SCHEDULE 14A
(RULE 14A-101)
PROXY STATEMENT
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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
CYGNE DESIGNS, INC.
-------------------------------------------------
(Name of the Corporation as Specified in Charter)
-------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box)
|X| No Fee Required
| | Fee computed on table below per Exchange Act Rule 14c-5(g) 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:
- ------------------------------------------------------------------------------
(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
form or schedule and the date of filing.
(1) Amount previously paid:
- ------------------------------------------------------------------------------
(2) Form schedule or registration number:
- ------------------------------------------------------------------------------
(3) Filing party:
- ------------------------------------------------------------------------------
(4) Dated filed:
- ------------------------------------------------------------------------------
<PAGE>
CYGNE DESIGNS, INC.
1372 BROADWAY
NEW YORK, NEW YORK 10018
(212) 354-6474
May 22, 1997
Dear Fellow Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 9:30 a.m., on Friday, June 20, 1997, at the offices
of Fulbright & Jaworski L.L.P., 31st Floor, 666 Fifth Avenue, New York, New
York.
This year, you are being asked only to elect four directors to the
Company's Board of Directors. In addition, I will be pleased to report on the
affairs of the Company and a discussion period will be provided for questions
and comments of general interest to stockholders.
We look forward to greeting personally those stockholders who are able to
be present at the meeting; however, whether or not you plan to be with us at the
meeting, it is important that your shares be represented. Accordingly, you are
requested to sign and date the enclosed proxy and mail it in the envelope
provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
/s/ BERNARD M. MANUEL
-----------------------------
BERNARD M. MANUEL
Chief Executive Officer
<PAGE>
CYGNE DESIGNS, INC.
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
--------------------
Notice is hereby given that the Annual Meeting of Stockholders of Cygne
Designs, Inc. will be held on Friday, June 20, 1997 at 9:30 a.m., at the offices
of Fulbright & Jaworski L.L.P., 31st Floor, 666 Fifth Avenue, New York, New York
for the following purposes:
(1) To elect four directors to serve for the ensuing year; and
(2) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Stockholders of record at the close of business on May 8, 1997 will be
entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. Stockholders who are unable to attend the Annual Meeting in person are
requested to complete and date the enclosed form of proxy and return it promptly
in the envelope provided. No postage is required if mailed in the United States.
Stockholders who attend the Annual Meeting may revoke their proxy and vote their
shares in person.
PAUL D. BAIOCCHI
Secretary
New York, New York
May 22, 1997
<PAGE>
CYGNE DESIGNS, INC.
1372 BROADWAY
NEW YORK, NEW YORK 10018
--------------------
PROXY STATEMENT
--------------------
GENERAL INFORMATION
PROXY SOLICITATION
This Proxy Statement is furnished to the holders of Common Stock, par value
$.01 per share (the "Common Stock"), of Cygne Designs, Inc. (the "Company") in
connection with the solicitation by the Board of Directors of the Company of
proxies for use at the Annual Meeting of Stockholders to be held on Friday, June
20, 1997, or at any adjournment thereof, pursuant to the accompanying Notice of
Annual Meeting of Stockholders. The purposes of the meeting and the matters to
be acted upon are set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Board of Directors is not currently aware of any other matters
which will come before the meeting.
Proxies for use at the meeting are being solicited by the Board of
Directors of the Company. All expenses incurred in connection with this
solicitation of proxies will be borne by the Company. Proxies will be mailed to
stockholders on or about May 23, 1997. The Company will make arrangements with
brokerage houses and other custodians, nominees and fiduciaries to send proxies
and proxy material to the beneficial owners of the shares and will reimburse
them for their expenses in so doing. Solicitation by officers and employees of
the Company may also be made of some stockholders in person, or by mail,
telephone, telecopier or telegraph, following the original solicitation.
Georgeson & Company Inc. has been retained by the Company to assist with the
solicitation of proxies for a fee of $7,000 plus reimbursement of certain
out-of-pocket expenses.
REVOCABILITY AND VOTING OF PROXY
A form of proxy for use at the Annual Meeting of Stockholders and a return
envelope for the proxy are enclosed. Stockholders may revoke the authority
granted by their execution of proxies at any time before their effective
exercise by filing with the Secretary of the Company a written notice of
revocation or a duly executed proxy bearing a later date, or by voting in person
at the meeting. Shares of the Company's Common Stock represented by executed and
unrevoked proxies will be voted in accordance with the choice or instructions
specified thereon. If no specifications are given, the proxies intend to vote
the shares represented thereby for all listed nominees for director and in
accordance with their best judgment on any other matters which may properly come
before the meeting.
