<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ]
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
KLEINERT'S INC
-----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
E. GERALD REISENBACK, Secretary
-----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 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:*
----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
*Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_______________________________________________
2) Form Schedule or Registration Statement No.:__________________________
3) Filing Party:_________________________________________________________
4) Date Filed:___________________________________________________________
<PAGE>
KLEINERT'S, INC.
MEETINGHOUSE BUSINESS CENTER
120 W. GERMANTOWN PIKE
PLYMOUTH MEETING, PENNSYLVANIA 19462
------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD April 18, 1996
------
The annual meeting of shareholders of Kleinert's, Inc. (the "Company") will
be held at 10:00 a.m. on April 18, 1996 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 consider a proposal to adopt the Kleinert's, Inc. 1996 Stock Option
Plan.
3. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 14, 1996
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 22, 1996
<PAGE>
KLEINERT'S, INC.
Meetinghouse Business Center
120 West Germantown Pike
Plymouth Meeting, Pennsylvania 19462
------
PROXY STATEMENT
------
Annual Meeting of Shareholders
to be held April 18, 1996
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 22,
1996.
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 and "FOR" the proposal to adopt the 1996 Stock Option Plan.
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
The holders of record of the Company's common stock at the close of
business on March 14, 1996, the record date for the Meeting, will be entitled
to notice of and 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 14, 1996. 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.
1
<PAGE>
<TABLE>
<CAPTION>
Name of Number Percent
Title of Class Beneficial Owner of Shares of Class
-------------- ------------------------------------ ---------------- ----------
<S> <C> <C> <C>
Common Stock Jay B. Andrews 62,500(1) 1.8%
Common Stock Jack Brier 1,318,047(2) 35.6%
Common Stock Kenneth Brier 71,872(3)(4) 2.1%
Common Stock Joseph J. Connors 46,200(5) 1.4%
Common Stock Bernhardt Denmark 50,000(3) 1.5%
Common Stock William Forman 193,000(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 -- --
Common Stock Estate of Louis Yaeger
in care of The Bank of New York 270,785(8) 8.1%
Common Stock All Directors and Executive Officers
as a Group (nine persons) 1,896,869(1)-(7) 56.9%
</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 48,822 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
Currently, the Board of Directors consists of eight members. All of the
present members of the Board of Directors, other than Bernhardt Denmark, are
nominees for election as directors at the Meeting. The Board has determined
to continue to fix the number of directors at eight persons, but has
concluded at this time not to nominate any person to fill the vacancy to be
created on the Board. 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.
The following is a description of the nominees for election as directors
and of the executive officers of the Company.
2
<PAGE>
Jay B. Andrews, age 51, 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 Healthtex, 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 70, 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 46, 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.
William Forman, age 63, 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 74, 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 Advanced Detectors, Inc.(See
"Certain Relationships and Related Transactions").
Marvin Grossman, age 58, 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 57, 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 Scott Mills, Inc. (See "Certain
Relationships and Related Transactions").
Joseph J. Connors, age 39, 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 a director of Mountbatten
Surety, Inc. and of Scott Mills, Inc. (See "Certain Relationships and Related
Transactions").
Gerald E. Monigle, age 51, has been employed as Vice President-Finance of
the Company since February, 1995. Prior to his employment with the Company,
Mr. Monigle was employed by Tasty Baking Company for 15 years as Controller
and Chief Accounting Officer.
COMMITTEES
The Board of Directors maintains an Audit Committee to review findings and
recommendations of the Company's independent public accountants. During
fiscal year 1995, Kenneth Brier and Nathan Greenberg constituted the
committee. The committee met once during fiscal year 1995.
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 1995, Messrs. Forman, Greenberg and
Riesenbach served on the committee. The committee met once during fiscal year
1995.
3
<PAGE>
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 1995, Messrs. Jack Brier and Riesenbach served on the committee. The
committee met once during fiscal year 1995.
