SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
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 (as permitted
by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
INNOVO GROUP INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount previously paid:
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(4) Date Filed:
INNOVO GROUP INC.
1808 North Cherry Street
Knoxville, Tennessee 37917
(423) 546-1110
March 15, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders of Innovo Group Inc. to be held on Tuesday, March 30, 1999 at
10:00 a.m. (local time) at the offices of the Company, 1808 North Cherry
Street, Knoxville, Tennessee.
At this meeting, you will be asked to vote, in person or by proxy,
on the following matters:
(1) the election of eight directors to serve on the Board of
Directors for a one-year term;
(2) the approval of, as separate matters, amendments to the
Company's Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of the Company's
common stock and to authorize shares of preferred stock;
(3) the ratification of the appointment of BDO Seidman, LLP as the
Company's independent auditors; and
(4) any other business as may properly come before the meeting or
any adjournments thereof. The official Notice of Meeting,
Proxy Statement and form of proxy are included with this
letter. The matters listed in the Notice of Meeting are
described in detail in the accompanying Proxy Statement.
Regardless of your plans for attending in person, it is important
that your shares be represented and voted at the 1999 Annual Meeting.
Accordingly, you are urged to complete, sign and mail the enclosed proxy
card as soon as possible.
Sincerely,
\s\ Samuel J. Furrow
Samuel J. Furrow
Chairman and Chief Executive Officer
INNOVO GROUP INC.
1808 North Cherry Street
Knoxville, Tennessee 37917
(423) 546-1110
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 30, 1999
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Stockholders
(the "Annual Meeting") of Innovo Group Inc. (the "Company") will be held
on Tuesday, March 30, 1999 at 10:00 a.m. (local time) at the offices of
the Company, 1808 North Cherry Street, Knoxville, Tennessee, to consider
and act upon the following proposals:
1. To elect eight directors to serve on the Board of Directors
for one-year terms and until their respective successors are elected and
qualified;
2. To approve and adopt an amendment to Article Fourth of the
Company's Amended and Restated Certificate of Incorporation to increase
the number of authorized shares of the Company's common stock from
7,000,000 to 15,000,000 shares;
3. To approve and adopt an amendment to Article Fourth of the
Company's Amended and Restated Certificate of Incorporation to authorize
5,000,000 shares of preferred stock with terms, conditions and preferences
to be determined by the Company's Board of Directors;
4. To ratify the appointment of BDO Seidman, LLP as the Company's
independent auditors for the fiscal year ending November 30, 1999; and
5. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on February
26, 1999 as the record date for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting. Only holders of the
Company's common stock of record at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. A list of the Company's stockholders entitled to
vote at the Annual Meeting will be open to the examination of any
stockholder for any purpose germane to the meeting during ordinary
business hours for a period of ten days before the Annual Meting at the
Company's offices. All stockholders are cordially invited to attend the
Annual Meeting.
By Order of the Board of Directors
Samuel J. Furrow
Chairman and Chief Executive Officer
Knoxville, Tennessee
March 15, 1999
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY, IF YOU WISH, REVOKE YOUR
PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
INNOVO GROUP INC.
1808 NORTH CHERRY STREET
KNOXVILLE, TENNESSEE 37917
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MARCH 30, 1999
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement and the accompanying Notice of Annual Meeting
and Proxy Card are being furnished, on or about March 15, 1999, to the
stockholders of Innovo Group Inc. (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company to be
used at the 1999 Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held on Tuesday, March 30, 1999 at 10:00 a.m.
(local time) at the offices of the Company, 1808 North Cherry Street,
Knoxville, Tennessee, and any adjournment thereof.
If the enclosed form of proxy is properly executed and returned to
the Company in time to be voted at the Annual Meeting, the shares
represented thereby will be voted in accordance with the instructions
thereon. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED: (I) "FOR" PROPOSAL
1 TO ELECT THE BOARD OF DIRECTORS' SEVEN NOMINEES FOR DIRECTOR; (II) "FOR"
PROPOSALS 2 AND 3 TO APPROVE, AS SEPARATE ITEMS, AMENDMENTS TO THE
COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK TO
15,000,000 SHARES AND TO AUTHORIZE 5,000,000 SHARES OF PREFERRED STOCK;
AND (III) "FOR" PROPOSAL 4 TO RATIFY THE BOARD OF DIRECTORS' APPOINTMENT
OF BDO SEIDMAN, LLP AS THE COMPANY'S INDEPENDENT AUDITORS. If any other
matters are properly brought before the Annual Meeting, proxies will be
voted in the discretion of the proxy holders. The Company is not aware of
any other matters to be presented at its Annual Meeting.
The cost of soliciting proxies in the form enclosed herewith will be
borne entirely by the Company. In addition to the solicitation of proxies
by mail, proxies may be solicited by Directors, officers and regular
employees of the Company, without extra remuneration, by personal
interviews, telephone, telegraph or otherwise. The Company will request
persons, firms and corporations holding shares in their name or in the
names of their nominees, which are beneficially owned by others, to send
proxy materials to and obtain proxies from the beneficial owners and will
reimburse the holders for their reasonable expenses in doing so.
The securities that may be voted at the Annual Meeting consist of
shares of common stock, par value $.10 per share ("Common Stock"), of the
Company. Each outstanding share of Common Stock entitles its owner to one
vote on each matter as to which a vote is taken at the Annual Meeting.
The close of business on February 26, 1999 has been fixed by the Board of
Directors as the record date (the "Record Date") for determination of
stockholders entitled to vote at the Annual Meeting. On the Record Date,
5,432,113 shares of Common Stock were outstanding and entitled to vote.
The presence, in person or by proxy, of the holders of at least a
majority of the shares of Common Stock issued and outstanding and entitled
to vote on the Record Date is necessary to constitute a quorum at the
Annual Meeting.
