<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
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Brauns Fashions Corporation
- --------------------------------------------------------------------------------
(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)(1)
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:
------------------------------------------------------------------------
<PAGE>
BRAUN'S FASHIONS CORPORATION
2400 XENIUM LANE NORTH
PLYMOUTH, MINNESOTA 55441
__________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 16, 1997
__________________
To the Shareholders:
Notice is hereby given that the Annual Meeting of Shareholders of Braun's
Fashions Corporation (the "Company") will be held at 2800 LaSalle Plaza, 800
LaSalle Avenue, Minneapolis, Minnesota on Wednesday, July 16, 1997 at 3:30 p.m.
Central Time for the following purposes as more fully described in the Proxy
Statement accompanying this Notice:
1. To elect two Class 3 directors to serve on the Board of Directors for
a term of three years;
2. To adopt a 1997 Stock Incentive Plan;
3. To ratify the appointment of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending February 28, 1998; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on June 2, 1997, are
entitled to notice of and to vote at the meeting or any adjournment thereof.
Your attention is directed to the accompanying Proxy Statement for the text
of the matters to be proposed at the meeting and further information regarding
each proposal to be made.
SHAREHOLDERS UNABLE TO ATTEND THE MEETING IN PERSON ARE ASKED TO COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE IN
PERSON IF YOU WISH.
By Order of the Board of Directors
Nicholas H. Cook
Chairman of the Board
June 6, 1997
Minneapolis, Minnesota
<PAGE>
BRAUN'S FASHIONS CORPORATION
2400 XENIUM LANE NORTH
PLYMOUTH, MINNESOTA 55441
------------------------------
PROXY STATEMENT
------------------------------
ANNUAL MEETING OF SHAREHOLDERS - JULY 16, 1997
INFORMATION CONCERNING SOLICITATION
AND VOTING
This Proxy Statement is furnished by the Board of Directors of Braun's
Fashions Corporation (the "Company") in connection with the solicitation of
proxies to be used at the Annual Meeting of Shareholders (the "Meeting") of the
Company to be held on Wednesday, July 16, 1997, at 3:30 p.m. Central Time, at
2800 LaSalle Plaza, 800 LaSalle Avenue, Minneapolis, Minnesota, and at all
adjournments thereof for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. ANY PROXY IN WHICH NO DIRECTION IS
SPECIFIED WILL BE VOTED IN FAVOR OF EACH OF THE MATTERS TO BE CONSIDERED. This
Proxy Statement and the Notice of Meeting and Proxy are being mailed to
shareholders on or about June 6, 1997.
The close of business on June 2, 1997 has been fixed as the record
date for the determination of shareholders entitled to receive notice of and to
vote at the Meeting. At that date, the Company's outstanding voting securities
consisted of 4,432,588 shares of common stock, par value $.01 per share (the
"Common Stock"). On all matters which will come before the Meeting, each
shareholder or his proxy will be entitled to one vote for each share of Common
Stock of which such shareholder was the holder of record on the record date.
The aggregate number of votes cast by all shareholders present in person or by
proxy at the Meeting will be used to determine whether a motion is carried.
Thus, an abstention from voting on a matter by a shareholder, while included for
purposes of calculating a quorum for the Meeting, has no effect on the item on
which the shareholder abstained from voting. In addition, although broker "non-
votes" will be counted for purposes of attaining a quorum, they will have no
effect on the vote.
Any Proxy given pursuant to this solicitation may be revoked by the
person giving it at any time prior to its use by (i) delivering to the principal
office of the Company a written notice of revocation, (ii) filing with the
Company a duly executed Proxy bearing a later date or (iii) attending the
Meeting and voting in person.
The costs of this solicitation will be borne by the Company. The
Company will request brokerage houses and other nominees, custodians and
fiduciaries to forward soliciting material to beneficial owners of the Company's
Common Stock. The Company will reimburse brokerage firms and other persons
representing beneficial owners for their expenses in forwarding solicitation
materials to beneficial owners.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of May 1, 1997: (i) by
each of the executive officers included in the Summary Compensation Table set
forth under the caption "Executive Compensation;" (ii) by each director;
(iii) by all directors and executive officers of the Company as a group; and
(iv) by each person known to the Company to be the beneficial owner of more than
5% of the outstanding shares of the Company's Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF SHARES
NAME BENEFICIALLY OWNED BENEFICIALLY OWNED
---- ------------------ ------------------
<S> <C> <C>
OFFICERS AND DIRECTORS
- ----------------------
Nicholas H. Cook 103,553(1) 2.3
Herbert D. Froemming 66,824(1) 1.5
William J. Prange 14,167(2) *
Marc C. Ostrow 278,780(3)(4) 6.3
James J. Fuld, Jr. 272,280(4)(5) 6.1
Donald D. Beeler 10,000(6) *
Larry C. Barenbaum 10,000(6) *
OTHER 5% SHAREHOLDERS
- ---------------------
Cowen & Company 346,500(7) 7.8
All directors and executive
officers as group (7 persons) 755,604(8) 16.8
</TABLE>
- -------------------------
*Less than 1%
(1) Includes 14,600 shares issuable pursuant to options granted.
(2) Includes 14,167 shares issuable pursuant to options granted.
(3) Mr. Ostrow's address is c/o Pennwood Capital Corporation, 477 Madison
Avenue, New York, New York 10022.
(4) Includes 6,667 shares issuable pursuant to options granted.
(5) Mr. Fuld's address is c/o James J. Fuld, Jr. Corp., 605 Third Avenue, Suite
3500, New York, New York 10158.
(6) Includes 10,000 shares issuable pursuant to options granted.
(7) The address of Cowen & Company is: 1 Financial Square, New York, New York
10005.
(8) This figure includes outstanding shares and options described in the
preceding footnotes.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
The Company's Certificate of Incorporation provides that the Board of
Directors be divided into three classes of directors of as nearly equal size as
possible. The Company's Bylaws further provide that the total number of
directors will be determined exclusively by the Board of Directors. Directors
are elected for a term of three years and the terms are staggered. Herbert D.
Froemming and James J. Fuld, Jr. are the directors in the class whose term
expires at the Meeting. Management and the Board of Directors have nominated
and recommended that Herbert D. Froemming and James J. Fuld, Jr. be reelected as
Class 3 directors, to hold office until the 2000 Annual Meeting of Shareholders
and until their respective successors are duly elected and qualified. Both of
the nominees are members of the Board of Directors of the Company and have
served in that capacity since originally elected or designated as indicated
below.
There is no family relationship among the nominees or between any
nominee and any of the Company's other directors.
VOTING INFORMATION
Proxies solicited by the Board of Directors will, unless otherwise
directed, be voted to elect Messrs. Froemming and Fuld. The affirmative vote of
the majority of shares of Common Stock present and entitled to vote at the
Meeting is necessary to elect each nominee. A shareholder submitting a Proxy
may vote for all or any of the nominees for election to the Board of Directors
or may withhold his or her vote from all or any of such nominees. IF A
SUBMITTED PROXY IS PROPERLY SIGNED BUT UNMARKED IN RESPECT OF THE ELECTION OF
DIRECTORS, IT IS INTENDED THAT THE PROXY AGENTS NAMED IN THE PROXY WILL VOTE THE
SHARES REPRESENTED THEREBY FOR THE ELECTION OF ALL OF THE NOMINEES. Both of the
nominees have agreed to serve the Company as a director if elected. However,
should any nominee become unwilling or unable to serve if elected, the Proxy
Agents named in the Proxy will exercise their voting power in favor of such
other person as the Board of Directors of the Company may recommend. The
Company's Certificate of Incorporation prohibits cumulative voting and each
director will be elected by a majority of the voting power of the shares present
and entitled to vote at the Meeting.
