SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
(x ) Filed by the Registrant
( ) Filed by a Party other than the Registrant
Check the appropriate box:
( ) Preliminary Proxy Statement
(x ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (Check the appropriate box):
(x ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $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:
Common Stock
2) Aggregate number of securities to which transaction applies:
12,758,717
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.
( ) 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.:
3) Filing Party:
4) Date Filed:
( ) Filing Fee of $ was previously paid on , 199 ,
the date the Preliminary Proxy Statement was filed.
<PAGE>
BRENDLE'S INCORPORATED(registration mark)
1995 ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
You are cordially invited to attend the 1995 Annual Meeting of
Shareholders, which will be held at the Jonesville/Elkin Holiday Inn
located at the intersection of Interstate 77 and N.C. Highway 67,
Jonesville, North Carolina, at 10:00 A. M., Eastern Daylight Time, on
Thursday, June 1, 1995.
At the Annual Meeting the matters referred to in the Notice of
Annual Meeting of Shareholders attached hereto will be voted upon. In
addition, the Company's management will report on operations and will be
available to respond to appropriate questions you may have about the
Company's business operations.
We hope you will be able to attend this year's Annual Meeting in
person, and we encourage you to do so. Whether or not you plan to
attend, it is important that your shares be represented and voted at the
Annual Meeting. Therefore, we urge you to complete, sign, date and
return your proxy card promptly in the enclosed envelope. No postage is
required if mailed in the United States.
Sincerely,
JOSEPH M. MCLEISH, JR.
President and Chief Executive Officer
May 1, 1995
<PAGE>
BRENDLE'S INCORPORATED(Registration mark)
1919 North Bridge Street Extension
Elkin, North Carolina 28621
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 1, 1995
The Annual Meeting of Shareholders of Brendle's Incorporated, a
North Carolina corporation (the "Company"), will be held at the
Jonesville/Elkin Holiday Inn located at the intersection of Interstate
77 and N.C. Highway 67, Jonesville, North Carolina at 10:00 A. M.,
Eastern Daylight Time, on Thursday, June 1, 1995, for the purposes of:
1. Electing seven directors;
2. Ratifying and approving the appointment of Price Waterhouse
LLP as independent accountants for the Company; and
3. Transacting such other business as may properly come before
the meeting.
Only holders of record of Common Stock, $1.00 par value per share,
of the Company as of the close of business on April 10, 1995 will be
entitled to notice of and to vote at the meeting, as set forth in the
accompanying Proxy Statement.
A list of shareholders entitled to vote at the meeting may be
examined at the Company's headquarters, 1919 North Bridge Street
Extension, Elkin, North Carolina 28621, during the ten-day period
preceding the meeting, and at the meeting.
DAVID R. RENEGAR
Secretary
May 1, 1995
<PAGE>
BRENDLE'S INCORPORATED(Registration mark)
1919 North Bridge Street Extension
Elkin, North Carolina 28621
__________________________________
PROXY STATEMENT
Dated May 1, 1995
__________________________________
GENERAL INFORMATION
The accompanying form of proxy is solicited by the Board of
Directors of Brendle's Incorporated, a North Carolina corporation (the
"Company"), in connection with the 1995 Annual Meeting of Shareholders
of the Company scheduled to be held on Thursday, June 1, 1995, and any
adjournments thereof. All shares of the Company's Common Stock, $1.00
par value per share ("Common Stock"), represented by duly executed
proxies delivered in timely fashion to the Company will be voted in
accordance therewith. A shareholder furnishing the accompanying proxy
may revoke it any time prior to the voting of the proxy by delivering to
the Corporate Secretary of the Company another proxy bearing a later
date or a written notice of revocation or by voting in person at the
Annual Meeting.
Solicitation of proxies may be made personally or by telephone,
telegraph or mail by officers and employees of the Company who will not
be additionally compensated therefor. The Company will request persons,
such as brokers, nominees and fiduciaries, holding stock in their names
for others, or holding stock for others who have the right to give
voting instructions, to forward proxy materials to their principals and
request authority for the execution of the proxy and will reimburse such
persons for their expenses in so doing. Certain agents of the Company
may assist in mailing proxy material for consideration consisting only
of reimbursement of mailing expenses or related costs. The total cost
of soliciting proxies will be borne by the Company.
VOTING
As of the close of business on April 10, 1995 (the "Record Date"),
there were outstanding and entitled to vote, 12,758,717 shares of Common
Stock held of record by 2607 holders. Only holders of record of Common
Stock at the close of business on the Record Date are entitled to notice
of and to vote at the Annual Meeting, with one vote for each share held
on the Record Date (unless the shares are voted cumulatively, as
described below). The approximate date on which this Proxy Statement
and the accompanying form of proxy will first be sent or given to
security holders is May 1, 1995.
Election of directors of the Company (Item 1 on the Proxy) will be
by a plurality of the votes cast at the Annual Meeting. Appointment and
notification of the independent accountants (Item 2 on the Proxy) will
require the affirmative vote of the holders of at least a majority of
the shares of Common Stock voted at the Annual Meeting. For purposes of
voting, a quorum of shareholders must be present at the Annual Meeting.
All votes will be cast as part of a single class of stock.
Under North Carolina law, as it applies to the Company, there is no
right to cumulative voting for the election of directors, unless it
appears that at the time of the election there is a shareholder who owns
or controls more than 25% of the Company's voting stock. Since it
appears that no such shareholders will exist, cumulative voting for the
election of directors will not be allowed at the Annual Meeting.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the beneficial ownership of the Company's Common Stock, the Company's
only class of equity voting security, as of April 10, 1995, by the Named
Executives (as defined under the heading herein "Executive
Compensation") and by each person, including any "group" as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), known by the Company to be the beneficial
owner of more than five percent of the Company's outstanding Common
Stock:
Common Stock Beneficially Owned(1)
Name and Address of Beneficial Owner(2) Amount and nature of Percentage
Beneficial Ownership of Class
Douglas D. Brendle . . . . 2,135,372(3) 16.7%
D & L Brendle Associates . . . . . . . . 1,035,000(4) 8.1%
S. Floyd Brendle . . . . . . . . . . . . . 1,723,515(5) 13.5%
K & F Brendle Associates . . . . . . . . . 500,000(6) 3.9%
William F. Cosby . . . . . . . . . . . . . 450,797(7) 3.5%
Patty Brendle Redway (Trusts under Agreement
with J. Harold Brendle). . . . . . . . . . . 1,912,667(8) 15.0%
William V. Grady . . . . . . . . . . . . . . 2,000 *
David R. Renegar . . . . . . . . . . . . . . 2,460(9) *
Gregory S. Stegall . . . . . . . . . . . . . 5,000(10) *
First Union National Bank. . . . . . . . . . . 1,009,615 7.9%
*less than 1%
(1) None of the persons or entities other than David R. Renegar,
indicated own any shares subject to options exercisable on April
10, 1995 or within 60 days thereafter.
(2) The address of these beneficial owners, except First Union National
Bank and Patty Brendle Redway, is c/o Brendle's Incorporated, 1919
North Bridge Street Extension, Elkin, North Carolina 28621. The
address of Patty Brendle Redway is c/o Wachovia Bank and Trust
Company, N.A., Trust Department, Post Office Box 3099,
Winston-Salem, North Carolina 27102. The address for First Union
National Bank is P.O. Box 889, Elkin, NC 28621.
(3) At January 28, 1995, Douglas D. Brendle served as the Company's
Chief Executive Officer and President. Mr. Brendle resigned these
positions on February 27, 1995. Of such 2,135,372 shares, Douglas
D. Brendle may be deemed to have sole voting power as to 956,886
shares, shared voting power as to 1,178,486 shares, sole investment
power as to 956,886 shares and shared investment power as to
1,178,486 shares.
