<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Lands' End, Inc.
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO LANDS' END(R) DIRECT MERCHANTS]
NOTICE OF 1997 ANNUAL MEETING
AND PROXY STATEMENT
<PAGE>
April 14, 1997
Dear Shareholder:
The annual meeting of Lands' End, Inc. shareholders will be held at our
headquarters in Dodgeville, Wisconsin, on Wednesday, May 14, 1997, beginning
at 10:00 a.m. C.D.T. (See map for directions.)
The directors and officers of your company join me in extending you a
cordial invitation to attend.
For those of you interested in seeing, firsthand, how we fill an order,
tours of our facilities will be available before the meeting. The first tour
will leave the activity center at 8:00 a.m. and the last one will leave
promptly at 9:00 a.m.
The agenda for the meeting includes the election of three directors, the
approval of the Company's Non-Employee Director Stock Option Plan and the
ratification of the appointment of independent public accountants. There also
will be a brief management presentation on the state of the business.
I hope you can be there, but whether you attend the meeting in person or
not, it's important that your shares be represented. To make sure they are,
please mark your votes on the enclosed proxy card and sign, date and mail it
in the postage-paid envelope. It will help us keep postage costs down if you
take a minute to do so now.
/s/ Gary C. Comer
Gary C. Comer
Chairman
<PAGE>
[LOGO LANDS' END(R) DIRECT MERCHANTS]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1997
To Our Shareholders:
The annual meeting of shareholders of Lands' End, Inc. (the "Company") will
be held at the offices of the Company, One Lands' End Lane, Dodgeville,
Wisconsin 53595, on May 14, 1997, at 10:00 a.m. C.D.T. for the following
purposes:
1. To elect three members to the Board of Directors of the Company to serve
until the annual meeting of shareholders in 2000, and until their
successors are duly elected and qualified.
2. To approve the Company's Non-Employee Director Stock Option Plan.
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants for the Company for the fiscal year ending January 30, 1998.
4. To consider and act upon such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 21, 1997, as
the record date for the meeting. All shareholders of record on that date are
entitled to notice of and to vote at the meeting.
Please complete and return the enclosed proxy in the envelope provided
whether or not you intend to be present at the meeting in person.
By order of the Board of Directors,
/s/ Robert S. Osborne
Robert S. Osborne
Secretary
Dodgeville, Wisconsin
April 14, 1997
YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN YOUR
PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Lands' End, Inc., a Delaware corporation (the
"Company"), of proxies to be voted at the 1997 annual meeting of shareholders
on Wednesday, May 14, 1997, and at any adjournment thereof (the "Annual
Meeting"). This Proxy Statement and the accompanying proxy card are being
mailed to shareholders on or about April 14, 1997.
PROXIES
Properly signed and dated proxies received by the Company's Secretary prior
to or at the Annual Meeting will be voted as instructed thereon or, in the
absence of such instructions, (a) FOR election to the Board of Directors of
the persons nominated by the Board, (b) FOR approval of the Company's Non-
Employee Director Stock Option Plan, (c) FOR the ratification of the
appointment of Arthur Andersen LLP as independent public accountants for the
Company and (d) in accordance with the best judgment of the persons named in
the proxy on any other matters which may properly come before the meeting. Any
proxy may be revoked for any reason prior to voting by notifying the Secretary
of the Company in writing of such revocation or by voting by ballot at the
meeting, which will cancel any proxies previously submitted. The Company has
appointed an officer of Firstar Trust Company, transfer agent for the Company,
to act as an independent inspector at the Annual Meeting.
VOTING OF PROXIES AND SHARES OUTSTANDING
Holders of record at the close of business on March 21, 1997, of shares of
the Company's common stock, $.01 par value per share (the "Common Stock"), are
entitled to vote on all matters which may be properly presented at the Annual
Meeting. The number of shares of Common Stock of the Company outstanding on
March 21, 1997, the record date for the meeting, was 32,408,830 all of one
class and each entitled to one vote, owned by 2,581 shareholders of record.
The holders of at least a majority of the shares of Common Stock must be
present in person or by proxy at the Annual Meeting in order for the Annual
Meeting to be held. Directors will be elected by a plurality of the votes cast
for the election of directors. The affirmative vote of the holders of a
majority of the shares of Common Stock present and entitled to vote at the
Annual Meeting is required for approval of each of the other actions proposed
to be taken at the Annual Meeting. On each such proposed action, pursuant to
Delaware law, abstentions are treated as present and entitled to vote and thus
have the effect of a vote against a proposed action. A broker non-vote (where
a broker submits a proxy but does not have authority to vote a customer's
shares on one or more matters) on a proposed action is considered not entitled
to vote on that action and thus is not counted in determining whether an
action requiring approval of a majority of the shares present and entitled to
vote at the Annual Meeting has been approved.
ELECTION OF DIRECTORS
The Board of Directors is composed of seven directors. The directors are
divided into three classes, two of which are composed of two directors each,
and one of which is comprised of three directors. One class is elected each
year for a three year term. The three nominees for election as directors to
serve until the annual meeting of shareholders in 2000, and until their
respective successors are duly elected and qualified, are Richard C. Anderson,
William E. Ferry and Howard G. Krane. The Board of Directors recommends that
shareholders vote "FOR" the election of Messrs. Anderson, Ferry and Krane.
2
<PAGE>
The following tabulation sets forth, as of March 21, 1997, certain
information about each nominee for election to the Company's Board of
Directors and each continuing director.
DIRECTOR NOMINEES FOR A TERM TO EXPIRE IN 2000
RICHARD C. ANDERSON AGE: 67
Vice Chairman of the Company since 1984. Mr. Anderson served as Chief
Executive Officer of the Company from 1990 through January 1993. In
addition, Mr. Anderson served as President and Chief Operating Officer from
1989 until 1992. He has been a director of the Company since 1979. From
1977 to 1984, Mr. Anderson was a senior executive of Needham, Harper &
Steers, serving as Executive Vice President in charge of programming and
media from 1981 until 1984. Mr. Anderson provides certain services to the
Company and its affiliates and is compensated for such services. See
"Meetings and Compensation of Directors; Committees of the Board."
WILLIAM E. FERRY AGE: 56
Vice Chairman of Sales since rejoining the Company in July 1996. Mr. Ferry
served as Executive Vice President, Merchandising, with the Company between
1981 and 1986. Mr. Ferry was the President and Chief Executive Officer for
Eastern Mountain Sports from 1986 until 1996. Mr. Ferry has been serving as
a director of the Company since November 1996.
HOWARD G. KRANE AGE: 63
Director of the Company since 1986. Mr. Krane's professional corporation is
a partner of Kirkland & Ellis, with which he has practiced law since 1957.
Kirkland & Ellis renders legal services to the Company. Mr. Krane is also
Chairman of the Board of Trustees of the University of Chicago.
DIRECTORS WHOSE TERM EXPIRES IN 1998
JOHN N. LATTER AGE: 71
Director of the Company since 1978. Since 1980, Mr. Latter has been
independently employed as a financial consultant.
MICHAEL J. SMITH AGE: 36
President and Chief Executive Officer of the Company since December 1994.
In 1983, Mr. Smith entered the employ of the Company as a Market Research
Analyst. In 1985, he became Circulation Manager of Planning and in 1988, he
was promoted to Manager of Merchandise Planning and Research. In 1990, Mr.
Smith was named Managing Director of Coming Home and in 1991, he was
elected Vice President of that business. Mr. Smith has been serving as a
director of the Company since his appointment to his current positions in
December 1994.
DIRECTORS WHOSE TERM EXPIRES IN 1999
GARY C. COMER AGE: 69
Founder of the Company and Chairman of the Board of Directors. Mr. Comer
was President of the Company from 1963 until 1989, and served as Chief
Executive Officer from 1963 until 1990. He has been a director of the
Company since 1963. Prior to 1963, Mr. Comer was employed for ten years as
a copywriter at Young & Rubicam.
