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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for use of the Commission Only RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BRYLANE INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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BRYLANE INC.
463 7th Avenue, 21st Floor
New York, New York 10018
NOTICE OF THE 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
TO THE STOCKHOLDERS OF BRYLANE INC.:
The 1998 Annual Meeting of Stockholders (the "1998 Annual Meeting") of
Brylane Inc.(the "Company") will be held at 3:00 p.m., local time, on Thursday,
May 28, 1998 at the Marriott Marquis, 1535 Broadway, New York, New York, for the
following purposes:
1. To elect nine directors of the Company to serve until the next annual
meeting of stockholders and until their successors are elected and
qualified;
2. To consider and vote upon a proposal to approve the Company's 1998
Performance Stock Option Plan;
3. To consider and vote upon a proposal to ratify the appointment of
Coopers & Lybrand L.L.P. as the Company's independent auditors; and
4. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this notice. Only the stockholders of record of the
Company's Common Stock at the close of business on April 16, 1998 will be
entitled to notice of and to vote at the 1998 Annual Meeting or any adjournment
or postponement thereof.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended January 31, 1998 is being mailed with this Notice but is not to be
considered part of the proxy soliciting material.
By Order of the Board of Directors
Robert A. Pulciani
Secretary
April 29, 1998
New York, New York
YOU ARE URGED TO VOTE UPON THE MATTERS PRESENTED AND TO SIGN, DATE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. IT IS IMPORTANT
FOR YOU TO BE REPRESENTED AT THE MEETING. PROXIES ARE REVOCABLE AT ANY TIME
PRIOR TO THE VOTE AND THE EXECUTION OF YOUR PROXY WILL NOT AFFECT YOUR RIGHT TO
VOTE IN PERSON IF YOU ARE PRESENT AT THE MEETING.
Requests for additional copies of proxy materials should be addressed to
Robert A. Pulciani, Corporate Secretary, at the offices of the Company, 463
7th Avenue, 21st Floor, New York, New York 10018.
<PAGE>
BRYLANE INC.
463 7th Avenue, 21st Floor
New York, New York 10018
------------------
PROXY STATEMENT
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 1998
------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Brylane Inc., a Delaware
corporation (the "Company"), for use at the 1998 Annual Meeting of Stockholders
(the "1998 Annual Meeting") to be held on Thursday, May 28, 1998 at 3:00 p.m.,
local time, at the Marriott Marquis, 1535 Broadway, New York, New York, and any
adjournment or postponement thereof. This Proxy Statement and the form of proxy
for the 1998 Annual Meeting were first mailed or delivered to the stockholders
of the Company on or about April 29, 1998.
MATTERS TO BE CONSIDERED
The 1998 Annual Meeting has been called (1) to elect nine directors to hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified, (2) to consider and vote upon a proposal to approve
the Company's 1998 Performance Stock Option Plan, (3) to consider and vote upon
a proposal to ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent auditors, and (4) to transact such other business as may
properly come before the meeting or any adjournment or postponement thereof.
RECORD DATE AND VOTING
The Board has fixed the close of business on April 16, 1998 as the record
date (the "Record Date") for the determination of stockholders entitled to vote
at the 1998 Annual Meeting and any adjournment or postponement thereof. As of
the Record Date, there were outstanding 18,408,650 shares of the Company's
common stock, par value $.01 per share (the "Common Stock").
QUORUM AND VOTING REQUIREMENTS
The holders of record of a majority of the outstanding shares of Common
Stock entitled to vote at the 1998 Annual Meeting, present in person or
represented by proxy, will constitute a quorum for the transaction of business
at the 1998 Annual Meeting. As to all matters, each stockholder is entitled to
one vote for each share of Common Stock held. Under Delaware law, abstentions
and broker non-votes are counted for purposes of determining the presence or
absence of a quorum for the transaction of business. Under the rules of the New
York Stock Exchange ("NYSE"), however, abstentions are counted for quorum
purposes, but broker non-votes are not counted. Under the rules of the NYSE,
brokers who hold shares in street name for customers have the authority to vote
on certain items when they have not received instructions from beneficial
owners. Brokers that do not receive instructions are entitled to vote on the
election of directors, the proposed approval of the 1998 Performance Stock
Option Plan and the other matters specified in the foregoing notice for the 1998
Annual Meeting. With regard to the election of directors, the nominees who
receive the greatest number of votes at the 1998 Annual Meeting will be elected
to the Board. Stockholders are not entitled to cumulate votes. Votes against a
candidate, votes withheld and abstentions have no legal effect in the election
of directors. In matters other than the election of directors, a majority of the
outstanding shares of Common Stock must actually vote on the matter and the
matter must be approved by a majority of the shares constituting the quorum at
the meeting. Under Delaware law and the rules of the NYSE, abstentions and
broker non-votes will have the same effect as a vote against the Company's 1998
Performance Option Plan.
<PAGE>
All proxies which are properly completed, signed and returned prior to the
1998 Annual Meeting will be voted. If a stockholder specifies how the proxy is
to be voted with respect to any of the proposals for which a choice is provided,
the proxy will be voted in accordance with such specifications. Any proposal
with respect to which a stockholder fails to so specify will be voted in
accordance with the recommendation of the Board: (a) for the Board's slate of
nominees, (b) for approval of the Company's 1998 Performance Stock Option Plan
and (c) to ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors. Any proxy given by a stockholder may be revoked at any
time before it is exercised, by filing with the Secretary of the Company an
instrument revoking it, by delivering a duly executed proxy bearing a later
date, or by the stockholder's attending the 1998 Annual Meeting and voting his
or her shares in person.
Proxies for the 1998 Annual Meeting are being solicited by mail directly
and through brokerage and banking institutions. The Company will pay all
expenses in connection with the solicitation of proxies. In addition to the use
of mails, proxies may be solicited by directors, officers and regular employees
of the Company personally or by telephone. The Company does not expect to pay
any fees or compensation for the solicitation of proxies (other than to
Corporate Investor Communications in connection with its services in sending
proxy materials and obtaining proxies), but may reimburse brokers and other
persons holding stock in their names, or in the names of nominees, for their
expenses in sending proxy materials to principals and obtaining their proxies.
All stockholders are urged to complete, sign and promptly return the
enclosed proxy card.
PROPOSAL 1 -- ELECTION OF DIRECTORS
Nine directors are to be elected at the 1998 Annual Meeting to serve until
the next annual meeting of stockholders and until their respective successors
have been elected and qualified. In the absence of instructions to the
contrary, proxies covering shares of Common Stock will be voted in favor of the
election of the persons listed below. In the event that any nominee for
election as director should become unavailable to serve, it is intended that
votes will be cast, pursuant to the enclosed proxy, for such substitute nominee
as may be nominated by the Company. Management has no present knowledge that
any of the persons named will be unavailable to serve.
Except as provided in the Governance Agreement (the "Governance Agreement")
dated as of April 3, 1998 by and between the Company and Pinault-Printemps-
Redoute, S.A., a societe anonyme organized and existing under the laws of France
("PPR"), no arrangement or understanding exists between any nominee and any
other person or persons pursuant to which any nominee was or is to be selected
as a director or nominee. For a summary of the arrangements under the
Governance Agreement, see "--Arrangements with PPR". None of the nominees has
any family relationship to any other nominee or to any executive officer of the
Company.
2.
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INFORMATION CONCERNING INCUMBENT DIRECTORS
Information is set forth below concerning the incumbent directors, all of
whom are also nominees for election as directors, and the year in which each
incumbent director was first elected as a director of the Company. Each nominee
has furnished the information as to his beneficial ownership of Common Stock as
of April 3, 1998 and, if not employed by the Company, the nominee's principal
occupation and five year employment history.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR
---- --- -------- SINCE
--------
<S> <C> <C> <C>
Peter J. Canzone.......... 68 President, Chief Executive Officer, 1993
Chairman of the Board and Director
Serge Weinberg(1)......... 47 Director 1998
Judith E. Campbell(1)..... 50 Director 1998
William C. Johnson(2)..... 58 Director 1994
Hartmut Kramer(1)......... 51 Director 1998
Johannes Loning........... 34 Director 1998
Antoine Metzger........... 44 Director 1998
Richard Simonin........... 45 Director 1998
Peter M. Starrett(1)(2)... 50 Director 1997
</TABLE>
________________
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Mr. Canzone became a member of the Board and President and Chief Executive
Officer of the Company at the time of the Company's formation and was elected
Chairman of the Board in June 1995. In addition Mr. Canzone has been Chief
Executive Officer of Brylane, L.P., a Delaware limited partnership and a wholly-
owned subsidiary of the Company ("Brylane" or the "Partnership"), and its
predecessor since 1978 and also served as President of Brylane and its
predecessor from 1978 until July 1996.
Mr. Weinberg became a member of the Board in connection with the PPR Stock
Purchase (as defined below). Since 1995, Mr. Weinberg has been Chairman and
Chief Executive Officer of PPR, a diversified company that, among other things,
operates specialized store chains as well as owns interests in other companies,
including La Redoute S.A., a company engaged in the mail order of retail
products through various catalogs, and Rexel, S.A., a company engaged in the
manufacture and distribution of electrical components, parts and supplies. Mr.
Weinberg joined PPR in 1990 and was President and Chief Executive Officer of
Rexel S.A. from 1991 to 1995 and of Companie Francais d'Afrique Orientale, a
company engaged in a variety of industrial and commercial activities in Africa
and French overseas territories, from 1990 to 1991. Mr. Weinberg has been vice-
chairman of Rexel Inc. since March 1994.
Ms. Campbell became a member of the Board at the time of the PPR Stock
Purchase. Ms. Campbell has no relationship with PPR. Since 1997, Ms. Campbell
has been Senior Vice President and Chief Information Officer of New York Life
Insurance Company. From 1995 to 1997, Ms. Campbell served as Senior Vice
President, Consumer Banking and Manager of Deposit Products, Consumer Payments
and Direct Banking of PNC Bank. Prior to joining PNC Bank, Ms. Campbell served
as Senior Vice President and Director of Business Services and as Senior Vice
President and Director of Customer Service of Midlantic Corporation from 1992 to
1995.
Mr. Johnson became a member of the Board in connection with the Company's
formation and served as Vice Chairman of the Board from June 1995 to April 1998.
From March 1990 until December 1994, Mr. Johnson served as Chief Executive
Officer of Grolier Incorporated, a publishing and printing company. Prior to
joining Grolier Incorporated, from 1982 to 1989, Mr. Johnson served as Chairman
of the Board and Chief Executive Officer of Fingerhut Corporation, a retail
catalog company.
3.
<PAGE>
Mr. Kramer became a member of the Board in connection with the PPR Stock
Purchase. Mr. Kramer began serving as Chairman and Chief Executive Officer of
La Redoute S.A. in 1998. From 1989 to 1998, Mr. Kramer served as Managing
Partner of Peek & Cloppenburg KG Dusseldorf, an apparel retailer, which he
joined in 1986.
Mr. Loning became a member of the Board in connection with the PPR Stock
Purchase. Since 1997, Mr. Loning has been Vice-President in charge of Corporate
Development of La Redoute S.A. From 1988 to 1997, Mr. Loning was a consultant
with Mercer Management Consulting (and its predecessor).
Mr. Metzger became a member of the Board in connection with the PPR Stock
Purchase. Since 1991, Mr. Metzger has been Chief Financial Officer of La
Redoute S.A. Previously, Mr. Metzger was Chief Financial Officer of S.A.
Redoute France (and its predecessor), a catalog retailer, from 1989 to 1991.
Mr. Metzger joined La Redoute S.A. in 1985 and served as financial controller of
S.A. Redoute France (and its predecessor) until 1989. Mr. Metzger is non-
executive Chairman of Ellos, a catalog retailer of apparel in Scandinavia, and
of Bernard S.A., a catalog retailer of office furniture and professional
cleaning products. From 1996 to 1997, he was a board member of Goldkamp AG, a
catalog retailer of apparel in Germany, which filed for bankruptcy in 1997.
Mr. Simonin became a member of the Board in connection with the PPR Stock
Purchase. Since May 1997, Mr. Simonin has been Chairman and Chief Executive
Officer of S.A. Redoute France. From September 1993 to April 1997, Mr. Simonin
served as Chairman of Kenzo S.A., an apparel manufacturer, and from July 1992 to
July 1996 served as Chairman of Givenchy, an apparel manufacturer. Both Kenzo
S.A. and Givenchy are part of the L.V.M.H. group.
Mr. Starrett became a member of the Board in May 1997. Mr. Starrett is
President of Warner Bros. Studio Stores Worldwide and has been employed by
Warner Bros. since May 1990. Mr. Starrett is also a director of Petco Animal
Supplies, Inc. and Guitar Center, Inc.
ARRANGEMENTS WITH PPR
On April 3, 1998, PPR acquired approximately 43.7% of the outstanding
shares of the Company's Common Stock, at a purchase price of $51.00 per share,
from certain stockholders (including (a) all of the Common Stock held by
affiliates of Freeman Spogli & Co. Incorporated ("FS&Co.") and an affiliate of
The Limited, Inc. ("The Limited"), (b) all of the shares held by certain other
stockholders and (c) certain shares held by certain members of the Company's
management) (such aquisitions, collectively, the "PPR Stock Purchase"). In
connection with the PPR Stock Purchase, Messrs. Mark J. Doran, John M. Roth and
Ronald P. Spogli, who were the FS&Co. nominees to the Board, and Samuel P. Fried
and William K. Gerber, who were The Limited nominees to the Board, resigned. To
fill the vacancies created by such resignations, Messrs. Kramer, Loning,
Metzger, Simonin and Weinberg, all of whom were proposed by PPR, were elected to
the Board.
