SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or Section
240.14a-12
Howard B. Wolf, Inc.
- ----------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
Common Stock, par value $.33-1/3 per share
-------------------------------------------------------
(2) Aggregate number of securities to which
transaction applies:
1,056,191
-------------------------------------------------------
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is
calculated and state how it was determined):
$4,400,000.00 (bona fide estimate of distributable cash
after liquidation (per Rule 0-11 (c) (2) (ii))
-------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------
(5) Total fee paid:
$880.00
-------------------------------------------------------
[ X ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------
<PAGE>
HOWARD B. WOLF, INC.
3809 Parry Avenue
Dallas, Texas 75226-1753
(214) 823-9941
_________, 1999
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the
Shareholders of Howard B. Wolf, Inc., a Texas corporation (the
"Company"), to be held at 10:00, a.m. on April ____, 1999 at
__________________ Dallas, Texas __________ (including any
adjournment or postponement thereof, the "Special Meeting").
At the Special Meeting, you will be asked to consider the
advisability of dissolving the Company by adopting a plan to
liquidate the Company and distribute its assets to the
shareholders (the "Plan of Liquidation").
DETAILS OF THE PLAN OF LIQUIDATION APPEAR IN THE
ACCOMPANYING PROXY STATEMENT. PLEASE GIVE THIS MATERIAL YOUR
CAREFUL ATTENTION.
Approval of the Plan of Liquidation requires the affirmative
vote of the holders of at least two-thirds (66-2/3%) of the
Company's issued and outstanding shares of common stock, $0.33-
1/3 par value per share (the "Common Stock"). Each share of the
Common Stock is entitled to one vote on all matters to come
before the Special Meeting. The Common Stock constitutes the only
outstanding class of capital stock of the Company.
It is important that your shares of Common Stock be
represented at the Special Meeting. Whether or not you plan to
attend the Special Meeting, please COMPLETE, SIGN AND DATE the
enclosed proxy card and MAIL it promptly using the enclosed, pre-
addressed, postage-paid, return envelope. If you attend the
Special Meeting, you may revoke the proxy given and vote in
person if you wish, even if you have previously returned your
proxy card. Your prompt attention will be greatly appreciated.
Sincerely,
Howard B. Wolf
Chairman of the Board
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY PROMPTLY.
<PAGE>
HOWARD B. WOLF, INC.
3809 Parry Avenue
Dallas, Texas 75226-1753
(214) 823-9941
____________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL __, 1999
To the Shareholders of Howard B. Wolf, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting (the "Special
Meeting") of Shareholders of Howard B. Wolf, Inc. (the
"Company"), will be held at _____________________________,
Dallas, Texas _____________ at 10:00 a.m. (Dallas, Texas time),
on April __, 1999 for the purpose of considering the advisability
of dissolving the Company by adopting a proposal to liquidate the
Company and distribute its assets to the shareholders. The full
text of the Plan of Complete Liquidation and Dissolution is
attached as Appendix A to the Proxy Statement.
THE SPECIAL MEETING IS BEING CALLED BY THE BOARD OF
DIRECTORS OF THE COMPANY IN ORDER FOR THE SHAREHOLDERS TO
CONSIDER THE ADVISABILITY OF DISSOLVING THE COMPANY BY ADOPTING A
PROPOSAL TO LIQUIDATE THE COMPANY AND DISTRIBUTE ITS ASSETS TO
THE SHAREHOLDERS.
The Board of Directors has fixed the close of business on
___________,1999 as the record date (the "Record Date") for the
determination of the shareholders entitled to notice of, and to
vote at, the Special Meeting or any adjournment thereof. Only
shareholders of record at the close of business on the Record
Date are entitled to notice of, and to vote at, the Special
Meeting. The stock transfer books will not be closed. A list of
shareholders entitled to vote at the Special Meeting will be
available for examination at the offices of the Company for ten
days prior to the Special Meeting. Approval of the Plan of
Liquidation requires the affirmative vote of the holders of at
least two-thirds (66%) of the Company's common stock.
EACH SHAREHOLDER IS CORDIALLY INVITED TO ATTEND THE SPECIAL
MEETING IN PERSON. TO ASSURE REPRESENTATION AT THE SPECIAL
MEETING, HOWEVER, SHAREHOLDERS ARE URGED TO DATE, SIGN AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-
PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER
ATTENDING THE SPECIAL MEETING MAY VOTE IN PERSON EVEN IF HE OR
SHE HAD PREVIOUSLY RETURNED A PROXY CARD.
By Order of the Board of Directors,
Howard B. Wolf
Chairman of the Board
Dallas, Texas
_________, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE PROPOSED
LIQUIDATION OF THE COMPANY.................................. 1
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS.............. 2
THE SPECIAL MEETING.......................................... 3
Time, Date and Place of Special Meeting..................... 3
Purpose of the Special Meeting; Recommendation of
the Board of Directors..................................... 3
Record Date and Outstanding Shares.......................... 4
Intentions to Vote.......................................... 4
Quorum and Voting of Proxies; Revocation.................... 4
Voting Rights............................................... 4
Vote Required............................................... 5
No Dissenters' or Appraisal Rights Under Texas Law.......... 5
Proxy Solicitation and Expenses............................. 5
THE PROPOSED LIQUIDATION..................................... 6
General..................................................... 6
Provision for Liabilities and Claims........................ 7
Estimated Amount Available for Distribution per Share....... 8
Distribution to Shareholders................................ 9
Directors Officers and Indemnification...................... 9
Background of the Proposed Liquidation...................... 9
The Company's Reasons for the Proposed Liquidation;
Recommendation of the Board of Directors................... 11
Interests of Certain Persons in the Proposed Liquidation.... 12
Regulatory Approvals........................................ 12
Material Federal Income Tax Consequences.................... 12
Expenses and Other Fees..................................... 14
Delisting and Deregistration of the Company's
Common Stock............................................... 14
OWNERSHIP OF COMMON STOCK BY MANAGEMENT...................... 15
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY.......... 16
PRO FORMA CONSOLIDATED SELECTED FINANCIAL DATA............... 17
STOCK PERFORMANCE DATA....................................... 18
Market Information.......................................... 18
Recent Market Price......................................... 18
Number of Holders........................................... 18
COMPARATIVE PER SHARE DATA................................... 19
PRO FORMA FINANCIAL DATA..................................... 20
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.............. 23
DEADLINE FOR SHAREHOLDER PROPOSALS........................... 23
MISCELLANEOUS................................................ 24
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE PROPOSED LIQUIDATION
Q. Who is soliciting my proxy?
A. The Board of Directors of Howard B. Wolf, Inc.
Q. Where and when is the Special Meeting?
A. 10:00 a.m., April __, 1999, at _____________________________
Dallas, Texas ____________.
Q. What am I voting on?
A. Management of the Company is seeking the authorization of
the shareholders to liquidate the Company and distribute its
assets to the shareholders through the adoption of the Plan of
Complete Liquidation and Dissolution.
Q. Why should the Company liquidate?
A. The Company has experienced the erosion of its primary
marketplace as more and more independent women's specialty stores
have closed and many remaining stores are placing smaller and
smaller orders. Contributing to this erosion are the
generational and societal buying habits of women. After
extensive research and study, management has determined that
these trends will continue to negatively impact the future
prospects of the Company.
Q. How will the money received from the liquidation be
distributed to the Company's shareholders?
A. After the payment of all of the Company's claims and
obligations, the Company shall distribute pro rata to the
shareholders all available cash. Management currently estimates
that approximately $4,400,000 (or $4.17 per share) will be
available for distribution in connection with the liquidation.
Q. Will shareholders have appraisal rights?
A. No. Shareholders of the Company will not have appraisal
rights as a result of this transaction.
Q. What should shareholders do now?
A. Shareholders should mail their signed and dated proxy card
in the enclosed envelope as soon as possible, so that their
shares will be represented at the shareholders' meeting.
Q. Can shareholders change their vote after they have mailed a
signed proxy card?
A. Yes. Shareholders can change their vote in one of three ways
at any time before their proxies are used. First, shareholders
can revoke their proxies by written notice. Second, shareholders
can complete new, later-dated proxy cards. Third, shareholders
can attend the special shareholders' meeting and vote in person.
Q. How are shares held in a broker's name voted?
A. Brokers will vote shares nominally held in their name (or in
what is commonly called "street name") only if the beneficial
shareholder provides the broker with written instructions on how
to vote. Absent such instructions, these shares will not be
voted. Shareholders are urged to instruct their brokers in
writing to vote shares held in street name for the proposed
transaction.
