<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to [section]240.14a-11(c) or
[section]240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DM Management Company
(Name of Registrant as Specified In Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
DM MANAGEMENT
- --------------------------------------------------------------------------------
DM MANAGEMENT COMPANY
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON NOVEMBER 8, 1996
AND
PROXY STATEMENT
- --------------------------------------------------------------------------------
IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 3
D M M A N A G E M E N T
October 16, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
DM Management Company. The meeting will be held at the offices of Foley, Hoag &
Eliot LLP, One Post Office Square, 16th Floor, Boston, Massachusetts on Friday,
November 8, 1996, beginning at 10:00 A.M., local time.
As a stockholder, your vote is important. We encourage you to execute and
return your proxy promptly whether you plan to attend the meeting or not so that
we may have as many shares as possible represented at the meeting. Returning
your completed proxy will not prevent you from voting in person at the meeting
prior to the proxy's exercise if you wish to do so.
Thank you for your cooperation, continued support and interest in DM
Management Company.
Sincerely,
/s/ Gordon R. Cooke
-----------------------------
Gordon R. Cooke
President and Chief Executive
Officer
25 RECREATION PARK DRIVE, SUITE 200, HINGHAM, MA 02043 - 617 740-2718 -
FAX 617 749-8523
WINTERBROOK WAY, RT. 104, MEREDITH, NH 03253 - 603 279-7051 - FAX 603 279-6297
<PAGE> 4
DM MANAGEMENT COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 8, 1996
Notice is hereby given that the Annual Meeting of Stockholders of DM
Management Company (the "Company") will be held at the offices of Foley, Hoag &
Eliot LLP, One Post Office Square, 16th Floor, Boston, Massachusetts on Friday,
November 8, 1996, beginning at 10:00 A.M., local time for the following
purposes:
1. To fix the number of directors that shall constitute the whole Board of
Directors of the Company at four;
2. To consider and vote upon the election of one Class C Director; and
3. To transact such further business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on October 1, 1996
as the record date for the determination of the stockholders of the Company
entitled to notice of, and to vote at, said Meeting and any adjournment thereof.
Only stockholders of record on such date are entitled to notice of, and to vote
at, said Meeting or any adjournment thereof.
By Order of the Board of Directors,
/s/ David R. Pierson
-----------------------------
David R. Pierson
Secretary
Boston, Massachusetts
October 16, 1996
YOUR VOTE IS IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY, WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING.
<PAGE> 5
DM MANAGEMENT COMPANY
25 RECREATION PARK DRIVE
HINGHAM, MASSACHUSETTS 02043
(617) 740-2718
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 8, 1996
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about October 16, 1996 in connection with the solicitation by
the Board of Directors of DM Management Company (the "Company") of proxies to be
used at the Annual Meeting of Stockholders of the Company, to be held on Friday,
November 8, 1996, and at any and all adjournments thereof (the "Annual
Meeting"). When proxies are returned properly executed, the shares represented
will be voted in accordance with the stockholders' directions. Stockholders are
encouraged to vote on the matters to be considered. However, if no choice has
been specified by a stockholder, the shares will be voted as recommended by
management. Any stockholder may revoke his proxy at any time before it has been
exercised by providing the Company with a later dated proxy, by notifying the
Company's Secretary in writing or by orally notifying the Company in person.
The Board of Directors of the Company (the "Board") has fixed the close of
business on October 1, 1996, as the record date for the determination of the
stockholders of the Company entitled to notice of, and to vote at, the Annual
Meeting and any adjournment thereof. Only stockholders of record on such date
are entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof. At the close of business on the record date, there were issued and
outstanding 4,326,157 shares of the Company's Common Stock, $.01 par value (the
"Common Stock"), entitled to cast 4,326,157 votes.
The By-Laws of the Company provide that the holders of a majority of the
shares of Common Stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at the
Annual Meeting. Shares of Common Stock represented by a properly signed and
returned proxy will be treated as present at the Annual Meeting for purposes of
determining a quorum. Abstentions and broker non-votes with respect to
particular proposals will not affect the determination of a quorum. Thus, shares
voted to abstain as to a particular matter, or as to which a nominee (such as a
broker holding shares in street name for a beneficial owner) has no voting
authority in respect of a particular matter, shall be deemed present for
purposes of determining a quorum. Any stockholder who attends the Annual Meeting
may not withhold his shares from the quorum count by declaring such shares
absent from the Annual Meeting.
Passage of the proposal to fix the number of directors constituting the
whole Board requires the approval of a majority of the votes properly cast.
