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 (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 Rule 14a-11(c) or Rule 14a-12 [ ]
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MUNSINGWEAR, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Items 22(a)(2) of Schedule A.
[ ] $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 transactions 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:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
[LOGO]
MUNSINGWEAR, INC.
8000 West 78th Street
Suite 400
Minneapolis, Minnesota 55439
August 16, 1996
To the Stockholders of Munsingwear, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of Munsingwear, Inc. to be held on Friday, September 6, 1996
at 10:00 a.m., Central Daylight Time, at the Radisson Hotel South, 7800
Normandale Boulevard, Bloomington, Minnesota 55439.
At the Annual Meeting, in addition to seeking your approval of ordinary annual
meeting business items, we will request your approval of a proposal to sell all
of Munsingwear's rights to its trademarks and certain associated assets relating
to the retail and professional golf businesses to Supreme International
Corporation ("Supreme") pursuant to a Purchase and Sale Agreement dated as of
May 22, 1996 (the "Agreement"). If the Supreme proposal is approved, the
purchased assets will be transferred to Supreme in exchange for approximately
$18 million in cash. In connection with the sale to Supreme, we request your
approval to amend the Certificate of Incorporation to change the Company's name
to "PremiumWear, Inc.," as required by the Agreement.
The sale to Supreme is a major component in the Company's strategy to maximize
stockholder value. On June 28, 1996, Munsingwear transferred its trademarks and
pending trademark applications in China, Macau, Vietnam and the U.S. territories
of Guam and the Northern Mariana Islands to ITOCHU Corporation, Toyobo Co., Ltd.
and Descente Ltd. for $5 million. The Company is currently in preliminary
discussions with several potential buyers for the remaining Advertising
Specialty Incentive ("ASI"), Uniform and Specialty Distributor business of the
Company, commonly referred to as the "Premium Business." However, the Board of
Directors is continuing to evaluate alternatives for the Premium Business to
maximize stockholder value, including the potential operation of the Premium
Business in the event a suitable offer is not received.
THE BOARD OF DIRECTORS BELIEVES THAT THE AGREEMENT, UPON THE TERMS AND
CONDITIONS SUMMARIZED IN THE ACCOMPANYING PROXY STATEMENT, IS IN THE BEST
INTERESTS OF MUNSINGWEAR STOCKHOLDERS AND THEREFORE UNANIMOUSLY RECOMMENDS THAT
YOU VOTE IN FAVOR OF THE AGREEMENT.
Whether or not you are able to attend the Annual Meeting in person, I urge you
to sign and date the enclosed Proxy and return it promptly in the enclosed
envelope. If you do attend the meeting in person, you may withdraw your Proxy
and vote personally on all matters brought before the meeting.
Very truly yours,
/s/ Lowell M. Fisher
Lowell M. Fisher
President and Chief Executive Officer
MUNSINGWEAR, INC.
8000 WEST 78TH STREET
SUITE 400
MINNEAPOLIS, MINNESOTA 55439
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 6, 1996
To All Holders of Common Stock:
The Annual Meeting of Stockholders of Munsingwear, Inc. ("Munsingwear" or the
"Company") will be held at the Radisson Hotel South, 7800 Normandale Boulevard,
Bloomington, Minnesota 55439, on Friday, September 6, 1996 at 10:00 a.m.,
Central Daylight Time, for the following purposes:
1. To consider and vote upon a proposal (i) to approve the Purchase and
Sale Agreement dated as of May 22, 1996 (the "Agreement") between
Munsingwear, Inc. and Supreme International Corporation, a Florida
corporation ("Supreme"), whereby Munsingwear has agreed to sell a
substantial portion of its assets to Supreme; and (ii) to amend
Munsingwear's Certificate of Incorporation to change the Company's
name, as required by the Agreement, to "PremiumWear, Inc."
2. To elect three directors to serve a three-year term, one director to
serve a two-year term, and one director to serve a one-year term.
3. To approve and ratify the grant of options to purchase 15,000 shares
of the Company's Common Stock to a non-employee director in
connection with services rendered to the Company.
4. To transact such other business as may properly come before the
meeting, or any adjournment or adjournments thereof.
Stockholders of record at the close of business on July 16, 1996 are entitled to
notice of and to vote at the Annual Meeting. Since it is important that your
shares be represented at the meeting, whether or not you personally plan to
attend, you are requested to sign, date and return your proxy card promptly in
the enclosed envelope. Returning your signed proxy will not prevent you from
voting in person at the meeting, should you desire to do so.
By Order of the Board of Directors
/s/ John R. Houston
John R. Houston, Secretary
Minneapolis, Minnesota
August 16, 1996
YOUR PROXY IS IMPORTANT; PLEASE SIGN, DATE AND MAIL IT TODAY.
MUNSINGWEAR, INC.
8000 WEST 78TH STREET
SUITE 400
MINNEAPOLIS, MINNESOTA 55439
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation on behalf
of the Board of Directors of Munsingwear, Inc. (the "Company" or "Munsingwear")
of proxies for the Annual Meeting of Stockholders of the Company to be held at
the Radisson Hotel South, 7800 Normandale Boulevard, Bloomington, Minnesota
55439 on Friday, September 6, 1996 at 10:00 a.m. Central Daylight Time, or any
adjournment or adjournments thereof. This Proxy Statement and the enclosed proxy
card are being mailed to stockholders on or about August 16, 1996.
Proxies may be revoked at any time before they are exercised by the execution
and delivery of a later proxy, and stockholders present at the meeting may
withdraw their proxies and vote in person. Unless revoked, proxies will be voted
and, where a choice is specified with respect to any matter to be voted upon,
the proxies will be voted as specified.
There were outstanding at the close of business on July 16, 1996, the record
date for stockholders entitled to notice of and to vote at the meeting,
2,058,078 shares of Common Stock, and each of such shares is entitled to one
vote at the meeting. Only stockholders of record at the close of business on
July 16, 1996 will be entitled to vote at the Annual Meeting. The presence, in
person or by proxy, of the holders of a majority of the shares of Common Stock
entitled to vote at the Annual Meeting of Stockholders constitutes a quorum for
the transaction of business.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by the
election inspectors appointed for the meeting. The election inspectors will
treat abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum but as unvoted for purposes of
determining the approval of the matter submitted to the stockholders for a vote.
Consequently, an abstention will have the same effect as a negative vote. If a
broker indicates on the proxy that it does not have discretionary authority as
to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT OTHER THAN
THOSE CONTAINED HEREIN, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MUNSINGWEAR
OR ITS MANAGEMENT OR AFFILIATES. EXCEPT AS OTHERWISE EXPRESSLY INDICATED, ALL
INFORMATION IS GIVEN AS OF THE DATE OF THIS PROXY STATEMENT.
AVAILABLE INFORMATION
Munsingwear is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance with that statute,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Room of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Suite 1400, Northwestern Atrium Center, 500
Madison Street, Chicago, Illinois 60604 and Room 1400, Seven World Trade Center,
12th Floor, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at its Washington, D.C.
address at prescribed rates. The Commission also maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements,
and other information regarding registrants that file electronically with the
Commission. Munsingwear Common Stock is listed on the New York Stock Exchange.
Reports, proxy statements and other information concerning Munsingwear may be
inspected at the offices of such exchange.
The Annual Report on Form 10-K for the fiscal year ended January 6, 1996, as
amended, the Annual Report to Stockholders of the Company for the fiscal year
ended January 6, 1996 and the Company's Form 10-Q Quarterly Report for the
quarters ended April 6, 1996 and July 6, 1996 accompany this Proxy Statement.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following Company documents which have been filed by the Company with the
Commission are hereby incorporated by reference in this Proxy Statement: (i)
Annual Report on Form 10-K for the year ended January 6, 1996, as amended,
including the portions of Munsingwear, Inc.'s 1995 Annual Report to Stockholders
incorporated therein by reference, (ii) Quarterly Report on Form 10-Q for the
fiscal quarter ended April 6, 1996, and (iii) Quarterly Report on Form 10-Q for
the fiscal quarter ended July 6, 1996.
All documents filed by the Company pursuant to Sections 13(a) or 15(d) of the
Exchange Act after the date hereof and before the Special Meeting shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy Statement to the
extent that a statement contained herein or in another subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Proxy Statement.
The information relating to the Company's business and its financial condition
appearing in this Proxy Statement does not purport to be comprehensive and
should be read together with, and is qualified in its entirety by, the
information and financial statements (including notes thereto) appearing in the
Annual Report on Form 10-K, the Annual Report to Stockholders and the Quarterly
Reports on Form 10-Q referred to in the first paragraph of this section.
THIS PROXY STATEMENT INCORPORATES CERTAIN DOCUMENTS BY REFERENCE. DOCUMENTS
RELATING TO THE COMPANY (EXCLUDING EXHIBITS UNLESS SPECIFICALLY INCORPORATED
THEREIN) ARE AVAILABLE FROM THE COMPANY WITHOUT CHARGE UPON WRITTEN OR ORAL
REQUEST TO STOCKHOLDER RELATIONS, 8000 WEST 78TH STREET, SUITE 400, MINNEAPOLIS,
MINNESOTA 55439, TELEPHONE NUMBER (612) 943-5000.
Munsingwear, Grand Slam, Slammer USA and Cotton Classics are registered
trademarks of Munsingwear, Inc. and Grand Slam Tour and Penguin Sport are
trademarks of Munsingwear, Inc.
TABLE OF CONTENTS
Page
Summary ................................................................ 4
Proposal No. 1 -- The Agreement and Related Matters .................... 8
Background of and Reasons for the Sale of the Retail and Golf Businesses 8
Fairness Opinion Discussion ............................................ 11
Disadvantages of the Agreement ......................................... 13
Right of First Refusal Agreement ....................................... 14
Management Agreement ................................................... 14
Terms of the Agreement ................................................. 14
Change of Name ......................................................... 17
Business of Supreme .................................................... 17
Operation of Munsingwear After the Closing Date ........................ 18
Interests of Certain Persons in the Agreement .......................... 18
Vote Required .......................................................... 19
Sale of Other Trademarks ............................................... 19
Accounting Treatment ................................................... 20
Federal Income Tax Consequences ........................................ 20
Selected Financial Information ......................................... 22
Selected Consolidated Financial Data of Munsingwear .................... 22
Unaudited Selected Pro Forma Financial Data ............................ 23
Cautionary Statement ................................................... 24
Market Prices of Common Stock/Dividends ................................ 24
Other Proposals to be Voted On ......................................... 25
Proposal No. 2 -- Election of Directors ................................ 25
Proposal No. 3 -- Director Options ..................................... 27
Executive Compensation and Other Information ........................... 28
Security Ownership of Certain Beneficial Owners,
Directors and Executive Officers ..................................... 34
Experts ................................................................ 35
Reorganization ......................................................... 35
Other Matters .......................................................... 36
Stockholder Proposals for 1997 Annual Meeting .......................... 36
Method of Proxy Solicitation ........................................... 36
Pro Forma Financial Information ........................................ F-1
Purchase and Sale Agreement ........................................ Exhibit A
Certificate of Amendment ........................................... Exhibit B
Fairness Opinion ................................................... Exhibit C
SUMMARY
THE FOLLOWING SUMMARY HIGHLIGHTS CERTAIN INFORMATION CONTAINED ELSEWHERE HEREIN
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND SHOULD BE READ IN
CONJUNCTION WITH, THE DETAILED INFORMATION AND FINANCIAL STATEMENTS CONTAINED
HEREIN AND IN THE EXHIBITS HERETO.
THE ANNUAL MEETING
The Annual Meeting is scheduled to be held on September 6, 1996 at 10:00 a.m.,
Central Daylight Time, at the Radisson Hotel South, 7800 Normandale Boulevard,
Bloomington, Minnesota 55439. The close of business on July 16, 1996 is the
Record Date for determining the holders of record of Munsingwear Common Stock
entitled to notice of and to vote at the Annual Meeting and any postponements or
adjournments thereof. On the Record Date, there were 2,058,078 shares of
Munsingwear Common Stock outstanding and entitled to vote and currently
exercisable options to purchase an aggregate 223,712 shares of Common Stock.
PROPOSALS TO BE VOTED ON
At the Annual Meeting, Munsingwear stockholders will consider and vote upon the
following proposals:
PROPOSAL NO. 1: To approve (i) the Agreement, attached as Exhibit A, pursuant to
which Munsingwear will sell to Supreme for $18 million all of its rights to its
trademarks and certain associated assets relating to its retail and professional
golf businesses (the "Retail and Professional Golf Businesses"); and (ii) an
amendment to Munsingwear's Certificate of Incorporation, in the form attached as
Exhibit B, to change the corporate name to PremiumWear, Inc., as required by the
Agreement. If the sale to Supreme is consummated, it is presently anticipated
that the net proceeds to the Company, together with proceeds from (i) the
liquidation of retail and pro golf inventory (which is not being sold to
Supreme) and (ii) the collection of accounts receivable (which are not being
sold to Supreme) would be approximately $24 million, $1 million of which was
deposited with Munsingwear upon execution of the Agreement and used to pay down
bank debt. The Company currently expects to use approximately $7 million of such
proceeds to pay off other liabilities, including remaining bank debt and
transaction costs related to the sale of the Retail and Professional Golf
Businesses, to retain between approximately $1 million and $4 million for
working capital purposes (in addition to approximately $9.8 million of net
assets retained by the Premium Business), and to distribute between $12 million
and $15 million ($5.83 to $7.29 per share, assuming no exercise of outstanding
stock options prior to the distribution) of the remaining proceeds to the
Munsingwear stockholders, the actual amount dictated by the working capital
needs of the Premium Business, if any, as of the closing of the Agreement and
the availability of bank financing to support the Premium Business. See
"Proposal No. 1, The Agreement and Related Matters -- Operation of Munsingwear
After the Closing Date." Such distribution will occur within 180 days of the
date of the Annual Meeting, the precise date depending on certain income tax
factors, and, pending such distribution, an amount of cash sufficient to effect
the distribution will be held in a separate account. See "Federal Income Tax
Consequences." The total proceeds, transaction costs and other related
liabilities are estimates based on the Company's financial statements as of July
6, 1996 and assumptions as to the forecasted activity between that date and the
anticipated closing date of the sale to Supreme, as well as forecasted proceeds
from the liquidation of inventory and collection of accounts receivable. Actual
results will likely differ from these estimates and will directly affect the
actual amount of cash available for distribution to stockholders. See "The
Agreement and Related Matters," "Sale of Other Trademarks," "Selected Financial
Information" and "Cautionary Statement."
The Company is currently in preliminary discussions with several potential
buyers for the ASI, Uniform Markets and Specialty Distributor business
(collectively, the "Premium Business" or the "Remaining Business"). However, the
Board of Directors is continuing to evaluate alternatives for the Remaining
Business to maximize stockholder value, including the potential operation of the
Remaining Business in the event a suitable offer is not received. See "The
Agreement and Related Matters -- Background of and Reasons for the Sale of the
Retail and Professional Golf Businesses; Operation of Munsingwear After the
Closing Date."
PROPOSAL NO. 2: To elect three directors to serve a three-year term, one
director to serve a two-year term, and one director to serve a one-year term.
See "Other Proposals to be Voted On."
PROPOSAL NO. 3: To approve and ratify the grant of options to purchase an
aggregate 15,000 shares of the Company's Common Stock to a non-employee
director in connection with services rendered to the Company. See "Other
Proposals to be Voted On."
Proposals No. 2 and No. 3 will be acted upon whether or not Proposal No. 1 is
adopted.
VOTE REQUIRED TO APPROVE THE PROPOSALS
The affirmative vote of the holders of a majority of all of the outstanding
shares of Munsingwear Common Stock entitled to vote is necessary to approve
Proposal 1 and the affirmative vote of the holders of a majority of the shares
of Munsingwear Common Stock present in person or by proxy at the Annual Meeting
is required to approve Proposals 2 and 3. Approval by holders of Supreme Common
Stock is not required.
Approximately 35% of the outstanding Munsingwear Common Stock is held by the
directors and executive officers of Munsingwear and their affiliates, each of
whom has indicated an intention to vote in favor of Proposals 1, 2 and 3. In
addition, officers and directors own exercisable options representing
approximately 8% of the fully diluted shares. THE BOARD OF DIRECTORS OF
MUNSINGWEAR UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE IN FAVOR OF THE
AGREEMENT. See "The Agreement and Related Matters -- Vote Required."
BACKGROUND OF AND REASONS FOR SALE OF ASSETS
On November 1, 1995, the Company retained The Bridgeford Group ("Bridgeford"),
an investment banking firm, to help it explore a range of opportunities to
maximize stockholder value. The primary focus of this effort was the retail
business where the Company had experienced growing operating losses. Following a
review of the Company's alternatives, the Munsingwear Board of Directors decided
to explore the possible sale of the retail business and authorized Bridgeford to
contact potentially interested acquirors. As a result of this process,
Bridgeford and the Company's management negotiated the Agreement with Supreme.
The Board of Directors determined that the sale to Supreme presented the best
alternative to maximizing stockholder value at this time. See "The Agreement and
Related Matters -- Background of and Reasons for the Sale of the Retail and
Professional Golf Businesses."
OPINION OF FINANCIAL ADVISOR
Bridgeford advised the Board of Directors that, in its opinion, the
consideration to be received by Munsingwear from Supreme for the sale of the
Retail and Professional Golf Businesses to Supreme and the assumption by Supreme
of certain related liabilities, in accordance with the Agreement, is fair, from
a financial point of view, to Munsingwear. See "The Agreement and Related
Matters -- Fairness Opinion" and Exhibit C.
BUSINESS OF SUPREME
Supreme International Corporation designs, imports and markets fashion-oriented
moderate and better men's and boys' sportswear under the brand names Natural
Issue(R), Textures by Natural Issue(tm) , Albert Nipon, Feldini(R), Gianfranco
Ruffini(R), Career Club(R), CC Sport(R), Monte Carlo(tm), Tippos, and others.
Supreme's products are sold to department stores, chain stores and specialty
retail stores throughout the United States and Puerto Rico. The address of
Supreme's principal executive offices is 7495 N.W. 48th Street, Miami, Florida
33166, and its telephone number is (305) 592-2830. See "The Agreement and
Related Matters -- Business of Supreme."
CONDITIONS; TERMINATION; REGULATORY APPROVAL
Consummation of the Agreement is subject to various conditions, including
approval of the Agreement by holders of Munsingwear Common Stock; the accuracy
of the parties' representations and warranties; the delivery of required
agreements, instruments and documents; the absence of legal proceedings
challenging the consummation of the Agreement; and certain other conditions. The
Agreement may be terminated under certain conditions, including, but not limited
to, (i) the mutual consent of both parties, (ii) either party's right to
terminate in the event of any law or regulation preventing the consummation of
the Agreement, or a material breach by the other party of its representations,
warranties or agreements, (iii) the failure of the other party to meet all
conditions precedent to consummation of the Agreement or (iv) Supreme's right to
terminate upon the occurrence of a "Trigger Event" (defined in the Agreement to
be either that Munsingwear shall have entered into or publicly announced its
intention to enter into a proposal with another party to acquire all or any
significant part of the assets being sold to Supreme or that the Munsingwear
Board of Directors shall have withdrawn or materially modified its approval of
the Agreement). If Supreme terminates the Agreement as a result of a Trigger
Event, Munsingwear may be required to pay Supreme $1,000,000 (plus the return of
the $1,000,000 deposit made by Supreme), and the Agreement would be deemed to
have been terminated without further liability to Munsingwear or Supreme. See
"The Agreement and Related Matters -- Terms of the Agreement -- Conditions to
Closing; Termination."
Consummation of the Supreme transaction pursuant to the Agreement was subject to
clearance by the Federal Trade Commission and United States Department of
Justice of the Notification and Report Form under the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, which clearance was
granted effective July 19, 1996. See "The Agreement and Related Matters -- Terms
of the Agreement."
CLOSING DATE
The Agreement provides that the sale of Munsingwear's assets to Supreme pursuant
to the Agreement must take place on or before September 30, 1996 (the "Closing
Date"), unless otherwise agreed by Supreme and Munsingwear. The Closing is
currently expected to occur following the Annual Meeting on September 6, 1996.
See "The Agreement and Related Matters -- Terms of the Agreement."
PAYMENT OF CONSIDERATION
At the Closing, Supreme shall pay to Munsingwear, at the election of Supreme,
(a) $18 million in cash payable at the Closing, or (b) $18.4 million, payable $9
million in cash and $9.4 million in a non-interest bearing senior note payable
six months after the Closing, secured by an irrevocable letter of credit or
other security which may be utilized as the sole collateral for a non-recourse
loan to Supreme immediately following the Closing in an amount of $9 million. If
Supreme elects alternative (b), Munsingwear would be able to access the entire
$18 million by using the secured note as collateral for a $9 million loan.
Munsingwear has agreed to deposit $350,000 of the purchase price in escrow at
the time of closing to cover the costs incurred in connection with a certain
trademark litigation which Supreme has agreed to assume. See "The Agreement and
Related Matters -- Terms of the Agreement."
BUSINESS OF THE COMPANY PENDING THE SALE OF ASSETS
Simultaneous with the execution of the Agreement, the Company and Supreme
entered into a Management Agreement, under which Supreme agreed to manage the
operation of the Retail and Professional Golf Businesses being purchased,
including the sale of Munsingwear's Fall and Holiday Retail and Professional
Golf product lines, management of the Munsingwear sales force and assistance in
the collection of accounts receivable. See "The Agreement and Related Matters --
Terms of the Agreement."
OPERATION OF MUNSINGWEAR AFTER THE CLOSING DATE
Munsingwear is currently in preliminary discussions with several potential
buyers for the remaining Advertising Specialty Incentive ("ASI"), Uniform and
Specialty Distributor business of the Company, commonly referred to as the
"Premium Business." However, the Company will continue to consider alternatives
for the Premium Business to maximize stockholder value, including the potential
operation of the Premium Business in the event a suitable strategic offer is not
received. The Premium Business represented approximately $16 million, or 31% of
the Company's total net sales for the year ended January 6, 1996 and
approximately $12.4 million, or 38% of the Company's total net sales for the six
months ended July 6, 1996. The Premium Business consists primarily of numerous
ASI customers (distributors of business incentive products), Specialty
Distributors (higher volume incentive distributors who service the ASI customer
base) and companies that purchase coordinated clothing for uniforms for
employees and agents.
SALE OF OTHER TRADEMARKS
On June 28, 1996, Munsingwear sold the Company's interest in the Munsingwear,
Grand Slam and Penguin trademarks in the Peoples Republic of China, Vietnam,
Macau and North Korea to ITOCHU Corporation, Toyobo Co., Ltd. and Descente
Ltd. (collectively, "ITOCHU") for $5 million in cash. ITOCHU previously
purchased the Munsingwear trademarks in Japan, Taiwan, South Korea and Hong
Kong, and has made Munsingwear a dominant golf apparel brand in Japan.
Proceeds from the sale were used to reduce the Company's bank loan. See "Sale
of Other Trademarks."
FEDERAL INCOME TAX CONSEQUENCES
If the Supreme transaction is consummated, the Company intends to make a
distribution of cash to the stockholders of Munsingwear. The receipt of cash by
a Munsingwear stockholder will be a taxable transaction for such stockholder for
federal income tax purposes. It is the Company's intention to maximize the
portion of the distribution characterized as a return of capital, which would
result in a capital gain only to the extent the return of capital exceeds the
stockholder's basis in the stock, and to minimize the portion characterized and
taxed as ordinary income. In order to achieve this objective, the distribution
will occur within 180 days of the Annual Meeting. Stockholders are urged to
consult their own tax advisors. See "Federal Income Tax Consequences."
