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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- - --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DM Management Company
(Name of Registrant as Specified In Its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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DM MANAGEMENT
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DM MANAGEMENT COMPANY
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON MAY 8, 1997
AND
PROXY STATEMENT
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IMPORTANT
PLEASE MARK, SIGN AND DATE YOUR PROXY
AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE.
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D M M A N A G E M E N T
April 10, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
DM Management Company. The meeting will be held at the offices of Foley, Hoag &
Eliot LLP, One Post Office Square, 16th Floor, Boston, Massachusetts on
Thursday, May 8, 1997, beginning at 10:00 A.M., local time.
As a stockholder, your vote is important. We encourage you to execute and
return your proxy promptly whether you plan to attend the meeting or not so that
we may have as many shares as possible represented at the meeting. Returning
your completed proxy will not prevent you from voting in person at the meeting
prior to the proxy's exercise if you wish to do so.
Thank you for your cooperation, continued support and interest in DM
Management Company.
Sincerely,
/s/ Gordon R. Cooke
Gordon R. Cooke
President and Chief Executive
Officer
25 RECREATION PARK DRIVE, SUITE 200, HINGHAM, MA 02043 * 617 740-2718
* FAX 617 749-8523
WINTERBROOK WAY, RT. 104, MEREDITH, NH 03253 * 603 279-7051 * 603 279-6297
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DM MANAGEMENT COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
Notice is hereby given that the Annual Meeting of Stockholders of DM
Management Company (the "Company") will be held at the offices of Foley, Hoag &
Eliot LLP, One Post Office Square, 16th Floor, Boston, Massachusetts on
Thursday, May 8, 1997, beginning at 10:00 A.M., local time for the following
purposes:
1. To fix the number of directors that shall constitute the whole Board of
Directors of the Company at six;
2. To consider and vote upon the election of two Class A Directors, one
Class B Director and one Class C Director;
3. To act upon a proposal to amend the 1993 Incentive and Nonqualified
Stock Option Plan to increase the number of shares of Common Stock that
may be issued pursuant to options granted thereunder from 700,000 to
1,200,000;
4. To act upon a proposal to amend the 1993 Incentive and Nonqualified
Stock Option Plan further to alter the formula stock option grants
thereunder to non-employee directors of the Company; and
5. To transact such further business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 3, 1997 as
the record date for the determination of the stockholders of the Company
entitled to notice of, and to vote at, the Annual Meeting and any adjournment
thereof. Only stockholders of record on such date are entitled to notice of, and
to vote at, the Annual Meeting or any adjournment thereof.
By Order of the Board of Directors,
/s/ David R. Pierson
David R. Pierson
Secretary
Boston, Massachusetts
April 10, 1997
YOUR VOTE IS IMPORTANT
PLEASE SIGN AND RETURN THE ENCLOSED PROXY, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
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DM MANAGEMENT COMPANY
25 RECREATION PARK DRIVE
HINGHAM, MASSACHUSETTS 02043
(617) 740-2718
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about April 10, 1997 in connection with the solicitation by
the Board of Directors of DM Management Company (the "Company") of proxies to be
used at the Annual Meeting of Stockholders of the Company, to be held on
Thursday, May 8, 1997, and at any and all adjournments thereof (the "Annual
Meeting"). When proxies are returned properly executed, the shares represented
will be voted in accordance with the stockholders' directions. Stockholders are
encouraged to vote on the matters to be considered. However, if no choice has
been specified by a stockholder, the shares will be voted as recommended by
management. Any stockholder may revoke his proxy at any time before it has been
exercised by providing the Company with a later dated proxy, by notifying the
Company's Secretary in writing or by orally notifying the Company in person.
The Board of Directors of the Company (the "Board") has fixed the close of
business on April 3, 1997, as the record date for the determination of the
stockholders of the Company entitled to notice of, and to vote at, the Annual
Meeting and any adjournment thereof. Only stockholders of record on such date
are entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof. At the close of business on the record date, there were issued and
outstanding 4,534,157 shares of the Company's Common Stock, $.01 par value (the
"Common Stock"), entitled to cast 4,534,157 votes.
The By-Laws of the Company provide that the holders of a majority of the
shares of Common Stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at the
Annual Meeting. Shares of Common Stock represented by a properly signed and
returned proxy will be treated as present at the Annual Meeting for purposes of
determining a quorum. Abstentions and broker non-votes with respect to
particular proposals will not affect the determination of a quorum. Thus, shares
voted to abstain as to a particular matter, or as to which a nominee (such as a
broker holding shares in street name for a beneficial owner) has no voting
authority in respect of a particular matter, shall be deemed present for
purposes of determining a quorum. Any stockholder who attends the Annual Meeting
may not withhold his shares from the quorum count by declaring such shares
absent from the Annual Meeting.
Passage of the proposal to fix the number of directors constituting the
whole Board requires the approval of a majority of the votes properly cast.
Abstentions and broker non-votes as to this proposal do not count as votes for
or against the proposal. The Class A, B and C Directors will be elected by a
plurality of the votes properly cast. Abstentions and broker non-votes as to
this election do not count as votes for or against such election. The
affirmative vote of a majority of the shares of Common Stock properly cast at
the Annual Meeting will be necessary to approve each of the proposals to amend
the Company's 1993 Incentive and Nonqualified Stock Option Plan (the "1993 Stock
Option Plan"). Abstentions as to each of these proposals will count as being
present and represented at the Special Meeting and entitled to vote, and will be
included in calculating the number of votes cast on these proposals (and thus
will have the effect of "no" votes). Broker non-votes will not be included in
calculating the number of votes cast on these proposals.
Votes will be tabulated by the Company's transfer agent, State Street Bank
and Trust Company.
PROPOSALS ONE AND TWO --
FIXING NUMBER OF DIRECTORS AND ELECTION OF DIRECTORS
The Company's By-Laws provide for a Board of Directors consisting of from
two to seven members. Within such limits, the number of directors constituting
the whole Board is determined by the stockholders at
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the annual meeting of stockholders, and may be increased or decreased by the
stockholders or the directors from time to time. The Board is divided into three
classes, labeled Class A, Class B and Class C, each containing, insofar as
possible, an equal number of directors. Directors are elected to serve for
three-year terms, and until their respective successors are duly elected and
qualified, with the term of one of the three classes expiring each year at the
Company's annual meeting or special meeting in lieu thereof.
The number of directors constituting the whole Board is currently fixed at
four, and the Board currently consists of two Class A Directors, one Class B
Director and one Class C Director.
The terms of the Company's two Class A Directors, William E. Engbers and
Samuel L. Shanaman, will expire at the Annual Meeting. The Company's current
Class B Director is Walter J. Levison. His term as a director will expire at the
Company's 1998 annual meeting of stockholders or special meeting in lieu
thereof. The Company's current Class C director is Gordon R. Cooke. His term as
a director will expire at the Company's 1999 annual meeting of stockholders or
special meeting in lieu thereof.
The Board has recommended that the number of directors constituting the
whole Board be fixed at six and has nominated Mr. Engbers and Mr. Shanaman for
election as Class A Directors, to serve until the Company's 2000 annual meeting
of stockholders or special meeting in lieu thereof, and until their successors
are duly elected and qualified. The Board has also nominated Ruth M. Owades for
election as a Class B Director, to serve until the Company's 1998 annual meeting
of stockholders or special meeting in lieu thereof, and until her successor is
duly elected and qualified, and Thomas J. Litle for election as a Class C
Director, to serve until the Company's 1999 annual meeting of stockholders or
special meeting in lieu thereof, and until his successor is duly elected and
qualified.
The nominees have agreed to serve as Directors if elected, and the Company
has no reason to believe that they will be unable to serve. In the event that
any of them is unable or declines to serve as director at the time of the Annual
Meeting, proxies may be voted for such other nominee as is then designated by
the Board.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL TO FIX THE NUMBER OF
DIRECTORS AT SIX AND FOR THE ELECTION OF MR. ENGBERS AND MR. SHANAMAN AS CLASS A
DIRECTORS, MS. OWADES AS A CLASS B DIRECTOR AND MR. LITLE AS A CLASS C DIRECTOR
OF THE COMPANY.
PROPOSAL THREE --
AMENDMENT TO THE 1993 STOCK OPTION PLAN TO INCREASE
THE NUMBER OF SHARES OF COMMON STOCK THAT MAY BE ISSUED
PURSUANT TO OPTIONS GRANTED THEREUNDER
The 1993 Stock Option Plan currently provides that the total number of
shares of Common Stock that may be issued pursuant to options granted under the
1993 Stock Option Plan shall not exceed 700,000 (subject to adjustment upon
certain changes in capitalization of the Company). The Company is proposing that
the 1993 Stock Option Plan be amended to increase the number of shares of Common
Stock that may be issued pursuant to options granted thereunder from 700,000 to
1,200,000. Currently, only 44,318 shares remain available for issuance pursuant
to new options to be granted under the 1993 Stock Option Plan, too few to cover
the automatic formula stock option grants that would be made to Mr. Litle and
Ms. Owades, the two nominees for new Outside Director positions, if they are
elected at the Annual Meeting. Additional shares are also required to cover the
annual option grants to Outside Directors that will automatically be made under
the 1993 Stock Option Plan if Proposal Four is adopted. See "Proposal
Four -- Amendment To The 1993 Stock Option Plan To Alter The Formula Stock
Option Grants To Outside Directors." The Company also believes that it is
desirable to have additional shares available to cover future option grants to
employees, and that increasing the number of shares available under the 1993
Stock Option Plan will further align the interests of shareholders and
management and will assist the Company in attracting and retaining key
executives.
The Board has authorized the amendment of the 1993 Stock Option Plan to
increase the number of shares available for issuance thereunder, but this
amendment will be effective only if this Proposal Three is approved by the
stockholders of the Company. See "Remuneration Of Executive Officers And
Directors -- Benefit Plans" for a description of the material features of the
1993 Stock Option Plan, the classes of persons
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eligible to participate therein, the approximate number of persons in each such
class and the basis of such participation and "Proposal Four -- Amendment To The
1993 Stock Option Plan To Alter The Formula Stock Option Grants To Outside
Directors" for a description of certain proposed changes to the formula stock
option grant provisions for members of the Board of Directors who are not
employees of the Company or any parent or subsidiary of the Company ("Outside
Directors"). Under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), stockholder approval of this amendment is necessary for stock
options issuable under the 1993 Stock Option Plan to qualify as incentive stock
options. Stockholder approval is also required to qualify compensation received
under the 1993 Stock Option Plan as "performance-based compensation" for
purposes of Section 162(m) of the Code.