In connection with the PPR Stock Purchase, PPR and the Company have entered
into the Governance Agreement which provides that, except as set forth below,
the Company will use its best efforts to have the Board include up to five
nominees of PPR in the slate of nominees presented by the Board for election at
each stockholder meeting at which directors are to be elected (such nominees who
become directors, "PPR Directors") and additionally specifies that PPR nominees
will have certain representation on the Board's committees. PPR's nominees for
the 1998 Annual Meeting are Messrs. Weinberg, Kramer, Loning, Metzger and
Simonin. If PPR's share ownership falls below the following percentages
(without PPR's buying back up to the applicable percentage within 30 days), PPR
agrees that the following number of PPR Directors will resign and be replaced by
independent directors. If PPR's ownership falls below 40%, one PPR Director
will resign; if PPR's ownership falls below 30%, two PPR Directors will resign;
and if PPR's ownership falls below 20%, three PPR Directors will resign. In
addition, the Governance Agreement provides that the Company will use its best
efforts to assure that three members of the Board will be "independent"
directors and that the Company's Chief Executive Officer will also be a
director. An "independent" director is defined as Messrs. William C. Johnson
and Peter M. Starrett, any individual who is not a member of management, and any
individual who is not, and has not been within the past three years, affiliated
with either FS&Co. or The Limited or any of their affiliates. The current
independent directors are Messrs. Johnson and Starrett and Ms. Campbell. Ms.
Campbell was selected and approved by Messrs. Johnson and Starrett,
4.
<PAGE>
the independent directors then in office, in accordance with the requirements of
the Bylaws of the Company (as amended in connection with the PPR Stock
Purchase), and joined the Board on April 2, 1998.
BOARD COMMITTEES
The standing committees of the Board are the Audit Committee, which reviews
the results and scope of the audit and other services provided by the Company's
independent auditors (the "Audit Committee"), and the Compensation Committee,
which administers the Company's stock, option and other compensation plans (the
"Compensation Committee"). The Audit Committee, which consisted of Messrs.
Johnson and Starrett during the fiscal year ended January 31, 1998 ("fiscal
1997"), met once during fiscal 1997. The Compensation Committee, which
consisted of Messrs. Fried, Roth, Spogli and Starrett during fiscal 1997, met
twice during fiscal 1997 and took various actions by unanimous written consent.
The Audit Committee currently consists of Messrs. Johnson and Starrett. The
Compensation Committee currently consists of Messrs. Kramer, Starrett and
Weinberg and Ms. Campbell. See "--Arrangements with PPR".
BOARD MEETINGS AND REMUNERATION
During fiscal 1997, the Board held four meetings and took various actions
by unanimous written consent. Each director except Mr. Fried attended at least
75% of the aggregate of the total number of meetings held by the Board during
fiscal 1997, and each director attended the total number of meetings held by all
committees of the Board during that period within which he was a director or
member of such committee of the Board.
The members of the Board, other than Messrs. Johnson and Starrett and Ms.
Campbell, do not receive compensation for services on the Board but are
reimbursed for their out-of-pocket expenses in serving on the Board. No member
of the Board receives compensation for services on any committee of the Board.
Messrs. Johnson and Starrett and Ms. Campbell each receive a per meeting fee of
$1,000, and at their election, an annual stipend of $25,000 or that number of
stock options at a price equal to 85% of the prevailing market price on the date
of grant such that the "in the money" value of such options at the date of grant
equals $25,000, as well as additional annual stock options at a price equal to
the prevailing market price on the date of grant pursuant to the Brylane 1996
Option Plan (as defined herein). In addition, Mr. Johnson has previously
purchased shares of Common Stock and has previously been granted options under
the Brylane 1996 Performance Option Plan (as defined herein), and Messrs.
Johnson and Starrett, as well as Ms. Campbell have previously been granted
options under the Brylane 1996 Option Plan. See "Executive Officers,
Compensation and Other Information--Stock Subscription Plans" and "--Option
Plans".
PROPOSAL NO. 2 -- APPROVAL OF
THE COMPANY'S 1998 PERFORMANCE STOCK OPTION PLAN
At the 1998 Annual Meeting, stockholders will be asked to approve the
Company's 1998 Performance Stock Option Plan (the "1998 Plan"), which was
adopted by the Board on April 21, 1998. A summary description of the 1998 Plan
is set forth below. This summary description does not purport to be complete
and is qualified in its entirety by reference to the full text of the 1998 Plan,
which is attached to this Proxy Statement as Exhibit A and incorporated herein
by this reference. Stockholders are urged to read the 1998 Plan in its
entirety. The Board recommends that the Company's stockholders vote to approve
the 1998 Plan.
SUMMARY DESCRIPTION OF THE 1998 PLAN
Purpose of the 1998 Plan. The 1998 Plan provides for the granting of stock
options to purchase shares of Common Stock ("Options") to participants in the
1998 Plan, which Options vest based on the Company's attaining performance
criteria as specified at the time of the grant and which may also be based on
the passage of time. The purpose of the 1998 Plan is to promote the growth,
development and financial success of the Company and its subsidiaries by
providing additional incentives to certain officers, key employees, consultants
and members of the boards of directors (or equivalent bodies) of the Company and
its subsidiaries which will be realized by such persons if the Company achieves
targeted performance goals as specified in particular option grants. By linking
5.
<PAGE>
such Options to the Company's financial performance, the Company can provide the
means for such persons to benefit directly from the Company's and its
subsidiaries' growth, development and financial success.
Eligibility. The persons who shall be eligible to receive grants of
Options under the 1998 Plan shall be (i) the officers, key employees and
consultants of the Company and its subsidiaries and (ii) members of the boards
of directors (or equivalent bodies) of the Company and its subsidiaries. A
person who holds an Option is herein referred to as a "Participant," and more
than one Option may be granted to any Participant. No determination has been
made at this time as to the individuals who are to receive Options or the number
of Options that will be granted to any particular individual or group of
individuals.
Administration. The 1998 Plan will be administered by the Compensation
Committee. The Compensation Committee has the authority to interpret the 1998
Plan and to adopt rules and procedures relating to the administration of the
1998 Plan. The Compensation Committee is authorized and empowered (i) to select
the Participants, to determine the number of shares of Common Stock that are
subject to each Option, to grant Options, and to extend the time period during
which an Option may be exercised; (ii) to determine the dates upon which Options
shall be granted and the terms and conditions thereof (including the performance
criteria and any related matters), which terms and conditions need not be
identical as to the various Options granted; (iii) to determine which Options
are to be Incentive Stock Options and which Options are to be Nonqualified Stock
Options; (iv) to interpret the 1998 Plan; (v) to prescribe, amend and rescind
rules relating to the 1998 Plan; (vi) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the grant of an
Option previously granted by the Compensation Committee; (vii) to determine the
rights and obligations of Participants under the 1998 Plan; (viii) to specify
the exercise price to be paid by Participants upon exercise of an Option; and
(ix) to accelerate the time during which an Option may be exercised in
accordance with the 1998 Plan, and to otherwise accelerate the time during which
an Option may be exercised (but not reduce the time of exercise for Options
which have vested), in each case notwithstanding the provisions in the option
agreement stating the time during which it may be exercised.
Effective Date. The 1998 Plan became effective upon its adoption by the
Board on April 21, 1998, subject to stockholder approval. The grant of any
Options before the 1998 Annual Meeting will be contingent upon stockholder
approval. If the 1998 Plan is not approved by the stockholders, the 1998 Plan
and any Options granted thereunder shall terminate.
Shares Subject to the 1998 Plan. Options covering an aggregate of 900,000
shares may be granted pursuant to the 1998 Plan, subject to adjustment to
reflect certain corporate events as described below. The maximum number of
shares that may be granted to a single Participant is 500,000. Upon the
expiration or termination, in whole or in part, for any reason of an outstanding
Option or any portion thereof which shall not have vested or shall not have been
exercised in full or in the event that any shares of Common Stock acquired
pursuant to the 1998 Plan are reacquired by the Company, (a) any shares of
Common Stock which have not been purchased or (b) the shares of Common Stock
reacquired, as the case may be, shall again become available for the granting of
additional Options under the 1998 Plan.
Option Price. Except as otherwise provided in the 1998 Plan, the exercise
price per share (the "Option Price") of the shares of Common Stock underlying
each Option shall not be less than 100 percent of the fair market value (as
defined in the 1998 Plan) of such shares on the date of grant of the Option;
provided, however, that if the Participant is a 10-percent stockholder of the
Company immediately before such Participant is granted an Incentive Stock
Option, the Option Price shall be not less than 110 percent of said fair market
value. Once vested, and prior to its termination date, an Option may be
exercised by the Participant by giving written notice to the Company specifying
the number of shares of Common Stock to be purchased and accompanied by payment
of the full purchase price therefor in cash, by check or in such other form of
lawful consideration as the Compensation Committee may approve from time to
time, including without limitation and in the sole discretion of the
Compensation Committee, the assignment and transfer by the Participant to the
Company of outstanding shares of Common Stock theretofore held by the
Participant in a manner intended to comply with the provisions of Rule l6b-3
under the Exchange Act, if applicable.
6.
<PAGE>
Options. It is intended that the Options under the 1998 Plan will either
qualify for treatment as incentive stock options under applicable federal tax
laws and regulations and be designated "Incentive Stock Options" or not qualify
for such treatment and be designated "Nonqualified Stock Options". Incentive
Stock Options may only be granted to employees. The aggregate fair market value
(determined as of the time an Option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Participant in any calendar year under the 1998 Plan and any other incentive
stock option plans (which qualify under applicable federal tax laws and
regulations) of the Company or any subsidiary shall not exceed $100,000.
Terms and Restrictions on Grants of Options. Notwithstanding any other
provisions set forth in the 1998 Plan, no Options may be granted under the 1998
Plan subsequent to 10 years from the date of effectiveness of the 1998 Plan.
The vesting of all Options may be based on the Company's attaining of
performance criteria as specified at the time of the granting thereof and may
also be based on the passage of time. The Compensation Committee shall
determine the performance criteria (which may be based, without limitation, on
financial performance criteria established for the Company, the stock prices of
the Company's publicly traded securities, or other factors determined by the
Compensation Committee), the performance measurement period and the vesting
schedule applicable to each Option or group of Options. The performance
criteria, the performance measurement period and the vesting schedule need not
be identical for all Options granted under the 1998 Plan. To the extent each
such Option shall not have vested, and does not also vest based on the passage
of time, it shall automatically terminate and cease to be exercisable to such
extent, notwithstanding the stated term during which it may be exercised.
Acceleration of Options. The Compensation Committee, in its sole
discretion, at any time, or from time to time, may elect to accelerate the
vesting of all or any portion of any Option then outstanding. In the event of
the acceleration of the exercisability of Options as the result of a decision by
the Compensation Committee, each outstanding Option so accelerated shall be
exercisable upon such terms and conditions as the Compensation Committee may
determine in its sole discretion; provided, that such terms and conditions
(other than terms and conditions relating solely to the acceleration of
exercisability and the related termination of an Option) may not adversely
affect the rights of any Participant without the consent of the Participant so
adversely affected. Any outstanding Option which has not been exercised by the
holder at the end of such period shall again become subject to the terms and
conditions in effect prior to the acceleration.
Recapitalization, Reorganization, Merger or Consolidation. If the
outstanding shares of Common Stock of the Company are exchanged for different
securities of the Company through a reorganization, merger, consolidation,
recapitalization or reclassification or if the number of outstanding shares is
changed through a stock split or stock dividend, an appropriate adjustment shall
be made in the number, exercise price, or kind of securities subject to any
outstanding Option granted under the 1998 Plan. Upon (i) the dissolution,
liquidation or sale of all or substantially all of the business, properties and
assets of the Company, (ii) any reorganization, merger, consolidation or
exchange of securities in which the Company does not survive or (iii) any
reorganization, merger, consolidation or exchange of securities in which the
Company does survive and any of the Company's stockholders have the opportunity
to receive cash, securities and/or other property in exchange for their shares
of Common Stock of the Company, the 1998 Plan and each outstanding Option shall
terminate, unless the Company's successor offers substitute options to the
Participants.
Termination of Options. Each Option granted under the 1998 Plan shall set
forth a termination date which shall be no later than ten years from the date
such Option is granted, except that with respect to Incentive Stock Options, if
the Participant is a ten percent or more stockholder of the Company (as
described by federal taxation laws) at the time such Option is granted, the
Option shall terminate no later than five years from the date of the grant.
Amendment of the 1998 Plan. The Board may make such amendments to the 1998
Plan and, with the consent of each Participant adversely affected, the
Compensation Committee may make such changes in the terms and conditions of
granted Options as it shall deem advisable. Such amendments and changes shall
include, but not be limited to, acceleration of the time at which an Option may
be exercised, but may not, without the approval of the stockholders (a) increase
the maximum number of shares subject to Options, except pursuant to provisions
under "--Recapitalization, Reorganization, Merger or Consolidation", or (b)
change the designation of the class of employees eligible to receive Incentive
Stock Options.
7.
<PAGE>
Termination of the 1998 Plan. The 1998 Plan shall terminate, in addition
to the other termination events set forth in the 1998 Plan, at the earliest of
ten years and the time when all shares of the Company's Common Stock which may
be issued under the 1998 Plan have been so issued; provided, however, that the
Board may in its sole discretion terminate the 1998 Plan at any other time.
Subject to provisions under "--Recapitalization, Reorganization, Merger or
Consolidation" above, no such termination shall in any way affect any Option
then outstanding.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1998 PLAN
The following summary of the effects of federal income taxation upon the
Participants and the Company with respect to shares of Common Stock issued under
the 1998 Plan does not purport to be complete and reference is made to the
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code").
General. Options granted under the 1998 Plan may be granted as Incentive
Stock Options or they may be designated and treated as Nonqualified Stock
Options. As described below, there are certain differences between an Incentive
Stock Option and a Nonqualified Stock Option with respect to the federal income
tax effect on both the Participant and the granting employer.
