<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
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
J. Baker, Inc.
(Name of Registrant as Specified In Its Charter)
J. Baker, Inc.
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
J. BAKER, INC.
555 TURNPIKE STREET
CANTON, MASSACHUSETTS 02021
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1997
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 10, 1997, at 9:30 a.m., for the
following purposes:
1. To elect two Class II Directors to serve for a three-year term until the
2000 Annual Meeting and until their respective successors are elected
and qualified;
2. To ratify the selection of KPMG Peat Marwick LLP as independent auditors
for the fiscal year ending January 31, 1998; and
3. 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 18, 1997 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
MARK T. BEAUDOUIN
Clerk
Canton, Massachusetts
May 6, 1997
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 10, 1997
GENERAL INFORMATION
This proxy statement and the accompanying proxy card are being mailed to
stockholders commencing on or about May 6, 1997. 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 10, 1997, at 9:30 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. 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" proposal number 2 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 18, 1997 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 18, 1997, there were 13,893,160 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 and broker non-votes are not counted for purposes of
determining whether a proposal presented to stockholders has been approved.
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<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 1, 1997,
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 13 (the "Summary Compensation Table") and (iv) the current
Directors and executive officers as a group.
<TABLE>
<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 State of Wisconsin Investment Board 744,600(2) 5.4%
$.50 par P.O. Box 7842
value Madison, WI 53707
Merrill Lynch & Co., Inc. 2,064,513(3) 14.6%
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281
Dimensional Fund Advisors, Inc. 859,272(4) 6.2%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
FMR Corp. 1,806,520(5) 12.3%
82 Devonshire Street
Boston, MA 02109
Goldman Sachs & Co. 1,408,100(6) 10.1%
85 Broad Street
New York, NY 10004
First Pacific Advisors, Inc. 781,500(7) 5.6%
11400 West Olympic Boulevard
Suite 1200
Los Angeles, California 90064
Sherman N. Baker 345,415(8) 2.5%
J. Christopher Clifford 34,500(9) *
Ervin D. Cruce 32,500(10) *
Nancy Ryan 7,500(11) *
Douglas J. Kahn 7,500(11) *
David Pulver 39,693(12) *
Melvin M. Rosenblatt 29,000(13) *
Stanley Simon 35,000(10) *
Jerry M. Socol 156,607(14) 1.1%
David A. Levin 25,000(11) *
Larry I. Kelley 33,499(15) *
Alan I. Weinstein 110,266(16) *
Dennis B. Tishkoff 28,080(17) *
Current Directors and Executive Officers as a Group
(13 persons) 726,528(18) 5.1%
</TABLE>
- ---------------
* Less than 1%
(1) Unless otherwise noted each person has sole voting and investment power
with respect to such shares.
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<PAGE> 5
(2) Information based solely on Schedule 13G of State of Wisconsin Investment
Board dated January 21, 1997. The beneficial owner has reported that it has
sole voting and dispositive power with respect to all of such shares.
(3) Information based solely on Schedule 13G of Merrill Lynch & Co., Inc. filed
on behalf of itself and certain of its subsidiaries dated February 14,
1997. Such information indicates that shares are held by Merrill Lynch &
Co., Inc., Merrill Lynch Group, Inc. and Princeton Services, Inc. as parent
holding companies in accordance with Rule 13d-1(b)(ii)(G) of the Securities
Exchange Act of 1934, and by Merrill Lynch Asset Management, L.P. and Fund
Asset Management, L.P., as registered investment advisors, and Special
Value Fund, Inc., a registered investment company. The Schedule 13G
indicates that shares are held as follows: (i) 2,064,513 are held by
Merrill Lynch & Co., Inc., which includes 201,510 shares issuable upon
conversion of the Company's convertible subordinated debentures; (ii)
2,062,653 are held by Merrill Lynch Group, Inc. and Princeton Services,
Inc.; (iii) 994,153 are held by Merrill Lynch Asset Management, L.P. as a
result of acting as an investment advisor to one or more investment
companies and on behalf of client discretionary investment accounts; (iv)
1,068,500 are held by Fund Asset Management, L.P. as a result of acting as
an investment advisor to one or more investment companies and on behalf of
client discretionary investment accounts; and (v) 1,068,500 are held by
Merrill Lynch Special Value Fund, Inc. The information indicates that each
entity has shared voting and dispositive power with respect to such shares.
(4) Information based solely on Schedule 13-G of Dimensional Fund Advisors,
Inc. dated February 5, 1997. Beneficial owners have reported that all of
such shares are held in portfolios of DFA Investment Dimensions Group,
Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group Trust
and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional Fund Advisors, Inc. serves
as investment manager. Dimensional Fund Advisors, Inc. disclaims beneficial
ownership of all such shares. Beneficial owners have reported that they
have sole voting power with respect to 582,754 shares and sole dispositive
power with respect to 859,272 shares.
(5) Information based solely on Schedule 13G of FMR Corp., Edward C. Johnson,
III, Chairman of FMR Corp. and Abigail P. Johnson, Director of FMR Corp.
