SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement |_| Confidential, for Use of the
Commission Only
|_| Definitive proxy statement (as permitted by Rule 14a-6(e)(2))
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BIG SMITH BRANDS, 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)(4)
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:
(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 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
BIG SMITH BRANDS, INC.
7100 WEST CAMINO REAL
SUITE 402
BOCA RATON, FLORIDA 33433
(561) 367-8283
-----------------------------
NOTICE OF SOLICITATION OF CONSENTS
-----------------------------
Dear Stockholder:
This Consent Statement (the "Consent Statement") is furnished to you by
Big Smith Brands, Inc. (the "Company") in connection with its solicitation of
written consents (the "Consents") from the holders of its common stock, par
value $.01 per share (the "Common Stock") to take the following actions (the
"Actions") without a stockholders' meeting pursuant to Section 228 of the
General Corporation Law of the State of Delaware:
1. to amend and restate (the "Plan Amendment") the Company's 1994
Stock Incentive Plan (the "1994 Plan")
a. to increase to 1,800,000 the number of shares
reserved for issuance under the 1994 Plan, and to
1,000,000 the number of shares of Common Stock with
respect to which options may be granted to any one
employee in any calendar year, and
b. to bring the 1994 Plan into compliance with certain
provisions of the Internal Revenue Code of 1986, as
amended (the "Code") and the Exchange Act;
2. to amend and restate (the "Charter Amendment") the Company's
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") to create a new class of "blank check" preferred
stock, $0.01 par value per share (the "Preferred Stock") consisting of
100,000 shares; and
3. to effect a reverse stock split of the Common Stock of the
Company pursuant to which each [three] shares of Common Stock of the
Company presently issued and outstanding will be changed into one
share of Common Stock and any fractional number of shares due to any
holder of record resulting from such reverse stock split will be
rounded up to the next whole number of shares.
The Board of Directors urges you to indicate your written consent to the
proposed corporate actions by marking, signing and dating the enclosed Consent
and promplty mailing it in the enclosed envelope. The proposed corporate action
may be taken only if the holders of a majority of the outstanding shares of
Common Stock at the close of business on June 3, 1998, which is the record date
for the soliciation (the "Record Date"), submit to the Company a written consent
to such actions. On June 3, 1998, there were 7,099,842 shares of Common Stock
outstanding, thus requiring Consents from the holders of no less than 3,549,922
shares of Common Stock to approve the Actions. This Consent Statement and the
related Consents are being furnished to certain stockholders of record of Common
Stock on the Record Date on or about June 11, 1998.
BECAUSE A CONSENT TO AN ACTION IS EFFECTIVE ONLY IF THE COMPANY RECEIVES
EXECUTED CONSENTS FROM THE HOLDERS OF A MAJORITY OF THE OUTSTANDING COMMON STOCK
WITHIN SIXTY DAYS OF ITS RECEIPT OF THE EARLIEST DATED CONSENT, YOUR FAILURE TO
EXECUTE A CONSENT HAS THE SAME EFFECT AS VOTING AGAINST OR WITHHOLDING CONSENT
FOR THE PROPOSALS.
<PAGE>
YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED
CONSENT AND MAIL IT IN THE ENCLOSED ENVELOPE PROMPTLY.
The Board of Directors unanimously recommends that you Consent to the
Actions.
By Order of the Board of Directors
S. PETER LEBOWITZ
Chairman of the Board
Boca Raton, Florida
June 11, 1998
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<PAGE>
BIG SMITH BRANDS, INC.
7100 WEST CAMINO REAL
SUITE 402
BOCA RATON, FLORIDA 33433
(561) 367-8283
-----------------------------
PROXY STATEMENT FOR
SOLICITATION OF CONSENTS
-----------------------------
GENERAL INFORMATION ABOUT SOLICITATION OF CONSENTS
CONSENT PROCEDURE; EFFECTIVENESS; RECORD DATE
Section 228 of the General Corporation Law of the State of Delaware
("GCL") states that, unless otherwise provided in a corporation's certificate of
incorporation, any action that may be taken at any annual or special meeting of
stockholders, may be taken without a meeting, without prior notice and without a
vote, if consents in writing, setting forth the action so taken, shall be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present and voted, and those
consents are delivered to the corporation by delivery to its registered office
in Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the books in which proceedings of meetings of
stockholders are recorded. The Company's Certificate of Incorporation does not
prohibit the use of such consents.
Only holders of record of Common Stock on June 3, 1998, the Record Date,
are eligible to consent to the Actions. A list of the Stockholders entitled to
consent to the actions by marking, signing and dating the Consent will be
available for examination by Stockholders during ordinary business hours for a
period of ten days following the mailing of this Consent Statement, at the
offices of the Company, 7100 West Camino Real, Suite 402, Boca Raton, Florida
33433.
The corporate action proposed herein will be adopted when properly
completed, unrevoked Consents are signed by the holders of record on the Record
Date of a majority of the shares of Common Stock then outstanding and those
Consents are presented to the Company. However, pursuant to GCL Section 228(c),
all Consents will expire, unless so presented, on the date 60 days after the
earliest dated Consent is delivered to the Company.
If the Actions described herein are taken by less than unanimous
consent, the Company, pursuant to GCL Section 228(d), will give prompt notice
thereof to those stockholders who have not executed Consents to the Actions
taken.
