<PAGE> 1
KLEINERT'S, INC.
MEETINGHOUSE BUSINESS CENTER
120 W. GERMANTOWN PIKE
PLYMOUTH MEETING, PENNSYLVANIA 19462
------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 20, 1995
------
The annual meeting of shareholders of Kleinert's, Inc. (the "Company")
will be held at 10:00 a.m. on April 20, 1995 at the Locust Club of
Philadelphia, 1614 Locust Street, Philadelphia, Pennsylvania 19103, for the
following purposes:
1. To elect directors to hold office until the next annual meeting of
shareholders and until their successors are duly elected and qualified.
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 17, 1995
as the record date for the meeting. Only shareholders of record as of that
date are entitled to notice of and to vote at the meeting and any adjournment
and postponement thereof.
The accompanying form of proxy is solicited by the Board of Directors of
the Company. Reference is made to the attached Proxy Statement for further
information with respect to the business to be transacted at the meeting.
You are cordially invited to attend the meeting. Whether or not you plan
to be present, please promptly sign, date and mail the enclosed proxy in the
enclosed return envelope which requires no postage if mailed within the
United States.
E. GERALD RIESENBACH,
Secretary
March 24, 1995
<PAGE> 2
KLEINERT'S, INC.
MEETINGHOUSE BUSINESS CENTER
120 W. GERMANTOWN PIKE
PLYMOUTH MEETING, PENNSYLVANIA 19462
------
PROXY STATEMENT
------
Annual Meeting of Shareholders
to be held April 20, 1995
GENERAL INFORMATION
This proxy statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Kleinert's, Inc. (the
"Company") for use at the Company's annual meeting of shareholders (the
"Meeting") to be held on the date, at the time and place and for the purposes
set forth in the foregoing notice. This proxy statement, the foregoing notice
and the enclosed proxy are being mailed to shareholders on or about March 24,
1995.
If the enclosed proxy is properly executed and returned prior to voting at
the Meeting, the shares represented thereby will be voted in accordance with
the instructions marked thereon. In the absence of instructions, the shares
will be voted "FOR" the nominees of the Board of Directors in the election of
directors. Management does not intend to bring any matter before the Meeting
other than as indicated in the notice and does not know of anyone else who
intends to do so. If any other matters properly come before the Meeting,
however, the persons named in the enclosed proxy, or their duly constituted
substitutes acting at the Meeting, will be deemed authorized to vote or
otherwise act thereon in accordance with their judgment on such matters. Any
proxy may be revoked at any time prior to its exercise by notifying the
Secretary in writing, by delivering a duly executed proxy bearing a later
date or by attending the Meeting and voting in person.
OUTSTANDING VOTING SECURITIES, VOTING RIGHTS
AND PRINCIPAL SHAREHOLDERS
VOTING SECURITIES
Holders of record of the Company's common stock at the close of business
on March 17, 1995, the record date for the Meeting, will be entitled to vote
on all matters brought before the Meeting. Each shareholder will be entitled
to one vote for each share of common stock held by him. Shareholders are not
entitled to cumulative voting rights in the election of directors. On the
record date for the Meeting, there were outstanding 3,331,431 shares of
common stock of the Company, and 1,665,716 shares are necessary to constitute
a quorum for the Meeting. Abstentions and broker non-votes will be included
for purposes of determining a quorum for the Meeting but will not be
considered as a vote in opposition of any matter on which a vote is taken at
the Meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning the holdings
of each person who was known to the Company to be the beneficial owner of
more than five percent (5%) of the Company's common stock and all shares
beneficially owned by each director, each nominee for director, each
executive officer and by all directors and executive officers as a group at
the close of business on the record date, March 17, 1995. Each of the persons
named below has sole voting power and sole investment power with respect to
the shares set forth opposite his name, except as otherwise noted.