The above shares include (i) 1,035,000 shares held by D & L Brendle
Associates, a North Carolina limited partnership in which the
general partners are Lydia U. Brendle, wife of Douglas D. Brendle,
2
<PAGE>
and a corporation controlled by Douglas D. Brendle and members of
his family, (ii) 133,036 shares held by Lydia U. Brendle as trustee
for their daughter, as to which shares Lydia U. Brendle has sole
voting and investment power, (iii) 5,450 shares held individually
by Lydia U. Brendle, (iv) 5,000 shares held jointly by Douglas D.
Brendle and Lydia U. Brendle, (v) 869,629 shares held of record by
Lydia U. Brendle under a trust agreement with Douglas D. Brendle
which is revocable by him and as to which shares he retains all
voting and dispositive powers, and (vi) 87,257 shares of which Mr.
Brendle is the sole record and beneficial owner.
Mr. Brendle disclaims beneficial ownership of the shares described
in items (i), (ii) and (iii) above and any other shares held by D &
L Brendle Associates and also disclaims membership in any "group,"
within the meaning of the Exchange Act.
(4) D & L Brendle Associates may be deemed to have sole voting and
investment power as to all of such 1,035,000 shares and shared
voting and investment power as to none of such shares. D & L
Brendle Associates disclaims beneficial ownership of any additional
shares in excess of the 1,035,000 shares over which it has sole
voting and dispositive power and also disclaims membership in any
"group," within the meaning of the Exchange Act.
(5) Of such 1,723,515 shares S. Floyd Brendle may be deemed to have
sole voting power as to 1,223,515 shares, shared voting power as to
500,000 shares, sole investment power as to 1,223,515 shares and
shared investment power as to 500,000 shares.
The above shares include 500,000 shares held by K & F Brendle
Associates, a North Carolina limited partnership in which the
general partners are Kathryn C. Brendle, wife of S. Floyd Brendle,
and a corporation controlled by S. Floyd Brendle and members of his
family. Excluded are an aggregate of 870 shares represented by
presently exercisable options held by Mr. Brendle's son, who is an
adult not living in Mr. Brendle's home.
Mr. Brendle disclaims beneficial ownership of any shares held by K
& F Brendle Associates as well as the shares excluded above and
also disclaims membership in any "group," within the meaning of the
Exchange Act.
(6) K & F Brendle Associates may be deemed to have sole voting and
investment power as to all of such 500,000 shares and shared voting
and investment power as to none of such shares. K & F Brendle
Associates disclaims beneficial ownership of any additional shares
in excess of the 500,000 shares over which it has sole voting and
investment power and also disclaims membership in any "group,"
within the meaning of the Exchange Act.
(7) Of such 450,797 shares, William F. Cosby may be deemed to have sole
voting power as to 120,797 shares, shared voting power as to
330,000 shares, sole investment power as to 120,797 shares and
shared investment power as to 330,000 shares.
The above shares include 330,000 shares held by C & W Cosby
Associates, a North Carolina limited partnership in which the
general partners are Patricia R. Cosby, wife of William F. Cosby,
and a corporation controlled by William F. Cosby and members of his
family.
Mr. Cosby disclaims beneficial ownership of any shares held by C &
W Cosby Associates and also disclaims membership in any "group,"
within the meaning of the Exchange Act.
3
<PAGE>
(8) Of such 1,912,667 shares, Patty Brendle Redway may be deemed to
have sole voting and investment power as to all of such shares, and
shared voting and investment power as to none of such shares.
All of the above 1,912,667 shares are held in two trusts created
under an agreement dated October 20, 1982 with J. Harold Brendle.
Patty Brendle Redway, widow of J. Harold Brendle, has sole voting
and investment power over all such shares. Wachovia Bank and Trust
Company, N.A., a subsidiary of The First Wachovia Corporation, is
trustee of such trusts.
Excluded are an aggregate of 5,870 shares, 870 of which are
represented by presently exercisable options held by Ms. Redway's
son who is an adult not living in her home.
Ms. Redway disclaims beneficial ownership of the 1,912,667 shares
as well as the other shares excluded above and also disclaims
membership in any "group," within the meaning of the Exchange Act.
(9) Includes 1460 shares represented by presently exercisable options.
(10) Shares are beneficially owned by Joanne Stegall, Mr. Stegall's wife.
The Common Stock holdings of Douglas D. Brendle, S. Floyd Brendle, Patty
Brendle Redway (her holdings being with respect to shares forming a part
of the Trusts created under an Agreement with J. Harold Brendle),
certain members of their immediate families and the family partnerships
described above (collectively, the "Brendle Family") aggregate in excess
of 45% of the Company's outstanding Common Stock. If all or certain
members of the Brendle Family were to vote in the same manner concerning
certain matters subject to a vote of shareholders of the Company, the
Brendle Family or such members could significantly impact the outcome of
any such vote. Accordingly, under proper circumstances the Brendle
Family may be said to be in "control" of the Company within the meaning
of that term under the Exchange Act. However, the Brendle Family has
not agreed to act in concert or as a group in connection with voting any
of the Company's Common Stock.
ELECTION OF DIRECTORS
(Item 1 on Proxy)
It is intended that the proxies solicited hereunder will be voted
for the election of the seven nominees listed below as directors, unless
authority so to vote is withheld. The Board of Directors recommends
that the shareholders vote for each of the nominees. Each nominee,
other than Mr. Westerfield, is currently a member of the Board of
Directors. Messrs. Dunn and Northen were appointed to serve for a one
year term on the Board of Directors on April 29, 1994 with the right to
stand for re-election in accordance with the Company's Plan of
Reorganization which was substantially consummated on April 29, 1994.
The remaining nominees were elected to their present terms by vote of
shareholders at the Company's 1992 Annual Meeting. The Company did not
hold an Annual Meeting of Shareholders during the years 1993 and 1994
primarily because of the Company's involvement in reorganization
proceedings. Each nominee, if elected, will serve until the Annual
Meeting of the Shareholders in 1996, or until his successor shall be
elected and shall qualify to serve. If any one or more of the nominees
shall become unable to stand for election as a Director at the Annual
Meeting, an eventuality not now anticipated by the Board of Directors,
then, unless contrary instructions are given by the shareholder, the
proxy may be voted for a substitute or substitutes designated by the
Board of Directors.
4
<PAGE>
Since April 29, 1994 the Company's Board of Directors has consisted
of nine (9) Board Members. The Company has historically maintained a
Board of Directors of seven (7) Directors. As noted above, Messrs. Dunn
and Northen were added to the Board on April 29, 1994 in accordance with
the Company's Plan of Reorganization. Three of the Company's Directors,
Thomas H. Davis, James B. Edwards and John D. Gray, who have served as
Directors of the Company since 1987, 1986 and 1984, respectively, have
decided not to stand for re-election. Each of Messrs. Davis, Edwards
and Gray have indicated that their decision to decline to stand for
re-election is due primarily to other commitments and did not involve
any disagreements with the Company's management. Stephen T. Westerfield
is being nominated to serve on the Board of Directors, resulting in a
slate of seven (7) nominees for Director.
The accompanying form of proxy may not be voted for more than seven
persons to be elected as directors. If cumulative voting is in effect at
the Annual Meeting, a shareholder's total cumulative votes may not
exceed seven times the number of shares said shareholder is entitled to
vote.