VOTING RIGHTS
The unrevoked signed Consents representing the holders of record on the
Record Date of at least a majority of the outstanding shares of Common Stock are
necessary to effect the Actions discussed below. On the Record Date, the Company
had outstanding and entitled to vote 7,099,842 shares of Common Stock, each
entitled to one vote upon matters to be acted by stockholder vote.
SOLICITATIONS OF CONSENTS
Following the original mailing of consent solicitation material,
executive and other employees of the Company and professional proxy solicitors,
may solicit proxies by mail, telephone, telegraph and personal interview. No
employee of the Company will receive any additional compensation for such
solicitation. Arrangements may also be made with brokerage houses and other
custodians, nominees and fiduciaries who are record holders of the Company's
Common Stock to forward consent solicitation material to the beneficial owners
of such stock, and the Company may reimburse such record holders for their
reasonable expenses incurred in such forwarding. The cost of soliciting consents
in the enclosed form will be borne by the Company.
REVOCATION OF CONSENTS
An executed Consent may be revoked at any time before expiration by
signing, dating, and delivering a written revocation before the time that
Consents representing the necessary number of shares of Common Stock to approve
the Actions have been received, but not after that date. A timely revocation may
be in any written form validly signed by the record holder as long as it
<PAGE>
clearly states that the Consent previously given is no longer effective. The
timely delivery of a subsequently dated Consent which is properly completed will
constitute a revocation of any earlier Consent. The revocation may be delivered
to the Company at its principal executive office at 7100 West Camino Real, Suite
402, Boca Raton, Florida 33433.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 1, 1998, the number of shares
of common stock beneficially owned (and the percentage of the Company's common
stock) by (i) each person known (based solely on Schedules 13D or 13G filed) to
the Company to be the beneficial owner of more than 5% of the common stock, (ii)
each director and nominee to the Board of the Directors of the Company, (iii)
the Named Executive (as hereinafter defined) and (iv) all directors and
executive officers of the Company as a group (based upon information furnished
by such persons). Under the rules of the Commission, a person is deemed to be a
beneficial owner of a security if such person has or shares the power to vote or
direct the voting of such security or the power to dispose of or to direct the
disposition of such security. In general, a person is also deemed to be a
beneficial owner of any securities of which that person has the right to acquire
beneficial ownership within 60 days. Accordingly, more than one person may be
deemed to be a beneficial owner of the same securities.
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE (%)
BENEFICIALLY OWNED OF COMMON STOCK
S. Peter Lebowitz 1,509,000 21.3%
c/o Big Smith Brands, Inc.
7100 West Camino Real, Suite 402
Boca Raton, Florida 33433
Theresa Lebowitz and Michael S. Nelson,
Esq., as trustees (1) 474,000 6.7%
c/o Kramer, Levin, Naftalis, Nessen &
Frankel
919 Third Avenue
New York, New York 10022
Glen Freeman (2) 15,000 *
c/o Big Smith Brands, Inc.
7100 West Camino Real, Suite 402
Boca Raton, Florida 33433
Theodore Listerman (2) 25,000 *
c/o Big Smith Brands, Inc.
7100 West Camino Real, Suite 402
Boca Raton, Florida 33433
Jack Schultz (2) (3) 17,000 *
c/o Big Smith Brands, Inc.
7100 West Camino Real, Suite 402
Boca Raton, Florida 33433
Julian Shaps (2) 15,000 *
c/o Big Smith Brands, Inc.
7100 West Camino Real, Suite 402
Boca Raton, Florida 33433
John Bagdasian (4) 8,500 *
c/o Big Smith Brands, Inc.
7100 West Camino Real, Suite 402
Boca Raton, Florida 33433
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<PAGE>
All directors and officers as a group (6
persons) (5) 1,589,500 22.2%
- -----------------
* Indicates beneficial ownership of less than one (1%) percent.
(1) Represents shares held in trust for the benefit of Barbara Lynn Van
Achte, Karen Sue Hart and Wendy Ann Lebowitz, with respect to which Mrs.
Lebowitz and Mr. Nelson, a partner at the law firm of Kramer, Levin,
Naftalis & Frankel, the Company's outside corporate counsel, serve as
trustees. Under the Trust Agreement, Mrs. Lebowitz and Mr. Nelson share
voting and dispositive power, subject only to the beneficiaries' right
to withdraw the shares under certain circumstances. Mrs. Lebowitz is the
wife, and the three trust beneficiaries are the daughters, of Mr.
Lebowitz.
(2) Includes 15,000 shares issuable upon exercise of options exercisable
within 60 days.
(3) Includes 2,000 shares issuable upon exercise of warrants exercisable
within 60 days.
(4) Includes 2,500 shares issuable upon exercise of options exercisable
within 60 days.
