<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
/X/ Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
Brown Group, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[LOGO] BROWN GROUP, INC.
8300 Maryland Avenue, Post Office Box 29, St. Louis, Missouri 63166-0029
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1997
The Annual Meeting of Shareholders of Brown Group, Inc. (the
"Corporation") will be held on the 22nd day of May, 1997, at 11:00 a.m., in
the Brown Group, Inc. Conference Center, located at 8300 Maryland Avenue, in
Clayton, in St. Louis County, Missouri, for the following purposes:
A. To elect four Directors; and
B. To transact such other business as may properly come before the
meeting.
On January 9, 1997, the Board of Directors of the Corporation amended
Article II, Section 1 of the Bylaws of the Corporation to increase the number
of Directors from eleven to twelve, and to classify the Directors in respect of
the time for which they shall severally hold office by dividing them into three
classes of four Directors each. At the same meeting, the Board of Directors
elected Mr. Thomas A. Williams to fill the Directorial vacancy created by this
amendment to the Bylaws, to serve until the 1997 Annual Meeting of the
Shareholders of the Corporation. Article II, Section 1 of the Bylaws, as so
amended, is set forth in Exhibit 1 to the accompanying Proxy Statement.
Holders of Common Stock of the Corporation whose names appear of record
on the books of the Corporation at the close of business on April 2, 1997 are
entitled to receive notice of and to vote at said meeting.
ROBERT D. PICKLE
Vice President, General Counsel
and Corporate Secretary
8300 Maryland Avenue
Post Office Box 29
St. Louis, Missouri 63166-0029
April 16, 1997
Shareholders are urged to sign, date and return the enclosed Proxy as
soon as possible. A postage paid, return addressed envelope is enclosed for
your convenience.
1
<PAGE> 3
[LOGO] BROWN GROUP, INC.
8300 Maryland Avenue, Post Office Box 29, St. Louis, Missouri 63166-0029
PROXY STATEMENT
---------
ANNUAL MEETING OF SHAREHOLDERS, MAY 22, 1997
---------
This Proxy Statement is furnished to Shareholders of Brown Group, Inc.
(the "Corporation") in connection with the solicitation by the Board of
Directors of the Corporation of Proxies for use at the Annual Meeting of
Shareholders to be held on May 22, 1997, and at all adjournments thereof, for
the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.
On the April 2, 1997 record date, the Corporation had outstanding
18,029,927 shares of Common Stock of the par value of $3.75 per share, each of
which is entitled to one vote. The Corporation's Annual Report for the Fiscal
Year ended February 1, 1997 accompanies this Proxy Statement. Such report shall
not, however, be considered as proxy soliciting material. This Proxy Statement,
the enclosed form of Proxy, and the Corporation's Annual Report to Shareholders
are being mailed to Shareholders of the Corporation on or about April 16, 1997.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
single person known by the Corporation, as of April 2, 1997, to beneficially
own more than 5% of the Common Stock of the Corporation:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
- ------------------------------------ ------------ ------------
<S> <C> <C>
John Hancock Mutual Life Insurance Company,
through its indirect, wholly-owned Subsidiaries
John Hancock Place 1,394,015<F1> 7.7%<F1>
Post Office Box 111
Boston, Massachusetts 02117
<FN>
- ---------------------
<F1> Based on written representations made to the Corporation by such
Shareholder, the named Shareholder, acting in various fiduciary
capacities, possessed sole voting authority over 642,370 shares and
sole investment authority over 1,394,015 shares.
</TABLE>
2
<PAGE> 4
SECURITY HOLDINGS OF MANAGEMENT
The following table sets forth, as of April 2, 1997, the amounts of
Common Stock of the Corporation beneficially owned by each Director of the
Corporation, each nominee for election as a Director of the Corporation,
certain Executive Officers of the Corporation who are listed in the Summary
Compensation Table on page 10 of this Proxy Statement, and all Directors and
Executive Officers of the Corporation as a Group, together with the number of
incentive options and non-qualified options to purchase shares of Common Stock
which are exercisable by such persons, either immediately or by June 1, 1997,
at prices ranging from $14.4375 to $37.8125 per share, and which option shares
are considered to be beneficially owned by such persons pursuant to Rule
13d-3(d) under the Securities Exchange Act of 1934:
<TABLE>
<CAPTION>
AMOUNT OF COMMON STOCK
BENEFICIALLY OWNED
-------------------------------------
NUMBER OF OPTIONS
SHARES EXERCISABLE BY
NAME OWNED JUNE 1, 1997
- ---- --------- --------------
<S> <C> <C>
Joseph L. Bower................................... 2,700 -0-
B. A. Bridgewater, Jr............................. 163,199 21,732
Brian C. Cook..................................... 60,520 19,518
Julie C. Esrey.................................... 1,500 -0-
Richard A. Liddy.................................. 2,000 -0-
John Peters MacCarthy............................. 4,250 -0-
John D. Macomber.................................. 3,500 -0-
William E. Maritz................................. 2,500 -0-
General Edward C. Meyer, Retired.................. 2,500 -0-
Gary M. Rich...................................... 13,604 8,750
Harry E. Rich..................................... 37,687 19,449
Jerry E. Ritter................................... 2,000 -0-
Daniel R. Toll.................................... 2,700 -0-
Thomas A. Williams................................ 40,510 18,750
Directors and Executive Officers as a Group
(25 persons, including those named above)....... 481,913 195,932
</TABLE>
Mr. B. A. Bridgewater, Jr. is the beneficial owner of 1.01% of the
Corporation's Common Stock. Each other person identified in the preceding
table is the beneficial owner of less than 1% of the Corporation's Common
Stock. The 25 persons comprising Directors and Executive Officers as a Group
are, in the aggregate, the beneficial owners of 3.7% of such outstanding
Common Stock, when the shares subject to the options described above are
considered as beneficially owned by such persons. Such option shares have been
deemed to be outstanding as of April 2, 1997, for purposes of calculating the
aggregate percentage beneficially owned by Directors and Executive Officers as
a Group.
3
<PAGE> 5
(A)
THE ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, with the terms of
office of each class ending in successive years. This classified Board
structure was adopted on November 2, 1954. Four Directors are to be elected for
terms expiring at the Annual Meeting in 2000; four Directors will continue in
office for terms expiring at the Annual Meeting in 1999; and four Directors
will continue in office for terms expiring at the Annual Meeting in 1998 (or,
in the case of each Director, until such Director's successor has been elected
and qualified). It is intended that the votes will be cast pursuant to the
accompanying Proxy for the election of the nominees named below, unless
otherwise directed. In the event that any nominees for office should for any
reason become unavailable, although no reason is known why any will be unable
to serve, it is intended that votes will be cast pursuant to the accompanying
Proxy for substitute nominees designated by the Board of Directors, except for
Proxies marked to the contrary.
The nominees and the Directors who will continue in office, the terms
for which they are nominated or have been elected, their other positions or
offices with the Corporation, their ages, the respective years which marked the
commencement of their continuous service as Directors of the Corporation and
their principal current occupations are as set forth below. All nominees except
Mr. Thomas A. Williams and all Directors continuing in office previously have
been elected by the Shareholders.
