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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
BRYLANE INC.
(NAME OF SUBJECT COMPANY)
BRYLANE INC.
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
117661 10 8
(CUSIP NUMBER OF CLASS OF SECURITIES)
ROBERT A. PULCIANI
EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER, SECRETARY AND TREASURER
BRYLANE INC.
463 SEVENTH AVENUE, 21ST FLOOR
NEW YORK, NEW YORK 10018
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING THIS STATEMENT)
COPIES TO:
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Roger H. Lustberg, Esq. Bruce A. Mann, Esq.
Thomas M. Cleary, Esq. Matthew S. Crowley, Esq.
Riordan & McKinzie Morrison & Foerster LLP
300 South Grand Avenue, 425 Market Street
29th Floor San Francisco, California 94105
Los Angeles, California Telephone: (415) 268-7584
90071
Telephone: (213) 629-4824
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Brylane Inc., a Delaware corporation
(the "Company"). The principal executive offices of the Company are located at
463 Seventh Avenue, 21st Floor, New York, New York 10018. The equity securities
to which this Solicitation/Recommendation Statement on Schedule 14D-9 ("Schedule
14D-9") relates is the shares of common stock, par value $.01 per share (the
"Shares"), of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to the tender offer disclosed in the Tender
Offer Statement on Schedule 14D-1, dated as of March 16, 1999 (the "Schedule
14D-1"), filed by Buttons Acquisition Corporation, a Delaware corporation
("Purchaser") and an indirect wholly-owned subsidiary of
Pinault-Printemps-Redoute S.A., a societe anonyme organized and existing under
the laws of the Republic of France ("Parent"), to purchase all outstanding
Shares not beneficially owned by Parent at $24.50 per share (the "Offer Price"),
net to the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated March 16, 1999 (the "Offer
to Purchase") and the related Letter of Transmittal (which, together with the
Offer to Purchase, as amended or supplemented from time to time, constitute the
"Offer"), copies of which are filed herewith as Exhibits (a)(1) and (a)(2),
respectively, and are incorporated herein by reference.
The Offer is made pursuant to that certain Agreement and Plan of Merger,
dated March 10, 1999 (the "Merger Agreement"), by and among the Company,
Purchaser and Parent. The Merger Agreement provides, among other things, that as
soon as practicable after the completion of the Offer and the satisfaction or
waiver of the conditions set forth in the Merger Agreement, Purchaser will be
merged with and into the Company (the "Merger"), and the Company will continue
as the surviving corporation of the Merger and as a wholly owned subsidiary of
Parent (the "Surviving Corporation"). At the effective time of the Merger, each
Share then outstanding (other than Shares owned directly or indirectly by Parent
or held in the treasury of the Company, all of which will be canceled, and other
than Shares held by stockholders who perfect appraisal rights under Delaware
law) will be converted into the right to receive $24.50 in cash, the same price
per Share paid in the Offer. A copy of the Merger Agreement is filed herewith as
Exhibit (c)(1) and is incorporated herein by reference.
The information set forth under the captions "INTRODUCTION," "SPECIAL
FACTORS -- Background of the Offer," "SPECIAL FACTORS -- Purpose and Structure
of the Offer; Reasons of Parent and Purchaser for the Offer and the Merger,"
"THE TENDER OFFER -- Section 1. Terms of the Offer" and "THE TENDER
OFFER -- Section 8. Certain Information Concerning Parent and Purchaser" of the
Offer to Purchase is incorporated herein by reference.
Concurrently with the filing of this Schedule 14D-9, Parent and Purchaser
are jointly filing with the Securities and Exchange Commission a Transaction
Statement on Schedule 13E-3, dated March 16, 1999.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent are located at 18, Place Henri Bergson, 75381 Paris, France Cedex 08, and
the principal executive offices of Purchaser are located c/o Wachtell, Lipton,
Rosen & Katz, 51 West 52nd Street, New York, New York 10019.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above.
(b) The information contained under the captions "INTRODUCTION," "SPECIAL
FACTORS -- Background of the Offer," "SPECIAL FACTORS -- The Merger Agreement"
and "SPECIAL FACTORS -- Interests of Certain Persons in the Offer and the
Merger" of the Offer to Purchase is incorporated herein by reference. Each
material contract, agreement, arrangement and understanding and actual or
potential conflict of interest between the Company or its affiliates and: (i)
its executive officers, directors or affiliates; or (ii) Purchaser, its
executive officers, directors or affiliates, is either incorporated herein by
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reference as a result of the previous sentence, disclosed in Exhibit (c)(2) and
incorporated herein by reference, or set forth below. All information contained
in this Schedule 14D-9 or incorporated herein by reference concerning Parent,
Purchaser or their respective officers, directors, representatives of
affiliates, or actions or events with respect to any of them, was provided by
Parent or Purchaser, respectively, and the Company takes no responsibility for
such information.
Indemnification of Directors and Officers.
The Company is a Delaware corporation. Pursuant to Section 145 of the
Delaware General Corporate Law ("DGCL"), a corporation incorporated under the
laws of the State of Delaware is permitted to indemnify its current and former
directors and officers under certain circumstances against certain liabilities
and expenses incurred by them by reason of their serving in such capacities, if
such persons acted in good faith for a purpose which they reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful.
Pursuant to Article Tenth of the Company's Certificate of Incorporation
(the "Certificate of Incorporation"), no director will be personally liable to
the Company or any stockholder for damages for any breach of fiduciary duty in
such capacity to the fullest extent permitted by Delaware law. The Company's
Certificate of Incorporation further provides that neither the amendment nor
repeal of Article Tenth, nor the adoption of any provision of the Certificate of
Incorporation or Bylaws nor, to the fullest extent permitted by Delaware law,
any modification of law, may eliminate or reduce the effect of Article Tenth in
respect of any acts or omissions occurring prior to such amendment, repeal,
adoption or modification. Article Tenth of the Certificate of Incorporation is
filed herewith as Exhibit (c)(4) and is incorporated herein by reference.
The Company has a contract for insurance coverage under which the Company's
directors and officers (as well as the Company) are indemnified under certain
circumstances with respect to litigation and other costs and liabilities arising
out of actual or alleged misconduct of such directors and officers.
The Merger Agreement contains certain provisions regarding the
indemnification of and the provision of insurance for directors described under
the heading "SPECIAL FACTORS -- The Merger Agreement -- Covenants" of the Offer
to Purchase.
The Company has entered into individual indemnity agreements with its
directors which provide that the Company shall indemnify each such person to the
full extent permitted by Delaware law. The indemnity agreements specify
procedures for determining entitlement to indemnification and advancement of
expenses and contain various other provisions designed to clarify the rights of
directors and officers to indemnity. In addition, the indemnity agreements
provide for indemnification in third party proceedings and in derivative
actions, and for payment of expenses; provided that the Company is not obligated
to indemnify with respect to (i) remuneration paid to an indemnitee if it is
determined that such remuneration was in violation of law; (ii) a final judgment
rendered against the indemnitee for an accounting of profits made from the
purchase or sale by the indemnitee of securities of the Company or any affiliate
of the Company pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or similar provisions of any federal, state or
local statute; or (iii) which it is determined that the indemnitee's conduct was
in bad faith, knowingly fraudulent or deliberately dishonest. The Company is
under no obligation to indemnify for settlements entered into without the
Company's written consent, or for acts in violation of the Securities Act of
1933, as amended. A form of such indemnity agreements is filed as Exhibit (c)(3)
hereto and is incorporated herein by reference.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Company Board. At a meeting held March 9, 1999,
the Special Committee (defined below) received presentations from Bear, Stearns
& Co. Inc. ("Bear Stearns") and from the Special Committee's legal counsel. At
such meeting, Bear Stearns delivered its oral opinion, which it confirmed by its
written fairness opinion, dated as of March 9, 1999 (the "Fairness Opinion"),
that, as of the date of such opinion, the consideration to be received by the
stockholders of the Company (other than Parent,
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the Company and their respective wholly-owned subsidiaries) in the Offer and the
Merger was fair to such stockholders from a financial point of view. A copy of
the Fairness Opinion is attached to this Schedule 14D-9 as Exhibit (a)(4) and is
incorporated herein by reference. The Fairness Opinion is described in more
detail below. At the conclusion of the meeting, the Special Committee, by the
unanimous vote, determined that the Offer, the Merger and the Merger Agreement
are fair to, and in the best interests of, the Company's stockholders. The
Special Committee also unanimously authorized the Company to waive the
restrictions of the Governance Agreement, dated April 3, 1998, between the
Company and Parent (the "Governance Agreement") to permit the Offer and the
Merger and recommended that the Company's Board of Directors (the "Company
Board") approve the Offer, the Merger and the Merger Agreement and that the
Company Board recommend to the Company's stockholders that they accept the Offer
and tender their Shares pursuant to the Offer. Based, among other
considerations, on the recommendation of the Special Committee, the Company
Board, acting by unanimous vote, first with the Directors who are affiliated
with Parent abstaining, and second, by a vote with all directors participating,
approved the Offer, the Merger and the Merger Agreement. The Company Board
recommends that the Company's stockholders accept the Offer and tender their
Shares in the Offer.
On March 9, 1999, the Company Board, based upon, among other things, the
unanimous recommendation of the Special Committee, unanimously
- determined that each of the Offer and the Merger is fair to and in the
best interests of the Company's stockholders (other than Parent and
Purchaser) and that the Merger Agreement is advisable;
- approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger; and
- recommended that the Company's stockholders accept the Offer and tender
their Shares in the Offer and adopt and approve the Merger Agreement and
the Merger.
In reaching its determinations referred to above, the Company Board
considered the following factors, each of which, in view of the Company Board,
supported such determinations:
- the conclusions and recommendations of the Special Committee;
- the receipt by the Special Committee of the opinion of Bear Stearns
addressed to the Special Committee that, based upon and subject to the
various assumptions and limitations set forth therein, as of the date
thereof, the $24.50 per Share to be received by the holders of the Shares
(other than Parent, the Company or any of their respective wholly owned
subsidiaries) in the Offer and the Merger pursuant to the Merger
Agreement is fair to such holders from a financial point of view; and
- the fact that the Offer Price and the terms and conditions of the Merger
Agreement were the result of arm's-length negotiations between the
Special Committee, the Company and Parent and their respective advisors.
The Company Board recognized that consummation of the Offer and the Merger
will deprive current stockholders of the opportunity to participate in the
future growth prospects of the Company, and, therefore, in reaching its
conclusion to approve the Offer and the Merger, determined that the historical
results of the operations and future prospects of the Company are adequately
reflected in the $24.50 price per Share. The members of the Company Board,
including the members of the Special Committee, evaluated the Proposal, the
Offer and the Merger in light of their knowledge of the business, financial
condition and prospects of the Company, and based upon the advice of financial
and legal advisors. In light of the number and variety of factors that the
Company Board and the Special Committee considered in connection with their
evaluation of the Offer and the Merger, neither the Company Board nor the
Special Committee found it practicable to assign relative weights to the
foregoing factors, and, accordingly, neither the Company Board nor the Special
Committee did so.
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The Company Board, including the members of the Special Committee, believes
that the Offer and the Merger are procedurally fair because, among other things:
- the Special Committee consisted of three independent directors appointed
to represent the interests of the Company's stockholders other than
Parent and its wholly owned subsidiaries;
- the Special Committee had the ability, under the Governance Agreement, to
prohibit Parent from making the Proposal and proceeding with the
negotiations and discussions that led to the Merger Agreement, and the
Governance Agreement restricted Parent's ability to acquire beneficial
ownership of additional Shares during a standstill period of three years
(subject to earlier termination under certain circumstances);
- the Special Committee retained and received advice from independent legal
counsel;
- the Special Committee retained Bear Stearns as its independent financial
advisor to assist it in evaluating a potential transaction with Purchaser
and received advice from Bear Stearns;
- the existence of the Minimum Condition (as defined below) (which may not
be waived by Parent or Purchaser) has the effect of requiring a majority
of the Company's stockholders (other than Parent and its wholly owned
subsidiaries) to tender their Shares into the Offer in order for it to be
consummated;
- the deliberations pursuant to which the Special Committee evaluated the
Offer and the Merger; and
- the fact that the $24.50 per Share price and the other terms and
conditions of the Merger Agreement resulted from active arm's-length
bargaining between representatives of the Special Committee, on the one
hand, and representatives of Parent, on the other hand.
Under Delaware law, a plan of merger requires the vote of a majority of all
outstanding shares entitled to vote thereon in order to be adopted. The Company
Board and the Special Committee recognized that the Merger is not structured to
require the approval of a majority of the Company's stockholders (other than
Parent and Purchaser) and that Parent and Purchaser have sufficient voting power
to approve the Merger as long as other stockholders holding less than 1% of the
outstanding Shares also vote in favor of the Merger. Parent is restricted under
the Governance Agreement from acquiring beneficial ownership of additional
Shares. A condition to the Merger, however, is that Purchaser shall have
purchased all Shares tendered in the Offer. Consummation of the Offer is
conditioned upon there being validly tendered, and not withdrawn, such number of
the then issued and outstanding Shares which (when aggregated with Shares
currently beneficially owned by Parent) constitutes at least 90%, or in certain
circumstances 75% (the "Minimum Condition"), of the then outstanding Shares on a
fully diluted basis, which effectively requires that over 50% of the Company's
minority stockholders tender their Shares in the Offer.
A letter to the Company's stockholders communicating the recommendation of
the Company Board and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits (a)(3) and (a)(9), respectively, and
are incorporated herein by reference.