Nominees for Director; Directors; and Certain Stock Ownership
Set forth below are the names of the nominees for election to the
Board of Directors (which nominees include certain present directors of
the Company), their principal occupation or employment during the past
five years, all their positions with the Company in the last five years,
the Common Stock of the Company beneficially owned by each of them, as
well as that beneficially owned by all directors and officers as a
group, in each case as of April 10, 1995, and certain other information
with respect to such directors:
<TABLE>
<CAPTION>
Director of Common Stock
Name Age Principal Occupation for Past 5 Company Beneficially % of
Years and other Information(1) Since Owned(2) Class
<S> <C> <C> <C> <C> <C>
Douglas D. Brendle 66 Chairman of the Board of
Directors of the Company
from February, 1986 to
February, 1995; Chief
Executive Officer of the
Company November, 1984 to
February, 1995; President of
the Company from
November, 1984 to June,
1989 and from April, 1993 to
February, 1995.(3)(4)(5) 1954 2,135,372(6) 16.7%
S. Floyd Brendle 64 Vice Chairman of the Board
of Directors of the Company
from April, 1989 to January,
1993; Executive Vice
President of the Company
from November, 1984 to
February, 1989 and from
January, 1993 to April,
1993.(3)(5)(7) 1954 1,723,515(7) 13.5%
5
<PAGE>
William F. Cosby 55 President and Chief Operating
Officer of the Company from
January, 1993 to April, 1993;
Senior vice President of the
Company from February,
1986 to June, 1989; for in
excess of one year prior
thereto he was Vice President
of the Company. 1973 450,797(8) 3.5%
Robert R. Dunn 48 President of The Finley
Group, Inc., a turn-around
management firm located in
Charlotte, North Carolina
since October, 1993; Vice
President of The Finley
Group, Inc. since 1986. 1994 0 *
John A. Northen 44 Partner in the law firm of
Northen, Blue, Rooks,
Thibaut, Anderson & Woods
located in Chapel Hill, North
Carolina since 1986. 1994 0 *
Stephen T. Westerfield 52 President and Chief Executive
Officer of STW International,
a retail consulting firm since
October, 1992; President and
Chief Executive Officer of
Office Mart Holdings Corp.
from June, 1989 to October,
1992; Executive Vice
President of Silo, Inc., a
consumer electronics retailer
from June, 1987 to June,
1989. (9) _______ 0 *
Patty Brendle Redway 67 Director of the Company
since 1984,(5)(10) 1984 1,912,667(11) 15.0%
All directors and officers
as a group (11 persons,
including the above)(1) -- __ __ 6,226,811(12) 48.8%
</TABLE>
* less than 1%.
6
<PAGE>
(1) Each of the current directors and officers of the Company
previously held the identical directorships and offices with
Brendle's Stores, Inc., a wholly-owned subsidiary of the Company,
as such person holds with the Company. Brendle's Stores, Inc.
previously held the substantial part of the operating assets of
the Company. Brendle's Stores, Inc. was merged into the Company
on April 29, 1994.
(2) As reported to the Company by the nominees. Includes, where
appropriate, shares held by spouses, minor children, family
companies, partnerships and trusts.
(3) Douglas D. Brendle and S. Floyd Brendle are brothers.
(4) Douglas D. Brendle serves on Advisory Boards of Appalachian State
University and Campbell University and for the Business School of
the University of South Carolina.
(5) By virtue of their stockholdings in the Company, positions with
the Company and family relationships, including relationships by
marriage, each of Douglas D. Brendle, S. Floyd Brendle and Patty
Brendle Redway may be deemed to be a controlling person of the
Company within the meaning of the rules of the Securities and
Exchange Commission.
(6) The information as to beneficial ownership set forth in footnote
(3) under the caption "PRINCIPAL SHAREHOLDERS" is incorporated
herein by reference.
(7) The information as to beneficial ownership set forth in footnote
(5) under the caption "PRINCIPAL SHAREHOLDERS" is incorporated
herein by reference.
(8) The information as to beneficial ownership set forth in footnote
(7) under the caption "PRINCIPAL SHAREHOLDERS' is incorporated
herein by reference.
(9) Mr. Westerfield currently serves as a director of Beall's
Department Stores, Inc. and Staples, Inc.
(10) Patty Brendle Redway is the widow of J. Harold Brendle, who was
the brother of Douglas D. Brendle and S. Floyd Brendle.
(11) The information as to beneficial ownership set forth in footnote
(8) under the caption "PRINCIPAL SHAREHOLDERS" is incorporated
herein by reference.
(12) Includes 1460 shares which may be acquired upon the exercise of
options exercisable April 10, 1995 or within 60 days thereafter.
Also includes certain shares as to which beneficial ownership is
disclaimed by certain directors and officers as referred to in
these footnotes.
With respect to the obligation of the Company's Executive Officers and
Directors to file reports under Section 16(a) of the Securities Exchange
Act of 1934, the Company has not received evidence of a timely filed
Form 4 or 5 by William F. Cosby, Director of the Company with respect to
stock transactions occurring during 1994. Mr. Cosby sold 20,000 shares
of Brendle's Incorporated stock in December, 1994.
7
<PAGE>
Committees
The Board of Directors has an Audit Committee consisting of Douglas D.
Brendle, Thomas H. Davis, James B. Edwards, John D. Gray, William F.
Cosby and John A. Northen. The Audit Committee provides recommendations
regarding matters involving the engagement and discharge of independent
auditors, directs and supervises special investigations, reviews the
plans for and results of the Company's procedures for internal auditing,
and reviews the adequacy of the Company's system of internal accounting
controls. Since Messrs. Davis, Edwards and Gray are not standing for
re-election to the Board of Directors, it is anticipated that a new
Audit Committee will be constituted following the Annual Meeting of
Shareholders, which the Audit Committee will have a majority of
independent directors.
Other standing committees of the Board of Directors include the
Nominating Committee which nominates new Board members and officers; the
Stock Option Committee, which administers the Company's stock option
plans; the Stock Appreciation Rights Committee, which administers the
Company's Unaffiliated Director Stock Appreciation Rights Plan; the
Unaffiliated Directors Committee, which reviews and approves or
disapproves certain related party transactions between the Company and
any of its affiliates; and the Compensation Committee, which reviews and
approves or disapproves certain compensation and employee benefit
matters and makes recommendations to the full Board of Directors
regarding compensation in general. The Nominating Committee consists of
Douglas D. Brendle, Thomas H. Davis and Patty Brendle Redway; the Stock
Option Committee, the Stock Appreciation Rights Committee and the
Compensation Committee consists of Douglas D. Brendle, S. Floyd Brendle,
James B. Edwards, Thomas H. Davis and Robert R. Dunn; and the
Unaffiliated Directors Committee consists of Thomas H. Davis, James B.
Edwards, and John D. Gray. Since Messrs. Davis, Edwards and Gray are
not standing for re-election to the Board of Directors, it is
anticipated that new committee assignments will be made following the
Annual Meeting of Shareholders for those committees on which these
individuals serve.
During the fiscal year ended January 28, 1995, the Board of Directors
held a total of three (3) meetings. The Compensation Committee met
twice and the Audit Committee met once. There were no other meetings of
formal committees. Also during such fiscal year, no director attended
fewer than a total of 75% of the aggregate of all meetings of the Board
of Directors and all meetings held by all committees of the Board of
Directors on which he served.
Each of the non-employee or non-officer directors, William F. Cosby,
Thomas H. Davis, James B. Edwards, John D. Gray, Robert R. Dunn, John A.
Northen and Patty Brendle Redway, receive a standard fee of $10,000
annually for service as a director plus $500 for each Board of
Directors' meeting attended. Non-employee members of the Audit
Committee and the Compensation Committee receive $250 for each meeting
attended. The total compensation paid to directors for Fiscal 1995 was
$80,250. It is anticipated that these fees will continue to be paid to
non-employees or non-officer directors in the current year. Directors
who are also officers of the Company receive no additional compensation
for attending Board of Director or committee meetings. No compensation
or fee (other than transportation costs) was paid for membership or
participation in any other committee.
EXECUTIVE COMPENSATION
The following table presents the information relating to total
compensation during the fiscal year ended January 28, 1995 of the then
Chief Executive Officer, Douglas D. Brendle, and the Company's Senior
Vice President, William V. Grady, the Company's Vice President and
Chief Financial Officer, David R. Renegar, and the Company's Senior Vice
President of Merchandising, Gregory S. Stegall (the
8
<PAGE>
"Named Executives"). All remaining Executive Officers of the Company,
who served in such capacities on January 28, 1995, were paid less than
$100,00 in total compensation for the fiscal year ending January 28,
1995.
