<PAGE>
B.B. WALKER COMPANY
414 East Dixie Drive, P.O. Drawer ll67, Asheboro, North Carolina 27204
- ------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH l7, l997
TO THE HOLDERS OF COMMON STOCK OF B.B. WALKER COMPANY
You are cordially invited to attend the Annual Meeting of the Shareholders
of B.B. Walker Company scheduled to be held on Monday, March l7, l997 at
7:00 p.m. EST in the executive offices of the Company at 4l4 East Dixie
Drive, Asheboro, North Carolina. The purposes of the meeting are:
(l) To elect 6 Directors of the Company.
(2) To consider ratifying the appointment by the Board of
Directors of Price Waterhouse LLP as the independent public
accountants of the Company.
(3) To transact such other business as may properly be brought
before the meeting or any adjournment thereof.
Only holders of common stock of record at the close of business on February
24, l997 will be entitled to vote at the meeting. The stock transfer books of
the Company will not be closed.
IMPORTANT - YOUR PROXY CARD IS ENCLOSED
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY. THIS WILL INSURE THAT
YOUR VOTE IS COUNTED, WHETHER OR NOT YOU ARE ABLE TO BE PRESENT. YOUR PROXY
CARD WILL BE RETURNED TO YOU IF YOU ARE PRESENT AT THE MEETING AND SO REQUEST.
PLEASE USE THE ENCLOSED POSTAGE PAID RETURN ENVELOPE FOR MAILING YOUR PROXY
CARD.
You have been mailed a copy of the Company's Annual Report, including
financial statements for the fiscal year ended November 2, l996.
By Order of the Board of Directors
DOROTHY W. CRAVEN
----------------------------
Dorothy W. Craven, Secretary
Date of Mailing:
February 24, l997
Cover
<PAGE>
B.B. WALKER COMPANY
414 East Dixie Drive, P.O.Drawer ll67, Asheboro, North Carolina 27204
- ------------------------------------------------------------------------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
March l7, l997 and Adjournments
SOLICITATION OF PROXY
The enclosed Proxy, mailed on February 24, l997, is solicited by the Board of
Directors of B.B. WALKER COMPANY, (the Company) for use at its Annual Meeting
of Shareholders to be held in the executive offices of the Company at 414 East
Dixie Drive, Asheboro, North Carolina, at 7:00 p.m. EST on Monday, March l7,
l997 or any adjournments thereof.
The Company will bear the cost of solicitation of proxies, including the
charges and expenses of brokerage firms and others for forwarding solicitation
material to beneficial owners of stock. In addition to the use of the mails,
proxies may be solicited by personal interview or by telephone and telegram.
Proxies and correspondence should be addressed to Dorothy W. Craven, Corporate
Secretary.
REVOCATION OF PROXY
Execution and return of a Proxy given in response to this solicitation will
not affect a Shareholder's right to attend the meeting and vote in person.
Any Shareholder signing and returning a Proxy in the form enclosed with this
statement may revoke it at any time before it is exercised by giving notice
thereof to the Company in writing or in open meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on February 24, l997 as
the record date for Shareholders entitled to notice of and to vote at the
meeting and any adjournment. On February 24, l997, the Company had issued
and outstanding l,726,534 shares of common stock all of which were outstanding
and entitled to vote. Each share of common stock is entitled to one vote. As
of January 6, l997, all Directors and Officers of the Company as a group (l0
persons) owned or controlled 801,433 shares or 46.42% of the outstanding
shares of the Company's common stock. Included in the solicitation of proxies
is the solicitation of discretionary authority to transact such other business
as may properly be brought before the meeting or any adjournments. The
presence, in person or by proxy, of the holders of a majority of the
outstanding shares of B.B. Walker Company common stock entitled to vote, is
necessary to constitute a quorum.
1
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As of January 6, 1997, the Company was aware of the following four direct and
beneficial owners of more than 5% of the outstanding shares of the Company's
common stock:
(l) James P. McDermott, a Director of the Company, as well as
Trustee of the Employee Stock Ownership Plan of B.B.
Walker Company (the ESOP), as Trustee, holds of record or
beneficially, 418,272 shares or 24.23% of the outstanding
common stock of B.B. Walker Company. Under the Plan he
is authorized as Trustee to vote all shares held by the ESOP
in the best interests of the participants. This total
does not include 27,420 shares owned directly and
beneficially by Mr. McDermott in his individual capacity. The
total also includes 2,000 shares under an unexercised
Directors stock option grant.
(2) Mrs. Nellie Jean Richardson, widow of the late former
Executive Vice President and former Director of the Company,
together with members of her family, holds of record or
beneficially l94,260 shares or ll.3% of the outstanding
common stock of the Company.
(3) Edna A. Walker, who is President of the B.B. Walker Foundation
and a Director of the Company, together with members of her
family, holds of record or beneficially, a total of l09,697
shares or 6.35% of the outstanding common stock of the
Company. The total also includes 2,000 shares under an
unexercised Directors stock option grant.