DAVID B. HELLER AGE: 66
Director of the Company since 1986. Since 1974, Mr. Heller has been
President of Advisory Research, Inc., an investment advisory firm. Mr.
Heller is also a director of Ambassador Apartments, Inc., a real estate
investment trust.
3
<PAGE>
MEETINGS AND COMPENSATION OF DIRECTORS
The Board of Directors held nine formal meetings during the fiscal year
ended January 31, 1997. All directors attended at least 75% of the total
number of meetings of the Board and Committees of which they were members.
Directors who are not salaried officers or employees of the Company are
eligible to receive an annual retainer of $25,000 in cash. If the shareholders
approve the Company's Non-Employee Director Stock Option Plan, the Non-
Employee Director Stock Option Plan will replace the annual retainer. See
"Approval of the Non-Employee Director Stock Option Plan." Directors who are
salaried officers or employees of the Company earn no additional compensation
for their services as directors.
In May 1995, the Board of Directors approved a form of agreement whereby
each director has the option to irrevocably elect to defer receipt of his
annual retainer. If a director elects to defer receipt of his annual retainer,
the deferred amount is adjusted to reflect the performance of the Company's
Common Stock during the deferral period. Deferrals are made for a period of
six months or such longer period as the director elects, and are payable only
in cash in one lump sum payment or up to five equal annual installments
commencing at the end of the deferral period. In the event of a director's
death, disability or termination of service as a director of the Board prior
to such date, the director (or his designated beneficiary) is entitled to
receive such payments commencing on the first business day of April in the
calendar year following such death, disability or termination of service.
Messrs. Anderson, Heller, Krane and Latter have each elected to defer receipt
of their annual retainers. Mr. Comer had waived receipt of the annual retainer
since the initial public offering in 1986 and has waived participation in the
Non-Employee Director Stock Option Plan; however, he received $6,250 as his
first payment of the annual retainer for the 4th quarter of fiscal year 1997.
In addition to the annual retainer described above, Mr. Anderson received
total compensation of $198,814 from the Company in consideration for his
providing creative and merchandising consulting services to the Company during
fiscal year 1997. Mr. Anderson also received an additional $11,250 from the
Company for serving as a director of the Company's majority-owned subsidiary,
The Territory Ahead, Inc., during fiscal year 1997. The Company paid $1,019 of
Lands' End, Inc. Health Care plan premiums for each of Mr. Anderson and Mr.
Comer in fiscal year 1997.
COMMITTEES OF THE BOARD
The Board has three standing committees: The Audit Committee, the
Compensation Committee and the Performance Compensation Committee. The Board
does not have a nominating committee. The functions of the standing committees
are described briefly below:
AUDIT COMMITTEE
The members of the Audit Committee are John N. Latter (chairman) and David
B. Heller. The functions of the Audit Committee are to recommend the
appointment of the Company's independent public accountants, to review and
approve the scope of the yearly audit and proposed budget for audit fees, to
review the results of the annual audit, to review the Company's internal
controls and the functions of the Company's internal audit staff, and to
report to the Board of Directors on the activities and findings of the Audit
Committee and make recommendations to the Board of Directors based on such
findings. The Company's internal audit staff and independent public
accountants have direct access to the Audit Committee to discuss auditing and
any other accounting matters. The Audit Committee held two formal meetings
during fiscal year 1997.
4
<PAGE>
COMPENSATION COMMITTEE
The members of the Compensation Committee are Howard G. Krane (chairman),
Gary C. Comer, David B. Heller and John N. Latter. The Compensation Committee
monitors the Company's overall compensation policies and specifically reviews
and approves all compensation to be paid to the Company's Chief Executive
Officer, to the four other most highly compensated executive officers (the
"Named Executive Officers") and to any other officer whose annual compensation
is $300,000 or more (except to the extent that such responsibility is
specifically vested in the Performance Compensation Committee). The
Compensation Committee administers the Long-Term Incentive Plan and
establishes the terms of any benefits granted thereunder. The Compensation
Committee held four formal meetings during fiscal year 1997.
Except for the proposed Non-Employee Director Stock Option Plan, none of the
members of the Compensation Committee is or has been, for a period of at least
one year prior to appointment, eligible to receive a benefit under any plans
of the Company entitling participants to acquire Common Stock, stock options
or stock appreciation rights.
PERFORMANCE COMPENSATION COMMITTEE
The members of the Performance Compensation Committee are David B. Heller
(chairman) and John N. Latter. The Performance Compensation Committee
administers the Stock Option Plan and establishes the terms of any benefits
granted thereunder. The Performance Compensation Committee also administers
the Company's non-stock based compensation plans which are intended to provide
"performance-based compensation" (as defined in Section 162(m) of the Internal
Revenue Code of 1986, as amended) including, but not limited to, establishing
objective performance goals and measures and certifying that such performance
goals and other material terms are satisfied. The Performance Compensation
Committee is comprised solely of directors who are not (i) current employees
of the Company (or any related entity), (ii) former employees of the Company
(or any related entity) receiving compensation for prior services (other than
certain pension benefits), (iii) former officers of the Company (or any
related entity), or (iv) consultants or individuals who are otherwise
receiving compensation for personal services in any capacity other than as a
director. The Performance Compensation Committee held four formal meetings
during fiscal year 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Gary C. Comer, who currently serves on the Compensation Committee, is the
Company's founder and Chairman of the Board of Directors. Mr. Comer was
President of the Company from 1963 until 1989, and served as Chief Executive
Officer from 1963 until 1990. Mr. Comer is retired from active employment at
the Company.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation of Executive Officers Generally
Lands' End believes that its employees are its most valuable asset. The
Company's goal is to recruit, motivate, reward and retain the best hourly and
salaried work force in the direct marketing industry. In addition, the Board
and the Compensation Committee desire to appropriately recognize and reward
the performance of key individuals who contribute to the Company's financial
performance. The Company has developed and implemented its compensation
policies and practices, including those for executive officers, with those
goals in mind.
The Compensation Committee believes that Lands' End has derived significant
benefits over the years from the fact that its founder and senior executive
officers have had substantial amounts of stock ownership in the Company.
Accordingly, one of the principal compensation practices used to recruit,
motivate and retain the Company's most senior executive officers has been the
use of stock option awards. Additional compensation for
5
<PAGE>
senior executives and other management personnel is provided through base
salaries and annual and long-term incentive plans based on specific financial
performance goals. In 1996, the Board adopted new annual and long-term
incentive plans with performance goals based on the Company's annual pre-tax
margin, each business unit's annual pre-tax margin and the Company's three
year average return on invested capital. Those plans are described below.
In 1994, the Compensation Committee engaged a nationally recognized
compensation consulting firm to assist in developing an overall perspective on
base, incentive and long-term compensation and benefit practices in the
specialty retail business. Since that time, representatives of the consulting
firm have met formally with the Compensation Committee (sometimes with other
Board members in attendance) on a regular basis and have had numerous other
informal discussions with members of the Compensation Committee and the Board.
The Compensation Committee believes that it is desirable for the Company to
maintain a competitive package of base, incentive and long-term compensation.
Accordingly, the Committee from time to time considers data provided by its
compensation consultant regarding compensation paid to executives of other
companies deemed to be comparable to the Company in certain respects. The
comparison group varies from time to time based on the specific nature of the
comparison but generally is comprised of companies that tend to have national
and international business operations and similar sales volumes, market
capitalizations, employment levels and lines of business. The companies used
for comparison in compensation matters generally are not the same companies
which comprise the published industry index in the Performance Graph included
in this Proxy Statement. The Compensation Committee believes that the
Company's most direct competitors for executive talent are not necessarily all
of the companies that would be included in the published industry index
established for comparing shareholder returns.
Although the Compensation Committee uses comparison group survey data in
developing the Company's overall compensation perspective, it also considers
other subjective factors that affect the comparability and usefulness of such
data to the Company. These factors include the Company's leading position as a
direct merchant, the evolving nature of its business as the Company continues
to invest in developing new catalog formats and expanding internationally, and
elements of its corporate culture.