The table below gives certain information concerning the nominees and
other directors:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE NOMINEE OR CONTINUING DIRECTOR IN TERM SINCE
- ---- --- -------------------------------------- --------
<S> <C> <C> <C>
Herbert D. Froemming . . . . . 60 Director; nominee with term expiring in 2000 1990
James J. Fuld, Jr.(2). . . . . 49 Director; nominee with term expiring in 2000 1986
Larry C. Barenbaum(1)(2) . . . 50 Director with term expiring in 1999 1992
Donald D. Beeler (1)(2). . . . 61 Director with term expiring in 1999 1992
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C> <C>
Nicholas H. Cook . . . . . . . 56 Director with term expiring in 1998 1987
Marc C. Ostrow (1) . . . . . . 51 Director with term expiring in 1998 1986
</TABLE>
- -------------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
NOMINEES AND DIRECTORS
CLASS 3 NOMINEES
HERBERT D. FROEMMING has served the Company as President and Chief
Operating Officer since June 1994. Mr. Froemming has been Secretary since
December 1990, and Treasurer since January 1989. From January 1989 until May
1994, Mr. Froemming served as the Company's Chief Financial Officer and, from
March 1992 to June 1994, Mr. Froemming was a Senior Vice President. He has been
a director of the Company since May 1990. From June 1984 until January 1989,
Mr. Froemming was self-employed and was affiliated with Sullivan Associates,
Inc. as a turnaround consultant for financially troubled companies. From
September 1978 to June 1984, he was Senior Vice President of Gamble Skogmo,
Inc., a merchandising and financial services conglomerate, and Wickes Companies,
Inc. which acquired Gamble Skogmo in 1980.
JAMES J. FULD, JR. has served as a director of the Company since 1986.
From November 1986 to December 1990, he served as Secretary of the Company.
Since December 1979, Mr. Fuld has been the Chairman, President and sole
shareholder of James J. Fuld, Jr. Corp., a private financial and management
consulting firm.
CLASS 2 DIRECTORS
LARRY C. BARENBAUM has served as a director of the Company since March
1992. From 1986 to November 1991, Mr. Barenbaum was President and Chief
Executive Officer of Lawrence Jewelry Company, a fashion, wholesale jewelry
distribution company he founded in 1970. Since November 1991, Mr. Barenbaum has
been self-employed as President of LCB Enterprises, Inc., a small business
investment and acquisition company specializing in the product distribution and
marketing fields. Mr. Barenbaum also served as President of ACII Corp., a
distributor of fashion accessories, which filed under Chapter 7 of the United
States Bankruptcy Code on December 26, 1997. Mr. Barenbaum also serves on
the Board of Directors of Signal Bank and United Community Bancshares, Inc.
DONALD D. BEELER has served as a director of the Company since March
1992. Since 1986, Mr. Beeler has been Chairman and Chief Executive Officer of
Snyder's Drug Stores, Inc. ("Snyders"), a Minneapolis-based retailer which
operates a chain of 73 stores. In addition, Snyders operates a wholesale
program, by contract, which supplies over 800 independent retailers in the
United States.
4
<PAGE>
CLASS 1 DIRECTORS
NICHOLAS H. COOK has served the Company in various capacities since
1977. Mr. Cook has been Chairman of the Board since January 1992, Chief
Executive Officer since December 1990, and a director since October 1987. From
December 1990 to June 1994, he also served as the Company's President and from
February 1987 to December 1990, he was a Vice President.
MARC C. OSTROW has served as a director of the Company since 1986.
From November 1986 until November 1991, Mr. Ostrow served as Chairman of the
Board of the Company, and until December 1990, also acted as President (on an
unpaid basis) of Braun's Holding Company, Inc. Since 1979, Mr. Ostrow's
principal occupation has been as Chairman, President and Chief Executive Officer
of Pennwood Capital Corporation, a private venture capital investment and
management firm.
The Company operated its business as debtor-in-possession under
Chapter 11 of the United States Bankruptcy Code from July 1996 until December
1996, when the Company's Plan of Reorganization was approved by creditors and
confirmed by the Bankruptcy Court. All of the nominees and directors have
served as directors of the Company during this period.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended March 1, 1997, the Board of Directors
held thirteen meetings. Each director attended at least 75% of the aggregate
total number of meetings of the Board of Directors plus the total number of
meetings of all committees of the Board on which he served.
The Audit Committee recommends to the Board of Directors the selection
of independent accountants and reviews the activities and reports of the
independent accountants as well as the internal accounting controls of the
Company. The Audit Committee is comprised of Messrs. Fuld, Barenbaum and Beeler
and held two meetings during the last fiscal year.
The Compensation Committee determines the compensation for executive
officers of the Company and establishes the Company's compensation policies and
practices. The Compensation Committee also grants stock options to employees of
the Company, including officers who are not directors of the Company, pursuant
to the Company's Stock Option Plan. The Compensation Committee is comprised of
Messrs. Ostrow, Barenbaum and Beeler and held four meetings during the last
fiscal year.
The Company has no nominating committee or any committee performing
those functions. The Board as a whole performs the functions which would
otherwise be delegated to a nominating committee.
5
<PAGE>
COMPENSATION OF DIRECTORS
The Company compensates directors who are not employed by the Company
or its affiliates $8,000 per year, payable quarterly, plus expenses for services
as a director. In addition, in June 1996, Messrs. Barenbaum and Beeler were
each granted an option to purchase 5,000 shares of Common Stock at an exercise
price of $3.00 per share.
1992 DIRECTOR STOCK OPTION PLAN
Effective March 1, 1992, the Company established the 1992 Director
Stock Option Plan (the "Director Option Plan"), which provides for the issuance
by the Company of a maximum of 40,000 shares of Common Stock to non-employee
directors upon the exercise of options.
The Director Option Plan provides for the automatic grant of non-
qualified options to purchase 10,000 shares of Common Stock, at an exercise
price equal to the fair market value of the shares on the date of grant, to each
non-employee director when such non-employee director becomes a member of the
Board for the first time. Such options will vest over a three-year period, with
one-third of such options becoming exercisable on each of the first, second and
third anniversaries of the date of grant. Options which expire, or are
cancelled or terminated without having been exercised, may be regranted to other
non-employee directors under the Director Option Plan. The Director Option Plan
terminates on March 1, 2002.
In June 1996, options previously granted to each of Messrs. Ostrow,
Fuld, Barenbaum and Beeler under the Director Option Plan to purchase 10,000
shares of Common Stock were repriced with an exercise price of $3.00 per share,
one third of which vested immediately, and the balance over the two year period
commencing in June 1997.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 as amended (the
"Securities Act") requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership on Form 3 and changes in ownership on
Forms 4 or 5 with the Securities and Exchange Commission (the "Commission") and
The NASDAQ Stock Market. Such officers, directors and ten percent shareholders
are also required by the Commission's rules to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or representation from certain reporting persons that no Forms 5 were required
for such persons, the Company believes that during the fiscal year ended March
1, 1997, all Section 16(a) filing requirements applicable to its officers,
directors and ten percent stockholders were complied with.
6
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions and recommendations regarding the compensation of the
Company's executives are made by a three member Compensation Committee (the
"Committee") composed entirely of non-employee directors. The Committee has
responsibility to review, establish and change compensation programs for the
Company's officers to most accurately reflect the current needs of the Company
and best measure and reward the performances of its executives. The following
is a report of the Compensation Committee of the Company describing the
compensation policies and rationale applicable to the Company's executive
officers with respect to the compensation paid to such executive officers for
the year ended March 1, 1997.
