<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13 or 15(d)
of THE SECURITIES EXCHANGE ACT OF 1934
NANTUCKET INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for
the Fiscal Year ended March 1, 1997, as set forth in the pages attached
hereto:
<TABLE>
<S> <C>
Item 10: Directors and Executive Officers of the Registrant
Item 11: Executive Compensation
Item 12: Security Ownership of Certain Beneficial Owners and
Item 13: Certain Relationships and Related Transactions
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
NANTUCKET INDUSTRIES, INC.
(Registrant)
Dated: June 26, 1997 By: /s/ Ronald S. Hoffman
------------------------
Ronald S. Hoffman
Chief Financial Officer
(Chief Accounting Officer)
1
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The text of Items 10, 11, 12 and 13 comprising Part III of
Registrant's Annual Report on Form 10-K, as amended, for the fiscal
year ended March 1, 1997, which presently consists of an incorporation
by reference to Registrant's definitive proxy statement, is hereby
amended to substitute therefor the full text of such Items as set forth
in the pages attached hereto.
2
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AMENDED ITEMS 10, 11, 12 AND 13
OF THE
ANNUAL REPORT ON FORM 10-K OF
NANTUCKET INDUSTRIES, INC. (the "Company")
FOR ITS FISCAL YEAR ENDED MARCH 1, 1997
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The table below sets forth for each director at March 1, 1997, such
director's name, age and other positions with the Company as at that
date.
<TABLE>
<CAPTION>
DIRECTOR (AGE) AND POSITION YEAR FIRST
WITH THE COMPANY ELECTED DIRECTOR
- ---------------------------- -----------------
<S> <C>
Class I--Current Term Expires in 1997
Stephen M. Samberg (52)
Chairman of the Board and Chief Executive Officer........... 1988
Robert M. Rosen* (52)......................................... 1983
Warren D. Cole* (38).......................................... 1994
Class II--Current Term Expires in 1998
George J. Gold (75)............................................ 1966
Joseph Visconti (51) President................................. 1996
Kenneth Klein (58)............................................. 1996
Class III--Current Term Expires in 2000
Donald D. Gold (71)............................................ 1966
Ronald S. Hoffman (54)
Chief Financial Office and Secretary......................... 1994
Roger A. Williams* (49)........................................ 1994
</TABLE>
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* Member of the Audit and Compensation Committees
Set forth below is information regarding the principal occupations of each
director during the past five years and other directorships held by each
director in public companies.
Warren D. Cole has been the Executive Vice President and Chief Financial
Officer of The Macklowe Organization, a large, privately held real estate
investment, development and management company based in New York City.
George J. Gold had been Chairman of the Board, Chief Executive Officer and
Treasurer of the Company, which positions he resigned on March 18, 1994.
3
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Donald D. Gold had been the Secretary of, and since September 1993, Vice
Chairman of the Company, which positions he resigned on March 18, 1994. Until
September 1993, Mr. Gold also served as President of the Company.
Ronald S. Hoffman has been Chief Financial Officer of the Company since
July, 1994 and Secretary thereof since October, 1994. Prior to his employment
with the Company, Mr. Hoffman was President of North Country Supply, Inc. and
so served for two years. From 1990 until 1992, Mr. Hoffman was a financial
consultant to clients in financial services and distribution activities. From
1984 until 1990, he served as Chief Financial Officer of ElectroSound Group,
Inc.
Kenneth Klein has been engaged in the private practice of law since
January 1, 1997. From 1994 until December 1996, Mr. Klein served President
and a director of National Capital Benefits Corp. a financial services
company. From January 1992 to March 1994 Mr. Klein was the President of
Viatical Funding Company, a financial services company. From January 1988 to
January 1992, Mr. Klein was the Senior Vice President, Chief Operating
Officer and General Counsel of Amivest Corporation, a New York Stock
Exchange, Inc. Member Firm and an NASD Registered Investment Advisor. Mr.
Klein also serves as a director or trustee of several privately-held
companies and not-for-profit entities. Mr. Klein serves as a director
pursuant to the Purchase Agreement with NAN Investors, L.P. as further
described under the heading "Certain Relationship and Related Transactions."
