<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ 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 sec.240.14a-11(c) or sec.240.14a-12
J. BAKER, INC.
(Name of Registrant as Specified In Its Charter)
ALAN I. WEINSTEIN, CLERK
(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(j)(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: Not
Applicable
2) Aggregate number of securities to which transaction applies: Not
Applicable
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: Not Applicable
4) Proposed maximum aggregate value of transaction: Not Applicable
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:
- --------------------------------------------------------------------------------
<PAGE> 2
J. BAKER, INC.
555 TURNPIKE STREET
CANTON, MASSACHUSETTS 02021
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 7, 1994
To the Stockholders of
J. BAKER, INC.
Notice is hereby given that the Annual Meeting of Stockholders of J. Baker,
Inc. (the "Company") will be held at the offices of the Company, 555 Turnpike
Street, Canton, Massachusetts on Tuesday, June 7, 1994, at 11:00 a.m., for the
following purposes:
1. To elect two Class II Directors to serve for a three-year term until the
1997 Annual Meeting and until their respective successors are elected
and qualified;
2. To consider and act upon a proposal to approve the 1994 Equity Incentive
Plan;
3. To ratify the selection of KPMG Peat Marwick as independent auditors for
the fiscal year ending January 28, 1995; and
4. To consider and act upon any matters incidental to the foregoing or any
other matters which may properly come before the meeting or any
adjournments thereof.
Only stockholders of record at the close of business on April 20, 1994 will
be entitled to notice of and to vote at the meeting and any adjournments or
postponements thereof.
By Order of the Board of Directors
ALAN I. WEINSTEIN
Clerk
Canton, Massachusetts
May 5, 1994
IMPORTANT
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING OF
STOCKHOLDERS. ACCORDINGLY, PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE. IF YOU SO CHOOSE, YOU
MAY VOTE YOUR SHARES IN PERSON AT THE MEETING.
<PAGE> 3
J. BAKER, INC.
555 TURNPIKE STREET
CANTON, MASSACHUSETTS 02021
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 7, 1994
GENERAL INFORMATION
This proxy statement and the accompanying proxy card are being mailed to
stockholders commencing on or about May 5, 1994. The accompanying proxy is
solicited by the Board of Directors of J. Baker, Inc. (the "Company") for use at
its Annual Meeting of Stockholders to be held at the offices of the Company, 555
Turnpike Street, Canton, Massachusetts on June 7, 1994, at 11:00 a.m., and any
adjournments or postponements thereof. The cost of solicitation of proxies will
be borne by the Company. Directors, officers and a limited number of employees
may assist in the solicitation of proxies by mail, telephone and personal
interview without additional compensation.
When a proxy is returned properly signed, the shares represented thereby
will be voted by the persons named as proxies in accordance with the
stockholder's directions. You are urged to specify your choices on the enclosed
proxy card. If a proxy is signed and no instructions are given, the shares will
be voted "FOR" the nominees named herein under proposal number 1 and "FOR"
proposals number 2 and 3, as set forth in the preceding Notice of Annual
Meeting, and in the proxies' discretion as to other matters that may properly
come before the meeting. The presence of a stockholder at the Annual Meeting
will not automatically revoke a stockholder's proxy. A stockholder may, however,
revoke a proxy at any time prior to the voting thereof on any matter by filing
with the Clerk of the Company a written notice of revocation, by delivering a
duly executed proxy bearing a later date or by attending the Annual Meeting and
voting in person.
The Board of Directors has fixed April 20, 1994 as the record date for the
meeting. Only stockholders of record on the record date are entitled to notice
of and to vote at the meeting and any adjournments or postponements thereof. As
of April 20, 1994, there were 13,829,258 shares of Common Stock, par value $.50
per share ("Common Stock"), of the Company issued and outstanding. Each share is
entitled to one vote. A majority of the outstanding shares will constitute a
quorum at the meeting. Abstentions and broker non-votes are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved.
1
<PAGE> 4
<TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 31, 1994,
with respect to the shares of Common Stock of the Company beneficially owned by
(i) any person who is known to the Company to be the beneficial owner of more
than 5% of the outstanding Common Stock of the Company, (ii) each director of
the Company and each of the nominees for election as director of the Company,
(iii) each of the executive officers named in the Summary Compensation Table
beginning on page 10 (the "Summary Compensation Table") and (iv) all directors
and executive officers as a group.
<CAPTION>
AMOUNT AND
NATURE OF
TITLE NAME, AND WITH RESPECT TO OWNERS BENEFICIAL PERCENT
OF CLASS OF 5% OR MORE, ADDRESS OWNERSHIP(1) OF CLASS
-------- ------------------------------------------- ------------ --------
<S> <C> <C> <C>
Common Stock T. Rowe Price Associates, Inc. 968,000(2) 7.0%
$.50 par value 100 East Pratt Street
Baltimore, MD 21202
Merrill Lynch & Co., Inc. 934,599(3) 6.8%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281
Oppenheimer Management Corporation 855,348(4) 6.2%
Two World Trade Center
New York, NY 10048-0203
NBD Bancorp, Inc. 783,400(5) 5.7%
611 Woodward Avenue
Detroit, Michigan 48226
Sherman N. Baker 412,868(6) 3.0%
J. Christopher Clifford 27,000(7) *
Ervin D. Cruce 23,000(8) *
Thomas H. Lee 77,267(9) *
David Pulver 32,193(10) *
Melvin M. Rosenblatt 21,500(11) *
Stanley Simon 27,500(8) *
Jerry M. Socol 135,500(12) *
Linda B. Kanner 46,750(13) *
Larry I. Kelley 20,750(14) *
Alan I. Weinstein 112,994(15) *
All Directors and Executive Officers as a
Group
(16 persons) 986,595(16) 7.0%
<FN>
- ---------------
* Less than 1%
(1) Unless otherwise noted each person has sole voting and investment power
with respect to such shares.
(2) Information based solely on Schedule 13G of T. Rowe Price Associates, Inc.
("Price Associates") filed on behalf of itself and one of its mutual funds
dated February 14, 1994. The beneficial owners have reported that the
shares are owned by various individual and institutional investors
including T. Rowe Price Growth Stock Fund, Inc. which owns 800,000 shares,
representing 5.8% of the shares outstanding, for which Price Associates
serves as investment adviser with power to direct investments and/or sole
power to vote the securities. Price Associates has reported that it has
sole voting power with respect to 131,000 shares and sole dispositive power
with respect to 968,000 shares. For purposes of the reporting
</TABLE>
2
<PAGE> 5
requirements of the Securities Exchange Act of 1934, Price Associates is
deemed to be a beneficial owner of such securities; however, Price
Associates expressly disclaims that it is, in fact, the beneficial owner of
such securities.
(3) Information based solely on Schedule 13G of Merrill Lynch & Co., Inc. filed
on behalf of itself and certain of its subsidiaries dated February 16,
1994. The beneficial owners have reported that they share voting and
dispositive power with respect to 933,500 shares with each of Merrill Lynch
Group, Inc. and Princeton Services, Inc.
(4) Information based solely on Schedule 13G of Oppenheimer Management
Corporation dated February 9, 1994. The beneficial owner has reported that
it has no voting power with respect to the shares and it has shared
dispositive power with respect to the shares.
(5) Information based solely on Schedule 13G of NBD Bancorp, Inc., dated
February 11, 1994. The beneficial owner has reported that it has sole
voting power with respect to 760,950 shares, sole dispositive power with
respect to 751,700 shares and shared dispositive power with respect to
29,000 shares.
(6) Includes currently exercisable options with respect to 35,000 shares.
(7) Includes 2,000 shares held by a charitable trust of which Mr. Clifford is a
trustee and as to which Mr. Clifford disclaims beneficial ownership and
currently exercisable options with respect to 15,000 shares.
(8) Includes currently exercisable options with respect to 20,000 shares.
(9) Includes currently exercisable options with respect to 15,000 shares.
(10) Includes currently exercisable options with respect to 5,000 shares.
(11) Includes 1,000 shares owned by Mr. Rosenblatt's wife as to which Mr.
Rosenblatt disclaims beneficial ownership and currently exercisable options
with respect to 17,500 shares.
(12) Includes 7,000 shares owned by Mr. Socol's wife as to which Mr. Socol
disclaims beneficial ownership and currently exercisable options with
respect to 66,250 shares.
(13) Includes 22,750 shares owned by Ms. Kanner as custodian for her children
and 2,000 shares owned by Ms. Kanner's husband, as to which Ms. Kanner
disclaims beneficial ownership. Includes currently exercisable options with
respect to 17,250 shares.
(14) Represents currently exercisable options with respect to 14,500 shares and
options for 6,250 shares exercisable within sixty (60) days of the record
date.
(15) Includes currently exercisable options with respect to 20,750 shares.
(16) Includes currently exercisable options with respect to 253,125 shares and
options for 12,500 shares exercisable within sixty (60) days of the record
date. Includes 806 shares issuable upon the conversion of convertible
subordinated debentures.
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive 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 ("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 beneficial
owners are required by SEC regulation to furnish the Company with copies of all
Section 16(a) forms they file. To the Company's knowledge, based solely on its
review of the copies of such reports furnished to the Company and written
representations that no other
3
<PAGE> 6
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with during the fiscal year ended January 29, 1994.
(PROPOSAL NUMBER 1)
ELECTION OF DIRECTORS
Pursuant to Massachusetts law, the Board of Directors of the Company has
voted to fix the number of directors at eight and to classify the Board of
Directors. The members of each class are elected for terms to continue until the
annual meeting of stockholders held in the third year following the year of
their election and until their respective successors are elected and qualified.
Consequently, the term of office of the nominees elected to the Board of
Directors at the 1994 annual meeting will continue until the annual meeting of
stockholders to be held in 1997 and until their respective successors are
elected and qualified.
