SCHEDULE 14a
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14 (a) of the Securities
Exchange Act of 1934
Filed by the Registrant~~
Filed by the Party other than the Registrant~~
Check the appropriate box:
~~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 Rule 14a-11 (c) or Rule 14a-12
KENWIN SHOPS, INC.
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(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):
~~$125 per Exchange Act Rules 0-11(c) (1) (ii), 14a-6(i) (1), or 14a-6(i)
(2) or Item 22 (a) (2) of the Schedule 14A.
~~$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i) (3).
~~Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(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) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
~~Fee paid previously with preliminary material.
- --------------------------------------------------------------------------------
~~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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
KENWIN SHOPS, INC.
6200 Memorial Drive
Stone Mountain, Georgia 30083
October 28, 1996
Dear Stockholder:
You are cordially invited to attend the special meeting of Stockholders
(the "Special Meeting") of Kenwin Shops, Inc. ("Kenwin") to be held on November
21, 1996 at 12:00 noon at Ramada Airport North, 1419 Virginia Avenue, Atlanta,
Georgia 30337.
At the Special Meeting you will be asked to consider and vote upon a
proposal to approve a management agreement (the "Management Agreement") between
Kenwin and D&A Funding Corporation ("D&A") pursuant to which D&A is managing the
day to day operations of Kenwin and Kenwin will sell to D&A an aggregate of
350,000 shares of its authorized but unissued Common Stock for $.01 per share.
At the Special Meeting you will be asked to vote on a number of
additional but related matters, including (i) the amendment of Kenwin's
Certificate of Incorporation so as to reduce the par value of Kenwin's Common
Stock from $1.00 to $.01 per share (the "Charter Amendment"), (ii) the election
of five (5) directors to serve until the next annual meeting, and (iii) such
other business as may properly come before the Special Meeting.
You should read carefully the accompanying Notice of Special Meeting
and Proxy Statement, which more fully describe the Management Agreement, Charter
Amendment, other related matters and additional related information.
THE BOARD OF DIRECTORS OF KENWIN HAS DETERMINED THAT THE MANAGEMENT
AGREEMENT AND CHARTER AMENDMENT ARE FAIR AND IN THE BEST INTERESTS OF KENWIN AND
ITS STOCKHOLDERS, AND IT HAS UNANIMOUSLY APPROVED AND RECOMMENDS THAT THE
STOCKHOLDERS OF KENWIN APPROVE THE MANAGEMENT AGREEMENT AND THE CHARTER
AMENDMENT.
The affirmative vote of a majority of the votes cast at the Special
Meeting is necessary for approval and adoption of each of the items proposed.
All stockholders are invited to attend the Special Meeting in person.
However, whether or not you plan to attend the Special Meeting, please complete,
sign, date and return your proxy in the enclosed envelope. If you attend the
meeting, you may vote in person if you wish, even though you have previously
returned your proxy. It is important that your shares be represented and voted
at the Special Meeting.
Sincerely,
Richard Moskowitz
President
<PAGE>
KENWIN SHOPS, INC.
6200 Memorial Drive
Stone Mountain, Georgia 30083
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 21, 1996
------------------------
To the Stockholders of Kenwin Shops, Inc.
NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Special
Meeting") of Kenwin Shops, Inc., a New York Corporation ("Kenwin"), will be held
on November 21, 1996 at 12:00 noon at Ramada Airport North, 1419 Virginia
Avenue, Atlanta, Georgia 30337.
1. To consider and vote upon a proposal to approve a Management
Agreement as modified (the "Management Agreement") with D&A Funding
Corporation ("D&A") pursuant to which D&A has been managing the day to
day operations of Kenwin and Kenwin will sell to D&A an aggregate of
350,000 shares of its authorized but unissued Common Stock for $.01 per
share.
2. To consider and vote upon a proposal to amend the Certificate of
Incorporation of Kenwin to reduce the par value of its Common Stock
from $1.00 to $.01 per share (the "Charter Amendment").
3. To elect five (5) directors to serve until the next annual meeting
of stockholders or until their successors are elected and qualified.
4. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close business on October 7, 1996,
the record date for the Special Meeting, are entitled to notice of and to vote
at the Special Meeting. The affirmative vote of the holders of a majority of the
shares of Common Stock of Kenwin outstanding and entitled to vote is necessary
to approve and adopt the Management Agreement and Charter Amendment, and to
elect each of the nominees as director.
If the Management Agreement and Charter Amendment are approved,
stockholders who do not vote in favor of the Management Agreement and Charter
Amendment will not be entitled to statutory appraisal rights. See "APPRAISAL
RIGHTS" in the accompanying Proxy Statement.
Whether or not you expect to attend the Special Meeting in person, please
complete, date and sign the enclosed proxy and return it without delay in the
enclosed envelope, which requires no additional postage if mailed in the United
States. Prior to the voting of the proxy at the Special Meeting, any person
giving a proxy has the power to revoke it at any time, and if you attend the
Special Meeting you may withdraw your proxy and vote in person.
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THE BOARD OF DIRECTORS OF KENWIN UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
IN FAVOR OF THE APPROVAL AND ADOPTION OF THE MANAGEMENT AGREEMENT AND CHARTER
AMENDMENT, AND THE ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS.
By Order of the Board of Directors,
Richard Moskowitz
President
Stone Mountain, Georgia
October 28, 1996
<PAGE>
KENWIN SHOPS, INC.
PROXY STATEMENT RELATING TO A
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 21, 1996
----------
This Proxy Statement is being furnished to the stockholders of Kenwin
Shops, Inc., a New York corporation (the "Company" or "Kenwin"), in connection
with the solicitation of proxies by the Board of Directors of Kenwin (the
"Board") for use at the special meeting of stockholders of Kenwin to be held on
November 21, 1996 at 12:00 noon at Ramada Airport North, 1419 Virginia
Avenue, Atlanta, Georgia 30337, including adjournments or postponements thereof
(the "Special Meeting").
At the Special Meeting the holders of Common Stock of Kenwin, par value
$1.00 per share (the "Common Stock"), will be asked to consider and vote upon
the following:
1. A proposal to approve and adopt a Management Agreement dated August
16, 1996 between Kenwin and D&A Funding Corporation, Inc., as modified
(the "Management Agreement") pursuant to which D&A has been managing
the day to day business of Kenwin. In addition, in accordance with a
separate consignment agreement dated August 16, 1996 (the "Consignment
Agreement"), D&A is furnishing inventory to Kenwin, to permit its
continued operation. As compensation for its management services, D&A
is being paid $50,000 per annum. It is also being paid a fee equal to
two (2%) percent of the aggregate original cost of goods shipped to
Kenwin. Kenwin will sell to D&A 350,000 shares of authorized but
unissued shares of Common Stock at a purchase price of $.01 per share.
Upon consummation of this purchase of Common Stock, and taking into
account prior open market purchases by affiliates of D&A, purchases by
D&A of 83,978 shares of Common Stock from certain inside stockholders
of Kenwin and the grant to D&A by such inside stockholders of
irrevocable proxies to vote other shares owned by them, D&A will own
48.8% of the issued and outstanding shares of Common Stock, and will
have the right to vote 58.1% of the issued and outstanding shares of
Common Stock.
2. A proposal to approve and adopt an Amendment of Kenwin's Certificate
of Incorporation to reduce the par value of the Common Stock from $1.00
to $.01 per share (the "Charter Amendment").
3. The election of five (5) nominees to the Board of Directors.
4. Such other business as may properly come before the Special Meeting.
The Board is unanimously recommending that the stockholders of Kenwin
vote for the approval and adoption of the Management Agreement and Charter
Amendment, pursuant to which D&A will acquire control of Kenwin, and to elect
the nominees to the Board of Directors. .
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders of Kenwin on or about October 28, 1996.
The date of this Proxy Statement is October 28, 1996.
<PAGE>
No person has been authorized to give any information or to make any
representation, other than those contained in this Proxy Statement in connection
with the solicitation made by this Proxy Statement and, if given or made, such
information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute the solicitation of a proxy
in any jurisdiction in which such solicitation may not lawfully be made.
The delivery of this Proxy Statement shall under no circumstances
create an implication that there has been no change in the information set forth
herein or in the affairs of the Company since the date hereof or that the
information herein is correct as of any time subsequent to its date.
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page Page
<S> <C> <C>
Available Information..................3 The Special Meeting...................9
Incorporation of Certain Documents The Management Agreement...........9
by Reference.........................3 The Parties..........................9
Summary............................... 4 Kenwin Shops, Inc....................9
Risk Factors.........................4 D&A Funding Corporation.............10
Special Meeting......................4 Background to the Management
Vote Required........................4 Agreement.........................11
The Management Agreement.............4 Performance of the Company
The Parties......................4 Subsequent to August 16, 1996.......12
Background.......................4 Recommendation of the Board and
(a) Prior to Introduction to D&A.5 Reasons for the Management Agreement.12
(b) Introduction to D&A..........5 The Management Agreement..........13
Recommendation of the Board......5 Conflicts of Interest.............14
(a) The Management Agreement.....5 Proposed Amendment to the Kenwin
(b) Charter Amendment............6 Certificate of Incorporation.........14
Election of Board of Directors........6 Material Federal Income Tax
Conflicts of Interest...............6 Consequences........................14
Material Federal Income Compensation of Directors and
Tax Consequences..................7 Executive Officers...................15
Certain Financial Data...............7 Summary Compensation Table...........16
Risk Factors...........................7 Options SAR Grants in Last Fiscal
Potential Adverse Effects if Year...............................17
Management Agreement...............7 Employment Agreements................17
is Termimated......................7 Election of Board of Directors.......18
No Assurance of Return to Description of the Capital Stock.....19
Profitiabilty.....................7 Stock Price and Dividend.............19
No Assurance of Listing on Principal Stockholders...............19
National Stock Exchange...........7 Management and Operations
Diluton..............................8 Since August 16, 1996................21
Reliance on Sole Source of Inventory.8 Certain Financial Information........21
Vulnerabilty to Economic Conditions..8 American Stock Exchange..............21
Kenwin's Reliance on Key Personnel...8 Government and Regulatory Approval...21
D&A's Reliance on Key Personnel......8 Expenses.............................21
Appraisal Rights.....................22
Independent Public Accounts..........22
Other Matters........................22
</TABLE>
2
<PAGE>
AVAILABLE INFORMATION
Kenwin is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance with the
Exchange Act, Kenwin files proxy statements, reports and other information with
the Securities and Exchange Commission (the "Commission"). This filed material
can be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, such material can be inspected at the offices of
the American Stock Exchange, Inc., 86 Trinity Place, New York, NY 10006.