dated February 14, 1997. The beneficial owner has reported that it has sole
voting power with respect to 147,596 shares and sole dispositive power with
respect to 1,806,520 shares. According to such information, Mr. Johnson,
Abigail P. Johnson and various Johnson family members and trusts for the
benefit of Johnson family members, through their ownership of voting common
stock of FMR Corp. and the execution of a family shareholders' agreement,
may be deemed to form a controlling group with respect to FMR Corp. The
information indicates that Fidelity Management & Research Company
("Fidelity"), a wholly owned subsidiary of FMR Corp., is the beneficial
owner of 1,631,638 shares of the Company's Common Stock as a result of
acting as investment advisor to several registered investment companies
(the "Fidelity Funds"). Such shares include 816,738 shares of the Company's
common stock issuable upon the conversion of the Company's convertible
subordinated debentures. Each of Mr. Johnson and FMR Corp., through its
control of Fidelity and the Fidelity Funds have sole dispositive power over
such 1,631,638 shares. Neither Mr. Johnson nor FMR Corp. has sole or shared
voting power over such shares, as such power resides with the Board of
Trustees of the Fidelity Funds and is carried out by Fidelity under written
guidelines established by the Board of Trustees. In addition, such
information indicates that Fidelity Management Trust Company ("Fidelity
Trust"), a bank and a wholly owned subsidiary of FMR Corp., is the
beneficial owner of 174,882 shares of the Company's common stock as a
result of its serving as investment manager of certain institutional
accounts, all of which shares are issuable upon conversion of the Company's
convertible subordinated debentures. Mr. Johnson and FMR Corp., through its
control of Fidelity Trust, each has sole dispositive power over all such
shares, sole voting power over 147,596
3
<PAGE> 6
shares and no voting power with respect to 27,286 shares of the Company's
common stock owned by the institutional account as reported above.
(6) Information based solely on Schedule 13G of Goldman Sachs & Co., the
Goldman Sachs Group, L.P. and the Goldman Sachs Equity Portfolios, Inc., on
behalf of Goldman Sachs Small Cap Equity Fund, dated February 14, 1997.
Such information indicates that Goldman Sachs & Company and the Goldman
Sachs Group, L.P. share voting and dispositive power with respect to
1,408,100 shares and Goldman Sachs Equity Portfolios, Inc. on behalf of
Goldman Sachs Small Cap Equity Fund shares voting and dispositive power
with respect to 1,100,400 shares.
(7) Information based solely on Schedule 13G of First Pacific Advisors, Inc.
dated February 12, 1997. The beneficial owner has reported that it has
shared voting power with respect to 741,500 shares and shared dispositive
power with respect to 781,500 shares.
(8) Includes currently exercisable options with respect to 37,547 shares.
(9) 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 22,500 shares.
(10) Includes currently exercisable options with respect to 27,500 shares.
(11) Represents currently exercisable options.
(12) Includes currently exercisable options with respect to 12,500 shares.
(13) 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 25,000 shares.
(14) 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 87,357 shares.
(15) Includes currently exercisable options with respect to 32,249 shares and
1,250 shares subject to options which are exercisable within 60 days.
(16) Includes currently exercisable options with respect to 30,653 shares and
3,125 shares subject to options which are exercisable within 60 days.
(17) Includes 320 shares owned by Mr. Tishkoff's wife as to which Mr. Tishkoff
disclaims beneficial ownership and currently exercisable options with
respect to 8,750 shares.
(18) Includes currently exercisable options with respect to 259,298 shares and
6,375 shares subject to options which are exercisable within 60 days.
Includes 806 shares issuable upon the conversion of convertible
subordinated debentures.
(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 ten. The Board of Directors is divided
into three classes of approximately equal size. 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 1997 annual meeting will
continue until the annual meeting of stockholders to be held in 2000 and until
their respective successors are elected and qualified.
4
<PAGE> 7
The nominees for the two Class II Directors to be voted upon at the meeting
are Nancy Ryan and Douglas J. Kahn, current holders of Class II directorships.
Stanley Simon, a Director of the Company and its predecessor since 1965 will not
be standing for re-election. 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.
The following table sets forth information regarding Ms. Ryan and Mr. Kahn,
the Board of Directors' nominees for election as Directors, as well as
information regarding each Director whose term is not to expire until the 1998
or 1999 Annual Meeting of Stockholders.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL EMPLOYMENT AND DIRECTOR
NAME AGE PRIOR BUSINESS EXPERIENCE SINCE
- --------------------------------- ---- ------------------------------------------- --------
<S> <C> <C> <C>
(NOMINEES FOR CLASS II TERM TO EXPIRE IN 2000)
Nancy Ryan....................... 47 Since 1980 President of Pro Media, Inc., 1995
Prior to 1980, Vice President/Media
Director of S & N Advertising.
Douglas J. Kahn.................. 40 Since 1993 President and Chief Operating 1995
Officer of the Royal Home Fashions Division
of Croscill Home Fashions, Inc., Prior to
1993, Senior Vice President -- Merchant
Banking Group, Donaldson, Lufkin and
Jenrette Securities Corporation; Director
of Croscill, Inc.
(CONTINUING DIRECTORS -- CLASS III TERM TO EXPIRE IN 1998)
J. Christopher Clifford.......... 51 Since 1986, General Partner of Berkshire 1985
Partners and affiliated partnerships.
Alan I. Weinstein................ 54 President and Chief Executive Officer of 1996
the Company since November, 1996 and March,
1997 respectively; Acting President and
Chief Executive Officer since September,
1996; Joined the Company in 1968 and for
the past 27 years has held various senior
level management positions; most recently
served as Senior Executive Vice
President, Chief Financial Officer, Chief
Administrative Officer and Secretary
since September 1988. Director of the
Company since September 1996.
David Pulver..................... 55 President of Cornerstone Capital, Inc. 1993
Chairman of the Board of Directors of Morse
Shoe, Inc., 1992-January 1993. Chairman
of the Board and Co-Chief Executive
Officer of The Children's Place,
1968-1984. Director of Costco Wholesale
Corporation, a subsidiary of Costco
Companies, Inc., County Seat, Inc., and
Argyle Television, Inc. Trustee of Colby
College in Waterville, Maine.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRESENT PRINCIPAL EMPLOYMENT AND DIRECTOR
NAME AGE PRIOR BUSINESS EXPERIENCE SINCE
- --------------------------------- ---- ------------------------------------------- --------
<S> <C> <C> <C>
(CONTINUING DIRECTORS -- CLASS I TERM TO EXPIRE IN 1999)
Sherman N. Baker................. 77 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................... 65 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.
Melvin M. Rosenblatt............. 66 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.