The nominees for the two Class II Directors to be voted upon at the meeting
are Thomas H. Lee and Stanley Simon, the current holders of the Class II
directorships. PROXIES WILL BE VOTED FOR THESE NOMINEES UNLESS OTHERWISE
SPECIFIED IN THE PROXY. Management does not contemplate that any of the nominees
will be unable to serve, but in such an event, proxies solicited hereby will be
voted for the election of another person or persons, if any, to be designated by
the Board of Directors.
The affirmative vote of a plurality of the outstanding shares of the
Company's Common Stock present or represented at the Annual Meeting is required
for the election of Directors.
<TABLE>
The following table sets forth information regarding Messrs. Lee and Simon,
the Board of Directors' nominees for election as Directors, as well as
information regarding each Director whose term is not to expire until the 1995
or 1996 Annual Meeting of Stockholders.
<CAPTION>
PRESENT PRINCIPAL EMPLOYMENT AND DIRECTOR
NAME AGE PRIOR BUSINESS EXPERIENCE SINCE
---- --- ------------------------------------------ --------
(NOMINEES FOR CLASS II TERM TO EXPIRE IN 1997)
<S> <C> <C> <C>
Thomas H. Lee.................... 50 Since 1974, owner of Thomas H. Lee Company. 1985
Chairman of the Board of Directors of
Hills Department Store Company, Director
of Autotote Corporation, General
Nutrition, Inc., Gillett Holdings, Inc.,
Health-o-meter, Inc., Snapple Beverage
Corporation, Finlay Fine Jewelry
Corporation and Playtex Family Products
Corporation and Individual General
Partner of ML Lee Acquisition Fund, L.P.,
ML Lee Acquisition Fund II, L.P. and ML
Lee Acquisition Fund (Retirement
Accounts) II, L.P.
Stanley Simon.................... 76 Since 1958, Principal of Stanley Simon & 1985
Associates. Director of the Company's
predecessor, National Shoes, Inc., from
1965 to 1985. Director of Gerber
Scientific, Inc., Vornado, Inc., and
General Microwave Corp.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRESENT PRINCIPAL EMPLOYMENT AND DIRECTOR
NAME AGE PRIOR BUSINESS EXPERIENCE SINCE
---- --- ------------------------------------------- --------
(CONTINUING DIRECTORS -- CLASS III TERM TO EXPIRE IN 1995)
<S> <C> <C> <C>
J. Christopher Clifford.......... 48 Since 1986, General Partner of Berkshire 1985
Partners and affiliated partnerships.
Jerry M. Socol................... 52 President of the Company since September 1988
1988 and Chief Executive Officer of the
Company since March 1990. Chief Executive
Officer of Filene's Department Stores
("Filene's"), August 1987 to June 1988.
President of Filene's, January 1984 to
August 1987. Director of County Seat
Stores.
David Pulver..................... 52 Since 1984, President of DP Investments, 1993
Inc. Chairman of the Board of Directors of
Morse Shoe, Inc., 1992-January 1993.
Chairman of the Board and President of
Kidco since 1986; Chairman of the Board
and Co-Chief Executive Officer of The
Children's Place, 1968-1984. Director of
Costco Wholesale Corporation, County Seat
Stores and Argyle Television Operations,
Inc. Trustee of Colby College in Water-
ville, Maine.
(CONTINUING DIRECTORS -- CLASS I TERM TO EXPIRE IN 1996)
Sherman N. Baker................. 74 Chairman of the Board of the Company. Chief 1985
Executive Officer of the Company and its
predecessor from 1970 until March 1990.
Ervin D. Cruce................... 62 Since January 1992, individual investor. 1986
During 1991, General Partner in the firm of
Cruce & O'Brien. Since April 1985,
Partner of BMA, the general partner of
Investment Limited Partnership. Former
Vice President of RER Texas, Inc.,
general partner of BMA. Prior to 1985,
partner in accounting firm of KPMG Peat
Marwick, where associated for 32 years.
Director of Texas Security Bancshares,
Inc.
Melvin M. Rosenblatt............. 63 Certified public accountant and Chairman of 1993
the Board and Chief Executive Officer of
Greenberg, Rosenblatt, Kull & Bitsoli,
P.C., a public accounting firm which he
has been associated with since 1957. Vice
Chairman of the Board of Trustees of
Clark University in Worcester, Mas-
sachusetts and Chairman of the Asset
Development Committee of the Greater
Worcester Community Foundation. Formerly
a Director of Ames Department Stores,
Inc., from 1979 through 1992.
</TABLE>
5
<PAGE> 8
INFORMATION ABOUT BOARD OF DIRECTORS AND COMMITTEES
Directors who are not employees of the Company or otherwise compensated by
the Company currently receive an annual fee of $20,000 and an annual fee of
$2,500 for each committee of the Board on which they serve and are eligible to
participate in the Company's 1992 Directors' Stock Option Plan (the "Directors'
Plan"). Pursuant to the Directors' Plan, each eligible director is automatically
granted an option to purchase 2,500 shares of the Company's Common Stock upon
his or her initial election to the Board of Directors and at the close of
business on the fifth business day following the Company's annual meeting of
stockholders, at an exercise price equal to the closing price of the Company's
Common Stock on the date of grant. In fiscal 1994, pursuant to the Directors'
Plan, each of Messrs. Clifford, Cruce, Lee, Pulver, Rosenblatt and Simon was
granted an option to purchase 2,500 shares of the Company's Common Stock at a
per share exercise price of $22.38, the fair market value of the Company's
Common Stock on the date of grant. In March 1993 upon their election as new
Directors, each of Messrs. Pulver and Rosenblatt was also granted an option to
purchase 2,500 shares of Common Stock at a per share exercise price of $21.75,
the fair market value of the Company's Common Stock on the date of grant.
The Company's Board of Directors held nine meetings during fiscal 1994. All
of the Directors attended at least 75% of these meetings and any meetings of any
committees of which such Director was a member, except for Mr. Lee.
The Board of Directors has standing Audit, Compensation, Executive and
Nominating Committees. These committees are reconstituted at the first meeting
of the Board following the annual meeting of stockholders.
The Audit Committee, which met three times during fiscal 1994, meets with
the Company's independent auditors and the principal financial personnel of the
Company to review the results of the annual audit. The Audit Committee also
reviews the scope of, and approves fees for, audit and non-audit services
performed by the independent auditors, reviews the independence of the
independent auditors and reviews the adequacy and effectiveness of internal
accounting controls. The present members of the Audit Committee are Messrs.
Cruce (Chairman), Pulver, Rosenblatt and Simon.
The Compensation Committee, which held two meetings during fiscal 1994,
reviews and makes recommendations to the full Board regarding the compensation
of senior officers of the Company. The present members of this committee are
Messrs. Simon (Chairman), Clifford, Cruce and Pulver.
The Executive Committee, which met six times during fiscal 1994, monitors
and follows developments in the Company's business between meetings of the Board
of Directors. The Executive Committee has no authority to take or authorize any
official actions on behalf of the Company or to act in place of the Board of
Directors. The present members of this committee are Messrs. Baker, Clifford,
Rosenblatt and Socol.
The Nominating Committee was established by the Board of Directors on March
29, 1994. The purpose of the Nominating Committee is to identify, evaluate and
nominate candidates for election to the Board. The present members of this
committee are Messrs. Pulver (Chairman), Cruce and Rosenblatt.
On October 27, 1993, Sherman N. Baker entered into a consent decree
settling SEC allegations of certain Federal securities law violations with
respect to sales of Company stock which Mr. Baker had made in the fall of 1991
for estate planning purposes. The Company's Board of Directors is aware of the
SEC allegations and Mr. Baker's settlement thereof, in which he neither admitted
nor denied the allegations. The Board was aware that several factors came into
play in Mr. Baker's decision to settle the claim, including the stress and
significant costs of continuing legal proceedings. The Board notes further Mr.
Baker's long and distinguished record of service and dedication to the Company
and reaffirms its confidence in Mr. Baker's integrity and ability to serve the
Company as a Director.
6
<PAGE> 9
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of four outside Directors. The Board of Directors delegates to the
Compensation Committee the responsibility for developing and administering the
policies which govern the total compensation program for executive officers of
the Company. The Committee also administers the Company's 1985 Amended and
Restated Stock Option Plan (the "1985 Plan") and the Cash Incentive Compensation
Plan (the "Incentive Plan") for all plan participants, including awards made to
the executive officers of the Company. In making pay decisions for the named
executives whose compensation is detailed in this proxy statement (other than
the Chief Executive Officer and the Chairman of the Board), the Committee also
takes into consideration the views and recommendations of the Chief Executive
Officer concerning each executive's overall contribution to the Company's
performance. The Committee has prepared the following report to summarize the
executive compensation approach of the Company and describe specific decisions
made by the Committee with respect to the Chief Executive Officer's compensation
and future compensation guidelines.
The general philosophy of the Committee is to link overall executive
compensation with the performance of the Company and the individual executive,
with operating division performance also emphasized for division executives. The
focus of performance is on the achievement of both annual and long-term business
objectives that contribute to the creation of long-term stockholder value. This
philosophy is reflected in the Company's executive compensation approach that
provides a major portion of total compensation in pay-for-performance programs
that consist of long-term stock-based incentives, an annual incentive plan and
merit salary increases. The combination of these compensation elements is
intended to produce total pay at the median of the marketplace among
similar-size specialty store retailers when the Company's performance also
reflects median performance in the same group. Similarly, total compensation is
intended to vary above or below the competitive median when Company performance
varies from the comparative industry median.
In 1993, the Committee engaged the services of compensation consultants
from KPMG Peat Marwick for the purpose of assisting the Committee with a full
review of the competitiveness and effectiveness of the Company's executive pay
practices in light of the merger with Morse Shoe, Inc. This review covered base
salary levels and ranges for each executive position, annual incentive
practices, executive benefit arrangements and stock-based long-term incentives.
It also included a comparative analysis of key industry financial results in
order to evaluate the Company's relative achievement of the desired pay to
performance relationship. The market data employed in the review included proxy
data from specialty store retailers with similar annual sales (eleven of which
comprise the "peer group" displayed in the Performance Graph below) and
nationally-known compensation surveys for the retailing industry.