Special Committee. In reaching its determinations and recommendations
referred to above, the Special Committee considered the following factors, each
of which, in the view of the Special Committee, supported such determinations:
- the history of the negotiations between the Special Committee and its
representatives and Parent and its representatives, including (a) that
the negotiations resulted in an increase in the price at which Parent was
prepared to acquire the Shares from $20.00 to $24.50 per Share, (b) the
Special Committee's belief that Parent would not further increase the
Offer Price, and, accordingly, $24.50 per Share was, in the opinion of
the Special Committee, the highest price which could be obtained from
Parent and (c) the Special Committee's belief that further negotiations
with Parent could cause Parent to abandon the Offer, with the resulting
possibility that the market price for the Shares could fall substantially
below $24.50, and probably below $20.00 per Share;
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- the Special Committee's concerns that the changes in the competitive
landscape which had caused the Management Projections (as defined below)
prepared in February 1999 to assume lower sales growth than that assumed
when the Budget Projections (as defined below) were prepared in the last
quarter of the Company's 1998 fiscal year also created greater
uncertainty that the Company's management could accurately estimate
future financial performance and that the Management Projections could be
achieved;
- the possibility that the anticipated release of fourth quarter fiscal
1998 and year end fiscal 1998 earnings of the Company, which are
substantially below the expectations of Wall Street analysts, could
significantly and adversely impact the Share price in the absence of the
Offer;
- the opinion of Bear Stearns that, based upon and subject to the various
assumptions and limitations set forth therein, as of the date thereof,
the $24.50 per Share to be received by the Company's stockholders (other
than Parent, the Company or any of their respective wholly owned
subsidiaries) in the Offer and the Merger pursuant to the Merger
Agreement is fair to such stockholders from a financial point of view,
and the report and analyses presented to the Special Committee in
connection therewith (See "-- Special Committee Financial Advisor;
Fairness Opinion"); a copy of Bear Stearns' opinion is attached as
Exhibit (a)(4) to this Schedule 14D-9 (stockholders are urged to read
this opinion in its entirety);
- the possibility that, because of lower than expected Company earnings or
a decline in the trading price of the Shares or the stock market in
general, the consideration the minority stockholders would obtain in a
future transaction might be less advantageous than the consideration they
would receive pursuant to the Offer and the Merger;
- the fact that Parent has sufficient stock ownership and Company Board
representation to prevent a disposition of the Company to a third party
without Parent's consent, that Parent had indicated that it was not
interested in selling the Company to a third party, and that under such
circumstances it was not feasible for the Special Committee to, and it
did not and did not ask Bear Stearns to, solicit third party indications
of interest for the acquisition of the Company or its businesses;
- the historical market prices and recent trading activity of the Shares,
including (a) that the Offer Price of $24.50 per Share represents a
premium of approximately 45.2% over the $16.875 per Share closing price
on December 1, 1998, the day prior to the December 2nd Announcement, (b)
that between September 1998 and the December 2nd Announcement the Shares
had traded at prices ranging from a low of $11.13 to a high of $17.13 per
Share, and (c) that the Shares never traded on the NYSE above $23.625 per
Share following the December 2nd Announcement and prior to execution of
the Merger Agreement;
- the Minimum Condition requirement that Purchaser not accept for payment
any tendered Shares unless there are validly tendered and not properly
withdrawn prior to the Expiration Date that number of Shares which, when
aggregated with the Shares currently beneficially owned by Parent,
represent at least 90% of the total number of outstanding Shares, on a
fully diluted basis, on the date of purchase; provided, that following
the Initial Expiration Date (as defined in the Merger Agreement),
Purchaser may, but is not required to, accept for payment tendered Shares
which, when aggregated with the Shares currently beneficially owned by
Parent, represent at least 75% of the total number of outstanding Shares,
on a fully diluted basis, on the date of purchase;
- the terms and conditions of the Offer, the Merger and the Merger
Agreement, including (a) that the Minimum Condition may not be waived by
Parent or Purchaser; (b) that the terms and conditions of the Offer may
not be changed in any manner which is adverse to the stockholders without
the consent of the Special Committee; (c) that the Company may terminate
the Merger Agreement if the Special Committee approves or recommends
another offer or an agreement to effect an Acquisition Transaction (as
defined below) under certain circumstances; (d) that the Offer and Merger
are not subject to any financing condition; and (e) the limited nature of
the conditions to the Offer and the Merger; and
- the availability of appraisal rights for the Company stockholders under
the DGCL in connection with the Merger.
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(b) Background.
Background of the Offer. On February 26, 1997, the Company issued
4,000,000 Shares for $24.00 per Share, with aggregate proceeds to the Company of
$89,280,000 in the Company's initial public offering (the "Initial Public
Offering"). In connection with the Initial Public Offering, on February 26,
1997, the Partnership became a wholly owned subsidiary of the Company pursuant
to an exchange transaction 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 (the "Exchange
Transaction"). In connection with the Exchange Transaction, the Partnership
retained all of its assets, operations and liabilities.
On October 20, 1997, the Company completed an offering (the "October 1997
Offering") on behalf of certain selling Stockholders (including FS&Co. and The
Limited) of 5,000,000 Shares for a per Share price of $46.00, with aggregate
proceeds to the selling Stockholders of $219,650,000. Concurrent therewith, the
Company repurchased from such selling Stockholders (including FS&Co. and The
Limited) an aggregate of 2,500,000 Shares for $46.00 per Share.
On April 3, 1998, Parent, through REDAM LLC, a Delaware limited liability
company and an indirect wholly owned subsidiary of Parent ("REDAM"), acquired
8,010,917 Shares, representing approximately 43.7% of the then outstanding
Shares, at a price of $51.00 from certain Stockholders (including all of the
Shares then held by affiliates of FS&Co. and an affiliate of The Limited, and
including 1,047,861 Shares held by certain other Stockholders, including certain
members of the Company's management) (the "April 1998 Stock Purchase"). The
April 1998 Stock Purchase was undertaken by Parent as step in its international
growth strategy, enhancing its presence in the United States and supporting its
objective of establishing its Redcats (previously named La Redoute) catalog
business as a major global distributor. The stock purchase agreements relating
to the April 1998 Stock Purchase are filed as Exhibits (c)(2) through (c)(5) to
the Schedule 14D-1 (as defined below). In connection with the April 1998 Stock
Purchase, the Company and Parent entered into a Governance Agreement, dated as
of April 3, 1998 (the "Governance Agreement"), pursuant to which, among other
things, Parent's ability to acquire additional Shares and to take other actions
has been limited, and into a Registration Rights Agreement, dated as of April 3,
1998 (the "Registration Rights Agreement"), pursuant to which the Company has
granted Parent certain registration rights to facilitate the resale of the
Shares beneficially owned by Parent under certain conditions. See "Interests of
Certain Persons in the Offer and the Merger."
Following April 3, 1998, REDAM acquired an additional 772,100 Shares in
open market and private transactions at prices ranging from $51.00 to $24.64 per
Share. On October 15, 1998, REDAM sold 166,000 Shares at a price of $13.50 per
Share in a private transaction to an unaffiliated third party.
In September and October 1998, the Company purchased in open market
transactions an aggregate of 1,240,800 Shares at an average price of $21.47 per
Share. The highest per Share price paid was $28.54, and the lowest per Share
price paid was $16.15.
On November 27, 1998, REDAM conveyed to EMPUSA LLC, a Delaware limited
liability company and an indirect wholly owned subsidiary of Parent ("EMPUSA"),
all of the 8,617,017 Shares owned by REDAM, which represented approximately
49.9% of the outstanding Shares. The directors of the Company affiliated with
Parent (the "Parent Directors") currently own an aggregate additional 27,270
Shares for their personal accounts.
On November 30, 1998, Serge Weinberg, Chairman and Chief Executive Officer
of Parent, held a preliminary discussion with Peter J. Canzone, Chairman and
Chief Executive Officer of the Company, regarding the possibility of Parent
making a request of the three independent directors of the Company regarding the
waiver of certain provisions of the Governance Agreement. Mr. Canzone agreed to
convene a special meeting of the Company Board to be held on December 2, 1998 to
consider any request Parent might present.
On December 2, 1998, at a special meeting of the Company Board, Parent
submitted a proposal letter (the "Proposal Letter") to the independent directors
of the Company, following the waiver by such independent directors of the terms
of the Governance Agreement which prohibit Parent from submitting such
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a proposal and making it public. The Proposal Letter sets forth Parent's
proposal (the "Proposal") to acquire all of the outstanding Shares not
beneficially owned by Parent for $20.00 per Share in cash. Parent also informed
the Company Board that it had retained J.P. Morgan to act as its financial
advisor in connection with the Proposal. A copy of the Proposal Letter is filed
as Exhibit (a)(15) to the Schedule 14D-1 (as defined below).
On December 2, 1998, Parent issued the following press release (the "December
2nd Announcement"):
Paris, December 2, 1998 -- Pinault-Printemps-Redoute S.A. ("PPR"), a
publicly traded specialty retailer listed on the Paris Bourse (PRTP.PA),
today announced that it has made a proposal to the independent directors of
the Board of Directors of Brylane Inc. (NYSE: BYL) regarding the
acquisition of all remaining outstanding shares of Brylane not owned by PPR
for $20 per share. The letter reflecting PPR's proposal which was sent to
the independent directors of Brylane is attached.
PPR currently owns approximately 49.9% of the outstanding Brylane common
stock. Affiliates of PPR own an additional approximately 0.2% of the
Brylane common stock. At a price per share of $20, the aggregate value of
the transaction would be approximately $172.5 million to acquire the shares
of common stock not already owned by PPR. The $20 per share purchase price
represents a premium of approximately 18.5% to yesterday's closing price
and 27.8% and 16.0% premium over the average of the closing prices of
Brylane common stock on the New York Stock Exchange over the past 30
trading days and 60 trading days, respectively.
PPR's proposal is subject to the approval of the Board of Directors of
Brylane, including the approval of a majority of the independent directors
on the Brylane Board, and other conditions customary in transactions of
this type. The proposed offer is not conditioned on financing.
"We believe that this transaction will better position Brylane to pursue
future business and growth opportunities while allowing PPR to capitalize
upon cross-border opportunities in the specialty catalog sector in a more
effective manner," said Serge Weinberg, Chairman of the Executive Board of
PPR. "Although we believe that Brylane faces many challenging competitors,
PPR has concluded that its corporate goals would be better served if it
owned all of the outstanding equity in Brylane."
PPR also stated in its proposal to the Brylane Board that PPR is not
interested, under any circumstances, in selling its interest in Brylane.
Moreover, PPR reserves the right to amend or withdraw the proposal at any
time in its discretion.
Brylane is the nation's leading specialty catalog retailer of value-priced
apparel, with a focused portfolio of catalogs that includes Lane Bryant,
Roaman's, Jessica London and KingSize, serving the special size apparel
market, and Chadwick's of Boston, Lerner, Bridgewater and Brett serving the
regular size apparel market. In addition, the Company's home catalog,
introduced in September 1998, offers value-priced home products. Brylane
also markets certain of its catalogs under the "Sears" name to customers of
Sears, Roebuck and Co. under an exclusive licensing arrangement with Sears
Shop at Home Services, Inc. Brylane is headquartered in New York and has
facilities in Indiana, Massachusetts and Texas.
Headquartered in Paris, PPR operates several specialized retail chains that
sell a wide range of consumer goods. PPR's principal chains include
Printemps (general merchandise), Conforama (furniture, household electronic
goods and appliances) and Fnac (records, books, computers and consumer
electronics). Through La Redoute, PPR is Europe's third largest mail order
company.
* * *
This press release is not an offer or the solicitation of an offer to buy
any securities of Brylane, and no such offer or solicitation will be made
except in compliance with applicable securities laws.
Information Concerning Forward-Looking Statements: This press release
contains forward-looking statements as defined by the federal securities
laws and are based on PPR's current expectations and assumptions, which are
subject to a number of risks and uncertainties that could cause actual
results to differ materially from those anticipated, projected or implied.
Certain factors that could cause actual results to differ are indicated in
Brylane's filings with the Securities and Exchange Commission.
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The text of the Proposal Letter to the Company Board is as follows:
December 2, 1998
STRICTLY CONFIDENTIAL
Independent Directors
Board of Directors
Brylane Inc.
463 Seventh Avenue, 21st Floor
New York, New York
Over the past year during which Pinault-Printemps-Redoute S.A. ("PPR") first
became interested in, and then acquired a significant stake in, Brylane Inc.
("Brylane"), we have developed a growing appreciation for the business,
operations, management and catalogs of Brylane. PPR believes, as it has since
its original purchase of Brylane shares, that Brylane can be an important
element in PPR's future international growth plans. PPR continues to have
confidence in the future performance of Brylane, its strategic direction and its
current management despite the recent disappointing operating results. We
believe that Brylane faces an increasingly difficult business environment, with
many challenging competitors, some of whom are parts of significantly larger,
well-capitalized companies. As such, PPR has now concluded that its corporate
goals would be better served if it owned all of the equity interest in Brylane
and PPR believes that Brylane, and its various constituencies, would be better
served if Brylane were to cease being a public company subject to the vagaries
and volatility of the public equity markets.
In light of current market and economic conditions, we are pleased that the
independent directors of Brylane have consented, pursuant to the terms of the
Governance Agreement currently in effect between PPR and Brylane, to allow PPR
to make, and the independent directors to consider and evaluate, a proposal from
PPR to acquire all of the publicly held shares of Brylane common stock.
Accordingly, on behalf of PPR, we are pleased to make the following proposal to
acquire all of the outstanding common shares of Brylane not currently owned by
PPR (the "Public Shares"). The principal terms of our proposal are as follows:
1. Our proposal would result in all holders of Public Shares receiving $20 per
share in cash. The transaction would involve an aggregate payment of
approximately $172.5 million to the holders of Public Shares, based on the
8,623,872 Public Shares we understand to be outstanding.
2. Initiation of the transaction would be subject to, among other things,
approval by the Board of Directors of Brylane, including the approval of a
majority of the independent directors, as required by the Governance
Agreement, execution of a definitive agreement, and other conditions
customary in transactions of this type.
3. The transaction would be financed through PPR's available cash and committed
facilities and would not be conditioned upon financing.