(5) Includes options and warrants to purchase 64,500 shares exercisable
within 60 days.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company receive one thousand dollars plus
expenses for each meeting of the Board of Directors that they attend and,
pursuant to the Company's 1994 Stock Incentive Plan (the "1994 Plan") are
automatically granted 10,000 options annually upon election at the Annual
Meeting. On June 12, 1997, each non-employee Director received an option to
purchase 20,000 shares of the Company's common stock at an exercise price of
$0.42. On February 11, 1998, each non-employee Director was granted an option to
purchase 10,000 shares of the Company's Common Stock at an exercise price of
$0.53. [Each non-employee director has been on the Board of Directors since 1995
and has received options to purchase 50,000 shares of Common Stock, representing
options to purchase 40,000 shares pursuant to the automatic grant provisions of
the 1994 Plan and other options to purchase 10,000 shares of Common Stock.] Each
grant under the 1994 Plan vests in four substantially equal parts on each of the
first four anniversaries of the date of the grant. To the extent the options are
unexercised, they expire on the fifth anniversary of the date of the grant.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
for services in all capacities for the fiscal years ended December 31, 1997,
December 31, 1996 and December 31, 1995, of the Chief Executive Officer of the
Company and John Bagdasian, Vice President and General Manager of the Company's
sportswear division, the only other executive officer of the Company who earned
over $100,000 during such fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
======================================================================================================
Annual Compensation Long Term Compensation
- ------------------------------------------------------------------------------------------------------
Other Annual Awards All Other
Name and Fiscal Salary Bonus Compensation Options Compensation
Principal Position Year ($) ($) ($) (1) (#) ($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
S. Peter Lebowitz-Chief 1997 $300,000 - $ 10,996 - -
Executive Officer 1996 $300,000 - $ 9,973 - -
1995 $250,000 - $ 8,700 175,000 (2) -
- ------------------------------------------------------------------------------------------------------
John Bagdasian 1997 $110,000 - - 10,000(3) -
======================================================================================================
</TABLE>
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<PAGE>
(1) Represents the valuation of certain club membership dues and
automobile lease payments of approximately $10,996, $9,973 and $8,700 for 1997,
1996 and 1995, respectively.
(2) Represents grants of options in connection with the Company's
initial public offering, the vesting of which was contingent upon the Company
achieving a certain level of net income during the fiscal year ended December
31, 1995, which level was not achieved.
(3) Represents options granted in 1997.
EMPLOYMENT ARRANGEMENTS
S. Peter Lebowitz is employed as the Company's President and Chief
Executive Officer under an employment agreement, expiring on December 31, 2003.
Pursuant to the employment agreement, Mr. Lebowitz receives annual compensation
of $300,000 and an annual bonus of up to $200,000 if the Company achieves a
certain specified levels of net income. The employment agreement with Mr.
Lebowitz further provided that if his employment were terminated by the Company
without cause or at any time following a change of control, or by Mr. Lebowitz
within twelve months after a change of control, the Company will pay to Mr.
Lebowitz three years'salary, bonus and benefits in the amount and kind then in
effect subject to certain adjustments in a lump sum 30 days after such
termination.
On February 11, 1998, in connection with his entry into the employment
agreement, Mr. Lebowitz was granted options for the purchase of 1,000,000 shares
of Common Stock pursuant to the terms and conditions of the Company's 1994 Plan.
Such grant is subject to stockholder approval to the extent the grant exceeded
the shares then available for grant under the 1994 Plan (i.e., 873,950 shares)
and approval of the increase to 1,000,000 in the maximum number of shares which
may be subject to options granted to any employee in a single year. The options
are exercisable at $0.53 per share, the highest ask price on the last date on
which trading took place prior to the date of grant, and vest in equal annual
installments on the first four anniversaries of the date of grant.
CONSENT TO THE PLAN AMENDMENT:
The Board of Directors approved and recommends to the stockholders the
Plan Amendment which (a) increases the number of shares reserved for issuance
and options available to be granted under the 1994 Plan to 1,800,000 shares from
500,000 shares and increases the number of shares of Common Stock with respect
to which options may be granted to any one employee in any calendar year to
1,000,000 shares from 400,000 shares and (b) brings the 1994 Plan into
compliance with certain new requirements of Section 16 of the Exchange Act and
the requirements of Section 162(m) of the Code. Prior to the approval of the
Plan Amendment, taking into account certain grants of options at the February
11, 1998 and May 19, 1998 meetings of the Board of Directors, options to
purchase 906,950 shares of Common Stock in excess of those reserved under the
1994 Plan had been granted by the Board of Directors, contingent upon
stockholder approval of the Plan Amendment.
DESCRIPTION OF THE PLAN AMENDMENT
This description of the Plan Amendment is qualified by reference to the
text of the Plan Amendment, which is available upon written request from the
Company at its executive offices and will be filed as an exhibit to the
Company's next periodic filing.
Increase in share reserved for issuance under the 1994 Plan. The Plan Amendment
increases the number of shares authorized for issuance under the 1994 Plan to
1,800,000 shares from 500,000 shares, and the number of shares that can be
awarded to any one employee during the term of the Plan to 1,000,000 shares from
400,000 shares. Prior to the Plan Amendment the Company had exhausted the shares
of Common Stock reserved for issuance under the 1994 Plan and had granted to S.
Peter Lebowitz, Chief Executive Officer of the Company, options to purchase an
additional 873,950 shares and had granted to other key employees of the Company
options to purchase an additional 33,000 shares under the 1994 Plan, contingent
upon the approval of the Plan Amendment by the stockholders. Following approval
of the Plan Amendment 393,050 shares are available for issuance upon exercise of
options not yet granted under the 1994 Plan.
