SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
[x] Filed by the Registrant
[_] Filed by a Party other than the Registrant
Check the appropriate box:
[x] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14-a6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
KASPER A.S.L., LTD.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange
Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined.):
4) Proposed maximum aggregate value of transaction: $
5) Total fee paid: $
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
================================================================================
#761533 v12
<PAGE>
KASPER A.S.L., LTD
77 METRO WAY
SECAUCUS, NEW JERSEY 07094
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 14, 1999
-------------------------
August 13, 1999
To Our Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of
Stockholders (the "Meeting") of Kasper A.S.L., Ltd., a Delaware corporation (the
"Company"), to be held on September 14, 1999, at 10:30 a.m., New York City time,
at the Meadowlands Plaza Hotel, 40 Wood Avenue, Secaucus, New Jersey 07094. The
following matters are to be presented for consideration at the Meeting:
(1) The election of seven directors to serve until the next Annual Meeting
of Stockholders and until their respective successors are elected and
qualified;
(2) A proposal to approve the Company's 1999 Share Incentive Plan;
(3) A proposal to approve an amendment to the Amended and Restated
Certificate of Incorporation of the Company to eliminate current
restrictions on the mortgage, pledge, transfer and other disposition of
the assets of the Company without obtaining the prior consent of at
least 66-2/3% of the outstanding voting stock of the Company in order
to permit the Company to enter into secured credit facilities and other
financing arrangements from time to time;
(4) A proposal to ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the year ending January 1, 2000; and
(5) The transaction of such other business as may properly come before the
Meeting or any adjournments or postponements thereof.
The close of business on August 10, 1999 has been fixed as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Meeting and any adjournments or postponements thereof. A list of
such stockholders of the Company as of the close of business on August 10, 1999,
will be open to the examination of any stockholder, for any purpose germane to
the meeting, during normal business hours, for a period of at least 10 days
prior to the Meeting at the Company's offices at 77 Metro Way, Secaucus, New
Jersey 07094.
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<PAGE>
By Order of the Board of Directors,
Lester E. Schreiber
Secretary
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE
REPRESENTATION OF YOUR SHARES. NO POSTAGE IS NEEDED IF MAILED IN THE UNITED
STATES.
3
<PAGE>
KASPER A.S.L., LTD.
77 METRO WAY
SECAUCUS, NEW JERSEY 07094
--------------------
PROXY STATEMENT
--------------------
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 14, 1999
August 13, 1999
This Proxy Statement is furnished to the holders (the
"Stockholders") of common stock, par value $0.01 per share (the "Common Stock"),
of Kasper A.S.L., Ltd., a Delaware corporation (the "Company") in connection
with the solicitation of proxies by the Board of Directors of the Company to be
voted at the 1999 Annual Meeting of Stockholders of the Company (the "Meeting")
to be held on September 14, 1999, at 10:30 a.m., New York City time, at the
Meadowlands Plaza Hotel, 40 Wood Avenue, Secaucus, New Jersey 07094 and at any
adjournments or postponements thereof. The following matters are to be presented
for consideration at the Meeting:
(1) The election of seven directors to serve until the next Annual Meeting
of Stockholders and until their respective successors are elected and
qualified;
(2) A proposal to approve the Company's 1999 Share Incentive Plan (the
"1999 Plan");
(3) A proposal to approve an amendment to the Amended and Restated
Certificate of Incorporation of the Company (the "Certificate of
Incorporation") to eliminate current restrictions on the mortgage,
pledge, transfer and other disposition of the assets of the Company
without obtaining the prior consent of at least 66-2/3% of the
outstanding voting stock of the Company in order to permit the Company
to enter into secured credit facilities and other financing
arrangements from time to time;
(4) A proposal to ratify the appointment of Arthur Andersen LLP as the
Company's independent auditors for the year ending January 1, 2000; and
(5) The transaction of such other business as may properly come before the
Meeting or any adjournments or postponements thereof.
The Board of Directors of the Company has fixed the close of
business on August 10, 1999 as the record date (the "Record Date") for the
determination of the holders of the Company's Common Stock, entitled to notice
of and to vote at the Meeting. Each Stockholder will be entitled to one vote for
each share of Common Stock held on all matters to come before the Meeting and
may vote in person or by proxy authorized in writing. At the close of business
4
<PAGE>
on the Record Date, there were 6,800,000 shares of Common Stock issued and
outstanding and entitled to vote.
This Proxy Statement and the accompanying form of proxy are
first being sent to Stockholders on or about August 13, 1999.
5
<PAGE>
VOTING RIGHTS
QUORUM
A majority of the total of such outstanding shares of Common
Stock, represented in person or by proxy at the Meeting, is required to
constitute a quorum for the transaction of business at the Meeting. Proxies
submitted which contain abstentions or broker non-votes will be deemed present
at the Meeting in determining the presence of a quorum.
REQUIRED VOTES
(1) Election of Directors. The affirmative vote of a plurality of votes
cast at the Meeting by the holders of Common Stock will be required for
the election of directors.
(2) Approval of Company's 1999 Share Incentive Plan. The affirmative vote
of a majority of the votes cast at the Meeting by the holders of Common
Stock will be required for the approval of the Company's 1999 Plan.
(3) Amendment to the Certificate of Incorporation. In accordance with the
Company's Certificate of Incorporation, the affirmative vote of 66-2/3%
of the shares of Common Stock outstanding as of the Record Date will be
required for the approval of the amendment to the Company's Certificate
of Incorporation.
(4) Ratification of Independent Auditors. The affirmative vote of a
majority of votes cast at the Meeting by the holders of Common Stock
will be required for the ratification of the appointment of Arthur
Andersen LLP as the Company's independent auditors for the year ending
January 1, 2000.
VOTING AND REVOCATION OF PROXIES
Stockholders are requested to complete, date, sign and
promptly return the accompanying form of proxy in the enclosed envelope. Common
Stock represented by properly executed proxies received by the Company and not
revoked will be voted at the Meeting in accordance with the instructions
contained therein. Proxies received for which instructions are not given will be
voted FOR election of each nominee for director named herein, FOR approval of
the 1999 Plan, FOR approval of the amendment to the Company's Certificate of
Incorporation and FOR ratification of the appointment of the independent
auditors. Proxies will be voted in the discretion of those named in the proxy
with respect to any other matters as may come before the Meeting, including
matters or motions dealing with the conduct of the Meeting. The Board of
Directors is not aware of any matters which are intended to be presented for
action at the Meeting other than as set forth in the Notice of Meeting.
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<PAGE>
Abstentions and broker non-votes are not counted in
determining the votes cast in connection with any of the matters presented for
consideration at the Meeting. Accordingly, abstentions and broker non-votes will
have the practical effect of reducing the number of votes needed to approve the
election of each nominee for director named herein, the approval of the 1999
Plan and the ratification of the appointment of the independent auditors.
Abstentions and broker non-votes will have the practical effect of a vote
AGAINST the amendment to the Company's Certificate of Incorporation.
The 177,268 shares of Common Stock issued in the name of the
Plan Administrator of the reorganization of the Leslie Fay Companies, Inc., of
which the Company had been a division ("Leslie Fay"), who holds such shares for
the benefit of the creditors of the Company pending the resolution of certain
creditor claims, will be voted in respect of each proposal submitted at the
Meeting in the same proportion as all other shares voted at the Meeting.
Any proxy signed and returned by a Stockholder may be revoked
at any time before it is voted by filing with the Secretary of the Company, at
the address of the Company set forth herein, written notice of such revocation
or a duly executed proxy bearing a later date or by attending the Meeting and
voting in person. Attendance at the Meeting will not in and of itself constitute
revocation of a proxy.
7
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's By-laws provide that the number of members of
the Board of Directors shall be fixed from time to time pursuant to a resolution
adopted by the agreement of the whole Board but shall not be less than seven.
The Board of Directors presently consists of seven members.
Unless authority to do so is withheld, proxies will be voted
at the Meeting for the election of each of the nominees named below to serve as
a director of the Company until the next Annual Meeting of Stockholders and
until their respective successors are elected and qualified. In the event that
any of the nominees should become unavailable or unable to serve for any reason,
the persons named in the form of proxy have been advised that they will vote for
such substitute nominees as the Board of Directors of the Company may propose.
The Company does not expect that any of the nominees will be unavailable or
unable to serve as a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE AS A
DIRECTOR TO HOLD OFFICE UNTIL THE NEXT ANNUAL MEETING OF STOCKHOLDERS AND UNTIL
THEIR RESPECTIVE SUCCESSORS ARE ELECTED AND QUALIFIED.
INFOrMATION ABOUT NOMINEES
The following table sets forth certain information concerning
the nominees for director of the Company (as of July 9, 1999):
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Arthur S. Levine 58 Chairman of the Board and Chief Executive Officer
William J. Nightingale 69 Director
Salvatore M. Salibello 53 Director
Larry G. Schafran 61 Director
Lester E. Schreiber 50 Chief Operating Officer and Director
Denis J. Taura 59 Director
Olivier Trouveroy 44 Director
</TABLE>
BACKGROUND OF DIRECTORS AND NOMINEES
Arthur S. Levine has served as the Chairman of the Board and
Chief Executive Officer of the Company since June 1997. Prior thereto and since
1975, he was Chief Executive Officer of Sassco Fashions, Ltd. ("Sassco"), the
Company's predecessor, which was sold to Leslie Fay in May 1980.
William J. Nightingale has served as a director of the Company
since June 1997. Mr. Nightingale is currently a Senior Advisor of Nightingale &
Associates, LLC, a general management consulting firm, and has served in various
capacities with that firm, including Chairman and Chief Executive Officer, since
July 1975. Mr. Nightingale is also a director of Furr's/Bishops, Inc. and Rings
8
<PAGE>
End, Inc., and a trustee of the Churchill Tax Free Fund of Kentucky, Churchill
Cash Reserves Trust and Narragansett Insured Tax Free Bond Fund.
Salvatore M. Salibello has served as a director of the Company
since July 1998. Mr. Salibello is a certified public accountant and founded
Salibello & Broder, an accounting/consulting firm, in 1978 and currently serves
as its managing partner.
Larry G. Schafran has served as a director of the Company
since June 1997. Mr. Schafran has served as the managing general partner of L.G.
Schafran & Associates, a real estate investment and development firm, since
October 1984. Mr. Schafran is also Chairman of the Board of Delta-Omega
Technologies, Inc., a specialty chemical company involved in the research,
development, manufacturing and marketing of environmentally safe products that
have applications in soil remediation. He is also a director of Publicard, Inc.,
a diversified investment company and an affiliated company of Balfour Investors
Incorporated, and is a director of COMSAT Corporation.
Lester E. Schreiber has served as Chief Operating Officer
since May 1996 and a director of the Company since June 1997. Prior to becoming
Chief Operating Officer, Mr. Schreiber served as Vice President of Operations
from January 1989 to April 1996.
Denis J. Taura has served as a director of the Company since
July 1998. He is a certified public accountant and a partner in Taura Flynn &
Associates, a firm specializing in reorganization and management consulting,
which he founded in April 1998. From September 1991 to March 1998, he served as
Chairman of D. Taura & Associates, a consulting firm. Mr. Taura is also a
director of Darling International, Inc.
Olivier Trouveroy has served as a director of the Company
since June 1997. He has served as a managing partner of Hampshire Equity
Partners, a private equity investment firm, and its predecessors since 1992. Mr.
Trouveroy also serves as a director of e.spire Communications, Inc. and Cost
Plus, Inc.
MEETINGS OF THE BOARD OF DIRECTORS
During the year ended January 2, 1999, the Board of Directors
held 8 meetings. Each director attended at least 75% of the meetings of the
Board of Directors that were held during the period such person served as a
director.
COMMITTEES
On June 10, 1997, the Board of Directors established an Audit
Committee, a Compensation Committee and a Finance Committee.
The Audit Committee is currently composed of Messrs.
Nightingale, Salibello and Schafran. The function of the Audit Committee is to
make recommendations concerning the selection each year of independent auditors
of the Company, to review the effectiveness of the Company's internal accounting
methods and procedures and to determine, through discussions with the
independent auditors, whether any restrictions or limitations have been placed
9
<PAGE>
upon them in connection with the scope of their audit or its implementation and
to address such other issues as may be appropriate. The Audit Committee met 6
times in 1998, with each member attending at least 75% of the meetings.
The Compensation Committee is currently composed of Messrs.
