As filed with the Securities and Exchange Commission on July 13, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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ACTIVE APPAREL GROUP, INC.
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(Exact name of Registrant as specified in its charter)
DELAWARE 13-3672716
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1350 BROADWAY, SUITE 2300
NEW YORK, NEW YORK 10018
(Address of principal executive offices, including zip code)
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1993 STOCK OPTION PLAN
(Full Title of Plans)
GEORGE Q HOROWITZ
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ACTIVE APPAREL GROUP, INC.
1350 BROADWAY, SUITE 2300
NEW YORK, NEW YORK 10018
(Name and Address of agent for service)
(212) 239-0990
(Telephone number, including area code, of agent for service)
COPY TO:
ROBERT H. FRIEDMAN, ESQ.
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
505 PARK AVENUE, 16TH FLOOR
NEW YORK, NEW YORK 10022
(212) 753-7200
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum
Title of Amount offering aggregate Amount of
securities to be price offering registration
to be registered registered per share price fee
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<S> <C> <C> <C> <C>
Common Stock, 444,300 (1) $4.91(2) $2,183,160 $606.92
$.002 par value shares
per share
</TABLE>
<PAGE>
(1) Represents an aggregate of 444,300 shares of Common Stock issuable by
the Registrant pursuant to the 1995 Non-Employee Director Stock Option
Plan and the 1993 Stock Option Plan (the "1993 Plan"). Options to
purchase 75,000 shares of Common Stock that were granted under the 1993
Plan to the Registrant's credit provider are not registrable hereunder
and are not registered hereby. Pursuant to Rule 416 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), this
Registration Statement also registers such indeterminate number of
additional shares of Common Stock that may be offered or issued
pursuant to the anti-dilution provisions set forth in such plans.
(2) Represents an aggregate of 223,285 shares of Common Stock with respect
to which options have been granted under such plans at a weighted
average exercise price of $7.69 per share. An additional 146,015 shares
of Common Stock, in the aggregate, may be offered under the plans.
Pursuant to Rule 457(h) promulgated under the Securities Act, the
offering price for the additional 146,015 shares of Common Stock that
may be issued under the plans is estimated solely for the purpose of
determining the registration fee and is based on $3.1875, the per share
average of high and low sale prices of the Common Stock as reported by
the Nasdaq SmallCap Market ("Nasdaq") on July 7, 1999.
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PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
EXPLANATORY NOTE
The information called for by Part I of this Registration Statement on
Form S-8 (the "Registration Statement") is included in the description of Active
Apparel Group, Inc.'s 1993 Stock Option Plan and 1995 Non-Employee Director
Stock Option Plan (collectively referred to as the "Stock Option Plans") to be
delivered to persons eligible to participate in the Stock Option Plans pursuant
to Rule 428(b)(1) promulgated under the Securities Act. Pursuant to the Note to
Part I of Form S-8, this information is not being filed with or included in this
Registration Statement. However, included herein is a Prospectus to be used in
connection with certain reoffers and resales of shares of common stock, $.002
par value per share, of Active Apparel Group, Inc. acquired pursuant to the
Stock Option Plans. Such Prospectus has been prepared in accordance with the
requirements of Form S-3 pursuant to General Instruction C of Form S-8.
<PAGE>
PROSPECTUS
202,598 SHARES
ACTIVE APPAREL GROUP, INC.
This prospectus relates to the reoffer and resale by certain selling
stockholders of shares of our common stock that we may issue to the selling
stockholders upon the exercise of stock options granted under our 1993 Stock
Option Plan or under our 1995 Non-Employee Director Stock Option Plan. This
prospectus also relates to certain underlying options that have not as of this
date been granted. If and when such options are granted to persons required to
use the prospectus to reoffer and resell the shares underlying such options, we
will distribute a prospectus supplement. The shares are being reoffered and
resold for the account of the selling stockholders, and we will not receive any
of the proceeds from the resale of the shares.
The selling stockholders have advised us that the resale of their
shares may be effected from time to time in one or more transactions on the
Nasdaq Stock Market, in negotiated transactions or otherwise, at market prices
prevailing at the time of the sale or at prices otherwise negotiated. See "Plan
of Distribution." We will bear all expenses in connection with the preparation
of this prospectus.
Our common stock is listed on the Nasdaq SmallCap Market under the
symbol "AAGP." The last reported sale price on the Nasdaq SmallCap Market for
our common stock on July 12, 1999 was $3.375 per share.
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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING AT PAGE 4.
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Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of the prospectus. Any representation to the contrary is a
criminal offense.
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The date of this Prospectus is July 13, 1999.
<PAGE>
TABLE OF CONTENTS
WHERE YOU CAN FIND MORE INFORMATION..........................................2
INCORPORATION BY REFERENCE...................................................3
RISK FACTORS.................................................................4
THE COMPANY.................................................................14
USE OF PROCEEDS.............................................................15
SELLING STOCKHOLDERS........................................................15
PLAN OF DISTRIBUTION........................................................18
LEGAL MATTERS...............................................................20
EXPERTS ...................................................................20
ADDITIONAL INFORMATION......................................................20
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). You
may read and copy any document we file at the SEC's public reference room
located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You
may obtain further information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the
public over the Internet at the SEC's web site at http://www.sec.gov. You may
also request copies of such documents, upon payment of a duplicating fee, by
writing to the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Our common
stock is listed on the Nasdaq SmallCap Market, and such reports and other
information may also be inspected at the offices of Nasdaq at 1735 K Street,
N.W., Washington, D.C. 20006-1500.
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INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information we incorporate by reference is
considered to be a part of this prospectus and information that we file later
with the SEC will automatically update and replace this information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"):
(1) Our Annual Report on Form 10-KSB for the year ended December
31, 1998;
(2) Our Quarterly Report on Form 10-QSB for the period ended March
31, 1999; and
(3) Our Application for Registration of our common stock on Form
8-A dated April 24, 1995.
You may request a copy of these filings (excluding the exhibits to such
filings that we have not specifically incorporated by reference in such filings)
at no cost, by writing or telephoning us at the following address:
Active Apparel Group, Inc.
1350 Broadway, Suite 2300
New York, New York 10018
Attention: Chief Financial Officer
(212) 239-0990
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the
SEC. You should rely only on the information provided or incorporated by
reference in this prospectus or any related supplement. We have not authorized
anyone else to provide you with different information. The selling stockholders
will not make an offer of these shares in any state where the offer is not
permitted. You should not assume that the information in this prospectus or any
supplement is accurate as of any other date than the date on the front of those
documents.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995 and information
relating to us that are based on the beliefs of our management, as well as
assumptions made by and information currently available to our management. When
used in this prospectus, the words "estimate," "project," "believe,"
"anticipate," "intend," "expect" and similar expressions are intended to
identify forward-looking statements. These forward-looking statements reflect
our current views with respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in these forward-looking statements, including those risks
discussed under "Risk Factors." You are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date on this
prospectus. We have no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this prospectus or to reflect the occurrence of unanticipated events.
RISK FACTORS
THE PURCHASE OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND THE OTHER INFORMATION
IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN OUR COMMON STOCK.
OPERATING LOSSES AND UNCERTAINTY OF FUTURE GROWTH AND RESULTS OF OPERATIONS
Our net sales and operating income for the fiscal year ended December
31, 1998 decreased compared to the same period in 1997. The decrease was
primarily due to the decreased sales volume of our Converse and MTV licensed
products and increased selling and shipping expenses attributable to greater
sales sample expense and increase in salaries of our employees involved in the
sale, shipping and design of our products. The table below compares our net
sales and operating income for fiscal years 1997 and 1998.
<TABLE>
<CAPTION>
1997 1998 (DECREASE) % (DECREASE)
---- ---- ---------- ------------
<S> <C> <C> <C> <C>
Net Sales $16,687,271 $15,011,926 $(1,675,345) (10%)
Operating Income $ 344,060 $ (434,728) $ (778,788) (226%)
</TABLE>
For the five fiscal years immediately preceding December 31, 1998,
however, we had experienced some gain and did not have any accumulated deficit.
While the retail environment
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remains difficult, we believe that we will return to our previous pattern of
sales growth, although we cannot assure you that we will be able to do so.
We are subject to all risks associated with operating an apparel
business, such as the uncertainty of market acceptance of our products, the need
to expand marketing and distribution capabilities and the unexpected problems
and expenses related to marketing, manufacturing and distribution. We expect
these uncertainties, difficulties and delays to be compounded by the highly
competitive environment and local and national economic conditions. Our future
operating results will also depend upon many factors including successful
identification and response to consumer market trends, effective monitoring and
controlling costs and efficient business operations and strategies.
DEPENDENCE ON EVERLAST PRODUCT LICENSES
Our former affiliate, Total Impact, Inc. ("Total Impact"), was granted
a license to distribute and sell products bearing the Everlast trademark in the
United States. The license is embodied in an agreement, dated as of June 1, 1992
between them and Everlast World's Boxing Headquarters Corporation ("Everlast").
On July 7, 1992, they assigned this license to us, as contained in the
Assignment of License Agreement, between us and them. Additionally, on January
1, 1993, Everlast granted us a license to distribute and sell their products in
Canada. The original term of our licenses to distribute and sell Everlast
certain products bearing the Everlast trademark in the United Stated and Canada,
collectively referred to as the "Everlast Licenses," expired on December 31,
1996. In January 1997, the Everlast Licenses were amended to extend the term to
December 31, 2002. We also have the option to renew these licenses for up to two
successive five-year terms through December 31, 2012, assuming we continue to
satisfy certain conditions specified in the Everlast Licenses. Our exclusive
right to sell women's activewear, sportswear, swimwear and coverups with the
Everlast trademark in the United States and Canada was granted under our
Everlast Licenses. We are required to satisfy certain terms and conditions
specified in the Everlast Licenses.
Furthermore, on January 1, 1999, we entered into an agreement with
Everlast to exclusively distribute and sell men's apparel using the Everlast
trademark in the United States and Canada ("Men's License"). The Men's License
expires on December 31, 2001 and is renewable twice, each for a five-year
period. Similar to the Everlast Licenses, we are required to satisfy certain
terms and conditions specified in the Men's Licenses.
