<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE NORTH FACE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(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.:
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(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
April 16, 1997
To The North Face, Inc. Stockholders:
We invite you to attend the annual meeting of stockholders of The North
Face, Inc. to be held on Tuesday, May 13, 1997, at 9:00 a.m. at our headquarters
located at 2013 Farallon Drive, San Leandro, California 94577.
Our notice of meeting and proxy statement describe the business we plan to
conduct at the meeting and other information. We will also report on our
company's progress and provide time for stockholders to ask questions.
Registration for those attending the meeting in person will begin at 8:30
a.m. In order to attend, you must be a stockholder of record listed with our
transfer agent or bring with you a copy of your brokerage or other account
statement showing that you were a stockholder on March 17, 1997.
We appreciate your decision to invest in The North Face, Inc. Your presence
at the meeting and vote are important to us. Please complete, sign and return
the enclosed proxy promptly to assure that you are represented at the meeting,
whether or not you plan to attend in person.
Sincerely,
Marsden S. Cason
Chairman
<PAGE>
[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 13, 1997
------------------------
TO THE STOCKHOLDERS OF THE NORTH FACE, INC.:
The annual meeting of stockholders of The North Face, Inc., a Delaware
corporation (the "Company"), will be held on Tuesday, May 13, 1997, at 9:00 a.m.
(local time) at the Company's headquarters located at 2013 Farallon Drive, San
Leandro, California, 94577 for the following purposes:
1. To elect two Class I directors of the Company to hold office for a three
year term.
2. To ratify the selection of Deloitte & Touche LLP as independent auditors
of the Company for its fiscal year ending December 31, 1997.
3. To transact such other business as may properly come before the meeting
or any adjournment.
Only stockholders of record at the close of business on March 17, 1997, are
entitled to notice of and to vote at this annual meeting.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE
PROVIDED, EVEN IF YOU PLAN TO ATTEND THE MEETING, TO ASSURE THAT YOUR SHARES ARE
REPRESENTED. IF YOU WERE A RECORD HOLDER OF STOCK ON MARCH 17, 1997, YOU MAY
ATTEND THE MEETING AND VOTE IN PERSON WHETHER OR NOT YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY.
By Order of the Board of Directors
Roxanna Prahser
Secretary
San Leandro, California
April 16, 1997
<PAGE>
THE NORTH FACE, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The Board of Directors of The North Face, Inc. (the "Company") is soliciting
the enclosed proxy for the annual meeting of stockholders to be held on Tuesday,
May 13, 1997, at 9:00 a.m. local time or at any postponement or continuation of
the meeting (the "Annual Meeting"), for the purposes set forth in these proxy
materials. The Annual Meeting will be held at the Company's principal executive
offices located at 2013 Farallon Drive, San Leandro, California 94577. The
Company is first mailing this proxy statement and the proxy to the stockholders
on or about April 16, 1997.
The Company will pay the expenses of soliciting the proxies for the Annual
Meeting, including preparation and mailing of this proxy statement, the proxy
and any additional information furnished to stockholders. The Company will
furnish copies of these proxy materials to brokers and others known to the
Company to hold stock of record for the beneficial owners, so that these brokers
and other holders may forward the materials to the beneficial owners. The
Company may reimburse those record holders for their costs of forwarding the
proxy materials. The Company's directors, officers or other regular employees
may also solicit proxies by telephone, fax or in person. The Company will not
pay any additional compensation to directors, officers or other regular
employees for their assistance in soliciting proxies.
RECORD DATE AND QUORUM
Only stockholders of record at the close of business on March 17, 1997, are
entitled to notice of the Annual Meeting and to vote shares of the Company's
Common Stock they held on that date at the Annual Meeting. Each share of Common
Stock outstanding on that date is entitled to one vote on each matter presented
for a vote at the Annual Meeting. On March 17, 1997, 11,204,865 shares of the
Company's Common Stock were outstanding. The Common Stock is the only class of
voting stock outstanding.
The quorum required for the Annual Meeting is the presence in person or by
proxy of not less than one third of the shares of Common Stock outstanding on
March 17, 1997. Affirmative and negative votes, abstentions and broker non-votes
will be considered as present for purposes of determining a quorum and will be
separately counted.
VOTING OF SHARES
Votes by proxy or in person at the Annual Meeting will be tabulated by the
inspector(s) of election appointed for the meeting. Each proxy card will be
voted in accordance with the instructions of the stockholder indicated on the
card, assuming the card is properly signed, returned to the Company and not
revoked. Unless contrary instructions are stated on the proxy card, the proxy
holders named in the card will vote for the director nominees proposed by the
Company's Board of Directors, for ratification of the selection of Deloitte &
Touche LLP as the Company's independent auditors, and, as to any other matter
that may properly be voted on at the meeting, as recommended by the Company's
Board of Directors or in their discretion if no Board recommendation is given.