(4) Kent T. Anderson, Chairman, President, Chief Executive
Officer and a Director of the Company holds of record and
beneficially a total of l62,927 shares or 9.44% of the
outstanding shares of common stock of the Company. The
total shown includes 38,750 shares of unexercised
stock option grants under the Employee 1987 Incentive
Stock Option Plan.
l. ELECTION OF DIRECTORS
---------------------
Six Directors are to be elected at the forthcoming Annual Meeting. The
recommendation of the Nominating Committee of the Board of Directors that the
existing six member Board be reelected, was accepted and the Board directed
that the six persons be its director nominees for consideration by the
shareholders. It is intended that the two persons named in the accompanying
Proxy will vote for the six director nominees named on the following pages
unless authority to vote is directed otherwise. Directors shall be elected by
a plurality of the votes cast at the meeting.
A Director is elected to serve until the next Annual Meeting of the
Shareholders or until a successor shall be elected and shall qualify. Each
nominee for Director has agreed to serve and, so far as the Board is aware,
will serve if elected. If any nominee is unable to serve, the proxies will be
voted by those named therein for the election of a substitute nominee selected
by the Board of Directors.
2
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Of the six nominees for director, one is presently an employee and three are
retired employees. The Company provides Directors and Officers Liability
insurance coverages. There are no family relationships between any of the
nominees and the executive officers of the Company or its subsidiary.
BOARD MEETINGS AND DIRECTORS' ATTENDANCE
The Board of Directors meets on a quarterly basis. The Annual Meeting of the
Board of Directors is held immediately following the Annual Meeting of the
Shareholders. Special meetings of the Board may be called at any time when
necessary as provided in the By-Laws. There were 4 Board meetings held in
l996. All Directors attended all meetings of the Board and of the Committees
on which he or she served during fiscal l996, except Robert L. Donnell, Jr who
was absent from one meeting.
BOARD COMMITTEES
The Board has 3 committees: an Audit Committee; a Compensation Committee; and
a Nominating Committee.
The Audit Committee, which held l meeting in l996, meets with the independent
public accountants and reviews the scope and results of the audit by the
independent auditing firm. The Committee makes recommendations to the Board
as to the selection of the independent public accountants and as to services
provided. In addition it reviews the system of internal control and
accounting policies. The Audit Committee is composed entirely of Directors
who are not employees of the Company or of its subsidiary. The five Members
of the Audit Committee are: James P. McDermott, Chairman; George M. Ball;
Robert L. Donnell, Jr.; Michael C. Miller and Edna A. Walker.
The Compensation Committee met once during the year when the fiscal 1996
financial results were available for its review. The Committee is directly
responsible for determining the compensation of the Chairman and Chief
Executive Officer of the Company, relating his compensation to an evaluation
of his performance during the fiscal year. The Committee presents its
recommendations to the Board of Directors for its consideration. The
Committee is composed of the 5 outside non-employee directors. The Committee
is responsible for the establishment and oversight of executive compensation,
benefit and retirement plans of the Company. The Compensation Committee is
composed of George M. Ball, Chairman; Robert L. Donnell, Jr.; James P.
McDermott; Michael C. Miller and Edna A. Walker.
The Compensation Committee also reviews the recommendations of management for
the issuance of Stock Option Grants under the Incentive Stock Option Plan of
the Company. After review, the Committee makes recommendations to the Board
regarding the issuance of the grants, the price at which the shares of stock
are issued, and the conditions of the grant.
3
<PAGE>
The Nominating Committee, composed of three non-employee directors who are not
officers of the Company or its subsidiary, held l meeting on January 4, 1996.
The Committee reviews information for the selection of qualified candidates
for director nominee and recommends to the Board of Directors for its
consideration the names of qualified director nominees who are willing to
serve if nominated and elected. This Committee has no current plans to
consider nominees recommended by security holders. The 3 Members of the
Nominating Committee are: Michael C. Miller, Chairman; Edna A. Walker and
George M. Ball.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
Name, Age & Year Equity Securities of
First Elected Principal Occupation Company, beneficially
a Director For Last Five Years owned on January 6,l997(l)
- ---------------- -------------------- --------------------------
Common Preferred
Shares(6) Shares
--------- ---------
Kent T. Anderson Chairman of the Board (1992) l62,927 -
(54)(l985) President (1984) & Chief (9.44%)
Executive Officer(l986)
George M. Ball Chairman, Philpott, 2,000 -
(62)(l993) Ball & Co., Investment (.12%)
Bankers, Charlotte, N. C.(4)
Robert L. Donnell, Jr. Retired. Formerly Executive 4,l46 -
(65) (l968) Vice President - Operations (.24%)
l968-l99l (5)
James P. McDermott Retired. Formerly Vice 27,420 -
(76)(l986) President & General (l.60%)
Counsel l974-l992.
Formerly Corporate
Secretary l984-l993.(2)
Michael C. Miller President & Chief Executive 2,000 -
(45) (l993) Officer, First National (.12%)
Bank & Trust Co.,
Asheboro, N.C.(3)
Edna A. Walker President l09,697 35
(72)(l952) B. B. Walker Foundation (6.35%) (4.2%)
4
<PAGE>
(l) The By-Laws and the Corporate Charter do not require Directors
to be Shareholders. The number of shares of common stock
shown includes shares held in the names of spouses, minor
children or certain relatives, as to which beneficial
ownership is disclaimed. The totals shown in the table
include shares subject to currently exercisable options
granted by the Company. Kent T. Anderson, who holds
currently exercisable stock option grants for 38,750 shares,
is the only director nominee who has grants under the 1987
Employee Incentive Stock Option Plan of the Company included
in the above table.
