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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 Section240.14a-11(c) or
Section240.14a-12
GANTOS, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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GANTOS, INC.
1266 EAST MAIN STREET, FIFTH FLOOR
STAMFORD, CONNECTICUT 06902
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
The Annual Meeting of Shareholders of Gantos, Inc. (the "Company") will be
held at the Best Western Midway Hotel, at 4101-28th Street, S.E., Grand Rapids,
Michigan 49512, on Thursday, June 19, 1997, at 11:00 a.m., Eastern Daylight
Time, for the following purposes:
<TABLE>
<S> <C>
ITEM I. To elect three directors to serve until the 2000 Annual Meeting of
Shareholders and until their successors are elected and qualified; and
ITEM II. To transact such other business as may properly come before the Annual
Meeting.
</TABLE>
The Board of Directors has set the close of business on May 1, 1997 as the
record date for determining shareholders entitled to notice of, and to vote at,
the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
[SIGNATURE]
ARLENE H. STERN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
May 9, 1997
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE SIGNED, DATED AND PROMPTLY
RETURNED IN THE ENCLOSED ENVELOPE, SO THAT YOUR SHARES WILL BE REPRESENTED
WHETHER OR NOT YOU ATTEND THE ANNUAL MEETING.
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GANTOS, INC.
1266 EAST MAIN STREET, FIFTH FLOOR
STAMFORD, CONNECTICUT 06902
------------------------
PROXY STATEMENT
FOR THE 1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 19, 1997
------------------------
GENERAL INFORMATION
The Annual Meeting of Shareholders of Gantos, Inc. (the "Company") will be
held at the Best Western Midway Hotel, at 4101-28th Street, S.E., Grand Rapids,
Michigan 49512, on Thursday, June 19, 1997, at 11:00 a.m., Eastern Daylight
Time, for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. The approximate mailing date for this proxy statement and proxy is
May 9, 1997.
It is important that your shares be represented at the meeting. If it is
impossible for you to attend the meeting, please sign and date the enclosed
proxy and return it to the Company. Shares represented by valid, executed and
dated proxies in the enclosed form will be voted if received in time for the
Annual Meeting in accordance with the instructions thereon. Unless your proxy is
otherwise marked, it will be voted FOR management's nominees for the Board of
Directors and will be voted at the discretion of the proxy holder in respect of
such other business, if any, as may properly be brought before the Annual
Meeting. Any person giving a proxy has the power to revoke it any time before it
is voted by executing a later dated proxy, by subsequent written notice to the
Company or by attendance and voting at the meeting. The proxy is solicited by
the Board of Directors of the Company and such solicitation may include requests
by mail, telegram and personal contact by its directors, officers and employees,
at no additional compensation. All expenses in connection with the solicitation
of proxies, including the costs of preparing and mailing the proxy materials,
will be borne by the Company. The Company will reimburse brokers or other
nominees for their expenses in forwarding proxy materials to principals.
As used in this Proxy Statement, 1994, 1995 and 1996 shall mean the fiscal
years ended January 28, 1995, February 3, 1996 and February 1, 1997,
respectively. Subsequent years shall mean the fiscal year ended on the Saturday
closest to January 31.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Only holders of record of Common Shares, $.01 par value ("Common Stock"), at
the close of business on May 1, 1997 (the "Record Date") are entitled to notice
of, and to vote at, the meeting or any adjournment or adjournments of the
meeting, each share having one vote on each matter submitted for a vote at the
meeting. On the Record Date, the Company had issued and outstanding 7,526,932
shares of Common Stock.
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As of the Record Date, the only person known to the Company to be the
beneficial owner of more than 5% of the Company's outstanding Common Stock was
as follows:
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<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OUTSTANDING SHARES
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<S> <C> <C>
Kennedy Capital Management, Inc. 467,200(a) 6.2%
10829 Olive Blvd.
St. Louis, MO 63141
</TABLE>
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(a) The information with respect to Kennedy Capital Management, Inc. is based
solely on a Schedule 13G report, dated, February 10, 1997. Kennedy Capital
Management, Inc. is an Investment Advisor registered under Section 203 of
the Investment Advisors Act of 1940. With respect to the 467,200 shares
beneficially owned by Kennedy Capital Management, the corporation has sole
power to vote or direct the vote of 437,200 shares and sole power to dispose
or direct the disposition of 467,200 shares.
ITEM I. ELECTION OF DIRECTORS
The Board of Directors proposes that the three persons named below as
nominees for election as directors be elected as directors of the Company to
hold office until the Annual Meeting of Shareholders to be held in the year
2000, and until their successors are duly elected and qualified or until their
earlier death, resignation or removal. Mr. Schomer was elected as a director at
the 1992 Annual Meeting of Shareholders on June 18, 1992, Mr. Marks was
appointed as a director pursuant to the Company's Plan of Reorganization
effective March 31, 1995. Ms. Stern was elected by the Board of Directors
effective July 8, 1996. If a quorum is present, the three nominees receiving the
greatest number of votes cast at the meeting or its adjournment will be elected.
Withheld votes and broker non-votes will not be deemed votes cast in determining
which nominees receive the greatest number of votes cast, but they will be
counted in determining whether a quorum is present. The persons named in the
accompanying proxy intend to vote all valid proxies received by them for the
election of these nominees, who have consented to serve if elected, unless the
giver of the proxy withholds authority to vote for any such nominee. If any
nominee is unable or declines to serve, which is not expected, it is intended
that the proxies be voted in accordance with the best judgment of the proxy
holders for another qualified person.
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The following information is furnished as of the Record Date with respect to
each nominee for election as a director, with respect to each person whose term
of office as a director will continue after the meeting, with respect to each
present or former executive officer of the Company named in the Summary
Compensation Table below, and with respect to all current directors and
executive officers as a group:
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<CAPTION>
PERCENTAGE OF
SHARES OF OUTSTANDING
COMMON STOCK COMMON STOCK
OF THE COMPANY OF THE COMPANY
NAME AND YEAR BENEFICIALLY BENEFICIALLY
FIRST BECAME A DIRECTOR AGE OWNED(A) OWNED
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<S> <C> <C> <C>
NOMINEES FOR ELECTION AS DIRECTORS
Arlene H. Stern 46 81,014(b) 1.1%
(1996)
Fred K. Schomer 57 23,700(c) *
(1992)
Erwin A. Marks 59 7,000(d) *
(1995)
DIRECTORS CONTINUING IN OFFICE
L. Douglas Gantos 65 186,666(e) 2.4%
(1961)
Hannah H. Strasser 37 243,803(f) 3.2%
(1995)
Mary Elizabeth Burton 45 7,000(g) *
(1995)
Elizabeth M. Eveillard 50 23,500(h) *
(1992)
S. Amanda Putnam 47 7,000(i) *
(1995)
OTHER EXECUTIVE OFFICERS
Kenneth Green 43 58,251(j) 1.0%
Gordon J. Tendler 46 6,140(k) *
Anthony Barnett 42 0 *
J.E. Bunka 38 7,813 *
Jane E. Pahls 37 500 *
All directors and executive officers as 649,117(l) 8.3%
a group (15 persons)
</TABLE>
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* Less than 1%.
(a) All directors, nominees and executive officers named in this proxy statement
have sole investment and voting power with respect to shares of Common Stock
beneficially owned by them, except as provided below.
(b) Includes 6,014 shares acquired under the Gantos, Inc. Employee Stock
Purchase Plan between January 31, 1997 and April 30, 1997.
