscope, availability being based only on new shipments of goods, and is not issuing additional letters of credit. It is expected that these restrictions will continue until the default conditions have been resolved and the overadvance and excess above the maximum line have been reduced to amounts acceptable to the factor. To date, no formal demand to Periscope has been made by the factor. Periscope is having on-going discussions with the factor to resolve these issues. If Periscope is successful in resolving the issues, Periscope will again have credit available under the Factoring Agreement. The Company is also exploring alternatives, should the factor stop all borrowing, and believes that other sources of financing will be available. However, no assurance can be given that the issues will be resolved or that additional sources of financing will be identified. 7 GIANT GROUP, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands, except per share amounts) 4. Earnings (Loss) Per Share ------------------------- Basic earnings (loss) per common share ("Basic EPS") is computed by dividing reported net earnings or loss available to common stockholders by the weighted average shares outstanding. The computation of diluted earnings (loss) per common share ("Diluted EPS") using the treasury stock method includes shares to be issued upon the assumed exercise of those stock options and warrants for which the average market price of the Company's common stock for the period exceeds the exercise price of the options and warrants. The calculation of Diluted EPS for the three and nine-month periods ended September 30, 1999 does not include 2,206,000 options and warrants, at a range of $5.44 to $8.25, because the effect would be anti-dilutive as the Company recorded a net loss for both periods. Options to purchase 2,101,000 shares of the Company's common stock at a range of $5.44 to $8.25 were outstanding during the prior year periods but were not included in the computation of Diluted EPS because the options prices were greater than the average market price of the Company's common stock and the effect would be anti-dilutive. 5. Comprehensive Income -------------------- The changes in components of comprehensive income (loss), net of benefit for income taxes, for the nine-month periods ended September 30, 1999 and 1998 are as follows:
1999 1998 ---------------------------------------- --------------------------------------- Pre-tax Tax Net Pre-tax Tax Net Amount Benefit Amount Amount Benefit Amount ------ ------- ------ ------- ------- ------ Other comprehensive loss: Unrealized losses on marketable securities, net $ (2,325) $ (930) $ (1,395) $ (6,183) $ (2,473) $ (3,710) Net income (loss) (875) 1,758 -------- -------- Comprehensive loss $ (2,270) $ (1,952) -------- --------
6. Affiliates' Transactions ------------------------ In March 1999, KCC signed an agreement with Santa Barbara Restaurant Group, Inc. ("SBRG"). In accordance with the agreement, KCC exchanged its remaining $2,995 of Checkers 13% restructured debt for 998,377 shares of SBRG's $.08 par value common stock at a market price of $3.00. The Company recorded investment income of approximately $129 equal to the remaining unamortized discount of the 13% restructured debt. In October 1999, the SBRG shares were registered under the Securities Act of 1933. On August 9, 1999, Checkers and Rally's merged in an all-stock transaction, which was previously announced on January 29, 1999. The merger agreement, approved by the stockholders of both Checkers and Rally's, provided that each outstanding share of Rally's stock be exchanged for 1.99 shares of Checkers stock. The Checkers common stock owned by Rally's (approximately 26% of Checkers common stock) was retired after the merger. In addition, the Checkers stockholders approved a post-merger one-for-twelve reverse stock split. Subsequent to the merger and reverse stock split, the Company owns approximately 535,000 shares of Checkers common stock or 5.7% of the outstanding shares of Checkers common stock and owns warrants to purchase approximately 237,000 shares of Checkers common stock at a strike price of $3.00. The new company will continue to operate restaurants under both the Checkers and Rally's brand names for the foreseeable future. 8 GIANT GROUP, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands, except per share amounts) 7. Information Concerning Business Segments ---------------------------------------- The Company's one reportable segment, the design, manufacture and sale of women and children's clothing, was acquired through an acquisition, effective December 11, 1998. The Company's current period consolidated statement of operations reflects the segment's results of operations for the three and nine months ended September 30, 1999. Women and children's clothing sales made to three major customers represented approximately 60% of net sales for the three and nine-month periods ended September 30, 1999. 8. Recent Accounting Pronouncements -------------------------------- In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". The statement is intended to eliminate the diversity in practice in accounting for internal-use software costs and improve financial reporting. The statement is effective for fiscal years beginning after December 15, 1998. The Company has adopted this statement in the first quarter of 1999 and has determined that the effect of this statement on the Company's current consolidated financial position and consolidated results of operations is not material. In June 1998, the Financial Accounting Standards Board issued FASB 133 "Accounting for Derivative Instruments and Hedging Activities" ("FASB 133"). This statement increases the visibility, comparability, and understanding of the risks associated with holding derivatives by requiring all entities to report all derivatives at fair value as assets or liabilities. It also provides guidance and practice by providing companies with comprehensive rules for all derivatives and hedging activities. FASB 133 is effective for fiscal quarters of fiscal years that begin after June 15, 2000. The Company will follow the disclosure requirements set forth in this statement; however, the Company does not currently hold or issue derivative instruments or nonderivative instruments that are designated and qualify as hedging instruments. 9. Commitments and Contingencies ----------------------------- The Company is involved in lawsuits as described in the Company's 1998 Annual Report on Form 10-K and as further described in the following paragraphs. Mittman/Rally's. In January and February 1994, two putative class action --------------- lawsuits were filed, purportedly on behalf of the shareholders of Rally's in the United States District Court for the Western District of Kentucky, against Rally's, certain of Rally's present and former officers, directors and shareholders and its auditors and GIANT. The complaints allege defendants violated the Securities Exchange Act of 1934, as amended, among other claims, by issuing inaccurate public statements about Rally's in order to arbitrarily inflate the price of Rally's common stock, and seek unspecified damages, including punitive damages. On April 15, 1994, GIANT filed a motion to dismiss and a motion to strike. On April 5, 1995, the Court struck certain provisions of the complaint but otherwise denied GIANT's motion to dismiss. In addition, the Court denied plaintiffs' motion for class certification. On July 31, 1995, the plaintiffs renewed this motion, and on April 16, 1996, the Court certified the class. Two settlement conferences have been conducted, most recently on December 7, 1998, but have been unsuccessful. Fact discovery was completed by summer 1999. Expert discovery will be completed by early spring of 2000. No trial date has been scheduled. Management is unable to predict the outcome of this matter at the present time. Rally's and GIANT deny all wrongdoing and intend to defend themselves vigorously in this matter. Harbor. In February 1996, Harbor Finance Partners ("Harbor") commenced a ------ derivative action, purportedly on behalf of Rally's, against Rally's officers and directors and GIANT, David Gotterer, and Burt Sugarman before the Delaware Chancery Courts. Harbor named Rally's as a nominal defendant. Harbor claims that directors and officers of both Rally's and GIANT, along with GIANT breached their fiduciary duties to the public shareholders of Rally's by causing Rally's to repurchase certain Rally's Senior Notes at an inflated price. The NASDAQ closing price of the Senior Notes as of August 5, 1999 was $89, approximately 31% higher than 9 GIANT GROUP, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollars in thousands, except per share amounts) the repurchase price of $67 7/8. Harbor seeks "millions of dollars in damages", along with rescission of the repurchase transaction. In the fall of 1996, all defendants moved to dismiss this action. On April 3, 