<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[ ] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (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
WILSONS THE LEATHER EXPERTS 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(1)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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(1) (Set forth the amount on which the filing fee is calculated and state how
it was determined):
<PAGE>
LOGO
7401 BOONE AVENUE NORTH BROOKLYN PARK, MINNESOTA 55428
Dear Shareholder: May 5, 1998
You are cordially invited to attend the Annual Meeting of Shareholders of
Wilsons The Leather Experts Inc., a Minnesota corporation (the "Company"), to
be held at The Northland Inn, 7025 Northland Drive, Brooklyn Park, Minnesota,
commencing at 10:00 a.m., Central Daylight Time, on Tuesday, June 16, 1998.
The Secretary's Notice of Annual Meeting and the Proxy Statement which
follow describe the matters to come before the meeting. During the meeting, we
will also review the activities of the past year and items of general interest
about the Company.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting in person, please
complete, sign and date the enclosed proxy card and return it in the enclosed
postage-paid envelope as promptly as possible. If you later desire to revoke
the proxy, you may do so at any time before it is exercised.
Sincerely,
/s/ Joel N. Waller
Joel N. Waller
Chief Executive Officer and Chairman
of the Board
<PAGE>
LOGO
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders of Wilsons The Leather Experts Inc., a
Minnesota corporation (the "Company"), will be held at The Northland Inn, 7025
Northland Drive, Brooklyn Park, Minnesota, on Tuesday, June 16, 1998,
commencing at 10:00 a.m., Central Daylight Time, for the following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Shareholders or until their successors are duly elected and qualified.
2. To approve and adopt the proposed Amended and Restated Articles of
Incorporation of the Company.
3. To ratify the appointment of Arthur Andersen LLP as independent public
accountants of the Company for the fiscal year ending January 30, 1999.
4. To act upon any other business that may properly be brought before the
meeting.
The Board of Directors of the Company has fixed April 29, 1998 as the record
date for the meeting and only shareholders of record at the close of business
on that date are entitled to receive notice of and vote at the meeting and at
any adjournments thereof.
Your proxy is important to ensure a quorum at the meeting. Please complete,
sign, date and return your proxy in the enclosed postage-paid envelope,
whether or not you plan to attend the meeting. Your cooperation in promptly
signing and returning your proxy will help the Company avoid further
solicitation expense. You may revoke the proxy at any time prior to it being
exercised, and returning your proxy will not affect your right to vote in
person if you attend the meeting and revoke the proxy.
By Order of the Board of Directors,
/s/ Philip S. Garon
Philip S. Garon
Secretary
Brooklyn Park, Minnesota
May 5, 1998
<PAGE>
LOGO
PROXY STATEMENT
GENERAL INFORMATION REGARDING THE SOLICITATION
The enclosed proxy is being solicited by the Board of Directors (the "Board
of Directors" or "Board") of Wilsons The Leather Experts Inc., a Minnesota
corporation (the "Company"), for use in connection with the Annual Meeting of
Shareholders to be held on Tuesday, June 16, 1998, at The Northland Inn, 7025
Northland Drive, Brooklyn Park, Minnesota, commencing at 10:00 a.m., Central
Daylight Time, and at any adjournments thereof.
Only shareholders of record at the close of business on April 29, 1998 will
be entitled to vote at the meeting or adjournments. Proxies in the
accompanying form which are properly signed, duly returned to the Company and
not revoked will be voted in the manner specified. If no instructions are
indicated, properly executed proxies will be voted for the proposals set forth
in this Proxy Statement. A shareholder executing a proxy may revoke it at any
time before it is exercised by notice in writing to an officer of the Company
or by properly signing and duly returning a proxy bearing a later date. The
mailing of this Proxy Statement and form of proxy to shareholders will
commence on or about May 5, 1998.
As of the date of this Proxy Statement, the Board of Directors of the
Company and management know of no other matters, other than those described in
the Notice of Annual Meeting and this Proxy Statement, that are to come before
the meeting. If any other matters are properly presented at the meeting and
call for a vote of shareholders, the persons named in the enclosed form of
proxy and acting thereunder will have the discretion to vote on such matters
in accordance with their best judgment.
The Company will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by the use of the mails, certain directors,
officers and employees of the Company may solicit proxies by telephone,
telecopier, telegram or personal contact. Such persons have requested
brokerage firms and custodians, nominees and other record holders to forward
soliciting materials to the beneficial owners of stock of the Company and will
reimburse them for their reasonable out-of-pocket expenses in so forwarding
such materials.
The address of the principal executive office of the Company is 7401 Boone
Avenue North, Brooklyn Park, Minnesota 55428, and the Company's telephone
number is 612-391-4000.
REQUIRED VOTE TO ELECT THE DIRECTORS AND APPROVE THE PROPOSALS
The common stock of the Company, par value $.01 per share, is the only
authorized and issued voting security of the Company. At the close of business
on April 29, 1998, there were 9,532,083 shares of common stock of the Company
issued and outstanding, each of which is entitled to one vote. Holders of
common stock are not entitled to cumulate their votes for the election of
directors.
The affirmative vote of the holders of a majority of the outstanding shares
of common stock of the Company present in person or represented by proxy and
entitled to vote on each matter to be acted upon at the meeting is required
for the approval of such matter. For this purpose, a shareholder voting
through proxy who abstains with respect to the matter is considered to be
present and entitled to vote on the matter, and is in effect casting a
negative vote, but a shareholder (including a broker) who does not give
authority to a proxy to vote, or withholds authority to vote, shall not be
considered present and entitled to vote on the matter.
Holders of a majority of the shares of the common stock of the Company
entitled to vote and present at the meeting constitute a quorum for purposes
of the meeting. Abstentions are counted as being present at the meeting and
entitled to vote for purposes of determining the presence or absence of a
quorum for the transaction of business.
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth, as of April 1, 1998, the beneficial
ownership of the common stock by (i) each person known by the Company
beneficially to hold more than 5% of the outstanding common stock, (ii) each
director or nominee for director of the Company, (iii) each officer of the
Company named in the Summary Compensation Table on page 8, and (iv) all
executive officers and directors of the Company as a group. Except as
otherwise noted, the listed beneficial owner has sole voting and investment
power with respect to the listed shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OUTSTANDING SHARES
------------------------------------ -------------------- ------------------
<S> <C> <C>
Neil I. Sell, as sole trustee of four
irrevocable trusts for the benefit of
Lyle Berman's children, and of two
irrevocable trusts for the benefit of
David Rogers' children and on behalf of
himself................................ 2,222,365.8(1) 23.3%
3300 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402
Morris Goldfarb........................ 2,147,630.0(2) 22.5
G-III Apparel Group, Ltd.