Chairman of the Board of Trustees of
Clark University in Worcester,
Massachusetts. Director 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>
INFORMATION ABOUT BOARD OF DIRECTORS AND COMMITTEES
Directors who are not employees of the Company are eligible to participate
in the Company's 1992 Directors' Stock Option Plan (the "Directors' Plan") and,
if they are not 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. 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
1997, pursuant to the Directors' Plan, each of Messrs. Clifford, Cruce, Kahn,
Pulver, Rosenblatt, Simon and Ms. Ryan were granted an option to purchase 2,500
shares of the Company's Common Stock at a per share exercise price of $9.50, the
fair market value of the Company's Common Stock on the date of grant.
The Company's Board of Directors held eight meetings during fiscal 1997.
All of the Directors attended at least 75% of these meetings and any meetings of
any committees of which such Director was a member.
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 two times during fiscal 1997, 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
6
<PAGE> 9
effectiveness of internal accounting controls. The present members of the Audit
Committee are Messrs. Rosenblatt (Chairman), Cruce, Kahn, Pulver and Simon.
The Compensation Committee, which held four meetings during fiscal 1997,
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. Clifford (Chairman), Kahn, Rosenblatt, Simon, and Ms. Ryan.
The Executive Committee, which met nine times during fiscal 1997, 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 Weinstein.
The Nominating Committee, which met two times during fiscal 1997,
identifies, evaluates and nominates candidates for election to the Board. The
present members of this committee are Messrs. Pulver (Chairman), Cruce and Ms.
Ryan.
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.
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 five 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"), the 1994 Equity Incentive Plan
(the "1994 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 the 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.
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<PAGE> 10
Effective as of October 1, 1996, the Company's former President and Chief
Executive Officer, Mr. Socol, resigned. He was replaced by Mr. Weinstein, who
was named "Acting" President and Chief Executive Officer. In November, 1996, Mr.
Weinstein was named President of the Company and in March, 1997 he was named
Chief Executive Officer and all "acting" titles were removed. With respect to
the compensation arrangement for the Company's Chief Executive Officer, Mr.
Weinstein, the components of his total compensation program are base salary,
bonus opportunities under the Incentive Plan, grants of stock options and grants
of performance shares. The specific elements of Mr. Weinstein's compensation are
discussed in further detail below.
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 the Company's human resources department and its compensation
consultants. These ranges reflect median market practice for positions of
comparable responsibility and scope in the specialty retailing marketplace.
On an annual basis, each executive of the Company engages in a formal
system of assessment known as the Performance Management Review Process whereby
goals and objectives for each performance period are established 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 review of his or her performance is conducted by the evaluating
manager. The assessment of Mr. Weinstein's performance as Chief Executive
Officer is the responsibility of the Committee. The base salary determined for
Mr. Weinstein for fiscal year 1998 is $375,000. In setting Mr. Weinstein's base
salary, the Committee considered his performance in managing the disposition of
two of the Company's divisions and in managing the Company's overall financial
and operating results. The Committee also considered competitive salary ranges
for comparably sized companies, as well as the opportunities Mr. Weinstein has
been offered to enhance total compensation through the Incentive Plan and the
equity incentive arrangements implemented by the Committee.
Cash Incentive Compensation Plan
The Company's Incentive Plan represents an annual incentive opportunity
designed to reward certain key employees for the 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 income
from operations 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.
These goals are 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 a percentage of each position's target
goal, as determined by the Committee from year to year, and the maximum
guideline (which ties to superior profit results) represents 175% of the target
goal. Each executive's award opportunity is also allocated on a weighted basis
across the operating units for which the executive has responsibility, including
a portion allocated to corporate profit results. For Mr. Weinstein, the entire
award opportunity is based on consolidated corporate results. In addition to
these award funding guidelines, the Incentive Plan provides for an individual
8
<PAGE> 11
performance modifier that can adjust a participant's funded award by as much as
50% upward or downward to reflect all aspects of the participant's performance
for the fiscal year.
For fiscal year 1997, Mr. Weinstein did not receive an award under the
Incentive Plan since the Company did not achieve its corporate pre-tax operating
income goals.
1985 Stock Option Plan and 1994 Equity Incentive Plan
The Company's 1985 Plan terminated, according to its terms, in June, 1995.
Although stock option grants are still outstanding under this Plan, no future
grants can be made from the Plan. However, on June 7, 1994, the Stockholders of
the Company voted to adopt the 1994 Plan which allows for the issuance of
incentive and non-qualified stock options, restricted stock grants, unrestricted
stock grants and performance share awards to executives and other key employees
of the Company. The 1994 Plan provides increased flexibility in the award of
equity based compensation through a combination of the incentive vehicles
authorized under the Plan and furthers the Committee's objective of aligning
executive officer compensation closely with long term stockholder interests. As
with the 1985 Plan, the 1994 Plan is administered by the Committee, which 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.
Grants of incentive or non-qualified stock options are made to executives
and other key employees of the Company under the 1994 Plan. As referenced,
grants of stock options under the 1994 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 and the 1994 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 and the 1994 Plan have been and are 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.
The Committee may also award shares of Common Stock to officers and other
eligible employees under the 1994 Plan subject to such conditions and
restrictions as the Committee may determine ("Restricted Stock"). Such
conditions and restrictions may include the achievement of certain performance
goals and/or continued employment with the Company through specified periods of
time. The purchase price, if any, of shares of Restricted Stock will be
determined by the Committee and failure to achieve performance goals or other
restrictions as determined by the Committee may result in employee forfeiture of
such awards.
Under the 1994 Plan, the Committee may also award shares of Common Stock
which are free from any restrictions ("Unrestricted Stock"). Unrestricted Stock
may be issued to eligible employees under the 1994 Plan in recognition of past
services or other valid consideration and may be issued in lieu of cash bonuses
paid to such employees. Unrestricted Stock may be issued at no cost or for a
purchase price determined by the Committee. Finally, the Committee may also
grant performance share awards ("Performance Share Awards") to eligible
employees under the 1994 Plan entitling the recipient to receive shares of
Common Stock upon the achievement of individual or Company performance goals or
such other criteria as the Committee shall determine.
