Securities and Exchange Commission
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ___)
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[ ] Definitive Additional Materials
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JD American Workwear, Inc.
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___________________________________________________________________
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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JD AMERICAN WORKWEAR, INC.
46 OLD FLAT RIVER ROAD
COVENTRY, RHODE ISLAND 02816
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Friday, March 5, 1999
To the Shareholders of
JD AMERICAN WORKWEAR, INC.:
Notice is hereby given that the Annual Meeting of Stockholders of JD
American Workwear, Inc. will be held at the offices of the Company, 46 Old
Flat River Road, Coventry, Rhode Island, on Friday, March 5, 1999 at 10:00
a.m., local time, for the purpose of considering and voting upon the
following matters:
1. To elect a Board of seven Directors to serve until the next
Annual Meeting of Stockholders and until their successors are
duly elected and qualified.
2. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record as of the close of business on January 6,
1999 are entitled to receive notice of and to vote at the meeting or any
adjournment thereof.
By order of the Board of Directors
David N. DeBaene
President and Chief Executive Officer
February 12, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING AND VOTE YOUR SHARES.
IN THE EVENT YOU CANNOT ATTEND, PLEASE DATE, SIGN AND MAIL THE ENCLOSED
PROXY TODAY TO THE COMPANY AT THE ADDRESS INDICATED ABOVE. A STOCKHOLDER
WHO EXECUTES AND RETURNS A PROXY IN THE ACCOMPANYING FORM HAS THE POWER TO
REVOKE SUCH PROXY AT ANY TIME PRIOR TO THE EXERCISE THEREOF.
JD AMERICAN WORKWEAR, INC.
46 OLD FLAT RIVER ROAD
COVENTRY, RHODE ISLAND 02916
PROXY STATEMENT
The accompanying proxy is solicited by the Board of Directors of JD
American Workwear, Inc. (the "Company"), for the use at the Annual Meeting
of Stockholders to be held on Friday, March 5, 1999 and any adjournments
thereof.
PROXY SOLICITATION AND EXPENSE
Proxies in the accompanying form, properly executed and received prior
to the meeting and not revoked, will be voted as specified, or if no
instructions are given, will be voted in favor of the proposals described
herein. Proxies may be revoked at any time prior to being voted by written
notice to the Secretary of the Company. Solicitation of proxies may be made
by personal interview, mail, telephone, telegraph, telefax or e-mail by
directors, officers and employees of the Company. The expense of soliciting
proxies will be borne by the Company. The Company may also request banking
institutions, brokerage firms, custodians, trustees, nominees and
fiduciaries to forward solicitation material to the beneficial owners of the
Company's Common Stock. The approximate date on which this Proxy Statement
and the accompanying proxy card will first be mailed to stockholders is
February 12, 1999.
OUTSTANDING VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only stockholders of record at the close of business on January 6,
1999 will be entitled to notice of and to vote at the meeting. At the close
of business on that date, the Company had outstanding 2,136,385 shares of
Common Stock, $.002 par value, exclusive of treasury shares. Each holder of
the Company's Common Stock will be entitled to one vote for each share held.
In addition, there were 313 shares of Manditorily Convertible Series A
Preferred Stock outstanding, each of which is entitled to 1,295 votes. In
addition, there are 2,500 shares of Series B 12% Cumulative Convertible
Preferred Stock outstanding, each of which is entitled to 200 votes. The
holders of the Series B Preferred Stock, as a class, shall be entitled to
elect one (1) director, and the holder of all other voting stock, as a
class, shall be entitled to elect the remaining members of the Board. The
presence at the meeting, in person or by proxy, of shareholders entitled to
cast at least a majority of the votes which all shareholders are entitled to
cast on each particular matter to be considered at the meeting will
constitute a quorum for the purpose of considering such matter.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Shares represented by the enclosed proxy will, unless otherwise
directed, be voted to elect the nominees listed below to serve until the
next annual meeting of stockholders and until their successors are duly
elected and qualified. In the event of a vacancy in the list of nominees,
the holders of the enclosed proxy will vote for the election of a nominee
acceptable to the remaining nominees. Management is not aware of any person
who is unable or unwilling to stand for election or to serve if nominated.