Q. Whom should shareholders call with questions?
A. The Company shareholders who have questions about the
transaction should call Eugene K. Friesen, the Company's Senior
Vice President and Treasurer, at (972) 823-9941.
Q. Has the Company sought a fairness opinion on the Proposed
Liquidation?
A. No. The Company has not sought a fairness opinion on the
Proposed Liquidation.
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<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements
including statements containing the words "believes,"
"anticipates," "expects," "intends" and words of similar import.
These statements involve known and unknown risks and
uncertainties that may cause the Company's actual results or
outcomes to be materially different from those anticipated and
discussed herein. Important factors that the Company believes
might cause such differences include the amount and nature of
liabilities of or that may be asserted against the Company, the
timing and amount of any distributions to shareholders pursuant
to the Plan of Liquidation, and those specific risks that are
discussed in the cautionary statements accompanying the forward-
looking statements in this Proxy Statement and in the Risk
Factors detailed in the Company's previous filings with the
Securities and Exchange Commission (the "Commission"). In
assessing forward-looking statements contained herein,
shareholders are urged to read carefully all cautionary
statements contained in this Proxy Statement and in those other
filings with the Commission.
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<PAGE>
HOWARD B. WOLF, INC.
3809 Parry Avenue
Dallas, Texas 75226-1753
(214) 823-9941
_________________________
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
THE SPECIAL MEETING
TIME, DATE AND PLACE OF SPECIAL MEETING
This Proxy Statement is being furnished in connection with
the solicitation of proxies by the Board of Directors of Howard
B. Wolf, Inc., a Texas corporation (the "Company") for use at the
Special Meeting of Shareholders to be held at 10:00 a.m. (Dallas,
Texas time) on _______, April __, 1999 at ______________________,
Dallas, Texas ________ and at any meeting held upon adjournment
or postponement thereof (the "Special Meeting").
Copies of this Proxy Statement, the attached Notice of
Special Meeting of Shareholders, and the enclosed form of proxy
are first being mailed to the Company's shareholders on or about
____________, 1999.
PURPOSE OF THE SPECIAL MEETING; RECOMMENDATION OF THE BOARD OF
DIRECTORS
At the Special Meeting, holders of the Company's common
stock, $0.33 1/3 par value per share (the "Common Stock"), will
consider the advisability of dissolving the Company by voting
upon a proposal to approve and adopt the Plan of Complete
Liquidation and Dissolution (the "Plan of Liquidation"), pursuant
to which the Board of Directors of the Company proposes to
liquidate the Company (the "Proposed Liquidation") and distribute
the assets of the Company to the shareholders. A copy of the
Plan of Liquidation has been attached as Appendix A to this Proxy
Statement.
Pursuant to the applicable provisions of the Texas Business
Corporation Act (the "TBCA"), the Company is required to obtain
the affirmative vote of at least two-thirds (66-2/3%) of the
outstanding shares of Common Stock in order to voluntarily
dissolve the Company. Upon the adoption of a resolution of the
shareholders of the Company to adopt the Plan of Liquidation, and
after compliance with the provisions of the TBCA, the Company
shall effect the Proposed Liquidation.
THE BOARD OF DIRECTORS HAS APPROVED THE PLAN OF LIQUIDATION
(SUBJECT TO SHAREHOLDER APPROVAL) AND RECOMMENDS THAT THE COMPANY
BE DISSOLVED.
The Company has made no provision or plan as to what it
would do if the shareholders of at least two-thirds of its common
stock do not vote in favor of the Plan of Liquidation.
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<PAGE>
RECORD DATE AND OUTSTANDING SHARES
The Board of Directors of the Company has fixed the close of
business on ____________, 1999 as the record date (the "Record
Date") for the determination of shareholders entitled to notice
of, and to vote at, the Special Meeting or any adjournment
thereof. Accordingly, only holders of record of the Company's
Common Stock at the close of business on the Record Date will be
entitled to vote at the Special Meeting, either by proxy or in
person. As of the Record Date, there were ____ holders of record
of the Common Stock of the Company and 1,056,191 shares of Common
Stock were issued and outstanding.
INTENTIONS TO VOTE
The directors and executive officers of the Company, who
beneficially hold an aggregate of approximately ________ of the
outstanding shares of Common Stock of the Company, have indicated
their intentions to vote their shares in favor of the Plan of
Liquidation. As of the Record Date, the total number of shares
of Common Stock which these individuals have indicated a desire
to vote equal [453,598] shares of Common Stock. Accordingly,
approval of the Plan of Liquidation by the Company's shareholders
is likely. See "Ownership of Common Stock by Management."
QUORUM AND VOTING OF PROXIES; REVOCATION
The presence at the Special Meeting, in person or by proxy,
of the holders of one-half (50%) of the Company's aggregate
shares of issued and outstanding Common Stock on the Record Date
will constitute a quorum at the Special Meeting. Shares of Common
Stock which are represented by properly executed proxy cards
received by the Company at or prior to the Special Meeting, and
not duly and timely revoked, will be voted according to the
instructions indicated on the proxy card. Unless contrary
instructions are given, the persons named on the proxy card
intend to vote the shares of Common Stock so represented FOR the
Plan of Liquidation.
Any holder of Common Stock has the power to revoke his or
her proxy at any time before it is voted at the Special Meeting
by delivering a written notice of revocation to the Secretary of
the Company, by a duly executed proxy bearing a later date, or by
voting by ballot at the Special Meeting.
Shares represented by proxies that reflect abstentions or
include "broker non-votes" will be treated as shares that are
present and entitled to vote for purposes of determining the
presence of a quorum. In the event that a quorum is not present
at the Special Meeting, it is expected that the meeting will be
adjourned or postponed to solicit additional proxies. The persons
named as proxies with respect to the Special Meeting may propose
and vote for one or more adjournments of the Special Meeting to
permit further solicitation of proxies in favor of the proposals;
provided, however, that no proxy which is voted against the Plan
of Liquidation will be voted in favor of any such adjournment or
postponement.
VOTING RIGHTS
Each share of Common Stock is entitled to one vote on each
matter to be acted upon or which may properly come before the
Special Meeting. The Common Stock constitutes the only
outstanding capital stock of the Company.
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<PAGE>
VOTE REQUIRED
The affirmative vote of the holders of at least two-thirds
(66%) of the issued and outstanding shares of Common Stock on the
Record Date is required to approve the Plan of Liquidation.
Abstentions and "broker non-votes" will have the effect of votes
against approval of the Plan of Liquidation. A broker non-vote
occurs when a nominee holding shares for a beneficial owner does
not vote on a proposal because the nominee does not have
discretionary voting power and has not received instructions from
the beneficial owner.
NO DISSENTERS' OR APPRAISAL RIGHTS UNDER TEXAS LAW
Shareholders of the Company who do not approve of the Plan
of Liquidation are not entitled to appraisal rights, dissenters'
rights or any other rights with respect to the Proposed
Liquidation under Texas law or the Company's Restated Articles of
Incorporation, as amended.
PROXY SOLICITATION AND EXPENSES
The accompanying proxy is being solicited on behalf of the
Board of Directors of the Company. All expenses of this
solicitation, including the cost of preparing, assembling, and
mailing this proxy soliciting material and Notice of Special
Meeting of Shareholders, will be paid by the Company. Additional
solicitation of holders of Common Stock by mail, telephone,
facsimile or by personal solicitation may be done by directors,
officers and regular employees of the Company, for which they
will receive no additional compensation. Brokerage houses and
other nominees, fiduciaries and custodians nominally holding
shares of Common Stock as of the Record Date will be requested to
forward proxy soliciting material to the beneficial owners of
such shares, and will be reimbursed by the Company for their
reasonable out-of-pocket expenses.
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<PAGE>
THE PROPOSED LIQUIDATION
GENERAL
The Company's Board of Directors unanimously recommends to
the shareholders that the shareholders approve adoption of the
Plan of Liquidation of the Company. By Resolution dated
February 3, 1999, the Directors approved the Plan of Liquidation
(a copy of which is attached to this Proxy Statement as Appendix
A). The Plan of Liquidation is subject to the approval of the
shareholders of the Company, which is the matter to be considered
at the Special Meeting. The summary description of the Plan of
Liquidation and its effects set forth hereafter is qualified in
its entirety by reference to the Plan of Liquidation itself. The
Plan of Liquidation basically provides that upon adoption by the
shareholders, the Company will be dissolved and its corporate
existence terminated in accordance with Texas law.