4. The acquisition transaction would be implemented through a cash tender offer
followed by a merger of a PPR subsidiary into Brylane, with Brylane as the
surviving corporation.
5. The separate identity of Brylane would be continued following consummation of
the transaction for the foreseeable future.
6. Brylane's officers and other employees would continue on their present terms
for the foreseeable future, and we would intend to work with Brylane
management to develop appropriate incentives for Brylane management and
employees, who, as a group, we value highly.
We believe that our proposal is at a fair price that reflects Brylane's
historical results and future prospects and that consummation of our proposed
transaction would be in the best interest of Brylane and its public
stockholders. Our proposed acquisition price of $20 per share represents an
18.5% premium over yesterday's
8
<PAGE> 10
closing price for Brylane and a 27.8% and 16.0% premium over the average of
Brylane's closing prices for the past 30 and 60 trading days, respectively.
We would like to make it clear that PPR is not interested, under any
circumstances, in selling its 49.9% interest in Brylane owned by PPR. Together
with its affiliates, PPR owns approximately 50.1% of Brylane's common stock
(based upon the 17,240,889 shares of Brylane common stock we understand to be
outstanding as of November 28, 1998) and, thus, there is no realistic prospect
of sale of a controlling interest in Brylane to a third party. Therefore, if we
are not able to consummate the proposal at a reasonable price we currently
intend to continue to be long-term stockholders of Brylane.
We understand that this proposal will be considered by a special committee of
independent directors of Brylane, as required by the Governance Agreement, and
that such committee will wish to retain its own financial and legal advisors to
assist in those deliberations. We invite such representatives to meet with our
advisors to discuss this proposal at your earliest convenience. As required
under federal securities laws, this proposal will be made public through a
Schedule 13D filing with the SEC, and we will be issuing a press release later
today to facilitate dissemination of the information in this letter.
We hope you will view our proposal favorably and give it your prompt attention.
We reserve the right to amend or withdraw this proposal at any time in our
discretion.
We look forward to hearing from you soon.
<TABLE>
<S> <C>
Sincerely,
/s/ Serge Weinberg /s/ Hartmut Kramer
Serge Weinberg Hartmut Kramer
Chairman and Chief Executive Officer Member of Executive Board
Pinault-Printemps-Redoute, S.A. Pinault-Printemps-Redoute, S.A.
Chief Executive Officer
La Redoute S.A.
</TABLE>
Following submission of the Proposal Letter to the independent directors of
the Company, the Company Board formed the Special Committee. The Special
Committee was granted the authority of the Company Board with respect to the
Proposal and authorized to retain, at the expense of the Company, financial and
legal advisors. The Company Board then reviewed and approved a press release
announcing that the Proposal had been received and that the Special Committee
comprised of three independent directors had been appointed to consider the
Proposal, which press release was issued later that day (the "December 2 Company
Press Release"). A copy of the December 2 Company Press Release is filed
herewith as Exhibit (a)(8) and incorporated herein by reference.
On December 4, 1998, the Special Committee met, together with its counsel,
and decided to retain a financial advisor, and following such meeting members of
the Special Committee met with or spoke to representatives of various investment
banking firms, including Bear Stearns, and received and reviewed proposals from
such investment banking firms regarding their possible engagement as financial
advisor to the Special Committee.
On December 30, 1998, the Special Committee decided that it would select
Bear Stearns as its financial advisor. In early January 1999, the Special
Committee and Bear Stearns negotiated the terms of Bear Stearns' retention. On
January 15, 1999 the Company issued a press release announcing the selection of
Bear Stearns as the Special Committee's financial advisor. On various dates in
January, February and March 1999, representatives of Bear Stearns met with
various members of the Company's management and with various members of the
Special Committee.
On January 29, 1999, the Special Committee met with representatives of Bear
Stearns and received Bear Stearns' preliminary analysis of the Proposal. At such
meeting, Bear Stearns stated that it did not anticipate
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<PAGE> 11
that it would be in a position to advise that the proposed acquisition price of
$20.00 per Share was fair to the stockholders from a financial point of view.
On February 2, 1999, representatives of J.P. Morgan and Bear Stearns held a
meeting at the offices of Bear Stearns in New York to review the Budget
Projections (as defined below) which had been provided to Bear Stearns by the
Company's management.
Members of Parent's management and representatives of J.P. Morgan held a
meeting at the Company's offices on February 12, 1999 to review the Budget
Projections with the Company's management. Representatives of Bear Stearns also
attended the meeting.
On February 18, 1999, the Company Board held its regularly scheduled
Company Board meeting to address matters unrelated to the Proposal. At such
meeting, among other matters, the Company's management presented the Company's
fiscal 1999, 2000 and 2001 projections prepared in the last quarter of the
Company's 1998 fiscal year (the "Budget Projections") to the Company Board. See
"SPECIAL FACTORS -- Certain Financial Projections (Unaudited)" of the Offer to
Purchase.
On February 22, 1999, representatives of Bear Stearns and J.P. Morgan held
a meeting to discuss their different perspectives on valuation of the Company.
At such meeting, J.P. Morgan made a presentation to Bear Stearns of the February
22 Report (as defined below) with respect to the views of J.P. Morgan and
Parent's management as to valuation of the Company. See "SPECIAL
FACTORS -- Position of Parent and Purchaser Regarding Fairness of the
Offer -- J.P. Morgan Reports" of the Offer to Purchase.
Following such meeting, counsel for Parent made a request to counsel for
the Special Committee to set up a meeting between Parent and its advisors and
the Special Committee and its advisors.
The Company's management and the Special Committee discussed the outlook
for the Company during February 1999 and at meetings held on March 3 and 4,
1999.
On March 4, 1999, members of Parent's management and representatives of
Parent's financial and legal advisors met with the Special Committee, its
financial and legal advisors and Peter J. Canzone, Chairman and Chief Executive
Officer of the Company, to review Parent's perspective on the Company's
valuation in light of certain projections of future financial results of the
Company prepared as of February 26, 1999 by the Company's management (the
"Management Projections") that had been received by J.P. Morgan from Bear
Stearns and Parent's own internal analysis of the Company's business. See
"SPECIAL FACTORS -- Certain Financial Projections (Unaudited)" of the Offer to
Purchase. As part of these discussions Parent's Chairman and the Special
Committee met to discuss various alternatives, including the possibility that
Parent might withdraw the Proposal if a satisfactory price could not be agreed
upon by the parties and the possibility that the Special Committee might
terminate discussions unless the price was significantly improved. During these
discussions, Parent expressed a possible willingness to increase the price from
that contained in the Proposal, subject to various conditions being satisfied,
including, without limitation, negotiation of all remaining issues and a
definitive merger agreement, approval of the Special Committee and receipt of a
fairness opinion from Bear Stearns. At the conclusion of these discussions,
Parent and the Special Committee requested their respective counsel to proceed
with the negotiation of a definitive merger agreement.
On March 5, 1999, counsel to Parent delivered a draft merger agreement to
counsel for the Special Committee and the Company. Between March 6 and March 9,
Parent, the Company and the Special Committee, and their respective counsel,
negotiated the terms of the definitive merger agreement. As a result of
negotiations, Parent confirmed to the Special Committee that it was willing to
increase the price it was prepared to pay to acquire all of the Shares it did
not beneficially own to $24.50 per Share.
At a meeting held on March 9, 1999 by telephone conference call, the
Special Committee met with its legal and financial advisors. At the meeting,
legal counsel to the Special Committee then reviewed the legal duties of the
Special Committee in approving a transaction and the proposed terms of the
Merger Agreement, and Bear Stearns reviewed its analysis and rendered its oral
opinion concerning the fairness from a financial point of view of the proposed
consideration to be received by stockholders (other than Parent, the Company and
their respective wholly owned subsidiaries) in the Offer and Merger. See
"-- Special Committee
10
<PAGE> 12
Financial Advisor; Fairness Opinion." The Special Committee unanimously (a)
determined that each of the Offer and the Merger is fair to and in the best
interests of the Stockholders (other than Parent and Purchaser) and that the
Merger Agreement is advisable; (b) approved the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger; (c)
approved the Company waiving the restriction of the Governance Agreement to
permit the Offer and Merger; and (d) recommended to the Company Board that the
Company Board recommend that the Company's stockholders accept the Offer and
tender their Shares pursuant to the Offer and approve and adopt the Merger and
the Merger Agreement.
Immediately following the Special Committee meeting on March 9, the Company
Board met by telephone conference call in a special Company Board meeting,
during which meeting the Company Board received presentations from counsel to
the Company, counsel to the Special Committee and counsel to Parent and received
the recommendation of the Special Committee. With the Parent Directors on the
Company Board abstaining and otherwise by unanimous vote, the Company Board
(including Mr. Canzone) then (a) determined that each of the Offer and the
Merger is fair to and in the best interests of the Stockholders (other than
Parent and Purchaser) and that the Merger Agreement is advisable; (b) approved
the Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger; and (c) recommended that the stockholders of the Company
accept the Offer and tender their Shares in the Offer and adopt and approve the
Merger Agreement and the Merger.
At such meeting, following the initial vote, the full Company Board then,
by unanimous vote, (a) determined that each of the Offer and the Merger is fair
to and in the best interests of the stockholders (other than Parent and
Purchaser) and that the Merger Agreement is advisable; (b) approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger; and (c) recommended that the Company Board recommend that the
stockholders of the Company accept the Offer and tender their Shares in the
Offer.
Following such meetings and finalization of necessary documentation,
Parent, Purchaser and the Company entered into the Merger Agreement.
On March 10, 1999, Parent and the Company issued a joint press release (the
"March 10 Press Release") announcing the transactions, including the execution
of the Merger Agreement. Also on March 10, 1999, Parent issued a French language
press release in Paris (the "French Press Release") announcing the transactions,
including the execution of the Merger Agreement. A copy of the March 10 Press
Release is filed herewith as Exhibit (a)(9) and is incorporated herein by
reference.
Also on March 10, 1999, Parent issued a press release (the "Parent Results
Press Release") announcing its audited consolidated results for the year ended
December 31, 1998.
On March 15, 1999, the Company issued a press release (the "March 15 Press
Release") announcing its results for the fiscal year ended January 30, 1999. See
"THE TENDER OFFER -- Certain Information Concerning the Company of the Offer to
Purchase." A copy of the March 15 Press Release is filed herewith as Exhibit
(a)(10) and incorporated herein by reference.
On March 16, 1999, pursuant to the Merger Agreement, Purchaser commenced
the Offer, and Parent and Purchaser issued a press release (the "March 16 Press
Release") announcing commencement of the Offer.
Special Committee Financial Advisor; Fairness Opinion. The Special
Committee retained Bear Stearns to act as its financial advisor in connection
with the Offer and the Merger and related matters based upon Bear Stearns'
qualifications, expertise and reputation. On March 9, 1999, Bear Stearns
delivered its oral opinion to the Special Committee that, based upon the
procedures and subject to the assumptions and qualifications described to the
Special Committee and later set forth in the written opinion of Bear Stearns
dated March 9, 1999, the consideration to be received by the holders of Shares
other than the Company, Parent and their respective wholly owned subsidiaries
pursuant to the Merger Agreement was fair from a financial point of view.
11
<PAGE> 13
The full text of Bear Stearns' written opinion dated as of March 9, 1999,
which highlights, among other things, assumptions made, matters considered, and
scope and limitations on the review undertaken, is attached as Exhibit (a)(4) to
this Schedule 14D-9 and is incorporated herein by reference. A copy of the Bear
Stearns' opinion is available for inspection and copying at the principal
executive offices of the Company. The following summary is qualified in its
entirety by reference to the full text of Bear Stearns' opinion. Stockholders
are urged to, and should, read Bear Stearns' opinion carefully and completely.
Bear Stearns' opinion is directed to the Special Committee and the Company
Board and addresses the fairness of the consideration, from a financial point of
view, to the Stockholders other than the Company, Parent and their respective
wholly owned subsidiaries pursuant to the Merger Agreement. It does not address
any other aspect of the Merger, including the Company's underlying business
decision to pursue the transaction, nor does it constitute a recommendation to
the Special Committee, the Company Board or any Stockholders as to whether to
tender their Shares in the Offer or how to vote in connection with the Merger.
In arriving at its opinion, Bear Stearns reviewed:
- a draft of the Merger Agreement, in substantially the form executed by
the parties;
- the Company's Initial Public Offering prospectus dated February 21, 1997,
its Annual Report to Stockholders and Annual Report on Form 10-K for the
fiscal year ended January 31, 1998 and its Quarterly Reports on Form 10-Q
for the periods ended May 2, 1998, August 1, 1998 and October 31, 1998;
- preliminary financial information for the fiscal year and quarter ended
January 30, 1999;
- certain financial and operating information, including projections, with
respect to the business, operations and prospects of the Company
furnished to Bear Stearns by the Company;
- a trading history of the Shares from February 21, 1997 (the date of the
Initial Public Offering) to March 4, 1999 and in comparison with those
other companies that Bear Stearns deemed generally comparable to the
Company; and
- a comparison of the historical financial results and present financial
condition of the Company with those of other companies Bear Stearns
deemed relevant; and, to the extent publicly available, the financial
terms of certain comparable acquisition transactions.
In addition, Bear Stearns had discussions with the Company's management and
the Special Committee concerning the Company's business, operations, assets,
liabilities, financial condition, liquidity and prospects and undertook such
other studies, analyses, inquiries and investigations as Bear Stearns deemed
appropriate.
In rendering its opinion, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information, including, and without limitation, the projections provided
to Bear Stearns by the Company. With respect to the Management Projections, Bear
Stearns assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of the
Company as to the expected future performance of the Company. In addition, Bear
Stearns assumed that, in all respects material to its analysis, the Offer and
the Merger would be consummated on the terms set forth in the Merger Agreement
and that the representations and warranties contained in the Merger Agreement
are true and correct. Bear Stearns did not make any independent valuation or
appraisal of the assets or liabilities of the Company, nor was Bear Stearns
furnished with any such appraisals. Bear Stearns' opinion was based on economic,
market and other conditions, and on the information made available to Bear
Stearns, as of the date of the opinion.