Statements contained in this Proxy Statement or in any document
incorporated by reference in this Proxy Statement relating to the contents of
any contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of such contract or
other document filed as an exhibit to this Proxy Statement or such other
documents, each such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following Kenwin documents are incorporated by reference in this
Proxy Statement: (i) Kenwin's Annual Report on Form 10-K for the year ended
December 31, 1995; (ii) Kenwin's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1996 and June 30, 1996; and (iii) Kenwin's Current Report on
Form 8-K for the Month of July, 1996.
All reports and definitive proxy or information statements filed by
Kenwin pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act
subsequent to the date of this Proxy Statement shall be deemed to be
incorporated by reference into this Proxy Statement from the dates of filing of
such documents. Any statement contained in a document incorporated or deemed to
be incorporated in this Proxy Statement shall be deemed to be modified or
superseded for purposes of this Proxy Statement to the extent that a statement
contained herein or in any other subsequently filed documents that also is or is
deemed to be incorporated by reference modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement.
3
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere
in this Proxy Statement. Reference is made to, and this summary is qualified in
its entirety by, the more detailed information contained elsewhere in this Proxy
Statement, in the attached Annexes and in the documents incorporated herein by
reference. Stockholders are urged to read carefully this Proxy Statement and the
attached Annexes in their entirety.
RISK FACTORS
For a discussion of certain factors that should be considered by
holders of Common Stock in connection with their consideration of the Management
Agreement and Charter Amendment, see "RISK FACTORS".
SPECIAL MEETING
The Special Meeting will be held at 12:00 noon on November 21, 1996 Ramada
Airport North, 1419 Virginia Avenue, Atlanta, Georgia 30337. Only holders of
record of Common Stock at the close of business on October 7, 1996 (the "Record
Date") will be entitled to notice of, and to vote at, the Special Meeting. At
the Special Meeting, holders of Common Stock will be asked to consider and vote
upon approval and adoption of the Management Agreement and the Charter
Amendment, copies of which are attached as Annexes I and II, respectively, to
this Proxy Statement, pursuant to which D&A will acquire a controlling interest
in Kenwin. Holders of Common Stock will also be asked to elect nominees to the
Board of Directors and transact such other business as may properly come before
the Special Meeting. See "THE SPECIAL MEETING.
VOTE REQUIRED
Under Section 614(b) of the Business Corporation Law of New York, the
affirmative vote of the holders of a majority of the shares of Common Stock
outstanding and entitled to vote is required for the approval and adoption of
the Management Agreement and the Charter Amendment, and to elect each director.
As of the Record Date, there were 557,160 shares of Common Stock outstanding and
entitled to vote, of which 176,956 shares (approximately 32% of the outstanding
shares of Common Stock) are subject to the voting control of D&A and its
affiliates. See "DESCRIPTION OF THE "COMMON STOCK" AND "PRINCIPAL STOCKHOLDERS."
THE MANAGEMENT AGREEMENT
Pursuant to the Management Agreement, D&A has been managing the day to day
operations of Kenwin, providing its management expertise and the services of its
personnel as necessary, including those of its President, Donald Weiner, to
serve as Chief Executive Officer of Kenwin. As explained in greater detail
hereinafter, as partial consideration for D&A's involvement, Kenwin will sell to
D&A 350,000 of the authorized but unissued shares of Common Stock at a purchase
price of $.01 per share.
THE PARTIES. Kenwin, founded in 1946, currently operates 90 retail stores
(reduced from a peak of 238 stores), including a recently opened mega-store,
selling moderately priced women's and children's clothing and accessories in
Georgia, Alabama, Mississippi, South Carolina, Louisiana, Texas and Arkansas.
Kenwin historically purchased clothing and accessories directly from
manufacturers, and distributed inventory to its stores from its central
warehouse facility located in Tucker, Georgia. Kenwin provides advertising,
4
<PAGE>
bookkeeping, inventory control and executive services for its stores. Kenwin's
stock has been listed and traded on the American Stock Exchange since 1971.
Kenwin has approximately 250 full time employees.
D&A was founded in July, 1996 in order to provide merchandise and
management services to companies engaged in the garment industry. The principal
address of D&A is 1600 Route 110, Farmingdale, NY 11735. The principal
shareholders of D&A are Donald Weiner, director and President, and Arthur Gins,
director and Secretary-Treasurer. Mr. Weiner is presently also the interim Chief
Executive Officer of Kenwin.
BACKGROUND.
(a) Prior to Introduction to D&A. Kenwin voluntarily filed for
bankruptcy protection under Chapter 11 of the federal bankruptcy law in the
United States Bankruptcy Court for the Southern District of New York in
September, 1994. In October, 1995, Kenwin emerged from bankruptcy, operating 102
retail stores. Between October, 1995 and July, 1996, the Company closed six
stores.
During the period from January, 1993 through July, 1996, the Company
experienced consistently decreasing revenues, from $24,367,648 in 1993 to
$19,517,143 in 1994, to $15,916,449 in 1995. For the six month period ended June
30, 1996, revenues further declined to $6,650,601 from $8,587,827 for the same
period in the prior year. The decline in revenues is substantially attributable
to the Company's failure to provide its stores with sufficient quantities of
quality merchandise. As a result of these declining revenues and continuing high
operating expenses, the Company experienced successive and increased net
operating losses in each of the years 1993, 1994, and 1995.
During the period from January 1, 1996 through August 15, 1996, the
Company's buyers were advised verbally by suppliers of garments that due to the
Company's worsening financial situation, the suppliers would be unable to
continue to supply merchandise to the Company.
Without additional inventory from suppliers, the Company was faced with
the prospect of permanently closing all operations. Management reached the
conclusion that the Company would have to find alternate methods to finance the
acquisition of inventory, control costs and increase sales or it would cease
doing business. This would result in the liquidation of its assets and, most
likely, a complete loss of its stockholders' investment.
(b) Introduction to D&A. Throughout this period, the Management of the
Company investigated all possible avenues to avoid cessation of business.
Numerous opportunities were pursued without success. Finally, however, D&A was
introduced to the Company in July, 1996. Discussions were initiated between D&A
and the Management of Kenwin, who sought new managerial expertise and new
merchandise on a consignment basis. Numerous discussions followed with Mr.
Weiner and other representatives of D&A. On August 16, 1996, the Board approved
the Consignment Agreement with D&A, pursuant to which D&A agreed to provide up
to 75,000 dresses to the Company at a price of $12.00, on a consignment basis.
The Company would retail the dresses in its stores at $21.99 and would pay D&A
only for dresses sold.
RECOMMENDATION OF THE BOARD.
The Board of Directors (the "Board") has unanimously determined that
the Management Agreement and the Charter Amendment are fair and in the best
5
<PAGE>
interests of Kenwin and its stockholders, and recommends that the stockholders
of Kenwin vote FOR the approval and adoption of the Management Agreement and the
Charter Amendment. In reaching its decision to approve these proposals, the
Board considered a number of factors. See "MANAGEMENT AGREEMENT-Background".
(a) The Management Agreement. On August 16, 1996, the Board approved
the Management Agreement, pursuant to which D&A has been managing the day to day
operations of the Company. This Agreement also provides that the Company will
sell to D&A 350,000 authorized but unissued shares of Common Stock at a purchase
price of $.01 per share. D&A will also receive (i) a fee of $50,000 per annum
for the services of its management personnel and (ii) a fee equal to two (2%)
percent of the aggregate original cost of goods shipped to the Company pursuant
to the Consignment Agreement.
Pursuant to the Management Agreement, Mr. Weiner was appointed interim
Chief Executive Officer on August 16, 1996 and is currently employed in that
capacity. Ira Abramson resigned as Chief Executive Officer, Chairman of the
Board, Vice President and Assistant Secretary, and entered into a one year
Consulting Agreement at a fee of $50,000.
D&A may terminate the Management Agreement at any time upon 30 days'
written notice to Kenwin. The Company may terminate the Management Agreement
upon a material breach of D&A's obligations thereunder, the insolvency or
bankruptcy of D&A, or if D&A's performance of the Management Agreement violates
any law or governmental regulation.
As interim Chief Executive Officer, Mr. Weiner assumed control of day
to day operations of the Company, including the acquisition, pricing and
distribution of inventory, the opening and closing of stores, and advertising
and merchandising. Under Mr. Weiner's management, the Company has closed an
additional seven stores which were not performing well, but recently opened the
first new mega-store under the Company's auspices. Mr. Weiner has initiated a
renegotiation of Kenwin's line of credit with Sterling National Bank
("Sterling") and engaged in a number of other actions intended to support the
goal of long-term stability and profitability of the Company.