RECORD DATE AND VOTING RIGHTS
Only stockholders of record at the close of business on May 8, 1997 are
entitled to notice of and to vote at the Annual Meeting or any and all
adjournments thereof. On May 8, 1997 there were 12,438,038 shares of Common
Stock outstanding; each such share is entitled to one vote on each of the
matters to be presented at the Annual Meeting. The holders of a majority of the
outstanding shares of Common Stock, present in person or by proxy and entitled
to vote, will constitute a quorum at the Annual Meeting. Abstentions and broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum. "Broker non-votes" are shares held by brokers or nominees which are
present in person or represented by proxy, but which are not voted on a
particular matter because instructions have not been received from the
beneficial owner. Under applicable Delaware law, the effect of broker non-votes
on a particular matter depends on whether the matter is one as to which the
broker or nominee has
1
<PAGE>
discretionary voting authority under the applicable rule of the New York Stock
Exchange. With respect to the proposal to elect directors, abstentions, broker
non-votes and instructions on the accompanying proxy card to withhold authority
to vote for one or more nominees will result in the respective nominees
receiving fewer votes.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of April 30, 1997 (except as
otherwise noted in the footnotes) regarding the beneficial ownership (as defined
by the Securities and Exchange Commission (the "SEC")) of the Company's Common
Stock by (i) each person known by the Company to own beneficially more than five
percent of the Company's outstanding Common Stock; (ii) each director and
nominee for election as a director of the Company; (iii) each executive officer
named in the Summary Compensation Table (see "Executive Compensation"); and (iv)
all directors and executive officers of the Company as a group. Except as
otherwise specified, the named beneficial owner has the sole voting and
investment power over the shares listed.
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE OF
OWNERSHIP OF CYGNE CYGNE
NAME AND ADDRESS COMMON STOCK (1) COMMON STOCK
- ---------------- ---------------- ------------
Limited Direct Associates, L.P.
c/o The Limited, Inc.
Three Limited Parkway
Post Office Box 16000
Columbus, Ohio 43230 (2) .................... 854,319 6.9%
Cleveland Investment Limited
5/F Ho Lee Commercial Building
38-44 D'Aguilar Street Central
Hong Kong ................................... 622,285 5.0%
Irving Benson and Dianne Benson (3) .......... 1,006,400 8.1%
James G. Groninger (4) ....................... 21,000 *
Stuart B. Katz (5) ........................... 14,000 *
Bernard M. Manuel and Isabelle Manuel (6) .... 1,427,554 11.4%
Trevor J. Wright (7) ......................... 162,229 1.3%
Roy E. Green (8) ............................. 402,678 3.2%
Gary C. Smith (9) ............................ 78,750 *
Paul D. Baiocchi (9) ......................... 25,000 *
Directors and executive officers as a group
(8 persons) (10) ............................ 3,137,611 24.5%
- ----------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the SEC,
which generally attribute beneficial ownership of securities to persons who
possess sole or shared voting power and/or investment power with respect to
those securities.
(2) This figure is based upon information set forth in an amended Schedule 13D
dated October 13, 1994, filed by Limited Direct Associates, L.P. (the
"Limited Partnership") with the SEC. The Limited Partnership is a limited
partnership consisting of a wholly-owned subsidiary and certain operating
divisions of The Limited, Inc.
2
<PAGE>
(3) Consists of 885,061 shares owned by Irving Benson, 66,339 shares owned by
Mr. Benson's wife, Dianne Benson, and 55,000 shares issuable pursuant to
options which are exercisable within 60 days of April 30, 1997. Mr. and
Mrs. Benson, however, each disclaim any beneficial ownership of the other's
shares. Does not include an aggregate of 123,839 shares owned by Mr. and
Mrs. Benson's two children. Mr. Benson's address is c/o the Company, 1372
Broadway, New York, New York 10018.
(4) Includes 16,000 shares issuable pursuant to options which are exercisable
within 60 days of April 30, 1997. Does not include 2,000 shares which are
the subject of options which are not exercisable within 60 days of April
30, 1997.
(5) Consists of shares issuable pursuant to options which are exercisable
within 60 days of April 30, 1997. Does not include 2,000 shares which are
the subject of options which are not exercisable within 60 days of April
30, 1997.
(6) Includes 1,147,215 shares owned by Bernard M. Manuel, 161,339 shares owned
by Mr. Manuel's wife, Isabelle Manuel, 64,000 shares owned by The Bernard
M. Manuel Foundation (the "Foundation"), of which Mr. Manuel is the sole
trustee, and 55,000 shares issuable pursuant to options which are
exercisable within 60 days of April 30, 1997. Mr. and Mrs. Manuel, however,
each disclaim any beneficial ownership of the other's shares. Mr. Manuel
disclaims beneficial ownership of the shares owned by the Foundation which
he has the right to vote. Does not include 322,678 shares owned by The
Bernard M. Manuel 1992 Irrevocable Trust for Children established by Mr.