512 Seventh Avenue
New York, NY 10018
Joel N. Waller......................... 1,115,285.3(3) 11.7
7401 Boone Avenue North
Brooklyn Park, MN 55428
David L. Rogers........................ 967,774.5 10.2
7401 Boone Avenue North
Brooklyn Park, MN 55428
Lyle Berman............................ 311,630.0 3.3
Thomas J. Brosig....................... 3,600.0(4) *
Carol S. Lund.......................... 149,833.8 1.6
David B. Sharp......................... 141,509.7 1.5
Jed Jaffe.............................. 124,861.5 1.3
All executive officers and directors
as a group (15 persons)............... 5,328,385.2 55.9
</TABLE>
- --------
* Represents less than 1%.
(1) Includes 1,836,000 shares of common stock held in four irrevocable trusts
for the benefit of Lyle Berman's children and 139,510.8 shares of common
stock held in two irrevocable trusts for the benefit of David Rogers'
children. Mr. Sell has disclaimed beneficial ownership of such shares.
(2) Includes 172,800 shares of common stock owned by the Goldfarb Family
Partners L.L.C. of which Mr. Goldfarb is the manager.
(3) Includes 100,000 shares of common stock owned by the Waller Family Limited
Partnership of which Mr. Waller is a general partner; 3,000 shares of
common stock owned by Mr. Waller's spouse and Mr. Waller's mother jointly;
and 1,000 shares of common stock owned by Mr. Waller's spouse. Also,
includes 3,000 and 1,000 redeemable common stock purchase warrants owned
by Mr. Waller's spouse and Mr. Waller's mother jointly and Mr. Waller's
spouse, respectively. The redeemable common stock purchase warrants are
currently fully exercisable. Mr. Waller disclaims beneficial ownership of
the shares and warrants owned by his spouse and his mother.
(4) Represents options which are currently exercisable to purchase 3,600
shares of common stock.
2
<PAGE>
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
At the meeting, the shareholders will be asked to elect five directors to
hold office until the next annual meeting of shareholders or until their
successors are elected and qualified. The Company's By-Laws provide that the
shareholders at each regular meeting shall determine the number of directors
to constitute the Board of Directors and that the shareholders or the Board
may thereafter increase the number of directors or the shareholders may
decrease the number of directors, provided that the Company's Amended Articles
of Incorporation state that the Board of Directors shall consist of not less
than five or more than nine members. The size of the Board is currently fixed
at five, and the Board has nominated the five current members of the Board
named below. Proxies solicited by the Board of Directors will, unless
otherwise directed, be voted to elect the five nominees named below to
constitute the entire Board.
Each nominee is currently serving as a director of the Company and has
indicated a willingness to serve as a director for the ensuing year. In case
any nominee is not a candidate at the meeting, the proxies named in the
enclosed form of proxy intend to vote in favor of the remainder of the
nominees and to vote for a substitute nominee in their discretion. Information
regarding the nominees as of April 1, 1998, is set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
Joel N. Waller.............................................. 58 May 1996
David L. Rogers(1).......................................... 55 May 1996
Lyle Berman(2).............................................. 56 May 1996
Thomas J. Brosig(1)(2)...................................... 48 May 1996
Morris Goldfarb(1).......................................... 47 May 1996
</TABLE>
- --------
(1) Member of Audit Committee
(2)Member of Compensation Committee
Joel N. Waller has served as Chairman and Chief Executive Officer of the
Company since its inception in May 1996 and was Chairman and Chief Executive
Officer of one of the predecessor companies to the Company (together with the
Company, "Wilsons") since April 1992. In 1983, CVS New York, Inc. hired
Mr. Waller as President of Wilsons, in which position he served until April
1992. Prior to joining Wilsons, Mr. Waller served in several capacities at
Bermans the Leather Experts Inc. ("Bermans"), including Senior Vice
President--General Merchandise Manager from 1980 to 1983, Division Merchandise
Manager from 1978 to 1980 and Buyer from 1976 to 1978. He currently serves on
the Board of Directors of Grand Casinos, Inc., Rainforest Cafe, Inc. and
Damark International, Inc.
David L. Rogers has served as President and Chief Operating Officer of
Wilsons since April 1992. In 1988, Mr. Rogers joined Wilsons as Executive Vice
President and Chief Operating Officer when Bermans was acquired by Wilsons.
Mr. Rogers served as Chief Operating Officer of Bermans from 1984 to 1988 and
Chief Financial Officer of Bermans from 1980 to 1984. Mr. Rogers currently
serves on the Board of Directors of Grand Casinos, Inc. and Rainforest Cafe,
Inc.
Lyle Berman has served as Chairman of the Board of Grand Casinos, Inc., a
gaming company, since October 1990, and served as Chief Executive Officer from
October 1990 to March 1998. Mr. Berman has also served as Chief Executive
Officer and Chairman of the Board of Directors of Rainforest Cafe, Inc., a
restaurant/retail company, since February 1994. From January 1989 through
September 1991, Mr. Berman served as a consultant to Wilsons. Mr. Berman
served as the President and Chief Executive Officer of Bermans from 1978 until
it was acquired by Wilsons in 1988. Mr. Berman is also the Chairman of the
Board of Directors of Innovative Gaming Corporation of America and a director
of G-III Apparel Group, Ltd., ("G-III") and New Horizon Kids Quest, Inc. Mr.
Berman was an executive officer and a director of Stratosphere Corporation, an
amusement and recreation company from February 1993 to July 1997. In January
1997, Stratosphere Corporation filed for reorganization under Chapter 11 of
the U.S. Bankruptcy Code.
3
<PAGE>
Thomas J. Brosig has served as President and a director of Grand Casinos,
Inc., a gaming company, since September 1996, and was named Chief Executive
Officer in March 1998. Mr. Brosig also served as Executive Vice President--
Investor Relations and Special Projects of Grand Casinos, Inc. from August
1994 to September 1996, as Secretary of Grand Casinos, Inc. from its inception
until May 1995, as its President from May 1993 to August 1994, as its Chief
Operating Officer from October 1991 until May 1993 and as its Chief Financial
Officer from its inception until January 1992. Mr. Brosig is also a director
of G-III and Famous Dave's of America, Inc.
