-----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, HYEIl2fE9wxVYP3Szmol/l6wTMg4PVWcgP1pRvX4gVS3TkoWWhd9vwTRnXghG3pM zb1jd9V32DT7egKj7u0gTw== 0000950152-04-006340.txt : 20040817 0000950152-04-006340.hdr.sgml : 20040817 20040817091614 ACCESSION NUMBER: 0000950152-04-006340 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20040703 FILED AS OF DATE: 20040817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARRY R G CORP /OH/ CENTRAL INDEX KEY: 0000749872 STANDARD INDUSTRIAL CLASSIFICATION: FOOTWEAR, (NO RUBBER) [3140] IRS NUMBER: 314362899 STATE OF INCORPORATION: OH FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08769 FILM NUMBER: 04980627 BUSINESS ADDRESS: STREET 1: 13405 YARMOUTH RD NW CITY: PICKERINGTON STATE: OH ZIP: 43147 BUSINESS PHONE: 6148646400 MAIL ADDRESS: STREET 1: 13405 YARMOUTH RD NW CITY: PICKERINGTON STATE: OH ZIP: 43147 10-Q 1 l08995ae10vq.txt R. G. BARRY CORPORATION UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 3, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission file number 1-8769 R. G. BARRY CORPORATION ------------------------ (Exact name of registrant as specified in its charter) OHIO 31-4362899 - -------------------------------------------------------------------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification Number) 13405 Yarmouth Road NW, Pickerington, Ohio 43147 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 614-864-6400 ------------ (Registrant's telephone number, including area code) NOT APPLICABLE -------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Shares, $1 Par Value, Outstanding as of July 3, 2004 - 9,836,602 Index to Exhibits at page 22 Page 1 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS R. G. BARRY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
July 3, 2004 January 3, 2004 (unaudited) ------------ --------------- (in thousands) ASSETS: Cash $ 1,630 $ 2,012 Accounts receivable (less allowances of $5,296 and $18,494, respectively) 8,417 7,118 Assets held for disposal 290 -- Inventory 32,142 32,797 Prepaid expenses 1,735 2,452 -------- -------- Total current assets 44,214 44,379 -------- -------- Property, plant and equipment, at cost 17,095 35,274 Less accumulated depreciation and amortization 12,219 25,905 -------- -------- Net property, plant and equipment 4,876 9,369 -------- -------- Other assets 3,593 7,532 -------- -------- Total assets $ 52,683 $ 61,280 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: Short-term notes payable 20,678 2,000 Current installments of long-term debt 1,847 3,869 Accounts payable 5,532 7,485 Accrued expenses 6,075 5,180 -------- -------- Total current liabilities 34,132 18,533 -------- -------- Accrued retirement costs and other, net 14,576 14,841 Long-term debt, excluding current installments 1,269 2,141 -------- -------- Total liabilities 49,977 35,515 -------- -------- Minority interest 388 378 Shareholders' equity: Preferred shares, $1 par value per share Authorized 3,775 Class A shares, 225 Series I Junior Participating Class A Shares, and 1,000 Class B Shares, none issued -- -- Common shares, $1 par value per share Authorized 22,500 shares (excluding treasury shares) 9,837 9,834 Additional capital in excess of par value 12,851 12,851 Deferred compensation (35) (84) Accumulated other comprehensive loss (3,419) (3,370) Retained earnings (accumulated deficit) (16,916) 6,156 -------- -------- Net shareholders' equity 2,318 25,387 -------- -------- Total liabilities and shareholders' equity $ 52,683 $ 61,280 ======== ========
Page 2 R. G. BARRY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Thirteen weeks ended Twenty-six weeks ended ----------------------------- ----------------------------- July 3, 2004 June 28, 2003 July 3, 2004 June 28, 2003 ------------ ------------- ------------ ------------- (unaudited) (in thousands, except per share amounts) Net sales $ 14,516 $ 19,016 $ 32,946 $ 39,394 Cost of sales 10,483 12,563 23,400 25,856 -------- -------- -------- -------- Gross profit 4,033 6,453 9,546 13,538 Selling, general and administrative expense 8,857 10,018 20,054 21,575 Restructuring and asset impairment charges 3,619 - 11,901 200 -------- -------- -------- -------- Operating loss (8,443) (3,565) (22,409) (8,237) Other income 45 - 90 53 Net interest expense (291) (297) (532) (471) -------- -------- -------- -------- Loss from continuing operations before income tax (expense) benefit and minority interest (8,689) (3,862) (22,851) (8,655) Income tax (expense) benefit (230) 1,474 (228) 3,341 Minority interest, net of tax (10) (7) (9) (35) -------- -------- -------- -------- Loss from continuing operations (8,929) (2,395) (23,088) (5,349) Income (loss) from discontinued operations, net of income tax 16 (390) 16 (1,308) -------- -------- -------- -------- Net loss ($ 8,913) ($ 2,785) ($23,072) ($ 6,657) ======== ======== ======== ======== Net loss per common share Basic and diluted ($ 0.91) ($ 0.29) ($ 2.34) ($ 0.68) ======== ======== ======== ======== Average number of common shares outstanding Basic and diluted 9,839 9,815 9,839 9,813 ======== ======== ======== ========
Page 3 R. G. BARRY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Twenty-six weeks ended ----------------------------- July 3, 2004 June 28, 2003 ------------ ------------- (unaudited) (in thousands) Cash flows from operating activities: Net loss ($23,088) ($ 6,657) Net income (loss) from discontinued operations 16 (1,308) -------- -------- Net loss from continuing operations (23,072) (5,349) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization of property, plant and equipment 843 844 Restructuring and impairment non-cash charges 6,486 -- Amortization of deferred compensation 50 58 Minority interest, net of tax 9 35 Changes in: Accounts receivable, net (1,275) (2,366) Inventory 580 (11,174) Prepaid expenses 716 (458) Deferred and recoverable income taxes -- 1,391 Other 826 888 Accounts payable (1,428) 420 Accrued expenses 918 (1,964) Accrued retirement costs and other, net (186) 17 -------- -------- Net cash used in continuing operations (15,533) (17,658) -------- -------- Net cash used in discontinued operations (533) (1,654) -------- -------- Net cash used in operating activities (16,066) (19,312) -------- -------- Cash flows from investing activities: Purchases of property, plant and equipment (123) (1,568) Proceeds from the sale of property, plant and equipment 64 -- -------- -------- Net cash used in investing activities (59) (1,568) -------- -------- Cash flows from financing activities: Proceeds from short-term notes, net 28,936 18,000 Repayments of short-term notes (10,204) -- Repayment of long-term debt (2,976) (446) Proceeds from shares issued and other 2 121 -------- -------- Net cash provided by financing activities 15,758 17,675 -------- -------- Effect of exchange rates on cash (15) 38 -------- -------- Net decrease in cash (382) (3,167) Cash at the beginning of the period 2,012 6,881 -------- -------- Cash at the end of the period $ 1,630 $ 3,714 ======== ======== Supplemental cash flow disclosures: Interest paid $ 508 $ 416 ======== ======== Income taxes paid (refunded), net $ 28 ($ 4,653) ======== ========
Page 4 R. G. BARRY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements - Under Item 1 of Part I of Form 10-Q for the periods ended July 3, 2004 and June 28, 2003 (in thousands, except per share data) 1. These interim consolidated financial statements are unaudited. All adjustments (consisting solely of normal recurring adjustments) have been made which, in the opinion of management, are necessary to fairly present the results of operations. 2. R. G. Barry Corporation and its subsidiaries (the "Company") operate on a fifty-two or fifty-three week fiscal year, ending annually on the Saturday nearest December 31st. Fiscal 2004 is a fifty-two week year, while fiscal 2003 was a fifty-three week year. 3. The Company has various stock option plans, under which have been granted incentive stock options and nonqualified stock options exercisable for periods of up to 10 years from the date of grant at prices not less than fair market value at the date of grant. In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 148, Accounting for Stock- Based Compensation - Transition and Disclosure, an amendment of SFAS No. 123. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amended the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation, to require prominent disclosures in annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect in measuring compensation expense. The disclosure requirements of SFAS No. 148 were effective for periods beginning after December 15, 2002. The Company has elected, in accordance with the provisions of SFAS No. 123, as amended by SFAS No. 148, to apply the current accounting rules under APB Opinion No. 25 and related interpretations in accounting for employee stock options and, accordingly, has presented the disclosure-only information as required by SFAS No. 123. Had the Company elected to recognize compensation expense based on the fair value of the options granted at the grant date as prescribed by SFAS No. 123, the Company's net loss would approximate the pro forma amounts indicated in the table below, for the periods noted:
Thirteen weeks ended Twenty-six weeks ended ------------------------------ ----------------------------- July 3, 2004 June 28, 2003 July 3, 2004 June 28, 2003 ------------ ------------- ------------ ------------- Net loss: As reported $ (8,913) $ (2,785) $ (23,072) $ (6,657) Pro forma (9,057) (2,976) (23,359) (6,988) Net loss per share: As reported $ (0.91) $ (0.29) $ (2.34) $ (0.68) Pro forma (0.93) (0.30) (2.37) (0.70)
Page 5 R. G. BARRY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Under Item 1 of Part I of Form 10-Q for the periods ended July 3, 2004 and June 28, 2003 - continued (in thousands, except per share data) Using the Black-Scholes option pricing model, the per-share, weighted-average fair value of stock options granted during 2004 and 2003, was $1.20 and $1.69, respectively, on the date of grant. The assumptions used in estimating the fair value of the options as of July 3, 2004, and June 28, 2003 were:
July 3, 2004 June 28, 2003 ------------ ------------- Expected dividend yield 0% 0% Expected volatility 60% 50% Risk-free interest rate 3.00% 3.00% Expected life-ISO grants 6 years 6 years Expected life-nonqualified grants 2 - 8 years 8 years
4. Income tax expense (benefit), from continuing operations, for the twenty-six week periods ended July 3, 2004 and June 28, 2003, consisted of:
2004 2003 ---- ---- U. S. Federal and Foreign tax expense (benefit) $228 $(2,952) State & Local tax expense (benefit) -- (389) ---- ------- Total $228 $(3,341) ==== =======
Income tax expense (benefit) for the twenty-six week periods ended July 3, 2004 and June 28, 2003 differed from the amounts computed by applying the U. S. federal income tax rate of 34.0 percent to pretax loss, as a result of the following:
2004 2003 ---- ---- Computed "expected" tax: U. S. Federal $(7,850) $(2,943) Valuation allowance 7,850 -- Foreign and other, net 228 (141) State & Local benefit, net of Federal tax benefit -- (257) ------- ------- Total $ 228 $(3,341) ======= =======
5. Basic net loss per common share has been computed based on the weighted average number of common shares outstanding during each period. Diluted net loss per common share is based on the weighted average number of outstanding common shares during the period, plus, when their effect is dilutive, potential common shares consisting of certain common shares subject to stock options and the employee stock purchase plan. Diluted loss per common share as of July 3, 2004 and June 28, 2003 does not include the effect of potential common shares due to the antidilutive effect of these instruments, as a result of the losses incurred during the periods noted. Page 6 R. G. BARRY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Under Item 1 of Part I of Form 10-Q for the periods ended July 3, 2004 and June 28, 2003 - continued (in thousands, except per share data) 6. Inventory by category for the Company consisted of the following:
July 3, January 3, 2004 2004 ---- ---- Raw materials $ 2,172 $ 3,771 Work in process 155 615 Finished goods 29,815 28,471 ------- ------- Total inventory $32,142 $32,797 ======= =======
Inventory is presented at its net realizable value, net of write-downs. Raw materials reflect a write-down balance of $2,153 as of July 3, 2004 and $2,839 as of January 3, 2004, and finished goods reflect a write-down balance of $194 as of July 3, 2004 and $3,022 as of January 3, 2004. 7. Restructuring and asset impairment charges - The Company has previously announced plans to reduce costs and improve operating efficiencies, and has recorded restructuring and asset impairment charges as components of operating expense. The following schedule highlights actual activities for the twenty-six week period through July 3, 2004, with comparative information through June 28, 2003.