Assuming the presence of a quorum at the Annual Meeting, a plurality
vote is required for the election of a Director, the affirmative vote of
a majority of the outstanding shares of Common Stock is required to
approve the amendments to the Company's Amended and Restated Certificate
of Incorporation (the "Certificate of Incorporation"), and the affirmative
vote of a majority of the shares present in person or represented by proxy
and entitled to vote is required to ratify the appointment of BDO Seidman,
LLP as the Company's independent public accountants for the 1999 fiscal
year. Unless otherwise required by law or the Company's Certificate of
Incorporation or the Company's Amended and Restated Bylaws (the "Bylaws"),
any other matter put to a stockholder vote will be decided by the
affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the
matter.
Abstentions and broker non-votes will be treated as shares that are
present, in person or by proxy, and entitled to vote for purposes of
determining the presence of a quorum at the Annual Meeting. Because
abstentions will be counted for purposes of determining the shares present
or represented at the Annual Meeting and entitled to vote, abstentions
will have the same effect as a vote "against" Proposals 2, 3 and 4.
Abstentions on Proposal 1 will not have any effect on the approval of
Proposal 1. Broker non-votes on a particular matter are not deemed to be
shares present and entitled to vote on such matter and, assuming presence
of a quorum, will not affect whether any proposal other than Proposals 2
and 3 is approved at the Annual Meeting.
The presence of a stockholder at the Annual Meeting will not
automatically revoke such stockholder's proxy. Stockholders may, however,
revoke a proxy at any time prior to its exercise by filing with the
Secretary of the Company a written notice of revocation, by delivering to
the Company a duly executed proxy bearing a later date or by attending the
Annual Meeting and voting in person.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE PROPOSALS SET FORTH IN THIS PROXY STATEMENT.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The Bylaws provide that the Board of Directors shall consist of not
fewer than three Directors, with the exact number of Directors (subject
to such minimum and any range of size established by the Company's
stockholders) to be determined by resolution of the Board of Directors.
The Board of Directors currently consists of eight Directors. At the
Annual Meeting, seven Directors will be elected to serve one-year terms.
The Board of Directors' nominees for election are set forth below.
Unless otherwise instructed on the proxy, properly executed proxies
will be voted for the election as Directors of all of the nominees set
forth below. The Board of Directors believes that all such nominees will
stand for election and will serve if elected. However, if any of the
persons nominated by the Board of Directors fails to stand for election or
is unable to accept election, proxies will be voted by the proxy holders
for the election of such other person or persons as the Board of Directors
may recommend. Directors will be elected by a plurality vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF
ITS NOMINEES FOR DIRECTORS.
Information as to Nominees
The following table sets forth certain information regarding the
persons nominated for election as Directors of the Company as of February
21, 1998.
Name Age Position with the Company
Samuel J. (Sam) Furrow 57 Chairman of the Board
Chief Executive Officer,
Director
Patricia Anderson-Lasko (2) 39 President, Director
L.E. (Butch) Smith 51 Director
Daniel A. (Dan) Page 49 Chief Operating Officer, Director
Samuel J. (Jay) Furrow, Jr. 25 Vice President, Director
Robert S Talbott (1)(2)(3) 45 Director
Herb Newton (1)(2)(3) 48 Director
Marc B. Crossman (1)(2)(3) 27 Director
____________________
(1) Member of the audit committee of the Board of Directors.
(2) Member of the executive compensation committee of the Board of Directors.
(3) Member of the stock option committee of the Board of Directors.
Following is information with respect to the business experience for
at least the last five years and certain other information regarding each
of the nominees for election as a Director.
Samuel J. (Sam) Furrow became a Director in April 1998 and the
Company's Chairman and Chief Executive Officer, succeeding Butch Smith, in
October 1998. Mr. Furrow has also been the Chairman of Furrow Auction
Company (a real estate and equipment sales company) since April 1968,
Chairman of Furrow-Justice Machinery Corporation (a six-branch industrial
and construction equipment dealer) since September 1983, Owner of
Knoxville Motor Company - Mercedes Benz since December 1980 and of Land
Rover of Knoxville since July 1997. Mr. Furrow has been a Director of
Southeastern Advertising Inc. (an advertising agency) since April 1968, a
Director of First American National Bank since September 1993, and of
Goody's Family Clothing, Inc, a publicly traded retail clothing store
chain, since 1995. Sam Furrow is Jay Furrow's father.
Patricia Anderson-Lasko has been President and a Director of the
Company since August 1990, and President of Innovo since she founded that
company in 1987. From August 1990 until August 1997, Ms. Anderson-Lasko
was also the Chairman and Chief Executive Officer of the Company.
L. E. (Butch) Smith became the Chairman and Chief Executive Officer
and a Director of the Company in August 1997 and served in that position
until October 1998. For more than five years prior thereto and since
leaving the Company, Mr. Smith has served as the president of Smith &
Smith, Inc., a privately held company engaged in real estate investing in
Tennessee. Mr. Smith is also the managing partner of Forbus Capital, LLC,
Capital Management, LLC and Crawford Properties, LLC, each of which is a
privately held real estate investment company.
Daniel A. Page became the chief operating officer and a Director of
the Company in August 1997. From June 1993 until August 1997, Mr. Page
was the principal operating and executive officer of Southeast Mat
Company, a privately held manufacturer of automobile floor mats. Prior
thereto Mr. Page was the president of Tennessee Properties Company, a
privately held real estate development company.
Samuel J. (Jay) Furrow, Jr. became the Company's Vice President for
Corporate Development and In-House Counsel in July 1998 and a Director in
January 1999. Mr. Furrow is an attorney. Prior to joining the Company,
Mr. Furrow attended the Southern Methodist University School of Law
beginning in August of 1995 and graduating with a J.D. in May 1998. Mr.
Furrow attended Vanderbilt University beginning in 1991 and graduating
with a BS degree in Political Science and Business in 1995. Jay Furrow is
Sam Furrow's son, and the President of StanRo Development, a real estate
development company.