No limitations were imposed by the Company or the Special Committee (or any
other party) on the scope of Bear Stearns' investigation or the procedures to be
followed by Bear Stearns in connection with preparing the Bear Stearns' opinion,
except that Bear Stearns was not authorized to solicit, and did not solicit,
indications of interest for the acquisition of all or any part of the Company
from any party, nor did it have any such discussions with any party other than
Parent.
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<PAGE> 14
Set forth below is a brief summary of certain analyses performed by Bear
Stearns and reviewed with the Special Committee on March 9, 1999 in connection
with the preparation of Bear Stearns' opinion. For the purpose of conducting
these analyses, Bear Stearns relied, among other things, on the Management
Projections provided to it by the Company, which are summarized under "SPECIAL
FACTORS -- Certain Financial Projections (Unaudited)" of the Offer to Purchase.
Applying the Offer Price of $24.50 per Share and the Company's most recent
estimates of EBITDA, EBIT and earnings per share for fiscal year 1998 and fiscal
year 1999, Bear Stearns calculated
- the multiple of enterprise value to 1998 EBITDA and EBIT of 9.6x and
13.1x, respectively, and the multiple of market price to 1998 earnings
per share of 22.7x; and
- the multiple of enterprise value to 1999 EBITDA and EBIT of 8.1x and
10.6x, respectively, and the multiple of market price to 1999 earnings
per share of 14.4x.
Comparable Public Company Analysis. As part of its analysis, Bear Stearns
compared certain financial information of the Company with corresponding
publicly available information of a group of five publicly-traded direct
marketing companies that Bear Stearns considered comparable in certain respects
with the Company. This group included: Blair Corporation, Coldwater, DM, Lands'
End and Lillian Vernon (collectively, the "Bear Stearns' Comparable Companies").
Bear Stearns analyzed the Offer Price by comparing certain market trading
statistics for the Company with those of the Bear Stearns' Comparable Companies.
The market trading information used in the ratios provided below is as of March
4, 1999. The market trading information used in the valuation analysis was
enterprise value to projected 1999 EBITDA and EBIT, and market price to
estimated 1999 earnings per share. All estimates for the Company were based on
Management Projections. Earnings per share estimates for Bear Stearns'
Comparable Companies were based on the harmonic mean of First Call estimates as
of March 4, 1999 while EBITDA and EBIT projections were based on recently
available research reports for each Bear Stearns' Comparable Company. An
analysis of the multiples for Bear Stearns' Comparable Companies yielded
harmonic mean multiples of projected 1999 EBITDA, EBIT and earnings per share of
6.1x, 7.4x, and 11.6x, respectively. The Offer Price results in implied
multiples of projected 1999 EBITDA, EBIT and earnings per share of 8.1x, 10.6x,
and 14.4x, respectively.
Precedent Transaction Analysis. Using publicly available information, Bear
Stearns performed an analysis of 15 precedent transactions of direct
marketing/catalog companies that Bear Stearns deemed comparable to the Offer and
the Merger. This analysis yielded harmonic mean multiples of latest 12 month's
EBITDA, EBIT and earnings per share of 9.4x, 11.7x and 20.9x, respectively. The
Offer, based on the Company's most recent estimates for fiscal 1998, results in
implied multiples of EBITDA, EBIT and earnings per share of 9.6x, 13.1x, and
22.7x, respectively.
Discounted Cash Flow Analysis. Bear Stearns performed a discounted cash
flow analysis of the Company for the fiscal years ended 1999 through 2003 based
on the Management Projections, which Bear Stearns extended for purposes of this
analysis to 2003 based on guidance from the Company. Unlevered free cash flows
of the Company were calculated as EBITA less taxes plus depreciation less
capital expenditures less changes in working capital. Bear Stearns calculated
terminal values by applying a range of exit multiples of 6.5x to 7.5x 2003
EBITDA for the Company. These multiples implied perpetual growth rates of
unlevered free cash flows of 3.3% to 4.1%, representing estimated ranges of
long-term cash flow growth rates for the Company. The unlevered cash flow
streams and terminal values were then discounted to the present using a range of
discount rates from 10.5% to 11.5%, representing an estimated weighted average
cost of capital range for the Company. The discounted values were then adjusted
by adding cash and subtracting debt to arrive at implied equity values. Based on
this analysis, Bear Stearns calculated implied per share values for the Company
from $18 to $25.
No company or transaction used in the Bear Stearns' Comparable Company or
precedent transaction analysis is identical to the Company or the Offer or the
Merger. Accordingly, any preceding analysis involved complex considerations and
judgments concerning financial and operating characteristics of the Company and
13
<PAGE> 15
other general business, economic, market, or financial factors that could affect
the public trading value or acquisition value of the Company and of the
companies to which it is being compared.
The preparation of a fairness opinion is a complex process and is not
conducive to a partial analysis or summary description. In arriving at its
opinion, Bear Stearns considered the results of all its analysis as a whole and
did not attribute any particular weight to any analysis or factor considered by
it. Bear Stearns believes that selecting any portion of the analyses, without
considering all analyses, would create an incomplete view of the process
underlying its opinion. In addition, Bear Stearns may have deemed various
assumptions more or less probable than other assumptions, so that the ranges of
valuations resulting for any particular analysis described above should not be
taken to be Bear Stearns' view of the actual value of the Company.
In performing its analyses, Bear Stearns made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Company. The analyses
performed by Bear Stearns are not necessarily indicative of actual value. These
analyses were performed solely as part of Bear Stearns' analysis of whether the
consideration to be received by the Stockholders other than the Company, Parent
and their respective wholly owned subsidiaries pursuant to the Merger Agreement,
was fair from a financial point of view, and were conducted in connection with
the delivery of Bear Stearns' opinion. The analyses are not appraisals that
reflect the prices at which the Company might actually be sold.
As described above, Bear Stearns' opinion provided to the Special Committee
and the Company Board was one of a number of factors taken into consideration by
the Special Committee in making its determination to recommend adoption of the
Merger Agreement and the transactions contemplated thereby. Consequently, the
Bear Stearns' analyses described above should not be viewed as determinative of
the opinion of the Special Committee or the view of the Company's management
with respect to the value of the Company.
In connection with its opinion, Bear Stearns made a presentation to the
Special Committee on March 9, 1999 (the "Bear Stearns Report") as to the
fairness of the Offer based on the foregoing analyses. A copy of the Bear
Stearns Report is filed as Exhibit (b)(2) to the Schedule 13E-3 and incorporated
herein by reference. The Bear Stearns Report is available for inspection and
copying at the principal executive offices of the Company during its regular
business hours to any stockholder or his representative who has been so
designated in writing.
Bear Stearns is an internationally recognized investment banking and
advisory firm. As part of its investment banking business, Bear Stearns is
regularly engaged in the valuation of business and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuation for estate, corporate and other purposes. Bear Stearns has advised
the Special Committee that, in the ordinary course of its business, Bear Stearns
and its affiliates may actively trade the debt and equity securities or senior
loans of the Company and Parent for their own account and for the accounts of
customers and, accordingly, may at any time hold a long or short term position
in the securities. Bear Stearns and its affiliates may maintain relationships
with the Special Committee and Parent in the future.
Pursuant to a letter agreement (the "Bear Stearns Letter Agreement")
between the Special Committee, the Company and Bear Stearns, dated January 28,
1999, the Company agreed to pay Bear Stearns the following compensation: (a) an
initial cash fee of $500,000; (b) an additional cash fee of $500,000 at the
earlier of April 30, 1999 or at such time Bear Stearns rendered an opinion; and
(c) a cash fee of $300,000 if Bear Stearns is called upon for testimony by
deposition or trial in litigation relating to any transaction. The Company has
also agreed to reimburse Bear Stearns for its reasonable out-of pocket expenses,
including attorneys' fees, and to indemnify Bear Stearns against certain
liabilities, including liabilities under the federal securities laws. The
Securities and Exchange Commission (the "Commission") has taken the position
that such indemnification under the federal securities laws may not be
enforceable if it is found to be against public policy.
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<PAGE> 16
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information contained in Item 4 regarding Bear Stearns under the
captions "SPECIAL FACTORS -- Background of the Offer," "SPECIAL
FACTORS -- Recommendation of the Company Board; Fairness of the Offer and
Merger -- Opinion of Bear Stearns" and "SPECIAL FACTORS -- Interests of Certain
Persons in the Offer and the Merger" of the Offer to Purchase is incorporated
herein by reference.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) The information contained under the caption "SPECIAL
FACTORS -- Interests of Certain Persons in the Offer and the Merger" of the
Offer to Purchase is incorporated herein by reference. Except as incorporated as
a result of the previous sentence, and as set forth in the following sentence,
no transactions in the Shares have been effected during the past 60 days by the
Company or, to the best of the Company's knowledge, by any executive officer,
director, affiliate or subsidiary of the Company. On January 12, 1999, two
executive officers of the Company, Dhananjaya K. Rao and Carol Meyrowitz,
exercised options to purchase 3,017 Shares and 2,268 Shares, respectively, at an
exercise price of $5.67 per share and sold such Shares on the same day at a
sales price of $22.875 per share.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates (other than Parent and Purchaser) presently
intend to tender to Purchaser pursuant to the Offer all Shares which are held of
record or beneficially owned by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described in this Schedule 14D-9 or in the Offer to Purchase,
no negotiation is being undertaken or is underway by the Company in response to
the Offer, the Merger or the Merger Agreement that relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any of its subsidiaries, (ii) a purchase, sale or transfer of a
material amount of assets by the Company or its subsidiaries, (iii) a tender
offer for or acquisition of securities by or of the Company or (iv) any material
change in the present capitalization or dividend policy of the Company.
(b) Except as described in this Schedule 14D-9 or in the Offer to Purchase,
no transaction, board resolution, agreement in principle, or signed contract is
being undertaken or is underway by the Company in response to the Offer, the
Merger or the Merger Agreement that relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any of its subsidiaries, (ii) a purchase, sale or transfer of a
material amount of assets by the Company or its subsidiaries, (iii) a tender
offer for or acquisition of securities by or of the Company or (iv) any material
change in the present capitalization or dividend policy of the Company.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Arrangements with Parent. In connection with the April 1998 Stock
Purchase, as defined above in "Item 4. The Solicitation or
Recommendation -- Background," Parent and the Company entered into the
Governance Agreement which provides that, except as set forth below, the Company
will use its best efforts to have the Company Board include up to five nominees
of Parent in the slate of nominees presented by the Company Board for election
at each stockholder meeting at which directors are to be elected and
additionally specifies that Parent nominees will have certain representation on
the Company Board's committees. The current Parent Directors serving on the
Board are Messrs. Weinberg, Kramer, Loning, Metzger and Simonin. If Parent's
share ownership falls below the following percentages (without Parent's buying
back up to the applicable percentage within 30 days), Parent agrees that the
following number of Parent Directors will resign and be replaced by independent
directors. If Parent's ownership falls below 40%, one Parent Director will
resign; if Parent's ownership falls below 30%, two Parent Directors will resign;
and if Parent's ownership falls below 20%, three Parent Directors will resign.
In addition, the Governance Agreement provides that the Company will use its
best efforts to assure that three members of the Company Board will be
"independent" directors and that the Company's Chief Executive Officer will also
be a director. An "independent" director is
15
<PAGE> 17
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. Judith E. Campbell. Ms. Campbell was selected and approved by
Messrs. Johnson and Starrett, the independent directors then in office, in
accordance with the requirements of the Bylaws of the Company (as amended in
connection with the April 1998 Stock Purchase), and joined the Company Board on
April 2, 1998.
The Governance Agreement also provides for a "standstill" period of three
years (the "Standstill Period") from the date of the Governance Agreement.
During the Standstill Period, Parent is prohibited from (i) becoming a member of
a group of persons acquiring, holding, voting or disposing of Shares which would
require a filing with the SEC on Schedule 13D because such group beneficially
owned more than 5% of the outstanding Shares (other than a group comprised
solely of Parent and its affiliates); (ii) purchasing Shares so that Parent and
its affiliates would beneficially own more than 47.55% of the outstanding Shares
(the "Permitted Percentage"); (iii) soliciting, encouraging or publicly
proposing to effect a merger, consolidation or other business combination of the
Company, sale of all or substantially all of the assets of the Company or
significant recapitalization or significant reorganization of the Company; (iv)
soliciting, initiating or encouraging or participating in any solicitation of
proxies or becoming a participant in any election contest; calling, encouraging
or participating in any special meeting of stockholders of the Company (or
taking any action with respect to acting by written consent of the Company's
stockholders); requesting, or taking any action to obtain a list of the
Company's stockholders; or initiating or proposing any stockholder proposal or
participating in or encouraging the making of, or soliciting stockholders of the
Company for the approval of, one or more stockholder proposals; or (v)
assisting, advising, encouraging or acting in concert with any person with
respect to, or seeking to do, any of the foregoing.
The Company may waive any of the above restrictions during the Standstill
Period upon the approval of a majority of the independent directors. The
independent directors unanimously waived the provision of the Governance
Agreement to permit Parent to make the Proposal and to enter into the Merger
Agreement and consummate the transactions contemplated thereby.
The Standstill Period may terminate early upon any of the following: (i)
the occurrence of any event of default by the Company or any subsidiary under
any of its debt agreements which would reasonably be expected to result in a
material adverse effect, and, in the case of a non-monetary event of default,
which default is not or cannot be cured by the Company within the applicable
cure period; (ii) the acquisition by any person or group other than Parent or
any of its affiliates, or the announcement or commencement of a tender or
exchange offer by any person or group other than Parent or any of its affiliates
to acquire, beneficial ownership of more than 20% of the outstanding Shares;
(iii) the commencement by any person or group not affiliated with Parent of an
election contest or the seeking through other means of the removal of any
Directors from office; and (iv) the written submission by any person or group
other than Parent or any of its affiliates a proposal to the Company, the
Company Board or any of its agents, representatives or affiliates with respect
to a merger, consolidation or other business combination of the Company, sale of
all or substantially all of the assets of the Company or significant
recapitalization or significant reorganization of the Company. Occurrence of (i)
through (iv) immediately above will not terminate the Standstill Period if a
majority of the independent directors determines that such proposal is not in
the best interest of the Company and its stockholders.