Components of Fiscal Year 1997 Compensation
Base Salary. In determining and reviewing base salary levels, the
Compensation Committee considers the size and responsibility of the
individual's position, the individual's overall performance, the base salaries
paid by competitors for comparable positions and, in the case of new hires,
the amount of the individual's prior compensation and the need to induce the
individual to enter the employ of the Company. In making salary decisions with
respect to senior executives and overseeing other salary decisions made by
management, the Committee exercises its discretion and judgment based on the
foregoing factors, without applying a specific formula to determine the weight
of each factor considered.
Annual Incentive Plan. The Annual Incentive Plan (bonus) provides for
participation by most of the Company's salaried employees (currently
approximately 640 individuals). Pursuant to this plan, each participant is
granted an annual incentive award on or about the beginning of each fiscal
year. Each annual incentive award consists of the right to be eligible to
receive a cash bonus partially paid during the applicable fiscal year and the
remainder paid after the completion of one full fiscal year from the date of
grant. In December, participants receive a partial payment under annual
incentive awards granted with respect to such period, and, if they are
employed at the end of the one year performance period, participants receive
the remaining payment in March.
Other than participants employed by international subsidiaries of the
Company, each participant's bonus eligibility amount is 10% of base salary,
provided that the Compensation Committee has the right to approve higher
levels for certain participants on an individual basis. Participants earn a
bonus equal to their bonus eligibility amount multiplied by a factor of 0% to
200%, depending on financial results measured by a matrix of (i) the Company's
annual pre-tax margin and (ii) the participant's business unit annual pre-tax
margin.
6
<PAGE>
The matrix is subject to adjustment from time to time at the discretion of the
Compensation Committee. For most of the Company's salaried employees, the
bonus eligibility amounts are 10% of base salary. For the Company's Named
Executive Officers other than the Chief Executive Officer and Mr. Ferry, the
bonus eligibility amounts are 60% of base salary. Mr. Ferry was given a
commitment, when he was hired by the Company as Vice Chairman, Sales, in July
1996, that his payment under the Annual Incentive Plan with respect to his
first year of participation would be at least $250,000. During his second year
of participation, Mr. Ferry's bonus eligibility amount will be 100% of base
salary. The bonus eligibility amount for the Chief Executive Officer is 100%
of base salary.
In addition, for fiscal year 1997, the Compensation Committee authorized
management to provide special incentives to the Company's core merchandise
leaders, creative directors for core business units, speciality business unit
leaders, international business unit leaders and direct marketing leaders
(approximately 15 individuals). Pursuant to this program, participants were
eligible to receive cash bonuses equal to 2% to 4% of the excess of the
participant's business unit pretax earnings over a threshold applicable to
that business unit. A similar program is being considered for fiscal 1998.
Long-Term Incentive Plan. The Long Term Incentive Plan provides for
participation by certain of the Company's managers (currently approximately 60
individuals). Pursuant to this plan, each participant is granted a long-term
incentive award on or about the beginning of each fiscal year. Each long-term
incentive award consists of the right to be eligible to receive a cash bonus
after the completion of three full fiscal years from the date of grant.
Participants must be employed by the Company at the completion of the three
year performance period in order to receive any payments under long-term
incentive awards granted with respect to such period (except in cases where a
participant's employment terminates due to retirement, disability or death).
The cash bonus eligibility amounts range from 10% to 30% of base salary for
individual participants. For most participants in the plan, the bonus
eligibility amounts are 10% of base salary. The Company's most senior
executives, including the Named Executive Officers, do not participate in the
Long Term Incentive Plan. Participants earn a bonus equal to their bonus
eligibility amount, multiplied by a factor of 0% to 200%, depending on overall
corporate results measured by a matrix of (i) the Company's three year average
pre-tax margin and (ii) the Company's three year average return on invested
capital. The matrix is subject to adjustment from time to time at the
discretion of the Compensation Committee.
Stock Awards and Options. As noted in last year's Compensation Committee
report, the Committee generally expects that participation in the Long-Term
Incentive Plan adopted in fiscal 1996 will lead to a reduction in the number
of employees to whom options are granted under the Company's Stock Option
Plan. Consistent with that view, the Company awarded stock option grants to a
limited number of employees in fiscal year 1997.
The Company awarded a total of 647,000 stock option grants in fiscal year
1997, including a total of 250,000 options to employees who are not Named
Executive Officers. In March 1996, the Company awarded a total of 147,000
stock option grants, including a grant of 50,000 options to Michael Smith,
12,000 options to Francis Schaecher, 25,000 options to Stephen Orum and a
total of 60,000 options to other employees, none of whom is a Named Executive
Officer. In July 1996, the Company awarded a total of 350,000 stock option
grants, including a grant of 250,000 options to William Ferry, as discussed
below, 60,000 options to Bradley Johnson and 40,000 options to another
officer, who is not a Named Executive Officer. In November 1996, the Company
awarded a total of 150,000 stock option grants to six other employees, none of
whom is a Named Executive Officer.
In connection with the Company's July 1996 hiring of Mr. Ferry as Vice
Chairman, Sales, he was provided with a compensation package that included the
grant of 25,000 shares of restricted stock and 250,000 stock options (as
discussed above). The Board and its compensation-related committees believed
that the overall compensation package, including the restricted stock and
stock options, was a reasonable and appropriate inducement to Mr. Ferry to
enter the employ of the Company.
7
<PAGE>
Chief Executive Officer Compensation
The Chief Executive Officer of the Company is Michael Smith. When Mr. Smith
was promoted to that position in December 1994, his annual base salary was set
at $300,000, which the Compensation Committee believed to be well below the
median for the Company's comparison group but nevertheless appropriate at that
time in light of Mr. Smith's relatively short tenure as Chief Executive
Officer, his previous compensation history with the Company and the
expectation that he would be granted a substantial number of stock options. In
July 1996, in light of the compensation package made available to Mr. Ferry as
well as Mr. Smith's performance as Chief Executive Officer, the Compensation
Committee undertook a special review of Mr. Smith's compensation level. As a
result of that review and after consulting with its compensation consultant,
in September 1996 the Compensation Committee increased Mr. Smith's base salary
to $425,000 per year and increased his bonus eligibility amount to 100% of
base salary for purposes of the Annual Incentive Plan described above.
In March 1996, the Performance Compensation Committee awarded Mr. Smith
options to purchase 50,000 shares of the Company's Common Stock at $17.25 per
share (the closing market price per share of the Common Stock on the date of
grant). The options are exercisable for ten years and vest at the rate of 10%
in year one, 15% in year two, 20% in year three, 25% in year four and 30% in
year five. The specific number of options awarded was based principally on
subjective judgment factors, including the overall compensation policies and
practices described above, the then current level of Mr. Smith's beneficial
ownership of stock in the Company and the number of stock options held by
other officers of the Company.
Tax Matters
The Compensation Committee and the Board have considered the provisions of
Section 162(m) of the Internal Revenue Code, which impose an annual limit of
$1 million on the deductibility of compensation payments to a company's chief
executive officer and the four other most highly compensated executive
officers for whom proxy statement disclosure is required and who are employed
at the end of such company's taxable year. "Performance-based compensation"
(as defined in the Code) is excluded from this limit. It is the Company's
intention to preserve the deductibility of compensation paid to its employees,
including gains realized upon the exercise of non-qualified stock options, to
the extent feasible and consistent with the Company's overall compensation
philosophy. Accordingly, the Performance Compensation Committee administers
the Company's Stock Option Plan and all other plans which are intended to
provide "performance-based compensation" as defined in Section 162(m) of the
Internal Revenue Code. This Committee consists of Mr. Heller, as chairman, and
Mr. Latter, each of whom is believed to meet certain director eligibility
requirements specified in Section 162(m).
Notwithstanding the foregoing, the Compensation Committee believes that the
Company's compensation philosophy is appropriate and consistent with the long-
term interests of the Company, without regard to tax considerations. In the
event of changes in the tax law or other circumstances that might affect tax
treatment, the Compensation Committee would not currently anticipate that
fundamental changes would be made in the Company's overall compensation
policies and practices.
