<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Fay's Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
Notice of
Annual Meeting
of Shareholders
To Be Held
On May 26, 1995
-------------------------------------
Proxy Statement
[LOGO OF
FAY'S INCORPORATED
APPEARS HERE]
<PAGE>
FAY'S INCORPORATED
7245 HENRY CLAY BOULEVARD
LIVERPOOL, NEW YORK 13088
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 1995
- --------------------------------------------------------------------------------
To the Shareholders of FAY'S INCORPORATED:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Fay's
Incorporated, a New York corporation (the "Company"), will be held at the
Syracuse Marriott, 6302 Carrier Parkway, Thruway Exit 35, East Syracuse, New
York at 10:00 a.m., Friday, May 26, 1995, for the following purposes:
1. To elect four Class I directors for a term of three years.
2. To ratify the appointment by the Board of Directors of Deloitte & Touche
LLP to audit the financial statements of the Company and its
subsidiaries for the fiscal year ending January 27, 1996.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment(s) thereof.
Only holders of record of the Company's Common Shares as of the close of
business on April 7, 1995 are entitled to notice of and to vote at the Annual
Meeting.
A Proxy Statement and form of proxy are furnished herewith.
Please sign and date the enclosed proxy and return it in the enclosed self-
addressed, postage-paid envelope. Prompt response by shareholders will reduce
the time and expense of solicitation. The proxy is revocable at any time before
it is voted by delivery of a duly executed proxy bearing a later date or by
attending the Meeting and voting in person.
By Order of the Board of Directors
WARREN D. WOLFSON
Senior Vice President and Secretary
Liverpool, New York
April 26, 1995
<PAGE>
FAY'S INCORPORATED/7245 HENRY CLAY BOULEVARD
LIVERPOOL, NEW YORK 13088
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 26, 1995
This Proxy Statement is furnished to the shareholders of Fay's Incorporated
(the "Company") in connection with the solicitation on behalf of the Board of
Directors of proxies to be voted at the Annual Meeting of Shareholders
scheduled to be held at 10:00 a.m. Friday, May 26, 1995 at the Syracuse
Marriott, 6302 Carrier Parkway, Thruway Exit 35, East Syracuse, New York and
any adjournment or adjournments thereof. The Proxy Statement and form of proxy
are being mailed on or about April 26, 1995 to shareholders of record on April
7, 1995.
The cost of soliciting proxies in the form enclosed will be borne by the
Company. Proxies may be solicited by directors, officers and regular employees
of the Company personally or by telephone, for which they will receive no
additional compensation. The Company may reimburse brokers and others for
reasonable expenses incurred by them in obtaining voting instructions from
beneficial owners of Common Shares held of record by such brokers and other
persons.
Proxies in the form enclosed, unless previously revoked, will be voted at the
Annual Meeting in accordance with the instructions indicated thereon. If
proxies which are signed and returned do not specify a vote on any proposal,
such proxies will be voted FOR the election of nominees for directors named
herein, and FOR the ratification of the appointment by the Board of Directors
of Deloitte & Touche to audit the financial statements of the Company and its
subsidiaries for the fiscal year ending January 27, 1996. All proxies delivered
pursuant to this solicitation are revocable at the option of the person issuing
same at any time prior to the voting thereof. To accomplish revocation, written
notice or a substitute proxy must be received by the Secretary prior to the
date of the Meeting at the Company's executive office, 7245 Henry Clay
Boulevard, Liverpool, New York 13088. Proxies may also be revoked by a vote
cast in person at the Annual Meeting. Attendance at the Meeting will not, in
itself, constitute revocation of the proxy.
The Annual Report of the Company for the fiscal year ended January 28, 1995
is being sent to shareholders together with this Proxy Statement.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
Only holders of record of the Company's $.10 par value common stock ("Common
Shares") as of the close of business on April 7, 1995 are entitled to notice of
and to vote at the Annual Meeting. On that date there were 20,532,752 Common
Shares issued and outstanding, each share entitled to one vote.
The election of each nominee for director requires a plurality of the votes
cast. An affirmative vote of the majority of the votes cast is required for
approval of all other matters submitted to the shareholders. Abstentions and
broker non-votes are not counted as votes cast on any matter to which they
relate and will have no effect on the outcome of the vote. A broker non-vote
occurs when a broker or other nominee does not have discretionary authority and
has not received instructions with respect to a particular proposal. Proxy
ballots are received and tabulated by the Company's transfer agent and
certified by the inspectors of election.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the knowledge of the Company, as of March 24, 1995, the following named
persons beneficially owned more than 5 percent of the Company's issued and
outstanding Common Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ----------------- --------
<S> <C> <C>
Henry A. Panasci, Jr. 5,655,168(a)(b) 27.5%
7245 Henry Clay Boulevard
Liverpool, New York 13088
Estate of Henry Panasci 1,117,175(b) 5.4%
3000 Howlett Hill Road
Camillus, New York 13031
</TABLE>
(a) Includes 1,117,175 shares held as co-executor under the Will of Henry
Panasci being the same shares shown as beneficially owned by the Estate of
Henry Panasci. Also includes 1,646,175 shares held as trustee in trust for
the benefit of Mr. Panasci's children and sister, 54,691 shares held as
trustee in trust for the benefit of an unrelated party and currently
exercisable options to purchase 27,625 shares.