(c) Includes 13,000 shares that Mr. Schomer has the right to acquire within 60
days of the Record Date pursuant to options granted to him under the
Company's Amended and Restated Director Stock
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Option Plan. In addition, the information includes 10,700 shares Mr. Schomer
owns jointly with his wife.
(d) Includes 7,000 shares that Mr. Marks has the right to acquire within 60 days
of the Record Date pursuant to options granted to him under the Company's
Amended and Restated Director Stock Option Plan.
(e) Includes 136,666 shares that Mr. Gantos has the right to acquire within 60
days of the Record Date pursuant to options granted to him under the
Company's Amended and Restated Stock Option Plan. In addition, the
information includes 16,667 shares of restricted stock, with restrictions on
transfer expiring on March 31, 1998, and they expire immediately upon
termination of Mr. Gantos' employment and consultation with the Company
unless such termination is by the Company for cause or by Mr. Gantos without
good reason.
(f) Includes 7,000 shares that Ms. Strasser has the right to acquire within 60
days of the Record Date pursuant to options granted to her under the
Company's Amended and Restated Director Stock Option Plan. In addition, the
information includes 11,315 shares held in investment advisory accounts over
which Ms. Strasser has voting and investment discretion and 225,488 shares
held by Cardinal Recovery Partners. Cardinal Capital Management LLC is a 1%
general partner in Cardinal Recovery Partners and Ms. Strasser is a 45%
general partner in Cardinal Capital Management. Ms. Strasser disclaims
beneficial ownership of the shares held by Cardinal Recovery Partners.
(g) Includes 7,000 shares that Ms. Burton has the right to acquire within 60
days of the Record Date pursuant to options granted to her under the
Company's Amended and Restated Director Stock Option Plan.
(h) Includes 13,000 shares that Ms. Eveillard has the right to acquire within 60
days of the Record Date pursuant to options granted to her under the
Company's Amended and Restated Director Stock Option Plan.
(i) Includes 7,000 shares that Ms. Putnam has the right to acquire within 60
days of the Record Date pursuant to options granted to her under the
Company's Amended and Restated Director Stock Option Plan.
(j) Includes 35,833 shares that Mr. Green has the right to acquire within 60
days of the Record Date pursuant to options granted to him under the
Company's Amended and Restated Stock Option Plan. In addition, the
information includes 6,667 shares of restricted stock, with restrictions on
transfer expiring March 31, 1998, and 2,418 shares acquired under the
Gantos, Inc. Employee Stock Purchase Plan between November 1, 1996 and April
30, 1997.
(k) Includes 1,140 shares acquired under the Gantos, Inc. Employee Stock
Purchase Plan between November 1, 1996 and January 31, 1997.
(l) Includes 230,331 shares that the Company's directors and executive officers
have the right to acquire within 60 days of the Record Date pursuant to
options granted to them under the Company's stock option plans.
OTHER INFORMATION RELATING TO DIRECTORS
Following is a brief account of the business experience during the past five
years of each nominee for the Board of Directors of the Company and each
continuing director of the Company:
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NOMINEES FOR TERMS TO EXPIRE IN 2000
CLASS II
---------------------
ARLENE H. STERN
Arlene H. Stern has been the Company's President and Chief Executive Officer
since September 8, 1996. From July 8, 1996 to September 8, 1996, Ms. Stern was
the President and Chief Operating Officer for the Company. Ms. Stern served as
Executive Vice President and Chief Operating Officer of Casual Corner Group,
Inc., a retail apparel specialty store chain and a division of U.S. Shoe
Corporation, from July 1993 to August 1995. From February 1985 to July 1993, Ms.
Stern was the Executive Vice President for Human Resources and Distribution with
P.A. Bergner & Company, a department store chain. While Ms. Stern is employed by
the Company, the Company will nominate her and use its reasonable efforts to
have her elected as a director of the Company (see Executive
Compensation--Employment Contracts and Termination of Employment and
Change-in-Control Arrangements--Arlene H. Stern).
FRED K. SCHOMER
Fred Schomer has been the Executive Vice President and Chief Financial
Officer for Gerber Products Company, a consumer products manufacturer, since
November 1988.
ERWIN A. MARKS
Erwin A. Marks has been the President of Marks & Associates, Inc., an
interim management and consulting firm specializing in underperforming companies
and restructurings, since April 1996. From June 1995 to April 1996, Mr. Marks
was the President of Circle Fine Arts Corporation, a retail art gallery chain.
From 1989 to June 1995, Mr. Marks was the Managing Director and Senior Vice
President of Heller Investments, Inc., a subsidiary of Heller Financial Inc., a
financial services company. Mr. Marks is also on the Board of Directors of Value
Merchants, Inc. Circle Fine Arts Corporation filed a voluntary petition for
relief under Chapter 11 of the United Stated Bankruptcy Code on February 8,
1996. Mr. Marks was an executive officer of Circle Fine Arts Corporation at the
time of the filing.
------------------------
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1998
CLASS III
---------------------
L. DOUGLAS GANTOS
L. Douglas Gantos has served as the Company's Chairperson of the Board since
September 1996. From July 1996 until September 1996, he served as the Company's
Chief Executive Officer and Chairperson of the Board. From August 1993 until
July 1996, Mr. Gantos served as the Company's President, Chief Executive Officer
and Chairperson of the Board. From April 1992 until August 1993 he served as the
Company's Chief Executive Officer and Chairperson of the Board. From April 1963
until April 1992, Mr. Gantos served as the Company's President and Chief
Executive Officer. While Mr. Gantos is an officer, the Company will use its
reasonable efforts to nominate Mr. Gantos and have him elected as a director of
the Company. In addition, while Mr. Gantos receives cash payments pursuant to a
letter of employment, as amended (see Executive Compensation--Employment
Contracts and Termination of Employment and Change-in-Control Arrangements--L.
Douglas Gantos), he will serve as a director of the Company during any period in
which the Company's Board of Directors desires him to serve as a director,
unless he is not elected by the shareholders or dies. The Company filed a
voluntary petition for relief under
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Chapter 11 of the United States Bankruptcy Code on November 12, 1993. Mr. Gantos
was an executive officer of the Company at the time of the filing.
HANNAH H. STRASSER
Hannah H. Strasser is co-head of the high yield group, responsible for
portfolio management and research for Cardinal Capital Management, a money
management company Ms. Strasser co-founded in April 1995. Prior to co-founding
Cardinal, Ms. Strasser was co-head of the high yield group and was responsible
for portfolio management and research for Deltec Asset Management Corp, a money
management firm. She was also a Managing Director and a member of Deltec's
Executive Committee. She currently serves as a member of the Board of Directors
of Rymer Foods Inc.
MARY ELIZABETH BURTON
Mary Elizabeth Burton has been the Chairman of BB Capital, Inc., a company
which was formed by Ms. Burton to invest in retail or service companies in the
health and beauty industries, since November 1994. From July 1992 until November
1994, she served as Chairman of the Board and Chief Executive Officer of
Supertans, Inc., a tanning store chain. From July 1991 until July 1992, she
served as Chairman of the Board and Chief Executive Officer of Postal Instant
Press, Inc. Ms. Burton currently serves as a member of the Board of Directors of
Staples, Inc., the office superstore.
------------------------
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 1999
CLASS I
---------------------
ELIZABETH M. EVEILLARD
Elizabeth M. Eveillard has been the Managing Director and head of the
Retailing Industry Group for PaineWebber Incorporated, an investment banking
firm, since April 1988.