<TABLE>
<CAPTION>
Name of Nominee Age Position with Company
- --------------- --- ---------------------
<S> <C> <C>
David N. DeBaene 40 Chairman of the Board, President and
Chief Executive Officer
Thomas A. Lisi 54 Vice President, Marketing and Director
Anthony P. Santucci 35 Treasurer and Chief Financial Officer
Elizabeth Cotter 37 Director
Dean M. Denuccio 33 Director
Steev Panneton 40 Vice President, Manufacturing and
Operations and Director
Herbert A. Canapary 66 Director
</TABLE>
David N. DeBaene, Chairman of the Board, President, and Chief
Executive Officer. Mr. DeBaene is the founder of the Company and was
responsible for obtaining the patent on the original Jaque Dubois
Construction Jean. Mr. DeBaene is responsible for all executive level
functions regarding the Company's operations and also shares responsibility
for raw materials sourcing and procurement, manufacturing arrangements,
product development, marketing and sales. Prior to founding the Company,
for 14 years Mr. DeBaene was an owner and/or foreman of a construction
company headquartered in West Warwick, Rhode Island, and also was involved
in nursing home administration from 1984 to 1990.
Thomas A. Lisi, Vice President, Marketing and Director. Mr. Lisi
became a director of the Company in January 1994, and became Vice President
of Marketing in June 1996. Mr. Lisi brings 25 years of experience in the
apparel industry to the Company. Mr. Lisi is a principal stockholder and
Chief Executive Officer of Geronimo Leathers, Inc. ("Geronimo"), a
manufacturer of mens leather apparel and outerwear with worldwide
distribution. Geronimo also specializes as a design and manufacturing
consultant to the outerwear trade and is a high volume private label
manufacturer to prominent merchants. Mr. Lisi is a member of the executive
committee of the Leather Apparel Association and is considered by his peers
to be a leading authority in the leather apparel industry. Mr. Lisi and the
Company are parties to a sales representative agreement and a consulting
agreement, and Geronimo and the Company are parties to an overseas agency
agreement. See "CERTAIN TRANSACTIONS."
Anthony P. Santucci, Treasurer and Chief Financial Officer. Mr.
Santucci became the Company's Chief Financial Officer in September 1996.
Mr. Santucci is also President of Bevco Plastics Company a privately held
corporation engaged in manufacturing and distribution of flexible vinyl
products. From 1992 to 1995, Mr. Santucci was Chief Financial Officer of
South Pointe Enterprises, Inc., a publicly held company engaged in
distribution of home videos. While at South Pointe, Mr. Santucci's
responsibilities included all accounting, financial reporting, financial
planning, risk management, tax functions, and managing a staff of 20
persons. During 1990 and 1991, Mr. Santucci was Controller of Weingeroff
Enterprises, Inc., a privately held jewelry manufacturing company. From
1988 to 1990, Mr. Santucci was Finance Manager of A. Santucci Wholesale,
Inc., a family owned and operated wholesale food service distributor.
From 1984 to 1988, Mr. Santucci was a senior accountant with Ernst & Young,
LLP (formerly Arthur Young and Company). In 1985 Mr. Santucci received a
B.S. in Business Administration from Bryant College.
Elizabeth Cotter, Director. Prior to joining the Company in January
1991, Ms. Cotter was a mortgage consultant for Providence Funding Corp. from
1989 through 1991. From March 1985 to 1989, Ms. Cotter was the director of
New England sales for Ready Capital Corp., a mortgage banking company. Ms.
Cotter holds a dual B.A./B.S. Bachelors degree from Boston University School
of Management (marketing and organizational behavior), and has taken
graduate level courses in the MBA program of the University of Rhode Island.
Ms. Cotter is the wife of David N. DeBaene.
Dean M. Denuccio, Director. Mr. Denuccio commenced serving as a
director upon the consummation of the Public Offering. Mr. Denuccio has
since 1994 been the Chief Executive Officer and principal stockholder of
Deanco Enterprises, Inc., a Providence, Rhode Island based home care health
provider which employs up to 200 home health care professionals. From 1988
to 1991, Mr. Denuccio was Chief Executive Officer and principal stockholder
of Personnel Network Services, a privately owned health care staffing
agency. From 1985 to 1988, Mr. Denuccio was a certified public accountant
with Ernest A. Almonte CPAs (1985-1987) and Ernst & Young, CPAs (1987-1988).
In 1986 Mr. Denuccio received a B.S. in Business Administration from Bryant
College, and in 1991 received a JD from University of Tulsa Law School.
Steev Panneton, Vice President, Manufacturing and Operations and
Director. Mr. Panneton has been an employee of the Company since its
inception in 1992, and has overseen and\or participated in all phases of the
Company's manufacturing operations. Mr. Panneton was elected to the Board
of Directors by the Board of Directors in January 1998 to fill the vacancy
created by the resignation of a former director.
Herbert Canapary, Director. Pursuant to the Securities Purchase
Agreement (the "Purchase Agreement") dated April 9, 1998, with The Union
Labor Life Insurance Company, a Maryland corporation ("ULLICO"), and certain
additional agreements related to the Purchase Agreement, Mr. Canapary was
elected to the Board of Directors in April 1998 by the Board of Directors to
fill the vacancy in the Board resulting from the increase in the number of
members of the Board from 5 to 7. Mr. Canapary has been employed by ULLICO,
the union labor life insurance company, for 17 years, and presently serves
as ULLICO's Vice-President - Investments.
