Willcox & Gibbs Inc/DE, et al. – ‘424B1’ on 6/23/97

As of:  Monday, 6/23/97   ·   Accession #:  912057-97-21564   ·   File #s:  333-24507, -01, -02, -03, -04, -05, -06, -07, -08, -09, -10, -11

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Prospectus   —   Rule 424(b)(1)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B1       Prospectus                                           170    878K 

Document Table of Contents

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                                                FILED PURSUANT TO RULE 424(b)(1)
                                                      REGISTRATION NO. 333-24507

PROSPECTUS                                                                      

WILLCOX & GIBBS, INC. 

OFFER TO EXCHANGE ITS 12 1/4% SERIES B SENIOR NOTES DUE 2003
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING
12 1/4% SERIES A SENIOR NOTES DUE 2003

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON     
JULY 23, 1997, UNLESS EXTENDED.                                                 

------------------------

 Willcox & Gibbs, Inc. ("Willcox & Gibbs" or the "Company") hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus (this 
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of        
Transmittal" and, together with this Prospectus, the "Exchange Offer"), to      
exchange $1,000 principal amount of its 12 1/4% Series B Senior Notes due 2003  
(the "New Notes") which have been registered under the Securities Act of 1933,  
as amended (the "Securities Act") pursuant to a registration statement (the     
"Registration Statement") of which this Prospectus is a part, for each $1,000   
principal amount of its outstanding 12 1/4% Series A Senior Notes due 2003 (the 
"Old Notes"), of which $85,000,000 principal amount is outstanding as of the    
date hereof. The Old Notes and the New Notes are sometimes collectively referred
to herein as the "Senior Notes." The Senior Notes are senior unsecured          
obligations of the Company (except for the security interest in 65% of the      
shares of a non-U.S. subsidiary) and are fully and unconditionally guaranteed on
a senior unsecured basis (the "Subsidiary Guarantees") by the Subsidiary        
Guarantors (as defined herein). See "The Exchange Offer."                       

   The Company will accept for exchange any and all validly tendered Old Notes
prior to 5:00 P.M., New York City time, on July 23, 1997, unless extended (such 
date, as it may be extended, the "Expiration Date"). Old Notes may be tendered  
only in integral multiples of $1,000. Tenders of Old Notes may be withdrawn at  
any time prior to 5:00 P.M., New York City time, on the Expiration Date. The    
Exchange Offer is not conditioned upon any minimum principal amount of Old Notes
being tendered for exchange. However, the Exchange Offer is subject to certain  
customary conditions. In the event the Company terminates the Exchange Offer and
does not accept for exchange any Old Notes, the Company will promptly return the
Old Notes to the holders thereof. The Company will not receive any proceeds from
the Exchange Offer. See "The Exchange Offer."                                   

THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL ARE FIRST BEING MAILED TO 
HOLDERS OF OLD NOTES ON JUNE 23, 1997.                                          

SEE "RISK FACTORS" BEGINNING ON PAGE 21 FOR A DISCUSSION OF CERTAIN     
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH THE EXCHANGE OFFER.        

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.     

THE DATE OF THIS PROSPECTUS IS JUNE 20, 1997. 

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    The New Notes will be obligations of the Company evidencing the same debt as
the Old Notes, and will be entitled to the benefits of the same indenture (the  
"Indenture"). See "Description of Senior Notes." The form and terms of the New  
Notes are generally the same as the form and terms of the Old Notes in all      
material respects except that the New Notes have been registered under the      
Securities Act and hence do not include certain rights to registration          
thereunder and do not contain transfer restrictions or terms with respect to    
certain special payments applicable to the Old Notes. See "The Exchange Offer." 

The New Notes are being offered hereunder in order to satisfy certain   
obligations under the Registration Rights Agreement, dated as of December 20,   
1996 (the "Registration Rights Agreement"), among the Company, the Subsidiary   
Guarantors and Dillon, Read & Co. Inc. (the "Initial Purchaser"), a copy of     
which has been filed as an exhibit to the Registration Statement of which this  
Prospectus is a part. The Exchange Offer is intended to satisfy the Company's   
obligations under the Registration Rights Agreement to register the New Notes   
and exchange them for the Old Notes under the Securities Act. Once the Exchange 
Offer is consummated, the Company will have no further obligations to register  
any of the Old Notes tendered for exchange, except pursuant to a shelf          
registration statement to be filed under certain limited circumstances specified
in "The Exchange Offer--Purpose of the Exchange Offer." See "Risk               
Factors--Consequences to Non-Tendering Holders of Old Notes." The Company has   
agreed to pay the expenses of the Exchange Offer.                               

Based on interpretations by the staff of the Securities and Exchange    
Commission (the "Commission") set forth in several no-action letters issued to  
third parties including Exxon Capital Holdings Corporation, SEC No-Action Letter
(available April 13, 1989)(the "Exxon Capital Letter"), Morgan Stanley & Co.    
Incorporated, SEC No-Action Letter (available June 5, 1991)(the "Morgan Stanley 
Letter") and Shearman & Sterling, SEC No-Action Letter (available July 2,       
1993)(the "Shearman & Sterling Letter") (collectively, the "Exchange Offer      
No-Action Letters"), the Company believes that the New Notes issued pursuant to 
the Exchange Offer in exchange for Old Notes may be offered for resale, resold  
and otherwise transferred by holders thereof who are not affiliates of Willcox &
Gibbs (other than a broker-dealer who acquired such Old Notes directly from the 
Company for resale pursuant to Rule 144A under the Securities Act or any other  
available exemption under the Securities Act) without compliance with the       
registration and prospectus delivery provisions of the Securities Act; PROVIDED 
that the holder is acquiring New Notes in its ordinary course of business and   
has no arrangement or understanding with any person to participate in any       
distribution (within the meaning of the Securities Act) of the New Notes.       
Persons wishing to exchange Old Notes in the Exchange Offer must represent to   
the Company that such conditions have been met. However, any holder who is an   
affiliate of the Company or who tenders in the Exchange Offer with the intention
to participate, or for the purpose of participating, in a distribution of the   
New Notes cannot rely on the interpretation by the staff of the Commission set  
forth in such no-action letters, including the Exchange Offer No-Action Letters,
and must comply with the registration and prospectus delivery requirements of   
the Securities Act in connection with any resale transaction. See "The Exchange 
Offer-- Purpose of the Exchange Offer." In addition, each broker-dealer that    
receives New Notes for its own account pursuant to the Exchange Offer must      
acknowledge that it will deliver a prospectus in connection with any resale of  
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is 
an "underwriter" within the meaning of the Securities Act. This Prospectus, as  
it may be amended or supplemented from time to time, may be used by a           
broker-dealer in connection with resales of New Notes received in exchange for  
Old Notes where such Old Notes were acquired by such broker-dealer as a result  
of market-making activities or other trading activities (other than acquisitions
directly from the Company). The Company has agreed that, for a period of up to  
180 days after the Expiration Date, it will use its reasonable efforts to make  
this Prospectus available to any broker-dealer for use in connection with any   
such resale. See "Plan of Distribution." EXCEPT AS DESCRIBED IN THIS PARAGRAPH, 
THIS PROSPECTUS MAY NOT BE USED FOR ANY OFFER TO RESELL, RESALE OR OTHER        
TRANSFER OF NEW NOTES.                                                          

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  Old Notes initially purchased by "qualified institutional buyers" (as such
term is defined in Rule 144A under the Securities Act) were initially           
represented by a single Global Old Note (as defined herein) in fully registered 
form, registered in the name of a nominee of The Depository Trust Company       
("DTC"), as depositary. Old Notes originally purchased by or transferred to     
institutional "accredited investors," within the meaning of Rule 501 (a)(1),    
(2), (3) or (7) under the Securities Act, who were not "qualified institutional 
buyers" (as defined in Rule 144A under the Securities Act) were issued in       
registered certificated form ("Certificated Securities").                       

Beneficial interests in the Global Old Note and one such Certificated   
Security representing the Old Notes have been shown on, and transfers thereof to
institutional "accredited investors" and "qualified institutional buyers" have  
been effected through, records maintained by DTC and its participants.          

    The New Notes exchanged for Old Notes represented by the Global Old Note and
such Certificated Security will be represented by one or more Global New Notes  
(as defined herein) in fully registered form, registered in the name of the     
nominee of DTC. The Global New Notes will be exchangeable for New Notes in      
registered form, in denominations of $1,000 and integral multiples thereof as   
described herein. The New Notes in global form will trade in DTC's Same-Day     
Funds Settlement System, and secondary market trading activity of such New Notes
will therefore settle in immediately available funds. See "Description of Senior
Notes--Book-Entry, Delivery and Form."                                          

  The New Notes will bear interest at a rate equal to 12 1/4% per annum from
the last date on which interest was paid on the Old Notes surrendered in        
exchange therefor, or if no interest has been paid, from the date of original   
issue of such Old Notes. Interest on the Senior Notes is payable semi-annually  
on June 15 and December 15 of each year, commencing June 15, 1997.              

  The Senior Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after December 15, 2001, at the redemption price  
of 106.125% of principal (declining to 103.063% on or after December 15 of      
2002), together with accrued and unpaid interest and Liquidated Damages, if any,
payable pursuant to Section 6 of the Registration Rights Agreement (the "Old    
Note Liquidated Damages") thereon to the date of redemption. On or prior to     
December 15, 1999, up to 30% of the originally issued principal amount of the   
Senior Notes then outstanding will be redeemable at the option of the Company   
from the Net Cash Proceeds of a Public Equity Offering (each as defined herein),
at 112 1/4% of the principal amount thereof, together with accrued and unpaid   
interest and Old Note Liquidated Damages, if any, to the date of redemption;    
PROVIDED that at least $59.5 million of the originally issued principal amount  
of Senior Notes remains outstanding immediately after such redemption and that  
such redemption occurs within 60 days following the closing of such Public      
Equity Offering. Finally, subject to the limitations and qualifications set     
forth in the Indenture, in the event of a Change of Control (as defined in      
"Description of Senior Notes"), holders of the Senior Notes will have the right 
to require the Company to purchase their Senior Notes, in whole or in part, at a
price equal to 101% of the aggregate principal amount thereof, plus accrued and 
unpaid interest and Old Note Liquidated Damages, if any, to the date of         
purchase. There can be no assurance that the Company will have the financial    
resources necessary to purchase the Senior Notes upon the occurrence of a Change
of Control. See "Description of Senior Notes."                                  

    The Senior Notes are senior unsecured obligations of Willcox & Gibbs (except
for the security interest in 65% of the shares of non-U.S. subsidiary) and are  
fully and unconditionally guaranteed on a senior unsecured basis by the         
Subsidiary Guarantors. The Senior Notes and each Subsidiary Guarantee ranks PARI
PASSU with all other unsecured and unsubordinated indebtedness of the Company   
and the applicable Subsidiary Guarantor, respectively. The Senior Notes and the 
Subsidiary Guarantees are, however, effectively subordinated to secured         
indebtedness of the Company and the Subsidiary Guarantors, with respect to the  
assets securing such indebtedness. Because the Company is a holding company, the
Senior Notes are effectively subordinated to all existing and future liabilities
of its subsidiaries that are not Subsidiary Guarantors. At March 31, 1997, the  
Company and the Subsidiary Guarantors had $4.3 million                          

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of secured indebtedness outstanding. Subject to certain limitations, the Company
and its subsidiaries (including the Subsidiary Guarantors) may incur additional 
secured and unsecured indebtedness.                                             

Prior to this offering, there has been no public market for the Senior  
Notes. The Company does not intend to list the Senior Notes on a national       
securities exchange or to seek approval for quotation through the NASDAQ        
National Market. As the Old Notes were issued and the New Notes are being issued
primarily to a limited number of institutions who typically hold similar        
securities for investment, the Company does not expect that an active public    
market for the Senior Notes will develop. In addition, resales by certain       
holders of the Senior Notes of a substantial percentage of the aggregate        
principal amount of such notes could constrain the ability of any market maker  
to develop or maintain a market for the Senior Notes. To the extent that a      
market for the Senior Notes should develop, the market value of the Senior Notes
will depend on prevailing interest rates, the market for similar securities and 
other factors, including the financial condition, performance and prospects of  
the Company. Such factors might cause the Senior Notes to trade at a discount   
from face value. See "Risk Factors--Lack of a Public Market for the Senior      
Notes."                                                                         

THE COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THE EXCHANGE OFFER. THE  
COMPANY HAS AGREED TO PAY THE EXPENSES OF THE EXCHANGE OFFER. NO UNDERWRITER IS 
BEING USED IN CONNECTION WITH THE EXCHANGE OFFER.                               

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED 
INFORMATION AND HISTORICAL AND PRO FORMA FINANCIAL STATEMENTS, INCLUDING THE    
NOTES THERETO, APPEARING IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE       
REQUIRES, REFERENCES TO THE "COMPANY" INCLUDE WILLCOX & GIBBS AND ITS DIRECT AND
INDIRECT SUBSIDIARIES. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE      
MATTERS SET FORTH UNDER THE HEADING "RISK FACTORS."                             

THE COMPANY 

    The Company believes that it is the largest independent distributor in North
America of replacement parts, supplies and specialized equipment to             
manufacturers of apparel and other sewn products, offering a broad product line 
of over 200,000 items. These products include industrial sewing equipment parts,
such as needles, hooks, motors, tools and other accessories, and specialized    
equipment, such as screen printing equipment and supplies and production        
planning and control systems. In addition, as a result of the consummation of   
the Macpherson Acquisition (as defined herein), the Company became a major      
distributor of embroidery equipment and supplies, marketing its products through
22 sales and distribution centers strategically located in the United States,   
Canada, Mexico, the Dominican Republic and England. During 1996, the Company's  
customer base consisted of over 15,000 manufacturers and dealers.               

  Since the Company was acquired by management and certain investors in July
1994 (the "Management Buyout"), the Company has expanded through internal growth
of operations and acquisitions. The Company intends to pursue strategic         
acquisitions to expand its product lines and to enter into new geographic       
markets. The Company believes that the size of its operations and the stable    
operating history of its replacement parts and supplies distribution business   
have enabled it to carry substantially higher levels of inventory than its      
competitors. These investments in inventory provide customers with wide         
selection, a high degree of product availability and assurance of prompt        
delivery. In addition, the Company believes that it is well positioned to pursue
selected growth opportunities internationally, particularly in Mexico and South 
America, based upon the size of its operations, its established inventory       
management systems and its growing sales in these markets.                      

INDUSTRY OVERVIEW                                                               

    Manufacturers of apparel and other sewn products generally utilize a variety
of modern equipment and supplies in their production processes. Although there  
have been advances in the speed of equipment and automation of manufacturing    
methods, the basic sewing process has changed very little since the first sewing
machines were introduced over 125 years ago. Accordingly, the basic design of   
sewing equipment and replacement parts and supplies used with respect to such   
equipment has remained stable for many years, and new generations of sewing     
equipment have frequently utilized many parts designed for prior generations. In
addition, since numerous manufacturers of sewn products do not regularly replace
major equipment upon the introduction of new models, substantial numbers of     
older machines typically continue to be used for many years after the production
of more advanced units.                                                         

 The improvements in speed of equipment and the trend toward automation in
apparel and sewn products manufacturing have increased the demand for           
replacement parts and supplies by manufacturers, since high speed production    
increases the wear and tear on equipment. In addition, automation results in the
utilization of other equipment, such as cutting and finishing devices, that must
be maintained. As a result of the large number of differing replacement parts   
and supplies utilized by apparel and sewn products manufacturers and the        
relatively small quantity of many items required at varying times, such         
manufacturers generally prefer to obtain replacement parts and supplies from    
dealers that stock a wide range of products and offer prompt delivery. In       
addition, manufacturers of such replacement parts, supplies and specialized     
equipment often prefer to sell such products through distributors who can       
provide wide market coverage, assume credit risk and stock inventory, thereby   
limiting the manufacturers' costs of marketing and distribution.                

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 The market for screen printing equipment and embroidery equipment used to
add decoration to apparel products has grown rapidly over the past several      
years. This growth has been propelled by expansion of the market for casual     
wear, such as T-shirts, sweatshirts and caps, which frequently feature printed  
or embroidered trademarks, slogans or other designs. In addition, improvements  
in technology have made screen printing and embroidery equipment less expensive 
and more sophisticated. The Company acquired Clinton Management Corp. and       
Clinton Machinery Corp. (together, "Clinton"), which distribute screen printing 
equipment and supplies, in February 1996, and Macpherson Meistergram, Inc. and  
its subsidiary, Geoffrey E. Macpherson Canada, Inc. (together, "Macpherson"),   
which principally distribute embroidery equipment and supplies, in January 1997,
in order to take advantage of the growing demand for such equipment and of the  
ability to market these complementary product lines to the same end-user group. 

  The market of apparel manufacturers in the Western Hemisphere has expanded
during the 1990s due to the shifting production of apparel products sold in the 
United States from the Far East to Mexico and the rest of Latin America.        
According to the U. S. Department of Commerce, in 1990 Asia accounted for 75.4% 
of U.S. imports of apparel, while Mexico and the Caribbean Basin Initiative     
("CBI") countries accounted for 11.2%. By 1995, Asia's share had dropped to     
62.7% of U.S. imports, while Mexico and the CBI countries increased to 23.1%.   
The trend towards increasing apparel imports to the United States from Mexico is
expected to accelerate with the implementation of the North American Free Trade 
Agreement ("NAFTA"). In addition, the Company anticipates that apparel          
manufacturers from around the world who sell their products to the United States
will increase apparel production in Mexico, the CBI countries and the rest of   
Latin America due to the improved political and economic climate of many of such
countries and the quick and relatively inexpensive access to the U.S. market    
from such region. The Company believes it is well positioned to capitalize on   
the shift in apparel production to the southern portion of the Western          
Hemisphere due to its broad product line, its existing distribution centers     
located nearby and its prior relationships with many of the manufacturers that  
are establishing production facilities south of the United States. For example, 
the Company is a supplier to one of its major customers, Fruit of the Loom, at  
its new Mexican manufacturing facility that began operations in 1996.           

COMPETITIVE STRENGTHS                                                           

   The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:                                

    - MARKET LEADERSHIP. The Company believes that it is the largest independent
    distributor of replacement parts, supplies and specialized equipment for
the apparel and other sewn products industry in North America. As a 
result, the Company has significant purchasing power and can realize
 economies of scale in marketing, distribution and administration. The
    Company believes that each of its principal operating units is among the
leaders in its respective market.                                   

- STRONG BRAND NAME RECOGNITION. The Willcox & Gibbs brand name has been
    well known in the apparel industry since the Company's predecessor began
   operations in the mid-1800s as an apparel equipment manufacturer. Since
    that time, the Company's Sunbrand and Unity divisions have developed and
    maintained well-recognized brand names in replacement parts distribution
      through a long history of comprehensive and high quality product lines and
an emphasis on customer service.                                    

   - BROAD LINES OF QUALITY PRODUCTS. The Company believes that it markets the
broadest line of quality replacement parts, supplies and specialized
  equipment to manufacturers of apparel and other sewn products in North
      America. For example, the Company's Sunbrand division markets over 180,000
items, while the Company believes that its closest competitor offers
      approximately 40,000 items. As a result of its broad product offering, the
    Company believes that it provides its customers with "one-stop shopping"
for their replacement parts, supplies and specialized equipment     
requirements.                                                       

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   - HIGH LEVEL OF CUSTOMER SERVICE. The Company provides its customers with a
comprehensive selection of products, a high degree of product       
   availability, convenient ordering systems and fast order response time.
    The Company's strategically placed distribution facilities and efficient
   inventory management systems enable it to achieve high order fill rates
      for replacement parts and supplies (in excess of 95% of orders are shipped
      within 24 hours), timeliness of delivery and wide geographic coverage. The
    Company utilizes a real-time computer inventory management system in its
      sewn products replacement parts and supplies businesses that enables it to
     search all inventory locations in North America for product availability.
  In addition, the Company maintains electronic data interchange ("EDI")
     systems that link the Company to selected customers, such as Levi Strauss
    and Fieldcrest Cannon. The Company fills substantially all of its orders
    of parts and supplies by customers in the United States through next-day
   delivery, which is important to assist customers in minimizing operator
downtime.                                                           

- STRONG RELATIONSHIPS WITH SUPPLIERS. The Company has developed strong 
   relationships with many of its suppliers, with some dating back over 30
years. The Company maintains exclusive U.S. distribution rights for 
      genuine replacement parts for Pfaff AG ("Pfaff") (since 1958), and Pegasus
    Sewing Machine Mfg. Co., Ltd. ("Pegasus") (since 1966), two major sewing
     equipment suppliers to the U.S. apparel and other sewn products industry,
   as well as exclusive distribution rights in certain territories for M&R
     Printing Equipment, Inc. ("M&R"), a major manufacturer of screen printing
equipment for the apparel industry in the United States and Barudan 
    Company, Ltd. ("Barudan"), a major manufacturer of embroidery equipment.

  - DIVERSIFIED BASE OF CUSTOMERS. During 1996, the Company sold products to
over 15,000 apparel and sewn products manufacturers and dealers of  
     replacement parts and supplies, with no single customer representing more
   than 5.2% of net sales. The Company has enjoyed long-term relationships
      with a number of its major customers, including Levi Strauss, Fruit of the
Loom, Fieldcrest Cannon, Russell Athletic and VF Corporation.       

   - EXPERIENCED MANAGEMENT TEAM. The Company's officers have an average of 16
     years of experience with the Company and the Company's predecessor and an
average of 19 years of industry experience. The Company retained    
    substantially all of the senior management of the businesses acquired in
 the Management Buyout in July 1994, of Clinton in connection with its
   acquisition by the Company in February 1996 and of Macpherson following
     consummation of the Macpherson Acquisition in January 1997. The Company's
      principal managers and employees collectively owned, as of March 31, 1997,
     on a fully diluted basis 63.1% of the Company's outstanding common stock.

BUSINESS STRATEGY                                                               

  The Company's strategy is to enhance its position as a leading distributor
of replacement parts, supplies and specialized equipment to the apparel and     
other sewn products industry. In order to achieve this objective, the Company   
has developed a business plan that consists of the following key elements:      

- MAINTAIN LEADING MARKET POSITION. The Company believes that it is the 
  leading independent distributor in North America of replacement parts,
     supplies and specialized equipment to the apparel and other sewn products
     industry. The Company believes that such leadership is based primarily on
the Company's long history of operations, broad line of products and
 excellent customer service. The Company intends to enhance its market
    leadership by maintaining and expanding its relationships with suppliers
and customers.                                                      

- EXPAND PRODUCT LINES. The Company intends to add lines of replacement 
      parts, supplies and specialized equipment that can be efficiently marketed
    through its existing distribution system. Such additions are intended to
      strengthen the Company's position as a "one-stop shop" without significant
incremental expenses related to selling, marketing, distribution and
administration.                                                     

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   - INCREASE PENETRATION OF EMERGING MARKETS. The Company believes that it is
  well positioned to increase sales by targeting growth opportunities in
    emerging markets such as Mexico, the CBI countries and the rest of Latin
   America. The Company expects that its comprehensive line of replacement
    parts, supplies and specialized equipment and long experience in serving
   the apparel and other sewn products industry will provide a competitive
   advantage over smaller, local competitors in these regions. The Company
  intends to expand its presence in these areas in 1997 by opening a new
sales office in Colombia.                                           

 - PURSUE SELECTED ACQUISITIONS. Since the Management Buyout in July 1994,
     the Company has pursued a plan of expanding its product offerings through
    strategic acquisitions. In February 1996, it acquired Clinton, a leading
distributor of screen printing equipment and supplies (the "Clinton 
Acquisition"), in November 1996 it acquired E.C. Mitchell Co., Inc. 
     ("Mitchell"), a manufacturer of abrasive cords and tapes used principally
      by apparel manufacturers (the "Mitchell Acquisition"), and in January 1997
     it acquired Macpherson, a leading distributor of embroidery equipment and
  supplies (the "Macpherson Acquisition"). The Company intends to pursue
      other strategic acquisitions to expand its product lines and to enter into
new geographic markets.                                             

HISTORY OF THE COMPANY                                                          

 The predecessor to the Company, formerly named Willcox & Gibbs, Inc. (the
"Company's Predecessor"), was incorporated in 1866 and began operations as a    
sewing equipment manufacturer. In the late 1960s, as sewing equipment           
manufacturing migrated overseas, the Company's Predecessor shifted its business 
into the distribution of replacement parts and supplies for the apparel and     
other sewn products industry. Parts and supply distribution remained the primary
focus of the Company's Predecessor until 1984, when it expanded into the        
distribution of electrical parts. Due to the large and fragmented nature of U.S.
electrical parts distribution, this segment grew rapidly and, by 1993,          
represented approximately 85% of the net sales of the Company's Predecessor. In 
1994, the Board of Directors of the Company's Predecessor decided to focus its  
business on electrical parts distribution and divest its other businesses. In   
July 1994, management and outside investors acquired the sewn products          
replacement parts, supply and specialized equipment distribution businesses of  
the Company's Predecessor (the "Distribution Business") for total consideration 
of $44.0 million.                                                               

    The Company currently operates through six principal business units: (i) its
Sunbrand division ("Sunbrand"), which is a distributor of replacement parts,    
supplies and specialized equipment to manufacturers of apparel and other sewn   
products; (ii) its Unity Sewing Supply Co. division ("Unity"), which is a       
wholesale distributor to dealers of replacement parts and supplies for use by   
the apparel and other sewn products industry; (iii) its Willcox & Gibbs, Ltd.   
("W&G, Ltd.") subsidiary, which is a distributor to manufacturers and dealers in
the United Kingdom and Europe of replacement parts and supplies for use by the  
apparel and other sewn products industry; (iv) its Clinton subsidiaries, which  
distribute screen printing equipment and supplies for the apparel industry; (v) 
its Leadtec Systems, Inc. ("Leadtec") subsidiary, which develops and supplies   
computer-based production planning and control systems for the apparel and other
sewn products industry; and (vi) Macpherson, acquired in January 1997 using a   
portion of the net proceeds from the sale of the Old Notes, which distributes   
embroidery equipment and supplies used in the apparel industry. See "The        
Macpherson Acquisition."                                                        

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THE MACPHERSON ACQUISITION

    A portion of the proceeds from the sale on January 3, 1997 by the Company of
the Old Notes was used to finance the acquisition by the Company of Macpherson. 
On November 27, 1996, the Company entered into a stock purchase agreement (the  
"Stock Purchase Agreement") with Macpherson and its shareholders pursuant to    
which the Company agreed to acquire all of the outstanding capital stock of     
Macpherson for a cash purchase price of $24.0 million. In connection with the   
Macpherson Acquisition, the Company assumed (and repaid immediately using a     
portion of the net proceeds from the sale of the Old Notes) approximately $6.1  
million of indebtedness of Macpherson and approximately $6.4 million of trade   
payables of Macpherson. Macpherson is primarily engaged in the distribution of  
embroidery equipment and supplies to the apparel industry.                      

In connection with the Macpherson Acquisition, the Company acquired     
Embroidery Leasing Corporation, a leasing company affiliate of Macpherson (the  
"Leasing Company"), for approximately $0.5 million, payable over three years,   
plus interest at 6.0% per annum. The Company intends to utilize the Leasing     
Company to offer flexible lease financing to its customers to support the       
Company's sales of equipment.                                                   

  The Macpherson Acquisition expanded the Company's product lines to include
the distribution of embroidery equipment and supplies to the apparel industry.  
The market for embroidery equipment has grown rapidly over the past ten years.  
The Company acquired Macpherson to take advantage of the expanding demand for   
such equipment and of the ability to market such equipment and the Company's    
complementary line of screen printing equipment to the same end-user group. In  
addition, the Company believes that Macpherson's embroidery equipment can be    
efficiently marketed through the Company's existing distribution network without
substantial additional expense. The acquisition of the Leasing Company furthered
the Company's objective of being a "one-stop shop" for its customers by enabling
the Company to offer attractive financing options to support the sale of its    
equipment.                                                                      

THE EXCHANGE OFFER

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The Exchange Offer........................... $1,000 principal amount of New Notes in      
                                              exchange for each $1,000 principal amount of 
                                              Old Notes. As of the date hereof, $85.0      
                                              million in aggregate principal amount of Old 
                                              Notes were outstanding. The Company will     
                                              issue the New Notes to Holders (as defined in
                                              "Description of Senior Notes") on or promptly
                                              after the Expiration Date.                   

                                              Based on interpretations by the staff of the 
                                              Commission set forth in no-action letters    
                                              issued to third parties, including the       
                                              Exchange Offer No-Action Letters, the Company
                                              believes that the New Notes issued pursuant  
                                              to the Exchange Offer in exchange for Old    
                                              Notes may be offered for resale, resold and  
                                              otherwise transferred by Holders thereof who 
                                              are not affiliates of the Company (other than
                                              a broker-dealer who acquired such Old Notes  
                                              directly from the Company for resale pursuant
                                              to Rule 144A under the Securities Act or any 
                                              other available exemption under the          
                                              Securities Act) without compliance with the  
                                              registration and prospectus delivery         
                                              provisions of the Securities Act; PROVIDED   
                                              that                                         

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                                              the Holder is acquiring New Notes in its     
                                              ordinary course of business and has no       
                                              arrangement or understanding with any person 
                                              to participate in any distribution (within   
                                              the meaning of the Securities Act) of the New
                                              Notes. Persons wishing to exchange Old Notes 
                                              in the Exchange Offer must represent to the  
                                              Company that such conditions have been met.  
                                              However, any Holder who may be deemed an     
                                              "affiliate" (as defined under Rule 405 of the
                                              Securities Act) of the Company or who tenders
                                              in the Exchange Offer with the intention to  
                                              participate, or for the purpose of           
                                              participating, in a distribution of the New  
                                              Notes cannot rely on the interpretation by   
                                              the staff of the Commission set forth in such
                                              no-action letters, including the Exchange    
                                              Offer No-Action Letters, and must comply with
                                              the registration and prospectus delivery     
                                              requirements of the Securities Act in        
                                              connection with any resale transaction. See  
                                              "The Exchange Offer--Purpose of the Exchange 
                                              Offer."                                      

                                              Each broker-dealer that receives New Notes   
                                              for its own account pursuant to the Exchange 
                                              Offer in exchange for Old Notes where such   
                                              Old Notes were acquired by such broker-dealer
                                              for its own account as a result of           
                                              market-making activities or other trading    
                                              activities (other than acquisitions directly 
                                              from the Company) must acknowledge that it   
                                              will deliver a prospectus in connection with 
                                              any resale of such New Notes. The Letter of  
                                              Transmittal states that by so acknowledging  
                                              and by delivering a prospectus, a            
                                              broker-dealer will not be deemed to admit    
                                              that it is an "underwriter" within the       
                                              meaning of the Securities Act. This          
                                              Prospectus, as it may be amended or          
                                              supplemented from time to time, may be used  
                                              by a broker-dealer in connection with resales
                                              of New Notes received as aforesaid. The      
                                              Company has agreed that, for a period of up  
                                              to 180 days after the Expiration Date, it    
                                              will use its reasonable efforts to make this 
                                              Prospectus available to any such             
                                              broker-dealer for use in connection with any 
                                              such resale. See "Plan of Distribution."     

Expiration Date.............................. 5:00 p.m., New York City time, on July 23,   
                                              1997, unless the Exchange Offer is extended  
                                              by the Company, in which case the term       
                                              "Expiration Date" means the latest date and  
                                              time to which the Exchange Offer is extended.

Accrued Amounts on the Senior Notes.......... The New Notes will bear interest from the    
                                              last date on which interest was paid on the  
                                              Old Notes surrendered in exchange therefor   
                                              or, if no interest has                       

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                                              been paid, from the date of original issuance
                                              of such Old Notes.                           

Conditions to the Exchange Offer............. The Exchange Offer is subject to certain     
                                              customary conditions. The conditions are     
                                              limited and relate in general to laws or     
                                              Commission policies that might impair the    
                                              ability of the Company to proceed with the   
                                              Exchange Offer. As of the date of this       
                                              Prospectus, none of these events had         
                                              occurred, and the Company believes their     
                                              occurrence to be unlikely. If any such       
                                              conditions do exist prior to the Expiration  
                                              Date, the Company may (i) refuse to accept   
                                              any Old Notes and return all previously      
                                              tendered Old Notes, (ii) extend the Exchange 
                                              Offer, or (iii) waive such conditions. See   
                                              "The Exchange                                
                                              Offer--Conditions."                          

Procedures for Tendering..................... Each Holder of Old Notes wishing to accept   
                                              the Exchange Offer must complete, sign and   
                                              date the Letter of Transmittal, or a         
                                              facsimile thereof, in accordance with the    
                                              instructions contained herein and therein,   
                                              and mail or otherwise deliver such Letter of 
                                              Transmittal, or such facsimile, together with
                                              such Old Notes to be exchanged and any other 
                                              required documentation to IBJ Schroder Bank &
                                              Trust Company, as Exchange Agent (the        
                                              "Exchange Agent"), at the address set forth  
                                              herein and therein or effect a tender of such
                                              Old Notes pursuant to the procedures for     
                                              book-entry transfer as provided for herein   
                                              and therein. By executing the Letter of      
                                              Transmittal, each Holder will represent to   
                                              the Company that, among other things, the New
                                              Notes acquired pursuant to the Exchange Offer
                                              are being obtained in the ordinary course of 
                                              business of the person receiving such New    
                                              Notes, whether or not such person is the     
                                              Holder, that neither the Holder nor any such 
                                              other person has an arrangement or           
                                              understanding with any person to participate 
                                              in the distribution of such New Notes and    
                                              that neither the Holder nor any such other   
                                              person is an "affiliate," as defined under   
                                              Rule 405 of the Securities Act, of the       
                                              Company or any of its subsidiaries. Each bro-
                                              ker-dealer that receives New Notes for its   
                                              own account in exchange for Old Notes, where 
                                              such Old Notes were acquired by such         
                                              broker-dealer as a result of market-making   
                                              activities or other trading activities, must 
                                              acknowledge that it will deliver a prospectus
                                              in connection with any resale of such New    
                                              Notes. See "The Exchange Offer--Procedures   
                                              for Tendering" and "Plan of Distribution."   

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Special Procedures for Beneficial Owners..... Any beneficial owner whose Old Notes are     
                                              registered in the name of a broker, dealer,  
                                              commercial bank, trust company or other      
                                              nominee and who wishes to tender such Old    
                                              Notes in the Exchange Offer should contact   
                                              such registered Holder promptly and instruct 
                                              such registered Holder to tender on such     
                                              beneficial owner's behalf. If such beneficial
                                              owner wishes to tender on such owner's own   
                                              behalf, such owner must, prior to completing 
                                              and executing the Letter of Transmittal and  
                                              delivering its Old Notes, either make        
                                              appropriate arrangements to register         
                                              ownership of the Old Notes in such owner's   
                                              name or obtain a properly completed bond     
                                              power from the registered Holder. The trans- 
                                              fer of registered ownership may take         
                                              considerable time and it may not be possible 
                                              to complete a transfer initiated shortly     
                                              before the Expiration Date. See "The Exchange
                                              Offer--Procedures for Tendering."            

Guaranteed Delivery Procedures............... Holders of Old Notes who wish to tender their
                                              Old Notes and whose Old Notes are not        
                                              immediately available or who cannot deliver  
                                              their Old Notes, the Letter of Transmittal or
                                              any other documents required by the Letter of
                                              Transmittal to the Exchange Agent, or cannot 
                                              complete the procedure for book-entry        
                                              transfer, prior to 5:00 p.m. on the          
                                              Expiration Date, may tender their Old Notes  
                                              according to the guaranteed delivery         
                                              procedures set forth in "The Exchange        
                                              Offer--Guaranteed Delivery Procedures."      

Withdrawal Rights............................ Tenders may be withdrawn at any time prior to
                                              5:00 p.m., New York City time, on the        
                                              Expiration Date.                             

Acceptance of Old Notes and Delivery of New                                                
  Notes...................................... The Company will accept for exchange any and 
                                              all Old Notes which are properly tendered in 
                                              the Exchange Offer prior to 5:00 p.m., New   
                                              York City time, on the Expiration Date. The  
                                              New Notes issued pursuant to the Exchange    
                                              Offer will be delivered promptly following   
                                              the Expiration Date. Any Old Notes not       
                                              accepted for exchange will be returned       
                                              without expense to the tendering Holder      
                                              thereof as promptly as practicable after the 
                                              expiration or termination of the Exchange    
                                              Offer. See "The Exchange Offer--Terms of the 
                                              Exchange Offer."                             

Material Federal Income Tax Considerations... The exchange pursuant to the Exchange Offer  
                                              should not be a taxable event for federal    
                                              income tax purposes. See "Material Federal   
                                              Income Tax Considerations."                  

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Exchange Agent............................... IBJ Schroder Bank & Trust Company is serving
                                              as Exchange Agent in connection with the    
                                              Exchange Offer.                             

TERMS OF NEW NOTES

The Exchange Offer applies to the entire $85,000,000 aggregate principal
amount outstanding of the Old Notes. The New Notes will be obligations of the   
Company evidencing the same debt as the Old Notes and will be entitled to the   
benefits of the same Indenture. See "Description of Senior Notes." The form and 
terms of the New Notes are generally the same as the form and terms of the Old  
Notes in all material respects except that the New Notes have been registered   
under the Securities Act and hence do not include certain rights to registration
thereunder and do not contain transfer restrictions or terms with respect to    
certain special payments applicable to the Old Notes. See "Description of Senior
Notes."                                                                         

                                                        [Enlarge/Download Table]
                                                                                           
The New Notes................................ $85,000,000 principal amount of 12 1/4%      
                                              Series B Senior Notes due 2003.              

Maturity Date................................ December 15, 2003.                           

Interest Rate and Payment Dates.............. The New Notes will bear interest at a rate of
                                              12 1/4% per annum. Interest on the New Notes 
                                              will accrue from the last date on which      
                                              interest was paid on the Old Notes           
                                              surrendered in exchange therefor, or if no   
                                              interest has been paid, from the date of     
                                              original issuance of such Old Notes. Interest
                                              on the New Notes is payable semi-annually in 
                                              cash in arrears on June 15 and December 15 of
                                              each year, commencing June 15, 1997. For a   
                                              discussion summarizing material U.S. federal 
                                              income tax consequences to Holders of the    
                                              Senior Notes, see "Material Federal Income   
                                              Tax Consequences--U.S. Holders--Original     
                                              Issue Discount."                             

Optional Redemption.......................... The Senior Notes will be redeemable at the   
                                              option of the Company, in whole or in part,  
                                              at any time on or after December 15, 2001, at
                                              the redemption prices set forth herein,      
                                              together with accrued and unpaid interest and
                                              Old Note Liquidated Damages, if any, to the  
                                              date of redemption. In the event the Company 
                                              consummates a Public Equity Offering (as     
                                              defined herein) on or prior to December 15,  
                                              1999, the Company may at its option use all  
                                              or a portion of the proceeds from such       
                                              offering to redeem up to 30% of the          
                                              originally issued principal amount of the    
                                              Senior Notes at a redemption price equal to  
                                              112 1/4% of the principal amount thereof,    
                                              together with accrued and unpaid interest and
                                              Old Note Liquidated Damages, if any, to the  
                                              date of redemption, PROVIDED that at least   
                                              $59.5 million of the originally issued       
                                              principal amount of Senior Notes remains     
                                              outstanding immediately after such redemption
                                              and that such redemption occurs within       

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                                              60 days following the closing of such Public 
                                              Equity Offering. See "Description of Senior  
                                              Notes--Redemption."                          

Ranking...................................... The Senior Notes are senior unsecured        
                                              obligations of the Company (except for the   
                                              security interest in 65% of the shares of a  
                                              non-U.S. subsidiary) and rank PARI PASSU in  
                                              right of payment with existing and future    
                                              unsecured and unsubordinated Indebtedness (as
                                              defined herein) of the Company and senior to 
                                              all Subordinated Indebtedness (as defined    
                                              herein) of the Company. At March 31, 1997,   
                                              the Company and the Subsidiary Guarantors had
                                              $0.5 million of unsecured indebtedness       
                                              outstanding other than the Senior Notes. The 
                                              Senior Notes, however, are effectively       
                                              subordinated to secured Indebtedness of the  
                                              Company and the Subsidiary Guarantors (as    
                                              defined below) with respect to the assets    
                                              securing such Indebtedness. Because the      
                                              Company is a holding company, the Senior     
                                              Notes are effectively subordinated to all    
                                              existing and future liabilities of its       
                                              subsidiaries that are not Subsidiary         
                                              Guarantors. At March 31, 1997, the Company   
                                              and the Subsidiary Guarantors had $4.3       
                                              million of secured Indebtedness outstanding. 
                                              Subject to certain limitations, the Indenture
                                              permits the Company and its Restricted       
                                              Subsidiaries (as defined herein) to incur    
                                              additional secured and unsecured             
                                              Indebtedness. See "Management's Discussion   
                                              and Analysis of Financial Condition and      
                                              Results of Operations--The Company" and      
                                              "Description of Senior Notes--Ranking" and   
                                              "--Certain Covenants--Limitation on Indebt-  
                                              edness and Disqualified Capital Stock."      

Subsidiary Guarantees........................ The Senior Notes are fully and               
                                              unconditionally guaranteed on a senior       
                                              unsecured basis by all of the Company's U.S. 
                                              subsidiaries existing as of the date of the  
                                              Indenture (and any other Subsidiary of the   
                                              Company that executes a Subsidiary Guarantee 
                                              in accordance with the provisions of the     
                                              Indenture) (the "Subsidiary Guarantors"). The
                                              Subsidiary Guarantees are unconditional joint
                                              and several obligations of each Subsidiary   
                                              Guarantor, ranking PARI PASSU in right of    
                                              payment with all other unsecured and         
                                              unsubordinated Indebtedness of such          
                                              Subsidiary Guarantor. See "Description of    
                                              Senior Notes--Subsidiary Guarantees and Other
                                              Security."                                   

Other Security............................... The Senior Notes are secured by a pledge of  
                                              65% of the capital stock of W&G, Ltd., a     
                                              wholly owned Restricted Subsidiary of the    
                                              Company organized                            

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                                              under the laws of the United Kingdom. See    
                                              "Description of Senior Notes--Subsidiary     
                                              Guarantees and Other Security."              

Change of Control............................ Upon the occurrence of a Change of Control,  
                                              each holder of Senior Notes will have the    
                                              right to require the Company to purchase all 
                                              or a portion of such holder's Senior Notes at
                                              a price equal to 101% of the aggregate       
                                              principal amount thereof, together with      
                                              accrued and unpaid interest and Old Note     
                                              Liquidated Damages, if any, to the date of   
                                              purchase. See "Description of Senior         
                                              Notes--Certain Covenants--Change of Control."

Original Issue Discount...................... The Old Notes were issued with original issue
                                              discount for federal income tax purposes.    
                                              Consequently, original issue discount will be
                                              includible by a Holder of New Notes as       
                                              interest income annually in such Holder's    
                                              gross income for federal income tax purposes 
                                              in advance of receipt of the cash payments to
                                              which the income is attributable. See        
                                              "Material Federal Income Tax Consequences"   
                                              and "Risk Factors--Original Issue Discount." 

Certain Covenants............................ The Indenture relating to the Senior Notes   
                                              contains certain covenants, including        
                                              covenants which limit: (i) indebtedness; (ii)
                                              issuance of preferred stock of subsidiaries; 
                                              (iii) restricted payments; (iv) issuances and
                                              sales of capital stock of restricted         
                                              subsidiaries; (v) sale/leaseback             
                                              transactions; (vi) transactions with         
                                              affiliates; (vii) liens; (viii) asset sales; 
                                              (ix) dividend and other payment restrictions 
                                              affecting restricted subsidiaries; (x)       
                                              conduct of business; and (xi) mergers,       
                                              consolidations and sales of assets. See      
                                              "Description of Senior Notes--Certain        
                                              Covenants" and "--Merger, Consolidation and  
                                              Sale of Assets."                             

Exchange Rights.............................. Holders of New Notes are not entitled to any 
                                              exchange rights with respect to the New      
                                              Notes. Holders of Old Notes are entitled to  
                                              certain exchange rights pursuant to the      
                                              Registration Rights Agreement. Under the     
                                              Registration Rights Agreement, the Company is
                                              required to offer to exchange the Old Notes  
                                              for new notes having substantially identical 
                                              terms which have been registered under the   
                                              Securities Act. The Exchange Offer is        
                                              intended to satisfy such obligation. Once the
                                              Exchange Offer is consummated, the Company   
                                              will have no further obligations to register 
                                              any of the Old Notes not tendered by the     
                                              Holders for exchange, except pursuant to a   
                                              shelf registration statement to be filed     
                                              under certain limited circumstances specified
                                              in "The Exchange Offer--Purpose of the       
                                              Exchange                                     

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                                              Offer." See "Risk Factors--Consequences to
                                              Non-Tendering Holders of Old Notes."      

Use of Proceeds.............................. The Company will not receive any proceeds 
                                              from the Exchange Offer.                  

RISK FACTORS

  Prospective investors should consider carefully all of the information set
forth in this Prospectus and, in particular, the information set forth under    
"Risk Factors" before making an investment in the Senior Notes or making a      
decision to participate in the Exchange Offer.                                  

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SUMMARY PRO FORMA FINANCIAL INFORMATION 

The following unaudited pro forma statement of operations data, other   
operating data and selected ratios for the year ended December 31, 1996 give    
effect to the Clinton Acquisition, the Mitchell Acquisition, the Macpherson     
Acquisition, the acquisition of the Leasing Company, the sale of the Old Notes  
and the application of the net proceeds therefrom (collectively, the            
"Transactions") as if each had occurred at the beginning of the period          
presented, except that Clinton's results of operations for the period after     
February 1, 1996 (the effective date of the Clinton Acquisition) are included in
Willcox & Gibbs' results of operations for such period and except that          
Mitchell's results of operations for the period after November 27, 1996 (the    
effective date of the Mitchell Acquisition) are included in Willcox & Gibbs'    
results of operations for such period.                                          

                                                        [Enlarge/Download Table]

                                                                          YEAR ENDED DECEMBER 31, 1996                  
                                                         ---------------------------------------------------------------
                                                                                                                        
                                                                                  MACPHERSON/                           
                                                         WILLCOX &    CLINTON/      LEASING                             
                                                           GIBBS     MITCHELL(C)   COMPANY(D)   ADJUSTMENTS   PRO FORMA 
                                                         ----------  -----------  ------------  -----------  -----------


                                                                             (DOLLARS IN THOUSANDS)                     
                                                                                                                        
STATEMENT OF OPERATIONS DATA:                                                                                           
Net sales............................................... $  113,851   $   2,975    $   67,767    $  --        $ 184,593 
Cost of goods sold......................................     77,623       1,888        50,221       (1,599)     128,133 
                                                         ----------  -----------  ------------  -----------  -----------
  Gross profit..........................................     36,228       1,087        17,546        1,599       56,460 
Selling, general and administrative expenses............     28,969         758        13,542         (629)      42,640 
                                                         ----------  -----------  ------------  -----------  -----------
  Operating income......................................      7,259         329         4,004        2,228       13,820 
Interest expense........................................      4,824          21           781        5,864       11,490 
Other income (expense)..................................         15         (14)       (1,161)         839         (321)
                                                         ----------  -----------  ------------  -----------  -----------
Income before income taxes..............................      2,450         294         2,062       (2,797)       2,009 
Income taxes............................................      1,137      --                54         (222)         969 
                                                         ----------  -----------  ------------  -----------  -----------
  Net income from continuing operations................. $    1,313   $     294    $    2,008    $  (2,575)   $   1,040 
                                                         ----------  -----------  ------------  -----------  -----------
                                                         ----------  -----------  ------------  -----------  -----------
OTHER OPERATING DATA:                                                                                                   
EBITDA(a)............................................... $    8,635   $     340    $    3,161    $   3,574    $  15,710 
Depreciation and amortization...........................      1,361          25           318          507        2,211 
Capital expenditures....................................      1,247          10           282       --            1,539 

SELECTED RATIOS:                                                                                                        
EBITDA/cash interest expense............................     --          --            --           --             1.47x
EBITDA less capital expenditures/cash interest                                                                          
  expense...............................................     --          --            --           --             1.33x
Total debt/ EBITDA......................................     --          --            --           --             5.50x
Ratio of earnings to fixed charges(b)...................     --          --            --           --             1.17x

See Notes to Summary Pro Forma Financial Information. 

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NOTES TO SUMMARY PRO FORMA FINANCIAL INFORMATION

(a) EBITDA represents income before income taxes plus interest expense,         
    depreciation and amortization for the applicable company and, in the case of
Willcox & Gibbs, certain other noncash charges included in cost of goods
  sold relating to the amortization of the step-up in basis of the inventory
 purchased in the Management Buyout. EBITDA should not be considered as an
  alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting    
   principles), but is presented to provide additional information relating to
 the Company's debt service capability. EBITDA should not be considered in
   isolation or as a substitute for other measures of financial performance or
liquidity.                                                              

(b) The ratio of earnings to fixed charges is computed by dividing earnings by  
fixed charges. For this purpose, earnings include pre-tax income from   
 continuing operations plus fixed charges. Fixed charges include interest,
   whether expensed or capitalized, amortization of debt expense and a portion
 of rental expense which is representative of the interest factor in these
rentals.                                                                

(c) Clinton's results of operations for the period after February 1, 1996 (the  
   effective date of the Clinton Acquisition) are included in Willcox & Gibbs'
results of operations for the period presented. Mitchell's results of   
    operations for the period after November 27, 1996 (the effective date of the
    Mitchell Acquisition) are included in Willcox & Gibbs' results of operations
for the period presented.                                               

(d) Excludes net sales of $2.9 million, operating loss of $0.5 million and net  
loss of $0.5 million attributable to Macpherson's engraving equipment   
  distribution business, which the Company discontinued upon consummation of
the Macpherson Acquisition.                                             

SUMMARY HISTORICAL FINANCIAL INFORMATION

WILLCOX & GIBBS                                                                 

The selected data presented below under the captions "Statement of      
Operations Data" and "Balance Sheet Data" as of December 31, 1994, 1995 and 1996
and for the years ended December 31, 1995 and 1996 and the period from July 13, 
1994 to December 31, 1994, are derived from the consolidated financial          
statements of the Company, which financial statements have been audited by KPMG 
Peat Marwick LLP, independent certified public accountants. The selected data   
presented below under the caption "Statement of Operations Data" for the period 
from January 1, 1994 to July 12, 1994, are derived from the consolidated        
statement of operations of the Company's Predecessor, which financial statement 
has been audited by KPMG Peat Marwick LLP. The "Statement of Operations Data"   
for the years ended December 31, 1992 and 1993 are unaudited. The financial     
statements of the Company's Predecessor for the years ended December 31, 1992   
and 1993 and for the period from January 1, 1994 to July 12, 1994 have been     
prepared as if the apparel operations had been operated as a separate entity    
during those periods. However, such financial statements do not reflect a       
complete allocation of all expenses applicable to the operation of an           
independent company. Certain expenses were allocated to the apparel operations  
by the Company's Predecessor based on actual usage or other allocation methods  
that approximate actual usage. The following table also sets forth selected     
consolidated financial information of the Company as of March 31, 1997 and for  
the three months ended March 31, 1996 and 1997. Such information was derived    
from the unaudited Consolidated Financial Statements of the Company. Such       
unaudited Consolidated Financial Statements, in the opinion of the Company's    
management, include all adjustments (consisting of normal recurring accruals)   
necessary for a fair presentation of the financial position and results of      
operations for such periods. The results of operations for the three months     
ended March 31, 1997 are not necessarily indicative of results that may be      
expected for the full year. The consolidated financial statements of the Company
as of December 31, 1995 and 1996, and for the years ended December 31, 1995 and 
1996 and the period from July 13, 1994 to December 31, 1994 and of the Company's
Predecessor for the period from January 1, 1994 to July 12, 1994, and the report
thereon, and the unaudited consolidated financial statements of the Company as  
of March 31, 1997 and for the three months ended March 31, 1996 and             

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1997, are included elsewhere in this prospectus. The selected consolidated      
financial information set forth below should be read in conjunction with        
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations--The Company" and the Consolidated Financial Statements and Notes    
thereto of the Company and the Company's Predecessor included elsewhere in this 
Prospectus.                                                                     

                                                        [Enlarge/Download Table]

                             COMPANY'S PREDECESSOR                                         COMPANY                                 
                       ---------------------------------  -------------------------------------------------------------------------
                                                                                                                                   
                            YEAR ENDED       JANUARY 1,   JULY 13, 1994                                     THREE MONTHS ENDED     
                           DECEMBER 31,         1994           TO         YEAR ENDED     YEAR ENDED             MARCH 31,          
                       --------------------  TO JULY 12,  DECEMBER 31,   DECEMBER 31,   DECEMBER 31,   ----------------------------
                         1992       1993        1994          1994           1995           1996           1996           1997     
                       ---------  ---------  -----------  -------------  -------------  -------------  -------------  -------------


                           (UNAUDITED)                                                                         (UNAUDITED)         
                                         (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)                                                 
                                                                                                                                   
STATEMENT OF                                                                                                                       
  OPERATIONS DATA:                                                                                                                 
Net sales............  $  76,048  $  77,574   $  41,309     $  41,644      $  90,431      $ 113,851      $  26,320      $  42,043  
Cost of goods sold...     47,821     49,228      26,909        29,162         60,642         77,623         17,976         29,084  
                       ---------  ---------  -----------  -------------  -------------  -------------  -------------  -------------
Gross profit.........     28,227     28,346      14,400        12,482         29,789         36,228          8,344         12,959  
Selling, general and                                                                                                               
  administrative                                                                                                                   
  expenses...........     20,814     21,315      11,997        11,264         23,606         28,969          6,763         10,974  
                       ---------  ---------  -----------  -------------  -------------  -------------  -------------  -------------
  Income from                                                                                                                      
    operations.......      7,413      7,031       2,403         1,218          6,183          7,259          1,581          1,985  
Interest expense.....      1,993      2,307       1,390         1,946          4,249          4,824          1,100          2,882  
Other (income)                                                                                                                     
  expense............        (55)       145         224           (86)           (18)           (15)            14             39  
                       ---------  ---------  -----------  -------------  -------------  -------------  -------------  -------------
  Income (loss)                                                                                                                    
    before income                                                                                                                  
    taxes and                                                                                                                      
    extraordinary                                                                                                                  
    item.............      5,475      4,579         789          (642)         1,952          2,450            495           (858) 
Income tax expense                                                                                                                 
  (benefit)..........        272        146         426          (288)           558          1,137            179           (355) 
                       ---------  ---------  -----------  -------------  -------------  -------------  -------------  -------------
  Income (loss)                                                                                                                    
    before                                                                                                                         
    extraordinary                                                                                                                  
    item.............      5,203      4,433         363          (354)         1,394          1,313            316           (503) 
Extraordinary item,                                                                                                                
  net................     --         --          --            --               (152)        --             --             (1,557) 
                       ---------  ---------  -----------  -------------  -------------  -------------  -------------  -------------
Net income (loss)....  $   5,203  $   4,433   $     363     $    (354)     $   1,242      $   1,313      $     316      $  (2,060) 
                       ---------  ---------  -----------  -------------  -------------  -------------  -------------  -------------
                       ---------  ---------  -----------  -------------  -------------  -------------  -------------  -------------
OTHER OPERATING DATA:                                                                                                              
EBITDA (a)...........  $   8,123  $   7,744   $   2,580     $   4,370      $   8,062      $   8,635      $   1,941      $   2,547  
Depreciation and                                                                                                                   
  amortization.......        655        858         401         3,066          1,861          1,361            345            524  
Capital                                                                                                                            
  expenditures.......        381        712         346           272            771          1,247            190            477  
Ratio of earnings to                                                                                                               
  fixed charges                                                                                                                    
  (b)................       3.47x      2.80x       1.52x         0.70x          1.42x          1.46x          1.26x          0.84x 
BALANCE SHEET DATA                                                                                                                 
  (AT PERIOD END):                                                                                                                 
Working capital......                                       $  24,563      $  21,924      $  18,653      $              $  55,954  
Total assets.........                                          51,717         52,528         79,728                       132,641  
Total debt...........                                          32,224         31,109         41,435                        90,025  
Common stock subject                                                                                                               
  to put option......                                              --             --          3,000                         3,000  
Total stockholders'                                                                                                                
  equity.............                                           5,967          7,892         12,677                         7,445  

  (FOOTNOTES TO THE SUMMARY HISTORICAL FINANCIAL INFORMATION ON FOLLOWING PAGE.)

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MACPHERSON                                                                      

  The following table sets forth selected consolidated financial information
of Macpherson as of December 31, 1994, 1995 and 1996 and for the years then     
ended. Such information was derived from the Consolidated Financial Statements  
of Macpherson, which have been audited by Arthur Andersen LLP and are included  
elsewhere in this Prospectus. The selected consolidated financial information   
set forth below should be read in conjunction with "Management's Discussion and 
Analysis of Financial Condition and Results of Operations--Macpherson" and the  
Consolidated Financial Statements and Notes thereto of Macpherson included      
elsewhere in this Prospectus.                                                   

                                                        [Enlarge/Download Table]

                                                                                      YEAR ENDED DECEMBER 31,     
                                                                                  ------------------------------- 
                                                                                                                  
                                                                                    1994       1995       1996    
                                                                                  ---------  ---------  --------- 


                                                                                      (DOLLARS IN THOUSANDS)      
                                                                                                                  
STATEMENT OF OPERATIONS DATA:                                                                                     
Net sales........................................................................ $  68,861  $  71,667  $  70,058 
Cost of goods sold...............................................................    52,216     53,769     52,610 
                                                                                  ---------  ---------  --------- 
  Gross profit...................................................................    16,645     17,898     17,448 
Operating expenses...............................................................    13,566     13,587     14,211 
                                                                                  ---------  ---------  --------- 
  Operating income...............................................................     3,079      4,311      3,237 
Interest expense.................................................................       390        218        781 
Other expense....................................................................       643        768      1,162 
                                                                                  ---------  ---------  --------- 
  Income before taxes............................................................     2,046      3,325      1,294 
Income taxes.....................................................................        54         76         54 
                                                                                  ---------  ---------  --------- 
  Net income..................................................................... $   1,992  $   3,249  $   1,240 
                                                                                  ---------  ---------  --------- 
                                                                                  ---------  ---------  --------- 
OTHER OPERATING DATA:                                                                                             
EBITDA (a)....................................................................... $   2,650  $   3,715  $   2,393 
Depreciation and amortization....................................................       214        172        318 
Capital expenditures.............................................................       171        178        282 
Ratio of earnings to fixed charges (b)...........................................      4.46x      9.37x      2.36x
BALANCE SHEET DATA (AT PERIOD END):                                                                               
Working capital.................................................................. $   9,721  $  10,925  $   9,965 
Total assets.....................................................................    31,458     44,403     38,864 
Total debt.......................................................................     2,820      4,947      6,710 
Equity...........................................................................     9,794     11,375     10,963 

------------------------                                                        

(a) EBITDA represents income before income taxes plus interest expense,         
    depreciation and amortization for the applicable company and, in the case of
Willcox & Gibbs, certain other noncash charges included in cost of goods
  sold relating to the amortization of the step-up in basis of the inventory
 purchased in the Management Buyout. EBITDA should not be considered as an
  alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting    
   principles), but is presented to provide additional information relating to
 the Company's debt service capability. EBITDA should not be considered in
   isolation or as a substitute for other measures of financial performance or
liquidity.                                                              

(b) The ratio of earnings to fixed charges is computed by dividing earnings by  
fixed charges. For this purpose, earnings include pre-tax income from   
 continuing operations plus fixed charges. Fixed charges include interest,
   whether expensed or capitalized, amortization of debt expense and a portion
 of rental expense which is representative of the interest factor in these
rentals.                                                                

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RISK FACTORS

 PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE SPECIFIC RISK FACTORS
SET FORTH BELOW AS WELL AS THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS   
BEFORE DECIDING TO INVEST IN THE SENIOR NOTES OR PARTICIPATE IN THE EXCHANGE    
OFFER.                                                                          

RANKING OF THE SENIOR NOTES AND SUBSIDIARY GUARANTEES; OTHER SECURITY           

The Senior Notes and each Subsidiary Guarantee are senior unsecured     
obligations of the Company and the applicable Subsidiary Guarantor,             
respectively, and rank PARI PASSU in right of payment with all other existing   
and future unsecured and unsubordinated Indebtedness of the Company and the     
applicable Subsidiary Guarantor, respectively. At March 31, 1997, the Company   
and the Subsidiary Guarantors had $0.5 million of unsecured indebtedness        
outstanding other than the Senior Notes. The Senior Notes and the Subsidiary    
Guarantees are effectively subordinated to secured Indebtedness of the Company  
and the Subsidiary Guarantors, respectively, with respect to the assets securing
such Indebtedness. The Indebtedness of the Company under its $18.5 million      
working capital facility with NationsBank, N.A. (the "New Credit Facility") is  
secured by accounts receivable of the Company, and W&G, Ltd.'s L1.0 million term
loan facility (the "W&G, Ltd. Credit Facility") is secured by substantially all 
of the assets of such United Kingdom subsidiary. At March 31, 1997, the Company 
and the Subsidiary Guarantors had $4.3 million of secured Indebtedness          
outstanding. Although the Indenture contains limitations on the amount of       
additional Indebtedness that the Company and its Restricted Subsidiaries        
(including certain of the Subsidiary Guarantors) can incur, under certain       
circumstances the amount of such Indebtedness could be substantial and may be   
secured. See "Description of Senior Notes--Certain Covenants--Limitation on     
Indebtedness and Disqualified Capital Stock" and "--Limitation on Liens."       

    The Senior Notes are secured by a pledge of 65% of the capital stock of W&G,
Ltd., the Company's wholly owned United Kingdom subsidiary. The Senior Notes    
effectively rank junior to any indebtedness, secured or unsecured, of W&G, Ltd. 
At December 31, 1996, W&G, Ltd. had L1.0 million outstanding Indebtedness.      