The director nominees receiving the greatest number of votes cast in the
election of directors will be elected. A properly executed proxy card which is
marked "withhold authority" as to one or more director nominees will not be
voted for the nominees so marked. Each other matter to be voted on at the
meeting will be approved if holders of a majority of the shares represented in
person or by proxy vote in favor of the matter. On matters for which abstentions
may be marked, abstentions will have the same effect as negative votes.
1
<PAGE>
A broker non-vote occurs where a broker holding stock in "street name" for a
beneficial owner returns a proxy and votes on one or more (usually routine)
matters but refrains from voting on other matters. The Company does not intend
to consider broker non-votes in determining the number of votes cast on any
matter.
REVOCATION OF PROXIES
Any person giving a proxy may revoke it at any time before it is voted at
the Annual Meeting by filing with the Secretary of the Company at the Company's
principal executive offices a written notice of revocation or a duly executed
proxy bearing a later date. A proxy may also be revoked by attending the meeting
and voting in person. Attendance at the meeting will not, by itself, revoke a
proxy.
PROPOSAL 1--ELECTION OF DIRECTORS
Six individuals currently serve on the Company's Board of Directors, which
is divided into three classes, serving staggered terms of office. At the Annual
Meeting, two Class I directors will be elected to serve three year terms. The
term of office of the current Class I directors expires at the Annual Meeting.
Peter M. Castleman, who is currently serving as a Class I director, has
decided not to stand for re-election as a director of the Company when his term
expires at the Annual Meeting. The Board of Directors has nominated Robert P.
Bunje, who has not previously served as a director or employee of the Company,
and incumbent Class I director Michael Doyle for election as Class I directors
at the Annual Meeting.
Following the Annual Meeting, the Board of Directors will consist of two
Class I directors whose terms expire at the annual meeting of stockholders in
2000, two Class II directors whose terms expire at the annual meeting in 1998,
and two Class III directors whose terms expire at the annual meeting in 1999.
All directors hold office until their successors have been elected and
qualified, or until their earlier death, resignation or removal. The Company's
Restated Certificate of Incorporation provides that each class of directors
elected at an annual stockholders meeting will be elected to serve a three year
term.
Each person named below as a nominee for election has consented to serve if
elected. If any nominee unexpectedly becomes unavailable to serve, the proxy
holders will vote the proxies for a substitute nominee designated by the Board
of Directors.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS--TERMS WILL EXPIRE AT THE 2000 ANNUAL
MEETING
ROBERT P. BUNJE
Mr. Bunje, 52, has been the President of Bunje Pacific Consulting
Corporation since April 1994. From 1977 through March 1994, he was a partner of
Deloitte & Touche LLP and its predecessor Touche Ross & Co., and served as
Managing Director of International Merger and Acquisition Services from 1984 to
1994. In that capacity, he has assisted clients in the evaluation, structuring
and negotiation of international mergers, acquisitions, and reorganizations. In
addition, Mr. Bunje continues to assist a number of organizations in strategic
and financial planning. Mr. Bunje's clients have included Nippon Electric Glass
Co. Ltd., Sumitomo Bank Ltd., Techneglas, Inc., The Kimpton Hotel & Restaurant
Group, Inc. and The Gap Stores, Inc. Mr. Bunje also serves as a director and
chairman of the compensation committee of Techneglas and is chairman of the
Board of Regents of Santa Clara University.
MICHAEL DOYLE DIRECTOR SINCE SEPTEMBER 1996
Mr. Doyle, 54, is Chairman of the Board of The Soft Bicycle Company and has
been the President of Michael Doyle and Associates since September 1987. He has
been an advisor to boards of directors and senior management in the areas of
strategic planning, visioning and organizational renewal and transformation for
over 25 years. Mr. Doyle's clients have included Arthur Andersen, Builders
Square, DuPont, General Electric, Hambrecht & Quist, Lucasfilm and Motorola.
2
<PAGE>
CLASS II DIRECTORS CONTINUING IN OFFICE--TERMS EXPIRE AT THE 1998 ANNUAL MEETING
JAMES FIFIELD DIRECTOR SINCE SEPTEMBER 1996
Mr. Fifield, 54, is the President and Chief Executive Officer of EMI Music,
a wholly-owned subsidiary of the EMI Group. Mr. Fifield joined EMI Music in May
1988 as President and Chief Operating Officer and was appointed President and
Chief Executive Officer in April 1989. Before joining EMI Music, Mr. Fifield
served for three years as the President and Chief Executive Officer of CBS/Fox
Video and held a number of executive positions with General Mills during a
career spanning 20 years.