Compliance with certain regulatory provisions. In order to maintain the
qualification of compensation paid by the Company to certain executive officers
in the form of options under the 1994 Plan as "performance based
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<PAGE>
compensation" which is excluded from the limits on the deductibility of
employment compensation under Section 162(m) of the Code, the Plan Amendment
adds to the 1994 Plan a requirement that, to the extent necessary for compliance
with Section 162(m), the Stock Option Committee will be composed solely of
"outside directors."
Additionally, in order to conform the 1994 Plan to the new regulations
under Section 16 of the Exchange Act, the amendment modifies the 1994 Plan's
provisions relating to stockholder approval of amendments to provide, among
other things, that such approval will be required for any amendment to the 1994
Plan for which shareholder approval is required by other applicable law or
regulation and adds a requirement that, to the extent necessary for compliance
with the regulations under Section 16, the Stock Option Committee will be
composed solely of "non-employee directors."
The following is a summary of the other principal provisions of the 1994
Plan.
SUMMARY OF 1994 PLAN
In 1994, the Company's Board of Directors adopted and the stockholders
approved the Big Smith Brands, Inc. 1994 Stock Incentive Plan (the "1994 Plan")
to provide officers and other employees of the Company an incentive to enter
into and remain in the service of the Company, to enhance the long-term
performance of the Company and to acquire a proprietary interest in the success
of the Company.
General. The 1994 Plan provides for the grant of (i) stock options which
are intended to qualify as "incentive stock options" under Section 422 of the
Code and (ii) nonqualified stock options (incentive and nonqualified stock
options are referred to collectively as "options"). Options may be granted under
the 1994 Plan to such officers, directors, other employees and consultants of
the Company as the Stock Option Committee in its discretion selects, provided
that only employees may receive grants of incentive stock options. The 1994 Plan
also provides for automatic grants of nonqualified options to directors who are
not employees, as described further below. In 1997, options were granted under
the 1994 Plan to a total of [seven] individuals; the group of individuals who
receive grants in future years may be larger or smaller.
Administration. The 1994 Plan is administered by the Stock Option
Committee, which must be composed of not less than two directors. The Stock
Option Committee is authorized to construe, interpret and implement the
provisions of the 1994 Plan, to select the individuals to whom awards will be
granted, and to determine the number of shares of Common Stock covered by such
awards and the other terms and provisions of such awards. The determinations of
the Stock Option Committee are made in its sole discretion and are conclusive.
Option Grants Under the 1994 Plan. Options granted under the 1994 Plan
are exercisable during the period fixed by the Stock Option Committee, provided
that no option will be exercisable less then one year after the date of grant
except as expressly provided in the 1994 Plan and no incentive stock option will
be exercisable more than ten years after the date of grant. The purchase price
per share payable upon the exercise of an option under the 1994 Plan (the
"option exercise price") will be established by the Stock Option Committee,
provided that the option exercise price of an incentive stock option will not be
less than 100% of the fair market value of a share of Common Stock on the date
of the grant. The option exercise price is payable in cash, or, with the consent
of the Stock Option Committee, by surrender of Common Stock of the Company
having a fair market value on the date of the exercise equal to part or all of
the option exercise price. No option granted under the 1994 Plan may be assigned
or transferred other than upon the grantee's death. All such options are
exercisable during the grantee's life only by the grantee.
The 1994 Plan provides for the automatic grants of nonqualified options
to directors who are not employees of the Company (each, an "eligible
director"). Each eligible director who is appointed to fill a vacancy on the
Board of Directors subsequent to January 1, 1995 will automatically receive a
grant of an option to purchase 20,000 shares, effective as of the last day of
the fiscal quarter of the Company in which the eligible director was appointed.
At each annual stockholders' meeting commencing with the 1995 annual meeting,
each eligible director elected to serve at such meeting also automatically
receives a grant of an option to purchase 10,000 shares, effective as of the
date of the annual meeting. The option exercise price of each nonqualified
option granted to an eligible director will be the fair market value of a share
of the shares subject to the option on the date of grant.
Termination of Employment or Service . The 1994 Plan provides that
unless the Stock Option Committee otherwise specifies: (i) all options not yet
exercised will terminate upon termination of the grantee's employment
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or service by reason of discharge for cause; (ii) if a grantee's employment or
service terminates for reasons other than cause or death, the grantee's options
generally will be exercisable for 90 days after termination to the extent
exercisable on the date of termination, but not after the expiration date of the
options; and (iii) if a grantee dies while in the Company's employ or service or
during the 90 day period provided in clause (ii) above, the grantee's options
will, to the extent exercisable on the date of death, generally remain
exercisable for one year after the date of death, but not after the expiration
date of the award.
Other Features of the 1994 Plan. The Stock Option Committee may amend
any outstanding option, including, without limitation, by amendment which would
accelerate the time or times at which the option may be exercised or extend the
scheduled expiration date of the option. The Board of Directors may suspend,
discontinue, revise or amend the 1994 Plan at any time or from time to time;
provided, however, that stockholder approval will be obtained for any amendment
to the extent necessary to comply with Section 422 of the Code (i.e., any
amendment which increases the number of shares which may be issued pursuant to
incentive stock options or changes the class of employees eligible to receive
such options) or other applicable law. Unless sooner terminated by the Board of
Directors, the provisions of the 1994 Plan respecting the grant of incentive
stock options will terminate on the tenth anniversary of the adoption of the
1994 Plan by the Board of Directors. All awards made under the 1994 Plan prior
to its termination will remain in effect until such awards have been satisfied
or terminated.