Everlast has the right to terminate the men's and women's licenses upon
certain circumstances, including our failure to sell the minimum quantity of
products covered in their respective licenses. If Everlast terminates its
licenses, or if we fail to renew any one of these licenses, we would lose the
right to sell and distribute their products. A loss of one of the licenses will
have a material adverse effect on our business, results of operations and future
growth. Currently, we are in compliance with the requirements specified in all
the licenses by
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the applicable licensor. However, we cannot assure you that we will always be
able to do so, which could result in the termination of the licenses by the
applicable licensor. You must note that the minimum quantity required to be sold
increases over time.
On May 20, 1994, we entered into a trademark license agreement with
Converse, Inc. (the "Converse License"). This agreement granted us a license to
distribute and sell Converse certain products bearing the Converse trademark.
Our exclusive rights to sell women's and girl's activewear and sportswear with
the Converse trademark in the United States was granted under the Converse
License. Our license expired on April 30, 1998 and was amended to extend the
term through March 31, 1999. On March 10, 1999, we decided not to renew the
Converse License. Additionally, the term of our amended license to market and
distribute certain products bearing certain trademarks owned by MTV Networks,
Inc. expired on June 30, 1999 and was not renewed because we did not achieve
sufficient sales to automatically renew the license agreement. Although we
believe that discontinuation of these licenses will not have a material impact
on our operations, we cannot assure that this will be so.
DEPENDENCE UPON THE CENTURY FACILITY
In August 1992, we entered into a factoring agreement with Century,
which has been amended from time to time (as so amended, the "Century
Agreement"). This agreement provides for Century's purchase of our accounts
receivable (the "Century Facility"). According to the terms of the Century
Agreement, Century is generally required to pay us the proceeds of the purchased
accounts receivable net of commissions, reserves and certain other amounts, five
business days after each of our customers has paid Century. However, Century has
the option to pay us in advance or to arrange, on our behalf, a letter of credit
in favor of our manufacturers, for the net amounts that they would pay us upon
its collection.
According to the Century Agreement, we assign to Century all of our
accounts receivable derived from our customers' product orders in the United
States. The assigned payments and other rights to our accounts receivable are on
a non-recourse basis. Therefore, Century must approve all customer credits
before any products are shipped to our customers.
The maximum total amount of accounts receivable that Century is willing
to advance continuously varies. We do not know the precise formula that Century
uses to calculate the maximum amount available under the Credit Facility. There
is also no formula stated in the Credit Agreement. Century bases its analysis on
various factors, including our qualifying accounts receivable, inventory and
equity capital. Occasionally, Century advances more than the maximum total
amount it estimated ("over-advances").
The table below shows the amount of our accounts receivable assigned to
Century and its advances and over-advances for the fiscal years ended December
31, 1997 and 1998:
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1997 1998
---- ----
Assigned Accounts Receivable $2,977,617 $1,988,101
Century's Advances $1,094,960 $ 486,364
Due From Factor-Century/(Over- $1,822,657 $1,501,737
advances)
We cannot assure you that Century will continue to make advances before
its commitments to us are due. We also cannot assure you that our relationship
with them will always be satisfactory.
We use any advances or letters of credit to increase our working
capital. As of December 31 1998, our working capital was $4,994,000. This is a
decrease from our working capital of $5,187,272 as of December 31, 1997.
Although our working capital needs have continuously increased, the Century
Facility has been sufficient. The decrease was primarily attributable to the
Company's net loss for the year ended December 31, 1998. We cannot assure you
that if there are no more advances or the Century Facility is terminated, that
we will not be materially adversely affected. We believe, however, that the
funds generated from our operations and the advances already made under the
Credit Facility will be sufficient to fund our working capital needs and capital
requirements for the next twelve months. If you need more information regarding
the Century Facility, the Century Agreement and our liquidity and capital
resources, you can see "Management's Discussion and Analysis or Plan of
Operations" section in the Form 10-KSB we filed on March 30, 1999 with the SEC.
CHARACTERISTICS OF APPAREL INDUSTRY AND ECONOMIC CYCLE
Historically, the apparel industry has experienced substantial changes
in its business cycle. Recessions, the states of the national and local
economies and uncertainties regarding future economic prospects affect consumer
spending habits and adversely affect our business, financial condition and
results of operations. In addition, we, as well as our competitors, sell to
retailers who have experienced financial difficulties during the past several
years. If these financial difficulties continue or worsen, we cannot assure you
that our business, financial condition and results of operations will not be
materially adversely affected. If you need more information regarding the
cyclical nature of the apparel industry, you can see "Management's Discussion
and Analysis or Plan of Operations" section in the Form 10-KSB we filed on March
30, 1999 with the SEC.
We do not believe that the sales of our products are seasonal in any
material way. Our products, taken as a whole, are sold year-round. While our
results of operations may vary quarterly, we do not believe that such variations
are material to our business. Consequently, our
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<PAGE>
results of operations in any one quarter are not representative of the results
of operations we expect for other quarters or for the full fiscal year.
CHANGES IN CONSUMER MARKET TRENDS; NEW PRODUCTS
Our ability to anticipate, gauge and respond adequately and timely to
rapid changes in consumer demand and market trends materially affect our
business and results of operations. We cannot assure you that we will be
competitive in this regard. We also cannot assure you that if we fail to achieve
our objectives, our business, results of operations or prospects will not be
materially adversely affected. We obtained a license to market Everlast men's
products exclusively in the United Stated starting January 1, 1999. The license
runs until December 31, 2001, with an option to renew for two successive
five-year periods. We cannot assure you, however, that our products will
continuously be received positively by our target markets.
COMPETITION
The apparel industry, specifically the sportswear and activewear
markets, is intensely competitive. The competition is based on:
o price
o design
o quality
o name recognition
o timing
We compete with a large number of competitors, many of which are larger
in size and have substantially greater financial and other resources than we
have available. We cannot assure you that we will be able to successfully
differentiate our products from other trademarks, products or designs. We also
cannot assure you that retailers or consumers will consider our present and
future products or designs to be superior to those of our competitors.
We are required to sell our Everlast products to Everlast at a 25%
discount from the lowest price we offer to any of our other customers. However,
Everlast may not resell or distribute these products at a price that is lower
than our lowest price. To date, Everlast has not purchased any of such products
from us. If Everlast makes a significant order of such products, it will
adversely affect our overall gross profit margins and could have a material
adverse effect on our business, financial condition and results of operations.
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<PAGE>
DEPENDENCE ON THIRD-PARTY MANUFACTURERS AND SUPPLIERS
We use third-party, independent contractors to manufacture all of our
products; we do not manufacture any of our products ourselves. Since 1993,
approximately 75% of our products have been manufactured by independent
contractors in the United States. The remaining 25% have been imported from
international independent contractors, primarily from the Asian countries.
Currently, we use over ten different manufacturers. Our two largest
domestic manufacturers accounted for approximately 44.4% and 18.8%,
respectively, of our total product requirements in the fiscal year ended
December 31, 1998. Because of available alternative sources, we do not believe
that a loss of any of our contractors would have a material adverse effect on
our business, financial condition and results of operations. We believe that we
have good relations with our contractors, but we do not have a written agreement
with any of them.
Bilateral textile agreements between the United States and foreign
nations have imposed constraints in the supply of our foreign-sourced products.
Political disputes between the United States and the foreign nations where the
foreign contractors are located may disrupt trade, impose additional import
regulations and duties, taxes and other charges. Additionally, political
instability in their respective countries may adversely affect some of our
product sources. If any of our domestic or foreign contractors are unable or
unwilling to manufacture or ship our products in a timely manner, our timely
delivery to customers will be adversely affected. Consequently, we may miss
retailing seasons with respect to some or all of our products and may adversely
affect our relationship with our customers, both of which could have a material
adverse effect on our business, financial condition and results of operations.
If you need to see more information regarding our contractors, you could read
"Business - Manufacturing and Suppliers" in the Form 10-KSB we filed on March
30, 1999 with the SEC.
INVENTORY CONTROL PROCEDURES
We have a "just-in-time" manufacturing and purchasing policy. We expect
this policy to decrease the risk of accumulating obsolete inventory that may
need to be sold at a discount or below cost when our actual sales are lower than
what we anticipated for any given period. We cannot assure you that our
"just-in-time" policy will continue to be successful or that it will not have an
adverse effect on our business. If you need to see more information regarding
our manufacturing and distribution policies, you could read "Business -
Manufacturing and Suppliers" and "Business - Sales and Distribution" sections in
the Form 10-KSB we filed on March 30, 1999 with the SEC.
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DEPENDENCE ON MANAGEMENT AND ATTRACTION OF KEY EMPLOYEES
George Q Horowitz, the Chairman of our Board, our Chief Executive
Officer, Chief Financial Officer, President and Treasurer has more than 23 years
of experience in the women's apparel industry. He has specialized on
merchandising, sales and operations side of the business. Rita Cinque Kriss, our
Executive Vice President, has more than 12 years of experience in the apparel
industry. She has specialized on production, merchandising and operations side
of the business.
We have entered into employment agreements with each of Mr. Horowitz
and Ms. Cinque Kriss. They have agreed to continue their employment and not to
compete with us. The loss of the services of either Mr. Horowitz or Ms. Cinque
Kriss would have a material adverse effect on our business, financial condition,
results of operations and prospects. Consequently, we have obtained a life
insurance policy on Mr. Horowitz in the amount of $2,000,000 and on Ms. Cinque
Kriss in the amount of $500,000. We cannot assure you that we will be able or
willing to maintain such insurance policies on acceptable terms or premiums, if
at all, in the future.
Our future growth will largely depend on our ability to retain the
services of Mr. Horowitz and Ms. Cinque Kriss, as well as our ability attract
and retain other qualified personnel. We cannot assure you that such individuals
can be attracted and retained because of the intense competition in the apparel
industry.
CONTROL BY CURRENT MANAGEMENT
Management of the Company and members of their immediate families
currently own or control more than 25.2% of our outstanding voting securities.
These persons are and will continue to be able to exercise control over the
election of the Company's directors.
ABSENCE OF DIVIDENDS
Since our inception in July 1992, we have not declared or paid a
dividend on our common stock. At present, we do not anticipate that we will pay
cash dividends on our common stock. We expect to retain all of our future
earnings for general working capital purposes. Accordingly, we cannot guaranty
that we will ever pay cash dividends.