Morris Goldfarb serves as Chief Executive Officer and Chairman of the Board
of G-III, a leather and non-leather apparel manufacturer and distributor. He
has served as an executive officer of G-III and its predecessors since its
formation in 1974. Mr. Goldfarb is also a director of Grand Casinos, Inc.,
Panasia Bank and Smiles Amusement Company LLC.
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors has created an Audit Committee and a Compensation
Committee. The members of each of these committees are appointed by the full
Board. The Board has not appointed a nominating committee. Under the Company's
Restated By-Laws, shareholders who wish to nominate persons for election to
the Board of Directors of the Company must send a written notice of nomination
of that person to the Secretary of the Company, at 7401 Boone Avenue North,
Brooklyn Park, Minnesota 55428, not less than 50 days before the meeting date,
unless fewer than 60 days notice of the meeting or prior public disclosure of
the date of the meeting is given, in which case the written notice from the
shareholder must be received not later than the close of business on the tenth
day following the day on which the notice of the meeting date is mailed or the
public disclosure is made. The notice from the shareholder, to be effective,
must include the nominee's name, the nominee's consent to being named in the
proxy statement as a nominee and to serving as a director if elected, and
certain other information specified in the Restated By-Laws.
The Audit Committee reviews accounting and auditing principles and
procedures of the Company with a view toward providing for adequate internal
controls and reliable financial records. To this end, it recommends to the
full Board the engagement of independent public accountants, reviews with the
independent public accountants the plans and results of the auditing
engagement, and considers the independence of the Company's public
accountants. The current members of the Audit Committee are identified above.
The Audit Committee met twice during the last fiscal year.
The Compensation Committee reviews and determines the Company's executive
compensation objectives and policies and administers the Company's stock
option plans and other employee benefit plans. The current members of the
Compensation Committee are the non-employee directors identified above. The
Compensation Committee met three times during the last fiscal year and took
written action in lieu of meeting on one occasion.
The Board of Directors met five times during the fiscal year ended January
31, 1998. Each director attended more than 75% of the meetings of the Board of
Directors and Board committees on which he serves.
DIRECTOR COMPENSATION
The Company does not currently pay cash compensation to members of the Board
of Directors for their services as directors. Morris Goldfarb is reimbursed
for his travel expenses to the Company's headquarters for Board meetings.
The Company has granted stock options to the directors. On June 26, 1996,
the Company granted options for 10,800 shares of common stock to Thomas J.
Brosig at an exercise price of $4.44 per share. Such options vest,
cumulatively, on a pro rated basis on each of the first, second, and third
anniversaries of the date of grant if Brosig continues as a director, subject
to the possible acceleration of vesting in certain circumstances. As of
April 1, 1998, options for 3,600 shares had vested. In addition, on January
28, 1998, the Company granted a stock option for 33,000 shares of common stock
of the Company to each of Lyle Berman, Thomas J. Brosig and Morris Goldfarb at
an exercise price of $8.75 per share. Such options vest, cumulatively, on a
pro rated basis on each of the first, second and third anniversaries of the
date of grant if the optionee continues as a director, subject to the possible
acceleration of vesting in certain circumstances.
4
<PAGE>
VOTING REQUIREMENTS
The affirmative vote of the holders of a majority of the outstanding shares
of common stock of the Company present in person or represented by proxy and
entitled to vote on the election of directors is required to elect the
directors. A shareholder voting through proxy who abstains with respect to the
election of directors is considered to be present and entitled to vote, and is
in effect casting a negative vote, but a shareholder (including a broker) who
does not give authority to a proxy to vote, or withholds authority to vote, on
the election of directors is not considered present and entitled to vote.
VOTING RECOMMENDATION
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES LISTED
ABOVE.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee, comprised entirely of non-employee directors,
reviews and approves the general compensation philosophies and policies of the
Company and determines the specific compensation for each of the Company's
executive officers. In addition, the Compensation Committee is responsible for
administering the Company's stock option plans and approving grants made in
connection therewith and for administering the Executive and Key Management
Incentive Plan (the "Incentive Plan").
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's compensation program for executive officers is designed to
promote the financial performance, business strategies and other values and
objectives of the Company. This program seeks to enhance shareholder value by
linking the financial interests of the Company's executives with those of its
shareholders. The Company has developed and implemented an executive
compensation program based on a pay-for-performance philosophy to achieve the
following objectives:
. To attract, reward and retain high-caliber executive officers who are
capable of leading the Company in the achievement of its business
objectives;
. To provide compensation awards which are highly competitive;
. To motivate and reward executives based on achievement of Company and
individual performance objectives; and
. To provide a maximum return on the Company's investment in resources to
shareholders by linking a significant portion of total compensation to
the financial results of the Company and the market value of the
Company's common stock.
THE COMPENSATION PROCESS
COMPENSATION REVIEW
The Board of Directors approves Company financial goals and performance
measures prior to the beginning of the fiscal year along with individual goals
and objectives for the Chairman and Chief Executive Officer (the "CEO") and
the President and Chief Operating Officer (the "COO"). The Compensation
Committee reviews and approves the base salaries for each executive officer,
including the CEO and COO. After year-end, the CEO and COO, along with the
Vice President of Human Resources, present to the Compensation Committee the
assessment of results.
The Compensation Committee received a thorough review and presentation of
total compensation for executive officers in fiscal 1997. Total compensation
under the Company's compensation program for executive officers for 1997 was
generally established to be between the 50th and 75th percentile of companies
included in certain retail compensation surveys, depending upon the particular
officer's position, responsibilities and the degree of difficulty and
challenge associated with the performance objectives.
5
<PAGE>
The Company's executive compensation program consists of three key elements:
(1) base salary; (2) short-term incentive, i.e., annual bonus; and (3) long-
term incentive, i.e. stock options. In addition, the executive officers
receive health and dental benefits and participate in the Company's 401(k)
Profit Sharing Plan on the same basis as other full-time employees of the
Company.
The policies and the basis for determining executive compensation and
specifically that of the CEO and COO are described below:
BASE SALARY
Base salaries for executive officers, with the exception of the CEO and COO,
are determined by reviewing and comparing salaries, and the corresponding job
descriptions, offered for similar positions by utilizing certain retail
compensation surveys and by reviewing salaries of persons with comparable
qualifications, experience and responsibilities at other companies of
comparable size in the retail industry. After reviewing these salaries and job
descriptions, the Company establishes a range of salaries paid for various
executive positions. Base salaries are set within these competitive salary
bands based on individual contributions and sustained performance. As an
executive officer's level of responsibility increases, a greater portion of
the total compensation package is based on incentive compensation, described
below, which may cause greater variability in the individual's overall
compensation package from year to year. In addition, the more responsibility
that an executive officer assumes in the organization, the more the
compensation package shifts to reliance on appreciation of the value of the
Company's stock through stock options.