4
<PAGE> 6
<TABLE>
TO BE ELECTED FOR A TERM
OF THREE YEARS
<CAPTION>
DIRECTOR
NAME AND OTHER POSITIONS OR OFFICES WITH CONTINUOUSLY
THE CORPORATION AGE SINCE
---------------------------------------- ---- -------------
<S> <C> <C> <C>
JOSEPH L. BOWER
Chairman of the Corporation's
BOWER [PHOTO] Compensation Committee and Member of the
Corporation's Executive Committee....... 58 1987
HARRY E. RICH
Executive Vice President and Chief
RICH [PHOTO] Financial Officer; Member of the
Corporation's Executive Committee....... 57 1985
JERRY E. RITTER
Member of the Corporation's Audit
RITTER [PHOTO] Committee and Member of the
Corporation's Compensation Committee.... 62 1996
THOMAS A. WILLIAMS
Vice President of the Corporation and
WILLIAMS [PHOTO] President, Brown Shoe Company........... 48 1997
5
<PAGE> 7
<CAPTION>
TO CONTINUE IN OFFICE
FOR TWO YEARS
DIRECTOR
NAME AND OTHER POSITIONS OR OFFICES WITH CONTINUOUSLY
THE CORPORATION AGE SINCE
---------------------------------------- ---- -------------
<S> <C> <C> <C>
JOHN PETERS MACCARTHY
Member of the Corporation's Audit
MacCARTHY [PHOTO] Committee and Member of the
Corporation's Compensation Committee.... 64 1996
JOHN D. MACOMBER
Member of the Corporation's Compensation
Committee and Member of the
MACOMBER [PHOTO] Corporation's Governance and Nominating
Committee............................... 69 1993
WILLIAM E. MARITZ
Chairman of the Corporation's Governance
and Nominating Committee; Member of the
MARITZ [PHOTO] Corporation's Executive Committee and
Member of the Corporation's Audit
Committee............................... 68 1983
GENERAL EDWARD C. MEYER, RETIRED
Member of the Corporation's Compensation
MEYER [PHOTO] Committee and Member of the
Corporation's Governance and Nominating
Committee............................... 68 1992
6
<PAGE> 8
<CAPTION>
TO CONTINUE IN OFFICE
FOR ONE YEAR
DIRECTOR
NAME AND OTHER POSITIONS OR OFFICES WITH CONTINUOUSLY
THE CORPORATION AGE SINCE
---------------------------------------- ---- -------------
<S> <C> <C> <C>
B. A. BRIDGEWATER, JR.
Chairman of the Board of Directors,
BRIDGEWATER [PHOTO] President and Chief Executive Officer;
Chairman of the Corporation's Executive
Committee............................... 63 1978
JULIE C. ESREY
Member of the Corporation's Audit
ESREY [PHOTO] Committee and Member of the
Corporation's Governance and Nominating
Committee............................... 58 1995
RICHARD A. LIDDY
Chairman of the Corporation's Audit
Committee; Member of the Corporation's
LIDDY [PHOTO] Executive Committee and Member of the
Corporation's Governance and Nominating
Committee............................... 61 1994
DANIEL R. TOLL
Member of the Corporation's Audit
TOLL [PHOTO] Committee and Member of the
Corporation's Compensation Committee.... 69 1981
</TABLE>
7
<PAGE> 9
The following are brief summaries of the business experience, during
the period of the past five years, of each of the nominees for election as
Directors of the Corporation and of each of the present Directors of the
Corporation who are continuing in office, including, where applicable,
information as to the other company directorships currently held by each of
them:
Mr. Joseph L. Bower is, and for the period of the past five years has
been, the Donald Kirk David Professor of Business Administration at the Harvard
Business School. In addition, from September, 1985 until September, 1989, he
was Senior Associate Dean and Director of External Relations at that
institution, where since September, 1989, he has been Chairman of Doctoral
Programs and Director of Research. Mr. Bower serves as a director of Anika
Research, the M. L. Lee Acquisition Fund, the New America High Income Fund and
Sonesta International Hotels Corporation and as a Trustee of the New England
Conservatory of Music and of the Dana DeCordova Museum.
Mr. B. A. Bridgewater, Jr. has been Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation during the past five
years. He serves also as a director of ENSERCH Corporation and Enserch
Exploration, Inc., FMC Corporation, McDonnell Douglas Corporation and
NationsBank Corporation and as a Trustee of Washington University.
Mrs. Julie C. Esrey serves as a director of various organizations. From
1962 to 1976, she was employed as an International Economist for Exxon
Corporation, where she subsequently was engaged as a consultant. Mrs. Esrey is
a member of the Executive Committee of the Board of Trustees of Duke
University, a director of the Duke Management Company and a member of the Board
of Visitors of the Duke University Medical Center. She also has recently served
as a director of Bank IV Kansas, National Association, in Wichita, Kansas and
as a member of the Central Governing Board for the Children's Mercy Hospital,
in Kansas City, Missouri.
Mr. Richard A. Liddy is a director and Chairman of the Board of
Directors, President and Chief Executive Officer of the General American Life
Insurance Company. He served as President and Chief Executive Officer of that
organization from 1992 until January 26, 1995, when he was elected to the
additional office of Chairman of the Board of Directors, and from 1988 until
1992 was President and Chief Operating Officer of the General American Life
Insurance Company. Mr. Liddy is a director and Chairman of the Board of the
Reinsurance Group of America, Inc., and of the registered investment companies
of the General American Capital Company and The Walnut Street Funds, Inc. Mr.
Liddy serves on the Boards of Directors of Ralston Purina Company, Union
Electric Company, the Boy Scouts of America, the Missouri Historical Society,
the Saint Louis Art Museum, the United Way of Greater Saint Louis and Webster
University in Saint Louis. Additionally, he is a member of the Board of
Directors of the American Council of Life Insurance.
Mr. John Peters MacCarthy is the immediate past Chairman and Chief
Executive Officer of Boatmen's Trust Company, a position he held from 1988
until his retirement in 1994. He served as President and Chief Executive
Officer of Centerre Bank National Association from 1984 until 1988. He served
as an officer of Centerre Trust Company from 1969 until 1979, when he was named
Chief Executive Officer and a Director of Centerre Trust Company. He was a
Partner in the law firm of Bryan, Cave, McPheeters and McRoberts in Saint
Louis, Missouri from 1959 to 1968. Mr. MacCarthy serves on the Board of
Directors of Union Electric Company. Mr. MacCarthy is a Trustee of Washington
University and of the Saint Louis Art Museum.
Mr. John D. Macomber has been Principal of JDM Investment Group, a
private investment firm, since 1992. From July, 1989 until November, 1992, Mr.
Macomber was Chairman and President of the Export-Import Bank of the United
States, in Washington, D.C., and, prior to that, was, successively, Chairman,
President and Chief Executive Officer of Celanese Corporation, in New York
City, and a Senior Partner with McKinsey & Company, Inc. He currently serves as
a director of Bristol-Myers Squibb Company, Lehman Brothers Holdings Inc.,
Pilkington, Ltd., Textron Inc. and Xerox Corporation; as a director of the
National Executive Services Corps, The Atlantic Council of the United States,
The French-American Foundation and the George Bush Presidential Library
Foundation; as Chairman of the Council for Excellence in Government, in
Washington,
8
<PAGE> 10
D.C.; as a member of the Advisory Board of the Center for Strategic and
International Studies; and as a Trustee of Adelphi University, the Carnegie
Institution of Washington and The Folger Library.
Mr. William E. Maritz has been Chairman of the Board of Directors and
Chief Executive Officer of Maritz Inc., a motivation, travel, training,
communications and marketing research services company, during the past five
years. From prior to April, 1991, Mr. Maritz served also as President of Maritz
Inc., a position which he relinquished on July 9, 1991. Mr. Maritz serves as a
director of Maritz Inc. and the General American Life Insurance Company and as
a Trustee of Washington University.
General Edward C. Meyer, Retired, served as Chief of Staff of the
United States Army until 1983. He currently is Chairman of MITRETEK Systems and
Managing Partner of Cilluffo Associates, L.P., a private investment group. He
currently is a director of ITT Corp., ITT Industries, GRC International, Inc.,
Aegon USA, FMC Corporation and FMC--Nurol Savinma Sanayii A.S. (an FMC
Corporation-Turkish joint venture). General Meyer is a Trustee of the George
Catlett Marshall Foundation, and a member of the Board of Governors of the
Smith Richardson Foundation, the Board of Overseers of the Hoover Institution
and the Board of Advisors of the Center for Strategic and International
Studies, in Washington, D.C., and is President of the Army Emergency Relief
Association and Chairman of the Association of Graduates of the United States
Military Academy, at West Point, New York.
Mr. Harry E. Rich has been Executive Vice President and Chief Financial
Officer of the Corporation during the past five years. Previously, Mr. Rich
served as Senior Vice President of the Corporation. Mr. Rich serves as a
director of the registered investment companies of the General American Capital
Company and The Walnut Street Funds, Inc.
Mr. Jerry E. Ritter is Chairman of the Board of Directors of the Kiel
Center sports and entertainment complex in Saint Louis and of the Saint Louis
Blues Hockey Club of the National Hockey League. Mr. Ritter also is Chairman of
the Board of Directors and Chief Executive Officer of Clark Enterprises, Inc.,
a holding company engaged in the management and operation of the Kiel Center.