Assuming that the Plan of Liquidation is approved by the
shareholders at the Special Meeting, then the Board of Directors
will proceed in the following manner:
1. To the extent deemed necessary by the Board of Directors,
the Board will establish and set aside reasonable amounts to meet
claims against the Company, including all contingent, conditional
or unmatured claims known to the Company and all claims which are
known to the Company but for which the identity of the claimant
is unknown. Claims which are filed with the Company will be dealt
with and provision will be made for payment of all duly approved
claims and liabilities (to the extent of available funds realized
upon sale of the Company's assets). The Company will also pay
all expenses of the liquidation and termination of the Company's
existence from the Company's cash and from the sale of these
assets. (See "Provision of Liabilities and Claims" hereafter).
2. If deemed appropriate by the Board of Directors, the Company
may establish an escrow account ("Escrow Account") or Trust
("Trust") and transfer to one or more escrow agents or trustees,
for the benefit of the shareholders (the "Escrow Agent(s)" or
"Trustee(s)," respectively), under an Escrow Account or Trust,
any assets of the Company which are (a) not reasonably
susceptible to distribution to the shareholders, including
without limitation non-cash assets and assets held on behalf of
the shareholders (i) who cannot be located or who do not tender
their certificates evidencing the Common Stock to the Company or
its agent as may be required or (ii) to whom distributions may
not be made based upon restrictions under contract or law,
including, without limitation, restrictions of the federal
securities laws and regulations promulgated thereunder or (b)
held as a contingency reserve out of which maybe paid any
contingent liabilities, including but not limited to those rising
under workers' compensation, environmental laws, federal or state
securities law, or any other federal or state laws, which arise
after the dissolution of the Company.
3. The Company shall distribute pro rata to the shareholders
all available cash including the cash proceeds of any sale,
exchange or disposition, except such cash, property or assets as
are required for paying or making reasonable provision for the
claims and obligations of the Company. Such distribution may
occur all at once or in a series of distributions and shall be in
cash, in such amounts, and at such time or times, as the Board of
Directors, Escrow Agent (s) or the Trustee(s) (as applicable), in
their absolute discretion, may determine. If and to the extent
deemed necessary, appropriate or desirable by the Board of
Directors, Escrow Agent(s) or the Trustee(s), in their absolute
discretion, the Company may establish and set aside a reasonable
amount (the "Contingency Reserve") to satisfy claims against the
Company, including, without limitation, tax obligations, and all
expenses of the sale of the Company's property and assets, of the
collection and defense
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<PAGE>
of the Company's property and assets, and of the liquidation and
dissolution provided for in the Plan of Liquidation. This
Contingency Reserve may consist of cash and/or property.
4. After provision for creditors' claims is made and all
property has been distributed and if there are no pending legal,
administrative or arbitration proceedings or adequate provisions
have been made to satisfy any judgment arising therefrom,
Articles of Dissolution will be filed with the Texas Secretary of
State, pursuant to the Texas Business Corporation Act ("TBCA"),
and any and all other necessary or appropriate actions will be
taken to dissolve and to terminate the Company's existence.
PROVISION FOR LIABILITIES AND CLAIMS
The Board of Directors believes that no material contingent
claims are outstanding as of the date of this Proxy Statement.
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<PAGE>
ESTIMATED AMOUNT AVAILABLE FOR DISTRIBUTION PER SHARE
The following estimate of the amount available for
distribution to shareholders is based upon the Board of
Directors' best estimates of the amounts available, the expenses
to be incurred and provisions for immaterial outstanding
contingent liabilities. Although the Directors have carefully
reviewed all of this material, it must be emphasized that THESE
AMOUNTS ARE ESTIMATES ONLY AND MUST BE CONSIDERED AS PRELIMINARY.
ACCORDINGLY, NO ASSURANCE CAN BE GIVEN THAT THE ESTIMATED
LIQUIDATION AMOUNT WILL BE ACTUALLY REALIZED OR THAT THE AMOUNTS
DISTRIBUTED TO SHAREHOLDERS WILL NOT VARY MATERIALLY FROM THE
PRELIMINARY AMOUNTS WHICH ARE SET FORTH BELOW. While it is not
possible to determine the exact amount that may ultimately be
realized upon disposition of the Company's assets if the Plan of
Liquidation is adopted by the shareholders, the Directors believe
that the amount available for distribution as a result of the
liquidation, will aggregate approximately $4.17 per share as set
forth below:
<TABLE>
<CAPTION>
Book Value on Estimated
Category February 3, 1999 Realizable Value
- ---------------------------------- -------------------- -------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 750,000 $ 750,000
Accounts receivable 1,900,000 1,500,000
Inventories 3,500,000 2,200,000
Prepaid expenses 50,000 0
Refundable federal income tax 200,000 400,000
Deferred federal income tax 239,000 165,000
-------------- --------------
Total current assets $6,639,000 5,015,000
Property, plant and equipment 800,000 1,800,000
(net)
Property, plant and equipment not 0 235,000
used in operations (net)
Other assets 50,000 50,000
-------------- --------------
Total assets $7,489,000 $ 7,100,000
============== ==============
Current liabilities:
Accounts payable and $ 400,000 $ 2,260,000
accrued liabilities
0 440,000
Contingency liability reserve
Deferred federal income tax 70,000 0
Shareholders' equity 7,019,000 4,400,000
-------------- --------------
Total liabilities
and shareholders' equity $7,489,000 $ 7,100,000
============== ==============
Estimated amount available for N/A $ 4,400,000
distribution to shareholders
Amount per share N/A $4.17
</TABLE>
-8-
<PAGE>
DISTRIBUTION TO SHAREHOLDERS
The Plan of Liquidation provides that the remaining assets
of the Company will be distributed to the shareholders at such
time as may be determined by the Board of Directors (or the
Escrow Agent (s) or Trustee(s), as applicable). The character,
amount and timing of these distributions will depend upon claims
filed against the Company during the claim periods established by
law and under the Plan of Liquidation, as well as any amounts
deemed necessary or appropriate to provide for the satisfaction
of the Company's liabilities, either fixed or contingent, as well
as the expenses of liquidating the Company.
The expenses of winding up the Company's affairs, preparing
all reports required by federal and state law in connection with
the Company's continued existence, the negotiation and completion
of payment of any claims against the Company, as well as all
expenses and liabilities which continue to arise or be incurred
during the course of the liquidation process will reduce the
amount of assets available for distribution to the shareholders.
Upon the initial distribution under the Plan of Liquidation,
shareholders may be required to surrender their common stock
certificates to the Company or its agents for cancellation. If
the distributions are to be made out of a Trust, then the
shareholders will have to surrender their common stock
certificates as a condition to entitlement to receive
distributions from a Trust.
The Company anticipates that the initial distribution to
shareholders will occur within 180 days of the approval of the
Plan of Liquidation.
DIRECTORS, OFFICERS AND INDEMNIFICATION
It is anticipated that the Company will continue to pay
compensation to certain officers who continue to provide services
to the Company at present levels through May 31, 1999.
It is anticipated that all of the Company's directors (all
but two of whom are shareholders of the Company) will remain
directors of the Company until the Certificate of Dissolution
becomes effective.
The Plan of Liquidation provides for indemnification to the
directors, officers, employees or agents of the Company against
all liabilities and expenses in connection with the liquidation
or any other affairs of the Company. In the event the Company's
assets, which may be held by a Trust for the benefit of
shareholders, are insufficient to satisfy these liabilities and
expenses, the Company will indemnify such persons moving funds
from the Contingency Reserve.
BACKGROUND OF THE PROPOSED LIQUIDATION
In 1952 Howard B. Wolf, Inc. began the designing,
manufacturing and marketing of the HOWARD WOLF label, which
consisted primarily of dresses for career and professional women
who demanded smart, fashionable clothes at a competitive price.
The Company developed a design staff and production facilities to
insure the look and quality of its products. Its primary market
was better women's specialty stores and department stores.
HOWARD WOLF fashions carved out a unique niche in the market
place and became a prestigious label among discriminating
consumers. As consumer demand changed in the market place, the
Company introduced HOWARD WOLF SPORTSWEAR label in 1972.
Maintaining most of their profile and marketplace, the HOWARD
WOLF labels enjoyed much success. Additional labels - PRET-A-
PORTE - dresses and sportswear and ERNESTO W. blouses - were
introduced in 1969 and 1976, respectively. In 1993, the HOWARD
WOLF W label, featuring dresses and sportswear in fashionable
larger sizes, was introduced. Due to a lack of sales volume, the
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<PAGE>
three latter mentioned labels were primarily relegated to serve
certain stores that placed special request orders.