BOARD MEETINGS
The Board of Directors held four meetings during the fiscal year ended
December 2, 1995. One 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 receive an annual
retainer of $10,000 each. No other directors received compensation in their
capacity as such during fiscal year 1995; 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 member of
the Board of Directors and a 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 Board of Directors of
Scott Mills, Inc. and 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, 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.
4
<PAGE>
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 1995 exceeded $100,000.
<TABLE>
<CAPTION>
Long-Term
Compensation
--------------
Annual Compensation Number of
------------------------------------------- Securities All Other
Name and Principal Fiscal Other Annual Underlying Compensation
Position Year Salary($) Bonus($) Compensation(1) Options (#) ($)(2)
------------------- -------- --------- --------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack Brier(3) ............... 1995 400,000 153,000 -- -- 140,000
Chairman of the Board; ...... 1994 300,000 124,000(4) -- -- --
Chief Executive Officer ..... 1993 300,000 110,000(4) -- -- --
Marvin Grossman ............. 1995 300,000 -- 61,381(5) -- 35,000
President of Kleinert's, Inc. 1994 298,000 -- 34,353(5) -- --
of Alabama .................. 1993 275,000 25,000 26,727(5) -- --
Jay Andrews ................. 1995 300,000 30,000 -- -- --
Executive Vice President of . 1994 298,000 -- -- -- --
Kleinert's, Inc. of Alabama . 1993 275,000 25,000 -- -- --
Joseph J. Connors ........... 1995 200,000 10,000 -- -- 8,750
Executive Vice President .... 1994 190,000 -- -- -- --
1993 158,333 -- -- -- --
</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 1995.
(2) Represents annual pre-retirement death benefits and annual retirement
benefits payable under the Company's Supplemental Income Plan, which for
Mr. Grossman and Mr. Connors are payable under a 15-year certain and life
annuity. Mr. Brier's benefit becomes payable at age 73 and is payable
over 7 years. 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 $26,492 in 1993
$34,143 in 1994 and $61,381 in 1995).
5
<PAGE>
FISCAL YEAR END 1995 OPTION VALUES
The following table sets forth certain information relating to the number
and value of unexercised options at December 2, 1995. No options were granted
to, and no outstanding options were exercised by, the named executive
officers during fiscal year 1995.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-The-Money Options
at December 2, 1995 at December 2, 1995
(Exercisable/Unexercisable) (Exercisable/Unexercisable)(1)
----------------------------------------- ----------------------------------
<S> <C> <C>
Jack Brier ............. 375,000/-- $4,181,250/--
Marvin Grossman ........ 37,500/-- 331,875/--
Jay Andrews ............ 62,500/-- 553,125/--
Joseph J. Connors ...... 25,000/-- 221,250/--
</TABLE>
- ------
(1) Values are calculated by subtracting the exercise price from the fair
market value of the common stock at December 2, 1995.
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 also 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. In fiscal year 1993, Mr. Brier earned $110,000, ,
which was paid in fiscal year 1994. In fiscal year 1994, Mr. Brier earned
$124,000 under this bonus agreement, which was paid in fiscal year 1995. In
fiscal year 1995 Mr. Brier earned a bonus of $153,000, which was paid in
fiscal year 1996.
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 $29,561, $40,224, $23,096, and
$28,156 respectively, and estimated credited years of service for each is 13,
39, 21 and 23 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.
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.
6
<PAGE>
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 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 fiscal years 1993,
1994 and 1995 under the terms of his employment agreement and two other
officers were granted bonuses for fiscal year 1994 which were paid during
fiscal year 1995.