Abstentions and broker non-votes as to this proposal do not count as votes for
or against the proposal. The Class C Director will be elected by a plurality of
the votes properly cast. Abstentions and broker non-votes as to this election do
not count as votes for or against such election.
Votes will be tabulated by the Company's transfer agent, State Street Bank
and Trust Company.
PROPOSALS ONE AND TWO --
FIXING NUMBER OF DIRECTORS AND ELECTION OF DIRECTORS
The Company's By-Laws provide for a Board of Directors consisting of from
two to seven members. Within such limits, the number of directors constituting
the whole Board is determined by the stockholders at the annual meeting of
stockholders, and may be increased or decreased by the stockholders or the
directors from time to time. The Board is divided into three classes, labeled
Class A, Class B and Class C, each containing, insofar as possible, an equal
number of directors. Directors are elected to serve for three-year terms, and
until their respective successors are duly elected and qualified, with the term
of one of the three classes expiring each year at the Company's annual meeting
or special meeting in lieu thereof.
<PAGE> 6
The number of directors constituting the whole Board is currently fixed at
five. There is currently a vacancy on the Board, and the term of the Company's
Class C Director, Gordon R. Cooke, will expire at the Annual Meeting. The Board
has recommended that the number of directors constituting the whole Board be
fixed at four and has nominated Mr. Cooke for election as a Class C Director, to
serve until the Company's 1999 annual meeting of stockholders or special meeting
in lieu thereof, and until his successor is duly elected and qualified.
The Company's Class A Directors are William E. Engbers and Samuel L.
Shanaman. Their terms as directors will expire at the Company's 1997 annual
meeting of stockholders or special meeting in lieu thereof. The Company's Class
B Director is Walter J. Levison. His term as a director will expire at the
Company's 1998 annual meeting of stockholders or special meeting in lieu
thereof.
Mr. Cooke has agreed to serve as a Class C Director if elected, and the
Company has no reason to believe that he will be unable to serve. In the event
that he is unable or declines to serve as director at the time of the Annual
Meeting, proxies will be voted for such other nominee as is then designated by
the Board.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL TO FIX THE NUMBER OF
DIRECTORS AT FOUR AND FOR THE ELECTION OF MR. COOKE AS A CLASS C DIRECTOR OF THE
COMPANY.
2
<PAGE> 7
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
The following table sets forth certain information concerning each director
and nominee for election as a director and each executive officer of the
Company:
<CAPTION>
NAME AGE POSITION
- --- --- --------
<S> <C> <C>
Gordon R. Cooke............. 51 President, Chief Executive Officer and Director
Samuel L. Shanaman.......... 55 Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director
Olga L. Conley.............. 38 Vice President of Finance and Treasurer
John J. Hayes............... 41 Executive Vice President of Marketing
Carol A. Maher.............. 55 Vice President of Human Resources
Stephanie B. Noble.......... 41 Vice President of Merchandising
Patricia C. Selander........ 39 Vice President of Inventory Management
William E. Engbers(1)....... 53 Director
Walter J. Levison(2)........ 78 Director
<FN>
- ---------------
(1) Chairman of Audit Committee, member of Compensation Committee.
(2) Chairman of Compensation Committee, member of Audit Committee.
</TABLE>
GORDON R. COOKE has been President and Chief Executive Officer of the
Company and a director since joining the Company in December 1995. Mr. Cooke
served as President of Time-Warner Interactive Merchandising, a division of Time
Warner Inc., from November 1993 until December 1995, and as President of
Bloomingdale's By Mail, a division of Federated Department Stores, Inc., from
April 1991 until October 1993.
SAMUEL L. SHANAMAN has been Executive Vice President, Chief Operating
Officer and Chief Financial Officer of the Company since December 1995 and a
director since July 1990. He served as President and Chief Executive Officer of
the Company from June 1994 until December 1995. Before that he served in a
variety of positions, including Vice President of Finance, Chief Financial
Officer, Executive Vice President and Chief Operating Officer. Mr. Shanaman
joined the Company in June 1990.
OLGA L. CONLEY has been Vice President of Finance since June 1996 and
Treasurer since August 1993. She joined the Company in October 1991 as Director
of Financial Services. From January 1987 to October 1991, Ms. Conley served as
Corporate Controller of Project Software & Development, Inc., a developer and
provider of project management and maintenance software.
JOHN J. HAYES has served as Executive Vice President of Marketing since
joining the Company in May 1996. From September 1990 until May 1996, Mr. Hayes
served as Vice President, Marketing and Catalog Production, of Bloomingdale's By
Mail, a division of Federated Department Stores, Inc.
CAROL A. MAHER has been Vice President of Human Resources since June 1996.