Base Salary
Base salaries for the Company's executive officers are reviewed annually
and are determined through an assessment of individual performance against
assigned objectives and key qualitative factors that include personal
accomplishments, strategic impact and career contribution to the Company. As a
guide for setting salaries, the Committee relies on competitive salary ranges
developed by its compensation consultants. These ranges reflect median market
practice for positions of comparable responsibility and scope in the targeted
retailing marketplace.
On an annual basis, each executive of the Company engages in a formal
system of assessment known as the Annual Performance Management Program whereby
goals and objectives for each performance period are established by the
executive which are subject to periodic review and assessment during the
performance period. At the conclusion of the performance period, the executive
completes a self-appraisal and a formal
7
<PAGE> 10
review of his or her performance is conducted by the evaluating manager. The
assessment of Mr. Socol's performance as Chief Executive Officer is the
responsibility of the Committee. The base salary determined for Mr. Socol for
fiscal year 1995 was $450,000, an increase of approximately 5.9% over fiscal
year 1994. In setting Mr. Socol's base salary, the Committee considered his
performance in managing the integration of the Morse Shoe operations into those
of the Company subsequent to the merger and the Company's overall financial and
operating results.
Cash Incentive Compensation Plan
The Company's Incentive Plan represents an annual incentive opportunity
designed to reward certain key employees for performance of the Company relative
to the achievement of pre-determined profit goals established for the year. Such
goals are based on the Company's budgeted corporate pre-tax operating income as
well as on each operating division's pre-tax operating income, prior to
allocation of corporate overhead. Payments under the Incentive Plan are based on
the achievement of such corporate and divisional profit goals, are recommended
by management, subject to review by the Committee, and are then recommended to
the full Board for approval.
The Incentive Plan is linked to relative achievement of goals that are
defined by a scale of threshold, target and superior profit results for the
fiscal year, with target performance linked to a target award size that
approximates median bonus opportunity in the marketplace. For the Incentive Plan
participants, the target award guidelines range by position level from 12% to
54% of base salary, with the Chief Executive Officer at the 54% level. The
threshold guideline for awards represents 25% of each position's target size and
the maximum guideline (which ties to superior profit results) represents 175% of
the target size. Each executive's award opportunity is also allocated on a
weighted basis across the operating units for which they carry responsibility,
including a portion allocated to corporate profit results. For Mr. Socol, the
entire award opportunity is based on consolidated corporate results.
In addition to these award funding guidelines, the Incentive Plan provides
for an individual performance modifier that can adjust a participant's funded
award by as much as 50% upward or downward to reflect all aspects of their
performance for the fiscal year. In reviewing Mr. Socol's performance for fiscal
year 1994, including the success of the Company in integrating the Morse Shoe
operations to achieve significant on-going efficiencies, the Committee decided
to apply an upward modifier of 50% to Mr. Socol's funded award of approximately
27% of base salary. The funded award reflected corporate pre-tax operating
income that was between the threshold and target corporate goals approved for
the year. As a result, Mr. Socol's fiscal year 1994 award was $168,863.
Stock Option Plan
Grants of incentive or non-qualified stock options are made to executives
and other key employees of the Company under the Company's 1985 Plan. Annual
grants of stock options under the 1985 Plan are made to such executives and
other key employees to enable them to participate in the creation of stockholder
value in the Company as well as to permit the accumulation of an equity interest
in the Company, thereby aligning the interests of executives with those of
stockholders. Options granted under the 1985 Plan generally vest at the rate of
25% per year and the term of each option is ten years. Individual grants under
the 1985 Plan are determined based upon the level of position held, individual
contribution to the achievement of the Company's financial goals and such other
performance factors as management and the Committee may consider. In March,
1993, the Committee approved a stock option grant to Mr. Socol of 60,000 shares
at an exercise price of $21.75. This grant was intended to reflect competitive
levels of long-term incentive opportunity for the Chief Executive Officer
position as identified in the 1993 post-merger market review and to place more
8
<PAGE> 11
emphasis on stock-based compensation in Mr. Socol's total compensation package.
Similar factors were applied by the Committee in making stock option grants to
the other executive officers during fiscal year 1994.
The Company's 1985 Plan will terminate, according to its terms, in June,
1995. Accordingly, on March 29, 1994, the Compensation Committee and the Board
of Directors voted to adopt the 1994 Equity Incentive Plan (the "Equity
Incentive Plan"), which, if approved by stockholders, will provide for the
issuance of stock options, restricted stock grants, unrestricted stock grants
and performance share awards to executives and other key employees of the
Company. The Equity Incentive Plan will provide more flexibility in the award of
equity based compensation through a combination of incentive vehicles authorized
under the Plan and will further the Committee's objective of aligning executive
officer compensation closely with long-term stockholder interests.
Compliance with Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code (the "Code"), which became
effective on January 1, 1994, will generally limit the Company's ability to
deduct compensation expense in excess of $1 million paid to the Company's Chief
Executive Officer or other executive officers named in the Summary Compensation
Table contained in this proxy statement. The Committee is currently evaluating
the impact that section 162(m) of the Code will have upon the Company's ability
to deduct compensation for Federal income tax purposes, with the goal of
establishing a final policy with respect thereto. Generally, the Committee
expects to attempt to structure compensation payments to executive officers so
as to be deductible under section 162(m). In the event, however, that the
Committee determines that so structuring a compensation payment would not be in
the best interests of the Company, the Committee would adjust its compensation
policies and payments to provide incentives to the executive officers to achieve
the performance measures or goals that the Committee believes to be in the best
interests of the Company.
COMPENSATION COMMITTEE
Stanley Simon, Chairman
J. Christopher Clifford
Ervin D. Cruce
David Pulver
9
<PAGE> 12
<TABLE>
EXECUTIVE COMPENSATION
The following table discloses compensation received by the Company's Chief
Executive Officer and the four most highly compensated executive officers for
the fiscal years ended January 29, 1994, January 30, 1993 and February 1, 1992.
SUMMARY COMPENSATION TABLE
<CAPTION>
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(3) OPTIONS COMPENSATION ($)(3)
- ----------------------------- ---- ---------- --------- ------------------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Jerry M. Socol............... 1994 420,673 168,683(1) 93,110(4) 60,000 3,538(5)
President, Chief Executive 1993 391,348 233,817(1) 48,797(4) 15,000 5,149(5)
Officer and Director 1992 340,264 -0- -0- 25,000 -0-
Sherman N. Baker............. 1994 350,000 92,610(1) -0- -0- -0-
Chairman of the Board 1993 350,000 212,192(1) -0- -0- -0-
1992 347,756 -0- -0- 50,000 -0-
Alan I. Weinstein............ 1994 280,000 56,840(1) -0- 30,000 3,538(5)
Senior Executive Vice 1993 229,244 90,392(1) -0- 7,500 5,149(5)
President, Chief Financial 1992 214,239 -0- -0- 16,000 -0-
Officer, Chief Administrative
Officer and Secretary
Larry I. Kelley.............. 1994 252,404 74,868(2) -0- 10,000 25,327(5)(6)
Executive Vice President, 1993 237,403 96,000(2) -0- 5,000 25,994(5)(6)
President of The Casual Male, 1992 117,900* 33,030(2) -0- 25,000 -0-
Inc.
Linda B. Kanner.............. 1994 262,558 37,530(1) -0- 20,000 -0-
Senior Executive Vice 1993 221,000 66,398(1) -0- 3,000 -0-
President, Director of Shoe 1992 156,402* -0- -0- 25,000 -0-
Merchandising and Operations
<FN>
- ---------------
* Amounts shown reflect partial year salaries for each of Ms. Kanner and Mr.
Kelley.
(1) Amounts shown reflect payments under the Company's Incentive Plan, and, with
respect to Messrs. Baker and Socol, additional compensation pursuant to the
terms of their employment agreements with the Company for fiscal 1993 only.
(2) Includes payment under the Company's Incentive Plan and guaranteed bonus
under employment agreement.
(3) In accordance with a release issued by the SEC, amounts of "Other Annual
Compensation" and "All Other Compensation" for 1992 are excluded from the
Summary Compensation Table.
(4) Amount shown reflects reimbursement for income taxes payable in connection
with the sale of shares acquired upon the exercise of certain stock
options.
(5) Amounts shown reflect contributions made by the Company under the 401(k)
Profit Sharing Plan based upon the officer's contributions.
(6) Amount shown reflects the reduction of $21,789 and $23,052, including
imputed interest, of the principal amount outstanding under a Note dated
June 3, 1991 in favor of The Casual Male, Inc., for fiscal 1994 and fiscal
1993, respectively.
</TABLE>
10
<PAGE> 13
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in the fiscal
year ended January 29, 1994 to the named executive officers.
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATE OF
OPTIONS STOCK PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(3) DATE 0% ($) 5% ($) 10% ($)
---- ---------- -------------- --------- ---------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Jerry M. Socol................... 60,000 13.9% $ 21.75 3/24/03 0 822,150 2,074,950
Sherman N. Baker................. 0 0 -- -- -- -- --
Linda B. Kanner.................. 20,000 4.6% $ 21.75 3/24/03 0 274,050 691,650
Larry I. Kelley.................. 10,000 2.3% $ 21.75 3/24/03 0 137,025 345,825
Alan I. Weinstein................ 30,000 6.9% $ 21.75 3/24/03 0 411,075 1,037,475
<FN>
- ---------------
(1) The options became exercisable as to 25% of the underlying shares on March
24, 1994 and will become exercisable as to 25% of the underlying shares on
each successive anniversary date thereof.
(2) The Company granted options representing 432,500 shares to employees in
fiscal 1994.
(3) The exercise price may be paid in cash or in shares of Common Stock valued
at fair market value on the date of exercise.
(4) The dollar amount under these columns are the result of calculations at 0%
and at the 5% and 10% rates set by the SEC and therefore are not intended
to forecast possible appreciation, if any, of the Company's stock price.