1997, the Chancery Court denied defendants' motion. In the second quarter of 1999, the plaintiffs filed document requests and interrogatories. Because of the merger of Rally's into Checkers (see Footnote 6), plaintiffs lost their standing to maintain this action, and voluntarily dismissed the action on September 10, 1999. KCC/Pike Santa Monica Action. In October 1996, KCC filed a complaint, in ---------------------------- the Los Angeles County Superior Court, against NeoGen Investors, L.P., N.D. Management, Inc., NeoGen Holdings, L.P., Danco Laboratories, Inc. and NeoGen Pharmaceutical, Inc. (collectively the "NeoGen Entities") and Joseph Pike, stating causes of action for fraud, breach of fiduciary duty, fraudulent concealment, breach of contract, unfair business practices and permanent and preliminary injunctive relief and against the licensors of Mifepristone, the Population Council, Inc. and Advances in Health Technology, Inc., on a declaratory relief claim. The complaint seeks damages for the breach by Joseph Pike and the NeoGen Entities of a July 24, 1996 agreement by which KCC agreed to contribute $6,000, in return for a 26% equity interest in the entity producing the drug, Mifepristone, in the United States and other parts of the world ("NeoGen Agreement"). The $6,000 contribution was not funded. On February 19, 1997, Joseph Pike and the NeoGen Entities filed an answer to the complaint, denying its material allegations and raising affirmative defenses. On that date, the NeoGen Entities also filed a cross-complaint against KCC, the Company, and certain of the Company's directors, Terry Christensen, David Malcolm and Burt Sugarman, which alleged causes of action for fraud, breach of contract, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage and unfair business practices. In October 1997, KCC settled their action with the licensors, the Population Council, Inc. and Advances in Health Technology, Inc., and in November 1997, KCC settled their action with Joseph Pike. On May 1, 1998, the court granted the NeoGen Entities summary adjudication on KCC's cause of action for breach of contract. Discovery in this action is complete. On October 2, 1998, the court entered an order, which, among other things, effectively eliminates NeoGen Entities' ability to obtain any money judgement from KCC and the other cross- defendants. On February 23, 1999, the court entered judgement pursuant to a Stipulation for Judgement, by which the parties' respective claims are dismissed with prejudice, save and except for the right to appeal certain issues. On or about April 22, 1999, NeoGen filed a notice of appeal of that judgement. On or about June 8, 1999, KCC filed a notice of cross-appeal. Neogen/ Danco v. KCC. This complaint for damages for trade libel was filed -------------------- on October 30, 1998 in the Superior Court for the State of California for the County of Los Angeles. The complaint alleged one cause of action for trade libel against all defendants KCC, GIANT, Terry Christensen and Does 1 through 20, regarding defendants' alleged statements to the media concerning plaintiffs Neogen Investors, L.P., and Danco Laboratories, Inc. and Joseph Pike. The complaint was never served. On August 3, 1999 Neogen filed a request for dismissal of the entire action without prejudice and the dismissal of this action was entered on that date by the court. Since management does not believe that the previously mentioned lawsuits and other claims and legal proceedings, in which the Company is a defendant, contain meritorious claims, management believes that the ultimate resolution of the lawsuits will not materially and adversely affect the Company's consolidated financial position or results of operations. On July 23, 1999, the Company amended the employment contract with the President and Chief Executive Officer of Periscope by increasing his annual base salary to $950 from $500 for the second and third year of his current employment term, in lieu of the $450 performance based bonus. The Company presently fails to meet the recently effective New York Stock Exchange ("NYSE") continued listing standards requiring total market capitalization of not less than $50 million and total stockholders' equity of not less than $50 million. The Company is exploring options to maximize shareholder value. Such options include, among other things, the sale of Periscope Sportswear, Inc., a subsidiary of the Company. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (Dollars in thousands, except per share amounts) On December 11, 1998, the Company acquired 100% of the outstanding common stock of Periscope, a designer and manufacturer of women and children's apparel. The acquisition has been accounted for by the purchase method of accounting. Periscope's results of operations for the three and nine-month periods ended September 30, 1999 are included in the Company's consolidated statement of operations for the current period. Periscope's unaudited results of operations for the three and nine-month periods ended September 30, 1998 are not included in the Company's consolidated statement of operations for the prior period; however, the prior period's unaudited results of operations for the Company and Periscope have been combined for proforma comparative purposes in the discussions that follow. Results of Operations for the Three Months Ended September 30, 1999 Versus - -------------------------------------------------------------------------- September 30, 1998 - ------------------ Net sales for the three-month period ended September 30, 1999 were $21,971. On a comparable basis, this was a decrease of $5,913 from net sales of $27,884 in the prior period. The net sales decrease, included a decrease of $10,313 in ladies' knit sportswear and children's apparel, partially offset by an increase of $4,400 in wovens and imported apparel. The company's sales continued to be adversely affected by the reduction of Periscope's available credit by the company's factor which resulted in the company's inability to purchase raw materials to produce goods and to ship orders. In August 1999, Periscope signed a factoring agreement with a new major factor to obtain a higher level of financing and lower interest rate than provided by the previous factor. However, due to the timing of completing this agreement there was no significant impact on sales for the third quarter. Gross profit for the three-month period ended September 30, 1999 was $4,363 or 19.9% of net sales. On a comparable basis, the prior period was $3,608 or 12.9% of net sales. The decrease in gross profit from the second quarter of 1999 resulted from a year-to-date adjustment, recorded in the third quarter, relating to higher returns and allowances than projected for the year. In addition, these results were impacted by the same factors causing the decrease in sales. The prior year Periscope historical gross profit was also affected by a year-to-date adjustment, recorded in the quarter relating to higher returns and allowances than projected for the year and an adjustment related to inventory obsolescence. Operating expenses for the three-month period ended September 30, 1999 increased $4,098 to $4,909 from $811 in the prior period. This increase is primarily due to the inclusion in the current period of the operating expenses of the apparel operation of $3,784, goodwill amortization of $172 and an overall increase in corporate expenses of $116. In the prior period, costs of $325 relating to the proposed merger of GIANT, Rally's and Checkers, was offset by net charter income of $354 related to the yacht that was sold in October of 1998. On a comparable basis, proforma operating expenses decreased $3,467 to $4,909 from $8,376 in the prior period which reflected expenses of $2,415 related to Periscope's attempted initial public offering, $325 related to the proposed merger and lower shipping and selling expenses of $985 primarily due to lower sales and the move of the apparel production and distribution facilities to Mexico. Other income (expense) for the three-month period ended September 30, 1999 decreased $1,523 to an expense of $995 from income of $528 in the prior period. The decrease is primarily related to the inclusion in the current period of the factoring and financing costs of the apparel operations of $1,003. In addition, the Company recorded lower investment income of $498 in the current period primarily due to lower interest income from the Company's investment in debt securities and recording of a discount of $139 on a current receivable acquired in the acquisition of Periscope that was determined will not be collected within one year. On a comparable basis, proforma other expense decreased $95 to an expense of $995 from $1,090 in the prior period reflecting the items previously discussed in this paragraph, offset by the decrease in financing costs of $615 primarily due to the funds that were advanced by the Company in December 1998 to the apparel operations