With respect to Mr. Weinstein's compensation, stock option grants are made
at fair market value, with a ten year term for each option granted. Vesting of
such options are in accordance with the provisions of the 1985 Plan and the 1994
Plan, respectively, generally with 25% of any such options vesting on each grant
anniversary date beginning on the first anniversary date after the date of grant
and ending on the fourth anniversary date. Mr. Weinstein was granted a
non-qualified stock option pursuant to the 1994 Plan for 25,000 shares of Common
Stock of the Company on March 11, 1997, at an exercise price of $8.94, in
connection with his being elected
9
<PAGE> 12
Chief Executive Officer and the removal of his "acting" title. This stock option
grant will vest at the rate of 20% per year beginning on the first anniversary
date after the date of grant and ending on the fifth anniversary date. This
grant was in addition to a non-qualified stock option for 12,500 shares of
Common Stock of the Company granted to Mr. Weinstein in March, 1996 at an
exercise price of $8.13.
The final component of Mr. Weinstein's compensation arrangement consists of
Performance Share Awards. During Fiscal 1997, the Committee granted Mr.
Weinstein a Performance Share Award that will entitle him to receive between
25,000 and 50,000 shares of the Company's Common Stock in fiscal year 1999 if
the price of the Common Stock attains certain targeted levels and remains at
such levels for a fixed period by a date certain. Specifically, the award is
linked to a performance term which began on March 26, 1996 and ends on April 30,
1998. If at the end of the performance term the "Target Price" (defined as the
average closing price of the Company's Common Stock for the fifteen consecutive
trading days prior to April 30, 1998) is either $10.00 or $14.00, Mr. Weinstein
will receive either 25,000 or 50,000 shares of the Company's Common Stock,
respectively. If the Target Price is between $10.00 and $14.00, the number of
shares Mr. Weinstein will receive will be determined by linear interpolation.
Repricing of Outstanding Options
The Committee and the Board of Directors believe that the Company's 1985
Plan and 1994 Plan (the "Plans") are important vehicles in the attraction,
motivation and retention of its executives and that the growth and success of
the Company is, in part, dependent upon, and the best interests of the Company
and its stockholders are served by, the Company's ability to continue to
attract, motivate and retain its executives. During the latter part of fiscal
1996 and early fiscal 1997, stock prices in the retail sector and, particularly,
the Company's stock price declined such that almost all of the stock options
granted in the prior five fiscal years were significantly out-of-the-money. This
fact acted as a disincentive to the group of executives who participated in the
Plans and who were and remain responsible for the profitable growth of the
Company. The Committee therefore recommended modifications which would restore
the incentive element of the Plans in a manner consistent with the stockholders'
long-term interests.
The Committee and the Board of Directors determined that lowering the
exercise price of outstanding stock options would restore the incentive which
the Plans were designed to create. At the same time, however, the Committee and
the Board of Directors determined that a reduction in such exercise prices to
the current market price of $5.25 per share would not create the necessary
incentive. As a result, the Committee and the Board of Directors offered all
participants in the Plans the opportunity to reprice to $9.00 per share any
currently outstanding stock options with exercise prices in excess of $9.00 per
share. Any participant electing to reprice stock options pursuant to this
program was also required to accept a reduced number of option shares
commensurate with the reduction in price to $9.00 from the price of the original
grant. Each repriced option retained the vesting schedule associated with the
original grant. The only exception to this program was in the case of David A.
Levin, who had been recently hired, and whose outstanding option shares were not
reduced commensurate with the reduction in price.
10
<PAGE> 13
Set forth below is certain information concerning the February, 1996
repricing of stock options held by executive officers of the Company:
<TABLE>
<CAPTION>
NEW NUMBER
NUMBER OF OF
SECURITIES SECURITIES
UNDERLYING MARKET PRICE EXERCISE UNDERLYING LENGTH OF ORIGINAL
OPTIONS OF STOCK AT PRICE OPTIONS OPTION TERM
REPRICED TIME OF AT TIME OF NEW REPRICED REMAINING AT DATE
OR REPRICING OR REPRICING OR EXERCISE OR OF REPRICING OR
NAME(1) DATE AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) AMENDED(#) AMENDMENT
- -------------------- -------- ---------- ------------ ------------ -------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sherman N. Baker.... 02/06/96 7,500 $ 5.00 $ 19.875 $ 9.00 3,396 8 years, 51 days
Jerry M. Socol...... 02/06/96 15,000 $ 5.00 $ 12.625 $ 9.00 10,693 6 years, 48 days
02/06/96 60,000 $ 5.00 $ 21.750 $ 9.00 24,828 7 years, 46 days
02/06/96 10,125 $ 5.00 $ 19.875 $ 9.00 4,585 8 years, 46 days
02/06/96 50,000 $ 5.00 $ 18.750 $ 9.00 24,000 9 years, 185 days
Alan I. Weinstein... 02/06/96 5,000 $ 5.00 $ 17.000 $ 9.00 2,647 3 years, 306 days
02/06/96 7,500 $ 5.00 $ 12.625 $ 9.00 5,347 6 years, 48 days
02/06/96 30,000 $ 5.00 $ 21.750 $ 9.00 12,414 7 years, 46 days
02/06/96 7,500 $ 5.00 $ 19.875 $ 9.00 3,396 8 years, 51 days
02/06/96 10,000 $ 5.00 $ 13.250 $ 9.00 6,792 9 years, 120 days
David A. Levin...... 02/05/96 100,000 $ 5.25 $ 13.000 $ 9.00 100,000 9 years, 127 days
02/05/96 50,000 $ 5.25 $ 13.000 $ 9.00 50,000 9 years, 127 days
Larry I. Kelley..... 02/20/96 5,000 $ 4.44 $ 12.625 $ 9.00 3,564 6 years, 34 days
02/20/96 10,000 $ 4.44 $ 21.750 $ 9.00 4,138 7 years, 32 days
02/20/96 5,000 $ 4.44 $ 19.875 $ 9.00 2,264 8 years, 36 days
02/20/96 5,000 $ 4.44 $ 13.250 $ 9.00 3,396 9 years, 98 days
Dennis B. Tishkoff.. -- -- -- -- -- -- --
James D. Lee........ 02/09/96 1,000 $ 4.94 $ 19.375 $ 9.00 4,645 8 years, 153 days
02/09/96 10,000 $ 4.94 $ 14,375 $ 9.00 6,261 8 years, 351 days
02/09/96 1,500 $ 4.94 $ 13.250 $ 9.00 1,019 9 years, 117 days
Stuart Needleman.... 02/07/96 2,500 $ 5.13 $ 12.625 $ 9.00 1,782 6 years, 47 days
02/07/96 5,000 $ 5.13 $ 12.750 $ 9.00 2,069 7 years, 45 days
02/07/96 15,000 $ 5.13 $ 16.500 $ 9.00 8,182 7 years, 267 days
02/07/96 2,000 $ 5.13 $ 19.875 $ 9.00 906 8 years, 50 days
02/07/96 1,500 $ 5.13 $ 13.250 $ 9.00 1,019 9 years, 119 days
Philip G.