Submitted by the Compensation Committee
of the Board of Directors
Howard G. Krane, Chairman
Gary C. Comer
David B. Heller
John N. Latter
8
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SUMMARY COMPENSATION TABLE
Set forth below is certain information concerning the compensation for each
of the Named Executive Officers for the fiscal year ended January 31, 1997:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------------
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------------
RESTRICTED
OTHER ANNUAL STOCK STOCK ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#) ($)(2)
------------------ ------ ------- ------- ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Michael J. Smith........ 1997 350,481 315,433 -0- -0- 50,000 40,134(3)
President and 1996 305,769 6,000 135,000(4) -0- 110,000 20,625
Chief Executive Officer 1995 142,654 44,936 -0- -0- -0- 8,604
William E. Ferry(5)..... 1997 207,692 250,000 -0- 493,750 250,000 31,030(6)
Vice Chairman, Sales
Stephen A. Orum......... 1997 250,000 135,000 -0- -0- 25,000 24,853
Executive Vice
President, 1996 254,807 5,000 -0- -0- 60,000 14,820
Chief Operating Officer 1995 203,192 96,008 -0- -0- -0- 14,631
Bradley K. Johnson(7)... 1997 177,885 96,058 -0- -0- 60,000 54,623(8)
Senior Vice President,
Chief Administrative
Officer &
Chief Financial Officer
Francis P. Schaecher.... 1997 193,250 104,355 -0- -0- 12,000 18,126
Senior Vice President 1996 191,615 3,760 -0- -0- 30,000 11,301
Operations 1995 186,000 87,885 -0- -0- -0- 16,783
</TABLE>
- --------
(1) Dividends, if any, on shares of restricted stock are paid at the same time
and at the same rate as dividends on the Company's unrestricted Common
Stock. The aggregate number and value (based on the closing price of the
Company's Common Stock ($28.375) on the New York Stock Exchange on January
31, 1997) of each Named Executive Officer's restricted stock holdings as
of such date are as follows: Mr. Smith, 1,800 shares, $51,075; Mr. Ferry,
25,000 shares, $709,375; Mr. Orum, 2,400 shares, $68,100; Mr. Johnson, 0
shares, $0; and Mr. Schaecher, 0 shares, $0.
(2) For fiscal year 1997, these amounts include the taxable portion of
premiums on Company-provided life insurance, Company's contributions to
the Retirement Plan and the Company's contributions to the Deferred
Compensation and Excess Benefit Plan, in the following amounts: Mr. Smith,
$792, $6,871, $32,167, respectively; Mr. Ferry, $2,804, $0, $0,
respectively; Mr. Orum, $3,403, $10,150, $11,300, respectively; Mr.
Johnson $773, $0, $0, respectively; and Mr. Schaecher, $1,575, $10,174,
$6,377, respectively.
(3) Of the $40,134 in 1997, $304 is for personal use of Company planes and the
remainder is described in footnote (2) above.
(4) In fiscal year 1996, Mr. Smith received a cash payment of $135,000 from
the Company pursuant to the terms of his appointment as President and
Chief Executive Officer of the Company, effective December 2, 1994.
(5) Mr. Ferry was appointed Vice Chairman, Sales on July 25, 1996.
(6) Of the $31,030 in 1997, $4,672 is for personal use of Company planes,
$23,554 is for relocation expenses and the remainder is described in
footnote (2) above.
(7) Mr. Johnson was appointed Senior Vice President, Chief Administrative
Officer and Chief Financial Officer on May 20, 1996.
(8) Of the $54,623 in 1997, $53,850 is for relocation expenses and the
remainder is described in footnote (2) above.
9
<PAGE>
STOCK OPTION GRANTS IN FISCAL YEAR 1997
Set forth below is certain information relating to options to acquire Common
Stock granted to each Named Executive Officer during the fiscal year ended
January 31, 1997, and the grant-date present value of each option grant.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED ANNUAL
TOTAL STOCK RATES OF STOCK PRICE
STOCK OPTIONS APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM
GRANTED EMPLOYEES IN PRICE EXP. ------------------------
NAME (#) (1) FISCAL YEAR ($/SH) DATE 5%($)(2) 10%($)(2)
---- ------- ------------ -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Michael J. Smith........ 50,000 7.73% 17.25 12/31/06 542,500 1,374,500
William E. Ferry........ 250,000 38.64% 19.75 12/31/06 3,105,000 7,870,000
Stephen A. Orum......... 25,000 3.86% 17.25 12/31/06 271,250 687,250
Bradley K. Johnson...... 60,000 9.27% 19.75 12/31/06 745,200 1,888,800
Francis P. Schaecher.... 12,000 1.85% 17.25 12/31/06 130,200 329,880
</TABLE>
- --------
(1) Options are exercisable starting on the first anniversary of the grant
date, with 10% of the shares covered thereby becoming exercisable at that
time, and an additional 15%, 20%, 25%, and 30% of the option shares
becoming exercisable on the second, third, fourth, and fifth anniversaries
of the grant date, respectively.
(2) The actual value, if any, an executive may realize will depend upon the
excess of the stock price over the exercise price on the date the option
is exercised, so there is no assurance that the value realized by the
executive will be at or near the amount shown. The potential value set
forth in the 5% and 10% columns was calculated by multiplying those
options by the excess of (a) the assumed market value of Common Stock if
the market value of Common Stock were to increase 5% or 10% in each year
of the option's 10-year term over (b) the exercise price shown. In order
to realize the potential value set forth in the 5% and 10% columns, the
per share price of the Common Stock would be approximately $28.10 and
$44.74, respectively, for options granted at $17.25 per share and
approximately $32.17 and $51.23, respectively, for options granted at
$19.75 per share.
STOCK OPTION EXERCISES AND FISCAL YEAR-END VALUE TABLE
Set forth below is certain information relating to options to acquire Common
Stock exercised by each Named Executive Officer during the fiscal year ended
January 31, 1997, and options to acquire Common Stock held by each Named
Executive Officer as of such date.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED STOCK IN-THE-MONEY
ACQUIRED OPTIONS AT FY-END STOCK OPTIONS
ON VALUE (#) AT FY-END ($)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) (1) UNEXERCISABLE UNEXERCISABLE (2)
---- -------- -------- ----------------- -------------------
<S> <C> <C> <C> <C>
Michael J. Smith........ -0- -0- 20, 680 / 158,120 256,435 / 1,853,415
William E. Ferry........ -0- -0- 0 / 250,000 0 / 2,156,250
Stephen A. Orum......... -0- -0- 49,160 / 94,440 678,595 / 1,115,105
Bradley K. Johnson...... -0- -0- 0 / 60,000 0 / 517,500
Francis P. Schaecher.... -0- -0- 8,160 / 42,440 74,970 / 480,355
</TABLE>
- --------
(1) Upon exercise of an option, an individual does not receive cash equal to
the amount contained in the Value Realized column of this table. Instead,
the amounts contained in the Value Realized column reflect the increase in
the price of the Company's Common Stock from the option award date to the
option exercise date. No cash is realized until the shares received upon
exercise of an option are sold.
(2) Calculated based upon the closing price of the Company's Common Stock
($28.375) on the New York Stock Exchange on January 31, 1997.
10
<PAGE>
PERFORMANCE GRAPH
The following graph presents the cumulative total shareholder return of the
Company, the Value Line Retail Index and the Standard & Poor's MidCap 400
Index for a five year period. Cumulative total shareholder return is defined
as share price appreciation assuming reinvestment of dividends. The Company's
Common Stock is included in both the Value Line Retail Index and the Standard
& Poor's MidCap 400 Index. In addition to the Company, 51 retailers (including
catalog companies) comprise the Value Line Retail Index. The dollar amounts
shown on the following graph assume that $100 was invested on February 1, 1992
in Company Common Stock, stocks constituting the Value Line Retail Index and
stocks constituting the Standard and Poor's MidCap 400 Index with all
dividends being reinvested. The January 31 dates shown on the following graph
do not correspond exactly with the last day of the Company's fiscal year in
calendar years 1993, 1994, 1995 and 1996.
