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THE NAHDREE GROUP, LTD.
FORMERLY KNOWN AS THE HE-RO GROUP, LTD.
530 SEVENTH AVENUE
NEW YORK, NEW YORK 10018
INFORMATION STATEMENT
JUNE 15, 1998
CHANGE IN MAJORITY OF DIRECTORS. This Information Statement is being
provided to holders of the Common Stock, par value $.01 per share ("Common
Stock"), of The Nahdree Group, Ltd. (formerly known as "The He-Ro Group, Ltd."),
and its subsidiaries (the "Company"), pursuant to Rule 14f-1 of the Securities
Exchange Act of 1934 (the "Act") in connection with the designation of new
directors of the Company constituting a majority of such directors. The new
directors are expected to take office on or after June 26, 1998. At the date
hereof, 11,995,230 shares of Common Stock, the only voting securities of the
Company, are outstanding.
CHANGE OF CONTROL. On December 24, 1997, the Company acquired (the
"Acquisition") from Mr. Hong J. Han, President of Nah Nah Collection, Inc. ("Nah
Nah"), all the outstanding stock of Nah Nah in exchange for 5,277,905
newly-issued shares of Common Stock (44% of the outstanding shares). In the
Acquisition, Mr. Han also received from Ms. Della Rounick, then the largest
stockholder of the Company, an irrevocable, three-year proxy (subject to
extension for another three years) to vote Ms. Rounick's 4,430,748 shares
(36.9%) of Common Stock, giving Mr. Han the power to vote 80.9% of the shares of
stock of registrant while the proxy is in effect. As a result, Mr. Han may be
deemed to have gained control of registrant.
NEW DIRECTORS. The Company currently has two directors: Hong J. Han, who
was appointed at the time of the Acquisition, and Della Rounick. Ms. Rounick
proposes to resign and be replaced by her designee, Matthew A. Berdon. In
addition, three other directors have been designated by Mr. Han: Sue Kim, Howard
D. Bader and Michael A. Nussbaum. Each of the new directors will be designated
by the existing directors pursuant to an agreement between the parties to the
Acquisition.
Directors hold office until their successors have been elected and
qualified at an annual meeting of the stockholders. During the fiscal year
ending May 31, 1999, directors who are not full-time employees of the Company
will receive a fee of $1,000 for each meeting of the Board or committee thereof
which such director attends but will not receive any additional compensation.
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DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES.
The following table sets forth the name, age, position and period in
office(1) of the directors, nominees for directors, executive officers and
significant employees of the Company, after the Acquisition:
<TABLE>
<CAPTION>
IN OFFICE
NAME AGE POSITION SINCE
- ---- --- -------- ---------
<S> <C> <C> <C>
Hong J. Han(2)..................... 45 President, Chief Executive Officer, Chairman 1988
of the Board
Della Rounick...................... 52 Director 1994
Sue Kim............................ 43 Director Nominee, Chief Operating Officer 1990
Matthew A. Berdon.................. 78 Director Nominee 1998
Michael A. Nussbaum................ 50 Director Nominee 1998
Howard D. Bader.................... 49 Director Nominee 1998
Chris Han(2)....................... 35 Chief Financial Officer, Secretary, Treasurer 1995
Victor Costa....................... 62 Designer 1995
David Minka........................ 46 Designer 1987
Chrystine Forti.................... 47 Designer 1988
Heather Wright..................... 44 Designer 1988
</TABLE>
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(1) Includes period of employment with either The He-Ro Group, Ltd. or Nah Nah
Collection, Inc. prior to the Acquisition.
(2) Hong J. Han and Chris Han are brothers.
BACKGROUND OF DIRECTORS, OFFICERS AND SIGNIFICANT EMPLOYEES
Hong J. Han Mr. Han has been President, Chief Executive Officer and
Chairman of the Board of the Company since December of 1997. Previously, he
founded Nah Nah in 1988 and was its President, Chief Executive Officer and
Chairman of the Board.
Della Rounick Ms. Rounick has been a director of the Company since January
of 1994, and has been a Chairman, Co-Chairman and Chief Executive Officer of the
Company at various times from June 1995 until October 1997. Prior thereto, Ms.