to reduce certain borrowings. Results of Operations for the Nine Months Ended September 30, 1999 Versus - ------------------------------------------------------------------------- September 30, 1998 - ------------------ Net sales for the nine-month period ended September 30, 1999 were $58,963. On a comparable basis this was a decrease of $7,423 from Periscope's net sales of $66,386 in the prior period. The net sales decrease, included a decrease of $15,217 in ladies' knit sportswear and children's apparel, partially offset by an increase of $7,794 in wovens and imported apparel. The company's sales continued to be adversely affected by the reduction of Periscope's available credit by the company's factor which resulted in the company's inability to purchase raw 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (cont.) (Dollars in thousands, except per share amounts) materials to produce goods and to ship orders. In August 1999, Periscope signed a factoring agreement with a new major factor to obtain a higher level of financing and lower interest rate than provided by the previous factor. However, due to the timing of completing the agreement, there was no significant impact on sales for the third quarter. Gross profit for the nine-month period ended September 30, 1999 was $12,797 or 21.7% of net sales. On a comparable basis Periscope's prior period was $12,348 or 18.6% of net sales. The decrease in gross profit from the second quarter of 1999 resulted from a year-to-date adjustment, recorded in the third quarter, relating to higher returns and allowances than projected for the year. In addition, these results were impacted by the same factors causing the decrease in sales. The prior year gross profit was also affected by a year-to- date adjustment, recorded in the quarter relating to higher returns and allowances than projected for the year and an adjustment related to inventory obsolescence. Operating expenses for the nine-month period ended September 30, 1999 increased $9,513 to $12,815 from $3,302 in the prior period. The increase is primarily due to the inclusion in the current period of the operating expenses of the apparel operations of $9,546 and goodwill amortization of $515. This increase in expenses is reduced by prior period Co-Ownership and charter expenses of $140, net of $1,308 in charter income earned prior to the sale of the yachts in April and October of 1998 and $325 related to the proposed merger involving GIANT, Rally's and Checkers. On a comparable basis, proforma operating expenses decreased $3,596 to $12,815 from $16,411in the prior period reflecting the items previously discussed, and prior period expenses of $2,415 related to Periscope's attempted initial public offering, and lower shipping and selling expenses of $805 primarily due to lower sales and the move of the apparel production and distribution facilities to Mexico. Other income (expense) for the nine-month period ended September 30, 1999 decreased $5,670 to expense of $960 from income of $4,710 in the prior period. The decrease is primarily related to the inclusion in the current period of the factoring and financing costs of the apparel operations of $2,293. In addition, the Company recorded lower investment income of $769 in the current period primarily due to lower interest income from the Company's investment in debt securities of $961 and recording of a discount of $139 on a current receivable acquired in the acquisition of Periscope that was determined will not be collected within one year, partially offset by higher gains on the sales of marketable securities of $291 in the current period. The Company also recognized a gain of $269 on the sale of land not used in the Company's operations in the current period compared to a gain of $2,855 on the sale of property and equipment recorded in the prior period. On a comparable basis, proforma other income (expense) decreased $1,567 to an expense of $960 from income of $607 in the prior period reflecting the items previously discussed in this paragraph, partially offset by a decrease in financing costs of $1,810 primarily due to the funds advanced by the Company in December 1998 to the apparel operations to reduce certain borrowings. Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents and marketable securities at September 30, 1999 totaled $10,676 compared with $12,023 at December 31, 1998. At September 30, 1999 and December 31, 1998, the Company had working capital of $17,218 and $19,544 with current ratios of 2.5 and 2.5 to 1, respectively. On August 10, 1999, Periscope signed an agreement ("Factoring Agreement") with a major factor to obtain a new factoring line which permits, as defined in the Factoring Agreement, daily working capital borrowing of 90.0% of eligible accounts receivable (non-recourse), 50.0% of letters of credit outstanding issued by Periscope and 50% of eligible inventory. The maximum borrowings under the Factoring Agreement are $36 million. The outstanding debt is collateralized by Periscope's receivables, inventory and other assets as defined in the Factoring Agreement. In addition, $4 million is guaranteed by the Company and $1million is personally guaranteed by Glenn Sands, Periscope's President and Chief Executive Officer. Borrowings are subject to a processing charge equal to 0.45% on factor credit approved accounts receivable and .30% on non-factor credit approved accounts receivable. In addition, an interest charge is applied to the total outstanding debt equal to the greater of 6% or the prime rate plus one-quarter of one percent. On October 1, 1999 this interest rate is subject to a 3% increase on certain borrowings as defined in the Factoring Agreement. Periscope is required under the Factoring Agreement to maintain certain financial ratios and places certain limitations on capital expenditures, indebtedness and dividend payments. The 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (cont.) (Dollars in thousands, except per share amounts) factoring line shall continue until the last day of the 24/th/ month from the date the Factoring Agreement was signed and thereafter automatically renews from year to year unless terminated at the option of Periscope with 60 days of acceptable written notice given to the factor or terminated by the factor by giving 5 days written notice to Periscope. The uncollected balance of receivables held by the factor was approximately $29 million and $12 million for the periods ended September 30, 1999 and December 31, 1998, respectively. The net outstanding balance under this factoring line was $5.3 million at September 30, 1999 and $3.9 million under the previous factoring line at December 31, 1998. Interest on the total outstanding debt was 8.50% and 8.25%, respectively, at September 30, 1999 and December 31, 1998. Periscope had approximately $6.8 million of open letters of credit at September 30, 1999. At September 30, 1999, Periscope was in technical default of certain covenants under the Factoring Agreement. In addition, the factor has provided an overadvance in excess of the amount provided for in the Factoring Agreement and the total outstanding, including letters of credit of $6.8 million, exceeds the maximum line of $36 million by approximately $2.2 million. As of November 1, 1999, the factor has restricted the borrowing by Periscope, availability being based only on new shipments of goods, and is not issuing additional letters of credit. It is expected that these restrictions will continue until the default conditions have been resolved and the overadvance and excess above the maximum line have been reduced to amounts acceptable to the factor. To date, no formal demand to Periscope has been made by the factor. Periscope is having on-going discussions with the factor to resolve these issues. If Periscope is successful in resolving the issues, Periscope will again have credit available under the Factoring Agreement. The Company is also exploring alternatives, should the factor stop all borrowing, and believes that other sources of financing will be available. However, no assurance can be given that the issues will be resolved or that additional sources of financing will be identified. This Factoring Agreement arranged by Periscope replaced the Company's May 1999 new letter of credit agreement. Both agreements were with the same factor. The new letter of credit agreement had provided for an additional letter of credit accommodation to collateralize the Company's obligations to third parties for Periscope's purchase of goods and inventory. The Company was subject to an interest rate equal to the greater of 6% or prime plus one-quarter of one percent on any money paid in connection with the New LC and other fees stated in the agreement. Upon the termination of the new letter of credit agreement, the Company received back from the factor its collateral security deposit of $2,000, plus interest. Net cash used by operating activities for the nine months ended September 30, 1999 