Rosenberg......... 02/06/96 2,500 $ 5.00 $ 17.000 $ 9.00 1,324 3 years, 281 days
02/06/96 3,000 $ 5.00 $ 12.625 $ 9.00 2,139 6 years, 48 days
02/06/96 8,000 $ 5.00 $ 21.750 $ 9.00 3,310 7 years, 46 days
02/06/96 3,000 $ 5.00 $ 19.875 $ 9.00 1,358 8 years, 51 days
02/06/96 2,500 $ 5.00 $ 13.250 $ 9.00 1,698 9 years, 120 days
</TABLE>
- ---------------
(1) The positions of Messrs. Baker, Socol, Weinstein, Levin, Kelley and Tishkoff
are as set forth in the Summary Compensation Table. In addition, Mr. Lee is
an Executive Vice President and President of the Licensed Discount Footwear
Division; Mr. Needleman is an Executive Vice President and President of the
Work 'N Gear Stores Division and Mr. Rosenberg is an Executive Vice
President and Chief Financial Officer and Treasurer of the Company.
11
<PAGE> 14
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 $1 million paid to the Company's Chief
Executive Officer or other executive officers named in the Summary Compensation
Table contained in this proxy statement. Generally, the Committee expects to
attempt to structure compensation payments to executive officers so as to be
deductible under Section 162(m). In the event, however, that the Committee
determines that so structuring a compensation payment would not be in the best
interests of the Company, the Committee would adjust its compensation policies
and payments to provide incentives to the executive officers to achieve the
performance measures or goals that the Committee believes to be in the best
interests of the Company.
COMPENSATION COMMITTEE
J. Christopher Clifford, Chairman
Douglas Kahn
Melvin M. Rosenblatt
Nancy Ryan
Stanley Simon
12
<PAGE> 15
EXECUTIVE COMPENSATION
The following table discloses compensation received by the Company's Chief
Executive Officers and the four next most highly compensated executive officers
for the fiscal years ended February 1, 1997, February 3, 1996 and January 28,
1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND OTHER ANNUAL ALL OTHER
PRINCIPAL POSITION(1) YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS COMPENSATION ($)
- ----------------------------------------- ---- ---------- --------- ------------------- ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Sherman N. Baker......................... 1997 288,337 -0- -0- 3,396(5) 86,098(6)
Chairman of the Board 1996 327,115 -0- -0- -0- 86,098(6)
1995 350,000 69,930(2) -0- 7,500 84,894(6)
Jerry M. Socol........................... 1997 276,923 -0- -0- 89,106(5) 389,423(7)
Former President, Chief 1996 458,654 -0- -0- -0- 1,125(8)
Executive Officer and Director 1995 446,154 89,910(2) -0- 60,125 2,250(8)
Alan I. Weinstein........................ 1997 308,000 33,333(3) -0- 43,096(5) 1,125(8)
President, Chief Executive 1996 313,923 -0- -0- 10,000 1,125(8)
Officer and Director 1995 305,231 45,584(2) -0- 7,500 2,250(8)
David A. Levin........................... 1997 375,000 -0- -0- 162,500(5) 62,543(8)(10)
Senior Executive Vice President, 1996 245,192 100,000(4) -0- 150,000 1,125(8)
Director of Shoe Merchandising 1995 -- -- -- -- --
and Operations and General Manager of
International Shoe Operations
Larry I. Kelley.......................... 1997 283,000 -0- -0- 68,362(5) 11,997(8)(9)
Executive Vice President, 1996 285,450 -0- -0- 5,000 20,391(8)(9)
President of The Casual Male, Inc. 1995 268,539 75,663(2) -0- 5,000 22,788(8)(9)
Dennis B. Tishkoff....................... 1997 270,000 -0- -0- 2,500 1,125(8)
Executive Vice President, 1996 271,442 -0- -0- 5,000 1,125(8)
President of Shoe Corporation of America 1995 255,000 114,648(2) -0- 15,000 2,250(8)
</TABLE>
- ---------------
(1) Effective as of October 1, 1996, Jerry M. Socol resigned from his positions
as President, Chief Executive Officer and Director of the Company. Alan I.
Weinstein was elected Acting President and Chief Executive Officer and
Director of the Company in September, 1996, and was named President of the
Company in November, 1996 and Chief Executive Officer of the Company in
March, 1997.
(2) Amounts shown reflect payments under the Company's Incentive Plan.
(3) Amount shown reflects a bonus paid to Mr. Weinstein in monthly installments
upon his being named Acting President and Chief Executive Officer in
September, 1996.
(4) Amount shown reflects guaranteed bonus under employment agreement.