Robert M. Rosen has been a partner in the law firm of Lane Altman & Owens
LLP, general counsel to the Company.
Stephen M. Samberg has been Chairman of the Board and Chief Executive
Officer of the Company since March 18, 1994. From September, 1993 until
January 1, 1996, Mr. Samberg also served as President of the Company. He has
also been in charge of the Company's men's underwear sales operations since
1988.
Roger A. Williams has been the Executive Vice President and Chief
Financial Officer of Guess ?, Inc. since March, 1994. From October 1992 to
February 1994, he served as Executive Vice President and Chief Financial
Officer of The Donna Karan Company. From July 1990 to October 1992, he was
Executive Vice President -Operations and Chief Financial Officer of Authentic
Fitness Corporation, a company formed in 1990 to acquire substantially all of
the Activewear division of Warnaco, Inc. Mr. Williams serves as a director
pursuant to the Agreement with the Guess Group as further described under the
heading "Certain Relationships and Related Transactions".
Joseph Visconti became President of the Company effective January 1,
1996. From July, 1991 through December 31, 1995, Mr. Visconti was President
and Chief Executive Officer of Salant Corp.'s men's and children's apparel
division. From July, 1987 to June, 1991, he was President of the William
Carter Company.
All executive officers of the Company are directors.
Executive officers of the Company are elected annually for a term of
office expiring at the Board of Directors meeting immediately following the
next succeeding Annual Meeting of Stockholders, or until their successors are
duly elected and qualified; however, each of the Company's current executive
officers is employed under a written employment contract (described below).
4
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George J. Gold and Donald D. Gold are brothers. None of the other
directors or executive officers of the Company are related to each other.
Section 16(a) Ownership Reporting Compliance
Based solely on a review of Forms 3 and 4 and amendments thereto,
furnished to the Company during the fiscal year ended March 1, 1997 and Forms
5 and amendments thereto furnished to the Company with respect to the fiscal
year ended March 1, 1997, no director, officer or beneficial owner of more
than 10% of the Company's equity securities failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act during the fiscal year
ended March 1, 1997 or any previous fiscal year except as follows:
(1) The Maurice Marciano Trust made two late Form 4 filings relating to
two gift transactions.
(2) The Paul Marciano Trust made one late Form 4 filing relating to one
gift transaction.
(3) The Armand Marciano Trust made one late Form 4 filing relating to
one gift transaction.
(4) George J. Gold made two late Form 4 filings relating to the sale of
shares.
(5) Donald D. Gold made two late Form 4 filings relating to the sale of
shares.
(6) Warren D. Cole made one late Form 4 filing relating to the sale of
shares.
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Directors, other than those employed by the Company, are paid $5,000
annually and an additional $500 for each Board or committee meeting attended in
person.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The law firm of Lane Altman & Owens LLP, of which Robert M. Rosen, a
director of the Company and a member of the Compensation Committee, is a
partner, is general counsel to the Company. Legal fees accrued for
professional services rendered by Lane Altman & Owens LLP to the Company in
fiscal 1997 were in the amount of $185,000.
License fees for the Company's use of certain trademarks of Guess ?,
Inc., of which Roger A. Williams, a director of the Company and a member of
the Compensation Committee, is Chief Financial Officer, were $294,000 in
fiscal 1997.
There are no other relationships or transactions involving members of the
Compensation Committee during the fiscal year ended March 1, 1997 required to
be reported pursuant to Item 402(j) of Regulation S-K.
5
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SUMMARY COMPENSATION TABLE
The Summary Compensation Table shows compensation information for the
Company's Chief Executive Officers and each of the four other most highly
compensated executive officers of the Company during the fiscal years ended
March 1, 1997, March 2, 1996 and February 25, 1995.
The Summary Compensation Table appears on pages 7 and 8.
Option/SAR Grants in Fiscal Year Ended March 1, 1997
No Option/SAR agents were made to the CEO and the other named executives in
the fiscal year ended March 1, 1997.
Aggregated Option/SAR Exercises in Fiscal Year Ended March 1, 1997 and
Fiscal Year-End Option/ SAR Values
See page 9.