(b) Henry A. Panasci, Jr. possesses sole voting and sole investment power with
respect to all shares indicated as beneficially owned, except for 1,117,175
shares beneficially owned by the Estate of Henry Panasci over which Mr.
Panasci shares voting and investment power with David H. Panasci (an
officer and director of the Company and Mr. Panasci's son) and Beth
Leventhal (Mr. Panasci's daughter), and 54,691 shares held in trust as
trustee for the benefit of an unrelated party over which Mr. Panasci shares
voting and investment power.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning Common Shares
beneficially owned as of March 24, 1995 by each director, by each executive
officer named in the Summary Compensation Table, and by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OWNERSHIP (A) OF CLASS
---- ----------------- --------
<S> <C> <C>
Robert H. Altman 14,802(b) .1%
Robert J. Bennett 3,500 *
Lee H. Flanagan 1,000 *
Tarky Lombardi, Jr. 25,939(c) .1%
Hyman M. Miller 99,046(d) .5%
Gale T. Mitchell 37,160 .2%
Gary L. Moreau 4,000 *
David H. Panasci 1,495,884(e) 7.3%
Henry A. Panasci, Jr. 5,655,168(f) 27.5%
James F. Poole, Jr. 45,620 .2%
Alair A. Townsend 500 *
Warren D. Wolfson 49,935 .2%
Directors and executive officers as a group 6,323,717(g) 30.5%
</TABLE>
* Less than .1% of the Common Shares outstanding
(a) The number of Common Shares shown in the table includes currently
exercisable options to purchase: 35,682 shares held by Mr. Mitchell; 42,951
shares held by Mr. D. Panasci; 27,625 shares held by Mr. H. Panasci; 39,926
shares held by Mr. Poole; 30,689 shares held by Mr. Wolfson; 8,250 shares
held by each of Messrs. Altman, Lombardi and Miller; and 3,000 shares held
by each of Messrs. Bennett and Moreau.
2
<PAGE>
(b) Includes 3,106 shares held in trust by Mr. Altman's wife for the benefit of
their children. Mr. Altman disclaims any beneficial interest in such
shares.
(c) Includes 6,113 shares owned by Mr. Lombardi's wife, 753 shares held in
trust by Mr. Lombardi for the benefit of his children, and 3,541 shares
held as trustee for the benefit of his mother under his father's Will. Mr.
Lombardi disclaims any beneficial interest in the shares owned by his wife.
(d) Includes 58,714 shares owned by Mr. Miller's wife. Mr. Miller disclaims any
beneficial interest in such shares.
(e) Includes 1,117,175 shares held as co-executor under the Will of Henry
Panasci. Also includes 3,375 shares owned by Mr. Panasci's wife. Mr.
Panasci disclaims any beneficial interest in such shares.
(f) Includes 1,117,175 shares held as co-executor under the Will of Henry
Panasci. Also includes 1,646,175 shares held in trust for the benefit of
Mr. Panasci's children and sister, and 54,691 shares held in trust for the
benefit of an unrelated party.
(g) Includes currently exercisable options to purchase 215,623 shares and
1,117,175 shares beneficially owned by the Estate of Henry Panasci.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides for a Board of
Directors consisting of not less than 9 nor more than 18 members, the exact
number to be determined prior to each Annual Meeting of Shareholders by a
majority of the directors then in office. The Certificate of Incorporation also
divides directors into three classes consisting of no less than three directors
per class, with the number of members comprising each class as equal as
possible to the number of members in each other class. The terms of office of
each class expire at Annual Meetings of Shareholders in each of the succeeding
three years.
The Board of Directors has fixed the number of directors at 13, five members
whose terms expire at the forthcoming Annual Meeting; three members whose terms
expire in 1996; three members whose terms expire in 1997; and two vacancies.
The vacancies which exist on the Board of Directors allow the Board to fill
such vacancies between Annual Meetings of Shareholders. The term of office of
any director elected by the Board to fill a vacancy expires on the date of the
subsequent Annual Meeting of Shareholders. Proxies cannot be voted for a
greater number of persons than the number of nominees named.
At this Meeting, four Class I directors will be elected to serve until the
1998 Annual Meeting, or until their successors are duly elected and qualified.
All nominees are presently members of the Board of Directors. Henry A. Panasci,
Jr. was last elected as a director by shareholders at the Annual Meeting held
on May 19, 1992. Robert J. Bennett was last elected as a director by
shareholders at the Annual Meeting held on May 28, 1993. Lee H. Flanagan and
Alair A. Townsend were elected directors by the Board of Directors on September
27, 1994, filling vacancies. John D. Burke, whose term expires upon the
convening of the Annual Meeting, will retire from the Board of Directors at
that time.
The persons named in the proxy card as proxies intend to nominate and vote
for the election of Robert J. Bennett, Lee H. Flanagan, Henry A. Panasci, Jr.,
and Alair A. Townsend as directors. Unless authority is withheld in the space
provided on the enclosed proxy card, the proxy will be voted for such nominees.
In the event that one or more of the nominees is unable to serve as a director
by reason of any unforeseen circumstance, it is intended that the proxies
solicited hereby will be voted for such other person or persons as may be
nominated by the Board of Directors. Proxies may not be voted for the election
to the Board of Directors of a greater number of persons than the number of
nominees named.