(5) Amount shown includes the following number of repriced options granted at a
reduced price in connection with the amendment of previously granted
options: Mr. Baker (3,396), Mr. Socol (64,106), Mr. Weinstein (30,596), Mr.
Levin (150,000), and Mr. Kelley (13,362). Except with respect to Mr. Levin,
the repriced options were for a reduced number of shares than previously
granted.
(6) Amount shown reflects payments made to Mr. Baker under the Company's
Retirement Plan.
(7) Amount shown reflects payments made to Mr. Socol pursuant to the terms of
his Termination Agreement dated as of October 1, 1996.
(8) Amounts shown reflect contributions made by the Company under the 401(k)
Profit Sharing Plan based upon the officer's contributions.
(9) Amount shown reflects the reduction of $10,872, $19,266 and $20,538,
including imputed interest, of the principal amount outstanding under a
Note dated June 3, 1991 in favor of The Casual Male, Inc., for fiscal 1997,
fiscal 1996 and fiscal 1995, respectively.
(10) Amount shown reflects payments for moving and other expenses of $61,418 in
connection with Mr. Levin's relocation from New Jersey to Massachusetts.
13
<PAGE> 16
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in the fiscal
year ended February 1, 1997 to the named executive officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATE OF
OPTIONS STOCK PRICE APPRECIATION FOR
GRANTED TO EXERCISE OPTION TERM(5)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------------
NAME GRANTED FISCAL YEAR(3) ($/SH)(4) DATE 0% ($) 5% ($) 10% ($)
- ---------------------------------- ---------- -------------- --------- ---------- ------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Sherman N. Baker.................. 3,396(1) .5% $ 9.00 03/29/04 0 19,222 48,711
Jerry M. Socol.................... 10,693(1) 1.6% $ 9.00 03/26/02 0 60,523 153,377
24,828(1) 3.7% $ 9.00 03/24/03 0 140,528 356,125
4,585(1) .7% $ 9.00 03/29/04 0 25,951 65,765
24,000(1) 3.6% $ 9.00 08/11/04 0 135,841 344,248
25,000(2) 3.8% $ 8.13 04/18/06 0 127,823 323,928
Alan I. Weinstein................. 2,647(1) .4% $ 9.00 12/14/99 0 14,982 37,968
5,347(1) .8% $ 9.00 03/26/02 0 30,264 76,696
12,414(1) 1.9% $ 9.00 03/24/03 0 70,264 178,062
3,396(1) .5% $ 9.00 03/29/04 0 19,222 48,711
6,792(1) 1.0% $ 9.00 06/06/05 0 38,443 97,422
12,500(2) 1.9% $ 8.13 04/18/06 0 63,911 161,964
David A. Levin.................... 100,000(1) 15.1% $ 9.00 02/05/06 0 566,004 1,434,367
50,000(1) 7.5% $ 9.00 02/05/06 0 283,003 717,184
12,500(2) 1.9% $ 8.13 04/18/06 0 63,911 161,964
Larry I. Kelley................... 3,564(1) .5% $ 9.00 03/26/02 0 20,172 51,121
4,138(1) .6% $ 9.00 03/24/03 0 23,421 59,354
2,264(1) .3% $ 9.00 03/29/04 0 12,814 32,474
3,396(1) .5% $ 9.00 06/06/05 0 19,221 48,699
5,000(2) .8% $ 8.13 04/05/06 0 25,565 64,786
50,000(2) 7.5% $ 9.50 06/05/06 0 298,724 757,027
Dennis B. Tishkoff................ 2,500(2) .4% $ 8.13 04/05/06 0 33,107 52,718
</TABLE>
- ---------------
(1) Represents repriced options granted at a reduced exercise price in
connection with the amendment of options for a larger number of shares
(except with respect to David A. Levin who received the same number of
options at a reduced exercise price). Repriced options set forth in the
above table were originally granted on various dates between December, 1989
and June, 1995 and such original grants vested as to 25% of the underlying
shares on the first anniversary date of grant and as to an additional 25% of
the underlying shares on each successive anniversary date thereof (except as
to the 50,000 share grant to Mr. Levin, which would have been exercisable on
August 5, 1997 subject to the achievement of certain stock price
appreciation criteria). All repriced options were granted with the same
vesting schedule as applied to the original grant.
(2) The options become exercisable as to 25% of the underlying shares on April
18, 1997 (April 5 and June 5, 1997 in the case of Mr. Kelley and April 5,
1997 in the case of Mr. Tishkoff) and become exercisable as to 25% of the
underlying shares on each successive anniversary date thereof.
(3) The Company granted options representing 663,762 shares to employees in
Fiscal 1997, of which 342,962 shares represented repriced options.
(4) The exercise price may be paid in cash or in shares of Common Stock valued
at fair market value on the date of exercise.
(5) 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
14
<PAGE> 17
not aware of any formula which will determine with reasonable accuracy a
present value based on future unknown or volatile factors. The calculation
of stock price appreciation hereunder is based upon an option term of ten
(10) years.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUE
The following table provides information on option exercises in Fiscal 1997
by the named executive officers and the value of such officers' unexercised
options at February 1, 1997.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sherman N. Baker............... 0 0 36,698 1,698 0 0
Jerry M. Socol(1).............. 0 0 87,357 0 0 0
Alan I. Weinstein.............. 0 0 26,701 22,395 11,250 0
David A. Levin................. 0 0 25,000 137,500 0 0
Larry I. Kelley................ 0 0 30,649 59,713 0 0
Dennis B. Tishkoff............. 0 0 8,750 13,750 0 0
</TABLE>
- ---------------
(1) Mr. Socol resigned from the Company effective as of October 1, 1996. Any
options vesting thereafter have lapsed.
(2) Fiscal year ended February 1, 1997. The average of the high and low prices
of the Company's Common Stock on January 31, 1997, the last trading day
preceding the Company's fiscal year end, was $6.75.