The Company did not use an alternative formula for grant date valuation, as
the Company is not aware of any formula which will determine with
reasonable accuracy a present value based on future unknown or volatile
factors. The determination of stock price appreciation hereunder is based
upon an Option Term of ten (10) years.
</TABLE>
<TABLE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUE
The following table provides information on option exercises in fiscal 1994
by the named executive officers and the value of such officers unexercised
options at January 29, 1994.
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerry M. Socol................. 0 0 41,250 77,500 317,109 107,968
Sherman N. Baker............... 15,000 170,625 35,000 0 387,188 0
Linda B. Kanner................ 6,000 82,000 5,250 34,750 45,797 128,078
Larry I. Kelley................ 3,000 38,250 10,750 26,250 93,765 134,297
Alan I. Weinstein.............. 10,000 156,250 9,875 38,625 52,603 67,993
<FN>
- ---------------
(1) Fiscal year ended January 29, 1994. The average of the high and low prices
of the Company's Common Stock on January 28, 1994, the last trading day
preceding the Company's fiscal year end, was $17.8125.
</TABLE>
11
<PAGE> 14
<TABLE>
RETIREMENT PLANS
The following table shows the annual benefits payable under the Company's
Retirement Plan and Supplemental Plan to persons in specified compensation and
years of service classifications, based on a straight life annuity form of
retirement income.
<CAPTION>
REPRESENTATIVE YEARS OF SERVICE
----------------------------------
AVERAGE OF HIGHEST FIVE
YEARS OF COMPENSATION 10 20 30 (MAXIMUM)
------------------------------------------- ------- ------- ------------
<S> <C> <C> <C>
$ 50,000................................... $ 5,420 $10,839 $ 16,259
100,000................................... 12,420 24,839 37,259
150,000................................... 19,420 38,839 58,259
200,000................................... 26,420 52,839 79,259
242,280*.................................. 30,295 60,590 90,885
250,000*.................................. 33,420 66,839 100,259
300,000*.................................. 40,420 80,839 121,259
350,000*.................................. 47,420 94,839 142,259
400,000*.................................. 54,420 108,839 163,259
450,000*.................................. 61,420 122,839 184,259
500,000*.................................. 68,420 136,839 205,259
<FN>
- ---------------
(*) The maximum compensation that may be used as of February 1, 1994 to
calculate benefits under the Retirement Plan and the Supplemental Plan is
$242,280.
</TABLE>
In December, 1993, the Board of Directors of the Company established a
Supplemental Retirement Plan (the "Supplemental Plan") to provide benefits
attributable to compensation in excess of $150,000, but less than $242,280. The
benefit provided by the Retirement Plan and the Supplemental Plan is equal to
(i) the sum of 0.75% of the executive's highest consecutive five-year average
annual compensation plus 0.65% of the excess of the executive's highest
consecutive five-year average annual compensation over the average of the Social
Security taxable wage bases, multiplied by (ii) the executive's years of
"benefit service" with the Company (not to exceed 30 years). Effective February
1, 1994, compensation for such purposes means all compensation reported on Form
W-2 up to a maximum of $242,280 for the calendar year ended December 31, 1993.
Annual benefits are payable under the Company's Retirement Plan for retirees at
age 65, prior to the offset, if any, for benefits accrued under the retirement
plan of the Company's predecessor and for Social Security benefits. As of
January 31, 1994, the number of years of "benefit service" for each of the
following individuals was as follows: Sherman N. Baker -- 30 years; Jerry M.
Socol -- 5 years; Linda B. Kanner -- 3 years; Larry I. Kelley -- 3 years; and
Alan I. Weinstein -- 25 years.
EMPLOYMENT ARRANGEMENTS
Mr. Baker is employed pursuant to an employment agreement dated March 25,
1993 which provides for an annual base salary of not less than $350,000 plus
incentive bonus compensation to which he may be entitled pursuant to the
Incentive Plan. The agreement contains certain non-competition restrictions upon
termination of employment and further provides that in the event Mr. Baker's
employment terminates due to his disability or death, the Company will pay him
or his estate an amount equal to his annual base salary for a period of one year
after termination of employment and any bonus amount payable with respect to
such fiscal year pro-rated through the date of termination of employment. The
agreement is effective through March 31, 1995.
Mr. Socol is employed pursuant to an employment agreement dated March 25,
1993 which provides for an annual base salary of not less than $425,000 plus
incentive bonus compensation to which he may be entitled pursuant to the
Incentive Plan. The agreement contains certain non-competition restrictions upon
termination
12
<PAGE> 15
of employment and further provides that in the event Mr. Socol's employment
terminates due to his disability or death, the Company will pay him or his
estate an amount equal to his annual base salary for a period of one year after
termination of employment and any bonus amount payable with respect to such
fiscal year pro-rated through the date of termination of employment. The
agreement is effective through March 31, 1995.
Ms. Kanner is employed pursuant to an agreement dated March 25, 1993 which
provides for an annual base salary of not less than $270,000 plus incentive
bonus compensation to which she may be entitled pursuant to the Incentive Plan.
The agreement contains certain non-competition restrictions upon termination of
employment and further provides that in the event Ms. Kanner's employment
terminates due to her disability or death, the Company will pay her or her
estate an amount equal to her annual base salary for a period of one year after
termination of employment and any bonus amount payable with respect to such
fiscal year pro-rated through the date of termination of employment. The
agreement is effective through March 31, 1995.
Mr. Kelley is employed pursuant to an agreement dated March 25, 1993 which
provides for an annual base salary of not less than $255,000 plus incentive
bonus compensation to which he may be entitled pursuant to the Incentive Plan.
The Agreement contains certain non-competition restrictions upon termination of
employment and further provides that in the event Mr. Kelley's employment
terminates due to disability or death, the Company will pay him or his estate an
amount equal to his annual base salary for a period of one year after
termination of employment and any bonus amount payable with respect to such
fiscal year pro-rated through the date of termination of employment. The
agreement is effective through March 31, 1995.
Mr. Weinstein is employed pursuant to an agreement dated March 25, 1993
which provides for an annual salary of not less than $290,000 plus incentive
bonus compensation to which he may be entitled pursuant to the Incentive Plan.
The agreement contains certain non-competition restrictions upon termination of
employment and further provides that in the event Mr. Weinstein's employment
terminates due to disability or death, the Company will pay him or his estate an
amount equal to his annual base salary for a period of one year after
termination of employment, and any bonus amount payable with respect to such
fiscal year pro-rated through the date of termination of employment. The
agreement is effective through March 31, 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Stanley Simon (Chairman), J.
Christopher Clifford , Ervin D. Cruce and David Pulver. None of these
individuals is an executive officer and no "compensation committee interlocks"
existed during the last fiscal year. Mr. Clifford is a partner of Berkshire
Partners which receives one-half of the fees the Company pays Thomas H. Lee
Company ("THL"), under a Management Agreement dated as of July 10, 1985 (the
"Management Agreement"), between the Company and THL for consulting and
management services in the areas of financial and strategic corporate planning.
For the fiscal year ended January 29, 1994, the Company paid THL $120,000 for
services under the Management Agreement. The Company believes that the terms of
the Management Agreement are as favorable as could be obtained from an
unaffiliated entity.
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return (stock
price appreciation plus dividends) on the Company's Common Stock with the
cumulative total return of the NASDAQ Composite Index and a peer group (1) for
the five years ending January 29, 1994.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG J. BAKER, INC., THE NASDAQ COMPOSITE INDEX AND A PEER GROUP
<CAPTION>
Cumulative Total Return
--------------------------------------------------
1/89 1/90 1/91 1/92 1/93 1/94
<S> <C> <C> <C> <C> <C> <C>
J. Baker, Inc. 100 166 36 113 210 182
PEER GROUP 100 94 83 144 187 159
NASDAQ COMPOSITE 100 105 108 166 187 214
<FN>
* $100 INVESTED ON 01/28/89 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
(1) The peer group is comprised of the following companies: Burlington Coat
Factory Warehouse, Charming Shoppes, Inc., Consolidated Stores, Edison
Brothers Stores, House of Fabrics, Jamesway Corp., Petrie Stores Corp.,
Pier 1 Imports, Rose's Stores, Inc., Ross Stores Inc. and Strawbridge &
Clothier.
</TABLE>
14
<PAGE> 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and THL are parties to the Management Agreement. Mr. Lee is a
principal of THL and Mr. Clifford was formerly associated with THL. Both Mr. Lee
and Mr. Clifford are Directors and stockholders of the Company. The Management
Agreement provides for an initial term of one year with automatic extensions
unless otherwise terminated by either party. Pursuant to the Management
Agreement, THL provides consulting and management services to the Company in the
areas of financial and strategic corporate planning. In exchange for such
services, the Company has agreed to pay THL a monthly fee of $10,000 plus
expenses, subject to change by mutual agreement for any extension of the
Management Agreement. For the fiscal year ended January 29, 1994, the Company
paid THL $120,000 for services under the Management Agreement, and the Company
expects to continue to engage the services of THL under the Management Agreement
for the contract year beginning July 10, 1994. The Company believes that the
terms of the Management Agreement are as favorable as could be obtained from an
unaffiliated entity.
During the Company's fiscal year ended January 29, 1994, Morse Shoe, Inc.
("Morse"), a subsidiary of the Company acquired on January 30, 1993 paid Hills
Department Store Company ("Hills") license fees pursuant to an agreement between
Morse and Hills for operation of licensed footwear departments in Hills
department stores. Mr. Lee is Chairman of the Board of Directors of Hills and an
owner of approximately 18% of the outstanding capital stock of Hills. The
Company believes that the terms of its license agreement with Hills are as
favorable as the terms of its agreements with other licensors.
On February 4, 1991, Hills filed a petition in bankruptcy under Chapter 11
of the United States Bankruptcy Code. On September 10, 1993, the Hills plan of
reorganization was confirmed by the United States Bankruptcy Court for the
Southern District of New York. Mr. Lee was Chairman of the Board of Directors of
Hills at the time of the filing of the Hills bankruptcy and upon the
confirmation of the Hills plan.