On February 27, 1995 Douglas D. Brendle resigned as the Company's
Chairman of the Board, President and Chief Executive Officer and Joseph
M. McLeish, Jr. was appointed as President and Chief Executive Officer
by the Board of Directors. In addition, during Fiscal 1995, three other
Executive Officers of the Company resigned their positions. William
Steven Day, Vice President of Stores, Steven W. Luka, Vice President and
General Merchandise Manager, and Aubrey L. Miller, Jr., Vice President
of Operations each resigned their positions on July 20, 1994, June 27,
1994 and July 20, 1994, respectively. In addition, Everett V. Purdy, the
Company's previous Senior Vice President of Merchandising, resigned his
position with the Company on March 22, 1995. Mr. Purdy joined the
Company in July 1994 and for Fiscal 1995 did not receive compensation in
excess of $100,000.
Upon Mr. Brendle's retirement from the Company on February 27, 1995,
the Company and Mr. Brendle entered into a Retirement and Consulting
Agreement which is described below. Upon the resignation of Messrs.
Day, Luka and Miller, each was paid a severance amount in accordance
with their employment contracts. The payments of these individuals is
reflected in footnotes to the Summary Compensation Table set forth
below.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Name and Principal Other Annual Options/SARs All Other
Position(4)(5)(6)(7)(8) Year Salary Bonus Compensation(1) (Shares) Compensation(2)
<S> <C> <C> <C> <C> <C> <C>
Douglas D. Brendle 1994-95 $199,992 -0- -0- -0- $20,239
Chairman and 1993-94 $199,992 -0- -0- -0- $20,596
Chief Executive 1992-93 $200,000 -0- -0- -0- $56,259
Officer
William V. Grady(3) 1994-95 $116,930 5,000 -0- 25,000 $ 1,250
Senior Vice President 1993-94 $110,006 -0- -0- -0- $ 6,186
1992-93 $ 8,462 -0- 30,000 $ 27,600
David R. Renegar 1994-95 $102,617 5,000 -0- 25,000 $ 735
Vice President and 1993-94 $ 98,000 -0- -0- -0- $ 693
Chief Financial 1992-93 $ 98,000 -0- -0- -0- $ 488
Officer
Gregory S. Stegall 1994-95 $100,318 5,000 -0- 25,000 $ 743
Vice President 1993-94 $ 98,000 -0- -0- -0- $ 710
1992-93 $ 98,000 -0- -0- -0- $ 398
</TABLE>
(1) None of the Named Executives received perquisites or other
personal benefits in excess of the lesser of $50,000 or 10% of
the total of his salary and bonus for any of the reported
years.
9
<PAGE>
(2) Includes value of premium payments on life insurance policies
for the Named Executives maintained by the Company and moving
expenses for William D. Grady in 1992.
(3) Mr. Grady joined the Company in December, 1992.
(4) On February 27, 1995, the Board of Directors appointed Joseph
M. McLeish, Jr. as its President and Chief Executive Officer,
replacing Douglas D. Brendle. The Company entered into an
Employment Contract with Mr. McLeish which is more fully
described below and which provides for an annual salary
$175,000 and bonuses of up to $75,000 based on the Company's
performance. In addition, Mr. McLeish will be reimbursed for
certain automobile and moving expenses.
(5) On July 20, 1994, W. Steven Day, Vice President of Stores,
resigned his position with the Company. During Fiscal 1995,
Mr. Day was paid $56,915 in salary. Mr. Day was also paid
$98,000 as a severance payment under the terms of his
Employment Contract with the Company.
(6) On June 27, 1994, Steven W. Luka, Vice President of Merchandising,
resigned his position with the Company. During Fiscal 1995,
Mr. Luka was paid $52,901 in salary. Mr. Luka was also paid
$105,000 as a severance payment under the terms of his
Employment Contract with the Company.
(7) On July 20, 1994, Aubrey L. Miller, Jr., Vice President of
Operations, resigned his position with the Company. During Fiscal
1995, Mr. Miller was paid $57,747 in salary. Mr. Miller was
also paid $105,000 as a severance payment under the terms of
his Employment Contract with the Company.
(8) On March 22, 1995, Everett V. Purdy, Vice President of
Merchandising, resigned his position with the Company. During
Fiscal 1995, Mr. Purdy was paid $88,538 in total compensation,
including moving expenses reimbursed in the amount of $18,630.
Mr. Purdy will receive $217,000 from the Company as a
severance payment pursuant to the terms of his Employment
Agreement with the Company. See "Employment Agreements with
Named Executives" below.
Option/SAR Grants Table
The following table provides information as to options granted to the
Named Executives during Fiscal 1995. No separate stock option rights
("SARs") were granted during Fiscal 1995.
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Individual Grants Potential Realizable
Number of # of Total Exercise or Value at Assumed
Securities Options/SARs Base Price Annual Rates of Stock
Underlying Granted to ($/Sh) Expiration Price Appreciation
Options/SARs Employees in Date Option Term
Granted (#)(1) Fiscal Year
5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Douglas D. Brendle . -0- -0- -0- --
William V. Grady . . . 25,000 5% .625 12/1/99 4,315 9,625
David R. Renegar . . . 25,000 5% .625 12/1/99 4,315 9,625
Gregory S. Stegall . . 25,000 5% .625 12/1/99 4,315 9,625
</TABLE>
____________________
(1) Options were granted on December 1, 1994 and vest 30% after one
year, another 30% after two years, and fully vest after three years.
There are no criteria for vesting other than continued employment
through the vesting dates and no other material terms of the options.
10
<PAGE>
Options/SAR Exercises and Year-End Value Table
The following table provides information as to options exercised or
held by the Named Executives during Fiscal 1995.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Options/SAR Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-Money
Number of Options/SARS at Options/SARs
Shares FY-End(#) at FY-End($)
Acquired on Value Exercisable/ Exercisable
Name Exercise(#) Realized($) Unexercisable(1) Unexercisable(1)
<S> <C> <C> <C> <C>
Douglas D. Brendle -- -- -- --
William V. Grady . . 30,000 28,125 /25,000 4,688
David R. Renegar . -- -- 1,460/25,000 4,688
Gregory S. Stegall . -- -- /25,000 4,688
</TABLE>
____________________
(1) The number of unexercised options and/or SARs available at fiscal
year end, whether exercisable or unexercisable, includes out-of-the
money options, and the value of unexercisable options and/or SARs
available at fiscal year end does not include out-of-the money options.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVES
The Company has employment agreements (the "Agreements") with all the
Named Executives, and with other employees, including Everett V. Purdy,
Vice President of Merchandising, who resigned his position with the
Company on March 22,1995. The Agreement with David R. Renegar was
executed effective August 1, 1994, and, replaced an employment agreement
executed in 1992. Each of the Agreements provided for the payment of
severance compensation in the form of a lump sum severance benefit to
the Named Executive in the amount of one times the officer's base salary
then in effect on the date of termination for Messrs. Grady and Stegall,
and two times the officer's base salary then in effect for Messrs. Purdy
and Renegar, respectively, if the employment of the Named Executive is
terminated for any reason other than the officer's death or disability,
or "Cause," as defined in the Agreements. If the employment of a Named
Executive is terminated for death or for Cause, he will be entitled only
to his base salary through the date of termination. If his employment
is terminated by reason of his disability, he will be entitled to
receive his base salary for a twelve-month period from the date
disabled. The Agreements provide that the Named Executives will not
engage in various activities competitive with the business of the
Company for a period of one or two years, depending on the respective
severance pay period allowed per Named Executive.