(2) The above set forth total of common stock beneficially owned
by James P. McDermott does not include the 418,272 shares of
common stock constituting 24.23% of the total shares
outstanding, held by him as Trustee of the Employee Stock
Ownership Plan and Trust of B.B. Walker Company for the
benefit of all Plan participants. Under the Plan,
participants exercise no voting control over shares of stock
allocated to their accounts so long as they are participants
in the Plan, unless required by North Carolina law. Shares
cannot be distributed to nor disposed of by participants while
employed. Equitable ownership by participants of shares
allocated to their accounts depends upon their being vested in
their accounts, which vesting is based upon their length of
service. Reference is made to subparagraph (l) under the
heading "VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF" on
page 2 of this Proxy Statement.
James P. McDermott, subsequent to his retirement in February
l992 as Vice President, General Counsel & Secretary of the
Company, was retained by the Company as a Consultant to render
services in two specialized areas. (l) James P. McDermott
oversees the administration and prepares the annual report
filings with the IRS of the Company's three ERISA qualified
employee benefit plans. Under the Consulting Agreement he
serves as Trustee and Plan Administrator for the three qualified
Plans. (2) In addition under the Consulting Agreement he is
responsible for the preparation and filing of the Annual Report
to the Securities and Exchange Commission, Washington, D.C.,
(the Form No. l0-K) and the preparation of the Proxy Statement
for filing with the SEC, which Proxy Statement is sent to
Shareholders for the Annual Meeting of the Shareholders. James P.
McDermott was paid $30,870 during fiscal l996 for services rendered.
5
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(3) Michael C. Miller, elected to the Board of Directors of B.B. Walker
Company on July 6, l993 has been President since l99l of First
National Bank & Trust Company, Asheboro, N.C. He was elected
Chief Executive Officer of the bank in January l994. In January
l994 he was elected President and Chief Executive Officer of FNB
Corp., the parent company of the bank. He has been associated with
First National Bank since l985 serving as Executive Vice President
until l99l when he was elected President. He is a Director of the
bank's parent holding company. Prior to joining the First National
Bank, he was an attorney engaged in the private practice of law in
Asheboro, N.C. Mr. Miller is a graduate of the University of
North Carolina at Chapel Hill, N.C. He holds a Masters of
Business Administration Degree in Management from Wake Forest
University and a Juris Doctor Degree from the Wake Forest
University School of Law. First National Bank has entered into a
Mortgage Loan transaction with the Company and holds a first lien
on the Company's facility in Somerset, Pennsylvania. First National
Bank is also a major participant with Mellon National Bank,
Pittsburgh, Pennsylvania, in a Term Loan to the Company secured
by a first lien on the Company's manufacturing facilities in
Asheboro, North Carolina and in Somerset, Pennsylvania.
(4) George M. Ball, elected to the Board of Directors of B.B.
Walker Company on September 7, l993, has been Chairman of
Philpott, Ball & Co., an investment banking firm in Charlotte,
N.C. since l99l. Prior to the founding of Philpott, Ball &
Co., he was Senior Vice President in charge of the Merger &
Acquisitions Department at Interstate/Johnson Lane Securities,
a regional securities firm in Charlotte, N.C. George Ball has
been involved on an executive level in corporate finance and
management and with securities firms since l968. He presently
serves on the Board of Directors of Juno Lighting, Inc., a
publicly held lighting equipment manufacturing company located
in Des Plaines, Illinois. Mr. Ball is a graduate of Yale
University following which he served for a number of years as
a pilot in the United States Marine Corps. George M. Ball, on
behalf of his employer Philpott, Ball & Company, has served
the B.B. Walker Company as a management consultant for a
number of years advising management on various matters of
corporate finance and restructuring. Philpott, Ball & Company
was paid $54,594 for its services rendered during fiscal
l996.
(5) Robert L. Donnell, Jr., upon his disability retirement as
Executive Vice President-Operations from the Company in l99l,
was retained by the Company under a Consulting Agreement to
confer with management from time to time as needed on changes
and improvements in the area of footwear manufacturing and
distribution. During fiscal l996, Robert L. Donnell, Jr. was
paid $l5,000 under his contract which expired on August 31, 1996.
6
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(6) DIRECTOR AND OFFICER SECURITIES REPORTS
Federal securities laws require the Company's directors
and executive officers to file with the Securities and
Exchange Commission, Washington, D.C. initial reports of
ownership and reports of changes in ownership of B.B.