SUBSTANTIAL LEVERAGE                                                            

 As a result of the sale of the Old Notes, the Company is highly leveraged
and has significant debt service requirements. At December 31, 1996, on a pro   
forma basis assuming that the sale of the Old Notes, the application of the net 
proceeds therefrom and the Macpherson Acquisition occurred on such date, the    
total Indebtedness of the Company would have been $86.5 million. The degree to  
which the Company is leveraged has important consequences to holders of the     
Senior Notes, including the following: (i) the ability of the Company to obtain 
additional financing in the future, whether for working capital, capital        
expenditures, acquisitions or other purposes, may be impaired; (ii) a           
substantial portion of the Company's cash flow from operations will be required 
to be dedicated to the payment of principal and interest on its indebtedness,   
thereby reducing funds available to the Company for other purposes; (iii) the   
Company's flexibility in planning for or reacting to changes in market          
conditions may be limited; (iv) the Company may be more vulnerable in the event 
of a downturn in its business; and (v) to the extent that the Company incurs any
indebtedness under the New Credit Facility, the W&G, Ltd. Credit Facility or any
other Working Capital Agreements (as defined herein), which indebtedness will be
at variable rates, the Company will be vulnerable to increases in interest      
rates.                                                                          

The Company estimates that its debt service requirements in 1997 will   
aggregate approximately $11.0 million (which is subject to change if borrowing  
levels and floating interest rates under the Working Capital Agreements vary    
from current estimates). Based on current operations, the Company expects that  
it will be able to service the principal and interest obligations on its        
indebtedness as well as its working capital needs and to fund its capital       
expenditures and other operating expenses out of cash flow from operations and  
available borrowings under any Working Capital Agreements. However, there can be
no assurance that the Company's business will continue to generate cash flow at 
levels sufficient to meet these requirements. If the Company is unable to       
generate sufficient cash flow from operations in the future to service its debt 
and                                                                             

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capital expenditures, it may be required to sell assets, reduce capital         
expenditures, refinance all or a portion of its existing debt (including the    
Senior Notes) or obtain additional financings. There can be no assurance that   
any such asset sales or refinancing would be possible or that any additional    
financing would be on terms acceptable to the Company. The Company's ability to 
meet its debt service obligations will be dependent upon its future performance 
which, in turn, will be subject to future economic conditions and to financial, 
business and other factors, many of which are beyond the Company's control.     

    The terms of the New Credit Facility, the Indenture and the other agreements
governing the Company's indebtedness impose operating and financing restrictions
on the Company and the Restricted Subsidiaries. Such restrictions affect, and in
many respects limit or prohibit, among other things, the ability of the Company 
and its Restricted Subsidiaries to incur additional indebtedness, create liens, 
sell assets or engage in mergers or acquisitions. These restrictions could limit
the ability of the Company to respond to market conditions or meet extraordinary
capital needs or otherwise could restrict corporate activities. There can be no 
assurance that such restrictions will not adversely affect the Company's ability
to finance its future operations or capital needs or to engage in other business
activities which will be in the interest of the Company. See "Description of    
Senior Notes--Certain Covenants" and "--Description of Certain Indebtedness."   

HOLDING COMPANY STRUCTURE                                                       

    Willcox & Gibbs is a holding company, the only assets of which are the stock
of its subsidiaries. All of the operations of Willcox & Gibbs are conducted     
through its direct and indirect wholly owned subsidiaries. Accordingly, Willcox 
& Gibbs' ability to service its indebtedness, including the Senior Notes, is    
dependent upon earnings and cash flow of its subsidiaries and the payment of    
funds by those subsidiaries to Willcox & Gibbs in the form of loans, dividends  
or otherwise. In addition, the ability of Willcox & Gibbs' subsidiaries to pay  
dividends, repay intercompany liabilities or makes other advances to Willcox &  
Gibbs is subject to restrictions imposed by corporate law and certain United    
States, state and foreign tax considerations. One of the Company's subsidiaries 
is incorporated outside the United States.                                      

MACPHERSON ACQUISITION                                                          

The Macpherson Acquisition was significantly larger than the Company's  
previous acquisitions and represented a substantial increase in the scope of the
Company's business. Macpherson's net sales for 1996 were approximately $70.0    
million, and the Company's net sales for 1996 were approximately $113.9 million.
In addition, the Macpherson Acquisition represents the addition of a significant
new product line. The success of the Macpherson Acquisition will depend upon,   
among other things, the Company's ability to integrate Macpherson's operations  
and to successfully expand into such new product line. There can be no assurance
that the Company can successfully integrate Macpherson, and any inability to do 
so may have a material adverse effect on the Company's results of operations and
financial condition. In addition, the Company expects to realize certain        
benefits as a result of the Macpherson Acquisition. Realization of such benefits
could be affected by a number of factors beyond the Company's control, such as  
general economic conditions, increased operating costs, the response of         
competitors or customers and regulatory developments. There can be no assurance 
that the Company will achieve the expected benefits.                            

ACQUISITION RISKS                                                               

  The Company intends to seek additional acquisition opportunities that will
allow it to increase its market penetration, product offerings and distribution 
capabilities. There can be no assurance that the Company will be able to        
successfully identify suitable acquisition candidates, complete acquisitions,   
integrate acquired operations into its existing operations or expand into new   
markets. There can also be no assurance that future acquisitions will not have  
an adverse effect upon the Company's operating results, particularly in the     
fiscal quarters immediately following the completion of such acquisitions while 
the operations of the acquired business are being integrated into the Company's 
operations. Once integrated, acquired operations may not achieve levels of      
revenues, profitability or productivity comparable with those achieved by the   
Company's existing operations, or otherwise perform as expected. In addition,   
the                                                                             

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Company competes for acquisition and expansion opportunities with companies that
have substantially greater resources.                                           

DEPENDENCE ON SUPPLIERS                                                         

  The Company derives significant revenues and operating income from certain
lines of replacement parts and equipment distributed under its distribution     
agreements with certain suppliers. For example, the Company (including the      
Company's Predecessor) has been the exclusive distributor of genuine replacement
parts in the United States for Pfaff, a German sewing equipment manufacturer,   
since 1958 and for Pegasus, a Japanese sewing equipment manufacturer, since     
1966. In 1996, approximately 5.7% of the Company's total purchases were from    
Pfaff and approximately 7.1% from Pegasus (3.5% and 4.4% respectively, on a pro 
forma basis assuming the Clinton Acquisition, the Mitchell Acquisition and the  
Macpherson Acquisition were consummated on January 1, 1996). In order to        
maintain the exclusivity of the Pfaff and Pegasus distribution agreements, the  
Company must meet certain performance targets. Historically, the Company has    
generally satisfied these requirements, although in certain prior years they    
were not satisfied and Pfaff and Pegasus waived such shortfalls.                

The Company is the exclusive distributor in certain territories         
(non-exclusive in certain other areas) of apparel screen printing equipment     
manufactured by M&R, which is a major manufacturer of such equipment in the     
United States. The Company's distribution agreements with M&R may be terminated 
at the end of any year on not less than 120 days notice. Purchases from M&R     
represented 15.7% of the Company's total purchases in 1996 (10.4% of the        
Company's total purchases in 1996 on a pro forma basis assuming the Clinton     
Acquisition, the Mitchell Acquisition and the Macpherson Acquisition were       
consummated on January 1, 1996).                                                

As a result of the Macpherson Acquisition, the Company is the exclusive 
distributor in the United States and Canada of embroidery equipment manufactured
by Barudan, which is one of the leading manufacturers of such equipment in the  
United States and Canada. The Company's distribution agreement with Barudan     
expires in 2003, subject to automatic renewal for a five year period, unless    
either party terminates such agreement on not less than 30 days notice.         
Macpherson's purchases from Barudan represented 78.0% of its total purchases in 
1996 (29.1% of the Company's total purchases in 1996 on a pro forma basis       
assuming the Clinton Acquisition, the Mitchell Acquisition and the Macpherson   
Acquisition were consummated on January 1, 1996).                               

    The Company's distribution agreements, both exclusive and non-exclusive, and
other supply arrangements with manufacturers are important to enable the Company
to obtain products sought by the Company's customers and to maintain the        
Company's broad product selection. Substantially all of such distribution       
agreements and other arrangements may be terminated by the supplier for any     
reason, although most exclusive distribution agreements require advance written 
notice. No assurance can be given that any of the Company's distribution        
agreements will be extended beyond their current term or that the Company will  
continue to be the distributor for any particular product.                      

INTERNATIONAL OPERATIONS; IMPACT OF NAFTA                                       

In 1995 and 1996, approximately 25.9% and 34.2%, respectively, of the   
Company's revenues were derived from international operations and export sales, 
which are subject in varying degrees to risks inherent in doing business abroad.
Such risks include the possibility of unfavorable circumstances arising from    
host country laws or regulations. In addition, foreign operations include risks 
of partial or total expropriation; currency exchange rate fluctuations and      
restrictions on currency repatriation; the disruption of operations from labor  
and political disturbances, insurrection or war; and the requirements of partial
local ownership of operations in certain countries.                             

   Any change in the value of the currencies of the foreign countries in which
the Company does business against the U.S. dollar will result in corresponding  
changes in the price and affordability of the Company's products, which could   
have a material adverse impact on the Company's business, financial condition   
and results of operations. The Company purchases a substantial amount of its    
inventories with                                                                

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foreign currencies, and Macpherson purchases a substantial majority of its      
products with Japanese yen. Most of the Company's and Macpherson's net sales are
in U.S. dollars. Although the Company enters into forward exchange contracts to 
hedge against foreign currency exchange risks, there can be no assurance that   
the Company will not experience foreign currency losses. See Note 1(h) of the   
Notes to Consolidated Financial Statements of the Company. In addition, the     
economies of certain of the Company's target Latin American markets have        
experienced significant and in some periods extremely high rates of inflation   
over the past few years. Inflation and rapid fluctuation in inflation rates have
had and may continue to have negative effects on these economies and could have 
a material adverse impact on the Company's business, financial condition and    
results of operations.                                                          

   NAFTA, implemented on January 1, 1994, removes barriers to free trade among
Canada, the United States and Mexico. The removal of barriers will take place   
over a 10 year period between Mexico and the United States and over five years  
between Canada and the United States. There can be no assurance that NAFTA will 
not result in an increase in apparel imports from Mexico that compete against   
products manufactured by the Company's customers in the United States, thereby  
adversely affecting the Company's sales in the United States. Historically, a   
majority of the Company's net sales has been to customers in the United States. 
No assurance can be given that the Company will be able to increase sales       
outside of the United States in the event of a decline in sales to customers in 
the United States.                                                              

COMPETITION                                                                     

The markets in which the Company competes are subject to intense        
competition. In addition, certain of the Company's competitors have greater     
financial resources than the Company and are less leveraged than the Company.   

DEPENDENCE ON EXISTING MANAGEMENT                                               

The depth of experience in the business represented by the Company's    
executive management team, including John K. Ziegler, Chairman and Chief        
Executive Officer, Maxwell L. Tripp, President and Chief Operating Officer, and 
the managers of the Company's operating divisions and subsidiaries, is a key    
component of the Company's competitiveness. Although the Company has entered    
into employment contracts with Mr. Ziegler, Mr. Tripp, Alan B. Lee, President of
Unity, Jack Klasky, President of Leadtec, Frank Scannavino, Chuck Nall and Marc 
Glazer, managers of Clinton, and Jerry Lee, President of Macpherson, the        
continued presence of such persons within the Company's management structure    
cannot be assured. The loss of the services of any of the foregoing persons     
could have a material adverse effect on the Company's business, financial       
condition and results of operations. The Company does not maintain any key      
person insurance.                                                               

CHANGE OF CONTROL                                                               

Upon a Change of Control, the Company will be required to offer to      
repurchase all of the outstanding Senior Notes at 101% of the principal amount  
thereof, plus accrued and unpaid interest to the date of repurchase. There can  
be no assurance that the Company will have the financial resources necessary or 
be permitted by its other debt agreements to repurchase the Senior Notes upon   
the occurrence of a Change of Control. The inability to repurchase all of the   
tendered Senior Notes would constitute an Event of Default (as defined herein)  
under the Indenture. See "Description of Senior Notes--Certain Covenants--Change
of Control."                                                                    

LACK OF PUBLIC MARKET FOR THE SENIOR NOTES                                      

  There is no existing trading market for the Senior Notes, and there can be
no assurance regarding the future development of a market for the Senior Notes, 
or the ability of holders of the Senior Notes to sell their Senior Notes, or the
price at which such holders may be able to sell their Senior Notes. If such a   
market were to develop, the Senior Notes could trade at prices that may be      
higher or lower than the initial offering price depending on many factors,      
including prevailing interest rates, the Company's operating results and the    
market for similar securities. The Initial Purchaser has advised the Company    
that it                                                                         

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currently intends to make a market in the New Notes. The Initial Purchaser is   
not obligated to do so, however, and any market making with respect to the New  
Notes may be discontinued at any time without notice. There can be no assurance 
as to the liquidity of any trading market for the Senior Notes or that an active
trading market for the Senior Notes will develop. The Company does not intend to
apply for listing or quotation of the Senior Notes on any securities exchange or
stock market.                                                                   

  Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of such       
securities. There can be no assurance that the market for the Senior Notes will 
not be subject to similar disruptions. Any such disruptions may have an adverse 
effect on holders of the Senior Notes.                                          

FRAUDULENT TRANSFER CONSIDERATIONS; UNENFORCEABILITY OF SUBSIDIARY GUARANTEES   

The obligations of any Subsidiary Guarantor as a guarantor under the    
Indenture may be subject to review under applicable fraudulent transfer or      
similar laws, in the event of the bankruptcy or other financial difficulty of   
any such Subsidiary Guarantor. In the United States, under such laws, if a court
in a lawsuit by an unpaid creditor or representative of creditors of any such   
Subsidiary Guarantor, such as a trustee in bankruptcy or any such person as     
debtor in possession, were to find that at the time such Subsidiary Guarantor   
incurred its obligations under its guarantee, it (i) received less than fair    
consideration or reasonably equivalent value therefor, and (ii) either (a) was  
insolvent, (b) was rendered insolvent, (c) was engaged in a business or         
transaction for which its remaining unencumbered assets constituted unreasonably
small capital, or (d) intended to incur or believed that it would incur debts   
beyond its ability to pay as such debts matured, such court could void all or a 
portion of such obligations under its guarantee and direct the return of any    
amounts paid with respect thereof. Moreover, regardless of the factors          
identified in the foregoing clauses (i) and (ii), a court could take such action
if it found that the guarantee was entered into with actual intent to hinder,   
delay or defraud creditors. The measure of insolvency for purposes of the       
foregoing will vary depending on the law of the jurisdiction being applied.     
Generally, however, an entity would be considered insolvent if the sum of its   
debts (including contingent or unliquidated debts) is greater than all of its   
property at a fair valuation or if the present fair salable value of its assets 
is less than the amount that would be required to pay its probable liability on 
its existing debts as they become absolute and matured.                         

CONSEQUENCES TO NON-TENDERING HOLDERS OF OLD NOTES                              

 Upon consummation of the Exchange Offer, the Company will have no further
obligation to register the Senior Notes except pursuant to a shelf registration 
statement to be filed under certain limited circumstance specified in "The      
Exchange Offer--Purpose of the Exchange Offer." Thereafter, subject to such     
exception, any Holder of Old Notes who does not tender its Old Notes in the     
Exchange Offer will continue to hold restricted securities which may not be     
offered, sold or otherwise transferred, pledged or hypothecated except pursuant 
to Rule 144 and Rule 144A under the Securities Act or pursuant to any other     
exemption from registration under the Securities Act relating to the disposition
of securities, in which case, an opinion of counsel must be furnished to the    
Company that such an exemption is available.                                    

ORIGINAL ISSUE DISCOUNT                                                         

The Old Notes were issued with original issue discount. Consequently,   
Holders of the New Notes generally will be required to include amounts in gross 
income for federal income tax purposes in advance of receipt of the cash        
payments to which the income is attributable. If a bankruptcy petition is filed 
by or against the Company under the United States Bankruptcy Code, the claim of 
a Holder of Senior Notes with respect to the principal amount thereof may be    
limited to an amount equal to the sum of: (i) the initial offering price for the
Senior Notes; and (ii) that portion of the original issue discount that is not  
deemed to constitute "unmatured interest" within the meaning of the United      
States Bankruptcy Code. Any original issue discount that was not amortized as of
any such bankruptcy filing would constitute "unmatured interest."               

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USE OF PROCEEDS 

THE EXCHANGE OFFER                                                              

This Exchange Offer is intended to satisfy certain of the Company's     
obligations under the Registration Rights Agreement. The Company will not       
receive any cash proceeds from the issuance of the New Notes offered in the     
Exchange Offer. In consideration for issuing the New Notes as contemplated in   
this Prospectus, the Company will receive in exchange Old Notes in like         
principal amount, the form and terms of which are the same in all material      
respects as the form and terms of the New Notes except that the New Notes have  
been registered under the Securities Act and hence do not include certain rights
to registration thereunder or contain transfer restrictions or terms with       
respect to Old Note Liquidated Damages. The Old Notes surrendered in exchange   
for the New Notes will be retired and canceled and cannot be reissued.          
Accordingly, issuance of the New Notes will not result in any proceeds to the   
Company or increase in the indebtedness of the Company.                         

THE SALE OF THE OLD NOTES                                                       

The net proceeds from the sale of the Old Notes, after deducting the    
discount to the Initial Purchaser, the discount to investors and estimated      
expenses, were approximately $79.2 million. The Company used the net proceeds as
follows: (i) $24.0 million were used to fund the cash portion of the purchase   
price of the Macpherson Acquisition; (ii) approximately $41.0 million were used 
by the Company to repay indebtedness existing as of the date of the Macpherson  
Acquisition (which included $8.5 million incurred in February 1996 to finance   
the purchase price for the Clinton Acquisition and the repayment of indebtedness
of Clinton and $3.0 million incurred in November 1996 to finance the purchase   
price for the Mitchell Acquisition); (iii) approximately $3.0 million were used 
to redeem a portion of the warrants issued in connection with certain of such   
indebtedness; (iv) approximately $6.1 million were used to repay debt assumed in
the Macpherson Acquisition; and (v) approximately $6.4 million were used to     
repay trade payables of Macpherson. In addition, as a result of the consummation
of the Macpherson Acquisition, Macpherson was obligated to make payments        
aggregating approximately $1.0 million pursuant to its phantom stock plan, and a
company owned by the principal shareholder of Macpherson agreed to pay          
Macpherson a receivable aggregating approximately $0.1 million. Accordingly, an 
additional $0.9 million was utilized to satisfy the phantom stock plan          
obligation.                                                                     

At December 31, 1996, the indebtedness of the Company that was repaid   
referred to above had a weighted average interest rate of 10.17% per annum. The 
foregoing indebtedness of the Company that was repaid included borrowings under 
the Financing and Security Agreement, dated as of February 1, 1996 (the "Old    
Credit Facility"), between the Company and NationsBank, N.A. ("NationsBank"),   
which permitted revolving borrowings by the Company through July 2001.          
Borrowings under the Old Credit Facility bore interest at a rate per annum equal
to the one month commercial paper rate for dealer-placed commercial paper of    
issuers whose corporate bonds are rated "AA" or its equivalent plus 4%, which   
rate was 9.57% per annum as of December 31, 1996. For a description of the      
interest rates and maturities of such other indebtedness that was repaid, see   
Note 5 of the Notes to the Consolidated Financial Statements of the Company and 
Note 6 of the Notes to the Consolidated Financial Statements of Macpherson.     

THE EXCHANGE OFFER

PURPOSE OF THE EXCHANGE OFFER                                                   

The Old Notes were sold by the Company on January 3, 1997 through the   
Initial Purchaser to "qualified institutional buyers" (as defined in Rule 144A  
under the Securities Act) and institutional "accredited investors" within the   
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act. In         
connection with the sale of the Old Notes, the Company, the Subsidiary          
Guarantors and the Initial Purchaser entered into the Registration Rights       
Agreement pursuant to which the Company and the Subsidiary Guarantors agreed to 
cause to be filed with the Commission within 180 days of January 3, 1997 (the   
date of original issue of the Old Notes), and use their best efforts to cause to
become effective on or prior to 150 days after the date of such filing, a       
registration statement with respect to the Exchange Offer.                      

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However, if (i) because of any change in applicable law or policy thereof by the
Commission, the Company is not permitted to effect the Exchange Offer, (ii) the 
Exchange Offer is not consummated within 180 days after the date of original    
issue of the Old Notes, (iii) the Initial Purchaser so requests within six      
months after consummation of the Exchange Offer with respect to the Old Notes   
not eligible to be exchanged for New Notes in the Exchange Offer and held by it 
following consummation of the Exchange Offer or (iv) any Holder of Old Notes    
notified the Company within 20 days of the consummation of the Exchange Offer   
that, for certain specified reasons, such Holder is precluded from participating
in the Exchange Offer or, in the case of any Holder that participates in the    
Exchange Offer, such Holder does not receive freely tradeable New Notes on the  
date of the exchange and such Holder notifies the Company within six months of  
such date, the Company and the Subsidiary Guarantors shall (A) cause to become  
effective a shelf registration statement (the "Shelf Registration Statement")   
with respect to resales of the Old Notes, (B) keep the Shelf Registration       
Statement effective until the earlier of (x) the time when the Senior Notes can 
be sold pursuant to Rule 144(k) of the Securities Act, and (y) the date on which
all of the Senior Notes covered by the Shelf Registration Statement have been   
sold pursuant thereto, and (C) during such period, upon request of any such     
Holder of Old Notes, amend the Shelf Registration Statement to bring current the
information contained therein.                                                  

  The Exchange Offer is being made by the Company to satisfy its obligations
pursuant to the Registration Rights Agreement. A copy of the Registration Rights
Agreement has been filed as an exhibit to the Registration Statement of which   
this Prospectus is a part. Once the Exchange Offer is consummated, the Company  
will have no further obligations to register any of the Old Notes not tendered  
by the Holders for exchange, except pursuant to a Shelf Registration Statement  
filed under the limited circumstances described in the immediately preceding    
paragraph. Thereafter, any Holder of Old Notes who does not tender its Old Notes
in the Exchange Offer and which is not eligible to use such a Shelf Registration
Statement will continue to hold restricted securities which may not be offered, 
sold or otherwise transferred, pledged or hypothecated except pursuant to Rule  
144 and Rule 144A under the Securities Act or pursuant to any other exemption   
from registration under the Securities Act relating to the disposition of       
securities (in such case an opinion of counsel must be furnished to the Company 
that such an exemption is available).                                           

    Based on interpretations by the staff of the Commission set forth in several
no-action letters issued to third parties, including the Exchange Offer         
No-Action Letters, the Company believes that New Notes issued pursuant to the   
Exchange Offer in exchange for Old Notes may be offered for resale, resold and  
otherwise transferred by Holders thereof who are not affiliates of the Company  
(other than a broker-dealer who acquired such Old Notes directly from the       
Company for resale pursuant to Rule 144A under the Securities Act or any other  
available exemption under the Securities Act) without compliance with the       
registration and prospectus delivery provisions of the Securities Act; PROVIDED 
that the Holder is acquiring New Notes in its ordinary course of business and   
has no arrangement or understanding with any person to participate in any       
distribution (within the meaning of the Securities Act) of the New Notes.       
Persons wishing to exchange Old Notes in the Exchange Offer must represent to   
the Company that such conditions have been met. However, any Holder who may be  
deemed an "affiliate" (as defined under Rule 405 of the Securities Act) of the  
Company or who tenders in the Exchange Offer with the intention to participate, 
or for the purpose of participating, in a distribution of the New Notes cannot  
rely on the interpretation by the staff of the Commission set forth in such     
no-action letters, including the Exchange Offer No-Action Letters, and must     
comply with the registration and prospectus delivery requirements of the        
Securities Act in connection with any resale transaction. In addition, any such 
resale transaction should be covered by an effective registration statement     
containing the selling security holders information required by Item 507 of     
Regulation S-K of the Securities Act.                                           

  Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer in exchange for Old Notes where such Old Notes were acquired 
by such broker-dealer as a result of market-making activities or other trading  
activities (other than acquisitions directly from the Company) must acknowledge 
that it will deliver a prospectus in connection with any resale of such New     
Notes. The Letter                                                               

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of Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or         
supplemented from time to time, may be used by a broker-dealer in connection    
with resales of New Notes received as aforesaid. The Company has agreed that for
a period of up to 180 days after the Expiration Date, it will use its reasonable
efforts to make this Prospectus available to such broker-dealers for use in     
connection with any such resale. See "Plan of Distribution."                    

  Except as set forth above, this Prospectus may not be used for an offer to
resell, or for a resale or other transfer of New Notes.                         

    The Registration Rights Agreement provides that if, (a) by the 180th day (or
if such 180th day is not a business day, the first business day thereafter)     
after the date of issue of the Old Notes, neither the Exchange Offer is         
consummated nor the Shelf Registration Statement is declared effective or (b)   
after either the Exchange Offer Registration Statement or the Shelf Registration
Statement is declared effective, such Registration Statement thereafter ceases  
to be effective or usable (subject to certain exceptions) in connection with    
resales of Old Notes or New Notes in accordance with and during the periods     
specified in the Registration Rights Agreement (each such event referred to in  
clauses (a) or (b) a "Registration Default"), then the Company will pay Old Note
Liquidated Damages to each Holder of Transfer Restricted Securities, during the 
first 90-day period immediately following the occurrence of such Registration   
Default, in an amount equal to $.05 per week per $1,000 principal amount of     
Senior Notes constituting Transfer Restricted Securities held by such Holder.   
The amount of the Old Note Liquidated Damages will increase an additional $.05  
per week per $1,000 principal amount of Senior Notes constituting Transfer      
Restricted Securities for each subsequent 90-day period until the applicable    
Registration Default has been cured, up to a maximum amount of Liquidated       
Damages of $.30 per week per $1,000 principal amount of Senior Notes            
constituting Transfer Restricted Securities. All accrued Old Note Liquidated    
Damages will be paid by the Company on each interest payment date to the Global 
Note Holders by wire transfer of immediately available funds or by federal funds
check and to the Holders of certificated securities by mailing a check to such  
Holders' registered addresses. Following the cure of all Registration Defaults, 
the accrual of Old Note Liquidated Damages will cease. For purposes of the      
foregoing, "Transfer Restricted Securities" means each Old Note until (i) the   
date on which such Old Note has been exchanged by the person other than a       
broker-dealer for a freely transferable New Note in the Exchange Offer, (ii)    
following the exchange by a broker-dealer in the Exchange Offer of an Old Note  
for a New Note, the date on which such New Note is sold to a purchaser who      
receives from such broker-dealer on or prior to the date of such sale a copy of 
this Prospectus, (iii) the date on which such Old Note has been effectively     
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date of which such Old Note is distributed to
the public pursuant to Rule 144 under the Securities Act or is saleable pursuant
to Rule 144(k) under the Securities Act.                                        

TERMS OF THE EXCHANGE OFFER                                                     

GENERAL                                                                 

    Upon the terms and subject to the conditions of the Exchange Offer set forth
in this Prospectus and in the Letter of Transmittal, the Company will accept any
and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New    
York City time, on the Expiration Date. The Company will issue $1,000 principal 
amount of New Notes in exchange for each $1,000 principal amount of outstanding 
Old Notes accepted in the Exchange Offer. Holders may tender some or all of     
their Old Notes pursuant to the Exchange Offer. However, Old Notes may be       
tendered only in integral multiples of $1,000.                                  

  As of June 20, 1997, there was $85.0 million aggregate principal amount of
the Old Notes outstanding. This Prospectus, together with the Letter of         
Transmittal, is being sent to all registered holders as of June 23, 1997.       

  In connection with the issuance of the Old Notes, the Company arranged for
certain of the Old Notes to be issued and transferable in book-entry form       
through the facilities of DTC, acting as depositary, and certain of the Old     
Notes to be represented by a Certificated Security. The New Notes exchanged for 
the                                                                             

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Old Notes, including Certified Securities, will initially be issued and         
transferable in book-entry form through DTC. See "Description of Senior Notes   
--Book-Entry Delivery and Form."                                                

The Company shall be deemed to have accepted validly tendered Old Notes 
when, as and if the Company has given oral or written notice thereof to the     
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders  
of Old Notes for the purpose of receiving the New Notes from the Company.       

If any tendered Old Notes are not accepted for exchange because of an   
invalid tender, the occurrence of certain other events set forth herein or      
otherwise, any such unaccepted Old Notes will be returned (except as described  
below with respect to tenders through DTC), without expense, to the tendering   
Holder thereof as promptly as practicable after the Expiration Date.            

  Holders of Old Notes who tender in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the     
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes 
pursuant to the Exchange Offer. The Company will pay the expenses, other than   
certain applicable taxes, of the Exchange Offer. See "--Fees and Expenses."     

EXPIRATION DATE; EXTENSIONS; AMENDMENTS                                         

  The Company has the right to extend the Exchange Offer. In order to extend
the Expiration Date, the Company will notify the Exchange Agent of any extension
by oral or written notice, each prior to 9:00 a.m., New York City time, on the  
next business day after the previously scheduled expiration date.               

  The Company reserves the right to delay accepting any Old Notes, to extend
the Exchange Offer, to amend the Exchange Offer or to terminate the Exchange    
Offer and not accept Old Notes not previously accepted if the applicable        
conditions set forth herein under "--Conditions" shall have occurred and shall  
not have been waived by the Company by giving oral or written notice of such    
delay, extension, amendment or termination to the Exchange Agent. Any such delay
in acceptance, extension, amendment or termination will be followed as promptly 
as practicable by oral or written notice thereof. If the Exchange Offer is      
amended in a manner determined by the Company to constitute a material change,  
the Company will promptly disclose such amendment in a manner reasonably        
calculated to inform the Holders of such amendment and the Company will extend  
the Exchange Offer as necessary to provide to such Holders a period of five to  
ten business days after such amendment, depending upon the significance of the  
amendment and the manner of disclosure to Holders of the Old Notes, if the      
Exchange Offer would otherwise expire during such five to ten business day      
period.                                                                         

  Without limiting the manner in which the Company may choose to make public
announcement of any extension, amendment or termination of the Exchange Offer,  
the Company shall have no obligation to publish, advertise, or otherwise        
communicate any such public announcement, other than by making a timely release 
to the Dow Jones News Service.                                                  

ACCRUED AMOUNTS ON THE SENIOR NOTES                                             

  The New Notes will bear interest at a rate equal to 12 1/4% per annum from
the last date on which interest was paid on the Old Notes surrendered in        
exchange therefor or, if no interest has been paid, from the date of original   
issuance of such Old Notes. Interest on the Senior Notes is payable             
semi-annually on June 15 and December 15 of each year, commencing on June 15,   
1997.                                                                           

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PROCEDURES FOR TENDERING                                                        

  To tender in the Exchange Offer, a Holder of Old Notes must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the signatures 
thereon guaranteed if required by the instructions to the Letter of Transmittal,
and mail or otherwise deliver such Letter of Transmittal or such facsimile,     
together with the Old Notes and any other required documents, so that it is     
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the   
Expiration Date.                                                                

Any financial institution that is a participant in DTC (the "Book-Entry 
Transfer Facility") may make book-entry delivery of the Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange       
Agent's account in accordance with the Book-Entry Transfer Facility procedure   
for such transfer. Although delivery of Old Notes may be effected through       
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility, the Letter of Transmittal (or facsimile thereof), with any required   
signature guarantees and any other required documents, must, in any case, be    
transmitted to and received or confirmed by the Exchange Agent at its address   
set forth in "--Exchange Agent" below prior to 5:00 p.m., New York City time, on
the Expiration Date. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY  
IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE  
AGENT.                                                                          

   The tender by a Holder will constitute an agreement between such Holder and
the Company in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal.                                        

   Delivery of all documents must be made to the Exchange Agent at its address
set forth below. Holders may also request their respective brokers, dealers,    
commercial banks, trust companies or nominees to effect the above transactions  
for such Holders.                                                               

   The method of delivery of the tendered Old Notes, the Letter of Transmittal
and all other required documents to the Exchange Agent is at the election and   
risk of the Holder. Instead of delivery by mail, it is recommended that the     
Holder use an overnight or hand delivery service. In all cases, sufficient time 
should be allowed to assure timely delivery. No Letter of Transmittal or Old    
Notes should be sent to the Company.                                            

   Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer.
The term "Holder" with respect to the Exchange Offer means any person in whose  
name Old Notes are registered on the books of the Company or any other person   
who has obtained a properly completed bond power from the registered Holder.    

ANY BENEFICIAL HOLDER WHOSE OLD NOTES ARE REGISTERED IN THE NAME OF ITS 
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE AND WHO WISHES  
TO TENDER SHOULD CONTACT SUCH REGISTERED HOLDER PROMPTLY AND INSTRUCT SUCH      
REGISTERED HOLDER TO TENDER ON ITS BEHALF. IF SUCH BENEFICIAL HOLDER WISHES TO  
TENDER ON ITS OWN BEHALF, SUCH BENEFICIAL HOLDER MUST, PRIOR TO COMPLETING AND  
EXECUTING THE LETTER OF TRANSMITTAL AND DELIVERING ITS OLD NOTES, EITHER MAKE   
APPROPRIATE ARRANGEMENTS TO REGISTER OWNERSHIP OF THE OLD NOTES IN SUCH HOLDER'S
NAME OR OBTAIN A PROPERLY COMPLETED BOND POWER FROM THE REGISTERED HOLDER. THE  
TRANSFER OF RECORD OWNERSHIP MAY TAKE CONSIDERABLE TIME.                        

   Signatures on a Letter of Transmittal (or facsimile thereof) or a notice of
withdrawal, as the case may be, must be guaranteed by an Eligible Institution   
(as defined below) unless the Old Notes tendered pursuant thereto are tendered  
(i) by a registered Holder who has not completed the box entitled "Special      
Payment Instructions" or "Special Delivery Instructions" on the Letter of       
Transmittal or (ii) for the account of an Eligible Institution. In the event    
that signatures on a Letter of Transmittal (or facsimile thereof) a notice of   
withdrawal, as the case may be, are required to be guaranteed, such guarantee   
must be by or through a member firm of a registered national securities exchange
or of the National Association of                                               

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Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an institution which falls within the     
definition of "Eligible Guarantor Institution" contained in Rule 17Ad-15        
promulgated by the Commission under the Exchange Act (each, an "Eligible        
Institution").                                                                  

 If the Letter of Transmittal (or facsimile thereof) is signed by a person
other than the registered Holder of the Old Notes tendered thereby, such Old    
Notes must be endorsed or accompanied by appropriate bond powers signed as the  
name of the registered Holder(s) appear(s) on the Old Notes, with the signatures
on the endorsement or bond power guaranteed by an Eligible Institution.         

    If the Letter of Transmittal (or facsimile thereof) or any Old Notes or bond
powers are signed by trustees, executors, administrators, guardians,            
attorneys-in-fact, officers of corporations or others acting in a fiduciary or  
representative capacity, such persons should so indicate when signing, and      
unless waived by the Company, evidence satisfactory to the Company of their     
authority to so act must be submitted with the Letter of Transmittal.           

All questions as to the validity, form, eligibility (including time of  
receipt) and acceptance of tendered Old Notes and withdrawal of tendered Old    
Notes will be determined by the Company in its sole discretion, which           
determination will be final and binding on all parties. The Company reserves the
absolute right to reject any and all Old Notes not properly tendered or any Old 
Notes the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any defects, 
irregularities or conditions of tender as to the Exchange Offer and/or          
particular Old Notes. The Company's interpretation of the terms and conditions  
of the Exchange Offer (including the instructions in the Letter of Transmittal) 
will be final and binding on all parties. Unless waived, any defects or         
irregularities in connection with tenders of Old Notes must be cured within such
time as the Company shall determine. None of the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of defects or     
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will  
not be deemed to have been made until such defects or irregularities have been  
cured or waived. Any Old Notes received by the Exchange Agent that are not      
properly tendered and as to which any defects or irregularities have not been   
cured or waived will be returned by the Exchange Agent to the tendering         
Holder(s) of Old Notes, unless otherwise provided in the Letter of Transmittal, 
as soon as practicable following the Expiration Date.                           

 By tendering, each Holder will represent to the Company that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being acquired
in the ordinary course of such Holder's business, that such Holder has no       
arrangement or understanding with any person to participate in the distribution 
of such New Notes, and that such Holder is not an "affiliate" (as defined under 
Rule 405 of the Securities Act) of the Company or any of its subsidiaries. If   
the Holder is a broker-dealer that will receive New Notes for its own account in
exchange for Old Notes that were acquired as a result of market-making          
activities or other trading activities, such Holder by tendering will           
acknowledge that it will deliver a Prospectus in connection with any resale of  
such New Notes. See "Plan of Distribution."                                     

GUARANTEED DELIVERY PROCEDURES                                                  

  Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent, or cannot    
complete the procedure for book-entry transfer, prior to 5:00 p.m. on the       
Expiration Date, may effect a tender if:                                        

(a) the tender is made through an Eligible Institution;                 

(b) prior to the Expiration Date, the Exchange Agent receives from such 
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the   
name and address of the Holder of the Old Notes and the principal amount        

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of Old Notes tendered, stating that the tender is being made thereby and        
guaranteeing that, within three New York Stock Exchange trading days after the  
date of execution of the Notice of Guaranteed Delivery, the Letter of           
Transmittal (or facsimile thereof) together with the certificate(s) representing
the Old Notes to be tendered in proper form for transfer (or a confirmation of a
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility of Old Notes delivered electronically) and any other documents required
by the Letter of Transmittal will be deposited by the Eligible Institution with 
the Exchange Agent; and                                                         

    (c) such properly completed and executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Old Notes in  
proper form for transfer (or a confirmation of a book-entry transfer into the   
Exchange Agent's account at the Book-Entry Transfer Facility of Old Notes       
delivered electronically) and all other documents required by the Letter of     
Transmittal are received by the Exchange Agent within three New York Stock      
Exchange trading days after the date of execution of the Notice of Guaranteed   
Delivery. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery   
will be sent to Holders who wish to tender their Old Notes according to the     
guaranteed delivery procedures set forth above.                                 

WITHDRAWAL OF TENDERS                                                           

  Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To  
withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile    
transmission notice of withdrawal must be received by the Exchange Agent at its 
address set forth herein prior to 5:00 p.m., New York City time, on the         
Expiration Date. Any such notice of withdrawal must (i) specify the name of the 
person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii)   
identify the Old Notes to be withdrawn (including the principal amount of such  
Old Notes), (iii) be signed by the Holder in the same manner as the original    
signature on the Letter of Transmittal by which such Old Notes were tendered    
(including any required signature guarantees) or be accompanied by documents of 
transfer sufficient to have the trustee with respect to the Old Notes register  
the transfer of such Old Notes into the name of the person withdrawing the      
tender, and (iv) specify the name in which any such Old Notes are to be         
registered, if different from that of the Depositor. All questions as to the    
validity, form and eligibility (including time of receipt) of such notices will 
be determined by the Company, which determination shall be final and binding on 
all parties. Any Old Notes so withdrawn will be deemed not to have been validly 
tendered for purposes of the Exchange Offer and no New Notes will be issued with
respect thereto unless the Old Notes so withdrawn are validly retendered. Any   
Old Notes which have been tendered but which are not accepted for payment will  
be returned to the Holder thereof without cost to such Holder as soon as        
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by 5:00 p.m. on following 
one of the procedures described above under "--Procedures for Tendering" at any 
time prior to the Expiration Date.                                              

CONDITIONS                                                                      

Notwithstanding any other term of the Exchange Offer, the Company may   
terminate or amend the Exchange Offer as provided herein and will not be        
required to accept for exchange, or exchange New Notes for, any Old Notes not   
theretofore accepted for exchange, if any of the following conditions exist:    

  (a) the Exchange Offer, or the making of any exchange by a Holder,
violates applicable law or any applicable policy of the Commission; or  

        (b) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer 
  which, in the reasonable judgment of the Company, might impair the ability
of the Company to proceed with the Exchange Offer; or                   

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      (c) there shall have been adopted or enacted any law, statute, rule or
regulation which, in the reasonable judgment of the Company, might      
 materially impair the ability of the Company to proceed with the Exchange
Offer.                                                                  

  If any such conditions exist, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to exchanging Holders, (ii) extend the  
Exchange Offer and retain all Old Notes tendered prior to the expiration of the 
Exchange Offer, subject, however, to the rights of Holders to withdraw such Old 
Notes (see "--Withdrawal of Tenders") or (iii) waive certain of such conditions 
with respect to the Exchange Offer and accept all properly tendered Old Notes   
which have not been withdrawn. If such waiver constitutes a material change to  
the Exchange Offer, the Company will promptly disclose such waiver in a manner  
reasonably calculated to inform Holders of Old Notes of such waiver.            

   The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such 
condition or may be waived by the Company in whole or in part at any time and   
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.                                              

  In addition, (i) if, because of any change in applicable law or applicable
policy thereof by the Commission the Company is not permitted to effect the     
Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days after
the date of original issue of the Old Notes, (iii) the Initial Purchaser so     
requests within six months after consummation of the Exchange Offer with respect
to the Old Notes not eligible to be exchanged for New Notes in the Exchange     
Offer and held by it following consummation of the Exchange Offer or (iv) any   
Holder of Old Notes notified the Company within 20 days of the consummation of  
the Exchange Offer that, for certain specified reasons, such Holder is precluded
from participating in the Exchange Offer or, in the case of any Holder that     
participates in the Exchange Offer, such Holder does not receive freely         
tradeable New Notes on the date of the exchange and such Holder notifies the    
Company within six months of such date, then the Company shall file a Shelf     
Registration Statement. Thereafter, the Company's obligation to consummate the  
Exchange Offer shall be terminated.                                             

EXCHANGE AGENT                                                                  

  IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for
the Exchange Offer. Questions and requests for assistance, requests for         
additional copies of this Prospectus or of the Letter of Transmittal and        
requests for Notices of Guaranteed Delivery should be directed to the Exchange  
Agent addressed as follows:                                                     

BY REGISTERED OR CERTIFIED MAIL:
IBJ Schroder Bank & Trust Company 
Bowling Green Station 
P.O. Box 84 
New York, New York 10274-0084 
Attention: Reorganization Operations Department 

BY HAND OR OVERNIGHT COURIER: 
IBJ Schroder Bank & Trust Company 
One State Street
New York, New York 10004
Attention: Securities Processing Window 
Subcellar one, (SC-1) 

By facsimile: (212) 858-2611
Attention: Customer Service 
Confirm by telephone: (212) 858-2103

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FEES AND EXPENSES                                                               

The expenses of soliciting tenders will be borne by the Company. The    
principal solicitation is being made by mail; however, additional solicitation  
may be made by telegraph, telephone or in person by officers and regular        
employees of the Company and its affiliates.                                    

The Company will not make any payments to brokers, dealers or others    
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The       
Company may also pay brokerage houses and other custodians, nominees and        
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of the Prospectus and related documents to the beneficial owners of the  
Old Notes, and in handling or forwarding tenders for exchange.                  

   The cash expenses incurred in connection with the sale of the Old Notes and
to be incurred in connection with the Exchange Offer will be paid by the        
Company, are estimated in the aggregate not to exceed $1.3 million, and include 
fees and expenses of the Exchange Agent and Trustee under the Indenture and     
accounting and legal fees.                                                      

   The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates          
representing New Notes or Old Notes for principal amounts not tendered or       
accepted for exchange are to be delivered to, or are to be registered or issued 
in the name of, any person other than the Holder of the Old Notes tendered, or  
if tendered Old Notes are registered in the name of any person other than the   
person signing the Letter of Transmittal, or if a transfer tax is imposed for   
any reason other than the exchange of Old Notes pursuant to the Exchange Offer, 
then the amount of any such transfer taxes (whether imposed on the Holder or any
other person(s)) will be payable by the tendering Holder. If satisfactory       
evidence of payment of such taxes or exemption therefrom is not submitted with  
the Letter of Transmittal, the amount of such transfer taxes will be billed     
directly to such tendering Holder.                                              

ACCOUNTING TREATMENT                                                            

   The New Notes will be recorded at the same carrying value as the Old Notes,
that is, face value less unamortized original issue discount as reflected in the
Company's accounting records on the date of the exchange. Accordingly, no gain  
or loss for accounting purposes will be recognized upon the consummation of the 
Exchange Offer. The issuance costs incurred in connection with the Exchange     
Offer will be capitalized and amortized over the term of the New Notes.         

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THE COMPANY 

The Company is a leading distributor of replacement parts, supplies and 
specialized equipment to the apparel and other sewn products industry. It is a  
Delaware corporation with its principal executive offices located at 900 Milik  
Street, Carteret, New Jersey 07008 (telephone: (908) 541-6255).                 

COMPANY HISTORY                                                                 

Willcox & Gibbs is a holding company which was organized on May 13, 1994
under the name "WG, Inc." by an investor group, which included members of the   
Company's current management, to acquire the Distribution Business from the     
Company's Predecessor. The Company's Predecessor was incorporated in 1866 as a  
manufacturer of sewing equipment. In the late 1960s, as sewing equipment        
manufacturing migrated overseas, the Company's Predecessor shifted its business 
into the distribution of replacement parts and supplies for the apparel and     
other sewn products industry. Parts and supply distribution remained the primary
focus of the Company's Predecessor until 1984, when it expanded into the        
distribution of electrical parts. Due to the large and fragmented nature of U.S.
electrical parts distribution, this segment grew rapidly and, by 1993,          
represented approximately 85.0% of the net sales of the Company's Predecessor.  
In 1994, the Board of Directors of the Company's Predecessor decided to focus on
electrical parts distribution and divest its other businesses.                  

On July 13, 1994, the Company, through its wholly owned subsidiary, WG  
Apparel, Inc. ("WG Apparel"), acquired the assets of Sunbrand and Unity, as well
as the stock of Leadtec and W&G, Ltd., and certain other assets in exchange for 
$41.0 million in cash, $3.0 million principal amount of subordinated debt and a 
warrant to purchase 122,970 shares of common stock of the Company. The cash     
portion of such purchase price was funded through approximately $36.2 million of
borrowings and $4.8 million from the sale of common stock of the Company. On    
July 26, 1995, the Company repurchased from the Company's Predecessor such      
subordinated debt and warrants, together with certain other assets (including   
the name "Willcox & Gibbs, Inc."), for approximately $4.1 million in cash.      
Effective January 1, 1996, the Company changed its name to Willcox & Gibbs, Inc.

THE CLINTON ACQUISITION                                                         

Effective as of February 1, 1996, the Company acquired all of the       
outstanding capital stock of Clinton, a leading distributor of screen printing  
equipment and supplies for the apparel industry. See "Business-- Clinton." The  
purchase price for Clinton consisted of $4.0 million in cash, 100,000 shares of 
the Company's common stock, the assumption of $4.5 million of indebtedness and  
payables, which was subsequently repaid, and contingent payments of up to 38.9% 
of the operating income of Clinton during each of the five years ending December
31, 2000. Such contingent payments may not exceed $10.5 million in the aggregate
over such five year period. In addition, the former shareholders of Clinton have
the right to require WG Apparel to purchase their shares of Company common stock
at a purchase price of $30 per share on the earliest of (i) the day after the   
Senior Notes have become due by occurrence of the scheduled maturity date or    
sooner acceleration, (ii) the fourth anniversary of the closing date of the     
Clinton Acquisition, (iii) the occurrence of an initial public offering of      
equity securities by the Company and (iv) a change of control of the Company,   
PROVIDED that in the case of clauses (ii) and (iii) such purchase is then       
permitted under the Indenture and the New Credit Facility. The Company's        
obligation to make contingent payments and to perform the put right is an       
unsecured obligation of the Company.                                            

THE MITCHELL ACQUISITION                                                        

    Effective November 27, 1996, the Company acquired certain assets of Mitchell
for $3.0 million in cash. The acquired assets relate to the manufacture and sale
of abrasive cords and tapes used principally in the apparel industry.           

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THE MACPHERSON ACQUISITION

On January 3, 1997, the Company acquired all of the outstanding capital 
stock of Macpherson for a cash purchase price of $24.0 million. In connection   
with the Macpherson Acquisition, the Company assumed (and repaid immediately    
using a portion of the net proceeds from the sale of the Old Notes)             
approximately $6.1 million of indebtedness of Macpherson and approximately $6.4 
million of trade payables of Macpherson. Macpherson is principally engaged in   
the distribution of embroidery equipment and supplies to the apparel industry.  
Macpherson also distributes engraving equipment, but the Company intends to     
discontinue this business in 1997. Accordingly, this line of business will be   
classified as discontinued operations for purposes of the Company's financial   
statements. On a pro forma basis assuming the Clinton Acquisition, the Mitchell 
Acquisition and the Macpherson Acquisition were consummated on January 1, 1996, 
the Company's net sales and income from continuing operations before            
extraordinary item for 1996 would have been $184.6 million and $13.8 million,   
respectively.                                                                   

As a result of the Macpherson Acquisition, the Company is the exclusive 
distributor in the United States and Canada through 2003 of embroidery equipment
manufactured by Barudan, and Barudan products accounted for approximately 78% of
Macpherson's total purchases in 1996. In connection with the Macpherson         
Acquisition, the Company, Macpherson, and Barudan entered into an agreement     
providing for a reduction in the prices charged to Macpherson for Barudan       
equipment during the year after the consummation of the Macpherson Acquisition  
and for Barudan to use its best efforts to maintain pricing after such initial  
year that results in gross profit margins for Macpherson comparable to such     
first year's pricing. In exchange, Macpherson agreed to pay for the Barudan     
equipment it purchases within a shorter time period after invoiced. As a result,
approximately $6.4 million of Macpherson's outstanding payables were paid from  
the net proceeds of the sale of the Old Notes in order to comply with the       
revised timetable for payments. On a pro forma basis, these agreements would    
have increased the Company's gross profit by $1.6 million for 1996, assuming the
effectiveness of the Macpherson Acquisition as of January 1, 1996. See "Pro     
Forma Combined Financial Information."                                          

In connection with the Macpherson Acquisition, the Company acquired the 
Leasing Company, a leasing company affiliate of Macpherson, for approximately   
$0.5 million, payable over three years, plus interest at 6.0% per annum. The    
Leasing Company commenced operations in March 1996. The Company intends to      
utilize the Leasing Company to offer flexible lease financing to its customers  
to support the Company's sales of equipment. The Leasing Company will be an     
Unrestricted Subsidiary for purposes of the Indenture.                          

 The Macpherson Acquisition expanded the Company's product line to include
the distribution of embroidery equipment and supplies to the apparel industry.  
The market for embroidery equipment has grown rapidly over the past ten years.  
The Company acquired Macpherson to take advantage of the expanding demand for   
such equipment and of the ability to market such equipment and the Company's    
complementary line of screen printing equipment to the same end-user group. In  
addition, the Company believes that Macpherson's embroidery equipment can be    
efficiently marketed through the Company's existing distribution network without
substantial additional expense. The acquisition of the Leasing Company will     
further the Company's objective of being a "one-stop shop" for its customers by 
enabling the Company to offer attractive financing options to support the sale  
of its equipment.                                                               

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CAPITALIZATION

  The following table sets forth as of December 31, 1996 and March 31, 1997,
the consolidated capitalization of the Company (i) on an historical basis and   
(ii) on a pro forma basis assuming that the sale of the Old Notes, the          
application of the net proceeds therefrom and the Macpherson Acquisition each   
had occurred as of such date. See "Use of Proceeds."                            

                                                        [Enlarge/Download Table]

                                                                                AS OF DECEMBER 31,    MARCH 31, 
                                                                                     1996(10)            1997   
                                                                              ----------------------  ----------
                                                                                                                
                                                                               ACTUAL     PRO FORMA     ACTUAL  
                                                                              ---------  -----------  ----------


                                                                                    (DOLLARS IN THOUSANDS)      
                                                                                                                
Long-term debt, including current maturities(1):                                                                
  Old Credit Facility, due 2001(2)........................................... $  19,347   $      --   $       --
  New Credit Facility(3).....................................................        --       1,255        4,314
  Senior note payable, due 2000(4)...........................................    12,802          --           --
  Senior note payable, due 2001(5)...........................................     6,471          --           --
  Senior note payable, due 2001(6)...........................................       902          --           --
  Senior note payable, due 2001(7)...........................................       200          --           --
  Variable W&G, Ltd. Credit Facility(8)......................................     1,713       1,713        1,640
  Note payable, due 1999(9)..................................................        --          --          507
  Senior Notes, net of debt discount of $1,487 and $1,436 at December 31,                                       
    1996 and March 31, 1997..................................................        --      83,513       83,564
                                                                              ---------  -----------  ----------
    Total long-term debt including current maturities........................    41,435      86,481       90,025
Common stock subject to put option...........................................     3,000       3,000        3,000
Total stockholders' equity...................................................    12,677       8,210        7,445
                                                                              ---------  -----------  ----------
Total capitalization......................................................... $  57,112   $  97,691   $  100,470
                                                                              ---------  -----------  ----------
                                                                              ---------  -----------  ----------

------------------------                                                        

(1) For further description of the Company's long-term debt, see Notes 5 and 6  
of Notes to the Consolidated Financial Statements of the Company.       

(2) For further description of the Old Credit Facility, see "Use of Proceeds."  

(3) For further description of the New Credit Facility, see "Description of     
Certain Indebtedness."                                                  

(4) Variable interest rate senior note payable, with final installment due July 
13, 2000.                                                               

(5) 12.95% senior note payable, due July 13, 2001, net of unamortized discount  
of $529.                                                                

(6) 10.98% senior note payable, due July 13, 2001, net of unamortized discount  
of $298.                                                                

(7) 11.66% senior note payable, due July 13, 2001.                              

(8) Variable interest rate note payable, denominated in pound sterling with     
final payment due in September 2000.                                    

(9) 6% note payable, due in installments through June 30, 1999.                 

                                             (NOTES CONTINUED ON THE NEXT PAGE.)

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(10) The following table sets forth the estimated sources and uses of funds in  
   connection with the sale of the Old Notes, the Mitchell Acquisition and the
  Macpherson Acquisition, assuming that each had occurred as of December 31,
1996.                                                                   

                                                        [Enlarge/Download Table]

                                                                             (DOLLARS IN     
                                                                              THOUSANDS)     
                                                                         --------------------
                                                                                             
SOURCES OF FUNDS:                                                                            
  Old Notes.............................................................      $   79,238     
  New Credit Facility...................................................           1,255     
  Cash on hand..........................................................           1,200     
                                                                                 -------     
      Total sources.....................................................      $   81,693     
                                                                                 -------     
                                                                                 -------     
USES OF FUNDS:                                                                               
  Repayment of debt.....................................................      $   39,723     
  Unamortized discount relating to debt repayment.......................             827     
  Repurchase of warrants................................................           3,026     
  Macpherson Acquisition:                                                                    
    Cash purchase price.................................................          24,000     
    Repayment of debt...................................................           6,710     
    Repayment of trade payables.........................................           6,442     
    Payment of phantom stock plan liability.............................           1,043     
    Payment of receivable due from affiliate of Macpherson..............             (78)    
                                                                                 -------     
      Total uses........................................................      $   81,693     
                                                                                 -------     
                                                                                 -------     

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PRO FORMA COMBINED FINANCIAL INFORMATION

  The following Unaudited Pro Forma Combined Statement of Operations for the
year ended December 31, 1996 gives effect to the Transactions as if each had    
occurred at the beginning of the period presented, except that Clinton's results
of operations for the period after February 1, 1996 (the effective date of the  
Clinton Acquisition) and Mitchell's results of operations for the period after  
November 27, 1996 (the effective date of the Mitchell Acquisition) are included 
in Willcox & Gibbs' results of operations for such period.                      

The Unaudited Pro Forma Combined Financial Statements have been prepared
using the purchase method of accounting for the Mitchell Acquisition and the    
Macpherson Acquisition, whereby the total cost of each acquisition is allocated 
to the tangible and intangible assets acquired and liabilities assumed based    
upon their respective fair values at the effective date of such acquisition. For
purposes of the Unaudited Pro Forma Combined Financial Statements, such         
allocations have been made based upon currently available information and       
management's estimates.                                                         

   The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1996 is based on the respective audited financial statements for   
the year ended December 31, 1996 of the Company and Macpherson and the unaudited
financial statements for the year ended December 31, 1996 of Clinton and        
Mitchell. The unaudited financial statements reflect all adjustments, consisting
of normal recurring accruals, which in the opinion of management of the         
applicable company are necessary for a fair presentation of results for the     
respective periods.                                                             

The Unaudited Pro Forma Combined Financial Statements do not purport to 
represent what the results of operations of the Company would actually have been
if any of the Transactions had occurred on such date or to project the results  
of operations of the Company for any future date or period. The Unaudited Pro   
Forma Combined Financial Statements set forth below should be read in           
conjunction with the respective Consolidated Financial Statements and Notes     
thereto of the Company, Macpherson and Clinton included elsewhere in this       
Prospectus, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--The Company" and "--Macpherson."                         

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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

                                                        [Enlarge/Download Table]

                                                                  YEAR ENDED DECEMBER 31, 1996                   
                                                 --------------------------------------------------------------- 
                                                                                                                 
                                                              CLINTON/    MACPHERSON/                            
                                                 WILLCOX &    MITCHELL      LEASING                              
                                                   GIBBS         (A)      COMPANY (B)   ADJUSTMENTS   PRO FORMA  
                                                 ----------  -----------  ------------  -----------  ----------- 


                                                                     (DOLLARS IN THOUSANDS)                      
                                                                                                                 
Net sales....................................... $  113,851   $   2,975    $   67,767    $  --        $ 184,593  
Cost of goods sold..............................     77,623       1,888        50,221       (1,599)(c)    128,133
                                                 ----------  -----------  ------------  -----------  ----------- 
      Gross profit..............................     36,228       1,087        17,546        1,599       56,460  
Selling, general and administrative                                                                              
  expenses......................................     28,969         758        13,542         (629)(d)     42,640
                                                 ----------  -----------  ------------  -----------  ----------- 
      Operating income..........................      7,259         329         4,004        2,228       13,820  
Interest expense................................      4,824          21           781        5,864(e)     11,490 
Other income (expense)..........................         15         (14)       (1,161)         839(f)       (321)
                                                 ----------  -----------  ------------  -----------  ----------- 
      Income before income taxes................      2,450         294         2,062       (2,797)       2,009  
Income taxes....................................      1,137      --                54         (222)(g)        969
                                                 ----------  -----------  ------------  -----------  ----------- 
      Income from continuing operations......... $    1,313   $     294    $    2,008    $  (2,575)   $   1,040  
                                                 ----------  -----------  ------------  -----------  ----------- 
                                                 ----------  -----------  ------------  -----------  ----------- 

OTHER OPERATING DATA:                                                                                            
EBITDA(h)....................................... $    8,635   $     340    $    3,161    $   3,574    $  15,710  
Depreciation and amortization...................      1,361          25           318          507        2,211  
Capital expenditures............................      1,247          10           282       --            1,539  

SELECTED RATIOS:                                                                                                 
EBITDA/cash interest expense....................     --          --            --           --             1.47x 
EBITDA less capital expenditures/cash interest                                                                   
  expense.......................................     --          --            --           --             1.33x 
Total debt/EBITDA(i)............................     --          --            --           --             5.50x 
Ratio of earnings to fixed charges(j)...........     --          --            --           --             1.17x 

See Notes to Unaudited Pro Forma Combined Statements of Operations. 

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NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS

(a) Reflects for the year ended December 31, 1996, the historical operating     
results of Clinton for one month and Mitchell for eleven months, since  
Clinton was acquired by the Company on February 1, 1996 and Mitchell was
acquired on November 27, 1996. Clinton's results of operations for the  
  period after February 1, 1996 and Mitchell's results of operations for the
  period after November 27, 1996 are included in Willcox & Gibbs' results of
operations for the year ended December 31, 1996.                        

(b) Reflects for the year ended December 31, 1996, the historical operating     
    results from continuing operations of Macpherson and the Leasing Company for
    the period ended December 31, 1996. The Leasing Company commenced operations
    in March 1996. Does not reflect net sales of $2.9 million, operating loss of
  $0.5 million, and net loss of $0.5 million for the year ended December 31,
    1996 attributable to Macpherson's engraving equipment distribution business,
which the Company discontinued upon consummation of the Macpherson      
Acquisition.                                                            

(c) Reflects the impact of reduction in prices charged to Macpherson for Barudan
equipment. See "The Macpherson Acquisition."                            

(d) Reflects the net reduction in officers' compensation and other benefits     
implemented as a result of the Clinton Acquisition and the Macpherson   
  Acquisition. The adjustment also reflects changes in goodwill amortization
as a result of the Transactions.                                        

(e) Reflects (i) pro forma interest expense calculated using an interest rate of
12 1/4% per annum on the Senior Notes, 9.0% per annum on the New Credit 
 Facility and 8.25% on the W&G Ltd. Credit Facility, (ii) the repayment of
all existing indebtedness, (iii) estimated amortization of deferred     
  financing costs at a rate of $0.6 million per annum, and (iv) amortization
of debt discount at a rate of approximately $0.2 million per annum. See 
"Capitalization."                                                       

(f) Reflects (i) the reduction in financing costs as a result of the agreement  
    to shorten the time to pay for purchases of Barudan equipment and (ii) costs
 incurred by Macpherson in connection with the Macpherson Acquisition. See
"The Macpherson Acquisition" and Note 12 to the Consolidated Financial  
Statements of Macpherson.                                               

(g) Reflects an assumed 38.0% corporate income tax rate for the operations of   
Clinton, Mitchell and Macpherson, which have operated as Subchapter S   
    corporations under the Internal Revenue Code and, accordingly, the income of
such companies was taxed directly to their respective shareholders.     

