<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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
MCNAUGHTON APPAREL GROUP INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials:
- --------------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identifying 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>
MCNAUGHTON APPAREL GROUP INC.
____________________
Notice of Annual Meeting of Stockholders
to be held March 15, 1999
____________________
New York, New York
February 22, 1999
To the Holders of Common Stock
of MCNAUGHTON APPAREL GROUP INC.:
The Annual Meeting of the Stockholders of MCNAUGHTON APPAREL GROUP INC.
(formerly Norton McNaughton, Inc., the "Company") will be held at the Company's
Showroom at 1407 Broadway, 26th Floor, New York, New York on Monday, March 15,
1999 at 9:00 a.m. local time (the "Meeting") for the following purposes, as more
fully described in the accompanying Proxy Statement:
1. To elect seven directors of the Company for the ensuing year;
2. To consider and take action upon a proposal to ratify the Board of
Directors' selection of Ernst & Young LLP to serve as the Company's
independent accountants for the Company's fiscal year ending November
6, 1999; and
3. To transact such other business as may properly come before the Meeting
or any adjournment or adjournments thereof.
The close of business on February 8, 1999 has been fixed by the Board of
Directors as the record date for the determination of the stockholders entitled
to notice of, and to vote at, the Meeting. A list of the stockholders entitled
to vote at the Meeting may be examined at the Company's executive offices
located at 463 Seventh Avenue, New York, New York, during the ten-day period
preceding the Meeting.
By Order of the Board of Directors,
Amanda J. Bokman, Secretary
You are cordially invited to attend the Meeting in person. If you do not
expect to be present, please mark, sign and date the enclosed form of Proxy and
mail it in the enclosed return envelope, which requires no postage if mailed in
the United States, so that your vote can be recorded.
<PAGE>
PROXY STATEMENT
This Proxy Statement, which will be mailed commencing on or about February
22, 1999 to the persons entitled to receive the accompanying Notice of Annual
Meeting of Stockholders, is provided in connection with the solicitation of
Proxies on behalf of the Board of Directors of McNaughton Apparel Group Inc.
(formerly Norton McNaughton, Inc., the "Company") for use at the Annual Meeting
of Stockholders, to be held on March 15, 1999 (the "Meeting"), and at any
adjournment or adjournments thereof, for the purposes set forth in such Notice.
The Company's executive offices are located at 463 Seventh Avenue, New York, New
York 10018.
At the close of business on February 8, 1999, the record date stated in the
accompanying Notice, the Company had outstanding 7,428,435 shares of common
stock, $.01 par value (the "Common Stock"). Each outstanding share is entitled
to one vote with respect to each matter to be voted on at the Meeting. The
Company has no class or series of stock outstanding other than the Common Stock.
A majority of the outstanding shares of Common Stock present in person or by
proxy will constitute a quorum for the transaction of business at the Meeting.
Directors are elected by plurality vote. Adoption of proposal 2 will
require the affirmative vote of a majority of the shares of Common Stock present
and entitled to vote thereon at the Meeting. Abstentions and broker non-votes
(as hereinafter defined) will be counted as present for the purpose of
determining the presence of a quorum. For the purpose of determining the vote
required for approval of matters to be voted on at the Meeting, shares held by
stockholders who abstain from voting will be treated as being "present" and
"entitled to vote" on the matter and, thus, an abstention has the same legal
effect as a vote against the matter. However, in the case of a broker non-vote
or where a stockholder withholds authority from his proxy to vote the proxy as
to a particular matter, such shares will not be treated as "present" and
"entitled to vote" on the matter and, thus, a broker non-vote or the withholding
of a proxy's authority will have no effect on the outcome of the vote on the
matter. A "broker non-vote" refers to shares of Common Stock represented at the
Meeting in person or by proxy by a broker or nominee where such broker or
nominee (i) has not received voting instructions on a particular matter from the
beneficial owners or person entitled to vote and (ii) the broker or nominee does
not have discretionary voting power on such matter.
<PAGE>
Information Concerning Certain Stockholders
- -------------------------------------------
The stockholders (including any "group," as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), who, to
the knowledge of the Board of Directors of the Company, owned beneficially more
than five percent of the Common Stock as of February 1, 1999, each director,
each nominee for director, each executive officer of the Company named in the
Summary Compensation Table who owned beneficially shares of Common Stock as of
such date, and all directors, nominees for director and executive officers as a
group, and their respective shareholdings as of such date (based upon
information obtained from such persons) are set forth in the following table.
Except as indicated in the footnotes to the table, all of such shares are owned
with sole voting and investment power.
<TABLE>
<CAPTION>
Shares of Common
Stock Owned Percent
Name Beneficially Of Class
- ---- ----------------- --------
<S> <C> <C>
Merrill Lynch & Co., Inc. 700,500(1) 9.43%
Norton Sperling 696,516(2) 9.33%
Jay Greenberg 561,717(3) 7.56%
Mutual Management Corp. 513,000(4) 6.91%
Brinson Partners, Inc. 512,900(5) 6.90%
Lighthouse Capital Management, Inc. 499,650(6) 6.73%
Dimensional Fund Advisors Inc. 498,900(7) 6.72%
Sanford Greenberg 815,617(8) 10.92%
Peter Boneparth 392,600(9) 5.04%
Stuart Bregman 190,000(10) 2.49%
David M. Blumberg 54,500(11) *
Howard Greenberg 40,422(12) *
Jerald S. Politzer 37,500(13) *
Amanda J. Bokman 28,667(14) *
Bradley P. Cost 27,500(15) *
Robert C. Siegel 8,000 *
Ben Mayo -- --
All Directors, Nominees and Executive Officers as a
Group (ten persons) 1,594,806(16) 19.51%
</TABLE>
_____________________
* Less than 1%.