WILLIAM N. SIMON DIRECTOR SINCE JUNE 1995
Mr. Simon, 49, has been Chief Executive Officer of the Company since
February 1997, and President of the Company since December 1995. From May 1988
through June 1994, Mr. Simon served as the Chairman of the Board of the
Company's predecessor and was Vice Chairman of the Company from June 1994 to
December 1995. From November 1978 through June 1994, Mr. Simon was Chairman and
Chief Executive Officer of Odyssey Worldwide Holdings B.V. ("Odyssey"), a
designer and manufacturer of high-end sports and outdoor apparel, and an
executive officer and director of several other Odyssey affiliates. Mr. Simon
has been involved in the design, manufacturing and sales of outdoor clothing and
equipment for over 26 years. In January 1993, Odyssey and certain holding
companies affiliated with Odyssey filed for protection in the United States
under Chapter 11 of the U.S Bankruptcy Code. In September 1994, Mr. Simon filed
a petition under Chapter 7 of the U.S. Bankruptcy Code and in January 1995 was
granted a discharge by the bankruptcy court and the proceeding was dismissed.
Mr. Simon personally had guaranteed substantially all of the indebtedness of
Odyssey and its affiliated companies and his bankruptcy filing was made in order
to terminate his personal liability for these corporate obligations.
CLASS III DIRECTORS CONTINUING IN OFFICE--TERMS EXPIRE AT THE 1999 ANNUAL
MEETING
MARSDEN S. CASON DIRECTOR SINCE JUNE 1994
Mr. Cason, 54, has served as the Company's Chairman since February 1997, and
served as Chief Executive Officer of the Company from June 1994 to February
1997. Mr. Cason joined the Company's predecessor in January 1993 as President
and director and served as a director and executive officer of several
affiliates of the predecessor. Prior to joining the Company's predecessor, from
May 1991 through January 1993, Mr. Cason was the Chief Executive Officer of
Carol Management Company and Doral Resort Hotels, an owner and manager of
condominiums, hotels and conference centers. Prior to May 1991, Mr. Cason was
involved in various business ventures as a chief executive officer.
RAY E. NEWTON, III DIRECTOR SINCE JUNE 1994
Mr. Newton, 33, served as the Chairman of the Company's Board of Directors
from January 1996 to February 1997. Mr. Newton joined J.H. Whitney & Co. in 1989
and has been a General Partner since May 1992. Prior to joining J.H. Whitney &
Co., he was employed by Morgan Stanley & Co. Incorporated, an investment banking
firm, where he was in the Merchant Banking Group. Mr. Newton is also a director
of Brothers Gourmet Coffees, Inc.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held 10 meetings during its fiscal year ended
December 31, 1996. The Board established an Audit Committee and a Compensation
Committee in 1996. It has no nominating committee. The Audit Committee consists
of two nonemployee directors, Mr. Doyle and Mr. Newton, who is Chairman, and met
one time during fiscal 1996. This committee recommends the engagement of the
independent auditors; meets with the Company's independent auditors to review
and discuss the draft
3
<PAGE>
annual financial statements with management and the independent auditors;
reviews the auditors' comments to management on internal accounting controls and
other matters which the auditors may include in their report to management; and
undertakes related functions.
The Compensation Committee consists of two nonemployee directors, Mr.
Castleman and Mr. Newton. This committee met two times during fiscal 1996. This
committee makes recommendations to the Board of Directors concerning executive
cash and noncash compensation and compensation performance standards, makes
awards under and otherwise administers the Company's stock incentive plans to
the extent not undertaken by the full Board of Directors, and otherwise performs
such other functions regarding compensation as may be delegated by the Board of
Directors. The Board of Directors has appointed Mr. Bunje to serve on this
committee in place of Mr. Castleman following the Annual Meeting, if Mr. Bunje
is elected as a director at the Annual Meeting.
No director attended, during the period he was a director, fewer than 75% of
the total number of meetings of the Board of Directors and meetings of the
committees of the Board of Directors on which he served.
COMPENSATION OF DIRECTORS
Each member of the Company's Board of Directors is reimbursed by the Company
for out-of-pocket expenses incurred in connection with attending Board meetings.
No member of the Company's Board of Directors currently receives any additional
cash compensation for such service. For the period in 1996 prior to the
Company's initial public offering, the Company paid J.H. Whitney & Co. (a
partnership whose general partners include Messrs. Castleman and Newton) a
management fee of $125,000.