In 1994 management recognized that the Company's traditional
target distribution channels, i.e. independent retail specialty
stores, were experiencing a decline in volume and that many were
opting to close their doors. The Company engaged a consulting
firm to analyze all aspects of its operations and markets with a
view to reposition itself for growth over the next decade.
Management concluded that the best course of action was to
continue to broaden the Company's market base by gaining a
greater penetration in selected geographical territories and
increase its marketing in Canada and Mexico. In addition, steps
were taken to develop chain and catalogue distribution.
The desired volume was not achieved in these geographical
territories, and initial export distribution was soon reduced
dramatically by the peso devaluation in Mexico and the economic
downturn in Canada. However, the volume of such exports never
made any material contribution to the Company. The development
of chain and catalogue sales was moderately successful, but
profit margins were unacceptably low in this segment of business.
In the 1980's, the Company closed all of its non-
headquarters' factories in order to gain cost efficiencies and
quicker turn-around time in production. Independent sewing
contractors were utilized together with limited offshore
production. In order to gain the cost efficiencies considered
necessary to be competitive in the marketplace, the Company
sought to significantly increase its sales volume to take
advantage of offshore production.
In the mid-1990's, the Company continued to experience the
erosion of its primary marketplace as more and more independent
women's specialty stores closed and many of the remaining stores
were placing smaller and smaller orders. Generational and
societal buying habits of women were among the reasons for the
stores' lower sales. Upon continued research and study,
management determined that it would be necessary to try to find a
compatible company to acquire or to merge with in order to gain
both sales volume and the efficiencies necessary to generate
acceptable profit levels. In 1996, the number one consulting
firm in the apparel industry was engaged to explore the entire
marketplace, both domestic and international, for the best
candidate for acquisition or merger. After a two-year search a
compatible partner had not been found.
In 1997, the Company did extensive research on vertical
retailing and opened two pilot HOWARD WOLF outlet mall retail
stores in premium outlet malls in Napa, California and Las Vegas,
Nevada. After approximately a year and one-half of operations in
Napa and approximately 11 months of operations in Las Vegas,
profitable sales volumes were not achieved and both stores
closed.
Sales orders booked for the Fall 1998 season and the
Holiday/Cruise 1998 season continued to be below desired levels.
The Company's operations for the first quarter ended August 31,
1998 were at a break-even profit level. Sales orders booked for
the Spring 1999 season were approximately forty percent lower
than in 1998. This lower sales volume contributed to the
Company's loss of $441,000 for the quarter ended November 30,
1998.
Management again scrutinized all of the Company's business
and concluded that in the foreseeable future little change, if
any, would be forthcoming in its niche in the fashion industry.
Many department stores and discount volume stores have become
deeply entrenched in obtaining their own private label brands
through volume importers, thus making them direct competitors.
Management also noted that several apparel manufacturers
throughout the country were closing.
-10-
<PAGE>
With the amount of 1999 Spring and Summer orders booked, the
Company's loss from operations in the third quarter was projected
to be even greater than in the second quarter. Again, one more
effort was made to find a strategic partner. When this failed,
management recommended to the Board of Directors that in the best
interests of the shareholders, the Company should meet its
obligations to its loyal customers by completing the production
and shipment of the 1999 Spring and 1999 Summer seasons and then
present to the shareholders the Plan of Liquidation. After
intense study and research, the Board of Directors approved a
press release to inform the shareholders and financial community
of the decision and to take the necessary action to call a
special shareholders meeting.
In February of 1999, the Company sold its facility in
Greenville, Texas, for $237,000. This facility had been leased
to a non-related entity and was not used in the Company's
operations.
The Company had entered into a contract whereby it would
have sold its Parry Avenue property in Dallas, Texas. However,
this contract was terminated by the prospective buyer and the
parties have negotiated a new agreement, pursuant to which such
prospective buyer must purchase the Parry Avenue property for
$1,700,000 or forfeit a $25,000 deposit. Upon any such sale of
the Parry Avenue property, the Company will lease back the Parry
Avenue property until it terminates its operations at the
facility or moves into another facility.
On February 16, 1999, the Company entered into a purchase
agreement (the "Purchase Agreement") with Jean St. Germain, a
California corporation ("JSG") pursuant to which the Company
agreed to sell JSG all of the assets necessary to produce
salesman's samples of the Howard Wolf Fall 1999 collection. In
addition, subject to either (a) the approval of the Company's
shareholders of the Plan of Liquidation, or (b) a vote by the
Company's Board of Directors to proceed without such approval,
the Company shall sell to JSG its interest in the Intellectual
Property (as defined in the Purchase Agreement). During the
period between the date of the Purchase Agreement and the I.P.
Closing Date (as defined in the Purchase Agreement), the use of
the Intellectual Property by JSG shall be governed by that
certain license agreement by and between the Company and JSG
attached as an exhibit to the Purchase Agreement.
On October 8, 1998, the Company began to downsize its staff.
As of March 2, 1999, the Company had 19 employees.
THE COMPANY'S REASONS FOR THE PROPOSED LIQUIDATION;
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE PLAN
OF LIQUIDATION IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS HAS APPROVED
THE PLAN OF LIQUIDATION AND RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE PLAN OF LIQUIDATION.
---
As described above under "Background of the Proposed
Liquidation," the decision of the Company's Board to approve the
Plan of Liquidation followed months of exploring and analyzing
the advantages and disadvantages of liquidating the Company's
assets. In making its recommendation to the shareholders of the
Company, the Board considered a number of factors, including
those noted immediately below which were determined by the Board
to favor a decision to consummate the Proposed Liquidation:
(i) the current financial condition and future prospects
for the Company, especially in light of the Board's
conclusion that the potential for growth in the
Company was limited without significant additional
capital expenditures or finding a strategic partner;
-11-
<PAGE>
(ii) liquidation will permit the Company's shareholders
to receive a portion of the value of the Company's
assets, which the Board believes have been
depreciated to less than current realizable value;
and
(iii) liquidation will prevent further erosion of the
shareholders' equity through continuing net
operating losses.
The foregoing discussion of the information and factors
considered by the Board is not intended to be exhaustive, but
includes all material factors considered by the Board. The Board
did not attempt to quantify or otherwise assign relative weights
to the specific factors it considered or determine that any
factor was of particular importance. A determination of various
weightings would, in the view of the Board of Directors, be
impractical. Rather, the Board viewed its position and
recommendations as being based on the totality of the information
presented to, and considered by, the Board. In addition,
individual members of the Board may have given different weight
to different factors.
INTEREST OF CERTAIN PERSONS IN THE PROPOSED LIQUIDATION
The directors of the Company currently anticipate that, upon
the dissolution of the Company, the Company will provide each of
its employees with severance payments equal to one week's salary
for each year of service by such employee, up to a maximum of ten
weeks. The total amount of such payments is estimated to be
$300,000. No assurance can be given that this estimated amount
for severance payments will not vary from the amount set forth
above.
REGULATORY APPROVALS
The Plan of Liquidation does not require any regulatory
approvals other than the federal filings required under
applicable U.S. securities laws in connection with this Proxy
Statement.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a general summary of the
material federal income tax consequences of the Proposed
Liquidation, including the Plan of Liquidation, to the Company
and its shareholders, but is not intended to be a complete
analysis of all the potential tax effects. The discussion
addresses neither the tax consequences that may be relevant to
particular categories or shareholders subject to special
treatment under certain federal income tax laws (such as, for
example, dealers in securities, banks, insurance companies, tax-
exempt organizations, and foreign individuals and entities) nor
any tax consequences arising under the laws of any state, local
or foreign jurisdiction.
The discussion is based upon the Internal Revenue Code of
1986, as amended, Treasury Regulations, administrative rulings
and judicial decisions now in effect, all of which are subject to
change at any time, either prospectively or retrospectively, by
legislative, administrative or judicial action. The following
discussion has no binding effect on the IRS or the courts and
assumes that the Company will liquidate in accordance with the
Plan of Liquidation. Distributions pursuant to the Plan of
Liquidation may occur at various times and in more than one tax
year. No assurances can be given that the tax treatment
described herein will remain unchanged through each distribution.
No ruling has been requested from the IRS with respect to
the anticipated tax treatment of the Plan of Liquidation, and the
Company will not seek an opinion of counsel with respect to the
anticipated tax treatment summarized herein. There can be no
assurance that a Trust (if implemented) will be treated as a
Trust for federal income tax purposes or that the distributions
made pursuant to the Plan of Liquidation will be treated as
liquidating distributions. There can be no assurance that the
Company's
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<PAGE>
determination of the fair market value of any property
distributed will not be challenged, or that, if challenged, will
be upheld. If any of the conclusions stated herein proves to be
incorrect, the result could be increased taxation at the Company
and/or the shareholder level, thus reducing the benefit to the
shareholders and the Company from the liquidation.