MARKET PRICES
The closing sale price of the Company's Common Stock as listed on the New York
Stock Exchange was (i) $7.00 on May 21, 1996, the last trading day prior to the
announcement of the proposed sale of assets to Supreme pursuant to the
Agreement, and (ii) $9.50 on August 14, 1996, the last trading day for which
closing prices were available prior to the date of this Proxy Statement. See
"Market Prices of Common Stock/Dividends."
INTERESTS OF CERTAIN PERSONS IN THE AGREEMENT
Certain of the present directors of Munsingwear hold or represent a significant
number of shares of Munsingwear Common Stock, either directly or indirectly, and
will receive their pro rata share of any distribution made to stockholders. See
"The Agreement and Related Matters -- Interests of Certain Persons in the
Agreement."
PROPOSAL NO. 1
THE AGREEMENT AND RELATED MATTERS
THE TRANSACTION PROVIDED FOR IN THE AGREEMENT HAS BEEN APPROVED BY THE BOARDS OF
DIRECTORS OF SUPREME AND MUNSINGWEAR. THE MUNSINGWEAR BOARD OF DIRECTORS
BELIEVES THAT THE AGREEMENT IS IN THE BEST INTERESTS OF MUNSINGWEAR STOCKHOLDERS
AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE PROPOSAL.
BACKGROUND OF AND REASONS FOR THE SALE OF THE RETAIL AND PROFESSIONAL GOLF
BUSINESSES
The Company was founded 110 years ago in 1886 as a manufacturer of
men's underwear. Throughout the early 1900's, the Company was an innovator of
new textile and apparel manufacturing processes and, during the 1940's and
1950's, expanded its product lines, acquired a women's intimate apparel company
and, in 1955, introduced the Grand Slam collection of golf apparel bearing the
Penguin logo. In late 1989, the Company began down-sizing its operations after
pursuing an unsuccessful growth-through-acquisition strategy in the mid-1980's.
After suffering losses of $89 million between 1987 and 1990, the Company, on
July 3, 1991, filed a voluntary petition for bankruptcy under Chapter 11
together with a proposed Plan of Reorganization. The Company emerged from
bankruptcy on October 29, 1991 a much smaller company with an unleveraged
balance sheet.
Upon emerging from reorganization in 1991, the Company adopted a strategy of
licensing its brands for general use in the apparel industry and limiting its
own manufacturing and sales to golf shirts, a business it had been active in
since 1954. The Company entered into a number of regional and worldwide
licensing agreements for the manufacture and sale of specific products
establishing a stream of royalty income with significant up-front payments and
guaranteed minimum royalties, generally over a three to five year period. While
this strategy increased royalty income, licensing gains were offset by
increasing operating losses. Beginning in 1993, selling, general and
administrative expenses increased significantly as the Company targeted
considerable resources toward selling golf shirts through department stores, a
very competitive and volatile niche of the retail segment. In 1994, gross
margins decreased primarily due to higher manufacturing and material costs that
were not able to be passed on through higher selling prices and because of
management's decision to add value to products by using better quality fabrics,
trims and other materials, as well as increasing overall sizes of products,
without increasing prices in order to achieve wider customer acceptance. In
1995, management's attempt to broaden the Company's product line into areas such
as casual wear were unsuccessful and led to significant mark-downs. In addition,
throughout this entire period, the Company experienced increased costs related
to the development of retail customer service programs, including "floor ready"
merchandise, electronic data interchange, bar coding, cooperative advertising
and store fixturing, which were demanded by the retail apparel marketplace. In
order to cover its cash requirements, the Company increased its short-term
borrowings and leveraged its balance sheet.
Under new management in 1994, the Company began shifting product mix toward the
faster growing professional golf and Advertising Specialty Incentive ("ASI"),
Uniform and Specialty Distributor markets, commonly known as the "Premium
Business," which have higher margins and less risk of style-related
obsolescence. Revenue growth in 1994 and 1995 was largely attributable to these
segments, but these growth areas required additional investment and working
capital, further increasing the Company's debt service burden. Sales of the
Premium Business for fiscal 1995 were approximately $16 million, or 31% of the
Company's total sales.
At the same time, the domestic apparel industry as a whole was undergoing
radical change that eroded profitability in retail apparel manufacturing. Rising
raw material costs and consumer pricing pressures led to industry-wide margin
erosion in the early 1990's as apparel prices failed to keep pace with the
overall Consumer Price Index. Smaller, undercapitalized domestic apparel
manufacturers became increasingly unable to compete with larger manufacturers
that had worldwide sourcing capabilities as well as the leverage to negotiate
pricing and other terms with retail customers. Furthermore, larger retailers
delayed orders as long as possible to verify consumer reactions to products,
forcing manufacturers and distributors to incur the financial costs of holding
more inventory.
In the fall of 1995, the increasingly competitive retail environment and the
Company's growing operating losses prompted the Board of Directors to hire a
financial advisor for the purpose of exploring alternatives to enhance
stockholder value. The Board interviewed several investment banking firms, most
of which concluded in their preliminary analysis that the Company could not be
sold as a whole at an acceptable premium to the then current trading price of
the Common Stock. On November 1, 1995, the Board of Directors selected The
Bridgeford Group ("Bridgeford"), a New York-based investment banking firm, as
financial advisor to explore strategic alternatives for maximizing stockholder
value. Bridgeford was selected based on its understanding and experience in the
investment banking and apparel industries, its approach to evaluating numerous
alternatives to enhancing stockholder value rather than simply concluding to
sell the entire company, and its willingness and availability to devote
significant time to the assignment. Bridgeford analyzed the Company and its
industry situation and made a number of presentations to the Board discussing
the possible alternative courses of action. Such alternatives were to sell the
Company as a whole, to continue current operations, or to acquire other apparel
companies to increase the Company's size and market position, with resulting
anticipated economies of scale. Continuing current operations was not deemed
feasible given the Company's continuing losses from operations and expected
decline in royalty income. Acquiring other companies was not considered feasible
given the Company's lack of capital. Sale of the Company as a whole was not
attractive since traditional valuation models which would be utilized by
prospective buyers indicated a value reflecting no premium over the public
trading price of the Company's Common Stock. Bridgeford believed that the true
value of the Company was not reflected in its financial performance, book value,
or stock price. It identified "hidden" assets which included the Company's
trademarks and names, royalty licensing stream, and net operating loss
carryforward. Bridgeford presented several alternatives for monetizing these
assets and the Board chose to continue studying the analyses.
At year-end 1995, the Company announced significant restructuring charges and
inventory write downs culminating with a $2.3 million reported loss for the
year, the largest annual loss since emerging from bankruptcy. In addition, the
Company's cash licensing royalty income was forecast to fall significantly in
1996 as certain guaranteed minimum licensing payments expired. As a result of
the eroding financial performance caused by the retail segment, the Company's
asset-based lender reduced loan advance rates on inventories, further tightening
the Company's available working capital.
On March 27, 1996, the Munsingwear Board of Directors authorized Bridgeford to
approach a select group of eleven potential strategic acquirors of the
trademarks and related retail business of Munsingwear, which had been selected
by Bridgeford with input from the Company's management. Given the sensitivity of
the issue with suppliers and retail customers and the Company's inventory and
receivables exposure, the Board chose not to initiate a large-scale auction
process of the retail business line but instead to concentrate on a focused
sales process. Bridgeford conducted due diligence on the business, visited the
Company's manufacturing facility, and prepared descriptive materials in
conjunction with management regarding the retail business. After negotiating
confidentiality agreements with the potential buyers, Bridgeford distributed
offering memoranda to those companies that had expressed initial interest. Four
parties expressed sufficient interest to enter into detailed discussions.
Following detailed discussions, three of the potential acquirors declined to
make a formal offer. The cited reasons were strategic rather than based on
price. Each of the companies indicated a greater desire to invest their capital
to build their own brands rather than to acquire new brands. Consequently,
Munsingwear focused its negotiations on Supreme. Concurrently, management and
Bridgeford began earnest discussions with potential buyers of the Munsingwear
trade names and trademarks in certain Asian countries, particularly the People's
Republic of China.
On April 7, 1996, Supreme submitted a letter of intent to acquire only the
retail business and trademarks for $11 million, a price which the Munsingwear
Board of Directors determined to be inadequate. Discussions were then held on
April 18, 1996 between Bridgeford, Munsingwear management, and the Chief
Executive Officer of Supreme. During these negotiations, the Company requested
$20 million for both the Retail and the Professional Golf Businesses, and
Supreme counter-offered with an $18 million offer. The offer included (i) the
worldwide rights to the trade names and trademarks in all distribution channels,
(ii) other assets relating to the retail and professional golf segments, (iii)
existing and pending license agreements and related royalty payments, (iv) all
advertising materials, and (v) the Munsingwear corporate name. Supreme proposed
to license back to Munsingwear the exclusive right to use the trademarks for
products in the Premium Business in the United States and Canada. The offer
excluded product inventories and accounts receivable related to the Retail and
Professional Golf Businesses. The negotiations with Supreme also contemplated
that an interim Management Agreement would be executed simultaneously with a
Purchase and Sale Agreement to ensure a smooth ownership transition and
liquidation of inventory and receivables, as well as continuous service for
customers.
At the May 3, 1996 meeting, the Munsingwear Board of Directors again considered
the Supreme offer. The Board noted that an important component of the Supreme
proposal was the retention by Munsingwear of the Premium Business under terms
which would be attractive to potential acquirors or which would allow
Munsingwear to operate the Premium Business if an acceptable offer was not
received. The Board directed the Chief Executive Officer and Bridgeford to
continue negotiations with Supreme.
The Chief Executive Officer of Munsingwear, the Chairman of the Board, Company
counsel, and two representatives from Bridgeford met with the Chief Executive
Officer and the Chief Financial Officer of Supreme in Miami, Florida on May 9,
1996. The parties further negotiated the Agreement. Munsingwear received
assurance from Supreme as to Munsingwear's ability to obtain a cash equivalent
of the full purchase price at the time of the closing. The parties also
negotiated the terms of a put right for Munsingwear to require Supreme to
purchase excess remaining inventory at the time of the closing. The parties also
discussed whether Supreme would have any interest in purchasing the Premium
Business, which led to discussions of a Right of First Refusal Agreement. The
parties also negotiated the proposed terms of the License Agreement for the
Premium Business. In exchange for minimum royalty obligations on Munsingwear for
the sale of certain Premium products, Munsingwear was able to add non-shirt
products to the License Agreement so that the Premium Business could offer a
"head to toe" line of clothing and to establish graduated royalty rates based on
the amount of sales for certain products.
Bridgeford again met with the Munsingwear Board of Directors on May 17, 1996 and
explained the results of the negotiations with Supreme. The Bridgeford
representative reported to the Board that he believed that Supreme would not
further negotiate the terms of the License Agreement and that Supreme was
concerned about the effect of any further delays on its ability to operate the
Retail and Professional Golf Businesses. Following extensive discussion, the
Board did not officially act to approve the transaction.
The Chief Executive Officer and Bridgeford held further negotiations with the
Chief Executive Officer and the Chief Financial Officer of Supreme, primarily
relating to the royalty rates for the Premium License Agreement, a requested
non-compete provision for the Premium License Agreement (which request was
dropped by Supreme), and the purchase price for the inventory put option. The
Munsingwear Board of Directors again met on May 22, 1996. The Board received
drafts of documents which were considered final by the parties who had
negotiated them. The Board considered in detail the transaction with Supreme,
and actively solicited further details of the negotiation process, particularly
with respect to the composition and valuation of remaining inventory, the
operation of the put provision in the Management Agreement, and the collection
of accounts receivable which were not being assumed by Supreme. Some members of
the Board expressed concern over the royalty rates and minimum sales obligations
imposed on Munsingwear under the License Agreement. The Board recessed and the
Chief Executive Officer and Company counsel called the Chief Financial Officer
of Supreme and its counsel to negotiate final points suggested by the Board
relating to clarification of procedures under the Right of First Refusal
Agreement and the potential liquidation of inventory by Munsingwear into the
retail markets. The Company representatives were successful in obtaining
additional assurances on the Right of First Refusal Agreement and a lower
royalty rate on one aspect of the License Agreement.
Upon reconvening, the representatives from Bridgeford described in detail to the
Directors the projected pro forma financial impact of the proposed transaction
with Supreme. Bridgeford indicated that, during the prior three year period when
the Company had reported losses, its Common Stock had generally traded at prices
close to the Company's book value. Bridgeford's pro forma analysis indicated
that the Company's stockholders' equity would increase significantly as a result
of the proposed transactions. Bridgeford concluded that if Munsingwear's Common
Stock continued to be valued by the stock market on the basis of book value per
share, the Company's market value would increase. Bridgeford's pro forma
analysis also indicated that the proceeds from the proposed transaction with
Supreme would significantly deleverage the Company's balance sheet.
Consequently, Munsingwear's debt service burden would likewise be reduced and
the Company's financial resources freed up to expand the Premium Business, to
distribute a dividend to stockholders, or to explore other alternatives.
Bridgeford then orally reported that, in its opinion, the consideration to be
received by Munsingwear from Supreme for the sale of the Retail and Professional
Golf Businesses to Supreme, and the assumption of certain related liabilities in
accordance with the Agreement, would be fair to the Company from a financial
point of view. See "Fairness Opinion Discussion" below. Following further
extensive discussion, the Munsingwear Board of Directors unanimously approved
and authorized the execution of the Agreement, the Management Agreement and the
Right of First Refusal Agreement with Supreme and the execution of the License
Agreement upon closing of the transactions contemplated by the Agreement.
The directors of Munsingwear believe that the sale of these assets to Supreme is
fair to and in the best interests of Munsingwear and its stockholders given (i)
the significant premium over book value that Supreme is willing to pay (the $18
million purchase price represents an approximate $14 million premium over the
book value of the tangible and intangible assets purchased from the Company as
of July 6, 1996); (ii) the increase of approximately $9 million in net book
value of the Company following the transaction and implied increase in value of
a share of Common Stock; (iii) the historic and projected operating loss of the
Company; and (iv) the absence of a viable alternative following an extensive
search. The Board of Directors of Munsingwear has unanimously approved the
Agreement and recommends that the stockholders vote in favor of the proposal to
approve the Agreement.
FAIRNESS OPINION DISCUSSION
Following its engagement by the Munsingwear Board of Directors on November 1,
1995, Bridgeford undertook an analysis of the feasible strategic alternatives
that were available to the Company to enhance stockholder value in light of the
Company's financial condition and recent financial performance. These
alternatives included the sale of the entire Company, exiting the Retail and
Professional Golf Businesses through liquidation, and divesting the Retail and
Professional Golf Businesses. Bridgeford made several presentations to the Board
presenting the results of its analysis.
At the May 22, 1996 Munsingwear Board Meeting, Bridgeford was asked to give an
oral opinion as to whether the consideration to be received by Munsingwear from
Supreme for the sale of the Retail and Professional Golf Businesses to Supreme
and the assumption of certain related liabilities in accordance with the
Agreement would be fair, from a financial point of view, to the Company.
Subsequently, Bridgeford was requested to confirm its opinion in writing. In
response, it has prepared and delivered the written opinion included in
Exhibit C.
In preparing its opinion, Bridgeford reviewed and analyzed: (i) the proposed
Purchase and Sale Agreement (including the exhibits thereto); (ii) certain
publicly available business, financial and trading information relating to the
Company, as well as the retail golf apparel and related industries; and (iii)
certain other information, including financial projections made jointly with
management and various valuation analyses which Bridgeford believed to be
relevant to its inquiry. It also participated in discussions among
representatives of the Company and Supreme and their legal advisors. In
addition, Bridgeford held discussions with Munsingwear's management concerning
the Company's operations, assets, present condition and future prospects and
undertook such other studies, analyses and investigations as Bridgeford deemed
appropriate.
The following is a brief summary of Bridgeford's valuation analysis of the
Retail and Professional Golf Businesses presented to the Board throughout the
strategic review process:
DISCOUNTED CASH FLOW ANALYSIS. In conjunction with management, Bridgeford
developed long-range revenue projections for Munsingwear's retail industry
segment. In this analysis, Bridgeford adjusted manufacturing costs to reflect
the median industry, as well as a potential buyer's average costs rather than
the Company's actual costs. Bridgeford made these adjustments because its
analysis indicated that Munsingwear's actual manufacturing costs were
significantly higher than the industry average and, in Bridgeford's opinion,
these adjustments would likely be made by potential acquirors in valuing the
Retail and Professional Golf Businesses. Bridgeford analyzed cases in which the
median and marginal operating cost structures were applied to Munsingwear's
budgeted 1996 sales of the Retail and Professional Golf Businesses. These cases
were used to determine the potential value to an optimal acquiror, which was
defined as one with a comparable retail apparel business but with a larger scale
and stronger offshore sourcing capabilities. Munsingwear's 1996 sales by the
Retail and Professional Golf Businesses were assumed to grow over the next five
years at the growth rate projected by equity research analysts for the optimal
acquiror. Bridgeford calculated the present value of the future streams of
unleveraged, after-tax cash flows of the business over a five-year period.
Bridgeford calculated terminal values for the Retail and Professional Golf
Businesses based on different multiple ranges ("Terminal Value Multiples") of
projected fiscal 2001 earnings before interest, taxes, depreciation and
amortization ("EBITDA"). Bridgeford used Terminal Value Multiples of 4.5x --
7.5x and discount rates of 11.0% to 14.0%. The range of growth and discount
rates assumed in Bridgeford's valuation analyses was based on Munsingwear's
weighted average cost of capital, as well as Bridgeford's judgment as to the
inherent risks of the Company and the apparel industry. Bridgeford also valued
the present value of the future streams of unleveraged, after-tax cash flows
using the perpetuity methodology. Bridgeford's perpetuity methodology assumed
annual growth rates of unleveraged after-tax cash flows of between 2.0% and 4.0%
into perpetuity and discount rates of 12.0% to 13.0%. Such multiples and rates
were determined on the basis of an analysis of comparable companies and on
several assumptions regarding factors such as the inflation rate, interest
rates, the inherent risks of the Company and the industry, and the cost of
capital. Based on Bridgeford's judgment as to the appropriate multiples and
discount rates to be applied to the Retail and Professional Golf Businesses, the
foregoing analysis implied a range of values of approximately $16 to $26
million, excluding the licensing agreements.
In addition to valuing the Munsingwear brand's future earnings, Bridgeford
performed three analyses to approximate the value of the Munsingwear trademarks
and trade names separately from the ongoing business: (i) a valuation based on a
comparison with apparel industry standards; (ii) a valuation based on industry
stock price movements; and (iii) a valuation based on the premium generated by
the brand names.
VALUATION BASED ON COMPARISON WITH APPAREL INDUSTRY STANDARDS. Since 1992,
Financial World has conducted an annual valuation of the leading apparel brands
with the assistance of a leading brand valuation expert, London-based
Interbrand. Munsingwear was not among the apparel companies valued by Interbrand
in its study, but the results of relatively comparable brands could be used as a
methodology to value the Retail and Professional Golf Businesses. The analysis
is based on a formula that multiplies brand net income by the Interbrand
"strength multiplier" for each company analyzed to determine brand value.
Interbrand determines these earnings "strength multipliers" by focusing on seven
areas for each brand: leadership, stability, market, internationality, trend,
support and protection. Bridgeford used the average, median and weighted average
(based on sales) ratio of brand value to brand sales of a group of relatively
comparable apparel brands multiplied by Munsingwear's 1996 budgeted sales by the
Retail and Professional Golf Businesses. The group of comparable apparel brands
included Hanes, Fruit of the Loom, Adidas, Timberland and Champion. While these
brands are not necessarily exact comparables to Munsingwear, particularly given
their varying products and operating margins, they represent approximate
benchmarks for an Interbrand valuation of the Company. This analysis generated a
valuation in the range of $9 to $15 million.
VALUATION BASED ON INDUSTRY STOCK PRICE MOVEMENTS. Another approach to value the
Munsingwear brands uses the Company's stock price as a measure, based on a
premise that the equity markets will adjust the price of a public company to
reflect the future prospects of its brands. The analytic model, which values
brand equity or value as a percentage of a company's tangible assets, was
developed by two University of Chicago professors based on 1985 data for 638
publicly-traded companies. In the model, the replacement costs of a company's
tangible assets, including plant, property and equipment, inventories and cash,
are subtracted from the equity market valuation. The balance, intangible assets,
is divided into three categories: the value of brand equity, the value of
non-brand factors (i.e, research and development and patents), and the value of
industry factors (regulation and concentration). Brand equity is assumed to be a
function of the age of a brand and its order of entry into its respective
market, the cumulative advertising, and the current state of industry
advertising. This model which indicated a 61% ratio of brand equity to tangible
assets indicates a value in the range of $15 to $17 million.
VALUATION BASED ON THE PRICE PREMIUMS GENERATED BY THE BRAND NAME. This analysis
quantifies the premiums generated by the brand name in the retail marketplace by
measuring the price premium attached to a particular brand through observing the
price differences in the market between name brands and private label products.
Given that a price premium can be obtained, the value of the brand name in a
given year would be that price differential multiplied by the unit sales volume.
Discounting these cash flows over a reasonable time period provides one
reasonable method for valuing the Munsingwear brand. Bridgeford conducted an
informal price survey of Munsingwear knit shirts versus private label shirts,
noting the price premiums often charged by retailers for the Munsingwear
product. Bridgeford was unable to generate sufficient objective data regarding
price premiums between private label and Munsingwear products to conduct an
analysis and consequently did not rely on this valuation methodology in its
final analysis.
In arriving at its opinion, Bridgeford assumed and relied upon the accuracy and
completeness of the financial and other information furnished to it without
independent verification. Bridgeford has not made nor obtained any evaluations
or appraisals of the assets or liabilities of the Company. Bridgeford's opinion
is necessarily based upon the particular market and economic situation of the
Company and on other conditions as they exist on, and can be evaluated as of,
the date of the Fairness Opinion. Bridgeford did not attribute any particular
weight to any analysis and factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Bridgeford believes that its analyses must be considered as a whole and that
considering any portion of the analysis and of the factors considered, without
considering all analyses and factors, could create a misleading or incomplete
view of the process underlying this opinion. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than as set
forth therein.
Bridgeford is an independent U.S. financial advisory firm, which is owned by The
Industrial Bank of Japan, Ltd., the largest long-term credit bank in Japan.
Bridgeford advises a select group of U.S. and multinational clients on financial
and financing strategies and valuation with respect to mergers, acquisitions and
divestitures in public and private markets worldwide. Bridgeford and its
professionals have substantial experience in rendering fairness opinions used in
merger and acquisition transactions, recapitalizations and other purposes.
Bridgeford is a registered member of the National Association of Securities
Dealers.
Pursuant to an engagement letter dated November 1, 1995, Bridgeford was retained
by the Company as its exclusive advisor in connection with strategic planning
and restructuring alternatives to enhance stockholder value. Under the
Bridgeford engagement letter, Bridgeford will be paid a percentage of any
consideration received by the Company as a result of certain defined
transactions which include, the proposed sale to Supreme and the completed sale
to ITOCHU. This percentage varies with the magnitude of total consideration
received as follows: $250,000 on the first $5 million or fraction thereof, plus
4.0% on the amount between $5 and $10 million, plus 3.0% on the amount between
$10 and $15 million, plus 2.0% on the amount between $15 and $20 million, plus
1.0% on the amount between $20 and $25 million. In addition, Bridgeford will
receive a $150,000 fee for the rendering of the Fairness Opinion, but this
amount may be reduced in the event the Remaining Business is sold. Based on the
sale of assets to ITOCHU and Supreme and rendering the Fairness Opinion,
Bridgeford will receive an aggregate fee of $880,000 plus reimbursement of
expenses incurred.