Long-Term Incentive Plans--Awards in Fiscal Year Ended March 1, 1997
No Long Term Incentive Plan Awards were made to the CEO and other named
executives in the fiscal year ended March 1, 1997.
6
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ----------------------
OTHER PAYOUTS
NAME AND ----------------------- ANNUAL RESTRICTED AWARDS LTIP ALL OTHER
PRINCIPAL FISCAL SALARY BONUS COMPEN- STOCK OPTIONS/ PAYOUTS COMPENSATION ($)
POSITION YEAR ($) (1) ($) SATION ($) AWARDS # SAR # ($) (2)
- -------------------- ----------- ---------- ----------- --------------- ------------ ----------- --------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen M. Samberg... 1997 $518,000 $0 $0 0 0 $0 $ 1,152
Chairman of the 1996 $522,769 $0 $0 0 0 $0 $ 4,152
Board, 1995 $500,000 $0 $0 0 75,000(3) $0 $ 3,522
Chief Executive Officer,
Treasurer and Director
Ronald S. Hoffman.... 1997 $150,000 $0 $0 0 0 $0 $ 1,152
Vice President- 1996 $152,885 $0 $0 0 0 $0 $ 3,696
Finance, 1995 $ 98,000(4) $0 $0 0 30,000(3) $0 $ 606
Chief Financial Officer,
Secretary and Director
George G.Gold(5)..... 1997 $ 0 $0 $0 0 0 $0 $254,061(8)
Director 1996 $ 0 $0 $0 0 0 $0 $356,730(6)
1995 $ 0 $0 $0 0 0 $0 $353,527(6)
7
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Donald D. Gold(7).... 1997 $ 0 $0 $0 0 0 $0 $104,061(6)
Director 1996 $ 0 $0 $0 0 0 $0 $ 89,717(6)
1995 $ 0 $0 $0 0 0 $0 $ 89,272(6)
Stephen P.Sussman(8). 1997 $144,000 $0 $0 0 0 $0 $ 1,152
1996 $146,769 $0 $0 0 0 $0 $ 4,087
1995 $144,000 $0 $0 0 22,500 $0 $ 3,744
Joseph Visconti...... 1997 $300,000 $0 $0 0 0 $0 $ 1,152
President and 1996 $ 51,923(9) $0 $0 0 30,000 $0 $ 0
Director........... 1995 $ 0 $0 $0 0 0 $0 $ 0
</TABLE>
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(1) Includes amounts deferred at the election of each of the named executive
officers pursuant to the Company's 401(k) Profit Sharing Plan.
(2) Comprised of 401(k) contributions in fiscal 1996 and 1995 and life insurance
premiums which benefits are payable to the estates of the named executive
officers, except where specifically footnoted as pursuant to the Severance
Agreement. For fiscal 1997, no 401(k) contributions were made and other
compensation reported hereunder was comprised solely of life insurance
premiums.
(3) The options reflected were awarded pursuant to the Company's 1992 Executive
Long-Term Option Plan.
(4) Mr. Hoffman was hired July 1, 1994.
(5) Chairman of the Board, Chief Executive Officer and Treasurer through March
18, 1994.
(6) Amounts paid pursuant to the Severance Agreement dated as of March 18, 1994
more fully described hereinabove.
(7) Vice Chairman and Secretary through March 18, 1994.
(8) Vice President--Finance through October 10, 1994. Mr. Sussman managed the
Company's production and distribution facility in Cartersville, Georgia.
(9) Mr. Visconti was hired and became a director effective January 1, 1996.
8
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Aggregated Options/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values(1)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
THE-MONEY
OPTIONS/SARS SHARES AT NUMBER OF SECURITIES
FY-END ($) ACQUIRED ON UNDERLYING UNEXERCISED
EXERCISABLE/ OPTIONS/SARS AT FY-END (#)
EXERCISE (#) EXERCISABLE/
NAME UNEXERCISABLE(2) VALUE REALIZED ($) UNEXERCISABLE
- ------------------------- ----------------------------- ------------------- -------------------------------
<S> <C> <C> <C>
Stephen M. Samberg....... 0
$0/$0 $0 30,000/45,000
Ronald S. Hoffman........ 0
$0/$0 $0 12,000/18,000
George J. Gold........... 0 $0 0/0
$0/0
Donald D. Gold........... 0
$0/$0 $0 0/0
Stephen P. Sussman....... 0
$0/$0 $0 9,000/13,500
Joseph Visconti.......... 0
$0/$0 $0 6,000/24,000
</TABLE>
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(1) There are currently no outstanding stock appreciation rights.