SHORT-TERM INCENTIVE COMPENSATION
The Company's Incentive Plan has been developed to provide opportunities to
motivate and reward key employees through annual cash incentive awards. All
executive officers are eligible to participate in the Incentive Plan. The
Incentive Plan rewards executives for attaining pre-determined Company goals
which create shareholder value through an increase in the market value of the
Company's common stock. Awards are based on actual results measured against
pre-established corporate financial objectives for consolidated earnings
before federal and state income taxes of the Company and its direct and
indirect subsidiaries ("EBT").
An award amount, expressed as a percentage of base salary at the beginning
of the fiscal year, is established for each participant each fiscal year and
is approved by the Compensation Committee. The targeted award is the amount of
the incentive award which will be earned by the executive officer if 100% of
budgeted EBT is achieved by the Company. However, the program is structured to
include a flexible scale ranging from 65% achievement of budgeted EBT to 135%
achievement of budgeted EBT resulting in payout levels that accordingly may be
either below or above the targeted award. In fiscal 1997, the Company achieved
104% of budgeted EBT, which resulted in a payout level of 112% of the targeted
awards.
LONG-TERM INCENTIVE COMPENSATION
The 1996 Stock Option Plan (the "1996 Option Plan") was developed to enhance
the total compensation package for key management and, in particular, to link
compensation to the market value of the Company's common stock. The desired
goal is to retain and develop personnel capable of assuring the future success
of the Company by affording them an opportunity to acquire a proprietary
interest in the Company through stock options. Stock option grants are
intended to focus executives on managing the Company from the perspective of
an owner with an equity position in the business. Except for a grant of
options to one individual promoted to executive officer in October 1997, the
Company made its first grants of options to executive officers in January
1998. New executive officers will generally be granted options to purchase
shares of the common stock upon appointment as an executive officer. All
executive officers are eligible for consideration of additional option grants
at the discretion of the Compensation Committee. Factors that were considered
in granting the options in fiscal year 1997 and will be considered in future
grants (which are not given a particular relative weight) include increases in
the level of responsibility, promotions, sustained exceptional performance
over a period of time and overall stock performance. In granting new options,
the Compensation Committee will also take into account the number of options
already granted to an officer. Stock options are granted at an option price
equal to the Fair Market Value (as defined in the 1996 Option Plan) of the
common stock on the date of grant and generally vest, cumulatively, on a
prorated basis on each of the first, second and third anniversaries of the
date of grant.
6
<PAGE>
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND CHIEF OPERATING OFFICER
The Company has entered into employment agreements with Joel Waller, as CEO,
and David Rogers, as COO, through May 25, 2000 (the "Employment Agreements").
Under the terms of the Employment Agreements, Mr. Waller and Mr. Rogers each
receives a base salary of $380,000 per year, or such higher amount as is
determined by the Board (prorated for any partial employment year). See
"Employment Contracts" below.
The Compensation Committee evaluates the performance and fixes the base
salary of the CEO and COO on an annual basis based on its assessment of their
past performance and its expectation as to their future contributions in
leading the Company and on the process described under base salaries above. In
setting 1997 base salaries, the Compensation Committee considered a number of
factors, including the Company's ability to secure financing, reduce and
control expenses, and efficiently use working capital to achieve goals. In
addition, the Compensation Committee also considered significant
accomplishments made by the Company during the prior year and other
performance factors, such as the effectiveness of the CEO and COO in
establishing the Company's strategic direction and providing leadership which
enables the management team to maximize its performance compared to the
competition. Factors considered by the Compensation Committee in determining
the CEO's and COO's base salary are not subject to any specific weighting
factor or formula. For fiscal year 1997, Messrs. Waller and Rogers declined a
merit increase in base salary as the Company was in transition to operating as
a stand-alone company and was in the process of obtaining additional financing
through its initial public offering.
The annual cash bonus for Messrs. Waller and Rogers, if any, is awarded
under the Incentive Plan and is entirely dependent on the accomplishment by
the Company of certain corporate goals approved by the Board as discussed
above. Pursuant to the provisions of the Incentive Plan, Mr. Waller's and Mr.
Rogers' respective bonuses for a fiscal year could range from 0% to 70% of
their base salary. For fiscal year 1997, each of them received a cash bonus of
$148,960. On January 28, 1998, each of them also received a stock option grant
for 99,000 shares of the Company's common stock, which vest, cumulatively, on
a prorated basis on each of the first, second and third anniversaries of the
date of grant.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation over $1 million paid to the
corporation's chief executive officer or any of the four other most highly
compensated executive officers. The Company, however, is currently eligible
for grandfathering relief from Section 162(m). Accordingly, the Company's
compensation deductions are not subject to the Section 162(m) limitations
otherwise applicable to a publicly-traded company.
COMPENSATION COMMITTEE
Thomas J. Brosig, Chairman
Lyle Berman
7
<PAGE>
EXECUTIVE COMPENSATION
The Company was incorporated in May 1996. The following table sets forth the
compensation for the 1997 fiscal year ended January 31, 1998 and for the
thirty-six week period of the 1996 fiscal year from inception (May 26, 1996)
to February 1, 1997 of the Chief Executive Officer of the Company and the four
other most highly compensated executive officers of the Company (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
- ----------------------------------------------------------------------------------
<CAPTION>
LONG-TERM
COMPENSATION
----------------
ANNUAL
NAME AND PRINCIPAL COMPENSATION SECURITIES
POSITION FISCAL ------------------ UNDERLYING ALL OTHER
- ------------------ YEAR SALARY BONUS OPTIONS (SHARES) COMPENSATION(1)
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joel N. Waller......... 1997 $380,000 $148,960 99,000 $9,567
Chairman and Chief
Executive Officer 1996 263,077 124,222 -- 9,915
David L. Rogers........ 1997 380,000 148,960 99,000 9,567
President and Chief
Operating Officer 1996 263,077 124,222 -- 10,107
Carol S. Lund.......... 1997 248,269 78,400 30,000 9,567
Executive Vice
President 1996 166,154 62,765 -- 9,388
David B. Sharp......... 1997 211,308 61,734 24,000 8,300
Vice President,
Marketing 1996 144,000 50,512 -- 4,841
Jed Jaffe.............. 1997 194,885 57,658 27,000 9,567
Vice President, Real
Estate(2) 1996 124,615 43,711 -- 7,892
- ----------------------------------------------------------------------------------
</TABLE>
(1) Includes profit sharing contributions and 401(k) matching contributions
under the Company's 401(k) Profit Sharing Plan.