S. AMANDA PUTNAM
S. Amanda Putnam has been the Vice President, Marketing Strategies for
Fitch, Inc., which is an international business and design consulting
organization, since 1992. From 1984 to 1992, Ms. Putnam was with the Management
Horizons Division of Price Waterhouse where she last held the position of Vice
President Research and Intelligence.
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES THEREOF
The Board of Directors of the Company has established an Audit Committee.
The current members of the Audit Committee are Elizabeth M. Eveillard,
Chairperson, Mary Elizabeth Burton and Erwin A. Marks. The Audit Committee is
responsible for (1) nominating the Company's independent accountants for
approval by the Board of Directors, (2) reviewing with the independent
accountants the scope, cost and results of the auditing engagement, (3)
reviewing and approving fees for professional services provided by the
independent accountants, (4) reviewing the reports submitted by the independent
accountants, and (5) reviewing the adequacy of the Company's system of internal
accounting controls. During 1996, the Audit Committee held four meetings.
The Board of Directors has established a Compensation Committee. The current
members of the Compensation Committee are Fred K. Schomer, Chairperson, S.
Amanda Putnam and Hannah H. Strasser. The Compensation Committee is responsible
for recommending to the Board of Directors compensation plans and arrangements
for senior management and directors and for administering the
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Company's Executive Bonus Plan, Stock Option Plans and Employee Stock Purchase
Plan. During 1996, the Compensation Committee held five meetings.
The Board of Directors has established an Executive Committee. The current
members of the Executive Committee are L. Douglas Gantos, Chairperson, Hannah H.
Strasser and Fred K. Schomer. The Executive Committee is permitted to exercise
all of the powers and authority of the Board of Directors in the management of
the business and affairs of the Company between meetings of the Board of
Directors, except as limited by the Michigan Business Corporation Act and the
Company's Bylaws. During 1996, the Executive Committee held one meeting.
During 1996, the Board of Directors held eight meetings. Each director of
the Company attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors (held during the period for which he or she
has been a director), and (ii) the total number of meetings held by all
committees of the Board on which he or she served (during the periods that he or
she served). The Board of Directors does not have any standing nominating
committee.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Under the Company's standard arrangements, each director who is not a
Company employee receives an annual fee of $15,000, payable quarterly, plus $500
for each Board meeting attended, including meetings by conference telephone
call, plus reasonable expenses.
Pursuant to the Gantos, Inc. Amended and Restated Director Stock Option Plan
(the "Directors Plan"), on April 1 each year, the Company automatically grants
an option to purchase 1,000 of the Company's common shares to each director of
the Company who (i) is a director of the Company as of the date the option is
granted under the Directors Plan, (ii) has served as a director of the Company
for at least nine months as of the date the option is granted under the
Directors Plan, and (iii) is not an officer or employee of the Company. Up to
100,000 common shares are reserved for issuance under the Directors Plan.
Options are exercisable on the date of grant and expire ten years
thereafter. The option exercise price is the fair market value of the common
shares on the date of grant. Options may be exercised either by payment in cash
or, at the discretion of the Board of Directors, (i) by surrender of common
shares of the Company, or (ii) by a promissory note, or (iii) by delivery of the
proceeds from a broker's sale of, or loan secured by, some or all of the shares
received upon exercise of the option. No options may be granted under the
Directors Plan after March 16, 2002.
On April 1, 1996 and 1997, 6,000 options to purchase common shares were
granted under the Directors Plan at an exercise price of $2.15625 and $2.40625,
respectively. As of the Record Date, options to purchase 46,000 common shares
remain authorized for future award under the Directors Plan.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. The Compensation Committee's overall compensation policy
applicable to the Company's executive officers is to provide a compensation
package that is intended to attract and retain qualified executives for the
Company and to provide them with incentives to achieve Company goals and
increase shareholder value. The Compensation Committee implements this policy
through salaries, bonuses, stock options, restricted stock awards, retirement
savings plans, employment and severance agreements and miscellaneous personal
benefits.
SALARIES. The Compensation Committee's policy is to provide salaries that
are comparable, in its subjective judgement, to those of similar executive
officers in similar companies in order to attract and
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retain qualified executives and that compensate employees for their individual
contributions and performance. The Committee also considers management's
recommendations. The Compensation Committee determines comparable salaries
through Company research regarding what is paid by other companies deemed
comparable to the Company in terms of size and/or business (adjusted for the
size of the Company and the experience and responsibility of the executive),
through the salary requests of the individuals interviewed by the Company for
open positions and through recommendations of executive search firms hired by
the Company to locate executive officers.
BONUSES. The Compensation Committee's policy is to adopt a bonus plan that
compensates executive officers for achieving the Company's earnings target set
near the beginning of the fiscal year and for their individual performance
during the year. The Compensation Committee also reserves the right to recommend
discretionary bonuses for the Company's executive officers based on its
subjective evaluation of management's recommendations and the Company's
performance and achievements and their individual performance and achievements
during the year even if the Company's earnings target is not met. These bonuses
are intended to make a significant portion of each executive officer's
compensation dependent on the Company's performance and to provide executive
officers with incentives to achieve Company goals, increase shareholder value
and work as a team. Bonuses are also intended to recognize the executive's
individual contributions to the Company.
For the fiscal year ended February 1, 1997, the 1996 Gantos, Inc. Executive
Bonus Plan ( the "1996 Plan"), as amended, was administered by the Company's
Compensation Committee and covered all of the executive officers of the Company
named in the Summary compensation Table below, along with certain other key
members of management. Pursuant to the 1996 Plan, the 1996 bonus pool equaled
50% of the Company's earnings in excess of the earnings target, up to a maximum
pool of 35% of the actual salaries of the plan participants. The 1996 Plan
provided for 50% of the bonus pool to be automatically earned and payable upon
the achievement of earnings in excess of the earnings target and to be
automatically allocated among the participants in proportion to the actual
salary paid to the participants. The Compensation Committee was to determine, in
its discretion, what portion, if any, of the remaining bonus pool would be paid
to each participant, based on its evaluation of senior management's
recommendations, the individual's performance and other factors as the Committee
deemed relevant. The Compensation Committee was not required to award the entire
remaining bonus pool and any participant could receive any amount of the
remaining bonus pool. For purposes of the 1996 Plan, earnings were defined as
the Company's income before taxes, extraordinary items, and bonuses payable
under this plan plus or minus any items not included in projections from which
the earnings target was determined and that otherwise increased or decreased
earnings, at the discretion of the Compensation Committee.
The earnings target was set by the Board of Directors after consultation
with senior management and receiving the recommendation of the Compensation
Committee, and it was lower than 1995 earnings. The Board reserved the right to
pay bonuses beyond those, if any, called for by the 1996 Plan. As a result of
the Company's 1996 earnings not meeting target, no bonuses were payable under
the 1996 Plan. For fiscal 1996, one contractually obligated bonus was paid to
Arlene H. Stern in the amount of $75,000.
STOCK OPTIONS AND RESTRICTED STOCK. The Compensation Committee's policy is
to award stock options and restricted stock to the Company's executive officers
in amounts reflecting the Compensation Committee's subjective evaluation of the
participant's position and ability to influence the Company's overall
performance and management's recommendations without any specific weight being
given to any of these factors. In determining the size of the individual awards
of options, the Compensation Committee also considers the amounts of options
outstanding and previously granted both in the aggregate and with respect to the
optionee, the amount of options remaining available for grant under the stock
option plans, and the aggregate amount of current awards, and for new officers,
the amount necessary to attract the officer to the Company and options held by
others at similar levels in the Company. Awards in 1996 consisted of stock
option grants with exercise prices equal to the fair market value of the
Company's common shares on the grant date. Options and restricted stock are
intended to provide participants with
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an increased incentive to make contributions to the long-term performance and
growth of the Company, to join the interests of participants with the interests
of shareholders of the Company, to secure for the Company the benefits of the
additional incentive inherent in the ownership of its Common Stock by key
employees of the Company and to help the Company attract and retain qualified
employees.