(2) No outstanding options were in the money at the end of fiscal 1997.
9
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EMPLOYMENT AND SEVERANCE AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
As of March 18, 1994, Messrs. George J. Gold and Donald D. Gold (the
"Golds") resigned their positions as executive officers of the Company and
entered into a Severance Agreement with the Company. The Severance Agreement
provides for an annual payment to the Golds of approximately $400,000, in the
aggregate, for each year of the five year term of the Severance Agreement.
The Severance Agreement also provides for the Company to pay them an amount
equal to their life and health insurance benefits and to continue paying
one-half of each of the Golds' share of the annual payments to his spouse in
the event of his death. Pursuant to the Severance Agreement, stock options
for 20,000 and 10,000 shares of Common Stock issued to George and Donald
Gold, respectively, under the 1992 Long-Term Incentive Stock Option Plan, and
bonus awards for maximums of $123,000 and $61,500 made to George and Donald
Gold, respectively, under the 1992 Executive Performance Benefit Plan, were
canceled. Further, the Golds agreed to relinquish their rights to receive
ownership of the whole life insurance policies on their lives described in
the previous paragraph.
Under the Severance Agreement, the Company also provided certain benefits
to the Golds in respect of sales of shares of the Company's Common Stock
("Shares") by them during the period September 1, 1994 to August 31, 1996
(the "Resale Period"). Such benefits provided, in general and subject to
certain limitations, that, for up to 100,000 Shares in the case of George J.
Gold and 60,000 Shares in the case of Donald D. Gold, the Company would pay
to the Golds for each Share sold by them for less than $5.00 during the
Resale Period, 80% of the lesser of (a) $1.50 and (b) the difference between
the sale price per Share and $5.00. The Golds sold a total of 157,875 Shares
of Common Stock including 88,400 shares at prices below $5.00 per share.
Further, the Severance Agreement provides for the Company, in general and
subject to specific limitations, to issue as of April 1, 1997, warrants for
the purchase of up to 157,875 Shares to the Golds. The number of such
warrants to be issued to George Gold is 93,840 and the number of such
warrants to be issued to Donald D. Gold is 64,035, the number of shares sold
by each of them during the Resale Period. As to each of the Golds, the
Severance Agreement provides that the aggregate exercise price for the
warrants issued to each of them will equal the aggregate gross proceeds from
his sales of Shares during the Resale Period.
As of March 1, 1994, the Company and Stephen M. Samberg, in connection
with his election as Chairman of the Board and Chief Executive Officer,
entered into a new employment agreement (the "1994 Agreement"). Under the
1994 Agreement, Mr. Samberg's annual base compensation is $518,000 and he is
entitled to discretionary bonuses as determined by the Compensation
Committee, in an amount not to exceed $300,000 per year. The 1994 Agreement
also provides that Mr. Samberg is eligible for the Company's other
compensatory plans and that the Company will provide health and disability
insurance for Mr. Samberg and reimburse all reasonable business expenses.
Effective July 1, 1997, subject to the approval of the Board of Directors,
the 1994 Agreement was amended and Mr. Samberg's annual base compensation was
reduced to $300,000. The Amendment also provides for Mr. Samberg to receive
commissions equal to 1 1/2% of net sales to specified customers of the
Company's products. The maximum amount of Mr. Samberg's annual cash
compensation is not to exceed $500,000 in any one year. Mr. Samberg is still
entitled to receive discretionary bonuses determined by the Compensation
Committee.
10
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During fiscal 1993, the Company entered into an employment agreement with
Stephen P. Sussman for a term expiring on February 28, 1998. Mr. Sussman has
been advised that effective June 1, 1997 his services are no longer required
by the Company during the balance of the term of the Agreement. Mr. Sussman
will continue to receive his base salary and benefits until February 28, 1998
and Mr. Sussman will be available to provide services to the Company on a
project basis, as requested. In addition, as required by Paragraph 3.05 of
his employment agreement, any earnings from other sources received by Mr.