(1) Information as to the holdings of Merrill Lynch & Co., Inc ("MLC"), on
behalf of Merrill Lynch Asset Management Group ("AMG"), and Merrill Lynch
Special Value Fund, Inc. ("SVF") is based upon a report on Schedule 13G
filed with the Securities and Exchange
2
<PAGE>
Commission on February 4, 1999. Such report indicates that MLC, on behalf
of AMG owns 700,500 shares with shared voting power and shared dispositive
power and SVF owns 700,500 shares with shared voting power and shared
dispositive power. Such report indicates that MLC is a parent holding
company as defined in the Securities Exchange Act of 1934, as amended, AMG
is an operational division of MLC consisting of MLC's indirectly owned
asset management subsidiaries and SVF is an investment adviser registered
under the Investment Advisers Act of 1940. MLC disclaims any beneficial
ownership interest in such shares. The address for MLC is 250 Vesey Street,
New York, New York 10381, and the address for SVF is 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.
(2) Includes 35,000 shares issuable upon exercise of currently exercisable non-
qualified stock options held by Mr. Sperling. The address for Mr. Sperling
is 1025 Seawane Drive, Hewlett Harbor, New York 11557.
(3) The address for Mr. J. Greenberg 300 S.E. 5th Avenue, Apt. 7070, Boca
Raton, Florida 33432.
(4) Information as to the holdings of Mutual Management Corp. ("MMC"), Salomon
Smith Barney Holdings Inc. ("SSBH") and Travelers Group Inc. ("TG") is
based upon a report on Schedule 13G filed with the Securities and Exchange
Commission. Such report indicates that MMC owns 513,000 shares with shared
voting power and shared dispositive power, SSBH owns 513,000 shares with
shared voting power and shared dispositive power and TG owns 513,000 shares
with shared voting power and shared dispositive power. Such report
indicates that SSBH and TG are parent holding companies as defined in the
Securities Exchange Act of 1934, as amended, and MMC, SSBH and TG are
investment advisers registered under the Investment Advisers Act of 1940.
TG and SSBH disclaim any beneficial ownership interest in such shares. The
address for MMC, SSBH and TG is 388 Greenwich Street, New York, New York
10013.
(5) Information as to the holdings of Brinson Partners, Inc. ("BPI"), Brinson
Holdings, Inc. ("BH"), SBC Holding (USA), Inc. ("SBC Holding") and Swiss
Bank Corporation ("Swiss Bank") is based upon a report on Schedule 13G
filed with the Securities and Exchange Commission. Such report indicates
that each of BPI, BH, SBC Holding and Swiss Bank owns 512,900 shares with
shared voting power and shared dispositive power. Such report indicates
that BPI is an investment adviser registered under the Investment Advisers
Act of 1940 and BH, SBC Holding and Swiss Bank are parent holding companies
as defined in the Securities Exchange Act of 1934, as amended. The address
for BPI and BH is 209 South LaSalle, Chicago, Illinois 60604. The address
for SBC Holding is 222 Broadway, New York, New York 10038. The address for
Swiss Bank is Aeschenplatz 6 CH-4002, Basel, Switzerland.
(6) Information as to the holdings of Lighthouse Capital Management, Inc.
("Lighthouse") and its affiliates is based upon a report on Schedule 13G
filed with the Securities and Exchange Commission. Such report indicates
that 499,650 shares are owned by Lighthouse and its affiliates with sole
voting power and sole dispositive power. Such report indicates that
Lighthouse is an investment adviser registered under the Investment
3
<PAGE>
Advisers Act of 1940. The address for Lighthouse is 10000 Memorial Drive,
Suite 660, Houston, Texas 77024.
(7) Information as to the holdings of Dimensional Fund Advisors Inc. ("DFA")
and its affiliates is based upon a report on Schedule 13G filed with the
Securities and Exchange Commission. Such report indicates that 498,900
shares are owned by DFA and its affiliates with sole voting power and sole
dispositive power (of which shares an aggregate of 174,300 are voted by
officers of DFA in their capacities as officers of affiliates of DFA).
Such report indicates that DFA is an investment adviser registered under
the Investment Advisers Act of 1940. The address for DFA is 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401.
(8) Includes 40,000 shares issuable upon exercise of currently exercisable non-
qualified stock options held by Mr. S. Greenberg.
(9) Includes 357,500 shares issuable upon exercise of currently exercisable
non-qualified stock options held by Mr. Boneparth.
(10) Consists of 190,000 shares issuable upon exercise of currently exercisable
non-qualified stock options held by Mr. Bregman.
(11) Includes 47,500 shares issuable upon exercise of currently exercisable non-
qualified stock options held by Mr. Blumberg.
(12) Includes 20,667 shares issuable upon exercise of currently exercisable non-
qualified stock options held by Mr. H. Greenberg.
(13) Consists of 37,500 shares issuable upon exercise of currently exercisable
non-qualified stock options held by Mr. Politzer.
(14) Consists of 28,667 shares issuable upon exercise of currently exercisable
non-qualified stock options held by Ms. Bokman.
(15) Includes 22,500 shares issuable upon exercise of currently exercisable non-
qualified stock options held by Mr. Cost.
(16) Includes for all Directors, Nominees and Executive Officers an aggregate of
744,334 shares issuable upon exercise of currently exercisable non-
qualified stock options.
To the Company's knowledge, there have been no significant changes in stock
ownership or control of the Company since February 1, 1999. The address for all
directors, nominees for director and executive officers of the Company is c/o
McNaughton Apparel Group Inc., 463 Seventh Avenue, New York, New York 10018.
4
<PAGE>
I. ELECTION OF DIRECTORS
Seven directors are to be elected at the Meeting. It is the intention
of each of the persons named in the accompanying form of Proxy to vote the
shares of Common Stock represented thereby in favor of the seven nominees listed
below, unless otherwise instructed in such Proxy. Each of the nominees, other
than Messrs. Mayo and Siegel, is presently serving as a director. In case any
nominee is unable or declines to serve, such persons reserve the right to vote
the shares of Common Stock represented by such Proxy for another person duly
nominated by the Board of Directors in such nominee's stead or, if no other
person is so nominated, to vote such shares only for the remaining nominees.
The Board of Directors has no reason to believe that any nominee named will be
unable or will decline to serve.
Certain information concerning the nominees for election as directors
of the Company is set forth below. Such information was furnished by them to
the Company.
SANFORD GREENBERG, age 58, has been Chairman of the Board, Chief Executive
Officer and a director of the Company since its founding in 1981.