Salibello, Schafran, Taura and Trouveroy. The function of the Compensation
Committee is to review and recommend to the Board of Directors policies,
practices and procedures relating to compensation of key employees and to
administer employee benefit plans. The Compensation Committee met 3 times in
1998, with each member attending at least 75% of the meetings.
The Finance Committee is currently composed of Messrs.
Nightingale, Salibello, Schafran, Taura and Trouveroy. The function of the
Finance Committee is to evaluate and review on a continuing basis specific
financing programs and requirements to meet the near and long-term needs of the
Company; to advise management of the Company's business plans and budgets; to
review the organization and functions of the Company's finance department; and
to participate in the development and implementation of the investment and the
investor programs. The Finance Committee did not meet in 1998, as these issues
were addressed by the Board of Directors as a whole.
COMPENSATION OF DIRECTORS
Each Director who is not an employee of the Company is paid
for service on the Board of Directors at the rate of $40,000 per annum. Each
current non-employee Director also received an option at the time of their
election to the Board of Directors to purchase 20,000 shares of Common Stock
("Director Options"). Such options vest ratably over the first three
anniversaries of the date of the grant and are exercisable at a price of $14.00
per share. The Company also reimburses each Director for reasonable expenses in
attending meetings of the Board of Directors. Directors who are also employees
of the Company are not separately compensated for their services as Directors.
10
<PAGE>
PRESENT BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding
the beneficial ownership of Common Stock as of July 9, 1999, based upon the most
recent information available to the Company for (i) each person known by the
Company to own beneficially more than five percent of Common Stock, (ii) each of
the Company's directors, (iii) each of the executive officers named in the
Summary Compensation Table under "Executive Compensation" and (iv) all directors
and executive officers of the Company as a group. Unless otherwise indicated,
the business address of each person listed is c/o Kasper A.S.L., Ltd., 77 Metro
Way, Secaucus, New Jersey 07094.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAMES AND ADDRESS OF BENEFICIALLY PERCENTAGE OWNERSHIP
BENEFICIAL OWNER OWNED OF COMMON STOCK
- ---------------- ----- ---------------
<S> <C> <C>
Arthur S. Levine........................ 818,879(1) 10.9%
William J. Nightingale.................. 13,534(2) *
Salvatore M. Salibello.................. 6,767(3) *
Larry G. Schafran....................... 13,534(4) *
Denis J. Taura.......................... 6,667(3) *
Olivier Trouveroy....................... 637,839(5) 9.4%
Gregg I. Marks.......................... 108,287(6) 1.6%
Lester E. Schreiber..................... 47,444(7) *
Dennis P. Kelly......................... 200(8) *
Barbara Bennett......................... 94,088(9) 1.4%
Whippoorwill Associates, Inc............ 1,352,909 19.9%
11 Martine Avenue
White Plains, NY 10606
Bay Harbor Management, L.C. ............ 379,571(10) 11.2%
777 South Harbour Island Boulevard
Ste. 270
Tampa, FL 33602
Blue Ridge L.P.......................... 730,000(11) 10.7%
660 Madison Avenue
New York, NY 10021
Hampshire Equity Partners............... 637,839(5) 9.4%
520 Madison Avenue
New York, NY 10022
Officers and Directors as a group....... 1,747,239(12) 22.5%
(15 persons)
- ------------------------------
* Less than one percent.
</TABLE>
(1) Includes 682,139 shares of Common Stock issuable upon the exercise of
currently exercisable options ("Management Options") issued pursuant to
the Company's 1997 Management Stock Option Plan (the "1997 Plan") and
25,016 shares issued to Alco Design Associates, Inc. Does not include
11
<PAGE>
approximately 709 shares of Common Stock which may be distributed to
Mr. Levine on an "if and when issued" basis from shares of Common Stock
held for the benefit of creditors (the "Holdback") of the Company
pending the resolution of certain creditor claims.
(2) Includes 13,333 shares of Common Stock issuable upon exercise of
currently exercisable Director Options. Mr. Nightingale disclaims
beneficial ownership of 100 shares which are held by his spouse.
(3) Includes 6,667 shares of Common Stock issuable upon exercise of
currently exercisable Director Options.
(4) Includes 13,333 shares of Common Stock issuable upon exercise of
currently exercisable Director Options. Mr. Schafran disclaims
beneficial ownership of 100 shares which are held by his spouse.
(5) Includes 13,333 shares of Common Stock issuable upon exercise of
currently exercisable Director Options which were issued to Hampshire
Equity Partners, pursuant to Mr. Trouveroy's status as a non-employee
director of the Company, a position for which he was designated by
Hampshire Equity Partners. Mr. Trouveroy, a director of the Company, is
a partner of the general partner of Hampshire Equity Partners. He
disclaims beneficial ownership of all securities listed.
Notwithstanding his disclaimer, Mr. Trouveroy may be deemed to be a
beneficial owner to the extent of his pecuniary interests in the
partnership. Does not include approximately 17,195 shares of Common
Stock which may be distributed to Hampshire Equity Partners on an "if
and when issued" basis pursuant to the Holdback.
(6) Includes 94,088 shares of Common Stock issuable upon exercise of
currently exercisable Management Options. Mr. Marks disclaims
beneficial ownership of 100 shares held by each of his two daughters.
(7) Includes 47,044 shares of Common Stock issuable upon exercise of
currently exercisable Management Options. Mr. Schreiber disclaims
beneficial ownership of 100 shares held by his spouse and 100 shares
held by each of his two children.
(8) Mr. Kelly disclaims beneficial ownership of 100 shares held by his son.
(9) Includes 94,088 shares of Common Stock issuable upon exercise of
currently exercisable Management Options.
(10) These shares are also indirectly owned by Tower Investment Group, Inc.,
the majority stockholder of Bay Harbor Management, L.C., Steven A. Van
Dyke, a stockholder and President of Tower Investment Group, Inc., and
Douglas P. Teitelbaum, a stockholder of Tower Investment Group, Inc.,
each of whom may also be deemed to be a beneficial owner of such
shares.
12
<PAGE>
(11) These shares are also indirectly owned by JAG Holdings, LLC, the
general partner of Blue Ridge L.P., and John A. Griffin, the Managing
Member of JAG Holdings LLC, each of whom may also be deemed to be a
beneficial owner of such shares.
(12) Includes 970,692 shares of Common Stock issuable upon exercise of
currently exercisable Management Options and currently exercisable
options issued to non-employee directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended ("Section 16(a)"), requires the Company's directors and officers, and
any persons who beneficially own more than ten percent of the Company's Common
Stock (collectively, the "Insiders"), to file Section 16(a) Forms reporting
ownership and changes in their ownership with the Securities and Exchange
Commission (the "SEC") and the Nasdaq National Market. Insiders are also
required by SEC regulations to furnish the Company with copies of all Section
16(a) Forms they file.
Based solely upon a review of the copies of such forms
furnished to the Company or written representations from certain reporting
persons that no Forms 5 were required for those persons, the Company believes
that the Insiders complied with all applicable Section 16(a) filing requirements
during fiscal year 1998, with the exception of Messrs. Levine, Schreiber, Cohn,
Nightingale, Schafran, Sind, Trouveroy, Marks, Kelly and Ms. Bennett, each of
whom filed a late Form 3. Mr. Nightingale also filed a late Form 5 reporting two
transactions; Mr. Marks also filed two late Forms 4 reporting, in the aggregate,
four transactions; and Mr. Schafran also filed a late Form 4 reporting five
transactions.
NON-DIRECTOR EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets Forth certain information with
respect to the executive officers and key employees of the Company (as of July
10, 1999):
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Gregg I. Marks 46 President
Mary Ann Domuracki 44 Executive Vice President -
Finance and Administration
Dennis P. Kelly 52 Chief Financial Officer
Barbara Bennett 47 Vice President-Design
Peter Eng 44 Vice President--Piece Goods
Peter Lee 51 Managing Director--Asia Expert,
Ltd.
Kenneth Kaufman 36 Co-Creative Director and Senior
Vice President of Design for the
Company's Anne Klein division.
13
<PAGE>
Isaac Franco 34 Co-Creative Director and Senior
Vice President of Design for the
Company's Anne Klein division.
</TABLE>
Gregg I. Marks has served as President of the Company since
its separation from Leslie Fay in June 1997 and had been the President of
Sassco, the Company's predecessor, since January 1989, having served in a number
of other positions in Sassco since August 1983. Mr. Marks is directly
responsible for the supervision of the Kasper suit line sales staff and the
heads of all other divisions report directly to him.
Mary Ann Domuracki has served as Executive Vice President --
Finance and Administration since January 1999. Ms. Domuracki's responsibilities
include corporate finance and general administrative matters of the Company.
Prior to joining the Company, Ms. Domuracki worked as a consultant with the
financial advisory firm of Conway Del Genio Gries & Co., LLC from April 1998 to
December 1998. From June 1987 to March 1998, Ms. Domuracki held several
executive positions at Danskin, Inc., ultimately serving as Chief Executive
Officer and President from April 1996 to March 1998. Ms. Domuracki is a
certified public accountant.
Dennis P. Kelly has served as Chief Financial Officer of the
Company since May 1995. Mr. Kelly is responsible for all financial and
accounting functions of the Company. Prior to joining the Company, Mr. Kelly
worked in several executive positions, most recently as Vice President and
Controller of Crystal Brands, Inc., a diversified apparel and jewelry
manufacturer, from October 1985 to February 1995. Mr. Kelly is a certified
public accountant and an attorney.
Barbara Bennett has served as Vice President for Design since
the Company separated from Leslie Fay in June, 1997, and had managed Sassco's
design division since October 1980. As head of the Company's in-house design
studio, Ms. Bennett is responsible for coordinating the input she receives from
the Company's sales staff, her design staff, and her analysis of the market to
oversee the design of each of the Company's product lines on a timely basis.
Peter Eng has served as Vice President for Piece Goods since
the Company separated from Leslie Fay in June, 1997, and had managed Sassco's
piece goods division since November 1982. Mr. Eng is responsible for the
development of new fabrics as well as variations of current fabrics.
Peter Lee has served as Managing Director for Asia Expert,
Ltd. since joining the Company in January 1997. Mr. Lee is responsible for
management of the Company's Hong Kong buying office. Prior to joining the
Company, Mr. Lee served for 25 years as Vice President in charge of
administration and production in Taiwan and the Philippines for Carnival
Textiles, a publicly-traded Taiwan company and one of the Company's largest
suppliers.
14
<PAGE>
Kenneth Kaufman has served as Co-Creative Director and Senior
Vice President of Design for the Company's Anne Klein division since it was
acquired by the Company in July 1999. Previously, he had been Co-Creative
Director and Vice President of Design for Anne Klein Company LLC since January
1997. Prior to joining Anne Klein Company LLC, he had been a designer for
Emanuel/Emanuel Ungaro.
Isaac Franco has served as Co-Creative Director and Senior
Vice President of Design for the Company's Anne Klein division since it was
acquired by the Company in July 1999. Previously, he had been Co-Creative
Director and Vice President of Design for Anne Klein Company LLC since January
1997. Prior to joining Anne Klein Company LLC, he had been a designer for
Emanuel/Emanuel Ungaro.
15
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth a summary of all compensation
awarded or paid to or earned by the chief executive officer and the other four
most highly compensated executive officers of the Company in the last fiscal
year (the "Named Executive Officers") for services rendered in all capacities to
the Company (including its subsidiaries) for the fiscal years ended January 2,
1999, January 3, 1998 and December 28, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Arthur S. Levine........................
Chairman of the Board 1998 $ 2,000,000 -- (1) -- $ 20,540 (2)
and Chief Executive Officer 1997 1,200,000 -- 1,240,252 1,507,635 (3)
1996 100,000 $ 65,000 -- 3,418,732 (4)
Gregg I. Marks.......................... 1998 $ 830,769 $ 115,000 -- $ 16,218 (5)
President 1997 500,000 370,000 171,068 16,824 (5)
1996 260,000 474,200 -- 11,228 (5)
Lester E. Schreiber..................... 1998 $ 258,173 $ 50,000 -- $ 17,052 (6)
Chief Operating Officer 1997 162,580 62,500 85,536 16,382 (6)
1996 100,080 131,500 -- 15,310 (6)
Dennis P. Kelly......................... 1998 $ 180,288 $ 65,000 -- $ 720 (7)
Chief Financial Officer 1997 150,000 65,000 -- 576 (7)
1996 150,000 60,000 -- 348 (7)
Barbara Bennett......................... 1998 $ 623,077 $ 50,000 -- $ 1,591 (8)
Vice President--Design 1997 600,000 50,000 171,068 3,218 (8)
1996 600,000 50,000 -- 1,477 (8)
</TABLE>
- -------------------------
(1) Mr. Levine's employment agreement with the Company provides for a bonus
commencing in fiscal year 1998 in an amount between $500,000 and $1.5
million based upon the fulfillment of certain EBITDA hurdles for the
fiscal years 1998, 1999 and thereafter.