The Company intends to file, as soon as practicable, a Registration
Statement under the Securities Act of 1933 covering the additional 500,000
shares of Common Stock issuable under the 1993 Stock Option Plan if Proposal
Three is approved by the stockholders of the Company.
The full text of the 1993 Stock Option Plan as proposed to be amended is
printed as Appendix A, beginning on page A-1.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL TO AMEND
THE 1993 STOCK OPTION PLAN.
PROPOSAL FOUR --
AMENDMENT TO THE 1993 STOCK OPTION PLAN TO ALTER THE
FORMULA STOCK OPTION GRANTS TO OUTSIDE DIRECTORS
The Company is proposing to amend the 1993 Stock Option Plan to alter the
formula stock option grants to Outside Directors.
The 1993 Stock Option Plan currently provides that each new Outside
Director shall automatically be granted, on the date such person first becomes a
member of the Board, a nonqualified stock option to purchase 24,000 shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock (determined in accordance with the terms of the 1993 Stock Option Plan) on
the date of option grant. Such option is immediately vested and exercisable as
to one-third of such shares, vests and becomes exercisable as to the remaining
two-thirds of such shares cumulatively in two equal annual installments on the
first and second anniversaries of the date the option is granted, provided that
the option holder continues to serve as a director immediately following such
annual meeting or special meeting in lieu thereof, and expires five years from
the date of grant. As amended, the 1993 Stock Option Plan would change the terms
of any such options granted to Outside Directors who first join the Board at the
Annual Meeting or thereafter so that each such option would have a seven-year
term, and so that in the event that a "Qualified Sale" occurred before the
expiration date of the option, and immediately prior to the closing of such
Qualified Sale the holder of the option was a member of the Board of Directors
of the Company, then immediately prior to such closing the option would become
exercisable as to a number of shares subject to the option, up to 100%, equal to
two times the number of shares as to which the option otherwise would have been
exercisable immediately prior to such closing. For such purposes, a "Qualified
Sale" means the sale of all or substantially all of the assets or issued and
outstanding capital stock of the Company, or a merger or consolidation involving
the Company in which the stockholders of the Company immediately before such
merger or consolidation do not own immediately after such merger or
consolidation capital stock or other equity interests of the surviving
corporation or entity representing more than fifty percent in voting power of
the capital stock or other equity interests of such surviving corporation or
entity outstanding immediately after such merger or consolidation.
As amended, the 1993 Stock Option Plan would also provide for additional
formula stock option grants to Outside Directors as follows: Each Outside
Director who has served for at least six months and who continues to serve at
each annual meeting or special meeting in lieu thereof beginning with the Annual
Meeting shall automatically be granted, on the date of such meeting, a
nonqualified stock option to purchase 5,000 shares of Common Stock at an
exercise price equal to the fair market value of the Common Stock (determined in
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accordance with the terms of the 1993 Stock Option Plan) on the date of option
grant. Such option would be immediately vested in full and would expire seven
years from the date of grant.
The purpose of the proposed amendments to the 1993 Stock Option Plan is to
encourage ownership of capital stock of the Company by Outside Directors in
order to help the Company attract and retain persons of exceptional competence
to the Company's Board of Directors and to furnish an added incentive for such
Outside Directors to increase their efforts on behalf of the Company. The Board
has authorized this amendment, but this amendment will be effective only if both
Proposal Three and this Proposal Four are approved by the stockholders of the
Company.
The full text of the 1993 Stock Option Plan as proposed to be amended is
printed as Appendix A, beginning on page A-1.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL TO AMEND
THE 1993 STOCK OPTION PLAN.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of the directors or executive officers of the Company has any interest
in the adoption of Proposal Three or Proposal Four except as follows:
(1) If both Proposal Three and Proposal Four are approved, the nonqualified
stock option to purchase 24,000 shares of Common Stock that would
automatically be granted to each of Thomas J. Litle and Ruth M. Owades,
the two nominees for election as new Outside Directors, would have a
seven-year term and provide for accelerated vesting in the event of a
"Qualified Sale" as described above. In addition, William E. Engbers
and Walter J. Levison, the Company's two current Outside Directors,
each would automatically be granted an additional nonqualified stock
option to purchase 5,000 shares of Common Stock at the Annual Meeting
(assuming they continue to serve at the time of such meeting), and all
of the Company's Outside Directors would receive a nonqualified option
to purchase 5,000 shares of Common Stock in connection with future
annual meetings or special meetings in lieu thereof (assuming they
continue to serve at the time of such meeting). See "Proposal
Four -- Amendment To The 1993 Stock Plan To Alter The Formula Stock
Option Grants To Outside Directors" for a description of these options.
(2) In the future, the Company's directors (other than Outside Directors)
and executive officers might, in the discretion of the Compensation
Committee, be granted stock options under the 1993 Stock Option Plan
which are exercisable for some portion of the additional shares
proposed to be made available for option grants under Proposal Three.
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DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each director
and nominee for election as a director and each executive officer of the
Company:
NAME AGE POSITION
- - ---------------------------- --- ---------------------------------------------------------
Gordon R. Cooke............. 51 President, Chief Executive Officer and Director
Samuel L. Shanaman.......... 55 Executive Vice President, Chief Operating Officer, Chief
Financial Officer and Director
David E. Brown.............. 48 Vice President -- Creative Director
Olga L. Conley.............. 38 Vice President of Finance and Treasurer
John J. Hayes............... 41 Executive Vice President of Marketing
Patricia C. Lee............. 33 Vice President -- J. Jill
Carol A. Maher.............. 55 Vice President of Human Resources
Stephanie B. Noble.......... 42 Senior Vice President -- Nicole Summers
Patricia C. Selander........ 39 Vice President of Inventory Management
William E. Engbers(1)....... 54 Director
Walter J. Levison(2)........ 78 Director
Thomas J. Litle............. 56 Nominee for election as a Director
Ruth M. Owades.............. 49 Nominee for election as a Director
- - ---------------
(1) Chairman of Audit Committee, member of Compensation Committee.
(2) Chairman of Compensation Committee, member of Audit Committee.
GORDON R. COOKE has been President and Chief Executive Officer of the
Company and a director since joining the Company in December 1995. Mr. Cooke
served as President of Time-Warner Interactive Merchandising, a division of Time
Warner Inc., from November 1993 until December 1995, and as President of
Bloomingdale's By Mail, a division of Federated Department Stores, Inc., from
April 1991 until October 1993.
SAMUEL L. SHANAMAN has been Executive Vice President, Chief Operating
Officer and Chief Financial Officer of the Company since December 1995 and a
director since July 1990. He served as President and Chief Executive Officer of
the Company from June 1994 until December 1995. Before that he served in a
variety of positions, including Vice President -- Finance, Chief Financial
Officer, Executive Vice President and Chief Operating Officer. Mr. Shanaman
joined the Company in June 1990.
DAVID E. BROWN joined the Company in March 1997 as Vice
President -- Creative Director. From September 1992 until March 1997 he was
employed by Structure, a division of The Limited, Inc., first as Art Director
and later as Creative Director. From September 1990 until September 1992 he was
employed by Hanover Direct, Inc., first as Vice President, Advertising and later
as Vice President, Creative Director, Home Group.
OLGA L. CONLEY has been Vice President of Finance since June 1996 and
Treasurer since August 1993. She joined the Company in October 1991 as Director
of Financial Services.
JOHN J. HAYES has served as Executive Vice President of Marketing since
joining the Company in May 1996. From September 1990 until May 1996, Mr. Hayes
served as Vice President, Marketing and Catalog Production, of Bloomingdale's By
Mail, a division of Federated Department Stores, Inc.
PATRICIA C. LEE has been Vice President -- J. Jill since December 1996. She
joined the Company in December 1991 as a buyer, and served as Director of
Merchandising from November 1994 until December 1996.
CAROL A. MAHER has been Vice President of Human Resources since June 1996.
She served as Director of Human Resources from joining the Company in December
1992 until June 1996. From January 1987 until
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December 1992 she was Director of Human Resources for Child World, Inc., a
subsidiary of Cole National Corporation.
STEPHANIE B. NOBLE has been Senior Vice President -- Nicole Summers since
December 1996. She joined the Company in April 1988 as Director of Merchandising
and served as Vice President of Merchandising from April 1989 until December
1996.
PATRICIA C. SELANDER joined the Company in January 1993 as Director of
Inventory Control and became Vice President of Inventory Management in October
1995. From September 1977 to January 1993, Ms. Selander was employed by Talbots,
where she held several positions, including Retail Planner, Sportswear Division
and Manager of Catalog Merchandise Systems.
WILLIAM E. ENGBERS has been a director of the Company since July 1990. Mr.
Engbers currently serves as Director, Venture Capital of Allstate Insurance
Company, which he joined in June 1989. Mr. Engbers is a director of Applied
Biometrics, Inc. and La Jolla Pharmaceutical Company.
WALTER J. LEVISON has been a director of the Company since March 1992.
Since October 1982, Mr. Levison has been a general partner of the Aegis Venture
Funds, a group of venture capital funds based in the Boston, Massachusetts area.
He is also a director of Davox Corporation.
THOMAS J. LITLE is a nominee for election as a Class C Director of the
Company. From 1995 to the present, Mr. Litle has been the Chairman of LitleNet
LLC, a company which he founded and which provides direct commerce connection
and information sharing services to the direct marketing industry. From 1985 to
1995, he was Chairman and Chief Executive Officer of Litle & Company, which
provided information sharing, payment processing and electronic network services
for the direct marketing industry. Mr. Litle is a director of SkyMall, Inc. and
the Direct Marketing Association.
RUTH M. OWADES is a nominee for election as a Class B Director of the
Company. From 1987 to the present, Ms. Owades has been President and Chief
Executive Officer of Calyx & Corolla, a catalog business which she founded and
which offers American consumers fresh-cut flowers and plants all year round.