The Company pays Greenberg, Rosenblatt, Kull & Bitsoli, P.C. $60,000
annually for consulting and management services provided to the Company in the
areas of financial and strategic corporate planning. Mr. Rosenblatt is a
principal of such firm and a director and stockholder of the Company. The
Company believes that the terms of this arrangement are as favorable as could be
obtained from an unaffiliated entity.
As of June 3, 1991, The Casual Male, Inc. made an interest-free loan in the
amount of $75,000 to Larry I. Kelley in connection with his agreement to become
the President of The Casual Male, Inc. and an Executive Vice President of the
Company. Mr. Kelley executed a promissory note (the "Note") in connection with
this loan which Note provides for the reduction, by twenty five percent, of the
principal amount outstanding on each anniversary year of the Note so long as Mr.
Kelley remains employed by the Company. If Mr. Kelley is no longer employed by
the Company or by an affiliate of the Company prior to June 3, 1995, the
remaining principal balance of the Note will become immediately due and payable,
provided, however, that in the event of Mr. Kelley's death or disability, such
balance will be reduced by $18,750. As of April 1, 1994, there was $37,500
outstanding under the Note. On February 2, 1993 and April 30, 1993, the Company
made loans, each in the amount of $15,000 to Mr. Kelley, which loans bear
interest at the rate of 6% and 6 1/2%, respectively (the "Loans"). Since the
beginning of the Company's last fiscal year, the largest aggregate amount
outstanding under the Note and the Loans was $86,250. Mr. Kelley has repaid the
entire balance of the April Loan and as of April 1, 1994, there remained $15,000
outstanding on the February Loan.
15
<PAGE> 18
(PROPOSAL NUMBER 2)
PROPOSAL TO APPROVE 1994 EQUITY INCENTIVE PLAN
PROPOSAL
The Board of Directors has adopted the 1994 Equity Incentive Plan (the
"1994 Plan") for officers and other employees of the Company and its
subsidiaries, subject to the approval of the Plan by the stockholders.
The 1994 Plan is to be administered by the Compensation Committee (the
"Committee"). The Committee, at its discretion, may grant to officers and other
employees a variety of stock incentive awards based on the Common Stock of the
Company. Awards under the 1994 Plan may include stock options (both incentive
options and non-qualified options), grants of restricted stock, grants of
performance shares and unrestricted grants of stock.
Subject to adjustment for stock splits, stock dividends and similar events,
the total number of shares of Common Stock that can be issued under the 1994
Plan is 1,000,000 shares, of which no more than 150,000 shares will be available
for grants in the form of restricted stock, performance shares or unrestricted
stock. In order to satisfy the performance-based compensation exception to the
$1 million cap on the Company's tax deduction imposed by section 162(m) of the
Code, the Plan also provides that no more than 100,000 stock options may be
granted to any one individual in any calendar year. The shares issued by the
Company under the 1994 Plan may be authorized but unissued shares or shares
reacquired by the Company.
RECOMMENDATION
The Board of Directors believes that stock options and other stock-based
incentive awards can play an important role in the success of the Company by
encouraging and enabling the officers and other employees of the Company and its
subsidiaries upon whose judgment, initiative and efforts the Company largely
depends for the successful conduct of its business to acquire a proprietary
interest in the Company. The Board of Directors anticipates that providing such
persons with a direct stake in the Company will assure a closer identification
of the interests of participants in the 1994 Plan with those of the Company,
thereby stimulating their efforts on the Company's behalf and strengthening
their desire to remain with the Company. However, under the Company's 1985 Plan,
there are only approximately 53,000 remaining shares available for grant. The
shares available under the 1985 Plan may be utilized prior to any grants of
incentive stock options or non-qualified stock options, respectively, under the
1994 Plan.
The Board of Directors believes that the proposed 1994 Plan, which provides
for a greater range of stock-based incentive awards and permits greater
flexibility in the terms of such awards than the 1985 Plan, will help the
Company to achieve its goals by keeping the Company's incentive compensation
program dynamic and competitive with those of other companies. Accordingly, the
Board of Directors believes that the 1994 Plan is in the best interests of the
Company and its stockholders and recommends that the stockholders approve the
Plan. The 1994 Plan will not take effect unless it is approved by the
affirmative vote of the holders of at least a majority of the shares of the
Common Stock present or represented and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE 1994 PLAN BE APPROVED, AND
THEREFORE RECOMMENDS A VOTE FOR THIS PROPOSAL.
SUMMARY OF THE 1994 PLAN
The following description of certain features of the 1994 Plan is intended
to be a summary only. The summary is qualified in its entirety by the full text
of the 1994 Plan which is attached hereto as Exhibit A.
16
<PAGE> 19
Plan Administration; Eligibility. The 1994 Plan is to be administered by
the Compensation Committee of the Board of Directors of the Company. All members
of the Committee must be "disinterested persons" as that term is defined under
the rules promulgated by the Securities and Exchange Commission and "outside
directors" as defined in Section 162 of the Code and the regulations promulgated
thereunder.
The Committee has full power to select, from among the employees eligible
for awards, the individuals to whom awards will be granted, to make any
combination of awards to participants, and to determine the specific terms of
each award, subject to the provisions of the 1994 Plan. Persons eligible to
participate in the 1994 Plan will be those employees of the Company and its
subsidiaries who are responsible for or contribute to the management, growth or
profitability of the Company and its subsidiaries, as selected from time to time
by the Committee.
Stock Options. The 1994 Plan permits the granting of (i) options to
purchase Common Stock intended to qualify as incentive stock options ("Incentive
Options") under Section 422 of the Code and (ii) options that do not so qualify
("Non-Qualified Options"). The option exercise price of each option will be
determined by the Committee but may not be less than 100% of the fair market
value of the shares on the date of grant.
The term of each option will be fixed by the Committee and may not exceed
ten years from date of grant in the case of an Incentive Option. The Committee
will determine at what time or times each option may be exercised and, subject
to the provisions of the 1994 Plan, the period of time, if any, after
retirement, death, disability or termination of employment during which options
may be exercised. Options may be made exercisable in installments, and the
exercisability of options may be accelerated by the Committee.
Upon exercise of options, the option exercise price must be paid in full
either in cash or by certified or bank check or other instrument acceptable to
the Committee or, if the Committee so permits, by delivery of shares of Common
Stock already owned by the optionee. The exercise price may also be delivered to
the Company by a broker pursuant to irrevocable instructions to the broker from
the optionee.
To qualify as Incentive Options, options must meet additional Federal tax
requirements, including limits on the value of shares subject to Incentive
Options which first become exercisable in any one year, and a shorter term and
higher minimum exercise price in the case of certain large shareholders.
Restricted Stock. The Committee may also award shares of Common Stock to
officers and other employees subject to such conditions and restrictions as the
Committee may determine ("Restricted Stock"). These conditions and restrictions
may include the achievement of certain performance goals and/or continued
employment with the Company through a specified restricted period. The purchase
price, if any, of shares of Restricted Stock will be determined by the
Committee. If the performance goals and other restrictions are not attained, the
employees may forfeit their awards of Restricted Stock.
Unrestricted Stock. The Committee may also grant shares (at no cost or for
a purchase price determined by the Committee) which are free from any
restrictions under the 1994 Plan ("Unrestricted Stock"). Unrestricted Stock may
be issued to employees in recognition of past services or other valid
consideration, and may be issued in lieu of cash bonuses to be paid to such
employees.
Performance Share Awards. The Committee may also grant performance share
awards to employees entitling the recipient to receive shares of Common Stock
upon the achievement of individual or Company performance goals and such other
conditions as the Committee shall determine ("Performance Share Awards"). Except
as otherwise determined by the Committee, rights under a Performance Share Award
not yet earned will terminate upon a participant's termination of employment.
Adjustments for Stock Dividends, Mergers, Etc. The Committee will make
appropriate adjustments in outstanding awards to reflect stock dividends, stock
splits and similar events. In the event of a merger,
17
<PAGE> 20
liquidation, sale of the Company or similar event, the Committee, in its
discretion, may provide for substitution or adjustments of outstanding options,
or may terminate all unexercised options with or without payment of cash
consideration.
Amendments and Termination. The Board of Directors may at any time amend
or discontinue the 1994 Plan, and the Committee may at any time amend or cancel
outstanding awards for the purpose of satisfying changes in the law or for any
other lawful purpose. However, no such action may be taken which adversely
affects any rights under outstanding awards without the holder's consent.
Further, Plan amendments shall be subject to approval by the Company's
shareholders if and to the extent required by the Securities Exchange Act of
1934, as amended, to ensure that awards granted under the Plan are exempt under
Rule 16b-3 promulgated under the Exchange Act.
Change of Control Provisions. The Plan provides that in the event of a
"Change of Control" (as defined in the 1994 Plan) of the Company, all stock
options shall automatically become fully exercisable. In addition, at any time
prior to or after a Change of Control, the Committee may accelerate awards and
waive conditions and restrictions on any awards to the extent it may determine
appropriate.
EFFECTIVE DATE OF 1994 PLAN
The 1994 Plan will become effective upon approval by the holders of at
least a majority of the shares of Common Stock present or represented and
entitled to vote at the Annual Meeting. Awards of Incentive Options may be
granted under the 1994 Plan until March 29, 2004.
TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
The following is a summary of the principal Federal income tax consequences
of option grants under the 1994 Plan. It does not describe all Federal tax
consequences under the 1994 Plan, nor does it describe state or local tax
consequences.