Parent and its affiliates currently own Shares in excess of the Permitted
Percentage, which were purchased in a series of transactions in the market since
the date of the April 1998 Stock Purchase. The provision of the Governance
Agreement prohibiting such ownership was waived by the Special Committee; at the
same meeting, a waiver to the Governance Agreement was put into place to allow
each individual affiliate of Parent to acquire up to an additional 20,000 Shares
for his own account.
Section 203 of the DGCL. Section 203 of the DGCL, in general, prohibits a
Delaware corporation such as the Company, from engaging in a "Business
Combination" (defined as a variety of transactions, including mergers, as set
forth below) with an "Interested Stockholder" (defined generally as a person
that is the beneficial owner of 15% or more of a corporation's outstanding
voting stock) for a period of three years
16
<PAGE> 18
following the date that such person became an Interested Stockholder unless (a)
prior to the date such person became an Interested Stockholder, the board of
directors of the corporation approved either the Business Combination or the
transaction that resulted in the stockholder becoming an Interested Stockholder,
(b) upon consummation of the transaction that resulted in the stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding stock held by directors who are also officers
of the corporation and employee stock ownership plans that do not provide
employees with the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer or (c) on or
subsequent to the date such person became an Interested Stockholder, the
Business Combination is approved by the board of directors of the corporation
and authorized at a meeting of stockholders, and not by written consent, by the
affirmative vote of the holders of a least 66 2/3% of the outstanding voting
stock of the corporation not owned by the Interested Stockholder.
The foregoing description of Section 203 of the DGCL is not necessarily
complete and is qualified in its entirety by reference to the DGCL.
In connection with the April 1998 Stock Purchase, the Company Board took
the actions necessary so that the provisions of Section 203 of the DGCL would
not be triggered. The Company Board confirmed and ratified these actions in its
approval of the transactions contemplated by the Merger Agreement and no further
action by the Company Board with regard to Section 203 of the DGCL is required.
Certain Legal Matters. Following the December 2 announcements by the
Company and Parent, eight putative class actions were filed by certain
stockholders in the Court of Chancery of the State of Delaware, New Castle
County, against the Company, its directors, its president and chief executive
officer and Parent. The complaints are entitled as follows: (1) Mohammad Yassin
v. Brylane Inc., et al., Civil Action No. 16819NC; (2) Goldplate Holdings, Inc.
v. Peter J. Canzone, et al., Civil Action No. 16820NC; (3) Patty Lisa v. Brylane
Inc., et al., Civil Action No. 16821NC; (3) F. Richard Mason v. Brylane Inc., et
al., Civil Action No. 16823NC: (4) Judith Wit v. Brylane Inc., et al., Civil
Action No. 16824NC; (5) Crandon Capital Partners v. Peter J. Canzone, et al.,
Civil Action No. 16825NC; (7) Spencer S. Falk v. Serge Weinberg, et al., Civil
Action No. 16827NC; and (8) Gerald Patlis v. Brylane Inc., et al., Civil Action
No. 16829NC. The complaints seek relief on behalf of a class of plaintiffs who
own Shares (other than Parent) and allege that the defendants breached their
fiduciary duties in connection with the proposed acquisition by Parent on the
ground that the $20 price contained in the Proposal was grossly inadequate and
unfair, and seek injunctive relief and/or damages or rescission of the
transaction. The foregoing complaints are filed herewith as Exhibits (g)(1)
through (g)(8) and are incorporated herein by reference.
In connection with the increase in the proposed price of $24.50, a
Memorandum of Understanding has been entered into by the defendants and counsel
for the plaintiffs in the above-referenced actions providing for the settlement
of the class action, subject to certain conditions, including judicial approval
and the completion of discovery by the plaintiffs.
Other Matters. Reference is hereby made to the Offer to Purchase and the
related Letter of Transmittal, copies of which are filed herewith as Exhibits
(a)(1) and (a)(2), respectively, and are incorporated herein by reference,
including without limitation the information contained under the captions
"SPECIAL FACTORS -- Background of the Offer" and "THE TENDER OFFER -- Section
14. Certain Legal Matters and Regulatory Approvals" of the Offer to Purchase.
17
<PAGE> 19
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <S>
(a)(1) Offer to Purchase (incorporated by reference to Exhibit
(a)(1) to Parent and Purchasers Tender Offer Statement on
Schedule 14D-1, dated March 16, 1998) (the "14D-1").
(a)(2) Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the 14D-1).
(a)(3) Letter to Stockholders, dated as of March 16, 1999, from
Peter J. Canzone, President and Chief Executive Officer of
the Company.*
(a)(4) Fairness Opinion of Bear Stearns & Co., Inc. dated March 9,
1999.*
(a)(7) Press Release issued by the Company on December 2, 1998
(incorporated by reference to Exhibit 10.99 to the Company's
Quarterly Report on Form 10-Q for the period ended October
31, 1998).
(a)(8) Press Release issued by Parent on December 2, 1998
(incorporated by reference to Exhibit 10.100 to the
Company's Quarterly on Form 10-Q for the period ended
October 31, 1998).
(a)(9) Press Release issued by Parent and the Company on March 10,
1999 (incorporated by reference to Exhibit (a)(8) to the
14D-1).
(a)(10) Press Release issued by the Company on March 15, 1999
(incorporated by reference to Exhibit (a)(9) to the 14D-1).
(c)(1) Agreement and Plan of Merger, dated as of March 10, 1999, by
and among the Company, Purchaser and Parent (incorporated by
reference to Exhibit (c)(1) to the 14D-1).
(c)(2) Description of Material Contracts, Agreements, Arrangements
or Understandings with Affiliates, Directors and Executive
Officers.
(c)(3) Form of Director Indemnity Agreement.
(c)(4) Article Tenth of the Company's Certificate of Incorporation
(incorporated by reference to Exhibit 3.14 to the Company's
Annual Report on Form 10-K for the fiscal year ended January
31, 1998).
(g)(1) Complaint Filed in Yassin v. Brylane Inc., et al., Civil
Action No. 16819NC (Court of Chancery of the State of
Delaware, New Castle County). (incorporated by reference to
Exhibit (g)(1) to the 14D-1)
(g)(2) Complaint Filed in Goldplate Holdings, Inc. v. Canzone, et
al., Civil Action No. 16820NC (Court of Chancery of the
State of Delaware, New Castle County). (incorporated by
reference to Exhibit (g)(2) to the 14D-1)
(g)(3) Complaint Filed in Lisa v. Brylane Inc., et al., Civil
Action No. 16821NC (Court of Chancery of the State of
Delaware, New Castle County). (incorporated by reference to
Exhibit (g)(3) to the 14D-1)
(g)(4) Complaint Filed in Mason v. Brylane Inc., et al., Civil
Action No. 16823NC (Court of Chancery of the State of
Delaware, New Castle County). (incorporated by reference to
Exhibit (g)(4) to the 14D-1)
(g)(5) Complaint Filed in Wit v. Brylane Inc., et al., Civil Action
No. 16824NC (Court of Chancery of the State of Delaware, New
Castle County). (incorporated by reference to Exhibit (g)(5)
to the 14D-1)
(g)(6) Complaint Filed in Crandon Capital Partners v. Canzone, et
al., Civil Action No. 16825NC (Court of Chancery of the
State of Delaware, New Castle County). (incorporated by
reference to Exhibit (g)(6) to the 14D-1)
(g)(7) Complaint Filed in Falk v. Weinberg, et al., Civil Action
No. 16827NC (Court of Chancery of the State of Delaware, New
Castle County). (incorporated by reference to Exhibit (g)(7)
to the 14D-1)
(g)(8) Complaint Filed in Patlis v. Brylane Inc., et al., Civil
Action No. 16829NC (Court of Chancery of the State of
Delaware, New Castle County). (incorporated by reference to
Exhibit (g)(8) to the 14D-1)
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to stockholders.
18
<PAGE> 20
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
BRYLANE INC.
By: /s/ ROBERT A. PULCIANI
------------------------------------
Name: Robert A. Pulciani
Title: Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
Dated: March 16, 1999
19
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ------------------------------------------------------------
<C> <S>
(a)(1) Offer to Purchase (incorporated by reference to Exhibit
(a)(1) to Parent and Purchasers Tender Offer Statement on
Schedule 14D-1, dated March 16, 1998) (the "14D-1").
(a)(2) Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the 14D-1).
(a)(3) Letter to Stockholders, dated as of March 16, 1999, from
Peter J. Canzone, President and Chief Executive Officer of
the Company.*
(a)(4) Fairness Opinion of Bear Stearns & Co., Inc. dated March 9,
1999.*
(a)(7) Press Release issued by the Company on December 2, 1998
(incorporated by reference to Exhibit 10.99 to the Company's
Quarterly Report on Form 10-Q for the period ended October
31, 1998).
(a)(8) Press Release issued by Parent on December 2, 1998
(incorporated by reference to Exhibit 10.100 to the
Company's Quarterly on Form 10-Q for the period ended
October 31, 1998).
(a)(9) Press Release issued by Parent and the Company on March 10,
1999 (incorporated by reference to Exhibit (a)(8) to the
14D-1).
(a)(10) Press Release issued by the Company on March 15, 1999
(incorporated by reference to Exhibit (a)(9) to the 14D-1).
(c)(1) Agreement and Plan of Merger, dated as of March 10, 1999, by
and among the Company, Purchaser and Parent (incorporated by
reference to Exhibit (c)(1) to the 14D-1).
(c)(2) Description of Material Contracts, Agreements, Arrangements
or Understandings with Affiliates, Directors and Executive
Officers.
(c)(3) Form of Director Indemnity Agreement.
(c)(4) Article Tenth of the Company's Certificate of Incorporation
(incorporated by reference to Exhibit 3.14 to the Company's
Annual Report on Form 10-K for the fiscal year ended January
31, 1998).
(g)(1) Complaint Filed in Yassin v. Brylane Inc., et al., Civil
Action No. 16819NC (Court of Chancery of the State of
Delaware, New Castle County). (incorporated by reference to
Exhibit (g)(1) to the 14D-1)
(g)(2) Complaint Filed in Goldplate Holdings, Inc. v. Canzone, et
al., Civil Action No. 16820NC (Court of Chancery of the
State of Delaware, New Castle County). (incorporated by
reference to Exhibit (g)(2) to the 14D-1)
(g)(3) Complaint Filed in Lisa v. Brylane Inc., et al., Civil
Action No. 16821NC (Court of Chancery of the State of
Delaware, New Castle County). (incorporated by reference to
Exhibit (g)(3) to the 14D-1)
(g)(4) Complaint Filed in Mason v. Brylane Inc., et al., Civil
Action No. 16823NC (Court of Chancery of the State of
Delaware, New Castle County). (incorporated by reference to
Exhibit (g)(4) to the 14D-1)
(g)(5) Complaint Filed in Wit v. Brylane Inc., et al., Civil Action
No. 16824NC (Court of Chancery of the State of Delaware, New
Castle County). (incorporated by reference to Exhibit (g)(5)
to the 14D-1)
(g)(6) Complaint Filed in Crandon Capital Partners v. Canzone, et
al., Civil Action No. 16825NC (Court of Chancery of the
State of Delaware, New Castle County). (incorporated by
reference to Exhibit (g)(6) to the 14D-1)
(g)(7) Complaint Filed in Falk v. Weinberg, et al., Civil Action
No. 16827NC (Court of Chancery of the State of Delaware, New
Castle County). (incorporated by reference to Exhibit (g)(7)
to the 14D-1)
(g)(8) Complaint Filed in Patlis v. Brylane Inc., et al., Civil
Action No. 16829NC (Court of Chancery of the State of
Delaware, New Castle County). (incorporated by reference to
Exhibit (g)(8) to the 14D-1)
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to stockholders.
<PAGE> 1
EXHIBIT (a)(3)
BRYLANE INC.
463 7TH AVENUE, 21ST FLOOR
NEW YORK, NEW YORK 10018
March 16, 1999
Dear Stockholder:
On behalf of the Board of Directors of Brylane Inc. (the "Company"), I am
pleased to inform you that the Company entered into an Agreement and Plan of
Merger, dated as of March 10, 1999 (the "Merger Agreement"), with
Pinault-Printemps-Redoute S.A. ("Parent") and Buttons Acquisition Corporation, a
wholly owned subsidiary of Parent ("Purchaser"), pursuant to which Purchaser has
commenced a cash tender offer (the "Offer") to purchase all of the outstanding
shares of common stock, par value $.01 per share, of the Company (the "Shares"),
not already owned by Purchaser or Parent, or either of their respective
wholly-owned subsidiaries, at a price of $24.50 per Share, net to the seller in
cash. Purchaser and Parent currently own approximately 49.9% of the Shares.
In accordance with the terms and conditions contained in the Merger
Agreement, following the successful completion of the Offer, Purchaser will be
merged with and into the Company (the "Merger"), with the Company as the
surviving corporation. At the effective time of the Merger, each remaining
issued and outstanding Share (other than Shares held directly or indirectly by
PPR or held in the treasury of the Company, all of which will be canceled, and
other than Shares held by shareholders who perfect appraisal rights under
Delaware law) will be converted into the right to receive $24.50 in cash.
The Board of Directors of the Company, by unanimous vote of all directors
present and voting, based upon, among other things, the unanimous recommendation
and approval of a special committee of the Board of Directors consisting of
three independent directors of the Company (the "Special Committee"), has
determined that each of the Offer and the Merger is fair to, and in the best
interests of, the Company's shareholders (other than Parent and Purchaser). The
Board of Directors has also approved, by unanimous votes of all directors
present and voting, the Offer, the Merger and the Merger Agreement and
recommends that shareholders accept the Offer and tender their Shares to
Purchaser pursuant to the Offer.