3
<PAGE>
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY,
BUSINESS EXPERIENCE, AND DIRECTOR
NAME OTHER DIRECTORSHIPS AGE SINCE
- -------------------------------------------------------------------------------
CLASS I--TO BE ELECTED FOR A TERM OF THREE YEARS
UNTIL THE 1998 ANNUAL MEETING
<C> <S> <C> <C>
Robert J. Bennett (a)(c) Chairman of the Board, 53 1992
President and Chief Executive
Officer of ONBANCorp, Inc.,
OnBank & Trust Co. and OnBank;
Director of ONBANCorp, Inc.,
OnBank & Trust Co. and OnBank.
Lee H. Flanagan President of B.G. Sulzle, Inc. 27 1994
(manufacturer of surgical
needles)
Henry A. Panasci, Jr. (d) Chairman of the Board and Chief 66 1966
Executive Officer of the
Company; Director of Niagara
Mohawk Power Corporation.
Alair A. Townsend (a) Vice President of Crain 53 1994
Communications, Inc.; Publisher
of Crain's New York Business;
Director of American Stock
Exchange, Inc.
CLASS II--TERM EXPIRES AT THE 1996 ANNUAL MEETING
Robert H. Altman (a) (b) (e) Partner in the law firm of 50 1984
Holtzmann, Wise & Shepard;
former member of the law firm
of Bangser, Klein & Rocca.
Gary L. Moreau (a) President and Chief Operating 40 1992
Officer of Oneida Ltd. (a
manufacturer and marketer of
tableware and industrial wire
products); Director of Oneida
Ltd.; former President of the
Oneida Silversmiths Division of
Oneida Ltd.
David H. Panasci (d) President and Chief Operating 36 1984
Officer of the Company; former
Executive Vice President of the
Company; former President of
The Paper Cutter Division of
the Company.
CLASS III--TERM EXPIRES AT THE 1997 ANNUAL MEETING
Tarky Lombardi, Jr. (b) (c) (e) Associate in the law firm of 65 1971
Devorsetz, Stinziano, Gilberti,
Heintz & Smith; Director and
Treasurer of Syracuse Tank &
Manufacturing Co., Inc.
(manufacturer of tanks, pipes
and culverts); former New York
State Senator.
Hyman M. Miller (b) (c) Private investor; Trustee of 72 1967
State of New York Power
Authority; retired New York
State Assemblyman; founder and
former officer of The Miller
Agency of New York, Inc.
Warren D. Wolfson Senior Vice President, General 46 1987
Counsel and Secretary of the
Company.
</TABLE>
4
<PAGE>
(a) Member of the Audit Committee.
(b) Member of the Compensation Committee.
(c) Member of the Nominating Committee.
(d) Henry A. Panasci, Jr. is the father of David H. Panasci, an officer and
director of the Company.
(e) See "Compensation Committee Interlocks and Insider Participation" and
"Certain Business Relationships" on page 13 of this Proxy Statement.
CORPORATE GOVERNANCE INFORMATION
The Board of Directors of the Company held six regularly scheduled meetings
during the fiscal year ended January 28, 1995. The Board of Directors has
standing Executive, Audit, Compensation Nominating, Retirement Plan and Stock
Option/Stock Purchase Plan Committees. Members of Audit, Compensation and
Nominating Committees are identified in the table listing nominees for election
of directors and directors whose terms continue.
The Audit Committee held four meetings during the fiscal year ended January
28, 1995. The Audit Committee reviews the work and procedures of the Company's
independent certified public accountants, Deloitte & Touche LLP; the
recommendations of such accountants; the action taken or contemplated by
Management on such recommendations; and the scope of the audit work performed
by Deloitte & Touche LLP. The Audit Committee also reviews the work, policies
and procedures of the Company's Internal Audit Department.
The Compensation Committee held two meetings during the fiscal year ended
January 28, 1995. The Compensation Committee is authorized to review and set
the compensation (including salary and bonus) of officers of the Company. The
Compensation Committee is also empowered to grant stock options to officers of
the Company and to set exercise prices and dates of exercisability in respect
thereof.
The Nominating Committee held one meeting during the fiscal year ended
January 28, 1995. The Nominating Committee nominates corporate officers and
directors and proposes candidates to fill vacancies on the Board of Directors.
The Nominating Committee does not have the authority to consider nominations to
the Board of Directors made or recommended by shareholders. Such nominations
are considered by the full Board of Directors.
During the fiscal year ended January 28, 1995, no incumbent director attended
fewer than 75 percent of the aggregate total number of meetings of the Board of
Directors and the number of meetings of the committees of which the director
was a member. All committees report the activities and actions taken by them to
the Board of Directors.