was $2,322 compared to cash provided by operating activities of $280 for the prior period. This increase in cash used for operations resulted from a net loss of $875 compared to a net income of $1,758 in the prior period and by higher liquidity requirements in the current period. Net cash used by investing activities for the nine months ended September 30, 1999 was $643 compared to cash provided by investing activities of $272 for the prior period. In the current period, purchases, net of sales of marketable securities was $666 compared to $19,575 in the prior period. This higher use of cash of $ 18,909 was off set by proceeds of $ 19,843 primarily from the sale of its remaining luxury yacht and corporate plane in the prior period. Net cash used by financing activities for the nine months ended September 30, 1999 was $187 compared with no financing activities for the prior period. During the current period, the Company had a short-tem loan of $1,662 that was taken out in May 1999 and repaid in August of 1999. In addition $143 was advanced to Periscope's President and Chief Executive Officer and Periscope made $44 of principal payments on capital lease obligations. The Company's current liquidity is provided by cash and cash equivalents, marketable securities, investment income, and borrowings under the Company's factoring line. As discussed above, the Company has on-going discussions with its factor to increase its available credit. In addition, the Company is exploring other options. Such options include, among other things, the sale of Periscope. 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (cont.) (Dollars in thousands, except per share amounts) Year 2000 - --------- The Company has completed its evaluation of its information technology for Year 2000 compliance. The cost incurred to modify its information technology infrastructure to be Year 2000 compliant is not material to its consolidated financial condition or results of operations. In addition, the remediation of Year 2000 issues involving the Company's information systems has also been completed. The Company does not anticipate any material disruption in its operations as a result of any failure by the Company to be in compliance. The Company has purchased new information technology platforms, which, among other things, are Year 2000 compliant. Hardware and software costs are capitalized by the Company and all other costs associated with Year 2000 compliance are expensed as incurred. The Company has had discussions with its customers and vendors and although the Company believes that the information systems of its major customers and vendors (insofar as they relate to the Company's business) comply with Year 2000 requirements, there can be no assurance that the Year 2000 issue will not affect the information systems of such customers and vendors as they relate to the Company's business, or that any such impact on such customers and vendors' information systems would not have a material adverse effect on the Company's business, consolidated financial condition or results of operations. Personal Holding Company - ------------------------ Under the Internal Revenue Code, in addition to the regular corporate income tax, an additional tax may be levied upon an entity that is classified as a Personal holding company. In general, this tax is imposed on corporations which are more than 50% owned, directly or indirectly, by 5 or fewer individuals (the Ownership Test) and which derive 60% or more of their income from Personal holding company sources, generally defined to be passive income (the Income Test). If a corporation falls within the Ownership Test and the Income Test, it is classified as a personal holding company, and will be taxed on its undistributed personal holding company income at a rate of 39.6%. The Company currently meets the stock ownership test. The Company has not met the income requirement in recent years and therefore has not been subject to this additional tax; however, no assurance can be given that the Income Test will not be satisfied in the future. Recent Accounting Pronouncements - -------------------------------- In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". The statement is intended to eliminate the diversity in practice in accounting for internal-use software costs and improve financial reporting. The statement is effective for fiscal years beginning after December 15, 1998. The Company has adopted this statement in the first quarter of 1999 and has determined that the effect of this statement on the Company's consolidated financial position and consolidated results of operations is not material. In June 1998, the Financial Accounting Standards Board issued FASB 133 "Accounting for Derivative Instruments and Hedging Activities" ("FASB 133"). This statement increases the visibility, comparability, and understanding of the risks associated with holding derivatives by requiring all entities to report all derivatives at fair value as assets or liabilities. It also provides guidance and practice by providing companies with comprehensive rules for all derivatives and hedging activities. FASB 133 is effective for fiscal quarters of fiscal years that begin after June 15, 2000. The Company will follow the disclosure requirements set forth in this statement; however, the Company does not currently hold or issue derivative instruments or nonderivative instruments that are designated and qualify as hedging instruments. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - ------------------------------------------------------------ The Company's primary financial instruments consist of money market funds paying interest at varying interest rates and equity securities and bond investments with fixed interest rates. The Company's market risk is the potential decrease in the value of the Company's financial instruments resulting from lower interest rates and lower market prices. The Company does not enter into derivatives for trading or interest rate exposure. Rather, the Company actively manages its investment portfolio to increase the returns on investment and to ensure liquidity and 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (cont.) (Dollars in thousands, except per share amounts) invests in instruments with high credit quality provided through major financial institutions. In addition, the Company attempts to make prudent and informed business decisions before investing in equity securities. For the nine-month period ended September 30, 1999, the Company believes there was no material change in the Company's primary financial instruments and related market risk as disclosed in the Company's 1998 Annual Report on Form 10-K. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 - -------------------------------------------------------------------------------- The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this document (as well as information included in oral statements or other written statements made or to be made by the Company) contains statements that are forward-looking, such as statements relating to plans for future activities. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by or on behalf of the Company. These risks and uncertainties include those previously mentioned under Periscope, as well as those relating to the development and implementation of the Company's business plan, domestic and global economic conditions, manufacturing in Mexico and other foreign countries, changes in consumer trends for apparel, acquisition strategy, activities of competitors, changes in federal or state tax laws and of the administration of such laws. 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings ----------------- For information regarding legal matters, see Note 9 of the Notes to Consolidated Financial Statements on page 9 of this Form 10-Q and Item 3 "Legal Proceedings" as reported in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. Items 2,3,4 and 5 are not applicable. Items 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 9.1 Voting Trust Agreement, by and among the Company, Burt Sugarman, acting in his capacity as Chairman of the Board of the Company as Trustee, and Glenn Sands 10.1 Amended and Restated Employment Agreement dated July 23, 1999, between Glenn Sands and Periscope 27 Financial Data Schedule (b) During the quarter ended September 30, 1999, no reports on Form 8-K were filed. 