Non-Cash As of Write-Offs As of Jan. 3, Charges Estimate and July 3, 2004 in 2004 Adjustments Paid in 2004 2004 ---- ------- ----------- ------------ ---- Employee separations $ 174 $ 2,566 $ (9) $ 2,021 $ 710 Other exit costs -- 1,708 -- 1,708 -- Noncancelable lease costs -- 1,349 -- 77 1,272 Asset impairments -- 6,287 -- 6,287 -- ------ -------- ----- -------- ------- Total restructuring costs $ 174 $ 11,901 $ (9) $ 10,093 $ 1,982 ====== ======== ===== ======== =======
The Company expects that a substantial portion of the accrued obligations will be paid before the end of the 2004 fiscal year.
Non-Cash As of Write-Offs As of Dec. 28, Charges Estimate and June 28, 2002 in 2003 Adjustments Paid in 2003 2003 ---- ------- ----------- ------------ ---- Employee separations $ 1,530 - - $ 1,010 $ 520 Asset impairments - 200 - 200 - Noncancelable lease costs 208 - - 8 200 ------- ----- ----- ------- ----- Total restructuring costs $ 1,738 $ 200 - $ 1,218 $ 720 ======= ===== ===== ======= =====
Page 7 R. G. BARRY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Under Item 1 of Part I of Form 10-Q for the periods ended July 3, 2004 and June 28, 2003 - continued (in thousands, except per share data) 8. Segment Information - The Company manufactures and markets comfort footwear for at- and around-the-home. The Company considers its "Barry Comfort" at- and around-the-home comfort footwear groups in North America and in Europe, as its two operating segments. The accounting policies of the operating segments are substantially similar, except that the disaggregated information has been prepared using certain management reports, which by their very nature require estimates. In addition, certain items from these management reports have not been allocated between the operating segments, including such items as a) costs of certain administrative functions, b) current and deferred income tax expense (benefit) and deferred tax assets (liabilities), and c) in some periods, certain other operating provisions.
Barry Comfort ------------------- Twenty-six weeks ended North July 3, 2004 America Europe Total ------- ------ ----- Net sales $ 28,368 $4,578 $ 32,946 Gross profit 8,860 686 9,546 Depreciation and amortization 722 121 843 Interest expense 501 31 532 Restructuring and asset impairment charges 11,901 -- 11,901 Pre tax profit (loss) from continuing operations (22,943) 92 (22,851) Additions to property, plant and equipment 92 31 123 Total assets devoted $ 51,279 $1,404 $ 52,683 ======== ====== ========
Barry Comfort ------------------- Twenty-six weeks ended North June 28, 2003 America Europe Total ------- ------ ----- Net sales $ 34,091 $5,303 $39,394 Gross profit 12,650 888 13,538 Depreciation and amortization 737 107 844 Interest expense 450 21 471 Restructuring and asset impairment charges 200 - 200 Pre tax loss from continuing operations (8,249) (406) (8,655) Additions to property, plant and equipment 1,500 68 1,568 Total assets devoted $ 89,418 $6,499 $95,917 ======== ====== ========
Page 8 R. G. BARRY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Under Item 1 of Part I of Form 10-Q for the periods ended July 3, 2004 and June 28, 2003 - continued (in thousands, except per share data) 8. Segment information - continued
Barry Comfort ------------------- Thirteen weeks ended North July 3, 2004 America Europe Total ------- ------ ----- Net sales $ 12,852 $1,664 $ 14,516 Gross profit 3,644 389 4,033 Depreciation and amortization 367 59 426 Interest expense 271 20 291 Restructuring and asset impairment charges 3,619 -- 3,619 Pre tax profit (loss) from continuing operations (8,748) 57 (8,689) Additions to property, plant and equipment 57 25 82 Total assets devoted $ 51,279 $1,404 $ 52,683 ======== ====== ========
Barry Comfort ------------------- Thirteen weeks ended North June 28, 2003 America Europe Total ------- ------ ----- Net sales $ 16,959 $2,057 $19,016 Gross profit 6,156 297 6,453 Depreciation and amortization 392 14 406 Restructuring and asset impairment charges -- -- -- Interest expense, net 282 15 297 Pre tax loss from continuing operations (3,471) (391) (3,862) Additions to property, plant and equipment 651 - 651 Total assets devoted $ 89,418 $6,499 $95,917 ======== ====== =======
Page 9 R. G. BARRY CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Under Item 1 of Part I of Form 10-Q for the periods ended July 3, 2004 and June 28, 2003 - continued (in thousands, except per share data) 9. During 2003, the Company sold certain assets of its Vesture thermal products subsidiary. Selected financial data relating to the discontinued operations follows:
Thirteen weeks ended Twenty-six weeks ended -------------------- ---------------------- July 3, June 28, July 3, June 28, 2004 2003 2004 2003 ---- ---- ---- ------- Net sales $ -- $ 878 $ -- $ 1,759 ===== ===== ==== ======= Gross profit -- 97 -- 57 Selling, general and administrative (2) 392 (2) 1,686 Income (loss) on sale of certain assets relating to discontinued operations 14 (223) 14 (223) ----- ----- ---- ------- Income (loss) from discontinued operations before income tax 16 (363) 16 (1,745) Income tax benefit -- 196 -- 660 ----- ----- ---- ------- Income (loss) from discontinued operations net of income tax $ 16 $(390) $ 16 $(1,308) ===== ===== ==== =======
10. Employee Retirement Plans The Company uses a measurement date of September 30 in making the required pension computations on an annual basis. In 2004, the Company has potential pension related payments of $1,617 for unfunded, nonqualified supplemental retirement plans as well as for payments anticipated for the 2003 year and 2004 quarterly estimated contributions into the funded, qualified associate retirement plan. The Company has applied for a deferral of the lump 2003 payment due in September 2004, approximating $747, and is awaiting approval of this application by the Internal Revenue Service. Once approved, this payment anticipated in the contribution projection above for 2004 will be deferred to 2005. During the first six months of 2004, the Company made payments totaling $286 under its qualified retirement plan and its nonqualified supplemental retirement plan. The components of net periodic benefit cost for the retirement plans were:
Thirteen weeks ended Twenty-six weeks ended -------------------- ---------------------- July 3, June 28, July 3, June 28, 2004 2003 2004 2003 ------ -------- ------- ------- Service cost $ -- $ 230 $ 214 $ 461 Interest cost 564 519 1,123 1,085 Expected return on plan assets (506) (504) (1,003) (1,009) Net amortization 31 (20) 159 54 Curtailment loss -- -- 1,128 -- ----- ----- ------- ------- Total pension expense $ 89 $ 225 $ 1,621 $ 591 ===== ===== ======= =======
Page 10 R. G. BARRY CORPORATION AND SUBSIDIARIES ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: The statements in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements, and are based upon information available to the Company on the date of this Report. Our forward-looking statements inherently involve risks and uncertainties that could cause actual results and outcomes to differ materially from those anticipated by our forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, the ability of the Company to close its manufacturing facilities in Mexico in accordance with plan without incurring substantial unplanned cost or delays or experiencing unforeseen labor difficulties; the ability of the Company to substantially increase its sourcing of products from outside North America to replace the products previously manufactured in its own plants in Mexico without incurring substantial unplanned cost and without negatively impacting delivery times or product quality; the continuing willingness of CIT to fund the Company's financing requirements under CIT's discretionary factoring and financing arrangement with the Company; the Company's ability to reduce its inventory levels in accordance with its plan; the continued demand for the Company's products by its customers and the continuing willingness of its customers and suppliers to support the Company as it implements its new business plan; the ability of the Company generally to successfully implement its new business plan; the unexpected loss of key management; and the impact of competition on the Company's market share. Other risks to the Company's business are detailed in our previous press releases, shareholder communications and Securities Exchange Act filings including our Annual Report on Form 10-K for the fiscal year ended January 3, 2004. Except as required by applicable law, we do not undertake to update the forward-looking statements contained in this Quarterly Report on Form 10-Q to reflect new information that becomes available after the date hereof. Introduction The following discussion and analysis provides investors and others with information that management believes to be necessary for an understanding of our financial condition and results of operations and cash flows and should be read in conjunction with the consolidated financial statements and notes to consolidated financial statements and other information found in this Quarterly Report on Form 10-Q. Critical Business Issues During the fiscal year 2004, management is focused on several key issues - implementation of our new business plan, inventory management and liquidity. New Business Plan With the assistance of experienced turnaround consultants, we developed a new business model that we believe should significantly reduce operating costs by simplifying our product offering and focusing our business on a core customer base that represented approximately 70% of our 2003 revenues. The key components of our new business plan and the actions we have already taken or expect to take in 2004 are as follows: - - We have employed an experienced turnaround professional as the President and CEO on an interim basis. - - We are streamlining our management structure and seeking to reduce selling, general and administrative costs to a lower level that is more consistent with our simplified business model. Page 11 Management's Discussion and Analysis of Financial Condition and Results of Operations - continued Critical Business Issues - continued - - We have reduced costs by closing our Mexican manufacturing facilities during the second quarter of 2004 and we are relying upon third party contract manufacturers in China and other locations outside North America to manufacture our products. - - We intend to further reduce operating costs through the closure of our operations support office in San Antonio, Texas by the end of 2004. The staff at this facility primarily supports our operations in Mexico. Some functions performed in San Antonio will be maintained and relocated to our Columbus, Ohio headquarters. As a result of the early termination of the office lease in San Antonio, we currently estimate that additional restructuring charges of approximately $300 thousand, relating to the early lease termination, will be incurred during the last half of 2004. - - We expect to reduce our inventory levels from year-end 2003 levels. We concluded that the actions contemplated by the 2004 business plan were necessary to materially reduce and eventually eliminate the operating losses incurred in 2002 and 2003. Because the business plan will result in substantial changes in the way in which we have done business for many years, we recognize that the implementation of the business plan carries business risks, which have been discussed in the section captioned "Risk Factors" in Item 7 of our Annual Report on Form 10-K for the fiscal year ended January 3, 2004. Implementation of the business plan has resulted in significant costs in the form of severance payments and asset write-downs, and is expected to result in additional such costs during the second half of 2004. (See also Note 7 of Notes to Consolidated Financial Statements.) In part due to these costs and write-downs, we expect to report an operating loss in 2004. 2004 Liquidity Based on the actions being taken in 2004 to create a lower-cost, more efficient business model, as described above, and the new CIT Facility, as described below under "CIT Credit Facility", management believes that there should be sufficient liquidity and capital resources to fund our operations through the balance of fiscal 2004, including our anticipated restructuring costs. Although our restructuring involves cash outlays, the majority of the 2004 restructuring costs are expected to be non-cash in nature and we expect that our plans to reduce inventory should generate additional cash flow. We recognize that the implementation of our new business plan presents business risks, and as discussed, we can give no assurance of the plan's success. However, we believe that the new business model, once implemented, should give the Company a reasonable opportunity to return to profitability, although that will not occur in 2004. Critical Accounting Policies and Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires that we make certain estimates. These estimates can affect our reported revenues, expenses and results of operations, as well as the reported values of certain of our assets and liabilities. Making estimates about the impact of future events has been a generally accepted practice for nearly all companies in nearly all industries for many years. We make these estimates after gathering as much information from as many resources, both internal and external to our organization, as are available to us at the time. After reasonably assessing the conditions that exist at the time, we make estimates and prepare our financial reports. We make these estimates in a consistent manner from period to period, based upon historical trends and conditions, and after review and analysis of current events and conditions. Management believes that these estimates reasonably reflect the current assessment of the financial impact of events that may not become known with certainty until some time in the future. Page 12 Management's Discussion and Analysis of Financial Condition and Results of Operations - continued Critical Accounting Policies and Use of Estimates - continued A summary of the more critical of these accounting policies requiring management estimates follows: a) We recognize revenue when goods are shipped from our warehouses distribution points to our customers and title passes. In certain circumstances, we have made arrangements with customers that provide for returns, discounts, promotions and other incentives. At the time we recognize revenue, we reduce our measurement of revenue by an estimated cost of potential future returns and allowable retailer promotions and incentives, and recognize a corresponding reduction in the amount of accounts receivable. As a result of the rapidly changing retail environment and the ever-changing economic environment, it is possible that returns or retailer promotions and incentives could be different than anticipated. Accordingly, we have identified this estimate as one requiring significant management judgement. Where appropriate, we also estimate an amount for the potential of doubtful accounts as a result of bad debts. b) We value inventories using the lower of cost or market method, based upon a standard costing method. We evaluate our inventories for any impairment in realizable value in light of the prior selling season, the economic environment, and our expectations for the upcoming selling seasons, and we provide appropriate write-downs under the circumstances. As of July 3, 2004, we estimated that the standard cost valuation of our inventory