She served as Director of Human Resources from joining the Company in December
1992 until June 1996. From January 1987 until December 1992 she was Director of
Human Resources for Child World, Inc., a subsidiary of Cole National
Corporation.
STEPHANIE B. NOBLE joined the Company in April 1988 as Director of
Merchandising and became Vice President of Merchandising in April 1989.
PATRICIA C. SELANDER joined the Company in January 1993 as Director of
Inventory Control and became Vice President of Inventory Management in October
1995. From September 1977 to January 1993, Ms. Selander was employed by
Talbots', where she held several positions, including Retail Planner, Sportswear
Division and Manager of Catalog Merchandise Systems.
WILLIAM E. ENGBERS has been a director of the Company since July 1990. Mr.
Engbers currently serves as Venture Group Manager of Allstate Insurance Company,
which he joined in June 1989. Mr. Engbers is a director of Applied Biometrics,
Inc. and La Jolla Pharmaceutical Company.
3
<PAGE> 8
WALTER J. LEVISON has been a director of the Company since March 1992.
Since October 1982, Mr. Levison has been a general partner of the Aegis Venture
Funds, a group of venture capital funds based in the Boston, Massachusetts area.
He is also a director of Davox Corporation.
The Company's executive officers are elected by the directors and hold
office until the first directors' meeting after the next annual meeting of
stockholders or special meeting in lieu thereof, and thereafter until their
successors are chosen and qualified, unless a shorter term is specified in the
vote appointing them.
COMMITTEES AND MEETINGS OF THE BOARD
During the fiscal year ended June 29, 1996 ("fiscal 1996"), the Board met
nine times and acted twice by unanimous written consent. No incumbent director
attended fewer than 75% of the aggregate of the total number of meetings held by
the Board and Committees of the Board on which he served.
The Board currently has two committees. The Audit Committee (currently
composed of Messrs. Engbers and Levison) reviews the internal accounting
procedures of the Company and consults with and reviews the services provided by
the Company's independent auditors. The Audit Committee met twice during fiscal
1996. The Compensation Committee (currently composed of Messrs. Engbers and
Levison) makes general policy decisions relating to compensation and benefits
for the Company's employees, including decisions with respect to compensation
for the Company's executive officers, and administers the Company's 1993
Incentive and Nonqualified Stock Option Plan (the "1993 Stock Option Plan") and
1993 Employee Stock Purchase Plan. The Compensation Committee met four times
during fiscal 1996 and acted five times by unanimous written consent.
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
DIRECTORS' COMPENSATION
Each non-employee director of the Company has served without cash
compensation but has been reimbursed, upon request, for expenses incurred in
attending Board meetings. Directors who are employees of the Company are not
paid any separate fees for serving as directors.
As Outside Directors (as defined in the 1993 Stock Option Plan) serving on
the Board of Directors at the time of the Company's Special Meeting of
Stockholders on April 25, 1996 (the "Special Meeting"), each of Mr. Engbers and
Mr. Levison automatically received a nonqualified stock option to purchase
24,000 shares of Common Stock (in addition to the nonqualified stock option to
purchase 12,000 shares of Common Stock that was previously granted to him
automatically under the 1993 Stock Option Plan in the form that was in effect
prior to such Special Meeting) at $3.25, the fair market value of the Common
Stock (as defined in the 1993 Stock Option Plan) on the date of option grant.
Such options expire on the fifth anniversary of the date of grant, were
immediately vested and exercisable as to two-thirds of the shares covered
thereby, and will vest and become exercisable as to the remaining one-third of
such shares immediately following the Annual Meeting, provided that the option
holder continues to be a member of the Board immediately following such meeting.