Incentive Stock Options. No taxable income will be recognized by a
Participant upon the grant or exercise of any Incentive Stock Option.
Additionally, the Company will not be entitled to any federal income tax
deduction as the result of the grant or exercise of any Incentive Stock Option.
Any gain or loss resulting from the subsequent sale of shares of Common Stock
acquired upon exercise of any Incentive Stock Option will be capital gain or
loss if such sale is made after the later of (i) two years from the date of the
grant of the Option and (ii) one year after the transfer of such stock to the
Participant upon exercise, so long as the Participant is an employee of the
Company from the date of grant until three months before the date of exercise.
In the event of the Participant's death or disability prior to exercise of an
Incentive Stock Option, special rules apply in determining whether gain or loss
upon sale of the stock acquired upon exercise of such Option will be taxable as
capital gain or loss or ordinary income. If the subsequent sale of stock is
made prior to the expiration of such two-year and one-year periods, the
Participant will recognize ordinary income in the year of sale in an amount
equal to the difference between the exercise price and the fair market value of
the shares of Common Stock on the date of exercise; provided, however, that if
such sale is a transaction in which a loss (if sustained) would have been
recognized by the Participant, the amount of ordinary income recognized by the
Participant will not exceed the excess (if any) of the amount realized on the
sale over the exercise price. The Company will then be entitled to an income
tax deduction of like amount. Any excess gain recognized by the Participant
upon such a disqualifying disposition would then be taxable as a capital gain.
If an individual sale of shares of Common Stock received through the exercise of
an Incentive Stock Option qualifies for capital gain treatment, the federal
capital gain tax rate from such sale will be determined based on the holding
period of the Common Stock in accordance with the tax rates then in effect under
the Code. The amount by which the fair market value of shares of Common Stock
purchased upon exercise of an Incentive Stock Option exceeds the exercise price
of such stock constitutes an "item of adjustment" that could then be subject to
the alternative minimum tax in the year that the Option is exercised.
Nonqualified Stock Options. Generally, at the time of the grant of a
Nonqualified Stock Option, no taxable income will be recognized by the
Participant and the Company will not be entitled to a deduction. Upon the
exercise of such an Option, the Participant generally will recognize taxable
income, and the Company will then be entitled to a deduction, in the amount by
which the then fair market value of the shares of Common stock issued to such
Participant exceeds the exercise price. Income recognized by the Participant
upon exercise of a Nonqualified Stock Option will be taxed as ordinary income.
Such income constitutes "wages" with respect to which the Company is required to
deduct and withhold federal and state income tax. Pursuant to the 1998 Plan,
the exercise of each Nonqualified Stock Option will be subject to the Company's
determination that all withholding taxes and liabilities relating to the Option
have been satisfied. Upon the subsequent disposition of shares of Common Stock
acquired upon the exercise of a Nonqualified Stock Option, the Participant will
recognize capital gain or loss in an amount equal to the difference between the
proceeds received upon disposition, and the fair market value of such shares at
the time of exercise. If the gain recognized in connection with such
disposition qualifies for capital gain treatment, the federal capital gain tax
rate for such sale will be determined based on the holding period of the Common
Stock in accordance with the tax rates then in effect under the Code.
8.
<PAGE>
Acceleration of Stock Options Upon Transfer of Control. Pursuant to the
1998 Plan, upon the occurrence of certain events involving a change of control
of the Company, the exercisability of Nonqualified Stock Options and Incentive
Stock Options may be accelerated. Such acceleration may be determined to be, in
whole or in part, a "parachute payment" for federal income tax purposes if it
arises from any events connected with a change of control of the Company. If
the present value of all of the Participant's parachute payments exceeds three
times the Participant's average annual compensation for the past five years, the
Participant will be subject to a special excise tax of 20% on the "excess
parachute payment". Such tax will be applied to the amount of such parachute
payment which is in excess of the greater of such average annual compensation of
the Participant or an amount which the Participant establishes as reasonable
compensation. In addition, the Company will not be allowed a deduction for such
"excess parachute payment".
Compensation Deduction Limitation. Upon exercise, Options granted under
the 1998 Plan to a "covered employee" (as defined below) with an option price
equal to or greater than the fair market value of the Common Stock at the time
of grant should not be subject to the $1.0 million deduction cap for
compensation paid to certain executives of publicly held corporations such as
the Company. So long as the Compensation Committee is at all times composed of
"outside directors" as defined in applicable Treasury Regulations, it should
then meet the exemption for "performance-based" compensation. For purposes of
the above paragraphs, a "covered employee" is a Participant who, on the last day
of the taxable year of the Company, is the chief executive officer or one of the
four other most highly compensated executive officers for proxy disclosure
purposes.
APPLICABILITY OF ERISA
The 1998 Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended, and it is not a tax-
qualified retirement plan under Section 401(a) of the Code.
BENEFITS TO BE RECEIVED BY OR ALLOCATED TO DIRECTORS AND EXECUTIVE OFFICERS
The benefits that would be received by or allocated to Directors and
executive officers of the Company participating in the 1998 Plan and to other
Participants cannot be determined at this time because the amount and value of
Options to be granted to any Participant are within the discretion of the
Compensation Committee (subject to certain limitations as set forth above) and
no specific grants have been made as of the date of this Proxy Statement.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD
Each holder of shares of Common Stock outstanding on the Record Date is
entitled to one vote per share on the proposal to approve the 1998 Plan.
Approval of such action requires the affirmative vote of a majority of the
shares of the Company's Common Stock present, or represented, and entitled to
vote at the Meeting, assuming the presence of a quorum.
THE BOARD BELIEVES THAT APPROVAL OF THE 1998 PLAN IS IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE "FOR"
APPROVAL THEREOF. PROXIES WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE
SPECIFICALLY INDICATED.
9.
<PAGE>
PROPOSAL 3 -- RATIFICATION OF THE APPOINTMENT OF
COOPERS & LYBRAND L.L.P. AS INDEPENDENT AUDITORS
The Company has appointed Coopers & Lybrand L.L.P. to continue as the
Company's auditors and to audit the books of account and other records of the
Company for the fiscal year ending January 30, 1999. The Company has been
advised that Coopers & Lybrand L.L.P. is independent with respect to the Company
within the meaning of the Securities Act of 1933, as amended, and the applicable
published rules and regulations thereunder. A representative of Coopers &
Lybrand L.L.P. will be available at the 1998 Annual Meeting to respond to
appropriate questions related to the audit of the Company's financial
statements. If the stockholders do not ratify the selection of Coopers &
Lybrand L.L.P., if Coopers & Lybrand L.L.P. should decline to act or otherwise
become incapable of acting, or if its employment is discontinued, the Company
will appoint independent public accountants for fiscal year 1999. Proxies
solicited by the Board will be voted in favor of ratification unless
stockholders specify otherwise.
VOTE REQUIRED AND RECOMMENDATION OF BOARD
Each holder of shares of Common Stock outstanding on the Record Date is
entitled to one vote per share on the proposal to approve Coopers & Lybrand
L.L.P. as the Company's independent auditors. Approval of such action requires
the affirmative vote of a majority of the shares of the Company's Common Stock
present or represented and entitled to vote at the 1998 Annual Meeting.
THE BOARD BELIEVES THAT THE APPROVAL OF COOPERS & LYBRAND L.L.P. AS THE
COMPANY'S INDEPENDENT AUDITORS FOR FISCAL 1999 IS IN THE BEST INTERESTS OF THE
COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL
THEREOF. PROXIES WILL BE VOTED FOR THIS PROPOSAL UNLESS OTHERWISE SPECIFICALLY
INDICATED.
10.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 3, 1998 by (i) each person
who is known by the Company to be the beneficial owner of more than 5% of the
Common Stock, (ii) each director and Named Executive Officer of the Company,
individually, and (iii) all current directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2) OF CLASS
- ---------------------------------------------------------------- ------------- --------
<S> <C> <C>
Pinault-Printemps-Redoute, S.A.(3)............................... 8,010,917 43.6%
FMR Corp.(4)..................................................... 1,609,800 8.8
Peter J. Canzone................................................. 21,433 *
Sheila R. Garelik................................................ 12,916(5) *
Robert A. Pulciani............................................... 100 *
Dhananjaya K. Rao................................................ 12,500(6) *
Carol Meyrowitz.................................................. 6,000(7) *
Judith E. Campbell............................................... 0 *
William C. Johnson............................................... 0 *
Hartmut Kramer(3)................................................ 0 *
Johannes Loning(3)............................................... 0 *
Antoine Metzger(3)............................................... 0 *
Richard Simonin.................................................. 0 *
Peter M. Starrett................................................ 8,013(8) *
Serge Weinberg(3)................................................ 0 *
All directors and executive officers of Brylane as a group (22
persons)......................................................... 148,280(9) *
</TABLE>
- ---------------------
* Less than 1%.
(1) The persons and entities named in this table have sole voting power and
investment power with respect to all shares of Common Stock or Series A
Convertible Redeemable Preferred Stock (the "Preferred Stock") shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in this table and these notes.
(2) The Company has reserved for issuance, to officers, key employees, certain
members of the Board and consultants of the Company (or its subsidiaries),
options to purchase up to 2,479,584 shares of Company Common Stock. See
"Executive Officers, Compensation and Other Information--Option Plans".
(3) Such information in the table has been furnished by PPR. The shares shown
as beneficially owned by PPR are held of record by REDAM LLC, a Delaware
limited liability company and a wholly owned subsidiary of PPR. Mr. Kramer
is Chairman and Chief Executive Officer of La Redoute S.A., a wholly owned
subsidiary of PPR, Mr. Loning is Vice President - Corporate Development of
La Redoute S.A., Mr. Metzger is Chief Financial Officer of La Redoute S.A.,
Mr. Simonin is Chairman and Chief Executive Officer of S.A. Redoute France
and Mr. Weinberg is Chairman and Chief Executive Officer of PPR, and as such
each may be deemed to be a beneficial owner of the shares owned by REDAM
LLC. Messrs. Kramer, Loning, Metzger, Simonin and Weinberg each disclaim
beneficial ownership of such shares. See "Proposal 1--Election of
Directors--Arrangements with PPR" for information concerning arrangements
pursuant to which PPR is entitled to designate the five members of the Board
indicated in the table. The address of REDAM LLC is c/o La Redoute S.A.,
110, rue de Blanchemaille, 59051 Roubaix Cedex 01 France. The address of
PPR is 18, Place Henri Bergson, 75381 Paris Cedex 08. The address of La
Redoute S.A. is 110, rue de Blanchemaille, 59051 Roubaix Cedex 01 France.
(4) As reported in a Schedule 13G dated February 14, 1998 filed jointly with the
Securities and Exchange Commission (the "Commission") by FMR Corp., Edward
C. Johnson 3d and Abigail P. Johnson, FMR Corp.,
11.
<PAGE>
Mr. Johnson and Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp. ("Fidelity"), each has claimed sole dispositive
power with respect to 1,222,500 shares owned by certain management
investment companies registered under the Investment Company Act of 1940 and
managed by Fidelity (the "Funds"). Neither FMR Corp. nor Mr. Johnson has
sole voting power with respect to the 1,222,500 shares owned by the Funds,
which power resides with the Fund's Boards of Trustees. In addition, Mr.
Johnson and FMR Corp., through its control of Fidelity Management Trust
Company ("FMTC"), a wholly-owned subsidiary of FMR Corp., each have claimed
sole voting and dispositive power with respect to 387,300 shares of Common
Stock beneficially owned by FMTC. Mr. Johnson and Ms. Johnson may be deemed
to be control persons of FMR Corp. The business address of FMR Corp. is 82
Devonshire Street, Boston, Massachusetts 02109.
(5) Includes 250 shares of Common Stock held by Ms. Garelik's son.
(6) Represents 12,500 shares of the Preferred Stock which are currently
convertible into Common Stock.
(7) Represents 6,000 shares of the Preferred Stock which are currently
convertible into shares of Common Stock.
(8) Includes 4,013 shares of Common Stock issuable within 60 days upon exercise
of options.
(9) Includes 4,013 shares of Common Stock issuable within 60 days upon exercise
of options.
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
The following individuals are the current executive officers of the Company,
the Partnership or its subsidiaries (including B.L. Management Services, Inc., a
Delaware corporation and an indirect, wholly-owned subsidiary of the Company
("B.L. Management"), which provides management services to the Company):
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Peter J. Canzone....... 68 President, Chief Executive Officer, Chairman of
the Board and Director
Sheila R. Garelik...... 53 President-Brylane
Robert A. Pulciani..... 57 Executive Vice President, Chief Financial Officer,
Secretary and Treasurer
Richard L. Bennett..... 66 Senior Vice President-Human Resources
William G. Brosius..... 61 Senior Vice President-Operations/Customer Service
Bruce G. Clark......... 53 Senior Vice President-Telemarketing
Kevin Doyle............ 44 Vice President/General Manager-Roaman's
Kevin McGrain.......... 43 Vice President/General Manager-Sears Business
Carol Meyrowitz........ 44 Executive Vice President-Chadwick's Merchandising
Loida Noriega-Wilson... 42 Vice President/General Manager-Lerner
Dhananjaya K. Rao...... 49 President and Chief Executive Officer-Chadwick's
Jules Silbert.......... 70 Senior Vice President-Marketing/New Business
Development
Arlene Silverman....... 48 Senior Vice President/General Manager-Lane Bryant
</TABLE>
Executive officers of the Company are elected by and serve at the
discretion of the Board. No arrangement exists between any executive officer
and any other person or persons pursuant to which any executive officer was or
is to be selected as an executive officer, other than as provided in certain
executive officers' employment agreements. See "--Employment Agreements". The
Governance Agreement which provides that prior to April 3, 1999, Messrs.
Canzone, Pulciani, Rao and Silbert and Mmes. Garelik and Meyrowitz cannot be
terminated other than for cause without the approval of two-thirds of the
directors then in office. None of the executive officers has any family
relationship to any nominee for director or to any other executive officer of
the Company.