PETER BONEPARTH, age 39, has been President and Chief Operating Officer of
the Company since April 1997. Prior to that time, Mr. Boneparth was
Executive Vice President and Senior Managing Director of Investment Banking
for Rodman & Renshaw, Inc., an investment banking firm, from March 1995 to
April 1997, and Managing Director of Investment Banking for Mabon
Securities Corp., a financial services firm, from May 1989 to March 1995.
Mr. Boneparth has been a director of the Company since March 1997.
AMANDA J. BOKMAN, age 35, has been Vice President and Chief Financial
Officer of the Company since June 1992, Secretary since March 1995,
Treasurer since February 1996 and a director since January 1994. From 1987
to 1992, Ms. Bokman was employed by Tishman Speyer Properties as an
associate in acquisitions and finance. From 1985 to 1987, Ms. Bokman was
an audit professional with Arthur Andersen, LLP.
STUART BREGMAN, age 61, has been Chief Executive Officer of Miss Erika,
Inc., a wholly owned subsidiary of the Company, since October 1997. Mr.
Bregman served as Chairman of the Board and Chief Executive Officer of Miss
Erika, Inc. prior to its acquisition by the Company since January 1991 and
as President since January 1978. Mr. Bregman has been a director of the
Company since October 1997.
BRADLEY P. COST, age 45, has been a partner in the law firm of Haythe &
Curley, New York, New York, since January 1988. Mr. Cost has been a
director of the Company since December 1995.
BEN MAYO, age 66, has been a consultant to misses and junior apparel
companies since May 1996. From 1977 to 1996, Mr. Mayo was employed by the
Corporate Division of May Department Stores and from 1985 to 1996, served
as Senior Vice President and General Merchandise Manager of Women's
Sportswear. From 1956 to 1977, Mr. Mayo served in a variety of
merchandising and management positions with various department and retail
stores.
5
<PAGE>
ROBERT C. SIEGEL, age 62, has been the principal of Siegel Associates, a
consultant for the apparel, footwear and retail industries, since December
1998. From December 1993 to December 1998, Mr. Siegel served as Chairman
of the Board, President and Chief Executive Officer of The Stride Rite
Corporation. Previously, Mr. Siegel was President of the Dockers and
Menswear divisions of Levi Strauss & Co., an apparel manufacturer and
distributor, from 1964 to 1993. Mr. Siegel is a director of The Bon Ton
Stores and Joe Boxer Corporation.
David M. Blumberg and Jerald S. Politzer opted not to stand for
election as directors of the Company in order to devote more time to their other
respective business interests.
Meetings and Committees of the Board of Directors
- -------------------------------------------------
During the past fiscal year, the Board of Directors of the Company met
seven times, including one time by written consent. Each of the persons named
above who were directors during fiscal 1998 attended at least 75% of the
meetings of the Board of Directors and meetings of any Committees of the Board
of Directors on which such person served which were held during the time that
such person served.
The Board of Directors of the Company has three standing committees: a
Compensation Committee whose members during the fiscal year ended October 31,
1998 were Messrs. Blumberg, Cost and Politzer; a Stock Option Committee whose
members during the fiscal year ended October 31, 1998 were Messrs. Blumberg,
Politzer and Boneparth; and an Audit Committee whose members during the fiscal
year ended October 31, 1998 were Messrs. Blumberg, Cost and Politzer. The
Company does not have a Nominating Committee and has established no procedures
whereby nominees for directors may be recommended by stockholders.
The Compensation Committee reviews and recommends remuneration
arrangements for executive officers and for members of the Board of Directors
and adopts compensation plans in which officers and directors are eligible to
participate. The Stock Option Committee grants stock options under the
Company's stock option plans and administers the Company's 1994 Stock Purchase
Plan. The Audit Committee reviews the Company's internal accounting procedures
and will consult with, and review the services provided by, the Company's
independent auditors. The Compensation Committee met one time, the Audit
Committee met one time and the Stock Option Committee met one time by unanimous
written consent during the fiscal year ended October 31, 1998.
Mr. H. Greenberg is the son of Mr. S. Greenberg.
6
<PAGE>
Executive Compensation
The following table sets forth information concerning the compensation
paid or awarded to the Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company for the fiscal years ended
October 31, 1998, November 1, 1997 and November 2, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
Name and Principal Fiscal ------------------- All Other
Position Year Salary Bonus Compensation
-------- ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Sanford Greenberg.................... 1998 $ 758,000(1) $ -- $ 45,668(2)
Chairman of the Board and CEO 1997 898,693(1) -- 53,488(2)
1996 872,693(1) -- 49,109(2)
Peter Boneparth...................... 1998 $ 500,000 $ -- $ --
President and COO 1997 250,000(3) -- 250,000(4)
1996 -- -- --
Stuart Bregman....................... 1998 $ 429,500 $658,749(5) $ --
President of Miss Erika, Inc. 1997 36,708(6) -- --
1996 -- -- --
Howard Greenberg..................... 1998 $ 320,000 $ -- $ --
Vice President 1997 447,287 -- --
1996 446,674 -- --
Amanda J. Bokman..................... 1998 $ 300,514 $ -- $ --
Vice President, 1997 293,842 -- --
Chief Financial Officer, 1996 291,563 -- --
Secretary and Treasurer
</TABLE>
_____________________
(1) Amount includes a bonus paid in connection with Mr. S. Greenberg's
agreement to extend the term of his employment agreement with the Company.
See "Employment Agreements" below.
(2) Amount includes the current dollar value of the benefit to such executive
officer of premiums paid by the Company with respect to the split-dollar
insurance arrangement, which benefit was determined by calculating the time
value of money (using the applicable federal rate) of the premiums paid by
the Company in the fiscal years ended October 31, 1998, November 1, 1997
and November 2, 1996 for the period from the date on which premiums were
paid until March 2015 (which is the earliest date on which the split-dollar
arrangement could terminate and premiums paid could be refunded to the
Company).
(3) Represents salary for the fiscal year ended November 1, 1997 from the
commencement of Mr. Boneparth's employment agreement on April 30, 1997.
(4) Signing bonus paid to Mr. Boneparth in connection with the execution of his
employment agreement with the Company. See "Employment Agreements" below.
7
<PAGE>
(5) Bonus paid pursuant to Mr. Bregman's employment agreement with Miss Erika.