Federal Income Tax Consequences of 1994 Plan Options. The following
summary of the tax consequences of options under the 1994 Plan is based on
present Federal tax laws, and does not purport to be a complete description of
the Federal tax consequences of the 1994 Plan.
There are generally no Federal tax consequences either to the optionee
or to the Company upon the grant of an option. On exercise of an incentive stock
option, the optionee will not recognize any income, and the Company will not be
entitled to a deduction for tax purposes, although such exercise may give rise
to liability for the optionee under the alternative minimum tax provisions of
the Code. Generally, if the optionee disposes of shares acquired upon exercise
of an incentive stock option within two years of the date of grant or one year
of the date of exercise, the optionee will recognize compensation income, and
the Company will be entitled to a deduction for tax purposes, in the amount of
the excess of the fair market value of the shares of Common Stock on the date of
exercise over the option exercise price (or the gain on sale, if less).
Otherwise, the Company will not be entitled to any deduction for tax purposes
upon disposition of such shares, and the entire gain for the optionee will be
treated as a capital gain. On exercise of a nonqualified stock option, the
amount by which the fair market value of the Common Stock on the date of
exercise exceeds the option exercise price will generally be taxable to the
optionee as compensation income, and will generally be deductible for tax
purposes by the Company. The disposition of shares of Common Stock acquired upon
exercise of a nonqualified stock option will generally result in a capital gain
or loss for the optionee, but will have no tax consequences for the Company.
As discussed above, Section 162(m) of the Code limits the deduction
which the Company may take for otherwise deductible compensation payable to
certain executive officers to the extent that the compensation exceeds $1
million, unless the compensation qualifies as "performance-based compensation."
The Company believes that, subject to stockholder approval of the proposed
amendments to the 1994 Plan, compensation recognized upon the exercise of
options will generally satisfy the requirements of Section 162(m).
NEW PLAN BENEFITS
On February 11, 1998, the Board of Directors and Stock Option Committee
approved the grant of options to purchase 1,000,000 shares to S. Peter Lebowitz
and the additional option grants to employees and directors of the Company
indicated in the chart below. Of the 1,000,000 options granted to Mr. Lebowitz,
873,950 are subject to stockholder approval of the Plan Amendment. All options
were granted with a per share exercise price equal to the closing price of the
day of grant or, if no trade took place on the date of grant, the highest ask
price on the last date prior to the date of grant on which trading of the
Company's Common Stock took place (February 11, 1998 grants: $0.53; May 19, 1998
grants: $XX). As awards other than automatic annual awards to non-employee
directors under the 1994 Plan are authorized by the Committee in its discretion,
it is not possible to determine the additional benefits or amounts, if any, that
will be received by any individual or group in 1998, or the benefits or amounts
that will be received by any individual or group in future years.
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<PAGE>
NAME OF INDIVIDUAL OR GROUP NUMBER OF OPTIONS
S. Peter Lebowitz 1,000,000
Chief Executive Officer
John Bagdasian
Vice President and General Manager of the Big
Smith sportswear line 0
Executive Group (3 persons) 1,010,000
Non-Executive Director Group 40,000
Non-Executive Officer Employee Group (104 23,000
persons)
CONSENT TO THE CHARTER AMENDMENT:
GENERAL
The Board of Directors approved and recommends to the stockholders the
amendment and restatement of Article Fourth of the Company's Certificate of
Incorporation to create a new class of "blank check" preferred stock consisting
of 100,000 shares (the "Charter Amendment") by filing a Certificate of Amendment
and Restatement to the Amended and Restated Certificate of Incorporation.
Creation of "Blank Check" Preferred Stock
The Board of Directors adopted a resolution unanimously approving and
recommending to the stockholders for their approval an amendment to the
Certificate of Incorporation to provide therein for the creation of 100,000
shares of "Blank Check" Preferred Stock. The text of Article Fourth of the
Certificate of Incorporation, as amended and restated is included in Annex A to
this Information Statement. The Board of Directors believes that having such
Blank Check Preferred Stock available for, among other things, possible issuance
in connection with such activities as public or private offerings of shares for
cash, dividends payable in stock of the Company, acquisitions of other companies
or businesses, and otherwise, is in the best interest of the Company and its
stockholders. As of the date hereof, the Company does not have any agreements or
understandings with any third party relating to the possible issuance of any
shares of Preferred Stock.
The term "Blank Check" Preferred Stock refers to stock for which the
designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof (collectively, the
"Limitations and Restrictions") are determined by the board of directors of a
company. As such, the Board of Directors of the Company will be entitled to
authorize the creation and issuance of 100,000 shares of Preferred Stock in one
or more series with such Limitations and Restrictions as may be determined in
the Board of Director's sole discretion, with no further authorization by
stockholders required for the creation and issuance thereof.