Manuel for the benefit of his children. Mr. Manuel's address is c/o the
Company, 1372 Broadway, New York, New York 10018.
(7) Consists of 140,729 shares owned by FWM N.V. which Mr. Wright may be deemed
to beneficially own by reason of his ownership of 23.41% of the outstanding
shares of the indirect sole stockholder of FWM N.V. and 21,500 shares
issuable pursuant to options which are exercisable within 60 days of April
30, 1997. Mr. Wright is not standing for re-election as a director.
(8) Consists of 322,678 shares owned by The Bernard M. Manuel 1992 Irrevocable
Trust for Children, of which Mr. Green is Trustee, and 80,000 shares
issuable pursuant to options which are exercisable within 60 days of April
30, 1997. Mr. Green disclaims beneficial ownership of the shares owned by
the trust.
(9) Consists of shares issuable pursuant to options which are exercisable
within 60 days of April 30, 1997.
(10) Includes 66,339 shares owned by Mr. Benson's wife, 161,339 shares owned by
Mr. Manuel's wife, 64,000 shares owned by the Foundation, 140,729 shares
owned by FWM N.V., 322,678 shares owned by The Bernard M. Manuel 1992
Irrevocable Trust for Children and 345,250 shares issuable pursuant to
options which are exercisable within 60 days of April 30, 1997. See notes
3, 4, 5, 6, 7 and 8 above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, as well as persons who
beneficially own more than ten percent of the Company's Common Stock, to file
initial reports of ownership and reports of changes in ownership with the SEC.
Executive officers, directors and greater than ten percent beneficial owners are
required by the SEC to furnish the Company with copies of all Section 16(a)
forms they file.
Based upon a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and directors,
the Company believes that during the fiscal year ended February 1, 1997 all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with.
3
<PAGE>
PROPOSAL--ELECTION OF DIRECTORS
Four directors (constituting the entire Board) are to be elected at the
Annual Meeting. Unless otherwise specified, the enclosed proxy will be voted in
favor of the persons named below to serve until the next annual meeting of
stockholders and until their successors shall have been duly elected and shall
qualify. In the event any of these nominees shall be unable to serve as a
director, the shares represented by the proxy will be voted for the person, if
any, who is designated by the Board of Directors to replace the nominee. All
nominees have consented to be named and have indicated their intent to serve if
elected. The Board of Directors has no reason to believe that any of the
nominees will be unable to serve or that any vacancy on the Board of Directors
will occur.
The nominees, their ages, the year in which each first became a director
and their principal occupations or employment during the past five years are:
<TABLE>
<CAPTION>
YEAR FIRST
NOMINEE AGE BECAME DIRECTOR PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
- ------- --- --------------- -----------------------------------------------
<S> <C> <C> <C>
Irving Benson ............... 58 1984 Consultant since November 1996; President of the
Company from the Company's incorporation in
October 1984 and Vice Chairman from April
1994 to November 1996; founder of the
Company's predecessor in 1975.
James G. Groninger .......... 53 1993 President of The Baysouth Company since January
1995; Managing Director of PaineWebber
Incorporated from April 1988 through December
1994.
Stuart B. Katz .............. 42 1993 Managing Director of Furman Selz LLC since February
1989; various other positions with Furman Selz LLC,
including Senior Vice President, since 1985.
Bernard M. Manuel ........... 49 1988 Chief Executive Officer of the Company since
October 1988 and Chairman of the Board since
December 1989.
</TABLE>
- ----------
Mr. Groninger is a director of Designs, Inc. and NPS Pharmaceuticals. Mr.
Manuel is a director of Designs, Inc.
In September 1993 the Company established an Audit Committee and a
Compensation Committee, each consisting of Messrs. Groninger and Katz. The Audit
Committee is charged with reviewing the Company's annual audit and meeting with
the Company's independent accountants to review the Company's internal controls
and financial management practices, and the Compensation Committee reviews
compensation practices, recommends compensation for the Company's executives and
key employees and functions as the Committee under the Company's 1993 Stock
Option Plan. The Compensation Committee met once and acted once by unanimous
written consent during the year ended February 1, 1997. The Audit Committee met
once during the year ended February 1, 1997.
During the fiscal year ended February 1, 1997, the Board of Directors held
six meetings and acted once by unanimous written consent in lieu of a meeting.