INCENTIVE OPTIONS
Under the Code, an employee will not realize taxable income by reason of
the grant or the exercise of an Incentive Option. If an employee exercises an
Incentive Option and does not dispose of the shares until the later of (a) two
years from the date the option was granted or (b) one year from the date the
shares were transferred to the employee, the entire gain, if any, realized upon
disposition of such shares will be taxable to the employee as long-term capital
gain, and the Company will not be entitled to any deduction. If an employee
disposes of the shares within such one-year or two-year period in a manner so as
to violate the holding period requirements (a "disqualifying disposition"), the
employee generally will realize ordinary income in the year of disposition, and,
provided the Company complies with applicable withholding requirements, the
Company will receive a corresponding deduction, in an amount equal to the excess
of (1) the lesser of (x) the amount, if any, realized on the disposition and (y)
the fair market value of the shares on the date the option was exercised over
(2) the option price. Any additional gain realized on the disposition will be
long-term or short-term capital gain and any loss will be long-term or
short-term capital loss. The employee will be considered to have disposed of his
shares if he sells, exchanges, makes a gift of or transfers legal title to the
shares (except by pledge or by transfer on death). If the disposition of shares
is by gift and violates the holding period requirements, the amount of the
employee's ordinary income (and the Company's deduction) is equal to the fair
market value of the shares on the date of exercise less the option price. If the
disposition is by sale or exchange, the employee's tax basis will equal the
amount paid for the shares plus any ordinary income realized as a result of the
disqualifying distribution. The exercise of an Incentive Option may subject the
employee to the alternative minimum tax.
An employee who surrenders shares of Common Stock in payment of the
exercise price of his Incentive Option generally will not, under proposed
Treasury Regulations, recognize any gain or loss upon the surrender of such
shares. The surrender of shares of Common Stock previously acquired upon
exercise of an Incentive
18
<PAGE> 21
Option in payment of the exercise price of another Incentive Option is, however,
a "disposition" of such shares of common stock. If the Incentive Option holding
period requirements described above have not been satisfied with respect to such
shares of common stock, such disposition will be a disqualifying disposition
that may cause the employee to recognize ordinary income as discussed above.
Under proposed Treasury Regulations, all of the shares of Common Stock
received by an employee upon exercise of an Incentive Option by surrendering
shares of common stock will be subject to the Incentive Option holding period
requirements. Of those shares, a number of shares (the "Exchange Shares") equal
to the number of shares of Common Stock surrendered by the employee will have
the same tax basis for capital gains purposes (increased by any ordinary income
recognized as a result of any disqualifying disposition of the surrendered
shares if they were Incentive Option shares) and the same capital gains holding
period as the shares surrendered. For purposes of determining ordinary income
upon a subsequent disqualifying disposition of the Exchange Shares, the amount
paid for such shares will be deemed to be the fair market value of the shares
surrendered. The balance of the shares received by the employee will have a tax
basis (and a deemed purchase price) of zero and a capital gains holding period
beginning on the date of exercise. The Incentive Option holding period for all
shares will be the same as if the option had been exercised for cash.
An Incentive Option that is exercised by an employee more than three months
after an employee's employment terminates will be treated as a Non-Qualified
Option for federal income tax purposes. In the case of an employee who is
disabled, the three-month period is extended to one year and in the case of an
employee who dies, the three-month employment rule does not apply.
NON-QUALIFIED OPTIONS
There are no federal income tax consequences to either the employee, or the
Company on the grant of a Non-Qualified Option. On the exercise of a
Non-Qualified Option, the employee (except as described below) has taxable
ordinary income equal to the excess of the fair market value of the Common Stock
received on the exercise date over the option price of the shares. The
employee's tax basis for the shares acquired upon exercise of a Non-Qualified
Option is increased by the amount of such taxable income. The Company will be
entitled to a federal income tax deduction in an amount equal to such excess,
provided the Company complies with applicable withholding rules. Upon the sale
of the shares acquired by exercise of a Non-Qualified Option, employees will
realize long-term or short-term capital gain or loss depending upon their
holding period for such shares.
Section 83 of the Code and the regulations thereunder provide that, the
date for reporting and determining the amount of ordinary income (and the
Company's equivalent deduction) upon exercise of a Non-Qualified Option and for
the commencement of the holding period of the shares thereby acquired by a
person who is subject to Section 16 of the Securities Exchange Act of 1934 will
be delayed until the date that is the earlier of (i) six months after the date
of the exercise and (ii) such time as the shares received upon exercise could be
sold at a gain without the person being subject to such potential liability.
An employee who surrenders shares of Common Stock in payment of the
exercise price of a Non-Qualified Option will not recognize gain or loss on the
surrender of such shares. (Such an employee will recognize ordinary income on
the exercise of the Non-Qualified Option as described above.) Of the shares
received in such an exchange, that number of shares equal to the number of
shares surrendered will have the same tax basis and capital gains holding period
as the shares surrendered. The balance of the shares received will have a tax
basis equal to their fair market value on the date of exercise, and the capital
gains holding period will begin on the date of exercise.
PARACHUTE PAYMENTS
The exercise of any portion of any option that is accelerated due to the
occurrence of a change of control may cause a portion of the payments with
respect to such accelerated options to be treated as "parachute
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payments" as defined in the Code. Any such parachute payments may be
non-deductible to the Company, in whole or in part, and may subject the
recipient to a non-deductible 20% federal excise tax on all or portion of such
payment (in addition to other taxes ordinarily payable).
(PROPOSAL NUMBER 3)
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick, independent public
accountants, to audit the books, records and accounts of the Company for the
fiscal year ending January 28, 1995. In accordance with a vote of the Board of
Directors, this selection is being presented to the stockholders for
ratification at this meeting.
The firm of KPMG Peat Marwick has audited the books of the Company and its
predecessor for more than twenty years. KPMG Peat Marwick has no direct or
indirect material financial interest in the Company. A representative of KPMG
Peat Marwick is expected to be present at the meeting and will be given the
opportunity to make a statement, if he so desires. The representative also will
be available to respond to questions raised by those in attendance at the
meeting.
The affirmative vote of a majority of the outstanding shares of the
Company's Common Stock present or represented at the Annual Meeting is required
to approve the proposal. Ratification by the stockholders is not required. If
the proposal is not approved by the stockholders, the Board of Directors does
not plan to change the appointment for fiscal 1995, but will consider the
stockholder vote in appointing auditors for fiscal 1996.
------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
SELECTION OF THE INDEPENDENT PUBLIC ACCOUNTANTS.
------------------------
OTHER MATTERS
The management of the Company knows of no matter not specifically referred
to above as to which any action is expected to be taken at the meeting. It is
intended, however, that the persons named as proxies will vote the proxies in
regard to such other matters and the transaction of such other business as may
properly be brought before the meeting, as seems to them to be in the best
interest of the Company and its stockholders.
STOCKHOLDER PROPOSALS
In accordance with the rules established by the SEC for a proposal of a
stockholder to be included in the Board of Directors' Proxy Statement for the
Company's 1995 Annual Meeting, the proposal must be received at the principal
executive offices of the Company on or before January 4, 1995. Such a proposal
must also comply with the requirements as to form and substance established by
the SEC in order to be included in the Proxy Statement.
In addition, the Company's By-Laws provide that any stockholder of record
wishing to nominate a director or have a stockholder proposal considered at an
annual meeting must provide written notice of such nomination or proposal and
appropriate supporting documentation, as set forth in the By-Laws, to the
Company at its principal executive offices not less than 75 days nor more than
180 days prior to the anniversary date of the prior year's annual meeting or
special meeting in lieu thereof (the "Anniversary Date"); provided, however,
that in the event that the annual meeting is called for a date more than seven
calendar days prior to the Anniversary Date, stockholders may, under certain
circumstances set forth in the Company's By-Laws, have additional time to
deliver their stockholder notice.
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EXHIBIT A
J. BAKER, INC.
1994 EQUITY INCENTIVE PLAN
SECTION 1. General Purpose of the Plan; Definitions
The name of the plan is the J. Baker, Inc. 1994 Equity Incentive Plan (the
"Plan"). The purpose of the Plan is to encourage and enable the officers and
other key employees of J. Baker, Inc. (the "Company") and its Subsidiaries upon
whose judgment, initiative and efforts the Company largely depends for the
successful conduct of its business to acquire a proprietary interest in the
Company. It is anticipated that providing such persons with a direct stake in
the Company's welfare will assure a closer identification of their interests
with those of the Company, thereby stimulating their efforts on the Company's
behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category
of grant under the Plan, shall include Incentive Stock Options,
Non-Qualified Stock Options, Restricted Stock Awards, Unrestricted Stock
Awards and Performance Share Awards.
"Board" means the Board of Directors of the Company.
"Cause" means the occurrence of one or more of the following: (i)
employee is convicted of, pleads guilty to, or confesses to any felony or
any act of fraud, misappropriation or embezzlement which has an immediate
and materially adverse effect on the Company or any Subsidiary, as
determined by the Board in good faith in its sole discretion, (ii) employee
engages in a fraudulent act to the material damage or prejudice of the
Company or any Subsidiary or in conduct or activities materially damaging
to the property, business or reputation of the Company or any Subsidiary,
all as determined by the Board in good faith in its sole discretion, (iii)
any material act or omission by employee involving malfeasance or
negligence in the performance of employee's duties to the Company or any
Subsidiary to the material detriment of the Company or any Subsidiary, as
determined by the Board in good faith in its sole discretion, which has not
been corrected by employee within 30 days after written notice from the
Company of any such act or omission, (iv) failure by employee to comply in
any material respect with the terms of his employment agreement, if any, or
any written policies or directives of the Board as determined by the Board
in good faith in its sole discretion, which has not been corrected by
employee within 30 days after written notice from the Company of such
failure, or (v) material breach by employee of his noncompetition agreement
with the Company, if any, as determined by the Board in good faith in its
sole discretion.
"Change of Control" is defined in Section 13.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" means the Committee of the Board referred to in Section 2.
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"Disability" means an employee's inability to perform his normal
required services for the Company and its Subsidiaries for a period of six
consecutive months by reason of the employee's mental or physical
disability, as determined by the Committee in good faith in its sole
discretion.
"Disinterested Person" means a member of the Board who qualifies as
such under Rule 16b-3(c)(2)(i) promulgated under the Act, or any successor
definition under said Rule.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 15.