TO THE BOARD OF DIRECTORS:
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are designed to attract
and retain highly qualified executives and to motivate them to maximize
shareholder value by achieving strategic Company goals. The Committee attempts
to balance short and long-term considerations in appropriately rewarding
individuals who are responsible for the Company's profitability, growth and
enhancement of shareholder value. Compensation for executive officers consists
of: (i) base salary, (ii) an annual cash incentive award, and (iii) a long-term
incentive, through a stock option plan. The Committee strongly believes that
management's compensation should be structured to emphasize the relationship
between pay and performance by placing a portion of compensation at risk and
subject to the achievement of financial goals and objectives. Additionally,
such qualitative factors as leadership skills, planning initiatives, technical
skills, and employee development have been deemed to be important factors to
take into account in considering levels of compensation.
COMPONENTS OF COMPENSATION
BASE COMPENSATION - It is the Company's policy to pay competitive base
compensation to its executive officers, as measured against the norms for
similar positions in companies of similar size and characteristics. The
Committee annually reviews and, if appropriate, adjusts executive officers'
salaries based on an evaluation of each officer's performance as well as the
performance of the Company as a whole. In making individual base salary
recommendations, the Committee considers the executive's sustained performance
against his or her individual job responsibilities including, where appropriate,
the impact of such performance on the business results of the Company, as well
as the executive's experience, management and leadership ability and potential
for advancement, his or her compensation history and the Company's performance.
CASH INCENTIVE AWARDS - To encourage performance and to provide a
direct link with executive compensation, the Company pays annual cash bonuses in
accordance with the Braun's Management Bonus Plan (the "Plan"). Under the Plan,
bonuses are primarily based on
7
<PAGE>
the Company's performance as measured against the Company's business plan.
Annual pre-tax earnings targets are set by the Committee based on the Company's
pre-tax earnings budget and other objective criteria as approved by the
Committee. Actual annual incentive payments are based upon a pre-bonus, pre-tax
earnings performance formula. The Committee may also make discretionary bonuses
based on individual achievement.
LONG-TERM INCENTIVE COMPENSATION - The Committee believes that
granting stock options to executive officers and key employees provides an
incentive for them to make decisions which are in the long-term best interest of
the Company. In determining stock option grants, the Committee considers the
executive's contribution to the Company's performance and his or her anticipated
future contributions toward meeting the Company's long-term strategic goals, as
well as industry practice.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The base salary of Nicholas H. Cook, the Company's Chief Executive
Officer, under his employment agreement which was $231,000 in fiscal 1997,
unchanged from his salary in fiscal 1996 and 1995. In connection with his
contributions during the Company's Chapter 11 bankruptcy proceeding and
successful emergence in December 1996, Mr. Cook received a bonus of $15,000
last year. In fiscal 1997, the Committee awarded Mr. Cook options to purchase
10,000 shares of Common Stock. The Committee also repriced options to purchase
77,600 shares of Common Stock. As a result, Mr. Cook currently holds options to
purchase 43,800 shares of Common Stock at an exercise price of $4.00 per share
which vests in three annual equal installments commencing in June 1997 and
options to purchase 43,800 shares of Common Stock at an exercise price of $2.00
per share which vests in three annual equal installments commencing in June
1998. The Committee believes that the grant of these options provides a
substantial incentive and further aligns the interest of senior management with
shareholders.
May 15, 1997 Members of the Compensation Committee
Marc C. Ostrow, Chairman
Larry C. Barenbaum
Donald D. Beeler
8
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth, the cash and noncash compensation for
each of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the other two executive officers whose compensation
exceeded $100,000 for such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM
---------------------------------------------------- COMPENSATION
------------
OTHER ANNUAL AWARDS ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) (#)(3) ($)(4)
- ------------------ ------ ------ ------ ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas H. Cook 1997 231,000 15,000 -- 87,600(5) 468
Chairman, Chief 1996 231,000 -- -- 0 435
Executive Officer 1995 231,000 -- -- 0 403
- ----------------------------------------------------------------------------------------------------------------------
Herbert D. Froemming 1997 200,000 15,000 -- 87,600(5) 2,922
President, Chief 1996 200,000 -- -- 0 1,770
Operating Officer 1995 193,000 -- -- 10,000 1,616
- ----------------------------------------------------------------------------------------------------------------------
William J. Prange (6) 1997 165,000 10,000 -- 85,000(5) 2,147
Senior Vice President, 1996 165,000 -- -- 0 1,144
General Merchandising 1995 133,558 -- -- 50,000 --
Manager
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects bonus earned during the fiscal year.
(2) "Other Annual Compensation" includes the following, to the extent that the
aggregate amount thereof exceeds the lesser of $50,000 or 10% of the total
annual salary and bonus reported for the individual: personal benefits
received by the named individuals and amounts reimbursed the individuals
during the year for payment of taxes.
(3) In June 1996, to retain and motivate key employees and management and with
a view towards aligning the interests of management with the Company's
shareholders, the Compensation Committee issued additional stock options to
key employees and management and reset the exercise prices and vesting
schedules on certain existing stock options. Messrs. Cook, Froemming and
Prange received additional options for 10,000, 10,000 and 35,000 shares,
respectively, resulting in total outstanding options to such individuals of
87,600, 87,600 and 85,000 options, respectively. Of these options, Messrs.
Cook, Froemming and Prange were granted 43,800, 43,800 and 42,500 options,
respectively, at an exercise price of $2.00 per share, which vest over
three years commencing in June 1998. In addition, Messrs. Cook, Froemming
and Prange were granted 43,800, 43,800 and 42,500 options, respectively, at
an exercise price of $4.00 per share and vest over three years commencing
in June 1997.
(4) "All Other Compensation" includes the following amounts contributed by the
Company during the fiscal year under the Company's Retirement Savings Plan
for each of the named officers: $2,234, $1,125 and $1,109 for Mr.
Froemming in 1997, 1996 and 1995, respectively, and $1,997 and $1,031 for
Mr. Prange for 1997 and 1996, respectively. Insurance premiums were paid
on behalf of each named executive officer in the amount of $468 for Mr.
Cook, $688 for Mr. Froemming and $150 for Mr. Prange in 1997, $435 for Mr.
Cook, $645 for Mr. Froemming and $113 for Mr. Prange in 1996 and $403 for
Mr. Cook and $597 for Mr. Froemming in 1995.
(5) Includes options which were repriced in June 1996, including 77,600 for
each of Messrs. Cook and Froemming and 50,000 for Mr. Prange.
(6) Mr. Prange became employed by the Company in April 1994.
9
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal
1997 to the named executive officers:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Individual Grants
- -----------------------------------------------------------------------------------------------
% of
Total Options/
SARs
Options/ Granted to Exercise Grant
SARs Employees or Base Date
Granted in Fiscal Price Expiration Present
Name (#) (1) Year (2) ($/sh) Date Value ($)(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nicholas H. Cook 43,800 9.05% 2.00 6-23-06 24,873
43,800 9.05% 4.00 6-23-06 11,996
- -----------------------------------------------------------------------------------------------
Herbert D. Froemming 43,800 9.05% 2.00 6-23-06 24,873
43,800 9.05% 4.00 6-23-06 11,996
- -----------------------------------------------------------------------------------------------
William J. Prange 42,500 8.78% 2.00 6-23-06 24,135
42,500 8.78% 4.00 6-23-06 11,640
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Includes options granted or repriced during fiscal 1997.
