<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission only
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-ll(c) or Rule 14a-12
ANDOVER TOGS, INC.
(Name of Registrant as Specified In Its Charter)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated, and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-ll(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $______________
(2) Form, Schedule or Registration Statement No.: _________________
(3) Filing Party: _________________
(4) Date Filed: __________________
<PAGE>
<PAGE>
ANDOVER TOGS, INC.
1333 BROADWAY
NEW YORK, NEW YORK 10018
-------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
-------------------------------
To the Stockholders of
ANDOVER TOGS, INC.
Please take notice that the 1998 Annual Meeting of Stockholders of
Andover Togs, Inc., a Delaware corporation (the "Company"), will be held at the
offices of Shack & Siegel, P.C., 530 Fifth Avenue, New York, New York 10036 on
Tuesday, June 2, 1998 at 9:30 a.m., for the following purposes:
1. To elect a board consisting of six directors for a term of one year;
2. To consider and approve an amendment to the Certificate of
Incorporation of the Company changing the name of the Company to "The Andover
Apparel Group, Inc.";
3. To ratify amendments to the Company's 1995 Stock Option Plan to
increase the number of shares of the Company's common stock subject to such plan
to 500,000 and to make certain other changes to such Plan;
4. To ratify the appointment of Mahoney Cohen & Company, C.P.A., P.C.
as independent auditors for the fiscal year ending November 30, 1998; and
5. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on April 13,
1998 as the record date for the purpose of determining the stockholders entitled
to notice of, and to vote at, the meeting.
YOU ARE REQUESTED, WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
MEETING, TO MARK, DATE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE.
You may revoke your proxy for any reason at any time prior to the
voting thereof, and if you attend the meeting in person you may withdraw the
proxy and vote your own shares. A list of the stockholders entitled to vote at
the Annual Meeting will be open to the examination of any stockholder of the
Company for any purpose germane to the Annual Meeting during regular business
hours at the office of the Company for the ten-day period prior to the Annual
Meeting.
By Order of the Board of Directors
DONALD D. SHACK, Secretary
New York, New York
April 28, 1998
<PAGE>
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
ANDOVER TOGS, INC.
-------------------------------
PROXY STATEMENT
-------------------------------
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of Andover Togs, Inc., a Delaware corporation (the "Company"), for use
at the 1998 Annual Meeting of Stockholders to be held at the offices of Shack &
Siegel, P.C., 530 Fifth Avenue, New York, New York on Tuesday, June 2, 1998 at
9:30 a.m., and at any adjournment or adjournments thereof. All proxies in the
accompanying form which are properly executed and duly returned will be voted in
accordance with the instructions specified therein. If no instructions are given
as to any matter, such proxies will be voted in accordance with the
recommendations of the Board of Directors as indicated in this Proxy Statement.
You may revoke your proxy at any time prior to its exercise by written notice to
the Company, by submission of another proxy bearing a later date or by voting in
person at the Annual Meeting. Such revocation will not affect a vote on any
matters taken prior thereto. The mere presence at the Annual Meeting of the
person appointing a proxy will not revoke the appointment.
The approximate date of mailing of this Proxy Statement and the
accompanying form of proxy to stockholders is April 29, 1998. The Company's
principal executive offices are located at 1333 Broadway, New York, New York
10018.
Only holders of record of the Company's common stock, $.10 par value per
share ("Common Stock"), at the close of business on April 13, 1998 (the "Record
Date") will be entitled to notice of and to vote at the Annual Meeting or at any
adjournment or adjournments thereof. On that date, 4,470,815 shares of Common
Stock were issued and outstanding. Each outstanding share entitles the holder
thereof to one vote with respect to each proposal properly brought before the
Annual Meeting for consideration by the stockholders.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date
concerning persons beneficially owning (to the knowledge of the Company) more
than five percent of the outstanding Common Stock and concerning each director
and nominee for director, the executive officers named in the Summary
Compensation Table below and the directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------- -------------------- --------
<S> <C> <C>
William L. Cohen, Chairman of the Board 1,400,697(1)(2) 31.2%
and Chief Executive Officer*
Peter A. Cohen, Director 1,304,407(1) 29.2%
c/o Ramius Capital Group
757 Third Avenue, 27th Floor
New York, New York 10017
Carolyn Cohen Zelikovic* 436,142(3) 9.8%
Herbert Rosenstock, Stanley Rosenstock 230,787(4) 5.2%
and General Sportwear Co., Inc.
23 Market Street
Ellenville, New York 12428
George S. Blumenthal, Director 62,785(5) 1.4%
c/o NTL, Inc.
110 East 59th Street, 26th Floor
New York, New York 10022
Steven Fenyves, Senior Vice President 13,000(6) **
-Administration and Operations*
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
<S> <C> <C>
Alan Kanis, Treasurer and Chief Financial 11,250(7) **
and Chief Accounting Officer*
Stanley F. Schmoller, Vice President - Manufacturing* 15,750(8) **
Steven A. Schwartz, President and Chief Operating Officer* 50,000(9) 1.1%
Donald D. Shack, Director and Secretary 80,150(10) 1.8%
c/o Shack & Siegel, P.C.
530 Fifth Avenue
New York, NY 10036
Monte Wolfson, Director 3,750(11) **
29 East 64th Street, Apt. 6D
New York, New York 10021
All directors and executive officers as a group (9 persons) 2,941,789(12) 63.9%
</TABLE>
- ----------------------
* This person has an address c/o the Company at 1333 Broadway, New York, NY
10018
** Less than one percent
(1) Does not include 41,250 shares held by a charitable foundation. Messrs.
William L. and Peter A. Cohen are two of the five directors of such
foundation and exercise shared voting power with respect to such shares.
(2) Includes 15,000 shares of Common Stock which Mr. Cohen has the right to
acquire upon exercise of currently exercisable stock options.
(3) Ms. Zelikovic is the sister of William and Peter Cohen.
(4) Based upon information provided to the Company by Herbert Rosenstock on
January 9, 1998.
(5) Includes 44,110 shares beneficially owned by Mr. Blumenthal as co-trustee
and income beneficiary under a trust created under the will of Klara
Blumenthal. Also includes 11,250 shares of Common Stock which Mr.
Blumenthal has the right to acquire upon the exercise of currently
exercisable stock options.
(6) Includes 7,500 shares of Common Stock which Mr. Fenyves has the right to
acquire upon the exercise of currently exercisable stock options.
(7) Includes 11,250 shares of Common Stock which Mr. Kanis has the right to
acquire upon the exercise of currently exercisable stock options.
(8) Includes 7,500 shares of Common Stock which Mr. Schmoller has the right to
acquire upon the exercise of currently exercisable stock options.
(9) Includes 50,000 shares of Common Stock which Mr. Schwartz has the right to
acquire upon the exercise of currently exercisable stock options.
(10) Includes 53,900 shares owned by Skylark Partners, a partnership of which
Mr. Shack is a member. Also includes 26,250 shares of Common Stock which
Mr. Shack has the right to acquire upon the exercise of currently
exercisable stock options.
(11) Includes 3,750 shares of Common Stock which Mr. Wolfson has the right to
acquire upon the exercise of currently exercisable stock options.
2
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<PAGE>
(12) Includes (i) 91,250 shares of Common Stock which certain executive officers
have the right to acquire upon the exercise of currently exercisable stock
options and (ii) 41,250 shares of Common Stock which certain directors may
acquire upon the exercise of currently exercisable stock options.
PROPOSAL 1: ELECTION OF DIRECTORS
At the 1998 Annual Meeting of Stockholders, six directors are to be
nominated for election, to serve until the next Annual Meeting of Stockholders
and until their respective successors are duly elected and qualify. Unless a
proxy shall specify that it is not to be voted for the nominees, or any of them,
it is intended that the shares of Common Stock represented by each duly executed
and returned proxy will be voted in favor of the election as directors of the
persons named below. If any nominee is not a candidate for election at the
Annual Meeting, an event which the Board of Directors does not anticipate, the
proxies will be voted for a substitute nominee proposed by the Board of
Directors, if any, and for the others named below and otherwise in the best
judgment of the persons named in the proxies.
The persons nominated as directors, except Mr. Schwartz, are all
currently directors, and their stock ownership is set forth above under
"Securities Ownership of Certain Beneficial Owners, Directors and Executive
Officers." The following table sets forth information concerning the nominees.
<TABLE>
<CAPTION>
NOMINEE DIRECTOR
NAME AND AGE POSITIONS WITH THE COMPANY SINCE
- ------------ -------------------------- -----
<S> <C> <C>
George S. Blumenthal (54) Director 1991
Peter A. Cohen (51) Director 1981
William L. Cohen (56) Chairman of the Board and Chief Executive Officer 1979
Steven A. Schwartz (53) President and Chief Operating Officer --
Donald D. Shack (69) Secretary and Director 1986
Monte Wolfson (72) Director 1994
</TABLE>
BIOGRAPHICAL INFORMATION
Mr. Blumenthal has been Chairman of the Board and Treasurer of OCOM
Corporation since 1990. He has been Chairman of the Board and Treasurer of NTL
Incorporated since April 1993 and has been Chairman of the Board, CEO and
Treasurer of CoreComm Incorporated since April 1989. Mr. Blumenthal was
President of Blumenthal Securities, Inc., a New York Stock Exchange member firm
for in excess of five years prior to November 1992. Mr. Blumenthal was the
Chairman and Treasurer of Cellular Communications International, Inc. until
April 1994. He was the Chairman and Treasurer of Cellular Communications, Inc.
until August 1996, when such company merged into AirTouch Communications, Inc.