Mr. Ritter is a Consultant to Anheuser-Busch Companies, Inc., a company engaged
in the brewing of beer and in providing family entertainment, where, from prior
to April, 1991 through 1996, he was Executive Vice President and Chief
Financial and Administrative Officer. Mr. Ritter is a director of The
Earthgrains Company, The O'Gara Company and Omniquip International, Inc., and
serves, also, as a member of the Board of Directors of the Automobile Club of
Missouri and as a member of the Board of Commissioners of the Saint Louis
Science Center.
Mr. Daniel R. Toll serves as a corporate and civic director. Until
March 31, 1985, Mr. Toll served as President of Walter E. Heller International
Corporation, a financial services company. Mr. Toll serves as a director of A.
P. Green Industries, Inc., Kemper National Insurance Companies, Lincoln
National Convertible Securities Fund, Inc., Lincoln National Income Fund, Inc.,
Mallinckrodt Inc. and NICOR Inc.
Mr. Thomas A. Williams has been a Vice President of Brown Group, Inc.
and President of Brown Shoe Company since January 13, 1994. He served as
Chairman of Pagoda Trading Company, Inc. from 1989 until May 23, 1996 and as
Vice President, International Operations of Brown Group, Inc. from March 3,
1993 until January 13, 1994, when he was elected as Corporate Vice President,
Footwear Wholesaling of the Corporation and as President of Brown Shoe Company.
Mr. Williams is a director and Vice Chairman of the Board of Directors of the
Footwear Distributors and Retailers of America, and a director and Chairman of
the Board of Directors of the Footwear Retailers of America Shippers'
Association. Mr. Williams also serves on the Boards of Directors of the Fashion
Footwear Association of New York and the Two/Ten International Footwear
Foundation.
There are no family relationships between any Directors or Executive
Officers of the Corporation.
9
<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER BENEFITS
The following information is given for the Fiscal Years ended February
1, 1997, February 3, 1996 and January 28, 1995 concerning annual and long-term
compensation for services rendered to the Corporation and its subsidiaries of
those persons who at February 1, 1997 were the Corporation's Chief Executive
Officer and the other four most highly compensated Executive Officers of the
Corporation whose total salary and bonuses exceeded $100,000:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS<F4>
------------------------------------- -----------------------------
SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND BONUS COMPENSATION STOCK AWARD(S) OPTIONS/SARS COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) ($)<F1> ($)<F2> ($)<F3> (#) ($)<F5>
------------------ ---- ---------- ------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
B. A. Bridgewater, Jr. 1996 725,000 164,140 -0- 581,875 -0- 11,051
Chairman of the Board, 1995 725,000 -0- -0- -0- -0- 11,101
President and Chief 1994 650,000 300,000 -0- 950,000 -0- 13,726
Executive Officer
Brian C. Cook 1996 475,000 -0- -0- -0- 15,000 6,128
Vice President of the 1995 475,000 -0- -0- -0- 32,500 6,032
Corporation and 1994 425,000 145,350 -0- 570,000 -0- 6,186
President, Famous
Footwear
Gary M. Rich 1996 330,000 192,720 -0- -0- 8,000 5,504
President, Pagoda 1995 330,000 -0- -0- -0- 14,000 5,077
U.S.A. 1994 300,000 84,000 -0- 247,000 3,000 5,358
Harry E. Rich 1996 400,000 90,560 -0- -0- 15,000 5,250
Executive Vice 1995 400,000 -0- -0- -0- 25,000 5,893
President 1994 350,000 165,000 -0- 380,000 -0- 6,277
and Chief Financial
Officer
Thomas A. Williams 1996 450,000 120,600 -0- -0- 15,000 5,250
Vice President of the 1995 450,000 -0- -0- -0- 35,000 5,295
Corporation and 1994 400,000 140,000 -0- 646,000 5,000 5,434
President, Brown Shoe
Company
<FN>
- ------------------------
<F1> Amounts are earned and accrued during the Fiscal Years indicated, and
are paid subsequent to the end of each Fiscal Year, pursuant to the
Corporation's Annual Incentive Plan, described below.
<F2> The named Executive Officers received certain perquisites, none of
which exceeded the lesser of $50,000 or 10% of any such Officer's salary
and bonus.
<F3> Restricted Stock Awards are valued by multiplying the closing market
price of the Corporation's unrestricted stock on the date of grant by the
number of shares awarded. Dividends are paid on Restricted Stock Awards at
the same rate as paid to all Shareholders.
10
<PAGE> 12
On February 1, 1997, Mr. Bridgewater held 81,250 Restricted Shares having
a market value of $1,335,546.88, Mr. Cook held 32,250 Restricted Shares
having a market value of $530,109.38, Mr. G. M. Rich held 10,250 Restricted
Shares having a market value of $168,484.38, Mr. H. E. Rich held 18,250
Restricted Shares having a market value of $299,984.38, and Mr. Williams
held 28,750 Restricted Shares having a market value of $472,578.13.
<F4> The Corporation has no long-term incentive plans other than those
described below.
<F5> Includes in 1996 for Mr. Bridgewater: $5,250.00 to the Corporation's
401(k) Plan, $4,920.00 in Corporation-paid group life insurance premiums
and $880.88 in the Employee Stock Purchase Plan. Includes in 1996 for Mr.
Cook: $5,393.83 to the Corporation's 401(k) Plan and $734.24 in the
Employee Stock Purchase Plan. Includes in 1996 for Mr. G. M. Rich:
$5,503.84 to the Corporation's 401(k) Plan. Includes in 1996 for Mr. H. E.
Rich: $5,250.00 to the Corporation's 401(k) Plan. Includes in 1996 for Mr.
Williams: $5,250 to the Corporation's 401(k) Plan. The Corporation has no
other Plans providing for other kinds of compensation entitlements,
including split-dollar life insurance arrangements, which otherwise would
be required to be disclosed in this column.
</TABLE>
ANNUAL INCENTIVE PLAN
The Corporation's Executive Officers and certain other key management
employees, as determined by the Compensation Committee of the Board of
Directors, are eligible to receive Incentive Awards granted under the
Corporation's Annual Incentive Plan. Payments are based upon the achievement of
financial objectives with respect to earnings and return on invested capital
each year. Payments may vary in light of corporate or divisional performance
(as appropriate) with respect to such financial objectives. Awards paid to
Executive Officers pursuant to the Corporation's Annual Incentive Plan are
included in the amounts stated in the second compensation column of the Summary
Compensation Table on page 10 of this Proxy Statement.
RESTRICTED STOCK PLANS
The Corporation's Executive Officers and certain other key management
employees, as determined by the Compensation Committee of the Board of
Directors, are eligible to receive Restricted Stock granted under the Brown
Group, Inc. Stock Option and Restricted Stock Plan of 1994, as amended by the
Shareholders at the 1996 Annual Meeting (the "1994 Plan"). Awards of
Restricted Stock have also been made to the Corporation's Executive Officers
and certain key management employees under the Brown Group, Inc. Stock Option
and Restricted Stock Plan of 1987, as amended (the "1987 Plan"). With the
1994 Plan having been approved by the Shareholders of the Corporation at the
1994 Annual Meeting of Shareholders, the Corporation is not making any further
Restricted Stock awards under the 1987 Plan.
Under both Plans, shares of Restricted Stock are granted at no cost to
the Participant and are delivered at the time of the grant, but are subject to
forfeiture until certain specified conditions are met. Each certificate
representing shares of Restricted Stock bears a legend referring to the Plan
under which it was issued, the risk of forfeiture of the shares and the fact
that such shares are non-transferable until the restrictions have been
satisfied and the legend has been removed. The recipient of Restricted Stock is
entitled to full voting and dividend rights with respect to such shares from
the date of grant. Under both Plans, shares vest in the Participant and
restrictions lapse as follows: one-half of the shares after four years from the
date of grant, an additional one-fourth after six years and the remaining
one-fourth after eight years. A Participant in a Plan is entitled to receive
shares of Restricted Stock free of restrictions only if he or she is, at the
time of the lapse of such restrictions, in the employ of the Corporation and
has been continuously so employed since the date of grant, except in the case
of retirement or death. If employment is terminated because of disability, the
Participant will be treated as continuing in the employ of the Corporation for
purposes of fulfilling the applicable restriction period. In the event (1) any
person other than the Corporation acquires more than 25% of the Corporation's
Common Stock, (2) the Corporation is liquidated or dissolved following a sale
of all or
11
<PAGE> 13
substantially all of its assets, or (3) the Corporation is not the surviving
parent corporation resulting from any merger or consolidation to which it is a
party (each of which is deemed to be a "change of control"), then any
unvested shares of Restricted Stock granted under either Plan shall immediately
mature and vest in full.