CONSEQUENCES TO THE COMPANY. After the approval of the
Proposed Liquidation and until the liquidation is complete, the
Company will continue to be subject to tax on its taxable income.
The Company will generally recognize taxable gain or loss on
sales of its property pursuant to the Plan of Liquidation. Upon
any liquidating distribution of property to the shareholders or
to a Trust (if applicable), the Company will generally recognize
gain or loss as if such property were sold to the shareholders
and/or a Trust. The amount of any such gain or loss will be the
difference between (i) the Company's adjusted tax basis for each
asset and (ii) the amount of consideration received for that
asset (reduced by the costs of the transaction allocable to that
asset) in the case of a sale, or the asset's fair market value in
the case of a liquidating distribution.
It is anticipated that the net taxable income recognized by
the Company as a result of the sale of its assets will not create
a significant current regular federal income tax liability for
the Company because of the Company's anticipated level of
operating losses and expenses for the fiscal year ending May 31,
1999.
CONSEQUENCES TO SHAREHOLDERS. The shareholders will not
recognize any gain or loss as a result of the sale by the Company
of its assets (or deemed sale of assets, in the event of any
liquidating distribution of property to the shareholders and/or
to a Trust). As a result of receiving a liquidating distribution
from the Company, a shareholder will recognize gain or loss equal
to the difference between (i) the sum of the amount of money
distributed to such shareholder directly or to a Trust on the
shareholder's behalf (if applicable), and (ii) such shareholder
's adjusted tax basis for his or her shares of Common Stock. A
shareholder adjusted tax basis will depend upon various factors,
including such shareholder's cost and the amount and nature of
any distributions received with respect thereto. Any gain or
loss should be capital gain or loss provided that the shares are
capital assets in the hands of the shareholder and will be long-
term capital gain or loss. Long-term capital gain realized by a
shareholder that is an individual, estate or trust may be
eligible for reduced tax rates.
The Company will provide shareholders and the IRS with a
statement of the amount of cash and the fair market value (as
determined by the Company) of any property distributed to the
shareholders during that year, at such time and in such manner as
required by the Treasury Regulations.
THE TRUST. If the Company transfers assets to a Trust,
shareholders will be treated for tax purposes at the time of
transfer as having received their pro rata share of money
transferred to the Trust, reduced by the amount of known
liabilities assumed by the Trust or to assets transferred are
subject. A Trust itself should not be subject to tax, assuming
that it is treated as a Trust for federal income tax purposes.
After formation of a Trust, shareholders must take into account
for federal income tax purposes their pro rata portion of any
income, expense, gain or loss recognized by the Trust.
As indicated above, the Company has not obtained any IRS
ruling as to the tax status of a Trust, and there can be no
assurance that the IRS will agree with the Company's conclusion
that a Trust should be treated as a Trust for federal income tax
purposes. If it were determined that a Trust should be
classified for federal income tax purposes as an association
taxable as a corporation (as a result of the change in the IRS
ruling guidelines or administrative positions, or otherwise),
income and losses of the Trust would be reflected on its own tax
return rather than being passed through to the shareholders and
the Trust would be required to pay federal income taxes at
corporate tax rates. Furthermore, a significant portion of the
above discussion would no longer be accurate. For instance, all
or a portion of any
-13-
<PAGE>
distribution made to the shareholders from a Trust may be treated
as a dividend subject to tax at ordinary income tax rates.
STATE AND LOCAL TAX CONSEQUENCES. The Company may be
subject to liability for state and local taxes with respect to
the sale of assets. Shareholders may also be subject to
liability for state and local taxes with respect to their receipt
of liquidating distributions and their interests in a Trust.
State and local tax laws may differ in various respects from
federal tax law. Shareholders should consult their tax advisors
with respect to the state and local tax consequences of the Plan
of Liquidation.
THE FOREGOING SUMMARY OF CERTAIN TAX CONSEQUENCES IS
INCLUDED FOR GENERAL INFORMATION ONLY AND DOES NOT CONSTITUTE
LEGAL ADVICE TO ANY SHAREHOLDER. THE TAX CONSEQUENCES OF THE
PLAN OF LIQUIDATION MAY VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF A SHAREHOLDER. THE COMPANY RECOMMENDS THAT EACH
SHAREHOLDER CONSULT HIS OR HER OWN ADVISOR REGARDING THE TAX
CONSEQUENCES OF THE PLAN OF LIQUIDATION.
EXPENSES AND OTHER FEES
The expenses of administering the Company, winding up the
Company's affairs, preparing all reports required by federal and
state law in connection with the Company's continued existence,
negotiating and completing payment of any claims against the
Company, and providing for the payment of all expenses and
liabilities which continue to arise or be incurred during the
course of the liquidation process will be paid by the Company.
DELISTING AND DEREGISTRATION OF THE COMPANY'S COMMON STOCK
If the Plan of Liquidation is approved, the Company's Common
Stock will be delisted from the American Stock Exchange and will
be deregistered under the Securities Exchange Act of 1934. The
stock ledger of the Company will closed upon such delisting and
deregistration.
-14-
<PAGE>
OWNERSHIP OF COMMON STOCK BY MANAGEMENT
The following table sets forth the beneficial ownership (as
defined by the rules of the Commission) of Common Stock of the
Company by (1) each director of the Company, (2) the Company's
Chief Executive Officer and each of the Company's other executive
officers (other than the Chief Executive Officer) whose total
salary and bonus exceed $100,000 and (3) all directors and
officers as a group, together with the percentage of the
outstanding shares which such ownership represents. Information
is stated as of ___________, 1999.
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1) Percent of Class
- ------------------------------- ------------------------ ------------------
<S> <C> <C>
Creed L. Ford III 1,000 *
Eugene K. Friesen 36,580 3.5
Joel Held - -
Juan M. Villamizar - -
Howard B. Wolf (2) (3) 254,729 24.1
Robert D. Wolf (2) (4) 161,289 15.3
All officers and directors as a
group (6 persons) (2) (3) (4) 453,598 42.9
* less than one percent
(1) The nature of the beneficial ownership of the shares by the
respective persons is sole voting and investment power
unless otherwise indicated.
(2) Howard B. Wolf is the father of Robert D. Wolf. Each of
such persons wholly disclaims any beneficial ownership of
shares owned by the other.
(3) Lois C. Wolf (wife of Howard B. Wolf) owns 42,665 shares
over which she has sole voting and investment powers. In
addition to the 254,729 shares, 40,600 shares are owned by
an "affiliate" of Mr. Wolf as that term is defined in the
General Rules and Regulations under the Securities Exchange
Act of 1934, and are held of record by Mr. Wolf as trustee
for certain private charitable foundations created by him.
Mr. Wolf disclaims any beneficial interest in such shares.
(4) Includes 1,000 shares held as trustee for his daughter.
</TABLE>
-15-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY
(Amounts in Thousands, Except Share and Per Share Data)
The following selected consolidated financial data for the
five fiscal years ended May 31, 1998 is derived from the audited
consolidated financial statements of the Company. The selected
consolidated financial data presented below should be read in
conjunction with the consolidated financial statements of the
Company, together with the Notes to consolidated financial
statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in the
Company's Annual Report on Form 10-K for the year ended May 31,
1998, included as Appendix B attached hereto, and the Company's
Quarterly Report on Form 10-Q for the period ended November 30,
1998, included as Appendix C attached hereto.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 14,322 $ 14,242 $ 15,213 $ 14,436 $ 14,269
Income before
federal income tax 626 1,004 1,332 1,220 1,222
Provision for federal
income tax 224 370 460 431 441
Net income 402 634 872 789 781
Basic and diluted
earnings per share .38 .60 .83 .75 .74
Cash dividends per
common share .32 .32 .32 .30 .28
Total assets 9,778 9,552 8,834 8,796 8,266
</TABLE>
-16-
<PAGE>
PRO FORMA CONSOLIDATED SELECTED FINANCIAL DATA
(Amounts in Thousands, Except Share and Per Share Data)
(Unaudited)
The following unaudited pro forma consolidated selected
financial data for the fiscal year ending May 31, 1999, was
derived from the unaudited pro forma consolidated statements of
operations and the unaudited pro forma consolidated balance sheet
included elsewhere in this Proxy Statement. This pro forma
consolidated selected financial data should be read in
conjunction with the description of the Plan of Liquidation
contained in this Proxy Statement and the pro forma financial
data appearing elsewhere herein and the Company's consolidated
financial statements included in the Company's Annual Report on
Form 10-K for the year ended May 31, 1998, included as Appendix B
attached hereto, and the Company's Quarterly Report on Form 10-Q
for the period ended November 30, 1998, included as Appendix C
attached hereto.