COMPARISON OF FIVE-YEAR TOTAL RETURN
AMONG LANDS' END, INC., VALUE LINE RETAIL INDEX AND S&P MIDCAP 400 INDEX
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
VALUE OF $100 INVESTED ON FEBRUARY 1,
1992 AT
---------------------------------------
1/31/93 1/31/94 1/31/95 1/31/96 1/31/97
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Lands' End, Inc......................... $82 $154 $102 $92 $179
Value Line Retail Index................. 104 112 94 94 111
S&P MidCap 400 Index.................... 111 128 122 160 195
</TABLE>
11
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table shows certain information concerning the number of
shares of the Company's Common Stock beneficially owned, directly or
indirectly, by each director and nominee for director of the Company, the
chief executive officer and each of the four other most highly compensated
executive officers of the Company, and the directors and executive officers as
a group. The following table also sets forth information concerning each
person known to the Company as of March 21, 1997, to be the "beneficial owner"
(as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended)
of more than 5% of the Company's Common Stock. Unless otherwise indicated, the
persons named in the table have sole voting and investment power with respect
to all shares shown as beneficially owned by them. Except as described in the
notes below, all information in the table and the accompanying footnotes is
given as of March 21, 1997, and has been supplied by each of the persons
included in the table.
<TABLE>
<CAPTION>
PERCENT
NAME OF BENEFICIAL OWNER AMOUNT OF CLASS
------------------------ ---------- --------
<S> <C> <C>
Gary C. Comer........................................ 17,399,392 53.69%
Address: Citicorp Plaza, Suite 620;
8420 W. Bryn Mawr Avenue; Chicago, IL 60631
Richard C. Anderson (1).............................. 1,184,010 3.65%
David B. Heller...................................... 8,000 *
Howard G. Krane (2).................................. 20,000 *
John N. Latter....................................... 145,000 *
William E. Ferry (3)................................. 131,500 *
Bradley K. Johnson................................... 0 *
Stephen A. Orum (4).................................. 77,060 *
Francis P. Schaecher (5)............................. 113,860 *
Michael J. Smith (6)................................. 55,850 *
All directors and executive officers as a group (10 19,134,672 58.81%
persons) (7)........................................
</TABLE>
- --------
(1) Share amount shown includes (i) 108,000 shares of the Company's Common
Stock owned by Mr. Anderson's wife as to which he disclaims beneficial
ownership and (ii) 19,200 shares of the Company's Common Stock which Mr.
Anderson gifted to his son as to which he disclaims beneficial ownership.
(2) Share amount shown includes 2,000 shares of the Company's Common Stock
owned by Mr. Krane's wife as to which he disclaims beneficial ownership.
(3) Share amount shown includes (i) 14,830 shares of the Company's Common
Stock owned by Mr. Ferry and his wife as tenants in common as to which he
disclaims beneficial ownership except to the extent of his pecuniary
interest therein, (ii) 150 shares of the Company's Common Stock which Mr.
Ferry gifted to his son as to which he disclaims beneficial ownership,
(iii) 61,520 shares of the Company's Common Stock owned by Mr. Ferry's
family's limited partnership, Ferry Lands' End Limited Partnership, as to
which he disclaims beneficial ownership except to the extent of his
pecuniary interest therein and (iv) 20,000 shares of the Company's Common
Stock owned by Mr. Ferry's family's limited partnership, Ferry Lands' End
II Limited Partnership, as to which he disclaims beneficial ownership
except to the extent of his pecuniary interest therein.
(4) Share amount shown includes (i) exercisable options for 60,660 shares of
Company Common Stock granted to Mr. Orum on December 9, 1991, April 6,
1993, December 10, 1993, February 13, 1995 and March 15, 1996 under the
Stock Option Plan and (ii) options for 6,000 shares of Company Common
Stock granted to Mr. Orum on April 6, 1993 under the Stock Option Plan,
which options will become exercisable within 60 days.
(5) Share amount shown includes exercisable options for 13,860 shares of
Company Common Stock granted to Mr. Schaecher on December 10, 1993,
February 13, 1995 and March 15, 1996 under the Stock Option Plan.
(6) Share amount shown includes (i) exercisable options for 42,180 shares of
Company Common Stock granted to Mr. Smith on April 6, 1993, December 10,
1993, February 13, 1995 and March 15, 1996 under the Stock Option Plan and
(ii) options for 4,000 shares of Company Common Stock granted to Mr. Smith
on April 6, 1993 under the Stock Option Plan, which options will become
exercisable within 60 days.
(7) Share amount shown includes exercisable options and options which will
become exercisable within 60 days for 126,700 shares of Company Common
Stock granted to certain executive officers under the Stock Option Plan.
*Less than 1%.
12
<PAGE>
APPROVAL OF THE NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Company seeks shareholder approval of the Lands' End, Inc. Non-Employee
Director Stock Option Plan (the "Plan"). On February 18, 1997, the Board of
Directors of the Company adopted the Plan subject to the approval of the Plan
by the Company's shareholders. The Board of Directors of the Company believes
it is in the best interest of the Company to encourage stock ownership by
members of the Board of Directors of the Company who are not also employed by
the Company ("Non-Employee Directors") in order to further align the interests
of the Non-Employee Directors with those of the shareholders. The Plan will
provide additional means for the Company to attract and retain qualified
individuals as members of the Board of Directors of the Company and to promote
such alignment of interests by granting Non-Employee Directors nonqualified
stock options from time to time. If the shareholders approve the Plan, the
Plan will replace the annual retainer paid to members of the Board of
Directors. See "Meetings and Compensation of Directors." The Board of
Directors recommends that shareholders vote "FOR" the approval of the Plan.
The following summary of the Plan is qualified in its entirety by the full
text of the Plan, a copy of which may be obtained without charge by sending a
written request to the Manager--Investor Relations, Lands' End, Inc., One
Lands' End Lane, Dodgeville, Wisconsin 53595.
Under the Plan, Non-Employee Directors are granted stock options to purchase
shares of the Company's Common Stock. Options are granted under the Plan with
an exercise price equal to the fair market value per share of the Company's
Common Stock on the date of the grant.
ADMINISTRATION OF THE PLAN
The Plan will be administered by a committee of the Board of Directors (the
"Committee") consisting of two or more members of the Board of Directors
designated by the Board. The initial members of the Committee are Michael J.
Smith and William E. Ferry. The Committee has no power to select the Non-
Employee Directors who will receive options, to set the exercise price of the
options, to determine the number of shares of Common Stock to be subject to an
option or the time at which an option shall be granted, to establish the
duration of an option, or to alter any other terms or conditions specified in
the Plan, except in the sense of administering the Plan subject to the
provisions of the Plan. Initially, four Non-Employee Directors, consisting of
all Non-Employee Directors other than Gary C. Comer, will participate in the
Plan.
SHARES AVAILABLE FOR ISSUANCE UNDER THE PLAN
There is an aggregate of 400,000 shares of the Company's Common Stock
available for issuance upon exercise of options granted under the Plan, which
shares may be authorized and unissued shares or treasury shares. Shares of
Common Stock allocable to the unexercised portion of expired or terminated
options may again become subject to options. The closing price of the
Company's Common Stock on the New York Stock Exchange on April 3, 1997 was
$25.375.
PLAN PARTICIPANTS
Under the Plan, an option may be granted only to a person who, at the time
of the grant, is a Non-Employee Director.