The Summary Compensation Table on page 10 of this Proxy Statement sets
out in the fourth compensation column the value of the shares of Restricted
Stock granted under either the 1987 Plan or the 1994 Plan to persons named in
that table. Such shares have been included in the Stock Ownership Table on page
3 of this Proxy Statement.
RETIREMENT PLANS
Substantially all salaried, full-time retail and store employees of the
Corporation and designated subsidiaries, as well as the Corporation's Executive
Officers, are eligible to participate in the Shareholder-approved Brown Group,
Inc. Retirement Plan (the "Retirement Plan") after twelve months' employment
and the attainment of 21 years of age. Terms of the Retirement Plan, which is
funded by the Corporation, include, among others, provisions for normal,
optional, early or deferred retirement benefits and for survivor benefits.
Under the Retirement Plan, pensions are computed on a two-rate formula
basis of .825 percent and 1.425 percent for each year of service. The .825
percent service credit is applied to that portion of the average annual salary
for the five highest consecutive years during the last ten-year period that
does not exceed the Social Security Wage Base (the portion of salary subject to
the Federal Social Security Act), and the 1.425 percent service credit is
applied to that portion of the average that exceeds said level.
Certain key employees and Executive Officers are also eligible to
participate in the Supplemental Executive Retirement Plan (the "Supplemental
Plan"). The purpose of the Supplemental Plan is to supplement the benefits
payable to Participants under the Retirement Plan which are otherwise reduced
on account of the limitations of Sections 415 and 401(a)(17) of the Internal
Revenue Code of 1986, as amended. Terms of the Supplemental Plan, among other
things, provide for: an increase in the formula basis for salary in excess of
the Social Security Wage Base; an early retirement benefit; the amount of
benefits payable under the Plan to equal the excess (if any) of the amount
which would have been payable to the Participant as a normal retirement benefit
under the Retirement Plan without regard to the limitations of Sections 415 and
401(a)(17) of the Code less the Participant's normal retirement benefit under
the Retirement Plan, taking into account the limitations of Sections 415 and
401(a)(17) of the Code; and payment, in lump sum value, of all benefits in the
event of a "change of control" of the Corporation, defined in the same manner
as in the 1987 Plan and the 1994 Plan above. The Supplemental Plan is unfunded.
All payments to a Participant will be made from the general assets of the
Corporation.
In addition to the Retirement Plan and the Supplemental Plan, the
Corporation has, incident to hiring, entered into separate agreements with four
Executive Officers at various times, providing additional credited years of
service over those for which the Executive is actually employed. One such
Executive Officer currently is employed by the Corporation.
The table on the following page shows the estimated annual retirement
benefits payable to Participants, including Executive Officers, in the
Retirement Plan on a straight life annuity basis, assuming normal retirement at
age 65 during 1997. The benefits shown in the table below are not subject to
deduction for Social Security or other offset amounts and also include benefits
under the Supplemental Plan. The table does not reflect the effect of profit
sharing balances on pension accounts. If the pension provided by the profit
sharing balance exceeds the formula benefit for the period of employment
preceding November 2, 1975, such excess is added to the total formula pension.
12
<PAGE> 14
<TABLE>
PENSION PLAN TABLE
YEARS OF SERVICE
<CAPTION>
FINAL AVERAGE
SALARY 10 15 20 25 30 35 OR MORE
------------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
$100,000........ $ 12,775 $ 19,162 $ 25,549 $ 31,936 $ 38,324 $ 44,711
$200,000........ 27,425 41,137 54,849 68,561 82,274 95,986
$300,000........ 42,075 63,112 84,149 105,186 126,224 147,261
$400,000........ 56,725 85,087 113,449 141,811 170,174 198,536
$500,000........ 71,375 107,062 142,749 178,436 214,124 249,811
$600,000........ 86,025 129,037 172,049 215,061 258,074 301,086
$700,000........ 100,675 151,012 201,349 251,686 302,024 352,361
$800,000........ 115,325 172,987 230,649 288,311 345,974 403,636
</TABLE>
The credited years of service (including service by agreement) for
purposes of determining benefits for each of the persons named in the Summary
Compensation Table on page 10 are as follows: Mr. B. A. Bridgewater, Jr.--33;
Mr. Brian C. Cook--16; Mr. Gary M. Rich--6; Mr. Harry E. Rich--13; and Mr.
Thomas A. Williams--14. The dollar amounts shown in the first two columns of
the Summary Compensation Table on page 10 are substantially the same as the
compensation covered by the Retirement Plans.
In 1944, the Shareholders approved the adoption of a Retirement Trust
to which the Corporation, and those subsidiaries which had adopted the Trust,
annually contributed six percent of their consolidated profits before taxes.
The Corporation's final contribution was made for the Corporation's 1975 Fiscal
Year. All full-time salaried employees and certain retail employees compensated
by commissions with five years' service with the Corporation or subsidiaries
which had adopted the Trust were eligible to participate.
The Corporation's annual contributions to the Trust were allocated to
the employees' accounts in proportion to each employee's salary.
All Participants' accounts, including the Corporation's contributions
thereto, became fully vested in the Participants on September 4, 1975. Cash
contributions by employees have been returned to each contributing employee
with interest at six percent per year to the date returned. The Retirement
Trust, after the Corporation's final contribution for the 1975 Fiscal Year, was
frozen on November 1, 1975, with account balances thereafter subject to change
solely for future earnings and market adjustments.
At retirement, each Participant under the Retirement Trust may receive
his or her Retirement Trust benefit in the form of either a lump sum or a
monthly annuity.
EMPLOYEE SAVINGS PLAN
Under the Corporation's Employee Savings Plan, as amended, eligible
employees (those who are 21 years of age or older and who have attained one
year of service with the Corporation) may elect to have from 2 percent to 17
percent of their annual salaries, up to a present maximum amount of $9,500 per
Plan Participant, invested in the Plan. The Corporation matches 75 percent of
the first 2 percent investment and 50 percent of the additional investment up
to the 6 percent level. Plan members employed prior to January 1, 1994 are 100
percent vested in their account balances at all times. Plan members employed on
January 1, 1994 and thereafter are vested in the Corporation's matching
contribution after five years. The Summary Compensation Table on page 10 of
this Proxy Statement sets out in the last column the amounts of contributions
by the Corporation
13
<PAGE> 15
which were allocated to the persons named in that table, exclusive of changes
representing increases and declines during the periods in the market price of
the Corporation's Common Stock, offset and reduced by dividends thereon and
short-term interest derived from cash balances of contributions awaiting
investment in such Common Stock. The full value of each Plan Participant's
account is paid to each Plan member when he or she retires, leaves the employ
of the Corporation or becomes permanently and totally disabled.
DIRECTORS' COMPENSATION
The Corporation pays each non-employee Director of the Corporation an
annual cash retainer of $17,500 and also pays an additional annual cash
retainer of $2,000 to the Chairman of the Corporation's Audit Committee, the
Chairman of the Corporation's Compensation Committee and the Chairman of the
Corporation's Governance and Nominating Committee.
The Corporation also pays each non-employee Director (a) a $1,000 fee
for attendance at each meeting of the Board of Directors, (b) a $1,000 fee for
attendance at each meeting of a standing committee of the Board of Directors
and (c) a $1,000 fee to each non-employee Director who is a member of the
Corporation's Executive Committee for attendance at each meeting of the
Executive Committee. The Corporation also pays the premiums for Directors' and
Officers' Liability insurance and Travel Accident insurance coverage for each
Director. The Corporation has no Directors' retirement plan, and pays no
additional Directors' remuneration to any Director who is an Officer or
employee of the Corporation.
Under the 1994 Plan, which was approved by the Corporation's
Shareholders at the 1994 Annual Meeting of Shareholders, each non-employee
Director in office on May 26, 1994 (the date the Plan became effective)
received a grant of 1,000 shares of Brown Group Common Stock. Thereafter, each
newly appointed non-employee Director is granted 1,000 shares on the date at
which the Director is first elected to serve. In addition, each non-employee
Director is granted 250 shares of Brown Group Common Stock annually, and each
non-employee Director who serves as Chairman of the Corporation's Audit,
Compensation or Governance and Nominating Committee is annually granted an
additional 100 shares of Brown Group Common Stock.
