<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 Rule 14a-11(c) or Rule 14a-12
BRAUN'S FASHIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(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:
----------------------------------------------------------------------
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 22, 1998
------------------
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 22, 1998 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 1 directors to serve on the Board of Directors for
a term of three years;
2. To increase the number of shares of Common Stock reserved for issuance
under the Company's 1997 Stock Incentive Plan from 300,000 to 450,000
shares;
3. To adopt a 1998 Director Option Plan;
4. To consider and act upon a proposal to approve stock options granted
to the Company's non-employee directors;
5. To ratify the appointment of Price Waterhouse LLP as the Company's
independent auditors for the fiscal year ending February 27, 1999; and
6. 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 12, 1998, 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 15, 1998
Minneapolis, Minnesota
<PAGE>
BRAUN'S FASHIONS CORPORATION
2400 XENIUM LANE NORTH
PLYMOUTH, MINNESOTA 55441
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF SHAREHOLDERS - JULY 22, 1998
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 22, 1998, 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 15, 1998.
The close of business on June 12, 1998 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 4,523,393 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, 1998: (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
---- ------------------ ------------------
OFFICERS AND DIRECTORS
- ----------------------
<S> <C> <C>
Nicholas H. Cook 97,600(1) 2.1
Herbert D. Froemming 149,824(2) 3.3
William J. Prange 44,500(3) *
Joseph E. Pennington 15,333(4) *
Ralph C. Neal 5,000(5) *
Marc C. Ostrow 215,000(6)(7) 4.7
James J. Fuld, Jr. 152,113(7)(8) 3.4
Donald D. Beeler 18,333(9) *
Larry C. Barenbaum 18,333(9) *
5% SHAREHOLDERS
- ---------------
McCullough, Andrews & Cappiello, Inc. 312,000(10) 6.9
All directors and executive
officers as group (9 persons) 739,903(11) 14.9
</TABLE>
- ---------------------------------
*Less than 1%
(1) Includes 97,600 shares issuable pursuant to options granted.
(2) Includes 83,000 shares issuable pursuant to options granted.
(3) Includes 44,500 shares issuable pursuant to options granted.
(4) Includes 13,333 shares issuable pursuant to options granted.
(5) Includes 5,000 shares issuable pursuant to options granted.
(6) Mr. Ostrow's address is c/o Pennwood Capital Corporation, 477 Madison
Avenue, New York, New York 10022.
(7) Includes 15,000 shares issuable pursuant to options granted.
(8) Mr. Fuld's address is c/o James J. Fuld, Jr. Corp., 605 Third Avenue,
Suite 3500, New York, New York 10158.
(9) Includes 8,333 shares issuable pursuant to options granted.
(10) The address of McCullough, Andrews & Cappiello, Inc. is 101 California
Street, San Francisco, California 94111.
(11) 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. Nicholas H.
Cook and Marc C. Ostrow are the directors in the class whose term expires at the
Meeting. Management and the Board of Directors have nominated and recommended
that Nicholas H. Cook and Marc C. Ostrow be reelected as Class 1 directors, to
hold office until the 2001 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. Cook and Ostrow. 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>
Nicholas H. Cook .................. 57 Director; nominee with term expiring in 2001 1987
Marc C. Ostrow(1) ................. 52 Director; nominee with term expiring in 2001 1986
Herbert D. Froemming .............. 61 Director with term expiring in 2000 1990
James J. Fuld, Jr.(2) ............. 50 Director with term expiring in 2000 1986
Larry C. Barenbaum(1)(2) .......... 51 Director with term expiring in 1999 1992
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Donald D. Beeler(1)(2) ............ 62 Director with term expiring in 1999 1992
</TABLE>
- -------------------
(1) Member of Compensation Committee
(2) Member of Audit Committee
NOMINEES AND DIRECTORS
CLASS 1 NOMINEES
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 from December 1990 through February 1998, 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.
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, 1996. 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. ("Snyder's"), a Minneapolis-based retailer which operates a
chain of 56 stores. In addition, Snyder's operates a wholesale program, by
contract, which supplies over 800 independent retailers in the United States.
CLASS 3 DIRECTORS
HERBERT D. FROEMMING has served the Company as Vice Chairman since July
1997. He was President and Chief Operating Officer from June 1994 through June
1997. Mr. Froemming was Secretary from December 1990 through February 1998, and
Treasurer from January 1989 through February 1998. From January 1989 until May
1994, Mr. Froemming served as the Company's Chief Financial Officer and, from
4
<PAGE>
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.
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 shareholders
and was confirmed by the Bankruptcy Court. All of the nominees and directors
served as directors of the Company during this period.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended February 28, 1998, the Board of Directors held
four 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.
COMPENSATION OF DIRECTORS
In fiscal 1998, the Company compensated directors who are not employed by
the Company or its affiliates $8,000 per year, payable quarterly, plus expenses.
In addition, in July 1997, the outside directors were each granted an option to
purchase 15,000 shares of Common Stock at an exercise price of $8.75 per share.
5
<PAGE>
Effective in fiscal 1999, directors who are not employed by the Company will
be paid $12,000 per year, payable quarterly, plus expenses. Committee
members will also receive $1,000 per year for serving on a committee and
committee chairpersons will receive $2,000 per year.
1992 DIRECTOR STOCK OPTION PLAN
Effective March 1, 1992, the Company established the 1992 Director Stock
Option Plan (the "1992 Director 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 1992 Director 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 1992 Director Plan. The 1992 Director Plan terminates on
March 1, 2002.
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 February
28, 1998, all Section 16(a) filing requirements applicable to its officers,
directors and ten percent stockholders were complied with.
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
6
<PAGE>
and rationale applicable to the Company's executive officers with respect to the
compensation paid to such executive officers for the year ended February 28,
1998.
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 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
7
<PAGE>
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 was $240,000 in fiscal 1998. In accordance with
the Company's bonus plan, Mr. Cook received a bonus of $121,794 last year. In
fiscal 1998, the Committee awarded Mr. Cook options to purchase 10,000 shares of
Common Stock. 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, 1998 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 four most highly compensated executive
officers of the Company.
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 1998 240,000 121,794 -- 10,000 555
Chairman, Chief 1997 231,000 15,000 -- 87,600(5) 468
Executive Officer 1996 231,000 -- 0 435
- -------------------------------------------------------------------------------------------------------------------------------
Herbert D. Froemming(6) 1998 210,000 121,794 -- 10,000 3,108
Vice Chairman, Chief 1997 200,000 15,000 -- 87,600(5) 2,922
Financial and 1996 200,000 -- -- 0 1,770
Administrative Officer
- -------------------------------------------------------------------------------------------------------------------------------
William J. Prange(7) 1998 203,333 121,794 -- 10,000 2,538
President, Chief 1997 165,000 10,000 -- 85,000(5) 2,147
Merchandising 1996 165,000 -- -- 0 1,144
Officer
- -------------------------------------------------------------------------------------------------------------------------------
Joseph E. 1998 141,667 76,121 -- 25,000 0
Pennington(8) 1997 5,625 -- -- 25,000 0
Senior Vice President 1996 -- -- -- 0 0
of Merchandise
Planning and
Distribution
- -------------------------------------------------------------------------------------------------------------------------------
Ralph C. Neal(9) 1998 156,667 76,121 -- 25,000 600
Senior Vice President 1997 65,967 -- -- 25,000 0
of Store Operations 1996 -- -- -- 0 0
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</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) On February 27, 1998, in connection with management succession
agreements, the Company accelerated the vesting schedule on 83,000
options to each of Messrs. Cook and Froemming, respectively, which
had remaining vesting schedules ranging from three to five years.
(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: $2,375, $2,234, and $1,125
for Mr. Froemming in 1998, 1997 and 1996, respectively, $2,375, $1,997
and $1,031 for Mr. Prange for 1998, 1997 and 1996, respectively, and
$600 for Mr. Neal in 1998. Insurance premiums were paid on behalf of
each named executive officer in the amount of $555 for Mr. Cook, $733
for Mr. Froemming and $163 for Mr. Prange in 1998, $468 for Mr. Cook,
$688 for Mr. Froemming and $150 for Mr. Prange in 1997 and $435 for Mr.
Cook, $645 for Mr. Froemming and $113 for Mr. Prange in 1996.
(5) Includes options which were repriced in June 1996, including 77,600 for
each of Messrs. Cook and Froemming and 50,000 for Mr. Prange.
9
<PAGE>
(6) Mr. Froemming will be employed with the Company until June 30, 1998 at
which time he has elected to take early retirement.
(7) Mr. Prange was promoted to Chief Executive Officer on February 27, 1998.
(8) Mr. Pennington became employed by the Company in February 1997 as Vice
President and was promoted to Executive Vice President and Chief
Operating Officer on February 27, 1998.
(9) Mr. Neal became employed by the Company in August 1996 as Vice President
and was promoted to Executive Vice President/Store Operations on
February 27, 1998
. OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1998
to the named executive officers:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Individual Grants
- --------------------------------------------------------------------------------------------------------------------------
% of Potential Realizable
Total Options/ Value at Assumed Annual
SARs Rates of Stock Price
Options/ Granted to Exercise Appreciation for Option
SARs Employees or Base Term (2)
Granted in Fiscal Price Expiration ---------------------------
Name (#) Year (1) ($/sh) Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas H. Cook 10,000 8.7% 8.75 7-17-07 55,028 139,452
- --------------------------------------------------------------------------------------------------------------------------
Herbert D. Froemming 10,000 8.7% 8.75 7-17-07 55,028 139,452
- --------------------------------------------------------------------------------------------------------------------------
William J. Prange 10,000 8.7% 8.75 7-17-07 55,028 139,452
- --------------------------------------------------------------------------------------------------------------------------
Joseph E. Pennington 25,000 21.7% 8.75 7-01-07 137,571 348,631
- --------------------------------------------------------------------------------------------------------------------------
Ralph C. Neal 25,000 21.7% 8.75 7-01-07 137,571 348,631
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company granted 115,000 options to employees during fiscal 1998.
(2) The dollar amounts under these columns are the result of calculations at
the assumed 5% and 10% rates mandated by the Securities and Exchange
Commission and, therefore, are not intended to forecast possible future
appreciation, if any, of the Company's stock price. The Company did not
use an alternative formula for a grant date valuation, as the Company is
not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatile factors. No gain to
the optionees is possible without an increase in stock price which will
benefit all stockholders commensurably.
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.
10
<PAGE>
OPTION EXERCISES AND VALUE OF OPTIONS AT END OF FISCAL 1998
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT END OF IN-THE-MONEY OPTIONS
SHARES FISCAL 1998 (#) AT END OF FISCAL 1998 (1)
ACQUIRED ------------------------------ -------------------------
ON VALUE
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------- -------- ------------- --------------- ------------- ---------------
(#) ($)(1)
--- ------
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nicholas H. Cook 0 N/A 97,600 0 $705,000 0
- -----------------------------------------------------------------------------------------------------------------------
Herbert D. Froemming 14,600 158,775 83,000 0 $605,538 0
- -----------------------------------------------------------------------------------------------------------------------
William J. Prange 0 N/A 14,167 80,833 $96,513 $588,175
- -----------------------------------------------------------------------------------------------------------------------
Joseph E. Pennington 0 N/A 8,334 41,666 $22,398 $96,352
- -----------------------------------------------------------------------------------------------------------------------
Ralph C. Neal 8,334 95,841 0 41,666 0 $169,273
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Value based on market value of the Company's Common Stock on February
27, 1998 less the exercise price.
EMPLOYMENT AND OTHER AGREEMENTS
In March 1998, the Company entered into three-year employment agreements
with Messrs. Prange, Pennington and Neal (the "Employment Agreements"). 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 1999, the Employment Agreements provide for annual base salaries
to Messrs. Prange, Pennington and Neal of $300,000, $175,000 and $175,000,
respectively. The Employment Agreements also provide that Messrs. Prange,
Pennington and Neal 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). Upon such termination, 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; provided,
however, the executive shall receive the full base salary for the remaining
term of the contract if there is a "change of control" (i) during fiscal 1999
at a price above $20 per share, (ii) during fiscal 2000 at a price above $25
per share or (iii) during fiscal 2001 at a price above $30 per share. 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). 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.
On February 26, 1998, the Company entered into a Management Succession and
Separation Agreement with each of Messrs. Cook and Froemming. Mr. Cook's
agreement provides that he shall continue to serve as the Company's Chairman of
the Board through August 31, 1999. Mr. Cook shall remain employed on a
full-time basis through August 31, 1998 and thereafter at such time as may be
required by the Board of Directors. Mr. Cook shall receive an annual salary of
$175,000 from April 1, 1998 through August 31, 1999, and an annual salary of
$100,000 from September 1, 1999 through August 31, 2001.
11
<PAGE>
Mr. Froemming's agreement provides that he shall continue to serve as the
Company's Vice Chairman through June 30, 1998. The agreement provides that on
June 30, 1998 in connection with his separation, the Company shall in one
installment pay Mr. Froemming his annual salary of $210,000.
The agreements also provide that 83,000 unvested options previously
granted to each of Messrs. Cook and Froemming became fully vested and
immediately exercisable on February 26, 1998. The Company has also agreed to
provide Messrs. Cook and Froemming with a loan of up to $200,000 each solely
in connection with the exercise of outstanding stock options. These loans,
if utilized, will have a term of three years and bear interest at a rate of
7% per year. The loans have a mandatory repayment provision which is
triggered upon meeting certain conditions relating to the sale of shares of
the Company's Common Stock underlying these stock options.
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 comparison of targeted
pre-tax earnings (as determined on an annual basis by the Compensation
Committee) to the Company's actual pre-tax earnings. In the event that
actual pre-tax earnings are less than or equal to the hurdle rate set by the
Compensation Committee from time-to-time, no bonuses are paid by the Company.
In fiscal 1998, Messrs. Cook, Froemming, Prange, Pennington and Neal
received bonuses of $121,794, $121,794, $121,794, $76,121 and $76,121,
respectively.
SECTION 401(k) PLAN
Effective March 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 1998 in the amount of $55,954,
including $2,375 on behalf of Mr. Froemming, $2,375 on behalf of Mr. Prange and
$600 on behalf of Mr. Neal.
12
<PAGE>
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholder return on the
Common Stock of the Company since February 27, 1993 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.
Braun's Fashions Corporation
Comparative Stock Performance
Fiscal Year Ended February 29, 1998
<TABLE>
<CAPTION>
Year-end Trading
Date Date Braun's Nasdaq (US) Nasdaq Retail
- -------- ------- ------- ----------- -------------
<S> <C> <C> <C> <C>
02/27/93 02/26/93 100.00 100.000 100.000
02/26/94 02/25/94 62.50 118.343 110.967
02/25/95 02/24/95 23.86 119.992 101.930
03/02/96 03/01/96 15.34 167.196 120.331
03/01/97 02/28/97 76.14 199.472 134.030
02/28/98 02/27/98 98.30 273.102 177.169
</TABLE>
13
<PAGE>
PROPOSAL TWO
PROPOSAL TO INCREASE THE NUMBER OF SHARES
AUTHORIZED UNDER THE 1997 STOCK INCENTIVE PLAN
GENERAL
On April 8, 1998, the Company's Board of Directors adopted, subject to
shareholder approval, an amendment to the Company's 1997 Stock Incentive Plan
(the "1997 Incentive Plan") increasing the number of shares of Common Stock
authorized for issuance under the 1997 Incentive Plan by 150,000 shares to
450,000 shares. 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. As of the record date for the Meeting, no shares of
Common Stock remained available for future grants of stock options under the
1997 Incentive Plan.
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.
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.
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.
14
<PAGE>
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 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
15
<PAGE>
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 AMEND 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.
PROPOSAL THREE
PROPOSAL TO APPROVE THE 1998 DIRECTOR STOCK OPTION PLAN
GENERAL
On April 8, 1998, the Board of Directors of the Company adopted the 1998
Director Stock Option Plan (the "1998 Director Plan") and directed that the 1998
Director Plan be submitted to shareholders for consideration at the Meeting.
The following is a summary of the principal features of the 1998 Director Plan
and is qualified in its entirety by reference to the complete text of the 1998
Director Plan as set forth as Exhibit A to this Proxy Statement. Shareholders
are urged to read the actual text of the 1998 Director Plan.
16
<PAGE>
SUMMARY OF 1998 DIRECTOR PLAN
The purpose of the 1998 Director Plan is to encourage increased ownership
by members of the Company's Board of Directors who are not employees. Under the
Company's 1992 Director Plan, options were granted to non-employee directors.
Directors who are not employees of the Company will be eligible to receive
awards under the 1998 Director Plan. Currently, the Company has four eligible
directors.
OPERATION OF THE 1998 DIRECTOR PLAN
The 1998 Director Plan provides for granting non-qualified stock options to
eligible directors upon certain events. The total number of shares of Common
Stock that may be issued under the 1998 Director Plan is 100,000 shares, subject
to adjustment as provided therein.
Each eligible director is automatically granted an option to purchase 5,000
shares of Common Stock in the month following each annual meeting of
shareholders held after July 22, 1998. The 1998 Director Plan is administered
by the Compensation Committee. Unless previously terminated by or with the
approval of the Board of Directors, the 1998 Director Plan will terminate on
April 8, 2008.
FEDERAL INCOME TAX CONSEQUENCES
The principal federal income tax consequences of options granted under the
1998 Director Plan are the same as those discussed above in connection with
non-qualified stock options awarded to employees of the Company under the 1997
Incentive Plan.
BOARD RECOMMENDATION AND SHAREHOLDER VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO ADOPT THE 1998
DIRECTOR 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.
17
<PAGE>
PROPOSAL FOUR
APPROVAL OF OPTIONS GRANTED TO
NON-EMPLOYEE DIRECTORS
On July 17, 1997, the Board of Directors granted to each non-employee
director, Marc C. Ostrow, James J. Fuld, Jr., Larry C. Barenbaum and Donald D.
Beeler, a non-qualified option to purchase 15,000 shares of Common Stock at an
exercise price of $8.75 per share, the fair market value of the Common Stock on
that date. Such options vest at the rate of 5,000 shares on each of the first
three anniversaries of the date of grant provided that such persons continue
to serve as a director on such vesting date. These options are subject to
shareholder approval and remain exercisable for a period of five years. The
options were granted to more fairly compensate such directors for their
contributions to the Company, particularly through the Company's recent
turnaround, and to provide an incentive for continued high performance.
BOARD RECOMMENDATION AND SHAREHOLDER VOTE REQUIRED
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE GRANT OF
OPTIONS TO NON-EMPLOYEE DIRECTORS. Ratification of the grant of options to
non-employee directors requires the affirmative vote by a majority of the shares
of Common Stock present or represented at the Meeting.
PROPOSAL FIVE
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 27,
1999. 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
18
<PAGE>
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, 1999 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
February 28, 1998, 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 1
directors to serve until the 2001 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 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.
By Order of the Board of Directors,
Nicholas H. Cook
Chairman of the Board
June 15, 1998
Minneapolis, Minnesota
19
<PAGE>
BRAUNS FASHIONS CORPORATION
1998 DIRECTOR STOCK OPTION PLAN
The purpose of the Brauns Fashions Corporation 1998 Director Stock
Option Plan (the "Option Plan") is to attract and retain persons of
outstanding competence to serve on the Board of Directors of Brauns Fashions
Corporation (the "Company").
1. ADMINISTRATION. The Option Plan will be administered by the Board
of Directors of the Company. Grants of stock options under the Option Plan
("Options") and the amount and nature of the Options so granted will be
automatic, as described below.
2. STOCK SUBJECT TO THE OPTION PLAN. An aggregate of 100,000 shares
of Common Stock, par value $.0l per share ("Common Stock"), of the Company
are reserved for issuance under the Option Plan. The number of shares
authorized for issuance under the Option Plan may be increased from time to
time by approval of the Board of Directors and, if required pursuant to Rule
16b-3 under the Securities Exchange Act of 1934 or the applicable rules of
any securities exchange or the NASD, the shareholders of the Company. In the
event of any reorganization, merger, recapitalization, stock dividend, stock
split, or similar change in the corporate structure or shares of the Company,
appropriate adjustments will be made to the number and kind of shares
reserved for issuance under the Option Plan and pursuant to outstanding
Options and to the exercise price of outstanding Options.
3. AUTOMATIC OPTION GRANTS. Under the Option Plan, each non-employee
director will automatically be granted Options to purchase shares of Common
Stock as follows:
i. On the date of the 1998 annual meeting of shareholders,
each non-employee director will automatically be granted an Option
to purchase 5,000 shares of Common Stock.
ii. Thereafter, on the date of each subsequent annual meeting
of shareholders at which the non-employee director is reelected, or
otherwise continues to serve as a director pursuant to the current
three year terms, to the Board of Directors, the non-employee
director shall automatically be granted an additional Option to
purchase 5,000 shares of Common Stock.
4. VESTING, EXERCISABILITY AND EXPIRATION. All Options granted under
the Option Plan shall be fully vested when granted, but may not be exercised
until six months following the date of grant. All Options granted under the
Option Plan shall expire five years after the date of grant.
5. TRANSFERABILITY. No Option granted under the Option Plan is
assignable or transferable during the lifetime of the director, either
voluntarily or involuntarily. Options shall be exercisable during a
director's lifetime only by such director. In the event of the death of a
non-employee director, Options granted under the Option Plan may be
transferred by will or the laws of descent and distribution and may only be
exercised by the executors or administrators of such
1
<PAGE>
director's estate or by the person or persons to whom such director's rights
under the Option shall pass by the director's will or the laws of descent and
distribution.
6. EXERCISE PRICE. The exercise price of Options granted under the
Option Plan shall be equal to the fair market value of one share of Common
Stock on the date of grant. For purposes of the Option Plan, "fair market
value" is the average of the high and low sales price of the Common Stock, as
reported by the NASDAQ National Market System on the date of grant. Payment
for the exercise of Options may be made in cash, by personal check payable to
the Company, by delivery of shares of Common Stock having an aggregate fair
market value on the date of exercise which is not less than the option
price, or by a combination thereof.
7. PLAN AMENDMENT AND TERMINATION. The Board of Directors may
suspend or terminate the Option Plan or any portion thereof at any time, and
may amend the Option Plan from time to time in any respect, provided that no
such amendment will be effective without approval of the shareholders, if
shareholder approval is required pursuant to Rule 16b-3 under the Securities
Exchange Act of 1934 or the applicable rules of any securities exchange or
the NASD. To the extent prohibited under Rule 16b-3 under the Securities
Exchange Act of 1934, the Option Plan may not be amended more than once every
six months. No termination, suspension or amendment of the Option Plan will
alter an outstanding Option without the consent of the holder of such Option.
Unless earlier terminated by action of the Board, the Option Plan will
terminate on July 17, 2008, and no Option shall be granted after any such
termination. Options outstanding upon termination of the Option Plan may
continue to be exercised in accordance with their terms.
8. COMPLIANCE WITH SEC REGULATIONS. It is the Company's intent that
the Option Plan comply in all respects with Rule 16b-3 of the Act and any
regulations promulgated thereunder. If any provision of this plan is later
found not to be in compliance with the Rule, the provision shall be deemed
null and void. All grants and exercises of Options under the Option Plan
shall be executed in accordance with the requirements of Section 16 of the
Act, as amended, and any regulations promulgated thereunder.
9. SHAREHOLDER APPROVAL. The Option Plan shall be subject to approval
by the shareholders holding at least a majority of the voting stock of the
Company represented in person or by proxy at a duty held shareholders'
meeting, and any Option granted under the Option Plan prior to the date of
such approval shall be contingent upon such approval.
10. EFFECTIVE DATE. This Option Plan shall be effective as of April 8,
1998, subject to shareholder approval of the Option Plan as described above
on or before April 8, 1999.
11. MISCELLANEOUS. Except as otherwise provided herein, no
non-employee director shall have any claim or right to be granted an Option
under the Option Plan. Neither the Option Plan nor any action hereunder
shall be construed as giving any director any right to be retained in the
service of the Company.
2
<PAGE>
PROXY
BRAUN'S FASHIONS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS - JULY 22, 1998
The undersigned hereby appoints Nicholas H. Cook and William J. Prange, 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 22, 1998 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 1 NOMINEES
NICHOLAS H. COOK
MARC C. OSTROW
<TABLE>
<S> <C> <C> <C>
2. PROPOSAL TO INCREASE THE NUMBER OF SHARES UNDER THE 1997 STOCK INCENTIVE PLAN FROM 300,000 TO 450,000
SHARES.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
3. PROPOSAL TO ADOPT THE 1998 DIRECTOR OPTION PLAN.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
4. PROPOSAL TO RATIFY THE GRANT OF STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
5. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP as the Company's independent auditors for
the Company's current fiscal year.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
6. 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, 3, 4 AND 5.
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 February 28, 1998 and Proxy Statement dated June 15,
1998 is hereby acknowledged by the undersigned.
<TABLE>
<S> <C>
Dated , 1998
-------------------------------------------------
Signature
-------------------------------------------------
Name, typed or printed
-------------------------------------------------
Tax identification or
social security number
</TABLE>