Rounick was director of design coordination for the Company as well as a
designer for the Company's Niteline and D'Ore lines.
Sue Kim Ms. Kim has been the Chief Operating Officer of the Company since
December 1997, and was previously Controller of Nah Nah from 1992 through 1997.
Matthew A. Berdon Mr. Berdon has been the chairman of the New York
operations of Urback Kahn & Werlin PC, Certified Public Accountants since
January 1998, before which he was the senior partner in the accounting firm of
Ferro, Berdon & Company, LLP since 1945. Mr. Berdon is also a director of Barnes
and Noble, Inc. He was formerly a director of the Company from September 1991
until January 1994.
Michael A. Nussbaum Mr. Nussbaum has been Publisher of News
Communications, Inc. ("NCI"), and President of Multi-Media Advertising, a
division of NCI, since 1990. He has also been President of Intervest Inc., a
media consulting company, since 1996.
Howard D. Bader Mr. Bader is a principal of the law firm of Ballon Stoll
Bader & Nadler, P.C., which firm has acted as general counsel to the Company
since March 1998.
Chris Han Mr. Han is a certified public accountant and was chief financial
officer for Nah Nah since May 1995. Prior thereto, Mr. Han was President of New
York Original, Inc. from May 1994 through May 1995 and served as Audit Manager
for Song, Shin, Chung & CPA's from May 1993 through May 1994.
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Victor Costa Mr. Costa is the designer of the Company's "Victor Costa by
Nahdree" collection of after-five wear and social occasion wear. Prior to the
Acquisition, he was a designer with Nah Nah since June 1995. Prior thereto, Mr.
Costa operated his own business under the name "Victor Costa".
David Minka Mr. Minka has been the designer of the Company's "Black Tie"
collection of social occasion wear and mother-of-the-bride wear since February
1987.
Chrystine Forti Ms. Forti has been the designer of the Company's
"Niteline" collection of social occasion wear since August 1988.
Heather Wright Ms. Wright is the designer of the Company's "Nah Nah"
collection of social occasion wear and mother-of-the-bride wear. Between 1993
and 1998, Ms. Wright was employed as a designer with various companies including
Jeffrey and Dara, John Roberts and K.C. Spencer, Regina Kravitz and Kathryn
Dianos.
MEETINGS AND COMMITTEES. The Board held three meetings during the fiscal
year ended May 31, 1998, each of which was attended by all of the directors then
in office. The Board does not have a standing audit, nominating or compensation
committee, or any committee performing similar functions.
PRINCIPAL STOCKHOLDERS
Principle Stockholders. The following table sets forth, as of the date
hereof, certain information regarding the number and percentage of shares of
Common Stock beneficially owned by (i) each named executive officer and
director, (ii) each person known by the Company to own more than five percent of
the Common Stock, and (iii) all officers and directors as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER POSITION OWNERSHIP OF CLASS
------------------------------------ ------------------ ---------- --------
<S> <C> <C> <C>
Hong J. Han(1)...................................... Chief Executive 9,708,653 80.9%
The Nahdree Group, Ltd. Officer & Director
530 Seventh Ave.
New York, NY 10018..................................
Della Rounick....................................... Director 4,430,748 36.9%
The Nahdree Group, Ltd.
530 Seventh Ave.
New York, NY 10018..................................
Officers and Directors as a group................... 9,708,653 80.9%
</TABLE>
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(1) Under the federal securities laws, Mr. Hong J. Han is deemed to be the
beneficial owner of the 4,430,748 shares owned by Ms. Della Rounick because
of the irrevocable proxy he holds to vote such shares. The proxy is for a
period of three years, and continues thereafter for up to another three
years or until Han sooner owns beneficially at least 55% of the outstanding
Common Stock, including currently exercisable options and warrants.