(2) Includes $3,150 in Group Term Life Insurance and $17,390 in automobile
allowance.
(3) Includes $2,325 in Group Term Life Insurance, $17,390 in automobile
allowance and $1,487,920 in consulting fees which Mr. Levine received
in fiscal year 1997 as principal of two consulting firms prior to June
4, 1997, at which time Mr. Levine became Chairman of the Board and
Chief Executive Officer of the Company.
(4) Includes $450 in Group Term Life Insurance, $15,640 in automobile
allowance and $3,402,642 in consulting fees which Mr. Levine received
in fiscal year 1996 as principal of two consulting firms prior to June
4, 1997, at which time Mr. Levine became Chairman of the Board and
Chief Executive Officer of the Company.
16
<PAGE>
(5) Includes $1,218, $1,824 and $428 in Group Term Life Insurance and
$15,000, $15,000 and $10,800 in automobile allowance for fiscal years
1998, 1997 and 1996, respectively.
(6) Includes $1,152, $482 and $160 in Group Term Life Insurance and
$15,900, $15,900 and $15,150 in automobile allowance for fiscal years
1998, 1997 and 1996, respectively.
(7) Represents $720, $576 and $348 in Group Term Life Insurance for fiscal
years 1998, 1997 and 1996, respectively.
(8) Represents $1,218, $1,566 and $1,218 in Group Term Life Insurance and a
clothing allowance of $373, $2,000 and $259 for fiscal years 1998, 1997
and 1996, respectively.
AGGREGATED OPTION/SAR EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR END VALUE
TABLE
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of Management Options during 1998 and
unexercised Management Options held as of the end of such year. The price of a
share of Common Stock of the Company as of the close of business on December 31,
1998 was $5.00. Accordingly, none of the Named Executive Officers would have
realized any value if they had exercised their Management Options on such date.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END
SHARES ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---- -------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Arthur S. Levine None N/A 496,101/744,151 $ 0.00/0.00
Gregg I. Marks None N/A 68,427/102,642 0.00/0.00
Lester E. Schreiber None N/A 34,214/51,321 0.00/0.00
Dennis P. Kelly None N/A -- 0.00/0.00
Barbara Bennett None N/A 68,427/102,642 0.00/0.00
</TABLE>
No Management Options were granted during 1998.
EMPLOYMENT AGREEMENTS
The Company has entered into a five-year employment agreement
with Mr. Levine, dated June 4, 1997, which provides for his employment as Chief
Executive Officer and Chairman of the Board of the Company. The agreement
provides for an annual compensation of $2 million. In addition to the base
compensation, the agreement provides for a bonus commencing in fiscal year 1998
in an amount between $500,000 and $1.5 million based upon the fulfillment of
certain EBITDA hurdles for the fiscal years 1998, 1999 and thereafter. Mr.
Levine is entitled to participate in standard benefit plans, such as the
Company's option plans and medical plans. The Company does not maintain a key
person life insurance policy on the life of Mr. Levine.
The employment agreement requires Mr. Levine to provide at
least 30 days' notice of intent to terminate the agreement. In addition, the
employment agreement provides that following termination, other than termination
17
<PAGE>
by Mr. Levine for "good reason" (as defined in the employment agreement) or by
the Company without "cause" (as defined in the employment agreement), Mr. Levine
shall not participate or engage in, either directly or indirectly, any business
activity that is directly competitive with the Company for the balance of the
original term of the employment agreement.
1997 MANAGEMENT STOCK OPTION PLAN
On December 2, 1997, the Board of Directors approved the 1997
Plan. To date, the Company has issued Management Options to purchase an
aggregate of 1,753,459 shares of Common Stock, which upon issuance will
represent approximately 20.5% of the Company's outstanding Common Stock. Such
Management Options are exercisable at $14.00 per share and vest as follows: 25%
vested immediately and 15% vest annually thereafter on June 4 from the years
1998 to 2002. The Management Options expire on June 1, 2004.
The 1997 Plan provides for the grant to officers and employees
of and consultants to the Company and its affiliates who are responsible for or
contribute to the management, growth and profitability of the Company of
Management Options to purchase Common Stock. The total number of shares of
Common Stock for which Management Options may be granted under the 1997 Plan is
2,500,000 shares. No participant may be granted options covering in excess of
1,500,000 shares of Common Stock over the life of the 1997 Plan. Management
Options are not transferable by the optionee other than by will or the laws of
descent and distribution or to facilitate estate planning, and each Management
Option is exercisable during the lifetime of the optionee only by such optionee.
The 1997 Plan is administered by the Compensation Committee of
the Board of Directors. Management Options granted as of the date hereof are
nonqualified stock options. The term of each Management Option granted pursuant
to the 1997 Plan may be established by the Compensation Committee, in its sole
discretion; provided, however, that the maximum term of each Management Option
granted pursuant to the 1997 Plan is six and one-half years. Management Options
shall become exercisable at such times and in such installments as the
Compensation Committee shall provide in the terms of each individual option
agreement.
If the 1999 Plan is approved by stockholders, it is
contemplated that options outstanding under the 1997 Plan would be cancelled and
the 1997 Plan would be terminated. Any options that may be issued in the future
will be issued under the 1999 Plan. Such options will be priced at not less than
their then current market value.
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
On June 10, 1997, the Board of Directors approved the grant of
stock options to purchase 20,000 shares of Common Stock to each of its five
non-employee directors. Each Director Option has an exercise price of $14.00 per
share and will vest ratably over the first three anniversaries following the
date of the grant. Director Options will expire on the fifth anniversary of the
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<PAGE>
date of the grant. Director Options are not transferable by the optionee other
than by will or the laws of descent and distribution, and each Director Option
is exercisable during the lifetime of the optionee only by such optionee. At the
date of issue, the fair market value per share was $15.50.
On July 30, 1998, the Board of Directors approved the grant of
stock options to purchase 20,000 shares of Common Stock to Salvatore M.
Salibello and Denis J. Taura, its two newly elected directors, under the same
terms as the Director Options granted on June 10, 1997. In addition, the
Director Options granted to Clifford B. Cohn and Robert L. Sind, the two
outgoing directors, became fully vested as of that date. The market value per
share on July 30, 1998 was $13.00.
Director Options outstanding as of the effectiveness of the
1999 Plan will remain outstanding if the 1999 Plan is approved by stockholders
at the Meeting. However, any future issuances of options to non-employee
directors may be issued under the 1999 Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company serves as a member of the
board of Directors or Compensation Committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
the Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee's responsibility is to review and
recommend to the Board of Directors policies, practices and procedures relating
to compensation of key employees and to administer employee benefit plans. The
Compensation Committee is presently composed of Messrs. Salibello, Schafran,
Taura and Trouveroy.
The Company's compensation policies are designed to enable the
Company to attract, motivate and retain senior management by providing
competitive compensation opportunities based both on individual performance and
on the financial performance of the Company. Accordingly, benefits are provided
through stock option incentives and bonuses which are generally consistent with
the goal of coordinating rewards to management with a maximization of
stockholder return. In reviewing Company performance, consideration is given to
the Company's earnings. Also taken into account are external economic factors
that affect results of operations. An attempt is also made to maintain
compensation within the range of that afforded like executive officers of
companies whose size and business is comparable to that of the Company.
Chief Executive Officer Compensation. For the seven months
following the Company's emergence from bankruptcy in June 1997, the salary of
Arthur S. Levine, the Company's Chief Executive Officer and Chairman of the
Board, equaled $1,200,000; for 1998 it equaled $2,000,000. Mr. Levine's
employment agreement with the Company provides for a bonus commencing in fiscal
year 1998 in an amount between $500,000 and $1.5 million based upon the
19
<PAGE>
fulfillment of certain EBITDA hurdles for the fiscal years 1998, 1999 and
thereafter. As a result of investments made by the Company during fiscal year
1998, the EBITDA hurdles for fiscal year 1998 were not met and, accordingly, Mr.
Levine did not receive a bonus for fiscal year 1998. The terms of Mr. Levine's
compensation for fiscal year 1998 arose out of the separation of the Company
from Leslie Fay in 1997.
The foregoing report is approved by all members of the
Compensation Committee.
Respectfully submitted,
Compensation Committee
-------------------------------------
Salvatore M. Salibello
Larry G. Schafran
Denis J. Taura
Olivier Trouveroy
20
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder
return (stock price appreciation plus dividends) on Common Stock with the
cumulative total return of the Nasdaq Market Index1 and a market weighted index
of publicly traded peers. The returns are calculated by assuming an investment
in the Common Stock and each index of $100 on June 10, 1997 (the first date on
which a stock quote was available in the over-the-counter market for the
Company's Common Stock). On August 7, 1998, the Common Stock was listed and
began trading on the Nasdaq National Market. The publicly traded companies
included in the peer group are: Fruit of the Loom, Inc., Liz Claiborne, Inc.,
Russell Corporation and V. F. Corporation.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG KASPER A.S.L., LTD.,
NASDAQ MARKET INDEX AND S&P GROUP INDEX
FISCAL YEAR ENDING
--------------------------------------------------
COMPANY/INDEX/MARKET 06/10/1997 01/02/1998 12/31/1998
- -------------------- ---------- ---------- ----------
Kasper A.S.L. Limited 100.00 77.42 32.26
Textiles Apparel 100.00 98.68 85.40
NASDAQ Market Index 100.00 112.57 158.77
ASSUMES $100 INVESTED ON JUNE 10, 1997
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING JANUARY 2, 1999
- --------------------
(1) The Nasdaq Market Index is calculated using all companies which trade on the
NASD National Market System or on the NASD supplemental listing. It includes
both domestic and foreign companies. The index is weighted by the then current
shares outstanding and assumes dividends reinvested. The return is calculated on
a monthly basis.
21
<PAGE>
PROPOSAL 2. APPROVAL OF THE COMPANY'S 1999
SHARE INCENTIVE PLAN
BACKGROUND
The Board of Directors is proposing for stockholder approval
the 1999 Plan. For the past two years the Company has used its 1997 Plan as one
means of attracting, retaining and motivating highly competent key employees and
further aligning their interests with those of the Company's other stockholders.
The 1999 Plan is intended to replace the 1997 Plan, which is expected to be
terminated if the 1999 Plan is approved by stockholders.
The 1999 Plan is intended to provide incentives which will
attract, retain and motivate highly competent persons as non-employee directors,
officers and key employees of, and consultants to, the Company and its
subsidiaries and affiliates, by providing them with opportunities to acquire
shares of Common Stock or to receive monetary payments based on the value of
such shares pursuant to the Benefits (as defined below). Such Benefits are not
otherwise available under the 1997 Plan, which is limited solely to the grant of
options to acquire Common Stock. In addition, the 1999 Plan is open to a broad
range of the Company's employees, whereas participation in the 1997 Plan is
limited to only those persons employed at the senior management level of the
Company. The 1999 Plan is intended to assist in further aligning the interests
of the Company's non-employee directors, officers, key employees and consultants
with those of its other stockholders. On July 28, 1999, the Compensation
Committee adopted, and the Board of Directors ratified, subject to stockholder
approval, the 1999 Plan. In structuring the 1999 Plan, the Committee sought to
provide for a variety of awards that could be flexibly administered to carry out
the purposes of the 1999 Plan. This authority will permit the Company to keep
pace with changing developments in management compensation and make the Company
competitive with those companies that offer creative incentives to attract and
retain non-employee directors, officers, key employees and consultants. Many
other companies have addressed these same issues in recent years and adopted an
"omnibus" type of plan. The 1999 Plan grants the Committee discretion in
establishing the terms and restrictions deemed appropriate for particular awards
as circumstances warrant.
THE FOLLOWING SUMMARY OF THE 1999 PLAN IS NOT INTENDED TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COPY OF THE 1999
PLAN ATTACHED TO THIS PROXY STATEMENT AS ANNEX A HERETO.