STOCK OPTION PLANS
The Corporation has options outstanding under the 1994 Plan and the
1987 Plan (both as described above). These Plans are administered by the
Corporation's Compensation Committee. The Compensation Committee, in its
discretion, based upon such factors as levels of responsibility and individual
performance, makes determinations as to those persons who are considered to be
key employees and who are therefore eligible for awards under these Plans. All
options are granted at 100% of market value on the date of the grant and expire
ten years from the date of grant. With the 1994 Plan having been approved by
the Shareholders at the 1994 Annual Meeting of Shareholders, the Corporation
will make no further awards under the 1987 Plan. In the event that (1) any
person other than the Corporation acquires more than 25% of the Corporation's
Common Stock, (2) the Corporation is liquidated or dissolved following a sale
of all or substantially all of its assets, or (3) the Corporation is not the
surviving parent corporation resulting from any merger or consolidation to
which it is a party, then any unexercisable options awarded under the 1987 Plan
and the 1994 Plan shall be settled by the payment by the Corporation to the
holder of such options of an amount equal to the difference between the
aggregate exercise price of such options and the aggregate fair market value of
the shares of the Corporation's Common Stock subject thereto.
14
<PAGE> 16
The following table shows information with respect to the options and
Stock Appreciation Rights ("SARs") granted to the Executive Officers named in
the Summary Compensation Table on page 10 during the past Fiscal Year:
<TABLE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION
OPTIONS/SARS FOR OPTION TERM
GRANTED TO AVERAGE ---------------------
OPTIONS/SARS EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED<F*> FISCAL YEAR<F*> BASE PRICE DATE 5%($) 10%($)
- ---- ------------- --------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
B. A. Bridgewater, Jr................... -0- n/a n/a n/a n/a n/a
Brian C. Cook........................... 15,000/14,422 5.9%/22.4% $16.875 2006 $159,189 $403,416
Gary M. Rich............................ 8,000/2,580 3.1%/4.0% $16.875 2006 $ 84,901 $215,155
Harry E. Rich........................... 15,000/12,688 5.9%/19.7% $16.875 2006 $159,189 $403,416
Thomas A. Williams...................... 15,000/14,422 5.9%/22.4% $16.875 2006 $159,189 $403,416
<FN>
- ---------------------
<F*> All SARS were issued in tandem with options presented in this table.
</TABLE>
The following table shows information with respect to the unexercised
options and SARs granted during the past Fiscal Year and in prior years to the
Executive Officers named in the Summary Compensation Table on page 10 and with
respect to option/SAR exercises by those persons during the past Fiscal Year:
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS/SARS
OPTIONS/SARS AT FY-END
AT FY-END (#) ($)<F2>
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) REALIZED ($)<F1> UNEXERCISABLE UNEXERCISABLE
- ---- ------------ ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
B. A. Bridgewater, Jr................... -0- -0- 21,732/-0- -0/-0-
Brian C. Cook........................... -0- -0- 17,393/39,375 $12,500/$37,500
Gary M. Rich............................ -0- -0- 10,000/20,000 $ 5,000/$15,000
Harry E. Rich........................... -0- -0- 27,699/33,750 $12,500/$37,500
Thomas A. Williams...................... -0- -0- 16,250/43,750 $12,500/$37,500
<FN>
- ---------------------
<F1> Based on the difference between the mean market price on the date of
exercise and the option price.
<F2> Based on the difference between the mean price at Fiscal Year-end and the
option price.
</TABLE>
LONG-TERM INCENTIVE PLANS
The Corporation has no long-term incentive plans under which any of the
Executive Officers named in the Summary Compensation Table on page 10 of this
Proxy Statement received any award during the periods covered.
15
<PAGE> 17
STOCK PURCHASE PLAN OF 1977
Substantially all salaried and commissioned employees, including
Executive Officers, may participate in the Stock Purchase Plan of 1977 after
twelve months' employment with the Corporation. Under this Plan, stock may be
purchased from the Corporation at 85 percent of its market value on the date of
purchase, or it may be purchased by the Trustee in the open market. In the
latter case, the Corporation and its participating subsidiaries contribute to
the Plan an amount equal to 17.647 percent of the Participants' contributions,
which is equivalent to 15 percent of the purchase price of the stock to the
Participants.
The Summary Compensation Table on page 10 of this Proxy Statement sets
out in the last column the amounts of contributions by the Corporation to the
Plan for the persons named in that table.
BOARD OF DIRECTORS AND STANDING
COMMITTEES OF THE BOARD
BOARD OF DIRECTORS
During the Fiscal Year ended February 1, 1997, the Board of Directors
of the Corporation met at regular and special meetings on seven separate
occasions. Each of the Directors attended not less than seventy-five percent
(75%) of the meetings of the Board of Directors and of all committees of the
Board of Directors of which each such person was a member. The Board of
Directors has established standing Audit, Compensation, Executive and
Governance and Nominating Committees.
AUDIT COMMITTEE
The Audit Committee of the Board of Directors presently is composed of
six members of the Board of Directors who are not Officers or employees of the
Corporation or of any of its subsidiaries. Each member of the Audit Committee
is regarded as independent of the management of the Corporation and as free
from any relationship which, in the opinion of the Board of Directors, would
interfere with the exercise of independent judgment as an Audit Committee
member. The Chairman of the Audit Committee is appointed by the Board of
Directors on the recommendation of the Board's Governance and Nominating
Committee. The members of the Audit Committee serve for a term of one year or
until their successors are appointed.
The responsibilities of the Audit Committee are: to select the
independent public accountants for the Corporation; to review with the
independent public accountants their annual audit plans, including the degree
of coordination with the Corporation's internal audit plans; to review proposed
audit fees; to be informed of the use of the independent public accountants for
significant management advisory services; to obtain explanations from
management for all significant variances in the financial statements between
years; to request an explanation of changes in accounting standards or rules
that have an effect on the financial statements; to inquire about the existence
and substance of any significant accounting accruals, reserves or estimates
made by management that had a material impact on the financial statements; to
inquire if there were any significant financial reporting issues discussed
during the accounting period and, if so, how they were resolved; during private
meetings with the independent public accountants, to request of them their
opinions on various matters including the quality of financial and accounting
personnel and the internal audit staff; to discuss with management and the
independent public accountants the substance of any significant issues
concerning litigation, contingencies, claims or assessments including tax
matters, and to understand how such matters are reflected in the Corporation's
financial statements; to review with the independent public accountants their
recommendations on accounting procedures and internal controls arising from the
annual audit as well as management's response to such recommendations; to
review the internal audit plans and scopes; to review, at least annually, the
status of compliance with the Corporation's Business Conduct Policies and to
inquire as to whether there have been any reported cases of noncompliance or
violations; and to instruct the independent
16
<PAGE> 18
public accountants and the internal audit staff that the Audit Committee
expects to be advised if there are any areas that require its special
attention.
The members of the Audit Committee are Mr. Richard A. Liddy, Chairman;
Mrs. Julie C. Esrey; Mr. John Peters MacCarthy; Mr. William E. Maritz; Mr.
Jerry E. Ritter; and Mr. Daniel R. Toll. During the Fiscal Year ended February
1, 1997, the Audit Committee met on three separate occasions.
COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors presently is
composed of six members of the Board of Directors who are not Officers or
employees of the Corporation or of any of its subsidiaries. The Chairman of the
Compensation Committee is appointed by the Board of Directors on the
recommendation of the Board's Governance and Nominating Committee. The members
of the Compensation Committee of the Board of Directors serve for a period of
one year or until their successors are appointed.
The responsibilities of the Compensation Committee are: to determine
the salaries and Annual Incentive Awards of the Officers and other executives
and key management employees of the Corporation and its subsidiaries; to review
and approve proposed changes in the salaries of other management employees; to
approve the participation of executives and other key management employees in
the Corporation's various compensation plans; to approve and recommend to the
Board of Directors (where appropriate) any changes which are indicated in the
Corporation's compensation programs; to monitor the Corporation's policies and
practices regarding promotion and management development; to counsel senior
management regarding assignment of responsibilities to managers; to ensure
continuity of experienced, qualified management at senior levels within the
Corporation; and to monitor the performance of the Chief Executive Officer and
assure continuity in this position, making appropriate recommendations to the
Board of Directors.