The Compensation Committee's policy is to grant options with a term of ten
years to provide a long-term incentive and to fix the exercise price of the
options at the fair market value of the underlying shares on the date of grant.
Such options only provide compensation if the price of the underlying shares
increases. In addition, the Compensation Committee's policy is to grant options
that vest over a specified period (generally three to five years for options
granted to executive officers in 1996) to provide the executive with an
incentive to remain with the Company. The Compensation Committee's policy is
also to provide new executives with options to attract them to the Company.
Generally, the Compensation Committee reserves the right to recommend the
payment of compensation to the Company's executives in amounts it deems
appropriate regardless of whether such compensation is deductible for federal
income tax purposes.
401(K) PLAN. The Company has adopted a 401(k) plan to provide all eligible
employees a means to accumulate retirement savings. Participants may defer
specified portions of their compensation. The 401(k) Plan provides for the
Company to make matching contributions to employee accounts where the employee
participates in the 401(k) plan.
EMPLOYEE STOCK PURCHASE PLAN. The Company has adopted an Employee Stock
Purchase Plan to provide all eligible employees the opportunity to purchase and
hold common shares of the Company. The shares are offered to the employees at a
15% discount.
EMPLOYMENT AND SEVERANCE AGREEMENTS AND MISCELLANEOUS PERSONAL
BENEFITS. The Compensation Committee's policy is to have employment agreements
with new executive officers to provide them with specified positions, periods of
employment, salaries, fringe benefits and severance benefits. The Compensation
Committee's policy is also to have severance agreements with selected key
employees. These benefits are intended to permit the executive officer to focus
his or her attention on performing his or her duties to the Company, rather than
on the security of his or her employment, and to provide the officer with
benefits deemed by the Compensation Committee to be suitable for the executive's
office. The Compensation Committee's policy, however, is that personal benefits
(other than severance pay) should not exceed 10% of the executive's salary and
bonus for the year.
1996 COMPENSATION DECISIONS REGARDING L. DOUGLAS GANTOS AND ARLENE H.
STERN. Mr. Gantos' 1996 salary was not increased from his 1995 salary based on
management's recommendation, the Committee's subjective evaluation of chief
executive officer salaries at similar companies (adjusted in the Committee's
subject judgement for differences in the Company's size and Mr. Gantos'
experience and responsibility), and the salary requests of individuals
interviewed by the Company to become its Chief Operating Officer. No bonus was
paid to Mr. Gantos for 1996 because the earnings target under the 1996 Plan was
not met.
As described in "Stock Options and Restricted Stock", the numbers of shares
subject to options granted to Mr. Gantos in fiscal 1996 reflect the Compensation
Committee's subjective evaluation of his position and ability to influence the
Company's overall performance, management's recommendations, the aggregate
amount of the proposed grants and the shares remaining available under the
Company's stock option plan.
The Compensation Committee also recommended that the Company enter into an
amendment to the employment agreement with Mr. Gantos in fiscal 1996 to help the
Company retain his services during the period of transition to a new Chief
Executive Officer. The Compensation Committee recommended approval of this
amendment based on its subjective judgement of the provisions required to retain
Mr. Gantos' services during this transition period.
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The salary, bonus and stock options provided to Arlene H. Stern for fiscal
1996 were based on amounts negotiated between the Company and Ms. Stern in
connection with her employment letter before she began working for the Company.
The amount of salary, minimum bonus and shares subject to the stock option
granted to Ms. Stern were recommended by the Compensation Committee based on its
subjective judgement of (i) the amounts necessary to attract Ms. Stern to the
Company, (ii) chief executive officer salaries and bonuses at similar companies
and those requested by other candidates for the position (adjusted in the
Committee's subjective judgement for differences in the Company's size and Ms.
Stern's experience and responsibility), and (iii) the number of options
previously granted to Mr. Gantos, Ms. Stern's and other candidiate's requests
regarding an equity position in the Company, and the Committee's subjective
judgement of what was appropriate in the circumstances for the Company's Chief
Executive Officer.
The Committee recommended that the Company enter into an employment letter
with Ms. Stern to help the Company obtain her services and to provide her with a
description of her positions with the Company and a specified period of
employment, a minimum base salary and bonus, fringe benefits and severance
benefits to allow her to focus her attention on performing her duties to the
Company rather than on the security of her employment. The Committee recommended
approval of this agreement base on it subjective judgement of the benefits
suitable for Ms. Stern's office, experience and duties.
By The Compensation Committee
Fred K. Schomer
S. Amanda Putnam
Hannah H. Strasser
10
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information for each of the fiscal years
ended February 1, 1997, February 3, 1996 and January 28, 1995 concerning the
compensation of (i) any person serving as the Company's Chief Executive Officer
during the fiscal year ended February 1, 1997, (ii) each of the Company's other
most highly compensated current executive officers who were serving as executive
officers as of February 1, 1997 and whose total annual salary and bonus exceeded
$100,000, and (iii) up to two additional executive officers whose total annual
salary and bonus exceeded $100,000 for the fiscal year ended February 1, 1997
and who were not serving as executive officers as of February 1, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------ -----------------------
OTHER RESTRICTED
ANNUAL STOCK SECURITIES ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) OPTIONS(#) ($)(8)
- ------------------------------------- ---- ------- ------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arlene H. Stern, President, Chief 1996 245,193(1) 75,000 5,949 0 350,000 14,260
Executive Officer and Director 1995 N/A N/A N/A N/A N/A N/A
1994 N/A N/A N/A N/A N/A N/A
L. Douglas Gantos, Chairperson of the 1996 413,943(2) 0 0 0 50,000 9,575
Board and former Chief Executive 1995* 535,096 183,750 0 187,500(6) 180,000 9,575
Officer and President 1994 525,000 156,485 0 0 0 5,059
Anthony Barnett, former Vice 1996 122,358(3) 0 6,325 0 10,000(7) 22,914
President, Store Operations 1995 N/A N/A N/A N/A N/A N/A
1994 N/A N/A N/A N/A N/A N/A
Gordon J. Tendler, former Vice 1996 180,000(4) 0 0 0 7,500(7) 1,818
President, General Merchandise 1995* 183,462 63,000 28,872 56,250(6) 50,000(7) 61,293
Manager for Sportswear, Coats and 1994 31,154(4) 9,286 0 0 0 2,937
Suits
Kenneth Green, Vice President, 1996 150,000 0 0 0 12,500 1,885
General Counsel and Secretary 1995* 149,039 70,000 0 75,000(6) 50,000 1,861
1994 125,000 47,258 0 0 0 2,742
Jane E. Pahls, former Vice President, 1996 138,788(5) 0 0 0 7,500(7) 1,467
General Merchandise Manager for 1995* 160,192 57,245 0 56,250(6) 50,000(7) 1,491
Dresses and Accessories 1994 166,826(5) 49,725 0 0 0 2,309
J.E. Bunka, former Senior Vice 1996 150,000(9) 0 0 0 12,500(7) 1,655
President, Finance, Chief Financial 1995* 149,039 70,000 0 75,000(6) 50,000(7) 1,673
Officer and Treasurer 1994 125,000 47,258 0 0 0 2,352
</TABLE>
- ------------------------------
* Annual salary for fiscal 1995 includes 53 weeks compared to 52 weeks in
fiscal years 1996 and 1994.