Actual Fiscal Year Pro Forma Fiscal Year
Ended Ended
May 31, 1998 May 31, 1999
------------------- ----------------------
Net sales $ 14,322 $ 9,600
Income (loss) before
federal income tax 626 (1,305)
Provision for (refund of)
federal income tax 224 (425)
Net income (loss) 402 (880)
Basic and diluted earnings
(loss) per share 0.38 (0.83)
Cash dividends paid per
common share 0.32 0.16
Total assets 9,778 4,990
-17-
<PAGE>
STOCK PERFORMANCE DATA
MARKET INFORMATION
The following table sets forth the high and low sales prices
per share of the Company's Common Stock on the American Stock
Exchange and the amount of and dividend paid for the quarterly
periods presented.
High Low Dividend
-------- -------- --------
Fiscal Year Ended May 31, 1997
First Quarter 7-5/8 6-1/2 .08
Second Quarter 7-3/8 6-1/8 .08
Third Quarter 6-3/4 5-7/8 .08
Fourth Quarter 7 5-1/2 .08
Fiscal Year Ended May 31, 1998
First Quarter 6-1/2 5-3/8 .08
Second Quarter 6-1/2 5-13/16 .08
Third Quarter 6-1/4 5-1/2 .08
Fourth Quarter 6-1/4 5-1/2 .08
Fiscal Year Ending May 31, 1999
First Quarter 5-9/16 5-1/4 .08
Second Quarter 5-7/16 4-3/8 .08
Third Quarter (through
February 28, 1999) 4-5/8 3-1/8 .00
RECENT MARKET PRICE
The following table sets forth the closing price and the
high and low sales prices per share of the Company's Common Stock
on the American Stock Exchange on February 3, 1999, the last
trading day preceding the public announcement of the Proposed
Liquidation and on __________, 1999 the latest practicable date
trading before the printing of this Proxy Statement. Shareholders
are urged to obtain current market quotations.
Closing High Low
------- ------- --------
February 3, 1999 3-7/16 3-7/16 3-7/16
__________, 1999
NUMBER OF HOLDERS
As of the Record Date, 1,056,191 shares of Common Stock were
issued and outstanding and were held of record by approximately
[____] persons, including several holders who are nominees for an
undetermined number of beneficial owners.
-18-
<PAGE>
COMPARATIVE PER SHARE DATA
(Unaudited)
The following table reflects the historical net income
(loss) per share from continuing operations in comparison with
the pro forma net income (loss) per share from continuing
operations after giving effect to the Proposed Liquidation. The
information presented in this table should be read in conjunction
with the description of the Proposed Liquidation contained in
this Proxy Statement and the pro forma financial data appearing
elsewhere herein and the Company's consolidated financial
statements included in the Company's Annual Report on Form 10-K
for the year ended May 31, 1998 included as Appendix B attached
hereto, and the Company's Quarterly Report on Form 10-Q for the
period ended November 30, 1998, included as Appendix C attached
hereto.
Actual Fiscal Pro Forma
year Fiscal Year
Ended Ended
May 31, 1998 May 31, 1999
---------------- -------------
Net income (loss) per share:
Basic and diluted earnings
(loss) per share $0.38 ($0.83)
-19-
<PAGE>
PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated balance sheet
as of May 31, 1999 reflects the historical accounts of the
Company as of that date adjusted to give pro forma effect to the
Proposed Liquidation as if such liquidation had occurred as of
May 31, 1998.
The pro forma financial data and accompanying notes should
be read in conjunction with the description of the Proposed
Liquidation contained in this Proxy Statement and the
Consolidated Financial Statements and related notes included: 1)
in the Company's 1998 Annual Report on Form 10-K previously filed
with the Commission, a copy of which accompanies this Proxy
Statement as Appendix B attached hereto and 2) in the Company's
Quarterly Report on Form 10-Q previously filed with Commission, a
copy of which accompanies this Proxy Statement as Appendix C
attached hereto. The Company believes that the assumptions used
in the following statements provide a reasonable basis on which
to present the pro forma financial data. The pro forma financial
data is provided for informational purposes only and should not
be construed to be indicative of the Company's financial
condition or results of operations had the Proposed Liquidation
occurred on the dates assumed and are not intended to project the
Company's financial condition on any future date or results of
operations for any future period.
-20-
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------
May 31, 1998 May 31, 1999
(Audited) (Pro Forma)
------------- -------------
(in dollars, except for shares outstanding)
<S> <C> <C>
Net Sales $ 14,321,914 $ 9,600,000
Costs and expenses:
Cost of sales 9,487,555 8,300,000
Selling, general
and administrative
expenses 4,127,553 3,300,000
Provision for
bad debt expenses 137,969 350,000
------------ ------------
Total 13,753,077 11,950,000
Income (loss) from operations 568,837 (2,350,000)
Gain on sale of property,
plant and equipment 1,085,000
Other income (expense) 43,881 (35,000)
Interest income 48,813 35,000
Interest expense (35,133) (40,000)
Income (loss) before
federal income tax 626,398 (1,305,000)
Federal income tax provision (224,477) 425,000
Net income (loss) 401,921 (880,000)
Retained earnings - beginning 5,369,844 5,434,000
Cash dividends (337,981) (169,000)
Retained earnings - ending 5,433,784 4,385,000
Average number
of shares outstanding 1,056,191 1,056,191
Basic and diluted
earnings (loss) per share 0.38 (0.83)
Dividends paid per share 0.32 0.16
-21-
<PAGE>
May 31, 1998 May 31, 1999
(Audited) (Pro Forma)
------------- -------------
Current assets:
Cash and cash equivalents $ 1,128,991 $ 3,425,000
Accounts receivable 2,530,137 1,000,000
Inventories 4,620,568 0
Prepaid expenses 159,322 0
Refundable federal income tax 112,813 400,000
Deferred federal income tax 234,000 165,000
------------ ------------
Total current assets 8,785,831 4,990,000
Property, plant and equipment (net) 939,214 0
Property, plant and equipment
not used in operations (net) 678 0
Other assets 51,957 0
Total assets 9,777,680 4,990,000
============ ============
Current liabilities:
Accounts payable and
accrued liabilities 1,975,408 150,000
Contingency liability reserve 0 440,000
Deferred federal income tax 74,000 0
Shareholders' equity 7,728,272 4,400,000
------------ ------------
Total liabilities
and shareholders' equity 9,777,680 4,990,000
============ ============
</TABLE>
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<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to
"incorporate by reference" information into this document, which
means we can disclose important information to you by referring
you to another document filed separately with the Securities and
Exchange Commission. The information incorporated by reference
is deemed to be part of this document, except for any information
superseded by information in, or incorporated by reference in,
this document. This document incorporates by reference the
documents set forth below that we have previously filed with the
Securities and Exchange Commission. These documents contain
important information about the Company and its finances.
FILING PERIOD
- ------------------------------ -------------------------------
Annual Report on Form 10-K Fiscal year ended May 31, 1998
Quarterly Report on Form 10-Q Quarter ended November 30, 1998
Current Report on Form 8-K Dated February 3, 1999
Current Report on Form 8-K Dated February 16, 1999
You should rely only on the information contained or
incorporated by reference in this document to vote on the matter
or matters presented at the Special Meeting. We have not
authorized anyone to provide you with information that is
different from what is contained in this document. This document
is dated March __, 1999. You should not assume that the
information contained in this document is accurate as of any date
other than such date, and the mailing of this document to
shareholders shall not create any implication to the contrary.
DEADLINE FOR SHAREHOLDER PROPOSALS
In the event that the Company is not liquidated and
dissolved, the Company presently anticipates that its next Annual
Meeting of Shareholders will be held in September 21, of 1999.
Any proposal by a Shareholder of the Company intended to be
presented at the 1999 Annual Meeting of Shareholders was required
to have been received by the Company at its principal executive
office not later than May 7, 1999 for inclusion in the Company's
Proxy Statement and form of proxy relating to that meeting.
-23-
<PAGE>
MISCELLANEOUS
Lane, Gorman and Trubitt, L.L.P. acted as the Company's
independent auditors for the fiscal year ended May 31, 1998. A
representative of Lane, Gorman and Trubitt, L.L.P. will attend
the Special Meeting to be held April ________, 1999, will have an
opportunity to make a statement, and will respond to appropriate
questions from shareholders.