(2) The Company granted or reset the price of 484,200 during fiscal 1997.
(3) As suggested by the Commission's rules on executive compensation
disclosure, the Company used the Black-Scholes model of options valuation
to determine grant date present value. The Company does not advocate or
necessarily agree that the Black-Scholes model can properly determine the
value of an option. The present value calculations are based on a ten-year
option term with an expected life of three or four years. Assumptions
include an interest rate of 6.50%, annual dividend yield of 0% and
volatility of 57.3%.
The following table sets forth, for each of the executive officers
named in the Summary Compensation Table above, the year-end value of unexercised
options.
OPTION EXERCISES AND VALUE OF OPTIONS AT END OF FISCAL 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT END OF IN-THE-MONEY OPTIONS
ACQUIRED FISCAL 1997 (#) AT END OF FISCAL 1997 (1)
ON VALUE ----------------------- -----------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
(#) ($)(1)
--- ------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas H. Cook -- N/A 0 87,600 $0 $470,850
- ------------------------------------------------------------------------------------------------------------------------
Herbert D. Froemming 16,000 123,990 0 87,600 $0 $470,850
- ------------------------------------------------------------------------------------------------------------------------
William J. Prange -- N/A 0 85,000 $0 $456,875
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Value based on market value of the Company's Common Stock on March 1, 1997
less the exercise price.
The following table sets forth, for each of the executives named in
the Summary Compensation Table, previously granted options that were repriced
during fiscal 1997 by the Compensation Committee.
10
<PAGE>
TEN-YEAR OPTIONS/SAR REPRICINGS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock at Price Remaining at
Options Repriced Time of at Time of New Exercise Date of
(#) Repricing Repricing Price Repricing
Name Date ($) ($) ($) (Years)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas H. Cook 6/24/96 38,800 1.56 7.00 2.00(1) 8.75
6/24/96 38,800 1.56 7.00 4.00(2) 8.75
- ------------------------------------------------------------------------------------------------------------------------------
Herbert D. Froemming 6/24/96 38,800 1.56 7.00 2.00(1) 8.75
6/24/96 38,800 1.56 7.00 4.00(2) 8.75
- ------------------------------------------------------------------------------------------------------------------------------
William J. Prange 6/24/96 25,000 1.56 7.00 2.00(1) 8.75
6/24/96 25,000 1.56 7.00 4.00(2) 8.75
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Options vest in three equal annual installments commencing on June 24,
1998.
(2) Options vest in three equal annual installments commencing on June 24,
1997.
EMPLOYMENT AGREEMENTS
In December 1991, the Company entered into three-year employment
agreements with Messrs. Cook and Froemming (the "Employment Agreements").
Although the original term of the Employment Agreements expired December 19,
1994, the Employment Agreements further provide for one-year automatic
extensions if the Employment Agreements are not terminated by the Company or the
executive. In fiscal 1996, the Employment Agreements provided for annual base
salaries to Messrs. Cook and Froemming of $231,000 and $200,000, respectively.
The Employment Agreements also provide that Messrs. Cook and Froemming are
entitled to certain severance benefits in the event that their employment is
terminated by the Company "without cause" or by such executive following a
"change of control" (both as defined in the Employment Agreements). In such
cases, the executive would receive his salary for one year following notice of
termination, less any cash compensation earned by the executive by other
reemployment during the period. In addition, the executive would continue to be
eligible for any option plans adopted by the Company during such period and
would have 180 days following such period in which to exercise all options
previously granted. The Employment Agreements provide for a continuation of
salary payments and other benefits thereunder in the event of disability of the
executive (reduced by any disability insurance benefits received by such
executive) or death (up to the benefit of any life insurance policies obtained
by the Company with respect to such executive). In addition, the Employment
Agreements provide for the executives' retention of their life insurance
policies at no cost to the executives in the event of retirement. Each of the
Employment Agreements contains a covenant not to compete with the Company for
(i) the period during which they receive severance benefits in the event of
their termination by the Company "without cause" or at their election upon a
"change of control," and (ii) a period of one year in the event of their
termination for any other reason.
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<PAGE>
MANAGEMENT BONUS PLAN
Effective March 1990, the Company established the Braun's Management
Bonus Plan (the "Bonus Plan") under which certain key management employees of
the Company, including all executive officers, are eligible to receive annual
bonuses. Bonuses under the Bonus Plan are based on (a) a comparison of targeted
pre-tax earnings (as determined on an annual basis by the Compensation
Committee) to the Company's actual pre-tax earnings and (b) a comparison of
targeted individual or department performance objectives to actual performance.
In the event that actual pre-tax earnings are less than or equal to the hurdle
rate based on a percentage of targeted pre-tax earnings set by the Compensation
Committee from time-to-time, no bonuses are paid by the Company. There were no
bonuses paid under the Bonus Plan to any of the executive officers named in the
Summary Compensation Table for fiscal 1997. However, in connection with their
contributions during the Company's Chapter 11 proceeding, Messrs. Cook,
Froemming and Prange received discretionary bonuses of $15,000, $15,000 and
$10,000, respectively.
SECTION 401(k) PLAN
Effective March 3, 1991, the Company established the Braun's Fashions,
Inc. Retirement Savings Plan, a voluntary tax deferred retirement plan qualified
under Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"401(k) Plan"). Pursuant to the 401(k) Plan, eligible employees (employed at
the Company for more than one year) may elect to contribute up to 16% of their
compensation, subject to limitations under the Internal Revenue Code, to the
401(k) Plan. The Company is permitted to make discretionary matching
contributions of up to 25% of the first 6% of the participant's pre-tax
contributions. Matching contributions vest at a rate of 25% per year. Neither
employee nor Company contributions to the 401(k) Plan are taxable to the
employee until such amounts are distributed to the employee, and Company
contributions are tax deductible by the Company at the time of contribution.
The Company made a contribution for fiscal 1997 in the amount of $56,993,
including $2,234 on behalf of Mr. Froemming and $1,997 on behalf of Mr. Prange.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on
the Common Stock of the Company since March 31, 1992 (the date of the Company's
initial public offering) to the cumulative total shareholder return over such
period of (i) the NASDAQ Stock Market (U.S. Companies) index and (ii) the NASDAQ
Retail Trade index. The information contained in this graph shall not be deemed
to be "soliciting material" or to be "filed" with the Securities and Exchange
Commission, nor shall such information be incorporated by reference into any
future filing under the Securities Act or the Exchange Act, except to the extent
that the Company specifically incorporates it by reference into any such filing.
NASDAQ
Stock
Braun's Market NASDAQ
Fashions (U.S. Retail
Corporation Companies) Trade
------------ ---------- -------
3/31/92.............................. 100% 100% 100%
2/27/93.............................. 157% 112% 88%
2/26/94.............................. 98% 131% 96%
2/25/95.............................. 37% 134% 90%
3/2/96............................... 24% 184% 105%
3/1/97............................... 120% 223% 118%
12
<PAGE>
PROPOSAL TWO
PROPOSAL TO APPROVE THE 1997 STOCK INCENTIVE PLAN
GENERAL
In 1987, the Company adopted the 1987 Stock Incentive Plan (the "1987
Incentive Plan") which, as amended, provides for the granting of options to
purchase up to 710,000 shares of Common Stock. As of the record date for the
Meeting, under the 1987 Incentive Plan, options to purchase 459,400 shares of
Common Stock were outstanding and 46,280 options were exercised. The 1987
Incentive Plan terminates on September 11, 1997 and options may not be
granted under that program after that date.