In arriving at their decisions, the Special Committee and the Board of
Directors gave careful consideration to a number of factors described in the
enclosed Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") which is being filed today with the Securities and Exchange Commission.
Among other things, the Special Committee considered the opinion of Bear Stearns
& Co. Inc., financial advisor to the Special Committee, dated March 9, 1999,
that, subject to the various assumptions and limitations set forth in the
opinion, as of the date of the opinion, the $24.50 per Share in cash to be
received by the shareholders of the Company (other than the Company, Parent or
any of their respective subsidiaries, including Purchaser) in the Offer and the
Merger pursuant to the Merger Agreement is fair to such shareholders from a
financial point of view. A copy of the written opinion of Bear Stearns & Co.
Inc., dated March 9, 1999, is included as an annex to this Schedule 14D-9. The
enclosed Schedule 14D-9 describes the decisions of the Special Committee and the
Board of Directors and contains other important information relating to such
decisions.
Also accompanying this letter is Purchaser's Offer to Purchase, dated March
16, 1999, together with a letter of transmittal to be used for tendering your
Shares. These documents set forth the terms and conditions of the Offer and
provide instructions as to how to tender your Shares. We urge you to read the
enclosed materials carefully and consider all factors set forth therein before
making any decision with respect to the Offer.
On behalf of the Board of Directors, management and employees of the
Company, I thank you for your support.
Very truly yours,
/s/ Peter J. Canzone
Peter J. Canzone
President and Chief Executive Officer
<PAGE> 1
EXHIBIT (a)(4)
[BEAR STEARNS LETTERHEAD]
March 9, 1999
Special Committee of the Board of Directors
Brylane, Inc.
463 Seventh Avenue
New York, NY 10018
Attention: Peter Starrett, Chairman
Gentlemen:
We understand that Brylane, Inc. ("Brylane"), Pinault-Printemps-Redoute S.A.
("PPR"), and Buttons Acquisition Corporation, a wholly-owned subsidiary of PPR,
("Purchaser") are considering entering into an Agreement and Plan of Merger (the
"Merger Agreement") or (the "Transaction") dated March 10, 1999. Pursuant to the
Merger Agreement Purchaser intends to purchase all of the outstanding Brylane
common stock currently held by holders other than PPR, the Company and their
respective wholly-owned subsidiaries (the "Public Stockholders"). Pursuant to
the terms of the Merger Agreement the Public Stockholders of Brylane will
receive $24.50 (the "Purchase Price") per share net to the sellers in cash in a
cash tender offer (the "Offer") made by Purchaser, and the Offer will be
followed by a merger, (the "Merger") in which each issued and outstanding share
of Common Stock of Brylane beneficially owned by the Public Stockholders at the
time of the Merger will be converted into the right to receive the Purchase
Price. You have provided us with a draft of the Merger Agreement dated March 9,
1999.
You have asked us to render our opinion as to whether the Purchase Price is
fair, from a financial point of view, to the Public Stockholders of Brylane.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the draft of the Merger Agreement dated March 9, 1999, which we
understand is in substantially the form to be executed by Brylane;
2. reviewed Brylane's Initial Public Offering Prospectus dated February 21,
1997 and its Annual Report to Stockholders and Annual Report on Form
10-K for the fiscal year ended January 31, 1998 and its Quarterly
Reports on Form 10-Q for the periods ended May 2, 1998, August 1, 1998
and October 31, 1998;
3. reviewed preliminary financial information for the fiscal year ended
January 31, 1999 and the fiscal quarter ended January 31, 1999;
4. reviewed certain operating and financial information, including
projections, provided to us by management relating to Brylane's business
and prospects;
5. met with certain members of Brylane's management to discuss its
operations, historical financial statements and future prospects;
6. reviewed the historical prices and trading volume of the common shares
of Brylane;
7. reviewed publicly available financial data, stock market performance
data and valuation parameters of companies which we deemed generally
comparable to Brylane;
8. reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to Brylane and the Merger Agreement; and
9. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information including, and without limitation, the projections provided to
us by Brylane. With respect to Brylane's most recent projected financial
results, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
management of Brylane as to the expected future performance of Brylane. We have
not assumed any responsibility for the independent verification of any such
information or of the projections provided to us and we have further relied upon
the assurances of the management of Brylane that they are unaware of any facts
that would make the information or projections provided to us incomplete or
misleading. In
II-1
<PAGE> 2
arriving at our opinion, we have not performed or obtained any independent
appraisal of the assets or liabilities of Brylane, nor have we been furnished
with any such appraisals. In connection with the preparation of this opinion, we
have not been authorized by the Special Committee, Brylane, or the Board of
Directors to solicit, nor have we solicited, third party indications of interest
for the acquisition of all or any part of Brylane. Our opinion is necessarily
based on economic, market and other conditions, and the information made
available to us, as of the date hereof. We have assumed that the Merger
Agreement executed and delivered by the parties will contain identical financial
and economic terms to the draft Merger Agreement reviewed by us. We have assumed
that, in all respects material to our analysis, the representations and
warranties contained in the Merger Agreement are true and correct and the
conditions to the Merger will be met and the Merger will be consummated on the
terms and conditions contemplated in the Merger Agreement.
We have acted as a financial advisor to the Special Committee in connection with
the Merger Agreement and will receive a fee for such services.
In the ordinary course of business, Bear Stearns may actively trade the equity
securities of Brylane for its own account and for the account of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
It is understood that this letter is intended for the benefit and use of the
Special Committee and the Board of Directors of Brylane and does not constitute
a recommendation to the Special Committee, the Board of Directors of Brylane or
any holders of Brylane common stock as to whether to tender their shares or how
to vote in connection with the Merger. This opinion does not address Brylane's
underlying business decision to pursue the Transaction. This letter is not to be
used for any other purpose, or reproduced, disseminated, quoted to or referred
to at any time, in whole or in part, without our prior written consent;
provided, however, that this letter may be included in its entirety in any
tender offer document, proxy statement or Schedule 13E-3 to be distributed to
the holders of Brylane Common Stock in connection with the Transaction.
Based on and subject to the foregoing, it is our opinion that the Purchase Price
is fair, from a financial point of view, to the Public Stockholders of Brylane
Inc.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ Jerry H. Marcus
------------------------------------------
Senior Managing Director
II-2
<PAGE> 1
EXHIBIT (C)(2)
DESCRIPTION OF MATERIAL CONTRACTS, AGREEMENTS, ARRANGEMENTS OR
UNDERSTANDINGS WITH AFFILIATES, DIRECTORS AND EXECUTIVE OFFICERS
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS
Information is set forth below concerning the incumbent directors of
Brylane Inc. (the "Company"):
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ---- --- -------- --------
<S> <C> <C> <C>
Peter J. Canzone..................... 68 President, Chief Executive Officer, 1993
Chairman of the Board and Director
Serge Weinberg(1).................... 48 Director 1998
Judith E. Campbell(1)................ 51 Director 1998
William C. Johnson(2)................ 59 Director 1994
Hartmut Kramer(1).................... 52 Director 1998
Johannes Loning...................... 35 Director 1998
Antoine Metzger...................... 45 Director 1998
Richard Simonin...................... 46 Director 1998
Peter M. Starrett(1)(2).............. 51 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 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
acquisition by Parent, through a wholly owned subsidiary, of 8,010,917 shares of
common stock, par value $0.01 per share, of the Company, representing 43.7% of
the then outstanding shares, on April 3, 1998, from certain stockholders at a
purchase price of $51.00 per share (the "Parent Stock Purchase"). 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 Redcats 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.
1
<PAGE> 2
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.
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
Redcats 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 Redcats 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 Redcats
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
Redcats 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 has
served as President of Peter Starrett Associates since 1998. From 1990 to 1998,
he served as President of Warner Bros. Studio Stores Worldwide. Mr. Starrett is
also a director of Petco Animal Supplies, Inc. and Guitar Center, Inc.
2
<PAGE> 3
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS 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...... 58 Executive Vice President, Chief Financial Officer, Secretary
and Treasurer
Richard L. Bennett...... 66 Senior Vice President -- Human Resources
William G. Brosius...... 62 Senior Vice President -- Operations/Customer Service
Kevin Doyle............. 45 Vice President/General Manager -- Roaman's
Kevin McGrain........... 44 Vice President/General Manager -- Sears Business
Loida Noriega-Wilson.... 43 Vice President/General Manager -- Lerner
Dhananjaya K. Rao....... 50 President and Chief Executive Officer-Chadwick's
Jules Silbert........... 71 Executive Vice President -- Marketing/New Business
Development
Arlene Silverman........ 49 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". 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.
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. 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
3
<PAGE> 4
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. 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 Executive 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 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 the Company are not compensated by the Company for their
services. Officers of the Company 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 the Company's fiscal years
ended (i) January 30, 1999 (the "1998 fiscal year"); (ii) January 31, 1998 (the
"1997 fiscal year"); and (iii) February 1, 1997 (the "1996 fiscal year").
4
<PAGE> 5
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
OPTIONS TO
ANNUAL COMPENSATION(3) PURCHASE
----------------------- COMMON ALL OTHER
NAME AND PRINCIPAL POSITION PERIOD SALARY(1) BONUS(1)(2) STOCK COMPENSATION(4)
--------------------------- ----------- --------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Peter J. Canzone................. Fiscal 1998 $602,917 $133,941 25,000(5) $115,405
President, Chief Executive Fiscal 1997
Officer 577,917 326,332 25,000(6) 135,849
and Chairman of the Board Fiscal 1996 552,750 421,464 24,000(7) 118,358
Sheila R. Garelik................ Fiscal 1998 423,500 85,831 20,000(5) 65,960
President of Brylane Fiscal 1997 400,583 208,783 17,000(6) 83,336
Fiscal 1996 364,542 244,484 18,000(7) 69,009
Dhananjaya K. Rao................ Fiscal 1998 400,521 100,000 20,000(5) 118,102
President and Chief Executive Fiscal 1997 375,637 435,000 17,000(6) 127,549
Officer -- Chadwick's Fiscal 1996 51,327(8) -- 25,000(7) 5,515
8,302(9)
Carol Meyrowitz(10).............. Fiscal 1998 371,467 75,000 18,000(5) 109,367
Executive Vice President -- Fiscal 1997 345,659 410,000 15,000(6) 121,623
Chadwick's Merchandising Fiscal 1996 49,063(8) -- 25,000(7) 5,451
6,397(9)
Robert A. Pulciani............... Fiscal 1998 337,917 69,482 18,000(5)
Executive Vice President, Fiscal 1997 312,750 163,598 15,000(6) 64,841
Chief Financial Officer, Fiscal 1996 286,583 185,059 12,000(7) 55,166
Secretary and Treasurer
</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 1998, Messrs. Canzone, Rao, and Pulciani and Mmes. Garelik and
Meyrowitz elected to defer $82,386, $43,927, $130,662, $127,333 and
$58,345, respectively, of their aggregate salary and bonus for such period.
For fiscal 1997, Messrs. Canzone, Rao, and Pulciani and Mmes. Garelik and
Meyrowitz elected to defer $90,425, $22,411, $119,087, $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, elected to
defer $97,421, $115,581, and $152,256, 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 August 3, 1996, February 1, 1997, August
1, 1997, January 31, 1998, August 1, 1998 and January 30, 1999 but were not
paid until August 1996, February 1997, August 1997, February 1998, August
1998 and February 1999, 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 and January 30, 1999, but were not
paid until March 1998 and February 1999, respectively. 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 1996,
fiscal 1997 or fiscal 1998 under either of the 1995 Partnership Unit Option
Plan or the 1993 Performance Partnership Unit Option Plan. See "-- Option
Plans".
5
<PAGE> 6
(4) In fiscal 1998, fiscal 1997 and fiscal 1996, 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 1998, fiscal 1997 and fiscal 1996, the amounts in each year
shown for Mr. Rao and Ms. Meyrowitz consist of $27,004, $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 fiscal 1998, Messrs. Canzone, Rao and Pulciani and Mmes. Garelik
and Meyrowitz earned (i) $49,431, $29,827, $27,279, $30,560 and $26,562,
respectively, under the Deferred Compensation Plan; (ii) $10,748, $10,748,
$10,748, $10,748, and $10,748, respectively, under the Retirement Plan
(which will not be paid until April 1999); and (iii) $50,226, $50,523,
$14,833, $19,652, and $45,053, respectively, under the Supplemental
Retirement Plan. In fiscal 1997, Messrs. Canzone, Rao and Pulciani, and
Mmes. Garelik and Meyrowitz earned (i) $54,255, $48,142, $28,581, $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 was not paid until May 1998); and (iii) $65,756,
$42,075, $20,422, $30,936, and $38,864, respectively, under the
Supplemental Retirement Plan. In fiscal 1996, Messrs. Canzone, Rao and
Pulciani, and Mmes. Garelik and Meyrowitz, earned (i) $58,453, $785,
$28,299, $36,542 and $750, respectively, under the Deferred Compensation
Plan; (ii) $10,119, $654, $10,119, $10,119 and $625, respectively, under
the Retirement Plan (which was paid in April 1997); and (iii) $44,786, $0,
$11,748, $17,348 and $0, respectively, under the Supplemental Retirement
Plan.
(5) These options were granted to the Named Executive Officers in 1998 pursuant
to Brylane's 1996 Stock Option Plan.
(6) These options were granted to the Named Executive Officers in 1997 pursuant
to Brylane's 1996 Stock Option Plan.
(7) These options were granted to the Named Executive Officers in 1995 and 1996
pursuant to the Partnership's 1995 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.
(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.
(10) Ms. Meyrowitz tendered her resignation from the Company on March 1, 1999 to
be effective May 28, 1999.
