-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ef2TcBzaZqWdbokFpN4RrBoZaUOK0KT8NqwWqp+HzPfcqBSofZDVXEcPC9l8ZBYI Qmomj/TjqfDcnRNgs0FkVQ== 0000950123-97-004295.txt : 19970515 0000950123-97-004295.hdr.sgml : 19970515 ACCESSION NUMBER: 0000950123-97-004295 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19970514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DRESS BARN INC CENTRAL INDEX KEY: 0000717724 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-WOMEN'S CLOTHING STORES [5621] IRS NUMBER: 060812960 STATE OF INCORPORATION: CT FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-25377 FILM NUMBER: 97604592 BUSINESS ADDRESS: STREET 1: 30 DUNNIGAN DR CITY: SUFFERN STATE: NY ZIP: 10901 BUSINESS PHONE: 9143694600 MAIL ADDRESS: STREET 1: 30 DUNNIGAN DRIVE CITY: SUFFERN STATE: NY ZIP: 10901 S-3/A 1 AMENDMENT #1 TO FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1997 REGISTRATION NO. 333-25377 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 THE DRESS BARN, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ CONNECTICUT 06-0812960 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
30 DUNNIGAN DRIVE SUFFERN, NEW YORK 10901 (914) 369-4500 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ELLIOT S. JAFFE CHAIRMAN 30 DUNNIGAN DRIVE SUFFERN, NEW YORK 10901 (914) 369-4500 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: RICHARD H. ROWE, ESQ. IAN B. BLUMENSTEIN, ESQ. PROSKAUER ROSE GOETZ & MENDELSOHN LLP LATHAM & WATKINS 1233 20 Street, N.W., Suite 800 885 Third Avenue, Suite 1000 Washington, D.C. 20036-2396 New York, New York 10022 (202) 416-6820 (212) 906-1200
------------------------ Approximate date of commencement of proposed sale to the public: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) of the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. ================================================================================ 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED MAY 14, 1997 PROSPECTUS 2,000,000 SHARES [DRESS BARN LOGO] COMMON STOCK All of the shares (the "Shares") of common stock, par value $.05 per share (the "Common Stock"), of The Dress Barn, Inc. ("Dress Barn" or the "Company") offered hereby (the "Offering") are being sold by The Jaffe Family Foundation and the Jaffe Family, L.P. (the "Selling Shareholders"). The Company will not receive any of the proceeds from the sale of the Shares. The Common Stock is listed on the Nasdaq National Market under the symbol "DBRN." On May 14, 1997, the closing sale price of the Common Stock on the Nasdaq National Market was $ per share. ------------------------ SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON STOCK OFFERED HEREBY. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
==================================================================================================== UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO SELLING PUBLIC COMMISSIONS(1) SHAREHOLDERS(2) - ---------------------------------------------------------------------------------------------------- Per Share................... $ $ $ - ---------------------------------------------------------------------------------------------------- Total (3)................... $ $ $ ====================================================================================================
(1) The Company and the Selling Shareholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deducting expenses of the Offering estimated at $ , of which approximately $ will be payable by the Selling Shareholders and approximately $ will be payable by the Company. (3) The Jaffe Family Foundation has granted the Underwriters an option, exercisable within 30 days after the date hereof, to purchase up to an aggregate of 300,000 additional shares of Common Stock to cover over- allotments, if any. If such option is exercised in full, total Price to Public, Underwriting Discounts and Commissions and Proceeds to Selling Shareholders will be $ , $ and $ , respectively. See "Underwriting." ------------------------ The Common Stock offered hereby is offered by the several Underwriters, subject to prior sale, when as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the shares of Common Stock will be made at the offices of Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York on or about , 1997. ------------------------ BEAR, STEARNS & CO. INC. ROBERTSON, STEPHENS & COMPANY THE DATE OF THIS PROSPECTUS IS , 1997. 3 AVAILABLE INFORMATION The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files annual and quarterly reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information may be inspected at the Commission's Public Reference Section, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the Commission's regional offices at 7 World Trade Center, 13th Floor, New York, New York 10048; and Northwest Atrium Center, 500 West Madison Street, Room 1400, Chicago, Illinois 60661-2511. Copies of such materials can also be obtained at prescribed rates from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, the Commission maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The Common Stock is traded on the Nasdaq National Market, and copies of such materials can also be inspected at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. INFORMATION INCORPORATED BY REFERENCE The following documents filed by the Company with the Commission are hereby incorporated by reference in this Prospectus: (1) the Annual Report of the Company on Form 10-K for the fiscal year ended July 27, 1996; (2) the Quarterly Report of the Company on Form 10-Q for the quarter ended October 26, 1996; (3) the Quarterly Report of the Company on Form 10-Q for the quarter ended January 25, 1997; and (4) the description of Common Stock contained in the Company's Registration Statement on Form S-1 declared effective May 4, 1983. All reports and other documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the Offering shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such reports and documents. Any statement contained in any document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon written or oral request of such person, a copy of any or all of the foregoing documents incorporated by reference herein (other than exhibits to such documents, unless such exhibits are specifically incorporated by reference into any such document). Requests for such documents should be submitted in writing to the Secretary of the Company at the Company's principal executive offices at 30 Dunnigan Drive, Suffern, New York 10901, telephone number: (914) 369-4500. ------------------------ CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS AND THE IMPOSITION OF PENALTY BIDS. SEE "UNDERWRITING." CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ALSO ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET. SEE "UNDERWRITING." ------------------------ The Company was incorporated in Connecticut in 1962. The Company's principal executive offices are located at 30 Dunnigan Drive, Suffern, New York 10901, telephone number: (914) 369-4500. 3 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information (including the financial statements and the notes thereto) included elsewhere or incorporated by reference in this Prospectus. Each prospective investor is urged to read this Prospectus in its entirety. Unless otherwise indicated, all references herein to "Dress Barn" or the "Company" include The Dress Barn, Inc. and its subsidiaries, and references to a "Fiscal" year specify the calendar year in which the fiscal year ended; for example Fiscal 1996 refers to the fiscal year ended July 27, 1996. In addition, unless otherwise indicated, information contained herein assumes that the Underwriters' over-allotment option is not exercised. ------------------------ THE COMPANY Dress Barn operates a national chain of value-priced specialty stores offering career apparel and accessories to the fashion-conscious working woman. In addition, the Company's stores carry a broad assortment of casual wear to suit its customers' total lifestyle needs. Over the past several years, the Company has evolved from an off-price chain to a value-priced specialty retailer. The Company distinguishes itself from (i) off-price retailers by its carefully edited selection of in-season, first-quality merchandise, service-oriented salespeople and its comfortable shopping environment, (ii) department stores by its value pricing and convenient locations and (iii) other specialty apparel retailers by its continuous focus on Dress Barn's target customer for more than 35 years. As part of this focus, the Company has successfully developed its own line of private brands, which constituted approximately 50% of net sales for the six months ended January 25, 1997. The Company's stores operate primarily under the names Dress Barn and Dress Barn Woman, the latter featuring larger sizes of styles similar to those found in the Dress Barn stores. The Company also operates combination Dress Barn/Dress Barn Woman stores ("Combo Stores"), which carry both Dress Barn and Dress Barn Woman merchandise. As of April 26, 1997, Dress Barn operated 702 stores in 43 states and the District of Columbia, consisting of 425 Dress Barn stores, 86 Dress Barn Woman stores and 191 Combo Stores. The Dress Barn and Dress Barn Woman stores average approximately 4,500 and approximately 3,900 square feet, respectively, and the Combo Stores average approximately 8,400 square feet. Based on the success of its Combo Stores, the Company is focusing its expansion strategy on opening new Combo Stores and converting existing Dress Barn and Dress Barn Woman stores to the combination format. The Company plans to open approximately 60 additional Combo Stores by the end of Fiscal 1998. INDUSTRY BACKGROUND The retail apparel industry has undergone significant contraction in recent years, with the closing of over 30 major retail chains and considerable consolidation. According to Dun and Bradstreet, over 9,500 retail apparel and accessory stores closed or failed in the United States between 1991 and 1995. As a result of this consolidation, the Company believes it is the second largest national specialty retail chain of value-priced women's clothing. This period was characterized by strong competition and price deflation, which resulted in operating margin pressure for the retail apparel industry. The Company believes that these trends have begun to reverse in the past six months. Another significant trend in retailing has been the steady reduction in regional shopping mall traffic. Studies show that busy consumers have less time to contend with suburban congestion and are, instead, shopping closer to home. According to a 1995 Stillerman Jones & Co. study, the nationwide average of mall visits by consumers and the average time spent shopping in malls fell to 3.3 visits per month and 66 minutes spent in 1995, from 3.5 visits per month and 71 minutes spent in 1991. With the majority of its stores located in strip centers, the Company believes it is well positioned to benefit from these trends. 4 5 COMPANY STRENGTHS Dress Barn is a leading specialty store offering women's career fashions at value prices. Dress Barn attributes its success to its: (i) strong name recognition and loyal customer base; (ii) long-standing relationships with vendors of quality merchandise; (iii) experienced management team; (iv) commitment to technology; (v) strong, consistent customer focus; (vi) low cost operating structure; and (vii) strong balance sheet. Strong Name Recognition. Since the Company's formation in 1962, Dress Barn has established and reinforced its image as a source of fashion and value for the working woman. The Company's 702 store locations in 43 states and the District of Columbia provide it with a nationally recognized name. In addition, the Company believes it has developed high awareness among its target customers through on-going advertising and local marketing activities. Strong Vendor Relationships. The Company has developed and maintains strong and lasting relationships with its domestic and offshore vendors. Dress Barn has worked with many of its vendors for more than 15 years, and often is one of the vendors' largest accounts. These relationships, along with the Company's buying power and strong credit profile, enable the Company to receive favorable purchase terms, exclusive merchandise and expedited delivery times. Experienced Management Team. The three senior members of the Company's merchandising team have worked together at Dress Barn for over 15 years, with each having substantial previous fashion retailing experience. This team engineered the Company's evolution from an off-price retailer to a value-priced specialty store. The Company's executive officers have an average tenure at Dress Barn of 14 years. The stability of its management has enabled the Company to develop a shared culture and vision and to maintain its focus on growing and refining its business. Commitment to Technology. Dress Barn has used technology to improve merchandising and customer service, reduce costs and enhance productivity. The Company's management information systems, which include a new IBM AS/400 integrated financial system and IBM 4694 point-of-sale system, allow it to provide better service to customers by reducing paperwork and decreasing the average transaction processing time. This enables sales associates to spend more time assisting customers. The Company has also developed a laptop system that delivers up-to-date store related information to its regional sales managers. The Company's distribution center systems, installed in 1994, have reduced per-unit distribution costs by over 50%, representing approximately $1.0 million in annual savings. Strong, Consistent Customer Focus. All aspects of Dress Barn's business are designed to be responsive to the Dress Barn customer. Since 1962, the Company has been consistent in targeting price-conscious and fashion-minded working women. The convenient locations of the Company's stores primarily in strip and outlet centers, carefully edited merchandise arranged for ease of shopping, comfortable store environment and friendly customer service embody Dress Barn's strong focus on its customers. Dress Barn's comprehensive training program encourages its sales associates to assist customers in a low-key and friendly manner. The Company believes it enhances its customers' shopping experience by avoiding aggressive sales tactics that would result from a commission-based compensation structure. Low Cost Operator. The Company continually seeks to reduce costs in all aspects of its operations and to create cost-consciousness at all levels. During Fiscal 1995 the Company established a cost control procedure which analyzes each department's budget twice annually to identify savings opportunities. For example, this focus on cost-cutting has contributed to a $900,000 reduction in selling, general and administrative expenses for the six months ended January 25, 1997, compared to the six months ended January 27, 1996, despite the Company's increased sales in the 1997 period. Strong Balance Sheet. The Company believes that its highly liquid balance sheet and internally generated funds provide a competitive advantage that enables the Company to pursue its long-term strategies regarding new stores, capital expenditures and acquisitions. 5 6 OPERATING STRATEGIES The Company's objective is to become the leading national chain of value-priced specialty apparel stores offering career fashions to the moderate income working woman. The Company has developed the following strategies to achieve this goal: (i) further development of Dress Barn's private brands; (ii) maintenance of Dress Barn's merchandise focus; (iii) continuation of the Combo Store roll-out; (iv) further development of customer targeted marketing; and (v) further improvement of customer service. Private Brand Strategy. The Company has gradually increased the percentage of sales from goods manufactured under Dress Barn's private brands, as well as goods produced by national brand manufacturers exclusively for Dress Barn, to approximately 50% and 15%, respectively, of the Company's net sales for the six months ended January 25, 1997. While the Company intends to continue to offer a balanced mix of both national brand name and private brand merchandise, it plans to continue to increase the percentage of private brand merchandise sold by its stores, including its successful Westport(R), Princeton Club(R) and Atrium(R) brands. Dress Barn's private brands typically create more value for its customers and promote Dress Barn's "fashion at a fraction" image. Merchandise Strategy. The Company's stores carry a broad assortment of career wear, including dresses, suits, separates, blouses, sweaters and other knitwear, as well as casual wear items, that are carefully edited to suit the lifestyle needs of its target customer. Dress Barn does not seek to dictate fashion trends; rather it offers current styles but avoids fashion-forward merchandise that is subject to rapidly changing trends. While career fashions remain the Company's primary focus, it continues to adapt to the evolving definition of "career," such as casual Fridays. In addition, the Company seeks to broaden its appeal by expanding its merchandise mix. The Company has recently introduced shoes and petites in select locations. Based on the success of these initial tests, the Company is gradually increasing the number of stores offering shoes and petites. Combo Store Roll-Out. Based on the success of the Combo Stores, the Company expects most future store openings to be Combo Stores. Because of their larger size, the Combo Stores provide the Company with greater presence in shopping centers, give the Company more leverage in negotiating lease terms, enable the Company to achieve lower operating cost ratios and offer increased flexibility in merchandise presentation. Of the approximately 60 additional Combo Stores which the Company plans to open by the end of Fiscal 1998, 25 are expected to be new stores and 35 are expected to be conversions from existing Dress Barn or Dress Barn Woman stores. In conjunction with its strategy of adding Combo Stores, the Company is aggressively closing underperforming locations and expects to close approximately 60 such locations during Fiscal 1997, of which 50 have been closed as of April 26, 1997. The Company has the option under a substantial number of its store leases to terminate the lease at little or no cost if specified sales volumes are not achieved, affording the Company greater flexibility to close certain underperforming stores. The Company's roll-out of Combo Stores, net of store closings, is expected to result in a small increase to the Company's aggregate store square footage in Fiscal 1997 and an increase, during that year, in the proportion of square footage attributable to Combo Stores from 33% to 40%. Targeted Marketing. The Company uses several marketing tools, such as transactional analyses through point-of-sale systems and customer surveys, in order to determine the preferences of its target customers, working women ages 25-55. In addition, the Company distributed six mailings during the 12 months ended January 25, 1997, each to approximately one million households including its credit card holders. The Company is also collecting data from its credit card program for use in other future marketing initiatives. Management believes that these tools will further improve the Company's ability to align its operations with the demands of its target customers on a consistent basis. Customer Service. Dress Barn continually seeks to improve the customer's shopping experience. For example, the Company's new management information systems enable store managers and sales associates to spend more time serving customers. The Company has also developed an ongoing video training program to continue to improve customer service and sales associates' product knowledge and selling skills. 6 7 ACQUISITION OPPORTUNITIES In order to supplement the Company's growth and enhance shareholder value, the Company considers three types of acquisition opportunities: (i) real estate oriented acquisitions to gain access to attractive sites and favorable lease terms; (ii) other retail operations that could benefit from Dress Barn's management and expertise, such as chains offering a complementary product line; and (iii) alternate channels of distribution, such as mail order catalogs. The Company seeks to assure that the earnings-per-share impact of a potential acquisition for the first full fiscal year will be approximately neutral to positive. The Company believes that its highly liquid balance sheet, with cash, cash equivalents and marketable securities of $119 million as of January 25, 1997, will enable it to take advantage of such acquisition opportunities should they arise. The Company believes that its Suffern, New York facility and its corporate, merchandising and distribution infrastructure is more than adequate to meet current needs and any foreseeable increase in the Company's store base due to expansion or acquisition. The Company is currently negotiating a letter of intent for a proposed acquisition of a private company in a new, but related, line of business that would meet Dress Barn's acquisition criteria. The specific terms of the acquisition are still subject to negotiation, and closing is subject to several conditions, including conducting a due diligence investigation to the Company's satisfaction and eventually negotiating and preparing a definitive purchase agreement. See "Risk Factors -- Risks Attendant to Acquisition Strategy" and "Business -- Acquisition Opportunities." RECENT DEVELOPMENTS During the third quarter ended April 26, 1997, net sales totaled $134.1 million compared to $125.2 million during the quarter ended April 27, 1996, an increase of 7%. Comparable store sales for the third quarter of Fiscal 1997 increased 6% over the third quarter of Fiscal 1996. Net sales for the nine-month period ended April 26, 1997 were $408.3 million compared to $381.7 million for the nine-month period ended April 27, 1996, an increase of 7%. Comparable store sales for the nine-months ended April 26, 1997 increased 5% over the nine-months ended April 27, 1996. The increase in net sales for the third quarter ended April 26, 1997 was positively affected by the reaction to the Company's merchandise and an absence of the adverse weather conditions that prevailed in the winter of 1996. Preliminary information indicates that net earnings for the third quarter ended April 26, 1997 increased 43% to $7.4 million, or $.32 per share, compared to $5.1 million, or $.23 per share, for the third quarter ended April 27, 1996. Preliminary information, subject to final review, also indicates that net income for the nine-month period ended April 26, 1997 increased 60% to $20.6 million, or $.90 per share, compared to $12.9 million, or $.58 per share, for the nine-months ended April 27, 1996. As of April 26, 1997, the Company operated 702 stores (including 191 Combo Stores) as compared to 749 stores (including 136 Combo Stores) in operation as of April 27, 1996. THE OFFERING Common Stock offered............................ 2,000,000 shares Common Stock outstanding (1).................... 22,854,727 shares Nasdaq National Market symbol................... DBRN Use of proceeds................................. The Company will not receive any proceeds from the sale of the Shares.