Robert S. Talbott, an attorney, joined the Board of Directors in
August 1998. He has served as President of Holrob Investments, LLC, a
company engaged in the acquisition, development, management and leasing of
real property, since 1997. From 1985 through 1997, Mr. Talbott served as
Executive Vice President and President of Horne Properties, Inc., where he
was involved in the acquisition and development of over 100 shopping
centers. He also serves as a member of the Public Building Authority of
Knoxville, Tennessee, as a member of the Knoxville Industrial Development
Board, as a Director of the Knoxville Chamber of Commerce and as Chairman
of the St. Mary's Foundation. Mr. Talbott also serves as a Director of
Excel Legacy Corporation, a real estate investment company the stock of
which is listed on the American Stock Exchange.
Herb J. Newton became a Director of the Company in August 1997. Mr.
Newton's principal occupation for in excess of the last five years has
been the ownership of retail automobile dealer franchises.
Marc B. Crossman has been a Director since January 1999. Mr.
Crossman has also been a Vice President and Equity Analyst with J.P.
Morgan Securities Inc., New York, New York, since January 1999, and was
previously a Director and Equity Analyst with CIBC Oppenheimer Corp. from
August 1997 through January 1999 and an Equity Analyst with Dain Rauscher
Wessels from September 1994 through August 1997.
Each of the Company's Directors is elected at the annual meeting of
stockholders and serves until the next annual meeting and until a
successor has been elected and qualified or their earlier death,
resignation or removal. Vacancies in the Board of Directors are filled by
a majority vote of the remaining members of the Board of Directors.
Executive officers of the Company are elected on an annual basis and
serve at the discretion of the Board of Directors.
Smith Group Stock Purchase Agreement and Related Voting Agreement
On August 13, 1997, the Company issued 675,000 shares of Common
Stock to a group of investors (the "Smith Group") comprised of L.E. Smith,
Dan Page, J. Eric Hendrickson and Herb Newton. The Smith Group paid
$1,350,000 for those shares. The purchase by the Smith Group was made
pursuant to a Stock Purchase Agreement (the "Smith Group Stock Purchase
Agreement") entered into by the members of the Smith Group, the Company
and Patricia Anderson-Lasko. Under the terms of the Smith Group Stock
Purchase Agreement, each of the members of the Smith Group was elected to
the Board of Directors, and the Company agreed to nominate the members of
the Smith Group as the Company's nominees for election as Directors for
its next annual stockholders' meeting.
As a condition to Smith Group Stock Purchase Agreement, Ms.
Anderson-Lasko entered into a voting agreement (the "Voting Agreement")
with the Smith Group. Under the Voting Agreement, Ms. Anderson-Lasko has
agreed to vote, in the manner directed by the Smith Group, such number of
shares of Common Stock as to which she has sole voting power as equals
one-half of the excess, if any, of the number of shares of Common Stock
as to which Ms. Anderson-Lasko has sole voting power over the number of
shares of Common Stock as to which the Smith Group has sole or shared
voting power. However, Ms. Anderson-Lasko is not required to vote any
shares as directed by the Smith Group unless the Company's net income has
increased (or net loss decreased). That determination is made based on
the reports filed by the Company under the Securities Exchange Act of 1934
(the "1934 Act") for the twelve month period ending as of the latest
fiscal quarter for which a quarterly report or annual report has been
filed by the Company under the 1934 Act as of the applicable voting date
compared to the same year-earlier period. Additionally, Ms.
Anderson-Lasko is not required to vote as directed by the Smith Group if
such vote would be contrary to a recommendation of the Company's Board of
Directors. The Voting Agreement has a term of two years. As of the date
of this Proxy Statement, Ms. Anderson-Lasko would, under the formula in
the Voting Agreement, not be required to vote any shares as directed by
the Smith Group.
Corporate Governance and Other Matters
The Board of Directors conducts its business through meetings and
through its committees. The Board of Directors acts as a nominating
committee for selecting candidates to stand for election as Directors.
Other candidates may also be nominated by any stockholder, provided such
other nomination(s) are submitted in writing to the Secretary of the
Company no later than 120 days prior to the anniversary date of the prior
year's annual meeting of stockholders at which Directors were elected,
together with the identity of the nominator and the number of shares of
the Company's stock owned, directly and indirectly, by the nominator. No
such nominations have been received as of the date hereof in connection
with the Annual Meeting.
The Board of Directors currently has three committees, the Audit
Committee, the Executive Compensation Committee and the Stock Option Plan
Committee.
The Audit Committee, among other things, recommends the firm to be
appointed as independent accountants to audit the Company's financial
statements, discusses the scope and results of the audit with the
independent accountants, reviews with management and the independent
accountants the Company's interim and year-end operating results,
considers the adequacy of the internal accounting controls and audit
procedures of the Company and reviews the non-audit services to be
performed by the independent accountants. The current members of the
Audit Committee are Messrs. Talbott, Crossman and Newton. The Executive
Compensation Committee reviews and recommends the compensation
arrangements for management of the Company. The current members of the
Executive Compensation Committee are Messrs. Talbott, Crossman and Newton
and Ms. Anderson-Lasko. The Stock Option Committee administers the
Company's 1991 Stock Option Plan (the "1991 Stock Option Plan"). The
current members of the Stock Option Committee are Messrs. Talbott,
Crossman and Newton.
During the year ended November 30, 1998, the Board of Directors held
six meetings. No Committee meetings were held during the same period
because all business was voted on by all Board members that were present.
No incumbent Director attended fewer than 75% of the total number of
meetings of the Board of Directors.
Director Compensation
Directors do not receive a fee for attending the meetings of the
Board of Directors and any of its Committees. All Directors are
reimbursed for their reasonable out-of-pocket expenses incurred in
attending Board meetings.
Mr. Furrow received a grant of nonqualified stock options to
purchase 100,000 shares of Common Stock at an exercise price of $4.75 per
share upon becoming a Director in March 1998. The options vest and become
exercisable at the rate of 2,083 shares per month served. Mr. Talbott
also received a grant of nonqualified stock options to purchase 100,000
shares of Common Stock at an exercise price of $4.75 per share and with
the same vesting schedule upon becoming a Director in August 1998.