The Company's executive officers are elected by the directors and hold
office until the first directors' meeting after the next annual meeting of
stockholders or special meeting in lieu thereof, and thereafter until their
successors are chosen and qualified, unless a shorter term is specified in the
vote appointing them.
COMMITTEES AND MEETINGS OF THE BOARD
During the twelve months ended December 28, 1996 (the "Twelve Month
Period"), the Board met nine times and acted twice by unanimous written consent.
No incumbent director attended fewer than 75% of the aggregate of the total
number of meetings held by the Board and Committees of the Board on which he
served.
The Board currently has two committees. The Audit Committee (currently
composed of Messrs. Engbers and Levison) reviews the internal accounting
procedures of the Company and consults with and reviews the services provided by
the Company's independent auditors. The Audit Committee met twice during the
Twelve Month Period. The Compensation Committee (currently composed of Messrs.
Engbers and Levison) makes general policy decisions relating to compensation and
benefits for the Company's employees, including decisions with respect to
compensation for the Company's executive officers, and administers the 1993
Stock Option Plan and 1993 Employee Stock Purchase Plan. The Compensation
Committee met six times during the Twelve Month Period and acted three times by
unanimous written consent.
REMUNERATION OF EXECUTIVE OFFICERS AND DIRECTORS
DIRECTORS' COMPENSATION
Each Outside Director of the Company has served without cash compensation
but has been reimbursed, upon request, for expenses incurred in attending Board
meetings. Beginning with fiscal 1997, each Outside
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Director will receive an annual retainer of $10,000 and, in addition, will
receive a fee of $1,000 for each meeting of the Board of Directors attended.
Directors who are employees of the Company are not paid any separate fees for
serving as directors.
Under the 1993 Stock Option Plan, Outside Directors of the Company receive
automatic formula stock option grants. The terms of the automatic stock option
grants that will be made to Outside Directors under the 1993 Stock Option Plan
at and after the Annual Meeting if Proposal Three and Proposal Four are adopted
are described above. See "Proposal Four -- Amendment To The 1993 Stock Option
Plan To Alter The Formula Stock Option Grants To Outside Directors" and
"Interest Of Certain Persons In Matters To Be Acted Upon." Mr. Engbers and Mr.
Levison, the Company's current Outside Directors, each has previously received
automatic stock option grants under the 1993 Stock Option Plan to purchase an
aggregate of 36,000 shares of Common Stock at exercise prices ranging from $3.25
to $9.00 per share. Such options are now fully vested.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services rendered in all capacities to the Company for the
Twelve Month Period and the fiscal years ended June 29, 1996 ("fiscal 1996") and
June 24, 1995 ("fiscal 1995") of (i) those persons who served as the Chief
Executive Officer of the Company during the Twelve Month Period and (ii) the
other executive officers of the Company serving on December 28, 1996 whose
salary and bonus for the Twelve Month Period exceeded $100,000:
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------- SECURITIES ALL OTHER
NAME AND SALARY(2) BONUS(3) UNDERLYING COMPENSATION(5)
PRINCIPAL POSITION PERIOD(1) ($) ($) OPTIONS(4)(#) ($)
- - ---------------------------- -------------------- --------- -------- ------------ ---------------
Gordon R. Cooke............. Twelve Month Period $ 300,020 $225,006 75,000 $ 145,493
President and Chief Fiscal 1996 150,010 135,000 175,000 49,620
Executive Officer Fiscal 1995 -- -- -- --
Samuel L. Shanaman.......... Twelve Month Period 155,002 46,501 30,000 358
Executive Vice President, Fiscal 1996 155,002 0 30,000 120
Chief Operating Officer Fiscal 1995 150,749 0 25,000 582
and Chief Financial
Officer
John J. Hayes(6)............ Twelve Month Period 127,591 26,249 70,000 60
Executive Vice President Fiscal 1996 18,172 0 70,000 0
of Marketing Fiscal 1995 -- -- -- --
Stephanie B. Noble.......... Twelve Month Period 138,372 22,502 30,000 293
Senior Vice President -- Fiscal 1996 127,493 0 30,000 120
Nicole Summers............ Fiscal 1995 115,268 0 0 217
Olga L. Conley.............. Twelve Month Period 88,499 15,001 38,000 364
Vice President of Finance Fiscal 1996 80,096 0 18,000 120
and Treasurer Fiscal 1997 76,306 0 0 366
- - ---------------
(1) Amounts reported for the Twelve Month Period include amounts for the last
six months of fiscal 1996, which are also included in amounts reported for
fiscal 1996.
(2) For the Twelve Month Period, fiscal 1996 and fiscal 1995, includes amounts
deferred by the named individuals pursuant to the Company's 401(k) Plan and
Trust. Amounts shown do not include amounts expended by the Company pursuant
to plans (including group disability, life and health) that do not
discriminate in scope, terms or operation in favor of officers and directors
and are generally available to all salaried employees.
(3) Amounts reported for each period include amounts earned with respect to that
period but paid in the subsequent period.
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(4) During the Twelve Month Period, fiscal 1996 and fiscal 1995, the Company did
not grant any restricted stock awards or stock appreciation rights or make
any long-term incentive plan payouts to any of the executive officers.
(5) The amounts reported include the following insurance premiums paid by the
Company with respect to term life insurance for the benefit of the named
individuals during the Twelve Month Period, fiscal 1996 and fiscal 1995,
respectively: Mr. Cooke, $110, $120 and $0; Mr. Shanaman, $120, $120 and
$120; Mr. Hayes, $60, $0 and $0; Ms. Noble, $120, $120 and $120; Ms. Conley,
$120, $120 and $120. The amounts reported also include the following Company
matching contributions pursuant to the Company's 401(k) Plan and Trust for
the Twelve Month Period, fiscal 1996 and fiscal 1995, respectively, for the
benefit of the named individuals: Mr. Cooke, $475, $0 and $0; Mr. Shanaman,
$238, $0 and $462; Mr. Hayes, $0, $0 and $0; Ms. Noble, $173, $0 and $97;
and, Ms. Conley, $244, $0 and $246. The amount reported for the Twelve Month
Period and fiscal 1996 for Mr. Cooke includes $144,908 and $49,500,
respectively, for relocation and other expenses.
(6) Mr. Hayes joined the Company in May 1996.
OPTION GRANTS
The following table sets forth certain information regarding stock options
granted during the Twelve Month Period by the Company to the individuals named
in the Summary Compensation Table:
OPTION GRANTS IN THE TWELVE MONTH PERIOD
INDIVIDUAL GRANTS POTENTIAL
----------------------------------------------------------- REALIZABLE
PERCENT OF VALUE AT ASSUMED
TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE
NUMBER OF GRANTED TO EXERCISE APPRECIATION FOR
SHARES UNDERLYING EMPLOYEES IN PRICE PER OPTION TERM(2)
OPTIONS TWELVE MONTH SHARE EXPIRATION -------------------
NAME GRANTED(#)(1) PERIOD ($/SH) DATE 5%($) 10%($)
- - ------------------------------- ----------------- ------------ --------- ----------- ------- --------
Gordon R. Cooke................ 75,000(3) 22.8% $2.0625 12/26/02 $62,973 $146,755
Samuel L. Shanaman............. 30,000(4) 9.1% 2.25 02/15/03 27,479 64,038
John J. Hayes.................. 70,000(5) 21.2% 4.25 05/16/03 121,112 282,243
Stephanie B. Noble............. 30,000(4) 9.1% 2.25 02/15/03 27,479 64,038
Olga L. Conley................. 18,000(6) 5.5% 5.00 06/06/03 36,639 85,385
20,000(7) 6.0% 3.25 11/29/03 26,462 61,667
- - ---------------
(1) All of these options were granted under the 1993 Stock Option Plan. These
options are exercisable during the holder's lifetime only by the holder, and
by the holder only while the holder is an employee of the Company, and for
certain limited periods of time thereafter in the event of retirement, death
or termination of employment other than for cause. In addition, in the event
of death of the option holder while an employee of the Company and before
expiration of the option, these options vest in full.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed rates of share price appreciation set by the
Securities and Exchange Commission of five percent and ten percent
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes or other expenses associated with
the exercise. Actual gains, if any, are dependent on the performance of the
Common Stock and the date on which the option is exercised. There can be no
assurance that the amounts reflected will be achieved.
(3) This option vests as to 25% of the shares which may be purchased thereunder
on December 26, 1996 and as to the remainder of such shares in 36 equal
installments on the 26th day of each month from January, 1997 through
December, 1999.
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(4) These options vest as to 20% of the shares which may be purchased thereunder
on February 15, 1997 and as to the remainder of such shares in 48 equal
installments on the 15th day of each month from March, 1997 through
February, 2001.
(5) This option vests as to 20% of the shares which may be purchased thereunder
on May 16, 1997 and as to the remainder of such shares in 48 equal
installments on the 16th day of each month from June, 1997 through May,
2001.
(6) This option vests as to 20% of the shares which may be purchased thereunder
on June 6, 1997 and as to the remainder of such shares in 48 equal
installments on the 6th day of each month from July, 1997 through June,
2001.
(7) This option vests as to 20% of the shares which may be purchased thereunder
on November 29, 1997 and as to the remainder of such shares in 48 equal
installments on the 29th day of each month from December, 1997 through
November, 2001.
OPTION EXERCISES AND DECEMBER 28, 1996 VALUES
The following table sets forth certain information concerning the number
and value of stock options exercised by each of the individuals named in the
Summary Compensation Table during the Twelve Month Period and of unexercised
stock options held by each of such individuals on December 28, 1996:
AGGREGATED OPTION EXERCISES DURING TWELVE MONTH PERIOD AND DECEMBER 28, 1996
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS HELD AT HELD AT
SHARES DECEMBER 28, 1996(#)(2) DECEMBER 28, 1996($)(2)(3)
ACQUIRED ON VALUE ----------------------------- -----------------------------
EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------------- ----------- ------------- ----------- -------------
Gordon R. Cooke 0 $ 0 43,750 131,250 $ 58,203 $174,609
Samuel L. Shanaman 0 0 154,831 43,332 261,988 37,500
John J. Hayes 0 0 0 70,000 0 0
Stephanie B. Noble 23,416 83,428 24,543 30,000 44,914 37,500
Olga L. Conley 0 0 9,375 40,625 17,156 9,804
- - ---------------
(1) Value is based on the last sales price of the Common Stock on the exercise
date, as reported by the Nasdaq National Market, less the applicable option
exercise price.