- --------------- (1) Excludes (a) 1,778,486 shares of Common Stock subject to outstanding options granted under the Company's stock option plans and (b) shares of Common Stock that may be issued in connection with a proposed acquisition. See "Business -- Acquisition Opportunities." 7 8 SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
TWENTY-SIX FISCAL YEAR ENDED WEEKS ENDED ------------------------------------------------------------------- ------------------------- JULY 25, JULY 31, JULY 30, JULY 29, JULY 27, JANUARY 27, JANUARY 25, 1992 1993(1) 1994 1995 1996(2) 1996 1997 ----------- ----------- ----------- ----------- ----------- ----------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) STATEMENT OF EARNINGS DATA: Net sales.................... $ 363,090 $ 419,586 $ 457,325 $ 500,836 $ 515,522 $ 256,477 $ 274,212 Gross profit................. 125,029 145,152 156,171 173,670 177,524 87,136 93,907 Writedown of underperforming and closed store assets.... -- -- -- -- 2,848(3) -- -- Operating income............. 21,989 27,410 23,913 26,354 26,672 10,656 18,659 Interest income-net.......... 3,003 2,338 1,727 2,670 3,343 1,655 2,115 Net earnings................. 16,194 19,039 16,153 18,285 18,909 7,756 13,192 Earnings per share........... 0.74 0.86 0.73 0.82 0.84 0.35 0.58 Weighted average shares outstanding (in thousands)................. 21,805 22,020 22,177 22,266 22,413 22,331 22,646 SELECTED OPERATING DATA: Number of stores open at the end of period: Dress Barn................. 482 513 544 578 492 546 451 Dress Barn Woman........... 52 92 98 106 97 106 91 Combo Stores............... 30 36 46 82 137 107 165 ------- ------- ------- ------- ------- ------- ------- Total number of stores....... 564 641 688 766 726 759 707 Total number of units(4)..... 594 677 734 848 863 866 872 Total number of units opened during the period(5)....... 101 117 95 146 107 57 45 Total number of units closed during the period.......... 39 34 38 32 92 39 36 Total store square footage (in thousands)............. 2,513 2,940 3,236 3,750 3,724 3,781 3,820 Average store size (sq. ft.)....................... 4,448 4,579 4,703 4,896 5,130 4,981 5,404 Comparable store sales increase (decrease)(6)..... (0.9%) 1.6% (1.1%) (1.4%) (3.5%) (4.6%) 5.1%
JANUARY 25, 1997 ----------- (IN THOUSANDS) BALANCE SHEET DATA: Working capital....................................................... $ 140,895 Total assets.......................................................... 275,479 Long-term debt........................................................ 3,500 Shareholders' equity.................................................. 215,036
- --------------- (1) Consists of 53 weeks. All other years presented consist of 52 weeks. (2) Certain reclassifications have been made to prior years' data to conform with 1996 presentation. (3) Reflects a charge relating to the Company's implementation of the provisions of Financial Accounting Standards No. 121. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." (4) One Combo Store equals two units; one Dress Barn or Dress Barn Woman store equals one unit. (5) Includes stores opened and single-format Dress Barn or Dress Barn Woman stores converted into Combo Stores. (6) The calculation of comparable store sales is based on the number of units rather than the number of stores open, with each Combo Store representing two units. New units are included in the comparable store base when they have been open for the entire prior fiscal year. In the case of conversions from single store formats to Combo Stores in the same center, the pre-existing portion of the store (unit) remains in the comparable store base. 8 9 RISK FACTORS Prospective investors, prior to making an investment decision, should carefully consider the following, together with the other matters included and incorporated by reference herein. In addition, this Prospectus contains forward-looking statements that involve risks and uncertainties. Discussions containing such forward-looking statements may be found in the material set forth under "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as in this Prospectus generally. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth herein and elsewhere in this Prospectus. COMPETITION The women's retail apparel industry is highly competitive. The Company competes primarily with department stores, off-price retailers, specialty stores, discount stores and mass merchandisers, many of which have substantially greater financial, marketing and other resources than the Company. Many department stores offer a broader selection of merchandise than the Company. In addition, many department stores have in the past been more promotional than they are now and have reduced their selling prices, and certain of the Company's competitors and vendors have opened outlet stores which offer off-price merchandise. The Company's sales and results of operations may also be affected by close-outs and going-out-of-business sales by other women's apparel retailers. Partially as a result of such competition, apparel retailers have experienced price deflation during the last several years. The Company may face periods of strong competition in the future which could have an adverse effect on its financial results. See "Business -- Competition." RISKS OF GROWTH STRATEGY The growth of the Company is dependent, in large part, upon the Company's ability to successfully execute its strategy of adding new Combo Stores and aggressively closing underperforming locations. Through the end of Fiscal 1998, the Company expects to open approximately 60 additional Combo Stores, of which 25 are expected to be new stores and 35 are expected to be conversions from existing Dress Barn or Dress Barn Woman stores. The success of the Company's growth strategy will depend upon a number of factors, including the identification of suitable markets and sites for new Combo Stores, negotiation of leases on acceptable terms, construction or renovation of sites in a timely manner at acceptable costs, and maintenance of the productivity of the existing store base. In addition, the Company must be able to hire, train and retain competent managers and personnel and manage the systems and operational components of its growth. The failure of the Company to open new Combo Stores on a timely basis, obtain acceptance in markets in which it currently has limited or no presence, attract qualified management and personnel or appropriately adjust operational systems and procedures would adversely affect the Company's future operating results. In addition, there can be no assurance that the opening of new Combo Stores in existing markets will not have an adverse effect on sales at existing stores in these markets. There can be no assurance that the Company will be able to successfully implement its growth strategies, continue to introduce the Combo Stores or maintain its current growth levels. See "Business -- Store Expansion Strategy." MERCHANDISE TRENDS The Company's success depends in part on its ability to anticipate and respond to changing merchandise trends and consumer preferences in a timely manner. Accordingly, any failure by the Company to anticipate, identify and respond to changing fashion trends could adversely affect consumer acceptance of the merchandise in the Company's stores, which in turn could adversely affect the Company's business and its image with its customers. If the Company miscalculates either the market for its merchandise or its customers' purchasing habits, it may be required to sell a significant amount of unsold inventory at below average markups over the Company's cost, or below cost, which would have an adverse effect on the Company's financial condition and results of operations. In addition, the Company has increased its use of private brands. The nature of the Company's obligations with respect to private brand purchases may make it more difficult to respond to changing trends by reducing order quantities. These factors could result in higher 9 10 markdowns and lower gross profits to the extent that sales of private brand merchandise are lower than expected. See "Business -- Merchandising." RISKS ATTENDANT TO ACQUISITION STRATEGY The Company generally considers three types of acquisition opportunities: (i) real estate oriented acquisitions, to gain access to attractive sites and favorable lease terms; (ii) other retail operations that could benefit from the Company's management and expertise, such as other apparel chains offering a complementary product line; and (iii) alternate channels of distribution, such as mail order catalogs. The Company has never completed an acquisition of the types listed in (ii) and (iii) above. At any given time, the Company may be in various stages of consideration of such opportunities. Such acquisitions are subject to due diligence, the negotiation of definitive agreements and other conditions typical in acquisition transactions, certain of which may be beyond the Company's control. There is no assurance that the Company will be able to identify desirable acquisition candidates or will be successful in entering into any definitive agreements with respect to desirable acquisitions. Moreover, even if definitive agreements are entered into, there is no assurance that any future acquisition will thereafter be completed or, if completed, that the anticipated benefits of the acquisition will be realized. The Company is currently negotiating a letter of intent for a proposed acquisition of a private company in a new, but related, line of business that would meet Dress Barn's acquisition criteria. The net sales of this business for its most recent fiscal year were approximately $85 million. The proposed purchase price is approximately $25 million to be paid in cash, in assumption of debt and/or in shares of Common Stock. To the extent the Company issues Common Stock to the seller, it is the Company's intention to purchase a similar number of shares of Common Stock on the open market or otherwise. Also, the Company may grant the seller a put option to require the Company to repurchase shares of Common Stock issued to the seller as part of the purchase price under certain circumstances. The target of the proposed acquisition, which has been in existence for 14 years, has advised the Company that it incurred operating losses for each of its past three years, including an operating loss of approximately $2.0 million in its last fiscal year, and had a working capital deficit of over $5.0 million as of December 31, 1996. The specific terms of the acquisition are still subject to negotiation, and closing is subject to several conditions, including conducting a due diligence investigation to the Company's satisfaction and eventually negotiating and preparing a definitive purchase agreement. There can be no assurance that the contemplated acquisition will be consummated successfully or that the completed acquisition will be operated profitably. See "Business -- Acquisition Opportunities." DEPENDENCE ON KEY EXECUTIVES The Company's success is largely dependent on the efforts and abilities of its executive officers, particularly Elliot S. Jaffe, its Chairman and Chief Executive Officer, and Burt Steinberg, its President and Chief Operating Officer. The loss of the services of any of these individuals could have a material adverse effect on the Company's business, financial condition and results of operations. See "Management." RELIANCE ON SYSTEMS AND DISTRIBUTION CENTER The Company relies upon its existing management information systems in operating and monitoring all major aspects of the Company's business, including sales, warehousing, distribution, purchasing, inventory control, merchandising planning and replenishment, as well as various financial systems. Any disruption in the operation of the Company's management information systems, or the Company's failure to continue to upgrade, integrate or expend capital on such systems as its business expands, would have a material adverse effect on the Company. In addition, the Company operates a 510,000 square foot office and distribution center in Suffern, New York. Management believes the systems and controls related to the distribution center are fully integrated and are more than adequate to meet current needs and any foreseeable increase in the Company's store base due to acquisition or expansion. However, any disruption in the operations of the distribution center would have a material adverse effect on the Company's business. See "Business - Management Information Systems." 10 11 QUARTERLY RESULTS AND SEASONALITY The Company has historically experienced substantially lower earnings in its second fiscal quarter ending in January than during its other three fiscal quarters, reflecting the intense promotional atmosphere that has characterized the Christmas shopping season in recent years. In addition, the Company's quarterly results of operations may fluctuate materially depending on, among other things, the timing of new store openings, net sales contributed by new stores, increases or decreases in comparable store sales, adverse weather conditions, shifts in timing of certain holidays, changes in the Company's merchandise mix and the timing of acquisitions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Quarterly Results and Seasonality." 11 12 USE OF PROCEEDS The Company will not receive any proceeds from the sale of the Shares. The 1,000,000 shares being sold by The Jaffe Family Foundation were recently contributed to it by the Jaffe Family, L.P. and are being sold to comply with tax laws governing foundations. The Jaffe Family, L.P. is selling 1,000,000 shares for tax planning purposes. CAPITALIZATION The following table sets forth the capitalization of the Company as of January 25, 1997:
(IN THOUSANDS) -------------- Long term debt(1).............................................................. $ 3,500 -------- Shareholders' equity(2): Preferred stock, par value $.05 per share; 100,000 shares authorized; no shares issued or outstanding.............................................. -- Common stock, par value $.05 per share; 30,000,000 shares authorized; 23,786,842 shares issued; 22,781,842 shares outstanding................... 1,189 Additional paid-in capital................................................... 18,114 Retained earnings............................................................ 200,300 Treasury stock, at cost...................................................... (5,706) Unrealized gain on investments............................................... 1,139 -------- Total shareholders' equity................................................ 215,036 -------- Total capitalization...................................................... $218,536 ========
(1) Consists of a loan from the New York State Urban Development Corporation due October 1, 2004 bearing interest at rates of 0% to 3% per annum. (2) Excludes (a) 1,851,371 shares of Common Stock subject to outstanding options granted under the Company's stock option plans and (b) shares of Common Stock that may be issued in connection with a proposed acquisition. See "Business -- Acquisition Opportunities." 12 13 SELECTED CONSOLIDATED FINANCIAL DATA The following selected consolidated financial data as of and for the fiscal years ended July 27, 1996, July 29, 1995, July 30, 1994, July 31, 1993 and July 25, 1992 have been derived from the audited consolidated financial statements of the Company and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations." The following selected consolidated financial data for the twenty-six weeks ended January 25, 1997 and January 27, 1996 are unaudited but have been prepared on the same basis as the audited financial data and, in the opinion of management, contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations for such periods. The results of operations for the twenty-six weeks ended January 25, 1997 are not necessarily indicative of results to be expected for the full fiscal year.