See "Employment Agreements" below.
(6) Represents salary for the fiscal year ended November 1, 1997 from the
commencement of Mr. Bregman's employment agreement on September 30, 1997.
The following table sets forth the grants of stock options to the
executive officers named in the Summary Compensation Table during the fiscal
year ended October 31, 1998. The amounts shown for each of the named executive
officers as grant date values are determined by the Black Scholes option pricing
model. Actual gains, if any, on option exercises and holdings of Common Stock
are dependent on the future performance of the Common Stock and overall stock
market conditions.
STOCK OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
% of Total Options
Granted To Exercise of Grant
Options Employees in Base Price Expiration Date Present
Name Granted Fiscal 1998 ($/Sh) Date Value ($)(1)
------- ------- ------------------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Stuart Bregman 140,000(2) 13.81% $3.625 10/30/08 $2.227
</TABLE>
_____________________
(1) The Company used the Black-Scholes option pricing model in determining
grant date present value. However, options will have no realizable value
unless, and then only to the extent that, the Common Stock price
appreciates from the grant date to the exercise date. The following key
assumptions used in the valuation are based upon historical experience and
are not a forecast of future stock price performance or volatility or of
future dividend policy:
Grant Date: October 30, 1998
Dividend Yield: N/A
Volatility: 0.56
Average Risk-Free Rate of Return: 4.788%
Expected Exercise Period: Seven years
(2) Options granted under the ME Acquisition Corp. Bonus Plan For Senior
Executives pursuant to the terms of Mr. Bregman's employment agreement.
See "Employment Agreements" below.
8
<PAGE>
The following table sets forth the number and value of options and
warrants held by the executive officers of the Company named in the Summary
Compensation Table at October 31, 1998. None of such executive officers
exercised options or warrants during the fiscal year ended October 31, 1998.
FISCAL YEAR END OPTION AND WARRANT VALUES
<TABLE>
<CAPTION>
Value of Unexercised In-the-Money Options
Number of Unexercised Options and Warrants and Warrants at 1998 Fiscal Year
at 1998 Fiscal Year Fiscal Year End(#) End ($)(1)
------------------------------------------ -----------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sanford Greenberg 32,500 7,500 (2) (2)
Peter Boneparth 105,000 605,000 (2) (2)
Stuart Bregman 190,000 -- (2) (2)
Howard Greenberg 20,667 29,333 (2) (2)
Amanda J. Bokman 28,667 71,333 (2) (2)
</TABLE>
_____________________
(1) In-the-money options and warrants are those where the fair market value of
the underlying Common Stock exceeds the exercise price of the option or
warrant. The value of in-the-money options and warrants is determined in
accordance with regulations of the Securities and Exchange Commission by
subtracting the aggregate exercise price of the option or warrant from the
aggregate year-end value of the underlying Common Stock.
(2) These options were not in-the-money as of October 31, 1998, as the fair
market value of the Common Stock was at or below the exercise price.
Compensation of Directors
The Company's policy is to pay directors who are not employees of the
Company an annual fee of $20,000, payable quarterly, and to reimburse each such
director for out-of-pocket expenses incurred in attending meetings of the Board
of Directors and committees of the Board. In addition, on April 15th of each
year, each non-employee director receives 5,000 ten-year options to purchase
Common Stock under the Company's Stock Option Plan for Non-Employee Directors.
These options have an exercise price of the fair market value of the Common
Stock on the date of grant and are exerciseable in cumulative annual
installments of 50% of the shares covered thereby beginning one year from the
date of grant.
Employment Agreements
Norton McNaughton of Squire, Inc., a wholly owned subsidiary of the
Company ("Squire"), has Employment Agreements with Sanford Greenberg, Peter
Boneparth, Howard Greenberg and Amanda J. Bokman and one other officer of
Squire. Miss Erika, Inc., a wholly owned subsidiary of the Company ("Miss
Erika"), has employment agreements with
9
<PAGE>
Stuart Bregman and Howard Zwilling and four other officers of Miss Erika. Jeri-
Jo Knitwear, Inc., a wholly owned subsidiary of the Company ("Jeri-Jo"), has
employment agreements with Susan Schneider, Leslie Schneider and Scott
Schneider.
Effective November 4, 1995, Squire entered into an Amended and
Restated Employment Agreement with Mr. S. Greenberg, the Company's Chairman of
the Board and Chief Executive Officer. The Amended and Restated Employment
Agreement terminates on November 5, 1999 and provides that Mr. S. Greenberg will
receive a base salary of $750,000 and is eligible to receive annual bonuses as
determined by the Compensation Committee of the Board of Directors. In addition,
the Amended and Restated Employment Agreement provides for an extension bonus of
approximately $600,000 payable in monthly increments over the term of the
Agreement.
On November 16, 1998, Squire entered into an Agreement with Mr. S.
Greenberg, whereby, in the event that on or prior to November 5, 1999 Squire has
not offered to extend the term of the Amended and Restated Employment Agreement
for at least one year and otherwise on the terms and conditions set forth
therein as then in effect, Squire has agreed to retain Mr. S. Greenberg to
provide consulting and advisory services on a project-by-project basis during
the period commencing on November 6, 1999 and terminating on October 31, 2001.
Under this Agreement, if it were to become effective, Mr. S. Greenberg would be
entitled to receive consulting fees of (i) $74,891.08 per month or (ii) the
compensation rate per month in effect at the end of the term of the Amended and
Restated Employment Agreement if it shall have been amended prior to November 5,
1999. Pursuant to this Agreement, if it were to become effective, Squire has
also agreed to (i) provide Mr. S. Greenberg and his dependents medical insurance
until his death, (ii) continue the payment of premiums on Mr. S. Greenberg's
life insurance policy until his death and (iii) continue the payment of premiums
on Mr. S. Greenberg's Split-Dollar Insurance policy until the payment of the
twentieth annual premium. In addition, pursuant to this Agreement, Mr. S.
Greenberg agreed to reduce the aggregate monthly payments of salary and
extension bonus payable under the Amended and Restated Employment Agreement from
$74,891.08 to $62,833.33.