Executive Compensation and Other Information
Summary Compensation Table. The following table sets forth the
compensation paid to the Chief Executive Officers of the Company during
1998 and to the other executive officer of the Company who received annual
compensation in excess of $100,000 during 1998 (the "Named Executive
Officers") during fiscal years 1998, 1997 and 1996.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation(1) Long-term Compensation
Name and Other Annual Options/
Principal Position Year Salary Bonus Compensation(5) SARs
<S> <C> <C> <C> <C> <C>
Samuel J. Furrow,
Chairman and CEO(2) 1998 -- -- -- 100,000
Patricia Anderson-Lasko, 1998 $188,493 -- -- --
President 1997 157,500 -- $4,070 --
1996 171,354(4) -- 1,346 --
L.E. Smith, Former 1998 29,375 -- -- --
Chairman and CEO(3) 1997 8,981 -- -- 160,000
</TABLE>
(1) No executive officers received or held restricted stock awards
during fiscal 1998, 1997 or 1996.
(2) Mr. Furrow's employment by the Company began in October 1996 with
no salary. Mr. Furrow received a grant of nonqualified stock
options to purchase 100,000 shares of Common Stock at an exercise
price of $4.75 per share upon becoming a Director in March 1998.
The options vest and become exercisable at the rate of 2,083 per
month through 2002.
(3) Mr. Smith was employed by the Company as its Chairman and Chief
Executive Officer from August 1997 through November 1998. In
connection with his employment, Mr. Smith was granted 160,000 in
nonqualified stock options with an exercise price of $3.315 per
share. All the options became vested upon Mr. Smith leaving the
Company's employment in November 1998. See "Employment
Agreements" below.
(4) At the request of the Company, Ms. Anderson-Lasko deferred the
payment of $51,000 of her fiscal 1995 salary until fiscal 1996.
(5) During fiscal 1998, 1997 and 1996 Ms. Anderson-Lasko received life
insurance benefits in the aggregate amounts of $0, $4,070 and
$1,346, respectively.
Option Grants. The following table sets forth information with
respect to grants of stock options to the Named Executive Officers who
received option grants during 1998.
Option/SAR Grants in 1998 (Individual Grants)
<TABLE>
Potential Realizable Value at
Percent of Total Assumed Annual Rates of
Options/ Options/SARs Exercise Stock Price Appreciation for
SAR Granted to Employees or Expiration Option Term
Name Granted # in Fiscal Year Base Price Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Samuel J. Furrow 100,000 80% $4.75 3/31/2003 $102,365 $220,448
</TABLE>
(1) Based on a closing price per share of $4.75 for the Common Stock on
March 1, 1998 as reported by the Nasdaq SmallCap Market. The 5% and
10% assumed rates of appreciation are specified by the SEC. There
can be no assurance that the market price of the Common Stock will
appreciate.
Option Exercises and Fiscal Year-End Values. The following table
sets forth information with respect to the Named Executive Officers
concerning the number of securities underlying unexercised options at 1998
year-end and the year-end value of all unexercised in-the-money options
held by such individuals. None of the Named Executive Officers exercised
any options during the fiscal year ended November 30, 1998.
Aggregated Option/SAR Exercised in 1998 and Year-end Option/SAR Values
<TABLE>
Shares Number of Unexercised Value of Unexercised
Acquired Options/SARs at FY-End In-the-Money Options/SARs
on Value (#) Exercisable/ ($) Exercisable/
Name Exercise Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Samuel J. Furrow 0 0 18,747 / 81,253 Not applicable(1)
L.E. Smith 0 0 160,000 / 0 Not applicable(1)
</TABLE>
(1) Based on a closing price per share of $1.4375 for the Common Stock
on November 30, 1998 as reported by the Nasdaq SmallCap Market.
Employment Agreements
In August 1997, and as required by the Smith Group Stock Purchase
Agreement, the Company entered into employment agreements with L. E.
Smith, Dan Page, Eric Hendrickson and Patricia Anderson-Lasko. The
agreements expire in August 1999, but provide that the terms may be
extended for additional one-year periods, starting in August 1999, at the
election of the parties. The employment agreements provide that L. E.
Smith, Dan Page, Eric Hendrickson and Patricia Anderson-Lasko will be
employed as the chief executive officer, chief operating officer,
treasurer and president, respectively, of the Company at annual base
salaries of $30,000, $30,000, $70,000 and $157,000, and that they will be
eligible for increases in salary, other bonuses and payments as the Board
of Directors directs. Mr. Smith was also granted 160,000 non-qualified
stock options and Mr. Page received a grant of 120,000 non-qualified stock
options vesting over 24 months. Vested options remain exercisable until
August 2002 at a price of $3.315 per share, which represents the split-
adjusted market price of the Common Stock at the time the terms of the
employment contracts and options were agreed to in a letter of intent
signed by the Smith Group, the Company, and Ms. Anderson-Lasko.
The employment agreements contain provisions requiring certain
severance payments in the event the Company terminates employment other
than for cause, death or disability. In such event, after 60 days notice,
the officers are entitled to a severance payment equal to the annual
salary provided for in their agreements. In connection with the
succession by Sam Furrow to the position of Chairman and Chief Executive
Officer, Mr. Smith and the Company agreed to terminate Mr. Smith's
employment agreement without requiring any severance payment. However, the
Company agreed that all 160,000 nonqualified stock options granted to Mr.
Smith in November 1997 that would have vested through November 1999 would
be fully vested in November 1998.
Stock Bonus Plan
The Board of Directors has authorized and may in the future
authorize the issuance of restricted stock to certain employees of the
Company.
Certain Relationships And Related Transactions
The Company has adopted a policy requiring that any material
transactions between the Company and persons or entities affiliated with
officers, Directors or principal stockholders of the Company be on terms
no less favorable to the Company than reasonably could have been obtained
in arms' length transactions with independent third parties.
On September 13, 1998, the Company entered into an agreement with
Confident Colors LLC, a company formed by Scott Parliament, a former
officer and Director of the Company, Jane Silk, the former chief operating
officer of Thimble Square, Inc. (a Company subsidiary) and the daughter of
former Company Director Eleanor Swartz, and others, to lease to Confident
Colors one of Thimble Square's Baxley, Georgia facilities and equipment
and to allow it to succeed to all of Thimble Square's business and
operations. The rental for the Baxley facility is $36,000 annually. The
Company sold Thimble Square's equipment used in the Baxley facility to
Confident Colors LLC for $30,000 on January 13, 1999. The Board of
Directors, of which Eleanor Swartz was no longer a member, unanimously
approved the Thimble Square lease agreement.