exceeded the estimated net realizable value of that inventory by $2.3 million, compared with a similar estimate made as of June 28, 2003 of $1.2 million. c) We make an assessment of the amount of income taxes that will become currently payable or recoverable for the just concluded period and what deferred tax costs or benefits will become realizable for income tax purposes in the future as a result of differences between results of operations as reported in conformity with accounting principles generally accepted in the United States and the requirements of the increasingly complex income tax codes existing in the various jurisdictions where we operate. In evaluating the future usability of our deferred and recoverable tax assets, we are relying on our capacity for refund of federal income taxes due to our tax loss carry-back position, and on projections of future profits. As a result of our cumulative losses, we have determined that it is uncertain when and whether the deferred tax assets we had recognized on our consolidated balance sheet will have realizable value in future years. Accordingly, we have fully reserved the value of those deferred tax assets. Should our profits improve in future years, such that those deferred tax items become realizable as deductions in future years, we will recognize that benefit, by reducing our reported tax expense in future years, once their realization becomes assured. d) We record accounts receivable net of allowances for potential future returns, allowable retailer promotions and incentives, anticipated discounts, and where appropriate allowances for doubtful accounts. Allowances for doubtful accounts are determined through analysis of the aging as of the date of the consolidated financial statements, assessments of collectibility based on historic trends and an evaluation of economic conditions. Costs associated with potential returns of products as well as allowable customer markdowns and operational chargebacks, net of expected recoveries, are included as a reduction to net sales and are part of the provision for allowances. These provisions are based upon seasonal negotiations and historic deduction trends, net expected recoveries and the evaluation of current market conditions. With the new CIT Facility in 2004, our exposure to bad debts is greatly diminished. e) We account for the CIT Facility as a financing facility in recognizing and recording trade receivables. For financial statement purposes, the factoring of receivables under the CIT Facility is not considered a sale of receivables. As such, the amounts advanced by CIT are considered short-term loans and are included within short-term notes payable on the accompanying consolidated balance sheet. Page 13 Management's Discussion and Analysis of Financial Condition and Results of Operations - continued Critical Accounting Policies and Use of Estimates - continued f) We make estimates of the future costs associated with restructuring plans related to operational changes that we have announced. As of July 3, 2004, we had an accrued balance of $2.0 million relating to the estimated future costs of closing or reorganizing certain operations, as previously outlined. As of June 28, 2003, we had an accrued balance of $720 thousand for similar restructuring and reorganization activities. Should the actual costs of these activities exceed these estimates, the excess costs will be recognized in the period in which such costs occur. Conversely, should the costs of such restructuring be less than the amounts estimated, future periods would benefit by that difference. g) In addition, there are various other accounting policies, which also require some judgmental input by management. We believe that we have followed these policies consistently from year to year, period to period. For an additional discussion of all of our significant accounting policies, the reader may refer to Note 1 of the Notes to Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended January 3, 2004. Actual results may vary from these estimates as a result of activities after the period end estimates have been made, and those subsequent activities will have either a positive or negative impact upon the results of operations in a period subsequent to the period when we originally made the estimate. Liquidity and Capital Resources As of the end of the second quarter of 2004, we had $10.1 million in net working capital. This compares with $35.4 million at the end of the second quarter of 2003, and $25.8 million at fiscal year-end 2003. The declines in net working capital from the end of the second quarter of 2003 and from fiscal year-end 2003 to the end of the second quarter of 2004 are primarily the result of the net losses we have incurred during the periods. The primary components of net working capital have changed as follows: - - Net accounts receivable decreased from $14.9 million at the end of the second quarter of 2003, to $8.4 million at the end of the second quarter of 2004. A portion of the decrease in accounts receivables reflects the $4.5 million decrease in net sales during the second quarter of 2004 compared with the same quarter in 2003. Accounts receivable at the end of the second quarter of 2004 increased by $1.3 million from $7.1 million at the end of fiscal 2003, representing a seasonal pattern of changes in receivables. - - Inventories ended the second quarter of 2004 at $32.1 million compared with $43.7 million one year ago, and $32.8 million as of the end of fiscal 2003. Compared with one year ago, there is a decrease in aggregate raw materials and work in process inventories from period to period of approximately $7.4 million, and an approximate $4.2 million decrease in finished goods inventory. This is consistent with our new business model - eliminating our production in Mexico and purchasing finished goods from third parties in China and elsewhere. The amount of inventory has also decreased from the end of fiscal 2003 by $655 thousand, consistent with our new business operating model. - - We ended the second quarter of 2004 with $1.6 million in cash and cash equivalents, compared with $3.7 million at the end of the second quarter of 2003. At the end of fiscal 2003, we had $2.0 million in cash and cash equivalents. At the end of the second quarter of 2004, we had borrowed $18.5 million in short-term notes from CIT plus $2.2 million against a life insurance policy insuring one of the Company's former executives, compared with $18 million in short-term notes borrowed from our bank at the end of the second quarter of 2003. In addition, at the end of the second quarter of 2003, there was an outstanding balance of $4.3 million due the Metropolitan Life Insurance Company under an existing 9.7% Long Term Note which the we repaid late in March 2004. The increase in short-term borrowings at the end of the second quarter of 2004 compared with the end of the second quarter of 2003, is primarily related to the losses that we incurred during the second half of 2003 and the first half of 2004. At the end of fiscal 2003 there were $2.0 million in short-term bank borrowings outstanding. Page 14 Management's Discussion and Analysis of Financial Condition and Results of Operations - continued Net capital expenditures during the first half of 2004 amounted to $59 thousand compared with $1.6 million during the first half of 2003. All expenditures in both years were funded out of working capital. As we transition from a manufacturing business model to an outsourcing model for procuring our finished goods products, we expect capital expenditures in future periods will continue at less than historic levels. CIT Credit Facility On March 29, 2004, we entered into a new factoring and financing agreement (the "CIT Facility") with The CIT Group/Commercial Services, Inc. ("CIT"). On March 30, 2004, we borrowed under the CIT Facility approximately $10.3 million to repay all outstanding indebtedness under our Revolving Credit Agreement ("Revolver") with Huntington National Bank ("Huntington") and related charges, and the Revolver was terminated. In addition, on that date, we borrowed approximately $2.3 million under the CIT Facility to repay all outstanding indebtedness under our Note Agreement with the Metropolitan Life Insurance Company and that agreement was terminated. The CIT Facility provides us with advances in a maximum amount equal to the lesser of (i) $35 million or (ii) a Borrowing Base (as defined in the CIT Facility). The CIT Facility is a discretionary facility, which means that CIT is not contractually obligated to advance us funds. The Borrowing Base, which is determined by CIT in its sole discretion, is determined on the basis of a number of factors, including the amount of our eligible accounts receivable and the amount of our qualifying inventory, subject to the right of CIT to establish reserves against availability as it deems necessary. The CIT Facility also includes a $3 million subfacility for the issuance of letters of credit that is counted against the maximum borrowing amount discussed above. Our obligations under the CIT Facility are secured by a first priority lien and mortgage on substantially all of our assets, including accounts receivable, inventory, intangibles, equipment, intellectual property and real estate. In addition, we have granted to CIT a pledge of the stock in our U.S. wholly owned subsidiaries. The subsidiaries have guaranteed our indebtedness under the CIT Facility. As part of the CIT Facility, we entered into a factoring agreement with CIT, under which CIT will purchase accounts receivable that meet CIT's eligibility requirements. The purchase price for the accounts is the gross face amount of the accounts, less factoring fees (discussed below), discounts available to our customers and other allowances. The factoring agreement provides for a factoring fee equal to 0.50% of the gross face amount of all accounts receivable factored by CIT, plus certain customary charges. For accounts outside the United States, we will pay an additional factoring fee of 1% of the gross face amount. For each 30 day period that an account exceeds 60 days unpaid, we must pay an additional fee of 0.25% of the gross face amount. The minimum factoring commission fee per year is $400,000 and if the fees paid throughout the year do not meet this minimum, CIT will charge us for the difference. We also agreed to pay CIT's expenses incurred in connection with negotiation of the CIT Facility, as well as fees for preparing reports, wire transfers, setting up accounts and other administrative services. Page 15 Management's Discussion and Analysis of Financial Condition and Results of Operations - continued Amounts outstanding under the CIT Facility bear interest at the prime rate as announced by JPMorgan Chase Bank ("Prime Rate") plus 1% (averaging 5% throughout the second quarter of 2004; increasing to 5.25% effective July 1, 2004 and as of the end of the second quarter on July 3, 2004). Interest is charged as of the last day of each month, and any change in the Prime Rate will take effect the first month following the change in the Prime Rate. Upon entering into the CIT Facility, we paid to CIT an initial facility set-up fee of $262,500. The term of the CIT Facility is for a period of three years. As of July 3, 2004, the outstanding balance under the CIT Facility was $18.5 million. The amount available to borrow under the CIT Facility changes daily, and we estimate that there was $4.0 million available to borrow under the CIT Facility as of July 3, 2004. For financial statement purposes, the factoring of receivables under the CIT Facility is not considered a sale of receivables. As such, the amounts advanced by CIT are considered short-term loans and are included within short-term notes payable on the accompanying consolidated balance sheet. We expect to meet our liquidity requirements for the remainder of 2004 from internally generated funds and borrowings under the CIT Facility. The amount of credit available under the CIT Facility is based, in part, on accounts receivable so that the adequacy of the CIT Facility in meeting our liquidity requirements will depend on the our sales results during the remainder of 2004. As discussed below in "Results of Operations-Continuing Operations," our net sales in the first half of 2004 declined by 16.4% as compared to net sales in the first half of 2003. This reduction resulted, in part, from our customers' concerns about our publicly announced liquidity concerns very early in 2004 and our introduction of new return policies which limit the magnitude of returned merchandise from our customers. Other Short-Term Debt Early in March 2004, we borrowed $2.2 million against the cash surrender value of life insurance policies insuring one of our former key executives. This $2.2 million indebtedness is classified within short-term notes payable in the accompanying consolidated balance sheet. Other Long-Term Indebtedness Effective January 1, 2002, the 15% duty imposed by the United States on slippers made in Mexico was eliminated. The slipper tariff had been scheduled for reduction at the rate of 2.5% per year until the scheduled elimination on January 1, 2008. We utilized third parties to assist us in obtaining this tariff relief. Upon the successful conclusion, we agreed to pay an aggregate of approximately $6.25 million, mostly in equal quarterly installments over a four-year period through the end of 2005. For accounting purposes, a portion of the payment to the consultants has been treated as debt and a portion of the payment has been treated as an imputed interest charge associated with that debt. The net present value of this four-year obligation, which is subordinated to our other obligations, is included within current installments and long-term debt at its discounted present value totaling $2.1 million as of the end of the second quarter of 2004. Off Balance Sheet Arrangements There have been no material changes in our "Off Balance Sheet Arrangements" and "Contractual Obligations" since the end of fiscal 2003, other than routine lease payments, the repayment of the Metropolitan Note, cancellation of the Revolver, and obtaining the CIT Facility, as noted above. Page 16 Management's Discussion and Analysis of Financial Condition and Results of Operations - continued Results of Operations - Continuing Operations During the second quarter of 2004, net sales amounted to $14.5 million, approximately $4.5 million less than net sales of $19.0 million during the same quarter in 2003. For the first half of 2004, net sales amounted to $32.9 million, compared with $39.4 million during the first half of 2003. Substantially all of the net sales decline both in the quarter and for the first half occurred in Barry Comfort North America, with a smaller portion attributable to Barry Comfort Europe. (See also Note 8 of Notes to Consolidated Financial Statements for selected segment information.) A portion of the decline in Barry Comfort North America net sales occurred in our branded Dearfoams(R) line of slippers for men and women, with smaller offsetting increases in our net sales to our mass merchandising customers. We believe that this overall reduction in net sales was attributable, in part, to our customers' concern about our publicly announced liquidity concerns early in 2004 and our introduction of new return policies which limit the magnitude of returned merchandise accepted from our customers. Gross profit during the second quarter of 2004, amounted to $4.0 million, or 27.8 percent of net sales. This compares with gross profit of $6.5 