(h) EBITDA represents income before income taxes plus interest expense,         
    depreciation and amortization for the applicable company and, in the case of
Willcox & Gibbs, certain other noncash charges included in cost of goods
  sold relating to the amortization of the step-up in basis of the inventory
 purchased in the Management Buyout. EBITDA should not be considered as an
  alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting    
   principles), but is presented to provide additional information relating to
 the Company's debt service capability. EBITDA should not be considered in
   isolation or as a substitute for other measures of financial performance or
liquidity.                                                              

(i) Total debt includes $85.0 million in Senior Notes, net of discount, plus    
    $1.3 million of indebtedness incurred under the New Credit Facility and $1.7
million under the W&G Ltd. Credit Facility at the end of the periods    
presented.                                                              

(j) The ratio of earnings to fixed charges is computed by dividing earnings by  
fixed charges. For this purpose, earnings include pre-tax income from   
 continuing operations plus fixed charges. Fixed charges include interest,
   whether expensed or capitalized, amortization of debt expense and a portion
 of rental expense which is representative of the interest factor in these
rentals.                                                                

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SELECTED HISTORICAL FINANCIAL INFORMATION 

WILLCOX & GIBBS                                                                 

The selected data presented below under the captions "Statement of      
Operations Data" and "Balance Sheet Data" as of the end of December 31, 1994,   
1995 and 1996 and for the years ended December 31, 1995 and 1996 and the period 
from July 13, 1994 to December 31, 1994, are derived from the consolidated      
financial statements of the Company, which financial statements have been       
audited by KPMG Peat Marwick LLP, independent certified public accountants. The 
selected data presented below under the captions "Statement of Operations Data" 
for the period from January 1, 1994 to July 12, 1994, are derived from the      
consolidated statement of operations of the Company's Predecessor, which        
financial statement has been audited by KPMG Peat Marwick LLP. The "Statement of
Operations Data" for the years ended December 31, 1992 and 1993 are unaudited.  
The financial statements of the Company's Predecessor for the years ended       
December 31, 1992 and 1993 and for the period from January 1, 1994 to July 12,  
1994 have been prepared as if the apparel operations had been operated as a     
separate entity during those periods. However, such financial statements do not 
reflect a complete allocation of all expenses applicable to the operation of an 
independent company. Certain expenses were allocated to the apparel operations  
by the Company's Predecessor based on actual usage or other allocation methods  
that approximate actual usage. The following table also sets forth selected     
consolidated financial information of the Company as of March 31, 1997 and for  
the three months ended March 31, 1996 and 1997. Such information was derived    
from the unaudited consolidated financial statements of the Company. Such       
unaudited consolidated financial statements, in the opinion of the Company's    
management, include all adjustments (consisting of normal recurring accruals)   
necessary for a fair presentation of the financial position and results of      
operations for such periods. The results of operations for the three months     
ended March 31, 1997 are not necessarily indicative of results that may be      
expected for the full year. The consolidated financial statements of the Company
as of December 31, 1995 and 1996, and for the years ended December 31, 1995 and 
1996 and the period from July 13, 1994 to December 31, 1994 and of the Company's
Predecessor for the period from January 1, 1994 to July 12, 1994, and the report
thereon and the unaudited consolidated financial statements of the Company as of
March 31, 1997 and for the three months ended March 31, 1996 and 1997, are      
included elsewhere in this prospectus. The selected consolidated financial      
information set forth below should be read in conjunction with "Management's    
Discussion and Analysis of Financial Condition and Results of Operations--The   
Company" and the Consolidated Financial Statements and Notes thereto of the     
Company and the Company's Predecessor included elsewhere in this Prospectus.    

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                                                        [Enlarge/Download Table]

                                        COMPANY'S PREDECESSOR                                                                     
                                -------------------------------------                                                             
                                     YEAR ENDED                                                  COMPANY                          
                                    DECEMBER 31,      JANUARY 1, 1994  -----------------------------------------------------------
                                --------------------    TO JULY 12,     JULY 13, 1994 TO        YEAR ENDED          YEAR ENDED    
                                  1992       1993          1994         DECEMBER 31, 1994    DECEMBER 31, 1995   DECEMBER 31, 1996
                                ---------  ---------  ---------------  -------------------  -------------------  -----------------
                                                                                                                                  
                                    (UNAUDITED)                                                                                   


                                                                  (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)                       
                                                                                                                                  
STATEMENT OF OPERATIONS DATA:                                                                                                     
Net sales...................... $  76,048  $  77,574     $  41,309          $  41,644            $  90,431           $ 113,851    
Cost of goods sold.............    47,821     49,228        26,909             29,162               60,642              77,623    
                                ---------  ---------       -------            -------              -------            --------    
  Gross profit.................    28,227     28,346        14,400             12,482               29,789              36,228    
Selling, general and                                                                                                              
  administrative expenses......    20,814     21,315        11,997             11,264               23,606              28,969    
                                ---------  ---------       -------            -------              -------            --------    
  Operating income.............     7,413      7,031         2,403              1,218                6,183               7,259    
Interest expense...............     1,993      2,307         1,390              1,946                4,249               4,824    
Other (income) expense.........       (55)       145           224                (86)                 (18)                (15)   
                                ---------  ---------       -------            -------              -------            --------    
  Income (loss) before income                                                                                                     
    taxes and extraordinary                                                                                                       
    item.......................     5,475      4,579           789               (642)               1,952               2,450    
Income tax expense (benefit)...       272        146           426               (288)                 558               1,137    
                                ---------  ---------       -------            -------              -------            --------    
  Income (loss) before                                                                                                            
    extraordinary item.........     5,203      4,433           363               (354)               1,394               1,313    
Extraordinary item, net........    --         --            --                 --                     (152)             --        
                                ---------  ---------       -------            -------              -------            --------    
  Net income (loss)............ $   5,203  $   4,433     $     363          $    (354)           $   1,242           $   1,313    
                                ---------  ---------       -------            -------              -------            --------    
                                ---------  ---------       -------            -------              -------            --------    
OTHER OPERATING DATA:                                                                                                             
EBITDA (a)..................... $   8,123  $   7,744     $   2,580          $   4,370            $   8,062           $   8,635    
Depreciation and                                                                                                                  
  amortization.................       655        858           401              3,066                1,861               1,361    
Capital expenditures...........       381        712           346                272                  771               1,247    
Ratio of earnings to fixed                                                                                                        
  charges (b)..................      3.47x      2.80x         1.52x              0.70x                1.42x               1.46x   
BALANCE SHEET DATA                                                                                                                
  (AT PERIOD END):                                                                                                                
Working capital................                                             $  24,563            $  21,924           $  18,653    
Total assets...................                                                51,717               52,528              79,728    
Total debt.....................                                                32,224               31,109              41,435    
Common stock subject to put                                                                                                       
  option.......................                                                                                          3,000    
Total stockholders' equity.....                                                 5,967                7,892              12,677    



                                 THREE MONTHS ENDED                                                                               

                                      MARCH 31                                                                                    
                                --------------------                                                                              
                                  1996       1997                                                                                 
                                ---------  ---------                                                                              
                                                                                                                                  
                                    (UNAUDITED)                                                                                   

                                                                                                                                  
STATEMENT OF OPERATIONS DATA:                                                                                                     
Net sales...................... $  26,320  $  42,043                                                                              
Cost of goods sold.............    17,976     29,084                                                                              
                                ---------  ---------                                                                              
  Gross profit.................     8,344     12,959                                                                              
Selling, general and                                                                                                              
  administrative expenses......     6,763     10,974                                                                              
                                ---------  ---------                                                                              
  Operating income.............     1,581      1,985                                                                              
Interest expense...............     1,100      2,882                                                                              
Other (income) expense.........        14         39                                                                              
                                ---------  ---------                                                                              
  Income (loss) before income                                                                                                     
    taxes and extraordinary                                                                                                       
    item.......................       495       (858)                                                                             
Income tax expense (benefit)...       179       (355)                                                                             
                                ---------  ---------                                                                              
  Income (loss) before                                                                                                            
    extraordinary item.........       316       (503)                                                                             
Extraordinary item, net........         -     (1,557)                                                                             
                                ---------  ---------                                                                              
  Net income (loss)............ $     316  $  (2,060)                                                                             
                                ---------  ---------                                                                              
                                ---------  ---------                                                                              
OTHER OPERATING DATA:                                                                                                             
EBITDA (a)..................... $   1,941  $   2,547                                                                              
Depreciation and                                                                                                                  
  amortization.................       345        524                                                                              
Capital expenditures...........       190        477                                                                              
Ratio of earnings to fixed                                                                                                        
  charges (b)..................      1.26x      0.84x                                                                             
BALANCE SHEET DATA                                                                                                                
  (AT PERIOD END):                                                                                                                
Working capital................            $  55,954                                                                              
Total assets...................              132,641                                                                              
Total debt.....................               90,025                                                                              
Common stock subject to put                                                                                                       
  option.......................                3,000                                                                              
Total stockholders' equity.....                7,445                                                                              

 (FOOTNOTES TO THE SELECTED HISTORICAL FINANCIAL INFORMATION ON FOLLOWING PAGE.)

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MACPHERSON                                                                      

  The following table sets forth selected consolidated financial information
of Macpherson as of December 31, 1994, 1995 and 1996 and for the years then     
ended. Such information was derived from the Consolidated Financial Statements  
of Macpherson, which have been audited by Arthur Andersen LLP and are included  
elsewhere in this Prospectus. The selected consolidated financial information   
set forth below should be read in conjunction with "Management's Discussion and 
Analysis of Financial Condition and Results of Operations--Macpherson" and the  
Consolidated Financial Statements and Notes thereto of Macpherson included      
elsewhere in this Prospectus.                                                   

                                                        [Enlarge/Download Table]

                                                                                      YEAR ENDED DECEMBER 31,     
                                                                                  ------------------------------- 
                                                                                                                  
                                                                                    1994       1995       1996    
                                                                                  ---------  ---------  --------- 


                                                                                      (DOLLARS IN THOUSANDS)      
                                                                                                                  
STATEMENT OF OPERATIONS DATA:                                                                                     
Net sales........................................................................ $  68,861  $  71,667  $  70,058 
Cost of goods sold...............................................................    52,216     53,769     52,610 
                                                                                  ---------  ---------  --------- 
  Gross profit...................................................................    16,645     17,898     17,448 
Operating expenses...............................................................    13,566     13,587     14,211 
                                                                                  ---------  ---------  --------- 
  Operating income...............................................................     3,079      4,311      3,237 
Interest expense.................................................................       390        218        781 
Other expense....................................................................       643        768      1,162 
                                                                                  ---------  ---------  --------- 
Income before taxes..............................................................     2,046      3,325      1,294 
Income taxes.....................................................................        54         76         54 
                                                                                  ---------  ---------  --------- 
  Net income..................................................................... $   1,992  $   3,249  $   1,240 
                                                                                  ---------  ---------  --------- 
                                                                                  ---------  ---------  --------- 

OTHER OPERATING DATA:                                                                                             
EBITDA(a)........................................................................ $   2,650  $   3,715  $   2,393 
Depreciation and amortization....................................................       214        172        318 
Capital expenditures.............................................................       171        178        282 
Ratio of earnings to fixed charges(b)............................................      4.46x      9.37x      2.36x

BALANCE SHEET DATA (AT PERIOD END):                                                                               
Working capital.................................................................. $   9,721  $  10,925  $   9,965 
Total assets.....................................................................    31,458     44,403     38,864 
Total debt.......................................................................     2,820      4,947      6,710 
Stockholders' equity.............................................................     9,794     11,375     10,963 

------------------------                                                        

(a) EBITDA represents income before income taxes plus interest expense,         
    depreciation and amortization for the applicable company and, in the case of
Willcox & Gibbs, certain other noncash charges included in cost of goods
  sold relating to the amortization of the step-up in basis of the inventory
 purchased in the Management Buyout. EBITDA should not be considered as an
  alternative measure of net income or cash provided by operating activities
(both as determined in accordance with generally accepted accounting    
   principles), but is presented to provide additional information relating to
 the Company's debt service capability. EBITDA should not be considered in
   isolation or as a substitute for other measures of financial performance or
liquidity.                                                              

(b) The ratio of earnings to fixed charges is computed by dividing earnings by  
fixed charges. For this purpose, earnings include pre-tax income from   
 continuing operations plus fixed charges. Fixed charges include interest,
   whether expensed or capitalized, amortization of debt expense and a portion
 of rental expense which is representative of the interest factor in these
rentals.                                                                

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS--THE COMPANY

 THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND SELECTED HISTORICAL     
FINANCIAL INFORMATION INCLUDED ELSEWHERE HEREIN.                                

GENERAL                                                                         

 Willcox & Gibbs was organized in 1994 by members of the Company's current
management and certain other investors to acquire the Distribution Business,    
which occurred on July 13, 1994. As a result, the Company's financial statements
for the period ended December 31, 1994 reflect the Company's results of         
operations for the period beginning July 13, 1994 and ending on December 31,    
1994. The financial statements of the Distribution Business for the period      
January 1, 1994 to July 12, 1994 have been prepared as if the Distribution      
Business had been operated as a separate entity during that period. However,    
such financial statements do not reflect a complete allocation of all expenses  
applicable to the operation of an independent company. Certain expenses were    
allocated to the Distribution Business by the Company's Predecessor based on    
actual usage or other allocation methods that approximate actual usage. For     
purposes of the discussion of the Company's 1994 results of operations below,   
the Company has combined the results for such two periods of 1994 (the "Combined
1994"). However, results for 1995 and 1994 are not directly comparable because  
of differences arising from the Company's operations as a separate entity       
beginning July 13, 1994. In addition, Combined 1994 does not purport to reflect 
the results of the Company had the Management Buyout occurred on January 1,     
1994.                                                                           

  Effective February 1, 1996, the Company acquired Clinton, a distributor of
screen printing equipment for the apparel industry. Approximately 25.2% of the  
Company's net sales for the year ended December 31, 1996, are attributable to   
the operations of Clinton. Accordingly, the results of the Company for the year 
ended December 31, 1996 are not directly comparable to the results for the year 
ended December 31, 1995 due to the inclusion of the operations of Clinton in the
1996 period. Approximately 18.7% of the Company's net sales for the three months
ended March 31, 1997, are attributable to the operations of Clinton.            
Accordingly, the results of the Company for the three months ended March 31,    
1997 are not directly comparable to the results for the three months ended March
31, 1996 due to the inclusion of the operations of Clinton in the full 1997     
period.                                                                         

In addition, on January 3, 1997, the Company acquired Macpherson.       
Approximately 27.4% of the Company's net sales for the three months ended March 
31, 1997 are attributable to the operations of Macpherson. Accordingly, the     
results of the Company for the first three months of 1997 are not directly      
comparable to the results for the same period in 1996 due to the inclusion of   
the operations of Macpherson in the 1997 period. See "The Macpherson            
Acquisition."                                                                   

    The Company currently operates through six principal business units: (i) its
Sunbrand division, which is a distributor of replacement parts, supplies and    
specialized equipment to manufacturers of apparel and other sewn products; (ii) 
its Unity division, which is a wholesale distributor to dealers of replacement  
parts and supplies for use by the apparel and other sewn products industry;     
(iii) its W&G, Ltd. subsidiary, which is a distributor to manufacturers and     
dealers in the United Kingdom and Europe of replacement parts and supplies for  
use by the apparel and other sewn products industry; (iv) its Clinton           
subsidiary, which is a distributor of screen printing equipment and supplies for
the apparel industry; (v) its Leadtec subsidiary, which develops and supplies   
computer-based production planning and control systems for the apparel industry 
and (vi) Macpherson, which distributes embroidery equipment and supplies used in
the apparel industry. See "The Macpherson Acquisition."                         

CERTAIN FACTORS THAT MAY AFFECT RESULTS OF OPERATIONS                           

 Inventory management is an important factor that may affect the Company's
results of operations. The carrying value of the Company's inventory increased  
significantly in the first quarter of 1997 as a result                          

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of the acquisition of Macpherson. Macpherson distributes embroidery equipment   
that is substantially more expensive on a per item basis than the Company's     
historic inventory, which was composed principally of replacement parts and     
supplies for use in the apparel and sewn products industry. The Company         
maintains an inventory of a large number of items, many of which need not be    
replaced frequently. In general, the Company's experience over many years of    
supplying the apparel and sewn products industries combined with the Company's  
technologically advanced inventory control system provide guidance on prudent   
inventory levels. However, because demand for the Company's products is         
dependent on the needs of the apparel and sewn products industries, a decline in
the operations of the Company's customers will reduce demand for the Company's  
products. Any such reduction in demand over an extended period could result in  
price reductions and inventory writedowns, which in turn could adversely affect 
the Company's gross margins.                                                    

In the years ended December 31, 1995 and 1996, approximately 25.9%, and 
34.2%, respectively, of the Company's revenues were derived from international  
operations and export sales, which are subject in varying degrees to risks      
inherent in doing business abroad. Such risks include the possibility of        
unfavorable circumstances arising from host country laws or regulations. In     
addition, foreign operations include risks of partial or total expropriation;   
currency exchange rate fluctuations and restrictions on currency repatriation;  
the disruption of operations from labor and political disturbances, insurrection
or war; and the requirements of partial local ownership of operations in certain
countries.                                                                      

The Company purchases products from domestic and foreign suppliers.     
Purchases from foreign suppliers may be denominated in a foreign currency. The  
Company may enter into forward foreign exchange contracts in order to establish 
the dollar cost of purchases from its suppliers payable in a foreign currency.  
The terms of these contracts will be less than one year. The Company does not   
engage in foreign currency speculation.                                         

Inflation has not affected the Company's results over the last several  
years, given its relatively low level in the United States during such period.  

RESULTS OF OPERATIONS                                                           

The following table sets forth the percentages that certain income and  
expense items bear to net sales for the periods indicated.                      

                                                        [Enlarge/Download Table]

                                                                                                             THREE MONTHS     
                                                                                                                ENDED         
                                                                          YEAR ENDED DECEMBER 31,             MARCH 31,       
                                                                    -----------------------------------  -------------------- 
                                                                                                                              
                                                                        1994                                                  
                                                                     (COMBINED)      1995       1996       1996       1997    
                                                                    -------------  ---------  ---------  ---------  --------- 
Net sales..........................................................       100.0%       100.0%     100.0%     100.0%     100.0%
Gross profit.......................................................        32.4         32.9       31.8       31.7       30.8 
Selling, general and administrative expenses.......................        28.0         26.1       25.4       25.7       26.1 
Operating income...................................................         4.4          6.8        6.4        6.0        4.7 
Interest expense...................................................         4.0          4.7        4.2        4.2        6.9 
Income taxes.......................................................         0.2          0.6        1.0        0.7       (0.7)
Net income.........................................................         0.0          1.4        1.2        1.2       (4.9)
                                                                          -----    ---------  ---------  ---------  --------- 
                                                                          -----    ---------  ---------  ---------  --------- 

  THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996                                                                  

   Net sales were $42.0 million in the first three months of 1997, an increase
of $15.7 million, or 59.7%, as compared to the first three months of 1996. Net  
sales increased primarily as a result of the inclusion in the 1997 period of the
results of Macpherson, acquired in January 1997, Clinton, acquired in February  
1996, and E.C. Mitchell Co., Inc. ("Mitchell"), a manufacturer of abrasive cords
and tapes used principally                                                      

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by apparel manufacturers, acquired in November 1996. These acquisitions         
contributed an aggregate additional $14.0 million to net sales in the first     
three months of 1997, as compared with the first three months of 1996.          

Gross profit in the first three months of 1997 was $13.0 million, an    
increase of $4.6 million, or 55.3%, as compared with the same period in 1996.   
Gross profit increased primarily due to the inclusion of Macpherson, Clinton and
Mitchell in the 1997 period. As a percentage of net sales, gross profit in the  
first three months of 1997 was 30.8%, as compared with 31.7% in the same period 
of 1996. The decrease in gross profit percentage was attributable to Macpherson 
and Clinton. Macpherson's and Clinton's gross profit margins have traditionally 
been lower than the gross profit margin associated with the Company's parts and 
supplies businesses because a larger percentage of their sales are for          
equipment.                                                                      

 Selling, general and administrative expenses in the first three months of
1997 were $11.0 million, an increase of $4.2 million, or 62.3%, as compared to  
the first three months of 1996. The increase consisted of the addition of $3.5  
million of operating expenses for Macpherson, Clinton and Mitchell. As a        
percentage of sales, such expenses increased to 26.1% for the first three months
of 1997, from 25.7% for the same period in 1996, primarily related to the       
Macpherson Acquisition.                                                         

Operating income in the first three months of 1997 was $2.0 million, an 
increase of $0.4 million, or 25.6%, as compared to the first three months of    
1996. The increase in operating income resulted from an increase in sales and   
the factors discussed above. As a percentage of net sales, operating income was 
4.7% in the first three months of 1997, as compared to 6.0% in the first three  
months of 1996. The decrease was principally attributable to the lower gross    
margins from Macpherson's and Clinton's sales.                                  

Interest expense was $2.9 million in the first three months of 1997, an 
increase of $1.8 million, or 162.0%, as compared with the first three months of 
1996. The increase in interest expense was a result of the refinancing as of    
January 3, 1997, a portion of which was used to finance the acquisition of      
Macpherson.                                                                     

Provision for income taxes for the first three months of 1997 was $0.3  
million, a decrease of $0.5 million, as compared to the first three months of   
1996. The Company's effective tax rate was 36.5% in the first three months of   
1997, as compared to 36.3% in the first three months of 1996.                   

The Company's results for the first three months of 1997 reflect an     
extraordinary loss from the extinguishment of debt (net of income tax benefit)  
of $1.6 million owing to the refinancing of the Company's indebtedness in       
connection with the Macpherson Acquisition and the issuance by the Company of   
$85.0 million aggregate principal amount of the Old Notes.                      

    Net loss in the first three months of 1997 was $2.1 million, compared to net
income of $0.3 million in the first three months of 1996. The decrease was      
attributable to the additional cost factors discussed above.                    

1996 COMPARED TO 1995                                                   

Net sales were $113.9 million in 1996, an increase of $23.4 million, or 
25.9%, as compared to 1995. Net sales increased primarily as a result of the    
Clinton Acquisition, which contributed $28.7 million to net sales in 1996. The  
increase was partially offset by a decline in sales by the Company of capital   
equipment resulting from general market conditions for apparel manufacturers.   

Gross profit in 1996 was $36.2 million, an increase of $6.4 million, or 
21.6%, as compared with 1995. As a percentage of net sales, gross profit in 1996
was 31.8% as compared with 32.9% period in 1995. The decrease in gross profit   
was primarily attributable to Clinton's contribution to gross profit. Clinton's 
gross profit margin has traditionally been lower than the Company's parts and   
supplies businesses because a larger percentage of Clinton's sales are          
attributable to capital equipment. The decrease in gross profit margin in 1996  
was partially offset by a decrease in the percentage of net sales comprised of  
capital                                                                         

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equipment and the corresponding increase in the percentage comprised of parts   
and supplies, since parts and supplies generally have higher margins than       
capital equipment.                                                              

   Selling, general and administrative expenses in 1996 were $29.0 million, an
increase of $5.4 million, or 22.7%, as compared to 1995. The increase consisted 
primarily of the addition of expenses for Clinton, which were $5.5 million. The 
increase was partially offset by a reduction of expenses as a result of         
management's continued efforts to lower costs of operations, coupled with lower 
sales expenses as a result of the decline in capital equipment sales.           

  Operating income in 1996 was $7.3 million, an increase of $1.1 million, or
17.4%, as compared to 1995. As a percentage of net sales, operating income was  
6.4% in 1996 as compared to 6.8% in 1995. The increase in operating income      
resulted primarily from an increase in sales and the efforts to reduce costs.   

  Interest expense was $4.8 million in 1996, an increase of $0.6 million, or
13.6%, as compared with 1995. The increase in interest expense was primarily a  
result of the additional borrowings incurred as of February 1, 1996 used to     
finance the acquisition of Clinton.                                             

 Provision for income taxes for 1996 was $1.1 million, an increase of $0.6
million, as compared to 1995. The Company's effective tax rate was 46.4% in     
1996, as compared to 28.6% in 1995.                                             

Net income in 1996 was $1.3 million, an increase of $0.1 million or 5.7%
compared to 1995. The increase was attributable to the factors discussed above. 

1995 COMPARED TO COMBINED 1994                                          

   Net sales were $90.4 million in 1995, an increase of $7.5 million, or 9.0%,
compared to Combined 1994. Net sales increased primarily as a result of the     
introduction by the Company of new product lines, an increase in the purchase of
capital equipment by apparel manufacturers and the completion of significant    
sales by the Company's Leadtec subsidiary of its "Satelite Plus" real-time      
computerized production control system.                                         

Gross profit in 1995 was $29.8 million, an increase of $2.9 million, or 
10.8%, as compared to Combined 1994. As a percentage of net sales, gross profit 
in 1995 was 32.9% as compared to 32.4% in Combined 1994. The increase in gross  
profit margin was primarily attributable to the increase in sales by Leadtec of 
its software products, which command higher margins than the Company's          
traditional businesses. The increases in margins in 1995 were partially offset  
by an increase in the cost of certain genuine parts distributed by the Company, 
which increases became effective October 1, 1994 and January 1, 1995.           

   Selling, general and administrative expenses in 1995 were $23.6 million, an
increase of $0.3 million, or 1.5%, as compared to Combined 1994. As a percentage
of net sales, selling, general and administrative expenses were 26.1% in 1995   
compared to 28.0% in Combined 1994. The increase in such expenses was           
principally attributable to increased selling costs arising from higher sales.  
However, sales increased at a higher rate than such expenses, resulting in a    
decrease in the percentage that such expenses comprised of net sales in 1995. In
addition, 1994 included certain expenses allocated by the Company's Predecessor 
to the Distribution Business prior to the Management Buyout, which were         
eliminated for periods after July 12, 1994.                                     

 Operating income was $6.2 million in 1995, as compared to $3.6 million in
1994, an increase of 70.7%. The increase was principally due to higher net sales
without corresponding increases in operating expenses. In particular, the       
increased sales by Leadtec of higher margin software products had a favorable   
impact on 1995 operating income.                                                

  Interest expense was $4.2 million in 1995, an increase of $0.9 million, or
27.3% as compared to 1994. The increase was principally attributable to the debt
incurred on July 13, 1994 in connection with the Management Buyout.             

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 Provision for income taxes for 1995 was $0.6 million, an increase of $0.4
million. The Company's effective tax rate was 28.6% in 1995. The effective tax  
rate for Combined 1994 is not meaningful, since the allocation of income taxes  
to the Distribution Business by the Company's Predecessor was not on the same   
basis as taxation applicable to an independent company.                         

The Company's results for 1995 reflect an extraordinary loss from the   
extinguishment of debt (net of income tax benefit) of $0.2 million relating to  
the repurchase by the Company from the Company's Predecessor of subordinated    
debt issued as part of the consideration in the Management Buyout.              

    Net income for 1995 was $1.2 million, as compared to net income of $9,000 in
Combined 1994. The increase was principally attributable to the factors         
discussed above.                                                                

LIQUIDITY AND CAPITAL RESOURCES                                                 

Since its formation in 1994, the Company has funded its working capital 
requirements, capital expenditures and acquisitions from net cash provided by   
operations, borrowings under its credit facilities and proceeds from the        
issuance of equity securities.                                                  

   The Company used a portion of the net proceeds of the sale of the Old Notes
to repay substantially all of its existing debt, which was incurred to fund the 
Management Buyout in July 1994, the Clinton Acquisition in February 1996, the   
Mitchell Acquisition in November 1996 and working capital requirements. The     
balance of such net proceeds were used to fund the $24.0 million purchase price 
for the Macpherson Acquisition, to repay approximately $6.1 million of          
indebtedness of Macpherson and to pay approximately $6.4 million of trade       
payables of Macpherson.                                                         

 In connection with the sale of the Old Notes, the Old Credit Facility was
terminated. The Company entered into the New Credit Facility with NationsBank,  
as lender, which became effective upon consummation of the sale of the Old      
Notes. The New Credit Facility, as amended as of April 23, 1997, provides for   
borrowings of up to $18.5 million in the aggregate outstanding at any time,     
subject to a borrowing base limitation equal to 85% of the Company's eligible   
accounts receivable. Borrowings under the New Credit Facility will bear interest
at a rate per annum, at the Company's option, equal to (i) NationsBank's prime  
rate plus 0.25% or (ii) LIBOR plus 2.50%. The New Credit Facility is secured by 
all accounts receivable of the Company and include certain covenants applicable 
to the Company, including requirements that the Company comply with certain     
financial ratios. The New Credit Facility expires on July 13, 2001. As of April 
30, 1997, $6.0 million was available to be borrowed by the Company under the New
Credit Facility.                                                                

   In October 1996, W&G, Ltd. borrowed L1.0 million under the W&G, Ltd. Credit
Facility with Coutts & Co. The loan under the W&G, Ltd. Credit Facility bears   
interest at a rate per annum equal to the bank's prevailing Base Rate, which is 
currently 6.0% per annum, plus a margin of 2.25% per annum. The loan is payable 
in eight semiannual installments of L125,000, commencing April 1997. The W&G,   
Ltd. Credit Facility is secured by substantially all of the assets of W&G, Ltd. 
The proceeds of this loan were used to repay indebtedness of W&G, Ltd. to the   
Company, and the Company used such funds to repay higher cost indebtedness.     

Effective February 1, 1996, the Company acquired all of the outstanding 
capital stock of Clinton. The purchase price for Clinton consisted of $4.0      
million in cash, 100,000 shares of the Company's common stock, the assumption of
$4.5 million of indebtedness and payables, which was subsequently paid, and     
contingent payments of up to 38.9% of the operating income of Clinton during    
each of the five years ending December 31, 2000. Such contingent payments may   
not exceed $10.5 million in the aggregate over such five year period. In        
addition the former shareholders of Clinton have the right to require WG Apparel
to purchase their shares of Company common stock at a purchase price of $30 per 
share on the earliest of (i) the day after the Senior Notes have become due by  
occurrence of the scheduled maturity date or sooner acceleration, (ii) the      
fourth anniversary of the closing date of the Clinton Acquisition, (iii) the    
occurrence of an initial public offering of equity securities by the Company and
(iv) a change of                                                                

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control of the Company, PROVIDED that in the case of clauses (ii) and (iii) such
purchase is then permitted under the Indenture and the New Credit Facility. The 
Company's obligation to make contingent payments and to perform the put right is
an unsecured obligation of the Company. The Company obtained the cash required  
in connection with the Clinton Acquisition through additional borrowings from   
its existing lenders and approximately $2.4 million in proceeds from the sale of
Company common stock to existing shareholders.                                  

    Effective November 27, 1996, the Company acquired certain assets of Mitchell
for $3.0 million in cash. The Company financed this purchase price through      
borrowings under the Old Credit Facility.                                       

In connection with the Macpherson Acquisition, the Company acquired the 
Leasing Company, a leasing company affiliate of Macpherson, for approximately   
$0.5 million payable over three years, plus interest at 6.0% per annum. The     
Company intends to utilize the Leasing Company to offer flexible lease financing
to its customers to support the Company's sales of equipment. The Company       
intends to fund its investment in the Leasing Company through borrowings under  
the New Credit Facility, which borrowings are expected to aggregate             
approximately $3.5 million in 1997. The Company plans for the Leasing Company to
arrange additional borrowings to finance its operations and to sell a portion of
its leases on a nonrecourse basis. The Leasing Company is an Unrestricted       
Subsidiary for purposes of the Indenture and, therefore, is not subject to any  
of the covenants contained in the Indenture. See "Description of Senior Notes." 

The Company's capital expenditures during the first three months of 1997
aggregated approximately $0.5 million. Such expenditures were primarily for     
computer, office and warehouse equipment and improvements.                      

    The Company intends to pursue selected acquisitions of other businesses that
will expand the Company's product lines or geographic coverage. The Company is  
currently negotiating the terms of investments in certain businesses in         
Colombia, which are not expected to involve material investments. Any           
acquisition would be funded through cash generated by the Company's operations, 
the issuance of additional securities by the Company, the sale of other assets  
by the Company or the incurrence of additional indebtedness. The Company's      
ability to sell assets and incur indebtedness are restricted under the Indenture
and the New Credit Facility.                                                    

   Net cash used in the Company's operating activities was $2.5 million during
the first three months of 1997 principally due to working capital changes. The  
Company's investing activities during the first three months of 1997 related    
principally to $36.7 million utilized in the Macpherson Acquisition. Net cash   
provided by financing activities aggregated $40.5 million, reflecting $84.0     
million of borrowings from the refinancing used to extinguish debt of $41.1     
million, $3.6 million in financing costs and $3.0 million to repurchase and     
retire warrants.                                                                

   Net cash used in the Company's operating activities was $0.3 million during
1996. Principal working capital changes included a $4.7 million increase in     
accounts receivable and a $1.4 million increase in inventories. The Company's   
investing activities during 1996 related principally to $12.0 million utilized  
in the Clinton and Mitchell Acquisitions. Net cash provided by financing        
activities aggregated $13.5 million, principally reflecting $10.5 million of    
borrowings and $2.3 million from the sale of Company common stock in connection 
with the Clinton Acquisition.                                                   

Net cash generated by the Company's operations in 1995 was $1.8 million.
Principal working capital changes included a $0.8 million decrease in accounts  
receivable and a $0.8 million increase in inventories. Cash used in investing   
activities of $0.8 million was principally related to capital expenditures      
during the year. Cash used in financing activities in 1995 aggregated $0.8      
million, reflecting a net increase in borrowings of $1.0 million, $1.8 million  
from the sale of Company common stock to the Company's Savings and Employee     
Stock Ownership Plan and the payment to the Company's Predecessor of $3.5       
million to retire indebtedness and redeem warrants issued in connection with the
Management Buyout.                                                              

   The Company believes that the cash generated from operations and borrowings
available under the New Credit Facility will be sufficient to meet the Company's
working capital and liquidity needs for the foreseeable future.                 

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS--MACPHERSON 

GENERAL                                                                         

   Macpherson is principally engaged in the distribution throughout the United
States and Canada of embroidery equipment used in the apparel industry.         
Macpherson also distributes engraving equipment, but this business will be      
discontinued in 1997.                                                           

    On December 31, 1994, Macpherson consummated a business combination in which
it acquired all of the outstanding common stock of Meistergram, Inc. and        
Macpherson Monogram, Inc. in exchange for Macpherson common stock, which was    
accounted for in a manner similar to pooling-of-interests due to the common     
ownership of the three companies. The purpose of the transaction was to combine 
the three lines of business of such companies, the distribution of embroidery,  
monogram and engraving equipment, to lower overhead costs and combine marketing 
efforts.                                                                        

The former shareholders of Macpherson elected under Subchapter S of the 
Internal Revenue Code to have Macpherson's income taxed directly to the         
shareholders. Accordingly, prior to the Macpherson Acquisition, Macpherson was  
not obligated to pay Federal income taxes or, in some cases, state income taxes.
Rather, Macpherson distributed dividends to its former shareholders each year in
amounts estimated as sufficient to pay the Federal and state income taxes       
attributable to the income of Macpherson for such year.                         

RESULTS OF OPERATIONS                                                           

The following table sets forth the percentages that certain income and  
expense items bear to net sales for the periods indicated:                      

                                                        [Enlarge/Download Table]

                                                                     YEAR ENDED DECEMBER 31,     
                                                                 ------------------------------- 
                                                                                                 
                                                                   1994       1995       1996    
                                                                 ---------  ---------  --------- 
Net sales.......................................................     100.0%     100.0%     100.0%
Gross profit....................................................      24.2       25.0       24.9 
Operating expenses..............................................      19.7       19.0       20.3 
Operating income................................................       4.5        6.0        4.6 
Interest expense................................................       0.6        0.3        1.1 
Net income......................................................       2.9        4.5        1.8 
                                                                 ---------  ---------  --------- 
                                                                 ---------  ---------  --------- 

1996 COMPARED TO 1995                                                   

  Net sales were $70.1 million in 1996, a decrease of $1.6 million, or 2.2%,
as compared to 1995. The decrease was primarily due to a decline in net sales of
embroidery and monogramming equipment due to delays in the introduction of a new
line of Barudan embroidery equipment and the sale of older lines of equipment at
discounts in order to accommodate the new line of inventory.                    

    Gross profit in 1996 was $17.4 million, a decrease of $0.5 million, or 1.0%,
as compared with 1995. As a percentage of net sales, gross profit in 1996 was   
24.9% as compared with 25.0% in 1995. The decrease in gross profit was primarily
attributable to the discounting of older lines of equipment in 1996 in          
contemplation of the introduction of Barudan's new line and to higher costs of  
such older equipment due to the unfavorable exchange rate between Japanese yen  
and U.S. dollars at the time of purchase. A majority of Macpherson's purchases  
of equipment is payable in Japanese yen, although substantially all of          
Macpherson's net sales are in U.S. dollars.                                     

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   Operating expenses in 1996 were $14.2 million, an increase of $0.6 million,
or 4.6%, as compared to 1995. The increase is principally attributable to       
increased marketing expenses, including the establishment of a new computer     
software sales and support group and additions to the technical support group.  

 Operating income in 1996 was $3.2 million, a decrease of $1.1 million, or
24.9%, as compared to 1995. The decrease in operating income was principally    
attributable to the increased volume of discounted sales and higher operating   
expenses in 1996, as discussed above.                                           

Interest expense was $0.8 million in 1996, an increase of 259.1%, as    
compared with 1995. The increase was attributable to additional levels of       
borrowings in 1996 required to maintain higher than customary levels of         
inventory resulting from the introduction of the new line of Barudan equipment. 
The Company expects Macpherson to return to its customary inventory levels      
during 1997.                                                                    

    Net income for 1996 was $1.2 million, a decline of $2.0 million or 61.8%, as
compared to 1995. The decrease was principally attributable to the reasons      
discussed above.                                                                

1995 COMPARED TO 1994                                                   

   Net sales were $71.7 million in 1995, an increase of $2.8 million, or 4.1%,
as compared to 1994. The increase was principally due to the growth in demand in
1995 for embroidery equipment distributed by Macpherson. The increase was       
partially offset by a decline in 1995 of $1.2 million in net sales of           
Macpherson's engraving equipment, principally due to the delay in the           
introduction of Macpherson's laser equipment and falling demand for Macpherson's
rotary engraving equipment.                                                     

Gross profit in 1995 was $17.9 million, an increase of $1.3 million, or 
7.5%, as compared to 1994. As a percentage of net sales, gross profit increased 
from 24.2% in 1994 to 25.0% in 1995. The improvement in gross profit margin was 
primarily due to improved pricing in response to higher customer demand. The    
improvement was partially offset by fluctuation in the exchange rate of Japanese
yen and U.S. dollars.                                                           

Operating expenses in 1995 were $13.6 million, which was essentially    
unchanged from 1994. Macpherson's consolidation of operations into one company  
at the end of 1994 enabled it to operate its marketing functions more           
efficiently and thereby avoid increased costs.                                  

  Operating income in 1995 was $4.3 million, an increase of $1.2 million, or
40.0%, as compared to 1994. The increase was principally due to higher sales    
without a related increase in operating expense levels.                         

 Interest expense in 1995 was $0.2 million, a decrease of $0.2 million, or
44.2%, as compared to 1994. The decrease was principally due to lower levels of 
borrowings.                                                                     

   Net income in 1995 was $3.3 million, an increase of $1.3 million, or 63.1%,
as compared to 1994. The increase was principally due to the factors discussed  
above.                                                                          

LIQUIDITY AND CAPITAL RESOURCES                                                 

Macpherson's principal sources of liquidity have been net cash from     
operations and borrowings under Macpherson's credit facility.                   

    Net cash generated by Macpherson's operating activities totaled $0.3 million
in 1996. Principal working capital changes included a $5.4 million decrease in  
accounts receivable, a $0.4 million decrease in inventories and a $7.0 million  
decrease in accounts payable. Macpherson's investing activities during 1996     
consisted of $0.3 million of capital expenditures. Net cash provided in         
financing activities aggregated $0.1 million, principally reflecting dividend   
payments of $1.7 million, reduced by a net increase in borrowings of $1.8       
million.                                                                        

 Net cash used in operating activities in 1995 was $0.1 million. Principal
working capital changes included a $5.0 million increase in accounts receivable,
a $7.8 million increase in inventories and a $9.2                               

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million increase in accounts payable. Net cash used in investing activities in  
1995 aggregated $0.1 million, principally reflecting capital expenditures. Net  
cash provided by financing activities in 1995 aggregated $0.5 million,          
principally attributable to a net increase in borrowings of $2.1 million, and   
partially offset by the payment of $1.9 million of dividends.                   

 Macpherson had a revolving credit line that permitted borrowings of up to
$7.0 million. The revolving credit line was due and payable upon expiration on  
July 31, 1998, and bore interest, payable monthly on the first day of each      
month, at the lower of LIBOR plus the LIBOR margin (2 1/2% prior to December 15,
1996), or the bank's prime rate. Borrowings under the revolving credit line were
limited to specified percentages of eligible inventory and receivables of the   
Company. The Company had outstanding borrowings of $4.8 million, with additional
credit of $2.2 million available at December 31, 1996. This revolving credit    
line was collateralized by all trade accounts receivable and all inventories of 
Macpherson, except for approximately $12.6 million of stitching machine         
inventory. The revolving credit line was repaid and terminated in connection    
with the consummation of the Macpherson Acquisition.                            

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BUSINESS

GENERAL                                                                         

    The Company believes that it is the largest independent distributor in North
America of replacement parts, supplies and specialized equipment to             
manufacturers of apparel and other sewn products, offering a broad product line 
of over 200,000 items. These products include industrial sewing equipment parts,
such as needles, hooks, motors, tools and other accessories, and specialized    
equipment, such as screen printing equipment and supplies and production        
planning and control systems. In addition, following consummation of the        
Macpherson Acquisition, the Company became a major distributor of embroidery    
equipment and supplies, marketing its products through 22 sales and distribution
centers strategically located in the United States, Canada, Mexico, the         
Dominican Republic and England. During 1996, the Company's customer base        
consisted of over 15,000 manufacturers and dealers.                             

Since the Management Buyout, the Company has expanded through internal  
growth of operations and acquisitions. The Company intends to pursue strategic  
acquisitions to expand its product lines and enter into new geographic markets. 
The Company believes that the size of its operations and the stable operating   
history of its replacement parts and supplies distribution business have enabled
it to carry substantially higher levels of inventory than its competitors. These
investments in inventory provide customers with wide selection, a high degree of
product availability and assurance of prompt delivery. In addition, the Company 
believes that it is well positioned to pursue selected growth opportunities     
internationally, particularly in Mexico and South America, based upon the size  
of its operations, its established inventory management systems and its growing 
sales in these markets.                                                         

    The Company currently operates through six principal business units: (i) its
Sunbrand division, which is a distributor of replacement parts, supplies and    
specialized equipment to manufacturers of apparel and other sewn products; (ii) 
its Unity division, which is a wholesale distributor to dealers of replacement  
parts and supplies for use by the apparel and other sewn products industry;     
(iii) its W&G, Ltd. subsidiary, which is a distributor to manufacturers and     
dealers in the United Kingdom and Europe of replacement parts and supplies for  
use by the apparel and other sewn products industry; (iv) its Clinton           
subsidiary, which is a distributor of screen printing equipment and supplies for
the apparel industry; (v) its Leadtec subsidiary, which develops and supplies   
computer-based production planning and control systems for the apparel industry 
and (vi) Macpherson, which distributes embroidery equipment and supplies used in
the apparel industry. See "The Macpherson Acquisition."                         

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   The following table sets forth for each of the Company's business units (i)
net sales for the years ended December 31, 1994, 1995 and 1996, and (ii) net    
sales for the year ended December 31, 1996 on a pro forma basis assuming that   
the Clinton Acquisition, the Mitchell Acquisition and the Macpherson Acquisition
were consummated on January 1, 1996.                                            

                                                        [Enlarge/Download Table]

                                                           YEAR ENDED DECEMBER 31,              
                                             ---------------------------------------------------
                                                                                                
                                                1994         1995                1996           
                                             -----------  -----------  -------------------------


                                              COMBINED    HISTORICAL   HISTORICAL  PRO FORMA(1) 
                                             -----------  -----------  ----------  -------------
                                                           (DOLLARS IN THOUSANDS)               
                                                                                                
Sunbrand....................................  $  59,794    $  65,872   $   60,435   $    60,435 
Unity.......................................     12,566       12,118       10,936        10,936 
W & G, Ltd..................................      6,246        6,535        7,372         7,372 
Clinton(2)..................................     --           --           28,682        31,657 
Leadtec.....................................      4,347        5,906        6,426         6,426 
Macpherson..................................     --           --           --            67,767 
                                             -----------  -----------  ----------  -------------
Net sales...................................  $  82,953    $  90,431   $  113,851   $   184,593 
                                             -----------  -----------  ----------  -------------
                                             -----------  -----------  ----------  -------------

------------------------                                                        

(1) Gives effect to the Clinton Acquisition, the Mitchell Acquisition and the   
Macpherson Acquisition as if each occurred on January 1, 1996. See "Pro 
Forma Combined Financial Information."                                  

(2) Clinton was acquired effective February 1, 1996. Sales of Mitchell (0.8     
million for 1996) are included with the Clinton pro forma amount for    
purposes of this presentation.                                          

INDUSTRY OVERVIEW                                                               

    Manufacturers of apparel and other sewn products generally utilize a variety
of modern equipment and supplies in their production processes. Although there  
have been advances in the speed of equipment and automation of manufacturing    
methods, the basic sewing process has changed very little since the first sewing
machines were introduced over 125 years ago. Accordingly, the basic design of   
sewing equipment and replacement parts and supplies used with respect to such   
equipment has remained stable for many years, and new generations of sewing     
equipment have frequently utilized many parts designed for prior generations. In
addition, since numerous manufacturers of sewn products do not regularly replace
major equipment upon the introduction of new models, substantial numbers of     
older machines typically continue to be used for many years after the production
of more advanced units.                                                         

 The improvements in speed of equipment and the trend toward automation in
apparel and sewn products manufacturing have increased the demand for           
replacement parts and supplies by manufacturers, since high speed production    
increases the wear and tear on equipment. In addition, automation results in the
utilization of other equipment, such as cutting and finishing devices, that must
be maintained. As a result of the large number of differing replacement parts   
and supplies utilized by apparel and sewn products manufacturers and the        
relatively small quantity of many items required at varying times, such         
manufacturers generally prefer to obtain replacement parts and supplies from    
dealers that stock a wide range of products and offer prompt delivery. In       
addition, manufacturers of such replacement parts, supplies and specialized     
equipment often prefer to sell such products through distributors who can       
provide wide market coverage, assume credit risk and stock inventory, thereby   
limiting the manufacturers' costs of marketing and distribution.                

 The replacement parts distribution business for sewing equipment involves
both "genuine" and "generic" parts. "Genuine" parts are replacement parts       
manufactured by the original equipment manufacturer. "Generic" parts are        
non-branded replacement parts manufactured by someone other than the original   
equipment manufacturer.                                                         

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 The market for screen printing equipment and embroidery equipment used to
add decoration to apparel products has grown rapidly over the past several      
years. This growth has been propelled by expansion of the market for casual     
wear, such as T-shirts, sweatshirts and caps, which frequently feature printed  
or embroidered trademarks, slogans or other designs. In addition, improvements  
in technology have made screen printing and embroidery equipment less expensive 
and more sophisticated. The Company acquired Clinton, which distributes screen  
printing equipment and supplies, in February 1996, and Macpherson, which        
principally distributes embroidery equipment and supplies, in January 1997, in  
order to take advantage of the growing demand for such equipment and of the     
ability to market these complimentary product lines to the same end-user group. 

  The market of apparel manufacturers in the Western Hemisphere has expanded
during the 1990s due to the shifting production of apparel products sold in the 
United States from the Far East to Mexico and the rest of Latin America.        
According to the U. S. Department of Commerce, in 1990 Asia accounted for 75.4% 
of U.S. imports of apparel, while Mexico and the CBI countries accounted for    
11.2%. By 1995, Asia's share had dropped to 62.7% of U.S. imports, while Mexico 
and the CBI countries increased to 23.1%. The trend towards increasing apparel  
imports to the United States from Mexico is expected to accelerate with the     
implementation of NAFTA. In addition, the Company anticipates that apparel      
manufacturers from around the world who sell their products to the United States
will increase apparel production in Mexico, the CBI countries and the rest of   
Latin America due to the improved political and economic climate of many of such
countries and the quick and relatively inexpensive access to the U.S. market    
from such region. The Company believes it is well positioned to capitalize on   
the shift in apparel production to the southern portion of the Western          
Hemisphere due to its broad product line, its existing distribution centers     
located nearby and its prior relationships with many of the manufacturers that  
are establishing production facilities south of the United States. For example, 
the Company is a supplier to one of its major customers, Fruit of the Loom, at  
its new Mexican manufacturing facility that began operations in 1996.           

   The following data compiled by the U.S. Department of Commerce demonstrates
the growth in apparel production by manufacturers located in the United States  
and the growth in imports of apparel in the recent past:                        

                                                        [Enlarge/Download Table]

                                                            VALUE OF        VALUE OF U.S.   
                                                          SHIPMENTS OF        IMPORTS OF    
                                                              U.S.             APPAREL      
                                                        APPAREL PRODUCTS     PRODUCTS(1)    
                                                        ----------------  ------------------
                                                                                            
                                                               (DOLLARS IN MILLIONS)        
1980...................................................    $   45,782                       
1981...................................................        49,823                       
1982...................................................        53,388                       
1983...................................................        55,375                       
1984...................................................        57,578                       
1985...................................................        56,993                       
1986...................................................        57,919                       
1987...................................................        64,243                       
1988...................................................        65,032                       
1989...................................................        63,399         $   25,372    
1990...................................................        64,414             26,602    
1991...................................................        65,345             27,230    
1992...................................................        71,546             32,462    
1993...................................................        74,010             35,278    
1994...................................................        76,898             38,343    
1995...................................................        77,800             40,998    

------------------------                                                        

(1) Imports are restricted to goods imported for consumption and are on a       
customs value basis. Information for periods prior to 1989 was not      
available.                                                              

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COMPETITIVE STRENGTHS                                                           

   The Company believes that it has a strong competitive position attributable
to a number of factors, including the following:                                

- MARKET LEADERSHIP.  The Company believes that it is the largest       
  independent distributor of replacement parts, supplies and specialized
equipment for the apparel and other sewn products industry in North 
      America. As a result, the Company has significant purchasing power and can
     realize economies of scale in marketing, distribution and administration.
     The Company estimates that each of its principal operating units is among
the leaders in its respective market.                               

 - STRONG BRAND NAME RECOGNITION.  The Willcox & Gibbs brand name has been
    well known in the apparel industry since the Company's predecessor began
   operations in the mid-1800s as an apparel equipment manufacturer. Since
    that time, the Company's Sunbrand and Unity divisions have developed and
    maintained well-recognized brand names in replacement parts distribution
      through a long history of comprehensive and high quality product lines and
an emphasis on customer service.                                    

    - BROAD LINES OF QUALITY PRODUCTS.  The Company believes that it markets the
broadest line of quality replacement parts, supplies and specialized
  equipment to manufacturers of apparel and other sewn products in North
      America. For example, the Company's Sunbrand division markets over 180,000
items, while the Company believes that its closest competitor offers
      approximately 40,000 items. As a result of its broad product offering, the
    Company believes that it provides its customers with "one-stop shopping"
for their replacement parts, supplies and specialized equipment     
requirements.                                                       

    - HIGH LEVEL OF CUSTOMER SERVICE.  The Company provides its customers with a
comprehensive selection of products, a high degree of product       
   availability, convenient ordering systems and fast order response time.
    The Company's strategically placed distribution facilities and efficient
   inventory management systems enable it to achieve high order fill rates
      for replacement parts and supplies (in excess of 95% of orders are shipped
      within 24 hours), timeliness of delivery and wide geographic coverage. The
    Company utilizes a real-time computer inventory management system in its
      sewn products replacement parts and supplies businesses that enables it to
     search all inventory locations in North America for product availability.
   In addition, the Company maintains EDI systems that link the Company to
selected customers, such as Levi Strauss and Fieldcrest Cannon. The 
  Company fills substantially all of its orders of parts and supplies by
customers in the United States through next-day delivery, which is  
important to assist customers in minimizing operator downtime.      

- STRONG RELATIONSHIPS WITH SUPPLIERS.  The Company has developed strong
   relationships with many of its suppliers, with some dating back over 30
years. The Company maintains exclusive U.S. distribution rights for 
      genuine replacement parts for Pfaff (since 1958) and Pegasus (since 1966),
   two major sewing equipment suppliers to the U.S. apparel and other sewn
  products industry, as well as exclusive distribution rights in certain
      territories for M&R, a major manufacturer of screen printing equipment for
the apparel industry in the United States, and Barudan, a major     
    manufacturer of embroidery equipment for the worldwide apparel industry.

   - DIVERSIFIED BASE OF CUSTOMERS.  During 1996, the Company sold products to
over 15,000 apparel and sewn products manufacturers and dealers of  
     replacement parts and supplies, with no single customer representing more
   than 5.2% of net sales. The Company has enjoyed long-term relationships
      with a number of its major customers, including Levi Strauss, Fruit of the
Loom, Fieldcrest Cannon, Russell Athletic and VF Corporation.       

    - EXPERIENCED MANAGEMENT TEAM.  The Company's officers have an average of 16
     years of experience with the Company and the Company's Predecessor and an
average of 19 years of industry experience. The Company retained    
    substantially all of the senior management of the businesses acquired in
 the Management Buyout in July 1994, of Clinton in connection with its
acquisition by                                                      

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    the Company in February 1996 and of Macpherson following consummation of
the Macpherson Acquisition in January 1997. The Company's senior    
   management and employees collectively owned, as of March 31, 1997, on a
fully diluted basis 63.1% of the Company's outstanding common stock.

BUSINESS STRATEGY                                                               

  The Company's strategy is to enhance its position as a leading distributor
of replacement parts, supplies and specialized equipment to the apparel and     
other sewn products industry. In order to achieve this objective, the Company   
has developed a business plan that consists of the following key elements:      

- MAINTAIN LEADING MARKET POSITION.  The Company believes that it is the
  leading independent distributor in North America of replacement parts,
     supplies and specialized equipment to the apparel and other sewn products
     industry. The Company believes that such leadership is based primarily on
the Company's long history of operations, broad line of products and
 excellent customer service. The Company intends to enhance its market
    leadership by maintaining and expanding its relationships with suppliers
and customers.                                                      

- EXPAND PRODUCT LINES.  The Company intends to add lines of replacement
      parts, supplies and specialized equipment that can be efficiently marketed
    through its existing distribution system. Such additions are intended to
      strengthen the Company's position as a "one-stop shop" without significant
incremental expenses related to selling, marketing, distribution and
administration.                                                     

    - INCREASE PENETRATION OF EMERGING MARKETS.  The Company believes that it is
  well positioned to increase sales by targeting growth opportunities in
    emerging markets such as Mexico, the CBI countries and the rest of Latin
   America. The Company expects that its comprehensive line of replacement
   parts, supplies and specialized equipment and substantial experience in
serving the apparel and other sewn products industry will provide a 
   competitive advantage over smaller, local competitors in these regions.
The Company intends to expand its presence in these areas in 1997 by
opening a new sales office in Colombia.                             

  - PURSUE SELECTED ACQUISITIONS.  Since the Management Buyout in July 1994,
     the Company has pursued a plan of expanding its product offerings through
    strategic acquisitions. In February 1996, it acquired Clinton, a leading
    distributor of screen printing equipment and supplies, in November 1996,
 it acquired Mitchell, a manufacturer of abrasive cords and tapes used
 principally by apparel manufacturers, and in January 1997 it acquired
   Macpherson, a leading distributor of embroidery equipment and supplies.
    The Company intends to pursue other strategic acquisitions to expand its
product lines and to enter into new geographic markets.             

SUNBRAND                                                                        

Sunbrand, which has been operating for over 40 years, believes it is the
largest distributor in North America of replacement parts, supplies and         
specialized equipment to manufacturers of apparel and other sewn products.      
Sunbrand's products are purchased from many of the leading manufacturers of     
equipment for the apparel and sewn products industry. The Company believes that 
Sunbrand's breadth of product selection makes it the apparel industry's leading 
one-stop shop for replacement parts and supplies. On a pro forma basis assuming 
the Clinton Acquisition, the Mitchell Acquisition and the Macpherson Acquisition
were consummated on January 1, 1996, Sunbrand's net sales would have accounted  
for approximately 32.7% of the Company's 1996 consolidated net sales.           

  PRODUCTS.  Sunbrand carries one of the most extensive lines of replacement
parts and supplies for the apparel and other sewn products industry in North    
America. Its product line includes a full range of replacement parts for sewing 
machines, spreading and cutting equipment, finishing equipment, and general     
supplies. Sunbrand also offers a broad base of manufacturing equipment,         
distribution systems, information systems and management services. Sunbrand     
offers over 180,000 items, while the Company                                    

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believes that its closest competitor offers approximately 40,000 items. The     
Company believes that Sunbrand's broad product line gives it the advantage of   
being the apparel industry's leading one-stop shop for replacement parts and    
supplies.                                                                       

SUPPLIERS.  Sunbrand purchases products from 1,200 different vendors,   
including many of the leading manufacturers of equipment for the apparel and    
sewn products industry. In addition, Sunbrand is the exclusive distributor of   
Pfaff and Pegasus genuine replacement parts in the United States. Sunbrand's    
five largest suppliers (other than Unity) accounted for 39.6% of its total      
purchases in 1996, and Pfaff and Pegasus accounted for approximately 11.0% and  
13.9%, respectively, of Sunbrand's purchases for such year. Sunbrand obtains all
of its generic sewing parts and supplies from Unity.                            

Pfaff, a German company, is a major manufacturer of industrial sewing   
equipment for the apparel industry and, in 1995, the Company believes Pfaff had 
an estimated 8.0% share of the U.S. "lock-stitch" industrial sewing machine     
market. Pegasus is a significant Japanese manufacturer of industrial sewing     
equipment, and, in 1995, the Company estimates that Pegasus had a 30.0% share of
the U.S. "chain-stitch" industrial sewing machine market. The Company (including
its predecessor) has been the exclusive distributor in the United States of     
Pfaff genuine parts since 1958 and of Pegasus genuine parts since 1966.         

Under the Company's distributor agreements with Pfaff and Pegasus, the  
Company is the exclusive United States distributor of Pfaff and Pegasus genuine 
parts through 1998, which exclusive arrangements automatically renew for        
successive two year periods unless notice of termination is given at least one  
year prior to December 31, 1998 or the end of any successive two year period of 
exclusivity. In order to maintain the exclusivity of the Pfaff and Pegasus      
distribution agreements, the Company must meet certain performance targets.     
Historically the Company has generally satisfied these requirements, although in
certain prior years they were not satisfied and Pfaff and Pegasus waived such   
shortfalls. Although the Company believes that its relationships with Pfaff and 
Pegasus have been good, there can be no assurance that the Pfaff or Pegasus     
distribution agreement will be extended beyond its current term or that the     
Company will continue to be the distributor for Pfaff or Pegasus parts. No      
assurance can be given that the failure to extend either the Pfaff or Pegasus   
distribution agreement or the loss by the Company of its supplier relationship  
with Pfaff or Pegasus would not have a material adverse effect on the Company's 
business, financial condition and results of operations. See "Risk              
Factors--Dependence on Suppliers."                                              

SALES AND DISTRIBUTION.  Sunbrand has its headquarters and principal    
warehouse facility in Atlanta, Georgia. In addition, Sunbrand maintains six     
strategically located branches that serve as regional sales offices and         
distribution points: Fall River, Massachusetts; Miami, Florida; El Paso, Texas; 
Mexico City and Gomez Palacio/Torreon, Mexico; and Santo Domingo, Dominican     
Republic. All of its branches are connected by a sophisticated computer ordering
system that allows real-time ordering and rapid inventory replenishment. The    
Atlanta warehouse provides over 180,000 different items, and the branches stock 
the parts ordered most frequently in their particular regions. The typical      
branch carries approximately 3,500 items.                                       

Sunbrand is well known for its 1,600 page catalog, which serves as a    
reference source for the apparel industry due to the breadth of Sunbrand's      
product lines. This catalog, which is published about every three years, is a   
valuable marketing tool that is used by many existing and potential buyers of   
parts and supplies.                                                             

   Sunbrand's customers are offered five convenient methods of placing orders:
(i) through the main Atlanta distribution center via a toll-free number printed 
at the bottom of each page of Sunbrand's catalog; (ii) through customer service 
representatives in the branch closest to them; (iii) through an on-line ordering
system installed at the customer's location linked to Sunbrand's mainframe      
computer; (iv) through electronic data interchange; and (v) via facsimile.      

   As of December 31, 1996, Sunbrand maintained a staff of 25 customer service
representatives, 13 of whom were located in Atlanta. Upon receipt of an order,  
customer service relays it either to the Atlanta                                

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warehouse or the closest branch via on-line computer, where the item is packed, 
shipped, and automatically re-ordered for inventory. During 1996, over 95% of   
Sunbrand's orders were shipped within 24 hours. Most packages are shipped via   
U.P.S. overnight and received by customers the following day.                   

In addition, Sunbrand maintains three groups of specialized personnel to
serve its customers: field sales representatives, product specialists and       
service technicians. Field sales representatives, who numbered 40 at December   
31, 1996, are based in Atlanta and each of Sunbrand's branch offices. Each field
sales representative is responsible for expanding existing customer             
relationships and developing new customers in his or her assigned territory.    
Sunbrand's product specialists, who totalled 23 as of December 31, 1996, are    
required to maintain thorough technical knowledge about their assigned products.
Product specialists are available to respond to inquiries regarding the         
Company's products and often accompany field representatives on customer calls. 
They also monitor product lines for profitability. Sunbrand's technical         
specialists repair, install, and train plant maintenance staffs in the operation
and maintenance of parts and equipment. The staff of technical specialists      
totalled 16 at December 31, 1996.                                               

   CUSTOMERS.  Sunbrand serviced over 11,400 customers in 1996, the largest of
which accounted for 6.1% of Sunbrand's 1996 net sales. Sunbrand's top ten       
customers, which included Levi Strauss, Fruit of the Loom, Fieldcrest Cannon,   
Russell Athletic and VF Corporation, represented 20.1% of Sunbrand's net sales  
in 1996. Sunbrand's top fifteen customers have all been Sunbrand customers for  
more than 15 years.                                                             

  Historically, a majority of Sunbrand's sales have been to customers in the
United States, although sales to customers in Latin America have increased      
significantly in recent years. Approximately 10% of Sunbrand's net sales in 1990
were to Latin America, which increased to 23.8% in 1996. The balance of         
Sunbrand's sales were to customers in the United States and Canada. Mexico was  
the principal location of Sunbrand's customers outside of the United States in  
1996, comprising 12.6% of Sunbrand's net sales, followed by the CBI countries   
and other South American countries. The Company may continue to follow important
customers from the U.S. as they pursue opportunities in the CBI and other South 
American countries.                                                             

COMPETITION.  While there is strong competition throughout the markets  
served by Sunbrand, Sunbrand believes that it is the largest distributor in     
North America of replacement parts and supplies to manufacturers of apparel and 
other sewn products. Most of Sunbrand's competitors are small, regional         
distributors. In addition, there are three national competitors to Sunbrand,    
some of which may have greater financial resources than the Company. Competition
is principally based on product availability, price and speed of delivery.      

UNITY                                                                           

 Unity, founded over 50 years ago in New York City, is a leading wholesale
distributor to dealers in North America of replacement parts and supplies for   
use in the apparel and sewn products industry. Unity does not sell directly to  
manufacturers or other end-users. On a pro forma basis assuming the Clinton     
Acquisition, the Mitchell Acquisition and the Macpherson Acquisition were       
consummated on January 1, 1996, Unity's net sales would have accounted for      
approximately 5.9% of the Company's 1996 consolidated net sales.                

PRODUCTS.  Unity's product line includes genuine and generic replacement
parts, needles, motors, tables, stands, cleaning guns and sewing lights. Unity  
offers over 70,000 items. Since Unity's customers (other than Sunbrand) are     
dealers who typically resell to medium-sized and smaller apparel manufacturers, 
Unity's sales have generally been substantially comprised of more economical    
generic replacement parts rather than genuine parts. In each of the past three  
years, generic parts have accounted for over 92% of Unity's net sales.          