Each Outside Director joining the Board after the date of the Special Meeting
will automatically receive a nonqualified stock option to purchase 24,000 shares
of Common Stock at the fair market value of the Common Stock (as defined in the
1993 Stock Option Plan) upon joining the Board. Such options will expire on the
fifth anniversary of the date of grant, will be immediately vested and
exercisable as to one-third of the shares covered thereby and will vest and
become exercisable as to the remaining two-thirds of such shares cumulatively in
two equal annual installments on the first and second anniversaries of the date
the option was granted, provided that the option holder is a director on such
anniversary.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered in all capacities to the Company for the
fiscal years ended June 29, 1996 ("fiscal 1996"), June 24, 1995 ("fiscal 1995")
and June 25, 1994 ("fiscal 1994") of (i) those persons who served as the Chief
Executive Officer of
4
<PAGE> 9
the Company during fiscal 1996, (ii) the other executive officers of the Company
serving on June 29, 1996 whose salary and bonus for fiscal 1996 exceeded
$100,000 and (iii) a former executive officer of the Company who was among the
four most highly compensated executive officers of the Company during fiscal
1996 but was not serving as an executive officer of the Company on June 29,
1996:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
---------------------- SECURITIES ALL OTHER
NAME AND FISCAL SALARY(1) BONUS(2) UNDERLYING COMPENSATION(4)
PRINCIPAL POSITION YEAR ($) ($) OPTIONS(3)(#) ($)
------------------ ------ --------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Gordon R. Cooke(5).......... 1996 $150,010 $135,000 175,000 $49,620
President and Chief 1995 -- -- -- --
Executive Officer 1994 -- -- -- --
Samuel L. Shanaman(6)....... 1996 155,002 0 30,000 120
Executive Vice President, 1995 150,749 0 25,000 582
Chief Operating Officer 1994 131,964 26,391 0 840
and Chief Financial
Officer
Stephanie B. Noble.......... 1996 127,493 0 30,000 120
Vice President of 1995 115,268 0 0 217
Merchandising 1994 119,018 23,804 0 640
George R. Burman, Jr.(7).... 1996 163,114 0 0 28,431
Former Chairman of the 1995 163,114 24,467 25,000 582
Board (no longer with the 1994 163,114 32,623 0 840
Company)
<FN>
- ---------------
(1) For fiscal 1996, fiscal 1995 and fiscal 1994, includes amounts deferred by
the named individuals pursuant to the Company's 401(k) Plan and Trust.
Amounts shown do not include amounts expended by the Company pursuant to
plans (including group disability, life and health) that do not discriminate
in scope, terms or operation in favor of officers and directors and are
generally available to all salaried employees.
(2) Amounts reported for each fiscal year include amounts earned with respect to
that fiscal year but paid in the subsequent fiscal year.
(3) During fiscal 1996, fiscal 1995 and fiscal 1994, the Company did not grant
any restricted stock awards or stock appreciation rights or make any
long-term incentive plan payouts to any of the executive officers.
(4) The amounts reported include the following insurance premiums paid by the
Company with respect to term life insurance for the benefit of the named
individuals during fiscal 1996, fiscal 1995 and fiscal 1994, respectively:
Mr. Cooke, $120, $0 and $0; Mr. Shanaman, $120, $120 and $240; Ms. Noble,
$120, $120 and $240; and Mr. Burman, $120, $120 and $240. The amounts
reported also include the following Company matching contributions pursuant
to the Company's 401(k) Plan and Trust for fiscal 1996, fiscal 1995 and
fiscal 1994, respectively, for the benefit of the named individuals: Mr.
Cooke, $0, $0 and $0; Mr. Shanaman, $0, $462 and $600; Ms. Noble, $0, $97
and $400; and Mr. Burman, $0, $462, and $600. The amount reported for Mr.
Cooke includes $49,500 for relocation expenses. The amount reported for
fiscal 1996 for Mr. Burman includes $6,353 paid with respect to Mr. Burman's
expenses in connection with the negotiation of his severance arrangement and
$21,958 payable to him after his employment with the Company terminates.
(5) Mr. Cooke was elected President and Chief Executive Officer of the Company
on December 26, 1995.
(6) Mr. Shanaman resigned as President and Chief Executive Officer of the
Company on December 26, 1995 and became Executive Vice President, Chief
Operating Officer and Chief Financial Officer of the Company.
(7) Mr. Burman resigned as Chairman of the Board on October 1, 1995.
</TABLE>
5
<PAGE> 10
OPTION GRANTS
<TABLE>
The following table sets forth certain information regarding stock options
granted during fiscal 1996 by the Company to the individuals named in the
Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
TOTAL STOCK PRICE
NUMBER OF OPTIONS EXERCISE APPRECIATION FOR
SHARES UNDERLYING GRANTED TO PRICE PER OPTION TERM(2)
OPTIONS EMPLOYEES IN SHARE EXPIRATION -------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ----------------- ------------ --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Gordon R. Cooke................ 100,000(3) 26.8% $2.25 12/26/2002 $91,598 $213,461
75,000(3) 20.1% 2.0625 12/26/2002 62,973 146,755
Samuel L. Shanaman............. 30,000(4) 8.0% 2.25 2/15/2003 27,479 64,038
Stephanie B. Noble............. 30,000(4) 8.0% 2.25 2/15/2003 27,479 64,038
George R. Burman, Jr........... 0 0 -- -- -- --
<FN>
- ---------------
(1) All of these options were granted under the 1993 Stock Option Plan. These
options are exercisable during the holder's lifetime only by the holder, and
by the holder only while the holder is an employee of the Company, and for
certain limited periods of time thereafter in the event of retirement, death
or termination of employment other than for cause. In addition, in the event
of death of the option holder while an employee of the Company and before
expiration of the option, these options vest in full.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed rates of share price appreciation set by the
Securities and Exchange Commission of five percent and ten percent
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercise. Actual gains, if any, are dependent on the performance of the
Common Stock and the date on which the option is exercised. There can be no
assurance that the amounts reflected will be achieved.