Sussman until February 28, 1998 will be credited against the salary payable
to him by the Company. In addition, in the event of the termination of Mr.
Sussman's employment by the Company, other than for good cause, or the
expiration of the agreement without renewal, the Company will be required to
retain Mr. Sussman as a consultant until February 28, 2003 for an annual fee
of $40,000.
On July 1, 1994, the Company entered into a one (1) year employment
agreement (extended through June 30, 1997) with Ronald S. Hoffman which
provides for an annual salary of $150,000. As additional contingent
compensation, Mr. Hoffman was granted options to purchase 30,000 shares of
Common Stock under the 1992 Executive Long Term Stock Option Plan. The
agreement also requires the Company to provide health and life insurance and
to reimburse all reasonable business expenses. Mr. Hoffman's agreement
expires on June 30, 1997, and he will continue to be employed by the Company
and serve as an officer and director.
As of January 1, 1996, the Company entered into an employment agreement
with Joseph Visconti which provides for an annual salary of $200,000 plus a
bonus for each fiscal year based on increases in sales from those achieved in
fiscal 1996, which bonus in the first fiscal year shall not be less than
$100,000. Effective July 1, 1997, subject to the approval of the Board of
Directors, the employment agreement was amended and Mr. Visconti's annual
salary was reduced to $150,000 and his bonus program was eliminated. In
addition to his salary Mr. Visconti will be entitled to receive commissions
on the Company's net sales ranging from 1/2% to 1 1/2% of specified
customers. Mr. Visconti was granted options to purchase 30,000 shares of
Common Stock under the Stock Option Plan. The agreement also requires the
Company to provide health and disability insurance and to reimburse all
reasonable business expenses.
In addition to delineating the duties and responsibilities of each
executive employee, the employee's salary and certain fringe benefits, and
the circumstances under which employment with the Company may be terminated,
the employment agreements for Stephen M. Samberg and Joseph Visconti, and the
Severance Agreement also contain certain provisions to take effect in the
event of a "Change in Control." A "Change in Control" generally is defined to
include (i) a merger or consolidation involving the Company pursuant to which
less than 75% of the outstanding voting securities or other beneficial
interest of the surviving or resulting corporation or other entity is held by
the stockholders of the Company other than those stockholders who acquire
beneficial ownership of 20% or more of the Company's outstanding stock
after the date of each agreement; (ii) the transfer to another corporation
(other than a wholly owned subsidiary or a corporation which is at least
75% owned by the Company's stockholders other than those stockholders
who acquire beneficial ownership of 20% or more of the Company's
outstanding stock after the date of each agreement) of substantially
all of the assets of the Company; (iii) the acquisition by any person of
the beneficial ownership of 30% or more of the Company's then outstanding
securities; (iv) a change in the composition of the majority of the
Board of Directors occurring within 24 months
11
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of the acquisition by any person of the beneficial ownership of 10% or more
of the Company's then outstanding securities; or (v) the occurrence of any of
the trigger events described in Sections 11(a)(ii) or 13(a) of the Company's
Shareholders Rights Plan.
In the event of any such Change in Control, certain specified benefits
("Termination Benefits") are provided for each such executive employee upon
termination of his employment by the Company other than for cause, or in the
event that he leaves the employ of the Company due to one of the following
events: (i) assignment inconsistent with his current status; (ii) distant
transfer; (iii) default by the Company under the employment agreement or
other agreement with the employee; (iv) failure on the part of the Company to
provide the employee with substantially similar plan benefits to those in
which he had been a participant; or (v) in the case of Messrs. Samberg,
Visconti, and Hoffman, inability to effectively discharge his duties due to a
Change in Control.
THE AMOUNT OF TERMINATION BENEFITS PAYABLE TO MR. Samberg is
determinable only at the time of termination and is, if such termination is
by the Company or by Mr. Samberg following a default by the Company, in
addition to any other amounts due under his employment agreement. Cash
benefits include (x) three years' base salary (totaling $1,500,000) and (y)
three times the average annual bonus in the preceding three years (or such
lesser number of years as have elapsed since the agreement was made); the sum
of (x) and (y) payable in a lump sum and discounted to present value. Mr.