Mr. Canzone has been Chief Executive Officer of the Company and its
predecessor since 1978 and also served as President of the Partnership, and its
predecessor from 1978 until July 1996. Mr. Canzone became a member of the Board
and President of the Company in connection with the Company's formation and was
elected Chairman of the Board in June 1995.
12.
<PAGE>
Ms. Garelik has been President of Brylane since July 1996. Ms. Garelik
served as Executive Vice President/President-Lane Bryant from August 1993 until
July 1996, and served as Executive Vice President/General Manager of Roaman's
from 1989 until August 1993.
Mr. Pulciani has been Executive Vice President, Chief Financial Officer and
Secretary of Brylane and its predecessor since May 1993. Mr. Pulciani became
the Treasurer of Brylane in connection with the Company's formation. Mr.
Pulciani joined Brylane in 1988, and served as Senior Vice President and Chief
Financial Officer from May 1988 to May 1993.
Mr. Bennett has been Senior Vice President-Human Resources of Brylane and
its predecessor since March 1986. Mr. Bennett joined Brylane in 1983, and
served as Vice President-Human Resources from 1983 to March 1986.
Mr. Brosius has been Senior Vice President-Operations/Customer Service of
Brylane and its predecessor since October 1987. Mr. Brosius joined Brylane in
1969, and served as Vice President-Fulfillment from 1979 to October 1987.
Mr. Clark has been Senior Vice President-Telemarketing of Brylane and its
predecessor since May 1988. Mr. Clark also served as Senior Vice President-
MIS/Telemarketing from May 1988 to April 1997. Mr. Clark joined Brylane in
1983, and served as Vice President-MIS/Telemarketing from 1983 to May 1988.
Mr. Doyle has been Vice President/General Manager-Roaman's since November
1996. Mr. Doyle joined Brylane in 1975 and served as Control Buyer, Assistant
Buyer, Associate Buyer, Buyer and Senior Buyer over a period of 14 years. Mr.
Doyle also served as Merchandise Director of Lane Bryant from August 1989 until
September 1993 and served as General Merchandise Manager of Roaman's from
September 1993 to November 1996.
Mr. McGrain was appointed Vice President/General Manager of the Company's
Sears Business in August 1995. Mr. McGrain joined Brylane in September 1988 and
was Vice President-Controller of Lerner from May 1992 to August 1995.
Ms. Meyrowitz has been Executive Vice President-Merchandising of the
Company's Chadwick's business since the Partnership acquired the Chadwick's of
Boston catalog division of The TJX Companies, Inc. ("TJX") in December 1996 (the
"Chadwick's Acquisition"). From May 1996 to December 1996, Ms. Meyrowitz served
as Executive Vice President-Merchandising of Chadwick's, Inc. From March 1991
to May 1996, Ms. Meyrowitz served as Senior Vice President and General
Merchandise Manager of Chadwick's, Inc. Previously, Ms. Meyrowitz was General
Merchandise Manager at Chadwick's from March 1990 to March 1991, and Vice
President and Senior Merchandise Manager from January 1989 to March 1990.
Ms. Noriega-Wilson joined Brylane in April 1995 as Vice President/General
Manager-Lerner. Prior to joining Brylane, Ms. Noriega-Wilson served as Vice
President of Merchandising of Montgomery Ward Direct from February 1993 to
February 1995.
Mr. Rao has been President and Chief Executive Officer of the Company's
Chadwick's business since the Chadwick's Acquisition in December 1996. From May
1996 to December 1996, Mr. Rao served as President and Chief Executive Officer
of Chadwick's, Inc. From January 1995 to May 1996, Mr. Rao served as Senior
Vice President, Operations and Marketing of Chadwick's, Inc. Previously, Mr.
Rao worked at the T. J. Maxx Division of TJX from 1978 until 1995. His
management positions during such time included Senior Vice President of
Distribution and Financial Planning and Analysis from November 1994 to January
1995, Senior Vice President of Distribution, Merchandise Planning and Inventory
Management from 1991 to 1994, Senior Vice President and Director of Distribution
from 1989 to 1991 and Vice President and Director of Distribution from 1981 to
1989.
Mr. Silbert has been Senior Vice President-Marketing/New Business
Development of Brylane since July 1995. From December 1993 to July 1995, Mr.
Silbert served as Vice President-New Business Development
13.
<PAGE>
of Brylane. From April 1982 prior to joining Brylane, Mr. Silbert was President
of The Silbert Group, Inc., an independent management consulting firm.
Ms. Silverman has been Senior Vice President/General Manager-Lane Bryant
since August 1996 and previously served as Senior Vice President/General
Manager-Roaman's from August 1993 to August 1996. Ms. Silverman joined Brylane
in 1973, and served in various merchandise capacities from May 1989 to May 1991,
and then served as Vice President of Roaman's from May 1991 to August 1993.
EXECUTIVE COMPENSATION
The officers of Brylane Inc. are not compensated by the Company for their
services. Officers of Brylane Inc. who are also officers of the Partnership or
its subsidiaries receive compensation from the Partnership or such subsidiaries
for their services to the Partnership. The following table sets forth all
compensation awarded to, earned by or paid to the Chief Executive Officer and
the other four most highly compensated executive officers (the "Named Executive
Officers") for their services to the Partnership for (i) the 1997 fiscal year,
(ii) the 1996 fiscal year, and (iii) the 1995 fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
--------------
ANNUAL COMPENSATION OPTIONS TO ALL OTHER
---------------------- PURCHASE COMPEN-
NAME AND PRINCIPAL POSITION PERIOD SALARY(1) BONUS(1)(2) COMMON STOCK SATION(4)
- ------------------------------------------------------ ----------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Peter J. Canzone...................................... Fiscal 1997 $577,917 $326,332 25,000(5) $135,849
President, Chief Executive Officer Fiscal 1996 552,750 421,464 24,000(6) 118,358
and Chairman of the Board 250,000(7)
Fiscal 1995 520,500 196,602 20,000(6) 106,393
Sheila R. Garelik..................................... Fiscal 1997 400,583 208,783 17,000(5) 83,336
President of Brylane Fiscal 1996 364,542 244,484 18,000(6) 69,009
43,750(7)
Fiscal 1995 318,500 155,043 10,000(6) 65,125
Robert A. Pulciani.................................... Fiscal 1997 312,750 163,598 15,000(5) 64,841
Executive Vice President, Chief Fiscal 1996 286,583 185,059 12,000(6) 55,166
Financial Officer, Secretary and 36,459(7)
Treasurer Fiscal 1995 266,750 85,383 6,000(6) 52,767
Dhananjaya K. Rao..................................... Fiscal 1997 375,637 435,000 17,000(5) 127,549
President and Chief Executive Fiscal 1996 51,327(8) -- 25,000(6) 5,515
Officer--Chadwick's 8,302(9)
Carol Meyrowitz....................................... Fiscal 1997 345,659 410,000 15,000(5) 121,623
Executive Vice President-- Fiscal 1996 49,063(8) -- 25,000(6) 5,451
Chadwick's Merchandising 6,397(9)
</TABLE>
__________________
(1) Included in the aggregate of salary and bonus is an amount of compensation
that was deferred at the election of each Named Executive Officer. For
fiscal 1997, Messrs. Canzone, Pulciani and Rao and Mmes. Garelik and
Meyrowitz elected to defer $90,425, $119,087, $22,411, $152,342 and $22,990,
respectively, of their aggregate salary and bonus for such period. For
fiscal 1996, Messrs. Canzone and Pulciani and Ms. Garelik,
14.
<PAGE>
elected to defer $97,421, $115,581, and $152,256, respectively, of their
aggregate salary and bonus for such period. For fiscal 1995, Messrs.
Canzone and Pulciani and Ms. Garelik, elected to defer $71,710, $46,818 and
$111,911, respectively, of their aggregate salary and bonus for such period.
(2) For Messrs. Canzone and Pulciani and Ms. Garelik, bonuses were earned during
the six-month seasons ended July 29, 1995, February 3, 1996, August 3, 1996,
February 1, 1997, August 1, 1997 and January 31, 1998, but were not paid
until August 1995, February 1996, August 1996, February 1997, August 1997
and February 1998, respectively. See "--Performance Bonus Program" for a
discussion of Brylane's bonus program in which such individuals are entitled
to participate. For Mr. Rao and Ms. Meyrowitz, bonuses were earned during
the year ended January 31, 1998, but were not paid until March 1998. See
"--Chadwick's Management Incentive Plan" and "--Chadwick's Long Range
Management Incentive Plan" for a discussion of the bonus program in which
such individuals are entitled to participate.
(3) For each of the periods set forth in the table above, no Named Executive
Officer received aggregate Other Annual Compensation in excess of the lesser
of $50,000 or 10% of the total of such officer's salary and bonus, nor did
any such Named Executive Officer receive any restricted stock award, stock
appreciation right or payment under any long-term incentive plan. Pursuant
to an exchange transaction that occurred in February 1997 in connection with
the Company's initial public offering in which the Company acquired,
directly, and indirectly through the acquisition of wholly-owned
subsidiaries, a 100% ownership interest in the Partnership in exchange for
shares of the Company's Common Stock (the "Incorporation Plan"), an option
to purchase one share of Common Stock was issued in substitution for each
outstanding option to purchase one partnership unit granted in fiscal 1995,
fiscal 1996 or fiscal 1997 under either of the 1995 Partnership Unit Option
Plan or the 1993 Performance Partnership Unit Option Plan. See "--Option
Plans".
(4) In fiscal 1997, fiscal 1996 and fiscal 1995, the amounts shown for Messrs.
Canzone and Pulciani and for Ms. Garelik consist of approximately $5,000,
$5,000 and $5,000, respectively, under a supplemental medical benefits plan.
In fiscal 1997 and fiscal 1996, the amounts in each year shown for Mr. Rao
and Ms. Meyrowitz consist of $26,494 and $4,076, respectively, for a car
allowance. The balance of such amounts for all such individuals consist of
deferred compensation in the form of a matching contribution by the
Partnership under the Deferred Compensation Plan, a cash contribution by the
Partnership under the Retirement Plan, and a contribution by the Partnership
under the Supplemental Retirement Plan, where applicable. See "--Deferred
Compensation Plan" and "--Retirement Plans". In 1997, Messrs. Canzone,
Pulciani and Rao and Mmes. Garelik and Meyrowitz earned (i) $54,255,
$28,581, $48,142, $36,562 and $45,427, respectively, under the Deferred
Compensation Plan; (ii) $10,838, $10,838, $10,838, 10,838, and $10,838,
respectively, under the Retirement Plan (which will not be paid until April
1998); and (iii) $65,756, $20,422, $42,075, $30,936, and $38,864,
respectively, under the Supplemental Retirement Plan. In 1996, Messrs.
Canzone, Pulciani and Rao, and Mmes. Garelik and Meyrowitz, earned (i)
$58,453, $28,299, $785, $36,542 and $750, respectively, under the Deferred
Compensation Plan; (ii) $10,119, $10,119, $654, $10,119 and $625,
respectively, under the Retirement Plan (which was not paid until April
1997); and (iii) $44,786, $11,748 and $17,348, respectively, under the
Supplemental Retirement Plan. In 1995, Messrs. Canzone and Pulciani and Ms.
Garelik, earned (i) $43,026, $21,128 and $28,413, respectively, under the
Deferred Compensation Plan; (ii) $10,164, $10,164 and $10,164, respectively,
under the Retirement Plan (which was not paid until May 1996); and (iii)
$48,203, $16,475 and $21,548, respectively, under the Supplemental
Retirement Plan.
(5) These options were granted to the Named Executive Officers in 1997 pursuant
to Brylane's 1996 Stock Option Plan.
(6) These options were granted to the Named Executive Officers in 1995 and 1996
pursuant to the Partnership's 1995 Partnership Unit Option Plan.
(7) These options were granted to certain of the Named Executive Officers in
1993 pursuant to the Partnership's 1993 Performance Partnership Unit Option
Plan.
(8) Reflects amounts earned as salary during such fiscal year by each of Mr. Rao
and Ms. Meyrowitz, respectively, since December 9, 1996, their date of hire
by the Partnership in connection with the Chadwick's Acquisition.
(9) These options were granted pursuant to the Partnership's 1995 Partnership
Unit Option Plan in connection with the Chadwick's Acquisition in exchange
for certain of such individuals' options to purchase TJX Common Stock.
15.
<PAGE>
EMPLOYMENT AGREEMENTS
B.L. Management has entered into employment agreements with each of Peter
J. Canzone, Robert A. Pulciani, Jules Silbert, Kevin McGrain, Kevin Doyle,
Sheila Garelik, Loida D. Noriega-Wilson and Arlene Silverman, which agreements
commenced on April 1, 1998. These agreements provide for annual salaries for
each of these individuals which currently are $605,000, $340,000, $320,000,
$195,000, $205,000, $420,000, $235,000 and $255,000, respectively. In addition,
the Partnership has entered into comparable employment agreements with each of
Richard Bennett, William Brosius, Daniel L. Carr, Bruce Clark, Robert Evans,
Lawrence Kinney and Henry Wren which provide for annual salaries which currently
are $230,000, $230,000, $176,000, $225,000, $176,000, $230,000 and $138,000,
respectively. Each of the employment agreements entered into by B.L. Management
and the Partnership will expire on or about March 31, 2001, but will be
automatically renewed for one-year terms thereafter, unless notice is given as
specified in such employment agreements. In the event that the employment of
any of these individuals is terminated without "cause" or the individual resigns
for "good reason" (as such terms are defined in the employment agreements),
Brylane will be required to pay such individual's base salary (reduced by any
salary earned from other sources) for the greater of (i) the remainder of the
term of the applicable employment agreement or (ii) one year. The employment
agreements also provide for (i) the payment of one year's salary upon
termination of employment by reason of death or disability (less any amounts
paid to such individuals under any disability plans), and (ii) with respect to
the termination of any of these individuals other than for "cause", the payment
of a pro rata portion of any bonuses or incentive compensation payable with
respect to any period commencing prior to the date of such individual's
termination. In addition, the employment agreements provide that each executive
will not compete with Brylane for a period of twelve months after termination
(subject to certain exceptions), unless the executive terminates his or her
employment for "good reason".