  SUPPLIERS.  Unity purchases the majority of its products from the Far East
and Germany. Japanese and German generic parts are generally regarded as the    
highest quality. Taiwanese products have a lesser                               

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reputation but are lower priced, and Unity purchases many commodity items from  
Taiwan in order to meet customers' low cost needs. In 1996, approximately 41% of
Unity's purchases came from Japan, 9% from Germany and 13% from Taiwan. United  
States purchases accounted for approximately 23% of the total in 1996, and the  
balance of its purchases came from Sunbrand.                                    

Unity purchases generic parts from hundreds of small manufacturers,     
principally through trading houses or similar arrangements. Many parts made in  
Japan and Taiwan are available to Unity's competitors through similar           
arrangements. However, Unity has exclusive arrangements with some manufacturers 
that give it either sole distribution rights or shared rights with a limited    
number of other wholesalers.                                                    

Unity's largest supplier is Sogawa, located in Osaka, Japan. The primary
products purchased by Unity from Sogawa are hooks used for sewing equipment,    
principally Hirose hooks. In 1996, Hirose hooks comprised approximately 19.9% of
Unity's total sales, and Sogawa products accounted for approximately 34.3% of   
Unity's purchases.                                                              

   SALES AND DISTRIBUTION.  Unity operates warehouses in Carteret, New Jersey;
Los Angeles, California; and Miami, Florida. The Carteret warehouse serves the  
eastern and midwestern United States, from Massachusetts to Georgia, and as far 
west as Dallas. The Los Angeles facility serves the western United States and as
far east as Denver. The Miami facility principally serves the Latin American    
trade. The Miami office initially collected orders that were filled from the    
Company's principal warehouse. Due to a rapid increase in orders, Unity opened a
full stocking warehouse in Miami in April 1993. During 1996, the Miami warehouse
filled approximately 85% of the orders taken by the office, and Unity plans to  
expand the Miami product line to improve same-day delivery capability.          

Unity utilizes a sophisticated inventory tracking computer system that  
closely analyzes inventory turnover for each replacement part. This system      
enables Unity to minimize inventory levels, yet maintain a very high service    
level.                                                                          

   Unity markets its products through its extensive 700 page catalog, which is
a leading source of information for dealers of replacement parts and supplies.  
In addition, Unity currently employs two full-time traveling salesmen who visit 
regularly with dealers and eight customer service representatives who regularly 
visit with large accounts to assist in service, delivery and new product needs. 
Most of Unity's orders are booked via telephone or facsimile due to the time    
sensitivity of the typical customer's needs. Both New York and California have  
nationwide 800 telephone service, and the Miami office offers 800 telephone     
service throughout Latin America.                                               

    Approximately half of all of Unity's shipped orders are sent directly to the
end-user, with dealers receiving, and subsequently redistributing, the other    
half. Whenever Unity delivers a product directly to an end-user, the dealer's   
label is placed on the package. U.P.S. ground deliveries represent approximately
80% of Unity's total deliveries, with overnight service comprising the remaining
20%. In order to reduce delivery time to customers, Unity often direct drop     
ships to end-users, thus bypassing inventory and shipping, and reducing the cost
to Unity.                                                                       

  CUSTOMERS.  Unity sells to a network of over 1,000 independently owned and
operated dealers, none of which accounted for more than 2.0% of Unity's net     
sales in 1996. Historically, a majority of Unity's sales have been to customers 
in the United States, although sales to customers in Latin America have         
increased significantly in recent years. Approximately 14% of Unity's sales in  
1990 were to Latin America, which increased to 25.2% in 1996. The balance of    
Unity's sales were to customers in the United States and Canada. To increase the
Company's participation in the Latin American markets, Unity plans to open a new
warehouse in Colombia, and similar plans in two other South American countries  
are under negotiation.                                                          

  COMPETITION.  Unity's business is highly competitive. There are four other
significant wholesalers that supply dealers with apparel parts and supplies,    
none of which has more than two warehouses, as compared                         

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to Unity's three distribution centers. In addition, there are numerous smaller, 
regional competitors, and in some instances dealers bypass wholesalers and buy  
directly from manufacturers or trading companies when purchasing a significant  
quantity of parts or supplies or if it is otherwise cost effective. Competition 
is principally based on product availability, price and speed of delivery.      

W&G, LTD.                                                                       

W&G, Ltd., a United Kingdom corporation organized in 1908, is a leading 
distributor of generic and genuine replacement parts, supplies and specialized  
equipment to apparel manufacturers and dealers in the United Kingdom and Europe.
The Company believes that the breadth of W&G, Ltd.'s inventory and its          
attainment of certain quality control standards make it a leading one-stop      
provider for apparel manufacturers and dealers in the United Kingdom and Europe.
On a pro forma basis assuming the Clinton Acquisition, the Mitchell Acquisition 
and the Macpherson Acquisition were consummated January 1, 1996, W&G, Ltd.'s net
sales would have accounted for approximately 4.0% of the Company's 1996         
consolidated net sales.                                                         

PRODUCTS.  W&G, Ltd. maintains an inventory of over 35,000 items, the   
majority of which are generic parts for sewing machines from virtually every    
manufacturer in the industry. In addition to generic machine parts, W&G, Ltd.   
sells two needle lines, sewing equipment, cutting equipment and pressing        
equipment.                                                                      

W&G, Ltd. purchases a majority of its products from the Far East and    
Germany, and also purchases a considerable amount of its products from Sunbrand 
and Unity. W&G, Ltd. has long standing non-exclusive relationships with its     
primary suppliers.                                                              

SALES AND DISTRIBUTION.  W&G, Ltd. sells the majority of its products   
directly to apparel manufacturers through its ten sales representatives. In     
addition, W&G, Ltd. currently employs three representatives to service its      
wholesale dealer business.                                                      

   W&G, Ltd.'s central warehouse in Braintree, Essex is located close to major
highways, railways to London and Stanstead Airport. In addition to the Braintree
warehouse, two additional stocking facilities are located in Nottingham and     
Leicester. To meet customers' time requirements, W&G, Ltd. often uses Royal Mail
and Parcelforce for next day delivery anywhere in the U.K. Less urgent shipments
are sent via regular mail.                                                      

CUSTOMERS.  W&G, Ltd. has been servicing its top ten customers for an   
average of 16 years. During 1996, approximately 60% of sales were direct to     
manufacturers, with the balance generated through dealer accounts. None of W&G, 
Ltd.'s customers accounted for more than 9.7% of its 1996 net sales.            

    COMPETITION.  W&G, Ltd.'s business is highly competitive. There are a number
of smaller, local competitors, as well as one major national U.K. competitor    
comparable in size to W&G, Ltd. Competition is principally based on product     
availability, price and speed of delivery.                                      

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CLINTON                                                                         

Clinton, founded by its current management in 1985 and acquired by the  
Company in February 1996, is a distributor of screen printing equipment and     
supplies for the apparel industry. See "The Company-- The Clinton Acquisition." 
Screen printing is the process by which designs are applied to fabric or other  
material using patterned screens. The Company acquired Clinton pursuant to its  
business strategy of expanding the product lines it is able to offer through its
existing distribution network. On a pro forma basis, assuming that the Clinton  
Acquisition, the Mitchell Acquisition and the Macpherson Acquisition were       
consummated on January 1, 1996, Clinton would have accounted for approximately  
17.2% of the Company's 1996 consolidated net sales (including Mitchell, which   
would have accounted for approximately 0.5% of such net sales).                 

PRODUCTS.  Clinton sells and services a complete line of automatic and  
manual screen printers, gas and electric dryers and other accessory equipment   
for the screen printing industry. Clinton also offers a comprehensive line of   
textile screen printing supplies, including inks, chemicals, emulsions, screen  
frames, screen mesh and other accessory items.                                  

The majority of Clinton's products are used to produce designs on men's,
women's and children's T-shirts and sweatshirts and other apparel items. Other  
significant applications include home furnishings, towels, hats, industrial     
fabrics and other non-apparel promotional articles made from fabric materials.  
Clinton also sells a complete line of equipment to graphics customers primarily 
for promotional signs and posters.                                              

 Clinton distributes the M&R line of screen printing equipment and dryers.
M&R is a major United States manufacturer of screen printing equipment. Pursuant
to two distribution agreements between Clinton and M&R, Clinton has certain     
distribution rights for M&R's screen printing equipment. With respect to M&R's  
textile equipment, Clinton has exclusive rights to distribute such equipment in 
five southeastern states of the United States and in Latin America, Europe,     
Africa, the Middle East, Asia and Australia (the "Worldwide Territory"). Clinton
has nonexclusive rights to distribute M&R's textile equipment in Mississippi and
Kentucky. With respect to M&R's graphics equipment, Clinton has nonexclusive    
rights to distribute such equipment in seven southeastern states of the U.S. and
the Worldwide Territory. The M&R agreement governing U.S. territories expires on
December 31, 1998 and continues from year to year thereafter, although it may be
terminated at any year end if written notice is given to the other party on or  
before July 1 of such year. The M&R agreement governing international territory 
expired on December 31, 1996 but continues from year to year thereafter,        
although it may be terminated by either party at any year end if written notice 
is given to the other party on or before September 1 of such year. M&R products 
comprised 51.2% of Clinton's total purchases in 1996. No other vendor accounted 
for more than 18.0% of Clinton's purchases in 1996.                             

SALES AND DISTRIBUTION.  Clinton's marketing strategy has been to align 
itself with single manufacturers of major screen printing products, which has   
allowed Clinton to secure agreements with leading manufacturers of certain      
products. The Company believes that these affiliations have created competitive 
advantages for Clinton, including closer working relationships, increased buying
power, opportunities for special terms and prices, increased stocking levels    
(which significantly reduces backorders) and enhanced product knowledge by      
Clinton personnel.                                                              

Clinton believes that it is one of the few companies within the screen  
printing industry to carry an extensive inventory of both equipment and         
supplies. This has enabled Clinton to serve as a "one-stop source" for          
customers, providing them with the convenience of dealing with a single supplier
for all of their screen printing needs. By purchasing an extensive inventory of 
equipment and supplies through single sources, Clinton is able to stock a more  
targeted inventory, as well as allowing for quicker delivery.                   

    Clinton direct sells to its customers with experienced sales representatives
supported by telemarketing, direct marketing materials and a monthly newsletter.
Clinton has a complete working showroom for                                     

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sales demonstrations, customer seminars and personnel training. Customer classes
are given monthly in both English and Spanish.                                  

Clinton has its headquarters in Miami Lakes, Florida with distribution  
warehouses in Miami Lakes, Florida; Charlotte, North Carolina; Los Angeles,     
California; Mexico City, Mexico; and Braintree, United Kingdom. Clinton markets 
its products in the United States and Latin America through a sales force       
currently numbering 17 backed up by a telemarketing department. In addition,    
approximately eight distributors are currently used in Latin America. Outside of
the Western Hemisphere, sales are made primarily by approximately 40            
distributors located throughout the world.                                      

    CUSTOMERS.  Clinton sells its products to over 1,000 customers in the screen
printing industry, primarily apparel manufacturers and contract apparel         
printers. These customers are located principally in the southeastern United    
States, but also in Latin America, Europe, Asia, Africa and the Far East.       
Clinton's largest customer accounted or approximately 3.5% of Clinton's 1996 net
sales, and Clinton's top ten customers accounted for approximately 22.2% of 1996
net sales.                                                                      

   COMPETITION.  M&R's screen printing equipment has captured a major share of
the U.S. market over the past several years, and Clinton estimates that M&R had 
approximately 70% of the U.S. market for such equipment in 1996. Competition    
with respect to Clinton's other products is strong, mainly from a variety of    
distributors of general printing equipment and supplies.                        

MACPHERSON                                                                      

Macpherson, founded in 1976, is principally engaged in the distribution 
throughout the United States and Canada of embroidery equipment used in the     
apparel industry. Such embroidery equipment is used to create designs on apparel
and other products utilizing one or more needle heads and thread. Embroidery can
add value to a finished product with little incremental expense, and            
technological developments in recent years have improved equipment capabilities 
and lowered capital costs.                                                      

  The Company acquired Macpherson in January 1997 using a portion of the net
proceeds from the sale of the Old Notes. On a pro forma basis, assuming that the
Clinton Acquisition, the Mitchell Acquisition and the Macpherson Acquisition    
were consummated on January 1, 1996, Macpherson would have accounted for        
approximately 36.7% of the Company's 1996 consolidated net sales. The Company   
believes that Macpherson's products can be effectively marketed through the     
Company's existing sales channels without significant added costs. In addition, 
the Company believes that the products distributed by Clinton and Macpherson are
complementary and can be targeted for sale to the same end-user group.          

  PRODUCTS.  Macpherson provides a complete line of technologically advanced
embroidery equipment for the apparel industry, as well as customer service,     
support and training, and a comprehensive line of embroidery supplies and       
accessories. Macpherson's principal supplier of embroidery machines is Barudan, 
a Japanese manufacturer.                                                        

    Embroidery machines may contain single or multiple sewing heads. Each sewing
head consists of a group of needles that are fed by spools of thread attached to
the equipment. The needles operate in conjunction with each other to embroider  
the thread into the cloth or other surface in such configuration as to produce  
the intended design. Thread flowing to each needle can be of the same or varying
color. Each head creates a design, and heads operating at the same time create  
the same size and shape designs. Thus, a 30 head machine with all heads         
operating simultaneously can create an identical-design on thirty surfaces. The 
design and production capabilities are enhanced through the integration of      
computers and specialized software applications.                                

   Growth in Macpherson's sales of singlehead and multihead machines continues
to be driven by technological advances in the machines and related computer     
software. These advances have reduced                                           

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customers' embroidery production costs and created new embroidery applications  
and markets. Macpherson collaborates with its suppliers in connection with their
development of new embroidery equipment and develops application software to    
enhance the efficiency of producing embroidered designs.                        

 Barudan is one of the world's major manufacturers of embroidery machines.
Under the distribution agreement among Macpherson, Barudan and certain of their 
affiliates, Macpherson is the exclusive distributor of new Barudan embroidery   
equipment in the United States and Canada until December 31, 2003. The Barudan  
Agreement automatically renews for a period of five years unless either party   
terminates such agreement on not less than 30 days notice. Purchases of Barudan 
products accounted for 78.0% of Macpherson's 1996 total purchases. No other     
product accounted for more than 5.3% of Macpherson's 1996 purchases.            

    SALES AND DISTRIBUTION.  Macpherson has been selling embroidery equipment in
the United States and Canada since 1976, and believes that it is one of the     
major distributors of Barudan equipment in the world. Macpherson is             
headquartered in Greensboro, North Carolina, and has seven additional sales     
offices located throughout the United States and in Canada. Each location has   
showrooms for the demonstration of equipment and embroidery techniques.         

 Macpherson markets its products through 13 sales representatives and four
dealers. In addition, the sales force is supported by 37 technical              
representatives who travel throughout the sales territory to train, instruct and
offer technical assistance to Macpherson's customer base. Macpherson also       
maintains eight technicians at its Greensboro, North Carolina, and Costa Mesa,  
California, facilities to offer telephone support to customers in technical     
applications.                                                                   

 Macpherson provides a full training facility located in Greensboro, North
Carolina, which conducts technical and application training courses throughout  
the year. In addition, a series of regional training sessions are conducted     
throughout the year at various trade shows, sales offices, and customer         
locations.                                                                      

  CUSTOMERS.  The products sold by Macpherson are used primarily by contract
embroiderers, manufacturers of apparel and fashion accessories, retail stores   
and embroidery entrepreneurs serving specialized niche markets. Macpherson's    
customers include Champion Products, Liberty Embroidery, Antiqua, Russell       
Athletic, Things Remembered and other major apparel manufacturers. Macpherson's 
largest customer accounted for approximately 4.9% of Macpherson's 1996 net      
sales, and its top ten customers accounted for approximately 19.9% of its 1996  
net sales.                                                                      

COMPETITION.  Macpherson competes with Hirsch International Corp., a    
distributor of Tajima singlehead and multihead embroidery machines. The Company 
believes that sales of Tajima machines comprised approximately 55.0% of the U.S.
market in 1996, compared to approximately 40.0% for Barudan. Macpherson also    
competes with a number of smaller distributors of competitive embroidery        
machines and with original equipment manufacturers, such as Melco Industries,   
which distribute products directly into Macpherson's markets. Macpherson        
believes it competes on the basis of the quality of the embroidery equipment it 
distributes, as well as its knowledge, experience and customer service.         
Macpherson's customers are subject to competition from importers of embroidered 
products, which could effect Macpherson's operations.                           

THE LEASING COMPANY                                                             

In connection with the Macpherson Acquisition, the Company acquired the 
Leasing Company, a leasing company affiliate of Macpherson, for approximately   
$0.5 million, payable over three years, plus interest at 6.0% per annum. The    
Leasing Company commenced operations in March 1996. The Company intends to      
utilize the Leasing Company to offer flexible lease financing to its customers  
to support the Company's sales of equipment.                                    

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The Leasing Company intends to sell a portion of its leases to financial
institutions on a non-recourse basis. The selling price of the leases to        
financial institutions is expected to equal the sales price of the equipment    
leased, plus a portion of the finance charges paid by the lessee. In addition,  
at the end of the lease term, the residual value of the equipment will either   
revert to the Leasing Company or the Leasing Company will sell the equipment to 
the lessee at terms agreed upon in the original lease agreement. Each lease will
generally have a term of 3-5 years.                                             

The Leasing Company will retain a majority of its leases. The Company   
intends to make an equity investment in the Leasing Company of approximately    
$3.5 million in 1997, and the Leasing Company is expected to arrange for        
additional borrowings to finance its operations.                                

    Prior to its acquisition by the Company, substantially all of the assets and
liabilities of the Leasing Company were removed. Accordingly, the principal     
benefit of the acquisition was the existing organization of the Leasing Company.

  The Leasing Company will be an Unrestricted Subsidiary for purposes of the
Indenture and, therefore, will not be subject to the covenants contained in the 
Indenture. See "Description of Senior Notes."                                   

LEADTEC                                                                         

    Leadtec, founded by its current chief executive officer in 1978 and acquired
by the Company's Predecessor in 1985, develops, distributes and supports        
computer software and specialized hardware for sewn products manufacturers. On a
pro forma basis assuming the Clinton Acquisition, the Mitchell Acquisition and  
the Macpherson Acquisition were consummated January 1, 1996, Leadtec's net sales
would have accounted for approximately 3.5% of the Company's 1996 consolidated  
net sales.                                                                      

PRODUCTS.  Leadtec's primary product is "Satelite Plus", which is a     
production planning and control system designed to allow apparel factory        
operators to monitor production progress and efficiency. The manufacture of sewn
products has unique characteristics like piecework incentives, products defined 
by style/color/size and highly engineered labor operations which render generic 
manufacturing software unable to deliver satisfactory solutions for the control 
and management of production. Leadtec's Satelite Plus-Registered Trademark-     
system is specifically designed for the sewn product manufacturing process.     

 Satelite Plus is available in both "batch" and "real-time" formats. Under
the batch product, production operators clip bar-coded coupons to capture data  
for each bundle or lot they produce. At the end of the day, or possibly at      
predetermined intervals during the day, coupons are submitted in "batch" for    
data input. This data is then processed by the Satelite Plus system to calculate
pay and generate reports for management.                                        

  The real-time Satelite Plus product is a computerized system that captures
production events as they occur and provides corresponding up-to-the-minute     
information to management. When the real-time system is installed at a factory, 
production workers have Satelite Plus proprietary terminals at their            
workstations that communicate with the computer system. Operator terminals are  
multilingual, and are capable of communicating in English, Spanish and other    
languages. The operators use these terminals to report for work, start bundles, 
report difficulties, and pace themselves for improved performance. The regular  
input of data by operators during the work shift and the processing of that data
by Satelite Plus enables management to monitor the productivity of the factory  
on a real-time basis. In addition, Satelite Plus can simulate the factory's     
performance after giving effect to changes under consideration by management.   
For example, the system predicts production on each job, recommends transfers,  
and projects the effects of each transfer on excess costs and daily production. 

The Satelite Plus real-time system is a complete package of hardware,   
software, installation and training support. The main processing computer is an 
IBM AS/400 with display stations for plant managers, supervisors, engineers,    
production planners and office/support staff. Production employees have         

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individual Satelite Plus terminals with barcode slot readers and displays for   
two-way communication with the system. The Network Manager consists of an IBM   
compatible PC and specialized communications hardware to complete the link      
between the AS/400 and the operator terminals.                                  

    SALES AND DISTRIBUTION.  Leadtec, through Satelite Plus, believes it has the
world's largest installed base of batch and real-time apparel production control
systems, with 200 installed systems and 44,300 user terminals as of December 31,
1996. To capitalize on its product recognition and the growth of off-shore      
apparel production, Leadtec established distribution arrangements in Australia  
in 1990, added its multi-lingual capabilities in 1991 and is presently enhancing
its systems for sale in Latin America.                                          

Sales of Satelite Plus factory installations typically require long     
lead-times to develop, given the significant capital expenditure and management 
resource commitment required. Leadtec's products are sold by a three-person     
direct sales force based in Atlanta, as well as by Sunbrand sales               
representatives who generate sales opportunities for Leadtec. Typically,        
customers commit to implement Satellite Plus in one plant on a trial basis. If  
the trial is successful, the customer then rolls-out the product on a plant by  
plant basis to the remainder of its manufacturing facilities. Accordingly,      
Leadtec's sales may vary significantly from year to year, as an installation of 
numerous plants for a single large customer can have a major impact on sales    
volume in any single year.                                                      

    SUPPORT AND DEVELOPMENT.  Leadtec provides installation and training support
on-site at the customer's facility. Leadtec also provides software and          
proprietary hardware maintenance services on a contract or time and material fee
basis. Support is offered to its real-time customers 24 hours per day, 7 days   
per week. Virtually all software support after the installation and training    
period is provided over the telephone by voice and/or data linkages.            
Approximately once each year, Leadtec distributes software updates to Satelite  
Plus customers who have an annual software maintenance contract. Support of     
proprietary hardware is provided on a time and material or annual contract basis
using Leadtec's repair center in California or vendors located in Los Angeles   
and in Europe. Leadtec also provides software development services to customers 
who require added features or customize software modules. Most software         
development is provided on a time and material fee basis.                       

    CUSTOMERS.  Leadtec's customers include Levi Strauss, Fruit of the Loom, Lee
Apparel, Van Heusen and Healthtex.                                              

  COMPETITION.  Leadtec is not aware of any system similar to Satelite Plus'
real-time system. However, its real-time system competes with traditional batch 
systems. There are numerous competitors with respect to the batch system.       
Competition is usually based on price, functionality and support.               

PROPERTIES                                                                      

    The Company leases all of its office and warehouse properties at its various
locations, except for the facilities owned by W&G, Ltd. in Braintree, England.  
The Company's headquarters are located in approximately 33,000 square feet of   
space in Carteret, New Jersey under a lease expiring in 2005, which also serves 
as the headquarters and principal warehouse for Unity. Sunbrand's Atlanta       
offices and warehouse occupy approximately 88,000 square feet under a lease     
expiring in 2001. Clinton operates its headquarters, showroom and warehouse and 
shipping facilities out of approximately 40,000 square feet located in Miami    
Lakes, Florida under a lease expiring in 1998. The Company's other operations   
are located in smaller leased spaces. The Company believes that, if necessary,  
it would be able to lease adequate replacement space without material additional
expense.                                                                        

EMPLOYEES                                                                       

As of December 31, 1996, the Company employed 433 full time employees,  
including 5 by WG Apparel, 237 by Sunbrand, 60 by Unity, 38 by W&G, Ltd., 71 by 
Clinton and 22 by Leadtec. The Company's employees are not represented by any   
labor union. As a result of the Macpherson Acquisition, approximately 141       
employees joined the Company's workforce effective January 3, 1997, none of whom
is represented by a union. The Company considers its employee relations to be   
good.                                                                           

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY                                 

  The following table sets forth certain information regarding the Company's
executive officers and directors. Ages are as of January 31, 1997.              

                                                        [Enlarge/Download Table]

              NAME                 AGE                          POSITION(S)                     
---------------------------------  ---     -----------------------------------------------------
                                                                                                

John K. Ziegler(1)...............      59  Chairman of the Board, Chief Executive Officer and   
                                           Director                                             

Maxwell L. Tripp.................      57  President, Chief Operating Officer and Director      

John K. Ziegler, Jr. ............      29  Chief Financial Officer                              

Jack Klasky......................      53  Vice President, President of Leadtec and Director    

Alan B. Lee......................      49  Vice President, President of Unity and Director      

Marc Glazer......................      35  Director                                             

Richard J. Mackey(1).............      65  Director and Consultant to the Company               

Mary-Anne Kieran.................      37  Secretary                                            

Sidney B. Becker(2)..............      86  Director                                             

Christopher W. Roser(2)..........      38  Director                                             

Frank E. Walsh, III(1)(2)........      30  Director                                             

------------------------                                                        

(1) Member of the Compensation and Stock Incentive Committee of the Board of    
Directors.                                                              

(2) Member of the Audit Committee of the Board of Directors.                    

    JOHN K. ZIEGLER.  Mr. Ziegler has been Chairman, Chief Executive Officer and
a Director of the Company since its incorporation in 1994. From 1987 to 1994, he
served as Chairman and Chief Executive Officer of the Company's Predecessor. Mr.
Ziegler joined the Company's Predecessor in 1966 as the Controller and          
Treasurer. During his 28 year tenure with the Company's Predecessor, Mr. Ziegler
held the positions of Controller, Treasurer, Executive Vice President, Chief    
Operating Officer, President and Director. Prior to joining the Company's       
Predecessor, he worked for six years with Coopers & Lybrand. Mr. Ziegler is a   
certified public accountant and received a Bachelor of Arts degree from         
Lafayette College and a Master of Business Administration from New York         
University's Stern School of Business. Mr. Ziegler is on the Board of Directors 
of Worldtex, Inc. ("Worldtex"), a manufacturer of covered elastic yarn that is  
listed on the New York Stock Exchange.                                          

    MAXWELL L. TRIPP.  Mr. Tripp has been President, Chief Operating Officer and
a Director of the Company since January 1, 1997. From the date of the Company's 
incorporation in 1994 until 1996, he was a Vice President and Director of the   
Company and he served as Sunbrand's President from 1985 until 1996. He joined   
the Company's Predecessor in 1960 and served as a technical service             
representative and a field sales representative. Mr. Tripp became Vice President
of Sales of Sunbrand in 1977 and Executive Vice President of Sales in 1982.     
Prior to joining the Company, Mr. Tripp spent five years at Swirl Inc. Mr. Tripp
regularly attends sales and technical workshops and is an active member in      
several industry associations. Mr. Tripp is the Chairman of the Associate Member
Congress and the Chairman of the                                                

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Technical Advisory Committee of the American Apparel Machinery Association and  
has been honored numerous times in recognition of his contributions to the      
apparel industry.                                                               

 JOHN K. ZIEGLER, JR.  Mr. Ziegler has been Chief Financial Officer of the
Company since September 1995. From 1994 until 1996, he also served as Controller
of the Company. From 1990 to 1994, Mr. Ziegler worked as an accountant for      
Coopers & Lybrand. Mr. Ziegler is a certified public accountant and received his
Bachelor of Arts degree from Lafayette College. John K. Ziegler, Jr. is the son 
of John K. Ziegler.                                                             

JACK KLASKY.  Mr. Klasky has been a Vice President and Director of the  
Company since its incorporation in 1994. He founded Leadtec in 1978 and has     
served as its President since that time. His primary responsibilities include   
short- and long-range planning, marketing and overall management. Previously, he
had been a Vice President of Lexitron Corporation and a program manager for     
Litton Industries, where he was responsible for managing development of large   
defense oriented computer systems. Mr. Klasky is a member of the American       
Apparel Manufacturers Association and numerous other industry organizations. He 
received a Bachelor of Science degree in Engineering in 1965 and a Master of    
Business Administration in 1966 from UCLA.                                      

   ALAN B. LEE.  Mr. Lee has been a Vice President and Director of the Company
since its incorporation in 1994. He has served as Unity's President since 1985. 
Previously, Mr. Lee served as Unity's Controller from 1980 to 1985 and as a     
staff accountant with the Company's Predecessor from 1975 to 1980. Mr. Lee holds
a Master of Business Administration from the City University of New York and a  
Bachelor of Arts degree from Queens College, City University of New York.       

 RICHARD J. MACKEY.  Mr. Mackey has served as a Director and consultant to
the Company since January 1, 1997. From the date of the Company's incorporation 
in 1994 until 1996, he was President and a Director of the Company. Mr. Mackey  
joined the Company's Predecessor in 1976 as a Vice President and Treasurer.     
During his 18 year tenure with the Company's Predecessor, Mr. Mackey served as  
Treasurer, Executive Vice President, Director, President and Chief Operating    
Officer. Since 1992, Mr. Mackey has served as Chairman and Chief Executive      
Officer of Worldtex, in which capacity he devotes a substantial amount of his   
business time. Prior to joining the Company's Predecessor, Mr. Mackey worked for
Viewlex, Republic Intermodal Inc., Avis Inc., and Arthur Andersen. Mr. Mackey is
a certified public accountant and received a Bachelor of Science degree from the
University of Illinois.                                                         

 MARY-ANNE KIERAN.  Ms. Kieran has been the Secretary of the Company since
1995. From 1987 until 1994, she was employed at the Company's Predecessor where 
she served as Secretary from 1992 until 1994. Ms. Kieran has a Bachelor of Arts 
degree from Fordham University.                                                 

  SIDNEY B. BECKER.  Mr. Becker has been a Director of the Company since its
incorporation in 1994. From 1987 until 1992, Mr. Becker was a Director of the   
Company's Predecessor. From 1976 until 1987, Mr. Becker served as the Chairman  
of the Board of Directors and Chief Executive Officer of the Company's          
Predecessor. During the years 1970 through 1976, he was a member of the Board of
Directors of and a consultant to the Company's Predecessor. Prior to such time, 
from 1958 until 1970, Mr. Becker first served as Chairman of the Company's      
Predecessor, and from 1958 until 1965, he also served as the Chief Executive    
Officer of the Company's Predecessor. Mr. Becker also serves on the Board of    
Directors of Worldtex.                                                          

MARC GLAZER.  Mr. Glazer has been Vice President of Operations/Domestic 
Sales of Clinton and a Director of the Company since the Company acquired       
Clinton effective February 1, 1996. Prior to the Clinton Acquisition, from 1985 
to 1996, Mr. Glazer served on the Board of Directors of Clinton and acted as    
Clinton's Vice President of Operations/Domestic Sales. Before joining Clinton,  
Mr. Glazer served as Corporate Controller for Precision Screen Machines.        

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 CHRISTOPHER W. ROSER.  Mr. Roser has been a Director of the Company since
its incorporation in 1994. Since 1987, Mr. Roser has been a General Partner of  
The Roser Partnerships I, II and III, which are venture capital partnerships.   
From 1986 until 1987, Mr. Roser worked at Ladenburg Thalmann & Co.              
("Ladenburg"), an investment bank listed on the New York Stock Exchange, as an  
associate in the corporate finance department. For one year prior to such period
from 1985 to 1986, he was a securities analyst with Equity Research Associates, 
a subsidiary of Ladenburg. During the years 1982 through 1984, Mr. Roser was    
employed as a staff public accountant with Main Hurdman KMG. Mr. Roser graduated
from the University of Colorado in 1981 with a Bachelor of Arts degree in       
economics and received a Master of Business Administration from New York        
University's Stern School of Business in 1984. Mr. Roser is also a Director of  
Hauser Chemical Research, Inc., a publicly traded chemical company, and the     
North American Technology Group, Inc., a publicly traded diversified concern.   

    FRANK E. WALSH, III.  Mr. Walsh has been a Director of the Company since its
incorporation in 1994. He is Vice President of Jupiter Capital Management, a New
Jersey registered investment advisory firm, where he has been employed since    
1991. Mr. Walsh also serves on the Board of Directors of Dynamotion/ ATI, a     
publicly traded capital goods manufacturer for the printed circuit board        
industry.                                                                       

 Each director will hold office for one year or until his or her successor
has been elected and qualified. Officers serve at the pleasure of the Board of  
Directors.                                                                      

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EXECUTIVE COMPENSATION                                                          

 SUMMARY COMPENSATION.  The following table sets forth certain information
concerning the compensation earned during the year ended December 31, 1996 for  
the Chief Executive Officer of the Company and its four other most highly       
compensated executive officers (collectively, the "Named Executive Officers").  

SUMMARY COMPENSATION TABLE                                                      

                                                        [Enlarge/Download Table]

                                                                       ANNUAL COMPENSATION(1)                         
                                                                  ---------------------------------      ALL OTHER    
NAME AND PRINCIPAL POSITION                                         YEAR       SALARY      BONUS      COMPENSATION(2) 
----------------------------------------------------------------  ---------  ----------  ----------  -----------------
                                                                                                                      

John K. Ziegler.................................................       1996  $  200,000  $  100,000      $   3,000    
  Chairman of the Board, Chief Executive Officer and Director                                                         

Jack Klasky.....................................................       1996     154,908     100,151          3,000    
  Vice President, President of Leadtec and Director                                                                   

Maxwell L. Tripp................................................       1996     124,840     105,910          3,000    
  Vice President, President of Sunbrand and Director(3)                                                               

Alan B. Lee.....................................................       1996     110,000      30,000          3,000    
  Vice President, President of Unity and Director                                                                     

Richard J. Mackey...............................................       1996     100,000           0              0    
  President and Director(4)                                                                                           

------------------------                                                        

(1) The aggregate amount of perquisites and other personal benefits, if any, did
    not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
 reported for each Named Executive Officer and has therefore been omitted.

(2) Amounts shown reflect matching contributions made by the Company to the     
   Company's Savings and Employee Stock Ownership Plan, a defined contribution
plan, of $3,000 on behalf of the indicated Named Executive Officers.    

(3) Effective January 1, 1997, Mr. Tripp became President and Chief Operating   
Officer of the Company and remained a Director of the Company.          

(4) Effective January 1, 1997, Mr. Mackey became a consultant to the Company and
remained a Director of the Company.                                     

OPTION GRANTS.  No stock appreciation rights have been granted by the   
Company. The Company granted no stock options during the year ended December 31,
1996.                                                                           

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AGGREGATED OPTIONS.  The table below sets forth certain information with
respect to options held as of December 31, 1996 by each Named Executive Officer.

AGGREGATED OPTIONS TABLE

                                                        [Enlarge/Download Table]

                                                                           VALUE OF UNEXERCISED
                                          NUMBER OF SECURITIES UNDERLYING  IN-THE-MONEY OPTIONS
                                                UNEXERCISED OPTIONS         AT FISCAL YEAR-END 
                                              AT FISCAL YEAR-END (#)               ($)         
                                          -------------------------------  --------------------

                                                                                               
                                                 EXERCISABLE (E)/            EXERCISABLE (E)/  
NAME                                             UNEXERCISABLE (U)          UNEXERCISABLE (U)  
----------------------------------------  -------------------------------  --------------------

John K. Ziegler.........................                 1,600(E)               $   30,400     
                                                         2,400(U)                   45,600     

Richard J. Mackey.......................                   800(E)                   15,200     
                                                         1,200(U)                   22,800     

Maxwell L. Tripp........................                 2,000(E)                   38,000     
                                                         3,000(U)                   57,000     

Jack Klasky.............................                 2,000(E)                   38,000     
                                                         3,000(U)                   57,000     

Alan B. Lee.............................                 2,000(E)                   38,000     
                                                         3,000(U)                   57,000     

RETIREMENT PLAN.  Under the Company's non-contributory retirement plan, 
eligible employees will be entitled at the normal retirement age of 65 to an    
annual retirement benefit equal to 11/4% of their earnings up to the maximum    
earnings subject to Social Security withholding and 1 % of all earnings in      
excess of such amount but less than $222,220 (as adjusted annually for cost of  
living increases) for each full year of service under the plan. Benefits under  
this plan are 100% vested after five years of service. The estimated annual     
retirement benefits payable under the plan formula described above at current   
Social Security withholding rates, assuming that normal retirement occurs at age
65, to the Named Executive Officers are as follows: to Mr. Ziegler, $107,500; to
Mr. Mackey, $64,455; to Mr. Tripp, $45,619; to Mr. Klasky, $39,729; and to Mr.  
Lee, $51,604.                                                                   

   Under the Company's supplemental retirement plan, key employees selected by
the Compensation and Stock Incentive Committee (the "Committee") are entitled to
an amount, payable monthly over a ten-year period following any specified event 
of retirement, death, disability or termination of employment, equal to a       
percentage (up to 40%) determined by the Committee of the portion (determined by
the Committee) of the employee's base salary for the Company's last full fiscal 
year prior to the specified event, multiplied by the employee's years of        
participation in the plan (not exceeding 10). Thus, upon normal retirement at   
age 65 (or, if later, then years as a participant), an employee receiving the   
maximum award possible under the plan will receive a total retirement benefit of
400% of base salary. If death or disability occurs prior to age 65, the employee
will receive a total death or disability benefit of up to 400% of base salary.  
After three full years as a plan participant, 30% of the retirement benefit     
becomes vested and thereafter an additional 10% of the retirement benefit vests 
for each additional full year of service. Upon involuntary termination (other   
than for cause, as defined) of any participant's employment or upon voluntary   
early retirement of any "designated participant" selected by the Committee, a   
portion of the vested retirement benefit will be paid which is in the same ratio
to the full vested benefit as the ratio of the total years worked for the       
Company to the total years which would have been worked to age 65. Amounts      
representing annual accruals under the plan have not been and cannot be readily 
calculated for individual participants. Messrs. Ziegler, Tripp, Klasky and Lee  
participate in the plan, and are entitled to benefits of 40%, 37%, 31% and 27%, 
respectively, of their base salary per year for 10 years.                       

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EMPLOYMENT CONTRACTS                                                            

  The Company has entered into employment contracts with Mr. Ziegler and Mr.
Tripp, Alan B. Lee, President of Unity, Jack Klasky, President of Leadtec and   
Jerry Lee, President of Macpherson. The term of each of the Company's employment
contracts with Mr. Ziegler, Mr. Tripp, Mr. A. Lee, Mr. Klasky and Mr. J. Lee is 
indefinite, but each employment contract may be terminated by the Company upon  
not less than one year written notice. Despite the existence of employment      
contracts, the continued employment of such persons cannot be assured. The loss 
of the services of any such person could have a material adverse impact on the  
Company's business, financial condition and results of operations. See "Risk    
Factors-- Dependence on Existing Management."                                   

COMPENSATION OF DIRECTORS                                                       

 The Company does not compensate the members of its Board of Directors for
their service as directors.                                                     

COMPENSATION AND STOCK INCENTIVE COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION 

  During fiscal 1996, John K. Ziegler and Richard J. Mackey, Chief Executive
Officer and President of the Company, respectively, served on the Compensation  
and Stock Incentive Committee of the Company's Board of Directors. Mr. Ziegler  
and Mr. Mackey also serve on the Board of Directors of Worldtex. There are no   
other Compensation and Stock Incentive Committee interlocks or insider          
participation with respect to such individuals. Effective January 1, 1997, Mr.  
Mackey became a consultant to the Company.                                      

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SECURITY OWNERSHIP OF CERTAIN 
BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of March 31, 1997 
regarding the beneficial ownership of: (i) each class of the Company's voting   
securities by each person who is known by the Company to be the beneficial owner
of more than 5% of any class of the Company's voting securities, and (ii) each  
class of equity securities of the Company by (a) each director of the Company,  
(b) each of the Named Executive Officers (as defined under the heading          
"Executive Compensation"), and (c) all directors and executive officers of the  
Company as a group.                                                             

                                                        [Enlarge/Download Table]

                                                                                                         PERCENT OF  
NAME AND ADDRESS OF BENEFICIAL OWNER                                               NUMBER OF SHARES(1)    CLASS(2)   
---------------------------------------------------------------------------------  -------------------  -------------
                                                                                                                     
John K. Ziegler..................................................................           116,959(3)         11.7% 
  c/o Willcox & Gibbs, Inc.                                                                                          
  900 Milik Street                                                                                                   
  Carteret, New Jersey 07008                                                                                         

Richard J. Mackey................................................................            66,558(4)          6.6  
  104 Crescent Beach Drive                                                                                           
  Huntington Bay, New York 11743                                                                                     

The Roser Partnership II, Ltd....................................................            65,483(5)          6.5  
  1105 Spruce Street                                                                                                 
  Boulder, Colorado 80302                                                                                            

Sidney B. Becker.................................................................            26,193(6)          2.6  
  201 East 79th Street                                                                                               
  Apartment 19B                                                                                                      
  New York, New York 10021                                                                                           

Frank E. Walsh, III..............................................................           130,965(7)         13.0  
  330 South Street                                                                                                   
  Morristown, New Jersey 07962                                                                                       

Marc Glazer......................................................................            33,657             3.3  
  c/o Clinton Machinery & Supply Co.                                                                                 
  5800 Miami Lakes Drive                                                                                             
  Miami Lakes, Florida 33014                                                                                         

Jack Klasky......................................................................            36,450(8)          3.6  
  c/o Leadtec Systems, Inc.                                                                                          
  6800 Owensmouth Avenue                                                                                             
  Suite 320                                                                                                          
  Canoga Park, California 91303                                                                                      

Alan B. Lee......................................................................            12,644(9)          1.3  
  c/o Unity Sewing Supply Co.                                                                                        
  900 Milik Street                                                                                                   
  Carteret, New Jersey 07008                                                                                         

Maxwell L. Tripp.................................................................            43,138(10)         4.3  
  c/o Sunbrand                                                                                                       
  3900 Green Industrial Way                                                                                          
  Atlanta, Georgia 30341                                                                                             

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                                                        [Enlarge/Download Table]

                                                                                                         PERCENT OF  
NAME AND ADDRESS OF BENEFICIAL OWNER                                               NUMBER OF SHARES(1)    CLASS(2)   
---------------------------------------------------------------------------------  -------------------  -------------
                                                                                                                     
Company's Savings and Employee Stock Ownership Plan..............................           167,005            16.6% 
  Riggs Bank, N.A., as trustee                                                                                       
  808 17th St., N.W.                                                                                                 
  Washington, D.C. 20006                                                                                             

All directors and executive officers of the Company as a group...................           699,052(11)        69.5  

------------------------                                                        

(1) The persons included in the table had sole voting and investment power with 
respect to shares reported as beneficially owned, except as otherwise   
indicated in the following notes. The table includes shares beneficially
   owned through the Company's Savings and Employee Stock Ownership Plan as of
March 31, 1997.                                                         

(2) Percentages are calculated by dividing (x) shares in the "Number of Shares" 
    column by (y) the sum of shares outstanding on March 31, 1997 and the shares
   which a particular owner (or group of owners) has a right to acquire within
60 days of such dates.                                                  

(3) Includes 16,730 shares of common stock held by Mr. Ziegler as trustee for   
the benefit of his wife, as to which Mr. Ziegler shares voting and      
investment power, and 2,000 shares for which options are presently      
exercisable.                                                            

(4) Includes 800 shares of common stock for which options are presently         
exercisable.                                                            

(5) Christopher W. Roser, a director of the Company, is a principal of the      
general partner of The Roser Partnership II, Ltd.                       

(6) Includes 26,193 shares of common stock owned by Mr. Becker's wife, as to    
which he disclaims beneficial ownership.                                

(7) Includes 130,965 shares of common stock held by WG Inc. Trust under which an
 uncle of Mr. Walsh acts as trustee and holds voting and investment power.
Mr. Walsh is a beneficiary of such trust.                               

(8) Includes 2,000 shares of common stock for which options are presently       
exercisable.                                                            

(9) Includes 2,000 shares of common stock for which options are presently       
exercisable.                                                            

(10) Includes 2,000 shares of common stock for which options are presently      
exercisable.                                                            

(11) Includes 8,400 shares of common stock for which options are presently      
exercisable.                                                            

DESCRIPTION OF CERTAIN INDEBTEDNESS 

THE NEW CREDIT FACILITY                                                         

 In connection with the sale of the Old Notes, the Old Credit Facility was
terminated and the Company entered into the New Credit Facility with            
NationsBank, as lender. The New Credit Facility provides for borrowings of up to
$18.5 million in the aggregate outstanding at any time, subject to a borrowing  
base limitation equal to 80% of the Company's eligible accounts receivable.     
Borrowings under the New Credit Facility will bear interest at a rate per annum,
at the Company's option, equal to (i) NationsBank's prime rate plus 0.75% or    
(ii) LIBOR plus 2.75%. The New Credit Facility is secured by all accounts       
receivable of the Company and includes certain covenants applicable to the      
Company, including requirements that the Company comply with certain financial  
ratios. The New Credit Facility expires on July 13, 2001.                       

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THE W&G, LTD. CREDIT FACILITY                                                   

   In October 1996, W&G, Ltd. borrowed L1.0 million under the W&G, Ltd. Credit
Facility with Coutts & Co. The loan under the W&G, Ltd. Credit Facility bears   
interest at a rate per annum equal to the bank's prevailing Base Rate, which is 
currently 6.0% per annum, plus a margin of 2.25% per annum. The loan is payable 
in eight semiannual installments of L125,000, commencing April 1997. The W&G,   
Ltd. Credit Facility is secured by substantially all of the assets of W&G, Ltd. 
The proceeds of this loan were used to repay indebtedness of W&G, Ltd. to the   
Company, and the Company used such funds to repay higher cost indebtedness.     

DESCRIPTION OF SENIOR NOTES 

The Senior Notes are issued under the Indenture, dated as of January 3, 
1997, among the Company, as issuer, the Subsidiary Guarantors and IBJ Schroder  
Bank & Trust Company, as trustee (the "Trustee"). The terms of the Senior Notes 
include those stated in the Indenture and those made part of the Indenture by   
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture  
Act"). The Senior Notes are subject to all such terms, and Holders of Senior    
Notes are referred to the Indenture and the Trust Indenture Act for a statement 
thereof. The following summary of certain provisions of the Indenture does not  
purport to be complete and is qualified in its entirety by reference to the     
Indenture, including the definitions of certain terms contained therein. The    
definitions of certain capitalized terms used in the following summary are set  
forth below under "--Certain Definitions."                                      

GENERAL                                                                         

The Senior Notes are senior unsecured obligations of the Company        
unconditionally guaranteed by the Subsidiary Guarantors limited to $85.0 million
aggregate principal amount. The Senior Notes are issued only in registered form,
without coupons, in denominations of $1,000 and integral multiples thereof.     
Principal of, premium, if any, and interest on the Senior Notes are payable, and
the Senior Notes are transferable, at the office or agency of the Company       
maintained for such purposes, which in the case of payments on the Senior Notes 
initially is the corporate trust office or agency of the Trustee maintained at  
One State Street, New York, New York 10004. No service charge will be made for  
any transfer, exchange or redemption of the Senior Notes, but the Company or the
Trustee may require payment of a sum sufficient to cover any tax or other       
governmental charge that may be payable in connection therewith.                

MATURITY, INTEREST AND PRINCIPAL PAYMENTS                                       

  The Senior Notes will mature on December 15, 2003. The New Notes will bear
interest at a rate equal to 12 1/4% per annum from the last date on which       
interest was paid on the Old Notes surrendered in exchange therefor, or if no   
interest has been paid from the date of the original issuance of such Old Notes.
Interest on the New Notes is payable semiannually in cash arrears on June 15 and
December 15 of each year, commencing June 15, 1997 to the Persons in whose names
the Senior Notes are registered in the Note Register at the close of business on
the June 1 or December 1 next preceding such interest payment date. Interest    
will be computed on the basis of a 360-day year comprised of twelve 30-day      
months.                                                                         

REDEMPTION                                                                      

  OPTIONAL REDEMPTION.  The Senior Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after December 15, 2001, upon   
not less than 30 nor more than 60 days' notice, at the redemption prices        
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest and Old Note Liquidated Damages, if any, to the date of         
redemption (subject to the right of Holders of record on the relevant record    
date to receive interest due on an interest payment date that is                

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on or prior to the date of redemption), if redeemed during the 12-month period  
beginning on December 15 of the years indicated below:                          

                                                        [Enlarge/Download Table]

                                                                                   REDEMPTION 
YEAR                                                                                  PRICE   
---------------------------------------------------------------------------------  -----------
                                                                                              
2001.............................................................................     106.125%
2002.............................................................................     103.063%

    Notwithstanding the foregoing, at any time on or prior to December 15, 1999,
up to 30% of the originally issued principal amount of Senior Notes will be     
redeemable, at the option of the Company, from the Net Cash Proceeds of a Public
Equity Offering, at a redemption price equal to 112 1/4% of the principal amount
thereof, together with accrued and unpaid interest and Old Note Liquidated      
Damages, if any, to the date of redemption, PROVIDED that at least $59.5 million
of the originally issued principal amount of Senior Notes remains outstanding   
immediately after such redemption and that such redemption occurs within 60 days
following the closing of such Public Equity Offering.                           

   In the event that less than all of the Senior Notes are to be redeemed, the
particular Senior Notes (or any portion thereof that is an integral multiple of 
$1,000) to be redeemed shall be selected not less than 30 nor more than 60 days 
prior to the date of redemption by the Trustee, from the outstanding Senior     
Notes not previously called for redemption, PRO RATA, by lot or by any other    
method the Trustee shall deem fair and appropriate.                             

 MANDATORY REDEMPTION.  The Company will not be required to make mandatory
redemption or sinking fund payments with respect to the Senior Notes.           

    OFFERS TO PURCHASE.  As described below, (a) upon the occurrence of a Change
of Control, the Company will be obligated to make an offer to purchase all      
outstanding Senior Notes at a purchase price equal to 101% of the principal     
amount thereof, together with accrued and unpaid interest and Old Note          
Liquidated Damages, if any, to the date of purchase and (b) upon certain sales  
or other dispositions of assets, the Company may be obligated to make offers to 
purchase Senior Notes with a portion of the Net Available Proceeds of such sales
or other dispositions at a purchase price equal to 100% of the principal amount 
thereof, together with accrued and unpaid interest and Old Note Liquidated      
Damages, if any, to the date of purchase. See "--Certain Covenants--Change of   
Control" and "--Limitation on Asset Sales."                                     

RANKING                                                                         

The Senior Notes and each Subsidiary Guarantee are senior unsecured     
obligations (except for the security interest in 65% of the shares of W&G, Ltd.)
of the Company, and the applicable Subsidiary Guarantor, respectively, and rank 
PARI PASSU in right of payment with all other existing and future unsecured and 
unsubordinated Indebtedness of the Company and the applicable Subsidiary        
Guarantor, respectively, and senior to all existing and future Subordinated     
Indebtedness of the Company and the Subsidiary Guarantors. The Senior Notes and 
Subsidiary Guarantees, however, are effectively subordinated to secured         
Indebtedness of the Company and the Subsidiary Guarantors with respect to the   
assets securing such Indebtedness. At December 31, 1996, on a pro forma basis   
assuming that the sale of the Old Notes, the application of the net proceeds    
therefrom and the Macpherson Acquisition occurred on such date, the Company and 
the Subsidiary Guarantors would have had no unsecured Indebtedness outstanding  
other than the Senior Notes and $1.3 million of secured Indebtedness            
outstanding. Subject to certain limitations, the Company and its Subsidiaries   
(including the Subsidiary Guarantors) may incur additional Indebtedness in the  
future. See "--Certain Covenants--Limitation on Indebtedness and Disqualified   
Capital Stock."                                                                 

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SUBSIDIARY GUARANTEES AND OTHER SECURITY                                        

Each Subsidiary Guarantor fully and unconditionally guarantees (each, a 
"Subsidiary Guarantee"), jointly and severally, to each Holder of Senior Notes  
and the Trustee, the full and punctual performance of the Company's obligations 
under the Indenture and the Senior Notes, including the payment of principal of 
and interest and Old Note Liquidated Damages, if any, on the Senior Notes. Each 
of the Subsidiary Guarantees is a senior unsecured obligation of the respective 
Subsidiary Guarantor and ranks PARI PASSU with all existing and future unsecured
and unsubordinated Indebtedness of such Subsidiary Guarantor. However, each     
Subsidiary Guarantee is effectively subordinated to the secured Indebtedness of 
the respective Subsidiary Guarantor with respect to the assets securing such    
Indebtedness.                                                                   

The obligations of each Subsidiary Guarantor are limited to the maximum 
amount which, after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of    
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to   
its contribution obligations under the Indenture, will result in the obligations
of such Subsidiary Guarantor under the Subsidiary Guarantee not constituting a  
fraudulent conveyance or fraudulent transfer under federal law or state law.    
Each Subsidiary Guarantor that makes a payment or distribution under a          
Subsidiary Guarantee shall be entitled to a PRO RATA contribution from each     
other Subsidiary Guarantor based on the net assets of each Subsidiary Guarantor,
determined in accordance with GAAP.                                             

   The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving   
Person) another corporation, Person or entity whether or not affiliated with    
such Subsidiary Guarantor unless (i) subject to the provisions of the following 
paragraph, the Person formed by or surviving any such consolidation or merger   
(if other than such Subsidiary Guarantor) assumes all of the obligations of such
Subsidiary Guarantor pursuant to a supplemental indenture, in form and substance
satisfactory to the Trustee, under the Senior Notes and the Indenture; (ii)     
immediately after giving effect to such transaction, no Default or Event of     
Default exists; and (iii) immediately after giving effect to such transaction as
if the same had occurred at the beginning of the most recently ended four full  
fiscal quarter period for which internal financial statements are available, the
Company could incur $1.00 of additional Indebtedness (other than Permitted      
Indebtedness) in accordance with paragraph (a) of the "--Limitation on          
Indebtedness and Disqualified Capital Stock" covenant.                          

  The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation  
or otherwise, or a sale or other disposition of all of the Capital Stock of any 
Subsidiary Guarantor, then such Subsidiary Guarantor (in the event of a sale or 
other disposition, by way of such a merger, consolidation or otherwise, of all  
of the capital stock of such Subsidiary Guarantor) or the corporation acquiring 
the property (in the event of a sale or other disposition of all or             
substantially all of the assets of such Subsidiary Guarantor) will be released  
and relieved of any obligations under its Subsidiary Guarantee, PROVIDED that   
the Net Available Proceeds of such sale or other disposition are applied in     
accordance with the applicable provisions of the Indenture. See "Certain        
Covenants--Limitation on Asset Sales." In addition, any Subsidiary Guarantor    
that is designated by the Board of Directors as an Unrestricted Subsidiary in   
accordance with the terms of the Indenture may, at such time, at the option of  
the Board of Directors at the time of such designation, be released and relieved
of any obligation under its Subsidiary Guarantee.                               

 Pursuant to a Pledge and Security Agreement (the "Pledge Agreement"), the
Senior Notes are secured by a pledge of 65% of the capital stock of W&G, Ltd.   
Upon declaration of a default under the Indenture and acceleration of the       
Indebtedness thereunder, the Collateral Agent named in the Pledge Agreement may 
sell the capital stock of W&G, Ltd. pledged pursuant to the Pledge Agreement.   
The Pledge Agreement establishes certain procedures to be followed by the       
Collateral Agent that are designed to provide the maximum possible proceeds as a
result of such a sale.                                                          

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CERTAIN COVENANTS                                                               

The Indenture contains, among others, the covenants described below.    

   LIMITATION ON INDEBTEDNESS AND DISQUALIFIED CAPITAL STOCK.  (a) The Company
will not, and will not permit any of its Restricted Subsidiaries to, create,    
incur, issue, assume, guarantee or in any manner become directly or indirectly  
liable for the payment of (collectively, "incur") any Indebtedness (including   
any Acquired Indebtedness but excluding any Permitted Indebtedness) or issue any
Disqualified Capital Stock, unless, on a pro forma basis after giving effect to 
such incurrence or issuance and the application of the proceeds therefrom, the  
Consolidated Fixed Charge Coverage Ratio for the four most recent consecutive   
fiscal quarters would have been equal to or greater than 2.0 to 1.0.            

(b) Neither the Company nor any Subsidiary Guarantor will incur any     
Indebtedness unless such Indebtedness is expressly PARI PASSU with, or          
subordinated in right of payment to, in the case of the Company, the Senior     
Notes or, in the case of a Subsidiary Guarantor, its Subsidiary Guarantee.      

   LIMITATION ON PREFERRED STOCK OF SUBSIDIARIES.  The Company will not permit
any of its Restricted Subsidiaries to issue any Preferred Stock (other than to  
the Company or to a Wholly Owned Subsidiary) or permit any Person (other than   
the Company or a Wholly Owned Subsidiary) to own any Preferred Stock of any     
Restricted Subsidiary of the Company.                                           

  LIMITATION ON RESTRICTED PAYMENTS.  (a) The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly:                    

     (i) declare or pay any dividend on, or make any other distribution to
    holders of, any shares of Capital Stock of the Company (other than dividends
   or distributions payable solely in shares of Qualified Capital Stock of the
Company or in options, warrants or other rights to purchase Qualified   
Capital Stock of the Company);                                          

  (ii) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any Affiliate thereof (other than any   
   Capital Stock owned by a Restricted Subsidiary) or any options, warrants or
other rights to acquire such Capital Stock;                             

   (iii) make any principal payment on or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal 
payment, scheduled sinking fund payment or maturity, any Subordinated   
Indebtedness; or                                                        

(iv) make any Restricted Investment;                            

(such payments or other actions described in clauses (i) through (iv) above     
being collectively referred to as "Restricted Payments"), unless at the time of 
and after giving effect to the proposed Restricted Payment (the amount of any   
such Restricted Payment, if other than cash, shall be the amount determined by  
the Board of Directors of the Company, whose determination shall be conclusive  
and evidenced by a Board Resolution),                                           

 (1) no Default or Event of Default shall have occurred and be continuing,

(2) the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in accordance with paragraph (a) of the "--Limitation on
Indebtedness and Disqualified Capital Stock" covenant, and                      

  (3) the aggregate amount of all Restricted Payments declared or made after
the date of the Indenture shall not exceed the sum (without duplication) of the 
following:                                                                      

  (A) 50% of the Consolidated Net Income of the Company (or, if such
Consolidated Net Income is a loss, minus 100% of such loss) accrued on a
cumulative basis during the period beginning on                         

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October 1, 1996 and ending on the last day of the Company's last fiscal 
quarter for which quarterly or annual financial statements are available
next preceding such proposed Restricted Payment,                        

  (B) the aggregate Net Cash Proceeds received after the date of the
    Indenture by the Company from the issuance or sale (other than to any of its
    Restricted Subsidiaries) of shares of Qualified Capital Stock of the Company
or any options, warrants or rights to purchase such shares of Qualified 
Capital Stock of the Company,                                           

  (C) the aggregate Net Cash Proceeds received after the date of the
Indenture by the Company (other than from any of its Restricted         
Subsidiaries) upon the exercise of any options, warrants or rights to   
purchase shares of Qualified Capital Stock of the Company,              

  (D) the aggregate Net Cash Proceeds received after the date of the
    Indenture by the Company from the issuance or sale (other than to any of its
  Restricted Subsidiaries) of Indebtedness or shares of Disqualified Capital
    Stock that have been converted into or exchanged for Qualified Capital Stock
   of the Company, together with the aggregate cash received by the Company at
the time of such conversion or exchange,                                

    (E) the aggregate Net Cash Proceeds received by the Company from the
 issuance or sale of its Qualified Capital Stock subsequent to the date of
  original issuance of the Senior Notes to any employee stock ownership plan
   or a trust established by the Company or any of its Restricted Subsidiaries
for the benefit of their employees to the extent that any such Net Cash 
Proceeds are equal to an increase in the Consolidated Net Worth of the  
Company resulting from principal repayments paid by such employee stock 
ownership plan or trust with respect to Indebtedness incurred by it to  
finance the purchase of such Qualified Capital Stock, and               

        (F) to the extent not otherwise included in Consolidated Net Income, the
    net reduction in Investments by the Company and its Restricted Subsidiaries,
   subsequent to the date of the original issuance of the Senior Notes, in any
  Person resulting from dividends, repayments of loans or advances, or other
  transfers of assets to the Company or a Restricted Subsidiary, or from the
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary  
 (valued in each case as provided in the definition of Investment), not to
 exceed the total amount of Investments (other than Permitted Investments)
made by the Company and its Restricted Subsidiaries in such Unrestricted
Subsidiary that were previously treated as a Restricted Payment.        

(b) Notwithstanding paragraph (a) above, the Company and its Restricted 
Subsidiaries may take the following actions so long as (in the case of clauses  
(ii), (iii) and (iv) below) no Default or Event of Default shall have occurred  
and be continuing:                                                              

      (i) the payment of any dividend on any Capital Stock of the Company or
any Restricted Subsidiary within 60 days after the date of declaration  
thereof, if at such declaration date such declaration complied with the 
   provisions of paragraph (a) above (and such payment shall be deemed to have
been paid on such date of declaration for purposes of any calculation   
required by the provisions of paragraph (a) above);                     

     (ii) the repurchase, redemption or other acquisition or retirement of
 any shares of any class of Capital Stock of the Company or any Restricted
    Subsidiary, in exchange for, or out of the aggregate Net Cash Proceeds from,
a substantially concurrent issuance and sale (other than to a Restricted
   Subsidiary) of shares of Qualified Capital Stock of the Company (other than
  Capital Stock issued or sold to a Subsidiary of the Company or an employee
   stock ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees);                       

(iii) the repurchase, redemption, repayment, defeasance or other  
acquisition or retirement for value of any Subordinated Indebtedness in 
exchange for, or out of the aggregate Net Cash Proceeds                 

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from, a substantially concurrent issuance and sale (other than to a     
   Restricted Subsidiary) of shares of Qualified Capital Stock of the Company;
and                                                                     

   (iv) the repurchase of shares of, or options to purchase shares of,
Capital Stock (other than Preferred Stock) of the Company or any of its 
    Subsidiaries from employees, former employees, directors or former directors
   of the Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors or their     
respective estates), pursuant to the terms of the agreements (including 
employment agreements) or plans (or amendments thereto) approved by the 
  Board of Directors of the Company under which such individuals purchase or
sell or are granted the option or right to purchase or sell such Capital
 Stock (other than Preferred Stock); PROVIDED, HOWEVER, that the aggregate
  amount of such repurchases shall not exceed $250,000 in any calendar year.

    The actions described in clauses (i), (ii), (iii) and (iv) of this paragraph
(b) shall be Restricted Payments that shall be permitted to be made in          
accordance with this paragraph (b) but shall reduce the amount that would       
otherwise be available for Restricted Payments under clause (3) of paragraph    
(a), PROVIDED that any dividend paid pursuant to clause (i) of this paragraph   
(b) shall reduce the amount that would otherwise be available under clause (3)  
of paragraph (a) when declared, but not also when subsequently paid pursuant to 
such clause (i).                                                                

   Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that the Restricted     
Payment complies with the Indenture and setting forth in reasonable detail the  
basis upon which the required calculations were computed.                       