(2) Jed Jaffe served as Vice President, Store Sales until March 1998, when he
was named Vice President, Real Estate.
8
<PAGE>
STOCK OPTIONS
The following table provides certain information concerning grants of stock
options during the fiscal year ended January 31, 1998 to the Named Executive
Officers. In accordance with the rules of the Securities and Exchange
Commission (the "Commission"), the table sets forth the potential realizable
value over the terms of the options (the period from the grant date to the
expiration date) based on assumed rates of stock appreciation of five percent
and ten percent, compounded annually. These amounts do not represent the
Company's estimate of future stock price. Actual realizable values, if any, of
stock options will depend on the future performance of the common stock.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ---------------------------------------------------------------------- ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SHARES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ------------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joel N. Waller.......... 99,000(2) 10.11% $8.75 1/28/08 $ 544,780 $ 1,380,579
David L. Rogers......... 99,000(2) 10.11 8.75 1/28/08 544,780 1,380,579
Carol S. Lund........... 30,000(2) 3.06 8.75 1/28/08 165,085 418,357
David B. Sharp.......... 24,000(2) 2.45 8.75 1/28/08 132,068 334,686
Jed Jaffe............... 27,000(2) 2.76 8.75 1/28/08 148,576 376,522
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) The potential realizable value is based on the term of the nonstatutory
stock options at the time of grant (ten years) and on the assumption that
the fair value of the common stock appreciates at the indicated rate for
the entire term of the option and that the option is exercised at the
exercise price and sold on the last day of its term at the appreciated
price.
(2) Represents nonstatutory stock options to purchase shares of common stock
granted on January 28, 1998 under the 1996 Option Plan. The listed options
become cumulatively exercisable with respect to one-third of the shares
covered thereby on each of the first three anniversaries of the date of
grant. The options each have a maximum term of ten years, subject to
earlier termination in the event of the optionee's cessation of service
with the Company. In the event of (i) a dissolution or liquidation of the
Company, (ii) a merger or consolidation of the Company with or into any
other entity, regardless of whether the Company is a surviving
corporation, or a proposed statutory share exchange with any other entity,
or (iii) a sale of substantially all of the assets of the Company, the
Compensation Committee may, but is not required to, arrange for the
substitution of other options for the listed options or declare that all
such options are immediately exercisable. If the Compensation Committee
makes a declaration that all such options are immediately exercisable,
then the options shall terminate at the date specified in such declaration
and the Company may, but is not required to, pay the holder of such
canceled options an amount equal to their equity therein. Upon an event
changing control of the Company (as defined in the 1996 Option Plan), the
listed options would become exercisable in full, provided that the
Compensation Committee, in its discretion, may provide that some or all of
such options will be canceled upon the change in control and the holders
of such cancelled options will be paid an amount equal to their equity
therein.
9
<PAGE>
The following table summarizes option exercises during the fiscal year ended
January 31, 1998 and provides information regarding the number of all
unexercised stock options held by the Named Executive Officers as of January
31, 1998, the end of the Company's last fiscal year:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
- -------------------------------------------------------------------------------------------------
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS AT
SHARES END FISCAL YEAR-END(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Joel N. Waller.......... 0 $ 0 0 99,000 $ 0 $ 0
David L. Rogers......... 0 0 0 99,000 0 0
Carol S. Lund........... 0 0 0 30,000 0 0
David B. Sharp.......... 0 0 0 24,000 0 0
Jed Jaffe............... 0 0 0 27,000 0 0
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated on the basis of the fair market value of the underlying shares
of common stock at January 30, 1998, the last trading day of the Company's
fiscal year, as reported by The Nasdaq(R) National Market, of $8.75 per
share, minus the per share exercise price, multiplied by the number of
shares underlying the option. All options listed in the table were granted
on January 28, 1998 at an exercise price of $8.75. On April 29, 1998, the
closing sale price of a share of the Common Stock was $14.75.
EMPLOYMENT CONTRACTS
The Company has entered into the Employment Agreements with Joel Waller, as
Chairman and Chief Executive Officer, and David Rogers, as President and Chief
Operating Officer, reporting to the Board of Directors. The Employment
Agreements are identical in all material respects, except for job
responsibilities which are consistent with Messrs. Waller's and Rogers'
titles. Under the terms of the Employment Agreements, Mr. Waller and Mr.
Rogers each receive a base salary of $380,000 per year, or such higher amount
as is determined by the Board (prorated for any partial employment year). In
no event may the Board of Directors reduce Messrs. Waller's and Rogers' base
salary for any year below the greater of $380,000 or the amount of base salary
paid by the Company to Messrs. Waller and Rogers for the immediately preceding
year.
The employment of each of Mr. Waller and Mr. Rogers under their respective
Employment Agreements will end only upon termination by the Company with or
without Cause (as defined in the Employment Agreements), upon death or
Disability (as defined in the Employment Agreements), upon expiration of the
employment term on May 25, 2000 or upon resignation. Upon termination of
employment, Mr. Waller or Mr. Rogers generally will be entitled to receive his
base salary through the date of termination (or through the end of the
employment period if termination by the Company occurred without Cause or
resignation by the employee occurred with Good Reason (as defined in the
Employment Agreements)), any amounts earned but not paid under the Incentive
Plan for a completed Plan Year (as defined in the Incentive Plan) and, in
certain circumstances, a pro rated portion of his Incentive Plan payment for
the year in which termination occurs, plus continuation of certain health,
life and disability insurance benefits. The Employment Agreements also include
confidentiality and non-solicitation provisions, but do not contain any
restrictions on competition.
There are no employment contracts with the next three most highly
compensated executives, Carol S. Lund, Jed Jaffe and David B. Sharp.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Lyle Berman and Thomas Brosig, directors of the Company, are members of the
Board's Compensation Committee. Mr. Berman is the Chairman of the Board of
Directors of Grand Casinos, Inc. and the Chief Executive Officer and Chairman
of the Board of Directors of Rainforest Cafe, Inc. Mr. Brosig is the Chief
10
<PAGE>
Executive Officer, President and a director of Grand Casinos, Inc. Joel N.
Waller, Chief Executive Officer and Chairman of the Board of Directors of the
Company, and David L. Rogers, President, Chief Operating Officer and director
of the Company, are both members of the Compensation Committee of the Board of
Directors of Grand Casino, Inc. and Rainforest Cafe, Inc.