Samberg, after an event giving rise to Termination Benefits, would also have
rights (a) for seven months thereafter, to exercise or be compensated for any
stock options or stock appreciation rights; and (b) to the immediate vesting
of any unvested equity or deferred compensation rights.
With respect to the Golds, in the event that, following such a Change in
Control, (a) the Company defaults, in an amount greater than $1,000, in its
obligations to pay money to either of the Golds, such of the Golds, in
addition to all other benefits under the Severance Agreement, shall be
entitled to a lump sum payment of twice the annual payment due him,
discounted to its then-present value; or (b) the Company defaults in any
other of its obligations to either of the Golds, such of the Golds shall be
entitled to a lump sum, discounted to its present value, of the greater of
(x) twice the annual payment due him, or (y) the aggregate of the remaining
payments due him under the Severance Agreement.
12
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Item No. 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of June 25, 1997 the beneficial share
ownership of each director and executive officer owning Common Stock, and of
all officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS OF NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
- ---------------------------- -------------------- -------------------
<S> <C> <C>
George J. Gold 452,918(2) 13.98
209 Sterling Road
Harrison, NY 10528
Donald D. Gold 218,139(2) 6.74%
3670 Paces Ferry Road
Atlanta, GA 30327
Stephen M. Samberg 298,903(3)(6) 8.50%
510 Broadhollow Road
Melville, NY 11747
Robert M. Rosen 9,000(4) *
101 Federal Street
Boston, MA 02110
Warren D. Cole 0 *
142 West 57th Street
New York, NY 10019
Ronald S. Hoffman 273,100(5)(6) 7.80%
510 Broadhollow Road
Melville, NY 11747
Roger A. Williams 3,000 *
1444 S. Alameda Street
Los Angeles, CA 90021
Joseph Visconti 6,000 *
510 Broadhollow Road
Melville, NY 11747
Kenneth Klein 0 *
242 E. 72nd. Street
Apt. # 7A
New York, NY 10021
All directors and officers as 1,261,060 35.67%
a group (9 persons)
</TABLE>
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* Less than 1%
13
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(1) Pursuant to the rules of the Securities and Exchange
Commission, shares of Common Stock which an individual or
member of a group has right to acquire within 60 days pursuant to
the exercise of options or warrants are deemed to be outstanding
for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person
shown in the table. Accordingly, where applicable, each individual
or group member's rights to acquire shares pursuant to the exercise
of options or warrants are noted below.
(2) All such shares are subject to the Nantucket Industries Stock Voting
Trust u/i/d March 22, 1994 (the "Voting Trust"). In addition, the
Severance Agreement provides for the Company to issue, as of April 1, 1997,
warrants for the purchase of up to a total of 157,875 shares to George J.
Gold and Donald D. Gold.
(3) Includes 20,303 shares which are subject to the Voting Trust and 30,000
shares that may be issued to Mr. Samberg pursuant to immediately exercisable
stock options.
(4) 5,000 of such shares are owned by the Lane Altman & Owens LLP
Profit Sharing Trust DTD 11/28/92. Lane Altman & Owens LLP, of
which Mr. Rosen is a partner, is general counsel to the Company.
(5) Includes 2,500 shares owned by Mr. Hoffman's wife. Beneficial
ownership of such shares is disclaimed by Mr. Hoffman. Also
includes 12,000 Shares that may be issued to Mr. Hoffman pursuant
to immediately exercisable stock options.
(6) Includes 248,600 shares representing the number of shares of Common
Stock into which the shares of Non-Voting Convertible Preferred Stock
held by The Samberg Group, L.L.C. may be converted. Mr. Samberg and Mr.
Hoffman's wife, among others, are members thereof, and, as such,
would share dispositive and voting power over such shares. Beneficial
ownership of all such shares is disclaimed by Mr. Hoffman.
(7) Represents 6,000 shares that may be issued to Mr. Visconti pursuant to
immediately exercisable stock options.
14
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In addition, each of the following has reported that it is the beneficial
owner of more than 5% of the outstanding Common Stock of the Company.