He is a director of CoreComm Incorporated, OCOM Corporation and NTL
Incorporated.
Mr. Peter A. Cohen is the Managing Member of Ramius Capital Group LLC,
a private investment firm, which is the successor to Ramius Capital Corporation,
of which Mr. Cohen had been the Managing Director since August 1994. From August
1994 until July 1997 he was a partner in Palladin Partners, a private investment
management firm. From December 1992 through May 1994, Mr. Cohen was the Chairman
of Republic New York Securities Corp. and Vice Chairman of Republic New York
Corp. Prior to January 1990, Mr. Cohen was employed in various senior executive
capacities by Shearson Lehman Hutton Inc., an investment banking firm, including
as its Chief Operating Officer from 1979 to 1984 and as its Chairman and Chief
Executive Officer from 1984 to January 1990. From May 1991 through December 1992
Mr. Cohen was President of Andrew Lauren & Co., Inc., an investment consulting
firm. He is currently a director of Presidential Life Corporation, Trace
Holdings, Inc., GRC International, Inc. and Olivetti SpA. Mr. Cohen is the
brother of William L. Cohen.
Mr. William L. Cohen has been principally employed in senior managerial
positions with the Company since 1965, as its Vice President-Administration from
1970 to 1983 and as its Chief Executive Officer since 1983. He was also
3
<PAGE>
<PAGE>
President of the Company from 1983 until December 1997. Mr. Cohen was elected to
the office of Chairman of the Board of Directors in 1987. Mr. Cohen is the
brother of Peter A. Cohen
Mr. Schwartz joined the Company as President and Chief Operating
Officer effective December 4, 1997. Prior to his employment by the Company, Mr.
Schwartz was President and Chief Operating Officer of the children's apparel
division of Bascorale LLC from February 1996 until August 1997. For over five
years prior to February 1996, Mr. Schwartz was President and Chief Operating
Officer of The Doe Spun Company, Inc., an apparel company, which emerged from
bankruptcy proceedings in 1993.
Mr. Shack has served as Secretary of the Company since 1986. Mr. Shack
is a director and shareholder of the law firm of Shack & Siegel, P.C., which has
served as general counsel to the Company since April 1993. Prior to April 1993,
Mr. Shack was a member of Whitman & Ransom, which served as general counsel to
the Company from January 1990 through March 1993. Prior to January 1990, Mr.
Shack was a member of the law firm of Golenbock and Barell, which served as
general counsel to the Company from 1986 through 1989. Mr. Shack is a director
of Ark Restaurants Corp., International Citrus Corporation and Just Toys, Inc.
Mr. Wolfson has been the President of Monte Wolfson Associates, Inc., a
retail and marketing consultant, for over five years. In addition, Mr. Wolfson
has been a United States Government advisor on the retail textile industry for
over 25 years. From 1975 until his retirement in 1986, Mr. Wolfson was employed
as President of Netco, Inc., the New York subsidiary of Zayre Group, an apparel
retailer. Prior thereto he served as Chairman and CEO of Diana Stores, Corp., an
apparel retailer. He was also Chairman of the Board of Ice Nine, Inc., an
apparel manufacturer, from 1992 until March 1995.
Each director holds office until the next annual meeting of
stockholders and until his successor is elected and qualifies. Each of the
nominees other than Mr. Schwartz was a director during the Company's recent
Chapter 11 bankruptcy proceedings, from which the Company emerged on May 12,
1997.
CERTAIN INFORMATION CONCERNING THE BOARD OF DIRECTORS
Messrs. Peter A. Cohen and Donald D. Shack serve as members of the
Audit Committee. The Audit Committee is responsible for conferring with the
Company's independent auditors with respect to the training and supervision of
internal accounting personnel; receiving and reviewing the recommendations of
the independent auditors; reviewing the consolidated financial statements of the
Company; meeting periodically with the auditors and Company personnel with
respect to the adequacy of internal accounting controls; resolution of potential
conflicts of interest; and review of the Company's accounting policies. The
Audit Committee did not meet during the past fiscal year.
Messrs. George S. Blumenthal and Monte Wolfson serve as members of the
Stock Option Committee, which administers the Company's stock option plans. The
Stock Option Committee held one meeting and took action on one additional
occasion by unanimous written consent during the past fiscal year.
The Company does not presently have compensation or nominating
committees, the customary functions of such committees being performed by the
entire Board of Directors.
During the Company's past fiscal year, the Board of Directors held two
meetings and took action on two additional occasions by unanimous written
consent. No member of the Board of Directors attended fewer than 75% of the
aggregate of (i) the number of meetings of the Board of Directors and (ii) the
number of meetings of committees of the Board of Directors on which he served,
except that Peter Cohen did not attend one Board of Directors meeting.
A directors' fee of $10,000 per annum is paid to each of Messrs.
Blumenthal and Wolfson, except that in fiscal 1996, Mr. Blumenthal received
$7,500, and the remaining $2,500 is being paid to Mr. Blumenthal over a five
year period as an unsecured creditor, due to the Company's bankruptcy
proceedings. Such fees are not paid to other members of the Board of Directors,
each of whom is either employed by, or renders consulting, legal or other
similar services to the Company.
The Company's 1995 Stock Option Plan provides for the annual grant of
options to purchase 2,500 shares of Common Stock to each director who is not an
employee and does not own 5% or more of the Common Stock (an "Outside
4
<PAGE>
<PAGE>
Director"), including the members of the Company's Stock Option Committee.
During fiscal year 1997, Messrs. Blumenthal, Shack and Wolfson were each granted
such options. These options are exercisable with respect to 25% of the shares
covered thereby commencing one year from the date of grant and as to an
additional 25% of the shares covered by the option upon each of the three
succeeding anniversary dates of the date of grant.
REQUIRED VOTE
The Company's By-laws provide that directors be elected by a plurality
of the votes cast at the Annual Meeting by the holders of the shares of Common
Stock present in person or by proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF
THE NOMINEES.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the names and ages, as of the Record
Date, of executive officers of the Company and all offices held by each such
person.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- ---- --- --------------------------
<S> <C> <C>
William L. Cohen 56 Chairman of the Board and
Chief Executive Officer
Steven A. Schwartz 53 President and Chief Operating Officer
Stephen Fenyves 54 Senior Vice President -
Administration and Operations
Alan Kanis 48 Treasurer and Chief Financial
and Chief Accounting Officer
Stanley F. Schmoller 59 Vice President - Manufacturing
Donald D. Shack 69 Secretary
</TABLE>
BIOGRAPHICAL INFORMATION
Biographical Information for Messrs. Cohen, Schwartz and Shack is set
forth above under "Proposal 1."
Mr. Fenyves has been employed by the Company since 1969 in various
executive capacities, including Vice President-Administration from 1986 to 1988,
Senior Vice-President-Administration, from 1989 to 1996 and in his present
capacity since 1996.
Mr. Kanis joined the Company as Treasurer and Chief Financial and Chief
Accounting Officer effective September 1, 1990. Prior to his employment by the
Company, Mr. Kanis had been Vice President-Finance of Shelburne Shirt Co. Inc.
for over five years.
Mr. Schmoller has been employed by the Company in various production
capacities since 1958 and in his present capacity for in excess of 16 years.
Each executive officer holds office at the pleasure of the Board of
Directors and until his successor has been duly elected and qualifies.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Peter A. Cohen renders financial and management consulting services to
the Company. Until March 19, 1996, he was paid a fee at the rate of $75,000 plus
certain benefits. Effective March 19, 1996 his consulting fee was eliminated. In
fiscal 1996, Mr. Cohen received $18,750 in consulting fees. He has continued to
render services without charge. Mr. Cohen is William Cohen's brother.
5
<PAGE>
<PAGE>
The firm of Shack & Siegel, P.C., of which Donald D. Shack is a director
and shareholder, has served as general counsel to the Company since April 1993.
Prior thereto, the firms of Whitman & Ransom and Golenbock and Barell, in both
of which Mr. Shack was a member, served as general counsel.
William L. Cohen is indebted to the Company in the amount of $92,755 in
respect of certain expenses paid on behalf of Mr. Cohen.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10 percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Such reporting persons are required by regulation to furnish the Company with
copies of all Section 16(a) reports that they file.
Based solely on its review of the copies of such reports received by it,
or written representations from certain reporting persons that no Form 5 was
required for those persons, the Company believes that, during the period from
December 1, 1996 through November 30, 1997, all filing requirements applicable
to its officers, directors and greater than 10 percent beneficial owners were
complied with.
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth, for the last three
fiscal years, all compensation paid or accrued to the chief executive officer
and each other executive officer receiving salary and bonus in excess of
$100,000 for services rendered to the Company and its subsidiaries during the
last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
------------------- OTHER ANNUAL OPTIONS
YEAR SALARY BONUS COMPENSATION (1) AWARDED (#)
---- ------ ----- ---------------- -----------
<S> <C> <C> <C> <C> <C>
William L. Cohen, 1997 $200,000(2) -- $21,734 --
Chairman of the Board 1996 433,077(2) -- -- --
and Chief Executive Officer(3) 1995 500,000 -- -- 20,000
Stephen Fenyves, 1997 $140,000 -- -- --
Senior Vice President -- 1996 175,000 -- -- --
Administration and Operations(3) 1995 179,609 $30,000 -- 10,000
Alan Kanis, 1997 $150,000 -- -- --
Treasurer and Chief Financial and 1996 166,000 -- -- --
Chief Accounting Officer(3) 1995 169,680 $35,000 -- 15,000
Stanley F. Schmoller, 1997 $109,150 -- -- ---
Vice President--Manufacturing 1996 132,807 -- -- ---
1995 138,540 $25,000 -- 10,000
</TABLE>
- -------------------
(1) Except as shown, officers' benefits, including car allowances, medical,
disability and life insurance and other benefits are valued, in the
aggregate, below reportable thresholds.