2
<PAGE> 3
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Number of Shares Percent of Class
--------------- ----------------------------------------- ---------------- ----------------
<S> <C> <C> <C>
Common Stock Jay B. Andrews 62,500(1) 1.8%
Common Stock Jack Brier 1,323,847(2) 35.7%
Common Stock Kenneth Brier 71,872(3)(4) 2.1%
Common Stock Joseph J. Connors 46,100(5) 1.4%
Common Stock Bernhardt Denmark 50,000(3) 1.5%
Common Stock William Forman 200,000(6) 6.0%
Common Stock Nathan Greenberg 29,000 0.9%
Common Stock Marvin Grossman 126,250(7) 3.8%
Common Stock E. Gerald Riesenbach -- --
Estate of Louis Yaeger in care of The Bank
Common Stock of New York 270,785(8) 8.1%
All Directors and Executive Officers as a
Common Stock Group (nine persons) 1,909,569(1)-(7) 53.2%
</TABLE>
------
(1) Represents immediately exercisable options to purchase 62,500 shares of
common stock granted under the 1991 Incentive Stock Option Plan. (See
"Management Compensation").
(2) Includes 47,822 shares of common stock owned by Mr. Brier's wife as to which
Mr. Brier disclaims any beneficial interest. Also includes immediately
exercisable options to purchase 375,000 shares of common stock granted under
a Non-Statutory Stock Option Agreement. See "Management Compensation." The
address of Mr. Brier is c/o Kleinert's, Inc., 120 W. Germantown Pike,
Plymouth Meeting, Pennsylvania 19462.
(3) Includes immediately exercisable options to purchase 25,000 shares of common
stock granted under Non-Statutory Stock Option Agreements to each of Messrs.
Kenneth Brier and Denmark.
(4) Includes 400 shares of common stock owned by Mr. Brier's wife for herself
and 900 shares of common stock owned by their minor children, as to which
Mr. Brier disclaims any beneficial interest.
(5) Includes immediately exercisable options to purchase 25,000 shares of common
stock granted under the 1991 Incentive Stock Option Plan. (See "Management
Compensation").
(6) The address of Mr. Forman is 8302 Old York Road, B66, Elkins Park,
Pennsylvania 19117.
(7) Includes immediately exercisable options to purchase 37,500 shares of common
stock granted under the 1991 Incentive Stock Option Plan. (See "Management
Compensation").
(8) The address of The Bank of New York is 48 Wall Street, New York, NY 10015.
ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors has the
authority to determine the number of the Company's directors, provided that
the number not be less than three or more than eleven. The Board has fixed
the number of directors at eight, each of whom will be elected at the Meeting
to serve until the next annual meeting of shareholders and until his
successor is elected and qualified. All of the present directors are nominees
for election as directors. Election of each director requires the affirmative
vote of a majority of the voting stock of the Company which is present in
person or by proxy at the Meeting. As stated above, the enclosed proxy will
be voted FOR the election as directors of such persons unless a contrary
instruction is given.
Management believes that all of the nominees are willing and able to serve
the Company as directors. If any nominee at the time of election is unable or
unwilling to serve or is otherwise unavailable for election, and as a
consequence thereof, other nominees are designated, the persons named in the
proxy or their substitutes will have the discretion and authority to vote or
to refrain from voting for other nominees in accordance with their judgment.
The Board of Directors does not have a nominating committee.
3
<PAGE> 4
The following is a description of the nominees for election as directors
and of the executive officers of the Company:
Jay B. Andrews, age 50, became a director in February 1988. Since July
1987 Mr. Andrews has been employed as Executive Vice President of Sales and
Marketing for Kleinert's, Inc. of Alabama, the Company's wholly-owned
subsidiary. Prior to his employment with the Company, Mr. Andrews was
employed by Health-tex, Inc. for 16 years where he held several positions,
the most recent of which was Senior Vice President and General Sales Manager.
Jack Brier, age 69, has been Chairman of the Board and Chief Executive
Officer of the Company since 1969. Mr. Brier also is Chairman and Chief
Executive Officer of Scott Mills, Inc., positions he has held since the
inception of that company. (See "Certain Relationships and Related
Transactions").
Kenneth Brier, age 45, became a director in January 1985. Since December
1991, Mr. Brier has been the President and Chairman of the Board of
Mountbatten, Inc., a standard Pennsylvania domiciled surety company. Mr.
Brier also has been President of Hammarskjold of Jonkoping Incorporated, a
real estate development corporation, since July 1985. Mr. Brier is the son of
Jack Brier.
Joseph J. Connors, age 38, became Executive Vice President and Assistant
Secretary of the Company in December 1993. Previously, Mr. Connors was Vice
President-Finance from December 1986 to November 1993, and Treasurer from
January 1983 to November 1986. Mr. Connors is also a director of Mountbatten,
Inc. and Scott Mills, Inc. (See "Certain Relationships and Related
Transactions").