OPTION TERMS
Subject to execution by a Non-Employee Director of the appropriate Option
Agreement, options are granted automatically and without further action of the
Board, as follows:
Initial Option. Each person who is a Non-Employee Director on the date of
the Annual Meeting in 1997 (the "Effective Date") will be granted, on the
Effective Date, an option to purchase twenty thousand (20,000) shares of
Common Stock (an "Initial Option"). Any Non-Employee Director who receives the
Initial Option
13
<PAGE>
will not be eligible to receive any Annual Options until immediately after the
Annual Meeting in 2000. The Initial Option vests and becomes exercisable as to
(A) 50% of the shares of Common Stock covered thereby on the Effective Date;
(B) another 25% of the shares of Common Stock covered thereby immediately
after the Annual Meeting in 1998, provided that such person is a Director on
such date; and (C) another 25% of the shares of Common Stock covered thereby
immediately after the Annual Meeting in 1999, provided that such person is a
Director on such date. If the participant ceases to be a Non-Employee Director
as a result of his or her death or disability, the Initial Option shall
immediately vest and become exercisable as to all of the shares of Common
Stock covered thereby as of the date of such termination.
Annual Option. Beginning immediately after the Annual Meeting in 1998, each
Non-Employee Director who was not granted an Initial Option will be granted,
immediately after such Annual Meeting and immediately after each Annual
Meeting thereafter where such person remains a Non-Employee Director, an
option to purchase five thousand (5,000) shares of Common Stock (an "Annual
Option"). Each Annual Option will vest and become exercisable immediately upon
the grant of such Annual Option. Non-Employee Directors who receive the
Initial Option will be eligible to receive the Annual Option commencing with
the Annual Meeting in 2000.
Interim Option. If a new Non-Employee Director is elected after the
Effective Date and not on the date of an Annual Meeting (whether to fill a
vacancy or newly-created director position), he or she will be granted, on the
date he or she is elected, an option (an "Interim Option") to purchase a
number of shares of Common Stock equal to five thousand (5,000) times a
fraction, the numerator of which is the number of complete months from the
date the Non-Employee Director is elected until the then anticipated date of
the next Annual Meeting and the denominator of which is twelve (12). Each
Interim Option shall vest and become exercisable immediately upon the grant of
such Interim Option.
TERMINATION AND TRANSFERABILITY OF OPTION
No option may be exercised later than December 31 of the year in which the
tenth anniversary of the date of grant occurs. The Plan allows the
participants to pay the option price payment in cash, Common Stock or a
combination thereof. In addition, the Plan authorizes the Committee to adjust
the number and type of shares of Common Stock subject to the Plan or
outstanding options in order to prevent a dilution or enlargement of benefits
as a result of a corporate transaction or event.
If a participant ceases to be a member of the Board for any reason, any
vested and unexercised option shall be exercisable for three years from the
date of such termination (or until such earlier time as the option would
otherwise expire or terminate on its own terms).
No option granted under the Plan is transferable other than to immediate
family members or by will or the laws of descent and distribution.
AMENDMENT AND TERMINATION OF THE STOCK OPTION PLAN
The Board of Directors may amend the Plan at any time in its sole
discretion, but no amendment may, without the participant's consent, impair
his or her rights to any option previously granted under the Plan, or without
shareholder approval (i) increase the maximum number of shares of Common Stock
which may be issued under the Plan (except to prevent a dilution or
enlargement of benefits as a result of a corporate transaction or event), (ii)
extend the termination date of the Plan or any option granted under the Plan,
or (iii) enlarge the class of persons eligible to receive options under the
Plan. The Board may terminate the Plan at any time with respect to shares of
Common Stock for which options have not previously been granted. In certain
circumstances, shareholder approval may also be required to comply with new or
existing legislation. The Plan provides that unless earlier terminated, the
Stock Option Plan will terminate at the close of business on the day following
the Annual Meeting in 2006.
14
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following is intended only as a brief, general summary of the federal
income tax rules relevant to stock options granted under the Plan, and assumes
(i) that any participant subject to Section 16(b) of the Securities Exchange
Act of 1934 will not exercise any option granted under the Plan before the six
month anniversary of the date of grant of such option and (ii) that the
exercise of options and disposition of option shares occur during the lifetime
of the participant. This discussion is not intended to provide guidance to
participants. Participants should consult their own personal tax advisors.
Nonqualified Stock Options. The holder of a nonqualified stock option
("NQO") (i.e., a stock option which is not an "incentive stock option" within
the meaning of Section 422 of the Internal Revenue Code) does not recognize
taxable income upon the grant of the NQO, nor is the Company entitled, for
income tax purposes, to a deduction. The participant recognizes ordinary
income on the exercise of an NQO equal to the excess of the fair market value
of the shares received on exercise over the option exercise price. The fair
market value of the shares is measured on the exercise date. Options granted
under the Plan are intended to be NQOs.
If the Company complies with applicable documentation requirements, it is
generally entitled to a deduction in computing its federal income taxes in an
amount equal to the ordinary income recognized by the participant on the
exercise of the NQO.
If a participant sells shares acquired pursuant to the exercise of an NQO,
the participant will recognize capital gain or loss equal to the difference
between the selling price of the shares and their fair market value on the
exercise date.
Exercise with Previously Owned Shares. The previous discussion assumes that
all shares of Common Stock acquired on the exercise of an option are paid for
in cash. If a participant pays for all or a portion of the option exercise
price with previously owned shares of Common Stock, the participant will
generally (although not in all cases) recognize no gain or loss on the
previously owned shares surrendered. The participant's tax basis in and
holding period for the surrendered shares (for purposes of determining capital
gains and losses, but not for purposes of determining whether a disqualifying
disposition occurs and its consequences) will generally carry over to an equal
number of shares received.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors recommends that shareholders ratify the appointment
of Arthur Andersen LLP as independent public accountants to audit the
Company's consolidated financial statements for the fiscal year ending January
30, 1998. A representative of Arthur Andersen LLP will be present at the
meeting with the opportunity to make a statement if such representative so
desires, and will be available to respond to appropriate questions raised
orally at the meeting or submitted in writing to the Company's Secretary
before the meeting.
OTHER INFORMATION
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission and the New
York Stock Exchange. Officers, directors and greater than ten-percent
beneficial owners are required by Securities and Exchange Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the best of the Company's knowledge, based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons that no Section 16(a) forms were required for those persons,
all Section 16(a) filing requirements applicable to its officers, directors
and greater than ten-percent beneficial owners were complied with during the
two fiscal years ended January 31, 1997.
15
<PAGE>
ADDITIONAL MATTERS
The Board of Directors is not aware of any other matters that will be
presented for action at the 1997 Annual Meeting. Should any additional matters
properly come before the meeting, properly signed and dated proxies will be
voted on those matters by the persons named therein in accordance with the
best judgment of such persons.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Company's By-Laws require that the Company be provided with written
notice with respect to the nomination of a person for election as a director
or the submission of any proposal at an annual meeting of shareholders. Any
such notice must include certain information concerning the nominating or
proposing shareholder, and the nominee or the proposal, and must be furnished
to the Company not less than 10 business days prior to such meeting. A copy of
the applicable By-Law provision may be obtained, without charge, upon written
request to the Secretary of the Company at the address set forth below.
In addition, all shareholder proposals to be included in the Board of
Directors' Proxy Statement and proxy for the 1998 Annual Meeting of
shareholders (i) must be received by the Secretary of the Company not later
than December 17, 1997, and (ii) must satisfy the conditions established by
the Securities and Exchange Commission as necessary to entitle such proposal
to be included in the Proxy Statement and form of proxy.
COST OF PROXY SOLICITATION
The Company will pay the cost of preparing, printing and mailing proxy
materials as well as the cost of soliciting proxies on behalf of the Board of
Directors. In addition to using the mails, officers and other employees of the
Company may solicit proxies in person and by telephone and telegraph.
REPORT TO SHAREHOLDERS
The Company has mailed this Proxy Statement along with a copy of the
Company's 1997 Annual Report to each shareholder entitled to vote at the
Annual Meeting. Included in the 1997 Annual Report are the Company's
consolidated financial statements for the fiscal year ended January 31, 1997.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
JANUARY 31, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, MAY BE
OBTAINED WITHOUT CHARGE BY SENDING A WRITTEN REQUEST TO THE SECRETARY, LANDS'
END, INC., ONE LANDS' END LANE, DODGEVILLE, WISCONSIN 53595.