TREATMENT OF OPTIONS ISSUED PURSUANT TO THE 1997 PLAN OR ISSUED TO NON-EMPLOYEE
DIRECTORS PRIOR TO THE EFFECTIVENESS OF THE 1999 PLAN
If the 1999 Plan is approved by stockholders, it is
contemplated that options outstanding under the 1997 Plan would be cancelled and
the 1997 Plan would be terminated. Any options that may be issued in the future
will be issued under the 1999 Plan. Such options will be priced at not less than
their then current market value. Director Options outstanding as of the
22
<PAGE>
effectiveness of the 1999 Plan will remain outstanding. However, any future
issuances of options to non-employee directors may be issued under the 1999
Plan.
SHARES AVAILABLE
The maximum number of shares of Common Stock that may be
delivered to participants under the 1999 Plan, subject to certain adjustments,
is equal to 2,500,000 shares. In addition, any shares of Common Stock subject to
a stock option or stock appreciation right which for any reason is cancelled or
terminated without having been exercised and, subject to limited exceptions, any
shares subject to stock awards, performance awards or stock units which are
forfeited, any shares subject to performance awards settled in cash or any
shares delivered to the Company as part or full payment for the exercise of a
stock option or stock appreciation right, shall again be available for Benefits
(as defined below) under the 1999 Plan.
In addition, during the term of the 1999 Plan, the number of
shares of Common Stock with respect to which Benefits may be granted to an
individual participant shall not exceed 1,500,000
ADMINISTRATION
The 1999 Plan provides for administration by a committee of
the Board of Directors of the Company appointed from among its members (the
"Committee"), which is comprised, unless otherwise determined by the Board of
Directors, solely of not less than two members who shall be (i) "Non-Employee
Directors" within the meaning of Rule 16b-3(b)(3) (or any successor rule)
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and (ii) "outside directors" within the meaning of Treasury Regulation
section 1.162-27(e)(3) under Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). The Committee is authorized, subject to the
provisions of the 1999 Plan, to establish such rules and regulations as it deems
necessary for the proper administration of the 1999 Plan and to make such
determinations and interpretations and to take such action in connection with
the 1999 Plan and any Benefits granted as it deems necessary or advisable. Thus,
among the Committee's powers are the authority to select officers and other key
employees of the Company and its subsidiaries to receive Benefits, and to
determine the form, amount and other terms and conditions of Benefits. The
Committee also has the power to modify or waive restrictions on Benefits, to
amend Benefits and to grant extensions and accelerations of Benefits.
ELIGIBILITY FOR PARTICIPATION
Participants will consist of such officers and key employees of, and
such consultants to, the Company and its subsidiaries and affiliates as the
Committee in its sole discretion determines to be responsible for the success
and future growth and profitability of the Company and whom the Committee may
designate from time to time to receive Benefits under the 1999 Plan. The number
23
<PAGE>
of officers and key employees who are eligible to participate in the 1999 Plan
is estimated to be 100, and an estimate of the number of consultants who are
eligible to participate in the 1999 Plan has not been made. All non-employee
directors of the Company also participate, but only to the extent set forth in
the 1999 Plan, as described below. Currently, there are five non-employee
directors.
TYPES OF BENEFITS
The 1999 Plan provides for the grant of any or all of the
following types of benefits: (1) stock options, including incentive stock
options and non-qualified stock options; (2) stock appreciation rights; (3)
stock awards; (4) performance awards; and (5) stock units (collectively,
"Benefits"). Benefits may be granted singly, in combination, or in tandem as
determined by the Committee. Stock awards, performance awards and stock units
may, as determined by the Committee in its discretion, constitute
performance-based awards, as described below.
STOCK OPTIONS
Under the 1999 Plan, the Committee may grant awards in the
form of options to purchase shares of Common Stock. Options may either be
incentive stock options, qualifying for special tax treatment, or non-qualified
options; however, no incentive stock option shall be issued to a participant in
tandem with a nonqualified stock option. The Committee will, with regard to each
stock option, determine the number of shares subject to the option, the manner
and time of the option's exercise and vesting, and the exercise price per share
of stock subject to the option. The exercise price will not be less than 100% of
the fair market value of the Common Stock on the date the stock option is
granted (the "Fair Market Value"). The exercise price may be paid in cash or, in
the discretion of the Committee, by the delivery of shares of Common Stock then
owned by the participant, by the withholding of shares of Common Stock for which
a stock option is exercisable, or by a combination of these methods. In the
discretion of the Committee, payment may also be made by delivering a properly
executed exercise notice to the Company, together with a copy of irrevocable
instructions to a broker to deliver promptly to the Company the amount of sale
or loan proceeds to pay the exercise price. The Committee may prescribe any
other method of paying the exercise price that it determines to be consistent
with applicable law and the purpose of the 1999 Plan. In determining which
methods a participant may utilize to pay the exercise price, the Committee may
consider such factors as it determines are appropriate. No stock option is
exercisable later than ten years after the date it is granted except in the
event of a participant's death, in which case, the exercise period may be
extended but no later than one year after the participant's death. The Committee
may, at the time of grant, provide for the grant of a subsequent "restoration"
stock option if the exercise price is paid for by delivering previously owned
shares of Common Stock of the Company. Restoration stock options (i) may be
granted in respect of no more than the number of shares of Common Stock tendered
in exercising the predecessor option, (ii) have an exercise price equal to the
Fair Market Value on the date the restoration stock option is granted and (iii)
have an exercise period that does not extend beyond the remaining term of the
predecessor option. As an illustration of the foregoing, assume that an option
24
<PAGE>
holder holds five shares of common stock of company X and an option to purchase
ten shares of common stock of company X at $5 per share ($50 aggregate exercise
price) which expires on December 31, 2000. In addition, assume shares of common
stock of company X currently trade at $10 per share. In lieu of paying the
aggregate exercise price in cash, the option holder may pay the exercise price
by delivering to company X the option holder's five shares of company X common
stock (worth $50). In exchange, company X will issue to the option holder 10
shares of common stock and a "restoration option" to purchase five shares at $10
per share, which restoration option terminates on December 31, 2000.
STOCK APPRECIATION RIGHTS ("SARS")
The 1999 Plan authorizes the Committee to grant an SAR either
in tandem with a stock option or independent of a stock option. An SAR is a
right to receive a payment in cash, Common Stock or a combination thereof, equal
to the excess of (x) the Fair Market Value, or other specified valuation, of a
specified number of shares of Common Stock on the date the right is exercised
over (y) the Fair Market Value or other specified valuation (which shall not be
less than Fair Market Value) of such shares of Common Stock on the date the
right is granted, all as determined by the Committee. SARs granted under the
1999 Plan are subject to terms and conditions relating to exercisability that
are similar to those imposed on stock options, and each SAR is subject to such
terms and conditions as the Committee shall impose from time to time.
STOCK AWARDS
The Committee may, in its discretion, grant Stock Awards
(which may include mandatory payment of bonus incentive compensation in stock)
consisting of Common Stock issued or transferred to participants with or without
other payments therefore. Stock Awards may be subject to such terms and
conditions as the Committee determines appropriate, including, without
limitation, restrictions on the sale or other disposition of such shares, the
right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods, and may
constitute Performance-Based Awards, as described below. The Stock Award will
specify whether the participant will have, with respect to the shares of Common
Stock subject to a Stock Award, all of the rights of a holder of shares of
Common Stock, including the right to receive dividends and to vote the shares.
PERFORMANCE AWARDS
The 1999 Plan allows for the grant of performance awards which
may take the form of shares of Common Stock, stock units or any combination
thereof, and which may constitute Performance-Based Awards. Such awards will be
contingent upon the attainment over a period to be determined by the Committee
of certain performance goals. The length of the performance period, the
performance goals to be achieved and the measure of whether and to what degree
such goals have been achieved will be determined by the Committee. Payment of
earned performance awards will be made in accordance with terms and conditions
prescribed or authorized by the Committee. The participant may elect to defer,
25
<PAGE>
or the Committee may require the deferral of, the receipt of performance awards
upon such terms as the Committee deems appropriate.
STOCK UNITS
The Committee may, in its discretion, grant Stock Units to
participants, which may constitute Performance-Based Awards. A "Stock Unit"
means a notional account representing one share of Common Stock. The Committee
determines the criteria for the vesting of Stock Units and whether a participant
granted a Stock Unit shall be entitled to Dividend Equivalent Rights (as defined
in the 1999 Plan). Upon vesting of a Stock Unit, unless the Committee has
determined to defer payment with respect to such unit or a participant has
elected to defer payment, shares of Common Stock representing the Stock Units
will be distributed to the participant (unless the Committee, with the consent
of the participant, provides for the payment of the Stock Units in cash, or
partly in cash and partly in shares of Common Stock, equal to the value of the
shares of Common Stock which would otherwise be distributed to the participant).
PERFORMANCE-BASED AWARDS
Certain Benefits granted under the 1999 Plan may be granted in
a manner such that the Benefit qualifies for the performance-based compensation
exemption to Section 162(m) of the Code ("Performance-Based Awards"). As
determined by the Committee in its sole discretion, either the granting or
vesting of such Performance-Based Awards will be based upon achievement of
hurdle rates and/or growth in one or more of the following business criteria:
(i) net earnings; (ii) earnings per share; (iii) net sales growth; (iv) market
share; (v) net operating profit; (vi) expense targets; (vii) working capital
targets relating to inventory and/or accounts receivable; (viii) operating
margin; (ix) return on equity; (x) return on assets; (xi) planning accuracy (as
measured by comparing planned results to actual results); (xii) market price per
share; (xiii) total return to stockholders; (xiv) divisional sales and
profitability; (xv) earnings before interest and taxes; (xvi) earnings before
interest, taxes, depreciation and amortization; (xvii) market expansion; and
(xviii) entering into new markets. In addition, Performance-Based Awards may
include comparisons to the performance of other companies, such performance to
be measured by one or more of the foregoing criteria. With respect to
Performance-Based Awards, the Committee shall establish in writing (x) the
performance goals applicable to a given period, and such performance goals shall
state, in terms of an objective formula or standard, the method for computing
the amount of compensation payable to the participant if such performance goals
are obtained and (y) the individual employees or class of employees to which
such performance goals apply no later than 90 days after the commencement of
such period (but in no event after 25% of such period has elapsed). No
Performance-Based Award shall be payable to, or vest with respect to, as the
case may be, any participant for a given fiscal period until the Committee
certifies in writing that the objective performance goals (and any other
material terms) applicable to such period have been satisfied.
26
<PAGE>
NON-EMPLOYEE DIRECTOR FORMULA AWARDS
If the 1999 Plan is approved, upon the date each new
non-employee director is first elected to the Board of Directors of the Company,
such non-employee director shall receive a Stock Option to purchase 20,000
shares of Common Stock. These non-employee director awards and grants may
contain additional restrictions or limitations not inconsistent with the
provisions of the 1999 Plan. Director Options outstanding as of the
effectiveness of the 1999 Plan will remain outstanding if the 1999 Plan is
approved by stockholders at the Meeting. However, any future issuances of
options to non-employee directors may be issued under the 1999 Plan.
OTHER TERMS
The 1999 Plan provides that Benefits may be transferred by
will or the laws of descent and distribution. The Committee determines the
treatment to be afforded to a participant in the event of termination of
employment for any reason including death, disability or retirement. In addition
to the foregoing, other than with respect to incentive stock options, the
Committee may permit the transferability of a Benefit by a participant to
certain members of the participant's immediate family or trusts for the benefit
of such persons or other entities owned by such person.
Upon the grant of any Benefit under the 1999 Plan, the
Committee may, by way of an agreement with the participant, establish such other
terms, conditions, restrictions and/or limitations covering the grant of the
Benefit as are not inconsistent with the 1999 Plan. The 1999 Plan terminates on
July 28, 2009, and no Benefit may be granted after July 28, 2009. The Committee
reserves the right to amend, suspend or terminate the 1999 Plan at any time.
However, no amendment may be made without approval of the stockholders of the
Company if the amendment will: (i) disqualify any incentive stock options
granted under the plan; (ii) increase the aggregate number of shares of Common
Stock that may be delivered through stock options under the plan; (iii) increase
either of the maximum amounts which can be paid to an individual participant
under the plan; (iv) change the types of business criteria on which
Performance-Based Awards are to be based under the plan; or (v) modify the
requirements as to eligibility for participation in the plan.
The 1999 Plan contains provisions for equitable adjustment of
Benefits in the event of a merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, reverse stock split, split up,
spinoff, combination of shares, exchange of shares, dividend in kind or other
like change in capital structure or distribution (other than normal cash
dividends) to stockholders of the Company. In addition, if there is a Change in
Control (as defined in the 1999 Plan) of the Company, outstanding stock options
and SARs will become exercisable immediately and, in the discretion of the
Committee, the excess of the Fair Market Value of such shares of Common Stock
subject to such stock options or SARs over the exercise price thereof will be
paid out in cash.