The terms of office of all Directors of the Company are from the time
of election until the next annual meeting of stockholders and until their
respective successors are elected and qualified as provided in the Bylaws of
the Company.
David N. DeBaene, Anthony P. Santucci and Herbert Canapary are members
of the Compensation Committee which reviews and makes recommendations with
respect to compensation of officers, employees and consultants, including
the granting of options under the Company's 1995 Stock Option Plan. The
Committee was not formed until after the close of the fiscal year ended
February 28, 1998, and has met once during the year ended February 28, 1999.
The Company does not have standing audit or compensation or nominating
committees. Upon the election of the Directors listed in this Proposal No.
1, the Company anticipates that the Board will form such committees.
The Board of Directors of the Company held 2 meeting during the fiscal
year ended February 28, 1998. In addition, the Board acted 3 times by
unanimous written consent without a meeting. Each incumbent director has
attended, during the 1998 fiscal year, at least 75% of the aggregate of all
meetings of the Board of Directors held during the period which he/she was a
director.
MANAGEMENT
The following is a list of the Company's executive officers, their
ages and their positions and offices:
<TABLE>
<CAPTION>
Name Age Position with Company
- ---- --- ---------------------
<S> <C> <C>
David N. DeBaene 40 Chairman of the Board, President and
Chief Executive Officer
Thomas A. Lisi 54 Vice President, Marketing and Director
Anthony P. Santucci 35 Treasurer and Chief Financial Officer
Steev Panneton 40 Vice President, Operations
</TABLE>
Mr. DeBaene's biography is included above under Proposal No. 1 -- Election
of Directors.
Mr. Lisi's biography is included above under Proposal No. 1 -- Election of
Directors.
Mr. Santucci's biography is included above under Proposal No. 1 -- Election
of Directors.
Mr. Panneton's biography is included above under Proposal No. 1 -- Election
of Directors.
All officers hold office at the pleasure of the Board of Directors.
See "Executive Compensation - Employment Agreements" below. None of the
Company's executive officers has a family relationship with any Director or
other executive officer of the Company, other than Mr. DeBaene, who is the
husband of Elizabeth Cotter, a Director of the Company.
EXECUTIVE COMPENSATION
The following table sets forth a summary for the fiscal years ended
February 28, 1998, 1997, and 1996, respectively, of the cash and non-cash
compensation awarded, paid or accrued, by the Company to all individuals
serving as the Company's chief executive officer during fiscal 1998
(collectively, the "named executive officers"). The Company at no time
during the last three fiscal years had any executive officers whose total
annual compensation exceeded $100,000, except as set forth below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Name and Fiscal Options by All Other
Principal Position Year Annual Compensation No. of Shares Compensation
- -----------------------------------------------------------------------------------------------------
Salary Bonus
------ -----
<S> <C> <C> <C> <C> <C>
David N. DeBaene, President and CEO 1998(1) $105,000 - - -
1997(2) 85,000 - - -
1996 57,557 - - -
<FN>
<F1> Under his employment agreement, Mr. DeBaene was entitled to be paid at
a rate of $105,000 per annum, plus $10,000 which was deferred from
fiscal 1997. However, in order to conserve cash, Mr. DeBaene has
agreed to defer approximately $15,000 of such compensation to fiscal
1999.
<F2> Under his employment agreement, Mr. DeBaene was entitled to be paid at
a rate of $85,000 per annum. However, in order to conserve cash, Mr.
DeBaene agreed to defer approximately $10,000 of such compensation to
fiscal 1998.
</FN>
</TABLE>
The Company does not have any annuity, retirement, pension, deferred
or incentive compensation plan or arrangement under which any executive
officers are entitled to benefits, nor does the Company have any long-term
incentive plan pursuant to which performance units or other forms or
compensation are paid. Executive officers who qualify will be permitted to
participate in the Company's 1995 Stock Option Plan which was adopted in
February 1995. See "Stock Option Plan." Executive officers may participate
in group life, health and hospitalization plans if and when such plans are
available generally to all employees.
Employment Agreements
Effective as of March 1, 1995, the Company entered into an employment
agreement with David N. DeBaene as Chairman and President. The agreement is
for a base term of five (5) years, and is thereafter renewable for
additional periods of three (3) years, unless the Company gives notice to
the contrary. In accordance with his agreement with the Company, Mr.
DeBaene's first year base salary is $65,000, increasing annually thereafter
in $20,000 increments. In order to conserve resources, Mr. DeBaene has
deferred the implementation of his salary increase. In addition, Mr.