By Order of the Board of Directors,
Howard B. Wolf
Chairman of the Board
March __, 1999
Appendices
- ----------
Appendix A - Plan of Complete Liquidation and Dissolution
of the Company.
Appendix B - Annual Report of the Company on Form 10-K for
the fiscal year ended May 31, 1998
Appendix C - Quarterly Report of the Company on Form 10-Q
for the period ended November 30, 1998.
Appendix D - Current Report of the Company on Form 8-K
dated February 3, 1999
Appendix E - Current Report of the Company on Form 8-K
dated February 16, 1999
-24-
<PAGE>
HOWARD B. WOLF, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD APRIL ___, 1999
The undersigned, having received the Notice of Special Meeting
and Proxy Statement dated __________ __, 1999, appoints
______________________________, and each of them as Proxies with full
power of substitution to represent the undersigned and to vote all
shares of Common Stock of Howard B. Wolf, Inc., which the undersigned
is entitled to vote at the Special Meeting of Shareholders, to be
held on April ___, 1999 at 10:00 am, Dallas, Texas time, at
______________________________, Dallas, Texas __________, and at any
adjournment or adjournments thereof.
Your vote is important! Please sign and date on the reverse and
return promptly to ________________________________________________
in the enclosed envelope, so that your shares can be represented at
the meeting.
(Continued and to be signed on the reverse)
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE,
IT WILL BE VOTED "FOR" THE PROPOSAL SET FORTH BELOW. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSAL.
A proposal to approve and adopt the Plan of Complete
Liquidation and Dissolution of Howard B. Wolf, Inc. (the "Company")
pursuant to which the Company will liquidate itself and distribute
its assets to the shareholders.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated: _____________________________________, 1999
_____________________________________________
Signature
_____________________________________________
Signature
Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as a
fiduciary or for an estate, trust, corporation or
partnership, your title or capacity should be
stated.
<PAGE>
APPENDIX A
PLAN OF COMPLETE LIQUIDATION AND DISSOLUTION
OF
HOWARD B. WOLF, INC.
This Plan of Complete Liquidation and Dissolution (the
"Plan") is intended to accomplish the complete liquidation and
dissolution of Howard B. Wolf, Inc., a Texas corporation (the
"Company"), in accordance with the Texas Business Corporation Act
and Section 331 of the Internal Revenue Code of 1986, as amended
(the "Code"), as follows:
1. The Board of Directors of the Company has adopted a
resolution recommending that the Company liquidate and dissolve.
This Plan has been approved and adopted by the Board of Directors
of the Company as being in the best interest of the Company and
its shareholders (the "Shareholders"). The Board of Directors
has directed that this Plan be submitted to the Company's
Shareholders for approval and adoption at a special meeting of
the Shareholders called for such purpose.
2. This Plan shall be adopted and become effective when
all of the following steps have been completed (the "Adoption
Date"):
(a) The Board of Directors shall have called a Special
Meeting of the Shareholders of the Company for the purpose
of allowing the Shareholders to vote on the question of the
liquidation of the Company and dissolution pursuant to
Article 6.03 of the Texas Business Corporation Act; and
(b) The Shareholders of the Company shall have
approved such liquidation and dissolution and shall have
adopted this Plan, in each case by an affirmative vote of
the holders of at least two-thirds of the outstanding shares
of the Company's common stock entitled to vote thereon (the
"Common Stock").
3. This Plan is intended to be a Plan of complete
liquidation and dissolution, and is intended to effect a
dissolution of the Company pursuant to the Texas Business
Corporation Act. Subject to any rights of third parties, the
Board of Directors may, notwithstanding Shareholder authorization
of the Plan and of the dissolution of the Company, amend the
Plan, but no such amendment shall postpone the effectiveness of
the Plan beyond the period contemplated herein.
4. After the Adoption Date, the Company shall not engage
in any business activities except to the extent necessary to
preserve the value of its assets, wind up its business and
affairs, and distribute its assets in accordance with this Plan.
No later than thirty (30) days following the Adoption Date, the
Company shall file Form 966 with the Internal Revenue Service.
5. From and after the Adoption Date, the Company shall
complete the following corporate actions:
(a) The Company shall determine whether and when to
(i) transfer the Company's property and Escrow Account or
assets (other than cash, cash equivalents and accounts
receivable) to a liquidating trust (established pursuant to
Section 8 hereof), or (ii) collect, sell, exchange or
otherwise dispose of all of its property and assets in one
or
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more transactions upon such terms and conditions as the
Board of Directors, in its absolute discretion, deems
expedient and in the best interests of the Company and the
Shareholders. In connection with such collection, sale,
exchange and other disposition, the Company shall collect or
make provision for the collection of all accounts
receivable, debts and claims owing to the Company.
(b) The Company shall pay or, as determined by the
Board of Directors, make reasonable provision to pay, all
claims and obligations of the Company, including all
contingent, conditional or unmatured claims known to the
Company and all claims which are known to the Company but
for which the identity of the claimant is unknown.
(c) The Company shall distribute pro rata to the
Shareholders, all available cash including the cash proceeds
of any sale, exchange or disposition, except such cash,
property or assets as are required for paying or making
reasonable provision for the claims and obligations of the
Company. Such distribution may occur all at once or in a
series of distributions and shall be in cash, in such
amounts, and at such time or times, as the Board of
Directors, Escrow Agent (s) or the Trustee(s) (as defined in
Section 8 hereof), in their absolute discretion, may
determine. If and to the extent deemed necessary,
appropriate or desirable by the Board of Directors, Escrow
Agent(s) or the Trustee(s), in their absolute discretion,
the Company may establish and set aside a reasonable amount
(the "Contingency Reserve") to satisfy claims against the
Company, including, without limitation, tax obligations, and
all expenses of the sale of the Company's property and
assets, of the collection and defense of the Company's
property and assets, and of the liquidation and dissolution
provided for in this Plan. The Contingency Reserve may
consist of cash and/or property.
6. The distributions to the Shareholders pursuant to
Sections 5, 7 and 8 hereof shall be in complete redemption and
cancellation of all of the outstanding Common Stock of the
Company. As a condition to receipt of any distribution to the
Shareholders, the Board of Directors, Escrow Agent(s) or the
Trustee(s), in their absolute discretion, may require the
Shareholders to (i) surrender their certificates evidencing the
Common Stock to the Company or its agent for recording of such
distributions thereon or (ii) furnish the Company with evidence
satisfactory to the Board of Directors, Escrow Agent(s) or the
Trustee(s) of the loss, theft or destruction of their
certificates evidencing the Common Stock, together with such
surety bond or other security or indemnity as may be required by
and satisfactory to the Board of Directors, Escrow Agent(s) or
the Trustee(s) ("Satisfactory Evidence and Indemnity"). As a
condition to receipt of any final distribution to the
Shareholders, the Board of Directors, Escrow Agent(s) or the
Trustee(s), in their absolute discretion, may require the
Shareholders to (i) surrender their certificates evidencing the
Common Stock to the Company or its agent for cancellation or (ii)
furnish the Company with Satisfactory Evidence and Indemnity.
The Company will finally close its stock transfer books and
discontinue recording transfers of Common Stock on the earliest
to occur of (i) the close of business on the record date fixed by
the Board of Directors for the final liquidating distribution,
(ii) the close of business on the date on which the remaining
assets of the Company are transferred to the Escrow Account or
the Trust or (iii) the date on which the Company ceases to exist
under the Texas Business Corporation Act (following any post-
dissolution continuation period thereunder), and thereafter
certificates representing Common
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Stock will not be assignable or transferable on the books of the
Company except by will, intestate succession, or operation of
law.
7. If any distribution to a Shareholder cannot be made,
whether because the Shareholder cannot be located, has not
surrendered its certificates evidencing the Common Stock as
required hereunder or for any other reason, the distribution to
which such Shareholder is entitled (unless transferred to the
Escrow Account or the Trust established pursuant to Section 8
hereof) shall be transferred, at such time as the final
liquidating distribution is made by the Company, to the official
of such state or other jurisdiction authorized by applicable law
to receive the proceeds of such distribution. The proceeds of
such distribution shall thereafter be held solely for the benefit
of and for ultimate distribution to such Shareholder as the sole
equitable owner thereof and shall be treated as abandoned
property and escheat to the applicable state or other
jurisdiction in accordance with applicable law. In no event
shall the proceeds of any such distribution revert to or become
the property of the Company.