The Committee may grant Benefits to participants who are
subject to the tax laws of nations other than the United States, which Benefits
may have terms and conditions as determined by the Committee as necessary to
27
<PAGE>
comply with applicable foreign laws. The Committee may take any action which it
deems advisable to obtain approval of such Benefits by the appropriate foreign
governmental entity; provided, however, that no such Benefits may be granted,
and no action may be taken which would violate the Exchange Act, the Code or any
other applicable law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The statements in the following paragraphs of the principal
U.S. federal income tax consequences of Benefits under the 1999 Plan are based
on statutory authority and judicial and administrative interpretations, as of
the date of this Proxy Statement, which are subject to change at any time
(possibly with retroactive effect). The law is technical and complex, and the
discussion below represents only a general summary.
Incentive Stock Options. Incentive stock options ("ISOs")
granted under the 1999 Plan are intended to meet the definitional requirements
of Section 422(b) of the Code for "incentive stock options." An employee who
receives an ISO does not recognize any taxable income upon the grant of such
ISO. Similarly, the exercise of an ISO generally does not give rise to federal
income tax to the employee, provided that (i) the federal "alternative minimum
tax," which depends on the employee's particular tax situation, does not apply
and (ii) the employee is employed by the Company from the date of grant of the
option until three months prior to the exercise thereof, except where such
employment terminates by reason of disability (where the three month period is
extended to one year) or death (where this requirement does not apply). If an
employee exercises an ISO after these requisite periods, the ISO will be treated
as an NSO (as defined below) and will be subject to the rules set forth below
under the caption "Non-Qualified Stock Options and Stock Appreciation Rights."
Further, if after exercising an ISO, an employee disposes of the Common Stock so
acquired more than two years from the date of grant and more than one year from
the date of transfer of the Common Stock pursuant to the exercise of such ISO
(the "applicable holding period"), the employee will generally recognize capital
gain or loss equal to the difference, if any, between the amount received for
the shares and the exercise price. If, however, an employee does not hold the
shares so acquired for the applicable holding period -- thereby making a
"disqualifying disposition" --the employee would recognize ordinary income equal
to the excess of the fair market value of the shares at the time the ISO was
exercised over the exercise price and the balance, if any, would generally be
treated as capital gain. If the disqualifying disposition is a sale or exchange
that would permit a loss to be recognized under the Code (were a loss in fact to
be realized), and the sales proceeds are less than the fair market value of the
shares on the date of exercise, the employee's ordinary income therefrom would
be limited to the gain (if any) realized on the sale. An employee who exercises
an ISO by delivering Common Stock previously acquired pursuant to the exercise
of another ISO is treated as making a "disqualifying disposition" of such Common
Stock if such shares are delivered before the expiration of their applicable
holding period. Upon the exercise of an ISO with previously acquired shares as
to which no disqualifying disposition occurs, despite some uncertainty, it
appears that the employee would not recognize gain or loss with respect to such
previously acquired shares. The Company will not be allowed a federal income tax
deduction upon the grant or exercise of an ISO or the disposition, after the
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applicable holding period, of the Common Stock acquired upon exercise of an ISO.
In the event of a disqualifying disposition, the Company generally will be
entitled to a deduction in an amount equal to the ordinary income included by
the employee, provided that such amount constitutes an ordinary and necessary
business expense to the Company and is reasonable and the limitations of
Sections 280G and 162(m) of the Code (discussed below) do not apply.
Non-Qualified Stock Options and Stock Appreciation Rights.
Non-qualified stock options ("NSOs") granted under the 1999 Plan are options
that do not qualify as ISOs. An employee who receives an NSO or an SAR will not
recognize any taxable income upon the grant of such NSO or SAR. However, the
employee generally will recognize ordinary income upon exercise of an NSO in an
amount equal to the excess of the fair market value of the shares of Common
Stock at the time of exercise over the exercise price. Similarly, upon the
receipt of cash or shares pursuant to the exercise of an SAR, the individual
generally will recognize ordinary income in an amount equal to the sum of the
cash and the fair market value of the shares received. As a result of Section
16(b) of the Exchange Act, under certain circumstances, the timing of income
recognition may be deferred (the "Deferral Period") for any individual who is an
executive officer or director of the Company or a beneficial owner of more than
ten percent (10%) of any class of equity securities of the Company. Absent a
Section 83(b) election (as described below under "Other Awards"), recognition of
income by the individual will be deferred until the expiration of the Deferral
Period, if any. The ordinary income recognized with respect to the receipt of
shares or cash upon exercise of an NSO or an SAR will be subject to both wage
withholding and other employment taxes. In addition to the customary methods of
satisfying the withholding tax liabilities that arise upon the exercise of an
SAR for shares or upon the exercise of an NSO, the Company may satisfy the
liability in whole or in part by withholding shares of Common Stock from those
that otherwise would be issuable to the individual or by the employee tendering
other shares owned by him or her, valued at their fair market value as of the
date that the tax withholding obligation arises. A federal income tax deduction
generally will be allowed to the Company in an amount equal to the ordinary
income included by the individual with respect to his or her NSO or SAR,
provided that such amount constitutes an ordinary and necessary business expense
to the Company and is reasonable and the limitations of Sections 280G and 162(m)
of the Code do not apply. If an individual exercises an NSO by delivering shares
of Common Stock, other than shares previously acquired pursuant to the exercise
of an ISO which is treated as a "disqualifying disposition" as described above,
the individual will not recognize gain or loss with respect to the exchange of
such shares, even if their then fair market value is different from the
individual's tax basis. The individual, however, will be taxed as described
above with respect to the exercise of the NSO as if he or she had paid the
exercise price in cash, and the Company likewise generally will be entitled to
an equivalent tax deduction.
Other Awards. With respect to other Benefits under the 1999
Plan that are settled either in cash or in shares of Common Stock that are
either transferable or not subject to a substantial risk of forfeiture (as
defined in the Code and the regulations thereunder), employees generally will
recognize ordinary income equal to the amount of cash or the fair market value
of the Common Stock received. With respect to Benefits under the 1999 Plan that
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are settled in shares of Common Stock that are restricted as to transferability
or subject to a substantial risk of forfeiture -- absent a written election
pursuant to Section 83(b) of the Code filed with the Internal Revenue Service
within 30 days after the date of transfer of such shares pursuant to the award
(a "Section 83(b) election") -- an individual will recognize ordinary income at
the earlier of the time at which (i) the shares become transferable or (ii) the
restrictions that impose a substantial risk of forfeiture of such shares lapse,
in an amount equal to the excess of the fair market value (on such date) of such
shares over the price paid for the award, if any. If a Section 83(b) election is
made, the individual will recognize ordinary income, as of the transfer date, in
an amount equal to the excess of the fair market value of the Common Stock as of
that date over the price paid for such award, if any. The ordinary income
recognized with respect to the receipt of cash, shares of Common Stock or other
property under the 1999 Plan will be subject to both wage withholding and other
employment taxes. the Company generally will be allowed a deduction for federal
income tax purposes in an amount equal to the ordinary income recognized by the
employee, provided that such amount constitutes an ordinary and necessary
business expense and is reasonable and the limitations of Sections 280G and
162(m) of the Code do not apply.
Dividends and Dividend Equivalents. To the extent Benefits
under the 1999 Plan earn dividends or dividend equivalents, whether paid
currently or credited to an account established under the 1999 Plan, an
individual generally will recognize ordinary income with respect to such
dividends or dividend equivalents.
Change in Control. In general, if the total amount of payments
to an individual that are contingent upon a "change of control" of the Company
(as defined in Section 280G of the Code), including payments under the 1999 Plan
that vest upon a "change in control," equals or exceeds three times the
individual's "base amount" (generally, such individual's average annual
compensation for the five calendar years preceding the change in control), then,
subject to certain exceptions, the payments may be treated as "parachute
payments" under the Code, in which case a portion of such payments would be
non-deductible to the Company and the individual would be subject to a 20%
excise tax on such portion of the payments.
Certain Limitations on Deductibility of Executive
Compensation. With certain exceptions, Section 162(m) of the Code denies a
deduction to publicly held corporations for compensation paid to certain
executive officers in excess of $1 million per executive per taxable year
(including any deduction with respect to the exercise of an NSO or SAR or the
disqualifying disposition of stock purchased pursuant to an ISO). One such
exception applies to certain performance-based compensation provided that such
compensation has been approved by stockholders in a separate vote and certain
other requirements are met. If approved by its stockholders, the Company
believes that Stock Options, SARs and Performance-Based Awards granted under the
1999 Plan should qualify for the performance-based compensation exception to
Section 162(m) of the Code.
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OTHER INFORMATION
The closing price of a share of Common Stock on July 9, 1999
was $5-1/8 per share. Approval of the 1999 Plan requires the affirmative vote of
a majority of the votes cast by the holders of the shares of Common Stock of the
Company voting in person or by proxy at the Meeting. If the 1999 Plan is not
approved by stockholders, the Company will reconsider the alternatives available
with respect to the compensation of non-employee directors, employees and others
who are not eligible to receive awards under the 1997 Plan.
If the 1999 Plan is approved by stockholders, it is
contemplated that options outstanding under the 1997 Plan would be cancelled and
the 1997 Plan would be terminated. Any options that may be issued in the future
will be issued under the 1999 Plan. Such options will be priced at not less than
their then current market value. Director Options outstanding as of the
effectiveness of the 1999 Plan will remain outstanding. However, any future
issuances of options to non-employee directors may be issued under the 1999
Plan.
THE BOARD OF DIRECTORS BELIEVES THAT THE 1999 PLAN IS IN THE
BEST INTEREST OF THE COMPANY AND ITS STOCKHOLDERS AND THEREFORE RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE 1999 PLAN.
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PROPOSAL 3. AMENDMENT TO THE CERTIFICATE OF INCORPORATION
THE FOLLOWING IS A BRIEF SUMMARY OF THE PROPOSED AMENDMENT,
THE FORM OF WHICH IS ATTACHED AS ANNEX B TO THIS PROXY STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE PROPOSED AMENDMENT. ALL STOCKHOLDERS ARE URGED
TO READ THE PROPOSED AMENDMENT IN ITS ENTIRETY.
The Board of Directors of the Company, by unanimous vote, has
approved, and recommends that holders of Common Stock approve the proposed
amendment to the Certificate of Incorporation of the Company to eliminate
current restrictions on the mortgage, pledge, transfer and other disposition of
the assets of the Company without obtaining the prior consent of at least
66-2/3% of the outstanding voting stock of the Company.
The Certificate of Incorporation of the Company currently
provides that any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
person of all or substantially all of the assets of the Company shall require
the affirmative vote of the holders of at least 66-2/3% of the voting power of
the then outstanding voting stock of the Company, voting together as a single
class. If approved, the proposed amendment to the Certificate of Incorporation
would delete the restriction on mortgages, pledges, transfers and other
dispositions of all or substantially all of the assets of the Company without
obtaining the prior consent of the holders of at least 66-2/3% of the voting
power of the then outstanding voting stock of the Company, while retaining the
other restrictions on sales, leases or exchanges of such assets.
The proposed amendment is necessary to permit the Company to
enter into credit facilities from time to time secured by the Company's assets,
which are customary to the operation of the Company's business and necessary to
finance the Company's working capital requirements. The Company is currently a
party to a Revolving Credit Facility, dated as of July 9, 1999 (the "Revolving
Credit Facility"), led by The Chase Manhattan Bank, which was entered into to
fund the Company's working capital requirements and to finance the purchase of
certain trademarks from Anne Klein Company LLC. The Revolving Credit Facility
provides the Company with two revolving credit lines aggregating up to $125
million, $100 million of which is secured by substantially all of the assets of
the Company. In the event the proposed amendments to the Certificate of
Incorporation are approved and certain other conditions are met, the revolving
credit lines will increase to $160 million and the entire amount of the
revolving credit lines will be secured by substantially all of the assets of the
Company. The Board of Directors of the Company believes that the amendments to
the Certificate of Incorporation are in the best interests of the Company and
the stockholders of the Company because they will enable the Company to enter
into such credit facilities and other financing arrangements, which are
necessary to fund the Company's working capital requirements and future growth.