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, $435,000, $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, Robert Evans and Henry Wren
which provide for annual salaries which currently are $230,000, $230,000,
$176,000, $176,000 and $160,000, 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
6
<PAGE> 7
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.
OPTION PLANS
1996 Performance Option Plan
The 1996 Performance Option Plan provides for the grant of incentive or
nonqualified stock options, as appropriate, to officers, key employees,
consultants and directors of the Company and its subsidiaries. Options granted
under the 1996 Performance Option Plan vest based on the Company's attaining
performance criteria as specified at the time of the grant and may also vest on
the passage of time. By linking such options to the Company's achieving targeted
financial performance goals, the Company can provide the means for optionees to
benefit from the Company's and its subsidiaries, growth, development and
financial success. Options covering up to 779,584 shares of common stock have
been reserved for issuance under the 1996 Performance Option Plan.
As of January 30, 1999, options to purchase 47,500 shares of Common Stock
were outstanding and exercisable under the 1996 Performance Option Plan, and
options for the purchase of 160,000 shares remained available for issuance. As
of January 30, 1999, options to purchase an aggregate of 572,034 shares of
Common Stock had been exercised under the 1996 Performance Option Plan.
1996 Option Plan
The 1996 Option Plan provides for the grant of incentive or nonqualified
stock options to officers, key employees, consultants and directors of the
Company and its subsidiaries. With certain exceptions, options granted under the
1996 Option Plan vest and become exercisable in three equal annual installments
on the first, second and third anniversaries of the date of original grant. As
amended, an aggregate of 1,700,000 shares of Common Stock have been reserved for
issuance under the Plan and all options granted under the 1996 Option Plan
terminate seven to ten years from the date of original grant, if not sooner due
to termination of employment.
As of January 30, 1999, options for the purchase of 806,881 shares of
Common Stock were outstanding under the 1996 Option Plan, and options for
763,700 shares remained available for issuance. As of January 30,
7
<PAGE> 8
1999, options to purchase an aggregate of 142,928 shares of Common Stock had
been exercised under the 1996 Option Plan.
1998 Performance Stock Option Plan
The 1998 Performance Stock Option Plan provides for the grant of incentive
or nonqualified stock options, as appropriate, to officers, key employees,
consultants and directors of the Company and its subsidiaries. Options granted
under the 1998 Performance Option Plan vest based on the Company's attaining
performance criteria as specified at the time of the grant and may also vest on
the passage of time. By linking such options to the Company's achieving targeted
financial performance goals, the Company can provide the means for optionees to
benefit from the Company's and its subsidiaries' growth, development and
financial success. Options covering up to 900,000 shares of Common Stock are
available for grants under the Plan. As of January 30, 1999, no options had been
granted under the Plan.
The following table sets forth information concerning options granted to
the Named Executive Officers of the Company during fiscal 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE OR TERM(3)
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 8.89 54.75 3/30/05 557,219 1,298,557
Sheila R. Garelik........ 20,000 7.11 54.75 3/30/05 445,775 1,038,845
Dhananjaya K. Rao........ 20,000 7.11 54.75 3/30/05 445,775 1,038,845
Carol Meyrowitz.......... 18,000 6.40 54.75 3/30/05 401,197 934,961
Robert A. Pulciani....... 18,000 6.40 54.75 3/30/05 401,197 934,961
</TABLE>
- ---------------
(1) The exercise price per share of these options was equal to the fair market
value of the Common Stock on March 30, 1998, the date of grant.
(2) These options were granted under the Company's 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.
8
<PAGE> 9
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 30, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT JANUARY 30, JANUARY 30,
1999(#)(1) 1999($)(2)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Peter J. Canzone..... 250,000 9,000,000 44,334/49,666 226,250/32,500
Sheila R. Garelik.... 49,750 1,922,063 21,667/37,333 105,000/24,375
Dhananjaya K. Rao.... 3,017 52,285 14,001/39,666 25,523/25,520
Carol Meyrowitz...... 2,268 39,304 13,334/36,333 25,523/25,520
Robert A. Pulciani... 36,459 1,312,524 11,000/32,000 32,375/16,250
</TABLE>
- ---------------
(1) Represent options granted under the 1996 Performance Stock Option Plan and
the 1996 Stock Option Plan.
(2) These values are calculated using the last reported sale price of the Common
Stock on the NYSE on January 29, 1999 of $23.0625 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. 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 $68,400 for 1998) 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.
During fiscal 1998, the Company amended the Retirement Plan so that all
participants could invest a portion of their account in Company Common Stock at
a purchase price equal to fair market value on the date of purchase. 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 and provided, that unlike with the Retirement Plan,
participants cannot invest their accounts in Company Common Stock. 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
9
<PAGE> 10
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 $623,750 to certain former employees and four former executive
officers under the Deferred Compensation Plan.
EMPLOYEE STOCK PURCHASE PLAN
During the 1998 fiscal year, the Company adopted the Brylane Employee Stock
Purchase Plan (the "Employee Stock Purchase Plan") which provides eligible
employees with a means to purchase Company Common Stock for investment purposes.
To be eligible, employees must have completed at least six months of continuous
service with the Company and have reached the age of majority in the state in
which they work. The Company's executive officers are not eligible to
participate in the Employee Stock Purchase Plan.
Purchases under the Employee Stock Purchase Plan are funded by payroll
deductions from the payroll of participating employees. The minimum payroll
deduction is $1.00, and there is no limit on the maximum payroll deduction for a
single payroll period. Participants may elect to increase or decrease their
payroll deductions as of the first day of a month and may cease making
contributions at any time, although they can only restart making them on the
next April 1. The Company holds all payroll deductions in a commingled account
until shortly before the monthly date on which the amounts are to be invested by
the designated agent under the Employee Stock Purchase Plan. The purchase price
the participant shall have deemed to have paid is the market price of all
Company Common Stock purchased by such agent for participants on the trade date.
If a participant ceases to be an employee of the Company, the Company will
automatically terminate the participant's account at the end of 30 days and will
cash out any such former participant, unless the employee makes alternative
arrangements with the agent beforehand to receive a stock certificate or to keep
open an active account. Any sales of Company Common Stock under the Employee
Stock Purchase Plan will be reduced by brokerage commissions and other costs of
such sale.
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.
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<PAGE> 11
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.
BOARD REMUNERATION
The members of the Board of Directors, 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.
Messrs. Johnson and Starrett and Ms. Campbell each receive a per meeting fee of
$1,000 (including committee meetings), 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. Pursuant to such election,
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. See "Compensation of
Executive Officers and Directors and Other Information -- Option Plans".
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For a description of certain transactions and arrangements involving
directors of the Company, see "Item 8. Additional Information to be
Furnished -- Arrangements with PPR" in the Schedule 14D-9 to which this
Description is attached.
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. See "Compensation of
Executive Officers and Directors and Other Information -- Option Plans", and
"-- Board Remuneration".
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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 January 30, 1999 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).......................... 8,617,017 50.0%
Capital Research and Management Company(4).................. 1,749,600 10.1
Peter J. Canzone............................................ 60,170(6) *
Sheila R. Garelik........................................... 44,547(7) *
Robert A. Pulciani.......................................... 28,253(8) *
Dhananjaya K. Rao........................................... 20,668(9) *
Carol Meyrowitz(5).......................................... 19,334(10) *
Judith E. Campbell.......................................... 1,000(11) *
William C. Johnson.......................................... 18,667(12) *
Hartmut Kramer(3)........................................... 25,000 *
Johannes Loning(3).......................................... 0 *
Antoine Metzger(3).......................................... 270 *
Richard Simonin............................................. 0 *
Peter M. Starrett........................................... 13,014(13) *
Serge Weinberg(3)........................................... 2,000 *
All directors and executive officers of Brylane as a group
(21 persons).............................................. 329,722(14) 1.9%
</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 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 3,379,584 Shares of Company Common Stock. See
"Compensation of Executive Officers and Directors and Other
Information -- Option Plans". Does not include any shares of Common Stock
issuable upon exercise of Options that will become exercisable pursuant to
the terms of the Merger Agreement.
(3) Such information in the table has been furnished by Parent. The shares
shown as beneficially owned by Parent are held of record by EMPUSA LLC, a
Delaware limited liability company and a wholly-owned subsidiary of Parent.
Mr. Kramer is Chairman and Chief Executive Officer of Redcats S.A., a
wholly-owned subsidiary of Parent, Mr. Loning is Vice
President -- Corporate Development of Redcats S.A., Mr. Metzger is Chief
Financial Officer of Redcats 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 Parent, and as such each may be deemed to be a
beneficial owner of the shares owned by EMPUSA LLC. Messrs. Kramer, Loning,
Metzger, Simonin and Weinberg each disclaim beneficial ownership of such
shares. See "Item 8. Additional Information to be Furnished -- Arrangements
with Parent" in the Schedule 14D-9 to which this Description is attached
for information concerning arrangements pursuant to which Parent is
entitled to designate the five members of the Board indicated in the table.
The address of EMPUSA LLC is c/o Redcats S.A., 110, rue de Blanchemaille,
59051 Roubaix Cedex 01 France. The address of Parent is 18, Place Henri
Bergson, 75381 Paris Cedex 08. The address of Redcats S.A. is 110, rue de
Blanchemaille, 59051 Roubaix Cedex 01 France.
(4) As reported in a Schedule 13G dated February 8, 1999 filed jointly with the
Securities and Exchange Commission (the "Commission") by Capital Research
and Management Company, as investment
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<PAGE> 13
advisor and SMALLCAP World Fund, Inc. an investment company registered
under the Investment Company Act of 1940, as amended, which is advised by
Capital Research and Management Company. The business address of Capital
Research and Management Company and SMALLCAP World Fund, Inc. is 333 South
Hope Street, Los Angeles, CA 90071.
(5) Ms. Meyrowitz tendered her resignation from the Company on March 1, 1999,
to be effective May 28, 1999.
(6) Includes 7,402 shares of Common Stock held by the Company's retirement plan
and 52,668 shares of Common Stock subject to Options (including 8,334
shares of Common Stock issuable within 60 days upon exercise of options).
(7) Includes 9,963 shares of Common Stock held by the Company's retirement plan
and 28,334 shares of Common Stock subject to Options (including 6,667
shares of Common Stock issuable within 60 days upon exercise of options)
and includes 250 shares of Common Stock held by Ms. Garelik's son.
(8) Includes 11,153 shares of Common Stock held by the Company's retirement
plan and 17,000 shares of Common Stock subject to Options (including 6,000
shares of Common Stock issuable within 60 days upon exercise of options).
(9) Includes 20,668 shares of Common Stock subject to Options (including 6,667
shares of Common Stock issuable within 60 days upon exercise of options).
(10) Includes 19,334 shares of Common Stock subject to Options (including 6,000
shares of Common Stock issuable within 60 days upon exercise of options).
(11) Reflects shares of Common Stock issuable within 60 days upon exercise of
options.
(12) Includes 12,667 shares of Common Stock subject to Options (including 1,000
shares of Common Stock issuable within 60 days upon exercise of options).
(13) Includes 5,014 shares of Common Stock subject to Options (including 1,000
shares of Common Stock issuable within 60 days upon exercise of options).
(14) Includes 38,383 shares of Common Stock held by the Company's retirement
plan and 237,086 shares of Common Stock subject to Options (including
48,004 shares of Common Stock issuable within 60 days upon exercise of
options).
13
<PAGE> 1
EXHIBIT(c)(3)
FORM OF INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement") dated as of , is
made by and between Brylane Inc., a Delaware corporation (the "Company"), on the
one hand, and (the "Indemnitee"), on the other hand.
R E C I T A L S :
A. Section 3.1 of the Bylaws of the Company (the "Bylaws") provides that,
except as set forth therein, the business and affairs of the Company shall be
managed by or under the direction of a Board of Directors of the Company (the
"Board"). The members of the Board of Directors are hereinafter referred to
individually as a "Director" and collectively as the "Directors."
B. The Company recognizes that competent and experienced persons are
increasingly reluctant to serve as members of the boards of corporations unless
they are protected by comprehensive liability insurance or indemnification, or
both, due to increased exposure to litigation costs and risks resulting from
their service to such corporations, and due to the fact that the exposure
frequently bears no reasonable relationship to the compensation of such persons.
C. The statutes and judicial decisions regarding the duties of such
persons who serve on boards of corporations are often difficult to apply,
ambiguous, or conflicting, and therefore fail to provide such persons with
adequate, reliable knowledge of legal risks to which they are exposed or
information regarding the proper course of action to take.
D. Each of the Company and the Indemnitee recognizes that plaintiffs often
seek damages in such large amounts and the costs of litigation may be so
substantial (whether or not the case is meritorious), that the defense and/or
settlement of such litigation is often beyond the personal resources of such
persons who serve on boards of corporations.
E. The Company believes that it is unfair for its Directors to assume the
risk of substantial judgments and other expenses which may occur in cases in
which the Director received no personal profit and in cases where the Director
acted in good faith.
F. Section 145 of the General Corporation Law of Delaware ("Section 145")
empowers a corporation to indemnify its directors by agreement and to indemnify
persons who serve, at the request of such corporations, as the director of other
corporations or enterprises, and expressly provides that the indemnification
provided by Section 145 is not exclusive.
G. The Board has determined that contractual indemnification as set forth
herein is not only reasonable and prudent but necessary to promote the best
interests of the Company and its stockholders.
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a Director of the Company.
I. The Indemnitee only is willing to serve, or to continue to serve, as a
Director of the Company, provided that the Indemnitee is furnished the indemnity
provided for herein by the Company.
A G R E E M E N T :
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth below, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Definitions.
(a) Agent. For purposes of this Agreement, "agent" of the Company means
any person who: (i) is or was a Director of the Company or a director of a
subsidiary of the Company; or (ii) is or was serving at the
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<PAGE> 2
request of, for the convenience of, or to represent the interest of the Company
or a subsidiary of the Company as a representative or director of another
foreign or domestic corporation, partnership or joint venture.