POSSIBLE VOLATILITY OF SECURITIES PRICES
The market price of our common stock has in the past been, and may in
the future continue to be, volatile. For instance, between January 1, 1998 and
July 12, 1999, the closing
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price of our common stock has ranged between $0.50 and $25.00. A variety of
events may cause the market price of our common stock to fluctuate
significantly, including:
o quarter to quarter variations in operating results;
o adverse news announcements;
o the introduction of new products;
o market conditions in the industry.
New fashion trends, from us or from our competitors, or governmental
regulation or general conditions in the apparel industry may have a significant
effect on our business and on the market price of our securities.
Additionally, the sale, or availability for sale, of substantial
amounts of Common Stock in the public market pursuant to Rule 144 or otherwise
could adversely affect the market price of our Common Stock and could impair our
ability to raise additional capital through the sale of our equity securities.
As of July 12, 1999, 618,525 shares of our common stock were eligible to be sold
under Rule 144.
POSSIBLE NASDAQ DELISTING; POTENTIALLY LIMITED TRADING MARKET
Our common stock is listed on the Nasdaq SmallCap Market. To remain
eligible for listing on the Nasdaq SmallCap Market we must comply with the
following:
o our common stock must have a minimum bid price of $1.00;
o we must have minimum tangible net assets of $2,000,000 or a market
capitalization of $35,000,000 or net income of $500,000 in two of the
three prior years; and
o we must have a public float of at least 500,000 shares with a market
value of at least $1,000,000; at least 300 stockholders must hold our
common stock; and at least two market makers must make a market in it.
If our common stock is delisted from Nasdaq, trading, if any, would be
conducted on the OTC Bulletin Board. If our common stock is delisted from
Nasdaq, the common stock could be considered a penny stock. SEC regulations
generally define a penny stock to be an equity security that is not listed on
Nasdaq or a national securities exchange and that has a market price of less
than $5.00 per share, subject to certain exceptions. The regulations of the SEC
would require broker-dealers to deliver to a purchaser of common stock a
disclosure schedule explaining the penny stock market and the risks associated
with it. Various sales practice
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requirements are also imposed on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors (generally
institutions). In addition, broker-dealers must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. If the common stock is traded on the OTC Bulletin Board and becomes
subject to the regulations applicable to penny stocks, investors may find it
more difficult to obtain timely and accurate quotes and execute trades in the
common stock.
POTENTIAL PRODUCT LIABILITY EXPOSURE
We are exposed to an inherent risk of potential product liability
claims, which could lead to substantial damage awards. We currently maintain
product liability and excess liability insurance in the amount of and with a
maximum payout of $7,000,000. If a successful claim is brought against us in
excess of, or outside of, our insurance coverage, it could have a material
adverse effect on our business, results of operations and financial condition.
Claims against us, regardless of their merit or eventual outcome, may also have
a material adverse effect on the consumer demand for our products.
BARRIERS TO TAKEOVER
Our Certificate of Incorporation and By-Laws contain certain provisions
which may deter, discourage, or make the assumption of control more difficult by
another corporation or person through a tender offer, merger, proxy contest or
similar transaction or series of transactions. These provisions include an
unusually large number of authorized shares of common stock and the prohibition
of cumulative voting.
The Company is subject to Section 203 of the Delaware General
Corporation Law, which prevents an "interested stockholder" (defined in Section
203, generally, as a person owning 15% or more of a corporation's outstanding
voting stock) from engaging in a "business combination" with a publicly-held
Delaware corporation for three years following the date such person became an
interested stockholder, unless:
o before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination;
o upon consummation of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (subject to certain
exceptions); or
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o following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder. A "business combination" includes mergers, stock or asset
sales and other transactions resulting in a financial benefit to the
interested stockholder.
The provisions of Section 203 could have the effect of delaying,
deferring or preventing a change in the control of the Company.
The overall effect of these provisions may be to deter a future tender
offer or other takeover attempt that some stockholders might view to be in their
best interest. Such an offer might include a premium over the market price of
our capital stock at that time. In addition, these provisions may assist our
current management to retain its position and place it in a better position to
resist changes which some of our stockholders may want them to make if they are
not satisfied with the conduct of our business.
LIMITATIONS ON LIABILITY OF DIRECTORS AND OFFICERS
Our Certificate of Incorporation allows us to indemnify any person who
is or was made a party to, or is or was threatened to be made a party to, any
pending, completed, or threatened action, suit or proceeding by reason of the
fact that he or she is or was our director, officer, employee or agent or is or
was serving at our request as a director, officer, employee or agent of any
corporation, partnership, joint venture, trust or other enterprise. The
Certificate of Incorporation permits us to advance expenses to an indemnified
party in connection with defending any such proceeding, upon receipt of an
undertaking by the indemnified party to repay those amounts if it is later
determined that the party is not entitled to indemnification.
The foregoing provisions may reduce the likelihood of derivative
litigation against directors and officers and discourage or deter stockholders
from suing directors or officers for breaches of their duties us. Even though
such an action, if successful, might otherwise benefit us and our stockholders.
In addition, the funds that we will use to indemnify directors and officers will
not be available for operational purposes.
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<PAGE>
THE COMPANY
Active Apparel Group, Inc. (the "Company"), a Delaware corporation
organized on July 6, 1992, is engaged in the design, manufacture, marketing and
sale of women's activewear, sportswear, swimwear and coverups, and, as of
January 1, 1999, the design, manufacture, marketing and sale of men's
activewear, sportswear and outerwear featuring the widely- recognized Everlast
trademark (the "Everlast Products"). Generally, the Company has the exclusive
right to use and distribute the Everlast Products in the United States, its
territories and possessions (collectively, the "United States") and Canada, its
provinces, territories and possessions (collectively, "Canada"). The Company is
also engaged in the design, manufacture, marketing and sales of unisex
activewear and accessories featuring "MTV's THE GRIND" and/or "THE GRIND"
trademarks (the "MTV Products"). The Company did not design or produce a line of
MTV activewear for sale in 1999. The Company decided not to renew the MTV
license, which expired on June 30, 1999. SEE "RISK FACTORS - DEPENDENCE ON
EVERLAST PRODUCT LICENSES". The Company is a member of the Sporting Goods
Manufacturers Association, the National Sporting Goods Association and the
Canadian Sporting Goods Association.
The Company's strategy is to expand the Company's operations and to
become a leading brand name supplier of women's and men's activewear and
sportswear. Key elements of this strategy include:
o balancing and diversifying the Company's product collections in terms
of style and price range;
o maximizing visibility in the Company's products through focused
advertising and marketing programs;
o expanding its product distribution system by establishing better
relationships with a broader network of retailers worldwide subject to
distribution restrictions of the Everlast Product licenses;
o capitalizing on the Company's strengths through design and
manufacture for private label activewear and sportswear customers.
All of the Company's products are manufactured by third party
independent manufacturing contractors in the United States and abroad and are
sold to over 20,000 retail locations throughout the United States and Canada.
See "Business - Sales and Distribution" sections in the Form 10-KSB we filed on
March 30, 1999 with the SEC.
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<PAGE>
PRODUCTS
The Company's product line primarily consists of the Everlast Products,
which are designed and marketed with a goal of a high level of brand name
recognition and consumer preference by combining performance, market appeal and
value. The Company performs extensive market research in attempting to provide
its retail customers and consumers with functionality along with the most
desirable styles, color schemes and fabrics. The Company has actively pursued a
strategy of developing a balanced and diversified mix of products in order to
maximize the brand name recognition and appeal to various demographic groups and
geographic areas. The Company's product line is primarily composed of the
Everlast collection.
The Company sells a diverse collection of Everlast Products consisting
of women's activewear, sportswear, swimwear and coverups, and as of January 1,
1999, men's activewear, sportswear and outerwear under the Everlast trademark
and logo. Since 1910, Everlast has gained wide recognition in professional and
amateur boxing. The Company believes that the Everlast name has become
synonymous with quality athletic products. The Company, through the Everlast
Products, seeks to continue this tradition, while recognizing that the active
person has particular demands regarding quality, comfort and style in activewear
and sportswear. The Everlast Products consist of approximately 80 separate
products with varying styles and functions. These include fitness apparel and
sportswear made of nylon, fleece, cotton, Lycra spandex and other technical
polyester fabrics with moisture management properties. The Everlast Products are
designed to feature the Everlast trademark and logo and to focus on the use of
appropriate fabric blends to maximize comfort and performance. The retail prices
for the Everlast Products generally range from $15 to $70.
USE OF PROCEEDS
The shares of common stock offered hereby are being registered for the
account of the selling stockholders identified in this prospectus. See "Selling
Stockholders." All net proceeds from the sale of the common stock will go to the
stockholders who offer and sell their shares. We will not receive any part of
the proceeds from such sales of common stock. We will, however, receive the
exercise price of the options at the time of their exercise. If all of the
options are exercised, we will realize proceeds in the amount of $2,071,286.
Such proceeds will be contributed to working capital and will be used for
general corporate purposes.
SELLING STOCKHOLDERS
This prospectus relates to the reoffer and resale of shares issued or
that may be issued to the selling stockholders under our 1993 Stock Option Plan
and the 1995 Non-Employee Director
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<PAGE>
Stock Option Plan (together, the "Stock Option Plans"). This Prospectus also
relates to such indeterminate number of additional shares of common stock that
may be acquired by the selling stockholders as a result of the antidilution
provisions of the Stock Option Plans. We will provide additional information
regarding the identity of the selling stockholders and certain other information
relating to the selling stockholders as supplement to this prospectus if we are
required by law to do so.
The following table sets forth (i) the number of shares of common stock
owned by each selling stockholder at July 12, 1999, (ii) the number of shares of
common stock to be offered for resale by each selling stockholder (i.e., the
total number of shares underlying options held by each selling stockholder
irrespective of whether such options are presently exercisable within sixty days
of July 12, 1999) and (iii) the number and percentage of shares of common stock
that each selling stockholder will beneficially own after completion of the
offering, assuming that all shares that may be offered for resale are sold and
no other shares beneficially owned by the selling stockholders are also sold.