(b) The Charter Amendment. The Charter Amendment provides that the par
value of the Common Stock shall be reduced from $1.00 per share to $.01 per
share. The reduction in par value is required by Section 504 of the New York
Business Corporation Law in order to permit the Company to sell the 350,000
shares of Common Stock pursuant to the Management Agreement at a purchase price
of $.01 per share.
ELECTION OF BOARD OF DIRECTORS
As of the date hereof, the Board is composed of seven (7) directors.
Upon approval of the Management Agreement and the Charter Amendment at the
Special Meeting, the current Board of Directors will resign. The stockholders
will be asked to vote upon and elect a new Board of five (5) directors to fill
the vacancies created by such resignations. The new Board will consist of only
five (5) members at this time, although it is anticipated that additional
directors, including one or more independent directors, will be sought. See
"ELECTION OF BOARD OF DIRECTORS".
6
<PAGE>
CONFLICTS OF INTEREST
Holders of Common Stock should be aware that executive officers of
Kenwin and members of the Board have certain interests in the transactions
contemplated by the Management Agreement and the Charter Amendment that are in
addition to, and may conflict with, the interests of the holders of Common Stock
generally. Messrs. Ira Abramson, a director, former officer, and currently a
consultant to the Company, Robert Schwartz, a director and former President of
the Company, and Richard Moskowitz, a director and President of the Company, and
members of their immediate families and affiliates, entered into an agreement
with D&A dated as of August 16, 1996, providing for D&A's purchase from them of
an aggregate of 83,978 shares of Common Stock. The Agreement provides for a
purchase price of $.50 per share plus successive payments equal to 10% of the
per share net income before taxes of the Company up to an additional $4.00 per
share. D&A also has received irrevocable proxies from these shareholders to vote
an additional 83,978 shares of Common Stock.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES.
Kenwin has been advised by its regular outside accountants, Gross,
Collins + Cress, P.C. (the "Accountants"), that consummation of the Management
Agreement may have adverse Federal income tax consequences to the Company. For a
discussion of possible adverse Federal income tax consequences, see "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES".
CERTAIN FINANCIAL DATA
Historical financial information of Kenwin is set forth in those documents
of Kenwin referred to herein at page 3, "INCORPORATION OF CERTAIN DOCUMENT BY
REFERENCE."
RISK FACTORS
POTENTIAL ADVERSE EFFECTS IF MANAGEMENT AGREEMENT IS TERMINATED
The Management Agreement permits D&A to terminate the Management
Agreement with or without cause upon at least 30 days' prior written notice. If
D&A withdraws its services, the Company would be deprived of essential
managerial and executive services. In such event, there is no assurance that the
Company would be able to implement new business initiatives and strategies
necessary to improve retail sales and cut costs and avoid being forced to cease
operations and close its business.
There is no assurance that if the proposals described in this Proxy
Statement are not approved by the stockholders of Kenwin, D&A will continue to
provide consigned merchandise or management services to Kenwin. In that event,
there is no assurance that Kenwin could locate other sources to provide
essential inventory and the management and merchandising services provided by
D&A. In fact, prior efforts had been unsuccessful.
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NO ASSURANCE OF RETURN TO PROFITABILITY
There is no assurance that the management services provided by D&A
pursuant to the Management Agreement will be sufficient to increase revenues,
reduce costs and return the Company to profitability.
NO ASSURANCE OF LISTING ON A NATIONAL STOCK EXCHANGE
The Company's Common Stock has been traded on the American Stock Exchange
("Amex") for many years. However, the Amex has informed the Company that due to
the Company's financial performance of consistent and growing operating losses
during the past few years it no longer satisfies the Amex listing requirements.
Accordingly, the Amex notified the Company that it intends to delist the Common
Stock from the Amex. The Company has appealed the initial decision to delist by
the Amex. However, there is no assurance that it will be successful. Once
delisting occurs, it may be more difficult to obtain listing on any exchange or
on the NASDAQ System.
DILUTION
D&A and its affiliates currently beneficially own 92,978 of the 557,160
authorized and outstanding shares of Common Stock, representing approximately
16.7% of the Common Stock outstanding (and also hold irrevocable proxies to vote
an additional approximately 15.1% of the Common Stock). Upon the consummation of
the Management Agreement, D&A and its affiliates will beneficially own 442,978
of the 907,160 outstanding shares of Common Stock, representing approximately
48.8% of the Common Stock outstanding. Together with the additional shares which
D&A is entitled to vote, this will give D&A control of the Company and will
cause a substantial dilution to the ownership interest of the current
stockholders. The control of the Company by D&A will limit the influence that
may be exercised by the public stockholders in the election of directors and in
the approval of major corporate actions.
RELIANCE ON SOLE SOURCE OF INVENTORY
Prior to entering into the Consignment Agreement, the Company had
approximately 35 sources of merchandise. Currently, the Company is obtaining all
of its garments from D&A. Limiting the Company's source of supply to D&A may
have an adverse effect on the Company's ability to acquire sufficient inventory,
particularly if there is an interruption in the receipt of inventory from D&A
for any reason.
VULNERABILITY TO ECONOMIC CONDITIONS
The Company's future operating results are dependent upon the economic
environments in which it operates. Demand for the Company's merchandise could be
adversely affected by economic conditions affecting consumer confidence and
discretionary spending generally. The Company expects the demand for its
merchandise (and consequently its results of operations) to continue to be
sensitive to economic conditions and other factors beyond its control. In
addition, retail clothing is highly competitive and price sensitive. Changes in
the volume of goods sold, and shoppers preferences as to fashion styles, may
have significant impact on the overall business of the Company and its growth
and profitability.
KENWIN'S RELIANCE ON KEY PERSONNEL
The future success of Kenwin is dependent on its ability to retain key
personnel. The Management Agreement and consulting and employment agreements
with Messrs. Abramson, Moskowitz, Sauer and Donald Schwartz are material to the
success of the Company. There is no assurance that these individuals can be
retained for sufficient periods of time to assure the return to profitability of
the Company, or that satisfactory other personnel can be found if they are not
retained.
8
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D&A RELIANCE ON KEY PERSONNEL
D&A is highly dependent on its two principal officers, Mr. Weiner and Mr.
Gins. If either or both of these individuals leave D&A, there is no assurance
that D&A will remain a viable entity.
THE SPECIAL MEETING
This Proxy Statement is being furnished to Kenwin stockholders in
connection with the solicitation by the Board of proxies for use at the Special
Meeting to be held on November 21, 1996 at 12:00 noon at Ramada Airport North,
1419 Virginia Avenue, Atlanta, Georgia 30337, including adjournments or
postponements thereof (the "Special Meeting").
At the Special Meeting the holders of Common Stock will be asked to
consider and vote upon:
1. A proposal to adopt and approve the Management Agreement, pursuant
to which D&A is managing the day to day business of Kenwin. As
compensation for its services, D&A is receiving a fee of $50,000 per
annum and two (2) percent of the aggregate original cost of goods
shipped (by D&A) to Kenwin. In addition, Kenwin has agreed to sell to
D&A 350,000 shares of the authorized but unissued shares of Common
Stock for $.01 per share. Upon consummation of such sale of Common
Stock, and taking into account prior open market purchases by
affiliates of D&A, the prior purchases by D&A of 83,978 shares of
Common Stock from certain inside stockholders of Kenwin and the
delivery to D&A by such inside stockholders of irrevocable proxies to
vote additional shares of Common Stock, D&A and its affiliates will
beneficially own 442,978 shares of Common Stock (approximately 48.8% of
the outstanding Common Stock) and will have the right to vote 526,956
shares of Common Stock (approximately 58.1% of the outstanding Common
Stock).
2. A proposal to amend Kenwin's Certificate of Incorporation to reduce
the par value of Common Stock from $1.00 to $.01 per share. The
reduction in par value is required by Section 504 of the BCL which
provides that capital stock may not be issued for consideration less
than par value.
3. The election of five (5) directors to the Board of Directors.
4. To transact such other business as may properly come before the
Special Meeting.
The affirmative vote of the holders of a majority of the shares of Common Stock
present at the Special Meeting and entitled to vote is required for the approval
and adoption of the foregoing proposals and election of each nominee for
director.
THE MANAGEMENT AGREEMENT
THE PARTIES
KENWIN SHOPS, INC. The Company operates 90 retail stores (including the
new mega-store) under the names "Dress for LE$$" and "Kenwin/Dress for Le$$"
which sell a line of moderately priced women's and children's wearing apparel,
located in Georgia, Alabama, Mississippi, South
9
<PAGE>
Carolina, Louisiana, Texas and Arkansas. Its stores are located in leased
premises and are generally situated in the center of local commercial districts.
The stores have all been modernized to the Company's specifications.
The Company operates primarily as a merchandising and selling entity.
It also provides substantial advertising, promotional, bookkeeping, inventory
control and executive services for each of the stores. Since August 16, 1996,
pursuant to the Consignment Agreement, substantially all new inventory for the
Company's stores has been provided by D&A. Until recently, the merchandise was
received at the Company's warehouse in Tucker, Georgia. All distribution of
merchandise and all inventory control was performed at the warehouse. However,
the Company moved out of the warehouse recently and currently, inventory is
being shipped to the stores directly by D&A.
The Company's stores are operated pursuant to a policy of retailing its
merchandise at prices designed to meet local competitive conditions. The
Company's merchandising strategy emphasizes quality leasehold locations,
inventory controls, and localized advertising and promotional policies. It
competes with other local and national retailers, some of which have greater
financial resources than the Company. While the retail apparel business is
highly competitive, the Company believes that if properly financed and provided
with sufficient quantity of inventory it will be able, through merchandise
selection, pricing strategies, and desirable locations, to compete on favorable
terms with its competitors. The Company's business is highly seasonal, with most
of its earnings and sales occurring in the Easter and Christmas seasons.