Walker Company common stock. The Company is required to
identify any officer, director or owner of more than 10% of
the Company's common stock who failed to timely file with
the Securities and Exchange Commission a required report
relating to beneficial ownership of common stock under
Section 16(a) of the Securities Exchange Act of 1934. Based
on Company records and other information, all parties subject
to these reporting requirements with respect to B.B. Walker
Company's common stock, filed the required reports on a
timely basis during fiscal l996.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table sets forth information concerning the annual compensation
for services in all capacities to the Corporation for the fiscal years ended
in November 1996, October l995 and l994, of those persons who were, at
November 2, l996 (i) the chief executive officer and (ii) the other four most
highly compensated executive officers of the Corporation, ("The Named
Officers") who were paid compensation of $l00,000 or more per year:
SUMMARY COMPENSATION TABLE
--------------------------
ANNUAL COMPENSATION
-------------------
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (g) (i)
Long Term
Other Compensation
Name and Annual Awards
Principal Compen- Options/ All Other
Position Year Salary(1) Bonus sation SAR(#) Compensation(2)(3)
- -------- ---- --------- ------- ------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Kent T. Anderson l996 $ 2l5,000 $ - $ - (1) - Sh. $ 2,493
Chief Executive l995 215,000 - - (l) 20,000 Sh. $ 2,126
Officer l994 l98,181 17,000 - (l) 6,250 Sh. $ 2,049
</TABLE>
"NO EXECUTIVE OFFICER OTHER THAN THE CHIEF EXECUTIVE OFFICER EARNED $l00,000
OR MORE IN BASE SALARY AND COMPENSATION DURING FISCAL l996."
7
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(1) Salary data shown for the Named Officer is prior to any deduction or
offset for participation in the Company's Thrift Plan, a Section 40l(k)
Plan. Since January l, l989, the Company has sponsored for the benefit
of all employees, including the Named Officer, Kent T. Anderson, the
Retirement Savings Plan of B.B. Walker Company (the Section 401(k) Plan).
Participants may contribute through payroll deduction each month on a
pre-tax basis. The Board of Directors for fiscal l996 authorized a
matching contribution to the Plan of ten (l0%) percent of actual payroll
deductions made during the year by active participants in the Plan who
were employed as of December 3l, l996. The Named Officer received a
matching contribution of $743 to his Section 401(k) Plan account for
fiscal l996. Such amount is included in column (i) All Other
Compensation. In addition, all executive officers, including the Named
Officer, are provided with nominal allowances for use of their personal
vehicles on Company business. Such amount is not included in the above
table.
(2) The Named Officer is a participant in the Employee Stock Ownership Plan
of B.B. Walker Company and subsidiary, (the ESOP). This Plan, which
has been in effect since l96l, is a defined contribution Plan under the
Employee Retirement Income Security Act of l974, (ERISA), and has
accumulated for the exclusive benefit of employee participants just under
24.23% of the outstanding common stock of the Company. The employees do
not contribute to the ESOP and participation is mandatory. The
contribution is allocated to individual participant accounts by a formula
under which all participants have the same percentage of their fiscal
year compensation contributed to their accounts. The "Named Officer"
was allocated $l,750 from the $65,000 contribution for fiscal l996 as
authorized by the Board of Directors and is included in column (i) All
Other Compensation.
(3) The Company provides a special life insurance program of various amounts
for Officers, Directors, truck drivers, salesmen and other key employees
of the Company and its subsidiary, with the Company and the employees
sharing the premium cost. A total of 93 employees are insured of which
l0 are Officers and Directors of the Company and its subsidiary and 79
are truck drivers, salesmen, supervisors and other key employees. In
fiscal l996 the Company and its subsidiary's share of the premium cost
amounted to $26,324. The amount applicable to Officers and Directors is
not included in the compensation shown in Column(i) All Other
Compensation, in the above table. The Company share during fiscal l996
of the total cost of the special life insurance coverage for all l0
executive officers and directors as a group was $5,589 or 21.2% of the
total Company cost. The portion of such cost applying to the director
nominees amounted to $2,637 or 10.0% of the total Company cost for the
class of employees covered.
8
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
No SAR's were granted by the Board of Directors to any key employee during the
fiscal l996 year. No Employee Stock Option Grants were made during the 1996
fiscal year under Part I, the Incentive Plan, of the 1995 Incentive Stock
Option Plan for Key Employees and Non-Employee Directors which Plan was
approved by the shareholders at the Annual Meeting on March 20, 1995.
However, under Part II of the Plan - the Automatic Option Grant Program,
applying only to non-employee Directors, automatic grants for 1,000 shares
each were made to all five non-employee directors following the close of the
Annual Shareholders Meeting on March 18, 1996. No options granted to Non-
Employee Directors were exercised in fiscal 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
---------------------------------------------------
The following table shows stock options exercised by Named Officers during
fiscal l996, including the aggregate value of gains on the date of exercise.
In addition, this table includes the number of shares covered by both
exercisable and non-exercisable stock options as of November 2, l996. Also
reported are the values for "in-the-money" options which represent the
positive spread between the exercise price of any such existing stock options
and the year-end price of Common Stock.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired on Value FY-End(#)(2) FY-End($)(3)
Name Exercise(#)(l)(4) Realized($)(3) Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kent T. Anderson -0- -0- 38,750 - ($82,031) -
</TABLE>
* Fair Market Value at Fiscal Year End 11/2/96 was $1.625 per share based on
the Bid Price of $1.25 per share and the Ask Price of $2.00 per share as
published in the Over the Counter Section of the financial pages of local
and regional newspapers.