LIMITATION ON ISSUANCES AND SALES OF CAPITAL STOCK OF RESTRICTED        
SUBSIDIARIES.  The Company (i) will not permit any Restricted Subsidiary to     
issue or sell any Capital Stock to any Person other than the Company or a Wholly
Owned Restricted Subsidiary and (ii) will not permit any Person other than the  
Company or a Wholly Owned Restricted Subsidiary to own any Capital Stock of any 
Restricted Subsidiary, except, in the case of clause (i) or (ii), with respect  
to a Wholly Owned Restricted Subsidiary as described in the definition of       
"Wholly Owned Restricted Subsidiary." The sale of all of the Capital Stock of   
any Restricted Subsidiary is permitted by this covenant but is subject to the   
limitations described under "--Limitation on Asset Sales."                      

  LIMITATION ON SALE/LEASEBACK TRANSACTIONS.  The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into,    
assume, guarantee or otherwise become liable with respect to any Sale/Leaseback 
Transaction unless (i) the Company or such Restricted Subsidiary, as the case   
may be, would be able to incur Indebtedness (not including the incurrence of    
Permitted Indebtedness) pursuant to and in an amount equal to the Attributable  
Indebtedness with respect to such Sale/Leaseback Transaction pursuant to the    
covenants described in paragraph (a) under "--Limitation on Indebtedness and    
Disqualified Capital Stock," (ii) the Company or such Restricted Subsidiary     
receives proceeds from such Sales/Leaseback Transaction at least equal to the   
fair market value of the property or assets subject thereto (as determined in   
good faith by the Company's Board of Directors, whose determination in good     
faith and evidenced by a Board Resolution will be conclusive) and (iii) the     
Company applies an amount in cash equal to the Net Available Proceeds of the    
Sale/Leaseback Transaction in accordance with the provisions of the "Limitation 
on Asset Sales" covenant as if such Sale/Leaseback Transaction were an Asset    
Sale.                                                                           

  LIMITATION ON TRANSACTIONS WITH AFFILIATES.  (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
or suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets or property 
or the rendering of any service) with, or for the benefit of, any of their      
respective Affiliates (each an "Affiliate Transaction") other than (i) Affiliate
Transactions permitted by clause (b) of this covenant, (ii) Affiliate           
Transactions on terms that are no less favorable to the Company or such         
Restricted                                                                      

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Subsidiary, as the case may be, than those that would be available in a         
comparable arm's length transaction with an unrelated Person, (iii) with respect
to any one transaction or series of related transactions involving aggregate    
payments in excess of $1.0 million but less than $5.0 million in the aggregate, 
the Company delivers an Officers' Certificate to the Trustee certifying that (A)
such transaction or series of related transactions complies with clause (i)     
above and (B) such transaction or series of related transactions has been       
approved by the Board of Directors (including a majority of the Disinterested   
Directors) of the Company, and (iv) with respect to any one transaction or      
series of related transactions involving aggregate payments in excess of $5.0   
million, the Company delivers an Officers' Certificate to the Trustee certifying
to the two matters referred to in clause (iii) above and that the Company has   
obtained a written opinion, a copy of which shall be attached to such Officers' 
Certificate, from an independent nationally recognized investment banking firm  
or appraisal firm specializing or having a speciality in the type and subject   
matter of the transaction or series of related transactions at issue, which     
opinion shall be to the effect set forth in clause (i) above or shall state that
such transaction or series of related transactions is fair from a financial     
point of view to the Company or such Restricted Subsidiary, as the case may be. 

(b) The restrictions set forth in clause (a) shall not apply to (i)     
transactions exclusively between or among the Company and any of its Restricted 
Subsidiaries or exclusively between or among the Restricted Subsidiaries so long
as such transactions are not otherwise prohibited by the Indenture, (ii)        
reasonable indemnities of officers, directors and employees of the Company or   
any Restricted Subsidiary permitted by bylaw or statutory provisions, (iii) the 
payment of reasonable and customary regular fees to directors of the Company or 
any of its Restricted Subsidiaries who are employees of the Company or any      
Affiliate and (iv) reasonable employee compensation and other benefit           
arrangements approved by the Board of Directors of the Company.                 

LIMITATION ON LIENS.  The Company will not, and will not permit any     
Restricted Subsidiary to, directly or indirectly, create, incur, assume, affirm 
or suffer to exist or become effective any Lien of any kind, except for         
Permitted Liens, upon any of their respective property or assets, whether now   
owned or acquired after the date of the Indenture, or any income, profits or    
proceeds therefrom, or assign or otherwise convey any right to receive income or
profits therefrom, to secure any Indebtedness of the Company or such Restricted 
Subsidiary, unless prior to, or contemporaneously therewith, the Senior Notes   
are equally and ratably secured; PROVIDED, HOWEVER, that if such Indebtedness is
expressly subordinated to the Senior Notes, the Lien securing such Indebtedness 
will be subordinated and junior to the Lien securing the Senior Notes, with the 
same relative priority as such Indebtedness has with respect to the Senior      
Notes. The incurrence of additional secured Indebtedness by the Company and its 
Restricted Subsidiaries is subject to further limitations on the incurrence of  
Indebtedness as described under "--Limitation on Indebtedness and Disqualified  
Capital Stock."                                                                 

   CHANGE OF CONTROL.  Upon the occurrence of a Change of Control, the Company
will be obligated to make an offer to purchase all of the then outstanding      
Senior Notes (a "Change of Control Offer"), and will purchase, on a Business Day
(the "Change of Control Purchase Date"), not more than 60 nor less than 30 days 
following the date notice is mailed, as provided below, all of the then         
outstanding Senior Notes validly tendered pursuant to such Change of Control    
Offer and not withdrawn, at a purchase price (the "Change of Control Purchase   
Price") equal to 101% of the principal amount thereof plus accrued and unpaid   
interest and Old Note Liquidated Damages, if any, to the Change of Control      
Purchase Date. The Change of Control Offer is required to remain open for at    
least 20 Business Days and until the close of business on the fifth Business Day
prior to the Change of Control Purchase Date.                                   

    In order to effect such Change of Control Offer, the Company will, not later
than the 30th day after the Change of Control, send, by first class mail, to the
Trustee and each Holder a notice of the Change of Control Offer, which notice   
shall govern the terms of the Change of Control Offer and shall state, among    
other things, the procedures that Holders must follow to accept the Change of   
Control Offer.                                                                  

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There can be no assurance that the Company will have available funds    
sufficient to fund the purchase of the Senior Notes that might be delivered by  
Holders seeking to accept a Change of Control Offer. In the event a Change of   
Control occurs at a time when the Company does not have available funds         
sufficient to pay the Change of Control Purchase Price for all of the Senior    
Notes delivered by Holders seeking to accept the Change of Control Offer, an    
Event of Default would occur under the Indenture. The definition of Change of   
Control includes an event by which the Company sells, conveys, transfers, leases
or otherwise disposes of all or substantially all of the properties and assets  
of the Company and its Restricted Subsidiaries, taken as a whole; the phrase    
"all or substantially all" is subject to applicable legal precedent and, as a   
result, in the future there may be uncertainty as to whether or not a Change of 
Control has occurred.                                                           

 The Company will not be required to make a Change of Control Offer upon a
Change of Control if another Person makes the Change of Control Offer at the    
same purchase price, at the same time and otherwise in substantial compliance   
with the requirements applicable to a Change of Control Offer to be made by the 
Company and purchases all Senior Notes validly tendered and not withdrawn under 
such Change of Control Offer. The existence of a Holder's right to require,     
subject to certain conditions, the Company to repurchase its Senior Notes upon a
Change of Control may deter a third party from acquiring the Company in a       
transaction that constitutes, or results in, a Change of Control.               

    The New Credit Facility also contains a "change of control" provision. Under
the New Credit Facility, any change in the ownership of any borrower thereunder 
(which term includes the Company, WG Apparel, Clinton, Leadtec and Macpherson)  
such that John K. Ziegler, Sr., the Company's Chairman and Chief Executive      
Officer, owns less than ten percent (10%) of the Company, constitutes an event  
of default under the New Credit Facility. In addition, the Company's            
indebtedness under the New Credit Facility is cross-defaulted to the New Notes  
such that certain defaults under the New Notes which accelerate their maturity  
or enable a Holder to call the New Notes prior to their stated maturity are also
defaults under the New Credit Facility. The Company has no other Senior         
Indebtedness that is subject to a change of control provision similar to the one
applicable to the New Notes or that is cross-defaulted to the New Notes.        

The Company is not entitled to waive the covenant relating to a Holder's
right to require the Company to repurchase such Holder's Notes upon a Change of 
Control or the "change of control" event of default under the New Credit        
Facility. As a consequence, the Company believes that these change of control   
provisions may make more difficult or discourage a takeover of the Company,     
whether favored or opposed by the management of the Company. In addition, the   
change of control covenant and other restrictive covenants in the Indenture may 
not afford the Holders of the Notes protection in all circumstances from the    
adverse affects of a highly leveraged transaction, reorganization,              
restructuring, merger or similar transaction, including a leveraged transaction 
initiated or supported by the Company or its subsidiaries. Consummation of any  
such transaction in certain circumstances may require a repurchase of the Notes 
and the refinancing of the New Credit Facility, and there can be no assurance   
that the Company or the acquiring party will have sufficient financial resources
to effect such repurchase.                                                      

    The Company will comply with Rule 14e-1 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and any other securities laws and         
regulations thereunder, if applicable, in the event that a Change of Control    
occurs and the Company is required to purchase Senior Notes as described above. 

 LIMITATION ON ASSET SALES.  (a) The Company will not, and will not permit
any Restricted Subsidiary to, engage in any Asset Sales unless (i) the Company  
or such Restricted Subsidiary, as the case may be, receives consideration at the
time of such Asset Sale at least equal to the fair market value of the assets   
and properties sold or otherwise disposed of pursuant to the Asset Sale (as     
determined by the Board of Directors of the Company, whose determination in good
faith shall be conclusive and evidenced by a Board Resolution), (ii) at least   
80% of the consideration received by the Company or the Restricted Subsidiary,  
as the case may be, in respect of such Asset Sale consists of cash or Cash      
Equivalents and (iii) the Company delivers to the Trustee an Officers'          
Certificate certifying that such Asset Sale complies                            

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with clauses (i) and (ii). The amount (without duplication) of any Indebtedness 
(other than Subordinated Indebtedness) of the Company or such Restricted        
Subsidiary that is expressly assumed by the transferee in such Asset Sale and   
with respect to which the Company or such Restricted Subsidiary, as the case may
be, is unconditionally released by the holder of such Indebtedness, shall be    
deemed to be cash or Cash Equivalents for purposes of clause (ii) and shall also
be deemed to constitute a repayment of, and a permanent reduction in, the amount
of such Indebtedness for purposes of the following paragraph (b). If at any time
any non-cash consideration received by the Company or any Restricted Subsidiary 
of the Company, as the case may be, in connection with any Asset Sale is        
converted into or sold or otherwise disposed of for cash (other than interest   
received with respect to any such non-cash consideration), then such conversion 
or disposition shall be deemed to constitute an Asset Sale hereunder and the Net
Available Proceeds thereof shall be applied in accordance with this covenant. A 
transfer of assets by the Company to a Restricted Subsidiary or by a Subsidiary 
to the Company or to a Restricted Subsidiary will not be deemed to be an Asset  
Sale and a transfer of assets that constitutes a Restricted Investment and that 
is permitted under "--Restricted Payments" will not be deemed to be an Asset    
Sale.                                                                           

In the event of the transfer of substantially all (but not all) of the  
property and assets of the Company and its Restricted Subsidiaries as an        
entirety to a Person in a transaction permitted under " --Merger, Consolidation 
and Sale of Assets," the successor corporation shall be deemed to have sold the 
properties and assets of the Company and its Subsidiaries not so transferred for
purposes of this covenant, and shall comply with the provisions of this covenant
with respect to such deemed sale as if it were an Asset Sale. In addition, the  
fair market value of such properties and assets of the Company or its           
Subsidiaries deemed to be sold shall be deemed to be Net Available Proceeds for 
purposes of this covenant.                                                      

 (b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company or any Restricted Subsidiary may either, no later than 270 days     
after such Asset Sale, (i) apply all or any of the Net Available Proceeds       
therefrom to repay Indebtedness (other than Subordinated Indebtedness) of the   
Company or any Restricted Subsidiary, PROVIDED, in each case, that the related  
loan commitment (if any) is thereby permanently reduced by the amount of such   
Indebtedness so repaid or (ii) invest all or any part of the Net Available      
Proceeds thereof in properties and assets that replace the properties or assets 
that were the subject of such Asset Sale or in other properties or assets that  
will be used in the business of the Company and its Restricted Subsidiaries. The
amount of such Net Available Proceeds not applied or invested as provided in    
this paragraph will constitute "Excess Proceeds."                               

(c) When the aggregate amount of Excess Proceeds equals or exceeds $5.0 
million, the Company will be required to make an offer to purchase, from all    
Holders of the Senior Notes, an aggregate principal amount of Senior Notes equal
to such Excess Proceeds as follows:                                             

       (i) The Company will make an offer to purchase (a "Net Proceeds Offer")
  from all Holders of the Senior Notes in accordance with the procedures set
    forth in the Indenture the maximum principal amount (expressed as a multiple
of $1,000) of Senior Notes that may be purchased out of the amount (the 
"Payment Amount") of such Excess Proceeds.                              

       (ii) The offer price for the Senior Notes will be payable in cash in an
 amount equal to 100% of the principal amount of the Senior Notes tendered
  pursuant to a Net Proceeds Offer, plus accrued and unpaid interest and Old
Note Liquidated Damages, if any, to the date such Net Proceeds Offer is 
consummated (the "Offered Price"), in accordance with the procedures set
 forth in the Indenture. To the extent that the aggregate Offered Price of
Senior Notes tendered pursuant to a Net Proceeds Offer is less than the 
    Payment Amount relating thereto (such shortfall constituting a "Net Proceeds
    Deficiency"), the Company may use such Net Proceeds Deficiency, or a portion
  thereof, for general corporate purposes, subject to the limitations of the
"Limitation on Restricted Payments" covenant.                           

       (iii) If the aggregate Offered Price of Senior Notes validly tendered and
    not withdrawn by Holders thereof exceeds the Payment Amount, Senior Notes to
be purchased will be selected on a PRO RATA basis.                      

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     (iv) Upon completion of such Net Proceeds Offer, the amount of Excess
Proceeds remaining shall be zero.                                       

The Company will not permit any Restricted Subsidiary to enter into or suffer to
exist any agreement that would place any restriction of any kind (other than    
pursuant to law or regulation) on the ability of the Company to make a Net      
Proceeds Offer following any Asset Sale. The Company will comply with Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder,
if applicable, in the event that an Asset Sale occurs and the Company is        
required to purchase Senior Notes as described above.                           

   LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.  The Company will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, create or suffer to exist or allow to    
become effective any consensual encumbrance or restriction of any kind on the   
ability of any Restricted Subsidiary (a) to pay dividends, in cash or otherwise,
or make any other distributions on its Capital Stock, or make payments on any   
Indebtedness owed, to the Company or any other Restricted Subsidiary, (b) to    
make loans or advances to the Company or any other Restricted Subsidiary or (c) 
to transfer any of its property or assets to the Company or any other Restricted
Subsidiary (any such restrictions being collectively referred to herein as a    
"Payment Restriction"), except in any such case for such encumbrances or        
restrictions existing under or by reason of (i) the Indenture or any other      
agreement in effect or entered into on the date of the Indenture, or (ii) any   
agreement, instrument or charter of or in respect of a Restricted Subsidiary    
entered into prior to the date on which such Restricted Subsidiary became a     
Restricted Subsidiary and outstanding on such date and not entered into in      
connection with or in contemplation of becoming a Restricted Subsidiary,        
PROVIDED such consensual encumbrance or restriction is not applicable to any    
properties or assets subsequently acquired by such Restricted Subsidiary, or    
(iii) pursuant to an agreement effecting a modification, renewal, refinancing,  
replacement or extension of any agreement, instrument or charter (other than the
Indenture) referred to in clause (i) or (ii) above, PROVIDED, HOWEVER, that the 
provisions relating to such encumbrance or restriction are not materially less  
favorable to the Holder of the Senior Notes than those under or pursuant to the 
agreement, instrument or charter so modified, renewed, refinanced, replaced or  
extended, or (iv) customary provisions restricting the subletting or assignment 
of any lease or the transfer of copyrighted or patented material, or (v)        
provisions in agreements that restrict the assignment of such agreements or     
rights thereunder, or (vi) the sale or other disposition of any properties or   
assets subject to a Lien securing Indebtedness.                                 

LIMITATION ON CONDUCT OF BUSINESS.  The Company will not, and will not  
permit any of its Restricted Subsidiaries to, engage in the conduct of any      
business other than any Related Business.                                       

FUTURE DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES.  The    
foregoing covenants (including calculation of financial ratios and the          
determination of limitations on the incurrence of Indebtedness and Liens) may be
affected by the designation by the Company of any existing or future Subsidiary 
of the Company as an Unrestricted Subsidiary. The definition of "Unrestricted   
Subsidiary" set forth under the caption "--Certain Definitions" describes the   
circumstances under which a Subsidiary of the Company may be designated as an   
Unrestricted Subsidiary by the Board of Directors of the Company.               

    ADDITIONAL COVENANTS.  The Indenture also contains covenants with respect to
the following matters: (i) payment of principal, premium and interest, if any,  
and Old Note Liquidated Damages, if any; (ii) maintenance of an office or agency
in The City of New York; (iii) arrangements regarding the handling of money held
in trust; (iv) maintenance of corporate existence; (v) payment of taxes and     
other claims; and (vi) maintenance of properties.                               

 REPORTS.  The Company will file on a timely basis with the Commission, to
the extent such filings are accepted by the Commission and whether or not the   
Company has a class of securities registered under the Exchange Act, the annual 
reports, quarterly reports and other documents that the Company would be        
required to file if it were subject to Section 13 or 15 of the Exchange Act. The
Company will also be                                                            

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required (a) to file with the Trustee (with exhibits), and provide to each      
Holder of Senior Notes (without exhibits), without cost to such Holder, copies  
of such reports and documents within 15 days after the date on which the Company
files such reports and documents with the Commission or the date on which the   
Company would be required to file such reports and documents if the Company were
so required and (b) if filing such reports and documents with the Commission is 
not accepted by the Commission or is prohibited under the Exchange Act, to      
supply at its cost copies of such reports and documents (including any exhibits 
thereto) to any Holder of Senior Notes promptly upon written request.           

MERGER, CONSOLIDATION AND SALE OF ASSETS                                        

The Company will not, in any single transaction or series of related    
transactions, merge or consolidate with or into any other Person, or sell,      
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of the properties and assets of the Company and its Restricted Subsidiaries on a
consolidated basis to any Person or group of Affiliated Persons, and the Company
will not permit any of its Restricted Subsidiaries to enter into any such       
transaction or series of transactions, if, in any event, such transaction or    
series of transactions, in the aggregate, would result in the sale, assignment, 
conveyance, transfer, lease or other disposition of all or substantially all of 
the properties and assets of the Company and its Restricted Subsidiaries on a   
consolidated basis to any other Person or group of Affiliated Persons, unless   
(i) either (A) if the transaction is a merger or consolidation, the Company     
shall be the surviving Person of such merger or consolidation, or (B) the Person
(if other than the Company) formed by such consolidation or into which the      
Company is merged or to which the properties and assets of the Company or its   
Restricted Subsidiaries, as the case may be, are sold, assigned, conveyed,      
transferred, leased or otherwise disposed of (any such surviving Person or      
transferee Person being the "Surviving Entity") shall be a corporation organized
and existing under the laws of the United States of America, any state thereof  
or the District of Columbia and shall, in either case, expressly assume by a    
supplemental indenture to the Indenture executed and delivered to the Trustee,  
in form satisfactory to the Trustee, all the obligations of the Company or the  
Restricted Subsidiary, as the case may be, with respect to the Senior Notes and 
the Indenture, and, in any case, the Indenture shall remain in full force and   
effect; and (ii) immediately before and immediately after giving effect to such 
transaction or series of transactions on a pro forma basis (and treating any    
Indebtedness not previously an obligation of the Company or any of its          
Restricted Subsidiaries which becomes an obligation of the Company or any of its
Restricted Subsidiaries in connection with or as a result of such transaction or
transactions as having been incurred at the time of such transaction or         
transactions), no Default or Event of Default shall have occurred and be        
continuing; (iii) except in the case of the consolidation or merger of any      
Restricted Subsidiary with or into the Company, immediately after giving effect 
to such transaction or transactions on a pro forma basis, the Consolidated Net  
Worth of the Company (or the Surviving Entity if the Company is not the         
continuing obligor under the Indenture) is at least equal to the Consolidated   
Net Worth of the Company immediately before such transaction or transactions;   
(iv) except in the case of the consolidation or merger of the Company with or   
into a Restricted Subsidiary or any Restricted Subsidiary with or into the      
Company or another Restricted Subsidiary, immediately before and immediately    
after giving effect to such transaction or transactions on a pro forma basis    
(assuming that the transaction or transactions occurred on the first day of the 
period of four fiscal quarters ending immediately prior to the consummation of  
such transaction or transactions, with the appropriate adjustments with respect 
to the transaction or transactions being included in such pro forma             
calculation), the Company (or the Surviving Entity if the Company is not the    
continuing obligor under the Indenture) could incur $1.00 of additional         
Indebtedness (other than Permitted Indebtedness) pursuant to the first paragraph
of the "--Limitation on Indebtedness and Disqualified Capital Stock" covenant;  
(v) if any of the properties or assets of the Company or any of its Restricted  
Subsidiaries would upon such transaction or series of related transactions      
become subject to any Lien (other than a Permitted Lien), the creation and      
imposition of such Lien shall have been in compliance with the "Limitation on   
Liens" covenant; and (vi) the Company (or the Surviving Entity if the Company is
not the continuing obligor under the Indenture) shall have delivered to the     
Trustee, in form and substance reasonably satisfactory to the Trustee, an       
Officers' Certificate and an Opinion of Counsel, each stating that such         

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consolidation, merger, transfer, lease or other disposition and any supplemental
indenture in respect thereto comply with the requirements under the Indenture   
and that all conditions precedent in the Indenture relating to such transaction 
have been satisfied.                                                            

    Upon any consolidation or merger or any sale, assignment, lease, conveyance,
transfer or other disposition of all or substantially all of the properties and 
assets of the Company and its Restricted Subsidiaries on a consolidated basis in
accordance with the foregoing, in which the Company is not the continuing       
corporation, the Surviving Entity shall succeed to, and be substituted for, and 
may exercise every right and power of, the Company under the Indenture with the 
same effect as if the Surviving Entity had been named as the Company therein,   
and thereafter the Company, except in the case of a lease, will be discharged   
from all obligations and covenants under the Indenture and the Senior Notes and 
may be liquidated and dissolved.                                                

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EVENTS OF DEFAULT                                                               

The following will be "Events of Default" under the Indenture:          

     (i) default in the payment of the principal of or premium, if any, on
any of the Senior Notes, whether such payment is due at Stated Maturity,
   upon redemption, upon repurchase pursuant to a Change of Control Offer or a
Net Proceeds Offer, upon acceleration or otherwise; or                  

       (ii) default in the payment of any installment of interest and Old Note
 Liquidated Damages, if any, on any of the Senior Notes, when due, and the
continuance of such default for a period of 30 days; or                 

(iii) failure to comply with the "--Limitation on Indebtedness and
Disqualified Capital Stock," "--Limitation on Preferred Stock of        
Subsidiaries," "--Limitation on Restricted Payments,"                   
  "--Limitation on Liens" covenants, default in the performance or breach of
   the provisions of the "Merger, Consolidation and Sale of Assets" section of
  the Indenture, the failure to make or consummate a Change of Control Offer
    in accordance with the provisions of the "Change of Control" covenant or the
 failure to make or consummate a Net Proceeds Offer in accordance with the
provisions of the "Limitation on Asset Sales" covenant; or              

      (iv) the Company or the Subsidiary Guarantors shall fail to perform or
    observe any other term, covenant or agreement contained in the Senior Notes,
  the Indenture (other than a default specified in (i), (ii) or (iii) above)
 or the Subsidiary Guarantees, as the case may be, for a period of 30 days
after written notice of such failure stating that it is a "notice of    
default" under the Indenture and requiring the Company or the Subsidiary
    Guarantors, as the case may be, to remedy the same shall have been given (x)
to the Company or the Subsidiary Guarantors, as the case may be, by the 
   Trustee or (y) to the Company or the Subsidiary Guarantors, as the case may
 be, and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Senior Notes then outstanding; or                         

      (v) the occurrence and continuation beyond any applicable grace period
of any default in the payment of the principal of, premium, if any, or  
    interest on any Indebtedness of the Company (other than the Senior Notes) or
  any Subsidiary for money borrowed when due, or any other default resulting
in acceleration of any Indebtedness of the Company or any Subsidiary for
money borrowed, provided that the aggregate principal amount of such    
Indebtedness shall exceed $2.5 million; or                              

       (vi) one or more final judgments or orders rendered against the Company
or any Subsidiary that are unsatisfied and that require the payment in  
money, either individually or in an aggregate amount, in excess of $2.5 
   million, which judgments or orders are not paid, discharged or stayed for a
period of 60 days; or                                                   

  (vii) certain events of bankruptcy or insolvency with respect to the
Company or any Restricted Subsidiary; or                                

 (viii) except as permitted by the Indenture and the Senior Notes, the
cessation of the effectiveness of any Subsidiary Guarantee or the       
  repudiation by any Subsidiary Guarantor (or by any Person acting on behalf
of any Subsidiary Guarantor) of its obligations under its Subsidiary    
Guarantee; or                                                           

      (ix) the cessation of the effectiveness of the Pledge Agreement or the
   repudiation by the Pledgor thereunder (or by any Person acting on behalf of
such Pledgor) of its obligations under the Pledge Agreement.            

    If an Event of Default (other than as specified in clause (vii) above) shall
occur and be continuing, the Trustee, by written notice to the Company, or the  
Holders of at least 25% in aggregate principal amount of the Senior Notes then  
outstanding, by written notice to the Trustee and the Company, may, and the     
Trustee upon the request of the Holders of not less than 25% in aggregate       
principal amount of the Senior Notes then outstanding shall, declare the        
principal of, premium, if any, and accrued and unpaid interest and Old Note     
Liquidated Damages, if any, on all of the Senior Notes due and payable          
immediately, upon which declaration all amounts payable in respect of the Senior
Notes shall be immediately due and payable. If an                               

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Event of Default specified in clause (vii) above occurs and is continuing, then 
the principal of, premium, if any, and accrued and unpaid interest and Old Note 
Liquidated Damages, if any, on all of the Senior Notes shall become and be      
immediately due and payable without any declaration, notice or other act on the 
part of the Trustee or any Holder of Senior Notes.                              

After a declaration of acceleration under the Indenture, but before a   
judgment or decree for payment of the money due has been obtained by the        
Trustee, the Holders of a majority in aggregate principal amount of the         
outstanding Senior Notes, by written notice to the Company and the Trustee, may,
under certain circumstances, rescind and annul such declaration and its         
consequences if all Events of Default, other than the non-payment of principal  
of, premium, if any, or interest on the Senior Notes that has become due solely 
by such declaration of acceleration, have been cured or waived. No such         
rescission shall affect any subsequent Default or Event of Default or impair any
right consequent thereto.                                                       

 No Holder will have any right to institute any proceeding with respect to
the Indenture or any remedy thereunder, unless such Holder has notified the     
Trustee of a continuing Event of Default and the Holders of at least 25% in     
aggregate principal amount of the outstanding Senior Notes have made written    
request, and offered reasonable indemnity, to the Trustee to institute such     
proceeding as Trustee under the Senior Notes and the Indenture, the Trustee has 
failed to institute such proceeding within 60 days after receipt of such notice 
and the Trustee, within such 60-day period, has not received directions         
inconsistent with such written request by Holders of a majority in aggregate    
principal amount of the outstanding Senior Notes. Such limitations will not     
apply, however, to a suit instituted by the Holder of a Senior Note for the     
enforcement of the payment of the principal of, premium, if any, or interest on 
such Senior Note on or after the respective due dates expressed in such Senior  
Note.                                                                           

   The Holders of a majority in principal amount of the Senior Notes may waive
any existing Default or Event of Default under the Indenture, and its           
consequences, except a default in the payment of the principal of or interest on
any Senior Notes.                                                               

   The Company will be required to furnish to the Trustee annual and quarterly
statements as to the performance by the Company of its obligations under the    
Indenture and as to any default in such performance. The Company will also be   
required to notify the Trustee within 10 days of any Default or Event of        
Default.                                                                        

LEGAL DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE                            

    The Company may, at its option and at any time, terminate the obligations of
the Company with respect to the outstanding Senior Notes (such action being a   
"legal defeasance"). Such legal defeasance means that the Company shall be      
deemed to have paid and discharged the entire Indebtedness represented by the   
outstanding Senior Notes and to have been discharged from all their other       
obligations with respect to the Senior Notes, except for (i) the rights of      
Holders of outstanding Senior Notes to receive payment in respect of the        
principal of, premium, if any, and interest on such Senior Notes when such      
payments are due, (ii) the Company's obligations to replace any temporary Senior
Notes, register the transfer or exchange of any Senior Notes, replace mutilated,
destroyed, lost or stolen Senior Notes and maintain an office or agency for     
payments in respect of the Senior Notes, (iii) the rights, powers, trusts,      
duties and immunities of the Trustee, and (iv) the legal defeasance provisions  
of the Indenture. In addition, the Company may, at its option and at any time,  
elect to terminate the obligations of the Company with respect to certain       
covenants that are set forth in the Indenture, some of which are described under
"--Certain Covenants" above, and any omission to comply with such obligations   
shall not constitute a Default or an Event of Default with respect to the Senior
Notes (such action being a "covenant defeasance"). In the event covenant        
defeasance occurs, certain events (not including nonpayment, bankruptcy,        
insolvency and reorganization events) described under "Events of Default" will  
no longer constitute an Event of Default with respect to the Senior Notes.      

    In order to exercise either legal defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of 
the Holders of the Senior Notes, cash in United States                          

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dollars, U.S. Government Obligations (as defined in the Indenture), or a        
combination thereof, in such amounts as will be sufficient, in the opinion of a 
nationally recognized firm of independent public accountants, to pay the        
principal of, premium, if any, and interest and Old Note Liquidated Damages, if 
any, on the outstanding Senior Notes to redemption or maturity; (ii) the Company
shall have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the outstanding Senior Notes will not recognize income, gain or loss 
for federal income tax purposes as a result of such legal defeasance or covenant
defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such legal     
defeasance or covenant defeasance had not occurred (in the case of legal        
defeasance, such Opinion must refer to and be based upon a published ruling of  
the Internal Revenue Service or a change in applicable federal income tax laws);
(iii) no Default or Event of Default shall have occurred and be continuing on   
the date of such deposit or insofar as clauses (vii) and (viii) under the first 
paragraph of "Events of Default" are concerned, at any time during the period   
ending on the 91st day after the date of deposit; (iv) such legal defeasance or 
covenant defeasance shall not cause the Trustee to have a conflicting interest  
under the Indenture or the Trust Indenture Act with respect to any securities of
the Company; (v) such legal defeasance or covenant defeasance shall not result  
in a breach or violation of, or constitute a default under, any material        
agreement or instrument to which the Company or any of its Restricted           
Subsidiaries is a party or by which the Company or any of its Restricted        
Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an  
Opinion of Counsel to the effect that after the 91st day following the deposit, 
the trust funds will not be subject to the effect of any applicable bankruptcy, 
insolvency, reorganization or similar laws affecting creditors' rights          
generally; (vii) the Company shall have delivered to the Trustee an Officers'   
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of the Senior Notes over the other creditors of the   
Company with the intent of defeating, hindering, delaying or defrauding         
creditors of the Company or others; and (viii) the Company shall have delivered 
to the Trustee an Officers' Certificate and an Opinion of Counsel satisfactory  
to the Trustee, each stating that all conditions precedent under the Indenture  
to either legal defeasance or covenant defeasance, as the case may be, have been
complied with.                                                                  

SATISFACTION AND DISCHARGE                                                      

The Indenture will be discharged and will cease to be of further effect 
(except as to surviving rights of registration of transfer or exchange of the   
Senior Notes, as expressly provided for in the Indenture) as to all outstanding 
Senior Notes when (i) either (a) all the Senior Notes theretofore authenticated 
and delivered (except lost, stolen, mutilated or destroyed Senior Notes which   
have been replaced or paid and Senior Notes for whose payment money or certain  
U.S. Government Obligations have theretofore been deposited in trust or         
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust) have been delivered to the Trustee for           
cancellation or (b) all Senior Notes not theretofore delivered to the Trustee   
for cancellation have become due and payable or will become due and payable at  
their Stated Maturity within one year, or are to be called for redemption within
one year under arrangements satisfactory to the Trustee for the serving of      
notice of redemption by the Trustee in the name, and at the expense, of the     
Company, and the Company has irrevocably deposited or caused to be deposited    
with the Trustee funds in an amount sufficient to pay and discharge the entire  
Indebtedness on the Senior Notes not theretofore delivered to the Trustee for   
cancellation, for principal of, premium, if any, and interest and Old Note      
Liquidated Damages, if any, on the Senior Notes to the date of deposit (in the  
case of Senior Notes which have become due and payable) or to the Stated        
Maturity or Redemption Date, as the case may be, together with instructions from
the Company irrevocably directing the Trustee to apply such funds to the payment
thereof at maturity or redemption, as the case may be; (ii) the Company has paid
all other sums payable under the Indenture by the Company; and (iii) the Company
has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel 
which, taken together, state that all conditions precedent under the Indenture  
relating to the satisfaction and discharge of the Indenture have been complied  
with.                                                                           

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AMENDMENTS AND WAIVERS                                                          

  From time to time, the Company and the Trustee may, without the consent of
the Holders of the Senior Notes, amend or supplement the Indenture or the Senior
Notes for certain specified purposes, including, among other things, curing     
ambiguities, defects or inconsistencies, qualifying, or maintaining the         
qualification of, the Indenture under the Trust Indenture Act or making any     
change that does not materially adversely affect the rights of any Holder of    
Senior Notes. Other amendments and modifications of the Indenture or the Senior 
Notes may be made by the Company and the Trustee with the consent of the Holders
of not less than a majority of the aggregate principal amount of the outstanding
Senior Notes; provided, however, that no such modification or amendment may,    
without the consent of the Holder of each outstanding Senior Note affected      
thereby, (a) change the Stated Maturity of the principal of, or any installment 
of interest on, any Senior Note or alter the provisions with respect to         
redemption of the Senior Notes, (b) reduce the principal amount of, premium, if 
any, or interest or Old Note Liquidated Damages, if any, on any Senior Note, (c)
change the coin or currency in which principal of, premium, if any, or interest 
or Old Note Liquidated Damages, if any, on, any Senior Note is payable, (d)     
impair the right to institute suit for the enforcement of any payment on or with
respect to any Senior Note, (e) reduce the above-stated percentage of aggregate 
principal amount of outstanding Senior Notes necessary to modify or amend the   
Indenture, (f) reduce the percentage of aggregate principal amount of           
outstanding Senior Notes necessary for waiver of compliance with certain        
provisions of the Indenture or for waiver of certain defaults, (g) modify any   
provisions of the Indenture relating to the modification and amendment of the   
Indenture or the waiver of past Defaults or covenants, except as otherwise      
specified, or the rights of any Holder to receive payments of principal of or   
premium, if any, or interest or Old Note Liquidated Damages, if any, on the     
Senior Notes, (h) change the ranking of the Senior Notes in a manner adverse to 
the Holders or expressly subordinate in right of payment the Senior Notes to any
other Indebtedness, (i) amend, change or modify the obligation of the Company to
make and consummate a Change of Control Offer in the event of a Change of       
Control or make and consummate a Net Proceeds Offer with respect to any Asset   
Sale or modify any of the provisions or definitions with respect thereto or (j) 
release any security that may have been granted in respect of the Senior Notes  
except as expressly provided in the Indenture.                                  

    The Holders of not less than a majority in aggregate principal amount of the
outstanding Senior Notes may, on behalf of the Senior Holders of all Senior     
Notes, waive any past default under the Indenture, except a default in the      
payment of principal of, premium, if any, or interest or Old Note Liquidated    
Damages, if any, on the Senior Notes, or in respect of a covenant or provision  
which under the Indenture cannot be modified or amended without the consent of  
the Holder of each Senior Note outstanding.                                     

THE TRUSTEE                                                                     

IBJ Schroder Bank & Trust Company serves as trustee under the Indenture.

   The Indenture (including provisions of the Trust Indenture Act incorporated
by reference therein) contains limitations on the rights of the Trustee         
thereunder, should it become a creditor of the Company, to obtain payment of    
claims in certain cases or to realize on certain property received by it in     
respect of any such claims, as security or otherwise. The Indenture permits the 
Trustee to engage in other transactions; provided, however, if it acquires any  
conflicting interest (as defined in the Trust Indenture Act) it must eliminate  
such conflict or resign.                                                        

GOVERNING LAW                                                                   

   The Indenture and the Senior Notes are governed by the laws of the State of
New York, without regard to the principles of conflicts of law.                 

CERTAIN DEFINITIONS                                                             

"Acquired Indebtedness" means, with respect to any specified Person, (a)
Indebtedness of any other Person existing at the time such other Person merged  
with or into or became a Restricted Subsidiary of                               

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such specified Person, including Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a          
Restricted Subsidiary of such specified Person or (b) assumed in connection with
acquisitions of properties or assets from such Person. Acquired Indebtedness    
shall be deemed to be incurred on the date the acquired Person becomes a        
Restricted Subsidiary or the date of the related acquisition of properties or   
assets from such Person.                                                        

 "Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect 
common control with such specified Person. For the purposes of this definition, 
"control," when used with respect to any Person, means the power to direct the  
management and policies of such Person, directly or indirectly, whether through 
the ownership of voting securities, by contract or otherwise; and the terms     
"controlling" and "controlled" have meanings correlative to the foregoing. For  
purposes of this definition, beneficial ownership of 10% or more of the voting  
common equity (on a fully diluted basis) or options or warrants to purchase such
equity (but only if exercisable at the date of determination or within 60 days  
thereof) of a Person shall be deemed to constitute control of such Person.      

"Asset Sale" means any sale, issuance, conveyance, transfer, lease,     
assignment or other disposition to any Person other than the Company or any of  
its Restricted Subsidiaries (including, without limitation, by means of a       
Sale/Leaseback Transaction or a merger or consolidation) (collectively, for     
purposes of this definition, a "transfer"), directly or indirectly, in one or a 
series of related transactions, of (a) any Capital Stock of any Restricted      
Subsidiary held by the Company or any other Restricted Subsidiary or (b) any    
other properties or assets of the Company or any of its Restricted Subsidiaries 
other than transfers of cash, Cash Equivalents, accounts receivable or other    
properties or assets in the ordinary course of business. For the purposes of    
this definition, the term "Asset Sale" also shall not include any of the        
following: (i) any transfer of properties or assets (including Capital Stock)   
that is governed by, and made in accordance with, the provisions described under
"--Merger, Consolidation and Sale of Assets"; (ii) any transfer of properties or
assets to an Unrestricted Subsidiary, if permitted under the "Limitation on     
Restricted Payments" covenant; (iii) sales of damaged, worn-out or obsolete     
equipment or assets that, in the Company's reasonable judgment, are either (x)  
no longer used or (y) no longer useful in the business of the Company or its    
Restricted Subsidiaries; and (iv) any transfers that, but for this clause (iv), 
would be Asset Sales, if after giving effect to such transfers, the aggregate   
fair market value of the properties or assets transferred in such transaction or
any such series of related transactions so designated by the Company does not   
exceed $500,000.                                                                

"Attributable Indebtedness" means, with respect to any particular lease 
under which any Person is at the time liable, whether or not accounted for as a 
Capitalized Lease Obligation, and at any date as of which the amount thereof is 
to be determined, the present value of the total net amount of rent required to 
be paid by such Person under the lease during the primary term thereof, without 
giving effect to any renewals at the option of the lessee, discounted from the  
respective due dates thereof to such date of determination at a rate per annum  
equal to the discount rate which would be applicable to a Capitalized Lease     
Obligation with a like term in accordance with GAAP. As used in the preceding   
sentence, the "net amount of rent" under any such lease for any such period     
shall mean the sum of rental and other payments required to be paid with respect
to such period by the lessee thereunder, excluding any amounts required to be   
paid by such lessee on account of maintenance and repairs, insurance, taxes,    
assessments, water rates or similar charges. In the case of any lease which is  
terminable by the lessee upon payment of a penalty, such net amount of rent     
shall also include the amount of such penalty, but no rent shall be considered  
as required to be paid under such lease subsequent to the first date upon which 
it may be so terminated.                                                        

 "Average Life" means, with respect to any Indebtedness, as at any date of
determination, the quotient obtained by dividing (a) the sum of the products of 
(i) the number of years (and any portion thereof) from the date of determination
to the date or dates of each successive scheduled principal payment (including, 
without limitation, any sinking fund or mandatory redemption payment            
requirements) of such Indebtedness multiplied by (ii) the amount of each such   
principal payment by (b) the sum of all such principal payments.                

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"Capitalized Lease Obligation" means, with respect to any Person, any   
obligation to pay rent or other amounts under a lease of (or other agreement    
conveying the right to use) any property (whether real, personal or mixed) that 
is required to be classified and accounted for as a capital lease obligation    
under GAAP and, for the purpose of the Indenture, the amount of such obligation 
at any date shall be the capitalized amount thereof at such date, determined in 
accordance with GAAP.                                                           

"Capital Stock" means, with respect to any Person, any and all shares,  
interests, participation, rights or other equivalents in the equity interests   
(however designated) in such Person, and any rights (other than debt securities 
convertible into an equity interest), warrants or options exercisable for,      
exchangeable for or convertible into such an equity interest in such Person.    

  "Cash Equivalents" means (i) marketable obligations with a maturity of 180
days or less issued or directly and fully guaranteed or insured by the United   
States of America or any agency or instrumentality thereof (provided that the   
full faith and credit of the United States of America is pledged in support     
thereof); (ii) demand and time deposits and certificates of deposit or          
acceptances with a maturity of 180 days or less of any financial institution    
that is a member of the Federal Reserve System having combined capital and      
surplus and undivided profits of not less than $500 million; (iii) commercial   
paper maturing no more than 180 days from the date of creation thereof issued by
a corporation that is not an Affiliate of the Company and is organized under the
laws of any state of the United States or the District of Columbia and rated at 
least A-1 by S&P or at least P-1 by Moody's; (iv) repurchase obligations with a 
term of not more than seven days for underlying securities of the types         
described in clause (i) above entered into with any commercial bank meeting the 
specifications of clause (ii) above; and (v) investments in money market or     
other mutual funds substantially all of whose assets comprise securities of the 
types described in clauses (i) through (iv) above.                              

 "Change of Control" means the occurrence of any event or series of events
(whether or not otherwise in compliance with the provisions of the Indenture) by
which: (a) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) (other than the Principals) is or becomes the        
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or 
indirectly, of more than 35% of the total Voting Stock of the Company, (b) the  
Company consolidates with or merges into another Person or any Person           
consolidates with, or merges into, the Company, in any such event pursuant to a 
transaction in which the outstanding Voting Stock of the Company is changed into
or exchanged for cash, securities or other property, other than any such        
transaction where (i) the outstanding Voting Stock of the Company is changed    
into or exchanged for Voting Stock of the surviving or resulting Person that is 
Qualified Capital Stock and (ii) the holders of the Voting Stock of the Company 
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving or resulting Person immediately 
after such transaction; (c) the Company, either individually or in conjunction  
with one or more Restricted Subsidiaries, sells, assigns, conveys, transfers,   
leases or otherwise disposes of, or the Restricted Subsidiaries sell, assign,   
convey, transfer, lease or otherwise dispose of, all or substantially all of the
properties and assets of the Company and its Restricted Subsidiaries, taken as a
whole (either in one transaction or a series of related transactions), including
Capital Stock of the Restricted Subsidiaries, to any Person (other than the     
Company or a Wholly Owned Restricted Subsidiary); (d) during any consecutive    
two-year period, individuals who at the beginning of such period constituted the
Board of Directors of the Company (together with any new directors whose        
election by such Board of Directors or whose nomination for election by the     
stockholders of the Company was approved by a vote of two-thirds of the         
directors then still in office who were either directors at the beginning of    
such period or whose election or nomination for election was previously so      
approved) cease for any reason to constitute a majority of the Board of         
Directors of the Company then in office; or (e) the approval by the holders of  
Capital Stock of the Company of any plan or proposal for liquidation or         
dissolution of the Company.                                                     

 "Common Stock" of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of     
assets upon any voluntary or involuntary liquidation, dissolution or winding up 
of such Person, to shares of Capital Stock of any other class of such Person.   

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"Consolidated Fixed Charge Coverage Ratio" means, with respect to the   
Company for any period, the ratio of (a) the sum of Consolidated Net Income,    
Consolidated Fixed Charges, Consolidated Income Tax Expense and Consolidated    
Non-cash Charges of the Company and its Restricted Subsidiaries, on a           
consolidated basis for such period, all determined in accordance with GAAP to   
(b) Consolidated Fixed Charges for such period. In making such computations, (i)
the Consolidated Fixed Charge Coverage Ratio shall be calculated on a pro forma 
basis assuming that (A) the Indebtedness to be incurred or the Disqualified     
Capital Stock to be issued (and all other Indebtedness incurred or Disqualified 
Capital Stock issued after the first day of such period of four full fiscal     
quarters referred to in the covenant described in paragraph (a) under "--Certain
Covenants--Limitation on Indebtedness and Disqualified Capital Stock" through   
and including the date of determination), and (if applicable) the application of
the net proceeds therefrom (and from any other such Indebtedness or Disqualified
Capital Stock), including to refinance other Indebtedness, had been incurred on 
the first day of such four quarter period and, in the case of Acquired          
Indebtedness, on the assumption that the related transaction (whether by means  
of purchase, merger or otherwise) also had occurred on such date with the       
appropriate adjustments with respect to such acquisition being included in such 
pro forma calculation and (B) any acquisition or disposition by the Company or  
any Restricted Subsidiary of any properties or assets outside the ordinary      
course of business, or any repayment of any principal amount of any Indebtedness
of the Company or any Restricted Subsidiary prior to the Stated Maturity        
thereof, in either case since the first day of such period of four full fiscal  
quarters through and including the date of determination, had been consummated  
on such first day of such four-quarter period; (ii) the Consolidated Fixed      
Charges attributable to interest on any Indebtedness required to be computed on 
a pro forma basis in accordance with the covenant described in paragraph (a)    
under "--Certain Covenants--Limitation on Indebtedness and Disqualified Capital 
Stock" and (A) bearing a floating interest rate shall be computed as if the rate
in effect on the date of computation had been the applicable rate for the entire
period and (B) which was not outstanding during the period for which the        
computation is being made but which bears, at the option of the Company, a fixed
or floating rate of interest, shall be computed by applying, at the option of   
the Company, either the fixed or floating rate; (iii) the Consolidated Fixed    
Charges attributable to interest on any Indebtedness under a revolving credit   
facility required to be computed on a pro forma basis in accordance with the    
covenant described in paragraph (a) under "--Certain Covenants--Limitation on   
Indebtedness and Disqualified Capital Stock" shall be computed based upon the   
average daily balance of such Indebtedness during the applicable period,        
provided that such average daily balance shall be reduced by the amount of any  
repayment of Indebtedness under a revolving credit facility during the          
applicable period, which repayment permanently reduced the commitments or       
amounts available to be reborrowed under such facility; (iv) notwithstanding    
clauses (ii) and (iii) of this proviso, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements relating
to Interest Rate Protection Obligations, shall be deemed to have accrued at the 
rate per annum resulting after giving effect to the operation of such           
agreements; and (v) if after the first day of the period referred to in clause  
(a) of this definition the Company has permanently retired any Indebtedness out 
of the Net Cash Proceeds of the issuance and sale of shares of Qualified Capital
Stock of the Company within 30 days of such issuance and sale, Consolidated     
Fixed Charges shall be calculated on a pro forma basis as if such Indebtedness  
had been retired on the first day of such period.                               

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    "Consolidated Fixed Charges" means, for any period, without duplication, (i)
the sum of (a) the interest expense of the Company and its Restricted           
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP, including, without limitation, any amortization of debt discount, the
net cost under Interest Rate Protection Obligations (including any amortization 
of discounts), the interest portion of any deferred payment obligation          
constituting Indebtedness, all commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance financing and all
accrued interest, in each case to the extent attributable to such period, (b) to
the extent any Indebtedness of any Person (other than the Company or a          
Restricted Subsidiary) is guaranteed by the Company or any Restricted           
Subsidiary, the aggregate amount of interest paid (to the extent not accrued in 
a prior period) or accrued by such other Person during such period attributable 
to any such Indebtedness, in each case to the extent attributable to that       
period, (c) the aggregate amount of the interest component of Capitalized Lease 
Obligations paid (to the extent not accrued in a prior period), accrued or      
scheduled to be paid or accrued by the Company and its Restricted Subsidiaries  
during such period, and (d) the aggregate amount of dividends paid (to the      
extent not accrued in a prior period) or accrued on Preferred Stock or          
Disqualified Capital Stock of the Company and its Restricted Subsidiaries, to   
the extent such Preferred Stock or Disqualified Capital Stock is owned by       
Persons other than the Company or any Restricted Subsidiary, less (ii), to the  
extent included in clause (i) above, amortization of capitalized debt issuance  
costs of the Company and its Restricted Subsidiaries during such period.        

  "Consolidated Income Tax Expense" means, for any period, the provision for
federal, state, local and foreign income taxes (including state franchise taxes 
accounted for as income taxes in accordance with GAAP) of the Company and its   
Restricted Subsidiaries for such period as determined on a consolidated basis in
accordance with GAAP.                                                           

    "Consolidated Net Income" means, for any period, the consolidated net income
(or loss) of the Company and its Restricted Subsidiaries for such period as     
determined in accordance with GAAP, adjusted by excluding (a) net after-tax     
extraordinary gains or losses (less all fees and expenses relating thereto), (b)
net after-tax gains or losses (less all fees and expenses relating thereto)     
attributable to Asset Sales, (c) net income (or net loss) of any Person (other  
than the Company or any of its Restricted Subsidiaries), in which the Company or
any of its Restricted Subsidiaries has an ownership interest, except to the     
extent of the amount of dividends or other distributions actually paid to the   
Company or any of its Restricted Subsidiaries in cash by such other Person      
during such period (regardless of whether such cash dividends or distributions  
are attributable to net income (or net loss) of such Person during such period  
or during any prior period), (d) net income (or net loss) of any Person combined
with the Company or any of its Restricted Subsidiaries on a "pooling of         
interests" basis attributable to any period prior to the date of combination,   
(e) net income of any Restricted Subsidiary to the extent that the declaration  
or payment of dividends or similar distributions by that Restricted Subsidiary  
of its net income is not at the date of determination permitted, directly or    
indirectly, by operation of the terms of its charter or any agreement,          
instrument, judgment, decree, order, statute, rule or governmental regulation   
applicable to that Restricted Subsidiary or its stockholders, and (f) income    
resulting from transfers of assets received by the Company or any Restricted    
Subsidiary from an Unrestricted Subsidiary.                                     

   "Consolidated Net Worth" means, at any date, the consolidated stockholders'
equity of the Company less (without duplication) the amount of such             
stockholders' equity attributable to Disqualified Capital Stock or treasury     
stock of the Company and its Restricted Subsidiaries, as determined in          
accordance with GAAP.                                                           

"Consolidated Non-cash Charges" means, for any period, the aggregate    
depreciation, depletion, amortization and other non-cash expenses of the Company
and its Restricted Subsidiaries deducted in computing Consolidated Net Income   
for such period, all determined on a consolidated basis in accordance with GAAP 
(excluding any such non-cash charge for which an accrual of or reserve for cash 
charges for any future period is required).                                     

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"Currency Hedge Obligations" means, at any time as to any Person, the   
obligations of such Person at such time which were incurred in the ordinary     
course of business pursuant to any foreign currency exchange agreement, option  
or futures contract or other similar agreement or arrangement designed to       
protect against or manage such Person's or any of its Subsidiaries' exposure to 
fluctuations in foreign currency exchange rates.                                

"Default" means any event, act or condition that is, or after notice or 
passage of time or both would become, an Event of Default.                      

    "Disinterested Director" means, with respect to any transaction or series of
transactions in respect of which the Board of Directors of the Company is       
required to deliver a resolution of the Board of Directors under the Indenture, 
a member of the Board of Directors of the Company who does not have any material
direct or indirect financial interest (other than an interest arising solely    
from the beneficial ownership of Capital Stock of the Company) in or with       
respect to such transaction or series of transactions.                          

"Disqualified Capital Stock" means any Capital Stock that, either by its
terms, by the terms of any security into which it is convertible or exchangeable
or by contract or otherwise, is, or upon the happening of an event or passage of
time or both would be, required to be redeemed or repurchased, in whole or in   
part, prior to the final Stated Maturity of the Senior Notes or is redeemable at
the option of the holder thereof at any time prior to such final Stated         
Maturity, or is convertible into or exchangeable for debt securities at any time
prior to such final Stated Maturity.                                            

    "Event of Default" has the meaning set forth above under the caption "Events
of Default."                                                                    

    "GAAP" means generally accepted accounting principles, consistently applied,
that are set forth in the opinions and pronouncements of the Accounting         
Principles Board of the American Institute of Certified Public Accountants and  
statements and pronouncements of the Financial Accounting Standards Board or in 
such other statements by such other entity as may be approved by a significant  
segment of the accounting profession of the United States of America, which are 
applicable as of the date of the Indenture.                                     

"Guarantee" or "guarantee" means, as applied to any obligation, (i) a   
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
or all of such obligation and (ii) an agreement, direct or indirect, contingent 
or otherwise, the practical effect of which is to assure in any way the payment 
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the     
payment of amounts drawn down under letters of credit. When used as a verb,     
"guarantee" has a corresponding meaning.                                        

"Holder" means a Person in whose name a Senior Note is registered in the
Note Register.                                                                  

  "Indebtedness" means, with respect to any Person, without duplication, (a)
all liabilities of such Person, contingent or otherwise, for borrowed money or  
for the deferred purchase price of property or services (excluding any trade    
accounts payable and other accrued current liabilities incurred in the ordinary 
course of business) and all liabilities of such Person incurred in connection   
with any letters of credit, bankers' acceptances or other similar credit        
transactions or any agreement to purchase, redeem, exchange, convert or         
otherwise acquire for value any Capital Stock of such Person, or any warrants,  
rights or options to acquire such Capital Stock, outstanding on the date of the 
Indenture or thereafter, if, and to the extent, any of the foregoing would      
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, (b) all obligations of such Person evidenced by bonds, notes,        
debentures or other similar instruments, if, and to the extent, any of the      
foregoing would appear as a liability upon a balance sheet of such Person       
prepared in accordance with GAAP, (c) all Indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with      
respect to property acquired by such Person (even if the rights and remedies of 
the seller or lender under such agreement in the event of a default are limited 
to repossession or sale of such property), (d) the Attributable Indebtedness of 
any                                                                             

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Capitalized Lease Obligation of such Persons, (e) all Indebtedness described in 
the preceding clauses and all dividends, the payment of which is secured by (or 
for which the holder of such Indebtedness has an existing right, contingent or  
otherwise, to be secured by) any Lien upon property (including, without         
limitation, accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness    
(the amount of such obligation being deemed to be the lesser of the value of    
such property or the amount of the obligation so secured), (f) all guarantees by
such Person of Indebtedness referred to in this definition, and (g) all         
obligations of such Person under or in respect of Currency Hedge Obligations and
Interest Rate Protection Obligations.                                           

  "Interest Rate Protection Obligations" means the obligations of any Person
pursuant to any arrangement with any other Person whereby, directly or          
indirectly, such Person is entitled to receive from time to time periodic       
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such Person  
calculated by applying a fixed or a floating rate of interest on the same       
notional amount and shall include, without limitation, interest rate swaps,     
caps, floors, collars and other similar agreements or arrangements designed to  
protect against or manage such Person's or any of its Subsidiaries' exposure to 
fluctuations in interest rates.                                                 

"Investment" means, with respect to any Person, any direct or indirect  
advance, loan, guarantee of Indebtedness or other extension of credit or capital
contribution to (by means of any transfer of cash or other property or assets to
others or any payment for property, assets or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,    
bonds, notes, debentures or other securities (including derivatives) or         
evidences of Indebtedness issued by, any other Person. In addition, the fair    
market value of the net assets of any Restricted Subsidiary at the time that    
such Restricted Subsidiary is designated an Unrestricted Subsidiary shall be    
deemed to be an "Investment" made by the Company in such Unrestricted Subsidiary
at such time. "Investments" shall exclude (a) extensions of trade credit or     
other advances to customers on commercially reasonable terms in accordance with 
normal trade practices or otherwise in the ordinary course of business, (b)     
Interest Rate Protection Obligations and Currency Hedge Obligations, but only to
the extent that the same constitute Permitted Indebtedness and (c) endorsements 
of negotiable instruments and documents in the ordinary course of business.     

"Leasing Company" means Embroidery Leasing Corporation.                 

"Lien" means any mortgage, charge, pledge, lien (statutory or other),   
security interest, hypothecation, assignment for security, claim or similar type
of encumbrance (including, without limitation, any agreement to give or grant   
any lease, conditional sale or other title retention agreement having           
substantially the same economic effect as any of the foregoing) upon or with    
respect to any property of any kind. A Person shall be deemed to own subject to 
a Lien any property which such Person has acquired or holds subject to the      
interest of a vendor or lessor under any conditional sale agreement, capital    
lease or other title retention agreement.                                       

"Maturity" means, with respect to any Senior Note, the date on which any
principal of such Senior Note becomes due and payable as therein or in the      
Indenture provided, whether at the Stated Maturity with respect to such         
principal or by declaration of acceleration, call for redemption or purchase or 
otherwise.                                                                      

"Moody's" means Moody's Investors Service, Inc. and its successors.     

    "Net Available Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents including payments in respect of
deferred payment obligations when received in the form of cash or Cash          
Equivalents (except to the extent that such obligations are financed or sold    
with recourse to the Company or any Restricted Subsidiary), net of (i) brokerage
commissions and other fees and expenses (including fees and expenses of legal   
counsel, accountants and investment banks) related to such Asset Sale, (ii)     
provisions for all taxes payable as a result of such Asset Sale (after taking   
into account                                                                    

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any available tax credits or deductions and any tax sharing arrangements), (iii)
amounts required to be paid to any Person (other than the Company or any        
Restricted Subsidiary) owning a beneficial interest in the properties or assets 
subject to the Asset Sale or having a Lien therein and (iv) appropriate amounts 
to be provided by the Company or any Restricted Subsidiary, as the case may be, 
as a reserve required in accordance with GAAP against any liabilities associated
with such Asset Sale and retained by the Company or any Restricted Subsidiary,  
as the case may be, after such Asset Sale, including, without limitation,       
pensions and other postemployment benefit liabilities, liabilities related to   
environmental matters and liabilities under any indemnification obligations     
associated with such Asset Sale, all as reflected in an Officers' Certificate;  
provided, however, that any amounts remaining after adjustments, revaluations or
liquidations of such reserves shall constitute Net Available Proceeds.          

"Net Cash Proceeds," with respect to any issuance or sale of Qualified  
Capital Stock or other securities, means the cash proceeds of such issuance or  
sale net of attorneys' fees, accountants' fees, underwriters' or placement      
agents' fees, discounts or commissions and brokerage, consultant and other fees 
and expenses actually incurred in connection with such issuance or sale and net 
of taxes paid or payable as a result thereof.                                   

    "Note Register" means the register maintained by or for the Company in which
the Company shall provide for the registration of the Senior Notes and the      
transfer of the Senior Notes.                                                   

"Permitted Indebtedness" means any of the following:                    

 (i) Indebtedness under Working Capital Agreements in an aggregate
 principal amount at any time outstanding not to exceed the greater of (A)
    $20.0 million or (B) 60% of the book value of the accounts receivable of the
   Company and its Restricted Subsidiaries, calculated on a consolidated basis
and in accordance with GAAP,                                            

      (ii) Indebtedness under the Senior Notes or the Indebtedness under the
senior notes issued in the Exchange Offer;                              

      (iii) Indebtedness outstanding or in effect on the date of the Indenture
   after giving effect to the Offering and the application of the net proceeds
therefrom;                                                              

      (iv) Indebtedness under Interest Rate Protection Obligations, provided
 that (1) such Interest Rate Protection Obligations are related to payment
    obligations on Permitted Indebtedness or Indebtedness otherwise permitted by
 paragraph (a) of the "Limitation on Indebtedness and Disqualified Capital
    Stock" covenant, and (2) the notional principal amount of such Interest Rate
Protection Obligations does not exceed the principal amount of such     
Indebtedness to which such Interest Rate Protection Obligations relate; 

    (v) Indebtedness under Currency Hedge Obligations, provided that (1)
such Currency Hedge Obligations are related to payment obligations on   
   Permitted Indebtedness or Indebtedness otherwise permitted by paragraph (a)
   of the "Limitation on Indebtedness and Disqualified Capital Stock" covenant
    or to the foreign currency cash flows reasonably expected to be generated or
 required by the Company and its Restricted Subsidiaries, (2) the notional
principal amount of such Currency Hedge Obligations does not exceed the 
principal amount of such Indebtedness and the amount of such foreign    
   currency cash flows to which such Currency Hedge Obligations relate and (3)
    such Currency Hedge Obligations are entered into for the purpose of limiting
    currency exchange rate risks in connection with transactions entered into in
the ordinary course of business;                                        

        (vi) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary
and Indebtedness of any Restricted Subsidiary to the Company or a Wholly
Owned Restricted Subsidiary; provided, however, that upon either (1) the
subsequent issuance (other than directors' qualifying shares), sale,    
   transfer or other disposition of any Capital Stock or any other event which
results in any such Wholly Owned Restricted Subsidiary ceasing to be a  
Wholly Owned Restricted Subsidiary or (2) the transfer                  

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 or other disposition of any such Indebtedness (except to the Company or a
Wholly Owned Restricted Subsidiary), the provisions of this clause (vi) 
shall no longer be applicable to such Indebtedness and such Indebtedness
shall be deemed, in each case, to be incurred and shall be treated as an
   incurrence for purposes of paragraph (a) of the "Limitation on Indebtedness
and Disqualified Capital Stock" covenant at the time the Wholly Owned   
Restricted Subsidiary in question ceased to be a Wholly Owned Restricted
Subsidiary or the time such transfer or other disposition occurred;     

      (vii) Indebtedness in respect of bid, performance or surety bonds issued
    for the account of the Company in the ordinary course of business, including
  guaranties or obligations of the Company with respect to letters of credit
  supporting such bid, performance or surety obligations (in each case other
than for an obligation for money borrowed);                             

    (viii) Indebtedness in respect of Capitalized Lease Obligations directly
    incurred by the Company, provided that such Indebtedness incurred under this
   clause (viii) does not exceed $2.5 million at any one time outstanding; and

      (ix) any renewals, amendments, extensions, supplements, modifications,
   deferrals, substitutions, refinancing or replacements (each, for purpose of
    this clause (ix), a "refinancing") by the Company or a Restricted Subsidiary
    of any Indebtedness incurred pursuant to paragraph (a) of the "Limitation on
    Indebtedness and Disqualified Capital Stock" covenant (without giving effect
   to the parenthetical excluding Permitted Indebtedness) or referred to above
 in clauses (ii) through (vi) or this clause (ix), so long as (A) any such
new Indebtedness shall be in a principal amount that does not exceed the
   principal amount (or, if such Indebtedness being refinanced provides for an
  amount less than the principal amount thereof to be due and payable upon a
 declaration of acceleration thereof, such lesser amount as of the date of
  determination) so refinanced plus the amount of any premium required to be
paid in connection with such refinancing pursuant to the terms of the   
  Indebtedness refinanced or the amount of any premium reasonably determined
    by the Company or such Restricted Subsidiary as necessary to accomplish such
  refinancing, plus the amount of expenses of the Company or such Restricted
   Subsidiary incurred in connection with such refinancing, (B) in the case of
 any refinancing of Indebtedness (including the Senior Notes) that is PARI
PASSU with or subordinated in right of payment to the Senior Notes, then
    such new Indebtedness is PARI PASSU with or subordinated in right of payment
 to the Senior Notes at least to the same extent as the Indebtedness being
refinanced and (C) such new Indebtedness has an Average Life equal to or
longer than the Average Life of the Indebtedness being refinanced and a 
  final Stated Maturity that is at least 91 days later than the final Stated
Maturity of the Indebtedness being refinanced.                          