DISADVANTAGES OF THE AGREEMENT
Munsingwear's Board of Directors believes that the principal disadvantage of the
Agreement to Munsingwear stockholders is that stockholders will not be able to
maintain their interest as stockholders in the Retail and Professional Golf
Businesses, nor have the opportunity to profit from any future growth, if any,
in such businesses. Although it has been the objective of Munsingwear's
management to develop the Company as a significant participant in these
businesses and to reach profitability, the Board of Directors believes that the
ability to accomplish these objectives is uncertain because of, among other
things, the extremely competitive environment in the retail and professional
golf industries, the significant amount of capital investment needed to reach
the critical mass required to be a meaningful source of supply to retailers and
the need for significant expansion of worldwide sourcing capability. See
"Selected Financial Data."
RIGHT OF FIRST REFUSAL AGREEMENT
Concurrent with execution of the Agreement, Munsingwear and Supreme also entered
into a Right of First Refusal Agreement pursuant to which Munsingwear granted to
Supreme a right of first refusal to acquire Munsingwear's Premium Business or
the trademarks being sold to ITOCHU in the event those trademarks and licenses
were not sold to ITOCHU. Supreme has the right to purchase these assets at a
price of 110% of the amount of a bona fide offer from a third party. The Right
of First Refusal Agreement will terminate if the transaction contemplated by the
Agreement does not close. If the closing occurs, the Right of First Refusal
Agreement will remain in effect until the earlier of twenty years or the
termination of the License Agreement.
MANAGEMENT AGREEMENT
Concurrent with execution of the Agreement, Munsingwear and Supreme entered into
a Management Agreement under which Supreme agreed to immediately assume
responsibility for operations of the business related to the assets being
purchased immediately upon execution of the Agreement. The Management Agreement
specifically provides that Supreme will manage the sale of Munsingwear's Fall
and Holiday Retail and Professional Golf Businesses lines, including the
management of Munsingwear's sales force and assistance in collection of
outstanding Munsingwear accounts receivable. Munsingwear has maintained the
right to sell all remaining inventory on hand as of the Closing to Supreme at
Supreme's average cost for similar products, or, at Munsingwear's election,
Munsingwear may continue to sell the inventory for a period of 90 days following
the Closing, subject to a right of Supreme to purchase these products during the
90-day period at the price a third party is willing to pay. The Management
Agreement will terminate upon the Closing or other termination of the Purchase
and Sale Agreement.
TERMS OF THE AGREEMENT
The following description of the Agreement is a summary and is qualified in its
entirety by reference to the complete text of the Agreement, which is attached
hereto as Exhibit A and is incorporated herein by reference. Any defined terms
used in this summary shall have the meanings set forth in the Agreement.
TRANSFER OF ASSETS AND PAYMENT OF THE PURCHASE PRICE. Under the Agreement,
Munsingwear will sell and transfer certain assets to Supreme and Supreme will
pay a Purchase Price at the election of Supreme of (a) $18 million in cash
payable at the Closing, or (b) $18.4 million payable $9.0 million in cash at the
Closing and $9.4 million by an interest bearing senior note payable six (6)
months after the Closing, secured by an irrevocable letter of credit issued by
NationsBank, N.A., or a comparable financial institution, or other security,
reasonably satisfactory to Munsingwear, which letter of credit or other security
may be utilized as the sole collateral for a non-recourse loan from NationsBank,
N.A. to Supreme immediately following the Closing in the amount of $9 million.
If Supreme elects alternative (b), Munsingwear would be able to access the
entire $18 million by using the secured note as collateral for a $9 million
loan. Munsingwear has received a good faith deposit in the amount of $1 million
to be applied and credited toward the total purchase price. Munsingwear has
agreed to deposit $350,000 of the purchase price into an escrow account at the
time of closing to cover the costs incurred in connection with a certain
trademark litigation which Supreme has agreed to assume (including the costs of
settlement or the satisfaction of any judgement relating thereto). If the
litigation has not been resolved by December 31, 1996, Supreme will obtain
control of the litigation and the escrow account.
ASSETS TO BE TRANSFERRED. The assets to be sold and transferred by Munsingwear
include substantially all of Munsingwear's interest in common law and registered
trade names and trademarks worldwide (but excluding the trademarks and trade
names for the Peoples Republic of China, Vietnam, Macau and such other "Excluded
Trademarks" as have previously been sold), customer lists and records for the
Retail and Professional Golf Businesses, rights in and to existing and pending
license agreements and related cash royalty income payable after the Closing,
advertising materials related to the Retail and Professional Golf Businesses,
certain design archives and equipment, embroidery disks, records relating to the
Retail and Professional Golf Businesses, copyrights associated with any of the
assets being acquired by Supreme and trademark sourcing and license sourcing
rights. Under the Agreement, Supreme will acquire Munsingwear's rights in the
corporate name "Munsingwear" and it is a condition to consummating the Agreement
that Munsingwear change its corporate name.
ASSETS RETAINED BY MUNSINGWEAR. All other assets of the Company are excluded
from the sale, including the Company's license rights for the Premium Business,
the Fairmont, North Carolina manufacturing plant and equipment, the "Excluded
Trademarks" (certain trademarks previously sold to ITOCHU and other parties),
all of Munsingwear's accounts receivable incurred prior to the Closing or
related to certain inventory, all of the Company's inventory, the Minneapolis,
Minnesota headquarters and equipment, the Company's New York office and the
Company's professional golf endorsement contracts.
LIABILITIES TO BE ASSUMED. Except for liabilities arising from the licenses
included in the Retail and Professional Golf Businesses and certain trademark
litigation in which Munsingwear is a party, Supreme is not assuming any
liabilities or obligations of Munsingwear. With respect to the trademark
litigation, Supreme is only assuming the fees and costs of such litigation
incurred after the Closing. Munsingwear has agreed to deposit $350,000 of the
purchase price into an escrow account at the time of closing to cover the costs
incurred in connection with a certain trademark litigation which Supreme has
agreed to assume (including the costs of settlement or the satisfaction of any
judgement relating thereto). If the litigation has not been resolved by December
31, 1996, Supreme will obtain control of the litigation and the escrow account.
CLOSING DATE. If the sale to Supreme pursuant to the terms set forth in the
Agreement are approved by Munsingwear stockholders at the Annual Meeting, and
all other conditions of the Agreement are met, the Closing Date of the sale
shall be as soon as practicable after the Annual Meeting, but in no event later
than September 30, 1996.
REPRESENTATIONS AND WARRANTIES. In the Agreement, Munsingwear has made various
representations and warranties to Supreme concerning, among other matters, the
corporate status of Munsingwear and Munsingwear's authorization to enter into
the Agreement and related transactions, ownership of assets (including
Munsingwear's interests in various licenses), maintenance of customer
relationships, ownership of intellectual property, existence and status of
licenses, absence of unpaid liability under any Benefit Plan (as defined in the
Agreement), completeness and accuracy of Munsingwear's financial statements,
absence of certain changes to the assets being purchased, liabilities, financial
condition or operation of the business acquired by Supreme, filing of tax
returns and payment of taxes, accuracy of SEC filings, absence of violations,
breaches, or defaults of the Certificate of Incorporation or Bylaws, absence of
any judgment, decree or order, compliance with laws, existence of litigation,
receipt of consents required for the Agreement, use of brokers, descriptions of
advertising materials, and general accuracy of representations and warranties.
Among the representations and warranties made by Supreme in the Agreement are
those concerning Supreme's corporate status, authorization to enter into the
Agreement, receipt of required consents, absence of violations, breaches or
defaults of its Articles of Incorporation or Bylaws and absence of brokers.
COVENANTS. Munsingwear has made various affirmative covenants in the Agreement
including, among others, covenants concerning operation of Munsingwear's
business prior to the Closing Date, Munsingwear's right to enter into any
transactions prior to the Closing Date relating to any portion of its business
other than the Retail and Professional Golf Businesses (subject to the rights
granted by Munsingwear to Supreme in the Right of First Refusal Agreement),
preparation and filing with the Federal Trade Commission and United States
Department of Justice of the Notification and Report Form under the provisions
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Filing"),
nondisclosure of confidential information regarding the use of the assets being
purchased by Supreme, preparation of audited financial statements within sixty
(60) days following the Closing for such periods as required by Regulation S-X
promulgated by the Securities and Exchange Commission, supply of Munsingwear
financial statements prepared in the ordinary course of business through the
Closing Date, calling of a Munsingwear meeting of stockholders to be duly called
and held on or before September 30, 1996, for the purpose of voting on the
approval and adoption of the Agreement and the transactions contemplated
thereby, action by the directors of Munsingwear, subject to their fiduciary
duties as advised by counsel, recommending approval and adoption of the
Agreement and the transactions contemplated thereby, use of best efforts to
ensure orderly transition of customers, delegation of costs relating to the
termination of employment of Munsingwear employees to Munsingwear (except for
employees hired by Supreme), payment by Munsingwear of any taxes resulting from
consummation of the sale, proration at the Closing Date of all charges, if any,
assessed by law against the owner of the assets being purchased by Supreme,
joint review of mail, payments, deliveries or other correspondence after the
Closing, change of Munsingwear's corporate name concurrent with the Closing, and
grant by Munsingwear to Supreme of reasonable access to the records of
Munsingwear to allow Supreme to conduct its due diligence investigation.
Supreme agreed to prepare and file its HSR Filing with the Federal Trade
Commission and with the Justice Department. Supreme also agreed to not use for
its own benefit or disclose or communicate or divulge confidential information
regarding Munsingwear's Premium Business and to provide Munsingwear with a list
of Munsingwear's employees whom Supreme wishes to hire not less than ten (10)
days before the Closing Date.
LICENSE AGREEMENT. Munsingwear and Supreme have agreed to enter into a License
Agreement as of the Closing in the form attached to the Agreement. The License
Agreement will grant Munsingwear an exclusive license to manufacture or have
manufactured, market and sell knit shirts, pants, footwear, headwear, woven
shirts, outerwear, rainwear and footwear, all bearing the Munsingwear brand and
Penguin logo by label or tag solely inside the garment, packaging or
advertising, in the Advertising Specialty Incentive, Uniform and Specialty
Distributor Markets (as previously defined as the "Premium Business").
Munsingwear will have the ability to manufacture these products anywhere in the
world and to sell the products in the Advertising Specialty Incentive, Uniform
and Specialty Distributor Markets in the United States and Canada. The term of
the license differs with respect to the type of licensed product. Generally, the
term for the knit shirt products is 20 years and the term of the other products
is five years. There will be no royalty obligation to Supreme on the knit shirt
products until August 2001, unless net sales exceed $50 million in one year, at
which time Munsingwear would be obligated to pay a standard royalty on net sales
in excess of $50 million. After August 2001, Munsingwear must pay a standard
royalty for net sales of all knit shirts bearing the licensed trademarks. There
is a minimum royalty for each of the other licensed products, which increases
each year during the term of the License Agreement.
CONDITIONS OF CLOSING; TERMINATION. The Agreement provides that the obligations
to consummate the sale of assets are subject to certain conditions. The
representations, warranties and covenants of each party must be true and correct
as of the Closing Date and each of the obligations of each party to be performed
on or before the Closing Date must be performed in all material respects.
The obligations of each party to consummate the sale of assets are further
conditioned upon (i) approval of the transaction by the directors and the
stockholders of Munsingwear and by directors of Supreme; (ii) the receipt of all
consents required from any third party; (iii) expiration of any applicable
waiting period for the HSR filing, which condition has now been met; (iv)
satisfactory completion of a due diligence examination by Supreme, which
condition has now been met; (v) absence of material adverse changes to
Munsingwear; (vi) absence of any injunctions, orders or other decrees of any
court or governmental body or any material pending or threatened litigation or
proceeding prohibiting consummation of the transactions; and (vii) delivery by
Munsingwear to Supreme of such agreements and instruments necessary for the
purpose of reflecting on the records of any applicable governmental agency the
transfer of those registered trademarks and pending applications included in the
Assets purchased.
The Agreement may be terminated and the transactions contemplated therein
abandoned at any time (i) upon mutual consent of Supreme and Munsingwear; (ii)
by Supreme and Munsingwear, if the Agreement is not consummated on or before
September 30, 1996 provided that if any party has breached or defaulted with
respect to its obligations under the Agreement, such party may not terminate the
Agreement and the other party to the Agreement may, at its option, enforce its
rights against such breaching or defaulting party and seek any remedies against
such party; (iii) by Supreme, if, as of the Closing Date, any of the conditions
to Closing have not been satisfied in any material respect by Munsingwear; (vi)
by Munsingwear, if, as of the Closing Date, any of the conditions to Closing
have not been satisfied in any material respect by Supreme; (v) by either party,
if there should be any law or regulation that makes consummation of the
Agreement illegal or prohibited; (vi) by either party, if there has been any
material breach on the part of the other of the representations, warranties or
agreements contained in the Agreement which cannot be or have not been cured
within 10 days after written notice by the party asserting the material breach,
(vii) by Supreme, upon the occurrence of any of the following events (a "Trigger
Event"): (a) Munsingwear shall have entered into or shall have publicly
announced its intention to enter into an agreement or an agreement in principle
with respect to any proposal to acquire all or any significant part of the
Assets being sold to Supreme pursuant to this Agreement; or (b) the Board of
Directors of Munsingwear shall have withdrawn or materially modified its
approval or recommendation of the Agreement.
Upon the occurrence of a Trigger Event, Munsingwear shall pay Supreme the sum of
$1 million in addition to returning Supreme's $1 million deposit upon receipt of
a written request from Supreme following the occurrence of the Trigger Event.
Upon termination, the Agreement shall become void and of no effect with no
liability on the part of either party except as provided for therein.
MUNSINGWEAR INDEMNIFICATION. Munsingwear has agreed to indemnify, defend and
hold harmless Supreme against claims (including interest, penalties and
reasonable attorney's fees) suffered or incurred by Supreme which arise, result
from or relate to (i) any breach of, or failure by Munsingwear to fulfill or
perform any of its representations, warranties, covenants or agreements in the
Agreement, or in any exhibit, schedule or other instrument furnished under the
Agreement, (ii) the operation or conduct of the Retail and Professional Golf
Businesses through the Closing Date, or (iii) any of the liabilities or
obligations of Munsingwear which are not expressly assumed under the Agreement.
Indemnification shall not be payable by Munsingwear unless and until the
aggregate amount of all claims by Supreme exceed $250,000 and unless the claims
are received by Munsingwear prior to the expiration of 18 months from the
Closing Date. Munsingwear's indemnification obligations shall be limited to $5
million in total payments for all claims made by Supreme.
SUPREME INDEMNIFICATION. Supreme has agreed to indemnify, defend and hold
harmless Munsingwear against claims (including interest, penalties and
reasonable attorney's fees) suffered or incurred by Munsingwear which arise,
result from or relate to any breach of or failure of Supreme to fulfill or
perform any of its representations, warranties, covenants or agreements under
the Agreement, or in any exhibit or other instrument furnished or to be
furnished under the Agreement. Indemnification shall not be payable by Supreme
unless and until the aggregate amount of all claims for indemnification by
Munsingwear exceed $250,000 and unless the claims for indemnification are
received by Supreme prior to the expiration of 18 months from the Closing Date.
Supreme's indemnification obligations shall be limited to $5 million in total
payments for all claims made by Munsingwear.
CHANGE OF NAME
Supreme has required, as a condition precedent to the sale of assets under the
Agreement, that the Company change its name to a name that does not include the
word "Munsingwear," any derivative or imitation thereof or any of the trademarks
being sold to Supreme, any derivative or imitation thereof, or any name
deceptively similar to these words. The Board of Directors has approved and is
requesting stockholder approval of a proposed amendment to the Company's
Certificate of Incorporation in the form attached hereto as Exhibit B, to change
its name to "PremiumWear, Inc.," a name the Company's Board believes
appropriately describes the Remaining Business which may be conducted by the
Company after the Closing Date.
The change in name will not affect, in any way, the validity or transferability
of stock certificates now held by existing stockholders, nor will the change
affect the Company's capital structure in any way.
BUSINESS OF SUPREME
Supreme International Corporation designs, imports and markets fashion-oriented
moderate and better men's and boys' sportswear under the brand names Natural
Issue(R), Textures by Natural Issue(tm), Albert Nipon, Feldini(R), Gianfranco
Ruffini(R), Career Club(R), CC Sport(R), Monte Carlo(tm), Tippos, and others.
Supreme's products are sold to department stores, chain stores and specialty
retail stores throughout the United States and Puerto Rico.
OPERATION OF MUNSINGWEAR AFTER THE CLOSING DATE
If the sale to Supreme is consummated, it is intended that management will
conduct a liquidation of the inventory of the Retail and Professional Golf
Businesses (which is not being sold to Supreme), and collect accounts receivable
(which are not being assumed by Supreme). The proceeds of these activities, as
well as the proceeds from the sale to Supreme, are expected to yield
approximately $24 million, $1 million of which was deposited with Munsingwear
upon execution of the Agreement and used to pay down bank debt. The Company
currently expects to use approximately $7 million of such proceeds to pay off
other liabilities, including remaining bank debt and transaction costs related
to the sale of the Retail and Professional Golf Businesses, to retain between
approximately $1 million and $4 million for working capital purposes (in
addition to approximately $9.8 million of net assets retained by the Premium
Business), and to distribute between $12 million and $15 million ($5.83 to $7.29
per share, assuming no exercise of outstanding stock options prior to the
distribution) of the remaining proceeds to the Munsingwear stockholders, the
actual amount dictated by the working capital needs of the Premium Business, if
any, as of the closing of the Agreement and the availability of bank financing
to support the Premium Business. Such distribution will occur within 180 days of
the date of the Annual Meeting, the precise date depending on certain income tax
factors, and, pending such distribution, an amount of cash sufficient to effect
the distribution will be held in a separate account. The total proceeds,
transaction costs and other related liabilities are estimates based on the
Company's financial statements as of July 6, 1996 and assumptions as to the
forecasted activity between that date and the anticipated closing date of the
sale to Supreme, as well as forecasted proceeds from the liquidation of
inventory and collection of accounts receivable. Actual results will likely
differ from these estimates and will directly affect the actual amount of cash
available for distribution to stockholders. See "Federal Income Tax
Consequences" and "Cautionary Statement."
Munsingwear is currently in preliminary discussions with several potential
buyers for the Remaining Business. However, the Company will continue to
consider alternatives for the Remaining Business to maximize stockholder value,
including the potential operation of the Remaining Business in the event a
suitable strategic offer is not received. The Premium Business represented
approximately $16 million, or 31%, of the Company's total net sales for the year
ended January 6, 1996 and approximately $12.4 million, or 38% of the Company's
total net sales for the six months ended July 6, 1996. Since it entered into the
Premium Business in 1993, the Company has experienced dramatic sales growth
which management expects to continue throughout 1996. The Premium Business
consists primarily of three types of customers: numerous Advertising Specialty
Incentive (ASI) customers (distributors of business incentive products) who make
purchases for "at once" delivery, often in small quantities such as 24 to 96
units; Specialty Distributors who purchase large quantities throughout the year,
generally based on forecasts provided periodically and who also service the ASI
customer base; and companies who purchase merchandise for uniforms, which
generally consist of "shelf stock" styles that are customized through color,
styling, embroidery and other processes. The Company manufactures approximately
75% of Premium Business merchandise domestically and 25% of product is sourced
offshore.
In the event the Company does not sell the Remaining Business and instead
continues its operations, the Company will seek a bank line of credit to support
the operations. The Company's current lender has indicated that it does not
intend to continue offering a credit facility for the Remaining Business
following the closing of the Supreme transaction and the pay-off of current
debt. Consequently, the Company has begun the process of securing another
lender, but no commitment has been obtained. If the Company cannot obtain a
suitable line of credit, the Company intends to retain closer to $4 million for
working capital (to supplement approximately $9.8 million of net assets retained
by the Remaining Business) and to distribute approximately $12 million to the
stockholders. See "Cautionary Statement."
INTERESTS OF CERTAIN PERSONS IN THE AGREEMENT
No executive officer of Munsingwear was offered employment with Supreme in
connection with execution of the Agreement. Certain of the present directors of
Munsingwear hold a significant number of shares of Munsingwear Common Stock
either directly or indirectly, and will receive their pro rata share of any
distribution made to stockholders. See "Security Ownership of Certain Beneficial
Owners, Directors and Executive Officers."
Under Section 145 of the Delaware General Corporation Law, a Delaware business
corporation has the power to indemnify a person made or threatened to be made a
party to a proceeding by reason of the person's former or present capacity as a
director, officer, employee or agent against judgments, penalties, fines and
reasonable expenses, including attorneys' fees incurred by the person in
connection with the proceeding, if the person: (i) acted in good faith; and (ii)
in the case of a criminal proceeding, had no reasonable cause to believe the
conduct was unlawful, and (iii) in other cases, reasonably believed that the
conduct was in the best interests of the corporation or that the conduct was not
opposed to its best interests. The Bylaws of Munsingwear authorize
indemnification of such persons to the fullest extent authorized by the Delaware
General Corporation Law. Assuming Munsingwear's officers and directors met the
standards for indemnification, they would be entitled to indemnification by
Munsingwear for acts or omissions in connection with the Agreement.
VOTE REQUIRED
Under the Delaware General Corporation Law, the Agreement must be approved by
the holders of a majority of the outstanding shares of Munsingwear Common Stock
entitled to vote. The directors and officers of Munsingwear, together with their
affiliates, own an aggregate of approximately 35% of the outstanding shares of
Munsingwear Common Stock and exercisable options representing approximately 8%
of the fully diluted outstanding shares. Each director and executive officer and
their affiliates have indicated an intention to vote to approve the Agreement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
AGREEMENT TO SELL ITS ASSETS TO SUPREME AND APPROVE THE CHANGE OF NAME OF THE
COMPANY IN CONNECTION WITH THE SALE.
SALE OF OTHER TRADEMARKS
Prior to and concurrent with the negotiation of the Supreme transaction,
Munsingwear was negotiating a proposed letter of intent with ITOCHU Corporation,
Toyobo Co., Ltd. and Descente Ltd. On June 14, 1996, the Company, ITOCHU
Corporation, Toyobo Co., Ltd. and Descente Ltd. executed a Purchase Agreement
for the sale of all of the Company's interest in the Munsingwear, Grand Slam and
Penguin marks in the People's Republic of China, Vietnam and Macau for a
purchase price of $5 million in cash. The closing of this transaction occurred
on June 28, 1996 and the proceeds were used to reduce bank debt of the Company.
These purchasers acquired the exclusive right to use the trade name
"Munsingwear" in these territories. The Company reserved certain rights to
manufacture or have manufactured for export goods bearing the same trademark in
these territories.
The Company, ITOCHU Corporation, Toyobo Co., Ltd. and Descente Ltd. also
entered into an Exclusive License Agreement for the Munsingwear, Grand Slam
and Penguin marks in the U.S. territories of Guam and the Northern Mariana
Islands. Munsingwear also reserved certain manufacturing rights in the
License Agreement. There will be no royalty obligations with respect to the
Exclusive License Agreement.
ACCOUNTING TREATMENT
The sales of assets to Supreme and ITOCHU will be accounted for by Munsingwear
as dispositions of assets and any cash distribution to stockholders as a return
of capital or a dividend, in accordance with generally accepted accounting
principles. See "Federal Income Tax Consequences."
FEDERAL INCOME TAX CONSEQUENCES
The Company plans to distribute a dividend of between $12 million and $15
million (between $5.83 and $7.29 per share, assuming no exercise of outstanding
stock options prior to distribution) to stockholders within 180 days of the date
of the Annual Meeting. In connection with the proposed distribution to
stockholders, the Company hired Arthur Andersen LLP to advise it of the tax
implications of the proposed stockholder distribution. Arthur Andersen LLP was
selected by the Company because it is a nationally recognized expert in tax
matters and because it currently serves as the Company's independent public
accountants. As such, Arthur Andersen LLP prepares the Company's tax returns,
assists with other tax planning matters and is familiar with the Company's
financial operations. The Company has had no other material relationship with
Arthur Andersen LLP and its affiliates during the preceding two years, other
than miscellaneous consulting services. The Company has been advised of the
following by Arthur Andersen LLP, but the Company has not requested Arthur
Andersen LLP to render a tax opinion with respect to this matter.