(3) These options vest in four equal installments on December 26 of each year
from 1996 to 1999.
(4) These options vest in five equal installments on February 15 of each year
from 1997 to 2001.
</TABLE>
6
<PAGE> 11
OPTION EXERCISES AND FISCAL YEAR-END VALUES
<TABLE>
The following table sets forth certain information concerning the number
and value of unexercised stock options held by each of the individuals named in
the Summary Compensation Table on June 29, 1996:
FISCAL YEAR-END OPTION VALUES
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS HELD AT HELD AT
SHARES JUNE 29, 1996(#) JUNE 29, 1996($)(2)
ACQUIRED ON VALUE ----------------------------- -----------------------------
EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gordon R. Cooke............ 0 $ 0 0 175,000 $ 0 $473,438
Samuel L. Shanaman......... 0 0 148,163 50,000 458,837 78,750
Stephanie B. Noble......... 3,375 785 44,584 30,000 173,013 78,750
George R. Burman, Jr. ..... 2,000 7,241 128,892 20,000 475,630 0
<FN>
- ---------------
(1) Value is based on the last sales price of the Common Stock on the exercise
date, as reported by the Nasdaq National Market, less the applicable option
exercise price.
(2) Value is based on the last sales price of the Common Stock before fiscal
1996 year end ($4.875 per share on June 27, 1996), as reported by the Nasdaq
National Market, less the applicable option exercise price.
</TABLE>
CERTAIN EMPLOYMENT AND SEVERANCE ARRANGEMENTS
In connection with the resignation of George R. Burman, Jr. from his
positions as Chairman of the Company's Board of Directors and a director of the
Company, Mr. Burman and the Company entered into a Severance Agreement dated as
of September 25, 1995 under which, among other things: (a) Mr. Burman continued
to be employed by the Company until September 30, 1996, and continued to receive
salary and regular employee benefits until September 30, 1996; (b) Mr. Burman
received a cash bonus of $24,467 for fiscal 1995; (c) the Company agreed to pay
Mr. Burman an additional $21,958 after his employment with the Company
terminates; and (d) the Company agreed to pay up to $10,000 of Mr. Burman's
expenses in connection with Mr. Burman's severance.
In connection with the hiring of Gordon R. Cooke as President and Chief
Executive Officer of the Company, Mr. Cooke and the Company entered into an
employment letter agreement dated December 21, 1995 under which, among other
things: (a) Mr. Cooke is paid a base salary at the rate of $300,000 per annum;
(b) Mr. Cooke received cash bonus payments of $135,000; (c) on December 26, 1995
Mr. Cooke was granted an option to purchase 100,000 shares of Common Stock at
$2.25 per share (the fair market value of the Common Stock (as defined in the
1993 Stock Option Plan) on such date) and on January 2, 1996 Mr. Cooke was
granted an option to purchase 75,000 shares of Common Stock at $2.0625 per share
(the fair market value of the Common Stock (as defined in the 1993 Stock Option
Plan) on such date), which options vest in four equal annual installments
commencing on December 26, 1996 and expire on December 26, 2002; (d) the Company
agreed to pay or reimburse Mr. Cooke for certain relocation expenses; and (e) if
Mr. Cooke's employment is terminated by the Company other than for just cause
(as defined in the Employment Letter Agreement), the Company will make severance
payments to Mr. Cooke in an aggregate amount equal to Mr. Cooke's annual base
salary at the time of termination, payable at the same time and in the same
amounts as such base salary would have been paid.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is composed of
independent, non-employee directors. The Committee currently consists of Messrs.
Engbers and Levison. Messrs. Engbers and Levison were members of the Committee
during all of fiscal 1995. Ronald J. Jackson joined the Committee on July 27,
1994 and served until his resignation from the Board of Directors on October 18,
1995.
7
<PAGE> 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policy
The Company's compensation package for its executive officers for fiscal
1996 had three principal components: (1) base salary; (2) bonus; and (3) stock
options. The Company's executive officers were also eligible to participate in
other employee benefit plans on substantially the same terms as other employees
who meet applicable eligibility criteria, subject to any legal limitations on
the amounts that may be contributed or the benefits that may be payable under
these Company plans.