Bernhardt Denmark, age 77, became a director in March 1992. Mr. Denmark, a
former President of International Playtex Corporation, previously served as a
director of the Company from 1983 to 1986. Mr. Denmark is Chairman of the
Board and Chief Executive Officer of Xsirius, Inc., a high-technology
research and development company. He also serves as a director of Advanced
Photonix, Inc., a manufacturer of solid state photodetection devices, and as
a trustee of Mark Centers Trust, a Maryland real estate investment trust.
William Forman, age 62, became a director in February 1988. Mr. Forman,
has been a private investor since 1984. Mr. Forman also serves as a director
of Scott Mills, Inc. (See "Certain Relationships and Related Transactions").
Nathan Greenberg, age 73, became a director in March 1992. Mr. Greenberg
founded the accounting firm of Greenberg, Rosenblatt, Kull & Bitsoli, P.C. in
Worcester and Springfield, Massachusetts, in 1958 and has been a member of
that firm since its founding. Mr. Greenberg is a member of the American
Institute of Certified Public Accountants and Massachusetts and Florida
Societies of CPAs. He also is a director of Xsirius, Inc. (See "Certain
Relationships and Related Transactions").
Marvin Grossman, age 57, became a director in December 1981. Since 1982,
Mr. Grossman has served as President and a director of Kleinert's, Inc. of
Alabama.
E. Gerald Riesenbach, age 56, became a director in April 1989. Since
February 1995, Mr. Riesenbach has been a partner in the law firm of Cozen and
O'Connor, general counsel to the Company. Previously, and for more than five
years, he had been a partner in the law firm of Wolf, Block, Schorr and
Solis-Cohen. He also is a director of Diagnostek, Inc., a provider of mail
pharmacy services and contract pharmacy management services, and of Scott
Mills, Inc. (See "Certain Relationships and Related Transactions").
COMMITTEES
The Board of Directors maintains an Audit Committee to review findings and
recommendations of the Company's independent public accountants. During
fiscal year 1994, Kenneth Brier and Nathan Greenberg constituted the
committee. The committee did not meet during fiscal year 1994.
The Compensation Committee is empowered to review the performance of
executive personnel other than the members of the committee and award
appropriate bonuses. During fiscal year 1994, Messrs. Forman, Greenberg and
Riesenbach served on the committee. The committee met once during fiscal year
1994.
4
<PAGE> 5
A Stock Option Committee recommends to the Board of Directors those
executive officers to whom stock options should be granted and the number of
shares of common stock to which such options should be subject. During fiscal
year 1994, Messrs. Jack Brier and Riesenbach served on the committee. The
committee met once during fiscal year 1994.
BOARD MEETINGS
The Board of Directors held four meetings during the fiscal year ended
December 3, 1994. None of the current directors attended less than 75% of the
aggregate number of meetings held by the Board and by the committees on which
such directors served.
COMPENSATION OF DIRECTORS
Bernhardt Denmark, Nathan Greenberg, Kenneth Brier and William Forman each
received $1,000 for each meeting of the Board of Directors and each committee
meeting of the Board which they attended. They also received an annual
retainer of $10,000 each. No other directors received compensation in their
capacity as such during fiscal year 1994; however, directors are reimbursed
for travel and lodging in connection with meeting attendance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jack Brier, Chairman of the Board and Chief Executive Officer of the
Company, also is Chairman of the Board and Chief Executive Officer of Scott
Mills, Inc. Mr. Brier also serves as a member of the Stock Option Committee
of the Company.
Joseph J. Connors, Executive Vice President of the Company, is a director
and member of the Stock Option Committee of Scott Mills, Inc. In his prior
position of Vice President -- Finance of the Company, Mr. Connors oversaw the
financial and accounting functions of Scott Mills when it was a division of
the Company prior to the spin-off of that division's assets to Scott Mills,
Inc. (See "Certain Relationships and Related Transactions").
E. Gerald Riesenbach, a member of the Compensation and Stock Option
Committees of the Company, is also a member of the Stock Option Committee of
Scott Mills, Inc. Mr. Riesenbach also serves as a partner in the law firm of
Cozen and O'Connor, outside general counsel to the Company.
William Forman, a member of the Company's Compensation Committee, also is
a member of the Board of Directors of Scott Mills, Inc.