TWENTY-SIX WEEKS ENDED FISCAL YEAR ENDED ----------------------- -------------------------------------------------------- JANUARY JANUARY JULY 25, JULY 31, JULY 30, JULY 29, JULY 27, 27, 25, 1992 1993(1) 1994 1995 1996(2) 1996 1997 -------- -------- -------- -------- -------- ---------- ---------- (IN THOUSANDS EXCEPT PER SHARE AMOUNTS) STATEMENT OF EARNINGS DATA: Net sales................................ $363,090 $419,586 $457,325 $500,836 $515,522 $256,477 $274,212 Cost of sales, including occupancy and buying costs......................... 238,061 274,434 301,154 327,166 337,998 169,341 180,305 -------- -------- -------- -------- -------- -------- -------- Gross profit........................... 125,029 145,152 156,171 173,670 177,524 87,136 93,907 Selling, general and administrative expenses............................. 95,350 108,565 120,131 133,253 132,176 67,193 66,290 Depreciation and amortization ......... 7,690 9,177 12,127 14,063 15,828 9,287 8,958 Write-down of underperforming and closed store assets.................. -- -- -- -- 2,848(3) -- -- -------- -------- -------- -------- -------- -------- -------- Operating income....................... 21,989 27,410 23,913 26,354 26,672 10,656 18,659 Interest income-net.................... 3,003 2,338 1,727 2,670 3,343 1,655 2,115 -------- -------- -------- -------- -------- -------- -------- Earnings before income taxes........... 24,992 29,748 25,640 29,024 30,015 12,311 20,774 Income taxes........................... 8,798 10,709 9,487 10,739 11,106 4,555 7,582 -------- -------- -------- -------- -------- -------- -------- Net earnings........................... $ 16,194 $ 19,039 $ 16,153 $ 18,285 $ 18,909 $ 7,756 $ 13,192 ======== ======== ======== ======== ======== ======== ======== Earnings per share..................... $ 0.74 $ 0.86 $ 0.73 $ 0.82 $ 0.84 $ 0.35 $ 0.58 Weighted average shares outstanding.... 21,805 22,020 22,177 22,266 22,413 22,331 22,646 BALANCE SHEET DATA: Working capital........................ $ 73,477 $ 83,476 $ 89,051 $103,310 $122,730 $111,709 $140,895 Total assets........................... 173,360 202,386 217,863 243,521 265,723 231,126 275,479 Long-term debt......................... -- -- -- 3,500 3,500 3,500 3,500 Shareholders' equity................... 120,339 142,003 159,198 178,938 199,096 187,571 215,036
- --------------- (1) Consists of 53 weeks. All other years presented consist of 52 weeks. (2) Certain reclassifications have been made to prior years' data to conform with 1996 presentation. (3) Reflects a charge relating to the Company's implementation of the provisions of Financial Accounting Standards No. 121. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 13 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION RECENT DEVELOPMENTS During the third quarter ended April 26, 1997, net sales totaled $134.1 million compared to $125.2 million during the quarter ended April 27, 1996, an increase of 7%. Comparable store sales for the third quarter of Fiscal 1997 increased 6% over the third quarter of Fiscal 1996. Net sales for the nine-month period ended April 26, 1997 were $408.3 million compared to $381.7 million for the nine-month period ended April 27, 1996, an increase of 7%. Comparable store sales for the nine-months ended April 26, 1997 increased 5% over the nine-months ended April 27, 1996. The increase in net sales for the third quarter ended April 26, 1997 was positively affected by the reaction to the Company's merchandise and an absence of the adverse weather conditions that prevailed in the winter of 1996. Preliminary information indicates that net earnings for the third quarter ended April 26, 1997 increased 43% to $7.4 million, or $.32 per share, compared to $5.1 million, or $.23 per share, for the third quarter ended April 27, 1996. Preliminary information, subject to final review, also indicates that net income for the nine-month period ended April 26, 1997 increased 60% to $20.6 million, or $.90 per share, compared to $12.9 million, or $.58 per share, for the nine-months ended April 27, 1996. As of April 26, 1997, the Company operated 702 stores (including 191 Combo Stores) as compared to 749 stores (including 136 Combo Stores) in operation as of April 27, 1996. The Company is currently negotiating a letter of intent for a proposed acquisition of a private company in a new, but related, line of business that would meet Dress Barn's acquisition criteria. See "Business -- Acquisition Opportunities." RESULTS OF OPERATIONS The table below sets forth certain financial data of the Company expressed as a percentage of net sales for the periods indicated:
TWENTY-SIX WEEKS FISCAL YEAR ENDED ENDED ----------------------------- --------------------- JULY JULY JULY JANUARY JANUARY 30, 29, 27, 27, 25, 1994 1995 1996 1996 1997 ------- ------- ------- --------- --------- Net sales.................................. 100.0% 100.0% 100.0% 100.0% 100.0% Cost of sales, including occupancy and buying................................... 65.9 65.3 65.6 66.0 65.8 Gross profit............................... 34.1 34.7 34.4 34.0 34.2 Selling, general and administrative expenses................................. 26.3 26.6 25.6 26.2 24.2 Depreciation and amortization.............. 2.6 2.8 3.0 3.6 3.2 Writedown of underperforming and closed store.................................... -- -- 0.6 -- -- ----- ----- ----- ----- ----- Operating income........................... 5.2 5.3 5.2 4.2 6.8 Interest income............................ 0.4 0.5 0.6 0.6 0.8 Income before income taxes................. 5.6 5.8 5.8 4.8 7.6 Income taxes............................... 2.1 2.1 2.1 1.8 2.8 ----- ----- ----- ----- ----- Net income................................. 3.5% 3.7% 3.7% 3.0% 4.8% ===== ===== ===== ===== =====
TWENTY-SIX WEEKS ENDED JANUARY 25, 1997 COMPARED TO TWENTY-SIX WEEKS ENDED JANUARY 27, 1996 Net sales increased by 6.9% to $274.2 million for the 26 weeks ended January 25, 1997 from $256.5 million for the 26 weeks ended January 27, 1996, due primarily to a 5% increase in comparable store sales. The increase in comparable store sales resulted primarily from better weather conditions during the 1997 period. The improvement in net sales was also attributable to an approximately 1% increase in total selling square footage, which was due to the opening of new Combo Stores and the conversion of single-format stores into Combo Stores. This offset the closing of underperforming stores, which resulted in the number of stores in operation declining to 707 stores as of January 25, 1997, from 759 stores in operation as of January 27, 1996. Gross profit (net sales less cost of goods sold, including occupancy and buying costs) increased by 7.8% to $93.9 million, or 34.2% of net sales, for the 1997 period from $87.1 million, or 34.0% of net sales, for the 1996 14 15 period. The increase in gross profit as a percentage of net sales was primarily due to a decrease in markdowns, as well as the fixed nature of occupancy costs which were unaffected by the increase in comparable store sales. Selling, general and administrative (SG&A) expenses decreased by 1.3% to $66.3 million, or 24.2% of net sales, in the 1997 period from $67.2 million, or 26.2% of net sales, in the 1996 period, reflecting the Company's continued focus on cost reductions and productivity improvements. Depreciation expense decreased by 3.5% to $9.0 million for the 1997 period from $9.3 million for the 1996 period. Depreciation expense for both periods reflect certain writeoffs related to the closure of 34 stores and 36 stores during the 1997 and 1996 periods, respectively. Interest income -- net increased by 27.8% to $2.1 million for the 1997 period from $1.7 million for the 1996 period. The increase resulted primarily from an increase in the Company's investment portfolio. FISCAL 1996 COMPARED TO FISCAL 1995 Net sales increased by 2.9% to $515.5 million in Fiscal 1996, from $500.8 million in Fiscal 1995. Comparable store sales decreased 3.5% from the prior year. The Company operated 726 stores at July 27, 1996, compared to 766 stores operated at July 29, 1995. The increase in net sales in Fiscal 1996 resulted from the Company's store development activity. Although the Company closed 72 stores in Fiscal 1996, the Company increased its selling square footage approximately 1% by opening 45 new stores and converting 50 single-format stores into Combo Stores. The decrease in comparable store sales in Fiscal 1996 resulted primarily from competitive pressures, unseasonable weather and a general price deflation in the women's apparel retail sector. Gross profit was $177.5 million, or 34.4% of net sales, in Fiscal 1996, compared to $173.7 million, or 34.7% of net sales, in Fiscal 1995. The decrease in gross profit as a percentage of net sales resulted primarily from spreading relatively fixed occupancy and buying costs over decreased comparable store sales. SG&A expenses as a percentage of net sales decreased 1.0% in Fiscal 1996 versus Fiscal 1995. The economies of converting stores to the larger combination format and an enhanced company-wide focus on cost controls contributed to this decrease. These factors more than offset the effect of lower comparable store sales on these relatively fixed expenses. Depreciation expense was $15.8 million in Fiscal 1996, compared to $14.0 million in Fiscal 1995. The 12.5% increase in Fiscal 1996 resulted primarily from additions to property and equipment related to the relocation of the Company's distribution facility in Fiscal 1994 and 1995. Depreciation expense in Fiscal 1996 also included a $3.0 million loss on disposal of closed store assets versus $2.3 million in Fiscal 1995. In the fourth quarter of Fiscal 1996, the Company implemented the provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement addresses the timing of recognition and the measurement of impairment of (a) long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used, and (b) long-lived assets and certain identifiable intangibles to be disposed of. The statement requires that such assets be reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable, and that such assets be reported at the lower of carrying amount or fair value. The Company recorded a pre-tax charge of $2.8 million in Fiscal 1996 resulting from adoption of this statement. Interest income -- net in Fiscal 1996 increased 25% over Fiscal 1995. The increase resulted primarily from an increase in the market value of the Company's managed municipal bond portfolio. FISCAL 1995 COMPARED TO FISCAL 1994 Net sales increased by 9.5% to $500.8 million in Fiscal 1995 from $457.3 million in Fiscal 1994. Comparable store sales decreased 1.4% from the prior year. The Company operated 766 stores at July 29, 1995, compared to 688 stores operated at July 30, 1994. 15 16 The increase in net sales in Fiscal 1995 resulted primarily from the Company's store development activities. In Fiscal 1995, the Company increased selling square footage by approximately 4% by opening 108 new stores while closing 30 existing stores. Gross profit increased to 34.7% of net sales in Fiscal 1995 from 34.1% of net sales in Fiscal 1994. The decrease in cost of goods sold as a percentage of net sales resulted primarily from improved initial mark-ups which offset higher occupancy costs from both new stores and expanded existing stores. SG&A expenses (restated to exclude depreciation) were $133.3 million in Fiscal 1995, compared to $120.1 million in Fiscal 1994, an increase of 10.9%. As a percentage of net sales, SG&A was 26.6% in Fiscal 1995 compared to 26.3% in Fiscal 1994. The increase in SG&A as a percentage of net sales primarily resulted from decreased comparable store sales and the corporate relocation to Suffern, New York. Depreciation expense was $14.0 million in Fiscal 1995, compared to $12.1 million in Fiscal 1994. The increase in Fiscal 1995 resulted primarily from additions to property and equipment related to the Company's store development activities. The loss on disposal of closed store assets was $2.3 million in Fiscal 1995 versus $1.2 million in Fiscal 1994. Interest income in Fiscal 1995 increased by 54.6% over Fiscal 1994. The increase resulted primarily from the increase in the market value of the Company's managed municipal bond portfolio. LIQUIDITY AND CAPITAL RESOURCES The Company has generally funded, through internally generated cash flow, all of its operating and capital needs. These include the opening of new stores, the remodeling of existing stores and the continued expansion of its Combo Store format. Total capital expenditures were $17.1 million, $22.0 million and $23.4 million in Fiscal 1996, 1995 and 1994, respectively. A total of approximately $15.0 million of capital expenditures during Fiscal 1994 and Fiscal 1995 were for the new Suffern, New York facility. In conjunction with the relocation of its headquarters, the Company accepted a $3.5 million low interest industrial revenue loan in Fiscal 1995 from the New York State Urban Development Corporation, bearing interest rates ranging from 0% to 3% per annum. The Company's cash, cash equivalents, marketable securities and investments increased approximately $19.0 million in Fiscal 1996 from Fiscal 1995. This was primarily due to the increase in earnings and a decrease in SG&A expenses. The Company funds inventory expenditures through cash flows from operations and the favorable payment terms the Company has established with its vendors. The Company's quick ratio (i.e., the ratio of current assets less inventory to current liabilities) has improved steadily over the past three years (1.54, 1.25 and 1.17 at the end of Fiscal 1996, 1995 and 1994, respectively). Merchandise inventories at July 27, 1996 increased $1.7 million from July 29, 1995 as the Company has continued to grow its inventory levels in line with projected sales. The Company's net cash provided by operations in Fiscal 1996 increased to $35.6 million as compared to $27.6 million in Fiscal 1995 and $23.7 million in Fiscal 1994. The increase in Fiscal 1996 was due to the increase in earnings and favorable income tax cash planning. During this three-year period, the Company has increased its cash, cash equivalents, marketable securities and investments by $30.2 million and financed its expansion and corporate relocation while only incurring $3.5 million in long-term debt. At January 25, 1997, the Company had working capital of approximately $141.0 million and three bank credit lines totaling $95.0 million without any outstanding borrowings. Inventory levels at the end of the period were consistent with the Company's sales projections. Expenditures for property and equipment totaled $6.5 million for the six months ended January 25, 1997, compared to $8.3 million of expenditures in the first six months of Fiscal 1996, and the Company anticipates spending approximately $10.0 million for the remainder of Fiscal 1997. This does not include amounts that may be paid in connection with the proposed acquisition. See "Business -- Acquisition Opportunities." The Company believes that its cash, cash equivalents, marketable securities and investments, together with cash flow from operations, will be adequate to fund the Company's proposed capital expenditures and other operating requirements. 16 17 INFLATION The Company does not believe that inflation had a material effect on its results of operations during the past two years. However, there can be no assurance that the Company's business will not be affected by inflation in the future. QUARTERLY RESULTS AND SEASONALITY The Company has historically experienced substantially lower earnings in its second fiscal quarter ending in January than during its other three fiscal quarters, reflecting the intense promotional atmosphere that has characterized the Christmas shopping season in recent years. In addition, the Company's quarterly results of operations may fluctuate materially depending on, among other things, the timing of new store openings, net sales contributed by new stores, increases or decreases in comparable store sales, adverse weather conditions, shifts in timing of certain holidays, changes in the Company's merchandise mix and the timing of acquisitions. The following table sets forth certain unaudited financial information for the Company in each quarter during Fiscal 1996 and each of the first two quarters of Fiscal 1997. The unaudited quarterly information includes all normal recurring adjustments which management considers necessary for a fair presentation of the information shown.
FISCAL 1996 FISCAL 1997 -------------------------------------------- -------------------- FIRST SECOND THIRD FOURTH FIRST SECOND QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- -------- -------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Net sales.................... $137,351 $119,127 $125,174 $133,871 $142,755 $131,457 Gross profit................. 48,387 38,750 43,783 46,604 49,960 43,947 Operating income............. 8,820 1,837 7,356 8,659 11,535 7,125 Net income................... 6,025 1,731 5,137 6,016 7,924 5,268 Earnings per share........... .27 .08 .23 .27 .35 .23 Percentage increase (decrease) in comparable store net sales...................... (4.3%) (4.7%) (3.4%) (1.1%) 1.9% 9.1% Total stores (end of period).................... 776 759 749 726 728 707
17 18 BUSINESS THE COMPANY Dress Barn operates a national chain of value-priced specialty stores offering career apparel and accessories to the fashion-conscious working woman. In addition, the Company's stores carry a broad assortment of casual wear to suit its customers' total lifestyle needs. Over the past several years, the Company has evolved from an off-price chain to a value-priced specialty retailer. The Company distinguishes itself from (i) off-price retailers by its carefully edited selection of in-season, first-quality merchandise, service-oriented salespeople and its comfortable shopping environment, (ii) department stores by its value pricing and convenient locations and (iii) other specialty apparel retailers by its continuous focus on Dress Barn's target customer for more than 35 years. As part of this focus, the Company has successfully developed its own line of private brands, which constituted approximately 50% of net sales for the six months ended January 25, 1997. The Company's stores operate primarily under the names Dress Barn and Dress Barn Woman, the latter featuring larger sizes of styles similar to those found in the Dress Barn stores. The Company also operates combination Dress Barn/Dress Barn Woman stores ("Combo Stores"), which carry both Dress Barn and Dress Barn Woman merchandise. As of April 26, 1997, Dress Barn operated 702 stores in 43 states and the District of Columbia, consisting of 425 Dress Barn stores, 86 Dress Barn Woman stores and 191 Combo Stores. The Dress Barn and Dress Barn Woman stores average approximately 4,500 and approximately 3,900 square feet, respectively, and the Combo Stores average approximately 8,400 square feet. Based on the success of its Combo Stores, the Company is focusing its expansion strategy on opening new Combo Stores and converting existing Dress Barn and Dress Barn Woman stores to the combination format. The Company plans to open approximately 60 additional Combo Stores by the end of Fiscal 1998. INDUSTRY BACKGROUND The retail apparel industry has undergone significant contraction in recent years, with the closing of over 30 major retail chains and considerable consolidation. According to Dun and Bradstreet, over 9,500 retail apparel and accessory stores closed or failed in the United States between 1991 and 1995. As a result of this consolidation, the Company believes it is the second largest national specialty retail chain of value-priced women's clothing. This period was characterized by strong competition and price deflation, which resulted in operating margin pressure for the retail apparel industry. The Company believes that these trends have begun to reverse in the past six months. Another significant trend in retailing has been the steady reduction in regional shopping mall traffic. Studies show that busy consumers have less time to contend with suburban congestion and are, instead, shopping closer to home. According to a 1995 Stillerman Jones & Co. study, the nationwide average of mall visits by consumers and the average time spent shopping in malls fell to 3.3 visits per month and 66 minutes spent in 1995, from 3.5 visits per month and 71 minutes spent in 1991. With the majority of its stores located in strip centers, the Company believes it is well positioned to benefit from these trends. COMPANY STRENGTHS Dress Barn is a leading specialty store offering women's career fashions at value prices, and attributes its success to its: (i) strong name recognition and loyal customer base; (ii) long-standing relationships with vendors of quality merchandise; (iii) experienced management team; (iv) commitment to technology; (v) strong, consistent customer focus; (vi) low cost operating structure; and (vii) strong balance sheet. Strong Name Recognition. Since the Company's formation in 1962, Dress Barn has established and reinforced its image as a source of fashion and value for the working woman. The Company's 702 store locations in 43 states and the District of Columbia provide it with a nationally recognized name. In addition, the Company believes it has developed high awareness among its target customers through on-going advertising and local marketing activities. 18 19 Strong Vendor Relationships. The Company has developed and maintains strong and lasting relationships with its domestic and offshore vendors. Dress Barn has worked with many of its vendors for more than 15 years, and often is one of the vendors' largest accounts. These relationships, along with the Company's buying power and strong credit profile, enable the Company to receive favorable purchase terms, exclusive merchandise and expedited delivery times. Experienced Management Team. The three senior members of the Company's merchandising team have worked together at Dress Barn for over 15 years, with each having substantial previous fashion retailing experience. This team engineered the Company's evolution from an off-price retailer to a value-priced specialty store. The Company's executive officers have an average tenure at Dress Barn of 14 years. The stability of its management has enabled the Company to develop a shared culture and vision and to maintain its focus on growing and refining its business. Commitment to Technology. Dress Barn has used technology to improve merchandising and customer service, reduce costs and enhance productivity. For example, the Company's management information systems, which include a new IBM AS/400 integrated financial system and IBM 4694 point-of-sale system, allow it to provide better service to customers by reducing paperwork and decreasing the average transaction processing time. This enables sales associates to spend more time assisting customers. The Company has also developed a laptop system that delivers up-to-date store related information to its regional sales managers. The Company's distribution center systems, installed in 1994, have reduced per-unit distribution costs by over 50%, representing approximately $1.0 million in annual savings. Strong, Consistent Customer Focus. All aspects of Dress Barn's business are designed to be responsive to the Dress Barn customer. Since 1962, the Company has been consistent in targeting price-conscious and fashion-minded working women. The convenient locations of the Company's stores primarily in strip and outlet centers, carefully edited merchandise arranged for ease of shopping, comfortable store environment and friendly customer service embody Dress Barn's strong focus on its customers. Dress Barn's comprehensive training program encourages its sales associates to assist customers in a low-key and friendly manner. The Company believes it enhances its customers' shopping experience by avoiding aggressive sales tactics that would result from a commission-based compensation structure. Low Cost Operator. The Company continually seeks to reduce costs in all aspects of its operations and to create cost-consciousness at all levels. During Fiscal 1995 the Company established a cost control procedure which analyzes each department's budget twice annually to identify savings opportunities. For example, this focus on cost-cutting has contributed to a $900,000 reduction in selling, general and administrative expenses for the six months ended January 25, 1997, compared to the six months ended January 27, 1996, despite the Company's increased sales in the 1997 period. Strong Balance Sheet. The Company believes that its highly liquid balance sheet and internally generated funds provide a competitive advantage that enables the Company to pursue its long-term strategies regarding new stores, capital expenditures and acquisitions. OPERATING STRATEGIES The Company's objective is to become a dominant national chain of value-priced specialty apparel stores offering career fashions to the moderate income working woman. The Company has developed the following strategies to achieve this goal: (i) further development of Dress Barn's private brands; (ii) maintenance of Dress Barn's merchandise focus; (iii) continuation of the Combo Store roll-out; (iv) further development of customer targeted marketing; and (v) further improvement of customer service. Private Brand Strategy. The Company has gradually increased the percentage of sales from goods manufactured under Dress Barn's private brands, as well as goods produced by national brand manufacturers exclusively for Dress Barn, to approximately 50% and 15%, respectively, of the Company's net sales for the six months ended January 25, 1997. While the