On October 20, 1998, the Company completed the issuance and sale to
Furrow-Holrob Development II, LLC, a company owned 50% by Samuel J. Furrow
and 50% by an entity controlled by Robert S. Talbott, of 899,000 shares of
Common Stock (or approximately 19.9% of the outstanding shares of Common
Stock after giving effect to the issuance) at a price of $2.00 per share.
Messrs. Furrow and Talbott were Directors at the time of the sale, and
Mr. Furrow had not yet become the Company's Chairman and Chief Executive
Officer. The price per share exceeded the price per share as reported by
the Nasdaq SmallCap Market prior to the date that the Company had entered
into a Stock Sale Agreement with respect to the sale of shares. The Board
of Directors, with Messrs. Furrow and Talbott excusing themselves from
deliberations and not voting, unanimously approved the stock sale. The
shares are "restricted" securities for purposes of Rule 144 promulgated
under the Securities Act of 1933, but are subject to agreed upon
"piggyback" and demand registration rights that would allow public resales
of the purchased shares. However, generally no more than 37,500 of the
shares may be sold in any calendar month under the terms of the Stock Sale
Agreement.
On October 7, 1998, the Company entered into a Warehouse Lease
Agreement with Furrow-Holrob Development II, LLC pursuant to which the
Company has leased the 78,900 square foot plant that now houses the
Company's executive offices and its manufacturing, administrative and
shipping facilities. The "triple net" lease provides for an annual base
rental rate of $2.00 per square foot, or $157,800 annually, plus a pro
rata share of real estate taxes, insurance premiums and common area
expenses, with an initial five-year term and two Company five-year renewal
options (subject to agreement on any change in the base rental rate). The
Board of Directors, with Messrs. Furrow and Talbott excusing themselves
from deliberations and not voting, unanimously approved the Warehouse
Lease Agreement.
Pursuant to the 1997 Stock Purchase Right Award awarded to her in
February 1997, Ms. Anderson-Lasko purchased 250,000 shares of Common Stock
(the "1997 Award Shares") with payment made by the execution of a non-
recourse note (the "Note") to the Company for the exercise price of
$2.8125 per share ($703,125 in the aggregate). The Note is due, without
interest, on April 30, 2002, and is collateralized by the 1997 Award
Shares. Ms. Anderson-Lasko may pay or prepay (without penalty) all or any
part of the Note by (i) the payment of cash, or (ii) the delivery to the
Company of other shares of Common Stock (other than the 1997 Award Shares)
that Ms. Anderson-Lasko has owned for a period of at least six months,
which shares would be credited against the Note on the basis of the
closing bid price for the Common Stock on the date of delivery.
Section 16 Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's Directors,
officers and persons who beneficially own more than ten 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 (the "Commission"). Directors, officers and greater than ten
percent beneficial owners are required by the Commission's regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on a review of copies of such forms furnished to the
Company and certain of the Company's internal records, or upon written
representations that no Form 5s were required, the Company believes that
during the year ended December 31, 1998, all Section 16(a) filing
requirements applicable to its Directors, officers and greater than ten
percent beneficial owners were satisfied with the exception that Robert
S. Talbott and Samuel J. Furrow each failed to file one report on a timely
basis.
APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
(PROPOSAL 2)
On February 22, 1999, the Board of Directors adopted an amendment to
Article Fourth of the Certificate of Incorporation, subject to stockholder
approval at the Annual Meeting, to increase the number of authorized
shares of Common Stock to 15,000,000 shares from 7,000,000 shares. At the
Annual Meeting, the stockholders of the Company will be asked pursuant to
Proposal 2 to consider and vote on the proposed amendment to Article
Fourth. The amended and restated form of Article Fourth of the
Certificate of Incorporation as proposed is attached to this Proxy
Statement as Attachment A. Attachment A also contemplates approval of
Proposal 3 to authorize 5,000,000 shares of preferred stock, par value
$.10 per share (the "Preferred Stock"), with a resulting increase in the
Company's total authorized shares of capital stock to 20,000,000 from
7,000,000. The amendment also deletes the language included in the
Certificate to effect the one-for-ten reverse stock split completed in
September 1998. If Proposal 2 is approved and Proposal 3 is not approved,
appropriate adjustments to the form of the amendment set forth in
Attachment A will be made.
The Board of Directors recommends that the stockholders of the
Company adopt Proposal 2. If Proposal 2 is approved by the stockholders at
the Annual Meeting, the proposed amendment to the Certificate of
Incorporation will become effective upon the filing of a Certificate of
Amendment of Certificate of Incorporation with the Secretary of State of
the State of Delaware, which is expected to occur promptly after the
Annual Meeting. Unless otherwise instructed on the proxy, properly
executed proxies will be voted in favor of approving the proposed
amendment to Article Fourth of the Certificate of Incorporation to
increase the number of authorized shares of Common Stock to 15,000,000.
The affirmative vote of a majority of the shares of Common Stock
outstanding as of the Record Date is required to approve Proposal 2.
The Certificate of Incorporation currently authorizes 7,000,000
shares of Common Stock, of which 5,432,113 shares of Common Stock were
issued and outstanding on the Record Date. As of the Record Date, 620,076
shares of Common Stock were subject to issuance upon exercise of
outstanding options previously issued by the Company.
The Board of Directors believes that the proposed increase in the
authorized shares of Common Stock is desirable to enhance the Company's
flexibility in connection with possible future actions, such as stock
splits, stock dividends, acquisitions, financing transactions, employee
benefit plan issuances, and such other corporate purposes as may arise.