The Board of Directors is required to make any determination to issue
shares of Common Stock or Preferred Stock based on its judgment as to the best
interests of the stockholders and the Company. Although the Board of Directors
has no present intention of doing so, it could issue shares of Preferred Stock
that may, depending on the terms of such series, make more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or other means. When, in the judgment of the Board
of Directors, this action will be in the best interest of the stockholders and
the Company, such shares could be used to create voting or other impediments or
to discourage persons seeking to gain control of the Company. Such shares could
be privately placed with purchasers favorable to the Board of Directors in
opposing such action. In addition, the Board of Directors could authorize
holders of a series of Common or Preferred Stock to vote either separately as a
class or with the holders of the Company's Common Stock, on any merger, sale or
exchange of assets by the Company or any other extraordinary corporate
transaction. The existence of the additional authorized shares could have the
effect of discouraging unsolicited takeover attempts. The issuance of new shares
also could be used to dilute the stock ownership of a person or entity seeking
to obtain control of the Company should the Board of Directors consider the
action of such entity or person not to be in the best interest of the
stockholders and the Company.
-7-
<PAGE>
CONSENT TO REVERSE STOCK SPLIT:
The Board of Directors approved and recommends to the stockholders a
one-for-[three] reverse stock split, pursuant to which each [three] shares of
Common Stock of the Company presently issued and outstanding will be changed
into one share of Common Stock and any fractional number of shares due to any
holder of record resulting from such reverse stock split will be rounded up to
the next whole number.
The Board of Directors recommends the reverse stock split in order to
make available authorized shares of Common Stock for use in the Company's
efforts to raise capital through a private placement or public offering, and to
increase the trading price of the Company's Common Stock to a range more
appropriate for such efforts and for meeting the initial listing requirements of
the Nasdaq Stock Market's SmallCap Market in connection with any application to
restore the Common Stock to trading in such market. There can be no assurance,
however, that such efforts will be successful or that the Company will meet the
necessary qualifications to submit such application, or if it does, that such
application will be approved.
In order to ensure that the Company has the flexibility to gain the
greatest benefit possible from the reverse split, the Consent gives the Board of
Directors the authority to change the ratio of the reverse stock split and to
postpone the effective date of the reverse stock split or to abandon the reverse
stock split as they, in their business judgment, deem to be in the best
interests of the Company and its stockholders.
STOCKHOLDER PROPOSALS
Any Stockholder proposal intended to be presented at the next annual
meeting of Stockholders must be received by the Company at its principal
executive offices, 7100 West Camino Real, Suite 402, Boca Raton, Florida 33433,
no later than February 15, 1999, in order to be eligible for inclusion in the
Company's proxy statement and form of proxy to be used in connection with that
meeting.
OTHER INFORMATION
Although it has entered into no formal agreements to do so, the Company
will reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding proxy-soliciting
materials to their principals. The cost of soliciting proxies on behalf of the
Board of Directors will be borne by the Company. Such proxies will be solicited
principally through the mail but, if deemed desirable, may also be solicited
personally or by telephone, telegraph, facsimile transmission or special letter
by directors, officers and regular employees of the Company without additional
compensation.
IF YOU HAVE ANY QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE TELEPHONE THE
COMPANY AT (561) 367-8283.
Sincerely yours,
S. PETER LEBOWITZ
Chairman of the Board
Boca Raton, Florida
June 11, 1998
-8-
<PAGE>
CONSENT TO THE PLAN AMENDMENT
RESOLVED, that the amendment to the Corporation's 1994
Stock Incentive Plan (the "Plan Amendment"), a copy of which is attached
hereto as Exhibit A, is hereby authorized, approved and adopted.
CONSENT TO THE CHARTER AMENDMENT
RESOLVED, that, pursuant to Section 242 of the General
Corporation Law of the State of Delaware, Article Fourth of the Restated
Certificate of Incorporation of Big Smith Brands, Inc. be amended and
restated (the "Charter Amendment") in its entirety as set forth in
Exhibit B attached hereto.
RESOLVED, that the proper officers of the Corporation,
acting singly, be, and each of them hereby is, authorized, empowered and
directed to execute and file, or cause to be filed, such Charter
Amendment as required by the laws of the State of Delaware or, in their
discretion, to determine not to file such Charter Amendment.
CONSENT TO THE REVERSE STOCK SPLIT
RESOLVED, that each three shares of Common Stock of the
Corporation presently issued and outstanding be changed into one share
of Common Stock so as to effect a one-for-three reverse stock split of
said issued and outstanding shares; that each holder of record of
certificates representing shares of Common Stock shall be entitled, upon
surrender of old certificates representing shares of Common Stock, to
receive a new certificate(s) representing one share of Common Stock for
each outstanding three shares of Common Stock held by such holder; that
any fractional number of shares due to any holder of record resulting
from such reverse stock split shall be rounded up to the next whole
number; and that the proper officers of the Corporation, acting singly,
be, and each of them hereby is, authorized to execute and deliver such
additional certificates and to make, subscribe, acknowledge, execute and
file, or cause to be filed, such documents, instruments or certificates
as may be required under the General Corporation Law of the State of
Delaware to give effect to the reverse stock split.
RESOLVED, that the Board of Directors of the Corporation
shall be authorized to determine in their sole discretion the effective
date of the reverse stock split or in such discretion to determine not
to effect such reverse split and shall be authorized to determine in
their sole discretion to change the ratio of the reverse stock split as
they, in their business judgment, deem to be in the best interests of
the Corporation and its stockholders.