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following Summary Compensation Table shows, for the fiscal years ended
January 30, 1993 (53 weeks), January 29, 1994 (52 weeks), and January 28, 1995
(52 weeks), compensation paid by the Company to the five highest compensated
executive officers of the Company in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION(4)
---------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND YEAR --------------------------------- OPTION ALL OTHER
PRINCIPAL POSITION ENDED SALARY($) BONUS($) OTHER($)(3) AWARDS(#)(4) COMPENSATION($)(5)
- ----------------------- -------- ----------- -------- ----------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Henry A. Panasci, Jr. 01/28/95 370,420 83,835 0 10,000 1,075
Chairman of the Board and 01/29/94 357,578 80,000 0 10,000 1,669
Chief Executive Officer (1) 01/30/93 350,730(2) 80,000 0 3,125 2,072
David H. Panasci 01/28/95 208,270 47,250 42,958 10,000 1,075
President and Chief 01/29/94 189,344 30,000 2,317 10,000 1,561
Operating Officer (1) 01/30/93 137,918(2) 30,000 909 3,125 1,309
Warren D. Wolfson 01/28/95 158,466 35,865 0 10,000 2,417
Senior Vice President, 01/29/94 152,963 35,000 6,955 10,000 2,834
General Counsel 01/30/93 149,884(2) 35,000 0 3,125 2,897
and Secretary
James F. Poole, Jr. 01/28/95 133,805 30,285 0 10,000 1,075
Vice President--Finance 01/29/94 128,097 25,000 0 10,000 1,094
and Chief Financial Officer 01/30/93 120,518(2) 25,000 0 3,125 1,158
Gale T. Mitchell 01/28/95 118,616 36,360 0 10,000 1,065
President-Wheels 01/29/94 109,406 30,000 0 10,000 956
Discount Auto Supply 01/30/93 98,325(2) 25,000 0 3,125 1,052
</TABLE>
(1) Between August 7, 1992, and March 25, 1993, Henry A. Panasci, Jr. also
served as the Company's President and Chief Operating Officer. Prior to
July 24, 1992, David H. Panasci served as President-The Paper Cutter
Division of the Company. Between July 24, 1992 and March 25, 1993 David H.
Panasci served as the Company's Executive Vice President. On March 26,
1993, David H. Panasci was elected President and Chief Operating Officer of
the Company.
(2) The fiscal year ended January 30, 1993 was comprised of 53 weeks, as
compared to 52 weeks for the years ended January 29, 1994 and January 28,
1995. Had the fiscal year ended January 30, 1993 been comprised of 52
weeks, the salaries of Messrs. H. Panasci, D. Panasci, Wolfson, Poole, and
Mitchell for such period would have been $344,076, $135,257, $147,038,
$118,230, and $96,460 respectively.
(3) Amounts reported represent the dollar value of the difference between the
price paid for the Company's Common Shares upon the exercise of stock
options under the Company's 1982 Stock Option Plan and the fair market
value of such Common Shares at the date of exercise.
(4) Other than stock options granted under the Company's 1982 Stock Option
Plan, during the period covered, the Company did not make any awards or
payouts of long-term compensation and does not maintain plans that make
awards or payouts of restricted stock, stock appreciation rights or long-
term incentive compensation. Amounts reported represent stock options
granted pursuant to the Company's 1982 Stock Option Plan and have been
adjusted to reflect a 5 for 4 stock split distributed on June 19, 1992.
(5) For the year ended January 28, 1995, includes (i) Company contributions to
the Company's Profit Sharing Plan (Mr. H. Panasci $1,075; Mr. D. Panasci
$1,075; Mr. Wolfson $1,075; Mr. Poole $1,075 and Mr. Mitchell $1,065) and
(ii) the dollar value of split dollar life insurance premiums (Mr. Wolfson
$1,342).
6
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during the fiscal year ended January 28, 1995 under the Company's 1982
Stock Option Plan to the five highest compensated executive officers of the
Company.
OPTION GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF RATES OF STOCK PRICE
SECURITIES APPRECIATION FOR
UNDERLYING PERCENT OF TOTAL OPTIONS EXERCISE OPTION TERM (3)
OPTIONS GRANTED TO EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED (1) FISCAL YEAR ($/SH.) DATE (2) 5%($) 10%($)
- ---- ----------- ------------------------ -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Henry A. Panasci, Jr. 10,000 2.3% 6.63 3/24/04 41,696 105,665
David H. Panasci 10,000 2.3% 6.63 3/24/04 41,696 105,665
Warren D. Wolfson 10,000 2.3% 6.63 3/24/04 41,696 105,665
James F. Poole, Jr. 10,000 2.3% 6.63 3/24/04 41,696 105,665
Gale T. Mitchell 10,000 2.3% 6.63 3/24/04 41,696 105,665
</TABLE>
(1) During the last fiscal year, the Company did not grant any stock
appreciation rights and does not maintain a plan under which stock
appreciation rights may be granted. Options granted under the Company's
1982 Stock Option Plan (the "Plan") may be incentive stock options, meeting
the requirements of Section 422 of the Internal Revenue Code, or non-
qualified stock options. The Plan is administered by the Stock Option-Stock
Purchase Plan Committee of the Board of Directors. Option grants to
officers of the Company are made by the Compensation Committee of the Board
of Directors. All other option grants are made by the Stock Option-Stock
Purchase Plan Committee. Directors who are not employees of the Company are
not eligible to participate in the Plan. The exercise price for Common
Shares purchased pursuant to exercise of options granted under the Plan is
determined by the Committee granting the option, except that the exercise
price of incentive stock options must be at least equal to the fair market
value of a Common Share on the date such option is granted. The exercise
price may be paid in cash or in Common Shares valued at fair market value
on the date of exercise. Each option granted under the Plan may be
exercised only on the dates provided for under the terms of the option, but
not later than 10 years after the date of grant. Each option is non-
transferable during the lifetime of the optionee. In the event of any
split-up, combination of shares, stock dividend, merger, consolidation or
recapitalization, the number of Common Shares available for issuance and
the number and option price of Common Shares subject to outstanding options
are proportionately adjusted as determined by the Stock Option-Stock
Purchase Plan Committee.