LONG TERM INCENTIVE AWARDS
During fiscal 1997, the Company made awards under its 1994 Plan to each of
the executive officers listed below. Information regarding the awards, the
performance criteria that must be met in order for the awards to be effective
and the period over which the performance is measured is included in the table
and the footnotes that follow.
LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR
SHARES, UNITS OR OTHER PERIOD UNTIL
NAME OTHER RIGHTS(1) MATURATION OR PAYOUT
- ------------------------------------------------------------- ---------------- --------------------
<S> <C> <C>
Sherman N. Baker............................................. -0- --
Jerry M. Socol............................................... (1) April 1, 1997(2)
Alan I. Weinstein............................................ (1) April 1, 1998
David A. Levin............................................... -0- --
Larry I. Kelley.............................................. (1) June 5, 1999 (2)
Dennis B. Tishkoff........................................... -0- --
</TABLE>
- ---------------
(1) Performance Share Awards granted under the 1994 Plan consist of an award of
a minimum and a maximum number of shares of the Company's Common Stock
("Stock Award") as follows: Jerry M. Socol (25,000-50,000), Alan I.
Weinstein (25,000-50,000) and Larry I. Kelley (12,500-25,000). Each
Executive Officer would be entitled to all, none or a portion of the shares
included in the Stock Award,
15
<PAGE> 18
depending upon the achievement of certain stock price appreciation criteria
during the Performance Period. See "Report of the Compensation Committee of
the Board of Directors on Executive Compensation" for further discussion of
the Stock Award to Mr. Weinstein.
(2) Each of the Performance Share Awards granted to Mr. Socol and Mr. Kelley
have lapsed as a result of their resignations from the Company as of October
1, 1996 and April 12, 1997, respectively.
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.
<TABLE>
<CAPTION>
REPRESENTATIVE YEARS OF SERVICE
----------------------------------
AVERAGE OF HIGHEST FIVE 30
YEARS OF COMPENSATION 10 20 (MAXIMUM)
------------------------------------------------ ------- ------- ----------
<S> <C> <C> <C>
$ 50,000................................... 5,095 10,190 15,286
100,000................................... 12,095 24,190 36,286
150,000................................... 19,095 38,190 57,286
200,000................................... 26,095 52,190 78,286
250,000*.................................. 33,095 66,190 99,286
261,560*.................................. 34,714 69,427 104,141
300,000*.................................. 40,095 80,190 120,286
350,000*.................................. 47,095 94,190 141,286
400,000*.................................. 54,095 108,190 162,286
450,000*.................................. 61,095 122,190 183,286
500,000*.................................. 68,095 136,190 204,286
</TABLE>
- ---------------
(*) The maximum compensation that may be used as of February 1, 1997 to
calculate benefits under the Retirement Plan and the Supplemental Plan is
$261,560.
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 the qualified plan limit which is
$160,000, but less than $261,560. 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, 1995, compensation for such
purposes means all compensation reported on Form W-2 (excluding such items as
bonuses and stock options) up to a maximum of $261,560 for the calendar year
ended December 31, 1996. 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, 1997, the number of years of
"benefit service" for each of the following individuals was as follows: Sherman
N. Baker -- 30 years; Jerry M. Socol -- 8 years; David A. Levin -- 1 year; Larry
I. Kelley -- 6 years; and Alan I. Weinstein -- 28 years.
EMPLOYMENT AND SEVERANCE ARRANGEMENTS
Mr. Baker is employed pursuant to an employment agreement dated March 25,
1993 which, as amended on March 31, 1997, provides for an annual base salary of
not less than $255,150 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
16
<PAGE> 19
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, 1998.
Mr. Weinstein is employed pursuant to an agreement dated March 25, 1993
which, as amended on March 7, 1995, April 5, 1996 and amended and restated on
March 31, 1997, provides for an annual salary of not less than $375,000 plus
incentive bonus compensation to which he may be entitled pursuant to the
Incentive Plan. In the event his employment is terminated without cause prior to
a Change of Control (as defined in the agreement), the agreement provides for
the payment to Mr. Weinstein of the greater of his base salary for one year or
the amount of base salary he would have received for the remainder of his
employment term. Further, in the event his employment is terminated within one
year after a Change of Control, the agreement provides for the payment to him of
up to three years base salary, offset, subject to certain conditions, by any
amounts earned by him from subsequent employment. The agreement also 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 until April 1,
1999.
Mr. Socol was employed pursuant to an employment agreement dated March 25,
1993 which, as amended on March 7, 1996 and April 5, 1996, provided for an
annual base salary of not less than $450,000 plus incentive bonus compensation
to which he may have been entitled pursuant to the Incentive Plan. The agreement
was effective until April 1, 1998. During fiscal 1997, Mr. Socol resigned as
President, Chief Executive Officer and a Director of the Company. Under the
terms of a Termination Agreement dated as of October 1, 1996 between the Company
and Mr. Socol (the "Socol Agreement"), Mr. Socol will receive the aggregate
amount of his base salary which would have been payable through April 1, 1998.
As of the date of the Socol Agreement and in partial satisfaction of the amounts
payable to him thereunder, Mr. Socol received a lump sum payment of $112,500. In
addition, the balance of amounts payable to Mr. Socol pursuant to the Socol
Agreement will be paid to him in weekly installments ending on June 29, 1997.
The Company will continue to provide Mr. Socol with certain group health,
dental, life and disability insurance benefits, at the employee cost thereof,
until April 1, 1998. All of Mr. Socol's stock options that had vested as of
October 1, 1996 will remain exercisable through July 1, 1997. Any other stock
options or performance share awards which had not vested as of October 1, 1996
have been forfeited. Mr. Socol is subject to certain non-competition and
non-solicitation provisions set forth in the Socol Agreement for a period of two
(2) years from October 1, 1996.