Effective April 30, 1997, Squire entered into an Employment Agreement
with Mr. Boneparth to serve as the President and Chief Operating Officer of the
Company, providing for a base salary of $500,000 per annum and a signing bonus
of $250,000. The Employment Agreement terminates on November 4, 2000. As
provided in the Employment Agreement, the Company granted options to Mr.
Boneparth to purchase an aggregate of 700,000 shares of Common Stock at an
exercise price of $5.50 per share, which was the fair market value of the Common
Stock on the date of grant. These options vest over the term of the Employment
Agreement, with an acceleration of the vesting if certain target stock prices
are attained. Under the Employment Agreement, 100,000 options vested on April
30, 1997; an additional 250,000 options vested on December 10, 1998; an
additional 250,000 options are to vest on the earlier to occur of (i) December
10, 1999 or (ii) the date on which the Company's stock price equals or exceeds
$13.00 per share for 20 consecutive trading days; and the remaining 100,000
options are to vest on the earlier to occur of (i) November 4, 2000 or (ii) the
date on which the Company's stock price equals or exceeds $20.00 per share for
20 consecutive trading days. The Employment Agreement also provides that in the
event of a change in control involving the Company, all outstanding options will
become vested and exercisable in full.
10
<PAGE>
Squire is a party to Employment Agreements with each of Ms. Bokman and
Mr. H. Greenberg, Chief Financial Officer, Vice President, Secretary and
Treasurer, and Vice President, of the Company, respectively. The Employment
Agreements were amended on October 22, 1997 to extend the respective termination
dates from November 4, 1997 to November 6, 1999 and to provide that Ms. Bokman
and Mr. H. Greenberg will receive annual base salaries of $300,000 and $320,000,
respectively. Under the terms of their Employment Agreements, both Ms. Bokman
and Mr. H. Greenberg will be eligible to receive annual bonuses as determined by
the Compensation Committee of the Board of Directors.
All of the above Employment Agreements provide for participation in
all employee benefit plans and programs offered by the Company to employees of
comparable seniority, including any bonus plan. The Employment Agreements
provide that if the employee dies, becomes disabled (i.e., unable to perform his
or her normal duties for a cumulative period of six months in any consecutive
12-month period), or is terminated by Squire for "due cause," Squire will pay to
such employee or the employee's legal representative the base salary (and, in
the case of Mr. S. Greenberg, the unpaid portion of the extension bonus) and,
except in the case of termination for due cause, to the extent approved by the
Compensation Committee of the Board of Directors, bonus amounts, in all cases,
accrued and unpaid to the date of such death, disability or termination. If
Squire terminates the employee's employment without due cause, it will be
required to pay salary and bonuses until the earlier to occur of the expiration
date of the Employment Agreement or the death of the employee. Pursuant to the
Employment Agreements, each executive officer has agreed that he or she will not
compete with the Company so long as he or she is employed by Squire and for a
period ranging from six months to three years thereafter, depending upon the
circumstances.
Effective October 1, 1997, in connection with the acquisition of Miss
Erika, Miss Erika entered into Employment Agreements with Mr. Stuart Bregman
(Chief Executive Officer of Miss Erika) and Mr. Howard Zwilling (President of
Miss Erika), providing for base salaries of $425,000 and $425,000, respectively,
per annum subject to increase if certain earnings targets are achieved for any
fiscal year during the term of the Employment Agreements. The Employment
Agreements terminate on November 6, 1999 if certain earnings targets, averaged
during fiscal years 1998 and 1999, are not achieved, or, if these averaged
earnings targets are achieved, on October 31, 2001. In addition, the Employment
Agreements provide for the participation of Messrs. Bregman and Zwilling in the
Miss Erika Bonus Plan (as defined below) in effect during the term of the
Employment Agreements. As provided in the Employment Agreements, the Company has
granted to each of Messrs. Bregman and Zwilling currently exercisable options to
purchase an aggregate of 50,000 shares of Common Stock of the Company at an
exercise price of $5.44 per share, which was the fair market value of the Common
Stock on the date of grant. In accordance with the terms of Mr. Bregman's
Employment Agreement, during the fiscal year ended October 31, 1998, Miss Erika
paid to Mr. Bregman a salary of $429,500 and a bonus of $658,749. In accordance
with the terms of Mr. Zwilling's Employment Agreement, during the fiscal year
ended October 31, 1998, Miss Erika paid to Mr. Zwilling a salary of $429,500 and
a bonus of $658,749. See "Executive Compensation" above.
The Employment Agreements of Messrs. Bregman and Zwilling provide for
participation in all employee benefit plans and programs offered by the Company
to employees of comparable seniority. The Employment Agreements provide that if
the employee dies, becomes disabled (i.e., unable to perform his normal duties
for a cumulative period of six months
11
<PAGE>
in any consecutive 12-month period), or is terminated by Miss Erika for "due
cause," Miss Erika will pay to such employee or the employee's legal
representative the base salary and, except in the case of termination for due
cause, to the extent approved by the Compensation Committee of the Board of
Directors, bonus amounts, in all cases, accrued and unpaid to the date of such
death or disability. If Miss Erika terminates the employee's employment without
due cause, it will be required to pay salary and bonuses during the period
ending one year following the end of the then current term of the Employment
Agreement. Pursuant to the Employment Agreements, each of Messrs. Bregman and
Zwilling has agreed that he will not compete with the Company so long as he is
employed by Miss Erika and for a period ranging from one year to one year plus
the unexpired term of the Employment Agreement, depending upon the
circumstances.
Miss Erika maintains a senior executive bonus plan (the "Miss Erika
Bonus Plan") for Messrs. Bregman, Zwilling and other officers of Miss Erika. The
Miss Erika Bonus Plan provides for the establishment of an annual cash Bonus
Pool in the event that certain annual earnings targets have been attained by
Miss Erika. In addition, the Miss Erika Bonus Plan provides for the
establishment of an annual Option Pool of options to purchase an aggregate of
28,000 shares of Common Stock for each $500,000 earned by Miss Erika in excess
of an annual earnings target. Each participant in the Miss Erika Bonus Plan is
allocated a percentage of the Bonus Pool and Option Pool pursuant to that
participant's Employment Agreement. During the fiscal year ended October 31,
1998, Messrs. Bregman and Zwilling were allocated a cash bonus of $658,749 and
$658,749, respectively, and stock options to purchase an aggregate of 140,000
and 140,000 shares of Common Stock, respectively, at an exercise price per share
of $3.625, the fair market value on the date of grant.