(l) Upon exercise of an option grant, the optionee must pay the exercise
price in cash.
9
<PAGE>
(2) Options shown in column (d) were made under the l987 Incentive Stock
Option Plan. All grants provide that only one-half of the number of
shares granted may be exercised at time of grant and the other half after
l2 months. Shares purchased at exercise of grant may not be sold without
penalty for a period of two years. Under the ISO plans any profit or
gain realized is not taxable to the grantee at time of exercise of the
grant, but is taxable to the grantee at time of sale of the stock.
(3) Represents the difference between the fair market value of the common
stock underlying option and the exercise price at exercise or fiscal year
end respectively.
(4) Of the key employees in management who have borrowed Company funds for
the purchase of B.B. Walker Company stock, a total of 4 persons borrowed
funds from the Company with which to exercise stock options for the
purchase of shares of B.B. Walker Company common stock. Such loans were
made under the "l989 Plan For The Lending Of Company Funds To Officers
and Directors For The Purchase of B.B. Walker Company Stock". The
lending of B.B. Walker Company funds to officers, directors and other key
employees in management, as authorized under North Carolina law, was
instituted initially by shareholder approval granted in l966. In l989
the loan program was updated and was approved by the Shareholders at the
Annual Meeting held on March l3, l989.
The loan program is in accord with a long standing Company policy of
encouraging officers, directors and other key employees in management to
become shareholders. The Board believes that employee stock ownership
will benefit the Company and its shareholders by encouraging key
employees to work diligently to increase the profitability of the
Company. Stock ownership by employees will identify their interests with
those of the Company's non-employee shareholders.
All loans are made in the sole and absolute discretion of the Board of
Directors. All borrowings are made solely to enable the employee to
purchase B.B. Walker Company stock from various sources, including the
exercise of all or part of any outstanding stock option grant. Loans are
made for a period of up to l0 years, and are repayable through payroll
deduction. Interest is charged at 2% below the lower of the prime rate
charged by the First National Bank and Trust Company, Asheboro, N.C. or
by the NationsBank of Charlotte, N.C., as determined by the Board of
Directors. Each loan is made under a negotiable promissory note and is
secured or collateralized by the pledge of all shares purchased with the
loan proceeds. All loans presently outstanding as of 11/2/96, totaling
$122,845, are at 4% per annum which rate is charged monthly on the
outstanding unpaid balance. All loans in the aggregate cannot and have
not exceeded $350,000 at any time.
The Chief Executive Officer is the only one of four executive officers
under the Plan who owes in excess of $60,000. At January 6, l997, his
unpaid principal balance was $64,244.
10
<PAGE>
EMPLOYMENT CONTRACT AND TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
-------------------------------------------------
Kent T. Anderson, as President and Chief Executive Officer, and the Company,
entered into an Employment Agreement on October 2, l989, five years after the
Chief Executive Officer was employed. The initial term was for three years
starting November l, l989 with an automatic annual extension provision
providing for the Agreement to be for no less than three years at all times.
The Agreement provided for the Chief Executive Officer's employment at a
minimum base salary of $l25,000 per year and for an annual increase on January
l of each year thereafter, of at least five (5%) percent of his current base
salary. The Agreement provides that the Board of Directors may, in its
discretion, grant merit increases to the Chief Executive Officer from time to
time. The Chief Executive Officer's salary for fiscal year l996 was $2l5,000
and was reduced to $l98,489 per fiscal year, effective November l, l996. The
Chief Executive Officer advised the Compensation & Stock Option Committee that
as an example to other employees, he was voluntarily waiving the 5% automatic
increase of $l0,750 at l/l/97. The Committee concurred with his decision.
This Agreement may not be terminated by the Company for any reason whatsoever
without penalty, other than for cause. It may be terminated with three years
prior written notice of termination. However, the Board may exercise its
statutory authority to remove the Chief Executive Officer from his present
elected office and function at any time. This would require immediate payment
of the three year compensation amount provided for in the Agreement. By
Amendment No. l dated July 6, l990, the Employment Agreement was modified to
comply with certain tax provisions of the Internal Revenue Code. The Chief
Executive Officer may, at his option, elect to reduce the total amount due him
under the Agreement so that no portion of the amounts received by him will be
subject to the excise tax imposed by the Internal Revenue Code on some
severance payments.
The Chief Executive Officer may terminate his employment under the Agreement
in the event: (i) The Company merges or consolidates with another person or
group or undertakes any other reorganization where the Company is not the
Surviving Entity; or (ii) the Company sells or transfers substantially all of
its business or assets to another person; or (iii) 50% or more of the capital
stock of the Company presently outstanding is acquired by a person or group at
any time after the date of this Agreement. In the event of such termination,
the Chief Executive Officer is entitled to receive immediately the full amount
of his current base salary for three years. Subject to the above mentioned
Amendment, unless the Chief Executive Officer elects to reduce the total
amount to be paid to him, the three years pay following the end of fiscal l996
would be $595,467. Such payment, if made, is to be made in full in cash and
without limitation. The Board of Directors, with the exception of Kent T.
Anderson who was not present, was unanimous in authorizing the execution of
this Employment Agreement.