DeBaene is entitled to receive an annual cash bonus based upon a percentage
of the Company's pre-tax income (as defined) for each fiscal year in
accordance with a sliding scale schedule contained in the agreements. No
bonus is payable unless and until the Company earns pre-tax income in excess
of $5 million. The agreement also provides for certain non-competition and
non-disclosure covenants of the executive and for certain Company paid
fringe benefits such as disability insurance and inclusion in pension,
profit sharing, stock option, savings, hospitalization and other benefit
plans at such times as the Company shall adopt them.
The agreement of Mr. DeBaene also provides for the payment of certain
additional severance compensation of $250,000 in the event that at any time
during the term thereof (i) the agreement is terminated by the Company
without cause (as defined therein), or (ii) terminated by the employee due
to a change in control (as defined therein). The Company believes that the
change in control provisions in this agreement may tend to discourage
attempts to acquire a controlling interest in the Company and may also tend
to make the removal of management more difficult; however, the Company
believes such provisions provide security and decision-making independence
for its executive officers.
Effective as of June 1, 1996, the Company entered into an Consulting
Agreement with Thomas A. Lisi for his services on a part-time basis as Vice
President/Marketing & Manufacturing. Mr. Lisi is obligated to render
services of not more than eight hours per week at the Company's headquarters
facility and is compensated at a rate of $33.00 per hour, without benefits.
The Consulting Agreement is for an initial trial term of three months
subject to termination by either party upon 30 days prior written notice.
After the expiration of the trial period, the agreement will continue for
successive three month periods, unless terminated by either party.
Director Compensation
The Directors of the Company are elected annually and serve until the
next annual meeting of stockholders and until a successor shall have been
duly elected and qualified. Directors of the Company who are not employees
or consultants do not receive any compensation for their services as members
of the Board of Directors, but are reimbursed for expenses incurred in
connection with their attendance at meetings of the Board of Directors.
Directors may be removed with or without cause by a vote of the majority of
the stockholders then entitled to vote.
Compensation Committee
David N. DeBaene, Anthony P. Santucci and Herbert Canapary are members
of the Compensation Committee which reviews and makes recommendations with
respect to compensation of officers, employees and consultants, including
the granting of options under the Company's 1995 Stock Option Plan.
Stock Option Plan
The 1995 Stock Option Plan. The Company's 1995 Stock Option Plan (the
"Plan") adopted by the Company's Board of Directors in February 1995 and by
the stockholders in July 1995, provides for the issuance of options
("Options") to employees, officers and, under certain circumstances,
directors of and consultants to the Company ("Eligible Participants").
Options granted under the plan may be either "incentive stock options"
("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") or "nonqualified stock options" ("NQSOs"). The Plan
does not provide for the issuance of stock appreciation rights but does
permit the granting of restricted and non-restricted stock and deferred
stock awards. A total of 250,000 shares of Common Stock were originally
reserved for issuance under the Plan; however, in January 1998, the Board of
Directors voted to amend the Plan and reserve for issuance under the Plan an
additional 500,000 shares, which amendment was ratified by the stockholders
of the Company at the Annual Meeting of Stockholders held April 15, 1998.
The Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"). The Committee has sole discretion and
authority, consistent with the provisions of the Plan, to select the
Eligible Participants to whom Options will be granted under the Plan, the
number of shares which will be covered by each Option and the form and terms
of the agreement to be used. All employees and officers of the Company
(except for members of the Committee) are eligible to participate in the
Plan. Directors are eligible to participate only if they have been declared
to be "eligible directors" by resolution of the Board of Directors. Members
of the Committee are not Eligible Participants. At February 28, 1998,
approximately 10 persons were eligible to receive ISOs under the Plan.
Options. The Committee is empowered to determine the exercise price
of Options granted under the Plan, but the exercise price of ISOs must be
equal to or greater than the fair market value of a share of Common Stock on
the date the Option is granted (110% with respect to optionees who own at
least 10% of the outstanding Common Stock). The exercise price of NQSOs
granted under the Plan must not be less than 85% of the fair market value of
the Common Stock on the date the Option is granted. The Committee has the
authority to determine the time or times at which Options granted under the
Plan become exercisable, but the Options expire no later than ten years from
the date of grant (five years with respect to Optionees who own at least 10%
of the outstanding Common Stock of the Company). The Options are
nontransferable, other than by will and the laws of descent, and generally
may be exercised only by an employee while employed by the Company or within
90 days after termination of employment (one year from termination resulting
from death or disability).
During fiscal 1998, NQSOs to purchase 200,000 shares of Common Stock
were granted to a consultant at exercise prices ranging from $2.50 to $3.25
per share. Subsequent thereto, in connection with the extension of the
consulting agreement with said consultant, options to purchase 50,000 of
said shares were surrendered, and the consultant was issued 50,000 shares.