The Company's 1996 Stock Option Plan for Non-Employee Directors (the
"Directors' Plan") was adopted by the Board of Directors and stockholders in May
1996 and June 1996, respectively. A total of 100,000 shares of Common Stock has
been reserved for issuance under the Directors' Plan. The Directors' Plan
initially provided for the formula grant of nonqualified stock options to
purchase 25,000 shares to each non-employee director of the Company initially
elected to the Board after the effective date of the Directors' Plan. As a
result of the 1996 amendment to Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, the Directors' Plan provides that, in lieu of the formula
grants, awards may be made under the Directors' Plan on a discretionary basis to
non-employee directors of the Company. During 1996, options to purchase 25,000
shares were granted to each of Messrs. Doyle and Fifield under the Directors'
Plan at an average exercise price of $25.63.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NOMINEE NAMED
ABOVE.
PROPOSAL 2--RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997 and has
determined that it is desirable to submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Stockholder
ratification of the selection of independent auditors is not required by the
Company's By-laws or otherwise. If the stockholders fail to ratify the
selection, the Audit Committee and the Board will reconsider the selection. Even
if the selection is ratified, the Board of Directors in its discretion may
direct the appointment of different independent auditors at any time.
Deloitte & Touche LLP has served as independent accountants to the Company
and its predecessor since 1993. Representatives of Deloitte & Touche LLP are
expected to be present at the Annual Meeting and will have an opportunity to
make a statement if they so desire and will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
4
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and footnotes set forth certain information regarding
the beneficial ownership of the Company's Common Stock as of March 17, 1997, by:
(i) each director and nominee for director who owned shares as of that date;
(ii) each of the executive officers named in the Summary Compensation Table set
forth in this Proxy Statement; (iii) all executive officers and directors of the
Company as a group; and (iv) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock:
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS OF BENEFICIALLY PERCENT OF
BENEFICIAL OWNER(1)(2) OWNED TOTAL
- ----------------------------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
Whitney 1990 Equity Fund, L.P.(3).................................................. 2,620,246 22.3%
Whitney Subordinated Debt Fund, L.P.(3)............................................ 1,110,506 9.5
J.H. Whitney & Co.(3).............................................................. 655,062 5.6
Pilgrim Baxter & Associates(4)..................................................... 1,106,900 9.4
Putnam Investments, Inc.(5)........................................................ 716,745 6.1
RCM Capital Management, L.L.C.(6).................................................. 599,500 5.1
William N. Simon(7)................................................................ 492,707 4.2
Marsden S. Cason................................................................... 386,156 3.3
Roxanna Prahser(8)................................................................. 12,100 *
Carlo Armenise..................................................................... 0 *
Roger Kase(9)...................................................................... 4,362 *
Michael Doyle(10).................................................................. 4,000 *
Robert P. Bunje(11)................................................................ 200 *
All directors and executive officers as a group (12 persons)....................... 917,501 7.8
</TABLE>
- ------------------------
* Less than 1%.
(1) Determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. Under this rule, a person is deemed to be the
beneficial owner of securities that can be acquired by such person within 60
days from March 17, 1997, upon the exercise of options, and each beneficial
owner's percentage ownership is determined by assuming that options that are
held by such person (but not those held by any other person) and that are
exercisable within 60 days from that date have been exercised. Unless
otherwise noted, the Company believes that all persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock beneficially owned by them.
(2) Unless otherwise indicated in these notes, the address of each of the
persons named above is in care of the Company at 2013 Farallon Drive, San
Leandro, California 94577.
(3) Whitney 1990 Equity Fund, L.P., Whitney Subordinated Debt Fund, L.P., and
J.H. Whitney & Co. are limited partnerships in which Ray E. Newton, III and
Peter M. Castleman, directors of the Company, are (together with other
individuals) general partners. Messrs. Newton and Castleman disclaim
beneficial ownership of the securities held by such partnerships, except to
the extent of their respective ownership interests in such partnerships. The
address of each of Whitney 1990 Equity Fund, L.P., Whitney Subordinated Debt
Fund, L.P. and J.H. Whitney & Co. is 177 Broad Street, Stamford, Connecticut
06901.
(4) Based on a Schedule 13G dated February 14, 1997, sent to the Company by
Pilgrim Baxter & Associates, Harold J. Baxter and Gary L. Pilgrim, 1255
Drummers Lane, Suite 300, Wayne, Pennsylvania 19087, indicating shared
voting power and sole dispositive power over the above shares.