COMPARATIVE STOCK PERFORMANCE
The comparative stock performance graph below compares the cumulative
shareholder return on the common stock of the Company for the period from May
27, 1997 (the effective date of the Company's initial public offering (the
"Initial Public Offering") of the Company's common stock) through January 31,
1998 with the cumulative total return on (i) the Nasdaq Retail Composite Stock
Index and (ii) the S&P 500 Index. The table assumes the investment of $100 in
the Company's common stock, the Nasdaq Retail Composite Stock Index and the
S&P 500 Index on May 27, 1997, and the reinvestment of all dividends through
January 31, 1998.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
MAY 27, JANUARY 31,
1997 1998
------- -----------
<S> <C> <C>
Wilsons The Leather Experts Inc. ........................... $100.00 $ 97.22
Nasdaq Retail Composite Stock Index......................... $100.00 $117.51
S&P 500 Index............................................... $100.00 $115.37
</TABLE>
11
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's directors and executive officers
file initial reports of ownership and reports of changes in ownership with the
Commission. Directors and executive officers are required to furnish the
Company with copies of all Section 16(a) forms they file. Based solely on a
review of the copies of such forms furnished to the Company and written
representations from the Company's directors and executive officers, all
Section 16(a) filing requirements were met for the fiscal year ended January
31, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1997, the Company was party to certain transactions
involving CVS New York, Inc. ("CVS"). Until March 27, 1998, CVS had been an
approximately 12.4% beneficial owner of shares of the Company. See "Warrants
Held By CVS" below.
SALE AGREEMENT
The Company was organized to acquire (the "Acquisition") all of the issued
and outstanding capital stock (the "Wilsons Shares") of Wilsons Center, Inc.,
the holding company of Rosedale Wilsons, Inc. and its subsidiaries prior to
the Acquisition (collectively, the "Predecessor Companies"). On May 24, 1996,
CVS, the Company and Wilsons Center, Inc., entered into a sale agreement (the
"Sale Agreement"), which provided for CVS to sell the Wilsons Shares to the
Company on May 25, 1996, subject to various conditions typically found in
transactions of this nature. In consideration for the Wilsons Shares, the
Company delivered to CVS: (i) $2.0 million in cash; (ii) a $55.8 million note
(the "CVS Note"); (iii) a warrant to purchase 1,350,000 shares of common stock
at an exercise price of $.60 per share (the "CVS Warrant"); (iv) a warrant to
purchase up to 1,080,000 shares of the Company's common stock at an exercise
price of $.60 per share (the "Manager Warrant"); (v) 4,320,000 shares of the
Company's common stock; and (vi) 7,405 shares of the Company's Series A
Preferred Stock. Thereafter, Leather Investors Limited Partnership I ("Limited
Partnership I") purchased from CVS the 4,320,000 shares of the Company's
common stock and Leather Investors Limited Partnership II ("Limited
Partnership II" and together with Limited Partnership I the "Limited
Partnerships") purchased from CVS the 7,405 shares of the Company's Series A
Preferred Stock for an aggregate consideration of $10.0 million in cash. On
May 27, 1997, the 7,405 shares of Series A Preferred Stock were exchanged for
617,083 shares of the Company's common stock. On June 2, 1997, upon completion
of the Company's Initial Public Offering, the Limited Partnerships
automatically dissolved, and the shares of common stock held by them were
distributed to their partners, which included the general partners Lyle Berman
and Morris Goldfarb, based on their respective interests in the Limited
Partnerships. Lyle Berman and Morris Goldfarb are directors of the Company.
Pursuant to the Sale Agreement, CVS agreed, subject to certain limitations
set forth therein, to indemnify the Company and its affiliates (and their
respective officers and directors) against and to hold them harmless from any
and all Damages (as defined in the Sale Agreement) incurred or suffered by any
such indemnified party arising out of, among other things: (i) certain
misrepresentations or breaches of warranties or covenants or agreements to be
performed by CVS or Wilsons Center, Inc. pursuant to the Sale Agreement; (ii)
claims relating to certain disclosed and undisclosed liabilities of the
Predecessor Companies; (iii) claims relating to the Closed Store Leases (as
defined in the Sale Agreement) and the Excluded Subsidiaries (as defined in
the Sale Agreement); (iv) claims related to certain taxes, primarily income
taxes; (v) claims related to certain recalled leather protector sprays; and
(vi) certain claims related to employees and certain employee benefits
matters. Generally, claims by the Company for indemnifications by CVS, other
than (a) those referred to in clauses (iii), (iv), (v) and (vi) above and (b)
those for breaches of covenants and for certain disclosed liabilities, which
will survive indefinitely or until the expiration of the applicable statute of
limitations and have no dollar limit, had to have been asserted on or prior to
August 25, 1997. No such claims that had to have been asserted on or prior to
August 25, 1997 were asserted on or prior to such date.
12
<PAGE>
The Company and its affiliates have also, subject to certain limitations set
forth in the Sale Agreement, agreed to indemnify CVS and its affiliates (and
their respective officers and directors) against and to hold them harmless
from any and all Damages incurred or suffered by any such indemnified party
arising out of, among other things, certain misrepresentations or breaches of
warranties or covenants or agreements to be performed by the Company or, after
May 25, 1996, by Wilsons Center, Inc. pursuant to the Sale Agreement.
Generally, claims by CVS for indemnifications by the Company relating to
misrepresentations or breaches of warranties had to have been asserted on or
prior to August 25, 1997. No such claims that had to have been asserted on or
prior to August 25, 1997 were asserted on or prior to such date.
NOTE HELD BY CVS
On May 25, 1996, the Company issued the CVS Note to CVS for $55.8 million as
partial consideration for the Acquisition. $5.5 million of accrued interest
became a part of the principal balance on May 25, 1997. On August 18, 1997,
the Company paid $56.5 million to repurchase the CVS Note from CVS at a
discount and to pay accrued interest thereon.