Each director attended at least 75% of the meetings of the Board of Directors
held when he was a director and of all committees of the Board of Directors on
which he served.
4
<PAGE>
VOTE REQUIRED
The four nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy and entitled to vote, a quorum
being present, shall be elected as directors. Only votes cast for a nominee will
be counted, except that the accompanying proxy will be voted for all nominees in
the absence of instruction to the contrary. Abstentions, broker non-votes and
instructions on the accompanying proxy card to withhold authority to vote for
one or more nominees will result in the respective nominees receiving fewer
votes.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL--ELECTION OF DIRECTORS" TO BE IN THE
BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A VOTE "FOR"
APPROVAL THEREOF.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table shows all the cash compensation paid or to be paid by
the Company or its subsidiaries as well as certain other compensation paid or
accrued, during the fiscal years indicated, to the Chief Executive Officer and
each of the four other most highly compensated executive officers of the Company
for such period in all capacities in which they served, as well as one executive
officer who was one of the four other most highly compensated executive officers
but was not an executive officer at fiscal year end.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
ANNUAL COMPENSATION UNDERLYING ALL
-------------------- OTHER ANNUAL OPTIONS/ OTHER
YEAR SALARY BONUS COMPENSATION SARS COMPENSATION(1)
---- ------ ----- ------------ ---- ---------------
<S> <C> <C> <C> <C> <C> <C>
Bernard M. Manuel ............... 1996 $433,983 -- -- -- $ 142
Chairman of the Board 1995 458,429 -- -- -- 142
and Chief Executive Officer 1994 452,115 -- -- 55,000 355
Irving Benson ................... 1996 433,500(3) -- $13,117(4) -- 857
Formerly Vice Chairman 1995 503,500 -- 11,705(4) -- 900
and President(2) 1994 452,115 -- 11,705(4) 55,000 917
Trevor J. Wright ................ 1996 267,643 -- 8,801(4) -- 648
Executive Vice President-- 1995 292,207 -- 13,750(4) -- 3,648(6)
Design 1994 247,920(5) -- 5,013(4) 21,500 6,555(6)
Gary C. Smith ................... 1996 271,656 -- -- -- 331
Senior Vice President-- 1995 273,995 -- -- 78,750(7) 361
Manufacturing 1994 253,846 -- -- 30,000 208
Roy E. Green .................... 1996 234,612 -- -- -- 1,337
Senior Vice President-- 1995 236,665 -- -- 80,000(8) 1,458
Chief Financial Officer 1994 220,000 -- -- 30,000 1,431
and Treasurer
Paul D. Baiocchi ................ 1996 195,000 -- -- -- 342
Vice President, General 1995 190,288 -- -- 25,000(10) 355
Counsel and Secretary 1994 151,492(9) -- -- 15,000 308
</TABLE>
- ----------
(1) Consists of certain insurance premiums on term life insurance paid by the
Company for the benefit of the named individuals.
(2) Mr. Benson, who continues to serve as a director of and consultant to the
Company, resigned as an officer and employee of the Company in November
1996. See "Certain Transactions."
(3) Includes $25,000 of severance, but excludes $18,333 of consulting fees,
paid to Mr. Benson during 1996 under the terms of the Consulting and
Severance Agreement with Mr. Benson dated November 27, 1996. See "Certain
Transactions."
(4) Represents a car allowance provided to the executive.
(5) Compensation amounts reflected for 1994 are for the period beginning April
7, 1994, the date Mr. Wright commenced his employment with the Company,
through January 28, 1995, the last day of the Company's 1994 fiscal year.
6
<PAGE>
(6) Includes $3,295 and $6,234 for 1995 and 1994, respectively, representing
the Company's matching contribution pursuant to its 401(k) defined
contribution plan.
(7) Consists of 58,750 shares issuable upon the exercise of options that were
granted during 1994 and 1993 which were repriced during 1995 and 20,000
shares issuable upon the exercise of options that were both granted and
repriced during 1995.
(8) Consists of 60,000 shares issuable upon the exercise of options that were
granted during 1994 and 1993 which were repriced during 1995 and 20,000
shares issuable upon the exercise of options that were both granted and
repriced during 1995.
(9) Compensation amounts reflected for 1994 are for the period beginning March
20, 1994, the date Mr. Baiocchi commenced his employment with the Company,
through January 28, 1995, the last day of the Company's 1994 fiscal year.
(10) Consists of 15,000 shares issuable upon the exercise of options that were
granted during 1994 which were repriced during 1995 and 10,000 shares
issuable upon the exercise of options that were both granted and repriced
during 1995.
During the fiscal year ended February 1, 1997 no options were granted to
the persons named in the Summary Compensation Table.