16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GIANT GROUP, LTD. - Registrant By: /s/ William H. Pennington -------------------------- William H. Pennington Vice President, Chief Financial Officer, Secretary and Treasurer Date: November 12, 1999 17 EX-9.1 2 VOTING TRUST AGREEMENT EXHIBIT 9.1 VOTING TRUST AGREEMENT Relating to Shares of Common Stock of GIANT GROUP, LTD. ----------------- This Voting Trust Agreement (the "Agreement") is made and entered into as of this 10th day of August, 1999 by and among GIANT GROUP, LTD., a Delaware corporation (the "Company"), Burt Sugarman, acting in his capacity as Chairman of the Board of the Company, as trustee (the "Trustee") and Glenn Sands ("Sands"). WHEREAS, the parties hereto desire to record their arrangement with respect to the shares of common stock, par value $.01 per share, of the Company owned by Sands. NOW, THEREFORE, in consideration of the premises and the agreements contained herein, the parties hereto agree as follows: 1. Certain Definitions. ------------------- (a) Additional Giant Common Stock shall have the meaning set ----------------------------- forth in the Agreement and Plan of Merger dated as of December 4, 1998, by and among Giant PS/ACQ Corporation, a Delaware corporation, Periscope Sportswear, Inc., a Delaware corporation and the Company. (b) Board means the Board of Directors of the Company. ----- (c) Common Stock means the common stock of the Company, par value ------------ $0.01 per share. (d) Holder means Sands and any transferee for whom shares of ------ Common Stock are held hereunder by the Trustee. (e) Officer means the Chief Executive Officer, the President, the ------- Treasurer, the Chief Financial Officer, the Controller, the Secretary or any Vice-President of the Company (f) Officer's Certificate means a certificate signed by two --------------------- Officers of the Company that complies with the requirements of this Agreement. (g) Opinion of Counsel means a written opinion from legal counsel ------------------ (such counsel may be an employee of or counsel to the Company or the Trustee) that complies with the requirements of this Agreement. (h) Person means in addition to such person, all of the following ------ persons: (i) any relative or spouse of such person, or any relative of such spouse, any one of whom has the same home as such person; (ii) any trust or estate in which such person collectively owns ten (10%) percent or more of the total beneficial interest or of which any of such persons serve as trustee, executor or in any similar capacity; and (iii) any corporation or other organization (other than the issuer) in which such person or any of the persons specified in (i) are the beneficial owners collectively of ten (10%) percent or more of any class of equity securities or ten percent or more of the equity interest. (i) Shares means the Holder's Shares and the Additional Shares ------ collectively, as adjusted pursuant to Section 8 hereto. (j) Trust Certificate means a Voting Trust Certificate ----------------- representing an interest in the Voting Trust, substantially in the form of Schedule A attached hereto (with such modification as may be appropriate). - ---------- (k) Voting Trust means the voting trust created by this ------------ Agreement. 2. Transfer of Holder's Shares to Trustee. The Holder hereby assigns -------------------------------------- and delivers or has caused to be assigned and delivered to the Trustee to be held pursuant to this Agreement all 721,386 shares of Common Stock, which constitute all shares of Common Stock of which Holder is the beneficial owner (not including Shares underlying stock options exercisable within sixty (60) days of the date hereof) (the "Holder's Shares"). Holder shall take all action and execute all documents as may be necessary in order to deliver the Holder's Shares to the Trustee and to transfer the Holder's Shares to the Trustee on the books of the Company. 3. Transfer of Additional Shares to Trustee. In the event additional ---------------------------------------- shares of Common Stock are acquired by Holder after the date of this Agreement (the "Additional Shares") by reason of the exercise of stock options or warrants or the acquisition of any additional shares of Common Stock, including but not limited to the acquisition of the Additional Giant Common Stock, the Holder shall assign and deliver or cause to be assigned and delivered to the Trustee to be held pursuant to this Agreement all such Additional Shares within three (3) business days of Holder's acquisition thereof. Holder shall take all action and execute all documents as may be necessary in order to transfer the Additional Shares to the Trustee on the books of the Company. 4. Transfer on Books of Company. The Trustee shall cause all Shares ---------------------------- transferred to or deposited with him in his capacity as Trustee, to be transferred to the Trustee on the books of the Company and will issue and deliver to the Holder a Voting Trust Certificate for the number of Shares so transferred to the Trustee pursuant to this Agreement. 2 5. Voting; Powers. -------------- (a) At all times prior to the termination of the Voting Trust, subject to Section 5(b), the Trustee shall have the sole and exclusive right to vote the Shares or give written consent, in person or by proxy, at all meetings of stockholders of the Company, and in all proceedings in which the vote or consent, written or otherwise, of the holders of Shares may be required or authorized by law. (b) The Trustee shall vote all Shares: (i) in any election of directors, in favor of the management slate of nominees and (ii) on any other matters which may come before the Company's stockholders in accordance with the recommendations of the Board, provided that in the event the Board makes no recommendation as to a particular matter, the Trustee shall vote (or give consent with respect to) the Shares in the same manner and in the same proportions as all other shares of Common Stock not subject to this Agreement are voted. 6. Transfer Restrictions. --------------------- (a) The Shares or Trust Certificates may not be sold, assigned, hypothecated, transferred, pledged, encumbered, gifted, attached, levied, or otherwise disposed of or alienated, voluntarily or involuntarily by the Holder, except in accordance with the terms and conditions of this Agreement. (b) The provisions of Section 6(a) hereof shall not apply to transfers of the Trust Certificates and the corresponding interests in the Voting Trust, provided that any Holder of Trust Certificates and the corresponding interests in the Voting Trust shall hold such certificates and interests subject to this Agreement and further provided such transfers are limited to the following: (i) Transfers by operation of law, descent or succession; (ii) Transfers by pledge or hypothecation to a financial institution or broker, provided that the terms of such pledge or hypothecation shall not prohibit the Trustee from exercising his rights pursuant to this Agreement; and (iii) Transfers with the written consent of the Board, which may be granted or withheld by the Board in its sole discretion. (c) The provisions of Section 6(a) hereof shall not apply to the sale of Shares if the Holder delivers to the Trustee evidence satisfactory to the Trustee, in his exercise of reasonable judgment, that the Holder has disposed of such Shares pursuant to Rule 144 or its then equivalent promulgated under the Securities Act of 1933, as amended (the "Sold Shares"). Upon receipt of such satisfactory evidence, the Trustee shall deliver to the Holder or Holder's designee, certificates representing the Sold Shares, duly endorsed for transfer, in exchange for Trust Certificates representing the Sold Shares, duly endorsed for transfer. Upon delivery by the 3 Trustee of the Sold Shares to the Holder or Holder's designee, the Sold Shares shall no longer be subject to this Agreement. 7. Dividends. If the Company shall pay or issue dividends or make other --------- contributions with respect to the Shares, the Trustee shall accept and receive such dividends and distributions. Any such dividends or distributions will be distributed immediately to the Holder; provided, however, that if such dividend or distribution is in shares of Common Stock or other voting securities of the Company, such shares or other securities shall be held by the Trustee pursuant to this Agreement and the Trustee shall issue an additional Trust Certificate or Certificates to the Holder. The Trustee may, if required by applicable law, require an IRS Form W-9 or other appropriate form from the Holder as a condition to making any payment or distribution to the Holder without deduction. 8. Adjustment in Shares. In the event there is an increase in the number -------------------- of Shares by reason of a stock split or dividend or a decrease in the number of Shares because of a contraction of Shares or a change in the number of outstanding Shares as a result of some other recapitalization in which the Company receives no consideration for the issuance of the additional or reduced number of Shares, the new additional or adjusted number of Shares shall be held by the Trustee and a new Trust Certificate representing the appropriate changed number of Shares shall be issued to the Holder upon surrender of the then existing Trust Certificates. 