As interim Chief Executive Officer Mr. Weiner has initiated certain
changes in the business operations of the Company, which the Company anticipates
will result in a higher volume of sales and greater profitability.
Capital Resources and Credit Arrangements. On September 29, 1995, The
Company executed a private label charge card agreement for a period of two years
with the Bank of Louisiana ("BOL") whereby BOL agreed to purchase substantially
all of the Company's outstanding customer accounts receivable, less a
delinquency reserve.
On October 23, 1995, the Company executed a $1,500,000 post-bankruptcy
line of credit with Sterling National Bank of New York ("Sterling"). The line of
credit is secured by the general assets of the Company, including, but not
limited to, cash, property and equipment, and intangibles. The line of credit
bears interest at Sterling's base rate plus 2.5%, payable monthly. The amount of
credit available is dependent on the value of goods in inventory. The Company is
permitted to borrow up to 50% of the value of goods in inventory. As of February
13, 1996, the indebtedness of the Company to Sterling was $918,347. Under Mr.
Weiner's direction, the Company dedicated its efforts to reducing this
indebtedness and, as of October 11, 1996, this indebtedness had been reduced to
$341,180.
D&A FUNDING CORPORATION. D&A was organized in July, 1996 by Mr. Weiner and
Mr. Gins in order to provide merchandise and management services to companies
engaged in the retail sale of clothing. Mr. Weiner's principal occupation is as
President of Dresses For Less, Inc. ("DFL"), a privately owned company which
sells discount women's clothing and accessories through its chain of retail
stores. Mr. Weiner created DFL in 1985 and has been its President continuously
since its inception. Mr. Gins is President of Seam Products, Inc., and other
privately owned companies which manufacture textiles and garments.
10
<PAGE>
BACKGROUND TO THE MANAGEMENT AGREEMENT
Financial Condition of Kenwin On September 19, 1994, Kenwin filed a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code. On October 12, 1995, Kenwin's Plan of Reorganization was confirmed by the
U.S. Bankruptcy Court and Kenwin emerged form bankruptcy. At the time of
confirmation, the Bankruptcy Court determined that the Plan for Reorganization
was fair and feasible and management was confident of Kenwin's future
profitability.
However, after the Company emerged from bankruptcy, its merchandise
suppliers were only willing to extend limited credit terms (e.g., within 15 days
of shipment). These terms put severe demands on the Company's financial
situation, since it was not possible to deliver inventory to the Company's
retail stores and generate sales revenue prior to the Company having to pay its
suppliers.
The Company experienced further financial problems resulting from
difficulty in selling the inventory in its stores. This was due to a combination
of factors, including a period of relatively slow retail sales for the garment
industry generally, and the poor quality of much of its inventory of
merchandise. During the first six months of 1996, Kenwin's revenues declined
22.56% from the same period one year earlier.
The Company was forced to sell much of its merchandise at steeply
discounted prices, simply to move the merchandise out of its stores. Not only
did these discounted sales reduce the Company's anticipated revenues, but they
also required the Company to re-value its inventory at lower values, thereby
restricting the credit available under the Sterling line of credit.
A result of the reduced revenues and restricted line of credit was that
the Company was unable to purchase sufficient quality merchandise to continue to
stock its stores. Attempts to make adjustments by purchasing less expensive
merchandise resulted in the Company receiving goods that did not sell well in
its stores. Faced with inventory that was selling very slowly, the Company
resorted to further mark downs of its retail prices, with the attendant negative
impact on revenues and the Sterling line of credit.
During the period from April, 1996 to July, 1996, the Company's
deteriorating financial condition drew the attention of the major credit
reporting agencies. These agencies reported negatively on the Company's credit
worthiness, which reports led some of the Company's suppliers to stop shipping
merchandise altogether. In addition, during this period, those companies which
supplied the Company with merchandise and which employed factors to finance
their sales to the Company were informed by their factors that they would no
longer finance sales to Kenwin. The suppliers in turn informed the Company that
they would no longer ship merchandise to Kenwin.
During the month of July, 1996, the Board determined that the Company
faced an immediate financial crisis. There was insufficient quality merchandise
in its stores to generate revenues to continue to support the Company as an
on-going business. The Board concluded that new sources of merchandise and
executive leadership were required, or the Company would be forced into a final
bankruptcy and liquidation. Faced with the very real possibility of a complete
loss of value of the Company's Common Stock, the Board sought new arrangements
with other companies in order to preserve the viability of Kenwin.
The Board entered into discussions with several companies, with a view
towards obtaining financing, new merchandise and executive leadership upon terms
11
<PAGE>
that were financially acceptable. None of these discussions were successful.
Finally, D&A was introduced to the Company and the Board entered into
discussions with Mr. Weiner in July, 1996.
During the course of continuing discussions with Mr. Weiner, the
Company's Management continued to pursue all other opportunities that offered
viable alternatives. Nothing emerged from these pursuits. On August, 16, 1996,
the Company and D&A entered into the Consignment Agreement pursuant to which D&A
is providing the Company with all of its requirements for merchandise on a
consignment basis. D&A agreed to ship the merchandise to the Company but retain
an ownership interest in the merchandise (and the risk that it would not sell)
until such time as the merchandise was sold by the Company. The Company
negotiated this arrangement to relieve it of having to pay for the new inventory
before it was able to sell the inventory and realize revenues. D&A accepted the
risk of supplying and shipping merchandise for which it would not receive
payment if the Company was unable to sell the inventory in its stores. The Board
also recognized the need for new executive leadership in order to revitalize the
Company's selection of merchandise and the development of marketing initiatives.
In order to provide such new leadership, on August 16, 1996 the Company entered
into the Management Agreement with D&A. Pursuant to the Management Agreement,
D&A supervises the day to day operations of the Company. As compensation for its
services, D&A receives an annual fee of $50,000 and a payment equal to 2% of the
gross volume of goods shipped by it to the Company. In addition, the Company
agreed to sell an aggregate of 350,000 authorized but unissued shares of Common
Stock to D&A at a purchase price of $.01 per share. Upon the consummation of the
sale of such shares, D&A and its affiliates will beneficially own 442,978 shares
of Common Stock, representing approximately 48.8% of the outstanding shares of
Common Stock.
IT IS THE OPINION OF THE BOARD THAT THE MANAGEMENT AGREEMENT IS FAIR
AND IN THE BEST INTEREST OF THE COMPANY AND THAT THE STOCKHOLDERS SHOULD APPROVE
AND ADOPT IT.
The detailed terms of the Consignment Agreement provide for the sale by
D&A to the Company on consignment of up to 75,000 assorted ladies dresses or
other ladies garments. The purchase price is $12.00 per dress, which is not paid
until the Company resells them at the intended retail price of $21.99. Upon sale
by the Company, it is obligated to pay to D&A the $12.00 purchase price.
PERFORMANCE OF THE COMPANY SUBSEQUENT TO AUGUST 16, 1996
Since August 16, 1996, the Company has obtained sufficient quantities
of quality merchandise to begin to expand inventory in its stores. The Company
has closed seven stores which were not performing well and has recently opened a
9,000 square foot "mega" store in Stone Mountain, Georgia. The Company also
closed its warehouse, at considerable cost saving, and is receiving inventory in
its stores shipped directly from D&A. In addition to the Company's customary
merchandise, a new higher priced (i.e. $29.99) line is being offered for sale in
the new mega store. Additionally, there will be leased departments, generating
substantial rental income, selling "dressy" dresses at $59.99, hats, accessories
and lingerie. A second mega store is planned to open in February, 1997.
RECOMMENDATION OF THE BOARD AND REASONS FOR THE MANAGEMENT AGREEMENT
The Board has determined that the terms of the Management Agreement
(and the Charter Amendment), and the transactions contemplated thereby are fair
to, and in the best interests of, the Company and its stockholders. ACCORDINGLY,
12
<PAGE>
tHE BOARD HAS UNANIMOUSLY APPROVED THE MANAGEMENT AGREEMENT AND THE CHARTER
AMENDMENT AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE
FOR APPROVAL AND ADOPTION OF THE MANAGEMENT AGREEMENT AND THE CHARTER AMENDMENT.
In making this determination, the Board consulted with the Company's operating
officers, as well as its accountants and legal advisors, and considered a number
of factors including, without limitation, the following:
~ There is no assurance that the Company will be able to secure merchandise
from suppliers except through the efforts of D&A
~ D&A is able to implement new business strategies for Kenwin designed to
increase revenues, such as opening mega-stores and locating tenants for
leased departments within such stores
~ D&A will attempt to renegotiate Kenwin's credit facilities with its banks
and other creditors on more favorable terms
~ The transactions enable Kenwin to continue to operate its business while
providing the opportunity to rebuild inventory and improve retail sales
THE MANAGEMENT AGREEMENT
The discussion in this Proxy Statement of the Management Agreement and
the description of the terms of the Management Agreement are subject to and
qualified in their entirety by reference to the Management Agreement, a copy of
which is attached hereto as Annex I and which is incorporated herein by
reference.
Pursuant to the Management Agreement, D&A manages the day to day
operations of the Company in accordance with the policies established by the
Board of Directors. As compensation to D&A, the Company will sell to D&A 350,000
authorized but unissued shares of Common Stock at a purchase price of $.01 per
share. D&A will also receive (i) a fee of $50,000 per annum and (ii) an
additional fee equal to two (2%) percent of the aggregate original cost of goods
shipped to the Company by D&A.
Pursuant to the Management Agreement, Mr. Weiner was appointed interim
Chief Executive Officer on August 16, 1996 and is currently serving in that
capacity. Ira Abramson resigned as Chief Executive Officer, Chairman of the
Board, Vice President and Assistant Secretary, and entered into a one year
Consulting Agreement with the Company at a fee of $50,000.