The following table sets forth information with respect to (i) stock
options exercised in the fiscal year ended February 1, 1997 by the persons named
in the Summary Compensation Table and (ii) unexercised stock options held by
such individuals on February 1, 1997.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED,
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR END (#) FISCAL YEAR END (1)
ACQUIRED ON VALUE ------------------------- --------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ -------- ------------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard M. Manuel -- -- 55,000 -- $ 0 $ 0
Irving Benson -- -- 55,000 -- $ 0 $ 0
Roy E. Green -- -- 80,000 -- $ 0 $ 0
Trevor J. Wright -- -- 21,500 -- $ 0 $ 0
Gary C. Smith -- -- 78,750 -- $ 0 $ 0
Paul D. Baiocchi -- -- 25,000 -- $ 0 $ 0
</TABLE>
- ----------
(1) Based on the closing stock price of the Company's Common Stock on January
31, 1997 of $0.906.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements, effective as of May 1,
1993, with Roy Green and Gary Smith and has entered into an amended and restated
employment agreement with Bernard Manuel, effective as of January 1, 1995. The
Company has also entered into an employment agreement, effective as of April 4,
1994, with Paul Baiocchi, the Company's Vice President, General Counsel and
Secretary. In connection with the FWM Acquisition, the Company entered into an
employment agreement, effective as of April 7, 1994, with Trevor Wright.
7
<PAGE>
Each of the foregoing agreements (collectively, the "Employment Agreements")
provides for automatic renewal for successive one year terms unless either party
notifies the other to the contrary at least 90 days prior to its expiration.
Unless further renewed, the Employment Agreement will expire on April 3, 1998,
in the case of Mr. Baiocchi, April 8, 1998 in the case of Mr. Wright, and April
30, 1998 in the case of Messrs. Green, Manuel and Smith.
The Employment Agreements require each employee to devote substantially all
of his time and attention to the business of the Company as necessary to fulfill
his duties. Pursuant to the Employment Agreements Messrs. Manuel, Wright, Green,
Smith and Baiocchi are currently entitled to an annual salary at a rate of
$494,000, $306,000, $245,000, $271,656 and $205,000, respectively, subject to
annual cost of living increases. The Employment Agreements also provide for the
payment of bonuses in such amounts as may be determined by the Board. Under the
Employment Agreements, the employee may terminate his employment upon 30 days'
notice. The Employment Agreements provide that in the event the employee's
employment is terminated by the Company at any time for any reason other than
justifiable cause, disability or death, or the Company shall fail to renew the
agreement at any time within two years following a "Change of Control of the
Company," the Company shall pay the employee the employee's base salary and
permit participation in benefit programs for the greater of (i) the remaining
term of the agreement or (ii) two years (in the case of Messrs. Manuel and
Wright), one year (in the case of Messrs. Green and Smith) or six months (in the
case of Mr. Baiocchi). In the event the Company elects not to renew the
agreement (other than within two years following a "Change in Control of the
Company"), the Company will, (a) in the case of Messrs. Manuel and Wright, pay
the employee a severance payment equal to the lesser of (i) two months' salary
plus one sixth of the employee's most recently declared bonus for each year the
employee has been employed by the Company or (ii) one year's annual salary, (b)
in the case of Messrs. Green and Smith, pay the employee a severance payment
equal to the lesser of (i) one month's salary plus one-twelfth of the employee's
most recently declared bonus for each year the employee has been employed by the
Company or (ii) six months' salary, and (c), in the case of Mr. Baiocchi, pay
him a severance payment equal to the lesser of (i) one month's salary plus
one-twelfth of his most recently declared bonus for each year he has been
employed by the Company or (ii) three months' salary. Each agreement contains
confidentiality provisions, whereby each executive agrees not to disclose any
confidential information regarding the Company, as well as non-competition
covenants. The non-competition covenants survive the termination of an
employee's employment for the greater of (i) the remaining term of the agreement
or (ii) two years (in the case of Messrs. Manuel and Wright), one year (in the
case of Messrs. Green and Smith), and six months (in the case of Mr. Baiocchi)
except in the event the Company elects not to renew the agreement, terminates
the employee's employment within two years following a "Change in Control of the
Company" or fails to make required severance payments.