11
<PAGE>
COMPENSATION OF OUTSIDE DIRECTORS
---------------------------------
Five of the six Directors are non-employees of the Company. The Company
provides Directors and Officers Liability Insurance coverage. Non-employee
outside Directors receive a meeting fee of $l,200 for each Board or Board
Committee Meeting, unless the Board and Committee meetings are held on the
same day. Directors who are full time employees of the Company or of its
subsidiary, namely Kent T. Anderson, do not receive any additional
compensation by reason of membership on or attendance at meetings of the Board
of Directors or Board Committees. Four quarterly Board Meetings are scheduled
each fiscal year in addition to the Annual Meeting of the Board of Directors
held immediately following the Annual Meeting of the Shareholders.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
-------------------------------------------------------------
The Compensation & Stock Option Committee of the Board of Directors, ("the
Committee"), is composed of the five outside non-employee directors and is
responsible for the establishment and oversight of the Company's policies for
executive compensation, as well as benefit and retirement plans of the
Company. The Committee is responsible for the initiation and operation of the
Company's incentive stock option plans. The Committee recommends to the Board
on an annual basis, the compensation of the Chief Executive Officer relating
his compensation to performance. The Board,(other than the Chief Executive
Officer), must approve all compensation actions affecting the Chief Executive
Officer. The Company does not utilize outside compensation consultants, but
does have available to it independent compensation data of other companies.
The Committee has prepared the following report for inclusion in this Proxy
Statement.
COMPENSATION PHILOSOPHY
From the Company's inception, its corporate philosophy concerning employee
compensation as established by the Board of Directors (and concurred with by
the Committee since its inception), has been for the Board to delegate to the
Chief Executive Officer, subject to review by the Board, the responsibility
for establishing rates of pay and bonus allocations for all employees, with
the exception of his own compensation (salary and bonus),for his performance
as Chief Executive Officer of the Company and subsidiary.
The Company's executive compensation policies have two primary goals: (l) to
attract and retain the highest quality executive officers and (2) to reward
those officers for superior corporate performance measured by the Company's
financial results and strategic achievements.
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The Chief Executive Officer is a Certified Public Accountant who had worked
for a number of years in the management services division of a world renowned
public accounting firm. He is a hands on executive and knowledgeable about
all aspects of footwear manufacturing, marketing and distribution activities,
including compensation and affordable employee benefits in those areas. The
Chief Executive Officer has a broad general knowledge of compensation levels
in other footwear manufacturing concerns and in communities wherein such are
located. To the Committee's knowledge no management employee has left
employment with the Company permanently for greater pay and/or fringe benefits
during tenure, which confirms the soundness of this delegation of Board
function.
The Committee believes the Chief Executive Officer is best qualified to judge
the merits of employee compensation requests and recommendations for
compensation levels for individual management employees. Due to the size of
the Company, the Chief Executive Officer, who is also the Chief Operating
Officer, is familiar with and works with all such management personnel on a
day to day basis. Delegation of authority on a report back basis is widely
used by him.
The Company, with its flexible internal communications relationship in
management and its open door policy for questions, suggestions and complaints,
etc., is not staffed as and does not operate as a bureaucracy. Salary
increases and bonus allocation amounts are based on merit and are generally
made by the Chief Executive Officer in conjunction with input from the
Department Heads subject to review by the Compensation Committee.
EXECUTIVE OFFICER COMPENSATION PROGRAM
--------------------------------------
The Chief Executive Officer's compensation program is comprised of base
salary, annual cash performance plan compensation and long-term incentive
compensation in the form of stock options. In addition the Committee believes
that basic management compensation should be adequate, but not excessive and
should be coupled with incentive compensation awards based on the individual's
performance and his/her contribution to the overall Company effort and
results. The Compensation Committee, in the interests of employee morale and
motivation, plans to continue supporting and recommending to the Board of
Directors and to the Chief Executive Officer, improvements in and to simple
and plain incentive compensation plans for management personnel in the areas
of:
(1) Merit salary increases based on the individual's level of
responsibility and on above average individual work
performance and goal achievement.
(2) The l995 Incentive Stock Option Plan for key management
employees and executive officers, which is based on merit,
above average performance and goal achievement. This ISO Plan
is intended to motivate a key management employee, who holds a
stock option grant, to work for long term Company growth and
profitability. Such will benefit key employee shareholders, as
well as benefit all other shareholders.
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(3) The 1992 Incentive Compensation (Bonus) Plan was established to
provide a fair and equitable formula for the sharing of Company
profits with those management employees who help make profits
possible. If there is a loss or if profits are minimal, no
bonus awards will be made. When the Company is adequately
profitable, graduated awards are made based on the individual's
level of responsibility and his/her performance thereunder.
The more responsible a key management employee's function is,
the greater the reward when pre-established goals are met or
exceeded.
Cash awards under the two-part Bonus Plan are based on the
Company meeting or exceeding during the fiscal year specified
income levels for each part. This two part Plan is designed
to share the Company profit on a merit and performance basis,
first with all management personnel and second with key
executive management. Payments under both parts being geared to
individuals achieving budgets and/or meeting specific
performance goals. In certain instances sharing is among
several individuals where group effort is to be rewarded.