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
7
<PAGE>
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 1990-1995):
$360 |------------------------------------------------------------------|
| |
| |
| |
| * |
| * |
$310 |------------------------------------------------------------------|
| |
| |
| |
D | |
| |
O $260 |------------------------------------------------------------------|
| * # |
L | |
| |
L | |
| @ |
A $210 |------------------------------------------------------------------|
| # # |
R | |
| & |
S | * |
| # |
$160 |------------------------------------------------------------------|
| @ @ @ |
| &# & & |
| & |
| |
| *@ |
$110 |------------------------------------------------------------------|
| *@&# |
| |
| |
| |
| |
$60 |----|----------|---------|-----------|-----------|-----------|----|
1990 1991 1992 1993 1994 1995
* = KLEINERTS INC. @ = S&P 500 & = S&P TEXTILES
# = S&P MIDCAP 400
<TABLE>
<CAPTION>
Five Year Total Return
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
KLEINERTS INC. * 100 121 178 245 336 318
S&P 500 @ 100 120 142 156 158 217
S&P TEXTILES & 100 147 189 136 141 145
S&P MIDCAP 400 # 100 142 171 193 193 256
</TABLE>
8
<PAGE>
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 December 4, 1994 through December 2, 1995 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. 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. 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.
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 10% of the outstanding voting stock of Scott Mills, Inc.
PERFORMANCE OF MANAGEMENT SERVICES
During fiscal year 1995, the Company provided certain third party services
to Scott Mills, Inc., including data processing and business management
services. The Company also processes accounts payable checks and disburses
funds on behalf of Scott Mills. As a consequence, the balance due to
Kleinert's, Inc. fluctuates based upon the timing of Scott Mills' repayment
to the Company for disbursements made on its behalf. The net receivable due
the Company at December 2, 1995 was $1,561,000, and consisted primarily of
the unreimbursed balance of disbursements made by the Company on behalf of
Scott Mills, Inc. The Company also charged Scott Mills management and service
fees of $86,000 for fiscal year 1995.
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On December 1, 1995, the Company executed a working capital agreement with
Scott Mills, Inc. confirming Scott Mills, Inc.'s obligations to the Company
as described above, and Scott Mills, Inc. granted the Company a first lien
and security interest in substantially all of Scott Mills, Inc.'s assets to
secure its obligation to repay to the Company the amounts due.
OFFICE LEASE
Scott Mills, Inc. subleases office space in Plymouth Meeting, Pennsylvania
for an annual rental of $14,400. Scott Mills, Inc. uses such space as its
executive office.
CUSTOMER AND SUPPLIER RELATIONSHIP
The Company was Scott Mills, Inc.'s largest customer during fiscal year
1995 and individually accounted for 46% of Scott Mills, Inc.'s consolidated
net sales. The Company expects to continue to purchase piece goods from Scott
Mills, Inc. in fiscal year 1996, 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 five percent (5%) of the total
sales of Precision Textile in fiscal year 1995. The shareholders of Precision
Textile are Curt Forman, the son of William Forman and Doron Matzkin, the
son-in-law of Jack Brier, respectively.
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 2, 1995.
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.
PROPOSAL -- ADOPTION OF 1996 STOCK OPTION PLAN
The Company's 1996 Stock Option Plan (the "Plan") was approved by the
Company's Board of Directors and, pursuant to the Plan, options to purchase
an aggregate of 500,000 Shares may be granted to management and key
employees, officers and directors of the Company, including non-employee
directors of the Company who are granted options under a "formula" (the
"Formula Options") which provides for automatic, non-discretionary grants
designed to permit the Plan to comply with certain exemptions from the
"short-swing profits" liability provisions of the Securities Exchange Act of
1934, as amended.
The Board of Directors believes that the availability of a non-cash
compensation benefit in the form of stock options enables the Company to
compete in the marketplace for qualified personnel without having to deplete
its cash resources. Additionally, stock options create an incentive for such
personnel to remain in the employ of or to continue to provide services to
the Company and devote themselves to the Company's success by providing them
with an opportunity to acquire or increase their pecuniary interest in the
Company through equity ownership. The Board believes that the adoption of the
Plan will provide the Company with the ability to retain and attract
qualified personnel, a significant factor in contributing to the Company's
anticipated growth.
The key provisions of the Plan are as follows:
1. Number of Shares. The aggregate maximum number of Shares for which
options may be granted under the Plan is 500,000 Shares. The maximum number
of Shares is subject to adjustment upon the occurrence of a stock dividend,
stock split, recapitalization or certain other capital adjustments.