Company intends to continue to offer a balanced mix of both national brand name and private brand merchandise, it plans to continue to increase the percentage of private brand merchandise sold by its stores, including its successful Westport(R), Princeton Club(R) and Atrium(R) 19 20 brands. Dress Barn's private brands typically create more value for its customers and promote Dress Barn's "fashion at a fraction" image. Merchandise Strategy. The Company's stores carry a broad assortment of career wear, including dresses, suits, separates, blouses, sweaters and other knitwear, as well as casual wear items, that are carefully edited to suit the lifestyle needs of its target customer. Dress Barn does not seek to dictate fashion trends; rather it offers current styles but avoids fashion-forward merchandise that is subject to rapidly changing trends. While career fashions remain the Company's primary focus, it continues to adapt to the evolving definition of "career," such as casual Fridays. In addition, the Company seeks to broaden its appeal by expanding its merchandise mix. The Company has recently introduced shoes and petites in select locations. Based on the success of these initial tests, the Company is gradually increasing the number of stores offering shoes and petites. Combo Store Roll-Out. Based on the success of the Combo Stores, the Company expects most future store openings to be Combo Stores. Because of their larger size, the Combo Stores provide the Company with greater presence in shopping centers, give the Company more leverage in negotiating lease terms, enable the Company to achieve lower operating cost ratios and offer increased flexibility in merchandise presentation. Of the approximately 60 additional Combo Stores which the Company plans to open by the end of Fiscal 1998, 25 are expected to be new stores and 35 are expected to be conversions from existing Dress Barn or Dress Barn Woman stores. In conjunction with its strategy of adding Combo Stores, the Company is aggressively closing underperforming locations and expects to close approximately 60 such locations during Fiscal 1997, of which 50 have been closed as of April 26, 1997. The Company has the option under a substantial number of its store leases to terminate the lease at little or no cost if specified sales volumes are not achieved, affording the Company greater flexibility to close certain underperforming stores. In Fiscal 1997, the Company's roll-out of Combo Stores, net of store closings, is expected to result in a small increase to the Company's aggregate store square footage and an increase in the proportion of square footage attributable to Combo Stores from 33% to 40%. Targeted Marketing. The Company uses several marketing tools, such as transactional analyses through point-of-sale systems and customer surveys, in order to determine the preferences of its target customers, working women ages 25-55. In addition, the Company distributed six mailings during the 12 months ended January 25, 1997, each to approximately one million households including its credit card holders. The Company is also collecting data from its credit card program for use in other future marketing initiatives. Management believes that these tools will further improve the Company's ability to align its operations with the demands of its target customers on a consistent basis. Customer Service. Dress Barn continually seeks to improve the customer's shopping experience. For example, the Company's new management information systems enable store managers and sales associates to spend more time serving customers. The Company has also developed an ongoing video training program to continue to improve customer service and sales associates' product knowledge and selling skills. ACQUISITION OPPORTUNITIES In order to supplement the Company's growth and enhance shareholder value, the Company considers three types of acquisition opportunities: (i) real estate oriented acquisitions to gain access to attractive sites and favorable lease terms; (ii) other retail operations that could benefit from Dress Barn's management and expertise, such as chains offering a complementary product line; and (iii) alternate channels of distribution, such as mail order catalogs. The Company seeks to assure that the earnings-per-share impact of a potential acquisition for the first full fiscal year will be approximately neutral to positive. The Company believes that its highly liquid balance sheet, with cash, cash equivalents and marketable securities of $119 million as of January 25, 1997, will enable it to take advantage of such acquisition opportunities should they arise. The Company believes that its Suffern, New York facility and its corporate, merchandising and distribution infrastructure is more than adequate to meet current needs and any foreseeable increase in the Company's store base due to expansion or acquisition. 20 21 The Company is currently negotiating a letter of intent for a proposed acquisition of a private company in a new, but related, line of business that would meet Dress Barn's acquisition criteria. The net sales of this business for its most recent fiscal year were approximately $85 million. The proposed purchase price is approximately $25 million to be paid in cash, in assumption of debt and/or in shares of Common Stock. To the extent the Company issues Common Stock to the seller, it is the Company's intention to purchase a similar number of shares of Common Stock on the open market or otherwise. Also, the Company may grant the seller a put option to require the Company to repurchase shares of Common Stock issued to the seller as part of the purchase price under certain circumstances. The target of the proposed acquisition, which has been in existence for 14 years, has advised the Company that it incurred operating losses for each of its past three years, including an operating loss of approximately $2.0 million in its last fiscal year, and had a working capital deficit of over $5.0 million as of December 31, 1996. The specific terms of the acquisition are still subject to negotiation, and closing is subject to several conditions, including conducting a due diligence investigation to the Company's satisfaction and eventually negotiating and preparing a definitive purchase agreement. See "Risk Factors -- Risks Attendant to Acquisition Strategy." MERCHANDISING The Company's stores offer a broad assortment of career wear including dresses, suits, separates, blouses, sweaters and other knitwear, as well as casual wear items, that are carefully edited to suit the lifestyle needs of its target customer. In addition, the Company offers other wardrobe items including accessories, jewelry, hosiery and shoes. Dress Barn and Dress Barn Woman are organized as separate divisions, each with a separate merchandising team. Combo Stores have merchandise offerings from both the Dress Barn and Dress Barn Woman merchandising divisions. A key component of the Company's merchandising strategy is to increase the percentage of its sales derived from private brands. Private brands allow the Company to differentiate itself from other retailers by providing an assortment of merchandise that is not available elsewhere and to improve the Company's control over the flow of merchandise into its stores by enabling the Company to better specify quantities, styles, colors, size breaks and delivery dates. In addition, the Company believes private brands provide it with more flexibility in the marketing process by allowing for higher initial mark-ons and limiting the ability of customers to compare prices with competing retailers. The Company believes it has the expertise to execute its private brand strategy due to its extensive experience sourcing goods, primarily overseas, its position as a merchandiser of established fashions and its already successful line of private brands. The percentage of the Company's sales generated from private brands has increased steadily to approximately 50% for the 26-week period ended January 25, 1997 from 40% during Fiscal 1996, 30% during Fiscal 1995 and 25% during Fiscal 1994. In Fiscal 1996, the Company introduced two new departments, shoes and petites, primarily in its Combo Stores. Following initial tests, these departments are being rolled out to additional stores. As of January 25, 1997, 47 stores had shoe departments and 12 stores featured petites. The Company expects to add another 48 shoe departments and 23 petite departments in the Spring of 1997. Virtually all merchandising decisions affecting the Company's stores are made centrally. Merchandising policy is under the direction of the Chairman, the President and five merchandise managers. Prices and markdowns are determined centrally but may be adjusted locally in response to competitive situations. Generally, the majority of the merchandise sold by the Company is uniformly carried by all stores, with a percentage varied by management according to regional or consumer tastes or the size of particular stores. To keep merchandise seasonal and in current fashion, inventory is reviewed weekly and markdowns are taken as appropriate to expedite selling. BUYING AND DISTRIBUTION Buying is conducted on a departmental basis for each of the Dress Barn and Dress Barn Woman divisions by the Company's staff of 18 buyers and 19 assistant buyers supervised by the President and five merchandise managers. The Company also uses independent buying representatives in New York and overseas. 21 22 The Company obtains its nationally branded merchandise from approximately 350 vendors and its private brand merchandise from approximately 50 vendors. Typical lead times for the Company in making purchases from its vendors range from approximately one month for items such as t-shirts, socks and hosiery to approximately six months for items such as suits and dresses. Generally, lead times do not vary significantly between the Company's private brands and nationally branded merchandise. No vendor accounted for as much as 5% of the Company's purchases in Fiscal 1996. The Company does not have any long-term supply contracts with its vendors. All merchandise is received from vendors at the Company's central warehouse and distribution facility in Suffern, New York, where it is inspected, allocated and shipped to its stores. The Company seeks to use its strong relationships with vendors to lower its operating costs by shifting freight and insurance costs to the vendors and by requiring them to provide ancillary services. For example, over 90% of the Company's merchandise is pre-ticketed by vendors and over 30% is pre-packaged for distribution to stores, which allows cross-docking in the distribution center to the stores. In addition, nearly half of the hanging garments purchased by the Company are delivered on floor-ready hangers. The Company generally does not warehouse merchandise, but distributes it promptly to stores. Turnaround time between the receipt of merchandise from the vendor and shipment to the stores is usually three days or less, and shipments are made daily to most stores, maintaining the freshness of merchandise. Because of such frequent shipments, the stores do not require significant storage space. The Company may on occasion buy certain basic clothing that does not change in style from year to year at attractive prices and warehouse such items at its distribution center until needed. STORE LOCATIONS AND PROPERTIES As of April 26, 1997, the Company operated 702 stores in 43 states and the District of Columbia. 393 of the stores are conveniently located in strip centers and 264 stores are located in outlet centers. The Dress Barn and Dress Barn Woman stores average approximately 4,500 and approximately 3,900 square feet, respectively, and the Combo Stores average approximately 8,400 square feet. In certain outlet centers, Dress Barn stores operate under the name Westport Ltd. and Dress Barn Woman stores operate under the name Westport Woman. Westport Ltd. and Westport Woman stores account for approximately 20% of the Company's stores currently in operation. The Company intends to convert approximately 50 of these stores to the Dress Barn or Dress Barn Woman name by the end of Fiscal 1997. After the conversion of the 50 stores, Westport Ltd. and Westport Woman stores will account for approximately 10% of the Company's stores. 22 23 The table below indicates the states in which the stores operating on April 26, 1997 were located, and the number of stores in each state:
DRESS DRESS BARN COMBO LOCATION BARN(1) WOMAN(2) STORES TOTAL - ---------------------------------------------- ----- ---------- ----- ----- Alabama....................................... 4 1 2 7 Arizona....................................... 12 1 3 16 Arkansas...................................... 1 -- 2 3 California.................................... 26 5 13 44 Colorado...................................... 5 1 3 9 Connecticut................................... 13 2 12 27 District of Columbia.......................... -- -- 1 1 Delaware...................................... 3 -- 2 5 Florida....................................... 16 2 7 25 Georgia....................................... 19 3 6 28 Idaho......................................... 2 1 1 4 Illinois...................................... 16 -- 8 24 Indiana....................................... 12 1 2 15 Iowa.......................................... -- -- 1 1 Kansas........................................ 3 1 2 6 Kentucky...................................... 2 1 3 6 Louisiana..................................... 1 -- 2 3 Maine......................................... 3 1 -- 4 Maryland...................................... 11 2 7 20 Massachusetts................................. 26 3 11 40 Michigan...................................... 19 2 8 29 Minnesota..................................... 1 -- 2 3 Mississippi................................... 1 -- 2 3 Missouri...................................... 5 1 7 13 Nebraska...................................... 3 -- -- 3 Nevada........................................ 3 1 2 6 New Hampshire................................. 5 1 2 8 New Jersey.................................... 30 12 10 52 New York...................................... 40 9 17 66 North Carolina................................ 20 7 6 33 Ohio.......................................... 11 1 7 19 Oklahoma...................................... 2 -- -- 2 Oregon........................................ 2 2 -- 4 Pennsylvania.................................. 32 9 12 53 Rhode Island.................................. 1 -- -- 1 South Carolina................................ 16 1 2 19 Tennessee..................................... 9 3 5 17 Texas......................................... 17 3 8 28 Utah.......................................... 3 2 1 6 Vermont....................................... 1 -- -- 1 Virginia...................................... 26 6 3 35 Washington.................................... 3 1 4 8 West Virginia................................. -- -- 1 1 Wisconsin..................................... -- -- 4 4 --- --- --- --- Total......................................... 425 86 191 702 === === === ===
- ------------------ (1) Includes 105 Westport Ltd. stores. (2) Includes 23 Westport Woman stores. 23 24 The Company leases all its stores. Most leases have formulas requiring the payment of a percentage of sales as additional rent, generally when sales reach specified levels. The Company's aggregate minimum rentals under operating leases in effect at July 27, 1996, and excluding locations acquired after July 27, 1996, for Fiscal 1997 are approximately $49.4 million. In addition, the Company is also responsible under its store leases for its pro rata share of maintenance expenses and common charges in strip and outlet centers. A substantial number of store leases give the Company the option to terminate the lease at little or no cost if certain specified sales volumes are not achieved. This affords the Company greater flexibility to close underperforming stores. Usually these provisions are operative only during the first few years of the lease. The Company leases its executive offices and distribution facilities in Suffern, New York. The Suffern facility has a total of 510,000 square feet, with 100,000 square feet of office space and the remainder for merchandise distribution. This lease expires on April 30, 2007, with three five-year options to extend the lease. Management believes the Suffern facility is sufficient to meet its current needs and any foreseeable increase in the Company's store base resulting from expansion or acquisition. NEW STORE OPENINGS In considering new markets for store openings, the Company typically focuses on several criteria, such as concentration of the Company's target customer base, the average household income in the surrounding area and the location of the proposed store relative to competitive retailers. Within the specific strip or outlet center, the Company evaluates the proposed co-tenants, the traffic count of the existing center and the location of the store within the center. The Company's real estate committee, which includes members of senior management, must approve each new lease. The committee receives input from field management. The Company estimates that more than 50% of new store openings have traditionally been in markets where the Company already has a presence, with the remainder being in new markets. Of the approximately 60 additional Combo Stores which the Company plans to open by the end of Fiscal 1998, 25 are expected to be new stores and 35 are expected to be conversions from existing Dress Barn or Dress Barn Woman stores. The Company's investment in new stores consists primarily of inventory, net of vendor payables, leasehold improvements, fixtures and equipment. The typical new Combo Store requires a total investment of approximately $220,000, consisting of $60,000 of inventory, $110,000 related to leasehold improvements and $50,000 of fixtures and equipment. The typical single unit Dress Barn or Dress Barn Woman store requires a total investment of approximately $140,000, consisting of $40,000 of inventory, $65,000 related to leasehold improvements and $35,000 of fixtures and equipment. Dress Barn often receives tenant improvement allowances from the landlords to offset these initial investments. The Company's stores are typically profitable within the first 12 months of operation. STORE MANAGEMENT AND OPERATIONS All stores are directly managed and operated by the Company. Each store is staffed by a supervisor, who may be the store manager, and at least one sales associate during non-peak hours, with additional sales associates added as needed at peak hours. The supervisors and sales associates perform all store operations, from receiving and processing merchandise and arranging it for display, to assisting customers. Each store manager reports to a district sales manager who, in turn, reports to a regional sales manager. Dress Barn employs 10 regional sales managers and 90 district sales managers. District sales managers typically visit each store at least once a week to review merchandise levels and presentation, staff training and personnel performance, expense control, security, cleanliness and adherence to Company operating procedures. As of April 26, 1997, the Company employed approximately 6,100 people, 3,500 of whom were employed on a part-time basis. The Company motivates its sales associates through promotion from within, creative incentive programs, competitive wages and the opportunity for bonuses. Associates compete in a broad variety of Company-wide contests involving sales goals and other measures of performance. The contests are designed to boost store profitability, create a friendly competitive atmosphere among associates and offer opportunities for additional compensation. Management believes that Dress Barn's creative incentive programs provide an important tool 24 25 for building cohesive and motivated sales teams. The Company has also implemented comprehensive training programs at the store level in order to ensure that the customer will receive friendly and helpful service, which include (i) on-going video training, (ii) workbooks and manuals and (iii) one-on-one training of sales associates by store managers. For the 26-week period ended January 25, 1997, approximately 58% of the Company's sales were paid for by credit card, with the remainder being by cash or check. In February 1994, the Company introduced its own Dress Barn credit card. Consistent with the other credit cards it accepts, the Company assumes no credit risk with respect to its Dress Barn card but pays a percentage of sales as a service charge. As of April 26, 1997, there were approximately 800,000 cardholders, whose purchases constituted approximately 15% of total sales during the six months ended January 25, 1997. The average transaction on the Dress Barn credit card during the current fiscal year through April 26, 1997 was approximately 50% more than the average of all other transactions. Virtually all of the Company's stores are open seven days a week. Stores located in strip and outlet centers conform to the hours of other stores in the center and are open most evenings, while downtown and free-standing stores are usually open two nights per week. STORE LAYOUT The Company's stores are designed to create a comfortable and pleasant shopping environment for its customers. Merchandise and displays at all of the stores are set up according to uniform guidelines and plans distributed by the Company. The Company's merchandise is carefully arranged by lifestyle category (e.g., career, casual and weekend wear) for ease of shopping. The stores also have private fitting rooms, drive aisles, appealing lighting, carpeting, background music and centralized cashier desks. Strategically located throughout the stores are "lifestyle" posters showing the customer complete outfits coordinated from among the stores' fashion offerings. ADVERTISING AND MARKETING The Company mainly uses print advertising that emphasizes current fashion apparel at value prices, as epitomized by Dress Barn's "fashion at a fraction" slogan. The Company also uses direct mail programs, with six mailings during the 12 months ended January 25, 1997, each to approximately one million households including its credit card holders. At the store level, the store supervisors host local marketing programs, including fashion shows and in-store events designed to create greater awareness of Dress Barn's merchandise. In addition, the Company considers its credit card program to be a significant component in the development of its targeted marketing efforts, enabling it to develop segmented marketing programs. MANAGEMENT INFORMATION SYSTEMS In the past several years, the Company has made a significant investment in technology to improve customer service, gain efficiencies and reduce operating costs. Dress Barn has installed an IBM AS/400 management information system, which integrates all major aspects of the Company's business, including sales, distribution, purchasing, inventory control, merchandise planning and replenishment, and financial systems. The Company is rolling out IBM 4694 point-of-sale systems with price look-up capabilities for both inventory and sales transactions. These systems can accommodate substantial growth in additional stores with minimal incremental investment. The Company has also developed a laptop system that delivers up-to-date store-related information to its regional sales managers. The Company's merchandising system tracks merchandise from the inception of the purchase order, through receipt at the distribution center, through the distribution planning process, and ultimately to the point of sale. To monitor the performance of various styles, management reviews sales and inventory levels on-line, organized by department, class, vendor, style, color and store. The system enables the Company to mark down slow-moving merchandise or efficiently transfer it to stores selling such items more rapidly. Through sophisticated yet inexpensive off-the-shelf systems, the Company analyzes historical hourly and projected sales trends to efficiently schedule sales personnel, minimizing labor costs while producing a higher 25 26 level of customer service. The Company believes that such investments in technology enhance operating efficiencies and position Dress Barn for future growth. COMPETITION The women's retail apparel industry is highly competitive. The Company competes primarily with department stores, off-price retailers, specialty stores, discount stores and mass merchandisers, many of which have substantially greater financial, marketing and other resources than the Company. Many department stores offer a broader selection of merchandise than the Company. In addition, many department stores have in the past been more promotional than they are now and have reduced their selling prices, but the Company believes this trend has stabilized. Also, certain of the Company's competitors and vendors have opened outlet stores which offer off-price merchandise. The Company's sales and results of operations may also be affected by close-outs and going-out-of-business sales by other women's apparel retailers. Partially as a result of such competition, apparel retailers have experienced price deflation during the last several years. However, the Company believes that this trend has begun to reverse in the past six months. The Company may face periods of strong competition in the future which could have an adverse effect on its financial results. 26 27 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information with respect to the directors and executive officers of the Company.