(2) Pursuant to the employment agreement between the Company and Mr. Cohen,
more fully described below, Mr. Cohen was entitled to be paid a base salary
of $500,000. Effective March 19, 1996, Mr. Cohen voluntarily reduced his
base salary to $400,000. Effective December 1, 1996, Mr. Cohen further
voluntarily reduced his base salary to $200,000.
(3) See "Certain Compensation Arrangements," below.
6
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<PAGE>
The following table details the total number of unexercised options and
the value of in-the-money options (i.e., the positive spread between market
price and exercise price) held at the end of the fiscal year ended November 30,
1997 by the persons named in the Summary Compensation Table above, separately
identifying the exercisable and unexercisable options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
SHARES ACQUIRED VALUE AT FY-END (#) OPTIONS AT FY-END (#)
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
William L. Cohen ---- ---- 10,000 10,000 $0 $0
Stephen Fenyves ---- ---- 5,000 5,000 $0 $0
Alan Kanis ---- ---- 7,500 7,500 $0 $0
Stanley F. Schmoller ---- ---- 5,000 5,000 $0 $0
</TABLE>
On June 13, 1995, the Company's stockholders ratified a new 1995 Stock
Option Plan (the "1995 Plan"), which replaced the Company's prior Non-Qualified
Stock Option Plan (the "NQ Plan"). The NQ Plan was terminated, although 103,500
options granted under the NQ Plan remain outstanding, 81,375 of which are
currently exercisable. Officers, directors, employees and independent sales
representatives were eligible for option grants to purchase shares of Common
Stock under the NQ Plan. The 1995 Plan permits the grant of both non-qualified
and incentive stock options. The 1995 Plan makes available, for issuance to
directors, employees and consultants of the Company, options to purchase up to
an aggregate of 225,000 shares of Common Stock. 221,500 options have been
granted under the 1995 Plan, of which 5,625 are exercisable. If Proposal 3,
described below, is approved by the stockholders of the Company at the Annual
Meeting, the number of shares authorized under the 1995 Plan will be increased
to 500,000, which will leave 278,500 options available for grant. Options to
purchase 365,000 shares of Common Stock are currently outstanding outside of the
plans described above.
CERTAIN COMPENSATION ARRANGEMENTS
William L. Cohen was employed under an agreement which expired in June
1996. The agreement provided for a base salary of $500,000 per annum, or such
greater amount from time to time determined by the Board of Directors of the
Company, incentive compensation in an amount equal to 5% of the Company's pretax
income up to $3,000,000 and 6% of the Company's pretax income in excess of
$3,000,000 and certain other benefits. Effective March 19, 1996, Mr. Cohen
voluntarily reduced his base salary by 20% to $400,000, and effective December
1, 1996, Mr. Cohen further reduced his base salary to $200,000.
The Company maintains a $4,000,000 split dollar life insurance policy on
Mr. Cohen. Annual premiums for the policy are approximately $122,600. The
Company currently pays approximately $115,900 of the premiums, and the William
L. Cohen Irrevocable Life Insurance Trust (the "Trust") pays the balance. Upon
Mr. Cohen's death, the Corporation will receive an amount approximately equal to
all premium payments made by it, and the Trust will receive the balance of the
$4,000,000 death benefit. The trustees of the Trust have assigned the policy to
the Corporation to secure such payment. In addition, the Company borrows from
time to time against the policy.
The Company and Mr. Stephen Fenyves are parties to an agreement pursuant
to which the Company has agreed to pay Mr. Fenyves a retirement benefit in the
form of salary continuation for 15 years after his retirement in annual amounts
ranging from $27,500 to $55,000 per year depending upon the age between 55 and
65 at which Mr. Fenyves retires. In the event of his death prior to attaining
age 65, but while he is employed by the Company, the Company will pay a death
benefit of $55,000 per year until Mr. Fenyves would have attained age 65 but in
any event for a minimum of 10 years. The Company currently maintains insurance
coverage to fund the death obligation, against which the Company borrows from
time to time.
7
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<PAGE>
During the Company's recent bankruptcy, the Company established an
enhanced severance program to induce officers and certain key employees to
remain with the Company. Stephen Fenyves, Alan Kanis and one other employee are
currently included in this program. The program entitles the individuals to up
to six months of additional severance if they are terminated without cause
during the 18 month period that commenced on January 16, 1997.
Mr. Schwartz and the Company entered into an agreement whereby, if the
Company terminates Mr. Schwartz's employment without cause (as defined), Mr.
Schwartz shall receive a severance payment ranging from two months' salary to
one year's salary, depending on his length of service to the Company. In
addition, Mr. Schwartz has received options, outside of the plans described
above, to purchase up to 300,000 shares of Common Stock at the exercise price of
$.25 per share, the market value on the date of grant, 50,000 of which are
exercisable. An additional 50,000 of such options become exercisable at the
times that the Common Stock reaches and maintains each of the following
progressive trading price thresholds: $1.50, $3.00, $4.00, $5.00 and $6.00.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As indicated above, the Company does not have a compensation committee;
compensation decisions are made by the Board of Directors. The members of the
Board include William L. Cohen, Peter A. Cohen and Donald D. Shack. William L.
Cohen is Chairman of the Board and President of the Company. Peter A. Cohen is
his brother. Mr. Shack is Secretary of the Company and a shareholder and
director of the law firm of Shack & Siegel, P.C., the Company's general counsel.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Common Stock to the cumulative total return of the Media General Nasdaq
Market Value Index (including all Nasdaq stocks) and of the common stock of the
national stock exchange or Nasdaq-listed companies included in the Company's
Standard Industrial Classification Industry Group (236 - Girls', Children's and
Infants' Outerwear) for the five-year period commencing December 1, 1992 and
ending November 30, 1997. The Company's Standard Industrial Classification
Industry Group index currently includes two companies. The data presented assume
a $100 investment on December 1, 1992 and dividend reinvestment in the Common
Stock and in each index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
YEARS ENDING
Company/Index 12/92 11/93 11/94 11/95 11/96 11/97
------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Andover Togs, Inc. 100 76.00 72.00 48.00 20.50 8.00
Nasdaq Market 100 119.03 128.19 162.53 201.65 250.48
Girls' Outerwear SIC Code 100 88.84 58.30 66.48 67.76 132.66
</TABLE>
8
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BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation is approved by the entire Board of
Directors. There is no compensation committee. The compensation of the three
executives named in the Summary Compensation Table other than Mr. Cohen is
determined through consultation between the Board and the Chief Executive
Officer. The Board has relied extensively on Mr. Cohen's views on matters
relating to the compensation of such other executives. The compensation paid to
Steven A. Schwartz was determined initially by Mr. Cohen in consultation with a
subcommittee of the Board of Directors consisting of Donald D. Shack and Monte
Wolfson and thereafter approved by the full Board.
It is the policy of the Board to tie a portion of executive compensation
to corporate performance. Mr. Cohen is one of the principal stockholders of the
Company. He owns 1,385,697 shares of Common Stock constituting over 31% of the
total outstanding Common Stock. Accordingly, his interest is closely aligned
with the interest of all stockholders. Prior to the bankruptcy proceedings, Mr.
Cohen was employed pursuant to an employment agreement, which expired in June
1996, providing for a base salary of $500,000 per annum plus 5% of the Company's
pretax income up to $3,000,000 and 6% of the Company's pretax income in excess
of 3,000,000. Effective March 19, 1996, Mr. Cohen voluntarily reduced his base
salary to $400,000 per annum, and effective December 1, 1996, Mr. Cohen agreed
to a further reduction to $200,000 per annum.
During fiscal year 1994, the Board of Directors decided to provide Mr.
Cohen with whole life insurance on a split- dollar basis. In doing so, the
Company obtained a $4,000,000 life insurance policy on the life of Mr. Cohen and
entered into a split-dollar insurance agreement with Mr. Cohen and his insurance
trust, pursuant to which Mr. Cohen's insurance trust pays a portion of the
annual premium attributable to term insurance ($6,700) and the Company pays the
balance ($115,900). Under this arrangement, the Company will be reimbursed for
the premiums it pays through either the cash surrender value of the policy or
the proceeds of the policy paid upon Mr. Cohen's death. The Board of Directors
believes that this insurance benefit provides Mr. Cohen with an attractive
compensation package.
Steven A. Schwartz was hired in December 1997 as President and Chief
Operating Officer. Incentives weigh heavily in his compensation arrangements. He
receives a base salary at the rate of $175,000 per annum. In fiscal 1998, Mr.
Schwartz will receive, in addition to his salary and expenses, 1% of sales in
excess of $20,000,000 if the Company's gross margin (sales less cost of goods
sold) exceeds 18%. In fiscal 1999, Mr. Schwartz will receive, in addition to his
salary and expenses, 10% of the Company's pretax earnings. Mr. Schwartz also
received a ten-year option to purchase 300,000 shares of Company stock at the
exercise price of $.25 per share (market value on the date of grant). The option
is exercisable immediately with respect to 50,000 shares and will become
exercisable for additional lots of 50,000 each at such times as the Company's
stock price reaches $1.50, $3.00, $4.00 $5.00 and $6.00 respectively and
maintains said price for 20 out of any 30 consecutive trading days.
