SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Soliciting Material Pursuant to
sec.240.14a-11(c) or sec.240.14a-12
[X] Definitive Proxy Statement [ ] Confidential, for Use of the
Commission Only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))
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.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE>
[LOGO]
March 6, 1998
To the valued Stockholders of The North Face, Inc.:
We invite you to attend the Annual Meeting of Stockholders of The North
Face, Inc. to be held on Tuesday, March 31, 1998, at 9:00 a.m. at our
principle executive offices located at 2013 Farallon Drive, San Leandro,
California 94577.
The following Notice of Annual Meeting of Stockholders and Proxy
Statement describe the proposals to be voted upon by the stockholders at the
meeting and information relevant thereto. Each of these items will be
discussed at the Annual Meeting with adequate time allotted for stockholder
questions.
You must be listed as a stockholder of record with our transfer agent,
American Stock Transfer & Trust Company, in order to attend the Annual
Meeting, or you must bring with you to the Annual Meeting a copy of your
brokerage or other account statement showing that you were a stockholder on
February 20, 1998. Registration for those attending the Annual Meeting in
person will begin at 8:30 a.m.
We highly value your decision to be a stockholder of The North Face,
Inc. Your presence at the meeting and vote are extremely important. 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,
LOGO
Marsden S. Cason
Chairman
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 31, 1998
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, March 31, 1998, at 9:00
a.m. (local time) at the Company's principal executive offices located at 2013
Farallon Drive, San Leandro, California, 94577 for the following purposes:
1. To elect two (2) Class II directors of the Company, each to hold
office for a three year term.
2. To amend the Company's 1996 Stock Incentive Plan to increase the
number of shares of the Company's Common Stock authorized thereunder by
600,000 shares to 1,283,950 shares.
3. To ratify the selection of Deloitte & Touche LLP as independent
auditors of the Company for the year ending December 31, 1998.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on February 20,
1998, are entitled to notice of and to vote at the 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 February 20,
1998, 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
LOGO
Christopher F. Crawford
Secretary
San Leandro, California
March 6, 1998
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, March 31, 1998, 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 Proxy to the stockholders on or about March 6, 1998.
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 (sometimes
referred to herein as the ''Proxy Materials''). 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 Proxy 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 February 20,
1998 (the ''Record Date''), are entitled to notice of the Annual Meeting and
to vote shares of the Company's Common Stock on said date at the Annual
Meeting. Each share of Common Stock outstanding on said date entitles the
requisite stockholder to one vote per proposal at the Annual Meeting. On the
Record Date, there were approximately 91 stockholders of record and a total of
11,543,759 shares of the Company's Common Stock outstanding. The Company's
Common Stock is the only class of voting stock currently outstanding.
It is necessary to establish a quorum of the outstanding shares of the
Company's Common Stock prior to the start of the Annual Meeting. According to
the Company's Restated Certificate of Incorporation, a quorum is present if not
less than one third of the shares of Common Stock outstanding on the Record
Date are present at the Annual Meeting in person or by proxy. 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 of election who will be appointed to such position by the Board
of Directors of the Company for purposes of the Annual 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 itself, the number of votes represented by any given proxy card will be
considered votes ''FOR'' each of the three proposals presented for stockholder
vote by the Company's Board of Directors at the Annual Meeting. Similarly, the
Company's Board of Directors may also consider an unmarked proxy card an
endorsement of 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.
With specific regard to Proposal One-Election of Directors, the two
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 proposal 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.
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 ONE-ELECTION OF DIRECTORS
Five 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 II directors will be elected to serve three year
terms. The terms of office of both of the current Class II directors expire at
the Annual Meeting.
The Board of Directors has nominated James Fifield and William N. Simon
to serve as Class II directors of the Company. Messrs. Fifield and Simon are
incumbent Class II directors first elected to serve on the Board in September
1996 and June 1995, respectively.
Following the Annual Meeting, the Board of Directors will consist of
two Class I directors whose terms expire at the annual meeting in 2000, two
Class II directors whose terms expire at the annual meeting in 2001, and one
Class III director whose term expires 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 from office. The
Company's Amended and 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 their proxies for a substitute nominee designated
by the Board of Directors.
Nominees for Election as Class II Directors-Terms Will Expire at the 2001
Annual Meeting
JAMES FIFIELD Director since September 1996
Mr. Fifield, 55, 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, 50, 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 27 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 I Directors Continuing in Office-Terms Expire at the 2000 Annual Meeting
ROBERT P. BUNJE Director since May 1997
Mr. Bunje, 53, has been the President of Bunje Pacific Consulting
Corporation since April 1994. From 1977 through March 1994, he was a partner at
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 his capacity as partner at Deloitte & Touche, Mr. Bunje 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, 55, 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.
Class III Director Continuing in Office-Term Expires at the 1999 Annual Meeting
MARSDEN S. CASON Director since June 1994
Mr. Cason, 55, 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.
Board Committees and Meetings
The Board of Directors held five meetings during its fiscal year ended
December 31, 1997. 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, Messrs. Bunje (Chairman) and Doyle, and
met two times during fiscal 1997. This committee approves the engagement of
the independent auditors; meets with the Company's independent auditors and
management to review and discuss the draft annual financial statements;
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 three nonemployee directors,
Messrs. Doyle (Chairman), Bunje and Fifield. This committee met two times
during fiscal 1997. 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.
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 providing the Company with strategic-planning consulting services,
Mr. Doyle was paid a fee of $100,000 in fiscal 1997.
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. 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 1997, options to purchase 25,000 shares and
10,000 shares were granted to Messrs. Bunje and Doyle under the Directors'
Plan at exercise prices of $14.38 and $22.25, respectively.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE IN FAVOR OF EACH NOMINEE NAMED ABOVE.
PROPOSAL TWO-AMENDMENT TO THE COMPANY'S 1996 STOCK
INCENTIVE PLAN
At the Annual Meeting, the stockholders will be asked to approve an
amendment to the Company's 1996 Stock Incentive Plan (the ''Plan'') to increase
the number of shares of Common Stock reserved for issuance thereunder by
600,000 shares to a total of 1,283,950 shares. The Company's Board of
Directors believes that the amendment of the Plan is critical to the Company's
continued ability to hire and retain talented employees. The Company has
historically included equity incentives as a significant component of
compensation for a broad range of the Company's employees. Further, in the
current employment environment, the Company believes that equity incentives
are a key component in attracting and motivating employees and help to better
align the interests of the employees with those of the stockholders. In order
to support its continued growth, the Company intends to hire additional
employees at all levels during 1998. Additionally, in order to retain the
services of its current employees as the Company matures, the Company believes
that it will be necessary to grant additional options to current employees.