NAME AGE POSITION -------------------------------------------- --- ----------------------------------- Elliot S. Jaffe............................. 70 Chairman of the Board of Directors and Chief Executive Officer Burt Steinberg.............................. 51 President, Chief Operating Officer and Director David R. Jaffe.............................. 37 Executive Vice President Armand Correia.............................. 51 Senior Vice President and Chief Financial Officer Roslyn S. Jaffe............................. 68 Secretary, Treasurer and Director Eric Hawn................................... 46 Senior Vice President Klaus Eppler................................ 67 Director Mark S. Handler............................. 63 Director Donald Jonas................................ 67 Director Edward D. Solomon........................... 65 Director
Elliot S. Jaffe, Chairman of the Board and founder of the Company, has been Chief Executive Officer since 1966. Mr. Jaffe also serves as a Director of the National Retail Federation. Burt Steinberg joined the Company in 1982, and has directed the Company's merchandise activities since that time. Mr. Steinberg became Senior Vice President in 1987 and President and Chief Operating Officer in 1989. Prior to joining the Company, Mr. Steinberg was Executive Vice President of Merchandise at Brooks Fashion Stores and was a Merchandise Manager with Abraham and Strauss, a division of Federated Department Stores. David R. Jaffe joined the Company in 1992 as Vice President of Business Development, was named Senior Vice President of the Company in 1995 and Executive Vice President in August 1996. Prior to joining the Company, Mr. Jaffe was a General Partner of Chemical Venture Partners. Mr. Jaffe is the son of Elliot S. and Roslyn S. Jaffe. Armand Correia joined the Company in 1991 as Senior Vice President and Chief Financial Officer. Prior to joining the Company, Mr. Correia was Senior Vice President and Chief Financial Officer of both Hit or Miss, Inc. and Chadwick's of Boston, Ltd., Inc., former divisions of TJX Companies, Inc., as well as a Vice President of TJX Companies, Inc. Roslyn S. Jaffe has been the Company's Secretary since 1966, Treasurer since 1983 and a Director since 1966. Roslyn S. Jaffe is the spouse of Elliot S. Jaffe. Eric Hawn joined the Company in 1986 as Vice President -- Stores and became Senior Vice President -- Stores in 1989. Prior to joining the Company, Mr. Hawn was a Senior Vice President of Brooks Fashion Stores and was with The Limited, Inc. for several years in various store management positions. Klaus Eppler was elected a Director of the Company in 1993. Since 1965, Mr. Eppler has been a partner in the law firm of Proskauer Rose Goetz & Mendelsohn LLP, general counsel for the Company. He is also a director of Bed Bath & Beyond Inc. and Inovision Corporation. Mark S. Handler was elected a Director of the Company in 1996. Mr. Handler was Co-Chairman and Co-Chief Executive Officer of R.H. Macy's, Inc. until 1993. Previously, he was President and Chief Operating Officer of R.H. Macy's, Inc. Donald Jonas was elected a Director of the Company in 1989. Mr. Jonas is Chairman of the Board and Chief Executive Officer of Lechters, Inc., a retailer of houseware products. Edward D. Solomon was elected a Director of the Company in 1990. Mr. Solomon is President of Edward D. Solomon & Co., which provides consulting services primarily to the retailing industry. Until 1993, he was Chief Executive Officer of Shoe-Town, Inc. 27 28 PRINCIPAL AND SELLING SHAREHOLDERS The following table sets forth certain information with respect to beneficial ownership of the Common Stock as of May 1, 1997, and as adjusted to reflect the sale of the Common Stock offered hereby, by: (i) the Selling Shareholders; (ii) each person known by the Company to be the beneficial owner of more than 5% of the Common Stock; (iii) each of the Company's directors; (iv) each of the Company's other executive officers; and (v) the Company's directors and executive officers as a group:
SHARES OF COMMON SHARES OF COMMON STOCK BENEFICIALLY SHARES STOCK BENEFICIALLY OWNED BEFORE SALE TO BE OWNED AFTER SALE UNDER THIS PROSPECTUS SOLD UNDER THIS PROSPECTUS ----------------------- --------- ------------------------ NAME OF SHAREHOLDER NUMBER PERCENTAGE NUMBER NUMBER PERCENTAGE - ------------------------------------- --------- ---------- --------- ---------- ---------- DIRECTORS, EXECUTIVE OFFICERS AND SELLING SHAREHOLDERS: The Jaffe Family Foundation.......... 1,369,310 5.9% 1,000,000(1) 369,310 1.6% Jaffe Family, L.P.................... 4,655,330 20.0 1,000,000 3,655,330 15.7 Elliot S. Jaffe(2)................... 6,280,476 27.0 -- 4,280,476 18.4 Roslyn S. Jaffe(3)................... 1,610,124 6.9 -- 610,124 2.6 Burt Steinberg(4).................... 468,615 2.0 -- 468,615 2.0 David R. Jaffe(5).................... 34,000 * -- 34,000 * Armand Correia(6).................... 30,511 * -- 30,511 * Eric Hawn(7)......................... 18,000 * -- 18,000 * Edward D. Solomon.................... 1,000 * -- 1,000 * Klaus Eppler......................... 300 * -- 300 * Mark S. Handler...................... 250 * -- 250 * Donald Jonas......................... 100 * -- 100 * All Directors and Executive Officers 7,074,066 30.4 -- 5,074,066 21.8 as a group (consisting of 10 persons)(8)........................ * Represents less than 1% of class OTHER BENEFICIAL OWNERS: Charles M. Royce(9).................. 1,411,050 6.1 -- 1,411,050 6.1 Quest Advisory Corp. 1414 Avenue of the Americas New York, NY 10019 Jeffrey N. Vinik(10)................. 1,266,800 5.4 -- 1,266,800 5.4 Vinik Partners, L.P. 260 Franklin Street Boston, MA 02110 Michael S. Gordon(10)................ 1,266,800 5.4 -- 1,266,800 5.4 Vinik Partners, L.P. 260 Franklin Street Boston, MA 02110 Mark D. Hostetter(10)................ 1,266,800 5.4 -- 1,266,800 5.4 Vinik Partners, L.P. 260 Franklin Street Boston, MA 02110
- --------------- (1) Does not include 300,000 shares that the Underwriters have the option to purchase to cover over-allotments, if any. (2) Includes 173,336 shares owned directly by Elliot S. Jaffe, 6,024,640 shares (25.9%) owned by the Selling Shareholders and 82,500 shares covered by options that are exercisable within 60 days of May 1, 1997. Elliot S. Jaffe and Roslyn S. Jaffe share voting and investing power with respect to the shares owned by The Jaffe Family Foundation, a New York not-for-profit corporation (the "Foundation"), and under the rules of the Commission are deemed to be the beneficial owners of such shares. Both 28 29 Elliot S. Jaffe and Roslyn S. Jaffe disclaim beneficial ownership of the shares owned by the Foundation. Elliot S. Jaffe has voting and investment power with respect to the shares owned by the Jaffe Family, L.P., a Connecticut limited partnership (the "Partnership"), and under the rules of the Commission is deemed to be the beneficial owner of such shares. His business address is 30 Dunnigan Drive, Suffern, New York 10901. (3) Includes 240,814 shares (1.0%) owned directly by Roslyn S. Jaffe and 1,369,310 shares (5.9%) owned by the Foundation. See Footnote (1) above. (4) Includes 185,615 shares owned directly by Mr. Steinberg and 283,000 shares covered by options that are exercisable within 60 days of May 1, 1997. (5) Includes 10,000 shares owned directly by Mr. Jaffe and 24,000 shares covered by options that are exercisable within 60 days of May 1, 1997. (6) Includes 6,000 shares owned directly by Mr. Correia and 24,511 shares covered by options that are exercisable within 60 days of May 1, 1997. (7) Includes 10,000 shares owned directly by Mr. Hawn and 8,000 shares covered by options that are exercisable within 60 days of May 1, 1997. (8) Includes shares owned by the Partnership and the Foundation as well as 422,011 shares covered by options held by the executive officers that are exercisable within 60 days of May 1, 1997. (9) Information regarding Mr. Charles M. Royce, Quest Advisory Corp. ("Quest") and Quest Management Corp. ("QMC") was obtained solely from a Schedule 13G dated February 7, 1997, filed by Mr. Royce, Quest and QMC with the SEC, a copy of which was sent to the Company. Such Schedule 13G states that Quest has the sole power to vote and dispose of 1,337,650 shares, that QMC has the sole power to vote and dispose of 73,400 shares, that Mr. Royce may be deemed to be a controlling person of Quest and QMC and as such may be deemed to beneficially own the shares owned by Quest and QMC, and that Mr. Royce does not own any shares outside of Quest and QMC and disclaims beneficial ownership of the shares held by Quest and QMC. (10) Information regarding Mr. Jeffrey N. Vinik, Mr. Michael S. Gordon and Mr. Mark D. Hostetter was obtained solely from a Schedule 13D dated March 12, 1997, filed by VGH Partners, L.L.C., Vinik Partners, L.P., Vinik Asset Management, L.P., Jeffrey N. Vinik, Michael S. Gordon, Mark D. Hostetter and Vinik Asset Management, L.L.C. Such 13D states that VGH Partners, L.L.C. and Vinik Partners, L.P. have the shared power to vote and dispose of 527,600 shares, that Vinik Asset Management, L.P. and Vinik Asset Management, L.L.C. have the shared power to vote and dispose of 739,200 shares, and Jeffrey N. Vinik, Michael S. Gordon and Mark D. Hostetter have the shared power to vote and dispose of 1,266,800 shares. 29 30 UNDERWRITING The underwriters named below (the "Underwriters"), for whom Bear, Stearns & Co. Inc. and Robertson, Stephens & Company LLC are acting as representatives (the "Representatives"), have severally agreed, subject to the terms and conditions of an Underwriting Agreement (the "Underwriting Agreement"), a form of which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part, to purchase from the Selling Shareholders the number of Shares set forth opposite their respective names below:
NUMBER OF NAME OF UNDERWRITERS SHARES ------------------------------------------------------------------ --------- Bear, Stearns & Co. Inc........................................... Robertson, Stephens & Company LLC................................. --------- Total................................................... 2,000,000 =========
The nature of the obligations of the Underwriters is such that all of the Shares must be purchased if any are purchased. Those obligations are subject, however, to various conditions, including the approval of certain matters by counsel. The Company and the Selling Shareholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act and, if such indemnification is unavailable, to contribute to payments that the Underwriters may be required to make in respect of such liabilities. The Company has been advised that the Underwriters propose to offer the Shares initially at the public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not to exceed $ per share; that the Underwriters may allow, and such dealers may reallow, a concession to certain other dealers not to exceed $ per share; and that after the commencement of the Offering, the public offering price and the concessions may be changed. The Jaffe Family Foundation, one of the Selling Shareholders, has granted the Underwriters an option to purchase up to 300,000 additional shares of Common Stock solely to cover over-allotments, if any. The option may be exercised in whole or in part at any time and from time to time within 30 days after the date of this Prospectus. To the extent such option is exercised, the Underwriters will be severally committed, subject to certain conditions, to purchase the additional shares in proportion to their respective purchase commitments as indicated in the preceding table. The Company, the Selling Shareholders and certain other shareholders of the Company have agreed that, for a period of 90 days after the date of this Prospectus, they will not, without the prior written consent of Bear, Stearns & Co. Inc., sell, offer to sell or otherwise dispose of any shares, or any securities convertible into or exchangeable or exercisable for any shares of Common Stock, other than the sale of the Shares offered hereby and the issuance of options and shares of Common Stock upon exercise of options pursuant to the Company's existing stock option plans. In order to facilitate the Offering, certain persons participating in the Offering may engage in transactions that stabilize, maintain, or otherwise affect the price of the Common Stock during and after the Offering. Specifically, the Underwriters may over-allot or otherwise create a short position in the Common Stock for their own account by selling more shares of Common Stock than have been sold to them by the Selling Shareholders. The Underwriters may elect to cover any such short position by purchasing shares of Common Stock in the open market or by exercising the over-allotment option granted to the Underwriters. In addition, such persons may stabilize or maintain the price of the Common Stock by bidding for or purchasing shares of Common Stock in the open market and may impose penalty bids, under which selling concessions allowed to syndicate members or other broker-dealers participating in the Offering are reclaimed if shares of Common 30 31 Stock previously distributed in the Offering are repurchased in connection with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price of the Common Stock at a level above that which might otherwise prevail in the open market. The imposition of a penalty bid may also affect the price of the Common Stock to the extent that it discourages resales thereof. No representation is made as to the magnitude or effect of any such stabilization or other transactions. Such transactions may be effected on the Nasdaq National Market or otherwise and, if commenced, may be discontinued at any time. In addition, certain persons participating in this Offering may also engage in passive market making transactions in the Common Stock on the Nasdaq National Market. Passive market making consists of displaying bids on the Nasdaq National Market limited by the prices of independent market makers and effecting purchases limited by such prices and in response to order flow. Rule 103 of Regulation M promulgated by the Commission limits the amount of net purchases that each passive market maker may make and the displayed size of each bid. Passive market making may stabilize the market price of the Common Stock at a level above that which might otherwise prevail in the open market and, if commenced, may be discontinued at any time. The Company has engaged Peter J. Solomon Securities Company Limited ("PJSS") to provide advisory services to the Company. In connection with the Offering, the Representatives have agreed to pay PJSS a fee and expenses of $162,500 and the Company has agreed to pay PJSS a fee and expenses of $62,500. LEGAL MATTERS The validity of the Shares has been passed upon for the Company by Proskauer Rose Goetz & Mendelsohn LLP, New York, New York. Klaus Eppler, Esq., a partner of Proskauer Rose Goetz & Mendelsohn LLP, is a Director of the Company. Certain legal matters relating to the Offering will be passed upon for the Underwriters by Latham & Watkins, New York, New York. EXPERTS The financial statements incorporated in this prospectus by reference from the Company's Annual Report on Form 10-K for the year ended July 27, 1996 have been audited by Deloitte & Touche LLP, independent public accountants, as stated in their report, which is incorporated herein by reference, and has been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 31 32 ====================================================== NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED BY THE COMPANY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MAY NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. UNDER NO CIRCUMSTANCES SHALL THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER CREATE ANY IMPLICATION THAT INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS. ------------------------ TABLE OF CONTENTS
PAGE ------- Available Information................. 3 Information Incorporated by Reference........................... 3 Prospectus Summary.................... 4 Risk Factors.......................... 9 Use of Proceeds....................... 12 Capitalization........................ 12 Selected Consolidated Financial Data................................ 13 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 14 Business.............................. 18 Management............................ 27 Principal and Selling Shareholders.... 28 Underwriting.......................... 30 Legal Matters......................... 31 Experts............................... 31
====================================================== ====================================================== 2,000,000 SHARES [DRESS BARN LOGO] COMMON STOCK -------------------- PROSPECTUS -------------------- BEAR, STEARNS & CO. INC. ROBERTSON, STEPHENS & COMPANY , 1997 ====================================================== 33 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth all expenses in connection with the registration of the securities described in this Registration Statement, approximately $170,000 of which are payable by the Selling Shareholders and approximately $220,000 of which are payable by the Company. All amounts shown are estimates except the Securities and Exchange Commission registration fee and the NASD filing fee. Securities and Exchange Commission registration fee............... $ 9,890 NASD filing fee................................................... 3,764 Accounting Fees and Expenses...................................... 60,000 Legal fees and expenses........................................... 150,000 Printing Expenses................................................. 70,000 Miscellaneous..................................................... 96,346 -------- Total................................................... $390,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Registrant's amended and restated Certificate of Incorporation (the "Charter") provides that the Registrant shall indemnify, to the fullest extent permitted by Section 33-320a of the Connecticut Stock Corporation Act (the "Connecticut Act"), any director, officer or shareholder of the Registrant. Such Section generally provides that, subject to certain exceptions and conditions, a Connecticut corporation shall indemnify its directors, officers and shareholders against liability with respect to certain specified actions, suits or proceedings, if such persons are successful on the merits in defending such actions, suits or proceedings, or acted in good faith and in a manner they reasonably believed to be in the best interest of the corporation, or if a court determines such persons are fairly and reasonably entitled to be indemnified. The Charter also provides, as permitted by Section 33-290(c) of the Connecticut Act, that no person who is or was a director of the Registrant shall be personally liable to the Registrant or its shareholders for monetary damages for breach of duty as a director in an amount that exceeds the compensation received by the director for serving the Registrant during the year of the violation, subject to certain exceptions. The Registrant also maintains directors' and officers' liability insurance insuring, with certain exceptions and conditions, the Registrant's directors and officers in their capacity as such against liability with respect to certain specified proceedings. The Connecticut legislature has enacted the Connecticut Business Corporation Act (the "CBCA"). The CBCA became effective on January 1, 1997, replacing the Connecticut Stock Corporation Act. Under the new CBCA, the extent to which indemnification is permitted will be similar to existing law, although it allows broader indemnification for non-director officers to an extent consistent with public policy. Indemnification is no longer mandatory (except in certain narrow circumstances). Instead, the CBCA sets the limit of indemnification allowed under certain circumstances, and prescribes the procedure under which corporations are to make determinations as to indemnification. Corporations in existence before January 1, 1997, such as the registrant, are subject to a grandfather clause under which they still have to provide the maximum indemnification allowable under the CBCA, unless amendments to their charters provide otherwise. The CBCA also authorizes corporations to provide insurance coverage even against liability for which indemnification is not allowed. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. II-1 34 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) EXHIBITS
NUMBER DESCRIPTION OF EXHIBIT - ------------ -------------------------------------------------------------------------------- 1.1 -- Underwriting Agreement 4.1 -- Amended and Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3(c) to the registrant's Registration Statement on Form S-1, Registration No. 2-82916) 4.2 -- Amended and Restated By-Laws, as amended (incorporated by reference to Exhibit 3(e) to the registrant's Registration Statement on Form S-1, Registration No. 2-82916) 4.3 -- Amendments to Amended and Restated Certificate of Incorporation (incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended July 30, 1988) 4.4 -- Amendments to Amended and Restated By-Laws (incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended July 30, 1988) 4.5 -- Amendments to Amended and Restated By-Laws (incorporated by reference to the registrant's Annual Report on Form 10-K for the fiscal year ended July 28, 1990) 5.1 -- Opinion of Proskauer Rose Goetz & Mendelsohn LLP, New York, New York 23.1 -- Consent of Proskauer Rose Goetz & Mendelsohn LLP, New York, New York -- included in Exhibit 5.1 23.2 -- Consent of Deloitte & Touche LLP 24 -- Power of Attorney -- included on signature page filed on April 17, 1997