The Compensation Committee reviews the base salary and the annual incentive
compensation of the Chief Executive Officer following the close of each fiscal
year. This review is made in light of his handling of his responsibilities,
his performance during the year and the financial results for the fiscal year.
BASE SALARY
The Chief Executive Officer's base salary through fiscal l996 was $2l5,000.
Effective November l, l996, his base salary was reduced to $l98,489 for fiscal
l997. This reduction is commensurate with the Company's operating results for
fiscal l996.
The Chief Executive Officer's 3 year continuing Employment Contract provides
for an automatic increase of 5% of base salary on January l following the
close of each fiscal year. The base salary by contract thus provides a floor
from which merit increases based on performance may be made. The Compensation
Committee independently determines merit increases in the base salary for the
Chief Executive Officer by evaluating the Company's performance against its
pre-set goals; examining the Company's performance within the industry and
evaluating the overall performance of the Chief Executive Officer in operating
the Company during fiscal year.
The Company was not profitable in fiscal l996 suffering a net loss of $4
Million. The Committee believes the footwear market and other factors faced
by the Company in fiscal l996 were beyond anyone's control. Major factors
were: the continuing decline in shipments due to the overstocked inventory
condition of dealers and retailers causing a decline in profit margins;
severe price competition from work shoe imports in the marketplace; accruals
and write-downs from marketing restructuring activities and an approximately
$l Million increase in deferred income tax reserves. The Committee believes
the Chief Executive Officer handled his responsibilities well during fiscal
l996 despite the operating results. The Chief Executive Officer has in place
substantial changes in response to the major factors underlying the fiscal
l996 operating loss.
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ANNUAL INCENTIVE COMPENSATION
Since Fiscal l996 generated an operating loss, no provision was made for the
payment of any bonuses under the 1992 Incentive Compensation (Bonus) Plan.
STOCK OPTION GRANTS
The Committee is responsible for reviewing and granting employee incentive
stock options under the 1995 Incentive Stock Option Plan for Key Employees and
Non-Employee Directors. No Employee Stock Option Grants were considered or
made by the Committee during fiscal 1996, and no stock option grants were
exercised during fiscal 1996.
DIRECTORS AND MEMBERS OF THE
COMPENSATION & STOCK OPTION COMMITTEE
George M. Ball, Chairman
R.L. Donnell, Jr.
James P. McDermott
Michael C. Miller
Edna A. Walker
CERTAIN TRANSACTIONS
--------------------
MAE, Inc. ("MAE" hereinafter), of Asheboro, North Carolina, is an advertising
agency and public relations firm owned by Maggie Anderson and her husband
Kent T. Anderson, Chairman and Chief Executive Officer of B.B. Walker
Company, ("Walker" hereinafter). During fiscal l996, Maggie Anderson, as the
only active principal and owner, rendered technical and creative services to
Walker in the areas of design, layout, color separation, photography and other
services, including the placement of Walker advertisements and ad copy in
trade publications, footwear magazines and other related media means. Other
services rendered include assistance in producing printed material,
coordinating public relations events and press conferences for the Company;
arranging interviews with print and electronic media and developing
promotional projects. During fiscal l996, Walker paid MAE a total of $455,68l
for services rendered. As advertising agent for Walker, MAE received certain
funds included in the above total, for the placing of Company advertising in
various trade publications, which funds were then transferred in payment
therefore, net of her standard commission. A substantial portion of the
payments are for creative work in design, layout, writing copy, etc.
This relationship was disclosed to and approved by the Board of Directors at
inception. The Chief Executive Officer updated the Board in October l996.
Walker is the largest of the half dozen accounts or clients serviced by MAE.
Maggie Anderson, her five associates and certain free-lance personnel work
directly with all marketing department officials at Walker in fulfilling
corporate advertising and related requirements. The Board believes the
services rendered to Walker by MAE and paid for are competitive as to price
and equal to or superior in quality to others available in this area.
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SHAREHOLDER RETURN PERFORMANCE PRESENTATION
-------------------------------------------
Set forth below is a table comparing the annual percentage change in the
Company's common stock with the percentage change in the NASDAQ Composite
Index and an index of peer companies ("Peer Group") selected by the Company.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(B.B. Walker Company, NASDAQ Composite Index, Peer Group)
NASDAQ
Measurement Period B.B. Walker Composite Peer
(Fiscal Year) Company Index Group
------------------ ----------- --------- -----
Measurement Point -
November 2, 1991 $ 100 $ 100 $ 100
October 31, 1992 $ 160 $ 111 $ 123
October 30, 1993 $ 440 $ 144 $ 228
October 29, 1994 $ 260 $ 143 $ 171
October 28, 1995 $ 60 $ 191 $ 148
November 2, 1996 $ 65 $ 225 $ 189
This graph depicts the total cumulative appreciation of a $l00
investment made on November 2, 1991 through October 31, l996
in B.B. Walker Company, the NASDAQ Composite Index and the
Peer Group.
The Peer Group is comprised of the following public companies:
Brown Group, Genesco, Justin Industries, McRae Industries,
Rocky Shoes & Boots, Timberland, Wellco Enterprises, Weyco
Group and Wolverine World Wide. These companies operate in
the same or similar markets and produce same or similar
products. The Peer Group appreciation is the average total
appreciation of the companies within the group.