(2) The options become exercisable as follows: 20% on July 1, 1994; 20% on
January 1, 1995; 20% on July 1, 1995; 20% on January 1, 1996; and 20% on
July 1, 1996.
(3) Potential realizable value is based on an assumption that the price of the
Company's Common Shares appreciate at 5% and 10% annually (compounded) from
the date of grant until the end of the 10 year option term. These
calculations are based on requirements promulgated by the Securities
Exchange Commission and are not intended to forecast possible future
appreciation of the stock price.
7
<PAGE>
The following table contains information with respect to the five highest
compensated executive officers of the Company concerning the exercise of
options during the fiscal year ended January 28, 1995 and unexercised options
held as of the end of the fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT AT FISCAL YEAR-
FISCAL YEAR-END(#)(1) END($)(2)
---------------------- --------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Henry A. Panasci, Jr. 0 0 27,625/8,000 2,668/720
David H. Panasci 7,563 42,958 42,951/8,000 21,146,720
Warren D. Wolfson 0 0 30,689/8,000 3,740/720
James F. Poole, Jr. 0 0 39,926/8,000 15,217/720
Gale T. Mitchell 0 0 35,682/8,000 7,348/720
</TABLE>
(1) During the last fiscal year, the Company did not grant any stock
appreciation rights and does not maintain a plan under which stock
appreciation rights may be granted.
(2) Value of unexercised options is (i) the fair market value of a Common Share
at January 28, 1995 ($6.75 per share) less the exercise price times (ii)
the number of Common Shares subject to options.
PENSION PLAN
The Company maintains a defined benefit pension plan which covers
substantially all full-time employees who have attained age 21 and have
completed one year of service. Annual retirement benefits under the Plan are
computed on a career average pay basis. The career average pay formula is the
sum of a one-time past-service benefit and annual benefit accruals. The past-
service benefit is calculated by multiplying 1 percent of a participant's 1980
earnings by the number of years the participant had been continuously employed
by the Company prior to January 1, 1981, less the participant's initial year of
service and any service prior to the participant attaining age 25. Annual
benefit accruals are calculated by multiplying .75 percent of a participant's
annual earnings, up to an amount equal to that year's "covered compensation,"
plus 1.25 percent of the participant's annual earnings in excess of covered
compensation. Covered compensation is equal to the average of the Social
Security wage base over the preceding 35 years. For 1994 such amount was
$24,300. The maximum amount of compensation taken into account under the Plan
for the year 1994 was limited by law to $150,000. The estimated annual benefits
payable upon retirement at the normal retirement age of 65 for Messrs. H.
Panasci, D. Panasci, Wolfson, Poole and Mitchell are $76,447, $62,445, $55,586,
$55,626 and $46,347, respectively. Amounts shown are straight life annuity
amounts, notwithstanding the availability of joint survivorship payment
options.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. D. Panasci,
Wolfson, Poole, and Mitchell. The agreements provide that, in the event the
employment of an executive officer is terminated by the Company without Cause
or by the executive officer for Good Reason (as such terms are defined in the
agreements), he will be entitled to severance compensation and the continuation
of certain employee welfare benefits. In the event such termination occurs
prior to a Change in Control (as defined in the agreements), the executive
officer is entitled to receive severance compensation (paid in installments
over one year) in an amount equal to the executive officer's base annual salary
at the time of termination of employment, plus an amount equal to the greater
of (i) the executive officer's most recent annual bonus award, or (ii) the
executive officer's average annual bonus award for the two most recent years.
In the event such termination occurs following a Change in Control, the
executive officer is entitled to receive severance compensation (paid in
installments over two years) in an amount equal
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to two times the executive officer's annual salary at the time of termination
of employment, plus an amount equal to the greater of (i) two times the
executive officer's most recent annual bonus award, or (ii) two times the
executive officer's average annual bonus award for the three most recent years.
The employment agreements also provide for the extension of employee welfare
benefits for the period of one year in the event the executive officer's
termination of employment occurs prior to a Change in Control and for a period
of two years in the event such termination occurs following a Change in
Control. Also, following a Change in Control, in the event employment of an
executive officer is terminated by the Company without Cause or by the
executive officer for Good Reason, he is entitled to receive, in a lump sum, an
amount equal to the aggregate difference between the exercise prices of any
options held by the executive officer to purchase shares of the Company's
common stock and the Fair Market Value (as defined in the agreements) of such
shares. The employment agreements further provide that termination of
employment by an executive officer for Good Reason following a Change in
Control will become effective no earlier than six months following a Change in
Control. The employment agreements also restrict the use of the Company's
confidential information and the ability of the executive officer to compete
with the Company prior to a Change in Control. The terms of the agreements
prohibit payment or distribution of any amount that would be non-deductible by
the Company for Federal income tax purposes pursuant to Section 280G of the
Internal Revenue Code.
John A. Kogut resigned as an officer and director of the Company on January
23, 1995 under circumstances giving rise to the entitlement of severance
compensation and continuation of certain benefits pursuant to the terms of his
employment agreement dated October 11, 1993. In accordance with said employment
agreement, Mr. Kogut shall receive the aggregate amount of $217,000 in equal
weekly installments payable through February 15, 1996.