EMPOWERING RESOLUTIONS IN RESPECT TO EACH OF THE ACTIONS
RESOLVED, that the proper officers of the Corporation,
acting singly, be, and each of them hereby is, authorized, empowered and
directed, in the name and on behalf of the Corporation, to execute and
deliver all such further documents, instruments, certificates or
agreements, and to take all such further action and to pay all such
expenses as any such officer, with and upon the advise of counsel, may
approve as necessary, proper, convenient or desirable in order to carry
out each of the foregoing resolutions and fully to effectuate the
purposes and intents thereof, the execution and delivery of any such
documents, instruments, certificates or agreements, and the taking of
any such action and the payment of any such expenses to be conclusive
evidence that the same shall have been approved hereby and that all
actions taken by the proper officers of the Corporation to date, in
connection with the foregoing resolutions or the transactions
contemplated thereby, are hereby in all respects, confirmed, ratified
and approved.
RESOLVED, that each of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President, the
Treasurer, the Chief Financial Officer and the
<PAGE>
Secretary of the Corporation shall be considered a proper officer of the
Corporation for the purposes of each of the foregoing resolutions.
<PAGE>
EXHIBIT A
AMENDMENT TO THE
BIG SMITH BRANDS, INC. 1994 STOCK INCENTIVE PLAN
WHEREAS, Big Smith Brands, Inc. (the "Company") has adopted the 1994
Stock Incentive Plan (the "Plan");
WHEREAS, Section 3.1 of the Plan provides that the Plan may be amended
by the Board of Directors of the Company (the "Board");
WHEREAS, the Board has determined that it is in the best interests of
the Company and its stockholders to amend the Plan, effective as of February 11,
1998, in the manner contemplated below, subject to the approval of the amendment
by the stockholders of the Company;
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Section 1.2.1 of the Plan is amended by deleting the final sentence
of such Section and substituting therefor the following:
"To the extent required for transactions under the Plan to
qualify for the exemptions available under Rule 16b-3 ("Rule
16b-3") promulgated under the Securities Exchange Act of 1934
(the "1934 Act"), all actions relating to awards to persons
subject to Section 16 of the 1934 Act shall be taken by the Board
unless each person who serves on the Committee is a "non-employee
director" within the meaning of Rule 16b-3 or such actions are
taken by a sub-committee of the Committee (or the Board)
comprised solely of "non-employee directors". To the extent
required for compensation realized from awards under the Plan to
be deductible by the Company pursuant to section 162(m) of the
Internal Revenue Code of 1986, the members of the Committee shall
be "outside directors" within the meaning of section 162(m)."
2. The first sentence of Section 1.5.1 of the Plan is amended and
restated to read as follows:
"The total number of shares of common stock of the Company, par
value, $.01 per share ("Common Stock"), with respect to which
awards may be granted pursuant to the Plan shall not exceed
1,800,000 shares."
3. Section 1.5.4 of the Plan is restated in its entirety to read as
follows:
"Subject to adjustment as provided in Section 1.5.2, the total
number of shares of Common Stock with respect to which stock
options may be granted to any one employee of the Company or any
subsidiary during any one calendar year shall not exceed
1,000,000 shares."
4. Section 3.1.2 is restated in its entirety to read as follows:
"Shareholder approval of any amendment shall be required with
respect to any amendment: (a) which increases the aggregate
number of shares which may be issued pursuant to incentive stock
options or changes the class of employees eligible to receive
such options or (b) for which shareholder approval is required by
other applicable law or regulation."
5. Section 3.6.1 is amended by deleting the words "(the "Tax Date")" in
the third sentence of such Section.
"Whenever shares of Common Stock are to be delivered pursuant to
an award under the Plan, the Company shall be entitled to require
as a condition of delivery that the grantee remit to the Company
an amount sufficient in the opinion of the Company to satisfy all
federal, state and other governmental tax withholding
requirements related thereto. With the approval of the
<PAGE>
Committee, which it shall have sole discretion to grant, the
grantee may satisfy the foregoing condition by electing to have
the Company withhold from delivery shares having a value equal to
the amount of tax to be withheld. Such shares shall be valued at
their Fair Market Value on the date as of which the amount of tax
to be withheld is determined. Fractional share amounts shall be
settled in cash. Such a withholding election may be made with
respect to all or any portion of the shares to be delivered
pursuant to an award.
6. Except as otherwise amended hereby, the Plan is confirmed and
ratified in all respects.
<PAGE>
EXHIBIT B
FOURTH: The total number of shares which the Corporation is to be
authorized to issue is 10,000,000 shares of common stock, par value $.01 (the
"Common Stock") and 100,000 shares of preferred stock, par value $.01 ("the
Preferred Stock").