<TABLE>
<CAPTION>
Number of Number of
Shares of Shares of Percentage of
Common Number of Common Stock Class to be
Stock Owned Shares to be after completion Owned after
at July 12, Offered for of the Offering completion of
Name 1999 (1) Resale(2) (3) the-Offering
- --------------------------------------- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
George Q Horowitz..................... 660,628 (4) 62,000 598,628 22.6%
Chairman of the Board;
Chief Executive Officer
James K. Anderson..................... 153,942 (5) 67,592 86,350 3.2%
Vice Chairman of the Board;
Director
Rita Cinque Kriss..................... 121,700 (6) 35,500 86,200 3.3%
Executive Vice President;
Secretary of the Company;
Director
Larry Kring........................... 25,338 (7) 15,000 10,338 *
Director
Edward R. Epstein .................... 22,500 (8) 14,400 1,000 *
Director
Angelo Giusti ........................ 9,400 (9) 8,000 1,400 *
Director
Donald J. Horowitz.................... 106 (10) 106 106 *
</TABLE>
- ------------------
* Less than 1%.
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<PAGE>
(1) Includes all options being registered for resale regardless of whether
these options are currently exercisable within 60 days.
(2) Consists of shares of common stock issuable upon exercise of options
both currently and not currently exercisable.
(3) Assumes that all shares that may be offered for resale are sold and no
other shares that are beneficially owned by the selling stockholders
are also sold. A person is deemed to be the beneficial owner of voting
securities that can be acquired by such person within 60 days after the
date hereof upon the exercise of options, warrants or convertible
securities. Each beneficial owner's percentage ownership is determined
by assuming that options, warrants or convertible securities that are
held by such person (but not those held by any other person) have been
exercised. Unless otherwise noted, we believe that all persons named in
the table have sole voting and investment power with respect to all
shares beneficially owned by them. The total issued and outstanding
shares as of the first quarter is 2,592,581 shares of common stock.
(4) Includes 42,000 shares of common stock issuable to Mr. Horowitz if he
decides to exercise his currently exercisable options within 60 days.
Mr. Horowitz has been the Company's President, Chief Executive Officer,
Treasurer and a director since July 1992 and Chairman of the Board
since January 1996.
(5) Includes 67,592 shares of common stock issuable to Mr. Anderson if he
decides to exercise his currently exercisable options within 60 days.
Mr. Anderson has been a director of the Company since August 1992.
(6) Includes 25,500 shares of common stock issuable to Ms. Cinque Kriss if
she decides to exercise her currently exercisable options within 60
days. Ms. Cinque Kriss has been the Company's Executive Vice President
and a director and Secretary since May 1994.
(7) Includes 15,000 shares of common stock issuable to Mr. Kring if he
decides to exercise his currently exercisable options within 60 days.
Mr. Kring has been a director of the Company since August 1993.
(8) Includes 11,900 shares of common stock issuable to Mr. Epstein if he
decides to exercise his currently exercisable options within 60 days.
Mr. Epstein has been a director of the Company since January 1996 and
has provided legal services to the Company since July 1992.
(9) Includes 5,500 shares of common stock issuable to Mr. Giusti if he
decides to exercise his currently exercisable options within 60 days.
Mr. Giusti has been the Company's Vice President of Operations since
June 1997 and a director since January 1997.
(10) Mr. Donald J. Horowitz was a director of the Company from August 1992
to August 1997.
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<PAGE>
We cannot assure you that the selling stockholders will exercise their
options to purchase our common stock.
The shares covered by this prospectus may be sold from time to time so
long as this prospectus remains in effect; provided, however, that the selling
stockholders are first required to contact our Corporate Secretary to confirm
that this prospectus is in effect. We intend to distribute to each selling
stockholder a letter describing the procedures that the selling stockholder may
follow in order to use this prospectus to sell the shares and under what
conditions the prospectus may not be used. The selling stockholders expect to
sell the shares at prices then attainable, less ordinary brokers' commissions
and dealers' discounts as applicable.
PLAN OF DISTRIBUTION
This offering is self-underwritten; neither we nor the selling
stockholders have employed an underwriter for the sale of common stock by the
selling stockholders. We will bear all expenses in connection with the
preparation of this prospectus. The selling stockholders will bear all expenses
associated with the sale of the common stock.
The selling stockholders may offer their shares of common stock
directly or through pledgees, donees, transferees or other successors in
interest in one or more of the following transactions:
o On any stock exchange on which the shares of common stock may be
listed at the time of sale;
o In negotiated transactions;
o In the over-the-counter market;
o In a combination of any of the above transactions.
The selling stockholders may offer their shares of common stock at any
of the following prices:
o Fixed prices which may be changed;
o Market prices prevailing at the time of sale;
o Prices related to such prevailing market prices;
o At negotiated prices.
The selling stockholders may effect such transactions by selling shares
to or through broker-dealers, and all such broker-dealers may receive
compensation in the form of discounts, concessions, or commissions from the
selling stockholders and/or the purchasers of shares of common stock for whom
such broker-dealers may act as agents or to whom they sell as principals, or
both (which compensation as to a particular broker-dealer might be in excess of
customary commissions).
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<PAGE>
Any broker-dealer acquiring common stock from the selling stockholders
may sell the shares either directly, in its normal market-making activities,
through or to other brokers on a principal or agency basis or to its customers.
Any such sales may be at prices then prevailing on Nasdaq or at prices related
to such prevailing market prices or at negotiated prices to its customers or a
combination of such methods. The selling stockholders and any broker-dealers
that act in connection with the sale of the common stock hereunder might be
deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act; any commissions received by them and any profit on the resale of
shares as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. Any such commissions, as well as other expenses
incurred by the selling stockholders and applicable transfer taxes, are payable
by the selling stockholders.
The selling stockholders reserve the right to accept, and together with
any agent of the selling stockholder, to reject in whole or in part any proposed
purchase of the shares of common stock. The selling stockholders will pay any
sales commissions or other seller's compensation applicable to such
transactions.
We have not registered or qualified offers and sales of shares of the
common stock under the laws of any country, other than the United States. To
comply with certain states' securities laws, if applicable, the selling
stockholders will offer and sell their shares of common stock in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the selling stockholders may not offer or sell
shares of common stock unless we have registered or qualified such shares for
sale in such states or we have complied with an available exemption from
registration or qualification.
The selling stockholders have represented to us that any purchase or
sale of shares of common stock by them will comply with Regulation M promulgated
under the Securities Exchange Act of 1934, as amended. In general, Rule 102
under Regulation M prohibits any person connected with a distribution of our
common stock (a "Distribution") from directly or indirectly bidding for, or
purchasing for any account in which he or she has a beneficial interest, any of
our common stock or any right to purchase our common stock, for a period of one
business day before and after completion of his or her participation in the
Distribution (we refer to that time period as the "Distribution Period").
During the Distribution Period, Rule 104 under Regulation M prohibits
the selling stockholders and any other persons engaged in the Distribution from
engaging in any stabilizing bid or purchasing our common stock except for the
purpose of preventing or retarding a decline in the open market price of our
common stock. No such person may effect any stabilizing transaction to
facilitate any offering at the market. Inasmuch as the selling stockholders will
be reoffering and reselling our common stock at the market, Rule 104 prohibits
them from effecting any stabilizing transaction in contravention of Rule 104
with respect to our common stock.
There can be no assurance that the selling stockholders will sell any
or all of the shares offered by them hereunder or otherwise.
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<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the issuance of the shares of
common stock offered hereby have been passed upon for us by Olshan Grundman
Frome Rosenzweig & Wolosky LLP, New York, New York.
EXPERTS
Our financial statements included in our annual report on Form 10-KSB
for the fiscal year ended December 31, 1998 referred to above have been audited
by Berenson & Company LLP, independent certified accountants, as set forth in
their report dated January 29, 1999 accompanying such financial statements, and
are incorporated herein by reference in reliance upon the report of such firm,
which report is given upon their authority as experts in accounting and
auditing.
Any financial statements and schedules incorporated by reference in the
registration statement of which this prospectus is part that have been audited
and are subject of a report by independent accountants will be so incorporated
by reference after the date of this prospectus in reliance upon such reports and
upon the authority of such firms as experts in accounting and auditing to the
extent covered by consents filed with the SEC.
ADDITIONAL INFORMATION
We have filed with the SEC a Registration Statement on Form S-8
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the shares offered hereby.
This prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the SEC. For further information with respect to us
and the shares of common stock offered hereby, please refer to the Registration
Statement. Statements contained in this prospectus about any contract or
document are not necessarily complete, and in each instance, you should refer to
the copy of such contract or document filed with the SEC. Each such statement is
qualified in all respects by such reference.
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<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The following documents filed by Active Apparel Group, Inc. (the
"Company") with the Securities and Exchange Commission (the "Commission") are
incorporated herein by reference and made a part hereof:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1998;
(b) The Company's Quarterly Report on Form 10-Q for the first quarter
of fiscal year 1999; and
(c) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on
April 24, 1995.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13, 14 and 15(d) of the Securities Exchange Act of 1934, as
amended, prior to the filing of a post-effective amendment that indicates that
all securities offered hereby have been sold or that de-registers all securities
remaining unsold, shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of the filing of such reports and documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
As permitted by the Delaware General Corporation Law ("DGCL"), the
Company's Certificate of Incorporation, as amended, limits the personal
liability of a director or officer to the Company for monetary damages for
breach of fiduciary duty of care as a director. Liability is not eliminated for
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payment of
dividends or stock purchase or redemptions pursuant to Section 174 of the DGCL
or (iv) any transaction from which the director derived an improper personal
benefit.
II-1
<PAGE>
The Company has also entered into indemnification agreements with each of
its directors and executive officers. The indemnification agreements provide
that the directors and executive officers will be indemnified to the fullest
extent permitted by applicable law against all expenses (including attorneys'
fees), judgments, fines and amounts reasonably paid or incurred by them for
settlement in any threatened, pending or completed action, suit or proceeding,
including any derivative action, on account of their services as a director or
officer of the Company or of any subsidiary of the Company or of any other
company or enterprise in which they are serving at the request of the Company.