Base salary levels for the Company's executive officers are intended to be
fair and competitive in the Company's industry. Salaries for executive officers
are reviewed annually, and any adjustments are based on individual performance,
change in responsibilities and market-based comparisons with other comparable
companies.
Bonuses for the Company's executive officers generally are based on a
percentage of base salary and conditioned upon the Company's ability to achieve
its financial plan. Executive officers who joined the Company during fiscal 1996
received hiring bonuses and/or guaranteed bonuses for fiscal 1996 or fiscal
1997. The Company's other executive officers did not receive bonuses for fiscal
1996, as the Company did not achieve its earnings goals for the fiscal year.
Stock option awards are intended to provide the executive officers with
longer term incentives that align their interests with those of the Company's
stockholders more generally. The Compensation Committee granted additional
incentive stock options to all of the Company's executive officers during fiscal
1996.
Chief Executive Officer Compensation
Samuel L. Shanaman. Mr. Shanaman served as President and Chief Executive
Officer of the Company during fiscal 1996 until December 26, 1995. Mr.
Shanaman's base salary for fiscal 1996 was at the rate of $155,000 per annum,
unchanged from the rate in effect since September 1, 1994. Mr. Shanaman did not
receive any bonus payments for fiscal 1996. Mr. Shanaman was granted an
incentive stock option for the purchase of 30,000 shares of Common Stock at an
exercise price of $2.25 per share, the closing price of the Common Stock on the
Nasdaq National Market on the date the option was granted. The option vests at
the rate of 20% a year commencing on February 15, 1997, and expires on February
15, 2003.
Gordon R. Cooke. Mr. Cooke joined the Company as President and Chief
Executive Officer on December 26, 1995. Mr. Cooke's base salary for fiscal 1996
was at the rate of $300,000 per annum. He received a guaranteed bonus for fiscal
1996 of $100,000 and a hiring bonus of $35,000. Mr. Cooke was granted two
incentive stock options, one for the purchase of 100,000 shares of Common Stock
at an exercise price of $2.25 per share and the other for the purchase of 75,000
shares of Common Stock at $2.0625 per share, in each case the closing price per
share on the Nasdaq National Market on the date the option was granted. The
options vest at the rate of 25% a year commencing on December 26, 1996 and
expire on December 26, 2002. The Company also paid or reimbursed Mr. Cooke for
certain relocation expenses. Mr. Cooke is also entitled to severance payments
equal to his annual base salary in the event his employment is terminated by the
Company without just cause, as defined in his employment letter agreement. Mr.
Cooke's compensation is the result of negotiations between him and the Company
in connection with his hiring, which was the result of an extensive search by
the Company for a new chief executive officer.
SUBMITTED BY THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS
William E. Engbers
Walter J. Levison (Chairman)
8
<PAGE> 13
PERFORMANCE GRAPH
The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of two broad market indexes, the Nasdaq
Stock Market Index for U.S. Companies and the Russell 2000 Index, and a peer
group composed of companies selected on a line-of-business basis and consisting
of Blair Corporation, Damark International Incorporated, Gander Mountain
Incorporated, Geerlings & Wade Incorporated, Hanover Direct Incorporated, Lands
End Incorporated, Lillian Vernon Corporation, Right Start Incorporated, Spiegel
Inc. and Williams Sonoma Inc. The return for each issuer in the peer group is
weighted according to the issuer's stock market capitalization.
The cumulative stockholder return for shares of the Company's Common Stock
is calculated assuming $100 was invested on November 2, 1993, the date on which
the Company's Common Stock commenced trading on the Nasdaq National Market. The
cumulative stockholder returns for the market indexes and the peer group are
calculated assuming $100 was invested on October 31, 1993. The Company paid no
cash dividends during the periods shown. The performance of the market indexes
and the peer group is shown on a total return (dividends reinvested) basis.
<TABLE>
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN*
AMONG DM MANAGEMENT COMPANY, THE NASDAQ STOCKMARKET -- US INDEX,
THE RUSSELL 2000 INDEX AND A PEER GROUP
<CAPTION>
MEASUREMENT PERIOD NASDAQ STOCK
(FISCAL YEAR COVERED) DM MANAGEMENT PEER GROUP MARKET--US RUSSELL 2000
<S> <C> <C> <C> <C>
11/02/93 100 100 100 100
6/94 100 90 91 93
6/95 38 80 122 112
6/96 49 83 156 139
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on October 1, 1996, there were issued and
outstanding 4,326,157 shares of Common Stock entitled to cast 4,326,157 votes.