In January 1998, the Company issued 9,500 shares of Common Stock to an
employee of said consultant in consideration of services rendered outside of
the scope of the consulting agreement. In June 1998, in connection with an
additional extension of the term of the consulting agreement with said
consultant and an expansion in scope of the services to be rendered by said
consultant, the Company issued options to purchase an additional 300,000
shares of Common Stock at exercise prices ranging from $3.25 to $5.25 per
share. Of these options, options to purchase 200,000 shares have been
surrendered and cancelled, and options to purchase 100,000 shares remain
outstanding.
As of the date of this report, there are outstanding NQSOs to purchase
12,500 shares having an exercise price of $1.50 per share, options to
purchase 50,000 shares having an exercise price of $3.25 per share and
options to purchase 50,000 shares having an exercise price of $3.75 per
share. In connection with the Public Offering, the Company agreed to
restrict the amount of Options available for grant under the Plan to 15% of
the number of shares of Common Stock outstanding.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (individual grants)
There were no individual grants of stock options or stock appreciation
rights to any of the named executive officers during fiscal 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
None of the named executive officers exercised stock options or stock
appreciation rights during fiscal 1998, and none of the named executive
officers held any stock options or stock appreciation rights as of the end
of fiscal 1998.
Option Repricing
Not applicable.
Compensation Committee Interlock and Insider Participation
No directors other than those identified above as members of the
Compensation Committee served on that Committee during the last completed
fiscal year. None of the executive officers of the Company has served on
the board of directors or on the compensation committee of any other entity,
any of whose officers served either on the Board of Directors or on the
Compensation Committee of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of April 30, 1998 certain
information regarding the ownership of the Company's securities by (i) each
person known by the Company to be the beneficial owner of more than 5% of
any class of the Company's voting securities, (ii) each of the Company's
directors, and (iii) all of the Company's executive officers and directors
as a group. Beneficial ownership has been determined in accordance with
Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Under
this Rule, certain shares may be deemed to be beneficially owned by more
than one person (such as where persons share voting power or investment
power). In addition, shares are deemed to be beneficially owned by a person
if the person has the right to acquire the shares (for example, upon
exercise of an option) within 60 days of the date as of which the
information is provided; in computing the percentage ownership of any
person, the amount of shares outstanding is deemed to include the amount of
shares beneficially owned by such person (and only such person) by reason of
these acquisition rights. As a result, the percentage of outstanding shares
of any person as shown in the following table does not necessarily reflect
the person's actual ownership or vote.
<TABLE>
<CAPTION>
Name and Address or Amount and Nature of Percentage
Number in Group Beneficial Ownership (1) of Class *
------------------- ------------------------ ----------
<S> <C> <C> <C>
David N. DeBaene Common Stock 714,650 (2) 33.45%
46 Old Flat River Road Series A Preferred 0 **
Coventry, RI Series B Preferred 0 **
Elizabeth Cotter Common Stock1 2,500 (3) **
46 Old Flat River Road Series A Preferred 0 **
Coventry, RI Series B Preferred 0 **
Thomas A. Lisi Common Stock 62,500 (4) 2.91%
46 Old Flat River Road Series A Preferred 0 **
Coventry, RI Series B Preferred 0 **
Steev Panneton Common Stock 60,023 2.81%
46 Old Flat River Road Series A Preferred 0 **
Coventry, RI Series B Preferred 0 **
Dean M. Denuccio Common Stock 0 **
15 Alpine Estates Drive Series A Preferred 0 **
Cranston, RI Series B Preferred 0 **
Hebert Canapary Common Stock 0 (5) **
111 Massachusetts Ave. Series A Preferred 0 (5) **
Washington, DC Series B Preferred 0 **
Anthony P. Santucci Common Stock 0 **
46 Old Flat River Road Series A Preferred 0 **
Coventry, RI Series B Preferred 0 **
All Officers and Director Common Stock 849,673 (2)(4)(5) 9.77%
As a Group (7 persons) Series A Preferred 0 **
Series B Preferred 0 **
Other 5% Stockholders
Joseph Lussier Common Stock 136,200 (6) 5.99%
1645 Warwick Ave.
Warwick, RI
William Durkin Common Stock 178100 (6)(7) 7.75%
69 East Shore Drive Series A Preferred 20 6.39%
Coventry, RI
Merit Capital Assoc, Inc. Series A Preferred 20 6.39%
1221 Post Road
Westport, CT
Mission Bay Consulting Common Stock 118,130 (8) 5.24%
600 Tollgate Road
Warwick, RI
Gerald Hoak Series A Preferred 40 12.78%
235 Deerfield Dr.
Pottsfield, PA
ULLICO Common Stock 1,299,000 (9) 37.81%
111 Massachusetts Ave Series B Preferred 2,500 100.00%
Washington, DC
<FN>
<F*> Assumes 1,984,899 shares of Common Stock, 313 shares of Series A
Preferred Stock and 2,500 shares of Series B Preferred Stock issued
and outstanding.