The following summary contains a description of the material United States
federal income tax considerations for Munsingwear and Munsingwear stockholders
with respect to the proposed sale to Supreme. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), regulations, rulings and
decisions in effect on the date of this Proxy Statement, all of which are
subject to change. This summary does not discuss any aspect of state, local or
foreign taxation and does not discuss all the tax considerations that may be
relevant to particular Munsingwear stockholders in light of their personal
investment circumstances, or to certain types of stockholders that may be
subject to special tax rules, such as financial institutions, tax-exempt
organizations, insurance companies, dealers in stock or securities, and foreign
corporations and individuals who are not citizens or residents of the United
States. The discussion with respect to Munsingwear stockholders is limited to
those stockholders who have held the Munsingwear Common Stock as "capital
assets" within the meaning of Section 1221 of the Code.
DISTRIBUTION OF CASH TO STOCKHOLDERS
The receipt of cash by Munsingwear stockholders will be a taxable transaction
for federal income tax purposes. However, the timing of the distribution will
affect whether the proceeds are treated as a dividend, which will be taxable as
ordinary income to the stockholders, or a return of capital, which will be
applied to reduce the stockholders' basis in their Munsingwear stock, and any
excess amounts will be taxable as capital gain income. If the distribution
occurs in the same taxable year as the sale to Supreme, the Company's earnings
and profits generated by the sale will cause the distribution to be treated as a
dividend in its entirety. However, if the distribution occurs in a different
taxable year than the year in which the sale occurs, the Company's accumulated
earnings and profits deficit are sufficient to cause some, and possibly all, of
the distribution to be treated as a return of capital for federal income tax
purposes. The Company intends to maximize the amount of the distribution that
will be treated as a return of capital to the shareholders. Consequently, if the
Company is likely to sell the Remaining Business prior to the end of fiscal
1996, distribution of the cash will be delayed to follow such sale in order to
allow distribution of the cash in the tax year following both transactions. The
precise timing of such distribution will depend on the timing of any such sale
of the Remaining Business. If the Remaining Business is not likely to be sold
prior to the end of fiscal 1996, the Company may change its tax year-end to an
earlier date in order to accommodate an earlier distribution of cash in next
year's tax year. In no event will the cash be distributed later than 180 days
following the date of the Annual Meeting. Pending such distribution, an amount
of cash sufficient to effect the distribution to stockholders will be held in a
segregated account which will be invested in short-term interest bearing
securities.
CONSEQUENCES OF THE SALE TO THE COMPANY
Munsingwear has a net operating loss carryover as of January 6, 1996 for regular
tax purposes of $35,300,000, which will begin to expire in 2002. This net
operating loss carryover will offset the taxable gain from selling the assets to
Supreme and ITOCHU for income tax purposes. However, a federal alternative
minimum tax of approximately $460,000 (equal to 2% of the taxable gain) will be
payable by the Company. In addition, approximately $150,000 in state income
taxes will be payable by the Company as a result of these transactions. The
income tax provision for financial reporting purposes is projected to be
$2,919,000, which will result in a cash expenditure of $610,000 and reduction of
the $2,309,000 income tax asset recorded on the January 6, 1996 balance sheet.
After the sales to Supreme and ITOCHU, the net operating loss carryover for
income tax purposes will be reduced to approximately $12,300,000. This net
operating loss carryover will be available to shelter any future income from the
Remaining Business, provided the Company does not undergo a 50% ownership
change, as defined in the Code, over a moving three-year testing period. In the
event the Remaining Business is sold prior to utilizing the net operating loss
carryover, any taxable gain resulting from such a sale could be offset against
the net operating loss carryover if no such ownership change has occurred. If an
ownership change has occurred, utilization of the net operating loss to shelter
the gain could be limited.
THE FOREGOING SUMMARY OF THE ANTICIPATED FEDERAL INCOME TAX CONSEQUENCES OF THE
DISTRIBUTION IS FOR GENERAL INFORMATION ONLY. HOLDERS OF MUNSINGWEAR COMMON
STOCK SHOULD CONSULT THEIR OWN ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF
ANY DISTRIBUTION, INCLUDING THE APPLICATION OF THE PRINCIPLES DISCUSSED ABOVE,
AS WELL AS THE EFFECT OF ANY FOREIGN, STATE, LOCAL OR OTHER TAX LAWS.
SELECTED FINANCIAL INFORMATION
SELECTED CONSOLIDATED FINANCIAL DATA OF MUNSINGWEAR
The following selected consolidated financial data as of and for each of the
four fiscal years in the period ended January 6, 1996, and as of and for the two
months ended January 4, 1992, and for the ten months ended October 29, 1991 have
been derived from the consolidated financial statements of the Company which
have been audited by Arthur Andersen LLP, independent public accountants. The
financial data as of and for the six months ended July 6, 1996 and July 8, 1995
have been derived from the unaudited financial statements of Munsingwear. In the
opinion of Munsingwear's management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial data
for the three months ended July 6, 1996 and July 8, 1995 have been reflected
therein. Operating results for the six months ended July 6, 1996 are not
necessarily indicative of the results that may be expected for the full year.
<TABLE>
<CAPTION>
PREDECESSOR
TWO COMPANY
SIX MONTHS ENDED FISCAL YEAR ENDED MONTHS TEN MONTHS
------------------- -------------------------------------------- ENDED ENDED
JULY 6, JULY 8, JANUARY 6, JANUARY 7, JANUARY 1, JANUARY 2, JANUARY 4, OCTOBER 29,
1996 1995 1996 1995 1994 1993 1992 1991
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 32,717 $ 29,728 $ 51,512 $ 37,407 $ 37,635 $ 37,867 $ 4,472 $ 31,127
Royalty income 2,269 2,464 4,609 4,528 3,624 1,977 272 890
Cost of goods sold 26,389 23,347 42,714 30,029 28,783 26,832 3,294 22,633
Gross profit % 19.3% 21.5% 17.1% 19.7% 23.5% 29.1% 26.3% 27.3%
Operating income (loss) 1,107 1,491 (1,074) (128) 157 2,414 (100) 1,193
Net income (loss) 3,087 556 (2,335) (573) (342) 1,241 (140) 54,714
Net income (loss) per share 1.48 0.27 (1.13) (0.28) (0.16) 0.59 (.07) nm
Weighted average shares
outstanding 2,086 2,066 2,066 2,066 2,093 2,093 2,092 nm
BALANCE SHEET DATA:
Inventories $ 10,259 $ 14,813 $ 14,641 $ 14,219 $ 8,233 $ 7,808 $ 5,050
Total assets 27,257 33,496 33,653 29,738 23,406 22,929 21,525
Long-term liabilities 331 1,792 351 550 2,469 1,290 1,530
Retained earnings (deficit) 938 556 (2,149) 186 759 1,101 (140)
Stockholders' equity 16,220 15,875 12,984 15,319 15,892 16,101 14,860
Dividends -- -- -- -- -- -- --
</TABLE>
nm = not meaningful
UNAUDITED SELECTED PRO FORMA FINANCIAL DATA
The following table summarizes certain selected unaudited pro forma financial
data for PremiumWear, Inc. (the name which will be adopted by Munsingwear, Inc.
following the sale of assets to Supreme) which gives effect to the asset sale
transaction; liquidation of related receivables, inventories and liabilities;
and estimated stockholder distribution. See "The Agreement and Related Matters"
and "Sale of Other Trademarks". Such pro forma data assumes the transaction had
been effective on July 6, 1996 for the balance sheet data and as of January 8,
1995 for the statement of operations data. The unaudited pro forma data set
forth in the following table is derived from, and should be read in conjunction
with, the historical consolidated financial statements of Munsingwear, Inc.,
including the respective notes thereto, incorporated by reference into this
Proxy Statement, and the pro forma financial information, including the notes
thereto, appearing elsewhere herein. See, "Pro Forma Financial Information." The
following pro forma financial data is presented for informational purposes only,
and is not necessarily indicative of the results of the future operations of the
remaining entity or the actual results that would have been achieved had the
transactions been consummated prior to the periods presented.
SIX MONTHS
ENDED YEAR ENDED
JULY 6, 1996 JANUARY 6, 1996
------------ ---------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales $12,447 $15,982
Cost of goods sold 9,510 12,229
Gross profit % 23.6% 23.5%
Operating income (loss) 181 (1,354)
Net income (loss) 2,948 (1,463)
Net income (loss) per share 1.41 (.71)
Weighted average shares outstanding 2,086 2,066
BALANCE SHEET DATA:
Inventories $ 5,345
Total assets 14,267
Long-term liabilities 331
Retained earnings -0-
Stockholders' equity 9,787
Dividends -- --
CAUTIONARY STATEMENT
Certain financial information included in this Proxy Statement represent
"forward-looking statements" made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those presently anticipated or projected. The Company wishes to caution
readers not to place undue reliance on any such forward-looking statements,
which speak only as of the date made. The following important factors, among
others, could affect the Company's actual results and could cause the Company's
actual amount available for distribution to stockholders to differ materially
from that presented in this Proxy Statement: (i) the extremely competitive and
volatile conditions that currently exist in the retail apparel marketplace could
affect the proceeds anticipated from the collection of accounts receivable and
the liquidation of inventories related to the sold business; (ii) actual
transaction costs, income taxes and other related liabilities could differ from
estimates, resulting in a reduction of estimated net proceeds; (iii) delays in
the timing of the projected closing date of the sale to Supreme would delay
paydown of bank indebtedness, which could cause the Company's line of credit
borrowings to exceed funds available under the current bank line of credit
agreement and cause management to seek other alternatives; and (iv) the
inability to carry out marketing and sales plans in the Remaining Business would
have a materially adverse impact on the Company's projections of capital needed
to fund operations of the Remaining Business. The foregoing list should not be
construed as exhaustive and the Company disclaims any obligation subsequently to
revise any forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
MARKET PRICES OF COMMON STOCK/DIVIDENDS
The Common Stock of Munsingwear is listed on the New York Stock Exchange under
the symbol "MUN." The following table sets forth the high and low closing prices
for the periods indicated:
QUARTER 1ST 2ND 3RD 4TH
- ------- --- --- --- ---
1994
High 7 6 5/8 7 1/2 8 7/8
Low 5 4 1/2 4 7/8 6 1/2
1995
High 8 3/4 8 5/8 9 5/8 8 7/8
Low 6 7/8 6 7/8 7 7/8 6 1/4
1996 (through August 14, 1996)
High 9 1/4 9 10 1/4
Low 6 1/2 6 5/8 8 7/8
On May 21, 1996, the day immediately prior to the public announcement of the
Agreement, the closing price for the Common Stock was $7.00. On August 14, 1996,
the closing price for the Common Stock was $9.50.
As of August 1, 1996, the Company had 848 stockholders of record. The Company
has not paid dividends on its Common Stock since fiscal 1980. The holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor.
OTHER PROPOSALS TO BE VOTED ON
PROPOSAL NO. 2
ELECTION OF DIRECTORS
Pursuant to the Company's Restated Certificate of Incorporation, as amended in
connection with the Reorganization described below in "Reorganization," the
Board of Directors is divided into three classes of directors, each director
serving a three-year term. One-third of the directors belong to each class.
Generally, each year only one class of directors is subject to stockholder vote.
During the last fiscal year, the Board of Directors added three new members,
Thomas D. Gleason, Kevin S. Moore and William J. Morgan. Each of the new
directors has been assigned to an existing class of the Board. In addition to
the election of the class nominated for a term ending in 1999, the Board of
Directors is seeking stockholder election of the two new members appointed to
the other two classes. Accordingly, Messrs. Benson, Gleason and Raskin have been
nominated for election to a three-year term at the 1996 Annual Meeting, Mr.
Moore has been nominated for election to a one-year term and Mr. Morgan has been
nominated for election to a two-year term.
It is intended that proxies will be voted for the following nominees. The
Company believes that the nominees will be able to serve; but should any of the
nominees be unable to serve as a director, the persons named in the proxies have
advised that they will vote for the election of such substitute nominee as the
Board may propose.
The names and ages of the nominees and other directors and their principal
occupations are set forth below, based upon information furnished to the Company
by such persons. Unless otherwise indicated, each of the directors has held
their respective identified positions for more than the past five years.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS SINCE
- ------------ -------------------------------------------- -----
<S> <C> <C>
NOMINATED FOR A TERM ENDING IN 1997:
Kevin S. Moore (41) Vice President and Chief Financial Officer of The Clark 1996
Estates, Inc. (investment management firm); Director of
Hitox Corporation of America and Ducommun, Incorporated.
NOMINATED FOR A TERM ENDING IN 1998:
William J. Morgan (41) President and director of Pacholder Associates, Inc. 1996
(registered investment advisor), 1984 to present; Director
of ICO, Inc., USF&G Pacholder Fund, Inc., Duckwall Alco
Stores, Inc. and Kaiser Resources, Inc.
NOMINATED FOR A TERM ENDING IN 1999:
Keith A. Benson (52) President of Music Stores Division of Musicland Stores 1993
Corporation (retail stores); Director of Musicland Stores
Corporation.
Thomas D. Gleason (60) Chairman of the Company's Board of Directors; Vice Chairman 1995
of Wolverine World Wide, Inc. (footwear manufacturing and
marketing), 1993 through April 17, 1996; Chief Executive
Officer of Wolverine World Wide, Inc. from 1972 to 1993.
Michael A. Raskin (71) Private Investor and Business Adviser; Chairman of ACA Joe 1991
International (apparel manufacturer), 1983 to 1986; Chairman
of Inmar Corporation (marketing and distribution company),
1981 to 1983; President of Joseph Magnin (apparel retailer),
1978 to 1980; Director of various private companies.
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE ANNUAL MEETING AND
WHOSE TERMS EXPIRE IN 1997:
C.D. Anderson (55) Chairman of Anderson Capital Management, Inc. (investment 1991
management firm); Director/Trustee of G.T. Global Mutual
Funds; Chairman and CEO, Plantagenet Holdings, Ltd.;
Director of various private companies.
Mark B. Vittert (48) Private Investor; Director of Lee Enterprises, Inc. and Dave 1994
& Busters, Inc.
OTHER DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THE ANNUAL MEETING AND
WHOSE TERMS EXPIRE IN 1998:
Lowell M. Fisher (63) President and Chief Executive Officer of the Company, 1990
October, 1993 to present; President of Chairman and
CEO, Inc. (management consulting firm), April 1990 to
October 1993; Chairman and Chief Executive Officer of 10,000
Holdings, Inc. (retail auto parts stores), January 1989 to
April 1990; Senior Vice President of the Company, October
1987 to January 1989.
Gerald E. Magnuson (65) Of Counsel to Lindquist & Vennum PLLP (law firm); Partner of 1982
Lindquist & Vennum PLLP to December 1994; Director of
Research, Incorporated, Sheldahl, Inc. and Washington
Scientific Industries, Inc.
</TABLE>
During the last fiscal year the Board of Directors met twelve times. Each
director attended more than 75% of the meetings of the Board of Directors and
any committee on which he served. Mr. Gleason was elected to the Board in July
1995 and Messrs. Moore and Morgan were elected in January 1996, following the
close of the last fiscal year.
The Board of Directors has established three standing committees, the Audit
Committee, the Compensation Committee and the Planning Committee. The Audit
Committee, which met twice during the last fiscal year, is currently comprised
of Messrs. Anderson (Chairman), Benson and Magnuson. Among other duties, the
Audit Committee reviews the internal and external financial reporting of the
Company, reviews the scope of the independent audit and considers comments by
the auditors regarding internal controls and accounting procedures and
management's response to those comments. The Compensation Committee, which met
once during the last fiscal year, is currently comprised of Messrs. Benson
(Chairman), Magnuson, Raskin and Vittert. The Compensation Committee approves
the compensation arrangements for senior management. The Planning Committee,
which met three times during the fiscal year, is currently comprised of Messrs.
Raskin (Chairman), Gleason and Fisher. Among other duties, the Planning
Committee reviews and recommends general corporate policy and assists management
in establishment of strategic direction for the Company. The Company does not
have a nominating committee.
Prior to March 1, 1996, non-employee members of the Board of Directors were paid
an annual fee of $12,000 plus $750 for each meeting of the Board and $500 for
each committee meeting attended. Effective March 1, 1996, the Board of Directors
reduced the compensation to a $10,000 annual fee plus $750 for each regular
meeting of the Board, $500 for each committee meeting held more than 24 hours
before or after a regular Board meeting, $150 for each committee meeting held
within 24 hours of a Board meeting and $150 for each telephonic meeting. Mr.
Gleason receives a fee of $41,667 per annum for serving as Chairman.
PROPOSAL NO. 3
DIRECTOR OPTIONS
BACKGROUND AND VOTE REQUEST
Under the Company's 1991 Stock Plan, which was merged with the 1992 Director
Stock Option Plan by the stockholders on May 19, 1994, all members of the
Company's Board of Directors who are not employees of the Company ("Non-Employee
Directors") who are elected or re-elected as a director at an annual or special
meeting of the stockholders or are serving an unexpired term as a director on
the date of an annual meeting at which any other director is elected
automatically receive five-year non-qualified stock options to purchase 5,000
shares of the Company's Common Stock with the exercise price equal to the fair
market value of the Company's Common Stock on such date.
Thomas D. Gleason was appointed to the Company's Board of Directors in July 1995
at the first Board of Directors meeting following the 1995 Annual Meeting.
However, Mr. Gleason attended the Annual Meeting of Stockholders held on May 24,
1995 and the Board of Directors meeting held that day. Because Mr. Gleason was
not a member of the Board of Directors on the date of the 1995 Annual Meeting,
he was not eligible to receive the automatic grant of non-qualified stock
options for Non-Employee Directors. By September 1995, Mr. Gleason had devoted
an equal amount of time to the Company as is expected of Non-Employee directors
for an entire fiscal year. Accordingly, on September 22, 1995, the Board of
Directors granted Mr. Gleason a non-qualified option outside of the 1991 Stock
Plan to purchase 5,000 shares of the Company's Common Stock at the fair market
value on the date of grant, which was $7.50 per share. This option will
terminate five years following the date of grant or, if earlier, 30 days after
termination of service as a Non-Employee Director, and will be exercisable at
any time following the date of grant. The purchase price, payment terms,
transfer restrictions and other similar provisions of employee stock options
apply to this stock option.
On January 30, 1996, Mr. Gleason was appointed as the Chairman of the Board of
Directors. The Board authorized the annual stipend described in Proposal No. 2
and granted him an additional five-year, non-qualified option outside the 1991
Stock Plan to purchase 10,000 shares of the Company's Common Stock at the fair
market value on the date of grant, which was $7.50 per share, for additional
services provided as Chairman of the Board.
The Corporate Responsibility Guidelines of the New York Stock Exchange require
stockholder approval of all options granted to officers and directors of the
Company prior to the listing of the shares. Accordingly, the Company is seeking
stockholder approval of the options to purchase 15,000 shares granted outside of
the 1991 Stock Plan to Mr. Gleason.
REGISTRATION WITH SEC
Upon approval of the director option proposal by the stockholders, the Company
intends to file a registration statement with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, covering the
shares issuable upon exercise of Mr. Gleason's options.
VOTE REQUIRED
Stockholder approval of the option grant to Mr. Gleason requires the affirmative
vote of the holders of a majority of the shares of Common Stock represented at
the meeting in person or by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL RELATING TO DIRECTOR
OPTIONS.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for fiscal years 1995, 1994 and 1993, the cash
compensation paid by the Company, as well as certain other compensation paid or
accrued for those years, to Lowell M. Fisher, Jr., the Company's Chief Executive
Officer, and to each of the other executive officers of the Company who received
more than $100,000 during the last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- AWARDS ALL OTHER
OTHER ANNUAL OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION(1) (#) ($)(2)
- ------------------ ---- ---------- --------- --------------- --- ------
<S> <C> <C> <C> <C> <C> <C>
Lowell M. Fisher, Jr. 1995 175,000 -- 3,039 35,000 3,703
Chief Executive Officer 1994 178,798 -- -- -- 644
1993 46,450 -- -- 100,000(3) 64,148
David E. Berg 1995 149,442 -- -- 5,000 3,572
Executive Vice President 1994 -- -- -- -- --
of Sales and Marketing 1993 -- -- -- -- --
Richard Brokl(4) 1995 141,912 -- 21 25,000 1,436
Executive Vice President- 1994 -- -- -- -- --
Operations and Chief 1993 -- -- -- -- --
Financial Officer
James S. Bury 1995 116,000 -- -- 3,000 4,882
Vice President and 1994 116,000 -- -- -- 2,070
Controller 1993 116,000 4,350 -- -- 1,843
Robert L. Horwitz(4) 1995 175,000 -- -- -- 3,316
Executive Vice
President- 1994 132,000 -- -- 17,500 115,797
Merchandising 1993 -- -- -- -- --
</TABLE>
(1) Reflects amounts reimbursed during fiscal 1995 for the payment of taxes.
(2) Includes Company contributions to the Company's retirement plan, as well
as premiums paid for term life insurance. For fiscal 1995, the Company's
contributions to the retirement plan for Messrs. Fisher, Berg, Bury and
Horwitz totaled $3,001, $2,939, $2,499 and $2,143, respectively, and the
balance for all named executives reflects term life insurance premiums.
The amount indicated for Mr. Fisher in 1993 reflects fees paid to a
company controlled by Mr. Fisher for consulting services to the Company
which were performed by Mr. Fisher during the period from July 21, 1993
through October 21, 1993. Fees paid Mr. Fisher prior to October 22, 1993
for services as a Non-Employee Director are excluded from all years.
(3) Excludes options to purchase 2,000 shares granted in each of fiscal 1993
and 1992 pursuant to the 1992 Directors Stock Option Plan while Mr. Fisher
was a Non-Employee Director.
(4) The employment of Messrs. Brokl and Horwitz was terminated as of September
26, 1995 and March 22, 1996, respectively.
In connection with the employment of Mr. Horwitz in 1994, the Company loaned Mr.
Horwitz $89,000 for the purchase of a home in the Twin Cities, and Mr. Horwitz
issued two promissory notes to the Company. One of the notes, in the principal
amount of $50,000, was initially due and payable on or before August 15, 1997,
without interest, and was discharged in connection with Mr. Horwitz's
termination on March 27, 1996. The other promissory note, in the amount of
$39,000, bears interest at the rate of 9% per annum and is due and payable on
August 15, 1999.
EMPLOYMENT AGREEMENTS
The Company entered into an Employment Agreement with Mr. Fisher effective as of
May 1, 1995, which was amended effective as of January 30, 1996. The agreement
is for an indefinite term and may be terminated by either party upon at least 60
days' written notice. If the agreement is terminated by either party for any
reason other than voluntary resignation, death, retirement, disability or cause
(as such terms are defined in the agreement), Mr. Fisher is entitled to receive
an amount equal to one and one-half (1 1/2 ) times his annual base salary in
eighteen equal month payments, as well as continuation of health and life
insurance benefits for that period. Mr. Fisher is subject to a non-compete
provision for the duration of his employment and during the period of payment of
the above-described amounts. In the event Mr. Fisher's employment is terminated
by reason of death, disability, retirement or without cause by the Company his
outstanding stock options may be exercised without regard to vesting
restrictions for a period of six months after termination. In the event of
termination of Mr. Fisher for any other reason, his outstanding stock options
may be exercised, to the extent vested, for a period of thirty days after
termination (provided that, in the event of termination for cause, the options
will terminate immediately).