RESTRICTED STOCK AGREEMENT
On May 25, 1996, the Company entered into a restricted stock agreement with
certain managers of the Company (the "Managers"), including the Named
Executive Officers (the "Restricted Stock Agreement"). The Restricted Stock
Agreement provided that 1,080,000 shares of the Company's common stock (herein
called the "Restricted Stock") purchased by the Managers for $.60 per share
would vest, among other circumstances, (i) up to 20 percent each year during
the performance period, commencing with the period ended February 1, 1997 and
continuing through and including the period ending on February 3, 2001, if the
Company achieves certain earnings targets that are determined by the Board
(plus potential catch-up vesting for years in which the Company fails to
achieve its targets), or (ii) immediately upon payment or prepayment of the
CVS Note in full at any time on or prior to December 31, 2000. As of February
1, 1997, 198,018 shares of such Restricted Stock had vested and, for the
period ended February 1, 1997, the Company recorded a $1.5 million noncash
compensation charge related to such shares. The remaining 881,982 shares of
Restricted Stock vested on August 18, 1997 upon repayment of the CVS Note. See
"Note Held by CVS" above. The Company recorded an additional noncash
compensation charge of $8.5 million related to such shares which is equal to
the difference between the fair market value of the Restricted Stock on the
date the shares vested, which was $10.25 per share, and the original price of
the Restricted Stock, which was $.60 per share; however, such charge did not
impact the Company's total shareholders' equity or cash balances. Each Manager
was responsible for any taxes and other sums required by law to be withheld by
the Company in connection with the Restricted Stock.
Pursuant to the Restricted Stock Agreement, Joel N. Waller, David L. Rogers,
Carol S. Lund, David B. Sharp and Jed Jaffe purchased, respectively,
338,869.8, 338,869.8, 48,594.6, 45,894.6 and 40,495.5 shares of the Company's
Restricted Stock at its then fair market value of $.60 per share. For the
period from inception (May 26, 1996) to February 1, 1997, Mr. Waller, Mr.
Rogers, Ms. Lund, Mr. Sharp and Mr. Jaffe had 62,131.7, 62,131.7, 8,908.8,
8,414.8 and 7,424.8 shares of their Restricted Stock vest, respectively. On
August 18, 1997, the remaining shares of Restricted Stock vested.
WARRANTS HELD BY CVS
The CVS Warrant was repurchased by the Company on March 27, 1998, for $9.99
million in cash, and upon the repurchase, the warrant was cancelled. The
purchase price of the CVS Warrant equaled $7.40 for each of the 1,350,000
shares of the Company's common stock subject to the CVS Warrant ($8.00 per
share minus a $.60 per share exercise price). The Manager Warrant
automatically lapsed upon repurchase of the CVS Note on August 18, 1997. See
"Note Held by CVS" above.
13
<PAGE>
OTHER RELATIONSHIP
The Company regularly conducts business with G-III of which Morris Goldfarb,
a director of the Company, is the Chief Executive Officer and Chairman of its
board of directors. Purchases from G-III totaled $7.5 million, $5.0 million,
and $4.7 million for the fiscal year ended January 31, 1998, the 13-month
period ended February 1, 1997 and the 12-month period ended December 31, 1995,
respectively. The Company believes that transactions with G-III are on terms
no less favorable to the Company than those obtainable in arms-length
transactions with unaffiliated third parties.
PROPOSAL NUMBER TWO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
On April 28, 1998, the Board of Directors approved, subject to shareholder
approval, the proposed Amended and Restated Articles of Incorporation of the
Company (the "Amended and Restated Articles") attached hereto as Appendix A.
At the meeting, shareholders are being asked to approve and adopt the Amended
and Restated Articles.
The full text of the Amended and Restated Articles is contained in Appendix
A to this proxy statement. Reference is made to the appendix for a complete
statement of the provisions of the Amended and Restated Articles, and the
following summary description of the Amended and Restated Articles is
qualified in its entirety by reference to the full text of the Amended and
Restated Articles.
DESCRIPTION OF AMENDED AND RESTATED ARTICLES
The Amended and Restated Articles reflect the previous conversion of the
multiple classes of common stock into a single class of common stock at the
time of completion of the Company's Initial Public Offering of common stock
pursuant to the terms of the existing Amended Articles of Incorporation of the
Company (the "Existing Articles"), increase the number of authorized shares of
the Company's common stock to 100,000,000, par value $.01, effect the
cancellation of the remaining designated Series A Preferred Stock, none of
which is outstanding, and delete any specified requirements as to actions that
can be taken only upon the approval of a super-majority or majority of the
directors. The Amended and Restated Articles do not amend any provisions
regarding preemptive rights, cumulative voting or the size of the Board of
Directors.
The Existing Articles provide for 45,000,000 shares of Common Stock
allocated among Undesignated Common, Class A Common, Class B Common and Class
C Common. It also sets out the terms of each such class of common stock. The
Existing Articles provide that all shares of common stock outstanding at the
time of the closing of the Initial Public Offering (which occurred in June
1997) shall automatically be converted into an equal number of shares of a
single class of common stock without class designation. The Existing Articles
contain other provisions that are applicable only prior to the completion of
the Initial Public Offering and set forth certain actions that can be taken
only with approval of a super-majority (prior to the completion of the Initial
Public Offering) or majority of the directors.
The Existing Articles also authorize 10,000,000 shares of preferred stock,
with power given to the Board to determine the relative rights, voting power,
preferences or restrictions of the preferred stock upon each issuance. The
Existing Articles designated 15,000 shares of the preferred stock as Series A
Preferred Stock, of which 7,405 shares were previously issued. On May 27,
1998, all issued shares of the Series A Preferred Stock were exchanged for
617,083 shares of the Company's common stock, leaving no shares of preferred
stock issued or outstanding. The terms of the Series A Preferred Stock
provided that those redeemed or reacquired shares would become undesignated
preferred stock, leaving 7,595 shares of Series A Preferred Stock available
for future issuance at the discretion of the Company's Board of Directors.
Adoption of the Amended and Restated Articles would effect the cancellation of
the 7,595 shares as designated Series A Preferred Stock, thereby converting
such shares into undesignated preferred stock.
14
<PAGE>
The Board of Directors is recommending the adoption of the Amended and
Restated Articles of Incorporation attached as Appendix A which would provide
that the authorized common stock of the Company would be 100,000,000 shares of
a single class. The Amended and Restated Articles of Incorporation would also
delete any provisions that, under the Existing Articles, are not effective
following the completion of the Initial Public Offering and, because of the
previous elimination of super-majority director voting requirements for any
matters under the Existing Articles as a result of the completion of the
Initial Public Offering, the Amended and Restated Articles have also
eliminated references to those actions that require approval of a majority or
super-majority of the directors. Lastly, the Amended and Restated Articles of
Incorporation would delete any provision pertaining to the designated Series A
Preferred Stock.
VOTE REQUIRED
The affirmative vote of the holders of the majority of the outstanding
shares of common stock of the Company present in person or represented by
proxy and entitled to vote on approving the Amended and Restated Articles is
required to approve them. A shareholder voting through proxy who abstains with
respect to this matter is considered to be present and entitled to vote, and
is in effect casting a negative vote, but a shareholder (including a broker)
who does not give authority to a proxy to vote, or withholds authority to
vote, on the approval of the Amended and Restated Articles is not considered
present and entitled to vote on this matter.