(1) Ms. Stern became an executive officer of the Company on July 8, 1996. The
amounts disclosed include all compensation paid by the Company to Ms. Stern
during fiscal 1996.
(2) Mr. Gantos stepped down as Chief Executive Officer in September 1996 and
Arlene H. Stern assumed that role.
(3) Mr. Barnett became an executive officer of the Company on April 19, 1996.
The amounts disclosed include all compensation paid by the Company to Mr.
Barnett during fiscal 1996. Mr. Barnett resigned as an executive officer of
the Company as of April 18, 1997.
(4) Mr. Tendler became an executive officer of the Company on November 28, 1994.
The amounts disclosed include all compensation paid by the Company to Mr.
Tendler during fiscal 1996, 1995 and 1994. Mr. Tendler resigned as an
executive officer of the Company as of April 18, 1997.
(5) Ms. Pahls became an executive officer of the Company on November 28, 1994.
The amounts disclosed include all compensation paid by the Company to Ms.
Pahls during fiscal 1996, 1995 and fiscal 1994. Ms. Pahls resigned as an
executive officer of the Company as of October 31, 1996.
11
<PAGE>
(6) The restricted shares awarded in fiscal 1995 vest in one-third cumulative
annual installments which began March 31, 1996. The restricted shares
awarded to Mr. Gantos also vest 100% immediately upon termination of his
employment with the Company, unless such termination is for cause (except
that Mr. Gantos' vesting restrictions continue during the period he is a
consultant to the Company). The restricted shares awarded to Messrs. Green
and Bunka and Ms. Pahls also were to vest 100% immediately before their
termination of employment with the Company if such termination was by the
Company without cause or by the employee for good reason and occurred before
March 31, 1997. No such termination occurred before March 31, 1997. Mr.
Gantos, Mr. Tendler, Mr. Green, Ms. Pahls and Mr. Bunka were originally
awarded 50,000, 15,000, 20,000, 15,000 and 20,0000 restricted shares,
respectively, in 1995. The officers receiving such restricted shares are
entitled to receive any dividends declared on the Common Stock with respect
to their restricted shares. No such dividends have been paid, however, since
such restricted shares were awarded. Based on the $2.625 closing price of
the Common Stock as reported by The Nasdaq National Market as of January 31,
1997 (the last trading day of fiscal 1996) the executive officers named in
the table above held the following number of restricted shares with the
following value as of February 1, 1997: L. Douglas Gantos -- 33,333
restricted shares ($87,499.13), Gordon J. Tendler -- 10,000 restricted
shares ($26,250.00). Kenneth Green -- 13,333 restricted shares ($34,999.13),
Jane E. Pahls -- 0 restricted shares ($0) and J.E. Bunka -- 0 restricted
shares ($0). 5,000 restricted shares held by Mr. Tendler as of February 1,
1997 were forfeited and transferred back to the Company upon his resignation
in April 1997.
(7) Pursuant to such executive officer's resignation, all outstanding stock
options were canceled.
(8) The amounts shown for fiscal 1996 include (i) $1,500, $424, $1,500, $1,500,
$1,467 and $1,472 for Mr. Gantos, Mr. Barnett, Mr. Tendler, Mr. Green, Ms.
Pahls and Mr. Bunka, respectively, representing the Company's contribution
to the executive officer in 1996 under the Company's 401(k) Plan, (ii)
$1,316, $8,075, $739, $318, $385 and $183 for Ms. Stern, Mr. Gantos, Mr.
Barnett, Mr. Tendler, Mr. Green and Mr. Bunka, respectively, representing
life insurance premiums paid by the Company in 1996 for policy values in
excess of $50,000, (iii) $12,944 paid to Ms. Stern for relocation expenses
in 1996, and (iv) $21,751 paid to Mr. Barnett for relocation expenses in
1996.
(9) Mr. Bunka resigned as an executive officer as of January 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended February 3, 1996, to each of the
executive officers of the Company named in its Summary Compensation Table above:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------ ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES OPTIONS % OF TOTAL APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- -------------------------------- ----------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Arlene H. Stern................. 350,000 57.8(1) 4.65625 7/08/06 1,024,902 2,597,302
L. Douglas Gantos............... 50,000 8.3(2) 3.375 3/19/06 106,126 268,944
Anthony Barnett................. 10,000 1.7(3) 3.25 4/19/06 20,439 51,797
Gordon J. Tendler............... 7,500 1.2(4) 3.375 3/19/06 15,919 40,342
Kenneth Green................... 12,500 2.1(4) 3.375 3/19/06 26,531 67,236
Jane E. Pahls................... 7,500 1.2(4) 3.375 3/19/06 15,919 40,342
J.E. Bunka...................... 12,500 2.1(4) 3.375 3/19/06 26,531 67,236
</TABLE>
- ------------------------
(1) The options become exercisable in one-third increments on July 8, 1997, 1998
and 1999, respectively. The option also becomes exercisable immediately upon
termination of Ms. Stern's employment with the Company, unless such
termination is by the Company for cause or by Ms. Stern without good reason,
and if a change in control occurs. The vested portion of the options at the
date of termination of Ms. Stern's employment with the Company may be
exercised (i) until one year after termination as a result of her death or
disability, (ii) until 90 days after termination for any other reason,
except that all rights to exercise the options terminate if she is
terminated for cause.
(2) The options become exercisable in one-third installments on March 19, 1997,
1998 and 1999, respectively. The option also becomes exercisable immediately
and continues to be exercisable until its
12
<PAGE>
original termination date, upon termination of Mr. Gantos' employment and
consultation with the Company.
(3) The options become exercisable in one-fifth increments on April 19, 1997,
1998, 1999, 2000 and 2001.
(4) The option became exercisable in one-fifth increments on March 19, 1997,
1998, 1999, 2000 and 2001, respectively.
Pursuant to the Amended and Restated Gantos, Inc. Stock Option Plan and the
Gantos, Inc. 1996 Stock Option Plan under which these options were granted, if
upon the exercise of these options the Company must pay any amount for income
tax withholding, in the Compensation Committee's sole discretion, either the
Company will appropriately reduce the amount of stock to be delivered to the
optionee or the optionee will pay such amount to the Company to reimburse the
Company for such income tax withholding. Also pursuant to the Amended and
Restated Gantos, Inc. Stock Option Plan and the Gantos, Inc. 1996 Stock Option
Plan, the Compensation Committee may accelerate the exercisability of stock
options and stock appreciation rights in connection with termination of a
participant's employment or a change in control of the Company.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information concerning each exercise of stock
options during the fiscal year ended February 1, 1997 by each of the executive
officers named in the Summary Compensation Table above and the value of
unexercised options held by such persons as of February 1, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FY-END(#) AT FY-END($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- -------------------------------- ----------------- ----------------- ------------------- -------------------------
<S> <C> <C> <C> <C>
Arlene H. Stern................. 0 0 0/350,000 0/0
L. Douglas Gantos............... 0 0 60,000/170,000 0/0
Anthony Barnett................. 0 0 0/10,000 0/0
Gordon J. Tendler............... 0 0 16,666/40,834 0/0
Kenneth Green................... 0 0 16,666/45,834 0/0
Jane E. Pahls................... 0 0 0/0 0/0
J.E. Bunka...................... 0 0 0/0 0/0
</TABLE>
- ------------------------
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
ARLENE H. STERN. The Company has a letter of employment, dated as of June
20, 1996 with Arlene H. Stern. Pursuant to Ms. Stern's employment letter she is
employed as the Company's President and Chief Executive Officer until July 8,
1999 (the "Term"), unless earlier terminated.