Mr. Doug Brendle retired as President and Chief Executive Officer
on February 27, 1995. Effective on March 1, 1995, the Company entered
into a Retirement and Consulting Agreement with Mr. Doug Brendle to
serve as a consultant to the Company, for a five-year period, in order
that the Company may continue to benefit from Brendle's experience,
knowledge, reputation and contacts in the
11
<PAGE>
industry, and to perform all duties delegated to him by the Board of
Directors or President on an as-needed basis. Mr. Doug Brendle was
named Chairman Emeritus of the Board of Directors, at no additional
compensation. The Retirement and Consulting Agreement provides for
annual retirement payments of $200,000 per year for five years (which
payments can be accelerated in the event of the sale of all or
substantially all of the Company's assets); for health and life
insurance for the remainder of his life; and for the continuation of
other benefits. The Retirement and Consulting Agreement also provides
for a term of three years the annual sum of $5,000 as an allowance for
office space, telephone and secretary, for an office for Mr. Brendle
located outside of the Company headquarters. The Retirement and
Consulting Agreement also provides that the Company continue health
insurance coverage for Mr. Brendle's wife, Lydia U. Brendle, for the
remainder of her life. The Agreement requires that Mr. Brendle not
compete with the Company nor solicit Company employees to enter into
competition with the Company during the five years through February 29,
2000.
On February 27, 1995, the Company entered into an employment agreement
with Joseph M. McLeish, Jr. to serve as President and Chief Executive
Officer of the Company (the "Employment Agreement"). The Employment
Agreement provides for an annual base salary of $175,000 and a possible
cash bonus, depending on the Company reaching certain performance levels
set by the Board, up to $75,000 on top of his base salary for Fiscal
1995. In years following Fiscal 1995, Mr. McLeish's formula incentive
compensation amounts are subject to such modifications as the Board
deems appropriate.
Mr. McLeish was also granted, on February 27, 1995, pursuant to the
terms of a Stock Option Grant Agreement of that date, a total of 50,000
stock options to purchase 50,000 shares of Company stock under the
Company's 1986 Stock Option Plan for 62.5(cent mark) per share, representing
the fair market value of the shares on February 27, 1995. The options
become exercisable, subject to continuous employment with the Company,
at the rate of 30% on February 27, 1996; 30% on February 27, 1997, and
40% on February 27, 1998. No portion of the options are exercisable
after February 27, 2000.
Pursuant to the Employment Agreement, the Company agreed to reimburse
Mr. McLeish for expenses incurred in connection with his relocation and
for certain automobile and other expenses.
Upon the occurrence of certain triggering events, the Employment
Agreement entitles Mr. McLeish to severance pay in a lump sum in the
amount of two times his annual base salary then in effect. The
triggering events include termination of the Employment Agreement by Mr.
McLeish in response to a change in the majority control of the Company,
whether in a transaction which is a sale, merger or other business
combination. Additional triggering events include termination of the
Employment Agreement by the Company for any reason other than Mr.
McLeish's death or disability or "Cause," as defined in the Employment
Agreement. If Mr. McLeish's employment is terminated for "Cause" or on
account of his death, or if he resigns other than in response to a
triggering event, he will be entitled only to his earned base salary to
the date of termination. If his employment is terminated on account of
his disability, he will be entitled to six months in salary from the
date of disability.
The Employment Agreement further provides that Mr. McLeish will not
engage in various activities competitive with the business of the
Company during the period of his employment under the Employment
Agreement and for a period of two years following termination thereof.
Mr. McLeish is also restricted during the term of his employment from
disclosing confidential information acquired by him during employment
with the Company.
12
<PAGE>
Stock Option Plans
The Company maintains a 1986 Incentive Stock Option Plan, as amended
(the "ISO Plan"). The ISO Plan provides for the issuance of stock
options for purchase of up to 400,000 shares of the Company's Common
Stock (before adjustment for shares issued pursuant to the Plan of
Reorganization) by officers and other key employees (including directors
who are employees) of the Company and its subsidiaries.
The ISO Plan permits the grant of incentive stock options within the
meaning of Section 422A of the Internal Revenue Code as in effect on the
date of grant, as well as non-qualified options which do not meet the
requirements of that section. The exercise price for an incentive stock
option granted under the ISO Plan will not be less than 100% of the fair
market value of the Common Stock on the date of grant, except that the
exercise price of incentive stock options awarded to any employee who
owns 10% or more of the Company's Common Stock at the date of grant may
not be less than 110% of such fair market value. The exercise price for
a non-qualified option granted under the ISO Plan will not be less than
95% of the fair market value of the Common Stock on the date of grant.
Options may be granted under the ISO Plan at any time prior to February,
1996 and must be exercised within ten years from the date of grant (five
years with respect to incentive stock options granted to certain owners
of 10% or more of the Company's Common Stock).
Beginning January 1, 1987, the aggregate fair market value, determined
at the date of grant, of stock for which incentive stock options are
exercisable for the first time by an employee under the ISO Plan
(including all plans of the Company and any parent or subsidiary) during
any calendar year became limited to $100,000. Provided that an optionee
under the ISO Plan remains in the employ of the Company for one full
year after the date options are granted to such employee, the Committee
(as hereinafter defined) which administers the ISO Plan has determined
that such options become exercisable at a rate of 20% per year, on a
cumulative basis, beginning one year from the date of grant.
The Company also maintains a 1986 Nonqualified Stock Option Plan, as
amended (the "1986 Nonqualified Plan"). The 1986 Nonqualified Plan
provides for the issuance of stock options for purchase of up to 10,000
shares of the Company's Common Stock (before adjustment for shares
issued pursuant to the Plan of Reorganization) by directors of the
Company who are not employees of the Company. Options for all 10,000
shares have been granted under the 1986 Nonqualified Plan, and must be
exercised within five years from the date of grant. There is no
limitation under the 1986 Nonqualified Plan on the number of options
which may be granted to a director or on the number of shares which may
be subject to any option, except for the maximum number of shares
available under the 1986 Nonqualified Plan. Options may not be granted
at an exercise price of less than 95% of the fair market value of the
Common Stock on the date of the grant. Options become exercisable in
full one full year from the date of grant provided that the optionee has
continued to serve the Company as a director during that period.
The Company further maintains a 1990 Stock Option Plan (the "1990
Plan") which was approved by the Shareholders on May 31, 1990 and became
effective on June 1, 1990. The 1990 Plan authorizes the grant of both
incentive stock options and non-qualified stock options for 10 years
from the effective date of the Plan for the purchase of up to 300,000
shares of common stock of the Company (before adjustment for shares
issued pursuant to the Plan of Reorganization). A Stock Appreciation
Right (a "Right") may be issued in tandem with each specific option
granted under the 1990 Plan and may be awarded to a Participant
concurrently with the grant of an option. A Right will provide the
Participant the right to receive an amount equal to the amount of
appreciation in the value of the Company's Common Stock (as defined in
the 1990 Plan documents) during the period the Right is outstanding and
upon its exercise. The Participant may be entitled to receive this
amount either entirely in cash, entirely
13
<PAGE>
in Company Common Stock or in some combination of the two. Upon the
exercise of either the option or the Right, such exercise will cancel
the corresponding option or Right. The option and its corresponding
Right will be hereinafter referred to as a "Unit".
With respect to the granting of Units which consist of incentive stock
options under the 1990 Plan: (a) the option price may not be less than
the fair market value of the Company's Common Stock on the date of grant
of the option; (b) in the case of participants who immediately prior to
the grant of the option own more than 10% of the voting power of the
Company's shares, the option price may not be less than 110% of the fair
market value of the Company's common stock on the date of grant of the
option; (c) the aggregate fair market value (determined at the time the
option is granted) of the stock with respect to which the options are
exercisable for the first time by a participant during any calendar year
(including incentive stock options granted under all option plans of the
Company) shall not exceed $100,000; (d) only full-time employees of the
Company are eligible to receive grants of incentive stock options; (e)
the option is not transferable by its holder, except that it may be
transferred in the event of death under a will or under the laws of
descent and distribution; and (f) the option is exercisable only by the
participant to whom it is granted, provided that in the event of such
participant's death or legal disability, the option may be exercised by
a person designated by the participant or a court-appointed legal
representative.