The Partnership has entered into employment agreements with each of Mr. Rao
and Ms. Meyrowitz, which agreements commenced on April 1, 1998 and will expire
on or about March 31, 2001. These agreements provide for annual salaries of
$400,000 for Mr. Rao and $370,000 for Ms. Meyrowitz and for participation in
Chadwick's performance bonus programs. In the event the employment of either of
these individuals is terminated without "cause" or if the individual resigns for
"good reason" (as such terms are defined in the employment agreements) the
Partnership will be required to pay such individual's base salary (reduced by
compensation from other employment after the first 12 months of the period) for
the longer of (i) one year or (ii) the remainder of the term of the applicable
employment agreement, continue certain benefits, and make prorated bonus
payments. The Rao and Meyrowitz employment agreements also provide for the
payment of an amount equal to two times such individual's annual base salary,
along with certain additional benefits, in the event such individual's
employment terminates under certain circumstances for the two year period
following a "change of control" (as defined). Upon a change of control, whether
or not an individual's employment terminates, the agreements provide for the
immediate, lump sum payment of certain bonus amounts. In addition, these
employment agreements provide that, subject to certain exceptions, such
executives will not compete with the Partnership for a period of 12 months after
termination of employment by the Partnership under certain circumstances.
STOCK SUBSCRIPTION PLANS
In connection with the Incorporation Plan, the Company adopted the Brylane
Inc. 1996 Stock Subscription Plan (the "Brylane Subscription Plan"), which in
part acts as a successor to a stock subscription plan (as amended, the
"Subscription Plan") adopted by VP Holding Corporation, a Delaware corporation
and wholly-owned subsidiary of the Company ("VP Holding"), in connection with
the acquisition of the Lane Bryant, Roaman's and Lerner catalog business
formerly owned and operated by The Limited (the "Brylane Acquisition").
Participants in the Brylane Subscription Plan are all of the members of
management of Brylane other than the Named Executive Officers, Messrs. Johnson,
Bennett and Brosius, and Ms. Noriega-Wilson. In addition, the Company has
adopted the Brylane Inc. 1996 Senior Management Stock Subscription Plan (the
"Senior Management Plan", and collectively with the Brylane Subscription Plan,
the "Stock Subscription Plans"), which in part acts as a successor to the
Subscription Plan with respect to the shares of VP Holding purchased by the
Named Executive Officers, Messrs. Johnson, Bennett and Brosius, and Ms. Noriega-
Wilson (collectively, the "Senior Management Investors"). The Company has
reserved 653,000 shares of Common Stock for issuance under the Stock
Subscription Plans collectively, of which 145,000 shares remain available for
issuance.
16.
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Pursuant to the Stock Subscription Plans, the following individuals
purchased the number of shares of Common Stock set forth after their names at a
purchase price of $10.00 per share: Mr. Canzone, 100,000; Ms. Garelik, 40,000;
Mr. Pulciani, 25,000; Mr. Doyle, 5,000; Mr. Johnson, 30,000; Mr. McGrain,
15,000; Mr. Silbert, 20,000; Ms. Silverman, 15,000; Mr. Bennett, 22,500; Mr.
Brosius, 22,500; and Mr. Clark, 25,000. For these individuals, $500,000,
$200,000, $125,000, $50,000, $0, $150,000, $100,000, $75,000, $112,500, $112,500
and $125,000 of their purchase price, respectively, was financed through the
delivery of promissory notes on the terms described below. Pursuant to the
Stock Subscription Plans, Ms. Noriega-Wilson purchased 15,000 shares of Common
Stock at a purchase price of $15.00 per share, for which $112,500 of the
purchase price was financed through the delivery of a promissory note on the
terms described below. Participants who chose not to pay the entire purchase
price of their subscription in cash could elect to pay up to 50% of such
purchase price through the delivery of a five-year, full recourse promissory
note, bearing interest at the rate of interest designated by Morgan Guaranty as
the prime rate at the time of purchase (which at the time of the Brylane
Acquisition was approximately 6%). In a few instances, the portion of the
purchase price paid by promissory note was greater than 50% of the total
purchase price. Accrued interest on the promissory notes is payable quarterly,
and the principal balance of, including all accrued and unpaid interest on, the
promissory notes is payable in full at maturity. The shares of Common Stock
purchased by such individuals who partially financed their purchases in this
manner have been pledged to the Company in order to secure repayment of the
notes. As of April 3, 1998, of the aggregate purchase price of approximately
$5.2 million paid for the shares of Common Stock purchased by such individuals
(net of repurchases), promissory notes in the aggregate amount of approximately
$40,000 remained outstanding.
OPTION PLANS
Brylane 1996 Performance Option Plan
In connection with the Incorporation Plan, the Company adopted the Brylane
Inc. 1996 Performance Stock Option Plan (the "Brylane 1996 Performance Option
Plan"), which acts as the successor to the Partnership's 1993 Performance
Partnership Unit Option Plan (as amended, the "1993 Option Plan") which was
adopted in connection with the Brylane Acquisition. An aggregate of 779,584
shares of Common Stock have been reserved for issuance under the Brylane 1996
Performance Option Plan. As amended, all options granted under the Brylane 1996
Performance Option Plan terminate 10 years from the date of grant of the options
under the 1993 Option Plan, if not sooner due to termination of employment.
Messrs. Canzone, Pulciani, Doyle, Johnson, McGrain, Silbert, Bennett,
Brosius and Clark, and Mmes. Garelik, Silverman and Noriega-Wilson have been
granted the right to purchase 250,000, 36,459, 3,750, 20,000, 11,250, 20,000,
31,250, 31,250, 34,375, 43,750, 11,250 and 15,000 shares of Common Stock,
respectively, at a price of $15.00 per share.
As of April 3, 1998, options for the purchase of 65,725 shares of Common
Stock at a purchase price of $15.00 per share were outstanding and exercisable
under the Brylane 1996 Performance Option Plan, and options for the purchase of
160,000 shares remained available for issuance. As of April 3, 1998, options to
purchase an aggregate of 553,859 shares of Common Stock had been exercised under
the Brylane 1996 Performance Option Plan.
Brylane 1996 Option Plan
In connection with the Incorporation Plan, the Company adopted the Brylane
Inc. 1996 Stock Option Plan (the "Brylane 1996 Option Plan"), which acts as the
successor to the Partnership's 1995 Partnership Unit Option Plan (as amended,
the "1995 Option Plan") which was adopted in connection with the Brylane
Acquisition. As amended, an aggregate of 1,700,000 shares of Common Stock have
been reserved for issuance under the Brylane 1996 Option Plan. Other than as
described below, all options become exercisable in three equal annual
installments on the first, second and third anniversaries of the date of
original grant (including, if relevant, the date of grant of the options under
the 1995 Option Plan). As amended, all options granted under the Brylane 1996
Option Plan terminate seven to ten years from the date of original grant
(including, if relevant, the date of grant of the options under the 1995 Option
Plan), if not sooner due to termination of employment.
17.
<PAGE>
Messrs. Canzone, Johnson, Pulciani, Silbert, Doyle, McGrain, Bennett,
Brosius and Clark, and Mmes. Garelik, Noriega-Wilson and Silverman have been
granted the right to purchase 20,000, 25,000, 6,000, 6,000, 1,000, 3,000, 5,000,
5,000, 5,500, 10,000, 4,000 and 4,000 shares of Common Stock, respectively, at a
price of $15.00 per share and a term of seven years. Messrs. Canzone, Pulciani,
Silbert, Doyle, McGrain, Bennett, Brosius and Clark, and Mmes. Garelik, Noriega-
Wilson and Silverman have been granted the right to purchase 24,000, 12,000,
6,000, 2,000, 4,000, 6,000, 6,000, 5,000, 18,000, 6,000 and 6,000 shares of
Common Stock, respectively, at a price of $19.00 per share and a term of seven
years. Messrs. Canzone, Pulciani, Silbert, Doyle, McGrain, Bennett, Brosius,
Clark, Johnson and Rao, and Mmes. Garelik, Noriega-Wilson, Silverman and
Meyrowitz have been granted the right to purchase 25,000, 15,000, 3,000, 3,000,
3,000, 3,000, 5,000, 2,500, 10,000, 17,000, 17,000, 5,000, 6,000 and 15,000
shares of Common Stock, respectively, at a price of $36.00 per share and a term
of seven years. Messrs. Canzone, Pulciani, Silbert, Doyle, McGrain, Bennett,
Brosius, Clark and Rao, and Mmes. Garelik, Meyrowitz, Noriega-Wilson and
Silverman have been granted the right to purchase 25,000, 18,000, 7,000, 4,000,
3,000, 5,000, 5,000, 3,500, 20,000, 20,000, 18,000, 5,000 and 5,000,
respectively, at a price of $54.75 per share and a term of seven years. Mr.
Silbert has been granted the right to purchase 5,000 shares of Common Stock at a
price of $41.00 per share and a term of seven years. In addition, Mr. Rao and
Ms. Meyrowitz have each been granted the right to purchase 25,000 shares of
Common Stock at a price of $20.00 per share, which options expire on December 9,
2006. In addition, in connection with the Chadwick's Acquisition, Mr. Rao and
Ms. Meyrowitz were granted options to purchase 2,269 and 1,861 shares of Common
Stock, respectively, at a price of $9.92 per share, in exchange for certain of
their options to purchase TJX common stock. Such options vest in full on
September 20, 1997 and expire on September 20, 2004. Finally, also in
connection with the Chadwick's Acquisition, Mr. Rao and Ms. Meyrowitz were
granted options to purchase 6,033 and 4,536 shares of Common Stock,
respectively, at a price of $5.67 per unit, in exchange for certain of their
options to purchase TJX common stock. Such options vest in equal 50% increments
on September 6, 1997 and September 6, 1998, and expire on September 6, 2005. On
May 22, 1997, Mr. Starrett was granted an option to purchase 2,000 shares of
Common Stock, at a price of $29.875 per share and a term of seven years, as well
as an additional option to purchase 3,347 shares of Common Stock, at a price of
$25.40 per share, which option vests in full on May 22, 1998 and expires on May
22, 2004. On March 31, 1998, Messrs. Johnson and Starrett were, and on April 3,
1998, Ms. Campbell was granted options to purchase 3,000 shares of Common Stock,
at a price of $54.75 per share and a term of seven years.
As of April 3, 1998, options for the purchase of 84,759 shares of Common
Stock at a purchase price of $15.00 per share, options for the purchase of
123,575 shares of Common Stock at a purchase price of $19.00 per share, options
for the purchase of 81,684 shares of Common Stock at a purchase price of $20.00
per share, options for the purchase of 2,000 shares of Common Stock at a
purchase price of $29.875 per share, options for the purchase of 3,347 shares of
Common Stock at a purchase price of $25.40 per share, options for the purchase
of 5,000 shares of Common Stock at a purchase price of $41.00 per share,
substitute options (issued in connection with the Chadwick's Acquisition) for
the purchase of 952 shares of Common Stock at a purchase price of $9.92 per
share, options for the purchase of 253,250 shares of Common Stock at a purchase
price of $36.00 per share, substitute options (issued in connection with the
Chadwick's Acquisition) for the purchase of 23,002 shares of Common Stock at a
purchase price of $5.67 per share, options to purchase 279,900 shares of Common
Stock at a purchase price of $54.75 per share, were outstanding under the
Brylane 1996 Option Plan, and options for the purchase of 721,131 shares
remained available for issuance.
As of April 3, 1998, options to purchase an aggregate of 121,400 shares of
Common Stock had been exercised under the Brylane 1996 Option Plan.
18.
<PAGE>
The following table sets forth information concerning options granted to
the Named Executive Officers of the Company during fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL RATES
------------------------------------------------- OF STOCK PRICE
% OF TOTAL APPRECIATION FOR OPTION
NUMBER OF OPTIONS TERM (3)
SECURITIES GRANTED TO --------------------------
UNDERLYING EMPLOYEES EXERCISE OR
OPTIONS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED YEAR ($/SH)(1) DATE(2) 5%($) 10%($)
- --------------------- ----------- ---------- ----------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Peter J. Canzone..... 25,000 9.31 36.00 7/24/04 366,300 854,100
Sheila R. Garelik.... 17,000 6.33 36.00 7/24/04 249,084 580,788
Robert A. Pulciani... 15,000 5.59 36.00 7/24/04 219,780 512,460
Dhananjaya K. Rao.... 17,000 6.33 36.00 7/24/04 249,084 580,788
Carol Meyrowitz...... 15,000 5.59 36.00 7/24/04 219,780 512,460
</TABLE>
_____________________
(1) The exercise price per share of these options was equal to the fair market
value of the Common Stock on July 24, 1997, the date of grant.
(2) These options were granted under the Brylane 1996 Option Plan and will
terminate seven years from the date of grant (if not sooner due to
termination of employment). These options become exercisable in three equal
installments on the first, second and third anniversaries of the date of
grant. See "--Option Plans".
(3) The potential realizable value is calculated based on the term of the option
at its time of grant. It is calculated assuming that the stock price on the
date of grant appreciates at the indicated annual rate compounded annually
for the entire term of the option, and that the option is exercised and sold
on the last day of its term for the appreciated stock price. No gain to the
optionee is possible unless the stock price increases over the option term,
which will benefit all stockholders.