(2) Subsequent to December 28, 1996, the Compensation Committee amended the
terms of outstanding options granted to the Company's executive officers
under the 1993 Stock Option Plan to, among other things, provide for monthly
vesting beginning in the first month after the first anniversary of option
grant. The information set forth in the table reflects these amendments.
(3) Value is based on the last sales price of the Common Stock before the end of
the Twelve Month Period ($3.50 per share on December 27, 1996), as reported
by the Nasdaq National Market, less the applicable option exercise price.
CERTAIN EMPLOYMENT AND SEVERANCE ARRANGEMENTS
In connection with the hiring of Gordon R. Cooke as President and Chief
Executive Officer of the Company in December 1995, Mr. Cooke and the Company
entered into an employment agreement which, among other things, set Mr. Cooke's
base salary at the rate of $300,000 per annum and provided for certain cash
bonus payments and option grants for fiscal 1996 and for the payment or
reimbursement by the Company of certain relocation expenses. In addition, the
agreement provides that if Mr. Cooke's employment is terminated by the Company
other than for just cause (as defined in the agreement), the Company will make
severance payments to Mr. Cooke in an aggregate amount equal to Mr. Cooke's
annual base salary at the time of termination, payable at the same time and in
the same amounts as such base salary would have been paid.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is composed of
independent, non-employee directors. The Committee currently consists of Messrs.
Engbers and Levison, who were the only members of the Committee during the
Twelve Month Period.
BENEFIT PLANS
1993 Incentive and Nonqualified Stock Option Plan
In August 1993, the Company's Board of Directors adopted and the Company's
stockholders approved the 1993 Stock Option Plan. At the 1994 Annual Meeting of
Stockholders, the stockholders of the Company approved an amendment to the 1993
Stock Option Plan to increase the number of shares of Common Stock that may be
issued pursuant to options granted thereunder from 200,000 to 300,000. At a
Special Meeting of Stockholders held on April 25, 1996, the Company's
stockholders adopted an additional amendment to the 1993 Stock Option Plan to
increase the number of shares of Common Stock that may be issued pursuant to
options granted thereunder to 700,000. The Board of Directors of the Company has
adopted an additional amendment to the 1993 Stock Option Plan to increase the
number of shares of Common Stock that may be issued pursuant to options granted
thereunder to 1,200,000, effective only if the amendment is approved by the
stockholders of the Company. See "Proposal Three -- Amendment To The 1993 Stock
Option Plan To Increase The Number Of Shares Of Common Stock That May Be Issued
Pursuant To Options Granted Thereunder."
The 1993 Stock Option Plan authorizes (i) the grant of options to purchase
Common Stock intended to qualify as incentive stock options ("Incentive
Options"), as defined in Section 422 of the Code, and (ii) the grant of options
that do not so qualify ("Nonqualified Options"). The exercise price of Incentive
Options granted under the 1993 Stock Option Plan must be at least equal to the
fair market value of the Common Stock on the date of grant. The exercise price
of Incentive Options granted to an optionee who owns stock possessing more than
10% of the voting power of the Company's outstanding capital stock must equal at
least 110% of the fair market value of the Common Stock on the date of grant.
The exercise price of Nonqualified Options granted under the 1993 Stock Option
Plan must not be less than 85% of the fair market value of the Common Stock on
the grant date.
The 1993 Stock Option Plan is administered by the Compensation Committee of
the Board of Directors. Except for certain non-discretionary option grants to
Outside Directors described below, the Compensation Committee selects the
individuals to whom options are granted and determines the option exercise price
and other terms of each award, subject to the provisions of the 1993 Stock
Option Plan. Incentive Options may be granted under the 1993 Stock Option Plan
to employees, including officers and directors who are also employees. As of
April 3, 1997, approximately 280 employees were eligible to participate in the
1993 Stock Option Plan. Nonqualified Options may be granted under the 1993 Stock
Option Plan to employees, officers, individuals providing services to the
Company and directors, whether or not they are employees of the Company.
No options may extend for more than ten years from the date of grant (five
years in the case of an optionee who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary ("greater-than-ten-percent-stockholders")). The aggregate fair
market value (determined at the time of grant) of shares issuable pursuant to
Incentive Options which first become exercisable by an employee or officer in
any calendar year may not exceed $100,000. In no event may any person be granted
options under the 1993 Stock Option Plan in any calendar year to purchase more
than 100,000 shares of Common Stock.
Options are non-transferable except by will or by the laws of descent or
distribution and are exercisable, during the optionee's lifetime, only by the
optionee. Options generally may not be exercised after (i) termination of the
optionee's employment by the Company for cause, (ii) thirty days after
termination of the optionee's employment by the Company without cause or by the
optionee voluntarily, (iii) ninety days following the optionee's retirement from
the Company in good standing by reason of age or disability under
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the then established rules of the Company, and (iv) one year following an
optionee's death if the optionee's death occurs prior to termination of the
optionee's employment with the Company.
Payment of the exercise price of the shares subject to the option may be
made with (i) cash or check for an amount equal to the option price for such
shares, (ii) with the consent of the Compensation Committee, shares of Common
Stock having a fair market value equal to the option price of such shares, (iii)
with the consent of the Compensation Committee, delivery of such documentation
as the Compensation Committee and the broker, if applicable, will require to
effect an exercise of the option and delivery to the Company of the sale or loan
proceeds required to pay the option price, (iv) with the consent of the
Compensation Committee, such other consideration which is acceptable to the
Compensation Committee and has a fair market value equal to the option price of
such shares, or (v) with the consent of the Compensation Committee, a
combination of the foregoing.
Under the 1993 Stock Option Plan, Outside Directors of the Company receive
automatic formula stock option grants. The terms of the automatic stock option
grants that will be made to Outside Directors under the 1993 Stock Option Plan
at and after the Annual Meeting if Proposal Three and Proposal Four are adopted
are described above. See "Proposal Four -- Amendment To The 1993 Stock Option
Plan To Alter The Formula Stock Option Grants To Outside Directors" and
"Interest Of Certain Persons In Matters To Be Acted Upon." Mr. Engbers and Mr.
Levison, the Company's current Outside Directors, each has previously received
automatic formula stock option grants under the 1993 Stock Option Plan to
purchase an aggregate of 36,000 shares of Common Stock at exercise prices
ranging from $3.25 to $9.00 per share. Such options are now fully vested.
At April 3, 1997 655,682 shares were issuable upon exercise of outstanding
options granted under the 1993 Stock Option Plan and 1,818 shares had been
purchased upon exercises of options granted thereunder. In November 1993, the
Company filed a registration statement on Form S-8 under the Securities Act of
1933, as amended (the "Securities Act") to register the original 200,000 shares
of the Company's Common Stock that may be issued pursuant to options granted
under the 1993 Stock Option Plan. In November 1994, the Company filed a
registration statement on Form S-8 under the Securities Act to register an
additional 100,000 shares of the Company's Common Stock that may be issued
pursuant to options granted under the 1993 Stock Option Plan. In May 1996, the
Company filed a registration statement on Form S-8 under the Securities Act to
register an additional 400,000 shares of the Company's Common Stock that may be
issued pursuant to options granted under the 1993 Stock Option Plan. The Company
intends to file, as soon as practicable, a Registration Statement covering the
additional 500,000 shares of Common Stock that will be issuable under the 1993
Stock Option Plan if Proposal Three is approved by the stockholders of the
Company.
New Plan Benefits
Except as set forth below, the proposed amendments to the 1993 Stock Option
Plan will not affect the manner in which the number of options to be received by
or allocated to participants in the 1993 Stock Option Plan are determined nor
would the proposed amendments, if they had been effective during fiscal 1996,
have affected the determination of such amounts in fiscal 1996. Except as set
forth below, the Company is unable to determine the dollar value and number of
options which will be received by or allocated to (i) any of the Company's
executive officers, (ii) the Company's current executive officers, as a group,
(iii) the Company's current directors who are not executive officers, as a
group, and (iv) the Company's employees who are not executive officers, as a
group, as a result of the proposed amendments because, except for the automatic
non-discretionary formula stock option grants to Outside Directors described
above, options are granted by the Compensation Committee of the Board of
Directors on a discretionary basis.
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The following table sets forth information concerning the benefit that will
be received by or allocated to the persons specified, assuming that Proposals
Three and Four are approved:
NUMBER OF
DOLLAR SECURITIES UNDERLYING
NAME AND POSITION VALUE($) OPTIONS GRANTED
- - ---------------------------------------------------------------- --------- ---------------------
William E. Engbers.............................................. (1) 5,000(2)(3)
Director
Walter J. Levison............................................... (1) 5,000(2)(3)
Director
Executive Officers (as a group)................................. 0 0
Directors who are not executive officers (as a group)........... (1) 58,000(3)(4)
All employees who are not executive officers (as a group)....... 0 0
- - ---------------
(1) The dollar value of the options to be granted is not determinable at this
time. Each such option will be granted at an exercise price equal to the
fair market value of the Common Stock on the date of option grant
(determined in accordance with the terms of the 1993 Stock Option Plan).
(2) Represents shares of Common Stock issuable pursuant to Nonqualified Options
to be granted to Mr. Engbers and Mr. Levison pursuant to automatic formula
stock option grants under the 1993 Stock Option Plan, as amended, at the
time of the Annual Meeting.
(3) Does not include shares of Common Stock issuable pursuant to Nonqualified
Options that would automatically be granted to Outside Directors under the
1993 Stock Option Plan, as amended, in connection with future annual
meetings or special meetings in lieu thereof.
(4) Represents shares of Common Stock issuable pursuant to Nonqualified Options
to be granted to Mr. Engbers, Mr. Levison, Mr. Litle and Ms. Owades pursuant
to formula stock option grants under the 1993 Stock Option Plan, as amended,
at the time of the Annual Meeting. Does not include shares of Common Stock
issuable pursuant to options which may be granted after the Annual Meeting
to Outside Directors upon their joining the Board of Directors pursuant to
formula stock option grants under the 1993 Stock Option Plan, as amended.