A statement of the designations of the authorized classes of
stock or of any series thereof, and the powers, preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, or of the authority
of the Board of Directors to fix by resolution or resolutions such
designations and other terms not fixed by the Certificate of
Incorporation, is as follows:
(a) The Preferred Stock may be issued in one or more
series, from time to time, with each such series to have such
designation, powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations
or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue of such series
adopted by the Board of Directors of the Corporation, subject to
the limitations prescribed by law and in accordance with the
provisions hereof, the Board of Directors being hereby expressly
vested with authority to adopt any such resolution or
resolutions. The authority of the Board of Directors with respect
to each such series shall include, but not be limited to, the
determination or fixing of the following:
(i) The distinctive designation and number of
shares comprising such series, which number may (except where
otherwise provided by the Board of Directors in creating such
series) be increased or decreased (but not below the number of
shares then outstanding) from time to time by like action of the
Board of Directors;
(ii) The dividend rate of such series, the
conditions and times upon which such dividends shall be payable,
the relation which such dividends shall bear to the dividends
payable on any other class or classes of stock or series thereof,
or any other series of the same class, and whether such dividends
shall be cumulative or non-cumulative;
(iii) The conditions upon which the shares of such
series shall be subject to redemption by the Corporation and the
times, prices and other terms and provisions upon which the
shares of the series may be redeemed;
(iv) Whether or not the shares of the series shall
be subject to the operation of a retirement or sinking fund to be
applied to the purchase or redemption of such shares and, if such
retirement or sinking fund be established, the annual amount
thereof and the terms and provisions relative to the operation
thereof;
(v) Whether or not the shares of the series shall
be convertible into or exchangeable for shares of any other class
or classes, with or without par value, or of any other series of
the same class, and, if provision is made for conversion or
exchange, the times, prices, rates, adjustments, and other terms
and conditions of such conversion or exchange;
(vi) Whether or not the shares of the series shall
have voting rights, in addition to the voting rights provided by
law, and, if so, the terms of such voting rights;
(vii) The rights of the shares of the series in the
event of voluntary or involuntary liquidation, dissolution, or
upon the distribution of assets of the Corporation;
<PAGE>
(viii) Any other powers, preferences and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, of the
shares of such series, as the Board of Directors may deem
advisable and as shall not be inconsistent with the provisions of
this Certificate of Incorporation.
(b) Whenever, at any time, dividends on the then
outstanding Preferred Stock, as may be required with respect to
any series outstanding, shall have been paid or declared and set
apart for payment on the applicable series of the then
outstanding Preferred Stock, and after complying with respect to
any retirement or sinking fund or funds for any series of
Preferred Stock, the Board of Directors may, subject to the
provisions of the resolution or resolutions creating any series
of Preferred Stock, declare and pay dividends on the Common
Stock.
(c) The holders of shares of the Preferred Stock of each
series shall be entitled upon liquidation or dissolution or upon
the distribution of the assets of the Corporation to such
preferences as provided in the resolution or resolutions creating
such series of Preferred Stock, and no more, before any
distribution of the assets of the Corporation shall be made to
the holders of shares of the Common Stock. Whenever the holders
of shares of the Preferred Stock shall have been paid the full
amounts to which they shall be entitled, the holders of shares of
the Common Stock shall be entitled to share ratably in all assets
of the Corporation remaining.
(d) At all meetings of the stockholders of the
Corporation, the holders of shares of the Common Stock shall be
entitled to one vote for each share of Common Stock held by them.
Except as otherwise provided by a resolution or resolutions of
the Board of Directors creating any series of Preferred Stock or
by the Delaware General Corporation Law, the holders of shares of
the Common Stock issued and outstanding shall have and possess
the exclusive right to notice of stockholders' meetings and the
exclusive power to vote.
<PAGE>
WRITTEN CONSENT OF
COMMON STOCKHOLDERS OF
BIG SMITH BRANDS, INC.
-----------------------------
THIS CONSENT IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned, the holder as of June 3, 1998 of the number of shares
of Common Stock of the Company indicated below, hereby consents to the above
Actions, unless otherwise directed as follows:
(INSTRUCTION: TO WITHHOLD CONSENT FOR ANY ACTION, STRIKE A LINE THROUGH
THE APPROPRIATE DESIGNATION IN THE LIST BELOW.)
CONSENT TO THE PLAN AMENDMENT
CONSENT TO THE CHARTER AMENDMENT
CONSENT TO THE REVERSE STOCK SPLIT
THIS CONSENT WHEN PROPERLY EXECUTED WILL APPROVE THE ACTIONS AS DIRECTED
BY THE UNDERSIGNED STOCKHOLDERS. IF NO OTHER DIRECTION IS MADE IMMEDIATELY
ABOVE, THIS CONSENT WILL APPROVE ALL ACTIONS DESCRIBED IN THIS CONSENT
STATEMENT. FAILURE TO COMPLETE AND RETURN THIS CONSENT WILL HAVE THE EFFECT OF
VOTING AGAINST THE ACTIONS.
PLEASE DATE, SIGN AND RETURN THIS CONSENT PROMPTLY USING THE ENCLOSED
ENVELOPE.
Receipt of the Consent Statement is hereby acknowledged.
Dated: _______________________, 1998
------------------------------------------------
(Name of Stockholder)
------------------------------------------------
(Signature of Stockholder)
------------------------------------------------
(Number of Shares of Common Stock Held)
Your signature should appear the same as
your name appears herein. If signing as
attorney, executor, administrator, trustee
or guardian, please indicate the capacity in
which signing. When signing as joint
tenants, all parties to the joint tenancy
must sign. When the consent is given by a
corporation, it should be signed by an
authorized officer.