The Management Agreement provides that upon the occurrence of any of
the following events Kenwin may terminate the Management Agreement on 30 days'
notice
~ upon the affirmative vote of two-thirds of the outstanding shares of Common
Stock
~ in the event that D&A commits a material breach of the Management Agreement ~
if D&A is dissolved or bankruptcy proceedings are initiated ~ if it becomes
unlawful for D&A to perform the material covenants of the
Management Agreement. Such events would require D&A to return the shares
purchased from Kenwin.
D&A may terminate the Management Agreement, with or without cause, upon
30 days' prior notice. If D&A exercises its right to terminate within one year
of the date of the Management Agreement, all shares sold by Kenwin to D&A will
be returned.
13
<PAGE>
CONFLICTS OF INTEREST
Holders of Common Stock should be aware that executive officers of
Kenwin and members of the Board have certain interests in the transactions
contemplated by the Management Agreement and the Charter Amendment that are in
addition to, and may conflict with, the interests of the holders of Common Stock
generally. Messrs. Ira Abramson, a director and consultant to the Company,
Robert Schwartz, a director and former President of the Company, and Richard
Moskowitz, a director and President of the Company, and members of their
immediate families and affiliates entered into an agreement with D&A dated as of
August 16, 1996, which provided for D&A's purchase from such persons of an
aggregate of 83,978 shares of Common Stock. The purchase price is $.50 per share
plus successive payments equal to 10% of the per share net income before taxes
of the Company, totaling not more than an additional $4.00 per share. D&A also
received irrevocable proxies to vote an additional 83,978 shares of Common Stock
owned by these persons.
OTHER OFFERS
The Company's Management engaged in discussions with persons other than D&A
who expressed interest in obtaining control of the Company. No offers or
commitments were made by those persons. If any serious offer, or commitment is
made, Management will communicate if appropriate with the Company's stockholders
and may make recommendation concerning stockholder action to be taken with
respect to such offer or commitment.
PROPOSED AMENDMENT TO THE KENWIN CERTIFICATE OF INCORPORATION
The Board has unanimously approved the Charter Amendment to the
Certificate of Incorporation of Kenwin to provide for reduction in the par value
of Common Stock from $1.00 per share to $.01 per share, a copy of which is
appended hereto as Annex II. The Board unanimously recommends that the
Stockholders approve the Charter Amendment. Pursuant to the Management
Agreement, Kenwin has agreed to sell to D&A authorized but unissued shares of
Common Stock for a purchase price of $.01 per share. Section 504 of the BCL
requires that shares of capital stock not be sold for less than par value. The
par value of Common Stock is presently $1.00 per share and therefore must be
reduced to $.01 in order to permit the sale to go forward.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
consequences of the proposals to holders of Common Stock and does not purport to
be a complete analysis or listing of all potential tax effects relevant to a
decision of whether or not to vote in favor of approval and adoption of the
proposals. The discussion does not reflect the individual tax position of any
holder of Common Stock and does not address the tax consequences that may be
relevant to holders of Common Stock with special tax status, including but not
limited to financial institutions, dealers in securities, holders that are not
citizens or residents of the United States, tax-exempt entities and holders that
acquired Common Stock upon the exercise of employee stock options or otherwise
as compensation. Moreover, the discussion does not address any consequences
arising under the laws of any state, locality or foreign jurisdiction. The
discussion is based on the Internal Revenue Code (the "Code"), treasury
regulations thereunder and administrative rulings and court decisions as of the
date hereof. All of the foregoing are subject to change and any such change
could affect the continuing validity of this discussion. In addition, Kenwin has
not requested a ruling from the Internal Revenue Service (the "IRS") with regard
to any of the federal income tax consequences of the proposals.
Shareholders are urged to consult with their own tax advisors regarding
the tax consequences of the proposals to them, including the effects of federal,
state, local, foreign and other tax laws.
14
<PAGE>
Kenwin may be exposed to an adverse federal income tax consequence as a
result of the consummation of the transactions anticipated by the proposals.
Specifically, the utilization of the existing Net Operating Loss ("NOL") may be
adversely affected as discussed below.
Kenwin has an accumulated NOL of approximately $2.3 million as of December
31, 1995. The Code and regulations generally permit a corporation to carry
forward its NOL for 15 years to offset income. However, the amount that may be
used each year may be limited. The Code places limitations on the use of an
existing NOL to offset income when a more than 50% change in ownership by 5% or
greater stockholders occurs within a three year period (referred to as an "owner
shift"). After such an owner shift, the amount of NOL available to offset income
in subsequent tax years is limited to the value of the corporation immediately
prior to the change multiplied by the published "long term tax-exempt federal
rate".
The NOL would provide an important benefit to Kenwin if it returns to
profitability under D&A's management. However, if an owner shift occurs, the
annual NOL deduction could be substantially limited. This could result in the
expiration of the NOL prior to its complete use. Assuming a combined federal and
state income tax rate of 40%, a substantial loss of tax savings in excess of $1
million may occur. Such a loss of tax savings would adversely affect the cash
flow and earnings per share of Kenwin, and consequently affect its stock price.
Upon completion of the transactions resulting from approval of the
proposals, D&A will own 442,978 shares of Common Stock, which will constitute
48.8% of the authorized and outstanding Common Stock. Accordingly, the proposed
transaction should not result in an owner shift. However, other 5% shareholder
changes combined with this transaction could cause such an owner shift.
Currently Kenwin is unaware of any such other changes which would cause an owner
shift.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
paid by Kenwin during the year ended December 31, 1995 to the Company's Chief
Executive Officer and each of the Company's four other most highly compensated
executive officers (collectively, the "Named Officers").
15
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Name
and Other Annual
Principal Salary Compensation(2) Options/SAR's
Position(1) ($) ($) (#)
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
Donald Weiner, - - -
Interim Chief
Executive Officer
Ira Abramson (3) 110,500 - -
former Chairman of Board,
CEO, Vice President,
Asst. Secretary
Robert Schwartz (4) 91,000 - -
former President
Richard Moskowitz 107,100 - -
President, COO
Kenneth Silberstein 69,077 - -
Treasurer (5)
Kenneth Sauer 53,865 - -
Treasurer
- ----------
<FN>
(1) The Company has a total of four executive officers.
(2) Includes transportation expenses and insurance.
(3) Mr. Abramson resigned his position as Chairman, CEO, Vice-President
and Assistant Secretary on August 16, 1996. Mr. Abramson has entered into
a one year consulting agreement with Kenwin.
(4) Mr. Schwartz resigned as President on August 16, 1996.
(5) Mr. Silberstein resigned as an Executive Officer on May 10, 1995.
</FN>
</TABLE>
16
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
--------------------------------------
No Options or SAR's were issued in Fiscal Year Ended December 31, 1995
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------
Number of Value of
Unexercised Unexercised
Options/SAR's at In the Money
FY-End(#) Options/SAR's at
Exercisable/ FY-End($)
Unexercisable Exercisable/Unexercisable
Name (1)(3) (1)(2)
Ira Abramson - -
Robert Schwartz - -
Richard Moskowitz - -
Kenneth Silberstein - -
Kenneth Sauer 1,000 -
(1) Consists exclusively of Exercisable Options. No SAR's have been issued.
(2) Pursuant to the 1990 Stock Option Plan, on March 9, 1992 the Company
granted 1,000 options to Mr. Sauer. These options are qualified incentive
stock options which have an exercise price of $6.25. These options expire
on March 9, 1997. Pursuant to the 1990 Stock Option Plan, on August 3, 1990
the Company granted 10,000 options to Messrs. Abramson, Schwartz, Moskowitz
and Silberstein. All were qualified incentive stock options which had an
exercise price of $5.64. These options expired on August 3, 1995. None of
the options described above have been exercised to date.
(3) Pursuant to agreements between the Company and 6 of its employees, all
outstanding options were cancelled as of September 20, 1996.
EMPLOYMENT AGREEMENTS
Certain members of current Management have entered into employment
agreements with Kenwin:
Richard Moskowitz entered into an employment agreement with the Company
on August 16, 1996 providing for his employment as President and Chief Operating
Officer for a term of one (1) year at an annual salary of $110,000. The
agreement also contains non-compete, non-disclosure and non-solicitation
clauses.
Kenneth Sauer entered into an employment agreement with the Company on
August 16, 1996 providing for his employment as Treasurer for a term of one (1)
year at an annual salary of $68,500, plus a $500 per month car allowance. The
agreement also contains non-compete, non-disclosure and non-solicitation
clauses.
17
<PAGE>
Donald Schwartz entered into an employment agreement with the Company
on August 16, 1996 providing for his employment as Vice President for a term of
one (1) year at an annual salary of $57,000. The agreement also contains
non-compete, non-disclosure and non-solicitation clauses.
ELECTION OF BOARD OF DIRECTORS
The current directors and executive officers of Kenwin and certain
information about them are set forth below.
Donald Weiner has been employed as interim Chief Executive Officer of
Kenwin since August 16, 1996. Mr. Weiner's principal employment during the past
five years was as President of Dresses For Less, Inc., Farmingdale, New York,
which is not an affiliate of Kenwin.
Immediately prior to the election at the Special Meeting, all of the
current directors will resign. At the Special Meeting the stockholders will be
asked to elect the prospective directors listed below to fill the vacancies
created by such resignations.
Name Age Offices Held
- ---- --- ------------
Arthur Gins 68 Director
Barbara Weiner 44 Director
Edith Gins 66 Director
Richard Moskowitz 47 Director, President
Donald Weiner 45 Director, interim Chief
Executive Officer
Upon the resignation of the current directors of Kenwin, the
stockholders will be asked to elect a new Board of Directors consisting of five
members. Certain information concerning the nominees for election as directors
is set forth below:
Barbara Weiner, 44, is married to Donald Weiner. Mrs. Weiner's
principal employment during the past five years has been as Secretary and
Comptroller of Dresses For Less, Inc., Farmingdale, New York.