(b) Expenses. For purposes of this Agreement, "expenses" includes all
direct and indirect costs of any type of nature whatsoever (including, without
limitation, all attorneys' fees and related disbursements, other out-of-pocket
costs and reasonable compensation for time spent by the Indemnitee for which she
is not otherwise compensated by the Company or any third party, provided that
the rate of compensation and estimated time involved is approved in advance by
the Board), actually and reasonably incurred by the Indemnitee in connection
with either the investigation, defense or appeal of a proceeding or establishing
or enforcing a right to indemnification under this Agreement, Section 145 or
otherwise, and amounts paid in settlement by or on behalf of the Indemnitee.
(c) Proceedings. For the purposes of this Agreement, "proceeding" means
any threatened, pending, or completed action, suit or other proceeding, whether
civil, criminal, administrative, investigative or any other type whatsoever.
(d) Subsidiary. For purposes of this Agreement, "subsidiary" means any
corporation or partnership of which more than 50% of the outstanding voting
securities or partnership interests, as the case may be, are owned directly or
indirectly by the Company, by the Company and one or more other subsidiaries, or
by one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to
serve as an agent of the Company, at the will of the Company (or under separate
agreement, if such agreement exists), in the capacity the Indemnitee currently
serves as an agent of the Company, so long as the Indemnitee is duly appointed
or elected and qualified in accordance with the applicable provisions of the
applicable partnership agreement or bylaws of each of such partnerships,
corporations or of any subsidiary thereof, or until such time as the Indemnitee
tenders his or her resignation in writing; provided, however, that nothing
contained in this Agreement is intended to create any right to continued
employment of the Indemnitee in any capacity.
3. Indemnification.
(a) Indemnification in Third Party Proceedings. Subject to Section 10
below, the Company shall indemnify the Indemnitee if the Indemnitee is a party
to or threatened to be made a party to or otherwise involved in any proceeding
(other than a proceeding by or in the name of the Company to procure a judgment
in its favor) by reason of the fact that the indemnitee is or was an agent of
the Company, or by reason of any act or inaction by him or her in any such
capacity, against any and all expenses and liabilities of any type whatsoever
(including, but not limited to, judgments, fines and penalties), actually and
reasonably incurred by him or her in connection with the investigation, defense,
settlement or appeal of such proceeding, but only if the Indemnitee acted in
good faith and in a manner she reasonably believed to be in, or not opposed to,
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any proceeding by judgment, order of court, settlement,
conviction or on plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that the Indemnitee did not act in good faith in a
manner which she reasonably believed to be in, or not opposed to, the best
interests of the Company, and with respect to any criminal proceedings, that
such person had reasonable cause to believe that his or her conduct was
unlawful.
(b) Indemnification in Derivative Actions. Subject to Section 10 below,
the Company shall indemnify the Indemnitee if the Indemnitee is a party to or
threatened to be made a party to or otherwise involved in any proceeding by or
in the name of the Company or a subsidiary of the Company to procure a judgment
in its favor by reason of the fact that the Indemnitee is or was an agent of the
Company or a subsidiary of the Company, or by reason of any act or inaction by
him or her in any such capacity, against all expenses actually and reasonably
incurred by the Indemnitee in connection with the investigation, defense,
settlement, or appeal of such proceedings, but only if the Indemnitee acted in
good faith and in a manner she reasonably believed to be in, or not opposed to,
the best interests of the Company or a subsidiary of the Company, except that no
indemnification under this Section 3 shall be made in respect of any claim,
issue or matter as to which the Indemnitee shall have been finally adjudged to
be liable to the Company or a subsidiary of the Company by a
2
<PAGE> 3
court of competent jurisdiction due to willful misconduct of a culpable nature
in the performance of the Indemnitee's duty to the Company or a subsidiary of
the Company, unless and only to the extent that any court in which such
proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as such
court shall deem proper.
4. Indemnification of Expenses of Successful Party. Notwithstanding any
other provisions of this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any proceeding or in defense
of any claim, issue or matter therein, including the dismissal of any action
without prejudice, the Company shall indemnify the Indemnitee against all
expenses actually and reasonably incurred in connection with the investigation,
defense or appeal of such proceeding.
5. Partial Indemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines or penalties) actually and reasonably incurred
by him or her in the investigation, defense, settlement or appeal of a
proceeding but is not entitled, however, to indemnification for the total amount
thereof, the Company shall nevertheless indemnify the Indemnitee for the portion
thereof to which the Indemnitee is entitled.
6. Advancement of Expenses. Subject to Section 10(b) below, the Company
shall advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company. The Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company as authorized by this Agreement. The advances to be
made hereunder shall be paid by the Company to or on behalf of the Indemnitee
within 30 days following delivery of a written request therefor by the
Indemnitee to the Company.
7. Notice and Other Indemnification Procedures.
(a) Notification of Proceeding. Promptly after receipt by the Indemnitee
of notice of the commencement of or the threat of commencement of any
proceeding, the Indemnitee shall, if the Indemnitee believes that
indemnification with respect thereto may be sought from the Company under this
Agreement, notify the Company of the commencement or threat of commencement
thereof.
(b) Request for Indemnification. Any indemnification requested by the
Indemnitee under Section 3 hereof shall be made no later than 10 days after
receipt of the written request of the Indemnitee, unless a good faith
determination is made within said 10-day period (i) by the Board by a majority
vote of a quorum thereof consisting of Directors who are not parties to such
proceedings; or (ii) in the event such a quorum is not obtainable, at the
election of the Company, either by independent legal counsel in a written
opinion or by a panel of arbitrators, one of whom is selected by the Company,
another of whom is selected by the Indemnitee and the last of whom is selected
by the first two arbitrators so selected, that the Indemnitee is not or (subject
to final judgment or other final adjudication as provided in Section 10(a)
below) ultimately will not be entitled to indemnification hereunder.
(c) Application for Enforcement. Notwithstanding a determination under
Section 7(b) above that the Indemnitee is not entitled to indemnification with
respect to any specific proceeding, the Indemnitee shall have the right to apply
to any court of competent jurisdiction for the purpose of enforcing the
Indemnitee's right to indemnification pursuant to this Agreement. Neither the
failure of the Company (including its Board or independent legal counsel or the
panel of arbitrators) to have made a determination prior to the commencement of
such action that the Indemnitee is entitled to indemnification hereunder, nor an
actual determination by the Company (including its Board or independent legal
counsel or the panel of arbitrators) that the Indemnitee is not entitled to
indemnification hereunder, shall be a defense to the action or create any
presumption that the Indemnitee is not entitled to indemnification hereunder.
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<PAGE> 4
(d) Indemnification of Certain Expenses. The Company shall indemnify the
Indemnitee against all expenses incurred in connection with any hearing or
proceeding under this Section 7 if the Indemnitee prevails in such hearing or
proceeding.
8. Assumption of Defense. In the event the Company shall be obligated to
pay the expenses of any proceeding against the Indemnitee, the Company, if
appropriate, shall be entitled to assume the defense of such proceeding, with
counsel reasonably acceptable to the Indemnitee, upon the delivery to the
Indemnitee of written notice of its election to do so. After delivery of such
notice, approval of such counsel by the Indemnitee and the retention of such
counsel by the Company, the Company shall not be liable to the Indemnitee under
this Agreement for any fees of counsel subsequently incurred by the Indemnitee
with respect to the same proceeding, provided that (a) the Indemnitee shall have
the right to employ his or her counsel in such proceeding at the Indemnitee's
expense; and (b) if (i) the employment of counsel by the Indemnitee has been
previously authorized in writing by the Company, (ii) the Indemnitee's counsel
delivers a written notice to the Company stating that such counsel has
reasonably concluded that there may be a conflict of interest between the
Company and the Indemnitee in the conduct of any such defense or (iii) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding within a reasonable time, then in any such event the fees and
expenses of the Indemnitee's counsel shall be at the expense of the Company.
9. Insurance. The Company may, but is not obligated to, obtain liability
insurance ("D&O Insurance") as may be or become available with respect to which
the Indemnitee is named as an insured. Notwithstanding any other provision of
this Agreement, the Company shall not be obligated to indemnify the Indemnitee
for expenses, judgments, fines or penalties which have been paid directly to the
Indemnitee by D&O Insurance. If the Company has D&O Insurance in effect at the
time the Company receives from the Indemnitee any notice of the commencement of
a proceeding, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
policy. The Company shall thereafter take all necessary or desirable action to
cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as
a result of such proceeding in accordance with the terms of such policy.
10. Exceptions.
(a) Certain Matters. Any provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement to
indemnify the Indemnitee on account of any proceeding with respect to (i)
remuneration paid to the Indemnitee if it is determined by final judgment or
other final adjudication that such remuneration was in violation of law, (ii)
which final judgment is rendered against the Indemnitee for an accounting of
profits made from the purchase or sale by the Indemnitee of securities of the
Company or any affiliate of the Company pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions
of any federal, state or local statute, or (iii) which (but only to the extent
that) it is determined by final judgment or other final adjudication that the
Indemnitee's conduct was in bad faith, knowingly fraudulent or deliberately
dishonest. For purposes of the foregoing sentence, a final judgment or other
adjudication may be reached in either the underlying proceeding or action in
connection with which indemnification is sought or a separate proceeding or
action to establish rights and liabilities under this Agreement.
(b) Claims Initiated by the Indemnitee. Any provision herein to the
contrary notwithstanding, the Company shall not be obligated pursuant to the
terms of this Agreement to indemnify or advance expenses to the Indemnitee with
respect to proceedings or claims initiated or brought voluntarily by the
Indemnitee and not by way of defense, except with respect to proceedings brought
to establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 145, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board finds it to be appropriate.
(c) Action for Indemnification. Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee for any expenses
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<PAGE> 5
incurred by the Indemnitee with respect to any proceeding instituted by the
Indemnitee to enforce or interpret this Agreement if the Indemnitee does not
prevail in such proceeding.
(d) Unauthorized Settlements. Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee under this Agreement for any amounts
paid in settlement of a proceeding effected without the Company's written
consent. Neither the Company nor the Indemnitee shall unreasonably withhold
consent to any proposed settlement; provided, however, that the Company may in
any event decline to consent to (or to otherwise admit or agree to any liability
for indemnification hereunder in respect of) any proposed settlement if the
Company determines in good faith (pursuant to Section 7(b) above) that the
Indemnitee is not or ultimately will not be entitled to indemnification
hereunder.
(e) Securities Act Liabilities. Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement to indemnify the Indemnitee or otherwise act in violation of any
undertaking appearing in and required by the rules and regulations promulgated
under the Securities Act of 1933, as amended (the "Act") in any registration
statement filed with the Securities and Exchange Commission under the Act. The
Indemnitee acknowledges that paragraph (h) of Item 512 of Regulation S-K
currently generally requires the Company to undertake in connection with any
registration statement filed under the Act to submit the issue of the
enforceability of the Indemnitee's rights under this Agreement in connection
with any liability under the Act on public policy grounds to a court of
appropriate jurisdiction and to be governed by any final adjudication of such
issue. The Indemnitee specifically agrees that any such undertaking shall
supersede the provisions of this Agreement and to be bound by any such
undertaking.
11. Nonexclusivity. The provisions for indemnification and advancement of
expenses set forth in this Agreement shall not be deemed exclusive of any other
rights which the Indemnitee may have under any provision of law or the Bylaws,
in any court in which a proceeding is brought, the vote of the disinterested
members of the Board, other agreements or otherwise, both as to action in the
Indemnitee's official capacity and to action in another capacity while occupying
his or her position as an agent of the Company, and the Indemnitee's rights
hereunder shall continue after the Indemnitee has ceased acting as an agent of
the Company and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee. Any provision herein to the contrary
notwithstanding, the Company may provide, in specific cases, the Indemnitee with
full or partial indemnification if the Board determines that such
indemnification is appropriate. This Agreement shall not be construed to
restrict any right to indemnification that the Indemnitee may otherwise have
under the Bylaws.
12. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of the Indemnitee, who, at the request and expense of the Company,
shall execute all papers required and shall do everything that may be reasonably
necessary to secure such rights, including the execution of such documents
necessary to enable the Company effectively to bring suit to enforce such
rights.
13. Interpretation of Agreement. It is understood that the parties hereto
intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent now or hereafter
permitted by law.
14. Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever, (a)
the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 13 hereof.
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15. Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provision hereof (whether or not similar)
nor shall such waiver constitute a continuing waiver.
16. Successors and Assigns. The terms of this Agreement shall bind, and
shall inure to the benefit of, the successors and assigns of the parties hereto.
17. Notice. Except as otherwise provided herein, any notice or demand
which, by the provisions hereof, is required or which may be given to or served
upon the parties hereto shall be in writing and, if by telegram, telecopy or
telex, shall be deemed to have been validly served, given or delivered when
sent, if by personal delivery, shall be deemed to have been validly served,
given or delivered upon actual delivery and, if mailed, shall be deemed to have
been validly served, given or delivered upon actual delivery and, if mailed,
shall be deemed to have been validly served, given or delivered three business
days after deposit in the United States mails, as registered or certified mail,
with proper postage prepaid and addressed to the party or parties to be notified
at the addresses set forth on the signature page of this Agreement (or such
other address(es) as a party may designate for itself by like notice).
18. Governing Law. This Agreement and the rights of the parties hereunder
shall be governed exclusively by and construed according to the laws of the
State of Delaware, and all rights and remedies shall be governed by such laws
without regard to principles of conflicts of laws.
19. Statement of Intent. It is the intent of the parties to this Agreement
that the provisions of this Agreement should be enforced to the same extent as
if such provisions were expressly set forth in the Bylaws.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the date first above written.
THE COMPANY:
BRYLANE INC.,
a Delaware corporation
By:
------------------------------------
Name: Robert A. Pulciani
Its: Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
Address: 463 7th Avenue
New York, New York 10018
THE INDEMNITEE:
--------------------------------------
Name:
Address:
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