In May 1997, the Company's Board of Directors adopted, subject to
shareholder approval, the Company's 1997 Stock Incentive Plan (the "1997
Incentive Plan"). The 1997 Incentive Plan is intended to replace the 1987
Incentive Plan. Options currently outstanding under the 1987 Incentive Plan
will not be affected by the adoption of the 1997 Incentive Plan. Under the
1997 Incentive Plan, the number of options available for grants will be
300,000.
The Board of Directors believes that stock options have been, and
will continue to be, an important compensation element in attracting and
retaining key employees. The 1997 Incentive Plan is intended to provide key
individuals, including officers and directors, of the Company with an
incentive to promote the success of the Company and to further align such
persons' interests with that of the Company's shareholders. A copy of the
1997 Incentive Plan is annexed to this Proxy Statement as Appendix A.
SUMMARY OF 1997 INCENTIVE PLAN
The purpose of the 1997 Incentive Plan is to aid the Company in
maintaining and developing management personnel capable of assuring the future
success of the Company, to offer such personnel incentives to put forth maximum
efforts for the success of the Company's business and to afford such personnel
an opportunity to acquire a proprietary interest in the Company. All key
employees of the Company are eligible to receive awards under the 1997 Incentive
Plan. Directors who are not employees are eligible to receive nonqualified
stock options. The 1997 Incentive Plan terminates in 2007, and no awards may be
made after such date. However, unless otherwise expressly provided in the 1997
Incentive Plan, any option granted may extend beyond the termination date of the
1997 Incentive Plan.
The 1997 Incentive Plan permits the granting of: (a) stock options,
including "Incentive Stock Options" meeting the requirements of Section 422 of
the Code ("Incentive Stock Options") and (b) stock options that do not meet such
requirements ("Nonqualified Stock Options"). The 1997 Incentive Plan is
administered by the Company's Compensation Committee (the "Committee"). The
Committee has the authority to establish rules for the administration of the
1997 Incentive Plan; to select the key persons to whom options are granted; to
determine the number of shares of Common Stock covered by such options; and to
set the terms and conditions of such options. Determinations and
interpretations with respect to the 1997 Incentive Plan are in the sole
discretion of the Committee, whose determinations and interpretations are
binding on all interested parties. The Committee may delegate to one or more
officers the right to grant options with respect to individuals who are not
subject to Section 16(b) of the Securities Act.
13
<PAGE>
The exercise price per share under any stock option cannot be less
than 100% of the fair market value of the Company's Common Stock on the date of
the grant of such option. Determinations of fair market value under the 1997
Incentive Plan are made in accordance with methods and procedures established by
the Committee. For purposes of the 1997 Incentive Plan, the fair market value
of shares of Common Stock on a given date is (i) the last sales price of the
shares as reported on The NASDAQ Stock Market, if the shares are then being
quoted on The NASDAQ Stock Market or (ii) the closing price of the shares on
such date on a national securities exchange, if the shares are then being traded
on a national securities exchange.
No option granted under the 1997 Incentive Plan may be assigned,
transferred, pledged or otherwise encumbered by the individual to whom it is
granted, otherwise than by will, by designation of a beneficiary, or by laws of
descent and distribution. Each option is exercisable during such individual's
lifetime, only by such individual, or, if permissible under applicable law, by
such individual's guardian or legal representative. If any shares of Common
Stock subject to any options are not purchased or are forfeited, the shares
previously used for such options become available for future grants under the
1997 Incentive Plan.
If any dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up,
combination, repurchase, or exchange of shares of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
shares of Common Stock or other securities of the Company, or other similar
corporate transaction or event affects the shares of Common Stock so that an
adjustment is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the 1997
Incentive Plan, the Committee may, in such manner as it deems equitable, adjust
(a) the number and type of shares (or other securities or property) which
thereafter may be made the subject of options, (b) the number and type of shares
(or other securities or property) subject to outstanding options, and (c) the
exercise price with respect to any option. The Committee may correct any
defect, supply any omission, or reconcile any inconsistency in the 1997
Incentive Plan or any option agreement in the manner and to the extent it shall
be deemed desirable to carry the 1997 Incentive Plan into effect.
The Board of Directors may amend, alter or discontinue the 1997
Incentive Plan at any time, provided that shareholder approval must be
obtainable for any change that (i) absent such shareholder approval, would cause
Rule 16b-3 as promulgated by the Securities and Exchange Commission under the
Securities Act, to become available with respect to the 1997 Incentive Plan;
(ii) requires the approval of the Company's shareholders under any rules or
regulations of the National Association of Securities Dealers, Inc. or any
securities exchange applicable to the Company; or (iii) requires the approval of
the Company's shareholders under the Internal Revenue Code (the "Code") in order
to permit Incentive Stock Options to be granted under the 1997 Incentive Plan.
The following is a summary of the principal federal income tax
consequences generally applicable to options under the 1997 Incentive Plan. The
grant of an option is not expected to result in any taxable income for the
recipient. The holder of an Incentive Stock Option generally will have no
taxable income upon exercising the Incentive Stock Option (except that a
liability may arise pursuant to the alternative minimum tax), and the Company
will not be entitled to a tax deduction when an Incentive Stock Option is
exercised. Upon exercising a Nonqualified Stock Option, the
14
<PAGE>
optionee must recognize ordinary income equal to the excess of the fair market
value of the shares of the Common Stock acquired on the date of exercise over
the exercise price, and the Company will be entitled at that time to a tax
deduction for the same amount. The tax consequences to an optionee upon a
disposition of shares acquired through the exercise of an option will depend on
how long the shares have been held and upon whether such shares were acquired by
exercising an Incentive Stock Option or by exercising a Nonqualified Stock
Option. Generally, there will be no tax consequences to the Company in
connection with disposition of shares acquired under an option, except that the
Company may be entitled to a tax deduction in the case of a disposition of
shares acquired under an Incentive Stock Option before the applicable Incentive
Stock Option holding periods set forth in the Code have been satisfied.
Special rules apply in the case of individuals subject to Section
16(b) of the Securities Act. In particular, under current law, unless a special
election is made pursuant to the Code, shares received pursuant to the exercise
of a stock option may be treated as restricted as to transferability and subject
to a substantial risk of forfeiture for a period of up to six months after the
date of exercise. Accordingly, the amount of any ordinary income recognized,
and the amount of the Company's tax deduction, may be determined as of the end
of such period. Common Stock acquired under the 1997 Incentive Plan may only be
re-offered or resold under an effective registration statement, under Rule 144
or under another exemption from the registration requirements of the Securities
Act of 1933, as amended.
BOARD RECOMMENDATION AND SHAREHOLDER VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO ADOPT THE
1997 INCENTIVE PLAN. The affirmative vote of a majority of the shares of Common
Stock present and entitled to vote at the Meeting on this item of business is
necessary to approve the proposal. Proxies solicited by the Board of Directors
will, unless otherwise directed, be voted to approve the proposal. Shares held
by persons who abstain from voting on the proposal and broker "non-votes" will
not be voted for or against the proposal. Shares held by persons abstaining
will be counted in determining whether a quorum is present for the purpose of
voting on the proposal but broker non-votes will not be counted for this
purpose.
15
<PAGE>
PROPOSAL THREE
RATIFICATION AND APPROVAL OF THE
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors selected the accounting firm of Price
Waterhouse LLP to serve as its independent auditor for the fiscal year ending
February 28, 1998. Price Waterhouse LLP has audited the Company's financial
statements since the fiscal year ended March 2, 1991. A proposal to ratify the
appointment for the current year will be presented at the Meeting.
Representatives of Price Waterhouse LLP are expected to be present at the
Meeting. They will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions from shareholders.