COMPENSATION OF DIRECTORS
Directors who are Company employees do not receive any additional
compensation for serving as directors. Directors who are not employees of the
Company are paid directors' fees of $2,000 per quarter, $750 for each Board of
Directors meeting attended and $500 for each committee meeting attended. The
presiding chairperson of each committee receives $750 for each committee
meeting attended. Pursuant to the Company's 1990 Stock Option Plan for Non-
Employee Directors, each director who is not an employee of the Company is
automatically granted an option to purchase 1,500 Common Shares on July 1 of
each year at an exercise price equal to the fair market value of the Common
Shares on the date of grant. Such options become exercisable in full on
December 1 of the year in which the option is granted, and expire ten years
from the date of grant. During the fiscal year ended January 28, 1995, each
non-employee director was automatically granted an option to purchase 1,500
Common Shares at an exercise price of $6.69 per share.
The Company's Retirement Plan for Non-Employee Directors provides retirement
benefits to any director who has not been an employee of the Company at any
time during the five year period immediately preceding the date of retirement.
Under the Plan, an eligible director who retires from the Board of Directors
following attainment of age 65, and who has served as a director for 10 or more
years, is entitled to receive, during such director's lifetime, an annual
retirement benefit equal to the annual retainer paid by the Company to non-
employee members of the Board in effect on the date that the director retires
from the Board (currently $8,000). Eligible directors who retire from the Board
of Directors following attainment of age 60, having served at least five years
on the Board, are entitled to receive a reduced retirement benefit until the
earlier of (i) the death of the director, or (ii) the number of years such
director served on the Board.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Decisions regarding compensation for executive officers of the Company are
the responsibility of the Compensation Committee of the Board of Directors (the
"Committee"). Each member of the Committee is a non-employee director of the
Company. The Committee sets annual salaries and bonuses for each executive
officer. In addition, pursuant to the Company's 1982 Stock Option Plan, the
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Committee is empowered to grant stock options to executive officers and to set
exercise prices and dates of exercisability in respect thereof. The Committee
is also responsible for recommending to the Board of Directors incentive
compensation and benefit programs for executive officers that achieve the
Company's long-term objectives.
Set forth below is a report of the Committee addressing the Committee's
compensation policies for executive officers and the Committee's bases for the
compensation reported during the Company's last fiscal year for the Company's
Chief Executive Officer, Henry A. Panasci, Jr.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
Philosophy
The Committee's compensation policies for executive officers are designed to
provide competitive levels of compensation that are materially linked to the
operating performance of the Company while recognizing individual initiative
and achievement and providing incentives to encourage maximum short and long-
term financial results for the benefit of the Company's shareholders.
Annual Base Salaries
When setting annual base salaries for executive officers, the Committee gives
recognition to the fact that the Company's ability to attract, retain and
motivate qualified individuals depends on the payment of salaries competitive
with those paid by comparable companies for similar positions. Accordingly, the
Committee retains the Hay Management Group, a compensation consulting firm, for
the purpose of evaluating the compensation levels of each of the executive
offices and providing the Committee with nationwide, industry and regional
compensation surveys for comparably rated positions.
The Committee has adopted a policy that grants an annual cost of living
increase to the base salary of each executive officer. Increases in base salary
in excess of a cost-of-living increase (not associated with adjustments made in
connection with competitive pay practices) are also granted following years
when both corporate and individual performance have met or exceeded expected
results, in order to preserve internal pay equity or in connection with a
significant change in an executive officer's responsibilities. The criteria
used to measure corporate and individual performance for base salary increases
include the growth in after-tax earnings per share; the rate of return on
shareholders' equity; targeted versus actual operating profits; targeted versus
actual revenue growth; the increase in the market value of the Company's stock;
and industry peer group comparisons involving price/earnings ratios, price/book
value ratios, and operating profits as a percentage of sales. In addition, the
Committee takes into account the financial performance of the Company's four
operating divisions when considering base salary increases for the heads of
each of the divisions. Personal performance criteria considered by the
Committee include each executive officer's: contribution to overall corporate
performance; effectiveness in budget management; performance in assigned
special projects; managerial ability; the quality of management development
programs; and participation in industry, public and civic affairs. The
performance criteria are evaluated by the Committee with no fixed or specific
mathematical weighting applied to each element of performance.
Bonuses
The Committee regards payment of annual bonuses to executive officers as
instrumental to the achievement of the Committee's objective of linking
executive compensation to corporate and individual performance. On March 25,
1994, at the recommendation of the Committee, the Company's Board of Directors
adopted the Fay's Incorporated Key Management Incentive Plan (the "Incentive
Plan"), effective as of January 30, 1994. The Incentive Plan bases bonus awards
to executive officers on achievement of targeted levels of sales and earnings.
The Committee believes that these factors, over time, are the key contributors
to the creation of shareholder value.