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
------------------- -------------------- -------------------
Dimensional Fund Advisors, Inc. 176,765(2) 5.46%
1229 Ocean Avenue
Santa Monica, CA
The Samberg Group, L.L.C. 353,403(3)(5) 9.93%
510 Broadhollow Road
Melville, NY 11747
GUESS?, Inc. 422,835 13.06%
1444 South Alameda Street
Los Angeles, CA 90021
Guess Group(3) 670,500(4) 20.70%
NAN Investors, L.P. 873,370(6) 22.61%
c/o Fundamental Capital Corp.
291 Ocean Avenue
Lawrence, NY 11559
- ------------------------
(1) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or member of a group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are deemed to
be outstanding for the purpose of computing the percentage ownership of such
individual or group, but are not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person shown in the table.
Accordingly, where applicable, each individual or group member's rights to
acquire shares pursuant to the exercise of options or warrants are noted
below.
(2) Dimensional Fund Advisors, Inc. is an investment advisor registered under
the Investment Advisors Act of 1940. Of this amount, Dimensional Fund
Advisors, Inc., has reported as of January 31, 1995 that it has sole voting
power of 110,230 shares.
(3) The Samberg Group, L.L.C. owns 5,000 shares of the Company's Non-Voting
Convertible Preferred Stock, which is convertible into 248,600 shares of the
Company's Common Stock. Mr. Samberg and Mr. Hoffman's wife, among others are
members of The Samberg Group.
(4) The Guess Group comprises Guess ?, Inc. ("GUESS?") and those other Reporting
Persons set forth in the Schedule 13D dated August 26, 1994 reporting the
group's purchase from the Company on August 19, 1994 of 490,000 shares of
Common Stock.
15
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(5) In accordance with Rule 13d-3(d) of the 1934 Act, assumes the conversion
into 232,000 shares of Common Stock of the Non-Voting Convertible Preferred
Stock held by the Samberg Group, L.L.C.
(6) In accordance with Rule 13d-3(d) of the 1934 Act, assumes the conversion of
the 12.5% Convertible Subordinated Debentures in the original principal
amount of $1,168,150 into 305,000 shares of Common Stock and the conversion
of the Convertible Subordinated Debenture in the original principal amount
of $1,591,850 into 318,370 shares of Common Stock. These securities were
purchased on August 15, 1996 by NAN Investors L.P. A Schedule 13D dated
August 22, 1996 was filed reporting the transaction. See "Certain
Relationships and Related Transactions."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company, the Golds, Messrs. Samberg, Sussman, Raymond L. Wathen (an
employee of the Company), Robert Polen (an employee of the Company), and The
Samberg Group, L.L.C., a limited liability company organized in Delaware,
entered into a Management Agreement as of March 1, 1994, pursuant to which the
Company on March 22, 1994 sold 5,000 shares of Non-Voting Convertible Preferred
Stock to The Samberg Group for $1,000,000. Such preferred stock is convertible
into shares of the Company's Common Stock at the rate of $5.00 per share.
Messrs. Samberg, Sussman, Wathen and Polen and Mr. Hoffman's wife are each
members of The Samberg Group.
The Management Agreement also provides that The Samberg Group, Messrs.
Samberg, Sussman, Wathen and Polen and the Golds will deposit all their Common
Stock into a voting trust. The voting of the shares deposited in said voting
trust is controlled by the terms of the trust instrument. Mr. Rosen serves as
the trustee of said voting trust.
The Management Agreement further provides for the cancellation of all
outstanding stock options and incentive awards granted prior to the date thereof
to the Golds and Messrs. Samberg, Sussman, Wathen and Polen and the issuance of
stock options for 150,000 shares of Common Stock in the aggregate to Messrs.
Samberg, Sussman, Wathen and Polen upon terms and conditions determined by the
Compensation Committee.
Pursuant to the Management Agreement, the Severance Agreement described
above was entered into by the Golds and the Company, the 1995 Agreement
described above was entered into by Mr. Samberg and the Company, and Mr.
Wathen's employment agreement, described above, was entered into by Mr. Wathen
and the Company.