9. Merger, etc. If the Company shall (i) merge, (ii) consolidate or (iii) ----------- dissolve following the sale of all or substantially all of the assets of the Company, and shares of capital stock or other voting securities of another corporation are issued in payment or exchange for Shares and if following any such transaction the stockholders of the Company hold a majority of the voting power of the surviving corporation or the directors of the Company constitute a majority of the directors of the surviving corporation, the shares or other securities of the surviving corporation held by the Holder shall automatically be and become subject to the terms of this Agreement and be held by the Trustee hereunder in the same manner and upon the same terms as the Shares, and in such event the Trustee shall issue to the Holder new Trust Certificates in lieu of the old Trust Certificates for the appropriate number of shares and other voting securities of such other corporation. 10. Successor Trustee. There shall initially be one Trustee, who shall be ----------------- Burt Sugarman. Upon the then Trustee ceasing to be the Chairman of the Board (a "Substitution Event"), the Board shall appoint the then Chairman of the Board to act as successor Trustee. In the event a successor Trustee shall not have been appointed within 30 days of the Substitution Event, the Company or Holder may petition a court of competent jurisdiction to appoint a successor, who shall be a member of the Board (other than Sands, or any other Holder if he or such Holder is at that time a member of the Board). 11. Acceptance of Trustee; Trustee May Own Shares. The Trustee hereby --------------------------------------------- accepts the trust created hereby and agrees to carry out the terms and provisions hereof. Nothing in this Agreement shall prevent the Trustee from owning shares of Common Stock, options to purchase 4 shares of Common Stock or other securities of the Company in his individual capacity or in any capacity other than as Trustee hereunder. 12. Expenses. Reasonable expenses lawfully incurred in the administration -------- of the Trustee's duties hereunder shall be reimbursed to him by the Company. 13. Notices. All notices, reports, statements, consents and other ------- communications directed to the Trustee from the Company shall be forwarded promptly by the Trustee to the Holder. All notices, notices of sale, election, consents and other communications required herein shall be given in writing by overnight courier, telegram or facsimile transmission and shall be addressed, or sent, to the appropriate address as set forth beneath the signature of each party hereto. 14. Termination. (a) This Voting Trust shall terminate upon the earlier ----------- to occur of the following: (i) five (5) years from the date hereof, subject to extensions in accordance with Section 218 of the Delaware Corporation Law, or (ii) the election of the Board, in its sole discretion, to terminate the Voting Trust. (b) Upon the termination of the Voting Trust the Holder shall surrender his Trust Certificates to the Trustee, and the Trustee shall deliver to the Holder certificates for Shares properly endorsed for transfer (to the extent possible), equivalent to the number of Shares represented by the respective Trust Certificates surrendered. 15. Certain Calculations. For purposes of this Agreement, the Holder -------------------- registered on the records of the Trustee as owing Trust Certificates representing Shares shall, in respect of such ownership, be deemed to be the Holder of Trust Certificates representing the number of shares of voting capital stock of the Company that the Trustee, acting on behalf of such Holder, may acquire, whether by conversion, subscription or otherwise, pursuant to or by reason of ownership of such Shares. 16. Counterparts. This Agreement may be executed in multiple counterparts ------------ all of which counterparts together shall constitute one agreement. Upon execution of this Agreement and the establishment of the Voting Trust, a copy of this Agreement shall be filed in the registered office of the Company in the State of Delaware and the Agreement shall be open to inspection in the manner provided for inspection under the laws of the State of Delaware. 17. Choice of Law. This Agreement is intended by the parties to be ------------- governed and construed in accordance with the laws of the State of Delaware without regard to conflicts of laws principles. 5 18. Bond. The Trustee shall not be required to provide any bond to secure ---- the performance of his duties hereunder. 19. Severability. In case any provision in this Agreement shall be ------------ invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 20. Amendment. This Agreement may only be amended by the written consent --------- of the Company, the then Holder(s) and the then Trustee. 21. Rights of Trustee. ----------------- (a) The Trustee may rely on any document he believes to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in any such document. (b) Before the Trustee acts or refrains from acting, he may require an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not be liable for any action he takes in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel, and advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by him under this Agreement in good faith and in reliance on such advice or opinion. (c) The Trustee shall not be liable for any act or omission to act which is in good faith and does not constitute gross negligence or willful misconduct. 22. Trustee's Disclaimer. The Trustee shall not be responsible for and -------------------- makes no representation as to the validity or adequacy of this Agreement; and he shall not be accountable for voting the Shares, paying any dividends received from the Company or releasing any Shares from the Voting Trust, provided, that such vote, payment or release is performed in accordance with the provisions of this Agreement. 6 IN WITNESS WHEREOF, the parties hereto has caused this Agreement to be executed as of the date first above written. TRUSTEE By: /s/ Burt Sugarman ----------------- Name: Burt Sugarman Title: Chairman of the Board, GIANT GROUP LTD. 9000 Sunset Boulevard 16th Floor Los Angeles, CA 90069 Facsimile No.: (310) 273-5249 HOLDER /s/ Glenn Sands --------------- Name: Glenn Sands _______________________________________ _______________________________________ _______________________________________ Address GIANT GROUP LTD. By: /s/ Burt Sugarman ----------------- Name: Burt Sugarman Title: Chairman and Chief Executive Officer 9000 Sunset Boulevard 16th Floor Los Angeles, CA 90069 Facsimile No.: (310) 273-5249 7 SCHEDULE A ---------- THE TRANSFER OF THIS VOTING TRUST CERTIFICATE IS SUBJECT TO TERMS AND CONDITIONS SET FORTH IN THE VOTING TRUST AGREEMENT DATED AS OF AUGUST __, 1999, A COPY OF WHICH HAS BEEN FILED IN THE REGISTERED OFFICE IN THE STATE OF DELAWARE OF GIANT GROUP, LTD., A DELAWARE CORPORATION (THE "CORPORATION"). SUCH COPY IS OPEN TO INSPECTION DAILY DURING BUSINESS HOURS BY ANY STOCKHOLDER OF THE CORPORATION OR ANY BENEFICIARY OF THE VOTING TRUST PURSUANT TO SUCH VOTING TRUST AGREEMENT. GIANT GROUP, LTD. VOTING TRUST CERTIFICATE Certificate No. No. of Shares ---- ---- This certifies that _____________ ("Holder") has transferred to the undersigned Trustee or is otherwise the beneficial owner of the above-stated number of voting shares of Common Stock, $.01 par value per share, of GIANT GROUP, LTD., a Delaware corporation (the "Corporation"), to be held by the Trustee pursuant to the terms of the Voting Trust Agreement dated as of August __, 1999 (the "Voting Trust Agreement"), a copy of which agreement has been delivered to the above-named Holder and filed in the registered office of the Corporation in the State of Delaware. The Holder, or his registered assigns, will be entitled (i) to receive payments equal to any and all cash dividends collected by the Trustee on the above-stated number of shares, (ii) to receive all other dividends or distributions except to the extent that property received is required to be deposited in the trust created by the Voting Trust Agreement, and (iii) to the delivery of a certificate or certificates for that number of shares on the termination of the Voting Trust Agreement, in accordance with its provisions. This Voting Trust Certificate is transferable on the books maintained by the Trustee at the principal office of the Trustee by the Holder hereof, in person or by a duly authorized attorney, and upon surrender hereof; and until so transferred the Trustee may treat the registered Holder hereof as the absolute owner hereof for all purposes. The Holder, by the acceptance of this Voting Trust Certificate, agrees to be bound by all of the provisions of the Voting Trust Agreement as fully as if the terms were set forth in this Voting Trust Certificate. EXECUTED this __ day of August, 1999. TRUSTEE By:_________________________________ Name: Burt Sugarman Title: Chairman of the Board, Giant Group Ltd. 8 [Form of Assignment for Reverse of Voting Trust Certificate] For value received, ___________________________ hereby sells, assigns, and transfers unto ________________________ the within Voting Trust Certificate and all rights and interests represented thereby, and does hereby irrevocably constitute and appoint ________________ attorney to transfer such Voting Trust Certificate on the books of the within-named Trustee with full power of substitution in the premises. Dated:______________________ Signed:______________________ Name: (Name must appear exactly as set forth on the face of this Certificate) [Signature Guarantee] 9 EX-10.1 3 AMENDED AND RESTATED EMPLOYMENT AGREEMENT EXHIBIT 10.1 AMENDED AND RESTATED EMPLOYMENT AGREEMENT AMENDED AND RESTATED EMPLOYMENT AGREEMENT, dated as of July 23, 1999 between GLENN SANDS (the "Executive") and PERISCOPE SPORTSWEAR, INC., a Delaware corporation (the "Company"), which amends and restates the Employment Agreement between the Executive and the Company, dated as of January 1, 1998, as amended by an Amendment to Employment Agreement, dated as of December 11, 1998. 