The Company entered into an employment agreement with Mr. Bury effective April
24, 1990. This agreement is for an indefinite term and may be terminated by
either party upon 30 days' prior written notice. The agreement provides, among
other things, for a lump sum cash severance payment to Mr. Bury in the event of
a voluntary or involuntary termination of employment in connection with a change
in control of the Company, as defined in the agreements, in an amount equal to
the number of months remaining in the two-year period commencing on the first
Event (as defined therein) in connection with the change in control, multiplied
by one calendar month's base salary, at the highest monthly base salary rate
paid at any time during the term of the agreement. The agreement also specifies
minimum base salaries to be paid during the term of the agreement. If an Event
had occurred at the end of fiscal 1995, Mr. Bury would have received $232,000
pursuant to his employment agreement.
STOCK OPTIONS
The following table contains information concerning individual grants of stock
options under the 1991 Stock Plan to each of the named individuals during the
last fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------------------------------ STOCK
PERCENT OF TOTAL PRICE FOR OPTION
OPTIONS OPTIONS GRANTED TO MARKET PRICE TERM($)
GRANTED EMPLOYEES IN FISCAL EXERCISE ON GRANT EXPIRATION --------------------
NAME (#) YEAR PRICE ($) DATE ($) DATE 5% 10%
- ---- --- ---- --------- -------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Lowell M. Fisher, Jr. 35,000(1) 35.2% $ 7.875 $ 7.875 01/26/00 76,150 168,272
David E. Berg 5,000(1) 5.0% 7.875 7.875 01/26/00 10,879 24,039
Richard Brokl 25,000(1)(2) 25.1% 7.875 7.875 01/06/96 -- --
James S. Bury 3,000(1) 3.0% 7.875 7.875 01/26/00 6,527 14,423
Robert L. Horwitz -- -- -- -- -- -- --
</TABLE>
(1) Becomes exercisable as to twenty percent (20%) of the shares on January
27, 1995 and each anniversary thereafter.
(2) These options were canceled as of January 6, 1996.
The following table contains information concerning the value of options
previously granted under the 1991 Stock Plan which were held by the named
individuals at the end of the last fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FY-END(#) FY-END($)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
Lowell M. Fisher, Jr. 86,000/53,000 $84,375/$28,125(1)
David E. Berg 9,610/4,000 $ 6,458/$-0-(2)
Richard Brokl -- --
James S. Bury 9,210/2,400 $ 6,458/$-0-(3)
Robert L. Horwitz 3,500/14,000(4) $ 7,438/$29,750
(1) Reflects the value of only 75,000 of the 139,000 options. The remaining
options had an exercise price higher than the fair market value of the
Common Stock at fiscal year-end.
(2) Reflects the value of only 8,610 of these 13,610 options. The remaining
options had an exercise price higher than the fair market value of the
Common Stock at fiscal year-end.
(3) Reflects the value of only 8,610 of these 11,610 options. The remaining
options had an exercise price higher than the fair market value of the
Common Stock at fiscal year-end.
(4) In connection with the termination of employment of Mr. Horwitz after the
end of the fiscal year, all outstanding options became fully exercisable
as of March 22, 1996.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives are generally made by the
Compensation Committee of the Board, currently consisting of Messrs. Benson
(Chairman), Magnuson, Raskin and Vittert. All decisions by the Compensation
Committee relating to the compensation of the Company's executive officers were
during fiscal 1995 and will, in fiscal 1996, be reviewed by the full Board.
Pursuant to SEC rules designed to enhance disclosure of companies' policies with
regard to executive compensation, set forth below is a report submitted by the
Compensation Committee addressing the Company's compensation policies for fiscal
1995 as they affected Mr. Fisher and Messrs. Berg, Brokl, Bury and Horwitz, the
executive officers other than the Chief Executive Officer who, for fiscal 1995,
were the Company's most highly paid executive officers whose compensation
exceeded $100,000 (collectively with Mr. Fisher, the "Named Executives"). The
following report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 (the "1933 Act") or the Securities Exchange Act of
1934 (the "1934 Act"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under the 1933 Act or the 1934 Act.
COMPENSATION PHILOSOPHY. The Compensation Committee's executive compensation
policies are designed to provide competitive levels of compensation that
integrate pay with the Company's annual and long-term performance goals, reward
above-average corporate performance, recognize individual initiative and
achievement, and assist the Company in attracting and retaining qualified
executives. Furthermore, the Company's use of stock options and restricted stock
grants reflects the Compensation Committee's position that stock ownership by
management and stock-based performance compensation arrangements are beneficial
in aligning management's and stockholders' interest and the enhancement of
stockholder value. Compensation payments, to the extent possible, are designed
to qualify for deductibility under the Internal Revenue Code of 1986, as
amended.
The Company has designed its executive compensation plans around these policies
and objectives. The Compensation Committee believes the Company's compensation
arrangements consistently meet these goals. The following is a description of
the Company's current plans and how each relates to the objectives indicated
above.
BASE SALARY. While the Chief Executive Officer determines the annual salary of
each officer of the Company (including the Named Executives) other than himself,
the Compensation Committee generally approves the salary determinations. In
determining or approving appropriate salary levels, the Compensation Committee
considers levels of responsibility, experience, individual performance and
internal equity, as well as external pay practices.
ANNUAL INCENTIVES. During fiscal 1995, the Compensation Committee recommended,
and the Board adopted, a Key Management Incentive Plan for 1995 (the "Plan") to
reward key management, including the Named Executives, for achieving prescribed
levels of operating performance. The maximum amount that could be earned was 25%
of base salary with one-half the award dependent upon the Company's operating
performance for fiscal 1995 and one-half dependent upon individual performance
to be assessed by the Compensation Committee. Given the Company's financial
performance for fiscal 1995, no awards were given pursuant to the Plan.
LONG-TERM INCENTIVES. The Company's overall long-term compensation philosophy is
that long-term incentives should be related to improvement in long-term
stockholder value. In furtherance of this objective, the Company awards to its
executive officers and other key personnel stock options and, on a very selected
basis, restricted stock. Stock options encourage and reward effective management
that results in long-term corporate financial success, as measured by stock
price appreciation. Stock options have value from the date the stock options are
granted. Stockholders also benefit from such stock price appreciation. The 1991
Stock Plan allows the grant of incentive stock options and non-qualified stock
options. Stock options are awarded consistent with the Company's objective to
include in total compensation a long-term equity interest for executive
officers, with greater opportunity for reward if long-term performance is
sustained. To encourage a longer-term perspective, the options are only
exercisable over a multiple year period and grants are made at an option price
equal to the fair market value of the Common Stock on the date of grant.
OTHER COMPENSATION PROGRAMS. The Company maintains certain broad-based employee
benefit plans in which its executive officers, including the Named Executives,
have been permitted to participate, including retirement, life and health
insurance plans. The Company's retirement plan consists of a profit sharing
plan, pursuant to which the Board of Directors may make annual discretionary
contributions, and a 401(k) employee savings plan which allows employees to make
pre-tax contributions and in which the Company matches employee contributions in
an amount equal to one-half of the employee's contribution up to 5% of the
employee's base salary. Other non-cash compensation benefits are provided to the
Named Executives. None of these plans are directly or indirectly tied to Company
performance.
MR. FISHER'S FISCAL 1995 COMPENSATION. Regulations of the SEC require the
Company to disclose the Compensation Committee's basis for compensation reported
for its Chief Executive Officer in fiscal 1995 and to discuss the relationship
between the Company's performance during the last fiscal year and such Chief
Executive Officer's compensation. Mr. Fisher's base salary for fiscal 1995 was
determined on the same basis as all other executive officers and, as indicated
above, given the Company's financial performance in 1995 no incentive
compensation was paid to any of the Named Executives, including Mr. Fisher. In
recognition of the importance of the role of Chief Executive Officer to the
Company, during fiscal 1995 the Company entered into an Employment Agreement
with Mr. Fisher, the terms of which are described under "Employment Agreements"
above.
SUBMITTED BY THE COMPENSATION COMMITTEE
OF THE COMPANY'S BOARD OF DIRECTORS
Keith A. Benson Gerald E. Magnuson Michael A. Raskin Mark B. Vittert
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Magnuson, a director and member of the Compensation Committee, is currently
Of Counsel to the law firm of Lindquist & Vennum PLLP which was paid for legal
services rendered to the Company during the last fiscal year. It is anticipated
that Lindquist & Vennum PLLP will continue to perform legal services for the
Company during the current fiscal year. During the last fiscal year, the Company
paid $23,000 to a company owned by Mr. Raskin, a director and member of the
Compensation Committee, for consulting services. It is anticipated that the
Company will continue to use the consulting services of Mr. Raskin's firm during
the current fiscal year.
PERFORMANCE GRAPH
In accordance with the rules of the Securities and Exchange Commission, the
following performance graph compares performance of the Company's Common Stock
on the New York Stock Exchange to the Russell 3000 Textile Apparel Industry
Index and to the Russell 2000 Index. The graph compares the cumulative total
stockholder return as of the end of each of the Company's last five fiscal years
on $100 invested at the end of fiscal 1990 and assumes reinvestment of all
dividends. Management of the Company believes any comparison of the performance
of the Company's Common Stock before and after the Reorganization on October 29,
1991 is not meaningful.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MUN $100.00 $ 59.00 $107.00 $ 72.00 $ 93.00 $ 83.00
Russell 2000 100.00 146.00 173.00 206.00 202.00 259.00
Russell 3000 Textile Apparel 100.00 170.00 205.00 164.00 155.00 178.00
</TABLE>
The following graph compares, with respect to each of the indices indicated
above, the cumulative total stockholder return on an annual basis through the
end of the Company's last fiscal year of $100 invested on October 29, 1991,
immediately following the Reorganization, and assumes reinvestment of all
dividends. While management of the Company believes a comparison of the
performance of the Company's Common Stock following the Reorganization is more
meaningful than a comparison of performance prior to the Reorganization, any
historical stock performance cannot be considered as necessarily indicative of
future performance.
COMPARISON OF POST-REORGANIZATION CUMULATIVE TOTAL RETURN
[GRAPH]
<TABLE>
<CAPTION>
OCT. 91 DEC. 91 DEC. 92 DEC. 93 DEC. 94 DEC. 95
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Munsingwear $100.00 $ 74.00 $134.00 $ 90.00 $116.00 $104.00
Russell 2000 100.00 106.00 125.00 149.00 146.00 188.00
Russell 3000 Textile Apparel 100.00 105.00 126.00 101.00 96.00 110.00
</TABLE>
The performance graphs above shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the 1933 Act or under the 1934 Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under the 1933 Act or the 1934 Act.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of August 1, 1996 (unless otherwise
specified), the beneficial ownership of Common Stock of the Company by each
stockholder who is known by the Company to own beneficially 5% or more of the
outstanding Common Stock of the Company, each director, each Named Executive and
by all directors and executive officers as a group. See "Reorganization" for a
description of certain restrictions on transfers of Common Stock by holders of
5% or more of the total fair market value of all outstanding Common Stock.
Except as otherwise indicated, the stockholders listed in the table have full
voting and investment powers with respect to the shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
OWNED OUTSTANDING SHARES
----- ------------------
<S> <C> <C>
Pension Benefit Guaranty Corporation 250,000(1) 12.2%
("PBGC")
2020 K Street, N.W.
Washington, D.C. 20006
The Clark Estates, Inc. 196,284(2) 9.6%
30 Wall Street
New York, NY 10005
Arnold M. Amster 187,000(3) 9.1%
767 Fifth Avenue
New York, NY 10153
Derek Anderson 179,032(4)(6) 8.7%
220 Sansome Street, Suite 400
San Francisco, CA 94104
Francisco A. Lorenzo 114,700(5) 5.6%
333 Clay Street
Suite 4040
Houston, TX 77002
Keith A. Benson 11,000(6) *
Lowell M. Fisher 97,800(6) 4.5%
Thomas D. Gleason 16,000(6) *
Gerald E. Magnuson 14,800(6) *
Kevin S. Moore 196,284(2) 9.6%
William J. Morgan -- (1) -- %
Michael A. Raskin 16,400(6) *
Mark B. Vittert 88,100(6) 4.3%
David E. Berg 19,220(6) *
Richard T. Brokl 100 *
James S. Bury 18,920(6) *
Robert L. Horwitz 13,600(6) *
All Directors and Executive Officers 921,256(6) 41.0%
as a Group (13 persons)
</TABLE>
*Less than 1%
(1) Pacholder Associates, Inc. ("PAI"), a registered investment advisor, has a
contract with PBGC pursuant to which PAI has full and complete investment
discretion with respect to the 250,000 shares of the Company's stock owned
by PBGC, including the power to vote such shares. William J. Morgan is the
president, a director and a stockholder of PAI. William J. Morgan
disclaims beneficial ownership of the 250,000 shares owned by PBGC.
(2) The Clark Estates, Inc. provides administrative assistance to a number of
Clark family accounts which beneficially own an aggregate 196,284 shares
of the Company's Common Stock, including The Clark Foundation, which owns
95,390 shares. The Clark Estates, Inc. has, or in certain instances
shares, voting power and/or dispositive power with respect to such shares.
The Clark Estates, Inc. has no remainder or other economic interest in
such trust or fiduciary accounts. Mr. Moore is Vice President and Chief
Financial Officer of The Clark Estates, Inc.
(3) Based on a Schedule 13D filed with the Company and the Securities Exchange
Commission, which indicates that Mr. Amster has or shares voting and
dispositive power with respect to these shares. Accordingly, Mr. Amster
may be deemed to be the beneficial owner of such shares.
(4) Mr. Anderson shares voting and dispositive power with respect to 146,732
shares acquired by Anderson Capital Management, Inc. ("ACM") as agent for
its investment advisory clients and, accordingly, Mr. Anderson may be
deemed to be the beneficial owner of such shares. Mr. Anderson disclaims
beneficial ownership of those 146,732 shares and 4,500 of the shares
represented as beneficially owned by him which are owned by his wife.
(5) Based on a Schedule 13D filed with the Securities and Exchange Commission.
Francisco A. Lorenzo shares voting and dispositive power with respect to
the shares of Common Stock owned by two private investment companies and
four trusts for the benefit of family members of Mr. Lorenzo. Accordingly,
Mr. Lorenzo may be deemed to be the beneficial owner of all of the 114,700
shares reported on the Schedule 13D.
(6) Includes 14,000 shares each for Messrs. Anderson, Magnuson and Raskin,
10,000 shares for each of Messrs. Benson and Vittert, 93,000 shares for
Mr. Fisher, 15,000 shares for Mr. Gleason, 10,610 shares for Mr. Berg,
9,810 shares for Mr. Bury, and 190,420 shares for all directors and
executive officers as a group which may be acquired within sixty days of
the date hereof upon the exercise of outstanding stock options.
Based upon its review of Forms, 3, 4 and 5 and any amendments thereto furnished
to the Company pursuant to Section 16 of the Securities Exchange Act of 1934,
the Company believes all of such forms were filed on a timely basis by the
reporting persons, except that Mr. Berg filed a late Form 3.
EXPERTS
The audited financial statements incorporated by reference in this Proxy
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
incorporated herein by reference in reliance upon the authority of said firm as
experts in giving said report.
Arthur Andersen LLP served as the independent public accountants for the Company
for fiscal 1995 and have been selected to act in such capacity for fiscal 1996.
A representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting of Stockholders. Such representative will have an opportunity to make a
statement if such representative desires to do so and will be available to
respond to appropriate questions.
REORGANIZATION
On July 3, 1991, the Company filed a Petition for Reorganization under Chapter
11 of the United States Bankruptcy Code, together with a Plan of Reorganization
and a Disclosure Statement, with the United States Bankruptcy Court for the
District of Minnesota. The Plan of Reorganization was confirmed by the
Bankruptcy Court on October 1, 1991 and became effective as of October 29, 1991
(the "Reorganization"). Pursuant to the Reorganization, holders of the Company's
Common Stock received one new share of Common Stock for every 25 shares of their
then existing Common Stock surrendered and the Company issued or committed to
issue in excess of 1,773,000 new shares of Common Stock to creditors in
satisfaction of indebtedness in excess of $53,000,000. Mr. Bury, currently an
executive officer, served as such when the Petition for Reorganization was filed
and throughout the Reorganization.
In connection with the Reorganization, in order to reduce the risk that any
change in the stock ownership of the Company may jeopardize certain Federal
income tax attributes of the Company, the Company's Certificate of Incorporation
was amended to limit the ability of persons beneficially owning, or who, upon
acquisition of any shares, would beneficially own, five percent (5%) or more of
the total fair market value of outstanding shares of Common Stock of the Company
(a "5% Holder"). Until October 29, 1993, no 5% Holder was permitted to sell,
transfer or dispose or contract to sell, transfer or dispose any shares of
Common Stock or options, warrants or other rights to acquire Common Stock,
except in accordance with the procedures described in Article V of the
Certificate of Incorporation. Until October 29, 2001, no 5% Holder may purchase
or acquire or contract to purchase shares of Common Stock, except in accordance
with the procedures described in Article V, and any such purchase, acquisition
or contract not in compliance with Article V shall be null and void.
OTHER MATTERS
The Board of Directors knows of no business other than that described herein
that will be presented for consideration at the Annual Meeting. If, however,
other business shall properly come before the meeting, the persons in the
enclosed form of proxy intend to vote the shares represented by said proxies on
such matters in accordance with their judgment in the best interest of the
Company.
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
The rules of the Securities and Exchange Commission permit stockholders of a
company, after timely notice to the Company, to present proposals for
stockholder action in the Company's proxy statement where such proposals are
consistent with applicable law, pertain to matters appropriate for stockholder
action and are not properly omitted by Company action in accordance with the
proxy rules. The Munsingwear, Inc. 1997 Annual Meeting of Stockholders is
expected to be held on or about May 23, 1997 and proxy materials in connection
with that meeting are expected to be mailed on or about April 18, 1997.
Stockholder proposals prepared in accordance with the proxy rules must be
received by the Company on or before December 19, 1996.
METHOD OF PROXY SOLICITATION
The entire cost of preparing, assembling, printing and mailing the Notice of
Annual Meeting of Stockholders, this Proxy Statement, the proxy itself, and the
cost of soliciting proxies relating to the meeting will be borne by the Company.
In addition to use of the mails, proxies may be solicited by officers,
directors, and other regular employees of the Company by telephone, telegraph,
or personal solicitation, and no additional compensation will be paid to such
individuals. The Company has engaged D.F. King & Co., Inc. to assist in the
solicitation of proxies for a fee of $4,500 plus out-of-pocket expenses. The
Company will, if requested, reimburse banks, brokerage houses, and other
custodians, nominees and certain fiduciaries for their reasonable expenses
incurred in mailing proxy material to their principals.
By Order of the Board of Directors,
/s/ John R. Houston
John R. Houston, Secretary
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information (the "Pro Forma
Financial Information") of PremiumWear, Inc. (the name which will be adopted by
Munsingwear, Inc. following the sale of assets to Supreme) is based on the
historical consolidated financial statements of Munsingwear, Inc. and has been
prepared to illustrate the effects of the sale of assets to Supreme; the
liquidation of related receivables, inventories and liabilities; the repayment
of bank and other debt; the payment of transaction costs from the sale of assets
to Supreme; the payment of severance benefits to 50 employees whose positions
will be eliminated due to reductions in workload, simplification of operations
and consolidation of duties; and the subsequent cash distribution to
stockholders in an assumed amount of approximately $15 million. See "The
Agreement and Related Matters" and "Sale of Other Trademarks". The Pro Forma
Financial Information and accompanying notes should be read in conjunction with
the consolidated financial statements of Munsingwear which are not reprinted in
this Proxy Statement but are included in the Munsingwear Annual Report to
Stockholders and Annual Report on Form 10-K for the year ended January 6, 1996
and Munsingwear's Quarterly Report on Form 10-Q for the quarter ended July 6,
1996, incorporated by reference in this Proxy Statement.
The pro forma statements of operations for the year ended January 6, 1996 and
the six months ended July 6, 1996 give effect to the transaction as if it had
occurred on January 8, 1995. The pro forma balance sheet as of July 6, 1996 has
been prepared as if the transaction had occurred on that date. The Pro Forma
Financial Information is not necessarily indicative of the results of future
operations of the remaining entity or the actual results that would have
occurred if the sales had been consummated on the indicated dates.
In addition, the total proceeds, transaction costs and other related liabilities
are estimates based on Munsingwear's financial statements as of July 6, 1996 and
assumptions to the forecasted activity between that date and the anticipated
Closing Date of the sale to Supreme, as well as forecasted proceeds from the
liquidation of inventory and collection of accounts receivable. Actual results
could differ from those estimates and would directly affect the estimated amount
available for distribution to stockholders. See "Cautionary Statement."
PREMIUMWEAR, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
As of July 6, 1996
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
(NOTE 2)
----------------------------------------------------------------------------
ASSET
LIQUIDATION
MUNSINGWEAR SALE TO & STOCKHOLDER PREMIUMWEAR
HISTORICAL SUPREME DISTRIBUTION PRO FORMA
---------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 68 $12,631 (a,d,e,f,i) $(11,631) (j,k,l) $ 1,068
Accounts receivable 10,259 -- (5,576) (j) 4,683
Inventories 8,359 (173) (b) (2,841) (j) 5,345
Prepaid expenses 877 (462) (b) -- 415
Total current assets 19,563 11,996 (20,048) 11,511
Property, plant & equipment 3,128 (372) (b) -- 2,756
Deferred taxes 775 (775) (e) -- --
Trademarks 3,791 (3,791) (c) -- --
$27,257 $ 7,058 $(20,048) $14,267
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit borrowings $ 1,726 $(1,726) (i) $ -- $ --
Current maturities of
long-term debt 22 -- -- 22
Accounts payable 4,755 -- (1,857) (k) 2,898
Accrued payroll &
employee benefits 1,298 -- (313) (k) 985
Unearned royalty income 1,317 (1,317) (g) -- --
Other accruals 1,588 (1,000) (h) (344) (k) 244
Total current liabilities 10,706 (4,043) (2,514) 4,149
Long-term debt, less
current maturities 12 -- -- 12
Post-retirement benefits 319 -- -- 319
331 -- -- 331
Stockholders' equity:
Common stock, 2,058,078
shares outstanding 21 -- -- 21
Capital in excess of par value 15,261 -- (5,495) 9,766
Retained earnings 938 11,101 (12,039) --
Total stockholders' equity 16,220 11,101 (17,534) 9,787
$27,257 $ 7,058 $(20,048) $14,267
The accompanying notes are an integral part of this pro forma consolidated balance sheet.
</TABLE>
PREMIUMWEAR, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended July 6, 1996
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
MUNSINGWEAR ADJUSTMENTS PREMIUMWEAR
HISTORICAL (NOTE 3) PRO FORMA
---------- -------- ---------
<S> <C> <C> <C>
Revenues:
Net Sales $32,717 $(20,270)(a) $12,447
Royalties 2,269 (2,269)(b) --
34,986 (22,539) 12,447
Expenses:
Cost of goods sold 26,389 (16,879)(c) 9,510
Selling, general and administrative 7,490 (4,734)(d) 2,756
33,879 (21,613) 12,266
Operating income 1,107 (926) 181
Interest expense (717) 715 (e) (2)
Other 33 -- 33
Income before tax and gain on
sale of trademarks 423 (211) 212
Gain on sale of trademarks (Note 4) 4,383 -- 4,383
Income before tax 4,806 (211) 4,595
Provision for income taxes 1,719 (72)(f) 1,647
Net income $ 3,087 $ (139) $ 2,948
Net income per common share $ 1.48 $ 1.41
Weighted average shares outstanding 2,086 2,086
The accompanying notes are an integral part of this pro forma consolidated statement of operations.