16
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2. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
---------------------------------------------
The Board of Directors of the Company at its January 6, l997 meeting, on the
recommendation of the Audit Committee, again selected the firm of Price
Waterhouse LLP, Winston-Salem, North Carolina, to continue as independent
public accountants of B.B. Walker Company and its subsidiary for the fiscal
year ending November 1, l997, subject to ratification by the Shareholders.
Unless otherwise specified by the Shareholders, votes will be cast pursuant to
the proxies hereby solicited in favor of the approval of the selection by the
Board of Price Waterhouse LLP, as independent public accountants, to audit the
books and accounts of the Company for the l997 fiscal year and until their
successors are selected. Price Waterhouse LLP has acted in such capacity
since April l973.
The Board of Directors and the Audit Committee are satisfied as to the
professional competence and standing of Price Waterhouse LLP. The Audit
Committee meets with representatives of Price Waterhouse LLP to review the
audit scope and estimated fees for the coming year and to review the results
of the audit of the prior fiscal year.
Price Waterhouse LLP plans to have one or more representatives present at the
Annual Meeting who will have the opportunity to make a statement if desired
and to respond to appropriate questions which any Shareholders might have.
Management knows of no direct or indirect material financial interests or
relationships that any members of such firm have with B.B. Walker Company.
The vote of a majority of shares present is necessary to ratify the Board of
Directors' selection of Price Waterhouse LLP.
The submission of Price Waterhouse LLP for shareholder approval at the
forthcoming meeting is not mandatory under North Carolina law or the rules and
regulations of the Securities and Exchange Commission. In the event the
Shareholders do not approve of the action of the Board of Directors, the Board
will take prompt action to select another competent independent public
accounting firm of equal ability and standing to perform the services
presently being rendered by Price Waterhouse LLP.
3. SHAREHOLDER PROPOSALS
---------------------
Proposals from Shareholders for inclusion in the Proxy Statement of B.B.
Walker Company relating to the l998 Annual Meeting of the Shareholders, must
be directed to the Secretary of the Company at the principal office of B.B.
Walker Company for consideration no later than November l, l997. All such
proposals must meet the requirements set forth in the rules and regulations of
the Securities and Exchange Commission, in order to be eligible for inclusion
in the Company's l998 Proxy Statement.
17
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4. OTHER MATTERS
-------------
The management of the Company knows of no other matters which may come before
this meeting. However, if any matters other than those referred to above
should come before the meeting, it is the intention of the persons named in
the enclosed Proxy to vote such proxy in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS, THIS 24TH DAY OF FEBRUARY, l997.
DOROTHY W. CRAVEN
----------------------------
Dorothy W. Craven, Secretary
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE AND SIGN THE
ENCLOSED PROXY CARD. RETURN THE CARD PROMPTLY IN THE
ACCOMPANYING POSTPAID PRE-ADDRESSED ENVELOPE. THANK YOU.
18
<PAGE>
B.B. WALKER COMPANY THIS PROXY IS SOLICITED ON BEHALF OF THE
4l4 East Dixie Drive BOARD OF DIRECTORS
P.O. Drawer ll67
Asheboro, N.C. 27204
P The undersigned hereby appoints Dorothy W.
R Craven and Rebecca S. Rich or either of
O them, as Proxies, each with the power to
X appoint a substitute and hereby authorizes
Y them to represent and to vote as designated
below, all of the shares of common stock of
B. B. Walker Company held of record by the
undersigned on February 24, l997 at the
Annual Meeting of Shareholders to be held
at 7:00 p.m. EST on March l7, l997 or any
adjournment thereof.
l. ELECTION OF [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
DIRECTORS (Except as marked to the to vote for all
contrary) nominees
K.T. Anderson; G.M. Ball, R.L. Donnell, Jr., J.P. McDermott
M.C. Miller and E.A. Walker
INSTRUCTION: To withhold authority to vote for one or more
individual nominees, write the name(s) of such
nominees(s) in the space provided below.
-------------------------------------------------------------
2. TO CONSIDER RATIFYING THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. WITH DISCRETIONARY AUTHORITY UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
YOUR PROXY MAY BE RESCINDED AT ANY TIME BEFORE IT IS EXERCISED AND WILL BE
RETURNED TO YOU ON REQUEST. THIS PROXY WILL BE VOTED AS SPECIFIED AND IF NO
SPECIFICATION IS MADE, SHALL BE VOTED IN FAVOR OF THE AFOREMENTIONED
PROPOSALS. PLEASE SIGN AND DATE THIS PROXY AND RETURN AT ONCE IN THE ENCLOSED
BUSINESS REPLY ENVELOPE. MANAGEMENT RECOMMENDS A VOTE FOR EACH OF THE ABOVE
PROPOSITIONS.
DATED
--------------------------------------
(SEAL)
--------------------------------------
Signature
(SEAL)
--------------------------------------
Signature
IMPORTANT: Please sign this Proxy exactly as your name appears hereon. If
shares are held jointly, both owners must sign. Others signing
in a representative capacity should give their full titles.
<PAGE>