Ms. Stern will receive (i) a salary of $425,000, subject to increase in the
discretion of the Compensation Committee, (ii) the right to participate in the
Company's Executive Bonus Plan, (iii) a minimum bonus of $75,000 with respect to
each of fiscal 1996, 1997 and 1998 (if employed at the end of each applicable
year), (iv) a grant of an option to purchase 350,000 common shares, which was
granted as of July 8, 1996, (v) a $750 a month car allowance, (vi) life
insurance in the amount of twice the amount of her base salary, as long as she
is insurable at standard rates, (vi) fringe benefits generally available to
other executive officers of the Company, (vii) reimbursement for various
relocation expenses, and (viii) reimbursement for the difference between the
cost of her Simsbury, Connecticut home and the net proceeds of its sale, up to
$250,000 of reimbursement, if such home is sold before July 8, 1999.
13
<PAGE>
Ms. Stern will also receive termination benefits, which vary depending on
the reason for her termination. If Ms. Stern's employment is terminated before
July 8, 1999 by the Company without "Cause", other than because of her death or
disability, or by Ms. Stern for "Good Reason", she will be entitled to (i) her
salary through the date of termination, (ii) any bonus earned with respect to
the prior fiscal year and a pro rata bonus for the fiscal year in which the
termination occurs, (iii) payment for the pro rata portion of her unused
vacation time for the fiscal year in which the termination occurs, (iv) a
continuation of her salary and minimum bonus for one year after the date of
termination (the "Period"), (v) during the Period, the same medical long-term
disability, dental and prescription drug coverage generally available to other
Company executive officers and her life insurance policy, (vi) the options
granted to her pursuant to the letter agreement fully vesting and remaining
exercisable for 90 days after such termination, and (vii) her life insurance
policy being assigned to her at the end of the Period, if assignable and if she
pays the Company the cash surrender value of the policy. These termination
benefits are subject to Ms. Stern's obligation to seek other employment and the
Company's right to offset amounts paid to Ms. Stern from such other employment
during the severance period.
If a change in control occurs before July 8, 1999 and within two years after
the change in control Ms. Stern's employment is terminated without "Cause",
other than because of her death or disability, or she terminates her employment
for "Good Reason", she will be entitled to the same types of benefits described
in the preceding paragraph, except that (i) all cash payments would be payable
in a lump sum within 30 days after such termination, (ii) the Period would
continue for three years after the date of termination, (iii) the total amount
of compensation contingent on a change in the ownership or effective control of
the Company would be limited to the maximum amount that may be paid to her and
not be deemed a "parachute payment" resulting in an excise tax to her and loss
of compensation deduction to the Company, and (iv) Ms. Stern would not have any
mitigation obligations.
If Ms. Stern's employment is terminated before July 8, 1999 because of her
death or disability, she will be entitled to (i) her salary through the date of
termination, (ii) any bonus earned with respect to the prior fiscal year and a
pro rata bonus for the fiscal year in which the termination occurs, (iii)
payment for the pro rata portion of her unused vacation time for the fiscal year
in which the termination occurs, (iv) for one year after the date of
termination, the same medical, dental and prescription drug coverage generally
available to other Company executive officers and, if such termination is not
the result of her death, her life insurance policy, (v) the options granted to
her pursuant to the letter agreement fully vesting and remaining exercisable for
one year after such termination, (vi) if such termination is not the result of
her death, her life insurance policy would be assigned to her one year after the
date of such termination, if assignable and if she pays the Company the cash
surrender value of the policy, and (vii) receipt of the benefits under any
disability or life insurance policy covering her.
If Ms. Stern's employment is terminated before July 8, 1999 by the Company
for "Cause" or by Ms. Stern without "Good Reason", she will be entitled to (i)
her salary through the date of termination, and (ii) any bonus earned with
respect to the prior fiscal year. She would also be required to reimburse the
Company for a pro rata portion of her relocation expenses paid by the Company.
The termination benefits described above are Ms. Stern's exclusive rights
with respect to termination of her employment. For purposes of Ms. Stern's
employment letter, "Cause" generally means (i) her continued failure to either
devote substantially full time to her employment duties (except because of
illness or disability) or make a good faith effort to perform her employment
duties, (ii) any willful act or omission that she knew or had reason to know
would materially injure the Company, (iii) breach of the non-competition,
confidentiality and non-solicitation provisions of the employment letter, (iv)
misrepresentations or breach by her regarding specified conflicting obligations
or specified claims regarding conflicting obligations, (v) conviction of a
felony involving dishonesty or fraud, (vi) certain acts contrary to directions
of the Board of Directors, or (vii) material breaches of the employment letter.
The employment letter provides notice and a chance to cure the items described
in clauses (i) and (ii).
14
<PAGE>
"Good Reason" under the employment letter generally means voluntary
termination of employment with the Company as a result of (i) a reduction
without her consent in duties, responsibilities, benefits or compensation, (ii)
material breach by the Company of the employment letter, (iii) any requirement
that she relocate outside of specified areas, or (iv) any failure of a successor
to the Company's business after a change in control to assume the Company's
obligations under the employment letter. "Change in Control" under the
employment letter generally means (i) any person (excluding specified related
parties) becoming the owner of 30% or more of the Company's capital stock, (ii)
the consummation of a business combination unless the shareholders before the
combination own more than 50% of the combined entity in substantially the same
proportions, (iii) a sale of substantially all of the Company's assets, (iv) the
continuing directors of the Company cease to be a majority of the Company's
directors, or (v) dissolution of the Company and liquidation of substantially
all of its assets.
L. DOUGLAS GANTOS. As of March 27, 1995, the Company entered into a letter
of employment with L. Douglas Gantos. This letter of employment was amended as
of March 19, 1996. Pursuant to Mr. Gantos' employment letter, as amended, he is
employed as part-time Chairperson of the Board or as a consultant to the Company
until September 8, 2000, unless earlier terminated. The Company's Board of
Directors will choose, in its sole discretion, which of the two positions he
will hold during that period. He is currently Chairperson of the Board. In
addition, while he is an officer of the Company, the Company will use its
reasonable efforts to nominate Mr. Gantos, and have him elected, as a director
of the Company. Also, while Mr. Gantos receives cash payments pursuant to the
letter agreement, he will serve as a director of the Company during any period
in which the Company's Board of Directors desires him to serve as a director,
unless he is not elected by the shareholders or dies.
Mr. Gantos' will receive (i) a salary of $250,000 while he is a consultant
or part-time Chairperson of the Board, (ii) a $1,000 a month car allowance and
an $8,000 a year tax, financial planning and legal advice allowance, (iii) life
insurance in the amount of $1,000,000 in addition to his $50,000 life insurance
policy, (iv) medical, dental and prescription drug coverage for himself and his
wife for their joint lives, to the same extent as such benefits are provided by
the Company to its executives, subject to the same contribution and co-payment
requirements applicable to other executive officers, and (v) fringe benefits
generally available to other executive officers of the Company.
Mr. Gantos will also receive termination benefits, which vary depending on
the reason for his termination. Regardless of the reason for his termination,
Mr. Gantos and his wife will receive the medical, dental and prescription drug
coverage described above for their joint lives. If Mr. Gantos' employment is
terminated before September 8, 2000 without "Cause" or by Mr. Gantos for "Good
Reason", he will be entitled to (i) his accrued bonus for the preceding year, if
any, and any other accrued compensation and benefits through the date of
termination, (ii) a continuation of his salary and benefits described above
through September 8, 2000 or his death, if earlier, and (iii) immediate vesting
of the restricted stock and stock options granted to him pursuant to the
employment letter, and such options will remain exercisable for their original
term.