With respect to non-qualified stock options granted under the 1990
Plan: (a) the option price for options granted to eligible employees
and unaffiliated directors may be less than the fair market value of the
Company's Common Stock on the date of grant; (b) there is no limit on
the aggregate fair market value of the shares for which an employee or
an unaffiliated director may be granted a non-qualified stock option;
and (c) full-time employees and unaffiliated directors of the Company
are eligible to receive non-qualified stock options.
All options granted under the 1990 Plan (incentive stock options and
non-qualified stock options): (a) may not be granted after 10 years
from the effective date of the Plan; (b) may not be exercised after ten
(10) years from the date of grant; (c) may be paid in full in cash or,
to the extent so authorized, in shares of Common Stock of the Company or
in a combination of cash and such shares; and (d) are subject to the
Company's right of repurchase at the option price for all shares that
are acquired by exercise of options during the year preceding the
termination of a participant's employment.
Rights granted in conjunction with incentive stock options will: (a)
expire no later than the expiration of the corresponding option; (b)
provide for the payment of no more than 100% of the difference between
the exercise price of the option and the market price of the stock
subject to the option at the time the Right is exercised; (c) not be
transferable except and only in the event the option is transferable;
(d) only be exercisable when the incentive stock option is eligible to
be exercised; and (e) be exercisable only when the market price of the
stock subject to the option exceeds the exercise price of the option.
Rights granted in conjunction with non-qualified stock options may have
such terms as the Stock Option Committee determines.
Both the ISO Plan and the 1990 Plan are administered by the
Compensation Committee of the Board of Directors (the "Committee"),
which has authority (subject to the respective provisions of the plans)
to select the persons to whom, and the number of shares for which,
options will be granted, and the time, number, manner of exercise and
other terms of the options. The Committee consists of Douglas D.
Brendle, S. Floyd Brendle, Thomas H. Davis, James B. Edwards and Robert
R. Dunn, none of whom is eligible to receive options under any of the
plans, and each of whom (as required by the respective provisions of the
plans) is a "disinterested person" within the meaning of that term
pursuant
14
<PAGE>
to Rule 16b-3 adopted under the Exchange Act. An option may be
exercised by payment to the Company of cash or, at the Committee's
discretion, by the surrender of shares of the Company's Common Stock or
a combination of cash and such shares. The market values of the
securities called for by the options under the ISO Plan and under the
1986 Nonqualified Plan, based on the average of the high and low
reported prices for the Company's Common Stock on the NASDAQ System for
National Market Issues on January 28, 1995, were $517,070 and $323,169,
respectively. The Company receives no payment for the granting of the
options.
Stock Appreciation Rights Plans
Effective August 18, 1989, the Company adopted, and currently
maintains, the Brendle's Key Employee Stock Appreciation Rights Plan
(the "Employee SAR Plan") and the Brendle's Unaffiliated Directors Stock
Appreciation Rights Plan (the "Directors SAR Plan"). The Employee SAR
Plan provides for the issuance of up to a maximum of 75,000 stock
appreciation rights. Participation in the Plan is limited to "key
employees" of the Company, who are considered to be those employees who
are in a position to materially affect the operations and profitability
of the Company by reason of the nature and extent of their duties and
responsibilities.
The Employee SAR Plan provides that participants shall be awarded
stock appreciation rights for periods of not less than three years nor
more than six years. Stock appreciation rights awarded to participants
are also subject to a vesting schedule which provides for vesting of
rights granted under the Employee's SAR Plan with the percentage of
vesting to be determined by the Stock Appreciation Rights Committee, but
which shall not permit 100% vesting earlier than the time the
participant has five years of continuous employment with the Company.
Upon exercise of stock appreciation rights, participants will receive
a cash payment in an amount equal to the increase, if any, in the market
value of the shares of common stock of the Company as of the date of
grant and the market value of the stock on the date of exercise of the
stock appreciation rights.
The Directors SAR Plan provides for the issuance of stock appreciation
rights to unaffiliated directors of the Company, which are exercisable
for the duration of the exercise period which shall not be less than six
months from the date of grant. Rights awarded to participants under the
Directors SAR Plan are deemed fully vested as of the date of grant. Any
participant, however, who ceases to serve as an unaffiliated director of
the Company for any reason other than his death or disability shall have
no further rights under the Directors SAR Plan. Rights granted to
unaffiliated directors may be exercised prior to their expiration only
during specified periods of each year. Upon exercise, a participant is
entitled to receive a cash payment in an amount equal to the
appreciation in market value of the shares of Common Stock of the
Company at the date of grant and the market value of the Common Stock of
the Company on the date of exercise of the right.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation committee (the "Committee") sets executive officers'
salaries, formulates bonuses for the Company's management awarded under
the Company's annual incentive compensation program, reviews and
approves compensation policies and plans for officers and other key
employees, reviews and approves salary and other compensation of
officers and other key employees, makes recommendations
15
<PAGE>
to the Board of
Directors of the Company (the "Board") with respect to the compensation
of directors and administers the Company's stock-based incentive plans.
The members of the Committee are all non-employees of the Company,
except Mr. Douglas D. Brendle, while a committee member, served as
President and Chief Executive Officer of the Company from April 13,
1993, to February 27, 1995. The Committee reviews and revises the
Company's compensation policies from time to time, as the needs of the
Company and the hiring or retention of executives for the Company
require. The policies are reviewed in light of their overall
consistency, in the subjective view of the Committee, with the Company's
financial performance, its business plan and its position within the
discount retail industry as well as the compensation policies of similar
companies in the discount retail business. The compensation of
individual executives is then evaluated by the Committee in accordance
with its established executive compensation policies. Following the
Company's substantial consummation on or about April 29, 1994 of the
reorganization plan mentioned elsewhere herein, the Committee reviewed
the Company's executive compensation plan. This review resulted in a
recommendation by the Committee to the Board, which was adopted by the
Board on September 15, 1994. This Board resolution formed a basis for
employment agreements with the four (4) then highest ranking executive
officers, other than Mr. Douglas D. Brendle, those being Messrs. Grady,
Purdy, Renegar and Stegall. These executive officers (herein called the
"Named Officers") entered into or revised their employment agreements
with the Company, to include severance arrangements, in certain events,
of one or two years' compensation and agreed to non-compete agreements
for the length of their agreed severance terms. Each Named Officer was
also granted, in December, 1994, 25,000 stock options, as described
below.
On April 19, 1995, the Committee adopted a formalized statement of
policy concerning compensation of the Company's executive officers,
which reflects the overall executive compensation policies which were
used to form the basis of the said employment agreements and stock
option grants for the said four (4) Named Officers and used in the
hiring of Mr. McLeish, as stated below. The statement of policy
follows:
"The Brendle's Executive Compensation Plan is designed:
(bullet) to attract and retain talented executives by providing a
compensation program that is competitive with the compensation
provided to executives at companies of comparable size and position
in the discount retail business, while maintaining compensation
within levels consistent with the Company's business plan,
financial objectives and operating performance;
(bullet) to provide appropriate incentives for executives to work toward the
achievement of the Company's annual performance targets established
in the Company's business plan; and
(bullet) to more closely align the interests of executives with those of
shareholders and the long-term interests of the Company by
providing long-term incentive compensation in the form of stock
options or other equity-based long-term incentive compensation."
Compensation of Executive Officers Other than the Chief Executive
Officer. The Company offers executive officers base salary, possible
annual incentive compensation and long-term incentive compensation,
determined in accordance with the general principles set forth below.
Base Compensation. In determining annual base compensation
adjustments for each executive officer, the Committee predicates its
decision on a subjective assessment of the individual executive's
performance in light of that executive's job responsibilities. During
Fiscal 1995, Messrs. Grady, Renegar and Stegall received base
compensation increases of $15,000, $10,000 and $5,000, respectively.
The Committee approved these increases in the base salaries, after
reviewing their responsibilities and
16
<PAGE>
performance levels in comparison to levels of executives with similar
responsibilities at other companies in the discount retail industry, and
based upon additional responsibilities assigned these officers.