By order of the Board of Directors,
/s/ Robert S. Osborne
Robert S. Osborne
Secretary
April 14, 1997
16
<PAGE>
LANDS' END 1997 ANNUAL MEETING
[LOGO OF MAP]
<PAGE>
LANDS' END, INC.
----------------
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
---------------------------------------
1. IDENTIFICATION OF THE PLAN.
1.1 Title. The Plan described herein shall be known as the "Non-Employee
Director Stock Option Plan" of Lands' End, Inc. (the "Company") and is referred
to herein as the "Plan." The Plan is hereby established as of the date of the
annual meeting of the Company's stockholders ("Annual Meeting") scheduled to be
held on or about May 14, 1997 (the "Effective Date").
1.2 Purpose. The Board of Directors of the Company believes it is in the
best interest of the Company to encourage stock ownership by members of the
Board of Directors of the Company who are not also employed by the Company
("Non-Employee Directors") in order to further align the interests of the Non-
Employee Directors with those of the shareholders. The Plan will provide
additional means for the Company to attract and retain qualified individuals as
members of the Board of Directors of the Company and to promote such alignment
of interests by granting Non-Employee Directors from time to time nonqualified
stock options ("Options") to purchase shares of common stock of the Company
("Company Shares"). By virtue of the benefits available under the Plan, Non-
Employee Directors will have an opportunity to participate in any future
appreciation in the value of Company Shares, which will furnish such Non-
Employee Directors with an additional incentive to work for and contribute to
the growth and success of the Company.
1.3 Adoption of the Plan. The Lands' End, Inc. Non-Employee Director
Stock Option Plan was adopted by the Company's Board of Directors on February
18, 1997, subject to approval by the Company's shareholders not later than
February 18, 1998.
1.4 Company Shares Reserved for the Plan. There is reserved for issuance
upon the exercise of Options to be granted under the Plan an aggregate of
400,000 Company Shares, which may be authorized and unissued shares or treasury
shares and which number is subject to adjustment for events occurring after the
Effective Date as provided in Section 5.4.
II. ADMINISTRATION OF THE PLAN.
2.1 Committee's Membership and Powers. The Plan will be administered by a
committee of the Board of Directors of the Company (the "Committee") consisting
of two or more members of the Board of Directors of the Company ("Directors") as
the Board of Directors of the Company (the "Board") may designate from time to
time. All questions of interpretation of the Plan or of any Option shall be
determined by the Committee, and such determination shall be final and binding
upon all persons having an interest in the Plan or such Option. Notwithstanding
any other provision herein to the contrary, the Committee shall have no
authority, discretion, or power to select the Non-Employee Directors who will
receive Options, to set the exercise price of the Options, to determine the
number of Company Shares to be subject to an Option or the time at which an
Option shall be granted, to establish the duration of an Option, or to alter any
other terms or conditions
<PAGE>
specified in the Plan, except in the sense of administering the Plan subject to
the provisions of the Plan. The initial members of the Committee are Michael J.
Smith and William E. Ferry.
2.2 Indemnification. Service on the Committee shall constitute service as
a Director so that members of the Committee shall be entitled to indemnification
and reimbursement as Directors to the full extent provided for at any time by
law, the Company's Certificate of Incorporation, the Company's By-Laws and in
any insurance policy or other agreement intended for the benefit of the
Directors.
III. PLAN PARTICIPANTS. An Option shall be granted only to a person who, at
the time of the grant, is a Non-Employee Director. A Non-Employee Director who
receives a grant of an Option is referred to herein as a "participant."
IV. TERMS AND CONDITIONS OF OPTIONS. Options shall be nonstatutory stock
options; that is, options which are not treated as incentive stock options
within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code"). Options shall be evidenced by option agreements
specifying the number of Company Shares covered thereby, in such form as the
Board shall from time to time establish (the "Option Agreements"). Option
Agreements may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the following terms and conditions:
4.1 Automatic Grant of Options. Subject to execution by a Non-Employee
Director of the appropriate Option Agreement, Options shall be granted
automatically and without further action of the Board, as follows:
(a) Initial Option. Each person who is a Non-Employee Director
immediately after the Annual Meeting on the Effective Date shall be granted,
on the Effective Date, an Option to purchase twenty thousand (2 0,000)
Company Shares (an "Initial Option"). Any Non-Employee Director who receives
the Initial Option will be eligible to receive the Annual Option commencing
with the Annual Meeting in 2000. The Initial Option shall vest and become
exercisable as follows:
(i) Time Vesting. Subject to the terms and conditions of the
Initial Option and subject to Section 4.1(a)(ii) below, the Initial
Option shall vest and become exercisable as to (A) 50% of the Company
Shares covered thereby on the Effective Date; (B) another 25% of the
Company Shares covered thereby immediately after the Annual Meeting in
1998, provided that such person is a Director on such date; and (C)
another 25% of the Company Shares covered thereby immediately after the
Annual Meeting in 1999, provided that such person is a Director on such
date.
(ii) Acceleration for Death or Disability. If the participant
ceases to be a Non-Employee Director as a result of his or her death or
"disability", the Initial
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Option shall immediately vest and become exercisable as to all of the
Company Shares covered thereby as of the date of such termination. For
this purpose a participant shall be considered "disabled" if the
Committee determines in good faith that he or she is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than 12 months.
(b) Annual Option. Commencing immediately after the Annual Meeting in
1998, each Non-Employee Director shall be granted, immediately after such
Annual Meeting and each Annual Meeting thereafter where such person remains
a Non-Employee Director, an Option to purchase five thousand (5,000) Company
Shares (an "Annual Option"); provided, however, that any Non-Employee
Director who receives the Initial Option will be eligible to receive the
Annual Option commencing with the Annual Meeting in 2000. Each Annual Option
shall vest and become exercisable immediately upon the grant of such Annual
Option.
(c) Interim Option. If a new Non-Employee Director is elected after
the Effective Date and not on the date of an Annual Meeting (whether to fill
a vacancy or newly-created director position), he or she shall be granted,
on the date he or she is elected, an Option (an "Interim Option") to
purchase a number of Company Shares equal to five thousand (5,000) times a
fraction, the numerator of which is the number of complete months from the
date the Non-Employee Director is elected until the then anticipated date of
the next Annual Meeting and the denominator of which is twelve (12). Each
Interim Option shall vest and become exercisable immediately upon the grant
of such Interim Option.
(d) Right to Decline Option. Notwithstanding the foregoing, any person
may elect not to receive an Option by so notifying the Company, orally or in
writing, no later than the day prior to the date such Option would otherwise
be granted. A person so declining an Option shall receive no payment or
other consideration in lieu of such declined Option. A person who has
declined an Option may revoke such election by delivering written notice of
such revocation to the Board no later than the day prior to the date such
Option would be granted.
4.2 Term of Options. Each Option shall expire and not be exercisable
after the first to occur of (i) December 31 of the year in which the tenth
anniversary of the Grant Date of such Option occurs and (ii) three years after
the Non-Employee Director ceases to be a Director of the Company for any reason.
4.3 Option Price. The Option price per Company Share shall be 100 percent
of the fair market value of a Company Share on the date the Option is granted
(the "Grant Date"). For this purpose "fair market value" of a Company Share as
of any date shall be equal to the last per share sales price reported for a
Company Share for such date in The Wall Street Journal or, if no sales of
Company Shares are reported for such date in The Wall Street Journal, for the
next succeeding date
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for which sales of Company Shares are so reported in The Wall Street Journal. If
sales of Company Shares are not reported for any date in The Wall Street
Journal, then the "fair market value" of a Company Share as of any date shall be
determined in such manner as shall be prescribed in good faith by the Committee.
4.4 Method of Exercising Options. An Option may be exercised only by a
written notice to the Company accompanied by payment of the full Option price
which may be made in any one or any combination of the following: cash,
certified or official bank check, or delivery of Company Share certificates
endorsed in blank or accompanied by executed stock powers evidencing Company
Shares whose value shall be deemed to be the "fair market value" (as determined
in accordance with Section 4.3 hereof) on the date of exercise of such Company
Shares.