   "Permitted Investments" means any of the following: (i) Investments in Cash
Equivalents; (ii) Investments in the Company or any of its Wholly Owned         
Restricted Subsidiaries; (iii) Investments by the Company or any of its         
Restricted Subsidiaries in another Person, if as a result of such Investment (A)
such other Person becomes a Wholly Owned Restricted Subsidiary or (B) such other
Person is merged or consolidated with or into, or transfers or conveys all or   
substantially all of its properties and assets to, the Company or a Wholly Owned
Restricted Subsidiary; (iv) Investments permitted under the "Limitation on Asset
Sales" covenant; (v) Investments made in the ordinary course of business in     
prepaid expenses, lease, utility, workers' compensation, performance and other  
similar deposits; (vi) Investments in an aggregate amount not to exceed $2.5    
million in any Person engaged primarily in a Related Business on the date of any
such Investment; and (vii) Investments in the Leasing Company in an aggregate   
amount not to exceed $5.0 million.                                              

"Permitted Liens" means the following types of Liens:                   

(i) Liens existing as of the date of the Indenture;             

(ii) Liens securing the Senior Notes;                           

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  (iii) Liens in favor of the Company or, with respect to a Restricted
Subsidiary, Liens in favor of another Restricted Subsidiary;            

    (iv) Liens on accounts receivable, notes receivable or chattel paper
  securing Indebtedness under one or more Working Capital Agreements that do
  not, in the aggregate, exceed the amounts permitted pursuant to clause (i)
of the definition of Permitted Indebtedness;                            

       (v) Liens securing Indebtedness that constitutes Permitted Indebtedness
pursuant to clause (ix) of the definition of "Permitted Indebtedness"   
   incurred as a refinancing of any Indebtedness secured by Liens described in
 clause (i) or (iv) of this definition; provided, however, that such Liens
   (x) are not less favorable to the Holders and are not more favorable to the
lienholders with respect to such Liens than the Liens in respect of the 
    Indebtedness being refinanced and (y) do not extend to or cover any property
   or assets of the Company or any of its Restricted Subsidiaries not securing
the Indebtedness so refinanced;                                         

   (vi) Liens for taxes, assessments or governmental charges or claims
either (A) not delinquent or (B) contested in good faith by appropriate 
 proceedings and as to which the Company or a Restricted Subsidiary of the
    Company, as the case may be, shall have set aside on its books such reserves
as may be required pursuant to GAAP;                                    

     (vii) statutory Liens of landlords and Liens of carriers, warehousemen,
   mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
    incurred in the ordinary course of business for sums not delinquent or being
   contested in good faith, if such reserve or other appropriate provision, if
  any, as shall be required by GAAP shall have been made in respect thereof;

     (viii) Liens incurred or deposits made in the ordinary course of business
  in connection with workers' compensation, unemployment insurance and other
types of social security, or to secure the payment or performance of    
    tenders, statutory or regulatory obligations, surety and appeal bonds, bids,
  government contracts and leases, performance and return of money bonds and
other similar obligations (exclusive of obligations for the payment of  
borrowed money);                                                        

        (ix) judgment Liens not giving rise to a Default or Event of Default and
so long as any appropriate legal proceedings which may have been duly   
initiated for the review of such judgment shall not have been finally   
    terminated or the period within which such proceeding may be initiated shall
not have expired;                                                       

   (x) easements, rights-of-way, zoning restrictions and other similar
  charges or encumbrances in respect of real property not interfering in any
    material respect with the ordinary conduct of business of the Company or any
of its Restricted Subsidiaries;                                         

  (xi) any interest or title of a lessor under any Capitalized Lease
Obligation or operating lease; provided that (A) the Attributable       
Indebtedness related thereto constitutes Indebtedness permitted to be   
incurred under the terms of the Indenture and (B) with respect to any   
 Capitalized Lease Obligation, such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease   
Obligation;                                                             

       (xii) Liens securing Purchase Money Indebtedness; provided, however, that
   (A) the Purchase Money Indebtedness shall not be secured by any property or
  assets of the Company or any Restricted Subsidiary other than the property
  or assets so acquired and any proceeds therefrom and (B) the Lien securing
such Purchase Money Indebtedness shall be created within 90 days of such
acquisition;                                                            

      (xiii) Liens upon specific items of inventory or other goods of any Person
   securing such Person's obligations in respect of bankers acceptances issued
or created for the account of such Person to facilitate the purchase,   
shipment or storage of such inventory or other goods;                   

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       (xiv) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property or assets 
relating to such letters of credit and products and proceeds thereof;   

     (xv) Liens encumbering deposits made to secure obligations arising from
  statutory, regulatory, contractual or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and   
setoff;                                                                 

    (xvi) Liens securing Acquired Indebtedness incurred in accordance with
the covenant described under "--Certain Covenants--Limitation on        
  Indebtedness and Disqualified Capital Stock;" provided that (A) such Liens
secured such Acquired Indebtedness at the time of and prior to the      
incurrence of such Acquired Indebtedness by the Company or a Restricted 
Subsidiary of the Company and were not granted in connection with, or in
    anticipation of, the incurrence of such Acquired Indebtedness by the Company
  or a Restricted Subsidiary of the Company and (B) such Liens do not extend
to or cover any property or assets of the Company or of any of its      
  Restricted Subsidiaries other than the property or assets that secured the
 Acquired Indebtedness prior to the time such Indebtedness became Acquired
 Indebtedness of the Company or a Restricted Subsidiary of the Company and
 are no more favorable to the lienholders than those securing the Acquired
 Indebtedness prior to the incurrence of such Acquired Indebtedness by the
Company or a Restricted Subsidiary of the Company; and                  

  (xvii) Liens on substantially all of the assets of W&G, Ltd. under any
Working Capital Agreement.                                              

"Person" means any individual, corporation, limited liability company,  
partnership, joint venture, association, joint stock company, trust,            
unincorporated organization or government or any agency or political subdivision
thereof.                                                                        

"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated) of such      
Person's preferred or preference stock, whether now outstanding or issued after 
the date of the Indenture, including, without limitation, all classes and series
of preferred or preference stock of such Person.                                

   "Principals" means (i) John K. Ziegler, Richard J. Mackey, John K. Ziegler,
Jr., Jack Klasky, Alan B. Lee, Maxwell L. Tripp, and other members of the       
Company's principal management or (ii) the Company's Savings and Employee Stock 
Ownership Plan and its other retirement plans holding shares of the Company's   
Capital Stock.                                                                  

"Public Equity Offering" means an offer and sale of Common Stock of the 
Company pursuant to a registration statement that has been declared effective by
the Commission pursuant to the Securities Act (other than a registration        
statement on Form S-8 or otherwise relating to equity securities issuable under 
any employee benefit plan of the Company).                                      

"Purchase Money Indebtedness" means Indebtedness of the Company and its 
Restricted Subsidiaries incurred in connection with the purchase of property or 
assets for the business of the Company and its Restricted Subsidiaries.         

  "Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Disqualified Capital Stock.                              

 "Related Business" means the businesses of the Company and the Restricted
Subsidiaries on the date on which the Senior Notes were originally issued and   
any business related, ancillary or complementary to the business of the Company 
and the Restricted Subsidiaries on such date.                                   

"Restricted Investment" means (without duplication) any Investment other
than a Permitted Investment including without limitation a Subsidiary designated
as an Unrestricted Subsidiary.                                                  

"Restricted Subsidiary" means any Subsidiary of the Company, whether    
existing on or after the date of the Indenture, unless such Subsidiary of the   
Company is an Unrestricted Subsidiary or is designated as                       

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an Unrestricted Subsidiary in the manner described in the definition of the term
"Unrestricted Subsidiary."                                                      

"S&P" means Standard and Poor's Rating Services, a division of The      
McGraw-Hill Companies, Inc., and its successors.                                

"Sale/Leaseback Transaction" means any direct or indirect arrangement   
pursuant to which properties or assets are sold or transferred by the Company or
a Restricted Subsidiary and are thereafter leased back from the purchaser or    
transferee thereof by the Company or one of its Restricted Subsidiaries.        

  "Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the date specified in the instrument evidencing
or governing such Indebtedness as the fixed date on which the principal of such 
Indebtedness or such installment of interest is due and payable.                

"Subordinated Indebtedness" means any Indebtedness of the Company or the
Subsidiary Guarantors which is expressly subordinated in right of payment to the
Senior Notes or Subsidiary Guarantees, respectively.                            

    "Subsidiary" means, with respect to any Person, (i) a corporation a majority
of whose Voting Stock is at the time, directly or indirectly, owned by such     
Person, by one or more Subsidiaries of such Person or by such Person and one or 
more Subsidiaries thereof or (ii) any other Person (other than a corporation),  
including, without limitation, a joint venture, in which such Person, one or    
more Subsidiaries thereof or such Person and one or more Subsidiaries thereof,  
directly or indirectly, at the date of determination thereof, have at least     
majority ownership interest entitled to vote in the election of directors,      
managers or trustees thereof (or other Person performing similar functions).    

"Subsidiary Guarantors" mean (i) all U.S. subsidiaries of the Company   
existing as of the date of the Indenture and (ii) any other Subsidiary of the   
Company or a Subsidiary thereof that executes a Subsidiary Guarantee in         
accordance with the provisions of the Indenture, and their respective successors
and assigns.                                                                    

    "Unrestricted Subsidiary" means (i) the Leasing Company, (ii) any Subsidiary
of the Company that at the time of determination will be designated an          
Unrestricted Subsidiary by the Board of Directors of the Company as provided    
below and (iii) any Subsidiary of an Unrestricted Subsidiary. The Board of      
Directors of the Company may designate any Subsidiary of the Company as an      
Unrestricted Subsidiary so long as (a) neither the Company nor any Restricted   
Subsidiary is directly or indirectly liable pursuant to the terms of any        
Indebtedness of such Subsidiary; (b) no default with respect to any Indebtedness
of such Subsidiary would permit (upon notice, lapse of time or otherwise) any   
holder of any other Indebtedness of the Company or any Restricted Subsidiary to 
declare a default on such other Indebtedness or cause the payment thereof to be 
accelerated or payable prior to its Stated Maturity; (c) such designation as an 
Unrestricted Subsidiary would be permitted under the "Limitation on Restricted  
Payments" covenant; (d) such designation shall not result in the creation or    
imposition of any Lien on any of the properties or assets of the Company or any 
Restricted Subsidiary (other than any Permitted Lien) and (e) the Company could 
incur $1.00 of additional Indebtedness (not including the incurrence of         
Permitted Indebtedness) under clause (a) of the "Limitation on Indebtedness and 
Disqualified Capital Stock" covenant; provided, however, that with respect to   
clause (a) above, the Company or a Restricted Subsidiary may be liable for      
Indebtedness of an Unrestricted Subsidiary if (x) such liability constituted a  
Permitted Investment or a Restricted Payment permitted by the "Limitation on    
Restricted Payments" covenant, in each case, at the time of incurrence, or (y)  
the liability would be a Permitted Investment in each case at the time of       
designation of such Subsidiary as an Unrestricted Subsidiary. Any such          
designation by the Board of Directors of the Company shall be evidenced to the  
Trustee by filing a Board Resolution with the Trustee giving effect to such     
designation along with an Officers' Certificate stating that such designation is
in compliance with the requirements under the Indenture. The Board of Directors 
of the Company may designate any Unrestricted Subsidiary as a Restricted        
Subsidiary if, immediately after giving effect to such designation on a pro     
forma basis, (i) no Default or Event of Default shall have occurred and be      
continuing,                                                                     

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(ii) the Company could incur $1.00 of additional Indebtedness (not including the
incurrence of Permitted Indebtedness) under clause (a) of the "Limitation on    
Indebtedness and Disqualified Capital Stock" covenant and (iii) if any of the   
properties and assets of the Company or any of its Restricted Subsidiaries would
upon such designation become subject to any Lien (other than a Permitted Lien), 
the creation or imposition of such Lien shall have been in compliance with the  
"Limitation on Liens" covenant.                                                 

    "Voting Stock" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances  
to elect at least a majority of the board of directors, managers or trustees of 
any Person (irrespective of whether or not, at the time, stock of any other     
class or classes shall have, or might have, voting power by reason of the       
happening of any contingency).                                                  

   "Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary to the
extent (i) all of the Capital Stock or other ownership interests in such        
Restricted Subsidiary, other than any directors' qualifying shares mandated by  
applicable law, is owned directly or indirectly by the Company or (ii) such     
Restricted Subsidiary is organized in a foreign jurisdiction and is required by 
the applicable laws and regulations of such foreign jurisdiction to be partially
owned by the government of such foreign jurisdiction or individual or corporate 
citizens of such foreign jurisdiction in order for such Restricted Subsidiary to
transact business in such foreign jurisdiction, provided that the Company,      
directly or indirectly, owns the remaining Capital Stock or ownership interest  
in such Restricted Subsidiary and, by contract or otherwise, controls the       
management and business of such Restricted Subsidiary and derives the economic  
benefits of ownership of such Restricted Subsidiary to substantially the same   
extent as if such Restricted Subsidiary were a wholly owned Subsidiary.         

    "Working Capital Agreements" mean (i) the New Credit Facility, (ii) the W&G,
Ltd. Credit Facility, (iii) with respect to any Person (including the Company), 
without duplication, any agreement or agreements between such Person and a      
financial institution or any institutions providing for the making of loans or  
advances on a revolving basis, the issuance of letters of credit and/or the     
creation of bankers' acceptances to fund such Person's general corporate        
requirements, and (iv) any refinancings, renewals, replacements, modification   
and extensions of any of the agreements described in clauses (i), (ii) and      
(iii).                                                                          

BOOK ENTRY; DELIVERY AND FORM                                                   

The New Notes will be issued in the form of a single, permanent global  
certificate in the definitive, fully registered form (the "Global New Note"), to
be deposited with the Trustee as custodian for DTC and registered in the name of
the nominee of DTC. Except as set forth below, the Global New Note may be       
transferred, in whole and not in part, only to another nominee of DTC or to a   
successor of DTC or its nominee.                                                

DTC has advised the Company as follows: It is a limited-purpose trust   
company which was created to hold securities for its participating organizations
(the "Participants") and to facilitate the clearance and settlement of          
transactions in such securities between Participants through electronic         
book-entry changes in accounts of its Participants. Participants include        
securities brokers and dealers (including the Initial Purchaser), banks, trust  
companies, clearing corporations and certain other organizations. Access to the 
DTC's book-entry system is also available to others, such as banks, brokers,    
dealers and trust companies that clear through or maintain a custodial          
relationship with a Participant, either directly or indirectly ("indirect       
participants"). Persons who are not Participants may beneficially own securities
held by DTC only through Participants or indirect participants.                 

    DTC has also advised that pursuant to procedures established by it ownership
of beneficial interests in the Global New Note will be shown on, and the        
transfer of that ownership will be effected only through, records maintained by 
DTC (with respect to Participants' interest), the Participants and the indirect 
participants. The laws of some states require that certain persons take physical
delivery in definitive form of securities which they own. Consequently, the     
ability to transfer beneficial interests in the Global New Note is limited to   
such extent.                                                                    

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   So long as a nominee of DTC is the registered owner of the Global New Note,
such nominee will be considered the sole owner or holder of the Senior Notes for
all purposes under the Indenture. Except as provided below, owners of beneficial
interests in the Global New Note will not be entitled to have Senior Notes      
registered in their names, will not receive or be entitled to receive physical  
delivery of Senior Notes in definitive form and will not be considered the      
owners or holders thereof under the Indenture.                                  

Neither the Company, the Trustee, the paying agent nor the Senior Notes 
registrar will have any responsibility or liability for any aspect of the       
records relating to or payments made on account of beneficial ownership         
interests in the Global New Note, or for maintaining, supervising or reviewing  
any records relating to such beneficial ownership interests.                    

    Principal, interest payments and payments of Old Note Liquidated Damages, if
any, on the Global New Note registered in the name of DTC's nominee or DTC will 
be made by the Company, either directly or through a paying agent, to DTC's     
nominee as the registered owner of the Global New Note. Under the terms of the  
Indenture, the Company and the Trustee will treat the persons in whose names the
Senior Notes are registered as the owners of such Senior Notes for the purpose  
of receiving payments of principal and interest on such Senior Notes and for all
other purposes whatsoever. Therefore, neither the Company, the Trustee nor any  
paying agent has any direct responsibility or liability for the payment of      
principal or interest on the Senior Notes to owners of beneficial interests in  
the Global New Note. DTC has advised the Company and the Trustee that its       
present practice is, upon receipt of any payment of principal or interest to    
credit immediately the accounts of the Participants with payment in amounts     
proportionate to their respective holdings in principal amount of beneficial    
interest in the Global New Note as shown on the records of DTC. Payments by     
Participants and indirect participants to owners of beneficial interests in the 
Global New Note will be governed by standing instructions and customary         
practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in "street name" and will be the responsibility of 
such Participants or indirect participants.                                     

As long as the Senior Notes are represented by a Global New Note, DTC's 
nominee will be the holder of the Senior Notes and therefore will be the only   
entity that can exercise a right to repayment or repurchase of the Senior Notes.
See " --Certain Covenants--Change of Control" and "--Limitation on Asset Sales."
Notice by Participants or indirect participants or by owners of beneficial      
interests in a Global New Note held through such Participants or indirect       
participants of the exercise of the option to elect repayment of beneficial     
interests in Senior Notes represented by a Global New Note must be transmitted  
to DTC in accordance with its procedures on a form required by DTC and provided 
to Participants. In order to ensure that DTC's nominee will timely exercise a   
right to repayment with respect to a particular Senior Note, the beneficial     
owner of such Senior Note must instruct the broker or other Participant or      
exercise a right to repayment. Different firms have cut-off times for accepting 
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other Participant or indirect participant through which it
holds an interest in a Senior Note in order to ascertain the cut-off time by    
which such an instruction must be given in order for timely notice to be        
delivered to DTC. The Company will not be liable for any delay in delivery of   
notices of the exercise of the option to elect repayment.                       

CERTIFICATED SECURITIES                                                         

 Subject to certain conditions, any person having a beneficial interest in
the Global New Note may, upon request to the Trustee, exchange such beneficial  
interest for Senior Notes in the form of Certificated Securities. Upon any such 
issuance, the Trustee is required to register such Certificated Securities in   
the name of, and cause the same to be delivered to, such person or persons (or  
the nominee of any thereof).                                                    

In addition, the Company will issue Senior Notes in definitive form in  
exchange for the Global Note if DTC is at any time unwilling or unable to       
continue as depository and a successor depository is not appointed by the       
Company within 90 days. In such an instance, an owner of a beneficial interest  
in the                                                                          

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Global Note will be entitled to have Senior Notes equal in principal amount to  
such beneficial interest registered in its name and will be entitled to physical
delivery of such Senior Notes in definitive form. Senior Notes so issued in     
definitive form will be issued in denominations of $1,000 and integral multiples
thereof and will be issued in registered form only, without coupons.            

  Neither the Company nor the Trustee will be liable for any delay by DTC or
its nominee in identifying the beneficial owners of Senior Notes and the Company
and the Trustee any conclusively rely on, and will be protected in relying on,  
instructions from DTC or its nominee for all purposes.                          

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MATERIAL FEDERAL INCOME TAX CONSEQUENCES

    The following is a summary of the material generally applicable U.S. federal
income tax consequences resulting from the exchange of Old Notes for New Notes  
pursuant to the Exchange Offer and from the beneficial ownership of Senior Notes
by certain persons. This summary does not purport to consider all the possible  
U.S. federal tax consequences of the participation in the Exchange Offer or the 
ownership or disposition of the Senior Notes and is not intended to reflect the 
particular tax position of any beneficial owner. It deals only with Senior Notes
held as capital assets. Moreover, it does not purport to deal with all aspects  
of federal taxation that may be relevant to particular investors in light of    
their personal investment circumstances and it does not address beneficial      
owners that may be subject to special tax rules, such as banks, insurance       
companies, tax-exempt organizations, dealers in securities or currencies,       
purchasers that hold Senior Notes as part of a hedging transaction or as part of
a straddle with other investments or as part of a "synthetic security" or other 
integrated investment (including a "conversion transaction") comprised of a     
Senior Note and one or more other investments, or purchasers that have a        
"functional currency" other than the U.S. dollar. Except to the extent discussed
below under "Non-U.S. Holders," this summary is addressed only to beneficial    
owners of Senior Notes ("U.S. Holders") that are citizens or residents of the   
United States, corporations, partnerships, or other business entities created or
organized in or under the laws of the United States or any State (including the 
District of Columbia), or estates or trusts the income of which is subject to   
U.S. federal income taxation regardless of its source ("U.S. Persons"). This    
summary is based upon the U.S. federal tax laws and regulations as now in effect
and as currently interpreted and does not take into account possible changes in 
such tax laws or such interpretations, any of which may be applied              
retroactively. It does not include any description of estate or gift tax laws or
the tax laws of any state, local or foreign government that may be applicable to
the Senior Notes or the beneficial owners thereof. Persons considering          
participating in the Exchange Offer or making an investment in the Senior Notes 
should consult their own tax advisors concerning the application of the U.S.    
federal tax laws to their particular situations as well as any consequences to  
them under the laws of any other taxing jurisdiction.                           

EXCHANGE                                                                        

The exchange of the Old Notes for the New Notes pursuant to the Exchange
Offer should not be treated as a taxable transaction for federal income tax     
purposes because the New Notes do not differ materially in kind or extent from  
the Old Notes. Accordingly, no gain or loss should be recognized by a Holder who
exchanges an Old Note for a New Note pursuant to the Exchange Offer, and each   
New Note should be viewed as a continuation of the corresponding Old Note. For  
purposes of determining gain or loss upon a subsequent sale or exchange of the  
New Notes, a holder's initial basis in the New Notes will be the same as such   
holder's adjusted basis in the Old Notes exchanged therefor, and the holding    
period of a holder in the New Note should include the period during which such  
holder held such corresponding Old Note.                                        

U.S. HOLDERS                                                                    

    PAYMENTS OF INTEREST.  In general, interest on a Senior Note will be taxable
to a U.S. Holder as ordinary income at the time it is received or accrued,      
depending on the U.S. Holder's method of accounting for tax purposes.           

ORIGINAL ISSUE DISCOUNT.  The Old Notes were issued with original issue 
discount ("OID") for federal income tax purposes. Because the New Notes are     
treated as a continuation of the Old Notes, the OID on the Old Notes will carry 
over to the New Notes, and continue to be treated in the same manner.           

   U.S. Holders of Senior Notes are required to include OID as ordinary income
as it accrues in accordance with a constant yield method based on compounding at
the end of each accrual period. The term "accrual period" may be any set of     
periods (which may be of varying lengths) selected by the U.S. Holder as long as
(i) no accrual period is longer than one year, and (ii) each scheduled payment  
of interest                                                                     

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or principal on the Senior Note occurs on the first or final day of an accrual  
period. In general, the amount of OID required to be included in income will    
increase with each successive accrual period.                                   

    The Company will report annually to the Internal Revenue Service (the "IRS")
and to each holder other than exempt holders not subject to the information     
reporting requirements, the amount of OID and interest accrued with respect to  
the Senior Notes.                                                               

   SALE OR REDEMPTION.  A U.S. Holder generally will recognize taxable gain or
loss on the sale or redemption of a Senior Note equal to the difference between 
the amount realized from such sale or redemption (other than any amount         
attributable to accrued interest) and such U.S. Holder's adjusted tax basis for 
such Senior Note. Such gain or loss generally will be capital gain or loss and  
will be long-term capital gain or loss if the holding period for such Senior    
Notes is more than one year. A U.S. Holder's adjusted tax basis in a Senior Note
is generally equal to the amount paid therefor, increased by accrued OID        
previously included in the U.S. Holder's gross income with respect to the Senior
Note.                                                                           

   OLD NOTE LIQUIDATED DAMAGES.  The Company intends to take the position that
the Old Note Liquidated Damages, if any, will be taxable to a U.S. Holder as    
ordinary income in accordance with the U.S. Holder's method of accounting for   
federal income tax purposes. The IRS may take a different view, however, which  
could affect the timing of the U.S. Holder's income with respect to the Old Note
Liquidated Damages and possibly could affect the timing of inclusion of interest
income.                                                                         

NON-U.S. HOLDERS                                                                

The following discussion summarizes material U.S. federal income tax    
consequences generally applicable to the ownership and disposition of the Senior
Notes by a beneficial owner who is not a U.S. Person ("Non-U.S. Holder"). This  
discussion does not purport to deal with all aspects of U.S. federal income     
taxation that may be relevant to a Non-U.S. Holder and does not describe any tax
consequences arising out of the laws of any state, locality or foreign          
jurisdiction or out of U.S. federal estate and gift tax laws. Non-U.S. Holders  
are advised to consult their tax advisors regarding the U.S. federal, state,    
local and foreign tax consequences of their participation in the Offering.      

  Under present U.S. federal income tax law and subject to the discussion of
backup withholding below:                                                       

    (a) payments of principal and interest (including OID) on the Senior
Notes by the Company or any agent of the Company to any Non-U.S. Holder 
   whose income from the Senior Notes is not effectively connected with a U.S.
trade or business will not be subject to U.S. federal withholding tax,  
 provided that (i) the Non-U.S. Holder does not actually or constructively
  own 10% or more of the total combined voting power of all classes of stock
of the Company entitled to vote, (ii) the Non-U.S. Holder is not a      
controlled foreign corporation (as defined for U.S. federal income tax  
  purposes) that is related to the Company through stock ownership or a bank
  making an extension of credit pursuant to a loan agreement in the ordinary
   course of business, and (iii) either (A) the beneficial owner of the Senior
Notes certifies to the Company or its agent, under penalties of perjury,
that he is not a U.S. Person and provides his name and address, or (B) a
  securities clearing organization, bank or other financial institution that
   holds customers' securities in the ordinary course of its trade or business
(a "financial institution") and holds the Senior Notes on behalf of the 
  beneficial owner, certifies to the Company or its agent under penalties of
  perjury that such statement has been received from the beneficial owner by
  it or by another financial institution and furnishes the payor with a copy
thereof; and                                                            

   (b) a Non-U.S. Holder generally will not be subject to U.S. federal
 income tax on gain recognized on a sale or other disposition (including a
redemption) of Senior Notes unless (i) the gain is effectively connected
    with the conduct of a trade or business within the United States by the Non-
 U.S. Holder or (ii) in the case of a Non-U.S. Holder who is a nonresident
    alien individual, such holder is present in the U.S. for 183 or more days in
the taxable year of the sale or disposition and either has              

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    a "tax home" (as defined for U.S. federal income tax purposes) in the United
    States or an office or other fixed place of business in the United States to
which the sale or disposition is attributable.                          

INFORMATION REPORTING AND BACKUP WITHHOLDING                                    

For each calendar year in which the Senior Notes are outstanding, the   
Company is required to provide the IRS with certain information, including the  
holder's name, address and taxpayer identification number, the aggregate amount 
of principal and interest paid to that holder during the calendar year and the  
amount of tax withheld, if any. This obligation, however, does not apply with   
respect to certain U.S. Holders, including corporations, tax-exempt             
organizations, qualified pension and profit sharing trusts and individual       
retirement accounts.                                                            

In the event that a U.S. Holder subject to the reporting requirements   
described above fails to supply its correct taxpayer identification number in   
the manner required by applicable law or under reports its tax liability, the   
Company, its agents or paying agents or a broker may be required to "backup"    
withhold a tax equal to 31% of each payment of interest and principal (and      
premium, if any) on the Senior Notes. This backup withholding is not an         
additional tax and may be credited against the U.S. Holder's U.S. federal income
tax liability, provided that the required information is furnished to the IRS.  

Under current Treasury Regulations, backup withholding and information  
reporting will not apply to payments made by the Company or any agent thereof   
(in its capacity as such) to a Non-U.S. Holder of a Senior Note if such holder  
has provided the required certification that it is not a U.S. Person as set     
forth in clause (iii) in paragraph (a) under "--Non-U.S. Holders," or has       
otherwise established an exemption (provided that neither the Company nor its   
agent has actual knowledge that the holder is a U.S. Person or that the         
conditions of any exemption are not in fact satisfied).                         

Payment of the proceeds from the sale of a Senior Note to or through a  
foreign office of a broker will not be subject to information reporting or      
backup withholding, except that information reporting may apply to such payments
if the broker is a U.S. Person, a controlled foreign corporation for U.S. tax   
purposes or a foreign person 50% or more of whose gross income from all sources 
for the three-year period ending with the close of its taxable year preceding   
the payment was effectively connected with a United States trade or business.   
Payment of the proceeds from a sale of a Senior Note to or through the United   
States office of a broker is subject to information reporting and backup        
withholding unless the holder or beneficial owner certifies as to its taxpayer  
identification number or otherwise establishes an exemption from information    
reporting and backup withholding.                                               

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PLAN OF DISTRIBUTION

  Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in        
connection with any resale of such New Notes. This Prospectus as it may be      
amended or supplemented time to time may be used by a broker-dealer in          
connection with resales of New Notes received in exchange for Old Notes where   
such Old Notes were acquired as a result of market making activities or their   
trading activities. The Company has agreed that for a period of up to 180 days  
after the Expiration Date, it will use its reasonable efforts to make this      
Prospectus, as amended or supplemented, available to any broker-dealer for use  
in connection with any such resale. In addition, until September 21, 1997 (90   
days after commencement of the Exchange Offer), all dealers effecting           
transactions in the New Notes may be required to deliver a prospectus.          

The Company will not receive any proceeds from any sale of New Notes by 
broker-dealers. New Notes received by broker-dealers for their own account      
pursuant to the Exchange Offer may be sold from time to time in one or more     
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of     
resale, at market prices prevailing at the time of resale, at prices related to 
such prevailing market prices or negotiated prices. Any such resale may be made 
directly to purchasers or to or through brokers or dealers who may receive      
compensation in the form of commissions or concessions from any such            
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer    
that resells New Notes that were received by it for its own account pursuant to 
the Exchange Offer and any broker or dealer that participates in a distribution 
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of New Notes and any          
commissions or concessions received by any such persons may be deemed to be     
underwriting compensation under the Securities Act. The Letter of Transmittal   
states that by acknowledging that it will deliver and by delivering a           
prospectus, a broker-dealer will not be deemed to admit that it is an           
"underwriter" within the meaning of the Securities Act.                         

  For a period of up to 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or         
supplement to this Prospectus to any broker-dealer that requests such documents 
in the Letter of Transmittal. The Company has agreed to pay the expenses        
incident to the Exchange Offer and will indemnify the Holders of the Old Notes  
against certain liabilities, including certain liabilities under the Securities 
Act, in connection with the Exchange Offer.                                     

LEGAL MATTERS 

  The legality of the New Notes offered hereby will be passed upon by Hughes
Hubbard & Reed LLP, New York, New York.                                         

EXPERTS 

    The consolidated balance sheets of Willcox & Gibbs, Inc. and subsidiaries as
of December 31, 1996 and 1995 and the related consolidated statements of        
operations, stockholders' equity, and cash flows for the years ended December   
31, 1996 and 1995 and for the period from July 13, 1994 (date of formation) to  
December 31, 1994 and the consolidated statements of operations and cash flows  
of the Company's Predecessor for the period from January 1, 1994 to July 12,    
1994 have been included herein and in the registration statement in reliance    
upon the report of KPMG Peat Marwick LLP, independent certified public          
accountants, appearing elsewhere herein, and upon the authority of said firm as 
experts in accounting and auditing.                                             

The combined balance sheet of Clinton Management Corp. (d/b/a Clinton   
Machine & Supply) and Clinton Machinery Corp. as of December 31, 1995 and the   
related combined statements of operations, stockholders' equity (deficit) and   
cash flows for the year then ended have been included herein and in the         
registration statement in reliance upon the report of KPMG Peat Marwick LLP,    
independent certified                                                           

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public accountants appearing elsewhere herein and upon the authority of said    
firm as experts in accounting and auditing.                                     

The consolidated balance sheets of Macpherson Meistergram, Inc. and     
subsidiary as of December 31, 1996 and 1995, the related consolidated statements
of income, stockholders' investment and cash flows for each of the three years  
in the period ended December 31, 1996, and the information set forth in the     
selected historical financial information as of December 31, 1996, 1995 and 1994
and each of the three years in the period ended December 31, 1996, included in  
this Prospectus, have been audited by Arthur Andersen LLP, independent public   
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said    
report.                                                                         

AVAILABLE INFORMATION 

  The Company has filed with the Commission a Registration Statement on Form
S-4 under the Securities Act for the registration of the New Notes offered      
hereby. As permitted by the rules and regulations of the Commission, this       
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information with respect to the 
Company and the New Notes offered hereby, reference is made to the Registration 
Statement and to the exhibits filed therewith. Statements contained in this     
Prospectus concerning the contents of any contract or other document are not    
necessarily complete. With respect to each such contract or other document filed
with the Commission as an exhibit to the Registration Statement, reference is   
made to the exhibit for a more complete description of the matter involved, and 
each such statement shall be deemed qualified in its entirety by such reference.

The Company is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act. The Company has agreed that,    
whether or not it is required to do so by the rules and regulations of the      
Commission, for so long as any of the Senior Notes remain outstanding, it will  
furnish to the Holders of the Senior Notes all annual reports, quarterly reports
and other documents that would be required to be filed with the Commission if   
the Company were subject to Section 13 or 15 of the Exchange Act. In addition,  
whether or not required by the rules and regulations of the Commission,         
following consummation of the Exchange Offer, the Company will file a copy of   
all such information and reports with the Commission for public availability    
(unless the Commission will not accept such a filing) and will make such        
information available to any prospective investors upon request. In addition,   
for so long as any of the Senior Notes remain outstanding, the Company has      
agreed to make available to any prospective purchaser of the Senior Notes or    
beneficial owner of the Senior Notes in connection with any sale thereof, the   
information required to be delivered pursuant to Rule 144A(d)(4) under the      
Securities Act to the extent required from time to time to enable Transfer      
Restricted Notes to be sold without registration under the Securities Act.      

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INDEX TO FINANCIAL STATEMENTS 

                                                        [Enlarge/Download Table]

                                                                                                               PAGE   
                                                                                                             ---------
                                                                                                                      
WILLCOX & GIBBS, INC. AND SUBSIDIARIES                                                                                
Audited Financial Statements:                                                                                         
  Independent Auditors' Report.............................................................................  F-2      
  Consolidated Balance Sheets as of December 31, 1996 and 1995.............................................  F-3      
  Consolidated Statements of Operations for the years ended December 31, 1996 and 1995, for the period July  F-4      
    13, 1994 to December 31, 1994 and for the period January 1, 1994 to July 12, 1994......................           
  Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996 and 1995, for the    F-5      
    period July 13, 1994 to December 31, 1994 and for the period January 1, 1994 to July 12, 1994..........           
  Consolidated Statements of Cash Flows for the years ended December 31, 1996 and 1995, for the period July  F-6      
    13, 1994 to December 31, 1994 and for the period January 1, 1994 to July 12, 1994......................           
  Notes to Consolidated Financial Statements...............................................................  F-7      
Unaudited Financial Statements:                                                                                       
  Consolidated Balance Sheet (Unaudited) as of March 31, 1997..............................................  F-28     
  Consolidated Statements of Operations (Unaudited) for the Three Months Ended March 31, 1997 and 1996.....  F-29     
  Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 1997 and 1996.....  F-30     
  Notes to Consolidated Financial Statements (Unaudited)...................................................  F-31     

MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY                                                                           
  Report of Independent Public Accountants.................................................................  F-36     
  Consolidated Balance Sheets as of December 31, 1996 and 1995.............................................  F-37     
  Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994...................  F-38     
  Consolidated Statements of Stockholders' Investment for the years ended December 31, 1996, 1995 and        F-39     
    1994...................................................................................................           
  Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994...............  F-40     
  Notes to Consolidated Financial Statements...............................................................  F-41     

CLINTON MANAGEMENT CORP. AND CLINTON MACHINERY CORP.                                                                  
  Independent Auditors' Report.............................................................................  F-50     
  Combined Balance Sheet as of December 31, 1995...........................................................  F-51     
  Combined Statement of Operations for the year ended December 31, 1995....................................  F-52     
  Combined Statement of Stockholders' Equity (Deficit) for the year ended December 31, 1995................  F-53     
  Combined Statement of Cash Flows for the year ended December 31, 1995....................................  F-54     
  Notes to Combined Financial Statements...................................................................  F-55     

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INDEPENDENT AUDITORS' REPORT

The Board of Directors                                                          

Willcox & Gibbs, Inc.:                                                          

 We have audited the accompanying consolidated balance sheets of Willcox &
Gibbs, Inc. and subsidiaries (the "Company") as of December 31, 1996 and 1995,  
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years ended December 31, 1996 and 1995 and for the period    
from July 13, 1994 (date of formation) to December 31, 1994 and the consolidated
statements of operations and cash flows of the Company's Predecessor (see note  
1) for the period from January 1, 1994 to July 12, 1994. These consolidated     
financial statements are the responsibility of the Company's management. Our    
responsibility is to express an opinion on these consolidated financial         
statements based on our audits.                                                 

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the financial position of Willcox &   
Gibbs, Inc. and subsidiaries at December 31, 1996 and 1995, and the results of  
their operations and their cash flows for the years ended December 31, 1996 and 
1995 and for the period from July 13, 1994 (date of formation) to December 31,  
1994 and the results of operations and cash flows of the Company's Predecessor  
(see note 1) for the period from January 1, 1994 to July 12, 1994, in conformity
with generally accepted accounting principles.                                  

  As discussed in note 1 to the consolidated financial statements, effective
July 13, 1994, Willcox & Gibbs, Inc. acquired the assets and liabilities of     
certain divisions of Rexel, Inc. in a transaction accounted for as a purchase.  
As a result of the transaction, the consolidated financial statements for       
periods after the transaction are presented on a different cost basis than that 
for the period before the acquisition and, therefore, are not comparable.       

                         KPMG Peat Marwick LLP

Atlanta, Georgia                                                                

February 26, 1997                                                               

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WILLCOX & GIBBS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

DECEMBER 31, 1996 AND 1995

                                                        [Enlarge/Download Table]

                                                                                              COMPANY            
                                                                                    ---------------------------- 
                                                                                                                 
                                                                                        1996           1995      
                                                                                    -------------  ------------- 
                                  ASSETS (NOTE 5)                                                                
Current assets:                                                                                                  
  Cash............................................................................. $     881,500        920,238 
  Trade accounts receivable, net of allowance for doubtful accounts of $2,419,000                                
    in 1996 and $1,596,000 in 1995.................................................    22,335,977     14,235,751 
  Inventories (note 3).............................................................    34,223,674     29,447,999 
  Prepaid expenses and other current assets........................................     2,655,412      2,021,276 
  Deferred income taxes (note 7)...................................................       804,006        563,408 
                                                                                    -------------  ------------- 
      Total current assets.........................................................    60,900,569     47,188,672 
Property and equipment, net (note 4)...............................................     4,400,341      2,811,486 
Deferred financing costs, less accumulated amortization of $811,755 in 1996 and                                  
  $435,439 in 1995 (notes 2 and 15)................................................     2,323,168      1,344,706 
Intangible assets, less accumulated amortization of $228,622                                                     
  in 1996 (notes 2 and 10).........................................................    11,059,878        603,000 
Other assets.......................................................................     1,044,532        579,659 
                                                                                    -------------  ------------- 
                                                                                    $  79,728,488     52,527,523 
                                                                                    -------------  ------------- 
                                                                                    -------------  ------------- 
                       LIABILITIES AND STOCKHOLDERS' EQUITY                                                      
Current liabilities:                                                                                             
  Revolving line of credit (notes 5 and 15)........................................ $  19,347,392     12,941,374 
  Book overdrafts..................................................................     1,499,297        597,110 
  Current installments of long-term debt (notes 6 and 15)..........................     3,195,401      1,812,500 
  Trade accounts payable...........................................................    12,806,244      6,230,155 
  Income taxes payable.............................................................       641,568        308,725 
  Accrued liabilities and other current liabilities................................     4,757,983      3,375,362 
                                                                                    -------------  ------------- 
      Total current liabilities....................................................    42,247,885     25,265,226 
Deferred income taxes (note 7).....................................................       290,113        154,946 
Accrued retirement benefits (note 8)...............................................     2,451,939      2,647,724 
Long-term debt, excluding current installments (notes 2, 6, and 15)................    18,893,332     16,354,787 
Other liabilities..................................................................       168,258        212,890 
                                                                                    -------------  ------------- 
      Total liabilities............................................................    64,051,527     44,635,573 
                                                                                    -------------  ------------- 
Common stock subject to put option (note 2)........................................     3,000,000       --       
Stockholders' equity (notes 2, 9, 10, and 15):                                                                   
  Common stock:                                                                                                  
    Class A, $10 stated value. Authorized 1,500,000 shares; issued and outstanding                               
      976,277 shares (including 100,000 shares subject to put option) in 1996 and                                
      658,248 shares in 1995.......................................................     8,762,770      6,582,480 
    Class B, no par value. Authorized 250,000 shares; none issued..................      --             --       
    Class C, no par value. Authorized 250,000 shares; none issued..................      --             --       
  Additional paid-in capital.......................................................     1,904,398        826,612 
  Subscriptions receivable.........................................................      (429,462)      (113,881)
  Retained earnings................................................................     2,201,527        888,400 
  Cumulative translation adjustment................................................       237,728       (291,661)
                                                                                    -------------  ------------- 
  Total stockholders' equity.......................................................    12,676,961      7,891,950 
                                                                                    -------------  ------------- 
Commitments (note 14)                                                                                            
                                                                                    $  79,728,488     52,527,523 
                                                                                    -------------  ------------- 
                                                                                    -------------  ------------- 

See accompanying notes to consolidated financial statements.

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WILLCOX & GIBBS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS 

YEARS ENDED DECEMBER 31, 1996 AND 1995, FOR THE PERIOD FROM 

JULY 13, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994

AND FOR THE PERIOD FROM JANUARY 1, 1994 TO JULY 12, 1994

                                                        [Enlarge/Download Table]

                                                                                                         COMPANY'S    
                                                                       COMPANY                          PREDECESSOR   
                                                   ------------------------------------------------  -----------------
                                                                                     PERIOD FROM        PERIOD FROM   
                                                                                  JULY 13, 1994 TO    JANUARY 1,1994  
                                                        1996           1995       DECEMBER 31, 1994  TO JULY 12, 1994 
                                                   --------------  -------------  -----------------  -----------------
                                                                                                                      
Net sales........................................  $  113,851,258     90,431,431       41,643,728         41,308,902  
Cost of goods sold...............................      77,623,034     60,642,521       29,161,827         26,908,448  
                                                   --------------  -------------  -----------------  -----------------
  Gross profit...................................      36,228,224     29,788,910       12,481,901         14,400,454  
Selling, general, and administrative expenses....      28,968,827     23,606,126       11,263,508         11,997,834  
                                                   --------------  -------------  -----------------  -----------------
  Operating income...............................       7,259,397      6,182,784        1,218,393          2,402,620  
Other income (expense):                                                                                               
  Interest expense...............................      (4,824,553)    (4,248,820)      (1,946,071)        (1,390,274) 
  Other, net.....................................          14,968         17,806           85,373           (223,922) 
                                                   --------------  -------------  -----------------  -----------------
  Income (loss) before income taxes and                                                                               
  extraordinary item.............................       2,449,812      1,951,770         (642,305)           788,424  
Income tax expense (benefit) (note 7)............       1,136,685        557,513         (288,022)           425,561  
                                                   --------------  -------------  -----------------  -----------------
  Income (loss) before extraordinary item........       1,313,127      1,394,257         (354,283)           362,863  
Extraordinary loss, net of income tax benefit of                                                                      
  $92,901 (note 10)..............................        --             (151,574)        --                 --        
                                                   --------------  -------------  -----------------  -----------------
    Net income (loss)............................  $    1,313,127      1,242,683         (354,283)           362,863  
                                                   --------------  -------------  -----------------  -----------------
                                                   --------------  -------------  -----------------  -----------------
Earnings (loss) per common share and common share                                                                     
  equivalent:                                                                                                         
  Income (loss) before extraordinary item........  $         1.23           1.85             (.74)                    
  Extraordinary item, net........................        --                 (.20)        --                           
                                                   --------------  -------------  -----------------                   
    Net income (loss)............................  $         1.23           1.65             (.74)                    
                                                   --------------  -------------  -----------------                   
                                                   --------------  -------------  -----------------                   
Weighted average number of common shares and                                                                          
  common share equivalents.......................       1,068,645        754,153          481,250                     
                                                   --------------  -------------  -----------------                   
                                                   --------------  -------------  -----------------                   

See accompanying notes to consolidated financial statements.

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WILLCOX & GIBBS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 

YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR THE PERIOD 
FROM JULY 13, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994 

                                                        [Enlarge/Download Table]

                                        CLASS A COMMON                    RETAINED      CLASS A                               
                                            STOCK          ADDITIONAL     EARNINGS    COMMON STOCK  CUMULATIVE      TOTAL     
                                     --------------------    PAID-IN    (ACCUMULATED  SUBSCRIPTIONS TRANSLATION  STOCKHOLDERS'
                                      SHARES     AMOUNT      CAPITAL      DEFICIT)     RECEIVABLE   ADJUSTMENTS     EQUITY    
                                     ---------  ---------  -----------  ------------  ------------  -----------  ------------ 
                                                                                                                              
Initial capitalization at July 13,                                                                                            
  1994.............................    481,250  $4,812,500     --            --            --           --         4,812,500  
Fair value of common stock warrants                                                                                           
  issued (note 10).................     --         --       1,688,000        --            --           --         1,688,000  
Net loss...........................     --         --          --          (354,283)       --           --          (354,283) 
Class A common stock issued to the                                                                                            
  Company's Employee Stock                                                                                                    
  Ownership Plan ("ESOP") relating                                                                                            
  to Rexel, Inc.'s ESOP rollover...    101,500  1,015,000      --            --        (1,015,000)      --            --      
Class A common stock issued to the                                                                                            
  Company's ESOP...................     24,827    248,267      --            --          (248,267)      --            --      
Translation adjustments............     --         --          --            --            --         (179,710)     (179,710) 
                                     ---------  ---------  -----------  ------------  ------------  -----------  ------------ 
Balance at December 31, 1994.......    607,577  6,075,767   1,688,000      (354,283)   (1,263,267)    (179,710)    5,966,507  
Net income.........................     --         --          --         1,242,683        --           --         1,242,683  
Proceeds from subscriptions                                                                                                   
  receivable.......................     --         --          --            --         1,263,267       --         1,263,267  
Class A common stock issued to the                                                                                            
  Company's ESOP...................     50,671    506,713     138,612        --          (113,881)      --           531,444  
Repurchase and retirement of                                                                                                  
  warrants (note 10)...............     --         --      (1,000,000)       --            --           --        (1,000,000) 
Translation adjustments............     --         --          --            --            --         (111,951)     (111,951) 
                                     ---------  ---------  -----------  ------------  ------------  -----------  ------------ 
Balance at December 31, 1995.......    658,248  6,582,480     826,612       888,400      (113,881)    (291,661)    7,891,950  
Net income.........................     --         --          --         1,313,127        --           --         1,313,127  
Proceeds from subscriptions                                                                                                   
  receivable.......................     --         --          --            --           113,881       --           113,881  
Class A common stock issued to the                                                                                            
  Company's ESOP...................     33,715    337,150     281,781        --          (429,462)      --           189,469  
Fair value of common stock warrants                                                                                           
  issued (note 9)..................     --         --         357,000        --            --           --           357,000  
Class A common stock issued in                                                                                                
  Clinton acquisition (note 2).....    100,000     --          --            --            --           --            --      
Class A common stock sold in                                                                                                  
  private placement (note 2).......    184,314  1,843,140     439,005        --            --           --         2,282,145  
Translation adjustments............     --         --          --            --            --          529,389       529,389  
                                     ---------  ---------  -----------  ------------  ------------  -----------  ------------ 
Balance at December 31, 1996.......    976,277  $8,762,770  1,904,398     2,201,527      (429,462)     237,728    12,676,961  
                                     ---------  ---------  -----------  ------------  ------------  -----------  ------------ 
                                     ---------  ---------  -----------  ------------  ------------  -----------  ------------ 

See accompanying notes to consolidated financial statements.

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WILLCOX & GIBBS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

YEARS ENDED DECEMBER 31, 1996 AND 1995, FOR THE PERIOD FROM 
JULY 13, 1994 (DATE OF FORMATION) TO DECEMBER 31, 1994
AND FOR THE PERIOD FROM JANUARY 1, 1994 TO JULY 12, 1994

                                                        [Enlarge/Download Table]

                                                                                                            COMPANY                
                                                                                                 ------------------------------    
                                                                                                      1996            1995         
                                                                                                 --------------  --------------    
                                                                                                                                   
Cash flows from operating activities:                                                                                              
  Net income (loss)............................................................................. $    1,313,127       1,242,683    
  Adjustments to reconcile net income (loss) to net cash provided by (used in) operating                                           
    activities:                                                                                                                    
    Depreciation and amortization...............................................................        651,606         458,514    
    Provision for losses on accounts receivable.................................................        267,034         580,520    
    Amortization of deferred financing costs and intangible assets..............................        604,938         290,292    
    Amortization of debt discounts..............................................................        175,929         187,786    
    Deferred income taxes.......................................................................        271,252          17,424    
    Extraordinary loss on debt extinguishment, net..............................................       --               151,574    
    Changes in operating assets and liabilities, net of effects of business acquisitions:                                          
      Trade accounts receivable.................................................................     (4,462,574)        723,813    
      Inventories...............................................................................     (1,005,426)       (797,067)   
      Prepaid expenses and other current assets.................................................       (363,358)       (371,160)   
      Other assets..............................................................................       (203,064)       (652,758)   
      Income taxes payable......................................................................        332,843         201,605    
      Trade accounts payable and other liabilities..............................................      2,164,304        (191,825)   
                                                                                                 --------------  --------------    
        Net cash provided by (used in) operating activities.....................................       (253,389)      1,841,401    
                                                                                                 --------------  --------------    
Cash flows from investing activities:                                                                                              
  Capital expenditures..........................................................................     (1,247,380)       (772,575)   
  Proceeds from sale of property and equipment..................................................         76,094          14,716    
  Payments for business acquisitions, net of cash acquired......................................    (12,012,103)       --          
                                                                                                 --------------  --------------    
    Net cash used in investing activities.......................................................    (13,183,389)       (757,859)   
                                                                                                 --------------  --------------    
Cash flows from financing activities:                                                                                              
    Net proceeds from (reduction of) revolving line of credit, net of proceeds from debt issued                                    
      in business acquisitions..................................................................      1,738,579       2,327,342    
    Increase (decrease) in book overdraft.......................................................        902,187         (22,497)   
    Proceeds from debt issued in business acquisitions..........................................      9,167,439        --          
    Proceeds from other debt....................................................................      1,603,500        --          
    Principal payments on long-term debt........................................................     (2,110,083)     (1,375,000)   
    Payment of financing costs..................................................................       (530,930)       --          
    Proceeds from common stock sold in private placement........................................      2,282,145        --          
    Extinguishment of debt......................................................................       --            (2,500,000)   
    Repurchase and retirement of warrants.......................................................       --            (1,000,000)   
    Proceeds from common stock issued to the Company's ESOP.....................................        303,350       1,794,711    
    Net financing transactions with Rexel, Inc..................................................       --              --          
                                                                                                 --------------  --------------    
      Net cash provided by (used in) financing activities.......................................     13,356,187        (775,444)   
      Effect of exchange rate changes in cash...................................................         41,853         (22,162)   
                                                                                                 --------------  --------------    
      Net change in cash........................................................................        (38,738)        285,936    
Cash at beginning of period.....................................................................        920,238         634,302    
                                                                                                 --------------  --------------    
Cash at end of period........................................................................... $      881,500         920,238    
                                                                                                 --------------  --------------    
                                                                                                 --------------  --------------    
Supplemental disclosure of cash flow information:                                                                                  
  Cash paid during the period for:                                                                                                 
    Interest.................................................................................... $    4,157,170       3,618,429    
                                                                                                 --------------  --------------    
                                                                                                 --------------  --------------    
    Income taxes, net of refunds................................................................ $      320,277         339,185    
                                                                                                 --------------  --------------    
                                                                                                 --------------  --------------    
Supplemental disclosure of noncash investing and financing activities:                                                             
  Issuance of common stock subscriptions receivable............................................. $      429,462         113,881    
                                                                                                 --------------  --------------    
                                                                                                 --------------  --------------    
  Effects of business acquisitions:                                                                                                
    Fair value of assets acquired............................................................... $    8,875,546        --          
                                                                                                 --------------  --------------    
                                                                                                 --------------  --------------    
    Liabilities assumed......................................................................... $    4,167,724        --          
                                                                                                 --------------  --------------    
                                                                                                 --------------  --------------    


                                                                                                                      COMPANY'S    

                                                                                                                     PREDECESSOR   

                                                                                                                   ----------------

                                                                                                   PERIOD FROM       PERIOD FROM   

                                                                                                  JULY 13, 1994    JANUARY 1, 1994 

                                                                                                 TO DECEMBER 31,     TO JULY 12,   

                                                                                                       1994              1994      

                                                                                                 ----------------  ----------------

                                                                                                                                   
Cash flows from operating activities:                                                                                              
  Net income (loss).............................................................................        (354,283)          362,863 

  Adjustments to reconcile net income (loss) to net cash provided by (used in) operating                                           
    activities:                                                                                                                    
    Depreciation and amortization...............................................................         184,421           315,615 

    Provision for losses on accounts receivable.................................................         320,678           223,551 

    Amortization of deferred financing costs and intangible assets..............................         411,498          --       

    Amortization of debt discounts..............................................................         110,526          --       

    Deferred income taxes.......................................................................        (425,886)         --       

    Extraordinary loss on debt extinguishment, net..............................................        --                --       

    Changes in operating assets and liabilities, net of effects of business acquisitions:                                          
      Trade accounts receivable.................................................................      (2,861,097)         (377,517)

      Inventories...............................................................................       3,005,525         1,587,496 

      Prepaid expenses and other current assets.................................................        (483,308)          (54,322)

      Other assets..............................................................................         121,236           500,650 

      Income taxes payable......................................................................         (76,125)          134,627 

      Trade accounts payable and other liabilities..............................................       3,146,368          (845,704)

                                                                                                 ----------------  ----------------

        Net cash provided by (used in) operating activities.....................................       3,099,553         1,847,259 

                                                                                                 ----------------  ----------------

Cash flows from investing activities:                                                                                              
  Capital expenditures..........................................................................        (279,808)         (283,864)

  Proceeds from sale of property and equipment..................................................         181,802          --       

  Payments for business acquisitions, net of cash acquired......................................     (39,089,106)         --       

                                                                                                 ----------------  ----------------

    Net cash used in investing activities.......................................................     (39,187,112)         (283,864)

                                                                                                 ----------------  ----------------

Cash flows from financing activities:                                                                                              
    Net proceeds from (reduction of) revolving line of credit, net of proceeds from debt issued                                    
      in business acquisitions..................................................................      (4,565,968)         --       

    Increase (decrease) in book overdraft.......................................................         619,607          --       

    Proceeds from debt issued in business acquisitions..........................................      36,187,500          --       

    Proceeds from other debt....................................................................        --                --       

    Principal payments on long-term debt........................................................        (312,500)          (48,245)

    Payment of financing costs..................................................................        --                --       

    Proceeds from common stock sold in private placement........................................       4,812,500          --       

    Extinguishment of debt......................................................................        --                --       

    Repurchase and retirement of warrants.......................................................        --                --       

    Proceeds from common stock issued to the Company's ESOP.....................................        --                --       

    Net financing transactions with Rexel, Inc..................................................        --                (940,955)

                                                                                                 ----------------  ----------------

      Net cash provided by (used in) financing activities.......................................      36,741,139          (989,200)

      Effect of exchange rate changes in cash...................................................         (19,278)           26,286 

                                                                                                 ----------------  ----------------

      Net change in cash........................................................................         634,302           600,481 

Cash at beginning of period.....................................................................        --               1,310,780 

                                                                                                 ----------------  ----------------

Cash at end of period...........................................................................         634,302         1,911,261 

                                                                                                 ----------------  ----------------

                                                                                                 ----------------  ----------------

Supplemental disclosure of cash flow information:                                                                                  
  Cash paid during the period for:                                                                                                 
    Interest....................................................................................       1,341,083         1,390,274 

                                                                                                 ----------------  ----------------

                                                                                                 ----------------  ----------------

    Income taxes, net of refunds................................................................        --                --       

                                                                                                 ----------------  ----------------

                                                                                                 ----------------  ----------------

Supplemental disclosure of noncash investing and financing activities:                                                             
  Issuance of common stock subscriptions receivable.............................................       1,263,267          --       

                                                                                                 ----------------  ----------------

                                                                                                 ----------------  ----------------

  Effects of business acquisitions:                                                                                                
    Fair value of assets acquired...............................................................      52,934,575          --       

                                                                                                 ----------------  ----------------

                                                                                                 ----------------  ----------------

    Liabilities assumed.........................................................................      11,934,575          --       

                                                                                                 ----------------  ----------------

                                                                                                 ----------------  ----------------


See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1996 AND 1995

(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                   

(A) OPERATIONS AND PRINCIPLES OF CONSOLIDATION                          

Willcox & Gibbs, Inc. and subsidiaries (the "Company") are engaged      
principally in the distribution of replacement parts, supplies, and specialized 
equipment to manufacturers of apparel and other sewn products in the domestic   
and export markets. The accompanying consolidated financial statements include  
the accounts of the Company and its wholly owned subsidiaries. All significant  
intercompany balances and transactions have been eliminated in consolidation.   

   The consolidated financial statements of the Company reflect a new basis of
accounting allocating the purchase price to the assets and liabilities acquired 
using the purchase method of accounting (note 2). The consolidated financial    
statements of the Company's Predecessor for the period from January 1, 1994 to  
July 12, 1994 consist of the apparel operations of Rexel, Inc. prior to their   
acquisition by Willcox & Gibbs, Inc. on July 13, 1994.                          

(B) INVENTORIES                                                         

 Inventories are stated at the lower of cost or market. Cost is determined
primarily by using the first-in, first-out method. Provisions for slow moving   
inventories are made based upon management's analysis of current inventory      
levels and expected sales in the future.                                        

(C) PROPERTY AND EQUIPMENT                                              

Property and equipment are recorded at cost. Depreciation is provided   
primarily using the straight-line method over the following estimated useful    
lives of the respective assets:                                                 

                                                                [Download Table]
                                                                         
Buildings......................................................  40 years
                                                                 3 to 7  
Machinery and equipment........................................  years   
                                                                 5 to 7  
Furniture and fixtures.........................................  years   

Leasehold improvements are amortized on a straight-line basis over the  
shorter of the lease term or estimated useful life of the asset.                

(D) DEFERRED FINANCING COSTS                                            

   Deferred financing costs represent origination fees and other related costs
incurred in connection with establishment of the Company's existing credit      
agreement. These costs have been deferred and are being amortized using the     
straight-line method over the term of the related debt.                         

(E) INTANGIBLE ASSETS                                                   

   Intangible assets consist primarily of costs in excess of the fair value of
net assets acquired in business combinations. Intangible assets are amortized on
a straight-line basis over the expected periods to be benefited, generally 40   
years. The Company assesses the recoverability of its intangible assets by      
determining whether the amortization of such balances over their remaining life 
can be recovered through undiscounted future operating cash flows of the        
acquired operation. The amount of impairment, if any, is                        

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)       
measured based on projected discounted future operating cash flows using a      
discount rate reflecting the Company's average cost of funds. The assessment of 
the recoverability of goodwill will be impacted if estimated future operating   
cash flows are not achieved.                                                    

(F) BOOK OVERDRAFTS                                                     

   Under the Company's cash management system, checks issued but not presented
to banks frequently result in overdraft balances for accounting purposes and are
classified as book overdrafts in the accompanying consolidated balance sheets.  