<F**> less than 1%
<F1> Except as otherwise indicated, each named holder has, to the Company's
knowledge, sole voting and investment power with respect to the shares
indicated.
<F2> Includes 48,000 shares owned of record by Mr. DeBaene's father, 51,000
shares owned of record by Mr. DeBaene's mother, and 28,150 shares
owned of record by Mr. DeBaene's sister. Does not include shares
owned of record by Elizabeth Cotter, Mr. DeBaene's wife.
<F3> Ms. Cotter is the spouse of David N. DeBaene.
<F4> Includes shares issuable upon exercise of 12,500 non-qualified stock
options.
<F5> Does not include Series B Preferred Stock, shares of Common Stock
issuable upon conversion of Series B Preferred Stock or shares of
Common Stock issuable upon exercise of outstanding warrants owned of
record by ULLICO, of which Mr. Canapary serves as Vice President -
Investments.
<F6> Includes shares issuable upon exercise of 136,200 common stock
purchase warrants (the "time warrants"). See "Certain Relationships
and Related Transactions."
<F7> Includes 25,900 shares of Common Stock issuable upon conversion of
Series A Preferred Stock.
<F8> Includes 18, 130 shares of Common Stock issuable upon conversion of
Series A Preferred Stock, and 100,000 shares issuable upon exercise of
non-qualified stock options.
<F9> Includes 500,000 shares of Common Stock issuable upon conversion of
Series B Preferred Stock as well as 799,000 shares issuable upon
exercise of outstanding warrants. See "Item 1 Business -- Recent
Developments -- Private Placement of Series B Preferred Stock."
</FN>
</TABLE>
Escrow of Shares In accordance with the requirements of certain
state securities administrators, certain of the Company's principal
stockholders have agreed to place into escrow an aggregate of 700,000 shares
(the "Escrow Shares") of the 875,000 shares of Common Stock held by them.
Under the escrow agreement, the Escrow Shares will be ratably released to
the holders in 25% increments on the sixth, seventh, eighth and ninth
anniversaries, respectively, of the initial public offering. If the Company
meets or exceeds certain net earnings or stock price targets, the release of
the Escrow Shares will be accelerated. Additionally, in accordance with the
requirements of another state securities administrator, the holdings of all
officers, directors and post-offering five percent (5%) stockholders are
subject to certain lock-up restrictions until January 1999.
Possible Change In Control. Pursuant to its agreements with ULLICO,
the Series B Preferred Stock holders shall be entitled to elect one director
out of the seven authorized directors of the Company's board and one
director out of the three directors comprising the Company's Compensation
Committee. If certain events occur or do not occur, such as the failure to
pay either a PIK Dividend or cash dividend to the Series B Preferred Stock
holders, the holders of the Series B Preferred Stock shall be entitled,
immediately upon giving written notice, to elect the smallest number of
directors that will constitute a majority of the authorized number of
directors. Moreover, ULLICO holds Series B Preferred Stock which is
currently convertible into 500,000 shares of Common Stock, and holds
warrants to purchase 799,000 shares of Common Stock. Pursuant to its
agreements with ULLICO, in the event the Company does not reach certain
performance milestones, the Series B Preferred Stock held by ULLICO may be
converted into a greater number of shares of the Company's Common Stock than
provided for upon conversion if the performance targets are met. As a
result, ULLICO could potentially obtain a substantial controlling interest
in the Company. There can be no assurance that the Company will be able to
meet the performance targets set forth in the applicable agreements and,
therefore, avoid a possible change in control of the Company's capital
stock. Such a change in control may result in fundamental changes to the
management of the Company and the character of its business.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Consulting Agreements
Warrants to Messrs. Durkin and Lussier. In connection with their
agreement to provide financial consulting services to the Company for a
three (3) year period commencing August 1996, the Company issued on August
6, 1996 to each of Messrs. Joseph Lussier and William Durkin, warrants to
purchase 232,824 shares of Common Stock expiring August 7, 2003, or a total
of 465,648 shares. The warrants are divided into two (2) classes, time
warrants which contain vesting provisions based solely on the expiration of
time, and performance warrants, containing vesting provisions based upon the
price of the Company's Common Stock during various periods. Messrs. Durkin
and Lussier received 136,200 time warrants and 96,624 performance warrants
each. As of the date of this report, none of the performance warrants have
vested and all have expired. At the date hereof, all of the time warrants
have vested and are exercisable. The exercise price of all of the warrants
is $4.00 per share, subject to adjustment under certain circumstances.