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Under the terms of the Incentive Plan, the Committee establishes, by March 30
of each fiscal year, targeted levels of sales and earnings for such fiscal
year. Targeted sales are established by the Committee taking into account sales
from comparable stores only. Targeted earnings are established by the Committee
on a pre-tax basis, exclusive of extraordinary items, unusual items, deductions
for retirement plan contributions and deductions for bonus compensation. The
executive officers named in the Summary Compensation Table can earn a sales
bonus amounting to 7.5% of their annual base salary should actual sales equal
100% of targeted sales and an earnings bonus amounting to 17.5% of their annual
base salary should actual earnings equal 100% of targeted earnings. However,
both sales bonuses and earnings bonuses are reduced in the event either actual
sales fall short of targeted sales or actual earnings fall short of targeted
earnings. No sales or earnings bonus is paid in the event that either actual
sales are less than 95% of targeted sales or actual earnings are less than 90%
of targeted earnings. Executive officers can earn additional bonuses up to a
maximum of 75% of annual base salary should both actual sales and actual
earnings exceed target sales and targeted earnings by 10%. In addition to sales
and earnings bonuses, the Incentive Plan authorizes the Committee to grant
discretionary bonuses to executive officers named in the Summary Compensation
Table, not to exceed 5% of the executive officer's annual base salary. The
criteria used in the award of discretionary bonuses is the same criteria used
when measuring corporate and individual performance for purposes of granting
annual base salary increases. Sales and earnings bonuses awarded to the
presidents of the Company's divisions are determined based 70% on the sales and
earnings performance of their respective divisions and 30% on the sales and
earnings performance of the Company. The Incentive Plan also limits the amount
of bonuses payable under the Incentive Plan when aggregated with bonuses
payable under any other incentive bonus plans maintained by the Company.
Stock Options
Grants of stock options to executive officers under the Company's 1982 Stock
Option Plan are designed to promote the identity of the long-term interests
between the Company's executives and its shareholders and assist in the
retention of executive officers. The Company does not maintain plans under
which stock appreciation rights or restricted stock can be awarded.
It is the policy of the Committee not to grant stock options to executive
officers at exercise prices less than the market value of a share of Common
Stock on the date of grant. Generally, the stock options are exercisable in 20%
increments every six months following the date of grant and expire ten years
from the date of grant. The primary consideration of the Committee in
determining the number of shares subject to each option grant is corporate
performance. The criteria used to measure corporate performance is the same
criteria that was used by the Committee when granting annual base salary
increases. The Committee intends to continue the Company's policy of granting
equal option grants to executive officers based on an overall assessment of
corporate performance.
On March 22, 1995, the Compensation Committee granted to Henry A. Panasci,
Jr. and the other four executive officers serving on the Company's senior
management committee options to purchase 10,000 Common Shares at an exercise
price equal to the fair market value of such Common Shares on the date of grant
($6.56 per share).
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
On March 22, 1995, the Compensation Committee awarded to Henry A. Panasci,
Jr. a salary increase of 6% effective March 26, 1995. Mr. Panasci's salary
increase took into account the increase in the cost of living, competitive pay
practices (as disclosed in the Hay Management Group compensation surveys) and
the performance criteria outlined above. A portion of Mr. Panasci's salary
increase was intended to reduce the gap in the base salary being received by
Mr. Panasci compared to chief executive officers of other retail businesses of
comparable size. Also reflected in such increase were performance related
factors that included the improvement in the Company's earnings, the growth in
comparable store sales
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and his role in managing the significant store growth that occurred in fiscal
1995. Under the terms of the Company's Key Management Incentive Plan, the
Committee granted to Mr. Panasci a bonus equal to 22.5% of his annual base
salary, or $83,835, in respect of the fiscal year ended January 28, 1995. The
bonus so granted was based on achievement of 100% of targeted sales and 99% of
targeted earnings, after adjustment of the original sales and earnings targets
for unusual competitive factors that impacted the sales and earnings of the
Company's Paper Cutter Division and the impact on earnings related to the
integration of the 30 National Auto Stores acquired by the Company in June
1994. In light of these adjustments, no discretionary bonus was granted Mr.
Panasci, although corporate and individual performance criteria may have
warranted the granting of such a bonus.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162 (M)
The Omnibus Budget and Reconciliation Act of 1993 resulted in the addition of
Section 162(m) to the Internal Revenue Code. Beginning in 1994, Section 162(m)
limits the federal income tax deduction to $1,000,000 per year for compensation
paid to a company's chief executive officer and to its four other most highly
compensated executive officers, unless such compensation meets the technical
definition of "performance based compensation," as set forth in the Code. The
Committee, when considering compensation levels and compensation programs,
considers all relevant factors, including tax deductions that may result from
such compensation or programs. Compensation paid to the Company's chief
executive officer and to each of its four other most highly compensated
executive officers has never exceeded $1,000,000, and in 1995 is not expected
to exceed $1,000,000. Accordingly, at this time the Committee has not
recommended that any special action be taken or any of the Company's plans or
programs be revised to ensure the deductibility of compensation pursuant to the
provisions of Section 162(m).
Submitted by the Compensation
Committee of the Board of Directors
Hyman M. Miller, Chairman
Robert H. Altman
John D. Burke
Tarky Lombardi, Jr.
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PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
FOR THE FIVE YEARS ENDED JANUARY 28, 1995
AND THE PERIOD ENDED MARCH 31, 1995
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1/90 1/91 1/92 1/93 1/94 1/95 3/95
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Fay's Incorporated 100 118 126 117 117 112 132
Media General Index 100 103 126 133 158 150 160
Composite Peer Group 100 123 155 161 160 201 206
</TABLE>
The graph above assumes a $100 investment on January 31, 1990, and
reinvestment of all dividends in the Company's Common Shares, the Media General
Index and a composite peer group consisting of the following companies: Arbor
Drugs, Inc., Big B, Inc., Drug Emporium, Inc. Eckerd Corp., Genovese Drug
Stores, Inc., Longs Drug Stores, Inc., Medicine Shoppe International, Inc.,
Revco D.C., Inc., Rite Aid Corp., Vitalink Pharmacy Services, and Walgreen
Company. The Media General Index is comprised of historical financial data of
approximately 7,000 companies traded on major stock exchanges throughout the
five year period.