For purposes of the Employment Agreements, a "Change in Control of the
Company" shall be deemed to occur if (i) there shall be consummated (x) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company's
Common Stock would be converted into cash, securities or other property, other
than a merger of the Company in which the holders of the Company's Common Stock
immediately prior to the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the merger, or (y) any
sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, or (ii) the stockholders of the Company shall approve any plan or
proposal for liquidation or dissolution of the Company, or (iii) any person (as
such term is used in Sections 13(d) and 14(d)(2) of the Exchange Act), shall
become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange
Act) of 40% or more of the Company's outstanding Common Stock other than
pursuant to a plan or arrangement entered into by such person and the Company,
or (iv) during any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board of Directors shall cease
for any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's stockholders, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
8
<PAGE>
On September 20, 1996, the Company sold to AnnTaylor Stores Corporation
(together with its affiliates, "Ann Taylor") Cygne's 60% interest in CAT,
Cygne's former sourcing joint venture arrangement with Ann Taylor, and the
assets of Cygne's Ann Taylor Woven Division that were used in sourcing
merchandise for Ann Taylor (the "Ann Taylor Disposition"). As a result of the
Ann Taylor Disposition, a change in control of the Company is deemed to have
occurred and if the Company shall fail to renew the employment agreement for any
of Messrs. Manuel, Wright, Green, Smith or Baiocchi within two years of the
closing date of the Ann Taylor Disposition then such employee shall become
entitled to the previously discussed severance arrangement.
The Employment Agreements also provide that if, in connection with a change
of ownership or control of the Company or a change in ownership of a substantial
portion of the assets of the Company (all within the meaning of Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code")), an
excise tax is payable by the employee under Section 4999 of the Code, then the
Company will pay to the employee additional compensation which will be
sufficient to enable the employee to pay such excise tax as well as the income
tax and excise tax on such additional compensation, such that, after the payment
of income and excise taxes, the employee is in the same economic position in
which he would have been if the provisions of Section 4999 of the Code had not
been applicable.
In connection with the closing of the Ann Taylor Disposition, the Company
entered into two 3-year consulting agreements with Ann Taylor for the services
of Mr. Bernard Manuel, the Company's Chairman of the Board and Chief Executive
Officer, and Mr. Irving Benson, the Company's then President and a director, to
facilitate the integration of CAT and the Ann Taylor Woven Division into Ann
Taylor's operations. See "Certain Transactions."
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives $3,500 for each Board of
Directors meeting attended, and $1,500 for each meeting of any committee of the
Board of Directors attended. In addition, directors who are not employees of the
Company are compensated through stock options.
The Company has adopted a Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"), pursuant to which options to acquire a maximum aggregate of
100,000 shares of Common Stock may be granted to non-employee directors. Options
granted under the Directors' Plan do not qualify as incentive stock options
within the meaning of Section 422 of the Code. The Directors' Plan provides for
the automatic grant to each of the Company's non-employee directors of (1) an
option to purchase 10,000 shares of Common Stock on the date of such director's
initial election or appointment to the Board to Directors, and (2) an option to
purchase 2,000 shares of Common Stock on each annual anniversary of such
election or appointment, provided that such individual is on such anniversary
date a non-employee director. The options will have an exercise price of 100% of
the fair market value of the Common Stock on the date of grant, have a ten-year
term and become exercisable in four equal annual installments commencing on the
first anniversary of the grant thereof, subject to acceleration in the event of
a change of control (as defined in the Directors' Plan). The options may be
exercised by payment in cash, check or shares of Common Stock. On April 15, 1993
Mr. Groninger was elected as a director of the Company and was granted an option
to purchase 10,000 shares of Common Stock at a purchase price of $4.00 per
share, the fair market value of the Common Stock on the date of grant. On
September 28, 1993 Mr. Katz was elected as a director of the Company and was
granted an option to purchase 10,000 shares of Common Stock at a purchase price
of $16.875 per share, the fair market value of the Common Stock on the date of
grant. On each of April 15, 1994, April 15, 1995, April 15, 1996 and April 15,
1997, the anniversary dates of his initial election to the Board of Directors,
Mr. Groninger was granted options to purchase 2,000 shares of Common Stock at a
purchase price of $23.50, $11.75, $1.75 and $0.687 per share, respectively, the
fair market values of the Common Stock on the dates of grant. On each of
September 28, 1994, September 28, 1995 and September 28, 1996, the anniversary
dates of his initial election to the Board of Directors, Mr. Katz was granted
options to purchase 2,000 shares of Common Stock at a purchase price of $22.50,
$3.25 and $1.125 per share, the fair
9
<PAGE>
market values of the Common Stock on the dates of grant. As a result of the Ann
Taylor Disposition, a change in control under the Directors' Plan is deemed to
have occurred and all options granted under the Directors' Plan prior to
September 20, 1996 became vested.