V. GENERAL PROVISIONS.
5.1 Option Agreement. No person shall have any rights under any Option
granted under this Plan unless and until the Company and the person to whom such
Options shall have been granted shall have executed and delivered an agreement
expressly conferring the grant of the Option to such person and containing
provisions setting forth the terms of the Option.
5.2 Shareholder Rights. A participant shall not have any dividend, voting
or other shareholder rights by reason of a grant of an Option prior to the
issuance of any Company Shares pursuant to the proper exercise of all or any
portion of such Option.
5.3 Transferability of Options.
(a) Permitted Transfers. Other than by will or the laws of descent
and distribution, each Option granted under this Plan shall be transferable
only to a member of a participant's Family Group (the "Permitted
Transferees"). A Permitted Transferee may make subsequent transfers to any
person who would also be a Permitted Transferee of the participant. If a
participant or Permitted Transferee transfers an Option pursuant to this
Section 5.3, he or she must give the Company prompt written notice of such
transfer and the transfer shall only be effective upon the Company's receipt
of such notice. An Option shall be exercisable during the participant's
lifetime only by such participant, his or her guardian in the event of
disability or, upon transfer, the Permitted Transferee. "Family Group" means
a participant's spouse and descendants (whether natural or adopted) and any
trust solely for the benefit of such participant and/or such participant's
spouse and/or descendants.
(b) Death. In the event of the death of a participant, exercise of any
Option that has not been previously transferred shall be made 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
benefit shall pass by will or the laws of descent and distribution and only
to the extent that the deceased participant was entitled thereto at the date
of his or her death.
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5.4 Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Company Shares,
other securities or other property), recapitalization, stock split, reverse
stock split, reorganization, merger, consolidation, combination, split-up, spin-
off, repurchase or exchange of Company Shares or other securities of the
Company, issuance of warrants or other rights to purchase Company Shares or
other securities of the Company, or other similar corporate transaction or event
affects the Company Shares such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall, in such manner as it may deem equitable, adjust any or
all of (a) the number and type of Company Shares (or other securities or
property) which thereafter may be made the subject of Options, (b) the number
and type of Company Shares (or other securities or property) subject to
outstanding Options, and (c) the grant, purchase, or exercise price with respect
to any Options, or, if deemed appropriate, make provision for a cash payment to
the holder of an outstanding Option.
5.5 Withholding of Taxes. The Company shall be entitled, if the Committee
(or any financial officer designated by it) considers it necessary or desirable,
to withhold (or secure payment from the participant in lieu of withholding) the
amount of any withholding or other payment required of the Company under the tax
withholding provisions of the Code, any state's income tax act or any other
applicable law with respect to any Company Shares issuable under such
participant's exercised Options, and the Company may defer issuance unless
indemnified to its satisfaction with respect to payment of such withholding or
other tax. Subject to such rules as the Committee may adopt, participants may
satisfy this obligation, in whole or in part, by an election to have the number
of Company Shares received upon exercise of any Option reduced by a number of
Company Shares having a "fair market value" (as determined in accordance with
Section 4.3 hereof) equal to the amount of the required withholding to be so
satisfied or to surrender to the Company previously held Company Shares having
an equivalent fair market value.
5.6 No Directorship Rights Conferred. Nothing in the Plan or in any
Option granted under the Plan shall confer any right on a Non-Employee Director
to continue as a Director or shall interfere in any way with any right or power
to remove him or her from the Board in accordance with applicable law and the
Company's Articles of Incorporation and Bylaws.
5.7 Disposition of Company Shares. Unless otherwise specifically
authorized by the Committee, participants may not dispose of, sell or otherwise
transfer any Company Shares acquired upon exercise of Options granted under the
Plan for a period of six months following the Grant Date.
5.8 Continued Availability of Company Shares Under Unexercised Options. If
an Option granted under the Plan terminates or expires without being wholly
exercised or if Company Shares as to which an Option has been exercised shall
for any reason not be issued, a new Option may be granted under the Plan
covering the number of Company Shares to which such termination, expiration,
failure to issue or reacquisition related.
5.9 Intent to Comply with Rule 16b-3. It is the intent of the Company
that the Plan comply in all respects with Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, that
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any ambiguities or inconsistencies in construction of the Plan be interpreted to
give effect to such intention and that if any provision of the Plan is found not
to be in compliance with Rule 16b-3, such provision shall be deemed null and
void to the extent required to permit the Plan to comply with Rule 16b-3.
5.10 No Strict Construction. No rule of strict construction shall be
applied against the Company, the Committee or any other person in the
interpretation of any of the terms of the Plan, any Option agreement or any
Option granted under the Plan or any rule or procedure established by the
Committee.
5.11 Choice of Law. Each Option granted under the Plan shall be considered
to be a contract under the laws of the State of Delaware and, for all purposes,
the Plan and each Option granted under the Plan shall be construed in accordance
with and governed by the laws of the State of Delaware.
5.12 Successors. This Plan is binding on and will inure to the benefit of
any successor to the Company, whether by way of merger, consolidation, purchase
or otherwise.
5.13 Severability. If any provision of the Plan or an Option Agreement
shall be held illegal or invalid for any reason, such illegality or invalidity
shall not affect the remaining provisions of the Plan or such agreement, and the
Plan and such agreement shall each be construed and enforced as if the invalid
provisions had never been set forth therein.
VI. AMENDMENT AND TERMINATION.
6.1 Amendment. The Board of Directors may amend the Plan from time to
time, in its sole discretion, but no amendment shall:
(a) without a participant's consent impair his or her rights to any
Option theretofore granted; or
(b) without the authorization and approval of the Company's
shareholders (i) increase the maximum number of Company Shares which may be
issued in the aggregate under the Plan, except as provided in Section 5.4,
(ii) extend the termination date of the Plan or of any Option granted under
the Plan or (iii) enlarge the class of persons eligible to receive Options
under the Plan.
6.2 Termination. The Board of Directors may terminate the Plan at any
time with respect to Company Shares for which Options have not theretofore been
granted. Unless earlier terminated, the Plan will terminate at the close of
business on the day following the Annual Meeting in 2006. Following the
termination of the Plan, no further Options may be granted under the Plan;
however, all Options which prior to the Plan termination have not expired,
terminated or been exercised or
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surrendered may be exercised thereafter in accordance with their terms and the
terms hereof, and the Committee shall continue to have its full powers under the
Plan.
* * * * *
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LANDS' END, INC.
ANNUAL MEETING OF SHAREHOLDERS--MAY 14, 1997
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Gary C. Comer, Michael J. Smith and Robert S.
Osborne as Proxies, each with the power to appoint his substitute and hereby
authorizes each of them to represent and to vote, as designated below, all of
the shares of common stock of Lands' End, Inc. held of record by the undersigned
on March 21, 1997, at the annual meeting of shareholders to be held on May 14,
1997, or any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this Proxy will be
voted FOR the election of the nominees listed in Item 1, FOR Proposal 2 and FOR
Proposal 3.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign.
. DETACH BELOW AND RETURN USING THE ENVELOPE PROVIDED .
<PAGE>
LANDS' END, INC. 1997 ANNUAL MEETING
1. ELECTION OF DIRECTORS: 1-Richard C. Anderson 2-William E. Ferry
3-Howard G. Krane [_] FOR all [_] WITHHOLD AUTHORITY
nominees listed to to vote for all
the left (except as nominees listed
specified below). to the left.
(Instructions: To withhold authority to vote for any indicated nominee, write
the number(s) of the nominee(s) in the box provided to the right. [_______]
2. PROPOSAL TO APPROVE THE COMPANY'S NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO APPROVE THE APPOINTMENT OF ARTHUR ANDERSEN LLP as the independent
public accountants of the Company.
[_] FOR [_] AGAINST [_] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Address Change? Date ____________ NO. OF SHARES
Mark Box [_]
Indicate changes below: [ ]
[ ]
[______________________________]
Signature(s) in Box
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