CERTAIN BUSINESS RELATIONSHIPS
During the fiscal year ended January 28, 1995, the law firm of which Robert
H. Altman is a member rendered legal services to the Company. During the fiscal
year ended January 28, 1995, the law firm of which Tarky Lombardi, Jr. is a
member rendered legal services to the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert H. Altman, a member of the Compensation Committee of the Board of
Directors, served as the Company's General Counsel and Secretary between 1976
and 1980. During the fiscal year ended January 28, 1995, the law firm of which
Mr. Altman is a member rendered legal services to the Company. During the
fiscal year ended January 28, 1995 the law firm of which Mr. Lombardi is a
member rendered legal services to the Company.
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PROPOSAL 2.
INDEPENDENT ACCOUNTANTS
The Board of Directors has engaged the firm of Deloitte & Touche LLP,
independent certified public accountants, to audit the financial statements of
the Company and its subsidiaries for the fiscal year ending January 27, 1996.
Deloitte & Touche LLP has served as independent auditors of the Company for
many years, and is considered by Management of the Company to be well-
qualified. The Board of Directors requests that the engagement of Deloitte &
Touche LLP be ratified by the shareholders.
The Company has been informed that a representative of Deloitte & Touche LLP
will be present at the Annual Meeting, will be available to respond to
appropriate questions from shareholders in attendance and will be able to make
a statement to the Meeting if such representative desires.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the Common Shares of the Company voting
in person or by proxy is required for approval of this Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE HOLDERS OF COMMON SHARES VOTE FOR
APPROVAL OF THE FOREGOING PROPOSAL.
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
The Company believes that for the fiscal year ended January 28, 1995, its
officers and directors complied with all filing requirements under Section
16(a) of The Securities Exchange Act of 1934, except that Tarky Lombardi, Jr.
failed to timely report on Form 4 the purchase of 47 Common Shares purchased
through the Company's Dividend Reinvestment and Stock Purchase Plan that was
due by January 10, 1995. Said purchase was reported by Mr. Lombardi on Form 5
on March 14, 1995.
SHAREHOLDER PROPOSALS AND NOMINATIONS
Any shareholder who desires to submit a proposal to be presented for vote of
shareholders at the Company's 1996 Annual Meeting must submit the proposal in
writing in time to be received by the Secretary of the Company at the Company's
principal office by December 22, 1995 for inclusion in the Company's 1996 Proxy
Statement and form of proxy relating to the Meeting. To be eligible for
inclusion in the Company's 1996 Proxy Statement, the proposal must conform to
the requirements of Regulation 14A promulgated under the Securities Exchange
Act of 1934. Any shareholder who desires to make a nomination for director to
be elected at the 1996 Annual Meeting must submit the nomination in writing to
be received by the Secretary of the Company at the Company's principal office
by December 22, 1995. Any nominations received by that date will be referred to
and considered by the Board of Directors.
OTHER MATTERS
The foregoing is the only business of which Management is aware will be
presented for action at the forthcoming Annual Meeting. If any other matters
properly come before the Meeting, the accompanying proxy confers discretionary
authority with respect to those matters, and the persons named in the
accompanying proxy intend to vote that proxy to that extent in accordance with
their best judgment.
By Order of the Board of Directors
WARREN D. WOLFSON
Senior Vice President and Secretary
Dated: April 26, 1995
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<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FAY'S INCORPORATED PROXY
7245 Henry Clay Boulevard, Liverpool, New York 13088
The undersigned hereby appoints Robert H. Altman and Hyman M. Miller as
Proxies, each with full power to appoint his substitute, and hereby authorizes
them to represent and vote, as designated below, all the Common Shares of Fay's
Incorporated held of record by the undersigned on April 7, 1995 at the Annual
Meeting of Shareholders to be held on May 26, 1995 or any adjournment(s)
thereof.
1. ELECTION OF FOUR DIRECTORS
[_] FOR All nominees listed below for the term set forth in the Proxy
Statement (except as marked to the contrary below)
[_] WITHHOLD AUTHORITY
to vote for all nominees listed below
INSTRUCTIONS: To withhold authority to vote for any individual nominees,
strike a line through the nominee's name listed below.
ROBERT J. BENNETT LEE H. FLANAGAN HENRY A. PANASCI, JR. ALAIR A. TOWNSEND
2. PROPOSAL to approve the appointment of Deloitte & Touche to audit the
financial statements of the Company and its subsidiaries for the fiscal
year ending January 27, 1996.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
(continued and to be signed on other side)
<PAGE>
(continued from other side)
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 all proposals.
Dated: ______________________________, 1995
___________________________________________
Signature
___________________________________________
Signature If Held Jointly
Please sign exactly as name appears herein. When
shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such. If a corporation, please
sign in full corporate name by duly authorized
officer. If a partnership, please sign in
partnership name by authorized person.