No indemnification will be provided under the indemnification agreements,
however, to any director or executive officer in certain limited circumstances,
including on account of knowingly fraudulent, deliberately dishonest or willful
misconduct. To the extent the provisions of the indemnification agreements
exceed the indemnification permitted by applicable law, such provision may be
unenforceable or may be limited to the extent they are found by a court of
competent jurisdiction to be contrary to pubic policy.
DELAWARE LAW
The Company is subject to Section 203 of the Delaware General Corporation
Law, which prevents an "interested stockholder" (defined in Section 203,
generally, as a person owning 15% or more of a corporation's outstanding voting
stock) from engaging in a "business combination" with a publicly-held Delaware
corporation for three years following the date such person became an interested
stockholder, unless: (i) before such person became an interested stockholder,
the board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced (subject to certain exceptions) or (iii)
following the transaction in which such person became an interested stockholder,
the business combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the affirmative vote
of the holders of 66 2/3% of the outstanding voting stock of the corporation not
owned by the interested stockholder. A "business combination" includes mergers,
stock or asset sales and other transactions resulting in a financial benefit to
the interested stockholder.
The provisions of Section 203 could have the effect of delaying,
deferring or preventing a change in the control of the Company.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
4(a) - 1993 Stock Option Plan.
II-2
<PAGE>
4(b) - 1995 Non-Employee Director Stock Option Plan.
5 - Opinion of Olshan Grundman Frome Rosenzweig & Wolosky LLP.
23(a) - Consent of Berenson & Company LLP, independent auditors.
23(b) - Consent of Olshan Grundman Frome Rosenzweig & Wolosky LLP
(included in its opinion filed herewith as Exhibit 5).
24 - Powers of Attorney (included on the signature page to this
Registration Statement).
ITEM 9. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to
include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action,
II-3
<PAGE>
suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by a controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
D. The undersigned registrant hereby undertakes to deliver or cause
to be delivered with the prospectus, to each person to whom the
prospectus is sent or given, a copy of the registrant's latest
annual report to stockholders that is incorporated by reference in
the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or cause to be delivered to
each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on this 12th day of
July, 1999.
ACTIVE APPAREL GROUP, INC.
/S/ GEORGE Q HOROWITZ
-------------------------------------
George Q Horowitz
Chief Executive Officer and President
POWER OF ATTORNEYS AND SIGNATORIES
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints George Q Horowitz his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for and in his or her name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission granting unto said attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
SIGNATURE TITLE DATE
Chairman of the Board, July 12, 1999
Chief Executive Officer,
Chief Financial Officer
/S/ GEORGE Q HOROWITZ (Principal Executive Officer
- ------------------------ and Principal Accounting
George Q Horowitz Officer)
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<PAGE>
SIGNATURE TITLE DATE
/S/ JAMES K. ANDERSON Vice Chairman of the Board July 12, 1999
- ----------------------
James K. Anderson
/S/ RITA CINQUE KRISS
- ---------------------- Executive Vice President, July 12, 1999
Rita Cinque Kriss Secretary and Director
- ---------------------- Director
Larry Kring
/S/ EDWARD R. EPSTEIN Director July 12, 1999
- ----------------------
Edward R. Epstein
/S/ ANGELO GIUSTI Director July 12, 1999
- ---------------------
Angelo Giusti
II-6
ACTIVE APPAREL GROUP, INC.
1993 STOCK OPTION PLAN
<PAGE>
ACTIVE APPAREL GROUP, INC.
1993 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
This stock option plan (the "Plan") is intended to encourage ownership
of the stock of Active Apparel Group, Inc. (the "Company") by (a) officers and
other employees of the Company and any present or future subsidiaries of the
Company by providing them with opportunities to purchase stock in the Company
pursuant to options granted hereunder which qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and (b) directors, officers, employees, consultants and advisors of the Company
and any present or future subsidiaries of the Company by providing them with
opportunities to purchase stock in the Company pursuant to options granted
hereunder which do not qualify as "incentive stock options" under the Code.
2. STOCK SUBJECT TO THE PLAN.
(a) The total number of shares of the authorized but unissued
or treasury shares of the common stock, par value $.01 per share, of the Company
("Common Stock") for which options may be granted under the Plan shall not
exceed 443,900 shares subject to adjustment as provided in Section 12 hereof.
(b) If an option granted hereunder shall expire or terminate
for any reason without having been exercised in full, the unpurchased shares
subject thereto shall again be available for subsequent option grants under the
Plan.
(c) Stock issuable upon exercise of an option granted under
the Plan may be subject to such restrictions on transfer, repurchase rights, or
other restrictions as shall be determined by the Board of Directors and set
forth in the option agreement.
3. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board of Directors
of the Company. A majority of the members of the Board of Directors shall
constitute a quorum, and any action may be taken by a majority of those present
and voting at any meeting. The decision of the Board of Directors as to all
questions of interpretation and application of the Plan shall be final, binding
and conclusive on all persons. The Board of Directors may, in its sole
discretion, grant options to purchase shares of the Company's Common Stock and
issue shares upon exercise of such options as provided in the Plan. The Board
shall have authority, subject to the express provisions of the Plan, to construe
the respective option agreements and the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option agreements, which may but need not be
identical, and to make all other determinations in the
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<PAGE>
judgment of the Board necessary or desirable for the administration of the Plan.
The Board may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any option agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and shall be the
sole and final judge of such expediency. No director shall be liable for any
action or determination made in good faith. The Board of Directors may, in its
discretion, delegate its power, duties and responsibilities to a committee,
consisting of two or more members of the Board of Directors, all of whom are
"disinterested persons" (as hereinafter defined) (the "Committee"). If the
Committee is so appointed, all references to the Board of Directors herein shall
mean and relate to the Committee, unless the context otherwise requires.
(b) Any option granted to a Director of the Company shall only
be granted (i) by the Board of Directors, all of the members of which are
"disinterested persons" (as hereinafter defined) or (ii) by the Committee,
appointed as described above and all of whom are "disinterested persons."
Directors who are not otherwise employees of the Company shall not be eligible
to be granted an option under the Plan. The preceding sentences shall not apply
with respect to any options granted prior to the date of the first registration
of an equity security of the Company under Section 12 of the Securities Exchange
Act of 1934.
(c) For the purposes of the Plan, a director or member of the
Committee shall be deemed to be "disinterested" only if such-person qualifies as
a "disinterested person" within the meaning of paragraph (c)(2)(i) of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as such term is
interpreted from time to time.
4. TYPE OF OPTIONS.
Options granted pursuant to the Plan shall be authorized by action of
the Board of Directors of the Company (or a committee designated by the Board of
Directors) and may be designated as either incentive stock options meeting the
requirements of Section 422 of the Code or as non-qualified options which are
not intended to meet the requirements of Section 422 of the Code, the
designation to be in the sole discretion of the Board of Directors. Options
designated as incentive stock options that fail to continue to meet the
requirements of Section 422 of the Code shall be redesignated as non-qualified
options automatically without further action by the Board of Directors on the
date of such failure to continue to meet the requirements of Section 422 of the
Code.
5. ELIGIBILITY.
Options designated as incentive stock options may be granted only to
officers and other employees of the Company or any present or future subsidiary
of the Company (herein called "subsidiary" or "subsidiaries") as defined in
Section 424 of the Code and the Treasury Regulations promulgated thereunder (the
"Treasury Regulations"). Options designated as non-qualified options may be
granted to the directors, officers, employees, consultants and advisors of the
Company and any of its subsidiaries.
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In determining the eligibility of an individual to be granted an
option, as well as in determining the number of shares to be optioned to any
individual, the Board of Directors shall take into account the position and
responsibilities of the individual being considered, the nature and value to the
Company or its subsidiaries of his or her service and accomplishments, his or
her present and potential contribution to the success of the Company or its
subsidiaries, and such other factors as the Board of Directors may deem
relevant.
No option designated as an incentive stock option shall be granted to
any employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock representing more than 10% of the voting
power or more than 10% of the value of all classes of stock of the Company or a
parent or a subsidiary, unless the purchase price for the stock under such
option shall be at least 110% of its -fair market value at the time such option
is granted and the option, by its terms, shall not be exercisable more than five
years from the date it is granted. In determining the stock ownership under this
paragraph, the provisions of Section 424(d) of the Code shall be controlling. In
determining the fair market value under this paragraph, the provisions of
Section 7 hereof shall apply.
6. OPTION AGREEMENT.
Each option shall be evidenced by an option agreement (the "Agreement")
duly executed on behalf of the Company and by the optionee to whom such option
is granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Board of Directors, provided that options designated as incentive stock
options shall meet all of the conditions for incentive stock options as defined
in Section 422 of the Code. No option shall be granted within the meaning of the
Plan and no purported grant of any option shall be effective until the Agreement
shall have been duly executed on behalf of the Company and the optionee.
7. OPTION PRICE.
The option price of shares of the Company's Common Stock for options
designated as non-qualified stock options shall be as determined by the Board of
Directors. The option price of shares of the Company's Common Stock for options
designated as incentive stock options shall be the fair market value of such
Common Stock at the time the option is granted as determined by the Board of
Directors in accordance with the Treasury Regulations promulgated under Section
422 of the Code. If such shares are then listed on any national securities
exchange, the fair market value shall be the mean between the high and low sales
prices, if any, on the largest such exchange on the business day immediately
preceding the date of the grant of the option or, if none, shall be determined
by taking a weighted average of the means between the highest and lowest sales
prices on the nearest date before and the nearest date after the date of grant
in accordance with Treasury Regulations Section 25.2512-2. If the shares are not
then listed on any such exchange, the fair market value of such shares shall be
the mean between the high and low sales prices, if any, as reported in
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the National Association of Securities Dealers Automated Quotation System
National Market System ("NASDAQ/NMS") for the business day immediately preceding
the date of the grant of the option, or, if none, shall be determined by taking
a weighted average of the means between the-highest and-lowest sales on the
nearest date before and the nearest date after the date of grant in accordance
with Treasury Regulations Section 25.2512-2. If the shares are not then either
listed on any such exchange or quoted in NASDAQ/NMS, the fair market value shall
be the mean between the average of the "Bid" and the average of the "Ask"
prices, if any, as reported in the National Daily Quotation Service for the
business day immediately preceding the date of the grant of the option, or, if
none, shall be determined by taking a weighted average of the means between the
highest and lowest sales prices on the nearest date before and the nearest date
after the date of grant in accordance with Treasury Regulations Section
25.2512-2. If the fair market value cannot be determined under the preceding
three sentences, it shall be determined in good faith by the Board of Directors.