Having such authorized Common Stock available for issuance in the future
will give the Company greater flexibility and will allow additional shares
of Common Stock to be issued without the expense and delay of a
stockholders' meeting. Such a delay might deny the Company the flexibility
the Board views as important in facilitating the effective use of the
Company's securities. The rules of the National Association of Securities
Dealers, Inc. ("NASD") currently require stockholder approval by issuers
of securities quoted on the Nasdaq SmallCap Market, on which the Common
Stock is currently quoted, as to the issuance of shares of common stock or
securities convertible into common stock in several instances, including
actions resulting in a change of control of the company, acquisition
transactions involving Directors, officers or substantial security holders
where the present or potential issuance of such securities could result in
an increase in outstanding common shares or voting power of 5% or more,
acquisition transactions generally where the present or potential issuance
of such securities could result in an increase in the voting power or
outstanding common shares of 20% or more, and certain other sales or
issuances of common stock (or securities convertible into or exercisable
for common stock) in a non-public offering equal to 20% or more of the
voting power outstanding before the issuance for less than the greater of
book or market value of the stock. Exceptions to these rules may be made
upon application to the NASD. In other instances, the issuance of
additional shares of Common Stock remains within the discretion of the
Board of Directors, without the requirement of further action by
stockholders except as otherwise required by applicable law or any stock
exchange on which the Company's securities may then be listed. The Company
is not currently engaged in any negotiations with respect to the use of
any shares of the additional authorized Common Stock, nor are there
currently any commitments, arrangements, understandings or plans with
respect to the issuance of such shares.
If the proposal to increase the authorized shares of Common Stock is
approved, the additional authorized shares will be part of the existing
class of such Common Stock and will increase the number of shares of
Common Stock available for issuance by the Company, but will have no
effect upon the terms of the Common Stock or the rights of the holders of
such shares. If and when issued, the proposed additional authorized
shares of Common Stock will have the same rights and privileges as the
shares of Common Stock currently outstanding. Holders of Common Stock will
not have preemptive rights to purchase additional shares of Common Stock.
The future issuance of additional shares of Common Stock on other
than a pro rata basis may dilute the ownership of current stockholders.
Such additional shares also could be used to block an unsolicited
acquisition through the issuance of large blocks of stock to persons or
entities considered by the Company's officers and Directors to be opposed
to such acquisition, which might be deemed to have an anti-takeover effect
(i.e., might impede the completion of a merger, tender offer or other
takeover attempt). In fact, the mere existence of such a block of
authorized but unissued shares, and the Board's ability to issue such
shares without stockholder approval, might deter a bidder from seeking to
acquire shares of the Company on an unfriendly basis. While the
authorization of additional shares of Common Stock might have such
effects, the Board of Directors of the Company does not intend or view the
proposed increase in authorized Common Stock as an anti-takeover measure,
nor is the Company aware of any proposed transactions of this type.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
APPROVAL OF AN AMENDMENT TO THE CERTIFICATE
OF INCORPORATION TO AUTHORIZE
PREFERRED STOCK
(PROPOSAL 3)
On February 22, 1999, the Board of Directors adopted amendments to
Article Fourth of the Certificate of Incorporation, subject to stockholder
approval at the Annual Meeting, to authorize 5,000,000 shares of Preferred
Stock. At the Annual Meeting, the stockholders of the Company will be
asked to consider and vote on the proposed amendments to Article Fourth of
the Certificate of Incorporation, substantially in the form included in
Attachment A hereto. The Board of Directors recommends that the
stockholders of the Company adopt Proposal 3. If Proposal 3 is approved by
the stockholders at the Annual Meeting, the proposed amendment to the
Certificate of Incorporation will become effective upon the filing of a
Certificate of Amendment of Certificate of Incorporation with the
Secretary of State of the State of Delaware, which is expected to occur
promptly after the Annual Meeting. Unless otherwise instructed on the
proxy, properly executed proxies will be voted in favor of approving the
proposed amendment to Article Fourth of the Certificate of Incorporation
to authorize the Preferred Stock. The affirmative vote of a majority of
the shares of Common Stock outstanding as of the Record Date is required
to approve Proposal 3. If Proposal 3 is approved and Proposal 2 above is
not approved, appropriate adjustments to the form of the amendment set
forth in Attachment A will be made.
If approved, the proposed amendment would allow the Company to issue
"blank check" preferred stock with such designations, rights and
preferences as the Board of Directors determined from time to time and
without requiring further approval or action by the Company's
stockholders. Although the Board of Directors believes that the Preferred
Stock would allow the Company enhanced flexibility in obtaining financing
for the Company's operations on the best possible terms, any particular
issuance or series of Preferred Stock could have preferences, voting
powers, conversion rights, qualifications, special or relative rights, and
privileges that could adversely affect the voting power or other rights of
holders of shares of Common Stock. Preferred Stock could be issued with
voting, conversion or other rights that could discourage possible
acquirers of the Company from making a tender offer or other attempt to
gain control of the Company, even if such transaction was generally
favorable to the Company's stockholders. Satisfaction of any dividend
preferences on outstanding Preferred Stock would also reduce the amount of
funds available for the payment of dividends on the Common Stock. In
addition, the holders of Preferred Stock would normally be entitled to
receive a preference payment in the event of any liquidation, dissolution
or winding-up of the Company before any payment is made to the holders of
the Common Stock. The Board of Directors has no present plans or
understandings for the issuance of any Preferred Stock and does not intend
to issue any Preferred Stock except on terms which the Board deems to be
in the best interest of the Company and its stockholders.
The Board of Directors believes that authorizing shares of Preferred
Stock is in the best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
(PROPOSAL 4)
The Board of Directors has appointed BDO Seidman, LLP ("BDO") as the
Company's independent auditors for the fiscal year ending November 30,
1999, subject to ratification by stockholders at the Annual Meeting.