(5) Based on a Schedule 13G dated January 27, 1997, sent to the Company by
Putnam Investments, Inc. ("PI") and its affiliates Marsh & McClennan
Companies, Inc. ("MMC"), The Putnam Advisory Company, Inc. ("PAC") and
Putnam Investment Management, Inc. ("PIM"). The address of PI, PAC and PIM
is One Post Office Square, Boston, Massachusetts 02109. PI is reported as a
wholly owned
5
<PAGE>
subsidiary of MMC and as wholly owning PAC and PIM. PI reports shared voting
power over 333,145 shares and shared dispositive power over 716,745 shares,
PIM reports shared dispositive power over 314,900 shares, and PAC reports
shared voting power over 333,145 shares and shared dispositive power over
401,845 shares. The Schedule 13G states that voting power is shared with
certain mutual fund trustees and institutional clients.
(6) Based on the Schedule 13G dated February 3, 1997, sent to the Company by RCM
Capital Management, L.L.C. ("RCM") jointly with its managing agent RCM
Limited L.P. and RCM General Corporation as general partner of the managing
agent. The address of RCM is Four Embarcadero Center, Suite 2900, San
Francisco, California 94111. The Schedule 13G describes sole voting power as
to 512,500 shares, and sole dispositive power as to 599,500 shares. Schedule
13G dated February 7, 1997, sent to the Company by Dresdner Bank AG reports
RCM as a wholly owned subsidiary of that bank.
(7) Includes 492,707 shares of Common Stock issuable upon exercise of stock
options.
(8) Includes 11,100 shares of Common Stock issuable upon exercise of stock
options.
(9) Includes 4,162 shares of Common Stock issuable upon exercise of stock
options.
(10) Mr. Doyle's address is 906A Union Street, San Francisco, California 94133.
(11) Mr. Bunje's address is 349 Sailfish Isle, Foster City, California 94404.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information with respect to the compensation
of the Company's Chief Executive Officer and each of the four other executive
officers most highly compensated in 1996 (collectively, the "Named Executive
Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-------------
NUMBER OF
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION (1) OPTIONS COMPENSATION
- ------------------------------------- --------- ---------- ------------ ----------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marsden S. Cason (2)(3) 1996 $ 360,000 $ 95,760(4) $ 1,200 -- --
Chief Executive Officer............ 1995 360,000 -- 1,200 -- --
William N. Simon(3) 1996 360,000 95,760(4) 1,200 -- --
President.......................... 1995 360,000 -- 1,200 701,707 $ 20,500(5)
Roxanna Prahser 1996 155,000 31,000(4) 780 5,550 --
Chief Financial Officer............ 1995 133,500 17,250(6) 600 -- --
Carlo Armenise 1996 116,900 68,400(7) 630 38,850 37,084(8)
Vice President Retail.............. 1995 N/A
Roger Kase
Vice President of Product 1996 160,000 32,000(4) 840 5,550 --
Development........................ 1995 91,400 400
</TABLE>
- ------------------------
(1) Life insurance premiums.
(2) Mr. Cason held at December 31, 1996, 277,824 fully vested restricted shares
of Common Stock awarded in 1994 under the Company's 1994 Stock Incentive
Plan pursuant to the payment of cash and delivery of a promissory note due
June 7, 2004, bearing interest at a rate of 9.0% per annum. As of December
31, 1996, $78,107 of principal and interest was unpaid on the note. The
restricted shares
6
<PAGE>
not then vested became fully vested under the applicable award agreements
upon completion of the Company's initial public offering in July 1996, and
are entitled to receive the same dividends, if any, as may be declared upon
Common Stock. The value of these 277,824 restricted shares at December 31,
1996, was $5,285,539 based on the closing market price of $19.25 per share
of the Common Stock and net of consideration paid for the shares. Mr. Cason
realized $827,444 from the sale of 37,429 shares of restricted stock as a
selling stockholder in a registered public offering in November 1996. No
other officers hold restricted shares under any stock plan.
(3) On February 20, 1997, the Company announced that Mr. Cason was named
Chairman and Mr. Simon was named Chief Executive Officer in addition to
President.
(4) Paid in 1997 for service in 1996.
(5) Payment for unused vacation time.
(6) Paid in 1995 for service in 1994.
(7) Includes bonuses of $45,000 paid on commencing employment in 1996 and
$23,400 paid in 1997 for service in 1996.
(8) Paid for relocation expenses in 1996.