Amendment of 1993 Stock Option Plan
The Company's Board of Directors may modify, revise or terminate the 1993
Stock Option Plan at any time and from time to time, except that (i) the class
of persons eligible to receive options and the aggregate number of shares
issuable pursuant to the 1993 Stock Option Plan may not be changed or increased
(other than pursuant to certain changes in the Company's capital structure)
without the consent of the stockholders of the Company and (ii) the provisions
of the 1993 Stock Option Plan relating to formula stock option grants to Outside
Directors may not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules thereunder.
FEDERAL INCOME TAX INFORMATION WITH RESPECT TO THE 1993 STOCK OPTION PLAN
The grantee of a Nonqualified Option recognizes no income for federal
income tax purposes on the grant thereof. On the exercise of a Nonqualified
Option, the difference between the fair market value of the underlying shares of
Common Stock on the exercise date and the option exercise price is treated as
compensation to the holder of the option taxable as ordinary income in the year
of exercise, and such fair market value becomes the basis for the underlying
shares which will be used in computing any capital gain or loss upon disposition
of such shares. Subject to certain limitations, the Company may deduct for the
year of exercise an amount equal to the amount recognized by the option holder
as ordinary income upon exercise of a Nonqualified Option.
The grantee of an Incentive Option recognizes no income for federal income
tax purposes on the grant thereof. Except as provided below with respect to the
alternative minimum tax, there is no tax upon exercise of an Incentive Option.
If no disposition of shares acquired upon exercise of the Incentive Option is
made by the
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option holder within two years from the date of the grant of the Incentive
Option or within one year after exercise of the Incentive Option, any gain
realized by the option holder on the subsequent sale of such shares is treated
as a long-term capital gain for federal income tax purposes. If the shares are
sold prior to the expiration of such periods, the difference between the lesser
of the value of the shares at the date of exercise or at the date of sale and
the exercise price of the Incentive Option is treated as compensation to the
employee taxable as ordinary income and the excess gain, if any, is treated as
capital gain (which will be long-term capital gain if the shares are held for
more than one year).
The excess of the fair market value of the underlying shares over the
option price at the time of exercise of an Incentive Option will constitute an
item of tax preference for purposes of the alternative minimum tax. Taxpayers
who incur the alternative minimum tax are allowed a credit which may be carried
forward indefinitely to be used as a credit against the regular tax liability in
a later year; however, the minimum tax credit can not reduce the regular tax
below the alternative minimum tax for that carryover year.
In connection with the sale of the shares covered by Incentive Options, the
Company is allowed a deduction for tax purposes only to the extent, and at the
time, the option holder receives ordinary income (for example, by reason of the
sale of shares by the holder of an Incentive Option within two years of the date
of the granting of the Incentive Option or one year after the exercise of the
Incentive Option), subject to certain limitations on the deductibility of
compensation paid to executives.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policy
The Company's compensation package for its executive officers has three
principal components: (1) base salary; (2) bonus; and (3) stock options. The
Company's executive officers are also eligible to participate in other employee
benefit plans on substantially the same terms as other employees who meet
applicable eligibility criteria, subject to any legal limitations on the amounts
that may be contributed or the benefits that may be payable under these Company
plans.
Base salary levels for the Company's executive officers are intended to be
fair and competitive in the Company's industry. Base salaries for executive
officers are reviewed annually, and any adjustments are based on such factors as
individual performance, change in responsibilities and market-based comparisons
with other comparable companies.
Bonuses for the Company's executive officers under the Company's bonus plan
are based on a percentage of base salary and conditioned on the Company's
ability to achieve its financial plan and/or the executive officer's ability to
achieve individual performance goals. Assigned bonus percentages vary depending
on the Compensation Committee's view of the importance of the executive
officer's contribution to the Company's ability to achieve its financial plan.
In addition, new executive officers sometimes receive hiring bonuses or
guaranteed bonuses in connection with their initial hiring.
Stock option awards are intended to provide the Company's executive
officers with longer term incentives that align their interests with those of
the Company's stockholders more generally. The Compensation Committee granted
additional stock options to all of the Company's current executive officers
during the Twelve Month Period.
Chief Executive Officer Compensation
Mr. Cooke's base salary during the Twelve Month Period was at the rate of
$300,000 per annum. He was paid a signing bonus in January, 1996 of $35,000, and
received a guaranteed bonus for fiscal 1996 of $100,000. Mr. Cooke was eligible
to receive a bonus for the six months ended December 28, 1996 of up to 30% of
his annual base salary, conditioned solely upon the Company's ability to achieve
its financial plan for the period. The Company achieved its financial plan for
the period, and as a result Mr. Cooke received a bonus of $90,006. The Company
also paid or reimbursed Mr. Cooke for certain expenses and provided him with the
use of an automobile. During the Twelve Month Period, Mr. Cooke was granted an
option to purchase 75,000 shares of Common Stock at $2.0625 per share, the
closing price per share on the Nasdaq National Market on
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January 2, 1996, the date of option grant. This option vests as to 25% of the
shares which may be purchased thereunder on December 26, 1996 and as to the
remainder of such shares in 36 equal installments on the last day of each month
from January, 1997 through December, 1999 and expires on December 26, 2002.
Under the terms of an employment agreement executed in connection with the
initial hiring of Mr. Cooke in December 1995, Mr. Cooke is entitled to severance
payments equal to his annual base salary in the event his employment is
terminated by the Company without just cause, as defined in the employment
agreement.
SUBMITTED BY THE COMPENSATION
COMMITTEE OF THE BOARD OF DIRECTORS
William E. Engbers
Walter J. Levison (Chairman)
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PERFORMANCE GRAPH
The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of two broad market indexes, the Nasdaq
Stock Market Index for U.S. Companies and the Russell 2000 Index, and a peer
group composed of companies selected on a line-of-business basis and consisting
of Blair Corporation, Damark International Incorporated, Gander Mountain
Incorporated, Geerlings & Wade Incorporated, Hanover Direct Incorporated, Lands
End Incorporated, Lillian Vernon Corporation, Right Start Incorporated, Spiegel
Inc. and Williams Sonoma, Inc. The return for each issuer in the peer group is
weighted according to the issuer's stock market capitalization.
The cumulative stockholder return for shares of the Company's Common Stock
is calculated assuming $100 was invested on November 2, 1993, the date on which
the Company's Common Stock commenced trading on the Nasdaq National Market. The
cumulative stockholder returns for the market indexes and the peer group are
calculated assuming $100 was invested on October 31, 1993. The Company paid no
cash dividends during the periods shown. The performance of the market indexes
and the peer group is shown on a total return (dividends reinvested) basis.
COMPARISON OF 37 MONTH CUMULATIVE TOTAL RETURN*
AMONG DM MANAGEMENT COMPANY, THE NASDAQ STOCK MARKET -- US INDEX,
THE RUSSELL 2000 INDEX AND A PEER GROUP
MEASUREMENT PERIOD DM NASDAQ
(FISCAL YEAR COVERED) MANAGEMENT COMPANY PEER GROUP STOCK MARKET-US RUSSELL 2000
NOV-02-93 100 100 100 100
JUN-94 100 90 91 93
JUN-95 38 80 122 112
JUN-96 49 83 156 139
DEC-96 38 90 170 147
* $100 INVESTED ON 11/02/93 IN STOCK OR
ON 10/31/93 IN INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
At the close of business on April 3, 1997, there were issued and
outstanding 4,534,157 shares of Common Stock entitled to cast 4,534,157 votes.
On April 3, 1997, the closing price of the Company's Common Stock as reported by
the Nasdaq National Market was $7.125 per share.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock as of April 3, 1997 by (i) each person
known by the Company to own beneficially more than five percent of the Common
Stock as of such date, (ii) each current director of the Company, (iii) each
nominee for director of the Company, (iv) each current executive officer of the
Company, (v) all current executive officers and directors of the Company as a
group and (vi) each person who served as an executive officer or director of the
Company during the Twelve Month Period:
SHARES BENEFICIALLY
OWNED(1)
---------------------
NAME NUMBER PERCENT
----------------------------------------------------------------- ---------- -------
Allstate Insurance Company and affiliates........................ 1,752,404 38.6%
Allstate Plaza South G5D
Northbrook, IL 60062
David E. Brown................................................... 0 *
Olga L. Conley(2)................................................ 13,168 *
Gordon R. Cooke(3)............................................... 62,380 1.4%
William E. Engbers(4)............................................ 36,100 *
John J. Hayes(5)................................................. 22,700 *
Patricia C. Lee(6)............................................... 4,634 *
Walter J. Levison(7)............................................. 58,204 1.3%
Thomas J. Litle.................................................. 0 *
Carol A. Maher(8)................................................ 8,896 *
Stephanie B. Noble(9)............................................ 47,959 1.1%
Ruth M. Owades................................................... 0 *
Patricia Selander(10)............................................ 16,500 *
Samuel L. Shanaman(11)........................................... 180,919 3.9%
All current directors and executive officers as group
(11 persons)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)................... 451,460 9.2%
- - ---------------
* Less than one percent.
(1) The persons named in this table have sole voting and investment power with
respect to the shares listed, except as otherwise indicated. The inclusion
herein of shares listed as beneficially owned does not constitute an
admission of beneficial ownership.
(2) Includes 12,000 shares issuable upon the exercise of outstanding stock
options currently exercisable or exercisable within sixty days following
April 3, 1997.
(3) Includes 61,980 shares issuable upon the exercise of outstanding stock
options currently exercisable or exercisable within sixty days following
April 3, 1997. Also includes 400 shares held by Mr. Cooke's daughters.
(4) Includes 100 shares held by Mr. Engbers' wife. Mr. Engbers disclaims
beneficial ownership of the shares held by his wife. Also includes 36,000
shares issuable upon exercise of outstanding stock options held by Mr.
Engbers currently exercisable or exercisable within sixty days following
April 3, 1997. Does not include 1,752,404 shares held by Allstate. Mr.
Engbers, a director of the Company, is Director, Venture Capital of
Allstate. Mr. Engbers disclaims beneficial ownership of the shares held by
Allstate.