The following table sets forth information concerning the number and value
of securities underlying unexercised options held by each of the Named Executive
Officers as of January 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT JANUARY 31, THE-MONEY OPTIONS AT
VALUE 1998(#)(1) JANUARY 31, 1998($)(2)
SHARES ACQUIRED REALIZED ------------------------- -------------------------
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Peter J. Canzone..... -- -- 271,333/47,667 9,396,822/1,067,428
Sheila R. Garelik.... -- -- 56,416/32,334 1,936,456/718,607
Robert A. Pulciani... 8,000 246,125 36,459/25,000 1,266,950/521,750
Dhananjaya K. Rao.... 13,618 502,718 0/36,684 0/862,583
Carol Meyrowitz...... 12,462 450,822 0/33,935 0/802,067
</TABLE>
_____________________
(1) Represent options granted under the Brylane 1996 Performance Option Plan and
the Brylane 1996 Option Plan.
(2) These values are calculated using the last reported sale price of the Common
Stock on the NYSE on January 30, 1998 of $49.75 per share, less the exercise
price of the options.
RETIREMENT PLANS
All of the Company's nonunion employees over 21 years of age are eligible
to participate in the Brylane, L.P. Savings and Retirement Plan (the "Retirement
Plan") after one year of employment. The Retirement Plan allows eligible
employees to make pre-tax contributions up to the lesser of $9,500 or 10% of
their compensation.
19.
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All amounts contributed by employees are immediately fully vested. The Company
matches 100% of employee contributions to the Retirement Plan up to a maximum
employer contribution of 3% of the employee's compensation. In addition, the
Company makes additional contributions to the Retirement Plan equal to 4% of
each participant's compensation up to the Social Security taxable wage base for
the year (which was $65,400 for 1997) and equal to 7% of each participant's
total compensation which exceeds that amount. An additional 1% of compensation
is contributed by the Company on behalf of those participants who have completed
at least five years of service. The Company's contributions begin to vest after
three years of service, at which time such contributions are 20% vested.
Thereafter, the contributions vest at a rate of 20% each year so that the
Company's contributions are fully vested after seven years of service.
Notwithstanding the foregoing, the Company's contributions fully vest when the
employee reaches age 65, dies or becomes disabled while employed by the Company.
Benefits under the Retirement Plan are paid in the form of a lump sum
distribution following termination of employment. In certain circumstances,
participants may be entitled to receive a distribution prior to termination of
employment. Participants may borrow from the Retirement Plan up to 50% of their
vested funds.
In addition to the Retirement Plan, the Company maintains the Brylane, L.P.
Supplemental Retirement Plan for certain highly compensated employees (the
"Supplemental Retirement Plan"). The Supplemental Retirement Plan allows an
eligible employee to receive the contributions which the employee would
otherwise receive under the Retirement Plan, except for certain limitations
imposed by the Code. An individual will receive such a contribution only if he
or she is employed by the Company on the last day of the year. Gains and losses
are credited to such employee account at a rate of 7-3/4%, compounded annually.
Vesting of contributions to the Supplemental Retirement Plan occurs at the
same rate as the Company's contributions to the Retirement Plan. The nonvested
portion of any account is forfeited upon termination of employment. Benefits
under the Supplemental Retirement Plan are paid in the same manner as under the
Retirement Plan. The benefits under the Supplemental Retirement Plan are not
funded, consisting of unsecured liabilities payable by the Company out of its
general assets.
DEFERRED COMPENSATION PLAN
The Company has adopted the Brylane, L.P. Deferred Compensation Plan for
eligible employees (the "Deferred Compensation Plan"). The Deferred
Compensation Plan credits participants' accounts with amounts of compensation,
up to 90% of compensation, which they defer voluntarily pursuant to elections
made prior to the period with respect to which such compensation is earned
("Deferrals"). The Deferrals will not be subject to federal income tax at the
time of the Deferral. Each participant's Deferrals are fully vested at all
times. Further, the Company may cause matching contributions to be credited to
certain participants' accounts at its discretion. Matching contributions
credited to the participants' accounts vest in the same manner as under the
Retirement Plan. A participant's account is payable at such time and in the
same manner as under the Retirement Plan.
Participation in the Deferred Compensation Plan is at the discretion of the
Board. Participants' accounts in the Deferred Compensation Plan will be
credited with interest at a rate specified by a committee of members of the
Board (currently the greater of LIBOR plus 2.0% or 7-3/4%). The benefits under
the Deferred Compensation Plan are not funded, consisting of unsecured
liabilities payable by the Company out of its general assets. Participants may
elect to have benefits paid in the form of lump-sum distributions or over a
period of time. Since December 1993, the Company has made pay-outs in the
approximate aggregate amount of $383,675 to certain former employees and one
former executive officer under the Deferred Compensation Plan.
PERFORMANCE BONUS PROGRAM
The Company (and its subsidiaries) have a semi-annual performance bonus
program based upon goals relating to the Company's operating profit. Such goals
are established at the beginning of each six-month season based upon a review by
the Board of management's operating budget for that season. Each participant in
such program may receive a bonus based on a certain percentage of half of his or
her annual salary, with the actual bonus amount to be based upon the extent to
which the operating profit goals for that season are met or exceeded.
20.
<PAGE>
CHADWICK'S MANAGEMENT INCENTIVE PLAN
In connection with the Chadwick's Acquisition, Brylane adopted the
Chadwick's Management Incentive Plan (the "Chadwick's MIP"). The Chadwick's MIP
is intended to provide key officers and associates of the Company's Chadwick's
division with cash incentive opportunities based on annual performance goals.
The Chadwick's MIP is administered by the Company's Compensation Committee,
which has full authority to grant awards, including selecting the relevant
performance criteria thereunder, adjusting performance criteria or award amounts
in certain circumstances, and amending the terms of such plan. At the beginning
of each fiscal year, the Compensation Committee determines a range of
performance goals from minimum to target to maximum, and for each participant
determines the relative weights of these performance goals and the award amounts
payable upon attainment of the goals.
CHADWICK'S LONG RANGE MANAGEMENT INCENTIVE PLAN
In connection with the Chadwick's Acquisition, Brylane adopted the
Chadwick's Long Range Management Incentive Plan (the "Chadwick's LRMIP"). The
Chadwick's LRMIP is administered by the Compensation Committee, which has full
authority to grant awards, including selecting the relevant performance criteria
thereunder, adjusting the performance criteria or award amounts in certain
circumstances, and amending the terms of such plan. Awards under the Chadwick's
LRMIP are generally made annually for each successive rolling three-year cycle.
At the time of award, the Compensation Committee determines a range of
performance goals for the three-year award cycle, from minimum to target to
maximum, and for each participant determines the relative weights of these
performance goals and the award amounts payable upon attainment of the goals.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a description of certain transactions and arrangements involving
directors of the Company, see "Proposal 1--Election of Directors--Arrangements
with PPR". For the fiscal year ended January 31, 1998, the Company paid to Mr.
Johnson, a director of the Company, an annual consulting fee of $75,000.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Company has a Compensation Committee of its Board of Directors which
currently consists of Messrs. Starrett, Kramer and Weinberg and Ms. Campbell.
Messrs. Kramer and Weinberg are two of the five PPR nominees to the Board. Ms.
Campbell and Mr. Starrett each receive a per meeting fee of $1,000, and at their
election, an annual stipend of $25,000 or stock options at a price equal to 85%
of the prevailing market price on the date of grant such that the "in the money"
value of such options at the date of grant equals $25,000, as well as additional
annual stock options at a price equal to the prevailing market price on the date
of grant pursuant to the Brylane 1996 Option Plan. On May 22, 1997, Mr.
Starrett was granted options to purchase 2,000 shares of Common Stock, at a
price of $29.875 per share, as well as additional options to purchase 3,347
shares of Common Stock, at a purchase price of $25.40 per share, pursuant to the
Brylane 1996 Option Plan. See "Executive Officers, Compensation and Other
Information--Stock Subscription Plans" and "--Option Plans".
21.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee recommends to the Board general compensation
policies for the Company, oversees the Company's compensation plans and specific
compensation levels for executive officers, and administers the Brylane 1996
Performance Option Plan, the Brylane 1996 Option Plan and the Stock Subscription
Plans.
The following is the Compensation Committee's report submitted to the Board
of Directors addressing the compensation of the Company's executive officers for
fiscal 1997.
COMPENSATION POLICY
The Company's executive compensation policy is designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long-term growth objectives and its ability to attract and
retain qualified executive officers. The Compensation Committee attempts to
achieve these goals by integrating competitive annual base salaries with (a)
bonuses based on corporate performance and on the achievement of specified
performance objectives through the Bonus Program, the Chadwick's MIP and the
Chadwick's LRMIP and (b) executive stock options. The Compensation Committee
believes that cash compensation in the form of salary and bonus provides Company
executives with short term rewards for success in operations, and that long term
compensation through the award of stock options encourages growth in management
stock ownership which leads to expansion of management's stake in the long term
performance and success of the Company.
Base Salary. In determining the base salary of each of the executive
officers, the Company periodically reviews surveys of salaries paid to executive
officers in comparable positions and with similar responsibilities as the
Company's executive officers by publicly traded companies in the retail catalog
industry that have sales volumes comparable to the Company's. The Company also
considers merit and the executive officer's performance in the prior year.
Bonuses. Annual incentives under the Bonus Program for the Chief Executive
Officer and under the Bonus Program, the Chadwick's MIP and the Chadwick's LRMIP
for the other Named Executive Officers are intended to reflect the Company's
belief that management's bonuses should provide incentives to maximize earnings
and the quality of those earnings. Awards under the Bonus Program are based on
the attainment of specified Company performance objectives, and the target bonus
amount is determined as a percentage of the recipient's base salary. Awards
under the Chadwick's MIP and the Chadwick's LRMIP are based on the attainment of
a range of performance goals from minimum to target to maximum, and the
Compensation Committee determines the relative weights of such performance goals
and the award amounts payable upon attainment of the goals for each participant.
For 1997, participants in the Bonus Program other than the Chief Executive
Officer maintained their prior year's baseline target bonus amounts equal to
102.1% of the base salaries paid to such persons. The target bonus amount for
the Chief Executive Officer remained at 56.5% of his base salary. Bonuses
payable under the Bonus Program, the Chadwick's MIP and the Chadwick's LRMIP
range from zero to two times the base salary, and depend on the level of
achievement of the specified performance objectives. For 1997, the performance
objective necessary to achieve the baseline amount was the attainment of a
specified operating profit.
Stock Options. The Compensation Committee believes that stock option
grants afford a desirable long-term compensation method because they closely
ally the interests of management with stockholder value, and that grants of
stock options are the best way to link directly the financial interests of
management with those of stockholders.
In July 1997, the executive officers of the Company, including the Chief
Executive Officer, were each granted options under the Brylane 1996 Option Plan,
and in October 1997, one of the Company's executive officers was granted an
additional option under the Brylane 1996 Option Plan. In each case, the number
of options that each executive officer or employee was granted was based
primarily on the executive's or employee's ability to influence the Company's
long term growth and profitability. The vesting provisions of the options
granted under the Brylane 1996 Option Plan are designed to encourage longevity
of employment with the Company.
22.
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee believes that Mr. Canzone, the Company's Chief
Executive Officer, provides valuable services to the Company, and that his
compensation should therefore be competitive with that paid to executives at
comparable companies. In addition, the Compensation Committee believes that the
compensation of the Chief Executive Officer should be heavily influenced by
Company performance. Therefore, although there is necessarily some subjectivity
in setting Mr. Canzone's salary, major elements of his compensation package are
directly tied to Company performance.
In fiscal 1997, Mr. Canzone's base salary was $577,917, an amount that the
Compensation Committee believes is generally comparable to salaries for other
executive officers in Mr. Canzone's position, as set forth in the surveys of
salaries paid to executive officers of other publicly traded companies in the
retail catalog industry with sales volumes comparable to the Company's. In
fiscal 1997, Mr. Canzone's bonus was $326,332, 56.5% of his annual salary.
INTERNAL REVENUE CODE SECTION 162(m)
Under Section 162 of the Code, the amount of compensation paid to certain
executives that is deductible with respect to the Company's corporate taxes is
limited to $1,000,000 annually. It is the current policy of the Compensation
Committee to maximize, to the extent reasonably possible, the Company's ability
to obtain a corporate tax deduction for compensation paid to executive officers
of the Company to the extent consistent with the best interests of the Company
and its stockholders.
The foregoing report has been furnished by Mr. Starrett. Messrs. Fried,
Roth and Spogli served on the Compensation Committee until April 3, 1998 when
each resigned from the Board and the Compensation Committee in connection with
the PPR Stock Purchase.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") ("Section 16(a)") requires the Company's directors and certain
of its officers, as well as persons who own more than 10% of a registered class
of the Company's equity securities (collectively, "Insiders"), to file reports
of ownership and changes in ownership with the Commission. Insiders are
required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5s were
required for those persons, the Company believes that its Insiders complied with
all applicable Section 16(a) filing requirements for fiscal 1997, with the
exception of Messrs. Bennett, Clark, Doyle, McGrain and Silbert and Mmes.
Noriega-Wilson and Silverman, each of whom filed a late Form 4 to report
acquisitions of Common Stock made in connection with the Company's directed
shares program that was part of its February 1997 initial public offering, and
Jessie Bourneuf, who reported late on a Form 5 an option previously granted to
her in connection with the Partnership's acquisition of the KingSize catalog
division of Wearguard, a wholly-owned subsidiary of ARAMARK Corporation, in
October 1995.
23.
<PAGE>
COMPANY PERFORMANCE
The following graph illustrates the change, over the 11-month period in fiscal
1997 commencing with the Company's initial public offering in February 1997, in
the value of $100 invested in Common Stock of the Company, the Standard & Poor's
500 Composite Stock Price Index and the Standard & Poor's Retail Stores
Composite Index (which does not include the Company). The plotted points
represent the closing price on the last day of fiscal 1997.