BOARD RECOMMENDATION AND SHAREHOLDER VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
SELECTION OF THE INDEPENDENT AUDITOR. Ratification of the selection requires
the affirmative vote by a majority of the shares of Common Stock present or
represented at the Meeting. Shares held by persons who abstain from voting on
the proposal and broker "non-votes" will not be voted for or against the
proposal. Shares held by persons abstaining will be counted in determining
whether a quorum is present for purposes of voting on the proposal but broker
non-votes will not be counted for this purpose. If the appointment is not
ratified by the shareholders, the Board of Directors is not obligated to appoint
other auditors, but the Board of Directors will give consideration to such
unfavorable vote.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's
next annual meeting of shareholders must be received by the Company at its
office located at 2400 Xenium Lane North, Plymouth, Minnesota 55441 on or before
January 31, 1998 to be considered for inclusion in the Company's proxy statement
and form of proxy relating to such meeting.
OTHER MATTERS
A copy of the Company's Annual Report on Form 10-K for the year ended
March 1, 1997, is included with this Proxy Statement.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Meeting in accordance with the directions
given. In voting by proxy in regard to the election of the two Class 3
directors to serve until the 2000 Annual Meeting of Shareholders, shareholders
may vote in favor of both nominees or withhold their votes as to both nominees
or withhold their votes as to specific nominees. With respect to other items to
be voted
16
<PAGE>
upon, shareholders may vote in favor of the item or against the item or may
abstain from voting. Shareholders should specify their choices on the enclosed
Proxy. Any Proxy in which no direction is specified will be voted in favor of
each of the matters to be considered.
The Board of Directors does not intend to bring any matters before the
Meeting other than as stated in this Proxy Statement and is not aware that any
other matters will be presented for action at the Meeting. Should any other
matters be properly presented, the person named in the enclosed form of Proxy
will vote the Proxy with respect thereto in accordance with their best judgment,
pursuant to the discretionary authority granted by the Proxy.
Dated: June 6, 1997
17
<PAGE>
BRAUN'S FASHIONS CORPORATION
1997 STOCK INCENTIVE PLAN
1. PURPOSE. The purposes of the Plan are to: (1) advance the
interest of Braun's Fashions Corporation, a Delaware corporation (the
"Company"), and its shareholders by providing an incentive to attract and retain
the officers and other key employees of the Company and its subsidiaries who are
primarily responsible for the management and successful growth of the business
of the Company and its subsidiaries; and (2) closely associate the interests of
the management and directors of the Company with the shareholders by reinforcing
the relationship between employee stock options and shareholder gains; (3)
provide management with an equity ownership in the Company commensurate with the
Company's performance as reflected in increased shareholder value; and (4)
maintain competitive compensation levels. It is intended that this purpose will
be effected through the granting of stock options and/or stock awards
(collectively, the "Grants") as provided herein.
2. EFFECTIVE DATE AND TERM OF PLAN. The effective date of the Plan
shall be July 16, 1997. No Grants shall be made after July 15, 2007, provided,
however, that the Plan and all Grants made on or before July 15, 2007, shall
remain in effect until they have been satisfied or terminated in accordance with
the terms thereof.
3 ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Stock Compensation Committee (the "Committee") of the Board of Directors
of the Company, which shall consist of at least two (2) directors, none of
whom, while serving on the Committee, shall be, or within one year prior
thereto have been, eligible to receive Grants under the Plan. The Committee
shall have authority to adopt rules and regulations for carrying out the
Plan, to select the individuals to whom Grants will be made, to determine the
number of shares to be optioned or awarded to each such individual and to
interpret, construe and implement the provisions of the Plan. Decisions of
the Committee shall be binding upon the Company and upon all individuals
eligible to participate in the Plan. No member of the Committee shall be
liable for any action taken or decision made in good faith relating to the
Plan or to any award thereunder.
4. STOCK SUBJECT TO THE PLAN. The aggregate number of shares
subject to the Plan shall be three hundred thousand (300,000) shares of the
Common Stock of the Company, $.01 par value per share. Such shares may be
authorized and unissued shares or may be treasury shares. Any shares subject to
an option or award which for any reason expires or is terminated unexercised as
to such shares may again be subject to an option or award under the Plan.
5. ELIGIBILITY. Grants of "incentive options" (defined below) may be
made only to officers and other key employees of the Company or any subsidiary
of the Company. Full or part-time employees, directors who are not
employees, consultants or independent contractors to the Company or any
subsidiary of the Company shall be eligible to receive options which do not
qualify as "incentive options."
In making this selection and determining the form and amount of
Grants, the Committee shall consider any factors deemed relevant, including the
individual's functions, responsibilities, value of services to the Company and
past and potential contributions to the Company's profitability and growth.
<PAGE>
6. INCENTIVE STOCK OPTIONS. Certain options granted hereunder shall
be "incentive options" under the provisions of Section 422A of the Internal
Revenue Code of 1986 (the "Code"), as amended, and the regulations thereunder.
Incentive options shall be evidenced by written stock option
agreements in such form as the Committee shall approve from time to time, which
agreements shall conform with this Plan and shall contain in substance the
following terms and conditions:
a. NUMBER OF SHARES. The option agreement shall specify the
number of shares to which it pertains.
b. PURCHASE PRICE. The purchase price per share of stock under
each option shall be at least 100% of the fair market value of such
stock on the day the option is granted, as determined by the
Committee.
c. TERM AND EXERCISE. Each such option may be exercised at
such time and in such manner (including, without limitation, in whole
or in part) as specified by the Committee which may, among other
things, provide that options may become subject to exercise in
installments; provided, however, that in no event shall an option be
exercisable more than ten (10) years from the date on which it is
granted. An optionee electing to exercise an option shall give
written notice to the Company of such election and of the number of
shares subject to such exercise. No option shall be exercisable for a
fractional share of stock.
d. PAYMENT. The purchase price of any stock purchased pursuant
to the exercise of an option granted hereunder shall be payable in
full on the exercise date in cash or by check or by delivery of shares
of Common Stock of the Company registered in the name of the optionee
duly assigned to the Company with the assignment guaranteed by a bank,
trust company or member firm of the New York Stock Exchange, or by a
combination of the foregoing. Any such shares so delivered shall be
deemed to have a value per share equal to the fair market value of
the shares on such date, as determined by the Committee. Subject to
the approval of the Committee, or of such person to whom the Committee
may delegate such authority (its "designee") (but such designee shall
have no authority to approve loans to himself), the Company may loan
to the employee a sum equal to an amount which is not in excess of
100% of the purchase price of the shares so purchased, such loan to be
evidenced by the execution and delivery of a promissory note.