Arthur Gins, 68, has been principally employed during the past five
years as President of Seam Products Co., Inc., North Bergen, New Jersey, a
textile and garment manufacturing company, and other privately owned textile and
garment manufacturing companies.
Edith Gins, 66, is married to Arthur Gins. She has been principally employed
during the past five years as Secretary, Treasurer, and Administrative Manager
of Seam Products Co., Inc., North Bergen, New Jersey, and as financial
administrator and manager of other privately owned textile and garment
manufacturing companies.
Richard Moskowitz's principal employment during the past five years has been
as Vice-President and Secretary of Kenwin. Mr. Moskowitz was appointed President
and Secretary of Kenwin on August 16, 1996.
The By-laws of Kenwin provide for a Board of Directors consisting of
seven members. The stockholders will be asked to vote on only five nominees for
director. Additional prospective appointees will be sought and it is intended
that at least one such person be an outside independent director.
18
<PAGE>
DESCRIPTION OF THE CAPITAL STOCK
As of the Record Date, there were 1,000,000 shares of Common Stock
authorized, of which 557,160 were issued and outstanding. All of the outstanding
shares are fully paid and non-assessable. As of the Record Date there were
442,840 shares authorized but unissued or held as treasury shares. All of the
shares of Common Stock have a par value of $1.00 per share. Each holder of
Common Stock is entitled to one vote for each share held.
Pursuant to the Company's 1995 reorganization plan an aggregate of
150,000 shares of Common Stock bearing restrictive legends were issued to
certain creditors (the "Restricted Shares"). The restrictive legend provides
that the holders of such shares agree to give a proxy to Management to vote such
shares in favor of any slate of directors nominated by the Board. However, the
proxy terminates upon the sale of the Restricted Shares in an open market
transaction. The Company believes that many of such Restricted Shares have been
sold in the open market.
Except for the Restricted Shares and the irrevocable proxies held by
D&A to vote 83,978 shares of Common Stock, the Company knows of no other
restrictions or agreements relating to voting any Common Stock.
As of August 15, 1996 there were outstanding stock options to purchase
5,500 shares of Kenwin Common Stock (the "Options") pursuant to the 1990 Stock
Option Plan, which were held by employees of Kenwin. All Options were terminated
by agreement between Kenwin and the respective option holders on September 20,
1996.
Kenwin has not paid cash dividends on its Common Stock during the past
five years. It has been the policy of the Board not to pay dividends, even if
earnings were available to pay such dividends. The nominees for election to the
Board have not expressed any policy with respect to the payment of dividends.
STOCK PRICE AND DIVIDEND
The Common Stock of Kenwin is traded on the Amex under the symbol
"KWN". The approximate number of record holders of Common Stock as of October
7,1996 was 290.
On August 16,1996, the high and low prices for Kenwin's shares quoted
on the Amex were $2.88 and $2.63, and as of October 7, 1996, the high and low
prices for Kenwin's shares quoted on the Amex were $3.38 and $3.00 respectively.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as to all beneficial
owners of more than five percent of Kenwin's Common Stock, as to all directors
and all directors and officers as a group, as of the dates indicated. Unless
otherwise indicated, in each case, the address of the beneficial owner is the
address of the Company.
19
<PAGE>
<TABLE>
After issuance
Name and Address of of share pursuant
Beneficial Owners As of October 7, 1996 to Management Agreement
Number of Individual Number of Percent of Number of Percent of
or Identity of Group Shares Class Shares Class
- -------------------- ------ ----- ------ -----
<CAPTION>
<S> <C> <C> <C> <C>
Donald Weiner 92,978 (1) 16.69% 42,978 (4) 48.83%
Arctic Financial Corp. 31,600 5.67 31,600 3.48%
P.O. Box 128
Oldwick, NJ 08858
Richard Moskowitz 13,849 2.49% 13,849 1.53%
Robert Schwartz 10,043 (2) 1.80% 10,043 1.11%
Ira Abramson 9,844 (3) 1.77% 9,844 1.09%
Martin L. Conrad 500 0.09% 500 0.06%
Henry S. Krauss 500 0.09% 500 0.06%
Donald Schwartz 350 0.06% 350 0.04%
Kenneth Sauer 100 0.02% 100 0.01%
All Officers and Directors 128,164 23.00% 457,277 50.41%
as a Group(8 persons as of
10/7/96; 7 persons after
the Special Meeting)
- ----------
<FN>
(1) Includes shares owned by affiliates of Mr. Weiner: (a) 83,978 shares owned
by D&A, (b) 3,500 shares owned by DPW Enterprises, Inc., (c) 1,500 shares owned
by Mr. Gins and (d) 2,000 shares owned by another shareholder of D&A.
(2) Includes (a) 5,400 shares owned by Mr. Schwartz's wife, (b) 200 shares owned
by Mr. Schwartz as custodian for his minor children, and (c) 200 shares owned by
Mr. Schwartz's wife as custodian for their minor children.
(3) Includes (a) 1,106 shares owned by Mr. Abramson's wife, (b) 417 shares owned
by Mr. Abramsons' wife as custodian for their children, and (c) 187 shares owned
by Mr. Abramson as custodian for his children.
(4) Includes (a) 92,978 shares owned as of October 7, 1996, and (b) 350,000
shares issuable pursuant to the Management Agreement.
</FN>
</TABLE>
20
<PAGE>
MANAGEMENT AND OPERATIONS SINCE AUGUST 16, 1996
Pursuant to the Management Agreement, Mr. Weiner was appointed interim
Chief Executive Officer on August 16, 1996. Mr. Weiner supervises the day to day
operations of the Company, subject to the policies and oversight of the Board.
Since August 16, 1996, Kenwin has obtained sufficient quantities of quality
garments to begin to expand its inventory in its stores and to increase retail
sales. Kenwin plans to close its main warehouse facility and supply its stores
by direct shipment of garments to the individual stores, thereby reducing
inventory costs.
During August and September, 1996 Kenwin closed seven stores which were
not performing well. Since then, Kenwin opened a 9,000 square foot mega store in
Stone Mountain, Georgia. In addition to Kenwin's usual merchandise, the mega
store sells dresses at $29.99 and through leased departments, "dressy" dresses
at $59.99, accessories, hats and lingerie. A second mega store is planned to
open in February, 1997.
Upon election of the new Board of Directors, it is anticipated that the
Company will retain its current executive officers in their respective
positions.
CERTAIN FINANCIAL INFORMATION
Certain historical financial information of Kenwin is set forth in the
document referred to in "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" at
page 3 of this Proxy Statement.
AMERICAN STOCK EXCHANGE
The Common Stock is traded on the Amex under the symbol "KWN". The
approximate number of record holders of Common stock as of October 7, 1996 was
290.
The Company's Common Stock has been traded on the American Stock Exchange
("Amex") since 1971. However, the Amex has informed the Company that due to the
Company's financial performance of consistent and growing operating losses
during the past few years it no longer satisfies the Amex listing requirements.
Accordingly, the Amex notified the Company that it intends to delist the Common
Stock from Amex. The Company has appealed the initial decision to delist by the
Amex. However, there is no assurance that it will be successful. Once delisting
occurs, it may be more difficult to obtain listing on any exchange or on the
NASDAQ System.
GOVERNMENTAL AND REGULATORY APPROVAL
Kenwin will issue 350,000 shares of Common Stock to D&A in a private
transaction which is exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933 as amended. Kenwin is not aware of any other governmental
or regulatory approvals required for the consummation of the Management
Agreement or the Charter Amendment, except for filing of the Charter Amendment
with the New York Secretary of State.
EXPENSES
Kenwin will bear the costs of solicitation of proxies and related
expenses. In addition to solicitation by mail, Kenwin may solicit proxies from
21
<PAGE>
stockholders by telephone, telegram, letter or in person. Brokers, nominees,
fiduciaries and other custodians have been requested to forward solicitation
material to beneficial owners of Common Stock held of record by them.
Kenwin will pay all expenses incurred incident to the preparation and
distribution of the Proxy Statement and carrying out of the transactions
contemplated herein.
APPRAISAL RIGHTS
Under New York Law stockholders of Kenwin who vote against the
Management Agreement and Charter Amendment will not be entitled to appraisal
rights regarding their shares of Common Stock.
INDEPENDENT PUBLIC ACCOUNTANTS
Gross, Collins + Cress, P.C., who have been the Company's independent
public accountants since November, 1993, have been selected previously by the
Board as Kenwin's independent public accountants for the current year.
Representatives of Gross Collins + Cress, P.C. are expected to be present at the
Special Meeting and available to respond to appropriate questions and to make a
statement on its behalf if it is desired that one be made.
OTHER MATTERS
The Board knows of no other business likely to be brought before the
Special Meeting. If, however, other matters come before the Special Meeting, it
is the intention of the persons named in the accompanying proxy to vote in
accordance with their judgment of such matters.
22
Annex I
MANAGEMENT AGREEMENT
--------------------
This AGREEMENT is made as of the 15th day of August, 1996 by and between
KENWIN SHOPS, INC., a New York corporation (the "Company"), and D&A FUNDING
CORP., a New York corporation (the "Manager").
W I T N E S S E T H :
---------------------
WHEREAS, the Manager has expertise in the retail garment industry and in
the supply, warehousing, pricing and financing of inventory generally; and
WHEREAS, the Company has requested the Manager, and the Manager has agreed,
to provide services to the Company in connection with the management and
administration of all aspects of the business of the Company.