"Fair Market Value" on any given date means the closing price per
share of Stock on the NASDAQ National Market Systems, or the principal
exchange on which the Stock is traded, on such date (or if no such price is
reported on such date, such price as reported on the nearest preceding date
on which such price is reported).
"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the
Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase shares of
Stock granted pursuant to Section 5.
"Outside Director" means a member of the Board who qualifies as such
under Section 162(m) of the Code and the regulations promulgated
thereunder.
"Performance Share Award" means Awards granted pursuant to Section 8.
"Restricted Stock Award" means Awards granted pursuant to Section 6.
"Retirement" means the employee's termination of employment with the
Company and its Subsidiaries after attainment of the age and/or service
requirements to qualify for early or normal retirement under the Company's
qualified retirement plan.
"Stock" means the Common Stock, par value $0.50 per share, of the
Company, subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning
with the Company if each of the corporations or entities (other than the
last corporation or entity in the unbroken chain) owns stock or other
interests possessing 50% or more of the economic interest or the total
combined voting power of all classes of stock or other interests in one of
the other corporations or entities in the chain.
"Unrestricted Stock Award" means Awards granted pursuant to Section 7.
SECTION 2. Administration of Plan; Committee Authority to Select Participants
and Determine Awards
(a) Committee. The Plan shall be administered by two or more Outside
Directors appointed from time to time to serve as the Compensation Committee of
the Board. Each member of the Committee shall also be a Disinterested Person. No
member of the Board shall be liable for any action or determination under the
Plan made in good faith.
(b) Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
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(i) to select the officers and other employees of the Company and its
Subsidiaries to whom Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Restricted Stock
Awards, Unrestricted Stock Awards and Performance Share Awards, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award,
which terms and conditions may differ among individual Awards and
participants, and to approve the form of written instruments evidencing the
Awards;
(v) to accelerate the exercisability or vesting of all or any portion
of any Award, with or without conditions;
(vi) subject to the provisions of Section 5(a)(ii), to extend the
period in which Stock Options may be exercised;
(vii) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts constituting interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and practices
for administration of the Plan and for its own acts and proceedings as it
shall deem advisable; to interpret the terms and provisions of the Plan and
any Award (including related written instruments); to make all
determinations it deems advisable for the administration of the Plan; to
decide all disputes arising in connection with the Plan; and to otherwise
supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
SECTION 3. Stock Issuable Under the Plan; Recapitalizations; Mergers; Substitute
Awards
(a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 1,000,000 shares, of which no
more than 150,000 shares shall be available for issuance in the form of
Restricted Stock Awards, Unrestricted Stock Awards or Performance Share Awards,
counted cumulatively, during the term of the Plan. For purposes of the foregoing
limitations, the shares of Stock underlying any Awards which are forfeited,
cancelled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) shall be added back to the shares
of Stock available for issuance under the Plan so long as the participants to
whom such Awards had been previously granted received no benefits of ownership
of the underlying shares of Stock to which the Award related. No more than
100,000 Stock Options may be granted to any one individual participant during
any calendar year period. The shares available for issuance under the Plan may
be authorized but unissued shares of Stock or shares of Stock reacquired by the
Company.
(b) Recapitalizations. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company, or additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, the
Committee shall make an appropriate or proportionate
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adjustment in (i) the maximum number and kind of shares reserved for issuance
under the Plan and in the form of Restricted Stock Awards, Unrestricted Stock
Awards or Performance Share Awards, (ii) the maximum number of Stock Options
that can be granted to any one individual participant; (iii) the number and kind
of shares or other securities subject to any then outstanding Awards under the
Plan, and (iv) the price for each share subject to any then outstanding Stock
Options under the Plan, without changing the aggregate exercise price as to
which such Stock Options remain exercisable. The adjustment by the Committee
shall be final, binding and conclusive. No fractional shares of Stock shall be
issued under the Plan resulting from any such adjustment, but the Committee in
its discretion may make a cash payment in lieu of fractional shares.
(c) Mergers. In the event a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board, or the board of directors of any corporation assuming the obligations
of the Company, may, in its discretion, take any one or more of the following
actions, as to outstanding Stock Options: (i) provide that such Stock Options
shall be assumed, or equivalent options shall be substituted, by the acquiring
or succeeding corporation (or an affiliate thereof), (ii) upon written notice to
the optionees, provide that all unexercised Stock Options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice, and/or
(iii) in the event of a business combination under the terms of which holders of
the Stock of the Company will receive upon consummation thereof a cash payment
for each share surrendered in the business combination (the "Merger Price"),
make or provide for a cash payment to the optionees equal to the difference
between (A) the Merger Price times the number of shares of Stock subject to such
outstanding Stock Options (to the extent then exercisable at prices not in
excess of the Merger Price) and (B) the aggregate exercise price of all such
outstanding options in exchange for the termination of such options.
(d) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances.
SECTION 4. Eligibility
Participants in the Plan will be such full or part-time officers and other
employees of the Company and its Subsidiaries who are responsible for or
contribute to the management, growth or profitability of the Company and its
Subsidiaries and who are selected from time to time by the Committee, in its
sole discretion.
SECTION 5. Stock Options
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. To the extent that any Option does not qualify
as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after March 28,
2004.
(a) Stock Options Granted to Employees. The Committee in its discretion
may grant Stock Options to eligible employees of the Company or any Subsidiary.
Stock Options granted to employees pursuant to this
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Section 5(a) shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem desirable:
(i) Exercise Price. The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall not be less than
100% of the Fair Market Value on the date of grant. If an employee owns or
is deemed to own (by reason of the attribution rules applicable under
Section 424(d) of the Code) more than 10% of the combined voting power of
all classes of stock of the Company or any Subsidiary or parent corporation
and an Incentive Stock Option is granted to such employee, the option price
of such Incentive Stock Option shall be not less than 110% of the Fair
Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date. The Committee may at any time accelerate the exercisability of all or
any portion of any Stock Option. An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option
and not as to unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been held by the
optionee for at least six months, if permitted by the Committee in its
discretion. Such surrendered shares shall be valued at Fair Market Value
on the exercise date; or
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Committee shall
prescribe as a condition of such payment procedure.
Payment instruments will be received subject to collection. The delivery of
certificates representing the shares of Stock to be purchased pursuant to
the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws.
(v) Non-transferability of Options. Except as otherwise permitted by
the Committee, no Stock Option shall be transferable by the optionee
otherwise than by will or by the laws of descent and distribution and all
Stock Options shall be exercisable, during the optionee's lifetime, only by
the optionee.
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(vi) Termination by Reason of Death. Any Stock Option held by an
optionee whose employment by the Company and its Subsidiaries is terminated
by reason of death shall become fully exercisable and may thereafter be
exercised by the legal representative or legatee of the optionee, for a
period of twelve months (or such longer period as the Committee shall
specify at any time) from the date of death, or until the expiration of the
stated term of the Option, if earlier.
(vii) Termination by Reason of Disability.
(A) Any Stock Option held by an optionee whose employment by the
Company and its Subsidiaries is terminated by reason of Disability shall
become fully exercisable and may thereafter be exercised, for a period
of twelve months (or such longer period as the Committee shall specify
at any time) from the date of such termination of employment, or until
the expiration of the stated term of the Option, if earlier.
(B) The Committee shall have sole authority and discretion to
determine whether a participant's employment has been terminated by
reason of Disability.
(C) Except as otherwise provided by the Committee at the time of
grant, the death of an optionee during the period provided in this
Section 5(a)(vii) for the exercise of a Stock Option shall extend such
period for twelve months from the date of death, subject to termination
on the expiration of the stated term of the Option, if earlier.
(viii) Termination by Reason of Retirement.
(A) Any Stock Option held by an optionee whose employment by the
Company and its Subsidiaries is terminated by reason of Retirement may
thereafter be exercised, to the extent it was exercisable at the time of
such termination, for a period of twenty-four months (or such other
period as the Committee shall specify at any time) from the date of such
termination of employment, or until the expiration of the stated term of
the Option, if earlier.
(B) Except as otherwise provided by the Committee at the time of
grant, the death of an optionee during a period provided in this Section
5(a)(viii) for the exercise of a Stock Option shall extend such period
for twelve months from the date of death, subject to termination on the
expiration of the stated term of the Option, if earlier.
(ix) Termination for Cause. If any optionee's employment by the
Company and its Subsidiaries is terminated for Cause, any Stock Option held
by such optionee, including any Stock Option that is immediately
exercisable at the time of such termination, shall immediately terminate
and be of no further force and effect; provided, however, that the
Committee may, in its sole discretion, provide that such Stock Option can
be exercised for a period of up to 30 days from the date of termination of
employment or until the expiration of the stated term of the Option, if
earlier.
(x) Other Termination. Unless otherwise determined by the Committee,
if an optionee's employment by the Company and its Subsidiaries terminates
for any reason other than death, Disability, Retirement, or for Cause, any
Stock Option held by such optionee may thereafter be exercised, to the
extent it was exercisable on the date of termination of employment, for
three months (or such longer period as the Committee shall specify at any
time) from the date of termination of employment or until the expiration of
the stated term of the Option, if earlier.
(xi) Annual Limit on Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its Subsidiaries become
exercisable for the first time by an optionee
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during any calendar year shall not exceed $100,000. To the extent that any
Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
(xii) Form of Settlement. Shares of Stock issued upon exercise of a
Stock Option shall be free of all restrictions under the Plan, except as
otherwise provided in this Plan.
SECTION 6. Restricted Stock Awards
(a) Nature of Restricted Stock Awards. The Committee may grant Restricted
Stock Awards to any employee of the Company or any Subsidiary. A Restricted
Stock Award is an Award entitling the recipient to acquire, at no cost or for a
purchase price determined by the Committee, shares of Stock subject to such
restrictions and conditions as the Committee may determine at the time of grant
("Restricted Stock"). Conditions may be based on continuing employment and/or
achievement of pre-established performance goals and objectives.