The members of the Compensation Committee are Mr. Joseph L. Bower,
Chairman; Mr. John Peters MacCarthy; Mr. John D. Macomber; General Edward C.
Meyer, Retired; Mr. Jerry E. Ritter; and Mr. Daniel R. Toll. During the Fiscal
Year ended February 1, 1997, the Compensation Committee met on three separate
occasions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Of the members of the Compensation Committee identified in the
preceding paragraph, none ever has been an employee of the Corporation or
of any of its subsidiaries.
EXECUTIVE COMMITTEE
The Bylaws of the Corporation provide that the Executive Committee of
the Board of Directors, presently composed of Mr. B. A. Bridgewater, Jr.,
Chairman; Mr. Joseph L. Bower; Mr. Richard A. Liddy; Mr. William E. Maritz; and
Mr. Harry E. Rich; shall have and may exercise, so far as is permitted by law,
all of the powers and duties of the Board in the direction of the management of
the business and affairs of the Corporation during the intervals between
meetings of the Board of Directors which may lawfully be delegated to it by the
Board of Directors, except with respect to certain categories of matters which
expressly have been reserved to the full Board of Directors. The Executive
Committee of the Board of Directors also performs Finance Committee functions.
The Executive Committee did not meet during the Fiscal Year ended February 1,
1997.
GOVERNANCE AND NOMINATING COMMITTEE
The Governance and Nominating Committee of the Board of Directors
presently is composed of five members of the Board of Directors who are not
Officers or employees of the Corporation or any of its subsidiaries. The
Chairman of the Governance and Nominating Committee is appointed by the Board
of
17
<PAGE> 19
Directors on the recommendation of this Committee. Members of the Governance
and Nominating Committee serve for a period of one year or until their
successors are appointed.
The responsibilities of the Governance and Nominating Committee are: to
develop appropriate criteria for serving as a member of the Board of Directors
and to screen, interview and recommend to the Board of Directors suitable
candidates for positions on the Board of Directors; to evaluate the structure
and composition of the Board of Directors, including the number and
responsibilities of the Standing Committees of the Board and to recommend
changes as indicated by this evaluation; to recommend chairmen and committee
members of each of the Standing Committees of the Board of Directors; to review
the elements and levels of Director compensation and the service of Directors
and to recommend any changes as indicated by this review; and to recommend to
the Board of Directors, prior to each Annual Shareholders' Meeting, suitable
persons to be designated by the Board of Directors as nominees for election by
the Shareholders to the office of Director of the Corporation, together with
their placement within the Corporation's classified Board structure as it was
adopted on November 2, 1954.
The Governance and Nominating Committee will consider suggestions from
all sources, including Shareholders, regarding possible Directorial candidates.
Such suggestions should be submitted to the Vice President, General Counsel and
Corporate Secretary of the Corporation, in the manner and within the time
required by the Bylaws of the Corporation.
The members of the Governance and Nominating Committee are Mr. William
E. Maritz, Chairman; Mrs. Julie C. Esrey; Mr. Richard A. Liddy; Mr. John D.
Macomber; and General Edward C. Meyer, Retired. During the Fiscal Year ended
February 1, 1997, the Governance and Nominating Committee met on four separate
occasions.
COMPENSATION COMMITTEE REPORT
The policy of the Compensation Committee of the Board of Brown Group,
Inc. is to provide compensation programs that attract, motivate, and help
retain a highly qualified management team to meet the special management
requirements of this Corporation. These programs are not only central to the
successful operation of the stable and growing elements of the Corporation, but
also provide important incentives to management responsible for restructuring,
renewal and rebuilding. In these two ways the programs align closely the
interests of management with those of Shareholders.
STATEMENT OF PURPOSE
THE COMMITTEE BELIEVES THAT COMPENSATION PROGRAMS MUST BE IN PLACE TO
ENABLE THE CORPORATION TO ATTRACT A LIMITED NUMBER OF EXECUTIVES WITH CRITICAL
EXPERIENCE FOR KEY POSITIONS, AND TO RETAIN AND MOTIVATE STRONG, CAPABLE
MANAGEMENT DURING AN EXTENDED PERIOD OF CHANGE AND REBUILDING. At the same
time, the cost of management compensation must bear a reasonable relationship
to the performance of the Corporation and the total return to Shareholders on
their investment in the Corporation. The purposes of the programs approved and
actions taken by the Compensation Committee continue to be as follows:
* Encourage and reward an entrepreneurial spirit and business success
each year in the operating divisions of the Corporation, and, at the
same time, build the structure and teamwork necessary for profitable
long-term growth in the footwear business.
* Recognize and reward success in identifying and implementing necessary
structural changes, including consolidation and closing of business
units and retail stores and associated overhead reduction throughout
the Corporation; with special emphasis on developing valuable new
business initiatives.
18
<PAGE> 20
Success in making these changes over time, and continued aggressive
management of the Corporation's growth businesses continue to position
the Corporation to move forward with encouraging prospects.
* Provide executives who succeed within the Corporation the opportunity
to build capital value through stock options and restricted stock, as
long as Shareholders build corresponding value; and, conversely, give
executives strong disincentives to join competitors in businesses often
characterized by executive job-switching.
CASH PAY LEVELS
To achieve these purposes, the Committee has set total cash
compensation levels that are reasonable in view of the practices of other
footwear companies, including the "Peer Group" companies reflected in the
tables following this report, and other large companies with whom Brown Group
competes for management. Competitive survey data for industry-related and other
large companies and "Peer Group" companies is provided by an independent
compensation consulting firm. In this total cash compensation program, a
combination of the executive's salary and a target annual incentive payment
approximates competitive total cash pay. Salaries are reviewed annually and are
determined based on the Committee's evaluation of this competitive survey data,
specific executive responsibilities, the changing nature of these
responsibilities, performance, and the competitive environment for attracting
and retaining footwear executives. Total cash compensation each year can be
increased or decreased substantially by the Committee by awarding an annual
incentive payment based on each recipient's performance in achieving objectives
established by the Committee at the beginning of the year. The competitive
survey data described above have indicated that these practices have placed
Brown Group's total cash pay levels generally near the median of the "Peer
Group" companies cited previously, and generally in the mid-range of other
large retail-oriented companies with whom Brown Group competes for management.
The amount of the annual incentive payment portion of total cash compensation
each year has historically been based half on the achievement of specific
financial objectives, and half upon achievement of specific management
objectives.
HOWEVER, IN VIEW OF THE CORPORATION'S POOR FINANCIAL PERFORMANCE IN
1995, A MODIFIED INCENTIVE PLAN WAS PUT IN PLACE FOR 1996 WHICH WAS TIED
ENTIRELY TO ACHIEVEMENT OF IMPROVED FINANCIAL OBJECTIVES, AND PROVIDED FOR
LOWER CASH INCENTIVE PAYMENTS THAN HAD PREVIOUSLY BEEN AVAILABLE.
This Plan provided for total incentive payments of $2.3 million if
financial objectives including earnings per share of $1.38, or divisional goals
and other financial plans consistent with that level of earnings, were
achieved. Actual Corporate performance overall included earnings per share of
$1.15, substantially better than in 1995, although lower than planned levels.
Divisional performance compared to Plan varied widely, although solid progress
was made throughout the Corporation. Considering these factors, the Committee
approved total incentive compensation payments of $1.8 million or approximately
53% of historical on-budget payout levels, and approximately 78% of the planned
incentive payments for 1996.
LONG-TERM STOCK INCENTIVES
The Committee also administers a long-term stock option and restricted
stock program. Shareholders strongly endorsed the use of stock options and
restricted stock in 1996 by increasing the shares available for stock option
and restricted stock awards by 825,000 shares by a vote of more than 92% of the
votes cast. Stock option and restricted stock grants to senior management in
1996, and in the past several years, have closely aligned the interests of
management with those of Shareholders. Additionally, because of the 8-year
holding period required prior to the full lapse of restrictions, restricted
stock awards have been an important influence in executive retention. THE SIZE
OF RESTRICTED STOCK AND STOCK OPTION GRANTS HAS BEEN BASED ON COMPARISON WITH
THE PRACTICES OF OTHER FOOTWEAR COMPANIES, INCLUDING THE "PEER GROUP"
COMPANIES REFLECTED IN THE TABLE FOLLOWING THIS REPORT, AND OTHER LARGE
COMPANIES WITH WHOM BROWN GROUP COMPETES FOR MANAGEMENT. Comparative long-
19
<PAGE> 21
term stock incentive practices of these companies are surveyed periodically by
an independent compensation consulting firm, and such a survey was conducted
and reviewed by the Committee in 1997. We observe that our practices in
granting stock awards have been generally competitive with those of the "Peer
Group" companies cited previously; in 1996, somewhat larger stock option
grants were made to selected key executives, in part in recognition of the
lower available cash incentive payments discussed previously.