million, or 33.9 percent of net sales, in the same quarter of 2003. For the six months, gross profit as a percent of net sales was 29.0 percent in 2004 compared with 34.4 percent in 2003. The most significant portion of the decline in gross profit dollars is the result of the decrease in net sales for the periods, while a portion of the decline is the result of a change in sales mix. During 2004, a greater proportion of sales was made through the mass merchandising channels of distribution with relatively fewer sales of the Company's branded Dearfoams(R); in addition, during 2004, we sold more closeout merchandise than in prior periods, also adversely impacting gross profit. Selling, general and administrative expenses during the second quarter amounted to $8.9 million, about $1.2 million lower than the same quarter one year ago. For the six months, these expenses amounted to $20.1 million, compared with $21.6 million for the same six months last year. The decrease in these expenses reflects the initial efforts of reducing the size of the business under the new business operating model as we reduce our dependence upon manufacturing and transition to a company dependent upon third parties and the importation of merchandise. During the second quarter of 2004, we recognized $3.6 million in restructuring and asset impairment charges, and during the first six months, we have recognized a total of $11.9 million in restructuring and asset impairment charges. These charges relate to the decisions during the first six months of 2004 to close all of the manufacturing operations in Mexico and begin to source all of our product needs from third party manufacturers in China. This compares with a $200 thousand asset impairment charge during the first six months of 2003. (See also Note 7 of Notes to Consolidated Financial Statements for added information relating to restructuring and asset impairment charges.) As a part of the closing of our Mexican manufacturing operations, we engaged a firm to conduct a public auction of a substantial portion of our manufacturing equipment. The auction was conducted in early August 2004. We also engaged the services of The Meridian Group ("Meridian") to assist us in identifying auction firms that could successfully market and sell our equipment in Mexico. Our acting Chief Executive Office, Thomas Von Lehman, is currently on leave from Meridian, and Mr. Von Lehman's spouse is the President and sole owner of Meridian. We expect to pay Meridian a fee at their normal and customary rates for providing such services. Page 17 Management's Discussion and Analysis of Financial Condition and Results of Operations - continued Net interest expense decreased slightly during the second quarter from 2003 to 2004, although net interest expense increased for the six months from 2003 to 2004. During the second quarter of 2004, net interest expense amounted to $291 thousand compared with $297 thousand during the second quarter of 2003. During 2004, we have borrowed relatively more under the CIT facility than we did during 2003 using the Revolving Credit Agreement that was in effect at that time. Also in 2004 the average interest rate charged under the CIT Facility is approximately 1 percent greater than under the Revolver. The decline in interest expense during the second quarter is largely due to the early repayment of the Metropolitan Note on March 30, 2004, which carried a coupon interest rate of 9.7% replacing that with funding under the CIT Facility at 5 percent. For the second quarter of 2004, we incurred a net loss of $8.9 million, or $0.91 per diluted share, compared with a net loss incurred during the second quarter of 2003 of $2.8 million, or $0.29 per diluted share. For the first six months of 2004, we incurred a net loss of $23.1 million, compared with a net loss of $6.7 million in 2003, including a net loss from discontinued operations of $1.3 million in 2003. Page 18 ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk Market Risk Sensitive Instruments - Foreign Currency We have historically transacted business in a number of foreign countries. Our primary foreign currency net cash outflows historically have occurred in Mexico. We have not hedged anticipated foreign currency net cash outflows in the Mexican Peso, as the Peso generally has declined in value over time, when compared with the U. S. Dollar. With our new business plan as discussed elsewhere, our foreign currency exposure in Mexican Pesos has diminished for future periods. Our primary foreign currency net cash inflows have been generated from Canada. At times, we have employed a foreign currency hedging program utilizing currency forward exchange contracts for anticipated net cash inflows from Canada. Under this program, increases or decreases in local operating revenue as measured in U. S. Dollars are partially offset by realized gains and losses on hedging instruments. The goal of the hedging program is to fix economically the exchange rates on projected foreign currency net cash flows. Foreign currency forward contracts are not used for trading purposes. All foreign currency contracts are marked-to-market and unrealized gains and losses are included in the current period's calculation of net income. Because not all economic hedges qualify as accounting hedges, unrealized gains and losses may be recognized in net income (loss) in advance of the actual projected net foreign currency cash flows. This often results in a mismatch between accounting gains and losses and transactional foreign currency net cash flow gains and losses. We believe that the impact of foreign currency forward contracts has not been material to our financial condition or results of operations. During the twenty-six weeks ended July 3, 2004, we have had no foreign currency exchange contracts. ITEM 4 - Controls and Procedures Evaluation of Disclosure Controls and Procedures With the participation of the interim President and Chief Executive Officer (the principal executive officer) and the Senior Vice President-Finance, Chief Financial Officer, Secretary and Treasurer (the principal financial officer) of R. G. Barry Corporation ("R. G. Barry"), R. G. Barry's management has evaluated the effectiveness of R. G. Barry's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), as of the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, R. G. Barry's interim President and Chief Executive Officer and R. G. Barry's Senior Vice President-Finance, Chief Financial Officer, Secretary and Treasurer have concluded that: (a) information required to be disclosed by R. G. Barry in this Quarterly Report on Form 10-Q would be accumulated and communicated to R. G. Barry's management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure; (b) information required to be disclosed by R. G. Barry in this Quarterly Report on Form 10-Q would be recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms; and (c) R. G. Barry's disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that material information relating to R. G. Barry and its consolidated subsidiaries is made known to them, particularly during the period in which this Quarterly Report on Form 10-Q is being prepared. Changes in Internal Control Over Financial Reporting There were no changes in R. G. Barry's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during R. G. Barry's fiscal quarter ended July 3, 2004, that have materially affected, or are reasonably likely to materially affect, R. G. Barry's internal control over financial reporting. Page 19 PART II - OTHER INFORMATION Item 1. Legal Proceedings On June 8, 2004, R. G. Barry Corporation ("R. G. Barry") received a "30-day letter" from the Internal Revenue Service ("IRS") proposing certain adjustments which, if sustained, would result in an additional tax obligation approximating $4 million plus interest. The proposed adjustments relate to the years 1998 through 2002. Substantially all of the proposed adjustments relate to the timing of certain deductions taken during that period. On July 7, 2004, R. G. Barry submitted to the IRS a letter protesting the proposed adjustments. R. G. Barry intends to vigorously contest the proposed adjustments. Item 2. Changes in Securities and Use of Proceeds (a) through (d) not applicable (e) R. G. Barry did not purchase any of its common shares during the quarterly period ended July 3, 2004. R. G. Barry does not currently have in effect a publicly announced repurchase plan or program. Item 3. Defaults Upon Senior Securities (a), (b) not applicable Item 4. Submission of Matters to a Vote of Security Holders (a) R. G. Barry's Annual Meeting of Shareholders (the "Annual Meeting") was held on May 27, 2004. At the close of business on the record date, April 1, 2004, 9,836,602 common shares were outstanding and entitled to vote at the Annual Meeting. At the Annual Meeting, 9,179,029, or 93.3% of the outstanding common shares entitled to vote, were represented in person or by proxy. (b) Director elected at the Annual Meeting, for three-year term, was: Edward M. Stan For: 8,230,406 Withheld: 948,623 Broker non-votes: none Other directors whose terms of office continued after the Annual Meeting: Christian Galvis Roger E. Lautzenhiser David P. Lauer Janice Page Harvey A. Weinberg Gordon Zacks (c) See Item 4(b) for the voting results for directors Proposal to adopt amendments to Article IV of the Company's Code of Regulations to clarify and separate the roles of officers: For: 9,083,176 Against: 75,575 Abstain: 23,278 Broker non-votes: none (d) Not Applicable Item 5. Other Information No response required Page 20 PART II - OTHER INFORMATION - continued Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: See Index to Exhibits on page 22. (b) Reports on Form 8-K: On April 5, 2004, R. G. Barry Corporation ("R. G. Barry") furnished information to the SEC on a Current Report on Form 8-K dated that same date, reporting under "Item 12. Results of Operations and Financial Condition" that on April 2, 2004, R. G. Barry issued a news release reporting operating results for the fiscal year ended January 3, 2004. On May 18, 2004, R. G. Barry furnished information to the SEC on a Current Report on Form 8-K dated that same date, reporting under "Item 12. Results of Operations and Financial Condition" that on May 17, 2004, R. G. Barry issued a news release reporting operating results for its first quarter ended April 3, 2004. On June 9, 2004, R. G. Barry filed a Current Report on Form 8-K, dated June 8, 2004, reporting that it had issued a news release announcing that the New York Stock Exchange ("NYSE") will suspend trading in the Company's shares prior to the market opening on June 14, 2004 and NYSE will apply to the SEC to delist the Company's shares. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. R. G. BARRY CORPORATION ------------------------------------ Registrant Date: August 16, 2004 /s/ Daniel D. Viren ------------------------------------ Daniel D. Viren Senior Vice President - Finance, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer) (Duly Authorized Officer) Page 21 R. G. BARRY CORPORATION INDEX TO EXHIBITS
Exhibit No. Description Location - ----------- ----------- -------- 3.1 Certificate adopting amendments to Code of Regulations of Filed herewith R. G. Barry Corporation (shareholders' action on May 27, 2004) 3.2 Code of Regulations of R. G. Barry Corporation (reflects Filed herewith all amendments through May 27, 2004) 10.1 R. G. Barry Corporation Supplemental Benefit Plans Trust Filed herewith (effective as of September 1, 1995) 31.1 Rule 13a-14(a)/15d-14(a) Certification (Principal Filed herewith Executive Officer) 31.2 Rule 13a-14(a)/15d-14(a) Certification (Acting Principal Filed herewith Financial Officer) 32.1 Section 1350 Certifications (Principal Executive Officer Filed herewith and Principal Financial Officer)
Page 22 EX-3.1 2 l08995aexv3w1.txt EX-3.1 EXHIBIT 3.1 Certificate regarding adoption of Amendments to Article IV of the Code of Regulations of R. G. Barry Corporation by the shareholders on May 27, 2004 The undersigned hereby certifies that he is the duly elected, qualified and acting Secretary of R. G. Barry Corporation (the "Company"); and that the amendments to the Company's Code of Regulations set forth below were duly adopted by the shareholders of the Company at the 2004 Annual Meeting of Shareholders duly called and held on May 27, 2004: (i) amend the first two sentences of Article IV, Section 1 to read "The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also choose a Chairman of the Board, a Chief Executive Officer, one or more Vice-Presidents, Assistant Secretaries, Assistant Treasurers and other officers."; (ii) delete current Sections 4 and 5 of Article IV and replace them in their entirety with the new Sections 4, 5 and 6 set forth below; and (iii) renumber existing Sections 6 through 11 of Article IV as Sections 7 through 12, respectively. The text of new Sections 4, 5 and 6 would read as follows: Section 4. Chairman of the Board. The Chairman of the Board, if there shall be one, shall preside at all meetings of the directors and of the shareholders. He shall perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Regulations or by the Board of Directors. Section 5. Chief Executive Officer. The Chief Executive Officer, if there shall be one, shall have, subject to the control of the Board of Directors, general supervision of and management over the business of the Corporation and over its officers and employees and shall see that all orders and resolutions of the Board of Directors are carried into effect. Except where by law the signature of the President is required, the Chief Executive Officer shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. The Chief Executive Officer shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Regulations or by the Board of Directors. Section 6. President. The President of the Corporation shall have, subject to the control of the Board of Directors and the Chief Executive Officer, if there shall be one, general and active supervision of and management over the business of the Corporation and over its officers and employees and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these Regulations, the Board of Directors, the Chief Executive Officer or the President. The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Regulations or by the Board of Directors. IN WITNESS WHEREOF, the undersigned has signed this Certificate this 16th day of August, 2004. /s/ Daniel D. Viren ----------------------------------------- Daniel D. Viren Senior Vice President - Finance, Chief Financial Officer, Secretary and Treasurer EX-3.2 3 l08995aexv3w2.txt EX-3.2 EXHIBIT 3.2 R. G. BARRY CORPORATION CODE OF REGULATIONS (reflects all amendments through May 27, 2004) ARTICLE I OFFICES Section 1. The principal office of the Corporation shall be in Pickerington, Ohio. Section 2. The Corporation may also have offices at such other places both within and without the State of Ohio as the Board of Directors may from time to time determine. ARTICLE II MEETINGS OF SHAREHOLDERS Section 1. Place of Meetings. Meetings of the shareholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Ohio, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. The Annual Meetings of shareholders shall be held in accordance with Section 1 of this Article, at which meetings the shareholders shall elect the Board of Directors, and transact such other business as may properly be brought before the meeting. Section 3. Special Meetings. Unless otherwise prescribed by law or by the Articles of Incorporation, special meetings