Messrs. Lussier is and Mr. Durkin was formerly affiliated with Merit Capital
Associates, Inc., the underwriter of the Company's Public Offering.
Mission Bay Consultants, Inc. On April 2, 1997, the Company entered
into a one (1) year Consulting Agreement with Mission Bay Consulting, Inc.,
a financial public relations firm ("Mission Bay"), for certain financial
consulting services. In connection with this Consulting Agreement the
Company issued to Mission Bay an option under the Company's 1995 Stock
Option Plan to purchase an aggregate of 200,000 shares of common stock, and
also issued 28,000 shares of common stock under the 1995 Stock Option Plan.
The Company has also agreed to reimburse Mission Bay for its accountable
expenses incurred in connection with the Agreement. In September 1997, in
consideration of the extension of the Consulting Agreement, 50,000 of said
options were surrendered, and the Company issued 50,000 shares of Common
Stock to Mission Bay Consulting under the 1995 Stock Option Plan. In
January 1998, the Company issued 9,500 shares to an employee of Mission Bay
Consulting, in consideration of services rendered outside of the scope of
the Consulting Agreement. In June 1998, in connection with an additional
extension of the term of the consulting agreement with Mission Bay and an
expansion in scope of the services to be rendered by said Mission Bay, the
Company issued options to purchase an additional 300,000 shares of Common
Stock at exercise prices ranging from $3.25 to $5.25 per share. Of these
options, options to purchase 200,000 shares have been surrendered and
cancelled, and options to purchase 100,000 shares remain outstanding
Related Party Loans
As disclosed in the Notes to the financial statements, the Company has
from time to time borrowed money from or loaned money to related parties.
At February 28, 1998, the Company owed approximately $25,000 in the
aggregate to the parents of David N. DeBaene and a corporation which they
control. In September 1998, a corporation controlled by Mr. DeBaene's
parents sold a piece of real estate which had previously been used as
collateral for a Small Business Administration loan to the Company. In
connection therewith, said corporation repaid approximately $150,000 of the
Company's SBA loan with the proceeds of the sale of the real estate, and the
Company executed a note to said corporation for $175,000 (reflecting the
prior $25,000 balance plus the additional $150,000), bearing interest at
10%. In addition, at February 28, 1998, David N. DeBaene owed
approximately $10,000 to the Company. This loan is not interest bearing.
Stockholders Agreement
A Stockholders Agreement dated April 9, 1998 (the "Stockholders
Agreement") was entered into among ULLICO, the Company, David N. DeBaene,
Annette DeBaene, Norman DeBaene, Thomas Lisi, and Steev Panneton (each, a
"Holder"). The Stockholders Agreement provides that the Company shall have
a right of first refusal before any shares of Common Stock may be
transferred by any Holder. ULLICO has a right of second refusal and co-sale
rights, if the Company does not elect to buy all of the securities it is
offered. If ULLICO enters into an agreement to transfer, sell or otherwise
dispose of all of its Preferred Stock, Warrants and any Common Stock issued
upon conversion or exercise of the former ("Purchased Shares") (such
agreement referred to as a "Tag-Along Sale"), each Holder has the right to
participate in the Tag-Along Sale. If ULLICO, alone or with another person,
accepts an offer from any party who is unaffiliated with it to purchase any
Purchased Shares which results in such party having the ability to elect a
majority of the Company's Board of Directors, then, at the request of
ULLICO, each Holder shall sell all shares of Common Stock held by such
Holder (referred to as a "Drag-Along Sale").
All future material affiliated transactions and loans will be made or
entered into on terms that are no less favorable to the Company than those
that can be obtained from unaffiliated third parties; and all future
material affiliated transactions and loans, and any forgiveness of loans,
will be approved by a majority of the independent outside members of the
Company's board of directors who do not have an interest in the
transactions.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of BDO Seidman, LLP served as the Company's
independent certified public accountants for the year ended February 28,
1998. The Board of Directors has not yet determined whether such firm will
be reappointed for the year ended February 28, 1999. It is not expected
that a representative of BDO Seidman, LLP will be present at the meeting;
however, if present, said representative will have an opportunity to make a
statement if he or she desires to do so, and will be available to respond to
appropriate questions from stockholders.