On October 1, 1996, the closing price of the Company's Common Stock as reported
by the Nasdaq National Market was $3.25 per share.
9
<PAGE> 14
PRINCIPAL STOCKHOLDERS
<TABLE>
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of October 1, 1996 by (i) each
person known by the Company to own beneficially more than five percent of the
Common Stock as of such date, (ii) each current director of the Company, (iii)
each current executive officer of the Company, (iv) all current executive
officers and directors of the Company as a group and (v) each person who served
as an executive officer or director of the Company during fiscal 1996:
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
---------------------
NAME NUMBER PERCENT
---- ---------- -------
<S> <C> <C>
Allstate Insurance Company and affiliates........................ 1,752,404 40.5%
Allstate Plaza South G5D
Northbrook, IL 60062
Cowen & Company(2)............................................... 331,000 7.7%
Financial Square
New York, NY 10005-3597
George R. Burman, Jr.(3)......................................... 183,710 4.1%
Olga L. Conley(4)................................................ 10,543 *
Gordon R. Cooke.................................................. 0 *
William E. Engbers(5)............................................ 36,100 *
John J. Hayes.................................................... 1,700 *
Ronald J. Jackson(6)............................................. 6,000 *
Walter J. Levison(7)............................................. 58,204 1.3%
Carol A. Maher(8)................................................ 6,646 *
Stephanie B. Noble(9)............................................ 40,459 *
Patricia Selander(10)............................................ 6,750 *
Samuel L. Shanaman(11)........................................... 159,551 3.6%
All current directors and executive officers as group
(9 persons) (4)(5)(7)(8)(9)(10)(11)............................ 319,953 7.0%
<FN>
- ---------------
* Less than one percent.
(1) The persons named in this table have sole voting and investment power with
respect to the shares listed, except as otherwise indicated. The inclusion
herein of shares listed as beneficially owned does not constitute an
admission of beneficial ownership.
(2) The beneficial owner has shared voting power with respect to 326,000 shares
and shared investment power with respect to 331,000 shares.
(3) Includes 133,892 shares issuable upon the exercise of outstanding stock
options currently exercisable or exercisable within sixty days following
October 1, 1996. Mr. Burman resigned from his positions as Chairman of the
Board and a director of the Company effective as of October 1, 1995.
(4) Includes 9,375 shares issuable upon the exercise of outstanding stock
options currently exercisable or exercisable within sixty days following
October 1, 1996.
(5) Includes 100 shares held by Mr. Engbers' wife. Mr. Engbers disclaims
beneficial ownership of the shares held by his wife. Also includes 36,000
shares issuable upon exercise of outstanding stock options held by Mr.
Engbers currently exercisable or exercisable within sixty days following
October 1, 1996. Does not include 1,752,404 shares held by Allstate. Mr.
Engbers, a director of the Company, is Venture Group Manager of Allstate.
Mr. Engbers disclaims beneficial ownership of the shares held by Allstate.
(6) Includes 4,000 shares issuable upon exercise of outstanding stock options
currently exercisable or exercisable within sixty days following October 1,
1996.
(7) Includes 36,000 shares issuable upon exercise of outstanding stock options
currently exercisable or exercisable within sixty days following October 1,
1996.
(8) Includes 5,750 shares issuable upon exercise of an outstanding stock option
currently exercisable or exercisable within sixty days following October 1,
1996.
(9) Includes 29,584 shares issuable upon the exercise of outstanding stock
options currently exercisable or exercisable within sixty days following
October 1, 1996.
</TABLE>
10
<PAGE> 15
(10) Includes 6,750 shares issuable upon exercise of outstanding stock options
currently exercisable or exercisable within sixty days following October 1,
1996.
(11) Includes 153,163 shares issuable upon the exercise of outstanding stock
options currently exercisable or exercisable within sixty days following
October 1, 1996. Also includes 1,000 shares held in trust for Mr.
Shanaman's wife. Mr. Shanaman disclaims beneficial ownership of the shares
held in trust for his wife.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater-than-10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon review of Forms 3 and 4 and amendments thereto furnished
to the Company during fiscal 1996 and Form 5 and amendments thereto furnished to
the Company with respect to fiscal 1996, or written representations that Form 5
was not required, the Company believes that all Section 16(a) filing
requirements applicable to its officers, directors and greater-than-10%
stockholders were fulfilled in a timely manner with the exception of a Form 3
filing for Mr. Hayes, which was made approximately three weeks late.