8. MANNER OF PAYMENT; MANNER OF EXERCISE.
(a) Options granted under the Plan may provide for the payment
of the exercise price by delivery of cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options.
(b) To the extent that the right to purchase shares under an
option has accrued and is in effect, options may be exercised in full at one
time or in part from time to time, by giving written notice, signed by the
person or persons exercising the option, to the Company, stating the number of
shares with respect to which the option is being exercised, accompanied by
payment in full for such shares as provided in subparagraph (a) above. Upon such
exercise, delivery of a certificate for paid-up non-assessable shares shall be
made at the principal office of the Company to the person or persons exercising
the option at such time, during ordinary business hours, within thirty (30) days
from the date of receipt of the notice by the Company, as shall be designated in
such notice, or at such time, place and manner as may be agreed upon by the
Company and the person or persons exercising the option.
9. EXERCISE OF OPTIONS.
Each option granted under the Plan shall, subject to Section 10(b) and
Section 12 hereof, be exercisable at such time or times and during such period
as shall be set forth in the Agreement; provided, however, that no option
granted under the Plan shall have a term in excess of ten (10) years from the
date of grant.
The the extent that an option to purchase shares is not exercised by an
optionee when it becomes initially exercisable, it shall not expire but shall be
carried forward and shall be exercisable, on-a-cumulative basis, until the
expiration of the exercise period.
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<PAGE>
10. TERM OF OPTIONS; EXERCISABILITY.
(a) TERM.
(1) Each option shall expire not more than ten (10) years from
the date of the granting thereof, but shall be subject to earlier termination as
herein provided.
(2) If an employee optionee is terminated for Cause (as
defined below) or voluntarily terminates his employment with the Company or one
of its subsidiaries, at any time, for any reason or for no reason, in either
such case, the option granted to such employee shall terminate, with respect to
any shares subject to options exercisable on the date of such termination, on
the tenth day following such termination, or on the date on which the option
expires by its own terms, whichever occurs first, and, with respect to any
shares subject to options not exercisable on the date of such termination, on
the date of such termination. For purposes of the Plan, the term "Cause" shall
mean the determination of the Board of Directors of the Company that any one or
more of the following events has occurred and is continuing on the date of such
determination: (i) substantial and continuing neglect or inattention by the
employee optionee of duties of his employment; (ii) willful misconduct or gross
negligence of the employee optionee in connection with the performance of such
duties; or (iii) the conviction of the employee optionee of a felony, either in
connection with the performance of his obligations to the Company or which shall
adversely affect the employee optionee's ability to perform such obligations.
(3) If an employee optionee is terminated by the Company
without Cause, at any time, or in the event of the termination of the employee
optionee's employment with the Company due to the death or disability of the
employee optionee, the option granted to such employee shall terminate, with
respect to any shares subject to options exercisable on the date of such
termination, on the 90th day following such termination, or on the date of the
option expires by its own terms, whichever occurs first, and, with respect to
any shares subject to options not exercisable on the date of such termination,
on the date of such termination.
(b) EXERCISABILITY.
An option granted to an employee optionee who ceases to be an employee
of the Company or one of its subsidiaries, at any time, for any reason or for no
reason, shall be exercisable only to the extent that the right to purchase
shares under such option has accrued and is in effect on the date such optionee
ceases to be an employee of the Company or one of its subsidiaries.
11. OPTIONS NOT TRANSFERABLE.
The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferable by such optionee and any such option
shall be exercisable during the lifetime of such optionee only by him. Any
option granted under the Plan shall be null and void and without effect
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<PAGE>
upon the bankruptcy of the optionee to whom the option is granted, or upon any
attempted assignment or transfer, including without limitation any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition, attachment, trustee process or similar process, whether legal
or equitable, upon such option.
12. RECAPITALIZATIONS, REORGANIZATIONS AND THE LIKE.
The existence of outstanding options shall not affect in any way the
right or power of the Company or its stockholders to make or authorize any or
all adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures, Preferred or prior preference
stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, the payment of a stock dividend, or other increase
or reduction of the number of shares of the Common Stock outstanding, without
receiving compensation therefor in money, services or property, then (i) the
number, class, and per share price of shares of stock subject to outstanding
options hereunder shall be appropriately adjusted in such a manner as to entitle
an optionee to receive upon exercise of an option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received as a result of the event requiring the adjustment had he exercised his
option in full immediately prior to such event; and (ii) the number and class of
shares then reserved for issuance under the Plan shall be adjusted by
substituting for the total number of shares of Common Stock then reserved that
number and class of shares of stock that would have been received by the owner
of an equal number of outstanding shares of Common Stock as the result of the
event requiring the adjustment.
If the Company is merged into or consolidated with another corporation
under circumstances where the Company is not the surviving corporation, or if
one or more corporations is merged into the Company or there is a consolidation
of the Company and one or more corporations in which the Company is the
surviving corporation and, in either such case, shares of Common Stock of the
Company are converted into cash, securities or other property other than shares
of the Common Stock of the Company, or if the Company is liquidated, or sells or
otherwise disposes of substantially all its assets to another corporation while
unexercised options remain outstanding under the Plan, (i) subject to the
provisions of clause (iii) below, after the effective date of such merger,
consolidation or sale, as the case may be, each holder of an outstanding option
shall be entitled, upon exercise of such option, to receive, in lieu of shares
of Common Stock, cash, securities or other property as the holders of shares of
Common Stock received pursuant to the terms of the merger, consolidation or
sale; (ii) the Board of Directors may accelerate the time for exercise of all
unexercised and unexpired options to and after a date prior to the effective
date of such merger, consolidation, liquidation or sale, as the case may be,
specified by the Board or (iii) all outstanding options may be cancelled by the
Board of Directors as of the effective date of any such merger,
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<PAGE>
consolidation, liquidation or sale provided that (x) notice of such cancellation
shall be given to each holder of an option and (y) each holder of an option
shall have the right to exercise such option to the extent that the same is then
exercisable or, if the Board of Directors shall have accelerated the time for
exercise of all unexercised and unexpired options, in full during the 30-day
period preceding the effective date of such merger, consolidation, liquidation
or sale.
Except as hereinbefore expressly provided, the issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash or property, or for labor or services either upon direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock then
subject to outstanding options.
13. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his or her employment by the Company (or any subsidiary) or interfere in any
way with the right of the Company (or any subsidiary), subject to the terms of
any separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Board of
Directors at the time.
14. WITHHOLDING.
The Company's obligation to deliver shares upon the exercise of the an
option granted under the Plan shall be subject to the option holder's
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements. The Company and employee may agree to withhold
shares of Common Stock purchased upon exercise of an option to satisfy the
above-mentioned withholding requirements.
15. RESTRICTIONS ON ISSUE OF SHARES.
(a) Notwithstanding the provisions of Section 8, the Company
may delay the issuance of shares covered by the exercise of an option and the
delivery of a certificate for such shares until one of the following conditions
shall be satisfied:
(i) The shares with respect to which such option has been
exercised are at the time of the issue of such shares effectively registered or
qualified under applicable Federal and state securities acts now in force or as
hereafter amended; or
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<PAGE>
(ii) Counsel for the Company shall have given an opinion,
which opinion shall not be unreasonably conditioned or withheld, that such
shares are exempt from registration and qualification under applicable Federal
and state securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of options shall be
effective, and the Company shall use its best efforts to bring about compliance
with the above conditions within a reasonable time, except that the Company
shall be under no obligation to qualify shares or to cause a registration
statement or a post-effective amendment to any registration statement to be
prepared for the purpose of covering the issue of shares in respect of which any
option may be exercised, except as otherwise agreed to by the Company in
writing.
16. PURCHASE FOR INVESTMENT.
Unless the shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933, as
now in force or hereafter amended, the Company shall be under no obligation to
issue any shares covered by any option unless the person who exercises such
option, in whole or in part, shall give a written representation and undertaking
to the Company which is satisfactory in form and scope to counsel for the
Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the option for his or her own account as an investment and not with
a view to, or for sale in connection with, the distribution of any such shares,
and that he or she will make no transfer of the same except in compliance with
any rules and regulations in force at the time of such transfer under the
Securities Act of 1933, or any other applicable law, and that if shares are
issued without such registration, a legend to this effect may be endorsed upon
the securities so issued.
17. MODIFICATION OF OUTSTANDING OPTIONS.
The Board of Directors may authorize the amendment of any outstanding
option with the consent of the optionee when and subject to such conditions as
are deemed to be in the best interests of the Company and in accordance with the
purposes of the Plan and so long as such amendment does not violate any
contractual obligations of the Company.
18. APPROVAL OF STOCKHOLDERS.
The Plan shall be subject to approval by the vote of stockholders
holding at least a majority of the voting stock of the Company voting in person
or by proxy at a duly held stockholders' meeting, or by written consent of a
majority of the stockholders, within twelve (12) months after the adoption of
the Plan by the Board of Directors and shall take effect as of the date of
adoption by the Board upon such approval. The Board of Directors may grant
options under the Plan prior to such approval, but any such option shall become
effective as of the date of grant only upon such approval and, accordingly, no
such option may be exercisable prior to such approval.
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<PAGE>
19. TERMINATION AND AMENDMENT OF PLAN.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board
of Directors of the Company. The Board of Directors may at any time terminate
the Plan or make such modification or amendment thereof as it deems advisable so
long as such modification or amendment does not conflict with contractual
obligations of the Company; provided, however, that except as provided in
Section 12, the Board of Directors may not, without the approval of the
stockholders of the Company obtained in the manner stated in Section 18,
increase the maximum number of shares for which options may be granted.
Termination or any modification or amendment of the Plan shall not, without the
consent of an optionee, adversely affect his or her rights under an option
theretofore granted to him or her.
20. RESERVATION OF STOCK.
The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
21. LIMITATION OF RIGHTS IN THE OPTION SHARES.
An optionee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the options except to the extent that the
option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.