COMPARISON OF 11 MONTH CUMULATIVE TOTAL RETURN*
AMONG BRYLANE INC., THE S&P 500 INDEX AND S&P RETAIL COMPOSITE INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period BRYLANE S&P S&P
(Fiscal Year Covered) INC. 500 INDEX RETAIL
- --------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 2/28/97 $100.00 $100.00 $100.00
FYE 1/31/98 $207.29 $123.96 $135.42
</TABLE>
*ASSUMES $100 INVESTED ON FEBRUARY 26, 1997 IN THE COMPANY'S COMMON STOCK OR ON
MARCH 1, 1997 IN EACH INDEX. FISCAL YEAR ENDING JANUARY 31.
The information contained above under the captions "Report of the
Compensation Committee of the Board of Directors" and "Company Performance"
shall not be deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission, nor shall such information be incorporated
by reference into any future filing under the Securities Act of 1933, as
amended, or the Exchange Act, except to the extent that the Company specifically
incorporates it by reference into such filing.
24.
<PAGE>
OTHER BUSINESS
The Company is not aware of any other business to be presented at the 1998
Annual Meeting. All shares represented by Company proxies will be voted in
favor of the proposals of the Company described herein unless otherwise
indicated on the form of proxy. If any other matters properly come before the
meeting, Company proxy holders will vote thereon according to their best
judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder who wishes to present a proposal for action at the 1999
annual meeting of stockholders and who wishes to have it set forth in the
corresponding proxy statement and identified in the corresponding form of proxy
prepared by management must notify the Company no later than December 30, 1998
in such form as required under the rules and regulations promulgated by the
Commission.
ANNUAL REPORTS
A copy of the 1998 Annual Report to Stockholders is being mailed to each
stockholder of record together with this Proxy Statement. The Company has also
filed with the Commission its Annual Report on Form 10-K for the fiscal year
ended January 31, 1998. A COPY OF THE ANNUAL REPORT ON FORM 10-K WILL BE
FURNISHED TO STOCKHOLDERS WITHOUT CHARGE UPON REQUEST IN WRITING TO Robert A.
Pulciani at 463 7/th/ Avenue, 21/st/ Floor, New York, New York 10018. Such
reports are not a part of the Company's soliciting material.
By Order of the Board of Directors
Robert A. Pulciani
Secretary
New York, New York
April 29, 1998
25.
<PAGE>
EXHIBIT A
BRYLANE INC.
1998 PERFORMANCE STOCK OPTION PLAN
Section 1. Description of Plan. This is the 1998 Performance Stock
-------------------
Option Plan, dated April 21, 1998 (the "Plan"), of Brylane Inc., a Delaware
corporation (the "Company"). Under this Plan, officers, key employees and
consultants of the Company or any of its subsidiaries and members of the Board
of Directors of the Company, to be selected as set forth below, may be granted
options ("Options") to purchase shares of the common stock of the Company
("Common Stock"). For purposes of this Plan, the term "subsidiary" means any
directly or indirectly majority or wholly owned entity of the Company
(individually, a "Subsidiary" and collectively, the "Subsidiaries"). It is
intended that the Options under this Plan will either qualify for treatment as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") and be designated "Incentive Stock Options" or not
qualify for such treatment and be designated "Nonqualified Stock Options."
Incentive Stock Options may only be granted to employees.
Section 2. Purpose of Plan. The purpose of the Plan and of granting
---------------
Options to specified persons is to promote the growth, development and financial
success of the Company and its Subsidiaries by providing additional incentives
to certain officers, key employees, consultants and members of the Board of
Directors (or equivalent bodies) of the Company and its Subsidiaries which will
be realized by such persons if the Company achieves targeted performance goals
as specified in particular option grants. By linking such Options to the
Company's financial performance, the Company can provide the means for such
persons to benefit directly from the Company's and its Subsidiaries' growth,
development and financial success. In furtherance of such purposes, Options
granted under the Plan shall be subject to performance criteria established as
provided herein (and may also be subject to time vesting).
Section 3. Eligibility. The persons who shall be eligible to receive
-----------
grants of Options under the Plan shall be (a) the officers, key employees and
consultants of the Company and the Subsidiaries and (b) members of the Board of
Directors (or equivalent bodies) of the Company and its Subsidiaries. A person
who holds an Option is herein referred to as a "Participant," and more than one
Option may be granted to any Participant.
The aggregate fair market value (determined as of the time an Option
is granted) of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by any Participant in any calendar year under
this Plan and any other incentive stock option plans (which qualify under
Section 422 of the Code) of the Company or any Subsidiary shall not exceed
$100,000.
Section 4. Administration.
--------------
(a) The Plan shall be administered by the Compensation Committee of
the Board of Directors of the Company (the "Committee") to be composed of not
less than two members of the Board. Members of the Committee shall be
appointed, both initially and as vacancies occur, by the Board, to serve at the
pleasure of the Board. A majority of its members shall constitute a quorum, and
the decision of a majority of those present at any meeting at which a quorum is
present shall constitute the decision of the Committee. A memorandum signed by
all of its members shall constitute the decision of the Committee without
necessity, in such event, for holding an actual meeting.
(b) The Committee is authorized and empowered to administer the Plan
and, subject to the Plan, (i) to select the Participants, to determine the
number of shares of Common Stock that are subject to each Option, to grant
Options, and to extend the time period during which an Option may be exercised;
(ii) to determine the dates upon which Options shall be granted and the terms
and conditions thereof (including the performance criteria and any related
matters), which terms and conditions need not be identical as to the various
<PAGE>
Options granted; (iii) to determine which Options are to be Incentive Stock
Options and which Options are to be Nonqualified Stock Options; (iv) to
interpret the Plan; (v) to prescribe, amend and rescind rules relating to the
Plan; (vi) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously granted by
the Committee; (vii) to determine the rights and obligations of Participants
under the Plan; (viii) to specify the exercise price to be paid by Participants
upon exercise of an Option; (ix) to accelerate the time during which an Option
may be exercised in accordance with the provisions of Section 16 hereof, and to
otherwise accelerate the time during which an Option may be exercised (but not
reduce the time of exercise for Options which have vested), in each case
notwithstanding the provisions in the Option Agreement (as defined in Section
13) stating the time during which it may be exercised; and (x) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
The interpretation and construction by the Committee of any provision of the
Plan or of any Option granted under it shall be final, conclusive and binding.
No member of the Committee shall be liable for any action or determination made
with respect to the Plan or any Option granted hereunder.
Section 5. Shares Subject to Plan. The aggregate amount of shares of
----------------------
Common Stock for which Options may be granted pursuant to the Plan shall be
900,000 subject to adjustment as provided in Section 11 hereof. The maximum
number of shares that may be granted to a single Participant is 500,000. The
number of shares of Common Stock which may be purchased by a Participant upon
exercise of each Option shall be determined by the Committee and set forth in
each Option Agreement. Upon the expiration or termination, in whole or in part,
for any reason of an outstanding Option or any portion thereof which shall not
have vested or shall not have been exercised in full or in the event that any
shares of Common Stock acquired pursuant to the Plan are reacquired by the
Company, (a) any shares of Common Stock which have not been purchased or (b) the
shares of Common Stock reacquired, as the case may be, shall again become
available for the granting of additional Options under the Plan.
Notwithstanding the preceding sentence, shares subject to a terminated option
shall continue to be considered to be outstanding for purposes of determining
the maximum number of shares that may be issued to a single Participant.
Similarly, the repricing of an Option will be considered the grant of a new
Option for this purpose.
Section 6. Option Price. Except as provided in Section 11 or Section
------------
12 hereof, the purchase price per share (the "Option Price") of the shares of
Common Stock underlying each Option shall not be less than 100 percent of the
fair market value of such shares on the date of grant of Option; provided,
however, that if the Participant is a 10-percent stockholder of the Company (as
defined in Code Section 422(b)(6)) immediately before such Participant is
granted an Incentive Stock Option, the Option Price shall be not less than 110
percent of said fair market value. Such fair market value shall be determined
by the Committee (a) if the Company's securities are traded on a national
securities exchange or on the National Association of Securities Dealers
Automated Quotation System (or a similar successor system), on the basis of the
reported closing sales price on such date or, in the absence of a reported sales
price on such date, on the basis of the average of the reported closing bid and
asked price on such date, or (b) in the absence of both a reported sales price
and a reported bid and asked price under clause (a), the Committee shall
determine such fair market value on the basis of such evidence as it deems
appropriate in its sole discretion.
Section 7. Terms and Restrictions on Grants of Options.
-------------------------------------------
Notwithstanding any other provisions set forth herein or in any Option
Agreement, no Options may be granted under the Plan subsequent to 10 years from
the date hereof. The vesting of all Options may be based on the Company's
attaining of performance criteria as specified at the time of the granting
thereof and may also be based on the passage of time. The Committee shall
determine the performance criteria (which may be based, without limitation, on
financial performance criteria established for the Company, the stock prices of
the Company's publicly traded securities, or other factors determined by the
Committee), the performance measurement period and the vesting schedule
applicable to each Option or group of Options in a schedule, a copy of which
shall be filed with the records of the Committee and attached to each Option
Agreement to which the same applies. The performance criteria, the performance
measurement period and the vesting schedule need not be identical for all
Options granted hereunder. Following the conclusion of each applicable
performance measurement period, the Committee shall determine the extent, if at
all, to which each Option subject thereto shall have vested based upon the
applicable performance criteria and vesting schedule. To the extent each such
Option shall not have vested, and does not also vest based on the passage of
time, it shall, automatically terminate and cease to be exercisable to such
extent, notwithstanding
A-2
<PAGE>
the stated term during which it may be exercised. The Committee shall promptly
notify each affected Participant of such determination. The Committee may
periodically review the performance criteria applicable to any Option or Options
and, in its sole judgment, may adjust the same to reflect unanticipated major
events, including but not limited to catastrophic occurrences, mergers and
acquisitions.
Section 8. Exercise of Options. Once vested, and prior to its
-------------------
termination date, an Option may be exercised by the Participant by giving
written notice to the Company specifying the number of shares of Common Stock to
be purchased and accompanied by payment of the full purchase price therefor in
cash, by check or in such other form of lawful consideration as the Committee
may approve from time to time, including without limitation and in the sole
discretion of the Committee, the assignment and transfer by the Participant to
the Company of outstanding shares of Common Stock theretofore held by the
Participant in a manner intended to comply with the provisions of Rule l6b-3
under the Exchange Act, if applicable. After giving due considerations of the
consequences under Section 16 of the Exchange Act and under the Code, the
Committee may also authorize the exercise of Options by the delivery to the
Company or its designated agent of an irrevocable written notice of exercise
form together with irrevocable instructions to a broker-dealer to sell or margin
a sufficient portion of the shares of Common Stock and to deliver the sale or
margin loan proceeds directly to the Company to pay the exercise price of the
Option. Once vested, and prior to its termination date, an Option may only be
exercised by the Participant or in the event of death of the Participant, by the
person or persons (including the deceased Participant's estate) to whom the
deceased Participant's rights under such Option shall have passed by will or the
laws of descent and distribution. Notwithstanding the foregoing, in the event
of disability (within the meaning of Section 22(e)(3) of the Code) of a
Participant, a designee of the Participant (or the legal representative of the
Participant if the Participant has no designee) may exercise the Option on
behalf of such Participant (provided such Option would have been exercisable by
such Participant) until the right to exercise such Option expires, as set forth
in such Participant's particular Option Agreement or this Plan.
Section 9. Issuance of Common Stock. The Company's obligation to
------------------------
issue its shares of Common Stock upon exercise of an Option is expressly
conditioned upon the compliance by the Company with any registration or other
qualification obligations with respect to such shares of Common Stock under any
state and/or federal law or rulings and regulations of any government regulatory
body and/or the making of such investment representations or other
representations and undertakings by the Participant (or the Participant's
designee, legal representative, heir or legatee, as the case may be) in order to
comply with the requirements of any exemption from any such registration or
other qualification obligations with respect to such shares of Common Stock
which the Company in its sole discretion shall deem necessary or advisable.
Such required representations and undertakings may include representations and
agreements that such Participant (or the Participant's designee, legal
representative, heir or legatee): (a) is purchasing such shares of Common Stock
for investment and not with any present intention of selling or otherwise
disposing of such shares of Common Stock; and (b) agrees to have a legend placed
upon the face and reverse of any certificates evidencing such shares of Common
Stock (or, if applicable, an appropriate data entry made in the ownership
records of the Company) setting forth (i) any representations and undertakings
which such Participant has given to the Company or a reference thereto, and (ii)
that, prior to effecting any sale or other disposition of any such shares of
Common Stock, the Participant must furnish to the Company an opinion of counsel,
satisfactory to the Company and its counsel, to the effect that such sale or
disposition will not violate the applicable requirements of state and federal
laws and regulatory agencies; provided, however, that any such legend or data
entry shall be removed when no longer applicable without the necessity of an
opinion of counsel. Inability of the Company to obtain, from any regulatory
body having jurisdiction, authority deemed by the Company's counsel to be
necessary for the lawful issuance and sale of any shares of Common Stock
hereunder shall relieve the Company of any liability in respect of the
nonissuance or sale of such shares of Common Stock as to which such requisite
authority shall not have been obtained. Any shares of Common Stock issued by
the Company upon exercise of an Option granted hereunder may be subject to a
right of first refusal of the Company with respect to all shares of Common Stock
proposed to be transferred by Participant, as described in Section 13 hereof and
certain other restrictions set forth in each particular Option Agreement.
Section 10. Nontransferability. An Option may not be sold, pledged,
------------------
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent or distribution. Any permitted transferee shall
be required prior to any transfer of an Option or shares of Common Stock
acquired
A-3
<PAGE>
pursuant to the exercise of an Option to execute a written undertaking to be
bound by the provisions of the applicable Option Agreement.
Section 11. Recapitalization, Reorganization; Merger or Consolidation.