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SUMMARY COMPENSATION TABLE
(INCLUDES INFORMATION RELATED TO
COMPENSATION PRIOR TO THE ACQUISITION)
EXECUTIVE COMPENSATION. The following table sets forth the compensation
paid by the Company and its subsidiaries during the fiscal years ended 1996,
1997 and 1998 to the Company's Chief Executive Officer and the named executive
officer.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- LONG TERM COMPENSATION
OTHER ---------------------------------- OTHER
ANNUAL RESTRICTED SECURITIES ANNUAL
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SATION AWARDS OPTIONS(#) PAYOUTS SATION
- --------------------------- ---- --------- -------- ------- ---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Hong J. Han................... 1998 $489,000 $40,000 -- -- -- -- (1)
CEO, President and 1997 428,000 -- -- -- -- -- --
Chairman of the Board 1996 503,500 -- -- -- -- -- --
Della Rounick(2).............. 1998 $ 93,077 -- -- -- -- -- --
CEO and Chairman 1997 220,000 -- -- -- -- -- --
of the Board 1996 220,000 -- -- -- -- -- --
Sam D. Kaplan(3).............. 1998 $118,346 -- -- -- -- -- --
CEO, Co-Chairman 1997 170,000 -- -- -- -- -- --
of the Board, and CFO 1996 161,346 -- -- -- 25,000(4) -- --
Mitchell Simbal(5)............ 1998 $ 13,846 $15,000 -- -- -- -- --
CEO, Vice President of 1997 130,836 15,000 $20,004(6) -- -- -- --
Retail 1996 140,000 18,000 10,002(6) -- 20,000(7) -- --
Sue Kim....................... 1998 $158,000 $20,000 -- -- -- -- --
Chief Operating Officer 1997 64,800 -- -- -- -- -- --
1996 55,000 -- -- -- -- -- --
</TABLE>
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(1) N.N.C.S., Inc., a company wholly-owned by Mr. Han, accrued $91,444 in
royalties during fiscal 1998, as described in the Certain Relationships and
Related Transaction Section herein.
(2) Ms. Rounick resigned from her position as CEO and Chairman of the Board of
the Company in October of 1997.
(3) Mr. Kaplan resigned from his position as Acting CEO and Co-Chairman of the
Board on December 24, 1997 and as CFO on January 30, 1998.
(4) Represents options to purchase 13,000 shares of Common Stock previously
granted which were repriced during fiscal 1996, and a grant of options to
purchase 12,000 shares of Common Stock granted during fiscal 1996. All such
options have expired.
(5) Mr. Simbal resigned from his position as CEO and Vice President of Retail on
July 11, 1997.
(6) Represents expense allowance for car and travel.
(7) Represents options to purchase 5,000 shares of Common Stock previously
granted which were repriced during fiscal 1996, and options to purchase
15,000 shares of Common Stock granted during fiscal 1996. All such options
have expired.
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COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
COMPARATIVE PERFORMANCE. Assuming dividend reinvestment, the following
graph depicts (i) the cumulative total stockholder return to stockholders of the
Company; (ii) The Total Return Index for the Nasdaq Stock Market (US Companies)
compiled by the Center for Research in Security Prices ("CRSP") and (iii) The
Total Returns Index for Women's, Misses' and Juniors' Outerwear Companies
compiled by CRSP.
PERFORMANCE GRAPH FOR THE NAHDREE GROUP, LTD.