VOTING RECOMMENDATION
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDED AND
RESTATED ARTICLES.
PROPOSAL NUMBER THREE
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have been the auditors
for the Company since May 1996. Upon recommendation of the Audit Committee,
the Board of Directors has selected Arthur Andersen LLP to serve as the
Company's independent public accountants for the fiscal year ending January
30, 1999, subject to ratification by the shareholders. While it is not
required to do so, the Board of Directors is submitting the selection of that
firm for ratification in order to ascertain the view of the shareholders. If
the selection is not ratified, the Board of Directors will reconsider its
selection.
A representative of Arthur Andersen LLP will be present at the meeting and
will be afforded an opportunity to make a statement if such representative so
desires and will be available to respond to appropriate questions during the
meeting.
VOTING RECOMMENDATION
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF ARTHUR ANDERSEN
LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED JANUARY 30,
1999.
15
<PAGE>
ADDITIONAL MATTERS
ANNUAL REPORT
The Annual Report to Shareholders of the Company for the fiscal year ended
January 31, 1998, which includes the Annual Report on Form 10-K and financial
statements, is being mailed with this Proxy Statement.
DEADLINE FOR SUBMISSION OF SHAREHOLDERS' PROPOSALS
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders must be received by the Secretary of the Company, at
7401 Boone Avenue North, Brooklyn Park, Minnesota 55428, no later than January
5, 1999 for inclusion in the proxy statement for that meeting.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no matters that
will be presented for determination at the Annual Meeting other than those
referred to herein. If any other matters properly come before the annual
meeting calling for a vote of shareholders, it is intended that the shares
represented by the proxies solicited by the Board of Directors will be voted
by the persons named therein in accordance with their best judgment.
By Order of the Board of Directors,
/s/ Phillip S. Garon
Philip S. Garon
Secretary
Dated: May 5, 1998
16
<PAGE>
APPENDIX A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WILSONS THE LEATHER EXPERTS INC.
ARTICLE 1--NAME
The name of this corporation shall be Wilsons The Leather Experts Inc.
ARTICLE 2--REGISTERED OFFICE
The registered office of this corporation shall be 7401 Boone Avenue North,
Brooklyn Park, Minnesota 55428.
ARTICLE 3--AUTHORIZED SHARES
SECTION 1. AUTHORIZED CAPITAL STOCK.
The aggregate number of shares of stock which the corporation is authorized
to issue is 110,000,000 shares, consisting of 100,000,000 shares of common
stock, par value $.01 (the "Common Stock"), and 10,000,000 shares of preferred
stock, par value $.01 (the "Preferred Stock"). The shares of Preferred Stock
and Common Stock are sometimes collectively referred to herein as the "capital
stock". The shares of Preferred Stock may be issued by the Board of Directors
of the corporation from time to time in one or more series, each of such
series to have such relative rights, voting power, preferences and
restrictions as adopted by the Board of Directors of the corporation.
SECTION 2. DESCRIPTION OF CAPITAL STOCK.
The rights, voting power and restrictions granted to or imposed upon the
shares of Common Stock or, to the extent set forth herein, other capital
stock, or the holders thereof are as follows:
(a) Voting Power.
(i) General. Each holder of Common Stock shall have one vote on all
matters submitted to the shareholders for each share of Common Stock
registered in the name of such holder on the books of the corporation.
(ii) Election of Directors. The Board of Directors of the corporation
shall consist of not less than five or more than nine members and the
directors of the corporation shall be elected by the affirmative vote of
the holders of the greater of (a) a majority of the voting power of the
shares of capital stock of the corporation present and entitled to vote on
the election of directors or (b) a majority of the voting power of the
minimum number of shares of capital stock of the corporation entitled to
vote that would constitute a quorum for the transaction of business at a
duly held meeting of shareholders.
(iii) No Cumulative Voting. No holder of shares of capital stock of the
corporation shall have any cumulative voting rights.
(b) Preemptive Rights.
No holder of shares of any class of capital stock of the corporation shall
be entitled as such, as a matter of right, to subscribe for, purchase or
receive any part of any new or additional issue of shares of stock of any
class or series whatsoever, or of securities convertible into or exchangeable
for or exercisable for or carrying a right to purchase any shares of stock of
any class or series whatsoever, whether now or hereafter authorized and
whether issued for cash or other consideration or by way of dividend or other
distribution.
A-1
<PAGE>
ARTICLE 4--LIMITATION OF DIRECTOR LIABILITY
To the fullest extent permitted by Chapter 302A, Minnesota Statutes, as the
same exists or may hereafter be amended, a director of this corporation shall
not be personally liable to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director. No amendment or repeal of
this Article shall apply to or have any effect on the liability or alleged
liability of any director of this corporation for or with respect to any acts
or omissions of such director occurring prior to such amendment or repeal.
A-2
<PAGE>
PROXY WILSONS THE LEATHER EXPERTS INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS--JUNE 16, 1998
The undersigned hereby appoints Joel N. Waller and David L. Rogers, and each
of them, as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote, as designated below, all of the
shares of common stock of Wilsons The Leather Experts Inc. (the "Company") held
of record by the undersigned on April 29, 1998, at the Annual Meeting of
Shareholders to be held on June 16, 1998, or any adjournment thereof.
1. ELECTION OF DIRECTORS. Nominees to the Board of Directors of the Company are
Lyle Berman, Thomas J. Brosig, Morris Goldfarb, David L. Rogers and Joel N.
Waller.
[_] FOR ALL NOMINEES LISTED ABOVE [_] WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed
contrary below) above
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.)
------------------------------------------------------------------------------
The Board of Directors recommends a vote "FOR" all nominees listed above.
2. APPROVAL AND ADOPTION OF THE AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF THE COMPANY.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote "FOR" this proposal.
(continued, and to be dated and signed, on other side)
3. RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT
PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING JANUARY 30,
1999.
[_] FOR [_] AGAINST [_] ABSTAIN
The Board of Directors recommends a vote "FOR" this proposal.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES LISTED ABOVE AND FOR THE PROPOSALS CONTAINED
HEREIN. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION WITH RESPECT TO
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
------------------------------------
Signature
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Signature if held jointly
Dated: _______________________, 1998
Please sign exactly as name appears
hereon. When shares are held by
joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by President or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