---------------------------------------------------------
(a) Subject to Section 11(b) hereof, if the outstanding shares of
Common Stock of the Company are exchanged for different securities of the
Company through a reorganization, recapitalization or reclassification or if the
number of outstanding shares is changed through a stock split or stock dividend,
an appropriate adjustment shall be made (i) in the number or kind of shares
which may be purchased pursuant to the exercise of Options, as provided in
Section 5 hereof, and (ii) in the number, exercise price, or kind of securities
subject to any outstanding Option granted under the Plan. Any such adjustment
in an outstanding Option, however, shall be made without change in the total
price applicable to the unexercised portion of the Option but with a
corresponding adjustment in the price for each share covered by the Option. In
making such adjustments, or in determining that no such adjustments are
necessary, the Committee may rely upon the advice of counsel and accountants to
the Company, and the determination of the Committee shall be final, conclusive
and binding. No fractional shares of stock shall be issued or issuable under
the Plan on account of any such adjustment.
(b) Subject to Section 16 hereof (i) upon the dissolution, liquidation
or sale of all or substantially all of the business, properties and assets of
the Company, (ii) upon any reorganization, merger, consolidation or exchange of
securities in which the Company does not survive or (iii) upon any
reorganization, merger, consolidation or exchange of securities in which the
Company does survive and any of the Company's stockholders have the opportunity
to receive cash, securities and/or other property in exchange for their shares
of Common Stock of the Company (each of the events described in clauses (i),
(ii) or (iii) is referred to herein as an "Extraordinary Event"), the Plan and
each outstanding Option shall terminate. In such event, each Participant who is
not tendered an option by the surviving entity in accordance with all of the
terms of the immediately succeeding sentence, or who does not accept any such
substituted option which is so tendered, shall have the right until 10 days
before the effective date of such Extraordinary Event to exercise, in whole or
in part, any unexpired Option or Options issued to the Participant, to the
extent that said Option is then vested and exercisable pursuant to the
provisions of said Option or Options and of Section 7 of the Plan. The Company
shall request that the surviving entity in any Extraordinary Event to tender to
any Participant an option or options to purchase other securities of the
surviving entity on the same basis as any Participant may purchase shares of
Common Stock hereunder and under the applicable Option Agreement (including
satisfaction of similar vesting provisions). The Company shall request that
such new option or options contain such terms and provisions as shall
substantially preserve the rights and benefits of any Option then outstanding
under the Plan with any changes to take into account the circumstances of the
surviving entity.
(c) The grant of an Option under the Plan shall not affect in any way
the right or power of the Company to make adjustments, reclassifications or
changes in its capital or business structures or to merge, consolidate,
dissolve, or liquidate or to sell or transfer all or any part of its business or
assets.
Section 12. Substitute Options. If the Company at any time should
------------------
succeed to the business of another entity through a merger, consolidation,
corporate reorganization or exchange, or through the acquisition of stock or
assets of such entity or its subsidiaries or otherwise, Options may be granted
under the Plan to option holders of such entity or its subsidiaries, in
substitution for options to purchase interests in such entity held by them at
the time of succession. The Committee, in its sole and absolute discretion,
shall determine the extent to which such substitute Options shall be granted (if
at all), the person or persons to receive such substitute Options (who need not
be all option holders of such entity), the number of Options to be received by
each such person, the Option Price of such Option (which may be determined
without regard to Section 6 hereof) and the terms and conditions of such
substitute Options; provided, however, that the Option Price of each such
substituted Option which is an Incentive Stock Option shall be an amount such
that, in the sole and absolute judgment of the Committee (and in compliance with
Section 424(a) of the Code), the economic benefit provided by such Option is not
greater than the economic benefit represented by the option in the acquired
entity as of the date of the Company's acquisition of such entity.
A-4
<PAGE>
Section 13. Option Agreement. Each Option granted under the Plan
----------------
shall be evidenced by a written option agreement (an "Option Agreement")
executed by the Company and the Participant which (a) shall contain each of the
provisions and agreements herein specifically required to be contained therein;
(b) shall indicate whether such Option is to be an Incentive Stock Option or a
Nonqualified Stock Option, and if an Incentive Stock Option shall contain terms
and conditions permitting such Option to qualify for treatment as an incentive
stock option under Section 422 of the Code; (c) may contain provisions which
give the Company a right of first refusal to purchase any shares of Common Stock
issued pursuant to the exercise of Options granted under the Plan which a
Participant proposes to sell and (d) may contain such other terms and conditions
as the Committee deems desirable and which are not inconsistent with the Plan.
Section 14. Rights as a Stockholder. No Participant (or any legal
-----------------------
representative, heir or legatee) shall have any rights as a stockholder with
respect to any shares covered by any Option until the date of the issuance of a
stock certificate to such person upon the due exercise of such Option. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 11 hereof.
Section 15. Termination of Options. Each Option granted under the
----------------------
Plan shall set forth a termination date thereof, in addition to any other
termination events set forth in the Plan and in each particular Option
Agreement, which, with respect to Nonqualified Stock Options, shall be no later
than ten years from the date such Option is granted and with respect to
Incentive Stock Options, shall be no later than ten years from the date such
Option is granted, unless the Participant is a 10-percent stockholder of the
Company (as described in Section 422(b)(6) of the Code) immediately before such
Option is granted, in which case the Option shall terminate no later than five
years from the date of the grant thereof. An Incentive Stock Option shall
contain any termination events required by Section 422 of the Code.
Section 16. Acceleration of Options. Notwithstanding the provisions
-----------------------
of Section 7 or Section 15 hereof, or any provision to the contrary contained in
a particular Option Agreement, the Committee, in its sole discretion, at any
time, or from time to time, may elect to accelerate the vesting of all or any
portion of any Option then outstanding. The decision by the Committee to
accelerate an Option or to decline to accelerate an Option shall be final,
conclusive and binding. In the event of the acceleration of the exercisability
of Options as the result of a decision by the Committee pursuant to this Section
16, each outstanding Option so accelerated shall be exercisable for a period of
at least five days from and after the date of such acceleration and upon such
other terms and conditions as the Committee may determine in its sole
discretion; provided, that such terms and conditions (other than terms and
--------
conditions relating solely to the acceleration of exercisability and the related
termination of an Option) may not adversely affect the rights of any Participant
without the consent of the Participant so adversely affected. Any outstanding
Option which has not been exercised by the holder at the end of such period
shall again become subject to the terms and conditions in effect prior to the
acceleration.
Section 17. Withholding of Taxes. The Company, or a Subsidiary, as
--------------------
the case may be, may deduct and withhold from the wages, salary, bonus and other
income paid by the Company (or such Subsidiary) to the Participant the requisite
tax upon the amount of taxable income, if any, recognized by the Participant in
connection with the exercise in whole or in part of any Option, or the sale of
shares of Common Stock issued to the Participant upon the exercise of an Option,
as may be required from time to time under any federal or state tax laws and
regulations. This withholding of tax shall be made from the Company's (or such
Subsidiary's) concurrent or next payment of wages, salary, bonus or other income
to the Participant or by payment to the Company (or such Subsidiary) by the
Participant of the acquired withholding tax, as the Committee may determine;
provided, however, that, in the sole discretion of the Committee, the
Participant may pay such tax by reducing the number of shares of Common Stock
issued upon exercise of an Option or by surrendering shares previously acquired
by the Participant (for which purpose such shares of Common Stock shall be
valued at fair market value as determined by the Committee, which determination
shall be final, conclusive and binding).
Section 18. Effectiveness and Termination of the Plan. The Plan shall
-----------------------------------------
become effective on April 21, 1998, subject to stockholder approval. All
Options granted prior to stockholder approval shall state that such grant is
subject to and the exercisability of such Options is contingent upon stockholder
approval. If the
A-5
<PAGE>
Plan is not approved by the stockholders, the Plan and any Options granted
thereunder shall terminate. The Plan shall terminate, in addition to the other
termination events set forth in the Plan, at the earliest of ten years and the
time when all shares of Common Stock which may be issued hereunder have been so
issued; provided, however, that the Board may in its sole discretion terminate
the Plan at any other time. Subject to Section 11 hereof, no such termination
shall in any way affect any Option then outstanding.
Section 19. Time of Granting Options. The date of grant of an Option
------------------------
shall, for all purposes, be the date on which the Committee makes the
determination granting such Option. Notice of the determination shall be given
to each Participant to whom an Option is so granted.
Section 20. Amendment of Plan. The Board of Directors of the Company
-----------------
may make such amendments to the Plan and, with the consent of each Participant
adversely affected, the Committee may make such changes in the terms and
conditions of granted Options as it shall deem advisable, taking into account
the provisions of Code Section 424(h) in the case of an Incentive Stock Option.
Such amendments and changes shall include, but not be limited to, acceleration
of the time at which an Option may be exercised, but may not, without the
approval of the stockholders (a) increase the maximum number of shares subject
to Options, except pursuant to Section 11 hereof, or (b) change the designation
of the class of employees eligible to receive Incentive Stock Options.
Section 21. Transfers and Leaves of Absence. For purposes of the
-------------------------------
Plan, (a) a transfer of a Participant's employment or consulting relationship,
without an intervening period, between the Company and a Subsidiary shall not be
deemed a termination of employment or a termination of a consulting relationship
and (b) a Participant who is granted in writing a leave of absence shall be
deemed to have remained in the employ of, or in a consulting relationship with,
the Company (or a Subsidiary, whichever is applicable) during such leave of
absence except that for purposes of exercising an Incentive Stock Option, the
Participant will be considered to have terminated employment on the 91st day of
the leave, unless his or her right to re-employment is guaranteed by statute or
contract.
Section 22. Indemnification. In addition to such other rights of
---------------
indemnification as they may have as members of the Board, the members of the
Committee shall be indemnified by the Company to the fullest extent permitted by
law against the reasonable expenses, including reasonable attorneys' fees,
actually and necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal therein, to which they or
any of them may be a party by reason of any action taken or failure to act under
or in connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in satisfaction of a judgment in any such action, suit or
proceeding except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Committee member is not entitled to
indemnification under applicable law; provided that within 60 days after
institution of any such action, suit or proceeding such Committee member shall
in writing offer the Company the opportunity, at the Company's expense, to
handle and defend the same, and that the Company shall not be required to
indemnify a person any amount incurred through any settlement unless the Company
consents in writing to the settlement.
Section 23. Not an Employment or Other Agreement. Nothing contained
------------------------------------
in the Plan or in any Option Agreement shall confer, intend to confer or imply
any rights of employment or any rights to a consulting or other relationship or
rights to continued employment by, or rights to a continued consulting or other
relationship with, the Company or any Subsidiary in favor of any Participant or
limit the ability of the Company, any Subsidiary or any other entity to
terminate, with or without cause, in its sole and absolute discretion, the
employment of, or consulting or other relationship with, any Participant,
subject to the terms of any written employment or consulting agreement to which
a Participant is a party.
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<PAGE>
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BRYLANE INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
FOR ANNUAL MEETING MAY 28, 1998
The undersigned hereby constitutes and appoints Peter J. Canzone,
Robert A. Pulciani and Serge Weinberg, and each of them, his true and
lawful agents and proxies with full power of substitution in each, to
represent the undersigned at the Annual Meeting of Stockholders of
BRYLANE INC. to be held at 3:00 p.m., local time, on Thursday, May 28,
1998 at the Marriott Marquis, 1535 Broadway, New York, New York, and at
any adjournments thereof, on all matters coming before said meeting as
described herein.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
BRYLANE INC.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS [_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
[_] For, except vote withheld from the following nominees:
<TABLE>
<S> <C> <C> <C> <C>
[_] Judith E. Campbell [_] Peter J. Canzone [_] William C. Johnson [_] Hartmut Kramer [_] Johannes Loning
[_] Antoine Metzger [_] Richard Simonin [_] Peter M. Starrett [_] Serge Weinberg
</TABLE>
2. APPROVAL OF 1998 PERFORMANCE STOCK OPTION PLAN
FOR [_] AGAINST [_] ABSTAIN [_]
3. RATIFICATION OF APPOINTMENT OF COOPERS & LYBRAND L.L.P.
AS INDEPENDENT AUDITORS
FOR [_] AGAINST [_] ABSTAIN [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES LISTED IN PROPOSAL 1
AND FOR APPROVAL OF PROPOSALS 2 AND 3.
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Said attorneys and proxies, and each of them, shall have the powers which the
undersigned would have if acting in person. The undersigned hereby revokes any
other proxy to vote at such Meeting and hereby ratifies and confirms all that
said attorneys and proxies, and each of them, may lawfully do by virtue hereof.
Said proxies, without hereby limiting their general authority, are specifically
authorized to vote in accordance with their best judgment with respect to
matters incident to the conduct of the Meeting; matters presented at the
Meeting but which are not known to the Board of Directors at the time of the
solicitation of this proxy; and with respect to the election of any person as a
director if a bona fide nominee for that office is named in the Proxy Statement
and such nominee is unable to serve or for good cause will not serve.
A majority of the above-named proxies present at said Meeting, either in
person or by substitute (or if only one thereof shall be present and acting,
then that one), shall have and exercise all powers of said proxies hereunder.
This proxy will be voted in accordance with the choices specified by the
undersigned on the other side of this proxy. IF NO INSTRUCTIONS TO THE CONTRARY
ARE INDICATED HEREON, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN
PROPOSAL 1 AND FOR APPROVAL OF PROPOSALS 2 AND 3; IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
The undersigned acknowledges receipt of a copy of the Notice of Annual
Meeting and Proxy Statement relating to the Meeting and a copy of the Company's
Annual Report to Stockholders.
Please sign exactly as your name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee, guardian or
corporate officer, please give full title as such.
The signer hereby revokes all proxies heretofore given by the signer to vote
at said meeting or any adjournments thereof.
DATED: ________, 1998
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(Signature)
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(Signature)
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