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Pursuant to the Certificate of Incorporation, the affirmative
vote of 66-2/3% of the voting power of the shares of Common Stock outstanding as
of the Record Date is required for approval of the amendment to the Certificate
of Incorporation. All shares of Common Stock which are entitled to vote and are
represented at the Meeting by properly executed proxies prior to or at the
Meeting, and not revoked, will be voted at the Meeting in accordance with the
instructions indicated on such proxies. If no instructions are indicated, such
proxies will be voted for approval of the amendment.
THE BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT TO
THE CERTIFICATE OF INCORPORATION IS IN THE BEST INTEREST OF THE COMPANY AND ITS
STOCKHOLDERS AND THEREFORE RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF
THE AMENDMENT.
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PROPOSAL 4. RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors of the Company, upon recommendation of
the Audit Committee, has appointed the firm of Arthur Andersen LLP to serve as
independent auditors of the Company for the year ending January 1, 2000, subject
to ratification of this appointment by the stockholders of the Company. Arthur
Andersen LLP currently serves as independent auditors for the Company, and is
considered by management of the Company to be well qualified. The Company has
been advised by Arthur Andersen LLP that neither it nor any member thereof have
any direct or material indirect financial interest in the Company.
One or more representatives of Arthur Andersen LLP will be
present at the Meeting, will have an opportunity to make a statement if he or
she desires to do so and will be available to respond to appropriate questions.
Ratification of the appointment of the independent auditors
requires the affirmative vote of a majority of the votes cast by the holders of
the shares of Common Stock voting in person or by proxy at the Meeting. If the
stockholders do not ratify the appointment of Arthur Andersen LLP, the Board of
Directors will reconsider the appointment.
All shares of Common Stock which are entitled to vote and are
represented at the Meeting by properly executed proxies prior to or at the
Meeting, and not revoked, will be voted at the Meeting in accordance with the
instructions indicated on such proxies. If no instructions are indicated, such
proxies will be voted for the ratification of the appointment of Arthur Andersen
LLP as independent auditors of the Company for the year ending January 1, 2000.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR
THE PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT
AUDITORS OF THE COMPANY FOR THE YEAR ENDING JANUARY 1, 2000.
MISCELLANEOUS
PROXY PROCEDURES AND EXPENSES OF SOLICITATION
The Company will hold the votes of all stockholders in
confidence from the Company, its directors, officers and employees except: (i)
as necessary to meet applicable legal requirements and to assert or defend
claims for or against the Company; (ii) in case of a contested proxy
solicitation; (iii) in the event that a stockholder makes a written comment on
the proxy card or otherwise communicates his/her vote to management; or (iv) to
allow the inspectors of election or transfer agent of the Company to certify the
results of the vote.
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The cost of preparing, assembling and mailing the proxy
materials is to be borne by the Company. The Company will also reimburse
brokers, fiduciaries and custodians for their expenses in forwarding proxies and
proxy soliciting materials to the beneficial owners of Common Stock held in
their names. The Company has retained Innisfree M&A Incorporated to assist the
Company in connection with the solicitation of proxies at a cost of
approximately $10,000 plus reimbursement of reasonable out-of-pocket expenses.
In addition to the use of the mails, proxies may be solicited without extra
compensation by directors, officers and employees of the Company by telephone,
telecopy, telegraph or personal interview.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2000
Annual Meeting of Stockholders must be received by the Company at 77 Metro Way,
Secaucus, New Jersey 07094, Attention: Secretary on or before March 1, 2000, to
be eligible for inclusion in the Company's Proxy Statement and form of proxy
relating to that meeting.
ADDITIONAL INFORMATION
Management of the Company does not know of any matters other
than those referred to in the accompanying Notice of Annual Meeting of
Stockholders which may properly come before the meeting or other matters
incident to the conduct of the meeting. As to any other matter or proposal that
may properly come before the meeting, including voting for the election of any
person as a director in place of a nominee named herein who becomes unable to
serve or for good cause will not serve and voting on a proposal omitted from
this Proxy Statement pursuant to the rules of the SEC, it is intended that
proxies received will be voted in accordance with the discretion of the proxy
holders.
The form of proxy and the Proxy Statement have been approved
by the Board of Directors and are being mailed and delivered to stockholders by
its authority.
By Order of the Board of Directors,
-----------------------------------------
Lester E. Schreiber
Secretary
New York, New York
August 13, 1999
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-------------------------
THE ANNUAL REPORT TO STOCKHOLDERS OF THE COMPANY FOR THE
FISCAL YEAR ENDED JANUARY 2, 1999, WHICH INCLUDES FINANCIAL STATEMENTS IS BEING
FURNISHED TO STOCKHOLDERS CONCURRENTLY HEREWITH. THE ANNUAL REPORT DOES NOT FORM
ANY PART OF THE MATERIAL FOR SOLICITATIONS OF PROXIES.
-------------------------
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ANNEX A
KASPER A.S.L., LTD.
1999 SHARE INCENTIVE PLAN
1. PURPOSE. The Kasper A.S.L., Ltd. 1999 Share Incentive Plan (the
"Plan") is intended to provide incentives which will attract, retain and
motivate highly competent persons as non-employee directors, officers, and key
employees of, and consultants to, Kasper A.S.L., Ltd. (the "Company") and its
subsidiaries and affiliates, by providing them opportunities to acquire shares
of Common Stock, par value $0.01 per share, of the Company ("Common Stock") or
to receive monetary payments based on the value of such shares pursuant to the
Benefits (as defined below) described herein. Additionally, the Plan is intended
to assist in further aligning the interests of the Company's non-employee
directors, officers, key employees and consultants to those of its other
stockholders.
2. ADMINISTRATION.
(a) The Plan will be administered by a committee (the "Committee")
appointed by the Board of Directors of the Company from among its members (which
may be the Compensation Committee) and shall be comprised, unless otherwise
determined by the Board of Directors, solely of not less than two members who
shall be (i) "Non-Employee Directors" within the meaning of Rule 16b-3(b)(3) (or
any successor rule) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (ii) "outside directors" within the meaning of
Treasury Regulation Section 1.162-27(e)(3) under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Committee is authorized,
subject to the provisions of the Plan, to establish such rules and regulations
as it deems necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with
the Plan and any Benefits granted hereunder as it deems necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all participants and their legal representatives. No member of
the Committee and no employee of the Company shall be liable for any act or
failure to act hereunder, except in circumstances involving his or her bad
faith, gross negligence or willful misconduct, or for any act or failure to act
hereunder by any other member or employee or by any agent to whom duties in
connection with the administration of this Plan have been delegated. The Company
shall indemnify members of the Committee and any agent of the Committee who is
an employee of the Company, a subsidiary or an affiliate against any and all
liabilities or expenses to which they may be subjected by reason of any act or
failure to act with respect to their duties on behalf of the Plan, except in
circumstances involving such person's bad faith, gross negligence or willful
misconduct.
(b) The Committee may delegate to one or more of its members, or to one
or more agents, such administrative duties as it may deem advisable, and the
Committee, or any person to whom it has delegated duties as aforesaid, may
employ one or more persons to render advice with respect to any responsibility
the Committee or such person may have under the Plan. The Committee may employ
such legal or other counsel, consultants and agents as it may deem desirable for
<PAGE>
the administration of the Plan and may rely upon any opinion or computation
received from any such counsel, consultant or agent. Expenses incurred by the
Committee in the engagement of such counsel, consultant or agent shall be paid
by the Company, or the subsidiary or affiliate whose employees have benefited
from the Plan, as determined by the Committee.
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<PAGE>
3. PARTICIPANTS. Participants will consist of such officers and key
employees of, and such consultants to, the Company and its subsidiaries and
affiliates as the Committee in its sole discretion determines to be responsible
for the success and future growth and profitability of the Company and whom the
Committee may designate from time to time to receive Benefits under the Plan.
Non-employee directors of the Company shall participate in the Plan only to the
extent provided in Section 12 hereof. Designation of a participant in any year
shall not require the Committee to designate such person to receive a Benefit in
any other year or, once designated, to receive the same type or amount of
Benefit as granted to the participant in any other year. The Committee shall
consider such factors as it deems pertinent in selecting participants and in
determining the type and amount of their respective Benefits.
4. TYPE OF BENEFITS. Benefits under the Plan may be granted in any one
or a combination of (a) Stock Options, (b) Stock Appreciation Rights, (c) Stock
Awards, (d) Performance Awards and (e) Stock Units (each as described below, and
collectively, the "Benefits"). Stock Awards, Performance Awards, and Stock Units
may, as determined by the Committee in its discretion, constitute
Performance-Based Awards, as described in Section 11 hereof. Benefits shall be
evidenced by agreements (which need not be identical) in such forms as the
Committee may from time to time approve; provided, however, that in the event of
any conflict between the provisions of the Plan and any such agreements, the
provisions of the Plan shall prevail.
5. COMMON STOCK AVAILABLE UNDER THE PLAN. The aggregate number of
shares of Common Stock that may be subject to Benefits, including Stock Options,
granted under the Plan shall be 2,500,000 shares of Common Stock, which may be
authorized and unissued or treasury shares, subject to any adjustments made in
accordance with Section 14 hereof. The maximum number of shares of Common Stock
with respect to which Benefits may be granted or measured to any individual
participant under the Plan during the term of the Plan shall not exceed
1,500,000; provided, however, that the maximum number of shares of Common Stock
with respect to which Stock Options or Stock Appreciation Rights may be granted
to an individual participant under the Plan during the term of the Plan shall
not exceed 1,500,000 (in each case, subject to adjustments made in accordance
with Section 14 hereof). Any shares of Common Stock subject to a Stock Option or
Stock Appreciation Right which for any reason is cancelled or terminated without
having been exercised, any shares subject to Stock Awards, Performance Awards or
Stock Units which are forfeited, any shares subject to Performance Awards
settled in cash or any shares delivered to the Company as part or full payment
for the exercise of a Stock Option or Stock Appreciation Right shall again be
available for Benefits under the Plan. The preceding sentence shall apply only
for purposes of determining the aggregate number of shares of Common Stock
subject to Benefits but shall not apply for purposes of determining the maximum
number of shares of Common Stock with respect to which Benefits (including the
maximum number of shares of Common Stock subject to Stock Options and Stock
Appreciation Rights) that may be granted to any individual participant under the
Plan.
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6. STOCK OPTIONS. Stock Options will consist of awards from the Company
that will enable the holder to purchase a number of shares of Common Stock at
set terms. Stock Options may be "incentive stock options" ("Incentive Stock
Options"), within the meaning of Section 422 of the Code, or Stock Options which
do not constitute Incentive Stock Options ("Nonqualified Stock Options"). The
Committee will have the authority to grant to any participant one or more
Incentive Stock Options, Nonqualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights). Each Stock
Option shall be subject to such terms and conditions consistent with the Plan as
the Committee may impose from time to time, subject to the following
limitations:
(a) EXERCISE PRICE. Each Stock Option granted hereunder shall have such
per-share exercise price as the Committee may determine at the date of the
grant; provided, however, subject to subsection (d) below, that the per-share
exercise price shall not be less than 100% of the Fair Market Value (as defined
below) of the Common Stock on the date the Stock Option is granted.
(b) PAYMENT OF EXERCISE PRICE. The option exercise price may be paid in
cash or, in the discretion of the Committee, by the delivery of shares of Common
Stock of the Company then owned by the participant, by the withholding of shares
of Common Stock for which a Stock Option is exercisable or by a combination of
these methods. In the discretion of the Committee, payment may also be made by
delivering a properly executed exercise notice to the Company together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures with
one or more brokerage firms. The Committee may prescribe any other method of
paying the exercise price that it determines to be consistent with applicable
law and the purpose of the Plan, including, without limitation, in lieu of the
exercise of a Stock Option by delivery of shares of Common Stock of the Company
then owned by a participant, providing the Company with a notarized statement
attesting to the number of shares owned, whereupon verification by the Company,
the Company would issue to the participant only the number of incremental shares
to which the participant is entitled upon exercise of the Stock Option. The
Committee may, at the time of the grant, provide for the grant of a subsequent
Restoration Stock Option if the exercise price is paid for by delivering
previously owned shares of Common Stock of the Company. Restoration Stock
Options (i) may be granted in respect of no more than the number of shares of
Common Stock tendered in exercising the predecessor Stock Option, (ii) shall
have an exercise price equal to the Fair Market Value on the date the
Restoration Stock Option is granted, and (iii) may have an exercise period that
does not extend beyond the remaining term of the predecessor Stock Option. In
determining which methods a participant may utilize to pay the exercise price,
the Committee may consider such factors as it determines are appropriate.