The proposed amendment to the Plan will enable the Company to offer equity
incentives to new employees and current employees and consultants. If the
proposed amendment to the Plan is not approved by the stockholders of the
Company, the Company will be unable to offer the equity incentives necessary
to support the future growth plans of the Company.
The Plan was originally adopted by the Board of Directors in May 1996.
As of the Record Date, options to purchase an aggregate of 592,655 shares of
the Company's Common Stock were outstanding under the Plan, with a weighted
average exercise price of $18.67 per share, and 79,362 shares (excluding the
600,000 shares subject to stockholder approval at this Annual Meeting) were
available for future grant. In addition, 11,933 shares have been issued upon
exercise of stock options granted under the Plan. A copy of the Plan is
attached to this Proxy Statement as Appendix A.
The Plan authorizes the Board of Directors of the Company (the
''Board'') to grant stock options to eligible employees and consultants of the
Company. The Plan is structured to allow the Board to create equity incentives
in order to assist the Company in attracting, retaining and motivating the
best available personnel for the successful conduct and growth of the
Company's business. The Board believes that the Plan is an essential tool to
link the long-term interests of stockholders and employees and serves to
motivate executives to make decisions that will, in the long run, give the
best returns to stockholders.
Summary of the Plan
General. The Plan authorizes the Compensation Committee (the
''Committee''), appointed by the Company's Board of Directors, to grant options
and rights to purchase Common Stock. Options granted under the Plan may be
either ''incentive stock options'' as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the ''Code''), or nonstatutory stock
options, as determined by the Board or the Committee.
Administration. The Plan shall be administered by the Board or the
Committee (as applicable, the ''Administrator''), which shall consist of not
less than two directors and to which the Board shall grant power to authorize
the issuance of the Company's capital stock pursuant to awards granted under
the Plan. It is intended that the directors appointed to serve on the
Committee shall be ''disinterested persons'' within the meaning of Rule16b-3
promulgated under the Securities Exchange Act of 1934 (''Rule 16b-3'') and
''outside directors'' within the meaning of Code Section 162(m) to the extent
Rule 16b-3 and Code Section 162(m), respectively, are applicable; however, the
mere fact that a Committee member shall fail to qualify under either of the
foregoing requirements shall not invalidate any award made by the Committee
which award is otherwise validly made under the Plan. The members of the
Committee shall be appointed by, and serve at the pleasure of, the Board. The
Committee shall have the authority (a) to exercise all of the powers granted
to it under the Plan, (b) to construe, interpret and implement the Plan and
any Plan Agreements executed pursuant to the Plan, (c) to prescribe, amend and
rescind rules and regulations relating to the Plan, including rules governing
its own operations, (d) to make all determinations necessary or advisable in
administering the Plan, (e) to correct any defect, supply any omission and
reconcile any inconsistency in the Plan, and (f) to amend the Plan to reflect
changes in applicable law.
Eligibility. Awards under the Plan may be made to such officers,
directors, and other salaried employees of the Company or its majority or
wholly owned subsidiaries, and to such consultants to the Company
(collectively, ''key persons''), as the Committee shall in its sole discretion
select with consideration given to recommendations by senior management.
However, only employees shall be eligible to receive awards of Incentive Stock
Options. No options shall be granted under the Plan to individuals owning more
than 10% of the Company's Stock.
Section 162(m) of the Code places limits on the deductibility for
federal income tax purposes of compensation paid to certain executive officers
of the Company. In order to preserve the Company's ability to deduct the
compensation income associated with options granted to such persons, the Plan
provides that no employee, director or consultant may be granted, in any
fiscal year of the Company, options to purchase more than 400,000 shares of
Common Stock.
Terms and Conditions of Options. Each option granted under the Plan
is evidenced by a written stock option agreement between the optionee and the
Company and is subject to the following terms and conditions:
(a) Exercise Price. The Board or the Committee determines the
exercise price of options at the time the options are granted. However, the
exercise price of an incentive stock option must not be less than 100% of the
fair market value of the Common Stock on the date the option is granted, and
the exercise price under a nonstatutory option shall be determined by the
administrator of the Plan. As the Company's Common Stock is listed on the
Nasdaq, the fair market value is the closing sale price for the Common Stock
(or the closing bid if no sales were reported) on the date the option is
granted.
(b) Form of Consideration. The means of payment for shares issued
upon exercise of an option is specified in each option agreement and generally
may be made by cash, check, a full-recourse promissory note, other shares of
Common Stock of the Company owned by the optionee, delivery of an exercise
notice together with irrevocable instructions to a broker to deliver the
exercise price to the Company from sale or loan proceeds, by a combination
thereof, or such other consideration and method of payment for the issuance of
shares as determined by the Committee to the extent permitted under applicable
laws.
(c) Exercise of the Option. Any option granted under the Plan shall
be exercisable at such times and under such conditions as determined by the
Committee. The Committee may provide that any option granted under this Plan to
any vice president or more senior executive officer will require that one or
more financial or other targets based on the performance of the Company or of
the individual must be satisfied as a further condition to the option becoming
exercisable.
(d) Termination of Employment or Consulting Relationship. If a
grantee's employment or consulting relationship terminates for any reason
other than death or disability, or, to the extent permitted by applicable law,
dismissal for cause, the grantee (or his legal representative, if applicable)
may exercise any outstanding option on the following terms and conditions: (a)
exercise may be made only to the extent that the grantee was entitled to
exercise the award on the date of employment termination; and (b) exercise
must occur within three (3) months after employment terminates, but in no
event after the expiration date of the award as set forth in the Plan
Agreement.
(e) Permanent Disability. If a grantee's employment or consulting
relationship with the Company is terminated as a result of his or her
disability, any outstanding option shall be exercisable on the following terms
and conditions: (a) exercise may be made only to the extent that the grantee
was entitled to exercise the award on the date of termination of employment;
and (b) exercise must occur by the earlier of the first anniversary of the
date of such termination of employment or the expiration date of the award.
Notwithstanding the foregoing, if the grantee holds an award intended to be an
Incentive Stock Option and such disability is not a ''disability'' as defined
in applicable provisions of the Code relating to incentive stock options, such
Incentive Stock Option shall to the extent not then exercised automatically
convert to a Nonqualified Stock Option on the day which is three months and
one day following the date of such termination of employment.