Annual Incentive Compensation. At present, the Company does not have
a formal annual incentive (bonus) compensation system for its executive
officers, other than for the President and Chief Executive Officer, as
outlined below. However, the Company has indicated to these executive
officers that it will consider possible annual incentive compensation
(bonuses) in the discretion of the Board and/or the Chief Executive
Officer, based upon individual performance, or achievement of the
Company's business plan or other criteria selected by the Board and/or
the Chief Executive Officer, in their sole discretion. For Fiscal 1995,
$5,000 bonuses were paid Messrs. Grady, Renegar and Stegall based upon
the President's judgment of their superior individual performances
during the reorganization proceeding and later in the fiscal year.
Long-Term Incentive Compensation. The Company uses stock options and
stock appreciation rights as the primary vehicles for long-term
incentive compensation, which are issued pursuant to the Brendle's stock
option plans mentioned elsewhere herein.
In Fiscal 1995, the Company granted options to purchase 25,000 shares
of Common Stock to each of Messrs. Grady, Purdy, Renegar and Stegall,
and options to purchase 50,000 shares were granted on February 27, 1995,
to Mr. Joseph M. McLeish, Jr., the new President and Chief Executive
Officer as further described below. Mr. Purdy's options terminated when
he left the Company in April, 1995. Options to purchase an aggregate of
500,000 shares were granted during Fiscal 1995 to these and 291 other
employees of the Company, including store and distribution center
managers, as well as various levels of corporate management. The size
of the option grant to each executive officer was determined by the
Committee based upon a subjective assessment of such executive officer's
performance and his or her respective level in the organization. The
Committee does not consider the number of shares beneficially owned by
executive officers when making such grants. The exercise price of each
option equaled the fair market value of the common Stock as of the date
of grant. The options vest at the rate of 50% per year for two (2)
years for those employees receiving generally less than five thousand
(5,000) options, and vest at the rate of 30%, 30% and 40%, annually,
over a three (3)-year period for those employees receiving generally
five thousand (5,000) options or more, and are not contingent upon any
performance or other criteria other than continued employment through
the vesting dates. All options expire five (5) years from the date of
grant.
Although the Company's stock option plans, as previously approved by
shareholders, permit the Committee to grant non-qualified stock options
exercisable at less than their fair market value on the date of grant,
the Committee has not done so in recent years and has no current
intention of doing so.
Compensation of President and Chief Executive Officer. Douglas D.
Brendle was the President and Chief Executive Officer during the fiscal
year, and his base compensation was at the rate of $200,000 per year,
which it had been since he voluntarily reduced his annual compensation
from $250,000 to $200,000 on January 19, 1992. Mr. Brendle retired on
February 27, 1995. On February 27, 1995, after an extensive search for
a qualified individual to assume the significant responsibilities of
President and Chief Executive Officer, the Company executed an
Employment Agreement with Joseph M. McLeish, Jr. to assume those
responsibilities. Taking into consideration its philosophy of linking
the compensation of senior executive officers to the performance of the
Company's stock through grants of stock options, and its desire to
encourage decision making that will produce near-term as well as
long-term benefits to the Company and its shareholders by providing
annual cash incentives to the Chief Executive Officer, the Committee
determined that Mr. McLeish's compensation should include a balance of
these forms of long-
17
<PAGE>
term and annual incentive compensation. In negotiations of the terms of
Mr. McLeish's Employment Agreement, the Company sought to strike this
balance, taking into consideration the responsibilities he would assume,
the general shortage of qualified executives with experience in discount
retail operations, and the Company's need to attract a person meeting
the requisite qualifications.
The President and Chief Executive Officer's Employment Agreement
provides that until he or the Company terminates the Agreement, or the
Board approves otherwise, he shall be entitled to (i) an annual base
salary of $175,000, (ii) the possibility of earning an annual bonus of
up to an additional $75,000 on top of his base salary in the fiscal year
ending January 27, 1996, and in the fiscal years following, based on
Company performance levels established by the Board, and (iii) stock
options to purchase 50,000 shares of Common Stock. The President and
Chief Executive Officer has been or will be reimbursed for certain
relocation and auto expenses and similar matters.
Federal Income Tax Deductibility Limitations. The Omnibus Budget
Reconciliation Act ("OBRA") passed by Congress in 1993 imposes a
$1,000,000 limit on the deductibility of certain compensation paid to
the Chief Executive Officer and other named officers. Compensation paid
to these officers in excess of $1,000,000, that is not performance
based, cannot be claimed by the Company as a tax deduction.
None of the officers named below received compensation in Fiscal 1995
that would exceed the $1,000,000 limit on deductibility under OBRA.
Thomas H. Davis, Chairman
Douglas D. Brendle
S. Floyd Brendle
Robert R. Dunn
James B. Edwards
Compensation Committee Interlocks and Insider Participation. Douglas
D. Brendle, who currently serves on the Compensation Committee of the
Board of Directors, served as President and Chief Executive Officer from
April 13, 1993 until February 27, 1995.
18
<PAGE>
PERFORMANCE GRAPH
Set forth below is the Company's Performance Graph and Supporting
Tables comparing the Company's cumulative total shareholder return for
the five-year period ending January 28, 1995 with that of the NASDAQ
Stock Market (US Companies) Index and the NASDAQ Retail Trade Index.
The price data for the two NASDAQ indices were calculated on a dividend
reinvested basis. Because the Company's fiscal year ends on a Saturday
and each of the five years included in the draft, the closing price for
the Friday prior to the end of the fiscal year has been used.
(Performance Graph appears here)
2/2/90 2/2/91 2/1/92 1/30/93 1/29/94 1/28/95
Brendle's Inc. $100.00 $38.70 $25.81 $16.13 $17.74 $8.06
NASDAQ - US $100.00 $102.49 $155.51 $175.79 $201.12 $193.87
NASDAQ Retail $100.00 $119.01 $204.74 $184.70 $197.04 $176.73
19
<PAGE>
TRANSACTIONS WITH OFFICERS AND DIRECTORS
Shareholders' Agreement
In April of 1986, prior to the initial public offering of the
Company's Common Stock, all of the then shareholders of the Company
(including Douglas D. Brendle, S. Floyd Brendle, Patty Brendle Redway,
and William F. Cosby) entered into a Shareholders' Agreement with the
Company. Therein, the shareholders agreed, among other things, to
restrict the transfer of their Common Stock to any unrelated party (as
defined) without the written consent of all remaining shareholders who
are parties to the Agreement unless the transferring shareholder gives a
right of first refusal to related parties (as defined) of the
transferring shareholder and to the remaining shareholders who are
parties to the Agreement, and such right of first refusal is not
exercised. In addition, the Shareholders' Agreement gives the right,
exercisable within nine months of death, to the personal representative
of certain deceased shareholders who were parties to the Agreement, to
cause the Company to redeem from the deceased shareholder's estate up to
that number of shares of Common Stock of the Company owned by the
deceased shareholder at his death valued at the average of the closing
prices for the 20 trading days prior to the date of death, not to exceed
the life insurance proceeds received by the Company as a result of such
death. The Company has purchased life insurance in the face amounts set
forth below at a net aggregate cost (premiums less dividends and
increase in cash surrender value) for the fiscal year ended January 28,
1995 of approximately $113,975: Douglas D. Brendle, $5,000,000; S.
Floyd Brendle, $5,250,000; William F. Cosby, $3,070,000; and Patty
Brendle Redway $3,000,000. The Company has borrowed $1,835,000, in the
aggregate, against these policies.
One effect of the Shareholders' Agreement may be to make it more
difficult for a third party to acquire a significant equity position in
the Company. Conversely, the Shareholders' Agreement may make it easier
for a party to the Shareholders' Agreement, including incumbent
management of the Company, to retain significant equity positions in the
Company or to retain their management positions with the Company. In
addition, implementation of certain of the aforesaid rights may, under
proper circumstances, cause a change in control of the Company.