(G) INCOME TAXES                                                        

Income taxes are accounted for using the asset and liability method.    
Deferred tax assets and liabilities are recognized for the future tax           
consequences attributable to differences between the financial statement        
carrying amounts of existing assets and liabilities and their respective tax    
bases and operating loss and tax credit carryforwards. Deferred tax assets and  
liabilities are measured using enacted tax rates expected to apply to taxable   
income in the years in which those temporary differences are expected to be     
recovered or settled. The effect on deferred tax assets and liabilities of a    
change in tax rates is recognized in income in the period that includes the     
enactment date.                                                                 

The Federal taxable income of the Company's Predecessor was included in 
Rexel, Inc.'s consolidated Federal income tax return. The allocation of Federal 
income tax expense was provided as if the Company's Predecessor filed a separate
Federal income tax return.                                                      

(H) FORWARD EXCHANGE CONTRACTS                                          

    The Company enters into forward exchange contracts for foreign currency as a
hedge against accounts payable denominated in a foreign currency. These         
contracts are used by the Company to minimize exposure and reduce risk from     
exchange rate fluctuations in the normal course of its foreign business. Gains  
and losses on forward exchange contracts are deferred and included in the       
measurement of foreign currency transaction gains and losses when realized. Cash
provided and used for forward exchange contracts is included in the cash flows  
resulting from changes in trade accounts payable. Contracts amounting to $45,514
and $1,123,098, whose contractual amounts approximate market value, were        
outstanding at December 31, 1996 and 1995, respectively.                        

(I) FOREIGN CURRENCY TRANSLATION                                        

    The local currency has been used as the functional currency of the Company's
subsidiaries located outside of the United States. Assets and liabilities       
denominated in foreign currency are translated from their respective foreign    
currencies into U.S. dollars using exchange rates in effect at the balance sheet
date. Revenues and expenses are translated at the average exchange rates in     
effect during the period. Translation gains and losses are included as a        
separate component of stockholders' equity. Transaction gains and losses        
included in results of operations are not material in 1996, 1995, or 1994.      

(J) FAIR VALUE OF FINANCIAL INSTRUMENTS                                 

 The fair values of the Company's senior notes payable are estimated based
upon cash flows discounted using the interest rate available to the Company for 
debt with similar terms and remaining                                           

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)       
maturities. The carrying value of the Company's remaining borrowings approximate
fair value due to the variable rate nature of the borrowings and/or the short   
maturity of the borrowings. The fair value of the Company's forward exchange    
contracts is estimated by obtaining quotes for contracts with similar terms. The
fair value of letters of credit are based on fees currently charged for similar 
arrangements. The carrying value of all other financial instruments approximate 
fair value due to the short-term nature of such instruments.                    

(K) EARNINGS PER SHARE                                                  

   Earnings per share is based on the weighted average number of common shares
and common share equivalents outstanding during the period. Stock options,      
warrants, and subscriptions receivable are considered to be common share        
equivalents and, accordingly, have been included in the computation of earnings 
per share in the accompanying consolidated statements of operations. The        
Company's Predecessor operated as divisions of Rexel, Inc. As a result, the     
earnings per share for the Company's Predecessor for the period from January 1, 
1994 to July 12, 1994 does not provide a meaningful comparison to the earnings  
per share of the Company and is, therefore, excluded from the accompanying      
consolidated statements of operations.                                          

(L) STOCK OPTIONS                                                       

    Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB") Opinion   
No. 25, Accounting for Stock Issued to Employees, and related interpretations.  
As such, compensation expense is recorded on the date of grant only if the      
current market price of the underlying stock exceeded the exercise price. On    
January 1, 1996, the Company adopted Statement of Financial Accounting Standards
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, which permits entities to     
recognize as expense over the vesting period the fair value of all stock-based  
awards on the date of grant. Alternatively, Statement 123 also allows entities  
to continue to apply the provisions of APB Opinion No. 25 and provide pro forma 
net income and pro forma earnings per share disclosures for employee stock      
option grants made in 1995 and future years as if the fair-value-based method   
defined in Statement 123 had been applied. The Company has elected to continue  
to apply the provisions of APB Opinion No. 25. Pro forma disclosure in          
accordance with the provisions of Statement 123 is not applicable to the        
accompanying consolidated financial statements since no stock options had been  
granted by the Company in 1995 or 1996.                                         

(M) USE OF ESTIMATES                                                    

  Management of the Company and the Company's Predecessor have made a number
of estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare these        
consolidated financial statements in conformity with generally accepted         
accounting principles. Actual results could differ from these estimates.        

(N) RECLASSIFICATIONS                                                   

    Certain reclassifications were made to the 1995 and 1994 accounts to conform
to classifications adopted in 1996.                                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) ACQUISITIONS                                                                

  On July 13, 1994, the Company was incorporated and entered into a Sale and
Purchase Agreement to acquire the net assets and certain common stock of the    
apparel operations of Rexel, Inc. The aggregate purchase price consisted of     
$41,000,000 in cash and a $3,000,000 subordinated note with detachable Class B  
common stock warrants issued to Rexel, Inc. Concurrent with the acquisition, the
Company sold common stock of the Company totaling $4,812,500 (note 9) and       
borrowed $35,680,000 from a lender and $507,500 from two officers of the        
Company. As discussed in note 10, the subordinated note and warrants were       
retired in 1995.                                                                

Effective February 1, 1996, the Company purchased Clinton Machinery     
Corporation and Clinton Management Corporation (collectively, "Clinton").       
Clinton is a distributor of screen-printing equipment and supplies for the      
apparel industry. The aggregate purchase price of $8,600,000 consisted of       
$4,000,000 in cash and the issuance of 100,000 shares of the Company's Class A  
common stock valued at $30 per share, due to the guarantee of the value by the  
Company; the assumption of approximately $4,500,000 of indebtedness and         
payables, which were subsequently repaid; and contingent payments of up to      
38.87% of the operating income (as defined in the purchase agreement) of Clinton
during each of the five years ending through December 31, 2000. Such contingent 
payments shall not exceed $10,500,000 and will be recorded as additional        
purchase consideration as such amounts become determinable. In addition, the    
shareholders of Clinton received a put option, giving them the right to sell the
Class A common shares to the Company at $30 per share at the earlier of four    
years from the acquisition date, the closing date of an initial public offering 
by the Company, any accelerated due date of the senior notes described in note  
15, or upon a change in control of the Company, as defined. In accordance with  
the rules and regulations of the Securities and Exchange Commission, the equity 
subject to this put option has been classified as common stock subject to put   
option in the accompanying consolidated balance sheet. The acquisition was      
financed by the issuance of 184,314 shares of Class A common stock, with        
proceeds of a 10.98% senior note payable for $1,200,000, and with proceeds of   
increasing the Company's variable rate senior note payable by $1,050,000 (note  
6). As a result of the transaction, the Company recorded approximately          
$8,531,000 of intangible assets and $463,000 of deferred financing costs.       

 Effective November 27, 1996, the Company acquired certain assets of E. C.
Mitchell Co., Inc. for $3,000,000 in cash. The acquired assets relate to the    
manufacture and sale of abrasive cords and tape used principally in the apparel 
industry. The Company financed the acquisition primarily by increasing its      
variable rate senior note payable by $2,050,000 and by issuing an 11.66% senior 
note payable for $200,000 (note 6). As a result of the transaction, the Company 
recorded approximately $1,900,000 of intangible assets and $68,000 of deferred  
financing costs.                                                                

  Each of the acquisitions have been accounted for as a purchase transaction
and, accordingly, the assets acquired and liabilities assumed have been recorded
at their estimated fair market values at the date of acquisition. The results of
operations of the acquired companies have been included in the accompanying     
consolidated financial statements as of the respective acquisition dates.       

The following represents the summary (unaudited) pro forma results of   
operations for the years ended December 31, 1996 and 1995 as if the acquisitions
of Clinton and E. C. Mitchell Co., Inc. had                                     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) ACQUISITIONS (CONTINUED)                                                    
occurred at the beginning of 1995. The pro forma results are not necessarily    
indicative of the results which may occur in the future.                        

                                                        [Enlarge/Download Table]

                                                                    1996           1995     
                                                               --------------  -------------
                                                                                            
Net sales..................................................... $  117,003,698    118,104,101
                                                               --------------  -------------
                                                               --------------  -------------
Income before extraordinary item.............................. $    1,626,078      1,935,007
                                                               --------------  -------------
                                                               --------------  -------------
Net income.................................................... $    1,626,078      1,783,433
                                                               --------------  -------------
                                                               --------------  -------------
Earnings per share............................................ $         1.49           1.66
                                                               --------------  -------------
                                                               --------------  -------------

(3) INVENTORIES                                                                 

Inventories consist of the following at December 31, 1996 and 1995:     

                                                        [Enlarge/Download Table]

                                                                      1996           1995    
                                                                  -------------  ------------
                                                                                             
Parts and supplies............................................... $  29,501,944    28,470,926
Machinery and equipment..........................................     4,721,730       977,073
                                                                  -------------  ------------
                                                                  $  34,223,674    29,447,999
                                                                  -------------  ------------
                                                                  -------------  ------------

 Cost of goods sold includes an amount related to the Company's step-up of
inventory costs when acquired on July 13, 1994. The amounts expensed were       
$480,000 for the year ended December 31, 1996 $1,402,000 for the year ended     
December 31, 1995 and $2,616,000 for the period from July 13, 1994 to December  
31, 1994. The amounts expensed are based upon sales of the inventory acquired.  

(4) PROPERTY AND EQUIPMENT                                                      

 Property and equipment consists of the following at December 31, 1996 and
1995:                                                                           

                                                        [Enlarge/Download Table]

                                                                        1996         1995   
                                                                    ------------  ----------
                                                                                            
Buildings and leasehold improvements............................... $  2,139,416   1,276,506
Machinery and equipment............................................    3,006,760   1,923,789
Furniture and fixtures.............................................      699,096     245,745
                                                                    ------------  ----------
                                                                       5,845,272   3,446,040
Less accumulated depreciation and amortization.....................    1,444,931     634,554
                                                                    ------------  ----------
  Net property and equipment....................................... $  4,400,341   2,811,486
                                                                    ------------  ----------
                                                                    ------------  ----------

(5) REVOLVING LINE OF CREDIT                                                    

    The Company has a Credit Agreement with its principal lenders which provides
for a revolving credit facility through July 2001 of up to the lesser of (i)    
$25,000,000 or (ii) the sum of 80% (85% for certain subsidiaries) of eligible   
accounts receivable and 55% of eligible inventory, less outstanding letters of  
credit. At December 31, 1996, approximately $3,229,000 was available under the  
facility. Under the Credit Agreement, substantially all assets of the Company   
are pledged as security. Borrowings under the facility bear interest at 4% plus 
the one month commercial paper rate for dealer-placed commercial paper of       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(5) REVOLVING LINE OF CREDIT (CONTINUED)                                        
issuers whose corporate bonds are rated "AA" or its equivalent (9.566% at       
December 31, 1996 and 9.858% at December 31, 1995). The Company pays an annual  
fee of 0.5% of the total unused availability of the facility. The Company also  
pays an annual fee of 2% on outstanding letters of credit. Letters of credit    
approximating $1,467,000 and $1,972,000 were outstanding at December 31, 1996   
and 1995, respectively. The Company has available approximately $3,533,000 and  
$3,028,000 in unused letters of credit at December 31, 1996 and 1995,           
respectively.                                                                   

  The Credit Agreement includes various covenants, including restrictions on
liens, capital expenditures, debt and lease obligations, dividends, and         
requirements that certain financial ratios be maintained. At December 31, 1996, 
the Company was not in compliance with a covenant specifying minimum tangible   
net worth and with covenants requiring that certain leverage and debt coverage  
ratios be maintained. These covenant violations were cured, however, as a result
of the refinancing described in note 15.                                        

(6) LONG-TERM DEBT                                                              

Long-term debt at December 31, 1996 and 1995 consists of the following: 

                                                        [Enlarge/Download Table]

                                                                     1996           1995    
                                                                 -------------  ------------
                                                                                            

Variable rate senior notes payable, with final installment due                              
  July 13, 2000................................................  $  12,802,417    11,812,500

12.95% senior note payable, due July 13, 2001, net of                                       
  unamortized discount of $528,784 and $645,213 at December 31,                             
  1996 and 1995, respectively..................................      6,471,216     6,354,787

10.98% senior note payable, due July 13, 2001, net of                                       
  unamortized discount of $297,500 at December 31, 1996........        902,500       --     

11.66% senior note payable, due July 13, 2001..................        200,000       --     

Variable rate UK note payable..................................      1,712,600       --     
                                                                 -------------  ------------

                                                                    22,088,733    18,167,287

Less current installments......................................      3,195,401     1,812,500
                                                                 -------------  ------------

Long-term debt, excluding current installments.................  $  18,893,332    16,354,787
                                                                 -------------  ------------
                                                                 -------------  ------------

   The variable rate senior notes payable are included in the Company's Credit
Agreement with its principal lender and are subject to the covenants described  
in note 5. The notes accrue interest at 4.25% plus the one month commercial     
paper rate for dealer-placed commercial paper of issuers whose corporate bonds  
are rated "AA" or its equivalent (9.816% at December 31, 1996 and 10.108% at    
December 31, 1995) and are payable in escalating quarterly installments with    
interest payable monthly.                                                       

   Both the 12.95% and 10.98% senior notes payable were issued with detachable
warrants for certain classes of common stock of the Company (note 9). The       
proceeds from the issuance of the debt were allocated between the debt and the  
warrants based on their relative fair values at the date of issuance. The       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) LONG-TERM DEBT (CONTINUED)                                                  
resulting debt discount is being amortized using the interest method over the   
life of the related debt. The fair value of the 12.95% senior note payable, net 
of the unamortized discount, is approximately $7,250,000 and $6,900,000 at      
December 31, 1996 and 1995, respectively. The fair value of the 10.98% senior   
note payable, net of the unamortized discount, is approximately $1,160,000 at   
December 31, 1996.                                                              

    The variable rate UK note payable is denominated in pound sterling and is an
obligation of the Company's United Kingdom subsidiary. The note is subject to   
certain financial covenants, accrues interest at 2.25% plus the bank's          
prevailing base rate (8.25% at December 31, 1996), and is payable in equal      
semiannual installments through September 2000.                                 

The aggregate maturities of long-term debt, excluding debt discount, at 
December 31, 1996 are as follows:                                               

                                                        [Enlarge/Download Table]

YEAR ENDING                                                                                   
DECEMBER 31,                                                                                  
-------------------------------------------------------------------------------               
                                                                                              

1997...........................................................................  $   3,195,401

1998...........................................................................      3,667,400

1999...........................................................................      3,907,900

2000...........................................................................      3,744,316

2001...........................................................................      8,400,000
                                                                                 -------------

                                                                                 $  22,915,017
                                                                                 -------------
                                                                                 -------------

  The Company's outstanding long-term debt and their contractual maturities,
except for the variable rate UK note payable, changed in connection with the    
refinancing described in note 15.                                               

(7) INCOME TAXES                                                                

    Total income tax expense (benefit) for the years ended December 31, 1996 and
1995, for the period from July 13, 1994 to December 31, 1994, and for the period
from January 1, 1994 to July 12, 1994 was allocated as follows:                 

                                                        [Enlarge/Download Table]

                                                                                COMPANY'S   
                                                                               PREDECESSOR  
                                                  COMPANY                    ---------------
                                 ------------------------------------------    PERIOD FROM  
                                                             PERIOD FROM     JANUARY 1, 1994
                                                          JULY 13, 1994 TO     TO JULY 12,  
                                     1996        1995     DECEMBER 31, 1994       1994      
                                 ------------  ---------  -----------------  ---------------
                                                                                            

Income (loss) from continuing                                                               
  operations.................... $  1,136,685    557,513        (288,022)         425,561   

Extraordinary item..............      --         (92,901)        --                --       
                                 ------------  ---------        --------          -------   

                                 $  1,136,685    464,612        (288,022)         425,561   
                                 ------------  ---------        --------          -------   
                                 ------------  ---------        --------          -------   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES (CONTINUED)                                                    
  Income tax expense (benefit) attributable to continuing operations for the
years ended December 31, 1996 and 1995, for the period from July 13, 1994 to    
December 31, 1994, and for the period from January 1, 1994 to July 12, 1994     
consists of the following:                                                      

                                                        [Enlarge/Download Table]

                                                                                COMPANY'S   
                                                                               PREDECESSOR  
                                                  COMPANY                    ---------------
                                 ------------------------------------------    PERIOD FROM  
                                                             PERIOD FROM     JANUARY 1, 1994
                                                          JULY 13, 1994 TO     TO JULY 12,  
                                     1996        1995     DECEMBER 31, 1994       1994      
                                 ------------  ---------  -----------------  ---------------
                                                                                            

Current:                                                                                    

  Federal....................... $    641,255    240,210         --               318,647   

  State.........................       75,442     75,604         --                31,500   

  Foreign.......................      148,736    224,275         137,864           75,414   

Deferred:                                                                                   

  Federal.......................      242,689     15,590        (381,056)          --       

  State.........................       28,563      1,834         (44,830)          --       
                                 ------------  ---------        --------          -------   

                                 $  1,136,685    557,513        (288,022)         425,561   
                                 ------------  ---------        --------          -------   
                                 ------------  ---------        --------          -------   

 Actual income tax expense (benefit) attributable to continuing operations
differs from expected income tax expense (benefit)--(computed by applying the   
U.S. Federal statutory income tax rate of 34% to income (loss) before income    
taxes and extraordinary item) for the years ended December 31, 1996 and         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES (CONTINUED)                                                    
1995, for the period from July 13, 1994 to December 31, 1994, and for the period
from January 1, 1994 to July 12, 1994 as follows:                               

                                                        [Enlarge/Download Table]

                                                                                                    COMPANY'S   
                                                                                                   PREDECESSOR  
                                                                                                  --------------
                                                                       COMPANY                     PERIOD FROM  
                                                     -------------------------------------------    JANUARY 1,  
                                                                                  PERIOD FROM          1994     
                                                                               JULY 13, 1994 TO    TO JULY 12,  
                                                         1996         1995     DECEMBER 31, 1994       1994     
                                                     ------------  ----------  -----------------  --------------
                                                                                                                

Computed expected income tax expense (benefit).....      $832,936     663,602        (218,384)         268,064  

Increase (decrease) in income taxes resulting from:                                                             

  Effect of lower foreign tax rates................      (100,866)   (164,898)        (75,737)         (41,478) 

  Nondeductible expenses...........................        70,437      60,862          35,687           30,702  

  State taxes, net of Federal income tax benefit...        68,643      44,654         (29,588)          31,222  

  Other, net.......................................       265,535     (46,707)        --               137,051  
                                                     ------------  ----------        --------     --------------

                                                       $1,136,685     557,513        (288,022)         425,561  
                                                     ------------  ----------        --------     --------------
                                                     ------------  ----------        --------     --------------

The tax effects of temporary differences that give rise to significant  
portions of the deferred tax assets and deferred tax liabilities at December 31,
1996 and 1995 are presented below:                                              

                                                        [Enlarge/Download Table]

                                                                          1996        1995    
                                                                       ----------  ---------- 
                                                                                              

Deferred tax assets:                                                                          

  Accounts receivable, due to allowance for doubtful accounts......... $  251,424     235,948 

  Inventory, due to reserves for obsolescence and costs capitalized                           
  for tax purposes....................................................    532,466     327,460 

  Accrued expenses deductible for tax purposes when paid..............     20,116      --     
                                                                       ----------  ---------- 

    Total deferred tax assets.........................................    804,006     563,408 
                                                                       ----------  ---------- 

Deferred tax liabilities:                                                                     

  Accelerated depreciation............................................   (242,074)    (94,897)

  Costs not yet expensed for book purposes............................    (48,039)    (60,049)
                                                                       ----------  ---------- 

    Total deferred tax liabilities....................................   (290,113)   (154,946)
                                                                       ----------  ---------- 

    Net deferred tax asset............................................ $  513,893     408,462 
                                                                       ----------  ---------- 
                                                                       ----------  ---------- 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) INCOME TAXES (CONTINUED)                                                    
    Income (loss) before income taxes and extraordinary item for U.S. operations
were $1,715,726, $807,145, $(1,270,539), and $427,929 for the years ended       
December 31, 1996 and 1995, for the period from July 13, 1994 to December 31,   
1994, and for the period from January 1, 1994 to July 12, 1994, respectively.   
Income before income taxes and extraordinary item for non-U.S. operations were  
$734,086, $1,144,625, $628,234, and $360,495 for the years ended December 31,   
1996 and 1995, for the period from July 13, 1994 to December 31, 1994, and for  
the period from January 1, 1994 to July 12, 1994, respectively.                 

    At December 31, 1996 and 1995, there was no valuation allowance recorded for
deferred tax assets. In assessing the realizability of deferred tax assets,     
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of    
deferred tax assets is dependent upon the generation of future taxable income   
during the periods in which those temporary differences become deductible.      
Management considers the scheduled reversal of deferred tax liabilities,        
projected future taxable income, and tax planning strategies in making this     
assessment. Based upon the nature of the temporary differences and projections  
for future taxable income over the periods which the deferred tax assets are    
deductible, management believes it is more likely than not the Company will     
realize the benefits of these deductible differences.                           

(8) PENSION BENEFITS AND OTHER RETIREMENT PLANS                                 

The Company has a qualified noncontributory defined benefit pension plan
covering substantially all of its domestic employees. The benefits are based on 
years of service and defined levels of compensation. The Company makes annual   
contributions to the plan equal to the maximum amount that can be deducted for  
income tax purposes. The Company also has a nonqualified supplemental retirement
plan covering key employees, which is not funded.                               

The Company also maintains a defined benefit plan for substantially all 
employees of its United Kingdom subsidiary. The plan is funded annually for the 
maximum amount permitted by local statute. The benefits are based on years of   
service and defined levels of compensation.                                     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) PENSION BENEFITS AND OTHER RETIREMENT PLANS (CONTINUED)                     
The following table sets forth the plans' funded status and amounts     
recognized in the accompanying consolidated balance sheets at December 31, 1996 
and 1995.                                                                       

                                                        [Enlarge/Download Table]

                                                                        1996                      1995         
                                                             --------------------------  ----------------------
                                                                              UNITED                   UNITED  
                                                               DOMESTIC      KINGDOM      DOMESTIC    KINGDOM  
                                                             ------------  ------------  ----------  ----------
                                                                                                               

Actuarial present value of benefit obligations:                                                                

    Vested benefit obligation............................... $  7,020,864     1,944,989   5,877,756   1,879,312
                                                             ------------  ------------  ----------  ----------
                                                             ------------  ------------  ----------  ----------

    Accumulated benefit obligation.......................... $  7,136,559     2,109,029   6,001,744   2,015,609
                                                             ------------  ------------  ----------  ----------
                                                             ------------  ------------  ----------  ----------

Projected benefit obligation................................ $  8,055,925     2,620,021   6,745,972   2,175,990

Plan assets at fair value...................................    6,730,352     2,305,726   5,615,569   1,792,257
                                                             ------------  ------------  ----------  ----------

Projected benefit obligation in excess of plan assets.......    1,325,573       314,295   1,130,403     383,733

Unrecognized net gain.......................................       11,911       --          393,023      --    
                                                             ------------  ------------  ----------  ----------

      Total accrued pension benefits........................    1,337,484       314,295   1,523,426     383,733

Supplemental retirement plan accrued liability..............      800,160       --          740,565      --    
                                                             ------------  ------------  ----------  ----------

      Total accrued retirement benefits..................... $  2,137,644       314,295   2,263,991     383,733
                                                             ------------  ------------  ----------  ----------
                                                             ------------  ------------  ----------  ----------

    For the nonqualified supplemental retirement plan, the assumed discount rate
was 8% at December 31, 1996 and 1995. No salary increase was assumed as the     
Company has frozen salaries at specified amounts. Net periodic supplemental     
retirement plan expense included in the accompanying consolidated statements of 
operations for the years ended December 31, 1996 and 1995, for the period from  
July 13, 1994 to December 31, 1994, and for the period from January 1, 1994 to  
July 12, 1994 was $59,595, $55,530, $110,420, and $146,592, respectively.       

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(8) PENSION BENEFITS AND OTHER RETIREMENT PLANS (CONTINUED)                     
   Net pension cost for the years ended December 31, 1996 and 1995 and for the
period from July 13, 1994 to December 31, 1994 include the following components:

                                                        [Enlarge/Download Table]

                                                              1996                    1995                    1994          
                                                     ----------------------  ----------------------  -----------------------
                                                                   UNITED                  UNITED                  UNITED   
                                                      DOMESTIC    KINGDOM     DOMESTIC    KINGDOM     DOMESTIC     KINGDOM  
                                                     ----------  ----------  ----------  ----------  ----------  -----------
                                                                                                                            

Service cost--benefits earned during the period..... $  338,182     128,732     264,428     113,766     175,165      45,000 

Interest cost on projected benefit obligation.......    548,625     216,485     456,836     199,169     203,753      84,000 

Actual return on plan assets........................   (785,405)   (190,516)   (702,713)   (136,114)     42,794     (74,000)

Net amortization and deferral.......................    323,959      --         321,963      --        (211,731)     --     
                                                     ----------  ----------  ----------  ----------  ----------  -----------

    Net pension cost................................ $  425,361     154,701     340,514     176,821     209,981      55,000 
                                                     ----------  ----------  ----------  ----------  ----------  -----------
                                                     ----------  ----------  ----------  ----------  ----------  -----------

    Assumptions used in accounting for the pension plans as of December 31, 1996
and 1995 were as follows:                                                       

                                                        [Enlarge/Download Table]

                                                                   DOMESTIC                           UNITED KINGDOM           
                                                     -------------------------------------  -----------------------------------
                                                        1996         1995         1994         1996         1995        1994   
                                                        -----        -----        -----        -----        -----     ---------
                                                                                                                               

Discount rates......................................        7.5%         7.5          8.0          9.0          9.0        10.0

Rates of increase in compensation levels............        4.5          4.5          4.5          8.0          8.0         9.0

Expected long-term rate of return on assets.........        8.0          8.0          8.0          9.0          9.0        10.0

 The Company also maintains the Willcox & Gibbs, Inc. Savings and Employee
Stock Ownership Plan to provide eligible employees with an opportunity to       
purchase the Company's Class A common stock through payroll deductions, which   
are matched by the Company, subject to certain limitations. The purchase price  
is based on an independent appraisal of the value of the Company's shares at the
subscription date. The Company's matching contributions vest at a rate of 20%   
for each year of service by the employee, with 100% vesting after five years of 
service. The Company's contribution to the plan, net of forfeitures, was        
approximately $305,000, $272,000, and $111,000 for the years ended December 31, 
1996 and 1995 and for the period from July 13, 1994 to December 31, 1994,       
respectively.                                                                   

(9) STOCKHOLDERS' EQUITY                                                        

   On July 13, 1994, the Company authorized 1,500,000 shares of Class A common
stock, no par value; 250,000 shares of Class B common stock, no par value; and  
250,000 shares of Class C common stock, no par value. All classes of common     
stock have identical rights and privileges. Pursuant to the purchase agreement, 
the Company entered into a Stockholders' Agreement to sell 481,250 shares of    
Class A common stock at $10 per share to certain investors. Additionally, as    
part of the purchase agreement, the Company issued detachable warrants for      
122,970 shares of Class B common stock attached to the subordinated note to     
Rexel, Inc. and 114,773 shares of Class C common stock attached to the 12.95%   
senior note payable to its principal lender (note 6). The warrants for the Class
C shares are convertible at                                                     

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(9) STOCKHOLDERS' EQUITY (CONTINUED)                                            
any time for nominal consideration, subject to certain redemption provisions. As
discussed in note 10, all of the warrants for the Class B shares were           
repurchased and retired by the Company in 1995. As discussed in note 15,        
warrants for 110,818 Class C shares were repurchased and retired by the Company 
on January 3, 1997.                                                             

In February 1996, the Company issued additional detachable warrants for 
32,985 shares of Class C common stock attached to the 10.98% senior note payable
to its principal lender (note 6).                                               

(10) TRANSACTION WITH FORMER STOCKHOLDER                                        

 On July 26, 1995, the Company retired its 8% subordinated note payable to
Rexel, Inc. and repurchased the associated detachable warrants and certain other
assets for $4,050,000 in cash. The purchase price was allocated as follows:     

                                                                [Download Table]
                                                                            
8% subordinated note............................................  $2,500,000

Common stock warrants...........................................  1,000,000 

Trademark.......................................................    250,000 

Other assets....................................................    300,000 
                                                                  --------- 

                                                                  $4,050,000
                                                                  --------- 
                                                                  --------- 

  As a result of the transaction, the Company recorded an extraordinary loss
from the extinguishment of debt (net of the income tax benefit of $92,901) of   
$151,574 in the accompanying financial statements. The Company funded the       
transaction with its revolving line of credit.                                  

   The Company also acquired the rights to the Willcox & Gibbs, Inc. name as a
result of this transaction and changed the Company name from WG, Inc. effective 
January 1, 1996.                                                                

(11) STOCK OPTIONS                                                              

On August 15, 1994, the Company adopted the Willcox & Gibbs, Inc. Stock 
Incentive Plan. Under the plan, options to purchase 41,250 shares were available
to be granted to key employees of the Company. During 1994, options for 36,500  
shares were issued at an exercise price of $10 per share, which the Company     
believes approximated fair value at the date of grant. As of December 31, 1996  
and 1995, 36,500 options remain outstanding. The options expire after ten years 
and vest at a rate of 20% per year of service, with 100% vesting after five     
years of service. At December 31, 1996, options for 14,600 shares were          
exercisable.                                                                    

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(12) FOREIGN OPERATIONS                                                         

 Following is a summary of geographic area information, as measured by the
locale of revenue-producing operations, for the years ended December 31, 1996   
and 1995, for the period from July 13, 1994 to December 31, 1994, and for the   
period from January 1, 1994 to July 12, 1994:                                   

                                                        [Enlarge/Download Table]

                                                                                                  COMPANY'S   
                                                                                                 PREDECESSOR  
                                                                   COMPANY                      --------------
                                               -----------------------------------------------   PERIOD FROM  
                                                                                                  JANUARY 1,  
                                                 YEARS ENDED DECEMBER 31,       PERIOD FROM          1994     
                                               ----------------------------  JULY 13, 1994 TO    TO JULY 12,  
                                                    1996           1995      DECEMBER 31, 1994       1994     
                                               --------------  ------------  -----------------  --------------
                                                                                                              

Net sales:                                                                                                    

  United States............................... $  100,995,604   79,381,846        36,837,194       36,131,154 

  United Kingdom..............................      7,371,861    6,535,063         2,953,944        3,726,342 

  Latin America...............................      5,483,793    4,514,522         1,852,590        1,451,406 
                                               --------------  ------------  -----------------  --------------

                                               $  113,851,258   90,431,431        41,643,728       41,308,902 
                                               --------------  ------------  -----------------  --------------
                                               --------------  ------------  -----------------  --------------

Net income (loss):                                                                                            

  United States............................... $      727,777      322,333          (844,653)          77,782 

  United Kingdom..............................        301,818      429,264           277,621          212,170 

  Latin America...............................        283,532      491,086           212,749           72,911 
                                               --------------  ------------  -----------------  --------------

                                               $    1,313,127    1,242,683          (354,283)         362,863 
                                               --------------  ------------  -----------------  --------------
                                               --------------  ------------  -----------------  --------------
                                                                [Download Table]

                                                         COMPANY             
                                               ----------------------------  

                                                                             
                                                       DECEMBER 31,          
                                               ----------------------------  



                                                    1996           1995      
                                               --------------  ------------  
                                                                             

Identifiable assets:                                                         

  United States............................... $   69,727,547   44,281,551   

  United Kingdom..............................      7,110,908    6,333,340   

  Latin America...............................      2,890,033    1,912,632   
                                               --------------  ------------  

                                               $   79,728,488   52,527,523   
                                               --------------  ------------  
                                               --------------  ------------  

Export sales from the United States to unaffiliated customers were      
approximately $26,100,000, $12,400,000, $4,200,000, and $5,000,000 for the years
ended December 31, 1996 and 1995, for the period from July 13, 1994 to December 
31, 1994, and for the period from January 1, 1994 to July 12, 1994,             
respectively.                                                                   

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(12) FOREIGN OPERATIONS (CONTINUED)                                             
   No provision is made for income taxes which may be payable if undistributed
earnings of foreign subsidiaries were to be paid as dividends to the Company,   
since the Company intends that such earnings will continue to be invested in    
those countries. Foreign tax credits may be available as a reduction of United  
States income taxes in the event of such distributions.                         

(13) SIGNIFICANT SUPPLIERS                                                      

    The Company is the exclusive distributor of genuine replacement parts in the
United States for Pfaff AG ("Pfaff"), a German sewing equipment manufacturer,   
and for Pegasus Sewing Machine Mfg. Co., Ltd. ("Pegasus"), a Japanese sewing    
equipment manufacturer. The Company's distribution agreements with Pfaff and    
Pegasus extend through 1998 and automatically renew for successive two-year     
periods unless notice of termination is given at least one year prior to        
December 31, 1998 or the end of any successive two-year period of exclusivity.  
In order to maintain the exclusivity of the Pfaff and Pegasus distribution      
agreements, the Company must meet certain performance targets. Historically, the
Company has generally satisfied these requirements, although in certain prior   
years they were not satisfied and Pfaff and Pegasus waived such shortfalls.     
During the year ended December 31, 1996, approximately 6% of the Company's total
purchases were from Pfaff and approximately 7% of the Company's total purchases 
were from Pegasus.                                                              

The Company also maintains exclusive distribution rights in certain     
territories for M&R Printing Equipment, Inc. ("M&R"), a manufacturer of         
screen-printing equipment for the apparel industry. The Company's distribution  
agreements with M&R may be terminated by either party at the end of any year on 
net less than 120 days' notice. During the year ended December 31, 1996,        
approximately 16% of the Company's total purchases were from M&R.               

(14) COMMITMENTS                                                                

The Company had certain commitments to purchase inventories for         
approximately $10,000 and $170,000 at December 31, 1996 and 1995, respectively. 
The Company does not expect to incur losses in connection with these purchase   
commitments.                                                                    

The Company has several noncancelable operating leases, primarily for   
buildings and equipment. These leases generally contain renewal options for     
periods ranging from three to seven years and require the Company to pay most   
executory costs such as maintenance and insurance.                              

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(14) COMMITMENTS (CONTINUED)                                                    
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31, 1996 
are approximately:                                                              

                                                                [Download Table]

Year ending                                                                 
December 31                                                                 
----------------------------------------------------------------            

1997............................................................  $1,126,000
                                                                            

1998............................................................    824,000 

1999............................................................    670,000 

2000............................................................    655,000 

2001............................................................    539,000 

Thereafter......................................................    755,000 
                                                                  --------- 

                                                                  $4,569,000
                                                                  --------- 
                                                                  --------- 

    Total rental expense for the years ended December 31, 1996 and 1995, for the
period from July 13, 1994 to December 31, 1994, and for the period from January 
1, 1994 to July 12, 1994 was approximately $1,559,000, $1,229,000, $515,000, and
$381,000, respectively.                                                         

(15) SUBSEQUENT EVENTS                                                          

   Effective January 3, 1997, the Company acquired all the outstanding capital
stock of Macpherson Meistergram, Inc. ("Macpherson") for $24,000,000 in cash and
the assumption of approximately $6,100,000 of indebtedness and $6,400,000 of    
trade payables. Macpherson is primarily engaged in the distribution of          
embroidery equipment and supplies to the apparel industry.                      

   In connection with the acquisition of Macpherson, the Company also acquired
all the outstanding capital stock of Embroidery Leasing Corp., a leasing        
affiliate of Macpherson, for approximately $500,000, payable over three years   
with interest at 6% per annum.                                                  

  Effective January 3, 1997, the Company issued $85,000,000 principal amount
of 12.25% Series A senior notes which are due in December 2003. The Company used
the proceeds, in part, to repay approximately $40,952,000 of its indebtedness   
($40,550,000 of which existed at December 31, 1996)-- (notes 5 and 6), to redeem
common stock warrants for a total of $3,026,000 (note 9), and to finance the    
acquisition of Macpherson.                                                      

Set forth below are condensed consolidating financial statements of the 
subsidiaries of the Company that have fully and unconditionally, jointly and    
severally guaranteed the Company's 12 1/4% Senior Notes (the "Guarantor         
Subsidiaries") and the non-guarantor subsidiaries of the Company (the           
"Non-Guarantor Subsidiaries"). Information with respect to the Company (parent  
only) is not presented since it is a holding company with no operations and no  
assets other than its investments in its subsidiaries. As of the date of        
issuance of the 12 1/4% Senior Notes, the Guarantor Subsidiaries were WG        
Apparel, Inc., Leadtec Systems, Inc., J&E Sewing Supplies, Inc., W&G Daon, Inc. 
W&G Tennessee Imports, Inc., Clinton Management Corp., Clinton Machinery        
Corporation, Clinton Leasing Corp., Clinton Equipment Corp., Macpherson         
Meistergram, Inc. and Paradise Color Incorporated, and the Non-Guarantor        
Subsidiaries were Willcox &                                                     

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(15) SUBSEQUENT EVENTS (CONTINUED)                                              
Gibbs, Ltd., Sunbrand S.A. de C.V., Sunbrand Caribe S.A., Allied Machine Parts  
Ltd., M.E.C. (Sewing Machine Limited), Unity Sewing Supply Company (UK) Limited,
Allide Machine Parts Limited, Matyork Limited, Forest Needle Company Limited,   
Morris & Ingram (Textiles) Limited, Eildon Electronics Limited, and Geoffrey E. 
Macpherson Canada, Inc. The Guarantor Subsidiaries are wholly owned by the      
Company, and there are no restrictions on the ability of the Guarantor          
Subsidiaries to make distributions to the Company, except those generally       
applicable under relevant corporation laws. Separate financial statements of    
each Guarantor Subsidiary and the eliminating entries have not been included    
because management has determined that they are not material to investors.      

CONDENSED CONSOLIDATED BALANCE SHEET

                                                        [Enlarge/Download Table]

                                                                                   DECEMBER 31, 1996            
                                                                                (AMOUNTS IN THOUSANDS)          
                                                                       -----------------------------------------
                                                                        GUARANTOR   NON-GUARANTOR               
                                                                       SUBSIDIARIES  SUBSIDIARIES   CONSOLIDATED
                                                                       -----------  --------------  ------------
                                                                                                                

                                Assets                                                                          

Cash..................................................................  $     343            539            882 

Accounts receivable, net..............................................     18,941          3,395         22,336 

Inventories...........................................................     30,133          4,091         34,224 

Other current assets..................................................      3,133            326           3459 
                                                                       -----------  --------------  ------------

  Current assets......................................................     52,550          8,351         60,901 

Property and equipment, net...........................................      2,853          1,547          4,400 

Intangible assets, net................................................     13,383         --             13,383 

Other assets..........................................................      1,025             19          1,044 
                                                                       -----------  --------------  ------------

                                                                        $  69,811          9,917         79,728 
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

                 Liabilities and Stockholders' Equity                                                           

Current notes and long-term debt......................................  $  22,114            428         22,542 

Accounts payable......................................................     13,462            844         14,306 

Accrued liabilities...................................................      4,231          1,169          5,400 
                                                                       -----------  --------------  ------------

  Current liabilities.................................................     39,807          2,441         42,248 

Long-term debt........................................................     17,609          1,284         18,893 

Other liabilities.....................................................      2,910         --              2,910 
                                                                       -----------  --------------  ------------

  Total liabilities...................................................     60,326          3,725         64,051 

Common stock subject to put option....................................      3,000         --              3,000 

Common stock..........................................................      8,763         --              8,763 

Other equity..........................................................     (2,278)         6,192          3,914 
                                                                       -----------  --------------  ------------

  Total equity........................................................      6,485          6,192         12,677 
                                                                       -----------  --------------  ------------

                                                                        $  69,811          9,917         79,728 
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

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(15) SUBSEQUENT EVENTS (CONTINUED)                                              
CONDENSED CONSOLIDATED BALANCE SHEET

                                                        [Enlarge/Download Table]

                                                                                   DECEMBER 31, 1995            
                                                                                (AMOUNTS IN THOUSANDS)          
                                                                       -----------------------------------------
                                                                        GUARANTOR   NON-GUARANTOR               
                                                                       SUBSIDIARIES  SUBSIDIARIES   CONSOLIDATED
                                                                       -----------  --------------  ------------
                                                                                                                

                                Assets                                                                          

Cash..................................................................  $     315            605            920 

Accounts receivable, net..............................................     11,753          2,483         14,236 

Inventories...........................................................     25,798          3,650         29,448 

Other current assets..................................................      2,395            190          2,585 
                                                                       -----------  --------------  ------------

  Current assets......................................................     40,261          6,928         47,189 

Property and equipment, net...........................................      1,479          1,332          2,811 

Intangible assets, net................................................      1,948         --              1,948 

Other assets..........................................................        561             19            580 
                                                                       -----------  --------------  ------------

                                                                        $  44,249          8,279         52,528 
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

                 Liabilities and Stockholders' Equity                                                           

Current notes and long-term debt......................................  $  14,754         --             14,754 

Accounts payable......................................................      6,054            743          6,797 

Accrued liabilities...................................................      3,112            602          3,714 
                                                                       -----------  --------------  ------------

  Current liabilities.................................................     23,920          1,345         25,265 

Long-term debt........................................................     16,355         --             16,355 

Other liabilities.....................................................      3,016         --              3,016 
                                                                       -----------  --------------  ------------

  Total liabilities...................................................     43,291          1,345         44,636 

Common stock..........................................................      6,582         --              6,582 

Other equity..........................................................     (5,624)         6,934          1,310 
                                                                       -----------  --------------  ------------

  Total equity........................................................        958          6,934          7,892 
                                                                       -----------  --------------  ------------

                                                                        $  44,249          8,279         52,528 
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

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(15) SUBSEQUENT EVENTS (CONTINUED)                                              
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                                         FOR THE YEAR ENDED DECEMBER 31, 1996   
                                                                                (AMOUNTS IN THOUSANDS)          
                                                                       -----------------------------------------

                                                                                                                
                                                                        GUARANTOR   NON-GUARANTOR               
                                                                       SUBSIDIARIES  SUBSIDIARIES   CONSOLIDATED
                                                                       -----------  --------------  ------------

Net sales.............................................................  $ 100,995         12,856        113,851 

Cost of goods sold....................................................     68,712          8,911         77,623 
                                                                       -----------  --------------  ------------

  Gross profit........................................................     32,283          3,945         36,228 

Selling, general and administrative expenses..........................     25,661          3,308         28,969 
                                                                       -----------  --------------  ------------

  Operating income....................................................      6,622            637          7,259 

Interest expense......................................................     (4,602)          (222)        (4,824)

Other income, net.....................................................       (118)           133             15 
                                                                       -----------  --------------  ------------

  Income before income taxes..........................................      1,902            548          2,450 

Income tax expense....................................................        940            197          1,137 
                                                                       -----------  --------------  ------------

  Net income..........................................................  $     962            351          1,313 
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

                                                        [Enlarge/Download Table]

                                                                         FOR THE YEAR ENDED DECEMBER 31, 1995   
                                                                                (AMOUNTS IN THOUSANDS)          
                                                                       -----------------------------------------
                                                                        GUARANTOR   NON-GUARANTOR               
                                                                       SUBSIDIARIES  SUBSIDIARIES   CONSOLIDATED
                                                                       -----------  --------------  ------------
                                                                                                                

Net sales.............................................................  $  79,382         11,049         90,431 

Cost of goods sold....................................................     53,287          7,355         60,642 
                                                                       -----------  --------------  ------------

  Gross profit........................................................     26,095          3,694         29,789 

Selling, general and administrative expenses..........................     20,862          2,744         23,606 
                                                                       -----------  --------------  ------------

  Operating income....................................................      5,233            950          6,183 

Interest expense......................................................     (4,066)          (183)        (4,249)

Other income, net.....................................................       (180)           198             18 
                                                                       -----------  --------------  ------------

  Income before income taxes and extraordinary item...................        987            965          1,952 

Income tax expense....................................................        254            304            558 
                                                                       -----------  --------------  ------------

  Income before extraordinary item....................................        733            661          1,394 

Extraordinary item, net...............................................       (151)        --               (151)
                                                                       -----------  --------------  ------------

  Net income..........................................................  $     582            661          1,243 
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

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(15) SUBSEQUENT EVENTS (CONTINUED)                                              
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

                                                        [Enlarge/Download Table]

                                                                           FOR THE PERIOD FROM JULY 13, 1994    
                                                                                 TO DECEMBER 31, 1994           
                                                                                (AMOUNTS IN THOUSANDS)          
                                                                       -----------------------------------------
                                                                        GUARANTOR   NON-GUARANTOR               
                                                                       SUBSIDIARIES  SUBSIDIARIES   CONSOLIDATED
                                                                       -----------  --------------  ------------
                                                                                                                

Net sales.............................................................  $  36,837          4,807         41,644 

Cost of goods sold....................................................     26,018          3,144         29,162 
                                                                       -----------  --------------  ------------

  Gross profit........................................................     10,819          1,663         12,482 

Selling, general and administrative expenses..........................     10,101          1,163         11,264 
                                                                       -----------  --------------  ------------

  Operating income....................................................        718            500          1,218 

Interest expense......................................................     (1,877)           (69)        (1,946)

Other income, net.....................................................        (43)           129             86 
                                                                       -----------  --------------  ------------

  Income (loss) before income taxes...................................     (1,202)           560           (642)

Income tax expense (benefit)..........................................       (498)           210           (288)
                                                                       -----------  --------------  ------------

  Net income (loss)...................................................  $    (704)           350           (354)
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                        [Enlarge/Download Table]

                                                                         FOR THE YEAR ENDED DECEMBER 31, 1996   
                                                                                (AMOUNTS IN THOUSANDS)          
                                                                       -----------------------------------------
                                                                        GUARANTOR   NON-GUARANTOR               
                                                                       SUBSIDIARIES  SUBSIDIARIES   CONSOLIDATED
                                                                       -----------  --------------  ------------
                                                                                                                
Cash flows from operating activities..................................  $   1,209         (1,462)          (253)
                                                                                                    ------------

Cash flows from investing activities:                                                                           
  Payments for business acquisitions, net of assets acquired..........    (12,012)        --            (12,012)
  Other changes.......................................................       (921)          (250)        (1,171)
                                                                       -----------  --------------  ------------
                                                                          (12,933)          (250)       (13,183)
                                                                       -----------  --------------  ------------

Cash flows from financing activities:                                                                           
  Proceeds from debt issuance.........................................     10,906          1,604         12,510 
  Proceeds from sale of common stock..................................      2,585         --              2,585 
  Other changes.......................................................     (1,739)        --             (1,739)
                                                                       -----------  --------------  ------------
                                                                           11,752          1,604         13,356 
                                                                       -----------  --------------  ------------

Effect of exchange rates..............................................     --                 42             42 
                                                                                                    ------------

Net change in cash....................................................         28            (66)           (38)

Cash at beginning of period...........................................        315            605            920 
                                                                                    --------------  ------------

Cash at end of period.................................................  $     343            539            882 
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(15) SUBSEQUENT EVENTS (CONTINUED)                                              
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                         FOR THE YEAR ENDED DECEMBER 31, 1995   
                                                                                (AMOUNTS IN THOUSANDS)          
                                                                       -----------------------------------------
                                                                        GUARANTOR   NON-GUARANTOR               
                                                                       SUBSIDIARIES  SUBSIDIARIES   CONSOLIDATED
                                                                       -----------  --------------  ------------
                                                                                                                
Cash flows from operating activities..................................  $   1,533            308          1,841 
                                                                       -----------  --------------  ------------

Cash flows from investing activities..................................       (670)           (88)          (758)
                                                                       -----------  --------------  ------------

Cash flows from financing activities:                                                                           
  Proceeds from debt issuance.........................................      2,327         --              2,327 
  Payments of debt....................................................     (3,875)        --             (3,875)
  Proceeds from sale of common stock..................................      1,795         --              1,795 
  Other changes.......................................................     (1,022)        --             (1,022)
                                                                       -----------  --------------  ------------
                                                                             (775)                         (775)
                                                                       -----------  --------------  ------------

Effect of exchange rates..............................................     --                (22)           (22)
                                                                                                    ------------

Net change in cash....................................................         88            198            286 

Cash at beginning of period...........................................        227            407            634 
                                                                       -----------  --------------  ------------

Cash at end of period.................................................  $     315            605            920 
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

                                                        [Enlarge/Download Table]

                                                                           FOR THE PERIOD FROM JULY 13, 1994    
                                                                                 TO DECEMBER 31, 1994           
                                                                                (AMOUNTS IN THOUSANDS)          
                                                                       -----------------------------------------
                                                                        GUARANTOR   NON-GUARANTOR               
                                                                       SUBSIDIARIES  SUBSIDIARIES   CONSOLIDATED
                                                                       -----------  --------------  ------------
                                                                                                                
Cash flows from operating activities..................................  $   2,584            515          3,099 
                                                                       -----------  --------------  ------------

Cash flows from investing activities:                                                                           
  Payments for business acquisitions, net.............................    (39,089)        --            (39,089)
  Other changes.......................................................         (9)           (89)           (98)
                                                                       -----------  --------------  ------------
                                                                          (39,098)           (89)       (39,187)
                                                                       -----------  --------------  ------------

Cash flows from financing activities:                                                                           
  Proceeds from debt issuance.........................................     36,188         --             36,188 
Payments of debt......................................................     (4,878)        --             (4,878)
  Proceeds from sale of common stock..................................      4,813         --              4,813 
  Other changes.......................................................        618         --                618 
                                                                       -----------  --------------  ------------
                                                                           36,741         --             36,741 
                                                                       -----------  --------------  ------------

Effect of exchange rates..............................................     --                (19)           (19)
                                                                       -----------  --------------  ------------

Net change in cash....................................................        227            407            634 

Cash at beginning of period...........................................     --             --             --     
                                                                       -----------  --------------  ------------

Cash at end of period.................................................  $     227            407            634 
                                                                       -----------  --------------  ------------
                                                                       -----------  --------------  ------------

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CONSOLIDATED BALANCE SHEET

MARCH 31, 1997

                                                        [Enlarge/Download Table]

                                                                                                     MARCH 31,    
                                                                                                        1997      
                                                                                                   -------------- 
                                                                                                                  
                                                                                                    (UNAUDITED)   
                                                      Assets                                                      
Current Assets:                                                                                                   
  Cash............................................................................................ $    1,667,423 
  Accounts receivable, less allowance for doubtful accounts of $3,506,318.........................     32,416,181 
  Inventories.....................................................................................     49,229,003 
  Prepaid expenses and other current assets.......................................................      4,862,376 
  Assets held for sale............................................................................        826,205 
  Deferred income taxes...........................................................................        938,825 
                                                                                                   -------------- 
      Total current assets........................................................................     89,940,013 

Property and equipment, net.......................................................................      5,475,048 
Deferred financing costs, less accumulated amortization of $152,679...............................      4,122,321 
Intangible assets, less accumulated amortization of $431,407......................................     31,719,302 
Other assets......................................................................................      1,384,295 
                                                                                                   -------------- 
                                                                                                   $  132,640,979 
                                                                                                   -------------- 
                                                                                                   -------------- 
                                       Liabilities and Stockholders' Equity                                       
Current Liabilities:                                                                                              
  Revolving line of credit........................................................................ $    4,314,082 
  Book overdrafts.................................................................................      1,494,620 
  Current installments of long-term debt..........................................................        609,900 
  Trade accounts payable..........................................................................     17,699,844 
  Accrued liabilities and other current liabilities...............................................      9,867,627 
                                                                                                   -------------- 
      Total current liabilities...................................................................     33,986,073 

Deferred income taxes.............................................................................        422,760 
Accrued retirement benefits.......................................................................      2,517,598 
Long-term debt, excluding current installments....................................................     85,101,453 
Other liabilities.................................................................................        168,258 
                                                                                                   -------------- 
      Total liabilities...........................................................................    122,196,142 
                                                                                                   -------------- 

Common stock subject to put option................................................................      3,000,000 

Stockholders' Equity:                                                                                             
  Common stock:                                                                                                   
    Class A, $10 stated value. Authorized 1,500,000 shares; issued and outstanding 987,223........      8,872,234 
    Class B, no par value. Authorized 250,000 shares; none issued.................................       --       
    Class C, no par value. Authorized 250,000 shares; none issued.................................       --       
  Additional paid in capital......................................................................       --       
  Subscriptions receivable........................................................................       (637,383)
  Retained earnings (accumulated deficit).........................................................       (881,932)
  Cumulative translation adjustment...............................................................         91,918 
                                                                                                   -------------- 
      Total stockholders' equity..................................................................      7,444,837 
                                                                                                   -------------- 
                                                                                                   $  132,640,979 
                                                                                                   -------------- 
                                                                                                   -------------- 

See accompanying notes to unaudited consolidated financial statements.

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CONSOLIDATED STATEMENTS OF OPERATIONS 

THREE MONTHS ENDED MARCH 31, 1997 AND 1996

                                                        [Enlarge/Download Table]

                                                                                         THREE MONTHS ENDED      
                                                                                             MARCH 31,           
                                                                                    ---------------------------- 
                                                                                                                 
                                                                                        1997           1996      
                                                                                    -------------  ------------- 


                                                                                            (UNAUDITED)          
                                                                                                                 
Net sales.......................................................................... $  42,042,970  $  26,319,787 
Cost of goods sold.................................................................    29,083,575     17,975,883 
                                                                                    -------------  ------------- 
    Gross profit...................................................................    12,959,395      8,343,904 
Selling, general, and administrative expenses......................................    10,973,947      6,763,393 
                                                                                    -------------  ------------- 
    Operating income...............................................................     1,985,448      1,580,511 
Other income (expense):                                                                                          
Interest expense...................................................................    (2,882,745)    (1,100,190)
Other income, net..................................................................        38,940         14,114 
                                                                                    -------------  ------------- 
    Income (loss) before income taxes and extraordinary item.......................      (858,357)       494,435 
Income tax expense (benefit).......................................................      (355,395)       178,776 
                                                                                    -------------  ------------- 
    Income (loss) before extraordinary item........................................      (502,962)       315,659 
Extraordinary loss, net of income tax benefit......................................    (1,556,898)      --       
                                                                                    -------------  ------------- 
    Net income (loss).............................................................. $  (2,059,860) $     315,659 
                                                                                    -------------  ------------- 
                                                                                    -------------  ------------- 
Earnings (loss) per common share and common share equivalent:                                                    
    Income (loss) before extraordinary item........................................ $       (0.53) $        0.32 
    Extraordinary item, net........................................................         (1.63)      --       
                                                                                    -------------  ------------- 
        Net income (loss) per share................................................ $       (2.16) $        0.32 
                                                                                    -------------  ------------- 
                                                                                    -------------  ------------- 
    Weighted average number of common shares and common share equivalents..........       953,674        977,196 
                                                                                    -------------  ------------- 
                                                                                    -------------  ------------- 

See accompanying notes to unaudited consolidated financial statements.

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WILLCOX & GIBBS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

THREE MONTHS ENDED MARCH 31, 1997 AND 1996

                                                        [Enlarge/Download Table]

                                                                                         THREE MONTHS ENDED       
                                                                                              MARCH 31,           
                                                                                    ----------------------------- 
                                                                                                                  
                                                                                         1997           1996      
                                                                                    --------------  ------------- 


                                                                                             (UNAUDITED)          
                                                                                                                  
Cash flows from operating activities:                                                                             
      Net income (loss)............................................................ $   (2,059,860) $     315,659 
Adjustments to reconcile net income (loss) to net cash used in operating                                          
  activities:                                                                                                     
  Depreciation and amortization....................................................        260,608        151,472 
  Provision for losses on accounts receivable......................................        237,563        164,367 
  Amortization of deferred financing costs.........................................        355,464        123,819 
  Amortization of debt discount....................................................         51,717         39,924 
  Deferred income taxes............................................................         (2,172)      --       
  Extraordinary loss on debt extinguishment, net...................................      1,556,898       --       
  Changes in operating assets and liabilities, net of effect of business                                          
    acquisitions:                                                                                                 
    Trade accounts receivable......................................................      3,386,992     (4,021,701)
    Inventories....................................................................      1,192,733        408,309 
    Prepaid expenses and other current assets......................................       (940,425)        38,640 
    Other assets...................................................................         22,959        (43,865)
    Income taxes payable...........................................................       (614,867)        42,222 
    Trade accounts payable and other liabilities...................................     (5,883,994)       244,204 
                                                                                    --------------  ------------- 
      Net cash used in operating activities........................................     (2,436,384)    (2,536,950)
Cash flows from investing activities:                                                                             
  Capital expenditures.............................................................       (538,641)      (210,519)
  Proceeds from sale of property and equipment.....................................         58,455         10,125 
  Payment for business acquisitions, net of cash acquired..........................    (36,732,470)    (8,219,165)
                                                                                    --------------  ------------- 
      Net cash used in investing activities........................................    (37,212,656)    (8,419,559)
Cash flows from financing activities:                                                                             
  Net proceeds from revolving line of credit.......................................      4,248,499      2,440,461 
  Increase (decrease) in book overdrafts...........................................         (4,677)        13,007 
  Proceeds from debt issued........................................................     83,980,050      6,167,439 
  Principal payments on long-term debt.............................................    (41,137,297)      (437,500)
  Payment of financing costs.......................................................     (3,605,926)      (265,108)
  Proceeds from common stock issued in private placement...........................       --            2,282,145 
  Repurchase and retirement of warrants............................................     (3,026,454)      --       
                                                                                    --------------  ------------- 
      Net cash provided by financing activities....................................     40,454,195     10,200,444 
                                                                                    --------------  ------------- 
Effect of exchange rate changes in cash............................................        (19,232)        (8,966)
Net increase (decrease) in cash....................................................        785,923       (765,031)
Cash at beginning of period........................................................        881,500        920,238 
                                                                                    --------------  ------------- 
Cash at end of period.............................................................. $    1,667,423  $     155,207 
                                                                                    --------------  ------------- 
                                                                                    --------------  ------------- 
Supplemental disclosure of cash flow information:                                                                 
  Cash paid during the period for:                                                                                
    Interest....................................................................... $      479,327  $     927,880 
                                                                                    --------------  ------------- 
    Income taxes................................................................... $      261,645  $     145,305 
                                                                                    --------------  ------------- 

See accompanying notes to unaudited consolidated financial statements.

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WILLCOX & GIBBS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED 

1. ORGANIZATION AND BASIS OF PRESENTATION                                       

 The accompanying unaudited consolidated financial statements of Willcox &
Gibbs, Inc. and subsidiaries (the "Company") have been prepared in accordance   
with generally accepted accounting principals for interim financial information 
and with the instructions to Form 10-Q and Article 10 of Regulation S-X.        
Accordingly, they do not include all of the information and footnotes required  
by generally accepted accounting principles for complete financial statements.  
In the opinion of management, all adjustments (consisting of normal recurring   
accruals) considered necessary for a fair presentation have been included.      
Operating results for the quarter ending March 31, 1997 are not necessarily     
indicative of the results that may be expected for the year ending December 31, 
1997.                                                                           

   The operations of Clinton Management Corp. (d/b/a Clinton Machine & Supply)
and Clinton Machinery Corp. (together, "Clinton") have been included in the     
Company's consolidated operations since their February 1, 1996 acquisition date.
The operations of E.C. Mitchell Co., Inc. ("Mitchell") have been included in the
Company's consolidated operations since its November 27, 1996 acquisition date. 
The operations of Macpherson Meistergram, Inc. ("Macpherson") have been included
in the Company's consolidated operations since its January 3, 1997 acquisition  
date. The operations of Embroidery Leasing Corp. ("ELC") have been included in  
the Company's consolidated operations since its January 3, 1997 acquisition     
date.                                                                           

2. ACQUISITIONS                                                                 

Effective February 1, 1996, the Company acquired Clinton in exchange for
$4,000,000 in cash, assumption of $4,500,000 in debt and payables, 100,000      
shares of Company Class A common stock and contingent payments of up to 38.87%  
of operating income (as defined in the purchase agreement) of Clinton during    
each of the five years ending December 31, 2000. Such contingent payments shall 
not exceed $10,500,000. In addition, the former shareholders of Clinton have the
right to require the Company to purchase their shares of Company common stock at
a purchase price of $30 per share upon the occurrence of certain events.        

Effective November 27, 1996, the Company acquired certain assets of E.C.
Mitchell, Co., Inc. for $3,000,000 in cash. The acquired assets relate to the   
manufacture and sale of abrasive cords and tape used principally in the apparel 
industry.                                                                       

   Effective January 3, 1997, the Company acquired all the outstanding capital
stock of Macpherson for $24,000,000 in cash. The acquisition included the       
assumption of approximately $6,100,000 of indebtedness and $6,400,000 of trade  
payables which were repaid from the proceeds of the refinancing (note 3).       
Macpherson is primarily engaged in the distribution of embroidery equipment and 
supplies to the apparel industry. The acquisition has been accounted for using  
the purchase method of accounting, with the purchase price allocated based on   
the fair value of the assets acquired and liabilities assumed, with the         

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED (CONTINUED) 

2. ACQUISITIONS (CONTINUED)                                                     
excess purchase price allocated to goodwill, which is being amortized over 40   
years. The amounts used in the purchase price allocation were as follows:       

                                                                [Download Table]

Fair value of:                                                                     
                                                                                   
Assets acquired....................................................... $33,378,426 
Liabilities assumed................................................... (28,506,519)
                                                                       ----------  
                                                                        4,871,907  

Excess purchase price, recorded as goodwill........................... 19,128,093  
    Total purchase price.............................................. $24,000,000 
                                                                       ----------  
                                                                       ----------  

3. REFINANCING                                                                  

  Effective January 3, 1997, the Company issued $85,000,000 principal amount
of 12.25% Series A senior notes which are due in December 2003. The Company used
the proceeds, in part, to repay approximately $40,952,000 of its indebtedness   
($40,550,000 of which existed at December 31, 1996), to redeem common stock     
warrants for a total of $3,026,000, and to finance the Macpherson acquisition.  

The Company recorded an extraordinary loss of $1,556,898 from the       
refinancing (which is net of income tax benefit of $954,228).                   