5
<PAGE> 6
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's
Chief Executive Officer and to each of the Company's other executive officers
whose salary and bonuses during fiscal year 1994 exceeded $100,000.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation ---------------------
------------------------------------------- Number of
Name and Principal Fiscal Other Annual Securities Underlying All Other
Position Year Salary($) Bonus($) Compensation(1) Options (#) Compensation($)(2)
----------------------------- -------- --------- ------------ --------------- --------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Jack Brier(3) ............... 1994 300,000 124,000(4) -- -- 98,000
Chairman of the Board; ...... 1993 300,000 110,000(4) -- -- --
Chief Executive Officer ..... 1992 300,000 -- -- -- --
Marvin Grossman ............. 1994 298,000 -- 34,353(5) -- 35,000
President of Kleinert's, Inc. 1993 275,000 25,000 26,727(5) -- --
of Alabama .................. 1992 271,667 -- 37,793(5) 37,500 (6) --
Jay Andrews ................. 1994 298,000 -- -- -- --
Executive Vice President of . 1993 275,000 25,000 -- -- --
Kleinert's, Inc. of Alabama . 1992 272,917 -- -- 62,500 (6) --
Joseph J. Connors ........... 1994 190,000 -- -- -- 8,750
Executive Vice President .... 1993 158,333 -- -- -- --
1992 138,333 -- -- 25,000 (6) --
</TABLE>
------
(1) Except as set forth in the above table regarding Marvin Grossman, such
compensation did not exceed for any named officer the lesser of $50,000 or
10% of such officer's total annual salary and bonus for 1994.
(2) Represents annual pre-retirement death benefits and annual retirement
benefits payable under the Company's Supplemental Income Plan, all of which
are payable under a 15-year certain and life annuity. Mr. Brier's benefit
becomes payable at age 70. Mr. Grossman's benefit becomes vested ratably
through 1995. Mr. Connors' benefit becomes vested at age 65.
(3) Mr. Brier also devotes significant time to Scott Mills, Inc. as its Chairman
and Chief Executive Officer. The compensation set forth opposite Mr. Brier's
name in the table above reflects compensation paid by the Company only. See
"Certain Relationships and Related Transactions").
(4) See "Employment Agreement."
(5) Includes the value of commissions paid to Mr. Grossman ($37,693 in 1992,
$26,492 in 1993 and $34,143 in 1994).
(6) Represents options granted April 16, 1992, which vested in three equal
cumulative annual installments commencing on the date of grant.
6
<PAGE> 7
FISCAL YEAR END 1994 OPTION VALUES
The following table sets forth certain information relating to the number
and value of unexercised options at December 3, 1994. No options were granted
to, and no outstanding options were exercised by, the named executive
officers during fiscal year 1994.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at December 3, 1994 at December 3, 1994
(Exercisable/Unexercisable) (Exercisable/Unexercisable)(1)
------------------------------- --------------------------
<S> <C> <C>
Jack Brier ....... 375,000/ -- $4,743,750/--
Marvin Grossman .. 37,500/ -- 388,125/--
Jay Andrews ...... 62,500/ -- 646,875/--
Joseph J. Connors 25,000/ -- 258,750/--
</TABLE>
------
(1) Values are calculated by subtracting the exercise price from the fair
market value of the common stock at December 3, 1994.
EMPLOYMENT AGREEMENT
In November 1994, Jack Brier, Chairman of the Company's Board of Directors
and Chief Executive Officer, entered into a three-year employment agreement
with the Company pursuant to which Mr. Brier is paid an annual salary of
$400,000. Pursuant to his current employment agreement and his prior
employment agreement, Mr. Brier is entitled to receive an incentive bonus
equal to 3.1% of the Company's pre-tax income in excess of $1,901,000
(representing pre-tax income for fiscal year 1989) for any fiscal year ending
during the employment term. Mr. Brier did not receive a bonus in fiscal year
1992. In fiscal year 1993, Mr. Brier earned a bonus of $110,000, which was
paid in fiscal year 1994. In fiscal year 1994, Mr. Brier earned a bonus of
$124,000, which was paid in fiscal year 1995.
PENSION PLANS
The Company has a retirement program for substantially all of its
employees, including officers and directors who are employees, subject to
certain age and service requirements. The retirement program is composed of a
formula, which is .8% of annual earnings for each year of service. Normal
retirement is at age 65.