The compensation of the three other executive officers consists of a
combination of cash salary, cash bonuses and stock options. Individual
compensation is reviewed on the basis of various considerations, including
Company performance, individual performance, position, tenure, internal
comparability and independent compensation surveys which provide information on
the compensation of management at other apparel companies. All three executives
are eligible to receive annual cash bonuses based on a review of the
considerations described above applicable during the year for which such a bonus
is payable. No bonuses were awarded in 1996 or 1997, and in view of the
bankruptcy proceedings and the Company's efforts to reduce overhead, each of the
three executives agreed to reductions in base salary in 1996 and 1997.
The Company's stock option program is designed to align the interest of
the executives with those of the stockholders at large. Options are granted with
exercise prices equal to market on the grant date and vest, generally, over a
period of five years. This approach is designed to give executives an incentive
to create stockholder value over the long term, since the full benefit of the
option cannot be realized unless price appreciation occurs over a number of
years, and the executive is rewarded only to the extent that stockholders at
large have benefitted. The Company does not issue options on any fixed basis
preferring to maintain a flexible program. No options were issued or grants made
to employees in 1996 or 1997.
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
corporation's Chief Executive Officer and four other most highly compensated
executive officers unless such compensation is paid pursuant to performance
standards prescribed under Section 162(m).
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The Company believes that Section 162(m) does not disallow deductions in respect
of stock options granted under the Company's existing stock option plans.
This report has been provided by the Board of Directors.
Respectfully Submitted,
William L. Cohen Donald D. Shack
Peter A. Cohen George S. Blumenthal*
Monte Wolfson*
- ---------------
* Members of Stock Option Committee
PROPOSAL 2: NAME CHANGE
The Board of Directors has approved a proposal to amend the Company's
Certificate of Incorporation to change the Company's name to "The Andover
Apparel Group, Inc." The Board of Directors believes that the current name of
the Company, Andover Togs, Inc., too closely identifies the Company with, and
limits it to, its traditional childrenswear lines and does not reflect the
diversification potential of the Company's business. Therefore, the Board of
Directors believes that a change of the Company's name will enable the public
and those already familiar with the Company to begin to broaden their image of
the Company.
The following resolution will be submitted to the stockholders for
approval at the Annual Meeting:
RESOLVED, that Article FIRST of the Company's Certificate of
Incorporation be amended to read in its entirety as follows:
"FIRST: The name of the corporation is The Andover Apparel Group, Inc."
REQUIRED VOTE
The affirmative vote of holders of a majority of the outstanding shares
of Common Stock is required for approval of this amendment to the Company's
Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION IN PROPOSAL 2.
PROPOSAL 3: APPROVAL OF AMENDMENTS TO 1995 STOCK OPTION PLAN
In 1995, the Board of Directors and the stockholders adopted the
Company's 1995 Stock Option Plan (the "1995 Plan"), which replaced the Company's
prior stock option plans. The 1995 Plan permits the grant of both non-qualified
and incentive stock options and makes available, for issuance to directors,
employees and consultants of the Company, options to purchase up to an aggregate
of 225,000 shares of Common Stock.
Subject to stockholder approval, the Company's Board of Directors has
approved various amendments to the 1995 Plan. These amendments increase the
number of shares available to be granted under the 1995 Plan and make certain
other changes as described below under the heading "Proposed Amendments."
A summary of the provisions of the 1995 Plan is included below under the
heading "Summary of the 1995 Plan." There then follows a description of the
proposed amendments being submitted to the stockholders for their approval. The
1995 Plan, setting forth the proposed amendments, is attached hereto as Annex A.
10
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SUMMARY OF THE 1995 PLAN
The following discussion, which summarizes certain provisions of the 1995
Plan, is qualified in its entirety by reference to the text of the 1995 Plan.
The 1995 Plan, marked to indicate the proposed amendments, is attached to this
proxy statement as Annex A.
PURPOSE
The purpose of the 1995 Plan is to provide incentives to directors,
officers, employees and consultants of the Company who have substantial
responsibility for the Company's management and growth by authorizing the award
of options to purchase Common Stock.
ADMINISTRATION OF THE PLAN
The 1995 Plan is administered by the Company's Stock Option Committee,
which shall consist of two or more directors comprised of "non-employee
directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934,
as amended (the "Act"). Subject to the express provisions of the 1995 Plan, the
Committee has the sole discretion to determine to whom among those eligible, and
the time or times at which, options will be granted, the number of shares to be
subject to each option and the manner in and price at which options may be
exercised. In making such determinations, the Committee may take into account
the nature and period of service of eligible plan participants, their level of
compensation, their past, present and potential contributions to the Company and
such other factors as the Committee in its discretion deems relevant. Options
are designated at the time of grant as either, "incentive stock options"
intended to qualify under Section 422 of the Internal Revenue Code of 1986 (the
"Code"), or "non-qualified options" which do not so qualify.
The Committee may amend, suspend or terminate the 1995 Plan at any time,
subject in certain instances to Board approval and except that no amendment may
be adopted without the approval of stockholders to the extent such approval is
required by law, agreement or the rules of any exchange upon which the Common
Stock is listed, and no such amendment may impair the rights of optionees under
outstanding options. Amendments which would (i) increase the maximum number of
shares which may be issued pursuant to the exercise of options or purchase
rights granted; (ii) change the eligibility requirements for participation; or
(iii) extend the term of options require Board approval, and, under the Code,
amendments materially increasing the benefits under the 1995 Plan generally
would require stockholder approval. Unless terminated earlier by the Board of
Directors, the 1995 Plan will terminate on April 1, 2005.
The Committee may amend or modify any option in any manner to the extent
that the Committee would have had the authority initially to grant such option;
provided that, except as provided in the 1995 Plan or in any agreement
evidencing such option, no such amendment or modification shall impair the
rights of any optionee under any outstanding option without the consent of such
optionee.
SHARES SUBJECT TO THE PLAN
No more than 225,000 shares of Common Stock may be issued pursuant to the
exercise of options granted. The aggregate number of shares for which options
may be granted, the number of shares covered by each outstanding option and the
exercise price per share thereof (but not the total price) and each such option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares resulting from a stock split, split-up or consolidation of shares
or any like capital adjustment or reclassification of shares or the payment of
any stock dividends, or any other increase or decrease in the number of shares
of the Company outstanding, without receipt of consideration by the Company.
Upon the dissolution or liquidation of the Company or upon a merger or
consolidation of the Company in a transaction in which all or substantially all
of the stockholders of the Company receive cash, securities of another company
or other consideration in exchange for their shares of stock, whether or not the
Company is the surviving corporation, or upon a sale of all or substantially all
of the assets of the Company, any option granted shall terminate, but the
optionee may, immediately prior to any such transaction exercise his or her
option, in whole or in part, as to the full number of shares which the optionee
would otherwise have been entitled to purchase during the remaining term of the
option. If such transaction consists in part of a tender offer for the Company's
shares, the Committee may, prior to or simultaneous with the closing of such
tender offer, elect to accelerate all or any portion of an option and cancel
such option upon payment to the respective optionee of an amount equal to the
amount by which the cash and other consideration to be paid to public
11
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stockholders in such tender offer exceeds the exercise price multiplied by the
number of shares remaining subject to such option. Notwithstanding the
foregoing, the Company may elect not to permit an optionee to exercise his or
her option immediately prior to any such event in accordance with the foregoing,
but in lieu thereof the Company may, in its discretion and immediately prior to
any such dissolution, liquidation, merger, consolidation or sale substitute a
new option for his or her option, such new option to be applicable to the stock
of the surviving or acquiring corporation or any of its affiliates and to be on
terms no less favorable to the optionee than those contained in his or her prior
option.
PARTICIPATION
The Committee is authorized to grant stock options from time to time to
such officers, directors, employees and consultants of the Company or its
subsidiaries as the Committee, in its sole discretion, may determine. Members of
the Committee are not eligible to receive options during their term of service
on the Committee except pursuant to the formula provisions of the 1995 Plan.
Under the formula grant provisions, Outside Directors automatically receive, on
April 1 of each year, options to purchase 2,500 shares of Common Stock. The 1995
Plan also provides for a yearly limit on the number of shares subject to awards
granted to any person, including to executive officers identified as "named
executive officers" in Item 402(a)(3) of Regulation S-K under the Act. Holders
of more than 10% of the Common Stock may not receive incentive stock options.
PRICE OF OPTIONS
The exercise price of each option is determined by the Committee, but in
the case of incentive stock options may not be less than 100% of the fair market
value of the shares of Common Stock covered by the option on the date the option
is granted. In the case of non-qualified stock options, the exercise price of
each option may not be less than 80% of the fair market value of the shares of
Common Stock covered by the option on the date the option is granted. Under the
formula grant provisions, options automatically granted annually to outside
directors have an exercise price equal to the fair market value of the Common
Stock on the date of grant.
ACQUISITION OF SHARES
In order to assist an optionee in the acquisition of shares of Common
Stock pursuant to the exercise of an option, the Committee may authorize the
payment by the optionee of the purchase price of the Common Stock (i) in shares
of Common Stock already owned by the optionee and having a fair market value on
the date of the exercise equal to the exercise price or (ii) in any other manner
(including the guaranty or extension of a loan to the optionee by the Company).
TERM AND EXERCISE OF OPTIONS
The Committee has the discretion to fix the term of each option granted,
with a maximum term length from date of grant of 10 years. Under the formula
grant provisions, options automatically granted annually to outside directors
are exercisable with respect to 25% of the shares covered thereby commencing one
year after the date of grant and as to an additional 25% of the shares covered
by the option upon on each of the three succeeding anniversary dates of the date
of grant, provided such director continues to serve as an outside director of
the Company on the date such options become exercisable. All such options
expire, to the extent unexercised, seven years after the date of the grant.