4. GUARANTOR SUBSIDIARIES                                                       

Set forth below are condensed consolidating financial statements of the 
subsidiaries of the Company that have fully and unconditionally, jointly and    
severally guaranteed the Company's 12 1/4% Senior Notes (the "Guarantor         
Subsidiaries") and the non-guarantor subsidiaries of the Company (the           
"Non-Guarantor Subsidiaries"). As of March 31, 1997, the Guarantor Subsidiaries 
were WG Apparel, Inc., Leadtec Systems, Inc., J&E Sewing Supplies, Inc., W&G    
Daon, Inc. W&G Tennessee Imports, Inc., Clinton Management Corp., Clinton       
Machinery Corporation, Clinton Leasing Corp., Clinton Equipment Corp.,          
Macpherson Meistergram, Inc. and Paradise Color Incorporated, and the           
Non-Guarantor Subsidiaries were Willcox & Gibbs, Ltd., Sunbrand S.A. de C.V.,   
Sunbrand Caribe S.A., Allied Machine Parts Ltd., M.E.C. (Sewing Machine         
Limited), Unity Sewing Supply Company (UK) Limited, Allide Machine Parts        
Limited, Matyork Limited, Forest Needle Company Limited, Morris & Ingram        
(Textiles) Limited, Eildon Electronics Limited, Geoffrey E. Macpherson Canada,  
Inc., Embroidery Leasing Corporation, Sunbrand de Colombia, Unity de Colombia   
and Clinton de Mexico. The Guarantor Subsidiaries are wholly owned by the       
Company, and there are no restrictions on the ability of the Guarantor          
Subsidiaries to make distributions to the Company, except those generally       
applicable under relevant corporation laws. Separate financial statements of    
each Guarantor Subsidiary have not been included because management has         
determined that they are not material to investors.                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED (CONTINUED) 

4. GUARANTOR SUBSIDIARIES (CONTINUED)                                           
CONDENSED CONSOLIDATED BALANCE SHEET

                                                        [Enlarge/Download Table]

                                                                                      MARCH 31, 1997               
                                                                                  (AMOUNTS IN THOUSANDS)           
                                                                        -------------------------------------------
                                                                         GUARANTOR    NON-GUARANTOR                
                                                                        SUBSIDIARIES  SUBSIDIARIES    CONSOLIDATED 
                                                                        -----------  ---------------  -------------
                                                                                                                   
                                Assets                                                                             
----------------------------------------------------------------------                                             

Cash..................................................................   $   1,037            630           1,667  
Accounts receivable, net..............................................      27,803          4,613          32,416  
Inventories...........................................................      44,093          5,136          49,229  
Other current assets..................................................       6,300            328           6,628  
                                                                        -----------       -------     -------------
  Total current assets................................................      79,233         10,707          89,940  
Property and equipment, net...........................................       3,920          1,555           5,475  
Intangible assets, net................................................      35,172            670          35,842  
Other assets..........................................................       1,203            181           1,384  
                                                                        -----------       -------     -------------
                                                                         $ 119,528         13,113         132,641  
                                                                        -----------       -------     -------------
                                                                        -----------       -------     -------------
                 Liabilities and Stockholders' Equity                                                              
----------------------------------------------------------------------                                             

Current notes and long-term debt......................................   $   4,496            428           4,924  
Accounts payable......................................................      17,035          2,159          19,194  
Accrued liabilities...................................................       9,262            606           9,868  
                                                                        -----------       -------     -------------

  Current liabilities.................................................      30,793          3,193          33,986  
Long-term debt........................................................      83,816          1,285          85,101  
Other liabilities.....................................................       3,109         --               3,109  
                                                                        -----------       -------     -------------
  Total liabilities...................................................     117,718          4,478         122,196  

Common stock subject to put option....................................       3,000         --               3,000  
Common stock..........................................................       8,872         --               8,872  
Other equity (deficit)................................................     (10,062)         8,635          (1,427) 
                                                                        -----------       -------     -------------
Total stockholders' equity............................................      (1,190)         8,635           7,445  
                                                                        -----------       -------     -------------
                                                                         $ 119,528         13,113         132,641  
                                                                        -----------       -------     -------------
                                                                        -----------       -------     -------------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED (CONTINUED) 

4. GUARANTOR SUBSIDIARIES (CONTINUED)                                           
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

                                                        [Enlarge/Download Table]

                                                                            THREE MONTHS ENDED MARCH 31, 1997     
                                                                                 (AMOUNTS IN THOUSANDS)           
                                                                       -------------------------------------------
                                                                        GUARANTOR    NON-GUARANTOR                
                                                                       SUBSIDIARIES  SUBSIDIARIES    CONSOLIDATED 
                                                                       -----------  ---------------  -------------
                                                                                                                  
Net sales.............................................................  $  36,777          5,266          42,043  
Cost of goods sold....................................................     25,487          3,597          29,084  
                                                                       -----------        ------     -------------

  Gross profit........................................................     11,290          1,669          12,959  
Selling, general and administrative expenses..........................      9,778          1,196          10,974  
                                                                       -----------        ------     -------------

  Operating income....................................................      1,512            473           1,985  
Interest expense......................................................     (2,708)          (174)         (2,882) 
Other income,net......................................................         32              7              39  
                                                                       -----------        ------     -------------

  Income (loss) before income taxes and extraordinary item............     (1,164)           306            (858) 
Income tax expense (benefit)..........................................       (477)           122            (355) 
                                                                       -----------        ------     -------------

  Income (loss) before extraordinary item.............................       (687)           184            (503) 
Extraordinary item, net...............................................     (1,557)        --              (1,557) 
                                                                       -----------        ------     -------------

  Net income (loss)...................................................  $  (2,244)           184          (2,060) 
                                                                       -----------        ------     -------------
                                                                       -----------        ------     -------------

                                                        [Enlarge/Download Table]

                                                                            THREE MONTHS ENDED MARCH 31, 1996     
                                                                                 (AMOUNTS IN THOUSANDS)           
                                                                       -------------------------------------------
                                                                        GUARANTOR    NON-GUARANTOR                
                                                                       SUBSIDIARIES  SUBSIDIARIES    CONSOLIDATED 
                                                                       -----------  ---------------  -------------
                                                                                                                  
Net sales.............................................................  $  23,377          2,943          26,320  
Cost of goods sold....................................................     15,976          2,000          17,976  
                                                                       -----------        ------     -------------

  Gross profit........................................................      7,401            943           8,344  
Selling, general and administrative expenses..........................      6,005            758           6,763  
                                                                       -----------        ------     -------------

  Operating income....................................................      1,396            185           1,581  
Interest expense......................................................     (1,071)           (29)         (1,100) 
Other income, net.....................................................        (17)            31              14  
                                                                       -----------        ------     -------------

  Income before income taxes..........................................        308            187             495  
Income tax expense....................................................        117             62             179  
                                                                       -----------        ------     -------------

  Net income..........................................................  $     191            125             316  
                                                                       -----------        ------     -------------
                                                                       -----------        ------     -------------

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED (CONTINUED) 

4. GUARANTOR SUBSIDIARIES (CONTINUED)                                           
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                            THREE MONTHS ENDED MARCH 31, 1997     
                                                                                 (AMOUNTS IN THOUSANDS)           
                                                                       -------------------------------------------
                                                                        GUARANTOR    NON-GUARANTOR                
                                                                       SUBSIDIARIES  SUBSIDIARIES    CONSOLIDATED 
                                                                       -----------  ---------------  -------------
                                                                                                                  
Cash flows from operating activities..................................  $  (2,680)           244          (2,436) 
                                                                       -----------                   -------------
Cash flows from investing activities:                                                                             
  Payments for business acquisitions..................................    (36,732)        --             (36,732) 
  Other changes.......................................................       (347)          (134)           (481) 
                                                                       -----------        ------     -------------
                                                                          (37,079)          (134)        (37,213) 
                                                                       -----------        ------     -------------
Cash flows from financing activities:                                                                             
  Proceeds from debt issuance.........................................     88,228         --              88,228  
  Principal payments on debt..........................................    (41,137)        --             (41,137) 
  Payments for financing costs........................................     (3,606)        --              (3,606) 
  Repurchase and retirement of warrants...............................     (3,026)        --              (3,026) 
  Other changes.......................................................         (5)        --                  (5) 
                                                                       -----------        ------     -------------
                                                                           40,454         --              40,454  
                                                                       -----------        ------     -------------
  Effect of exchange rates............................................     --                (19)            (19) 
                                                                       -----------        ------     -------------
  Net change in cash..................................................        695             91             786  

  Cash at beginning of period.........................................        343            539             882  
                                                                       -----------        ------     -------------
  Cash at end of period...............................................  $   1,038            630           1,668  
                                                                       -----------        ------     -------------
                                                                       -----------        ------     -------------

                                                        [Enlarge/Download Table]

                                                                             THREE MONTHS ENDED MARCH 31, 1996      
                                                                                  (AMOUNTS IN THOUSANDS)            
                                                                       ---------------------------------------------
                                                                        GUARANTOR    NON-GUARANTOR                  
                                                                       SUBSIDIARIES  SUBSIDIARIES     CONSOLIDATED  
                                                                       -----------  ---------------  ---------------
                                                                                                                    
Cash flows from operating activities..................................  $  (2,634)            97           (2,537)  

Cash flows from investing activities:                                                                               
  Payment for business acquisition....................................     (8,219)        --               (8,219)  
                                                                                                           ------   
  Other changes.......................................................       (129)           (71)            (200)  
                                                                       -----------        ------           ------   
                                                                           (8,348)           (71)          (8,419)  
                                                                       -----------        ------           ------   
Cash flows from financing activities:                                                                               
  Proceeds from debt issuance.........................................      8,608         --                8,608   
  Proceeds from sale of common stock..................................      2,282         --                2,282   
  Other changes.......................................................       (690)        --                 (690)  
                                                                       -----------        ------           ------   
                                                                           10,200         --               10,200   
                                                                       -----------        ------           ------   
  Effect of exchange rates............................................     --                 (9)              (9)  
                                                                       -----------        ------           ------   
  Net change in cash..................................................       (782)            17             (765)  

  Cash at beginning of period.........................................        315            605              920   
                                                                       -----------        ------           ------   
  Cash at end of period...............................................  $    (467)           622              155   
                                                                       -----------        ------           ------   
                                                                       -----------        ------           ------   

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Board of Directors of                                   

Macpherson Meistergram, Inc.:                                                   

  We have audited the accompanying consolidated balance sheets of Macpherson
Meistergram, Inc. (a North Carolina corporation) and subsidiary as of December  
31, 1996 and 1995, and the related consolidated statements of income,           
stockholders' investment and cash flows for each of the three years in the      
period ended December 31, 1996. These financial statements are the              
responsibility of the Company's management. Our responsibility is to express an 
opinion on these financial statements based on our audits.                      

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Macpherson Meistergram, Inc.
and subsidiary as of December 31, 1996 and 1995, and the results of their       
operations and their cash flows for the each of the three years in the period   
ended December 31, 1996, in conformity with generally accepted accounting       
principles.                                                                     

We have also audited, in accordance with generally accepted auditing    
standards, the balance sheet as of December 31, 1994 (which is not presented    
herein), and have expressed an unqualified opinion on that balance sheet. In our
opinion, the information set forth in the selected historical financial         
information as of December 31, 1996, 1995 and 1994 and for each of the three    
years in the period ended December 31, 1996, appearing on pages 20 and 44, is   
fairly stated in all material respects in relation to the financial statements  
from which it has been derived.                                                 

Greensboro, North Carolina,                                                     

February 21, 1997.                                           Arthur Andersen LLP

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1996 AND 1995 

                                                        [Enlarge/Download Table]

                                      ASSETS                                             1996           1995     
----------------------------------------------------------------------------------  --------------  -------------
                                                                                                                 
                                 (NOTES 3 AND 6)                                                                 
CURRENT ASSETS:                                                                                                  
  Cash............................................................................   $    470,972   $     260,297
  Trade accounts receivable, less allowances for doubtful accounts of $869,000 and                               
    $778,000......................................................................     14,921,024      20,322,528
  Inventories (Note 2)............................................................     21,462,266      22,079,873
  Prepayments, deposits and other.................................................        587,114         474,158
                                                                                    --------------  -------------
        Total current assets......................................................     37,441,376      43,136,856
                                                                                    --------------  -------------
PROPERTY AND EQUIPMENT:                                                                                          
  Leasehold improvements..........................................................      1,031,489       1,030,241
  Machinery and equipment.........................................................      1,658,446       1,348,113
  Furniture and fixtures..........................................................        651,832         641,315
  Automobiles.....................................................................        128,259         124,708
                                                                                    --------------  -------------
                                                                                        3,470,026       3,144,377
  Less--Accumulated depreciation..................................................      2,410,186       2,195,230
                                                                                    --------------  -------------
                                                                                        1,059,840         949,147
                                                                                    --------------  -------------
OTHER ASSETS......................................................................        362,722         316,843
                                                                                    --------------  -------------
                                                                                     $ 38,863,938   $  44,402,846
                                                                                    --------------  -------------
                                                                                    --------------  -------------


                     LIABILITIES AND STOCKHOLDERS' INVESTMENT                                                    
----------------------------------------------------------------------------------                               
                                                                                                                 
CURRENT LIABILITIES:                                                                                             
  Current maturities of long-term debt (Note 6)...................................   $    462,225   $     424,547
  Short-term bank borrowings (Note 6).............................................      6,247,835       4,060,136
  Accounts payable and accrued liabilities (Note 4)...............................     20,765,463      27,726,856
                                                                                    --------------  -------------
        Total current liabilities.................................................     27,475,523      32,211,539
                                                                                    --------------  -------------
LONG-TERM DEBT (Note 6)...........................................................              0         461,840
                                                                                    --------------  -------------
DEFERRED COMPENSATION (Note 8)....................................................        425,356         354,747
                                                                                    --------------  -------------
COMMITMENTS AND CONTINGENCIES (Notes 7, 9 and 11)                                                                
STOCKHOLDERS' INVESTMENT (Note 2):                                                                               
  Common stock, $1 par value, 300,000 authorized shares; 11,119 shares issued and                                
    outstanding...................................................................         11,119          11,119
  Additional paid-in capital......................................................      1,564,833       1,564,833
  Retained earnings...............................................................      9,367,896       9,777,980
  Foreign currency translation gain (Note 2)......................................         19,211          20,788
                                                                                    --------------  -------------
                                                                                       10,963,059      11,374,720
                                                                                    --------------  -------------
                                                                                     $ 38,863,938   $  44,402,846
                                                                                    --------------  -------------
                                                                                    --------------  -------------

The accompanying notes to consolidated financial statements 
are an integral part of these balance sheets. 

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF INCOME 
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                        [Enlarge/Download Table]

                                                                         1996           1995           1994      
                                                                     -------------  -------------  ------------- 
                                                                                                                 
NET SALES:                                                                                                       
  Machines.......................................................... $  56,622,534  $  59,169,340  $  56,994,446 
  Parts, supplies and services......................................    13,435,333     12,497,607     11,866,437 
                                                                     -------------  -------------  ------------- 
                                                                        70,057,867     71,666,947     68,860,883 
                                                                     -------------  -------------  ------------- 
COST OF GOODS SOLD:                                                                                              
  Machines..........................................................    42,784,499     44,521,220     42,583,772 
  Parts, supplies and services......................................     9,825,085      9,247,868      9,631,986 
                                                                     -------------  -------------  ------------- 
                                                                        52,609,584     53,769,088     52,215,758 
                                                                     -------------  -------------  ------------- 
        Gross profit................................................    17,448,283     17,897,859     16,645,125 
OPERATING EXPENSES..................................................    14,211,038     13,586,510     13,566,538 
                                                                     -------------  -------------  ------------- 
        Income from operations......................................     3,237,245      4,311,349      3,078,587 
                                                                     -------------  -------------  ------------- 
OTHER EXPENSE (INCOME):                                                                                          
  Interest expense, net.............................................       781,454        217,615        389,930 
  Foreign exchange costs (Note 2)...................................       934,618        811,588        683,068 
  Costs incurred in connection with the sale of the Company (Note                                                
    12).............................................................       242,225              0              0 
  Other, net........................................................       (15,500)       (43,347)       (40,201)
                                                                     -------------  -------------  ------------- 
                                                                         1,942,797        985,856      1,032,797 
                                                                     -------------  -------------  ------------- 
INCOME BEFORE INCOME TAX PROVISION..................................     1,294,448      3,325,493      2,045,790 
INCOME TAX PROVISION (Note 5).......................................        54,432         76,600         53,486 
                                                                     -------------  -------------  ------------- 
NET INCOME.......................................................... $   1,240,016  $   3,248,893  $   1,992,304 
                                                                     -------------  -------------  ------------- 
                                                                     -------------  -------------  ------------- 

The accompanying notes to consolidated financial statements 
are an integral part of these statements. 

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT 

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(NOTE 2)

                                                        [Enlarge/Download Table]

                                                                                                   FOREIGN                  
                                                   COMMON STOCK       ADDITIONAL                  CURRENCY                  
                                               --------------------    PAID-IN       RETAINED    TRANSLATION                
                                                SHARES     AMOUNT      CAPITAL       EARNINGS       GAIN          TOTAL     
                                               ---------  ---------  ------------  ------------  -----------  ------------- 
                                                                                                                            
BALANCE, December 31, 1993....................    11,119  $  11,119  $    499,643  $  8,533,556   $  27,205   $   9,071,523 
  Net income..................................         0          0             0     1,992,304           0       1,992,304 
  Foreign currency translation loss (Note                                                                                   
    2)........................................         0          0             0             0      (5,652)         (5,652)
  Cash dividends paid to stockholders (Note                                                                                 
    5)........................................         0          0             0    (2,067,908)          0      (2,067,908)
  Cash contribution from stockholders.........         0          0       804,033             0           0         804,033 
                                               ---------  ---------  ------------  ------------  -----------  ------------- 
BALANCE, December 31, 1994....................    11,119     11,119     1,303,676     8,457,952      21,553       9,794,300 
  Net income..................................         0          0             0     3,248,893           0       3,248,893 
  Foreign currency translation loss (Note                                                                                   
    2)........................................         0          0             0             0        (765)           (765)
  Cash dividends paid to stockholders (Note                                                                                 
    5)........................................         0          0             0    (1,928,865)          0      (1,928,865)
  Cash contribution from stockholders.........         0          0       261,157             0           0         261,157 
                                               ---------  ---------  ------------  ------------  -----------  ------------- 
BALANCE, December 31, 1995....................    11,119     11,119     1,564,833     9,777,980      20,788      11,374,720 
  Net income..................................         0          0             0     1,240,016           0       1,240,016 
  Foreign currency translation loss (Note                                                                                   
    2)........................................         0          0             0             0      (1,577)         (1,577)
  Cash dividends paid to stockholders (Note                                                                                 
    5)........................................         0          0             0    (1,650,100)          0      (1,650,100)
                                               ---------  ---------  ------------  ------------  -----------  ------------- 
BALANCE, December 31, 1996....................    11,119  $  11,119  $  1,564,833  $  9,367,896   $  19,211   $  10,963,059 
                                               ---------  ---------  ------------  ------------  -----------  ------------- 
                                               ---------  ---------  ------------  ------------  -----------  ------------- 

The accompanying notes to consolidated financial statements are an integral part
of these statements.

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

                                                        [Enlarge/Download Table]

                                                                             1996          1995          1994     
                                                                         ------------  ------------  ------------ 
                                                                                                                  
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                             
  Net income............................................................ $  1,240,016  $  3,248,893  $  1,992,304 
  Adjustments to reconcile net income to net cash provided by (used in)                                           
    operating activities-                                                                                         
      Depreciation and amortization.....................................      317,799       171,895       214,000 
      Increase in cash surrender value of life insurance................      (77,655)      (66,556)      (76,757)
      Gain on sales of property and equipment, net......................      (13,000)      (21,208)      (31,753)
      Deferred compensation expense.....................................       83,749        59,503        78,336 
      Payments made under deferred compensation arrangements............      (13,140)      (13,140)            0 
      Changes in current assets and liabilities:                                                                  
        Trade accounts receivable.......................................    5,401,504    (5,085,305)     (201,274)
        Inventories.....................................................      418,838    (7,803,867)    5,883,863 
        Prepayments, deposits and other.................................     (112,956)      161,642         5,784 
        Accounts payable and accrued liabilities........................   (6,961,393)    9,243,033    (4,172,488)
      Other.............................................................       (1,577)        6,469        33,107 
                                                                         ------------  ------------  ------------ 
          Net cash provided by (used in) operating activities...........      282,185       (98,641)    3,725,122 
                                                                         ------------  ------------  ------------ 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                             
  Additions to property and equipment...................................     (281,577)     (178,028)     (171,067)
  Proceeds from sales of property and equipment.........................       64,854        36,737       112,041 
  Other.................................................................       31,776             0             0 
                                                                         ------------  ------------  ------------ 
          Net cash used in investing activities.........................     (184,947)     (141,291)      (59,026)
                                                                         ------------  ------------  ------------ 
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                             
  Cash contribution received from stockholders..........................            0       261,157       804,033 
  Payments of cash dividends............................................   (1,650,100)   (1,928,865)   (2,067,908)
  Increase (decrease) in short-term borrowings, net.....................    2,187,699     2,523,236    (2,712,881)
  Payments of long-term debt............................................     (424,162)     (396,624)     (370,561)
                                                                         ------------  ------------  ------------ 
          Net cash provided by (used in) financing activities...........      113,437       458,904    (4,347,317)
                                                                         ------------  ------------  ------------ 
NET INCREASE (DECREASE) IN CASH.........................................      210,675       218,972      (681,221)
CASH, beginning of year.................................................      260,297        41,325       722,546 
                                                                         ------------  ------------  ------------ 
CASH, end of year....................................................... $    470,972  $    260,297  $     41,325 
                                                                         ------------  ------------  ------------ 
                                                                         ------------  ------------  ------------ 

The accompanying notes to consolidated financial statements 
are an integral part of these statements. 

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994

1. DESCRIPTION OF OPERATIONS:                                                   

    The principal activities of Macpherson Meistergram, Inc. and subsidiary (the
Company) include the distribution, marketing and servicing, throughout the      
United States and Canada, of embroidery and monogram machines (stitching        
machines), textile machines and engraving machines used primarily in the apparel
industry.                                                                       

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:                                  

PRINCIPLES OF CONSOLIDATION                                                     

  The accompanying consolidated financial statements include the accounts of
Macpherson Meistergram, Inc. (a North Carolina corporation) and its             
majority-owned subsidiary, Geoffrey E. Macpherson Canada, Inc. (an Ontario,     
Canada, corporation). All significant intercompany accounts and transactions    
have been eliminated in consolidation.                                          

The financial statements of the Canadian subsidiary have been translated
into U.S. dollars at the balance sheet date rate of exchange for asset and      
liability accounts and the average rate of exchange for income statement        
accounts. Translation gains and losses are reflected in the foreign currency    
translation account in the stockholders' investment section of the accompanying 
consolidated balance sheets.                                                    

On December 31, 1994, Macpherson, Inc. acquired all of the outstanding  
common stock of Meistergram, Inc. and Macpherson Monogram, Inc. in exchange for 
1,119 shares of common stock of Macpherson, Inc. The Company accounted for the  
acquisition in a manner similar to a pooling-of-interests due to the common     
ownership of all three companies. As a result, the stockholders' investment     
information in the accompanying consolidated financial statements was restated  
in 1994 to record the effect of this transaction. In conjunction with this      
transaction, the name of Macpherson, Inc. was changed to Macpherson Meistergram,
Inc.                                                                            

USE OF ESTIMATES                                                                

The preparation of consolidated financial statements in conformity with 
generally accepted accounting principles requires management to make estimates  
and assumptions that affect the reported amounts of assets and liabilities at   
the date of the consolidated financial statements and the reported amounts of   
revenues and expenses during the reporting period. Actual results could differ  
from those estimates.                                                           

CONCENTRATIONS OF CREDIT RISK IN TRADE ACCOUNTS RECEIVABLE                      

The Company does not have significant concentrations of credit risk with
respect to trade accounts receivable due to the large number of entities        
comprising the Company's customer base and dispersion of the Company's customers
across all segments of the apparel industry and many geographic regions of the  
United States and Canada. The Company distributes a portion of its products     
through third-party distributors. The Company performs ongoing credit           
evaluations of its customers' financial condition. The Company establishes an   
allowance for doubtful accounts based upon factors related to credit risk of    
specific customers, historical trends and other information.                    

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)                      
FOREIGN EXCHANGE COSTS                                                          

Gains and losses from foreign exchange transactions that hedge existing 
assets or liabilities are included in the carrying amounts of those assets and  
liabilities and are ultimately recognized in the consolidated statements of     
income as part of those carrying amounts. Gains and losses from foreign exchange
transactions that hedge firm purchase commitments are deferred and recognized as
adjustments to the carrying amounts of the related inventory items when the     
inventory items are purchased. Premiums paid for foreign exchange contracts and 
contract options are amortized over the lives of the respective contracts. See  
Note 9 regarding foreign exchange risk management.                              

INVENTORIES                                                                     

   Inventories consist of machines, parts and supplies held for sale. Machines
are recorded at the lower of specific cost or market value while parts and      
supplies are recorded at the lower of first-in, first-out (FIFO) cost or market.
Inventories also include rental machines held at customer locations under a     
"rent-to-own" program. Rental machines are recorded at specific cost and the    
specific cost of each machine is reduced to reflect a portion of the rental     
revenues earned to date. Reserves are established to record provisions for slow 
moving inventories in the period in which it becomes reasonably evident that the
product is not salable or the market value is less than cost. Inventories at    
December 31, 1996 and 1995, were as follows:                                    

                                                        [Enlarge/Download Table]

                                                                    1996           1995     
                                                                -------------  -------------
                                                                                            
Stitching machines (includes $211,043, and $0 of rental                                     
  machines at December 31, 1996 and 1995)...................... $  12,174,002  $  13,295,211
Textile machines...............................................       662,607        582,631
Engraving machines (includes $16,049 and $113,322 of rental                                 
  machines at December 31, 1996 and 1995)......................     1,487,388      1,637,419
Parts, supplies and other......................................     7,138,269      6,564,612
                                                                -------------  -------------
                                                                $  21,462,266  $  22,079,873
                                                                -------------  -------------
                                                                -------------  -------------

PROPERTY AND EQUIPMENT                                                          

    All property and equipment is stated at cost. Depreciation is computed using
accelerated methods for both financial and income tax reporting purposes. The   
estimated service lives used for calculating depreciation are as follows:       

                                                                [Download Table]
                                                                            
                                                                      7-31.5
Leasehold improvements.........................................        years
Machinery and equipment and furniture and fixtures.............    5-7 years
Automobiles....................................................      5 years

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)                      
POSTRETIREMENT BENEFITS                                                         

 The Company adopted a plan during 1996 whereby it provides certain health
care and life insurance benefits for eligible retired employees and their       
eligible dependents. Employees retiring from the Company with 15 consecutive    
years of service immediately prior to retirement are eligible for these         
benefits, subject to deductibles, copayment provisions and other limitations.   

   The Company accrues the estimated cost of retiree health and life insurance
benefits over the 15 years that employees render service immediately preceding  
retirement age. The initial accumulated liability of approximately $50,000 is   
being amortized over 10 years. The Company intends to amend its postretirement  
benefits plan in 1997 whereby no new participants will be admitted to the plan  
after February 28, 1997.                                                        

INCOME TAXES                                                                    

The stockholders of the Company have elected under Subchapter S of the  
Internal Revenue Code (IRC) to have the Company's income taxed directly to the  
stockholders. Under this election, the corporate income or loss of the S        
Corporation is allocated to its stockholders for inclusion in their personal    
federal income tax returns and, accordingly, no provision for federal income    
taxes is required in the accompanying consolidated statements of income. In     
addition, state income taxes are provided for any income attributable to states 
that do not recognize S Corporation status.                                     

   Deferred income taxes are provided, when applicable, for timing differences
between the recognition of certain income and expense items for financial       
reporting and income tax purposes. These differences relate primarily to certain
accrued expenses not currently deductible for state income tax purposes.        

MINORITY INTEREST IN SUBSIDIARY                                                 

During 1996, 1995 and 1994, the principal stockholder of Macpherson     
Meistergram, Inc. held a 21% interest in Geoffrey E. Macpherson Canada, Inc.    

  Geoffrey E. Macpherson Canada, Inc. has been in a negative equity position
throughout each of the three years in the period ended December 31, 1996.       
Accordingly, the minority stockholder's interest in subsidiary has been reduced 
to zero in the accompanying consolidated balance sheets. The minority           
stockholder's interest in the cumulative net losses of the Canadian subsidiary  
exceeded the minority stockholder's net investment by approximately $99,500 at  
December 31, 1996. The minority stockholder's interest in future income, if any,
of Geoffrey E. Macpherson Canada, Inc. will be offset by this amount. Subsequent
to December 31, 1996, the minority interest in Geoffrey E. Macpherson Canada was
acquired by W.G. Apparel Inc. in connection with its acquisition of the Company 
(See Note 12).                                                                  

REVENUE RECOGNITION                                                             

The Company distributes embroidery, monogramming, textile and engraving 
machines, which it offers for sale or rent. Revenue related to the sale of      
equipment is recorded at the time of shipment. Aggregate rental revenue is      
recognized over the term of the lease and is included in parts, supplies and    
services sales in the accompanying consolidated statements of income.           

    The Company's customer support services include training, technical support,
warranty and maintenance services. Service revenues and costs are recognized    
when services are provided. Sales of computer                                   

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)                      
hardware and software are recognized when shipped provided that no significant  
vendor and postcontract and support obligations remain and collection is        
probable. Warranty costs associated with products sold with warranty protection,
as well as other vendor and postcontract support obligations, are estimated     
based on the Company's historical experience and recorded in the period the     
product is sold.                                                                

FAIR VALUES OF FINANCIAL INSTRUMENTS                                            

Financial instruments consist primarily of investments in cash, trade   
accounts receivable, accounts payable and debt obligations. At December 31, 1996
and 1995, the fair value of the Company's financial instruments approximated the
carrying value.                                                                 

CONSOLIDATED STATEMENTS OF CASH FLOWS                                           

 During the years ended December 31, 1996, 1995 and 1994, the Company paid
interest of $712,000, $272,000 and $397,000, and income taxes of $78,000,       
$76,000 and $69,000, respectively.                                              

RECLASSIFICATIONS                                                               

Certain balances in the 1995 and 1994 financial statements have been    
reclassified to conform with the current period presentation.                   

3. MAJOR SUPPLIER AND DISTRIBUTION AGREEMENT:                                   

 The Company's principal suppliers of embroidery and monogramming machines
are Barudan America, Inc. and Barudan Co. Ltd. (hereinafter referred to         
collectively as Barudan) with manufacturing facilities in Cleveland, Ohio, and  
Nagoya, Japan, respectively. The Company made purchases of $38,697,000,         
$47,213,000 and $30,563,000 for the years ended December 31, 1996, 1995 and     
1994, respectively, representing 78%, 80% and 70% of the Company's total        
purchases. Purchases are made through Tekmatex, which is the trading company    
through which Barudan sells its machines to the Company. Payment terms on       
purchases range from 30 to 150 days. In addition, Tekmatex charges interest on  
past due amounts at prime plus 1%. Interest expense related to machine purchases
was $387,000, $0 and $64,000 for the years ended December 31, 1996, 1995 and    
1994, respectively. Accounts payable to Tekmatex are collateralized by          
approximately $10,044,000 of stitching machine inventory and all other assets   
not pledged under the Company's debt arrangement (See Note 6). $6,442,000 of    
outstanding accounts payable to Tekmatex was repaid in January 1997 in          
connection with the acquisition of the Company by W.G. Apparel, Inc. (See Note  
12).                                                                            

The Company has a distribution agreement with Barudan (Distribution     
Agreement) which provides the Company with the exclusive right to distribute    
Barudan's products throughout the United States and Canada. The Distribution    
Agreement expires December 31, 2003, at which time it automatically renews for a
five-year period unless it has been terminated with prior written notice of 30  
days. The Distribution Agreement, among other things, requires the Company to   
make certain minimum purchases, which are agreed upon by the parties on an      
annual basis. The minimum purchases were met in 1996, 1995 and 1994.            

   Although management of the Company is of the opinion that the likelihood of
termination of the Distribution Agreement with Barudan is remote, management    
believes that it could represent and sell other embroidery and monogramming     
machine product lines, if required.                                             

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)

4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:                                    

Accounts payable and accrued liabilities at December 31, 1996 and 1995, 
consist of the following:                                                       

                                                        [Enlarge/Download Table]

                                                                    1996           1995     
                                                                -------------  -------------
                                                                                            
Accounts payable to major supplier--                                                        
  Domestic currency............................................ $   7,102,450  $   7,986,182
  Foreign currencies...........................................     8,095,002     14,843,600
All other trade accounts payable--                                                          
  Domestic currency............................................     3,085,115      2,207,101
  Foreign currencies...........................................       628,184        305,588
Accrued payroll and commissions................................     1,068,099      1,631,337
Other accrued liabilities......................................       786,613        753,048
                                                                -------------  -------------
                                                                $  20,765,463  $  27,726,856
                                                                -------------  -------------
                                                                -------------  -------------

5. INCOME TAXES:                                                                

State income taxes for certain states in which the Company operates are 
payable directly by the Company and, as such, the income tax provision included 
in the accompanying consolidated statements of income is for these state income 
taxes only. The income tax provision does not include federal and certain state 
income taxes of approximately $505,000, $1,226,000 and $745,000 for the years   
ended December 31, 1996, 1995 and 1994, respectively, which otherwise would have
been payable if the Company had not elected Subchapter S status under the IRC.  

   Distributions are generally paid in amounts approximating the stockholders'
personal income tax liabilities resulting from the current S Corporation        
earnings. No distributions to the stockholders have been made subsequent to     
December 31, 1996, to fund their expected S Corporation tax liabilities for the 
year ended December 31, 1996.                                                   

6. BANK BORROWINGS AND LONG-TERM DEBT:                                          

   On September 30, 1996, the Company refinanced its revolving credit line and
term note with a new revolving credit line of $7,000,000 and a term note of     
$570,992. The revolving credit line is due and payable upon expiration on July  
31, 1998, and bears interest, payable monthly on the first day of each month, at
the lower of the LIBOR rate plus the LIBOR margin (2 1/2% at December 31, 1996),
as defined, or the bank's prime rate less the bank's prime rate margin (0% at   
December 31, 1996), as defined. Borrowings under the revolving credit line are  
limited to specified percentages of eligible inventory and receivables of the   
Company. The Company had outstanding borrowings of $6,247,835, with additional  
borrowings of $752,165 available under this agreement at December 31, 1996. This
revolving credit line is collateralized by all trade accounts receivable and all
inventories of the Company, except for approximately $10,044,000 of stitching   
machine inventory. The stitching machine inventory and all remaining assets of  
the Company are pledged under purchase money agreements with trading companies  
of the Company's principal supplier (See Note 3). The term note is due and      
payable in 15 equal installments of $39,320 beginning October 15, 1996, with the
final installment due and payable on December 15, 1997. The term note bears     
interest at 6.7%. Collateral on the term note is the same as the revolving      
credit line above. As of December 31, 1996, the Company had outstanding         
borrowings of $462,225 on the term note, all of which                           

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)

6. BANK BORROWINGS AND LONG-TERM DEBT: (CONTINUED)                              
mature in 1997. All borrowings outstanding under these credit arrangements were 
repaid in January 1997 in connection with the acquisition of the Company by W.G.
Apparel Inc. (See Note 12).                                                     

The loan agreements contain various covenants which, among other        
requirements, limit acquisitions and dispositions of property and equipment,    
require maintenance of insurance coverage satisfactory to the lenders, limit the
payment of cash dividends, prohibit additional debt and require maintenance of  
certain financial covenants. At December 31, 1996, there were no events of      
noncompliance with these loan agreements.                                       

7. LEASE COMMITMENTS:                                                           

   The Company leases certain operating assets as well as office and warehouse
space under operating leases, with the primary facilities being leased from the 
principal stockholder through November 1998, with options to renew through      
November 2018. At December 31, 1996, future minimum payments due under operating
leases with the principal stockholder and unrelated parties are as follows:     

                                                        [Enlarge/Download Table]

                                                                       PRINCIPAL   UNRELATED 
                                                                      STOCKHOLDER   PARTIES  
                                                                      -----------  ----------
                                                                                             
1997.................................................................  $ 399,000   $  100,000
1998.................................................................    369,000       77,000
1999.................................................................          0       60,000
2000.................................................................          0       25,000
2001.................................................................          0        4,000
Thereafter...........................................................          0            0
                                                                      -----------  ----------
                                                                       $ 768,000   $  266,000
                                                                      -----------  ----------
                                                                      -----------  ----------

    Rent expense for the years ended December 31, 1996, 1995 and 1994, by lessor
was as follows:                                                                 

                                                        [Enlarge/Download Table]

                                                             1996        1995        1994   
                                                          ----------  ----------  ----------
                                                                                            
Principal stockholder.................................... $  379,000  $  359,000  $  343,000
Unrelated parties........................................    129,000     179,000     263,000
                                                          ----------  ----------  ----------
                                                          $  508,000  $  538,000  $  606,000
                                                          ----------  ----------  ----------
                                                          ----------  ----------  ----------

8. BENEFIT PLANS:                                                               

401(K) PLAN                                                                     

The Company has a 401(k) profit sharing plan covering substantially all 
full-time employees. The Company matches 25% of eligible employees'             
contributions up to 4% of the eligible employees' compensation for the year. The
Company may make additional contributions to the plan at the discretion of the  
Board of Directors. Total contributions to the plan were $41,000, $85,000 and   
$64,000 for the years ended December 31, 1996, 1995 and 1994, respectively.     

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)

8. BENEFIT PLANS: (CONTINUED)                                                   
PHANTOM STOCK PLAN                                                              

The Company maintains a phantom stock plan as a means of attracting and 
retaining key employees, including officers and directors. Under the provisions 
of the plan, "units" are awarded to participants based on the consolidated      
operating income of the Company. Unit values are determined annually through the
provisions of the plan. Participants vest in annual awards at 20% per annum, and
become fully vested upon the occurrence of a vesting event, as defined by the   
plan. The Company recognized compensation expense of $84,000, $60,000 and       
$78,000 in the accompanying consolidated statements of income for the years     
ended December 31, 1996, 1995 and 1994, respectively. At December 31, 1996, the 
book value of the total units awarded to date under the plan is approximately   
$540,000, of which $425,000 is vested.                                          

Under the provisions of the plan, if more than 50% of the voting capital
stock of the Company is sold in any 12-month period, the plan immediately       
terminates, all units become 100% vested, are payable within 45 days of the date
of the transaction and are valued based on the average sales price of the stock.
As discussed in Note 12, the Company was sold to W.G. Apparel, Inc. subsequent  
to year-end. Based on the terms of the sale, the value of the units issued to   
date under the plan is estimated to be approximately $1,043,000, and is payable 
in February 1997.                                                               

POSTRETIREMENT PLAN                                                             

The Company provides certain health care and life insurance benefits for
eligible retired employees and their eligible dependents. The Company does not  
fund this benefit arrangement and may modify plan provisions to terminate the   
plan at its discretion. Financial information related to the plan was determined
by an independent actuary. At December 31, 1996, the accumulated benefit        
obligation was $50,000, none of which is funded. The unrecognized initial       
obligation at December 31, 1996, was $45,000 and the net periodic postretirement
benefit expense recorded for the year ended December 31, 1996, was $5,000.      

The accumulated postretirement benefit obligation was computed using an 
assumed discount rate of 7.0% for 1996. The health care cost trend rate was     
assumed to be 11% for 1996 and was assumed to decline by approximately 1% in    
each subsequent year to 5.5% where it remains thereafter.                       

9. FOREIGN EXCHANGE RISK MANAGEMENT:                                            

Because of potential volatile fluctuations in the exchange rate between 
Japanese yen and U.S. dollar, the Company enters into forward foreign exchange  
contracts in order to establish the dollar cost of purchases and firm purchase  
commitments from its Japanese suppliers payable in yen.                         

 The terms of these contracts are less than one year. The Company does not
engage in foreign currency speculation. At December 31, 1996, the Company had   
entered into forward foreign exchange contracts to purchase 1,018,622,999       
Japanese yen subsequent to December 31, 1996, at a contracted cost of           
$9,385,321, including $7,930,200 to hedge accounts payable as of December 31,   
1996, and $1,455,121 to cover outstanding commitments to purchase machines and  
parts. The difference between the contracted costs and the fair value of the    
contracts that hedge the outstanding purchase commitments at December 31, 1996, 
based on foreign currency exchange rates at December 31, 1996, was a deferred   
loss of $58,299. These deferred losses will be recognized in operations as part 
of the purchases that will be made over the next 12 months. The fair market     
value of all foreign currency exchange contracts was $8,792,603 at              

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)

9. FOREIGN EXCHANGE RISK MANAGEMENT: (CONTINUED)                                
December 31, 1996. The unamortized premium paid for these contracts at December 
31, 1996, of $78,042 is being amortized over the life of the contracts.         

    The Company's credit risk in these transactions is the cost of replacing, at
current market rates, these contracts in the event of default by the other      
party. Management believes the risk of incurring such losses is remote as the   
contracts are with major financial institutions.                                

10. RELATED-PARTY TRANSACTIONS:                                                 

LOAN RECEIVABLE FROM PRINCIPAL STOCKHOLDER                                      

   At December 31, 1995, the Company had a loan receivable of $54,000 from the
principal stockholder. During the year ended December 31, 1996, this note       
receivable was repaid by the principal stockholder. During the year ended       
December 31, 1996, the Company made advances of $99,900 to the principal        
stockholder. At December 31, 1996, $32,900 remained outstanding.                

RECEIVABLE FROM THE CAROLINA DYNAMO                                             

   The Company performs certain accounting functions and pays accounts payable
on behalf of the Carolina Dynamo, which is owned by the principal stockholder of
the Company. At December 31, 1996 and 1995, the Company had receivables from the
Carolina Dynamo of $44,684 and $62,762, respectively. These receivables have    
been included in prepayments, deposits and other assets in the accompanying     
consolidated balance sheets.                                                    

LEASING AND MANAGEMENT AGREEMENT                                                

  Effective March 1, 1996, the Company entered into a leasing and management
agreement (the Agreement) with Embroidery Leasing Corporation (ELC), which is   
50% owned by the principal stockholder of the Company. The Agreement establishes
a contractual arrangement whereby ELC arranges financing for the Company's      
domestic customers, at the customer's option, and pays the Company a commission 
for each financing transaction completed. The Company's primary                 
responsibilities, as defined in the Agreement, are delivery and installation of 
the equipment, providing support for the leasing program, providing its standard
warranty and certain other administrative tasks. The Agreement expires on March 
1, 2001. ELC paid the Company approximately $27,000 in commissions during the   
year ended December 31, 1996. Subsequent to year-end, ELC was acquired by W.G.  
Apparel Inc. in connection with its acquisition of the Company (See Note 12).   

11. COMMITMENTS AND CONTINGENCIES:                                              

LITIGATION                                                                      

The Company is subject to various claims and actions which arise in the 
ordinary course of its business. Although the final outcome of these matters    
cannot be determined, based on the facts presently known, it is management's    
opinion that the amount of ultimate liability with respect to these actions will
not materially affect the consolidated financial position, results of operations
and cash flows of the Company.                                                  

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MACPHERSON MEISTERGRAM, INC. AND SUBSIDIARY 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES: (CONTINUED)                                  
PURCHASE COMMITMENTS                                                            

As of year-end, the Company had outstanding purchase commitments for    
inventory of approximately $13,601,000.                                         

12. SUBSEQUENT EVENTS:                                                          

   On January 3, 1997, 100% of the outstanding common stock of the Company was
sold to W.G. Apparel, Inc., a wholly owned subsidiary of Willcox & Gibbs, Inc., 
for $24,000,000 in cash. Concurrent with its acquisition of the Company, Willcox
& Gibbs, Inc. issued $85,000,000 of 12 1/4% Series A Senior Notes Due 2003. The 
Company is a guarantor under these notes.                                       

   On January 3, 1997, the Company entered into employment contracts with five
key employees. The Company may terminate these contracts at any time subsequent 
to January 2, 1998, by providing not less than one year's advance written notice
to the employee.                                                                

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INDEPENDENT AUDITORS' REPORT

The Boards of Directors                                                         

Clinton Management Corp. and Clinton Machinery Corp.:                           

We have audited the accompanying combined balance sheet of Clinton      
Management Corp. (d/b/a Clinton Machine & Supply) and Clinton Machinery Corp.   
(together, "Clinton") as of December 31, 1995, and the related combined         
statements of operations, stockholders' equity (deficit) and cash flows for the 
year then ended. These combined financial statements are the responsibility of  
Clinton's management. Our responsibility is to express an opinion on the        
combined financial statements based on our audit.                               

We conducted our audit in accordance with generally accepted auditing   
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the combined financial statements. An 
audit also includes assessing the accounting principles used and significant    
estimates made by management, as well as evaluating the overall combined        
financial statement presentation. We believe that our audit provides a          
reasonable basis for our opinion.                                               

   In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Clinton Management  
Corp. (d/b/a Clinton Machine & Supply) and Clinton Machinery Corp. as of        
December 31, 1995 and the results of their operations and their cash flows for  
the year then ended, in conformity with generally accepted accounting           
principles.                                                                     

                         KPMG Peat Marwick LLP

Atlanta, Georgia                                                                

November 2, 1996                                                                

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CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP. 

COMBINED BALANCE SHEET
DECEMBER 31, 1995 

                                                        [Enlarge/Download Table]

                                      ASSETS (NOTE 4)                                      
                                                                                           
Current assets:                                                                            
  Cash.......................................................................... $  --     
  Accounts receivable, net of allowance for doubtful accounts of $463,884....... 3,802,067 
  Inventory (note 1 (c))........................................................ 3,437,016 
  Prepaid expenses..............................................................   142,940 
  Notes receivable..............................................................    36,920 
  Employee advances.............................................................   101,213 
  Due from affiliates (note 3)..................................................   523,360 
                                                                                 --------- 
    Total current assets........................................................ 8,043,516 
Property and equipment, net (note 2)............................................   342,574 
Other receivables...............................................................    71,986 
Other assets....................................................................    35,103 
Notes receivable, net of allowance for doubtful accounts of $200,000............   112,014 
                                                                                 --------- 
                                                                                 $8,605,193
                                                                                 --------- 
                                                                                 --------- 


                           LIABILITIES AND STOCKHOLDERS' DEFICIT                           
                                                                                           
Current liabilities:                                                                       
  Bank overdraft................................................................ $  43,092 
  Revolving line of credit (note 4)............................................. 3,436,361 
  Accounts payable.............................................................. 4,361,965 
  Accrued expenses and other current liabilities................................   597,407 
  Distribution payable to shareholders..........................................   186,375 
  Current installments of long-term debt (note 5)...............................     1,910 
                                                                                 --------- 
    Total current liabilities................................................... 8,627,110 
Long-term debt, excluding current installments (note 5).........................     5,793 
                                                                                 --------- 
    Total liabilities........................................................... 8,632,903 
                                                                                 --------- 
Stockholders' deficit:                                                                     
  Common stock (note 6).........................................................       600 
  Additional paid-in capital....................................................     2,700 
  Accumulated deficit...........................................................   (31,010)
                                                                                 --------- 
    Total stockholders' deficit.................................................   (27,710)
Commitments and contingencies (notes 8 and 10)                                             
                                                                                 --------- 
                                                                                 $8,605,193
                                                                                 --------- 
                                                                                 --------- 

See accompanying notes to combined financial statements.

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CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP. 

COMBINED STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 1995

                                                        [Enlarge/Download Table]
                                                                                           
Net sales (note 3)............................................................. $26,764,365
Cost of goods sold (note 9).................................................... 20,267,799 
                                                                                ---------- 
    Gross profit...............................................................  6,496,566 
Selling, general and administrative expenses...................................  6,304,184 
                                                                                ---------- 
    Operating income...........................................................    192,382 
Interest expense...............................................................    334,630 
Other expense, net.............................................................     65,129 
                                                                                ---------- 
    Net loss................................................................... $  207,377 
                                                                                ---------- 
                                                                                ---------- 

See accompanying notes to combined financial statements.

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CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP. 

COMBINED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

YEAR ENDED DECEMBER 31, 1995

                                                        [Enlarge/Download Table]

                                                                                      RETAINED            TOTAL    
                                                                   ADDITIONAL         EARNINGS        STOCKHOLDERS'
                                                        COMMON       PAID-IN        (ACCUMULATED         EQUITY    
                                                         STOCK       CAPITAL          DEFICIT)          (DEFICIT)  
                                                      -----------  -----------  --------------------  -------------
                                                                                                                   
Balance at December 31, 1994.........................  $     600    $   2,700       $  1,125,015       $ 1,128,315 
Net loss.............................................     --           --               (207,377)         (207,377)
Distributions to stockholders........................     --           --               (948,648)         (948,648)
                                                           -----   -----------       -----------      -------------
Balance at December 31, 1995.........................  $     600    $   2,700       $    (31,010)      $   (27,710)
                                                           -----   -----------       -----------      -------------
                                                           -----   -----------       -----------      -------------

See accompanying notes to combined financial statements.

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CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP. 

COMBINED STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1995

                                                        [Enlarge/Download Table]
                                                                                            
Cash flows from operating activities:                                                       
  Net loss....................................................................... $(207,377)
  Adjustments to reconcile net loss to cash provided by operating activities:               
    Depreciation and amortization................................................    73,659 
    Changes in operating assets and liabilities:                                            
      Accounts receivable........................................................   503,866 
      Inventory..................................................................  (717,381)
      Prepaid expenses...........................................................    (2,400)
      Notes receivable...........................................................    13,870 
      Employee advances..........................................................   (33,949)
      Due from affiliates........................................................  (144,996)
      Other receivables..........................................................     4,155 
      Other assets...............................................................    21,152 
      Accounts payable and other liabilities.....................................   844,655 
                                                                                  --------- 
        Net cash provided by operating activities................................   355,254 
                                                                                  --------- 
Cash flows used in investing activities--capital expenditures....................  (212,253)
                                                                                  --------- 
Cash flows from financing activities:                                                       
  Net proceeds from line of credit and other borrowings..........................   535,934 
  Distributions to stockholders..................................................  (762,273)
  Principal payments on long-term debt...........................................    (5,506)
  Bank overdraft.................................................................    43,092 
                                                                                  --------- 
        Net cash used in financing activities....................................  (188,753)
                                                                                  --------- 
Net decrease in cash.............................................................   (45,752)
Cash, beginning of year..........................................................    45,752 
                                                                                  --------- 
Cash, end of year................................................................ $  --     
                                                                                  --------- 
                                                                                  --------- 

See accompanying notes to combined financial statements.

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CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP. 

NOTES TO THE COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 1995 

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

(A) PRINCIPLES OF CONSOLIDATION AND OPERATIONS                          

    Clinton Management Corp. (d/b/a Clinton Machine & Supply) distributes screen
printing supplies, printing and drying equipment, accessory equipment and       
replacement parts worldwide. Clinton Machinery Corp., under the name of M&R     
International, distributes screen printing and drying equipment, accessory      
equipment and replacement parts worldwide.                                      

The accompanying combined financial statements include the accounts of  
Clinton Management Corp. (d/b/a Clinton Machine & Supply) and Clinton Machinery 
Corp. (together, "Clinton"). The companies that comprise Clinton have the same  
stockholders whose ownership shares are the same for each company.              

(B) ACCOUNTS AND OTHER RECEIVABLES                                      

Clinton has established allowances for doubtful accounts based upon     
management's judgment of collectibility of receivables and returns on sales     
using factors such as historical experience and past customer payment history.  

Other receivables consist of amounts which are retained by third party  
creditors financing customers' purchases.                                       

(C) INVENTORY                                                           

Inventory is stated at the lower of cost or market using the first-in,  
first-out method. Inventory at December 31, 1995 consists of the following:     

                                                                [Download Table]
                                                                            
New machines....................................................  $ 587,764 
Used machines...................................................    588,980 
Parts and supplies..............................................  2,260,272 
                                                                  --------- 
                                                                  $3,437,016
                                                                  --------- 
                                                                  --------- 

(D) PROPERTY AND EQUIPMENT                                              

   Property and equipment are stated at cost. Depreciation and amortization is
calculated using the straight-line method over the shorter of the lease term or 
the estimated useful lives of the respective assets. Repairs and maintenance    
expenditures are expensed as incurred.                                          

(E) BANK OVERDRAFT                                                      

  Under Clinton's cash management system, checks issued but not presented to
banks frequently result in overdraft balances for accounting purposes and are   
classified as bank overdraft in the accompanying combined balance sheet.        

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CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP. 

NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                      
(F) INCOME TAXES                                                        

Clinton, with the consent of its stockholders, elected subchapter S     
corporation status under the Internal Revenue Code, effective January 1, 1991   
for Clinton Management Corp. and January 1, 1990 for Clinton Machinery Corp. In 
lieu of corporation income taxes, the stockholders of an S corporation are taxed
on their proportionate share of each company's taxable income. Therefore, no    
liability for federal or state income taxes has been included in these combined 
financial statements.                                                           

(G) FAIR VALUE OF FINANCIAL INSTRUMENTS                                 

   Clinton has determined that the carrying value of all financial instruments
approximate fair value. The carrying value of Clinton's borrowings approximate  
fair value due to the nature of the variable interest rate on the borrowings and
their maturity.                                                                 

(H) USE OF ESTIMATES                                                    

Management of Clinton has made a number of estimates and assumptions    
relating to the reporting of assets and liabilities and the disclosure of       
contingent assets and liabilities to prepare these combined financial statements
in conformity with generally accepted accounting principles. Actual results     
could differ from these estimates.                                              

(I) NEW ACCOUNTING STANDARD                                             

   In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of        
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", which becomes   
effective for fiscal years beginning after December 15, 1995. Statement 121     
establishes accounting standards for the impairment of long-lived assets and    
certain identifiable intangible assets. Clinton does not believe the impact of  
Statement 121 will have a material impact on its financial position or results  
of operations.                                                                  

(2) PROPERTY AND EQUIPMENT                                                      

Property and equipment at December 31, 1995 consists of the following:  

                                                                [Download Table]
                                                                             
Leasehold improvements............................................  $  77,950
Machinery and equipment...........................................    526,024
                                                                    ---------
                                                                      603,974
Less accumulated depreciation.....................................    261,400
                                                                    ---------
Net property and equipment........................................  $ 342,574
                                                                    ---------
                                                                    ---------

(3) RELATED PARTY TRANSACTIONS                                                  

   The stockholders of Clinton are also stockholders of Clinton Leasing Corp.,
Golden Brush, Clinton Equipment Corp., Equip-Net, Inc., Clinton de Mexico, Citex
and Paradise Color. At December 31, 1995,                                       

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CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP. 

NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 

(3) RELATED PARTY TRANSACTIONS (CONTINUED)                                      
due from affiliates represent receivables from sales transactions, payment of   
operating expenses and advances to stockholders. During the year ended December 
31, 1995, Clinton had sales to these entities of approximately $388,000.        

(4) REVOLVING LINE OF CREDIT                                                    

    At December 31, 1995, $3,436,361 is outstanding under a $3,500,000 revolving
line of credit arrangement with a bank. Under the terms of the line of credit,  
interest is payable monthly at the bank's prime rate plus five-eighths percent  
(9.125% at December 31, 1995). The line of credit is due on demand and is       
secured by inventory, equipment, accounts receivable, assignments of all        
insurance policies applicable to insured accounts receivable, and keyman life   
insurance policies on each of the stockholder guarantors.                       

The line of credit contains certain restrictive covenants including     
requirements to maintain working capital of $1,500,000 commencing December 31,  
1995 ($1,000,000 from December 31, 1994 through December 31, 1995), and limit   
capital expenditures to $100,000 annually. At December 31, 1995, Clinton was not
in compliance with the debt covenants. In February 1996, the line of credit was 
paid in full by Willcox & Gibbs, Inc. ("Willcox & Gibbs") upon the acquisition  
of Clinton (note 10).                                                           

(5) LONG-TERM DEBT                                                              

Long-term debt at December 31, 1995 consists of the following:          

                                                                [Download Table]
                                                                               
Note payable in installments of $261 per month, including interest             
  at 10% through December 1998, collaterized by equipment...........  $   7,703
Less current maturities.............................................      1,910
                                                                      ---------
Total long-term debt................................................  $   5,793
                                                                      ---------
                                                                      ---------

  The aggregate annual maturities of long-term debt at December 31, 1995 are
as follows:                                                                     

                                                        [Enlarge/Download Table]

YEAR ENDING DECEMBER 31,                                                                        
-------------------------------------------------------------------------------------           
                                                                                                
1996.................................................................................  $   1,910
1997.................................................................................      2,732
1998.................................................................................      3,061
                                                                                       ---------
                                                                                       $   7,703
                                                                                       ---------
                                                                                       ---------

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CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP. 

NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 

(6) COMMON STOCK                                                                

At December 31, 1995, common stock consisted of the following:          

                                                                [Download Table]
                                                                                
Clinton Management Corp. (d/b/a Clinton Machine & Supply), $1 par               
  value, 7,500 shares authorized, 300 shares issued and                         
  outstanding........................................................  $     300
Clinton Machinery Corp., $1 par value, 10,000 shares authorized, 300            
  shares issued and outstanding......................................        300
                                                                       ---------
Total common stock...................................................  $     600
                                                                       ---------
                                                                       ---------

(7) PROFIT SHARING PLAN                                                         

   Clinton has a qualified profit sharing plan covering all employees who have
attained twenty-one years of age with one year of service. The profit sharing   
plan contribution is determined annually by management. A contribution of       
$10,000 was accrued for the year ended December 31, 1995.                       

(8) COMMITMENTS                                                                 

   Clinton has several noncancelable operating leases, primarily for buildings
and equipment. These leases generally contain options for periods ranging from  
three to five years and require Clinton to pay most executory costs such as     
maintenance and insurance.                                                      

  Future minimum lease payments under non-cancelable leases (with initial or
remaining base terms in excess of one year) as of December 31, 1995 are         
approximately:                                                                  

                                                        [Enlarge/Download Table]

YEAR ENDING DECEMBER 31,                                                                          
--------------------------------------------------------------------------------------            
                                                                                                  
1996..................................................................................  $  162,000
1997..................................................................................     162,000
1998..................................................................................     162,000
                                                                                        ----------
                                                                                        $  486,000
                                                                                        ----------
                                                                                        ----------

    The lease for Clinton's primary operating facility has a five-year option to
renew. Management has not made a decision whether or not to renew the lease.    

   Total rental expense for the year ended December 31, 1995 was approximately
$212,780.                                                                       

(9) MAJOR SUPPLIERS                                                             

Clinton purchases a majority of the equipment they sell from one vendor.
Clinton Machinery Corp. distributes this vendor's equipment in seven            
southeastern states and internationally, exclusive of Canada. For the year ended
December 31, 1995, approximately 55% of combined purchases were from this       
vendor.                                                                         

   A majority of printing supplies are purchased from one vendor. For the year
ended December 31, 1995, approximately 17% of combined purchases were from this 
vendor.                                                                         

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CLINTON MANAGEMENT CORP.
(D/B/A CLINTON MACHINE & SUPPLY)
AND CLINTON MACHINERY CORP. 

NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1995 

(10) ACQUISITION BY WILLCOX & GIBBS, INC.                                       

Effective February 1, 1996, Clinton was purchased by Willcox & Gibbs in 
exchange for $4,000,000 in cash, the assumption of $4.5 million in debt and     
payables, 100,000 shares of Willcox & Gibbs' Class A common stock, and          
contingent payments of up to 38.87% of the operating income (as defined) of     
Clinton during each of the five years to December 31, 2000. Such contingent     
payments shall not exceed $10,500,000 in the aggregate. In addition, the        
stockholders of the Company received a put option, giving them the right to sell
the Class A common shares to Willcox & Gibbs at $30 per share at the earlier of 
four years from the acquisition date or such time Willcox & Gibbs has an initial
public offering.                                                                

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--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY  
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR  
THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION  
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE      
COMPANY OR THE INITIAL PURCHASER. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING  
LETTER OF TRANSMITTAL CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.    
NEITHER DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL   
NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE  
ANY IMPLICATION THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS NOT BEEN A CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.                                           
------------------------

TABLE OF CONTENTS 

                                                                [Download Table]

                                                    PAGE   
                                                    -----  
                                                           
Prospectus Summary.............................           5
Risk Factors...................................          21
Use of Proceeds................................          26
The Exchange Offer.............................          26
The Company....................................          35
The Macpherson Acquisition.....................          36
Capitalization.................................          37
Pro Forma Combined Financial Information.......          39
Selected Historical Financial Information......          42
Management's Discussion and Analysis of                    
 Financial Condition and Results of                        
 Operations--The Company.......................          45
Management's Discussion and Analysis of                    
 Financial Condition and Results of                        
 Operations--Macpherson........................          51
Business.......................................          54
Management.....................................          68
Security Ownership of Certain Beneficial Owners            
 and Management................................          74
Description of Certain Indebtedness............          75
Description of Senior Notes....................          76
Material Federal Income Tax Consequences.......         106
Plan of Distribution...........................         109
Legal Matters..................................         109
Experts........................................         109
Available Information..........................         110
Index to Financial Statements..................         F-1

UNTIL SEPTEMBER 21, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW 
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO    
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO       
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR      
UNSOLD ALLOTMENTS OF SUBSCRIPTIONS.                                             

WILLCOX & GIBBS, INC. 

--------------- 

OFFER TO EXCHANGE ITS 

12 1/4% SERIES B SENIOR NOTES 

DUE 2003 WHICH HAVE BEEN

REGISTERED UNDER THE

SECURITIES ACT OF 1933, AS

AMENDED, FOR ANY AND ALL

OF ITS OUTSTANDING 12 1/4%
SERIES A SENIOR NOTES DUE 2003

--------------------- 

PROSPECTUS

--------------------- 

JUNE 20, 1997 

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B1’ Filing		Date		First		Last			Other Filings
		12/31/03		65		154
		12/15/03		13		76
		12/15/01		3		76
		7/13/01		37		122
		3/1/01		158
		12/31/00		35		169
		7/13/00		37		122
		12/15/99		3		77
		6/30/99		37
		12/31/98		59		131			10-K,  NT 10-K
		7/31/98		53		155
		1/2/98		159
		12/31/97		141					10-K
		12/15/97		155
		9/21/97		109		170
		7/23/97		1		10
Filed on:		6/23/97		1		28
		6/20/97		1		170
		6/15/97		3		76
		4/30/97		49
		4/23/97		49
		3/31/97		3		145			10-Q
		2/28/97		153
		2/26/97		112
		2/21/97		146
		1/31/97		68
		1/3/97		9		159
		1/1/97		68		73
		12/31/96		17		159
		12/20/96		2
		12/15/96		53
		11/27/96		9		141
		11/2/96		160
		10/15/96		155
		10/1/96		80
		9/30/96		155
		3/31/96		18		145
		3/1/96		158
		2/1/96		17		169
		1/1/96		23		129
		12/31/95		18		169
		12/15/95		166
		7/26/95		35		129
		1/1/95		48
		12/31/94		18		167
		10/1/94		48
		8/15/94		129
		7/13/94		18		137
		7/12/94		18		132
		5/13/94		35
		1/1/94		18		132
		12/31/93		18		149
		7/2/93		2
		12/31/92		18		42
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