Total projected annual pension benefits at age 65 for Messrs. Brier,
Connors, Grossman and Andrews approximate $25,903, $40,224, $23,100 and
$28,230, respectively, and estimated credited years of service for each is
12, 38, 20 and 22 years, respectively.
REPORTS OF THE COMPENSATION AND STOCK OPTION COMMITTEES
ON
EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee"), composed of outside directors of the Board of Directors of the
Company, reviews the performance of the Company's executive personnel,
develops and makes recommendations to the Board with respect to executive
compensation policies and is empowered by the Board to award appropriate
bonuses. The Stock Option Committee of the Board of Directors (the "Option
Committee"), composed of disinterested persons (as defined under Rule 16b-3
of the Securities Exchange Act of 1934), recommends to the Board those
executive officers to whom stock options should be granted and the number of
shares of common stock to which such options should be subject. (The
Compensation Committee and the Option Committee are sometimes together
referred to herein as the "Committees.")
The Committees have access to independent compensation data and are
authorized, if determined appropriate in any particular case, to engage
outside compensation consultants.
7
<PAGE> 8
The objectives of the Committees are to support the achievement of desired
Company performance, to provide compensation and benefits that will attract
and retain superior talent and reward performance, and to fix a portion of
compensation to the outcome of corporate performance.
The executive compensation program is generally composed of base salary,
discretionary bonuses and long term incentives in the form of stock options.
The compensation program also includes various benefits, including a
supplemental retirement income plan, health insurance plan and a pension plan
in which substantially all of the Company's employees participate.
Base salary levels for the Company's executive officers are competitively
set relative to salaries of officers of companies comparable to the Company
in business, size and location. In the case of the Chief Executive Officer of
the Company, base salary is fixed by an employment contract over a multi-year
period. In November, 1994, the Compensation Committee recommended to the
Board of Directors the terms of a new employment agreement for Jack Brier,
the Company's Chief Executive Officer. Compensatory terms under the
employment agreement were determined on the basis of Mr. Brier's prior
employment agreement with the Company, his contributions to the Company and
the base salary and other benefits typically granted to chief executive
officers of companies within the Company's industry and within the Company's
proximate geographic area.
In other cases, base salary levels are fixed on an annual basis by the
Chief Executive Officer of the Company. In each instance, base salary takes
into account individual experience and performance specific to the Company.
Other than for the Chief Executive Officer, whose annual bonus is fixed by
contract and determined by reference to an amount by which pre-tax income for
any fiscal year exceeds a predesignated threshold, the Compensation Committee
is empowered, upon recommendation by the Chief Executive Officer of the
Company, to recommend for full Board approval the payment of cash bonuses to
other executive officers of the Company. Bonus levels typically are based on
factors relating to overall corporate performance, division and/or identified
product line performance and personal performance. Factors reviewed in
determining corporate, divisional and product line performance are generally
based on achievement of preset financial objectives, for example, by
reference to sales and operating profit targets established on an annual and
quarterly basis by the Board of Directors. Factors determinative of personal
performance include participation and contribution in strategic and business
plan objectives, organizational and management development and progress and
other similar more qualitative factors. The payment of all cash bonuses,
other than to the Chief Executive Officer which is determined by contract,
are entirely discretionary. Mr. Brier earned a bonus for both fiscal years
1993 and 1994 under the terms of his employment agreement and two other
officers were granted bonuses for fiscal year 1993 which were paid during
fiscal year 1994.
The Option Committee believes that employee equity ownership provides
significant additional motivation to executive officers to maximize value for
the Company's shareholders and, therefore, periodically recommends to the
Board of Directors grants of stock options to the Company's executive
officers. Stock options are granted typically at prevailing market price and,
therefore, will only have value if the Company's stock price increases over
the exercise price. The Option Committee believes that the grant of stock
options provides a long term incentive to such persons to contribute to the
growth of the Company and establishes a direct link between compensation and
shareholder return, measured by the same index used by shareholders to
measure Company performance. The terms of options granted by the Board of
Directors, including vesting, exercisability and option term, are determined
by the Board of Directors upon recommendation by the Option Committee, which
recommendation is based upon relative position and responsibility of each
executive officer, historical and expected contributions of each officer to
the Company, previous option grants to executive officers and a review of
competitive equity compensation for executive officers of similar rank in
companies that are comparable to the Company's industry, geographic location
and size. For information regarding recent options granted to the Company's
executive officers, reference is made to the table set forth in the proxy
statement under the caption "Management Compensation."