<TABLE>
<CAPTION>
'NASDAQ STOCKS
(SIC 2330-2339
US
NASDAQ STOCK COMPANIES)|WOMAN'S,
MEASUREMENT PERIOD 'THE NAHDREE MARKET (US MISSES', AND
(FISCAL YEAR COVERED) GROUP, LTD.' COMPANIES) JUNIORS' OUTERWEAR'
<S> <C> <C> <C>
5/28/93(1) 100 100 100
95 100.46 112.441
95 100.58 106.6
47.5 105.777 127.491
57.5 108.928 144.013
47.5 111.376 142.087
42.5 108.056 145.27
37.5 111.069 137.369
40 114.441 126.77
35 113.372 138.079
30 106.4 146.677
25 105.019 146.407
5/31/94 27.5 105.275 125.869
25 101.424 132.572
22.5 103.505 137.563
22.5 110.104 155.936
27.5 109.822 140.628
32.5 111.98 102.869
27.5 108.266 104.706
27.5 108.569 107.659
27.5 109.178 92.946
26.25 114.951 89.009
17.5 118.36 88.493
18.75 122.087 61.295
5/31/95 17.5 125.237 52.676
16.25 135.386 57.418
17.5 145.338 58.586
18.75 148.285 54.683
17.5 151.695 50.62
15 150.825 45.473
10 154.367 37.758
8.125 153.544 35.858
6.875 154.301 36.18
8.75 160.173 38.116
10 160.705 38.74
15 174.037 35.262
5/31/96 35 182.028 38.213
27.5 173.823 35.822
23.75 158.345 37.224
20 167.217 35.178
18.75 180.007 33.317
16.25 178.019 29.761
15 189.023 30.097
13.75 188.853 28.083
20 202.275 34.277
27.5 191.093 33.47
25 178.618 28.233
17.5 184.202 25.332
5/30/97 22.5 205.085 28.339
18.75 211.36 29.585
7.5 233.669 33.947
5 233.314 34.371
8.125 247.119 39.61
8 234.319 39.916
4 235.493 40.496
9 231.795 41.231
5.4 239.084 35.856
2.4 261.473 41.307
3.2 271.103 38.608
6.4 275.703 45.554
5/29/98 6.6 N/A(2) N/A(3)
_______________
(1) Monthly indexes derived from compounded daily returns that include all dividends. Indexes
were reweighted daily, using the market capitalization of the previous trading day. The
index level for all series was set to $100.00 on 5/28/93. If the monthly interval, based
on the fiscal year-end, is not a trading day, the preceding trading day is used.
(2) Data for Nasdaq Market Index unavailable from CRSP after 4/30/98.
(3) Data for SIC Industry Index unavailable from CRSP after 4/30/98.
</TABLE>
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. In December 1997, Mr. Hong
J. Han, the Chief Executive Officer and a director of the Company acquired
beneficial ownership of 80.9% of the Common Stock of the Company (see "Change in
Control" above). In December 1997, Mr. Han also acquired (i) from Ms. Rounick, a
director, subordinated indebtedness of the Company, to the Estate of Herbert
Rounick (of which Ms. Rounick is executrix) in the amount of $5,660,801 bearing
interest at 9.278% (Ms. Rounick retained $1,000,000 of such subordinated
indebtedness), and (ii) from a bank group (for whom Marine Midland Bank, N. A.
was agent) subordinated indebtedness of the Company, as well as all the
collateral therefore, in the amount of $2,750,000 bearing interest at 2% above
the prime rate.
The Company's "Nahdree" trademark (the "Trademark"), was owned by Nah Nah,
a New York corporation then wholly-owned by Mr. Hong J. Han, since its first use
by Nah Nah in 1992. In July 1997, the Trademark was transferred by Nah Nah to
N.N.C.S., Inc. ("NNCS"), also a New York corporation wholly-owned by Mr. Han. A
logo related to the Trademark was registered by NNCS in April 1998. Mr. Han has
caused NNCS to license (the "License") the Trademark and the aforesaid logo to
the Company for a period of one year ending May 31, 1999, at a royalty of 3% of
the revenues of the Company from the sale of goods bearing the Trademark.
Subject to the approval of the Company's Board of Directors, the Company's
management may use the Trademark or the related logo on all goods sold by the
Company, including goods also bearing one of the Company's other trademarks, all
of which goods would be subject to such royalty, and intends to renew the
License on an annual basis. However, there is no assurance that any such renewal
of the License will actually occur, or will occur on the same terms as in the
present License. Royalties in the prior fiscal year were $91,444 under a similar
license pursuant to which NNCS waived two-thirds of the royalties. Such
royalties were accrued but not paid. The Company considers its rights under the
License to be material and a failure to obtain a renewal of the License on
reasonable terms for periods following May 31, 1999, would have a material
adverse effect on the Company's business.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. The Company has
no evidence that any of the persons mentioned below, each of whom is subject to
Section 16(a) of the Act, has timely filed the reports indicated pursuant to
Section 16(a): Forms 3 and 4: Sam Kaplan, Della Rounick, Martin Bring and
William Carone, and Form 4: Mitchell Simbal. Each such person will be advised to
timely file a Form 5, in the event such filing is required, for such fiscal
year. Reports on Form 5 are required to be filed on or before July 15, 1998.
6