(b) FINANCIAL STATEMENT SCHEDULES: Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the financial statements or notes thereto. ITEM 17. UNDERTAKINGS (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Exchange Act) that is incorporated by reference in the 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. (h) Insofar as indemnification for liabilities arising under the Securities Act 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 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, 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 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 and will be governed by the final adjudication of such issue. (i) The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or II-2 35 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus 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. II-3 36 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SUFFERN, STATE OF NEW YORK, ON THE 12TH DAY OF MAY, 1997. THE DRESS BARN, INC. By: /s/ Elliot S. Jaffe --------------------------------- Elliot S. Jaffe Chairman of the Board and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURES TITLE DATE - ------------------------------------------ ------------------------------------ --------------- /s/ Elliot S. Jaffe Chairman of the Board and Chief May 12, 1997 - ------------------------------------------ Executive Officer (Principal Elliot S. Jaffe Executive Officer) * President, Chief Operating Officer May 12, 1997 - ------------------------------------------ and Director Burt Steinberg * Senior Vice President and Chief May 12, 1997 - ------------------------------------------ Financial Officer (Principal Armand Correia Financial Officer and Principal Accounting Officer) * Secretary, Treasurer and Director May 12, 1997 - ------------------------------------------ Roslyn S. Jaffe * Director May 12, 1997 - ------------------------------------------ Klaus Eppler * Director May 12, 1997 - ------------------------------------------ Mark S. Handler * Director May 12, 1997 - ------------------------------------------ Donald Jonas * Director May 12, 1997 - ------------------------------------------ Edward D. Solomon *By: /s/ ELLIOT S. JAFFE - ------------------------------------------ Elliot S. Jaffe Attorney-in-fact
II-4 EX-1.1 2 UNDERWRITING AGREEMENT 1 DRAFT 2,000,000 Shares of Common Stock The Dress Barn, Inc. UNDERWRITING AGREEMENT May __, 1997 BEAR, STEARNS & CO. INC. ROBERTSON, STEPHENS & COMPANY LLC as Representatives of the several Underwriters named in Schedule II attached hereto c/o Bear, Stearns & Co. Inc. 245 Park Avenue New York, NY 10167 Ladies and Gentlemen: The shareholders named in Schedule I hereto (together, the "Selling Shareholders") propose, subject to the terms and conditions stated herein, to sell to the several underwriters named in Schedule II hereto (the "Underwriters") an aggregate of 2,000,000 shares (the "Firm Shares") of common stock, par value $.05 per share (the "Common Stock"), of The Dress Barn, Inc., a Connecticut corporation (the "Company"), and, for the sole purpose of covering over-allotments in connection with the sale of the Firm Shares, The Jaffe Family Foundation proposes to grant to the Underwriters an option to purchase up to 300,000 additional shares (the "Additional Shares") of Common Stock. The Firm Shares and any Additional Shares purchased by the Underwriters are referred to herein as the "Shares." The Shares are more fully described in the Registration Statement referred to below. 1. Representations and Warranties of the Company and Selling Shareholders. (a) The Company and the Jaffe Family, L.P. jointly and severally represent and warrant to, and agree with, the Underwriters that: 2 (i) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement, and may have filed an amendment or amendments thereto, on Form S-3 (File No. 333-25377), for the registration of the Shares under the Securities Act of 1933, as amended (the "Act"). Such registration statement, including the prospectus, financial statements and schedules, exhibits and all other documents filed as a part thereof, as amended at the time of effectiveness of the registration statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to Rule 430A or Rule 434 of the Rules and Regulations of the Commission under the Act (the "Regulations"), is herein called the "Registration Statement," and the prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Regulations or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) or Rule 434 filing is required or made, is herein called the "Prospectus." The term "preliminary prospectus" as used herein means a preliminary prospectus as described in Rule 430 of the Regulations. Any reference herein to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), on or before the effective date of the Registration Statement, the date of such preliminary prospectus or the date of the Prospectus, as the case may be, and any reference herein to the terms "amend," "amendment" or "supplement" with respect to the Registration Statement, any preliminary prospectus or the Prospectus shall be deemed to refer to and include (A) the filing of any document under the Exchange Act after the effective date of the Registration Statement, the date of such preliminary prospectus or the date of the Prospectus, as the case may be, which is incorporated therein by reference and (B) any such document so filed. (ii) At the time of the effectiveness of the Registration Statement or the effectiveness of any post-effective amendment to the Registration Statement, when the Prospectus is first filed with the Commission pursuant to Rule 424(b) or Rule 434 of the Regulations, when any supplement to or amendment of the Prospectus is filed with the Commission, when any document filed under the Exchange Act is filed and at the Closing Date (as hereinafter defined) and any Additional Closing Date (as hereinafter defined), the Registration Statement and the Prospectus and any amendments thereof and supplements thereto complied or will comply in all material respects with the applicable provisions of the Act and the Regulations and the Exchange Act and the respective rules and regulations thereunder and does not or will not contain an untrue statement of a material fact and does not or will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein (A) in the case of the Registration Statement, not misleading and (B) in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading. When any related preliminary prospectus was first filed with the Commission (whether filed as part of the registration statement for the registration of the Shares or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment thereof or supplement thereto was first filed with the Commission, such preliminary prospectus and any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Act and the Regulations and the Exchange Act and the respective rules and regulations thereunder and did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. No representation and warranty is made in this subsection (ii), however, with respect to any information contained in the Registration Statement or the Prospectus or any related preliminary prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through you as herein stated expressly for use in connection with the preparation thereof. (iii) The Company and each of D.B.R., Inc. and D.B.X. Inc. (together, the "Significant Subsidiaries") has been duly organized and is validly existing as a 2 3 corporation in good standing under the laws of its jurisdiction of incorporation. The Company and each of the Significant Subsidiaries is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary. The Company and each of the Significant Subsidiaries has all requisite power and authority, and all necessary consents, approvals, authorizations, orders, registrations, qualifications, licenses and permits of and from all public, regulatory or governmental agencies and bodies, to own, lease and operate its properties and conduct its business as now being conducted and as described in the Registration Statement and the Prospectus, and no such consent, approval, authorization, order, registration, qualification, license or permit contains a materially burdensome restriction not adequately disclosed in the Registration Statement and the Prospectus. (iv) This Agreement and the transactions contemplated herein have been duly and validly authorized by the Company and this Agreement has been duly and validly executed and delivered by the Company. (v) Neither the Company nor any of the Significant Subsidiaries is in violation of its respective certificate of incorporation or by-laws or in default in the performance of any obligation, agreement or condition contained in any bond, debenture, note or any other evidence of indebtedness or in any other agreement, indenture or instrument material to the conduct of its business to which it is a party or by which it or any of its property is bound. (vi) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (A) conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of the Significant Subsidiaries pursuant to, any agreement, instrument, franchise, license or permit to which the Company or any of the Significant Subsidiaries are a party or by which any of such entities or their respective properties or assets may be bound or (B) violate or conflict with any provision of the certificate of incorporation, by-laws or other organizational documents of the Company or any of the Significant Subsidiaries or any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of the Significant Subsidiaries. No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of the Significant Subsidiaries is required for the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, including the sale and delivery of the Shares, except the registration under the Act of the Shares and such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses and permits as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters. (vii) The Shares, when delivered and sold in accordance with this Agreement, will be duly and validly authorized, issued and outstanding, fully paid and nonassessable, and will not have been issued in violation of or be subject to any preemptive rights. The Company had, at January 25, 1997, an authorized and outstanding capitalization as set forth in the Registration Statement and the Prospectus. The Common Stock, the Firm Shares and the Additional Shares conform to the descriptions thereof contained in the Registration Statement and the Prospectus. (viii) Except as described in the Prospectus, there are no outstanding (A) shares of capital stock of the Company or securities or obligations of the Company convertible into or 3 4 exchangeable or exercisable for any such capital stock, (B) warrants, rights or options to subscribe for or purchase from the Company any such capital stock or any such convertible or exchangeable securities or obligations or (C) obligations of the Company to issue such shares, any such convertible or exchangeable securities or obligations, or any such warrants, rights or options. (ix) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as set forth in the Registration Statement and the Prospectus, there has been no material adverse change in the business, prospects, properties, operations, condition (financial or other) or results of operations of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, and since the date of the latest balance sheet presented in the Registration Statement and the Prospectus, neither the Company nor any of its subsidiaries has incurred or undertaken any liabilities or obligations, direct or contingent, which are material to the Company and its subsidiaries taken as a whole, except for liabilities or obligations which are reflected in the Registration Statement and the Prospectus. (x) To the best of the Company's knowledge, Deloitte & Touche LLP, who have certified the financial statements and supporting schedules included in the Registration Statement, are independent public accountants as required by the Act and the Regulations. (xi) The financial statements, including the notes thereto, and supporting schedules included in the Registration Statement and the Prospectus present fairly in all material respects the financial position of the Company as of the dates indicated and the results of its operations for the periods specified; except as otherwise stated in the Registration Statement, said financial statements have been prepared in conformity with generally accepted accounting principles applied on a consistent basis; and the supporting schedules included in the Registration Statement present fairly in all material respects the information required to be stated therein. (xii) Except as described in the Prospectus, there is no litigation or governmental proceeding to which the Company or any of its subsidiaries is a party or to which any property of the Company or any of its subsidiaries is subject or which is pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries which might have a material adverse effect on the business, prospects, properties, operations, condition (financial or other) or results of operations of the Company and its subsidiaries taken as a whole or which is required to be disclosed in the Registration Statement and the Prospectus (a "Material Adverse Effect"). (xiii) The Company and each of the Significant Subsidiaries has good and marketable title to all property and assets described in the Registration Statement as being owned by it free and clear of all liens, claims, encumbrances and restrictions that, singly or in the aggregate, might have a Material Adverse Effect or might materially interfere with the use made by the Company or such subsidiary. All leases to which the Company or any the Significant Subsidiaries is a party are valid and binding and no default has occurred or is continuing thereunder that, singly or in the aggregate, might have a Material Adverse Effect, and the Company and the Significant Subsidiaries enjoy peaceful and undisturbed possession under all such leases to which any of them is a party as lessee with such exceptions as do not materially interfere with the use made by the Company or such subsidiary. (xiv) Neither the Company nor any of the Significant Subsidiaries has violated any foreign, federal, state or local law or regulation relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"), nor any federal or state law relating to discrimination in the hiring, promotion or pay of employees nor any applicable federal or state wages and hours laws, nor any provisions of the Employee Retirement 4 5 Income Security Act or the rules and regulations promulgated thereunder, which in each case, singly or in the aggregate, might have a Material Adverse Effect. (xv) There is no alleged liability, or to the best knowledge of the Company, potential liability (including, without limitation, alleged or potential liability or investigatory costs, cleanup costs, governmental response costs, natural resource damages, property damages, personal injuries or penalties) of the Company or any of the Significant Subsidiaries arising out of, based on or resulting from (A) the presence or release into the environment of any Hazardous Material (as defined below) at any location, whether or not owned by the Company or any such subsidiary or (B) any violation or alleged violation of any Environmental Law, which alleged or potential liability is required to be disclosed in the Prospectus, other than as disclosed therein, or might, singly or in the aggregate have a Material Adverse Effect. The term "Hazardous Material" means (A) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (B) any "hazardous waste" as defined by the Resource Conservation and Recovery Act, as amended, (C) any petroleum or petroleum product, (D) any polychlorinated biphenyl and (E) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance regulated under or within the meaning of any other law relating to protection of human health or the environment or imposing liability or standards of conduct concerning any such chemical material, waste or substance. (xvi) Neither the Company nor any person acting on behalf of the Company has taken or will take, directly or indirectly, any action designed to cause or result in, or which constitutes or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. (xvii) No holder of securities of the Company has any rights to the registration of securities of the Company because of the filing of the Registration Statement or otherwise in connection with the sale of the Shares contemplated hereby. (xviii) The Company is not, and upon consummation of the transactions contemplated hereby will not be, subject to registration as an "investment company" under the Investment Company Act of 1940. (xix) The conditions for use of Form S-3, as set forth in the General Instructions thereto, have been satisfied. (xx) Except for the Significant Subsidiaries, no subsidiary of the Company has any material operations, assets or liabilities. (xxi) The Shares are listed on the Nasdaq National Market. (b) Each Selling Shareholder, severally and not jointly, represents and warrants to, and agrees with, the several Underwriters that: (i) At the time of the effectiveness of the Registration Statement or the effectiveness of any post-effective amendment to the Registration Statement, when the Prospectus is first filed with the Commission pursuant to Rule 424(b) or Rule 434 of the Regulations, when any supplement to or amendment of the Prospectus is filed with the Commission, when any document filed under the Exchange Act is filed and at the Closing Date (as hereinafter defined) and any Additional Closing Date (as hereinafter defined), the Registration Statement and the Prospectus and any amendments thereof and 5 6 supplements thereto complied or will comply in all material respects with the applicable provisions of the Act and the Regulations and the Exchange Act and the respective rules and regulations thereunder and does not or will not contain an untrue statement of a material fact and does not or will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein (A) in the case of the Registration Statement, not misleading and (B) in the case of the Prospectus, in the light of the circumstances under which they were made, not misleading. When any related preliminary prospectus was first filed with the Commission (whether filed as part of the registration statement for the registration of the Shares or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment thereof or supplement thereto was first filed with the Commission, such preliminary prospectus and any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Act and the Regulations and the Exchange Act and the respective rules and regulations thereunder and did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The representations and warranties made in this subsection (i), however, shall relate only to information contained in the Registration Statement or the Prospectus or any related preliminary prospectus or any amendment thereof or supplement thereto in reliance upon or in conformity with information furnished in writing to the Company by or on behalf of such Selling Shareholder. (ii) This Agreement and the transactions contemplated herein have been duly and validly authorized by such Selling Shareholder and this Agreement has been duly and validly executed and delivered by such Selling Shareholder. (iii) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (A) conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of such Selling Shareholder pursuant to, any agreement, instrument, franchise, license or permit to which such Selling Shareholder is a party or by which such Selling Shareholder or its properties or assets may be bound or (B) violate or conflict with any provision of the organizational documents of such Selling Shareholder or any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over such Selling Shareholder or any of its properties or assets. No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental or regulatory agency or body having jurisdiction over such Selling Shareholder or any of its properties or assets is required for the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, including the sale and delivery of the Shares, except the registration under the Act of the Shares and such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses and permits as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters. (iv) Neither such Selling Shareholder, nor any person acting on behalf of such Selling Shareholder, has taken or will take, directly or indirectly, any action designed to cause or result in, or which constitutes or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. (v) Such Selling Shareholder has been duly organized and is validly existing as a limited partnership in good standing under the laws of Connecticut or as a not-for-profit corporation in good standing under the laws of New York, as the case may be. 6 7 (vi) Such Selling Shareholder is the lawful owner of the Shares to be sold by it pursuant to this Agreement and has, and on the Closing Date (and Additional Closing Date, if applicable) will have, good and clear title to such Shares, free of all restrictions on transfer, liens, encumbrances, security interests and claims whatsoever. (vii) Upon delivery of and payment for the Shares to be sold by such Selling Shareholder pursuant to this Agreement, good and clear title to such Shares will pass to the Underwriters, free of all restrictions on transfer, liens, encumbrances, security interests and claims whatsoever. 