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2. Eligibility. All management and key employees, including officers of
the Company, are eligible to receive options under the Plan. Eligibility is
determined by the Option Committee. Additionally, non-employee directors
receive Formula Options on a non-discretionary basis as described above.
3. Option Grants. The maximum number of Shares which may be subject to any
one option granted under the Plan to an optionee for any year is 200,000
Shares. In addition, limitations are imposed under the Internal Revenue Code
of 1986, as amended (the "Code") with respect to incentive stock options
granted under the Plan. With respect to Formula Options, each non-employee
director is granted an option to purchase 25,000 Shares upon approval of the
Plan by the Shareholders or upon his election to the Board. Ten thousand
(10,000) Shares of each Formula Option are exercisable immediately on the
grant date and 5,000 Shares become exercisable on each of the three
successive anniversaries of the grant date.
4. Administration. The Plan is administered by a committee composed of two
or more non-employee directors (the "Committee"), which has authority to
determine the optionees, the number of Shares subject to the options, the
option price and other terms and conditions with respect to options granted
under the Plan other than Formula Options granted to non-employee directors
and subject to applicable legal requirements pertaining to incentive stock
options imposed under the Code.
5. Term of Plan. The Plan provides that no option may be granted more than
10 years after the adoption of the Plan.
6. Option Price. The option price per Share for a non-qualified stock
option is determined by the Committee in its discretion but may not be less
than the fair market value per Share at the time of the grant. The option
price for an incentive stock option must at least be equal to 100% of the
fair market value of the Shares at the time of grant; provided, however, that
the option price with respect to an incentive stock option granted to a
stockholder owning ten percent or more of the Common Stock of the Company may
not be less than 110% of the fair market value of the Shares on the date of
grant. On March 14, 1996, the closing bid and asked prices for the Common
Stock were $16 and $17 3/4, respectively.
7. Term of Options. Options granted under the Plan terminate on the
earlier to occur of (a) the option expiration date specified in the option
document, which may not exceed ten years from the date of grant, or five
years from the date of grant with respect to an incentive stock option
granted to a stockholder owning ten percent or more of the Common Stock of
the Company; (b) the expiration of three months from the date the optionee's
employment or service with the Company terminates for any reason other than
disability or death; (c) the expiration of one year from the date the
optionee's employment or service with the Company terminates due to
disability or death; (d) the date upon which a determination is made by the
Committee that the optionee has breached his employment or service contract
with the Company or has been engaged in any type of disloyalty to the
Company, including fraud, embezzlement, theft, commission of a felony and
other similar acts; and (e) the date fixed by the Board as an accelerated
expiration date in the event of a liquidation or dissolution of the Company
or a Change in Control, as defined in the Plan.
8. Payment. An optionee may pay for option Shares in cash, in Shares or in
a combination of cash and Shares.
9. Option Contract. Each grant is set forth in a separate agreement with
the optionee and indicates whether the option is a non-qualified or incentive
option, and the terms and conditions of the option. No option may be
transferred under the Plan except by will or by the laws of descent and
distribution.
10. Provisions Relating to a "Change in Control." In the event of a
"Change in Control," the Committee may take whatever action with respect to
outstanding options it deems necessary or desirable, including accelerating
the expiration date of the options. In addition, options held by employees
and by members of the Board of Directors will become immediately exercisable
in full on a "Change in Control." A "Change in Control" will occur under the
Plan upon requisite stockholder approval (or the Board of Directors, if such
approval is not required) of a plan of liquidation or dissolution or the sale
of substantially all of the assets of the Company. Subject to certain
exceptions, a "Change of Control" will also occur upon requisite approval by
the Company's and the other constituent corporation's stockholders (or the
Board of Directors, if such approval is not required) of the Merger or
consolidation of the Company with or into such other constituent corporation.
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In addition, a Change of Control will occur if certain entities, persons or
groups specified in the Plan have become beneficial owners of or have obtained
voting control over more than 50% of the Company's outstanding Shares, or on the
first date upon which a majority of the Board consists of persons who have been
members of the Board for less than two years, unless the nomination of each new
director who was not a director at the beginning of such period was approved by
a vote of two-thirds of the directors then still in office who were directors at
the beginning of the period.