NOW, THEREFORE, the parties hereby agree as follows:
1. Services.
---------
1.1 During the term hereof (as provided in Section 2 of this Agreement),
the Manager shall manage the day to day business of the Company subject, always,
to the objectives and policies of the Company as established from time to time
by the Company's Board of Directors (the "Board"), including:
(a) the administration of the day- to-day business of the Company and the
performance of such other administrative functions in connection with the
management of the business of the Company as the Board shall request from time
to time;
(b) negotiating and preparing, or causing to be negotiated and prepared,
any and all agreements, documents and instruments with the Company's suppliers,
vendors, lenders, employees and landlords, including, without limitation, any
amendments to existing purchase agreements, loan agreements, security documents,
leases and other agreements and documents to which the Company is a party as
obligor;
(c) providing to the Company warehousing services in connection with the
Company's operations including, without limitation, the use of the Manager's own
warehouse facilities for the purposes of effecting direct shipment to the
Company's retail stores;
(d) administering the Company's retail business including purchasing,
<PAGE>
owning, pricing and disposing of the Company's inventory;
(e) the provision of the services of Mr. Donald Weiner ("Weiner") as the
acting chief executive officer of the Company, to whom all officers and
employees of the Company shall report, and such other officers and other staff
of suitable skills and experience from among the members of the staff of the
Manager as may be necessary in order to properly perform the services referred
to herein;
(f) keeping all such books and records of things done and transactions
performed on behalf of the Company as the Board may require from time to time,
including liaising with the Company's accountants, financial advisors, lawyers
and other professionals;
(g) from time to time or at any time as requested by the Board, reporting
to the Board concerning the performance of the foregoing services and furnishing
advice and recommendations with respect to all aspects of the business affairs
of the Company;
(h) assisting the Company to comply with the requirements of all applicable
securities laws, including the Securities Act and the Exchange Act; and
(i) such other services as the Company may request and the Manager may
agree to provide from time to time.
1.2. During the term hereof, the Manager shall do all in its power to
maintain and promote the existing business of the Company and shall at all times
and in all respects conform to and comply with the lawful directions,
regulations and recommendations made by the Board and in the absence of any
specific directions, regulations and recommendations as aforesaid and subject to
the terms and conditions of this Agreement shall provide general administrative
and advisory services in connection with the management of the business of the
Company; provided, however, that the parties recognize that the Manager conducts
its own business and shall not be required to devote itself exclusively to the
affairs of the Company but only to such an extent as may be required in order to
perform its duties under this Agreement. The Manager shall be free to act for
and represent any other person, firm, corporation, company or other entity
throughout the world without the consent of the Company whether or not the said
person, firm, corporation, company or other entity is engaged in business in
competition with the Company.
2
<PAGE>
2. Term.
-----
The term of this Agreement shall commence on the date hereof and shall
terminate one year from the date hereof, unless earlier terminated pursuant to
Section 5 hereof.
3. Fees And Expenses:
------------------
(a) In consideration for the Manager's providing the services to the
Company specified in this Agreement (other than with respect to the services
described in Section 1(c) hereof), the Company shall pay the Manager a fee (the
"Fee") at the annual rate of Fifty Thousand Dollar ($50,000.00) per annum,
commencing on the date hereof, payable weekly in arrears. In addition, in
consideration for the Manager's providing the services to the Company specified
in Section 1(c) hereof, the Company shall pay to the Manager, weekly in arrears,
an amount equal to two percent (2%) of the aggregate original cost of goods
shipped to the Company during the immediately preceding week.
In addition, in consideration for the Manager's providing services to the
Company specified in this Agreement, the Company shall issue to the Manager all
of the Company's authorized but unissued stock and treasury stock currently held
in treasury by the Company, aggregating 443,650 shares of the common stock, par
value $1.00 per share, of the Company, at a price of one cent per share all of
which shall be fully paid and nonassessable upon such issuance. In the event
that the manager terminates this agreement within one year from the date hereof,
all such shares shall be returned to the Company.
(b) The Manager shall not be liable to pay, and the Company shall pay from
its own funds, (i) all of the Company's expenses, whether in connection with the
services and activities set forth in Section 1 or otherwise, including the
Company's directors' fees and expenses, (ii) all expenses, including attorneys'
fees and expenses, incurred on behalf of the Company in connection with (A) any
litigation commenced by or against the Company, (B) any investigation by any
governmental, regulatory or self-regulatory authority, (iii) all premiums for
insurance of any nature, including, without limitation, any key man life
insurance, directors' and officers' liability insurance, general liability
insurance and business interruption insurance, (iv) all costs in connection with
the administration of the registration and listing of the Company's securities,
and (v) any and all other fees and expenses that may be payable by the Company
3
<PAGE>
at any time. The Company shall promptly reimburse the Manager for any and all
expenses incurred by the Manager from time to time, which shall include, without
limitation, all attorneys' fees and expenses in connection with the preparation,
negotiation, execution and delivery of this Agreement, the Stock Purchase
Agreement and other agreements referenced or contemplated herein (vi) directors
and officers liability insurances for a period of three years protecting not
only the present officers and directors but also all of the officers and
directors of the Company for the past three years, and (vii) all fees and
expenses of the attorneys for the Company.
4. Relationship Of The Parties.
----------------------------
(a) The Company acknowledges that the Manager shall have no responsibility
hereunder, direct or indirect, with regard to the formulation or implementation
of the business plans, policies, management or strategies (financial, tax, legal
or otherwise) of the Company, all of which are solely the responsibility of the
Company. The Company shall set corporate policy independently through its own
Board and nothing contained herein shall be construed to relieve the directors
or officers of the Company from the performance of their respective duties or to
limit the exercise of their powers.
(b) Without limiting the foregoing, the Manager shall have no liability to
the Company for errors of judgment or for any act or omission, negligent,
tortious or otherwise, unless such act or omission on the part of the Manager
constitutes negligence or willful misconduct.
(c) The Company hereby agrees to defend, indemnify and save the Manager and
its affiliates (other than the Company, if the Company shall at any time be such
an affiliate) officers, directors, employees and agents harmless from and
against any and all loss, claim, damage, liability, cost or expense, including
reasonable attorneys' fees, incurred by the Manager or any such affiliates based
upon a claim by or liability to a third party arising out of the operation of
the Company's business. The Company shall have the right, upon notice to the
Manager, to undertake the defense of the Manager by counsel chosen by the
Company in connection with any such claim or liability and shall pay the fees
and disbursements of such counsel; provided, however, that such counsel is not
reasonably objected to by the Manager.
(d) In all activities under this Agreement the Manager shall be an
independent contractor. Nothing in this Agreement shall be deemed to make the
Manager, or any of its subsidiaries or employees, the agent, employee, joint
venturer or partner of the Company or create in the Manager the right or
authority to incur any
4
<PAGE>
obligation on behalf of the Company or to bind the Company in any way whatsoever
except as may be expressly provided in this Agreement.
(e) The provisions of Section 3(b) and this Section 4 shall survive any
termination of this Agreement.
5. Termination.
------------
5.1. The Company may terminate this Agreement as follows:
(a) At any time upon thirty (30) days' notice for any reason upon the
affirmative vote of the holders of two-thirds of the Company's outstanding
common shares;
(b) In the event:
(i) the Manager commits any material breach of or omits to observe
any of the material obligations or undertakings expressed to be
assumed by it under this Agreement and, such breach or omission,
if capable of remedy, is not remedied to the satisfaction of the
Company within thirty (30) days of notice by the Company of such
material breach or omission and requiring action to remedy the
same; or
(ii)any material consent, authorization, license or approval of, or
registration with or declaration to, governmental or public
bodies or authorities or courts required by the Manager to
authorize, or required by the Manager in connection with, the
execution, delivery, validity, enforceability of admissibility in
evidence of this Agreement or the performance by the Manager of
its obligations under this Agreement which the Company reasonably
considers to be necessary or desirable in order to ensure that
the interests of the Company are not prejudiced and the ability
of the Manager to perform its obligations under this Agreement is
not materially affected, is modified in a manner unacceptable to
the Company or is not granted or is revoked or terminated or
expires and is not renewed or otherwise ceases to be in full
force and effect (each of which is hereinafter referred to as a
"Breach") except as any such Breach shall be caused by Company or
its Board, officers or agents; or
(iii)the Manager takes any action or any legal proceedings are started
or other steps taken for (1) the Manager to be adjudicated or
found bankrupt or insolvent or a petition in bankruptcy to be
filed either by or against the Manager, (2) the winding-up or
dissolution of the Manager or (3) the appointment of a
liquidator, administrator, examiner, trustee, sequestrator,
receiver or similar officer of the Manager over the whole or any
part of its undertakings, assets, rights or revenues, or any
similar event occurs or similar proceeding is taken and not
dismissed within 90 days, with respect to the Manager in any
jurisdiction to which the Manager is subject, in which event this
Agreement shall be automatically terminated without need for
notice on the part of the Company; or
(iv) it becomes unlawful at any time for the Manager to perform all or
any of the material covenants or its obligations under this
Agreement, or for the Company to exercise the rights vested in it
under this Agreement.
(c) Upon the effective date of termination pursuant to this Section, the
Manager shall promptly wind up its service hereunder as may be required in order
to minimize any interruption to the Company's business.
(d) Upon termination the Manager shall, as promptly as possible, submit a
final accounting of funds received and disbursed under this Agreement and any
undisbursed funds of the Company in the Manager's possession or control will be
promptly paid by the Manager as directed by the Company.
5.2 The Manager may terminate this Agreement with or without cause at
any time upon at least 30 days' prior written notice to the Company.