In June 1998, in connection with the acquisition of Jeri-Jo, Jeri-Jo
entered into Employment Agreements with Susan Schneider and Leslie Schneider,
each to serve as Co-Chief Executive Officer and Co-President, and Scott
Schneider to serve as Executive Vice President of Jeri-Jo, and providing for
base salaries of $400,000, $400,000 and $250,000, respectively, per annum. The
Employment Agreements will terminate in June 2000. As provided in the Employment
Agreements, the Company granted to these executives ten-year options to purchase
an aggregate of 546,429 shares of Common Stock at an exercise price equal to
$6.38 per share. These options are currently exercisable with respect to 100,000
of such options and will become exercisable upon the earlier of (i) the date
which is nine years and six months from the date of grant and (ii) (A) with
respect to 350,000 of such options, the date of delivery of a statement of
operations of Jeri-Jo for the twelve-month period ending June 30, 1999, which
statement of operations indicates that Jeri-Jo has achieved an EBITDA (as
defined in the Employment Agreements) of at least $11.0 million for such twelve-
month period and (B) with respect to 96,429 of such options, the date of
delivery of a statement of operations of Jeri-Jo for the twelve-month period
ending June 30, 1999, which statement of operations indicates that Jeri-Jo has
achieved an EBITDA (as defined in the Employment Agreements) of at least $15.0
million for such twelve-month period. The Employment Agreements provide for the
grant of options to purchase an aggregate of 50,000 shares of Common Stock in
the event that EBITDA (as defined in the Jeri-Jo purchase agreement) attained by
Jeri-Jo in either of the first two years following June 1998 is equal to or in
excess of $17.0 million and an aggregate of 30,000 shares of Common Stock for
each $1.0 million of EBITDA in excess of $17.0 million attained by Jeri-Jo in
either of the first two years following June 1998. Additionally, the Employment
Agreements provide for participation in all employee benefit plans and programs
offered by the Company to employees of comparable seniority. The Employment
Agreements also provide that if the
12
<PAGE>
employee dies, becomes disabled (i.e., unable to perform his or her normal
duties for a cumulative period of six months in any consecutive 12-month
period), or is terminated by Jeri-Jo for "due cause," Jeri-Jo will pay to such
employee or the employee's legal representative the base salary and, except in
the case of termination for due cause, a pro rata bonus amount and bonus
options. If Jeri-Jo terminates the employee's employment without due cause, it
will be required to continue to pay salary until the expiration date of the
Employment Agreement. Pursuant to the Employment Agreements, each executive
officer agrees that she or he will not compete with the Company so long as she
or he is employed by Jeri-Jo and for a period of two years thereafter.
Jeri-Jo maintains a key-executive option plan (the "Jeri-Jo Bonus
Plan"). Under the Jeri-Jo Bonus Plan options to purchase an aggregate of 50,000
shares of Common Stock have been granted to executive employees of Jeri-Jo. In
addition, in keeping with historical practices, Jeri-Jo will continue to provide
for a cash bonus pool for its key executives and employees. Additionally, all
employees of Jeri-Jo will be eligible to participate in the Company's stock
option plans and stock purchase plans. The number of options awarded to any
employee in any year will be determined upon the recommendation of the senior
management of Jeri-Jo, subject to the approval of the Stock Option Committee of
the Board of Directors of the Company. Any options recommended to be awarded to
Jeri-Jo employees in any year, will be based upon a percentage of operating
income contributed by Jeri-Jo to the consolidated operating income of the
Company for such fiscal year.
Compensation Committee Interlocks
and Insider Participation
- ---------------------------------
The Compensation Committee of the Board of Directors consisted of
David M. Blumberg, Bradley P. Cost, and Jerald S. Politzer during the fiscal
year ended October 31, 1998. Each of the current members of the Compensation
Committee is an independent director of the Company.
Section 16(a) Reporting Requirements
- ------------------------------------
Under Section 16(a) of the Securities Exchange Act of 1934, directors
and executive officers of the Company, and persons who own more than ten percent
of the Company's Common Stock, are required to file reports concerning their
beneficial ownership of securities of the Company with the Securities and
Exchange Commission (the "Commission"). Directors, executive officers and
greater than ten percent stockholders are required by regulations of the
Commission to furnish the Company with copies of all Section 16(a) reports they
file.
The Company believes that for the period ending October 31, 1998, its
directors, executive officers and greater than ten percent stockholders complied
with all Section 16(a) filing requirements.
Certain Relationships and Related Transactions
- ----------------------------------------------
The Company made loans, as of November 5, 1993, in the principal
amount of $920,000 to each of Messrs. S. Greenberg, Sperling and J. Greenberg,
and $120,000 to Mr. H
13
<PAGE>
Greenberg. Each loan is evidenced by a limited recourse promissory note with
interest accruing at the rate of 5.84% per annum and a maturity date of November
5, 2003. Recourse on the promissory notes is limited to a pledge to the Company
of each Management Investor's Common Stock. Each of the promissory notes
provides that in the event of any sale or other transfer of shares of Common
Stock by any of the Management Investors, such person is required to repay his
note in an amount equal to the principal amount owing under the note on March
27, 1995 multiplied by a fraction, the numerator of which is the number of
shares of Common Stock which are being sold or transferred, and the denominator
of which is the number of shares owned by such Management Investor on March 27,
1995. At January 31, 1999, the outstanding principal amounts of the promissory
notes of Messrs. S. Greenberg, Sperling, J. Greenberg and H. Greenberg totalled
$887,700, $795,791, $701,594 and $22,811, respectively, and were secured by
pledge of an aggregate of 250,000, 250,000, 250,000 and 18,755 shares of Common
Stock, respectively.