8. Except as may be limited by law, if deemed necessary,
appropriate or desirable by the Board of Directors, in its
absolute discretion, in furtherance of the liquidation and
distribution of the Company's assets to the Shareholders, as a
final liquidating distribution or from time to time in order to
effect the completion of the Plan, the Company may establish an
Escrow Account ("Escrow Account") or liquidating trust ("Trust"),
and transfer to one or more escrow agents or liquidating
trustees, for the benefit of the Shareholders (the "Escrow
Agent(s)" or "Trustee(s)" respectively), under an Escrow Account
or a Trust, any assets of the Company which are (i) not
reasonably susceptible to distribution to the Shareholders,
including without limitation non-cash assets and assets held on
behalf of the Shareholders (a) who cannot be located or who do
not tender their certificates evidencing the Common Stock to the
Company or its agent as herein above required or (b) to whom
distributions may not be made based upon restrictions under
contract or law, including, without limitation, restrictions of
the federal securities laws and regulations promulgated
thereunder or (ii) held as the Contingency Reserve, out of which
may be paid any contingent liabilities, including but not
limited to those rising under workers' compensation,
environmental laws, federal or state securities law, or any other
federal or state laws, which arise after the dissolution of the
Company. Any Escrow Account or Trust shall be established and
maintained at a bank or other financial institution whose
deposits are insured by the FDIC and which shall be selected by
the Board of Directors, in its sole and absolute discretion. The
Board of Directors is hereby authorized to appoint one or more
individuals, corporations, partnerships or other persons, or any
combination thereof, including, without limitation, any one or
more officers, directors, employees, agents or representatives of
the Company, to act as the initial Escrow Agent, Trustee or
Trustees for the benefit of the Shareholders and to receive any
assets of the Company. Any Escrow Agent(s) or Trustee(s)
appointed as provided herein shall succeed to all right, title
and interest of the Company of any kind and character with
respect to such transferred assets and, to the extent of the
assets so transferred and solely in their capacity as Escrow
Agent(s) or Trustee(s), shall assume all of the liabilities and
obligations of the Company, including, without limitation, any
unsatisfied claims and unascertained or contingent liabilities.
Further, any conveyance of assets to the Escrow Agent(s) or
Trustee(s) shall be deemed to be a distribution of property and
assets by the Company to the Shareholders for the purposes of
Section 3 of this Plan. Any such conveyance to the Escrow
Agent(s) or Trustee(s) shall be in trust for the Shareholders of
the Company. The Company, subject to this Section 8 and as
authorized by the Board of Directors, in its absolute
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discretion, may enter into a liquidating trust agreement with the
Escrow Agent(s) or Trustee(s), on such terms and conditions as
the Board of Directors, in its absolute discretion, may deem
necessary, appropriate or desirable. Adoption of this Plan by a
vote of at least two-thirds of the Common Stock entitled to vote
shall constitute the approval of the Shareholders of any such
appointment and any such Escrow Agent(s) or liquidating Trust
agreement as their act and as a part hereof as if herein written.
9. Whether or not an Escrow Account or Trust shall have
been previously established pursuant to Section 8, in the event
it should not be feasible for the Company to make the final
distribution to the Shareholders of all assets and properties of
the Company prior to March 31, 2001, then, on or before such
date, the Company shall be required to establish a Trust and
transfer any remaining assets and properties (including, without
limitation, any uncollected claims, contingent assets and the
Contingency Reserve) to the Trustee(s) as set forth in Section 8.
10. After the Adoption Date, the officers of the Company
shall, at such time as the Board of Directors, in its absolute
discretion, deems necessary, appropriate or desirable, obtain any
certificates required from the Texas tax authorities and/or any
other applicable tax authority and, upon obtaining such
certificates, the Company shall file with the Secretary of State
of the State of Texas a certificate of dissolution (the
"Certificate of Dissolution") in accordance with the Texas
Business Corporation Act.
11. Adoption of this Plan by holders of at least two-thirds
of the Common Stock entitled to vote shall constitute the
approval of the Shareholders of the sale, exchange or other
disposition in liquidation of all of the property and assets of
the Company, whether such sale, exchange or other disposition
occurs in one transaction or a series of transactions, and shall
constitute ratification of all contracts for sale, exchange or
other disposition which are conditioned on adoption of this Plan.
12. In connection with and for the purpose of implementing
and assuring completion of this Plan, the Company may, in the
absolute discretion of the Board of Directors, pay any brokerage,
agency, professional and other fees and expenses of persons
rendering services to the Company in connection with the
collection, sale, exchange or other disposition of the Company's
property and assets and the implementation of this Plan.
13. In connection with and for the purpose of implementing
and assuring completion of this Plan, the Company may, in the
absolute discretion of the Board of Directors, pay to the
Company's officers, directors, employees, agents and
representatives, or any of them, compensation or additional
compensation above their regular compensation, in money or other
property, in recognition of the extraordinary efforts they, or
any of them, will be required to undertake, or actually
undertake, in connection with the implementation of this Plan.
Adoption of this Plan by at least two-thirds of the Common Stock
entitled to vote, shall constitute the approval of the Company's
Shareholders of the payment of any such compensation.
14. Notwithstanding authorization or consent to this Plan
and the transactions contemplated hereby by the Shareholders, the
Board of Directors may modify, amend or abandon this Plan and the
transactions contemplated hereby without further action by the
Shareholders to the extent permitted by the Texas Business
Corporations Act.
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15. The Board of Directors of the Company is hereby
authorized, without further action by the Shareholders, to do and
perform or cause the officers of the Company, subject to approval
of the Board of Directors, to do and perform, any and all acts,
and to make, execute, deliver or adopt any and all agreements,
resolutions, conveyances, certificates and other documents of
every kind which are deemed necessary, appropriate or desirable,
in the absolute discretion of the Board of Directors, to
implement this Plan and the transactions contemplated hereby,
including, without limiting the foregoing, (a) sell, dispose,
convey, transfer, and deliver the assets of the Company, (b) to
satisfy or provide for the satisfaction of the obligations of the
Company, (c) to distribute all of the assets of the Company to
which Shareholders or for their benefit to the extent provided
above, (d) to dissolve the Company in accordance with the laws of
the State of Texas and cause its withdrawal from all
jurisdictions in which it is authorized to do business, and (e)
prepare and consummate all filings or acts required by any state
or federal law or regulation to wind up its affairs.
16. The Company shall indemnify each of its directors,
officers, employees and agents, trustees, escrow agents and any
other advisor engaged by the Company (the words "he", "his,"
"him," and "person" being used hereafter in this paragraph to
refer to such indemnified person and entity), against all
liabilities and expenses, including amounts paid in satisfaction
or judgments in compromise or as fines and penalties, and counsel
fees, reasonably incurred by him in connection with the defense
or disposition of any action, suit or other proceeding by the
Company or any other person, whether civil or criminal, in which
he may be involved or with which he may be threatened, while in
office or while engaged by the Company or thereafter and whether
in connection with the liquidation of the Company or otherwise,
by reason of his being or having been such a director or trustee,
director, officer, employee or agent, except with respect to any
matter as to which (i) his action or failure to act was material
to the cause of action so adjudicated and was committed in bad
faith or was the result of active and deliberate dishonesty, (ii)
he actually received an improper benefit in money, property or
services, or (iii) in the case of any criminal action or
proceeding, he had reasonable cause to believe his action or
failure to act was unlawful; provided, however that as to any
proceeding by or in the right of the Company, indemnification may
not be made in respect to any proceeding in which such director
or trustee, director, officer, employee or agent, shall have been
adjudicated to be liable to the Company. The Board of Directors
may make advance payments in connection with the indemnification
under this paragraph, provided that the indemnified director,
trustee, officer, employee or agent shall have given a written
affirmation of his good faith belief that he meets the standard
of conduct necessary for indemnification. Indemnification under
this section shall be to the fullest extent allowed under the
Texas Business Corporation Act. The foregoing indemnification
provision shall survive the liquidation and termination of the
Company. The rights accruing to any director, trustee, officer,
employee or agent under this Section 16 shall not exclude any
other right to which he may be lawfully entitled.
17. This Plan and the terms hereof shall be interpreted and
construed under the laws of the State of Texas.
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APPENDIX B
May 31, 1998 Annual Report on Form 10-K
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APPENDIX C
November 30, 1998 Quarterly Report on
Form 10-Q
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APPENDIX D
Current Report on Form 8-K
dated February 3, 1999
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APPENDIX E
Current Report on Form 8-K
dated February 16, 1999