(5) Includes 14,000 shares issuable upon the exercise of an outstanding stock
option currently exercisable or exercisable within sixty days following
April 3, 1997.
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(6) Includes 2,682 shares issuable upon the exercise of an outstanding stock
option currently exercisable or exercisable within sixty days following
April 3, 1997.
(7) Includes 36,000 shares issuable upon exercise of outstanding stock options
currently exercisable or exercisable within sixty days following April 3,
1997
(8) Includes 8,000 shares issuable upon exercise of an outstanding stock option
currently exercisable or exercisable within sixty days following April 3,
1997.
(9) Includes 32,043 shares issuable upon exercise of outstanding stock options
currently exercisable or exercisable within sixty days following April 3,
1997.
(10) Includes 16,500 shares issuable upon exercise of outstanding stock options
currently exercisable or exercisable within sixty days following April 3,
1997.
(11) Includes 164,414 shares issuable upon exercise of outstanding stock options
currently exercisable or exercisable within sixty days following April 3,
1997. Also includes 2,000 shares held in trust for Mr. Shanaman's wife. Mr.
Shanaman disclaims beneficial ownership of the shares held in trust for his
wife.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Officers,
directors and greater-than-10% stockholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely upon review of Forms 3 and 4 and amendments thereto furnished
to the Company during the Twelve Month Period and Form 5 and amendments thereto
furnished to the Company with respect to the Twelve Month Period, or written
representations that Form 5 was not required, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and
greater-than-10% stockholders were fulfilled in a timely manner except as
previously reported, and except for a Form 4 filing for Ms. Noble, which was
made approximately two months late, and a Form 4 filing for Mr. Shanaman, which
was made approximately one month late.
INFORMATION CONCERNING AUDITORS
The accounting firm of Coopers & Lybrand L.L.P., which has served as the
Company's principal independent accountants continuously since the Company's
formation, was selected by the Board to continue in that capacity for fiscal
1997. A representative of Coopers & Lybrand L.L.P. is expected to be present at
the Annual Meeting. This representative will have the opportunity to make a
statement if such representative desires to do so and will be available to
respond to appropriate questions presented at the Annual Meeting.
SOLICITATION
No compensation will be paid by any person in connection with the
solicitation of proxies. Brokers, banks and other nominees will be reimbursed
for their out-of-pocket expenses and other reasonable clerical expenses incurred
in obtaining instructions from beneficial owners of the Common Stock. In
addition to the solicitation by mail, special solicitation of proxies may, in
certain instances, be made personally or by telephone by directors, officers and
certain employees of the Company. It is expected that the expense of such
special solicitation will be nominal. All expenses incurred in connection with
this solicitation will be borne by the Company.
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STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the proxy materials related to the
1997 Annual Meeting of Stockholders or Special Meeting in lieu thereof must be
received by the Company at its Executive Offices no later than December 11,
1997.
MISCELLANEOUS
The Board does not intend to present to the Annual Meeting any business
other than the proposals listed herein, and the Board was not aware, a
reasonable time before mailing this Proxy Statement to stockholders, of any
other business which may be properly presented for action at the Annual Meeting.
If any other business should come before the Annual Meeting, the persons present
will have discretionary authority to vote the shares they own or represent by
proxy in accordance with their judgment.
AVAILABLE INFORMATION
Stockholders of record on April 3, 1997 will receive a Proxy Statement and
the Company's 1996 Annual Report on Form 10-K (excluding exhibits), which
contains detailed financial information concerning the Company. The Company will
mail, without charge, an additional copy of the Company's Annual Report on Form
10-K (excluding exhibits) to any stockholder entitled to receive this Proxy
Statement who requests it in writing. Please submit any such written request to
Olga L. Conley, Vice President of Finance, DM Management Company, 25 Recreation
Park Drive, Suite 200, Hingham, Massachusetts 02043.
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APPENDIX A
DM MANAGEMENT COMPANY
1993 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
SECTION 1. PURPOSE
This Amended and Restated 1993 Incentive and Nonqualified Stock Option Plan
(the "Plan") of DM Management Company (the "Company"), is designed to provide
additional incentive to executives and other key employees of the Company, and
any parent or subsidiary of the Company, and for certain other individuals
providing services to or acting as directors of the Company or any such parent
or subsidiary. The Company intends that this purpose will be effected by the
granting of incentive stock options ("Incentive Stock Options") as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options ("Nonqualified Options") under the Plan which afford
such executives, key employees or other individuals an opportunity to acquire or
increase their proprietary interest in the Company through the acquisition of
shares of its Common Stock. The Company intends that Incentive Stock Options
issued under the Plan will qualify as "incentive stock options" as defined in
Section 422 of the Code and the terms of the Plan shall be interpreted in
accordance with this intention. The terms "parent" and "subsidiary" shall have
the respective meanings set forth in Section 424 of the Code.
SECTION 2. ADMINISTRATION
2.1 The Committee. The Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Board") or another committee
consisting of at least two members of the Company's Board (in either case, the
"Committee"). None of the members of the Committee shall be an officer or other
employee of the Company. It is the intention of the Company that the Plan shall
be administered by "disinterested persons" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934 and by "outside directors" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder, but the authority and validity of any act taken or not taken by the
Committee shall not be affected if any person administering the Plan is not a
"disinterested person" or "outside director." Except as specifically reserved to
the Board under the terms of the Plan, the Committee shall have full and final
authority to operate, manage and administer the Plan on behalf of the Company.
Action by the Committee shall require the affirmative vote of a majority of all
members thereof.
2.2 Powers of the Committee. Subject to the terms and conditions of the
Plan, the Committee shall have the power:
(a) To determine from time to time the persons eligible to receive
options and the options to be granted to such persons under the Plan and to
prescribe the terms, conditions, restrictions, if any, and provisions
(which need not be identical) of each option granted under the Plan to such
persons;
(b) To construe and interpret the Plan and options granted thereunder
and to establish, amend, and revoke rules and regulations for
administration of the Plan. In this connection, the Committee may correct
any defect or supply any omission, or reconcile any inconsistency in the
Plan, or in any option agreement, in the manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective. All decisions
and determinations by the Committee in the exercise of this power shall be
final and binding upon the Company and optionees;
(c) To make, in its sole discretion, changes to any outstanding option
granted under the Plan, including:
(i) to reduce the exercise price, (ii) to accelerate the vesting
schedule or (iii) to extend the expiration date; and
(d) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company
with respect to the Plan.
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SECTION 3. STOCK
3.1 Stock to be Issued. The stock subject to the options granted under the
Plan shall be shares of the Company's authorized but unissued common stock, $.01
par value (the "Common Stock"), or shares of the Company's Common Stock held in
treasury. The total number of shares that may be issued pursuant to options
granted under the Plan shall not exceed an aggregate of 1,200,000 shares of
Common Stock; provided, however, that the class and aggregate number of shares
which may be subject to options granted under the Plan shall be subject to
adjustment as provided in Section 8 hereof.
3.2 Expiration, Cancellation or Termination of Option. Whenever any
outstanding option under the Plan expires, is cancelled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such option may again be the subject of options under the
Plan.
3.3 Limitation on Grants. In no event may any person be granted options
under the Plan in any calendar year to purchase more than 100,000 shares of
Common Stock. The number of shares of Common Stock issuable pursuant to an
option granted under the Plan that is subsequently forfeited, cancelled or
otherwise terminated shall continue to count toward the foregoing limitation in
the calendar year of grant. In addition, for purposes of applying the foregoing
limitation, if the exercise price of an option granted under the Plan is
subsequently reduced, the transaction shall be deemed a cancellation of the
original option and the grant of a new one.
SECTION 4. ELIGIBILITY
4.1 Persons Eligible. Incentive Stock Options under the Plan may be
granted only to officers and other employees of the Company or any parent or
subsidiary of the Company. Nonqualified Options may be granted to officers or
other employees of the Company or any parent or subsidiary of the Company, and
to members of the Board and consultants or other persons who render services to
the Company or any such parent or subsidiary (regardless of whether they are
also employees), provided, however, that options may be granted to members of
the Board who are not employees of the Company or any such parent or subsidiary
("Outside Directors") only as provided in Section 4.4.
4.2 Greater-Than-Ten-Percent Stockholders. Except as may otherwise be
permitted by the Code or other applicable law or regulation, no Incentive Stock
Option shall be granted to an individual who, at the time the option is granted,
owns (including ownership attributed pursuant to Section 425 of the Code) more
than ten percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary (a "greater-than-ten-percent
stockholder"), unless such Incentive Stock Option provides that (i) the purchase
price per share shall not be less than one hundred ten percent of the fair
market value of the Common Stock at the time such option is granted, and (ii)
that such option shall not be exercisable to any extent after the expiration of
five years from the date it is granted.
4.3 Maximum Aggregate Fair Market Value. The aggregate fair market value
(determined at the time the option is granted) of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by any
optionee during any calendar year (under the Plan and any other plans of the
Company or any parent or subsidiary for the issuance of incentive stock options)
shall not exceed $100,000 (or such greater amount as may from time to time be
permitted with respect to incentive stock options by the Code or any other
applicable law or regulation).
4.4 Option Grants to Outside Directors.
(a) Grant of Options.
(i) Each Outside Director serving on the Board immediately before
the meeting of the Company's shareholders at which this Section 4.4 in
this form is approved (the "Approval Meeting") has previously been
granted Nonqualified Options to purchase an aggregate of 36,000 shares
of Common Stock automatically under this Section 4.4 in the form that
was in effect prior to the Approval Meeting.