6
<PAGE>
6. Rights Of The Manager And Restrictions On Its Authority.
--------------------------------------------------------
6.1 Notwithstanding the other provisions of this Agreement:
(a) the Manager may act upon any advise, resolutions, requests,
instructions, recommendations, direction or information obtained in writing from
the Company or any banker, accountant, broker, lawyer or other person acting as
agent of or adviser to the Company and the Manager shall incur no liability to
the Company for anything done or omitted or suffered in good faith in reliance
upon such advice, instruction, resolution, recommendation, direction or
information made or given by the Company or its agents and shall not be
responsible for any misconduct, mistake, oversight, error or judgment, neglect,
default, omission, forgetfulness or want of prudence on the part of any such
banker, accountant, broker, lawyer, agent or adviser or other person as
aforesaid;
(b) the Manager shall not be under any obligation to carry out any request,
resolution, instruction, direction or recommendation of the Company or its
agents if the performance thereof is or would be illegal or unlawful or the
Manager reasonably believes such action may subject it to liabilities not
expressly assumed hereby;
(c) the Manager shall incur no liability to the Company for doing or (as
the case may be) failing to do any act or thing which it shall be required to do
or perform or forbear from doing or performing by reason of any provision of any
present or future law or any regulation or resolution made pursuant thereto or
any decision, order or judgment of any court or any lawful request, announcement
or similar action of any person or body exercising or purporting to exercise the
legitimate authority of any government or of any central or local governmental
institution in each case where above entity has jurisdiction.
6.2. Nothing herein shall affect the exercise of central management and
control of the Company by the Board and in particular but without prejudice to
the generality of the foregoing, nothing herein shall derogate from the powers
and duties of the Board to manage and administer the Company and its business.
7. Notices.
--------
All notices, consents and other communications hereunder or necessary to
exercise any rights granted hereunder, shall be in writing, either by prepaid
registered mail or telecopy as follows:
If to the Company:
7
<PAGE>
Kenwin Shops, Inc.
4747 Granite Drive
Tucker, Georgia 30084
Attention: Richard Moskowitz,
Vice President & Secretary
Telephone: (770) 938-0451
Telecopy: (770) 938-4631
With a copy to:
Martin L. Conrad, Esq.
c/o Jaffin, Conrad, Finkelstein & Frank
230 Park Avenue, Suite 510
New York, New York 10169
Telephone: (212) 661-4480
Telecopy: (212) 599-2957
If to the Manager:
D&A Funding Corp.
c/o Dresses For Le$$, Inc.
1600 Route 110
Farmingdale, New York 11735
Attention: Donald Weiner, President
Telephone: (516) 249-3344
Telecopy: (516) 249-1542
With copies to:
Julius Herling, Esq.
1025 Westchester Avenue, Suite 106
White Plains, New York 10604
Telephone: (914) 287-0875
Telecopy: (914) 682-8446
and:
David I. Ferber, Esq.
530 Fifth Avenue
New York, New York 10036-5101
Telephone: (212) 944-2200
Telecopier: (212) 944-7630
8. Entire Agreement, Etc.
----------------------
This Agreement embodies the entire agreement and understanding between
the parties hereto relating to the services to be provided by the Manager to the
Company and may not be amended, waived or discharged except by an instrument in
writing executed by the party against whom enforcement of such amendment, waiver
or discharge is
8
<PAGE>
sought.
9. Miscellaneous.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York and the parties submit to the
jurisdiction of any federal or state courts located in the Borough of Manhattan,
City of New York, in connection with any claim arising out of this Agreement.
This Agreement constitutes the sole understanding and agreement of the parties
hereto with respect to the subject matter thereto. The headings of this
Agreement are for ease of reference and do not limit or otherwise affect the
meaning hereof. All the terms of this Agreement, whether so expressed or not,
shall be binding upon the parties hereto and their respective successor and
assigns. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
10. Effective Date
--------------
This Agreement shall become effective upon the execution of all other
agreements (including but not limited to stock purchase agreements, consulting
agreements for Ira Abramson and employment agreements for Richard Moskowitz)
between D&A Funding Corp. and Kenwin Shops, Inc. and the relevant officers and
directors of Kenwin Shops, Inc. which are contemplated to transfer control of
Kenwin Shops, Inc. Said other agreements shall be executed within seven (7) days
of the date hereof. If said other agreements are not executed within seven (7)
days of the date hereof, either party shall have the option to terminate this
Agreement. However, the Company may not terminate this Agreement if the stock
purchase agreement is not signed by any of the stockholders.
11. Proxies
-------
The Sellers shall deliver to the Manager irrevocable proxies for all of
their stock within 7 days of the date hereof, failing which the Manager shall
have the right to terminate this Agreement.
12. Counterparts.
-------------
This Agreement may be executed in written counterparts which together shall
9
<PAGE>
constitute an instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
D&A FUNDING CORP.
By:________________________
Donald Weiner, President
KENWIN SHOPS, INC.
BY:________________________
Ira Abramson, President
9
<PAGE>
MODIFICATION TO MANAGEMENT AGREEMENT
This modification is made to that certain Management Agreement dated as of
August 15, 1996 by and between Kenwin Shops, Inc. (the "Company") and D&A
Funding Corporation (the "Manager") (the "Management Agreement").
W I T N E S S E T H :
WHEREAS, the Company and the Manager have heretofore entered into the
Management Agreement which provides for, among other things, the sale and
issuance by the Company to the Manager of an aggregate of 443,650 shares of the
Common Stock of the Company at a price of $.01 per share, in consideration for
the Manager's providing services to the Company as therein set forth; and
WHEREAS, the parties wish to modify the Management Agreement as hereinafter
provided.
NOW, THEREFORE, it is agreed as follows:
1. The parties hereby agree to modify the provision set forth in the second
paragraph of Paragraph 3(a) of the Management Agreement, by reducing the number
of shares of Common Stock to be purchased by the Manager from the stated
aggregate of 443,650 shares to 350,000 shares, all of which shall be issued out
of the authorized but unissued Common Stock of the Company.
2. Except as modified by Paragraph 1 above, the Management Agreement is and
shall remain in full force and effect as of the date upon which the same was
executed.
D&A Funding Corporation
By________________________
Donald Weiner, President
KENWIN SHOPS, INC.
By________________________
Richard Moskowitz, President
Annex II
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
KENWIN SHOPS, INC.
Under Section 805 of the
Business Corporation Law
Pursuant to the provisions of Section 805 of the Business Corporation Law,
the undersigned, being the President and Secretary of the corporation, hereby
certify:
FIRST: The name of the Corporation is
KENWIN SHOPS, INC.
SECOND: The Certificate of Incorporation was filed by the Secretary of
State of New York, on December 10, 1946.
THIRD: The amendment to the Certificate of Incorporation effected by this
Certificate is as follows:
The paragraph of the Certificate of Incorporation, relating to the
authorized shares of the corporation, is hereby amended to change the authorized
capital of the corporation from one million (1,000,000) shares, par value one
dollar ($1.00) per share, to one million (1,000,000) shares, par value one cent
($0.01) per share, so as to read as follows:
"The corporation shall be authorized to issue one million
(1,000,000)shares all of which shall have a par value of one
cent ($0.01) per share."
<PAGE>
FOURTH: The amendment of the Certificate of Incorporation was authorized by
the affirmative vote of the holders of at least a majority of the shares
entitled to vote at a meeting of shareholders.
FIFTH: The 557,160 shares, par value one dollar ($1.00) per share which are
currently authorized and outstanding, are hereby changed, at the rate of one for
one, into 557,160 shares, par value one cent ($0.01) per share, issued and
outstanding.
The 442,840 shares, par value one dollar ($1.00) per share which are
currently authorized but are not outstanding, are hereby changed into 442,840
shares, par value one cent ($0.01) per share, authorized but not outstanding.
SIXTH: The stated capital of the corporation is reduced from $557,160.00 to
$5,571.60 by reduction of the par value of the issued shares of the corporation
as set forth in the change stated above.
IN WITNESS WHEREOF, we hereunto sign our names and affirm that the
statements made herein are true under the penalties of perjury, this ___ day of
November, 1996.
KENWIN SHOPS, INC.
By_________________________________
- President
By_________________________________
- Secretary
KENWIN SHOPS, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS - NOVEMBER 21, 1996
The undersigned hereby appoints DONALD WEINER and ARTHUR GINS, or either of
them, proxies with full power of substitution, for the undersigned to vote with
respect to all shares of stock of KENWIN SHOPS, INC. (the "Company") of the
undersigned at the Special Meeting of Stockholders to be held on Thursday,
November 21, 1996 at 10:00 a.m. in the morning, at Kenwin Shops, Inc., 6200
Memorial Drive, Stone Mountain, Georgia, and at any adjournments thereof, with
all the powers the undersigned would possess if personally present, upon the
following matters: (Please mark votes :X)
1. Election of All Directors
Nominees: Richard Moskowitz, Donald Weiner, Arthur Gins, Barbara Weiner and
Edith Gins.
~~VOTE FOR all nominees listed above; except vote withheld from following
~~VOTE WITHHELD from all nominees nominees (if any .
2. Proposal to approve the Management Agreement with D&A Funding Corporation,
which provides for various actions, including the sale to D&A Funding
Corporation of 350,000 shares of Common Stock at $.01 per share.
~~FOR ~~AGAINST ~~ABSTAIN
3. Proposal to amend the Company's Certificate of Incorporation to provide for
a reduction in par value of the Company's Common Stock from $1.00 per share
to $.01 per share.
~~FOR ~~AGAINST ~~ABSTAIN
4. In their discretion upon all other matters as may properly come before the
meeting.
~~FOR ~~AGAINST ~~ABSTAIN
The Proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this Proxy will be voted
for all Proposals.
Dated , 1996
-----------------------------
Signature of Stockholder
Proxy Must Be Signed Exactly
As Name Appears Hereon
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