Mr. Levin was employed pursuant to an employment agreement dated June 12,
1995 which as amended on April 5, 1996, provided for an annual base salary of
not less than $375,000 plus incentive bonus compensation to which he may have
been entitled pursuant to the Incentive Plan. The agreement was effective until
April 1, 1998. Effective as of March 15, 1997, Mr. Levin resigned as Senior
Executive Vice President and Director of Shoe Merchandising and Operations for
the Company. Under the terms of a Termination Agreement dated as of March 15,
1997 between the Company and Mr. Levin (the "Levin Agreement"), Mr. Levin will
continue to receive his base salary on a weekly basis until April 1, 1998. In
addition, effective as of the date of the Levin Agreement, Mr. Levin will
receive the sum of $200,000 payable in weekly installments. Further, effective
as the date of the Levin Agreement, Mr. Levin received a lump sum payment of
$100,000. Mr. Levin is entitled to participate in the health and dental programs
of the Company, at the Company cost thereof, until April 1, 1998. All of Mr.
Levin's stock options that had vested according to their terms as of the date of
the Levin Agreement will continue to be exercisable until June 15, 1997. Any
stock
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<PAGE> 20
options which had not vested as of March 15, 1997 have been forfeited. Mr. Levin
is subject to a certain non-solicitation provision set forth in the Levin
Agreement for a period of one (1) year from March 15, 1997.
Mr. Kelley was employed pursuant to an agreement dated March 25, 1993
which, as amended on November 7, 1995 and April 5, 1996, provided for an annual
base salary of not less than $283,000 plus incentive bonus compensation to which
he may have been entitled pursuant to the Incentive Plan. Mr. Kelley resigned
from the Company effective April 12, 1997 and is receiving no severance pay in
connection with his resignation. All of Mr. Kelley's stock options which had
vested as of April 12, 1997 will be exercisable until July 12, 1997. Any stock
options or performance share awards which had not vested as of April 12, 1997
have been forfeited. Mr. Kelley is subject to certain non-competition and
non-solicitation provisions set forth in the agreement for a period of two (2)
years from the effective date of his resignation.
Mr. Tishkoff was employed pursuant to an agreement dated as of November 19,
1993 as amended on March 7, 1995, April 25, 1995 and November 26, 1995 which
provided for an annual base salary of not less than $270,000 plus incentive
bonus compensation to which he may have been entitled to pursuant to the
Incentive Plan. Mr. Tishkoff resigned effective as of March 5, 1997 in
connection with the sale of the Company's Shoe Corporation of America division
to Mr. Tishkoff and an investor group. Mr. Tishkoff is receiving no severance
pay in connection with his resignation. All of Mr. Tishkoff's stock options
which had vested as of March 5, 1997 will be exercisable until June 5, 1997. Any
stock options which had not vested as of March 5, 1997 have been forfeited. Mr.
Tishkoff is subject to certain non-competition and non-solicitation provisions
set forth in the agreement for a period of two (2) years from the effective date
of his resignation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are J. Christopher Clifford
(Chairman), Douglas Kahn, Melvin M. Rosenblatt, Nancy Ryan and Stanley Simon.
None of these individuals is an executive officer and no "compensation committee
interlocks" existed during the last fiscal year. Mr. Clifford is a principal
partner of Berkshire Partners ("Berkshire") which receives fees from the Company
for consulting and management services in the areas of financial and strategic
corporate planning under a Management Agreement dated as of June 30, 1995 (the
"Management Agreement"). For the fiscal year ended February 1, 1997, the Company
paid Berkshire $60,000 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.
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.
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<PAGE> 21
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 Stock Market -- U.S. Index, and the Dow
Jones Retailer -- Specialty Apparel Index for the five years ending February 1,
1997.
<TABLE>
<CAPTION>
DOW JONES
Measurement Period NASDAQ STOCK RETAILERS-
(Fiscal Year Covered) J. BAKER INC. MARKET-US SPECIALTY- APPAREL
<S> <C> <C> <C>
2/1/92 100 100 100
1/30/93 175 113 95
1/29/94 155 129 89
1/28/95 124 124 80
2/3/96 44 180 93
2/1/97 60 234 110
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and Berkshire are parties to the Management Agreement. Mr.
Clifford is a principal of Berkshire and a Director and stockholder of the
Company. The Management Agreement provides for an initial term of one year with
automatic extensions of one year unless otherwise terminated by either party.
Pursuant to the Management Agreement, Berkshire 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
Berkshire a monthly fee of $5,000 plus expenses, subject to change by mutual
19
<PAGE> 22
agreement for any extension of the Management Agreement. For the fiscal year
ended February 1, 1997, the Company paid Berkshire $60,000 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.
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.
(PROPOSAL NUMBER 2)
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
public accountants, to audit the books, records and accounts of the Company for
the fiscal year ending January 31, 1998. 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 LLP has audited the books of the Company and
its predecessor for more than twenty years. KPMG Peat Marwick LLP has no direct
or indirect material financial interest in the Company. A representative of KPMG
Peat Marwick LLP 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 1998, but will consider the
stockholder vote in appointing auditors for fiscal 1999.
------------------------
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 1998 Annual Meeting, the proposal must be received at the principal
executive offices of the Company on or before January 5, 1998. 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
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<PAGE> 23
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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<PAGE> 24
PROXY J. BAKER, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J. Christopher Clifford and Sherman N.
Baker, 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 18,
1997 at the Annual Meeting of Stockholders to be held June 10, 1997 and any
adjournment or postponement thereof.
<TABLE>
<S> <C> <C>
1. PROPOSAL to elect [ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to
two Class II Directors: (except as marked to the contrary below) vote for any nominee listed
below
Nancy Ryan Douglas J. Kahn
</TABLE>
(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 ratify the selection of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year ending January 31, 1998.
[ ] 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 AND 2. 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.
<TABLE>
<S> <C>
PLEASE SIGN IN THE SAME FORM AS NAME APPEARS ON THIS Date: ..............................
CARD.
FIDUCIARIES AND CORPORATE OFFICERS SHOULD INDICATE THEIR Signature: .........................
TITLE.
Signature: .........................
</TABLE>