of shareholders may be called by the Chairman of the Board, the President, the directors by action at a meeting or a majority of the directors acting without a meeting, or by persons who hold shares of Voting Stock (as such term is defined in subparagraph 111(H) of Article SEVENTH of the Articles of Incorporation) representing fifty percent of the vote entitled to be cast by the holders of all then outstanding shares of Voting Stock. Upon the request in writing delivered either in person or by registered mail to the President or Secretary by any persons entitled to call a special meeting of shareholders, such officer shall forthwith cause notice to be given to the shareholders entitled thereto. If such notice is not given within fifteen days after the delivery or mailing of such request, then the persons making such request may call a meeting by giving notice in the manner provided in these Regulations. Section 4. Notice. Written notice of either an annual or a special meeting stating the time, place and purposes of the meeting shall be given, either by personal delivery or by mail, not less than seven nor more than sixty days before the date of the meeting to each shareholder of record entitled to notice of the meeting. Such notice may be given by or at the direction of the President, any Vice-President or the Secretary. If mailed, such notice shall be addressed to the shareholder at his address as it appears on the records of the Corporation. Notice of adjournment of a meeting need not be given if the time and place to which it is adjourned are fixed and announced at such meeting. Section 5. Waiver of Notice. Notice of the time, place and purposes of any meeting of shareholders may be waived in writing, either before or after the holding of such meeting, by any shareholder entitled to such notice. Such written waiver shall be filed with or entered upon the records of the meeting. Any shareholder who attends a meeting without protesting the lack of proper notice thereof, either prior to or at the commencement of such meeting, shall be deemed to have waived notice of such meeting. Section 6. Action Without a Meeting. Unless otherwise provided by the Articles of Incorporation, any action which may be authorized or taken at a meeting of shareholders may be authorized or taken without such a meeting with the affirmative vote or a written approval of all the shareholders entitled to notice of such meeting. Such written approval shall be filed with or entered upon the records of the Corporation. Section 7. Quorum. Except as otherwise provided by law or by the Articles of Incorporation or these Regulations, the holders of a majority of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock, voting together as a single class, present in person or represented by proxy and entitled to vote thereat, shall constitute a quorum at all meetings of the shareholders for the transaction of business. No action required by law, the Articles of Incorporation or these Regulations to be authorized or taken by the holders of a designated proportion of shares of any particular class or of each class, may be authorized or taken by a lesser proportion. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. Section 8. Voting. Except as otherwise provided by law or by the Articles of Incorporation or these Regulations, any issue brought before any meeting of shareholders shall be decided by the vote of the holders of a majority of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock, voting together as a single class, present in person or by proxy, and entitled to vote at such meeting. Except as otherwise provided in the Articles of Incorporation, each holder of any share of any class or series of Voting Stock of the Corporation represented at a meeting of shareholders shall be entitled to cast, for each share of such class or series of Voting Stock of the Corporation entitled to vote thereat held by such shareholder, such number of votes as shall be authorized by the Articles of Incorporation for each share of such class or series of Voting Stock. Such votes may be cast in person or by proxy appointed by a writing signed by such person. A telegram or cablegram appearing to have been transmitted by such person or a photographic, photostatic, or equivalent reproduction of a writing appointing a proxy shall be a sufficient writing. No appointment of a proxy shall be valid after the expiration of eleven months after it is made unless the writing specifies the date on which it is to expire or the length of time it is to continue in force. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of shareholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 9. List of Shareholders Entitled to Vote. Upon request of any shareholder at any meeting of shareholders, there shall be produced at such meeting an alphabetically arranged list, or classified lists, of the shareholders of record as of the record date of such meeting, who are entitled to vote, showing their respective addresses and the number and class of shares held by each. Such list or lists when certified by the officer or agent in charge of the transfers of shares shall be prima-facie evidence of the facts shown therein. ARTICLE III Directors Section 1. Number, Election and Authority of Directors. The number of directors will be fixed in accordance with the Articles of Incorporation. Except where the law, the Articles of Incorporation or these Regulations require any action to be authorized or taken by shareholders, all of the authority of the Corporation shall be exercised by the directors. The directors shall be elected at the annual meeting of shareholders and except as provided in the Articles of Incorporation, each director shall hold office until the next annual meeting of the shareholders and until his successor is elected and qualified, or until his earlier removal from office or death. When the annual meeting is not held or directors are not elected thereat, they may be elected at a special meeting called for that purpose. Directors need not be shareholders. Directors may be removed from office in accordance with the provisions of the Articles of Incorporation. For their own government the directors may adopt by-laws not inconsistent with the Articles of Incorporation or these Regulations. Section 2. Meetings of Directors and Notice. Unless otherwise provided in the Articles of Incorporation or these Regulations, and subject to the exceptions, applicable during an emergency as that term is defined in Section 1701.01 of the Ohio Revised Code, for which provision is made in Division (F) of Section 1701.11 of the Ohio Revised Code, both regular and special meetings of the directors may be called by the Chairman of the Board, the President, any Vice-President, or any two directors. Such meetings may be held at any place within or without the State of Ohio and, may be held through any communications equipment if all persons participating can hear each other and participation in a meeting pursuant to this Section shall constitute presence at such meeting. Written notice of the time and place of each meeting of the directors shall be given to each director either by personal delivery or by mail, telegram or cablegram at least two days before the meeting, which notice need not specify the purposes of the meeting. Notice of adjournment of a meeting need not be given if the time and place to which it is adjourned are fixed and announced at such meeting. Section 3. Waiver of Notice. Notice of the time and place of any meeting of directors may be waived in writing, either before or after holding such meeting, by any director entitled to such notice. Such written waiver shall be filed with or entered upon the records of the meeting. The attendance by any director at any meeting of directors, without protesting, prior to or at the commencement of the meeting, the lack of proper notice, shall be deemed to be a waiver by such director of notice of such meeting. Section 4. Committees. The Board of Directors may, by resolution or resolutions passed by a majority of the entire Board, designate from among its members an executive committee and one or more committees, each committee to consist of three or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these Regulations, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, but no such committee shall have the power .or authority to fill vacancies in the Board of Directors or in any committee. An act or authorization of an act by any such committee within the authority delegated to it shall be as effective for all purposes as the act or authorization of the Board. Each committee shall keep regular minutes and report to the Board of Directors when required. Section 5. Quorum. Unless otherwise provided in the Articles of Incorporation and subject to the exceptions applicable during an emergency, as that term is defined in Section 1701.01 of the Ohio Revised Code, for which provision is made in Division (F) of Section 1701.11 of the Ohio Revised Code, a majority of the whole authorized number of directors is necessary to constitute a quorum for a meeting of the directors. The act of a majority of the directors present at a meeting at which a quorum is present is the act of the Board of Directors. Section 6. Actions of Board. Unless otherwise provided by the Articles of Incorporation or these Regulations, any action which may be authorized or taken at any meeting of the Board of Directors, or of any committee thereof, may be authorized or taken without a meeting with the affirmative vote or approval of, and in a writing or writings signed by all the members of the Board of Directors or committee, as the case may be, who would be entitled to notice of a meeting of the Board of Directors or committee, as the case may be, held for such purpose, which writing or writings shall be filed with the minutes of proceedings of the Board of Directors or committee. Section 7. Compensation. The Board of Directors by the affirmative vote of a majority of those in office, and irrespective of any financial or personal interest of any of them, shall have authority to establish reasonable compensation, which may include pension, disability, and death benefits, for services to the Corporation by directors and officers, or to delegate such authority to one or more officers or directors. Section 8. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial or personal interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith reasonably justified by such facts, authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved at a meeting of the shareholders held for such purpose by the affirmative vote of the holders of shares entitling them to exercise a majority of the voting power of the Corporation held by persons not interested in the contract or transaction; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV OFFICERS Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board (who must be a director), a President, a Secretary and a Treasurer. The board of Directors, in its discretion, may also choose one or more Vice-Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law, the Articles of Incorporation or these Regulations to be acknowledged, executed or verified by two or more officers. The officers of the Corporation need not be shareholders of the Corporation nor, except in the case of the Chairman of the Board, need such officers be directors of the Corporation. Section 2. Election. The Board of Directors at its first meeting held after each annual meeting of shareholders shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any officer may be removed with or without cause by the directors without prejudice to the contract rights of such officer. The election or appointment of an officer for a given term, or a general provision in the Articles of Incorporation or these Regulations or the by-laws, if any, shall not be deemed to create contract rights. Section 3. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board, if there be one, by the President, any Vice-President, the Secretary or the Treasurer, and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. The Corporation shall not, directly or indirectly, vote any shares issued by it, and such shares shall not be considered as outstanding for the purpose of computing the voting power of the Corporation or of shares of any class. Section 4. Chairman of the Board. The Chairman of the Board, if there shall be one, shall preside at all meetings of the directors and of the shareholders. He shall perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Regulations or by the Board of Directors. Section 5. Chief Executive Officer. The Chief Executive Officer, if there shall be one, shall have, subject to the control of the Board of Directors, general supervision of and management over the business of the Corporation and over its officers and employees and shall see that all orders and resolutions of the Board of Directors are carried into effect. Except where by law the signature of the President is required, the Chief Executive Officer shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. The Chief Executive Officer shall also perform such other duties and may exercise such other powers as from time to time may be assigned to his by these Regulations or by the Board of Directors. Section 6. President. The President of the Corporation shall have, subject to the control of the Board of Directors and the control of the Chief Executive Officer, if there shall be one, general and active supervision of and management over the business of the Corporation and over its officers and employees and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation any sign and execute documents when so authorized by these Regulations, the Board of Directors, the Chief Executive Officer or the President. The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Regulations or by the Board of Directors. Section 7. Vice-Presidents. At the request of the President or in his absence or in the event of his inability or refusal to act (and if there be no Chairman of the Board), the Vice-President or the Vice-Presidents if there is more than one (in the order designated by the Board of Directors) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the and have such other powers as the Board of Directors from time to time may prescribe. If there be no Chairman of the Board and no Vice-President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Section 8. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of shareholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the shareholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 9. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 10. Assistant Secretaries. Except as may be otherwise provided in these Regulations, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board, the President, any Vice-President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 11. Assistant Treasurers. Except as may be otherwise provided in these Regulations, Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chairman of the Board, the President, any Vice-President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 12. Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. ARTICLE V SHARES Section 1. Form of Certificates. Every holder of shares in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board, the President or a Vice-President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the number and class of shares owned by him in the Corporation. Every certificate shall state that the Corporation is organized under the laws of Ohio, the name of the person to whom the shares represented by the certificates are issued, the number of shares represented by the certificate, and if the shares are classified, the designation of the class, and the series, if any, of the shares represented by the certificate. There shall also be stated on the face or back of the certificate the express terms, if any, of the shares represented by the certificate and of the other class or classes and series of shares, if any, which the Corporation is authorized to issue, or a summary of such express terms, or that the Corporation will mail to the shareholder a copy of such express terms without charge within five days after receipt of written request therefor, or that a copy of such express terms is attached to and by reference made a part of such certificate and that the Corporation will mail to the shareholder a copy of such express terms without charge within five days after receipt of written request therefor if the copy has become detached from the certificate. In case of any restriction on transferability of shares or reservation of lien thereon, the certificate representing such shares shall set forth on the face or back thereof the statements required by the General Corporation Law of Ohio in order to make such restrictions or reservations effective against a transferee of such shares. No certificate for shares shall be executed or delivered until such shares are fully paid. Section 2. Signatures. When a certificate for shares is countersigned, whether by manual or facsimile signature, by an incorporated transfer agent or registrar, the signature of Many officer of the Corporation authorized to sign such a certificate may be facsimile, engraved, stamped, or printed. Although any officer of the Corporation, transfer agent or registrar whose manual or facsimile signature is affixed to such a certificate ceases to be such officer, transfer agent or registrar before the certificate is delivered, such certificate nevertheless shall be effective in all respects when delivered. Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of shares to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfers. Shares of the Corporation shall be transferable in the manner prescribed by law and by these Regulations. Transfers of shares shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued. Section 5. Record Date. (a) For any lawful purpose, including, without limitation, the determination of the shareholders who are entitled to: (1) receive notice of or to vote at a meeting of shareholders; (2) receive payment of any dividend or distribution; (3) receive or exercise rights of purchase of or subscription for, or exchange or conversion of, shares or other securities, subject to contract rights with respect thereto; or (4) participate in the execution of written consents, waivers, or releases; the directors may fix a record date which shall not be a date earlier than the date on which the record date is fixed and, in the cases provided for in Clauses (1), (2) and (3) above, shall not be more than sixty days, unless the Articles of Incorporation or these Regulations specify a shorter or a longer period for such purpose, preceding the date of the meeting of the shareholders, or the date fixed for the payment of any dividend or distribution, or the date fixed for the receipt or the exercise of rights, as the case may be. (b) If a meeting of the shareholders is called by persons entitled to call the same, or action is taken by shareholders without a meeting, and if the directors fail or refuse, within such time as the persons calling such meeting or initiating such other action may request, to fix a record date for the purpose of Clause (1) or (4) of Paragraph (a) of this Section, then the persons calling such meeting or initiating such other action may fix a record date for such purpose, subject to the limitations set forth in Paragraph (a) of this Section. (c) The record date for the purpose of Clause (1) of Paragraph (a) of this Section shall continue to be the record date for all adjournments of such meeting, unless the directors or the persons who shall have fixed the original record date shall, subject to the limitations set forth in Paragraph (a) of this Section, fix another date, and in case a new record date is so fixed, notice thereof and of the date to which the meeting shall have been adjourned shall be given to shareholders of record as of said date in accordance with the same requirements as those applying to a meeting newly called. (d) The directors may close the share transfer books against transfers of shares during the whole or any part of the period provided for in Paragraph (a) above, including the date of the meeting of the shareholders and the period ending with the date, if any, to which adjourned. (e) If no record date is fixed therefor, the record date for determining the shareholders who are entitled to receive notice of, or who are entitled to vote at, a meeting of shareholders, shall be the date next preceding the day on which notice is given, or the date next preceding the day on which the meeting is held, as the case may be. (f) The record date for a change of shares shall be the time when the certificate of amendment or of amended Articles of Incorporation effecting such change is filed in the office of the Secretary of State. Section 6. Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE VI GENERAL PROVISIONS Section 1. Dividends. The Board of Directors may, from time to time, declare, and the Corporation may pay, dividends on its outstanding shares in cash, property or its own shares pursuant to law and subject to the provisions of the Articles of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of directors may from time to time designate. Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Ohio". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 5. Amendments. Except as otherwise provided by law, the Articles of Incorporation or these Regulations, these Regulations may be adopted, amended or repealed in whole or in part or new Regulations may be adopted by the affirmative vote of the holders of a majority of the votes entitled to be cast by the holders of all then outstanding shares of Voting Stock, voting together as a single class, present in person or represented by proxy and entitled to vote in respect thereof, at an annual meeting or any special meeting duly called. EX-10.1 4 l08995aexv10w1.txt EX-10.1 EXHIBIT 10.1 R. G. BARRY CORPORATION SUPPLEMENTAL BENEFIT PLANS TRUST (Effective as of September 1, 1995) This Trust Agreement is hereby created effective as of September 1, 1995, by and between R. G. Barry Corporation ("Company") and Harry Miller ("Trustee"). WITNESSETH: WHEREAS, the Company has adopted and maintains the supplemental retirement benefit plans as described in Appendix A to this Trust Agreement, which plans are collectively referred to herein as the "Supplemental Plans"; WHEREAS, the Supplemental Plans are not tax-qualified plans under section 401 of the Internal Revenue Code of 1986, and the applicable regulations thereunder, as the same may be amended ("Code"), and the Supplemental Plans are designed to provide supplemental retirement benefits ("Supplemental Benefits"), including supplemental deferred compensation, supplemental retirement benefits, and a restoration of benefits limited by Code limitations which are applicable to the R. G. Barry Corporation Salaried Employees' Pension Plan; WHEREAS, the Company desires to establish a trust ("Trust" or "Trust Fund") and to contribute to the Trust assets that shall be held therein, subject to the claims of the Company's creditors in the event of the Company's Insolvency (as herein defined) until paid to the participants and their beneficiaries under the Supplemental Plans ("Trust Beneficiaries") in such manner and at such times as specified in the Supplemental Plans; WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Supplemental Plans as unfunded plans maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, and the applicable regulations thereunder, as the same may be amended ("ERISA"); WHEREAS, it is the intention of the Company to make, at its discretion, contributions to the Trust to provide itself with a source of funds to assist it in meeting its obligations under the Supplemental Plans; and WHEREAS, the Trustee desires to accept the Trust established under this Trust Agreement and to act as Trustee thereunder; NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: ARTICLE I. ESTABLISHMENT OF TRUST 1.1 INITIAL TRUST DEPOSIT Subject to the claims of its creditors as set forth in Article III, the Company hereby deposits with the Trustee in trust Ten Dollars ($10.00) which shall become part of the principal of the Trust to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. 1.2 PERMANENCE The Trust hereby established is revocable by the Company; it shall become irrevocable upon a Change of Control, as defined herein. 1.3 GRANTOR TRUST The Trust is intended to be a grantor trust, of which the Company is the grantor, within the meaning of subpart E, part I, subchapter 1, subtitle A of the Code, and shall be construed accordingly. The Company agrees to report all items of income and deduction of the Trust on its own income tax returns, and shall have no right to any distributions from the Trust or any claim against the Trust for funds necessary to pay any income taxes with respect to amounts so reported. 1.4 EXCLUSIVE BENEFIT The principal of the Trust and any earnings thereon shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes herein set forth. Neither the Trust Beneficiaries nor the Supplemental Plans shall have any preferred claim on, or any beneficial ownership interest in, any assets of the Trust prior to the time such assets are paid to the Trust Beneficiaries as provided in Article II, and all rights created under the Supplemental Plans and this Trust Agreement shall be mere unsecured contractual rights of the Trust Beneficiaries against the Company. Any assets held by the Trust will be subject to the claims of the Company's general creditors under Federal and state law in the event of Insolvency, as defined in Section 3.1. 1.5 ADDITIONAL TRUST DEPOSITS The Company may at any time, or from time to time, make additional deposits of cash or other property in trust with the Trustee to augment the principal to be held, administered and disposed of by the Trustee as provided in this Trust Agreement. Unless there is a Change of Control, any such additional deposits shall be made within the sole discretion of the Company. Neither the Trustee nor any Trust Beneficiary shall have any right to compel such additional deposits. Upon a Change of Control, the Company shall, as soon as possible, but in no event longer than 60 days following the Change of Control, as defined herein, make an irrevocable contribution to the Trust in an amount that is sufficient to pay each Trust Beneficiary the benefits to which Trust Beneficiaries would be entitled pursuant to the terms of the Supplemental Plan(s) as of the date on which the Change of Control occurred. The Trustee or any Trust Beneficiary shall have the right to compel such deposits immediately following a Change of Control or in subsequent years, as described below. Within 180 days following the end of each Plan Year following a Change of Control, the Company shall be required to irrevocably deposit additional cash or other property to the Trust in an amount sufficient to pay each Trust of Beneficiary the benefits payable pursuant to the terms of the Supplemental Plan(s) with respect to such Plan Year. 1.6 PAYMENT OF TAXES The Company shall from time to time pay any and all taxes which at any time are lawfully levied or assessed upon or become payable with respect to the Trust Fund, the income or any property forming a part thereof, or any security transaction pertaining thereto. The Company may contest the validity of any such taxes. 1.7 STATUS OF SUPPLEMENTAL PLANS The Supplemental Plans are intended to be "unfunded" and maintained "primarily for the purposes of providing supplemental benefits for a select group of management or highly compensated employees" for purposes of ERISA. As such, it is intended that the Supplemental Plans are not to be subject to those provisions of Title I of ERISA for which they are eligible for exemption due to their status. The existence of this Trust is not intended to alter said characterization of the Supplemental Plans. 1.8 ADDITIONAL PLANS The Company may from time to time add other supplemental plans to the list of plans intended to be covered by the Trust. The Company may also delete plans from such list unless there has been a Change of Control, as defined herein. Any such addition or deletion shall be made by an amendment to Appendix A, and the plans so listed in Appendix A from time to time shall be the "Supplemental Plans" as covered by this Trust Agreement. ARTICLE II. PAYMENTS TO TRUST BENEFICIARIES WHEN THE COMPANY IS NOT INSOLVENT 2.1 SUPPLEMENTAL BENEFIT PAYMENTS At all times when the Company is not Insolvent, the Trustee shall, upon the direction of the Company, make payments of Supplemental Benefits to Trust Beneficiaries from the assets of the Trust, if and to the extent such assets are available for distribution, in accordance with the Supplemental Plans. The Company may make payment of benefits directly to Trust Beneficiaries as they become due under the terms of the Supplemental Plan(s). In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Supplemental Plan(s), the Company shall make the balance of each such payment as it falls due. The entitlement of a Trust Beneficiary to Supplemental Benefits shall be determined by the Company or such party as it shall designate under the Supplemental Plans, and any claim for such Supplemental Benefits shall be considered and reviewed under the procedures set out in the Supplemental Plans. 2.2 INSUFFICIENT TRUST ASSETS If the Trust assets are not sufficient to make payments of Supplemental Benefits to the Trust Beneficiaries in accordance with the Supplemental Plans, the Trustee shall so notify the Company. In such event, it is intended that the Company will then make payments in accordance with the Supplemental Plans. 2.3 DISCHARGE OF PAYMENT OBLIGATION Any payments made by the Trustee to the Trust Beneficiaries shall be in discharge of the Company's obligations under the Supplemental Plans; provided, however, that the Company shall remain liable to the Trust Beneficiaries for all amounts due under the Supplemental Plans to the extent not paid by the Trustee. ARTICLE III. TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARIES WHEN THE COMPANY IS INSOLVENT 3.1 INSOLVENCY The Company shall be considered "Insolvent" for purposes of this Trust Agreement if -- (a) the Company is unable to pay its debts as they become due, or (b) the Company is the subject of a pending proceeding as a debtor under the United States Bankruptcy Code (or any successor Federal statute). At all times during the continuance of this Trust, the principal and income of the Trust shall be subject to claims of general creditors of the Company under federal and state law as set forth below. 3.2 DETERMINATION OF INSOLVENCY The Board of Directors and the Chief Executive Officer of the Company shall have the duty to promptly inform the Trustee in writing of the Company's Insolvency. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent, the Trustee shall independently determine, within 60 days after receipt of such notice, whether the Company is Insolvent. The Trustee may employ attorneys, accountants and other advisers to make such determination and may rely conclusively on their conclusions. The expenses of such determination shall be allowed as administrative expenses of the Trust. 3.3 DISCONTINUANCE OF BENEFIT PAYMENTS Upon written notification of the Company's Insolvency by the Board of Directors and Chief Executive Officer of the Company pursuant to Section 3.2, or pending its determination of whether the Company is Insolvent, the Trustee shall discontinue payment of Supplemental Benefits to the Trust Beneficiaries, and shall hold the Trust Fund for the benefit of the Company's general creditors, after payment of amounts authorized in Article IX. The Trustee shall continue the investment of the Trust Fund in accordance with Article V, and shall make payments out of the Trust Fund to the Company's general creditors only in accordance with instructions from a court of competent jurisdiction or from a person appointed by such a court. 3.4 RESUMPTION OF BENEFIT PAYMENTS The Trustee shall resume payments of Supplemental Benefits to the Trust Beneficiaries in accordance with Article II of this Trust Agreement only after the Trustee has determined that the Company is not Insolvent, the Trustee has determined that the Company is no longer Insolvent, or a court of competent jurisdiction orders the resumption of such payments. The Trustee shall have the discretion to determine which of the above alternatives is appropriate to the situation. 3.5 DUTY TO INQUIRE Unless notified of the Company's Insolvency pursuant to Section 3.3, the Trustee shall have no duty to inquire whether the Company is Insolvent. The Trustee may in all events rely on such evidence concerning the Company's solvency as may be furnished to the Trustee which will give the Trustee a reasonable basis for making a determination concerning the Company's solvency. Nothing in this Trust Agreement shall in any way diminish any rights of Trust Beneficiaries to pursue their rights as general creditors of the Company with respect to Supplemental Benefits or otherwise. 3.6 SUSPENDED PAYMENTS If the Trustee discontinues payments of Supplemental Benefits from the Trust pursuant to Section 3.3 and subsequently resumes such payments, the first payment following such discontinuance shall include the aggregate amount of all payments which would have been made to the Trust Beneficiaries in accordance with the Supplemental Plans during the period of such discontinuance, unless the Company otherwise directs. ARTICLE IV. PAYMENTS TO THE COMPANY 4.1 REVERSION AFTER SATISFACTION OF LIABILITIES The Company shall have no right or power to direct the Trustee to return to the Company or to divert to others any of the Trust assets before all payments of Supplemental Benefits to the Trust Beneficiaries pursuant to the Supplemental Plans. If it is determined through actuarial valuation that certain Trust assets will clearly never be required to pay Supplemental Benefits to the Trust Beneficiaries, the Trustee, upon written notification by the Company of such determination, shall return such excess assets to the Company. ARTICLE V. INVESTMENT OF TRUST FUND 5.1 TYPES OF INVESTMENTS Except for money and other property subject to the investment responsibility of an investment manager as provided in Section 5.4, and subject to Section 5.2, the Trustee shall, in its discretion, invest and reinvest the assets of the Trust, without distinction between principal and income, in any property, real, personal or mixed, wherever situated, and whether or not productive of income, including, without limitation, domestic or foreign, common and preferred stocks, mutual funds, common trust funds, bonds, notes, debentures, securities convertible into common stock, leaseholds, mortgages (including, without limitation, any collective or part interest in any bond and mortgage or note and mortgage), interest-bearing accounts and certificates of deposit (including those within its own banking department or within a Federally insured institution which may be affiliated with the Trustee), oil, mineral or gas properties, royalties, interests or rights (including equipment pertaining thereto), equipment trust certificates, investment trust certificates, savings bank deposits, commercial paper, and insurance contracts (including those to which amounts may be deposited and withdrawn). The Trustee shall, at the direction of the Company, purchase life insurance and/or annuity contracts including group annuity contracts providing flexible funding or similar vehicles or for the investment of assets in separate accounts, invested in any securities and other property including real estate, regardless of whether or not the insurance carrier shall have assumed any contractual or other liability as to the benefits to be provided thereunder, the value thereof, or the return therefrom. Such life insurance and/or annuity contracts shall be considered investments of the Trust Fund and, together with all rights, privileges, options and elections contained therein, shall vest in the Trustee but shall be exercised, assigned or otherwise disposed of as directed by the Company. The insurance carrier under any such contract shall have full responsibility for the management and control of the assets held thereunder. 5.2 INVESTMENT POLICIES The Board of Directors of the Company shall have the right at any time and in its discretion to formulate investment policies and standards for the investment of the Trust Fund. Such policies and standards may include, among other things, the percentage of the Trust Fund which may be invested in fixed income securities, the percentage of the Trust Fund which may be invested in common stocks, and the percentage of the Trust Fund which may be invested in the securities of any one company. Such policies may be changed from time to time by resolution of the Board, or by any committee or administrator acting with respect to the Supplemental Plans, as designated by the Board. Any statement of investment policies and standards promulgated by the Board of Directors shall be provided in writing to the Trustee, and the Trustee may rely on such statement until such time as it receives written notice of any change in such policies and standards from the Company. 5.3 GENERAL POWERS OF THE TRUSTEE The Trustee, in addition to and not in modification or limitation of all of its common law and statutory authority, shall be authorized and empowered, in its discretion (except as provided in Section 5.4), to exercise any and all of the following rights, powers and privileges with respect to any cash, securities or other properties held by the Trustee in Trust hereunder: (a) To sell any such property at such time and upon such terms and conditions as the Trustee deems appropriate. Such sales may be public or private, for cash or credit, or partly for cash and partly for credit, and may be made without notice or advertisement of any kind. (b) To exchange, mortgage, or lease any such property and to convey, transfer or dispose of any such property on such terms and conditions as the Trustee deems appropriate. (c) To grant options for the sale, transfer, exchange or disposal of any such property. (d) To exercise all voting rights pertaining to any securities; and to consent to or request any action on the part of the issuer of any such securities; and to give general or special proxies or powers of attorney with or without power of substitution. (e) To consent to or participate in amalgamations, reorganizations, recapitalizations, consolidations, mergers, liquidations, or similar transactions with respect to any securities, and to accept and to hold any other securities issued in connection therewith. (f) To exercise any subscription rights or conversion privileges with respect to any securities held in the Trust Fund. (g) To collect and receive any and all money and other property of whatsoever kind or nature due or owing or belonging to the Trust Fund and to give full discharge thereof; and to extend the time of payment of any obligation at any time owing to the Trust Fund, as long as such extension is for a reasonable period, and continues at reasonable interest. (h) To cause any securities or other property to be registered in, or transferred to, the individual name of the Trustee or in the name of one or more of its nominees, or one or more nominees of any system for the centralized handling of securities, or it may retain them unregistered and in form permitting transferability by delivery; but the books and records of the Trust shall at all times show that all such investments are a part of the Trust Fund. (i) To organize under the laws of any state a corporation for the purpose of acquiring and holding title to any property which it is authorized to acquire under this Trust Agreement and to exercise with respect thereto any or all of the powers set forth in this Trust Agreement. (j) To manage, operate, repair, improve, develop, preserve, mortgage or lease for any period any real property or any oil, mineral or gas properties, royalties, interest or rights held by it directly or through any corporation, either alone or by joining with others, using other Trust assets for any of such purposes; to modify, extend, renew, waive or otherwise adjust any or all of the provisions of any such mortgage or lease; and to make provision for amortization of the investment in or depreciation of the value of such property. (k) To settle, compromise, or submit to arbitration any claims, debts or damages due or owing to or from the Trust; to commence or defend suits or legal proceedings whenever, in its judgment, any interest of the Trust requires it; and to represent the Trust in all suits or legal proceedings in any court of law or equity or before any other body or tribunal, insofar as such suits or proceedings relate to any property forming part of the Trust Fund or to the administration of the Trust Fund. (l) To borrow money from others for the purposes of the Trust, but the Trustee shall not be authorized to borrow any money from its banking department or from the Company or any subsidiary or associated company. (m) To employ such agents and counsel, including attorneys, accountants, actuaries, and investment managers, as may be reasonably necessary in managing and protecting the Trust Fund and to pay them reasonable compensation. (n) To purchase, hold and sell interests or units of participation in any collective or common trust fund established by the Trustee, including any such funds which may be established in the future. (o) Generally to do all acts, whether or not expressly authorized, which the Trustee deems necessary or desirable, but acting at all times according to the principles expressed in Articles V and VIII. 5.4 INVESTMENT RESPONSIBILITIES The Company may (but need not) appoint an Investment Manager or Managers to manage (including the power to acquire and dispose of) all or any of the assets of the Trust Fund. In the event of any such appointment, the Company shall establish the portion of the assets of the Trust Fund which shall be subject to the management of the Investment Manager and shall so notify the Trustee in writing. Likewise, the Company may establish that all or a portion of the assets of the Trust Fund shall be subject to the investment jurisdiction of the Company itself and shall advise the Trustee of such determination. With respect to such assets over which either an Investment Manager or the Company has investment responsibility, the Investment Manager or the Company shall possess all of the investment and administrative power and responsibilities granted to the Trustee hereunder, including the power to hold the indicia of ownership of any investment in a collective trust fund, and the Trustee shall invest and reinvest such assets pursuant to the written directions of the Investment Manager or the Company. If the Company so directs, an Investment Manager shall have the power to acquire and dispose of assets in the name of the Trust. The investment jurisdiction of the Company may be exercised in any manner consonant with its duties as a fiduciary, including -- (a) directing the Investment Manager or the Trustee that certain investments or types of investments be made or liquidated; (b) directing the Investment Manager or the Trustee that certain investments or types of investments not be made; and (c) requiring that the Trustee or the Investment Manager obtain approval prior to acquiring or disposing of any asset. The Trustee shall have no investment responsibility with respect to the assets subject to the investment responsibility of an Investment Manager or the Company, and shall have no duty to inquire into the direction of such Investment Manager or the Company, to solicit such directions nor to review and follow the investments made pursuant to any such direction, other than to the extent provided by law. 5.5 COMPANY STOCK The Company may from time to time contribute its common stock or other securities to be held in the Trust. The Trustee may invest in securities or obligations issued by the Company. All rights associated with any such Company stock or securities shall be exercised by the Trustee at the direction of the Company. ARTICLE VI. DISPOSITION OF INCOME 6.1 TRUST INCOME During the term of this Trust, all income received by the Trust, net of any expenses and taxes properly paid from the Trust Fund, shall be accumulated and reinvested. ARTICLE VII. ACCOUNTING BY THE TRUSTEE 7.1 MAINTENANCE OF TRUST RECORDS The Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be done, including all such specific records as shall be agreed upon in writing between the Company and the Trustee. All such accounts, books and records shall be open to inspection and audit at all reasonable times by any person designated by the Company. Within 60 days following the close of each calendar year and within 60 days after the removal or resignation of the Trustee, the Trustee shall deliver to the Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being show separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. ARTICLE VIII. RESPONSIBILITY OF THE TRUSTEE 8.1 STANDARD OF CARE The Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; provided, however, that the Trustee shall incur no liability to anyone for any action taken pursuant to a direction, request, or approval given by the Company which is contemplated by, and in conformity with, the terms of the Supplemental Plans or this Trust Agreement, and to that extent shall be relieved of the prudent man rule for investments. 8.2 DUTY AS TO LITIGATION The Trustee shall not be required to undertake or to defend any litigation arising in connection with this Trust Agreement, unless it be first indemnified by the Company against its prospective costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto, and the Company hereby agrees to indemnify the Trust Fund for such costs, expenses and liability. 8.3 RETENTION OF COUNSEL The Trustee may consult with legal counsel (who may also be counsel for the Trustee generally, or for the Company) with respect to any of its duties or obligations hereunder, and shall be fully protected in acting or refraining from acting in accordance with the advice of such counsel. 8.4 EXTENT OF TRUSTEE'S POWERS The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power, except as otherwise provided herein, to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor the Trustee, or to loan to any person the proceeds of any borrowing against such policy. General powers of the Trustee are described in Section 5.3. 