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(ii) Each Outside Director first joining the Board at the Approval
Meeting or thereafter shall automatically be granted, on the date such
person first becomes a member of the Board, a Nonqualified Option to
purchase 24,000 shares of Common Stock. Such Nonqualified Option shall
be immediately vested and exercisable as to one-third of such shares and
shall vest and become exercisable as to the remaining two-thirds of such
shares cumulatively in two equal annual installments on the first and
second anniversaries of the date the option was granted, provided that
the option holder continues to be a member of the Board on such
anniversary. Notwithstanding the foregoing, in the event that a
Qualified Sale (as hereinafter defined) occurs before the expiration
date of such Nonqualified Option, and immediately prior to the closing
of such Qualified Sale the option holder is a director of the Company,
then immediately prior to such closing such Nonqualified Option shall
become exercisable as to a number of shares subject to such Nonqualified
Option, up to 100%, equal to two times the number of shares as to which
such Nonqualified Option otherwise would have been exercisable
immediately prior to such closing. A Qualified Sale shall mean the sale
of all or substantially all of the assets or issued and outstanding
capital stock of the Company, or a merger or consolidation involving the
Company in which the stockholders of the Company immediately before such
merger or consolidation do not own immediately after such merger or
consolidation capital stock or other equity interests of the surviving
corporation or entity representing more than fifty percent in voting
power of the capital stock or other equity interests of such surviving
corporation or entity outstanding immediately after such merger of
consolidation.
(iii) On the date of each annual meeting of the Company's
stockholders or special meeting in lieu thereof beginning with the
Approval Meeting, each Outside Director who has served for at least six
months and continues to serve at that meeting shall automatically be
granted a Nonqualified Option to purchase 5,000 shares of Common Stock.
Such Nonqualified Option shall be immediately vested in full.
(b) Purchase Price. The purchase price per share of Common Stock
under each Nonqualified Option granted pursuant to this Section 4.4 shall
be equal to the fair market value of the Common Stock on the date the
Nonqualified Option is granted, such fair market value to be determined in
accordance with the provisions of Section 6.3.
(c) Expiration. Each Nonqualified Option that has been granted to an
Outside Director as described in Section 4.4(a)(i) expires on the fifth
anniversary of the date of grant. Each Nonqualified Option granted to an
Outside Director under Section 4.4(a)(ii) or (iii) shall expire on the
seventh anniversary of the date of grant.
SECTION 5. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE
5.1 Termination of Employment. Except as may be otherwise expressly
provided herein, options shall terminate on the earlier of:
(a) the date of expiration thereof;
(b) immediately upon the termination of the optionee's employment with
or performance of services for the Company (or any parent or subsidiary of
the Company) by the Company (or any such parent or subsidiary) for cause
(as determined by the Company or such parent or subsidiary); or
(c) thirty days after the date of termination of the optionee's
employment with or performance of services for the Company (or any parent
or subsidiary of the Company) by the Company (or any such parent or
subsidiary) without cause or voluntarily by the optionee;
provided, that Nonqualified Options granted to persons who are not employees of
the Company (or any parent or subsidiary of the Company) need not, unless the
Committee determines otherwise, be subject to the provisions set forth in
clauses (b) and (c) above.
An employment relationship between the Company (or any parent or subsidiary
of the Company) and the optionee shall be deemed to exist during any period in
which the optionee is employed by the Company
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(or any such parent or subsidiary). Whether authorized leave of absence, or
absence on military or government service, shall constitute termination of the
employment relationship between the Company (or any parent or subsidiary of the
Company) and the optionee shall be determined by the Committee at the time
thereof.
As used herein, "cause" shall mean (x) any material breach by the optionee
of any agreement to which the optionee and the Company (or any parent or
subsidiary of the Company) are both parties, (y) any act or omission to act by
the optionee which may have a material and adverse effect on the business of the
Company (or any such parent or subsidiary) or on the optionee's ability to
perform services for the Company (or any such parent or subsidiary), including,
without limitation, the commission of any crime (other than ordinary traffic
violations), or (z) any material misconduct or material neglect of duties by the
optionee in connection with the business or affairs of the Company (or any such
parent or subsidiary) or any affiliate of the Company (or any such parent or
subsidiary).
5.2 Death or Retirement of Optionee. In the event of the death of the
holder of an option that is subject to clause (b) or (c) of Section 5.1 above
prior to termination of the optionee's employment with or performance of
services for the Company (or any parent or subsidiary of the Company) and before
the date of expiration of such option, such option shall terminate on the
earlier of such date of expiration or one year following the date of such death.
After the death of the optionee, his executors, administrators or any person or
persons to whom his option may be transferred by will or by the laws of descent
and distribution, shall have the right, at any time prior to such termination,
to exercise the option to the extent the optionee was entitled to exercise such
option at the time of his death.
If, before the date of the expiration of an option that is subject to
clause (b) or (c) of Section 5.1 above, the optionee shall be retired in good
standing from the Company for reasons of age or disability under the then
established rules of the Company, the option shall terminate on the earlier of
such date of expiration or ninety (90) days after the date of such retirement.
In the event of such retirement, the optionee shall have the right prior to the
termination of such option to exercise the option to the extent to which he was
entitled to exercise such option immediately prior to such retirement.
SECTION 6. TERMS OF THE OPTION AGREEMENTS
Each option agreement shall be in writing and shall contain such terms,
conditions, restrictions, if any, and provisions as the Committee shall from
time to time deem appropriate. Such provisions or conditions may include without
limitation restrictions on transfer, repurchase rights, or such other provisions
as shall be determined by the Committee; provided that such additional
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any Incentive Stock Option
granted under the Plan to fail to qualify as an incentive option within the
meaning of Section 422 of the Code. The shares of stock issuable upon exercise
of an option by any executive officer, director or beneficial owner of more than
ten percent of the Common Stock of the Company may not be sold or transferred
(except that such shares may be issued upon exercise of such option) by such
officer, director or beneficial owner for a period of six months following the
grant of such option.
Option agreements need not be identical, but each option agreement by
appropriate language shall include the substance of all of the following
provisions:
6.1 Expiration of Option. Notwithstanding any other provision of the Plan
or of any option agreement, each option shall expire on the date specified in
the option agreement, which date shall not, in the case of an Incentive Stock
Option, be later than the tenth anniversary (fifth anniversary in the case of a
greater-than-ten-percent stockholder) of the date on which the option was
granted, or as specified in Section 5 of this Plan.
6.2 Exercise. Each option may be exercised, so long as it is valid and
outstanding, from time to time in part or as a whole, subject to any limitations
with respect to the number of shares for which the option may be exercised at a
particular time and to such other conditions as the Committee in its discretion
may specify upon granting the option.
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6.3 Purchase Price. The purchase price per share under each option shall
be determined by the Committee at the time the option is granted; provided,
however, that the option price of any Incentive Stock Option shall not, unless
otherwise permitted by the Code or other applicable law or regulation, be less
than the fair market value of the Common Stock on the date the option is granted
(110% of the fair market value in the case of a greater-than-ten-percent
stockholder) and the option price of any Nonqualified Option shall not be less
than 85% of the fair market value of the Common Stock on the date the option is
granted. For the purpose of the Plan the fair market value of the Common Stock
shall be (i) in the case of the Non-Qualified Options granted to Outside
Directors in connection with the Company's initial public offering, the initial
public offering price and (ii) in all other cases, the closing price per share
on the date of grant of the option as reported by a nationally recognized stock
exchange, or, if the Common Stock is not listed on such an exchange, as reported
by the National Association of Securities Dealers Automated Quotation System
("Nasdaq") National Market System or, if the Common Stock is not listed on the
Nasdaq National Market System, the mean of the bid and asked prices per share on
the date of grant of the option or, if the Common Stock is not traded over the
counter, the fair market value as determined by the Committee.
6.4 Transferability of Options. Options shall not be transferable by the
optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during his lifetime, only by him/her.
6.5 Rights of Optionees. No optionee shall be deemed for any purpose to be
the owner of any shares of Common Stock subject to any option unless and until
the option shall have been exercised pursuant to the terms thereof, and the
Company shall have issued and delivered the shares to the optionee.
6.6 Repurchase Right. The Committee may in its discretion provide upon the
grant of any option hereunder that the Company shall have an option to
repurchase upon such terms and conditions as determined by the Committee all or
any number of shares purchased upon exercise of such option. The repurchase
price per share payable by the Company shall be such amount or be determined by
such formula as is fixed by the Committee at the time the option for the shares
subject to repurchase is granted. In the event the Committee shall grant options
subject to the Company's repurchase option, the certificates representing the
shares purchased pursuant to such option shall carry a legend satisfactory to
counsel for the Company referring to the Company's repurchase option.
6.7 "Lockup" Agreement. The Committee may in its discretion specify upon
granting an option that the optionee shall agree for a period of time (not to
exceed 180 days) from the effective date of any registration of securities of
the Company (upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities), not to sell, make any short
sale of, loan, grant any option for the purchase of, or otherwise dispose of any
shares issued pursuant to the exercise of such option, without the prior written
consent of the Company or such underwriters, as the case may be.
SECTION 7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
7.1 Method of Exercise. Any option granted under the Plan may be exercised
by the optionee by delivering to the Company on any business day a written
notice specifying the number of shares of Common Stock the optionee then desires
to purchase and specifying the address to which the certificates for such shares
are to be mailed (the "Notice"), accompanied by payment for such shares.
7.2 Payment of Purchase Price. Payment for the shares of Common Stock
purchased pursuant to the exercise of an option shall be made either by (i) cash
or check equal to the option price for the number of shares specified in the
Notice, or (ii) with the consent of the Committee, other shares of Common Stock
which (a) either have been owned by the optionee for more than six (6) months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (b) have a fair market value on the date of surrender not greater
than the aggregate option price of the shares as to which such option shall be
exercised, (iii) with the consent of the Committee, delivery of such
documentation as the Committee and the broker, if applicable, shall require to
effect an exercise of the option and delivery to the Company of the sale or loan
proceeds required to pay the option price, (iv) with the consent of the
Committee, such other consideration which is acceptable to the Committee and
which has a fair market value equal to the option price of such shares, or (v)
with the consent of the Committee, a combination of (i), (ii) (iii), (iv) and/or
(v). For the
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purpose of the preceding sentence, the fair market value per share of Common
Stock so delivered to the Company shall be determined in the manner specified in
Section 6.3. As promptly as practicable after receipt of the Notice and
accompanying payment, the Company shall deliver to the optionee certificates for
the number of shares with respect to which such option has been so exercised,
issued in the optionee's name; provided, however, that such delivery shall be
deemed effected for all purposes when the Company or a stock transfer agent of
the Company shall have deposited such certificates in the United States mail,
addressed to the optionee, at the address specified in the Notice.