On August 19, 1994, the Guess Group bought 490,000 shares of Common Stock
pursuant to a Common Stock Purchase Agreement dated August 18, 1994 by and among
the Company, the Guess Group and the Samberg Group (the "Guess Agreement").
Consideration paid was $6.00 in cash per share of Common Stock. All shares sold
were previously held by the Company as treasury stock.
The Guess Agreement provides the Guess Group with certain registration
rights and, with respect to the issuance of additional stock by the Company,
certain rights to purchase additional shares. The Agreement also provides
certain restrictions on the ability of the Guess Group to acquire additional
voting stock of the Company, to dispose of its Common Stock and to engage in
control transactions or proxy solicitations with respect to the Company.
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THE GUESS GROUP HAS DESIGNATED ROGER A. Williams, the Executive Vice
President and Chief Financial Officer of GUESS?, to serve as a director of the
Company, and he has been so elected. The Guess Agreement requires the Company
and the Samberg Group to each use its best efforts to cause one individual
designated collectively by the Guess Group to be elected a director of the
Company at future annual meetings of the Company so long as the Guess Group
and their affiliates beneficially own in the aggregate at least the lesser of
490,000 shares of Common Stock or 15% of the outstanding Common Stock.
As a condition to the Guess Agreement, the Company amended its Share Rights
Agreement so that the Guess Group's acquisition of Common Stock would not
trigger any defensive measures thereunder. Provisions were made in each
executive officer's employment agreement and the Severance Agreement so that
such acquisition would not be a "Change in Control" under those agreements.
The Company is licensed by GUESS? to manufacture and sell certain garments
under the GUESS? trademarks. Effective May 31, 1996, the License was extended
though the period ended May 31, 1999. For the contract year ending May 31, 1997,
minimum sales of $8 million were required. The Company informed GUESS? that it
would not achieve the minimum net sales of $8 million required, pursuant to the
license agreement, for the twelve month period ending May 31, 1997. GUESS? has
agreed not to terminate the license agreement as of May 31, 1997 and the Company
has agreed that GUESS?, in its sole and subjective discretion, may terminate the
license agreement at any time after December 31, 1997. For each contract year
ending in May thereafter, the minimum sales goal increases by $2,000,000.
Minimum royalties are $560,000, $700,000 and $840,000 of the contract years
ended May 31, 1997, 1998 and 1999, respectively. In fiscal 1996, such license
fees were in the amount of $294,000.
On August 15, 1996, pursuant to a Common Stock and Convertible Subordinated
Debenture Purchase Agreement dated as of August 13, 1996 (the "Purchase
Agreement")between the Company and NAN Investors, L.P. (the "Investor"), the
Company sold to the Investor 250,000 shares of Common Stock for an aggregate
purchase price of $740,000, and two (2) convertible subordinated debentures of
the Company in the original principal amounts of $1,168,150 and $1,591,850,
respectively, which debentures are convertible into 305,000 and 318,370
additional shares ("Conversion Shares") of Common Stock. All shares sold and all
Conversion Shares to be issued are authorized and unissued shares of Common
Stock reserved for issuance pursuant to the Purchase Agreement.
The Purchase Agreement provides the Investor with certain registration
rights. Pursuant to the exercise of certain rights, the Company filed a
Registration Statement covering the registration of the 250,000 shares sold to
the Investor and the Conversion shares which was declared effective by the
Securities and Exchange Commission on April 11, 1997. The Purchase Agreement
also requires the Company and The Samberg Group to each use its best efforts to
cause Kenneth Klein to be elected as a director of the Company at future annual
meetings of the Company so long as the Investor and its affiliates beneficially
own in the aggregate at least the lesser of 250,000 shares of Common Stock or 7%
of the outstanding Common Stock. The Company has been advised that Mr. Klein is
not an affiliate of Investor.
As a condition to the Purchase Agreement, the Board of Directors and
shareholders of the Company adopted Amendments to the Company's Certificate of
Incorporation. In addition, provisions were made in each executive officer's
employment agreement and the Severance
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Agreement so that the Investor's acquisition would not be a "Change in
Control" under those Agreements.
Additional relationships and related transactions are described above, under
the caption "Compensation Committee Interlocks and Insider Participation."
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