Compensation Committee: Stock Option Committee:
E. Gerald Riesenbach, Chairman E. Gerald Riesenbach, Chairman
William Forman, Member Jack Brier, Member
Nathan Greenberg, Member
8
<PAGE> 9
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholders' return on the
common stock of the Company for the last five fiscal years with the
cumulative return on the S&P 500 Index, the S&P Midcap 400 Index and the S&P
Textile-Apparel Manufacturers Index over the same period (assuming the
investment of $100 in the Company's common stock and such indices during the
fiscal years 1989-1994):
$310 |-----------------------------------------------------------------------|
| |
| |
$290 |-----------------------------------------------------------------------|
| * |
| |
$270 |-----------------------------------------------------------------------|
| |
| |
$250 |-----------------------------------------------------------------------|
| |
| |
$230 |-----------------------------------------------------------------------|
| |
| |
$210 |---------------------------------------------------------*-------------|
| |
| |
$190 |-----------------------------------------------------------------------|
| # # |
| |
$170 |-----------------------------------------------------------------------|
| # |
| *$ @ @ |
$150 |-----------------------------------------------------------------------|
| @ |
| |
$130 |-------------------------------#---------------------------------------|
| $ |
| @ $ |
$110 |---------------------------------------------------------$-------------|
| $ * |
| @ @ |
$90 |-*--------------#------------------------------------------------------|
| # * |
| $ |
$70 |----------------|--------------|-------------|-----------|-------------|
1989 1990 1991 1992 1993 1994
<TABLE>
<CAPTION>
Base
Period Return Return Return Return Return
Company/Index Name 1989 1990 1991 1992 1993 1994
------------------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
KLEINERTS INC. 100 85.71 103.97 152.78 210.31 288.13
S&P 500 100 96.53 116.17 137.62 151.52 153.11
S&P MIDCAP 400 100 92.88 131.91 159.72 179.76 179.71
S&P TEXTILE -- Apparel Mfrs. 100 80.95 119.16 153.47 110.57 114.89
</TABLE>
Kleinert's = * S&P 500 = @
S&P MIDCAP 400 = # TEXTILE = $
9
<PAGE> 10
COMPLIANCE WITH SECTION 16(A)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of the
Company's common stock (collectively, the "Reporting Persons") to file reports
of ownership and changes in ownership with the Securities and Exchange
Commission and to furnish the Company with copies of these reports. Based on the
Company's review of the copies of these reports received by it, the Company
believes that all filings required to be made by the Reporting Persons for the
period November 28, 1993 through December 3, 1994 were made on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PLAN OF REORGANIZATION -- SPIN-OFF
On November 27, 1993, pursuant to a certain Plan of Reorganization, the
Company transferred substantially all of the assets of its Scott Mills
division, subject to certain liabilities, to Scott Mills, Inc., a
Pennsylvania corporation which, at that time, was an indirect wholly-owned
subsidiary of the Company.
On March 15, 1994, the Company distributed, by dividend to its
shareholders of record as of November 27, 1993, all of the issued and
outstanding common stock of Scott Mills, Inc. (the "Spin-off"). The purpose
of the Spin-off was to create two independent companies which would enable
the Company to concentrate its resources on its core apparel business, which
involves the design, manufacture, marketing and sale of infant's and
children's clothing for sale to retailers under both the Company labels and
private labels, and would enable Scott Mills, Inc. to concentrate its
resources on the textile manufacturing business, which involves the sale of
piece goods to apparel manufacturers, including the Company.
In connection with the Spin-off, the Company contributed $1,300,000 to
Scott Mills, Inc., which represented the amount which the Company anticipated
was sufficient to meet Scott Mills, Inc.'s cash requirements for its 1994
fiscal year. In addition, the Company retained the accounts receivable of the
Scott Mills division and agreed to pay Scott Mills, Inc.'s accounts payable
at November 27, 1993.