2. Purchase, Sale and Delivery of the Shares. (a) On the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, the Selling Shareholders agree to sell to the Underwriters and the Underwriters, severally and not jointly, agree to purchase from the Selling Shareholders, at a purchase price per share of $___________, the number of Firm Shares set forth opposite the respective names of the Underwriters in Schedule I hereto plus any additional number of Shares which such Underwriter may become obligated to purchase pursuant to the provisions of Section 9 hereof. (b) Payment of the purchase price and delivery of certificates for the Shares shall be made at the office of Latham & Watkins, 885 Third Avenue, New York, New York 10022, or at such other place as shall be agreed upon by you and the Selling Shareholders, at 10:00 A.M. on the third or fourth business day (as permitted under Rule 15c6-1 under the Exchange Act) (unless postponed in accordance with the provisions of Section 9 hereof) following the date of the effectiveness of the Registration Statement (or, if the Company has elected to rely upon Rule 430A of the Regulations, the third or fourth business day (as permitted under Rule 15c6-1 under the Exchange Act) after the determination of the initial public offering price of the Shares), or such other time not later than ten business days after such date as shall be agreed upon by you and the Selling Shareholders (such time and date of payment and delivery being herein called the "Closing Date"). Payment shall be made to the Selling Shareholders by wire transfer in same day funds, against delivery to you for the respective accounts of the Underwriters of certificates for the Shares to be purchased by them. Certificates for the Shares shall be registered in such name or names and in such authorized denominations as you may request in writing at least two business days prior to the Closing Date. The Company and the Selling Shareholders will permit you to examine and package such certificates for delivery at least one business day prior to the Closing Date. (c) In addition, The Jaffe Family Foundation hereby grants to the Underwriters an option to purchase up to 300,000 Additional Shares at the same purchase price per share to be paid by the Underwriters to the Selling Shareholders for the Firm Shares as set forth in this Section 2, for the sole purpose of covering over-allotments in the sale of Firm Shares by the Underwriters. This option may be exercised at any time in whole or up to three times in part on or before the 30th day following the date of the Prospectus, by written notice by you to the Company and the Jaffe Family Foundation. Such notice shall set forth the aggregate number of Additional Shares as to which the option is being exercised and the date and time, as reasonably determined by you, when the Additional Shares are to be delivered (each such date and time being herein sometimes referred to as an "Additional Closing Date"); provided, however, that an Additional Closing Date shall not be earlier than the Closing Date or earlier than the second full business day after the date on which the option shall have been exercised or later than the eighth full business day after the date on which the option shall have been exercised (unless such time and date are postponed in accordance with the provisions of Section 9 hereof). Certificates for the Additional Shares shall be registered in such name or names and in such authorized denominations as you may request in writing at 7 8 least two business days prior to each Additional Closing Date. The Company and the Jaffe Family Foundation will permit you to examine and package such certificates for delivery at least one business day prior to the Additional Closing Date. The number of Additional Shares to be sold to each Underwriter on each Additional Closing Date shall be the number which bears the same ratio to the aggregate number of Additional Shares being purchased on such Additional Closing Date as the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto (or such number increased as set forth in Section 9 hereof) bears to 2,000,000, subject, however, to such adjustments to eliminate any fractional shares as you in your sole discretion shall make. Payment for the Additional Shares shall be made by wire transfer in same day funds at the offices of Latham & Watkins, 885 Third Avenue, New York, New York 10022, or such other location as may be mutually acceptable, upon delivery of the certificates for the Additional Shares to you for the respective accounts of the Underwriters. 3. Offering. Upon your authorization of the release of the Firm Shares, the Underwriters propose to offer the Shares for sale and distribution to the public upon the terms set forth in the Prospectus. 4. Covenants of the Company and Selling Shareholders. (a) The Company covenants and agrees with the Underwriters that: (i) If the Registration Statement has not yet been declared effective, the Company will use its best efforts to cause the Registration Statement and any amendments thereto to become effective as promptly as possible, and if Rule 430A is used or the filing of the Prospectus is otherwise required under Rule 424(b) or Rule 434, the Company will file the Prospectus (properly completed if Rule 430A has been used) pursuant to Rule 424(b) or Rule 434 within the prescribed time period and will provide evidence satisfactory to you of such timely filing. The Company will notify you immediately (and, if requested by you, will confirm such notice in writing) (A) when the Registration Statement and any amendments thereto become effective, (B) of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for any additional information, (C) of the mailing or the delivery to the Commission for filing of any amendment of or supplement to the Registration Statement or the Prospectus, (D) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto or of the initiation, or the threatening, of any proceedings therefor, (E) of the receipt of any comments from the Commission and (F) of the receipt of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose or enter a stop order at any time, the Company will use its best efforts to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such order as soon as possible. The Company will not file any amendment to the Registration Statement or any amendment of or supplement to the Prospectus (including the prospectus required to be filed pursuant to Rule 424(b) or Rule 434) that differs from the prospectus on file at the time of the effectiveness of the Registration Statement before or after the effective date of the Registration Statement or file any document under the Exchange Act if such document would be deemed to be incorporated by reference into the Prospectus to which you shall reasonably object in writing after being timely furnished in advance a copy thereof. 8 9 (ii) If at any time when a prospectus relating to the Shares is required to be delivered under the Act, any event shall have occurred as a result of which the Prospectus as then amended or supplemented would, in the judgment of the Representatives or counsel to the Underwriters, include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it shall be necessary at any time to amend or supplement the Prospectus or Registration Statement to comply with the Act or the Regulations, or to file under the Exchange Act so as to comply therewith any document incorporated by reference in the Registration Statement or the Prospectus or in any amendment thereof or supplement thereto, the Company will notify you promptly and prepare and file with the Commission an appropriate amendment or supplement (in form and substance satisfactory to you) which will correct such statement or omission or which will effect such compliance and will use its best efforts to have any amendment to the Registration Statement declared effective as soon as possible. (iii) The Company will promptly deliver to you two signed copies of the Registration Statement, including exhibits and all documents incorporated by reference therein and all amendments thereto, and the Company will promptly deliver to each of the Underwriters such number of copies of any preliminary prospectus, the Prospectus, the Registration Statement and all amendments of and supplements to such documents, if any, and all documents incorporated by reference in the Registration Statement and Prospectus or any amendment thereof or supplement thereto as you may reasonably request. (iv) The Company will endeavor in good faith, in cooperation with you, at or prior to the time of effectiveness of the Registration Statement, to qualify the Shares for offering and sale under the securities laws relating to the offering or sale of the Shares of such jurisdictions as you may designate and to maintain such qualification in effect for so long as required for the distribution thereof; provided, however, that in connection therewith the Company shall not be required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction where it is not so qualified. (v) The Company will make generally available (within the meaning of Section 11 (a) of the Act) to its security holders and to you as soon as practicable, but not later than 90 days after the end of its fiscal quarter in which the first anniversary date of the effective date of the Registration Statement occurs, an earning statement (in form complying with the provisions of Rule 158 of the Regulations) covering a period of at least twelve consecutive months beginning after the effective date of the Registration Statement. (vi) The Company will obtain the undertaking of each of its executive officers and directors named in the Prospectus and Elise Jaffe that during the period of 90 days from the date of the Prospectus, such aforementioned persons will not without your prior written consent, issue, sell, offer or agree to sell, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock (or any securities convertible into or exercisable or exchangeable for Common Stock), on their own behalf, other than the Company's issuance of Common Stock upon the exercise of presently outstanding stock options. (vii) During a period of three years from the effective date of the Registration Statement, the Company will furnish to you copies of (A) all reports to its shareholders and (B) all reports, financial statements and proxy or information statements filed by the Company with the Commission or any national securities exchange. 9 10 (viii) The Company, during the period when the Prospectus is required to be delivered under the Act or the Exchange Act, will file all documents required to be filed with the Commission pursuant to Section 13, 14 or 15 of the Exchange Act within the time periods required by the Exchange Act and the rules and regulations thereunder. (b) Each Selling Shareholder covenants and agrees with the Underwriters that during the period of 90 days from the date of the Prospectus, it will not without your prior written consent, sell, offer or agree to sell, grant any option for the sale of, or otherwise dispose of, directly or indirectly, any shares of Common Stock (or any securities convertible into or exercisable or exchangeable for Common Stock) other than such Selling Shareholder's sale of Shares hereunder. 5. Payment of Expenses. Whether or not the transactions contemplated in this Agreement are consummated or this Agreement is terminated, the Company and the Selling Shareholders hereby agree to pay all costs and expenses incident to the performance of the obligations of the Company and the Selling Shareholders hereunder, including those in connection with (i) preparing, printing, duplicating, filing and distributing the Registration Statement, as originally filed and all amendments thereof (including all exhibits thereto), any preliminary prospectus, the Prospectus and any amendments or supplements thereto (including, without limitation, fees and expenses of the Company's accountants and counsel), and all other documents related to the public offering of the Shares (including those supplied to the Underwriters in quantities as hereinabove stated), (ii) the transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the qualification of the Shares under state or foreign securities or Blue Sky laws, including the costs of printing and mailing a preliminary and final Blue Sky Memoranda and the reasonable fees of counsel for the Underwriters and such counsel's reasonable disbursements in relation thereto, (v) filing fees of the Commission and the National Association of Securities Dealers, Inc., (vi) the cost of printing certificates representing the Shares and (vii) the cost and charges of any transfer agent or registrar. 6. Conditions of Underwriters' Obligations. The obligations of the Underwriters to purchase and pay for the Firm Shares and the Additional Shares, as provided herein, shall be subject to the accuracy of the representations and warranties of the Company and the Selling Shareholders herein contained, as of the date hereof and as of the Closing Date (for purposes of this Section 6, "Closing Date" shall refer to the Closing Date for the Firm Shares and any Additional Closing Date, if different, for the Additional Shares), to the absence from any certificates, opinions, written statements or letters furnished to you or to Latham & Watkins ("Underwriters' Counsel") pursuant to this Section 6 of any misstatement or omission, to the performance by the Company and the Selling Shareholders of their obligations hereunder, and to the following additional conditions: (a) The Registration Statement shall have become effective not later than 5:30 P.M., New York time, on the date of this Agreement, or at such later time and date as shall have been consented to in writing by you; if the Company shall have elected to rely upon Rule 430A or Rule 434 of the Regulations, the Prospectus shall have been filed with the Commission in a timely fashion in accordance with Section 4(a) hereof, and, at or prior to the Closing Date no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof shall have been issued and no proceedings therefor shall have been initiated or threatened by the Commission. (b) At the Closing Date you shall have received the opinion of Proskauer Rose Goetz & Mendelsohn LLP, counsel for the Company and the Selling Shareholders, dated the Closing Date addressed to the Underwriters and in form and substance satisfactory to Underwriters' Counsel, to the effect that: (i) The Registration Statement and the Prospectus and any amendments thereof or supplements thereto (other than the financial statements and schedules and other financial data included or incorporated by reference therein, as to which no opinion need be rendered) comply as to form in all material respects with the requirements of the Act and the Regulations. The documents filed under the Exchange Act and incorporated by reference in the Registration 10 11 Statement and the Prospectus or any amendment thereof or supplement thereto (other than the financial statements and schedules and other financial data included or incorporated by reference therein, as to which no opinion need be rendered) when they became effective or were filed with the Commission, as the case may be, complied as to form in all material respects with the Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder. (ii) The Registration Statement is effective under the Act, and, to the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof has been issued and no proceedings therefor have been initiated or threatened by the Commission and all filings required by Rule 424(b) of the Regulations have been made. (iii) The Company and each Significant Subsidiary has been duly organized and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation. The Company and each Significant Subsidiary, as to states other than Connecticut, New York and Delaware, based solely on certificates of corporate officials, copies of which have been furnished to you, is duly qualified and in good standing as a foreign corporation in each jurisdiction listed in such certificate, which certificate shall indicate that such jurisdictions are the only jurisdictions in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except where the failure to be so qualified or in good standing, singly or in the aggregate, would not have a Material Adverse Effect. The Company and each Significant Subsidiary has all requisite corporate authority to own, lease and license its respective properties and conduct its business as now being conducted and as described in the Registration Statement and the Prospectus. All of the issued and outstanding capital stock of each Significant Subsidiary has been duly and validly issued and is fully paid and nonassessable and was not issued in violation of preemptive rights and is held directly or indirectly by the Company, free and clear of any lien, encumbrance, claim, security interest, restriction on transfer, shareholders' agreement, voting trust or other defect of title known to such counsel. (iv) This Agreement has been duly and validly authorized, executed and delivered by the Company and each Selling Shareholder. (v) To such counsel's knowledge, neither the Company nor any of the Significant Subsidiaries is in violation of its respective certificate of incorporation or by-laws or in default in the performance of any obligation, agreement or condition contained in any agreement, indenture or instrument filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended July 27, 1996, or to any other report or document subsequently filed with the Commission pursuant to the Act or the Exchange Act. (vi) The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby by the Company and the Selling Shareholders do not and will not (A) conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company, any of the Significant Subsidiaries or either of the Selling Shareholders pursuant to any agreement, instrument, franchise, license or permit known to such counsel to which the Company, any of the Significant Subsidiaries or either of the Selling Shareholders is a party or by which any of such corporations or their respective 11 12 properties or assets may be bound or (B) violate or conflict with any provision of the certificate of incorporation or by-laws of the Company, any of the Significant Subsidiaries or either of the Selling Shareholders or, to the best knowledge of such counsel, any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company, any of the Significant Subsidiaries or either of the Selling Shareholders or any of their respective properties or assets. Under the Federal laws of the United States, the laws of State of New York and the laws of the State of Connecticut, no consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental or regulatory agency or body having jurisdiction over the Company, any of the Significant Subsidiaries or either of the Selling Shareholders or any of their respective properties or assets is required for the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, except for (A) such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters (as to which such counsel need express no opinion) and (B) such as have been made or obtained under the Act. (vii) The Company has an authorized capital stock as set forth in the Registration Statement and the Prospectus. All of the outstanding shares of Common Stock are duly and validly authorized and issued, are fully paid and nonassessable and were not issued in violation of or subject to any preemptive rights under the corporation law of the State of Connecticut or the certificate of incorporation of the Company. The Shares to be delivered on the Closing Date have been duly and validly authorized and, when delivered by the Selling Shareholders in accordance with this Agreement, will be duly and validly authorized, issued, fully paid and nonassessable and will not have been issued in violation of or subject to any preemptive rights under the corporation law of the State of Connecticut or the certificate of incorporation of the Company. The Common Stock, the Firm Shares and the Additional Shares conform to the descriptions thereof contained in the Registration Statement and the Prospectus. (viii) Upon the delivery of the Firm Shares and payment therefor in accordance with the terms of this Agreement, the several Underwriters will acquire all of the rights of the Selling Shareholders to such Shares and will acquire such Shares free and clear of any "adverse claim" (as such term is used in Section 8-302 of the Uniform Commercial Code as in effect in the State on New York), assuming the several Underwriters acquire such Shares in good faith and without notice of any such "adverse claim." (ix) To such counsel's knowledge, there is no litigation or governmental or other action, suit, proceeding or investigation before any court or before or by any public, regulatory or governmental agency or body pending or threatened against, or involving the properties or business of, the Company or any of its subsidiaries which is of a character required to be disclosed in the Registration Statement and the Prospectus which has not been properly disclosed therein. (x) Jaffe Family, L.P. has been duly organized and is validly existing as a limited partnership in good standing under the laws of Connecticut. (xi) The Jaffe Family Foundation has been duly organized and is validly existing as a not-for-profit corporation in good standing under the laws of New York. 12 13 (xii) In addition, such counsel shall also provide you a statement in a separate letter that such counsel has acted as outside counsel to the Company and the Selling Shareholders in connection with the purchase by the Underwriters of the Firm Shares and the Additional Shares, as the case may be, from the Selling Shareholders. In that capacity, they participated in conferences with certain officers of, and with the independent accountants for, the Company and representatives of the Underwriters concerning the preparation of the Registration Statement and the Prospectus. Although they made certain inquires and investigations in connection with the preparation of the Registration Statement and the Prospectus, they did not independently verify the accuracy or completeness of the statements made in the Registration Statement or the Prospectus and the limitations inherent in their role as outside counsel are such that they cannot and do not assume responsibility for or pass on the accuracy or completeness of such statements. Subject to the foregoing, they can state to you that their work in connection with this matter did not disclose any information that would cause them to believe that either the Registration Statement at the time it became effective (including the information deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable), or any amendment thereof made prior to the Closing Date as of the date of such amendment, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or that the Prospectus as of its date (or any amendment thereof or supplement thereto made prior to the Closing Date as of the date of such amendment or supplement) and as of the Closing Date contained or contains an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief or opinion with respect to the financial statements and schedules and other information of a financial, statistical or accounting nature which are or should be included or incorporated by reference therein). (xiii) The statements set forth or incorporated by reference in the Prospectus under the caption "Description of Capital Stock" and Item 15 of Part II of the Registration Statement, insofar as such statements constitute a summary of legal matters documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings. (xiv) Such counsel may state that their opinions are 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, and that they express no opinions as to the laws of any other jurisdiction. In rendering its opinion and separate letter referred to above, they may state that they have relied upon the opinion of __________ as to matters of the laws of the State of Connecticut, which is in a form satisfactory to them. (c) All proceedings taken in connection with the sale