22. NOTICES.
Any communication or notice required or permitted to be given under the
Plan shall be in writing and shall be deemed duly given if hand-delivered or
mailed by registered or certified mail, postage prepaid, return receipt
requested, as follows:
(a) If to the Company:
Active Apparel Group, Inc.
1350 Broadway
Suite 2300
New York, NY 10018
Attn: President
With a copy to:
Hutchins & Wheeler
101 Federal Street
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Boston, MA 02110
Attn: Michael J. Riccio, Jr., Esquire
(b) If to an Optionee:
To the most recent address furnished
in writing to the Company by the
Optionee,
unless and until notice of another or different address shall be given as
provided herein.
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<PAGE>
Adopted by the Board of Directors:
Approved by the Stockholders:
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ACTIVE APPAREL GROUP, INC.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
-------------------
The purpose of this 1995 Non-Employee Director Stock Option Plan (the
"Plan") is to promote the interests of Active Apparel Group, Inc. (the
"Company") by providing an inducement to attract and retain the services of
qualified persons who are not employees or officers of the Company to serve as
members of its Board of Directors and as chairmen of the committees thereof. The
Plan shall be effective as of the date it is adopted by the Board of Directors
of the Company, subject to the approval of the Plan by the holders of at least a
majority of the outstanding shares of the Company's common stock present, or
represented, and entitled to vote at the 1995 Annual Meeting of Stockholders.
Grants of options may be made under the Plan on and after its effective date,
subject to stockholder approval of the Plan as provided above. In the event such
approval is not obtained, any options granted under the Plan shall be null and
void.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
The total number of the authorized but unissued shares of common stock,
par value $.002 per share, of the Company (the "Common Stock") for which options
may be granted under the Plan shall not exceed 100,000 in the aggregate, subject
to adjustment in accordance with Section 9 hereof.
3. ADMINISTRATION.
--------------
The Plan shall be administered by the Board of Directors (the "Board")
or by a committee appointed by the Board (the "Committee"). In the event the
Board fails to appoint or refrains from appointing a Committee, the Board shall
have all power and authority to administer the Plan. In such event, the word
Committee wherever used herein shall be deemed to mean the Board. The Committee
shall, subject to the provisions of the Plan, have the power to construe this
Plan, to determine all questions hereunder, and to adopt and amend such rules
and regulations for the administration of the Plan as it may deem desirable. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
under it.
4. AUTOMATIC GRANT OF OPTIONS.
--------------------------
(a) Subject to the availability of shares of Common Stock under
the Plan, on the date on which this Plan is approved by the Company's
shareholders and on January 1 of each year thereafter, commencing January 1,
1996, options to purchase 3,000 shares of Common Stock (subject to adjustment in
accordance with Section 9 hereof) shall be automatically granted to
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each member of the Board of Directors who is not an employee or officer of the
Company on the date of grant.
(b) Subject to the availability of shares of Common Stock under
the Plan, on the date on which this Plan is approved by the Company's
shareholders and on January 1 of each year thereafter, commencing January 1,
1996, (i) options to purchase 200 shares of Common Stock (subject to adjustment
in accordance with Section 9 hereof) shall be automatically granted to each of
the Chairman of the Board of Directors and the Secretary of the Board of
Directors, provided that such person is not an employee or officer of the
Company on the date of grant, and (ii) options to purchase 100 shares of Common
Stock (subject to adjustment in accordance with Section 9 hereof) shall be
automatically granted to the Chairman of each committee of the Board of
Directors, provided that such person is not an employee or officer of the
Company on the date of grant.
Except for the specific options referred to above, no other options
shall be granted under the Plan.
5. OPTION AGREEMENT.
----------------
Each option granted under the Plan shall be evidenced by an option
agreement (the "Agreement") duly executed on behalf of the Company and by the
director to whom such option is granted, which Agreement shall (i) comply with
and be subject to the terms and conditions of the Plan and (ii) provide that the
optionee agrees to continue to serve as a director of the Company during the
term for which he was elected.
6. OPTION EXERCISE PRICE.
---------------------
Subject to the provisions of Section 9 hereof, the option exercise price
for an option granted under the Plan shall be the fair market value of the
shares of Common Stock covered by the option on the date of grant of the option.
If such shares are then listed on any national securities exchange, the fair
market value shall be the mean between the high and low sales prices, if any, on
such exchange on the business day immediately preceding the date of the grant of
the option or, if none, shall be determined by taking a weighted average of the
means between the highest and lowest sales prices on the nearest date before and
the nearest date after the date of grant. If the shares are not then listed on
any such exchange, the fair market value of such shares shall be the mean
between the high and low sales prices, if any, as reported in the National
Association of Securities Dealers Automated Quotation System National Market
System ("NASDAQ/NMS") for the business day immediately preceding the date of the
grant of the option, or, if none, shall be determined by taking a weighted
average of the means between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant. If the shares are not then
either listed on any such exchange or quoted in NASDAQ/NMS, the fair market
value shall be the mean between the average of the "Bid" and the average of the
"Ask" prices, if any, as reported in the National Daily Quotation Service for
the business day
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<PAGE>
immediately preceding the date of the grant of the option, or, if none, shall be
determined by taking a weighted average of the means between the highest and
lowest sales prices on the nearest date before and the nearest date after the
date of grant. If the fair market value cannot be determined under the preceding
three sentences, it shall be determined in good faith by the Committee.
7. VESTING OF SHARES AND NON-TRANSFERABILITV OF OPTIONS.
----------------------------------------------------
(a) VESTING. Options granted under the Plan shall not be
exercisable until they become vested. Options granted under the Plan shall vest
in the optionee and thus become exercisable, in accordance with the following
schedules provided that the optionee has contiguously served as a member of the
Board through such vesting date:
Cumulative Percentage of
Shares for which Option
WILL BE EXERCISABLE DATE OF VESTING
------------------- ---------------
33.34% On the first anniversary of the date of grant
66.67% On the second anniversary of the date of grant
100.00% On the third anniversary of the date of grant
(b) Upon a Change of Control (as defined below), all options
granted under the Plan shall vest and become immediately exercisable. For
purposes of this Agreement, a "Change of Control" shall mean the happening of
any of the following events:
(i) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2)) of the Securities Exchange
Act of 1934 (the "Exchange Act") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 30% or more the combined
voting power of the then outstanding securities entitled to vote generally in
the election of directors of the Company; excluding, however, the following: (1)
any acquisition directly from the Company, other than an acquisition by virtue
of the exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, (4) any acquisition by any entity pursuant to a transaction which is
approved by the Board of Directors; or (5) any acquisition by any person who is
the beneficial owner of at least 10% of the Company's Common Stock on June 30,
1995;
(ii) The approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company ("Corporate Transaction");
excluding, however, any Corporate Transaction which would result in the voting
securities of the Company immediately prior to such Corporate
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<PAGE>
Transaction continuing to represent (either by remaining outstanding or being
converted into voting securities or another entity) 50% or more of the combined
voting power of the securities entitled to vote generally in the election
directors of the Company or such other entity outstanding immediately after such
Corporate Transaction, or
(iii) If during any period of two consecutive years (not
including any period prior to June 30, 1995), individuals who at the beginning
of such period constitute the Board of Directors and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board.
(c) EXERCISE. To the extent that the right to exercise an
option has accrued and is in effect, the option may be exercised in full at one
time or in part from time to time by giving written notice, signed by the person
or persons exercising the option, to the Company, stating the number of shares
of Common Stock with respect to which the option is being exercised, accompanied
by payment in full for such shares, which payment may be in cash or in whole or
in part in shares of Common Stock already owned for a period of at least six
months by the person or persons exercising the option, valued at fair market
value, as determined under Section 6 hereof, on the date of exercise; provided,
however, that there shall be no such exercise at any one time as to fewer than
three hundred (300) shares or all of the remaining shares then purchaseable by
the person or persons exercising the option, if fewer than three hundred (300)
shares. Upon such exercise, delivery of a certificate for paid-up non-assessable
shares shall be made at the principal office of the Company to the person or
persons exercising the option at such time, during ordinary business hours, not
more than thirty (30) days from the date of receipt of the notice by the
Company, as shall be designated in such notice, or at such time, place and
manner as may be agreed upon by the Company and the person or persons exercising
the option.
(d) LEGEND ON CERTIFICATES. The certificates representing such
shares shall carry such appropriate legend, and such written instructions shall
be given to the Company's transfer agent, as may be deemed necessary or
advisable by counsel to the Company in order to comply with the requirements of
the Securities Act of 1933 or any state securities laws.
(e) NON-TRANSFERABILITY. Any option granted pursuant to the
Plan shall not be assignable or transferable other than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order, as
defined by the Internal Revenue Code of 1986, as amended (the "Code"), or Title
I of the Employment Retirement Security Income Act, or the rules thereunder, and
shall be exercisable during the optionee's lifetime only by him or her.
8. TERM OF OPTIONS.
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<PAGE>
(a) Each option shall expire seven (7) years from the date of
the granting thereof, but shall be subject to earlier termination as herein
provided.
(b) Except as otherwise provided in this Section 8, in the event
that an optionee ceases to be a director of the Company, the option granted to
such optionee may be exercised by him, but only to the extent that under Section
7 hereof the right to exercise the option has accrued and is in effect. Such
option may be exercised at any time within thirty (30) days after the date such
optionee ceases to be a director of the Company, at which time the option shall
terminate, or prior to the date on which the option expires by its terms,
whichever is earlier.
(c) If the optionee ceases to be a director of the Company
because the optionee has become permanently disabled (within the meaning of
Section 22(e)(3) of the Code), the option granted to such optionee may be
exercised by the optionee, to the extent the optionee was entitled to do so on
the date such optionee ceases to be a director. Such option may be exercised at
any time within six months after the date the optionee ceases to be a director,
at which time the option shall terminate, or prior to the date on which the
option otherwise expires by its terms, whichever is earlier.
(d) In the event of the death of an optionee, the option granted
to such optionee may be exercised, to the extent the optionee was entitled to do
so on the date of such optionee's death, by the estate of such optionee or by
any person or persons who acquired the right to exercise such option by bequest
or inheritance or otherwise by reason of the death of such optionee. Such option
may be exercised at any time within one (1) year after the date of death of such
optionee, at which time the option shall terminate, or prior to the date on
which the option otherwise expires by its terms, whichever is earlier.