LOAN AND FINANCING TRANSACTION
In December 1994, Scott Mills, Inc. obtained a $500,000 subordinated three
year loan from the Company which bears interest at 8.5% per annum and is
scheduled for repayment in full at the end of its term; interest is paid
annually. Also in December of 1994, Messrs. Forman, Greenberg and Riesenbach,
together with certain other persons affiliated with the Company advanced
loans to Scott Mills, Inc. in the aggregate amount of $500,000. These loans
were evidenced by subordinated five year term notes bearing interest at 8.5%
per annum. Mr. Forman loaned $25,000 of such amount, Mr. Greenberg loaned
$50,000 of such amount and Mr. Riesenbach loaned $10,000 of such amount. The
notes are convertible into shares of common stock of Scott Mills, Inc. at a
price of $.50 per share.
In December 1993, Scott Mills, Inc. entered into a factoring agreement
with a lender which agreed to make cash advances up to 85% of Scott Mills,
Inc.'s accounts receivable. In connection therewith, the Company agreed to
indemnify the lender against any liability from certain claims resulting from
the transfer of assets from its Scott Mills division to Scott Mills, Inc.
pursuant to the Spin-off.
COMMON OFFICERS, DIRECTORS AND SHAREHOLDERS
Certain of the current directors of the Company and its Chairman (Mr. Jack
Brier) also serve as officers, directors or employees of Scott Mills, Inc.
and receive compensation from Scott Mills, Inc. for such services.
Accordingly, conflicts of interest may arise with respect to future corporate
opportunities and other matters in light of their relationship with Scott
Mills, Inc. and the Company. Mr. Brier is also the beneficial owner of
approximately 32% of the outstanding voting stock of Scott Mills, Inc.
10
<PAGE> 11
PERFORMANCE OF MANAGEMENT SERVICES
During fiscal year 1994, the Company provided certain services to Scott
Mills, Inc., including financial reporting, insurance, accounting systems,
shareholder relations, legal and human resources, and received for such
services the sum of $208,000. The Company will continue to assist Scott
Mills, Inc. in the administration of certain of these activities and Scott
Mills, Inc. will continue to reimburse the Company, at a rate that will
depend upon the amount of services provided by the Company, until Scott
Mills, Inc. is able to perform the services independently. Scott Mills, Inc.
believes it will develop its own computer systems no later than 1995.
OFFICE LEASE
Scott Mills, Inc. subleases office space from the Company in Plymouth
Meeting, Pennsylvania for an annual rental of $14,400. Scott Mills, Inc. uses
such space as its executive office.
CUSTOMER AND SUPPLIER RELATIONSHIPS
The Company was Scott Mills, Inc.'s largest customer during fiscal year
1994 and individually accounted for 36% of Scott Mills, Inc.'s consolidated
net sales. The Company expects to purchase from Scott Mills, Inc. in fiscal
year 1995 approximately the same quantity of piece goods as it purchased
during fiscal year 1994, although there can be no assurance that the Company
will continue to purchase from Scott Mills, Inc. the same amount of piece
goods that it has purchased in the past.
The Company has an agreement with Precision Textile Company, Inc.
("Precision Textile"), a Florida corporation, pursuant to which Precision
Textile performs contract sewing on behalf of Kleinert's, Inc. of Alabama,
the Company's wholly-owned subsidiary. Payments to Precision Textile by the
Company's subsidiary accounted for more than ten percent (10%) of the total
sales of Precision Textile. The shareholders of Precision Textile are Curt
Forman, the son of William Forman, and Doron Matzkin, the son-in-law of Jack
Brier.
Pursuant to an exclusive licensing arrangement between the Company and
Hygienics Industries, Inc. ("Hygienics"), the Company's adult incontinence
products are distributed through Hygienics. Hygienics is a Pennsylvania
corporation, the sole stockholder of which is Michael Brier, the son of Jack
Brier. Payments to Hygienics under the license agreement accounted for more
than five percent (5%) of the total sales of Hygienics during the fiscal year
ended December 3, 1994.
In general, the Company believes that the terms of the transactions
described in this section are at least as favorable as those that might have
been obtained from unaffiliated third parties.
PROPOSALS OF SECURITY HOLDERS
All proposals of any holder of the Company's voting securities which the
holder desires be presented at the next annual meeting of shareholders and be
included in the proxy statement and form of proxy prepared for that meeting
must be received by the Company no later than November 24, 1995.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
On November 18, 1994, the Company informed the accounting firm of Price
Waterhouse LLP that the Company would not retain it to audit the Company's
financial statements for the Company's fiscal year ending December 3, 1994.