Mr. Benson, a director of the Company and formerly Vice Chairman and
President of the Company, is currently a consultant to the Company. See "Certain
Transactions."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The report of the Compensation Committee shall not be deemed incorporated
by reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Exchange Act, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
The Compensation Committee is comprised of two directors. As members of the
Compensation Committee, it is our responsibility to determine the most effective
total executive compensation strategy based on the Company's business and
consistent with stockholders' interests. Our specific duties entail reviewing
the Company's compensation practices, recommending compensation for executives
and key employees and administering the Company's Employee Stock Option Plan.
The Company is a private label designer, merchandiser and manufacturer of
women's apparel. One of the Company's strengths is its strong management team,
many of whom have been with the Company for a significant period of time. The
central goal of the Compensation Committee is to ensure that the Company's
remuneration policy is such that the Company is able to attract, retain and
reward capable employees who can contribute both short-and longer-term to the
continued success of the Company. Equity participation and a strong alignment to
stockholders' interest are key elements of the Company's compensation
philosophy. The Company's executive compensation program consists of three
parts: base salary, annual bonus and stock options.
Changes made in 1993 to the Code impose certain limitations on the
deductibility of executive compensation paid by public companies for taxable
years beginning in or after 1994. In general, under the new limitations, the
Company will not be able to deduct annual compensation paid to certain executive
officers in excess of $1,000,000 except to the extent that such compensation
qualifies as "performance-based compensation" (or meets other exceptions not
here relevant). Non-deductibility would result in additional tax cost to the
Company. It is possible that at least some of the cash and equity based
compensation paid or payable to the Company's executive officers will not
qualify for the "performance-based compensation" exclusion under the new
deduction limitation provisions of the Code. Nevertheless, the Compensation
Committee anticipates that in making compensation decisions it will give
consideration to the net cost to the Company (including for this purpose, the
potential limitation on deductibility of executive compensation).
Base salary represents the fixed component of the executive compensation
program. Determinations of base salary levels are established on an annual
review of marketplace competitiveness with similar companies, and on internal
relationships. Periodic increases in base salary relate to individual
contributions to the Company's overall performance, relative marketplace
competitiveness levels, length of service and the industry's annual competitive
pay practice movement.
No bonuses were awarded to executive officers for the year ended February
1, 1997.
The Compensation Committee, which administers the Company's stock option
plan, believes that one important goal of the executive compensation program
should be to provide executives, key employees and consultants who have
significant responsibility for the management, growth and future success of the
Company with an opportunity to
10
<PAGE>
increase their ownership and potentially gain financially from the Company's
stock price increases. This approach ensures that the best interests of the
stockholders, executives and employees will be closely aligned. Therefore,
executive officers and other key employees of the Company are granted stock
options from time to time, giving them a right to purchase shares of the
Company's Common Stock at a specified price in the future. The grant of options
is based primarily on an employee's potential contribution to the Company's
growth and financial results. In determining the size of option grants, the
Compensation Committee considers the number of options owned by such officer,
the number of options previously granted and currently outstanding, and the
aggregate size of the current option grants. Options generally are granted at
the prevailing market value of the Company's Common Stock and will only have
value if the Company's stock price increases. Generally, options become
exercisable in equal amounts over four years and the individual must be employed
by the Company for such options to become exercisable. No options were granted
to executive officers of the Company during the fiscal year ended February 1,
1997.
1996 COMPENSATION TO CHIEF EXECUTIVE OFFICER
The base salary for Mr. Manuel during 1996 was $494,000, which was
unchanged since June 1994. The Compensation Committee determined during 1996
that, in light of the Company's financial condition, it was not appropriate to
increase Mr. Manuel's salary. In addition, in June 1995, Mr. Manuel accepted a
reduction in salary which has to date remained in effect. During the fiscal year
ended February 1, 1997, Mr. Manuel was not granted any stock options.
Respectfully submitted,
JAMES G. GRONINGER and
STUART B. KATZ
CERTAIN TRANSACTIONS
In connection with the closing of the Ann Taylor Disposition, the Company
entered into two 3-year consulting agreements with Ann Taylor for the services
of Mr. Bernard Manuel, the Company's Chairman of the Board and Chief Executive
Officer, and Mr. Irving Benson, the Company's then President and a director, to
facilitate the integration of CAT and the Ann Taylor Woven Division into Ann
Taylor's operations. These agreements, which require an annual fee of $225,000
for the services of each of Messrs. Benson and Manuel, provided for automatic
assignment to the consultant if his employment with the Company were terminated
for any reason. The consulting agreement with Ann Taylor for the services of Mr.
Benson was assigned to Mr. Benson in connection with his resignation as
President of the Company on November 29, 1996. The consulting agreement with Ann
Taylor for the services of Mr. Manuel is expected to be bought out in
consideration of the payment by Ann Taylor to the Company of approximately
$533,000.