SECTION 8. CHANGES IN COMPANY'S CAPITAL STRUCTURE
8.1 Rights of Company. The existence of outstanding options shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize, without limitation, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of Common
Stock, or any issue of bonds, debentures, preferred or prior preference stock or
other capital stock ahead of or affecting the Common Stock or the rights
thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
8.2 Recapitalization, Stock Splits and Dividends. If the Company shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, in any such case without receiving
compensation therefor in money, services or property, then (i) the number,
class, and price per share of shares of stock subject to outstanding options
hereunder shall be appropriately adjusted in such a manner as to entitle an
optionee to receive upon exercise of an option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received as a result of the event requiring the adjustment had he exercised his
option in full immediately prior to such event; and (ii) the number and class of
shares set forth in Sections 3.1, 3.3 and 4.4 shall be adjusted by substituting
therefor that number and class of shares of stock that the owner of an equal
number of outstanding shares of Common Stock would own as the result of the
event requiring the adjustment.
8.3 Merger without Change of Control. After a merger of one or more
corporations into the Company, or after a consolidation of the Company and one
or more corporations in which (i) the Company shall be the surviving
corporation, and (ii) the stockholders of the Company immediately prior to such
merger or consolidation own after such merger or consolidation shares
representing at least fifty percent of the voting power of the Company, each
holder of an outstanding option shall, at no additional cost, be entitled upon
exercise of such option to receive in lieu of the number of shares as to which
such option shall then be so exercisable, the number and class of shares of
stock or other securities to which such holder would have been entitled pursuant
to the terms of the agreement of merger or consolidation if, immediately prior
to such merger or consolidation, such holder had been the holder of record of a
number of shares of Common Stock equal to the number of shares for which such
option was exercisable.
8.4 Sale or Merger with Change of Control. If the Company is merged into
or consolidated with another corporation under circumstances where the Company
is not the surviving corporation, or if there is a merger or consolidation where
the Company is the surviving corporation but the stockholders of the Company
immediately prior to such merger or consolidation do not own after such merger
or consolidation shares representing at least fifty percent of the voting power
of the Company, or if the Company is liquidated, or sells or otherwise disposes
of substantially all of its assets to another corporation while unexercised
options remain outstanding under the Plan, (i) subject to the provisions of
clause (iii) below, after the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be, each holder of an
outstanding option shall be entitled, upon exercise of such option, to receive,
in lieu of shares of Common Stock, shares of such stock or other securities,
cash or property as the holders of shares of Common Stock received pursuant to
the terms of the merger, consolidation, liquidation, sale or disposition; (ii)
the Committee may accelerate the time for exercise of all unexercised and
unexpired options to and after a date prior to the effective date of such
merger, consolidation, liquidation, sale or disposition, as the case may be,
specified by the Committee; or (iii) all outstanding options may be cancelled by
the Committee as of the effective date of any such merger,
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consolidation, liquidation, sale or disposition provided that (x) notice of such
cancellation shall be given to each holder of an option and (y) each holder of
an option shall have the right to exercise such option to the extent that the
same is then exercisable or, if the Committee shall have accelerated the time
for exercise of all unexercised and unexpired options, in full during the 30-day
period preceding the effective date of such merger, consolidation, liquidation,
sale or disposition.
8.5 Adjustments to Common Stock Subject to Options. Except as hereinbefore
expressly provided, the issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock then subject to outstanding options.
8.6 Miscellaneous. Adjustments under this Section 8 shall be determined by
the Committee, and such determinations shall be conclusive. No fractional shares
of Common Stock shall be issued under the Plan on account of any adjustment
specified above.
SECTION 9. GENERAL RESTRICTIONS
9.1 Investment Representations. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
9.2 Compliance with Securities Laws. The Company shall not be required to
sell or issue any shares under any option if the issuance of such shares shall
constitute a violation by the optionee or by the Company of any provisions of
any law or regulation of any governmental authority. In addition, in connection
with the Securities Act of 1933, as now in effect or hereafter amended (the
"Act"), upon exercise of any option, the Company shall not be required to issue
such shares unless the Committee has received evidence satisfactory to it to the
effect that the holder of such option will not transfer such shares except
pursuant to a registration statement in effect under such Act or unless an
opinion of counsel satisfactory to the Company has been received by the Company
to the effect that such registration is not required. Any determination in this
connection by the Committee shall be final, binding and conclusive. In the event
the shares issuable on exercise of an option are not registered under the Act,
the Company may imprint upon any certificate representing shares so issued the
following legend or any other legend which counsel for the Company considers
necessary or advisable to comply with the Act and with applicable state
securities laws:
The shares of stock represented by this certificate have not
been registered under the Securities Act of 1933 or under the
securities laws of any State and may not be sold or transferred
except upon such registration or upon receipt by the Corporation
of an opinion of counsel satisfactory to the Corporation, in
form and substance satisfactory to the Corporation, that
registration is not required for such sale or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act; and in the event any shares are
so registered the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an option or the issuance of shares
pursuant thereto to comply with any law or regulation of any governmental
authority.
9.3 Employment Obligation. The granting of any option shall not impose
upon the Company (or any parent or subsidiary of the Company) any obligation to
employ or continue to employ any optionee; and the right of the Company (or any
such parent or subsidiary) to terminate the employment of any officer or other
employee shall not be diminished or affected by reason of the fact that an
option has been granted to him/her.
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9.4 Withholding Tax. Whenever under the Plan shares of Common Stock are to
be delivered upon exercise of an option, the Company shall be entitled to
require as a condition of delivery that the optionee remit an amount sufficient
to satisfy all federal, state and other governmental withholding tax
requirements related thereto.
SECTION 10. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may modify, revise or terminate this Plan at any
time and from time to time, except that (i) the class of persons eligible to
receive options and the aggregate number of shares issuable pursuant to this
Plan shall not be changed or increased, other than by operation of Section 8
hereof, without the consent of the stockholders of the Company and (ii) the
provisions of Section 4.4 shall not be amended more than once every six (6)
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act, or the rules thereunder.
SECTION 11. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
SECTION 12. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective upon its adoption by the Board of Directors
provided that the stockholders of the Company shall have approved the Plan
within twelve months prior to or following the adoption of the Plan by the
Board. No option may be granted under the Plan after the tenth anniversary of
the effective date. The Plan shall terminate (i) when the total amount of Common
Stock with respect to which options may be granted shall have been issued upon
the exercise of options or (ii) by action of the Board of Directors pursuant to
Section 10 hereof, whichever shall first occur.
* * * * * * * *
A-8
31
DM MANAGEMENT COMPANY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DM MANAGEMENT COMPANY
A STOCKHOLDER WISHING TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS
NEED ONLY SIGN AND DATE THIS PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
Proxy for the Annual Meeting of Stockholders to be held on May 8, 1997
The undersigned stockholder of DM Management Company (the "Company"), revoking all prior proxies, hereby appoints Gordon R. Cooke,
Samuel L. Shanaman and Olga L. Conley, or any of them acting singly, proxies, with full power of substitution, to vote all shares
of capital stock of the Company which the undersigned is entitled to vote at the Annual Meeting of Stockholders to be held at the
offices of Foley, Hoag & Eliot LLP, One Post Office Square, Boston, Massachusetts on Thursday, May 8, 1997, beginning at 10:00
a.m., local time, and at any adjournments thereof, upon matters set forth in the Notice of Annual Meeting dated April 10, 1997 and
the related Proxy Statement, copies of which have been received by the undersigned, and in their discretion upon any other business
that may properly come before the meeting or any adjournments thereof. Attendance of the undersigned at the meeting or any adjourned
session thereof will not be deemed to revoke this proxy unless the undersigned shall affirmatively indicate the intention to vote
the shares represented hereby in person prior to the exercise of this proxy.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN WITH RESPECT TO ONE OR MORE OF THE
PROPOSALS SET FORTH ON THE REVERSE SIDE OF THIS CARD, WILL BE VOTED FOR SUCH PROPOSAL OR PROPOSALS.
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PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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Please sign exactly as your name(s) appear(s) on stock certificate. If stockholder is a corporation, please sign in full corporate
name by president or other authorized officer and, if a partnership, please sign full partnership name by an authorized person.
- - ------------------------------------------------------------------------------------------------------------------------------------
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- - -------------------------------------------------------- -------------------------------------------------------------------
- - -------------------------------------------------------- -------------------------------------------------------------------
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32
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
For Against Abstain
1. To fix the number of directors that shall [ ] [ ] [ ]
constitute the whole Board of Directors of
the Company at six.
-----------------------
DM MANAGEMENT COMPANY 2. To elect all of the following as Directors
----------------------- of the Company.
CLASS A: WILLIAM E. ENGBERS For All With- For All
SAMUEL L. SHANAMAN Nominees hold Except
CLASS B: RUTH M. OWADES [ ] [ ] [ ]
CLASS C: THOMAS J. LITTLE
RECORD DATE SHARES: If you wish to withhold your shares from one of the nominees,
mark the "For All Except" box and strike a line through the
nominee's(s') name(s). Your shares will be voted for the
remaining nominee(s).
For Against Abstain
3. To amend the 1993 Incentive and Nonqualified [ ] [ ] [ ]
Stock Option Plan to increase the number of
shares of Common Stock that may be issued
pursuant to options granted thereunder from
700,000 to 1,200,000.
4. To amend the 1993 Incentive and Nonqualified [ ] [ ] [ ]
Stock Option Plan further to alter the
formula stock option grants thereunder to
non-employee directors of the Company.
Please promptly date and sign this proxy and mail it in the
enclosed envelope to ensure representation of your shares. No
postage need be affixed if mailed in the United States.
--------------
Please be sure to sign and date this Proxy Date Mark box at right if an address change or comment has been [ ]
- - ------------------------------------------------------------- noted on the reverse side of this card.
- - -----Stockholder sign here-------------Co-owner sign here----
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DETACH CARD DETACH CARD
DM MANAGEMENT COMPANY
Dear Stockholder:
Please take note of the important information enclosed with this Proxy Ballot. There are a number of issues related to the
management and operation of your Company that require your immediate attention and approval. These are discussed in detail
in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to vote your shares.
Please mark the boxes on this proxy card to indicate how your shares will be voted. Then sign the card, detach it and
return your proxy vote in the enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, May 8, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
DM Management Company