CEO COMPENSATION
The Committee maintained the salary of the Chief Executive Officer for
1996 at the $725,000 level. However, consistent with the financial objectives
and financial results of the Corporation in 1996, an incentive payment of
$164,140 was awarded, whereas no payment was made in 1995 when the Committee
determined that the Corporation's financial results did not justify a payment.
As indicated above, the incentive plan provided for payments tied directly to
the level of achievement of the Corporation's financial objectives, and the
Corporation's 1996 financial results were within the range required to earn
this payout.
RESTRICTED STOCK AND STOCK OPTION AWARDS
While no stock options were granted to the Chief Executive Officer in
1996, a restricted stock award of 35,000 shares was made to him. For other
Executive Officers, no restricted stock grants were made, but stock option
grants for an aggregate of 123,000 shares were made to 13 such Executive
Officers of the Corporation. The restricted stock awards made to the Chief
Executive Officer and the stock option grants made to other Executive Officers
in 1996 were determined by the Committee on the basis of the factors discussed
above with respect to the cash and long-term stock incentive compensation of
the Executive Officers, and on the Committee's judgment as to the level at
which such awards would, in each particular case, serve the purpose of
restricted stock and stock option grants: to continue to align the interests of
management with those of Shareholders, and to strengthen management's
commitment to the Corporation.
The Omnibus Budget Reconciliation Act of 1993 limits deductibility of
certain compensation for the Chief Executive Officer and the additional four
Executive Officers who are highest paid and employed at year end to $1 million
per year, effective for tax years beginning on or after January 1, 1994. In
1996, no Brown Group executive received compensation of $1 million or more. The
policy of the Committee related to this statutory provision is to establish and
maintain a compensation program that maximizes the creation of long-term
Shareholder value. Action is expected to be taken to qualify the Corporation's
compensation approaches for deductibility to the extent consistent with the
objectives of the Corporation's executive compensation program and with
maintaining competitive compensation.
Respectfully submitted,
COMPENSATION COMMITTEE OF THE
BROWN GROUP, INC. BOARD OF DIRECTORS
MR. JOSEPH L. BOWER, CHAIRMAN
MR. JOHN PETERS MACCARTHY, MEMBER
MR. JOHN D. MACOMBER, MEMBER
GENERAL EDWARD C. MEYER, RETIRED, MEMBER
MR. JERRY E. RITTER, MEMBER
MR. DANIEL R. TOLL, MEMBER
20
<PAGE> 22
PERFORMANCE OF THE CORPORATION
Set forth below is a line graph comparing the annual percentage change
in the cumulative total Shareholder return on the Corporation's Common Stock
against the cumulative total return of two assumed Peer Group Indices and the
Standard & Poor's Composite-500 Index, with investment weighted based on market
capitalization. The Corporation's Fiscal Year ends on the Saturday nearest to
each January 31; accordingly, share prices are as of the last business day in
each Fiscal Year.
<TABLE>
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
<CAPTION>
1/29/93 1/28/94 1/27/95 02/02/96 01/31/97
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Brown Group, Inc. / / $119.13 / / $147.97 / / $141.45 / / $ 63.03 / / $ 83.16
Peer Group No. 1 * $ 95.72 * $ 82.57 * $ 71.53 * $ 75.58 * $118.71
Peer Group No. 2 (dia) $ 92.85 (dia) $ 74.63 (dia) $ 49.13 (dia) $ 44.51 (dia) $ 75.28
S&P 500 Index X $110.58 X $123.89 X $125.09 X $173.55 X $219.26
</TABLE>
[GRAPH]
21
<PAGE> 23
The following table is derived from the data shown in the foregoing
line graph and is intended to assist Shareholders in evaluating their total
returns on an annual basis for various holding periods.
<TABLE>
COMPOUND ANNUAL RATES OF TOTAL RETURN TO SHAREHOLDERS<F*>
<CAPTION>
5 Year 4 Year 3 Year 2 Year 1 Year
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brown Group, Inc. -3.62% -8.59% -17.48% -23.33% 31.93%
---------------------------------------------------------------------------------
Peer Group No. 1 3.49% 5.53% 12.86% 28.83% 57.06%
---------------------------------------------------------------------------------
Peer Group No. 2 -5.52% -5.11% 0.29% 23.79% 69.13%
---------------------------------------------------------------------------------
S&P 500 Index 17.00% 18.67% 20.96% 32.39% 26.34%
---------------------------------------------------------------------------------
<FN>
<F*> For indicated holding periods, in Fiscal Years of the Corporation
corresponding to the previous graph, ended January 31, 1997.
</TABLE>
The Peer Group No. 1 Index depicted in the foregoing line graph and
table consists of six companies believed to be engaged in similar businesses:
Edison Brothers Stores, Inc., GENESCO Inc., Nine West Group, Inc., The Stride
Rite Corporation, The United States Shoe Corporation and Wolverine World Wide,
Inc. The Peer Group No. 2 Index depicted in the foregoing line graph and table
includes Edison Brothers Stores, Inc., GENESCO Inc., The Stride Rite
Corporation and Wolverine World Wide, Inc. This is the original peer group
established in 1992, adjusted to reflect the acquisition of The United States
Shoe Corporation's footwear business by Nine West Group, Inc. and the
Corporation's divestiture of its fabric business. As a result of the changing
nature and character of the footwear industry, the Corporation intends to
consider the establishment of a suitably modified Peer Group to reflect such
changed conditions as may have appeared or may appear in the present and
succeeding Fiscal Years of the Corporation. Shareholders are cautioned against
drawing any conclusions from the data contained therein, as past results are
not necessarily indicative of future performance. These indices are included
for comparative purposes only and do not indicate an opinion of management that
such indices are necessarily an appropriate measure of the relative performance
of the Corporation's Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's Executive Officers and Directors, and persons who own more than
ten percent of a registered class of the Corporation's equity securities, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC") and with the New York and Chicago Stock
Exchanges. Executive Officers, Directors and greater-than-ten-percent
Shareholders are required by SEC regulations to furnish the Corporation with
copies of all Section 16(a) forms they file.
Based solely on review of the copies of such reports furnished to the
Corporation, or written representations that no such reports were required, the
Corporation believes that such persons complied with all Section 16(a) filing
requirements applicable to them with respect to transactions during the Fiscal
Year ended February 1, 1997.
22
<PAGE> 24
VOTING
Under the New York Business Corporation Law (the "BCL") and the
Corporation's Certificate of Incorporation, the presence, in person or
represented by Proxy, of the holders of a majority of the outstanding shares of
Common Stock is necessary to constitute a quorum of Shareholders to take action
at the Annual Meeting. For these purposes, shares which are present, or
represented by Proxy, at the Annual Meeting will be counted as present,
regardless of whether the holder of the shares or Proxy fails to vote on a
particular matter or whether a broker with discretionary voting authority fails
to exercise such authority with respect to any particular matter. Once a quorum
of Shareholders is established, the affirmative vote of a plurality of the
shares which are present in person or represented by Proxy at the Annual
Meeting is required to elect each Director. The affirmative vote of a majority
of the shares which are present in person or represented by Proxy and entitled
to vote at the Annual Meeting is required to act on any other matter properly
brought before the Annual Meeting.
Shares represented by Proxies which are marked "vote withheld" with
respect to the election of any person to serve on the Board of Directors will
not be considered in determining whether such a person has received the
affirmative vote of a plurality of the shares. Shares represented by Proxies
which are marked "abstain" with respect to any other proposal will not be
considered in determining whether such proposal has received the affirmative
vote of a majority of the shares and such Proxies will not have the effect of a
"no" vote. Shares represented by Proxies which deny the Proxy-holder
discretionary authority to vote on a proposal will not be considered in
determining whether such proposal has received the affirmative vote of a
majority of the shares and such Proxies will not have the effect of a "no"
vote.