On September 30, 1997, Miss Erika, a wholly-owned subsidiary of the
Company, completed the acquisition of substantially all the assets and the
assumption of substantially all the liabilities of the former Miss Erika, Inc.,
including accrued bonuses payable to officers and employees of the selling
corporation. In January 1998, the Company paid $433,000 to Mr. Bregman in
satisfaction of his accrued bonus assumed pursuant to the acquisition. The
purchase price in the acquisition consisted of $24.0 million in cash paid at the
closing, the assumption of $2.5 million of indebtedness for borrowed money and
certain other contractual obligations. In addition, the Company has agreed to
pay the selling corporation or its assigns, which may include Mr. Bregman, an
additional contingent payment in cash and/or Company Common Stock in the event
that certain earnings targets are achieved by Miss Erika for the two fiscal
years ending November 6, 1999. The aggregate contingent payment, if any,
payable by the Company is equal to the amount by which four times the average of
Miss Erika's earnings before income taxes, depreciation and amortization, as
defined in the Miss Erika purchase agreement ("Miss Erika EBITDA"), for the two
fiscal years ending November 6, 1999, exceeds $24.0 million. Miss Erika
achieved Miss Erika EBITDA during fiscal 1998 which, if sustained in fiscal
1999, will result in the payment of significant additional consideration,
however, the Company cannot predict the amount of additional consideration that
may be payable.
14
<PAGE>
Performance Graph
- -----------------
The following performance graph compares the cumulative total
stockholder return on the Common Stock to the NASDAQ Stock Market-US Index and
to the S&P Textiles (Apparel) Index (referred to in the Company's Proxy
Statement for fiscal 1995 as the S&P Textile Index and for fiscal 1994 as the
S&P Textile and Apparel Index) since March 1, 1994, the date the Common Stock
began to be publicly traded. The graph assumes that $100 was invested in the
Common Stock and each Index on March 1, 1994 and that all dividends were
reinvested.
[LINE GRAPH]
*$100 INVESTED ON 3/1/94 IN STOCK OR ON 2/28/94 IN INDEX - INCLUDING
REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
- -----------------------------------------------------------------------------------------------------------------------------
MCNAUGHTON APPAREL GROUP INC. NASDAQ STOCK MARKET (U.S.) S & P TEXTILES (APPAREL)
<S> <C> <C> <C>
3/1/94 100 100 100
4/94 124 93 100
7/94 129 91 99
10/94 116 99 103
1/95 101 96 93
4/95 110 108 98
7/95 114 128 101
10/95 125 133 95
1/96 46 136 105
4/96 62 154 119
7/96 43 140 119
10/96 50 157 119
1/97 38 178 125
4/97 35 162 127
7/97 34 206 135
10/97 39 207 136
1/98 36 211 122
4/98 40 243 155
7/98 45 243 137
10/98 21 232 106
</TABLE>
15
<PAGE>
Report of the Compensation Committee
- ------------------------------------
The Compensation Committee of the Board of Directors determines the
compensation arrangements for executive officers of the Company. The Company's
compensation program for its executives aims to attract and retain individuals
of superior ability and managerial talent, reward individual initiative and
performance and link pay with the interests of the Company's stockholders by
providing executives with incentives which reward achievement that contributes
to the growth and profitability of the Company.
Salaries. Salaries of the Company's executive officers are intended
---------
to be generally consistent with executives at comparable apparel companies. In
determining salaries, the Compensation Committee has considered a report
prepared by a nationally recognized consulting firm and has analyzed prevailing
compensation levels among the Company's competitors. Factors considered in
determining salaries are individual performance, experience, level of
responsibility and contributions to the success of the Company. The base
salaries for Sanford Greenberg and each of the executive officers are determined
pursuant to the terms of their Employment Agreements, which were based on the
foregoing considerations.
Bonuses. Bonuses for Mr. S. Greenberg and each of the Company's other
--------
executive officers are based upon the Company's performance and achievement by
executives of individual objectives, as evaluated by the Compensation Committee.
No such bonuses were paid to Mr. S. Greenberg or any other executive officer of
the Company during the fiscal year ended October 31, 1998. See "Employment
Agreements" above.
Stock Options. The Company periodically grants stock options to its
--------------
executive officers and other key employees which are intended to provide the
Company's executives and other key employees with a significant incentive to
work to maximize stockholder value. The number of options granted are based
upon the executive's level of responsibility, Company performance and individual
performance. Generally, options are granted with an exercise price of 100% of
the fair market value of the Common Stock on the date of grant and have a ten
year term. The Compensation Committee believes that by providing its executives
and key employees who have substantial responsibility for the management and
growth of the Company with an opportunity to profit from increases in the value
of the Common Stock, the interests of the Company's stockholders and executives
will be most closely aligned.
On April 15, 1998, the Company granted 5,000 non-qualified stock
options to each of Messrs. Blumberg, Cost, and Politzer pursuant to the
Company's Stock Option Plan for Non-Employee Directors. The options have an
exercise price of $5.375 per share and are exercisable as to 50% of the shares
covered thereby on April 15, 1999 and exercisable as to 100% of the shares
covered thereby beginning April 15, 2000.
During the fiscal year ended October 31, 1998, the Company granted to
certain executives of Jeri-Jo pursuant to their Employment Agreements ten year
options to purchase an aggregate of 546,429 shares of Common Stock at an
exercise price equal to $6.375 per share. These options are currently
exercisable with respect to 100,000 of such options and will become exercisable
upon the earlier of (i) the date which is nine years and six months from the
date of grant and (ii) (A) with respect to 350,000 of such options, the date of
delivery of a statement of
16
<PAGE>
operations of Jeri-Jo for the twelve-month period ending June 30, 1999, which
statement of operations indicates that Jeri-Jo has achieved an EBITDA (as
defined in the Employment Agreements) of at least $11.0 million for such twelve-
month period and (B) with respect to 96,429 of such options, the date of
delivery of a statement of operations of Jeri-Jo for the twelve-month period
ending June 30, 1999, which statement of operations indicates that Jeri-Jo has
achieved an EBITDA (as defined in the Employment Agreements) of at least $15.0
million for such twelve-month period. See "Employment Agreements" above.
On October 30, 1998 pursuant to the ME Acquisition Corp. Bonus Plan
For Senior Executives, the Company granted an aggregate of 392,000 currently
exerciseable, non-qualified stock options to certain senior executives of Miss
Erika. The options have an exercise price of $3.625 per share. See "Employment
Agreements" above.