(b) Acceptance of Award. A participant who is granted a Restricted Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within 30 days (or such shorter date as the
Committee may specify) following the award date by making payment to the
Company, if required, by certified or bank check or other instrument or form of
payment acceptable to the Committee in an amount equal to the specified purchase
price, if any, of the shares covered by the Award and by executing and
delivering to the Company a written instrument that sets forth the terms and
conditions of the Restricted Stock Award in such form as the Committee shall
determine.
(c) Rights as a Stockholder. Upon complying with Section 6(b) above, a
participant shall have the rights of a stockholder with respect to the voting of
the Restricted Stock, subject to such conditions contained in the written
instrument evidencing the Restricted Stock Award. Unless the Committee shall
otherwise determine, certificates evidencing the Restricted Stock shall remain
in the possession of the Company until such Restricted Stock is vested as
provided in Section 6(e) below.
(d) Restrictions. Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered or disposed of except as specifically provided
herein or in the written instrument evidencing the Restricted Stock Award. In
the event of termination of employment by the Company and its Subsidiaries for
any reason other than death or Disability, the Company shall have the right, at
the discretion of the Committee, to repurchase Restricted Stock with respect to
which conditions have not lapsed at their purchase price, or to require
forfeiture of such shares to the Company if acquired at no cost, from the
participant or the participant's legal representative. The Company must exercise
such right of repurchase or forfeiture not later than the 90th day following
such termination of employment (unless otherwise specified in the written
instrument evidencing the Restricted Stock Award).
(e) Vesting of Restricted Stock. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the shares
on which all restrictions have lapsed shall no longer be Restricted Stock and
shall be deemed "vested." A participant whose employment is terminated for
reason of death or Disability shall become fully vested in his Restricted Stock
on his termination date to the extent such vesting is otherwise contingent only
on continued service with the Company. Where vesting is contingent on attainment
of pre-established performance goals, the vesting of Restricted Stock in the
case of death or Disability shall remain dependent on the attainment of such
goals and shall be determined as of such date or dates specified by the
Committee.
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(f) Waiver, Deferral and Reinvestment of Dividends. The written instrument
evidencing the Restricted Stock Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.
SECTION 7. Unrestricted Stock Awards
The Committee may, in its sole discretion, grant (or sell at a purchase
price determined by the Committee) an Unrestricted Stock Award to any employee
of the Company or any Subsidiary pursuant to which such employee may receive
shares of Stock free of any restrictions under the Plan in lieu of any cash
compensation to such employee.
SECTION 8. Performance Share Awards
(a) Nature of Performance Share Awards. A Performance Share Award is an
award entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. Performance Share Awards may be granted under the Plan to any employees of
the Company or any Subsidiary, including those who qualify for awards under
other performance plans of the Company. The Committee in its sole discretion
shall determine whether and to whom Performance Share Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Shares; provided, however, that the
Committee may rely on the performance goals and other standards applicable to
other performance unit plans of the Company in setting the standards for
Performance Share Awards under the Plan.
(b) Restrictions on Transfer. Performance Share Awards and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
(c) Rights as a Shareholder. A participant receiving a Performance Share
Award shall have the rights of a shareholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the written instrument evidencing the Performance Share Award (or
in a performance plan adopted by the Committee).
(d) Termination. Except as may otherwise be provided by the Committee at
any time prior to termination of employment, a participant's rights in all
Performance Share Awards shall automatically terminate upon the participant's
termination of employment by the Company and its Subsidiaries for any reason.
(e) Acceleration, Waiver, Etc. At any time prior to the participant's
termination of employment by the Company and its Subsidiaries, the Committee may
in its sole discretion accelerate, waive or, subject to Section 11, amend any or
all of the goals, restrictions or conditions imposed under any Performance Share
Award.
SECTION 9. Tax Withholding
(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be
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withheld with respect to such income. The Company and its Subsidiaries shall, to
the extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(b) Payment in Stock. A participant may elect to have such tax withholding
obligation satisfied, in whole or in part, by (i) authorizing the Company to
withhold from shares of Stock to be issued pursuant to any Award a number of
shares with an aggregate Fair Market Value (as of the date the withholding is
effected) that would satisfy the withholding amount due, or (ii) transferring to
the Company shares of Stock owned by the participant with an aggregate Fair
Market Value (as of the date the withholding is effected) that would satisfy the
withholding amount due. With respect to any participant who is subject to
Section 16 of the Act, the following additional restrictions shall apply:
(A) the election to satisfy tax withholding obligations relating to an
Award in the manner permitted by this Section 9(b) shall be made either (1)
during the period beginning on the third business day following the date of
release of quarterly or annual summary statements of sales and earnings of
the Company and ending on the twelfth business day following such date, or
(2) at least six months prior to the date as of which the receipt of such
an Award first becomes a taxable event for Federal income tax purposes;
(B) such election shall be irrevocable;
(C) such election shall be subject to the consent or disapproval of
the Committee; and
(D) the Stock withheld to satisfy tax withholding must pertain to an
Award which has been held by the participant for at least six months from
the date of grant of the Award.
SECTION 10. Transfer, Leave of Absence, Etc.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing.
SECTION 11. Amendments and Termination
The Board may, at any time, amend or discontinue the Plan and the Committee
may, at any time, amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Award if it were then initially granted
under this Plan) for the purpose of satisfying changes in law or for any other
lawful purpose, but no such action shall adversely affect rights under any
outstanding Award without the holder's consent. If and to the extent required by
the Act to ensure that Awards granted under the Plan are exempt under Rule 16b-3
promulgated under the Act, Plan amendments shall be subject to approval by the
Company's stockholders.
SECTION 12. Status of Plan
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with
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any Award or Awards. In its sole discretion, the Committee may authorize the
creation of trusts or other arrangements to meet the Company's obligations to
deliver Stock or make payments with respect to Awards hereunder, provided that
the existence of such trusts or other arrangements is consistent with the
foregoing sentence.
SECTION 13. Change of Control Provisions
Upon the occurrence of a Change of Control as defined in this Section 13:
(a) Each outstanding Stock Option shall automatically become fully
exercisable notwithstanding any provision to the contrary herein.
(b) Each Restricted Stock Award and Performance Share Award shall be
subject to such terms, if any, with respect to a Change of Control as have
been provided by the Committee in connection with such Award.
(c) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person," as such term is used in Sections 13(d) and 14(d)
of the Act (other than the Company, any of its Subsidiaries, or any
trustee, fiduciary or other person or entity holding securities under
any employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 30% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Company's Board of Directors ("Voting Securities") or
(B) the then outstanding shares of Stock of the Company (in either such
case other than as a result of acquisition of securities directly from
the Company); or
(ii) persons who, as of the Effective Date, constitute the
Company's Board of Directors (the "Incumbent Directors") cease for any
reason, including, without limitation, as a result of a tender offer,
proxy contest, merger or similar transaction, to constitute at least a
majority of the Board, provided that any person becoming a director of
the Company subsequent to the Effective Date whose election or
nomination for election was approved by a vote of at least a majority of
the Incumbent Directors shall, for purposes of this Plan, be considered
an Incumbent Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
shareholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 80% or more
of the voting shares of the corporation issuing cash or securities in
the consolidation or merger (or of its ultimate parent corporation, if
any), (B) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any
party as a single plan) of all or substantially all of the assets of the
Company or (C) any plan or proposal for the liquidation or dissolution
of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be
deemed to have occurred for purposes of the foregoing clause (i) solely as
the result of an acquisition of securities by the Company which, by
reducing the number of shares of Stock or other Voting Securities
outstanding, increases (x) the proportionate number of shares of Stock
beneficially owned by any person to 30% or more of the shares of Stock then
outstanding or (y) the proportionate voting power represented by the Voting
Securities beneficially owned by any person to 30% or more of the combined
voting power of all then
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outstanding Voting Securities; provided, however, that if any person
referred to in clause (x) or (y) of this sentence shall thereafter become
the beneficial owner of any additional shares of Stock or other Voting
Securities (other than pursuant to a stock split, stock dividend, or
similar transaction), then a "Change of Control" shall be deemed to have
occurred for purposes of the foregoing clause (i).
SECTION 14. General Provisions
(a) No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.
(b) Delivery of Stock Certificates. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
SECTION 15. Effective Date of Plan
This Plan shall become effective upon approval by the holders of a majority
of the shares of Stock of the Company present or represented and entitled to
vote at a meeting of stockholders. Subject to such approval by the stockholders
and to the requirement that no Stock may be issued hereunder prior to such
approval, Stock Options and other Awards may be granted hereunder on and after
adoption of this Plan by the Board.
SECTION 16. Governing Law
This Plan shall be governed by the law of the Commonwealth of Massachusetts
except to the extent such law is preempted by federal law.
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PROXY J. BAKER, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jerry M. Socol and J. Christopher Clifford,
and each of them individually, attorneys with full power of substitution in each
for and in the name of the undersigned, with all powers the undersigned would
possess if personally present, to vote all shares of the Common Stock of J.
Baker, Inc. (the "Company") held of record by the undersigned on April 20, 1994
at the Annual Meeting of Stockholders to be held June 7, 1994 and any
adjournment or postponement thereof.
1. PROPOSAL to elect
two Class II Directors:
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to
(except as marked to the vote for any nominee
contrary below) listed below
Thomas H. Lee Stanley Simon
(INSTRUCTION: To withhold authority to vote for one of the nominees, strike
a line through the nominee's name in the list above.)
2. PROPOSAL to consider and act upon a proposal to approve the 1994 Equity
Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL to ratify the selection of KPMG Peat Marwick as independent
auditors of the Company for the fiscal year ending January 28, 1995.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED ON REVERSE SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
PLEASE SIGN IN THE SAME FORM AS NAME Date: ..............................
APPEARS ON THIS CARD.
FIDUCIARIES AND CORPORATE OFFICERS Signature: .........................
SHOULD INDICATE THEIR TITLE.
Signature: .........................