Representatives of BDO will be present at the Annual Meeting and will have
the opportunity to make a statement if they so desire and be available to
respond to appropriate questions. Unless otherwise instructed on the
proxy, properly executed proxies will be voted in favor of ratifying the
appointment of BDO to audit the books and accounts of the Company for the
fiscal year ending November 30, 1999. The affirmative vote of a majority
of the votes present in person or represented by proxy at the Annual
Meeting is required to approve Proposal 6.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 4.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table provides information as of February 15, 1999
concerning beneficial ownership of Common Stock by (1) each person or
entity known by the Company to beneficially own more than 5% of the
outstanding Common Stock, (2) each Director and nominee for election as a
Director of the Company, (3) each Named Executive Officer, and (4) all
Directors and executive officers of the Company as a group. The
information as to beneficial ownership has been furnished by the
respective stockholders, Directors and executive officers of the Company,
and, unless otherwise indicated, each of the stockholders has sole voting
and investment power with respect to the shares beneficially owned.
Shares Beneficially Owned (1)
Name Number Percent
Samuel J. (Sam) Furrow 923,996 (2) 16.1%
1808 North Cherry Street
Knoxville, Tennessee 37917
L.E. Smith (3) 445,533 (4)(5) 7.7%
1808 North Cherry Street
Knoxville, Tennessee 37917
Patricia Anderson-Lasko 286,143 (6)(7)(8) 5.0%
1808 North Cherry Street
Knoxville, Tennessee 37917
Daniel A. Page (3) 358,833 (9) 6.2%
1808 North Cherry Street
Knoxville, Tennessee 37917
J. Eric Hendrickson (3) 50,000 *
Samuel J. (Jay) Furrow, Jr. 28,014 *
Robert S. Talbott 917,900 (2) 16.0%
Tyson Place, Suite Three
2607 Kingston Pike
Knoxville, Tennessee 37919
Herb J. Newton (3) 176,833 3.1%
Marc B. Crossman, Director 1,500 *
All Executive Officers 2,222,176 (3)(4)(5)(6)(9) 38.7%
and Directors as a Group (5)
(10 persons)
_________________
* Less than 1%.
(1) Pursuant to the rules of the Securities and Exchange Commission,
certain shares of the Company's common stock that a beneficial owner
set forth in this table has a right to acquire within 60 days of the
date hereof pursuant to the exercise of options or warrants for the
purchase of shares of common stock are deemed to be outstanding for
the purpose of computing the percentage ownership of that owner but
are not deemed outstanding for the purpose of computing percentage
ownership of any other beneficial owner shown in the table. Shares
outstanding and eligible to vote exclude 200,000 shares held as an
appeal bond for the Company's appeal of the Tedesco litigation (see
Note 10 of Notes to Consolidated Financial Statements). Under the
terms of the bond, such shares are not eligible to vote.
(2) 899,000 of such shares are owned by Furrow - Holrob Development II,
LLC, which is owned 50% by Samuel J. Furrow and 50% by Holrob
Investments, LLC, which is controlled by Robert S. Talbott.
(3) Messrs. Smith, Page, Hendrickson and Newton are deemed to be a
"group" (the "Smith Group") for purposes of Section 13(d) of the
Exchange Act. In certain circumstances the Smith Group may be
entitled to direct the manner in which shares owned by Patricia
Anderson-Lasko are voted, and the Smith Group holds rights of first
refusal with respect to certain shares of common stock. See
"Election of Directors (Proposal One) Smith Group Stock Purchase
Agreement and Related Voting Agreements."
(4) Includes 245,833 shares owned by Forbus Investments, L.P., a limited
partnership comprised of members of the family of Mr. Smith. The
management of Forbus Investments, L.P. resides in two general
partner limited liability companies controlled by Mr. Smith. Mr.
Smith disclaims beneficial ownership of the shares owned by Forbus
Investments, L.P.
(5) Includes 160,000 shares subject to options exercisable by Mr. Smith.
(6) Includes 7,943 shares owned by DWL International, a corporation in
which Ms. Anderson-Lasko's spouse, Donald W. Lasko, holds a
controlling interest.
(7) Includes 250,000 shares purchased by Ms. Anderson-Lasko pursuant to
the 1997 Stock Purchase Right Award, awarded to her in February
1997. Under the terms of the 1997 Stock Purchase Right Award, Ms.
Anderson-Lasko was permitted to, and elected to, pay for the
purchase of the 250,000 shares (the "1997 Award Shares") by the
execution of a non-recourse note (the "Note") to the Company for the
exercise price of $2.8125 per share ($703,125) in the aggregate).
The Note is due, without interest, on April 30, 2002, and is
collateralized by the 1997 Award Shares purchased therewith. Ms.
Anderson-Lasko may pay or prepay (without penalty) all or any part
of the Note by (i) the payment of cash, or (ii) the delivery to the
Company of other shares of Common Stock (other than the 1997 Award
Shares) that Ms. Anderson-Lasko has owned for a period of at least
six months, which shares would be credited against the Note on the
basis of the closing bid price for the Common Stock on the date of
delivery. The 1997 Award Shares will be forfeited and returned (at
the rate of one shares per $2.8125) to the Company to the extent the
Note is not paid on or before its maturity; accordingly, the number
of shares owned by Ms. Anderson-Lasko could decrease in the future.
(8) In certain circumstances the Smith Group may be entitled to direct
the manner in which shares owned by Ms. Anderson-Lasko are voted.
See "Election of Directors (Proposal 1) Smith Group Stock
Purchase Agreement and Related Voting Agreements."
(9) Includes 90,000 shares subject to options exercisable, or which
become exercisable within 60 days of the date hereof, by Mr. Page.
DATE OF SUBMISSION OF STOCKHOLDER PROPOSALS
TO BE INCLUDED IN PROXY MATERIALS
Any proposal or proposals intended to be presented by any
stockholder at the 1999 Annual Meeting of Stockholders must be received by
the Company by November 30, 1999 to be considered for inclusion in the
Company's Proxy Statement and form of proxy relating to that meeting.