Upon the termination of an optionee's service with the Company for cause,
all unexercised options or portions thereof held by such optionee shall expire
and be forfeited as of such date. If an optionee dies, retires or quits his or
her service with the written consent of the Company, or if the service of the
optionee is terminated by the Company for reasons other than cause, such
optionee (or his or her estate) may exercise his or her option within three
months following such death or termination of service, provided however that the
optionee may only exercise his or her option for the number of shares which he
or she could have purchased as of the date of such termination. Options granted
are not transferable except by will or pursuant to the laws of descent and
distribution.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is only a summary of the principal Federal
income tax consequences of the grant and exercise of options and is based on
existing Federal law, which is subject to change, in some cases retroactively.
This discussion is also qualified by the particular circumstances of each
optionee, which may substantially alter or modify the
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Federal income tax consequences herein discussed. In addition, this summary does
not address state and local tax consequences of the grant and exercise of
options. The 1995 Plan is not subject to the provisions of ERISA.
The Taxpayer Relief Act of 1997 (the "1997 Tax Act") significantly
changed the tax treatment of long-term capital gains for individuals. Under the
1997 Tax Act, the maximum capital gains tax rates for individuals are (i) 20% on
gains from sales of capital assets held for more than 18 months and (ii) 28% on
gains from sales of capital assets held for more than 12 months but not more
than 18 months. In contrast, the maximum individual ordinary income tax rate is
39.6%. The following discussion assumes that the shares of Common Stock acquired
upon exercise of a stock option constitute capital assets in the option holder's
hands.
Non-qualified Options. An individual who is a United States taxpayer who
is granted a non-qualified stock option under the Plan will not realize any
income for Federal income tax purposes on the grant of an option. An optionee
will realize ordinary income for Federal income tax purposes on the exercise of
an option, provided the shares are not then subject to a substantial risk of
forfeiture within the meaning of Section 83 of the Code ("Risk of Forfeiture"),
in an amount equal to the excess, if any, of the fair market value of the shares
of Common Stock on the date of exercise over the exercise price thereof. If the
shares are subject to a Risk of Forfeiture on the date of exercise, the optionee
will realize ordinary income for the year in which the shares cease to be
subject to a Risk of Forfeiture in an amount equal to the excess, if any, of the
fair market value of the shares at the date they cease to be subject to a Risk
of Forfeiture over the exercise price, unless the optionee shall have made a
timely election under Section 83(b) of the Code to include in his income for the
year of exercise an amount equal to the excess of the fair market value of the
shares of Common Stock on the date of exercise over the exercise price. The
amount realized for tax purposes by an optionee by reason of the exercise of a
non-qualified stock option granted under the Plan is subject to withholding by
the Company and the Company is entitled to a deduction in an amount equal to the
income so realized by an optionee.
Provided that an individual who is a United States taxpayer satisfies
certain holding period requirements provided by the Code, such individual will
realize long-term capital gain or loss, as the case may be, if the shares issued
upon exercise of a non-qualified stock option are disposed of more than one year
after (i) the shares are transferred to the individual or (ii) if the shares
were subject to a Risk of Forfeiture on the date of exercise and a valid
election under Section 83(b) of the Code shall not have been made, the date as
of which the shares cease to be subject to a Risk of Forfeiture. The amount
recognized upon such disposition will be the difference between the option
holder's basis in such shares and the amount realized upon such disposition.
Generally, an option holder's basis in the shares will be equal to the exercise
price plus the amount of income recognized upon exercise of the option.
Incentive Stock Options. An incentive stock option holder who meets the
eligibility requirements of Section 422 of the Code will not realize income for
Federal income tax purposes, and the Company will not be entitled to a
deduction, on either the grant or the exercise of an incentive stock option. If
the incentive stock option holder does not dispose of the shares acquired within
two years after the date the incentive stock option was granted to him or within
one year after the transfer of the shares to him, (i) any proceeds realized on a
sale of such shares in excess of the option price will be treated as long-term
capital gain and (ii) the Company will not be entitled to any deduction for
Federal income tax purposes with respect to such shares.
If an incentive stock option holder disposes of shares during the
two-year or one-year periods referred to above (a "Disqualifying Disposition"),
the incentive stock option holder will not be entitled to the favorable tax
treatment afforded to incentive stock options under the Code. Instead, the
incentive stock option holder will realize ordinary income for Federal income
tax purposes in the year the Disqualifying Disposition is made, in an amount
equal to the excess, if any, of the fair market value of the shares of Common
Stock on the date of exercise over the exercise price.
An incentive stock option holder generally will recognize a long-term
capital gain or loss, as the case may be, if the Disqualifying Disposition is
made more than one year after the shares are transferred to the incentive stock
option holder. The amount of any such gain or loss will be equal to the
difference between the amount realized on the Disqualifying Disposition and the
sum of (x) the exercise price and (y) the ordinary income realized by the
incentive stock option holder as the result of the Disqualifying Disposition.
The Company will be allowed in the taxable year of a Disqualifying Disposition a
deduction in the same amount as the ordinary income recognized by the incentive
stock option holder.
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Notwithstanding the foregoing, if the Disqualifying Disposition is made
in a transaction with respect to which a loss, if sustained, would be recognized
to the incentive stock option holder, then the amount of ordinary income
required to be recognized upon the Disqualifying Disposition will not exceed the
amount by which the amount realized from the disposition exceeds the exercise
price. Generally, a loss may be recognized if the transaction is not a "wash"
sale, a gift or a sale between certain persons or entities classified under the
Code as "related persons".
Alternative Minimum Tax. For purposes of computing the Federal
alternative minimum tax with respect to shares acquired pursuant to the exercise
of incentive stock options, the difference between the fair market value of the
shares on the date of exercise over the exercise price will be includable in
alternative minimum taxable income in the year of exercise if the shares are not
subject to a Risk of Forfeiture; if the shares are subject to a Risk of
Forfeiture, the amount includable in alternative minimum taxable income will be
taken into account in the year the Risk of Forfeiture ceases and will be the
excess of the fair market value of the shares at the date they cease to be
subject to a Risk of Forfeiture over the exercise price. The basis of the shares
for alternative minimum tax purposes, generally, will be an amount equal to the
exercise price, increased by the amount of the tax preference taken into account
in computing the alternative minimum taxable income. In general, the alternative
minimum tax is the excess of 26% of alternative minimum taxable income up to
$175,000 and 28% of such income above $175,000 over the regular income tax, in
each case subject to various adjustments and exemptions.
Deductions for Federal Income Tax Purposes. Pursuant to Rule 162(m) of
the Code and the regulations promulgated thereunder, the Company is not able to
deduct compensation to certain employees to the extent compensation exceeds $1.0
million per tax year. Covered employees include the chief executive officer and
the four other highest paid senior executive officers of the Company for the tax
year. Certain performance-based compensation, including stock options, is exempt
provided that (i) the stock options are granted by a committee of the Board
which is comprised solely of two or more "outside directors", (ii) the plan
under which the options are granted is approved by stockholders, and (iii) the
plan states the maximum number of shares with respect to which options may be
granted during a specified period to any employee.
PROPOSED AMENDMENTS
The following description of the proposed amendments is qualified in its
entirety by reference to Annex A.
1. The 1995 Plan provides for the issuance of options to purchase an
aggregate of 225,000 shares of Common Stock. Since its adoption, 221,500 options
have been granted under the 1995 Plan, leaving 3,500 available for grant. The
Board of Directors believes that the option program is essential in order to
attract new employees and to provide incentives to current employees and that an
increase in the number of options available for grant is necessary for that
purpose. Accordingly, subject to the approval of stockholders, the Board has
authorized an increase in the number of shares issuable under the 1995 Plan to
500,000, thereby making available for issuance options to purchase an additional
275,000 shares, for a total of 278,500 options available for grant.
2. Pursuant to the 1995 Plan, if an optionee dies while associated with
the Company or within three months after retirement, the option terminates three
months after the date of death. The proposed amendment increases this period to
one year. The 1995 Plan also provides that if an optionee leaves the Company for
a reason other than cause, the option will terminate three months thereafter.
The proposed amendment increases this period to six months for non-qualified
stock options.
3. Optionees may pay the exercise price of their options with shares of
Common Stock, under the 1995 Plan, only at the discretion of the Committee. The
proposed amendment would permit this method of exercise without Committee
approval.
4. The 1995 Plan provides that Outside Directors receive options to
purchase 2,500 shares of Common Stock per year and no other options. The
proposed amendment increases the annual grant to 5,000 options and permits the
grant of additional options to Outside Directors at the discretion of the
Committee.
5. The Board of Directors has also proposed certain technical amendments
to the 1995 Plan as set forth on Annex A. These amendments reflect various
changes in the law since 1995.
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PLAN BENEFITS
The following table sets forth certain information, as of the record
date, concerning outstanding options granted pursuant to the 1995 Plan to (i)
each executive officer named in the Summary Compensation Table (see "Executive
Compensation"); (ii) all current executive officers, as a group; (iii) all
non-employee directors, as a group; and (iv) all other employees, including all
current officers who are not executive officers, as a group.
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE SHARES (#)
- ----------------- ------------ ----------
<S> <C> <C>
William L. Cohen $0(1) -0-
Chairman of the Board and Chief Executive Officer
Stephen Fenyves
Senior Vice President - Administration and Operations $0(1) 35,000
Alan Kanis
Treasurer, Chief Financial Officer and Chief Accounting Officer $0(1) 35,000
Stanley F. Schmoller
Vice Present - Manufacturing $0(1) 10,000
All executive officers, as a group $0(1) 80,000
All non-executive directors, as a group (2) $0(1) 22,500
All other employees, as a group $3,125 119,000
</TABLE>
- --------------------
(1) These options are out-of-the-money.