Price Waterhouse LLP had been the Company's principal accountants for the
purposes of auditing its financial statements since the fiscal year ended
December 1, 1990. The report of Price Waterhouse LLP on the consolidated
financial statements of the Company for the past two fiscal years did not
contain an adverse opinion or a disclaimer of opinion, and was not qualified
or modified as to uncertainty, audit scope or accounting principles. The
Company has had no disagreements with its former principal accountants on any
matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure which disagreements, if not resolved to the
satisfaction of its former principal accountants, would have caused it to
make reference to the subject matter of the disagreements in connection with
its report relating to the audits for the Company's two most recent fiscal
years or during the period November 28, 1992 to November 18, 1994.
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The Company's decision not to retain Price Waterhouse LLP was not based on
the expectation that any such disagreement would arise in connection with the
audit of its financial statements for the current fiscal year. The decision
not to retain Price Waterhouse LLP was made by the Company's management
pursuant to the authority granted to it by the Company's Board of Directors.
On November 18, 1994, the Company engaged the accounting firm of Ernst &
Young LLP as its principal accountants to audit the Company's financial
statements for the fiscal year ending December 3, 1994. The Company has not
engaged or otherwise consulted with Ernst & Young LLP regarding any matter
relating to the Company's financial statements, and no written report or oral
advice was provided to the Company by Ernst & Young LLP regarding any
decision of the Company as to any accounting, auditing or financial reporting
issue. A representative of Ernst & Young LLP will be present at the meeting
with the opportunity to make a statement if he desires to do so and to answer
appropriate questions.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies will be borne by the Company. In
addition to the use of the mails, solicitations may be made by telephone and
personal interviews by officers, directors and regularly engaged employees of
the Company. It is not anticipated that anyone will be specifically engaged
by the Company or by any other person to solicit proxies. Brokerage houses,
custodians, nominees and fiduciaries will be requested to forward this proxy
statement to the beneficial owners of the stock held of record by such
persons, and the Company will reimburse them for their charges and expenses
in this connection.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, AT THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
THE SCHEDULES THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUESTS SHOULD BE DIRECTED TO
GERALD MONIGLE, VICE PRESIDENT-FINANCE, AT THE ADDRESS OF THE COMPANY
APPEARING ON THE FIRST PAGE OF THIS PROXY STATEMENT.
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KLEINERT'S, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS--APRIL 20, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Jack Brier and
Joseph J. Connors, or either one of them, as proxies, with full
power of substitution, to vote all shares of stock of Kleinert's,
Inc. (the "Company") which the undersigned would be entitled to vote
if personally present at the annual meeting of shareholders of the
Company to be held at The Locust Club of Philadelphia, 1614 Locust
Street, Philadelphia, Pennsylvania, at 10:00 a.m. on April 20, 1995,
or at any adjournments or postponements thereof:
(1) ELECTION OF DIRECTORS WITHHOLD AUTHORITY
FOR all nominees listed below to vote for all nominees below / /
(except as marked to the
contrary below) / /
J. Andrews, J. Brier, K. Brier, B. Denmark, W. Forman, N. Greenberg,
M. Grossman, E. G. Riesenbach
(Instructions: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the above
list.)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED, OR IF
NO SPECIFICATIONS ARE MADE, WILL BE VOTED FOR THE ELECTION OF THE
ABOVE NOMINEES FOR DIRECTORS AND TO USE THEIR DISCRETION TO VOTE ON
ANY OTHER MATTER AS MAY PROPERLY COME BEFORE THE MEETING.
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THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF MEETING
AND PROXY STATEMENT FURNISHED HEREWITH, AND HEREBY CONFIRMS THAT
THIS PROXY SHALL BE VALID AND MAY BE VOTED WHETHER OR NOT THE
SHAREHOLDER'S NAME IS SET FORTH BELOW OR A SEAL IS AFFIXED OR THE
DESCRIPTION, AUTHORITY OR CAPACITY OF THE PERSON SIGNING IS GIVEN OR
OTHER DEFECT OF SIGNATURE EXISTS.
Dated: , 1995
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Signature of Shareholder
Note: When signing as attorney-in-fact,
executor, administrator, trustee or
guardian, please add your title as such,
and if signer is a corporation, please
sign with full corporate name by duly
authorized officer or officers and affix
the corporate seal. Where stock is
issued in the name of two or more
persons, all such persons should sign.
Please Date, Sign and Return Promptly in the Enclosed Postage Paid
Envelope
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