(f) Death. If a grantee dies while employed by, or consulting for the
Company or any subsidiary, or after employment or consulting termination but
during the period in which the grantee's awards are exercisable pursuant to the
provisions of the Plan concerning such grantee's termination of employment, any
outstanding option shall be exercisable on the following terms and conditions:
(a) exercise may be made only to the extent that the grantee was entitled to
exercise the award on the date of death; and (b) exercise must occur by the
earlier of the first anniversary of the grantee's death or the expiration date
of the award. Any such exercise of an award following a grantee's death shall
be made only by the grantee's executor or administrator, unless the grantee's
will specifically disposes of such award, in which case such exercise shall be
made only by the recipient of such specific disposition. If a grantee's
personal representative or the recipient of a specific disposition under the
grantee's will shall be entitled to exercise any award pursuant to the
preceding sentence, such representative or recipient shall be bound by all the
terms and conditions of the Plan and the applicable Plan Agreement which would
have applied to the grantee including, without limitation, certain restrictions
as set forth in the Plan.
(g) Termination of Options. Each stock option agreement will specify
the term of the option and the date when all or any installment of the option
is to become exercisable. Notwithstanding the foregoing, however, the term of
any incentive stock option shall not exceed 10 years from the date of grant.
No options may be exercised by any person after the expiration of its term.
(h) Other Provisions. The stock option agreement may contain such
terms, provisions and conditions that are inconsistent with the Plan as may be
determined by the Committee.
Adjustment Upon Changes in Capitalization, Corporate Transactions. In
the event that the stock of the Company is changed by reason of any stock
split, reverse stock split, stock dividend, recapitalization or other change
in the capital structure of the Company or by reason of any merger,
consolidation, spinoff or other corporate reorganization in which the Company
is the surviving corporation, appropriate proportional adjustments shall be
made in the number and class of shares of stock subject to the Plan, the
number and class of shares of stock subject to any option or right outstanding
under the Plan, and the exercise price of any such outstanding option or
right. Any such adjustment shall be made upon approval of the Board and, if
required, the stockholders of the Company, whose determination shall be
conclusive.
Amendment, Suspensions and Termination of the Plan. The Board may
amend, suspend or terminate the Plan at any time; provided, however, that
stockholder approval is required for any amendment to the extent necessary to
comply with Rule 16b-3 promulgated under the Securities Exchange Act of 1934
(''Rule 16b-3'') or Section 422 of the Code, or any similar rule or statute. No
such action by the Board or stockholders may alter or impair any option or
stock purchase right previously granted under the Plan without the written
consent of the optionee. Unless terminated earlier, the Plan shall terminate
ten years from the date of its approval by the stockholders or the Board of
the Company, whichever is earlier.
Federal Tax Information. Options granted under the Plan may be either
''incentive stock options,'' as defined in Section 422 of the Code, or
nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. Net capital gains on shares held
between 12 and 18 months are currently taxed at a maximum federal rate of 28%.
Net capital gains on shares held for more than 18 months are capped at 20%.
Capital losses are allowed in full against capital gains and up to $3,000
against other income. If these holding periods are not satisfied, the optionee
will recognize ordinary income at the time of sale or exchange equal to the
difference between the exercise price and the lower of (i) the fair market
value of the shares at the date of the option exercise or (ii) the sale price
of the shares. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director,
or 10% stockholder of the Company. The Company will be entitled to a deduction
in the same amount as the ordinary income recognized by the optionee. Any gain
or loss recognized on such a premature disposition of the shares in excess of
the amount treated as ordinary income will be characterized as long-term or
short-term capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize taxable income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by
an optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sale price and the optionee's purchase price, to the
extent not recognized as taxable income as described above, will be treated as
long-term or short-term capital gain or loss, depending on the holding period.
Net capital gains on shares held between 12 and 18 months are currently taxed
at a maximum federal rate of 28%. Net capital gains on shares held for more
than 18 months are capped at 20%. Capital losses are allowed in full against
capital gains and up to $3,000 against other income.
The Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the optionee with respect to shares acquired
upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Plan, does not purport to be complete, and does
not discuss the tax consequences of the optionee's death or the income tax
laws of any municipality, state or foreign country in which an optionee may
reside.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO THE COMPANY'S
1996 STOCK INCENTIVE PLAN.
PROPOSAL THREE-RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS
The Board of Directors has selected Deloitte & Touche LLP as the
Company's independent auditors for the year ending December 31, 1998 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 auditors 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 UNANIMOUSLY RECOMMENDS A
VOTE IN FAVOR OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE COMPANY'S YEAR ENDING DECEMBER 31, 1998.
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 the
Record Date, 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(3)
- ---------------------------------------- ------------- ---------
<S> <C> <C>
Putnam Investments, Inc.(4)............... 1,558,223 13.5%
One Post Office Square
Boston, MA 02109
Pilgram Baxter & Associates Ltd. (5)...... 1,139,400 9.9%
825 Duportail Road
Wayne, PA 19087
AIM Management Group, Inc. (7)............ 875,600 7.4%
1315 Peachtree Street, NE
Atlanta, GA 30309
Franklin Resources, Inc. (8).............. 573,190 5.0%
777 Mariners Idland Blvd., 6th Floor
San Mateo, CA 94404
William N. Simon.......................... 272,706 2.3%
James Fifield............................. 47,534 *
Michael Doyle............................. 40,334 *
Karl Heinz Salzburger..................... 20,000 *
Todd Katz................................. 12,026 *
Jack Boys................................. 5,117 *
Christopher F. Crawford................... 2,500 *
Robert P. Bunje........................... 1,000 *
Marsden S. Cason.......................... 324 *
Tucker Hacking............................ 200 *
All directors and executive officers
as a group (10 persons)................. 401,741 3.4%
</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 the Record Date upon the exercise of options. Each beneficial
owner's percentage ownership is determined by assuming that all options held
by such person (but not those held by any other person) 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) 11,543,759 shares of Common Stock were outstanding on the Record Date.
(4) Based solely on information contained in a Schedule 13G filed January
26, 1998.
(5) Based solely on information contained in a Schedule 13G filed January
9, 1998.
(6) Based solely on information contained in a Schedule 13G filed February
11, 1998.