8.5 INDEMNIFICATION The Trustee shall be indemnified and held harmless by the Company against and from any and all loss, cost, liability, or expense (including any attorneys' fees and court costs) that may be imposed upon or reasonably incurred by the Trustee in connection with or resulting from any claim, action, suit, or proceeding to which the Trustee may be a party or in which the Trustee may be involved by reason of any action taken or failure to act under this Trust and against and from any and all amounts paid by the Trustee in settlement (with the Company's written approval) or paid by the Trustee in satisfaction of a judgment in any such action, suit, or proceeding. The foregoing provision shall not be applicable to any Trustee if the loss, cost, liability, or expense is due to such Trustee's willful misconduct. Such indemnity shall include all claims and liabilities arising from any breach of fiduciary responsibility by a fiduciary other that the Trustee, unless the Trustee -- (a) knowingly participates in, or knowingly undertakes to conceal, an act or omission of such other fiduciary, knowing such act or omission is a breach; (b) by its failure to act in accordance with 8.1 in the administration of its specific responsibilities which give rise to its status as a fiduciary, has enabled such other fiduciary to commit a breach; or (c) has knowledge of a breach by such other fiduciary, unless it makes reasonable efforts under the circumstances to remedy the breach. The performance by the Trustee of trades, custody, reporting, recording and bookkeeping with respect to assets managed by another fiduciary shall not be deemed to give rise to any participation or knowledge on the part of the Trustee. Such indemnification shall survive the amendment or termination of the Trust Agreement or the resignation or removal of the Trustee and shall be construed as a contract between the Company and the Trustee under the laws of the State of Ohio. 8.6 LIMITATION OF POWERS Notwithstanding any powers granted to the Trustee pursuant to this Trust Agreement or under applicable law, the Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Code. 8.7 ACTION BY THE TRUSTEE When more than one individual and/or entity serves as Trustee, action by the trustees shall be determined by the majority of the trustees. Such action shall be binding upon all parties at interest. The individuals and/or entities who collectively act as Trustee may act by vote at a meeting or by writing without a meeting. Any act of more than one individual or entity serving as Trustee shall be sufficiently evidenced if certified to by one of the individuals or entities serving as Trustee, and, if there is more than one individual and/or entity serving as Trustee, one of the trustees may be given authority to perform all administrative and ministerial duties. Any individual who serves as Trustee hereunder may be an employee of the Company. ARTICLE IX. COMPENSATION AND EXPENSES OF THE TRUSTEE 9.1 COMPENSATION AND EXPENSES The Trustee, unless such Trustee is also an employee of the Company, shall be entitled to receive such reasonable compensation for its services as shall be agreed upon by the Company and the Trustee. The Trustee shall also be entitled to receive its reasonable expenses incurred with respect to the administration of the Trust, including fees incurred by the Trustee pursuant to Article VIII of this Trust Agreement. Such compensation and expenses shall be payable by the Company, but if not paid by the Company, shall constitute a charge against the Trust and shall be withdrawn by the Trustee from the Trust. ARTICLE X. RESIGNATION AND REMOVAL OF TRUSTEE 10.1 RESIGNATION OR REMOVAL The Trustee may be removed at any time upon 30 days' written notice by the Company. The Trustee may resign at any time, upon 30 days' written notice to the Company. Such advance notification may be accepted within a shorter time period as agreed to by the parties. 10.2 CHANGE OF CONTROL Notwithstanding any Trust provisions to the contrary, upon a Change of Control, as defined herein, Trustee may not be removed by Company for five years. If Trustee resigns or is removed within five years of a Change of Control, as defined herein, Trustee shall select a successor Trustee in accordance with the provisions of Section 10.4(b) hereof prior to the effective date of Trustee's resignation or removal. 10.3 SETTLEMENT OF TRUST ACCOUNTS Upon its resignation or removal, the Trustee, with the written consent of the Company, may reserve such amounts as it deems necessary for the payment of any outstanding taxes or other liabilities of the Trust Fund and its reasonable fees and expenses in connection with the settlement of its accounts. Any balance of such reserve remaining after the payment of such taxes, liabilities, fees, and expenses shall be paid over to the successor Trustee within 60 days after receipt of notice of resignation, removal, or transfer, unless the Company extends the time limit. 10.4 APPOINTMENT OF SUCCESSOR (a) If the Trustee resigns or is removed in accordance with Section 10.1 hereof, the Company may appoint any one or more individuals or third parties as a successor to replace the Trustee upon resignation or removal. If no such appointment has been made, the Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of the Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the Company or the successor Trustee to evidence the transfer. (b) If the Trustee resigns or is removed pursuant to the provisions of Section 10.2 hereof and selects a successor Trustee, the Trustee may appoint any third party such as a bank trust department or other party that may be granted corporate trustee powers under state law, as long as such successor is independent and not subject to the control of the Company. The appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee. The new Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer. 10.5 ACTS OF PRIOR TRUSTEE The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to the provisions herein. The successor Trustee shall not be responsible for any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. ARTICLE XI. AMENDMENT OR TERMINATION OF TRUST AGREEMENT 11.1 AMENDMENT OR TERMINATION This Trust Agreement may be amended any time and in any manner by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, no such amendment shall alter Section 11.2, conflict with the terms of the Supplemental Plans, or make the Trust revocable after it has become irrevocable in accordance with Section 1.2 hereof. In addition, Sections 1.5, 1.8, 10.2, and 10.4 of this Trust Agreement may not be amended by the Company for five years following a Change of Control, as defined herein. 11.2 LIMITATION ON TERMINATION The Trust shall not terminate prior to the time that all Supplemental Benefits have been paid under the Supplemental Plans. 11.3 REMAINING TRUST ASSETS Upon termination of the Trust as provided in Section 11.2, any assets remaining in the Trust shall be returned to the Company. ARTICLE XII. SEVERABILITY AND ALIENATION 12.1 SEVERABILITY If any provision of this Trust Agreement is, becomes, or is deemed invalid or unenforceable in any jurisdiction, such provision shall be deemed amended to conform to applicable law as to be valid, legal and enforceable in any jurisdiction so deeming. The validity, legality and enforceability of such provision shall not in any way be affected or impaired in any other jurisdiction; if such provision cannot be so amended without materially altering the intention of the parties, it shall be stricken and the remainder of this Trust Agreement shall remain in full force and effect. 12.2 ALIENATION To the extent permitted by law, Supplemental Benefits payable to Trust Beneficiaries under the Supplemental Plans and this Trust Agreement may not be assigned (either at law or in equity), alienated, or subject to attachment, garnishment, levy, execution or other legal or equitable process. A Trust Beneficiary may not assign or transfer any interest in the Supplemental Benefits due hereunder and shall have no direct interest in or to any Trust asset unless and until paid to such Trust Beneficiary. ARTICLE XIII. MISCELLANEOUS 13.1 GOVERNING LAW This Trust Agreement shall be governed by and construed in accordance with the laws of Ohio. 13.2 EMPLOYMENT CONTRACT This Trust Agreement does not constitute a contract of employment, and it does not give any Trust Beneficiary the right to be retained in the employ of the Company or any affiliate. 13.3 TAX WITHHOLDING The Trustee shall withhold all amounts required by law to be withheld from any payments made pursuant to this Trust Agreement, including any or all amounts required to be withheld by the Code, the Federal Insurance Contribution Act, any state income or other tax act, any applicable city, county or municipality's earnings or income tax act. The Trustee shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld, and paid by the Company. 13.4 REFERENCE TO COMPANY Where appropriate, all references to Company shall refer to any subsidiary or affiliate of the Company designated as a participating employer under any Supplemental Plan; provided, however, that only the Company shall be permitted to amend or terminate the Trust Agreement and to provide any directions to the Trustee as provided herein. 13.5 DESIGNATION OF AUTHORIZED PARTIES The Board of Directors of the Company, or such committee as may properly act on its behalf, may from time to time designate a person, persons or committee to act on its behalf under this Trust Agreement, particularly as regards investment directions and directions regarding the payment of Supplemental Benefits. The Board shall instruct the Trustee in writing as regards any such designation, including the designee's scope of authority to act on its behalf. The Trustee shall be able to rely on the acts of such designated party, provided such reliance is in good faith. 13.6 SUCCESSORS This Trust Agreement shall be binding upon the Company and any successor, direct or indirect, of the Company whether such succession results from a merger, consolidation, liquidation, purchase of securities, acquisition of assets or otherwise. 13.7 TRUSTEE For purposes of this Trust Agreement, the Trustee shall not be deemed an agent, receiver or an assignee of the Company. 13.8 CHANGE OF CONTROL For purposes of this Trust, Change of Control shall mean any of the following events: (a) Any person, entity, or group of persons, within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934 ("Act"), or any comparable successor provisions, purchases or otherwise acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Act) of 20 percent or more of either the outstanding shares of common stock or the combined voting power of the Company's then outstanding voting securities entitled to vote generally; (b) The stockholders of the Company approve a reorganization, merger, or consolidation, in each case, with respect to which persons who were stockholders of the Company immediately prior to such reorganization, merger, or consolidation do not, immediately thereafter, own more than 50 percent of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged, or consolidated Company's then outstanding securities, or the Company is liquidated or dissolved or all or substantially all of the Company's assets are sold; or (c) Individuals who constitute the board of directors of the Company on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least three quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (c), considered as though such person were a member of the Incumbent Board. Notwithstanding anything in the foregoing to the contrary, no Change of Control shall be deemed to have occurred for purposes of this Trust Agreement by virtue of any transaction which results in a Participant or group of Participants acquiring, directly or indirectly, 20 percent or more of the combined voting power of the Company's voting Securities. * * * * * * * * * * IN WITNESS WHEREOF, the Company has caused this Trust Agreement to be executed by its duly authorized officers and the Trustee, to evidence its acceptance of the Trust, has caused this Trust Agreement to be executed effective as of September 1, 1995. COMPANY: R. G. BARRY CORPORATION By /s/ Harry Miller ------------------------------------------------ Vice President of Human Resources By /s/ Richard L. Burrell ------------------------------------------------ Senior Vice President of Finance and Treasurer By /s/ Michael S. Krasnoff ------------------------------------------------ Vice President of Finance and Assistant Treasurer TRUSTEE: HARRY MILLER /s/ Harry Miller APPENDIX A TO THE R. G. BARRY CORPORATION SUPPLEMENTAL BENEFIT PLANS TRUST The following supplemental retirement benefit plans of R. G. Barry Corporation are intended to be covered under the Trust Agreement for the above-referenced Trust: R. G. Barry Corporation Supplemental Retirement Plan (As established effective as of January 1, 1978) R. G. Barry Corporation Restoration Plan (As established effective as of January 1, 1994) R. G. Barry Corporation Deferred Compensation Plan (As established effective as of September 1, 1995) EX-31.1 5 l08995aexv31w1.txt EX-31.1 EXHIBIT 31.1 RULE 13a-14(a) / 15d-14(a) CERTIFICATION I, Thomas M. Von Lehman, certify that 1. I have reviewed this Quarterly Report on Form 10-Q of R. G. Barry Corporation for the quarterly period ended July 3, 2004; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 16, 2004 /s/ Thomas M. Von Lehman ---------------------------------------------------- Printed Name: Thomas M. Von Lehman Title: Interim President and Chief Executive Officer (Principal Executive Officer) EX-31.2 6 l08995aexv31w2.txt EX-31.2 EXHIBIT 31.2 RULE 13a-14(a) / 15d-14(a) CERTIFICATION I, Daniel D. Viren, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of R. G. Barry Corporation for the quarterly period ended July 3, 2004; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 16, 2004 /s/ Daniel D. Viren -------------------------------------------------- Printed Name: Daniel D. Viren Title: Senior Vice President - Finance, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer) EX-32.1 7 l08995aexv32w1.txt EX-32.1 EXHIBIT 32.1 SECTION 1350 CERTIFICATIONS* I, Thomas M. Von Lehman, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Quarterly Report of R. G. Barry Corporation on Form 10-Q for the quarterly period ended July 3, 2004 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of R. G. Barry Corporation. Date: August 16, 2004 By: /s/ Thomas M. Von Lehman * ---------------------------------------------------- Thomas M. Von Lehman, Title: Interim President and Chief Executive Officer (Principal Executive Officer) I, Daniel D. Viren, certify, pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge, the Quarterly Report of R. G. Barry Corporation on Form 10-Q for the quarterly period ended July 3, 2004 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of R. G. Barry Corporation. Date: August 16, 2004 By: /s/ Daniel D. Viren * ---------------------------------------------------- Daniel D. Viren Title: Senior Vice President - Finance, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer) *These certifications are being furnished as required by Rule 13a-14(b) under the Securities Exchange Act of 1934 (the "Exchange Act") and Section 1350 of Chapter 63 of Title 18 of the United States Code, and shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. These certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing. -----END PRIVACY-ENHANCED MESSAGE-----