of the Firm Shares and the Additional Shares as herein contemplated shall be satisfactory in form and substance to you and to Underwriters' Counsel, and the Underwriters shall have received from Underwriters' Counsel a favorable opinion, dated as of the Closing Date with respect to the issuance and sale of the Shares, the Registration Statement and the Prospectus and such other related matters as you may reasonably require, and the Company shall have furnished to Underwriters' Counsel such documents as they request for the purpose of enabling them to pass upon such matters. (d) At the Closing Date you shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated the Closing Date to the effect that (i) 13 14 the condition set forth in subsection (a) of this Section 6 has been satisfied, (ii) as of the date hereof and as of the Closing Date the representations and warranties of the Company set forth in Section 1 hereof are accurate, (iii) as of the Closing Date the obligations of the Company to be performed hereunder on or prior thereto have been duly performed and (iv) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, the Company and its subsidiaries have not sustained any material loss or interference with their respective businesses or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, and there has not been any material adverse change, or any development involving a material adverse change, in the business prospects, properties, operations, condition (financial or otherwise) or results of operations of the Company and its subsidiaries taken as a whole. (e) At the time this Agreement is executed and at the Closing Date, you shall have received a customary "comfort letter" from Deloitte & Touche LLP, independent public accountants for the Company, dated as of the date of this Agreement and as of the Closing Date, respectively, addressed to the Underwriters and in form and substance satisfactory to you. (f) Prior to the Closing Date the Company and the Selling Shareholders shall have furnished to you such further information, certificates and documents as you may reasonably request. (g) You shall have received from each person who is a director or executive officer of the Company named in the Prospectus and Elise Jaffe an agreement to the effect that such person will not, directly or indirectly, without your prior written consent, offer, sell, offer or agree to sell, grant any option to purchase or otherwise dispose (or announce any offer, sale, grant of an option to purchase or other disposition) of any shares of Common Stock (or any securities convertible into or exercisable or exchangeable or exercisable shares of Common Stock) for a period of 90 days after the date of the Prospectus. If any of the conditions specified in this Section 6 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements or letters furnished to you or to Underwriters' Counsel pursuant to this Section 6 shall not be in all material respects reasonably satisfactory in form and substance to you and to Underwriters' Counsel, all obligations of the Underwriters hereunder may be cancelled by you at, or at any time prior to, the Closing Date and the obligations of the Underwriters to purchase the Additional Shares may be cancelled by you at, or at any time prior to, the Additional Closing Date. Notice of such cancellation shall be given to the Company and the Selling Shareholders in writing, or by telephone or telecopy confirmed in writing. 7. Indemnification. (a) The Company and each Selling Shareholder jointly and severally agree to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Shares, as originally filed or any amendment thereof, or any related preliminary prospectus or the Prospectus, or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission to state therein a 14 15 material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that (A) the Company and the Selling Shareholders will not be liable in any such case to the extent but only to the extent that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through you expressly for use therein and (B) such indemnity with respect to any untrue statement or omission in any preliminary prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, liabilities, claims, damages and expenses purchased Shares if such person did not receive a copy of the Prospectus (excluding documents incorporated by reference) at or prior to the confirmation of the sale of such Shares to such person in any case where such delivery is required by the Act and the untrue statement or omission of material fact contained in the preliminary prospectus was corrected in the Prospectus. Notwithstanding the foregoing, (i) in no case shall The Jaffe Family Foundation be liable or responsible for any amount in excess of the total proceeds from the sale of Shares by it hereunder and (ii) in no case shall the Jaffe Family, L.P. be liable or responsible for any amount in excess of the total proceeds from the sale of Shares by it hereunder unless, prior to seeking indemnification in an amount in excess of the total proceeds from the sale of Shares by the Jaffe Family, L.P. hereunder, either (A) a Bankruptcy Event (as hereinafter defined) shall have occurred or (B) a court of competent jurisdiction shall have rendered a judgment against the Company for indemnification pursuant to this Agreement, and such judgment shall remain unsatisfied for a period of 30 days. For purposes of this Agreement, a "Bankruptcy Event" shall mean (1) the Company pursuant to or within the meaning of any Bankruptcy Law (as hereinafter defined) (a) commences a voluntary case, (b) consents to the entry of an order for relief against it in an involuntary case, (c) consents to the appointment of a Custodian (as hereinafter defined) of it or for all or substantially all of its property, (d) makes a general assignment for the benefit of its creditors or(e) generally is not paying its debts as they become due or (2) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law, which order or decree remains unstayed and in effect for 60 consecutive days, that (a) is for relief against the company in an involuntary case, (b) appoints a Custodian of the Company or for all or substantially all of the property of the Company or (c) orders the liquidation of the Company. The term "Bankruptcy Law" means Title 11, United States Code, or any similar Federal or state law for the relief of debtors. The term "Custodian" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. (b) Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, each Selling Shareholder, each of the directors of the Company, each of the officers of the Company who shall have signed the Registration Statement, and each other person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), jointly or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Shares, as originally filed or any amendment thereof, or any related preliminary prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Underwriter through you expressly for use therein; provided, however, that in no case shall such Underwriter be liable or responsible for any amount in excess of the underwriting discount applicable to the Shares purchased by such Underwriter hereunder. This indemnity will be in addition to any liability which any Underwriter may otherwise have, including under this Agreement. The Company and the Selling Shareholders acknowledge that the statements set forth in the last paragraph of the cover page and in the six paragraphs under the caption "Underwriting" in the Prospectus constitute the only information furnished in writing by or on behalf of any Underwriter expressly for use in the registration statement relating to the Shares as originally filed or in any amendment thereof, any related preliminary prospectus or the Prospectus or in any amendment thereof or supplement thereto, as the case may be. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Section 7). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the 15 16 commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party. Notwithstanding the foregoing, the party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events the fees and expenses of not more than one firm of counsel representing the indemnified parties (not including local counsel) shall be borne by the indemnifying parties. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; provided, however, that such consent was not unreasonably withheld. 8. Contribution. In order to provide for contribution in circumstances in which the indemnification provided for in Section 7 hereof is for any reason held to be unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, the Company and the Selling Shareholders, on the one hand and the Underwriters, on the other hand, shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company and the Selling Shareholders any contribution received by the Company and the Selling Shareholders from persons, other than the Underwriters, who may also be liable for contribution, including persons who control the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the Company) as incurred to which the Company, the Selling Shareholders and one or more of the Underwriters may be subject, in such proportions as is appropriate to reflect the relative benefits received by the Company and the Selling Shareholders, on the one hand, and the Underwriters, on the other hand, from the offering of the Shares or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in Section 7 hereof, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Selling Shareholders, on the one hand, and the Underwriters, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Shareholders, on the one hand, and the Underwriters, on the other hand, shall be deemed to be in the same proportion as (a) the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Selling Shareholders and (b) the underwriting discounts and commissions received by the Underwriters, respectively, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and the Selling Shareholders, on the one hand, and of the Underwriters, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Shareholders or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling Shareholders and 16 17 the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this Section 8, (i) in no case shall any Underwriter be liable or responsible for any amount in excess of the underwriting discount applicable to the Shares purchased by such Underwriter hereunder, (ii) in no case shall The Jaffe Family Foundation be liable or responsible for any amount in excess of the total proceeds from the sale of Shares by it hereunder (iii) in no case shall the Jaffe Family, L.P. be liable or responsible for any amount in excess of the total proceeds from the sale of Shares by it hereunder unless, prior to seeking contribution in an amount in excess of the total proceeds from the sale of Shares by the Jaffe Family, L.P. hereunder, either (A) a Bankruptcy Event shall have occurred or (B) a court of competent jurisdiction shall have rendered a judgment against the company for contribution pursuant to this Agreement, and such judgment shall remain unsatisfied for a period of 30 days. and (iv) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding the provisions of this Section 8 and the preceding sentence, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. For purposes of this Section 8, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as such Underwriter, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (i), (ii), (iii) and (iv) of this Section 8. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 8 or otherwise. No party shall be liable for contribution with respect to any action or claim settled without its consent; provided, however, that such consent was not unreasonably withheld. 9. Default by an Underwriter. (a) If any Underwriter or Underwriters shall default in its or their obligation to purchase Firm Shares or Additional Shares hereunder, and if the Firm Shares or Additional Shares with respect to which such default relates do not (after giving effect to arrangements, if any, made by you pursuant to subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares or Additional Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to the respective proportions which the numbers of Firm Shares set forth opposite their respective names in Schedule I hereto bear to the aggregate number of Firm Shares set forth opposite the names of the non-defaulting Underwriters. (b) In the event that such default relates to more than 10% of the Firm Shares or Additional Shares, as the case may be, you may in your discretion arrange for yourself or for another party or parties (including any non-defaulting Underwriter or Underwriters who so agree) to purchase such Firm Shares or Additional Shares, as the case may be to which such default relates on the terms contained herein. In the event that within five calendar days after such a default you do not arrange for the purchase of the Firm Shares or Additional Shares, as the case may be, to which such default relates as provided in this Section 9, this Agreement or, in the case of a default with respect to the Additional Shares, the obligations of the Underwriters to purchase and of The Jaffe Family Foundation to sell the Additional Shares shall thereupon terminate, without liability on the part of The Jaffe Family Foundation with respect thereto (except in each case as provided in Section 5, 7(a) and 8 hereof) or the Underwriters, but nothing in 17 18 this Agreement shall relieve a defaulting Underwriter or Underwriters of its or their liability, if any, to the other Underwriters and the Selling Shareholders for damages occasioned by its or their default hereunder. (c) In the event that the Firm Shares or Additional Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, you or the Selling Shareholders shall have the right to postpone the Closing Date or Additional Closing Date, as the case may be, for a period not exceeding five business days in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment or supplement to the Registration Statement or the Prospectus which, in the opinion of Underwriters' Counsel, may thereby be made necessary or advisable. The term "Underwriter" as used in this Agreement shall include any party substituted under this Section 9 with like effect as if it had originally been a party to this Agreement with respect to such Firm Shares and Additional Shares. 10. Survival of Representations and Agreements. All representations and warranties, covenants and agreements of the Underwriters, the Selling Shareholders and the Company contained in this Agreement, including the agreements contained in Section 5, the indemnity agreements contained in Section 7 and the contribution agreements contained in Section 8, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling person thereof or by or on behalf of the Company, any of its officers and directors or any controlling person thereof or by or on behalf of the Selling Shareholders or any controlling person thereof, and shall survive delivery of and payment for the Shares to and by the Underwriters. The representations contained in Section 1 and the agreements contained in Sections 5, 7, 8 and 11 (d) hereof shall survive the termination of this Agreement, including termination pursuant to Section 9 or 11 hereof. 11. Effective Date of Agreement; Termination. (a) This Agreement shall become effective upon the later of when (i) you and the Company shall have received notification of the effectiveness of the Registration Statement or (ii) the execution of this Agreement. If either the initial public offering price or the purchase price per Share has not been agreed upon prior to 5:00 P.M., New York time, on the fifth full business day after the Registration Statement shall have become effective, this Agreement shall thereupon terminate without liability to the Company, the Selling Shareholders or the Underwriters except as herein expressly provided. Until this Agreement becomes effective as aforesaid, it may be terminated by the Company or the Selling Shareholders by notifying you or by you notifying the Company or the Selling Shareholders. Notwithstanding the foregoing, the provisions of this Section 11 and of Sections 1, 5, 7 and 8 hereof shall at all times be in full force and effect. (b) You shall have the right to terminate this Agreement at any time prior to the Closing Date or the obligations of the Underwriters to purchase the Additional Shares at any time prior to the Additional Closing Date, as the case may be, if (i) any domestic or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially disrupt, the market for the Company's securities or securities in general; or (ii) if trading on the New York Stock Exchange or American Stock Exchange shall have been suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the New York Stock Exchange or American Stock Exchange by the New York Stock Exchange or American Stock Exchange or by order of the Commission or any other governmental authority having jurisdiction; or (iii) if a banking moratorium has been declared by a New York State or federal authority or if any new restriction materially adversely affecting the distribution of the Firm Shares or the Additional Shares, as the 18 19 case may be shall have become effective; or (iv) (A) if the United States becomes engaged in hostilities or there is an escalation of hostilities involving the United States or there is a declaration of a national emergency or war by the United States or (B) if there shall have been such change in political, financial or economic conditions if the effect of any such event in (A) or (B) as in your judgment makes it impracticable or inadvisable to proceed with the offering, sale and delivery of the Firm Shares or the Additional Shares, as the case may be, on the terms contemplated by the Prospectus. (c) Any notice of termination pursuant to this Section 11 shall be by telephone or telecopy and confirmed in writing by letter. (d) If this Agreement shall be terminated pursuant to any of the provisions hereof (otherwise than pursuant to (i) notification by you as provided in Section 11(a) hereof or (ii) Section 9(b) or 11(b) hereof), or if the sale of the Shares provided for herein is not consummated because any condition to the obligations of the Underwriters set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company or the Selling Shareholders to perform any agreement herein or comply with any provision hereof, the Company and the Selling Shareholders will, subject to demand by you, reimburse the Underwriters for all reasonable out-of-pocket expenses (including the reasonable fees and expenses of their counsel) incurred by the Underwriters in connection herewith. 12. Notices. All communications hereunder, except as may be otherwise specifically provided herein, shall be in writing and, if sent to any Underwriter, shall be mailed, delivered, or telecopied and confirmed in writing to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, Attention: Equity Capital Markets; if sent to the Company or Selling Shareholders, shall be mailed, delivered, or telegraphed and confirmed in writing to the Company or the Selling Shareholders c/o the Company, 30 Dunnigan Drive, Suffern, New York 10901, Attention: Burt Steinberg, with copy to Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway, New York, New York 10036, Attention: Klaus Eppler. 13. Parties. This Agreement shall inure solely to the benefit of, and shall be binding upon, the Underwriters, the Company, the Selling Shareholders and the controlling persons, directors, officers, employees and agents referred to in Section 7 and 8, and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. The term "successors and assigns" shall not include a purchaser, in its capacity as such, of Shares from any of the Underwriters. 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, BUT WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 19 20 If the foregoing correctly sets forth the understanding between you, the Company and the Selling Shareholders, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us. Very truly yours, THE DRESS BARN, INC. By_____________________________ The Selling Shareholders: THE JAFFE FAMILY FOUNDATION By_____________________________ JAFFE FAMILY, L.P. By_____________________________ Accepted as of the date first above written BEAR, STEARNS & CO. INC. ROBERTSON, STEPHENS & COMPANY LLC By BEAR, STEARNS & CO. INC. By__________________________ Senior Managing Director On behalf of themselves and the other Underwriters named in Schedule II hereto. 20 21 SCHEDULE I Number of Firm Name of Shareholder Shares to be Sold - --------------------------------------------------------------------------- Jaffe Family, L.P. 1,000,000 The Jaffe Family Foundation 1,000,000 Total ...... 2,000,000 21 22 SCHEDULE II Number of Firm Name of Underwriter Shares to be Purchased - ---------------------------------------------------------------------------- Bear, Stearns & Co. Inc Robertson, Stephens & Company LLC Total ...... 2,000,000 22 EX-5.1 3 OPINION AND CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 5.1 May 13, 1997 The Dress Barn, Inc. 30 Dunnigan Drive Suffern, New York 10901 Ladies and Gentlemen You have requested our opinion in connection with the registration statement on Form S-3 (the "Registration Statement") being filed by you with the Securities and Exchange Commission for the purpose of registering under the Securities Act of 1933, as amended (the "Act"), 2,300,000 shares of your common stock, par value $.05 (the "Shares"), to be sold by the Jaffe Family, L.P. and The Jaffe Family Foundation (the "Selling Shareholders"). On the basis of such investigation as we have deemed necessary, we are of the opinion that the Shares will be, when sold by the Selling Shareholders, legally issued, fully paid and non-assessable. Klaus Eppler, a partner in our firm, is a director of The Dress Barn, Inc. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission thereunder. Very truly yours, PROSKAUER ROSE GOETZ & MENDELSOHN LLP By: /s/ RICHARD H. ROWE ------------------------------------ A Partner EX-23.2 4 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 1 to Registration Statement No. 333-25377 on Form S-3 of our report dated September 20, 1996 appearing in the Annual Report on Form 10-K of The Dress Barn, Inc. for the year ended July 27, 1996 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. Deloitte & Touche LLP New York, New York May 13, 1997 -----END PRIVACY-ENHANCED MESSAGE-----