(2) Each of the Outside Directors has been granted 7,500 options under the 1995
Plan. The other nominees not listed in this table have not received any
options to date under the 1995 Plan.
The last sale price of the Common Stock on the Record Date was $.125 per share.
REQUIRED VOTE
The Board of Directors believes it to be in the best interest of the
Company that the foregoing amendments be approved and recommends them for
approval by the Company's stockholders. The following resolution will be
submitted to the stockholders for approval at the Annual Meeting:
RESOLVED, that the amendments to the Company's 1995 Stock Option Plan
indicated on Annex A attached to the Company's proxy statement, dated
April 28, 1998, be and they hereby are adopted.
The affirmative vote of holders of a majority of the shares of Common
Stock present in person or by proxy and entitled to vote at the Annual Meeting
is required for approval of the amendments to the 1995 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF
PROPOSAL 3.
PROPOSAL 4: RATIFICATION OF SELECTION OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
It is proposed that the stockholders ratify the appointment by the
Board of Directors of Mahoney Cohen & Company, C.P.A., P.C. as the independent
auditors of the Company for the fiscal year ending November 30, 1998. The
Company expects a representative of Mahoney Cohen & Company, C.P.A., P.C. to be
present at the Annual Meeting to respond to appropriate questions submitted by
stockholders, and such representative may make such statements as he or she may
desire.
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The Company engaged Mahoney Cohen & Company, CPA, P.C. (the "New
Accountants") to audit its financial statements for the fiscal years ending
November 30, 1996 and 1997. The New Accountants replace the firm of Deloitte &
Touche LLP (the "Former Accountants"), who had audited the Company's financial
statements for the fiscal years ending November 30, 1985 through 1995. The
decision to change independent accountants was approved by the Company's Board
of Directors, including all members of the Audit Committee of the Board of
Directors, on March 7, 1997.
The audit report of the Former Accountants on the consolidated
financial statements of the Company as of and for the fiscal year ended November
30, 1994 did not contain any adverse opinion or disclaimer of opinion, nor was
it qualified or modified as to uncertainty, audit scope, or accounting
principles. The audit report of the Former Accountants on the consolidated
financial statements of the Company as of and for the fiscal year ended November
30, 1995 was delayed and finally issued on August 15, 1997, after the Company
emerged from bankruptcy. Such report does not contain any adverse opinion or
disclaimer of opinion, nor is it qualified or modified as to uncertainty, audit
scope or accounting principles. The Former Accountants were dismissed as of
August 15, 1997, the date that they issued their audit report.
During the Company's two most recently completed fiscal years and the
subsequent interim period up to the date hereof, there were no disagreements
between the Company and the Former Accountants on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures, which such disagreements, if not resolved to the satisfaction of the
Former Accountants, would have caused it to make reference to the matter of
disagreement in its report.
REQUIRED VOTE
Approval by the stockholders of the appointment of independent auditors
is not required, but the Board of Directors deems it desirable to submit this
matter to the stockholders. If holders of a majority of the shares of Common
Stock present and entitled to vote at the Annual Meeting do not approve the
selection of Mahoney Cohen & Company, C.P.A., P.C., the selection of independent
auditors will be reconsidered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF MAHONEY COHEN & COMPANY, C.P.A., P.C. AS INDEPENDENT
AUDITORS OF THE COMPANY.
VOTING PROCEDURES
Votes withheld in connection with the election of one or more of the
nominees for director will not be counted in determining the votes cast and will
have no effect on the vote. Abstentions and broker non-votes in connection with
the name change will have the effect of a negative vote. Abstentions in
connection with the approval of the amendments to 1995 Plan and the ratification
of auditors will have the effect of a negative vote, whereas broker non-votes
will not be considered as present and will have no effect on the vote. All
shares represented in person or by proxy will be counted for purposes of
determining a quorum. Members of the Cohen family who hold approximately 70% of
the outstanding shares of Common Stock have indicated their intention to vote as
recommended by the Board of Directors, and therefore it is expected that all
matters will be carried accordingly.
Under the rules of the National Association of Securities Dealers and
the exchange of which the broker is a member, brokers who hold shares in street
name for customers have the authority to vote on certain items when they have
not received instructions from beneficial owners. Brokers that do not receive
instructions are generally entitled to vote upon the election of directors, the
name change and the selection of independent auditors.
GENERAL
The solicitation of proxies in the accompanying form is made by the
Board of Directors, and the cost thereof will be borne by the Company, which
cost is not expected to exceed $10,000. In addition to the solicitation of
proxies by use of the mails, some of the officers, directors and other employees
of the Company may also solicit proxies personally or by mail, telephone or
telegraph, but they will not receive additional compensation for such services.
Brokerage firms, custodians, banks, trustees, nominees or other fiduciaries
holding shares of Common Stock in their names will be requested
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by the Company to forward proxy materials to their principals and will be
reimbursed for their reasonable out-of-pocket expenses in such connection.
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other matters to be presented for action, but if any other matters
properly come before the Annual Meeting, it is intended that the persons voting
the accompanying proxy will vote the shares represented thereby in accordance
with their best judgment.
It is important that proxies be returned promptly. Therefore, whether
or not you plan to attend the Annual Meeting in person, you are urged to mark,
date, execute and return your proxy in the enclosed envelope, to which no
postage need be affixed if mailed in the United States.
STOCKHOLDER PROPOSALS
Stockholder proposals in respect of matters to be acted upon at the
Company's 1999 Annual Meeting of Stockholders should be received by the Company
on or before February 6, 1999 in order that they may be considered for inclusion
in the Company's proxy materials.
By Order of the Board of Directors
DONALD D. SHACK
Secretary
Dated: April 28, 1998
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ANNEX A
Legend:
Insertions are shown by a double underline:
Deletions are shown by italicized bracketed text: [italics]
ANDOVER TOGS, INC.
AMENDED 1995 STOCK OPTION PLAN
ARTICLE 1
PURPOSE AND SCOPE OF THE PLAN
1.1 PURPOSE. This Stock Option Plan (the "Plan") is to advance
the interests of Andover Togs, Inc. (the "Company") and its stockholders by
assisting the Company in attracting and maintaining strong management and
consulting personnel upon whose judgment the success of the Company depends. The
Plan is also intended to enable the Company to reward the efforts, abilities and
industries of such officers, directors, employees and consultants who render
employment and other services which contribute materially to the success of the
Company's business. By encouraging ownership in the Company, the Company seeks
to increase the incentives of its employees, officers, directors and consultants
for enhancing shareholder value.
1.2 DEFINITIONS. For purposes of the Plan, unless the context
otherwise indicates, the following definitions shall be applicable:
(a) "Board" or "Board of Directors" means the Board of
Directors of the Company, as constituted from time to time.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any successor statute.
(c) "Commission" means the Securities and Exchange
Commission.
(d) "Committee" means the Stock Option Committee of the
Company which shall be composed of not less than two persons appointed by the
Board of Directors, each of whom shall be (i) a [disinterested person]
*"NON-EMPLOYEE DIRECTOR"* as that term is defined in Rule 16b-[3(c)(2)(i)]
*3(b)(3)* of the General Rules and Regulations under the Exchange Act and
(ii) an "outside director" within the meaning of Section 162(m) of the Code
and the rules and regulations promulgated thereunder.
(e) "Consultant" means an individual who is not an
Employee but who has been retained by the Company to render services as an
independent contractor.
(f) "Director" means any person who is a member of the
Board of Directors whether or not such person is an Employee.
(g) "Employee" means and includes any person who is an
employee of the Company (including officers and directors who are also
employees) or of any Subsidiary.
(h) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
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(i) "Executive Officer" means and includes any "named
executive officer" as defined in Item [402(a)(ii)(3)] *402(a)(3)* of Regulation
S-K under the Exchange Act of 1934, as amended.
(j) "Exercise Price" means the price designated by the
Committee at which a Share may be purchased upon exercise of an Option as the
same may be adjusted pursuant to Article 5 hereof.
(k) "Fair Market Value" of a Share means (i) if the Shares
are quoted on the Nasdaq National Market or listed on a national securities
exchange, the closing price on such market or such exchange, (ii) if the Shares
are not quoted on the Nasdaq National Market or listed on a national securities
exchange, the mean between the closing bid and asked prices of publicly-traded
Shares in the over-the-counter market as reported on the Nasdaq system or by any
nationally recognized quotation service selected by the Company, or (iii) if the
Shares are not then publicly-traded, as determined by the Committee.
(l) "Grant Date," as used with respect to a particular
Option, means the date an Option is granted by the Committee pursuant to the
Plan.
(m) "Grantee" means an individual to whom an Option, or
portion thereof, is granted by the Committee pursuant to the Plan.
(n) "Incentive Stock Option" means an Option intended to
qualify under Section 422 of the Code.
(o) "Non-Qualified Stock Option" means an Option, or
portion thereof which has been designated by the Committee as a non-qualified
stock option or an Option, or portion thereof, which does not qualify as an
Incentive Stock Option.
(p) "Option" means an option to purchase Shares granted
pursuant to Article 2 and Article 4 of the Plan.
(q) "Option Agreement" means a written agreement between a
Grantee and the Company evidencing an Option, consistent with the provisions of
Article 2 and Article 4 of the Plan.
(r) "Outside Director" means, *FOR ALL PURPOSES OTHER THAN
SECTION 1.2(d)*, a Director who is not an Employee and who does not own 5% or
more of the [outstanding] Shares.