Mr. Benson, who founded the Company's predecessor in 1975 and continues to
serve on the Board of Directors of the Company, has entered into a consulting
and severance agreement with the Company which provides for an aggregate of
$200,000 in severance payments and pursuant to which he is providing services to
Cygne with respect to design, development and merchandising matters and special
projects for a term of two years at an annual fee of $110,000 plus reimbursement
of certain out-of-pocket expenses. The agreement may be terminated by the
Company at any time after May 31, 1997 upon the payment to Mr. Benson of an
aggregate of $210,000 and by Mr. Benson at any time after May 31, 1997 upon 30
days notice.
During the fiscal year ended February 1, 1997, the Company sold to The
Limited, Inc. approximately $62.7 million of merchandise. From time to time The
Limited, Inc. has provided financing to or purchased fabric on behalf of the
Company.
11
<PAGE>
PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act or under the Exchange Act,
except to the extent the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
Set forth below is a line graph which compares the cumulative total
shareholder return on the Company's Common Stock against the cumulative total
return of the S&P 500 Index and the S&P Textile-Apparel Index for the period
from July 30, 1993, when the Company's Common Stock was first publicly traded,
to January 31, 1997(the last business day of the Company's fiscal year).
TOTAL SHAREHOLDER RETURN FROM JULY 30, 1993
VS. THE TOTAL RETURN S&P 500 STOCK INDEX AND
THE TOTAL RETURN S&P TEXTILE-APPAREL INDEX
[GRAPHICAL REPRESENTATION OF DATA TABLE BELOW]
<TABLE>
<CAPTION>
7/30/93 1/28/94 1/27/95 2/2/96 1/31/97
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
CYGNE DESIGNS $100.00 $156.10 $112.20 $ 11.59 $ 8.84
TOTAL RETURN S&P 500
STOCK INDEX 100.00 108.30 109.50 151.92 191.95
TOTAL RETURN S&P 100.00 99.34 100.43 114.61 162.89
TEXTILE-APPAREL INDEX
</TABLE>
12
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP have been the independent auditors of the Company since
March 1993 and will serve in that capacity for the fiscal year ending January
31, 1998. A representative of Ernst & Young LLP will be present at the Annual
Meeting and will have an opportunity to make a statement if he desires to do so,
and will respond to appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the 1998
Annual Meeting of Stockholders of the Company must be received by the Company no
later than January 23, 1998 for inclusion in the Board of Directors' proxy
statement and form of proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon at the
Annual Meeting. However, if any other business properly comes before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
on such matters in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
Annual Meeting, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors
PAUL D. BAIOCCHI
Secretary
Dated: May 22, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT
CHARGE TO ANY STOCKHOLDER REQUESTING IT IN WRITING FROM: CYGNE DESIGNS, INC.,
1372 BROADWAY, NEW YORK, NEW YORK 10018, ATTENTION: PAUL D. BAIOCCHI, SECRETARY.
13
<PAGE>
CYGNE DESIGNS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 20, 1997
Bernard M. Manuel, Roy E. Green and Paul D. Baiocchi, and each of them, as
the true and lawful attorneys, agents and proxies of the undersigned, with full
power of substitution, are hereby authorized to represent and to vote all shares
of Common Stock of Cygne Designs, Inc. held of record by the undersigned on May
8, 1997, at the Annual Meeting of Stockholders to be held at 9:30 A.M. on
Friday, June 20, 1997, at the offices of Fulbright & Jaworski L.L.P. 31st Floor,
666 Fifth Avenue, New York, New York, and at any adjournment thereof. Any and
all proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR
PROPOSAL--ELECTION OF DIRECTORS.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE
SIDE
- --------------------------------------------------------------------------------
PLEASE MARK
[X] YOUR VOTES AS
IN THIS EXAMPLE.
FOR WITHHOLD
Proposal--Election of Directors [ ] [ ]
Nominees are:
Irving Benson, James G. Groninger, Stuart B. Katz and Bernard M. Manuel.
Discretionary authority is hereby granted with respect to such other matters as
may properly come before the meeting.
FOR all listed nominees (except do not vote for the nominee(s) whose name(s)
appear(s) below):
________________________________________________________________________________
Signature______________ Signature if held jointly_______________DATED __, 1997
IMPORTANT: Please sign exactly as name appears above. Each joint owner shall
sign. Executors, administrators, trustees, etc. should give full
title as such. If signer is a corporation, please give full
corporate name by duly authorized officer. If a partnership,
please sign in partnership name by authorized person. The
above-signed acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the Proxy Statement furnished therewith.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING
THE ENCLOSED ENVELOPE.