1. Term of Agreement. Subject to the terms and conditions hereof, the ----------------- term of employment of the Executive under this Employment Agreement shall be for the period commencing on January 1, 1998 (the "Commencement Date") and terminating on December 31, 2002, unless sooner terminated as provided in accordance with the provisions of Section 6 hereof; provided, however, that the Company shall have the option to extend the Executive's employment hereunder for two additional one year periods (each, an "Extension Period") by giving the Executive written notice of its exercise of such option no less than 90 days prior to the expiration of the then current term. (Such term of employment, including any Extension Period, is herein sometimes called the "Employment Term".) 2. Employment. The Company hereby agrees to continue to employ the ---------- Executive as President and Chief Executive Officer and the Executive hereby accepts such employment and agrees to perform his duties and responsibilities hereunder in accordance with the terms and conditions hereinafter set forth. 3. Duties and Responsibilities. The Executive shall be President and --------------------------- Chief Executive Officer of the Company during the Employment Term. The Executive shall report to and be subject to the direction of the Board of Directors and shall perform such duties consistent with his title and position as may be assigned to him from time-to-time by the Board of Directors. During the Employment Term, Executive shall devote his full time, skill, energy and attention to the business of the Company and shall perform his duties in a diligent, trustworthy, loyal and businesslike manner. 4. Compensation. (a) The Company shall pay to Executive a salary ------------ (the "Base Salary") at the rate specified in the following sentence payable in such manner as it shall determine, but in no event any less often than monthly, less withholding required by law and other deductions agreed to by Executive. The Company shall pay the Executive a salary at the rate of $500,000 per year for the first, fourth and fifth years of the Employment Term, and at the rate of $950,000 per year the second and third years of the Employment Term. (b) In addition to the Base Salary, the Company shall pay the Executive a $450,000 bonus (the "Bonus") for the first, fourth and fifth years of the Employment Term and the first and second years of the Extension Period if the following conditions are met as to the particular year: (i) during the first year of the Employment Term (A) the Company consummates an initial public offering, (B) the Company has net sales of at least $87,000,000 and (C) the Executive is continually employed by the Company through December 31, 1998; (ii) during the fourth or fifth year, as applicable, of the Employment Term, (A) the Company has net sales of at least $110,000,000 or $120,000,000, respectively, and (B) the Executive is continually employed by the Company through December 31, 2001 or December 31, 2002, respectively; and (iii) during the first or second year, as applicable, of the Extension Period of the Employment Term (A) the Company has net sales of at least $130,000,000 or $140,000,000, 2 respectively, and (B) the Executive is continually employed by the Company through December 31, 2003 or December 31, 2004, respectively. For purposes of this paragraph (b), net sales shall mean gross sales less returns and allowances. Any Bonus payable hereunder shall be paid within forty- five (45) days of the close of the applicable year of the Employment Term. 5. Expenses and Benefits. --------------------- (a) The Company shall, consistent with its policy of reporting and reimbursement of business expenses, reimburse the Executive for such ordinary and necessary business related expenses as shall be incurred by the Executive in the course of the performance of his duties under this Agreement. In addition, the Executive shall be entitled to an annual $50,000 non-accountable expense allowance. (b) The Executive shall be eligible to participate to the extent that he qualifies in all benefit plans, including without limitation, pension, term life insurance, hospitalization, medical insurance and disability plans as are made available from time-to-time to executives of the Company. (c) Should the Company, in its sole discretion, obtain key-man insurance policies on the life of the Executive, the Executive shall have the right to designate a beneficiary of such policies for up to $1 million in proceeds thereof (the "Designated Portion"). The Executive shall cooperate with the Company in obtaining such key-man insurance, including timely submitting to any required medical or other examination. The Executive acknowledges that (i) the Company shall have the sole discretion to obtain and to maintain or terminate any such key-man life insurance policies with respect to the Executive, including the amount of the policies, (ii) if the Company does obtain and maintain such life insurance policies, the Company 3 shall be entitled to all proceeds from such insurance policies other than the Designated Portion, and (iii) the Executive or any beneficiaries the Executive may designate under such insurance policies shall have no rights with respect to the maintenance or termination of such insurance policies or the proceeds of such insurance policies other than the Designated Portion on non-terminated policies. (d) The Executive shall be entitled to four weeks of paid vacation annually, which shall be taken in accordance with the procedures of the Company in effect from time-to-time. 6. Termination. ----------- (a) The Company shall have the right to terminate the employment of the Executive under this Agreement for disability in the event Executive suffers an injury, illness or incapacity of such character as to substantially disable him from performing his duties hereunder for a period of more one hundred eighty (180) consecutive days upon the Company giving at least thirty (30) days written notice of termination; provided, however, that if the Executive is eligible to receive disability payments pursuant to a disability insurance policy paid for by the Company, the Executive shall assign such benefits to the Company for all periods as to which he is receiving full payment under this Agreement. (b) This Agreement shall terminate upon the death of Executive. (c) The Company may terminate this Agreement at any time because of (i) the Executive's material breach of any term of this Agreement or (ii) the willful engaging by the Executive in misconduct which is materially injurious to the Company, monetarily or otherwise; provided, in each case, however, that the Company shall not terminate this Agreement pursuant to this Section 6(c) unless the Company shall first have delivered to the Executive a 4 notice which specifically identifies such breach or misconduct and the Executive shall not have cured the same within fifteen (15) days after receipt of such notice. (d) The Executive may terminate his employment for "Good Reason" if: (i) he is assigned, without his express written consent, any duties inconsistent with his positions, duties, responsibilities, authority and status with the Company as of the date hereof, or a change in his reporting responsibilities or titles as in effect as of the date hereof, except in connection with the termination of his employment by him without Good Reason; (ii) his Base Salary compensation is reduced; or (iii) any other material breach of this Agreement by the Company, provided the Executive shall first have delivered to the Company a notice which specifically identifies such breach and the Company shall not have cured the same within fifteen (15) days after receipt of such notice. 