(7) Based solely on information contained in a Schedule 13G filed February
6, 1998.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information regarding the annual
compensation of the Company's Chairman, Chief Executive Officer, Chief
Financial Officer and the additional four most highly compensated executive
officers of the Company (collectively, the ''Named Executive Officers'') for
fiscal 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
----------
Other Number of All
Annual Securities Other
Compen- Underlying Compen-
Name and Principal Position Year Salary Bonus sation(1) Options sation
- --------------------------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Marsden S. Cason......... 1997 $370,800 $147,949 (2) $3,060 90,000 --
Chairman 1996 360,000 95,760 (3) 1,200 -- --
1995 360,000 -- 1,200 -- --
William N. Simon............ 1997 370,800 147,949 (2) 1,200 50,000 --
President and CEO 1996 360,000 95,760 (3) 1,200 -- --
1995 360,000 -- 1,200 701,707 $20,500 (4)
Karl Heinz Salzburger(5) 1997 138,716 -- -- -- 164,366
CEO of The North Face 1996 -- -- -- 80,000 --
(Europe) Ltd. 1995 -- -- -- -- --
Christopher F. Crawford(6).. 1997 61,192 24,605 (2) 222 30,000 --
Chief Financial Officer 1996 -- -- -- -- --
1995 -- -- -- -- --
Todd Katz(7)................ 1997 160,000 -- 864 37,000 --
Vice President of Sales 1996 -- -- -- -- 252,969
1995 -- -- -- -- --
Jack Boys................... 1997 154,500 46,350 (2) 856 12,000 --
Vice President Marketing 1996 150,000 24,808 (3) -- 33,300 --
1995 -- -- -- -- --
Tucker Hacking.............. 1997 150,000 45,000 (2) 756 12,000 --
Vice President Product 1996 125,000 27,000 (3) 700 5,500 --
Acquisition 1995 125,000 15,750 (8) -- -- --
</TABLE>
- ----------------
(1) Life insurance premiums.
(2) Paid in 1998 for service in 1997.
(3) Paid in 1997 for service in 1996.
(4) Payment for unused vacation time.
(5) Mr. Salzburger became an employee of the Company on April 1, 1997. Mr.
Salzburger's compensation includes director fees of $12,500 per month (for a
total of 9 months) for services rendered as a director of The North Face
(Europe) Ltd., usage of an automobile having an annual value of $8,710 and a
hiring bonus of $43,312. Annual salary is $250,000. Certain portions of Mr.
Salzburger's compensation are denominated in Italian Lira and are set forth
above based on year end exchange rates.
(6) Mr. Crawford became an employee of the Company on August 29, 1997. Mr.
Crawford's salary was paid in 1997 for service from date of hire to December
31, 1997. Annual salary is $185,000.
(7) Mr. Katz became an employee of the Company on January 1, 1997. Prior to
becoming an employee, Mr. Katz was associated with the Company as the sole
proprietor of a contracted sales agency. In 1997, the Company paid Mr. Katz
$252,969 for activities performed in 1996. These payments represented gross
revenue earned by Mr. Katz's sales agency. Similarly, the Company paid Mr. Katz
$654,882 in 1996 and $210,567 in 1995.
(8) Paid in 1996 for service in 1995.
Option Grants
The following table provides information with respect to the stock
option grants made to each Named Executive Officer during 1997:
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
----------------------------------------------- Potential Realizable
% of Value at Assumed
Number of Total Annual Rates of Stock
Securities Options Exercise Price Appreciation for
Underlying Granted to Price Expir- Option Term(2)
Options Employees inPer Share ation -----------------------
Name Granted Fiscal Year (1) Date 5% 10%
- ---------------------------- ----------- ---------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Marsden S. Cason(3)......... 90,000 19.2 $20.88 12/17/07 $1,181,536 $2,994,244
William N. Simon(3)......... 50,000 10.7 20.88 12/17/07 656,409 1,663,469
Karl Heinz Salzburger(3).... -- -- -- -- -- --
Christopher F. Crawford(4).. 30,000 6.4 21.84 06/07/04 266,732 621,599
Todd Katz(5)................ 37,000 7.9 18.22 06/07/04 291,958 687,371
Jack Boys(5)................ 12,000 2.6 18.22 06/07/04 94,689 222,931
Tucker Hacking(5)........... 12,000 2.6 18.22 06/07/04 94,689 222,931
</TABLE>
- ----------------
(1) All options were granted with exercise prices equal to the fair market
value of the Common Stock on the date of grant.
(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 December 17, 2007 unless certain
targets are met as determined by the Company's Board of Directors, in which
case the options vest fully on December 17, 1998.
(4) 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 four years beginning 1998.
Such targets were met with respect to 1997, and one-quarter of such options
shall vest in August 1998 according to the terms of the option schedule.
(5) 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 1998.
Such targets were met with respect to 1997, causing one-quarter of the options
to vest in January 1998.
Option Exercises and Value
The following table summarizes the number of options exercised in 1997,
the number of securities underlying unexercised options and the value of such
options on an aggregated basis held by each Named Executive Officer at December
31, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
Total Value
of Unexercised
Value of Unexercised
Shares Number of Unexercised In-the-Money Options
Acquired Options at Fiscal Year-End at Fiscal Year-End(1)
on Value -------------------------- ---------------------------
Name Exercise Realized (2) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------- --------- ------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Marsden S. Cason........... -- -- -- 90,000 -- $101,250
William N. Simon........... 220,000 $4,839,694 272,706 50,000 $5,692,438 $56,250
Karl Heinz Salzburger...... -- -- 20,000 60,000 33,200 99,600
Christopher F. Crawford.... -- -- -- 30,000 -- $4,800
Todd Katz.................. -- -- 2,776 39,774 57,946 197,764
Jack Boys.................. 8,326 121,194 -- 36,974 -- 432,727
Tucker Hacking............. -- -- 18,038 21,712 379,761 217,819
</TABLE>
- ----------------
(1) Based on the difference between the closing market price of the Common
Stock at December 31, 1997, which was $22.00, 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.
Employment and Other Agreements
Christopher F. Crawford, the Company's Chief Financial Officer, is a
party to an offer letter with the Company that set forth compensation levels,
eligibility for merit-based increases and benefits, including eligibility to
participate in the Company's stock incentive plans. The aforementioned letter
specifies that employment with the Company is voluntary and can be terminated
at any time by either party.
Karl Heinz Salzburger, the Chief Executive Officer of The North Face
(Europe) Limited, a subsidiary of the Company, is a party to an employment
agreement, a director's agreement and an umbrella agreement with the Company
and certain of its subsidiaries. Such agreements set forth various operating
arrangements between the Company, its subsidiaries and Mr. Salzburger and set
forth Mr. Salzburger's compensation arrangements, including salary, bonus and
benefits. In addition, such agreements provide that, in the event of Mr.