INFORMATION CONCERNING AUDITORS
The accounting firm of Coopers & Lybrand L.L.P., which has served as the
Company's principal independent accountants continuously since the Company's
formation, was selected by the Board to continue in that capacity for fiscal
1997. A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting. This representative will have the opportunity to make a
statement if such representative desires to do so and will be available to
respond to appropriate questions presented at the Annual Meeting.
SOLICITATION
No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses incurred
in obtaining instructions from beneficial owners of the Common Stock. In
addition to the solicitation by mail, special solicitation of proxies may, in
certain instances, be made personally or by telephone by directors, officers and
certain employees of the Company. It is expected that the expense of such
special solicitation will be nominal. All expenses incurred in connection with
this solicitation will be borne by the Company.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy materials related to the
1997 Annual Meeting of Stockholders or Special Meeting in lieu thereof must be
received by the Company at its Executive Offices no later than June 18, 1997.
MISCELLANEOUS
The Board does not intend to present to the Annual Meeting any business
other than the proposals listed herein, and the Board was not aware, a
reasonable time before mailing this Proxy Statement to stockholders, of any
other business which may be properly presented for action at the Annual Meeting.
If any other business should come before the Annual Meeting, the persons present
will have discretionary authority to vote the shares they own or represent by
proxy in accordance with their judgment.
11
<PAGE> 16
AVAILABLE INFORMATION
Stockholders of record on October 1, 1996 will receive a Proxy Statement
and the Company's 1996 Annual Report to Stockholders, which contains detailed
financial information concerning the Company. The Company will mail, without
charge, a copy of the Company's Annual Report on Form 10-K (excluding exhibits)
to any stockholder solicited hereby who requests it in writing. Please submit
any such written request to Olga L. Conley, DM Management Company, 25 Recreation
Park Drive, Suite 200, Hingham, Massachusetts 02043.
12
<PAGE> 17
DM MANAGEMENT COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DM MANAGEMENT
COMPANY. A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF
THE BOARD OF DIRECTORS NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN THE
ENCLOSED ENVELOPE.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 8, 1996.
The undersigned stockholder of DM Management Company (the "Company"), revoking
all prior proxies, hereby appoints Gordon R. Cooke, Samuel L. Shanaman and Olga
L. Conley, or any of them acting singly, proxies, with full power of
substitution, to vote all shares of capital stock of the Company which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
at the offices of Foley, Hoag & Eliot LLP, One Post Office Square, Boston,
Massachusetts on Friday, November 8, 1996, beginning at 10:00 A.M., local time,
and at any adjournments thereof, upon matters set forth in the Notice of Annual
Meeting dated October 16, 1996 and the related Proxy Statement, copies of which
have been received by the undersigned, and in their discretion upon any other
business that may properly come before the meeting or any adjournments thereof.
Attendance of the undersigned at the meeting or any adjourned session thereof
will not be deemed to revoke this proxy unless the undersigned shall
affirmatively indicate the intention of the undersigned to vote the shares
represented hereby in person prior to the exercise of this proxy.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN WITH RESPECT TO ONE OR MORE OF THE PROPOSALS SET FORTH ON THE
REVERSE SIDE OF THIS CARD, WILL BE VOTED FOR SUCH PROPOSAL OR PROPOSALS.
- --------------------------------------------------------------------------------
PLEASE VOTE AND SIGN ON THE OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
PLEASE SIGN EXACTLY AS NAME(S) APPEAR ON STOCK CERTIFICATE. If stockholder is a
corporation, please sign full corporate name by president or other authorized
officer and, if a partnership, please sign full partnership name by an
authorized partner or other person.
- --------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C> <C>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
For Against
1. To fix the number of directors that shall / / / /
constitute the whole Board of Directors of the
Company at four.
For Against
2. To elect Gordon R. Cooke as a Class C Director of / / / /
the Company.
RECORD DATE SHARES:
------------------------------------------
Please promptly date and sign this proxy and mail it in the enclosed
envelope to assure representation of your shares. No postage necessary
affixed if mailed in the United States.
REGISTRATION
------------------------------------------
--------------
Please be sure to sign and Date
date this Proxy. Mark box at right if comments or address change have
- ------------------------------------------------------ been noted on the reverse side of this card.
Shareholder sign here Co-owner sign here
- ------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
DETACH CARD DETACH CARD
DM MANAGEMENT COMPANY
Dear Stockholder:
Please take note of the important information enclosed with this Proxy
Ballot. There are issues related to the management of your company
that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your
right to vote your shares.
Please mark the boxes on the proxy card to indicate how your shares
shall be voted. Then sign the card, detach it and return your proxy
vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of
Stockholders, November 8, 1996.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
DM Management Company