OPTION GRANTS. The following table provides information with respect to the
stock option grants made to each Named Executive Officer during 1996:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE OF ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ----------------------
NAME GRANTED FISCAL YEAR SHARE (1) DATE 5% 10%
- ------------------------------------- ----------- --------------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Marsden S. Cason..................... -- -- -- -- -- --
William N. Simon..................... -- -- -- -- -- --
Roxanna Prahser(3)................... 5,550 1.2% $ 9.60 6/07/2004 $ 25,665 $ 61,588
Carlo Armenise(3).................... 16,650 3.9 3.38 6/07/2004 27,553 66,341
22,200 5.2 9.60 6/07/2004 102,661 246,350
Roger Kase(3)........................ 11,100 2.6 9.60 6/07/2004 51,331 123,175
</TABLE>
- ------------------------
(1) All options were granted at the fair market value of the Common Stock on the
date of grant, as determined by an independent valuation.
(2) The potential realizable value through the expiration date of the options
has been determined on the basis of the fair market value of the shares at
the time the options were granted, compounded annually over the term of the
option, net of exercise price. These values have been determined based upon
assumed rates of appreciation and are not intended to forecast the possible
future appreciation, if any, of the price or value of the Company's Common
Stock.
(3) The options become exercisable on June 7, 2004 unless certain financial
targets are met as determined by the Company's Board of Directors, in which
case the options vest one-quarter each year over 4 years beginning in 1997.
7
<PAGE>
OPTION EXERCISES AND VALUE. The following table summarizes the options
exercised during 1996, number of securities underlying unexercised options and
the value of such options on an aggregated basis held by the Named Executive
Officers at December 31, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
SHARES ACQUIRED VALUE -------------------------- ---------------------------
NAME ON EXERCISE REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- --------------- --------------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Marsden S. Cason............ 102,571 $ 2,267,311(3) -- -- -- --
William N. Simon............ 69,000 820,679
140,000 2,968,546 492,707 -- $ 8,929,754 --
Roxanna Prahser............. -- 11,100 16,650 211,175 $ 264,733
Carlo Armenise.............. -- -- 38,850 -- 478,493
Roger Kase.................. -- 4,162 23,588 75,441 333,437
</TABLE>
- ------------------------
(1) Based on the difference between the closing market price of the Common Stock
at December 31, 1996, which was $19.25, and the option exercise price. The
actual value of unexercised options fluctuates with the market price of the
Common Stock.
(2) Based on the difference between the fair market value of the Common Stock at
the date of exercise and the exercise price.
(3) Mr. Cason also realized value from the sale of stock described in Note (2)
to the Summary Compensation Table.
EMPLOYMENT AND OTHER AGREEMENTS
Ms. Prahser, Mr. Armenise and Mr. Kase received letters from the Company
that offered employment and set forth compensation levels, eligibility for merit
increases and benefits, including eligibility to participate in the Company's
stock incentive plans. Each letter agreement specifies that employment with the
Company is voluntary and can be terminated at any time by either party. If the
Company terminates Mr. Armenise's employment without cause, he is entitled under
his letter agreement to six months severance at his then current base rate of
pay.
Mr. Cason holds 108,332 shares of Common Stock subject to a certain
Management Stock Purchase and Non-Competition Agreement dated as of June 7,
1994, which restricts him from engaging in defined businesses competitive with
the Company for a certain period following the end of his employment by the
Company and provides that if he breaches this covenant, the Company may
repurchase stock subject to this agreement which he then holds.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Two members of the Company's Board of Directors, Messrs. Newton and
Castleman, who serve as the members of the Compensation Committee, are general
partners of J.H. Whitney & Co. ("Whitney"), Whitney 1990 Equity Fund, L.P. (the
"Equity Fund") and Whitney Subordinated Debt Fund, L.P. (the "Debt Fund"). In
connection with the acquisition of substantially all of the assets and certain
of the liabilities of the Company's predecessor in 1994, the Company, Whitney
and the Equity Fund entered into a Preferred Stock Purchase Agreement pursuant
to which the Company issued an aggregate of 1,920,000 shares of Preferred Stock
in consideration of $12,166,667, which shares, together with accrued dividends,
were converted on July 8, 1996, into an aggregate of 4,186,399 shares of Common
Stock in connection with the Company's initial public offering.
Also in connection with the acquisition, the Company and the Debt Fund
entered into a Subordinated Note and Common Stock Purchase Agreement (the
"Purchase Agreement") pursuant to which the Company issued to the Debt Fund a
Subordinated Promissory Note due June 7, 2001 bearing interest at the rate of
10.101% per annum (the "Subordinated Note") in the aggregate principal amount of
8
<PAGE>
$24,333,333 in return for a loan of $24,013,645 and 1,419,415 shares of Common
Stock at a purchase price of $0.225 per share. Approximately $14.9 million of
outstanding principal under the Subordinated Note, together with accrued
interest, was repaid in July 1996 with the proceeds of the initial public
offering. The remaining balance of the Subordinated Note of approximately $9.4
million, plus accrued interest, was repaid with the proceeds of a subsequent
public offering of Common Stock by the Company in November 1996. For the period
in 1996 prior to the Company's initial public offering, the Company paid Whitney
a management fee of $125,000.