(s) "Service" means the term of employment of an Employee
or the retention of a Consultant by the Company or any Subsidiary or the term
during which of an individual serves as a director of the Company.
(t) "Shares" or "Shares of Stock" means shares of common
stock, $.10 par value per share, of the Company. Shares may consist of
authorized but unissued Shares or Shares which have been previously issued and
reacquired by the Company.
(u) "Subsidiary" means and includes any corporation more
than 50% of whose voting stock is beneficially owned or controlled by the
Company.
1.3 ADMINISTRATION. The Plan shall be administered by the
Committee. Subject to the express provisions of the Plan, the Committee, in its
sole discretion, from time to time, shall determine the Directors, Employees and
Consultants from among those eligible to whom, and the time or times at which,
Options shall be granted, and the number of Shares to be subject to each Option.
In making such determinations the Committee may take into account
recommendations made by management, the nature and length of Service rendered by
the prospective Grantee, his or her level of compensation, his or her past,
present and potential contributions to the Company and such factors as the
Committee shall in its discretion deem relevant. Subject to the express
provisions of the Plan and any consents required by any applicable laws
affecting the Plan and Options, the Committee shall have complete authority to
interpret and construe the Plan, to prescribe, amend and rescind rules and
regulations related to it, to determine the terms and provisions of the
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respective Option Agreements and to make all other determinations necessary or
advisable for the administration of the Plan. The determinations of the
Committee on the matters referred to in this Section 1.3 shall be conclusive.
1.4 ELIGIBILITY FOR PARTICIPATION. Any Director, Employee or
Consultant shall be eligible to receive Options granted under the Plan.
1.5 SHARES SUBJECT TO THE PLAN. Subject to adjustment as
hereinafter provided, no more than [225,000] *425,000* Shares may be issued
pursuant to Options granted under the Plan. If any Option shall expire or
terminate for any reason without having been exercised in full, the unpurchased
Shares subject thereto shall again be available for the purposes of the Plan.
1.6 DURATION OF THE PLAN. Unless previously terminated by the
Committee or the Board of Directors, the Plan will terminate on April 1, 2005.
Such termination will not terminate any Option then outstanding.
ARTICLE 2
TERMS AND CONDITIONS OF OPTIONS
2.1 OPTIONS AND OPTION AGREEMENTS. Each Option granted under
the Plan shall be subject to all of the applicable terms and conditions of the
Plan and shall be evidenced by an Option Agreement. The Option Agreement shall
contain such terms and conditions not inconsistent with the Plan as the
Committee may deem appropriate, including, among other things, when and to what
extent the Option is exercisable, the number of Shares that may be purchased
upon exercise of an Option, the Exercise Price, and the conditions to the
exercise of any Option. The Option Agreement may also designate the Option as a
Non-Qualified Stock Option or an Incentive Stock Option.
2.2 EXERCISABILITY AND TERM. (a) Except as otherwise provided
below, the Committee shall determine the term of each Option and whether the
Option shall be exercisable in full or in installments and, if in installments,
the number of installments. No Option, however, may remain outstanding for more
than 10 years after the Grant Date.
(b) Except as otherwise provided herein, an Option granted
under the Plan may be exercised from time to time during its term for the full
number of Shares then purchasable upon exercise of the Option or from time to
time for any part thereof; provided, however, that no Option may be exercised in
part with respect to fewer than 25 Shares, except to purchase the remaining
Shares then purchasable under such Option.
(c) Except as otherwise provided below, Options shall
terminate immediately upon the termination of the Service of the Grantee.
Options granted under the Plan shall not, however, be affected by any change of
Service so long as the Grantee continues to be a Director, Employee or
Consultant.
(d) If a Grantee dies while he or she is a Director,
Employee or Consultant or within three months after the termination of such
Grantee's Service by reason of his or her retirement with the written consent of
the Company, such Option may be exercised within [three months] *ONE YEAR* after
such Grantee's death by his or her personal representative or by the person or
persons to whom the Grantee's rights under the Option pass by will or by the
applicable laws of descent and distribution; provided, however, that no Option
may be exercised after its expiration and provided further than such Option may
only be exercised for the number of Shares which could have been purchased by
the Grantee on the date of such termination.
(e) If a Grantee voluntarily retires or quits his or her
Service with the written consent of the Company, or if the Service of the
Grantee is terminated by the Company for reasons other than cause, such Grantee
may exercise his or her Option within *SIX MONTHS (OR* three months *IN THE CASE
OF AN INCENTIVE STOCK OPTION)* following such termination of Service; provided,
however, that no Option may be exercised after its expiration and provided
further that the Grantee may only exercise his or her Option for the number of
Shares which he or she could have purchased as of the date of such termination.
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(f) Nothing herein shall impose upon the Company the
obligation to continue the Service of any Grantee. The rights of the Company to
terminate the Service of a Grantee shall not be diminished or affected by reason
of the granting of an Option.
2.3 EXERCISE PRICE. The Exercise Price for Options shall be
determined by the Committee at the time the Option is granted, but shall not be
less than 80% of the Fair Market Value of the Shares on the Grant Date provided,
however, that the Exercise Price per Share subject to an Incentive Stock Options
shall equal at least 100% of the Fair Market Value of a Share on the Grant Date.
2.4 NONTRANSFERABILITY. No Option granted under the Plan shall
be transferable by the Grantee otherwise than by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of the Grantee
solely by such Grantee.
2.5 METHOD OF EXERCISE. A Grantee electing to exercise an
Option shall exercise such Option by delivering to the Company written notice of
such election to exercise, specifying the number of Shares such Grantee has
elected to purchase, together with the Exercise Price for the Shares being
purchased in accordance with the terms of Section 2.6 below.
2.6 PAYMENT FOR SHARES. The Exercise Price shall become
immediately due and payable upon exercise of the Option and payment thereof
shall be made to the Company as follows: (i) in cash (including check, bank
draft or money order) or (ii) [at the discretion of the Committee,] by
delivering to the Company Shares of Stock already owned by the Grantee and
having a Fair Market Value on the date of the exercise equal to the Exercise
Price or a combination of such Shares and cash, or (iii) *AT THE DISCRETION OF
THE COMMITTEE,* by any other proper method specifically approved by the
Committee.
2.7 LIMITATION ON AGGREGATE SHARES. The number of Shares with
respect to which Options may be granted under the Plan to any Executive Officer
in any fiscal year of the Company shall not exceed 100,000 Shares and the number
of Shares with respect to which Options may be granted under the Plan to any
individual who is not an Executive Officer in any fiscal year of the Company
shall not exceed 75,000 Shares.
2.8 INCENTIVE STOCK OPTION LIMITATIONS. Options granted under
the Plan may be Non-Qualified Stock Options or Incentive Stock Options, as
specified by the Committee; provided, however, that no Incentive Stock Option
may be granted to any Grantee who, at the time of grant, owns stock of the
Company (or any Subsidiary) representing more than 10% of the total combined
voting power of all classes of stock of the Company (or such Subsidiary).
Options shall be exercisable at such time or times as the Committee shall
determine; provided, however, that the aggregate Fair Market Value of the Shares
(measured on the Grant Date) with respect to which Incentive Stock Options are
exercisable for the first time by any Grantee during any calendar year (under
all stock options plans of the Company) may not exceed $100,000.
ARTICLE 3
LOANS AND FINANCIAL ACCOMMODATIONS TO GRANTEES
3.1 PURPOSE. In order to assist the Grantee with the
acquisition of Shares of Stock pursuant to the exercise of an Option granted
under the Plan, including the payment of any taxes resulting from such exercise,
the Board may, in its discretion, whenever, in the judgment of the Board, such
assistance is permitted by applicable law and may reasonably be expected to
benefit the Company, authorize, either at the time of the grant of the Option or
thereafter (a) the extension of a loan to the Grantee by the Company, or (b) the
guarantee by the Company of a loan obtained by the Grantee from a third party.
3.2 TERMS OF LOAN OR GUARANTEE. The Committee or Board shall
determine the terms of any loan or guarantee made pursuant to this Article 3,
including the interest rate and other terms of repayment thereof, and whether
such loan or guarantee shall be secured or unsecured. Each loan shall be
evidenced by a promissory note having a maximum term to maturity of not more
than sixty (60) months. The maximum amount of any loan or guarantee shall be
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the Exercise Price for Shares purchased upon exercise of an Option plus (a)
related interest payments and (b) the amount of tax liability incurred by the
Grantee as a result of the exercise of an Option.
3.3 USE OF LOANED OR GUARANTEED FUNDS. No amount loaned to a
Grantee and no amount repayment of which is guaranteed by the Company shall be
used for any purpose other than payment of (i) the Exercise Price of Shares
acquired on the exercise of an Option granted or to be granted under the Plan
and (ii) taxes attributable to such exercise.
ARTICLE 4
GRANT OF OPTIONS TO [Members Of The Committee And To]
OUTSIDE DIRECTORS [Who Are Not Members Of The Committee]
4.1 APPLICATION OF THE PLAN TO [Members of the Committee and
to] Outside Directors. [Who Are Not Members of the Committee. Except as provided
in this Article 4, all] *ALL* terms and conditions of the Plan govern the grant
of options to [members of the Committee and to] Outside Directors, [who are not
members] *AND NOTHING IN THIS ARTICLE 4 IS INTENDED TO LIMIT THE AUTHORITY OF
THE COMMITTEE TO GRANT OPTIONS TO ANY SUCH PERSON UNDER SECTION 1.3 OR THIS
ARTICLE 4 EVEN THOUGH SUCH PERSON MAY BE A MEMBER* of the Committee.