(c) EXERCISE PERIOD. Stock Options granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee; provided, however, that no Stock Option
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<PAGE>
shall be exercisable later than ten years after the date it is granted except in
the event of a participant's death, in which case, the exercise period of such
participant's Stock Options may be extended beyond such period but no later than
one year after the participant's death. All Stock Options shall terminate at
such earlier times and upon such conditions or circumstances as the Committee
shall in its discretion set forth in such option agreement at the date of grant.
(d) LIMITATIONS ON INCENTIVE STOCK OPTIONS. Incentive Stock Options may
be granted only to participants who are employees of the Company or one of its
subsidiaries (within the meaning of Section 424(f) of the Code) at the date of
the grant. The aggregate Fair Market Value (determined as of the time the Stock
Option is granted) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a participant during any calendar
year (under all option plans of the Company and of any parent corporation or
subsidiary corporation (as defined in Sections 424(e) and (f) of the Code,
respectively)) shall not exceed $100,000. For purposes of the preceding
sentence, Incentive Stock Options will be taken into account in the order in
which they are granted. The per-share exercise price of an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of the Common Stock
on the date of the grant, and no Incentive Stock Option may be exercised later
than ten years after the date it is granted; provided, however, that Incentive
Stock Options may not be granted to any participant who, at the time of the
grant, owns stock possessing (after the application of the attribution rules of
Section 424(d) of the Code) more than 10% of the total combined voting power of
all classes of stock of the Company or any parent or subsidiary corporation of
the Company, unless the exercise price is fixed at not less than 110% of the
Fair Market Value of the Common Stock on the date of the grant and the exercise
of such option is prohibited by its terms after the expiration of five years
from the date of the grant of such option. In addition, no Incentive Stock
Option may be issued to a participant in tandem with a Nonqualified Stock
Option.
7. STOCK APPRECIATION RIGHTS.
(a) The Committee may, in its discretion, grant Stock Appreciation
Rights to the holders of any Stock Options granted hereunder. In addition, Stock
Appreciation Rights may be granted independently of, and without relation to,
Stock Options. A Stock Appreciation Right means a right to receive a payment in
cash, Common Stock or a combination thereof, in an amount equal to the excess of
(x) the Fair Market Value, or other specified valuation, of a specified number
of shares of Common Stock on the date the right is exercised over (y) the Fair
Market Value, or other specified valuation (which shall be no less than the Fair
Market Value) of such shares of Common Stock on the date the right is granted,
all as determined by the Committee; provided, however, that if a Stock
Appreciation Right is granted in tandem with or in substitution for a Stock
Option, the designated Fair Market Value in the award agreement may be the Fair
Market Value on the date such Stock Option was granted. Each Stock Appreciation
Right shall be subject to such terms and conditions as the Committee shall
impose from time to time.
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(b) Stock Appreciation Rights granted under the Plan shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Committee; provided, however, that no Stock
Appreciation Rights shall be exercisable later than ten years after the date it
is granted except in the event of a participant's death, in which case, the
exercise period of such participant's Stock Appreciation Rights may be extended
beyond such period but no later than one year after the participant's death. All
Stock Appreciation Rights shall terminate at such earlier times and upon such
conditions or circumstances as the Committee shall in its discretion set forth
in such right at the date of grant.
8. STOCK AWARDS. The Committee may, in its discretion, grant Stock
Awards (which may include mandatory payment of bonus incentive compensation in
stock) consisting of Common Stock issued or transferred to participants with or
without other payments therefor. Stock Awards may be subject to such terms and
conditions as the Committee determines appropriate, including, without
limitation, restrictions on the sale or other disposition of such shares, the
right of the Company to reacquire such shares for no consideration upon
termination of the participant's employment within specified periods, and may
constitute Performance-Based Awards, as described in Section 11 hereof. The
Committee may require the participant to deliver a duly signed stock power,
endorsed in blank, relating to the Common Stock covered by such an Award. The
Committee may also require that the stock certificates evidencing such shares be
held in custody or bear restrictive legends until the restrictions thereon shall
have lapsed. The Stock Award shall specify whether the participant shall have,
with respect to the shares of Common Stock subject to a Stock Award, all of the
rights of a holder of shares of Common Stock of the Company, including the right
to receive dividends and to vote the shares.
9. PERFORMANCE AWARDS.
(a) Performance Awards may be granted to participants at any time and
from time to time, as shall be determined by the Committee. Performance Awards
may constitute Performance-Based Awards, as described in Section 11 hereof. The
Committee shall have complete discretion in determining the number, amount and
timing of awards granted to each participant. Such Performance Awards may be in
the form of shares of Common Stock or Stock Units. Performance Awards may be
awarded as short-term or long-term incentives. Performance targets may be based
upon, without limitation, Company-wide, divisional and/or individual
performance.
(b) With respect to those Performance Awards that are not intended to
constitute Performance-Based Awards, the Committee shall have the authority at
any time to make adjustments to performance targets for any outstanding
Performance Awards which the Committee deems necessary or desirable unless at
the time of establishment of such targets the Committee shall have precluded its
authority to make such adjustments.
(c) Payment of earned Performance Awards shall be made in accordance
with terms and conditions prescribed or authorized by the Committee. The
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<PAGE>
participant may elect to defer, or the Committee may require or permit the
deferral of, the receipt of Performance Awards upon such terms as the Committee
deems appropriate.
10. STOCK UNITS.
(a) The Committee may, in its discretion, grant Stock Units to
participants hereunder. The Committee shall determine the criteria for the
vesting of Stock Units. Stock Units may constitute Performance-Based Awards, as
described in Section 11 hereof. A Stock Unit granted by the Committee shall
provide payment in shares of Common Stock at such time as the award agreement
shall specify. Shares of Common Stock issued pursuant to this Section 10 may be
issued with or without other payments therefor as may be required by applicable
law or such other consideration as may be determined by the Committee. The
Committee shall determine whether a participant granted a Stock Unit shall be
entitled to a Dividend Equivalent Right (as defined below).
(b) Upon vesting of a Stock Unit, unless the Committee has determined
to defer payment with respect to such unit or a participant has elected to defer
payment under subsection (c) below, shares of Common Stock representing Stock
Units shall be distributed to the participant unless the Committee provides for
the payment of the Stock Units in cash or partly in cash and partly in shares of
Common Stock equal to the value of the shares of Common Stock which would
otherwise be distributed to the participant.
(c) Prior to the year with respect to which a Stock Unit may vest, the
participant may elect not to receive a distribution upon the vesting of such
Stock Unit and for the Company to continue to maintain the Stock Unit on its
books of account. In such event, the value of a Stock Unit shall be payable in
shares of Common Stock pursuant to the agreement of deferral.
(d) A "Stock Unit" means a notional account representing one share of
Common Stock. A "Dividend Equivalent Right" means the right to receive the
amount of any dividend paid on the share of Common Stock underlying a Stock
Unit, which shall be payable in cash or in the form of additional Stock Units.
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11. PERFORMANCE-BASED AWARDS. Certain Benefits granted under the Plan
may be granted in a manner such that the Benefits qualify for the
performance-based compensation exemption of Section 162(m) of the Code
("Performance-Based Awards"). As determined by the Committee in its sole
discretion, either the granting or vesting of such Performance-Based Awards
shall be based on achievement of hurdle rates and/or growth rates in one or more
business criteria that apply to the individual participant, one or more business
units or the Company as a whole. The business criteria shall be as follows,
individually or in combination: (i) net earnings; (ii) earnings per share; (iii)
net sales growth; (iv) market share; (v) net operating profit; (vi) expense
targets; (vii) working capital targets relating to inventory and/or accounts
receivable; (viii) operating margin; (ix) return on equity; (x) return on
assets; (xi) planning accuracy (as measured by comparing planned results to
actual results); (xii) market price per share; (xiii) total return to
stockholders; (xiv) divisional sales and profitability; (xv) earnings before
interest and taxes; (xvi) earnings before interest, taxes, depreciation and
amortization; (xvii) market expansion; and (xviii) entering into new markets. In
addition, Performance-Based Awards may include comparisons to the performance of
other companies, such performance to be measured by one or more of the foregoing
business criteria. With respect to Performance-Based Awards, (i) the Committee
shall establish in writing (x) the performance goals applicable to a given
period, and such performance goals shall state, in terms of an objective formula
or standard, the method for computing the amount of compensation payable to the
participant if such performance goals are obtained and (y) the individual
employees or class of employees to which such performance goals apply no later
than 90 days after the commencement of such period (but in no event after 25% of
such period has elapsed) and (ii) no Performance Based Awards shall be payable
to or vest with respect to, as the case may be, any participant for a given
period until the Committee certifies in writing that the objective performance
goals (and any other material terms) applicable to such period have been
satisfied. With respect to any Benefits intended to qualify as Performance-Based
Awards, after establishment of a performance goal, the Committee shall not
revise such performance goal or increase the amount of compensation payable
thereunder (as determined in accordance with Section 162(m) of the Code) upon
the attainment of such performance goal. Notwithstanding the preceding sentence,
the Committee may reduce or eliminate the number of shares of Common Stock or
cash granted or the number of shares of Common Stock vested upon the attainment
of such performance goal.
12. NON-EMPLOYEE DIRECTOR FORMULA AWARDS.
(a) Subject to the approval of this Plan by stockholders, upon the date
each new non-employee director is first elected to the Board of Directors of the
Company, such non-employee director shall receive a Stock Option to purchase
20,000 shares of Common Stock at not less then the then current Fair Market
Value (subject to adjustment as provided in Section 14).
(b) The agreements accompanying the awards and grants made under this
Section 12 may contain additional restrictions or limitations not inconsistent
with the provisions of the Plan.
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13. FOREIGN LAWS. The Committee may grant Benefits to individual
participants who are subject to the tax laws of nations other than the United
States, which Benefits may have terms and conditions as determined by the
Committee as necessary to comply with applicable foreign laws. The Committee may
take any action which it deems advisable to obtain approval of such Benefits by
the appropriate foreign governmental entity; provided, however, that no such
Benefits may be granted pursuant to this Section 13 and no action may be taken
which would result in a violation of the Exchange Act, the Code or any other
applicable law.
14. ADJUSTMENT PROVISIONS; CHANGE IN CONTROL.
(a) If there shall be any change in the Common Stock of the Company,
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, reverse stock split, split up, spin-off, combination of shares,
exchange of shares, dividend in kind or other like change in capital structure
or distribution (other than normal cash dividends) to stockholders of the
Company, an adjustment shall be made to each outstanding Stock Option and Stock
Appreciation Right such that each such Stock Option and Stock Appreciation Right
shall thereafter be exercisable for such securities, cash and/or other property
as would have been received in respect of the Common Stock subject to such Stock
Option or Stock Appreciation Right had such Stock Option or Stock Appreciation
Right been exercised in full immediately prior to such change or distribution,
and such an adjustment shall be made successively each time any such change
shall occur. In addition, in the event of any such change or distribution, in
order to prevent dilution or enlargement of participants' rights under the Plan,
the Committee will have authority to adjust, in an equitable manner, the number
and kind of shares that may be issued under the Plan, the number and kind of
shares subject to outstanding Benefits, the exercise price applicable to
outstanding Benefits, and the Fair Market Value of the Common Stock and other
value determinations applicable to outstanding Benefits; provided, however, that
any such arithmetic adjustment to a Performance-Based Award shall not cause the
amount of compensation payable thereunder to be increased from what otherwise
would have been due upon attainment of the unadjusted award. Appropriate
adjustments may also be made by the Committee in the terms of any Benefits under
the Plan to reflect such changes or distributions and to modify any other terms
of outstanding Benefits on an equitable basis, including modifications of
performance targets and changes in the length of performance periods; provided,
however, that any such arithmetic adjustment to a Performance-Based Award shall
not cause the amount of compensation payable thereunder to be increased from
what otherwise would have been due upon attainment of the unadjusted award. In
addition, other than with respect to Stock Options, Stock Appreciation Rights,
and other awards intended to constitute Performance-Based Awards, the Committee
is authorized to make adjustments to the terms and conditions of, and the
criteria included in, Benefits in recognition of unusual or nonrecurring events
affecting the Company or the financial statements of the Company, or in response
to changes in applicable laws, regulations, or accounting principles.
Notwithstanding the foregoing, (i) each such adjustment with respect to an
Incentive Stock Option shall comply with the rules of Section 424(a) of the
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Code, and (ii) in no event shall any adjustment be made which would render any
Incentive Stock Option granted hereunder other than an incentive stock option
for purposes of Section 422 of the Code.