7. Liquidated Damages. It is understood that if the Executive (i) ------------------ shall elect to terminate his employment for a Good Reason (as defined above) or (ii) his employment is terminated by the Company otherwise than as provided in Section 6, the Executive will suffer damages which will be difficult to calculate. Consequently, in the event of a termination of the Executive's employment for either of these reasons, the Executive shall be entitled by way of liquidated damages and not as a penalty to receive a single lump sum payment in an amount equal to the amount of the Base Salary payments that, but for his termination of employment under this Section 7, would have been payable to the Executive for the remainder of the Employment Term, and Sections 8 and 9 shall be inapplicable and void. The Company shall 5 make the lump-sum payment to the Executive within fifteen (15) days following his termination of employment for the reason set forth in this Section 7. The Executive shall not be required to mitigate the amount of any payment provided in this Section 7 nor shall the amount payable under this Section be reduced by any compensation earned by the Executive after the date of his termination of employment. 8. Revealing of Trade Secrets, etc. The Executive acknowledges the ------------------------------- interest of the Company in maintaining the confidentiality of information related to its business and shall not at any time during the Employment Term or thereafter, directly or indirectly, reveal or cause to be revealed to any person or entity the supplier lists, customer lists or other confidential business information of the Company or any of its affiliates; provided, however, that the parties acknowledge that it is not the intention of this paragraph to include within its subject matter (a) information not proprietary to the Company or its affiliates, (b) information which is then in the public domain, or (c) information required to be disclosed by law. 9. Covenants Not to Compete. (a) During the Covered Period (as defined ------------------------ below), the Executive shall not anywhere in North America, directly or indirectly, with or without compensation, engage in, be employed by or control, advise, manage, finance or receive any economic benefit from, or have any interest (whether as a shareholder, director, officer, employee, subcontractor, partner, consultant, agent or otherwise) in, any business, company, firm or other entity which is engaged in, or conducts activities substantially similar to or likely to be competitive with the business of the Company as conducted from the date hereof until the date of termination of this Agreement (the "Competitive Business"); provided, however, that nothing herein shall prohibit the Executive from owning not more than five (5%) percent of the outstanding stock of any publicly held corporation. Without limiting the foregoing, during the 6 Covered Period, the Executive shall not, in competition with the Competitive Business, (i) solicit or deal with any supplier, contractor or customer of the Company; (ii) seek to persuade any employee of the Company or any of its subsidiaries or divisions to discontinue his or her status or employment therewith; or (iii) hire or retain any employee of the Company or any of its subsidiaries or divisions. (b) For purposes of this Employment Agreement, the "Covered Period" shall extend (i) from the Commencement Date until the date of termination of this Agreement and for a period of three (3) years thereafter, if the Executive shall terminate his employment with the Company without cause at any time during the Employment Term (including during any Extension Period), or if the Company shall terminate this Agreement pursuant to Section 6(c) above at any time during the Employment Term (including during any Extension Period); or (ii) from the Commencement Date until the date of termination of this Agreement and for a period of one (1) year thereafter, if the Company shall exercise its option to extend the Executive's employment hereunder for an Extension Period and the Executive shall determine not to so extend his employment with the Company. (c) If the Executive shall continue to be employed by the Company through the Employment Term, the provisions of Section 9(a) above shall not apply and, in lieu thereof, the Executive agrees that, from the Commencement Date until the date of termination of this Agreement and for a period of one (1) year thereafter, the Executive shall not anywhere in North America, directly or indirectly, on behalf of any business, company, firm or other entity which is engaged in, or conducts activities substantially similar to or likely to be competitive with the business of the Company as conducted from the date hereof until the date of termination of this Agreement, (i) seek to persuade any employee of the Company or any of its subsidiaries 7 or divisions to discontinue his or her status or employment therewith; or (ii) hire or retain any employee of the Company or any of its subsidiaries or divisions. (d) In the event that the provisions of this Section 9 should ever be deemed to exceed the time or geographic limitations or any other limitations permitted by applicable law, then such provisions shall be deemed amended to the maximum permitted by applicable law. The Executive specifically acknowledges and agrees that (x) the remedy at law for any breach of the foregoing covenants will be inadequate, and (y) the Company, in addition to any other relief available to it, shall be entitled to temporary and permanent injunctive relief in the event the Executive violates the provisions of this Section 9. 10. Opportunities. During his employment with the Company, and for one ------------- year thereafter, the Executive shall not take any action which might divert from the Company any opportunity learned about by him during his employment with the Company (including without limitation during the Employment Term) which would be within the scope of any of the businesses then engaged in or planned to be engaged in by the Company. 11. Survival. In the event that this Agreement shall be terminated, -------- then notwithstanding such termination, the obligations of the Executive pursuant to Sections 8 and 9 of this Agreement shall survive such termination, except to the extent otherwise provided in Section 7 of this Agreement. 12. Contents of Agreement, Parties in Interest, Assignment, etc. This ----------------------------------------------------------- Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof. All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the parties hereto, except that the duties and responsibilities of the Executive 8 hereunder which are of a personal nature shall neither be assigned nor transferred in whole or in part by the Executive. This Agreement shall not be amended except by a written instrument duly executed by the parties. 13. Severability. If any term or provision of this Agreement shall be ------------ held to be invalid, illegal or unenforceable for any reason, such term or provision shall be ineffective to the extent of such invalidity, illegality or unenforceability without invalidating the remaining terms and provisions hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable term or provision had not been contained herein. 14. Notices. Any notice, request, instruction or other document to be ------- given hereunder by any party to the other party shall be in writing and shall be deemed to have been duly given when delivered personally or five (5) days after dispatch by registered or certified mail, postage prepaid, return receipt requested, to the party to whom the same is so given or made: If to the Company addressed to: Periscope Sportswear, Inc. 1407 Broadway Suite 620 New York, New York 10018 Attn: Secretary with a copies to: GIANT GROUP, LTD. 9000 Sunset Boulevard Los Angeles, California 90069 Attn: Burt Sugarman, President and Thelen Reid & Priest LLP 40 West 57th Street New York, New York 10019 Attn: Bruce A. Rich, Esq. If to Executive 9 addressed to: Glenn Sands 2 Rio Vista Drive Alpine, New Jersey 07620 with a copy to: Phillips Nizer Benjamin Krim & Ballon LLP 666 Fifth Avenue New York, N.Y. 10103-0084 Attn: Donald L. Kreindler, Esq. or to such other address as the one party shall specify to the other party in writing. 15. Counterparts and Headings. This Agreement may be executed in one ------------------------- or more counterparts, each of which shall be deemed an original and all which together shall constitute one and the same instrument. All headings are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. PERISCOPE SPORTSWEAR, INC. By: /s/ Scott Pianin ----------------- Scott Pianin Executive Vice President /s/ Glenn Sands ---------------- Glenn Sands 10 EX-27 4 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1,074,000 9,602,000 3,120,000 0 12,176,000 28,432,000 2,952,000 1,016,000 60,645,000 11,214,000 0 0 0 73,000 47,829,000 60,645,000 58,963,000 58,963,000 46,166,000 46,166,000 11,458,000 0 2,317,000 (978,000) (103,000) 0 0 0 0 (875,000) (0.22) (0.22)
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