Effective April 1, 1998, the Boston office of Richard A. Eisner &
Company, LLP ("RAE") was merged into the Boston office of BDO Seidman, LLP
("BDO"). As this merger resulted in RAE no longer having an office in the
Providence-Boston area, the Company concluded that it would be appropriate
to select a new accounting firm. By unanimous consent, the Board of
Directors of the Company voted on May 5, 1998, to retain BDO to serve as the
Company's independent auditors. RAE's report on the Company's financial
statements for the year ended February 28, 1997 contains a statement
expressing substantial doubt about the Company's ability to continue as a
going concern. However, during the Company's two most recent fiscal years
or any subsequent interim period, there were no disagreements between the
Company and RAE on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to the satisfaction of RAE, would have caused it to make reference
to the subject matter of the disagreement in connection with its report on
the audited financial statements.
Prior to the engagement of BDO there were no discussions between the
Company and BDO regarding (i) the application of any accounting principle to
a specific or completed transaction (ii) the type of audit opinion that
might be rendered on the Company's financial statements, or (iii) any matter
that was the subject of disagreement with the Company's former auditor on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
The Company requested that RAE furnish it with a letter addressed to
the Securities and Exchange Commission indicating whether RAE agrees with
the statements made by the Company in response to this Item, or, if not,
stating the basis upon which RAE disagrees. A copy of said letter has been
filed with the Commission.
ANNUAL REPORT
ANY PERSON FROM WHOM PROXIES FOR THIS MEETING ARE SOLICITED MAY OBTAIN
FROM THE COMPANY, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT TO THE
SECURITIES AND EXCHANGE COMMISSION ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
FEBRUARY 28, 1998, INCLUDING THE FINANCIAL STATEMENTS THEREIN AND THE
RELATED SCHEDULES, BY WRITING THE COMPANY AT 46 OLD FLAT RIVER ROAD,
COVENTRY, RHODE ISLAND 02816 ATTENTION: SECRETARY. ANY SUCH REQUEST FROM A
BENEFICIAL OWNER OF STOCK NOT REGISTERED IN HIS NAME MUST CONFIRM THAT HE
WAS A BENEFICIAL OWNER OF SUCH STOCK ON THE RECORD DATE.
STOCKHOLDER PROPOSALS
Proposals of security holders intended to be presented at the next
annual meeting of stockholders must be received by the Company at 46 Old
Flat River Road, Coventry, Rhode Island 02816, on or before June 15, 1999
for inclusion in the proxy material for said meeting.
OTHER BUSINESS
It is not anticipated that any business other than as set forth hereinabove
will be brought before the meeting. Management is not aware of any matters
proposed to be presented to the meeting by any other person. However, if
any other business should properly come before the meeting, it is the
intention of the persons named in the enclosed form of proxy to vote on such
matters in accordance with their best judgment on such business.
JD AMERICAN WORKWEAR, INC.
Annual Meeting of Stockholders
March 5, 1999
The undersigned hereby appoints David N. DeBaene and Anthony P. Santucci, or
either one of them, as proxy or proxies for the undersigned, with full
powers of substitution, to vote at the Annual Meeting of Stockholders to be
held on Friday, March 5, 1999 at 10:00 a.m., local time, at the offices of
the Company, 46 Old Flat River Road, Coventry, Rhode Island and at any and
all adjournments thereof, according to the number of votes that the
undersigned would be entitled to cast with all powers the undersigned would
possess if personally present at said meeting. This proxy may be exercised
to vote for the following purposes:
1. FOR ___ AGAINST ___
the election of all of the following nominees listed below as
Directors of the Company:
David N. DeBaene
Dean M. Denuccio
Elizabeth Cotter
Thomas A. Lisi
Steev Panneton
Anthony P. Santucci
Hebert Canapary
If you do not wish your shares be voted "FOR"
a particular nominee, mark "AGAINST" above and
strike a line through the name(s) of the person(s)
for whose election you do not wish to consent.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
The undersigned hereby ratifies and confirms all that said proxy or
proxies, or substitutes, may do by virtue hereof. The proxies are
authorized to vote in their discretion with respect to matters not known or
determined at the date of the Proxy Statement. Receipt of the Notice of
Meeting, Proxy Statement and Annual Report is hereby acknowledged.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
YOUR SPECIFICATIONS ABOVE. IN THE ABSENCE OF SPECIFICATIONS, THIS PROXY
WILL BE VOTED "FOR" ALL OF THE PROPOSALS SET FORTH ABOVE.
Dated:_________________ ____, 1999
_____________________________ L.S.
_____________________________ L.S.
Please sign here exactly as name appears at the left. When signing as
attorney, executor, administrator, trustee or guardian, please give your
full title as such. Each joint owner or trustee should sign the proxy. If
the stockholder is a corporation, the office of the person signing should be
indicated.
Please sign, date and mail today to:
JD AMERICAN WORKWEAR, INC.
46 OLD FLAT RIVER ROAD
COVENTRY, RI 02816
This proxy is solicited on behalf of
the Board of Directors of the Company.