4.2 [Eligibility for Participation. Members of the Committee
and Outside Directors are only eligible to receive options pursuant to Section
4.3 below. Members of the Committee are not eligible to receive Options pursuant
to Section 1.3 for a period of one year after the termination of their Service
on the Committee.]
[4.3]*4.2* ANNUAL GRANT OF OPTIONS. Each [member of the
Committee and each] Outside Director [who is not a member of the Committee]
shall be granted an Option to purchase [2,500] *5,000* Shares (as adjusted
pursuant to Section 5.1) on April 1 of each year during the term of the Plan so
long as on such date he is [a member of the Committee or] an Outside Director.
The provisions of this Section [4.3] *4.2* shall not be amended more than once
every twelve months.
[4.4] *4.3* EXERCISABILITY AND TERM OF OPTIONS. An option
granted to [a member of the Committee or to] an Outside Director *PURSUANT TO
SECTION 4.2* shall become exercisable with respect to 25% of the Shares covered
thereby commencing one year after the Grant Date of such Option and as to an
additional 25% of the Shares covered by the Option upon each of the three
succeeding anniversary dates of the Grant Date. Options granted to [members of
the Committee and to] Outside Directors *PURSUANT TO SECTION 4.2* shall expire
seven years from their respective Grant Date.
[4.5] *4.4* OPTION PRICE. The Exercise Price for Options
granted to [members of the Committee and to] Outside Directors pursuant to
Section [4.3] *4.2* shall be 100% of the Fair Market Value of the Shares on the
Grant Date.
ARTICLE 5
GENERAL PROVISIONS
5.1 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. (a) The
aggregate number and class of Shares for which Options may be granted under the
Plan, the number and class of Shares covered by each outstanding Option and the
Exercise Price per Share thereof (but not the total price) and each such Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, split-up or consolidation of Shares
or any like capital adjustment or reclassification of Shares or the payment of
any stock dividends, or any other increase or decrease in the number of Shares
of the Company outstanding, without receipt of consideration by the Company.
(b) Subject to any required action by its stockholders, if
the Company shall be the surviving corporation in any merger or consolidation,
except as otherwise provided below, any Option granted hereunder shall be
adjusted so as to pertain and apply to the securities to which the holder of the
number of Shares of the Company subject to the Option would have been entitled
in such merger or consolidation.
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(c) Upon the dissolution or liquidation of the Company or
upon a merger or consolidation of the Company in a transaction in which all or
substantially all of the stockholders of the Company receive cash, securities of
another company or other consideration in exchange for their Shares of Stock,
whether or not the Company is the surviving corporation, or upon a sale of all
or substantially all of the assets of the Company, any Option granted hereunder
shall terminate, but the Grantee may, immediately prior to any such transaction
exercise his or her Option, in whole or in part, as to the full number of Shares
which he or she would otherwise have been entitled to purchase during the
remaining term of the Option irrespective of any installment features. If such
transaction consists in part of a tender offer for the Company's Shares, the
Committee may, prior to or simultaneous with the closing of such tender offer,
elect to accelerate all or any portion of an Option and cancel such Option upon
payment to the respective Grantees of an amount equal to the amount by which the
cash and other consideration to be paid to public stockholders in such tender
offer exceeds the Exercise Price multiplied by the number of Shares remaining
subject to such Option. Notwithstanding the foregoing, the Company may elect not
to permit a Grantee to exercise his or her Option immediately prior to any such
event in accordance with the foregoing, but in lieu thereof the Company may, in
its discretion and immediately prior to any such dissolution, liquidation,
merger, consolidation or sale substitute or cause to be substituted a new option
for his or her Option, such new option to be applicable to the stock of the
surviving or acquiring corporation or any of its affiliates and to be on terms
no less favorable to the Grantee than those contained in his or her prior
Option.
(d) Adjustment and elections under this Section 5.1 shall
be made by the Committee whose determination as to what adjustments shall be
made and the extent thereof shall be final, binding and conclusive.
5.2 PRIVILEGES OF STOCK OWNERSHIP. No Grantee shall be
entitled to the privileges of stock ownership as to any Shares of Stock not
actually issued and delivered to him or her.
5.3 SECURITIES REGULATIONS. Unless at the time of the exercise
of an Option and the issuance of the Shares purchased by a Grantee pursuant
thereto there shall be in effect as to such Shares a Registration Statement
under the Securities Act of 1933, as amended, and the rules and regulations of
the Commission, the Grantee exercising such Option shall deliver to the Company
at the time of exercise, a certificate certifying that he or she is acquiring
the Shares issuable to him or her upon such exercise for the purpose of
investment and not with a view to their sale or distribution. The Company shall
not be required to issue or deliver certificates for Shares until there shall
have been compliance with all applicable laws, rules and regulations, including
rules and regulations of the Commission.
5.4 SUSPENSION, AMENDMENT AND TERMINATION OF THE PLAN. (a) The
Committee may at any time suspend, amend or terminate the Plan, provided that
the approval of the Board of Directors of the Company will be required for any
amendment which will:
(i) increase the maximum number of Shares which may
be issued pursuant to Options; or
(ii) change the provisions of Section 1.4; or
(iii) change the provisions of Section 4.2; or
(iv) extend the term of Options.
(b) The power of the Committee to amend the Plan under
this Section 5.4 is subject in certain instances to the requirements of the
Exchange Act and other provisions of applicable law which may require
stockholder approval of such amendments in order to achieve the Company's
objectives and the purposes of the Plan.
(c) Unless the Plan shall theretofore have been terminated
by the Committee or the Board of Directors, the Plan shall terminate April 1,
2005. No Option may be granted during the term of any suspension of the Plan or
after termination of the Plan. The amendment or termination of the Plan shall
not, without the written consent of the Grantee, alter or impair any rights or
obligations of such Grantee under any Option theretofore granted.
5.5 AMENDMENT OF OUTSTANDING OPTIONS. The Committee may amend
or modify any Option in any manner to the extent that the Committee would have
had the authority under the Plan initially to grant or prescribe the terms
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of such Option; provided that, except as expressly contemplated elsewhere herein
or in any agreement evidencing such Option, no such amendment or modification
shall impair the rights of any Grantee under any outstanding Option without the
consent of such Grantee.
5.6 SECTION 16 OF THE EXCHANGE ACT. With respect to persons
subject to Section 16 of the Exchange Act, transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee.
5.7 GOVERNING LAW. This Plan and the Committee's actions in
respect thereof shall be governed and construed in accordance with the
substantive law of the State of Delaware.
5.8 EFFECTIVE TIME. This Plan shall become effective upon
approval thereof by the holders of a majority of the Company's Shares present
and entitled to vote at a meeting of the Company's stockholders duly held.
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APPENDIX 1 -- PROXY CARD
PROXY
ANDOVER TOGS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Andover Togs, Inc. (the "Company"),
hereby appoints WILLIAM L. COHEN, STEVEN A. SCHWARTZ and DONALD D. SHACK, and
each of them, the proxies of the undersigned, each with full power to appoint
his substitute, and hereby authorizes them to vote in the name, place and
stead of the undersigned, all of the shares of the Company that the undersigned
is entitled to vote, at the Annual Meeting of Stockholders of the Company to be
held at the offices of Shack & Siegel, P.C., 530 Fifth Avenue, New York, NY
10036, at 9:30 a.m. local time, on June 2, 1998, and at any adjournment(s)
thereof, as follows:
1. ELECTION OF DIRECTORS, as provided in the Company's Proxy Statement:
[ ] FOR all nominees listed below
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed below
(Instructions: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH OR OTHERWISE STRIKE OUT THE NOMINEE'S NAME BELOW)
G. S. Blumenthal, P. A. Cohen, W. L. Cohen, S. A. Schwartz, D. D. Shack,
M. Wolfson
2. Amending the Company's Certificate of Incorporation to change the name of the
Company to The Andover Apparel Group.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Ratification of the amendment to the Company's 1995 Stock Option Plan (i) to
increase the number of shares available to be granted thereunder from 225,000
to 500,000 and (ii) to make the other changes described in the Proxy
Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Ratification of the appointment of Mahoney Cohen & Company, C.P.A., P.C. as
the Company's independent auditors for the fiscal year ending November 30,
1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned hereby revokes any other proxy to vote at such Annual
Meeting and hereby ratifies and confirms all that said attorneys and proxies,
and each of them, may lawfully do by virtue hereof. With respect to matters not
known at the time of the solicitations hereof, said proxies are authorized to
vote in accordance with their best judgment
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH
THE INSTRUCTIONS INDICATED HEREON. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE DIRECTORS NAMED IN PROPOSAL 1, FOR THE ADOPTION OF
PROPOSALS 2, 3 AND 4 AND AS SUCH PROXIES SHALL DEEM ADVISABLE ON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. EACH MATTER ABOVE WAS PROPOSED
BY THE BOARD OF DIRECTORS.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and accompanying Proxy Statement dated April 28, 1998 relating to the
Annual Meeting and the 1998 Annual Report to Stockholders.
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Signature(s) of Stockholder(s)
The signature(s) hereon should correspond exactly with the name(s) of
the Stockholder(s) appearing on the Stock Certificate. If stock is jointly held,
all joint owners should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If signer is a corporation,
please sign the full corporate name, and give title of signing officer.
Date:_____________________________, 1998
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE. IT IS IMPORTANT THAT YOU VOTE.
STATEMENT OF DIFFERENCES
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In Annex A, proposed deletions will appear within square brackets; proposed
additions will appear within asterisks.
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