Interest shall be paid annually on the unpaid balance of the
promissory note at such rate as shall be determined by the Committee
or its designee. Such promissory note shall be secured by the pledge
to the Company of shares having an aggregate fair market value on the
date of purchase equal to or greater than the amount of such note. An
optionee shall have, as to such pledged shares, all rights of
ownership including the right to vote such shares and to receive
dividends paid on such shares, subject to the security
2
<PAGE>
interest of the Company. Such shares shall not be released by the
Company from the pledge unless the proportionate amount of the note
secured thereby has been repaid to the Company. All notes executed
and delivered pursuant hereto shall be payable at such times and in
such amounts and shall contain such other terms as shall be specified
by the Committee or its designee or stated in the option agreement;
provided, however, that such terms shall conform to requirements
contained in any applicable regulations which are issued by any
governmental authority.
e. RIGHTS AS A SHAREHOLDER. The optionee shall have no rights
as a shareholder with respect to any shares covered by his option
until the date of issuance of a stock certificate to him for such
shares. No adjustment shall be made for dividends or other rights for
which the record date is prior to the date such stock certificate is
issued.
f. PURCHASE FOR INVESTMENT. Each employee acquiring shares
hereunder will be required to give a representation that he is
acquiring such shares as an investment and not with a view to, or for
sale in connection with, the distribution of any such shares. This
requirement shall be imposed solely for the purpose of enabling the
Company to comply with the provisions of the Securities Act of 1933,
as amended. If at any time the stock which may be issued pursuant to
this Plan is registered with the Securities and Exchange Commission,
this section and any representation given hereunder shall become
inoperative.
g. MAXIMUM VALUE OF SHARES. No incentive option shall be
granted to an employee in any calendar year under this or any other
incentive option plan of the Company or its subsidiaries to purchase
shares as to which the aggregate fair market value (determined on the
date of grant) of shares which first become exercisable thereunder in
any calendar year exceeds $100,000.
h. NONTRANSFERABILITY. No option shall be transferable by the
optionee except by will or the laws of descent and distribution.
During the life of an optionee, an option shall be exercisable only by
such person or such person's guardian or legal representative.
i. TEN PERCENT SHAREHOLDER RULE. Notwithstanding any other
provision in the Plan, if at any time an option is to be granted
pursuant to the Plan, the optionee owns, directly or indirectly,
shares of the Company's Common Stock possessing more than ten percent
(10%) of the total combined voting power of the Common Stock, then any
incentive options to be granted to such optionee pursuant to the Plan
shall satisfy the requirements of Section 422(c)(5) of the Code, and
the option price shall be not less than 110% of the fair market value
of the Common Stock of the Company as described herein, and such
option by its terms shall not be exercisable after the expiration of
five (5) years from the date such option is granted.
3
<PAGE>
7. NONQUALIFIED OPTIONS. Options other than "incentive written
options" may be granted hereunder. Such nonqualified options shall be evidenced
by written stock option agreements in such form as the Committee shall approve
from time to time, which agreements shall conform with this Plan and shall
contain in substance the terms and conditions specified in Section 6 (with the
exception of subsections (b), (g) and (i) thereof) of this Plan plus such other
terms and conditions as the Committee shall designate.
8. RESTRICTED STOCK AWARDS. The Committee may make awards,
evidenced by such written agreement as the Committee shall, from time to time,
prescribe, consisting of a specified number of shares of the Company's Common
Stock with an appropriate restrictive legend affixed thereto or the right to
receive such number of shares (hereinafter called "Restricted Stock"). Such
award shall be neither an option nor a sale, but shall be subject to the
following conditions and restrictions:
a. Restricted Stock may not be sold or otherwise transferred by
the employee until ownership vests at such time and in such manner as
specified by the Committee which may, among other things, provide that
only a certain percentage of such shares shall vest each year.
b. Except as otherwise determined by the Committee, all rights
and title to Restricted Stock granted to a participant under the Plan
shall terminate and be forfeited to the Company upon failure to
fulfill all conditions and restrictions applicable to such Restricted
Stock, including, without limitation, continuation of the
participant's employment with the Company or a subsidiary of the
Company.
c. Except for the restrictions set forth herein and those
specified by the Committee, a holder of Restricted Stock shall
possess all the rights of a holder of the Company's Common Stock;
provided, however, that in those cases where the Grant of Restricted
Stock consists of the grant of the right to receive a specified number
of shares of the Company's Common Stock, the holder of such Restricted
Stock shall have the rights of a holder of the Company's Common Stock
only with respect to the shares which shall have fully vested.
d. All other provisions of the Plan not inconsistent with this
section shall apply to Restricted Stock or the holder thereof, as
appropriate, unless otherwise determined by the Committee.
9. RECAPITALIZATION. In the event there is any recapitalization in
the form of a stock dividend, distribution, split, subdivision or combination of
shares of Common Stock of the Company, resulting in an increase or decrease in
the number of shares of Common Stock outstanding, the number of shares of Common
Stock available under the Plan, shall be increased or decreased proportionately,
as the case may be, and the number of shares covered by each outstanding Grant
and
4
<PAGE>
the exercise price per share under the outstanding options shall be increased
or decreased proportionately, as the case may be, without change in the
aggregate exercise price.
10. REORGANIZATION. If, pursuant to any reorganization, sale or
exchange of assets, consolidation or merger, outstanding Common Stock of the
Company is or would be exchanged for other securities of the Company or of
another corporation which is a party to such transaction, or for property, any
option or other award under the Plan theretofore granted shall apply to the
securities or property into which the Common Stock covered thereby would have
been changed or for which such Common Stock would have been exchanged had such
Common Stock been outstanding at the time. In any of such events the total
number of class of shares then remaining available for issuance under the Plan
(including shares reserved for outstanding options and awards and shares
available for future grant of options or other award under the Plan) shall
likewise be adjusted so that the Plan shall thereafter cover the number and
class of shares equivalent to the shares covered by the Plan immediately prior
to such event.
11. GENERAL RESTRICTIONS.
a. The Company will not be obligated to make any Grant or issue
shares of Common Stock, or make any payment if counsel to the Company
determines that such Grant, issuance or payment would violate any law
or regulation of any governmental authority or any agreement between
the Company and the NASD or any national securities exchange upon
which the Common Stock is quoted or listed. In connection with any
Grant, issuance or transfer, the person acquiring the shares shall,
if requested by the Company, give assurances satisfactory to counsel
to the Company regarding such matters as the Company may deem
desirable to assure compliance with all legal requirements. Each
Grant shall be subject to the requirement that if at any time the
Committee shall determine, in its discretion, that the listing,
registration or qualification of the shares subject to such Grant upon
NASDAQ, any securities exchange or under any state or federal law, or
that the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, such
Grant or the issue or purchase of shares thereunder, such Grant shall
be subject to the condition that such listing, registration,
qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
b. Certificates evidencing shares of Common Stock issued
pursuant to the Plan may bear a legend describing restrictions on
transfer thereof.
12. TERMINATION OF EMPLOYMENT. Subject to the specific provisions of
any executive or any other employment agreement entered into by the Company,
incentive options and nonqualified options, shall terminate immediately upon the
termination of the optionee's employment by the Company or any subsidiary;
provided, however, that in the event such termination of employment results from
(i) the optionee's retirement with the consent of the Company, such options
5
<PAGE>
may be exercised within three (3) months of the date of termination, and (ii)
the optionee's disability (as defined in Section 105(d)(4) of the Internal
Revenue Code of 1986, as amended) or death, such options may be exercised by the
optionee's legal representative, heir or devisee, as appropriate, within one (1)
year from the date of disability or death. Notwithstanding clause (i) of the
preceding sentence, the Company may terminate and cancel an incentive option or
a nonqualified option during the three-month period referred to in such clause
if the optionee engages in employment or activities contrary, in the opinion of
the Board of Directors or the Committee, to the best interests of the Company or
any subsidiary. In addition, the Committee shall, in each case in which clause
(i) of the second preceding sentence may be applicable, determine whether a
termination of employment shall be considered retirement with the consent of the
Company. Notwithstanding the foregoing, (i) no incentive option or nonqualified
option shall be exercisable after the expiration date of such option, and (ii)
no incentive option or nonqualified option (or portion thereof) which is not
exercisable on the date of termination of employment shall be exercisable
thereafter without the consent of the Committee.
13. DEFINITIONS. Any terms or provisions used herein which are
defined in Sections 421, 422A or 425 of the Code, or the regulations thereunder
or corresponding provisions of subsequent laws and regulations in effect at the
time Grants are made hereunder shall have the meaning as therein defined.
14. AMENDMENT OF THE PLAN. The Board of Directors of the Company,
may, from time to time, terminate the Plan or modify or amend its term or the
terms of any agreement entered into pursuant hereto in any respect whatsoever,
including, without limitation, the making of such amendments or revisions as the
Board shall deem advisable in order to conform the Plan to any change in any law
or regulation applicable thereto; provided, however, that the Board shall not,
without approval by a majority vote of the outstanding shares of the Company
having general voting power, (i) increase the aggregate number of shares subject
to the Plan (other than increases due to changes in capitalization), (ii) change
the manner of determining the minimum option price, (iii) extend the period
during which options may be granted or exercised, (iv) change the designation of
the class of employees eligible to receive Grants, (v) amend the Plan in any
manner that will cause incentive options issued under it to fail to meet the
requirements of Section 422A of the Code, or (vi) materially increase the
benefits accruing to participants under the Plan. No termination, modification
or amendment of the Plan or any agreements hereunder shall, without the consent
of the employee to whom any Grant shall theretofore have been made, impair the
rights of such employee thereunder.
15. NO EMPLOYMENT RIGHTS. The Plan and any Grants made under the
Plan shall not confer upon any employee any right with respect to continuance of
employment by the Company or any subsidiary, or interfere in any way with the
right of the Company or any subsidiary by which an employee is employed to
terminate his employment at any time, with or without cause.
16. LEAVES OF ABSENCE. The Committee shall be entitled to make such
rules, regulations, and determinations as it deems appropriate under the Plan
with respect to any leave of absence taken by the recipient of any award.
Without limiting the generality of the foregoing, the
6
<PAGE>
Committee shall be entitled to determine whether or not any such leave of
absence shall constitute a termination of employment within the meaning of the
Plan.
17. WITHHOLDING TAXES. Whenever the Company proposes or is required
to issue or transfer shares of Common Stock under the Plan, the Company shall
have right to require the optionee to remit to the Company an amount sufficient
to satisfy any federal, state and/or local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares. Alternatively,
the Company may issue or transfer such shares of Common Stock net of the number
of shares sufficient to satisfy the withholding tax requirements. For
withholding tax purposes, the shares of Common Stock shall be valued on the date
the withholding obligation is incurred.
18. DEFINITION. In this Plan, "fair market value" as of any date and
in respect of any share of Common Stock means the closing price on such date or
the next business day, if such date is not a business day, of a share of Common
Stock reflected in the consolidate trading tables of the WALL STREET JOURNAL
(presently as listed on The NASDAQ National Market System).
7
<PAGE>
INSERT TO BRAUN'S 1997 STOCK INCENTIVE PLAN
INSERT 1A
- ---------
(2) closely associate the interests of the management of the Company with the
shareholders by reinforcing the relationship between employee stock options and
shareholder gains; (3) provide management with an equity ownership in the
Company commensurate with the Company's performance as reflected in increased
shareholder value; and (4) maintain competitive compensation levels.
INSERT 1B
- ---------
No member of the Committee shall be liable for any action taken or decision made
in good faith relating to the Plan or to any award thereunder.
INSERT 2A
- ---------
In making this selection and determining the form and amount of Grants, the
Committee shall consider any factors deemed relevant, including the individual's
functions, responsibilities, value of services to the Company and past and
potential contributions to the Company's profitability and growth.
INSERT 2B
- ---------
An optionee electing to exercise an option shall give written notice to the
Company of such election and of the number of shares subject to such exercise.
INSERT 3A
- ---------
(i) TEN PERCENT SHAREHOLDER RULE. Notwithstanding any other provision in
the Plan, if at any time an option is to be granted pursuant to the Plan, the
optionee owns, directly or indirectly, shares of the Company's Common Stock
possessing more than ten percent (10%) of the total combined voting power of the
Common Stock, then any incentive options to be granted to such optionee pursuant
to the Plan shall satisfy the requirements of section 422(c)(5) of the Code, and
the option price shall be not less than 110% of the fair market value of the
Common Stock of the Company as described herein, and such option by its terms
shall not be exercisable after the expiration of five (5) years from the date
such option is granted.
8
<PAGE>
INSERT 6A
- ---------
Subject to the specific provisions of any executive or any other employment
agreement entered into by the Company,
INSERT 8A
- ---------
16. LEAVES OF ABSENCE. The Committee shall be entitled to make such rules,
regulations, and determinations as it deems appropriate under the Plan with
respect to any leave of absence taken by the recipient of any award. Without
limiting the generality of the foregoing, the Committee shall be entitled to
determine whether or not any such leave of absence shall constitute a
termination of employment within the meaning of the Plan.
17. WITHHOLDING TAXES. Whenever the Company proposes or is required to
issue or transfer shares of Common Stock under the Plan, the Company shall have
right to require the optionee to remit to the Company an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares. Alternatively,
the Company may issue or transfer such shares of Common Stock net of the number
of shares sufficient to satisfy the withholding tax requirements. For
withholding tax purposes, the shares of Common Stock shall be valued on the date
the withholding obligation is incurred.
18. DEFINITION. In this Plan, "fair market value" as of any date and in
respect of any share of Common Stock means the closing price on such date or
the next business day, if such date is not a business day, of a share of Common
Stock reflected in the consolidated trading tables of the WALL STREET JOURNAL
(presently as listed on The NASDAQ National Market System).
9
<PAGE>
PROXY
BRAUN'S FASHIONS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - JULY 16, 1997
The undersigned hereby appoints Nicholas H. Cook and Herbert D. Froemming,
and each of them, with full power of substitution as proxies and agents (the
"Proxy Agents") in the name of the undersigned, to attend the Annual Meeting of
Shareholders of Braun's Fashions Corporation to be held at 2800 LaSalle Plaza,
800 LaSalle Avenue, Minneapolis, Minnesota on Wednesday, July 16, 1997 at 3:30
p.m. Central Time, or any adjournment thereof, and to vote the number of shares
of Common Stock of the Company that the undersigned would be entitled to vote,
and with all the power the undersigned would possess, if personally present, as
follows.
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS / / FOR all nominees listed below / / WITHHOLD authority
(EXCEPT AS MARKED TO THE TO VOTE FOR ALL NOMINEES LISTED
CONTRARY). BELOW.
</TABLE>
(TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH
THE NOMINEE'S NAME IN THE LIST BELOW.)
CLASS 3 NOMINEES
HERBERT D. FROEMMING
JAMES J. FULD, JR.
<TABLE>
<S> <C> <C> <C>
2. PROPOSAL TO ADOPT A 1997 STOCK INCENTIVE PLAN.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP as the Company's independent auditor for
the Company's current fiscal year.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
4. In their discretion, the Proxy Agents are authorized to vote on such other business as may properly
come before the meeting or any adjournment thereof.
</TABLE>
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED TO THE COMPANY WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3.
PLEASE DATE AND SIGN the enclosed proxy exactly as the name(s) appears
herein and return promptly in the accompanying envelope. If the shares are held
by joint tenants or as community property, both shareholders should sign.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
Receipt of Notice of Annual Meeting of Shareholders, Annual Report on Form
10-K for the year ended March 1, 1997 and Proxy Statement dated June 6, 1997 is
hereby acknowledged by the undersigned.
<TABLE>
<S> <C>
Dated , 1997
-------------------------------------------------
Signature
-------------------------------------------------
Name, typed or printed
-------------------------------------------------
Tax identification or
social security number
</TABLE>