Salzburger's termination by the Company or its subsidiaries without cause, or
in the event that Mr. Salzburger resigns for good reason (as defined in such
agreements), Mr. Salzburger shall be entitled to severance payments in an
amount of up to approximately $400,000.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors currently consists
of Messrs. Doyle (Chairman), Bunje and Fifield. No member of the Compensation
Committee or executive officer of the Company has a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity.
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. Doyle (Chairman), Bunje and Fifield,
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 1997.
General Policies
Executive compensation policies and decisions were conceived by the
Board of Directors prior the Company's initial public offering in 1996. The
policies and decisions for 1997 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 1997.
Upon the recommendations of the Committee members, the Board of
Directors approved cash bonuses to all of the Company's officers for 1997 based
primarily upon the fact that the Company's 1997 earnings per share exceeded 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
1997.
All executive officers received grants of stock options in 1997.
Individual grants in 1997 were allocated by the Board of Directors under the
Company's 1996 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 1997, and (iii) overall cash compensation and potential
stock ownership believed to be needed in the case of officers first employed
by the Company in 1997. 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 based on certain
criteria established by the Board of Directors.
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 a base cash salary of $370,800 in
1997. 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 1997 based on the cash bonus policies described above.
In December 1997, Messrs. Cason and Simon were granted options to purchase
90,000 shares of Common Stock and 50,000 shares of Common Stock, respectively.
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 1996 and 1997, 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
Michael Doyle
Robert P. Bunje
James Fifield
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 February 20, 1998.
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.
<TABLE>
<CAPTION>
Nasdaq
National S&P Textile
The Market (Apparel
Measurement Period North Face Composite Manufacturers)
(Fiscal Year Covered) Inc. 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 $108.80 $120.20
Fiscal Year ended
December 31, 1997 $157.14 $133.16 $128.88
February 20, 1998 $199.11 $146.94 $137.78
</TABLE>
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, 1997, all Section 16(a) filing requirements applicable
to its officers, directors and greater than 10% beneficial owners were
complied with, except as follows: (i) Messrs. Katz and Crawford each filed a
Form 3, Initial Statement of Beneficial Ownership, approximately one and two
weeks late, respectively; (ii) Mr. Doyle filed a Form 4, Statement of Changes
in Beneficial Ownership, approximately one month late regarding a purchase of
the Company's Common Stock and filed a Form 5 approximately one week late; and
(iii) Mr. Salzburger filed a Form 3 approximately six weeks late.
DEADLINE FOR 1999 ANNUAL MEETING OF STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1999 Annual
Meeting of Stockholders must be received by the Company not later than
November 6, 1998, in order to be considered 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 on 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
LOGO
Christopher F. Crawford
Secretary
March 6, 1998
APPENDIX A
THE NORTH FACE, INC.
1996 STOCK INCENTIVE PLAN
ARTICLE I
GENERAL
1.1 Purpose
The purpose of The North Face, Inc. 1996 Stock Incentive Plan (the
''Plan'') is to provide for officers and other employees (including directors
whether or not employees) of, and consultants to, The North Face, Inc. (The
''Company'') an incentive (a) to enter into and remain in the service of the
Company, (b) to enhance the long-term performance of the Company, and (c) to
acquire a proprietary interest in the success of the Company.
1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered by the
Compensation Committee (the ''Committee'') of the board of directors of the
Company (the ''Board''), which shall consist of not less than two directors
and to which the Board shall grant power to authorize the issuance of the
Company's capital stock pursuant to awards granted under the Plan. It is
intended that the directors appointed to serve on the Committee shall be
''disinterested persons'' within the meaning of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934 (''Rule 16b-3'') and ''outside directors''
within the meaning of Code Section 162(m) to the extent Rule 16b-3 and Code
Section 162(m), respectively, are applicable; however, the mere fact that a
Committee member shall fail to qualify under either of the foregoing
requirements shall not invalidate any award made by the Committee which award
is otherwise validly made under the Plan. The members of the Committee shall
be appointed by, and serve at the pleasure of, the Board.
1.2.2 The Committee shall have the authority (a) to exercise all of the
powers granted to it under the Plan, (b) to construe, interpret and implement
the Plan and any Plan Agreements executed pursuant to Section 2.1, (c) to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (d) to make all determinations
necessary or advisable in administering the Plan, (e) to correct any defect,
supply any omission and reconcile any inconsistency in the Plan, and (f) to
amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a majority
of its members. Any action may be taken by a written instrument signed by a
majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters relating to the
Plan or any Plan Agreement shall be final, binding and conclusive.
1.2.5 No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
1.2.6 Notwithstanding anything to the contrary contained herein: (a)
until the Board shall appoint the members of the Committee, the Plan shall be
administered by the Board; and (b) the Board may, in its sole discretion, at
any time and from time to time, resolve to administer the Plan. In either of
the foregoing events, the term ''Committee'' as used herein shall be deemed to
mean the Board.
1.3 Persons Eligible for Awards
Awards under the Plan may be made to such officers, directors, and
other salaried employees of the Company or its majority or wholly owned
subsidiaries, and to such consultants to the Company (collectively, ''key
persons''), as the Committee shall in its sole discretion select with
consideration given to recommendations by senior management. However, only
employees of the Company and its majority or wholly owned subsidiaries shall
be eligible to receive awards of Incentive Stock Options defined in Section
1.4.
1.4 Types of Awards Under Plan
Awards under the Plan may be granted, as determined in the discretion
of the Committee, in the form of (i) stock options which are intended to
qualify as incentive stock options (the ''Incentive Stock Options'') under
Section 422 of the Internal Revenue Code of 1986, as amended (the ''Code''),
or (ii) nonqualified stock options (the ''Nonqualified Stock Options'') which
are not intended to qualify as Incentive Stock Options. Awards shall be
designated as either an Incentive Stock Option or a Nonqualified Stock Option
in the applicable Plan Agreement. All awards when granted are intended to be
nonqualified stock options, unless the applicable Plan Agreement explicitly
states that the option is intended to be an incentive stock option. If an
option is intended to be an incentive stock option, and if for any reason such
option (or any portion thereof) shall not qualify as an incentive stock
option, then, to the extent of such nonqualification, such option (or portion)
shall be regarded as a nonqualified stock option appropriately granted under
the Plan provided that such option (or portion) otherwise meets the Plan's
requirements relating to nonqualified stock options. The term ''award'' means
any award of stock options under the Plan.
1.5 Shares Available for Awards
1.5.1 Subject to Section 1.5.2, the total number of shares of common
stock of the Company, par value $0.0025 per share (''Common Stock''), with
respect to which awards may be granted pursuant to the Plan shall equal
1,283,950 shares. Such shares may be authorized but unissued Common Stock or
authorized and issued Common Stock held in the Company's treasury or acquired
by the Company for the purposes of the Plan. The Committee may direct that any
stock certificate evidencing any shares issued pursuant to the Plan shall bear
a legend setting forth such restrictions on transferability as may apply to
such shares pursuant to the Plan.