Other Compensation. The Company has entered into a split-dollar
-------------------
insurance arrangement with Mr. S. Greenberg, pursuant to which the Company will
pay the premium costs of a life insurance policy that pays death benefits of
$1,915,000 upon the death of Mr. S. Greenberg. Upon surrender of the policy or
payment of the death benefit thereunder, the Company is entitled to repayment of
an amount equal to the aggregate premiums paid by the Company, with all
remaining policy benefits to be paid to Mr. S. Greenberg's beneficiaries.
Compliance with Internal Revenue Code Section 162(m). Section 162(m)
-----------------------------------------------------
of the Internal Revenue Code of 1986, as amended (the "Code"), generally
disallows a tax deduction to publicly held companies for compensation exceeding
$1,000,000 paid to each of the Company's Chief Executive Officer and four other
most highly compensated executive officers. Certain performance-based
compensation is not subject to the deduction limit if certain requirements are
met. The Company does not expect this deduction limitation to have a material
effect on its operations or financial condition.
THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
David M. Blumberg
Bradley P. Cost
Jerald S. Politzer
17
<PAGE>
II. RATIFICATION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Ernst & Young LLP
to serve as independent auditors for the Company for the fiscal year ending
November 6, 1999. The Board of Directors considers Ernst & Young LLP to be
eminently qualified.
Although it is not required to do so, the Board of Directors is
submitting its selection of Ernst & Young LLP for ratification at the Meeting,
in order to ascertain the views of stockholders regarding such selection. If
the selection is not ratified, the Board of Directors will reconsider its
selection.
A representative of Ernst & Young LLP will be present at the Meeting,
with the opportunity to make a statement if such representative desires to do
so, and will be available to respond to appropriate questions.
The Board of Directors recommends that stockholders vote FOR
ratification of the selection of Ernst & Young LLP to serve as independent
auditors for the Company for the fiscal year ending November 6, 1999.
III. OTHER MATTERS
The Board of Directors of the Company does not know of any other
matters which may be brought before the Meeting. However, if any such other
matters are properly presented for action, it is the intention of the persons
named in the accompanying form of Proxy to vote the shares represented thereby
in accordance with their judgement on such matters.
Miscellaneous
- -------------
If the accompanying form of Proxy is executed and returned, the shares
of Common Stock represented thereby will be voted in accordance with the terms
of the Proxy, unless the Proxy is revoked. If no directions are indicated in
such Proxy, the shares represented thereby will be voted FOR the nominees
proposed herein in the election of directors and FOR ratification of the Board
of Directors' selection of independent accountants for the Company. Any Proxy
may be revoked at any time before it is exercised. The casting of a ballot at
the Meeting by a stockholder who may therefore have given a Proxy or the
subsequent delivery of a Proxy will have the effect of revoking the initial
Proxy.
All costs relating to the solicitation of Proxies will be borne by the
Company. Proxies may be solicited by officers, directors and employees of the
Company and its subsidiaries personally, by mail or by telephone, telecopier or
telegraph, and the Company may pay brokers and other persons holding shares of
stock in their names or those of their nominees for their reasonable expenses in
sending soliciting material to their principals.
18
<PAGE>
It is important that Proxies be returned promptly. Stockholders who
do not expect to attend the Meeting in person are urged to mark, sign and date
the accompanying form of Proxy and mail it in the enclosed envelope, which
requires no postage if mailed in the United States, so that their votes can be
recorded.
Stockholder Proposals
- ---------------------
Stockholder proposals intended to be presented at the Annual Meeting
of Stockholders of the Company for the fiscal year ending November 6, 1999 must
be received by the Company by November 8, 1999 in order to be considered for
inclusion in the Company's Proxy Statement relating to such Meeting. In the
event that a stockholder fails to notify the Company by January 24, 2000 of an
intent to be present at the Annual Meeting of Stockholders of the Company for
the fiscal year ending November 6, 1999 in order to present a proposal for a
vote, the Company will have the right to exercise its discretionary authority to
vote against the proposal, if presented, without including any information about
the proposal in its proxy materials.
Amanda J. Bokman,
Secretary
New York, New York
February 22, 1999
19
<PAGE>
Proxy Card - Side #1:
MCNAUGHTON APPAREL GROUP INC.
PROXY - Annual Meeting of Stockholders March 15, 1999
The undersigned, a stockholder of MCNAUGHTON APPAREL GROUP INC., does
hereby appoint Sanford Greenberg and Peter Boneparth, or either of them, with
full power of substitution, the undersigned's proxies, to appear and vote all
shares of Common Stock which the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held at the McNaughton Apparel Group Inc. Showroom
at 1407 Broadway, 26th Floor, New York, New York on Monday, March 15, 1999 at
9:00 a.m., local time, or at any adjournment thereof, upon such matters as may
properly come before the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby instructs said proxies or their substitutes to vote
as specified below on each of the following matters and in accordance with their
best judgment on any other matters which may properly come before the Meeting.
1. Election of Directors [_] FOR all the nominees listed (except as
marked to the contrary below).
[_] WITHHOLD AUTHORITY to vote for the
nominees listed below.
Sanford Greenberg, Peter Boneparth, Amanda J. Bokman, Stuart Bregman,
Bradley P. Cost, Ben Mayo and Robert C. Siegel
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
2. Ratification of appointment of Ernst & Young LLP as independent auditors
for the fiscal year ending November 6, 1999.
FOR [_] AGAINST [_] ABSTAIN [_]
The Board of Directors favors a vote "FOR" each item.
<PAGE>
Proxy Card - Side #2:
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED AS TO ANY OF THE ITEMS, THEY WILL BE VOTED IN FAVOR OF THE ITEM(S)
FOR WHICH NO DIRECTION IS INDICATED.
IMPORTANT: Before returning this proxy, please sign your
name or names on the line(s) below exactly as shown thereon.
Executors, shareholders, trustees, guardians or corporate
officers should indicate their full titles when signing.
Where shares are registered in the name of joint tenants or
trustees, such joint tenants or trustees should sign.
Dated: ______________________________________________, 1999
___________________________________________________________
Name
_____________________________________________________(L.S.)
_____________________________________________________(L.S.)
Stockholder(s) Sign Here
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