(b) Notwithstanding any other provision of this Plan, if there is a
Change in Control of the Company, all then outstanding Stock Options and Stock
Appreciation Rights shall immediately become exercisable. For purposes of this
Section 14(b), a "Change in Control" of the Company shall be deemed to have
occurred upon any of the following events:
(i) During any period of two (2) consecutive years, the
individuals who at the beginning of such period constitute the Company's Board
of Directors or any individuals who would be "Continuing Directors" (as
hereinafter defined) cease for any reason to constitute at least a majority
thereof; or
(ii) The Company's Common Stock shall cease to be publicly
traded; or
(iii) The Company's Board of Directors shall approve a sale of
all or substantially all of the assets of the Company, and such transaction
shall have been consummated; or
(iv) The Company's Board of Directors shall approve any
merger, consolidation, or like business combination or reorganization of the
Company, the consummation of which would result in the occurrence of any event
described in Section 14(b)(i) or (ii) above, and such transaction shall have
been consummated.
For purposes of this Section 14(b), "Continuing Directors" shall mean
(x) the directors of the Company in office on the Effective Date and (y) any
successor to any such director and any additional director who after the
Effective Date was nominated or selected by a majority of the Continuing
Directors in office at the time of his or her nomination or selection.
The Committee, in its discretion, may determine that, upon the
occurrence of a Change in Control of the Company, each Stock Option and Stock
Appreciation Right outstanding hereunder shall terminate within a specified
number of days after notice to the holder, and such holder shall receive, with
respect to each share of Common Stock subject to such Stock Option or Stock
Appreciation Right, an amount equal to the excess of the Fair Market Value of
such shares of Common Stock immediately prior to the occurrence of such Change
in Control over the exercise price per share of such Stock Option or Stock
Appreciation Right; such amount to be payable in cash, in one or more kinds of
property (including the property, if any, payable in the transaction) or in a
combination thereof, as the Committee, in its discretion, shall determine. The
provisions contained in the preceding sentence shall be inapplicable to a Stock
Option or Stock Appreciation Right granted within six (6) months before the
occurrence of a Change in Control if the holder of such Stock Option or Stock
Appreciation Right is subject to the reporting requirements of Section 16(a) of
the Exchange Act and no exception from liability under Section 16(b) of the
Exchange Act is otherwise available to such holder.
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15. NONTRANSFERABILITY. Each Benefit granted under the Plan to a
participant shall not be transferable otherwise than by will or the laws of
descent and distribution, and shall be exercisable during the participant's
lifetime only by the participant. In the event of the death of a participant,
each Stock Option or Stock Appreciation Right theretofore granted to him or her
shall be exercisable during such period after his or her death as the Committee
shall in its discretion set forth in such option or right at the date of the
grant and then only by the executor or administrator of the estate of the
deceased participant or the person or persons to whom the deceased participant's
rights under the Stock Option or Stock Appreciation Right shall pass by will or
the laws of descent and distribution. Notwithstanding the foregoing, at the
discretion of the Committee, an award of a Benefit other than an Incentive Stock
Option may permit the transferability of a Benefit by a participant solely to
the participant's spouse, siblings, parents, children and grandchildren or
trusts for the benefit of such persons or partnerships, corporations, limited
liability companies or other entities owned solely by such persons, including
trusts for such persons, subject to any restriction included in the award of the
Benefit.
16. OTHER PROVISIONS. The award of any Benefit under the Plan may also
be subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Committee determines appropriate,
including, without limitation, for the installment purchase of Common Stock
under Stock Options, for the installment exercise of Stock Appreciation Rights,
to assist the participant in financing the acquisition of Common Stock, for the
forfeiture of, or restrictions on resale or other disposition of, Common Stock
acquired under any form of Benefit, for the acceleration of exercisability or
vesting of Benefits in the event of a Change in Control of the Company, for the
payment of the value of Benefits to participants in the event of a Change in
Control of the Company, or to comply with federal and state securities laws, or
understandings or conditions as to the participant's employment in addition to
those specifically provided for under the Plan.
17. FAIR MARKET VALUE. For purposes of this Plan and any Benefits
awarded hereunder, Fair Market Value shall be the closing price of the Company's
Common Stock on the date of calculation (or on the last preceding trading date
if Common Stock was not traded on such date) if the Company's Common Stock is
readily tradeable on a national securities exchange or other market system, and
if the Company's Common Stock is not readily tradeable, Fair Market Value shall
mean the amount determined in good faith by the Committee as the fair market
value of the Common Stock of the Company.
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18. WITHHOLDING. All payments or distributions of Benefits made
pursuant to the Plan shall be net of any amounts required to be withheld
pursuant to applicable federal, state and local tax withholding requirements. If
the Company proposes or is required to distribute Common Stock pursuant to the
Plan, it may require the recipient to remit to it or to the corporation that
employs such recipient an amount sufficient to satisfy such tax withholding
requirements prior to the delivery of any certificates for such Common Stock. In
lieu thereof, the Company or the employing corporation shall have the right to
withhold the amount of such taxes from any other sums due or to become due from
such corporation to the recipient as the Committee shall prescribe. The
Committee may, in its discretion and subject to such rules as it may adopt
(including any as may be required to satisfy applicable tax and/or non-tax
regulatory requirements), permit an optionee or award or right holder to pay all
or a portion of the federal, state and local withholding taxes arising in
connection with any Benefit consisting of shares of Common Stock by electing to
have the Company withhold shares of Common Stock having a Fair Market Value
equal to the amount of tax to be withheld, such tax calculated at rates required
by statute or regulation.
19. TENURE. A participant's right, if any, to continue to serve the
Company or any of its subsidiaries or affiliates as an officer, employee, or
otherwise, shall not be enlarged or otherwise affected by his or her designation
as a participant under the Plan.
20. UNFUNDED PLAN. Participants shall have no right, title, or interest
whatsoever in or to any investments which the Company may make to aid it in
meeting its obligations under the Plan. Nothing contained in the Plan, and no
action taken pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the Company and any
participant, beneficiary, legal representative or any other person. To the
extent that any person acquires a right to receive payments from the Company
under the Plan, such right shall be no greater than the right of an unsecured
general creditor of the Company. All payments to be made hereunder shall be paid
from the general funds of the Company and no special or separate fund shall be
established and no segregation of assets shall be made to assure payment of such
amounts except as expressly set forth in the Plan. The Plan is not intended to
be subject to the Employee Retirement Income Security Act of 1974, as amended.
21. NO FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Benefit. The Committee shall
determine whether cash, Benefits or other property shall be issued or paid in
lieu of fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
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22. DURATION, AMENDMENT AND TERMINATION. No Benefit shall be granted
more than ten years after the Effective Date. The Committee may amend the Plan
from time to time or suspend or terminate the Plan at any time. No amendment of
the Plan may be made without approval of the stockholders of the Company if the
amendment will: (i) disqualify any Incentive Stock Options granted under the
Plan; (ii) increase the aggregate number of shares of Common Stock that may be
delivered through Stock Options under the Plan; (iii) increase either of the
maximum amounts which can be paid to an individual participant under the Plan as
set forth in Section 5 hereof; (iv) change the types of business criteria on
which Performance-Based Awards are to be based under the Plan; or (v) modify the
requirements as to eligibility for participation in the Plan.
23. GOVERNING LAW. This Plan, Benefits granted hereunder and actions
taken in connection herewith shall be governed and construed in accordance with
the laws of the State of New York (regardless of the law that might otherwise
govern under applicable New York principles of conflict of laws).
24. EFFECTIVE DATE.
(a) The Plan shall be effective as of July 28, 1999, the date on which
the Plan was adopted by the Committee (the "Effective Date"), provided that the
Plan is approved by the stockholders of the Company at an annual meeting or any
special meeting of stockholders of the Company within 12 months of the Effective
Date, and such approval of stockholders shall be a condition to the right of
each participant to receive any Benefits hereunder. Any Benefits granted under
the Plan prior to such approval of stockholders shall be effective as of the
date of the grant (unless, with respect to any Benefit, the Committee specifies
otherwise at the time of the grant), but no such Benefit may be exercised or
settled and no restrictions relating to any Benefit may lapse prior to such
stockholder approval, and if stockholders fail to approve the Plan as specified
hereunder, any such Benefit shall be cancelled.
(b) This Plan shall terminate on July 28, 2009 (unless sooner
terminated by the Committee).
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ANNEX B
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
KASPER A.S.L., LTD.
PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
------------------
THE UNDERSIGNED, being an authorized officer of Kasper A.S.L.,
Ltd. (the "Company"), hereby certifies that:
FIRST: The name of the Company is Kasper A.S.L., Ltd.
SECOND: The original Certificate of Incorporation was filed
with the Secretary of State of the State of Delaware on March 5, 1997.
THIRD: The Amended and Restated Certificate of Incorporation
was filed with the Secretary of State of the State of Delaware on May 30, 1997.
FOURTH: A Certificate of Amendment of Amended and Restated
Certificate of Incorporation was filed with the Secretary of State of the State
of Delaware on November 5, 1997.
FIFTH: Paragraph (ii) of Section 6 of Article VIII of said
Amended and Restated Certificate of Incorporation is hereby deleted in its
entirety and replaced with the following:
"(ii) any sale, lease or exchange (in one transaction
or a series of transactions) to or with any person
(whether or not an Interested Stockholder or
Affiliate thereof) of all or substantially all of the
assets of the Corporation;"
SIXTH: The foregoing amendment of Paragraph (ii) of Section 6
of Article VIII has been adopted by the Directors of the Company, and approved
by the stockholders of the Company, in accordance with Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, _________ has caused this Certificate of
Amendment to be issued this ___ day of ____________, 1999.
<PAGE>
ANNEX C
KASPER A.S.L., LTD.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS - SEPTEMBER 14, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints, as proxies for the
undersigned, ARTHUR S. LEVINE, LESTER E. SCHREIBER and MARY ANN DOMURACKI, or
any one of them, with full power of substitution, to vote all shares of the
common stock of Kasper A.S.L., Ltd. (the "Company") which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be held
on Tuesday, September 14, 1999, at 10:30 a.m., New York City time, at the
Meadowlands Plaza Hotel, 40 Wood Avenue, Secaucus, New Jersey 07094, and at any
adjournments or postponements thereof, receipt of Notice of which Meeting and
the Proxy Statement accompanying the same being hereby acknowledged by the
undersigned, upon the matters described in the Notice of Meeting and Proxy
Statement and upon such other business as may properly come before the Meeting
and any adjournments or postponements thereof, hereby revoking any proxies
heretofore given.
EACH PROPERLY EXECUTED PROXY WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS MADE BELOW AND ON THE REVERSE SIDE HEREOF. IF NO
SPECIFICATIONS ARE MADE, THE PROXIES WILL BE VOTED FOR EACH LISTED NOMINEE TO
SERVE AS A DIRECTOR AND FOR PROPOSALS 2, 3 AND 4.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
A VOTE FOR EACH NOMINEE AND FOR PROPOSALS 2, 3 AND 4 IS
RECOMMENDED BY THE BOARD OF DIRECTORS.
1. Election of Directors (check one box only)
/ / FOR each nominee listed at right / / WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees
at right): listed at right
Arthur S. Levine, William J. Nightingale, Salvatore M.
Salibello, Larry G. Schafran, Lester E. Schreiber, Denis J.
Taura and Olivier Trouveroy
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, STRIKE OUT THAT
NOMINEE'S NAME IN THE LIST AT RIGHT.)
2. To approve the Company's 1999 Share Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve the amendment to the Company's Amended and
Restated Certificate of Incorporation.
FOR AGAINST ABSTAIN
/ / / / / /
4. To ratify the appointment of Arthur Andersen LLP as
independent auditors for the Company.
FOR AGAINST ABSTAIN
/ / / / / /
DATED: ____________________________, 1999
------------------------------------------
(SIGNATURE OF STOCKHOLDER)
------------------------------------------
(SIGNATURE OF STOCKHOLDER)
<PAGE>
ANNEX C
NOTE: PLEASE SIGN YOUR NAME OR NAMES EXACTLY
AS SET FORTH HEREON. FOR JOINTLY OWNED
SHARES, EACH OWNER SHOULD SIGN. IF SIGNING
AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE INDICATE THE
CAPACITY IN WHICH YOU ARE ACTING. PROXIES
EXECUTED BY CORPORATIONS SHOULD BE SIGNED BY
A DULY AUTHORIZED OFFICER AND SHOULD BEAR
THE CORPORATE SEAL.
PLEASE DATE AND SIGN THIS PROXY AND MAIL IT PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES