<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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 Section 240.14a-11(c) or Section
240.14a-12
Bradlees, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(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>
BRADLEES, INC.
ONE BRADLEES CIRCLE
BRAINTREE, MA 02184
May 3, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting (the "Annual
Meeting") of Bradlees, Inc., a Massachusetts corporation (the "Company"), to be
held on Wednesday, May 31, 2000 at 9:00 a.m. at the Dedham Hilton, Dedham,
Massachusetts.
The Annual Meeting has been called for the purpose of (i) electing three
Class I directors of the Company to serve until the 2003 Annual Meeting and
until their respective successors and assigns are duly elected and qualified,
(ii) approving the Company's 2000 Stock Option and Incentive Plan (the "2000
Stock Plan"), (iii) appointing Arthur Andersen LLP as the Company's auditors for
the fiscal year ending February 3, 2001 and (iv) considering and voting upon
such other business as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 19, 2000 as
the record date for determining stockholders entitled to notice of, and to vote
at, the Annual Meeting and any adjournments or postponements thereof.
The Board of Directors of the Company recommends that you vote "FOR" the
election of the nominees of the Board of Directors as Directors of the Company.
The Board of Directors believes that the 2000 Stock Plan is in the best interest
of the Company and therefore recommends that you vote "FOR" the approval of the
2000 Stock Plan. The Board of Directors also recommends that you vote "FOR" the
appointment of Arthur Andersen LLP as auditors for the Company for the fiscal
year ending February 3, 2001.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
Sincerely,
[LOGO]
Peter Thorner
CHIEF EXECUTIVE OFFICER
<PAGE>
BRADLEES, INC.
--------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, MAY 31, 2000
--------------
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders (the
"Annual Meeting") of Bradlees, Inc. (the "Company") will be held on Wednesday,
May 31, 2000 at 9:00 a.m. at the Dedham Hilton, Dedham, Massachusetts for the
following purposes:
1. To elect three Class I directors of the Company to serve until the 2003
Annual Meeting of Stockholders and until their respective successors are
duly elected and qualified;
2. To approve the Company's 2000 Stock Option and Incentive Plan; and
3. To appoint Arthur Andersen LLP as the Company's auditors for the fiscal
year ending February 3, 2001.
Any action may be taken on the foregoing matters at the Annual Meeting on
the date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
may be postponed.
The Board of Directors has fixed the close of business on April 19, 2000 as
the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting and at any adjournments or postponements thereof.
Stockholders of record of the Company's common stock, par value $.01 per share,
at the close of business on that date will be entitled to notice of and to vote
at the Annual Meeting and at any adjournments or postponements thereof.
You are requested to complete and sign the enclosed form of proxy which is
being solicited by the Board of Directors and to mail it promptly in the
enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may vote
in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
[LOGO]
David L. Schmitt, CLERK
Braintree, Massachusetts
May 3, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID ENVELOPE
PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH,
EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE>
BRADLEES, INC.
ONE BRADLEES CIRCLE
BRAINTREE, MASSACHUSETTS 02184
--------------
PROXY STATEMENT
--------------
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 31, 2000
May 3, 2000
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Bradlees, Inc. (the "Company") for use at
the 2000 Annual Meeting of Stockholders of the Company to be held on May 31,
2000 at 9:00 a.m., and at any adjournments or postponements thereof (the "Annual
Meeting"). At the Annual Meeting, stockholders will be asked to vote upon
(i) the election of three Class I directors of the Company, (ii) the approval of
the Company's 2000 Stock Option and Incentive Plan (the "2000 Stock
Plan") (iii) the appointment of Arthur Andersen LLP as the Company's auditors
for the fiscal year ending February 3, 2001, and (iv) any other matters properly
brought before the Annual Meeting.
VOTING
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to stockholders on or about May 3, 2000. The Board of
Directors has fixed the close of business on April 19, 2000 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting (the "Record Date"). Only stockholders of record of the Company's
common stock, par value $.01 per share (the "Common Stock"), at the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting. As of the Record Date, there were 9,820,785 shares of Common
Stock outstanding and entitled to vote at the Annual Meeting. Holders of Common
Stock outstanding as of the close of business on the Record Date will be
entitled to one vote for each share held by them.
The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Directors are elected by a plurality of the votes cast at the Annual
Meeting. The affirmative vote of a majority of the total votes cast on the
proposals is required to (i) approve the 2000 Stock Plan and (ii) appoint Arthur
Andersen LLP as the Company's auditors. Abstentions and broker non-votes are
each included in the number of shares present at the Annual Meeting for purposes
of establishing a quorum. Abstentions and broker non-votes will have no effect
on the outcome of the election of directors or the proposals to be voted on at
the Annual Meeting.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. SHARES REPRESENTED BY A PROPERLY EXECUTED PROXY RECEIVED PRIOR TO THE
VOTE AT THE ANNUAL MEETING AND NOT REVOKED WILL BE VOTED AT THE ANNUAL MEETING
AS DIRECTED ON THE PROXY. IF A PROPERLY EXECUTED PROXY IS SUBMITTED AND NO
INSTRUCTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR (I) THE ELECTION OF THE
THREE NOMINEES FOR CLASS I DIRECTORS OF THE COMPANY NAMED IN THIS PROXY
STATEMENT, (II) THE APPROVAL OF THE 2000 STOCK PLAN AND (III) THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS THE COMPANY'S AUDITORS. IT IS NOT ANTICIPATED THAT ANY
MATTERS OTHER THAN THOSE SET FORTH IN THIS PROXY STATEMENT WILL BE PRESENTED AT
THE ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN
ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.
<PAGE>
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Clerk of the Company at the
address of the Company set forth above; by filing a duly executed proxy bearing
a later date; or by appearing in person and voting by ballot at the Annual
Meeting. Any stockholder of record as of the Record Date attending the Annual
Meeting may vote in person whether or not a proxy has been previously given, but
the presence (without further action) of a stockholder at the Annual Meeting
will not constitute revocation of a previously given proxy.
The Company's Annual Report for the year ended January 29, 2000, including
the Company's audited financial statements for the fiscal year ended
January 29, 2000, is being mailed to stockholders concurrently with this Proxy
Statement.
PROPOSAL 1
ELECTION OF A CLASS OF DIRECTORS
The Board of Directors of the Company is currently comprised of nine members
and is divided into three classes, with the directors in each class serving for
a term of three years and until their successors are duly elected and qualified.
As the term of one class expires, a successor class is elected at each
succeeding annual meeting of stockholders.
At the Annual Meeting, three Class I directors will be elected to serve
until the 2003 Annual Meeting and until their successors are duly elected and
qualified. The Nominating Committee of the Board of Directors has nominated John
A. Curry, Willis G. Ryckman and Laurie M. Shahon for election as Class I
directors (the "Nominees"). The Board of Directors anticipates that each of the
Nominees will serve as a director if elected. However, if any person so
nominated is unable to accept election, the proxies will be voted for the
election of such other person or persons as the Nominating Committee of the
Board of Directors may recommend.
VOTE REQUIRED FOR APPROVAL
The election of the Director Nominees requires the affirmative vote of a
plurality of the votes cast on the proposal at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES
AS DIRECTORS OF THE COMPANY.
2
<PAGE>
INFORMATION REGARDING NOMINEES AND DIRECTORS
The following table sets forth certain information with respect to the three
Nominees for election as directors at the Annual Meeting and those continuing
directors of the Company whose terms expire at the annual meetings of
stockholders in 2001 and 2002 based on information furnished to the Company by
each director. The following information is as of April 10, 2000 unless
otherwise specified.
Current Class I directors, Stephen J. Blauner, Lawrence Lieberman and
Charles K. MacDonald will not be standing for re-election to the Board of
Directors. The Board of Directors thanks each of them for their contributions to
the Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ---- -------- --------
<S> <C> <C>
CLASS I NOMINEES FOR ELECTION AT THE 2000 ANNUAL MEETING
John A. Curry............................................... 65 *
Willis G. Ryckman........................................... 55 *
Laurie M. Shahon............................................ 48 *
CLASS II CONTINUING DIRECTORS--TERM TO EXPIRE IN 2001
Robert A. Altschuler (2).................................... 43 1999
Robert G. Lynn.............................................. 50 1997
William H. Roth (3)......................................... 48 1999
CLASS III CONTINUING DIRECTORS--TERM TO EXPIRE IN 2002
W. Edward Clingman, Jr. (2) (3)............................. 46 1999
John M. Friedman, Jr. (1)................................... 55 1996
Peter Thorner (3)........................................... 56 1997
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating Committee.
MR. CURRY previously served as a Director of the Company from January 1994
to February 1999. He has served as President Emeritus of Northeastern University
since September 1996. He served as President of Northeastern University from
prior to 1995 to 1996.
MR. RYCKMAN previously served as a Director of the Company from May 1997 to
February 1999. He has served as Founder and President of WGR, Inc. since prior
to 1995 and of WGR Golf L.P. since prior to 1995. He served as Chairman of the
Board of Tri Tech Labs, Inc. and Irma Shorell, Inc. since prior to 1995. He also
serves as a Director of Green Heat, LLC, Banyan Hotel Management Corporation,
Krasdale Foods, Inc., National Propane Corp. and Panavision, Inc.
MS. SHAHON has served as President and Founder of Wilton Capital Group since
prior to 1995. Ms. Shahon serves as a director of One Price Clothing
Stores, Inc. and Homeland Holding Corporation and its subsidiary, Homeland
Stores, Inc.
MR. ALTSCHULER became a Director of the Company in February 1999. He has
served as Vice President and Director of Leasing for Marx Realty & Improvement
Co., Inc. since prior to 1995. Since 1996, Mr. Altschuler has also served as
Class A Member Representative for Victory Markets, LLC.
MR. LYNN became President and Chief Operating Officer of the Company in
April 1998. He served as President and Chief Merchandising Officer of the
Company from April 1997 to April 1998. Mr. Lynn was elected a Director of the
Company in April 1997. Prior to joining the Company, he was a consultant to
3
<PAGE>
various retail and manufacturing clients from January 1996 to April 1997. He was
Vice Chairman and Chief Operating Officer of American Eagle Outfitters, Inc.
from January 1995 to December 1995 and a Director from prior to 1995 to
December 1995. Mr. Lynn was a retail consultant to the creditors' committee in
the McCrory bankruptcy from prior to 1995 to January 1995.
MR. ROTH became a Director of the Company in February 1999. He has served as
a partner at the law firm of Kelly & Roth since prior to 1995.
MR. CLINGMAN became a Director of the Company in February 1999. As a founder
and principal of Clingman & Hanger Management Associates, L.L.C., a management
consulting firm, Mr. Clingman became President, Chief Executive Officer and
Director of Venture Stores, Inc. ("Venture") in July 1999 with responsibility
for completing its liquidation and related wind-down. Venture filed for
bankruptcy protection under Chapter 11 of the United States Bankruptcy Code in
1998. Mr. Clingman served as President and Chief Executive Officer of Best
Products Co., Inc. ("Best Products") from 1997 to 2000 (during Best Products'
liquidation and related wind-down). Prior to serving as President and Chief
Executive Officer, Mr. Clingman served as Senior Vice President, General Counsel
and Secretary of Best Products from May 1996 to December 1996. He served as Vice
President, General Counsel and Secretary of Best Products from prior to 1995 to
May 1996. On September 24, 1996, while Mr. Clingman was Senior Vice President,
General Counsel and Secretary of Best Products, Best Products filed for
bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.
Best Products was subsequently liquidated.
MR. FRIEDMAN became a Director of the Company in 1996. Mr. Friedman was a
partner at Dewey Ballantine LLP from prior to 1995 to his retirement in
April 1996.
MR. THORNER has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since April 1997. He served as Chairman of the
Board of Directors, President and Chief Executive Officer of the Company from
December 1996 to April 1997. He served as President and Chief Operating Officer
of the Company from June 1995 to December 1996 and he was elected a Director of
the Company in July 1995. He was Vice Chairman of the Company from March 1995 to
June 1995.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company held 10 meetings during the fiscal
year ended January 29, 2000. Each of the directors attended more than 75% of the
aggregate of the total number of meetings of the Board of Directors and of the
committees of which he was a member which were held during the period he was a
director or committee member.
The Board of Directors has established an audit committee (the "Audit
Committee"), a compensation committee (the "Compensation Committee") and a
nominating committee (the "Nominating Committee"). The Audit Committee, which
consists solely of outside directors and is governed by the Audit Committee
Charter, recommends to the Board of Directors the firm to be appointed as
independent accountants to audit financial statements and to perform services
related to the audit. The Audit Committee also reviews the scope and results of
the audit with the independent accountants, reviews with management and the
independent accountants the Company's year-end operating results, considers the
adequacy of the internal accounting procedures and confirms and assures the
independence of both the internal auditors and the independent accountants. The
current members of the Audit Committee are W. Edward Clingman, Jr. (Chairman),
Robert A. Altschuler and Lawrence Lieberman. The Company is in the process of
identifying an additional non-employee member of the Board of Directors to fill
the position on the Audit Committee which will be created by the departure of
Mr. Lieberman from the Board of Directors.
The Compensation Committee, which consists solely of outside directors,
reviews and recommends to the Board of Directors the compensation arrangement
for all directors and certain officers, approves such
4
<PAGE>
arrangements for other senior level executives and administers and takes such
other action as may be required in connection with certain compensation and
incentive plans of the Company. The Compensation Committee also determines the
number of options to be granted or shares of Common Stock to be issued to
eligible persons under the Company's 1999 Stock Option Plan (the "1999 Option
Plan") and its 2000 Stock Plan. In addition, the Compensation Committee
establishes, amends and revokes rules and regulations for administration of
these plans. The current members of the Compensation Committee are John M.
Friedman, Jr. (Chairman), Stephen J. Blauner and Charles K. MacDonald. The
Company is in the process of identifying two other non-employee members of the
Board of Directors to fill the positions on the Compensation Committee which
will be created by the departure of Messrs. Blauner and MacDonald from the Board
of Directors.
The Nominating Committee consists of the Chairman of the Board and two
non-employee directors nominated by the Chairman of the Board and approved by a
majority of the Board. The purpose of the Nominating Committee is to facilitate
the nomination of directors to fill vacancies on the Board. The members of the
Nominating Committee are Peter Thorner (Chairman), William H. Roth and W. Edward
Clingman, Jr. Stockholders of the Company seeking to nominate candidates for
election as directors at an annual meeting of stockholders must satisfy the
timing and informational requirements set forth in the Company's by-laws, as
described under "Stockholder Proposals" below.
DIRECTOR COMPENSATION
In 1999, each director who was not an employee of the Company received an
annual retainer of $30,000. For 2000, the Board of Directors approved the
following compensation for each director who is not an employee of the
Company: (i) a $24,000 annual retainer; (ii) a $2,500 annual retainer for
Committee Chairman; (iii) a $1,000 meeting fee for each meeting of the Board of
Directors attended; (iv) a $500 meeting fee for each telephonic meeting of the
Board of Directors attended; (v) a $1,000 meeting fee for each committee meeting
attended; and (vi) a $500 meeting fee for each telephonic committee meeting
attended. In addition, under the 2000 Stock Plan, each non-employee director
will also receive an annual stock option grant to purchase 2,500 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock at the date of grant. Unless earlier terminated, all options granted to
the non-employee directors under the proposed program will vest on the date that
is one year after the grant of such options. Directors who are also employees of
the Company do not receive any remuneration for serving as directors.
5
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth the aggregate
compensation earned by the Company's Chief Executive Officer and each of the
four other most highly compensated executive officers in fiscal 1999
(collectively, the "Named Executive Officers") with respect to the three fiscal
years ended January 29, 2000.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS PAYOUTS
------------------------ --------
ANNUAL COMPENSATION SHARES
--------------------------------------- RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK OPTIONS LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS GRANTED(#) PAYOUTS COMPENSATION
- ---------------------- -------- --------- -------- ---------------- ---------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter Thorner......... 1999 $934,009 $635,938(1) (2) -- 250,000 -- $1,829,168(3)
CHAIRMAN AND CHIEF 1998 $847,596 $467,500(4) $55,836(5) -- -- $550,000(6) $ 601,169(7)
EXECUTIVE OFFICER 1997 $741,827 $299,063(8) (2) -- -- $150,000(6) $ 9,318(11)
Robert G. Lynn........ 1999 $599,999 $375,000(1) (2) -- 100,007 -- $ 344,754(3)
DIRECTOR, PRESIDENT,
AND 1998 $586,442 $300,000(4) (2) -- -- -- $ 189,020(7)
CHIEF OPERATING
OFFICER 1997 $401,827(9) $196,875(8) $29,109 -- -- -- $ 840(11)
Cornelius F. Moses,
III................. 1999 $300,000 $131,250(1) (2) -- 36,363 -- $ 158,851(3)
SENIOR VICE PRESIDENT
AND 1998 $282,343 $105,000(4) (2) -- -- -- $ 128,636(7)
CHIEF FINANCIAL
OFFICER 1997 $279,175 $84,012(8) (2) -- -- -- $ 1,054(11)
Thomas N. Smith....... 1999 $295,000 $129,062(1) (2) -- 36,363 -- $ 34,986(3)
SENIOR VICE PRESIDENT, 1998 $295,000 $103,250(4) (2) -- -- -- $ 76,004(10)
Stores 1997 $ 45,385(9) -- -- -- -- -- $ 127,768(12)
David L. Schmitt...... 1999 $255,000 $111,562(1) (2) -- 36,363 -- $ 124,808(3)
SENIOR VICE PRESIDENT, 1998 $246,154 $89,250(4) (2) -- -- -- $ 103,980(7)
GENERAL COUNSEL, 1997 $243,751 $73,500(8) (2) -- -- -- $ 912(11)
SECRETARY AND CLERK
</TABLE>
- ------------------------------
(1) Includes an earned bonus paid in April 2000 pursuant to the Company's
Corporate Bonus Plan.
(2) Perquisites and other personal benefits for the indicated periods did not
exceed the lesser of $50,000 or 10% of reported salary and bonus.
(3) Includes premiums paid by the Company with respect to term life insurance
for the calendar year ended December 31, 1999 and the following earned
bonuses paid in February 2000 pursuant to the Company's Management Emergence
Bonus Plan following the paydown of the outstanding convertible notes of the
Company: Mr. Thorner--$814,890; Mr. Lynn--$238,494; Mr. Moses--$152,717;
Mr. Smith--$33,870; and Mr. Schmitt--$118,846. If an employee leaves the
Company for any reason, other than death, disability, an involuntary
termination without Cause (as defined) or a voluntary termination for Good
Reason (as defined), within one year of receiving a payment under the
Management Emergence Bonus Plan, then the payment shall be subject to
partial or total recoupment. Also includes a special incentive award granted
by the Compensation Committee of the Board of Directors to Mr. Thorner for
1999 in the amount of $1,000,000, of which $500,000 was paid to Mr. Thorner
in January 2000 (See "Employment Agreement with Mr. Thorner" below). In
addition, includes a special incentive award granted by the Compensation
Committee of the Board of Directors to Mr. Lynn for 1999 and 2000 (combined)
in an amount up to a total of $500,000 to be awarded at Mr. Thorner's
discretion. Mr. Thorner has to date elected to award $200,000 to Mr. Lynn,
$100,000 of which was paid to Mr. Lynn in February 2000. Also includes the
following matching contributions made by the Company pursuant to the
Bradlees 401(k) Savings Plan (the "401(k) Plan"); Mr. Thorner--$5,000;
Mr. Lynn--$5,000; Mr. Moses--$5,000; Mr. Smith--$0; and
Mr. Schmitt--$5,000.
(4) Includes an earned bonus paid in April 1999 pursuant to the Company's
Corporate Bonus Plan.
(5) Includes $26,400 for an automobile allowance and $29,436 for reimbursement
of certain legal and annual financial counseling expenses and the tax
liabilities related to such reimbursement.
(6) Represents amounts paid pursuant to the Company's Enterprise Appreciation
Incentive Plan which was terminated upon the Company's emergence from
bankruptcy.
(7) Includes premiums paid by the Company with respect to term life insurance
for the calendar year ended December 31, 1998 and the following earned
bonuses paid following the Company's emergence from bankruptcy pursuant to
the Company's Management Emergence Bonus Plan: Mr. Thorner--$400,000;
Mr. Lynn--$116,667; Mr. Moses--$75,000; and Mr. Schmitt--$58,333. Also
includes the following deferred payments, with interest, paid following the
Company's emergence from bankruptcy with respect to the bonuses earned
pursuant to the Company's Corporate Bonus Plan in fiscal 1997 and/or its
predecessor, the Retention Bonus Plan in fiscal 1995;
Mr. Thorner--$190,228; Mr. Lynn--$69,873; Mr. Moses--$52,017; and
Mr. Schmitt--
6
<PAGE>
$44,251. Also includes the following matching contributions made by the
Company pursuant to the 401(k) Plan: Mr. Thorner--$1,798; Mr. Lynn--1,385;
Mr. Moses--$692; and Mr. Schmitt--$588.
(8) Includes an earned bonus paid in April 1998 pursuant to the Company's
Corporate Bonus Plan, but excludes the following deferred payments which
were paid, with interest, following the Company's emergence from bankruptcy:
Mr. Thorner--$99,688; Mr. Lynn--$65,625; Mr. Moses--$28,004; and
Mr. Schmitt--$24,500.
(9) Represents a partial year beginning when Mr. Lynn joined the Company in
April 1997 and Mr. Smith joined the Company in December 1997.
(10) Includes premiums paid by the Company with respect to term life insurance
for the calendar year ended December 31, 1998. Also includes $58,351 for
relocation expenses related to Mr. Smith's employment as Senior Vice
President, Stores of the Company and reimbursement for tax liabilities
related to such relocation expenses. Also includes an earned bonus of
$16,667 paid in 1999 pursuant to the Company's Management Emergence Bonus
Plan.
(11) Includes premiums paid by the Company with respect to term life insurance
for the calendar year ended December 31, 1997.
(12) Includes a signing bonus, reimbursement of temporary housing expenses and
the tax liabilities related to such reimbursement and other incidental
expenses related to Mr. Smith's employment as Senior Vice President, Stores
of the Company.
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth certain
information regarding options granted during the fiscal year ended January 29,
2000 by the Company to the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
------------------------------------- AT ASSUMED ANNUAL
% OF TOTAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED APPRECIATION
UNDERLYING TO EXERCISE OR FOR OPTION TERM(2)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ---------------------
NAME GRANTED IN 1999(1) ($/SH) DATE 5%($) 10%($)
- ---- ---------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Peter Thorner....................... 250,000 28% $4.22 4-15-04 1,707,987 2,306,915
Robert G. Lynn...................... 100,007 11% $4.22 4-15-04 683,243 922,830
Cornelius F. Moses, III............. 36,363 4% $4.22 4-15-04 248,430 335,545
Thomas N. Smith..................... 36,363 4% $4.22 4-15-04 248,430 335,545
David L. Schmitt.................... 36,363 4% $4.22 4-15-04 248,430 335,545
</TABLE>
- ------------------------
(1) Based on a total of 887,050 options granted to employees in 1999.
(2) Represents the value of the options granted at the end of the option terms
if the price of the Company's Common Stock were to appreciate annually by 5%
and 10%, respectively. There is no assurance that the stock price will
appreciate at the rates shown in the table.
7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES. The following table sets forth certain information regarding stock
options exercised during the fiscal year ended January 29, 2000 and stock
options held as of January 29, 2000 by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED FISCAL YEAR-END FISCAL YEAR-END(2)
ON VALUE ------------------------------------ ---------------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE(#)(3) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- ---- ----------- -------------- ----------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Peter Thorner........ 0 -- 83,333 166,667 398,332 796,668
Robert G. Lynn....... 0 -- 33,335 66,672 159,341 318,692
Cornelius F. Moses,
III................ 0 -- 12,121 24,242 57,938 115,877
Thomas N. Smith...... 0 -- 12,121 24,242 57,938 115,877
David L. Schmitt..... 0 -- 12,121 24,242 57,938 115,877
</TABLE>
- --------------------------
(1) Value realized equals the aggregate market value of the shares acquired on
the exercise date(s), less the applicable aggregate option exercise
price(s).
(2) Year-end value is based on the closing market price per share on
January 28, 2000 ($9.00), the last trading day of the fiscal year, less the
applicable aggregate option exercise price(s) of in-the-money options
multiplied by the number of unexercised in-the-money options which are
exercisable and unexercisable, respectively.
(3) Includes options exercisable within 60 days after January 29, 2000.
RETIREMENT PLANS
The Company maintains a qualified retirement plan (the "Retirement Plan")
for eligible employees. The retirement benefits under the Retirement Plan are
determined pursuant to a benefit formula that takes into account the employee's
Final Average Compensation (as defined in the Retirement Plan), and/or years of
service, up to 30 years. Effective December 31, 1998, the Retirement Plan for
non-union employees was frozen for credited service and salary adjustments and
the Company reinstated matching contributions to its 401(k) Plan. All benefits
under the Retirement Plan, except the minimum benefits, are subject to an
integration offset based upon the employee's Covered Compensation (as defined in
the Retirement Plan) or Final Average Compensation, if less. The Company also
maintains a non-qualified Supplemental Executive Retirement Plan (the
"Supplemental Plan"). Under the Supplemental Plan, as amended in the third
quarter of 1999, an eligible employee, upon normal retirement at age 65, may
receive supplemental retirement benefits equal to his Final Average
Compensation, minus the sum of (a) 50% of his Social Security benefits and
(b) the annual benefit payable from the Retirement Plan multiplied by a
percentage factor which ranges from 10% to 385%, depending on the employee's
years of service. The benefits from the Supplemental Plan are payable in the
form of a single lump sum amount. The following table shows the estimated lump
sum retirement benefits which will be payable to participating employees from
the Retirement Plan and the Supplemental Plan after selected periods of service.
These benefits presented below do not reflect the Social Security or Retirement
Plan offset described above.
8
<PAGE>
PENSION PLAN TABLE
ESTIMATED LUMP SUM RETIREMENT BENEFITS
<TABLE>
<CAPTION>
FINAL AVERAGE 10 YEARS OF 15 OR MORE YEARS
COMPENSATION* SERVICE OF SERVICE
------------- ----------- ----------------
<S> <C> <C>
$200,000 $380,000 $770,000
$250,000 $475,000 $962,500
$300,000 $570,000 $1,155,000
$400,000 $760,000 $1,540,000
$500,000 $950,000 $1,925,000
$600,000 $1,140,000 $2,310,000
$700,000 $1,330,000 $2,695,000
$800,000 $1,520,000 $3,080,000
$900,000 $1,710,000 $3,465,000
$1,000,000 $1,900,000 $3,850,000
$1,100,000 $2,090,000 $4,235,000
$1,200,000 $2,280,000 $4,620,000
$1,300,000 $2,470,000 $5,005,000
$1,400,000 $2,660,000 $5,390,000
$1,500,000 $2,850,000 $5,775,000
$1,600,000 $3,040,000 $6,160,000
</TABLE>
- ------------------------
* Federal law limits the amount of compensation that may be taken into account
in calendar year 1999 in calculating benefits under the Retirement Plan to
$160,000 and limits the annual benefits that may be payable in calendar year
1999 to $130,000. These tax limits do not apply to benefits payable from the
Supplemental Plan.
Compensation recognized under the Retirement Plan is the participant's
annualized rate of base salary. Compensation under the Supplemental Retirement
Plan is the participant's base salary, bonus and severance lump sum. The
calculation of retirement benefits under both plans is generally based upon the
participant's highest annual compensation averaged over 36 months. As of
December 31, 1999, the years of credited service for the Retirement Plan, given
the freeze discussed above, for Messrs. Thorner, Lynn, Moses, Smith, and Schmitt
were 4, 2, 4, 0 and 4, respectively. As of December 31, 1999, the years of
credited service for the Supplemental Plan for Messrs. Thorner, Lynn, Moses,
Smith, and Schmitt were 10, 3, 5, 2, and 5, respectively.
EMPLOYMENT AGREEMENT WITH MR. THORNER
Bradlees has entered into a three-year employment agreement with
Mr. Thorner, commencing as of October 26, 1995 and amended as of November 7,
1997 and as of May 3, 1999. This employment agreement is automatically extended
for one additional day each day unless either party gives the other party two
years written notice of its election not to extend the employment agreement.
Mr. Thorner's current base salary under the employment agreement is $925,000.
The agreement also provides for certain retirement benefits, for reimbursement
of certain legal, annual financial counseling and relocation expenses and
participation in the Company's employee benefit plans. The employment agreement
also provides that in the event of Mr. Thorner's termination of employment by
the Company (including following a change in control of the Company) without
Cause or Good Reason (as defined in the employment agreement), Mr. Thorner would
generally be entitled to all payments and benefits called for under the
agreement for the remainder of its term. Upon the Company's emergence from
bankruptcy, a $3,000,000 letter of credit was provided to Mr. Thorner pursuant
to the terms of the employment agreement.
9
<PAGE>
On September 8, 1999, the Compensation Committee awarded Mr. Thorner a
special annual incentive award of $1,000,000 both as a retention incentive and
in recognition of, among other things, the Company's strong operating
performance since emerging from bankruptcy. One-half of this bonus was paid on
January 15, 2000 and the second-half is payable on April 15, 2001 subject to the
satisfaction of certain conditions, and subject to an obligation on
Mr. Thorner's part to repay all or a portion of each bonus payment should he
voluntarily leave the employ of the Company for other than Good Reason within
approximately fifteen months of the January 2000 payment or within 12 months of
the April 2001 payment.
SEVERANCE ARRANGEMENTS
In 1995 the Company established a severance program (the "Severance
Program") that covers all officers, Vice President and above, and certain other
employees of the Company, but not including Mr. Thorner who has a separate
employment agreement (see Employment Agreement with Peter Thorner above). If the
employment of any participant in the Severance Program is terminated other than
for Cause, death, disability or by the employee, then salary is guaranteed,
subject to mitigation by other employment, for up to eighteen months for the
President and Senior Vice Presidents, twelve months for Vice Presidents and
certain other employees, and six months for certain other employees. In
addition, certain participants would also receive a lump-sum payment equal to
the amount of any target incentive payment for the fiscal year in which the
termination occurred (the "Severance Lump Sum").
If the employment of certain participants is terminated other than for
Cause, death, disability or retirement, or is terminated under certain other
circumstances, within one year following a change of control of the Company, the
employee will receive a lump-sum payment. The payment is the Severance Lump Sum
amount plus one and one-half times the annual salary in effect immediately prior
to the change of control (the "Annual Salary") for the President and Senior Vice
Presidents and one times the Annual Salary for Vice Presidents. The other
participants will receive up to one times their Annual Salary, payable over a
period of up to one year and subject to mitigation by other employment. For
purposes of the Severance Program, a change of control includes but is not
limited to the acquisition by any person of beneficial ownership of 50% or more
of the Company's outstanding voting securities, or the failure of the incumbent
members of the Board of Directors to continue to constitute a majority of the
Board unless the election of the new directors has been approved by the
incumbent directors.
10
<PAGE>
STOCK PERFORMANCE CHART
The following chart provides an annual comparison from February 3, 1999 (the
date the Company's Plan of Reorganization became effective and its Common Stock
was first publicly traded) of the cumulative total shareholder return (assuming
reinvestment of any dividends) among Bradlees, Inc., an SIC Code Index (SIC Code
5331, Variety Stores) and a NASDAQ Market Index. The historical information set
forth below is not necessarily indicative of future performance.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG BRADLEES, A VARIETY STORE INDEX AND A NASDAQ MARKET INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
2/3/99 4/30/99 7/30/99 10/29/99 1/28/00
<S> <C> <C> <C> <C> <C>
BRADLEES, INC. 100 84.62 205.13 115.38 92.31
SIC CODE INDEX 100 107.11 99.74 120.47 116.73
NASDAQ MARKET INDEX 100 100.73 104.18 116.08 154.4
</TABLE>
DOLLARS
REPORT OF THE COMPENSATION COMMITTEE
The Company's Board of Directors has established a Compensation Committee to
oversee the administration of compensation matters as they relate to the
Company's senior executives. The Compensation Committee is composed solely of
non-employee directors. The Compensation Committee's responsibilities are to
(i) review with the Chief Executive Officer his performance and the performance
of other senior executive officers of the Company, (ii) review and establish the
base salary of the Chief Executive Officer and other senior executive officers
of the Company, (iii) review and approve the annual incentive bonus
compensation, (iv) issue and administer grants and awards to employees under the
1999 Option Plan and the 2000 Stock Plan, and (v) report periodically on its
activities to the Board of Directors.
OBJECTIVE OF THE COMPANY'S COMPENSATION PROGRAM. The Company's executive
compensation program is intended to attract, retain and reward executives who
are capable of leading the Company effectively and meeting the Company's goals
and objectives. The Compensation Committee believes that a combination of cash
and equity-based compensation provides the most effective means of properly
incentivizing the Company's executives while also better aligning their
interests with those of the Company's stockholders.
11
<PAGE>
The Company uses a three-pronged approach to its compensation for its senior
executives. First, the executive's base salary is intended to create a
reasonably competitive minimum level of compensation for each executive for the
following twelve months. Second, the Company offers discretionary bonuses to
senior executive officers based upon the achievement of corporate and individual
performance goals, with the objective of rewarding executives for their past
twelve months' performance. Finally, the Company utilizes stock options granted
under its 1999 Option Plan and its 2000 Stock Plan as a long-term incentive for
the senior executive officers of the Company. The Compensation Committee
believes that stock options are important in aligning management and stockholder
interests and in encouraging management to adopt a longer-term perspective.
Accordingly, options generally provide for incremental vesting over a three-year
period.
COMPENSATION COMMITTEE PROCEDURES. The Compensation Committee reviews its
compensation policies on an annual basis and considers specific compensation
matters with regard to executives throughout the year. The Compensation
Committee meets periodically, and may consult by telephone at other times. The
determinations of the Compensation Committee relating to the compensation of the
Company's senior executive officers are generally reported to all of the
non-employee directors.
FACTORS CONSIDERED IN SETTING COMPENSATION OF CHIEF EXECUTIVE OFFICER. The
Compensation Committee considers numerous qualitative and quantitative factors
in setting the Chief Executive Officer's compensation levels. These factors
include the operating results (such as total sales growth, comparable store
sales growth, gross margins, net income and EBITDA) for the Company and the
price of its Common Stock for the preceding year as well as the expected
operating results for the coming year. In addition, the Compensation Committee
considers a number of other factors which are not subject to precise measurement
and which can only be properly assessed over the long term.
COMPENSATION DECISIONS FOR CHIEF EXECUTIVE OFFICER. Mr. Thorner has served
as the Chairman and Chief Executive Officer of the Company since December 1996.
The Compensation Committee believes that Mr. Thorner's performance in leading
the Company out of bankruptcy was exceptional and that he has contributed
significantly to the Company's strong results for fiscal 1999. Mr. Thorner's
current base salary is $925,000. In addition, on September 8, 1999 the
Compensation Committee awarded Mr. Thorner a $1.0 million bonus based on a
number of factors including to reward Mr. Thorner for the Company's
extraordinary operating performance since its emergence from bankruptcy at the
beginning of fiscal 1999 and to provide incentive compensation to Mr. Thorner
that can be used as a retention tool. Towards that end, one-half of the bonus
was paid in January 2000, and the balance is payable in April 2001 subject to
the satisfaction of certain conditions, and subject to an obligation on
Mr. Thorner's part to repay all or a portion of each bonus payment should he
voluntarily leave the employ of the Company for other than Good Reason within
approximately fifteen months of the January 2000 payment or within twelve months
of the April 2001 payment.
DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), generally limits the corporate deduction for
compensation paid to each executive officer named in the compensation table of
the Company's proxy statement to $1 million, unless certain requirements are
met. The Compensation Committee believes that the cash incentive payments paid
or to be paid to Mr. Thorner serve the best interests of the Company and its
stockholders by allowing the Company to retain Mr. Thorner as its Chairman and
Chief Executive Officer, even if certain of the cash incentive compensation paid
to Mr. Thorner did not meet the requirements of Section 162(m), and the
Compensation Committee believes that the requirements of Section 162(m) have, in
fact, been met.
Submitted by the Compensation Committee for
fiscal 1999
JOHN M. FRIEDMAN, JR., Chairman
STEPHEN J. BLAUNER
CHARLES K. MACDONALD
12
<PAGE>
CERTAIN RELATIONSHIPS
In February 1998, the Company made a loan in the amount of $100,000 to
Thomas N. Smith, Senior Vice President, Stores, in connection with his
relocation. This loan was interest-free and payable on January 30, 1999. The due
date was extended until April 15, 1999, with interest at 10% per annum during
the extension period. The loan was repaid in full. In September 1998, the
Company made a loan in the amount of $100,000 to Bruce Conforto, Senior Vice
President and Chief Information Officer, in connection with his relocation. This
loan was interest-free and payable on or prior to March 31, 1999. The loan was
repaid in full.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based on a review of the reports of changes in beneficial ownership of the
Company's Common Stock and written representations furnished to the Corporation,
the Corporation believes that its executive officers and directors filed on a
timely basis the reports required to be filed under Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), during the
fiscal year ended January 29, 2000, with the following exception: the Form 3 for
Mr. Alfred Snyder, Senior Vice President, Logistics, was filed late.
PROPOSAL 2
APPROVAL OF THE 2000 STOCK OPTION AND INCENTIVE PLAN
PROPOSAL
On March 1, 2000, the Board of Directors voted to adopt the 2000 Stock Plan,
subject to its approval by the stockholders at the Annual Meeting. The 2000
Stock Plan authorizes the Company to issue to key employees and others up to
1,250,000 shares of Common Stock pursuant to various stock incentive awards. The
number of shares of Common Stock reserved for issuance under the 2000 Stock Plan
is subject to adjustment for stock splits, stock dividends and similar events.
The Board of Directors believes that approval of the 2000 Stock Plan is
critical to the future growth and success of the Company. The market for
highly-talented executives in the retail industry is extremely competitive. One
of the key factors in attracting and retaining these executives is the ability
to offer equity-based compensation incentives. A large portion of the options
available for issuance under the Company's 1999 Option Plan were granted
pursuant to the Company's Plan of Reorganization in connection with its
emergence from bankruptcy. The 2000 Stock Plan provides the Company with the
ability to make equity-based awards to attract and retain vital executives in
the future.
SUMMARY OF THE 2000 STOCK OPTION AND INCENTIVE PLAN
The following description of certain features of the 2000 Stock Plan is
intended to be a summary only. The summary is qualified in its entirety by the
full text of the 2000 Stock Plan.
PLAN ADMINISTRATION. The 2000 Stock Plan is administered by the
Compensation Committee of the Board of Directors (the "Committee"). No less than
two members of the Committee must be "Non-Employee Directors" as the term is
defined under the rules promulgated by the Securities and Exchange Commission.
The Committee has full power to select, from among the individuals eligible
for awards, the individuals to whom awards will be granted, to make any
combination of awards to participants, and to determine the specific terms and
conditions of each award, subject to the provisions of the 2000 Stock Plan.
ELIGIBILITY AND LIMITATIONS ON GRANTS. Persons eligible to participate in
the 2000 Stock Plan are those officers, other employees, consultants and
prospective employees of the Company and any subsidiary who
13
<PAGE>
are responsible for or contribute to the management, growth or profitability of
the Company and its subsidiaries, as selected from time to time by the
Committee. Directors of the Company are also eligible to participate in the 2000
Stock Plan.
In no event may any one participant receive options and stock appreciation
rights to purchase more than 500,000 shares of Common Stock (subject to
adjustment for stock splits and similar events) during any one calendar-year
period. In addition, the maximum award of restricted stock, performance shares
or deferred stock (or combination thereof) for any one individual that is
intended to qualify as "performance-based compensation" under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code") will not exceed
500,000 shares of Common Stock (subject to adjustment for stock splits and
similar events) for any performance cycle.
STOCK OPTIONS. The 2000 Stock Plan permits the granting of (i) options to
purchase Common Stock intended to qualify as incentive stock options under
Section 422 of the Code ("Incentive Options") and (ii) options that do not so
qualify ("Non-Qualified Options"). Only employees of the Company (and any
subsidiaries) may be granted Incentive Stock Options. The option exercise price
of each option will be determined by the Committee but may not be less than 100%
of the fair market value of the Common Stock on the date of grant in the case of
Incentive Options, and may not be less than 85% of the fair market value of the
Common Stock on the date of grant in the case of Non-Qualified Options. However,
employees participating in the 2000 Stock Plan may be granted, in the discretion
of the Committee, discounted Non-Qualified Options in lieu of cash bonuses.
The term of each option will be fixed by the Committee and may not exceed
ten years from the date of grant in the case of an Incentive Option. The
Committee will determine at what time or times each option may be exercised and,
subject to the provisions of the 2000 Stock Plan, the period of time, if any,
after retirement, death, disability or termination of employment during which
options may be exercised. Options may be made exercisable in installments, and
the exercisability of options (including options granted under predecessor
plans) may be accelerated by the Committee.
Upon exercise of options, the option exercise price must be paid in full
either in cash or by certified check or other instrument acceptable to the
Committee or, if the Committee so permits, by delivery of shares of Common Stock
already owned by the optionee. The exercise price may also be deliverable to the
Company by a broker pursuant to irrevocable instructions to the broker from the
optionee.
At the discretion of the Committee, stock options granted under the 2000
Stock Plan may include a "reload" feature pursuant to which an optionee
exercising an option by delivery of shares of Common Stock would automatically
be granted an additional stock option (with an exercise price equal to the fair
market value of the Common Stock on the date the additional stock is granted) to
purchase that number of shares of Common Stock equal to the number delivered to
exercise the original stock option. The purpose of this feature is to enable
participants to maintain an equity interest in the Company without dilution.
To qualify as Incentive Options, options must meet additional federal income
tax requirements, including limits in the value of shares subject to Incentive
Options which first become exercisable in any one calendar year, and a shorter
term and higher minimum exercise price in the case of certain large
stockholders.
STOCK APPRECIATION RIGHTS. The Committee may award a stock appreciation
right ("SAR") either as a freestanding award or in tandem with a stock option.
Upon exercise of the SAR, the holder will be entitled to receive an amount equal
to the excess of the fair market value on the date of exercise of one share of
Common Stock over the exercise price per share specified in the related stock
option (or, in the case of freestanding SAR, the price per share specified in
such right, which price may not be less than the fair market value of the Common
Stock on the date of grant), multiplied by the number of shares of Common Stock
with respect to which the SAR is exercised. If the SAR is granted in tandem with
a stock option, exercise of the SAR cancels the related option to the extent of
such exercise.
14
<PAGE>
STOCK OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS. The 2000 Stock Plan
provides for the automatic grant of Non-Qualified Options to non-employee
directors. Each non-employee director who is serving as a director of the
Company on the fifth business day after each annual meeting of shareholders,
beginning with the 2000 annual meeting, will automatically be granted on such a
day a Non-Qualified Option to acquire 2,500 shares of Common Stock. The exercise
price of each such Non-Qualified Option is the fair market value of the Common
Stock on the date of the grant. Such Non-Qualified Option may not be exercised
before the first anniversary of the date of grant.
RESTRICTED STOCK. The Committee may award shares of Common Stock subject to
such conditions and restrictions as the Committee may determine ("Restricted
Stock"). These conditions and restrictions may include the achievement of
certain performance goals and/or continued employment with the Company through a
specified restricted period. The purchase price, if any, of Restricted Stock
will be determined by the Committee. If the performance goals and other
restrictions are not attained, the recipients will forfeit their awards of
Restricted Stock.
DEFERRED STOCK AWARDS. The Committee may also award phantom stock units as
deferred stock awards to participants. The deferred stock awards are ultimately
payable in the form of shares of Common Stock and may be subject to such
conditions and restrictions as the Committee may determine. These conditions and
restrictions may include the achievement of certain performance goals and/or
continued employment with the Company through a specified vesting period. During
the deferral period, subject to terms and conditions imposed by the Committee,
the deferred stock awards may be credited with dividend equivalent rights.
Subject to the consent of the Committee, a participant may make an advance
election to receive a portion of his or her compensation or restricted stock
award otherwise due in the form of a deferred stock award.
UNRESTRICTED STOCK. The Committee may also grant (at no cost or for a
purchase price determined by the Committee) shares of Common Stock which are
free from any restrictions under the 2000 Stock Plan ("Unrestricted Shares").
Unrestricted Stock may be issued in recognition of past services or other valid
consideration, and may be issued in lieu of cash compensation due to the
recipient.
PERFORMANCE SHARE AWARDS. The Committee may also grant performance share
awards entitling the recipient to receive shares of Common Stock upon the
achievement of individual or Company performance goals and other such conditions
as the Committee shall determine.
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGER, ETC. The Committee will make
appropriate adjustments in outstanding awards to reflect stock dividends, stock
splits and similar events.
AMENDMENTS AND TERMINATION. The Board of Directors may at any time amend or
discontinue the 2000 Stock Plan, and the Committee may at any time amend or
cancel outstanding awards for the purpose of satisfying changes in the law or
for any other lawful purpose. However, no such action may be taken which
adversely affects any rights under outstanding awards without the holder's
consent. To the extent required by the Code to ensure that options granted under
the 2000 Stock Plan qualify as Incentive Options or awards granted under the
2000 Stock Plan qualify as performance-based compensation, amendments shall be
subject to approval by the Company's stockholders.
SECTION 162(M) COMPLIANCE. To ensure that certain awards (e.g. restricted
stock, performance shares, and deferred stock) granted to the top five Named
Executive Officers under the 2000 Stock Plan qualify as "performance-based
compensation" under Section 162(m) of the Code, the 2000 Stock Plan provides
that the Committee may require that the vesting of such awards be conditioned on
the satisfaction of performance criteria which may include any or all of the
following: (i) the Company's return on equity, assets, capital or investment;
(ii) pre-tax or after-tax profit levels of the Company or any subsidiary,
division, operating unit or business segment thereof, or any combination of the
foregoing; (iii) comparable store sales results; (iv) total stockholder return;
(v) changes in the market price of the Company's Common
15
<PAGE>
Stock; (vi) sales or market share; (vii) earnings per share; or (viii) a change
in the number of stores. The Committee will select the particular performance
criteria within 90 days following the commencement of a performance cycle. To
satisfy the requirements of Section 162(m) of the Code, stock options and stock
appreciation rights with respect to no more than 500,000 shares of Common Stock
(subject to adjustment for stock splits and similar events) may be granted to
any one individual during any one calendar-year period. In addition, the maximum
award of restricted stock, performance-based compensation under Section 162(m)
of the Code will not exceed 500,000 shares of Common Stock (subject to
adjustment for stock splits and similar events) for any performance cycle.
CHANGE OF CONTROL PROVISIONS. The 2000 Stock Plan provides that in the
event of a "Change of Control" (as defined in the 2000 Stock Plan) of the
Company, all stock options and stock appreciation rights granted under the 2000
Stock Plan shall automatically become fully exercisable. The restrictions and
conditions on all other awards which relate solely to the passage of time and
continued employment shall automatically be deemed waived, unless otherwise
provided in the award agreement. In addition, at any time prior to or after a
Change in Control, the Committee may accelerate awards and waive conditions and
restrictions on any awards to the extent it may determine appropriate.
NEW PLAN BENEFITS
Approximately 350 employees and seven non-employee directors are currently
eligible to participate in the 2000 Stock Plan. Non-Qualified Options to
purchase 17,500 shares will be granted to non-employee directors in 2000
assuming approval of the 2000 Stock Plan. Each Non-qualified Option granted to a
non-employee director will have an option exercise price equal to the fair
market value of the Common Stock on the date of grant. The number of shares that
may be granted to executive officers and other persons is undeterminable at this
time, as such grants are subject to the discretion of the Committee.
TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
The following is a summary of the principal federal income tax consequences
of transactions under the 2000 Stock Plan. It does not describe all federal tax
consequences under the 2000 Stock Plan, nor does it describe state or local tax
consequences.
INCENTIVE OPTIONS. No taxable income is generally realized by the optionee
upon the grant or exercise of an Incentive Option. If shares of Common Stock
issued to an optionee pursuant to the exercise of an Incentive Option are sold
or transferred after two years from the date of grant and after one year from
the date of exercise, then (i) upon sale of such shares, any amount realized in
excess of the option price (the amount paid for the shares) will be taxed to the
optionee as a long-term capital gain, and any loss sustained will be a long-term
capital loss, and (ii) there will be no deduction for the Company for federal
income tax purposes. The exercise of an Incentive Option will give rise to an
item of tax preference that may result in alternative minimum tax liability for
the optionee.
If shares of Common Stock acquired upon the exercise of an Incentive Option
are disposed of prior to the expiration of the two-year and one-year holding
periods described above (a "disqualifying disposition"), generally (i) the
optionee will realize ordinary income in the year of disposition in an amount
equal to the excess (if any) of the fair market value of the shares of Common
Stock at exercise (or, if less, the amount realized on a sale of such shares of
Common Stock) over the option price thereof, and (ii) the Company will be
entitled to deduct such amount. Special rules will apply where all or a portion
of the exercise price of the Incentive Option is paid by tendering shares of
Common Stock.
If an Incentive Option is exercised at a time when it no longer qualifies
for the tax treatment described above, the option is treated as a Non-Qualified
Option. Generally, an Incentive Option will not be eligible for the tax
treatment described above if it is exercised more than three months following
termination of employment.
16
<PAGE>
NON-QUALIFIED OPTIONS. With respect to Non-Qualified Options under the 2000
Stock Plan, no income is realized by the optionee at the time the option is
granted. Generally (i) at exercise, ordinary income is realized by the optionee
in an amount equal to the difference between the option price and the fair
market value of the shares of Common Stock on the date of exercise, and the
Company receives a tax deduction for the same amount, and (ii) at disposition,
appreciation or depreciation after the date of exercise is treated as either
short-term or long-term capital gain or loss depending on how long the shares of
Common Stock have been held. Special rules will apply where all or a portion of
the exercise price of a Non-Qualified Option is paid by tendering shares of
Common Stock.
PARACHUTE PAYMENTS. The exercise of any portion of any option or other
award that is accelerated due to the occurrence of a Change of Control may cause
a portion of the payments with respect to such accelerated awards to be treated
as "parachute payments" as defined in the Code. Any such parachute payments may
be non-deductible to the Company, in whole or in part, and may subject the
recipient to a non-deductible 20% federal exercise tax on all or a portion of
such payment (in addition to other taxes ordinarily payable).
LIMITATION ON COMPANY'S DEDUCTIONS. As a result of Section 162(m) of the
Code, the Company's deduction for certain awards under the 2000 Stock Plan may
be limited to the extent a Covered Employee (e.g. one of the Named Executive
Officers) receives compensation in excess of $1,000,000 in such taxable year of
the Company (other than performance-based compensation that otherwise meets the
requirements of Section 162(m) of the Code).
VOTE REQUIRED FOR APPROVAL
The proposed approval of the 2000 Stock Plan requires the affirmative vote
of a majority of the total votes cast on the proposal at the Annual Meeting.
THE BOARD OF DIRECTORS BELIEVES THAT THE 2000 STOCK PLAN IS IN THE BEST
INTEREST OF THE COMPANY AND THEREFORE UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE 2000 STOCK PLAN.
17
<PAGE>
PROPOSAL 3
APPOINTMENT OF COMPANY'S INDEPENDENT AUDITORS
Arthur Andersen LLP, Independent Public Accountants has been the auditor of
the Company since 1997. The Audit Committee and the Board of Directors have
proposed that Arthur Andersen LLP be appointed as auditor of the Company for the
fiscal year ending February 3, 2001. A representative of Arthur Andersen LLP
will attend the Annual Meeting and be available to respond to appropriate
questions.
VOTE REQUIRED FOR APPOINTMENT
The proposed appointment of the Company's auditors requires the affirmative
vote of a majority of the total votes cast on the proposal at the Annual
Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE APPOINTMENT
OF ARTHUR ANDERSEN LLP AS AUDITOR OF THE COMPANY FOR THE FISCAL YEAR ENDING
FEBRUARY 3, 2001.
OTHER MATTERS
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table presents information as of April 10, 2000 with regard to
each director continuing in such position following the Annual Meeting, each
nominee for election as a director at the Annual Meeting, each Named Executive
Officer, all executive officers, continuing directors and nominees as a group
and each person or entity believed by the Company to beneficially own more than
5% of the Company's Common Stock. All such information was provided by the
stockholders listed and reflects their beneficial ownership as of the dates
specified in the footnotes to the table.
<TABLE>
<CAPTION>
DIRECTORS, NOMINEES,
EXECUTIVES OFFICERS, SHARES BENEFICIALLY PERCENTAGE OF ALL
AND 5% BENEFICIAL OWNERS(1)(2) OWNED(2) OUTSTANDING SHARES(3)
- ---------------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
Awad Asset Management, Inc................................ 1,286,590 12.9%
Gemina Partners, L.P.(4).................................. 656,000 6.6%
Robert A. Altschuler...................................... 0 *
W. Edward Clingman, Jr.................................... 2,500 *
John A. Curry............................................. 0 *
John M. Friedman, Jr...................................... 0 *
Robert Lynn............................................... 66,670(5) *
Cornelius F. Moses, III................................... 24,242(6) *
William H. Roth........................................... 1,500 *
Willis G. Ryckman......................................... 5,000 *
David L. Schmitt.......................................... 24,242(7) *
Laurie M. Shahon.......................................... 2,000 *
Thomas N. Smith........................................... 24,242(8) *
Peter Thorner............................................. 166,666(9) 1.7%
All directors and executive officers
as a group (consisting of 20 people)...................... 486,756 4.9%
</TABLE>
- ------------------------
* Represents less than 1.0% of the issued and outstanding shares of Common
Stock.
(1) Unless otherwise indicated, the mailing address for each stockholder and
director is c/o the Company, One Bradlees Circle, Braintree, Massachusetts
02184. The mailing address for Awad Asset Management, line. is 250 Park
Avenue, 2nd Floor, New York, New York 10177. The mailing address for Gemina
Partners, L.P. is 900 Third Avenue, New York, New York 10022.
18
<PAGE>
(2) As used in this table, "beneficial ownership" means the sole or shared power
to vote or direct the voting of a security, or the sole or shared investment
power with respect to a security (i.e., the power to dispose, or direct the
disposition of, a security). In computing the number of shares of Common
Stock beneficially owned by a person, shares of Common Stock subject to
options held by that person that are currently exercisable or exercisable
within 60 days of April 10, 2000 are deemed outstanding, but are not deemed
to be outstanding for the purpose of computing the percentage ownership of
any other person. We have issued warrants to purchase 941,534 shares of our
Common Stock, out of a maximum authorized amount of 1,000,000 warrants, to
certain creditors after the surrender of their pre-petition notes, but until
such surrender is complete, all of the recipients of such warrants are not
determinable.
(3) Percentage ownership is based upon 9,966,720 shares of Common Stock issued
or presumed issued and outstanding as of April 10, 2000. This includes
certain shares expected to be issued as final unresolved pre-petition claims
are settled.
(4) Gemina Capital Management, L.L.C., as the general partner of Gemina
Partners, L.P., and Leonard Schuster and Steven Schuster, as the managing
members of Gemina Capital Management, L.L.C., each may be deemed to be the
indirect beneficial owners of the 656,000 shares of the Company's Common
Stock directly held by Gemina partners, L.P. In addition, Leonard Schuster
and Steven Schuster may be deemed to be the indirect beneficial owners of
203,500 shares of the Company's Common Stock directly held by Stelvio
Limited, a Jersey Channel Islands company that they jointly control.
(5) Includes options to purchase 66,670 shares of Common Stock which are
exercisable within 60 days of April 10, 2000 but excludes options to
purchase 33,337 shares of Common Stock which are not currently exercisable.
(6) Includes options to purchase 24,242 shares of Common Stock which are
exercisable within 60 days of April 10, 2000 but excludes options to
purchase 12,121 shares of Common Stock which are not currently exercisable.
(7) Includes options to purchase 24,242 shares of Common Stock which are
exercisable within 60 days of April 10, 2000 but excludes options to
purchase 12,121 shares of Common Stock which are not currently exercisable.
(8) Includes options to purchase 24,242 shares of Common Stock which are
exercisable within 60 days of April 10, 2000 but excludes options to
purchase 12,121 shares of Common Stock which are not currently exercisable.
(9) Includes options to purchase 166,666 shares of Common Stock which are
exercisable within 60 days of April 10, 2000 but excludes options to
purchase 83,334 shares of Common Stock which are not currently exercisable.
SOLICITATION OF PROXIES
The cost of solicitation of proxies in the form enclosed herewith will be
borne by the Company. In addition to the solicitation of proxies by mail, the
directors, officers and employees of the Company may also solicit proxies
personally or by telephone without special compensation for such activities. The
Company will also request persons, firms and corporations holding shares in
their names or in the names of their nominees, which are beneficially owned by
others, to send proxy materials to and obtain proxies from such beneficial
owners. The Company will reimburse such holders for their reasonable expenses
associated therewith.
19
<PAGE>
STOCKHOLDER PROPOSALS
For a proposal of a stockholder to be included in the Company's proxy
statement for the Company's 2001 Annual Meeting, it must be received at the
principal executive office of the Company on or before January 3, 2001. Such a
proposal must also comply with the requirements as to form and substance
established by the Securities and Exchange Commission for such a proposal to be
included in the proxy statement and should be directed to Clerk:,
Bradlees, Inc., One Bradlees Circle, Braintree, Massachusetts 02184.
Pursuant to the Company's by-laws, stockholders of the Company seeking to
bring business before an annual meeting of stockholders (other than proposals to
be considered for inclusion in the Company's proxy statement described above),
or to nominate candidates for election as directors at an annual meeting of
stockholders, must comply with the requirements set forth in the Company's
by-laws. The Company's by-laws provide that any stockholder of record wishing to
have such a stockholder proposal or director nomination considered at an annual
meeting must provide written notice of such proposal and appropriate supporting
documentation as set forth in the by-laws to the Company at the Company's
principal executive office not less than 75 days nor more than 120 days prior to
the anniversary date of the immediately preceding annual meeting; provided,
however, that in the event the annual meeting is scheduled to be held on a date
more than 30 days before the anniversary date of the prior year's annual meeting
or more than 60 days after the anniversary date of the prior year's annual
meeting, notice must be so delivered not later than the close of business on the
later of (A) the 75th day prior to the scheduled date of such annual meeting or
(B) the 15th day following the day on which the Company first makes a public
announcement of the date of such annual meeting. Proxies solicited by the Board
of Directors may, under certain circumstances prescribed in Rule 14a-4 of the
Exchange Act, be voted in accordance with the direction of the proxy holders
with respect to stockholder proposals presented at the annual meeting (other
than proposals included in the Company's proxy statement).
BY-LAW AMENDMENTS
On November 23, 1999, the Board of Directors amended the Company's By-laws.
A copy of the by-law amendment has been filed by the Company as an exhibit to
the Company's Registration Statement on Form 8-A filed with the Securities and
Exchange Commission on November 30, 1999.
The by-laws were amended to provide that, notwithstanding anything to the
contrary contained therein, the Company shall be subject to the provisions of
Section 50A of Chapter 156B of the General Laws of the Commonwealth of
Massachusetts ("Section 50A").
Under Section 50A, the Board of Directors has been divided into three
classes with one class to be elected at each year's annual meeting of
stockholders commencing as of the 2000 annual meeting. In addition to requiring
a staggered Board, Section 50A provides, among other things, that (i) all
vacancies in the Board shall be filled only by the Board, (ii) directors elected
by the Board to fill vacancies shall hold office for the remainder of the term
of the class of directors in which the vacancy occurred, (iii) no decrease in
the number of directors constituting the Board may shorten the term of any
incumbent director, (iv) the number of directors may be fixed only by the Board,
and (v) directors may be removed by stockholders only for "cause" and by the
affirmative vote of a majority of the shares outstanding and entitled to vote
thereon. Section 50A defines "cause" as only (i) conviction of a felony,
(ii) declaration of unsound mind by order of court, (iii) gross dereliction of
duty, (iv) commission of an action involving moral turpitude or (v) commission
of an action which constitutes intentional misconduct or a knowing violation of
law if such action in either event results both in an improper substantial
personal benefit and a material injury to the company.
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE
COMPANY. PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
TODAY.
20
<PAGE>
DETACH HERE
PROXY
BRADLEES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Peter Thorner and David L. Schmitt, or
any of them, each with full power of substitution, the lawful attorneys and
proxies of the undersigned to attend the Annual Meeting of Stockholders of
Bradlees, Inc. to be held on May 31, 2000 and any adjournments or
postponements thereof, to vote the number of shares the undersigned would be
entitled to vote if personally present, and to vote in their discretion upon
any other business that may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" PROPOSALS 1, 2 AND 3. THIS PROXY MAY BE REVOKED AT ANY TIME
PRIOR TO THE TIME IT IS VOTED BY ANY MEANS DESCRIBED IN THE ACCOMPANYING
PROXY STATEMENT.
- ---------------- ------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ---------------- -------------
<PAGE>
BRADLEES, INC.
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
DETACH HERE
/X/ PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2
AND 3.
1. To elect as Class I Directors:
NOMINEES: (01) J. Curry, (02) W. Ryckman, (03) L. Shahon
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES
/ / --------------------------------------
For all nominees except as noted above
2. To approve the Company's 2000 FOR AGAINST ABSTAIN
Stock Option and Incentive Plan. / / / / / /
3. To appoint Arthur Andersen LLP as FOR AGAINST ABSTAIN
the Company's auditors for the fiscal / / / / / /
year ending February 3, 2001.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please date and sign exactly as name(s) appear(s) hereon. If shares are held
jointly, each holder should sign. Please give full title and capacity in
which signing if not signing as an individual stockholder.
Signature ______________ Date: _________ Signature ______________ Date: ______