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND PERFORMANCE GRAPH ARE
NOT CONSIDERED FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND ARE NOT
CONSIDERED TO BE INCORPORATED BY REFERENCE INTO ANY FILINGS WITH THE SECURITIES
AND EXCHANGE COMMISSION, WHETHER THE FILING IS MADE BEFORE OR AFTER THE DATE OF
THIS PROXY STATEMENT, AND IRRESPECTIVE OF ANY GENERAL LANGUAGE OTHERWISE
INCORPORATING FILINGS BY THE COMPANY.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Company's Board of
Directors currently consists of Messrs. Castleman and Newton, each of whom is a
non-employee director of the Company. The Committee was established in early
1996, and its members made recommendations concerning executive compensation
matters to the Board of Directors during 1996.
GENERAL POLICIES.
Executive compensation policies and decisions for 1996 were implemented by
the Board of Directors prior the Company's initial public offering in 1996. The
policies and decisions for 1996 were based primarily upon goals of attracting
and retaining executive officers who are motivated to contribute to the
Company's growth and business objectives, and offering competitive compensation
to these officers based upon their individual contributions and the overall
performance of the Company. Compensation is offered in the form of base salaries
intended to reflect competitive salaries at comparable companies, cash bonuses
based primarily on corporate performance, and stock options intended to align
the interests of executive officers and stockholders.
Base salaries for the executive officers reflect the historic salary
structure for the levels of executive responsibility at the Company and the
recommendations of the Committee members as to appropriate salary levels and
competitive factors, including salaries believed necessary to employ certain
executive officers who joined the Company during 1996.
Upon the recommendations of the Committee members, the Board of Directors
approved cash bonuses to all of the Company's officers for 1996 based primarily
upon the fact that the Company's 1996 earnings per share met a target
recommended by the Committee members and adopted by the Board of Directors. The
Board of Directors also considered relative base salaries and each officer's
individual performance in determining specific cash bonuses for 1996.
All executive officers received grants of stock options in 1996 prior to the
Company's initial public offering, except for Marsden S. Cason and William N.
Simon. Individual grants in 1996 were allocated by the Board of Directors under
the Company's 1995 Stock Incentive Plan as recommended by the Committee members,
based on (i) goals of providing potential stock ownership in order to align the
interests of management and stockholders and to motivate officers to achieve
earnings per share and other goals set by the Company, (ii) individual and
Company performance prior to the dates of grant in the case of officers employed
prior to 1996, and (iii) overall cash compensation and potential stock ownership
believed to be needed in the case of officers first employed by the Company in
1996. The exercise price of options granted under this plan was the fair market
value of the underlying stock on the date of grant. The option agreements
provide that options vest in 2004 if the individual is then employed, with
earlier accelerated vesting on an annual basis over 4 years following the year
of grant if certain earnings per share targets are met and the individual is
employed by the Company on the vesting date.
9
<PAGE>
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to a publicly held corporation to the extent that more than $1 million
is paid to any of its chief executive officer and four other most highly
compensated executive officers employed at the end of any fiscal year. The
Committee believes it unlikely that cash compensation paid for 1997 to any of
these officers would exceed $1 million. The Committee does not expect that the
limitation of Section 162(m) as now in effect will apply to awards of stock or
stock options previously made to these individuals. The Committee may adopt a
policy concerning this limitation when the Committee considers a policy to be
necessary or appropriate.
COMPENSATION OF CEO AND PRESIDENT.
Marsden S. Cason (who served as Chief Executive Officer until February 1997
and is now Chairman and a director) and William N. Simon (who was appointed
Chief Executive Officer in February 1997 in addition to his positions as
President and a director) each received in 1996 a base cash salary of $360,000,
the same base salary paid in 1995. The base salaries for these two officers were
established by the Board of Directors under the policies described above. Each
of these officers also earned a cash bonus for 1996 based on the cash bonus
policies described above. Neither officer received any grants of stock options
in 1996. The Board of Directors believes that these two officers made
substantial contributions to increases in sales, income and earnings per share
and otherwise strong performance by the Company in 1995 and 1996, and worked
well as a team in continuing to build the Company's management depth and product
lines. The Board of Directors exercised its judgment to determine the
compensation for these officers based on the above factors and the policies
described above.