1.5.2 If there is any change in the outstanding shares of Common Stock
by reason of a stock dividend or distribution, stock split-up,
recapitalization, combination or exchange of shares, or by reason of any
merger, consolidation, spinoff or other corporate reorganization in which the
Company is the surviving corporation, the number of shares available for
issuance both in the aggregate and with respect to each outstanding award, and
the purchase price per share under outstanding awards, shall be equitably
adjusted by the Committee, whose determination shall be final, binding and
conclusive. After any adjustment made pursuant to this Section 1.5.2, the
number of shares subject to each outstanding award shall be rounded to the
nearest whole number, subject to Section 1.5.1.
1.5.3 Any shares subject to an award under the Plan that remain
unissued upon the cancellation or termination of such award for any reason
whatsoever (other than by reason of exercise), shall again become available
for awards under the Plan. In any year, a person eligible for awards under the
Plan may not be granted options under the Plan covering a total of more than
400,000 shares of Common Stock.
1.6 Definitions of Certain Terms
1.6.1 The ''Fair Market Value'' of a share of Common Stock on any day
shall be the Fair Market Value of a share of Common Stock on such day as
determined by the Committee; provided that the Fair Market Value of a share of
Common Stock as of the date of adoption of the Plan shall be deemed to be nine
dollars and sixty cents ($9.60) per share if the 1.11 for 1 stock split
referred to in Section 1.5.1 is effected (or $10.66 per share prior to that
stock split). The ''Fair Market Value'' of all or part of an option on any day
shall be the product of (a) the number of shares for which such option (or part
thereof) is then exercisable, multiplied by (b) the excess of the Fair Market
Value of a share of Common Stock on such day over the exercise price with
respect to such option.
1.6.2 The term ''employment'' means, in the case of a grantee of an
award under the Plan who is not an employee of the Company, the grantee's
association with the Company as a consultant or otherwise.
1.6.3 A grantee shall be deemed to have a ''termination of employment''
upon ceasing to be employed by the Company and any of its parent or subsidiary
corporations or by a corporation assuming awards in a transaction to which
section 424(a) of the Code applies. The Committee may in its discretion
determine (a) whether any leave of absence constitutes a termination of
employment for purposes of the Plan, (b) the impact, if any, of any such leave
of absence on awards theretofore made under the Plan, and (c) when a change in
a non-employee's association with the Company constitutes a termination of
employment for purposes of the Plan. The Committee shall have the right to
determine whether the termination of a grantee's employment is a dismissal for
cause and the date of termination in such case, which date the Committee may
retroactively deem to be the date of the action that is cause for dismissal.
Such determinations of the Committee shall be final, binding and conclusive.
1.6.4 The terms ''parent corporation'' and ''subsidiary corporation''
have the meanings given them in section 424(e) and (f) of the Code,
respectively.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan shall be evidenced by a written
agreement (''Plan Agreement'') which shall contain such provisions as the
Committee may in its sole discretion deem necessary or desirable, consistent
with the terms of this Plan. By accepting an award pursuant to the Plan, a
grantee thereby agrees that the award shall be subject to all of the terms and
provisions of the Plan and the applicable Plan Agreement.
2.2 Grant of Stock Options
2.2.1 During the term of the Plan specified in Section 3.10, the
Committee may grant Incentive Stock Options and/or Nonqualified Stock Options
to purchase shares of Common Stock from the Company, to such persons, and in
such amounts and subject to such terms and conditions, as the Committee shall
determine in its sole discretion, subject to the provisions of the Plan,
except that, no options shall be granted under this Plan to any person (i)
owning stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company (or its parent or
subsidiary corporations), or (ii) owning more than ten percent (10%) of the
Company's voting stock (as determined under federal income tax laws and
regulations relating to Incentive Stock Options).
2.2.2 Each Plan Agreement with respect to an option shall set forth the
amount (the ''option exercise price'') payable by the grantee to the Company
upon exercise of the option evidenced thereby. The option exercise price per
share shall be determined by the Committee in its sole discretion, provided
that in no event shall it be less than the Fair Market Value of a share of
Common Stock.
2.2.3 No option granted under this Plan may be exercised in whole or in
part more than ten (10) years after its date of grant, and the Committee in
its sole discretion may grant options which may be exercised during terms of
ten (10) years or less. Each Plan Agreement with respect to an option shall
set forth the periods during which the award evidenced thereby shall be
exercisable, whether in whole or in part, consistent with the requirements of
this Section 2.2.3.
2.3 Exercise of Options
Subject to the provisions of this Article II, each option granted under
the Plan shall be exercisable as follows:
2.3.1 Any option granted under this Plan shall be exercisable at such
times and under such conditions as determined by the Committee. In no case
shall options be exercisable at a rate of less than twenty percent (20%) per
year over five (5) years from the date the option is granted, unless otherwise
permitted by applicable law, except that the Committee may provide that any
option granted under this Plan to any vice president or more senior executive
officer will require that one or more financial or other targets based on the
performance of the Company or of the individual must be satisfied as a further
condition to the option becoming exercisable.
2.3.2 Unless the applicable Plan Agreement otherwise provides, once an
option (or portion thereof) becomes exercisable, such option (or portion)
shall remain exercisable until exercise, expiration, cancellation or
termination of the award, but in no event later than ten (10) years following
the date of grant of such option.
2.3.3 Unless the applicable Plan Agreement otherwise provides, an
option may be exercised from time to time as to all or part of the shares as
to which such award is then exercisable.
2.3.4 An option shall be exercised by the filing of a written notice
with the Company, on such form and in such manner as the Committee shall in
its sole discretion prescribe.
2.3.5 Any written notice of exercise of an option shall be accompanied
by payment for the shares being purchased. Such payment, which shall be equal
in amount to the exercise price of the portion of the option being exercised,
shall consist of (a) cash, (b) certified or official bank check payable to the
Company (or the equivalent thereof acceptable to the Committee), (c) with the
consent of the Committee in its sole discretion, by the promissory note and
agreement of the grantee providing for payment with interest on the unpaid
balance accruing at a rate not less than that needed to avoid the imputation of
income under Code Section 7872 and upon such terms and conditions (including
the security, if any, therefor) as the Committee may determine, (d) other
shares which (i) have been owned by the grantee for the requisite period, if
any, necessary to avoid a charge to the Company's earnings for financial
reports purposes, and (ii) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the shares as to which the option is
being exercised, (e) delivery of a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the Company
the amount of sale or loan proceeds required to pay the exercise price, (f)
any combination of the foregoing methods of payment, or (g) such other
consideration and method of payment for the issuance of shares as determined
by the Committee to the extent permitted under applicable laws.