The Corporation knows of no other matters to come before the Annual
Meeting. If any other matters properly come before the Annual Meeting, the
Proxies solicited hereby will be voted on such matters in accordance with the
judgment of the persons voting such Proxies.
SHAREHOLDER PROPOSALS
FOR 1998 ANNUAL MEETING
Proposals of eligible Shareholders intended to be presented at the 1998
Annual Meeting, currently scheduled to be held on May 28, 1998, must be
received by the Corporation by December 17, 1997 for inclusion in the
Corporation's Proxy Statement and Proxy relating to that meeting. Upon receipt
of any such proposal, the Corporation will determine whether or not to include
such proposal in the Proxy Statement and Proxy in accordance with regulations
governing the solicitation of proxies.
In order for a Shareholder to nominate a candidate for Director, under
the Corporation's Bylaws timely notice of the nomination must be received by
the Corporation in advance of the meeting. Ordinarily, such notice must be
received by the Corporation not less than 60 days nor more than 90 days prior
to the meeting; provided, however, that in the event that less than 70 days'
notice or prior public disclosure of the date of the meeting is given or made
to Shareholders, notice by such Shareholder to be timely must be so received
not later than the close of business on the 10th day following the day on which
such notice of the date of the Annual Meeting was mailed or such public
disclosure was made. The Shareholder filing the notice of nomination must
describe various matters regarding the nominee, including such information as
(a) the name, age, business and residence addresses, occupation and shares held
of such person; (b) any other information relating to such nominee required to
be disclosed in the Proxy Statement; and (c) the name, address and shares held
by the Shareholder.
In order for a Shareholder to bring other business before a Shareholder
meeting, under the Corporation's Bylaws timely notice must be received by the
Corporation within the time limits described above. A Shareholder's notice
shall set forth as to each matter the Shareholder proposes to bring before the
Annual Meeting various information regarding the proposal, including (a) a
brief description of the business desired to
23
<PAGE> 25
be brought before the Annual Meeting and the reasons therefor, (b) the name and
address of such Shareholder proposing such business, (c) the number of shares
of Common Stock of the Corporation which are beneficially owned by such
Shareholder and (d) any material interest of such Shareholder in such business.
These requirements are separate from and in addition to the requirements a
Shareholder must meet to have a proposal included in the Corporation's Proxy
Statement.
In each case, notice must be given to the Vice President, General
Counsel and Corporate Secretary of the Corporation, whose address is 8300
Maryland Avenue, Post Office Box 29, St. Louis, Missouri 63166-0029. Any
Shareholder desiring a copy of the Corporation's Bylaws will be forwarded one
without charge upon written request from such individual.
INDEPENDENT AUDITORS
Ernst & Young LLP were the auditors for the Corporation for the year
ended February 1, 1997, and the Board of Directors, on the recommendation of
its Audit Committee, has engaged that firm as auditors for the year ending
January 31, 1998. Representatives of that firm will be present at the Annual
Meeting to respond to appropriate questions that may be raised, and they will
have an opportunity to make a statement, if they so desire.
MISCELLANEOUS
The Corporation will bear the cost of solicitation of Proxies. Proxies
will be solicited by mail. They also may be solicited by Executive Officers and
regular employees of the Corporation personally or by telephone or telegram,
but such persons will not be specifically compensated for such services. It is
contemplated that brokerage houses, custodians, nominees and fiduciaries will
be requested to forward the soliciting material to the beneficial owners of
stock held of record by such persons and will be reimbursed for their
reasonable expenses incurred therein.
Even though you plan to attend the meeting in person, please sign, date
and return the enclosed Proxy promptly. The person giving a Proxy has the power
to revoke it, at any time before it is exercised, by giving written notice of
revocation to the Vice President, General Counsel and Corporate Secretary of
the Corporation or by duly executing and delivering a Proxy bearing a later
date, or by attending the Annual Meeting and casting a contrary vote. All
shares represented by Proxies received in time to be counted at the Annual
Meeting will be voted. A postage paid, return addressed envelope is enclosed
for your convenience. Your cooperation in giving this your immediate attention
will be appreciated.
ROBERT D. PICKLE
Vice President, General Counsel
and Corporate Secretary
8300 Maryland Avenue
Post Office Box 29
St. Louis, Missouri 63166-0029
April 16, 1997
24
<PAGE> 26
EXHIBIT 1
ARTICLE II
"Section 1. Number. The number of directors within the maximum and
minimum limits provided for in the Certificate of Incorporation may be changed
from time to time by the stockholders or by the Board of Directors by an
amendment to these Bylaws. Subject to amendment of these Bylaws, as aforesaid,
the number of directors of the Corporation shall be twelve. Such directors
shall be classified in respect of the time for which they shall severally hold
office, by dividing them into three classes consisting of four directors each.
At each annual election, the successors of the directors of the class whose
term shall expire in that year, shall be elected to hold office for the term of
three years so that the term of office of one class of directors shall expire
in each year. The Board of Directors shall not choose as a director to fill a
temporary vacancy any person over the age of seventy years, and shall not
recommend to the stockholders any person for election as a director for a term
extending beyond the Annual Meeting of Stockholders following the end of the
calendar year during which he attains his seventieth birthday, provided,
however, that this shall not apply to directors elected or holding office, at
the time of the Annual Meeting of Stockholders in 1967; and provided further,
that this shall not prevent the designation by the Board of such person as an
Honorary Director, to serve without vote."
25
<PAGE> 27
[LOGO] BROWN GROUP, INC.
8300 Maryland Avenue, Post Office Box 29, St. Louis, Missouri 63166-0029
April 16, 1997
Dear Shareholder:
The Annual Meeting of Shareholders of Brown
Group, Inc. will be held on the 22nd day of May,
1997, at 11:00 a.m., in the Brown Group, Inc.
Conference Center, located at 8300 Maryland Avenue,
in Clayton, in St. Louis County, Missouri.
It is important that your shares be represented
at this meeting. Whether or not you plan to attend
the meeting, please review the enclosed proxy
materials, complete the attached proxy form below,
and return it promptly in the envelope provided.
PLEASE DETACH PROXY HERE, SIGN AND MAIL
- -------------------------------------------------------------------------------
BROWN GROUP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE CORPORATION FOR
ANNUAL MEETING MAY 22, 1997
The undersigned hereby constitutes and appoints B. A. Bridgewater, Jr., Harry
E. Rich and Robert D. Pickle, and each of them, his true and lawful agents and
proxies, with full power of substitution in each, to represent the undersigned
at the Annual Meeting of Shareholders of BROWN GROUP, INC., to be held in the
Brown Group, Inc. Conference Center, located at 8300 Maryland Avenue, in
Clayton, in St. Louis County, Missouri, on Thursday, May 22, 1997, at 11
o'clock a.m., and at any adjournments thereof, and to vote all the shares of
Common Stock of the Corporation standing on the books of the Corporation in the
name of the undersigned as specified on the reverse side hereof and in their
discretion on such other business as may properly come before the meeting.
Dated: ___________________, 1997
--------------------------------
--------------------------------
Signature of Shareholder
THIS PROXY MUST BE SIGNED
EXACTLY AS
NAME APPEARS HEREON.
Executors, administrators, trustees,
etc. should give full titles as
such. If the signer is a
corporation, please sign full
corporate name by duly authorized
(over) officer.
<PAGE> 28
IT IS IMPORTANT THAT YOU VOTE, SIGN AND RETURN THE
PROXY BELOW AS SOON AS POSSIBLE.
BY DOING SO, YOU MAY SAVE THE CORPORATION THE
EXPENSE OF ADDITIONAL SOLICITATION.
PLEASE DETACH PROXY HERE, SIGN AND MAIL
- -------------------------------------------------------------------------------
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING:
---
ELECTION OF DIRECTORS:
Nominees: Joseph L. Bower, Harry E. Rich, Jerry E. Ritter and Thomas A.
Williams.
/ / VOTE FOR all nominees listed.
/ / VOTE FOR all nominees listed, except: _____________________
/ / VOTE WITHHELD from all nominees.
This proxy when properly executed will be voted in the manner directed by the
undersigned Shareholder. If no direction is made, this proxy will be voted for
the Proposal, as recommended by the Board of Directors.
--------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
FORM PROMPTLY USING THE ENCLOSED ENVELOPE
--------------------------------------------------------
<PAGE> 29
Appendix
Page 21 of the printed Proxy contains a performance graph. The information
in the graph is set forth in the table which appears before said graph.