OTHER BUSINESS TO BE TRANSACTED
As of the date of this Proxy Statement, the Board of Directors knows
of no other business which may come before the Annual Meeting. If any
other business is properly brought before the Annual Meeting, it is the
intention of the proxy holders to vote or act in accordance with their
best judgment with respect to such matters.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED NOVEMBER 30, 1998 ACCOMPANIES THIS PROXY STATEMENT. STOCKHOLDERS
MAY OBTAIN, FREE OF CHARGE, AN ADDITIONAL COPY OF THE COMPANY'S 1998
ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) BY WRITING TO INNOVO GROUP
INC., ATTENTION: INVESTOR RELATIONS, 1808 NORTH CHERRY STREET, KNOXVILLE,
TENNESSEE 37917. THE COMPANY WILL PROVIDE COPIES OF THE EXHIBITS TO THE
FORM 10-K UPON PAYMENT OF A REASONABLE FEE.
INNOVO GROUP INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
HELD MARCH 30, 1999
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder of Innovo Group Inc. (the "Company")
hereby appoints Campbell B. Lanier, III, Samuel J. Furrow, and Michael G.
Misikoff, or any of them, with full power of substitution, as proxies to
cast all votes, as designated below, which the undersigned stockholder is
entitled to cast at the 1999 Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Tuesday, March 30, 1999 at 10:00 a.m. (local time)
at the offices of the Company, 1808 North Cherry Street, Knoxville,
Tennessee, upon the following matters and any other matter as may properly
come before the Annual Meeting or any adjournments thereof.
1. Election of seven Directors to serve on the Board of Directors:
[ ] FOR all the nominees listed above (except as marked to the
contrary below).
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed above.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED
BELOW.)
____________________________________________________________________
__________
2. Proposal to approve the amendment to Article Fourth of the Company's
Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of the Company's Common Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve the amendment to Article Fourth of the Company's
Amended and Restated Certificate of Incorporation to authorize the
Preferred Stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify the appointment of BDO Seidman, LLP as the
independent auditors of the Company for the fiscal year ending
November 30, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be dated and signed on reverse side.)
(continued from other side)
This proxy, when properly executed, will be voted as directed by the
undersigned stockholder and in accordance with the best judgment of the
proxies as to other matters. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" THE NOMINEES LISTED IN PROPOSAL 1, "FOR" PROPOSALS 2, 3 AND 4,
AND IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXIES AS TO OTHER
MATTERS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED IN
PROPOSAL 1, AND "FOR" PROPOSALS 2, 3 AND 4.
The undersigned hereby acknowledges prior receipt of the Notice of
Annual Meeting of Stockholders and Proxy Statement dated March ___, 1999
and the Annual Report on Form10-K for the year ended November 30, 1998,
and hereby revokes any proxy or proxies heretofore given. This Proxy may
be revoked at any time before it is voted by delivering to the Secretary
of the Company either a written revocation of proxy or a duly executed
proxy bearing a later date, or by appearing at the Annual Meeting and
voting in person.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
Date: March ____ , 1999.
___________________________________________
_
Signature of Stockholder or Authorized
Representative
Please date and sign exactly as name
appears hereon. Each executor,
administrator, trustee, guardian,
attorney-in-fact and other fiduciary
should sign and indicate his or her
full title. In the case of stock
ownership in the name of two or more
persons, all persons should sign.
[ ] I PLAN TO ATTEND THE MARCH 30, 1999 ANNUAL STOCKHOLDERS MEETING
PLEASE COMPLETE, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE
A QUORUM AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY
SHARES. DELAY IN RETURNING YOUR PROXY MAY SUBJECT THE COMPANY TO
ADDITIONAL EXPENSE.
ATTACHMENT A
INNOVO GROUP INC.
PROPOSED AMENDED ARTICLE FOURTH OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
FOURTH: (a) The total number of shares of capital stock that
the Corporation shall be authorized to issue is 20,000,000 divided into
two classes as follows: (i) fifteen million (15,000,000) shares of common
stock having a par value of $.10 per share ("Common Stock"), and (ii) five
million (5,000,000) shares of serial preferred stock in series having a
par value of $.10 per share (the "Preferred Stock").
(b) The Common Stock shall be subject to all of the
rights, privileges, preferences and priorities of the Preferred Stock as
set forth herein and in the certificate of designations filed to establish
the respective series of Preferred Stock. Each share of Common Stock
shall have the same relative rights as and be identical in all respects to
all the other shares of Common Stock. Whenever there shall have been
paid, or declared and set aside for the Common Stock as to the payment of
dividends, the full amount of dividends and of sinking fund or retirement
payments, if any, to which such holders are respectively entitled in
preference to the Common Stock, then dividends may be paid on the Common
Stock and on any class or series of stock entitled to participate
therewith as to dividends, out of any assets legally available for the
payment of dividends thereon, but only when and as declared by the Board
of Directors of the Corporation. In the event of any dissolution,
liquidation, or winding up of the Corporation, whether voluntary or
involuntary, the holders of the Common Stock, and holders of any class or
series of stock entitled to participate therewith, in whole or in part, as
to the distribution of assets in such event, shall become entitled to
participate in the distribution of any assets of the Corporation remaining
after the Corporation shall have paid, or provided for payment of, all
debts and liabilities of the Corporation and after the Corporation shall
have paid, or set aside for payment, to the holders of any class of stock
having preference over the Common Stock in the event of dissolution,
liquidation or winding up the full preferential amounts (if any) to which
they are entitled. Each holder of shares of Common Stock shall be
entitled to attend all special and annual meetings of the stockholders of
the Corporation and, share for share and without regard to class, together
with the holders of all other classes of stock entitled to attend such
meetings and to vote (except any class or series of stock having special
voting rights), to cast one vote for each outstanding share of Common
Stock so held upon any matter or thing (including, without limitation, the
election of one or more directors) properly considered and acted upon by
the stockholders.
(c) The Board of Directors is authorized, subject to
limitations prescribed by the Delaware General Corporation Law and the
provisions of this Amended and Restated Certificate of Incorporation, to
provide by resolution or resolutions from time to time and filing a
certificate pursuant to the applicable provision of the Delaware General
Corporation Law, for the issuance of the shares of Preferred Stock in
series, to establish from time to time the number of shares to be included
in each such series, to fix the powers, designation, preferences,
relative, participating, optional or other special rights of the shares of
each such series and the qualifications, limitations and restrictions
thereof.