Split Dollar Insurance Agreements
The Company has entered into split dollar life insurance agreements
for the benefit of four of its executive officers and/or directors or
their spouses and families. Upon the death of any such officer or
director, the Company will receive not less than the net premiums paid,
and the insured's beneficiary will receive the balance of the insurance
proceeds. Pursuant to the agreements, life insurance coverage, the
premiums for which are paid by the Company, has been purchased on the
following persons in the following aggregate policy amounts: Douglas D.
Brendle, $3,000,000; S. Floyd Brendle, $2,000,000; David R. Renegar,
$113,220; and Gregory S. Stegall, $127,439. The Company's net aggregate
cost (premiums less dividends and increase in cash surrender value) for
such insurance for the fiscal year ended January 29, 1994 was
approximately $193,046.
Leases
Brenco, a North Carolina partnership consisting of Douglas D. Brendle,
S. Floyd Brendle, William F. Cosby, and two Trusts under an Agreement
with J. Harold Brendle, dated October 20, 1982 ("Brenco"), leases 13
stores and the Company's corporate office building and contiguous
warehouse to the Company. During the fiscal year ended January 28,
1995, the Company paid or accrued to Brenco an aggregate of
approximately $2,294,732 with respect to these leases. All of the
leases are for a 10-year period from
20
<PAGE>
their respective dates of origin, except for one lease which is for a
7-year period, with remaining lease terms ranging from zero (0) year to
four (4) years, and the leases have certain extension options. The
Company anticipates, with respect to those leases which expire during
the current fiscal year, that it will enter into agreements for the
extension of such leases or exercise its renewal options prior to the
date of expiration of any such lease. All of the leases grant to
Brenco the right to require the Company to purchase any or all of the
premises under any or all of the leases at a purchase price equal to the
fair market value of the respective premises purchased, as such fair
market value is determined by a third party appraiser acceptable to both
the Company and Brenco, provided, however, that, in each event, the
purchase of the premises is first approved by the Committee of
Unaffiliated Directors of the Company in their sole discretion. The
total amount owing under the Brenco leases for their remaining terms is
approximately $3,117,000. The Bankruptcy Court approved amendments to
the Brenco leases which provided for incentive rent based on the
performance of the Company and which will extend certain of the leases
by one (1) to two (2) years.
On November 1, 1991, the Company and Brenco entered into an agreement
wherein Brenco agreed to reduce rents payable by the Company by an
annual amount of $500,000. This agreement was required by the Company's
lenders as part of the loan agreement reached between the Company and
its lenders in October, 1991.
Brenco is the owner and franchisee of the Holiday Inn located in
Jonesville, North Carolina in which the Company held various meetings
and corporate functions during the fiscal year ended January 28, 1995.
The Company was charged the standard corporate rates for these services
and paid an aggregate of $32,686 therefor.
Management of the Company believes that the terms of all these leases
are no less favorable to the Company than would have been available from
unaffiliated third parties.
Transportation Activities
During the fiscal year ended January 28, 1995, a subsidiary of the
Company occasionally used an airplane owned by Sky-Lease, Inc., the
voting securities of which are owned by Douglas D. Brendle, S. Floyd
Brendle, William F. Cosby, and a Trust under an Agreement dated October
20, 1982 with J. Harold Brendle, and Sky-Lease, Inc. was paid an
aggregate of $17,710 in rent charges for such airplane. The Company
previously leased two airplanes from Sky-Lease, Inc., however, such
leases were terminated effective December 31, 1991, by mutual agreement
of the parties and as a condition to the Loan Agreement entered into
between the Company and its lenders in October, 1991.
Loan Agreements
As a condition to the loan agreement entered into between the Company
and its lenders in October, 1991, Douglas D. Brendle and Brenco each
loaned $1,000,000 to the Company which loans were satisfied by the
Company in April 1994, pursuant to the provisions of the Plan of
Reorganization. Under the terms of the Plan, Mr. Brendle and Brenco
received payment of the principal balance of their secured claims and
52% of their unsecured claims, together with their proportional share of
35% new stock issuance made as a part of the Plan of Reorganization,
without any allowances for post-petition interest accruals. The Company
has no other loan amounts owing to related parties.
21
<PAGE>
Hold Harmless and Other Agreements
The Company is party to agreements with Thomas H. Davis, James B.
Edwards and John D. Gray, non-employee directors of the Company, to hold
each harmless, subject to certain limitations under applicable law, from
liabilities arising from service as a director of the Company. The
agreements contain certain assurances that the provisions of the
Company's by-laws relating to indemnification of directors will not be
changed. The Company has not entered into similar agreements with other
directors, but may do so in the future.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(Item 2 on Proxy)
The Board of Directors has appointed Price Waterhouse LLP, independent
public accountants, as its auditors for the Company's fiscal year ending
January 27, 1996. Price Waterhouse LLP has acted in this capacity since
the beginning of the Company's 1974 fiscal year. The Company has been
advised by Price Waterhouse LLP that neither the firm nor any of its
members or associates has any direct financial interest or material
indirect financial interest in the Company or any of its subsidiaries
other than as auditors. Although the appointment of independent
auditors is not required to be submitted to a vote of the shareholders,
the Directors believe that shareholders may wish to participate in this
process. A negative vote by shareholders will be considered in
connection with the selection of the Company's auditors for its fiscal
year ending February 1, 1997. The Company understands that a
representative from Price Waterhouse LLP will be present at the Annual
Meeting of Shareholders, will have the opportunity to make a statement
if he desires to do so, and will be available to respond to appropriate
questions. The Board of Directors considers Price Waterhouse LLP well
qualified to act as the Company's auditors and recommends that
shareholders vote for approval of the appointment of this firm as
independent auditors of the Company for the Company's fiscal year ending
January 27, 1996.
SHAREHOLDER PROPOSALS - 1996 ANNUAL MEETING
Shareholder proposals, in order to be included in the Company's proxy
material for the 1996 Annual Meeting of Shareholders, must be in
writing, addressed and sent to the Corporate Secretary and received by
the Company no later than January 1, 1996.
MISCELLANEOUS MATTERS AND OTHER BUSINESS
Proxies solicited hereunder will be voted for the election as
directors of the seven nominees set forth herein and for the other
proposals herein unless contrary instructions are given on such proxies
or unless they are duly revoked prior to being voted.
The Board of Directors knows of no other matter to come before the
Annual Meeting of Shareholders. However, if any other matter requiring a
vote of the shareholders should arise, it is the intention of the
persons named in the proxy to vote thereon according to their best
judgment. However, no discretionary power to vote is solicited which
would cause such persons to be beneficial owners of the Company's Common
Stock within the meaning of the North Carolina Control Share Acquisition
Act.
By Order of the Board of Directors
DAVID R. RENEGAR
Secretary
Dated: May 1, 1995
Elkin, North Carolina
22
**************************************************************************
APPENDIX
**************************************************************************
<PAGE>
Brendle's Incorporated
1919 N. Bridge Street Ext.
Elkin, NC 28621
PROXY
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints David R. Renegar and David B.
Blanco, and each of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to take action with respect to
and vote, as designated below, all the shares of Common Stock of
Brendle's Incorporated ("Company") held of record by the undersigned on
April 10, 1995, at the Annual Meeting of Shareholders to be held on June
1, 1995, and any adjournments thereof.
1. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the contrary below) [ ] for all nominees listed below [ ]
Douglas D. Brendle, S. Floyd Brendle, William F. Cosby, Robert R. Dunn,
John A. Northen, Patty Brendle Redway and Stephen T . Westerfield
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
2. PROPOSAL TO RATIFY AND APPROVE THE APPOINTMENT OF PRICE WATERHOUSE
as the independent public accountants of the Company for the fiscal
year ended 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.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is
given, the proxy will be voted for Items 1 and 2.
Please sign exactly as name appears below.
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee, guardian
or other fiduciary, please give full title
as such. If a corporation, please print
full corporate name and sign by President
or other authorized officer. If a
partnership, please sign in partnership
name by authorized general partner.
Signature
Other holder's signature if held jointly.
DATED: ____________ ___, 1995
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