</TABLE>
PREMIUMWEAR, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended January 6, 1996
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
PRO FORMA
MUNSINGWEAR ADJUSTMENTS PREMIUMWEAR
HISTORICAL (NOTE 3) PRO FORMA
---------- -------- ---------
<S> <C> <C> <C>
Revenues:
Net Sales $51,512 $(35,530)(a) $15,982
Royalties 4,609 (4,609)(b) --
56,121 (40,139) 15,982
Expenses:
Cost of goods sold 42,714 (30,485)(c) 12,229
Selling, general and administrative 13,961 (9,374)(d) 4,587
Restructuring costs (Note 4) 520 -- 520
57,195 (39,859) 17,336
Operating income (loss) (1,074) (280) (1,354)
Interest expense (1,158) 1,152 (e) (6)
Other 2 -- 2
Income (loss) before income taxes (2,230) 872 (1,358)
Provision for income taxes 105 -- 105
Net income (loss) $(2,335) $ 872 $(1,463)
Net loss per common share $ (1.13) $ (0.71)
Weighted average shares outstanding 2,066 2,066
The accompanying notes are an integral part of this pro forma consolidated statement of operations.
</TABLE>
PREMIUMWEAR, INC.
NOTES TO PRO FORMA UNAUDITED FINANCIAL STATEMENTS
1. BASIS OF ACCOUNTING
On May 22, 1996, Munsingwear, Inc. ("the Company") entered into an agreement to
sell all of its rights to its trademarks and certain associated assets in the
retail and professional golf businesses to Supreme International Corporation
("Supreme") for $18,000,000 in cash. Upon consummation of this transaction,
liquidation of related accounts receivable and inventories, repayment of bank
and other debt, payment of severance benefits and payment of transaction costs,
estimated net proceeds of between $12 million and $15 million will be
distributed to stockholders, with between approximately $1 million and $4
million to be retained by the Company for working capital purposes. This
transaction will be recorded as a sale of assets and distribution to
stockholders. All estimated transaction costs, expense accruals, asset
valuations and other losses anticipated in the disposition of the related assets
and liabilities are included in the accompanying pro forma consolidated
financial statements. Following this transaction, the Company will maintain only
its Advertising Specialty Incentive, Uniform and Specialty Distributor business
(the "Remaining Business") under an exclusive license agreement from Supreme and
will change its corporate name. See "Proposal No. 1, The Agreement and Related
Matters -- Terms of the Agreement -- License Agreement" elsewhere in this Proxy
Statement for a description of the Remaining Business and license agreement. The
Company is seeking stockholder approval to change the corporate name to
"PremiumWear, Inc."
The PremiumWear, Inc. pro forma consolidated statements of operations for the
year ended January 6, 1996, and for the six months ended July 6, 1996, exclude
the results of the sold business for the respective periods and include other
adjustments based on management's estimate of the effect of changes in
operations that would have occurred assuming the transaction had taken place at
the beginning of each period. Under the terms of its licensing agreement with
Supreme, the Company has an obligation to pay Supreme licensing fees on premium
sales over specified annual aggregate dollar amounts until 2001, at which time
license fees will be payable on all premium sales. The accompanying pro forma
consolidated financial statements assume commencement of this licensing
agreement as of January 8, 1995; however, during the periods presumed, sales do
not reach the specified threshold at which license fees become payable.
2. PRO FORMA BALANCE SHEET ADJUSTMENTS
The accompanying pro forma balance sheet reflects adjustment for the
transactions described in Note 1 as follows:
SALE TO SUPREME:
Represents the sale of trademarks to Supreme, write-off of certain assets
rendered unrealizable by the sale transaction, the payment of severance benefits
to 50 employees whose positions will be eliminated due to reductions in
workload, simplification of operations and consolidation of duties, and other
adjustments resulting therefrom.
<TABLE>
<CAPTION>
PROPERTY
CASH & CASH PREPAID PLANT & DEFERRED
(IN THOUSANDS) EQUIVALENT INVENTORIES EXPENSES EQUIPMENT TAXES TRADEMARKS
---------- ----------- -------- --------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(a) Estimated proceeds
from sale to Supreme $ 17,000 -- -- -- -- --
(b) Writeoff of assets
unrealizable as a result
of transaction -- $ (173) $ (462) $ (372) -- --
(c) Carrying value of
trademarks sold -- -- -- -- -- $ (3,791)
(d) Estimated transaction
costs (933) -- -- -- -- --
(e) Estimated income
taxes payable (510) -- -- -- (775) --
(f) Estimated severance
payments (1,200) -- -- -- -- --
(g) Recognition of
previously unearned
royalty income -- -- -- -- -- --
(h) Recognition of cash
deposit -- -- -- -- -- --
(i) Paydown of line of
credit borrowings (1,726) -- -- -- -- --
$ 12,631 $ (173) $ (462) $ (372) $ (775) $ (3,791)
</TABLE>
WIDE TABLE CONTINUED FROM ABOVE
LINE OF UNEARNED
CREDIT ROYALTY OTHER STOCKHOLDER'S
BORROWINGS INCOME ACCRUALS EQUITY
---------- ------ -------- ------
(a) Estimated proceeds
from sale to Supreme -- -- -- $ 17,000
(b) Writeoff of assets
unrealizable as a result
of transaction -- -- -- (1,007)
(c) Carrying value of
trademarks sold -- -- -- (3,791)
(d) Estimated transaction
costs -- -- -- (933)
(e) Estimated income
taxes payable -- -- -- (1,285)
(f) Estimated severance
payments -- -- -- (1,200)
(g) Recognition of
previously unearned
royalty income -- $ (1,317) -- 1,317
(h) Recognition of cash
deposit -- -- $ (1,000) 1,000
(i) Paydown of line of
credit borrowings $ (1,726) -- -- --
$ (1,726) $ (1,317) $ (1,000) $ 11,101
RECEIVABLES COLLECTION, INVENTORY LIQUIDATION AND STOCKHOLDER DISTRIBUTION:
Represents effect of net cash proceeds from collection of accounts receivable
and sale of inventory and cash disbursements for paydown of payables and accrued
liabilities related to the business sold to Supreme, and subsequent distribution
of cash to stockholders.
<TABLE>
<CAPTION>
ACCRUED
CASH AND PAYROLL &
CASH ACCOUNTS ACCOUNTS EMPLOYEE OTHER STOCKHOLDERS'
(IN THOUSANDS) EQUIVALENTS RECEIVABLE INVENTORIES PAYABLE BENEFITS ACCRUALS EQUITY
- -------------- ----------- ---------- ----------- ------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
(j) Estimated liquidation of receivables
and inventory $ 6,296 $(5,576) $(2,841) -- -- -- $ (2,121)
(k) Estimated paydown of other
liabilities (2,514) -- -- $(1,857) $(313) $(344) --
(l) Estimated cash available for
distribution to stockholders (15,413) -- -- -- -- -- (15,413)
$(11,631) $(5,576) $(2,841) $(1,857) $(313) $(344) $(17,534)
</TABLE>
CASH AVAILABLE FOR DISTRIBUTION:
Components of the estimated cash available for distribution to stockholders are
as follows:
Estimated balance of proceeds from sale of assets to Supreme $17,000,000
Estimated proceeds from receivables collection and inventory
liquidation 6,296,000
Paydown of line of credit borrowings (1,726,000)
Estimated payment of liabilities related to sold business (2,514,000)
Estimated transaction costs (933,000)
Estimated severance benefits (1,200,000)
Estimated cash retained in the business (1,000,000)
Estimated income taxes payable (510,000)
Estimated cash available for distribution to stockholders $15,413,000
The total proceeds, transaction costs and other related liabilities are
estimates based on Munsingwear's financial statements as of July 6, 1996 and
assumptions to the forecasted activity between that date and the anticipated
Closing Date of the sale to Supreme, as well as forecasted proceeds from the
liquidation of inventory and collection of accounts receivable. Actual results
could differ from those estimates and would directly affect the estimated amount
available for distribution to stockholders.
3. PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
The accompanying pro forma statements of operations reflect adjustment for the
items described in Note 1 in the following adjustments:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(IN THOUSANDS) JULY 6, 1996 JANUARY 6, 1996
- -------------- ------------ ---------------
<S> <C> <C>
(a) Reduction of revenues related to sold business $(20,270) $(35,530)
(b) Elimination of royalties related to sold business (2,269) (4,609)
(c) Reduction of cost of goods sold (16,879) (30,485)
(d) Reduction of commissions, salaries and other operating
expenses related primarily to elimination of personnel, and
reduction in rents and other expense (4,734) (9,374)
(e) Reduction of interest expense which results from paydown of
borrowings with cash proceeds from sale 715 1,152
(f) Reduction in provision for income taxes (72) --
$ (139) $ 872
</TABLE>
Upon the completion of the sale transaction and the related liquidation of
assets and liabilities, the Company will record, net of income taxes of
$1,285,000, a gain on sale of $8,980,000. This gain will be recognized in fiscal
1996, and has not been reflected in the accompanying pro forma consolidated
statements of operations.
4. EFFECT OF NON-RECURRING ITEMS ON PRO FORMA FINANCIAL STATEMENTS
The results of operations of Munsingwear, Inc. for the year ended January 6,
1996 include non-recurring restructuring charges of $520,000 reflecting expenses
associated with staff reductions and future lease payments on excess office
space. Had these events not occurred, pro forma net loss would have been
$943,000, and pro forma net loss per common share would have been $0.46 for the
year ended January 6, 1996.
The results of operations of Munsingwear, Inc. for the six months ended July 6,
1996 include a non-recurring gain on the sale of trademarks of $4,383,000,
before income taxes, reflecting the sale to ITOCHU. Had this event not occurred,
pro forma net income would have been $80,000, and pro forma net income per
common share would have been $0.04 for the six months ended July 6, 1996.
EXHIBIT A
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into as of this
22nd day of May, 1996, by and among SUPREME INTERNATIONAL CORPORATION, a Florida
corporation ("Purchaser"), and MUNSINGWEAR, INC., a Delaware corporation (the
"Company").
The Company is in the business of designing, sourcing, producing and
distributing shirts and other apparel products to retailers (including
department stores, national chains, specialty and discount stores) and
professional golf shops utilizing the various trademarks and trade names listed
on Schedule 1.1.1 hereto (the "Business").
Purchaser is in the business of designing, importing and marketing men's
sportswear.
The parties hereto desire that Purchaser acquire certain assets of the Company
related to the Business, which assets are described in Section 1.1, in
consideration of the payment of the "Purchase Price," as such term is defined
herein, and in consideration of Purchaser's other agreements in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, and of the
representations, warranties and agreements of the parties contained herein, the
parties hereto do hereby agree as follows:
1. ASSET PURCHASE.
1.1 Purchase and Sale of Assets. The Company hereby agrees to sell, transfer and
assign to Purchaser or its designee, and Purchaser or its designee hereby agrees
to acquire from the Company, on the terms and conditions set forth herein, the
following assets of the Company (collectively, the "Assets"):
1.1.1 Trademarks and Trade Names. all of the Company's rights in and to
the common law and registered trade names and trademarks worldwide listed on
Schedule 1.1.1 attached hereto and made a part hereof, including all
variants thereof and all goodwill associated therewith, and all
registrations, applications and other rights associated with the foregoing,
whether issued or pending, for distribution through all channels
(collectively, the "Trademarks"), but excluding the trademarks and
tradenames for the Peoples Republic of China, Vietnam, Macau, North Korea
and such other Trademarks as are listed on Schedule 1.1.1 (collectively, the
"Excluded Trademarks"), which exclusion shall not prohibit Purchaser from
manufacturing and exporting goods utilizing the Trademarks in or from any
such countries (the "Trademark Sourcing Rights"), except as described on
Schedule 1.1.1(a) attached hereto and made a part hereof, which Schedule
shall be provided to Purchaser by the Company within seven days after the
date hereof;
1.1.2 Customer Lists and Records. all current customer lists, and
records for the Business, set forth on Schedule 1.1.2 attached hereto and
made a part hereof;
1.1.3 Licenses and Other Agreements. all of the Company's rights in and
to existing and pending licensing agreements and all cash royalty income
payable after Closing (as hereinafter defined) listed on Schedule 1.1.3
attached hereto and made a part hereof, and all licensing agreements and
other agreements currently under negotiation as listed on Schedule 1.1.3,
but subject to change of control provisions (collectively, the "Licenses"),
except for the licensing agreements currently existing or being negotiated
for the U.S. Territories of Guam and the Northern Mariana Islands
(collectively, the "Excluded Licenses"), which exclusion shall not prohibit
Purchaser from manufacturing and exporting goods utilizing the Licenses in
or from such countries (the "License Sourcing Rights"), except as described
on Schedule 1.1.3(a) attached hereto and made a part hereof, which Schedule
shall be provided to Purchaser by the Company within seven days after the
date hereof;
1.1.4 Advertising Materials. all of the Company's rights in and to
advertising materials related to the Business and trade show booths and
booth locations, including without limitation, locations at the MAGIC and
PGA shows listed on Schedule 1.1.4 attached hereto and made a part hereof
(the "Advertising Materials");
1.1.5 Archives and Disks. all of the Company's rights in and to originals
of product advertising and design archives and embroidery disks listed on
Schedule 1.1.5 attached hereto and made a part hereof and all design
equipment owned by Munsingwear and utilized in connection with the Business
(the "Archives and Disks");
1.1.6 Corporate Name. all of the Company's rights in and to the
corporate name "Munsingwear" and all derivations and variations of the
term Munsingwear set forth on Schedule 1.1.6 attached hereto and made a
part hereof; and
1.1.7 Other Records. all books, files, papers, and records owned by the
Company and used in the operation of the Business (other than the Company's
tax and general accounting records and its minute and stock books),
including data bases, docketing programs, files and print-outs relating to
the Trademarks, to the extent legally transferable by the Company, subject
to the provisions of Section 11.5 of this Agreement;
1.1.8 Copyrights. all of the Company's rights in and to the common law
and registered copyrights associated with any of the Assets, all rights to
the Company's labels, labeling, advertising and promotional materials used
in the Business which are capable of being subject to copyright, and all
registrations, applications and other rights associated with the foregoing
whether issued or pending (collectively, the "Copyrights"); and
1.1.9 Sourcing Rights. the Trademark Sourcing Rights and the Licensing
Sourcing Rights.
It is specifically understood and agreed by the parties hereto that,
except as set forth in Section 1.2, Purchaser is acquiring, and the Company
is selling, all of the tangible and intangible assets owned by the Company
or in which the Company has an interest and used by the Company in the
Business.
1.2 Excluded Assets. All assets of the Company not otherwise included in the
Assets shall not be purchased by Purchaser, including, without limitation, the
following (all of which are collectively referred to as the "Excluded Assets"):
(a) the right to design, source, produce and distribute shirts and other
apparel products pursuant to the License Agreement described in Section 7.2
solely through the channels of distribution set forth on Exhibit B to the
License Agreement (the "ASI Premium/Specialty Markets") in the United States
and Canada;
(b) the Company's Fairmont, North Carolina manufacturing plant and
equipment;
(c) all of the Company's rights in and to the Excluded Trademarks and
the Excluded Licenses;
(d) all of the Company's accounts receivable incurred prior to the
Closing Date or related to the Inventory, as defined in the Management
Agreement attached hereto as Exhibit 7.1;
(e) all of the Company's inventory, including raw materials,
work-in-process and finished goods, as of the Closing Date;
(f) the Company's Minneapolis, Minnesota headquarters and equipment;
and
(g) the Company's New York office and professional golf endorsements.
1.3 Assumption of Liabilities. Except for liabilities arising from the Licenses
included in the Assets and trademark litigation in which the Company is a party,
as set forth on Schedule 3.14 attached hereto and made a part hereof (the
"Trademark Litigation"), Purchaser shall not assume or in any way be liable or
responsible for any liabilities or obligations of the Company whatsoever,
including, without limitation, any state, federal and local income, business,
occupation, sales, withholding and similar taxes (collectively "Tax
Liabilities"). Without limiting the generality of the foregoing, Purchaser shall
have no liability or responsibility for any Tax Liabilities arising as a result
of or in connection with the transactions contemplated by this Agreement, any
liabilities related to the Company's business, pending or threatened litigation,
any unknown or undisclosed claims, liabilities or obligations, any obligations
for contributions to employment insurance, disability or other employee benefit
programs, unpaid commissions for sales, collection of accounts receivable or
payment of accounts payable. With respect to Trademark Litigation, Purchaser
shall only assume the fees and costs of such litigation incurred after the
Closing Date.
2. PURCHASE PRICE AND CLOSING.
2.1 Purchase Price.
2.1.1 Purchase Price. As the purchase price (the "Purchase Price") for
the Assets, Purchaser shall pay to the Company, at the election of Purchaser
(a) $18.0 million in cash (including the Deposit, as hereinafter defined)
payable at the Closing, or (b) $18.4 million (including the Deposit),
payable $9.0 million in cash at the Closing and $9.4 million by delivery at
Closing of a $9.4 million non-interest bearing senior note (the "Note")
payable six months after Closing, secured by an irrevocable letter of credit
issued by NationsBank, N.A., or a comparable financial institution, or other
security, reasonably satisfactory to the Company, which letter of credit or
other security may be utilized as the sole collateral for a non-recourse
loan from NationsBank, N.A. to Purchaser immediately following the Closing
in the amount of $9.0 million. The Company hereby acknowledges receipt of
the amount of $1,000,000 (the "Deposit") as a good faith deposit to be
applied and credited toward the total Purchase Price. The remaining unpaid
cash portion of the Purchase Price shall be paid at the Closing by wire
transfer or certified or cashier's check.
2.1.2 Deposit. In the event the transactions contemplated by this
Agreement are not consummated due to Purchaser's default hereunder, the
Company shall retain the Deposit as liquidated damages. For such purposes,
the parties acknowledge and agree that it would be extremely difficult or
impossible to fix the precise amount of damages suffered by the Company in
such event, and agree that the sum of $1,000,000 is a reasonable
approximation of the amount of damages which would be suffered. If this
Agreement is terminated for any reason other than Purchaser's default, the
Company shall refund the Deposit to Purchaser within five days of
Purchaser's written request therefor.
2.2 Time and Place. The closing of the transactions contemplated hereby (the
"Closing") shall be held at the offices of Lindquist & Vennum, 4200 IDS Center,
Minneapolis, Minnesota 55402, at 10:00 a.m. on August 31, 1996, or at such other
place and at such other time as the parties may mutually agree (the "Closing
Date"). The Closing shall be deemed completed when the parties have delivered
the consideration and documents to be delivered by them as specified below.
2.3 Deliveries by Purchaser. Purchaser shall, at the Closing, deliver or
cause to be delivered to the Company:
2.3.1 Purchase Price. Payment of the balance of the Purchase Price, in
accordance with Section 2.1.
2.3.2 License Agreement. The license agreement described in Section
7.1 in the form of Exhibit 2.3.2 attached hereto and made a part hereof.
2.3.3 Opinion of Counsel. The opinion of counsel to Purchaser in the form
and with respect to the matters identified in Exhibit 2.3.3 attached hereto
and made a part hereof.
2.3.4 Secretary's Certificate. A certificate of the Secretary of
Purchaser certifying as to (a) a copy of the resolutions of the Board of
Directors of Purchaser approving the transactions contemplated hereby and
(b) the incumbency and authority of the officers of Purchaser executing this
Agreement on behalf of Purchaser and the documents executed and delivered by
Purchaser in connection therewith.
2.3.5 Certificate. A certificate of the authorized officers of Purchaser,
certifying that (a) the representations and warranties of Purchaser herein
remain true and correct at the Closing Date and (b) Purchaser has complied
with all agreements and covenants contained herein which are to be performed
prior to the Closing Date.
2.3.6 Other Documents. Such other certified resolutions, documents and
certificates as are required to be delivered by Purchaser pursuant to the
provisions of this Agreement.
2.4 Deliveries by the Company. The Company shall, at the Closing, deliver or
cause to be delivered to Purchaser:
2.4.1 Bill of Sale. A bill of sale, in form and substance satisfactory to
Purchaser, transferring title to the Assets to Purchaser.
2.4.2 Assignments of Trademarks, Licenses and Copyrights. Assignments, in
form and substance satisfactory to Purchaser (and in a form that may be
recorded in the applicable governmental records), transferring title to the
Trademarks, Licenses and Copyrights, including the Trademark Sourcing Rights
and the License Sourcing Rights.
2.4.3 Opinions of Counsel. The opinions of counsel to the Company in the
form and with respect to the matters identified in Exhibit 2.4.3 attached
hereto and made a part hereof.
2.4.4 Consents. Copies of all consents received from third parties
relating to the transactions contemplated hereby.
2.4.5 Secretary's Certificate. A certificate of the Secretary of the
Company certifying as to (a) a copy of the resolutions of the Board of
Directors and shareholders of the Company, approving the transactions
contemplated hereby and (b) the incumbency and authority of the officers of
the Company executing this Agreement on behalf of the Company and the
documents executed and delivered by the Company in connection therewith.
2.4.6 Amendment to the Company's Certificate of Incorporation. An
amendment to the Company's Certificate of Incorporation changing its name to
a name that is not confusingly similar to or a colorable imitation of the
name "Munsingwear" or any of the Trademarks.
2.4.7 Certificate. A certificate of the authorized officers of the
Company, certifying (a) that the representations and warranties of the
Company made herein remain true and correct at the Closing Date and (b) that
the Company has complied with all agreements and covenants contained herein
which are to be performed prior to the Closing Date.
2.4.8 Possession. Possession of all of the Assets, together with all
files, books and records relating to the Assets.
2.4.9 Other Documents. Such other certified resolutions, documents and
certificates as are required to be delivered by the Company pursuant to
the provisions of this Agreement.
2.5 Intervening Litigation. If prior to the Closing Date any preliminary or
permanent injunction or other order issued by a court of competent jurisdiction
or by any other governmental authority shall restrain or prohibit this Agreement
or the consummation of the transactions contemplated herein for a period of 15
days or longer, the Closing shall be adjourned at the option of either party for
a period of 30 days, even though the adjourned date is after August 31, 1996. If
at the end of such 30-day period such injunction or order shall not have been
favorably resolved, either party may, by written notice thereof to the other,
terminate this Agreement, without liability or further obligation hereunder.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In order to induce Purchaser to enter into and perform its obligations under
this Agreement, and subject to the exceptions set forth on the Schedules
attached hereto and made a part hereof (which exceptions shall be deemed
representations and warranties hereunder), the Company hereby makes each of the
representations and warranties to Purchaser as set forth below, each of which
shall be deemed material (and Purchaser, in executing, delivering and
consummating this Agreement, has relied and will rely upon the correctness and
completeness of each of such representations and warranties notwithstanding any
independent investigation):
3.1 Corporate Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation with full corporate power and authority to carry on its business
as it is now being conducted and proposed to be conducted, and to own, operate
and lease its properties and assets. The Company is duly qualified or licensed
to do business in good standing in the jurisdictions set forth on Schedule
3.1(a) attached hereto and made a part hereof, those being every jurisdiction in
which the conduct of the Company's business, the ownership or lease of its
properties, or the transactions contemplated by this Agreement, require it to be
so qualified or licensed and the failure to be so qualified or licensed would
have a material adverse effect on (a) the Assets, (b) the Business or (c)
Purchaser's use of the Assets or conduct of the Business subsequent to the
Closing Date (a "Material Adverse Effect"). True, complete and correct copies of
the Company's charter and bylaws as presently in effect have been previously
delivered to Purchaser. The Company has no subsidiaries. The corporate minute
books of the Company have been made available to Purchaser, are complete and
correct and contain all of the proceedings of the shareholders and directors of
the Company.
3.2 Corporate Authority. The Company has full corporate power and authority to
(a) own the Assets, (b) to carry on the Business as presently conducted and (c)
execute, enter into and carry out the provisions of this Agreement and the
agreements contemplated hereby. All corporate action on the part of the Company
necessary for the authorization, execution, delivery and performance of all
obligations of the Company under this Agreement and the agreements contemplated
hereby has been, or, with respect to approval by shareholders of the Company
prior to the Closing will be taken, all of which actions have been or will be in
full compliance with applicable law, and this Agreement and the agreements
contemplated hereby constitute the valid and legally binding obligation of the
Company, enforceable in accordance with their respective terms, except as such
validity, binding nature and enforceability may be affected by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditor's rights.