If Mr. Gantos' employment is terminated before September 8, 2000 by the
Company for "Cause" or by Mr. Gantos without "Good Reason", he will be entitled
to (i) his accrued bonus for the preceding year, if any, and any other accrued
compensation and benefits through the date of termination, and (ii) immediate
vesting of the stock options (but not the restricted stock) granted to him
pursuant to the employment letter, and such options will remain exercisable for
their original term.
If Mr. Gantos' employment is terminated before September 8, 2000 because of
his death, he will be entitled to (i) his accrued bonus for the preceding year,
if any, a pro-rated bonus for the year of termination, if any, and any other
accrued compensation and benefits through the date of termination, (ii) the
proceeds of his life insurance policy, and (iii) immediate vesting of the
restricted stock and stock options granted to him pursuant to the employment
letter, and the options would remain exercisable for their original term.
15
<PAGE>
If Mr. Gantos' employment is terminated before September 8, 2000 because of
his disability, he will be entitled to (i) his accrued bonus for the preceding
year, if any, a pro-rated bonus for the year of termination, if any, and any
other accrued compensation and benefits through the date of termination, (ii) a
continuation of his salary described above through September 8, 2000 or his
death, if earlier, offset by any proceeds of disability insurance provided by
the Company, (iii) a continuation of the benefits described above for one year,
except that the life insurance policy would be maintained at least through
September 8, 2000 or his death, if earlier, and (iv) immediate vesting of the
restricted stock and stock options granted to him pursuant to the employment
letter, and such options would remain exercisable for their original term.
If Mr. Gantos' employment terminates because the agreement expires, he will
be entitled to (i) any accrued compensation and benefits through the date of
termination, and (ii) immediate vesting of the restricted stock and stock
options granted to him pursuant to the employment letter, and such options will
remain exercisable for their original term.
The termination benefits described above are Mr. Gantos' exclusive rights
with respect to termination of his employment. For purposes of Mr. Gantos'
employment letter, "Cause" generally means continued failure to either devote
substantially full working time to his duties (while he is a full-time employee)
or make a good faith effort to perform his employment duties, willful acts or
omissions materially injuring the Company, conviction of a felony involving
dishonesty or fraud that is injurious to the Company, or any material breach by
Mr. Gantos of the non-competition provisions of the employment letter. "Good
Reason" under the employment letter generally means termination as a result of
substantial reduction in Mr. Gantos' duties, responsibilities, benefits or
compensation, any material breach by the Company of the employment letter, any
requirement that Mr. Gantos relocate outside of specified areas or the failure
to elect Mr. Gantos as a director while he is an officer.
VICKI BOUDREAUX. The Company has a letter of employment, dated as of
September 3, 1996, with Vicki Boudreaux. Pursuant to Ms. Boudreaux's employment
letter she is employed as the Company's Vice President, Planning and Allocation.
Ms. Boudreaux's employment letter provides her with (i) an initial salary of
$120,000, (ii) the right to participate in the Company's Executive Bonus Plan,
(iii) six months separation pay, as her exclusive severance benefit, if her
employment is terminated without cause (other than pursuant to her death or
disability) before September 16, 1998 (subject to Ms. Boudreaux's obligation to
seek other employment and the Company's right to offset amounts paid to Ms.
Boudreaux from such other employment during the severance period), (iv)
reimbursement for various relocation expenses, (v) fringe benefits the Company
provides its other Vice Presidents, and (vi) a grant of an option to purchase
10,000 common shares, which was granted September 16, 1996.
JOSEPH GIUDICE. The Company has a letter of employment, dated as of
September 25, 1996, with Joseph Giudice. Pursuant to Mr. Giudice's employment
letter he is employed as the Company's Senior Vice President, Merchandise
Planning and Operations. Mr. Giudice's employment letter provides him with (i)
an initial salary of $225,000, (ii) the right to participate in the Company's
Executive Bonus Plan, (iii) twelve months separation pay, as his exclusive
severance benefit, if his employment is terminated without cause (other than
pursuant to his death or disability) before September 16, 1998 (subject to Mr.
Giudices's obligation to seek other employment and the Company's right to offset
amounts paid to Mr. Giudice from such other employment during the severance
period), (iv) reimbursement for various relocation expenses, (v) fringe benefits
the Company provides its other Vice Presidents, and (vi) a grant of an options
to purchase 25,000 common shares, which was granted September 16, 1996.
HOPE GREY. The Company has a letter of employment, dated as of September
25, 1996, with Hope Grey. Pursuant to Ms. Grey's employment letter she is
employed as the Company's Vice President, Technical Product Management. Ms.
Grey's employment letter provides her with (i) an initial salary of $120,000,
(ii) the right to participate in the Company's Executive Bonus Plan, (iii) six
months separation pay, as her exclusive severance benefit, if her employment is
terminated without cause (other than pursuant to her death or disability) before
September 30, 1998 (subject to Ms. Grey's obligation to seek
16
<PAGE>
other employment and the Company's right to offset amounts paid to Ms. Grey from
such other employment during the severance period), (iv) reimbursement for
various relocation expenses, (v) fringe benefits the Company provides its other
Vice Presidents, and (vi) a grant of an option to purchase 10,000 common shares,
which was granted September 30, 1996.
DENNIS HORSTMAN. The Company has a letter of employment, dated as of
November 1, 1996, with Dennis Horstman. Pursuant to Mr. Horstman's employment
letter he is employed as the Company's Senior Vice President, Merchandising and
Marketing. Mr. Horstman's employment letter provides him with (i) an initial
salary of $300,000, (ii) the right to participate in the Company's Executive
Bonus Plan, and if employed at the end of the 1997 fiscal year, he will receive
at least 50% of his bonus potential under that plan for that year, (iii) twelve
months separation pay, as his exclusive severance benefit, if his employment is
terminated without cause (other than pursuant to his death or disability) before
December 2, 1998 (subject to Mr. Horstman's obligation to seek other employment
and the Company's right to offset amounts paid to Mr. Horstman from such other
employment during the severance period), (iv) reimbursement for various
relocation expenses, (v) fringe benefits the Company provides its other Senior
Vice Presidents, and (vi) a grant of an option to purchase 35,000 common shares,
which was granted December 2, 1996.
NEAL GOTTFRIED. The Company has a letter of employment, dated as of April
23, 1997, with Neal Gottfried. Pursuant to Mr. Gottfried's employment letter he
is employed as the Company's Senior Vice President, Store Operations and Visual
Merchandising. Mr. Gottfried's employment letter provides him with (i) an
initial salary of $225,000, (ii) the right to participate in the Company's
Executive Bonus Plan, (iii) twelve months separation pay, as his exclusive
severance benefit, if his employment is terminated without cause (other than
pursuant to his death or disability) before April 23, 1999 (subject to Mr.
Gottfried's obligation to seek other employment and the Company's right to
offset amounts paid to Mr. Gottfried from such other employment during the
severance period), (iv) reimbursement for various relocation expenses, (v)
fringe benefits the Company provides its other Vice Presidents, and (vi) a grant
of an option to purchase 25,000 common shares.
SEVERANCE AGREEMENTS. The Company has entered into a Severance Agreement
dated as of March 18, 1997 with Kenneth Green. The agreement provides him with
12 months separation pay, as his exclusive severance benefit, if his employment
is terminated without cause (and other than pursuant to his death or disability)
before March 31, 1999 (subject to Mr. Green's obligation to seek other
employment and the Company's right to offset amounts paid to Mr. Green from such
other employment during the severance period).