11. Amendment of the Option Contract and the Plan. Generally, the
Committee has the right to amend an option document, subject to the
optionee's consent if such amendment is not favorable to the Optionee. The
Board may amend the Plan from time to time as it deems advisable; provided,
however, that no amendment may be made which would change the class of
individuals eligible to receive an incentive stock option or increase the
number of Shares as to which options may be granted without obtaining
stockholder approval of such amendment within twelve months from the date of
such amendment. In addition, except in limited circumstances, amendments to
the provisions of the Plan pertaining to Formula Options granted to
non-employee directors may not be made more than once every six months.
12. Federal Income Tax Consequences. The following discussion is intended
to briefly summarize the general principles of Federal income tax law
applicable to options granted under the Plan. A recipient of an incentive
stock option ("ISO") will not recognize taxable income, for regular tax
purposes, upon either the grant or the exercise of ISO. The holder will
recognize long-term capital gain or loss on a disposition of the Shares
acquired upon exercise of the ISO, provided the option holder does not
dispose of the Shares within two years from the date the ISO was granted or
within one year after the Shares were transferred to the option holder.
Currently for regular Federal income tax purposes, long-term capital gain is
taxed at a maximum rate of 28%, while ordinary income may be subject to a
maximum rate of 39.6%. If the option holder satisfies both of the foregoing
holding periods, then the Company will not be allowed a deduction by reason
of the grant or exercise of the ISO.
As a general rule, if the option holder disposes of the Shares before
satisfying both holding period requirements (a "disqualifying disposition"),
the gain recognized by the option holder on the disqualifying disposition
will be taxed as ordinary income to the extent of the difference between (a)
the lesser of the fair market value of the Shares on the date of exercise or
the amount received for the Shares in the disqualifying disposition, and (b)
the adjusted basis of the Shares, and the Company will be entitled to
deduction in that amount. The gain (if any) in excess of the amount
recognized as ordinary income on a disqualifying disposition will be
long-term or short-term capital gain, depending on the length of time the
option holder held the Shares prior to the disposition.
The amount by which the fair market value of the Shares at the time of
exercise exceeds the option price will be included in the computation of such
holder's "alternative minimum taxable income" in the year the option holder
exercises the ISO. If the option holder pays the alternative minimum tax with
respect to the exercise of the ISO, the amount of such tax paid will be
allowed as a credit against regular tax liability in subsequent years. The
option holder's basis in the Shares for purposes of the alternative minimum
tax will be adjusted when income is included in the alternative minimum
taxable income.
A recipient of a non-qualified stock option will not recognize taxable
income at the time of grant, and the Company will not be allowed a deduction
by reason of the grant. Such an option holder will, in general, recognize
ordinary income in the taxable year in which the option holder exercises the
non-qualified stock option, in an amount equal to the excess of the fair
market value of the Shares received at the time of exercise over the exercise
price for the option shares, and the Company will be allowed a deduction in
that amount. Upon the disposition of the Shares subject to the option, an
option holder will recognize long-term or short-term capital gain or loss,
depending upon the length of time the Shares were held prior to the
disposition, equal to the difference between the amount realized on the
disposition and the option holder's basis in the Shares (which basis
ordinarily is the fair market value of the Shares on the date the option was
exercised).
Adoption of the Plan requires the affirmative vote of a majority of the
shares voting in person or by proxy at the Annual Meeting. All of the
directors of the Company have indicated their intent to vote for the
proposal. The Board recommends that stockholders vote FOR the proposal.
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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 22, 1996.
RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS
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 ended December 2, 1995. 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 E. 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 18, 1996
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 18, 1996, or at any adjournments or postponements thereof:
(1) ELECTION OF DIRECTORS
FOR all nominees listed below
(except as marked to the contrary WITHHOLD AUTHORITY
below) / / to vote for all nominees below / /
J. Andrews, J. Brier, K. Brier, 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.)
(2) To adopt the 1996 Stock Option Plan
FOR / / AGAINST / /
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: , 1996
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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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