3.3 Assets. Schedules 1.1.1 through 1.1.5 hereto contain a complete and accurate
description of the Assets and specify the nature of all of the Assets as of the
date hereof. The property identified in said Schedules (i.e., the Assets)
constitutes all of the personal property of any nature owned by the Company and
used in the operation of the Business as conducted at this date and those assets
which are necessary in order for Purchaser to operate the Business following the
Closing Date, except, in either case, for the Excluded Assets. The Company
presently has, and shall deliver to Purchaser at the Closing, good, valid and
marketable title to every one of the Assets, whether tangible or intangible,
free and clear of all liens, pledges, claims, conditional sales contracts,
security interests or agreements, licenses, leases, mortgages or encumbrances of
any nature whatsoever, subject to the Licenses and as set forth on the aforesaid
Schedules. Except for the Licenses, the Company has not granted to any person
any license or right, whether exclusive or nonexclusive, to market, sell, lease,
license or use any of the Assets, and has not sold, transferred or conveyed, any
of the right, title and interest, or any option to purchase or acquire any of
its right, title or interest, in and to any of the Assets. All of the Licenses
included in the Assets are transferable without the consent of the licensor
thereof, except for those Licenses for which such consent has been received by
the Company, or which will be delivered at the Closing. All of such consents are
identified in Schedule 3.3 attached hereto and made a part hereof.
3.4 Customer Relationships. Attached hereto as Schedule 1.1.2 is a list of the
Company's customers with respect to the Business as of the date hereof (the
"Customers"). The Company is not aware that any of its Customers intends to
reduce materially or terminate, during the 12 month period following the date of
this Agreement, the amount of its business with the Company compared to that
conducted during the fiscal year ended January 6, 1996, which reduction,
individually or in the aggregate, would have a Material Adverse Effect.
3.5 Intellectual Property. Schedule 1.1.1 and Schedule 1.1.8 hereto set forth a
true, correct and complete list of the Trademarks and Copyrights (the
"Intellectual Property"). The Intellectual Property constitutes all of the
intellectual property used by the Company in the Business, except for the
Excluded Assets. The Company is the owner of, or otherwise has the free and
unrestricted right to use, each of the Intellectual Property, free and clear of
all liens, encumbrances, security interests, pledges, claims, equities and other
restrictions or charges of any kind or nature whatsoever, except as set forth on
Schedules 1.1.1, 1.1.3, 3.5 and 3.14. The consummation of the transactions
contemplated hereby will not cause the termination, expiration, breach or
modification of any of the Intellectual Property. Except as set forth on
Schedule 3.14 attached hereto and made a part hereof, there are no pending or
threatened claims against the Company alleging that the use of the Intellectual
Property infringes or conflicts with the rights of others under patents,
trademarks, copyrights, trade secrets or other proprietary rights and the
Company's use of the Intellectual Property in the Business does not infringe or
conflict with the trademarks or copyright rights of others. The Company has
taken all reasonable steps to maintain its interest in the Trademarks, to
protect its interests from infringement by third parties, and to protect against
dissemination any trade secrets or confidential information relating to the
Assets. Subject to Schedule 1.1.3, the Company has not entered into any
consents, settlement agreements, undertakings or other agreements that relate to
the use, registration or scope of protection to be afforded to the Intellectual
Property. Subject to Schedule 1.1.3, no interest in any Intellectual Property
has been assigned, transferred, licensed or sublicensed by the Company to any
other party. Although Purchaser is not acquiring the Excluded Trademarks at
present, and thus may not sell goods utilizing the Trademarks in countries
covered by an Excluded Trademark, except as described on Schedule 1.1.1(a),
Purchaser may manufacture and export goods utilizing any of the Trademarks in
and from any country protected by an Excluded Trademark.
3.6 Licenses. Schedule 1.1.3(a) hereto sets forth a true, correct and complete
list of the Licenses, including a schedule designating the recordal of licenses
and security interest agreements with business and governmental bodies, along
with documentation and expiration dates, where appropriate. A complete and
accurate copy of each License has been delivered to Purchaser. All of the
Licenses are valid, binding and enforceable in accordance with their respective
terms (except as such validity, binding nature and enforceability may be
affected by applicable by bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditor's rights) and were entered into in the ordinary course of business on
an "arms-length" basis. The Company is not in breach of or in default under any
License, no action or claim is pending, and to the Company's knowledge, no
notice of any such claim or action has been received which threatens to revoke,
modify or terminate any License, except as set forth in Schedule 3.14, and to
the best of the Company's knowledge, no occurrence or circumstance exist which
constitutes (with or without the giving of notice or the lapse of time or both)
a breach or default by the other party thereto. The consummation of the
transactions contemplated hereby, except as set forth on Schedule 3.3, will not
cause the termination, expiration, breach or modification of any of the Licenses
and the Company has not been notified or advised by any party to a License of
such parties intention or desire to terminate or modify any License. Except as
set forth on Schedule 1.1.3(a), no License prohibits or will prohibit Purchaser
from manufacturing and exporting goods utilizing the Trademarks in or from the
country which is the subject of such License.
3.7 ERISA. For purposes of this Agreement, the term "Benefit Plan" means any
employee benefit plan, including, without limitation, any employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), maintained or contributed to by the Company
or with respect to which the Company has had any direct or indirect, fixed or
contingent liability. Neither the Company, nor Purchaser following the date of
this Agreement, shall have, at any time hereafter, any unpaid liability for
contributions or payments to any Benefit Plan. No Benefit Plan is (i) a
"multi-employer" plan within the meaning of the Internal Revenue Code of 1986,
as amended or ERISA or the regulations promulgated thereunder or (ii) a
"multiple employer plan," as defined in ERISA. The Company has received no
notice that it is not in full compliance with any of the requirements of ERISA
and its regulations and to the best of the Company's knowledge there exists no
event described in Section 4043 of ERISA, excluding Subsections 4043(b)(2) and
4043(b)(3) thereof, with respect to the Company.
3.8 Financial Statements. The audited consolidated financial statements and
unaudited consolidated interim financial statements of the Company included in
its annual report on Form 10-K for the fiscal year ended January 6, 1996 (the
"1995 10-K") and, upon delivery to Purchaser, the Audited Financial Statements
(as hereinafter defined) required by Section 5.4, fairly present, in conformity
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto), the consolidated financial
position of the Company as of the dates thereof and their consolidated results
of operations and changes in financial position for the periods then ended
(subject to normal year-end adjustments in the case of any unaudited interim
financial statements). All such financial statements comply with the
requirements of Regulation S-X promulgated by the Securities and Exchange
Commission (the "SEC").
3.9 Absence of Changes. Since January 6, 1996, there has not been:
3.9.1 Material Changes. any adverse change in the Assets or in the
liabilities, financial condition or operations of the Business except for
changes in the ordinary course of business which have not and may not,
either individually or in the aggregate, result in a Material Adverse
Effect;
3.9.2 Sale of Assets: Permitted Liens. any sale, assignment, transfer
or lease of any of the Assets, other than in the ordinary course of
business, or any lien or encumbrance created on any of the Assets except
for liens for taxes not yet due and payable and except for continuations
of existing mortgages, deeds of trust, security interests or other
encumbrances;
3.9.3 Transactions Outside Ordinary Course of Business. any other
transaction relating to the Business other than in the ordinary course of
the Business, except as contemplated by this Agreement or the Right of
First Refusal Agreement described in Section 7.3;
3.9.4 Other Events. any other event or condition of any character
which has or is likely to have a Material Adverse Effect; or
3.9.5 Agreements. any agreement or commitment by the Company to do any
of the things described in this Section 3.9.
3.10 Taxes. The Company has accurately prepared and timely filed in all material
respects all federal, state and local income tax returns and other tax returns
which are required to be filed, and has paid, or made provision for the payment
of, all taxes which have or may have become due pursuant to said returns or
applicable law or pursuant to any assessment which has been levied upon its
assets, business or operations. The Company has not waived or extended any
applicable statute of limitations relating to the assessment of federal, state
or local taxes and no examinations of the federal, state or local tax returns of
the Company are currently in progress nor, to the best knowledge of the Company,
is any such examination threatened.
3.11 SEC Filings. The Company has delivered to Buyer a true and correct copy of
the 1995 Form 10-K. As of its filing date, the 1995 Form 10-K did not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
3.12 No Default. The Company is not in violation, breach, or default of any term
or provision of its Certificate of Incorporation or Bylaws, or of any term or
provision of any state or federal judgment, decree or order applicable to or
binding upon it. The execution, delivery and performance of and compliance by
the Company with this Agreement and the other agreements contemplated hereby
(assuming approval by the Company's shareholders), will not result in any such
violation or constitute a default under (or an event which with notice or lapse
of time or both would constitute an event of default) or result in (a) the
termination, expiration, breach or modification, or accelerate the performance
required by, any such term or provision or any term or provision of (i) except
as set forth on Schedule 3.3, any of the Licenses, or (ii) any other agreement
related to the Business; or (b) the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the Assets, which violation, conflict,
default, termination, acceleration or creation in the cases of subsections
(a)(ii) and (b), would have a Material Adverse Effect.
3.13 Compliance With Laws. The Company is in compliance with, and has received
no notice of any violation of, any applicable federal, foreign, state or local
statute, law, rule, ordinance or regulation affecting the use of the Assets and
conduct of the Business.
3.14 Litigation. Except as set forth on Schedule 3.14, no litigation,
proceeding, suit, action or controversy is pending or threatened by or against
the Company before any court or administrative or governmental agency relating
to the Assets of the Business nor which if adversely determined would have a
Material Adverse Effect, nor, to the knowledge of the Company, is there any
basis for any such litigation, proceeding or controversy by or against the
Company before any court or administrative or governmental agency.
3.15 Consents. The Company has obtained or, prior to the Closing will obtain,
all consents, authorizations, approvals, orders, registrations and
qualifications from, and made all filings with, any third party, including,
without limitation, all customers, and any public, governmental, administrative
or regulatory authority, agency or body required on the part of the Company in
connection with the execution, delivery or performance of this Agreement and the
other agreements contemplated hereby by the Company. Such consents,
authorizations, approvals, orders, registrations, qualifications and filings are
identified on Schedule 3.3.
3.16 Finders. Except as set forth on Schedule 3.16, the Company has not employed
or engaged any broker, finder or similar intermediary in connection with the
transactions contemplated herein, and no such person is entitled, as a result of
the Company's actions, to any fee or commission payable by the Company based
upon the consummation of the transactions contemplated hereby.
3.17 Advertising Materials. Schedules 1.1.4 and 1.1.5 include a list of all
Advertising Materials and Archives and Disks used by the Company in connection
with the Business. All of the items on such Schedule are suitable for the
purposes for which they are intended and in good condition and repair, ordinary
wear and tear excepted.
3.18 Disclosure. No representation or warranty by the Company contained in this
Agreement nor any other written statement or certificate furnished or to be
furnished by the Company pursuant hereto or in connection with the transactions
contemplated hereby, when read together, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained therein or herein not misleading in
light of the circumstances under which they were made.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
In order to induce the Company to enter into and perform its obligations under
this Agreement, Purchaser hereby represents, warrants and covenants to the
Company as set forth below.
4.1 Corporate Organization. Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Florida
with full corporate power and authority to carry on its business as it is now
being conducted and proposed to be conducted, and to own, operate and lease its
properties and assets. Purchaser is duly qualified or licensed to do business in
good standing in the jurisdictions in which the conduct of Purchaser's business,
the ownership or lease of its properties, or the transactions contemplated by
this Agreement, require it to be so qualified or licensed and the failure to be
so qualified or licensed would have a material adverse effect on Purchaser's
assets, liabilities, operations or financial position, except for consents which
will be obtained by Purchaser prior to Closing.
4.2 Corporate Authority. Purchaser has full corporate power and authority to (a)
own its properties and assets, (b) carry on its business as presently conducted
and (c) to enter into and carry out the provisions of this Agreement and the
other agreements contemplated hereby. All corporate action on the part of
Purchaser necessary for the authorization, execution, delivery and performance
of all obligations of Purchaser under this Agreement and the other agreements
contemplated hereby, has been taken, all of which actions have been in full
compliance with applicable law, and this Agreement and the other agreements
contemplated hereby constitute the valid and legally binding obligation of
Purchaser, enforceable in accordance with their respective terms, except as such
validity, binding nature and enforceability may be affected by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditor's rights.
4.3 Consents. Purchaser has obtained or, prior to the Closing will obtain, all
consents, authorizations, approvals, orders, registrations and qualifications
from, and has made all filings with, any third party, including, without
limitation, any public, governmental, administrative or regulatory authority,
agency or body required on the part of Purchaser in connection with the
execution, delivery or performance of this Agreement and the other agreements
contemplated hereby by Purchaser.
4.4 No Default. Purchaser is not in violation, breach, or default of any term or
provision of its Articles of Incorporation or Bylaws, or of any term or
provision of any state or federal judgment, decree or order applicable to or
binding upon it. The execution, delivery and performance of and compliance by
Purchaser with this Agreement and the other agreements contemplated hereby by
Purchaser will not result in any such violation or constitute a default under
(or an event which with notice or lapse of time or both would constitute an
event of default) or result in (a) the termination, expiration, breach or
modification of, or accelerate the performance required by, any such term or
provision or any term or provision of any contract material to the operation of
Purchaser's business, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of Purchaser, which
violation, conflict, default, termination, acceleration or creation would have a
material adverse effect on Purchaser's assets, liabilities, operations or
financial position, except for consents which will be obtained by Purchaser
prior to Closing.
4.5 Finders. Purchaser has not employed or engaged any broker, finder or similar
intermediary in connection with the transactions contemplated herein, and no
such person is entitled, as a result of Purchaser's actions, to any fee or
commission payable by Purchaser based upon the consummation of the transactions
contemplated hereby.
5. COVENANTS OF COMPANY.
The Company further agrees as follows:
5.1 Conduct of Business. From the date hereof and through the Closing Date, the
Company will use its best efforts to preserve the Assets and the Business
intact, to keep available to the Company the services of the Company's present
employees engaged in the Business, to preserve the Company's good will and
relationships with the Business customers, retailers, dealers, suppliers and
others having dealings with the Company with respect to the Business, and to
operate the Business of the Company diligently, in good faith and in accordance
with past practices. The Company shall also maintain and preserve its corporate
existence and all rights, privileges, franchises, Trademarks, licenses and other
authority and rights adequate for the conduct of the Business (including the
timely prosecution of actions against people or entities who infringe on the
Company's Trademarks in a manner consistent with past practices), and comply
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority with respect to the Business. The Company shall not
enter into any transaction with respect to the Business (including, without
limitation, any license agreement for the Trademarks (other than pending license
agreements described on Schedule 1.1.3)), other than in the ordinary course of
business, or create, incur or permit to exist any mortgage, deed of trust,
security interest or other encumbrance of any kind upon or on any of the Assets
other than continuations of existing mortgages, deeds of trust, security
interests or other encumbrances. Purchaser acknowledges the Company has the
right to enter into any transactions prior to the Closing relating to any
portion of its business other than the Assets, subject to the rights granted by
the Company to Purchaser in the Right of First Refusal Agreement described in
Section 7.3.
5.2 Hart-Scott-Rodino Filing. The Company shall promptly prepare and file with
the Federal Trade Commission ("FTC") and with the United States Department of
Justice ("Justice Department"), the Notification and Report Form required with
respect to the transactions contemplated hereby under the provisions of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). The
Company shall furnish to Purchaser copies of the Notification and Report Form,
and shall promptly notify Purchaser of any request by the FTC or Justice
Department for additional information with respect to such filings. Purchaser
shall promptly respond to any such request. Such filings shall conform to the
requirements of the HSR Act and the rules promulgated thereunder applicable to
the Company. The filing fee payable in connection with such filing shall be paid
by Purchaser.
5.3 Trade Secrets and Confidentiality. The Company agrees that at all times
hereafter (including at all times after the Closing Date), it will not use for
its own benefit or disclose, communicate or divulge to, or use for the direct or
indirect benefit of any other person, firm, corporation, business or entity any
confidential information regarding the use of the Assets in the Business,
including but not limited to any information relating to the customers,
retailers, trade practices, trade secrets or know-how associated with or
relevant to the Business. The parties acknowledge that all of these items
constitute trade secrets.
5.4 Financial Statements.
5.4.1 Audited Financial Statements. The Company shall prepare, within 60
days following the Closing, at its cost, audited consolidated financial
statements relating to the Assets and the Business, for such periods as
required by Regulation S-X promulgated by the Securities and Exchange
Commission (the "Audited Financial Statements"). The Audited Financial
Statements shall (a) be prepared by a firm of independent accountants
selected by the Company, (b) be in conformity with generally accepted
accounting principles consistently applied throughout the periods covered
hereby, and (c) comply with the requirements of Regulation S-X. Upon
delivery of the Audited Financial Statements to Purchaser, the
representations and warranties set forth in Section 3.7 shall apply to the
Audited Financial Statements.
5.4.2 Interim Financial Information. From the date hereof and through the
Closing Date, the Company shall supply Purchaser with such interim unaudited
financial information related to the Assets and the Business as Purchaser
may request and the Company regularly prepares in the ordinary course of its
business.
5.5 Stockholder Meeting; Proxy Material. The Company shall cause a meeting of
its stockholders to be duly called and held as soon as reasonably practicable
and in any event on or before August 31, 1996 for the purpose of voting on the
approval and adoption of this Agreement and the transactions contemplated
hereby. The directors of the Company shall, subject to their fiduciary duties as
advised by counsel, recommend approval and adoption of this Agreement and the
transactions contemplated hereby by the Company's stockholders. In connection
with such meeting, the Company (a) will promptly prepare and file with the SEC,
will use its best efforts to have cleared by the SEC, and will thereafter mail
to its stockholders as promptly as practicable, a Proxy Statement and all other
proxy materials for such meeting, (b) will use its best efforts to obtain the
necessary approvals by its stockholders of this Agreement and the transactions
contemplated hereby and (c) will otherwise comply with all legal requirements
applicable to such meeting.
5.6 Customers. Following the Closing Date, the Company will use its best efforts
to ensure an orderly transition in transferring to Purchaser the Company's
relationships with the Customers, including, without limitation, preparing and
distributing to the Customers a mutually agreed notification of the sale.
5.7 Employees. Except for employees of the Company who are hired by Purchaser,
at all times hereafter (including all times after the Closing Date), the Company
shall be responsible for all costs relating to the termination of employment of
any of its employees, including, without limitation severance pay and unpaid
vacation in accordance with existing arrangements with such employees.
5.8 Taxes. The Company shall pay all taxes, including, without limitation sales
and use taxes, resulting from the consummation of the transactions contemplated
hereby.
5.9 Prorations. All charges, if any, that may be assessed by law against the
owner of the Assets, including without limitation personal property taxes, shall
be prorated at the Closing Date, with the Company paying and being responsible
for all charges relating to the period ending on the Closing Date, and Purchaser
paying and being responsible for all such charges accruing after the Closing
Date.
5.10 Mail; Bank Accounts. After the Closing, Purchaser and the Company shall
jointly review all mail, payments, deliveries or other correspondence addressed
to the Company which relate to the use of the Assets or the Business. Any of
such mail, payments, deliveries or correspondence as relates to any of the
Assets, shall be forwarded to, retained by, and shall be the property of
Purchaser. To the extent any of such materials relate to any liabilities not
being assumed by Purchaser hereunder, or to the affairs of the Company unrelated
to the Assets being acquired by Purchaser, such material shall be retained by
and shall be the property of the Company. In any event, each party shall be
entitled to receive and retain a photocopy of all such materials, to the extent
they relate to the Assets or the Business. All telephone inquiries and other
verbal communications made with respect to the use of the Assets in the Business
shall promptly be referred by the Company to Purchaser and its representatives.
5.11 Change of Name. Concurrently with the Closing, the Company shall file with
the appropriate authorities such documents as are required to change its
corporate name to a name which does not include the word "Munsingwear", any
derivative thereof or any colorable imitation, any of the Trademarks, any
derivative thereof or any colorable imitation, or any name deceptively similar
to any of the foregoing. Following the Closing, except pursuant to the License
Agreement described in Section 7.2, the Company shall not use any fictitious
name or trade name which includes the word "Munsingwear", any derivative thereof
or any colorable imitation, any of the Trademarks, any derivative thereof or any
colorable imitation, or any name deceptively similar to any of the foregoing.
5.12 Due Diligence Investigation. From the Date of this Agreement until Closing
or termination of this Agreement, the Company will grant to Purchaser, its
agents and representatives, reasonable access at reasonable times (upon
reasonable advance notice) to all of the properties, books, accounting,
financial and statistical records, corporate records and other business files of
the Company relating to the Company's use of the Assets in the Business for
purposes of examining the same in connection with the transactions contemplated
hereby. The Company shall and shall cause its officers, employees and auditors
to cooperate fully with such due diligence investigation.
6. COVENANTS OF PURCHASER.
6.1 HSR Act Filings. Purchaser shall promptly prepare and file with the FTC and
with the Justice Department, the Notification and Report Form required with
respect to the transactions contemplated hereby under the provisions of the HSR
Act. Purchaser shall furnish to the Company copies of the Notification and
Report Form, and shall promptly notify the Company of any request by the FTC or
Justice Department for additional information with respect to such filings. The
Company shall promptly respond to any such request. Such filings shall conform
to the requirements of the HSR Act and the rules promulgated thereunder
applicable to Purchaser. The filing fee payable in connection with such filing
shall be paid by the Purchaser.
6.2 Trade Secrets and Confidentiality. Purchaser agrees that at all times
hereafter (including at all times after the Closing Date), it will not use for
its own benefit or disclose, communicate or divulge to, or use for the direct or
indirect benefit of any other person, firm, corporation, business or entity any
confidential information regarding the use of the Company's ASI/Premium
Specialty Markets business, including but not limited to any information
relating to the customers, retailers, trade practices, trade secrets or know-how
associated with or relevant to the ASI/Premium Specialty Markets business. The
parties acknowledge that all of these items constitute trade secrets.
6.3 Employees. Purchaser shall provide the Company with a list of the Company's
employees whom Purchaser wishes to hire not less than ten days before the
Closing Date.
7. ADDITIONAL AGREEMENTS.
7.1 Management Agreement. Upon execution of this Agreement, the Company and
Purchaser shall enter into the Management Agreement in the form of Exhibit
7.1 attached hereto and made a part hereof.
7.2 License Agreement. At Closing, the Company and Purchaser will enter into the
License Agreement in the form of Exhibit 2.4.4, pursuant to which, among other
matters, Purchaser will license to the Company use of the "Munsingwear" and
"Penguin" trademarks for sales to the ASI Premium/Specialty Market.
7.3 Right of First Refusal. Upon execution of this Agreement, the Company and
Purchaser shall enter into the Right of First Refusal Agreement in the form of
Exhibit 7.3, pursuant to which, among other matters, the Company shall grant
Purchaser a right of first refusal to (a) acquire the Excluded Trademarks and
Excluded Licenses, and (b) purchase the Company's ASI Premium/Specialty Markets
business.
7.4 Confidentiality. The confidentiality agreement dated March 1, 1996
heretofore executed by the Company and Purchaser shall remain in effect until
the earliest to occur of (a) the Closing Date or (b) April 30, 1998.
7.5 Disclosure Restrictions. Purchaser and the Company will consult with each
other before issuing any press releases or otherwise making any public
statements with respect to the transactions contemplated hereby, and neither
shall issue any such press release or make any such public statement without the
prior consent of the other, except as may be required by applicable law.