MASTER SEVERANCE PLAN. On January 11, 1994, the Company's Board of
Directors adopted a Master Severance Plan as amended March 15, 1994. The Master
Severance Plan provides severance benefits to employees (including the officers
listed in the Summary Compensation Table above) if they are terminated without
cause. The amount of such benefits payable to executive officers of the Company
is (i) two weeks of the employee's base salary at the time of termination (one
week for Mr. Gantos) multiplied by the number of full years of such employee's
service to the Company at the time of termination; provided that such benefits
may not exceed one year of the employee's base compensation; plus (ii) such
employee's accrued vacation at the time of termination. As described above, Mr.
Green has a severance agreement, and Ms. Stern, Mr. Gantos, Ms. Boudreaux, Mr.
Giudice, Ms. Grey, Mr. Horstman and Mr. Gottfried have employment letters, with
the Company providing for severance rights that differ from those under the
Master Severance Plan.
STOCK OPTION AND RESTRICTED STOCK TERMS. The stock option granted to Mr.
Gantos on March 31, 1995 to purchase 180,000 common shares at $4.16 a share
provides that the option becomes immediately exercisable, and continues to be
exercisable until its original termination date, upon termination of Mr. Gantos'
employment and consultation with Gantos. The stock option granted to Mr. Gantos
on
17
<PAGE>
March 19, 1996 to purchase 50,000 common shares at $3.375 provides that the
option becomes immediately exercisable until its original termination date upon
termination of Mr. Gantos' employment and consultation with the Company. The
stock option granted to Ms. Stern on July 8, 1996 to purchase 350,000 common
shares at $4.65625 a share provides that the option becomes immediately
exercisable upon termination of Ms. Stern's employment with the Company, unless
such termination is by the Company for Cause or by Ms. Stern without Good
Reason, and if a Change in Control occurs. The vested portion of the options at
the date of termination of Ms. Stern's employment with the Company may be
exercised (i) until one year after termination as a result of her death or
disability, and (ii) until 90 days after termination for any other reason,
except that all rights to exercise the options terminate if she is terminated
for Cause. The 50,000 restricted common shares awarded to Mr. Gantos on March
31, 1995 also provide for the restricted shares to vest immediately upon
termination of Mr. Gantos' employment and consultation with Gantos unless such
termination is by the Company for cause or by Mr. Gantos without good reason.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended February 1, 1997 Mr. Schomer, Ms. Putnam and
Ms. Strasser served as sole members of the Company's Compensation Committee.
None of the members of the Company's Compensation Committee during the fiscal
year ended February 1, 1997 (i) was, during such fiscal year, an officer or
employee of the Company, or (ii) was formerly an officer of the Company or its
subsidiary.
PERFORMANCE GRAPH
The following line graph compares for the period since the Company's
emergence from Chapter 11 on March 31, 1995 (i) the yearly cumulative total
shareholder return (i.e., the change in share price divided by the initial share
price, expressed as a percentage; the Company has not paid cash dividends) on
the Company Common Stock with (ii) the cumulative total return of the CRSP Total
Return Index for The Nasdaq Stock Market (U.S. Companies), and with (iii) the
cumulative total return of the CRSP Total Return Index for the Nasdaq Retail
Trade Stocks:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
GANTOS, INC. NASDAQ US INDEX NASDAQ RETAIL INDEX
<S> <C> <C> <C>
Mar-95 $100 $100 $100
Jul-95 $63 $123 $116
Jan-96 $57 $130 $110
Jul-96 $115 $134 $126
Jan-97 $75 $171 $136
</TABLE>
<TABLE>
<CAPTION>
HALF YEARS
---------------------------------------------------------------
MAR. JUL. JAN. JUL. JAN.
1995 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Gantos, Inc................................................ 100 63 57 115 75
Nasdaq US Index............................................ 100 123 130 134 171
Nasdaq Retail Index........................................ 100 116 110 126 136
</TABLE>
Assumes $100 invested on March 31, 1995 in Gantos, Inc. Common Stock, CRSP Total
Return Index for The Nasdaq Stock Market (U.S. Companies) and CRSP Total Return
Index for Nasdaq Retail Trade Stocks.
* Total Return Assumes Reinvestment of Dividends.
18
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) reports
they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended February 1, 1997 all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with, except that during 1996, (i)
an initial report of ownership was filed late by Jeffrey C. Tuori, (ii) while
Hannah H. Strasser timely filed a Form 3 reporting her election as a director of
the Company, she inadvertently did not include in that report common shares that
she owned; this omission was corrected by reporting these shares in an amendment
to her Form 3 filed in 1997, and (iii) one report covering one transaction was
filed late by Gordon J. Tendler.
19
<PAGE>
ITEM II. OTHER MATTERS
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP are the independent accountants for the Company and
have reported on the Company's financial statements in the Annual Report of the
Company which accompanies this Proxy Statement. The Company's independent
accountants are appointed by the Board of Directors after receiving the
recommendation of its Audit Committee. The Company will not select its
independent accountants for 1997 until later in its fiscal year.
Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting of Shareholders and will have the opportunity to make a statement
at the meeting if they desire to do so. The representatives will also be
available to respond to appropriate questions.
OTHER PROPOSALS
Neither the Company nor the members of its Board of Directors intend to
bring before the Annual Meeting any matters other than those set forth in the
Notice of Annual Meeting, and they have no present knowledge that any other
matters will be presented for action at the meeting by others. If any other
matters properly come before such meeting, however, it is the intention of the
persons named in the enclosed form of proxy to vote in accordance with their
best judgment.
A shareholder proposal which is intended to be presented at the 1998 Annual
Meeting of Shareholders and is eligible for inclusion in the Company's proxy
statement for that meeting under applicable rules of the Securities and Exchange
Commission must be received by the Company at its principal executive offices,
1266 Main Street, Fifth Floor, Stamford, Connecticut 06902 by January 9, 1998.
Such proposals should be sent to the Secretary of the Company by certified mail,
return receipt requested.
By Order of the Board of Directors
[SIGNATURE]
ARLENE H. STERN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dated: May 9, 1997
20
<PAGE>
/x/ PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
FOR all nominees WITHHOLD AUTHORITY
listed below to vote for all
(except as marked to nominees listed
the contrary below). below.
1. ELECTION OF / / / /
DIRECTORS
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
______________________________
NOMINEES: Arlene H. Stern, Fred K. Schomer and Erwin A. Marks
Account No. No. of Shares Proxy No.
2. In their discretion with respect / / / / / /
to any other matters that may
properly come before the meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREIN. IF NO SPECIFICATIONS ARE MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS NAMED IN THIS PROXY.
___________________________________(L.S.)
___________________________________(L.S.) Dated ___________________, 1997
IMPORTANT: Please sign exactly as your name appears hereon. When signing as
attorney, executor, administrator or guardian, please give your full title as
such. If shares are held in the name of more than one person, each person must
sign the Proxy.
<PAGE>
GANTOS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF GANTOS, INC.
The undersigned hereby appoints Arlene H. Stern, Kenneth Green and Jeffrey
C. Tuori, and each of them, the proxies of the undersigned, with full power
of substitution, to vote all of the shares of $.01 par value Common Shares of
Gantos, Inc. ("Company") which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Company to be held on June 19, 1997,
and at any and all adjournments thereof.
PLEASE SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ACCOMPANYING POSTPAID
ENVELOPE.
(Continued and to be signed on reverse side)