9. ADJUSTMENTS.
-----------
Upon the occurrence of any of the following events, an optionee's rights
with respect to options granted to him or her hereunder shall be adjusted as
hereinafter provided, unless otherwise specifically provided in the written
agreement between the optionee and the Company relating to such option:
(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such subdivision, combination or stock dividend.
(b) CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated
with or acquired by another entity in a merger, sale of all or substantially all
of the Company's assets or otherwise (an "Acquisition"), the Committee or the
board of directors of any entity assuming the
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<PAGE>
obligations of the Company hereunder (the "Successor Board"), shall, as to
outstanding options, either (i) make appropriate provision for the continuation
of such options by substituting on an equitable basis for the shares then
subject to such options the consideration payable with respect to the
outstanding shares of Common Stock in connection with the Acquisition; or (ii)
upon written notice to the optionees, provide that all options must be
exercised, to the extent then exercisable, within a specified number of days of
the date of such notice, at the end of which period the options shall terminate;
or (iii) terminate all options in exchange for a cash payment equal to the
excess of the fair market value of the shares subject to such options (to the
extent then exercisable) over the exercise price thereof.
(c) RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than a transaction
described in subparagraph (b) above) pursuant to which securities of the Company
or of another corporation are issued with respect to the outstanding shares of
Common Stock, an optionee upon exercising an option shall be entitled to receive
for the purchase price paid upon such exercise the securities he would have
received if he had exercised his option prior to such recapitalization or
reorganization.
(d) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, each option will terminate
immediately prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by the
Committee.
(e) ISSUANCES OF SECURITIES. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
subject to options. No adjustments shall be made for dividends paid in cash or
in property other than securities of the Company.
(f) FRACTIONAL SHARES. No fractional shares shall be issued under
the Plan and the optionee shall receive from the Company cash in lieu of such
fractional shares.
(g) ADJUSTMENTS. Upon the happening of any of the events described
in subparagraphs (a), (b) or (c) above, the class and aggregate number of shares
set forth in Section 2 hereof that are subject to options which previously have
been or subsequently may be granted under the Plan shall also be appropriately
adjusted to reflect the events described in such subparagraphs. The Committee or
the Successor Board shall determine the specific adjustments to be made under
this paragraph 9 and, subject to Section 3, its determination shall be
conclusive.
10. RESTRICTIONS ON ISSUE OF SHARES.
-------------------------------
Notwithstanding the provisions of Section 7 hereof, the Company may delay
the issuance of shares of Common Stock covered by the exercise of any option and
the delivery of a certificate for such shares until one of the following
conditions shall be satisfied:
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<PAGE>
(i) the shares with respect to which an option has been exercised are at
the time of the issue of such shares effectively registered under applicable
Federal and state securities acts now in force or hereafter amended; or
(ii) counsel for the Company shall have given an opinion, which opinion
shall not be unreasonably conditioned or withheld' that such shares are exempt
from registration under applicable Federal and state securities acts now in
force or hereafter amended.
It is intended that all exercises of options shall be effective.
Accordingly, the Company shall use its best efforts to bring about compliance
with the above conditions within a reasonable time, except that the Company
shall be under no obligation to cause a registration statement or a
post-effective amendment to any registration statement to be prepared at its
expense solely for the purpose of covering the issue of shares in respect of
which any option may be exercised, except as otherwise agreed to by the Company
in writing.
11. RIGHTS OF HOLDER ON PURCHASE FOR INVESTMENT: SUBSEQUENT REGISTRATION.
--------------------------------------------------------------------
Unless the shares of Common Stock to be issued upon exercise of an option
granted under the Plan have been effectively registered under the Securities Act
of 1933, as now in force or hereafter amended, the Company shall be under no
obligation to issue any shares covered by any option unless the person who
exercises such option, in whole or in part, shall give a written representation
and undertaking to the Company which is satisfactory in form and scope to
counsel to the Company and upon which, in the opinion of such counsel, the
Company may reasonably rely, that he is acquiring the shares issued to him
pursuant to such exercise of the option for his own account as an investment and
not with a view to, or for sale in connection with, the distribution of any such
shares, and that he will make no transfer of the same except in compliance with
any rules and regulations in force at the time of such transfer under the
Securities Act of 1933, or any other applicable law, and that if shares are
issued without such registration a legend to this effect may be endorsed upon
the securities so issued. In the event that the Company shall, nevertheless,
deem it necessary or desirable to register under the Securities Act of 1933 or
other applicable statutes any shares with respect to which an option shall have
been exercised, or to qualify any such shares for exemption from the Securities
Act of 1933 or other applicable statutes, then the Company shall take such
action at its own expense and may require from each optionee such information in
writing for use in any registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
from such holder against all losses, claims, damages and liabilities arising
from such use of the information so furnished and caused by any untrue statement
of any material fact therein or caused by the omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
12. LOANS PROHIBITED.
----------------
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<PAGE>
The Company shall not, directly or indirectly, lend money to an
optionee or to any person or persons entitled to exercise an option by reason of
the death of an optionee for the purpose of assisting him or them in the
acquisition of shares covered by an option granted under the Plan.
13. APOROVAL OF SHAREHOLDERS.
The Plan shall be subject to approval by the vote of shareholders holding
at least a majority of the voting stock of the Company voting in person or by
proxy at a duly held stockholders' meeting, or by written consent of of the
shareholders holding at least a majority of the voting stock of the Company, and
shall take effect immediately as of its date of adoption upon such approval.
14. TERMINATION AND AMENDMENT OF PLAN.
---------------------------------
Unless sooner terminated as herein provided, the Plan shall terminate ten
(10) years from the date upon which the Plan was duly approved by the
shareholders. The Board may at any time terminate the Plan or make such
modification or amendment thereof as it deems advisable, provided however that,
except as provided in Section 9 hereof, no modification or amendment to the
provisions of the Plan may be made more than once every six (6) months other
than to comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder, if the effect of such amendment or
modification would be to change (i) the requirements for eligibility under the
Plan, (ii) the timing of the grants of options to be granted under the Plan or
the exercise price or vesting schedule thereof, or (iii) the number of shares
subject to options to be granted under the Plan either in the aggregate or to
one director. Any amendment to the provisions of the Plan which (i) materially
increases the number of shares which may be subject to options granted under the
Plan, (ii) materially increases the benefits accruing to optionees under the
Plan, or (iii) materially modifies the requirement for eligibility to
participate in the Plan, shall be subject to approval by the shareholders of the
Company obtained in the manner stated in Section 13 hereof. Termination or any
modification or amendment of the Plan shall not, without the consent of an
optionee, affect his rights under an option previously granted to him.
15. LIMITATION OF RIGHTS IN THE OPTION SHARES.
-----------------------------------------
An optionee shall not be deemed for any purpose to be a shareholder of the
Company with respect to any of the options except to the extent that the option
shall have been exercised with respect thereto and, in addition, a certificate
shall have been issued theretofore and delivered to the optionee.
16. NOTICES.
-------
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its
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<PAGE>
principal place of business, attention: President, and, if to an optionee, to
the address as appearing on the records of the Company.
17. COMPLIANCE WITH RULE 16B-3.
--------------------------
It is the intention of the Company that the Plan comply in all respects
with Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act
of 1934 (the "Act") and that optionees remain disinterested persons for purposes
of administering other employee benefit plans of the Company and having
transactions under such other plans be exempt from Section 16(b) of the Act.
Therefore, if any Plan provision is found not to be in compliance with Rule
16b-3 or if any Plan provisions would disqualify optionees from remaining
disinterested persons, that provision shall be deemed null and void, and in all
events the Plan shall shall be construed in favor of its meeting the
requirements of Rule 16b-3.
-9-
Olshan Grundman From Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
July 12, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Active Apparel Group, Inc. -
Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-8
dated the date hereof (the "Registration Statement"), filed with the Securities
and Exchange Commission by Active Apparel Group, Inc., a Delaware corporation
(the "Company"). The Registration Statement relates to an aggregate of 444,300
shares (the "Shares") of common stock, par value $.002 per share of the Company.
The Shares will be issued and sold by the Company in accordance with the
Company's 1993 Stock Option Plan and the 1995 Non-Employee Director Stock Option
Plan (collectively referred to as the "Plans").
We advise you that we have examined originals or copies
certified or otherwise identified to our satisfaction of the Certificate of
Incorporation and By-laws of the Company, minutes of meetings of the Board of
Directors and stockholders of the Company, the Plan and such other documents,
instruments and certificates of officers and representatives of the Company and
public officials, and we have made such examination of the law, as we have
deemed appropriate as the basis for the opinion hereinafter expressed. In making
such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
to original documents of documents submitted to us as certified or photostatic
copies.
<PAGE>
Securities and Exchange Commission
July 12, 1999
Page -2-
Based upon the foregoing, we are of the opinion that the
Shares, when issued and paid for in accordance with the terms and conditions set
forth under their respective Plans, will be duly and validly issued, fully paid
and non-assessable.
We are members of the bar of the State of New York.
Accordingly, this opinion is limited to the federal laws of the United States,
the laws of the State of New York and the General Corporation Law of the State
of Delaware. Insofar as the opinion expressed above relates to matters that are
governed by the laws of the State of Delaware, our investigation of the
applicable law has been limited exclusively upon our review of what we believe
to be the relevant provisions of the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to this firm under the
caption "Legal Matters" in the prospectus constituting a part of the
Registration Statement.
Very truly yours,
/s/ Olshan Grundman Frome Rosenzweig & Wolosky LLP
OLSHAN GRUNDMAN FROME ROSENZWEIG & WOLOSKY LLP
BERENSON & COMPANY LLP
Certified Public Accountants
135 West 50th Street
New York, NY 10020
(212) 977-6800
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in this Registration
Statement of Active Apparel Group, Inc., on Form S-8 of our report dated January
29, 1999, on our audits of the financial statements of Active Apparel Group,
Inc., as December 31, 1998 and for the years ended December 31, 1998 and 1997,
which report appears in the Annual Report on Form 10-KSB.
/s/ Berenson & Company LLP
New York, NY
July 12, 1999