7.6 Acquisition Proposals. The Company shall not, and shall use its best efforts
to cause its officers, directors and employees and any attorney, accountant, or
other agent retained by it not to (i) initiate, encourage or solicit, directly
or indirectly, the making of any proposal or offer (an "Acquisition Proposal")
to acquire all or any significant part of the Assets, whether by merger,
purchase of securities or assets, tender offer or otherwise (an "Acquisition
Transaction"), or initiate, directly or indirectly, any contact with any person
in an effort to or with a view towards soliciting any Acquisition Proposal or
(ii) participate in any discussions or negotiations regarding, or furnish to any
other person any information with respect to, an Acquisition Proposal.
Notwithstanding the foregoing, the Company may (i) furnish or cause to be
furnished information subject to a confidentiality agreement in a form
substantially similar to that previously executed by Purchaser and (ii) in
response to an Acquisition Proposal, issue a communication to its security
holders of the type contemplated by Rule 14d-9(e) or 14e-2 under the Exchange
Act or otherwise communicate the Board's position with respect to such
Acquisition Proposal to the stockholders of the Company, and (iii) participate
in discussions and/or negotiations with persons who have sought the same, if the
Company's Board of Directors determines, based as to legal matters on the advice
of outside legal counsel, and as to financial matters on the opinion of an
investment banking firm, that the failure to furnish such information or to hold
discussions and/or negotiations with such entity or group or to take and
disclose such position would be inconsistent with the proper exercise of the
fiduciary duties of the Company's Board of Directors. In the event the Company
receives an Acquisition Proposal, it shall promptly inform Purchaser as to the
material terms thereof.
7.7 Expenses.
7.7.1 Except as set forth in this Agreement, each party will be
responsible for its own expenses in connection with the transactions
contemplated hereby.
7.7.2 The Company shall pay Purchaser the sum of $1.0 million (the
"Termination Fee") in addition to returning Purchaser's Deposit, promptly
upon receipt of a written request therefor from Purchaser after the
termination of this Agreement as a result of the occurrence of any of the
events set forth below (a "Trigger Event"):
(i) the Company shall have entered into, or shall have publicly
announced its intention to enter into an agreement or an agreement in
principle with respect to any Acquisition Proposal; or
(ii) the Board of Directors of the Company shall have withdrawn or
materially modified its approval or recommendation of this Agreement.
7.7.3 Any payment required by Section 7.7.2 shall become payable within
two business days after termination of the Agreement.
7.7.4 The Company acknowledges that the agreements contained in this
Section 7.7 are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Purchaser would not enter
into this Agreement; accordingly, if the Company fails to promptly pay the
Termination Fee when due, the Company shall in addition thereto pay to
Purchaser all costs and expenses (including fees and disbursements of
counsel) incurred in collecting such Termination Fee, as the case may be,
together with interest on the amount of such Termination Fee (or any unpaid
portion thereof) from the date such payment was required to be made until
the date such payment is received by Purchaser at the prime rate reported in
The Wall Street Journal from time to time during such period.
8. CONDITIONS TO CLOSING.
8.1 Conditions to Obligations of Purchaser. The obligation of Purchaser to
purchase and pay for the Assets shall be subject to and conditioned upon the
satisfaction at the Closing of each of the following conditions (any of which
may be waived in the sole and absolute discretion of Purchaser):
8.1.1 Representations and Warranties. All of the representations and
warranties of the Company made herein shall be true, accurate and correct at
the Closing Date.
8.1.2 Compliance with Agreement. The Company shall have complied with all
agreements and covenants contained herein which are to be performed prior to
the Closing Date.
8.1.3 Corporate Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the directors and
stockholders of the Company in accordance with Delaware law.
8.1.4 Consents. The Company shall have received, at or prior to the
Closing, all consents required from any third party with respect to the sale
of the Assets, and the consummation of the transactions contemplated hereby.
8.1.5 HSR Act. Any applicable waiting period under the HSR Act relating
to the purchase of the Assets shall have expired.
8.1.6 Due Diligence Examination. Within 45 days of the date of this
Agreement, Purchaser shall have determined that the results of the "due
diligence" examination performed by Purchaser are satisfactory to Purchaser,
in its reasonable discretion.
8.1.7 Absence of Material Adverse Changes. There shall have been no
Material Adverse Effect.
8.1.8 No Proceeding or Litigation. There shall not be in effect any
injunctions, orders or other decrees of any court or governmental body or
any material pending or threatened litigation or proceeding prohibiting,
restraining or otherwise preventing the consummation of the transactions
contemplated hereby.
8.1.9 Additional Instruments. The Company shall have delivered to
Purchaser such agreements and instruments, in recordable and/or fileable
form, as are necessary for the purpose of reflecting on the records of any
applicable governmental agency the transfer of those registered trademarks
and pending applications which are included in the Assets. Such agreements
and instruments shall be in form and substance reasonable satisfactory to
Purchaser.
8.2 Conditions to Obligations of the Company. The obligation of the Company to
sell the Assets shall be subject to and conditioned upon the satisfaction at the
Closing Date of each of the following conditions (any of which may be waived in
the sole and absolute discretion of the Company):
8.2.1 Representations and Warranties. The representations and warranties
of Purchaser made herein shall be true and correct as of the Closing Date.
8.2.2 Compliance with Agreement. Purchaser shall have complied with all
obligations set forth herein to be performed prior to the Closing Date.
8.2.3 Corporate Approvals. This Agreement and the transactions
contemplated hereby shall have been approved by the directors of Purchaser
in accordance with Florida law.
8.2.4 Consents. Purchaser shall have received at or prior to the Closing,
all consents required from any third party with respect to the sale of the
Assets and the consummation of the transactions contemplated hereby.
8.2.5 HSR Act. Any applicable waiting period under the HSR Act relating
to the purchase of the Assets shall have expired.
8.2.6 No Proceeding or Litigation. There shall not be in effect any
injunctions, orders or other decrees of any court or governmental body or
any material pending or threatened litigation or proceeding prohibiting,
restraining or otherwise preventing the consummation of the transactions
contemplated hereby.
9. TERMINATION AND ABANDONMENT.
9.1 Methods of Termination. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of Purchaser and the Company;
(b) by Purchaser and the Company if this Agreement is not consummated on
or before August 31, 1996; provided that if any party has breached or
defaulted with respect to its respective obligations under this Agreement on
or before such date, such party may not terminate this Agreement pursuant to
this Section, and the other party to this Agreement may at its option
enforce its rights against such breaching or defaulting party and seek any
remedies against such party, in either case as provided hereunder and by
applicable law;
(c) by Purchaser, if as of the Closing Date, any of the conditions
specified in Section 8.1 have not been satisfied in any material respect;
(d) by the Company, if as of the Closing Date, any of the conditions
in Section 8.2 have not been satisfied in any material respect;
(e) by either the Company or Purchaser, if there shall be any law or
regulation that makes consummation of the Agreement illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining
Purchaser or the Company from consummating the Agreement is entered and such
judgment, injunction, order or decree shall become final and nonappealable;
(f) by Purchaser, if there has been a material breach on the part of the
Company of the representations, warranties or agreements of the Company
contained herein which cannot be or has not been cured within 10 days after
written notice by Purchaser to the Company of such breach;
(g) by the Company, if there has been a material breach on the part of
Purchaser of the representations, warranties or agreements of Purchaser
contained herein which cannot be or has not been cured within 10 days after
written notice by the Company to Purchaser of such breach; or
(h) by Purchaser, upon the occurrence of any Trigger Event described
in Section 7.7.2 hereof.
The party desiring to terminate this Agreement pursuant to this Section
9.1 shall give written notice of such termination to the other party in
accordance with Section 12.3.
9.2 Effect of Termination. If this Agreement is terminated pursuant to Section
9.1, this Agreement shall become void and of no effect with no liability on the
part of any party hereto, except that the agreements contained in Sections 7.4,
7.7 and 2.1.2 shall survive the termination hereof.
10. INDEMNIFICATION.
10.1 Indemnification By the Company. The Company shall indemnify, defend and
hold harmless Purchaser against and in respect of any and all claims, demands,
losses, liabilities, judgments, costs, expenses and obligations, including,
without limitation, interest, penalties and reasonable attorneys's fees
(collectively, "Purchaser Losses"), suffered or incurred by Purchaser which
arise, result from or relate to: (a) any breach of, or failure by the Company to
fulfill or perform any of its representations, warranties, covenants or
agreements in this Agreement, or in any exhibit, schedule or other instrument
furnished under this Agreement, (b) the operation or conduct of the Business
through the Closing Date, or (c) any of the liabilities or obligations of the
Company, which are not expressly assumed hereunder; provided, however that
(a) indemnification shall not be payable by the Company unless and until
the aggregate amount of all claims for indemnification by Purchaser
hereunder exceeds $250,000 and unless the claims for indemnification are
received by the Company prior to the expiration of 18 months from the
Closing Date; and
(b) the Company's indemnification obligations under this Section 10.1
shall be limited to $5,000,000 in total payments for all claims by
Purchaser.
10.2 Indemnification By Purchaser. Purchaser hereby covenants and agrees with
the Company, that Purchaser shall indemnify, defend and hold harmless the
Company against and in respect of any and all claims, demands, losses,
liabilities, costs, expenses and obligations, including, without limitation,
interest, penalties and reasonable attorneys' fees (collectively, "Company
Losses") suffered or incurred by the Company which arise, result from or relate
to any breach of or failure of Purchaser to fulfills or perform any of its
representations, warranties, covenants or agreements in this Agreement, or in
any exhibit or other instrument furnished or to be furnished under this
Agreement; provided, however, that
(a) indemnification shall not be payable by Purchaser unless and until
the aggregate amount of all claims for indemnification by the Company
hereunder exceeds $250,000 and unless the claims for indemnification are
received by Purchaser prior to the expiration of 18 months from the Closing
Date; and
(b) Purchaser's indemnification obligations under this Section 10.1 shall
be limited to $5,000,000 in total payments for all claims by the Company.
10.3 Defense of Claims. In the event that a claim, demand or assessment is made
or threatened against a party to this Agreement (for purposes of this Section
10.3, the "Indemnitee") which the Indemnitee believes is subject to
indemnification by the other party (the "Indemnitor"), the Indemnitee shall
promptly notify the Indemnitor of such claim, demand or assessment and shall
provide the Indemnitor with a reasonable opportunity to defend the same at the
Indemnitor's own expense and with mutually acceptable counsel; provided that the
Indemnitee shall at all times also have the right to fully participate in the
defense of such claim, demand or assessment at its own expense. If the
Indemnitor shall, within a reasonable time after receipt of notice, fail to
defend the threatened claim, demand or assessment, Indemnitee shall have the
right, but not the obligation, to undertake the defense of, and to compromise
and settle the claim, demand or assessment; provided, however, that Indemnitee
shall not compromise or settle any such claim, demand or assessment without the
prior written consent of Indemnitor, which consent shall not be unreasonably
withheld. If the claim is one that cannot by its nature be defended solely by
Indemnitee, Indemnitor shall make available all information and assistance that
Indemnitee may reasonably request in connection with such defense.
11. POST-CLOSING OBLIGATIONS.
11.1 Further Assurances. The Company covenants and agrees to make, execute and
deliver to Purchaser any and all powers of attorney and other authority which
the Company may lawfully make, execute and deliver, in addition to any such
powers and authorities as are contained herein, which may be or become
necessary, proper or convenient to enable Purchaser to reduce to possession,
collect, enforce, own or enjoy any and all rights and benefits in, to, with
respect to, or in connection with, the Assets, or any part or portion thereof,
and upon Purchaser's request, to take in the Company's name, any and all steps
and to do any and all things which may be or become lawful and necessary,
proper, convenient or desirable to enable Purchaser to reduce to possession,
collect, enforce, own and enjoy any and all rights and benefits in, to, with
respect to, or in connection with, the Assets, and each and every part and
portion thereof. The Company also covenants and agrees with Purchaser, its
successors and assigns, that the Company will do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, any and all
further acts, instruments, papers and documents as may be necessary to carry out
and effectuate the intent and purposes of this Agreement.
11.2 Payment of Liabilities. The Company shall satisfy and discharge as the same
shall become due, all of its liabilities, obligations, debts, accounts payable
and commitments including but not limited to tax liabilities, not specifically
assumed by Purchaser.
11.3 Existing Bookings. Following the Closing Date, the Purchaser will use its
best efforts to fulfill existing bookings and sourcing commitments for the sale
of apparel.
11.4 Use of Software. The Company shall grant Purchaser the right to use the
Business' software without charge until six months after the Closing Date.
11.5 Access to Records. The Company shall preserve for a period of at least
seven years after the Closing Date all original documents evidencing the Assets
or the Business or the use of the Assets in the Business, and all other original
books, files, papers, records and other data regarding Purchaser, in a usual,
regular and ordinary manner consistent with past practices of the Company. The
Company shall, subject to such reasonable limitations as may be necessary to
protect the Company's proprietary information, at Purchaser's sole expense and
on reasonable prior notice to the Company, (i) afford to Purchaser, and its
counsel, accountants, consultants and other representatives reasonable access
during normal business hours to examine, inspect and copy any books, records and
original documents of the Company to the extent necessary in order for Purchaser
to comply with or respond to any audit, investigation or other governmental
investigation or inquiry, and (ii) cooperate with reasonable requests of
Purchaser with respect to the use of such documents transferred hereunder for
such purposes.
12. MISCELLANEOUS.
12.1 Survival of Warranties. All agreements, representations and warranties of
the parties made herein (including the exhibits attached hereto) shall survive
the execution and delivery of this Agreement and the Closing, subject to any
limitation with respect thereto set forth herein, for a period of 18 months from
the Closing Date.
12.2 Modification. This Agreement may not be amended, waived or modified
except in writing executed by the parties hereto.
12.3 Notices. All notices under this Agreement shall be in writing, and may be
delivered by hand or sent by mail, facsimile transmission or overnight courier.
Notices sent by mail shall be sent by certified mail, return receipt required,
and shall be deemed received on the date of receipt indicated by the receipt
verification provided by the national postal service. Notices delivered by
overnight courier shall be deemed received on the date of receipt indicated by
the verification provided by the courier. Notices sent by facsimile transmission
shall be deemed received the day on which sent, and shall be conclusively
presumed to have been received in the event that the sender's copy of the
facsimile transmission contains the "answer back" of the other party's facsimile
transmission. Notices shall be effective upon receipt. Notice shall be given,
mailed or sent to the parties at the following addresses:
To the Company: Munsingwear, Inc.
8000 West 78 Street
Suite 400
Minneapolis, Minnesota 55439
Attn: Lowell Fisher, Chairman
With a copy to: Lindquist & Vennum 4200 IDS Center
Minneapolis, Minnesota 55402
Attn: John R. Houston, Esq.
Purchaser: Supreme International Corporation
7495 N.W. 48th Street
Miami, Florida 33166
Attn: George Feldenkreis, Chairman
With a copy to: Broad and Cassel
201 S. Biscayne Boulevard
Miami Center -- Suite 3000
Miami, Florida 33131
Attn: Dale S. Bergman, Esq.
Any party hereto may designate any other address for notices given it hereunder
by written notice to the other party given at least ten(10) days prior to the
effective date of such change.
12.4 Severability. Any provision of this Agreement which is deemed to be
invalid, illegal or unenforceable in any Jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining provisions hereof
in such jurisdiction or rendering that or any other provision of this Agreement
invalid, illegal or unenforceable in any other jurisdiction.
12.5 Applicable Law. This Agreement and the rights and obligations of the
parties hereto shall be governed by the laws of the State of Delaware.
12.6 Assignability. This Agreement may not be assigned by either party hereto.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns.
12.7 Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
12.8 Headings. The various headings used in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof.
12.9 Entire Agreement. This Agreement and the exhibits hereto constitute the
entire agreement between the parties relating to the subject matter hereof, and
supersedes all prior agreements, representations and understandings.
12.10 Further Assurances. Subsequent to this date, each of the parties hereto
shall, without charge to the other, take such additional actions and execute,
deliver and file such additional instruments as may be reasonably required to
give effect to the transactions contemplated hereby.
12.11 Attorneys' Fees in Event of Dispute. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other reasonable costs incurred in that action or
proceeding, in addition to any other relief to which she. he, it or they may be
entitled.
12.12 Waivers. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute a waiver of any other provision, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing, by the party making the waiver.
IN WITNESS WHEREOF, the parties hereto have executed and entered into this
Agreement on the date first above written.
"Purchaser": SUPREME INTERNATIONAL
CORPORATION, a Florida corporation
By: /s/ George Feldenkreis
Chairman of the Board and Chief
Executive Officer
"The Company": MUNSINGWEAR, INC., a Delaware corporation
By: /s/ Lowell M. Fisher
Chief Executive Officer
LIST OF EXHIBITS
EXHIBIT NUMBER DESCRIPTION
2.3.2 License Agreement
2.3.3 Opinion of Purchaser's Counsel
2.4.3 Opinions of the Company's Counsel
7.1 Management Agreement
7.3 Right of First Refusal Agreement
EXHIBIT B
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
Munsingwear, Inc., a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Munsingwear, Inc. (the
"Company") held on July 24, 1996, a resolution was duly adopted setting forth an
amendment of the Certificate of Incorporation of the Company, declaring said
amendment to be advisable. The resolution setting forth the proposed amendment
is as follows:
RESOLVED, that an amendment to Article I of the Company's Certificate of
Incorporation is hereby approved by the Board of Directors, and Article I is
hereby amended and restated to read as follows:
"ARTICLE I.
NAME
The name of the Corporation is PremiumWear, Inc."
SECOND: That on September 6, 1996, at an Annual Meeting, a majority of the
stockholders of the Company consented to and approved the resolution adopted
by the Board of Directors.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Lowell M. Fisher, its President, this day of September, 1996.
MUNSINGWEAR, INC.
By Lowell M. Fisher
President and Chief Executive Officer
EXHIBIT C
May 22, 1996
Board of Directors
Munsingwear, Inc.
8000 West 78th Street
Minneapolis, MN 55439
Dear Sirs:
We understand that Munsingwear, Inc. ("Munsingwear") is considering entering
into an Agreement (the "Agreement") dated as of May 22, 1996 which provides,
subject to the terms and conditions thereof, that Supreme International
("Supreme") will acquire certain assets of the Company (the "Assets") and assume
certain related liabilities of the Company (the "Liabilities").
You have requested our opinion with respect to the fairness, from a financial
point of view, of the consideration proposed to be received by Munsingwear from
Supreme pursuant to the Agreement.
In preparing our opinion, we reviewed and analyzed: (i) the Agreement; (ii)
certain publicly available business, financial and trading information relating
to Munsingwear, Supreme, and the retail golf apparel and related industries: and
(iii) certain other information, including financial projections made by
management of Munsingwear and various valuation analyses which we believe to be
relevant to our inquiry. In addition, we have participated in discussions among
representatives of Munsingwear and Supreme and their respective legal advisors
and had discussions with management of Munsingwear concerning the operations,
assets, liabilities, present condition and future prospects of Munsingwear and
undertook such other studies, analyses and investigations as we deemed
appropriate.
Each methodology used to value the Assets resulted in an implied range of
values. In arriving at our opinion, we did not attribute any particular weight
to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each.
We have assumed and relied upon the accuracy and completeness of the financial
and other information furnished to us for the purposes of this opinion without
independent verification. In arriving at our opinion, we have not made nor
obtained any evaluations or appraisals of the Assets or Liabilities. Our opinion
is necessarily based upon the particular market and economic situation of
Munsingwear and on other conditions as they exist on, and can be evaluated as
of, the date of this letter. Our opinion relates solely to the fairness, from a
financial point of view, of the consideration to be received by Munsingwear
pursuant to the Agreement and does not address Munsingwear's underlying business
decision to effect the transactions contemplated by the Agreement.
We have acted as financial advisor to the Board of Directors of Munsingwear and
will receive a fee for our services, a portion of which is contingent upon
closing of the transaction pursuant to the Agreement. In addition, Munsingwear
has agreed in our engagement agreement to indemnify us against certain
liabilities which may arise from rendering this opinion.
Based upon and subject to the foregoing, we are of the opinion that as of the
date hereof, the consideration to be received by Munsingwear from Supreme in
respect of the sale of the Assets and the assumption of the Liabilities pursuant
to the Agreement is fair, from a financial point of view, to Munsingwear.
The opinion is for the use and benefit of the Board of Directors of Munsingwear
and is rendered to the Board of Directors in connection with its consideration
of the Agreement. We express no opinion concerning the Management Agreement and
the License Agreement as defined in the Agreement. This opinion is not intended
to be and does not constitute a recommendation to any Munsingwear shareholder as
to how such shareholder should vote with respect to the Agreement.
Very truly yours,
By: /s/ C. BARRY SCHAEFER
C. Barry Schaefer
Managing Director
MUNSINGWEAR, INC.
8000 West 78th Street, Suite 400, Minneapolis, Minnesota 55439
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting and Proxy
Statement dated August 16, 1996, hereby appoints Lowell M. Fisher and Gerald E.
Magnuson as proxies (each with the power to act alone and with the power of
substitution and revocation), to represent the undersigned and to vote as
designated below, all shares of Common Stock of Munsingwear, Inc. held of record
by the undersigned on July 16, 1996, at the Annual Meeting of Stockholders to be
held on September 6, 1996, at the Radisson Hotel South, 7800 Normandale
Boulevard, Bloomington, Minnesota 55439.
THE MUNSINGWEAR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE FOLLOWING
PROPOSALS:
1. PROPOSAL TO (i) APPROVE THE PURCHASE AND SALE AGREEMENT WITH SUPREME
INTERNATIONAL CORPORATION; and (ii) PROPOSAL TO AMEND THE CERTIFICATE OF
INCORPORATION TO CHANGE THE CORPORATE NAME TO "PREMIUMWEAR, INC."
|_| FOR |_| AGAINST |_| ABSTAIN
2. ELECTION OF DIRECTORS:
|_| FOR all nominees listed below
(except as marked to the contrary)
|_| WITHHOLD AUTHORITY
to vote for all nominees listed below
Keith A. Benson Thomas D. Gleason Michael A. Raskin
William J. Morgan Kevin S. Moore
(Instruction: To withhold authority to vote for any individual nominee,
mark the FOR box and write that nominee's name in the space provided below.)
(Continued, and to be completed and signed, on the reverse side)
(Continued from the other side)
3. PROPOSAL TO APPROVE THE OPTIONS GRANTED TO THE COMPANY'S CHAIRMAN.
|_| FOR |_| AGAINST |_| ABSTAIN
4. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
THIS 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 PROPOSALS (1), (2) AND (3) AND, IN THE DISCRETION OF THE PROXIES, ON ANY
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
Dated: __________________, 1996
_______________________________
Signature(s) of Stockholder(s)
_______________________________
Signature if held jointly
PLEASE SIGN exactly as name
appears on this card. When
shares are held by joint
tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full
title as such. If a
corporation, please sign in
full corporate name by
president or other authorized
officer. If a partnership,
please sign in partnership name
by an authorized person.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this proxy statement of our report dated April 5, 1996 and
incorporated by reference in Munsingwear, Inc.'s Annual Report on Form 10-K for
the fiscal year ended January 6, 1996 and to all references to our Firm included
in this proxy statement.
/s/ Arthur Andersen LLP
Minneapolis, Minnesota
August 16, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Munsingwear, Inc.:
We have audited the accompanying consolidated balance sheets of
Munsingwear, Inc. (a Delaware corporation) and subsidiary as of January 6, 1996
and January 7, 1995, and the related consolidated statements of
operations, cash flows and changes in stockholders' equity for each of the three
fiscal years in the period ended January 6, 1996. These financial statements are
the responsbility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Munsingwear, Inc.
and subsidiary as of January 6, 1996 and January 7, 1995 and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended January 6, 1996 in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Minneapolis, Minnesota
April 5, 1996