2.3.6 Promptly after receiving payment of the full option exercise
price, the Company shall, subject to the provisions of Section 3.2, deliver to
the grantee or to such other person as may have exercised the award, a
certificate or certificates for the shares of Common Stock for which the award
has been exercised. If the method of payment employed upon option exercise so
requires, and if applicable law permits, an optionee may direct the Company to
deliver the certificate(s) to the optionee's stockbroker.
2.3.7 No grantee of an option (or other person having the right to
exercise such award) shall have any of the rights of a stockholder of the
Company with respect to shares subject to such award until the issuance of a
stock certificate to such person for such shares. Except as otherwise provided
in Section 1.5.2, no adjustment shall be made for dividends, distributions or
other rights (whether ordinary or extraordinary, and whether in cash,
securities or other property) for which the record date is prior to the date
such stock certificate is issued.
2.4 Termination of Employment; Death
2.4.1 The provisions of Section 2.4 of this Plan shall apply unless an
applicable Plan Agreement otherwise provides. Except to the extent otherwise
provided in Section 2.4.2 or 2.4.3 or 2.4.4 or in the applicable Plan
Agreement, all options not theretofore exercised shall terminate upon
termination of the grantee's employment for any reason (including death). To
the extent options held by a grantee are not exercisable on the date of any
such termination, such options shall not thereafter become exercisable.
2.4.2 If a grantee's employment terminates for any reason other than
death or disability, or, to the extent permitted by applicable law, dismissal
for cause, the grantee (or his legal representative, if applicable) may
exercise any outstanding option on the following terms and conditions: (a)
exercise may be made only to the extent that the grantee was entitled to
exercise the award on the date of employment termination; and (b) exercise must
occur within three (3) months after employment terminates, but in no event
after the expiration date of the award as set forth in the Plan Agreement.
2.4.3 If a grantee dies while employed by the Company or any
subsidiary, or after employment termination but during the period in which the
grantee's awards are exercisable pursuant to Section 2.4.2, any outstanding
option shall be exercisable on the following terms and conditions: (a)
exercise may be made only to the extent that the grantee was entitled to
exercise the award on the date of death; and (b) exercise must occur by the
earlier of the first anniversary of the grantee's death or the expiration date
of the award. Any such exercise of an award following a grantee's death shall
be made only by the grantee's executor or administrator, unless the grantee's
will specifically disposes of such award, in which case such exercise shall be
made only by the recipient of such specific disposition. If a grantee's
personal representative or the recipient of a specific disposition under the
grantee's will shall be entitled to exercise any award pursuant to the
preceding sentence, such representative or recipient shall be bound by all the
terms and conditions of the Plan and the applicable Plan Agreement which would
have applied to the grantee including, without limitation, the provisions of
Section 3.2 hereof.
2.4.4 If a grantee's employment by the Company is terminated as a
result of his or her disability, any outstanding option shall be exercisable
on the following terms and conditions: (a)exercise may be made only to the
extent that the grantee was entitled to exercise the award on the date of
termination of employment; and (b)exercise must occur by the earlier of the
first anniversary of the date of such termination of employment or the
expiration date of the award. Notwithstanding the foregoing, if the grantee
holds an award intended to be an Incentive Stock Option and such disability is
not a ''disability'' as defined in applicable provisions of the Code relating
to incentive stock options, such Incentive Stock Option shall to the extent
not then exercised automatically convert to a Nonqualified Stock Option on the
day which is three months and one day following the date of such termination
of employment.
2.5 Restrictions upon Option Shares
In addition to such restrictions as may apply or be imposed upon shares
acquired pursuant to awards under applicable state or federal securities laws,
the Committee may in its sole discretion provide for one or more of the
following: rights of first refusal, rights to repurchase shares following
termination of employment, and other restrictions upon transfer, provided that
any Plan Agreement permitting the Company to repurchase shares upon
termination of employment shall provide, to the extent required by law, that
the price paid upon such repurchase shall be cash equal to the higher of the
original purchase price or fair value, and that such repurchase right must be
exercised within ninety (90) days after termination of employment.
2.6 Special Incentive Stock Option Requirement
In order for a grantee to receive special tax treatment with respect to
stock acquired under an option intended to be an Incentive Stock Option, the
grantee of such option must be, at all times during the period beginning as of
the date of grant and ending on the date three (3) months before the date of
exercise of such option, an employee of the Company or any of the Company's
parent or subsidiary corporations, or of a corporation or a parent or
subsidiary corporation of such corporation issuing or assuming a stock option
in a transaction to which Code Section 424(a) applies.
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 The Board may from time to time, without stockholder approval,
suspend, discontinue, revise or amend the Plan in any respect whatsoever,
except that no such amendment shall materially impair any of the grantee's
rights or materially increase any of the grantee's obligations under any award
theretofore made under the Plan without the consent of the grantee (or, upon
the grantee's death, the person having the right to exercise the award). For
purposes of this Section3.1, any action of the Board or the Committee that
alters or affects the tax treatment of any award shall not be considered to
materially impair any rights of any grantee merely because of such alteration
or effect. Furthermore, except as and to the extent otherwise permitted by
Section 1.5.2, no such amendment shall, without stockholder approval, (i)
materially increase the benefits accruing to grantees under the Plan, (ii)
materially increase, beyond the amounts set forth in Section 1.5.1 the number
of shares of Common Stock in respect of which awards may be granted under the
Plan or increase the number of shares of Common Stock in respect of which
options may be granted in any year under Section 1.5.3, (iii) materially
modify the designation of Section 1.3 of the class of persons eligible to
receive awards under the Plan, (iv) provide for the grant of stock options
having an option exercise price per share of Common Stock less than one
hundred percent (100%) of the Fair Market Value of a share of Common Stock on
the date of grant, (v) permit a stock option to be exercisable more than ten
(10) years after the date of grant, or (vi) extend the term of the Plan beyond
the period set forth in Section 3.10.