COMPENSATION COMMITTEE
Peter M. Castleman
Ray E. Newton, III
10
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative returns for the
Company's Common Stock, the Nasdaq National Market Composite Index, and the S&P
Textile (Apparel Manufacturers) Index beginning July 2, 1996, when the Company's
Common Stock commenced public trading, and ending December 31, 1996. This
information assumes investment of $100 at the beginning of that period in the
Company's Common Stock at the initial public offering price of $14.00 and in
these indexes, and assumes reinvestment of dividends where applicable. This
information is not necessarily indicative of future price performance.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
S&P TEXTILE
MEASUREMENT PERIOD THE NORTH FACE, NASDAQ NATIONAL MARKET (APPAREL MANUFACTURERS)
(FISCAL YEAR COVERED) INC. COMPOSITE INDEX INDEX
- ---------------------- ------------------- ---------------------- ----------------------------
<S> <C> <C> <C>
Measurement Date
July 2, 1996 $ 100.00 $ 100.00 $ 100.00
Fiscal Year Ended
December 31, 1996 $ 137.50 $ 122.30 $ 120.20
</TABLE>
11
<PAGE>
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 beneficially own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") initial reports of ownership and changes in
ownership of Common Stock and other equity securities of the Company. SEC
regulations require these persons to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on a review of the copies of such
reports furnished to the Company or written representations that no Forms 5 were
required, the Company believes that, during the fiscal year ended December 31,
1996, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% beneficial owners were complied with, except that
(i) Mr. Fifield and Mr. Doyle each filed a Form 3 initial ownership report
approximately one month late following their appointment to the Company's Board
of Directors, and (ii) Mr. Doyle filed one Form 4 approximately one month late
to report a purchase of shares of the Company's Common Stock.
DEADLINE FOR 1998 ANNUAL MEETING STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 annual meeting of
stockholders must be received by the Company not later than December 18, 1997,
in order to be considered under SEC regulations for inclusion in the Company's
proxy statement and proxy for that meeting. Proposals should be addressed to the
Company's Secretary at its principal executive offices. The Company's By-laws
provide additional advance notice and other requirements for stockholder
proposals and for director candidates nominated by stockholders at an annual or
special meeting of stockholders. A stockholder may obtain a copy of the
Company's By-laws without charge upon written request to the Company's
Secretary.
OTHER MATTERS
The Board of Directors is not aware of any matters that will be presented
for consideration at the Annual Meeting other than those described in this Proxy
Statement. If any other matters properly come before the Annual Meeting, the
persons named in the accompanying proxy will have the authority to vote on those
matters in accordance with their own judgment.
By Order of the Board of Directors
Roxanna Prahser
Secretary
April 16, 1997
12
<PAGE>
THE NORTH FACE, INC.
PROXY
THIS PROXY IS SOLICITED BY THE COMPANY'S BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON MAY 13, 1997.
The undersigned hereby appoints Marsden S. Cason, William N. Simon, and
Roxanna Prahser as proxies with full power of substitution, and authorizes
them, or any one or more of them, to vote all shares of Common Stock of The
North Face, Inc. (the "Company") which the undersigned is entitled to vote at
the Company's Annual Meeting of Stockholders to be held on May 13, 1997, and
at any and all postponements, continuations and adjournments thereof, with
all powers that the undersigned would possess if personally present, upon the
matters specified on the reverse side of this card and in accordance with the
following instructions, with discretionary authority as to any other matters
that may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER ON THE REVERSE SIDE. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED ON THE
REVERSE SIDE AND FOR PROPOSAL 2, AND, AS TO ANY OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE MEETING, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
THE DISCRETION OF THE PROXIES.
(Continued on Reverse Side)
[x in box] Please mark your votes as in this example.
WITHHOLD
1. Election of Directors FOR AUTHORITY Nominees: Robert P. Bunje
to vote for all Michael Doyle
nominees listed
/ / / /
For, except vote withheld from the following nominee(s): _________________
2. To ratify selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending December 31, 1997.
FOR AGAINST ABSTAIN
/ / / / / /
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED FOR DOMESTIC MAILING.
PLEASE CHECK THIS BOX IF YOU PLAN TO ATTEND THE MEETING. / /
Signatures: _____________________ ____________________ Date: _______, 1997
Signature Signature if held jointly
Note: Please sign exactly as your name appears hereon. Joint owners should
each sign. When signing as an attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in
full corporate name by authorized officer. If a partnership, please sign in
partnership name by authorized person.