3.1.2 The Committee may amend any outstanding Plan Agreement,
including, without limitation, by amendment which would (a) accelerate the
time or times at which the award may be exercised, (b) waive or amend any
goals, restrictions or conditions set forth in the Agreement, (c) extend the
scheduled expiration date of the award, or (d) cancel any Plan Agreement with
or without substituting a new Plan Agreement therefor. However, any such
cancellation or amendment that materially impairs the rights or materially
increases the obligations of a grantee under an outstanding award shall be
made only with the consent of the grantee (or, upon the grantee's death, the
person having the right to exercise the award).
3.2 Restrictions
3.2.1 If the Committee shall at any time determine that any Consent (as
hereinafter defined) is necessary or desirable as a condition of, or in
connection with, the granting of any award under the Plan, the issuance or
purchase of shares or other rights hereunder, or the taking of any other
action hereunder (each such action being hereinafter referred to as a ''Plan
Action''), then such Plan Action shall not be taken, in whole or in part,
unless and until such Consent shall have been effected or obtained to the full
satisfaction of the Committee.
3.2.2 The term ''Consent'' as used herein with respect to any Plan
Action means (a) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or other self-regulatory
organization or under any federal, state or local law, rule or regulation, (b)
the expiration, elimination or satisfaction of any prohibitions, restrictions
or limitations under any federal, state or local law, rule or regulation or the
rules of any securities exchange or other self-regulatory organization, (c)
any and all written agreements and representations by the grantee with respect
to the disposition of shares, or with respect to any other matter, which the
Committee shall deem necessary or desirable to comply with the terms of any
such listing, registration or qualification or to obtain an exemption from the
requirement that any such listing, qualification or registration be made, and
(d) any and all consents, clearances and approvals in respect of a Plan Action
by any governmental or other regulatory bodies or any parties to any loan
agreements or other contractual obligations of the Company or any affiliate.
3.3 Nonassignability
No award or right granted to any person under the Plan or under any
Plan Agreement shall be assignable or transferable other than by will or by
the laws of descent and distribution. All rights granted under the Plan or any
Plan Agreement shall be exercisable during the life of the grantee only by the
grantee.
3.4 Withholding Taxes
3.4.1 Whenever cash is to be paid pursuant to an award under the Plan,
the Company shall be entitled to deduct therefrom an amount sufficient in its
opinion to satisfy all federal, state and other governmental tax withholding
requirements related to such payment.
3.4.2 Whenever shares of Common Stock are to be delivered pursuant to
an award under the Plan, the Company shall be entitled to require as a
condition of delivery that the grantee remit to the Company an amount
sufficient in the opinion of the Company to satisfy all federal, state and
other governmental tax withholding requirements related thereto. With the
approval of the Committee, which it shall have sole discretion to grant, the
grantee may satisfy the foregoing condition by electing to have the Company
withhold from delivery shares having a value equal to the amount of tax to be
withheld. Such shares shall be valued at their Fair Market Value on the date
as of which the amount of tax to be withheld is determined (the ''Tax Date'').
Fractional share amounts shall be settled in cash. Such a withholding election
may be made with respect to all or any portion of the shares to be delivered
pursuant to an award.
3.5 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon any
grantee the right to continue in the employ of the Company or affect any right
which the Company may have to terminate such employment.
3.6 Nature of Payments
3.6.1 Any and all grants of awards and issuances of shares of Common
Stock under the Plan shall be in consideration of services performed for the
Company by the grantee.
3.6.2 All such grants and issuances shall constitute a special
incentive payment to the grantee and shall not be taken into account in
computing the amount of salary or compensation of the grantee for the purpose
of determining any benefits under any pension, retirement, profit-sharing,
bonus, life insurance or other benefit plan of the Company or under any
agreement between the Company and the grantee, unless such plan or agreement
specifically provides otherwise.
3.7 Non-Uniform Determinations
The Committee's determinations under the Plan need not be uniform and
may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee
shall be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Plan Agreements,
as to (a) the persons to receive awards under the Plan, (b) the terms and
provisions of awards under the Plan, and (c) the treatment of leaves of absence
pursuant to Section 1.6.3.
3.8 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.9 Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of said
sections.
3.10 Effective Date and Term of Plan
The Plan shall become effective upon the earlier to occur of its
adoption by the Board of Directors or its approval by the stockholders of the
Company. No award under the Plan shall be exercisable until the Plan is
approved by the stockholders of the Company within twelve (12) months before
or after the date the Plan is so adopted by the Board of Directors. The term
of the Plan shall end on the tenth anniversary of the Plan's effective date.
3.11 Information to Grantees
To the extent required by law, the Company shall provide to each
grantee of an award, during the period for which such grantee has one or more
options granted hereunder outstanding, and to each stockholder who has
purchased shares of stock pursuant to such awards, copies of consolidated
financial statements of the Company no less frequently than annually.
3.12 Governing Law
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of Delaware, without
giving effect to principles of conflict of laws.
<PAGE>
THE NORTH FACE, INC.
PROXY for Annual Meeting of Stockholders
To be Held March 31, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of THE NORTH FACE, INC., a Delaware corporation,
hereby acknowledges receipt of (1) the Notice of Annual Meeting of Stockholders
and (2) the Proxy Statement, both dated March 6, 1998, and hereby appoints
William N. Simon and Christopher F. Crawford, and each of them. proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the Annual Meeting
of Stockholders of THE NORTH FACE, INC. to be held at the Company;s principle
executive offices located at 2013 Farallon Drive, San Leandro, California, on
March 31, 1998 at 9:00 a.m., local time, and at an adjournment or adjournments
thereof, and to vote all shares of Common Stock which the undersigned would be
entitled to vote, if then and there personally present, on the matters set
forth on the reverse.
(Continued on Reverse Side)
[x in box] Please mark your votes as in this example.
WITHHOLD
1. To elect two FOR AUTHORITY The Board of Directors
(2) Class II to vote for all has nominated the
directors of the Company, nominees listed following incumbent Class
each to hold office for a II Directors:
three year term. James Fifield
William N. Simon
/ / / /
For, except vote withheld from the following nominee(s): _________________
2. To vote upon an amendment to the Company's 1996 Stock Incentive Plan to
increase the number of shares of Company Common Stock authorized thereunder by
600,000 shares to 1,283,950 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for its year ending December 31, 1998.
FOR AGAINST ABSTAIN
/ / / / / /
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ABOVE-MENTIONED ITEMS.
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. / /
___________________ _________ By:______________ Title:__________ Dated:____
Name of Stockholder Signature (if applicable) (if applicable)
Note: (This proxy should be marked, dated, signed by each stockholder exactly
as such stockholder's name appears hereon, and returned promptly in the
enclosed envelope. Persons signing in a fiduciary capacity should so indicate.
If shares are held by joint tenants or as community property, both should
sign.)
